fm )k UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY til3D,W llruiT' COMMENTARIES ON THE LAW OF PARTNERSHIP AS A BKANCH OF COMMERCIAL AND MARITIME JURISPRUDENCE, WITH OCCASIONAL ILLUSTRATIONS FROM THE CIVIL AND FOREIGN LAW. By JOSEPH STORY, LL.D., *./ ONE OF THE JUSTICES OF THE SUPREME COURT OF THE UNITED STATES, AND DANE PROFESSOR OF LAW IN HARVARD UNIVERSITY. SIXTH EDITION. By JOHN C. GRAY, Jr., OF THE BOSTON BAR. " In Societatis Contractibus Fides exuberet." — Corf. Lib. 4, tit. 37, 1. 3. " Semper enim. non id, quoarnewall, AV jmrte Barr v. Speirs Barrett i'. Swann Barrow, Ex parte Barry v. Xesham Bartle v. Xutt liartlett !'. Jones Barton ;'. Hanson v. Williams Bass V. Bass V. Taylor Bate V. Robins Bateman v. Binder Battlcy V. Lewis I^audier, Er jmrte Baxter v. IJrown V. Conolly V. l{()dnian V. West 446 70, 250 115, 252 70 449 384 290 139 6, 70, 307 36 6 27, 41 58, 141, 154 101,218 233 328 349 824 1-16 377 93 99 42, 45 288 Bedford v. Deakin Belknap v. Cram Bell V. Ansley V. Humphries V. Morrison V. Nevin V. Xewraan V. Phyn Bellairs ?'. Ebsworth Belote V. Wynne Benjamin v. Porteus Bennet, E.r parte Bennett v. Stickuey ' Benson, Ex parte v.TAa. V. Hadfield V. Heathorn V. Kctchum Bentley v. Bates V. Craven Berkeley v. Hardy Berry v. Hawes Berthold v. Goldsmith Besch V. Frolich Bevan, Ex parte V. Lewis Biddlecome v. Bond Biddulph, Ex parte Bignold V. Waterhouso Bilton r. Blakely Binney r. Le Gal Bird V. Morrison Birdsall v. Colie Bishop V. Breckles V. Countess of Jersey V. Hall Bispham v. Price Black's Appeal Black V. Black Blair r. Agar V. Bromley 107 Blake's Case Blake v. Dorgan V. Nutter Blakeley's Ex'rs, Ex jxirte Blakcney v. Dufaur Bland, Ex /larte V. Haselrig Blanshard, /« re Blew V. Wyatt Biigh V. Brent Section 7 102, 108 191, 349 346, 349 152 10 182, 331 290 174 233 103, 120 103, 120 158, 253 '362 242 446 107, 324 195 363 93 251 324 32,41 208, 389 114 388 263, 359 155 418 41 229 175 117 264 41.49 295, 297 386 140, 263 214 108 107, 130 844 114 93 330 275 168 241 233 376 92, 93 232 , 108, 1C.8 268, 271 288 92, 93 201 n 228, 330 455 324 417, 428 158 98 INDEX TO CASES CITED. XVll Blisset /•. Daniel Bloxam v. Hubbard Bloxhani v. Pell Blue V. Leathers Biundell v. Winsor Boardman, Ex parte V. Gore Bodenham v. Purchas Boggett V. Frier Bolitho, Ex parte Bolton, Ex parte V. Puller Bonbonus, Ex parte Bond, ^.r parte V. Aitkia r. Hilton V. Pittard 19,21 56 Bonfield v. Smith Bonsteel v. Vanderbilt Booth V. Parks Borden v. Cnyler Bosanquet, Ex parte V. Wray Bottomley v. XuttaU Bouldin v. Page Bourne v. Freeth Boussmaker, Ex parte Bovill 1-. Hammond V. Wood Bowden, Ex parte Bower v. Douglass Bowie V. Maddox Bowker v. Burdekin Bowles's (Lewis) Case Bowman v. Bailey Bowyer v. Anderson Boyce v. Coster Boyd I'. Emmerson V. McCann Boydell v Drummond Bo_vers i'. Elliott Boyington v. Boyington Bradbury v. Dickens Bradford i-. Kimberly Bradley v. Chamberlin V. White Braithwaite v. Britain Skofield Section 172, 2U, 275 256, 449, 454 68 41,46 164 376 108 253 10 106, 140, 142 379 154, 369, 376 132, 133, 134, 388 384, 385 122 454 ,23,31,34,42,55, , 59, 60, 61, 64, 69 64, 134 Braley v. Goddard Brandon v. Robinson Brandrara v. Wharton Brassington v. Ault Bray v. Fromout Breckinridge v. Shrieve Bredow v. Mut. Savings Inst Brenan v. Preston Brett V. Beckwith Brettel v. Williams Brewster c. Hamniet Bridge v. McCullough Bridges v. ^Mitchell Brierly v. Cripps 40 198, 343 384, 386 117, 122 221, 234 155 107 150, 151 9 219 361 I 389 322 65 117 422 34,41 41,43 92 114, 219 161 324 93 114 99, 100 182, 185, 331 198, 331 34, 41, 43, 49 253, 323, 324 b 150, 151 41, 43 208 324 241 70 102 rt 344 428 30 127 264 Briggs, Ex parte V. Briggs Brigliam v. Dana Bright V. Hutton Brisban f. Boyd Brockway v. Bumap Brodie v. Howard Bromley v. Elliot Brooke v. Enderby V. AVashington Brooks V. Martin Broom r. Broom Broome, Ex parte Broph}' V. Holmes Brotherson v. Hodges Brown, Ex parte V. BirdsaU. V. Byers V. De Tastet V. Douglas V. Gordon V. Leonard V. Litton 111, 418 113 263, 363, 376 233 219 V. McFarland V. Oakshot V. Tapscott V. Tarkington Browne v. Gibbins Bruen v. Marquand Brundred r. Muzzy Brutton v. Burton Brydges v. Branfill Bryson v. Whitehead Buchan o. Sumner Buchanan v. Curry Buchoz V. Grandjean Buck V. Burhngame V. Winn Buckingliam v. Hanna Buckley, Ex parte V. Barber V. Buckley r. Carter Bucknam v. Barnum i;. Brett Buckner v. Lee Butlum V. Buffum Butbrd V. Xeely Bulkley v. Dayton Bull V. Scliuberth Bullen V. Sliarp Bullitt V. Meth. Ep. Church Bullock V. Crockett Burckle r. Eckart Burden v. Burden Burdon v. Barkns Burfield v. Kouch Burgess v. Atkins : V. Burgess Burke v. Winkle Section 68 159 34, 45 151 107, 322, 324 33 421, 455 27, 30, 49 157, 253, 334 63, 83, 93 6 93 232 27 454 140, 367, 390 241 102 a 329, 341, 343, 349 362 158, 324 130, 160 173, 233, 329. 343, 348, 349 182 93 219, 221 6 148 114, 115 70 114 108 99 92, 93, 94 114 114 379 93 86 143 328, 342, 344 93 290 49 454 68, 105, 106, 139 93 307 115 47 49, 60, 70 358 203 41, 49 182, 185, 331, 344. 349 93, 205 207 261 100 10 XVIU INDEX TO CASES CITED. Burleigh v. Stott Burls V. Smith Burn r. Burn Burnell v. Hunt Burnley v. Rice Burnside i-. Merrick Burrall v. Acker Burrell, Ex parte Barton, Ex parte V. Greene V. Issitt V. Wigley V. AVookey Burwcll V. Mandeville's Ex'r V. Springfield Bur}^ V. Allen Bush V. Steinman Busliell, Ex parte Butcliart v. Dresser Butler V. Stocking Butterficld, Ex jxirte V. Hemsley Buxton I'. Lister Byers v. Van Deusen Section 107 144 120 201 243 92, 93 2(52 390 403 261 160 215 175, 177, 178, 348 201 a, 319 « 132 203, 233 461 132 328 127 390 122, 127 189 215, 300 Caddick r. Skidmore Cadwallader r. Kroesen Cady V. Slieplierd Caldicott V. Griffiths Caldwell v. Leiber V. Stilenian C'iunniack v. Johnson Camptiell v. Mullett V. Steen r. Thomson 83,93 113 120, 122, 324 144, 219 182, 233, 331 319 263, 264, 393 358, 359, 360, 362 446 24 6 218, 221, 233 418, 428, 432 93 Chambers v. Howell Champion v. Bostwick Chance}" v. May Chandler, Ex parte Chapman i\ Beach v. Beckinton V. Devereux V. Durant V. Koops Chappell i;. Bray Cliapple V. Cadell Charlton v. Poulter Chase v. Barrett V. Deming i\ Kendall Section 343 38, 49, 58 229 379, 381 231, 288 246 130 455 261, 262, 263 419, 446 213, 231 225, 227, 228, 229, 231, 288 27, 34, 36, 43 241 322 275 Chavany v. Van Sommer Cheap V. Cramond 15. 16, 32, 34, 36, 41, 44, 56, 59, 60, 61 Cheetham v. Ward 168 Child V. Sands 454 Chippendale, Ex parte 113, 182 Christian v. Ellis 263 Christie, Ex parte 143, 442, 454 V. Craig 428 Christy v. Sherman 114 Chuck, Ex parte 45, 68, 69 Church V. Knox 263, 264 V. Sparrow 126, 140 Churton v. Douglas 99, 100, 329 City Bank of Brooklyn v. McChes Candler r. Candjer Capen v. Barrows Card V. Hope Carlisle »•. Mulhem Carr i'. Smith Carrol v. Blencow Carroll v. Waters Carron Company (Case of the) Carter v. Beaman V. Home r. Whalley Carver i'. Miller Castelli I'. Cook Castle V. Bullard Caswell V. Cooper Cateshy, Ex parte Catskill Bank r. Gray 14 r. SUiU Catt V. Howard Cecil V .luxou Chadboiirne r. Duncan Cbadsey i'. Harrison Ch;inilierlain v. Dow V. Walker 219 10 456 277 133 174 159, 160 422 428 166 219 394 43, 49 127 152 11 416 219 159 219 ney Clagett I'. Kilbourne Claiborne v. Creditors Clapp V. Rogers V. Upson Clark V. Blackstock V. Gilbert V. Leach Clarke, Ex parte , In re V. Bickers V. Bradshaw V. Price Clarkson v. Carter Claveriug r. Westley 160, 161 82, 263 280, 290 160 161 143 47 198 376 143 862 324 224 241 106 Clay, Ex parlr 363, 376, 377, 379, 380 , V. Cottrell 132 [ Clcgg V. Fisiiwick 174, 331 Clegliorn v. Insurance Bank 377 I Clement v. Brush 117 V. Hadlock 27, 32 I Clements r. Hall 174, 331 I Clemoiitson v. Blessig 9, 315 Cleveland v. Woodward 134 Cleworth r. Ticktbrd 114 Clough V. Ratdifle 290 Clowes, Ex parte 870 Cobham, Ex jHirte 377, 379 Cockburn i'. 'I'liompson 229 Coikerell v. Aucompte 144 Cocks I'. Nash 168 Coder V. Iluling 98 liSDEX TO CASES CITED. XIX Coffee V. Brian Coffin I'. Jenkins Cofton i\ Horner Colbeck, In re Coleman v. Coleman Coles V. Coles f. Trecothick Collamer v. Foster Collins V. Barrett V. Jackson V. Warren Section 219 42 225 69 219 92, 93, 94, 98 117 219 257 24 93 93 285 328 Erie CoUumb V. Read Colt V. AVoollaston Combs V. Boswell Commercial Bank of Lake r. Western Reserve Bank Commercial Bank v. Warren V. Wilkins Commonwealth v. Smith Conklin v. Barton V. Ogborn Conkling v. Washington University 14. 70 Connecticut River Bank v. French 131 Conro V. Port Henry Iron Co. 834 O'JO 183 263 14 27,49 322 Conroy v. Woods Const V. Harris Converse v. Ferre Symmes Cook, Ex }Ki/ie V. Arthur ^ V. Batclielior ^ V. Beech V. Catchpole V. Collingridge Cooke, Ex parte V. Cooke V. Seeley Cookson V. Cookson Coomer v. Bromley Coope V. Eyre Cooper V. Hood V. Watlington Coover's Appeal Copeman i-. Gallant Copland, Ex /Mrte V. Toulmin Coppard v. Page Corbett v. Poelnitz Corpe V. Overton Coryton v. Litliebye Cosio V. De Bernales Coslake v. Till Coster v. Clarke V. Murray Cothay v. Fennell Cottam V. Partridge Col ton V. Evans Couch V. Mills Course i'. Prince Coursen v. Hamlin Coventry v. Barclay 359 123, 192 422 454 363, 376 264 257 358 215 99, 207, 349, 350, 351 208 215 243 82, 93, 207 168 3, 19, 30, 45, 63, 147 99 210 263 372 377 24, 157, 253 42, 59 10 257, 10. 7 2.58 239 99 93 233 241, 242, 243 V33 114 168 219 182 192, 206 Cowell V. Sikes V. Watt Cox V. Delano V. Hickman V. McBuiney V. Peters V. Reid Coxwell V. Bromet Crallan v. Oulton Crane v. French Crawford v. Hamilton V. Stirling Section 253, 368 83 30,49 1, 49. 70 92,93 330 455 349 324 a, 360 263 195 127 263 Crawfurd v. Baum Crawshav v. Collins 99, 100, 175, 191, 198, 233, 313, 322, 325, 329, 331, 341, 342, 343, 348, 348 a, 349, 350, 351 V. Maule 5, 82, 84. 93, 189, 195, 196, 201, 231, 269, 273, 275, 277, 292, 317, 318, 322, 325, 329, 330, 346, 350, 351, 356 Cregler v. Durham 159 Cremer v. Higginson 245 Crisp, Ex parte 379 Crockett v. Crain 263 Crofi V. Pyke 97 Crooker v. Crooker 93, 370 Croone v. Bivens 359 Cross V. Cheshire 219 Crosthwait v. Ross 102 a Crottes V. Frigerio 219 Cruikshank v. M'Vicar 221, 325 Crusader, The 42 Cruttwell V. Lye 99 Culluni V. Bloodgood 101 Cumming v. Forester 242 Cummings i'. Mills 21 V. Parish 117 Cumpston r. McNair 280 Cunningham v. Bragg 322 Curling v. Robertson 421 Currier v. Rowe 219 V. Webster ' 219 Gushing i-. Marston 2-34 Cust, Ex parte 392 Custance v. Bradshaw 93 Cutbush V. Cutbush 201 a Cutler V. Winsor 34, 41, 44, 45 Cutter V. Fanning 166 D. Dacie v. John Dale V. Hamilton Dana v. Lull y. Stearns Dance v. Girdler Daniel v. Cross V. Toney Darbey v. Whitaker Darby y. Baines V. Darby DarUng v. ^iarch 329, 330 15, 82, 83, 93 101, 310 7 2.50 158 122 215 428 82, 93 133, 322 XX INDEX TO CASES CITED. Section Dartmouth College, Trustees of v. A\'oo' )•. Alexander 7J. Cornell i;. Fairbank INDEX TO CASES CITED. XXV Jackson v. Woolley Jacky V. Butler Jacomb v. Harwood Jaggers v. Binnings James v. Bixby Janes v. Whitbread Janson, Ex parte Jaques v. Marquand Januan v. Ellis Section 324 « 261 362 453 455 70 363, 380 140, 142 iiy Jarvis v. Brooks 92, 93, 263, 359, 376 V. Noyes 449 Jebb V. McKiermaa 219 Jeffereys v. Small 90, 93, 342 Jefferys v. Smith 82, 150, 183, 231 Jennings ;;. Baddeley 290 Jervis V. White 227, 259 Jestons y. Brooke 18 John and Siegmund, The 445 John of London, The 428 Johns, Ex parte 394, 405 V. Battin 122 Johnson v. Byerly 238 V. Evans 263 V. Helleley 99 V. King 264 V. Miller 46 V. Peck 238 Johnston v. Button 123 Jones V. Clayton 260 V. Dwyer 399 V. Gibbons 403 V. Jones 182 V. Lusk 358 V. Maund 253 V. McMichael 27, 83 V. Moore 324 V. Neale 82, 92, 93, 373 V. Noy 292, 295, 297 V. Yates 221, 231^, 234, 238 Jonge Pieter, The • 9 Tobias, The 447 Jordan v. Wilkins 31, 61 Joseph V. Pebrer 164 Judson V. Adams 41, 43, 46 Juggeevvundas Keeka Shah v. Ramdas Brijbooken Das 93 Julia, The 9, 240, 315 Julio V. IngaUs 27, 30, 44 K. Karthaus v. Ferrer 114 Kay V. Duchesse de Pienne 10 Keating r. Marsh 108 Keane v. Boycott 7 Keble v. Thompson 368 Kell V. Nainby Kelley v. Hurlburt Kellogg V. Griswold Kelluni ?'. Emerson Kemble v. Kean Kemeys v. Eichards 241, 242, 255 138 46 449 224 132 Kemp V. Carnley v. Coffin Kendall, Ex parte Kennedy, Ex parte V. Lee Section 101 322 253,360,361,862, 364, 405 380 99 Kensington, Ex parte 245, 363, 377, 380 Kent, The 445 Kershaw v. Mathews 201 .Ketcham v. Clark 160, 272, 307, 308 Ketchum v. Durkee 134, 146, 153, 358 Kieran v. Sanders 241 Kiffin V. Willis 168 Kilby V. Wilson 166, 238 Kilgour r. Finlyson 160, 322, 396 Kill V. HoUister 215 Kilshaw v. Jukes 49 Kimball v. Blanc 456 V. Hamilton Ins. Co. 101 V. Thompson 358 V. Wliitney 362 Kimberley ;;. Jennings 224 Kimbro v. Bullitt 102 a Knig V. Chuck 198 V. Faber 133 V. Hamilton 182 V. Lowry 455 V. Wartelle 233 V. Smith • 254 (The) i;.Beeston 125 '■ V. Collector of the Customs 342, 417 Kingman v. Spurr 307 Kirby v. Carr 295, 297 — V. IngersoU 101 V. Schoonmaker 97, 326 Kirk V. Blurton 102, 142 ;,'. Hodgson 123 Kirkham v. Newstead 155 Kirkiey v. Hodgson 403, 404 Kirkman v. Booth 201 a V. Snodgrass 161 Kirwan v. Kirwan 152, 1.55 Knebell v. White 222, 229 Knight V. Coates 449 V. Marjoribanks 172 Knott V. Morgan 100, 259 Knowles v. Houghton 229 Knox V. Summers 263 Kramer r. Arthurs 82, 93 Kuhne v. Law 263, 376 L. Lacy V. Hall V. McNeile V. Woolcott La Forest, Ex parte Lake v. Craddock V. Duke of Argyll V. Gibson Lamb v. Durant 93 107 336, 339 388 92,93 65, 150 342 416 XXVI INDEX TO CASES CITED. Section Lamb v. Grover 46 LaniLden v. Sliarp 122 Lamphir i-. Creed 11 Lancaster Bank v. Myley 82, 92, 263 Lane v. Williams 362 Lang V. Waring 92, 93, 132 Langan v. Hewett 127 Langdale, Ex parte 19, 32, 35, 36, 56, 60, 61, 64 Lange v. Kennedy 322. Lansing r. Gaine 127, 133, 160 Latham r. Simmons 263 Laughlin v. Lorenz's Adm'r 199, 201 a Laverty v. Burr 127 Law, E.r parte 139 V. Ford 330 Lawrence i'. Taylor 93 V. Trustees of Orphan House 862 Lawson v. Bank of London 100 V. Morgan 227 ■Layfield, v. 123 Leacii r. Leach 331 Leaf, Ex parte 380 V. Coles 295, 351 Lean v. Schutz 10 Leary v. Shout 288 Lee, Ih re 377, 380 f. Laslibrooke 182 r. Page 203,215 Lees V. Laforest 331 Le Fanu v. Malcomson 257 Lefever v. Underwood 169 Leicestershire Banking Co., Ex piirhi 889 Leigliton v. Wales 218 Leonard v. Huntington 455 Le Koy v. Johnson 102, 126, 130, 134. 160 Leveck v. Shaftoe 241 Leverson v. Lane 133 Levi V. Carrick 182, 349 Levy V. Cadet 3.4 Lewis V. Chapman 257 V. Langdon 6,100, 202, 329, 346 V. Motn-tt 182 V. He illy 322 Liardet ;;. Adams 288 Lingon v. Simi)son 329 Linton w. Hurley 166 Little V. Clarke 161 1'. Ilazzard 122 Littlewood V. Caldwell 227, 288 Livingston v. Cox 81 V. Ilastie 127, 133 V. Lynch 125 V. Pittsiturgh R. R. Co. 1 1 3 V. Ilaili 215 V. Uoosevelt 102, 1 26, 127. 132, l:',:! Lloyd, Ex parte 'X'. r. Archbowle 211 V. Ahhby 153 Lloyd V. Bellis V. Freshfield V. Loaring Lobb, Ex jHirte Lock V. Lynam V. Purdon Section 166 130, 133, 134, 140 123, 125 370 178 218 Locke, V. Stearns 108 Lockwood V. Comstock 322 Lockyer v. Savage 208 Lodge, Ex parte 390 — V. Dicas 155, 156, 253 V. Prichard 363, 376 Logan V. Mason 157 London Assurance Co. v. Bold 251 Long V. Majestre 178 Longman v. Pole 238, 256 Loomis V. Marshall 34, 35, 45, 49 Lord V. Baldwin 241, 263 V. Davison 12 V. Parker 12 Loscombe v. Russell 222, 229, 288 Loudon Society v. Hagerstown Bank 113 263 120 458 93 93, 122 Lovejoy v. Bowers Lovelace's (Lord) Case Low V. Mumford Lowe V. Alexander Lowery v. Drew Lowthorp V. Smith Lucas V. De la Cour . V. Laws 449 107 264 Lucena v. Craufurd 242 Ludlow V. Cooper 82, 92, 93 Lumberman's Bank v. Pratt 322 Lusk V. Smith 322 Lyman v. Lyman 72, 182, 331 Lyndon v. Gorham 264 Lyon V. Johnson 160 V. Knowles 34, 43 Ly th V. Ault 155, 156 M. Mabbett v. White Mac^kay )'. Blood good Mackenzie v. Poolcy Maclae v. Sutherland Macy V. Combs V. De Wolf t'. Wheeler Maildcford c. Austwick Mailgwick r. Wimble Mainwaring v. Newman Mair v. Glennie 27, Major ^). Hawkcs Maltby r. N. W. Va.R.R. Maiidcl >\ Peay Manning r. Wads worth Manuf and Mcch. 15ank v. V. 101 120 455 143 41 417, 421, 441, 444, 465 455 172 201, 231, 844 221 30, 32, 41, 42, 46, 56 328 113 358 189 108 Co. Gore Winship 106 INDEX TO CASES CITED. XXVI 1 Section ]\rarch V. Ward 143 March ington v. Vernon 242 Marengo, The 428, 449 Marine Bank v. Ogden 14 Markham v. Merrett 93 Maries v. Hill 358 Marlett v. Jackman 319, 336 Marquand v. N. Y. Mannf. Co. 269, 272, 275, 307, 308, 313 V. Webb 455 Marsh v. Hutchinson 10 V. Robinson 242 Marshall v. Colman 202, 226, 229, 288 V. Marshall 277 V. Watson IMarten v. Van Schaick Martin, Ex parte v. Crompe V. Heathcote Martyn v. Gray Marwick, hi re Mason v. Potter V. Rumsey Massey v. Tingle Master v. Kirton Matliewson v. Clark Matlacky. James JMatlock r. Matlock Maude, Ex parte Mawman v. Gillett Mayhew v. Merrick Maynard v. Fellows McAlister v. Montgomery McAllester v. Sprague M'Alpine v. Mangnall McClelland v. Remsen M'CoU V. Oliver M'Connell v. Hector McCormick v. Gray McCready v. WoodhuU M'Cullough V. Sommerville M'Dermot v. Laurence McDonald v. Eggleston V. Millaudon McDougald v. Banks McGill V. McGill M'Gregor v. Bainbrigge McGuire v. Ramsey MTver v. Humble McKnight v. Ratcliff M'Lanahan v. Ellery McMahon v. Davidson McNaughten v. Partridge McNeillie v. Acton McNutt V. Strayhorn McPlierson v. Pemberton McQuewans v. Hamlin Meaghan, In re Mealier v. Cox Mechanics' Bank v. Hildreth V. Livingston 160 Mellersh v. Keen 99, 272, 297 Merrick v. Brainard 307 227, 329 99, 330 403 342, 346 233 64 880 46 102 233 227, 269, 288 5 93 93 394, 406 241 218 264 93 168 70 101 219 240, 316 372 446 101 93 117, 122 67 192 344 24 92 36, 55, 64 166 254, 255 416 117, 155 201a 360 6, 263 114, 127 208 27, 288, 290 358 Merrick v. Gordon Merrill v. Bartlett Merryweather v. Nixan Metcalfi;. Bruin V. Taylor Section 34,40, 58 a 444 0, 210, 220 250 416 Metcalfe v. Rycroft 115, 119, 244 Metropolitan Omnibus Co. v. Haw- kins ■ 257 Meyer v. Sharpe 15, 27, 41, 55, 56, 57 Meyers v. Field 30 Mifflin V. Smith 106, 138, 139, 198 279 Milbank v. Revett 228,' 231 Milburn v. Codd 219 V. Guytlier 449 Miles V. Thomas 202, 224, 225, 227, 229 269 Millar v. Craig 180^ 182 Millaudon v. Sylvestre 182 Miller v. Bartlet 35, 41, 45, 49 V. Hughes 30 V. Mackay 418 V. Price 238 V. Sims 7 Milliken v. Loring 328 Millington v. Fox 100, 259 Mills V. Barber 101 Milne v. Bartlet 295 Milton V. Mosher 122 Minchin, Ex parte 376 Minnit v. Whinery 123, 130 Mitchell V. Dall 80 V. Tarbutt 166 Mitcheson v. Oliver 455 Mobley v. Lombat 264 Moderwell v. MuUison 93 Moffatt V. Farquharson 449 V. Van Millingen 221, 234 Mohawk & Hudson R. R. Co. v. Niles 41, 58 a Moline Water Power Co. v. Web- ster 363 Moller V. Lambert 250 Molton V. Caniroux 7 Jlonro, Ex parte 403 Moody V. Buck 449 V. Payne 263, 264, 311 Moor V. Hill 244 Moore, Ex parte 406 V. Bare 24 V. Pennell 263 V. Sample 264 V. Smith 41, 46 Moran v. Palmer 93 Moravia v. Levy 219 Moreau v. SafFarans 92, 93 Moreton v. Hardern 166 Morgan v. Marquis 339 v. Richardson 114 V. Tarbell 253 Morison v. Moat 227, 344 Morley v. Gaisford 166 V. Newman 215 XXVlll INDEX TO CASES CITED. Morris, Ex parte V. Allen — V. Barrett — V. Colman — V. Harrison I'. Kearsley Morrison v. Blodgett Morrow f. Riley Morse v. Wilson Morton v. Blodgett Motley V. Downinan Muirliead r. Salter Muldon V. "Whitlock MuUany v. Keenan Mullett V. Hucliinson Mumford v. Xicoll Munson v. Sears Murphy, In re 51 array v. Bogert V. Mumford V. Murray V. SomerAdlle Murrill v. Xeill Musier r. Trompbour Mutual Savings Inst. v. INluzzy V. Whitney Myers v. Edge V. Standart V. Willis Section ' 376 182 92, 93 224 201 93 261, 262, 263 219 69 263 100, 259 61 455 218 126 59, M4 30 208 307 325, 328 339, 341, 363 134 263, 376 27,31 Enslin 344 32, 43, 45 245 324 455 Xorfolk, Ex parte North V. Bloss V. Mudge N. Xapier v. Catron r. McLeod National Bank v. Norton Natusch V. Irving 125, Neal V. Sheaffield Neale v. Turton Nerot V. Burnand Nesbitt 1-. Meyer New Draper, The Newell V. Humphrey Newhall v. Buckingham Newman v. Bagley V. Bean Newmarcli v. Clay Newsome v. Coles Newton v. Belcher V. Boodle New York Fire Ins. Co. nett Niciiolson V. Bicketts Nicoil i;. fJlcnnie i;. Mumford Section 393 80, 241 114 North Bank of Kentucky v. Keizer 376 Northern Coal Mining Co., In re 201 a Northern Penn. Coal Co.'s Appeal 93 Norway v. Rowe 231, 288 Nottidge V. Prichard 115 Noj'es V. Cushman 2, 3, 4 V. N. H., N. L., & Stonington R. R. Co. 115, 123 V. Ogden Niday v. Harvey Niveu V. Spickerman Nixon V. NaHh NockeLs V. Crosby Nokes, Ex parte Nolle, Ex jHirte 117, 122 115 322, 334 193, 222, 325 117 219, 221, 234 269, 306, 356 189 445 331 2G1, 264 263 41, 262 155, 157, 159 160 151 102, 142, 202 V. Bon- 127, 130 102 tt, 142 166 261, 263, 307, 311,417 93 155 221 263 219 H4 111, 127 o. Oakford v. Eur. & Am. Co. Oakley v. Pasheller Ocean, The Ogden V. Aster Ogle, Ex parte Ohl V. Eagle Ins. Co. Olcott V. Wing Oldaker v. Lavender Oldknow, Ex parte Oliphant v. Mathews Oliver v. Gray L". Hamilton Ord V. Portal Ordiorne v. Woodman Orleans (Steamboat) v. Orr V. Chase Osborne i'. Harper V. JuUion Ostrom V. Jacobs Otis V. Sill Ouston V. Hebden Owen, Ex parte V. Body V. Van Uster Owens V. Collins Owston V. Ogle Oxley, Ex parte P. Page, Ex parte V. Brant V. Carpenter V. Cox Pahlman v. Graves Paine v. Tiiacher Palmer v. Dodge I'. Myers V. Stephens Parieute v. Lubliock Park I'. Woolen Parker, Er /mrte V. Barker V. Cousins Steamship 158 156, 158, 370 449 343 376 416, 417 83 206, 232 377 139 30 228, 231 244 219 Phoebus 427,428 119 244 150 142, 324 98 437, 438 372 70 86, 143, 151 93 449 208 V. Gossago 377 161, 241 262 201 363 219 322 101 142 245, 249 159 390 64 322 214 INDEX TO CASES CITED. XXIX Parker v. ^lacomber V. Morrell V. Muggridge r. Pi St or V. Ramsbottom Parkhurst v. Muir Parkin i-. Carruthers Parr, Er parte Parry, Ex parte Parsons v. Crosby r. Havward Patch V. Wheatland Patten v. Gurney Patterson v. Blake V. Brewster V. Gandasequi r. Silliman Pattison v. Blancliard Section | 821, 322 823' 3-41 I 263, 264 163 228 65, 140, 160, 334, 335 387, 889 444 Payne v. Hornby V. Ives I'. ^latthews V. State Peacock, Ex parte I'. Peacock 241 198 102 458 93 83, 362 455 214 3, 34, 40, 58, 219 346 127 863 324 389 15, 24, 32, 59, 84, 181, 231, 269, 275, 322, 325 Peake, Ex parte 163, 358, 377, 380 Pearce v. Chamberlain I'. Lindsay V. Piper Pearpoint v. Graham Pearson v. Skelton Pease v. Hewitt V. Hirst Peck V. Fisher Peel V. Thomas Peele, Ex ])arte Peniberton v. Oakes Penninian v. Munson Penny v. Black Perens v. Johnson Perren r. Keene Perrine v. Hankinson Perrott v. Bryant Perry v. Butt V. Jackson Petit V. Chevelier Pettee v. Orser Pettes t'. Spalding Pettyt r. Janeson Peyton v. Lewis Phelps V. Brewer Philips V. Philips Phillips V. Ames V. Atkinson 17. Clagett V. Cook r. Phillips Pickard v. Sears Pierce v. Jackson Trit»'o" 195, 196, 295, 316, 317 272, 290 101, 275, 310 34, 61, 219, 220 ' 222, 408 203 244, 248 92, 93 151, 164 152, 359, 368, 370 246, 253 41 205 172, 263, 311, 331 322 38,43 41, 42, 55, 59 15, 30 252 225 101 264 191, 349 15b 114 344 369 344 114 261, 264 93 398 2G1, 263 93 Pierce v. Wood Pierson i>. Hooker V. Steinmeyer Pigott V. Bagley Pine, Ex parte Pinkney v. Hall Piper V. Smith Pitchford v. Davis Pitkin V. Pitkin Pitt, The Pittam V. Foster Pitts V. Waugh Place r. Sweetzer Plumer v. Lord Plummer, In re 37 Pollock V. Paterson Pond V. Clark Ponton V. Dunn Pope V. Ham an V. Risley Porter v. M'Clure Porter v. AVheeler Post r. Kimberly 30, Potter V. Greene V. McCoy V. Moses Pott V. Evton Potts V. Bell V. Blackwell Powell V. Messer Powles V. Page Pratt V. Langdon V. Page Prentice v. Prentice Preston r. Strutton V. Tamplin Price r. Barker r. Groom V. Williams Pugh V. Currie Purdy V. Powers Purple V. Cook Purviance v. IM'Chntee V. Sutherland Putnam v. Dobbins V. Wise R. Section 108 115 33, 49, 67 201 390 132 93, 182 150 201 a, 319 a 428 107 83, 93, 138 264 12 6, 385, 387, 389 295 182 200 261 107, 160, 161 3,45 331 45, 56, 61, 147, 280 64 120, 155 277 86, 41, 43 9, 315 358 133 160, 164 49 160 351 219 418, 455 168 70 215 93 133 263, 376 49 122 93 5,43 Raba r. Ryland Rackstraw r. Imber Radcliffe r. Rushworth Radenhurst v. Bates Randall v. Randall Randolpli v. Daly Ransom v. Van Deventer Rapid, The Rajjp i\ Latham Rathbone v. Drakeford Rawlins v. Wickham Rawlinson v. Clarke 107 27, 126 268 30 244, 254 82, 93 260 358 9, 315 108, 166 114 232 41, 43, 47, 49, 221 XXX INDEX TO CASES CITED. Ravnard v. Chase Read v. Bowers Reade c. Bentley Reboul V. Chalker Reed v. Howard V. Hussey V. Sliepardson Section 6 231 277 194 261 42 261, 263 V. White 155, 156. 158, 370, 455 Reeve, Ex parte 376, 390, 405, 406. 407 V. Parkins 290 Reeves u. Avers 93 Reid, Ex pake 392, 393 V. Holhnshead 15, 66, 27, 126 Reilly v. Smith 161 Reinheinier r. Hemingway 261, 263 Remington v. Cnmmings 117 Rent )n v.^ Chaplain 263, 311, 330 Reppert v. Colvin 324 Revens v. Lewis 421, 428 Rex V. Alnion 166 V. Inhab. of Austrey 122 V. Marsh 166 V. Pearce 166 V. Topham 166 Reyneli v. Lewis 151 Revnolds v. Bowley 404 — '■ V. Hicks 49, 70 V. Mardis 182 V. Toppan 34, 44, 56 Rice, In re 362 V. Austin 41, 42, 43. 45, 261 V. Barnard 72, 92, 93, 360, 381 V. Gordon 343, 362 V. Siiute 454 Rich V. Coe 455 Richards v. Davies 222, 229, 231 I'. Fisiier 254 V. Heather 361 Ricliardson, Ex jnirte 201 a, 319 a, 399 V. Bank of England 229, 348 a V. Farmer 138 V. Hastings 229 V. Moles 160 I'.Tobey 358 238 126 97 92, 93 363 133 207, 350 394 449 93 418 24 93, 231, 330 219 92 263 168 321, 322, 359 Richmond v. Heapy Ricketts v. Bennett Ridgely i'. Carey Ritlgway's Appeal Ridgway v. Clare Ridley v. Taylor Rigden v. Pierce Ring, Ex jiitrle Rijiley v. Crooker V. Waterworth liiteliie v. Couper Roach i;. Perry RoJK'rt.s I'. Eherhanlt V. Fitlcr c. McCarty /.'. Koberta r. Strang Roblj (,'. Mudge Robbins v. Fuller Robertson v. Baker V. Lockie V. Quiddington Robbins v. Laswell Robinson, Ex parte V. Aldridge V. Alexander V. Anderson V. Crowder V. Gregory t;. Marchant V. Taylor r. Wilkinson Section 328 93 297 99, 100 23, 27 339 133 233 24 101 101 256, 257 322, 328 138, 158 Robley v. Brooke 24 Robson V. Drummond 243, 244, 249 Rockwell V. AVilder 219 Rodgers v. Meranda 363, 365, 376, 390 Rodriguez v. Heflernan 272, 307, 311 Roe V. Galliers 208 Rogers v. Batchelor 132, 133 r. Harvey 93 V. Kichline 241 Rolfe V. Flower 152, 3»9 Rollcston V. Hibbert 416 Rollins V. Stevens 127 Roosevelt v. Maik ' 324 Booth V. Quin 123 Ross V. Decy 241 V. Drinker 45 Roth V. Colvin 133 Rothwell r. Humphreys 126 Rowe r. Wood 181 Rowland, In re 372 V. Boozer 93 Rowlands v. Evans 295 Rowlandson, Ex paiie 35, 45, 53, 55, 56, 358, 384, 385, 402 Rowley v. Adams 93 Roxby, Ex parte 370, 385 Ruddock's Case 115 Ruffin, Ex parte 97, 260, 263, 325, 326, 342, 347, 358, 359, 360, 361, 362, 372, 373, 401, 403 Russ r\ Fay 2t)3 Russell V. Austwick 174 V. Lelaiid 272 r. Pelligrini 215 V. Perkins 247 Rutland's (Countess of) Case 268, 271 Ryall V. Rowk's 403 Ryan v. Mackmaih 329 Sadler, Ex parte V. Lee V. Nixon Sage V. Cliollar V. Ensign V. Sherman 363, 380 108, 168 «, 207 219 358 162, 324 82, 92, 103 INDEX TO CASES CITED. XXXI St. Aubvn ;;. Smart St. Barbe Sale V. Dishman's Ex'rs Salmon v. Davis Sander v. Sander Sandilands v. IMarsh San Jose Indiano, The Saville r. Kobertson 34, 56, Sawyer v. Freeman V. Goodwin Sayer v. Bennet Sclieiffelin v. Stevens Scliemehorn v. Loines Scholefield v. Eichelberger Section 108 394, 405 122 115 295, 297 102, 103,- 111 127, 131 316 138, 14G, 147, 148 446 108 295, 316 161 9, V. Heafield Scott V. Avery V. Liverpool I'. Miller V. ^lilne Scudder i-. Delashmut Seaver v. Phelps Secor V. Keller Seddon, Ex parte Sedgwick v. Daniell Sedgworth v. Overend See Reuter, The Seeley v. Boehm Selden v. Bank of Commerce Selki'ig V. Davies 455 195, 201a, 315, 317 346 215 215 6 233 263 7 241 370 219 256, 454 445 231 127 93 Seneca, Tlie 437, 439 Senhouse v. Christian 231 Servante r. James Sexton V. Sexton Shackle v. Baker Sharon Canal Co. v. Fulton Bank Sharp V. Milligan V. Warren Shattuck V. Lawson Shedd V. Bank of Brattleboro V. Wilson Shelly r. Hiatt Shelton v. Cocke Shepperd v. Oxenford Sheridan v. !Medara Shipton V. Thornton 449 172 99 14 93 219 219 114 263 343 324 231, 330 67, 69 202 Shirreff y. Wilks 127, 132, 133, 152 Shoemaker v. Benedict 324 Shott V. Strealfield Sichel V. Mosenthal Siegel V. Chidsey Siffkin V. Walker Sigourney v. Munn Sikes V. Work Silk V. Prime Siilitoe, Ex parte Simpson's Case Simpson v. Chapman V. Feltz V. Geddes Sims V. Brittain 65 189 313, 358 136, 140, 154 82, 93, 351 30, 219 363 390, 394 316 343 182 324 418 Section 108 27, 30, 145 247, 250, 251 157, 250, 253 416 264 Sims V. Brutton V. AVilling Simson r. Cooke V. Ingham Sisters, The Sitler V. Walker Skinner v. Dayton 117, 119, 120, 122, 275 V. Stocks 241, 242, 454 V. Tinker 275 Skipp V. Harwood 97, 261, 263, 264, 311 Skirving i\ Williams 199 Skrine r. The Sloop Hope 439 Slater, Ex parte 370 V. Lawson 324 a Sloan V. Moore 101, 231 Smead v. Lacey 152 Smith, Ex parte 205, 313, 314, 399 , In re 261, 263, 264 — ■ V. Barrow 219 V. Black 155 V. Burnham 83, 93, 138 V. Cooker 257 I'. Craven 142, 147 V. Danvers 92 V. De Silva 441, 444 V. Emerson 261 V. Everett 99, 100 V. Fromont 229, 231 V. Hill 59 V. Jackson 93 V. Jameson 368 V. Jeyes 191, 227, 231, 288 V. Kerr 122 V. Lay 418 V. Ludlow 324 V. Mules 214, 288, 351 V. Mulock 275 V. Oriell 328, 342 V. Rogers 158 V. Smith 68, 64, 93, 205 V. Tarlton 83, 93 V. Watson 27, 30, 40, 41, 42, 56 V. Wigley 157 1-. Winter 120, 160 V. Wright 3, 30, 32 Snaith v. Burridge 132 Snodgrass' Appeal 268 Snow r. Howard 143 Snyder r. May 117 Solly V. Forbes 168 Somerset Works v. Minot 380 Somerville v. Mackay 233 Soule r. Hayward 27 Southard v. Steele 114 South Carolina Bank v. Case 102, 106, 139, 140. 142 South worth v. Smith 428 Sparrow v. Carruthers 10 V. Chisman 237 Spaulding v. Ludlow Woollen Mill 107 Speake v. Wliite 323 xxxn INDEX TO CASES CITED. Spear v. Xewell Speiglits I'. Peters Spiers v. Houston Sprague, Ex parte Spring V. Gray Staats V. Hewlett Stables v. Eley Stainer v. Tysen Stansfeid v. Levy Stanton Iron Co., Re Stanwood v. Owen Starbuck v. Sliaw State V. Linaweaver V. Quick Stead r. Salt Steamboat Orleans v. Phoebus Stearns v. Houghton Stedinan v. Feidler Steiglitz V. Eggington Stepliens v. Thompson Sternburg v. Callanan Sterndale v. Ilankinson Sterry v. Clifton Stevens v. Benning V. Faucet V. The Sandwich V. Yeatman Stewart v. Forbes V. Gibson r. Hall V. IJotrers Section 219 228, 330 245 873 233 143 65 128 134 70 157, 199, 201 a 419, 441, 449 107 307 114, 115 427, 428 346 421, 455 121 155 153 157, 233 6 249 27, 166 439 203 24, 191, 192 6 455 249, 254, 444 227 Stockdale v. Ullerv Stocken v. Dawson 180, 182, 331, 343, 360, 372 Stocker v. Brockelbank 27, 32, 41, 45, 56 Stockton V. Frey 166 Stockwell V. Diilingham 139 Stoddanl v. Wood 221 Stone V. Marsh 108, 166 Storer v. Hunter 399 Storrs V. Barker 398 Story V. Lord Winsor 82, 231 Stoughton I'. Lynch 173, 176, 178, 182, 233, 329 Strange v. Lee 240, 247, 250 Strangtbnl c Green 114 Street r. Kig))y 215, 299 Sunimey v. I'atton 93 Sumner v. llampson 93 V. Powell 362 Sutclitte V. Dohrman 261 Sutton V. Irwine V. Buck Swan V. Stedman V. Steele Sweetser v. French Sweetzer v. Mead Sylray v. White Sylve»ter v. Smith 127 416 122 102, 103, 106, 126. 133 127 122 219 134 Section Taft V. Buffum 307 Taggard v. Loring 41, 44, 416 Taitt, Ex jMite 377, 379, 381, 383 Tapley v. Butterfield 93, 101, 122, 310 Tappan v. Bailey 102 a V. Blaisdell 263 1-. Kimball 162, 824 Tasker v. Bartlett 122 V. Sheplierd 249 Tassey v. Church ' 328, 324 Tatam v. Williams 233 Tate, Ex jmi-te 378 Tattersall v. Groote 215, 232, 285 Taunton Iron Co. v. Richmond 324 Taylor, Ex paiie 7 V. Church 257 V. CoryeU 114 V. Davies 229 V. Davis 227 V. Fields 261, 268, 264, 407 V. Hillyer 133 V. Jones 166 V. Richards 428 V. Salmon 229 V. Terme 49 Teague v. Hubbard 219, 221, 234 Teed v. Baring 455 V. Elworthy " 241, 255 Temple v. Seaver 322 Tenant v. Goldwin 422 Tench v. Roberts 6, 32, 56, 59, 61 Tenney v. Johnson 263, 359 Terrell, Ex parte 407 Terrett v. Taylor 76 Thicknesse v. Bromilow 106, 126 Thomas v. Minot 376 Thoniason v. Frere 814, 386, 337, 338, 339 Thompson v. Andrews 201 a, 819 a V. Franks 113 V. Frist 264 V. Waithman 324 a Thomson v. Campbell's Trustees 24 V. Davenport 138, 455 V. Finilcn 455 V. Hoskins 454 V. Lav 7 V. Lewis 263, 264 v. Percival 155, 156, 158, 253, 255, 370 V. Snow 34, 45 V. Williamson 24 Thornbury ;•. Bevill 6 Thornton v. Di.xon 93 11. Illingworth 255 V. Proctor 182, 185, 331 Thorpe, Ex parte 132 V. Jackson 362 Tibbatts i;. Ti!)batts 46 Tieriian v. Jackson 244, 254 Tilford V. Ham.«ey 133,142 Tillinghast v. Champlin 93, 263, 360 INDEX TO CASES CITED. XXXlll Section Tobias v. Blin 41 Todd V. Enily 144 Tombeckbee Bank v. Dumell 160, 322 Tomlin v. Lawrence 262 Toombs V. Hill 363, 376 Towle V. Meserve * 221 Towne v. Leach 264 Townend v. Townend 180, 343 Townsend v. Devaj'nes 93 Townshend v. Townshend 233 Travis v. Milne 343 TreadweU v. Brown 261, 264, 376 V. Williams 93 Trcdwen v. Bourne 126 Tremlett v. Hooper Troughton i'. Hunter Trowbridge v. Cushman Trueman v. Loder Trull V. Trull Tucker v. Moreland V. Oxley Tunno v. The Betsina Tupper V. Haythorne Turbeville r. Ryan Turner v. Bissell V. IMajor Tutt V. Adams Twiss V. Massey Tyng V. Thayer Tyrell v. 'Washburn 151 367 162 263 184, 142 368 7,255 363 439, 449 126 122 32, 34, 35, 36, 41, 42, 43, 45, 46 99 127 363, 376, 379 349 317 u. Union Bank v. Knapp 233 United States v. Astley 117 United States Bank v. Binney 63, 72, 80, 101, 102, 103, 105, 106, 126, 138, 139, 140, 198, 278, 279 University of Cambridge v. Bald- win 250 Upham V. Naylor 264 Usborne, Ex parte 403 V. Van Amringe v. Ellmaker 219 Vance v. Blair 219 V. Cowing 362 Vanderburgh v. Hull 47 Van Keuren v. Parmelee 324 Van Kuren v. Trenton Co. 14 Van Ness v. Forrest 219 Van Sandau v. Moore 189 Van Valen r. Russell 263, 393 Van Valkenburgh v. Bradley 322 Venable v. Levick 132 Venning v. Leckie 219 Venus, The 316 Vere Ex parte 208 V. Ashby 152, 153 Vice V. Anson V. Fleming Victoria, The Vigers v. Pike Vigilantia, The Voguel, Ex parte Voorhees v. Jones Vulliamy v. Noble Section 151 123 445 133 rt 316 377 43,49 162, 195, 258, 317, 319,336,343 v. Brewster ■ V. Dodge 164, 69, w. Wade V. Jenkins 99 Wadsworth v. Manning 27 Waggoner v. Gray 182 Wak, In re 261, 262, 337, 340 161 80, 241 160 271 58 229 324 388 324 363 231, 344 330 67 264 121, 238 215 228, 229 115 261 391 242, 243 324 27,44 227 160 Wall Waite V. Foster Waithman v. Miles Waland v. Elkins Walburn v. Ingilby Walden v. Sherburne Walker, Ex parte V. Duberry V. Eyth i\ House i,'. Trott Balcom Wallace v. Hull V. Jvelsall Wallis V. Hirsch Walhvorth v. Holt Walmsley v. Cooper Walsh V. Adams Walton V. Butler V. Dodson V. Robinson Ward V. Thompson Warder v. Stilwell Wardwell v. Haight Warner v. Smith Warren, In re V. Ball V. French V. Wheelock Washburn v. Bank 115 909 Falls V. 24 75, 83, 93, 142, 202 159 181 219 of Bellows 263, 360, 376 319, 331, 343 358 228, 231, 262, 263, 275, 288, 290, 292, 295 182, 288, 329, 349 32, 35, 36, 41, 45, 64, 251, 368, 393 6 154 2,15,16,18,30, 32, 34, 36, 48, 49, 53, 55, 58, 59, 60, 61, 64, 66, 67, 68, 147 Way V. Bassett 324 a, 324 h Waydell w. Luer • 155 Goodman Waterman v. Hunt Waters v. Taylor Watney v. Wells Watson, Ex jmrte V. Fletcher Watt V. Kirby Waugh V. Carver XXXIV INDEX TO CASES CITED. Weaver v. Rogers V. Weaver Webster v. Bray V. Webster Section 238 380 24 100, 202, 319, 329 Wedaerburnr.Wedderburn 99, 180,343 Welch V. Knott 100 Weller v. Baker 258 Welles V. March 101 Wellington r. jNIcIntosli 215 AVells V. Masterman 102 V. Turner 107 Wesson v. Newton 114 West V. Skip 90, 97, 261, 401 Westcott V. Tvson 175 Westerdell v. Dale 455 Westerlo r. Evertson 219 Western Bank of Scotland v. Needed 159 Western Stage Co. v. Walker 123 Weston V. Barton 246, 247 Wetmore v. Baker 58 Weyer v. Thorn burgh 363, 376, 380 Wheatcroft v. Hickman 70 Wheatlev r. Caliioun 93 Wheeler f. Bice 133 V. Sage , 174 Wheelwright v. Depeyster 454 Whitakcr v. Brown 132 Wliitcomb r. Whiting 107, 323, 324 White V. Ansdell 218 t-. Harlow 219 V. Jones 2G1 V. Smith 167 V. Tudor 322 V. Woodward 264 Whiteliead v. t'hadweirs Adm'r 376 Whitfwright v. Stimpson 228 Wiiitley r. Lowe 233, 324 « Whitman r. B. & M. R. R. Co. 93 V. Leonard 65, 298, 305, 322 «. Robinson 330 Whitmore, A'.r jxirte 152, 370 Wldtnoy i: Dutcli 255 V. Ladd 2(U r. Munroe 2G4 WliittiMiton Mills r. Upton 14 Whittle >;. M'Farlane 182, 185. 331 Whitwell V. Terrin 455 Wiiit worth V. Harris 189 Wickham >: AVickhara 107,388 Wigirin /-. Ciimiiigs 219 r. 'i'udor 168 Wightniari r. Townroe 70 Wilhraham v. Snow 263 Wilcox V. Kellogg 301 V. Wilcox 93 Wild >: Dean 370 >: ]Milnc H50 Wilder. K.cp 142 Wildes ?'. ('ha|)rnan 359 Wildes V. Ee.sHendcii 155 Wililtnan, Kr iKirtr SH5 NVilkins r. IVarcx- 103 Wilkinson v. Frasier V. Henderson V. Page Wilks V. Davis Willett.r. Blanford V. Chambers Section 32,42 253, 362 215 215 329, 343, 349 74, 75, 108, 132 William Bagaley, The 453 Williams, Ex parte 97, 263, 322, 325, 326, 346, 358, 359, 360, 361, 362, 368, 370, 372, 394, 401, 402, 403 V. Attenborough 82, 231 V. Barton 218 V. Bingley 227 V. Bramhall 132 V. Brimhall 395 V. Butler 86 V. Everett 254 V. Henshaw 219 V. Jones 6, 146, 152, 194 V. Keats 160, 335 V. Love 93 V. Soutter 67 V. Williams 212 V. Wilson 99 Williamson v. Fox 161 V. Johnson 142 Willings V. Blight 428, 434 Wilhs V. Dvson 123, 130 V. Freeman 93, 263 Willison V. Patteson 9 Wilmer v. Currey 362 Wilsford V. Wood 244, 254 Wilson V. Conine 261 V. Cutting 219, 449 V. Dickson 453 V. Filchter 330 V. Greenwood 207, 208, 228, 229, 231, 313, 322, 325, 329, 330, 346, 396 V. Hunter 93, 122 V. Ixeed 449 V. Uobertson 358 V. Soi)er 101, 346 V. Wallace 241 V. Whitehead 148, 149 V. Williams 127, 132, 133 Winch V. Keelcy 372 Winship v. Bank of U. S. 55, 63, 102, 103, 105 Winsor v. ( 'utts 44 V. Savage 182 Winter v. Innes 158, 263, 323, ?24 b ('. White 219 Wintle V. Crowthcr 133 Wish V. Small 32, 41, 45 Wiihim,'tMn r. Herring 41, 45 Withncll r. (J.Mi-tham 125 Wiltcr V. Uichards 263 Woddrop V. \Vard 376 Wolbert (;. Harris 228 Wootl, Ex pane 371 , 376, 404 INDEX TO CASES CITED. XXXV Wood V. Bracldick V. Duke of Argyll I'. Gault V. Holbeck V. Merritt V. O'Kelley V. Pennell V. Robson V. Rutland Ins. Co. V. Scoles V. Shepherd V. A'allette V. "Wilson Woodbridge v. Swann Woodward v. Cowing Wooldridge i'. Wilkins Worrall v. Grayson Wray v. Hutchinson v. IMilestone Wren v. Kirton Wrexham v. Huddleston 218 Section 324, 344 65, 1.50 268 133 449 241 65 215 254 182 114 38, 49, 67 215 328, 342 75, 89, 94 93 219 , 219, 287, 288, 292 218, 219 I 82 292, 295 Section Wright V. Cumpsty 219 V. Hunter 454 V. Miehie 219 V. Pulhara 160 V. Russell 250, 251 Wrightson v. Pullan 160 Wyatt V. Marquis of Hertford 455 Wycoff r. PurneU 219 Wylie V. Wylie 93 Yale V. Eames Yarnell v. Anderson Yates V. Bell Yeatman v. Woods Yonge, Ex parte Young, Ex parte V. Axtell V. Hunter 160 158 254 93 181, 892, 406 208, 348, 417, 442, 443, 444 61, 64, 65, 68 147, 150, 387 LAW OF PARTNERSHIP. COMMENTARIES ON PARTNERSHIP. CHAPTER L PARTNERSHIP WHAT CONSTITUTES. { § 1. Partnership and agency. 2. Definition of partnership. 3. Partnership founded in contract. 4. Roman law. 5. Delectus personarum. 6. Partnership must be founded in good faith, and for a lawful purpose.} § 1. Having completed our Review of the Law of Agency, we are naturally conducted, in the next place, to the consideration of the La\y of Partnership ; for every Partner is an agent of the Partnership ; and his rights, powers, duties, and obligations, are in many re- spects governed by the same rules and principles, as those of an agent. A partner, indeed, virtually em- braces the character both of a principal and of an agent. ^ So far as he acts for himself and his own inter- est in the common concerns of the partnership, he may ^ { " The law as to partnership is undoubtedly a branch of the law of prin- cipal and agent; and it would tend to simplify and make more easy of solution the questions which arise on this subject, if this true principle were more constantly kept in view. Mr. Justice Story lays it down in the first section of his work on Partnership." Per Lord Wensleydale, in Cox v. Hickman, 8 H. L. Cas. 268, 312.} 4 PARTNERSHIP. [cHAP. 1. properly be deemed a principal ; and so far as he acts for his partners he may as properly be deemed an agent. ^ The principal distinction between him and a mere agent is, that he has a community of interest with the other partners in the whole property and business and responsibilities of the partnership ; whereas an agent, as such, has no interest in either. Pothier con- siders partnership, as but a species of mandate, saying : Contractus societatis, non secies ac contractus man- dati.^ § 2. Partnership, often called copartnership, is usu- ally defined to be a voluntary contract between two or more competent persons to place their money, effects, labor, and skill, or some or all of them, in lawful com- merce or business, with the understanding, that there shall be a communion of the profits thereof between them,^ Pufendorf has given a definition substantially the same. Contractus societatis est, quo duo phiresve inter se j^ecuniam, res, aut oi^ras conferunt, eo fine, ut quod inde redlt lucri inter singulos jiro rata dividatur^ Pothier says, that partnership is a contract, whereby two or more persons put, or contract to put, something in common to make a lawful profit in common, and recip- rocally engage with each other to render an account thereof:^ or, as he has expressed it in another place, Societas est contractus de conferendis bona fide rebus aut operis, anlmo lucri quod lionestum sit ac licitum in commune faciendi.^ Domat says, that partnership ' Baring r. Lyman, 1 Story, 396. " Potli. Pand. 17, 2, Intr. ' 3 Kent, 23, 24 ; Wats, on V. 1, 2d ed. ; Gow on T. 1, 3d cd. ; Coll. on P. B. 1, 0. 1, p. 2, 2d ed.; Mont, ou P. B. 1, Pt. 1, p. 1, 2d ed. [Noyes v. Cushman, 25 Vt. 390.] ♦ Puf. Law of Nat. B. 5, c. 8, § 1 ; AVats. on P. 2, 2d ed. ; Gow on P. c. 1, p. 1, 3d ed.; Waiigh v. Carver, 2 II. BI. 23.0, 21G. ' Poth. de Soc. art. prel. n. 1. « Poth. Puud. 17, 2. CHAP. I.] WHAT CONSTITUTES. 5 is a contract between two or more persons, by which they join in common either their whole substance or a part of it, or unite in carrying on some commerce, or some work, or some other business, that they may share among them all the profit or loss, which they may have by the joint stock, which they have put into part- nership.^ Vinnius says : Societas est contractus^ cfiio in- ter aliquos res aut o^Jerce communicantur ^ lucri in com- mune faciendi gratia.^ The Civil Code of France defines it thus : Partnershi]) is a contract, by which two or more persons agree to put something in common, with a view of dividing the benefit which may result from it.^ Lan- guage nearly equivalent has been adopted by many other foreign writers.'* § 3. Let us consider some of the more important ingre- dients, which are involved in this definition or description of partnership, and may be said to constitute its essence. In the first place, it is founded in the voluntary contract of the parties, as contradistinguished from the relations which may arise between the parties by mere operation of law, independent of such contract.^ Vinnius on this point says : Societas est consortium voluntarlum ; nisi enim consensu et tractatu de ea re habito communio sus- cepia sit, non est societas.^ There are many cases in which ' Domat, Civ. Law, 1, 8, 1, art. prel. ^ Vinn. ad Inst. 3, 2G, Intr. ^ Code Civil, art. 1832. * J. Voet, Comm. 17, 2, § 1 ; Ersk. Inst. B. 3, tit. 3, § 18 ; Tapla, Elem. de Jur. Merc. p. 86, § 1, ed. Madrid, 1829 ; 5 Duvergier, Droit Civil Franc, tit. 9; Contr. de Soc. c. 1, n. 17, p. 31, 32; Persil, des Soc. Comm. n. 2, p. 6, 7; 2 Bell, Comm. B. 7, p. 611, 5th ed. ; -1 Pardessus, Droit Comm. art. 966 ; Van Leeuwen's Comm. c. 23, § 1 ; Asso & Manuel, Inst, of Laws of Spain, B. 2, tit. 15. * 4 Pardessus, Droit Comm. art. 969, 973; 5 Duvergier, de Soc. n. 33, 39, 40, 65; 17 Duranton, Droit Franc. Liv. 3, tit. 9, art. 320; Coll. on P. B. 1, c. 1, § 1, p. 4, 2d ed. ; Wats, on P. c. 1, p. 5, 6, 2d ed. ; Id. 27. ^ Vinn. ad Inst. 3, 26, Intr. 6 PARTNERSHIP. [cHAP. I. a community of interest is created by law between par- ties, as, for example, in cases of joint tenancy or tenancy in common in lands, or goods, or chattels, under devises and bequests in last wills and testaments, and deeds and donations inter vivos, and inheritances and successions. But no partnership arises therefrom ; for they are not strictly founded in contract, although they may exist by the original or subsequent consent of the parties who re- ceive the benefit thereof.^ It has been well said by Pothier, that partnership and community are not the same thing. La societe ei la communauU ne sont pas meme chose.^ The first is founded upon the contract of the parties, which thus creates the community ; the last may exist independent of any contract whatsoever. And Pothier goes on to illustrate the distinction by putting the cases of joint heirs and joint legatees, where there is a community of interest, but there is no partnership.^ Another illustration may be seen in the case of the part- owners of a ship, who are treated as tenants in common thereof, each having a distinct although an undivided in- terest in the whole. They thus may properly be said to have an undivided interest in the ship ; and yet that mter- est does not make them partners."* So, if two joint own- ers of the merchandise should consign it for sale abroad to the same consignee, giving him separate instructions, each for his own share, their interests are several, and 1 See 2 Bl. Comm. 180-188 ; Id. 399, 400; Com. Dig. Estates, K. 1, K. 6 ; Story on Ag. § 39 ; Wats, on P. c. 1, p. 5, 6, 2d ed. ; 3 Kent, 25. * Poth. de Soc. n. 2. See 5 Duvergier, de Soo. n. 33-35, 40; 4 Par- dessus, Droit Comm. art. 969 ; 17 Duranton, Droit Franc, art. 320. 3 Poth. de Soc. n. 2, n. 182-184; Voet, ad Pand. 17, 2, n. 2, Tom. 1, p. 748. " Abbott on Ship. Pt. 1, c. 3, p. 68, ed. 1829 ; Wats, on P. c. 1, p. 5, 6; Id. c. 2, p. 6 7, 2d ed.; 3 Kent, 25; Ersk. Inst. B. 3, tit. 3, §18; 2 Bell, Comm. p. 655, 5th ed. ; 1 Stair, Inst. B. 1, tit. 16, § 1, p. 156 ; Porter v. M'- Clure, 15 Wend. 187. [Noyes v. Cushman, 25 Vt. 390.] CHAP. I.] WHAT CONSTITUTES. 7 they are not to be treated as partners in the adven- ture.^ The same result takes place, where a purchase is made for several distinct persons by a broker or other agent of certain goods, each being to take a certain por- tion, or quantity, but they are not to be sold for their joint account or profit. In such a case no partnership exists, although there is a community of interest in the goods purchased.^ In short, every partnership is founded in a community of interest ; but every community of in- terest does not constitute a partnership ; or, as Duranton expresses it : La soeiete aussi lyroduit une communcmte ; en un mot, toute soeiete est Men une communcmte ; mais toute communaute n'est 2^oint une soeiete. II f aid pour eela la xiolonte des jyarties.^ § 4. The Roman Law has recognized the same distmc- tion : lit sit pro soeio aetio, societatem intereedere oportet; nee enim sufficit rem esse communem, nisi societas inter- eedit. Communiter autem res agi potest etiam citra socie- tatem ; id puta, cfum non affectione societcdis ineidimus in communionem,, id evenit in re duohus legata; item si a duohus simid emp)ta res sit ; aid si hereditas vel doncdio communiter nobis ohvenit ; aid si a duohus separatim emimus partes eorum^non soeiifuturi} Nam cum trac- tatu hahiio societas co'ita est, pro socio aetio est; cuin sine tractatu in re ipsa et negotio, communiter gestiim ' Hall V. Leigh, 8 Cranch, 50 ; Jackson v. Robinson, 3 Mason, 138. {See § 27, 30.} [So, where two persons agree to divide the profit and loss upon the purchases and sales of certain articles of merchandise, each person to make his own purchases and sales, and entirely with his own funds, and in his own name, they ai'e not partners either to third persons, or inter sese. Smith V. Wright, 5 Sand. 113. And see Pattison v. Blanchard, 1 Seld. 186.] * Hoare r. Dawes, Doug. 371 ; Coope v. Eyre, 1 H. Bl. 37 ; 3 Kent, 2.5 ; Gibson v. Lupton, 9 Bing. 297 ; Holmes v. Unit. Ins. Co. 2 Johns. Cas. 329, 331. 3 17 Duranton, Droit Franc, art. 320; Poth. de Soc. n. 2. * D. 17, 2, 31 ; Poth. Pand. 17, 2, n. 30 ; Vinn, ad Inst. 3, 26, lutr. 8 PARTNERSHIP. [cHAP. I. videtur} And again: Qui nolunt inter se contendere, Solent per nuntiiim rem emere in commune, quod a socie- tate longe remotum est.^ § 5. Hence it is an established principle of the com- mon law, that as a partnership can commence only b}^ the voluntary contract of the parties, so, when it is once formed, no third person can be afterwards introduced into the firm, as a partner, without the concurrence of all the partners, who compose the original tirm.^ It is not suffi- cient to constitute the new relation, that one or more of the firm shall have assented to his introduction ; for the dissent of a single partner will exclude him, since it would, in effect, otherwise amount to a right of one or more of the partners to change the nature, and terms, and obligations of the original contract, and to take away the delectus personce, Avhich is essential to the constitu- tion of a partnership.'* So stubborn indeed is this rule, that even the executors and other personal representa- tives of a partner do not, in that capacity, succeed to the state and condition of that partner.^ The Roman law is direct to the same purpose. Qui admittitur socius, ei iantum socius est, qui adynisit; et recte; cum enim soci- etqs consensu contrahatur, socius 7nihi esse non potest, quem ego socium esse nolui. Quid ergo, si socius mens eum admisit f Ei soli socius est.^ It even pressed the ' D. 1 7, 2, 32 ; Poth. Pand. 1 7, 2, n. 30. See also 1 Swans. 509, note (a). ^ D. 17, 2, 33. 3 { See § 307-309, and note at end of chap. Iv.| [But if the term of the partnership has expired, the interest of one partner therein may be assigned to a stranger, and such assignee may maintain a bill for an account against the other partners. Mathewson v. Clarke, 6 How. 122.] * Coll. on P. B. 1, c. 1, § 1, p. 4, 5, 2d ed. ; Ex parte Barrow, 2 Rose, 252, 255 ; Crawshay v. Maule, 1 Swans. 508, 509, and the learned note of the Reporter, n, (a), p. 509 ; Putnam v. Wise, 1 Hill, (N. Y.) 234. s Ibid. « D. 17, 2, 19 ; Poth. Pand. 17, 2, n. 28 ; 1 Domat, 1, 8, 2, art. 5; Poth. de Soc. n. 145. See 1 Swans. 509, note (a). CHAP. I.] WHAT CONSTITUTES. 9 rule to a still further extent, and held, that a positive stipulation between the partners at the commencement of the partnership, that the heir or personal representa- tive of a partner should succeed him in the partnership, was inoperative and incapable of being enforced. Adeo morte socii solmtur socieias, ut nee ah initio pacisci pos- simius, ut helves succedat societati. Nemo potest societa- tem heredi suo sic parere, ut ipse heres sociiis sit} The common law, however, treats such a stipulation as valid and obligatory.^ This also, according to Pothier, was the doctrine of the old French law ; ^ and the modern code of France has expressly adopted it, in opposition to the Roman law."* Such also is the law of Scotland.^ § 6. It is also upon the like ground, that partnership is a contract founded purely upon the consent of the parties, that jurists are accustomed to attach to it the ordinary incidents and attributes of contracts. It is ac- cordingly treated by them, as in its very nature and character a contract arising from and governed by the principles of natural law and justice.^ Accordingly it must, in the first place, be founded in good faith and the positive consent of the parties ; secondly, it must be for a lawful object and purpose ; and thirdly, it must be between parties sui juris and competent to enter into such a contract. John Voet therefore affirms : Societas est contractus juris gentium, bonce fidei, consensu con- stans, super re honesta, de htcri et damni communione ; quam inire possunt omnes liheram hahentes rermn > D. 1 7, 2, 59 ; Id. 1 7, 235 ; Poth. Panel. 1 7, 2, n. 56, 35 ; 1 Domat, 1 , 8, 2, art. 4. 2 Coll. on P. B. 1, c. 1, § 1, p. 5, 6, 2d ed, ; 2 Bell, Comm. G34, 5th ed. {See§196.{ ^ Potli. de Soc. n. 145. * 1 Locre, Esprit du Code de Comm. tit. 3, art. 18, n. 3, p. 106; Code Civil, art. 1868; 17 Duranton, Droit Franc, de Soc. n. 471; 5 Duvergier, Droit Civil Franc, de Soc. n. 433, 444. * 2 Bell, Comm. 620, 5th ed. « Poth. de Soc. n. 4. 10 PARTNERSHIP. [cHAP. I. suarum adminisirationem} Hence, if the contract be founded in fraud or imposition, either upon one of the parties, or upon third persons, it is utterly void.^ And on this point the Roman law speaks the general sense of nations, Societas, si dolo Tnalo, aid frcmdandi causa coita sit, iijso jure mdlius momenti est; quia fides bona contraria est fraudi et dolo^ And again : Quia nee societas aid mandaium fiagitiosce rei ullas vires hahet^ The same rule applies to cases, where the partnership is for immoral or illegal purposes,^ or is in contravention of the positive law,*^ or of the public policy of the country. Thus, if the partnership be for illegal gaming,' or illegal insurances, or wagers, or to carry on contra- band trade, or to support a house of ill-fame or de- baucherv ; in these and the like cases, the contract will be deemed a mere nullity, and is equally denounced, as such, by the Roman law, and the foreign law, and the common law.^ The Roman law is very expressive on ' 1 Voet, Comm. 1 7, 2, § 1 . See also Poth. de Soc. n. 4. ^ 1 Story, Eq. Jur. § 222-240. {See § 285.} 3 D. 17, 2, 3, 3; Poth. Pand. 17, 2, n. 1. " D. 18, 1, 35, 2; Poth. Pand. 18, 1, n. 15; Id. 17, 2, n. 5; 1 Voet, ad Pand. 17, 2, n. 7, p. 750. = [See McPherson v. Pemberton, 1 Jones, (N. C.) 378.] « [Gordon v. Howden, 12 CI. & Fin. 237.] '' [See Watson v. Fletcher, 7 Gratt. 1.] 8 Gow on P. c. 1, p. 4, 5, ed. 1837 ; Coll. on P. B. 1, c. 1, § 1, p. 29-54, 2d ed. ; Wats, on P. c. 1, p. 35-46 ; 3 Kent, 28 ; Poth. de Soc. n. 14; Story, Confl. of Laws, § 244-260 ; 1 Bell, Comm. p. 297-306, 5th ed. ; Code Civil of France, art. 1833; 17 Duranton, Droit Civil Franc, de Soc. tit. 9, c. 1, § 1, n. 327; 5 Duvergier, Droit Civil Franc. 9, de Soc. c. 1, n. 24, 25. { See Lind. on P. 136-162. A traditionary case of a bill in equity brought by one highwayman against another for an account is given in 2 Poth. on Obi. (Evans' ed.) 3, n. The use of a fictitious name is not illegal. Aubin v. Holt, 2 Kay & J. ^^-^ Lewis v. Langdon, 7 Sim. 421. But see Thornbury v. Bevill, 1 You. & C. C. C. 554. Under a statute requiring every person car- rying on the business of pawnbroking to have his name printed over the door of his shop, an agreement for a pawnbroking partnership with dormant mem- bers was held illegal. Armstrong v. Armstrong, 3 RIyl. & K. 45, 53 ; Arm- CHAP. I.] WHAT CONSTITUTES. 11 this point. Nee enwi ulla societas male/lciorum, vel communicaiio justa damni ex malejicio est} Again: Quod autem ex furto vel ex alio mcdejicio qucesitum est, in societatetji non o2)ortere conferri, pcdam est ; quia delictorum turpis atque foeda communio e'st.^ strong V. Lewis, 2 Cr. & M. 274. Under a statute forbidding any person, not duly qualified, from acting as an attorney, it has been held, that an unqualified person may receive a share of an attorney's profits, if he does not receive them in consideration of acting as an attorney, e. g. if such person is the widow of a deceased partner. Candler v. Candler, Jac. 225 ; Stei'ry v. Chfton, 9 C. B. 110; Scott v. Miller, H. R. V. Johns. 220. See Raynard v. Chase, 1 Burr. 2. But an agreement between a qualified and an unqual- ified person to carry on the business of attorneys is illegal ; Williams v. Jones, 5 B. & C. 108, even if the agreement be that the unqualified person shall re- ceive a share of the profits as salary, and shall not be a partner. Tench v. Roberts, (J Madd. 145; Re Jackson, 1 B. & C. 270. On the question whether joint stock companies are illegal, see § 164. The members of an illegal partnership have no remedies against each other in respect to the illegal transactions; either at law, De Begnis v, Arraistead, 10 Bing. 107 ; or in equity, Stewart v. Gibson, 7 CI. & Fin. 707 ; Ewing V. Osbaldiston, 2 ]\Iyl. & C. 53 ; Bartle v. Nutt, 4 Pet. 184. How far this rule applies to collateral transactions the immediate consideration of which is not illegal seems not clearly settled. Metcalf on Contr. 262-269. Meri-yweather v. Nixan, and notes, 2 Sm. Lead. Cas. 456. See Brooks v. Martin, 2 Wallace, 70; Brown v. Tarkington, 3 Wallace, 377.} ' D. 27, 3, 1, 14 ; Poth. Pand. 17, 2, n. 5. D. 17, 2, 53 ; Poth. Pand. 17, 2, n. 18. 12 PARTNERSHIP. [chap. H. CHAPTEE 11. WHO MAY BE PARTNERS. I § 7. Infants and lunatics. 8. Foreign law. 9. Aliens. 1 0. Rights of married women at law. 11. In equity. 12. Whether a married woman can be a partner. 13. Roman law. 14. Foreign law. Note. — Corporations. } § 7. In the next place, as to the persons who are capable of entering into a partnership. The general rule of the common law is, that every person of sound mind, sui jtiris,^ and not otherwise restrained by law, may enter into a contract of partnership.^ As to infants, they are not by the common law incapable of enter- ing into a partnership, since it cannot be universally affirmed, that it may not be for their benefit.^ And here we have another illustration of the analogy between partnership and other common contracts ; for although the contract of partnership by an infant is not abso- ' { A partnership is not dissolved by the lunacy of a partner, see § 295- 297; therefore a lunatic may he a partner. Whether a contract by a lunatic to become a partner can in all cases be avoided by him, is perhaps unsettled. In England it is held, that if one contracts with a lunatic, not knowing him to be so, and the contract is executed, the lunatic cannot avoid it. Molton v. Camroux, 2 Exch. 487; s. c. 4 Exch. 17; but this doctrine has not been universally adopted in America. Seaver v. Phelps, 11 Pick. 304.} 2 Coll. on P. B. 1, c. 1, § 1, p. 8, 2d ed. ; Gow on P. c. 1, p. 1, 2, 3d ed. 1837; 1 Story, Eq. Jur. § 222-239. « See Goode v. Harrison, 5 B. & Aid. 147, 156-159; 1 Story, Eq. Jur. § 240-243 ; [Dana i'. Stearns, 3 Cush. 3 72.] CHAP. II.] WHO MAY BE PARTNERS. 13 liitely void ; yet it is not, on the other hand, positively binding upon him, but is voidable, and may be avoided by him, when he comes of age, according to the known distinction, so well stated by Lord Chief Justice Eyre, that such contracts made by an infant, as the Court may pronounce to be to his prejudice, are merely void ; such as are of an uncertain nature as to the benefit or pre- judice, are voidable only, and it is at the election of the infant to affirm them or not ; and such as are clearly for his benefit (as a contract for necessaries), are valid and obligatory.^ If an infant, however, engages in a partnership, he must at or within a reasonable time after his arrival of age notif}' his disaffirmance thereof, otherwise he will be deemed to have confirmed it, and will be bound by subsequent contracts made on the credit of the partnership.^ If, upon his arrival of age, he elects to continue the partnership, and does continue it, he will be then held liable as a partner.^ Indeed, if an infant should hold himself out as a partner during his infancy, although in reality not so, and should not after his arrival of age notify his disaffirmance thereof, he would be liable to third persons, trusting the part- nership, to the same extent, as if he were actually a partner; for his conduct would, under such circum- stances, amount to a delusion or deceit upon such third ' Keane v. Boycott, 2 H. Bl. 511, 514, 515; Corayns, Dig. Enfant, B. 5, 6, C. 1-4, 9 ; Holmes v. Blogg, 8 Taunt. 35 ; Id. 508 ; 1 Story, £q. Jur. § 240-242; Baylis v. DIueley, 3 M. & S. 477; Tucker v. Moreland, 10 Pet. 58, 66-70 ; 2 Kent, 233-245. ^ {If an infant pays a premium on entering a partnership, and before com- ing of age disaffirms the contract, he cannot recover the premium back. Ex parte Taylor, 8 De G. M. & G. 254. But see Corpe v. Overton, 10 Bing. 252.} 2 Goode V. Harrison, 5 B. & Aid. 147, 156-160; Holmes v. Blogg, 8 Taunt. 35 ; Thompson v. Lay, 4 Pick. 48 ; 2 Kent, 233-245 ; [Miller v. Sims, 2 Hill, (S. C.) 479.] 14 PARTNERSHIP. [cHAP. II. persons ; and where one of two innocent parties must suffer, he ought to do so, whose negligence or misconduct has occasioned the loss.^ § 8. The like principle will be found recognized in the foreign law. The essence of the contract of part- nership, like that of other contracts, consisting in con- sent, it follows, that if a person is incapable of giving his consent, he is not bound by the contract.^ And Pothier says, that this rule equally applies to cases of partnership, as to other cases of contract.^ Hence per- sons of unsound mind, or in a state of drunkenness, or under guardianship, or otherwise incapable, as are luna- tics, minors, and prodigals, cannot become partners.'' The French law holds minors and persons under guar- dianship as rather incapable of binding themselves by contract, than incapable of contracting. They may oblige others to them ; although they cannot oblige themselves to others ; ^ and so is the doctrine of the Institutes. Ncmicfiie placidt meliorem qiiidem concli- tionem licere eis facere, etiam sine tutoris auctoritate.^ The Scottish law adopts a similar doctrine.'' § 9. As to aliens, there is no doubt, that alien friends may lawfully contract a partnership in one country, although some or all of the partners are resident in another country. But alien enemies are disabled dur- ing war from entering into any partnership with each other, as indeed they are from entering into any other commercial contract.^ A state of hostility puts an end ^ Goode V. Harrison, 5 B. & Aid. 147, 152, 157, 158. See also Fitts r. Hall, 9 N. H. 441 ; [Bingham on Infancy (Bennett's ed.) and note.] {On the question whether if an infant partner disaffirms a contract, the contract can be treated as the separate contract of the other partners, see § 255. } 2 Poth. Obi. n. 49-53. •■' Poth. de Soc. n. 77; 17 Duranton, Droit Franc, n. 321. ^ Poth. Obi. n. 49-53. ^ Pq^Ij Qbl. n. 52. « Inst. 1, 21, Intr. ' 2 Bell, Comra. 624, 5th ed. « Coll. on P. B. 1, c. 1, p. 9, 2d ed. CHAP. II.] WHO MAY BE PARTNERS. 15 to the rights of commercial intercourse, trade, and busi- ness between the respective subjects of the belligerent nations, who are domiciled therein.^ Nay, the principle goes further, and an antecedent partnership, existing between persons domiciled in different countries, is dissolved by the breaking out of war between those countries ; for the whole rights, duties, obligations, relations, and interests of the partnership, as such, become changed thereby, and the objects of the partner- ship are no longer legally attainable, or capable of exe- cution.^ § 10. As to married women, they are by the com- mon law incapable of forming a partnership, since they are disabled generally to contract, or to engage in trade.^ It sometimes, however, happens in practice, that, with the consent of their husbands, they become entitled to shares in banking partnerships, and other commercial establishments ; but in such cases their husbands are entitled to their shares, and become part- ners in their stead."* There are, however, some excep- tions to this rule, even at the common law. Thus, for example, by the custom of London, a married woman » 1 Kent, 66-69 ; Potts v. Bell, 8 T. R. 548 ; Wlllison v. Patteson, 7 Taunt. 439; The Indian Chief, 3 Rob. 22; The Jonge Pieter, 4 Rob. 79; The Franklin, 6 Rob. 127; Griswold v. Waddington, 15 Johns. 57; s. c. 16 Johns. 438; Ex parte Boussmaker, 13 Ves. 71 ; The Rapid, 8 Cranch, 155; The Julia, Id. 181 ; Seholefield v. Eichelberger, 7 Pet. 586. * Griswold r. Waddington, 16 Johns. 438. — The masterly judgment of Mr. Chancellor Kent in this case examines and exhausts the whole learning on the subject. See also, 1 Domat, 1, 8, 5, art. 11, 12, 15. {See § 315, 316, and Clemonston r. Blessig, 11 Exch. 135, n.} * 2 Kent, 54-64. {Marriage of a female partner dissolves a partnership, § 306.} * Gow on P. 2, 3d ed. 1837; Coll. on P. B. 1, c. 1, § 1, p. 9, 10, 2d ed. ; Cosio V. De Bernales, 1 Car. & P. 266 ; s. C. Ry. & M. 102 ; 1 Story, Eq. Jur. § 243 ; 2 Ibid. § 1367-1373 ; 1 Bl. Comm. 442-444 ; Wats, on P. c. 7, p. 384, 2d ed. 16 PARTNERSHIP. [chap. U. is authorized to carry on trade as a feme sole ; and thence it has been inferred, that she may enter into a partnership in her trade in that city.^ So, a wife may acquire a separate character and power to contract by the civil death of her husband, as by his exile, banish- ment, profession, or abjuration of the realm. ^ The same rule has been applied, where the husband has, in pursuance of a criminal sentence, been transported to foreign parts for a term of years.^ The ground of these exceptions is, that, by operation of law, the husband is disabled to return ; and his matrimonial rights are therefore consequently suspended during his exile, ban- ishment, or transportation.'* In the cases of abjuration and profession he is treated as civiUter mortuus.^ The same rule has also been applied in England to the case of a w^oman, the wife of a foreigner, who had never been in England, who was thereby held entitled to contract, and to sue and be sued as 3. feme sole.^ § 11. Such is the doctrine of the common law in respect to married women. But a far more extended rule is adopted in Courts of Equity, w^here, if the wife possesses or is entitled to any property for her sole and separate use, either by agreement with her husband, or ' Coll. on P. B. 1, c. 1, § 1, p. 10. See Beard ». Webb, 2 B. & P. 93 ; Burke v. Winkle, 2 S. & R. 189 ; 2 Roper on Husb. & W. c. 16, § 5, p. 126, 127. 2 Beard v. Webb, 2 B. & P. 93, 105; Lean v. Schutz, 2 W. Bl. 1195 ; 1 Bl. Comm. 443 ; 2 Roper on Husb. & W. c. 16, § 5, p. 123, 124. ' 2 Roper on Husb. & W. c. 16, § 5, p. 123, 124 ; Sparrow v. Carruthers, cited 2 W. Bl. 1197, and in Corbett v. Poelnitz, 1 T. R. 5, 7, and in De Gail- Ion V. L'Aigle, 1 B. & P. 357 ; Carrol r. Blencow, 4 Esp. 27; s. c cited in Boggett V. Frier, 11 East, 303 ; Marsh v. Hutchinson, 2 B. & P. 226, 231-233 ; Clancy on Married Women, c. 4, p. 54-56, 63; Co. Litt. 133 a, 133 b ; Gregory v. Paul, 15 Mass. 31 ; 2 Kent, 154-164. * Ibid. * Marsh r. Hutchinson, 2 B. & P. 231. ^ De Gaillon v. L'Aigle, 1 B. & P. 35 7 ; Kay v. Duchesse de Pienne, 3 Camp. 123 ; Gregory v. Paul, 15 Mass. 31 ; Abbot v. Bayley, 6 Pick. 89. CHAP. II.] "WHO MAY BE PARTNERS. 17 otherwise, she is generally treated, as to such property, as a feme sole, and may dispose of the same accordingly, and bind herself by contract touching the same.^ A full discussion of this topic properly belongs to a trea- tise on the jurisdiction of Courts of Equity.^ It may, however, be proper here to state, that if, by an ante- nuptial or postnuptial agreement for a valuable con- sideration, the husband contracts to allow his wife to carry on trade for her sole and separate use, if the property is vested in trustees, it will be held secure against the husband and his creditors even at law ; and, if no trustees are interposed, it will be open to the like protection in equity.^ If the agreement is voluntary, it will be good, and will be enforced in equity against the husband ; but not against his creditors.^ In like manner, if a husband should desert his wife, and she should be enabled, by the aid of her friends, to carry on a separate trade (such as that of a milliner) for her own support, and that of her family, her earnings in that trade will, in equity, be held to belong to her sepa- rate use, and be enforced accordingly against the claims of her husband,^ § 12. Although, as we have seen,^ it has been thought, that a feme covert, having authority to carry on trade as ^feme sole, by the custom of London, may enter into, a partnership in such trade ; yet it does not appear 1 2 Story, Eq. Jar. § 1370-1402 ; 2 Kent, 162-172. 2 2 Story, Eq. Jiir. § 13 70-1402. 3 2 Story, Eq. Jur. § 1385, 1387; 2 Roper on Husb. & W. c. 18, §4, p. 16 7—175. * 2 Story, Eq. Jur. § 1386, 1387; 2 Roper on Husb. & W. c. 18, § 4, p. 167-175. '= 2 Story, Eq. Jur. § 1387; 2 Roper on Husb. & W. c. 18, § 4, p. 174, 175 ; Cecil v. Juxon, 1 Atk. 278 ; Lamphir v. Creed, 8 Ves. 599 ; Coinyns' Dig. Chancery, 2 M. 11. « Ante, § 10. 2 18 PARTNERSHIP. [cHAP. II. ever to have been decided, that the authority of a ferae covert to carry on trade as a feme sole, arising from the consent or agreement of her husband, positively entitles her to engage in a partnership in the trade. If, indeed, the trade cannot otherwise be carried on, either neces- sarily, or conveniently, or beneficially, his consent to the partnership might, perhaps, be inferred. But the con- sent of the husband, that his wife may carry on trade for her sole and separate use, does not necessarily im- port, that she may involve herself in the complex trans- actions, responsibilities, and duties of partnership. In cases where the law treats the marriage as suspended, and entitles her to act as ?ifer)ie sole (as in cases of ban- ishment, abjuration, or transportation), there may be just ground to presume, that, as she is thereby generally restored to her rights as a feme sole, she may enter into a partnership in trade. But the question never having undergone any direct adjudication, must be deemed still open for discussion and decision.^ § 13. In the Roman law the same positive union and unity of rights and interests between husband and wife are not recognized, which exist under the common law ; ^ for in the Roman law, the husband and wife * { Under a statute of Massachusetts, Gen. Sts. c. 108, §1,3, -which pro- vides that a married woman may sell her separate property, enter into any contracts in reference to the same, and carry on any trade or business on her sole and separate account in the same manner as if she were sole, it has been held, that a woman may belong to a trading partnership, if her husband is not a member thereof, but not if he is a member, Plumer v. Lord, 5 All. 460; S. C. 7 All, 481 ; s, c, 9 All. 455; Lord v. Parker, 3 All, 127 ; Lord v. Davi- son, Id, 131 ; Edwards v. Stevens, Id. 315. If a married woman invests her separate property in a partnership business to be conducted by her and others, and property is bought and delivered to such partners, a mere trespasser can- not defend himself by denying her capacity to carry on such partnership busi- ness. Hornefler v. Duress, 13 Wis. 603. See Everit v. Watts, 10 Paige, 82 ; Atwood V. Meredith, 37 Miss. 635. See post, § 239.} 2 I Burge, Col. & For. Law, Pt, 1, c, 7, § 1, p, 263, 264 ; Poth, Pand. 1, 6, n. 9, 21. CHAP. II.] "VVHO MAY BE PARTNERS. 19 constitute separate and distinct persons, and are sepa- rately capable of contracting, under certain limitations and restrictions, with each other, as well as with third persons.^ Mr. Justice Blackstone has expressed the same doctrine still more broadly, and says : " In the civil law the husband and wife are considered as two distinct persons, and may have separate estates, con- tracts, debts, and injuries."^ Hence, the contracts of the husband did not bind the wife, unless she ex- pressly assented thereto. Frustra disputas (says the Code) de coniinctibus, cum marito tuo hahitis, utrumne jure steterint, an minime : turn iibi siifficicd, si 2^ro2)rio nomine nullum contr actum hahuisti, quominus pro marito tuo conveniri j^ossis.^ § 14. In the modern foreign law the same principle has been adopted with various modifications, adapted to local institutions, usages, and policy. The law of Scot- land most nearly approaches the English law. Inde- pendently of special contract, the husband and wife, by entering into marriage, are joined in the strictest society or partnership, which draws after it a communication of their mutual civil interests, styled, in that law, the com- munion of goods, and, in the foreign law generally, the property in community. During the marriage, the wife is placed under the direction of the husband, who has, jure metritis the sole authority of administering the prop- erty in communion ; and so absolute is this right, that he may solely dispose of the property, and it may be attached by his creditors. In consequence of this right and power, the husband becomes liable also to the personal debts of 1 See Domat, 1, 0, 6, art. 1-7 ; I BI. Comm. 444 ; AyllfTe's Pand. B. 2, tit. G, p. 81, 82 ; 1 Bro. Civ. & Adm. Law, 82 ; 1 Burge, Col. & For. X,a.w, B. 1, Pt. 1, c. 7, § 1, p. 263, 269, 272-274. 2 1 Bl. Comm. 444. => Cod. 4, 12, 1. 20 PARTNERSHIP. [cHAP. II. his wife.^ The wife does not seem entitled to enter into any contract independent of his consent. The law of France recognizes still more extensively the distinct char- acters and rights of the husband and wife. The husband and wife, independently of any special convention, hold their property in community, and the husband is the sole administrator of the property of the community.^ The wife can do no act in law without the authority of her husband, even though she shall be a public trader, or not in community, or separate in her property.^ Hence, she is incapable of contracting without his authority and con- sent.^ She cannot become a sole trader without his con- sent.^ But, if authorized by him to act as a sole trader, she may make herself liable for all the concerns of her mercantile transactions ; and in that case she also renders her husband liable, if there be a community of goods be- tween them.*" It has thence been supposed that his consent and authority may extend to a contract of partnership by her in trade.^ The law of Louisiana coincides with that of France.^ The law of Holland and of Spain, and proba- bly that also of most of the continental states of Europe, contains provisions in many respects similar.^ 1 Ersk. Inst. B. 1, tit. 6, § 12-18; 1 Bell, Comm. 631-G35, 5th ed. ; 1 Burge, Col. & For. Law, Pt. 1, c. 7, p. 423-462. 2 Code Civil, art. 1400, 1421. ^ Code Civil, art. 215, 217; Locrd, Esprit du Code de Comm. art. 4, p. 27-30. * Poth. Obi. n. 52. 5 Locre, Esprit du Code de Comm. tit. 1, art. 4, p. 26-29, 36-38, 42. ® Code de Comm. art. 4, 5 ; Code Civil, art. 220. 7 Poth. de Soc. n. 77. » Code of Louisiana, 1825, art. 121-131. 9 1 Burge, Col. & For. Law, Pt. 1, c. 7, § 2, p. 276, 293-303; Id. § 4, p. 413, 418-423. { Note. — There are dicta that a corporation cannot be a member of a partnership; Sharon Canal Co. v. Fulton Bank, 7 Wend. 412 ; Marine Bank V. Ogden, 29 111. 248. See Angell & Ames on Corp. § 272. In Van Kuren v. Trenton Co. 2 Beasl. 302, the point was raised, but not decided. In CHAP. II.] WHO MAY BE PARTNERS. 21 Whittenton Mills v. Upton, 10 Gray, 582, it was held, that a manufacturing corporation established under the laws of Massachusetts could not be a mem- ber of a partnership ; and the reasoning of the court seems applicable to all corporations. See Comm. v. Smith, 10 All. 448, 456. In Catskill Bank v. Gray, 14 Barb, 471, it was held, that a corporation might make itself liable to third persons by sharing the profits of a partnership; but in Whittenton Mills V. Upton, uii sup., Avhere a corporation and an individual had held themselves out as partners, it was held, that the corporation and the individual could not, on the petition of the latter, be put Into insolvency as a partnership. See, further, Conkling v. Washington University, 2 Md. Ch. 497.} 22 PARTNERSHIP. [cHAP. III. CHAPTER III. PARTNERSHIP BETWEEN THE PARTIES COMMUNITY OF INTERESTS. { § 15. Contribution of property or labor. 16. Community of partnership property. 1 7. Foreign law. 18. Communion of profit. 1 9. Whether communion of losses is necessary. 20. Roman law. 21. Modern law. 22. Statement of Pothier. 23. Equal sharing in profit and loss not necessary. 24. Presumption of equality. 25. Roman and foreign law. 26. French law. 27. There may be community of profits without community of property. 28. Doctrine of Pufendorf. 29. Doctrine of Pothier and of the Roman law.} § 15. In the next place, every partnership presupposes that there must be something brought into the common stock or fund by each party.^ But it is not necessary, that each should contribute or contract to contribute mon- ey, goods, effects, or other property, towards the common stock ; for one may contribute labor or skill, and another may contribute property, and another may contribute money, according as they shall agree.~ And for this there is good reason ; and it is well put in the Roman law : ^ 3 Kent, 24, 25. 2 Coll. on P. B. 1, c. 1, § 1, p. 10, 2d ed.; Peacock v. Peacock, 16 Ves. 49; Reid v. Hollinshead, 4 B. & C. 878; Meyer v. Sharpe, 5 Taunt. 74; Waugh V. Carver, 2 H. Bl. 235, 246 ; 2 Bell, Comm. B. 7, c. 1, p. 614, 5th ed.; 1 Stair, Inst. B. 1, tit. IG, § 2; Domat, 1, 8, 1, art. 7; Dob v. Halsey, 16 Johns. 34. [Dale v. Hamilton, 5 Hare, 393; Perry v. Butt, 14 Ga. 699.] CHAP. III.] COMMUNITY OF INTERESTS. 23 Plerumque enim tanta est indiistrna socii, ut plus societati confer at, quam pecunia ; item, si solus naviget, si solus 2)eregtnnefur, pericula siibeat solus} Sometimes it hap- pens, that each partner contributes only skill or labor, or services for the common benefit ; as, for example, hoiise- wrights, or shipbuilders, or riggers, who are partners ; or commission merchants, brokers, or other agents, whose partnership only extends to the profits of their business, and who have no capital stock embarked in the enter- prise.^ But all must contribute something ; and thus join together either money, or goods, or other property, or labor, or skill ; ^ or, as Pothier expresses it : II est de T essence die contrat de societe, que cliacune des parties ap- porte ou s' oblige d'apporter quelque chose a la societe; ou de Vargent, ou d'autres effets, ou son travail et son industrie} The Roman law pronounces the same rule : Societatem, uno pecmiiain confer ente, alio operam, posse contrahi, magis ohtinuit.^ And, indeed, it may be said to be universally adopted in modern times.^ § 16. In the next place, from what has been already said,^ it is apparent, that in every case of partnership there is a community of the property of the partnership 1 D. 17, 2, 29, 1 ; Poth. Panel. 17, 2, n. 3; Inst. 3, 26, 2; Domat, 1, 8, 1, art. 7. =* Coll. on P. B. 1, c. 1, § 1, p. 10, 11, 2d ed. ; Cheap v. Cramond, 4 B. & Aid. 663 ; Waugh v. Carver, 2 H. Bl. 235. 3 Coll. on P. B. 1, c. 1, § 1, p. 10, 11, 2d ed. ; 3 Kent, 24, 25. In Waugh i: Carver, 2 H. Bl. 235, 246, Lord Chief Justice Eyre said: "A case may be stated, in which it is the clear sense of the parties to the contract, that they shall not contribute ; that A. is to contribute neither labor nor money, and, to go still further, not to receive any profits. But if he will lend his name as a partner, he becomes as to all the rest of the world a partner." * Poth. de Soc. n.'8-lO; 4 Pardessus, Droit Comm. art. 983, 984. ^ Cod. 4, 37, 1 ; Poth. Pand. 17, 2, n. 2; Inst. 3, 26, 2; Vinn. ad Inst. 3, 26, 2, n. 3, « See 2 Bell, Comm. B. 7, p. 611, 5th ed.; Poth. de Soc. n. 8-10 ; Vinn. ad Inst. 3, 26, Intr. p. 693 ; Domat, 1, 8, 1, art. 7. ^ Ante, § 3. 24 PARTNERSHIP. [cHAP. III. between the parties, as soon as it becomes part of the common stock, although it may before that time have ex- clusively belonged to one or more of them.^ In this case, however, it is to be understood, that we are speak- ing of a partnership, designed to be such between the parties themselves ; and not merely of a partnership which may by construction of law exist as to third per- sons, although not intended between the parties, of which more will presently be said.- Partners, therefore, are to be treated, in a qualified sense, as joint-tenants of the partnership property, having an interest therein ^^er my et 2oer tout (as the phrase of our ancient law is), that is, having an interest therein by the half or moiety, and by all ; or, more accurately speaking, they, each of them, have an interest in, and the entire possession, as well of every parcel, as of the whole.^ § 17. This principle is equally recognized in the for- eign law ; and indeed seems to result directly from the nature of the contract of partnership, which supposes, that the property brought into it is put into community by the joint consent of the parties. Accordingly Pothier insists upon this as a leading distinction. La societe est le contrat par lequel deux ou plusieurs personnes conmen- nent de rtiettre quelque chose en commim;'^ and the same distinction is fully supported by other jurists.^ Mr. Bell says, that the property of the partnership is common, ' 3 Kent, 24-26; 4 Pardessus, Droit Comm. art. 969-972. {But prop- erty employed in partnership transactions may belong to one partner only, § 27. On what is partnership propertj', see § 98, 99, 371-373.} 2 Waugh V. Carver, 2 H. Bl. 235, 246 ; Hesketh v. Blanohard, 4 East, 144 ; Cheap v. Cramond, 4 B. & Aid. 663 ; Reid v. Holllnshead, 4 B. & C. 867. 3 2 Bl. Comm. 182. * Poth. de Soc. n. 2; Poth. Pand. 17, 2, Intr. to n. 1. * 5 Uuvergier, Droit Civ. Franc, tit. 9, n. 33-40 ; Vinn. ad Inst. 3, 26, Intr. p. 693. CHAP. III.] COMMUNITY OF INTERESTS. 25 and held^ro indlviso by all the partners as a stock and in trust. ^ So Vinnius says : Ut sit societas, necesse est ali- quid mutuo conferri et commimicari : nisi quid iitrinque in commune conferatur, societas non inteUigitur.^ The Roman law adopted the same prmciple. In societate omniimi honorum o'^nnes res, quce coeuntium sunt, con- tinuo commxinicantur ? § 18. In the next place, every real partnership, so in- tended between the parties themselves, imports, ex vi termini, a community of interest in the profits of the business of the partnership, that is to say, a joint and mutual interest in the profits thereof, or a communion of profit. And this is of the very essence of the con- tract ; for, without this communion of profit, a partner- ship cannot, in the contemplation of law, exist."* And ' 2 Bell, Comm. B. 7, c. 1, p. G12, 613, 5tli ed. ; Stair, Inst. B. 1, c. 16, § 1. 2 Yinn. ad Inst. 3, 26, Intr. p. 693. 3 D. 17, 2, 1 ; Id. 17, 2, 3, 1 ; Both. Band. 17, 2, n. 13, 14; Domat, 1 8, 1, art. 2. 4 Coll. on B. B. 1, c. 1, § 1, p. 11, 2d ed. ; 4 Pardessus, Droit Comm. art. 969 ; 5 Duvergier, Droit Civ. Franc, tit. 9, n. 11 ; 3 Kentn, 24, 25 ; Wats, on P. c. 1, p. 33-35; Id. p. 56, 57, 2d ed. ; Felichy v. Hamilton, 1 Wash. C. C. 491; Gow on B. c. 4, p. 153, 154, 3d ed. — Mr. CoUyer expresses the doctrine in the following terms. " To constitute a partnership between the partners themselves, ther3 must be a communion of profit between them. A communion of profit implies a communion of loss ; for every man, who has a share in the profits of a trade, ought also to bear his share of the loss." Again : " By a connnuniou of profit is intended a joint and mutual interest in profit." Coll. on B. B. 1, c. 1, § 1, p. 11, 2d ed. By joint interest, as he afterwards explains, he means a joint interest in the profits arising from the sale of the goods; and by mutual interest, that each party has a specific in- terest in the profits, as a principal trader. Id. p. 11, 17. Mr. Collyer after- wards states a curious case from Select Cases in Chancery (p. 9), where work was jointly undertaken by two persons, and they were to divide the money therefor ; and they were held not to be partners. His language is : " Ai-ain, upon principles similar to those of the foregoing cases, if two persons jointly agree to do a particular piece of work, but the money received for such work is not to be employed on their joint account, the persons so con- tracting are not partners. Thus, in the case of Finckle v. Stacey (Sel. Ca. 9), joint articles were entered into by the plaintiflf and defendant for 26 PARTNERSHIP. [CHAP. III. SO Potliier has laid down the doctrine. II est de Fessence de ce contrat, que la soeiete soit contractee pour Vinteret commun des parties} If the contract be for the sole and exclusive benefit of one party, it is not properly a case of partnership, but must fall under some other denomina- tion, such as a mandate.^ Hence, if in a pretended contract of partnership, it should be agreed, .that one of the parties should take all the profit, without the others having any share thereof, it would be a mere nullity, and constitute no partnership.^ The Roman jurists ■ doing a particular piece of work for the Duke of Marlborough, on account of which several sums of money had been jointly received by them, and im- mediately divided between them. There being a sum demanded by them in arrear, which the duke refused to pay, as being unreasonable, Stacey applied to Finckle to join him in a suit to recover what was in arrear ; which he refused to do, declaring that he had several advantageous works under the duke, which he should lose, should he join in a suit ; on which Stacey applied, and got his own half of the sum, which was due to the two. A bill was then brought for a moiety of the money so received ; and it was insisted it should be considered as a partnership in trade, and this money as so much received on the joint account. But the court were of opinion it was not to be considered as a partnership, but only an agreement to do a particular act, between which thore is great difference ; and that it is so is plain, for the money, which they had received, they immediately divided, and did not lay out on a common account. The bill was dismissed with costs. Upon this case, however, it is to be observed, that if no application had been made to the plaintiff to sue the duke, a bill for an account, supposing an account necessary, would clearly have been sustainable against the defendant on other grounds than those of partnership. Here, however, the plaintiff, for his own private ends, had absolutely refused to join in suing for the money ; and the court observed : ' It is pi-etty extraordinary, that he sliould come here to have the benefit of another's act, in which he refused to join ; which refusal was with a corrupt view for his own advantage, and not on a common account, the money due on which he would rather sacrifice than forego his own particular advantage. And here is no insolvency in the duke ; if there had been, perhaps it would have deserved consideration.' " > Poth. de Soc. n. 11. 2 Poth. de Soc. n. 12 ; Waugh v. Carver, 2 H.'Bl. 235, 246. 3 Poth. de Soc. n. 12; 3 Kent, 29, 30; D. 17, 2, 30; Poth. Pand. 17, 2, n. 3 ; Vinn. ad Inst. 3, 26, Intr. p. 693; Jestons v. Brooke, Covvp. 793. In many cases of this sort the contract would be treated as a mere cover for usury. Ibid. ; Poth. de Soc. n. 22. CHAP. III.] COMMUNITY OF INTERESTS. 27 branded such a contract with the odious epithet of Soci- etas Leo7iina, in ahusion to the fable of the lion, who, having entered into a partnership with the other wild beasts for hunting, appropriated the whole prey to him- self^ And the Roman law declared, Societatem talem coiri non posse, ut alter lucrum tantum, alter damnum sentiret ; et hanc societatem leoninam solitum appellare. Et nos consentimus taleyn societatem nullain esse, ut alter lucrum sentiret, alter vero nullum, lucrum, sed damnum sentiret; Iniquissimum enirti genus societa- tis est, ex qua quis damnum, non etiam lucrum, spec- tet.^ The modern Code of France has expressly pro- mulgated the same doctrine. It declares that the contract, which shall give to one of the partners the en- tirety of the profits, is nuU.^ Nay, it has gone further, and added, that it is the same of a stipulation, which shall free from all contribution to losses the moneys or effects brought into the partnership fund by one or more partners.^ § 19. So strong and inflexible is this rule, that it is often laid down in elementary works, as well as in the common law authorities, that to constitute a partnership there must be a communion of profits and losses between the partners.^ And this in a qualified sense is perfectly true, when it is understood with the proper limitations 1 Poth. de Soc. n. 12 ; 3 Kent, 29, 30. 2 D. 17, 2, 29, 2; Poth. Pand. 17, 2, n. 3; Poth. de Soc. n. 19; Domat, 1, 8, 1, art. 6-10; Id. 1, 8, 2, art. 12. 3 Code Civil, art. 1855. * Code Civil, art. 1855. * See Coll. on P. B. 1, e. 1, § 1, p. 11 ; Gow on P. c. 1, p. 1, 3d ed. ; 3 Kent, 23, 24 ; Mont, on P. B. 1, Pt. 1, p. 2 ; Grace v. Smith, 2 W. Bl. 998 ; Wats, on P. c. 1, p. 1; Id. p. 56, 2d ed. ; Ersk. Inst. B. 3, tit. 3, § 18; 1 Domat, 1, 8, 1, art. 1 ; Poth. de Soc. n. 19, 20; 1 Stair, Inst. B. 1, tit. 16, § 3; Coope v. Eyre, 1 H. Bl. 37; Bond v. Pittard, 3 JNI. & W. 357, 360; 4 Pardessus, Droit Coram, n. 996 ; 5 Duvergier, Droit Civ. Franc, n. 17 ; Ex parte Langdale, 18 Ves. 300; Green v. Beesley, 2 Bing. N. C. 108, 112; Dry V. Boswell, 1 Camp. 329 ; Hoare v. Dawes, Doug. 371. 28 PARTNERSHIP. [cHAP. III. belonging to the statement. The doctrine will be found in the Roman law. Societas cum contra]iitui\ tarn lucri quam damni commimio initur} Sicuti lucrum ita damnum quoque commune esse oportet.^ Modern foreign jurists often use expressions to the same effect.^ The Roman law carried this equitable presumption still fur- ther, and declared, that if the partners expressly men- tioned their shares in one respect only, either solely as to the profit, or solely as to the loss, their shares of that, which was omitted, should be regulated by what was ex- pressed. lUiid expeditum, est ; si in una causa pars fuerit ex2)ressa, veluti in solo lucro, vel in solo damno, in altera vero omissa^ in eo quoque, quod prcetermissum est, ean- dem partem servari} But all this language is to be interpreted in a limited and qualified sense ; and so understood, it admits of no real dispute. § 20. In the first place, every partnership imports, in the absence of all contrary stipulations, that the profit and loss are to be borne by all the partners, according to their respective proportions thereof.'' And the ques- tion was much discussed in the Roman law, whether a stipulation, that one partner only should bear all the losses, and both should share the profits, was valid or not. It was finally settled, according to the opinion of Servius Sulpitius, that it was valid, *and that one partner might, by agreement, be entitled to share in the profits, and not be accountable for any part of the loss.^ But > D. 17, 2, 67; Poth. Pand. 17, 2, n. 38; Domat, 1, 8, 1, art. 1. => D. 17, 2, 52, 4; Poth. Pand. 17, 2, n. 39; Domat, 1, 8, 1, art. 1. 3 5 Duvergier, Droit Civ. Franc, tit. 9, n. 13-18; 4 Pardessus, Droit Comm. art. 996. ■* Inst. 3, 26, 3 ; Vinn. ad Inst. 3, 26, 3; Domat, 1, 8, 1, art. 5. 5 Wats, on P. c. 1, p. 59, 60, 2d ed. ; Coll. on P. B. 1, c. 1, § 2, p. 105, 106, 2d ed.; 1 Voet, ad Pand. 17, 2, n. 8, p. 751 ; Domat, 1, 8, 1, art. 7, 8. 6 Inst. 3, 26, 2; Wats, on P. c. 1, p. 56, 57, 2d ed. ; Domat, 1, 8, 1, art. 6-9. CHAP. Ill,] COMMUNITY OF INTERESTS. 29 then every such stipulation was understood to be with this reserve, that the losses were first to be deducted from the profits ; and that if profits accrued from one species of things, and losses from another, what remained only after the losses were deducted was to be deemed profits.^ So that, in fact, each partner in this way, who shared a part of the profits, shared, by deduction from the gross profits, his proportion of the losses also, as far as there were any profits. Ita coiri sociefatem j^osse (says the Digest), id nullius ijartem damni alter sentiat, lucimm vero commune sit, Casslus indat. Quod ita demum valebit [ut et Sahinus scrihit), si tanti sit opera^ quanti dammcm est.^ And again : Mucins scrihit, non posse societatem coiri, ut cdiam damni, aliam liicri par- tem socius ferat. Serviiis in notatis Mucii ait, nee j)osse societatem ita contrahi ; neque enim lucrum intelUgitur, nisi omni damno deducto ; neque damnum, nisi omni lucro deducto. Sed potest coiri societas ita, ut ejus lucri, cpiod reliquum in societate sit, omni damno de- ducto, pars cdia feratur ; et ejus damni, quod similiter relincpiatur, pars cdia ccijncdur.^ The Institutes express the same doctrine still more succinctly : ^t acleo, contra Quinti 3Iutii sententiam ohtinuit, id illud cpiocpie con- stiterit , posse convenire, ut quis lucri partem ferat, de damno non teneatur. Quod tamen ita intelligi oportet, ut si in alia re lucrum, in alia damnum illcdum sit, compensatione facta, solum, quod superest, intelligcdur lucro esse.^ § 21. It is in this sense, that the proposition has been generally understood by jurists in modern times, and adopted into the common law ; that each partner must ' Domat, 1, 8, 1, art. 7, 8. 2 D. 17, 2, 29, 1 ; Poth. Pand. 17, 2, n. 3. 3D. 17, 2, 30; Poth. Pand. 17, 2, n. 3: Poth. de See. n. 21; Domat, 1, 8, 1, art. 7-9. * Inst. 3, 26, 2. 30 PARTNERSHIP. [cHAP. III. at all events share in the losses, so far, at least, as they constitute a charge upon, and diminution or deduction from, the profits ; and in this sense it is regularly true.^ » Coll. on P. B. 1, c. 1, § 1, p. 11, 2d ed. ; Poth. de Soc. n. 13, 19, 21 ; 5 Duvergier, Droit Civ. Franc, n. 13-18; Id. n. 220-222; Bond «. Pittard, 3 M. & W. 357, 360; Vinn. ad Inst. 3, 26, 2; 4 Pardessus, Droit Comm. 996- 999; 1 Stair, Inst. B. 1, tit. 16, § 3. {See Cummings v. Mills, 1 Daly, 520. Mr. Lindley explains clearly the different meanings of the word " profits." (Lind. on P. 10.) "By writers on Political Economy, the word profit is used to denote the difference between the valne of advances, and the value of returns made by their employment. Profits are divided by these writers into gross or net; gross profits being the whole of the above difference, and net profits being so much of that difference as is attributable solely to the capital employed. The remainder of the difference, or in other words the gross profits, minus the net profits, has no particular name, but it represents the profits attributable to industry, skill, and enterprise. (As will be noticed hereafter, lawyers are accustomed to call gross returns gross profits.') " If the term profit be used to denote the difference between the value of advances and the value of returns, the profit arising from anj- trade, business, or adventure will be a positive or a negative quantity, or neither, according as the value of the returns is greater or less than, or equal to, the value of the advances. Using the term profit in this sense, persons who share the profits of any business necessarily share its losses, if losses are incurred ; for if they do not, what they share is not the difference above alluded to, but something else ; as, for example, that difference if it happens to be a gain. " But the word profit is generally used in a less extensive signification, and presupposes an excess of the value of returns over the value of advances. Using the word profit in this more limited and popular sense, persons who share profits do not necessarily share losses, for ihey may stipulate for a division of gain, if any, and yet some one or more of them may by agree- ment be entitled to be indemnified against losses by the others ; so that whilst all share profits, some only bear losses. " The actual or gross returns obtained by advances obviously include profits (in the sense of gain), if profits have been made. But those returns do not include losses, if losses are incurred ; for_losses are the excess of the advances over the actual returns, and come out of the advances, and not out of the returns. Hence, persons who share gross returns share profits in the sense of gain ; but they do not, hy sharing the returns, share losses, for these fall entirely on those making the advances. Moreover, although a division of gross returns is a division of profits, if there are any, it is only so incidentally, and because such profits are included in what is divided ; it is not a division of profits as such ; and under an agreement for a divi- sion of gross returns, whatever is returned must be divided, whether there be profit or loss, or neither. " These considerations have led to the distinction in English law between CHAP. III.] COMMUNITY OF INTERESTS. 31 § 22. Potliier states this doctrine with uncommon clearness and accuracy. After remarking, that, consist- ently with equity, it may be agreed between the part- ners, that one should bear a less proportion, or even no part of the loss of the partnership, he adds, that this is not to be understood in the sense, that one partner is to have a share of the profit of each particular trans- action, which shall be advantageous to the partnership, . without contributing any thing to the losses, which the I partnership may sustain from other transactions, which! shall be unprofitable to it; for that would manifestly be unjust. But it is to be understood in this sense, that, after the dissolution of the partnership, an account is to be taken of all the profits of the partnership, and a like account of all the losses on all the business undertaken by the partnership ; and if the totality of the profits exceeds the totality of the losses, the partner shall take his share of the excess. And if, on the contrary, the totality of the losses exceeds that of the profits, the partner shall have neither profit nor loss.^ And this is in accordance with the Roman law : JSfeque enhn lucrum intellicjitur, nisi omni damno deducio ; neque damnum, nisi omni lucro deducio.^ § 23. Hence it may be laid down, as a general rule of agreements to share profits and agreements to share gross returns, and to the doctrine that whilst an agreement to share profits creates a partnership, an agreement to share gross returns does not." An agreement, by one or more partners, to indemnify the others against loss entitles each of the partners to a share of the excess of the returns over the advances, while it entitles some of the partners to be indemnified by the others for all losses beyond the advances. If the parties are indemnified, and indemnified not only against losses beyond the advances, but also against the loss of the advances themselves, the contract becomes one of loan, and ceases to be one of partnership, at least as between the parties themselves, though it may be so as to third persons. See Lind. on P. 17.} ' Poth. de Soc. n. 21. See 5 Duvergier, Droit Civ. Franc, n. 13-18. - D. 17, 2, 30; Poth. Pand. 17, 2, n. 3. 32 PARTNERSHIP. [cHAP. III. the common law, that, m order to constitute a partner- ship, it is not essential that the partners should equally share the profits and losses. It is sufficient, if they are to share in the profits of the business, after a deduction of the losses ; or, in other words, that they should share in the net profits according to their respective propor- tions. It is, 'therefore, competent for the partners by their stipulations to agree, that the profits shall be divided, and if there be no profits, but a loss, that the loss shall be borne by one or more of the partners exclusively, and that the others shall, inter sese, be exempted therefrom.^ So, the proportion in which they are to share the profits, or losses, may be varied at their pleasure, whether they contributed equally to the common stock, or not; and the same rule is applicable to the proportions in which they are to bear the losses.^ Thus, they may agree, that one or more partners shall take a greater proportion of the profits than the others, and shall, if there be no prof- its, share a less proportion of the losses, or even be wholly exempted therefrom.^ The reason of all this is, that the inequality of skill, of labor, or of experience, which the partners may bring into the particular business, may not only justify, but positively require this inequality of com- pensation, and of exemption from loss, as a matter of justice and equity between the parties. And the law has, therefore, wisely not prohibited it ; but has left it to the parties to exercise their own discretion in these matters, taking care that no fraud, imposition, or undue advan- ^ Coll. on P. B. 1, c. 1, § 1, p. 11, 2d ed.; Gow on P. c. 1, p. 9, 3d ed. ; Bond V. Pittard, 3 M. & W. 357, 359; Gilpin v. Enderbey, 5 B. & Aid. 954. {Bobbins v. Laswell, 27 111. 365.} 2 Wats, on P. c. 1, p. 56, 57, 2d ed. 3 Coll. on P. B. 1, c. 1, § 1, p. 11, 2d ed. ; Gow on P. c. 1, p. 9, 3d ed. ; Gilpin V. Enderbey, 5 B. & Aid. 954, 964 ; Bond v. Pittard, 3 M. & VV. 357, 3G0; Wats, on P. c. 1, p. 56,57, 2d ed. ; Fereday v. Hordern, Jac. 144. CHAP. III.] COMMUNITY OF INTERESTS. 33 tage is taken of the other side.^ In fact (as has been well observed by a learned writer), by the common law, the various stipulations and provisions relating to the com- mencement of the partnership, the manner in which the business is to be conducted, the space of time for which the partnership is to endure, the capital which each is to bring into the trade, the proportion in which the profits and losses are to be di\dded, the time and manner agreed upon for settling the accounts, the powers and duties of the partners in regard to conducting the business, and entering into engagements which may affect the partner- ship, the mode in which the partnership may be dissolved, together with the various covenants adapted to the cir- cumstances of each particular case, are purely and en- tirely the subject of personal and private agreement and arrangement ; and in whatever way they may ultimately be settled, they cannot be impeached, unless they inter- fere with, or contravene some rule or principle of law.'*^ § 24. In the absence, however, of all precise stipula- tions between the partners, as to their respective shares in the profits and losses, and in the absence of all other controlling evidence and circumstances, the rule of the common law is, that they are to share equally of both ; for in such a case equality would seem to be equity.^ And the circumstance that each partner has brought an unequal amount of capital into the common stock, or that one or more has brought in the whole capital, and ' See Poth. de Soc. n. 18, 19. See also, 5 Duvergier, Droit Civ. Franc, n. 13-18 ; 4 Pardessus, Droit Comm. n. 997 ; Van Leeuwen's Comm. B. 4, c. 23, §10. * Gow on P. c. 1, p. 9, 3d ed. 3 Wats, on P. c. 1, p. 59, 60, 2d ed. ; Coll. on P. B. 1, c. 1, § 2, p. 105, lOG, 2d ed. ; 3 Kent, 28. [Roach v. Perry, 16 111. 37 ; Donelson v. Posey, 13 Ala. 752.] Gould V. Gould, 6 Wend. 263. But sec Thompson v. Williamson, 7 Bligh, X. s. 432; s. c. xiih nom. Thomson v. Campbell's Trustee's; 5 W. & Shaw, 16 ; 2 Moreau & Carl. Partidas, Pt. 5, 1. 3, 4, p. 766, 76 7. 3 34 PARTNERSHIP. [cHAP. III. the others have only brought industry, skill, and experi- ence, would not seem to furnish any substantial or deci- sive ground of difference, as to the distribution. On the contrary, the very silence of the partners, as to any par- ticular stipulation, might seem fairly to import, either, that there was not, all things considered, any real ine- quality in the benefits to the partnership in the case, or that the matter was waived upon grounds of good-will, or affection, or liberality, or expediency.^ It is true, that it has sometimes been asserted, that in cases of this sort, there is no natural presumption that the partners are to share equally ; and that it is a matter of fact to be settled by a jury, or by a court, according to all the circum- stances, what would be a reasonable apportionment. Thus, it was held by Lord Ellenborough, that if a father and son should be partners, no presumption would arise, that they were to share in moieties in the absence of all positive stipulations ; but, that the shares were to be as- certained by a jury, if the case were at law.^ But this doctrine was afterwards positively disapproved of by Lord Eldon, who held that even in the case of a father and son, who are partners, if no distinct shares are ascer- tained by force of any express contract, they must of ne- cessity be equal partners, and are entitled to moieties.^ ' Coll. on P. B. 2, c. 1, § 2, p. 105-107, 2d ed. ; 3 Kent, 28 ; Wats, on P. c. 1, p. 56-60, 2d ed ; Gould v. Gould, 6 Wend. 2G3. See Van Leeuwen's Comm. B. 4, c. 23, § 10. ^ Peacock v. Peacock, 2 Camp. 45. ^ Peacock v. Peacock, 16 Ves. 49, 56 ; [Webster v. Bray, 7 Hare, 159, 1 79] ; Farrar v. Beswick, 1 Moo. & R. 527 ; Coll. on P. B. 1, c. 1, § 2, p. 105, 106, 2d ed. ; Gow on P. c. 1, p. 8, 9, 3d ed. ; 2 Bell, Comm. B. 7, c. 1, p. 614, 615, 5th ed. — In Farrar v. Beswick, 1 Moo. and R. 527, Mr. Justice Parke held the same doctrine as Lord Eldon, and said : " Where a partnership is found to exist between persons, but no evidence is given to show in what proportions the parties are interested, it is to be presumed, that they are interested in equal moieties." It is true, that in the case of Thompson v. Williamson, 7 Bligh, N. s. 1, 432 ; s. c. 5 W. & Shaw, 16, a doubt was thrown CHAP. III.] COMMUNITY OF INTERESTS. 35 However, it must be still deemed an open question in England, since a recent decision in the House of Lords upon this doctrine, as a doctrine of the common law, by Lord Wynford and Lord Brougham ; but I cannot think, that it is successfully maintained by the reasoning contained in their opinions. Each of these learned judges ad- mitted on that occasion, that if there is nothing to guide the judgment of the court to give unequal shares, there is no rule for them to go by, but to give in equal shares. What is this but affirming, that in the absence of all controll- ing circumstances, leading to a different conclusion, the presumption of law is, that the partners are to take in equal shares? But it is not an irresistible presumption ; for where there are circumstances, which demonstrate, that the partners in the particular case did in fact intend, or from the general habit and custom of their trade and business, under the like circumstances, must be fairly presumed to have intended, to share in a different proportion, there is not the slightest difficulty in admitting, that the presumption of law ought to yield to the presumption of fact, as legal presumptions ordinarily do in other cases. And this is what seems to have been intended by Lord Eldon, in his opinion in Peacock t>. Peacock, 16 Ves. 49, 56; and was explicitly avowed by Mr. Baron Parke, in Farrar v. Beswick, 1 Moo. & R. 527. The real difficulty lies in holding, that, where there is an inequality in the stock, or skill, or services, or experience of the different partners, any one or more of those circumstances alone, or in conjunction with other circumstances, equally indeterminate and equivocal, should overcome the ordinary presump- tion of law of equality of shares between the partners. Now, Lord Ellen- borough, in Peacock v. Peacock, 2 Camp. 45, seems to have acted upon the ground, that, in every such case of inequality, there was no such presump- tion of law whatever to govern it; but that it was open for the jury to take into consideration all the circumstances, if the suit were at law, or for the court, if the suit were in equity, and to adjudge the proportions, not upon any supposed contract between parties actually established, but as it were ex cequo et bono, as upon a quantum meruit. It was in this view, that Lord Eldon seems to have expressed his disapprobation of the doctrine ; because it assumed to overthrow a presumption of law (and it would not have been materiall}' different, if it were a presumption of fact), upon indeterminate circumstances, which might be urged with more or less effect to a jury, but which carried no certainty, as to the positive intent or contract of the parties. His Lordship on that occasion said : " The father employed his son in his business; and, as is frequently done by a father, meaning to introduce his son, the business was carried on in the name of ' Peacock and Co.' It appeared to me, that the son, insisting that he had a beneficial interest, must be entitled to an equal moiety, or to nothing; that, as no distinct share was ascertained by force of any express contract between them, they must of necessity be equal partners, if partners in any thing. In that view the re- sult of the issue, that was directed, appears to be extraordinary. The propo- sition being, that the son was interested in some share, not exceeding a 36 PARTNERSHIP. [cHAP. III. has questioned, if it has not shaken, the doctrine of Lord Eldon, and affirmed that of Lord Ellenborough.^ In moiety, the jury in some way, upon the footing of quantum meruit, held him entitled to a quarter. I have no conception, how that principle can be applied to a partnership. The parties, however, consider themselves bound by that verdict." If, by the custom of any particular trade or business under the like circumstances, the rule was general to give a fixed proportion, as, for example, a fourth to one partner, and three fourths to another, on account of the inequality of capital, or skill, or experience, or age, or the relation of parent and child, that might properly control the presumption of law ; for it would amount to strong presumptive evidence, that the partners intended to contract upon the usual terms. But where there are no such circumstances, and nothing determinate in the evidence, but all rests upon conjecture, at best admitting of various force and application, what ground is there to presume a contract for a quantum meruit ? The more reasonable ground would seem to be, that the parties meant to treat with each other upon a footing of equality, or to waive the inequality, as a matter of liber- ality, or bounty, or parental or filial aft'ection, or proximity of blood or personal friendship. There seems also to be very great uncertainty in the application of the doctrine ; for from such indeterminate and vague circum- stances very different conclusions might be drawn by different juries and different courts; and it seems far more convenient to adopt a general rule of interpretation of the intention of the parties, in the absence of any express or implied agreement or usage, as to the apportionment of the profits. Cases may indeed arise, where the presumption fairly would be, that the parties were to share the profits only in moieties, and not the capital ; as, for example, in the case of a partnership between a father and a son, where the father supplied the whole capital. However this may be, the Judges of the Scot- tish Court of Session adopted the doctrine of Lord Eldon, in the case of Thompson v. Williamson, 7 Bligh, N. s. 432; s. c. 5 W. & Shaw, 16; 7 Shaw & D. No. 333 ; but it was overturned in the House of Lords by the de- cision of Lords Wynford and Brougham. Mr. Bell and Mr. Erskine main- tain the same doctrine as the Court of Session (2 Bell, Comm. B. 7, c. 1, p. 614, 615, 5th ed. ; Ersk. Inst. B. 3, tit. 3, § 19). Nor does it appear to me that the doctrine of Lord Stair (1 Stair, Inst. B. 1, tit. 16, § 3), is intended to be different, notwithstanding the suggestion of Lord Wynford. In Gould v. Gould, 6 Wend. 263, the Court of Errors of New York held, that, in the ab- sence of all proof to the contrary, partners will be presumed to be equally interested in the partnership funds. See Harrison r. Sterry, 5 Cranch, 289. ' Thompson ij. Williamson, 7 Bligh, n. s. 432; s. c. 5 W. & Shaw, 16. [But see a later decision by Vice Chancellor Wigram, AVebster v. Bi-ay, 7 Hare, 159, 177, and another by Lord Cottenham, Stewart v. Forbes, 1 Hall & Tw. 461, 4 72 ; .s. c. 1 Macn. & G. 137. In the latter case the Lord Chancellor refers to Peacock v. Peacock, and says : " In that case it was properly held, that, in the absence of any contract between the parties, or any dealing from CHAP. III.] COMMUNITY OF INTERESTS. 37 America the authorities, as far as they go, seem decidedly to favor the doctrine of Lord Eldon.^ which a contract might be inferred, it would be assumed, that the parties had carried on business on terms of an equal partnership But what would have been the decision in Peacock v. Peacock, if the books and accounts, instead of absolute silence as to the shai-es of the partners in each year, had described the shares in which the partners were interested in the business, and had attributed to the plaintiff four sixteenths only of the shares of the business ? These entries are as conclusive of the rights of the parties, as if they had been found prescribed in a regular contract."] { Thompson v. Wil- liamson (7 Bligh, N. s. 432) was a decision on the Scotch, not on the English law. From the report of this case in the Scotch Court of Session (^ifub nom. Campbell i'. Thomson, 7 Court of Sess. cases, No. 333, p. 650) it appears that the defender contended " that there was no universal rule of law establishing a presumption of equality in partnership ; that it was a ques- tion of circumstances to be decided by a jury," while the pursuers maintained "that in the absence of any written evidence to establish the extent of a partner's share, the presumption by the law of Scotland was equality." The court found for the pursuers, and as Lord Wynford says (7 Bligh, N. s. 433) "took upon themselves to declare that when there is no express contract" the partnership property and profits must be equally divided, or in the words of Lord Brougham (7 Bligh, N. s. 440) they decided that "unless there be a special contract to exclude the legal presumption, the legal presumption shall give him [the partner] an equal share of the profits, and shall exclude all evidence of the fact; excluding all consideration of the particular circum- stances of the case." It was this decision "taking it simply as a question of Scotch law, deciding nothing further, as it is our rule, or ought to be our rule, in no case to go further than the simple question before us," (7 Bligh, N. s. 446) which was reversed ; and that Thompson v. Williamson has not been con- sidered as deciding that there is no presumption of equality seems clear from several more recent cases which have decided that there is such a presump- tion, without an intimation that such decision is in conflict with the judgment of the House of Lords. Collins v. Jackson, 31 Beav. 645; Robinson v. An- derson, 20 Beav. 98, s. c. 7 De G. M. & G. 239. In this latter case. Sir J. L. Knight-Bruce, L. J., says : " The evidence satisfies us that the result of it cannot be represented more favorably for the defendant, than that the statements on one side neutralize those on the other. So putting it, I con- ceive that the presumption of law remains, which is equality ; " and Sir G. J. Turner, L. J. : " In the absence of evidence of an agreement for a different divi- sion, the presumption is in favor of equality." See, also, Lind. on P. 573-576 ; Robley r. Brooke, 7 Bligh, x. s. 90; M'Gregor i\ Bainbrigge, 7 Hare, 164, n. ; Copland v. Toulmin, 7 CI. & Fin. 349 ; Warner v. Smith, 1 De G.J. & S. 33 7.} ' 3 Kent, p. 28; Gould v. Gould, 6 Wend. 2G3. { Donelson v. Posey, 13 Ala. 752; Roach v. Perry, 16 111. 37. Farr u. Johnson, 25 111. 522 ; Moore tf. Bare, 11 Iowa, 198. But see dissenting opinion of Hoffman, J., in Hiis- brouck V. Childs, 3 Bosw. 105.} 38 PARTNERSHIP. [cHAP. III. § 25. The Roman law promulgates the like doc- trine. If no express agreement were made by the partners concerning their shares of the profit and loss, the profit and loss were shared equally between them. If there was any such agreement, that was to be faith- fully observed. Et quidem (say the Institutes), si nihil de j)Cirtihus lucr'i et damni nominoiim convenerit, cnquales scilicet partes et in hicro et in damno spectantui'. Quod si expressmfuerint partes^ lice servari dehent} So the Digest. Si non fuerintpaiies societati adjectce, ceqicas eas esse con- stat.^ This also seems to be the rule adopted into the mod- ern commercial law; but then it is received, not without some modifications and qualifications.^ Thus, Vinnius says, that this doctrine is commonly and rightly under- stood to be true, when the partners have contributed an equal amount to the capital stock ; for if they have contributed unequal amounts, then they are to share according to the proportions furnished by each. Pufen- dorf and Noodt adopt the like interpretation ;'* although it must be admitted, that there are other jurists, who construe the Roman law as indiscriminately applicable to all cases, whether of equal or of unequal contributions, either in capital or stock, or in labor or services, or in a mixed proportion of each.^ 1 Tnst. 3, 26, 1 ; 1 Voet, ad Pand. 17, 2, n. 8, p. 751 ; Vinn. Sel. Quest. Jur. c. 53, 54 ; Domat, 1, 8, 1, art. 4. " D. 1 7, 2, 29 ; Poth. Pand. 1 7, 2, n. 7. ^ See Vinn. ad Inst. ed. Ileinecc. 3, 26, 3, p. 695, Comm. ; Van Leeu- Tven's Comm. B. 4, c. 23, § 10. * Puf. on Law of Nat. B. 5, c. 8, § 1 , 2 ; 2 Noodt, Opera, Comm. ad Dig. 1 7, 2, 29, 2, p. 297, 298, ed. 1767. But see Vinn. Sel. Quest. Jur. e. 53, 54; Vinn. ad Inst. 3, 26, 2. See Asso & Manuel's Inst, of Laws of Spain, B. 2, tit. 15. * Ibid.; 5 Duvergier, Droit Civ. Franc, n. 224. — Ileineccius pays this beautiful tribute to the memory of Noodt, speaking of his then recent death : "Quern eximium jure cousultum, dum base scribo, ad Superos e.xcessisse, non sine dolore audio. Mortuum saltern nemo dixerit, qui tot egregiis operibus immortalem sibi gloriam peperit, et jam vivus, quodammodo interfuit posteri- tati." Hein. Vinn. ad Inst. 3, 26, 1, note. {See Hasbrouck v. Childs, 3 Bosw. 105-1 CHAP, in.] COMMUNITY OF INTERESTS. 39 § 26. Pothier himself, while he admits the coiTectness of the general rule of the Roman law, suggests some modifications, or rather qualifications of it, in its actual application.^ Where each partner has contributed mon- ey or effects of a value fixed between them at the time, there, he says, that they are to share in proportion to the value so fixed ; and that they are to share equally, only when no such value is fixed. Where the money or effects brought into the partnership are so estimated at a fixed value, his opinion is, that it ought to make no difference . as to the partners sharing in proportion to such value, although one may also bring a higher, or peculiar skill or industry into the firm.^ The Civil Code of France provides that the share of each partner in the profits or losses is, in the absence of any other agreement in the articles of partnership, to be in proportion to what he brings into the partnership funds ; and in the like case, if one partner brings skill only, his share of the profits or losses is regulated, as if what he brought in had been equal to that of the partner who has brought the least.^ The Code of Louisiana more closely adheres to the Ro- man law, and declares, that when the contract of part- nership does not determine the share of each partner in the profits or losses, each one shall be entitled to an equal share of the profits, and must contribute equally to the losses.^ ' 1 Poth. de Soc. n. 15-20; Id. n. 73. 2 Poth. de Soc. n. 15-21 ; Id. n. 73. See also, 5 Duvergier, Droit Civ. Franc, n. 12, n. 224; 13 Toullier, Droit Civ. Franc, n. 411, 412. 3 Code Civil, art. 1853. {See Hasbrouck v. Childs, 3 Bosw. 105.} * Code of Louisiana (1825), art. 2896. — Mr. Watson has made some re- marks on this subject, which show the difliculty of making a suitable appor- tionment of profits, in many cases, where there is no express agreement between the parties, and that presumptions of very different force and importance may arise from the circumstances, often nicely balancing each other. "But with respect to the profit and loss" (says he), "to be derived from a partnership, the subject of which comprises the capital, stock, and I 40 PARTNERSHIP. [CHAP. III. § 27. These two circumstances, that there is a commu- nity of interest in the capital stock, and also a commu- interest of each partner therein, together with the labor and skill to be em- ployed, and the division thereof, what naturally occurs on point of distribu- tion seems to be this, that if each partner contributes an equal proportion of capital, stock, and labor, and skill, then each must, according to justice, receive an equal share in the profit and loss; but where they contribute unequally, certain rules should be prescribed according to the circumstances of the partnership, for the purpose of adjusting the respective shares of all the partners. For instance, if one partner furnishes labor, and the other money, whatever the produce of such partnership trade may amount to, it should seem right to divide it, after deducting the sum advanced, in the proportion of the interest of the money to the wages of the labor, allowing such a rate of interest as money might be borrowed for upon the same species of security, and such wages or allowance as a skilful workman would be entitled to, for the same degree of labor and a similar trust, according to the principle laid down in the civil law, which says, that no man doubts, but that partnership may be entered into by two persons, when one of them only finds money, inasmuch as it often happens, that the work and labor of the other amounts to the value of it, and supplies its place. For in partner- ships, where on the one side labor is contributed, and on the other, only the use of money, that partner, who contributed the money, does not always admit the other to a share of the principal, but only to his share of the profit, which such labor and money joined together might produce. And if A. for instance, who furnishes labor only, hath no title to any part of the money advanced upon dissolving the partnership, so B. alone should be liable to the risk of the money, as owner thereof; for in such a case it is not the money itself, but the risk, which it runs, and the probable gain, which may accrue from it, that are to be compared with the labor. Therefore, when the profits of such a partnership are to be shared, it would be out of all proportion in point of reciprocal advantage, if the labor were to be com- pared with the principal sum advanced ; and the only fair criterion to judge by is a true comparison between the value of the labor on one side, and the risk and hazard which the money advanced is exposed to on the other. And perhaps the better way in forming partnerships of this sort, is to rate the risk of the principal, and the hopes of the profit, according to the in- terest that is generally given for money so borrowed upon risk. Suppos- ing, then, this interest to be £5 per cent ; if one party contributes labor worth £50, and the other advances £1,000 in money, each partner will share equally the profit. According to this rule, if there should be nothing gained by the partnership concern, A. would lose his labor, and B. bis in- terest, which would be equal and just. And should the original stock be diminished, by the same rule A. loses only his labor, whereas B. would lose his interest and a part of the principal ; for which eventual disadvantage B. is compensated by having the interest of his money computed at five pounds CHAP. III.] COMMUNITY OF INTERESTS. 41 nity of profit and loss, in the sense already stated, in all the partners, where they exist, are decisive that the case per cent in the division of the profits, where there are any. But it some- times happens in partnership concerns, that labor and money are so blended or interwoven together, as to give to him, that contributed only his labor, a share in the principal; the labor contributed by one partner, and the money advanced by the other, being so intermixed as to make one general mass. As for example, one partner spends the money advanced by him in buying up un wrought materials, and the other furnishes personal skill and labor to work them up and manage them, which very often happens in large manufacturing towns. Thus, again, if I supply a weaver with £100 to buy wool, and he makes cloth of it, computing his labor at £tOO, it is manifest, that here both of us have an equal interest in the cloth, and when it is sold, the money must be equally divided ; nor in fairness could I deduct the £100 contributed at first, and then divide the remainder with him. This rule obtains in other things as well as money ; as Avhen one allows ground for a building, on condition that he, who builds thereon, shall have a moiety ; or, when one trusts a flock to be fed on condition, that, if it be sold within a limited time, the money shall be proportionably divided amongst the part- ners. Therefore, the profit or loss to be derived from trade by partners ought always to be arranged and provided for at the commencement of their partnership, according to certain agreed proportions." Wats, on P. c. 1, p. 57-59, 2d ed. See also on the same point Voet, ad Pand. 17, 2, n. 8 ; and Vinn. Sel. Quest. Jur. c. 53, 54 ; Duvergier, Droit Civil Franc, n. 244- 288; 17 Duranton, Droit Civil Franc, n. 415-433; Poth. de Soc. n. 15-20; Coll. on P. B. 2, c. 1, § 2, p. 106, 107, 2d ed., cites Puf Lib. 5, c. 8 ; Van Leeuwen's Comm. B. 4, c. 23, § 10; Asso & Manuel's Inst, of Laws of Spain, B. 2, tit. 15. Mr. Rutherforth, In his Listitutes (B. 1, c. 13, § 32-36), has fully discussed the subject; and his remarks are so just and appropriate, that they are here cited. " In partnerships of trade, goods, or money, or labor, under which I include skill, or management, are by the consent of their re- spective owners, united into one common stock. Each partner has in view a benefit to be received for a benefit which he gives. The separate stock of any of the partners alone might be too small to trade with, in the manner pro- posed ; or the nature of the undertaking may require not only more goods or more money than any one of them could supply, but more labor or more skill than any one of them is equal to. The gain, arising from the common stock of goods or money, is the price obtained lor the use of those goods or money ; and the gain, arising from their joint labor, is the wages obtained for such labor. If we consider the gain in this view, it is easy to determine what proportion of it each partner ought to receive. In whatever propor- tion the use of one partner's goods is more valuable than the use of the other partner's goods, so much more of the gain belongs to the former, than to the latter. I do not mean, that in dividing the gain, any regard is to be had to the particular share of it, which arose accidentally from the goods contrib- 42 PARTNERSHIP. [cHAP. III. is one of real partnership between the parties them- selves.^ But it is not essential in all cases, to constitute uted by this or that partner ; but that after the goods are united in a joint stock by agreement, each partner has a claim to the gain arising from it, in proportion to what was the probable value of the use of his goods, if he had traded with them separately. And as the probable value of the use is in proportion to the value of tlie goods themselves, each partner's claim upon the gain will be in the same proportion. In like manner, where there is a joint labor, since the profits arising from it are the wages of that joint labor, each partner has a claim, not to that particular part of the gain which his labor earned, for then it would be no partnership, but to such a compara- tive share out of the common wages or gain, as is proportional to the value of his labor, when compared with the labor of the other. As the gain of each partner, so likewise the loss of each ought to be jiroportionable to the value of what he contributes. As much as the goods, which one partner contributes, exceed in their value the goods, which the other contributes, so much greater is the claim of the former ujjon the joint stock, than the claim of the latter. Since, therefore, their respective claims upon the whole stock are in proportion to the share of that stock, which came originally from each of them, their claim upon each part of the whole must be in the same proportion. And, consequently, if any part of the stock is lost, each part- ner having a claim upon such part lost in proportion to his original share, loses a claim in the same projjortion, that is, the loss of each is in proportion to the original share which he contributed towards the common stock. This, then, is the rule for adjusting the gain and loss in partnerships, where no ex- press agreement has been made to the contrary. Each partner is to receive such a share of the gain, or to bear such a share of the loss, as has the same proportion to what any other of the partners receives or bears, that the share contributed by the former has to the share contributed by the latter. The interest or claim of each upon the whole stock is in this proportion ; and, con- sequently, the interest or claim of each in the increase or decrease of it, in any part added to it by way of gain, or in any part taken from it by way of loss, ought to be in the same proportion. If the parties agree, that one of them shall have a share in the gain, but shall bear no share in the loss, the contract is a mixed one ; it is partly partnership, and partly insurance. As they are all of them to have a share in the gain, it is partnership ; but he or they, who are to bear all the loss, insure the principal stock of him who is to bear none of it. To adjust the shares, which each party, in such a mixed contract, is to i-eceive in the gain, we are to consider what it is worth to insure his principal, who is not subject to any loss. And when the value of such insurance is de- ' Dob V. Halsey, 16 Johns. 34 ; 3 Kent, 24 ; Coll. on P. B. 1, c. 1, § 1, p. 11-17; 2d ed. ; Ex parte Gellar, 1 Rose, 297. [See also Rawlinson v. Clarke, 15 M. & W. 292 ; Allen v. Davis, 8 Eng. (Ark.) 28.] {As to what constitutes persons partners inter sese, as well as to third persons, see the next chapter. } * CHAP. III.j CO^LMU^'ITY OF INTERESTS. 43 such a partnership, that both should concur, that is, that there should exist, as between the parties themselves, a ducted from the whole sain, and assigned to those who were to have borne all the loss, if there had been any, the remaining portion is to be divided, in proportion to each party's share in the capital stock. It is generally main- tained to be contrary to the nature of partnerships, that, where a capital stock is made by mutual consent, the parties so forming a capital stock should agree, that one of them should have all the gain, and the other bear all the loss. And certainly such an agreement is contrary to the nature of partnership, if we define partnership to be a contract, which gives the parties a common claim to the joint stock; because, where they have a common claim to the stock, they must, in consequence, have a common claim to the gain arising from it, and to the losses sustained in it. But such an agreement, though it may be inconsistent with the nature of partnership, is not inconsistent with the law of common justice. A man wants five hundred pounds capital stock, to enter upon a certain branch of trade ; he has only three hundred pounds of his own. I agi-ee to let him have two hundred pounds to make up his capital, upon con- dition, that he shall have all the advantage arising from the whole ; that, if he saves the whole capital, my money shall be returned, but that if any part of it is lost, 1 will bear the loss, as far as the two hundred pounds, which I have advanced. There can, I think, be no question, whether the law of nature would allow of such an act of humanity as this. You may say, that such an agreement is contrary to the law of partnership. I grant it is, and therefore am satisfied, that it should not be called a partnership. I only insist, that the agreement is not contrary to the law of nature, and leave it to you to call it by what name you please. Perhaps you may have no name for it; but a contract is not the more unlawful for wanting a name. In partnership, where work is contributed on one side, and money on the other, the partner, from whom the money comes, may contribute either the use only of the money, or the property of it. If he contributes only the use of it, and still keeps his property in the principal, so that the joint stock is to be considered as made up of the labor of one partner, and of the use of the other's money; it is plain, that, supposing the principal to be safe, it be- longs to him, and that, supposing it to be lost, he alone is to bear such loss. The other partner, who contributes work, since, as the case is put, he had no claim to the principal money, or to any part of it, cannot be obliged to make good any part of that loss, or to bear any share in it. But if he con- tributes the property of his money, so that tlie joint stock, upon which each of them has a common claim, is made up of his principal money, and of the other's labor, then the partner, who labors, has a claim upon the princijjal money itself; and, consequently, whenever the partnership is dissolved, if the principal money, or any part of it is safe, he ought to have a share in it ; and if the principal is lost, he is a sufferer by losing such share. In the former case, where he, from whom the money comes, still keeps his ])ro\y- erty in it, and has a right to the whole principal, you may ask, what it is, 44 PARTxNERSHIP. [cHAP. III. community or communion of interest in the capital stock, and also in the profit and loss.^ For, if the whole capital stock, embarked in an enterprise or adventure, belongs to, and is, by agreement, to remain the exclusive property of one of the parties ; yet, if there is a community of profit or of profit and loss, in the enterprise or adventure, be- tween all the parties, they will be partners in the profit, or the profit and loss, between themselves, as well as to third persons, although not partners in the capital stock.^ The one does not necessarily include the other, and there- fore we are carefully to distinguish between the cases. Where there is a positive agreement between the parties ■which he contributes. But the answer is obvious. He contributes the use of his money ; that is, he contributes the clear gain, which he might proba- bly have made of it himself. This, however, is not all. He contributes, besides this, the hazard of his principal ; because, if the whole or any part of it should be lost, the loss is his. In order, therefore, to adjust the share ■which each partner ought to have in the gain, if there is any, you are to value the work of one, and the use and hazard of the other's money ; and in proportion to the value contributed by each of tlieni, upon such an esti- mate, their respective gains are to be settled. In the other case, where he, from whom the money comes, contributes the property of it, and the other contributes his labor, in adjusting their respective shares of the gain, you are to value the money of one and the labor of the other. And when the com- parative values of ■what each has contributed are thus settled, their respecti^'e shares in the gain are to be in the same proportion." > {Meaher v. Cox, 37 Ala. 201.} * Ex parte Hamper, 17 Ves. 403. {See § 55-58, 205; Lind. on P. 16, 17, 551 ; Greenham v. Gray, 4 Ir. C. L. 501 ; Fromont v. Coupland, 2 Bing. 170 ; French v. Styring, 2 C. B. N. s. 357 ; Ward v. Thompson, 22 How. 330 ; Bromley v. Elliot, 38 N. H. 287, 309; Stevens v. Faucet, 24 111. 483; Rob- bins r. Laswell, 27 111. 365 ; Fawcett v. Osborn, 32 111. 411 ; Bartlett t'. Jones, 2 Strobh. 471 ; Jones v. McMichael, 12 Rich. Law, 176. This doctrine is de- nied in Dwinel v. Stone, 30 Me. 384. Chase v. Barrett, 4 Paige, 148, is also sometimes referred to as an authority in opposition to the views of the text. But it is to be observed that, though Chancellor Walworth says that to con- stitute a partnership there must be a joint ownership of the partnership funds, yet the point decided was, that A., an alleged partner, could not share in the capital stock, and the decision can be sustained not only on the ground that A. was not a partner, but also on the ground that though he was a partner, yet that the capital stock remained, in the words of the text, " the exclusive property" of his copartner. See Conklin v. Barton, 43 Barb. 435.} CHAP, in.] COMMU^'ITY OF INTERESTS. 45 on this point, that will govern ; where there is no such agreement, and no implication from the circumstances of the particular case, leading to a different conclusion, there will be presumed to be a community of interest in the property, as well as in the profit and loss.^ Where the property of one partner only is, by agreement, actually put into community, as partnership property, there, in the absence of any controlling stipulations, the like commu- nity in the profit and loss will be intended to exist between the parties, as incident to the community of property.^ But where the agreement merely in terms expresses that the property is furnished by one partner, and the parties are to have a community of interest, and share in the prof- it and loss, the like inference is not ordinarilv or necessa- rily deducible.^ And accordingly it has been held at the common law. that if A. is the owner of goods, and agrees with B., that B. shall be interested in a particular por- tion of the profit and loss of the adventure or voyage abroad, in which the goods are to be embarked, such an agreement will not alone make A. and B. partners in the goods, as between themselves, but only partners in the profits.^ But, if the goods themselves are purchased on joint account, or are treated as a joint concern, or both parties are, by their agreement, to be interested therein ; there, a very different inference will arise, and the parties will be treated as partners in the goods, as well as in the ' Coll. on P. B. 2. c. 1, § 2, p. 106-113, 2d ed. See Brophy v. Holmes, 2 Molloy. 1. {See Julio r. Ingalis, 1 All. 41.} * Reid V. HoUinshead, 4 B. & C. 8G7. 3 Coll. on r. B. 2, c. 1, § 2, p. 106-112, 2d ed. ; Mair v. Glennie, 4 M. & S. 240. " Meyer v. Sharpe, 5 Taunt. 74 ; Smith v. Watson, 2 B. & C. 401 ; Coll. on P. B. 2, c. 1, § 2, p. 107-1 12, 2d cd.; Hesketh v. Blanchard. 4 East. 144 ; Ex parte Hamper, 1 7 Ves. 403 ; Mair i\ Glennie, 4 M. & S. 240; [E.xplainod in Stocker v. Brockelbank, 3 Maon. & G. 250 ; 5 Eng. L. & Eq. 6 7] ; Hall v. Leigh, 8 Cranch, 50; [Clement v. Hadlock, 13 N. H. 185.] 46 PARTNERSHIP. [cHAP. III. profits and losses.^ The like doctrine will apply, where each of the parties contributes labor and services and materials in the manufacture of any articles of trade, and the articles, when made, are to be equally or proportion- ably shared between them ; they will be deemed partners, inter sese ; for the articles manufactured, and so to be divided, may well be deemed the profits or losses of their joint undertaking and business. It is not a mere division of a capital stock jointly purchased, but of a capital stock in new proceeds or products." § 28. The like distinction is recognized and maintained by foreign jurists. Pufendorf says : " Upon breaking up of partnership, if each party only contributed money, it is plain, upon a division, that each must receive accord- ing to his contribution. But if both money and labor were contributed, it must be considered after what man- ner the contribution or collection was made ; for when labor is contributed on one side, and only the use of mon- ey on the other, he who contributed the money, does not admit the other to a share in the principal, but only to his proportion of the gain that might be made of the money and labor joined together. And in this case, as he that contributed only labor, has no title to any part of the money, when they break off partnership, so the other alone, as owner, is concerned in the risk that the money is exposed to ; and in such a partnership as this, not the money itself, but the risk that it runs, and the gain, that may be probably expected from it, is compared with the labor." ^ He afterwards adds : " But sometimes the labor » Reid V. Hollinshead, 4 B. & C. 867 ; Coll. on P. B. 2, c. 1, § 2, p. 112, 113, 2d ed.; Ex parte Gellar, 1 Rose, 297; [Soule v. Hay ward, 1 Cal. 345]; {Sims V. AViiling, 8 S. & R. 103.} * Musier r. Trumpbour, 5 "Wend. 274 ; Everitt v. Chapman, 6 Conn. 347 ; [Wadsworth v. Manning, 4 Md. 59] ; 3 Kent, 24, 25. {But see Hitchings v. Ellis, 12 Gray, 449.} ' Puf. B. 5, c. 8, § 2, by Kennet, and Barbcyrac's note. CHAP. III.] COMMUNITY OF INTERESTS. 47 and money are so interwoven together, as to give him that contributed only his labor, a share even in the principal ; the labor of the one, and the money of the other, being in a manner united into one mass. As when one lays out his money upon unwrought commodities, and another spends his labor in w^orking them up, and managing them. Thus, if I give a weaver £100 to buy wool, and he makes cloth of it, computing his labor at £100, it is manifest that here both of us have an equal interest in the cloth ; and, when it is sold, the money must be equally divided. Nor ought I to subtract the money that I contributed at first, and then divide the remainder with him." ^ § 29. The like distinction is asserted by Pothier. " When " (says he) " two persons contract a partnership between themselves, to sell in common certain goods, which belong to one of them, and to share the proceeds, it is necessary carefully to examine what is their inten- tion. If the intention is to put the very goods into part- nership, the partnership will extend to the same ; and if a part of the goods perish before the sale proposed by the parties is made, the loss will be borne as a common loss. But, if the intention is to put into partnership, not the goods themselves, but the price which shall be obtained therefor, the entire loss will fall upon the partner to whom the goods belonged." ^ And Pothier adds, that the like rule will apply to the case of two merchants, who are associated for the sale of merchandise, which each of them has in his own shop. It will depend upon the na- ture of their agreement, as to the goods being brought into partnership, or only the proceeds, when sold, wheth- er, if a loss takes place, it is to be borne by both as a common loss, or by the original owner only.^ The llo- man law was equally direct and expressive. Chun tres ' Puf. B. 5, c. 8, § 2, by Konnet, and BarbejTac's note- * Toth. de Soc. n. 54. ^ Ibid. 48 PARTNERSHIP. [cHAP. III. equos haheres, et ego uniim, societatem coimics, ut, accepto equo meo, quadrigam venderes, et ex pi^etio quartam mihi redderes. Si igitur ante venditionem equus mens mor- tims sit, non putare se, Celsus ait, societatem manere, nee ex pretio equorum tuorum partem deheri ; nee enim habendoi quadrigce, sed vendendcB coitam societatem. Ceterum, si id actum dicatur ut quadriga jieret, eaque communicaretur , tuq^ie in ea tres partes haheres, ego quartam, non duhie adhuc socii sumus} We here see the distinction clearly laid down between a partnership in the capital stock, and a partnership in the profits or losses arising from the sale. Ulpian also says : Coiri societatem et simjjliciter licet; et si non fuerit distinc- tum, videtur coita esse imiversorum, quoi ex qumstu veniunt ; hoc est, si quod lucrum ex emptione, venditione, locatione, conductione, descendit.^ Yinnius has put the same distinction in a clear light : Possunt igitur duo so- cietatem sic coire, ut unus jjecuniam confer at, unde merces emantur et negotiatio exerceatur ; alter operant duntaxat, qui projicisccdur ad merces emendas, emat et ve7idat, ut sic deinde lucrum com,mune sit. Ceterum hcec collatio non uno modojit ; nam aut opera confertur cum solo p>eciiniai usu, quo casu soi's domino peril, et si salva est, domino salva est ; aut opera confertur cum ipso do- m.inio pecunice, quo casu qui operam impendit,p)articepsfit soi^tis. In prima specie comparatur cum opera non sors, sed 2^€,ricidum amittendce sortis, et lucrum, quod ex ea p)rohahiliter siJerari poterat. In altera operm preiium habetur, quasi sorti adjectum, et pro eo, quod valet, in ipsa sorte p)artem hahet, qui operam p)rcestc(t.^ ' D. 17, 2, 58; Id. 17, 2, 58, 1 ; Poth. Pand. 17, 2, n. 22; Doraat, 1, 8, 4, art. 14 ; Coll. on P. B. 1, c. 2, § 2, p. 109, 2d ed. 2 I). 17, 2, 7; Poth. Pand. 17, 2, n. 20; Domat, 1, 8, 3, art. 2. ' Vinn. ad Inst. 3, 26, 2, n. 3, p. G97. CHAP. IV.] AS TO THIRD PERSONS. 49 CHAPTER IV. PARTNERSHIP AS TO THIRD PERSONS.^ § 30. Community of property does not of itself constitute a partnership. 31. Cases where it may constitute a partnership. 32. Community of profit does not of itself constitute a partnership. 33. When participation in the profits makes one a partner. 34. Meaning of an interest in the profits, as profits. 35. Lord Eldon on the rule that interest in the profits, as profits, makes one a partner. 36. Remarks on the rule. 37. Roman and foreio-n law. 38. That participation in the profits makes one a partner is a presumptive rule only. 39. The cases will be found in harmony. 40. Cases of joint shipment and purchase. 41. Cases of brokers and other agents. 42. Cases of masters and seamen of vessels. 43. American cases. 44. American cases of masters of vessels. 45. 46. American cases of the manufacture of goods. 47. American cases of agency. 48. A mere agent is not a partner. 49. The intention of the parties should govern. 50. Roman law. 51. French law, 62, The distinction of the common law defensible. 53. Liability of a partner to third persons. 54. Classification of cases of such liability. 55. (1) Community of profit and loss, though not in property. 56-58. Illustrative cases. 59. (2) Community of profit and loss, where there is no property. 60. (3) Participation in profits, but not in losses. 61. Illustrative cases. 62. Roman law. 63. These three classes include dormant partnerships. 64. (4) Holding out as partner. ' {In this chapter, notwithstanding its title, the author treats not only of cases in which persons are partners as to third parties, but also discusses largely the cases in which they are partners inter sese. ] 4 50 PARTNERSHIP. [cHAP. IV. § 65. How such holding out may arise. 66. (5) Loans and annuities. 67. Test of liability in such cases. 68. 69. Ilhistrative cases. 70. Liability of trustees and executors as partners. KoTE. — Subpartnership.} § 30. In considering the question, when and under what circumstances a partnership may exist, as to third persons, although not between the parties themselves, we are led to the remark, that there may be a community of interest in property, without any community in the profits thereof, as well as a community of interest in the profits, without any community in the property, out of which they are to arise. ^ The absence of both ingre- dients is necessarily decisive that no real partnership exists. But a nice and difficult question may arise, and, indeed, often does arise. When and under what circum- stances, notwithstanding the absence of one of these in- gredients, the presence of the other will still be deemed to create a partnership between the parties themselves ; ^ or, if not between themselv-es, yet it will be deemed to 1 {That a partnership may exist without community in property, see §27.} ' { Who are partners inter sese. The community of both j^rofit and loss constitutes a partnership. Green v. Beesley, 2 Bing. N. C. 108; Brett v. Beckwith, 3 Jur. x. s. 3L In Duryea v. Whitcomb, 31 Vt. 395, an agree- ment to jointly own property and to share in the profit and loss of the busi- ness was held to be by necessary legal construction an agreement for part- nership, though nothing was said by the parties about a partnership, and though thev were not aware that the legal effect of the agreement was to create one. See Meyers v. Field, 37 Mo. 434. Mr. Lindley (Lind. on P. 13) says, he " is not aware of any case in which persons who have agreed to share profit and loss have been held not to be partners." The only case in the Supreme Court of any of the United States in which such persons seem held not to be partners is Dwinel v. Stone, 30 Me. 384. There persons who shared profit and loss were held not to be partners, for the reason that they Lad no community of interest in the property (a reason not supported by the weight of authority, see § 27.) The facts in Dwinel v. Stone are not fully disclosed, and it is possible that the agreement to share profit and loss was really an agreement to share gross returns, as Mr. Lindley suggests to have been the case in Mair v. Glennie, 4 M. & S. 240 ; if this was so, the CHAP. lY.] AS TO THIRD PERSONS. 51 exist as to third persons.^ It may be laid down as a general rule, that in all such cases no partnership will be created between the parties themselves, if it would be contrary to their real intentions and objects. And none will be created between themselves and third per- sons, if the whole transactions are clearly susceptible of a different interpretation, or exclude some of the essen- tial ingredients of partnership.^ Thus, for example, as has been already intimated, if two persons should agree decision that no partnership existed was in accordance with the current of authority; vide infra. See Smith v. Wright, 5 Sand. 113. Though nothing be said about losses, yet an agreement to share profits is presumptively an agreement to share losses also, and therefore constitutes a partnership. Hodgman v. Smith, 13 Barb. 302; Cox v. Delano, 3 Dev. 89; Perry v. Butt, 14 Ga. 699 ; Miller v. Hughes, 1 A. K. I\Iarsh. 181 ; Lind. on P. 13. But even though indemnity against losses is stipulated for, yot prima facie an agreement to share profits is an agreement for jjai'tnership. Lind. on P. 1 7. Whether persons are to be partners, at any rate inter sese, in this class of cases depends on intention. To determine whether the intention was to create a partnership or not, the fact whether a community of property has or has not been created is strong though not conclusive evidenre. Liad. on P. 16 ; Julio V. Ingalls, I All. 41 ; Ellsworth r. Pomeroy, 26 Ind. 158. Per- sons may not be partners although they call themselves so. Rvdclifi'e v. Rush- worth, 33 Beav. 484; Oliver v. Gray, 4 Ark. 425. The chief classes of cases in which sharing; in profits has been held not to make persons partners inter sese are — 1. Sharing in gross returns (see § 34) ; 2. Sharing in joint shipments and purchases ; 3. Sharing by agents ; 4. Sharing by seamen and mastei's of vessels; 5. Sharing by landlords; 6. Sharing by manufacturers of goods ; 7. Sharing by carriers (classes 2-7 are considered in § 40-47, 58 a) ; 8. Sharing by lenders and annui- tants (see § G6-69) ; 9. Sharing by creditors, trustees, &c. (See § 70.) See further on the subject, § 146-151. As persons who are partners inter sese are liable as partners to third per- sons, cases in which persons have been held not liable as partners to third persons are a fortiori authorities to show that they were not partners inter sese. Cases in which persons who are not partners inter sese have yet been held liable as such to third persons will be considered infra. Note to § 49. { ' See Gibson v. Lupton, 9 Bing. 297; Post v. Kimberly, 9 .Johns. 4 70; Geddes v. Wallace, 2 Bligh, 270; Hazard v. Hazard, 1 Story, 371. See 1 Sm. Lead. Cas. 504, &c., 2d ed., note to Waugh v. Carver. • {This rule of the author is disapproved by Mr. Justice Bell in Bromley V. Elliot, 38 N. H. 287, 306, "as laid down by a plausible writer, but often superficial thinker."] 52 PARTNERSHIP. [cHJ AP. IV. to purchase goods on joint account in certain propor- tions, without any intention to sell them on joint account, or to be jointly concerned in the future sale, this will give them a community of interest in the property, when purchased, but will not make them partners ; and they will be joint tenants or tenants in common thereof, ac- cording to circumstances.^ And it will make no differ- ence, whether the purchase is made in their joint names, or in the name of one of them, or through the instru- mentality of an agent." In cases of this sort one essen- tial ingredient, that of a communion of profit and loss, is wanting.^ Upon similar principles, if two persons agree to do a particular piece of work, but the money received for the work is not to be employed on their joint account, or for their joint benefit, the persons so contracting are not partners, but merely joint contract- ors.'* So, if two joint owners of merchandise should consign it to the same consignee for sale, informing him, that each owns a moiety thereof, and should give him separate and distinct instructions, each for his own share, as to the sales and returns, they would not be partners in the adventure ; but each would be deemed entitled to > Ante, § 3 ; 3 Kent, 25, 26 ; Coope v. Eyre, 1 H. Bl. 37 ; Gow on P. c. 1, p. 10, 11, 3d ed. ; Id. c. 4, p. 153, 154 ; Smith v. Watson, 2 B. & C. 401 ; Hardinji i'. Foxcroft, 6 (jreenl. 76 ; Jackson v. Robinson, 3 Mason, 138. {So a joint purchase of land, Sikes v. Work, 6 Gray, 433 ; Munson r. Sears, 12 Iowa, 1 72. Tenants in common of a race-horse who share his winnings and divide the expenses of his keep are not partners in the horse. French v. Styring, 2 C. B. N. s. 35 7. See Oliver v. Gray, 4 Ark. 425.} * 3 Kent, 25, 26; Hoare v. Dawes, Doug. 371 ; Coope v. Eyre, 1 H. Bl. 37; Post r. Kimberly, 9 Johns. 470 ; Holmes v. Unit. Ins. Co. 2 Johns. Cas. 329 ; Harding v. Foxcroft, 6 Greenl. 76. =• Coope V. Eyre, 1 H. Bl. 37; Gow on P. c. 1, p. 10, 3d ed.; Coll. on P. B. 1, c. 1, § 1, p. 11-15, 2d ed,; Gibson v. Lupton, 9 Bing. 29 7. {A club is not a partnership. See § 144. See also Austin v. Thomson, 45 N. H. 113.} * Coll. on P. B. 1, c. 1, § 1, p. 15, 16, 2d ed. ; FInckle v. Stacey, Sel. Ca. 9 ; [Dwinel v. Stone, 30 Me. 384.] CHAP. IV.] AS TO THIRD PERSONS. 53 a separate account, and a separate action against the consignee, if he should disobey his own orders.^ § 31. But cases may nevertheless occur, where a com- munity of interest in the property may draw after it the establishment of a partnership between the parties, although a sale of the property for the joint profit may not be contemplated by the parties. Thus, as in the ex- ample already suggested, if two persons should agree together, to furnish an equal quantity of materials to manufacture articles of a particular description, and to employ their mutual skill, labor, and services, in man- ufacturing the articles ; and then the articles were to be equally divided between them, and sold by each on his separate account, there, a partnership in the prop- ertv and manufactured articles would be deemed to exist.^ § 32. On the other hand, there may be a community of interest in the profits between the parties, without any community of interest in the property itself.^ But this participation in the profits will not (as we have seen"*) create a partnership between the parties them- ' Hall V. Leigh, 8 Cranch, 50; Jackson v. Robinson, 3 Mason, 138. {A., B. and C. agreed that each should furnish 3,000/. worth of goods to be shipped on joint adventure, the profits to be divided in proportion to the shipments. Held, no partnership. Heap v. Uobson, 15 C. B. x. s. 460. But see Sims v. Willing, 8 S. &R. 103.} ^ Ante, § 27; Musier v. Trunipbour, 5 Wend. 274 ; Everitt v. Chapman, 6 Conn. 347; Bond v. Pittard, 3 M. & W. 357 ; 3 Kent, 24-26. See also, Jordan v. Wilkins, 3 Wash. C. C. 1 1 0. ' [Thus, when two mercantile firms agree to share profits and loss upon contracts for the purchase or sale of merchandise in a particular branch of their business, to be made by each firm separately in its own name, and to be executed with its separate fund, this does not constitute them partners, either as between themselves or to third persons ; since each firm would be sepa- rately bound to fulfil its own contracts, and there would be no union of funds, services, or property, but only a division of profit and loss. Smith v. Wright, 5 Sand. H3.] * Ante, § 27, 28 ; Hazard v. Hazard, 1 Story, 371. In this case the court said : " Now, upon the point, whether there was a partnership or not between 54 PARTNERSHIP. [chap. IV. selves, as to the property, as well as the profits, contrary to their intentions.^ Nor will it necessarily create such a partnership in all cases, as to third persons. The these parties in the factory business, under the agreement, it is necessary to take notice of a ■vvell-known distinction between cases, where, as to third persons, there is held to be a partnership, and cases where there is a partner- ship between the parties themselves. The former may arise between the parties by mere operation of law against the intention of the parties ; whereas, the latter exists only Avhen such is the actual intention of the parties. Thus, if A. and B. should agree to carry on any business for their joint profit, and to divide the profits ecjually between them, but B. should bear all the losses, and should agree, that there should be no partnership between them ; as to third persons dealing with the firm, they would be held partners, although inter sese, they would be held not to be partners. This distinction is often taken in the authorities. It was very fully discussed and recognized in VVaugh V. Carver. 2 H. Bl. 235; Cheap v. Cramond, 4 B. & Aid. GG3; Peacock v. Peacock, 16 Ves. 49 ; Ex parte Hamper, 17 Ves. 403 ; Ex parte Hodgkinson, 19 Ves. 291 ; Ex parte Langdale, 18 Ves. 300 ; Tench v. Roberts, 6 Madd, 145, note ; Hesketh v. Blanchard, 4 East, 144 ; Muzzy v. Whitney, 10 Johns. 226 ; Dob v. Halsey, 16 Johns. 34. The question before us is, not as to the liability to third persons ; but it is solely whether between themselves the agreement was intended to create and did create a partnership. I have looked over the agreement carefully, and my opinion is, that no partnership whatsoever was intended between the parties; but that Benjamin Hazard was to be employed as a mere superintendent, and not as a partner ; and was to be paid the stipulated portion of the profits for his services as superintend- ent. This, it is said, in the agreement, was to be the sole reward for his services; and, if there were no profits, then he was to submit to lose the value of his services. It is not anywhere said in the agreement, that the parties are to be partners in the business ; nor that Benjamin Hazard is to pay any part of the losses. But language is used, from which, I think, it may fairly be inferred, as the full understanding of the parties, that the whole capital stock was to be held by T. R. Hazard, as his sole and exclusive property, and that the stock was to be furnished by him, and the proceeds thereof were to be delivered and sold by him, and charged to him, as his individual prop- erty, and debts and credits. Now, if this be so, there is no pretence to say, that the parties intended a partnership. A mere participation in the profits will not make the parties partners inter sese, whatever it may do as to third persons, unless they so intend it. If A. agi'ees to give B. one-third of the profits of a particular transaction in business, for his labor and services ' Wish V. Small, 1 Camp. 331, note; Dry v. Boswell, 1 Camp. 329, 330; Mair V. Glennic, 4 M. & S. 240 ; [Explained in Stocker v. Brockelbank, 3 Macn. & G. 250, 5 Eng. Law & Eq. 6 7 ; Clement v. Hadlock, 1 3 N. H. 1 85] ; post, §41,42. CHAP. IV.] AS TO THIRD PERSONS. 55 various cases, in which a partnership may exist, as to third persons, although not between the parties them- selves, will presently come under our consideration ; ' and therefore, what is here said, will principally respect the question, when no partnership is created either way. Thus, if a party has no interest whatsoever in the capital stock, and as between himself and the other parties has also no rights as a partner, or no mutuality of powers and duties, but is simply employed as an agent, and is to receive either a given sum out of the profits, or a pro- portion of the profits, or a residuum of the profits therein, that may make both liable to third persons as partners; but not as between themselves. This was the very point adjudged in Hesketh v. Blanchard, 4 East, 144, where Lord Ellenborough said: 'The distinction taken in Waugh v. Carver and others, applies to this case. Quoad tliird persons it was a partnership, for the plaintiff was to share half the profits. But, as between themselves, it was only an agreement for so much, as a com- pensation for the plaintiff's trouble, and for lending R. his credit.' The same doctrine was fully recognized in Muzzy r. "Whitney, 10 Johns. 226. It is not necessary, in the present case, to decide, whether Benjamin Hazard was, under the agreement, a partner as to third persons. That question may be left for decision, until it shall pi-operly arise in judgment. And before it is decided, it might be necessary to examine a very nice and curious class of cases, standing, certainly, upon a very thin distinction, if it is a clearly dis- cernible distinction, between cases of partnership as to third persons, and cases of mere agency, where the remuneration is to be by a portion of the profits. This distinction is alluded to by Lord Eldon, in Ex parte Hamper, 17 Ves. 403, and by Lord Chief Justice Abbott in Cheap r. Cramond, 4 B. & Aid. 663, 670. In the latter case, the Chief Justice said: ' Such an agree- ment is perfectly distinct from the cases, put in the argument before us, of remuneration made to a traveller, or other clerk or agent (in proportion to the profits), by a portion of the sums received by the master or principal, in lieu of a fixed salary, which is only a mode of payment adopted to increase or secure exertion.' It was also acted upon in Muzzy v. Whitney, 10 Johns. 226; Dry v. Boswell, 1 Camp. 320; Wish v. Small, Id., note ; Benjamin v. Porteus, 2 H. Bl. 590; Wilkinson v. Frasier, 4 Esp. 182; and Mair v. Glennie, 4 M. & S. 240, 244. My judgment is, that in the present case the parties never intended any partnership in the capital stock ; but a mere participation of interest in the profits ; and that the one-third or one-fourth of the profits, allowed by the agreement to Benjamin Hazard, was merely a mode of paying him as agent for his superiutendency of the factories." 1 Post, § 53-70. 56 PARTNERSHIP. [cHAP. IV. beyond a certain sum, as a compensation for his labor and services, as agent of the concern, and not otherwise ; he will not be deemed a partner in the concern from that fact alone ; not a partner with the others inter sese, for that would be contrary to their intentions and objects ; ^ nor as to third persons, because the transaction admits of a different interpretation, and may justly be deemed a mere mode of ascertaining and paying the compensation of an agent, as in a naked case of agency. In such a case, it may be properly enough said, that the agent is entitled to a share or portion in the profits, liquidated or unliquidated, and, therefore, that he has, in a certain sense, a community of interest therein, with the actual partners. But he does not participate therein, as an owner ^9?'o tanto, or as possessed thereof, ^er my et per tout, or as clothed with the rights, and powers, and duties of a partner. He has only a limited interest therein, either as entitled to a fixed sum, to be paid out of the profits, or as entitled to a lien thereon, or as possessed of an undivided portion thereof as a tenant in common. I 33. The distinction between the cases, where a par- ticipation in the profits will make a man liable to third persons, as a partner, or not, is sometimes laid down by elementary writers in different language. Thus it has been said by a learned writer : " A distinction, however, prevails between an interest in the profits themselves, as profits, and the payment of a given sum of money in proportion to a given quantum of the profits, as the re- ward of, and as a compensation for, labor and services " 2 1 Gow on p. c. 1, p. 10, 11 ; Geddes v. Wallace, 2 Bligh, 270; Benjamin V. Porteus, 2 11. Bl. 590; Dry v. Boswell, 1 Camp. 329, 330; Wish v. Small, I Camp. 331, note; Ex parte AVatson, 19 Ves. 459; Muzzy v. Whitney, 10 Johns. 226 ; Turner v. Bissell, 14 Pick. 192. See Garey v. Pyke, 10 Ad. & E. 512; post, § 33-36, 38-40. * Gow on P.O. 1, p. 18, 3d cd. ; [Brockway v. Burnap, 16 Barb. 309; Pierson v. Steinmyer, 4 Rich. 301).] CHAP. IV.] AS TO THIRD PERSONS. 57 Another learned writer lias expressed himself in the fol- lowing terms: " In order to constitute a communion of profit between the parties, the interest in the profit must be mutual, that is, each person must have a specific in- terest in the profits as a principal trader. He is not a partner, if he merely receives out of the profits a com- pensation for his trouble, in the character of an agent or servant of the concern." ^ § 34. The distinction, as thus presented, does certainly wear the appearance of no small subtlety and refine- ment, and scarcely meets the mind in a clear and unam- biguous form ; ^ for the question must still recur ; when may a party properly be said to have " an interest in the profits, as profits " ? When also may it properly be said, that " the interest in the profits is mutual," and that " each person has a specific interest in the profits, as a pri7icipal trader " ? No absolute test is given to distin- guish the cases from each other, and it is not easy to grasp it, Avhen stated in so abstract a form. The true meaning of the language, " an interest in the profits, as profits (which has probably been borrowed from the subtle and refined statement of an eminent judge ),^ seems to be, that the party is to participate, indirectly at least, in the losses, as well as in the profits, or, in other words, that he is to share in the net profits, and not in the gross profits.'* If he is to share in the net profits, which sup- poses him to have a participation of profit and loss, that will constitute him a partner ; if in the gross profits, then it will be otherwise.^ Thus, where an agreement was made between the owner of a lighter, and B., a 1 Coll. on p. B. 1, c. 1, § 1, p. 17, 18, 2d ed. " Coll. on P. B. 1, c. 1, § 1, p. 23, 2d ed. » Lord Eldon. " Post, § 56. '" Bond V. Pittard, 3 M. & W. 35 7; post, § 220, and note; post, § 41, 42, 48. 58 PARTNERSHIP. [CHAP. IV. lighter-man, that, in consideration of his working the hghter, he should have half her gross earnings, it was held to be only a mode of paying B. wages for his labor, and not a partnership ; but, that if the profits were to be equally divided between them, there the participation of the parties of the profit and loss would make the agree- ment a partnership.^ § 35. Lord Eldon has adverted to the like distinc- tion, and disapproved of it in strong terms. On one occasion his Lordship said : " The cases have gone fur- ther to this nicety, upon a distinction so thin, that I cannot state it as established upon due consideration ; that if a trader agrees to pay another person, for his labor in the concern, a sum of money, even in propor- tion to the profits, equal to a certain share, that will not make him a partner ; but, if he has a specific interest in the profits themselves, as profits, he is a partner." ^ On another occasion, he said, referring to the case be- fore him, " That it was impossible to say, that as to ' Dry V. Boswell, 1 Camp. 329, 330; Cheap v. Cramond, 4 B. & Aid. 6G3, 670. See also Waugh v. Carver, 2 H. Bl. 235, 246, 247 ; SavUle v. Robert- son, 4 T. R. 720; Bond v. Pitlard, 3 M. & W. 357; Pearson v. Skelton, 1 M. & W. 504; s. c. Tyrw. & G. 848; {Heyhoe v. Burge, 9 C. B. 431.} See also Cutler v. Winsor, 6 Pick. 335; Bailey v. Clark, 6 Pick. 372; Turner v. Bissell, 14 Pick. 192; Chase v. Barrett, 4 Paige, 148, 159 ; Brigham v. Dana, 29 Vt. 1, 9 ; post, § 53-69, 220. — In this case the distinction is clearly pointed out between participation in the gross profits and participation in the net profits. See post, § 220, note ; {§21, note ; Lind. on P. 19 ; Lyon o. Knowles, 3 B. & S. 556 ; Bowman v. Bailey, 11 Vt. 170 ; Pattison v. Blanchard, 1 Seld. 186 ; Merrick v. Gordon, 20 N. Y. 93.} See 1 Sm. Lead. Cas. 504, 2d ed., note to Waugh v. Carver. The case of Thompson v. Snow, 4 Greenl. 264, seems to be contrary; for it makes no distinction between sharing the net earnings and sharing the gross earnings; post, § 44, and Reynolds v. Toppan, 15 IVIass. 3 70. See also Loomis v. Marshall, 12 Conn. 69 ; post, § 45 ; [Denny V. Cabot, 6 Met. 82 ; Bradley v. White, 10 Met. 303] ; {Parsons on P. p. 88, n. (q.)} » Ex parte Hamper, 17 Ves. 403 ; Coll. on P. B. 1, c. 1, § 1, p. 23, 24, 2d ed. ; Ex parte Watson, 19 Ves. 459 ; Turner v. Bissell, 14 Pick. 192 ; Loomis V. Marshall, 12 Conn. 69 ; 1 Sm. Lead. Cas. 504, note, 2d ed. CHAP. IV.] AS TO THIRD PERSONS. 59 third persons, they (the parties) were not partners, the ground being settled, that if a man, as a reward for his labor, chooses to stipulate for an interest in the profits of a business, instead of a certain sum proportioned to those profits, he is, as to third persons, a partner ; and no arrangement between the parties themselves could prevent it." ^ § 36. But however nice the distinction may be in itself, and however difficult it may be successfully to apply it to the circumstances of particular cases, it is by no means clear, that there is not a very just and satisfactory foundation on which it may well rest.^ The question in all this class of cases is first to arrive at the intention of the parties inter sese ; and secondly, if between themselves there is no intention to create a partnership either in the capital stock, or in the profits, whether there is any stubborn rule of law, which will nevertheless, as to third persons, make a mere partici- pation in the profits conclusive, that there is a partner- ship. If there is any such rule of law, the next inquiry is, as to the nature, and foundation, and true extent thereof. Now, it is incumbent upon those who insist that a partnership exists between the parties, as to third persons, by mere operation of law, in opposition to their own intention, to establish, that in the given case, under all the circumstances, there is such a rule, and that it is strictly applicable. What then is the rule of law relied on for the purpose 1 It is said, that the true criterion is, whether the parties are to participate in profit ; ^ or, according to the language used on an- > Ex parte Rowlandson, 1 Rose, 89, 91, 92 ; Coll. on P. B. 1, c. 1, § 1, p. 24-29, 2d ed. ; Ex parte Langdale, 18 Ves. 300. See also the remarks of Mr. Chief Justice Gibson in Miller v. Bartlet, 15 S. & R. 137. See Hazard V. Hazard, 1 Story, 371-376; ante, § 32, note. 2 See 3 Kent, 33, 34. ^ Lord Eldon in Ex parte Langdale, 18 Ves. 300. 60 PARTNERSHIP. [CHAP. IV. other occasion, "Every man, who has a share in the profits of a trade, ought also to bear his share of the loss as a partner."^ In a just sense this language is sufficiently expressive of the general rule of law ; but it is assuming the very point in controversy to assert, that it is universally true, or that there are no qualifi- cations, or Umitatious, or exceptions to it. On the contrary, the very cases alluded to by Lord Eldon, in the clearest terms establish, that such qualifications, limitations, and exceptions do exist; and are either contemporaneous with the promulgation of the general rule, or are necessary to its just apphcation and use. It is, therefore, far from being universally true, that a mere participation in the profits constitutes the party a partner ; at most, it is true only suh modo. Indeed, as an original question, it might admit of very grave doubt, whether it would not have been more con- venient, and more conformable to true principles, as well as to public policy, to have held, that no partner- ship should be deemed to exist at all, even as to third persons, unless such were the intention of the parties, or unless they had so held themselves out to the pub- lic.^ But the common law has already settled it otherwise ; and therefore it is useless to speculate upon the subject.^ ' Grace v. Smith, 2 W. Bl. 998, 1000; Ex parte Hamper, 17 Ves. 403; Ex parte Watson, 19 Ves. 459, 461 ; Waugh v. Carver, 2 H. Bl. 247 ; Tur- ner u. Bissell, 14 Pick. 192. " Sec the remarks of Mr. Chancellor Walworth, in Chase v. Barrett, 4 Paige, 148, 159, IGO ; post, § 48, 49. * The ground upon which the participation in the profits of a trade, although ' no partnership is intended to exist between the parties, shall make them partners as to third persons, is thus stated by Lord Chief Justice De Gre}', in Grace v. Smith, 2 W. Bl. 998, 1000. " Every man, who has a sliare of the profits of a trade, ought also to bear his share of the loss. And if any one takes part of the profit, he takes a part of that fund on which the credi'tor relies for his payment. If any one advances or lends money to a trader, it CHAP. IV.] AS TO THIRD PERSONS. 61 § 37. The E-oman law and the modern foreign law do not appear to have created a partnership between the parties, as to third persons, without their consent, is only lent on his general personal security, and yet the lender is generally interested in those profits. He relies on them for repayment." Now, to say the least of" it, this reasoning is very artificial ; for if the creditor trusts to the personal security of his debtor generally, for advances made, or goods sold, and he has no lien on the property or profits of the trade for repayment, it seems difficult to perceive why other persons should be liable to him on account of their receipt of a portion of the profits, there being no privity of contract and no partnership existing in the advances of money or goods sold between the parties. Why should a mere participant in the profits, contrary to the intent of the agreement between himself and his co- contractor, be held responsible to a creditor of the latter, when the latter has trusted to his personal security, and only had a general confidence, that he "was doing a profitable business ? Why should the creditor's contract displace the contract of the immediate parties ? The rule might have some show of equity, if the party were only held liable to the extent of the profits re- ceived by him. But the rule makes him liable to pay all the losses, and all the debts, whether he has recived any profits or not. There is great force on this point in the argument of the counsel for the defendants in Waugh v. Carver, 2 H. Bl. 244, 245. It was there said : " The profits are not a capital, unless carried on as capital, and not divided. Ship agents are not traders, but their employment is merely to manage the concerns of such ships in port as are addressed to them. Suppose two fishermen were to agree to share the profits of the fish that each might catch, one would not be liable for mending the nets of the other. So, if two watermen agree to divide their fares, neither would be answerable for repairing the other's boat. Nor would any artificers, who entered into similar agreements to share the produce of their separate labor, be obliged to pay for each other's tools or materials. And this is not an agreement as to the agency of all ships, with which tlie parties were concerned, for such as came to the particular address of one were to be the sole profit of that one. It was, indeed, clearly the intent of the parties to the agreement, and is so expressed, that neither should be answerable for the losses, acts, or deeds of the other, and that the agreement should not extend to their separate mercantile concerns. It must, therefore, be a strong and invariable rule of law, that can make the parties to the agreement responsible for each other, against their express intent. But all cases of partnership, which have been hitherto decided, have proceeded on one or other of the following grounds : — 1. Either there has been an avowed authority given to one party to contract for the rest ; 2. Or, there has been a joint capital or stock ; 3. Or, in cases of dormant partnei-s, there has been an appearance of fraud in holding out false colors to the world." See also' post, § 48-52. However, the doctrine is (as is fully stated in the text) completely established, upon the very ground asserted in Grace r. Smith. 62 PARTNERSHIP. [CHAP. IV. or against the stipulations of their own contract ; and, therefore, the common law seems to have pressed its principles on this subject to an extent not required by, even if it is consistent with, natural justice.^ Indeed, the Roman law deemed all contracts to be made only between the immediate parties thereto ; and no direct remedy was generally furnished to or against third per- sons, even where one of the immediate parties was a mere agent of such third persons, and it required the interference of the Proetor to enlarge the remedy by an equitable extension to reach them.^ § 38. Admitting, however, that a participation in the profits will ordinarily establish the existence of a part- nership between the parties in favor of third persons, in the absence of all other opposing circumstances, it See Waugh v. Carver, 2 H. Bl. 235, 246, 247 ; Cheap v. Cramond, 4 B. & Aid. 663; Dob v. Halsey, 16 Johns. 34; M'lver v. Humble, 16 East, 169, 174, 175; 3 Kent, 24, 25, 27; Ex parte Langdale, 18 Ves. 300; [Pott v. Eyton, 3 C. B. 32; Barry v. Nesham, Id. 641.] {^'I hope I shall stand excused, if I venture to discuss the reasoning in Waugh r. Carver. What was it ? It was that ' he who takes a share of the profits of a business, takes part of the fund on which creditors rely for payment.' Can any thing be con- ceived more false ? Creditors neither can nor do rely on profits for payment. Profits do not exist until creditors are paid. Look at any individual transaction. A. sells goods to B. for lOOZ. ; B. resells them for 110/. There is 10/. profit. Does the creditor look to this 10/. for the payment of his 1 00/. '? No : he looks to the 100/. That sum would pay him, and is the proper fund to pay him. The 10/. would not. The 10/. evidently belongs to B., and is the fund to enable him to pay the outgoings of his trade and subsist himself and his family." Testimony of Mr. Commissioner Fane before a Committee of the House of Commons, given in Lind. on P. 40, n. (/.). In fact, what a creditor does rely on as a fund of payment are the gross returns, not the net profits. Yet it is declared that one who shares gross returns is not, while one who shares net profits is, a partner, because the latter takes from the fund on which creditors rely. Perhaps there is no other instance in commercial law, where so many confessedly harsh decisions have been based on so obvious a fallacy. } ' See Domat, 1, 8, 2, art. 1 ; Id. 1, 8, 4, art. 18; Civil Code of France, art. 1862-1865 ; Vinn. ad Inst. 3, 26, 2, n. 3 ; 17 Duranton, Droit Civil, n. 328-331 ; 5 Duvergier, Droit Civ. Franc, n. 45 ; Id. n. 385-387 ; 4 Pardessus, Droit Comm. n. 969 ; post, § 50. * Story on Ag. § 165, 261, 271, 425. CHAP. IV.] AS TO THIRD PERSONS. 63 remains to consider, whether the rule ought to be regarded, as any thing more than mere presumptive proof thereof, and therefore liable to be repelled, and overcome by other circumstances, and not as of itself overcoming or controlling them.^ In other words, the question is, whether the circumstances, under which the participation in the profits exists, may not qualify the presumption, and satisfactorily prove, that the por- tion of the profits is taken, not in the character of a partner, but in the character of an agent, as a mere compensation for labor and services. If the latter be the true predicament of the party, and the whole trans- action admits, nay, requires, that very interpretation, where is the rule of law, which forces upon the trans- action the opposite interpretation, and requires the Court to pronounce an agency to be a partnership, con- trary to the truth of the facts, and the intention of the parties'? Now, . it is precisely upon this very ground, that no such absolute rule exists, and that it is a mere presumption of law, which prevails in the ab- sence of controllino^ circumstances, but is controlled bv them, that the doctrine in the authorities alluded to is founded. If the participation in the profits can be clearly shown to be in the character of agent, then the presumption of partnership is repelled. In this way the law carries into efi"ect the actual intention of the parties, and violates none of its own established rules. It simply refuses to make a person a partner, who is but an agent for a compensation payable out of the profits; and there is no hardship upon third persons, since the party does not hold himself out as more than ^ [In Wood V. Vallette, 7 Ohio St. 1 72, it was held that a contract be- tween parties to share in the 7}et profits of a business, to the carrying on of which they respectively contribute, necessarily makes them partners as to third persons dealing with the firm.] 64 PARTNERSHIP. [cHAP. IV. an agent. This qualification of the rule (the rule itself being built upon an artificial foundation) is, in truth, but carrying into efiect the real intention of the parties, and would seem far more consonant to justice and equity, than to enforce an opposite doctrine, which must always carry in its train serious mischiefs or ruin- ous results, never contemplated by the parties. In this view the distinction, taken in the authorities above alluded to, has a reasonable and just foundation, and is entirely consistent with the equities, which ought to pre- vail in all reciprocal contracts.^ ' Mr. Chancellor Walworth has expressed himself in favor of the distinc- tion as well founded, in the case of Champion v. Bostwick, 18 Wend. 175, 184. He there said : " There is a class of cases, in which it has been held that a person, who merely receives a compensation for his labor in proportion to the gross profits of the business in which he is employed, is not a partner with his employer even as to third persons. The distinction appears to be between the stipulation for a compensation proportioned to the profits, and a stipulation for an interest in such profits, so as to entitle him to an account as a partner (1 Rose, 91) ; a distinction, whieh Lord Eldon says is so thin, that he cannot state it as settled upon due consideration. But he says, it is clearly settled as to third persons, though he regrets it, 'that if a man stipulates, that as the reward of his labor he shall have, not a specific interest in the business, but a given sum of money, even in proportion to the quantum of profits, that will not make him a partner ; but if he agrees for a part of the profits, as such, giving him a right to an account, though having no property in the capital, he is as to third persons a partner; and no arrangement between the parties themselves can prevent it.' Ex parte Hamper, Stark's Law of P. 137. Cary, however, defends the principle, upon which this distinction is based. He insists, that as the person, who is to receive a compensation for his labor in proportion to the profits of the business, without having a specific lien upon such profits to the exclusion of other creditors, it is for their interest that he should be compensated in that way, instead of receiving a fixed compensation, whether the business pro- duced profits or otherwise ; on the other hand, that, if he stipulates for an interest in the profits of the business, which would entitle him to an account, and give him a specific lien or a preference in payment over other creditors, and giving him the full benefit of the increased profits of the business, with- out any corresponding risk in case of loss, it would operate unjustly as to other creditors ; and therefore that it is perfectly right in principle, that he should be holden to be liable to third parties, as a partner in the latter case, but not in the first. Cary on P. 11, note i. I am inclined to think this CHAP. IV.] AS TO THIRD PERSONS. 65 § 39. Keeping this distinction in view, all the sup- posed repugnancy or difficulty of the various decided cases vanishes, and they are in harmony with each other, distinction is a sound one, as regards the rights of third persons. But as between the parties themselves, it is perfectly competent for them to a."Tee, that one shall have his full share of tlie anticipated profits, as a compensa- tion for his labor or skill, -without running any risk of absolute loss, except as to third persons, if instead of producing profits the business should prove a losing concern. Many of the cases cited by the counsel for the plaintiffs in error, were those, in which the question arose between the immediate parties to the agreement, which was supposed to make them partners as between themselves ; and they may therefore be reconciled with other cases, in which they were held to be liable as partners to third persons upon the principles before stated." IMr. Gary in the passage alluded to says : " It is not within the original object of tliis work to enter into any contested points, or to broach an opinion not immediately sanctioned by judicial decisions. In the present case, however, it may be allowable to depart from this rule, as the principle, on which the above distinction is grounded, seems to the author of this work perfectly clear and just. On the one hand, suppose a person is to receive a proportion of a given quantum of profits, by way of recompense for his labor, this cannot be productive of injustice to any of the creditors of the trader, for the trader's own interest will not suffer him to give a greater proportion of the profits than the particular adventure will well afford. As if the risk is worth ten per cent he will not be satisfied with securing five per cent only as his own return, but will probably offer an equal share of the profits above the five per cent. But suppose the adventure fails, and there is none or very little profit to be divided, the cred- itor is obviously in a better condition than if a sum certain had been given as wages ; for as every undertaking must be attended with some expense, and it is usual to pay agents or servants before any return of profit can be fairly calculated upon, it would be unreasonable to say, that an agent or servant shall not be paid, until the trader's other creditors are satisfied, and whether those wages are paid by a proportion of the profits, or by a sum certain, which must be deducted from the profits, cannot be very material to the creditors. On the other hand, if the agent agrees for a part of the profits as such, and stipulates for an interest in tlie profits of a business, instead of a certain sum proportioned to those profits, he obtains the right of an account, and to the prejudice of the creditors may institute a suit against his employer, not for the recovery of his wages, but for an account of profits; and supposing him not to be thereby constituted a partner, might take his full share of the profits, having an obvious advantage over the other creditors ; for in case of the trader's insolvency, his claim (still supposing him not to be a partner) would be prior to that of other creditors, ■whereas in the former case he has not a determinate interest in the profits, but on the event of the trader's becoming bankrupt, would be on the same 5 66 PARTNERSHIP. [CHAP. IV. as well as with common sense.^ Let us proceed then to illustrate the doctrine by adverting to some of the more striking cases, in which it has been judicially recognized and confirmed. § 40. Thus, where A., having neither money nor credit, offered to B., that if he would order certain goods to be shipped with A., upon adventure to foreign parts, if any profit should arise therefrom, B. should have one- half for his trouble ; and B. accepted the offer, and the goods were purchased accordingly, and charged to both A. and B. as joint debtors; and B., having been after- wards compelled to pay the whole debt, brought a suit against A.'s executors, to recover the value of the goods so purchased; on an objection taken, that A. and B. were partners in the adventure, and the action was not therefore maintainable, the court overruled the objec- tion, and held, that quoad third persons, this was a part- nership, for the plaintiff B. was to share half the profits ; but, as between themselves, it was only an agreement for so much, as a compensation for the plaintiff's trouble, and for lending A. his credit.^ In this case the purchase was on joint account, for the purpose of selling the same goods and dividing the profits ; and therefore it might well be deemed a partnership, as to third persons, as for example, in favor of the seller of the goods, consistently with the distinction above stated.^ footing with other simple contract creditors." See also Perrine v. Hankcrson, • 6 Halst. 181 ; 3 Kent, 25, note (b), where the learned commentator adopts with approbation the doctrine of Mr. Chancellor Walworth. See also Story on Contracts, § 352, 353, 357, and note. ' See Mont, on P. B. 1, Pt. 1, p. 10-12, 2d ed., where many of the cases are collected. « Hesketh v. Blanchard, 4 East, 144, 146 ; Smith v. Watson, 2 B. & C. 401 ; Post, § 56, 57. ' [So where several persons were engaged in running a line of stages from A. to B., and by the agreement between them one was to run at his own expense a portion of the route, and the others, in like manner, the residue ; each being authorized to collect fare over the whole or any part of CHAP. IV.] AS TO THIRD PERSONS. 67 § 41. But a case, bringing the distinction to its strict- est test, may easily be put, of factors, brokers, and other agents, who are employed to sell goods on account of their principals, and are to receive a commission out of the profits, or a proportion of the profits, or a particular percentage out of the price, or a part or the whole of the price, beyond a certain sum, for which the goods are sold, as a compensation for their services. In all such cases it has been constantly held, that the factors, brok- ers, and other agents, are not partners with their prin- cipals, as to third persons, and a fortiori^ not between themselves and their principals.^ It might be different, as to third persons (as we shall hereafter see), if the factor, broker, or other agent, were not only thus to receive a proportion of the profits, but also to bear a proportion of the losses.^ So, where a lighterman the route ; the parties to settle monthly, and the fare so received to be divided in proportion to the length of each one's route, the party found to have received more than his share, to pay over to the other the balance on each monthly settlement, this was held not to constitute a partnership be- tween the parties, Avhatever it might be as between them and third persons. Pattison v. Blanchard, 1 Seld. 186. And see Ellsworth v. Tartt, 26 Ala. 733: Bonsteel i\ Vanderbilt, 21 Barb. 26] ; {Merrick v. Gordon, 20 N. Y. 93. See§58rt.} 1 Coll. on P. B. 1, c. 1, § I, p. 18-29. See Dixon v. Cooper, 3 Wils. 40 ; Benjamin v. Porteus, 2 H. Bl. 590 ; Meyer v. Sharpe, 5 Taunt. 74 ; Rice v. Austin, 17 Mass. 197, 206 ; 3 Kent, 33 ; 2 Bell, Comm. B. 7, p. 623, 5th ed.; Withington v. Herring, 3 Moo. & P. 30 ; Gibbons v. Wilcox, 2 Stark. 43 ; [Tobias v. Blin, 21 Vt. 544] ; Gow on P. c. 1, p. 18-20, 3d ed. ; Ex parte •Watson, 19 Ves. 459; Turner v. Bissell, 14 Pick. 192; [Denny v. Cabot, 6 Met. 82; Bradley v. White, 10 Met. 303; Judson v. Adams, 8 Cush. 556; Pottv. Eyton,3 C. B. 32; Burckle r. Eckart, 1 Denio,337; s. c. 3 Comst. 132]; {Fitch V. Hall, 25 Barb. 13 ; Hanna v. Flint, 14 Cal. 73; Berthold v. Gold- smith, 24 How. 536 ; Hallet v. Desban, 14 La. An. 529 ; Ellsworth v. Poraeroy, 26 Ind. 158. See also Braley v. Goddard, 49 Me. 115; Benson v. Ketchum, 14 Md. 331.} * Smith r. Watson, 2 B. & C. 401 ; Coll. on P. B. 1, c. 1, § 1, p. 19, 2d ed. ; Green v. Beesley, 2 Bing. N. C. 108. But see Mair v. Glennie, 4 M. & S. 240 ; [Explained in Stocker v. Brockelbank, 3 Macn. & G. 250, 5 Eng. L. & Eq. 67] ; Perrott v. Bryant, 2 You. & C. Ex. 61, 67, 68. 68 PARTNERSHIP. [cHAP. IV. agreed with the owner of a lighter to work the lighter, and to receive half of the gross earnings, as his compensation therefor, he was held not to be a partner, even as to third persons ; but it was merely a mode of compensation of his services.^ So, where a person agreed to give his attendance and services in a grocery store, and for such attendance and services he was to receive a fixed salary, and also a commission of seven per cent upon the profits of the business, from the owners, it was held, that this did not constitute him a partner, upon the ground, that a commission on the profits was distinct from an interest in the profits.^ It might perhaps be more accurately said, that it was a mere mode of compensation for an agency. The like rule would apply, where a person should agree to de- pasture cattle on the lands of another, who was to be repaid for fattening the same, by equally dividing all the profits with the owner, above £20, the estimated value of the cattle, upon a resale.^ ' Ante, § 34 ; Dry v. Boswell, 1 Camp. 329 ; Coll. on P. B. 1, c. 1, § 1, p. 21, 2d ed. ; Gow on P. p. 19, 20, 3d ed. ; Taggard v. Loring, 16 Mass. 336 ; Cutler V. Winsor, 6 Pick. 335; Cheap v. Cramond, 4 B. & Aid. 663, 670; [Heimstreet v. Howland, 5 Denio, 68.] See also Mohawk & Hudson R. R. Co. V. Niles, 3 Hill, (N. Y.) 162 ; {Bowman v. Bailey, 10 Vt. 170; Bowyer V. Anderson, 2 Leigh, 550.} * Miller v. Bartlet, 15 S. & R. 137 ; [Pott v. Eyton, 3 C. B. 32] ; {New- man V. Bean, 1 Fost. 93 ; Bartlett v. Jones, 2 Strobh. 4 71 ; Macy v. Combs, 15 Ind. 469.} ' Wish V. Small, 1 Camp. 331, note; Gow on P. p. 19, 20, 3d ed. ; [Raw- linson v. Clarke, 15 M. & W. 292. And where A. agrees to furnish a farm with a certain amount of teams and labor, and B. is to manase the farm, and give certain labor, the crops to be divided between them, this does not constitute a partnership. Blue v. Leathers, 15 111. 31 ; {Moore v. Smith, 19 Ala. 774; post, § 46, note.} So, where a patentee of an article con- tracted with the defendant to act as manager of the business of manufacturing the article which was to be marked with the patentee's name, the defendant furnishing all the capital, but the patentee having the management of the work, employing the workmen, making the purchases, &c., and was to receive a remuneration equal to forty per cent on the capital stock, deducting all CHAP. IV.] AS TO THIRD PERSONS. 69 § 42. It is upon the like ground, that if the master of a ship contracts with the owner to receive a certain pro- portion of the profits of the voyage, in Heu of wages and primage, this alone will not constitute him a partner with the owner m the adventure inter sese, whatever may be the case as to third persons.^ So, seamen engaged liabilities, but by express terms was not to be a partner with the defendant, this was held not to make the patentee a partner with the defendant, although his remuneration depended distinctly upon the amount of profits. Stocker V. Brockelbank, 3 Macn. & G. 250, 5 Eng. L. & Eq. 67, But if the joint owners of a patent agree to make a common interest to sell, and to divide the net proceeds equally, a partnership is thereby created. Penniman v. Munson, 26 Vt. 164 ; and see Noyes v. Cushman, 25 Vt. 390.] ' Mair v. Glennie, 4 M. & S. 240. — In this case, by agreement, the master of the ship was to have, in lieu of wages, primage, &c., one-fifth share of the profit or loss of the intended voyage on ship and cargo, and was to follow the instructions of the owner of the ship and cargo, and do all the business himself that he could do, and for the rest make the best bargains he could. The voyage was to Havana, and to take in a return cargo for the Baltic. The owner became bankrupt during the voyage, and had mortgaged the ship to A. & Co. for advances ; who had not taken pos- session of the ship upon her return, and had also become bankrupts. The ship and cargo had been sold, and the suit was by the assignees of the owner against the assignees of the mortgagees, for the proceeds. One question was, whether the master, under the agreement, was a partner in the ship and cargo, for the voyage. The court held that he was not. On this occasion Lord Ellenborough said : " And upon this point, it has been contended, that the cajJtain was virtually a partner. But on what ground has it been so contended? The ground is, because payment of the captain's wages was to depend, as to its amount, upon a reference to the value of the cargo, but, according to that mode of argument, every seaman in a Greenland voyage would become a jiartner in a fishing concern. There is no pretence, therefore, for saying, that the captain was a partner, because his wages were to be regulated and paid by reference to a calculation on the profits of the adventure." [This case was commented upon and approved in Stocker v. Brockelbank, 3 Mac. & G. 250, 5 Eng. L. & Eq. 67.] This language is certainly very general ; and perhaps in its application it ought to be limited to the very case before the court, which Involved the point only whether there was a partnership between the parties ; not whether there was a partnership as to third persons. It is indeed difficult, even with this qualification, to reconcile this case with the doctrine pronudgated in some other cases ; for as the master was to share both in the profit and losses of the voj'age, it would seem that the owner and master were, inter sese, part- ners in the ship and cargo for the voyage, as well as in regard to third 70 PARTNERSHIP. [cHAP. IV. in the whale fisheries, who are to receive a certain pro- portion of the profits or proceeds of the voyage after the sale thereof, in lieu of wages, are not deemed inter sese, or as to third persons, partners with the owner and master therein ; but their shares are treated, as in the nature of wages, unliquidated at the time, but capable of being reduced to a certainty, on the sale of the oil or fish, when it has taken place ; and thus they become en- titled to wages to the extent of their proportion in the produce of the voyage.^ It would be manifestly against the common understanding in all such voyages, to con- sider them partners inter sese.^ And it would be equally against the common usage to treat them as partners as to third persons, and liable thereby for the outfits, ad- vances, and other charges for the voyage to third per- sons, who should give credit for them. On the contrary, in all such voyages the owner of the ship is treated as solely responsible therefor, and the masters, of&cers, and crew are not even deemed tenants in common in the persons. At least there are authorities which sustain this view of the matter. See ante, § 27, 32, 34, 41 ; post, § 43, 44, 55-58. {But in Mair v. Glennie, the expression profit or loss seems to have been used for gross returns. See § 30, note} ; Smith v. Watson, 2 B. & C. 401 ; Bond v. Pittard, 3 M. & W. 357 ; Green v. Beesley, 2 Bing. N. C. 108 ; Perrott v. Bryant, 2 You. & C. Ex. 61, 68; Coll. on P. B. 1, c. 1, § l,|p. 20-24, 2d ed. ' Wilkinson v. Frasier, 4 Esp. 182 ; Baxter v. Rodman, 3 Pick. 435, 438, 439 ; Turner v. Bissell, 14 Pick. 192, 195 ; {Coffin v. Jenkins, 3 Story, 108 ; The Crusader, Ware, 437 ; Reed v. Hussey, Bl. & Howl, 525 ; Duryee V. Elkins, Abbotts, Adm. 529.} ^ Rice V. Austin, 17 Mass. 197, 205, 206. — Mr. Justice Putnam, in de- livering the opinion of the court in this case, said : " It cannot, however, be true, that all who participate in the profits are to be considered as partners, in respect to the concern or adventure, from which the profits of the voyage arise. Seamen, for example, who are employed in the whale fisheries, are usually compensated for their services by a certain part of the profits of the voyage. Nevertheless, it has not been supposed, that this circumstance made the mariner a partner with the ship-owner, so as to render it lawful for a creditor of the mariner to take the whole cargo of oil for his private debt." See also Turner v. Bissell, 14 Pick. 192. CHAP. IV.] AS TO THIRD PERSONS. 71 voyage ; but are rather deemed entitled to several and distinct proportions of the proceeds thereof, as in the nature of wages, and in no sense as partners.^ The case therefore is one where the seamen are to participate in the profits, if any, but are to bear no part of the losses, if the profits are not sufiicient to repay the owner.^ In like manner, where persons, who are engaged as dredg- ers in the oyster fisheries, have no interest in the boats, nor in the fish caught, but the latter belong wholly to ' See Fennings v. Lord Gi'enville, 1 Taunt. 241. — In Baxter v. Rodman, 3 Pick. 435, 438, Mr. Chief Justice Parker, in delivering the opinion of the court, it being a case growing out of a contract for a. whaling voyage, said : "The first objection is, that as by virtue of the contract, on which the master and crew engage in the voyage, they are to receive their pay out of the proceeds of the oil, they are joint owners and quasi partners, and so ought all to have joined in the action. If this were the law, it would be found to be exceedingly inconvenient, and would, no doubt, entirely break up the peculiar mode of conducting these voyages, which have been found to be so beneficial to those who carry them on, and to the country. That every seaman should be tenant in common with all the other seamen, the master, and the owners of the vessel, in all the oil, Avhich may be taken on a whaling voyage, so that no action could be brought respecting it without joining all, and none could be sued without the whole, giving every seaman a right to discontinue the action, or to release the claim, or to receive pay- ment for the whole, would be a state of things not suspected by the wise and enterprising men who have carried on the whale fishery. But we think it is not the law. The owners of the vessel and projectors of the voyage are the owners of the product of the voyage. The true meaning of the shipping contract is, that the men shall be paid out of the proceeds in a stipulated proportion. It is an agreement as to the mode of compensation, and gives them no property in the oil, but only regulates the amount of compensation," In the common cod fisheries a different usage seems to prevail. There the fishermen generally share the fish caught, and the pro- ceeds thereof, when sold by the owner, in certain fixed proportions. Tliis has never been supposed to constitute them partners inter sese, or as to third persons, in the adventure. At most they could be deemed no more than tenants in common of the fish caught with the owner. The act of Congress manifestly contemplates them as having rights and interests in severalty, and gives each fisherman a several remedy against the vessel for his shar^j of the fish caught, and of the proceeds when sold. Act of 19 June, 1813, c. 2. See Houston v. Darling, 16 Me. 413. * See Coppard v. Page, Forrest, 1 ; Perrott v. Bryant, 2 You. & C. Ex. 61, 67, 68. 72 PART^'ERSHIP. [chap. IV. the owners of the boats ; and the dredgers are to receive a share of the profits ; such persons are not deemed partners in the adventure, either inter sese, or as to third persons ; but it is treated as a mere mode of calculating the amount of wages due to them from the owners of the boats.^ But it might be otherwise, if the dredgers were to share in the profits and losses according to certain agreed proportions.^ § 43. In America the doctrine has been applied to other analogous cases, and pressed somewhat further. Thus, where a party was to receive, by way of rent, a portion of the profits of a farm or tavern, let to hire by him, it was held, that he ought not to be deemed a part- ner in the concern ; but that it was to be treated as a mode of receiving compensation only.^ Upon the like analogy, where A. advanced his funds to be invested by B. in live oak in Florida, to be procured, cut, and trans- ported at the expense of B., but on account and risk of A., to the navy yard of the United States, and for his services and disbursements, B. was to receive half the profits, and A., for his risk and advances, was to have the residue of the profits ; it was held, that the parties were not partners in the timber, nor could third persons be at liberty to treat it as partnership property. On that occasion the court said, that it was not true, that all, who participated in the profits, are to be considered as partners in respect to the concern or adventure, from which the profits arise. And the case was put of ship- ' Perrott v. Bryant, 2 You. & C. Ex. 61, 67. 2 Coppard v. Page, Forrest, 1 ; Perrott v. Bryant, 2 You. & C. Ex. 61, 68. But see Mair v. Glennie, 4 M. & S. 240; [Stocker v. Brockelbank, SMacn. & Q. 250, 5 Eng.. L. & Eq. 67.] 3 Perrine v. Hankinson, 6 Halst. 181; 3 Kent, 33; {Lyon v. Knowles, 3 B. & S. 556 ; Putnam v. Wise, 1 Hill, (X. Y.) 234 ; Bowyer v. Anderson, 2 Leigh, 550; Chase v. Barrett, 4 Paige, 148. But see Catskill Bank v. Gray, 14 Barb. 471. 1 CHAP. IV.] AS TO THIRD PERSONS. 73 ments to India upon half profits (which are so generally practised in this country), in which it has never been supposed, that thereby the shippers and the owners of the shiji became answerable for each other, or were in any way interested, as partners, in respect to the pro- perty, which constituted the original adventure, and which was undertaken to be carried to India for half profits, or in the return cargo, in which the proceeds were invested ; but that the half profits were treated only as a mode of compensation for freight, disburse- ments, and charges in the course of the voyage.^ So, where A. and B. having entered into a contract with a turnpike company to make and complete a certain road, afterwards agreed with C. to let him have a share of the profits, if any, in making the second ten miles of the road, in proportion to the help he afforded in complet- ' Rice v. Austin, 17 Mass. 197, 206 ; Turner v. Bissell, U Pick. 192, 195 ; 3 Kent, 3-4 ; {Braley r. Goddard, 49 Me. 115. } [So, where an agree- ment was entered into between D. and W., under which D. was to furnish goods for a store, and pay all the expenses, and W. was to transact the business of the store, and receive half of the profits, as a compensation for his service, it was held that they were not partners, and that D. only was liable for goods furnished. Bradley v. White, 10 Met. 303. See also Pott V. Eyton, 3 C. B. 32; Dunham v. Rogers, 1 Penn. St. 255; Rawlinson v. Clark, 15 M. & AV. 292. The like rule was followed, where A. agreed to manufacture articles for B., who agreed to furnish the raw materials, and to pay A. such amount as should arise from the profits of the business, de- ducting the materials and incidental expenses of B., together with ten per cent on the amount of sales. Judson v. Adams, 8 Cush. 556. So where a railroad corporation leased to A. a public house, owned by the company, he paying a certain sum annually out of the net profits for the use of the fur- niture, and " one-half of the net proceeds arising from keeping the house as a hotel," and keeping an account, open to their inspection, and giving his own time and attention, and having free passage over their road for himself and all persons employed by him, and all articles used by him in keeping the house, it was held, that the corporation did not thereby become a partner, and liable for supplies furnished the house by third persons. Holmes v. Old Colony Railroad Co., 5 Gray, 58. The question does not seem to have been raised in this case, whether the railroad company had any corporate power to engage in the business of hotel keeping.] 74 PARTNERSHIP. [CHAP. IV. ing the same, the one-half to be taken from A.'s part, and the other half from B.'s part ; it was held, that this agreement did not create a partnership between A., B., and C, but was only a mode of paying C. for his help and lab or. ^ § 44. So, where the master of a ship agreed with the owner to take her for the purpose of getting employment in the freighting business, and engaged to victual and man her, and pay half the port charges, pilotage, &c. ; and the owner was to pay the other half, together with eight dollars per month for one man's wages, and to put the vessel in sufficient order for busi- ness ; and all the money so stocked in the vessel was to be equally divided between the master and the owner, each party accounting for the above ; it was held, that the master was,^9ro liac vice, owner for the voyage un- dertaken, and the owner was not a partner, even as to third persons ; for the agreement amounted to no more than a compensation out of the earnings of the vessel, after deducting certain fixed charges.^ In this case the deduction was from the gross earnings. In another case the same principle was applied to the case of the net earnings. Thus, where the vessel was let to charter to the master for the season, and she was by the agreement to be at the risk of the owner, and after deducting the first cost of the lumber, or whatever she might carry, the owner was to receive two-fifths of the net proceeds, ' Muzzy V. Whitney, 10 Johns. 22G. — In this last case, as in Hesketh v. Blanchard, 4 East, 144, the real question before the court was, whether the parties were partners inter sese ; and the court did not decide, whether the parties were partners as to third persons, as the court did in Hesketh V. Blanchard. But the inference deducible from the language of the court leads to the conclusion that they were not partners either Avay. 3 Kent, 34. But see Dob v. Halsey, 16 Johns. 34; jVoorhees v. Jones, 5 Dutch. 270.} " Cutler V. Winsor, 6 Tick. 335 ; Taggard v. Loring, 16 Mass. 336. See Dry V. Boswell, 1 Camp. 329, 330; [Dwinel v. Stone, 30 Me. 384.] CHAP. IV.] AS TO THIRD PERSONS. 75 and the master was to purchase the cargoes at his own expense, to victual and man the vessel, and to pay the two-fifths at the end of each trip ; it was held, that the master was, |;ro hac vice, owner for the season ; and that the general owner was not liable to third persons, as a partner on account of other shipments, not made within the scope of the agree- ment.^ § 45. Other cases have arisen, where the same dis- tinction has been still more strikingly adopted. Thus, where A., residing at a distance from a factory of cloths, occupied by B., entered into an agreement with B., in substance as follows : A. was to furnish a full supply of wool for the factory for two years ; and B. was to man- ufacture such wool into broadcloths and satinets, in a good and workmanlike manner, according to the direc- tions of A., and to devote the entire use of his factory to that purpose for the term ; and the net proceeds of the cloths, after deducting the incidental expenses and charges of sale, were to be divided, so that A. should have fifty-five per cent, and B. forty-five per cent thereof; and in the manufacture of satinets from such wool, A. was to pay fifty-five per cent, and B. forty-five per cent of the cost of the warp ; and the expense of insurance on the work and cloth was to be borne by A. and B., in the same ratio as their interest was in the final division of the avails of the cloths ; and in case of ' Reynolds v. Toppan, 15 Mass. 370. — This case seems to have turned upon its own peculiar circumstances ; otherwise, it might not seem easy at first view to reconcile it with the doctrine of Lord EUenborough, in Dry r. BoswcU, 1 Camp. 329, 330, where the distinction is expressly taken between sharing the gross earnings and sharing the net earnings. The former is not, the latter is, the case of a partnership. Ante, § 34, and note ; post, § 56. See also Cheap v. Cramond, 4 B. & Aid. 663, 668, cited post, § 56, note; {Ward v. Thompson, 22 How. 330; Winsor v. Cutts, 7 Grcenl. 261. But see Julio v. Ingalls, 1 All. -11.} 76 PARTNERSHIP. [cHAP. IV. the destruction of any work or cloth by fire, the amount received of the insurers was to be divided between A. and B., according to the loss sustained by each ; it was held, that under this agreement, A. and B. were not partners, either inter se, or as to third persons, and that B. had no other interest in the profits, than a compen- sation for his labor and materials by a percentage on the avails of the cloths.^ ' Loomis V. Marshall, 12 Conn. 69. — The general reasoning of the cases on this subject was so fully gone into upon this occasion, that it may be acceptable to the learned reader to have an opportunity to examine it. Mr. Justice Huntingdon, in delivering 'the opinion of the court, said: "That the parties to this agreement did not intend to create a partnership, either as between themselves or third persons, is, we think, very obvious from the facts set forth in the motion, connected with the stipulations contained in the agreement ; and if they are liable as partners, they are made so by construction of law. Those who were to furnish the wool, supposed they alone were responsible for the purchase-money ; and those who were to perform the labor and provide the materials necessary to complete the man- ufacture of it, believed they alone were liable for the price of the labor and materials. If they are all jointly liable, their liability arises from the fact, that they have entered into a contract, which, as between themselves and the jjlaintiff, controls their clear intention, if not express stipulation, to the contrary. And it is undoubtedly true that a person may expressly refuse to be responsible as partner, and yet, in the same instrument which con- tains that refusal, may agree to such terms as will in law constitute him a partner. Whether these defendants have entered into such terms, is to be determined by a fair construction of the agreement which they have executed. While, on the one hand, we should be careful to adopt no rule of constniction, wliich would enable parties, who are interested in the profits of business, as profits, to deprive the creditors of any portion of the fund, on which they have a just claim for the payment of the debts due to them ; so, on the other hand (to use the language of Kent, C. J., in Post v. Kimberly, 9 Johns. 504) , ' we must be careful not to carry the doctrine of constructive partner- ship so far as to render it a trap for the unwary.' We must in this, as other cases, look to the entire transaction, in order to judge correctly of its nature and tendency. And we think (as is said by Gould, J., in Coope v. Eyre, 1 H. Bl. 44), 'Cases of this nature should stand on broad lines, not on subtleties and refinements, the source of litigation and disputes.' A com- munity of interest in land does not, of itself, constitute a partnership ; nor does a mere community of interest in personal estate. There must be some joint adventure, and an agreement to share in the profit of the undertaking. Porter v. M'CIure, 15 Wend. 187 ; Green v. Beesley, 2 Bing. N. C. 108 ; CHAP. IV.] AS TO THIRD PERSONS. 77 § 46. The like decision was made under the follow- ing circumstances. By a written agreement A. agreed to furnish B. for one year with wool to be worked into Feretlay v. Hordern, Jac. 144. This community of profit is the test to de- termine Avhother the contract be one of partnership ; and to constitute it, a partner must not only share in the profits, but share in them as a principal ; for the rule is now well established, that a party, who stipulates to receive a sura of money in proportion to a given quantum of the profits, as a reward for his labor, is not chargeable as a partner. The cases are collected and well arranged by CoUyer, in his Treatise on Partnership, 14, 15, et scq., and by Gary (on Partn.), 8-11. They embrace iactors and brokers, who receive a commission out of the profits of the goods sold by them ; masters of vessels, who share in the profit and loss of the adventure in lieu of wages ; seamen employed in the whale fisheries ; shipments from this country to India on half profits ; those who receive, in the form of rent, a portion of the profits of a farm or tavern ; and a variety of other adventures, to which it is unnecessary particularly to refer. Dry v. Boswell, 1 Camp. 329 ; Wish V. Small, 1 Camp. 331, note; Hesketh v. Blanchard, 4 East, 144; Mair «. Glennie, 4 M. & S. 240 ; Dixon v. Cooper, 3 Wils. 40 ; Withington v. Herring, 5 Bing. 442 ; Rice v. Austin, 17 Mass. 197 ; Baxter v. Rodman, 3 Pick. 435 ; Cutler V. Winsor, 6 Pick. 335 ; Turner v. Bissell, 14 Pick. 192 ; Muzzy v. Whitney, 10 Johns. 226 ; Ross v. Drinker, 2 Hall, 415 ; Harding r. Foxcroft, 6 Greenl. 76 ; Thompson v. Snow, 4 Greenl. 264 ; Miller v. Bartlet, 15 S. & R. 137. The rule, which these and other cases establish, is founded on the distinction which has been taken between agreements, by which the parties have a specific interest in the profits themselves, as profits, and such as give to the party sought to be charged as a partner, not a specific interest in the business or profits, as such, but a stipulated projjortion of the profits, as a compensation for his labor and services. Ex parte Chuck, 8 Bing. 469. We are aware that this distinction has not received the approbation of Lord Eldon, who says, in Ex parte Hamper, 17 Ves. 403: 'The cases have gone further to this nicety, upon a distinction 'so thin, that I cannot state it as established upon due consideration, that if a trader agrees to pay another person for his labor in the concern a sum of money even in proportion to the profits, equal to a certain share, that will not make him a partner ; but if he has a specific interest in the profits themselves, as profits, he is a partner. It is clearly settled, though I regret it, that if a man stipulates, that, as the reward of his labor, he shall have, not a specific interest in the business, but a given sum of money, even in proportion to a given quantum of the profits, that will not make him a partner ; but if he agrees for a part of the profits, as such, giving him a right to an account, though having no property in the capital, he is, as to third persons, a partner.' Id. 412 ; Ex parte Rowlandson, 1 Rose, 91 ; Ex parte Watson, 19 Ves. 459. We do not propose to examine the reasonableness of the doubts expressed by this distinguished judge. Such inquiry we consider closed by a series of precedents, which we do 78 PARTNERSHIP. [chap. IV. satinets, and B. was to deliver to A. all the satinets, which the wool would make, and to find and pay for warps for the same ; A. was to pay B., for working the wool, finding the warps, &c., forty per cent on the sale of the satinets ; each was to pay half the charges ; A. was to have the whole direction of the sales, and if he should make sales himself, he was to have one and a half per cent upon forty per cent of the sales. It was held, that A. and B. were not partners inter sese, or as to third persons.^ not feel at liberty to disregard. They have settled princijiles, which have for a long period regulated the agreements of parties, in cases to which they are applicable ; and they ought not now to be questioned. The dis- tinction, to which we have referred in our opinion, embraces the present case. The object of Marshall and his associates was to have the wool man- ufactured into cloth. They resided at a distance from the factory occupied by French and Hubbell, and were unacquainted with the business of manu- facturing. They were willing to avail themselves of the opportunity, which the possession of the factory by French afforded, of having their wool worked into cloth, and of the skill of French and Hubbell, to prepare it for market. To secure and increase exertion, they agreed to give them, as a reward for their services and the materials, which they should furnish, a certain proportion of the ' net proceeds of all the cloths, after deducting incidental and necessary expenses of transporting and other proper charges of sale.'' It is not expressed, in terms, to be for such compensation ; but this is its legal meaning. In many of the cases, to which we have referred, the language of the agreements was not more explicit than in the one now under consideration ; but looking at the entire transaction, such was con- sidered tlie obvious meaning of the parties. French and Hubbell had no other interest in the profits than such as arose from the agreement to pay them for their labor, &c., in a specific proportion of the amount of the sale of the manufactured article." [See Brigham v. Dana, 29 Vt. 1, 9.] ' Turner v. Bissell, 14 Pick. 192. — On this occasion Mr. Justice Wilde, in delivering the opinion of the court, said: "The question submitted is, whether the defendants are liable in this suit as partners. It is admitted, that they were not partners inter se ; for by the terms of their agreement, they had not a mutual interest in the profits and loss of the business, to which it related, which is essential to render a partnership complete. But the plaintiif's counsel contend, that both of the defendants participated in the profits of the business, and were thereby chargeable with respect to third persons. And it is certainly a well-established principle, that whoever participates in the profits of a trade, or has a specific interest in the profits CHAP. IV.] AS TO THIRD PERSONS. 79 § 47. So, where a person was employed as an uf^cnt in conducting the husiness of a foundry for iron cast- ings, at a fixed salary of ^300, and in addition thereto, he was to receive one-third of the profits of the foundry, themselves, as profits, is chargeable as a partner with respect to tliiril persons. Gow on P. 14. But it is equally well established, that, where a party is entitled to or receives a given sum of money, in proportion to a given quantum of the profits, as a compensation for his labor and services, he is not thereby liable to be charged as a partner. Gow on P. 19. Thus, in Dry v. Boswell, 1 Camp. o29, the proprietor of a lighter agreed with a person to work his lighter, and to allow him therefor one-half of tlie "toss earnings, as a compensation for his labor ; and it was ruled by Lord Ellen- borough, that such an agreement did not constitute a partnership. The cases of the seamen employed in the whale fisheries, and of shipments to India on half profits, come within the same distinction. So factors and other agents, who receive commissions in proportion to the amount of sales, are inter- ested in the profits, but as they have no interest in them, excepting so far as they may determine the amount of compensation for their services, they do not thereby become partners. And we are of opinion, that the present case falls within this distinction. The object of Bissell was to have his wool worked into cloth, and he agreed to allow Root, as compensation for manufacturing, an amount of money to be regulated by the amount of sales ; and in no other manner was Root interested in the profits. The circumstance, that Root was to find warps, does not affect the principle, upon which the distinction as to compensation is founded. If Bissell had agreed with Root to pay him a certain sura for his services, and for supplying the warps, there could be no pretence for holding them as partners ; and we can perceive no difference in principle, arising from the circumstance, that the compensation was to be determined according to the amount of sales." [And see Hawes v. Tillinghast, 1 Gray, 289 ; {Denny v. Cabot, 6 Met. 82 ; Judson V. Adams, 8 Cush. 556; Hitchings v. Ellis, 12 Gray, 449; Kellogg V. Griswold, 12 Vt. 291 ; Mason v. Potter, 26 Vt. 722 ; Lamb v. Grover, 47 Barb. 317; Dunham v. Rogers, 1 Penn. St. 255; Johnson v. Miller, 16 Ohio, 431. See § 41.} So where A. agreed to serve B. as overseer on his (lirm for one year, A. to furnish a certain number of hands and horses, and to defray his and their expenses himself, and they were to be worked on B.'s farm in connection with B.'s hands and horses, and A. was to have one-fourth of the crojj for his compensation, this was held to constitute no partnership iiiter sese, as A. was to share only in the gross profits, and not at all in the loss. Moore v. Smith, 19 Ala. 774 ; {Blue v. Leathers. 15 111. 31; ante, § 41, note.} But where A. gave B. possession of a stock-farm for a term of years to improve, B. to have one-third of the profits, and to pay no rent, the current expenses to be paid by the concern, and six per cent interest to be allowed on advances made by either party, this contract was held to be a partnership. Tibbatts v. Tibbatts, 6 McLean, 80.] 80 PARTNERSHIP. [cHAP. IV. if any were made, and he had nothing to do with the losses ; and his employers were to find all the capital stock, and he was to give his services ; it was held, that the agent was not, either as to his employers, or as to third persons, a partner ; but that the case fell within that class of decisions, where the agent was to receive a share of the profits as a compensation for his labor and services/ § 48. These may suffice as illustrations of the dis- tinction above alluded to. The whole foundation, on which it rests, is, that no partnership is intended to be created by the parties inter sese ; that the agent is not clothed with the general powers, rights, or duties of a partner ; that the share in the profits given to him is not designed to make him a partner, either in the capital stock, or in the profits, but to excite his dili- gence, and secure his personal skill and exertions, as an agent of the concern, and is contemplated merely as a compensation therefor. It is, therefore, not only susceptible of being treated purely as a case of agency ; but in reality it is positively and absolutely so, as far as the intention of the parties can accomplish the object. Under such circumstances, what ground is there in reason, or in equity, or in natural justice, why in favor of third persons this intention should be over- thrown, and another rule substituted, which must work a manifest injustice to the agent, and has not operated either as a fraud, or a deceit, or an intentional wrong upon third persons ? Why should the agent, who is by this very agreement deprived of all power over the capital stock, and the disposal of the funds, and even 1 Vanderburgh v. Hull, 20 Wend. 70. See 1 Smith, Lead. Cas. 504, and note, 2d ed. ; [Rawlinson v. Clarke, 15 M. & W. 292] ; {§ 41 ; Clark V. Gilbert, 32 Barb. 57G ; Atherton v. Tilton, 44 N. H. 452; Bull v. Schu- berth, 2 Md. 38. But see Holt v. Kernodle, 1 Ired. 19t). j CHAP. IV.] AS TO THIRD TERSONS. 81 of the ordinary rights of a partner to a levy ^ thereon, and an account thereof, be thus subjected to an un- limited responsibility to third persons, from whom he has taken no more of the funds or profits (and, indeed, ordinarily less so) than he would have taken, if the compensation had been fixed and absolute, instead of being contingent?^ If there be any stubborn rule of law, which establishes such a doctrine, it must be obeyed; but if none such exists, then it is assuming tlie very ground in controversy to assert, that it flows from general analogies or principles. On the contrary, it may be far more correctly said, that even admitting (what as a matter unaffected by decisions, and to be reasoned out upon original principles, might well be doubted^), that where each party is to take a share of the profits indefinitely, and is to bear a proportion of the losses, each having an equal right to act as a principal, as to the profits, although the capital stock might belong to one only,"* it shall constitute, as to third persons, a case of partnership ; yet that rule ought not to apply to cases, where one party is to act manifestly as the mere agent for another, and is to receive a compensation for his skill and services only, and not to share as a partner, or to possess the rights and powers of a partner. § 49. In short, the true rule, ex ceqico et bono, would seem to be, that the agreement and intention of the parties themselves should govern all the cases. If they intended a partnership in the capital stock, or in the profits, or in both, then, that the same rule should apply in favor of third persons, even if the agreement ' {Qu. lien?} * Gary on P. 11, note (i) ; ante, § 37, note (1). =» Ante, § 36, 37. * Grace v. Smith, 2 W. Bl. 998 ; Waugh v. Carver, 2 H. Bl. 235 ; ante, § 27, 28. 82 PARTNERSHIP. [cHAP. IV. were unknown to them. And, on the other hand, if no such partnership were intended between the parties, then, that there should be none as to third persons, unless where the parties had held themselves out as partners to the public, or their conduct operated as a fraud or deceit upon third persons. It is upon this foundation, that the decisions rest, which affirm the truth and correctness of the distinction already con- sidered, as a qualification of the more general doctrine contended for. And in this view it is difficult to per- ceive, why it has not a just support in reason, and equity, and public policy. Wherever the profits and losses are to be shared by the parties in fixed propor- tions and shares, and each is intended to be clothed with the powers, and rights, and duties, and responsi- bilities of a principal, either as to the capital stock, or the profits, or both, there may be a just ground to assert, in the absence of all controlling stipulations and circumstances, that they intend a partnership. But where one party is stripped of the powers and rights of a partner, and clothed only with the more limited powers and rights of an agent, it seems harsh, if not unreasonable, to crowd upon him the duties and responsibilities of a partner, which he has never as- sumed, and for which he has no reciprocity of reward or interest. It has, therefore, been well said by Mr. Chancellor Kent, in his learned Commentaries, that " to be a partner, one must have such an interest in the profits, as will entitle him to an account, and give him a specific lien or preference in payment over other creditors. There is a distinction between a stipulation for a compensation for labor proportioned to the profits, which does not make a person a partner ; and a stipu- lation for an interest in such profits, which entitles the CHAP. IV. J AS TO THIRD PERSONS. 83 party to an account, as a partner." ' And Mr. Collyer has given the same doctrine in equally expressive terms, when he says, that in order to constitute a com- munion of profits between the parties, which shall make them partners, the interest in the profits must be mutual ; that is, each person must have a specific inter- est in the profits, as a principal trader.^ ' 3 Kent, 25, note (b) ; Gary on P. 11, note (i) ; ante, § 37, note (1) ; post, § 57. [See Rawlinson v. Clarke, 15 M. & W. 292.] * Coll. on P. B. 1, c. 1, § 1, p. 17, 2d ed.; Id. p. 11; Id. p. 23. {The doctrine that participation in profits makes one liable as a partner to third persons by operation of law, first distinctly enunciated in Waugh v. Carver, 2 H. Bl. 235, after being disapproved by almost all text-writers, reluctantly followed by courts and broken in upon by subtle exceptions and limitations, has been finally overthrown in England. A series of cases has decided that the law of partnership is a branch of the law of agency ; that the test to determine the liability of one sought to be charged as a partner, is whether the trade is carried on In his behalf; and that participation In the profits Is not decisive of that question, except so far as It is evidence of the relation of principal and agent between the persons taking the profits and those actually carrying on the business. Cox v. Hickman, 18 C B. 617; s. c. 8 H. L. C. 268 ; Kllshaw v. Jukes, 3 B. & S. 847 ; Bullen v. Sharp, (Exch. Ch.) Law Rep. 1 C. P. 86. In the last case Mr. Justice Blackburn says, p. 109: "The first point therefore to be determined in the present case. Is what really was the eflTect of the decision of the House of Lords In Cox v. Hickman, 8 H. L. C. 268. Prior to that decision, the dictum of De Grey, C. J., In Grace v. Smith, 2 W. Bl. 998, 'that every man who has a share of the profits of a trade ought also to bear a share of the loss,'' had been adopted as the ground of judgment in Waugh v. Carver, 2 H. Bl. 235, where it was laid down 'that he who takes a moiety of all profits indefinitely shall, by operation of law, be made liable to losses If losses arise, upon the prlnciijle that, by taking a part of the profits, he takes from the creditors a part of that fund which Is the proper security to them for the payment of their debts.' This decision had never been overruled. The reasoning on which It proceeds seems to have been generally acquiesced in at the time : and when, more recently. It was dis- puted, it Avas a common opinion (in which I for one participated) that the doctrine had become so inveterately part of the law of England that It would require legislation to reverse it. In Cox v. Hickman, the creditors of a trade had agreed that their debtor's trade should be carried on for the purpose of paying them their debts out of the profits; and the composition deed, to wliich they were parties, secured to them a property in the profits. The rule laid down In Waugh v. Carver, If logically followed out, led to the conclusiou 84 PARTNERSHIP. [CHAP. IT. § 50. The Roman law fully recognized the same dis- tinction, treating the case as a mandate, and not as a thai all the creditors who assented to this deed, and by so doing agreed to take the profits, were individually liable as partners; but, when it was sought to apply the rule to such an extreme case, it was questioned Avhether the rule itself was really established. There was a very great difference of opinion amongst the judges who decided the case in its various stages below, and also amongst those consulted in the House of Lords. In the result, the House of Lords, — consisting of Lord Campbell, C, and Lords Brougham, Cranworth, Wensleydale, and Chelmsford, — unanimously decided that the creditors were not partners. The judgments of Lord Cranworth and of Lord Wensleydale bear internal evidence of having been written. Lord Campbell, C, and Lords Brougham and Chelmsford said a few words expressing their concurrence. It is, therefore, in the written judgments, and more especially in the elaborate judgment of Lord Cranworth, that we must look for the ratio decidendi. Now, we find Lord Cranworth says, 8 H. L. C. 306 : ' It was argued, that, as they would be interested in the profits, therefore they would be partners. But this is a fallacy. It is often said that the test, or one of the tests, whether a person not ostensibly a partner is nevertheless, in contemplation of law, a partner, is, whether he is entitled to participate, in the profits. This, no doubt, is in general a sufficiently accurate test; for a right to participate in profits affords cogent, often conclusive, evidence that the trade in which the profits have been made was carried on in part for or on behalf of the person setting up such a claim. But the real ground of the liability is, that the trade has been carried on by persons acting on his behalf; when that is the case, he is liable to the trade obligations, and entitled to its profits, or to a share of them. It is not strictly correct to say that his right to share in the profits makes him liable to the debts of the trade. The correct mode of stating the proposition is, to say that the same thing which entitles him to the one makes him liable to the other, viz. the fact that the trade has been carried on on his behalf, i. e. that he stood in the relation of principal towards the persons acting ostensibly as the traders by whom the liabilities have been incurred, and under whose management the profits have been made. Taking this to be the ground of liability as a partner, it seems to me to follow that the mere concurrence of creditors in an arrangement under which they permit their debtor, or trustees for their debtor, to continue his trade, applying the profits in discharge of their demands, does not make them partners with their debtor or the trustees. The debtor is still the person solely interested in the profits, save only that he has mortgaged them to his creditors. He receives the benefit of the profits as they accrue, though he has precluded himself from applying them to any other purpose than the discharge of his debts. The trade is not cari*ied on b}- or on account of the creditors ; though their consent is necessary in such a case ; for, without it, all the property might be seized by them in execution. But the trade still remains the trade of the debtor or his trustees ; the debtor or CHAP. IV.] AS TO THIRD PERSONS. 85 partnership, unless the hitter was the intention of the parties themselves, where one person was employed to the trustees are the person by or on behalf of whom it is carried on." He afterwards adds, 8 H. L. C. 309 : ' The authorities cited in argument did not throw much light upon the subject. I can find no case in which a person has been made liable as a dormant or sleeping partner, where the trade might not fairly be said to have been carried on for him, together with those ostensibly conducting it, and when therefore he would stand in the position of principal towards the ostensible members of the firm as his agents.' And Lord Wensleydale says, 8 H. L. C. 312: 'A man who allows another to carry on trade, whether in his own name or not, to buy and sell, and to pay over all the profits to him, is undoubtedly the principal, and the person so employed is the agent, and the principal is liable for the agent's contracts in the course of his employment. So, if two or more agree that they shall carry on a trade, and share the profits of it, each is a principal, and each is an agent for the other ; and each is bound by the other's contracts Id carrying on the trade, as much as a single principal would be by the act of an agent who was to give the whole of the profits to his employer. Hence, it becomes a test of the liability of one for the contract of another that he is to receive the whole or a part of the profits arising from that contract, by virtue of the agreement made at the time of the employment. I believe this is the true principle of partnership liability. Perhaps the maxim that he who partakes the advantage ought to bear the loss, often stated in the earlier cases on the subject, is only the consequence, not the cause, why a man is made liable as a partner. Can we, then, collect from the trust deed that each of the subscribing creditors is a partner with the trustees, and by the mere sig- nature of the deed constitutes them his agents for carrying on the business on the account of himself and the rest of the creditors ? I think not.' And he afterwards gives as the reason of his decision, that in the particular case, there was not 'such a participation of profits as to constitute the relation of principal and agent between the creditors (the defendants) and the trustees, who actually made the contract sued on.' " I think that the ratio decidendi is, that the proposition laid down in Waugh V. Carver, viz. that a participation in the profits of a business does of itself, by operation of law, constitute a partnership, is not a correct state- ment of the law of England ; but that the true question is, as stated by Lord Cranworth, whether the trade is carried on on behalf of the person sought to be charged as a partner, the participation in the profits being a most im- portant element in determining that question, but not being in itself decisive ; the test being, in the language of Lord Wensleydale, whether it is such a par- ticipation of profits as to constitute the relation oi' principal and agent between the person taking the profits and those actually carrying on the business." And in the same case, p. 125, Mr. Baron Bramwell says: "They say that the defendant is a partner with his son ; and that, if not part- ners inter se, they are so as regards third parties. A most remarkable 86 PARTNERSHIP. [chap. IV. sell the goods of another, and was to receive for his ser- vices a portion of the profits, or the whole or a part of expression ! Partnership means a certain relation between two parties. How, then, can it be correct to say that A. and B. are not in partnership as between themselves, they have not held themselves out as being so, and yet a third person has a right to say they are so as relates to him V But that must mean inter se, for partnership is a relation inter se, and the word cannot be used except to signify that relation. A. is not the agent of B. ; B. has never held him out as such ; yet C. is entitled, as between himself and B., to say that A. is the agent of B. ! Why is he so entitled, if the fact is not so, and B. has not so represented? But 'partnership,' and a 'right to call persons partners as regards third parties' are words, and the tJnng must be looked at, viz. the taking or sharing of profits, which it is said gives C. a right as against B., to say B. is a partner of A. ^Vhy should it ? I trust, that, in the present state of authority, this question may be freely handled without presumption, and that the goodness of such a rule may be examined; because, thou2h we are bound to administer the law as we find it, vet, when we are considering what is the law, we may not improperly inquire into the reasonableness of that suggested. Why, then, does a taking or sharing of A.'s profits by B. entitle C. to demand payment by B. of A.'s debts in the trade? How, if there is such taking or sharing in this case, does it prove that the defendant ' subscribed the policy and became an insurer ' ? If A. agrees with B. to share profits and losses, but not to interfere with the busi- ness, and not to buy nor sell, and does not interfere, nor buy nor sell, and C. knowing this, deals with B., he would have no claim on A. AVhy should he, if he does not know of it ? Why, upon finding out something between A. and B., which has in no way affected or influenced him, should he who has dealt with B. have a claim on A. ? It is said, because profits are what the creditor trusts to, they are his fund for payment. This would be a bad reason, if true in fact. A man who trusts another generally, has a claim on his profits and capital too. How does a man who trusts the former only more affect the creditor's fund? But, further, it really is not true in substance, only in words. It is not a receipt of profits, in substance, that makes a man liable. If I agree to receive a sum in proportion to profits, as, for instance, a sum equal to a tenth, I am not liable. If I receive a tenth, I am. What is the difference, except in words, at least as far as creditors are concerned ? How can one set of words between A. and B., give C. a right, and the same thing in other words not ? How many men in a thousand, not lawyers, could be got to understand, that, of the two servants of a firm, the one who received a tenth of the profits was liable for its debts, and the other who received a sum equal to a tenth was not ? This Mr. Justice Story calls 'satisfactory.' Story on P. § 32. Satisfactory in what sense? In a practi- cal business sense ? No ; but in the sense of an acute and subtle lawyer, who is pleased with refined distinctions, interesting as intellectual exercises, though unintelligible to ordiuciry men, and mischievous when applied to the CHAP. IV.] AS TO THIRD PERSONS. 87 the excess of price beyond a given sum.^ SI maryarUa tibi vendenda dedero, ut, si ea decern vendidisses, red- ordinary affairs of life. Lord Eldon did not think it satisfactory. Ex parte Hamper, 17 Ves. 404. Such a law is a law of surprise and injustice, and against good policy. It fixes a liability on a man contrary to his intent and expectation, and without reason, and gives a benefit to another which he did not bargain for and ought not to have, and prevents that free use of capital and enterprise which is so important. It is said that this is true of a dor- mant partner. It is not : his existence may be unknown to the creditor ; but the dormant partner knows he is liable, and means to be ; and the creditor trusts all such persons ; he means to deal with all real persons. It may be said, that, if this reasoning is right, a man might bargain to receive all the profits of a business, and not be liable. The answer is, the thing is impossi- ble. There never was, and never will be, a honajide agreement by one man to carry on a business, bear all its losses, and pay over all its profits. Should such an agreement appear, it would obviously be colorable. Where there is a chance of profit to the trader, there such an agreement may be honest ; and, where honest, ought not to make him liable who is certainly to receive some of the profits, and perhaps all. "I have hitherto dealt with the case on principle. I proceed to examine the authorities. The labor formerly needful is now rendered unnecessary by Cox v. Hickman, 8 H. L. C. 268. That case has settled the law, I may be permitted, I hope, to say, in a perfectly satisfactory manner. . . . But, even if we assume that the law supposed to exist before Cox v. Hickman, remains untouched, that is to say, the supposed law of Waugh v. Carver, 2 H. Bl. 235, I think the same conclusion ought to be come to. Lord Wensley- dale does not notice that case. Lord Cranworth does, and, with submission, gives a better reason for the decision than is to be found in the case itself. The Chief Justice there says the question is whether they have not consti- tuted themselves partners in respect to other persons, and puts his decision on the ground that, ' he who takes a moiety of all the profits indefinitely, shall by operation of law be liable to losses.' Let us hope that this notion is over- ruled, — one which I believe has caused more injustice and mischief than any bad law in our books. ... I hope I shall not be charged with arro- gance for the way in which I have spoken of bygone opinions. The law liad drifted into the condition from which it was rescued by Cox v. Hickman. No one in particular was responsible for, and probably no one person could have put it at once in the position it was in. But the true line had been de- parted from, at first but a little, and for a good reason ; and every subse- quent move took it further away in a wrong direction, till it was happily brought back by Co.x v. Hickman." In America there is much conflict among the authorities. It has been generally considered that a mere participation in the profits, even the net profits, will not necessarily constitute one a partner ; and even the Pcnusyl- ' Ante, §37. 88 PARTNERSHIP. [cHAP. IV. deres mihi decern ; si pluris^ quod excedit tu haheres ; mihi videtur (says Ulpian) si animo contrahendce socie- Yania courts, though they have complained greatly of the rule that a commis- sion on profits is not such an interest as constitutes partnership, have yet followed it. Miller v. Bartlet, 15 S. & R. 137 ; Dunham v. Rogers, 1 Penn. St. 255. But this doctrine has not been universally received. In a case in Maryland, in 1815, Taylor v. Terme, 3 Harr. & J. 505, the plaintiff con- tended that an agent who received a share of the profits was liable as a partner; the defendant admitted that the English cases were so, but con- tended that as they were decided since the revolution they should not govern in this country. The court gave judgment for the plaintiff. There is no opinion. The Supreme Court of Ohio in Wood v. Vallette, 7 Ohio St. 172, say, "that even an agent cannot stipulate with his employer to receive an interest in the profits, other than of gross profits, as a remuneration for his services, without thereby becoming a partner as to third persons." In this case, however, the agreement between the parties was probably such as to constitute them partners inter sese. In Bromley v. Elliot, 38 N. H. 287, the Supreme Court of New Hampshire say that the case in which the person dealing with the alleged partners knows or ought to know that they are not partners "seems the only exception which can be admitted to the general rule that he who shares profits must share losses and responsibilities, with safety to the public, or to those who deal with such parties." "It is said, they must share the profits as profits, to render them liable. The principle thus cited rests on a distinction long since disapproved as too thin to be satisfac- tory." "Again it is said, that a person may receive a share of the profits of a business, by way of salary or compensation for services, without being held liable as a partner to third persons. This principle has not been adopted here, and, unless received with the qualification that the true character of the agreements between the parties is made known to those who may have deal- ings with them, or the apparent relations of the parties are so evidently those of principal and agent, or rather of master and servant, that no person could be misled or defrauded in consequence of the connection, it seems to us it would be of most unsafe and dangerous tendency, and wholly unfit to be adopted." These remarks seem, however, to be uncalled for, as the court was of opinion that the facts constituted the defendants partners inter sese. In Pierson v. Steinmeyer, 4 Rich. 309, 319, it is said that the only excep- tion to the rule that he who shares profits is liable as a partner to third per- sons, is in the case of agents and servants, and the court refused to extend the exception to cover the case of one who had made advances to the firm. On the other hand, some cases come very near, if not quite up to the modern English rule. In the leading case of Loomis v. Marshall, 12 Conn. 69 (see § ■45, ante), the court say, " a partner must not only share in the profits, but share in them as a principal," and in Bucknam v. Barnum, 15 Conn. 67, 73, attention is called to the fact that the decision in Loomis i'. Mar- shall was placed on this ground. So in Hallet v. Desban, 14 La. An. 529, and Berthold v. Goldsmith, 24 How. 536, though in this case the actual CHAP. lY.] AS TO THIRD PERSONS. 89 taiis id actum sit, pro socio actionem; si minus^prce- scfriptis verbis} In short, the Roman law seems prin- relations between the alleged partners were known to third persons. See Burt'kle V. Eckhart, 3 Comst. 132. In some Auieriean cases, he who shares in profits is said to be liable to third persons, on the ground that he takes a part of the fund on which creditors rely. Purviance v. M'Clintee, 6 S. & R. 259 ; see ante, § 36. The test, however, commonly proposed in the American cases is, whether the alleged partner has a specific lien on the profits to the exclusion of other creditors, and the i-ight to an account. This is laid down in Cham- pion V. Bostwick, 18 Wend. 175, § 38, ante; and is followed by a series of decisions in Massachusetts. Denny v. Cabot, 6 Met. 82 ; Bradley v. White, 10 Met. 303; Holmes v. Old Colony R. R. Co. 5 Gray, 58; Fitch v. Har- rington, 13 Gray, 468 ; Pratt v. Langdon, 12 All. 544. In this last case it is said that "the decisive fact is, that each had a lien on the stock for his share of the profits." So, Catskill Bank v. Gray, 14 Barb. 471 ; Voor- hees V. Jones, 5 Dutch. 270; Reynolds v. Hicks, 19 Ind. 113. See Cox v. Delano, 3 Dev. 89 ; Conklin v. Barton, 43 Barb. 435. Undoubtedly the fact that a person has a lien on the profits is " cogent, often conclusive, evidence" that he is a partner; but it maybe doubted whether, as an ultimate test to be applied in all cases, it is entirely satis- factory. It is said in the leading case of Champion v. Bostwick, 18 Wend. 175, in language which has been often adopted in subsequent decisions, that if one stipulates for an interest in the profits of a business which would entitle him to an account, and give him a specific lien or a preference in payment over other creditors, giving him the full benefit of the increased profits without any corresponding risk in case of loss, it would operate unjustly as to other creditors. But the creditors to whom he is preferred are only the separate creditors of the actual partners ; he has no preference over the partnership creditors, for there are no profits till they are paid, and it is only out of the profits that his remuneration is to come. Why should the fact that he has a priority over one set of creditors, make him liable " to his last shilling" to another set of creditors? A second mort- gagee has a priority over the mortgagor's general creditors ; but has it been ever argued that tlierefore his whole property, of every kind, should be liable for the first morttrage debt ? Yet the cases would seem verv analogous. And though a partner is entitled to an account, yet a person may well be entitled to an account, and yet not be a partner. If he is to receive a sum equal to a share of the profits, he is, by the great weight of authority, clearly no partner ; yet how can he secure the payment of the compensa- tion agreed upon unless he has an account? See also Holmes v. Old Colony R. R. Co., 5 Gray, 58. See 2 Am. Law Rev. 1, 193. } ' D, 17, 2, 44 ; Poth. Pand. 17, 2, n. 4, and note, ibid. ; 17 Duranton, Droit Franc, de Societe, n. 332; Poth. de Soc. n. 13; 5 Duvergier, Droit Civil Franc, n. 45. 90 PARTNERSHIP. [cHAP. IV. cipally, if not altogether, to have treated the case of partnership only as between the parties themselves, and does not even affect to give rights to third persons against them, founded upon any responsibility not con- templated by the partnership contract.^ Voet, in speaking on the subject, manifestly deems every part- nership, whether express or implied, to be a matter of consent between the parties. Societas dimditur jyrimo (says he) in expressam, qum expressa conventione Jit, et tacitmn, quce, re contrahi dicitur, dum rehus ijjsis et factls, simulemendo, vendendo, hccra et damna divideiido, socii ineundce societatis vohmtatem declarant.^ § 51. The same distinction is well known and fully recognized in the French law. Pothier has not, indeed, spoken with his usual clearness, or exactness, on the subject.^ But Pardessus has expressed his opinion in the most direct and satisfactory manner. Thus (he says), whenever a merchant, instead of a fixed salary, agrees to give his agent a certain part of the annual profit, the agent is a letter of his services under an aleatory condition ; but he is not a partner. He can- not make claim in that quality to any proprietary in- terest in the merchandise, bought with the funds of his principal, although he partakes of the profits thereof. He cannot, at least without an express stipulation, have any voice in the deliberations of the partnership ; and he will not be subjected to the contracts of the partnership in respect to third persons, unless, indeed, he has exceeded his powers, and then he is responsible as a mandatary.^ So, when one person has trusted * See 17 Duranton, Droit Franc, de Societe, n. 334; Poth. Pand. 17, 2, n. 30-40; ante, § 37. '^ Voet, ad Pand. 17, 2, § 2. ' See Potli. Pand. 17, 2, n. 4, and Pothier's notes, ibid. Poth. de Soc. n. 13 ; 5 Duvergier, Droit Civ. Franc, n. 45 ; ante, § 37. * Pardessus, Droit Comm. Tom. 4, n. 969 ; Id. Tom. 2, n. 560. CHAP. IV.] AS TO THIRD PERSONS. 91 goods to another to be sold for him, and has agreed to give him the whole or a part of the price, which shall exceed a certain sum, this will not create a part- nership between them ; but only be a salaried man- date, or commission to the agent, thus undertaking the business.^ Duvergier holds the same opinion, and has reasoned out the grounds thereof with uncommon acuteness and ability.^ And, indeed, it seems to be > Pardessus, Droit Comm. Tom. 4, n. 969. See, also, Id. Tom. 2, n. 306 ; Id. Tom. 3, n. 702. * 5 Duvergier, Droit Civ. Franc, n. 48-56. — The following quotation clearly exhibits his views. " Enfin, il y a un usage fort repandu parmi les commercans, qui consiste a donner, a titre d'appointemens, a leur commis ou employes, une quote part des benefices de leur commerce. Cette stipulation semble, au premier coup-d'oeil, reunir tons les elemens de la societe ; elle a d'un autre cote, beaucoup d'analogie avec le mandat salarie. On comprend combien il est utile de savoir a laquelle de ces deux classes de contrats elle appartient reellement. II est inutile de citer d'autres exem- ples. Ceux que je viens de presenter montrent assez, qu'il est tres difficile de demeler le veritable caractere de ces conventions qui paraissent partici- per egalement de la societe, du mandat salari^, et du louage d'ouvrage. Recherchons maintenant les principes, qui doivent dinger dans cette appre- ciation. La definition qui a ete precedemment donnee du contrat de societe, me semble jeter sur ces delicates questions une lumiere suffisante. Elle pre- sente deu.x idees principales ; elle montre dans le contrat de societe deux elemens essentiels ; d'aboi'd, un fonds commun compose des mises particu- lieres ; en second lieu, une participation aux benefices produits par le fond social ainsi forme. Si done j'analyse une convention, et que je ne voie point, qu'elle ait fait des choses, dont chaeun des contractans etait proprietaire exclusif, une chose commune a tons, je suis autorise a conclure, qu'elle n'est point une societe. Je suis conduit a la meme consequence, quoique un droit de propriete soit etabli par I'effet de la stipulation, si les contractans n'ont point eu en vue de se partager des benefices resultant de I'etat de commu- naute, qu'ils ont cree. II ne suffit done pas, qu'ils aient mis leurs proprietds en contact, sans les confondre, et qu'ils se soient procures par h\ certains avantages, pour qu'ils soient associes; il ne suffit pas meme, que les pro- priet^s soient confondues, et que cette communication de droits ait acciden- tellement des resultats profitables ; il faut que ce soit prdcisement en vue de ces resultats que la convention ait dte formee. L'application de cos princi- pes aux diverses hypotheses, dont il vient d'etre parl^, montre que, dans aucune d'elles, il n'y a societe. Entre le proprietaire de pierreries ou d'autres objets, et celui qui se charge de les vendre, moyennant la j)ortion du prix, qui exc6dera une limite ddterminee, il n'y a point de propriety com- 92 PARTNERSHIP. [cHAP. IV. the established doctrine of the French tribunals. This coincidence of doctrine, founded upon general reason- mune. L'industrie de I'un s'exerce sur une chose, qui ne cesse point d'ap- partenir a Tautre. II n'y a point, a proprement parler, de benefice, qui se partage entre eux; la somme totale, moyennant laquelle la vente est faite, est le prix des objets vendus ; elle est la representation, d'abord de la valeur intrinseque de ces objets, et en second lieu des peines, des soins et meme des frais qui ont pu etre necessaires pour les faire parvenir a un acheteur. Dans toute vente, le prix se compose de ces deux elemens ; lorsque les marches se concluent, sans intermediaire entre I'acheteur et le vendeur, ce dernier touche les deux parties du prix ; au cas contraire, I'une est perdue par le proprietaire, I'autre par I'entremetteur. On devrait en dire autant, alors meme, que le salarie de I'agent place entre le vendeur et I'acheteur, oon- sisterait en une certaine quotite du prix, a quelque somme qu'il s'elevat. C'est precisement ce qui se passe, tons les jours, dans les ventes ou autres negociations, qui se font par I'intermediaire de courtiers. La commission ou droit de courtage est de tant pour cent sur le produit des operations ; et Ton n'a jamais songe k voir la des soeiet6s, parce qu'on a bien senti, que la chose dont la vente est faite, ne devient point la copropriete du vendeur et du courtier ; qu'il n'y a point de benefices proprement dits dans une pareille operation, car il n'y a point augmentation de valeur produite par I'effet d'une mise en communaute ; que seulement, il y a vente et distribution du prix entre deux personnes, qui y ont droit, a titre different. Lorsque qua- tre chevaux appartenant a deux maitres sont reunis pour etre vendus, la propriete de chacun restant separee, il est egalement e'vident, qu'il n'y a point de societe ; car il n'y a rien de mis en commun, il n'y a point de copro- priete formee par la reunion de proprietes distinctes. A la verite, la com- binaison des contractans a pour but et pour resultat d'augmenter la valeur venale des choses, qui leur appartiennent ; mais la societe suppose I'existence d'une masse commune de benefices, ti laquelle chacun vient puiser selon son droit. Ici, chacun et reste proprietaire de ce, qui lui appartenait avant la convention, il profile seulement de Texcedant de valeur, qui est survenu a sa chose. Dans la troisieme espece, oil Ton a voulu voir une societe, il n'y a reellement qu'un mandat, ou I'etablissement d'un etat de communaute transitoire. Le fait, sur lequel s'explique la loi romaine citee par Pothier, n'est pas presente avec une precision parfaite, et lorsqu'on veut indiquer ses consequences avec I'exactitude convenable, on est oblige d'admettre une distinction. Si les deux voisins, qui ont eu la pensee d'acheter un fonds place pres de leurs heritages, sont d'accord sur la portion, que chacun y doit prendre ; celui qui fait I'acquisition agit, pour partie, en son uom personnel, et, pour partie, comme mandataire. II n'y a pas I'apparence d'une societe ; il n'y a pas meme communaute, puisque le partage est fait i I'avance. Si le lot de chacun n'est pas determine, la propriete du fonds sera indivise; mais, on le sait, I'indivision ne suflit point pour constituer la societe ; elle €tablit seulement une communaute. Ce n'est pour les contractans qu'un CHAP. IV.] AS TO THIRD PERSONS. 93 ing, between foreign jurists and the municipal juris- prudence of the common law, as to the propriety of etat transitoire ; leur but est le partage, et non la perception des bdn^fices, que la chose conimune pout produire. L'avantage que trouve cliaque ache- teur, dans la reunion a son heritage d'une partie du fonds acquis en com- mun, n'est pas un Acritable benefice social. II est meme possible, qu'il y ait pour eux perte materielle dans I'acquisition, que le fonds ne vaille pas ce qu'ils I'ont jDaye et qu'ils aient sciemment fait un marche desavantageux, pour eloigner un voisinage desagreable, ou pour executer des ameliorations purement voluptuaires. On ne saurait trop insister sur la necessite de con- server au mot benefices son sens exact et rigoureux ; car c'est parce que I'on regarde benefices et avantages comme des expressions equivalentes, que Ton se nieprend sur le caractere d'une foule de conventions. Si toutes celles qui procurent quelques avantages aux contractans, etaient des societes, cette qualification conviendrait a un nombre infini de contrats. L'arrange- ment que font les commer^ans avec leurs commis, lorsqu'ils donnent a ceux-ci, au lieu d'appointemens, une portion des benefices de leur maison, pai'ait, plus que tout autre, reunir les elemens constltutifs de la societe. L'industrie du commis ne forme-t-elle pas sa mise ? Ne prend-il point part aux benefices, dans la veritable acception du mot ? Ne concourt-il pas aux pertes, puisque s'il n'y a pas de benefices il perd son travail ? Malgre cette reunion de cir- constances, les auteurs et les tribunaux decident, qu'il ne faut pas confondre un commis interesse avec un veritable associe. lis font ressortir les diffe- rences, qui existent entre leur position et leurs droits. Le commis n'a point, disent-ils, la copropriete du fonds social ; il n'en dispose point librement et en maitre ; il reste soumis a I'autorite et aux ordres de son patron ; il peut etre renvoye par lui, sauf dedommagement; il ne participe point aux pertes; il n'est jjoint personnelloment tenu envers les tiers ; ainsi il n'a ni les pre- rogatives ni les obligations d'un associe. Ces observations sont justes ; cependant seules elles ne seraient pas decisives et Ton pourrait, a la rigueur, concevoir un associe reduit, par des conventions particuliercs, a une situa- tion a pen pri" s semblable a celle qui vient d'etre decrite. Rien n'empeche, en effet, de stipuler, que les choses mises dans la societe resteront la pro- priete de I'un des associes, et que radministration lui sera exclusivement reservee ; que I'autre particlpera aux pertes, en ne recevant rien pour son travail ; et qu'en cas d'insuflSsance du fonds'soclal, il ne sera point person- nellement oblige au palement des dettes. Mais la reunion de ces clauses fort extraordinalres n'etabliralt pas encore une similitude parfaite entre I'associe et le commis. D'une part, lors meme que les choses mises en societe restent la propriete de celui, qui les y apporte, leur jouissance au moins est mise en commun et chacun des associes y a droit. Or le commis interesse n'est point coproprietaire des eapitaux de celui qui I'emploie, quoi- que ces eapitaux soient fournis en pleine propriete, et non pas seulcment pour la jouissance. D'un autre cole, I'associe, qui donne son industric comme mise sociale, s'ensa^e a faire un travail determine mais independant ; il a 94 PARTNERSHIP. [cHAP. IV. the distinction above stated, certainly affords no slight confirmation of its accuracy and entire conformity to the true principles, which ought to regulate the subject. § 52. Thus much, at least, seemed proper to be said in vindication of the distinction at the common law, and the cases in support of it, which have been treated by some learned minds (as we have seen), as founded in too much subtlety and refinement, and as not recon- cilable with acknowledged principles, or just juridical reasoning.^ The charge might be fairly retorted, and the reasoning pressed, that the rule itself, to which the distinction is applied as an exception, is open to the same objection, and to others of a more serious nature. § 53. But waiving all such discussions, let us now proceed to the consideration of the various cases, in which the parties have been held to be partners, as to third persons, even when they were clearly not so, as between themselves.^ It is unnecessary to consider the cases, where the parties intend a partnership between themselves ; for in such cases they clearly are, or at des devoirs a rempllr envers la societe, mais il n'a point d'ordres k recevoir de ces co-associes. Le commis, au contraire, s'oblige a executer la volonte du chef de la maison ; il est, relativement a lui, dans un etat d'inferiorite et de subordination incompatible avec le caractere et les droits d"un associe. Ce rapprochement, qu'il serait facile de pousser plus avant, montre que, sous des apparences semblables, sont cachees des differences bien tranchees ; qu'il ne faut pas, encore une fois, voir dans la participation a des benefices, un signe infallible de I'existence d'une societe. L'associe et le commis interesse ont cela de commun, (ju'ils sont I'un et I'autre appeles a recueillir une portion de benefices; mais la nature de leurs droits et la source k laijuelle ils les puisent, n'en restent pas moins distinctes et separees; I'un participe au gain, parce qu'il est coproprietaire de la chose qui le produit ; et I'autre, parce qu'il a fait un travail pour lequel on lui a promis cette esp^ce de salaire." See also the decisions of the French tribunals, cited by Duvergier, Id. p. 68, n. (2). See also Duranton, Droit Civ. Franc. Tom. 17, n. 329-331. 1 Ante, § 48-51. M See § 49, note.} CHAP. IV.] AS TO THIRD PERSONS. 95 least may be held to be partners, as to third persons.^ The converse rule, however, does not reciprocally apply at the common law ; for persons are often held part- ners, as to third persons, where, either expressly or by just implication, they are not to be deemed partners between themselves.^ § 54. The cases in which this liability as partners as to third persons exists, may be distributed into the following classes.^ First, where, although there is no ' Ex parte Hodgkinson, 19 Ves. 291, 294. ^ Mr. Collyer seems to entertain some doubt as to the terms, nature, and extent of the doctrine on this point, and says : " In the preceding cases, although the parties manifested, by their agreement, an intention not to contract the relation of partnership, yet it was held, that such intention could not prevail against an express stipulation to share the profits ; a stipulation, which, as we have already seen, is the primary test of a part- nership between the parties, and renders them liable to third persons. But the authorities have gone still further, and it has even been held, that an agreement to share the profits of an adventure, although not so expressed as to create a partnership between the parties, may nevertheless create a part- nership, as between them and the world. In Waugh v. Carver, there are several expressions of Lord Chief Justice Eyre, which lead to this conclu- sion ; and on the authority of those expressions, the case of Hesketh v. Blanchard was decided, in which it was held, that the agreement might con- stitute the parties as partners, quoad third persons, although under the cir- cumstances it did not place them in that situation inter se." And again : " Upon the whole, notwithstanding the doctrine laid down in Hesketh v. Blanchard, and some other cases, the general result of the authorities seems to be, that persons, who share the profits of the concern are prima facie liable as partners to third persons ; but they may repel the presumption of partnership by showing that the legal relation of partnership it^ter sese does not exist. With i-eference to the last of these two positions, it may be ob- served, that, in Hoare v. Dawes, the defendants, who were charged as dor- mant partners, rebutted the pi'csumption of partnership, by showing that they had no communion of profit with the broker. So, where a person was charged as a dormant partner in the profits of a lighter, but it turned out, that he was to have only half the gross earnings as wages, it was held, that he was not a partner with the lighter-man, and therefore not liable for the repairs." Coll. on P. B. 1, c. 1, § 3, 4, p. 59, 60, 2d ed. It does not aj)pear to me, that the authorities (juite justify the conclusion of Mr. Collyer, how- ever reasonable it may seem to be. See post, § 66-59 ; Ex parte llowland- son, 1 Rose, 89-91 ; Waugh v. Carver, 2 H. Bl. 235, 246. " { Though the author professes, in the preceding section, that he is pro- 96 PARTNERSHIP. [CHAP. IV. community of interest in the capital stock ; yet the parties agree to have a community of interest or par- ticipation in the profit and loss of the business or adventure, as principals, either indefinitely, or in fixed proportions. Secondly, where there is, strictly speak- ing, no capital stock ; but labor, skill, and industry are to be contributed by each in the business, as principals, and the profit and loss thereof are to be shared in like manner. Thirdly, where the profit is to be shared between the parties, as principals, in like manner ; but the loss, if any occurs beyond the profit, is to be borne exclusively by one party only. Fourthly, where the parties are not in reality partners ; but hold themselves out, or at least are held out by the party sought to be charged, as partners to third persons, w^ho give credit to them accordingly. Fifthly, where one of the parties is to receive an annuity out of the profits, or as a part thereof. § 55. And first, as to cases where there is no com- munity of interest in the capital stock ; but there is a community of interest or participation in the profit and loss of the business or adventure, as principals.^ It is this circumstance, that the parties are to act and share, as principals^ which forms a prominent distinction between this class of cases and that where an agency exists, with a compensation therefor out of the profits. But the other circumstance is also important, that the ceeding to consider the cases " in which the parties have been held to be partners as to third persons, even when they were clearly not so as between themselves," it would seem that in the first two classes the parties are partners inter sfise, as well as to third persons. See § 30, note. As to the third class, see § 60, note.} ' { See § 54, note} ; Coll. on P. B. 1, c. 1, § 1, p. 25 ; Id. § 2, p. 53-55, 58, 2d ed. ; Wat. on P. c. 1, p. 11, 12, 2d ed. ; Id. p. 33 ; Ex parte Digby, 1 Deac. 341 ; s. c. 2 Mont. & A. 735 ; 3 Kent, 31, 32 ; Ex parte Ilodgkinson, 19 Ves. 291 ; Winship v. Bank of U. S. 5 Pet. 529, 561 ; Ex parte Rowland- son, 1 Rose, 89 ; Hazard v. Hazard, 1 Story, 371. CHAP. IV.] AS TO THIRD PERSONS. 97 parties are to share in the loss, as well as in the profit. Indeed, this is ordinarily laid down, as the true test of partnership in this class of cases. ^ A communion of profit generally implies a communion of loss in the limited sense already suggested, that is, that there can be no ascertained profits, until after all the losses are deducted therefrom.^ There may, however, be, and often is, a stipulation in partnership contracts, that all the losses beyond what the profits will meet, shall be borne by one party only, or borne in a different pro- portion between the parties, from what they take in the profits.^ But where the agreement either expressly, or by fair implication, admits, that the parties are to share in losses, as well as in profits, that circumstance will ordinarily, at the common law, be held to make them partners as to third persons, and in many cases also between themselves, upon the ground, that such is the proper and essential accompaniment of a part- nership, and that it is inconsistent with the notion, that the share of the profits is designed to be a mere remu- neration for services.^ § 56. A few examples may serve to illustrate the principle. Thus, if the owners of a ship, owned by them as tenants in common, should employ the ship in a particular trade or adventure upon joint account, and were to participate in proportion to their interests in the profits and losses of the trade or adventure ; they would 1 Green v. Beesley, 2 Bing. N. C. 108; Waugh r. Carver, 2 H. Bl. 235, 24 7 ; Holmes v. Unit. Ins. Co. 2 Johns. Cas. 329, 331 ; Perrott v. Bryant, 2 You. & C. Ex. 61, 68; Meyer v. Sharpe, 5 Taunt. 74. « Ante, § 20-23. ' Ante, § 23, 24; Coll. on P. B. 1, c. 1, § 1, p. 11, 2d cd. ; Gilpin v. Enderbey, o B. & Aid. 954 ; Bond v. Pittard, 3 M. & W. 357. * Coll. on P. B. 1, c. 1, § 1, p. 19; Green v. Beesley, Bing. N. C. 108; M'lver V. Humble, 16 East, 173; 3 Kent, 26; [Everett v. Coe, 5 Denio, 180.] 7 98 PARTNERSHIP. [cHAP. IV. be partners in the adventure inter sese, as well as to third persons, although they might still remain tenants in common of the ship.^ The like result would arise, if several tenants in common of goods should ship them, to be sold on joint account, and their respective shares in the proceeds were to be invested in other goods on their several and not joint account, on the return voy- ages, they would be partners in the adventure on the outward voyage, but not in the return voyage, unless the return goods were to be sold on joint account.^ So, if the owner of a ship should agree with the master, that the vessel should be employed on a particular ad- venture or voyage for the benefit of both parties, and they were to share the profits and losses (not the gross profits or proceeds), indefinitely, or in certain fixed pro- portions ; there, although the owner would still remain sole owner for the adventure, or the voyage, yet as both were to share the losses, as well as the profits thereof, they would be deemed partners.^ The same doctrine * Mumford v. Nicoll, 20 Johns. 611; Post v. Kimberly, 9 Johns. 470; Saville V. Robertson, 4 T. R. 720, 725 ; Coll. on P. B. 1, c.'l, § 1, p. 16, 17, 2(ied. ^ Holmes v. Unit. Ins. Co. 2 Johns. Cas. 329, 331, 332. ' Ante, § 34, 42, 44 ; Dry v. Boswell, 1 Camp. 329, 330. But see Mair v. Glennie, 4M. & S. 240 ; [Stocker v. Brockelbank, 3 Macn. & G. 250, oEng. Law & Eq. 67] ; Cheap v. Cramond, 4 B. & Aid. 663, 668-670. — In this last case (which was one of sharing commissions). Lord Chief Justice Abbott, in delivering the opinion of the court, said: "And such an agreement is perfectly distinct from the cases, put in the ai'gument before us, of remune- ration made to a traveller, or other clerk or agent, by a portion of the sums received by or for his master or principal, in lieu of a fixed salary, which is only a mode of payment adopted to increase or secure exertion. It is dis- tinct also from the case of a factor receiving for his commission a percentage on the amount of the price of the goods sold by him, instead of a certain sum proportioned to the quantity of the goods sold, as was the case of Dixon V. Cooper, 3 Wils. 40, wherein it was held, that the factor was a competent witness to prove the sale. It differs also from the case of a per- son receiving from a trader an agreed sum, in respect of goods sold by his recommendation, as one shilling per chaldron on coals, or the like, for there there is no mutuality ; and such a case resembles a payment made to an agent CHAP. IV.] AS TO THIRD PERSONS. 99 would apply, if the parties were to share the profits or the net profits ; for in each of these cases there must be a deduction first made of all the charges and losses.^ So, if two persons sliould enter into an agreement, that the one should buy goods on account of the other, and should proceed abroad with them, and there sell them, and they were to be equally interested in the profit and loss of the adventure ; this would constitute a partner- ship between them.^ So, if a person should agree with a broker, that the latter should purchase goods for the former, and should receive for his trouble a certain pro- portion of the profits arising from the sale of the goods, and should bear a certain proportion of the losses ; such an agreement, although it would not vest any property in the broker in the goods so purchased, or in the pro- ceeds thereof, would yet, by reason of his participation in the profits and losses, render him liable, as a partner, to thu'd persons.^ § 57. Upon the like ground, where A., having neither money nor credit, offered to B., that if he would order for procuring orders, and has no distinct reference in the terms of the agree- ment to any particular coals purchased by the coal merchant for resale, upon which a third person may become a creditor of the coal merchant, and probably could not in any instance be shown to apply in its execution to any such particular purchase." But see Reynolds v. Toppan, 15 Mass. 370, cited ante, § 44, note. * Cheap V. Cramond, 4 B. & Aid. 663, 668-670; Ex parte Rowlandson, 1 Rose, 89, 91, 92; Ex 'parte Hodgkinson, 19 Ves. 291,294; Grace v. Smith, 2 W. Bl. 998, 1000 ; Tench v. Roberts, 6 Madd. 145, note ; Bailey v. Clark, 6 Pick. 372; Dob v. Halsey, 16 Johns. 34; ante, § 34; post, § 57, 58; Bond V. Pittard, 3 M. & W. 357, 360, 361. ^ Ex 2}(trte Rowlandson, 1 Rose, 89-91. — In this last case Lord Eldon said : "It was impossible to say, as to third persons, they were not partners, the ground being settled, that if a man, as a reward for his labor, chooses to stipulate for an interest in the profits of a business, instead of a certain sum proportioned to those profits, he is as to third persons a partner, and no arrangement between the parties themselves could prevent it." ' Smith V. Watson, 2 B. & C. 401 ; Meyer v. Sharpe, 5 Taunt. 74; Ex parte Langdale, 18 Yes. 300 ; S. c. 2 Rose, 444. 100 PARTNERSHIP. [CHAP. IV. with him certain goods from C. to be shipped upon a foreign adventure, and sold by A. abroad, if any profits should arise from them, B. should have half the profits for his trouble ; and the goods were accordingly ordered and charged by C. to their joint account ; it was held that B. was jointly liable with A., as a partner to C. And the court there took the distinction, that quoad third persons it was a partnership, for B, was to share half the profits ; but as between themselves, it was only an agreement for so much, as a compensation for B.'s trouble, and lending A. his credit.^ So, where A. agreed with B. to convey by horse and cart the mail between particular places, at a certain price per annum, and to pay his proportion of the expense of the cart, &c. ; and the money received by the carriage of parcels was to be divided between the parties, and the damage occasioned by the loss of parcels was to be borne in equal propor- tions ; it was held, that they were partners inter sese, as well as to third persons. And upon that occasion Lord Chief Justice Tindal observed : " I have always under- stood the definition of partnership to be a mutual par- ticipation of profit and loss."^ § 58. Upon the like ground, where one person ad- vanced funds for carrying on a particular trade, and another furnished his personal services only in. carrying on the trade, for which he was to receive a proportion * Hesketh v. Blanchard, 4 East, 144, 146; s. c. ante, § 40; Meyer v. Sharpe, 5 Taunt. 74. See Coll. on P. B. 1, c. 1, § 2, p. 50, 59, CO, 2d ed. — Mr. CoUyer thinks, tbat in Hesketh v. Blanchard, 4 East, 144, the parties were partners inter sese, as well as to third persons ; and there is certainly, in other authorities, strong ground to support that opinion. { Such is Mr. Lind- ley's opinion (Lind. on P. 732), at any rate the remark of Lord Ellen- borough that they were partners quoad third persons was only a dictum, unnecessary to the decision of the case, j Ante, § 42, and note ; post, § 68, * Green v. Beesley, 2 Bing. N. C. p. 108. See also Fromont v. Coup- land, 2 Bing. 170; Coll. on P. B. 1, c. 1, § 1, p. 19, 2d ed. CHAP. IV.] AS TO THIRD PERSONS. lOl of the net profits ; it was held, that they were partners inter sese, as well as to third persons.^ And the princi- ple was there fully recognized, which had been estab- lished in prior cases, that he, who is to take a part of the profits, shall by operation of law be made liable to losses, as to third persons; because by taking a part of the profits, he takes from the creditors a part of that fund which is the security for the payment of their debts. ^ So, where A., B., and C. entered into partner- ship in the business of tanning hides, and it was stipu- lated that A. should furnish one-half of the stock, to keep the tannery in operation, and should market and receive one-half the leather, and that B. and C. should furnish the other half of the stock, and receive and market for the other half of the leather, and that in making purchases each should use his own credit sepa- rately ; it was held, that they were partners as to third persons, as well as between themselves, as to stock sold to one of the partners ; for the stipulation, as to the di- vision of the manufactured article specifically among the partners, was equivalent to a participation of profit and loss.^ So, where three persons ran a line of coaches from one place to another, the route being divided among them into three sections, the occupant of each section furnishing his own carriages and horses, hiring drivers, and paying the expenses of his own section, and the money received from the passengers, as fare, deduct- ing the tolls of the turnpike gates, was divided among them in proportion to the number of miles of the route run by each ; it was held, that they were part- ' Dob V. Halsoy, 16 Johns. 34, 40 ; Everett v. Coe, 5 Denio, 180 ; 3 Kent, 24, 25; Coll. on P. B. 1, c. 1, § 2, 2d ed. ; ante, § 34. * Ibid. ; Grace «. Smith, 2 W. Bl. 998, 1000 ; Waugh v. Carver, 2 H. Bl. 235, 245 ; Hesketh v. Blanchard, 4 East, 144 ; ante, § 27, 30, 32. ' Everitt v. Chapman, 6 Conn. 347. 102 PARTNERSHIP. [CHAP. IV. ners as to tliird persons, as well for torts, as upon contracts.^ ' Champion v. Bostwick, 18 Wend. 175. [Explained in Pattison v. Blanchard, 1 Sel. 186.] — Mr. Chancellor Walworth on this occasion said: " It is not necessary to constitute a partnership, that there should be any property constituting the capital stock, which shall be jointly owned by the partners. But the capital may consist in the mere use of property, owned by the individual partners separately. It is sufficient to constitute a part- nership, if the parties agree to have a joint interest in, and to share the profits and losses arising from, the use of property or skill, either separately or combined. Here the capital, which each (jontributed or agreed to contribute to the joint concern, was the horses, carnages, harnesses, drivers, &c., which were necessary to run his part of the route, and to be fed, repaired, and paid at his own expense. The only debts or expenses, for which they were to be jointly liable as between themselves, were the tolls upon the whole line ; and the joint profits, which they were to divide, if any remained after paying the tolls, was the whole passage money received upon the entire line. Although it may be fairly inferred, that each party supposed, that the expenses of running his part of the line, exclusive of the tolls, would be equal to the distance run by him, it by no means follows, that any of them . supposed, that the actual passage money or profits of the different parts of the line, would be in the same proportion ; as it is a well-known fact, that the number of passengers, who travel in public conveyances, increase as you approach large market towns, or other places of general resort. The only object of the agreement to divide the passage money earned upon the whole line, among the different proprietors, must have been to give to those, who ran that part of the line, where there was the least travel, a portion of the passage money on other parts of the route, as a fair equivalent for their equal contribution of labor and expense for the joint benefit of all. And as all the owners of the line were thus interested in every part of the route, and were liable to the passengers, if they were unreasonably detained on the way, I am inclined to think, that, if the driver of either had refused to carry on the passengers over his ;^art of the line without any sufficient ex- cuse, either of the other parties, who happened to be present, might have employed another driver at the common expense to proceed with the team to the end of that route, although as between themselves the owner of that part of the line would be bound to pay such extra expense. And the same right would have existed, if the driver, by reason of intoxication or other- wise, was incapable of discharging his duty with safety to the passengers. Although the title to the coach and horses for the time being might not be so far vested in the partners, as to authorize any of them to take them out of the general owner himself under similar circumstances, the passengers might unquestionably be sent on by either of the others at his expense ; or at the expense of all the owners of the line, who were interested in having it done, if he was unable to pay the expense." See also Waland v. CHAP. IV.] AS TO THIRD PERSONS. 103 § 58 a. On the other hand, where there was an agree- ment by a raih'oad company with certain persons, who were engaged in transporting merchandise from New York to various places in the West, by way of Hudson River and canals, that these carriers should deliver up their freight to the company at particular places, and the company should transport the goods from thence to their destination, and that the carriers should pay the company therefor a certain portion of the freight, ac- cording to certain distances ; it was held, that this agree- ment did not make the company partners with the car- riers in the transportation of the goods, either inter sese, or as to third persons.^ The ground of this decision seems to have been, that there was no community of interests, or division of the profits of a joint concern, between the parties. The railroad company had no interest in the profits or losses of the transportation company, on that part of the route which the latter were to accomplish ; nor the transportation company, in the profit or loss in the railroad portion of the trans- portation. Each company was to receive a fixed pro- portion of the freight, whether the other would lose or gain on its own portion of the route, so that there was no community of- profit or loss. Many other cases might be cited to the same efi"ect ; but those, which have been referred to, are sufficient to illustrate the doc- trine already suggested under this head. § 59. In the next place, as to the class of cases, where, strictly speaking, there is no capital stock, but labor, skill, and industry are to be contributed by each Elkins, 1 Stark. 272, and Barton v. Hanson, 2 Taunt. 49 ; Wctmore v. Baker, 9 Johns. 307. See Fromont o. Coupland, 2 Bing. 170; Green V. Beesley, 2 Bing. N. C. 108. [See the last two cases commented upon, in Pattison v. Blanchard, 1 Seld. 186.] » Mohawk & Hudson Railroad Co. v. Niles, 3 Hill, (N. Y.) 162 ; {Mer- rick V. Gordon, 20 N. Y. 93.} 104 PARTNERSHIP. [cHAP. IV. party in the trade or business, as principals, and the profit and loss are to be shared in certain proportions between them.^ In this class of cases the like rule ap- plies ; and the parties are treated as partners, not only as to third persons, but also inter sese, upon the plain ground, that it is a trade or business carried on upon joint account, and that there is a complete communion of interest, both in the profit and loss thereof between them. It has, therefore, every distinctive mark of part- nership. One or two cases will abundantly serve to present this doctrine in a clear and satisfactory light.^ Thus, if A. and B. should agree to employ their joint labor and services and skill in business, as insurance brokers, and to divide the profits and losses between them, they would to all intents and purposes be held partners in that business. So, if A. and B. should agree to carry on the business of solicitors upon joint account, and to divide the profits and losses thereof in certain proportions between them, this would make them partners, not only as to third persons, but inter sese.^ Nor would the result be varied, if the parties agreed to share the profits between them, omitting any express provision as to losses ; for in such cases they could by mere operation and intendment of law share the losses, upon the ground, that the losses must first be deducted before the profits can be ascertained ; and also upon the more general ground which is so often recog- nized in the authorities, that every man who has a share of the profits of a trade or business, ought also to bear his share of the loss.'* Indeed, all the authorities at the » {See §54, note.} ^ See the reasoning of Lord Chief Justice Eyre in Waugh v. Carver, 2 H. Bl. 235. ^ See Hopkinson v. Smith, 1 Bing. 13 ; Tench v. Roberts, 6 Madd. 145 ; [Smith V. Hill, 8 English, 173.] ■• Grace v. Smith, 2 W. Bl. 998, 1009 ; Ex parte Cellar, 1 Rose, 297 ; CHAP. IV.] AS TO THIRD PERSONS. 105 ccmmon law take the rule to be, that shaiing the losses and the profits constitutes such a communion and mu- tuality of interest therein, as creates a clear partnership, as to third persons ; and, in the absence of all contrary or inconsistent stipulations, as between themselves also.^ Hence all the adventurers in a fishing voyage, who are to share in the profits and losses of the adventure ac- cording to certain proportions, and to contribute towards the outfit, are deemed partners in the adventure to all intents and purposes.^ So, where a merchant in Lon- don was by agreement to recommend consignments to a merchant abroad, and the commissions on all sales of goods, recommended by the one to the other, were to be equally divided between them, without allowing any deduction for expenses ; it was held, that they were not only partners in that business, as to third persons, but also as between themselves.^ § 60. In the next place, as to the class of cases, where the parties are to share the profits between them, if any, as principals; but the losses are to be borne exclusively by one party.^ It is here that the Waugh V. Carver, 2 H. Bl. 235 ; Cheap v. Cramond, 4 B. & Aid. 663 ; Bond ». Pittard, 3 M. ife W. 357, 360, 361. See Finckle v. Stacey, Sel. Cas. 9 ; Gow on P. c. 1, p. 14, 15, 3d ed. ; Coll. on P. B. 1, c. 1, § 2, p. 54, 2d ed. ; ante, § 19-24. ^ Geddes v. Wallace, 2 Bligli, 270 ; Peacock v. Peacock, 2 Camp. 45 ; Gow on P. 12, 13, 3ded. * See Coppard v. Page, Forrest, 1 ; Perrott v. Bryant, 2 You. & C. Ex. 61, 68; ante, § 42. ' Cheap V. Cramond, 4 B. & Aid. 663, 669, 670 ; Walden v. Sherburne, 15 Johns. 409, 421,422. * { See § 30, note. In only two of the leading cases referred to under this class, viz., Waugh v. Carver, 2 H. Bl. 235, and Cheap v. Cramond, 4 B. & Aid. 663, was it distinctly said that the alleged partners were not so inter sese, altliough they were so as to third persons. Waugh v. Carver must be considered as overruled by Bullen v. Sharp, Law Rep. 1 C. P. 86, and other recent cases, see § 49, note ; and Cheap v. Cramond is distinctly placed on Waugh V. Carver, see § 61, note.} Wats, on P. c. 1, p. 17-27, 2d ed. ; ante, § 57. 106 PARTNERSHIP. [cHAP. IV. pressure of the general doctrine, that a participation in the profits, as profits, creates a partnership between thera, is most severely felt, and is most difficult to main- tain upon general reasoning. In all this class of cases it is the intention of the parties, that no partnership should exist between themselves ; and the common law, in this respect, gives full force and effect to that inten- tion. But in regard to third persons, the common law holds, that the mere right to participate in the profits creates a partnership between the parties, notwithstand- ing there is no participation in the losses, ultra the profits, and it is not their intention to be partners.^ The doctrine here seems to be founded in part upon the con- sideration, that even in such a case there is incidentally, and to a limited extent, a participation in the losses, as well as in the profits ; for before it can be ascertained, that there are any profits, the losses must first be de- ducted, and the residue only shared as profits.^ But the main reason is, that, which has been already advert- ed to, as the first foundation of the doctrine, to wit, that every man, who has a share of the profits of the trade or business, ought also to bear his share of the loss ; for if any one takes part of the profit, he takes a part of the fund, on which the creditor of the trade relies for his payment.^ » {See §49, note.} ^ Ante, § 19-25, 55-57 ; Cheap v. Cramond, 4 B. & Aid. 6G3 ; Gilpm v. Enderbey, 5 B. & Aid. 954 ; Ex paiie Langdale, 2 Rose, 444 ; s. c. 18 Ves. 300, 301 ; Bond v. PIttard, 3 M. «fe W. 357. ^ Ante, §27,28, 32, 36, notes; Grace». Smith, 2W.B1. 998, 1000.— Lord Eldon, in Ex parte Langdale, 18 Ves. 300, s. c. 2 Rose, 444, said: "The true criterion is, whether they (the parties) are to participate in tlie profit. That has been the question ever since Gi'ace v. Smith." Lord Chief Jus- tice Eyre, in Waugh v. Carver, 2 H. Bl. 235, 247, approved the doctrine, so promulgated in Grace v. Smith, as standing upon the fair ground of reason. Whether it does so, may certainly, if the question were new, admit of a good deal of argument. See ante, § 48-51, and note 3. The point, however, now stands dryly upon the maxim, Ita Lex scripta est. See Green v. Bees- ley, 2 Bing. N. C. 108 ; ante, § 57. CHAP. IV.] AS TO THIRD PERSONS. 107 AVithout inquiring into the true force of this mode of reasoning, a task, which would be a matter of superero- gation, since, so far as the authorities go, it seems ab- solutely established, it may be useful to illustrate it by reference to some of the leading cases, in which it has been discussed and recognized. § 61. Thus, for example, if one person should en- gage with another in any trade or business, under an arrangement to divide the profits between them ; but if there should not be any profits, but a loss, then that the loss should be borne by one only ; that would make them partners, as to third persons, at all events.^ On the like ground, if two solicitors should carry on busi- ness on joint account, and one should be entitled to receive a fixed sum, and also a share of the profits, and not be liable for any losses, they would be partners inter sese, as well as to third persons.^ So, where two merchants agreed to enter into partnership for a certain term of years, and each was to furnish the same amount of capital, and one was to receive a certain annual sum out of the profits, if any, and if none, out of the capital, and at the expiration of the term he w^as to receive his full original capital by instalments ; it was held, that they were partners intei^ sese, and also as to third per- sons.^ So, where two ship agents, at different ports, entered into an agreement with each other to share in certain proportions the profits of their respective com- missions, and discount on tradesmen's bills, employed by them in repauing ships confided to their care, but neither was to be answerable for the acts or losses of » Ex parte Langdale, 18 Ves. 300, 301 ; Geddes v. Wallace, 2 Bligli, 270 ; Jordan v. Wilkins, 2 Wash. C. C. 482 ; Gow on P. c. 1, p. 16, M ed. ; Gilpin V. Enderbey, 5 B. & Aid. 954 ; Bond v. Pittard, 3 M. & W. 357. « See Bond v. Pittard, 3 M. & W. 357, 360 ; Tench v. Roberts, 6 INIadd. 145, note. ' Gilpin. I'. Enderbey, 5 B. & Aid. 954. 108 PARTNERSHIP. [CHAP. IV. the other, but each was to bear his own ; it was held, that they were partners as to third persons, aUhough not as between themselves.^ So, where a commission '> 1 Waugh V. Carver, 2 H. Bl. 235; Cheap v. Cramond, 4 B. & Aid. 663, 668 ; [Emanuel v. Draughn, 14 Ala. 303.] — In Waugh v. Carver, Lord Chief Justice Eyre said : " Whether these persons were to interfere more or less with their advice and directions, and many small parts of the agreement, I lay entirely out of the case ; because it is plain upon the construction of the agreement, if it be construed only between the Carvers and Giesler, that they were not, nor ever meant to be, partners. They meant each house to carry on trade without risk of each other, and to be at their own loss. Though there was a certain degTee of control at one house, it was without an idea that either was to be involved in the consequences of the failure of the other, and without understanding themselves responsible for any circum- stances that might happen to the loss of either. That was the agreement between themselves. But the question is, whether they have not, by parts of their agreement, constituted themselves partners in respect to other persons ? The case therefore is reduced to the single point, whether the Carvers did not entitle themselves, and did not mean to take a moiety of the profits of Giesler's house, generally and indefinitely as they should arise, at certain times agreed upon for the settlement of their accounts. That they have so done is clear upon the face of the agreement ; and upon the authority of Grace v. Smith, he who takes a moiety of all the profits in- definitely, shall, by operation of law, be made liable to losses, if losses arise, upon the principle that, by taking a part of the profits, he takes from the creditors a part of that fund which is the proper security to them for the payment of their debts. That was the foundation of the decision in Grace V. Smith, and I think it stands upon the fair ground of reason. I cannot agree, that this was a mere agency, in the sense contended for on the part of the defendants, for there was a risk of profit and loss : a ship agent employs tradesmen to furnish necessaries for the ship, he contracts with them, and is liable to them, he also makes out their bills in such a way as to determine the charge of commission to the ship-owners. With respect to the commis- sion indeed, he may be considered as a mere agent, but as to the agency itself, he is as much a trader as any other man, and there is as much risk of profit and loss to the person with whom he contracts, in the transactions with him, as with any other trader. It is true that he will gain nothing but his discount ; but that is a profit in the trade, and there may be losses to him as well as to the owners. If therefore the principle be true, that he who takes the general profits of a partnership must of necessity be made liable to the losses, in order that he may stand in a just situation with regard to the creditors of the house, then this is a case clear of all difficulty. For though, with respect to each other, these persons were not to be considered as part- ners, yet they have made themselves such with regard to their transactions with the rest of the world." In this case, it seems that the Court considered CHAP. IV.] AS TO THIRD PERSONS. 109 merchant in London agreed with another commission merchant in Rio Janeiro, equally to divide between them the commissions on the sale of all goods recom- mended by the one house to the other ; it was held, that as to third persons, they were partners in this busi- ness.^ "commissions to mean profits; and that the net commissions, and not the gross commissions, wei-e divisible." Coll. on P. B. 1, c. 1, § 1, p. 30. ' Cheap V. Ci-amond, 4 B. & Aid. 6G3. — In this case, it is not clear, whether the Court treated the case as one where the gross commissions, or the net commissions were to be divided, although the commissions were treated as if the word had been profits, and therefore undistinguishable from profits. The language of Lord Chief Justice Abbott, in delivering the opinion of the Court, was as follows : " And in support of this propo- sition, the case of Waugh v. Cai'ver was cited and relied on. And we are all of opinion, that the present case cannot be distinguished in principle from that, and that our decision must be governed by it. It is true, that in that case a definite part of the commission was, by agreement oi'the parties, to be deducted as compensation for the charges and expenses before a division took jjlace ; and also that each party was to share in some specified measure with the other, in other parts of the profits of their respective business, such as wai'ehouse rent, and discount upon tradesmen's bills. And it was contended, in this case, on the part of the plaintiffs, that the bank- rupts and Ruxton were to be considered as dividing the gross pi'oceeds only, and not the net proceeds or profits of each other's agency or factorage ; and that a division of gross proceeds does not constitute a partnership. We think, however, that the previous deduction of a definite part of the commission before the division in the case cited, is an unimportant fact. It cannot have the effect in all cases of leaving the remainder as clear profit, because the expense and charge cannot be in all cases uniformly the same, but must vary with the particular circumstances of each transaction ; so that in effect a part only of the gross commission, or proceeds of tlie agency, and not the whole, was to be divided in that case ; and taking the definite deducted part at a fifth, or any other aliquot part, the absent house, instead of receiving one-half, as in the case at bar, would, by the agreement, receive two-fifths, or some other definite part of the whole gross sum, and not an indefinite part thereof, depending upon the actual and clear profit of the transaction. And although, in the case of Waugh v. Carver, the agreement was not confined to a division of the conunission, but extended also to the moneys received in certain other parts of the transactions of tiie two houses, yet the principle of the decision is not affected by that circumstance, the principle being, that where two houses agree that each shall share with the other the money received in a certain part of the business, they are, as to such part, partners with regard to those who deal with them therein, though 110 PARTNERSHIP. [cHAP. IV. § 62. We may conclude this head with the remark, that the Roman law did not (as we have seen) ordi- thej may not be partners inier sese. By the effect of such an agreement, each house receives from the other a part of that fund on which the creditors of the other rely for payment of their demands, according to the language of Lord Chief Justice De Grey, in the case of Grace v. Smith. And such an agreement is perfectly distinct from the cases put in the argument before us of remuneration made to a traveller, or other clerk or agent, by a por- tion of the sums received by or for his master or principal in lieu of a fixed salary, which is only a mode of payment adopted to increase or secure exertion. It is distinct also from the case of a factor receiving for his commission a percentage on the amount of the price of the goods sold by him, instead of a certain sum proportioned to the quantity of the goods sold, as was the case of Dixon v. Cooper, wherein it was held, that the factor was a competent witness to prove the sale. It differs also from the case of a person receiving from a trader an agreed sum, in respect of goods sold by his recommendation, as one shilling per chaldron on coals, or the like, for there is no mutuality ; and such a case resembles a payment made to an agent for procuring orders, and has no distinct reference in the terms of the agreement to any particular coals purchased by the coal merchant for re- sale, upon which a third person may become a creditor of the coal merchant, and probably could not in any instance be shown to apply in its execution to any such particular purchase. But it is to be observed, that, even on a case of this nature, the inclination of Lord Mansfield's opinion, in Young ». AxtoU, cited 2 H. Bl. 24_', was, that such an agreement might constitute a partnership. Of the case of Muirhead v. Salter, referred to in the argu- ment, we have neither the facts nor the ground of decision brought before us with sufficient accuracy, to enable us to consider it as an authority on the present question. It may have been, that the division of the conunission between the two insurance brokers was a solitary instance ; that the assured had recognized the second broker, as being the person employed by him- self; or that the court did not think fit, under all the circumstances of the particular case, to disturb the verdict of a jury of merchants, as to the effect of a division of the commission in that particular species of agency, the divided commission being, as I understand, payable for effecting the policy, and not for receiving the money from the underwriters, in the event of the loss, and payable whether any loss had occurred or not. So that we cannot consider that case as having contravened or weakened the authority of the decision in Waugh v. Carver. Upon the authority of this latter case, and for the reasons already given, we think the direction of tlie learned judge at the trial, and the verdict of the jury, are right, and that the rule for a new trial ought to be discharged." There is certainly some obscurity in that part of the opinion, which refers to the question as to the gross or the net commissions. If the learned judge meant to say, that a division of the gross commissions would make them partners, the case certainly is in CHAP. IV.] AS TO THIRD PERSONS. Ill narily contemplate cases to be cases of partnership ex- cept where the parties intended to create a partnership, and the losses, as well as the profits, were to be shared in some proportions by each of them. The usual inter- pretation was, that if the agreement provided either for a distribution of the profits alone, or of the losses alone, in certain proportions, the other, which was omitted, would be presumed to be intended to be shared in the same proportion. Illud expeditiim est, si in una ccmsa pars fuerit expressa (veluii in solo lucro, vel in solo damno) in altera vero omissa ; in eo quoque, quodprce- termisswn est, eandem p)artein servari} And unless some provision was found in the agreement itself, touch- ing the matter, the Roman laAv presumed, as a natural result from the contract, that the partners were to share in both, and to share equally. Nam sicuti lucrum, ita damnum quoque commune esse op)ortet ; quod non culpa sodi contingit.^ Quoniam societas, cum contrahitur, tarn lucri, quavi damni communio initur.^ Still, how- ever (as we have seen), the Roman law, if the parties clearly intended a partnership, did not prevent them from agreeing, in consideration of peculiar services or credit in aiding the partnership, that the partners should share the profits between them, if any, and that the one rendering such services, or credit, might be exempted conflict Avith other authorities. But if he meant, that the division was to be of the net commissions, deducting all charges, then it would be in harmony with those authorities. See ante, § 34, 44, 55-60. Sec Pearson v. Skelton, 1 M. & W. 504. The same case is much more fully reported in 1 Tyrw. & G. 848, where the distinction between an interest in the gross profits, and that in the net profits, is clearly stated. Ilis language on that occasion is quoted, post, § 220, note. Mr. Collyer understands Cheap v. Cramond, 4 B. & Aid. 663, to have decided that there is no diflference between a division of the gross and a division of the net commissions. 1 Inst. 3, -26, 3 ; Domat, 1, 8, 1, art. 5 ; ante, § 27, 50. « D. 17, 2, 52, 4; Poth. Pand. 17, 2, n. 39; Domat, 2, 1, 1, art. 1. » D. 17, 2, 67, Intr. ; Domat, 1, 8, 1, art. 1, 3, 4. 112 PARTNERSHIP. [cHAP. IV. from all losses beyond the profits.^ But it does not ap- pear, that the Roman law ever established a partnership in favor of third persons, against the intention of the parties, from the mere participation of profits, and a for- tiori^ where there was an express provision against one party being liable for any losses.^ § 63. The principles established in these three classes of cases ^ are commonly applied to dormant and secret partnerships, where the ostensible partners only are known or act, and yet other persons, who are to share the profits, are held responsible as partners to third persons, although they may not be so chargeable inter sese^ Thus, for example, if A. and B. should agree to carry on any trade or business for their joint and mu- tual account, to divide the profits and losses between them, and A. alone was to be known in the trade and business, and to be solely responsible for the debts and contracts thereof, and B. was to be a secret dormant partner, B. would nevertheless be deemed a partner as to third persons, and responsible to them for all the debts and contracts growing out of such trade or business.^ The same rule would apply to a case, where it was even expressly agreed between the parties, that there should be no partnership between them ; but they were merely to share the profits and losses, or the profits only, and one was to bear all the losses.*^ 1 D. 17, 2, 29, 1 ; Domat, 1, 8, 1, art. 9 ; ante, § 37, 50. 2 Ante, § 50. 3 Ante, § 55, 59, 60. * 3 Kent, 32, Winship v. Bank of U. S. 5 Pet. 529 ; Etberidge v. Binney, 9 Pick. 272. * Hoare v. Dawes, 1 Doug. 371 ; Winship v. Bank of U. S. 5 Pet. 529; s. c. sub nom. U. S. Bank v. Binney, 5 Mason, 176 ; Coope v. Eyre, 1 H. Bl. 37 ; Geddes v. Wallace, 2 Bligh, 270 ; {Beckham v. Drake, 9 M. & W. 79 ; 8. C. 11 M. & W. 315 ; Lind, on P. 273} ; [Baring v. Crafts, 9 Met. 380; Brooke v. Washington, 8 Gratt. 248.] « Gow on P. c. 1, p. 12-18, 3d ed.; Coll. on P. B. 1, c. 1, § 1, p. 11-27, 2d ed.; Id. § 2, p. 53-67; Id. B. 3, c. 3, § 3, p. 368, 370, 371; Wats. CHAP. IV.] AS TO THIRD PERSONS. 113 § 64. In the next place, as to the class of cases, where the parties are not in reality partners, but are held out to tlie world as such in transactions affecting third per- sons. In such cases, they will be clearly held partners, as to such persons.^ Tliis doctrine turns upon no pecu- liar principles of municipal jurisprudence ; but is founded in the enlarged principles of natural law and justice, ex ceqiio et bono. For, wherever one of two innocent per- sons must suffer from a false confidence or trust reposed in a third, he who has been the cause of that false con- fidence, or trust, and is to be benefited by it, ought to suffer, rather than the other ; and this must apply a fortiori^ where the credit is given to a party solely upon the faith of the fraudulent allegation of a fact, which is known to such party at the time to be untrue. The reason of the doctrine is fully expounded by a late emi- nent judge in the following terms. " The definition of a partnership cited from Pufendorf is good, as between the parties themselves, but not with respect to the world at large. If the question were between A. and B., whether they were partners, or not; it would be very well to inquire, whether they had contributed, and in what proportions, stock, or labor, and on what agree- ments they were to divide the profits of that contribu- tion. But in all these cases a very different question arises, in which the definition is of little service. The question is generally, not between the parties, as to what on P. c. l,p. 17-27, 2d ed. ; Hesketh v. Blanchard, 4 East, 144; [Smith V. Smith, 7 Fost. 244 ; Hill v. Voorhies, 22 Fenn. St. 68 ; Brooke v. Wash- ington, 8 Gratt. 248 ; Griffith v. Buffum, 22 Vt. 181.] 1 3 Kent, 32, 83 ; Post v. Kimberly, 9 Johns. 4 70, 489 ; Ex parte Watson, 19 Ves. 459,469; Fox v. Chfton, 6 Bing. 776 ; Coll. on P. B. 1, c. 1, § 2, p. 60-64, 2d ed. ; Parker w. Barker, 1 Brod. & B. 9 ; Goode v. Harrison, 5 B. & Aid. 147; Bond v. Pittard, 3 M. & W. 357; 2 Bell, Comm. B. 7, c. 2, p. 023, 624, 5th ed. See Bonficld v. Smith, 12 M. & W. 405, the converse case, where the firm name was A. & Co., and the defendant held himself out as the sole partner then in the firm. 8 114 PARTNERSHIP. [cHAP. IV. shares they shall divide, but respecting creditors, claim- ing a satisfaction out of the funds of a particular house, who shall be deemed liable in regard to these funds. Now, a case may be stated, in which it is the clear sense of the parties to the contract, that they shall not be partners ; that A. is to contribute neither labor nor money, and, to go still further, not to receive any profits. But if he will lend his name as a partner, he becomes, as against all the rest of the world, a partner, not upon the ground of the real transaction between them, but upon principles of general policy, to prevent the frauds, to which creditors would be liable, if they were to suppose, that they lent their money upon the apparent credit of three or four persons, when in fact they lent it only to two of them, to whom, without the others, they would have lent nothing.^ Upon so clear and natural a doctrine, it seems unnecessary to cite at large the authorities in its support. They are uniform and positive to the purpose.^ § 65. This last class of cases may arise from the express acknowledgments of the parties, or by impli- cation or presumption from circumstances. Thus, if a person should expressly hold himself out as a partner, and thereby should induce the public at large, or par- ticular persons, to give credit to the partnership, he would be liable as a partner for the debts so contracted, although he should in reality not be a partner.^ On ^ Lord Chief Justice Eyre in Waugh v. Carver, 2 H. Bl. 235, 246. 2 Coll. on P. B. 1, c. 1, § 5, p. 53-64 ; Gow on P. c. 1, p. 10, 3d ed. ; Wats, on P. p. 33, 34, 2d ed. ; 3 Kent, 31-33 ; Hoare v. Dawes, 1 Doug. 371 ; Young V. Axtell, cited 2 H. Bl. 242 ; Ex parte Langdale, 2 Rose, 444 ; s. c. 18 Ves. 300, 301 ; M'lver v. Humble, 16 East, 169 ; Bond r. PIttard, 3 M. & W. 357, 359; {Martyn v. Gray, 14 C. B. N. s. 824 ; Dutton w. Wood- man, 9 Cush. 255; Potter v. Greene, 9 Gray, 309.} 3 Wats, on P. c. 1, p. 6, 2d ed. ; Id. p. 33 ; Gow on P. c. 1, p. 10-13, 3d ed.; Id. p. 23, 24; Coll. on P. B. 1, c. 1, § 2, p. 53-67, 2d ed. ; Guidon v. Robson, 2 Camp. 302; Young v. Axtell, cited 2 H. Bl. 242. {To charge a defendant with liability as a partner on the ground of representation of CHAP. IV.] AS TO THIRD PERSONS. 115 the other hand, if a known partner should silently withdraw from the partnership, without giving any notice thereof, he would still remain liable to persons, who should continue to deal with it upon the faith and confidence, that he still remained a partner ; for his silence, under such circumstances, would be equivalent to an affirmation of a continuing partnership.^ But this subject will naturally occur in other connections in a subsequent part of these Commentaries, and needs not here be further dwelt upon.^ § 66. In the next place as to the class of cases where one of the parties is to receive an annuity out of the profits, or as a part thereof. And here it may be generally stated, that a person, who lends money to a firm, and is to receive therefor a fixed interest (whether usurious, or otherwise, is not material), or an annuity, certain as to amount and duration, will not thereby become, as to third persons, a partner in the firm ; for, in such a case, there is no mutuality of profit with the firm, and no general participation in the himself as a partner, it must be proved either that he has ' represented himself as a partner to the plaintiff, or has made such a public repre- sentation of himself in that character as to lead the jury to conclude that the plaintiff, knowing of that representation, and believing the defend- ant to be a partner, gave him credit under that belief. Ford v. Whitmarsh, Hurlst. & Walm. 53. This rule, in spite of the remark in Young v. Axtell, cited 2 H. Bl. 242, seems now well settled. Dickinson v. Valpy, 10 B. & C. 128, 140. Wood V. Duke of Argyll, 6 M. & G. 928, 932 ; Lake v. Duke of Argyll, 6 Q. B. 477; Shott v. Strealfield, 1 M. & Rob. 8; Baird v. Planque, 1 Fost. & Finl. 344; Fitch v. Harrington, 13 Gray, 468; Wood v. Pennell, 51 Me. 52 ; Irvin v. Conklin, 36 Barb. 64 ; Bowie v. Maddox, 29 Ga. 285 ; Lind. on P. 41-52; Metcalf on Contr. 113 ; 1 Sm. Lead. Cas. (6th Am. cd.) 1190; Smith's Merc. Law, (5th ed.) 23, note (r.)} ' Coll. on P. B. 3, c. 3, § 3, p. 368-376, 2d ed. ; Godfrey v. Turnbull, 1 Esp. 371 ; AVhitman v. Leonard, 3 Pick. 177; Griswold t'. Waddington, 15 Johns. 57; Parkin v. Carruthers, 3 Esp. 248; Stables v. Eley, 1 Car. & P. 614 ; Graham i\ Hope, 1 Peake, 154. * {See § 158-163.} 116 PARTNERSHIP. [cHAP. IV. casual and indefinite profits, which, as we have seen, constitutes one of the ingredients of partnership.^ Cases of this kind often occur upon the retirement of a partner, leaving money or funds in the hands of the firm, and upon the decease of a partner, who bequeathes an annuity to his widow out of the profits ; and in neither case will the retiring partner, or the widow, be held a partner as to third persons, as he or she cer- tainly is not, as to the partners themselves.^ It is true, that it may be said, that the retiring partner or widow has, in a certain sense, an interest in the profits. But the same suggestion may be made as to creditors of the firm. If any one advances or lends money to a trader, it is only lent on his general personal security. It is no specific lien upon the profits in the trade ; and yet the lender is generally interested in those profits. He relies on them for repayment. And there is no diff"erence, whether money be lent de novo, or be left behind in the trade by a retiring partner ; or, whether the terms of the loan be kind, or be harsh.^ § 67. The true criterion, by which we are to distin- guish cases of this kind from cases in which there is a partnership as to thhd persons, is to ascertain, whether the retiring partner, or lender, or annuitant, is to receive a share of the profits, as profits, or whether the profits are relied on only as a fund of payment ; or, in other words, whether the profit, or premium, or annuity, is certain and defined, or is casual, indefinite, and de- pending on the accidents of trade. In the former case, it is a loan ; in the latter, a partnership. The hazard of profit or loss is not equal and reciprocal, if the retir- ' Coll. on P. B. 1, c. 1, § 1, p. 26, 2d ed. 2 Coll. on P. B. 1, c. 1, § 1, p. 26, 27, 2d ed. Grace v. Smith, 2 W. BI. 9 98, 1000; Waugh v. Carver, 2 H. Bl. 235, 245. ^ Grace v. Smith, 2 W. Bl. 998, 1000. CHAP. IV.] AS TO THIRD PERSONS. 117 ing partner, or lender, or annuitant, can receive a limited sum only for the profits of the loan or other fund ; and therefore the law will not deem him or her a partner, since there is an utter want of mutuality of right and interest in the profit.^ § 68. There may be, and indeed sometimes is great nicety in the application of the doctrine ; but, never- theless, the distinction itself is ordinarily clear and satisfactory. Thus, if a person is to receive an annuity in lieu of profits, he will not be held to be a partner as to third persons ; because such words negative the presumption, that the annuity is to be paid out of the profits ; since it is not to vary in its amount with the profits, nor to depend, as to its duration, on the term or continuance of the partnership.- But if he is to receive a certain percentage on the profits, or on the amount of the business done, he will clearly be, as to third persons, a partner, since the amount to be received would rise and fall with the amount of the profits or business.^ So (it has been said), if a retiring > Grace v. Smith, 2 W. Bl. 998, 1000; Waugh v. Carver, 2 H. Bl. 235, 247. {In McDonald v. Millaudon, 5 La. (Miller), 403 ; Sheridan v. Medara, 2 Stockt. 469 ; Pierson v. Steinmeyer, 4 Rich. 309 ; and Wood v. Vallette, 7 Ohio St. 172, persons who had lent money for a share in the profits were held liable as partners. In the first two cases the contracts, unless they were contracts for partnership, were usurious ; see note infra. In the last case, the one who advanced the money also furnished service?, and the con- tract is said by the court to be not a contract of loan, but of actual partner- ship. In Pierson r. Steinmeyer, p. 319, the court recognized the distinction between participation in the profits as profits, and the receiving of a sum proportionable to the profits in cases of agency, but they refused to apply the distinction in the case of a loan. O'Neall, J., dissented. On the other hand, in Gibson- v. Stone, 43 Barb. 285, and Williams r. Soutter, 7 Iowa, 435, a loan for a share of profits was held not to create liability as a partner. See §49, note; § 70, note; Wall v. Balcom, 9 Gray, 92.} » Coll. on P. B. 1, c. 1, § 1, p. 27, 28, 2d ed. ' Young V. Axtell, cited 2 H. Bl. 242; Waugh v. Carver, 2 H. Bl. 235, 246, 247 ; [Buckner v. Lee, 8 Ga. 285, 288.] 118 PARTNERSHIP. [cHAP. IV. partner is entitled to receive a certain interest on the funds, which he leaves in the partnership, and also a fixed annuity for a certain number of years, if the partner shall so long live, in lieu of the profits of the trade, with a right to inspect the books of the partner- ship, he will be deemed a partner ; for, taking the whole transaction together, it is apparent, that he is to be paid out of the profits.^ § 69. It is upon a similar ground, that, where a person is to receive an annuity of a fixed sum out of the profits of a trade or business, he is held to be a partner as to third persons ; for in such a case the 1 Bloxham v. Pell, cited 2 W. BI. 999 ; Coll. on P. B. 1, c. 1, § 1, p. 28, 2d ed. ; Id. § 2, p. 54. — This case seems to stand upon the utmost verge of the law, even if it be at all maintainable. It differs from Grace v. Smith, 2 W. Bl. 998, principally in the circumstance, that the annuity was determina- ble upon the contingency of the death of the partner, and there was a right to inspect the books. But as the interest was fixed, and the annuity for a determinate term, although liable to be defeated by the happening of the contingency of the death of the party, it does not seem easy to see, how either the interest or the annuity can be properly treated as a payment to be made exclusively out of the profits. The right to inspect the books may seem more strongly to indicate a partnership ; but ought it to be decisive ? See Gow on P. c. 1, p. 21, 22, 3d ed. ; Gary on P. p. 3, 14, 171. Certainly an annuity of a fixed sum, determinable on the death of the annuitant, or of the partner, cannot, per se, be treated as creating a partnership as to third persons, when payable in lieu of the profits of the trade ; for there is no mutuality in the profits, and no sharing of profit and loss ; as it is not made payable out of the profits exclusively. See Ex parte Chuck, 8 Bing. 469 ; Young v. Axtell, cited 2 H. BI. 242; Holyland v. De Mendez, 3 Mer. 184; Watson on P. c. 1, p. 11, 12, 2d ed. {In Grace v. Smith, 2 W. Bl. 998, the judgment in which " has always been regarded as the great authority for the proposition, that a person who shares profits shall be liable to third parties as if he were in fact a partner," the decision was that an annuitant was not, under the circumstances, liable as a partner. Mr. Lindley regards the cases of Gilpin V. Enderbey, 5 B. & Aid. 954, and Fereday v. Hordern, Jac. 144 as decisions on the law of usury rather than on the law of partnership, and the case of Bloxham v. Pell, 2 W. Bl. 999, as resting on the reason given by Lord !Mansfield that " it shall not lie in the defendant Pell's mouth to say it is usury and not a partnership," and on the maxim Quum quod ago non valet ut ayam, valeat quantum valere potest. Lind. on P. 18, 35. See Ex parte Briggs, 3 Deac. & Ch. 367 ; ante, § 49, note.} CHAP. IV.] AS TO THIRD PERSONS. 119 annuity will be payable out of the net profits, and will rise and fall accordiiig to the profits, if there be not enough profits to pay the annuity ; and there will also be a lien on the profits therefor.^ In short, in all cases of this kind, the real question to be solved is, whether the party is in effect to participate in the rise or fall of the profits, and has an interest in the profits, as such ; or, whether he only looks to profits as a fund for pay- ment of the annuity ; but not exclusively to that fund. In the former case he is a partner ; in the latter he is not. Questions of this sort also sometimes arise in cases where a simulated partnership is resorted to, in order to disguise a loan upon usurious interest ; and then the court will look astutelv to the real nature of the transaction. It may be clearly a case of usury between the parties, which will create no legal partnership as between themselves, although they may as clearly be liable as partners to third persons.^ § TO. We may conclude this part of our subject with the remark, that persons may not only be partners as to third persons, but also i7i(er sese, where they are not interested personally, but are concerned in an oflRLcial capacity only in the partnership, for the use and benefit of others. Thus, where a trustee for third persons is concerned in a partnership, but derives no profit personally therefrom, or an executor or adminis- trator is, in pursuance of partnership articles, admitted into the partnership after the death of a deceased partner, he will be deemed to all intents and purposes, as to the other partners, as well as to third persons, a » Bond V. Pittard, 3 M. & W. 357, 361 ; In re Colbeck, Buck, 48 ; Ex parte Chuck, 8 BIng. 469; Ex parte Hamper, 17 Ves. 403, 412; ante, § 66, 67. * Gilpin V. Enderbey, 5 B. & Aid. 954 ; Morse v. Wilson, 4 T. R. 353 ; Coll. on P. B. 1, c. 1, § 1, p. 38-41, 2d ed. See also Poth. de Soc. n. 22-27 ; {Sheridan v. Medara, 2 Stockt. 469.} 120 PARTNERSHIP. [CHAF. IV. partner.^ But if a person is not in the firm, and has no control or authority or interest, either in the capital stock or in the profits thereof,'^ and his cestui que trust is the party in interest (whether he be infant or an adult), the mere reservation to such person of a right to an account of the profits, and that the partnership shall be governed by his advice, will not (it should seem) constitute him a partner in any respect whatso- ever. Thus, where it appeared, that a father, on the formation of a partnership, invested a sum of money in the partnership firm on behalf of his son, who was a minor ; and it was stipulated, that the other partners should account with the father, as the trustee of his son, for one-third profit of his son's capital, or any loss, that might accrue, and should be governed and directed by his advice in all matters relative to the business ; it was determined, that this did not constitute the father a partner, the jury having found, that the money was not invested by him for his own benefit, and that he had not reserved to himself the power of drawing out the principal or profits, as trustee for his son.^ > Gow on P. c. 1, § ], p. 16, 3d eS. ; Wightman v. Townroe, 1 M. & S. 412; Ex parte Garland, 10 Ves. 110; Barker v. Parker, 1 T. R. 287, 295; Coll. on P. B. 3, c. 3, § 4, p. 427, 428, 2d ed. ; Owen v. Body, 5 Ad. & E. 28. {But see Gibson v. Stevens, 7 N. H. 352. If a debtor assigns his property to trustees for the benefit of creditors, with power in the trustees to carry on the business, and divide the net profits among the creditors in proportion to their debts, the creditors becoming parties to the deed are not liable as partners for debts contracted by the trustees in carrying on the business. Cox v. Hickman, 8 H. L. C. 268, s. c. sub nom. Wheatcroft «;. Hickman, 9 C. B. N. s. 47, revers- ing Hickman v. Cox, in the Exchequer Chamber, 3 C. B. N. s. 523,. which affirmed the judgment of the Court of Common Pleas in the same case, 18 C. B. 617. See Re Stanton Iron Co. 21 Beav. 164 ; Owen v. Body, 5 Ad. & E. 28 ; M'Alpine v. Mangnall, 3 C. B. 496 ; Janes v. Whitbread, 11 C.B. 406 ; Sul- len V. Sharp, Law Rep. 1 C. P. 86 ; ante, § 49, note ; Conkling v. Washington University, 2 Md. Ch. 497 ; Drake v. Ramey, 3 Rich. 37 ; Brundred v. Muzzy, 1 Dutch, 268.} 2 [See Price v. Groom, 2 Exch. 542.] ^ Barklie v. Scott, 1 Huds. & Br. 83, cited Gow on P. Suppl. London, 1841,c. l,§l,p. 1. CHAP. IV.] AS TO THIRD PERSOJs^S. 121 {Note. Sub-partnership. — If several persons are partners, and one of them agrees to share profits with a stranger, this does not make the strano-er a partner in the principal firm. Ex parte Barrow, 2 Rose, 252 ; Bray v. Fromont, 6 Madd. 5; Lind. on P. 52; Coll. on P. (3d Am. ed.) § 194; 3 Ross, Lead. Cas. 697. See Drake v. Ramey, 3 Rich. 37. Whether a sub-partner is liable to third persons for the debts of the prin- cipal firm is not clearly settled. Mr. Collyer (Coll. on P. 3d Am. ed. § 194) and Mr. Lindley (Lind. on P. 53) are of opinion that a sub-partner is not liable, and it is so held in Reynolds v. Hicks, 19 Ind. 113. In Fitch v. Harrington, 13 Gray, 468, A. and B. were members of a firm, and an action was brought against A., B., and C. for a partnership debt ; it was alleged that C. shared profits with B., and was hable as a partner. The jury was in- structed that " if there was a sub-partnership between B. and C, by which C. was to share in the profits of the firm, to which profits B. was entitled, this alone would not make C. liable for the debts of the firm." The jury returned a verdict in favor of C, and the plaintiff excepted. The exceptions were sustained on the ground that this instruction, " given, as it was, without any explanation, may have misled the jury." The court say : " An agreement between one copartner and a third person, that he shall participate in the profits of the firm, as profits, renders him liable, as a partner, to the creditors of the firm, although, as between himself and the members of the firm, he is not their copartner ; but if such third person, by his agreement with one member of the firm, is to receive compensation for his labor, services, &c., in proportion to the profits of the business of the fii'm, without having any specific lien on the profits, to the exclusion of other creditors, he is not liable for the debts of the firm." But can a partner give a stranger a specific lien on the profits of the partnership to the exclusion of other creditors ? In Sir Charles Raymond's Case,' as cited by Lord Eldon in Ex parte Barrow, 2 Rose, 252, 255, it was held that a sub-partner " had no demand against it [the partnei-ship], had no account in it, and that he must be satisfied with a share of the profits arising and given" to the sub-partner with whom he had entered into tho sub-partnership. And see § 49, note.} 122 PARTNERSHIP. [CHAP. V. CHAPTER V. PARTNERSHIP DIFFERENT SORTS OF. {§ 71. Preliminary. 72. Universal partnerships. 73. In the Roman law; 74. General partnerships. 75. Special partnerships. 76. Private partnerships and public companies. 77. Unincorporated companies and corporations. 78. Classification of partnerships in the French law. 79. In the Scottish law. 80. Ostensible, nominal, and dormant partners. 81. Objects of partnership. 82. Partnerships concerning land. 83. Peculiar character of such partnerships. 84. Duration of partnership. 85. Roman law. 86. Mode of formation of partnerships. 8 7. Foreign law. } § 71. Having thus ascertained the true nature of the contract of partnership ; the persons who are in law capable of being partners, or not ; and what will con- stitute a partnership inter sese, and what merely as to third persons ; we may now proceed to other consider- ations touching the subject, which seem necessary to be adverted to, as preliminaries to the more full discussion of the rights, duties, interests, powers, and responsibili- ties of partners, as well mfer sese, as in respect to third persons. § 72. Partnerships then at the common law may, in respect to their character and extent, be divided into three classes ; universal partnerships ; general partner- ships ; and limited or special partnerships. By univer- sal partnerships we are to understand those, where the CHAP. V.J DIFFERENT SORTS OF. 123 parties agree to bring into the firm all their property, real, personal, and mixed, and to employ all their skill, labor, services, and diligence in trade or business, for their common and mutual benefit, so that there is an entire communion of interest between them. Such con- tracts are within the scope of the common law ; but they are of very rare existence.^ § 73. The Roman law fully recognized the same classi- fication. Societates contrahuntur, sive universorum ho- norum, sive negotiationis aUciijiis, sive vectigalis, sive etiam rei unius.^ And in neither case was it necessarv that the parties should contribute in equal proportions. Societas autem co'iri potest, et valet etiam inter eos, qui non sunt oiquis facultatibus, cum plerimique 2xaq)eiHor opera suppleat^ quantum ei j^er comjjarationem 2)citri- monii deest.^ In that law universal partnerships were distinguished into two sorts ; first, those, which were of all the property of the parties, present and future ( Uni- versorum honorimi^) ; and, secondly, those which extend only to all the gains, earnings, and profits of all the busmess done by them. ( Universorum, quce ex quoistu 1 [Lyman v. Lj-mau, 2 Paine, 11 ; Rice r. Barnard, 20 Vt. 479. — In this case the partnership was said to be, " not strictly a partnership, but rather a universal hotchpot of all the property and liabilities, present and prospective, of both the persons concerned."] In U. S. Bank v. Binney, 5 Mason, 1 76, 183, the court said : " In respect to the general law regulating partnei-ships, there does not seem any real dispute or difficulty. Partnerships are usually divided into two sorts, general and limited. The former is, where the parties are partners in all their commercial business ; the latter, where it is limited to some one or more branches, and does not include all the business of the pai't- ners. There is, probably, no such thing as a universal partnership, if, by the terms, we are to understand, that every thing done, bought, or sold, is to be deemed on partnership account. Most men own some real or personal estate, which they manage exclusively for themselves." ^ D. 17, 2, 5; Poth. Pand. 17, 2, n. 11 ; Inst. 3, 26. 3 D, 17, 2, 5; Poth. Pand. 17, 2, n. 12. * Poth. de Soc. n. 28, 29, 43 ; D. 17, 2, 5-12; Poth. Pand. 17, 2, n. 13-18 ; Domat, 1, 8, 3, art. 1, 4, 124 PARTNERSHIP. [CHAP. V. veniunt}) The former sort was never deemed to be in- tended, unless it was explicitly stipulated ; the latter was ordinarily presumed from the mere formation of a partnership.^ In societate omnium honorum omnes res, quce coeuntium sunt, continuo communicantur .^ Co'iri societatem et swipliciter licet. Et si non fuerit distinctum, videtur co'iia esse universorum, quce ex quces- tu veniunt ; hoc est, si quod lucrum ex eynj^tione, vendi- iione, locatione, conductione descendit^ Qucestus enim mtelligitur, qui ex opera cujusque descendit.^ Sed et si adjiciatur, ut et qucestus et lucri socii sint, verum est, non cid aliicd lucrum, quam cpiod ex qucesiu venit, hanc quoque adjectioneyn pertinere.^ § 7-i. General partnerships are properly such, where the parties carry on all their trade and business, what- ever it may be, for the joint benefit and profit of all the parties concerned, whether the capital stock be limited or not, or the contributions thereto be equal or unequal.' But where the parties are engaged in one branch of trade or business only, the same appellation is ordinarily applied to it. Thus, if two merchants are engaged in mercantile commerce and business on joint account, and also in manufacturing and other business solely on joint account, it is properly a general partnership. But, if the same merchants carry on no other business than that of commerce on joint account, they would be usu- 1 Poth. de Soc. n. 43 ; Domat, 1, 8, 3, art. 2 ; 1 Voet, ad Pand. 17, 2, n. 4, p. 749 ; Vinn. ad Inst. 3, 26, Intr. '^ Poth. de Soc. n. 29, 43; Domat, 1, 8, 3, art. 2, 3; Poth. Pand. 17, 2, n. 20, 21. D. 17, 2, 1 ; Poth. Pand. 17, 2, n. 13. ^ D. 1 7, 2, 7 ; Poth. Pand. 17, 2, n. 20 ; Poth. de Soc. n. 29, 43. * D. 1 7, 2, 8 ; Poth. Pand. 1 7, 2, n. 20. « D. 17, 2, 13; Poth. Pand. 17, 2, n. 20; Domat, 1, 8, 3, art. 2, 3; Poth. de Soc. n. 43-45. ' Willett V. Chambers, Cowp. 814, 816; 2 Bell, Comm. B. 7, c. 2, p. 621, 5th ed. CHAP. T.] DIFFERENT SORTS OF. 125 ally spoken of as engaged in a general partnership. The former case approaches very nearly to that of a general partnership in the Roman law, unwersorum^ qiKE ex qiicestu veniunt} The latter would be distin- guished by the Roman law, as a particular partnership, negotiationis alimjus. The like distinctions prevail in the foreign law.^ § 75. Special partnerships, in the sense of the com- mon law, are those which are formed for a special or particular branch of business, as contradistinguished from the general business or employment of the parties, or of one of them.^ They are more commonly called limited partnerships, when they extend to a single trans- action or adventure only ; such as the purchase and sale on joint account of a particular parcel of goods, or the undertaking of a voyage or adventure to foreign parts upon joint account.'* But the appellation may be ap- plied indifferently, and without discrimination to both classes of cases. They therefore fall within the denomi- nation of the Roman law, Sociefas sive negotiationis alicKJus, sive vectigalis, sive etiam rei unius.^ § 76. At the common law partnerships are also some- ' Ante, § 73, Poih. de Soc. n. 43. * Ante, § 73 ; Potb. de Soc. n. 54, 55 ; Domat, 1, 8, 3, art. 1 ; Wats, on P. c. 1, p. 1, 2d ed. ; 2 Bell, Comm. B. 7, c. 2, p. 621, 5th ed. ; 1 Voet, ad Pand. 17, 2, n. 5, p. 750; Vinn. ad Inst. 3, 26, Intr.; 3 Kent, 30, note (a); Civil Code of France, n. 1836-1842; Civil Code of Louisiana, art. 2795-2805. =* Willett 1-. Chambers, Cowp. 814, 816 ; 2 Bell, Comm. B. 7, c. 2, p. 621, 5th ed.; \_In re Warren, Daveis, 320, 323.] * { Partnerships in commandite as established by the laws of the several States are often called limited partnerships. See § 78. } * Ante, § 73 ; Poth. de Soc. n. 54 ; 1 Voet, ad Pand. 17, 2, n. 5, p. 750. [But an association of persons, who agree in writing to pay a particular sum for the erection of a house of worship, or other public building, which when complete is to be owned by the subscribers in proportion to the amount paid by each, is not even a special partnership. Woodward v. Cowing, 41 Mc. 9.] {See§ 144.} 126 PARTNERSHIP. [cHAP. V. times divided into other kinds. (1.) Private partner- ships, which are composed of two or more partners for some merely private undertaking, trade, or business ; and (2.) PubUc companies, where a large number of persons are concerned, and the stock is divided into a large number of shares, the object of the undertaking being of an important nature, and often embracing pub- lic, as well as private interests and benefits.^ The latter are also subdivided, (1.) into unincorporated companies, or associations ; and (2.) into incorporated companies, fraternities (or guilds, as they were anciently called), and corporations existing under a charter of the crown or government, and having special powers and rights conferred thereby.^ In both cases, however, the part- nership, although commonly called a public company or association, is not, in contemplation of law, more than a mere private partnership ; for in the sense of the law no company is a public company or association, whose in- terests do not exclusively belong to the public, and are not exclusively subject to the regulation and government of the legislature, or other proper public functionaries. Thus, for example, a college, a bank, a turnpike com- pany, a bridge company, a manufacturing company, a company for mining, or for foreign trade or commerce, whether incorporated or not, is still but a mere private association.^ Whereas a town, a parish, a hundred, a board of trade, or a treasury department, created by the government for public purposes, and exclusively regulated thereby, would be strictly a public company, whether incorporated or not. ' Wats, on P. c. 1, p. 3, 4, 2d ed. ; Coll. on P. B. 5, c. 1-3, p. 721-793, 2d ed. ; Gow on P. c. 1, p. 2-4, 3d ed. 2 Wats, on P. c. 1, p. 3, 4, 2d ed. ; Comyn's Dig. Trade, B. D. 3 Trustees of Dartmouth College v. Woodward, 4 Wheat. 518; Terrett V. Taylor, 9 Cranch, 43, 52. CHAP. Y.] DIFFERENT SORTS OF. 127 § 77. Unincorporated companies and associations dif- fer in no material respect, as to their general powers, rights, duties, interests, and responsibilities, from mere private partnerships, nnless otherwise expressly provid- ed for by statute, except that the business thereof is usually carried on by directors, or trustees, or other officers, acting for the proprietors or shareholders ; and they usually extend to some enterprise, in which the public have an ultimate concern.^ But incorporated companies, or corporations, are governed strictly, as to their powers, rights, duties, interests, and responsibili- ties, by the terms of their respective charters ; and the shareholders, or stockholders, are not personally or in- dividually liable in their private capacities, unless expressly so declared by their charters, for the acts, or doings, or contracts of the officers, or members of the company, or corporation ; ^ whereas in unincorporated companies and associations the shareholders and stock- holders are personally responsible in their individual capacities for aU acts of the officers and company, or association, in the same manner, and to the same extent, as private partners are.^ § 78. In the French law, partnerships are distin- guished into three sorts. (1.) Partnerships under a collective name, that is, where the trade or business of the partnership is carried on under a particular social name or firm, containing the names of some or of all » Wats, on p. c. 1, p. 3, 4, 2d ed. ; Coll. on P. B. 5, c. 1, § 4, p. 764-771, 2d ed. ; Id. c. 1, § 2, p. 734 ; 2 Bell, Comm. B. 7, c. 2, p. 627, 628, 5th ed. 2 Wats, on P. c. 1, p. 4, 2d ed. 3 Wats, on P. c. 1, p. 3, 4, 2d ed. ; Coll. on P. B. 5, c. 1, § 1-4 ; Id. c. 2 : Id. c. 3, p. 721-783, 2d ed. — Mr. Collyer, in the chapters above cited, has given a very full view of joint-stock companies, both at common law, and by statute, as well as of mining companies. See also 2 Bell, Comm. B. 7, c. 2, p. 627-630, 5th ed. 128 PARTNERSHIP. [CHAP. V. of the partners.^ (2.) Partnerships in cotmnandite, or in commendam, that is, hmited partnerships, where the contract is between one or more persons, who are gen- eral partners, and jointly and severally responsible, and one or more other persons, who merely furnish a par- ticular fund or capital stock, and thence are called com- mandataire, or coinmandataires, or partners in com- mandite ; the business being carried on under the social name, or firm of the general partners only, composed of the names of the general or complementary partners, the partners in commandite being liable to losses only to the extent of the funds or capital furnished by them.^ (3.) Anonymous partnerships are, where all the partners are engaged in the common trade or business, but there is no social name or firm, but a name designating the objects of the association, and the trade or business is managed by directors.^ They correspond with our ordi- nary joint-stock companies, and other unincorporated associations. Similar distinctions are adopted in many other foreign countries, and in the Law^s of Louisiana.'* Special partnerships i7i commandite have also been re- cently introduced by statute into the jurisprudence of several States in the Union. ^ But the regulations ap- plicable to such partnerships vary in different countries and States, and are strictly local, and therefore seem unnecessary to be brought further under examination in the present Commentaries. § 79. In the Scottish law, partnerships are sometimes ' Code of Commerce, art. 20, 21 ; Wats, on P. c. 1, p. 2, 2d ed.; Poth. de Soc. n. 57. ^ Code of Commerce, art. 23, 24 ; Wats, on P. c. 1, p. 2, 2d ed. ; Poth. de Soc. n. 60, 102. 3 Code of Commerce, art. 29, 30; Wats, on P. c. 1, p. 2, 2d ed. * Code of Louisiana, art. 2796, 2810, 2883. * 3 Kent, 34, 35 ; {Parsons on P. 526.} CHAP, v.] DIFFERENT SORTS OF. 129 divided into ordinary partnerships, acting under a social name or firm ; and joint adventures, where no firm is used ; and public companies. But in truth the two former are generally governed by the same rules. And therefore it may be properly said, that, in the Scottish law, partnerships are divisible into three classes; (1.) Ordinary partnerships ; (2.) Joint-stock companies ; (3.) Public companies.^ In the former, the firm consti- tutes a distinct person in contemplation of law, capable independently of maintaining with third persons, as well as with the individual partners, the relation of debtor and creditor ; and the partners, although jointly and severally liable for all the debts and contracts of the firm, are so, not as primary or principal debtors or contractors, but rather as guarantors or sureties of the firm.^ Such a partnership may be either general or special. By general partnership the Scottish law does not intend the societas unwerso^min honoruin of the Roman law, but a partnership in the whole trade or manufacture carried on by the parties.^ By special partnership, in the Scottish law, is intended a partner- ship limited to a particular branch of business, or ex- cluding a particular branch, which would otherwise be included in a general partnership.'* The second class, joint-stock companies, differs in several respects from the former class. (1.) By the credit raised with the public being placed entirely on the joint-stock of the company, as indicated by its descriptive name. (2.) By a difference in the management and operation of the association, as conducted, not by the shareholders per- sonally, but by directors or other officers appointed by 1 2 Bell, Comm. B. 7, p. 612, 621, 649, 656, 5th ed. 2 2 Bell, Comm. B. 7, p. 619, 620, 5th ed. 3 2 Bell, Comm. B. 7, p. 621, 5th ed. * 2 Bell, Comm. B. 7, p. 621, 5th ed. 9 130 PARTNERSHIP. [cHAP. V. the association, and made publicly known. (3.) By the shares being made transferable. In joint-stock compa- nies, the liability of the shareholders to creditors is, by the common law of Scotland, limited to the amount of their respective shares, and they are not, as in ordinary partnership, jointly and severally responsible for all the debts of the firm.^ The third class, public companies, embraces such as are created by royal or parliamentary authority ; and therefore they have conferred upon them such powers, privileges, and exemptions only, as by the charter and by law properly belong to them.^ § 80. In this connection it seems proper also to advert to the various denominations given to partners, and which in our subsequent inquiries should be kept steadily in view, to prevent any mistakes and embar- rassments in the application of cases and principles. Partners, then, are ordinarily divided as follows: (1.) Ostensible partners, or those, whose names are made known and appear to the world as partners, and who in reality are such.^ (2.) Nominal partners, or those who appear, or are held out to the world as partners ; but who have no real interest in the firm or business.* (3.) Dormant partners, or those whose names are not known, or do not appear as partners, but who never- theless are silent partners, and partake of the profits, and thereby become partners, either absolutely to all intents and purposes, or at all events, in respect to third persons.^ Dormant partners, in strictness of lan- guage, mean those who are merely passive in the firm, > 2 Bell, Comm. B. 7, p. 627, 628, 5th ed. 2 2 Bell, Comm. B. 7, p. 656, 5th ed. 3 Coll. on P. B. 1, c. 1, § 1, p. 3, 2d ed. ; 1 Mont, on P. c. 2, § 1, 2 ; Gow on P. c. 1, p. 12, 3d ed. ; 3 Kent, 31. " Ibid. 5 Ibid ; {North v. Bloss, 30 N. Y. 374 ; Mitchell v. Dall, 2 Harr. & G. 159, 172; Waite v. Dodge, 34 Vt. 181 ; Deford v. Reynolds, 36 Penn. St. 325.} CHAP, v.] DIFFERENT SORTS OF. 131 whether known or unknown, in contradistinction to those who are active, and conduct the business of the firm, as principals.^ Unknown partners are properly secret partners ; but in common parlance, they are us- ually designated by the appellation of dormant partners.^ ' [And it has been thought that although some of the partners are active managing partners, and have given public notice of their interest in the firm, yet if the business is conducted under the individual name of one of the firm, the others are dormant partners; so far at least, that it is not necessary to join them in a bill to enforce a debt due the firm, contracted by one ignorant of their interest in the concern ; Bank of St. Marys v. St. John, 25 Ala. 566.] 2 Coll. on P. B.l, c. 1, § 1, p. 3, 2d ed.; 1 Mont, on P. c. 2, § 1, 2; Gow on P. c. 1, p. 12, 3d ed. ; 3 Kent, 31 ; Hoare v. Dawes, 1 Doug. 371 ; U. S. Bank t'. Binney, 5 Mason, 176, 185. — In this last case the Court said: "It has been said, that this is the case of a secret partnership ; that it was the intention of the Binneys, that their connection with it should be kept secret, and that the management of the business in the name of 'John ^Vinship' shows this intention. In point of fact, there is no covenant or declaration in the articles of copartnership, by which the partners have bound themselves to keep it secret ; or that the names of the Binneys should never be disclosed to any persons dealing with AVinship in the partnership concerns. In point of fact, too, if the evidence is believed, WinshijJ, immediately after its forma- tion, and during its continuance, constantly avowed it, and made it known, and obtained credit in the business of the firm thereby. He stated the Binneys to be partners ; and this statement was generally known and believed by the public, and especially by persons dealing with Winship in respect to the business of the firm. If the jury believe this evidence, then in point of fact, whatever was the original intention of the parties, this was not a secret partnership in the common meaning of the terms. I under- stand the common meaning ef secret partnership to be, a partnership where the existence of certain persons as 2:)artners is not avowed or made known to the pubUc by any of the partners. Where all the partners are publicly made known, whether it be by one, or all the partners, it is no longer a secret partner- ship ; for this is generally used in contradistinction to notorious and open part- nership. And it makes no difference in this particular, whether the business of the firm be carried on in the name of one person only, or of him and com- pany. Even if some of the partners intend to l)e such secretly, and their names are disclosed against their wishes and intentions ; still, when generally known and avowed by any other of the partners, the partnei-ship is no longer a secret partnership. If, therefore, in the present case, Winship, against the wishes and intention of the Binneys, did in the course of the business of the firm make known that they were partners, and who all the partnera were, so that they became public and notorious, I should say, it was no longer a 132 PARTNERSHIP. [cHAP. V. Similar designations also prevail in the Scottish avv.^ § 81. In respect to the objects of partnerships, it may be generally stated, that they are not confined to mere commercial business or trade ; but may extend to manufactures, and to all other lawful occupations and employments, and to professional and other business ; ^ as, for example, they may embrace the business of at- torneys, solicitors, conveyancers, surgeons, apothecaries, physicians, mechanics, artisans, engineers, owners of stage-coaches, farmers, drovers, brokers, bankers, factors, consignees, and even of artists and sculptors and paint- ers. They may extend to all the business of the par- ties ; or to a single branch thereof, or to a single adven- ture, or even to a single thing.^ And so (as we have seen) stood the doctrine in the Roman law. Societates contraliuntur swe universorum honorum, sive negotia- tionis alicujus, sive vectigalis, sive etiam rei unius} But there cannot lawfully be a partnership in a mere personal ofiice, especially when it is of a public nature, and involves a distinct personal confidence in the skill and integrity of the particular party. ^ § 82. There may also be a partnership in some cases touching interests in lands, or in a single tract of land, secret partnership in the common sense of the terms ; if secret in any sense, it must be, under such circumstances, in a peculiar sense. Sometimes dor- mant and secret partners are used as synonymous. But I take it, that dor- mant is generally used in contradistinction to active, and secret to open or notorious. However, nothing important turns in this case upon the accu- racy of definitions, since it must be decided upon the principles of law appli- cable to such a partnership as this in fact was, and is proved to be, whatever may be its denomination." ' 2 Bell, Comm. B. 7, c. 2, p. 622, 623, 5th ed. 2 3 Kent, 28 ; Coll. on P. B. 1, c. 1, § 1, p. 29-32, 2d ed.; Gow on P. c. 1, p. 5, 3d ed. ; [Livingston v. Cox, 6 Penn. St. 360, 364.] 3 Ante, § 73. * D. 17, 2, 5; Poth. Pand. 17, 2, n. 11-26. * Coll. on P. B. 1, c. 1, § 1, p. 31, 32, 2d ed. CHAP, v.] DIFFERENT SORTS OF. 133 which will be governed by the ordinary rules, applica- ble to partnership in trade or commerce.^ Thus, for example, there may be a partnership in the working of a mine ; for Courts of Equity constantly treat the work- ing of a mine as a species of trade ; and apply the same remedial justice to such cases as they do to ordinary partnersliips.^ So, real estate, held for general partner- ship purposes, has attributed to it the common qualities of partnership property, in whosesoever name the title may stand in law.^ In short (as has been well ob- served), in the working of mines (such as a colliery), it seems difficult to establish, that there is an interest in the land, distinct from the partnership in trade ; a mere interest in land, in which a partition could take place. For, when persons, having purchased such an interest, manufacture and bring to market the produce of the land, as one common fund, to be sold for their common benefit, it may fairly be contended, that they have entered into an agreement, which gives to that interest the nature, and subjects it to the doctrmes, of a partnership in trade.'* ' [See Fall River Whaling Co. v. Borden, 10 Cush. 458, 474 ; Jones v. Neale, 2 P. & H. 339]; {Darby v. Darby, 3 Drew. 495; Kramer v. Arthurs, 7 Penn. St. 165; Heirs of Ludlow v. Cooper's Devisees, 4 Ohio St. 1; Clagett V. Kilbourne, 1 Black, 346.} * Coll. on P. B. 5, c. 3, p. 783, 784, 2d ed. ; Williams v. Attenborough, Turn. & R. 70, 73 ; Story r. Lord Windsor, 2 Atk. 630 ; "Wren i: Kirton, 8 Ves. 502 ; Crawshay v. Maule, 1 Swans. 495 ; Fereday v. Wightwick, Taml. 250; [Sage v. Sherman, 2 Comst. 417]; JefFerys v. Smith, 1 Jac. & W. 298; 1 Story, Eq. Jur. § 674. 3 Gow on P. c. 1, p. 32-35, 3d ed. ; Id. c. 5, § 2, p. 232; Id. § 4, p. 340; Coll. on P. B. 2, c. 1, § 1, p. 82-102, 2d ed.; 3 Kent, 37-39; Randall v. Randall, 7 Sim. 271 ; Cookson v. Cookson, 8 Sim. 529; Sigourney v. Munn, 7 Conn. 11 ;. Hoxie v. Carr, 1 Sumn. 173, 182, 186; [Dale v. Hamilton, 5 Hare, 369 ; Lancaster Bank i\ Myley, 13 Penn. St. 544.] •» Per Lord Eldon, in Crawshay v. Maule, 1 Swans. 518, 523, 526, 527. — Mr. Collyer has a valuable chapter on the subject of partnerships in mines, ■which contains a summary of the general doctrines of Courts of Equity touching them. See Coll. on P. B. 5, c. 3, p. 783-792, 2d ed. 134 PARTNERSHIP. [cHAP. V. § 83. But although there is no positive incompetency at th€ common law of creating a partnership in the buy- ing and selling of lands on joint account, and for the joint benefit of the parties, by way of commercial spec- ulation and commercial adventure ; yet such a contract must, from the nature of the case, and the positive rules of law and the Statute of Frauds, be reduced to writing ; and then the stipulations of the parties will constitute the sole rule to ascertain their intent, and to enforce their respective rights.^ The general rules of law, applicable to ordinary commercial partnerships, are not applied to them ; ^ nor are the ordinary remedies thereof enforced either at law, or in equity, inter sese^ or as to third persons.^ Thus, for example, the ordinary doctrine of the liability of dormant partners does not extend to partnerships formed for speculations in the purchase and sale of lands. ^ The present Commenta- ' Smith V. Burnham, 3 Sumn. 435, 458-471 ; [7n re Warren, Daveis, 320, 323. In England, the Vice-Chancellor, in an elaborate judgment, reviewing the authorities, has sustained an agreement for such a partnership, without any writing within the Statute of Frauds. Dale v. Hamilton, 5 Hare, 369. See also Smith v. Tarlton, 2 Barb. Ch. 336 ; Fall River Whaling Co. v. Borden, 10 Cush. 458, 474] ; j Dale v. Hamilton was affirmed by Lord Cottenham, e. 2, Phil. 266. See also Forster v. Hale, 3 Ves. 696 ; S. C. 5 Ves. 308, Cowell v. Watt, 2 Hall & Tw. 224. But in Caddick v. Skidmore, 2 De G. & J. 52, Lord Cranworth, C, says that an agreement between A. and B. to become partners in a colliery for the purpose of demising it in royalties to be divided between them would be within the operation of the Statute of Frauds. See Lind. on P. 82-84. See also Hale i\ Henrie, 2 Watts, 143; HanfFt'. How- ard, 3 Jones, Eq. 440; Jones v. McMichael, 12 Rich. 176. In this last case a partnership agreement was held void, both "because it was not to be performed within a year and because it related to interests in land. See § 93, note (V. 1, A.)} 2 [Patterson v. Brewster, 4 Edw. Ch, 352.] * [In Olcott V. Wing, 4 McLean, 15, it was held that the same principles governed partnerships for buying and selling land as ordinary partnerships, and that a Court of Equity would decree a sale of the lands after dissolution, and a division of profit or loss, according to the terms of the partnership.] •» Pitts V. Waugh, 4 Mass. 424 ; Smith v. Burnham, 3 Sumn. 435, 470, 471. [But see Brooke v. Washington, 8 Gratt. 248, contra.'] CHAP, v.] DIFFERENT SORTS OF. 135 ries are designed to treat principally of partnerships in the ordinary business of trade, navigation, commerce, manufactures, and arts ; and other cases will be inci- dentally discussed by way of illustration only, or to distinguish them from the general rules belonging to common partnerships. § 84. And here it may be proper to say a few words, as to the extent and duration of partnerships in point of time, and also as to the different modes, in which they may be formed. As to the first point, as partner- ships are formed by the voluntary consent of the par- ties, they may be for life, or for a specific period of time, or conditional, or indefinite in their duration, or for a single adventure or dealing ; and therefore dependent upon the mutual will or pleasure of the parties.^ The period may be fixed by express stipulation, or it may be implied from circumstances.^ If no particular period is fixed by the parties for the duration of a partnership, it is deemed to exist during their mutual pleasure only, and of course is dissoluble by either of them, at any time when he chooses to withdraw therefrom.^ When a particular term is fixed, it is presumed to endure until that period has elapsed ; when no term is fixed, it is presumed to endure for the life of the parties, unless previously dissolved by some act or notice of one of the parties, or by operation of law. But in no case will the law presume, that the partnership is intended to con- tinue beyond the life of the parties ; and therefore if 1 Wats, on p. c. 7, p. 379, 2d ed. ; Coll. on P. B. 1, c. 2, § 1, p. 68, 2ded. ; Gow on P. c. 5, p. 219-226, 3d ed. ; Poth. de Soc. n. 64; 3 Kent, 52-54; 2 Bell, Comm. B. 7, c. 2, p. 630-633, 5th ed. " Coll. on P. B. 1, c. 2, § 1, p. 68, 2d ed. ; Crawshay v. Maule, 1 Swans. 495, 521, 525 ; Alcock v. Taylor, Taml. 506. 3 Ibid.; Featherstonhaugh v. Fenwick, 17 Ves. 298, 307, 308; Ex parte Nokes, cited in Wats, on P. c. 7, p. 380, 2d ed. ; Peacock v. Peacock, 1 6 Ves. 49 ; 2 Bell, Comm. B. 7. c. 2, p. 630-634, 5th ed. 136 PARTNERSHIP. [cHAP. V. such is the object, it must be provided for by some ex- press stipulation.^ The causes, which will constitute a dissolution, or a cause of dissolution, will naturally come under review in our subsequent pages. § 85. The Roman law fully recognized the like prin- ciples. Tamdiu societas dmxit, quamdm consensus partium integer 2^ef sever at.^ So, in the Institutes it is said: Manet autem societas eo usque, donee in eodem consensu perseveraverint. At, cum aliquis renunciaverit societati, solvitur societas.'^ And again in the Digest: Societas co'iri potest vel in perpetumn, id est, dum vi- vunt, vel ad tempus, vel ex tempore, vel sub conditioned The Roman law went further than ours; and positively prohibited the duration of any partnership beyond the life of the parties ; and therefore a provision, that the heir of one should share in the partnership, was held wholly void. Nidla societatis in odernum coitio est.^ Nemo potest societatem hceredi suo sic parere, ut ijyse hceres socius sit.^ Idem [Papinianus) resp)ondit, socie- tatem non posse idtra mortem porrigi? The French law, and in general the law of the other nations of con- tinental Europe, adopt similar principles.^ § 86. In the next place, as to the different modes in which partnerships may be formed. At the common law, no particular forms or solemnities are required to constitute a partnership between the parties. It is suf- 1 Crawshay w. Maule, 1 Swans. 495, 521 ; s. c. 1 Wik Cb. 181. { See § 196.} ^ Cod. 4, 37, 5 ; Domat, 1, 8, 5, art. 1, 2 ; Id. 1, 8, 3, art. 8, 9. ^ Inst. 3, 26, 4. * D. 17, 2, 1 ; Poth. Pand. 17, 2, n. 10 ; Potli. de Soc. n. 64, 65 ; Domat, 1, 8, 5, art. 1, 2; Id. 1, 8, 13, art. 8, 9. « D. 17, 2, 70; Poth. Pand. 17, 2, n. 10; 1 Swans. 509, note (a); Vinu. ad Inst. 3, 26, § 4, n. 1, p. 698. « D. 17, 2, 35 ; Poth. Pand. 17, 2, n. 56 ; Domat, 1, 1, 2, art. 2-5. "• D. 17, 2, 52, 9 ; Poth. Pand. 17, 2, n. 56, 57. 8 Civ. Code of France, art. 1865-1871; Poth. de Soc. n. 64, 65; Id. u. 146-154. CHAP, v.] DIFFERENT SORTS OF. 137 ficient, that it is formed by the voluntary consent of the parties, whether that be express or implied ; whether it be by written articles, or by unsolemn writ- ings ; or whether it be by tacit approbation, or by parol contract, or even by mere acts.^ It is indeed usual to have some writings pass between the parties, when a partnership is formed for a specific term, or even during the pleasure of the parties, if the business is expected to be of a permanent nature, or of long duration. But this is a matter resting in the mere discretion and choice of the parties, and is by no means made indispensable by the law. And this also seems to have been the rule of the Roman law. Sociefatem coire et re, et verbis, et ^;er mmtiimi, j^osse nos, duhmm non est.^ Yoet has expressed the same doctrine in broader language. Societas dwidltur priino in expressam, qiice ex expressa conventione fit, et tacitam, quce re contrahi dicitur, diim rebus ij^sis et factis, simid emendo, vendendo, lucra et damna dividendo, socii ineimdce societatis voluntatem declarant.^ § 87. The old French law required, that all general partnerships and partnerships in commandite should be reduced to writing and registered, unless when the concern was under one hundred livres in vahie.'* And ' {The creation of a partnership by an agent without authority, if ratified by the person so made a partner, establishes that relation, and will cut off the intervening rights of third persons, if the doctrine is applied for the pro- tection of a superior equity ; and the partnership assets must be first applied to the payment of the partnership debts. Williams v. Butler, 35 111. 544. See also Buckingham i\ Hanna, 20 Ind. 110} ; Coll. on P. B. 1, c. 1, § 1, p. 2, 3, 2d ed.; Wats, on P. c. 1, p. 4, 5, 2d ed. ; Gow on P. c. 1, p. 4, 5,3d ed.; 2 Bell, Comm. B. 7, c. 2, p. 621-623, 5th ed. [And it is sufficient evidence to prove a person to be in partnership, that he and others had agreed to form a company, and that business had been carried on, on the basis of such agree- ment. Owen V. Van Uster, 10 C. B. 318 ; 1 Eng. L. & Eq. 396.] 2 D. 17, 2, 4 ; Poth. Pand. 14, 2, n. 6 ; Domat, 1, 8, 3, art. 6. ^ 1 Voet, ad Pand. 1 7, 2, § 2, p. 748 ; ante, § 50. '« Poth. de Soc. n. 79-81. 138 PARTNERSHIP. [CHAP. V. r this continues in substance to be the rule under the modern Code of France.^ Similar regulations are to be found in the laws of some other nations ; but the Roman law seems more generally to have been fol- lowed.^ * Code of Commerce, art. 39-44. 2 3 Kent. 24, note (a) ; 2 Bell, Comm. B. 7, c. 2, p. 621-623, 5th ed. ; 1 Voet, ad Pand. 17, 2, § 2, p. 748 : 1 Tapia, Elem. de Jur. Merc. Lib. 2, c. 2, § 1, p. 83, 84 ; Van Leeuwen's Comm. B. 4, c. 23, § 1, 3. CHAP. VI.] PARTNERSHIP PROPERTY. 139 CHAPTER VI. RIGHTS AND INTERESTS OF PARTNERS IN PARTNERSHIP PROPERTY. { § 88. Preliminary. 89. Joint tenancy, tenancy in common. 90. Partnership neither of the two. 91. Partners are joint owners of partnership property. 92. 93. Real estate of a partnership. 94. Power of jsartners over partnership property. 95. Roman law. 96. Scottish law. 97. Lien on the partnership property. 98. What constitutes partnership property. 99. Good-will of the partnership. 100. Right to use the firm name.} § 88. Having disposed of these preliminary matters, we shall next proceed to the consideration of the rights and interests, powers and authorities, duties and obli- gations, liabilities and exemptions, of partners between themselves, as well as in relation to third persons. In treating of these points, so far as respects the partners themselves, we shall keep mainly in view cases where a real partnership exists according to the intention of the parties, and there is a community of interest in the property, as well as in the profits of the trade or busi- ness, without any special stipulations, which may vary the application of the general principles of law. Of course, where any such stipulations exist, which are lawful in their nature or character, they properly con- stitute exceptions to those principles, and pro tmito may create new and peculiar relations and obligations.^ 1 Ante, § lG-29. 140 PARTNERSHIP. [cHAP. VI. § 89. And first in relation to the rights and inter- ests of the partners inter sese, in the partnership capital, stock, funds, and effects. Partners differ from mere part-owners of goods and chattels in several respects. The latter are either joint owners, or tenants in com- mon, each having a distinct, or at least an independent, although an undivided interest in the property ; and neither can transfer or dispose of the whole property, or act for the others in relation thereto ; but merely for his own share, and to the extent of his own several right and interest.^ In cases of joint-tenancy of goods or chattels, indeed, the joint-tenants are said to be seised or possessed per my et per tout., by the half or moiety and by all ; that is, they each of them have the entire possession, as w^ell of every parcel, as of the whole ; ^ or, as Bracton has expressed it : Quilibet totum tenet, et nihil tenet; scilicet, totum in communi, et nihil sepa- ratini j^er se.^ Hence it is said, that in joint-tenancy there is a fourfold unity, unity of interest, unity of title, unity of time, and unity of possession ; "* and the right to the whole belongs to the survivor.^ But still each joint- tenant has an independent, and, in a certain sense, a distinct right and interest in the property during his lifetime, which cannot be disposed of by the other joint-tenant, but which he may severally himself dispose of, and thus sever the joint-tenancy ; and he may now by statute, although not at common law, have an action of account against the other for his share of the profits ' Com. Dig. Esiafe, K. 1-10 ; Litt. § 321 ; Co. Litt. 200, a; [Woodward v. Cowing, 41 Me. [), 12.] * 2 Bl. Comm. 182, 399 ; Litt. § 288 ; Co. Litt. 186, a; Bac. Abr. Joint-ten- ancy and Tenancy in Common (C). ^ Bracton, Lib. 5, tr. 5, c. 26, p. 430 ; Co. Litt. 186, a. * 2 Bl. Comm. 180, 399. * 2 Bl. Comm. 183, 184 ; Com. Dig. Estate, K. 3, 4 ; Litt. § 281, 282 ; Co. Litt. 181, 182, a. CHAP. VI.] PARTNERSHIP PROPERTY. 141 derived from the common property.^ On the other hand, tenants m common hold undivided portions of the property by several titles, or in several rights, although by one title ; but they have their possession in common and undivided ; so that there may be an entire disunion of interest, of title, and of time among them.^ Hence it is said, that tenants in common properly take by distinct moieties, and have no entirety of interest; and therefore there is no sur- vivorship between them ; but the share of the deceased tenant in common goes to his personal or real repre- sentative.^ § 90. From the resemblances thus existing between cases of joint-tenancy and tenancy in common and part- nerships, it has been sometimes said, that partners are ' 2 Bl. Comm. 183 ; Com. Dig. Accompt, B. — There is no small subtlety in the language of our Law Books on this subject. Thus, Blackstone uses language to the efFect, that the interest of two joint-tenants is not only equal or similar, but it is one and the same ; that survivorship is the natural and necessary consequence of the union and entirety of their interests ; that one has not a distinct moiety from the other ; and that if by any subsequent act, as by alienation or forfeiture of either, the interest becomes separate and distinct, the joint-tenancy instantly ceases. 2 Bl. Comm. 183, 184. And yet it is palpable, that one joint-tenant may transfer or alien his own right severally, and thereby sever the joint-tenancy. And therefore it has been well observed by Lord Coke, after quoting the language of Bracton (already cited), that joint-tenants hold per my et per tout: "And albeit they are so seised, yet to divers purposes each of them hath but a right to a moiety, as to enfeoff, give or demise, or to forfeit." Co. Litt. 186, a. And afterwards he adds : " And where all the joint-tenants join in a feoffment, every one of them in judgment of law doth but give his part. If an alien and a subject purchase land jointly, the king upon office found shall have a moiety ; and Littleton afterwards in this chapter (§ 291) saith, that one joint-tenant hath one moiety in law, and the other the other moiety." Co. Litt. 186, a. Now, what is this but admitting, that joint-tenants have in reality distinct and independent interests, capable of a distinct alienation ; and that each has but a moiety, concurrent and undivided, with tiie other in the property, with a right of survivorship in case no severance takes place ? 2 Com. Dig. Estate, K. 8 ; 2 Bl. Comm. 192 ; Litt. § 292 ; Co. Litt. 188, b. 3 Com. Dig. Estate, K, 8 ; 2 Bl. Comm. 194, 399; Abbott on Ship. c. 3, p. 68, Am. ed. 1829. 142 PARTNERSHIP. [cHAP. VI. either tenants in common of the partnership effects, or joint-tenants without the benefit of survivorship.^ But this language is by no means accurate ; and perhaps no case could better exemplify the truth of the maxim, Ntdliim simile est idem. Partnership differs from joint- tenancy in two important particulars. In the first place, joint-tenants cannot dispose of the interest of each other in the joint property, although they hold per ony et per tout ; but each has the sole power of dis- posing of his own interest therein ; ^ whereas, in cases of partnership, each partner is not only a joint owner with the others of the partnership property, but he also has full power to dispose of the entire right of all the partners therein, for the purposes of the partner- ship, and in the name of the firm. In the next place, there is no survivorship in cases of partnership, as there is in joint-tenancy. This has been the doctrine of the common law for more than three centuries, and indeed is probably coeval with the business of joint trade and commerce in England. Thus, Lord Coke, in speaking of joint-tenancy in chattels and debts, contracts and duties, where the right of survivorship ordinarily exists, adds : " An exception is to be made of two joint mer- chants ; for the wares, merchandises, debts, or duties, that they have as joint merchants, or partners, sliall not survive, but shall go to the executors of him, that deceaseth ; and this is ^;e?' legem mercatoricmi^ which (as hath been said) is a part of the laws of this realm for the advancement and continuance of commerce and trade, which is ^;>'o bono 2^i(bUco ; for the rule is, that Jus accrescendi inter Tiiercatores p)ro heneficio comtnercii ' Wats, on P. c. 2, p. 65, 2d ed. ; Gow on P. c. 2, § 1, p. 32, 3d ed. ; West V. Skip, 1 Ves. Sr. 239, 242; 3 Kent, 36, 3 7. ^ Co. Litt. 186, a; Litt. § 291 ; ante, § 89, note b; West v. Skip, 1 Yes. Sr. 239, 242. CHAP. VI.] PARTNERSHIP PROPERTY. ^ 143 locum non hahet" ^ It might be added, that otherwise partnerships would never have been formed for purposes of trade, since the death of either partner might bring want or ruin upon his family, and the whole business would be full of perils and hazards, which might occa- sion losses far beyond any hope of reasonable gains and profits. Within the benefit of the rule, all persons engaged in any trade, foreign or domestic, were origin- ally deemed merchants ; ^ and now it is applied to all employments and business between two or more per- sons on joint account and benefit, whether they fall under the denomination of merchants, or not.^ So strong is this doctrine, that even where persons are clearly joint-tenants of any property, and it is after- wards bv them deliberately embarked in trade and business on joint account, as partners, such property will cease to be held by them in joint-tenancy, and will, in case of the decease of either, be no longer subject to the jus accrescendl ; for the joint-tenancy is thereby severed, and a partnership established in the property in lieu thereof.'* Partnership diff"ers quite as much from a tenancv in common ; for in a tenancv in com- mon each party has a separate and distinct, although an undivided interest, and possesses (as it is technically expressed) the whole of an undivided moiety of the property, and not an undivided moiety of the whole property ; ^ whereas in partnership the partners are ' Co. Litt. 182, a; Com. Dig. Merchant, D. ; 2 Brownl. 99 ; Coll. on P. B. 2, c. 1, § 1, p. 80, 81, 2d ed.; Jackson v. Jackson, 7 Yes. 535; s. C. 9 Ves. 591. 2 2 Brownl. 99 ; Com. Dig. Merchant, A. ' Jackson v. Jackson, 9 Ves. 591, 596, 597; Jefferys v. Small, 1 Vern. 217 ; Coll, on P. B. 2, c. 1, § 1, p. 76, 77, 80-82, 2d ed. ; 2 Bl. Comm. 404. * Jackson r. Jackson. 7 Ves. 535; S. C. 9 Ves. 591 ; Hall v. Digbv, 4 Bro. P. C. 224; s. c. 4*Bro. P. C. by Tomlins, 577; CoU. on P. B. 2, c. 1, § 1, p. 80, 81, 2d ed. * 2 Bl. Comm. 182, 191-193. 144 ^ PARTNERSHIP. [cHAP. YI. joint owners of the whole property. A tenant in com- mon can dispose only of his own share in the property ; whereas (as we have seen), each partner may, in the partnership name, dispose of the entirety of the prop- erty for partnership purposes. § 91. The true nature, character, and extent of the rights and interests of partners in the partnership capital, stock, funds, and effects, is, therefore, to be ascertained by the doctrines of law appHcable to that rehition, and not by the mere analogies furnished by joint-tenancy, or by tenancy in common. It may, therefore, be said, that in cases of real partnerships, unless otherwise provided for by their contract, part- ners are joint owners and possessors of all the capital, stock, funds, and effects belonging to the partnership, as well those which" are acquired during the partner- ship, as those which belong to it at the time of its first formation and establishment.^ So, that, whether its stock, funds, or effects be the product of their labors or manufactures, or be received or acquired by sale, barter, or otherwise, in the course of their trade or business, there is an entire community of right and interest therein between them ; each has a concurrent title in the whole, or, as Bracton says : Tenet totmn in co^mnu- ni, et nihil separatmi per"- se.^ § 92. Nor is there in reality, as between the partners themselves, any difference, whether the partnership property, held for the purposes of the trade or busi- ness consists of personal or movable property, or of real or immovable property, or of both, so far as their ultimate rights and interests therein are concerned.^ > 3 Kent, 36, 37; Coll. on P. B. 2, c. 1, § 2, p. 76, 77, 2d ed.;. Wats, on P. c. 2, p. 66, 2d ed. 2 Ante, § 89 ; Bract c. 26, p. 430 ; Coll. on P. B. 2, c. 1, § 2, p. 78, 2d ed. 3 Wats, on P. c. 2, p. 72-77 ; Gow on P. c. 2, § 1, p. 32-36, 3d ed. ; Sage V. Sherman, 2 Comst. 417. — There are some differences, however, arising CHAP. YI.] PARTNERSHIP PROPERTY. 145 It is true, that at law, real or immovable property is deemed to belong to the persons, in whose name the title by conveyance stands. If it is in the name of a stranger, or of one partner only, he is deemed the sole owner at law ; ^ if it is in the names of all the partners, or of several strangers, they are deemed joint-tenants, or tenants in common,^ according to the true in- terpretation of the terms of the conveyance.^ But, however the title may stand at law, or in whose- from the very nature and character of the particular property. Each partner, as we shall presently see (and indeed, as has been already intimated), may sell or dispose of the entirety of any personal property of the jjartnei-ship in the name of the firm. But if real estate has been conveyed to both partners for the partnership account, they ordinarily become tenants in common thereof at law, and each can convey by deed only his own share or moiety, and not that of the other. So, that while one partner may in the name of the firm sell the whole of any goods or articles belonging to the partnership, both must join in order to convey the entirety of the real estate thereof. Coles V. Coles, 15 Johns. 159, 161; Wats, on P. c. 2, p. 72, 73, 2ded.; 2 Bell, Comm. B. 7, c. 1, p. 613-615, 5th ed. ; Coll. on P. B. 2, c. 1, § 1, p. 82-101, 2ded. ' [Cox V. McBurney, 2 Sand. 561. — In equity he might be considered as holding in trust for the partnership, if the property is paid for from partnership funds. McGuire t". Ramsey, 4 Eng. (Ark.) 518; Peck v. Fisher, 7 Cush. 386 ; Jarvis v. Brooks, 7 Fost. 37. The legal title, however, is un- disturbed, except so far as to protect the equitable rights of the respective partners. Lang v. Waring, 25 Ala. 625. And see Black i-. Black, 15 Ga. 445; Galbraith v. Gedge, 16 B. Mon. 631.] * [See Lancaster Bank v. Myley, 13 Penn. St. 544; Jones i". Neale, 2 P. & H. 339. In Massachusetts it is settled that real estate conveyed to and held by partners as tenants in common, although purchased with partnership funds, and for partnership use, is to be considered at law as the several property of the individual partners, and liable to be levied on for their separate debts ; but if so taken, it will be considered in equity as held by the creditor in trust, to be applied, so far as may be necessary, to the payment of partnership debts. Peck v. Fisher, 7 Cush. 386 ; see Burnside r. Merrick, 4 Met. 537 ; Dyer v. Clark, 5 Met. 562; Howard v. Priest, 5 Met. 582.] ^ Anderson v. Tompkins, 1 Brock. 456, 465. See Blake r. Nutter, 19 Me. 16. [And parol evidence has been held inadmissible to show that real estate conveyed to two as tenants in common was purchased and paid for by them as partners, and was partnership property. Ridgway's Appeal, 15 Penn. St. 17 7.] 10 146 PARTNERSHIP. [CHAP. VI. soever name or names it may be, the real estate belonging to the partnership will in equity be treat- ed as belonging to the partnership, like its personal funds, and disposable and distributable accordingly ; and the parties, in whose names it stands, as owners of the legal title, will be held to be trustees of the part- nership, and accountable accordingly to the partners, according to their several shares and rights and inter- ests in the partnership, as cestuis que trust, or beneficia- ries of the same.^ Hence in equity, in case of the death of one partner, there is no survivorship in the real estate of the partnership ; but his share will go to his proper representatives.'^ § 93. Indeed, so far as the partners and their cred- itors are concerned, real estate belonging to the part- nership is in equity treated as mere personalty, and governed by the general doctrines of the latter.^ And so it will be deemed in equity, to all other intents and purposes, if the partners themselves have, by their agreement or otherwise, purposely impressed upon it ^ 1 Storv Eq. Jur. § 674; Coll. on P. B. 2, c. 1, § 1, p. 82, 83, 2d ed.; Hoxie V. Carr, 1 Sumn. 173; Gaines v. Catron, 1 Humph. 514: [Smithy. Danvers, 5 Sand. 669 ; Boyce v. Coster, 4 Strobh. Eq. 25 : Fall River AMial- ing Co. I'. Borden, 10 Cush. 458; Andrews v. Brown, 21 Ala. 437; Ludlow V. Cooper, 4 Ohio St. 1 ; Roberts r. McCarty, 9 Ind. 16 ; Buchan v. Sumner, 2 Barb. Ch. 165; Delmonico v. Guillaume, 2 Sand. Ch. 366; Rice p, Bar- nard, 20 Vt. 479 ; Moreau r. SafFarans, 3 Sneed, 595.] 2 Lake v. Craddock, 3 P. Wm. 158 ; s. C. 1 Eq. Cas. Abr. 290 ; Morris v. Barrett, 3 You. & J. 384 ; Jackson v. Jackson, 9 Ves. 591 ; Coll. on P. B. 2 c. 1, § 1, p. 82-102, 2d ed. ; Wats, on P. c. 2, p. 72-77, 2d ed. ; 1 Story Eq. Jur. § 674; 3 Kent, 37, 38. 3 Thornton v. Dixon, 3 Bro. Ch. 199, and Mr. Belt's note (1); Balmain V. Shore, 9 Yes. 500, 507-509 ; [Matlock v. Matlock, 5 Ind. 403] ; Ripley v. Waterworth, 7 Ves. 425; [Rice v. Barnard, 20 Yt. 479]; Cookson v. Cook- son, 8 Sim. 529; Fereday v. Wightwick, 1 Russ. & M. 45; Houghton v. Houghton, 11 Sim. 491 ; [Buchan v. Sumner, 2 Barb. Ch. 165, 200] ; 1 Story Eq. Jur. § 674. [And a lease thereof by one partner in his own name will enure for the benefit of the firm. Moderwell v. MuUison, 21 Penn. St. 257.] CHAP. TI.] PARTNERSHIP PROPERTY. 147 the character of personalty.^ But a question has been made whether, in the absence of any such agreement, or other act, affecting its general character, real estate, held as a part of the partnership funds, or stock, ought to devolve upon, or descend, as real estate, to the heir or devisee, or ought to belong as personalty to the exe- cutor or administrator, upon the death of the partner. Ujjon this 2^oint there has been a diversity of judicial opinion, as well as of judicial decision ; some judges holdini^-, that in such a case it retained its original char- acter of real estate, and passed to the heirs or devisees accordingly; and others holding, that it was to be treated throughout, as partnership property, and there- fore as personalty, and belonged to the executor or ad- ministrator. The doctrine under these circumstances must be considered as open to many distressing doubts.^ ' [But it seems the property should be purchased for partnership uses as well as with partnership funds, in order to constitute it personalty. Gal- braith v. Gedge, 16 B. Mon. 631 ; Coder v. Huling, 27 Penn. St. 84. And see 10 Cush. 458. But see Ludlow v. Cooper, 4 Ohio St. 1, 9.] * Lord Thurlow held the former opinion in Thornton v. Dixon, 3 Bro. Ch. 199, and Belt's note (1) ; and Sir William Grant, in Bell v. Phyn, 7 Yes. 453, and Balmain r. Shore. 9 Ves. oUO, adopted the same opinion. On the other hand. Lord Eldon, in Selkrig v. Davies, 2 Dow, 230, 242, held the opposite opinion, that all property, involved in a partnership concern, ought to be considered as personal ; and again affirmed it in Townsend v. Devaynes, reported in 1 Mont, on P. Appx. 97 ; 3 Bro. Ch. 199, Belt's note (1 ) . Sir John Leach, in Fereday v. Wightwick, 1 Russ. & M. 45, and Phillips v. Phillips, 1 Myl. & K. 649, aiid Broom v. Broom, 3 Myl. & K. 443, was of the same opinion as Lord Eldon. Mr. Baron Alderson, in Morris v. Kearsley, 2 You. «& C. Ex. 139, acted on the same opinion. More recently, Yice-Chancellor Shadwell has upheld the doctrine of Sir Wm. Grant. Cookson v. Cookson, 8 Sim. 529. Mr. Collyer, in his valuable Treatise on Partnership, has discussed at large the whole learning applicable to this point. See Coll. on P. B. 2, c. 1, § 1, p. 82-102. Mr. Bell has summed up the Scottish law on these points as follows : " The property of the company is comuion ; held pro indiviso by all the partners, as a stock, and in trust; responsible for the debts of the coucern ; and subject, after the debts are paid, to division among the partners according to their agree- ment. This is a great point in the doctrine of partnership, aiul important 148 PARTISERSHIP. [cHAP. VI. § 94. In virtue of this community of rights and in- terests in the partnership stock, funds, and effects, each consequences are deducible from it. The common stock includes all lands, houses, ships, leases, commodities, money ; whatever is contributed by the partners to the company use. It comprehends also whatever is created by the joint exertions of the company, or acquired in the course of the employ- ment of their capital, skill, and industry. All this, by the operation of law, and the nature and efiect of the contract, becomes common property ; is held by all the partners jointly for the uses of the partnership ; and is directly answerable as a stock for the payment of its debts. 1. Vesting of the Stock. — The stock or common fund is held by the partners pro indiviso. And, 1. This j5i'o indiviso right implies, as between the parties themselves, a right of retention in each partner over the stock, for any advances, which he may have made to the company, or for any debt due by the company, for which he may be made responsible. 2. It also implies, in relation to the public at large, creditors of the company, a trust in the several partners, as joint trustees for payment, in the first place, of the company debts. And on this point rests, (1), the preference, which the creditors of the company have over the company flmds ; none of the partners, nor any one in their right, as individual creditors or otherwise, being entitled to more than the reversion after the jnirposes of the trust are fulfilled: and, (2), the peculi- arity, that hereditable subjects belonging to and held by a company, are considered not as hereditable in succession, but as movable ; consisting of the jus crediti only. 3. In this respect, the contract of partnership has the efiect of a direct conveyance of property to the company, of whatever is engaged to be given, or by clear evidence is contributed to the use of the company by any of the partners, to whom it belongs. The contract does not indeed supersede the necessity of the completion of the transference by tradition or otherwise ; but it operates as a conveyance (titulus transferendi dominii), which, when followed by tradition, possession, intimation, and the other methods of completing a transference by law, vests the property in the partners, jointly for the purposes already expressed. ' Society,' says Lord Stair, ' is not so much a permutative as a commutative contract, whereby the contractors communicate to each other some stock, work, or profit. The effect of society is, that thereby something, which before was proper, becometh, or is continued to be, common to the copartners.' He adds : ' Yet this communication is not effectual to transfer the property in part, or to comnmnicate it without delivery or possession, by which property by positive law is transferred.' This distinction is of some consequence. Where the question is between the parties and their representatives, as to what shall be considered as the estate of the company, but without involving any competition with third parties, whatever falls under the fair construction of the contract will, as a personal right, belong to the company and its creditors. But whei'c there arises a competition depending on the question of real right, it will be determined according to that criterion of real right, which CHAP. VI.] PARTNERSHIP PROPERTY. 149 partner possesses full power and authority to sell, pledge, or otherwise to dispose of the entirety of any the law has appointed in cases of transference. But in determining what shall amount to an engagement to contribute, and consequent conveyance of a particular subject, it is not always the use of the subject that will settle the point. In one case, certain subjects, of which the use was given to the company, were held to be fairly intended as part of the stock, from the way in which they were mentioned in the inventories. In another nearly similar case, the same inference was avoided, the partnership not being of a perma- nent character, but a momentary joint adventure merely. In respect to movables, all commodities comprehended within the partnership, and in possession of the partner, to whom they previously belonged, are held, as by traditio brevis manus, to be vested in the company ; for the partners having power to hold for the company as prcepositi, their possession will be presumed to be for the common behoof But money due by a third party to an individual partner, or commodities in the hands of third parties, con- tributed by the owner as part of his stock, will not be transferred without delivery or intimation. The creditors of the owner, using attachment by diligence before intimation of the partnership, would attain a preference over the company. Ships must be transferred according to the directions of the statute. 4. As to land and other property, which, by the forms of territorial conveyance, require to be transferred by deed, the partnership will acquire by the contract nothing more than the jus ad rem. If, for example, a cotton-mill is, by the agreement, contibuted as his share of stock, on the part of the owner, this will not feudally transfer to the company the property of the mill, so as to entitle them to exclude the adjudication of the separate creditors of the proprietor trusting to the record. But it will, like a general disposition, confer on the company a jus ad rem, by virtue of which they may, in a declarator and adjudication in implement, have that property declared and adjudged to the partners jointly, or to a trustee, as part of the stock of the concern. 5. Such personal property as may have been acquired in the name of the society, becomes eo ipso the property of the partnership), although purchased by an individual partner with his own money. He is prcepositus of the company, and entitled to advance money and acquire projierty directly for the common behoof. 6. Such personal property as a partner acquires, even in his OAvn name, provided it be bene- ficial acquisition and in the company's line of trade, is, according to the spirit of the contract of partnership, to be held as acquired for the com- pany ; and the company will be entitled to claim it. But it would rather seem, that in such a case the property would pass to the partner in real right, with a jus ad rem to the company and its creditors. 7. A partner, who binds himself to pay a sum or I'ungible into the stock, is debtor to the company ; and the loss of the money or fungible, before being put into stock, is his private loss. If he has engaged to put in a specific subject into stock, and it perish, the loss is to the company, unless the partners shall 150 PARTNERSHIP. [CHAP. VI. particular goods, wares, merchandise, or other personal effects belonging to the partnership, and not merely of be in mora:'' 2 Bell, Conim. B. 7, c. 1, p. 613-615, 5th ed. Mr. Chancel- lor Kent, in his learned Commentaries (Vol. 3, 37-40), has discussed the subject at large ; and after referring to the American authorities, which are as much in conflict with each other as the English, he expresses his own opinion to be, that the weight of authority is, that equity will consider the person, in whom the real estate is vested, as trustee for the whole concern, and the property will be entitled to be distributed as personal estate. 3 Kent, 37-39 ; and the authorities cited in the notes, Id. See Gow on P. c. 2, p. 32-35, 3d ed. ; Wats, on P. c. 2, p. 81-89, 2d ed. ; Gow on P. Suppl. 1841, to 3d ed. c. 2, § 1, 8-13. { Real Estate of a Partnership. — I. The interest of a partnership in real estate can only be equitable. The legal title must be either in all the partners as individuals, or in one or more of them, or in a stranger. Coles V. Coles, 15 Johns. 159; 1 Am. Lead. Cas. 494, 4th ed. The holders of the legal title may be either joint-tenants or tenants in common, according to the terms of the conveyance to them. JefFereys v. Small, 1 Vern. 217; Elliott ?;. Brown, 3 Swans. 489. The equitable interest of a partner in real estate cannot of course be availed of in ejectment. Collins v. Warren, 29 Mo. 236 ; Lowe v. Alexander, 15 Cal. 296. Li Moreau v. SafFarans, 3 Sneed, 595, it was held, that a conveyance to J. S. & Company vested the legal title in J. S. On the partition of partnership real estate, see Greene v. Graham, 5 Ohio, 264 ; Patterson v. Blake, 12 Lad. 436. See also Ensign V. Bi-iggs, 6 Gray, 329; Whitman v. Boston & Maine R. R. Co., 3 All. 133. II. The equitable interest of a partner in partnership real estate is the right to have the use of it, the right to have it employed, if necessary, for the payment of partnership debts, and of any balance due him from his copart- ners, and after such payments, a share in it proportional to his interest in the partnership. 1 Am. Lead. Cas. 494, 4th ed. ; 1 Lead. Cas. in Eq. 229, 230 [152-154], 240, 3d Am. ed. and cases there cited. Thus, though the partners are at law joint-tenants, there will be no jus accrescendi allowed in equity. Lake v. Craddock, 3 P. Wm. 158. If one of the partners has a one-third interest and the other a two-thirds interest in the partnership, they will have that same proportionate interest at equity in partnership lands, though the lands were conveyed to them in equal shares as tenants in common. Putnam v. Dobbins, 38 111. 394. So one holding the legal title to partnership real estate, cannot be compelled in equity to convey a moiety of the estate to his copartner, when the balance of accounts is against the latter. AVilliams u. Love, 2 Head, 81. IJI. 1. As in all cases of real estate held on trust, one who purchases real estate ffrom the partner having the legal title, with notice that it is partnersliii) property, will take the land subject to the equities of the part- ne^is and partnershi]) creditors ; but a purchaser who has no such notice will I CHAP. VI.] PARTNERSHIP PROPERTY. 151 his own share thereof, for purposes withm the scope of the partnership.^ In respect to his own share thereof, take the land dischai'ged of such equities. 1 Am. Lead. Cas. 497 4th ed. ; 1 Lead. Cas. in Eq. 240, 3d Am. ed. ; Hoxie v. Carr, 1 Sumn. 173 ; Til- linghast v. Champlin, 4 R. I. 173 ; Frink v. Branch, 16 Conn. 200 ; Buchan V. Sumner, 2 Barb. Ch. 165 ; M'Dermot v. Laurence, 7 S. & R. 438 ; Mat- lack V. James, 2 Beasl. 126 ; Forde v. Herron, 4 Munf. 316 ; Divine v. Mitchum, 4 B. Mon. 488 ; Buck v. Winn, 11 B. Mon. 320 ; Reeves v. Ayers, 38 111. 418. But see Treadwell v. Williams, 9 Bosw. 649. 2. So, also, as in other trilsts, partnership equities will be enforced against the heirs, devisees, or widow of the partner who held the legal title. Burnside v. Merrick, 4 Met. 537 ; Dyer v. Clark, 5 Met. 562 ; Howard v. Priest, 5 Met. 582 ; Sumner v. Hampson, 8 Ohio, 328. In Smith v. Jack- son, 2 Edw. Ch. 28, the claim for dower, of the widow of a deceased partner who held the legal title to partnership real estate, was held paramount to the equities of the other partners ; but this decision stands alone, and finds no support in the other cases. But though the claim of the widow for dower must yield to the trust for the partnership, yet if the land is purchased by one without notice of the partnership, and is therefore held discharged of the trust, the right of the vendor's widow to dower revives, and will be enforced against the purchaser. Markham v. Merrett, 7 How. Miss. 437. But when partnership land is conveyed for a partnership debt, the party to whom it is conveyed will hold it free from any claim of dower by the widow of one of the partners. Duhring v. Duhring, 20 Mo. 174. 3. Partnership real estate will be held bound to the partnership creditors in preference to the creditors of the separate partners. 1 Am. Lead. Cas. 497, 498, 4th ed. ; 1 Lead. Cas. in Eq. 240, 3d Am. ed. ; Crooker V. Crooker, 46 Me. 250 ; Jones v. Neale, 2 P. & H. 339. At law the sepa- rate creditor will not be postponed to a partnership creditor. Blake v. Nutter, 19 Me. 16. See Goodwin v. Richardson, 11 Mass. 469. But a separate creditor who has levied at law will hold the land in trust for the partnership. Peck v. Fisher, 7 Cush. 380. In Hale v. Henrie, 2 Watts, 143, and Ridgway's Appeal, 15.Penn. St. 177, it was held, that if the land be recorded as owned by A. and B., and 1 Wats, on P. c. 2, p. 91-93, 2d ed. ; Gow on P. c. 2, § 2, p. 51-54, 3d ed. ; Coll. on P. B. 3, c. 1, § 1, p. 263-268, 2d ed. ; Id. B. 2, c. 1, § 2, p. 113 ; Fox V. Hanbury, Cowp. 445 ; 3 Kent, 44 ; [Woodward v. Cowing, 41 ]Me. 9.] Of course we are to except from this doctrine all cases, where, although the property originally belonged to the partnership, it has become the property of an individual partner by the consent of the firm ; for in such cases, the property is to all intents and purposes to be treated as the private property of that partner, and is disposable by him alone accordingly in tiie same manner, as if it never had belonged to the partnership. Coll. on P. B. 2, c. 1, § 2, p. 113, 114, 2ded. 152 PARTNERSHIP. [cHAP. VI. he may be properly deemed to do all acts of this sort, as owner; in respect to the shares of his copartners, he there is no notice on record that A. and B. are partners, a separate creditor of A. can hold A.'s undivided moiety of the land against the creditors of the partnership. Contra, Fall River Whaling Co. v. Borden, 10 Cush. 458. Hale V. Henrie and Ridgway's Appeal are questioned, and it would seem with reason, in 1 Lead. Cas. in Eq. 241, 3d Am. ed., as contravening the general rule that creditors can take only the equities of their debtors. IV. 1. A partner cannot, of course, give a good legal title to that part of the partnership real estate in which he has only an equitable interest. Dillon V. Brown, 11 Gray, 179; Davis v. Christian, 15 Gratt. 11. And a purchaser of such interest takes it subject to all equities, though unknown to him. Kramer v. Arthurs, 7 Penn. St. 165. A surviving partner, however, has authority over the real estate of the firm, and can sell it for partnership debts ; and, if he has only the equitable interest, equity will compel the heir of the deceased partner to convey the legal title. Andrews' Heirs v. Brown's Administrators, 21 Ala. 437 ; Del- monico v. Guillaume, 2 Sand. Ch. 366 ; Pierce's Adm'r v. Trigg's Heirs, 10 Leigh, 406 ; Galbraith v. Gedge, 16 B. Mon. 631. Though the purchaser is not obliged to see to the application of the purchase-money, yet if he is cognizant that the action of the surviving partner is fraudulent, he will not be protected in his purchase. Tillinghast t). Champlin, 4 R. I. 173; Hol- land V. Fuller, 13 Lid. 195 ; Lang v. Waring, 25 Ala. 625. Li Dupuy v. Leavenworth, 17 Cal. 262, where one partner had absconded, the other partner was held authorized to sell the partnership real estate, and a bona fide purchaser from him could compel a conveyance from one who had pur- chased with notice from the absconding partner. See Moran v. Palmer, 13 Mich. 367. 2. Whether a conveyance by one partner of the real estate of the partnership for a firm debt without the assent of the other partners is valid is a question which arises in two classes of cases which do not seem suffi- ciently distinguished in the books. First. When the partner has the legal title to a part only of the real estate, as when he is tenant in common with his copartners. Li this case he can convey only so much as he has title to, for the legal title can be conveyed only by deed, and one partner cannot bind the others by deed. § 117-122 ; Dillon V. Brown, 11 Gray, 179; Haynes v. Seachrest, 13 Iowa, 455. The assent of the other partners may be proved to have been given before the conveyance, or they may be proved to have ratified it afterward. Juggee- wundas Keeka Shah r. Ramdas Brijbooken Das, 2 Moo. Ind. App. 487 ; Lowery v. Drew, 18 Tex. 786 (which was the case of a bond for a deed) ; Wilson V. Hunter, 14 Wis. 683. Secondly. When the partner has the legal title to the whole estate. There is no technical obstacle to such a partner conveying the title to a partnership creditor, and the only objection is that indicated in § 94 of the CHAP. VI.] PARTNERSHIP PROPERTY. 153 may be properly deemed to do such acts, as their agent, and as the accredited representative of the firm. The text of a fundamental difference in the power of partners over real and personal estate. In spite of the statement in the text, which has been fol- lowed by the text-books generally, it may be doubted whether this distinc- tion exists. The authority cited in the text is Coles v. Coles, 15 Johns. 159, but in that case the partners were at law tenants in common. The other cases commonly cited in support of this doctrine are Anderson v. Tompkins, 1 Brock. 456 ; Tapley v. Butterfield, 1 Met. 515 ; Dyer v. Clark, 5 Met. 562 ; Tillinghast v.' Champlin, 4 R. 1. 173 ; but none of these, when examined, will be found to decide the point. In Sharp v. Milligan, 22 Beav. 606, there is a semble that if a partnership is formed for no fixed period, a partner cannot bind the firm by a lease for twenty-one years, but the remark is not based on any thing in the jieculiar nature of real estate. Lawrence v. Taylor, 5 Hill, (N. Y.) 107. On the other hand, there is a dictum in Jones v. Neale, 2 P. «& H. 339, that a conveyance by a partner having the legal title to a partnership creditor passes the property to the land as against other partnership creditors. Mr. Lindley (Lind. on P. 229) says, " The writer is not aware of any decision in which an equitable mortgage made by one partner by a deposit of deeds relating to partnership real estate, has been upheld, or the contrary ; he can therefore only venture to submit, that such a mortgage ought to be held valid in all cases in which it is made by a partner having an implied power to borrow on the credit of the firm. See Ex parte, Lloyd, 1 Mont. & Ayr. 494." On the whole, it is submitted that the rule as laid down in the text is co-extensive only with the rule that one partner cannot bind another by deed, and that an attempt to push it beyond such latter rule to a case in which a partner having the legal title to partnership property sells or pledges it for a partnership debt has no support either in the decided cases or on principle. In Moderwell V. Mullison, 21 Penn. St. 257, 259, Woodward, J., says : " Partners are the agents of each other in partnership transactions ; and when real estate is brought into the p.artnei'ship business, it is treated in equity as personal estate ; and a lease of it by one partner is as much a partnership transaction, as a sale of partnership goods by him would be." V. The chief cpiestion which has arisen with regard to partnership real estate is to determine when land becomes partnership property. 1. Real estate imrcliased with partnersliip funds. A. Real estate purchased by the partnership funds for partnership pur- poses is partnership property, and this whether the legal title is taken in the name of one or of all of the partners. Lind. on P. 555 ; 1 Am. Lead. Gas. 495, 4th ed. ; 1 Lead. Cas. in Eq. 231, 232 [155, 156], 3d Am. ed. ; Phillips V. Phillips, 1 Myl. & K. 649 ; Fereday v. Wightwick, 1 Russ. & M. 45 ; Townsend v. Devaynes, 1 Mont, on P. App. 97 ; Broom i-. Broom, 3 Myl. & K. 443 ; Morris v. Kearsley, 2 You. & C. Ex. 139 ; Bligh t'. Bront, 15 J: PARTNERSHIP. [CHAP. VI. law, however, treats each partner, without any nicety of discrimination of this sort, as possessing a dominion Id. 268 ; Houghton v. Houghton, 11 Sim. 491 ; Hoxie v. Carr, 1 Sumn. 173, 181 ; Burnside v. Merrick, 4 Met. 537 ; Dyer v. Clark, 5 Met. 562 ; How- ard V. Priest, 5 Met. 582 ; Crooker v. Crooker, 46 Me. 250 ; BufFum v. Buf- fum, 49 Me. 108 ; Jarvis v. Brooks, 7 Fost. 37 ; Willis v. Freeman, 35 Vt. 44; Delmonico v. Guillaume, 2 Sand. Ch. 366; Buchan v. Sumner, 2 Barb. Ch. 165 ; Smith ik Tarlton, 2 Barb. Ch. 336 ; Matlack v. James, 2 Beasl. 126 ; Baldwin v. Johnson, Saxt. Ch. 441 ; Abbott's Appeal, 50 Penn. St. 234; Robertson v. Baker, 11 Fla. 192; Greene v. Greene, 1 Ohio, 535; Matlock V. Matlock, 5 Ind. 403. See Fall River AVhaling Co. v. Borden, 10 Cush. 458; Carlisle's Adm'rs v. Mulhern, 19 Mo. 56. In Duhring v. Duhring, 20 Mo. 174, where the case states that the land was bought with partnership funds, " to be held as an investment," until the firm closed busi- ness, the land was held to be partnership property; but it is plain from the rejjort that the firm occupied part of the premises, and that the main use of the land was for partnership purposes, and the land was finally sold for a partnership debt. So if land is bought with partnership funds with the intention of using it for jiartnership purposes, though in fact it is never so used, it is partner- ship property. Erwin's Appeal, 39 Penn. St. 535. A partnership consisted of four members, two of Avhom were dormant, the ostensible partners bought lands to be used in the partnership business in their own name. A small part only of the price was paid ; but what little was paid came out of the partnership funds. The partners, (including the dormant members) were held liable for the remainder of the purdhase-money. Brooke v. Washington, 8 Gratt. 248. On the other hand, in N. Penn. Coal Co.'s Ap- peal, 45 Penn. St. 181, land was bought by one partner in his own name, and he gave a bond and mortgage for pai't of the price, the remainder of the price was paid out of the partnership funds, and the land was used in the business of the fii-m ; yet, on the ground that the vendor had given credit to the individual partner, the firm was held not liable for the unpaid purchase-money. See also Pitts v. Waugh, 4 Mass. 424. See Forsyth v. Clark, 3 Wend. 637 ; Dewey v. Dewey, 35 Vt. 555 ; Lacy v. Hall, 37 Penn. St. 360; Boyers v. Elliott, 7 Hump. 204; infra 2. B. B. Real estate purchased with partnership funds, but not for partnership purposes, is presumed to belong to the partners in proportion to their in- terest in the partnership. (In New York, however, it is otherwise, implied trusts having been abolished by statute. Cox v. McBurney, 2 Sand. 561.) But this presumption may be rebutted ; and it may be shown that the real estate belongs to the partner in whose name the legal title was taken. Smith V. Smith, 5 Ves. 193. See Hunt v. Benson, 2 Humpli. 459. Though real estate purchased with partnership funds, but not for part- nership purposes, belongs to the partners, in the absence of evidence to CHAP. VI.] PARTNERSHIP PROPERTY. 155 over the entirety of the property, and not merely over his own share, and, therefore, as clothed with all the or- the contrary, yet it seems to be the better opinion that the land belongs to the partners separately, and not to the partnership. Wooldridge v. Wil- kins, 3 How. Miss. 360. There are did a to the same effect in Bell v. Phyn, 7 Ves. 4.53 ; Randall V. Randall, 7 Sim. 271 ; Sigourncy v. Munn, 7 Conn. 11 ; Coder v. Huling, 27 Penn. St. 84, Lind. on P. 552 ; Am. 1 Lead. Cas. 495, 4th ed. ; 1 Lead. Cas. in Eq. 235, 236, [159-162], 241, 3d Am. ed. On the other hand, in Galbraith v. Gedge, 16 B. Mon. 631, land purchased with partner- ship funds, though there was no evidence that it was bought for sale, and though apparently it was not used for partnership purposes, was considered as partnership property ; and in Buck v. Winn, 11 B. Mon. 320, it is said that land bought with partnership funds, not for the firm use, but as a specu- lation, or a safe investment, is partnership property. In Sumner v. Hamp- son, 8 Ohio, 328, and Andrews' Heirs v. Brown's Adm'r, 21 Ala. 437, it does not appear whether the land was used for partnership purposes or not. In Fall River AVhaling Co. v. Borden, 10 Cush. 458, 467, 470, lands were purchased by partners, and the deed taken to them as tenants in common. " The cost of the purchase went into the partnership accounts. The estates were entered into the company books as comiiany property. As portions were sold for profit, from time to time, the proceeds were merged in the general funds of the copartnership. These lands were avowedly purchased for speculation." It Avas held, that the lands were partnership property. The court say : "In order to affect lands with partnership equities, it is not necessary that such land should be the incident merely of a commercial partnership ; but it may be in part, at least, the distinct substratum of a co- partnership." See Hoxie v. Carr, 1 Sumn. 173 ; Dilworth v. Mayfield, 36 Miss. 40. When land is bought by a commercial partnei'ship from partnership funds for the purpose of selling to pay firm debts, it is partnership property. Heirs of Pugh V. Currie, 5 Ala. 446. And when land is taken for a partnership debt, it becomes partnership property, though it be not used in partnership business. Buchan v. Sumner, 2 Barb. Ch. 165 ; Collumb v. Read, 24 N". Y. 505 ; Put- nam V. Dobbins, 38 111. 394. See Moran v. Palmer, 13 Mich. 367. Contra, Goodwin v. Richardson, 11 Mass. 469. But this last case seems partly based on a State statute, and was a decision at law. See the comments of Story, J., in Hoxie v. Carr, 1 Suran. 173, 185. 2. Heal estate not purchased with j)artnersMp ftmds. A. A partnership may be formed by an oral agreement ; and though the Statute of Frauds re(|uires that an agreement concerning land shouhl be in writing, yet if the existence of a partnership be once proved, whetlior by writing or by parol, and the fact that land has been purchased by partner- 156 PARTNERSHIP. [CHAP. VI. dinary attributes of ownership.^ This doctrine, indeed, seems indispensable to the security and convenience of ship funds be also proved, whether by writing or parol, then a trust for the partnership attaches to such land, because it comes within the general class of implied trusts, which it has long been settled (whether wisely or not it would be now vain to inquire) are excepted out of the statute. But in those cases in which the purchase is not made from partnership funds, and thei-e is therefore no resvdting trust, it becomes important to consider the effect of the Statute of Frauds. If a partnership is formed under written articles which provide for the purchase of land, it may be shown by parol evidence that land standing in the name of one of the partners was bought for partnership purposes, and was partnership property. Frederick v. Cooper, 3 Iowa, 171. And in Fall River Whaling Co. v. Borden, 10 Cush. 458, it is said that if a part- nership be proved to exist by any memorandum in writing, or by books or other written transactions, a partnership trust will attach to land treated as partnership property ; but in this case it would seem that the land was purchased with partnership funds, and therefore came within the general class of resulting trusts. Though a partnership for the purchase and sale of lands must be evidenced originally by writing, yet the fact of the substitution of two partners in the place of two of the original partners may be proved by parol. Rowland v. Boozer, 10 Ala. 690. In Bird v. Morrison, 12 Wis. 138, the question is very fully discussed, and the court conclude that whatever may be the law where the alleged partners are tenants in common of the land, or where the land is an incident to the part- nership, yet that a partnership, to consist in dealings in real estate, cannot be proved by oral evidence so as to affect lands purchased by one of the alleged partners in his own name, even though the alleged partners are, in fact, partners in a commercial partnership under written articles. In Fowler V. BalUey, 1-4 Wis. 125, it does not appear whether the partnership was ^ 3 Kent, 44. — Mr. Chancellor Kent here says : " With respect to the power of each partner over the partnership property, it is settled that each one, in ordinary cases, and in the absence of fraud on the part of the purchaser, has the complete jus disponendi of the whole partnership interests, and is considered to be the authorized agent of the firm. He can sell the effects, or compound or discharge the partnerehip debts. This power results from the nature of the business, and is indispensable to the safety of the public, and the successful operations of the partnershljJ. A like power in each partner exists in respect to purchases on joint account ; and it is no matter ynth what frau- dulent views the goods were purchased, or to what purposes they are applied by the purchasing partner, if the seller be clear of the Imputation of collusion. A sale to one partner, in a case within the scope and course of the partner- ship business, is, in judgment of law, a sale to the partnership." CHAP. VI.] PARTNERSHIP PROPERTY. 157 the public, as well as to the facility of transacting com- mercial business. But in respect to real estate a diffcr- formed by written articles ; the question of the application of the Statute of Frauds was not raised. The cases of Forster v. Hale, 3 Ves. 696 ; s. c. 5 Ves. 308, and Dale v. Hamilton, 5 Hare, 369 ; s. c. 2 Ph. 266, are commonly cited as authorities to prove that lands may be alFected with a trust in favor of a partnership, though the partnership was formed by parol, and the land was not purchased with partnertihip funds. But in Forster v. Hale, the case was decided both by the Master of the Rolls and on ajipeal, on the ground that there was a written declaration of trust. Lord Chancellor Loughboi-ough says (5 Ves. 314) : " The case appears proved in the strictest manner by the written evi- dence ; " it would seem, also, that the court was of opinion that the purchase was made out of the partnership funds. Dale v. Hamilton, it is true, was decided by Vice-Chancellor Wigram (5 Hare, 369), without regard to the fact that there was a written memorandum ; but Lord Chancellor Cotten- ham, on appeal, made a decree in favor of the plaintiff, distinctly on the sole ground of the existence of a written memorandum (2 Ph. 266) ; and the Vice-Chancellor's judgment in Dale v. Hamilton, o Hare, 369, must be con- sidered as weakened, if not overruled, by the case of Caddick v. Skidmore, 2 De G. & J. 52. The marginal note in this case is as follows : " An agree- ment between A., a lessee of a mine, and B. to become partners in the mine, paying the reserved rent, subletting the mine at a royalty, and dividing the proceeds. Held, to be within the Statute of Frauds, and not sufficiently proved by a receipt signed by A. and given to B. for a sum as B.'s share of the head-rent of the mine, the sum being exactly half of that rent." In Henderson v. Hudson, 1 Munf 510, an agreement to form a partner- ship, for the purpose of purchasing land, was held within the statute, and it was so held by Judge Story, in a very well-considered case. Smith v. Burn- ham, 3 Sumn. 435, Pitts v. Waugh, 4 Mass. 424 ; In re Warren, Davies, 820; Deloney v. Hutcheson, 2 Rand. 183. See Bird v. Morrison, 12 Wis. 138 ; Fall River AVhaling River Co. v. Borden, 10 Cush. 458. Li this last case the court say : "The cost of the purchase went into the partner^ihip account," which would seem to mean that the purchase was made with part- nership funds. The only American cases in which lands have been allowed to be affected with a partnership trust, when neither was the existence of the partnersiiip evidenced by writing, nor the lands purchased with partnership funds, seem to be Dilworth v. Mayfield, 36 Miss. 40, and llunff v. Howard, 3 Jones, Eq. 440 ; and in the former of these cases no question as to the Statute of Frauds was raised. Li Black v. Black, 15 Ga. 445, it was held, tliat an agreement between a partnership and a stranger, that the latter should have an interest in the profits arising from the sale of the partnership lands was within the Statute of Frauds. If A. and B., who are in partnership as attorneys, agree by parol to engage in the business of buying lands, though 158 PARTNERSHIP. [cHAP. VI. ent rule prevails, founded upon the nature of the prop- erty and the provisions of the common law applicable such agreement may be void as between themselves, yet the holders of a note signed by them botli, and given in the course of such business, are entitled to proceed against the partnership assets in preference to the sep- arate creditors. In re Warren, Davies, 320. B. Real estate not purchased with partnership funds will of course become converted into partnei'ship property by express agreement. When there is no express agreement, Mr. Lindley (Lind. on P. 555) sums up the rule as follows : "It seems that land acquired, whether gratuitously or not, for the purpose of carrying on a partnership business, and used for that purpose, is to be considered as property of the partnership ; but that land which is not so acquired, but which, belonging to several persons jointly or in common, is employed by them for their common jirofit, does not become partnership property unless there is some evidence to show that it has been treated by them as ancillary to their partnership business, and as part of the common stock of the firm." Crawshay v. Maule, 1 Swans. 495, 522 ; Roberts V. Eberhardt, Kay. 148 ; Morris v. Barrett, 3 You. & J. 384 ; Brown w. Oak- shot, 24 Beav. 254 ; Phillips v. Phillips, 1 Myl. & K. 649 ; s. c. Bisset on P. 50 ; Jackson v. Jackson, 7 Yes. 535, s. c. 9 Yes. 591 ; Fereday u. Wightwick, Taml. 250; Essex v. Essex, 20 Beav. 442. See also, Caddick v. Skidmoi-e, 2 De G. & J. 52 ; Burdon v. Barkus, 2 GifF. 412. The American cases hold generally that real estate not purchased with partnership funds does not become partnership property, though used for partnership purposes unless there is some agreement that it shall be so considered, 1 Am. Lead. Cas. 496, 4th ed. Wheatley's Heirs v. Calhoun, 12 Leigh, 264 ; Frink v. Branch, 16 Conn. 260; See Divine v. Mitchum, 4 B. Mon. 488; Owens v. Collins, 23 Ala. 837. In Boyers v. Elliott, 7 Humph. 204, and Fall River Whaling Co. v. Borden, 10 Cush. 458, the land seems to have been pur- chased with partnei'shii) funds. See Pitts v. Waugh, 4 Mass. 424. In Forsyth v. Clark, 3 Wend. 637, it was held, that land did not become part- nership property, though partnership funds were employed by a partner in its purchase, if it was not agreed at the time of the purchase, that it sliould be made with partnei'ship funds ; but in Dewey v. Dewey, 35 Yt. 555, where laud was purchased by one partner for partnership use, and was so used for twenty-six years, the fact that the partner purchasing took the title in his own name, and gave his individual note for the amount, without the knowledge of the other partner, the note being paid out of partnership) funds, did not pi'event a resulting trust arising for the other partner in a moiety of the land; and in Lacy v. Hall, 37 Penn. St. 3G0, where one of two partnei-s, acting as the financial member of the firm, purchased land to promote the partnership business, tliough the purchase was made in liis own name, and with his own money, and where the firm afterwards expended money and made valuable improvements on the land, the purchase was lield that of the firm, and enured to its benefit. CHAP. VI. J PARTNERSHIP PROPERTY. 159 thereto. Each partner is required, both at law and in equity, to join in every conveyance of real estate, in VI. Real estate which has once been partnership property mav by- agreement be changed into separate property. Rowley v. Adams, 7 Beav. 548, 1 Lead. Cas. in Eq. 237, [162], 3d Am. ed. VII. The remaining question on the snbject is whether the property of a partner in partnership land is real or personal estate. If it is tlie former, it is liable to dower, and goes, on the partner's decease, to his heir; if the latter, it is free from dower, and goes to his personal representatives. The question is complicated in the cases with that previously discussed, viz. whether the real estate has become partnershij) property ; if it has not, there can be no question that it is liable to all the incidents, and has all the qual- ities of real estate. The cases in England are conflicting ; but the result is well summed by Mr. Lindley in the following passage. (Lind. on P. 565.) " If a share of a partner is nothing more than his proportion of the part- nership assets after they have been tui-ned into money and applied in liqui- dation of the partnership debts, it necessarily follows that in e(|uity, a share in a partnership, whether its property consists of land or not, must, as between the real and personal representatives of a deceased partner, be deemed to be personal and not real estate. And although the decisions upon this point are conflicting, the authorities which are in favor of the above conclusion certainly preponderate over the others. Thornton v. Dixon, 3 Bro. Ch. 199 ; Bell v. Phyn, 7 Ves. 453 ; Randall v. Randall, 7 Sim. 271 ; Cookson v. Cookson, 8 Sim. 529, are all cases in which part- nership realty was treated as realty. On the other hand, Ripley v. Water- worth, 7 Ves. 425 ; Townsend v. Devaynes, 1 Mont, on P. note 2a. Appx. p. 97 ; Phillips v. Phillips, 1 Myl. & K. 649 ; Broom v. Broom, 3 Myl. & K. 443; Morris v. Kearsley, 2 You. & C. Ex. 139; Houghton v. Houghton, 11 Sim. 491 ; Essex v. Essex, 20 Beav. 442, and Darby v. Darby,. 3 Drew, 495 ; Holroyd v. Holroyd, 7 Weekly Rep. 426, all support the statement in the text. " In Thornton v. Dixon, 3 Bro. Ch. 199, the court recognized the rule, that partnership property must be considered as personal estate ; but held, that the lands which were there in question could not be so considered, as they had been conveyed to all the partners in common, and there was no agreement for a sale. " In Bell V. Phyn, 7 Ves. 453, partners in trade purchased, with the funds of the firm, a share in a plantation, and kept the accounts relating to the estate in tiie partnership books ; and it was held, upon the authority of the last case, that, assuming the land to have become partnership projierty, it ought not to be regarded as personal estate. " In Randall v. Randall, 7 Sim. 271, the partners were farmers, maltsters, and biscuit makers. They bought land for the farming business, and it was held, that, as it was not acquired for the purpose of any partnership in trade, the land could not be treated as personalty. 160 PARTNERSHIP. [cHAP. VI. order to pass the entirety thereof to the grantee ; and if one partner only executes it, whether it be in his " In Cookson v. Cookson, 8 Sim. 529, a father, who was seised in fee of land on which he carried on business as a bottle manufacturer, took his son into partnership, and conveyed a share in the land to him. The land was declared by the articles of partnership to be partnership property. But on the death of the flither, it was held, that his share in the land was to be treated as real estate, no sale being required for the payment of the part- nership debts, or for any other purpose. " These are the cases which militate against the rule under discussion. The following are those which support it : — " In Ripley v. Waterworth, 7 Ves. 425, partnership land was conveyed to trustees upon trust, upon a dissolution of the partnership, to sell and pay the partnership debts, and divide the residue of the money arising from the sale amongst the partners ; and it was held, upon the death of one of them, that his share in the land was personal estate, although the land was not in fact sold, and the deceased's share in it was purchased by the surviving part- ners, under a clause enabling them so to do, and contained in the convey- ance to the trustees. "In Townsend v. Devaynes, 1 Mont, on P. note 2a. Appx. p. 97; see too, 11 Sim. 498, note ; two persons in partnership as paper makers, pur- chased paper-mills for the use of the firm, and paid for them out of its funds. It was agreed that, on the death of either, the survivor should have the op- tion of purchasing his share. One of the partners died, and his share was purchased by the survivor. It was held, that the whole of the purchase money formed part of the personal estate of the deceased, although most of the money was paid in respect of the interest of the deceased in the mills. " In Phillips V. Phillips, 1 Myl. & K. 649, two persons in partnership as brewers purchased public houses for the purposes of their trade, and had them conveyed to both in fee. On the death of one of them, it was held, that his share in the houses was to be treated as personal estate. " Broom v. Broom, 3 INIyl. & K. 443, is a decision to the same effect as the last, and decided on its authority. " In Morris v. Kearsley, 2 You. & C. Ex. 139. A partnership of brewers was possessed of real estate conveyed partly to the partners as tenants in common, and partly to one or more of the partners, in trust for the fii-m ; and it was decided that the several lands, hereditaments, and premises belonging to the partnership, ought to be considered as personal estate. The report does not state how, when, or for what purpose, the property was originally acquired. " In Houghton v. Houghton, 11 Sim. 491, two brothers, A. and B., were partners as soap boilers. They purchased land for the purposes of their trade, took a conveyance to themselves as tenants in common, and mort- CHAP. VI,] PARTNERSHIP PROPERTY. 161 own name, or in that of the firm, the deed will not ordinarily convey any more than his own share or in- terest therein/ gaged the land for the purchase money. They then built on the land, In- sured the buildings, and paid the expenses and the interest of the mortgage debt out of the partnership funds. A. died intestate, and B. took another brother, C, into partnership. B. and C. paid off the mortgage, and took a reconveyance to themselves as joint tenants in fee, and expended money in building and insurance, defraying the expense, as well as providing the mort- gage money, out of the funds of the partnership. On B.'s death it was held that the land and buildings had clearly become partnership property, and that it ought, therefore, to be treated as personal estate. •'In Darby w. Darby, 3 Drew, 495, two brothers embarked in joint specu- lations in land. Their scheme was to buy land, convert it into building sites, and then sell it at a profit. This was done on several occasions, the land being generally conveyed to one of them only. On the death of that one, it was held that his interest in all the land bought by both, and still unsold, was personal and not real estate. " In Essex v. Essex, 20 Beav. 442, two brothers were, under the will of their lather, seized of fi-eehold lands. They agreed to become partners as curriers and tanners for fourteen years, and to carry on their business on those lands. It was stipulated that if either died during the copartnership term, the other should take his share in the freeholds, and that the entirety thereof, including the plant and tan-pits, should be valued at £5,000. The fourteen years expired, but the partnership was continued as before. On the death of one of th^partners, it was held that his share in the freeholds was to be regarded as personal estate. " There are also various dicta of Lord Eldon in flivor of the broad principle that partnership property is to be regarded as personal and not as real estate. See the judgment of V. C. Kindersley, in Darby i'. Darby, 3 Drew, 498, &c. " Upon the whole, therefore, it is submitted : — 1. That, notwithstanding Thornton v. Dixon, Bell v. Phyn, and Randall v. Randall, the true rule is, as stated by the vice-chancellor, Kindersley, in Darby v. Darby, 3 Drew, 506, ' that whenever a partnership purchase real estate for the partnership purposes, and with the partnership funds, it is, as between the real and per- sonal representatives of the partners, personal estate.' See, in addition to the cases referred to above, Holroyd v. Holroyd, 7 AVeekly Rep. 420. " 2. That, notwithstanding Cookson r.Cookson, no satisfactory distinction, with reference to the question of conversion, can be drawn between land purchased with partnership moneys, and land acquired in any other way. See per Lord Eldon, in Jackson v. Jackson, 9 Ves. 593 : ' It is very diflicult to make a distinction between a joint tenancy by will, by a gratuitous deed. 1 Coles V. Coles, 15 Johns. 151i, 161 ; [Jackson v. Stanford, 19 Geo. 14]; ante, § 93, note. 11 162 PARTNERSHIP. [CHAP. VI. § 95. The Roman law does not seem, ordinarily, to have conferred upon partners the same extensive or a purchase, the law of merchants, if it applies to one, must apply to all ; ' and that the question of conversion, like the question of survivorship, turns only on whether the land is or is not to be deemed property of the firm in the true sense of that expression. " If, indeed, the property is not partnership property in the true sense of the phrase (t. e. the property of the firm, or, in other words, of all the part- ners, as such), the rule has no application. Therefore, in a case where two out of three partners were owners of land occupied by the firm, and for which the firm paid a rent, and the land was in fact kept distinct from the joint property of the three partnex's, it was properly held, on the death of one of the two partners to whom the rent was paid, that his interest in the land was not to be considered as personal, but as real estate. Rowley V. Adams, 7 Beav. 548 ; Balraain v. Shore, 9 Ves. 500 ; see, too, Phillips v . Phillips, ante. So, if land belongs to all the partners as tenants in common, but not as partners, and that land is used by them for partnership purposes, but is nevertheless intended to remain vested in them as tenants in common, and not to form part of the assets of the firm, the share of each partner will be real and not personal estate. In the case now supposed, co-owners of land are partners : but the co-ownership continues unaffected by the partnership. But it is not possible on this ground to uphold Thornton V. Dixon, Bell v. Phyn, Randall v. Randall, and Cookson v. Cookson. In each of these four cases the land had become part of the assets of the firm, or it had not ; if it had, these four cases are in direct conflict with those which have just been alluded to ; whilst, if it had not, they are in no less direct conflict Avith other cases Avhich are authorities on the question what is and what is not property of the firm. The doctrine of conversion which has just been considered, merely amounts to this, that on the death of a partner, his share in the partnership is, as between his real and personal representa- tives, to be treated in equity as money and not as land. The crown cannot avail itself of the doctrine, and require probate duty to be paid, upon the assumption that the share of the deceased actually consisted of money. Custance v. Bradshaw, 4 Hare, 315. And if the shares of the partners in partnership realty are of suflicient value, they are not precluded by the doctrine in question from voting in respect of those shares at elections for members of Parliament. Baxter v. Brown, 7 Man. & Gr. 198. See, too, Rogers v. Harvey, 5 C. B. N. s. 3." But see 23 Law Mag. 98. The subject has been often alluded to in the American courts, and the books are full of dicta on the matter ; but there seem to be but few cases in which the point has arisen directly for decision between the widow or heirs on one side, and the personal representatives on the other. In several of the cases where the widow's claim for dower has been allowed, the case seems to have turned not on the point that partnership land was to be re- garded as real estate as between the widow and next of kin, but on the CHAP. VI.] PARTNERSHIP PROPERTY. 163 powers and mutual rights over the disposition of the partnership property, as is given by the common law, point that the real estate in question never became partnership property. Wooldridge v. Wilkins, 3 How. Miss. 360 ; Markham v. Merrett, 7 How. Miss. 437. See Dilworth v. Mayfield, 36 Miss. 40. In the following cases it has been held, that, as between the widow and heirs of a deceased partner on one side, and the personal representatives on the other, partnership real estate goes, in the absence of agreement for an absolute conversion into personalty, to the former. Wilcox v. Wilcox, 13 All. 252 ; Buckley v. Buckley, 11 Barb. 43 ; Goodburn v. Stevens, 5 Gill, 1 ; s. c. 1 Md. Ch. 420 ; Hale v. Plummer, 6 Ind. 121 ; Summey v. Patton, 1 Winst. Eq. o2 ; Dilworth v. Mayfield, 36 Miss. 40; Piper v. Smith, 1 Head, 93. In this latter case, however, the Court say that the weight of authority is the other way, " and it should be so held, if the question were an open one " in tl\at State, but they declare themselves concluded by the earlier cases of McAlister v. Montgomery, 3 Haywood, 94 ; Yeatman v. Woods, 6 Yerg. 20. In Wilcox V. Wilcox, 13 All. 252, Wells, J., says: "We are unable to see how the equities, which spring from the relation of copartnership, and are raised for the protection of the rights of the several copartners, inter sese, and of their joint creditors, can, by any principle of law or equity, be invoked by oiae class of the representatives of a deceased copartner against another class of representatives of the same copartner, each claiming the same interest and right. The legal estate passes to the heirs, with the incident of dower to the widow. Equity interfei-es for equitable jjurposes only. This right of each copartner to hold the real estate of the firm as security through him for the partnership debts, and to him for his advances and for the amount of his interest in the final results of the joint business, is often called an equitable lien. Now, when the joint debts are all paid, all balances between the several copartners fully adjusted, and there remains undivided real estate in which they are tenants in common, the legal title of each corresponding to his interest or share in the partnership, for what can one partner have any lien upon the share of the other in such real estate ? For what purposes, and upon what grounds, can he appeal to a court of equity to decree its sale? Certainly in Massachusetts, where equitable jurisdiction is given only ' where the parties have not a plain, adequate, and complete remedy at the common law,' such an appeal nuist fail ; a fortiori, Avould the executor or administrator liiil of any right to come into e(iuity for such a purpose." It is generally admitted, that, if there is an agreement that the land shall be considered as personal property, such agreement will be enforced be- tween the real and personal representatives. See Goodburn i'. Stevens, uhi supra; Hale v. Plummer, ubi supra; Galbraith v. Gedge, 16 B. Mon. 631. And it is held, that an agreement to buy and sell lands and share in the profits of the sale is such an agreement as will convert the lands abso- 164 PARTNERSHIP. [CHAP. VI. unless, indeed, a particular partner was specially clothed with the authority of all the partners, as the general agent of the partnership in the administration of its affairs. Hence, one partner could not ordinarily, in virtue of that relation alone, contract debts, which would be binding on all the partners, or alienate more than his share of the partnership property. Accord- ingly it is laid down in the Digest : Nemo ex sociis plus parte sua potest aliejiare, etsi totorum honorum socii sint} And again : In re communi nemlnem dominorum lutely into personalty as between heir and administrator. Heirs of Ludlow u. Cooper's Devisees, 4 Ohio St. 1. See NicoU v. Ogden, 29 111. 323; Coster V. Clarke, 3 Edw. Ch. 428 ; Wylie v. Wylie, 4 Grant, Cfi. (u. c.) 278. But see Dilworth v. Mayfield, 36 Miss. 40. The case of Dyer v. Clark, 5 Met. 562, is commonly cited as an authoi-ity against the doctrine of arbsolute conversion ; but the question as to right of heir and administrator in the partnership real estate does not seem to have been presented to the court. There ai'e numerous dicta sustaining the same view as in Buchan v. Sumner, 2 Barb. Ch. 165 ; Galbraith v. Gedge, 16 B. Mon. 631 ; Lang v. Waring, 25 Ala. 625 ; but in none of these cases does the precise point seem to have arisen for decision. On the other hand, in Pierce v. Trigg, 10 Leigh, 406, 427, is a dictum to the contrary, and the opinion of Chancellor Kent (3 Kent, 39, note b), and of Judge Story (1 Story, Eq. Jur. § 674), were in favor of the absolute conversion. See also Hoxie v. Carr, 1 Sumn. 173 ; Piper v. Smith, ubi supra. On the whole, the law does not seem to have advanced much beyond its condition when the author declared it open to many distressing doubts. If the doctrine that partnership real estate should pass to the widow and heirs of the partner, is finally adopted, many curious questions may arise, as Wliether this doctrine applies to a partner who had no legal, but only an equitable interest in the land .'' Whether, if partnership land is sold for the payment of debts, any surplus goes to the heir or to the executor, and if it goes to the heir, whether it goes as real or personal property .-^ Whether equity will compel the partnership creditor to exhaust the personal assets before proceeding against the real estate? There do not seem to be any decisions touching tliese points, except those under the general doctrines of equitable conversion and marshalling of assets. The avoidance of these and other similar difficult questions seems to be a practical reason for adopting the doctrine of absolute conversion.} > D. 17, 2, G8 ; Poth. Pand. 17, 2, n. 26, 27 ; Poth. de Soc. n. 89 ; Domat, 1, 8, art. 16. CHAP. VI.] PARTNERSHIP PROPERTY." 165 jure facere quicqiiam, invito altero, posse : uncle onan- ifesium est lyrohibendi jus esse} Those, who were specially appointed to administer the affairs of the part- nership, were called magistri societatis — ita magistri appellanturr Similar principles prevail in our day in the foreign law of many countries, whose jurisprudence is founded on the Roman law ; and especially in that of France.^ However, by the modern code of France, the partners are deemed to have given reciprocally to each other the power of administering one for the other, in default of any special stipulations as to the mode of administration.'* This, of course, leaves the rights of the partners to be governed by the general law of France, where such stipulations exist, although they may be unknown to third persons, and, of course, it may expose the latter to some hazards of loss or incon- venience, if thev trust to their confidence in a sinsjle partner, not notoriously authorized to administer for the partnership. § 96. The Scottish law has avoided this difficulty, and followed the general doctrine of the common law. By the Scottish law, it is implied from the very nature of partnership, that each partner is clothed with the complete power of administering the property and affairs of the partnership, as prcepositus negotiis socie- tatis, to the effect not only of holding possession of the property for the company, and of acquiring property for them in the course of their trade and business, but also to the effect of entering into contracts on behalf of the company, and binding the company by all acts in the 1 D. 10, 3, 28; Poth. Pand. 17, 2, n. 27. 2 D. 2, U, 14; Id. 50, 16, 57; Domat, 1, 8, 4, art. 16; 2 Bell, Comm. B. 7, p. 615, 5tli ed. =» Poth. de Soc. n. 66-72. * Code Civil, art. 1856, 1860. 166 ■ PARTNERSHIP. [CHAP. VI. ordinary administration of such trade and business.^ And it will make no difference in this respect, that there are private stipulations between the partners themselves prohibiting or restraining this right or authority ; for, as a general institorial power, it will still be deemed to exist in favor of third persons, who are ignorant of any such prohibitions or restrictions.^ § 97. Besides this community of interest in the capital stock, funds, and effects of the partnership, each partner has certain rights, liens, and privileges thereon. In the first place, no one partner has any right to share in the partnership property, except what remains thereof after the full discharge and pay- ment of all debts and liabilities of the partnership ; and, therefore, each partner has a right to have the same applied to the due discharge and payment of all such debts and liabilities, before any one of the part- ners, or his personal representatives, or his individual creditors, can claim any right or title thereto.^ In short, as between the partners themselves, the debts and liabilities of the firm to creditors and third per- sons are a fund appropriated, in the first instance, to the discharge and payment of such debts and liabil- ities, and there is, jaroperly speaking, as between them, a lien thereon, or at least an equity, which may be worked out through the partners in favor of the credi- tors, although it may not directly attach in the creditors by virtue of their original claims, in all cases.^ Each ' 2 Bell, Comm. B. 7, p. 615, 5th ed. 2 2 Bell, Comm. B. 7, p. 615, 5th ed. 3 Coll. on P. B. 2, c. 1, § 1, p. 77, 2d ed.; West v. Skip, 1 Ves. Sr. 239, 242; Ex parte Ruffin, 6 Ves. 119. * Ex parte RufHn, G Ves. 119, 126. — In this case Lord Eldon said: " It is the case of two partners, who owed several joint debts, and had joint effects. Under those circumstances their creditors, who had a demand iijion them in respect of those debts, had clearly no Hen whatsoever upon the CHAP. VI.] PARTNERSHIP PROPERTY. . 167 partner also has a specific lien on the present and future property of the partnership, not only for the debts and partnersliip effects. They had power of suing, and by process creating a demand, that would directly attach upon the partnership effects. But they had no lien upon or interest in them in point of law or equity. If any creditor had brought an action, the action would be joint; his execution might be either joint or several. He might have taken in execution both joint and separate effects. It is also true, that the separate creditors of each, by bringing actions, might acquire a certain interest even in the part- nership effects ; taking them in execution in the way, in which separate creditors can affect such property. But there was no lien in either. The partnership might dissolve in various ways ; first, by death ; secondly, by the act of the parties ; that act extending to nothing more than mere disso- lution ; M'ithout any special agreement as to the disposition of the property, the satisfaction of the debts, much less any agreement for an assignment from either of the partners to the others. The partnership might also be dissolved by the bankruptcy of one or of both, and by effluxion of time. If it is dis- solved by death, referring to the law of merchants, and the well-known doctrine of this Court, the death being the act of God, the legal title in some respects, in all the equitable title, would remain, notwithstanding the survi- vorship ; and the executor would have a right to insist, that the property should be applied to the partnership debts. I do not know that the partner- ship creditors would have that right ; supposing both remained solvent. So upon the bankruptcy of one of them there would be an equity to say, the assignees stand in the place of the banki'upt ; and can take no more than he could ; and consequently nothing until the partnership debts are paid. So, upon a mere dissolution, without a special agreement, or a dissolution by effluxion of time ; to wind up tlie accounts the debts must be paid, and the surplus be distributed in j^roportion to the different interests. In all these ways the equity is not that of the joint creditors, but that of the partners with regard to each other, that operates to the payment of the partnership debts. The joint creditors must of necessity be paid, in order to the administration of justice to the partners themselves. When the bankruptcy of both takes place, it puts an end to the partnership certainly ; but still it is very possible, and it oftens happens in fact, that the partners may have different interests in the surplus ; and out of tliat a necessity arises, tliat the partnership debts must be paid : otherwise the surplus cannot be distributed according to equity ; and no distinction has been made with reference to their interests, whether in different proportions, or equally. Many cases have occurred upon the distribution between the separate and joint estates ; and the principle in all of them, from the great case of Mr. Fordyce, has been, that if the Court should say, tliat what has ever been joint or separate property shall always remain so, the consequence would be, that no part- nership could ever arrange their affairs. Therefore a bona fide transmuta- tion of the property is understood to be the act of men acting fairly, wind- 168 PARTNERSHIP. [cHAP. VI. liabilities due to third persons, but also for his own amount or share of the capital stock, and funds, and for all moneys, advanced by him for the use of the firm, and also for all debts due to the firm'for moneys ab- stracted by any other partner from such stock and funds beyond his share.-^ / It follows from this principle, that if any partner takes the whole or a part of his share out of the partnership stock, the stock so taken, if identified, is applicable to the payment of what shall, upon an account taken, be found due from him to the partnership, before any of it can be applied to the payment of his debts, due to his own separate cred- itors ; for such partner has an interest in the stock only to the amount of the ultimate balance due to him, as his share of the stock.^ The same rule will apply to any other property, into which the partnership prop- erty may have been converted, so far and so long as its original character and identity can be distinctly traced.^ Hence it may be stated, as a general corollary from the foregoing considerations, that no separate creditor of any partner can acquire any right, title, or interest, in the part- nership stock, funds, or effects, by process or otherwise, merely in his character as such creditor, except for so much as belongs to that partner, as his share or balance, after all prior claims thereon are deducted and satisfied.'* ing up the concern, and binds the creditors ; and therefore the Court always lets the arrangements be, as they stand, not at the time of the commission, but of the act of bankruptcy." s. P. Ex parte Williams, 11 Ves. 3, 5 ; [Kirby v. Schoonmaker, 3 Barb. Ch. 46.] 1 Coll. on P. B. 2, c. 1, § 1, p. 77, 2d ed. ; West v. Skip, 1 Ves. Sr. 239, 242 ; Ex parte Ruffin, 6 Ves. 119. 2 Coll. on P. B. 2, c. 1, § 1, p. 78, 79, 2d ed. ; West v. Skip, 1 Ves. Sr. 239, 240, 242 ; Skipp v. Harwood, 2 Swans. 586 ; Crqil v. Pyke, 3 P. Wms. 180 ; Wats, on P. c. 2, p. 66, 2d ed. 3 Coll. on P. B. 2, c. 1, § 1, p. 78, 79, 2d ed. ; Ridgely v. Carey, 4 Har. & McH. 167. * {See § 261-264, and c. xv.} CHAP. VI.] PARTNERSHIP PROPERTY. 169 § 98. What properly constitutes partnership prop- erty may be, m some particular cases, an inquiry of no inconsiderable embarrassment and difficulty, although, when all the facts are established, the principles of law applicable to it are generally clearly defined. So far as personal j)ropei;ty is concerned, not only the capital, stock, funds, and other effects originally put into the partnership, but all the property subsequently acquired by the firm, by sale, barter, or otherwise, and all the debts and other claims arising in the course of the trade and business thereof, are deemed part of the partner- ship capital, stock, funds, and effects.^ So, all real es- tate, purchased for the partnership, and paid for out of the funds thereof, in whosesoever name it stands," is treated in the same manner.^ Leases of land, also, orig- inally granted to or for the partnership, or subsequently renewed during the partnership, for the purposes there- of, fall under the like predicament.'* In short, whatever property, whether real, or personal, or mixed, is pur- chased for the use and purposes of the partnership, and is chargeable to the same, is in the contemplation of courts of equity, even if not of courts of law, treated as a part of the effects thereof.^ § 99. There is a peculiar species of interest, which arises in cases of partnership, and is often treated as in some sort a part of the partnership property. It is what is commonly called the good- will of the trade or ' Coll. on P. B. 2, c. 1, § 1, p. 76-78, 2d ed. {But the capital stock may remain the property of one partner. See § 27. } ^ [But see Otis v. Sill, 8 Barb. 102, 122, as to such a rule at law, if the title is in only one partner.] ' Coll. on P. B. 2, c. 1, § 1, p. 82, 83, 2d ed. ; Jackson v. Jackson, 7 Ves. 535; 9 Ves. 591. {See § 93.} * Coll. on P. B. 2, c. 1, § 1, p. 83, 84, 101, 2d ed. ; Elliot v. Brown, 3 Swans. 489, note ; Alder v. Fouracre, 3 Swans. 489 ; Featherstonhaugh v. Fenwick, 17 Ves. 298 ; Gow on P. c. 2, § 1, p. 32-34,3d ed. ; Coles v. Coles, 15 Johns. 159, 161. * Story, Eq. Jur. § 674. 170 PARTNERSHIP. [cHAP. VI. business. This good-will may be properly enough de- scribed to be the advantage or benefit, which is acquired by an establishment, beyond the mere value of the cap- ital, stock, funds, or property employed therein, in con- sequence of the general public patronage and encour- agement, which it receives from constant or habitual customers, on account of its local position, or common celebrity, or reputation for skill or affluence, or punctu- ality, or from other accidental circumstances or necessi- ties, or even from ancient partialities or prejudices. Thus, an inn, a nursery of trees and shrubs, a favorite fashionable stand, or a newspaper establishment, may, and often does enjoy a reputation, and command a price beyond the intrinsic value of the property invested therein, from the custom, which it has obtained and secured for a long time ; and this is commonly called the good-will of the establishment.^ Lord Eldon upon one occasion said, that a good-will of this sort was noth- ing more than the probability, that the old customers will resort to the old place.^ It is certainly not a visi- ble, tangible interest, or a commodity, upon which a definite or fixed allowance can be made;^ nor, perhaps, would a contract, touching the conveyance thereof, be decreed to be specifically performed in equity.^ It is 1 See Cruttwell v. Lye, 17 Ves. 335 ; Coslake v. Till, 1 Russ. 376 ; Dougherty v. Van Nostrand, 1 Hoff. 68-70. See also an able review of the doctrine in 16 Am . Jur. 87-92 ; { Churton v. Douglas, H. R. V. Johns. 174 ; Austen v. Boys, 2 De G. & J. 626.} 2 Cruttwell V. Lye, 17 Ves. 335, 346. 3 Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. {The value of the good-will assigned exclusively to one partner on a dissolution, is what it would have produced if sold in the most advantageous manner, and at the proper time. MoUersh v. Keen, 28 Beav. 453. On the value of good-wUl in a part- nership-) of limited duration see Austen v. Boys, 24 Beav. 598 ; s. c. on ap- peal, 2 De G. & J. 626.} ^ Baxter v. Conolly, 1 Jac. & W. 576 ; Coslake v. Till, 1 Russ. 376, 378 ; Shackle v. Baker, 14 Ves. 468. {Cooper v. Hood, 26 Beav. 293; Robert- son V. Quiddington, 28 Beav. 529.} CHAP. VI.] PARTNERSHIP PROPERTY. 171 not, therefore, strictly speaking, a part of the partner- ship effects, of which, upon a dissolution thereof, a di- vision can be compelled, unless, indeed, in cases, where a sale of the whole premises and stock will be ordered ; and then the good- will will accompany such sale, and may create a speculative value in the mind of a pur- chaser, of which each partner will be entitled to his share of the benefit.^ But the term " good-will " is sometimes applied to another case, where a retiring partner contracts not to carry on the same trade or business at all, or not within a given distance. This is an interest, which may be valued between the parties, and may therefore be assigned \vith the premises and the rest of the effects to the remaining partner, as an accompaniment of the ordinary good-will of the estab- lishment.^ Good-will, in the former sense, is therefore ' Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. ; Id. c. 3, § 4, p. 214-218 ; Crawshay v. Collins, 15 Ves. 218, 227; Crutwell u.»Lye, 1 Rose, 123; Featberstonhaugh v. Fenwiek, 17 Ves. 298, 309, 310 ; Dougberty v. Van Nostrand, 1 Hoff. 68-70; Gow on P. c. 5, § 4, p. 349, 350, M ed. — Lord Rosslyn, in Hammond v. Douglas, 5 Ves. 539, held, that the good-will of a trade, carried on without articles, survives, and is not to be considered as partnership stock, to which the representatives of a deceased partner have any right. But Lord Eldon, in Crawshay r. Collins, 15 Ves. 227, expressed doubts of the pi'opriety of that determination, considering it difficult to draw any solid distinction between the lease of the partnership premises, and the good-will, which consists in the habit of the trade being conducted on those premises. Gow on P. c. 5, § 4, p. 349, 3d ed. ; Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. {On a sale of partnership property and busi- ness, the good-will will be included. Williams v. Wilson, 4 Sand. Ch. 379 ; Holden's Adm'rs v. M'Makin, 1 Pars. Eq. Cas. 270 ; Marten v. Van Schaick, 4 Paige, 479. In this last case a receiver was appointed to carry on a news- paper for the purpose of presei-ving the good-will, but to sell without delay. The right to use the name of a periodical must be sold for the benefit of a partnership on its dissolution. Bradbury v. Dickens, 27 Beav. 53. See Mellersh v. Keen, 28 Beav. 453 ; Turner v. Major, 3 Giff. 442. The estate of a deceased partner participates in the good-will.. Smith v. Everett, 27 Beav. 446, Wade v. Jenkins, 2 Giif. 509. See Wedderburn r. Wedderburn, 22 Beav. 84, 104 ; Davies v. Hodgson, 25 Beav. 177, and the following note. } °- Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. ; Id. c. 3, § 4, p. 214- 218, and note ; Bryson v. Whitehead, 1 Sim. & St. 74 ; Harrison v. Gard- 172 PARTNERSHIP. [CHAP. YI. an advantage arising from the mere fact of sole owner- ship of the premises, stock, or establishment, without ner, 2 Madd. 198 ; Cruttwell v. Lye, 17 Yes. 335 ; Gow on P. c. 5, § 4, p. 349, 3d ed. — Lord Eldon, in Kennedy v. Lee, 3 Mer. 441, 432, speaking on this subject, used the following language: " AVhere two persons are jointly interested in trade, and one by purchase becomes sole owner of the partnership property, the very circumstance of sole ownership gives him an advantage beyond the actual value of the property, and which may be pointed out as a distinct benefit, essentially connected with the sole owner- ship. In the case of the trade of a nursery-man, for instance, the mere knowledge of the fact, that he is sole owner of the property, and in the sole and exclusive management of the concern, gives him an advantage which the other partner, supposing him to carry on the same trade, with other property, not the partnership property, would not possess. In that sense, therefore, the good-will of a trade follows from, and is connected with, the fact of sole ownership. There is another way, in which the good- will of a trade may be rendered still more valuable ; as by certain stipula- tions entered into between the parties at the time of the one relinquishing his share in the business ; as by inserting a condition, tliat the withdrawing partner shall not carry on the same trade any longer, or that he shall not carry it on within a certain distance of the place, where the partnership trade was carried on, and where the continuing partner is to carry it on upon his own sole and separate account. Xow it is evident, that in neither sense was the good-will of this trade at all considered, as among the sub- jects of the valuation to be made by either party. It was not so considered by the plaintiff, when he wrote his letter of the 21st of October. The words ' concern ' and ' inheritance ' are used inartificially, and cannot be construed as having any reference but to the actual subjects of valuation. And when the plaintiff offers to take the business himself, he could not have forgotten, that the defendant's own estate of Butterwick, lay contiguous to the partnership property, and therefore his introducing no stipulation, with reference to the fact of its contiguity, is a clear intimation, that when he wrote this letter, he had no intention, in offering to take the partnership property, to purchase with it the good-will, in the sense of restricting the defendant from carrying on the trade in its vicinity. In that sense, at least, therefore, the good-will of the trade was not the subject of contract, or treaty even, between the parties." {If a partnershijD is dissolved, each part- ner, in the absence of agreement, can carry on business in the name of the old firm. Banks v. Gibson, 34Beav. 566. See Dent v. Turpin, 2 John. & Hem. 139. The surviving partner can carry on the same trade. Davies v. Hodgson, 25 Beav. 177. Hence, though the estate of a deceased partner par- ticipates in tlie good-will (see previous note) , yet as the surviving partner, after the sale of the partnership business, can at once set up a similar business in the same place, the good-will will often sell for but little. Lind. on P. 710 ; Smith D.Everett, 27 Beav. 446; Davies i'. Hodgson, 25 Beav. 177 ; Cook v. CHAP. VI.] PARTNERSHIP PROPERTY. 173 reference to other persons, as rivals ; and in the latter sense, as an advantage arising from the fact of exclud- ing the retiring partner from the same trade or busi- ness, as a rival. ^ It seems that good-will can constitute a part of the partnership effects or interests only in cases of mere commercial business or trade ; and not in cases of professional business, Avhich is almost neces- sarily connected with personal skill and confidence in the particular partner.^ § 100. Under this head a curious question has arisen; and that is, whether the right to use the firm name is a part of the good-wdll belonging to the partnership, Collingridge, Jac. 607. The form of the decree in Cook v. Collingridge is given at 27 Beav. 456. In Churton v. Douglas, H. R. V. Johns. 174, Wood, V. C, says that, on a sale, by the retiring partner to the other partner of the good-will, the retiring partner may set up a precisely similar business next door, provided he sets it up distinctly as a separate business. In Hall v. Barrows, 10 Jur. Is', s. 55; s. C. 33 L. J. n. s. Ch. 204, Lord Westbury, C, held that under a stipulation in articles that the surviving partner sliould have the option of taking all the jjartnership stock on paying to the representa- tive of the deceased partner the value of his share, the good-will must be included in the valuation, but on the looting that the surviving ])ai'tner was at liberty to set up and carry on the same business as that of the partner- ship. See Johnson v. Helleley, 34 Beav. 63 ; s. c. on appeal, 2 De G. J. & S. 446. In Hall v. Hall, 20 Beav. 139, a retiring partner was not allowed to share in the value of the good-will, though the stipulations of the articles were much like those in Hall v. Barrows : the decision seems hardly to be re- conciled with that case. It thus appears tliat the good-will of a partnership is of little value after dissolution, for lack of power in the courts to restrain tlie former or surviving partners from carrying on a similar business. In Wil- liams V. Wilson, 4 Sand. Ch. 379, the court assumed this power, and on a sale of partnershi]) property and the good-will of the business, ordered that either ol' the Ibrmer partners might be a purchaser; but that, except they purchased, they should be restrained from conducting the same business, directly or indirectly, in the same city. See § 100, 210-212, Turner v. Major, 3 Giff. 442. } > Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. ; Gow on P. c. ."., § 4, p. 349, 350, 3d ed. * Farr v. Pearce, 3 Madd. 74, 76; Coll. on P. B. 2, c. 1, § 1. p. 103, 104, 2d ed. ; Gow on P. c. 5, § 4, p. 349, 350, 3d ed. ; j Austen v. Boys, 2 DeG. &. J. 62G.} 174 PARTNERSHIP. [cHAP. VI. or whether in case of the dissohition thereof by the death of the partner, it belongs to the survivors. That the right to use the name of a known and celebrated firm, especially in the case of manufactures, is often a very valuable possession, is unquestionable ; and, there- fore, courts of equity will often interpose to protect the right against the abuse of third persons, in using it for their own advantaije.^ But it has been thouojht, that this right, however valuable, does not fall within the true character and nature of good-will; but that it belongs to the surviving partner.^ ' Eden on Injunct. c. 14, p. 314, 315 ; Motley v. Downman, 3 Myl. & C. 1, 14, 15; Millington v. Fox, 3 Myl. & C. 338; 2 Story, Eq. Jur. § 951 ; Knott V. Morgan, 2 Keen, 213, 219 ; Webster v. "Webster, 3 Swans. 490, n. ; Gow on P. c. 2, § 4, p. 109, 3d ed. {The name of a firm may be a trade- mark. Holloway v. Holloway, 13 Beav. 209 ; Lawson v. Bank of Loudon, 18 C. B. 84 ; Welch v. Knott, 4 K. & J. 747 ; Burgess v. Burgess, 3 De G., Macn. & G. 896 ; Hall v. Barrows, 9 Jur. x. s. 483 ; s. c. 32 L. J. n. s. Cb. 548 ; on appeal, 10 Jur. n. s. 55, s. c. 33 L. J. n. s. Ch. 204 ; Bradbury V. Dickens, 27 Beav. 53. | ^ Lewis u. Langdon, 7 Sim. 421. — In this case Vice-Chancellor Sbad- well said: "The question in this case depends on the right, in the surviv- ing partner, to carry on the business under the name of the jiartnership. Lord Eldon, certainly, has expressed a doubt, in the case of Crawshay v. Collins, 15 Ves. 227, upon what has been understood to be the proposition laid down by Lord Rosslyn, in the case of Hammond v. Douglas, 5 Ves. 539. It is true, that the question might have been, to a certain degree, whether, hav- ing regard to what had taken place, the money should be considered to be- long to one party, rather than to another ; and it is also observable, that Lord Eldon mio;ht have been throwing out his observations with reference to a supposed connection between the place where the business was carried on, and the good-will. But it occurs to me, that if the good-will is to be con- sidered as a salable article, which belongs to the partnership, then this con- sequence must follow ; namely, that the surviving partner must be under an obligation to carry on the trade for some time after his partner's death, in or- der that the thing, which is said to be salable, may be preserved until it can be sold. If a partnership were carried on between A. and B. under the name of Smith & Co., and the surviving partner chose to discontinue the busi- ness, and to write to the customers, and say, that his partner was dead, and that the business was at an end, the effect would be, that that, which is said to be salable, would cease to exist. Now, what power is there in a court of equity, to compel a partner to carry on a trade after the death of his co- CHAP. VI.] PARTNERSHIP PROPERTY. 175 pa/tnor, merely that, at a ftture time, the good-will, as it is called, may be sold ? It is plain, that, unless there is such a power in this court, it must be in the discretion of the surviving partner to determine, what shall be done ■with the good-will ; and, if that is the case, it must be his property. I can- not but think, when two partners carry on a business in partnership together under a given name, that, during the partnership, it is the joint right of them both to carry on the business under that name, and that, upon the death of one of them, the right which they before had jointly, becomes the separate right of the survivor." See also "Webster v. Webster, 3 Swans. 490, n. {If a partnership is dissolved, each partner, in the absence of agreement, can carry on business in the name of the old firm. Banks v. Gibson, 34 Beav. 566. See Dent v: Turpin, 2 John. & Hem. 139. The firm name survives to a surviving partner, and cannot, therefore, be sold as part of the partnership assets. Robertson v. Quiddington, 28 Beav. 529. See Smith v. Everett, 27 Beav. 446. J. D., a member of a firm styled J. D. & Co., assigned his interest in the business and the good-will thereof to his late partners, who continued to carry on the business under a new name with the addition " late J. D. & Co." J. D. took a partner and set up in the same neighborhood in a similar business under the name of J. D. & Co. He was restrained by injunction. Churton v. Douglas, H. R. V. Johns. 174. Mr. Lindley, (Lind. on P. 710,) says : " In the event of dissolution bv death, it has been said that the good-will survives. But this is not correct, if ^it is meant that the value of the good-will, as such, be- longs to the survivor. It undoubtedly may hapjDen that the survivor may ob- tain the benefit of the good-will, without paying for it ; for he is at liberty, (unless restrained by agreement) to carry on business on his own account, and, it is said, in the name of the late firm. See Webster v. Webster, 3 Swans. 490, and Hammond v. Douglas, 5 Ves. 539. But see contra, Smith V. Everett, 27 Beav. 446. The executor of the deceased partner has no right to do this. Lewis v. Langdon, 7 Sim. 421. Under these circum- stances, if, on the death of a partner, the good-will is put up for sale, it will produce nothing if it is known that the surviving partner will exercise his rights. He will, therefore, acquire all the benefit of the good-will ; but he does not acquire it by survivorship, as something belonging to him exclu- sively, and with which the executors of the deceased partner have no concern ; for if he did, he might sell the good-will for his own benefit, and this he can- not do. See Smith v. Everett, 27 Beav. 446 ; Wedderburn v. Wodderburn, 22 Beav. 84, 104. (Hammond v. Douglas, 5 Ves. 539 is not consistent with the statement in the text, but this case has been much doubted, and is against all principle.) When, therefore, it is said that, on tlje death of one partner, the good-will of the firm survives to the other, what is meant is, that the sur- vivor is entitled to all the advantages incidental to his former connection with the firm, and that he is under no obligation, in order to render those advantages salable, to retire from business himself." See § 99. } 176 PARTNERSHIP. [cHAP. YIl. CHAPTER VIL POWERS AND AUTHORITIES OF PARTNERS. {§ 101. Power over the partnership property. General assignments. 102. Partners have all powers incident to the trade. 102 a. Power to give negotiable paper. 103, 104. Necessity of general powers in partners. 105. Misconduct of partner does not affect liability to third parties. 106. Nor does the constitution of the partnership. 107. Representations and admissions of a partner. 108. Liability for frauds by a partner. 109. Power of partners in the Roman and French law. 110. Limitations on a partner's power. 111. 112. Powers confined to the scope of the oi'dinary business of the partnership. 113. Determination of this scope. 114. A partner cannot submit to arbitration. 115. Though he may compromise or release a debt. 116. Roman law. 117. One partner cannot bind the others by deed. 118. Roman law. 119. Illustrative cases. 120. Limitation of the rule. 121. Whether authority to seal must be given under seal. 122. ^American doctrine. 122 a. A partner cannot bind a firm before its establishment. 123. Power of a majority. 124. Roman law. 125. Majority cannot change the partnership articles.} § 101. As to the powers and authorities of the part- ners during the existence of the partnership (for their powers and authc^ities upon the dissokition thereof will be considered hereafter, in another place), they have been in part already suggested. In the first place, when- ever there are written articles, or particular stipulations between the partners, these will regulate their respect- ive powers and authorities inter sese, although not, if CHAP. VII,] POWERS AND AUTHORITIES. 177 unknown, in their dealings with third persons.^ But, independently of any such articles or stipulations ex- pressed, each partner is Pi^cepositus negotiis societatls, and each partner, virtide officii, possesses an equal and general power and authority in behalf of the firm, to transfer, pledge, exchange, or apply or otherwise dis- pose of the partnership property and effects, for any and all purposes within the scope and objects of the partner- ship, and in the course of its trade and business.^ Or, as was said by a learned judge upon a recent occasion, " One partner by virtue of that relation (of partner- ship) is constituted a general agent for another as to all matters within the scope of the partnership deal- ings, and has communicated to him, by virtue of that relation, all authorities necessary for carrying on the partnership, and all such as are usually exercised by partners in that business, in which they are engaged. Any restriction which, by agreement amongst the j^art- ners, is attempted to be imposed upon the authority which one possesses as a general agent for the other, is operative only between the partners themselves, and does not limit the authority as to third persons, who acquire rights by its exercise, unless they know that such restrictions have been made." ^ The power ex- tends also to assignments of property of the firm, as a security for antecedent debts, as well as for debts there- after to be contracted on account of the firm.'* Nor will it make any diff"erence, whether the assignment be ' 3 Kent, 40-42; U. S. Bank r. Binney, 5 Mason, 176; s. c. 5 Pet. 529 ; Coll. on P. B. 3, c. 1, p. 259, 260, 2d ed. ^ 3 Kent, 40-46 ; Story on Ag. § 37, 39, 124 ; Coll. on P. B. 2, c. 2, § 1, p. 129, 2d ed. ; Gow on P. c. 2, § 2, p. 36, 51-53, 3d ed. ; 2 Bell, Comm. B. 7, c. 1, p. 615, 616, 5th ed. 3 Hawken v. Bourne, 8 M. & W. 703, 710. •• Harrison v. Sterry, 5 Cranch, 289 ; Anderson c. Tompkins, 1 Brock. 456 ; Tapley v. Butterfield, 1 Met. 515. 12 178 PARTNERSHIP. [CHAP. TIL for the benefit of one creditor, or of several, or of all of the joint creditors.^ But it may well admit of some doubt, whether this power extends to a general assign- ment of all the funds and effects of the partnership by one partner, for the benefit of creditors ; for such an assignment would seem to amount of itself to a sus- pension or dissolution of the partnership itself.^ The 1 Ibid. 2 Pearpoint v. Graham, 4 Wash. C. C. 232; [Dana v. Lull, 17 Vt. 390; Cullum V. Bloodgood, 15 Ala. 34; Deming v. Colt, 3 Sand. .:284 ; Hayes V. Heyer, 3 Sand. 284; Wilson v. Soper, 13 B. Mon. 411; Fisher v. Murray, 1 E. D. Smith, 341; Mabbett v. White, 2 Kern. 442; Kemp v. Carnley, 3 Duer, 1; Kirby v. Ingersoll, 1 Dougl. (Alich.), 477, Harrington, Ch. 172. If, however, one partner has abandoned all control of the business, an assignment by the other is valid, if an equal distribution is thereby secured. Kemp v. Carnley, 3 Duer, 1] ; Deckertu. Filbert, 3 W. & S. 454. — In this case, it was held, that after a dissolution of partnership, one partner could not make a voluntary assignment of the effects of the partnership for the benefit of creditors against the express dissent of his copartner. In Anderson v. Tompkins, 1 Brock. 456, Mr. Chief Justice Marshall affirmed the authority of one partner to assign all the partnership effects for the pay- ment of the creditors thereof. On that occasion, he said : " It will be readily conceded, that a fraudulent sale, whether made by deed or otherwise, would pass nothing to a vendee concerned in the fraud. But, with this exception, I feel much difficulty in setting any other limits to the power of a partner, in disjjosing of the effects of the comjiany, purchased for sale. He may sell a yard, a piece, a bale, or any number of bales. He may sell the whole of any article, or of any number of articles. This power certainly would not be exercised in the presence of a partner, without consulting him ; and if it were so exercised, slight circumstances would be sufficient to render the transac- tion suspicious, and, perhaps, to fix on it the imputation of fraud. In this respect, every case must depend on its own circumstances. But with respect to the power, in a case perfectly fair, I can perceive no ground on which it is to be questioned. But this power, it is said, is limited to the course of trade. What is understood by the course of trade ? Is it that which is act- ually done every day, or is it that which may be done whenever the occa- sion for doing it presents itself? There are small traders, who scarcely ever, in practice, sell a piece of cloth uncut, or a cask of spirits. But may not a partner in such a store sell a piece of cloth, or a cask of spirits ? His power extends to the sale of the article, and the course of trade does not limit him as to quantity. So with respect to larger concerns. By the course of trade is understood dealing in an article in which the company is accustomed to deal ; and dealing in that article for the company. Tompkins and Murray CHAP. VII.] POWERS AND AUTHORITIES. 179 doctrine, however, is strictly confined to personal prop- erty, and does not extend to real estate held by the sold goods. A sale of goods was in the course of their trade, and within the power of either partner. A fair sale, then, of all or of a part of the goods was within the power vested in a partner. This reasoning applies with increased force, when we consider the situation of these partners. The one was on a voyage to Europe, the other in possession of all the partnership effects for sale. The absent partner could have no agency in the sale of them. He could not be consulted. He could not give an opinion. In leav- ing the country, he must have intended to confide all his business to the partner, who remained, for the purpose of transacting it. Had this then been a sale for money, or on credit, no person, I think, could have doubted its ob- ligation. I can perceive no distinction in law, in reason, or in justice, between such a sale and the transaction which has taken place. A mercliant may rightfully sell to his creditor, as well as for money. He may give goods in payment of a debt. If he may thus pay a small creditor, he may thus pay a large one. The quantum of debt, or of goods sold, cannot alter the right. Neither does it, as I conceive, affect the power, that these goods were con- veyed to trustees to be sold by them. The mode of sale must, I think, depend on circumstances. Should goods be delivered to trustees for sale, without necessity, the transaction would be examined with scrutinizing eyes, and might, under some circumstances, be impeached. But if the necessity be ai^parent, if the act is justified by its motives, if the mode of sale be such as the circumstances require, I cannot say, that the partner has exceeded his power. This is denominated a destruction of the partnership subject, and a dissolution of the partnership. But how is it a destruction of the subject ? Can this appellation be bestowed on the application of the joint property to the payment of the debts of the company ? How is it a dissolution of the partnership ? A partnership is an association to carry on business jointly. This association may be formed for the future before anj' goods are accjuired. It may continue after the whole of a particular purchase has been sold. But either partner had a right to dissolve this partnership. The act, however, of applying the means of carrying on their business to the payment of their debts, might suspend the operations of the company, but did not dissolve the contract, under which their operations were to be conducted." In Egberts v. AVood, 3 Paige, 517, 523, 524, Mr. Chancellor Walworth said: "It appears to be the better opinion, that one of the partners, at any time during the existence of the partnership, may assign the partnership effects, in the name of the firm, for the payment of the debts of the company, although by such assignment a preference is given to one set of creditors over another. In the case of Dickinson v. Legare and others, cited by the complainant's counsel from the Equity Reports of South Carolina, 1 Desaus. 537, the Court of Chancery of that State decided against the validity of an assignment of all the pai'tnership eSects, made by one of the partners, without the knowledge or consent of the other, to pay the debt of a particular creditor. Chancellor 180 PARTNERSHIP. [CHAP. VII. partnership ; for in such a case the partner, who exe- cutes the deed of conveyance, can transfer no more title Matthews, who delivered the opinion of the court in that case, admits, that it was a question of the first impression, no case analogous to it having come under the view of the court. That assignment, however, was made under very peculiar circumstances. The company during the revolutionary war were doing business in this country. And while one of the partners was on a voyage to France, he was taken by a British ship of war, and carried as a prisoner to England, where he was prevailed upon by a creditor residing there, to give him a general assignment of all the partnership funds, which funds were then in this country, to secure the payment of his particular debt against the firm. Although the decision was put upon the general ground, that one partner had not the right to assign the partnership funds in this manner, without the consent of his copartner, there is no doubt that the par- ticular circumstances, under which that assignment took place, had a very considerable influence in bringing the mind of the Chancellor to that result. The assignment in that case being made by a citizen of one of the United States, during the existence of the war, to an alien enemy and in an enemy's country, was probably void by the laws of war, so far at least as to prevent its being carried into effect by any of the courts of this country. And cer- tainly it could not be considered as made according to any mercantile usage. That decision, however, has been recently overruled by the Court of Appeals in the same State, in the case of Robinson v. Crowder, 4 McCord, 519; where it was held, that an assignment by one partner of all the effects of the firm in payment of the partnership debts was valid, as against his copartners. In Pearpoint v. Graham, 4 Wash. C. C. 232, in the Circuit Court of the United States for the district of Pennsylvania, Judge Washington doubted the right of one of the partners, without the consent of the others, to assign the whole of the partnership effects in such a manner as to terminate the partnership. But he declined expressing any decided opinion upon this question, which he considered unnecessary to the decision of the cause then before him ; as, in that case, the copartner had subsequently assented to the assignment. In Mills V. Barber, 4 Day, 428, the Supreme Court of Errors in Connecticut decided, that one partner, without the knowledge of the other, might make a valid assignment of partnership funds, to secure the payment of a debt due from the firm. See Forkner v. Stuart, 6 Gratt. 197. And in Harrison w Sterry, 5 Cranch, 289, the Supreme Court of the United States decided, that one of the partners might assign the partnership effects to a trustee, for the security or payment of the creditors of the firm, without the concurrence of his copartners. I do not intend, in this case, to express any opinion in favor of the validity of such an assignment of the partnership effects to a trustee by one partner, against the known wishes of his copartner, and in fraud of his right to participate in the distribution of the jjartnership funds among the creditors, or in the decision of the question, which of those creditors should have a preference in payment, out of the effects of an insolvent concern. CHAP. VII.] POWERS AND AUTHORITIES. 181 than he possesses ; and he cannot transfer the property belonging to the firm, whether it was conveyed directly As a Court of Equity, upon a proper application, would protect the rights of the several partners in this respect, before an assignment had actually been made, and if they could not agree among themselves, would ajjpoint a receiver of the effects of the partnership, and would apply them in payment of all the debts due from the firm ratably, it might perhaps apply the same rule to the case of an assignment to a trustee for the payment of the favorite credi- tors of one of the partners only, where the equitable rights of the parties had not in fact been changed by any proceedings under the assignment." — But in the subsequent case of Havens v. Hussey, 5 Paige, 30, 31, the Chancellor greatly qualified that ojiinion. On that occasion he said: "In the case of Egberts v. Wood, 3 Paige, 517, I had occasion to refer to most of the cases relative to assignments of partnership^ effects made by one of the copartners. And I then arrived at the conclusion, that, from the nature of the contract of copartnership, one of the partnership might make a valid assignment of the partnership effects, or so much thereof as was necessary for that purpose, in the name of the firm, directly to one or more of the creditors in payment of his or their debts : althouirh the effect of such assignment was to aive a preference to one set of creditors over another. But as it was not necessary for the decision of that case, I did not express any opinion, as to the validity of an assignment of the partnership effects by one partner, against the known wishes of his copartner, to a trustee, for the benefit of the favorite creditors of the assignor; in fraud of the rights of his copartner to participate in the distribution of the partnership effects among the creditors, or in the decision of the question as to which of the creditors, if any, should have a preference in payment out of the effects of an insolvent concern. The present case presents that point distinctly for the decision of the court. And upon the most deliberate examination of the question, I am satisfied, that the decision of the Vice-Chancellor is correct ; that such an assignment is both illegal and inequit- able, and cannot be sustained. The principle, upon which an assignment by one partner in payment of a partnership debt rests, is, that there is an implied authority for that purpose from his copartner, from the very nature of the contract of partnership ; the payment of the company debts being always a part of the necessary business of the firm. And while eitlier party acts fairly within the limits of such implied authority, his contracts are valid, and bind- ing upon his copartner. One member of the firm, therefore, without any express authority from the other, may discharge a j>artnership debt, either by the payment of money, or by the transfer to the creditor of any other of the copartnership effects ; although there may not be sufficient left to pay an equal amount to the other creditors of the firm. But it is no part of the ordinary business of a copartnership, to appoint a trustee of all the part- nership effects, for the purpose of selling and distributing the proceeds among the creditors in unequal proportions. And no such authority as that can be implied. On the contrary, such an exercise of power by one 182 PARTNERSHIP. [cHAP. VII. to the firm, or held in trust ; for it belongs to the part- ners as tenants in common, and neither of the partners can convey more than his undivided interest.^ of the firm, without the consent of the other, is in most cases a virtual dissohition of the copartnership ; as it renders it impossible for the firm to continue its business. The case of Harrison v. Sterry, 5 Cranch, 289, which, perhaps, has gone as far as any other on this subject, was not sustained as an assignment of all the partnership effects to a trustee for the payment of preferred creditors. It professed to be the transfer of a certain specific portion of the partnership property, for the purpose of saving the credit of the firm, and to raise funds to carry on the partnership business. And upon the ground that it was not in fact what it professed to be, but was merely intended to give a preference to particular creditors, the court held the assignment void, as a fraud upon the bankrupt laws. It was only upon the supposition, that the assignment was in fact what it professed to be, that Chief Justice Marshall held it to be within the power usually exercised by a managing partner." In Hitchcock v. St. John, 1 Hoff. 511, Mr. Vice- Chancellor Hofi'man decided against the authority of one partner to make any general assignment, allowing preferences, and said : " The power to make a sale of the partnership effects resides in each partner while the relation exists. The power to bind the firm upon a purchase equally exists in each, although the goods never came into joint stock. All these instances of authority, as well as that to make negotiable paper, flow from the principle, that each is the agent of the whole. But for what is he such agent ? For the purposes of carrying on the business of the firm, and because the autliority to do the act is implied from the nature of the business. Best, J., in Barton v. Williams, 5 B. »S: Aid. 395, 405. Xow a transfer of all the effects of a firm for payment of its debts, is a virtual dissolution of the partner- ship. It supersedes all the business of the firm, as such. It takes from the control of each all the property with which such business is conducted. The purposes of the business then clearly do not require that such a power should be implied. What other reason is there for holding, that by the contract of partnership it is to be inferred ? I do not think that the principle insisted upon by the counsel for the defendant is the true one, namely, that such a transfer is only invalid, when it operates as a fraud upon the other partner; when, for example, it is made against his wishes, and to give preferences, which he is unwilling to give. It strikes me that the principle, upon which the invalidity is established, lies deeper. I consider that neither during the existence, nor after the dissolution of a partnership, can such a transfer be made, because of want of power in any one partner to make it. A direct payment of money, or a transfer of property to an acknowl- edged creditor, is an admitted and a necessary power, during the existence of the partnership. We probably are compelled by authorities to go so far * Anderson v. Tompkins, 1 Brock. 456, 463. {See § 94.} CHAP. VII.] POWERS AND AUTHORITIES. 183 § 102. Each partner may, in like manner, enter into any contracts or engagements on behalf of the firm in the ordinary trade and business thereof; as for example, by buying, or selling, or pledging goods,^ or by paying, or receiving, or borrowing moneys, or by drawing, or negotiating, or indorsing, or accepting bills of exchange, and promissory notes, and checks, and other negotiable securities, or by procuring insurance for the firm, or by doing any other acts, which are incident or appropriate as to say, that it is a necessary surviving power after a dissolution, in -what- ever way that is effected. All that is requisite to test the transfer is the amount of debt, and the extent of the fund assigned. But upon an assign- ment of the property of a firm to a trustee, a complication of duties and responsibilities is involved. An agent is appointed to control and dispose of the whole. The capacity, integrity, and industry of another are brought to the management; and the fitness of the party selected is judged of solely by one member of the firm. From what part or principle of the partnership relation can such an authority emanate ? It is impossible to uphold a rule, which would rob every member of a firm of a voice and share in this last, and probably most important act of a failing house. It is no contradiction of this doctrine, that, where the assignment is made after insolvency, and divides the funds with perfect equality among all the creditors, it will be supported. It is clear, that either partner might file a bill, obtain an injunction and receiver, and insure an equal distribution of all the funds. An assignment fairly securing the same equality is an object of favor in this court. In the absence of any indication on the part of the copartner of a contrary inten- tion, it may well be inferred, that he consents to do justice. A serious question might indeed arise in a case in which, after such an assignment by one partner, the other should make a transfer of a specific piece of property, in payment of a just debt of the firm." There is no small difficulty in supporting the doctrine, even with these qualifications, that one partner may make a general assignment of all the partnership property. {Graser v. Stellwagen, 25 N. Y. 315; Welles v. March, 30 N. Y. 344; Robinson v. Gregory, 29 Barb. 560; McClelland v. Remsen, 36 Barb. 622; Palmer v. Myers, 43 Barb. 509 ; Pettee v. Orser, 6 Bosw. 123 ; Kiml)all v. Hamilton Fire Ins. Co. 8 Bosw. 495; Hennessy v. Western Bank. 6 W. & S. 300; Sloan V. Moore, 37 Penn. St. 217 ; M'Cullough v. Sommerville, 8 Leigh, 415 ; Hughes v. Ellison, 5 Mo. 463 : Drake v. Rogers, 6 Mo. 317 ; Forbes V. Scannell, 13 Cal. 242; Barcrofl v. Snodgrass, 1 Coldwell, 430; 1 Am. Lead. Cas. 444, 4th ed.} 1 {One partner may execute a valid mortgage of a vessel owned by the firm. Ex parte Howden, 2 Mont. D. & De G. 574; Patch v. Wheatland, 8 All. 102.} 184 PARTNERSHIP. [CHAP. VII. to such trade or business, according to the common course and usages thereof.^ So each partner may con- ' 3 Kent, 40-42 ; Story on Ag. § 37, 124 ; Coll. on P. B. 3, c. 1, § 4, p. 282, 2d ed. ; Id. B. 2, c. 2, § 1, p. 128, 129 ; Id. B. 3, c. 1, p. 259 ; Id. § 1, p. 263, 268-293 ; Gow on P. e. 2, § 2, p. 36-69, 3d ed. ; Id. c. 4, § 1, p. 146, 147; Wats, on P. c. 4, p. 167, 2d ed. ; Id. p. 195. — The cases on this subject are exceedingly numerous. Many of them will be found col- lected in the elementary wi'iters in the pages above cited. See also Swan V. Steele, 7 East, 210 ; Hope v. Cust, cited by Lawrence, J., in 1 East, 53 ; Sandilands v. Marsh, 2 B. »& Aid. 673 ; U. S. Bank v. Binney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; South Carolina Bank v. Case, 8 B. & C. 427 ; Liv- ingston V. Roosevelt, 4 Johns. 251 ; Fisher v. Tayler, 2 Hare, 218, 229. In Winship v. Bank of U. S. 5 Pet. 629, 561, Mr. Chief Justice Marshall, in delivering the opinion of the court, said: " Partnerships for commercial purposes, for trading with the world, for buying and selling from and to a great number of individuals, are necessarily governed by many general principles, which are known to the public, which subserve the purpose of justice, and which society is concerned in sustaining. One of these is, that a man, who shares in the profit, although his name may not be in the firm, is responsible for all its debts. Another, more applicable to the subject under consideration, is, that a partner, certainly the acting partner, has power to transact the whole business of the firm, whatever that may be, and consequently to bind his partners in such transactions, as entirely as himself. This is a general power, essential to the well conducting of business ; which is implied in the existence of a partnership. When, then, a partnership is formed for a particular purpose, it is understood to be in itself a grant of power to the acting members of the company to transact its business in the usual way. If that business be to buy and sell, then the individual buys and sells for the company, and every person, with whom he trades in the way of its business, has a right to consider him as the company, whoever may compose it. It is usual to buy and sell on credit ; and if it be so, the partner, who purchases on credit in the name of the firm, must bind the firm. This is a general authority held out to the world, to which the world has a right to trust. The articles of copartnership are perhaps never published. They are rarely if ever seen, except by the partners themselves. The stipulations they may contain are to regulate the conduct and rights of the parties, as between themselves. The trading world, with whom the company is in 25erpetual intercourse, cannot individually examine these articles, but must trust to the general powers contained in all partnerships. The acting partners are identified with the company, and have power to conduct its usual business, in the usual way. This power is conferred by entering into the partnership, and is perhaps never to be found in the articles. If it is to be restrained, fair dealing requires that the restriction should be made known. These stipulations may bind the partners ; but ought not to afifect those to whom they are unknown, and who trust to the general and well CHAP. VII.] POWERS AND AUTHORITIES. 185 sign goods to an agent or factor for sale on account of the firm, and give instructions and orders relating to the sale.^ All such contracts and engagements, acts and things, he has authority to make and do in the name of the firm, and, indeed, in order to bind the firm, they must ordinarily be made and done in the name of the firm; otherwise they will bind the individual partner only, who executes them, as his own private acts, con- tracts, or other things.^ And this is entirely in coinci- established commercial law." See also Hooper v. Lusby, 4 Camp. 66 ; Le Roy V. Johnson, 2 Pet. 186, 198 ; Ex parte Agace, 2 Cox, 312 ; 2 Bell, Comm. B. 7, p. 615-618, 5th ed. ; {1 Am. Lead. Cas. 407, 4th ed.} ' 3 Kent, 40-45. ^ {See § 134-151, 202} ; Kirk v. Blurton, 9 M. & W. 284 ; Faith v. Rich- mond, 11 Ad. & E. 339 ; Story on kg. § 37, 39, 41, 147, 155, 161 ; Coll. on P. B. 3, c. 1, § 4, p. 277, 278, 282, 2d ed. ; Id. B. 3, c. 2, § 2, p. 315-323, 2d ed. ; Pothier on Oblig. n. 83, and note by Evans ; 3 Kent, 41-44. —Mr, Chancellor Kent, in his learned Commentaries, in the passage above cited, has summed up the doctrine in the following terms: "In all contracts concerning negotiable paper, the act of one partner binds all ; and even though he signs his individual name, provided it appears on the face of the paper to be on partnership account, and to be intended to have a joint operation. But if a note or bill be drawn by one partner, in his own name only, and without appearing to be on partnership account, or if one partner borrow money on his own security, the partnership is not bound by the signature, even though it was made for a partnership pur- pose, or the money applied to a partnership use. The borrowing partner is the creditor of the firm, and not the original lender. If, however, the bill be drawn by one partner in his own name, upon the firm or partnership account, the act of drawing has been held to amount, in judgment of law, to an acceptance of the bill by the drawer in behalf of the firm, and to bind tlie firm as an accepted bill. And though the partnership be not bound at law in such a case, it is held, that equity will enforce payment from it, if the bill was actually drawn on partnership account. Even if the paper was made in a case, which was not in its nature a partnership transaction, yet it will bind the firm, if it was done in the name of the firm, and there be evidence that it was done under its express or implied sanction. But if part- nership security be taken from one partner, without the previous knowledge and consent of the others, for a debt, which the creditor knew at the time was the private debt of the particular partner, it would be a fraudulent transaction, and clearly void in respect to the partnership. So, if from the subject-matter of the contract, or the course of dealing of the partnership, the creditor was chargeable, with constructive knowledge of that fact, the r 186 PARTNERSHIP. [CHAP. VII. dence with the rule of the Homan law, as to jomt em- ployers of ships, against whom the exercitorial action partnership was not liable. There is no distinction in principle upon this point, between general and special partnerships ; and the question, in all cases, is a question of notice, express or constructive. All partnerships are more or less limited. There is none, that embraces, at the same time, every branch of business ; and when a person deals with one of the partners in a matter not within the scope of the partnership, the intendment of law will be, unless there be circumstances, or proof in the case, to destroy the pre- sumption, that he deals with him on his private account, notwithstanding the partnership name be assumed. The conclusion is otherwise, if the subject- matter of the contract was consistent with the partnership business ; and the defendants in that case would be bound to show that the contract was out of the regular course of the partnership dealings. When the business of a partnership is defined, known, or declared, and the company do not appear to the world in any other light than the one exhibited, one of the partners cannot make a valid partnership engagement, except on partnership account. There must be at least some evidence of previous authority beyond the mere circumstance of partnership, to make such a contract binding. If the pub- lic have the usual means of knowledge given them, and no acts have been done or suffered by the partnership, to mislead them, every man is presumed to know the extent of the partnership, with whose members he deals ; and when a person takes a partnership engagement without the consent or au- thority of the firm, for a matter that has no reference to the business of the firm, and is not within the scope of its authority, or its regular course of dealing, he is, in judgment of law, guilty of a fraud. It is a well-established doctrine, that one partner cannot rightfully apply the partnership funds to discharge his own pre-existing debts, without the express or implied assent of the other partners. This is the case, even if the creditor had no knowledge at the time, of the fact of the fund being partnership property. The author- ity of each partner to dispose of the partnership funds, strictly and rightfully, extends only to the partnership business, though in the case of bona fide pur- chasers, without notice, for a valuable consideration, the partnership may, in certain cases, be bound by the act of ope partner. But, if the negotiable paper of a firm be given by one partner on his private account, and that paper, issued within the general scojie of the authority of the firm, passes into the hands of a bona fide holder, who has no notice, either actually or constructively, of the consideration of the instrument; or if one partner should purchase, on his private account, an article, in which the firm dealt, or which had an immediate connection with the business of the firm, a diifer- ent rule applies, and one, which requires the knowledge of its being a pri- vate, and not a partnership transaction, to be brought home to the claimant. These are general principles, which are considered to be well established in the English and American jurisprudence." In some cases, however, it is a matter of great nicety to decide, whether the partner alone is bound, or the " 1 . CHAP. VII.] POWERS AND AUTHORITIES. 187 lay. Si 2^lures navein exerceant, cum qiiolibet eorum in solidum agi potest. Ne in plures adversarios destrin- gaiur, qui cum uno contraxerit} Jure societatis per socium cere alieno socius non ohltgatur, nisi in commu- nem ctrcam pecunice versce simt.^ This is also the rule of the French law,^ and of the Scottish law.^ Pothier partnership. Thus if a bill is drawn upon a firm, and is accepted by one of the firm in his own name, it will be treated as an acceptance of the firm. Wells V. Masterman, 2 Esp. 731; Mason v. Rumsey. 1 Camp. 384; Beach V. State Bank, 2 Ind. 488 ; Coll. on P. B. 3, c. 1, § 2, p. 274, 275, 2d ed. {But see Heenan v. Nash, 8 Minn. 407.} So, where a note was drawn, " / promise," and was signed " for A. B. & C. — A." it was held to bind the partnership. Hall v. Smith, 1 B. & C. 407 ; Coll. on P. B. 3, c. 1, § 2, p. 277, 278, 2d ed. ; Lord Galway v. Matthew, 1 Camp. 403. See also Story on Ag. § 154, 275, 276 ; Doty v. Bates, 11 Johns. 544; Gow on P. c. 2, § 2, p.40- 42, 3ded. ; Id. p. 49, 50. Wats, on P. c. 4, p. 214, 2d ed. ; U. S. Bankv.Bin- ney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; Faith v. Richmond, 3 Per. & Dav. 187. ' D. 14, 1, 25; Id. 14, 1, 2; Poth. Pand. 14, 1, n. 10; Domat, 1, 16, 3, art. 6, 7; D. 14, 1, 4, § 1, 2; Domat, 1, 8, 4, art. 16; Story on Ag. § 124, note. 2 D. 17, 2, 82; Domat, 1, 8, 3, art. 10. ^ Poth. on Oblig. n. 83. * 2 Bell, Comm. B. 7, c. 1, p. 615, 5th ed. ; Ersk. Inst. B. 3, tit. 3, § 20. — Mr. Erskine says : " It hath been much disputed, how far an obligation, signed by one of the partners, affects the company or copartnery by the Ro- man law ; as to which, a variety of distinctions bath been imagined by Doc- tors, to reconcile the different expressions of the Roman jurisconsults. According to our present practice, the partners in private companies gener- ally assume to themselves a firm or name, proper to their own company, by which they may be distinguished in their transactions ; and in all deeds subscribed by this name of distinction, every partner is, by the nature of co- partnery, understood to be intrusted with a power from the company of bind- ing them. Any one partner, therefore, who signs a bill, or other obligation, by the company's firm, obliges all the other partners : but where he subscribes a deed by his own proper subscription, the creditor, who followed his faith alone in the transaction, hath no action against tlie company, unless he shall prove, that the money lent or advanced by him was thrown into the connnon stock." Lord Stair says : " The same question is incident here, that before hath been touched concerning mandates, when one or more of the parties act in the matter of the society, Avhether thereliy the whole society be obliged by the obligations of these ? Whether obligations, made to these, constitute the society creditor ? Or whether real riglits, acquired by these, are ipso facto common to the society, or if there be but an obligation upon the actors to communicate the property always remaining in the actors, till they effect- ually communicate ? The resolution of this being the same with that in 188 PARTNERSHIP. . [CHAP. VII. says : Whatever may be the authority of a partner, in order that a debt contracted by him should bind his partners, it is necessary that it should be contracted in the name of the firm.^ § 102 a. In the remarks which have been already made, in respect to the power of each partner to bind the firm by bills of exchange, promissory notes, checks, and other negotiable instruments, we are to understand that this doctrine is not applicable to all kinds of part- nership, but is generally limited to partnerships in trade and commerce, for in such cases it is the usual course of mercantile transactions, and grows out of the general customs and laws of merchants, which is a part of the common law, and is recognized as such.^ But the same reason does not apply, or at least may not apply to oth- er partnerships, unless indeed it is the common custom or usage of such business to bind the firm by negotiable instruments, or it is necessary for the due transaction thereof.^ Hence, attorneys who are in partnership have mandates, we refer you thither, and say only this m general, that when these parties only act in the name of the society, and by its express warrant, or by what they have been accustomed to do, in so far they are not only partners, but mandators, and it hath the same effect, as if the society had acted itself. But when they act not so, there doth only arise an obligement upon the partners-actors to communicate ; in the mean time the property remaineth in the actors ; and if transmitted to others before this communication, the society will be thereby excluded, but the actors will remain obliged for rep- aration of the damage and interest of the society. And this will hold, though things be bought or acquired by the common money of the society ; but all the natural interest, birth, fruits, and profit of the society, is of it- self and instantly, common to the society." Stair's Inst. B. 1, tit. 16, § 6. p. 159. 1 Both, de Soc. n. 100, 101. [But see Newton v. Boodle, 3 C.B. 795; post, § 202.] 2 Hedley v. Bainbridge, 3 Q. B. 316, 321 ; {Tappan v. Bailey. 4 Met. 529.} =» {Dickinson v. Valpy, 10 B. & C. 128; Brown v. Byers, 16 M. & W. 252 ; Greenslade v. Dower, 7 B. & C. 635 ; Nicholson v. Ricketts, 2 E. & E. 497 ; Crosthwait v. Ross, 1 Humph. 23 ; Gray v. Ward, 18 111. 32 ; Lind. on P. 214. See Kimbro v. Bullitt, 22 How. 256.} CHAP. YII.] POWERS AND AUTHORITIES. 189 110 implied authority to become parties to negotiable instruments, and to bind the firm thereby.^ The author- ity to do such acts must in such cases be either express- ly given, or be recognized as proper and necessary, or in the usual course of the particular business of that fir 111. ~ § 103. This doctrine of the common law, as to the general right and authority of each partner to bind the firm, and act for the firm in all partnership transactions, equally applies to all cases of partnership in trade, whether the partners be all known, or some be secret or dormant partners.^ It doubtless has its foundation in ' [So an attorney has no implied power, as such, to bind his partner by receiving money to lay out on security for the depositor, and to hold the money in his hands until an opportunity oifers for laying it out. Har- man v. Johnson, 2 E. & B. 61, 18 Eng. L. & Eq. -400;] {Breckinridge v. Shrieve, J: Dana, 375. See Atkinson v. Mackreth, Law Rep. 2 Eq. 570; Alliance Bank v. Tucker, 15 Weekly Rep. 992. See § 12G. An attorney has no imjjlied authority to bind his copartners by a post-dated check, drawn in the firm name. Forster v. Mackreth, Law Rep. 2 Ex. 1C3.} 2 Hedley i-. Bainbridge, 3 Q. B. 316, 321. ^ Dormant partners ai'e bound by the written unsealed contracts of the ostensible partners, as much as by their parol contracts ; but not, for tech- nical reasons, by their sealed contracts. {See § 117-122.} Beckham v. Drake, 9 M. & W. 79, s. c. 11 M. & W. 315, overruling Beckham v. Knight, 4 Bing. N. C. 243 ; s. c. 1 Man, & G. 738. See Swan v. Steele, 7 East, 210 ; Sandilands r. Marsh, 2 B. & Aid. 673; U. S. Bank v. Binney, 5 Mason, 176; s. c. 5 Pet. 529; Coll. on P. B. 3, c. 1, p. 259, 2d ed. The whole doctrine is well summed up by Mr. Chief Justice Marshall, in the case of Binney v. U. S. Bank, o Pet. 529, 561, where he states the reasons of the general rule, and the application of it to dormant partnership. Immediately after the passage already cited (ante, § 102, note), he added as follows : " The counsel for the plaintiff in error supposes, that though these principles may be appHcable to an oj^en avowed partnership, they are inapj)licable to one that is secret. Can this distinction be maintained ? If it could, there would be a difference between the responsibility of a dormant partner, and one whose name was to the articles. But their responsibility, in all partnership transactions, is admitted to be the same. Those who trade with a firm on the credit of individuals, whom they believe to be members of it, take upon themselves the hazard that their belief is well founded. If they are mistaken, they must submit to the consequences of their mistake ; if their belief be verified by the fact, their claims on the partners, who were not ostensible, are 190 PARTNERSHIP. [cHAP. VII. common convenience and public policy in regard to all commercial operations, if indeed in a general view it might not be deemed almost a matter of moral neces- sity in the enlarged intercourse and trade of modern nations. If it were not admitted, then, it would be ne- cessary, that every partner should expressly agree to or confirm every transaction aifecting the partnership be- fore it could acquire any absolute obligation, or be con- clusive upon the partnership. The absence, or illness, or remote residence, of a single partner might greatly delay and retard, if it would not prostrate the best con- certed enterprise or bargain ; and before any negotiation could be completed, it would be indispensable, that the other contracting party should first by inquiry ascertain who all the parties were in any particular firm, and as valid as on those whose names are in the firm. This distinction seems to be founded on the idea, that, if partners are not openly named, the resort to them must be connected with some knowledge of the secret stipulations be- tween the partners, which may be inserted in the articles. But this certainly is not correct. The responsibility of unavowed partners depends on the general principles of commercial law, not on the particular stipulation of the articles. It has been supposed, that the principles laid down in the third in- struction, respecting these secret restrictions, are inconsistent with the opinion declared in the first ; that in this case, where the articles were before the court, the qnestion, whether this was in its origin a secret or an avowed part- nership, had become unimportant. If this inconsistency really existed, it would not affect the law of the case; unless the judge had laid down principles, in the one or the other instruction, which might affect the party injuriously. But it does not exist. • The two instructions were given on different views of the subject, and apply to different objects. The first respected the parties to the firm, and their liability, whether they were or were not known, as mem- bers of it ; the last applies to secret restrictions on the partners, which change the power held out to the world, by the law of partnership. The meaning of the terms ' secret partnership,' or the question, whether this did or did not come within the definition of a secret partnership, might be unim- portant ; and yet the question, whether a private agreement between the partners, limiting their responsibility, was known to a person trusting the firm, might be very important." See also Watson on P. c. 5, p. 168-174, 2d ed. Furze v. Sharwood, 2 Q. B. 388, 417; [and it exists so long as the relation continues, notwithstanding the objection of the other partners. Wilkins v. Pearce, 5 Denio, 541 ; Sage v. Sherman, 2 Comst. 417.] CHAP. Vir.] POWERS AND AUTHORITIES. 191 whether they had all deliberately assented thereto. The arrangements of commerce, which are now accomplished in a single hour or day, might thus require whole weeks, or even months, before they could be matured or estab- lished.^ To avoid this difficulty, the common law has adopted a very satisfactory, and at the same time a very facile rule. It decides, that in the absence of any known, controlling stipulation between the parties, each partner shall be deemed invested by the consent of all of them with an equal and complete power of administration of the whole partnership property, funds, and affairs. It gives to all and each of the partners, what the Roman law allows to be delegated to one by a special authority, the entire administration of all the partnership business, and thereby, as such admistrator, he may act for the whole, and in the name of the whole. Si plures exerceant, unum autem de numero suo magistrum fecerint, hujus nomine in solidum poterunt convenvri.^ § 104. It has, therefore, been well remarked by a learned writer, that, " Although the general rule of law is, that no one is liable upon any contract, except such as are privy to it; yet this is not contravened by the liability of partners, as they may be imagined virtually present at, and sanctioning the proceedings, they singly enter into in the course of trade ; or, as each is vested with a power, enabling them to act at once as principals, and as the authorized agent of their copartners. It is for the advantage of partners themselves, that they are thus held liable, as the credit of their firm in the mer- cantile world is hereby greatly enhanced, and a vast fa- cility is given to all their dealings ; insomuch, that they may reside in distant parts of the country, or in different 1 Wats, on p. c. 4, p. 166, 167, 2d ed. ; Gow on P. c. 2, § 2, p. 36, 37, 3d ed. ; Coll. on P. B. 2, c. 2, § 1, p. 128, 129; " D. 14, 1, 4, 1 ; Civil Code of France, art. 1836, 1857. 192 PARTNERSHIP. [cHAP. VII. quarters of the globe. A due regard to the interests of strangers is at the same time observed ; for, where a merchant deals with one of several partners, he goes upon the credit of the whole partnership, and therefore ought to have his remedy against all the individuals who compose it."^ § 105. Whenever, therefore, credit is given to a firm, within the scope of the business of that firm, whether the partnership be of a general or of a limited nature, it will bind all the partners, notwithstanding any secret reservations between them, which are unknown to those who give the credit. And no subsequent misapphcation of the fund by the partner procuring it, to which the creditor is not a party, or privy, will exonerate them from liability. Thus, for example, if one partner should borrow money on the credit of the firm, which he should subsequently misapply to his own private purposes with- out any knowledge or connivance on the part of the lender, the firm would be bound therefor.^ § 106. Nor will it make any difference in cases of this sort, as to third persons, whether the partnership is carried on for the benefit of the partners themselves alone, or for the benefit of others, who are the cestuis que trust, or beneficiaries. In each case the trustees and the cestuis que trust, or beneficiaries, will be equally bound by the acts of a single partner, and equally liable therefor to third persons.^ The same rule applies, whether the partnership is carried on in a firm or com- 1 Wats, on p. c. 4, p. 167, 168. See also Gow on P. c. 2, § 2, p. 36, 37, 3d ed. 2 U. S. Bank v. Binney, 5 Mason, 176, 187, 188; Etheridge v. Binney, 9 Pick. 272, 274, 275; Winship v. Bank of U. S. 5 Pet. 529; [Buckner v. Lee, 8 Ga. 285, 291,] ^ Coll. on P. B. 3, c. 1, p. 260; Thicknesse v. Bromilow, 2 Cromp. & J. 425; Clavering v. Westley, 3 P. Wms. 402; Furze v. Sharwood, 2 Q. B, 388,417,418. {But see § 70.} CHAP. YII.] POWERS AND AUTHORITIES. 193 pany name, or in the name of one partner only. If in the name of the partner only, it will, however, be ne- cessary to show, that the transaction was in the business, or upon the credit of the partnership, and not of that partner alone. ^ § 107. The like rule applies to other acts, done by any partner, touching the partnership business, and to any acknowledgments, representations, declarations, admis- sions, or undertakings of any partner relating thereto. Thus the representation of any fact, or a misrepresen- tation of any fact, made in any partnership transaction, by one partner, will bind the firm.^ So, the acknowl- edgment of one partner, during the continuance of the partnership, of a debt, as due by the partnership, will amount to a promise, binding on the firm. So, the ad- mission of any fact, by one partner, material as evidence in a suit, will, under the like circumstances, be deemed the admission of all the partners.^ So, a part payment of a debt of the firm, by one partner, will not only extinguish pro tanto the partnership debt, but will, under the like circumstances, operate as an admission of the existence of the residue of the debt, binding on ' Coll. on P. B. 3, 0. 1, § 2, p. 270-277, 2d ed. ; Baker r. Charlton, 1 Peake, 80; 1 Mont, on P. p. 37, note (c) ; 2 Bell, Comm. B. 7, p. 615-618, 5th ed. ; Swan r. Steele, 7 East, 210; {Davison v. Robertson, 3 Dow. 218.} U. S. Bank i\ Binney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; [Buckner v. Lee, 8 Ga. 285]; Etheridge v. Binney, 9 Pick. 272; Ex parte Bolitho, Buck, 100; South Carolina Bank v. Case, 8 B. & C. 427; Manuf. & Mech. Bank v. AVinship, 5 Pick. 11 ; Mifflin v. Smith, 17 S. & R. 165; Furze v. Sharwood, 2 Q. B. 388, 417, 418. This last case involved the same point as was decided in U. S. Bank v. Binney, 5 Mason, 176, and it was decided the same way. {See §139.) - Gow on P. c. 2, § 2, p. 55, 3d ed. ; Id. 129, 130 ; Rapp v. Latham, 2 B. & Aid. 795 ; Coll. on P. B. 3, c. 1, § 4, p. 290 ; Id. § 5, p. 296-298, 2d ed. : Lucas V. De la Cour, 1 M. & S. 249 ; [Blair r. Bromley, 5 Hare, 542.] 3 [Pope V. Risley, 23 Mo. 185]; {Wickham v. Wickham, 2 K. & J. 478 ; Folk V. Wilson, 21 Md. 538; Gordon v. Bankard, 37 111. 147. See Wells v. Turner, 16 Md. 133.} 13 194 PARTNERSHIP. [cHAP. VII. the partnership.^ So, the acts of joint proprietors of stage coaches, in relation to their partnership concerns, will be deemed the acts of all of them, and binding on all.^ So, notice to or by one of a firm is deemed notice to or by all of them. ^ § 108. The principle extends further, so as to bind the firm for the frauds committed by one partner in the course of the transactions and business of the partner- ship, even when the other partners had not the slight- est connection with, or knowledge of, or participation in the fraud ; ^ for (as has been justly observed), by form- ing the connection of partnership, the partners declare themselves to the world satisfied with the good faith and integrity of each other, and impliedly undertake to be responsible for what they shall respectively do withm the scope of the partnership concerns.^ Hence, if in the business of the partnership, money is received, partly by one of the firm and partly by another, to be laid out 1 Coll. on P. B. 3, c. 1, § 4, p. 282-286, 290, 2d ed. ; Lacy v. M'Neile, 4 Dowl. & R. 7; Pittam v. Foster, 1 B. & C. 248; Burleigh v. Stott, 8 B. & C. 36.— The authorities are all agreed on this point, during the existence of the partnership. But whether such an acknowledgment or admission, or promise, or payment by one partner, after the dissolution of the firm, will bind the others, is a matter upon which thei'e are conflicting authorities ; and the point will be hereafter discussed in another connection. See Bell v. Morrison, I Pet. 351, 378; 3 Kent, 49, 50; VVhitcomb tJ. Whiting, 2 Doug. 652; Brisban V. Boyd, 4 Paige, 1 7. { On the law under the present Statutes of Limitations in England, see Lind. on P. 370-379.} 2 Coll. on P. B. 3, c. 1, § 4, p. 287, 288, 2d ed.; Helsby v. Hears, 5 B. & C. 504. 3 Coll. on P. B. 3, c. 1, § 4, p. 290-292, 2d ed. ; Bignold v. Waterhouse, 1 M. & S. 255 ; [Haywood v. Harmon, 17 111. 477 ; Bouldin v. Page, 24 Mo. 594] ; { Spaulding v. Ludlow Woollen Mill, 36 Vt. 150 ; State v. Linaweavei", 3 Head, 51 ; Lind. on P. 230-232. See Baldwin v. Leonard, 39 Vt. 260; Herbert v. Odlin, 40 N. H. 267.} * [Pierce v. Wood, 3 Fost. 519; Locke v. Stearns, 1 Met. 560]; {See § 131, 166.} * Gow on P. c. 2, § 2. p. 55, Id. c. 4, § 1, p. 146-148, 3d ed. ; Coll. on P. B. 3, c. 1, § 5, p. 293-304, 2d ed. ; Wats, on P. c. 4, p. 175, 2d ed. CHAP. VII.] POWERS AND AUTHORITIES. 195 Upon a mortgage, and a mortgage is forged by one part- ner, without the knowledge of the other, the innocent partner will be liable for the whole money. ^ So, if repre- sentations of certain facts, as existing, are fraudulently made by one partner, unknown to the others, in the partnership business, and the facts never existed, but the whole statement is a mere fiction, the firm will be bound to the same extent, as if it were true, and the facts existed." This whole doctrine proceeds upon the intelligible ground, that, where one of two innocent persons must suffer by the act of a third person, he shall suffer, who has been the cause or occasion of the confidence and credit reposed in such third person. § 109. The French law has adopted a rule essential- ly the same as that of the common law. The admin- istration of the affairs of the partnership may be delegated or intrusted to one or more of the partners.^ But in the absence of any stipulation to this effect, the partners are deemed to have given reciprocally to each > {§ 166, 168}; Willett v. Chambers, Cowp. 814; Stone ». Marsh, Ry. & Moo. 364; 6 B. & C. 551 ; Hume v. Bolland, Ry. & Moo. 371; Keating v. Marsh. 2 CI. & Fin. 250 ; Manuf. & Mech. Bank v. Gore, 15 Mass. 75 : Board- man V. Gore, 15 Mass. 331 ; [Blair v. Bromley, 5 Hare, 542, s. c. 2 Phil. 354. But see Sims v. Brutton, 5 Exch. 802, 1 Eng. L. & Eq. 446] ; {Devaynes v. Noble, 1 Mer. 572, 611; Brydges v. Branfill, 12 Sim. 369. Ex parte Bid- dulph, 3 De G. & Sm. 587; Sadler v. Lee, 6 Beav. 324: De Ribeyre v. Barclay, 23 Beav. 107; Eager r. Barnes, 31 Beav. 579; Atkinson v. Mack- reth. Law Rep. 2 Eq. 570 ; Sawyer v. Goodwin, 15 Weekly Rep. 1008 ; s. c. 36 L. J. Ch. 578, St. Aubyn v. Smart, Law Rep. 5 Eq. 183. But see § 168, note; also Harman v. Johnson, 2 E. & B. 61.} - Rapp V. Latham, 2 B. & Aid. 795; Hume r. Bolland, Ry. & Moo. 371 ; [Beach v. State Bank, 2 Lid. 488 ; Doremus v. McCormick, 7 Gill, 49 ; Sweet V. Bradley, 24 Barb. 549; Hawkins r. Appleby, 2 Sand. 421]; {Griswold v. Haven, 25 N. Y. 595 ; French v. Rowe, 15 Iowa, 563.} [And in Equity the limitation in bar of the claim in such cases does not begin to run until the time of the discovery of the fraud. Blair v. Bromley, 5 Hare, 542, s. c. 2 Phil. 354. Sec Sims v. Brutton, 5 Exch. 802, 1 Eng. L. cSc Eq. 446.] ^ Code Civil, art. 1856, 1857; Poth. de Soc. n. 66, 67, 89, 90, 96, 98; Poth. on Oblig. n. 83; Code of Louisiana (of 1825), art. 1841. 196 PARTNERSHIP. [chap. YH. other the power of administering the one for the other ; and what each one does is valid even for the share of his partners, without his having obtained their consent.^ » Code Civil, art. 1859; Poth. de Soc. n. 90-100; Poth. on Oblig. n. 83, 89. — Pothier (on Oblig. n. 83) has expounded the reason of this doctrine exactly as it would be stated at the common law. " We are also deemed to contract b}- the ministry of our partners, when they contract, or are regarded as contracting for the affairs of the partnership. For, by entering into the partnei'ship with them, and permitting them to transact the business of it, we are deemed to have adopted and approved beforehand of all the contracts, which they may make for the affiiirs of the partnership, as if we had con- tracted jointly with them, and we have acceded beforehand to all the conse- quent obligations. A partner is deemed to contract for the affairs of the partnership, whenever he adds to his signature the words, and Company, although afterwards the contract does not turn to the benefit of the partner- ship. For instance, if he borrows a sum of money, for which he gives a note with the words, and Company, added to his signature, although he has em- ployed the money in his private affairs, or lost it at play, he is still deemed to have contracted for the affairs of the partnership, and consequently obliges his partners as having borrowed the money jointly with him, and as having contracted by his ministry. For his partners must take the consequence of having entered into their engagement with such a person; but those, who contract with him, ought not to be deceived and suffer by his want of fidelity. The signature, and Company, does not, however, oblige my partners, if it appears by the very nature of the contract, that it does not concern the affairs of the partnership ; as if I put that signature to the lease belonging to myself and not to the company. When the partner does not sign and Company, he is deemed to have only contracted for his own private affairs, and does not bind his partners, unless the creditor shows by other proof, that he contracted in the name of the partnership, and that the contract actually related to the partnership affairs." See also Story on Ag. § 124, note (1), and Poth. on Oblig. n. 447, 448; Poth. de Soc. n. 96. Mr. Bell in his learned Commentaries (2 Bell, Comm. B. 7, p. 611, 5th ed.) has made some very appropriate remarks on the state of the Roman law. " Partnership is thus a contract involving important relations to the public, as well as to the contracting partners. In the infancy of trade it is little regarded or under- stood : and no proofs perhaps are more decisive of the low state of mercantile intercourse in Rome, than the very imperfect state of the Roman jurisprudence with respect to partnership. In the simple view of partnership as a mere society, in all that relates to the shares of parties accidentally associated as joint proprietor, or the rules of contribution and division in the management of a common stock or concern, there is no defect in the Roman law. But the subject is never contemplated in that more delicate and important light, which presents for decision the interests and dealings of the company with third parties, and the powers CHAP. YII.] POWERS AND AUTHORITIES. 197 In these respects the French law differs (as has been already suggested) from the Roman law ; for the latter did not ordinarily clothe one partner (any more than any other agent) with the power of generally adminis- tering the affairs of the partnership, unless it was especially delegated and confided to him. Under other circumstances, each one could act only for his own share, and so bind himself.^ JSfemo ex sociis jylus 2mrie sua 2^otest aUenare, efsi totorum honorum socii sint.^ Item magistri societatu7n 2:>cictum et i^rodesse et obesse constat.^ Si socius 2^'^oiwicmi pecunimn miduam dedit^ omnimodo creditam \j)eGuniatii\ facit, licet ceteri dissen- serint. Quod si coinmunein [_peciiniani] nwneravit^ non of partners to pledge the stock and credit of the society with the indi- vidual responsibility of the partners. In modern times, the effects of this contract, in its relations to third parties, are by far the most important. The question in this view is, not what share or profit, or what proportion of loss, upon a common stock, each partner is to gain or to suffer; but what are the rights of those, who deal with the company, in claiming preferably on its common stock, and what responsibility is undertaken by the several partners for contracts bona fide entered into by third parties ? In this inquiry, be the reciprocal rights and liabilities of the partners what they may in respect to each other, they each, in their relation to the public, hold an authority, which no force of private stipulation can alter or restrain ; and by means of which, in the face of the most express injunctions or prohibitions of their contract, the several partners, or even those perhaps, who may long have left the partnership, may, by the act of any one of the number, be made responsible to third parties to the whole extent of their private fortune. It is in this view chiefly, that definitions of partnership (which, like all others, are proverbially dangerous, seldom useful) are to be received with peculiar caution, if borrowed or derived from the writings of the civilians; who neg- lect almost entirely the implied power and unlimited mandate of the partners to bind the rest. Even in the writings of some modern lawyers, this limited character appears in their definitions of partnership, while their doctrine ex- tends to consequences which are not presented prominently in the descrip- tion." See post, last note of this section. " Poth. Pand. 17, 2, n. 26-29; Domat, 1, 8, 4, art. 16; D. 17, 2, 68; Story on Ag. § 124, note (1) ; Id. § 425-427 ; ante, § 102. - D. 1 7, 2, 68 ; Poth. Pand. 17, 2, n. 26, 27. * D, 2, 14, 14; Poth. Pand. 2, 14, n. 46; Domat, 1, 8, 4, art. 16; Poth. de Sec. n. 89. 198 PARTNERSHIP. [CHAP. VII. alias creditam efficit, nisi ceteri qiioque consentiant ; quia suce partis tantum alienationem hahuit} This delega- tion of the administration of the partnership, or assent to any contract made by one partner, need not, under the Roman law, be express ; but might be implied from circumstances. But it has been a matter of no small discussion among the civilians, what circumstances were sufficient for such a purpose.^ ' D. 12, 1, 16; Poth. Pand. 12, 1, n. 12; Domat, 1,8, 4, art. 16. ^ Story on Ag. § 124, n. (1); Poth. de Soc. n. 96. — In these respects the Roman law seems to have followed out its own doctrines respecting the rights, duties, and obligations of principals and agents. The follow- ing statement of the general provisions of that law on this subject may not be unacceptable. By the Roman law, as it originally stood, the prin- cipal could not ordinarily sue or be sued on the contract made through the instrumentality of his agent ; but the latter was generally treated as the proper and sole contracting party. This was subsequently altered by the edicts of the Praetor, so far as it respected the rights of third persons to institute suits against the principal, in cases falling within the reach of the exercitorial and institorial actions. But the exercitorial action did not lie in favor of the owner or employer (exercitor) against the other contracting party. He was not, however, without a remedy ; for, if there was a con- tract of hire with the master, the owner or employer might recover the hire in a direct action ex locato ; if it was a gratuitous contract, he might maintain an action ex mandaio. So the Digest has declared. Sed ex con- trario, exercenti navem adversus eos, qui cum magistro contraxerunt, actio non polliceiur, quia non eodem auxilio indigebat; sed aut ex locato cum magistro^ si mercede operam ei exhihet ; aut si gratuitam, mandati agere potest. The institorial action was, also, in its terms apjjarently limited to suits against the principal, ^quum Prcetori visum est, sicut commoda sen- timus ex actu institorum, ita etiam ohligari nos ex contractibus ipsorum et conveniri. But no like action lay against the other contracting party by the principal. However, he was not without remedy ; since, by a cession of the right of action from the institor, he might, in some cases, maintain a suit founded thereon against the other party. Sed non idem facit circa eum, qui institorem prceposuit, ut experiri possit : sed, si quidem servum proprium institorem hahuit, potest esse securus, acquisitis sihi action ibus ; si autem vel alienum servum, vel etiam hominem Liherum, actione dejicietur. Ipsum tamen institorem, vel dominum ejus convenire poterit, vel mandati, vel negotiorum gestorum. It is added : Marcellus autem ait, dehere dari actionem ei, qui institorem praposuit, in eos, qui eum eo contraxerint. And Gains held, that the principal might maintain the suit, if he could not other- wise vindicate his right ; Eo nomine, quo institor contraxit, si modo aliter rem CHAP. VII.] POWERS AND AUTHORITIES. 199 § 110. The limitations at the common law, upon this authority of each partner to bind the partnership, may stiam servare non potest. In special eases, also, where the contract, made through an agent, was declared to be directly obligatory between the princi- pal and the other contracting party (as, for example, in case of a sale), the principal might maintain a direct action thereon. Thus, the Digest puts it : Si jirocurator vendiderit^ et caverii emptori ; quceritur, an domino, eel adversus dominum actio dari deheat ? Et Papinianus (Lib. 3, Responsorum) ^jw/a^, cum domino ex empto agi posse utili actione, ad exemplum institorice actionis si modo rem vendendam mandavit ; ergo et per contrarium, dicendum est^ utilem ex empto actionem domino competere. But, except in these and a few other cases, the general rule seems to have prevailed in the Roman law, that reciprocal actions lay in cases of agency only between the direct and immediate parties thereto. The modern nations of continental Europe seem, with great wisdom, to have adopted the general doctrine of allowing reciprocal actions between the principal and the other contracting parties, where it is not excluded by the nature, or express terms of the contract. The rights of principals against third persons, arising from the acts and con- tracts of their agents, may be further illustrated by the consideration of payments made to or by the latter. And, first, in relation to payments made to agents. Such payments are good, and obligatory upon the prin- cipal in all cases, where the agent is authorized to receive payment, either by express authority, or by that resulting from the usage of trade, or from the particular dealings between the parties. In such cases, the maxim of the Roman law is justly applied ; Quod jussu alterius solvitur, pro eo est, quasi ipsi solutum esset. But, the principal may intercept such payment, by giving notice to the debtor not to pay to the agent, before the money is paid ; and, in such a case, if the agent has no superior right, from a lien or otherwise, any subsequent payment, made to the agent, will be invalid, and the principal may recover the money from the debtor. Story on Ag. § 425-429; Id. § 163, 261, 271. See, also, on this subject, Poth. on Oblig. n. 54-84, and especially n. 82, 83, 447, 448. Pothier (n. 82) says: " We con- tract through the ministiy of another, not only when a person merely lends us his ministry by contracting in our name and not in his own, as when we contract by the ministry of a tutor, curator, agent, &c., in their quality as such. We are also deemed to contract by the ministry of another, though he contracts himself in his own name, when he contracts in relation to the affairs which we have committed to his management ; for we are supposed to have adopted and approved, beforehand, of all the contracts, which he may make respecting the affairs committed to him, as if we had contracted our- selves, and ai-e held to have acceded to all the obligations resulting therefrom. Upon this principle is founded the actio exercitoria, which those, who have contracted with the master of a ship for matters relative to the conduct of such ship, have against the proprietor, who has appointed the master. Upon the same principle is founded the actio institoria, which those, who 200 PARTNERSHIP. [cHAP. VII. be readily deduced from what has been ah'eady stated. The authority can be exercised only in cases falling within the ordinary business and transactions of the firm, where the other party has no knowledge or notice, that the partner is acting in violation of his duties and obligations to the firm, or for purposes disapproved of by the firm, or in fraud of the rights thereof^ § 111. In the first place, the authority, to be valid, must be exercised in cases within the scope of the ordinary business and transactions of the firm.^ Thus, for example, in cases of factorage, it is a common, al- though not an invariable usage, to guaranty the solven- cy of the purchasers on sales made by the factor, and to receive therefor a commission del credere ; and this would be deemed an authority within the scope of a partnership, formed for factorage purposes, although it could not be shown, that the partners had stipulated for that power in their articles of partnership, or even if they had excluded it by such articles, if it was un- known to the principal, for whom they were dealing.^ have contracted with the manager of a commercial concern, or a manu- factory, have against the employer (le commettant) ; and the actio utilis institoria, which relates to contracts made with a manager, of any other kind. Observe, there is a difference between these managers, and tutors, curators, syndics, &c. When these managers contract, they contract themselves, and enter into a personal obligation. Their employers are only regarded as accessory to their contracts, and to the obligations resulting from them ; whereas the others do not contract themselves, but only afford their ministry in contracting, and therefore do not oblige themselves, but only those who contract by their ministry." See ante, first note of this section. ' Coll. on P. B. 3, c. 1, p. 259-282, 2d ed.; Story on Ag. § 125; Ex parte Agace, 2 Cox, 312; Wats, on P. c. 4, p. 180, 2d ed.; Farrar v. Hutch- inson, 9 Ad. & E. 641. " Wats, on P. c. 4, p. 180, 194, 2d ed.; Sandilands v. Marsh, 2 B. & Aid. 673,679. {See § 126, 127.} 3 See Sandilands v. Marsh, 2 B. & Aid. 673; Coll. on P. B. 3, c. 1, § 3, p. 279-281 ; Hope v. Cust, 1 East, 53 ; Ex parte Nolte, 2 Glyn & J. 295. CHAP. VII.] POWERS AND AUTHORITIES. 201 So, it is the common course of business for persons engaged in the purchase and sale of horses, to give a warranty on sales made by them ; and therefore a war- ranty, made in the course of such business by one partner, would bind the partnership, notwithstanding the articles prohibited such warranty, if the purchaser were unacquainted therewith.^ On the other hand, where it is not the common course of the business, in which a partnership is engaged, to give letters of guaranty or of credit, if one partner should give such a letter of guaranty or credit, it would not be binding on the firm, although given in the name thereof.^ § 112. For the like reason, if one partner should in the name of the firm make purchases of goods, not connected with the known business of the firm, such purchases would not bind the partnership. Thus, for example, if a partnership is engaged in the mere busi- ness of selling dry goods by wholesale or retail, uncon- nected with navigation, a purchase of a ship by one partner, in the name of the firm, would not be binding on the other partners, unless they should assent thereto. So, if persons are engaged in the mere business of tal- low chandlers, as partners, a purchase of a cargo of flour, or of pepper, or of coffee, or of other things by one partner, wholly beside the business of the firm, would not bind the other partners. But if the articles were such as might be apphed or called for in the 1 Coll. on p. B. 3, c. 1, § 260; Sandilands v. Marsh, 2 B. & Aid. 673, 679, per Abbott, C.J. ' Coll. on P. B. 3, c. 1, § 3, p. 279, 280 ; Hope v. Cust, 1 East, 53 ; Dun- can V. Lowndes, 3 Camp. 478: [Hasleham v. Young, 5 Q. B. 833. And although sucli guaranty might be convenient and reasonable for accomplish- ing the objects of the partnership, it would not be binding upon the other partners without their recognition or adoption, unless it was rcasonably necessary for the business of the partnership. Brettel v. Williams, 4 Exch. 623. Overruling whatever is contrary in Ex parte Gardom, 15 Ves. 286.] {See §127.) 202 PARTNERSHIP. [cHAP. VII. ordinary course of their business, the purchase of such articles would bind the firm, even though they were unnecessary at the time, or were bought contrary to the private stipulations between the partners, or were not designed to be used in the partnership at all, if the vendor were not acquainted with the facts. § 113. The real difficulty in many cases of this sort is to ascertain what contracts, engagements, and acts are properly to be deemed within the scope of the par- ticular partnership, trade or business ; for these are not exactly the same in all sorts of trade or business.^ On the contrary, in many cases, rights, powers, and author- ities over the partnership property and partnership concerns exist either by usage, or by general under- standing, or by natural implication, which are wholly unknown in others. To answer the inquiry, then, sat- isfactorily, it is not enough to show, that in other trades or other business, certain rights, powers, and authorities are incident thereto, and may be lawfully exercised by each of the partners ; but we must see, that they ap- propriately belong to, or are, by usage or otherwise, implied or incidental to the particular trade or business in which the partnership is engaged.^ § 114. Having enumerated some of the general powers and authorities, which ordinarily belong to partnerships, and the general limitations thereof (a ' {1 Am. Lead. Cas. 407, 442, 4th ed. Some of the later cases in which questions as to the scope of a partnership business have arisen are London, &c.. Society v. Hagerstown, &c., Bank, 36 Penn. St. 498 ; Thompson V. Franlcs, 37 Penn. St. 327 ; Livingston v. Pittsburgh R. R. Co. 2 Grant's Cas. 219 ; Maltby v. N. W. Va. R. R. Co. 16 Md. 422 ; Cadwallader v. Kroesen, 22 Md. 200; Freeman v. Carpenter, 17 Wis. 126.} ^ Dickinson v. Valpy, 10 B. & C. 128. {Mr. Lindley is of opinion that such powers nuist be necessary in order that the firm may be bound. Lind. on P. 193-195; and see Brettel w. Williams, 4 Exch. 623; ILiwtayne v. Bourne, 7 M. & W. 595 ; Ex parte Chippendale, 4 De G. M. & G. 19.} CHAP. VII.] POWERS AND AUTHORITIES. 203 subject which will more fully occur hereafter in other connections), it may be proper here to state, in further illustration of the foregoing remarks, what powers and authorities are not ordinarily deemed to be within the scope of partnerships, and which therefore require some special delegation or solemn instrument to confer them. And, in the first place, it may be laid down as a gen- erally recognized principle, that one partner has no power or authority to submit or refer to arbitration any matters whatsoever, concerning or arising out of the partnership business.^ The reason assigned is, that it is not within the scope of the ordinary business or of the powers or authorities necessary or proper to carry on the business of the partnership.^ Another reason is, that the award may call upon the partners to do acts, which they might not otherwise be compellable to per- form.^ But the soundest reason seems to be, that, as it ' Com. Dig. Arbitrament, D. 2 ; 2 Bell, Coram. B. 7, p. 618, 5th ed. : Stead V. Salt, 3 Bing. 101 ; Hambidge v. De la Crouee, 3 C. B. 742 ; Ad- ams V. Bankart, 1 Cr. M. & R. 681 ; {Hatton v. Eoyle, 3 H. & N. 500} : Kartbaus v. Ferrer, 1 Pet. 222, 228 ; Strangford v. Green, 2 Mod. 228 ; [Buchoz V. Grandjean, 1 Mich. 367 ; Harrington v. Higham, 13 Barb. 660 ; Abbott V. Dexter, 6 Cush. 108 ; Armstrong v. Robinson, 5 Gill & J. 412] ; Buchanan v. Curry, 19 Johns. 137 ; [Wood v. Shepherd, 2 P. & H. 442] ; {1 Am. Lead. Cas. 452, 4th ed. See, also, Wesson v. Newton, 10 Cush. 114 ; Horton v. Wilde, 8 Gray, 425 ; McQuewans v. Hamlin, 35 Penn. St. 517} ; 3 Kent, 49; Ersk. Inst. B. 3, tit. 3, § 23. —In Pennsylvania and Kentucky a different doctrine is established ; that one partner may by an unsealed instrument refer any partnership matter to arbitration, which will bind the partnership. Taylor v. Coryell, 12 S. & R. 243 ; Southard v. Steele, 3 Monr. 435. | So in Illinois, Hallack v. March, 25 111. 48. } See Cotton v. Evans, 1 Dev. & Bat. Eq. 284 ; per Lord Abinger in Clewortli v. Pickford, 7 M. & W. 314, 321. 2 Ibid. 3 Gow on P. c. 2, § 2, p. 66 ; Adams v. Bankart, 1 Cr. M. & R. 681. [It has been decided, that one partner lias no implied authority to consent to an order for judgment in an action against himself and his copartner. Ham- bidge V. De la Crouee, 3 C. B. 742 ; Binney v. Le Gal, 19 Barb. 592 ; & Morgan v. Richardson, 16 Mo. 409. {See Rathbone v. Drakeford, 4 Moo. P. 57 ; Brutton v. Burton, 1 Chitty, 707, 1 Am. Lead. Cas. 462, 4th ed. Among 204 PARTNERSHIP. [CHAP. VII. takes away the subject-matter from the ordmary cog- nizance of the estabHshed courts of justice, which have the best means to investigate the merits of the case by proper legal proofs and testimony, and the means of arbitrators to accomplish the same purposes are very narrow, and often wholly inadequate, it ought not to be presumed, that the partners mean to waive their ordinarv leoal rio^hts and remedies, unless there be some special delegation of authority to that eiFect, either formal or informal.^ the later American cases on this point are Shedd v. Bank of Brattleboro', 32 Vt. 709 ; Christy v. Sherman, 10 Iowa, 535 ; North v. Mudge, 13 Iowa, 496. But see Edwards v. Pitzer, 12 Iowa, 607 ; EUiott v. Holbrook, 33 Ala. 659.} And service of a writ on one partner, after dissolution, will not authorize judgment against the other. Faver v. Briggs, 18 Ala. 478. An acknowledgment of service of a writ written by one partner in presence of the other, and with his consent, binds the firm. Freeman v. Carhart, 17 Ga. 348. {See Lind. on P. 227.} An appearance in a suit entered by an attorney, employed by one of the partners, will be binding and con- clusive upon the other partners. Bennett v. Stickney, 17 Vt. 531. But such appearance by an attorney employed by one partner, has been construed to be only an appearance for the partners, as partners, and for the purpose of defending the action against the firm, and not as an appearance for the partners, individually and severally, and such an appearance will not bind one partner individually, who is without the jurisdiction, was not served with process, and did not authorize the appearance, so as to render the judgment everyichere conclusive against him. Phelps v. Brewer, 9 Cash. 390.] ' See Adams v. Bankart, 1 Cr. M. & R. 681 ; Bruen v. Marquand, 17 Johns. 58 ; 3 Kent, 44 ; [Boyington v. Boyington, 10 Vt. 107.] — Mr. Gow, in the Supplement to his Treatise on Partnership, London, 1841, c. 2, § 2, p. 17, says : " In the case of Boyd v. Emmerson, 2 Ad. & E. 184, one ques- tion was, whether a partner could bind his copartners by a parol submission to arbitration. But the case being disposed of on other points, it became unnecessary to decide that question. However, Sir F. Pollock, who had to maintain the affirmative, in the course of his argument observed, that the point might be considered as res Integra, and admitted that ' one partner cannot bind another in a matter of arbitration, where the submission is by deed ; because, in general, he cannot bind his partner by any deed.' Harrison V. Jackson, 7 T. R. 207. But it does not follow that one of several persons, who are general partners, cannot in any way bind the rest by a submission to arbitration, upon a specific matter of partnership right. One partner CHAP. VII.] POWERS AND AUTHORITIES. 205 § 115. It may not perhaps seem very easy to see, since one partner alone may release, or even compound, or compromise a partnership debt,^ in what essential respect the latter power differs from that which re- spects a submission to arbitration. A release by one partner certainly binds all the partners, as indeed a receipt for the debt would ; because, as a debtor may lawfully pay his debt to one of them, he ought also to be able to obtain a discharge upon due pay- may bring, or settle an action on behalf of the rest. Furnival v. Weston, 7 J. B. Moore, 356 ; Harwood v, Edwards, Gow on P. 65, note (g), 3d ed. Why may he not enter into an agi'eement to refer the subject-matter ? And if so, why may not one agree, on behalf of the rest, to be governed by an opinion, in which both they and the opfjosite party may confide .° In Strang- ford V. Green, 2 Mod. 228, the submission appears to have been by arbitra- tion bond, and therefore the partner could not be bound. In Stead v. Salt, 3 Bing. 101, the parties were not partners generally, but only in the dealings, to which the award related ; the matter was twice rel'erred. In the first instance, four partners signed the agreement of reference ; the arbitration went off, and the new agreement was signed by three only. In the absence of any explanation, it was reasonable to suppose, that, if both agreements were signed by the authority of all the partners, the second would have been executed by the same number as the first. The passage cited in that case, from Com. Dig. Arbitrament, D. 2, from which it was implied that a partner cannot bind his copartner, probably refers to submissions by deed. There is no ground in reason for saving, that, in the case of a genei-al partnership in a banking firm, one partner cannot submit, on behalf ol' all, to such a mode of settling a dispute upon a partnership concern as was adopted here. Suppose the question had been a practical one, as to something to be done in the course of business, might not a partner have agreed to take the judg- ment of an experienced person, as a custom-house officer, a dock-master, or an eminent merchant? And if so, why not the opinion of counsel in the present case ? To hold, that the opinion could not be so taken, would throw great impediments in the way of a very common, uselul, and economical mode of settling such disputes." See post, § 122, note. ^ See Gow on P. c. 2, § 2, p. 61, od ed., and Ellison v. Dezell, there cited ; Metcalfe v. Rycroft, 6 M. & S. 75 ; Coll. on P. B. 3, c. 2, § 1, p. 311, 312, 2d ed. ; [Harabidge v. De la Crouee, 3 C. B. 742] ; {Wallace v. Kelsall, 7 M. & W. 264 ; Lind. on P. 221, 222. See Nottidge v. Prichard, 2 Cl. & Fin. 379. Payment to one partner is a defence to an action at law by the firm, though the other partner has given notice to the debtor not to pay to such partner. Noyes v. New Haven, Xew London, & Stonington R. R. Co. 30 Conn. 1.} 206 PARTNERSHIP. [chap. VII. ment.^ There is another technical reason, applicable to such a case ; which is, that the release certainly operates as against the partner himself; and if so, since no suit could be brought for the debt without uniting him as plaintiff, the release of one plaintiff w^ould necessarily bar the action as to the others.^ The compromise of a debt, by taking less than its nominal amount, seems to be an incident to the collection of the debt, and may fairly, therefore, be deemed within the discretion con- fided to each partner ; and indeed in practice it is so ordinarily treated. These cases, therefore, seem clearly distinouishable from that of a submission to arbitra- tion, since they steer wide of the objections, which have been already mentioned, as applicable to the latter. § 116. The Roman law coincides in many respects with ours on this subject It admits a release or dis- charge by one joint creditor to the debtor, or a release 1 Stead V. Salt, 3 Bing. 101 ; Coll. on P. B. 3, c. 2, § l,p. 313, 314; Id. B. 3, c. 4, §2, p. 452, 453; Id. B. 3, c. 5, § 5, p. 485, 2d ed. ; Pierson v. Hooker, 3 Johns. 68 ; Wats, on P. e. 4, p. 225, 2d ed. ; Story on Ag. § 49. " See Adams j;.^Bankart, 1 Cr. M. & R. 681 ; Wats, on P. c. 4. p. 222, 2d ed. ; Coll. on P. B. 3, c. 2, § 1, p. 311, 312, 2d ed. ; Hawkshaw r. Parkins, 2 Swans. 539 ; Halsey v. Whitney, 4 Mason, 206 ; Pierson v. Hooper, 3 Johns. 68; Bulkley u. Dayton, 14 Johns. 387; Bruen v. Marqnand, 17 Johns. 58; Ruddock's Case, 6 Co. 25 a; Salmon v. Davis, 4 Binn. 375; Napier tJ. McLeod, 9 Wend. 120. {Arton v. Booth, 4 Moore, 192; Furni- val V. Weston, 7 Moore, 356 ; Phillips v. Clagett, 11 M. & W. 84. If the re- lease has been obtained by fraudulent collusion with one of the partners, it will not be a defence to an action. See § 132 ; Barken-. Richardson, 1 Y. & J. 362 ; Aspinall v. London & X. W. R. R. Co., 11 Hare, 325 ; 1 Am. Lead. Cas. 453, 4th ed.} But although one partner may release a debt of the partnership in his own name alone ; yet, if he enters into a covenant in his own name with a debtor of the partnership, not to sue him therefor, that is no release of the debt ; and will not prevent a suit from being maintained by a partner, in the names of all the partners for the debt. The remedy for the debtor in such a case is by a suit against that partner for breach of his covenant. Walmsley v. Cooper, 3 Per. l^ Dav. 149 ; s. c. 11 Ad. & E. 216; post, §323, 324. CHAP. VII.] POWERS AND AUTHORITIES. 207 or discharge to one joint debtor by the creditor, to be an extinguishment of the entire contract. Cum duo eandem pecimiam aut promiserhii^ aut stijndati sunt, ipso jure et singidi in solidum dehentur, et singidi de- bent. Ideoque 2)etitione acceptilatione unius tota solvitur ohligatio} And yet by the Roman law it is not compe- tent for one of two creditors, or for one of two partners, to compromise a suit, or to submit a controversy touch- ing their joint demands to arbitration, without the con- sent of both ; for in such a case each can act only as the agent of the other ; and a general authority is not deemed to include such a right. Mandato generali non continej^i eticmi transactiotiem decidendi causa interpo- sitam.^ The same doctrine is fully recognized in the law of France,^ and probably in that of many other nations of continental Europe. § 117. In the next place it is a general rule of the common law, that one partner, from that mere relation, cannot bind the others by a deed or instrument under seal, either for a debt or any other obligation, even when contracted in the course of their commercial dealings and business, and within the scope thereof; unless indeed the authority be expressly given under the seals of the other partners, and include the very act done under seal."^ The reason of this rule seems to ^ D.4o, 2, 2. " D. 3, 3, 60 ; Doniat, 1, 15, 3, art. 11. 3 Poth. de Soo. n. 68. * Wats, on P. c. 4, p. 218-222, 2ded. ; Coll. on P. B. 3, c. 2, § 1, p. 308- 312, 2d ed. ; Gow on P. c. 2, § 2, p. 57-60, 3d ed. ; 3 Kent, 47-49 ; Story on Ag. § 49-51 ; Dickerson v. Wheeler, 1 Humph. 51 ; Napier v. Catron, 2 Humph. 534; McXaughten v. Patridge, 11 Ohio, 223; [McDonald v. Eg- gleston, 26 Vt. 154; Snyder f. May, 19 Penn. St. 235; Henry v. Gates, 26 Mo. 315 ; Piemington v. Cummings, 5 Wis. 138] ; {Bowker v. Burdekin, 11 M. & W. 128 ; Met. on Contr. 124 ; 1 Am. Lead. Cas. 449, 4th ed. But see Dudgeon i'. O'Conuell, 12 Jr. Eq. 566. See also Cummings v. Parish, 39 Miss. 412.} 208 PARTNERSHIP. [cHAP. VII. be purely technical; and has its origin in the general doctrine of agency at the common law ; where it is held, that an agent or attorney cannot execute a deed or sealed instrument, in the name of his principal, so as to bind him thereby, as the proper party thereto, unless the authority is conferred upon him by an in- strument of equal dignity and solemnity, that is by one under seal.^ And yet the common law does not seem in all cases to follow out its own principle ; for it is not required to execute any instrument or writing, not un- der seal, that the authority to an agent, or attorney, or partner, should be in writing. It maybe by parol, or even be implied from circumstances.^ Ordinarily, also, the dissolution of a contract is required by the common law to be by an instrument of the same dignity and solemnity, as that by which it is created.^ Eodem modo, quo oritur, eodem modo dissolvitur.^ § 118. The Roman law seems to have acted upon one uniform principle, if not in the formation of con- tracts, at least in the dissolution of contracts ; that is to say, that they might and ought to be dissolved in the same mode in which they were created. Nihil tarn naturale est, quani eo genere quidque dissolvere, quo coUigatum est. Ideo verhorimi ohligatio verbis tollitur ; nudi consensus ohligatio contrario consensu dissolvitur.^ 1 Story on Ag. § 49 ; Co. Litt. 48, b. ; Harg. note 2 ; Harrison v. Jack- son, 7 T. R. 207 ; P-aley on Ag. by Lloyd, 157, 158 ; 2 Kent, 613 ; 3 Kent, 47, 48; Green v. Beals, 2 Caines, 254; Clement v. Brush, 3 Johns. Cas. 180; Skinner v. Dayton, 19 Johns. 513 ; Berkeley v. Hardy, 5 B. & C. 355 ; Gow on P. c. 2, § 2, p. 58-60, 3d ed. ; U. S. v. Astley, 3 Wash. C. C. 508 ; [^x 2?a?''>^omisit ^que, cum emptio, vel venditio, vel locatio confracta est; quoniam consensu nudo contrahi p)otest, etiam dissensu contrario dissolvi potest.^ But a distinction was taken in the Roman law between mere consensual contracts, and other civil obligations, which resulted from real contracts or stipulations under that law. The former might be discharged by a simple agreement ; but to discharge the latter, jjleno jure, it was necessary for the act to be done by the formality of an acceptilation.^ 1 D. 46, 3, 80 ; Poth. Pand. 58, 17, n. 1388. =* D. 46, 3, 80. ^ Inst. 3, 30, § 1, 2. — Pothier has expounded this doctrine in his Treat- ise on Obligations, n. .571, and says: "According to the principles of the Roman law, there was a difference between civil obligations resulting from consensual contracts, which were contracted by the mere consent of the pai'ties, and other civil obligations, which resulted from real contracts, or from stipulations. With respect to those contracted by the consent of the parties, the release might be made by a simple agreement, by which the creditor agreed with the debtor to hold him acquitted, and such agreement extinguished the obligation pleno jure. With respect to other civil obliga- tions for the release to extinguish the obligation pleno Jure, it was necessary to have recourse to the formality of an acceptilation, either simple, if the obligation resulted from a stipulation, or Aquilian, if from a real contract. A simple agreement by the creditor to acquit the debtor, did not extinguish such obligations 2>Ieno jure ; but only gave the debtor an exception, or Jin de non recevoir, against the action of the creditor, demanding the payment of the debt, contrary to the fliith of the agreement. This distinction and these subtilties are not admitted in the law of France, in which we have no such form as an acceptilation ; and all debts, of whatever kind, and in what- ever manner contracted, are extinguished, pleno jure, by a simple agreement of release between the creditor and debtor, provided the creditor is capable of disposing of his property, and the debtor is not a person to whom the creditor is prohibited by law from making a donation. Therefore all that is said in the title, ff. de Accept, concerning the form of an acceptilation, and particularly that acceptilation cannot be made under a condition (L. 4, if. de Accept.), has no application in the law of France. With us there is nothing to prevent the creditor making the release of the debt depend upon a con- 14 210 PARTNERSHIP. [cHAP. VII. § 119. Upon the ground of the general pnnciple of the common law, it has been held, that a bond, signed by one partner in the course of the partnership busi- ness, without an authority under seal, binds only the partner, who signs and seals it, although it is signed and sealed in the name of the firm.^ Thus, a bond, given in the name of the firm at the custom-house, for the payment of the duties on goods imported for and belonging to the partnership, will not bind the part- nership, but only the partner signing and sealing the same.^ A fortiori, if a deed be made by one partner in dition, and the effect of such a release is to render the debt conditional, the same as if it had been contracted under the opposite condition to that of the release." 1 In Harrisons. Jackson, 7 T. R. 207, 210, Lord Kenyon said: "The law of merchants is part of the law of the land ; and in mercantile transac- tions, in drawing and accepting bills of exchange, it never was doubted, but that one partner might bind the rest. But the power of binding each other by deed is now for the first time insisted on, except in the nisi prius case cited, the facts of which are not sufficiently disclosed to enable me to judge of its propriety. Then it was said, that, if this partnership were con- stituted by writing under seal, that gave authority to each to bind the others by deed. But I deny that consequence, just as positively as the former ; for a general partnership agreement, though under seal, does not authorize the partners to execute deeds for each other, unless a particular power be given for that purpose. This would be a most alarming doctrine to hold out to the mercantile world ; if one partner could bind the others by such a deed as the present, it would extend to the case of mortgages, and would enable a partner to give to a favorite creditor a real lien on the estates of the other partners." See 3 Kent, 47, 48. {But see Orr v. Chase, 1 Mer. 729. In Fisher v. Pender, 7 Jones, Law, 483, it was held, following the pre- vious course of decision in North Carolina, that, when it appeared on the face of an instrument that A. signed, sealed, and delivered it, in order to bind the firm of which he was a member, and not as his individual deed, they were not individually liable. But see contra, 1 Am. Lead. Cas. 461, 4th ed. See, also, Jarman v. Ellis, 7 Jones, Law, 77.} 2 Metcalfe v. Rycroft, 6 M. & S. 75 ; Elliot v. Davis, 2 B. & P. 338 ; Hawkshaw v. Parkins, 2 Swans. 539 ; Harrison v. Jackson, 7 T. R. 207 ; Skinner v. Dayton, 19 Johns. 513. — To cure this very difficulty. Congress have been compelled to pass an act, providing, that such a bond given and sealed in the name of the firm, or partners, under his seal (see Hawk- shaw V. Parkins, 2 Swans. 539), shall be binding on all of them. Act of 1st March, 1823, c. 149. § 25. CHAP. VII.] POWERS AND AUTHORITIES. 211 the name of the fu'm, conveying away the real estate of the firm, it will be invalid to convey the title of the other partners, since the law requires, that every con- vevance of real estate should be by the deed of the party himself, who possesses the title ; and another person cannot convey it in his name, except by an authority under seal.^ § 120. This doctrine seems peculiar to the common law ; and, as hus been suggested, seems mainly founded on technical reasoning. It has, however, been some- times maintained, as founded in public policy ; and that it would be a dangerous power, and enable one partner to give undue preferences to favorite creditors. But this power now exists, as to all personal property and funds of the partnership ; and, as an original founda- tion of the doctrine, seems at once inadequate, and unsatisfactory. Indeed, a strong inclination has been exhibited in our day to get rid of the doctrine, or to qualify and limit it so far, that, practically speaking, it would have little operation and influence. One excep- tion is, that if the deed is executed by one partner in the presence of and with the assent of all the partners, it shall be deemed the deed of all.^ But, perhaps, this is not so properly an exception, as it is an application of an old rule of the common law, which makes a deed, executed by an agent in the presence of his principal, the deed of the latter, although the authority to do it is merely by parol.^ The case of a release by one part- 1 {See§ 94.} * Ball V. Dunsterville, 4 T. R. 313 ; Burn v. Burn, 3 Ves. 573 ; Mackay V. Bloodgood, 9 Johns. 285 ; Halsey v. Whitney, 4 IMason, 206 ; Coll. on P. B. 3, c. 2, § 1, p. 308-310, 2d ed. See Smith v. Winter, 4 M. & W. 454. See Hunter t'. Parker, 7 M. & W. 322; {Anthonys. Butler, 13 Pet. 423; Potter V. McCoy, 26 Penn. St. 458.} ^ Lord Lovelace's Case, W. Jones, 268 ; Story on Ag. § 51 ; Gow on P. c. 2, § 2, p. 59, 3d ed. 212 PARTNERSHIP. [CHAP. VII. ner, either in his own name, or in that of the firm, of a partnership debt, may also be thought to constitute another exception. But, in fact, it turns, as we shall presently see, upon another distinct consideration, that a release by one joint creditor discharges the action as to both ; and such a deed of one partner is clearly operative as to himself.^ § 121. But the main struggle has been, not so much to contest the doctrine of the common law, that an au- thority to execute a sealed instrument does not flow from the ordinary relation of partnership, as to con- test the doctrine, that it requires a prior authority under seal, or a subsequent ratification under seal, to make the execution valid.^ The old authorities, and indeed the whole current of decisions in England, estab- lish the rigid doctrine in its fullest extent. They assert, that no prior authority, or subsequent ratification, either verbal, or by writing, without seal is sufficient to give validity to the instrument, as the sealed contract of the party.^ This is reducing the rule itself to its true technical character, and stripping it of all pretence of being founded in public policy. The American courts have in this view strongly inclined to repudiate it in all cases, where an express, or an implied authority or confirmation could be justly established, not under seal, whether it be verbal, or in writing, or circum- stantial.'' » Gow on P. c. 2, § 2, p. 60, 3d ed, ; Coll. on P. B. 3, c. 2, § 1, p. 308- 312, 2d ed. ; Cady v. Shepherd, 11 Pick. 400; Gram v. Seton, 1 Hall, 262; Skinner «. Dayton, 19 Johns. 513; Story on Ag. § 49 ; ante, §114; Beckham V. Drake, 9 M. & W. 79, 91-94. {Beckham v. Drake, 11 M. & W. 315,} Beckham iJ. Knight, 1 Man. & G. 738; ante, § 115. 2 3 Kent, 47, 48. 3 Gow on P. c. 2, § 2, p. 58-60, 3d ed. ; Steiglitz v. Eggington, Holt N. P. 141 ; Hunter v. Parker, 7 M. & W. 322, 342 ; Wallace v. Kelsall, 7 M. & W. 264, 272. * 3 Kent, 47, 48. CHAP. VII.] POWERS AND AUTHORITIES. 213 § 122. Some of the American decisions may be sup- ported upon the general ground, that the act, if done by an unsealed instrument, would have been within the scope of the business of the partnership, and the pow- ers and authorities belonging to each partner.^ In such cases there does not seem any solid reason, why the act, when done, should be vitiated by being under the seal and signature of the firm.^ There seems nothing incongruous in such a case in holding, that it is binding on the individual partner, as his sealed instrument, and on the other partners as their agreement or assignment, made by their authorized agent.^ Thus, a purchase of ' Tapley v Butterfield, 1 Met. 515. * [Purviance v. Sutherland, 2 Ohio St. 478 ; Sweetzer v. Mead, 5 Mich. 107]; {Milton v. Mosher, 7 Met. 244; Dubois' Appeal, 38 Penn. St. 231 ; Daniel v. Toney, 2 Metcalfe, 523; Human v. CunifFe, 32 Mo. 316; Met. on Contr. 125 ; 1 Am. Lead. Cas. 450.} 3 See Harrison v. Sterry, 5 Cranch, 289 ; Cady v. Shepherd, 11 Pick. 400. — In Anderson v. Tompkins, 1 Brock. 456, 462, Mr. Chief Justice Marshall said : " It is said, this transfer of property is by a deed, and that one partner has no right to bind another by deed. For this a case is cited, which, I believe, has never been questioned in England, or in this country. Harrison V. Jackson, 7 T. R. 207. I am not, and never have been satisfied with the extent to which this doctrine has been carried. The particular point decided in it is certainly to be sustained on technical reasoning, and perhaps ought not to be controverted. I do not mean to controvert it. That was an action of covenant on a deed ; and if the instrument was not the deed of the de- fendants, the action could not be sustained. It was decided not to be the deed of the defendants, and I submit to the decision. No action can be sus- tained against the partner, who has not executed the instrument, on the deed of his copartner. No action can be sustained against the partner, which rests on the validity of such a deed, as to the person who has not executed it. This principle is settled. But I cannot admit its application in a case where the property may be transferred by delivery, under a parol contract, where the right of sale is absolute, and the change of property is consummated by delivery. I cannot admit, that a sale, so consummated, is annulled by the circumstance, that it is attested by, or that the trusts under which it is made, are described in a deed. No case goes thus far; and I think such a decision could not be sustained on principle." See also Sale v. Dishman's Executors, 3 Leigh, 548; Coll. on P. B. 3, c. 2, § 1, p. 313, 2d ed. ; s. p. Hunter v. Parker, 7 M. & W. 322. [In Ex parte Bosanquet, De Gex, 432, the Chief Judge in Bankruptcy said : " As to the objection, that the security 214 PARTNERSHIP. [cHAP. VII. goods, in the course of the trade and business of the partnership, under the seal of the iirm, has been held binding on the firm.^ But the more general doctrine, and, indeed, that which is principally relied on, is, that a prior authority, or a subsequent ratification, not un- der seal, but either express or implied, verbal or written, is sufficient to establish the deed, as the deed of the firm, and binding upon it as such.^ being effected by a deed executed by one partner could not bind the firm, it might be true that the instrument would not take effect as the deed of the firm; but the transaction itself was one within the authority of the partner, and the circumstance of a deed being executed would not invalidate the contract." See also Everit v. Strong, 7 Hill, (N. Y.) 585.] ' Cady V. Shepherd, 11 Pick. 400. ^ Skinner v. Dayton, 19 Johns. 513; Cady v. Shepherd, 11 Pick. 400 ; Gram v. Seton, 1 Hall, 262; [Herbert v. Hanrick, 16 Ala. 581; Smith «. Kerr, 3 Comst. 144; McDonald v. Eggleston, 26 Vt. 154; Drumright v. Philpot, 16 Ga. 424; Swan v. Stedman, 4 Met. 548; Ely v. Hair, 16 B. Monr. 230.] The whole reasoning on which this doctrine depends, as well as the authorities on which it is founded, were most ably and elaborately re- viewed in the case of Cady v. Shepherd, 1 1 Pick. 405, 406, and in Gram v. Seton, 1 Hall, 262. In the latter case especially, all the English, as well as the American authorities, were examined at great length by Mr. Chief Justice Jones, and his judgment is worthy of a most attentive perusal. On that occasion he said : " The principle, that a partner cannot, by virtue of the authority he derives from the relation of copartnership, bind his co- partner by deed, has been too long settled to be now shaken. It is the technical rule of the common law applicable to deeds, which has been in- grafted into the commercial system of the law of partnership ; and unless the charter-party in question can, under the circumstances of this case, be construed to be the deed of Bunker, the defence must prevail. The reasons for the restrictions are not very satisfactory ; for all the mischiefs, which the expositors of the rule ascribe to the authority of members of a copartnership to seal for their copartners, may flow almost as extensively, and nearly with equal facility, from the use of the name and signature of the copartnership. The dangers of allowing the use of a seal to the members of a copartnership are supposed to consist in these two attributes of the seal ; that it imports a consideration, and that it is competent to convey absolutely, or to charge and encumber real estate. But negotiable paper, by which the partner may bind the firm, equally imports a consideration with a seal ; and upon general prin- ciples, the use of the seal of the copartner, equally with the signature of the copartnership, would, if permitted, be restricted to copartnership purposes and copartnership operations solely ; and the joint deed of the copartners, CHAP. VII.] POWERS AND AUTHORITIES. 215 § \22 a. In the next place, although one partner may procure advances of money to carry on the business of executed by the present for the absent members, be held competent to con- vey or to encumber the copartnership property alone, and to have no oper- ation upon the private funds or separate estate of the copartners. With these restrictions upon the use and operation of the seal, is not the power of a partner to bind his copartner, and to charge and encumber his estate, as great and as mischievous, without the authority to use the seal of the absent partner, as it would be with that authority ? Those powers undeniably place the fortune of the members of a general copartnership, to a great de- gree, at the disposal of any one of the copartners ; but it' is necessary to the beneficial management of the joint concern, that extensive powers should be vested in the members who compose it ; and when the copartners live re- motely from each other, their joint business concerns cannot be advanta- geously conducted or carried on, without a latitude of authority in each, which is inconsistent with the perfect safety of the other copartners. It cripples the operation of a partner, whose distant residence precludes a personal co- operation, to deny him the use of the seal of his copartner for instruments requiring it, and which the exigencies of their joint concerns i-ender expe- dient or beneficial to them. He must be clothed with the power to execute deeds for his copartner when necessarily required for the purposes of the trade ; and if that authority is not inherent in the copartnership, it must be conferred by letter of attorney, and it must be general, or it will be inade- quate to the ends of its creation. A copartnership, especially, which is em- ployed in foreign trade, and has occasion to employ ships for the transporta- tion of merchandise, or to borrow money on respondentia, if its members are dispersed, as is often the case, must be seriously embarrassed in its operations by the application of the rule, that requires every copartner, who is to be bound by the charter-party or the respondentia bond, to seal it personally, or by attorney duly constituted for that specific purpose, with his own seal. Similar difficulties would arise out of the same rule, when the operations of the house required the copartnership to execute other deeds. Can it then be, that this stern rule of the common law, which has its appropriate sphere of action, and a most salutary operation on those relations of society, where men, not otherwise connected, are the owners of undivided property, Is to be applied in all its force, and to govern, with unbending severity, in the concerns of copartners, whose intimate connection and mutual interest re- quire such large power and ample confidence in the integrity and prudence of each other, to give to their operations efficiency, vigor, and success ? The pressure of these considerations has induced a relaxation of the com- mon-law rule, to adapt it to the exigencies of commercial copartnerships, and other associations of Individuals operating with joint funds for the com- mon benefit. The rule Itself remains ; but the restrictions it imposes are qualified by the application of other principles. The general authority of a partner, for example, derived from his relation to his copartners, does not 216 PARTNERSHIP. [CHAP. VII. an established partnership, and thereby bind the firm ; yet if the partnership is not established, one partner has not an implied authority to bind the firm for advances in the incipient state thereof to raise capital therefor.^ § 123. These seem to be the principal exceptions to the authority of one partner to bind the partnership by his own acts and contracts, done within the scope of partnership trade and business, and for the purposes thereof. But another question may arise ; and that is, whether in cases of partnership the majority is to gov- ern in case of a diversity of opinion between the part- ners, as to the partnership business and the conduct thereof; or, whether one partner can, by his dissent, arrest the partnership business, or suspend the ordinary powers and authorities of the other partners in relation empower him to seal an instrument for them, so as to make it binding upon them •without their assent, and against their will. This is the fair import of the modern cases, and is, I apprehend, the principle courts are disposed to apply to the use of a seal in joint contracts for copartnership purposes. An absent partner is not bound by a deed executed for him by his copartner, without his previous authority or permission, or his subsequent assent and adoption. But the previous authority or permission of one partner to an- other to seal for him, or his subsequent adoption of the seal as his own, will impart efficacy to the instrument as his deed ; and that pi-evious authority or subsequent adoption may be by parol. These are the results, which I de- duced from the judicial decisions, especially those of our own courts, on the subject ; and if I am correct in my deduction, the conclusion must be favor- able to the validity of this charter-party, as the deed of both the partners." {Bond V. Aitkin, 6 W. & S. 165 ; Johns v. Battin, 30 Penn. St. 84. The same rule has been extended to instruments affecting real estate. Haynes v. Seachrest, 13 Iowa, 455 ; Wilson i\ Hunter, 14 AVis. 683. Lowery v. Drew, 18 Tex. 786. The previous authority or subsequent ratification must be proved. Dillon v. Brown, 11 Gray, 179. Butterfield v. Hemsley, 12 Gray, 226. Fox r. Norton, 9 Mich, 207. In Delaware authority cannot be proved by parol. Little v. Hazzard, 5 Harring. 291. Nor perhaps in Tennessee. Tur- beville v. Ryan, 1 Humph. 113; Napier v. Catron, 2 Humph. 534; but see Lambden v. Sharp, 9 Humph. 224. The several partners may use one and the same seal. Tasker v. Bartlett, 5 Cush. 359, 364. Lambden v. Sharp. ubi sup. Contra, Rex v. Inhab. of Austrey, 6 M. & S. 319.} 1 Fisher v. Tayler, 2 Hare, 218, 229. {See § 146.} CHAP. VII.] POWERS AND AUTHORITIEiS. 217 thereto, against the will of the majority. Where there is no stipulation in the partnership articles to control or vary the result (for if there be any stipulation, that ought to govern),^ the general rule would seem to be, that each partner has an equal voice, however unequal the shares of the respective partners may be, because in such a case, each partner has a right to an equal share of the profits ; ^ and the majority, acting fairly and bona fide, have the right and authority to conduct the part- nership business, within the true scope thereof, and dis- pose of the partnership property, notwithstanding the dissent of the minority.^ Where there are but two * Const V. Harris, Turn. & R. 496, 517, 518, 521 ; 3 Kent, 45 ; {§ 213.} " See ante, § 24. ' Coll. on P. B. 2,c. 2, § 1, p. 129, 130; Id. B. 3, c. 1, § 262, 2d ed.; 3 Chltty on Comm. and Manuf. c. 4, p. 236 ; Const v. Harris, Turn & K. 496, 517, 518, 524, 525 ; Kirk v. Hodgson, 3 Johns. Ch. 400, 405, 406 ; [Johnston V. Dutton, 27 Ala, 245] ; {Western Stage Co. v. Walker, 2 Iowa, 504. See Noyes v. New Haven, New London, & Stonington R. R. Co. 30 Conn. 1 ; Lind. on P. 508-518.} It is not easy to say, that this doctrine is so entirely settled, as to admit of no controversy. The elementary writers are not all agreed about it ; and the dicta of judges do not always admit its correctness. Still it appears to me, that the text states the true doctrine, fairly deducible from a just survey of all the leading authorities. On one occasion, Lord Eldon said : " If I consider them (a lodge of freemasons) as individuals, the ma- jority had no right to bind the minority." Lloyd v. Loaring, 6 Ves. 773, 777. But that was not a case strictly of partnership ; but rather of a club. Mr. Wat- son, in his Treatise on Partnership (c. 4, p. 194, 2d ed.), says : "We have seen in V. Layfield, 1 Salk. 292, Lord Holt held, that the act of one partner should be presumed the act of the others, and should bind them, unless they could show a disclaimer. And it would seem, that, even during the subsistence of the partnership, and in the established course of trade, one partner may, to a certain degree, limit his responsibility. If there be any particular specula- tion or bargain proposed, which he disapproves of, by giving distinct notice to those with whom his copartners are about to contract, that he will not in any manner be concerned in it, they could not have recourse upon him ; as proof of this notice would rebut h\s prima facie liability. The partnership in that case might either be considered as dissolved, or quoad hoc as suspended. Where three persons entered into partnership in the trade of sugar-boiling, and ajireed, that no sugars should be boui^ht without the consent of the majority ; one of them afterwards makes a protest, that he would no longer be concerned in partnership with them. The other two persons after make 218 PARTNERSHIP. [CHAP. VII. persons in the firm, and they dissent from each other, it would seem a just result, that it amounts to a tempo- rary suspension of the right and authority of each to carry on or manage the partnership business, or dispose of the partnership property, in respect to all persons having notice of such disagreement.^ But in every case, where the decision of the majority is to govern, it would seem reasonable, that the minority, if practicable, should have notice thereof and be consulted ; and if the majority should choose wantonly to act without infor- mation to, or consultation with the minority, it would hardly be deemed a bona fide transaction, obligatory upon the latter.^ a contract for sugars, the seller having notice, that the third had disclaimed the pai'tnership, he shall not be charged." The case in 1 Salkeld, 292, will not be found to justify the broad conclusion of the author. It was there held, that partners would be presumed to have assented to a transaction designed for their benefit, unless they had refused to be concerned in it. The case in 16 Vin. Abr. 244, A. pi. 12, is, indeed, directly in point. But the same case is reported under the name of Minnit v. Whinery, 3 Bro. P. C. 523 (5 Bro, P. C. by Tomlins, 489), where it appears, that the case turned upon very different considerations, and facts establishing an exclusive credit to the other partners, contracting the debt, and that there had been a dissolution of the partnership at the time. See Coll. on P. B. -3, c. 1, p. 261, 2d ed. In the case of Vice v. Fleming, 1 Y. & J. 227, 230, Mr. Chief Baron Alexander said : " It is clear that the defendant might, by an absolute notice, have dis- charged himself from all future liability, whether he ceased or continued to be a partner." Mr. Baron Garrow added : " All the partners of a firm are liable for the debts of the firm ; but this responsibility may be limited by express notice by one, that he will not be liable for the acts of his copartners." It does not seem to me, that the facts of that case required so strong a state- ment, or that the point was positively in judgment. The case of Willis v. Dyson, 1 Stark. 164, is not in point; for there were but two partners, and they dissented in opinion, and notice was given by one. In Lord Gal way v. Matthew, 1 Camp. 403, s. c. 10 East, 264, a majority of the partners did not CO ncurin giving the note. See Booth v. Quin, 7 Price, 193 ; 3 Kent, 45 ; Coll. on P. B. 2, c. 2, § 2, p. 129, 130, 2d ed.; Gow on P. c. 2, § 2, p. 52, 3d ed. and note, ibid, of American editor (Mr. Ingraliam) ; Id. c. 4, § 1, p. 149. » Willis V. Dyson, 1 Stark. 164; {Donaldson v. Williams, 1 Cr. & M. 345.} 2 Const ?7. Harris, Turn. & R. 496, 525, 527. — In this case Lord Eldon said: " I call that the act of all, which is the act of the majority, provided CHAP. VII.] POWERS AND AUTHORITIES. 219 § 124. The Roman law seems to have aclo])ted the general rule, that no act was binding upon all the part- ners, unless so far as it was expressly or impliedly agreed to by all ; and consequently the refusal or pro- hibition of one rendered the act a nullity, as to him- self. In this respect, the partner prohibiting was held to have a superior right against the others. In re coinmimi neminem dotninoruin jure facere quicquam^ invito altero, 2)osse. Unde manifestum est prohibendi jus esse ; in re enim pari potiorem causmn esse prohi- hentis constat. Sed etsi in communi prohiheri socius a socio, ne quid faciat, potest, ut tamen factum opus tol- lat, cogi non potest, si, cum prohihere poterat, hoc prce- ternfiisit} The French law has adopted the same doc- trine, in the absence of all counter stipulations of the parties." But if the administration of the partnership be confided to one or more of the partners, the others can- not recall that authority, or annul or prohibit its ex- ercise during the existence of the partnership, or the presumed duration of the authority.^ Such also is the rule of the Scottish law ; '^ and of the Louisiana Code.^ all are consulted, and the majority are acting hona fide^ meeting not for the purpose of negativing what, when they are met together, they may, after due consideration, think proper to negative. For a majority to say, We do not care what one partner may say, we being the majority, will do what we please, is, I apprehend, what this court will not allow." Again: "In all partnerships, whether it is expressed in the deed or not, the partners are bound to be true and faithful to each other. They are to act upon the joint opinion of all, and the discretion and judgment of any one cannot be ex- cluded. What weight is to be given to it is another question. The most prominent point on which the court acts, in appointing a receiver of a part- nership concern, is, the circumstances of one partner having taken upon himself the power to exclude another partner from as full a share in the management of the partnei*ship, as he, who assumes that power, himself enjoys." ' D. 10, 3, 28; Poth. Pand. 17, 2, n. 27; Domat, 1, 3, 4, art. 22. " Poth. de Soc. n. 87-91. « Poth. de Soc. n. 71, 90. * 1 Stair, Inst. tit. 16, § 4, p. 157. » Code, art. 2838, 2839, 2841. 220 PARTNERSHIP. [cHAP. VII. § 125. The doctrine of the common hiw above stated, as to the right of the majority to govern in all cases, where the stipulations of the articles of the partner- ship do not import the contrary, must be strictly confined to acts done within the scope of the business of the partnership, and does not extend to the right to change any of the articles thereof In such a change, it is essential that all should unite ; otherwise it is not obligatory upon them.^ This is emphatically true in case of joint associations, and joint-stock companies of an extensive nature, in the constitution of which certain articles are treated as fundamental, and cannot be al- tered or varied without the consent of all the members ; for the rule, which applies to public bodies, strictly so called, that the majority is to govern in all cases, is inapplicable to private associations, where the terms originally prescribed for the association must and ought to remain in full force, until abrogated by the consent of all the associates.^ ' [Thus, if written articles of partnership stipulate that there shall be no trade in spirituous liquors, and they be so changed by the majority as to allow such trade, this is a material alteration, at least when such trade is con- trary to law, and will justify the minority in withdrawing from the firm. Abbot V. Johnson, 32 N. PI. 9.] * Livingston v. Lynch, 4 Johns. Ch. 573, 596. — In this case Mr. Chan- cellor Kent said: "Lord Coke, Co. Lltt. 181, b. took the distinction between public and private associations, and admitted, that, in matters of public con- cern, the voice of the majority should govern, because it was for the public good, and the power was to be more favorably expounded than when it was created for private purposes. In Viner, tit. Authority, B., we have several cases marking the same distinction ; and it is now well settled, that in matters of mere private confidence, or personal trust or benefit, the majority cannot conclude the minority. But where the power is of a public or general nature, the voice of the majority will control, on grounds of public convenience; and this is also part of the law of cor])orations. Attorney-General v. Davy, 2 Atk. 212; The King v. Beeston, 3 T. R, 592; Withnell v. Gartham, 6 T. R. 388 ; Grindley v. Barker, 1 B. & P. 229 ; Green v. Miller, 6 Johns. 39 ; 5 Co. 63, a. In Lloyd v. Loaring, 6 Ves. 773, there was a suit by three per- sons, on behalf of themselves and all the other members of a lodge of fi-ee- CHAP. VII.] POWERS AND AUTHORITIES. 221 masons ; and Lord Eldon observed, ' that if he considered them as individuals, the majority had no right to bind the minority. One individual has as good a right to possess the projjerty as any other, unless he can be affected by some agreement.' Mr. Abbott, I^aw of Shipping, Part 1, c. 3, § 2, admits the extreme inconvenience, under the law of England, of enjoying personal chattels vested in several distinct proprietors, without a common consent and agreement among them. But the ease most applicable to the one before us, is that of Davies v. Hawkins, 3 M. & S. 488. A company was formed for brewing ale, and by deed they confided the conduct of the business to two persons, who were to be trustees of the company. General quarterly meet- ings of the company were to be held. It was resolved by the K. B., that one person only could not be appointed at a general quarterly meeting, in place of the two originally appointed under the deed, unless such alteration was made by the consent of all the subscribers. Lord Ellenborough said, that ' a change had been made in the constitution of this company, which could not be made without the consent of the whole body of the subscribers. It was such a substituted alteration in its constitution, as required the assent of all.'" {Natusch v. Irving, Gow on P. app. 398, 3d ed. ; Lind. on P. 511- 514.} 222 PARTNERSHIP. [CHAP. VIII. CHAPTER VIII. LIABILITIES AND EXEMPTIONS OF PARTNERS AS TO THIRD PERSONS. { § 126. Proof of authority to bind the firm sometimes necessary, 127. In case of a guaranty. 128. Firm not bound to a party who knows the want of authority. 129. Foreign law on the subject. 130. Illustrative cases. 131. So a fortiori^ in cases of fraud. 132. Firm not bound by the use of its property or credit in favor of a partner's private creditor. 133. This a presumptive rule only. 133 fi. Equity will prevent such use. 134. Firm not liable when credit is given to one partner. 135. Roman law. 136. Emly v. Lye, 15 East, 7. 137. French law. 138. Rule not ajiijlicable to a dormant partner. 139. Firm business carried on in the name of one partner. 140. Taking a separate security. 141. Stage-coach proprietors. 142, 143. Negotiable paper in the name of a partner. ■ 144. Clubs. 145. Joint purchases. . 146. Commencement of liability. 147-151. Illustrative cases. 152, 153. Liability of incoming partner. 154. A firm sometimes not bound though the creditor meant to bind it. 155. Extinguishment of liablHty. 156. By credit given to a partner. 157. Appropriation of payments. 158. Discharge of retiring partner. 159. Liability of retiring partners for future debts. Dormant partners. 160. Ostensible partnere. 161. What is sufficient notice of retirement. 162. Notice of a dissolution other than by retirement. 163. Fraudulent retirement. 164. Joint-stock companies. 165. Scottish law. CHAP, VIII.] LIABILITIES AND EXEMPTIONS. 223 166. Liability of the partnership for torts. 16 7. Torts several as well as joint. 168. Release of one partner releases all. 168 cr. Notice of copartners' acts.} § 126. There are certain powers and authorities, which from long usage and recognition are so generally attached to all sorts of partnerships, that they will be deemed to exist by presumption of law (presumptione juris ef dejure), unless there is clear evidence to repel the presumption, or some positive contrary stipulation be agreed upon between the parties. Thus, for exam- ple, each partner may, as we have seen, buy and sell goods, belonging to or for the use of the partnership or the ordinary business thereof; ^ each partner may pledge the partnership property, or borrow money for partnership purposes, on the credit of the firm.^ These cases are sufficiently clear from what has been already suggested in a former section.^ But the same doctrine cannot be as universally affirmed, as to the right to draw, or indorse, or accept, or negotiate bills of ex- change, or to make, or indorse promissory notes, not being the securities of third persons, held by the firm, as a part of the funds thereof, and therefore disposable accordingly. For although, in the ordinary course of commercial partnerships, these are known and univer- 1 Coll. on P. B. 3, c. 1, § 1, p. 263-265, 267, 2d ed. ; Hyat r. Hare, Comb. 383; Thicknesse v. Bromllow, 2 Cr. & J. 425; ante, § 102; Livingston v. Roosevelt, 4 Johns. 251 ; U. S. Bank v. Binney, 5 Mason, 176 ; s. c. 5 Pet. 529. 2 Coll. on P. B. 3, c. 1, § l,p. 263, 267; Id. 290, 291, 2d ed. ; Rothwell V. Humphreys, 1 Esp. 406 ; Thicknesse v. Broniilow, 2 Cr. & J. 425; Bank of U. S. V. Binney, 5 Mason, 176; s. c. 5 Pet. 529; Fox t'. Ilanbury, Cowp. 445; Raba v. Ryland, Gow, 132; Tupper v. Haythorn, Gow, 135; Reid v. HoUinshead, 4 B. & C. 86 7; Church v. Sparrow, 5 Wend. 223; Livingston V. Roosevelt, 4 Johns. 251, 265 ; 2 Bell, Comm. B. 7, p. 615, 616, 5th ed. ; 3 Kent, 43-46 ; Gow on P. c. 2, § 2, p. 36-56, 3d ed. ; Wats, on P. c. 4, p. 195 ; U. S. Bank v. Binney, 5 Mason, 1 76 ; s. c. 5 Pet. 529. = Ante, § 102. 224 PARTNERSHIP, [cHAP. VIII. sally acknowledged operations, which any partner is competent to transact, because they arise from the usages of trade, and the previous consent of all the partners, and from this universality in practice, they are now adopted as a general rule of law ; ^ yet it by no means follows, that the like rule prevails in all other sorts of partnership, or in such as are of a special and peculiar nature.^ The foundation of any general and known usage may here altogether fail, and the very nature, or organization, or objects of the partnership may show, that it is neither a proper nor a necessary power to be exercised by a partner.^ Thus, if a part- nership is organized for mining, or for farming purposes, the directors or active agents thereof will not, as inci- dent thereto, possess a power to draw or accept bills, or to draw or indorse notes for the company. But there should be some proof, that an express authority is given for this purpose, or that it is implied by the usages of the business, or the ordinary exigencies and objects thereof.^ 1 Coll. on P. B. 3, c. 1, § 2, p. 268-279, 2d ed. ; Thicknesse v. Bromilow, 2 Cr. & J. 425 ; U. S. Bank v. Binney, 5 Mason, 1 76, 184 ; s. c. 5 Pet. 529 ; Livingston v. Roosevelt, 4 Johns. 251 ; Swan v. Steele, 7 East, 210; Gow on P. c. 2, § 2, p. 38-50, 3d ed.; Le Roy v. Johnson, 2 Pet. 186; Harrison v. Jackson, 7 T. R. 207. 2 Dickinson v. Valpy, 10 B. & C. 128; Thicknesse v. Bromilow, 2 Cr. & J. 425, 430. [But this rule was extended to banking partnerships, in Bank of Australasia v. Breillat, 6 Moore, P. C. 152, where the language of the text is cited with approbation.] {See § 102 a.} » Coll. on P. B. 3, c. 2, § 2, p. 329, 330, 2d ed.; Gow on P. c. 4, § 1, p. 149, 150, 3d ed. * Coll. on P. B. 3, c. 1, § 2, p. 269, 2d ed. ; Dickinson v. Valpy, 10 B. & C. 128; Mullett v. Huchinson, 7 B. & C. 639; Thicknesse v. Bromilow, 2 Cr. & J. 425 ; Greenslade v. Dower, 7 B. & C. 635. [In Ricketts v. Bennett, 4 C. B. 686, it was held that one of several co-adventurers in a mine has not, as such, any authority to pledge the credit of the general body for money borrowed for the concern. And the fact that he had the general 7nanar/e- ment of the mine makes no difference, in the absence of circumstances from which an implied authority for that jjurpose can be inferred. See also CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 225 § 127. The like observations apply with increased force to cases of guaranty.^ If one partner gives a letter of credit or guaranty in the name of the part- nership, it is not to be treated, as of course binding on the partnership ; for it is not a natural or necessary in- cident in all sorts of partnerships, for one partner to possess the power to bind his copartners by a guaranty.^ It must be shown to be justified, either by the usages of the particular trade or business, or by the known habits of the particular partnership, or by the express or implied approbation of all the partners in the given case.^ The same rule will apply to cases, where one Tredwen v. Bourne, 6 M. & W. 461 ; Hawtayne v. Bourne, 7 M. & W. 595 ; Hawken r. Bourne, 8 M. & W. 703.] Pothier has put several cases illustrative of au analogous doctrine, in cases of partnerships not commercial. Poth. de Soc. 102-104. Mr. Chancellor Kent has well summed up the doctrine in his Commentaries, 3 Kent, 46. He says : " It was formerly understood, that one partner might bind his copartners by a guaranty, or letter of credit, in the name of the firm ; and Lord Eldon, in the case of Ex parte Gardom, considered the point too clear for argument. But a different principle seems to have been adopted ; and it is now held, both in England and in this coun- try, that one partner is not authorized to bind the partnership by a guaranty of the debt of a third person, without a special authority for that purpose, or one to be implied from the previous course of dealing between the parties, unless the guaranty be afterwards adopted and acted upon by the firm. The guaranty must have reference to the regular course of business transacted by the partnership, and then it will be obligatory ujjon the company, and this is the principle on which the distinction rests. The same general rule applies, when one partner gives the copartnership as a mere and avowed surety for another, without the authority or consent of the firm ; for this would be pledging the partnership responsibility, in a matter entirely un- connected with the partnership business." ' 2 Bell, Comm. B. 7, p. 618, 5th ed. ; 3 Kent, 40. {See previous note.} ^ [Sweetser v. French, 2 Cush. 309 ; Andrews v. Planters' Bank, 15 Miss. 192; Langan v. Hewett, 21 Id. 122; Tutt v. Addams, 24 Mo, 186] ; {1 Am. Lead. Cas. 457, 4th ed.} ^ Duncan v. Lowndes, 3 Camp. 478 ; Sandilands v. Marsh, 2 B. & Aid. 673 ; Payne v. Ives, 3 Dow. &Ry. 664 ; Ex parte Nolte, 2 Giyn & J. 295, 300 ; Coll. on P. B. 3, c. 1, § 3, p. 279-281, 2(1 ed. ; Crawford v. Stirling, 4 Esp. 207 ; Theobald on Prin. and Surety, 29-31 ; 2 Bell, Comm. B. 7, c. 1, p. 618, 5th ed. ; 3 Kent, 46, 47 ; Sutton v. Irwine, 12 S. & R. 13 ; Hamill v. Purvis, 15 226 ■ PARTNERSHIP. [cHAP. VIII. partner signs or indorses the name of a firm to a note, as surety for a third person, in which note the partner- ship has no interest, and where it is not in the course of their business.^ 2 Penn. 177 ; Gow on P. c. 2, § 2, p. 37, 38, 56-58; Id. c. 4, § 1, p. 148, 149, 3d ed. ; Dob v. Halsey, 16 Johns. 34; [Rollins v. Stevens, 31 Me. 254] ; Foot V. Sabin, 19 Johns. 154: N. Y. F. Ins. Co. v. Bennett, 5 Conn. 574 ; {Alliance Bank v. Tucker, 15 Weekly Rep. 992.} There is some apparent discrepancy in the authorities. But the text contains what seems to me the just results belonging to the doctrine ; and it is accordingly adopted by Mr. Chancellor Kent in his Commentaries. 3 Kent, 46, 47. In Hope v. Cust, cited by Mr. Justice Lawrence in Shirreflf v. Wilks, 1 East, 48, 53, Lord Mansfield is reported to have said : " There is no doubt but that the act of every single partner in a transaction relating to the partnership, binds all others. If one gives a letter of credit or guaranty in the name of all the partners, it binds all." Lord Mansfield was here addressing himself to the case of bankers, when it might perhaps be within the ordinary scope of their business. On the other hand. Lord EUenborough, in Duncan v. Lowndes, 3 Camp. 478, in the case of a commercial partnership, said: "As it is not usual for merchants in the common course of business to give collateral engagements of this sort, I think you must jirove that Lowndes had authority from Bateson to sign the partnership firm to the guaranty in question. It is not incidental to the general power of a partner to bind his copartners by such an instrument. The case was not, however, a guaranty in the partner- ship business, but a guaranty of the acceptances of a third person, not belonging to the partnership funds. In Sandilands v. Marsh, 2 B. & Aid. 673, a guaranty of an annuity by one partner, the partnership not dealing in annuities, but the dealing in this annuity being known to the other partner, and not disapproved of by him, and he having no knowledge of the guaranty, was held to bind the partnership, upon the ground that the transaction as to the annuity, being adopted as a part of the business binding on the partner- ship, the whole transaction bound the partnership, although the guaranty was not known. This must have been sustained u23on the notion, that dealers in annuities, in the ordinary course of things, were accustomed to guaranty them ; for the mere adoption of an act of one partner, where there was a concealment of material circumstances, might not bind him, if the business were not within the scope of their ordinary business." {The decision in Ex parte Gardom, 15 Ves. 286, and Lord Mansfield's dictum, must be considered as overruled, and the law in England settled in accordance with the text by Hasleham v. Young, 5 Q. B. 833, and Brettel v. Williams, 4 Exch. 623.} ' Laverty v. Burr, 1 Wend. 529, 531 ; Bank of Rochester v. Bowen, 7 Wend. 158 ; Wilson v. Williams, 14 Wend. 146 ; Catskill Bank v. Stall, 15 Wend. 364; [Rollins v. Stevens, 31 Me. 454] ; {McQuewans v. Hamlin, 35 Penn. St. 517 ; Selden v. Bank of Commerce, 3 Minn. 166, 1 Am. Lead Cas. CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 227 § 128. Ill the next place, every contract in the name of the firm, in order to bind the partnership, must not only be within the scope of the business of 455, 4tli ed. See Butterfield r. Hemsley, 12 Gray, 220. | The American cases are very generally agreed on this point. In Laverty v. Burr, 1 Wend. 529, 531, Mr. Justice Sutherland, in delivering the opinion of the court, said : " Hosraer, the agent of the plaintiffs, took t]}e note in question for a debt due from Allen, the maker, to them. He refused to take Allen's note with- out security. The security given was the indorsement of Burr and Baldwin, the defendants, and of Smith and Jenkins, the second indorsers. The plaintiffs, therefore, knew, when they took the note, that the indorsement of the defendant was made by one of the partners, in the name of the firm, as security for Allen, and not for a debt due from the firm. The partner, who did not sign the note, is not bound by it under such circumstances, unless he was previously consulted, and assented to the transaction ; and the burden of proving, that the partner, who did not sign the note, con- sented to be bound, is thrown on the creditor. Dob v. Halsey, 16 Johns. 34, and Foot v. Sabin, 19 Johns. 154. In England, the assent of all the partners is presumed, and the burden of avoiding the security is thrown on the firm, and they are required to prove, that the note was signed by one of the partners on his individual account, without the knowledge and against the consent of the others, and that the creditor knew that fact, when he took the paper of the firm. Here the onus prohandi is thrown on the creditor. The law upon this subject is very fully considered and clearly established in the cases referred to, and also in Livingston v. Hastie, 2 Caines, 246, Lansing v. Galne, 2 Johns. 300, and Livingston r. Roosevelt, 4 Johns. 251. The only distinction between this case and that of Foot v. Sabin, 19 Johns. 154, is this. In that case the note was signed by one of the partners in the name of the firm as sureties ; here it was indorsed ; and it was urged upon the argument of this cause, that in every general partnership, each member necessarily possesses the power of signing or mdorsing negotiable commercial paper in the customary way of business, though the power of pledging the firm as sureties for third persons may not exist. The form of the transaction cannot be material, except by way of evidence. AVhen paper is signed by one partner in the name of the firm, as sureties for a third, it carries on the face of it evidence that it was not given for a partnership debt, and proof of that fact becomes unneces- sary. But when it is signed or indorsed in the ordinary manner, such proof must be given. But when the fact is established, that it was not given for a partnership debt, and that the person to whom it was passed knew it, no matter what the form of the instrument is, it does not bind the partners, who did not sign or assent to it. In this case, the assent of Baldwin is not shown, and he is therefore entitled to judgment." [The authority, however, may be proved by circumstances. Butler v. Stocking, 4 Seld. 4U8.] 228 PARTNERSHIP. [cHAP. VIII. the partnership, but it must be made with a party who has no knowledge, or notice, that the partner is acting in violation of his obligations and duties to the firm, or for purposes disapproved of by the firm, or in fraud of the firm.^ For every such contract, made with such knowledge or notice, will be void as to the firm, how- ever binding it may be upon the individual partner making it.- This is a natural result of the principles of justice and equity applied to every other contract, as well as to that of partnership contract. It also follows from the known limitations of the law of agency : for no agent can bind his principal in any transaction, in which he knowingly exceeds his author- ity, or knowingly colludes with another person, having notice, in any violation of the rights of his principal.^ § 129. The same principles are incorporated into the foreign law, of the modern nations of Europe, in respect to partnership. Thus, Pothier says, that in cases of partnership, the signature of the firm by one partner will not oblige the partnership, if it appeara from the verv nature of the contract, that it does not concern the business of the partnership.^ So, Mr. Bell asserts the like principles to belong to the Scottish law. When (says he) the party has notice of a stipulated restraint on the power of the partners ; or when, by the circumstances, or in its own nature, the transaction is such as to carry evidence with it of a misapplication of 1 fLincl. on P. 260-269 ; 1 Am. Lead. Cas. 442, 4th ed.} - See Stainer v. Tysen, 3 Hill, (N. Y.) 279. 3 Story on Ag. § 125, 165; 3 Kent, 44-46; Gow on P. c. 2, § 2, p. 42; Id. p. 40-56, 3d ed. ; Coll. on P. B. 3, c. 1, p. 261, 2d ed. [Thus, if a per- son seeking to enforce a contract for goods sold a firm upon the negotiation of one partner, knew that such partner was not authorized by the articles of co- partnership to purchase goods for the firm, the other partners are not liable therefor. Hastings r. Hopkinson, 28 Vt. 108.] * Poth. on Oblig. n. 83 ; Poth. de Soc. n. 101. CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 229 the firm to what is an mdividual concern only, and not a matter in ^Yhich the company is interested, the company and the other partners will not be bound. ^ § 130. This doctrine may be illustrated in various ways ; but the same principle pervades the whole of the cases. Thus, if a person should trust a firm, with a full knowledge that one partner had withdrawn from it, or that the firm was dissolved, or that the other partners disavowed or repudiated any such transaction ; in each of these cases he would have no remedy against any of the partners, except the one with whom he had entered into the contract.^ So, also, if the creditor should have 1 2 Bell, Comm. B. 7, p. 616, 5th ed. ^ Minnit v. Whinery, or Whitney, 5 Bro. P. C. by Tomlins. 489 ; s. C. 16 Vin. Ab. 244 ; s. c. 2 I^ro. P. C. 323 ; Le Roy i: Johnson, 2 Pet. 186 ; Gow on P. c. 2, § 2, p. 48, 49, 3d ed. ; Coll. on P. B. 3, c. 1, p. 262, 2d ed.; Willis V. Dyson, 1 Stark. 164; Alderson v. Pope, 1 Camp. 404, note. {See Lind. on P. 46} ; Gow on P. c. 2, § 2, p. 55-57, 2d ed. ; Id. c. 4, § 1, p. 148-150.— Mr. Gow (on P. c. 2, p. 48, 49. 3d ed.) has stated the Avhole doctrine very clearly and distinctly. " On the subject " (says he) " of negotiable instru- ments, it remains to be observed, that even in transactions, in which all the partners are interested, the authority of one partner to make, draw, accept, or indorse promissory notes or bills of exchange in the joint name is only im- plied, and may, therefore be rebutted by express previous notice, to the party taking a joint security from one partner, of his want of authority, or that the others will not be liable upon it. Such a power is not indispensably essential to the existence of a partnership ; the partners may stipulate between them- selves that it shall not be exercised ; and if a third person, apprised of such stipulation, will take a joint security, he cannot sue the firm upon it, although it were truly represented to him, by the partner giving the security, that the money to be advanced on it was required for the purpose of, and was iu fact applied in liquidating the partnership debts ; much less can he hold the firm responsible on a security so obtained, if he take it in defiance of a positive notice, previously given by one of the members, that he will not be answera- ble for any bill or note signed and negotiated by the others. And the power of one partner to bind the firm by a negotiable security, where it is capable of being exercised, is only co-existent with the duration of the partnership it- self; for, immediately on its dissolution, the power ceases." But although a partner has withdrawn from a partnership, and it is known to the other party, yet if his name is still to continue in the firm for a limited period, that will 230 PARTNERSHIP. [CHAP. VIII. notice of any private arrangement between the partners by which the power of one partner to bind the fu-m, or his liabiHty on the partnership contracts is quahfied, restricted, or defeated ; the creditor would be bound by such arrangement, and could not enforce any right in contravention thereof.^ The cases have gone yet create a liability on his part as a partner for that period, since he thereby holds himself out to the world, as responsible for their engagements for that period, not- withstanding the dissolution of the partnership. Brown v. Leonard, 2 Chitty, 120. 1 Coll. on P. B. 3, c. 1, p. 261 ; Id. p. 329, 2d ed. ; Minnit v. Whinery, 583 ; Bignold v. Waterhouse, 1 M. & S. 255 ; Gow on P. c. 2, § 2, p. 54-56, 2 Bro. P. C. 323 ; s. c. 5 Bro. P. C. by Tomlins, 489 ; Ex parte Harris, 1 Madd. 3d ed. ; Id. c. 4, § 1, p. 149-151. — In Lord Galway v. Mathew, 10 East, 264, Lord Ellenborough said : " The general authority of one partner to draw bills or promissory notes to charge another is only an implied authority ; and that implication was rebutted in this instance by the notice given by Smithson, who is now sought to be charged, which reached the plaintiff, warning him that Mathew had no such authority. It is not essential to a partnership, that one partner should have power to draw bills and notes in the partnership firm to charge the others ; they may stipulate between themselves, that it shall not be done ; and if a third person, having notice of this, will take such a securi- ty from one of the partners, he shall not sue the others upon it, in breach of such stipulation, nor in defiance of a notice previously given to him by one of them, that he Avill not be liable for any bill or note signed by the others." Mr. Gow, sjieaking on this subject, says : " So if the person, with whom the single partner deals, is at the time conscious of the misconduct of that partner in pledging the joint name to a separate transaction, he cannot enforce against the firm any claim that may arise to him out of such dealings. Neither can he call upon the firm to fulfil a contract which has been made by one partner, if he be privy to a private agreement between the partners themselves, the effect of which is to throw the responsibility upon the single partner alone. There- fore, where four persons are partners in a coach concern, but one by agree- ment provides the coaches at a certain rate jaer mile, he alone is responsible for repairs done to the coach by a person cognizant of this arrangement, al- though the names of all four appear on the vehicle. So, if it be notorious, that the proprietors have separate departments and interests, they must be sued separately by the tradesmen, who may supply each with goods." {Mr. Lindley (Lind. on P. 266) says : " Granting that a person, knowing the limits of a partner's authority as set by his copartners, cannot hold them responsible for an act done by him in excess of his authority, it still remains to determine the effect of notice, by non-partners, of stipulations entered into between the partners themselves. "In Galway v. Mathew, 10 East, 264, Lord Ellenborough is reported to CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 231 further ; and it has been held, that where a note has been made or indorsed by a partner, in violation of his have said, ' It is not essential to a partnership that one partner sliould have power to draw bills and notes in the partnership firm to charge the others; they may stipulate between themselves that it shall not he done ; and if a third person, having notice of this, will take such a security from one of the partners, he shall not sue the others upon it in breach of such stipulation.' " Again, in Alderson v. Pope, 1 Camp. 404, note, the same judge held ' that where there was a stipulation between A., B., and C, who appeared to the world as copartners, that C. should not participate in profit and loss, and should not be liable as a partner, C. was not liable as such, to those who had notice of this stipulation.' These dicta appear to authorize the statement that if part- ners stipulate amongst themselves that certain things shall not be done, no person who is aware of this stipulation is entitled to hold the firm liable for what may be done by one of the members, contrary to such stipulation. But it is submitted that this proposition is too wide. A stranger dealing with a partner is entitled to hold the firm liable for whatever that partner may do on its behalf within certain limits. To deprive the stranger of this right, he ought to have distinct notice that the firm will not be answerable for the acts of one member, even within these limits. Now notice of an agreement between the members that one of them shall not do certain things, is by no means neces- sarily equivalent to notice that the firm will not be answerable for them if he does. For there is nothing inconsistent in an agreement between the mem- bers of a firm that certain things shall not be done by one of them, and a readiness on the part of all the members to be responsible to strangers for the acts of each other, as if no such agreement had been entered Into. It Is im- material to a stranger what stipulations partners may make amongst them- selves, so long as they do not seek to restrict their responsibility as to him : and it is only when knowledge of an agreement between partners necessarily in- volves knowledge that they decline to be responsible for the acts of each other, within the ordinary limits, that a stranger's rights against the firm can be pre- judiced by what he may know of the private stipulations between its members. "In Galway r. Matthew, 1 Camp. 403, and 10 East, 264, the plaintiff's knowledge of want of authority was derived, not from notice of any agreement between the partners, but from an advertisement published by one of them, warning all persons that he would no longer be liable for drafts drawn by the others on the partnership account. (Distinct notice to the same effect existed in MInnit v. Whitney, 16 Vin. Ab. 244, s. C. 5 Bro. P. C. 489 ; Willis v. Dyson, 1 Stark. 164.) The passage, therefore. In the judgment, and extracted above, was by no means necessary for the decision of the case. With re- spect to Alderson v. Pope, 1 Camp. 404, note, if all that was meant was that a person knowing that C. did not authorize A. or B. to act on his behalf, could not hold C. liable for their acts, the case [)resents no dilHculty; but If anything more than tlils was meant, the authority of the decision becomes at least doubtful, it having been held in another case that a person who holds himself out as a partner with others with whom he has no concern, is liable for their 232 PARTNERSHIP. [chap. Yin. duty and authority, if the holder, who receives it, has been guiky of gross negligence in receiving it, it Avill not be binding in his hands upon the partnership.^ § 131. The same doctrine applies, a fortiori to cases of fraud ; for, although in cases of partnership, a fraud committed by one partner in the course of the part- nership business and transactions, without the knowl- edge of the other partners, will bind the firm, and create a liability co-extensive therewith ; ^ vet it would be absurd to apply this principle to any cases, where the fraud is known to, or participated in, or connived at by. the third person, whose interest it affected ; for that would be to allow him to take advantage of his own wrong, and would affect the innocent with the grossest injustice. Thus, for example, if one partner should acts, even to persons having notice of the true state of affairs ; and the de- cision was based upon the very ground that a person, who holds himself out as a partner with others, expresses his readiness to incur the responsibilities of a partner as regards strangers, whatever he may intend shall be the case be- tween him and those with whom he associates his name. Brown v. Leonard, 2 Chitty, 1 20. Against the general proposition in question it may be further urged that if partners agree not to be liable beyond a certain amount, and a stranger has notice of that agreement, the notice avails nothing against him. Such an agreement, coupled wjth notice of it on the part of a person dealing with the firm, is by no means equivalent to a contract between him and it, that he shall not hold the members responsible beyond the amount which they may have agreed between themselves to contribute respectively. See Green- wood's Case, 2 De G. M. & G. 459, 476. The writer is not acquainted with any case in which it has been decvled that persons who are aware of the terms upon which partners have agreed together to carry on business are deemed to contract with them upon the basis of the agreement come to amongst them- selves. In all cases of this description, the real question to be determined seems to be whether there was distinct notice that the firm would not be an- swerable to strangers for acts which, without such notice, would clearly impose liability upon it; and in case of ^any doubt upon this point, the firm ought clearly to be liable, the onus being on it to show sufBcient reason why liability should not attach to it."} » Lloyd V. Freshfield, 2 C. & P. 325 ; s. c. 9 Dow. & Ry. 19 ; In. Y. F. Ins. Co. r. Bennett, 5 Conn. 5 74; {Chapman v. Devereux, 32 Vt. 616.} 2 Ante, §108; Coll. on P. B. 3, c. 1, § 5,p.293-304, 2d ed. ; Gow on P. c. 2, § 2, p. 55, 3d ed. ; Id. c. 4, § 1, p. 146-148. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 233 make a negotiable security in the name of the partner- ship, and dispose of it to a third person, who knew that the proceeds were to be applied in fraud of the firm, or for purposes not within the scope of their business, or for illegal purposes, it would not be binding on the firm.^ A fortiori, if the whole transaction should be a medi- tated fraud to accomplish a mere gaming purpose, or some other illegal purpose, between the very parties, the same rule would apply.^ § 132. Similar principles will apply, although not always to the same extent, or with the same certainty, where one paitner misapplies the funds, or securities, or other efiects of the partnership in discharge or payment of his own private debts, claims, or contracts. In such cases the creditor, dealing with the partner, and know- ing the circumstances, will be deemed to act 7nala Jide, and in fraud of the partnership, and the transaction, by which the funds, securities, and other effects of the partnership have been so obtained, will be treated as a nullity.^ The same rule will ordinarily apply to the case of a note, or indorsement, or acceptance, given by one partner in the name of the firm for his own separate debt or contract ; for it is a clear misapplication of the partnership credit."* So, a release of a pattnership debt ^ { See Connecticut River Banli v. French, 6 All. 313 ; Warren v. French, 6 All. 31 7.} 2 Coll. on P. B. 5, 0. 1, § 5, p. 293-303, 2d ed. ; Gow on P. c. 2, § 2, p. 55, 56, 3d ed. ; Id. c. 4, § 1. p. 147-151 ; Sandilands v. Marsh, 2 B. & Aid. 673. 3 Gow on P. c. 2, § 2, p. 42-48, 3d ed. ; 3 Kent, 42, 43 ; Ex parte Agace 2 Cox, 312 ; Coll. on P. B. 3, c. 2, § 3, p. 331-347, 2d ed. ; Hope v. Cust cited 1 East, 53 ; Arden v. Sharpe, 2 Esp. 524 ; Shirreff v. Wilks, 1 East 48; [Kemeys v. Richards, 11 Barb. 312]; Green v. Deakin, 2 Stark. 347 Ex parte Goulding, 2 Glyn & J. 118 ; Snaith v. Burridge, 4 Taunt. 684 Rogers v. Batchelor, 12 Pet. 221 ; [Ex 2yaiie Bushell, 3 Mont. 1). & De G. 615 ; Burwell v. Springfield, 15 Ala. 273.] * Gow on P. c. 2, § 2, p. 44-48, 3d ed. ; Coll. on P. B. 3, c. 2, § 3, p. 831-347, 2d ed. ; Wats, on P. c. 4, p. 196, 197, 2d ed. ; Wliitakcr i\ Brown, 11 Wend. 75; Gansevoort r. Williams, 14 Wend. 133; Wilson r. 234 PARTNERSHIP. [CHAP. VIII. by one partner (which ordinarily will extinguish the partnership debt), will be held inoperative and void, as Williams, 14 Wend. 146 ; Dob v. Halsey, 16 Johns. 34; [Lang v. Waring, 17 Ala. 145] ; {Ex parte Thorpe, 3 Mont. & Ayr. 716, 1 Am. Lead. Cas. 454, 4th ed. ; Fall River Union Bank v. Sturtevant, 12 Cush. 372 ; Clay V. Cottrell, 18 Penn. St. 408 ; Venable v. Leviok, 2 Head, 351. } In Arden V. Sharpe, 2 Esp. 524, 525, Lord Kenyon said: "The bill is indorsed by one partner in the name of the firm. One partner certainly may indorse a bill in the partnership name ; and if it goes into the world, and gets into the hand of a bona jide holder, who takes it on the credit of the partnership name, and is ignorant of the circumstances, though in fact the bill was first discounted for that one partner's own use, in such case the partnership is liable. But the case is dififerent, where the party, who brings the action, was himself the person who took the bill with the indorsement by one part- ner only, and was informed that the transaction was to be concealed from the other. He cannot sue the partnership. The transaction indicates that the money was for that partner's own use, and not raised on the partnership account, therefore he shall not be allowed to resort to the security of the partnership, to whom in the original transaction he neither looked nor trusted." In Livingston v. Roosevelt, 4 Johns. 251, 265, Mr. Justice Van Ness said: "The distinction between general and special partnerships is probably coeval with their existence. A general rule applicable to both is, that in transactions relating to the joint concern, one of several partners may bind the rest. He may sign notes, indorse or accept bills for the com- mon benefit, &c., without applying to the rest in every particular case. But this authority of a single partner has its limitations. Formerly, as appears by the case of Pinkney v. Hall, 1 Salk. 126, and s. c. 1 Ld. Raym. 175, it was probably less extensive than at this day. One partner of the concern has no authority to pledge the partnership goods for his own debt ; nor can he bind the firm to any engagements, known at the time to be unconnected with, and foreign to, the partnership. This has not only been so settled by this court, but now is, and always has been, the established law in England. Not an adjudged case, nor, I believe, a single dictum can be found the other way. This will appear from most of the cases, which I shall presently have occasion to mention for another purpose. In special partnerships, however, this power of the individuals composing them is restricted to still narrower limits, and can only be legally exei-cised within the compass of that particular business to which the partnership relates. It is as circumscribed as the partnership itself. It is, therefore, analogous to that which is con- ferred on an agent, appointed for a special purpose, who, if he exceed his authority, cannot bind his principal. Fenn v. Harrison, 3 T. R. 757. This analogy is complete, in all cases, where third persons have dealings with a special partner, with notice that he is such. And, accordingly, it has been repeatedly ruled, that, whenever such a partner pledges the partnership funds, or credit, in a transaction, which is known to be unconnected with, CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 235 to the firm, if it was taken in discharge of the separate debt of the partner releasing it by his creditor knowing all the circumstances.^ § 133. But although this is the general doctrine in the absence of all controlling circumstances ; yet the presumption of any fraud or misapplication may be rebutted by the circumstances of the particular case. Thus it may be shown, that the other partners have du'ectly or by fair implication authorized or confirmed the application of the partnership funds, securities, effects, or credits to the very purpose," or that the part- ner had acquired, with the consent of his partners, an exclusive interest therein, or that, from other circum- stances, the transaction was actually hona fide, and un- exceptionable, although it went to the discharge of the private debt by one partner only.^ For, it has been and not fairly and reasonably within, the compass of the partnership, it is, as to the other partners, fraudulent and void. They, however, to entitle themselves to the protection of this rule of law, must not do, or consent to, or suffer any thing to be done, which may hold them out to the world as general partners ; and it would always be prudent and proper (though I will not say it is indispensably necessary) to give public notice to the community, that the partnership is special, and of the particular species of traffic or business to which it is confined; Willet v. Chambers, Cowp. 814; De Ber- kom c. Smith, 1 Esp. 29 ; Arden v. Sharpe, 5 Esp. 524 ; Shirreff t'. Wilks, 1 East, 48. In the case. Ex ])arte Bonbonus, 8 Ves. 540,. Lord Eldon ex- presses himself thus : ' I agree it is settled, that if a man gives a partnership engagement in the partnership name, with regard to a transaction, not in its nature a partnership transaction, he, who seeks the benefit of that engagement, must be able to say, that though in its nature not a particular transaction, yet there was some authority beyond the mere circumstance of partnership, to enter into that contract, so as to bind the partnership ; and then it depends uyyon the degree of evidence.' " [See also Ex parte Bushell, 3 Mont. D. & De G. 615.] ' Gram v. Cadwell, 5 Cowen, 489 ; Everngliim v. Ensworth, 7 Wend. 320; Farrar v. Hutchinson, 9 Ad. & E. 641;. {1 Am. Lead. Cas. 4.53, 4th ed. ; Williams v. Bramhall, 13 Gray, 462. But see Halls v. Coe, 4 McCord, 136.} '■ [Wheeler v. Rice, 8 Gush. 205] ; {Darling v. March, 22 Me. 184.} ^ Gow on P. c. 2, § 2, p. 44-48, 3d ed. ; Id. c. 4, § 1, p. 149-151 ; 3 Kent, 42-44; Coll. on P. B. 3, c. 1, § 4, p. 287-289; Id. p. 313-331; Id. 236 • PARTiNERSHIP. [cHAP. YIII. very justly remarked, that the appHcation by a single partner of a joint security, in discharge of his individ- ual debt, by no means necessarily establishes, that it is a fraud upon the firm; for it may not only have been expressly authorized by the firm, but it may frequently result from prudential considerations and arrangements, referable to their own business and interests.^ The c. 2, § 8, p. 331-338, 2d ed. ; Ex jmrte Agace, 2 Cox, 312 ; Ripley v. Taylor, 13 East, 175, 178, 182 ; WIntle v. Crowther, 1 Cr. & J. 316 ; Baird v. Coch- ran, 4 S. & R. 397 ; {1 Am. Lead. Cas. 454, 4th ed. } 1 See Gow on P. c. 4, § 1, p. 149, 3d ed. ; Coll. on P. B. 3, c. 2, § 3, p. 831-347, 2d ed. ; Ex 2:>arte Bonbonus, 8 Ves. 540; Frankland v. McGusty, 1 Knapp, 274; Ridley i'. Taylor, 13 East, 175, 178. 182; Wats, on P. c. 4, p. 202, 2d ed. ; Shirr'eff v. Wilks, 1 East, 42; 2 Bell, Coram. B. 7, p. 616,* 617, 5th ed. ; {Carter v. Beaman, 6 Jones, Law, 44.} — In Ex paHe Bon- bonns, 8 Ves. 540, 543, 544, Lord Eldon said : " This petition is presented upon a principle, which it is very difficult to maintain ; that if a partner for his own accommodation pledges the partnership, as the money comes to the account of the single partner only, the partnership is not bound. I cannot accede to that. I agree, if it is manifest to the persons advancing money, that it is upon the separate account, and so, that it is against good faith, that he should pledge the partnership, then they should show that he had authority to bind the partnership. But if it is in the ordinary course of commercial transactions, as upon discoiuit, it would be monstrous to hold, that a man borrowing money upon a bill of exchange pledging the partner- ship, without any knowledge in the bankers that it is a separate transaction, merely because that money Is all carried Into the books of tlie individual, therefore the partnership should not be bound. No case has gone that length. It was (k)ubted, whether Hope v. Cust was not carried too far, yet that does not reach this transaction ; nor ShirreflF v. Wilks ; as to wliich I agree with Lord Kenyon, that, as partners, whether they expressly provide against it in their articles (as they generally do, though unnecessarily), or not, do not act with good faith, when pledging the partnership property for the debt of the Individual, so it Is a fraud In the person taking that pledge for his separate debt. The question of fact, whether this was fair matter of discount, or, being an antecedent, separate debt of Rogers, the discount was obtained merely for the purpose of paying that debt by the application of the partnership funds, which (piestiou is brought forward by the affidavits, though not by the petition, must lead to further examination. If the partners are privy, and silent, permitting him to go on dealing In this way, without giving notice, the question will be, whether subsequent approbation is not for this purpose equivalent to previous consent. Purnell, therefore, must explain himself upon this ; for if he admits all these circumstances to have been in his knowledge, it will be very difficult to say he Is entitled to the CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 237 mere fact, that a note, or security, or fund of the firm has been taken in discharge or payment of the separate debt of one partner, is not alone decisive of collusion, or fraud, or misapplication thereof. Neither is the fact, benefit of that principle, which is established for the safety of partners. That explanation, if material in 1793, is much more so now; when one of the partners is dead ; another gone abroad ; the managing clerk dead. Under these circumstances, if the examination as to the propriety of the proof made in 1793, which I consider a sort of judgment for the debt, can- not be gone into but under most unfavorable circumstances to those who made it, I cannot throw that difficulty upon those who come forward then ; and permit the inattention of the others, who might have come at any time since, to be prejudicial to third persons." Again he added : "In Fordyce's Case, Lord Thurlow and the Judges had a great deal of conversation upon the law ; and they doubted, upon the danger of placing every man, with whom the paper of a partnership is pledged, at the mercy of one of the partners with reference to the account he may afterwards give of the trans- action. There is no doubt, now, the law has taken this course ; that if, under the circumstances, the party taking the paper can be considered as being advertised in the nature of the transaction, that it was not intended to be a partnership proceeding, as if it was for an antecedent debt, prima facie, it will not bind them ; but it will, if you can show previous positive authority. In many cases of partnership and different private concerns, it is frequently necessary, for the salvation of the partnership, that the private demand of one partner should be satisfied at the moment ; for the ruin of one partner would spread to the others, who would rather let him liberate himself by dealing with the firm. The nature of the subsequent transactions, therefore, must be looked to, as well as that at the time. It is impossible now to forget, whatever I might have thought of it in 1793, that the person, upon whose evidence this joint demand could be cut down, is Purnell, the bankrupt ; who could not be a witness at law ; whose duty, also, it Avas to protect the partnership against this proof; and who has permitted it to stand all this time : and who, upon all the circumstances appearing in these affidavits, if he should deny notice, could not be believed by a jury." See also Hood V. Aston, 1 Russ. 412, -llo. [So, the use of a partnership name by one partner for his own private benefit, may be ratified by the other part- ner ; and no independent consideration is necessary to support a subsequent promise by the other partner to pay such partnership obligation. Com- mercial Bank v. Warren, 15 N. Y. 577.] {But in Taylor v. Hillyer, 3 Blackf, 433, it was held that such subsequent promise by the other, if oral, was within the Statute of Frauds, and did not bind him, qucere tamen. And a note given in the firm name with tlie consent of all the partners, ibr the debt of one partner, may be renewed in the firm name by that jiartner, and it will not be necessary for the holder of tlie note to show that the other membei-s authorized the renewal. Tillbrd v. Kamsey, 37 Mo. 563.} 238 PART>'ERSHIP. [chap. VIII. that the amount thereof has been passed to the separate private credit on account of one partner ; nor that a note or security of the firm has been in part discounted, or applied to pay a separate debt of one partner ; for all these circumstances may be consistent with entire good faith, and without gross negligence on the part of the creditor. There must, therefore, be some other ingredients in the case, importing some knowledge or suspicion of mala Jides^ or some reasonable grounds, Avhich should put the creditor upon further inquiry.^ It may, however, be taken as the general rule, that where a note, or security, or fund of the firm has been taken in discharge of a separate debt of one partner, the burden of proof is on the holder or creditor to show circumstances, sufficient to repel every presumption of fraud, or collusion, or misconduct, or negligence, on his own part, unless indeed the cu'cumstances, already in proof on the other side, repel such presumption.^ And ^ See Coll. on P. B. 3, c. 2, § 3, p. 331-347, 2d ed. ; Ridley v. Taylor, 13 East, 175 ; Ex j^o^'te Bonbonus, 8 Ves. 540-545 ; Hood v. Aston, 1 Russ. 412, 415. • Frankland v. McGusty, 1 Knapp, 274, 301, 305, 306 ; Ex paHe Bon- bonus, 8 Ves. 540 ; Coll. on P. B. 3, c. 2, § 3, p. 342, 343 ; Lloyd r. Fresh- field, 9 Dow. & Ry. 19 ; s. c. 2 C. & P. 325 ; Foot v. Sabin, 19 Johns. 154, 157, 158; Dob v. Halsey, 16 Johns. 34, 38; Gansevoort r. Williams, 14 Wend. 133 ; {1 Am. Lead. Cas. 454, 4th ed. ; Robinson v. Aldridge, 34 ^liss. 352 ; King V. Faber, 22 Penn. St. 21. } — In Frankland v. McGusty, 1 Knapp, 274, 301. Sir John Leach (Master of the Rolls), in delivering the opinion of the court, said : "I take it to be clear, from all the cases upon the subject, that it lies upon a separate creditor, who takes a partnership security for the payment of his separate debt, if it be taken simpliciter, and there is nothing more in the case, to prove that it was giveb with the consent of the other partners. But there mav be other circumstances attendinjr the transaction, which mav afford the separate creditor a reasonable ground of belief that the security, so given in the partnership name, is given with the consent of the other part- ners ; and those circumstances occurred in the case which was cited, and which seemed to be inconsistent with the other authorities. I refer now to the case of Ridley v. Taylor. In that case the bill was dated eighteen days before its delivery by the partner to his separate creditor, and it was not known by the creditor that it was drawn and indorsed by tlie debtor alone ; CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 239 if the securities or funds of the partnership are received in payment of the separate debt of one partner by and the bill was to a greater amount than the separate debt. The court therefore were of opinion, that there was reasonable ground for the separate creditor believing it not to have been given to him in fraud of the partner- ship, and that the general presumption, that a partnership security, when applied in payment of a separate debt, is in fraud of the partnership, was repelled by the special circumstances which belonged to that particular occasion. Upon a consideration, therefore, of all the authorities, I am of opinion, that the law is, that taken simpliciter the separate creditor must show the knowledge of the partnership ; but if there are circumstances to show a reasonable belief, that it was given with the consent of the part- nership, it lies upon the partners to prove the fr&ud. I think that will reconcile all the cases." And again (Id. p. 305, 306): "The counsel seemed to be perfectly satisfied with a reference to one of the members of the court to examine what the law was in that case, it having been ad- mitted here, that there was no direct evidence, whether these bills had been given with the assent of the partners, or whether they had not been given with their assent ; and the question therefore was, when bills had been given by an individual partner in the name of the partnership firm, for liis individual debt, upon whom the burden of proof lay to show that the other partners did not assent to the formation of those bills. Upon the con- sideration of that question, and examining all the authorities, it appeared to the member of the court, who had the duty of that examination, that, simpliciter, bills drawn by one partner for a separate debt in the partnership name, could not be recovered ujion, as against the partnership firm ; but that the person claiming payment of the bills must prove either a direct as- sent of the other partners to the formation of the bills, or if not such direct assent, that there were some circumstances in the transaction, from which the party taking them might reasonably infer, that they were given with the consent of the other partners." In Dob v. Halsey, 16 Johns. 34, 38, Mr. Chief Justice Spencer, in delivering the opinion of the court, said: "This court has decided, in several cases, that where a note is given in the name of the firm, by one of the partners, for the private debt of such partner, and known to be so by the person taking the note, the other partners are not bound by such note, unless they have been previously consulted, and consent to the transaction. Livingston v. Hastie, 2 Caines, 240 : Lansing v. Gaine, 2 Johns. 300; Livingston v. Roosevelt, 4 Johns. 251. In Ridley v. Taylor, 13 East, 175, the Court of King's Bench held, that if one partner draw or indorse a bill in the name of the partnership, it will, prima facie^ bind the firm, although passed by one partner to a separate creditor, in dis- charge of his private debt, unless there be covin between such separate debtor and creditor, or, at least, the want of authority, either express or im- plied, in the debtor partner, to give the security of the firm for his separate debt. The onlv difference between the decision of this court and that 240 PARTNERSHIP. [chap. YHI. his creditor, it will not be necessary for the partners to establish the fact, that the creditor knew at the time, of the King's Bench, consists in this : We require the separate creditor, ■who has obtained the partnership paper for the private debt of one of the partners, to show the assent of the whole firm to be bound ; the rule of the Iving's Bench throws the burden of avoiding such security on the firm, by requiring them to prove that the act was covinous on the part of the partner, for whose private debt the paper of the firm was given, by show- ing, that it was done without the knowledge and against the consent of the other partners, and that the fact was known to the separate creditor, when he took the paper of the firm. I can perceive no substantial differ- ence, whether the note of a firm be taken for a private debt of one of the partners, by a separate creditor of the partner pledging the security of the firm, and taking the property of the firm upon a purchase of one of the partners, to satisfy his private debt. In both cases, the act is equally injurious to the other partners ; it is taking their common property to pay a private debt of one of the partners." The same point was decided in Foot V. Sabin, 19 Johns. 154, 157, 158, where the same learned judge said: "The plaintiff proved Holmes's signature to the note, and, also, that Wilson and Foot were jjartners, and that Wilson signed the name of the firm ; and it appeared on the face of the note, that they signed as ' sureties ' to Holmes. Whether we apply this proof to the general issue or to the special plea, the plaintiff has not maintained either issue. It was incumbent on him to show, that all the defendants were liable on the note, and that Wilson executed the note with the express assent and authority of Foot. In this case, it appearing, that the signature of the name of the firm, by Wilson, was not for a partnership debt, Wilson could not bind his partner. Foot. All the cases were reviewed in Dob v. Halsey, 16 Johns, oi, and the principle established is this, that where a note is given in the name of a firm, by one of the partners, for the private debt of such partner, and known to be so by the person taking the note, the other partner is not bound, unless he has been previously consulted, and has consented to the transaction ; and the burden of the proof, that the partner, who did not sign the note, consented to be bound, is thrown on the creditor. The same principle applies with greater force, when one of the partners becomes security for another person, and attempts to bind his copartners. The creditor is aware, that he is pledging the partnership responsibility in a matter in nowise connected with the partnership business ; and that is a fraud on such of the partners as do not assent expressly that the firm shall be bound. When, therefore, it appeared, from the plaintiff^s own showing, that the note was signed by Holmes, as jirincipal, and by Wilson, with the name of the firm of Wilson and Foot, as sureties for Holmes, nothing was shown to bind Foot, and the plaintiff failed to maintain the issue. On the motion for a nonsuit, the court held, that the plaintiff was bound to prove the authority or consent of Foot, to the making the note, which the court CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 241 that it was a misapplication of the securities or funds ; considered he had done. There was no proof of any authority or consent of Foot, except the proof of the signature of Wilson of the name of the firm. The court, then, certainly drew a very incorrect legal inference from the fact proved." Perhaps the whole doctrine cannot be summed up better than it is done by Mr. Chancellor Kent in his learned commentaries. " In all contracts," says he, " concerning negotiable paper, the act of one part- ner binds all ; and even though he signs his individual name, provided it appeal's on the face of the paper, to be on pai'tnership account, and to be intended to have a joint operation. But if a note or bill be drawn by one partner, in his own name only, and without appearing to be on partnership account, or, if one partner borrow money on his own security, the partner- ship is not bound by the signatui'e, even though it was made for a partner- ship purpose, or the money applied to a partnership use. The borrowing partner is the creditor of the firm, and not the original lender. If, how- ever, the bill be drawn by one partner in his own name, upon the firm or partnership account, the act of drawing has been held to amount, in judg- ment of law, to an acceptance of the bill by the drawer in behalf of the firm, and to bind the firm as an accepted bill. And though the partnership be not bound at law in such a case, it is held, that equity will enforce pay- ment from it, if the bill was actually drawn on partnership account. Even if the paper was made in a case, which was not in its nature a partnership transaction, yet it will bind the firm, if it was done in the name of the firm, and there be evidence that it was done under its express or implied sanc- tion. But if partnership security be taken from one partner, without the previous knowledge and consent of the others, for a debt, M-hichthe creditor knew at the time was the private debt of the particular partner, it would be a fraudulent transaction, and clearly void in respect to the partnership. So, if from the subject-matter of the contract, or the course of dealing of the partnership, the creditor was chargeable with constructive knowledge of that fact, the partnership is not liable. There is no distinction in principle upon this point between general and special partnerships ; and the question, in all cases, is a question of notice, express or constructive. All partnerships are more or less limited. There is none that embraces, at the same time, every branch of business ; and when a person deals with one of the partners in a matter not within the scope of the partnership, the intendment of law will be, unless there be circumstances or proof in the case to destroy the presumption, that he deals with him on his pi'ivate account, notwithstanding the partnership name he assumed. The conclusion is otherwise, if the sub- ject-matter of tiie contract was consistent with the partnership business ; and the defendants in that case would be bound to show, that the contract was out of the regular course of the partnership dealings. When the business of a partnership is defined, known, or declared, and the couij)any do not ap- pear to the world in any other light than the one exhibited, one of the partners cannot make a valid partnership engagement, except on partner- ship account. There must be at least some evidence of previous authority 16 242 PARTNERSHIP. [cHAP. VTII. for the very nature of such a transaction ought to put beyond the mere circumstance of partnership, to make such a contract bind- ing. If the public have the usual means of knowledge given them, and no acts have been done or suffered by the partnership to mislead them, every man is presumed to know the extent of the partnership, with whose mem- bers he deals. And wlieu a person takes a partnership engagement, with- out the consent or authority of the firm, for a matter that has no reference to the business of the firm, and is not within the scope of its authority, or its regular course of dealing, he is, in judgment of law, guilty of a fraud. It is a well-established doctrine, that one partner cannot rightfully apply the partnership funds to discharge his own pre-existing debts, without the express or implied assent of the other partners. This is the case even if the creditor had no knowledge at the time of the fact of the fund being partnership property. The authority of each partner to dispose of the partnership funds strictly and rightfully extends only to the partnership business, though in the case of bona fide purchasers, without notice, for a valuable consideration, the partnership may, in certain cases, be bound by the act of one partner." 3 Kent, 41-43. The question upon whom the burden of proof lies to show, that the partnership funds or securities have or have not been misapplied, by the application thereof to the payment of a separate debt of one part- ner, has been elaborately discussed in some other cases in the American Reports ; and the conclusion is uniformly maintained, that the burden of proof is on the holder, and not on the other partners. In Gansevoort v. Williams, 14 Wend. 133, 135, Mr. Justice Xelson, in delivering the opinion of the court, examined all the cases at large. The following extract may not be unacceptable to the learned reader: "The English cases upon this subject are not always consistent with themselves ; and even the same court, while they profess to adhere to their general position, namely, that the partner denying the authority of his associate must prove affirma- tively, that the holder knew the paper was given in a transaction uncon- nected with the partnership ; and also, that he did not assent, sometimes substantially disregard the latter qualification of the rule in the application of it to the facts. The case of Hope v. Cust, before Lord Mansfield, in 1774, cited by Lawrence, J., in 1 East, 53, is an instance. There one Fordyce, who traded largely in his private capacity, as well as in the business of a banker with others, had considerable dealings in his private capacity with Hope & Co., in Holland, and gave to them a general guaranty in the part- nership name, for money due in his separate capacity. The plaintiffs failed in recovering on the guaranty. Lord Mansfield, in reporting the case to the Coui't of Chancery, it being an issue from that court, said he left it to the jury to say, whether, under the circumstances, the taking of the guaranty was, in respect to the partners, a fair transaction, or covinous, with suffi- cient notice to the plaintiffs of the injustice and breach of trust Fordyce was guilty of in giving it. Chitty on Bills, 33. The case seems to have been put to the jury, from the history given of it, upon the gross negligence of the plaintiffs in not discovering that Fordyce was committing a fraud upon ! CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 243 him upon further inquiry ; and however hona fide his his associates. But it does not appear, that there was any affirmative evidence showing that the other partners had not assented, and that this was known to the phaintiffs. In Ex paHe Bonbonus, 8 Ves. 540, Lord Chan- cellor Eldon says, in Fordyce's case, Lord Thurlow and the judges had a great deal of conversation upon the law, and they doubted upon the danger of placing every man, with whom the paper of the partnership is pledged, at the mercy of one of the partners, with reference to the account he may afterwards give of the transaction. But he says, 'there is no doubt now the law has taken that course ; that if, under the circumstances, the party taking the paper can be considered as being advertised in the nature of the transaction, that it was not intended to be a partnership proceeding, as if it was for an antecedent debt, prima facie it will not bind them.' The case of ShirrefF v. Wilks, 1 East, 48, is another instance. There the plaintiff, Oct. 1795, sold a quantity of porter to B. & W., partners, which was shipped by them to the West Indies. In April, 1796, R. came into the firm and continued till November following, when it was dissolved. The balance due for the porter, as settled by W., was £78, for which the plain- tiffs drew upon the defendants the bill in question, which was accepted by B. in the name of the then firm. The court decided R. was not bound, and Lord Kenyon says, R. had no concern with the matter, and was no debtor of the plaintiffs ; that no assent of his was found, and nothing to show that he had any knowledge of the transaction ; that the transaction was fraudu- lent upon its face. In Ridley v. Taylor, 13 East, 175, the rule was applied by Lord Ellenborough with more strictness. There he required something more than the naked fact, that the Bill in the name of the firm was given for the private debt of the member who drew it, and that fact known to the plaintiffs. The court would not infer want of authority or fraud upon these facts ; and they considered the circumstances of the case of Shirreff v. Wilks, as having fairly authorized such a presumption, and that it was decided upon that ground. But in Green v. Deakin, 2 Stark. 347, a partnership security (a bill) was given by one member for his private debt to the plaintiff; and although it appeared expressly, that the plaintiff was not informed, that the associate had not concurred, yet Lord Ellenborough held, that the nature of the transaction was intrinsically notice, and he non- suited him. So, in Wood v. Holbeck, Chitty on Bills, 33, note z, the action was on a bill against three acceptors, where it appeared they were partners in a tea speculation, and the drawer, a wine merchant, drew it in payment of wine delivered to one of them ; the jury Avere dii'ected, if they Ibund it was drawn without the knowledge or concurrence of the other two, they were not liable, omitting the necessity of bringing home affirmatively notice to the holder. It is not material to look any further into these cases ; they will be found stated and refi-rred to in Cliitty on Bills, p. 29, 33. They all clearly prove, that while the English courts hold to the position, that the firm is liable on a bill or note made by one out of the partnership business, unless the holder knows that it was so made, and that the other 244 PARTNERSHIP. [CHAP. VIII. conduct may be, it is a case of negligence on his part, partners did not concur, the frequent practical operation and effect of it under their direction does not essentially differ from the rule as settled in this court. They undoubtedly put the defence of the copartner upon the ground of fraud, committed upon him by his associate and the holder. But this is sometimes inferred from the fact, that the bill or note is given for a private debt, and that known to the holder ; and at other times further proof is required negativing a presumed concurrence of the copartner. In this court, the cases are believed to be uniform from that of Livingston V. Hastie, 2 Caines, 246, down to the present time, that where a note or other security is given in the name of the firm, by one partner for his private debt, or in a transaction unconnected with the partnership business, which is the same thing, and known to be so by the person taking it, the other partners are not bound, unless they have consented. 11 Johns. 544; 16 Johns. 34; 19 Johns. 154 ; 3 Wend. 418 ; 5 Wend. 223 ; 6 Wend. 615 ; 7 Wend. 158, 309. Prima facie, the execution of the bill or note in the name of the firm by one partner binds the whole. The burden, therefore, of proving a presumptive want of authority, and of course fraud, for that necessarily follows, lies upon the copartners. 11 Johns. 544. We hold, that the fact of the paper of the fii'm being given out of the partnership business by one member is presumptive evidence of want of authority to bind the other members of the finn, and if the person taking it knows the flict at the time, he is chargeable with notice of want of authority, and guilty of concurring in an attempted fraud upon the other partners. It may be asked, why should the partners be bound at all, when the paper is in fact signed without their authority? This is no doubt against general princi- ples, and involves the injustice of subjecting a person to answer for an act of another, to which he never expressly or impliedly assented. The an- swer is founded upon the law merchant. By entering into the partner- ship, each reposes confidence in the other, and constitutes him a general agent as to all the partnership concerns ; and the inconvenience to com- merce, if it were necessary, that the actual consent of each partner should be obtained, or that it should be ascertained, that the transaction was for the benefit of the firm in the ordinary transaction of their business, suggested the rule, that the act of one, when it has the appeai-ance of being on behalf of the firm, is considered the act of the rest ; and whenever a bill is drawn, accepted, or Indorsed by one of several partners, on behalf of the firm during its continuance, which comes into the hands of a bona fide holder, the partners are liable to him, though in truth one partner only nego- tiated the bill for his own benefit, without the consent of the copartners. Swan V. Steele, 7 East, 210; Chitty on Bills, 30. There appears never to have been a doubt in England or in this State, in any of the cases, but that all the partners are bound, unless the hona fides can be impeached. What shall amount to an impeachment is oftentimes a debatable question, and in England seems to rest very much upon the circumstances of the case. There is more uniformity and precision in the application of the rule here. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 245 which will not entitle him to recover against the part- nership.^ It is undoubtedly the practice of mercantile firms to indorse the bank paper of each other by the hand of any one of the members. Upon a strict appli- cation of the rule in this court, and upon some of the cases in England, such paper would not bind the firm, if the bank had knowledge of the facts. It is not Avithin the purpose and business of a mercantile firm to indorse paper for their neighbors. Such business is not within the contem- plation of the partnership, and therefore no authority is to be implied or attached to any one of the members. It might well alarm the mercantile community to lay down the position, that the pai'tnership indorsement of accommodation paper, by one of the firm, for any person that might ask him, would be binding upon all, whether the holder knew the facts or not. Even the authority of one partner to sign bills and notes for the firm when interested, is only implied, and may be rebutted by notice. Chitty on Bills, 33. It would be a strange implication of authority, where the firm had no interest. But if it should appear, that a house was in the habit of indorsing at the bank or elsewhere for another, such general course of dealing would be sufficient evidence of authority from all the members of the firm, and such use of it by one would bind all. Duncan v. Lowndes, 3 Camp. 478. The authority would not flow from the partnership, but from facts and considerations independently of it." See, also, on the same point, Wilson v. Williams, 14 Wend. 146 ; Rogers v. Batchelor, 12 Pet. 221, 229-232. 1 Rogers v. Batchelor, 12 Pet. 229-232 ; [Powell v. Messer, 18 Tex. 401] ; {Purdy V. Powers, 6 Penn. St. 492 ; 1 Am. Lead. Cas. 453, 456, 4th ed.} — This point came directly before the Supreme Court of the United States in the case of Rogers v. Batchelor, 12 Pet. 221, 229, and was much discussed. Upon that occasion the Court said : " The first instruction raises these questions; whether the funds of a partnership can be rightfully applied by one partner to the discharge of his own separate pre-existing debt, without the assent, express or imjilied, of the other partner ; and, whether it makes any differ- ence, in such a case, that the separate creditor had.no knowledge at the time of the fact of the fund being partnership property. We are of opinion in the negative on both questions. The implied authority of each partner to dispose of the partnership funds strictly and rightfully extends only to the business and transactions of the partnership itself; and any disposition of those funds, by any partner, beyond such purposes, is an excess of his authority as partner, and a misappropriation of those funds, for which the partner is responsible to the partnership ; though in the case of bona jide purchasers, without notice, for a valuable consideration, the partnership may be bound by such acts. Whatever acts, therefore, are done by any partner, in regard to partnership property or contracts, beyond the scope and objects of the partnership, must, in general, in order to bind the partnership, be derived from some further authority, express or implied, conferred upon such partner, beyond that resulting from his character as partner. Such is 246 PARTNERSHIP. [CHAP. VIII. § 133 a. Upon like principles, if the acting partners of a firm, or the governing body of a joint-stock company the general principle ; and, in our judgment, it is founded in good sense and reason. One man ought not to be permitted to dispose of the property, or to bind the rights of another, unless the latter has authorized the act. In the case of a partner, paying his own separate debt out of the partnership funds, it is manifest, that it is a violation of his duty and of the rights of his partners, unless they have assented to it. The act is an illegal con- version of the funds ; and the separate creditor can have no better title to the funds than the partner himself had. Does it make any diff'erence, that the separate creditor had no knowledge, at the time, that there was a mis- appropriation of the partnership funds ? We think not. If he had such knowledge, undoubtedly he would be guilty of gross fraud ; not only in morals, but in law. That was expressly decided in Shirreff" v. Wilks, 1 East, 48 ; and, indeed, seems too plain upon principle, to admit of any serious doubt. But we do not think, that such knowledge is an essential ingredient in such a case. The true question is, whether the title to the property has passed from the partnership to the separate creditor. If it has not, then the partnership may re-assert their claim to it in the hands of such cred- itor. The case of Ridley v. Taylor, 13 East, 175, has been supposed to inculcate a different and more modified doctrine. But upon a close exam- ination, it will be found to have turned upon its own peculiar circum- stances. Lord EUenborough in that case admitted, that one partner could not pledge the partnership property for his own separate debt ; and if he could not do such an act of a limited nature, it is somewhat difficult to see, how he could do an act of a higher nature, and sell the property. And his judgment seems to have been greatly influenced by the consider- ation, that the creditor in that case might fairly presume, that the partner was the real owner of the partnership security ; and that there was an absence of all the evidence (which existed and might have been produced) to show, that the other partner did not know, and had not authorized the act. If it had appeared from any evidence, that the act was unknown to, or unauthorized by the other partners, it is very far from being clear, that the case could have been decided in favor of the separate creditor ; for his Lordship seems to have put the case upon the ground, that either actual covin in the creditor should be shown, or, that there should be pregnant evidence, that the act was unauthorized by the other partners. The case of Green v. Deakin, 2 Stark. 347, before Lord EUenborough, seems to have proceeded upon the ground, that fraud, or knowledge by the separate creditor, was not a necessary ingredient. In the recent case. Ex parte Goulding, cited in Coll. on P. 283, 284, 1st ed., the Vice-Chan- cellor (Sir John Leach) seems to have adopted the broad ground, upon which we are disposed to place the doctrine. Upon the appeal, his decision was confirmed by Lord Lyndhurst. Upon that occasion his Lordship said : ' No principle can be more clear, than that, where a partner and a creditor CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 247 should unite with a stranger to produce a fraud against the firm or company for whom they act, a court of enter into a contract on a separate account, the partner cannot pledge the partnership funds, or give the partnership acceptances in discharge of this contract, so as to bind the firm.'' There was no pretence in that case of any fraud on the part of the separate creditor. And Lord Lvndhurst seems to have put his judgment upon the ground, that unless the other partner as- sented to the transaction he was not bound ; and that it was the duty of the creditor to ascertain, whether there was such assent or not. The same ques- tion has been discussed in the American courts on various occasions. In Dob V. Halsey, 16 Johns. 34, it was held by the court, that one partner could not apply partnership property to the payment of his own separate debt, without the assent of the other partners. On that occasion, Mr. Chief Justice Spencer stated the difference between the decisions in Xew York, and those in England, to be merely this : that in New York the court re- quired the separate creditor, who had obtained the partnership paper for the private debt of one of the partners, to show the assent of the whole firm to be bound ; and that in England, the burden of proof was on the other part- ners to show their want of knowledge or dissent. The learned judge add- ed :' I can perceive no substantial difft'rence, whether the note of a firm be taken for a private debt of one of the partners by a separate creditor of a partner, pledging the security of the firm ; and taking the property of the firm, upon a purchase of one of the partners to pay his private debt. In both cases, the act is equally injurious to the other partners. It is taking their common property to pay a pi'ivate debt of one of the partners.' The same doctrine has been, on various occasions, fully recognized in the Supreme Court of the same State. And we need do no more than refer to one of the latest; the case of Evernghim «. Ensworth, 7 Wend. 326. Indeed, it had been fully considered long before, in Livingston v. Roosevelt, 4 Johns. 251. It is true, that the precise point now before us, does not appear to have received any direct adjudication ; for in all the cases above mentioned, there was a known application of the funds or securities of the partnership to the payment of the separate debt. But we think, that the true principle to be extracted from the authorities is, that one partner cannot apply the partnership funds or securities to the discharge of his own private debt with- out their consent ; and that without their consent their title to the property is not devested in favor of such separate creditor, whether he knew it to be partnership property or not. In short, his right depends, not upon his knowl- edge, that it was partnership property ; but upon the fiict, whether the other partners had assented to such disposition of it or not." [But if one partner indorse and negotiate a note in the firm name, l)ut out of the legitimate business of the company, a subsequent holder will be entitled to recover against the partnership, on proving that he became a holder before maturity, for a valuable consideration, and without notice of the fraud. Gil- dersleeve v. Mahony, 5 Duer, 383 ;] { 1 Am. Lead. Cas. 455, 4th ed. ; Roth 248 PARTNERSHIP. [cHAP. VIII. equity might interfere and repudiate such acts, and ask [1] to be reUeved against them.^ § 134. There are other cases, which constitute excep- tions to the general liabiUty of partners for acts or con- tracts concerning the partnership business, which deserve special notice in this connection. One of them is, where in the very transaction, although it may be for the benefit or use of the partnership, and in the business thereof, yet the credit is exclusively given to the partner, trans- acting it, upon his sole and separate liability. The law is exceedingly clear and w^ell settled upon this point. If money is borrowed, or goods bought, or any V. Colvin, 32 Vt. 125. A partner drew a check in the name of the firm, pay- able to bearer, for the purpose of paying a debt due from the firm to H., but instead of so using it, he retained it, and paid the debt due H. by setting off against it a debt due from H. to him individually, and paying the balance in cash. Subsequently he transferred the check to B. to pay a private debt. Held, that B. could maintain an action on the check against the firm. Gale V. Miller, 44 Barb. 420. Any doubt thrown on the rule as to the burden of proof, by Lord Ellen- borough's dictum in Ridley v. Taylor, 13 East, 175, must be considered as removed by the recent case of Leverson v. Lane, 13 C. B. x. s. 278, in which it was held that one who takes from a partner in a firm, for his separate debt, a bill accepted in the firm name, must show that the acceptance was with the concurrence of the other partners. In this case Mr. Justice Williams said : " I do not mean to deny that there is in the judgment of Lord Ellenborough, in Ridley v. Taylor, 13 East, 175, a dictum which is to some extent inconsis- tent with the law as laid down in this case. But that dictum is clearly at variance with all the authorities both before and since that judgment ; " and Mr. Justice Byles said: " I adopt the law as laid down in a text-book of very great value, — Smith''s Mercantile Law, where I think it is correctly laid down (p. 44), and evidently well considered, and after reading Lord Ellen- borough's judgment in Ridley v. Taylor, 13 East, 175, ' It would seem,' says the learned author, ' that the unexplained fact that a partnership security has been received from one of the partnei's in discharge of a separate claim against himself, is a badge of fraud, or of such palpable negligence as amounts to fraud, which it is incumbent on the party who so took the security to remove, by showing either that the partner from whom he received it acted un- der the authority of the rest, or at least that he himself had reason to believe so.' " See also Hogg v. Skeen, 18 C. B. n. s. 426. } 1 Vigers v. Pike, 8 CI. & Fin. 562, 648. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 249 other contract is made by one partner upon his own ex- clusive credit, he alone is liable therefor ; and the part- nership, although the money, property, or other con- tract is for their proper use and benefit, or is applied thereto, will in no manner be liable therefor.^ For it is entirely competent for one partner to borrow money, or to buy goods, or to enter into contracts on his own sole and exclusive credit with third persons ; and, on the other hand, it is equally competent for them to rely on that exclusive credit, and either to refuse to contract with the fii-m, or to exonerate the firm from all liability upon any contract, which would otherwise bind the firm, as being for then- account and benefit. For the maxim of the common law here applies with its full force : 3Iodus et co7iventio vincunt legem; and either party may at his pleasure waive or relinquish rights, to which he would otherwise be entitled. It is but following out the rule of natural justice and the exposition of the in- tention of the parties recognized in the Pandects. Ante omnia enim animachertendum. est, ne conventio in alia re facta, aut cum alia persona, in cdia re, aliave persona noceat^'^ § 135. This very case was directly put in the Roman law, in relation to joint employers of ships, where one ' Coll. on P. B. 3, c. 2, § 2, p. 819, 2d ed. ; Id. p. 342, 343 ; Ex parte Emly, 1 Rose, 61; Ex parte Bonbonus, 8 Ves. 540; Sylvester v. Smith, 9 Mass. 119, 121 ; Gow on P. c. 4, p. 154, 155, 3d ed. ; Lloyd v. Freshfield, 2 C. & P. 325 ; 9 Dow. & Ry. 19 ; Ketchiim v. Durkee, 1 Hoff. 538 ; Le Roy V. Johnson, 2 Pet. 186, 198-200. See Trueman v. Loder, 11 Ad. & E. 589, 595 ; De Mautort v. Saunders, 1 B. & Ad. o98 ; Bonfield v. Smith, 12 M. & W. 405; [Green v. Tanner, 8 Met. 411. And if the contract is made with one alone, and credit is given to him, he is liable on such contract, without joinifig his copartners. Hagar v. Stone, 20 Vt. 106 ; Stansfeld v. Levy, 3 Stark. 8; Murray v. Somerville, 2 Camp. 99, n. ; Cleveland v. Woodward, 15 Vt. 302] ; {Lind. on P. 290-292; 1 Am. Lead. Cas. 448, 4th ed.} ^ D. 2, 14, 27, 4; Poth. Oblig. n. 85. 250 PARTNERSHIP. [cHAP. VIII. acted as the administrator of the concern, and con- tracted in his own name exclusively. Si 2^hires navem exerceant, cum quolibet eoruTn in solidiun agi 2^otest. JSfe in plicres adversarios destringatur^ qui cum uno contraxeritJ The same rule is adopted in the French law ; and accordingly Pothier says : When a partner has not contracted in the name of the firm, but in his own name alone, he alone will be bound, although the contract has been applied to the benefit of the partner- ship. Thus, if a partner has borrowed money in his sole name, for his own account, and then he applies the money to partnership purposes, the creditor cannot have any action against the firm ; for, according to the principles of law, a creditor has his remedy only against the party with whom he has contracted, and not against those who have been benefited or received profit from it.^ And this ao-ain is but the dictate of the Roman law. iVb?^ adversus te creditores, qui mutuam su^njjsisti pecuniatn, sed ejus, cui hanc credideras heredes experiri, contra juris formara evidenter postulas.^ § 136. One illustration may be taken from a case, which has already passed into judgment. In that case, one of two partners drew bills of exchange in his own name, which he procured to be discounted by a banker, through the medium of the same agent who procured the discount of other bills drawn in the partnership name, with the same banker ; it was held by the court, that the banker had ho remedy against the firm, either upon the bills so drawn in his own name, or for money, had and received through the medium of such bills, although the proceeds were carried to the partnership account. The reason was, that the money was advanced 1 D. 14, 1, 1, § 25; Id. 14, 1, 2; ante, § 102. « Poth. de Soc. n. 101, 105, 106. => Cod. 4, 2, 15. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 251 solely on the security of the parties, whose names were on the bills, by way of loan to them, and not by way of loan to the partnership. And it made no difference in the case, that the banker conceived at the time, that all the bills were drawn on the partnership account ; since he did not credit the firm, but only the names on the bills.i § 137. The French law has followed out the like doctrine to its legitimate conclusion. Whenever one partner in a commercial partnership contracts a debt in his own sole name, he alone will be responsible therefor ; and the creditor will have no recourse against the partnership, even although the debt may have been contracted in behalf of, or for the benefit of the part- nership.^ And a fortiori in cases of non-commercial partnerships, the doctrine is held to apply ; ^ with the reservation, however, that the other partners have not made him their agent to contract a joint obligation in solido, or otherwise.^ § 138. Still, although the general principle is clear, it may not always be easy to apply it to the circum- stances of particular cases ; for it is often a matter of no inconsiderable difficulty and intricacy at the common law to ascertain in point of fact, whether there has been an exclusive credit given to one partner or not. In the case of a dormant and secret partner, the credit is manifestly given only to the ostensible partner ; for no other party is known. Still, however, it is not treated as an exclusive credit ; for the law in all cases of this sort founds its decision upon the ground, that the creditor has had a choice or election of his debtor, ' Emly V. Lye, 15 East, 7 ; Siffkin v. Walker, 2 Camp. 308 ; ante, § 102 ; post, § 142, 243. See Faith v. Richmond, 11 Ad. & E. 339. 2 Poth. de Soc. n. 100, 101. ^ p^^y^ jg goc. n. 105. ♦ Poth. de Soc. n. 104, 105. 252 PARTNERSHIP. [CHAP. VIII. which cannot be, where the partner is dormant and unknown.^ The credit therefore is not deemed ex- clusive, but binding upon all, for whom the partner acts, if done in their business and for their benefit, as is the case in cases of agency for an unknown principal.^ § 139. Another case may easily be put. Suppose a partnership to be carried on in the sole name of one of the partners, and he at the same time should transact business upon his own separate account ; and he should borrow money in his own name. In such a case the question may arise, whether the partnership is bound for such borrowed money, or the individual partner only. And it must be resolved by taking into con- sideration the whole circumstances of the case. Thus, if the money is in fact borrowed for the partnership business, or it is in fact applied to the partnership busi- ness, in the absence of all controlling circumstances, the partnership will be bound therefor ; since the fair pre- sumption is, that it was intended by the partner to pledge the partnership credit, and not merely his indi- vidual credit, whether the partnership was known or unknown to the lender. On the other hand, if the money was borrowed for the separate use of the indi- » Ante, § 63. 2 Story on Ag. § 291, '292 ; 2 Kent, 630, 631 ; Paley on Ag. by Lloyd, 245, 250, 3d ed. ; Thomson v. Davenport, 9 B. & C. 78, 86, 87 ; Poth. on Oblig. n. 82, 83, 447 ; Coll. on P. B. 1, c. 1, § 1, p. 11, 12, 14, 2d ed. ; Id. B. 3, c. 1, p. 259; Hoare v. Dawes, Doug. 371 ; Gow on P. c. 4, § 1, p. 162, 163, 3d ed. ; Saville v. Robertson, 4 T. R. 720 ; Robinson v. Wilkin- son, 3 Price, 538 ; U. S. Bank v. Binney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; Kelley v. Hurlburt, 5 Cowen, 534; Mifflin v. Smith, 17 S. & R. 25; {Far- mers' Bank of Missouri v. Bayless, 35 Mo. 428; Richardson v. Farmer, 36 Mo. 35; 1 Am. Lead, Cas. 448, 4th ed.} The law with regard to dormant partners extends only to commercial partnerships. It has, there- fore, no application to dormant partners in land speculations. Pitts v. Waugh, 4 Mass. 424; Smith v. Burnham, 3 Sumn. 435. {See § 83.} CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 253 vidiial partner, or actually applied to that use, the con- trary presumption would prevail. But, if the business of the partnership were different from the separate business of the individual partner, and he should bor- row expressly of the lender for the one business or for the other, the lender would be deemed to give credit to that particular business, and not to the other business ; and then the partnership would or would not be bound according to the fact, whether it was borrowed for their business or uot.^ And, in such a case, it would make no difference, whether the lender did, or did not know, that there was any partnership in either business, or whether the money was actually applied to the business, for which it was expressly borrowed, or not. But in the absence of all proofs, as to the purpose,, for which the money was borrowed, or to which it was applied, it would be deemed to be borrowed upon the separate account of the individual partner.^ ' [And the declaration by the borrower at the time, that it was on part- nersliip account has been held sufficient proof to bind the firm. Oliphant V. Mathews, 16 Barb. 608.] |See § 106. If one partner contracts a debt, representing to the creditor, that it is for the benefit of the firm, and if the contract is within the scope of the firm business, the firm is liable, whether the representations are true or false ; Stockwell v. Dillingham, 50 Me. 442.} ^ See Coll. on P. B. 3, c. 1, § 2, p. 275-277, 2d ed. ; Etheridge v. Binney, 9 Pick. 272; Mifflin v. Smith, 17 S. & R. 165; U. S. Bank v. Bin- ney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; [Oliphant v. Mathews, 16 Barb. 608 ; South Carolina Bank v. Case, 8 B. & C. 427 ; Buckner v. Lee, 8 Ga. 285.] {In Furze v. Sharwood, 2 Q. B. 388, it was held, that under the peculiar circumstances of the case the burden of proof was on the partners to show that the contract sued on was on account of the separate business. Ex parte Law, 3 Deac. 541 ; Hnbbell v. Woolf, 15 Ind. 204.} — In U. S. Bank V. Binney, 5 Mason, 176, 183, 184, the court said: "In respect to both general and limited partnerships, the same general principle applies, that each partner has authority to bind the firm, as to all tilings within the scope of the partnership, but not beyond it. Where the contract is made in the name of the firm, it will, pt-ima facie, bind the firm, iniless it is ultra the business of the firm. Where the firm imports, on its fivce, a company, 254 PARTNERSHIP. [CHAP. VIII. § 140. Various other cases may be put to illustrate the same rule. Thus, if a person should advance money as A. B. & Co., or A., B., & C, there the contracts made by the partners in that name bind the firm, unless they are known to be beyond the scope and business of the firm.' But where the business is carried on in the name of one of the partners, and his name alone is the name of the firm, there, in order to bind the firm, it is necessary not only to prove the signa- ture, but that it was used as the signature of the firm by a party author- ized to use it on that occasion, and for that purpose. In other words, it must be shown to be used for partnership objects, and as a partnership act. The proof of the signature is not enough. The plaintiffs must go further, and show, that it is a partnership signature. In the present case, the signature of ' John Winship ' may be on his own individual account, as his personal contract, or it may be on account of the partnership. Upon the face of the paper it stands indifferent. The burden of proof, then, is upon the plaintiffs to establish, that it is a contract of the firm, and ought to bind them." And again: "The notes are all indorsed in the name of ' John Winship.' For aught, therefore, that appears on the face of them, they were notes only binding him personally. The plaintiffs must, then, go further, and show either expressly or by implication, that these notes were ofiered by Winship, as notes binding the firm, and not merely on himself personally ; or that the discounts were made for the benefit, and in the course of the business of the firm. It is not sufficient for the plain- tiffs to prove, that the bank, in discounting these notes, acted upon the belief, that they bound the firm, and were for the benefit and busmess of the firm. They must go further and prove, that the belief Avas known to and sanctioned by Winship himself in offering the notes ; and that he inten- tionally held out to them, that the discounts were for the credit, and on the account of the firm ; and that his indorsement was the indorsement of the firm, and to bind them ; and that the bank discounted the notes upon the faith of such acts and representations of Winship. The jury will judge from the whole evidence, how the case stands in these respects. The mere fact, that the discounts so procured were applied to the use of the firm is not, of itself, sufficient to prove, that the discounts were pro- cured on account of the firm. It is a strong circumstance, entitled to weight, but not decisive." In Etheridge v. Binney, 9 Pick. 272, 274, the court said: "Now as the partner, whose name is assumed by the firm, may also engage in other branches of business, in which he may want credit on his own private account, if he applies for a loan of money to one, who is ignorant of the copartnership, and no information is given of its existence, it is a private loan, and does not bind the firm, unless the creditor shall know, that the money borrowed, or the goods procured, by the individual, went to the use of the firm. The burden of proof in such 1 [Barrett v. Swann, 17 Me. 180; Holmes v. Porter, 39 Me. 157.] CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 255 for a firm, and yet take the security of one partner therefor, the security would bind that partner only.^ And indeed, under such circumstances, if the separate security is knowingly taken upon advances for the firm, it will ordinarily be treated, as an election by the cred- case is upon the creditor, in order to make good his cLaim upon the firm ; for he credited the individual, and not the firm, and it will be presumed to be fiar the private benefit of the individual, imless the contrary is proved. But if the existence of the firm is known to the person, who makes the loan, and representations are made to him by the borrower, that he bor- rows for the u^e of the company, and that they are answerable for the debt, so that credit is given to the company, and not to the individual partner, the burden of proof is upon the company, when sued, to show that tlie power confided to the individual has been abused, and that the money borrowed was applied to his private use, and also, that this was known to the lender to be his intention. This principle necessarily follows from cases settled. If a purchase is made in the name of a firm, or money borrowed, and a note given or indorsed in that name, this is prima facie evidence of a debt from the firm, and it can only be rebutted by proof in the defence, that tin's was fraudulently done by the individual partner for his own private use, and that this was known to the creditor. So that in the limited partnership, if the name of the firm had been John Winship & Co., or AVinship & Binney, all notes given to any creditor, in either of those names, would be company notes, unless disproved, as before stated. Xow, the making and offering of such a note is nothing more tlian a representa- tion that the money is wanted for the use of the company, and as they con- fide in the individual, they will be bound by his acts. The name of the firm here being only the name of the individual, a note offered in that name, unaccompanied by any representation, would of coui'se import only a promise by John Winship alone ; and the credit being given to him alone, the creditor would not recover against the firm, without proving, that the money actually went into the funds of the firm. But if the borrowing part- ner states that he is one of a company, and that he borrows money for the company, or purchases goods for their use, tlien, as there is such company, and as they have given him authority to use the company credit to a certain extent, and as the creditor will have no means of knowing whether he is acting honestly towards his associates, or otherwise, if he lends the money or sells the goods on the faith of such representation, the company will be bound, unless they prove that the contract Avas for his private benefit, and known to be so by the creditor." > Coll. on P. B. 3, c. 2, § 2, p. 315-324, 2d ed. ; Silf kin v. Walker, 2 Camp. 308; Emly v. Lye, 15 East, 7. {If goods are sold to a firm, taking the note of one member does not discharge the firm, unless an agreement to discharge is affirmatively shown. Folk v. Wilson, 21 Md. 538. { 256 PARTNERSHIP. [CHAP. VIII. itor, to absolve the partnership from responsibility, and to confine the credit to that partner only.^ Nor will it make any difference in such a case, that the money has not only been borrowed, but has been applied to part- nership purposes, if the contract has been exclusively upon the separate credit or security of one partner.^ On the other hand, if money is actually borrowed on the credit of the firm in the course of the business of the firm, it will make no difference in the liability of the other partners, that it has been misapplied by the borrowing partner.^ But care must be j;aken to distin- guish between cases of this sort, and cases, where the separate security of one partner has been taken, not as the primary debt, but merely as collateral security for the primary debt, as one of the firm ; for, in the latter case, the firm will undoubtedly be- holden, notwith- standing the separate security.^ § 141. The custom of a particular trade or business may in some cases also furnish an exemption of the partnership upon contracts made for their benefit, and establish, that the credit is exclusively given to the contracting partners. Instances, however, of this sort are of rare occurrence ; and it has been remarked by a learned writer, that perhaps there is no ordinary trade » Coll. on P. B. 3, c. 2, § 2, p. 318, 319, 321, 2d ed. ; Ex parte Hunter, 1 Atk. 223; Ex parte Emly, 1 Rose, 61; Gow on P. c. 4, § 2, p. 154-156, 3ded. 2 Coll. on P. B. 3, c. 2, § 2, p. 319, 320, 2d ed. ; Bevan v. Lewis, 1 Sim. 376 ; Lloyd v. Freshfield, 2 C. & P. 325 ; Parkin v. Carriithers, 3 Esp. 248 ; Jaques v. Marquand, 6 Cowen, 497 ; [Green v. Tanner, 8 Met. 411] ; {Farmers' Bank of Missouri v. Bayless, 35 Mo. 428.} 3 Coll. on P. B. 3, c. 1, § 1, p. 263; Id. B. 3, c. 2, p. 322, and note, 2d ed. ; Church v. Sparrow, 5 Wend. 223 ; U. S. Bank v. Binney, 5 Mason, 176 ; 8. c. 5 Pet. 529 ; Gow on P. c. 4, § 2, p. 146, 147, 3d ed. ; Id. § 3, p. 282-284 ; ante, § 105. < Coll. on P. B. 3, c. 2, § 2, p. 323, 2d ed. ; Id. p. 275 ; Ex parte Brown, cited 1 Atk. 225 ; Denton v. Rodie, 3 Camp. 493 ; South Carolina Bank v. Case, 8 B. & C. 427 ; Ex parte Bolitho, Buck, 100. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 257 or business, except that of stage-coach proprietors, in which the firm have been held not liable for repairs made, or goods supplied, by the order of one partner for the use of the concern.^ In general, such proprie- tors are held bound, like all other partners." But under some special circumstances, the credit has been held to be exclusively given to the partner ordering the repairs or supplies. Thus, where several persons furnished with horses, which were their several prop- erty, the several stages of a coach, and in the general business and profits all the proprietors were partners, and shared the profits, it was held, that the proprie- tors were not all jointly liable for goods furnished to one partner for the use of his horses, drawing the coach along his part of the road ; and that the goods must be deemed furnished upon the exclusive credit of that partner.^ § l-i2. The general rule is, as we have seen, that if a bill or note is drawn or indorsed in the name of one partner only, not being the firm name, it will not be a contract binding on the firm, but on himself only, even although it may be a transaction for the use or benefit of the firm.'' But, nevertheless, cases might arise, where the partnership might be held liable, as the drawers or indorsers of the note or bill, notwithstanding it was ' Coll. on P. B. 3, c. 3, § 3, p. 329, 330, 2d ed. * Ibid. ; Arthur v. Dale, cited Coll. on P. B. 3, c. 2, § 3, p. 330, 2d ed. ^ Barton v. Hanson, 2 Taunt. 49 ; s. c. 2 Camp. 97 ; Hiard v. Bigg, Man- ning's Nisi Prius, Index, 220; Gow on P. c. 4, § 1, p. 149, 150, 3d ed. * Coll. on P. B. 3, c. 1, § 2, p. 277, 2d ed. ; Id. B. 3, c. 2, § 3, p. 331- 347 ; Jaques v. Marquand, 6 Cowen, 497 ; Smith v. Craven, 1 Cr. & J. 500, 507 ; ante, § 13G ; Trueman v. Loder, 11 Ad. & E. 589 ; Faith i'. Richmond, 11 Ad. & E. 339; ante, § 102; {Nicholson v. Ricketts, 2 E. & E. 497; Farmers'' Bank v. Bayless, 35 Mo. 428 ; and see the cases on the negotiable paper of partnerships well collected in Byles on Bills, 43-53. Lind. on P. 274-282.} 17 258 PARTNERSHIP. [CHAP. VIII. made or indorsed only in the name of one partner.^ But, then, in such cases, in order to bind the firm it must appear, that the other partners had constantly treated such note or bill, so made and indorsed, as the note, or bill, or indorsement of the firm in the adopted name of the partner, as a firm name, ^ro hac vice; or at least, as the note, or bill, or indorsement made by the firm by procuration of the partner, so that the holder ■would be at liberty to write over the partner's name the name of the firm by procuration of the partner (A. and B. by procuration of B.).^ But, whether this would be so, or not, it has been held, that if one partner makes use of an assumed firm name, not the real name of the firm, and signs it by procuration of the assumed firm, and the other partners knew his habit of so doing, and adopted the note, or bill, or indorsement, as that of the firm, the partners will be held to have adopted the new firm name, ^jro hac vice, and will be bound by the con- tract.^ ^ [Palmer w. Stephens, 1 Denio, 471.] '^ South Carolina Bank v. Case, 8 B. & C. 427 ; Ex parte Bolitho, Buck, 100; {1 Am. Lead. Gas. 448, 4th ed. See Ostrom v. Jacobs, 9 Met. 454.} 8 Williamson v. Johnson, 1 B. & C. 146 ; Coll. on P. B. 3, c. 1, § 2, p. 276, 277, 2d ed. ; Id. B. 3, c. 2, § 2, p. 319-324 ; [/n re Warren, Daveis, 320, 325 ; Newton V. Boodle, 3 C. B. 795 ; post, § 202 ; {Faith v. Richmond, 11 Ad. &E. 339 ; Kirk v. Blurton, 9 M. & W. 284 ; Wilde v. Keep, G C. & P. 235 ; Smith's Merc. Law, 81, 3d Am. ed. See Tilford v. Ramsey, 37 Mo. 563, 567. } This liability of a pai'tnership, notwithstanding the names of individuals only were used, is illustrated in the following case. Where the proprietors of a line of canal boats, bv articles between themselves agreed that the business of the coniern at Bochester should be conducted by J. A., one of the proprietors, in his own name, and that at Albany it should be conducted by W. M., an agent, in his name, but in behalf of and upon the responsibility of the defendants, who were two of the proprietors ; that no copartnership name should be used, and no paper made, accepted, or indorsed in the name, or on account of the copartnership ; and that each party should raise his share of the money needed by the concern upon his own responsibility, and the other parties were not to be liable therefor, but all the parties were to CHAP. Ylir.] LIABILITIES AND EXEMPTIONS. 259 § 143. The doctrine has even been pressed further ; and it has been held, that a note or other security may be so signed, as at once to make the partner signing it separately liable, and also the firm liable thereon. Thus, where A. (one of the partners in the firm of A., B., and C.) made a promissory note in these words : " Sixty days after date, I promise to pay D., E., or order," &c., and signed the note "For A., B., & C. — A.;" it was held, that the firm was liable thereon, and also that he was separately liable ; so that, in effect, it was treated as a joint and several security, a joint security of the firm, and a several one of the partners signing it.^ This share equally in the profits ; it was held, that a bill by J. A. in his own name, to raise money for the business of the concern, drawn ujion and accepted by W. M., in his name, bound all the proprietors, at once as drawers and accejitors. Bank of Rochester v. Monteath, 1 Denio, 402 ; Palmer r. Stephens, 1 Denio, 471.] ' Lord Galway v. Matthew, 1 Camp. 403 ; Hall v. Smith, 1 B. & C. 407 ; [Staats V. Howlett, 4 Denio, 559.] See Story on Ag. § 154, 275, 276 ; Coll. on P. B. 3, c. 1, § 2, p. 277, 2d ed. — In the case of Lord Galway, 1 Camp. 403, the firm were held liable. Li the case of Hall v. Smith, 1 B. & C. 407, which was a note of this sort payable to bearer, and was signed A., B., and C. by A., the suit was against A. only; and he was held separately liable. Mr. Justice Bayley on this occasion said: "In pronouncing judgment for the plaintiff, we shall not give to the note any different effect from that which it appears upon the face of it to have. The words used are ' I prom- ise to pay,' and it is signed by the defendant. What then is the import of those words ? Surely, that W. Smith promises. It is true, that he promises for himself and others, but he alone promises. Now, there are many cases, where a p.arty, entering into a contract in his own name on behalf of others, may be sued, or those, for whom he contracts, may be sued, and e concerso, an agent may sue, or the parties beneficially interested may sue. If any hardship arise from this construction, it might have been avoided by intro- ducing the pronoun ' we ' instead of ' I ; ' and on the other hand, a great difficulty may be imposed upon the plaintiff, if he be compelled to sue all ; for then he would be bound to prove the partnership of all the parties, whereas in this action it is sufficient to prove the handwriting of the defend- ant. The cases of March i'. Ward, and Clark v. Blackstock, import, that the word ' I' creates a several promise by each party that signs, and here a fortiori that must be the effect of it, for the party sued is the only person, who actually made the promise. The plaintiff is thei-efore entitled to re- cover." { Hall V. Smith, has been overruled by Ex parte Buckley, 14 M. & W. 260 PARTNERSHIP. [cHAP. VIII. construction of the instrument certainly goes to th^ very verge of the law ; and perhaps may be thought to deserve further consideration. § 1-i-i. Cases of a different character may occur, where the question, whether exclusive credit has been given to one partner, or joint contractor, may admit of much discussion and difficulty, founded upon, the pecu- liar circumstances thereof. Thus, in case one member of a club should order goods for the use and benefit of the club, all the members of the club, w^ho concurred in the order, or subsequently ratified it, might be liable for the amount thereof, although the member, who ordered the goods, should be made debtor in the trades- man's books, unless it clearly appeared, that the trades- man meant to give exclusive credit to that member only ; for such entry in the books would not of itself be decisive of an intent to give such exclusive credit.^ 469 ; s. c. 1 Pb. 562. See also In re Clarke, De G. 153, reversing Ex parte Christie, 3 Mont. D. & De G. 736 ; Owen v. Van Uster, 10 C. B. 318 ; Matlae V. Sutherland, 3 E. & B. 1 ; Snow v. Howard, 35 Barb. 55, 35 Law Mag. 298. } ' Delauney v. Strickland, 2 Stark. 416 ; Flemyng v. Hector, 2 M. & W. 172; Coll. on P. B. 1, c. 1, § 1, p. 31, 2d ed. ; {Caklicott v. Griffiths, 8 Exch. 898 ; Todd v. Emly, 8 M. & W. 505. Though the members of a club are not liable to third parties from the ipere fact of association, they may be liable for the acts of agents whom they have authorized. Cockerell V. Aucompte, 2 C. B. n. s. 440; Burls v. Smith, 7 Bing. 705; Lind. on P. 55.} In the case of Flemyng v. Hector, Lord Abinger said: "I Lad thought, Init without much consideration, at the Assizes, that these sort of institutions were of such a nature, as to come under the same view as a partnership, and that the same incidents might be extended to them ; that, where there were a body of gentlemen, forming a club, and meeting together for one common object, what one did in respect of the society bound the others, if he had been requested and had consented to act for them. Several cases have been cited in the course of the argument, which do not apply, with the exception of one of them, to societies of this nature. Trading associations stand on a very different footing. Where persons engage in a community of profit and loss as partners, one partner has the right of property for tlic Avhole. So, any of the partners has a right, in any ordinary transactions, unless the contrary be clearly sliown, to bind the partnership by a credit ; he might accept a bill of exchange in the name of CHAP. Till.] LIABILITIES AND EXEMPTIONS. 261 § 145. Neither does it necessarily follow, because two persons, who are not partners, have joined together the firm, and as between the firm and strangers the partnership would be bound, although there might be an understanding in the firm that he was not to accept. It appears to me, that this case must stand upon the ground, on which the defendant put it, as a case between principal and agent ; and I am the more inclined to look at it in that light, by an observation, made by Mr. Piatt, in the course of the argument yesterday, on the subject of bills of exchange. I apprehend, that one of the members of this club could not bind another by accepting a bill of exchange, acting as a commit- tee man, even where there might be an apparent necessity to accept, as in the case of a purchase of a pipe of wine : the party might draw a bill, but I do not think he could accept the bill to bind the members of the club. It is, therefore, a question here, how far the committee, who are to conduct the affairs of this club as agents, ai-e authorized to enter into such con- tracts, as that, upon which the plaintiffs now seek to bind the members of the club at large ; and that depends on the constitution of the club, which is to be found in its own rules ; and upon two of the cases, those that were tried before me at Guilford, looking at these general rules, it certainly does strike me, that it is impossible to interpret them, so as to give the com- mittee the power of dealing on credit, even for the purpose of the club. It appears by the rules, that every member is to pay his subscription of ten guineas as entrance money, before he can become a member, and a yearly subscription of five guineas ; so, that by the provisions of the club, there is to be a fund in hand in order to bear the expenses. But then, again, every member, who makes use of the club, who either eats or drinks there, or takes any sort of refreshment, is to pay ready money. That shows again, that the club was not disposed, and not intended, to have any transactions on credit, even with its own members ; and it also shows, that care was taken to pro- vide ready money to meet every expense ; so that, if a party, or a gentle- man of the club, were to order any particular thing, that the club did not contain, he is to pay for it instanter ; so that no occasion was expected to be necessary for the committee's pledging the credit of the club, or even their own. Under these circumstances, as the rules of the club, which are in writing, must be taken to form the constitution of the club, and are to be construed as matters of law, I do not see what there was to go to the jury ; I do not see any thing in these rules, of which the jury are to be the judges. The words are, ' to manage the affairs of the club ; ' the question then is, what the affairs of the club are. They are to have in their hands a subscrip- tion, and they are to take care, that every member pays it before he comes into the club, and pays for every thing he has in the club. It therefore ap- pears that the members in general intended to provide a fund for the com- mittee to call upon. I cannot infer, that they intended the committee to deal upon credit, and unless you infer that that was the intention, how are the defendants bound ? " 262 PARTNERSHIP. [CHAP. VIII. to make a purchase for a joint shipment, that they will be jointly liable to the vendor for the purchase-money ; for if the purchase has been made under circumstances which demonstrate that the vendor gave an exclusive credit to each of them for a moiety (as by drawing a separate bill on each for a moiety), then each will be solely and separately liable only for his own share.^ And the same rule may be justly applicable to cases of partnership, where such a division of the credit is authorized and acted upon by the vendor, with a clear un- derstanding that it is to be an exclusive credit, pro tarito. § 146. The case of a debt, contracted prior to the existence of a partnership, has also sometimes been treated as a case where exclusive credit is given to the contracting party, and not to the firm, although they ultimately receive the benefit thereof.^ But it may be resolved into the more general principle, that a contract can be obligatory only upon those who are parties to it, or derive a benefit from it at the time of its incep- tion.^ In short, the joint interest or joint liability must be contemporaneous with the formation of the contract itself, in order to superinduce the correspond- ing liability to perform it ; and if there be no partner- ship then in existence, to be bound, or none which is a party or privy to the contract, it cannot be deemed their contract ; but solely that of those who contracted, and were capable of contracting it at the time. Other- » Gibson V. Lupton, 9 Bing. 297. { See Sims v. Willing, 8 S. & R. 103. } 2 See Ketclmm v. Durke, 1 Hoffm. 538. 3 Gow on P. c. 4, § 1, p. 150-153, 3d ed. ; Coll. on P. B. 3, c. 3, § 1, p. 348-368, 2d ed. ; Saville v. Robertson, 4 T. R. 720; Ketcbum v. Durkee, 1 Hoffm. 538; {Lind. on P. 23-30, 311-314.} Where no other time is fixed for the commencement of a partnership in an agi'eement between the parties, it is taken to have commenced on the date of the agreement, as the presumed intention of the parties. Williams v. Jones, 5 B. & C. 108. {See Battley v. Lewis, 1 Man. & G. 155, and § 194, post.} CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 263 wise, the law would introduce the extraordinary anom- aly of making a contract, consummate and perfect between all the original parties, expand so as to be in fact the contract of other parties, who had not, and perhaps could not, at the time, have any interest in, or privity, or connection therewith.^ ' Gow on P. c. 4, § 1, p. 150-152, 3d ed. — Mr. Gow has well stated the principle, and illustrated it by the cause of Saville v. Robertson, 4 T. R, 720. Mr. Gow says, p. 151, 152, " A joint contract, however, entered in- to by one or more individuals, is binding only upon those who have a joint interest in it at the time of its inception ; for no subsequent act by any per- son, who may afterwards become a partner, not even an acknowledgment that he is liable, will entail upon that person the obligation of fulfilling such a contract, if it clearly appear, that a partnership did not exist at the time the contract was made. The joint interest must be contemporaneous with the formation of the contract itself, to superinduce the corresponding liabili- ty to perform it. If it were otherwise, the law would, in fact, create a sup- posed contract, when the real contract between the parties was consummated, before the joint interest and consequent joint risk was in existence. Thus, where several persons agreed upon a maritime adventure, and to provide a cargo of goods, which should, in the judgment of the majority, be proper for the voyage ; and permission was given to the supercargo (who was to have a proportionate profit, and bear an equal loss with the respective ad- venturers) to ship, on the joint account, as many goods as he might think fit ; such goods being first approved by a majority of the persons concerned in the adventure, as proper for the voyage ; and it was afterwards agreed, that each party was to hold no other share or proportion in the adventure, than the amount of what each separately ordered and shipped ; and that the orders given for the cargo and outfit of the ship were to be separately paid, and that one was not to be bound for any goods or stores ordered or shipped by the other ; and that the supercargo should have free liberty to ship what goods were suitable to the voyage, over and above the ship and outfit, leav- ing room for those ordered by the adventurers ; and that the ship should be made over in trust for the general concern ; it was held, that if the supercar- go afterwards purchased goods, as part of the cargo, and the ship sailed with the goods so purchased, he alone was liable for them, and not his co- adventurers jointly with him. The reason on which this determination pro- ceeded, seems to have been, that, after the purchase of the goods made by the several adventurers, there was still, before they became joint property, a further act to be done, which was the putting them on board the ship, in which they had a common concern for the joint adventure, and until that further act was done, the goods purchased by each remained the separate property of the purchaser. The partnership in the goods did not arise until their admixture in ihe common adventure." Again he adds (p. 153) : 264 PARTNERSHIP. [chap. VIII. § 147. This doctrine may easily be illustrated by a few cases. Thus, if two persons should separately purchase goods on their own separate accounts, and afterwards should a^ree to unite their interests therein, in one joint commercial adventure for their joint and mutual profit, this would create a partnership in the goods for that adventure. But it would not make them liable as partners to the vendors of the goods ; for they then had no joint interest in the purchase.^ The same rule would apply to a case where one mer- chant should purchase goods on his own sole account, and afterwards should ship them upon a joint adven- ture for joint profits with other persons, whom he had subsequently admitted as sub-purchasers, or to whom he had subsequently sold an undivided interest in the goods ; for in such a case tlie original credit was exclu- sively given to himself; and the other parties could in no just legal sense be deemed parties or privies to the contract of purchase.^ It would ordinarily be other- " It is not, however, sufficient to constitute a joint liability for the capital brought into the trade, that there is to be a subsequent participation in the profit deriyed from it. In such a case, the right to participation can only take its origin from the time of the introduction of the capital ; and, al- though communion of profit is a strong circumstance to explain a contract in itself doubtful, and to show, as the legal presumption is, that a partner- ship existed at the time amongst the participants ; yet, where the nature of the contract clearly appears, it cannot have such a retrospect as to alter it, and to substitute the responsibility of several for that of an indi^-idual con- tractor. Therefore, if several persons agree to form a partnership, and that each shall contribute a certain share of the capital, and any of the persons borrow or purchase the share, which is by him afterwards brought into the common stock, the liability for payment to the lender or vendor is not joint, but personal." i Gow on P. c. 4, § 1, p. 151-153, 3d ed. ; Saville v. Robertson, 4 T. R. 720 ; Coll. on P. B. 3, c. 3, § 1, p. 348-358, 2d ed.; Id. p. 365, 366 ; Young V. Hunter, 4 Taunt. 582 ; Gouthwaite v. Duckworth, 12 East, 421 ; {Duncan V. Lewis, 1 Duvall, 183.} - Gow on P. c. 4, § 1, p. 151-153, 3d ed. ; Young i'. Hunter, 4 Taunt. 582; Greenslade v. Dower, 7 B. & C. 635; Coll. on P. B. 3, c. 3, § 1, p. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 265 wise, however, if the joint adventure were agreed upon before the purchase, and the purchase were to be made for all the persons concerned therein in the name of one.^ 356-358, 2ded. ; Id. p. 365 ; Coope v. Eyre, 1 H. Bl. 37 ; Gardiner v. Chllds, 8 C. & P. 345; Gouthwalte v. Duckworth, 12 East, 421; {Davis v. Evans, 39 Vt. 182.} ^ Gow on P. c. 4, § 1, p. 151-153, 2d ed. ; Goutliwaite r. Durkwortli, 12 East, 421, 4:'4 ; Waugli w. Carver, 2 H. Bl. 235,246; Gardiner v. Clillds, 8 C. & P. 345 ; Smith v. Craven, 1 Cr. & J. 500 ; Post v. Kimberly, 9 Johns. 470 ; Feliohy v. Hamilton, 1 Wash. C. C 491 ; Coll. on P. B. 3, c. 3, § 1, p. 349- 357. — In the text the qualifying word ''ordinarily" is inserted with refer- ence to a su Coll. on P. B. 3, c. 3, § 1, p. 848-350, 2d ed. ; Id. 365, 366 ; Id. B. 5, c. 1, § 2, p. 735-743; Howell v. Brodie, 6 Bing, N. C. 44; Gouthwaite v. Duckworth, 12 East, 421 ; Young v. Hunter, 4 Taunt. 582 ; 2 Bell, Comm. B. 7, c. 3, p. 649-652, 5th ed. [Thus where certain per- sons, proposing to form a company, applied to the defendant to become president, to which he assented, and permitted himself to be publicly named as such ; but the company was never formed, tliough meetings pre- liminary to its formation were had, at one of Avhich the defendant presided ; it was held that the jury might, if they thought fit, infer that the defendant held himself out as contracting for work to be done in respect of such pre- liminary meetings, though the order for such work was not directly given by the defendant ; and that the defendant, if he so held himself out, was liable for the work performed. Lake v. Duke of Argyll, 6 Q. B. 477 ; Wood V. Duke of Argyll, 6 :\Iann. & G. 928.] 272 PARTNERSHIP. [cHAP. VIII. thereafter be formed.^ It would have been otherwise, if he had held himself out as a partner in a company already formed ; ^ or had contributed to its funds, and had been present at a meeting of the company, and a party to a resolution to purchase the goods.^ On the 1 Bourne «. Freeth, 9 B. & C. 632; Dickinson v. Valpy, 10 B. & C. 128. See Forrester v. Bell, 10 Ir. Law, 555; Fox v. Clifton, 6 Bing. 776; {Lind. on P. 25-30. See Reynell v. Lewis, 16 M. & W. 517 ; Hutton i\ Thompson, 3 IL L. Cas. 161 ; Briglit v. Hutton, lb. 841, 368.} In Fox r. Clifton, Lord Chief Justice Tindal said: "Upon this first question, therefore, whether a partnership was actually formed, we think, if the right to participate in the profits of a joint concern is to be taken, as undoubtedly it ought to be, as a test of a partnership, these defendants were not entitled at any time to demand a share of profits, if profits had been made ; inasmuch as they had never fulfilled the condi- tions, upon which they subscribed. We think the matter proceeded no fur- ther, than that the defendants had offered to become partners in a projected concern, and that the concern proved abortive before the period, at which the partnership was to commence ; and, therefore, with respect to the agency of the directors, which is the legal consequence of a partnership com- pletely formed, we think the directors proceeded to act before they had au- thority from these defendants ; for they began to act in the name of the whole, before little more than half the capital was subscribed for, or half the shares were allotted. The persons, therefore, who contracted with the di- rectors, must rest upon the security of the directors, who made such con- tract, and of those subscribers, who by executing the deed have declared themselves partners, and of any, who have by their subsequent conduct rec- ognized and adopted the acts and contracts of the directors. But they have not the security of the present defendants, who are not proved by the evidence to stand in any one of such jjredicaments. It is unnecessary to advert to any of the cases, which have been referred to, each of which must rest upon its own peculiar circumstances; except that with respect to Per- ring V. Hone, decided in this court, we think it right to obsei-ve, that the great point, whether there was a partnership or not, does not ajipear to have been made the prominent subject of argument, but to have been rather as- sumed than disputed ; for the advertisement or prospectus was not brought to the attention of the court, nor is there any argumenl upon the terms of it. It is not incompatible with that determination, that the court might have held the proof of partnership incomplete, if the same materials had been brought before them, which are presented to us." 2 Ibid. ; Braithwaite v. Skofield, 9 B. & C. 401 ; Fox v. Clifton, 6 Bing. 776 ; Howell v. Brodie, 6 Bing. N. C. 44. ' Ibid.; {Tredwen v. Bourne, 6 M. & W. 461; Peel v. Thomas, 15 C. B. 714.} CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 273 other hand, if a jiarty supposes himself by mistake to have an interest in a company ah'eady formed, and he has not ; if he does not hold himself out as a partner, and no credit is given to him, the contracts of the com- pany will not bind him, although he should afterwards, acting under the mistake, declare himself to have an interest therein.^ § 152. From what has been already stated, it is ap- parent, that an incoming partner (that is, a new partner coming into an existing firm) will not be liable in respect to debts, contracted by the firm previously to his entering it.^ But although this is the clearly established doctrine, yet it does not follow, that an incoming partner may not become liable for such debts, by expressly assuming them upon a proper considera- tion, or otherwise dealing with the creditor in such a manner as to create an implied obligation and duty to pay the same in common with the old firm. The pre- sumption of law, indeed, is against any such liability ; but the presumption, like many others, may be re- moved by due and satisfactory proofs of the contrary intention and agreement.^ Thus, for example, if the balance due from the old firm be with the consent of the creditor, and all of the new firm carried to the debit of the new firm, the latter deriving a benefit therefrom, as a credit or deposit, it is very clear, that ' Vice V. Anson, 7 B. «& C. 409. [Explained in Owen v. Van Uster, 10 C. B. 318, 1 Eng. L. & Eq. 39G.] {Newton v. Belcher, 12, Q. B. 921.} * Coll. on P. B. 3, c. 3, § 2, p. 361, 2d ed. ; Sbirreflf v. Wilks 1 East, 48; Williams v. Jones, 5 B. & C. IDS"; Vere v. Ashby, 10 B & C. 288; [A>Tault v. Chamberlin, 26 Barb. 83]; {Lind.' on P 314-318.} ' Ibid. ; Catt v. Howard, 3 Stark. 3; Ex paiie Jackson, 1 Ves. Jr. 131 Kirwan r. Kirwan, 2 Cr. & M. 617 ; Helsby v. Mears, 5 B. & C. 504 [Beale v. Mouls, 10 Q. B. 976] ; {Rolfe v. Flower, Law Rep. 1 P. C. 27 ; s. c. 3 Moore P. C. x. s. 365 ; Smead v. Lacey, Disney, 239.} 18 274 PARTNERSHIP. [chap, VHI. the new firm will be bound thereby and therefor, as their own debtJ A fortiori, the same rule will apply, where it is an express stipulation of the partnership between the old firm and the incoming partner, that the new firm shall assume all the outstanding debts of the firm, and shall pay the same, and the creditor shall assent thereto and take the new firm, as his debtors.^ § 153. Indeed, it may be generally stated, that, in all cases of this nature, the primary consideration is, not so much to ascertain between what parties the orig- inal contract was actually made, as it is to ascertain whether there has subsequently been, w4th the consent of all the parties, any change or extinguishment of that contract. Where it is established by satisfactory evidence, that, upon the accession of a new partner, a new promise has been made by the entire new firm, in respect of the old debt, with the consent of the old partners, as well as of the creditor, it will amount to a novation of the debt, as it is called in the Roman law {iiovatio dehiti), and the new partner will be chargeable with the debt. But such an adoption or ratification of the new promise by the new partner must be clearly shown, otherwise it will not be obligatory upon him ; and it cannot be inferred from the mere act of joining in the partnership, without other circumstances in aid of the inference.^ § 154. Hitherto we have been principally consider- ing cases, where either an exclusive credit has been 1 Coll. on p. B. 3, c. 3, § 2, p. 361-3C5, 2d ed. ; Ex parte Peele, 6 Ves. 602. ' Ibid.; {^x/jar/e Whitmore, 3 Deac. 365.} 3 Coll. on P. B. 3, c. 3, § 2, p. 864, 365, 2d ed. ; Vere v. Ashby, 10 B. 6 C. 288. See also Lloyd v. Ashby, 2 B. & Ad. 23 ; Hoby v. Roebuck, 7 Taunt. 157: Ketdimn v. Durkee, Hoflf. 538; {Lind. on P. 317; Sternburg v. Callanan, l-A Iowa, 251.} CHAP. Till.] LIABILITIES AND EXEMPTIONS. 275 given to one partner in the partnership business, or where the transaction could not, from its nature and character, or its period of commencement or origin, be deemed to bind the partnership. But it is quite pos- sible for third persons to enter into a contract with one partner, under an impression that the particular con- tract is made with and binding on the firm, when in point of law it has no such obligation. (1.) Thus, in the first place (as we have seen),^ if a person should lend and advance money to a firm at the request of one partner, and take his separate note or bill, or other security, for the amount, not intending thereby to give an exclusive credit to such partner, it is very clear, that he cannot sue the partnership on such note or bill, or other security, whatever might be his remedy against the firm for the money lent and advanced.^ (2.) In the next place, if a third person should contract with one partner in a matter beyond, or unconnected with the partnership business, the firm will not be liable to him upon such contract, although he may have im- plicitly trusted to the credit of the firm, and not to the individual partner alone.^ (3.) In the next place, a third person may, upon receiving a consideration, assent to such private arrangements pf a firm, as will deprive him in point of law of any remedy against the firm, or a part of them, although he did not so intend/ (4.) And in the next place (as we have seen),^ the custom of a particular trade may essentiaUy affect the liability 1 Ante, § 136, 137, 140, U2. "- Coll. ou P. B. 3, c. 2, § 2, p. 315-323, 2d ed.; Siffkin t'. Walker, 2 Camp. 308 ; Emly v. Lye, 15 East, 7 ; Dentoii v. Rodie, 3 Camp. 493 ; [Watt V. Kirby, 15 111. 200.] 3 Coll. on P.B. 3, c. 2, § 2, p. 316, 324-326 ; Ex parte Agace, 2 Cox, 312. 4 Coll. on P. B. 3, c. 2,§ 2, p. 316, 326-329, 2d ed. ; Bolton v. Puller, 1 B. & P. 539. * Ante, § 141. 276 PARTNERSHIP. [CHAP. VIII. of the firm to a third person upon a contract, made Avith one of the partners, if that person has full notice of the custom, and is therefore bound by it, whatever might have been his own private interpretation there- of, as to its being an obligation binding on the firm.^ § 155. The liability of the fii-m to third persons may thus, in the very origin or progress of the transactions of one partner, or other person, assuming to act in be- half of the firm, not only never arise, or it may be varied, limited, or qualified ; but even when the liability has clearly attached, and become absolute and binding, subsequent transactions between such third persons and one of the partners may work an extinguishment of such liability, either wholly or partially.^ Thus, if a partnership were originally liable to a creditor for a debt, and he should afterwards accept a security of one partner, at all events, if it should be a security of a higher or negotiable nature, for the whole debt, as a satisfaction thereof, wholly or in part, it will operate as an extinguishment of the debt of the partnership.^ 1 Coll. on P. B. 3, c. 2, § 2, p. 316, 329-331, 2d ed. ; Barton v. Hanson, 2 Taunt. 49 ; Hiard v. Bigg, Manning's Nisi Prius, Dig. Index, 220 ; Gow on P. c. 4, § 1, p. 149, 150, 3d ed. 2 Coll. on P. B. 3, c. 3, § 3, p. 376-383 ; Id. p. 385-389, 2d ed. ; Gow on P. c. 3, §1, p. 129, 3d ed.; Newmarch v. Clay, 14 East, 239; 2 Bell, Comm. B. 7, c. 2, p. 638, 639, 5tli ed. ; ante, § 146, 150. { On releases, see §168.} 3 Gow on P. 0. 4, § 1, p. 155-157, 3d ed. ; Coll. on P. B. 3, c. 3, § 3, p. 385-389, 2d ed. ; Reed v. White, 5 Esp. 122 ; Evans v. Drummond, 4 Esp. 89, 92; Newmarch v. Clay, 14 East, 239 ; [Stephens v. Thompson, 28 Vt. 77] ; Thompson «. Perclval, 5 B. & Ad. 925. — It is laid down in Gow on P. c. 4, § 1, p. 155-157, 3d ed., that the security should be of a higher nature than the original debt, in order to extinguish the partnership debt. But that doctrine has since been overturned. The very question was before the court in Thomjj- son V. Percival, 5 B. & Ad. 925. On that occasion Lord Denman, in deliver- ing tlie opinion of the court, said : " It appears to us, that the facts proved raised a (question for the jury, whether it was agreed between the plaintiffs and James, that the former should accept the latter as their sole debtor, and should take the bill of exchange accepted by him alone, by way of satisfac- tion for the debt due from both. If it was so agreed, we think, that the CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 277 Upon the like ground, if the creditor should receive the separate security of each partner, for his own share agreement and receipt of the bill would be a good answer on the part of Charles Percival to this demand, by way of accord and satisfaction. It is not necessary to determine, whether the assent of Charles to this agreement was necessary, in order to give it such an operation ; because if it was, there is evidence of a delegation by Charles to James to make such an agreement ; for James had the partnership effects left in his hands, and was to pay all the partnership debts. It cannot be doubted, but that, if a chattel of any kind had been, by the agreement of the plaintiffs, and both the defendants, given and accepted in satisfaction of the debt, it would have been a good discharge. It is not required, that the chattel should be of equal value ; for the j^arty re- ceiving it is always taken to be the best judge of that in matters of uncertain value. Andrew v. Boughey, Dyer, 75, a. Nor can it be questioned, but that the bill of exchange of third persons, given and accepted in satisfaction of the debt, would be a good discharge. But it is contended, that the accept- ance of a bill of exchange by one of two debtors cannot be a good satisfac- tion, because the creditor gets nothing which he had not before. The written security, however, which was negotiable, and transferable, is of Itself some- thing different from that which he had before ; and many cases may be con- ceived, in which the sole liability of one of two debtors may be more benefi- cial than the joint liability of two, either in respect of the solvency of the parties, or the convenience of the remedy, as in cases of bankruptcy or sui'- vivorship, or in various other ways; and whether it was actually more beneficial In each particular case, cannot be made the subject of inquiry. The cases of Lodge v. Dicas, 3 B. & Aid, 611, and David v. ElKce, 5 B. & C. 196, are said to be against this view of the law. [Lodge v. Dicas, may now be considered as overruled. Lyth v. Ault, 7 Exch. 669, 11 Eng. Law & Eq. 580. See Wildes v. Fessenden, 4 Met. 12 ; Harris v. Lindsay, 4 Wash. C. C. 271.] In the former, however, no new negotiable security was given, nor does the difference between the joint liability of two, and the sejiarate lia- bility of one, appear to have been brought under the consideration of the court. In the latter, no bill of exchange was given, and that decision, on consideration, is not altogether satisfactory to us. We cannot but think, that there was abundant evidence in that case to go to a jury (and upon which the court might have decided), of the payment of the old debt by IngHs, EUIce & Co. to the plaintiff, and a new loan to the new firm ; which might have been as well efiected by a transfer of account by mutual consent, as by actual payment of money. The cases of Evans v. Drummond, 4 Esp. 89, and Reed v. White, 5 Esp. 122, are authorities the other way. In the former, Lord Kenyon points out forcibly the altered relation of the par- ties by the substitution of the bill of the remaining partner for that of the firm ; and it is diflicult to see on what ground he decided the case, unless upon this, viz., that such substitution under an agreement operated as a satisfaction, as far as regarded the retiring partners; and in Reed v. White, Lord Ellen- 278 PARTNERSHIP. [cHAP. Till. of the debt, in satisfaction thereof, all joint liability of the partnership for the debt would henceforth be gone.^ The doctrine is equally true in the converse case, where a partnership is a creditor, and the separate and distinct security of the debtor is taken to each partner severally for his share of the debt.~ § 156. This question most generally occurs in cases of a retu'ing partner, where the creditor, knowing of his rethement, subsequently gives credit to the remaining borough acted upon that authority, and so dh-ected a special jury of merchants, who entirely agreed with him. These cases were afterwards brought to the no- tice of Lord Ellenborough, who expressed his approbation of them, in Bedford v. Deakin, 2 Stark. 178. That case, however (which was also before the court, in 2 B. & Aid. 210). was distinguished from them, because the creditor there expressly reserved the liability of the original debtors. If, therefore, the plaintiffs in this case did expressly agree to take, and did take the separate bill of exchange of James in satisfaction of the joint debt, we are of opinion that his doing so amounted to a discharge of Charles." See s. p. Kirwan r. Kirwan. 2 Cr. & M. 617 ; Hart v. Alexander, 2 M. & W. 484 : Harris v. [Far- well, 15 Beav. 31, 15 £ng. L. & Eq. 70 ; Benson r. Hadiield, 4 Hare, 32] ; Coll. on P. B. 3, c. 3, § 3, p. 385-398, 2d ed. {A bond given by one partner for a partnership debt extinguishes the original debt, unless it be shown to have been intended only as a collateral security. See cases collected in 1 Sm. Lead. Cas. 571, [459], 6th Am. ed. So judgment against one part- ner merges a 'firm debt. 1 Sm. Lead. Cas. 6th Am. ed., tibi supra ; Lind. on P. 368-370; Ex parte Higgins, 3 De G. & J. 33. Equity- will some- times interfere to give relief against the partnership after a bond has been given by one of the partners. See Smith v. Black, 9 S. & R. 142, McNaugh- ten r. Partridge, 11 Ohio, 223; Xiday v. Harvey, 9 Gratt. 454. Taking the security- of one partner for a firm security of no higher nature does not of itself extinguish the latter in the absence of some express or implied agree- ment. Byles on Bills, 369 ; Bottomley r. Nuttall, 5 C. B. x. s. 122 ; Waydell V. Luer. 3 Denio, 410 ; Hill r. Voorhies, 22 Penn. St. 68 ; Potter i-. McCoy, 26 Penn. St. 458 : 1 Sm. Lead. Cas. 566. [453], 6th Am. ed. ; Lyth v. Ault, American note, 7 Exch. 6 75. Whether this would be the case in those States, such as Massachusetts and Vermont, where the giving of a note is prima facie pavment is a quare suggested by Professor Parsons. Parsons on P. 111. See Stephen v. Thomjison, 28 Yt. 77, where a receipt from one partner '■ to bal- ance account " was held prima facie a discharge of the partnership.} 1 Gow on P. c. 3, § 1. p. 129, 130, 3d ed. ; Garret v. Taylor, 1 Esp. N. P. 117 ; Kirkham r. Xewstead, 1 Esp. N. P. 117 ; Coll. on P. B. 3, c. 5, § 1, p. 467, 2d ed. ; Wats, on P. c. 8, p. 420, 2d ed. » Ibid. CHAP. VIIl] liabilities AND EXEMPTIONS. 279 pajL-tners, or to the new firm, and enters into new and separate contracts with the latter, touching his debt, or allows his property to remain under their control and management, as, for example, by way of new deposit, or by carrying the balance to the debit of the new firm, or by deferring payment of balances upon receiving additional interest, or by receiving a separate security therefor, or upon other considerations. In such cases the general conclusion is, that exclusive credit is in- tended to be given to the new firm ; and if so, then the retiring partner is discharged.^ But the mere striking of the balance, and carrying the same to a new account, opened with the new firm, will not alone extinguish the original debt against the old firm, unless accompanied by other circumstances, which establish, that a new and exclusive credit is given to the new firm.~ 8 157. In cases of this sort, where there are runnins: accounts between the firm and third persons, and one of the partners retires, the question, as to the appropri- ation of payments, subsequently made by the partners remaining in the firm, often arises, and especially in re- ' Evans v. Drummond, 4 Esp. 89 ; Reed v. White, 5 Esp. 122 ; Oakley V. Pasbeller, 10 Bligb, n. s. 548 ; s. c. 4 CL & Fin. 207 ; Hart v. Alexander, 2 M. & W. 484; Thompson v. Percival, 5 B. »& Ad. 925; Devaynes v. Noble, 1 Mer. 530 ; [Farrar v. Deflinne, 1 C. & K. 580] ; 2 Bell, Comm. B. 7, c. 2, p. 638, 639, 5th ed. ; Gow on P. c. 5, § 2, p. 244, 245, 3d ed. ; Coll. onP. B. 3, c. 3, § 3, p. 376-398, 2ded. {See Lind. on P. 353-367.} The cases of David v. EUice, 5 B. & C. 196, and Lodge v. Dicas, 3 B. & Aid. 611, are the other way. But their authority seems shaken, if not entirely overturned, in the more recent decisions, and especially in the cases of Thompson v. Percival, 5 B. & Ad. 925, and Hart v. Alexander, 2 M. & W. 484 ; [Harris v. Farwell, 15 Beav. 31, 15 Eng. L. & Eq. 70 ; Lyth v. Ault, 7 Exch. 669, 11 Eng. L. & Eq. 580.] See Coll. on P. B. 3, c. 3, § 3, p. 383- 398, 2d ed. ; Id. B. 3, c. 3, § 2, p. 326, 327, where all the authorities are collected and commented on. See also Gow on P. c. 4, § 1, p. 155-159, 3ded. = Coll. on P. B. 3, c. 3, § 3, p. 391, 392, 2d ed. ; David v. Ellico, 5 B. & C. 196; Lodge v. Dicas, 3 B. & Aid. 611; Hart i'. Alexander, 2 M. & W. 484. 280 PARTNERSHIP. [cHAP. VIII. lation to banking transactions. As to this the doctrine has been generally laid down, that where divers debts are due from a person, and he pays money to his cred- itor, the debtor may, if he pleases, appropriate the pay- ment to the discharge of anv one or other of those debts. If he does not appropriate it, the creditor may make an appropriation. But if there is no appropri- ation by either party, and there is an account current between them (as is the case between banker and cus- tomer), the law makes an appropriation according to the order of the items of the account, the first item on the debit side of the account being discharged or re- duced by the first item on the credit side.^ To apply these principles to cases of retiring partners : Where there is a cash account current between a firm and a customer, and the account is in favor of the latter, a retiring partner will be liable for the balance of this account at the time of his retirement. But if the ac- count be continued, the balance, for which the retiring partner is liable, will be diminished by every payment, W'hich is made by the new firm, supposing such pay- ment not to be appropriated to the discharge of any specific item ; because in such case, it is the first item on the debit side of the account, which is discharged or reduced by the first item on the credit side.^ 1 Coll. on P. B. 3, c. 3, § 3, p. 376-383, 2d ed. ; Davaynes v. Noble, Clayton's Case, 1 Mer. 572. See Copland v. Toulmin, 1 West, H. L. 16J: ; s. c. 7 CI. & Fin. 349; {Xewniarch v. Clay, 14 East, 239; Brooke v. Enderby, 2 Brod. & B. 70; Smith v. Wigley, 3 Moore & Sc. 174; Stem- dale V. Hankinson, 1 Sim. 393 ; Bank of Scotland v. Christie, 8 CI. & Fin. 214 ; Allcott V. Strong, 9 Cush. 323 ; Stanwood r. Owen, 14 Gray, 195 ; Logan V. Mason, 6 W. & S. 9. } 2 Post, § 253-256 ; Ibid. — Mr. Collyer has added in another place (p. 321), the following remarks : "To render an appropriation of payment by the act of the party valid, it must be made at the time of payment, if made by the payor, and within a reasonable time after payment, if made by the payee. Sir AVilliam Grant was inclined to hold, according to the principles CHAP. Vlir.] LIABILITIES AND EXEMPTIONS. 281 § 158. It frequently happens, that upon the retu'e- ment of one partner, the remaining partners undertake of the civil law, that the appropriation, even if made by the payee, must be made at the time of payment. But cases might be stated, where such a rule, if strictly adhered to. would be productive of injustice ; and it is manifestly at variance with the decisions on this subject in the courts of common law. On the other hand, those courts have been inclined to favor the creditor too much, and have in many cases 'extended the proposition — that if the debtor does not apply the payment, the creditor may make the application to what debt he pleases — much beyond its original meaning, so as in general to authorize the creditor to make his election when he thinks fit.' In a recent case, however, the court of King's Bench came to a very just decision on this important subject. Thus, in Simson v. Ingham, an action on a bond was brought by Bruce & Co., bankers, against the heirs and devisees of Benjamin Ingham. The bond was given by Ingham and another, bankers, at Huddersfield, to the plaintiffs, their London correspondents, conditioned for remitting money to provide for bills, and for the repayment of such sums as Bruce & Co. might advance on account of persons consti- tuting the Huddersfield Bank. The damages were assessed by an arbitrator at £13,845, subject to the opinion of the court, upon the following facts : The house of Bruce & Co. were in the habit of sendins: to the Huddex'S- field Bank monthly statements of their accounts. Benjamin Ingham died in September, 1811. The last statement sent previously to his death was for the month of August. The balance of that account was greatly in favor of Bruce & Co. No alteration in the account was made in the books of Bruce & Co. immediately on the death of Benjamin Ingham; but, during the residue of that month and a part of October, the remittances made by the Huddersfield Bank, and the payments made for them by Bruce & Co., were entered in continuation of the former account. Before, however, any account was transmitted to the Huddersfield Bank, subsequent to that for August, Bruce & Co., in consequence of a communication Avith their solicitor, opened a new account, and in that inserted all the remittances and payments made subsequent to the death of Benjamin ; and in Xovember, they transmitted to the Huddersfield Bank statements of two accounts. The first of these accounts was thus entitled : — ' Debtors, Messrs. B. & J. Ingham & Co. (old account), in account with Bruce & Co., creditors ; ' and the first item on the debit side was the balance of August. The second account was in the same form, but entitled ' new account.' This account began on the 16th September, without any balance brought forward, and contained the remittances and payments made during that month, subsequent to the death of Benjamin, and also those made in the month of October. From this time the old and new accounts were kept separate in the books of Bruce & Co. The Huddersfield Bank did not appear to have ever objected to the accounts being kept separately by Bruce & Co., although in their own books they only kept one account. The arbitrator was of opinion, that, 282 PARTNERSHIP. [CHAP. VIII. to pay the debts and to secure the credits of the firm. Tliis is a mere matter of private arrangement and agreement between the partners ; ^ and can in no re- spect be admitted, to vary the rights of the existing creditors of the firm.^ But in all cases of this sort it may be stated, as a general doctrine, that if the arranoement is made known to a creditor, and he assents to it, and by his subsequent act, or conduct, or binding contract, he agrees to consider the remaining partners as his exclusive debtors, he may lose all right and claim against the retiring partner, especially if the retiring partner will sustain a prejudice, and the cred- itor will receive a benefit from such act, conduct, or contract.^ Some illustrations of this doctrine have been already stated in the cases of an exclusive credit under these circumstances, the balance due on the death of Benjamin Ingham was not discharged by subsequent payments by the new firm. Accordingly, after making certain allowances for dishonored bills, he assessed the damages at the sum above aAvarded ; and the Court of King's Bench held the award to be right. In the preceding case, the court proceeded on the principle, that the entries, which had been continued in the creditor's books immediately on the death of Ingham, not having been communicated to the debtors, were not conclusive on the creditors, and consequently, that the general legal appro- priation, of which such entries would otherwise have been evidence, was incomplete. It is clear from this, as also from the express opinions of the judges, that they did not consider it necessary, in order to support any alleged appropriation on the part of the creditor, that he should prove it to have been made at the time of payment. On the other hand, if payment be made to the creditor of any sum in respect of an account current, the credi- tor making no appropriation at the time of payment, and if, after such pay- ment, the debtor and creditor continue their mutual dealings, or do any other mutual act in respect of the same account, the creditor will be barred by such subsequent transactions from establishing an appropriation of the payment." ' [And if the new firm misapply the assets, they will be liable to the out- going partner fur any payments by him of the old debts. Peyton v. Lewis, 12 B. Mon. 366.] 2 Coll. on P. B. 3, c. 2, § 2, p. 327-329, 2d ed. ; Id. B. 3, c. 3, § 3, p. 383-400. 3 Coll. on P. B. 3, 0. 3, § 3, p. 383-398, 2d ed. CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 283 given to the new firm.^ So, if the creditor should give up the securities of the old firm, and take those of the new firm in lieu thereof; or should give a prolonged credit to the new firm for the old debt, receiving from the latter, in consideration thereof, an additional inter- est, or a new security ; in all such cases the retiring partner would be held discharged,- But the mere fact of the creditor s taking an additional security from the new firm without surrendering the old, or of his re- ceiving interest from the new firm, without varying from that due on the old debt ; or of his acquiescing in delay, without contracting upon any new consideration to prolong the credit, will not absolve the retiring part- ner from his original responsibility.^ § 159. In this connection, it seems proper to inquire into the circumstances, which will or will not exonerate » Ante, § 152. * Coll. on P. B. 3, c. 3, § 3, p. 383-398, 2d ed. ; Evans v. Drummond, 4 Esp. 89 ; Reed v. White, 5 Esp. 122 ; Thompson v. Percival, 5 B. & Ad. 925 ; Oakley v. Pasheller, lOBligh, n. s. 548 ; s. c. 4 CI. & Fin. 207 ; Gonghv. Davies, 4 Price, 200; Harris v. Lindsay, 4 Wash. C. C. 271 ; Hartu. Alex- ander, 2 M. & W. 484. [But see Yarnell v. Anderson, 14 Mo. 619] ; {Winter v. Innes, 4 Myl. & C. 101; Oakford v. Eur. & Am. Steamship Co., 1 Hemm. & M. 182.} 3 Coll. on P. B. 3, c. 3, § 3, p. 383-398, 2d ed. ; Featherstone v. Hunt, 1 B. & C. 113; Bedford v. Deakin, 2 B. & Aid. 210; Daniel v. Cross, 3 Ves. 277; Harris v. Lindsay, 4 Wash. C. C. 271; Blew w. AVyatt, 5 C. «fc P. 397; Smith v. Rogers, 17 Johns. 340; {Winter v. Innes, 4 Myl. & C. 101. But in Brown v. Gordon, 16 Beav. 302, creditors of a banking firm were held to have accepted siu'viving partners as their debtors and to have discharged the estate of a deceased partner by a delay of sixteen years. See Robinson v. "Wilkinson, 3 Price, 538} ; [Harris v. Farwell, 15 Beav. 31, 15 Eng. L. & Eq. 70. In this case a firm consisted of three members. One of them died in 1837, and a new partner was admitted. A creditor of the old firm received interest on his debt from the new firm until 1841, when they became bankrupt. He then proved his claim against the new firm, sweariufj thev were indebted to «him for monev received to his use. The separate estate of the deceased partner was held not dis- charged thereby.] All these cases turn upon the same general considera- tion ; whether there has been a new and exclusive credit given to the new firm inextinguishmeiit of tlic debt, or to the prejudice of the firm. 284 PARTNERSHIP. [cHAP. VIII. a retiring partner from future liability for the new debts and liabilities, contracted by the firm with third persons, after his retirement.^ Of course the retiring partner is not by his retirement exonerated from the prior debts and liabilities of the firm." In the first place, then, a dormant partner is not liable for any debts or other contracts of the firm, except for those which are contracted during the period that he remains a dormant partner. Upon his retirement his liability ceases, as it began, de jure, only with his accession to the firm.^ The reason is, that no credit is, in fact, in any such case given to the dormant partner. His lia- bility is created by operation of law, independent of his intention, from his mere participation in the profits of the business ; and therefore it ceases by operation of law, as soon as such participation in the profit ceases, whether notice of his retirement be given or not.'* But this doctrine must be taken with its appropriate qualifi- cations ; and it is strictly applicable only, where the persons dealing with the firm have no knowledge what- soever, that he is a dormant partner. If the fact of his being a dormant partner be unknown to all the credi- tors, no notice whatever of his retirement is necessary ; if it be known to a few, notice to those few is neces- ' {SeeLind. on P. 327.} " Gow on P. c. 5, § 2, p. 240-251, 3d ed. ; Coll. on P. B. 3, c. 3, § 3, p. 369-372, 2d ed. [Thus, if goods be sent to a firm to sell on commission, and one pai'tncr retires before they are all sold, he still continues liable to the consignor for the receipts of sales by the continuing partner ; since the liability attaches on receipt of the goods ; Briggs i\ Briggs, 15 N. Y. 471 ; and notice to the consignor of the fact of dissolution would not ex- onerate the retiring partner. Dean v. McFaul, 23 Mo. 76.] ' Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed. ; Id. B. 3, c. 3, § 3, p. 370, 371 ; Gow on P. c. 5, § 2, p. 251, 3d ed. ; 3 Kent, 68. " Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed.: Id. B. 3, c. 3, § 3, p. 370, 371 ; Gow on P. c. 5, § 2, p. 251, 3d ed.; 3 Kent, 68 ; [Ayrault v. Chamberlin, 26 Barb. 89]; {Warren v. Ball, 37 111. 76; Chamberlain v. Dow, 10 Mich. 319.} CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 285 sary ; because they may fairly be presumed to have given credit to the firm with reference to their knowl- edge of the dormant partner.^ § 160. In the next place, where an ostensible or known partner retires from the firm, he will still remain liable for all the debts and contracts of the firm, as to all persons, who have previously dealt with the firm, and have no notice of his retirement.^ This is a just result of the principle, that where one of two innocent persons must suff"er from giving a credit, he who has misled the confidence of the other, and has been the cause of the credit, either by his representa- tion, or his negligence, or his fraud, ought to sufi"er, instead of the other. And where a person notoriously holds himself out as a partner, all the world, who deal with the firm, are presumed to deal with it upon his credit, as well as upon that of the other members of the firm- ; and his omission to give them notice of his retirement is equivalent to a continual representation, that he still remains a member of the firm, and liable therefor.^ But, as to persons who have had no previ- ^ Ibid. ; Evans v. Drummond, 4 Esp. 89 ; Newinarch v. Clay, 14 East, 239; Farrar v. Deflinne, 1 C. & K. 580; {Carter v. AVhalley, 1 B. & Ad. 11; Heath v. Sansom, 4 B. &. Ad. 172; Grosvenor v. Lloyd, 1 Met. 19; Edwards v. McFall, 5 La. Ann. 16 7 ; Cregler v. Durham, 9 Ind. 375 ; Park V. Wooten, 35 Ala. 242 ; Lind. on P. 326; 1 Sm. Lead. Cas. 1186, 6th Am. ed. But see Goddard v. Pratt, 16 Pick. 412,428; Deford v. Reynolds, 36 Penn. St. 325. See also AVestern Bank of Sootland v. Needell, 1 Post. & Fin. 461.} '^ Coll. on P. B. 3, c. 3, § 2, p. 368-371, 2d ed. ; Gow on P. c. 5, § 2, p. 240-2.52, 3d ed. ; 2 Bell, Comra. B. 7, c. 2, p. 640, 641, 5th ed. ; [Clapp V. Rogers, 2 Kern. 283; Pope v. Risley, 23 Mo. 185.] {On what consti- tutes a previous dealing, see Lyon v. Johnson, 28 Conn. 1 ; Mechanics' Bank v. Livingston, 33 Barb. 458 ; Bank of the Commonwealth v. Mud- gett, 45 Barb. 663. } " Coll. on P. B. 3, c. 3, § 3, p. 369-375, 2d ed. ; 3 Kent, 66-68 ; Gow on P. c. 5, § 2, p. 248-251, 3d ed. ; Id. c. 4, § 1, p. 198; Graham v. Hope, Peake, 154 ; Gorham v. Thompson, Peake, 42 ; [Wardwell v. Haight, 2 Barb. 549] ; "Wats, on P. c. 7, p. 384, 385, 2d ed. ; [Davis v. Allen, 3 Corast. 168] ; {Lind. on P. 329.} 286 PARTNERSHIP. [CHAP. VIII. ous dealings with the firm, and no knowledge who are or have been partners therein, a different rnle may prevail. In such cases, unless the ostensible partner, who has retired, suffers his name still to appear, as one of the firm, so as to mislead the public (as by its being stated, and still remaining in the firm name), he will not be liable to mere strangers, who have no knowledge of the persons who compose the firm, for the future debts and liabilities of the firm, notwithstanding his omission to give public notice of his retirement ; for it cannot truly be said in such cases, that any credit is given to the retiring partner by such strangers. Every new creditor or new customer is- bound to inquire, who are the parties really interested at the time in the firm if he would be safe in his credit and dealings with them. Umiscpdsque debet esse gnarus conditionis ejus, cum quo contrahit} A fortiori, if public notice has 1 2 Bell, Coram. B. 7, p. 642, 5tli ed. ; Coll. on P. B.-3, c. 3, § 2, p. 369-375, 2d ed. ; {Lind. on P. 329} ; Parkin v. Carnithers, 3 Esp. 248; 3 Kent, 67, 68; Williams v. Keats, 2 Stark. 290; Brown v. Leonard, 2 Chitty, 120 ; Newsome v. Coles, 2 Camp. 617 ; Dolman v. Orchard, 2 C. «& P. 104; Tombeckbee Bank v. Dmnell, 5 Mason, 56; Lansing v. Gaine, 2 Johns. 300 ; Ketcham v. Clark, 6 Johns. 144, 148 ; Carter v. Whalley, 1 B. & Ad. 11 ; Le.Roy v. Johnson, 2 Pet. 186, 198, 200. — I am aware, that the doc- trine is sometimes laid down more broadly, and the liability is made to at- tach, unless the partner has given public notice of the dissolution. Thus, in Parkin v. Carruthers, 3 Esp. 248, 249, Mr. Justice Le Blanc said : "The pi'inciple on which I proceed is this: — That there was a partner- ship subsisting, under tte firm of Parkin, Campbell, & Co., which con- tinued after the retirement of John Campbell. The rule of law is clear, that where there is a partnership of any number of persons, if Siwy change is made in the partnership, and no notice is given, any person dealing with the partnership, either before or after such change, has a right to call upon all the parties, who at first composed the firm." In summing up to the jury, his Lordship laid it down as the law on the subject, " That if the plaintiff advanced the money, even after the time that one of the partners had retired, if he did not know of such retirement, he had a right to sue all who before constituted the partnership. Li point of fact in this case, John Campbell had retired ; but still, if this was really a partnership, and the money was lent to tlie persons carrying on trade under that firm, all were liable." But in this case, Campbell's name was in the name of th^ CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 287 been given of his retirement, the retiring partner will not be liable to new creditors or customers, even if firm. See also Gow on P. c. 5, § 2, p. 248, 249, 3d ed. ; Id. p. 251- 253; 2 Bell, Comm. B. 7, e. 2, p. 640-642, otli ed. It strikes me, however, that the text contains the true principle. Where a partner- ship is in fact dissolved by the retirement of a partner, who is known, but whose name is not in the firm, it does not seem I'ight to make him liable to third persons, who afterwards trust the firm, without knowing who compose it at the time, or of the previous connection of the i-etiring partner. His case does not, under such circumstances, seem essentially to differ from that of a dormant partner ; for such third persons give no credit to him, and he receives no share of the profits derived therefrom. Mr. Watson has stated the true principfe ; that "as credit is given to the whole firm, justice i-equires, that all those, who belonged to it, should be bound, while it is supposed to exist." But to whom bound ? Certainly, to those only, who give credit to the firm, believing, that the original partners, whom they knew, still continued in it. The case of Carter v. Whalley, 1 B. & Ad. 11, seems directly in point, in supjjort of the doctrine of the text. There the debt was contracted after the retirement of one partner, and no public notice had been given thereof. But although it was known to some persons, that he was a partner, yet it did not appear, that this creditor knew it, or believed it, or gave credit to the partner. Mr. Justice Parke, on that occa- sion, said : " The plaintiff was bound to show an acceptance by four parties ; that is, that Veysey, who did accept the bill, was authorized to do so by the three others named in the declaration. Saunders had given no direct authority ; he was not a partner at the time. But he may by his conduct have represented himself as one, and induced the plaintiff to give him credit as such, and so be liable to the plaintiff. Such would have been the case, if he had done business with the plaintiff before, as a member of a firm, or had so publicly appeared as a partner, as to satisfy a jury, that the plaintiff must have believed him to be such ; and if he had suffered the plaintiff to continue in and act upon that belief, by omitting to give notice of his having ceased to be a partner, after he really had ceased, he would be responsible for the consequences of his original representation, uncontra- dicted by a subsequent notice. But in order to render him liable on this ground, it is necessary, that he should have been known as a member of the firm to the plaintiffs, either by direct transactions, or public notoriety. In the present instance, that was not so. The name of the company gave no information as to the parties composing it, and the plaintiff did not show that Saunders had dealt with him in the character of a partner, or had held himself out so publicly to be one, as that the plaintiff must have known it. Carter, the plaintiff, lived at Birmingham ; it should have appeared, that there had been such a dealing at that jilace by Saunders, or that his con- nection with the company had been so generally known there, that a knowl- edge of it by Carter must have been presumed. There having been no evidence for the jury on these points, I think the nonsuit was right." { In City Bank of Brooklyn v. McChesney, 20 X. Y. 240, a retired partner Avas 288 PARTNERSHIP. [CHAP. VIII. they have never seen such notice, or had any knowledge or hiformation thereof ; ^ smce the retiiing partner has done all, which can be reasonably required to give public notice of his withdrawal.^ § 161. AVhat will amount to due and sufficient notice of the retirement of a partner is a question of fact, often of no small nicety and difficulty ; for notice needs not be express ; but it may be constructive, and be imphed from circumstances.^ A notice in one of the public and held liable to a subsequent creditor -who had had notice of the prior partner- shijj, and had had no notice of the dissolution, though he had had no prior dealings with the firm. There had been in this case no notice of the dissolu- tion published in the newspapers. See Holdane v. Butterworth, 5 Bosw. 1 ; Pratt r. Page, 32 Vt. 13.} 1 Coll. on P. B. 3, c. 3, § 3, p. 369-372, 2d ed. ; Parkin v. Carruthers, 3 Esp. 248 ; Gow on P. c. 5, § 2, p. 248, 249, 3d ed. ; Newsome v. Coles, 2 Camp. 617 ; Godfrey v. Turnbull, 1 Esp. 371 ; Wright i-. Pulham, 2 Chittj, 121 ; s. c. sub nom. Wrightson v. Pullan, 1 Stark. 375. ^ Ibid. — We are of course to understand this doctrine with the qualifi- cation, that nothing is otherwise done by the retiring partner to continue his liability ; such, for example, as by authorizing the negotiable securities of the old firm to be issued and negotiated in the name of the old firm ; for in such case, he would be bound by such indorsement. Coll. on P. B. 3, c. 3, § 3, p. 372-37a, 2d ed. See also Abel r. Sutton, 3 Esp. 108; Kilgour v. Finlyson, 1 H. Bl. 155; Heath t'. Sansom, 4 B. & Ad. 172. {Burton v. Issitt, 5 B. & Aid. 267 ; Brown v. Leonard, 2 Chitty, 120; Smith v. Winter, 4 M. & W. 454 ; Yale v. Eames, 1 Met. 486 ; Waite v. Foster, 33 Me. 424 ; Richardson v. Moies, 31 Mo. 430. See § 322, post.} [The rules of notice, proper to ordinary trading partnerships, are not applicable always to companies established under statutes. For instance ; A., B., C, and D., who carried on business under the firm of G. P. & Co., in 1840 opened an ac- count with a banking company, established under the 7 Geo. 4, c. 46, and 1 & 2 Vict. c. 96. In 1842, A. retired from the firm; but this fact was not advertised in the London Gazette ; nor was any change made in the pass- book. It was held, that the mere fact of D., one of the firm of G. P. & Co., being also a director of the banking company (but having, as such, no share in the management of or interference in the banking accounts) did not amount to notice — actual or constructive — to the bank of the dissolution, so as to discharge A. in respect of a debt subsequently accruing ; a banking company, so established, differing in this respect from an ordinary trading partnership. Powles i\ Page, 3 C. B. 1 6.] ^ {Lind. on P. 335 ; Amidown v. Osgood, 24 Vt. 278 ; Wait v. Brewster, 31 Vt. 516 ; American Linen Thread Co. v. Wortendyke, 24 N. Y. 550 ; Wil- liamson u.Fox, 38 Penn. St. 214 ; Clapp v. Upson, 1 2 Wis. 492.} CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 289 regular newspapers of the city or county, where the partnership business was carried on, is the usual mode of giving the information, and may, in ordinary cases, be quite sufficient. But even the sufficiency of that notice might be questioned in many cases, unless it is shown, that the party entitled to notice is in the habit of reading the paper. ^ Public notice given in some such reasonable way, will not be deemed actual and express notice ; but it will be good presumptive evi- dence, and sufficient for a jury to conclude all persons, who have not had any previous dealings with the firm. As to persons, who have been previously in the habit of dealing with the firm, it is requisite, that actual notice should be brought home to the creditor, or at least, that the credit should be given under circumstances, from which actual notice may be inferred.^ If the facts are all found or ascertained, the reasonableness of notice may be a question of law for the Court. But gener- ally it will be a mixed question of law and fact, to be submitted to a jury under the direction of the Court, whether notice in the particular case, under all the cir- cumstances, has been sufficient to justify the inference of actual or constructive knowledge of the fact of the dissolution. The weight of authority seems now to be, that notice in one of the usual advertising gazettes of the place, where the business was carried on, when published in a fair and usual manner, is of itself notice ^ of the fact to all persons, who have not been previous dealers with the partnership.'* » [Pope V. Risley, 23 Mo. 185.] 2 [See Page r. Brant 18 111. 37.] {Little v. Clarke, 3G Penn. St. 114 ; Reilly r. Smith, 16 l^a. An. 31 ; Scheiffelin i'. Stevens, 1 Wiust. Law, 106. Kirk- man V. Snodgrass, 3 Head. 370. } » [But see Boyd v. MoCann, 10 Md. 118.] * 3 Kent, 67, 68. — I have followed almost the very words of Mr. Chancel- lor Kent, in his excellent Commentaries. See also, on the same subject, 19 290 PARTNERSHIP. [cHAP. VIII. § 162. The same principles apply to notice in the case of a dissolution of the partnership by the acts of the parties, as ordinarily apply to the case of a retiring partner.^ Until due notice is given of the dissolution, each partner will remain liable for the acts and contracts of the others in relation to the partnership, so far as they respect persons who have previously dealt with the firm, or have known the names of the partners, or have given credit thereto ; although not to mere strangers, who do not fall under the like predicament.^ But very different considerations apply in the case of a dissolution of the partnership by mere operation of law, as by the death of a partner ; for in such a case his estate is not bound or liable for any subsequent debts or contracts, entered into by the survivors of the firm.^ This subject, however, will more properly come under review, when the effects of a dissolution by death come under consideration, and may therefore be here dismissed with this brief notice. § 168. There is another case, in which a retiring partner may, notwithstanding notice of his withdrawal. Coll. on P. B. 3, c. 3, § 3, p. 368-371. 2d ed. ; Gow on P. c. 5, § 2, p. 248-251, 3d ed. ; Wats, on P. c. 7, p. 384, 385, 2d ed. ; 2 Bell, Comm. B. 7, p. 640- 643, 5th ed. ; { City Bank of Brooklyn v. McChesney, 20 N. Y. 240 ; Hol- dane v. Butteinvorth, 5 Bosw. l.| ' I In Trougbton v. Hunter, 18 Beav. 4 70, a partnership was dissolved by decree. The Gazette would not insert an advertisement of the dissolution unless signed by both partners. One partner refused to sign. He was or- dered by the court to do so.} 2 Ante, § 1 28, 1 29, 160 ; Gow on P. c. 5, § 2, p. 248-251, 3d ed. ; Coll. on P. B. 3,c. 3, § 3, p. 368-375, 2d ed. ; Id. B. 1, c. 2, § 3, p. 75. {A partner- ship note is taken out of the operation of the Statute of Limitations by a part payment thereof made by one partner within six years, although the firm had then been dissolved by the voluntary act of the partners, if the holder of the note had previous dealings with the firm, and was not notified, and had no knowledge of the dissolution. Sage jj. Ensign, 2 All. 245 ; Tappanw. Kimball, 10 Fost. 136.} « 3 Kent, 63 ; Gow on P. c. 5, § 2, p. 248, note ; Id. c. 5, § 4, p. 362, 3d ed. ; Vulliamy v. Noble, 3 Mer, 593, 614 ; 3 Chitty on Comm. and Manuf. c. 4, p. 250; |§ 336, 343.} CHAP. Till.] LIABILITIES AND EXEMPTIONS. 291 be responsible, not only for the past debts of the old firm, but for the new debts contracted by the new firm ; and that is, in a case of positive or constructive fraud. This may take place, when, upon the actual in- solvency of the firm, known to all the partners, they permit the retiring partner to withdraw a portion of the partnership funds out of the reach of the joint cred- itors of the new firm, for the purpose of cheating or defrauding the latter ; for in such a case the fraud viti- ates the whole transaction ; and the retiring partner will be held liable to the full extent of all the funds so fraudulently withdrawn.^ But the mere fact, that • Anderson v. IMaltby, 2 Ves. Jr. 244 ; s. c. 4 Bro. Ch. 423 ; Coll. on P. B. 3, c. 3, § 3, p. 400-404, 2d ed. — In this case Lord Loughborough said : " The case resolves itself into a plain question whether in 1784, upon the first of July, the defendant was bona Jide a creditor of the other two then about to enter into a new partnership. If not, if all this transaction is to be void, under the color, in which It presents itself to me, it is an imposition, not upon them only, because they were consenting, but upon the creditors, who must deal with the partnership of the two contrived upon a certain foresight of bankruptcy at no very remote period, though the exact time was not certain, managed between persons of the same family, by which the creditors of the two have been losers exactly to the amount of what he has received. The only doubt I have is, whether I should better attain the justice of the case, by directing an account of all transactions between Brough and George Maltby from the commencement of their partnership, for it can go no further back, and the defendant, with an inquiry into the state of accounts at that period between them, to see, whether there was any consideration whatsoever, upon which he could be a creditor ; for if it was all moonshine, and there was no property, upon which any account could be made out, it is all an imposition to create a false credit to themselves, and to give him the name of a creditor, when in fact he was none, and a mere device to draw the money of other people from the new copartnership into his pocket. Whether this should be done in the Master's office, or by discussion of an issue at law, is a point, upon which 1 doubt. Consider which will best attain justice. As to the last, it depends so much upon writing and accounts, that it will hardly come within the pe- riod, in which a trial at law can be had with advantage. I do not think it a ease, in which, if a trial can be had, I should be unwilling to have the assist- ance of a jury to decide It. But I would not let it go to an action, but cer- tainly would direct an issue ; for I must take care to have the true question tried exactly upon the merits in equity, which affect the real justice of the case, and not upon the points not relating to that, which would be made In an 292 PARTNERSHIP. [CHAP. VIII. a retiring partner knows at the time that the partner- ship is insolvent, will not of itself involve him in any liabilities for the new firm, or vitiate the dissolution, if it was without any intention of fraud, and entirely consistent in all its circumstances with good faith. ^ § 164. In joint-stock and other large companies, which are not incorporated, but are a simple, although an extensive partnership, their liabilities to third per- sons are generally governed by the same rules and principles, which regulate common commercial partner- ships." In such companies the fundamental articles generally divide the stock into shares, and make them transferable by assignment or delivery ; and the whole business is conducted by a select board of trustees or directors. Without undertaking to assert in what cases such companies may or may not be deemed illegal, and the members liable to be treated as universally respon- sible, upon the ground of usurping and attempting to exercise the proper functions of a corporation, which the legislature or government is alone competent to establish ; ^ it may well deserve inquiry, how far any action. I agree with the defendant, that if any of these payments cannot be recovered at law, there would be no equity for it. There can be no diifer- ence between a court of law and of equity as to this. The true question for an issue would be, whether the partnership was indebted to the retiring part- ner on account of his share in the partnership." > Coll. on P. B. 3, c. 3, § 3, p. 400-402, 2d ed. ; Parker v. Ramsbottom, 3 B. & C. 257; Ex parte Peake, 1 Madd. 346 ; Gow on P. c. 5, § 2, p. 237, 238, 3d ed. ^ 3 Chitty on Comm. and Manuf. c. 4, p. 226 ; Coll. on P. B. 5, c. 1, § 1, p. 721-734, 2d ed. ; 2 Bell, Comm. B. 7, c. 2, § 2, p. 627-630. [But see Powles v. Page, 3 C. B. 16. In Irvine v. Forbes, 11 Barb. 587, it was held, that the members of a telegraph company, formed as a private association, were not partners, but tenants in common, and that the majority had no pow- er to bind the minority, except by agreement.] {See Parsons on P. c. 18 ; Lind. on P. 3.} " Coll. on P. B. 0, c. 2, § 1, p. 730-734, 2d ed. ; Joseph v. Pebrer, 3 B. & C. 639 ; Blundell v. Winsor, 8 Sim. 601 ; AValburn v. Ingilby, 1 Myl. & K. 61, 76; {Lind. on P. 145.} ii CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 293 stipulation in those articles, and which limit the respon- sibility of the members to the mere joint funds, or to a qualified extent, will be binding upon their creditors, who have notice of such a stipulation, and contract their debts with reference thereto. This question, many years ago, was presented to the Supreme Court of the United States ; but the cause went off without any decision upon the point. It seems to have been thought, that such a stipulation can in no wise operate as a limitation of the general liability of all the part- ners for all their debts, even though the creditors have full notice thereof.^ It may, however, be still deemed an open question, whether creditors, with such notice, can proceed against the members upon their general responsibility, as partners, where they have expressly contracted only to look to the social funds ; and, whether, if they have notice of the qualifying stipula- tion, and contract with reference to it, it may not be easy to assign a reason, why it does not amount to an ' See Bhmdell v. Winsor, 8 Sim. 601 ; Walburn v. Ingilby, 1 Myl. & K. 61, 76. — In this last case Lord Brougham said: "The clause intimating that each subscril)er is only to be liable to the extent of his share, is not enough to make the association illegal. Such a regulation is wholly nugatory, indeed, as between the company and strangers, and can serve no purpose whatever, unless to give notice. In that light it is not to be viewed as criminal, or as a means of deception ; for the publicity of it may tend to inform such as deal with the company, and a proof of that publicity in the neighborhood of parties so dealing might go to fix them with notice. For any other purpose, for the purpose of restricting the liability of the share- holders, it would plainly be of no avail ; and whosoever became a subscriber upon the faith of the restricting clause, or of the limited responsibility, which that holds out, would have himself to blame, and be the victim of his ignorance of the known law of the land." This language does not seem necessarily addressed to a case, where the creditor contracts with a knowl- edge of the restrictive clause ; but may be satisfied by referring it to cases, where no such knowledge exists. Tiie A'ice-Chancellor's decision, in 8 Sim. 601, is susceptible of a like interpretation. [See Greenwood's Case, 3 De G. M. & G. 459, 23 Eng. L. & Eq. 422 ; Hallett v. Dowdall, 18 Q. B. 2, 9 Eng. L. & Eq. 347 ; Peel v. Thomas, 15 C. B. 714; 29 Eng. L. & Eq. 276.] 294 PARTNERSHIP. [CHAP. VIII. implied agreement to be bound by it, as much as if it were expressly agreed to. There is certainly nothing illegal in a creditor's agreeing' to such a limited respon- sibility, as a qualification or condition of his contract; and in many other analogous cases contracts of this sort are deemed perfectly proper, and unexceptionable ; as for example, where a commission merchant agrees to look exclusively to the goods for the reimbursement of his advances ; or a mortgagee agrees to look exclu- sively to the mortgaged property for his debt. But a qualified agreement of this nature must be proved, and is never presumed without some reasonable proof thereof. S 165. The law of Scotland has recos^nized a distinc- tion, grounded on these considerations, between the nature, character, and efi"ect of such joint associations, and those of mere private partnerships ; confining the responsibility of shareholders in such companies to the extent of three shares. This great question was tried about the middle of the last century, in the case of the Arran Fishing Company. The doctrine established in that case was this : That there is a clear distinction be- tween the case of a joint-stock company, and that of a company trading without relation to a stock. That in the former case, the managers are liable for the debt, which they contract, while each partner is bound to make good his subscription. That there is no ground of further responsibility against the shareholders ; nei- ther on their contract, nor on any ground of mandate, beyond their share ; the very meaning of confining the trade to a joint-stock being, that each shall be liable for what he subscribes, and no further. That in ordi- nary partnerships, there is a universal mandate and a joint 2^r(epositura, by which each partner is Institor of the whole trade to an unlimited extent, each being liable CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 295 m soUdo for the company debts. ^ In this respect the Scottish law seems to have followed the general doc- trine of the Roman law, that in all partnerships each of the partners should be liable, not in solido, but only for his own share. ^ And this also is the general rule of the French law in all cases, except of partnerships for commercial purposes, where, wpoii grounds of public policy, each of the partners is held liable in solido.^ § 166. We have thus far considered the liabilities and exemptions of partners in cases arising under contracts ; and the inquiry next presented is, when, and under what circumstances, partners are liable for torts, done in the course of the partnership concerns, or by any one of the partners under color thereof. As to torts not committed in the course of the partnership busi- ness, it is very clear, that the partnership is not liable therefor in its social character, unless indeed they are assented to or adopted as the act of the partnership.^ But torts may arise in the course of the business of the partnership, for which all the partners will be liable, although the act may not in fact have been assented to by all the partners.^ Thus, for example, if one of the partners should commit a fraud in the course of the partnership business, all the partners mil be liable there- for, although they have not all concurred in the act.^ So, if one of a firm of commission merchants should sell 1 2 Bell, Comm. B. 7, p. 627, 628, 5th ed. " D. 45, 2, 11, § 1, 2. 3 Both, de Soc. n. 96, 103, 104. * {Taylor v. Jones, 42 N. H. 25 ; Cutter v. Fanning, 2 Iowa, 580. See Stevens v. Faucet, 24 111. 483. } " Coll. on B. B. 3, c. 1, § 6, p. 305-307, 2d ed. ; Gow on P. c. 4, § 1, p. 160, 161, 3d ed. ; [Ex parte E>Te, 3 Mont. D. & De G. 12; Stockton v. Frey, 4 Gill, 406.] « Coll. onP.B. 3, c. 1, § 5, p. 296, 297; Id. B. 3, c. 1, § 6, p. 305-307, 2d ed. ; Gow on P. c. 4, § 1, p. 160, 161, 3d ed. See Rapp v. Latham, 2 B. & Aid. 795 ; Stone v. Marsh, 6 B. «& C. 551 ; Ivilby v. Wilson, By. & Moo. 178; {§108, 131, 168, 368.} 296 PARTNERSHIP. [CHAP. VIII. goods, consigned to the partnership, fraudulently, or in violation of instructions, all the partners would be lia- ble for the conversion in an action of trover.^ So, if one of a firm, who are common carriers, should unlawfully convert the goods intrusted to the firm for carriage, or should negligently lose or injure them, all the partners would or might be held liable in tort therefor.^ The same doctrine would apply to a conversion or loss by the negligence or fraud of an agent of the firm.^ So, if partners own a ship, and by the negligence of the master, goods, shipped on board on freight, are neg- ligently injured or lost ; or another ship is by such negligence injured by a collision with her, the partners will be liable for the loss."* For in all such cases the maxim applies : Qui facit per al'mm, facit per se ; and the master in such a case acts not only personally, but as the agent or prcepositus of the entire firm.^ The doctrine has been carried further ; and the partnership has been held liable for a libel, which was published and sold by one partner in the course of the business of the firm, as, for example, by a printer or bookseller, one of the firm in that business.^ The same rule might 1 Coll. on P. B. 3, c. 1, § 6, p. 305, 306, 2d ed. ; Nicoll v. Glennie, 1 M. & S. 588; {§ 108, 168, note; Castle v. BuUard, 23 How. 172. See Stevens v. Faucet, 24 111. 483. } 2 Gow on P. c. 4, § 1, p. 160, 161, 3d ed. ; Coll. on P. B. 3, c. 1, § 1, p. 305, 306, 2d ed. : Moreton v. Hardern, 4 B. & C. 223. 3 Coll. on P. B. 3, c. 1, § 5, p. 296, 297, 2d ed. ; Id. B. 3, c. 1, § 6, p. 305, 306 ; Id. B. 3, c. 6, § 5, p. 505 ; Id. § 7, p. 527 ; {Linton v. Hurley, 14 Gray, 191 ; MoKnight v. Ratcliff, 44 Penn. St. 156.} * Gow on P. c. 4, § 1, p. 160, 3d ed. ; Coll. on P. B. 3, c. 1, § 6, p. 305- 307, 2d ed. ; Mitchell v. Tarbutt, 5 T. R. 649 ; Morley v. Gaisford, 2 H. Bl. 442 ; Moreton v. Hardern, 4 B. & C. 223. » Gow on P. c. 4, § 1, p. 160, 3d ed. ; Coll. on P. B. 3, c. 1, § 6, p. 305, 3d ed. ; [Lloyd v. Bellis, 37 Eng. L. & Eq. 545] ; Wats, on P. c. 4, p. 235, 2d ed. 8 Wats, on P. c. 4, p. 241, 2d ed. ; Rex w. Almon, 5 Burr. 2686 ; Coll. on P. B. 3, c. 1, § 6, p. 306, 2d ed. ; Gow on P. c. 4, § 1, p. 161, 3d ed. ; Rex V. Pearce, Peake, 75 ; Rex v. Topham. 4 T. R. 1 26 ; Rex v. Marsh, 2 B. & C. 717, 723; Attorney General v. Stannyforth, Bunb. 97. CHAP. VITI.] LIABILITIES AND EXEMPTIONS. 297 apply to cases of written slander, as by declaring a rival merchant a bankrnpt, or a cheat, if written in the name, and as the act of the firm. So, if breaches of the rev- enue laws by fraudulent importations, or smuggling, or entries at the custom-house are committed by one of the firm in the course of the business thereof, all the firm would be liable penally, as well as ci^dlly, there- for.i § 167. But, in all cases of this sort, although the partners are jointly liable as wrongdoers, it by no means follows, that they must all be sued. On the contrary, as the law treats all torts as several, as well as joint, the party injured may, at his election, either sue all the partners, or any one or more of them for the tort ; and it will constitute no objection, that his partners were also concerned in it.^ This is a rule by no means peculiar to partnerships ; but it extends to all cases of joint torts and trespasses at the common law, whether positive or constructive. 8 168. From what has been already su^CTested. it is obvious, that a tort committed by one partner, or by any other agent of the partnership, will not bind the partnership, unless it be either authorized or adopted by the firm, or be within the proper scope and business of the partnership. x'Vnd, as in either way, partners may thus all be affected by the tort of one partner, so also a discharge or release of one, on account of the tort, will amount to a discharge or release of all the other partners. This, again, is the result of a general rule of the common law, applicable to all cases of joint ' Coll. on P. B. 3, c. 1, § 6, p. 306-308, 2d ed. ; Gow on P. c. 4, § 1, p. 161, Sd ed. ; Attorney General v. Burges, Bunb. 223. 2 Coll. on P. B. 3, c. 1, § 6, p. 306, 307, 2d ed. ; Id. B. 3, c. 6, § 3, p. 505 ; Id. p. 527 ; Gow on P. c. 4, § 1, p. 160, 161, 3d ed. ; Edmonson v. Davis, 4 Esp. 14 ; Attorney General v. Burges, Bunb. 223 ; Wats, on P. c. 4, p. 235, 2d ed.; {White v. Smith, 12 Rich. Law, 595.} 298 PARTNERSHIP. [chap. VIII. torts and trespasses ; and has been recognized from the earHest times.^ § 168 a. In respect to what acts of one partner the others will and ought to be held to have notice of, so as to bind them all by implied consent or acquiescence, it may be laid down as a general rule, for the protection of those who deal with partners, that all of the part- ners have such knowledge and notice of the acts of any of their partners relative to their business, as in discharge of their plain duty they might or ought to have obtained.^ 1 Co. Litt. 232, a; Bac. Abr. Release (G) : Com. Dig. Belease, B. 4 ; Id. Pleader, 3 M. 12; Klffin v. Willis, 4 Mod. 379. }A release to one partner is a release to all, whether the claim released arise ex contractu or ex delicto. Cocks V. Nash, 9 Bing, 341 ; Cheetham v. Ward, 1 B. & P. G30. Secus with a covenant not to sue. Lind. on P. 351 ; Couch v. Mills, 21 Wend. 424.' If it clearly appears from the terms of the release that it is intended to enure only to the benefit of the releasee it will not discharge the other partners. Solly V. Forbes, 2 Brod. & B. 38 ; Price v. Barker, 4 E. & B. 760. Hartley V. Manton, 5 Q. B. 247 ; Roberts v. Strang, 38 Ala. 566. See also Wig- gin V. Tudor, 23 Pick. 434, 444; McAllester v. Sprague. 34 Me. 296.} [The distinction between the liability of the firm, and of an individual partner for a tortious act, committed by one partner on property in the custody of the firm, is illustrated by a recent English decision. Thus ; a customer deposited a box containing various securities with his bankers for safe custody, and afterwards granted a loan of a portion of such securities to one of the other partners in the banking-house, for his own private purposes, upon his depositing in the box certain railway shares, to secure the replacing of the securities. This partner afterwards for his own purposes, and with- out the knowledge of the customer, subtracted the railway shares, and sub- stituted others of a less value. It was held, that, as the proceeds of the railway shares were not apjilied to the use of the partnership, the banking firm were not answerable for this tortious act of their partner for his own benefit, nor for any loss occasioned by this subtraction of the shares, on the ground of negligence. Ex parte Eyre, 3 Mont. D. & De G. 12. See another instance in Coomer v. Bromley, 5 De G. & Sm. 532, 12 Eng. L. & Eq. 307, where Blair v. Bromley, 2 Ph. 354, is commented upon, and distin- guished.] {See Bishop v. Countess of Jersey, 2 Drew. 143 ; § 108, note.} ^ Sadler v. Lee, 6 Beav. 324. CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 299 CHAPTER IX. RIGHTS, DUTIES, AND OBLIGATIONS OF PARTNERS BETWEEN THEMSELVES. { § 169. Partners bound to exercise good faith, diligence, and discretion. 1 70. Roman law. 1 71. French law. 172. Opinion of Cicero. 1 73. Duty of conforming to the terms of the partnership. 174. Partner cannot stipulate for his private advantage. 1 75. Nor sell or buy in the partnership business for his own advantage. 176. French and Roman law. 177, 178. Carrying on a business adverse to the partnership. 179. Case of newspapers. 180. Conflict of duties where one is executor of his deceased partner. 181. Duty to account and right to manage. 182. Extra comjiensation not allowed ; allowance of interest on capital. 183. Reasonable discretion required. 184. Pothier on the duties and rights of partners. 18.5. Partners allowed for necessary expenses, but not for extra services. 186. Opinion of Voet.} § 169. We come, in the next place, to the considera- tion of the rights, duties, and obligations of partners between themselves. And here it may be stated, that as the contract itself has its soHd foundation in the mutual respect, confidence, and belief in the entire integrity of each partner, and his sincere devotion to the business and true interests of the partnership ; good faith, reasonable skill, and diligence, and the exercise of sound judgment and discretion, are natu- rally, if not necessarily, implied from the very nature and character of the relation of partnership. In this respect, the same doctrine applies, which ordinarily applies to the cases of mandataries or agents for hire ; ^ > Story on Ag. § 182-189 ; Story on Bailm. § 421, 455. 300 PARTNERSHIP. [cHAP. IX. and to other cases of bailment for the mutual benefit of both parties. Hence, if the partnership suffers any loss from the gross negligence, unskilfulness, fraud, or wanton misconduct of any partner in the course of the partnership business, he will ordinarily be responsible over to the other partners for all the losses, and injuries, and damages sustained thei'eby, whether directly, or through their own liability to third persons.^ Of course all losses, injuries, and damages sustained by the part- nership from the positive breach of the stipulations contained in the articles of partnership, on the part of any partner, are to be borne exclusively by that part- ner, and he must respond over to them therefor. § 170. This is the dictate of common sense and justice ; and it has been expressly affirmed by the Roman law. In relation to third persons, that law declares, that partners are liable, not only for fraud, but for negligence as well as fraud. Thus, in one place, after enumerating other contracts, it is said: Sed uhi utriusque iitilitas vertitur, ut in emjito^ ut in locato, tit in dote, ut in pignore, ut in societaie, et dolus, et culpa prcestatur!^ As between the partners them- selves, the like redress was also given. 8i quid dolo nostro socius danini ceperit, a nobis rep)etat.^ Yenit autem in hoc judicium pro socio honafides."^ And again : Utrum ergo tantwn dolum, an etiam cidpam prcEstare socium oporteat, qua^ritur f Celsus ita scripsit. Socios inter se dolum et cidpam prcesfare op)ortet. Si in coe- ' Ibid. Jin Lefever v. Underwood, 41 Penn. St. 505, a partner deposited partnership money in a bank in his own name. The bank failed. The partner was held liable to his copartners. } 2 D. 13, 6, 5, 2; Poth. Pand. 13, 6, n. 12; Story on Ag. § 182, 183; Poth. Pand. 17, 2, n. 27. 3 D. 17,2, 59, 1 ; Id. 17, 2, 52, 1 ; Poth. Pand. 17, 2, n. 36 ; Domat, 1, 8, 4, art. 3, 4, 7, 8. * {D. 17,2, 52, 1.} CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 301 unda societate (inquit) artem operamve poUicitus est alter, cfcc, nimirum ibi etiam culpa prcestaiicla est. Quod si rei communi socius nocuit, macjis admittit^ cid- pam cpioque venire} Again : Socius socio etiam cidpoi 7iomine tenetur, id est, desidice atque negligentioi.^ Again: Si qui societatem ad emendum coierint, deinde res alterius dolo vel cidpa non empta sit, pro socio esse actionem constat.^ But it is added : Damna, quce im- jjrudentibics accidunt, hoc est, damna fatcdia, socii non cogentur 2^rcestare} And the general principle, which runs through the whole matter, is summed up in the fol- lowing expressive words. Culpa aidem non ad exactis- siynam diligentiam dirigenda est ; sufficit etenim talem dillgentiam communihus rebus adhibere, qualem suis rebus adhibere solet ; quia, qui parum diligentem sibi socium adquirit, de se queri debet.^ It would, perhaps, have been more exact to say, that in cases of partner- ship the same diligence is ordinarily required of each partner, as reasonable and prudent men generally em- ploy about the like business ; unless the circumstances of the particular case repel such a conclusion.'^ § 171. The same doctrine runs through the whole structure of the French law on the same subject.^ Pothier even presses it to a somewhat further extent, in which he also follows the Roman law, holding, that a partner cannot absolve himself from losses, occasioned by his fault and negligence in one business, by placing, in opposition to such claim, as a compensation, the I 1 D. 17, 2,52, 2 ; Poth. Panel. 17, 2, n. 3G. 2 D. 17, 2, 72; Poth. Pand. 17, 2, n. 3G. * D. 17, 2, 52, 11 ; Poth. Pand. 17, 2. n. 36. •» D. 17, 2, 52,3; Poth. Pand. 17, 2, n. 3G ; Domat, 1, 8, 4, art. 3, 4. 5 D. 17, 2, 72 ; Poth. Pand. 17, 2, n. 36 ; Domat, 1, 8, 4, art. 2, 3, 7, 8. 6 Storyon Ag. § 182-185 ; Story on Baihn. § 11, 13-15, 18; Id. § 455; Jones on Ballm. 98; Poth. de Soc. n. 124. 7 Poth. dc Soc. n. 124, 125. 302 PARTNERSHIP. [CHAP. IX. profits, which he has brought to the partnership by his industry and dihgence in other business of the firm. The reason he affirms to be. that the partner, who thus exerts his industry and diligence, does no more than his duty thereto ; and therefore the firm is not indebted to him on that account.^ JSfon oh emn rem minus ad periculum socii ^jer^i^ie^, quod negUgentia ejus periisset^ quod in 2^^^^^isque aUis industria ejus societas aucta fuisset. Et ideo, si socius qucedam negligenter in socie- tate egisset, in plerisque autem societatem auxisset, non com2)ensatur coinj^endium cum negUgentia.^ The doc- trine, thus stated, aUhough somewhat strict and austere, may perhaps be deemed sakitary and convenient, as creating a deep interest in partners to perform all their duties with fidelity and diligence. It does not, however, seem to have been held applicable to a series of con- nected acts, all of which form a part of the same entire business transaction, such, for example, as the sale of a cargo of goods by one partner, who manages the whole sale, where, although there may be some negligence, as to the sale of a part, by which some loss has been in- curred, yet there has been a great profit upon other parts ; so that the loss is much more than compensated for by the extra rate of profits. § 172. The necessity of entire good faith, and of the absence of fraud on the part of partners towards each other, is inculcated by Cicero in terms of deep import and sound morality. In rehus minoribus socium fallere tinpissimum est; neque injuria; propterea quod aux- iliicm sibi se putat adjunxisse, qui cum altero rem com- municavit. Ad cujus igltur fidem confugiet^ aim per ejusfidem la^ditur, cui se comyniseritf Atque ea sunt > Poth. de Soc. n. 125. - D. 17, 2, 25 ; Id. 17, 2, 26; Poth. Pand. 17, 2, n. 29 ; Domat, 1, 8, 4, art. 8. CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 303 anhnadvertenda peccata maxime^ quce difficillime prcB- caventiir. Tecti esse ad alienos possumus ; intimi multa aptertiora videant necesse est. Socium vero cavere qui p)ossumus ? Quern, etiam si inetuimus, jus officii Icedi- mus. Recte igitur majores eum, qui socium fefeUisset, in mroruin honorwn niimero non putarunt haberi op)or- tere} The Roman law has also expressed the obligation of good faith in exceedingly strong language. In societatis contractihiis fides exiiberetP- Good faith not only requires, that every partner should not make any false representation to his partners, but also that he should abstain from all concealments, which may be in- jiu'ious to the partnership busmess. If, therefore, any partner is guilty of any such concealment, and derives a private benefit therefrom, he will be compelled in equity to account therefor to the partnership. Upon the like ground, where one partner, who exclusively superin- tended the accounts of the concern, had agreed to pur- chase the share of his copartners in the business for a sum, which he knew, from the accounts in his posses- sion, but which he concealed from them, to be for an inadequate consideration, the bargain was set aside in equity, as a constructive fraud ; for he could not in fairness deal with the other partners for their share of the profits of the concern without putting them in possession of all the information, which he himself had with respect to the state of the accounts and the value of the concern.^ § 173. One of the most obvious duties and obliga- ^ Cicero, Pro Roscio. Amer. c. 40, cited by Pufendorf, B. 5, c. 8, § 4, and by Coll. on P. B 2, c. 2, p. 117, 2d ed. "- Cod. Lib. 4, 37, 3; Domat, 1, 8, 4, art. 1, 2; {Blisset v. Daniel, 10 Hare, 493. 1 ^ Maddeford v. Austwick, 1 Sim. 89; {Perens v. Johnson, 3 Sm. & G. 419; Sexton v. Sexton, 9 Gratt. 204; Hopkins v. Watt, 13 111. 298. See Kuight r. Marjoribanks, 11 Beav. 322; s. c. 2 Macn. & G. 10.} 304 PARTNERSHIP. [cHAP. IX. tions of all the partners is, strictly to conform themselves to all the stipulations contained in the partnership arti- cles ; ^ and also to keep within the bounds and limitations of the rights, powers, authorities, and acts, belonging and. appropriate to the due discharge of the partnership trade or business. Of course, every known deviation from, and every excess in the exercise of such rights, powers, authorities, and acts, which produce any loss or injury to the partnership, are to that extent to be borne by the partner who causes or occasions the loss or in- jury, and he is bound to indemnify the other partners therefor.^ The same doctrine is recognized by Pothier, ' Coll. on P. B. 2, c. 2, § 2,i). 131-161, 2d ed. ^ The doctrine here stated is sometimes of great practical importance in the settlement of partnership accounts. An illustration of it occurred in the case of Stoughton v. Lynch, 1 Johns. Ch. 467, as to funds, which one partner had withdrawn from the jjartnership contrary to the articles. On that occasion, Mr. Chancellor Kent said : " The articles of copai-tner- ship intended to preserve, in a state of progressive accumulation, the funds of the house ; and the clause, upon which the question before me has arisen, is to be taken strictly. This is evidently the sense and spirit of the agreement. It is expressly stipulated, that the capital and profits of the company were to remain in the house, and to be employed for the ben- efit of the concern, during the jiartnership, with this special exception, that such part only was to be withdrawn, as might be necessary for private ex- penses. And to show the care, with which the parties guarded the funds from being diverted by either of them, it was further stipulated, that neither of them was to do business at New York on their private account, nor lend any of the capital stock, or enter into acceptances ; but each party was to do his best to promote the advantage of the company. After reading these articles, it is impossible not to view most of the charges, which the defendant wishes to include under the special exception, as palpably inadmissible. To consider palate, musical instruments, carriages and horses, and the whole fur- niture of a house, as coming within the permission granted to the parties to withdraw the funds of the house only when necessary for private expenses, is, in my judgment, an unreasonable and extravagant pretension. The object of the decretal order, of last July, was, not to exempt from interest all those moneys withdrawn, that were not supposed to be employed in land specula- tions. I then observed, that, if the funds so withdrawn had been employed in trade, the party would have had to account, not merely for interest, but for the j)rofits of that trade ; and we find authority for this in Brown v. Lit- ton, 1 P. Wms. 140, and in Crawshay v. Collins, 15 Ves. 218, where the prin- CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 305 as existing in the French law ; ^ and it seems, indeed, so clearly the result of natural justice as to require no particular exposition.^ § 174. But there are many implied duties and obliga- tions of an equally important, although not perhaps always of so obvious a nature. Thus, for example, it is a violation of good faith, for any partner, in conduct- ing the partnership business, to stipulate clandestinely with third persons for any private and selfish advantage ciple is stated, that if one partner trade alone on a joint stock, he shall divide the profits. The least that I could do in this case was to make him jiay inter- est on all moneys withdrawn beyond the private necessity expressed in the contract. The interest of the parties as joint traders, the obvious policy and meaning of the contract, and that good faith, which is the animating principle in all mercantile associations, unitedly concur in recommending us to view the claims set up by either party, under the exception, with a jealous and scru- pulous eye. Without such a rule of construction, a partnershij), like the pres- ent, with all its provisions to preserve the funds of the house untouched, might soon languish under the carelessness, or dissipation, or discordant and rival views of either of the contracting parties. The parties, then, had in view, that funds were to be withdrawn only when necessary for private ex- penses ; and when at any time withdrawn, the party must have done it with a view to that necessity. That must have been the purpose, for which they were withdrawn. The more safe and regular way would have been, to have stated, in each case, the object of the appropi-iation, so that each party, at the end of every year, when a fair balance of the books, according to the articles, was to be made, signed, and approved, might have known and judged of the requisite appropriation. But it would, perhaps, be too rigorous to require the production of such an original entry to justify every such appropriation ; and I am willing even to presume, that a fair and reasonable sum, drawn away in each year, was necessary for the private expenses of each individ- ual partner during that year. Beyond this presumption I cannot go. All the European expenses of the defendant are, therefore, to be laid out of the case ; because, as I understand from the suggestions of the counsel upon the argument, there was no concurrent, or any thing like contemporary, appro- priations, or drafts, with any presumed reference to those expenses. I am to presume, then, and I do presume and believe, that the defendant never deemed it necessary, at the time, to recur to the permission granted under these articles, to meet and defray those expenses. The idea of Including them under this article was an afterthouglit, ailsing many years after those ex- penses had been borne and forgotten." 1 Poth. de Soc. n. 133. 2 Poth. Pand. 17, 2, n. 3G ; Domat, 1, 8, 4, art. 3,4, 7. 20 306 PARTNERSHIP. [cHAP. IX. and benefit to himself, exclnsive of the partnership ; for all the partnership property and partnership contracts should be managed for the equal benefit of all partners, according to their respective interests and shares there- in.^ If, therefore, any one partner should so stipulate clandestinely for any private advantage or benefit to himself, to the disadvantage, or in fraud of his partners, he will in equity be compelled to divide such gains with them.^ ■ The same principle will apply to clandestine bargains for his own private advantage and benefit, made in contemplation of establishing a partnership with other persons, and as a premium for his services therein.^ So, if a purchase is made -on the partnership account by one partner, who clandestinely stipulates and receives any reward or allowance from the seller for his own private profit, he will be compelled to share the same with his partners."* So, wdiere one partner obtains the renewal of a partnership lease secretly in his own name, he will be held a trustee for the firm in the re- newed lease."* » Coll. on P. B. 2, c. 2, § 1, p. 117-120, 2d ed. ; 3 Kent, 51 ; {Gardner v. McCutcheon, 4 Beav. 534; Lind. on P. 494.} 2 Ibid. ; Russell v. Austwick, 1 Sim. 52. 3 Fawcett v. Whitehouse, 1 Russ. & M. 132, 148, 149 ; Hiehens v. Con- greve, 4 Russ. 562. {See Beck v. Kantorowicz, 3 Kay & J. 230.} * Carter v. Home, 1 Eq. Cas. Abr. Account, A. pi. 13. {But see Wheeler V. Sage, 1 Wallace, (u. s. s. c.) 518.} * Featherstonhaugh v. Fenwick, 17 Yes. 298; Hiehens v. Congreve, 1 Russ. & M. 150, note B. ; s. c. 4 Russ. 562; Coll. on P. B. 2, c. 2, § 1, p. 120, 121, 2d ed.; Dougherty v. Van Nostrand, 1 Hoff. 68, 69, 70; {Clegg V. Fishwick, 1 Macn. & G. 294. See Clements v. Hall, 2 De G. & J. 173, reversing s. c. 24 Beav. 333.} [But see Anderson v. Lemon, 4 Sand. 552.] — Lord Eldon in Featherstonhaugh v. Fenwick, 1 7 Ves. 311, said : "It is clear, that one partner cannot treat privately, and behind the backs of his copart- ners, for a lease of the premises, where the joint trade is carried on, for his own individual benefit. If he does so treat, and obtains a lease in his own name, it is a trust for the partnership ; and this renewal must be held to have been so obtained. Consider, what an unreasonable advantage one partner would, upon a difierent principle, obtain over the rest. In this respect, there CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 307 § 1T5, The same doctrine is applied to other analo- gous cases. In all purchases and sales, made on account of the partnership, every partner is bound to act ex- pressly for the benefit of the partnership ; and, there- fore, he has no right, and cannot consistently with his can be no distinction, whether the partnership is for a definite, or indefinite period. If one partner might so act in the latter case, he might equally in the former. Supposing the lease and the partnership to have different terms of duration, he might, having clandestinely obtained a renewal of the lease; say to the other partners : ' The premises, on which we carried on our trade, have become mine exclusively ; and I am entitled to demand from you whatever terms I think fit, as the condition for permitting you to carry on the trade here.' Is it possible to permit one partner to take such an advantage ? When the application was made for a renewal, no notice of dissolution had been given ; nor had the plaintiff notice of any intention of renewing the lease. It is not true, as has been represented, that the im- pediment to a renewal to the partnership arose solely from the indisposition of Mr. Wilkinson to any connection with the plaintiff: as, before any ob- jection had been made on that or any other ground, the defendant goes Avith the intention, and for the direct purpose, of obtaining a renewal for himself and his son exclusively. He makes the application to Murray ; who says, the proposal was for a renewal for the benefit of the defendants ; expressly excluding the plaintiff, with whom it was represented, that George Fenwick was determined to have no further connection in trade ; and though it may be true, that Wilkinson afterwards said, he would not have granted a lease to the defendants jointly with the plaintiff, that declaration had become quite unnecessary, by the resolution, previously expressed by the defendant, not to take a lease jointly with him. This clandestine conduct was very unfair towards the plaintiff. The defendants had not intimated to him, that they would not have any further connection with him, and that they in- tended to apply for a lease on their own account. They ought first to have given him notice, and to have placed him on equal terms with them ; and then, if Mr. Wilkinson had thought proper to give them the preference, the case might admit of a different consideration. Instead of that, they clandes- tinely obtained an advantage, which would enable them to dissolve the partnership on terms very unfavorable to the plaintiff; and they evidently had that object in view. If they can hold this lease, and the partnership stock is not brought to sale, they are by no means on equal terms. The stock cannot be of equal value to the plaintiff, who was to carry it away, and seek some place, in which to put it, as to the defendants, who were to continue it in the place where the trade was already established ; and if the stock was sold, the same circumstance would cive them an advantage over other bidders. In effect they would have secured the good-will of the trade to themselves, in exclusion of their partner." 308 PARTNERSHIP. [cHAP. IX. duty, voluntarily place himself in a situation, in which his bias, as well as his interest, is in opposition to the interest of the partnership. Thus, if a partner buys goods for the partnership account, and makes the bar- gain by a barter of his own private goods on his own sole account, and charges the partnership with the full cash value and price of the goods, as if they were bought for cash ; it will be a constructive fraud upon the part- nership ; and he will be compelled in equity to account for any private profit so made in the barter.^ The same rule will apply to the converse case of a sale of the part- nership property under the like circumstances ; for the general doctrine is, that there is an implied obligation between partners, that they are to use the partner- ship property for the benefit thereof, and not other- wise.^ § 176. This wholesome principle of justice has been adopted in many other cases, where peculiar relations » Burton v. Wookey, 6 Madcl. 367 ; Coll. on P. B. 2, c. 2, § 1, p. 122, 2d ed. — On this occasion Sir John Leach (the Vice-Chancellor) said : " It is a maxim of the courts of equity, that a person, who stands in the relation of trust or confidence to another, shall not be permitted, in pursuit of his pri- vate advantage, to j^lace himself in a situation, which gives him a bias against the due discharge of that trust or confidence. The defendant here stood in relation of trust or confidence towards the plaintiff, which made it his duty to purchase the lapis calaminaris at the lowest possible price ; when in the place of purchasing the lapis calaminaris, he obtained it by barter for his own shop goods, he had a bias against a fair discharge of his duty to the jjlaintiff. The more goods he gave in barter for the article purchased, the greater was the profit, which he derived from the dealing in store goods ; and as this profit be- longed to him individually, and as the saving by a low price of the article pur- chased was to be equally divided between him and the plaintiff, he had plainly a bias against the due discharge of his trust or confidence towards the plaintiff. I must, therefore, decree an account of the profit made by the defendant in his barter of goods, and must declare, that the plaintiff is entitled to an equal division of that profit with the defendant." 6 Madd. 367; { Bentley t;. Craven, 18 Beav. 75.} 2 Crawshay r. Collins, 15 Ves. 218, 227. { See Westcott v. Tyson, 38 Pcnn. St. 389.} CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 309 exist between the parties, by courts of equity.^ Potliier has directly apphed it, not only to cases of bargains during the partnership,^ but also to a case, where a partner contemplates a dissolution solely to aid his own sinister and selfish purposes. In order (says he) to enable a partner to dissolve a partnership, two things must concur; (1.) the renunciation of the partnership must be made in good faith ; (2.) it must not be made at an unreasonable time (contre temjjs). Debet esse facia bona fide et temj^estive. The renunciation is not made in good faith, when the partner renounces to appropriate to himself alone the profits, which the other partners proposed for the partnership, when it was formed.^ This is the very doctrine inculcated by courts of equity under the like circumstances.'* It is also the doctrine of the Roman law^ Si societatem ineamus ad aliquam rem emendam ; deinde solus volueins earn emere, ideoque re- nuntiaveris societati, ut sokes emeres ; teneberis quanti interest mea. Sed si ideo renuntiaveins, quia emptio tibi displicebat, non teneberis quamvis ego emero ; quia hie nulla fraus est.^ § 177. Upon similar grounds it is the implied obliga- tion and duty of every partner, not to engage in any other business or speculation, which must necessarily deprive the partnership of a portion of the skill, indus- try, diligence, or capital, which he is bound to employ therein.*" In other words, he is not at liberty to deal on his own private account in any matter or business, which is obviously at variance with, or adverse to, the > 1 Story, Eq. Jur. § 315, 316, 321 ; Id. § 221 ; 2 Story, Eq. Jur. § 1261, 1265 ; Stoughton v. Lynch, 1 Johns. Ch. 467, 470. 2 Poth. de Soc. n. 59. ^ Poth. de Soc. n. 150. * Featherstonhangh I?. Fenwick, 17 Ves. 298. « D. 17, 2, 65, 4; Poth. Pand. 17, 2, n. 64; Domat, 1,8, 4, art. 5, 17. 8 3 Kent, 51 ; Burton v. Wookey, 6 Madd. 367. 310 PARTNERSHIP. [CHAP. IX. business or interest of the partnership. The object of this prohibitory rule is, to withdraw from each partner the temptation to bestow more attention, and to exercise a sharper sagacity in respect to his own purchases and sales and negotiations, than he does in respect to the concerns of the partnership, in the same or in a con- flicting line of business.^ It is, therefore, a rule founded in the soundest policy. Pothier lays down the same rule, and inculcates it in emphatic language, insisting that no partner has a right to prefer his own particular interest to that of the firm, or to take away the profits of a bargain from the firm, and appropriate them to his own private advantage.^ Boulay Paty is equally ex- pressive on the same subject ; and he applies it, as well to cases of masters of ships, as to partners.^ § 178. If, therefore, one partner should clandestinely carry on another trade, or the same trade for his own private advantage, and in a manner injurious to the true interests of the partnership, or should divert the capital or funds of the partnership to such secret and sinister purposes, he will be compelled in equity to ac- count for all the profits made thereby.^ So, if one partner should purchase articles upon his own private account in some special trade and business, in which the partnership was engaged, and injuriously to the partnership, as for example, by purchasing lapis calami- naris of neighboring miners, on his own private account, that being also the business of the partnership, he would be held to account for the profits made thereby.^ 1 3 Kent, 51. '^ Poth. de Soc. n. 59. ^ 2 Boulay Paty, Droit Comm. § 19, p. 94. '' Long V. Majestre, 1 Johns. Ch. 305 ; Glassington v. Thwaites, 1 Sim. & St. 124, 133 ; 3 Kent, 51 ; Burton v. Wookey, 6 Madd. 367 ; Stoughton v. Lynch, 1 Johns. Ch. 46 7, 4 70; {Lock v. Lynam, 4 Ir. Ch. 188; England v. Curling, 8 Beav. 129 ; Herrick i\ Ames, 8 Bosw. 115.} ' Burton y. Wookey, 6 Madd. 367. CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 311 Indeed courts of equity will go further in cases of this sort, and restrain the partner by injunction from carry- ing on any trade or business, which is thus inconsistent with the rights and mterests of the partnership ; for (as has been well remarked) the principles of courts of equity will not permit, that parties, bound to each other, by an express or implied contract, to promote an undertaking for the common benefit, should any of them engage m another concern, which necessarily gives them a direct interest adverse to that under- taking.^ But if there be no such necessary conflict or incompatibility of interests, the mere circumstance, that the partner may thereby be exposed to the tempta- tion to be dishonest, or to abuse his trust, or to betray his duty, has not been thought sufficient to justify courts of equity in imposing such restraint by injunction.- § 179. The principle and the exception may readily be illustrated by the case of two rival morning news- papers, and two evening newspapers. All newspapers are, to some extent, rivals ; and there is also neces- sarily some degree of rivalry between a morning and an evening paper, especially in the country. The question may, therefore, very properly arise in many cases, whether a person, engaged as a partner in the management of a morning paper, is at liberty to assist with his skill, labor, and property, the publication of an evening newspajoer, which may affect the interests of the former. If both papers are published in the same city, for the Hke general circulation, it will be difficult to escape the conclusion, that the interest in the one is adverse to and in conflict with that of the other. But, if one is published in another city, or one is designed mainly for city cumulation, and the other 1 Glassington r. Thwaites, 1 Sim. & St. 124, 133. 2 Ibid. 312 PARTNERSHIP. [CHAP. IX. exclusively for country circulation, or the one is a daily, and the other a weekly paper, the same conflict and adversary interests may not arise ; and the nature and objects of the particular papers, as well as the habits and usages of the trade, may furnish material ingredi- ents for a distinction between the cases. ^ ' Glassington v. Thwaites, 1 Sim. & St. 124, 131, 133. — On this occa- sion Sir John Leach (the Vice-Chancellor) said : " All newspapers are to some extent rivals. The competition is more immediate between two morning papers and two evening papers ; but there is necessarily some degree of rivalry between a morning and an evening paper, especially in the country. It might, therefore, have been made a question, whether it would be a due act of management in the partnership concern of a morning paper, to assist with its proiierty and Its labor the publication of any other newspaper, so as to enable the majority of the j^artners in that respect to bind the minority. But the question does not arise ; because the plaintiff himself is to be considered as a party to the practice, before his copartners became the proprietors of the evening paper ; and because there is evi- dence, that the proprietors of other morning papers have adopted the same practice with respect to other evening papers, so as to form a sort of usage in the trade to this effect. And it is to be considered, that the annual sum, paid by the evening paper for the accommodation afforded to it, outweighs the danger of increased competition. The true question here is, whether it makes any difference, that the other proprietors of the Herald have now be- come the proprietors of the evening paper ; and 1 think it does not make a material difference. It is true, that a considerable part of the expense of a newspaper is occasioned by procuring information ; and if some of the pro- prietors of a morning paper are also the proprietors of an evening paper, they may have a stronger interest to promote the success of the evening paper than of the morning paper, and a strong temptation to use the infor- mation obtained at the expense of the morning paper for the benefit of the evening paper. This temptation forms a powerful objection in all cases to the partner in the concern of one newspaper being permitted to be a partner in the concern of any other newspaper. But it is an objection founded on the principle of policy and discretion, against which parties may protect themselves by their contracts ; and accordingly, it is a common covenant in such partnership articles, that no partner shall be the proprietor of any other newspaper. In the present case, there is actually a covenant, that the pro- prietors will not be concerned in any other morning paper, which, bj' impli- cation, affords the conclusion, that it was the intention of the parties, that they might engage in the concern of any evening paper. Where there is no such covenant of restraint, it is clear, that, at law, a partner in one newspaper may be a proprietor in any other newspaper ; and in this case, equity must follow law ; and it cannot be intended, that the parties meant to impose a CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 313 § 180. Cases of a very delicate and embarrassing nature sometimes arise in cases of partnership, where one partner dies, and one or all of the survivors are appointed his executors, and the partnership is con- tinued as between the survivors. Under such circum- stances, it may be difficult to say, that there may not sometimes arise conflicting; duties and oblia^ations in their difl"erent acts and characters, as partners and as executors. Still greater embarrassments may occur, where the executors also sustain the character of guar- dians of the children of the testator, who by the articles have a right upon arriving at their majority to come into the firm. It has been well remarked by a learned writer, that it is clear, that surviving partners so situ- ated, have inconsistent duties to perform. It is true, that the difficulties of this situation are not so obvious, where the parties claiming under the testator are all sui juris, as where some of them are infants. But even in the former case, the surviving partner cannot, without the full knowledge and consent of these parties, make his situation of executor a means of advantage to his copartnership ; and in the latter case, the difficulties, restraint, which they might have expressed, and have not expressed, and where it is plain their attention was directed to the subject. The princi- ples of courts of equity would not permit, that parties bound to each other by express or implied contract to promote an undertaking for the common benefit, should any of them engage in another concern, which necessarily gave them a direct interest adverse to that undertaking. But the argument here is, not that the defendants, by becoming the proprie- tors of the evening papei", place themselves in a situation, in which they are necessarily required to betray their duty to the morning paper ; but that, if their interest be greater in the evening paper than the morning paper, they are exposed to a temptation to be dishonest and to betray their duty to the morning paper. If they act honestly, it is immaterial to the morning paper, whether the defendants are or not the proprietors of the evening paper. And for this reason it is, that it makes no difference in the present case, that the defendants have become the proprietors of the evening paper." 314 PARTS^ERSHIP. [cHAP. IX. « in the absence of specific contract, seem to be insuper- able, unless the whole partnership concern be wound up, or recourse be had to a court of equity.^ § 181. In the next place, there is an implied obliga- tion and duty upon all the partners, as a matter of good faith, to which they are mutually pledged to each other, that the business of the partnership shall be conducted in such a manner, as that each of the part- ners may be enabled to see, that it is carrying on for ' Coll. on P. B. 2, c. 2, § 1, p. 123, 2d ed. ; Id. B. 2, c. 3, § 4, p. 210, 211. — The case of Wedderburn v. "Wedderburn, 2 Keen, 722; s. c. 4Myl. & C. 41, demonstrates the truth of these remarks. In that case the accounts of successive partnerships and retirements of partners, after the death of the first partner (the testator), were overhauled in equity, after a lapse of thirty years from the testator's death. The decretal order in that case contains the form of the proper order to be made in such cases, and may serve as a valuable precedent. 2 Keen, 752, 753. This case was affirmed upon the appeal by Lord Cottenham, who then used the following language : "I have had many occasions to consider, and have frequently expressed my sense of the difficulties, which the court has to encounter in administering equity according to its acknowledged principles in cases of this description. So many decisions have established the right of parties to participate in the profits of trade, carried on under circumstances similar to the present, that no question can be raised as to the duty of the court in decreeing such relief, when a proper case arises for it ; but it is obvious, that very great difficulties exist in enforcing this right. Great expense, great delay, and great hardship upon the defendants frequently attend the prosecution of decrees for this purpose, and the apparent benefit decreed to the plaintiff is frequently much diminished, if not lost, in the attempt to enforce it. For these reasons it appears to me, that these are cases, in which, above all others, it is for the interest of all parties to settle the matters in contest between them by private arrangement and compromise ; and I earnestly recommend to the pai'ties to take this into their serious consideration. I have no doubt but that a settlement might be effected, which would secure to the plaintiffs more than they can possibly obtain from the most successful prosecution of the decree, and which would, at the same time, protect the defendants against much of the expense, inconvenience, and hardship, to Avhich they must be exposed if it be adversely prosecuted. This, however, is entirely for their private consideration. My duty is only to dispose of the matters litigated upon this appeal, which, for the reasons I have before given, I now do by dismissing the appeal with costs." 4 Myl. & C. 55. {Millar v. Craig, 6 Bcav. 433; Stocken c. Dawson, 6 Beav. 371; Town- end V. Townend, 1 Giff. 201.} CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 315 their mutual advantage, and not injuriously to the common interest.^ It seems, therefore, the proper duty of each partner to keep precise accounts of all his own transactions for the firm, and to have them always ready for inspection and explanation." And if one partner receives any moneys for the partnership, he ought at once to enter the receipt thereof in the books of the firm, so that the same may be open to the in- spection of all the partners.^ This, indeed, is one of the ordinary stipulations of partnership articles ; but it is a mere affirmance of the general doctrine of the law.'* It follows from these considerations, that one partner cannot exclude another from a personal interposition, and an equal management in the concerns of the part- nership. The powers of all are in this respect co-ordi- nate and co-extensive, whether the partnership be in full operation, or be subsisting only for the purpose of winding up the aff"airs thereof.^ There may be excep- tions and limitations growing out of the particular articles or other incidents of the partnership, as where one partner has sole authority to act in the manage- ment of the concern ; or where one partner is the sole owner of the property, and the other partners are only to share the profits.^ The Roman law inculcated a similar doctrine ; and if one partner was prevented by the others from an equal participation in any of the > Coll. on P. B. 2, c. 2, § 1, p. 126, 2d ed. : Peacock v. Peacock, 16 Ves. 49, 51 ; 3 Chitty on Comm. & Manuf. c. 4, p. 230. 2 Coll. on P. B. 2, c. 2, § 1, p. 121. 126, 2d ed. ; Id. B. 2, c. 2, § 2, p. 142 ; Rows v. Wood, 2 Jac. & W. 553, 558 ; Ex parte Yonge, 3 Ves. & B. 31, 36; {Lind. on P. 659-666.} 3 Goodman v. Whitcomb, 1 Jac. & W. 589, 593. * Coll. on P. B. 2, c. 2, § 2, p. 142, 2d ed. * Coll. on P. B. 2, c. 2, § 1, p. 126, 2d ed. ; Rowe v. Woods, 2 Jac. & W. 553, 558. « Ibid. 316 PARTNERSHIP, [CHAP. IX. partnership property, he might, even during the con- tinuance thereof, maintain an action i^ro socio} § 182. In the next place, as there is an implied obli- gation in every partner to exercise due diligence and skill, and to devote his services and labors for the pro- motion of the common benefit of the concern, it hence follows, that he must do it without any reward or com- pensation, unless, indeed, it be expressly stipulated for between the partners, as it well may be under peculiar circumstances.^ The reason is, that each partner, in taking care of the joint property, is in fact taking care of his own interest, and is performing his own duties and obligations, implied in, and constituting a part of, the consideration for the others to engage in the part- nership ; and the law never undertakes to measure and settle between the partners the relative value of their various and unequal services bestowed on the joint busi- ness, for the obvious reason, that it is impossible to see, how far in the original estimate of the parties, when the connection was formed, the relative experience, skill, ability, or even the known character and reputa- tion of each, entered as ingredients into the adjustment of the terms thereof.^ 1 D. 17, 2, 52, 13; Poth. Pand. 17, 2, n. 33. ^ Thornton v. Proctor, 1 Anst. 94 ; Franklin v. Robinson, 1 Johns. Ch. 157, 165; Bradford v. Kimberly, 3 Johns. Ch. 431, 434; Caldwell v. Leiber, 7 Paige, 483; Burden v. Burden, 1 Ves. & B. 170; Lee v. Lash- brooke, 8 Dana, 214; Whittle v. M'Farlane, 1 Knapp, 311, 315 ; [Lewis v. MofFett, 11 111. 392 ; Lyman v. Lyman, 2 Paine, C. C. 11 ; King v. Hamilton, 16 111. 190; Coursen v. Hamlin, 2 Duer, 513; jHutcheson v. Smith, 5 Ir. Eq. 117 ; Lind. on P. 636. But see Levi v. Kai-riek, 13 Iowa, 344.} And on the same principle a surviving partner has been held not entitled to compensation for services in winding up the affairs of the firm. Beatty v. Wray, 19 Penn. St. 516]; {Stocken v. Dawson, 6 Beav. 371; Brown v. McFarland, 41 Penn. St. 129 ; Piper v. Smith, 1 Head, 93. But see Feather- stonliaugh v. Turner, 25 Beav, 382, 392.} * [Interest on advances of capital by one of the partners to the firm, will be allowed, where there is any agreement or understanding to that CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 3 IT § 183. Nor is good faith alone required in all part- nership acts ; but also the exercise of a sound and rea- sonable discretion by each partner, for the mutual ben- efit and interest of the concern. It is, therefore, the duty of each partner to avoid transgressing or abusing in any way the ordinary privileges of a partner in the management of the concern ; as, for example, by pro- fuse, or wanton, or unnecessary expenditures in the partnership business, or by rash and imprudent specu- lations, or by negligent or extravagant sacrifices of the partnership property.^ Even where a right is reserved to one partner to assign his share to another, who shall thereby be entitled to admission as a partner, good effect. Coll. on P. (Perkins's ed.) B. 2, c. 3, § 338, note, p. 309 ; Winsor v. Savage, 9 Met. 346 ; Hodges v. Parker, 17 Vt. 242 ; Millaudon v. Sylves- tre, 8 La. (Curry), 262; Reynolds v. Mardis, 17 Ala. 32; {Pond v. Clark, 24 Conn. 37U ; Lind. on P. 649.} But it has been distinctly declared by an American court that, in the absence of any such evidence, neither of the partners will be entitled to intei-est on advances before a general settlement or dissolution. Lee v. Lashbrooke, 8 Dana, 214; Jones V. Jones, 1 Tred. Eq. 332 ; Honore v. Colmesnil, 7 Dana, 199 ; Waggoner w.-Gray, 2 Hen. & Mun. 603; Dexter v. Arnold, 3 Mason, 284; Desha v. Smith, 20 Ala. 747. An eminent English judge has intimated a contrary opinion. According to him, the law is not clear, that, where partners are equally laborious and equally attentive to the business, interest should not be allowed on any excess of capital, and the parties thus be put on equal terms in that respect. "Can one believe," he says, connnenting on the facts of a case in judgment, " that the party, to whom the whole capital belonged, renounced his advantage in that respect, and continuing to take an equally laborious part in the transaction of the business, should bring in his whole income, both partnership and private, and yet intend to reserve no advantage of that income upon the settlement of accounts between hini- seli' and copartner ? I must say, I have a great difficulty in coming to such a conclusion as that." Millar v. Craig, 6 Beav. 433 ; Hodges v. Parker, 17 Vt. 242 ; Stoughton v. Lynch, 1 Jolmson, Ch. 467 ; Simpson v. Feltz, 1 McCord, Ch. 213 ; Ex imrte Chippendale, 4 De G. M. & G. 19, s. c. sub nam. In re German Mining Co. 19 Eng. L. & Eq. 591 ; Beacham v. Eck- ford, 2 Sand. Ch. 116. See post, § 349, note] ; {Morris v. Allen, 1 Mc- Carter, 44. See Wood v. Scolos, Law llcp. 1 Ch. 369; Watney v. Wells, Law Rep. 2 Ch. 200; Hill v. King, 9 Jur. n. s. 527.} 1 Coll. on P. B. 2, c. 2, § 1, p. 127, 2d ed. 318 PARTNERSHIP. [chap. IX. faith AYOuld seem to require, that the assignment should be to a person of competent skill and honesty, and not to a mere insolvent, or to a known profligate ; for this would seem to be an abuse, and not a fair exercise of the right of assignment.^ § ISi. Pothier, in discussing the subject of the rights, duties, and obligations of partners, in respect to each other, has laid down a number of general rules, as guides and principles. First. That each partner may use the property, belonging to the partnership, accord- ing to its proper use and destination, and not otherwise, reciprocally allowing to his other partners the like use and privilege.- Second. That each partner has a right to compel the other partners to bear theh share of the expenses, which are necessary for the preservation of the common property.^ Third. No partner has a right to make any material change or innovation upon the common, permanent, or fixed property, or inheritable estate of the firm, even though it may be beneficial to the firm, without the consent of his partners ; for this is deemed an authority not delegated by the firm, and ' Coll. on P. B. 2, c. 2, § 1, p. 129, 130, 2d ed. ; 2 Bell, Comm. B. 7, p. 620, 5th ed. — In the case of Jefferys v. Smith, 3 Russ. 158, 168, Sir John Copley (Master of the Rolls) seemed to think, that the insolvency of the assignee constituted no just objection. On that occasion he said: "It is said, that the assignment was colorable ; that is, that it was made for the sake of securing the assignor from future liability. Suppose he made it with that view, he had a right so to protect himself from future liability. It is alleged, that the assignee was not a responsible person. Let it be so ; Guppy, for the purpose of securing himself, had a right to assign to a person not responsible. The only ground of objection would be, that, though there was an assignment in form, there was an understanding between the parties, that the assignee should be a trustee for the assignor. Here there is no pretence for such a supposition. I must hold, therefore, that, at all events, the assignment, coupled with the notice, freed Guppy from future liability." But ought not a court of equity to interfere, where an assignment is made to a notoriously incompetent person, or to one of bad and dissolute habits? See 2 Bell, Comm. B. 7, p. 620, 5th ed. ^ Both, de Soc. n. 84, 85. ^ Both, de Soc. n. 86. CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 1119 which any one may prohibit from being done.^ Fourth. No partner can alienate or bind the property of the firm, except to the extent of his own interest therein.^ These rules may not be unreasonable in themselves ; but it cannot be affirmed, that all of them have a just foundation in our law. On the contrary, as we have seen, some of them are repudiated.^ Pothier afterwards adds some other obligations of partners inter sese ; as for example, that each partner is bound to account to the others for all that he owes to the firm, deducting what is due to him by the firm."* So, also, each partner is bound to account to the extent of the share, which he has in the partnership, for whatever is due to his other partners by the firm, deducting whatever those partners owe to the firm.^ These rules seem little more than an expansion of the principles of the Roman law on the same subject.^ § 185. This is but a very summary view of the lead- ing rights, duties, and obligations of partners inter sese, implied by law ; and indeed a full enumeration of them, with reference to the cu'cumstances of each particular kind of partnership, would be found at once tediously minute, and of little value, even if it were practicable. The rights, duties, and obligations of partners intei' sese must necessarily be expanded or restrained, to meet the exigencies of their peculiar trade and business ; and general rules can do little more than to point out the ordinary course in common transactions. We shall have occasion hereafter to consider the rights, duties, and obligations, expressed in, and arising under articles ' Poth. de Soc. n. 87, 88. * Poth. de Soc. n. 89. 3 Ante, § 95. * Poth. de Soc. n. 108-123. * Poth. de Soc. n. 108, n. 120-132. « Poth. Pand. 17, 2, n. 26-29 ; Id. n. 33 ; Id. n. 36. See also Domat, 8, 8, 4, art. 7, 10-16. 320 PARTNERSHIP. [cHAP. IX. of partnership, and the interpretation thereof. But, in conchiding this part of the subject, it may be remarked, that partners are entitled inter sese to be allowed all charges, losses, and expenditures, which they have prop- erly, or necessarily, or unavoidably, incurred in trans- acting the partnership business.^ On the other hand (as we have seen),^ no partner is entitled, unless under some special agreement, to any compensation, commis- sion, or reward, for his skill, labor, or services, while em- ployed in the ^partnership business.^ The nature of the contract implying, that each partner shall gratuitously give and exert all his skill, labor, and services, so far as they may be properly required for the due accomplish- ment and success of the partnership operation.'* If any allowance is intended to be made for extra services or labor, it is a fit matter to be adjusted in the articles, under which the partnership is formed. § 186. John Voet lays down the like doctrine in expressive terms, admitting at the same time, that, by custom or special agreement, a compensation may be allowed to one or more partners for extraordinary labor, skill, or services. " Salarium seu ho^iorariwni quod at- tinet, licet rarior ejus in societate, qucmi quidem in mandato, usus sit, dum 2^cirtes lucri singidis ohvenientes sufficiens operce pretium sunt ; nihil tamnen impedit, quo minus uni socio, negotia societatis forte p)otissimum aut ' See Domat, 1,8, 4, art. 11, 12; Thornton v. Proctor, 1 Anst. 94. 2 Ante, § 1.82. « Coll. on P. B. 2, c. 2,§ l,p. 130; Id. §2, p. 142, 151, 2ded. ; Franklin v. Robinson, 1 Johns. Ch. 157, 165 ; Whittle v. M'Farlane, 1 Knapp, 311; Dougherty v. Van Nostrand, 1 Hoff. 68 ; Burden v. Burden, 1 Ves. & B. 170 ; ante, § 183. * Ante, § 183 ; Franklin v. Robinson, 1 Johns. Ch. 157, 165; Whittle v. M'Farlane, 1 Knapp, 311 ; Bradford v. Kimberly, 3 Johns. Ch. 431 ; Dougherty v. Van Nostrand, 1 Hoff. 08 ; Burden v. Burden, 1 Ves. & B. 170. CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 321 unice tractanti ac promoveiiti, cu7n ad illam operam supra ceteros prmstandaifn ex conventio7ie non teneretur^ vel ah initio salarium aliqiiod assignetur, vel j^ostea viri honi arhitratu adjudicetur, idque extraor dinar ia potius magnistratus cognitione, qicam ordinaria pro socio actione intentata, argumento eorwn qiicB de salario in mandata inter ve7iiente dicta sunt. Quod et moribus hodiernis conveniens esse, patet ex resjmnso Jwiscon- sultorum et mercatorum inter Responsa JurisconsuUo- rura Hollandice.'' ^ The same doctrine may be traced back to the Roman law.'"* 1 1 Voet, ad Pand. 17, 2, § 19, p. 757. 2 Domat, 1, 8, 4, art. 11, 12. 21 322 PARTNERSHIP. [cHAP. X. CHAPTER X. RIGHTS, DUTIES, AND OBLIGATIONS OF PARTNERS UNDER THE ARTICLES THEREOF. { § 187. Partnership articles. 188, 189. Specific performance of an agreement for partnership. 190. Construction of general words. 191. Articles explained by conduct under them. 192. Articles modified and waived by acts of the partners. 193. Business not to be extended beyond the articles. 194. Commencement of partnership. 195. Partnership dissolved by death, notwithstanding articles. 196. Roman law. 197. 198. Partnership continued beyond the time limited in the articles. 199. Continuance of partnership, notwithstanding death. 200. Same subject. Appointment of successor. 201. Same subject. Election of executor or appointee. 201 a. Same subject. Liability of the assets of the deceased. 202. Firm name. 203. Advances of capital. 204. Management of the firm business. 205. Ownership of partnership property. 206. Annual accounts. 207. 208. Purchase of shares on dissolution. 209. Prohibition from carrying on business during the partnership. 210-212. After dissolution. 213. Power of a majority. 214. Expulsion of partners. 215. Reference to arbitration. } § 187. Hitherto, we have been mainly considering the rights, duties, and obligations of partners inter sese, implied by law. But, as written articles often exist relative to the formation, management, rights, duties, and obligations of the particular partnership, it may not be without use to bring together some of the more important stipulations and arrangements usually con- tained in those articles, and to ascertain what, in point CHAP. X.] CONSTRUCTION OF ARTICLES. 323 of law, is the true interpretation, application, and ob- jects thereof; and, incidentally, how far they are capable of being enforced, either in Courts of Law, or in Courts of Equity.^ § 188. At the threshold of these inquiries we are met with the question, whether Courts of Equity (for it is clear, that Courts of Common Law have no jurisdiction, except to give damages), are competent to decree the specific performance of a preliminary agreement to enter into a partnership ; and if so, under what circum- stances a specific performance wdll be decreed. In re- sjDCct to this matter, it may be at once perceived how full of delicacy, diflftculty, and embarrassment every at- tempt to enforce a preliminary contract of this sort must be. The success of every partnership is usually so essentially dependent upon the hearty co-operation and exertions of all the partners for the common good ; and reluctance, and discontent, and resistance are so incompatible with such success ; that at first it would seem, that no Court of Equity ought to exert any such authority to compel an observance of a mere treaty to form a partnership. But, on the other hand, there may be serious evils, resulting from a total refusal to in- terfere in all cases of this sort under any circumstances ; for one or more of the partners may have incurred re- sponsibilities on account of the intended firm, or prelimi- nary steps for the business of the intended partnership may have been taken, and acts done, putting the same into an inchoate and imperfect operation upon the full faith and confidence of the punctilious discharge of * I have availed myself throughout this whole chapter mainly of the materials contained in Mr. Collyer's able work on Partnei*ship, B. 2, c. 2, § 2, p. 131-1 G2, 2d ed. Mr. Bell has also devoted a considerable space to the examination of the same subject, which will well reward the attentive ex- amination of the learned reader. 2 Bell, Comm. B. 7, c. 2, § 4, p. 645-648, 5th ed. 324 PARTNERSHIP, [cHAP. X. duties by the other side, so that it may work a most se- rious, if not an irreparable mischief and injury, not to enforce the specific performance of the contract, so as to bind all parties to the acts so done, and to the respon- sibilities so incurred. § 189. Courts of Equity have upon this subject adopted an intermediate ground ; while, on the one hand, they will not ordinarily entertain bills for a specific perform- ance of such a preliminary contract ; they will, on the other hand, under special and peculiar circumstances, in order to suppress frauds, or manifestly mischievous consequences, compel such a performance.^ One of the cases, in which Courts of Equity will not ordinarily in- terfere, is, where the partnership is to continue during the mere pleasure of the parties ; for in such a case it seems utterly nugatory to decree a partnership, which may be immediately dissolved at the will of the dissatis- fied party." On the other hand, where the partnership > Buxton V. Lister, 3 Atk. 383, 385 ; Hibbert v. Hibbert, cited Coll. on P. B. 2, c. 2, § 2, p. 132, 133', 2d ed,; Wats, on P. c. 1, p. 60, 2d ed. ; Anon. 2 Yes. Sr. 629, 630; Gow on P. c. 2, §4, p. 109, 110, 3d ed.; 1 Story, Eq. Jur. § 666, and note ; Coll. on P. B. 2, c. 2, § 2, p. 131-133, 2d ed. ; {Lind. on P. 796 ; Sicbel v. Mosentbal, 30 Beav. 371 ; Manning v. Wadsworth, 4 Md. 59.} Lord Hardwicke, in Buxton v. Lister, 3 Atk. 385, arguendo, said : " Suppose two partners should enter into an agreement by such a memorandum as is in the present case, to carry on a trade together, and that it should be specified in the memorandum, that articles should be drawn pursuant to it, and be- fore they are drawn, one of the parties flies off; I should be of opinion, upon a bill brought bj' the other in this court for a specific performance, that, notwithstanding it is in relation to a chattel interest, yet a specific performance ought to be decreed." * Hercy r. Birch, 9 Yes. 357, 359; 1 Madd. Ch. Pract. 411, note (x) ; Coll. on P. B. 2, c. 2, § 2, p. 133-135, 2d ed. ; Yan Sandau v. Moore, 1 Russ. 441, 463. But seeGow on P. c. 2, §4, p. 110, 111, 3d ed. — Mr. Swanston, in his learned note to Crawshay v. Maule, 1 Swans. 495, 513, has remarked : "It seems clear, that, in general, the Court of Chancery will compel specific performance of an agreement for a partnership, Buxton v. Lister, 3 Atk. 385 ; Anon. 2 Yes. 629 ; but Lord Eldon is represented to have held, that this doctrine is not applicable to partnerships, which may be immediately dis- solved. Hercy v. Birch, 9 Yes. 360. See 1 Madd. Princ. & Pract. 411, 2d ed. CHAP. X.] CONSTRUCTION OF ARTICLES. 325 has informally gone into operation, or it is for a specific term of time, Courts of Equity have not unfrequently decreed a specific performance, with the view of invest- ing the parties fully with all their legal rights/ § 190. Passing from these preliminary considera- tions, let us, in the next place, attend to some of the more important stipulations usually contained in arti- cles of partnership. And here it is to be observed, that the same rules of construction apply, as in ordinary cases ; that is to say, to ascertain what is the real intention of the parties in particular stipulations ; and, when ascertained, to carry it into effect, limiting any general language, incautiously used, to the particular purposes and objects and transactions specified.- On the other hand, general language, and especially such as relates to the nature and extent of covenants, may frequently be applied, and deemed to run through the whole body of the articles. Thus, for example, the words of covenant, which usually occur at the com- mencement, or introductory part of the articles, usually declare the covenant to be joint and several ; and words of covenant in the succeeding stipulations of the mstrument are on that account usually construed, This distinction, however, must be received, it is presumed, not without qualification. In many such cases, though the partnership could be imme- diately dissolved, the performance of the agreement (like the execution of a lease after the expiration of the term, see Xesbitt v. Meyer, 1 Swans. 223, 226), might be important, as investing the party with the legal rights, for which he contracted." {England v. Curling, 8 Beav. 129; Whitworth j;. Harris, 40 Miss. 483.} We have already seen (ante, § 181), that, although in ordinary partnerships the Roman law only gave the action pro socio after a dissolution of the partnership ; yet in certain peculiar partnerships for collection of the pub- lic revenue {Causa Vectigalium), the action pro socio for an account lay during the continuance of the partnership. Poth. Pand. 1 7, 2, n. 33 ; D. 1 7, 2, 65, 15. » Coll. on P. B. 2, c. 2, § 2, p. 135, 2d ed. ; Gow on P. c. 2, § 4, p. 109, 110, 3d ed. But see Downs v. Collins, 6 Hare, 418 ; [Lind. on P. 797.} - Coll. on P. B. 2, c. 2, p. 137 ; 1 Fonbl. Eq. B. 1, c. 6, § 16, and note (1) ; Gainsborough v. Stork, Barnard. Ch. 312. 326 PARTNERSHIP. [CHAP. X. although not so expressed, to be also intended to be joint and several.^ § 191. It is not, however, less important, in order to arrive at correct results, to take into consideration other matters. Thus, although the articles of part- nership regulate the rights, duties, obligations, and interests of the parties thereto, in certain specified cases ; yet they leave in full force all the other rights, duties, obligations, and interests, implied by law, so far as they are not superseded, controlled, qualified or limited by those articles.^ In the next place, in all cases of doubtful interpretation, the actual construc- tion, adopted by the partners in their partnership trans- actions, will be, and indeed ought to be, adopted,- as the true, legitimate, and appropriate interpretation intend- ed by themselves.^ ^ 192. In the next place, partnership articles in the Yiew of Courts of Equity, whatever may be the rule at law, are liable to be controlled, superseded, qualified, or waived by the acts and transactions of the partner- ship, in the course of tlie business thereof, wherever the assent of all the partners thereto may be fairly inferred, and however positive, or stringent, those pro- visions may be."* In short, in many cases of this kind, » Coll. on P. B. 2, c. 2, § 2, p. 139, 2d ed. ; Id. B. 2, c. 8, § 1, p. 169. 2 Coll. on P. B. 2, c. 2, § 2, p. 138, 139 ; Crawshay v. Collins, 15 Ves. 218, 226 ; Jackson v. Sedgwick, 1 Swans. 460, 469 ; Pettyt v. Janeson, 6 Madd. 146 ; {Smith v. Jeyes, 4 Beav. 503.} 3 Coll. on P. B. 2, c. 2, § 2, p. 139, 2d ed. ; Geddes v. Wallace, 2 Bligh, 270, 271, 297, 298; [Beacbam v. Eckford, 2 Sand. Ch. 116. Entries in the books of a partnership have been said to be as conclusive of the rights of the partners, as if prescribed in a regular contract. Stewart v. Forbes, 1 Hall & Tw. 461 ; s. c. 1 Macn. & G. 137.] ■* [" Partners," it has been said, " if they please, may, in the course of the partnership, daily come to a new arrangement for the purpose of having some addition or alteration in the terms on which they carry on business, provided those additions or alterations be made with the unanimous concur- CHAP. X.] CONSTRUCTION OF ARTICLES. 327 looking to the course of conduct of the partners, and the special circumstances of their business, or to their general acquiescence, or their positive acts, we may often have the most satisfactory evidence that the partnership articles have been laid aside, either pro tanto, or in whole, and that new articles and arrangements have been entered into in their stead. ^ Hence, it has been rence of all the partners." England v. Curling, 8 Beav. 129 ; McDou- gald V. Banks, 13 Ga. 451.] 1 Geddes v. Wallace, 2 Bligh, 270, 297, 298 ; Jackson v. Sedgwick, 1 Swans, 460, 469; [England v. Curling, 8 Beav. 129; Stewart v. Forbes, 1 Hall & Tw. 461 ; s. c. 1 Macn. & G. 137] ; Const v. Harris, Turn. & R. 496, 523 ; Gow on P. c. 1, § 1, p. 9, 10, 3d ed. ; | Coventry v. Barclay, 33 Beav. 1, affirmed on appeal, 12 Weekly Rep. 500, 10 Jur. N. s. Digest, 158.} — In Const ». Harris, Turn. & R. 523, Lord Eldon said: "In ordinary partnerships nothing is more clear than this, that although partners enter into a written agreement, stating the terms, upon which the joint concern is to be carried on, yet, if there be a long course of dealing, or a course of dealing, not long, but still so long as to demonstrate, that they have all agreed to change the terms of the original written agreement, they may be held to have changed those terms by conduct. For instance, if in a com- mon partnership, the parties agi-ee, that no one of them shall draw or accept a bill of exchange in his own name, without the concurrence of all the others ; yet, if they afterwards slide into a habit of permitting one of them to draw or accept bills, without the concurrence of the others, this court will hold, that they have varied the terms of the original agreement in that re- spect. So, in this case, if it can be shown, that in the administration of this property, the proprietors in general, after 1812, pursued a diiferent course from that provided for by the deed of March, 1812, they must be taken to have altered the agreement, and to have substituted the terms, to which, in their conduct, they have adhered, instead of the terms contained in the original agreement. And, with respect to the present plaintiff, there can be no doubt, that if, after the deed of 1812 was executed, his testatrix gave iu to a course of administration of the property, different from the course pro- vided for by the deed ; if her acts, or the acts of others with her consent, afforded such evidence of departure from the terms of the written agree- ment, as to amount to the substitution of a new agreement, though evidenced only by parol, instead of the written agi'eemont ; lie, claiming under her, must be bound by her acts, and cannot be at liberty to revert back from those acts, establishing a new agreement, to call into operation again the old agi'eement, and to insist, that the non-execution of the old agreement is, in such circumstances, a breach of trust. So, again, it is a principle of this court with respect to partnership concerns, that a partner, who complains that the other partners do not do their duty towards him, must be ready at all times, and offer himself to do his duty toward them." 328 PARTNERSHIP. ' [CHAP. X. judicially declared, that, in Courts of Equity, articles of partnership, containing clauses, which have not been acted upon by the parties, are read, as if those clauses were expunged, or were not inserted therein.^ § 193. In respect to the nature, and extent, and kind of business of the partnership, as stated in the articles. Courts of Equity construe the articles strictly, and do not permit the business to be extended by any of the partners, without the consent of all of them, either express or implied, to any other business or branch of business, of a different nature, extent, or kind ; and if it is attempted, they will interpose by way of injunction to restrain the offending parties.^ § 194. In the next place, as to the commencement of the partnership. If no other time is fixed by the articles, the commencement will take place from the date and execution of the instrument.^ And this rule is so inflexible at law, that parol evidence has been deemed inadmissible to control this intendment, al- though the partnership would thus be rendered illegal at least, if thereby the true construction of the words of the instrument would be varied.^ This is certainly pressing the law of implied construction to a great, but perhaps not to an undue extent. It would not probably be acted upon by Courts of Equity, unless ' Jackson v. Sedgwick, 1 Swans. 460, 469 ; Coll. on P. B. 2, c. 2, § 2, p. 139, 2d ed. 2 Natusch V. Irving, Gow on P. Ap. 398, 407, 3d ed. ; Id. p. Ill, 112. 3 Coll. on P. B. 2, c. 2, § 2, p. 140, 2d ed. * Williams v. Jones, 5 B. & C. 108; {Lind. on P. G85 ; Dix v. Otis, 5 Pick. 38. But see Davis v. Jones, 17 C. B. 625; Reboul v. Cbalker, 27 Conn. 114.} — Perhaps Williams v. Jones i-equires a more full exposition. The ground, upon which the learned judges put it, was, that the evidence made the instrument conditional, instead of being, as it was in terms, abso- lute. But, suppose the instrument had been signed on the first day of Janu- ary, and it was agreed between the parties by parol, that it should commence on the first day of the ensuing February, would the like objection have applied ? CHAP. X.] CONSTRUCTION OF ARTICLES. 329 the parol evidence was repugnant to the terms of the written contract, as, for example, by making the agree- ment conditional, when upon its face it was absolute ; and not merely a supplement thereto. § 195. In the next place, as to the duration of the partnership. Although the partnership be fixed to a particular term or period of time, yet it is always understood, as an implied condition or reservation (unless the contrary is expressly stipulated), that it is dissolved by the death of either of the partners, at any time within that period.^ This doctrine seems an exception to the ordinary rules of the common law in the interpretation of contracts ; and it has sometimes been complained of as unreasonable. But it seems founded in very equitable principles, and is a natural result of the peculiar objects of the contract.^ Every partnership is founded upon a delectus personce, which implies confidence and knowledge of the personal character and skill and ability of the other associates ; and their personal co-operation, advice, and aid, in all 1 Coll. on P. B. 1, c. 2, § 2, p. 73, 74, 2d ed. ; Id. B. 2, c. 2, § 2, p. 140 ; Crawford v. Hamilton, 3 Madd. 251 ; Scholefield v. Eichelbergei-, 7 Pet. 586, 594 ; VuUiamy i: jS:oble, 3 Mer. 593, 614 ; Gow on P. c. 5, § 1, jd. 219, 220, 3d ed.; Gratz v. Bayard, 11 S. & R. 41 ; {Bell v. Nevin, 15 Weekly Rep. 85 ; 6 Am. Law Reg. n. s. 181.} ^ In Crawshay v. Maule, 1 Swans. 495, 509, Lord Eldon said: "The doctrine, that death or notice ends a partnership, has been called unrea- sonable. It is not necessary to examine that opinion ; but much remains to be considered before it can be approved. If men will enter into a partnership, as into a marriage, for better and worse, they must abide by it ; but if they enter into it without saying how long it shall endure, they are understood to take that course in the expectation, that circumstances may arise, in which a dissolution will be the only means of saving them from ruin ; and considering what persons death might introduce into the partner- ship, unless it works a dissolution, there is strong reason for saying, that such should be its effect. Is the surviving partner to receive into the partnership, at all hazards, the executor or administrator of the deceased, his next of kin, or possibly a creditor taking administration, or whoever claims by represen- tation, or assignment from his representative ? " ' 330 PARTNERSHIP. [cHAP. X. the transactions thereof. The death of any one part- ner necessarily puts an end to all such co-operation, advice, and skill. If, therefore, the partnership were not, whatever might be the stipulated terms for its continuance, put an end to by the death of any one partner, one of two things must follow ; either that the whole business of the partnership must be carried on by the surviving partners exclusively, at the hazard of the estate and interests of the deceased partner ; or else that the personal representative of the deceased, toties quoties, who may be a mere stranger, or even a woman, wholly unfit for and unacquainted with the business, must be admitted into the management. AVe see at once, that either alternative may be highly inconvenient or injurious to the rights, interests, and objects of the original concern.^ The law, therefore, will not force it upon the parties ; but it presumes, in the absence of all contrary stipulations, that by a tacit consent, death is to dissolve the partnership, because it dissolves the power of a personal choice, confidence, and management of the concern.^ § 196. The Roman law adopted this doctrine in its fullest extent, and did not (as we have seen), even per- mit the parties by their private stipulations to agree, that upon the death of a partner, his heir should be admitted into the partnership for the reasons before suggested. Solvitur adhuc societas etiam morte socii ; quia qui so- eietatem contrahit, certam personam sibi elujit. Bed et, si consensu plu7num societas contracta sit, morte unius socii solvitur, etsi j^lures supersint ; nisi in coeunda so- cietate aliter convenerit? This last qualification, as we ' See Pearcev. Chamberlain, 2 Ves. Sr. 33, 34 ; Poth. de Soc. n. 144, 145 ; Doraat, 1, 8, 4, art. 14; Id. 1, 8, 2, art. 3, 4. 2 Gow on P, c. 5, § 1, p. 218-220, 3d ed. ; Mr. Swanston's note to Craw- shay V. Maule, 1 Swans. 509, note (a). 3 Inst. 3, 2G, 5. CHAP. X.] CONSTRUCTION OF ARTICLES. f331 shall presently see, applied only to the continuance of the partnership by the survivors.^ Nemo 2}ote.Ht societa- tem herecll siio sic parere, ut ipse heres sociiis sit.^ Idem respondit, societatem 71071 posse idtra mortem, porrigi ; et ideo nee Uhertatem de siipremis judiciis consirmgere qtiis poferit, vel cognatum idteriorem proximiorihus in- ferre.^ Again : Adeo, Tnorte socii solvitur societas, ut nee ah initio pacisci possimus, ut heres etiam succedat societafi^ Societcis quemadmodum ad heredes socii non transit^ ita nee ad adrogatorem ; Ne alioquin in- vittis quis socius efficiatur, cui non vidt^ The law of England, as well as that of France (as we have seen), is contrary in this respect to the Roman law ; and permits the parties, by express stipulation, to provide for the continuance of the partnership after the death of one partner, and for the admission thereto of his heir, or other representative.^ § 197. But suppose the original term of the partner- ship should expire by the mere effluxion of time, and still the partnership should (as indeed not unfrequently happens) continue to be carried on by the same parties, without the execution of any new articles of partnership, or without any express recognition of the old articles ; the question would arise, as to what ought, under such circumstances, to be deemed the terms and stipulations of the continued partnership. Is it to be presumed to be renewed for the like period of time, and upon the like stipulations and conditions, as those which were contained in the old articles ? Or is it to be deemed a ' Domat, 1, 8, 5, art. 14, 15. '^ D. 17, 2, 35. 3 D. 17, 2, 52, 9. ■» D. 17, 2, 59. * D. 17, 2, 65, 11 ; D. 3, 2, 6, 6. ^ Ante, § 5; Pearce v. Chamberlain, 2 Ves. Sr. 33; Bahnain v. Shore, 9 Ves. 500; Crawshay v- Maule, 1 Swans. 495, 508; Poth. de Soc. n. 144, 145; Gow on P.c. 5, § 1, p. 219, 220, 3d ed.; Coll. on P. B. 2, c. 2, § 2, p. 140, 147, 2d ed.; Gratz v. Bayard, 11 S. & R. 41. 332 PARTNERSHIP. [CHAP. X. mere partnership during the pleasure of both parties, and dissoluble instantaneously at the will of either "? And, if the latter be the true predicament thereof, then, are the interests of the parties, and their shares in the profits, while it is actually continued, to be governed and guided by the stipulations of the old articles or not '? § 198. Perhaps these inquiries cannot be answered universally in the same manner, as equally applicable to the circumstances of all cases ; for the habits of the trade, and the conduct of the parties, may often estab- lish the fact satisfactorily, that some of the articles have been practically waived, or abrogated, or qualified, while others are necessarily implied, as being in full force and operation. In such cases, the presumption of the actual state of the partnership contract will necessarily vary with the circumstances, and be governed by them, and not govern them. In the absence, however, of all pre- sumptions of this nature, the general rule seems to be, that the partnership is to be deemed one for no definite period, but dissoluble at the will of any of the part- ners ; ^ but that, in other respects, the old articles of the expired partnership are to be deemed adopted by impli- cation, as the basis of the new partnership during its actual continuance.^ ' Featherstonhaugh v. Fenwick, 17 Ves. 298, 307. [See Gould v. Horner, 12 Barb. GOl,] 2 Booth V. Parks, 1 MoUoy, 4G5 ; Crawshay v. Collins, 15 Ves. 218, 228; U. S. Bank v. Binney, 5 Mason, 176, 185. — In this last case the Court said : " Whether the present be a limited or general partner- ship, is to be determined by the whole evidence in the case. It is certain, that by the articles it is a limited copartnership, and confined to the soap and candle business. Those articles expired, by their own limitation, in two years, and had force no longer, unless the parties elected to continue the partnership on the same terms. That is matter of evidence upon the whole facts. The natural presumption Is, that as the partnership was continued in fact, it was continued on the same terms as before, unless that presumption CHAP. X.] CONSTRUCTION OF ARTICLES. 333 § 199. In this connection, it may be well to say a few words, as to clauses in articles of partnership, stipulat- ing for the continuance thereof, notwithstanding the death of one or more of the partners.^ Such a clause is usually introduced into partnerships for a long term of years, where the outlay of capital is great in perma- nent fixtures and manufacturing establishments, and the locality of the trade renders it important in point of profit and good-will, that it should be steadily carried on, as long as may be, under the same proprietors or their representatives. In cases of this sort, the clause commonly empowers the representative of the deceased is rebutted by the other circumstances in the case. There is no written agreement respecting the extension of the copartnership ; and therefore it is open for inquiry upon all the evidence. The present notes were made and indorsed long after the term of two years expired. The plaintiffs con- tend, that the jiartnership was then general ; the defendants, that it was lim- ited, as before. The jury must determine between them, upon weighing all the facts and presumptions." [Thus, if by the written agreement one part- ner is to receive no compensation for his time and services unless a profit is realized from the business, and by the articles of partnership it was to con- tinue for one year, but was in fact continued two years without any new agreement, it was held that the same provision must apply to the second year. Bradley v. Chamberlin, 16 Vt. 613]; {Essex v. Essex, 20 Beav. 442; Parsons v. Hay ward, 31 Beav. 199, affirmed on appeal 8 Jur. n. s. 924; s. c. 6 L. T. N. s. 628; Mifflin v. Smith, 17 S. & R. 165. A memo- randum of a partnership between A., B., and C. provided that, if one died, the survivors should pay to his executors the value of his capital as appearing on the last account. A. died, and B. and C. continued the business. B. after- wards died. Held, from the conduct of the parties, that the same stipulation was continued in existence, and that C. should pay to B.'s executors the value of his capital as appearing on the last account. King v. Chuck, 1 7 Beav. 325. But where the articles of a partnership for a term provided that either partner might, In the event of specified conduct on the part of the other, dissolve the partnership by notice, and that the latter partner should, in that case, be considered as quitting the business of the former, this pro- vision was held not applicable to a continuation of the partnership, afler the term, without an express renewal. Clark v. Leach, 32 Beav. 14, affirmed on appeal. 1 De G. J. & S. 409.} * {See Laughlin v. Lorenz's Adm'rs, 48 Penn. 275; Stanwood v. Owen, 14 Gray, 195.} 334 PARTNERSHIP. [CHAP. X. partner to carry on the trade, in conjunction with the survivors, for the benefit of the widow and children of the deceased partner ; and frequently, also, for the ad- mission of one or more of his children into the concern, upon his or their arrival at majority.^ Sometimes the provision partakes of the character of a settlement, giv- ing an interest in the partnership to the widow, during her life, and dividing her share, after her death, equally among all the children.^ Under such circumstances, the question may arise, whether all the children take a vested interest in the partnership trade, from time to time, as they are born, so that, although they should die during the lifetime of their mother, yet their shares thereof will be transmissible ; or, whether such children only, as are living at the death of the mother, are en- titled to take a vested share or interest. It has been decided, that the latter is the true interpretation to be put upon such provisions ; upon the ground, that the primary object of all such clauses is the continuance of the partnership ; and that all the other provisions, con- tained therein, ought to be treated as subservient to this leading purpose.^ ^ Coll. on P. B. 2, c. 2, § 2, p. 147, 148, 2d ed. [See Downs v. Collins, 6 Hare, 418.] 2 Ibid. {See Skirving v. Williams, 24 Beav. 275.} 3 Coll. on P. B. 2, c. 2, § 2, p. 147, 148, 2ded. ; Balraain v. Shore, 9 Ves. 500, 506, 507. — The case of Balmain v. Shore was of this nature ; and Sir William Grant, in delivering his judgment, said : " The object of these very ill-drawn articles is to constitute a partnership for the very unusual term of 99 years. As it was not to be expected any of the parties should live so long, it was necessary to ascertain in what mode the partnership was to continue after their death ; and it appears to have been intended for their own bene- fit, and that of their families, called, in some parts of the articles, their se- quels in right. From the manner in which the interests are given in the clause, more particularly ascertaining the mode of succession to the shares, the question arises, whether the words are to be construed as they would be, if applied to dispositions of property in general ; or a different con- struction is to be made, from the consideration of the subject. It must be CHAP. X.] CONSTRUCTION OF ARTICLES. 335 § 200. Sometimes the clause provides for the con- tinuance of the partnership, by stipuhiting, that the interest of the deceased partner in the concern, after his death, and during the term of the partnership, shall go to such persons as he shall by his will name and appoint ; and in default of such appointment, that it shall devolve on his wife, and in case of her death, upon his children, in equal shares ; and in case of the death of all his children, to his executors and adminis- trators, who are to succeed to all his rights and powers admitted, that if this were a settlement of a sum of money, or other proper- ty, the children would take vested interests ; and the words, ' after the de- cease of such widow,' &c., would postpone, not the commencement of the interest, but only the commencement of the possession. Accordingly, it was contended, on the one hand, that under this instrument all the children took vested interests in the partnership shares, as they were born ; and though some died before their mothers, yet their shares were transmissible ; on the other, that the words in the clause, to which I have alluded, are tb have a different construction ; and tliat such children only will be entitled to a share, as shall be living at the death of the widow. The words, I think, must receive their construction from the consideration of the particular in- strument. The primary object was to constitute a partnership, and to as- certain the manner in which the shares were to be enjoyed in succession. It was but a secondary object, and through that medium, to give a benefit to the families ; and it appears to me, the object of this clause was to designate and ascertain, who are to supply the vacancies, as they shall happen ; that no interest was intended by anticipation to any one ; but the object was to provide for the filling up of that vacancy, which miglit happen by the death of any partner interested in the partnership. For instance, where one of the original partners died, and left a widow, she instantly was to succeed to a share ; when she died, and left children, they were instantly to succeed to that share ; and, until a vacancy happened, there was no room for ascer- taining the objects, who were to come in the place of the party dying ; and therefore such children only, as should be living at the time the vacancy happened, could be intended to succeed upon that vacancy. That is more evident from the provision as to the sale of a share ; which is periectly in- compatible with the supposition, that the children, as they were born, should take vested interests in the partnership shares of their parents. It was impossible the children, then born, could take such a vested inter- est, as they must at all events succeed to. It was only upon the suppo- sition, that the partner left a share, that there could be any successor ; and the vacancy must happen, before the succession could be ascertained." 336 PARTNERSHIP. [CHAP. X. in the business and management of the partnership. Now, under such circumstances, the question may arise, in what manner this power of appointment is to be construed ; whether as a technical power of appoint- ment, or not. If as a technical power, then it will be necessary for the testator, in making the appointment by will, to allude in some distinct manner to the power, so as to demonstrate, that it is thereby intended to be executed ; for a general gift of all his estate and effects to one or more of his children, will not be deemed a specific execution of the power. But, if not to be con- strued technically, then such a gift will amount to a sufficient designation of the donee or donees, as ap- pointees of his share and interest in the concern, as succeeding partners. Upon the same enlarged view of the objects of this clause (as to the continuance of the partnership business), it has been held, that such a power of appointment is not to be treated as technical ; and, therefore, that the appointment is well executed by such a general gift.^ § 201. Another question may arise under clauses for the continuance of the partnership, and the admis- sion of the executor and administrator of the deceased partner into the firm, and that is, whether, when the ' Coll. on P. B. 2, c. 2, § 2, p. 148, 149, 2d ed. ; Ponton v. Dunn, 1 Russ. & M. 402. — On this occasion Sir John Leach (Master of the Rolls) said : " It is true, the words ' name and appoint ' are used in the deed ; but considering the relation of the parties, I cannot understand them to be used with a view to create a power of appointment in its technical sense, and to limit the testator's power of disposition by will over this part of his prop- erty. Without this stipulation, those who claimed through him, would have had no title to share in the partnership profits after his death ; and it is a mere bargain with his partner, that he should have a power of disposition by will, and if he died without a will, that the property should devolve to his family in the manner stated. This property will therefore pass under the description in his will, of ' all other his estate and effects, of whatsoever nature or description.'" CHAP. X.1 CONSTRUCTION OF ARTICLES. 337 _i partnership is intended to be continued after the death of the partner, it is a matter of election with the widow, children, appointee, or executor, or administra- tor, of the deceased, to continue the same, or not ; or whether it is absolute and peremptory upon them. In respect to clauses of this nature, the general rule is, in the absence of all clear and well-defined declarations to the contrary, that they are to be construed, as giving the executor or administrator an option, so that he may continue the partnership, or not, as he may think proper ; and of course a reasonable time will be allow- ed to him for that purpose.^ Probably the same rule would prevail in the case of a widow, a child, a legatee, or appointee, unless the language of the provision clearly established a positive direction, that at all events the partnership should be continued.^ If it did, then it would seem clear, that every such i^arty must take, if he takes at all, according to the terms of the will, and not otherwise ; and that he cannot ' Coll. on P. B. 2, c. 2, § 2, p. 149, 150, 2d ed. ; Pigott v. Bagley, 1 Mc- Cle. & Y. 569; [Downs v. Collins, 6 Hare, 418] ; {Madgwick v. Wimble, 6 Beav. 495.} Where the articles provide, that the executors or ad- ministrators shall continue the partnership, if they think fit, they will be considei'ed as jaartners unless they give notice within a reasonable time to the contrary. Coll. on P. B. 2, c. 2, § 2, p. 151, 2d ed. ; Morris v. Hai-ri- son, CoUes, 157. " Kershaw v. Matthews, 2 Russ. 62 ; Pigott v. Bagley, 1 McCle. & Y. 509. — In the former case Lord Eldon said : " If there is a partnership car- ried on under articles, which stipulate that, upon the death of a partner, he shall be succeeded in the business, either by some person, whom he shall appoint, or by his executors, it may happen, that his appointees or his ex- ecutors do not think proper to come into his place on the same terms on which he was a partner in the concern. In that case, the death of the party puts an end to the partnership. The stipulation may be, that the appointee or executor of the deceased partner is to be a partner only, if he does this or that particular thing. If the executor or appointee refuses to comply with the proviso, the whole concern must be wound up. But the dissolution which takes place, is not a dissolution wrought by the exclusion of the ex- ecutor or appointee ; for he never becomes a partner." 22 338 PARTNERSHIP. [CHAP. X. elect to take the benefit without continuing the part- nership.^ § 201 a. Another question of a very important na- ture may arise out of a provision for the continuation of a partnership after the death of one of the partners, as to the extent to which contracts made after the death of that partner bind his assets." A testator, directing the continuance of a partnership, may, if he so choose, bind his general assets for all the debts of the partnership contracted after his death.^ But he may also limit his responsibility, either to the funds already embarked in the trade, or to any specific amount to be invested therein for that purpose ; and then the creditors can resort to that fund or amount only, and not to the general assets of the testator's estate, although the partner, or executor, or other person carrying on the trade, may be personally re- sponsible for all the debts contracted.^ And this leads » Coll. on P. B. 2, c. 2, § 2, p. 149, 150, 2d ed. ; Crawshay v. Maule, 1 Swans. 495, 512. {See Page v. Cox, 10 Hare, 163. } [Where the option was secured to " the executor or administrator,'" on sivine; notice within three months after the decease of the parties ; and the parties dying intestate, the widow gave such notice within the three months, but without taking out let- ters of administration till some time after the three months, it was held, that she had not efiiectually complied with the condition, so as to be admit- ted into the firm. Holland v. King, 6 C. B. 727.] ^ Burwell r.'Mandeville's ExV, 2 How. 560, 576. ^See also Ex parte Gar- land, 10 Ves. 110, 119 ; Ex parte Richardson in re Hodgson, 3 Madd. 138 ; Thompson v. Andi-ews, 1 Myl. & K. 116; Pitkin v. Pitkin, 7 Conn. 807; Scholefield v. Eichelberger, 7 Pet. 586, 594; Gratz v. Bayard, 11 S. & R. 41. \_In re Xorthern Coal Mining Co., 10 Eng. L. & Eq. 171 ; s. c. sub nom. Ex parte Blakeley's Ex'rs, 3 Macn. & G. 726.] {See § 319 a.} ' {Laughlin v. Lorenz's Adm'r, 48 Penn. St. 275 ; Davis v. Christian, 15 Gratt. 11. But see Stanwood v. Owen, 14 Gray, 195.} • * This is clearly established by the case Ex parte Garland, 10 Ves. 110, where the subject was fully discussed by Lord Eldon, and Ex parte Rich- ardson, 3 Madd. 138, 157, where the like doctrine was affirmed by Sir John Leach (then Vice-Chancellor), and by the same learned judge, when Master of the Rolls, in Thompson v. Andrews, 1 Myl. & K. 116. The case of Hankey v. Hammock, before Lord Kenyon, when Master of the Rolls, CHAP. X.] CONSTRUCTION OF ARTICLES. 339 US to remark, that nothing but the most clear and unambiguous language, demonstrating in the most positive manner that the testator intends to make his general assets liable for all debts contracted in the continued trade after his death, and not merely to limit it to the funds embarked in that trade, would justify the court in arriving at such a conclusion, from the manifest inconvenience thereof, and the utter im- possibility of paying off the legacies bequeathed by the testator's will, or distributing the residue of his estate, without in effect saying at the same time that the payments may be recalled, if the trade should become unsuccessful or ruinous. Such a result would ordinarily be at war with the testators intention in bequeathing such legacies and residue, and would, or might postpone the settlement of the estate for a half- century, or until long after the trade or continued partnership should terminate. Lord Eldon^ put the inconvenience in a strong light, by suggesting several cases where the doctrine would create the most mani- fest embarrassments, if not utter injustice ; and he said, that the convenience of mankind required him to hold, that the creditors of the trade, as such, have not a claim against the distributed assets in the hands of third per- sons, under the directions in the same will, which has reported in Cook's Bankrupt Law, 67, 5th ed., and more fully in a note to 3 Madd. 148 ; so far as may be thought to decide that the testators assets are generally liaVjle under all circumstances, where the trade is directed to be carried on after his death, has been completely overturned by other later cases, and expressly overruled by Lord Eldon, in Ex parte Garland, 10 Ves. 110, 121, 122, where he stated that it stood alone, and he felt compelled to decide against its authority. The case of Pitkin v. Pitkin, 7 Conn. 307, is fully in point to the same effect. See also Burwell v. Mandeville's Ext, 2 How. 560, 576, where th'e doctrine stated in the text was affirmed. ' Ex paiie Garland, 10 Ves. 110, 121, 122. 340 PARTNERSHIP. [cHAP. X. authorized the trade to be carried on for the benefit of other persons.^ § 202. In partnership articles it is also often agreed what shall be the proper style of the firm, as for example, John Doe and Company ; and, under such circumstances, it is a part of the duty of every partner, in signing contracts and other instruments, punctili- ously to observe and follow the very formulary.^ This may be necessary, not only to bind the firm itself, but also to absolve him from any personal liability, not only to third persons, but also to his partner.^ It will ' This, also, was manifestly the opinion of Sii' John Leach in the cases Ex j!?«r/e Richardson, 3 Madd. 138; Thompson v. Andrews, 1 Myl. »& K. 116, and was expressly held in the case in Pitkin v. Pitkin, 7 Conn. 307. {In Kirkman v. Booth, 11 Beav. 273, 280, Lord Langdale, M. R., says: " It is, and it has been admitted to be, a rule without exception, that, to authorize executors to carry on a trade or permit it to be carried on with the property of a testator held by them in trust, there ought to be the most distinct and positive authority and direction given by the will itself for that purpose." So Cutbush v. Cutbush, 1 Beav. 184 ; McNeillie v. Acton, 4 De G. M. & G. 744. In Stanwood v. Owen, 14 Gray, 195, it was held, that a stipulation that, on the death of either partner, the survivor might carry on the business for one year for the benefit of the parties, did not • justify the allowance, against the insolvent estate of a deceased partner, ■of a debt contracted by the survivor within the year. In Laughlin v. Lorenz's Adm'r, 48 Penn. St. 275, articles of partnership provided that in the case of the death of either partner, the partnership should continue to the next 1st of August, and should then be settled up "in such manner as may be decided on by the survivor and the representatives of the deceased partner." One partner died, and on the next 1st of August, his representative, the surviving partner, and a third person, formed a partnership for five years under the name of the old firm, contiiuiing its business, collecting its assets and paying its debts. Held, that the estate of the deceased partner was liable for the debts of the new firm. This case seems to go far beyond any other of the recent cases in extending the liability of the estate of the deceased partner. The court seem to consider that the presumption is in favor of binding the general assets, and not against it as would appear to be considered in the cases cited above. In Davis v. Christian, 15 Gratt. 11, a deceased partner's general assets were held liable. } ' Coll. on P. B. 2, c. 2, §'2, p. 241, 2d ed. ■■' See ante, § 102 ; Shipton v. Thornton, 9 Ad. & E. 314, 329-332 ; Faith V. Richmond, 11 Ad. & E. 339 ; ante, § 102, 136, 142. CHAP. X.] CONSTRUCTION OF ARTICLES. 341 be a clear breach of such duty and engagement, to use another firm name as that of the firm ; as, for example, if the firm name be Doe & Roe, to use the name of Doe & Company, or Doe & Roe & Company.^ It will be equally a breach for one partner to sign his own name, adding " for self and partners ; " because by those words it can no more be known, who are his partners, whom he means to bind, than by any other general words.^ This doctrine applies, afortioi^l^ where the firm name is intended to express the names of all, who are partners, as for example, John & Richard Doe; for in such a case it may be for the benefit of each partner, that he may be known to the world to be a member in that concern, and also, that, as between the partners themselves and the world, it should not be left as a mere matter of speculation, who are really partners, or who are not dormant partners ; but that the firm may have the credit, and the public the confi- dence, resulting from the knowledge of the fact.^ And probably a Court of Equity might, in a case of this sort, interfere by way of injunction, to prevent any mischief to the firm, by thus exposing it to the consequence of being made liable for proceedings of one partner, to which it did not really assent.^ ' Coll. on P. B. 2, c. 2, § 2, p. 141, 2d ed. ; Marshall v. Colman, 2 Jac. & W. 266, 268, 269. [But where a partnership was to be carried on "in the name of Seymour & Ayres," a signature of these names, with the addi- tion of their respective Christian names, was held to bind the partnership. Newton v. Boodle, 3 C. B. 795. But see In re Warren, Daveis, 320, 326.] ^ Ibid. 3 Marshall v. Colman, 2 Jac. & W. 266, 269. * In Marshall v. Colman, 2 Jac. & W. 266, a bill was filed for such an injunction, not asking for a dissolution. But it was denied upon special grounds. On that occasion Lord Eldon said : "There is only this point in the case now before me, which I wish seriously to consider, namely, that although this Court will interfere, where there is a breach of covenants in articles of partnership, so important in its consequences, as to authorize the party complaining to call for a dissolution of the partnership, whether (and it is a matter that will deserve a great deal of consideration before it goes 342 PARTNERSHIP. [cHAP. X. ■ § 203. In the next place, partnership articles often contain provisions for the advance of particular amounts so far) it will ertertain the jui'isdiction of producing a decree (for this is what is to be done in the cause, in which this motion is now made) for a per- petual injunction, as to a particular covenant, the partnership not being dis- solved by the Court. There is one case, which is constantly occurring, that of a partner raising money for his private use on the credit of the partner- ship firm ; and the Court interferes then, because there is a ground for dis- solving the partnership. But then the danger must be such, there must be that abuse of good faith between the members of the partnership, that the Court will try the question, whether the partnership should not be dissolved in consequence. But it is quite a different thing, and it would be quite a new head of equity for the Court to interfere, where one party violates a particular covenant, and the other party does not choose to put an end to the partnership ; in that way there may be a separate suit and a perpetual injunction in respect of each covenant ; that is, a jurisdiction, that we have never decidedly entertained. All this bill seeks is a perpetual injunction against using any other than this particular firm and name ; and the ques- tion would be, if very serious mischief were to arise from not using it, whether the party would not be obliged to frame his bill diiferently. I have no difiiculty in saying, that, where the members of a partnership contract by covenant, that the firm shall be A., B., C, and D., it is a breach of that covenant for' A. -to sign those instruments, to which the covenant refers, in the name A. and Co. ; but it is no less a breach of that covenant for D. to sign his own name, adding ' for self and partners,' because by these words it can no more be known, who are his partners, than by the word Co. When partners enter into such contracts, the meaning and intent is, that, in the first place, it may be known to the world, for the benefit of each partner, that he is a partner in that con- cern, and also that, as between each partner and the world, it should not be left to them to speculate, who are really partners, or who are dormant partners, and so on. It is intended, that each individual may have the credit, which belongs to his name, and may not be exposed to conse- quences, which might arise from his name not being used. But it must be made out to be a case, which goes further than this does, to entitle the Court to grant an injunction against the breach of such a contract; it must be a studied, intentional, prolonged, and continued inattention to the application of one party calling upon the other to observe that con- tract. Looking at the circumstances of this case altogether, recollecting that the application was only made by the plaintiff in April last, and even admitting, that some of the letters, as has been insisted, may amount to contracts binding on the plaintiff, the question is, whether it was not known who were really partners ? I do not mean to say, that there has been such an exact performance of the contract as there ought to be ; and these gentlemen will do well (if they mean to protect themselves from the CHAP. X.] CONSTRUCTION OF ARTICLES. 343 towards the capital stock, at particular periods, or pro- visions for the admission of other partners, upon the payment of particular sums of money, by them, by in- stalments. In all such cases the party so contracting is treated as a debtor to the firm, to the full amount so to be contributed or paid, as debitu7n in prcesenti, solveti- dum in futuro ; and, indeed, he stands in equity as to such debts, precisely in the same relation to them, as if he were a third person, who was a debtor thereto.^ § 20-1. In the next place, partnership articles some- times provide, that one or more of the partners shall exclusively manage and administer all the concerns thereof, or one or more particular departments of the business. In cases of this sort, courts of equity will uphold with a steady hand every such stipulation, and give it full effect during the continuance of the part- nership, and inhibit the non-competent partners from intermeddling therewith.^ And this is entirely in coin- interference of this Court) to use all the names in the concern, — they must do that, or the Court will be under the necessity of awarding an injunction, or dissolving the partnership." The motion was refused Avith- out costs. As to whether the right to use the partnership firm, after the death of one partner, belongs to the survivor, or is a part of the good- will of the partnership, see ante, § 100, and Lewis v. Langdon, 7 Sim. 421, See also Webster v. Webster, 3 Swans. -490, n. In Miles v. Thomas, 9 Sim. 606, Sir Launcelot Shadwell (the Vice-Chancellor) thought, that an injunction might be granted, whenever the act comi^lained of is one that leads to the destruction of the partnership property, notwithstanding a dissolution thereof may not be prayed. > Coll. on P. B. 2, c. 2, § 2, p. 141, 2d ed. ; Akhurst v. Jackson, 1 Swans. 85, 89. [See also Bury v. Allen, 1 Coll. 589, 607] ; { Stevens v. Yeatman, 19 Md. 480. In Featherstonhaugh v. Turner, 25 Beav. 382, it is said that a person selling a share in his business and becoming a partner with the purchaser, for an in- definite period, cannot, in equity, immediately dissolve the partnership and retain the premium, and to a similar effect are the decisions in Astle v. Wright, 23 Beav. 7 7, and Freeland v. Stansfeld, 2 Sm. & G. 479. On the allowance of interest on advances, see § 182, n., and on the return of premiums on dis- solution, see Airey v. Borham, 29 Beav. 620; Pease v. Hewitt, 31 Beav. 22; Bullock V. Crockett, 3 Giff. 507 ; Lee v. Page, 30 Law J. x. s. Ch. 857.} 2 Ante,§ 173, 182, 193, 202; Coll. on P. B. o, c. 1, § 3, p. 753-759, 2ded. 344 PARTNERSHIP. [cHAP. X. cidence with the French law on the same subject ; for, by that law, where by the articles one or more partners are exclusively to administer the affairs of the partner- ship, the power is deemed irrevocable during the con- tinuance of the partnership, and cannot be lawfully in- terfered with by the other partners.^ The Roman law seems impliedly to have promulgated the same doc- trine.^ The Code of Louisiana has also made it a part of its own positive regulations.^ § 205. In the next place, in partnership articles it is sometimes agreed, that the real estate and fixtures, be- longing to the firm, shall not be treated as partnership property, as between the partners ; but that all the partners shall have a several and individual interest therein. In such cases, the interests of the partners will be treated throughout, as their several and sepa- rate estate ; and of course, in cases of bankruptcy of the partners, it will be distributable to and among their separate creditors respectively, in preference to their joint creditors.^ The rule is, or at least may be, differ- ent in cases of mere personal property, which still re- mains in the reputed ownership of the partnership, although it will be the same, if the property be clearly and exclusively in the ownership of one partner, as his separate personal property.^ » Poth.de Soc. n. 71, 72. 2 D. 14, 1, 1, § 13, 14 ; Poth. Pand. 14, 1, n. 4. =■ Code of Louisiaiica (1825), arts. 2838-2840. * Coll. on P. B. 2, c. 2,§ 2, p. 141, 2d ed. ; Id. B. 4, c. 2, § 1, p. .595, 596, 600; Id. B. 2, c. 1, § 2, p. 113; Smith v. Smith, 5 Ves. 189; Exj)arte Smith, 3 Madd. 63. {Where the owner of a lease admits another to be his partner in the use of a part only of the demised property, and afterwards dissolves the partnership, the partner no longer has any interest in the lease. Burdon V. Barkus, 3 Giff. 412.} * Coll. on P. B. 2, c. 2, § 2, p. 141, 2d ed. ; Id. B. 4, c. 2, § 1, p. 595, 696, 600; Id. B. 2, c. 1, § 2, p. 113 ; Smith v. Smith, 5 Ves. 189; Ex parte Smith, 3 Madd. 63 ; Coll. on P. B. 4, c, 2, § 1, p. 596-605, 2d ed. {See Parsons on P. 252 ; Penny v. Black, 9 Bosw. 310.} CHAP. X.] CONSTRUCTION OF ARTICLES. o45 § 206. Connected with this stipulation is ordinarily another for an annual account, valuation, and balance of the moneys, stock in trade, and credits of the part- nership, and also of the debts due by the partnership ; ^ and sometimes also for an annual division of the profits, or of a portion thereof. The annual accounts, when so settled and balanced, are ordinarily held to be conclu- sive, unless some error is shown ; and to guard against the opening of such accounts, upon suggested errors at distant periods, it is not unfrequently further provided, that such annual statements and settlements of the ac- counts shall be binding and conclusive upon all the parties, notwithstanding any errors, unless they are dis- covered in the lifetime of the partners, or during the term of the partnership.^ But all such clauses are nugatory, in cases where the error has arisen from the fraud of any of the partners ; for fraud will vitiate any, even the most solemn transactions.^ § 207. Another usual stipulation in the articles is for a general account of all the partnership property and concerns, upon the dissolution or expiration of the partnership, which is followed up by another, pointing out the mode of winding up the concerns, and of divid- ing and distributing the partnership property and effects. This is generally provided for in one of two modes. One mode is, by a general conversion of all the partnership assets into cash, by a sale, and dividing the produce thereof, after providing for the payment of the debt's of the firm, among all the parties, in proportion to their respective shares and interests. Another mode is by ' Coll. on P. B. 2, c. 2, § 2, p. 144, 145, 2d ed. ^ See Coll. on P. B. 2, c. 2, § 2, p. 145, 146, 2d ed. ; Oldaker v. Laven- der, 6 Sim. 239; {Coventry?;. Barclay, 33 Beav. 1, affirmed on appeal, 12 Weekly Rep. 500 ; s. c. 10 Jur. N. s. Digest, 158.} 3 See Coll. on P. B. 2, c. 2, § 2, p. 145,. 146, 2d ed. ; Oldaker v. Laven- der, 6 Sim. 239. 346 PARTNERSHIP. [cHAP. X. providing, that one or more of the partners shall be entitled to purchase the shares of the other at a valu- ation.^ The former mode is that constantly adopted by Courts of Equity, in the absence of any express stipu- lations; the latter mode can be insisted upon, only when there is an express stipulation to that very effect.^ A mere stipulation for the division of the partnership stock and eifects, at the end of the partnership, will not be deemed by Courts of Equity sufficient to entitle one or more of the partners to purchase them at a valua- tion ; but merely to provide for a division in the usual manner, by a sale.^ The same rule of a sale is applied in all cases, where the mode prescribed by the partner- ship articles becomes impracticable, or cannot otherwise be fairly obtained.'* § 208. Under the clause in the articles for the pur- chase at a valuation, upon the dissolution of a part- nership, the question has arisen, whether that clause is applicable to a dissolution by bankruptcy. It has been thought that it is not, although the point has not ex- pressly come under decision ; but a strong inclination of opinion, in that direction, was expressed by Lord Eldon.^ The question turns upon this, whether a man ' Coll. on P. B. 2, c. 2, § 2, p. 145, 146, 2d ed., which cites 7 Jarman's Convey. 31 ; Cookson v. Cookson, 8 Sim. 529. {See Burfield v. Rouch, 31 Beav. 241 ; Homfray v. Fothergill, Law Rep. 1 Eq. 567.} * Ibid.; Wilson v. Greenwood, 1 Swans. 471, 482 ; Featherstonhangh ?;. Fenwick, 17 Ves. 298; {Dickinson v. Dickinson, 29 Conn. 600.} ^ Coll. on P. B. 2, c. 2, § 2, p. 146; Rigden v. Pierce, 6 Madd. 353 ; Cook V. Collingridge, Jac. 607. ^ Cook V. CollinsTridge, Jac. 607. ' Wilson V. Greenwood, 1 Swans. 471, 481, and the Reporter's note (a) ; Gow on P. c. 5, § 3, p. 300, 3d ed.; Coll. on P. B. 2, c. 2, § 2, p. 145, 146, 2d ed. ; post, § 396. — Mr. Swanston in his note says: " The following are some of the principal authorities applicable to this point. Lockyer v. Savage, 2 Str. 947 ; Roe v. Galliers, 2 T. R. 133 ; Ex parte Hill, Cook's Bankr. Law, 228 ; 1 Cox, 300 ; Ex parte Bennet, Cook's Bankr. Law, 229. In the mat- ter of Murjjhy, 1 Sch. & Lef. 44 ; Ex parte Henecy, cit. Id. ; In the matter CHAP. X.] CONSTRUCTION OF ARTICLES. 347 cau, by contract, or otherwise, provide for a particular disposition of his property, in an event which deprives him of all disposing power over it, and vests that right in other persons.^ § 209. We have already seen, that it is an implied duty and obligation of every partner, not to carry on any business inconsistent Avith, or contrary to the true interest of the partnership.^ But this is often expressly provided for by a special stipulation in the partnership articles. Where the language is general, it will, of course, be construed to apply to all other business, inju- rious to, or interfering wdth the interest and business of the partnership. But if the stipulation be limited to engaging in the same business on the separate account of the partner, or to engaging in any other particularly specified business, during the continuance of the part- nership, there, it would seem to leave the partner free to engage in any other than the excepted business, upon the known maxim of the law, that Expressio unius est exclusio alterius.^ of Meaghan, 1 Sch. & Lef. 179; Dommett v. Bedford, 6 T. R. 684; 3 Ves. 149 ; Ex parte Cooke, 8 Ves. 353 ; Ex parte Hinton, 14 Ves. 598 ; Ex parte O.xley, 1 Ball & Beat. 257; Higinbotham v. Holme, 19 Ves. 88; Ex parte Vere, 19 Ves. 93; 1 Rose, 281; Ex parte Young, Buck, 179; 3 Madd. 124; Ex parte Hodgson, 19 Ves. 206. And see Brandon v. Robinson, 18 Ves. 429. The general distinction seems to be, that the owner of property may, on alienation, qualify the interest of his alienee, by a condition to take effect on bankruptcy ; but cannot, by contract or otherwise, qualify his own interest by a like condition, determining or controlling it in the event of his own bankruptcy, to the disappointment or delay of his creditors; the^ws dispo- neiidi, which for the first purpose is absolute, being, in the latter instance, subject to the disposition previously prescribed by law." ' Ibid. - Ante, § 178, 179. 3 Coll. on P. B. 2, c. 2, § 2, p. 143, 2d ed.; Glassington v. Thwaltes, 1 Sim. & St. 124. — Mr. Collyer (Coll. on P. B. 2, c. 2, § 1, p. 142, 143, 2d ed.) has remarked : " If several persons enter into partnership, under a stipulation, that the copartners, or any of them, shall not, during the continuance of the copartnership, engage in any business otherwise than upon the account and 348 PARTNERSHIP. [CHAP. X. § 210. The like language, in partnership articles, will also, in some cases, be construed to import a prohibition to engage in the same trade, upon a withdrawal from the partnership, even when there are no express words to the purpose, but the prohibition arises by mere im- plication. Thus, where by the articles it was agreed, that the trade of the partnership (that of a brewer) should continue for eleven years, with a proviso, that if either of the parties should be so minded, upon giving six months' notice to the other, he should be at liberty to quit the trade and mystery of a brewer, and the other party should be at liberty to continue the trade upon his own account; it was held by the Court, that the party giving such notice, upon the true interpretation of the words, "to be at liberty to quit the trade and mystery of a brewer, &c." was not at liberty to engage in the brewery business on his own account, but was bound to quit it altogether.^ § 211. So, where, upon the retirement of one of two partners from a partnership in trade, it was left to arbi- trators to determine (among other things) what was to be paid to the retiring partner for the good-will of the trade ; and the arbitrators, upon the understanding that the retiring partner would not set up the trade in the same street or vicinity, awarded to him a certain sum for his share of the good-will thereof, which was accord- ingly paid by the other partner ; and he afterwards set for the benefit of the same copartnership ; and, after the execution of the articles, one of the partners with the consent of the others becomes a partner in a separate firm, the articles of partnership, coupled with such consent, will not operate to make the other partners of the original firm partners also in the separate firm. But a person may, by the decree of a Court of Equity, be- come a partner in the separate business of his copartner, entered into without his consent, in violation of the articles." ' {Lind. on P. 705-712; ante, § 99, 100, and notes} ; Cooper v. Wat- lington, 3 Doug. 413 ; s. c. 2 Chitty, 451. CHAP. X.] CONSTRUCTION OF ARTICLES. 349 up the trade in the same neighhorhood ; the Court, not- withstandmg the arbitrators had laid no express restraint on the retiring partner, in their award, held, that he should be restrained by injunction from carrying on the trade there, as it was a violation of the implied parol understanding of all parties at the time.^ § 212. A fortiori, an injunction will lie in a case, where, upon the withdrawal of a partner, it is agreed between the parties, that the business shall be carried on by the remaining partners alone, if such retiring part- ner should act in any manner inconsistent with such an agreement. Thus, where the plaintiff and defendant had been partners in stage-coaches ; and by an agreement on the dissolution of their partnership, it was stipulated, that the business, so far as it was carried on between Newbury and London, should belong to the plaintiff, and that the defendant should not carry on the business of coach proprietor between Newbury and London ; the defendant afterwards set up a stage-coach, which began its journey at a place a few miles distant from Newbury, but travelled through Newbury to London. On a bill filed, and an affidavit in support thereof. Lord Eldon granted an injunction to restrain the defendant from carrying on the business between Newbury and London. So, where a company, in which A. and B. were partners, contracted with the Postmaster-General for the service of the mail, each partner supplying horses for a distinct part of the road ; but in consequence of the bad manner, in which A. horsed the coach, the Postmaster-General had been frequently obliged to suspend the contract ; it was held, that B. might maintain an injunction against A. to restrain him from interfering with B.'s portion of the road, upon the ground of the irreparable injury to * Harrison v. Gardner, 2 Madd. 198 ; Gow on P. c. 2, § 4, p. 107, 3d ed. 350 PARTNERSHIP. [cHAP. X. the partnership, which would ensue from such an inter- ference.^ § 213. We have, also, already seen what the general rule of law is, as to the right and authority of a major- ity, or of a definite number, to direct and regulate the concerns of the partnership.^ This subject, in cases of partnerships, composed of numerous persons, frequently constitutes a matter of a special provision in the arti- cles ; and so far as the provision extends, it will form the rule of the partnership.^ But it will not be extended by implication to any collateral cases, although they may fall within the same, or even a greater, mischief.^ Thus, for example, if it is intended, that, in cases of dif- ficulty, the majority shall have power to wind up or sell the concern, the authority must be expressly given ; for it will not be inferred frpm the general language of any provision, that the majority, or any definite number, shall have authority to direct and regulate the concerns of the partnership.^ And in these, as in the like cases the provision itself, so far at least as Courts of Equity may be called upon to enforce it, may be controlled, or waived by the acquiescence, or action, of the partners habitually in a different course.^ § 214. Provision is, also, often made in partnership articles, for the expulsion of a partner for gross mis- conduct, or in case of insolvency, or bankruptcy, or other special enumerated cases. Of course, such a provision will govern in all cases to which it properly > Coll. on P. B. 2, c. 3, § o, p. 238, 2d ed. ; Williams v. Williams, 1 Wils. Ch. 473, note ; Anderson v. Wallace, 2 MoUoy, 540. ^ Ante, § 123-125. » Coll. on P. B. 2, c. 2, § 2, p. 143, 144, 2d ed. * Ibid. * Ibid. ; Chappie v. Cadell, Jac. 537. ^ Ante, § 192; Glassington v. Thwaites, 1 Sim. & St. 124; Jackson v. Sedgwick, 1 Swans. 460. CHAP. X.] CONSTRUCTION OF ARTICLES. 351 applies.^ And where a provision is made for insolvency, the question may arise whether it means a technical in- solvency under the insolvent debtor's act, or a mere ina- bility to pay just debts, according to the common use of the phrase in commercial transactions. The latter, it should seem, is to be deemed the true sense.- § 215. It is also usual to insert in articles of partner- ship, a stipulation that disputes and controversies between the partners shall be referred to arbitrators, to be named by the respective partners. It seems, that no action at law is maintainable for a breach of any stipulation of this sort, as it is against the policy of the common law, and has a tendency to exclude the jurisdiction of the Supreme Courts, which are provided by the Govern- ment with ample means to entertain and decide all legal controversies.^ Besides ; there is this additional diffi- ^ [See the late important case of Blisset v. Daniel, 10 Hare, 493, 23 Eng. L. & Eq. 105]; {Patterson v. Silliman, 28 Penn. St. 304. See Smith w. Mules, 9 Hare, 556. On expulsion from a club, see Hopkinson v. Marquis of Exeter, Law Rep. 5 Eq. 63. Evans v. Philadelphia Club, 50 Penn. St. 107.} 2 Coll. on P. B. 2, c. 2, § 2, p. 151, 152, 2d ed. ; Parker v. Gossage, 2 Cr. M. & R. 617 ; Biddlecome v. Bond, 4 Ad. & E. 332. » Gow on P. c. 2, § 3, p. 72, 89, 3d ed. ; Figes v. Cutler, 3 Stark. 139 ; Coll. on P. B. 2, c. 3, § 1, p. 165, 166, 2d ed. ; Kill v. HoUister, 1 Wils. 129 ; AVats. on P. c. 7, p. 383, 2d ed. [The more recent cases in England establish the doctrine, that an agreement to submit a controversy to arbitra- tion before a suit is brought, is binding upon the pai'ties making it. See Scott V. Avery, 8 Exch. 487 ; 5 H. L. Gas. 811 ; Livingston v. Ralli, 5 E. & B. 132 ; Russell v. Pelligrini, 6 E. & B. 1020.] {In Livingston v. Ralli, 5 E. & B. 132, it was held that an action lay for breach of a covenant to refer. An agreement to refer, and arbitrators named, and a covenant not to sue, and a power to examine witnesses under oatli, and to make the submission a rule of court, prevents a party from filing a bill with the view of withdraw- ing the case from the arbitration. Dimsdale v. Robertson, 2 Jones & Lat. 58. But an agreement to submit the aifairs of a partnership to arbiti'a- tion, and that the submission shall be made a rule of court, cannot be pleaded in bar to a bill in e(piity seeking discovery, com2)laining that the plaintilFis harassed by actions, and praying for a receiver ; though before the bill was filed, arbitrators were appointed, and, since bill filed, the submission has 352 PARTNERSHIP. [CHAP. X. culty, that it would be impracticable for the party to establish at the trial, that, upon such an arbitration, he would have succeeded, so as to entitle him to damages.^ In either view, the stipulation would seem to be nuga- tory and futile. But be this as it may, it is very clear, that no stipulation of this sort will be decreed to be specifi- cally performed by a Court of Equity ; not merely upon the ground of public policy, but also upon the ground of the utter inadequacy of arbitrators to administer entire justice between the parties, from a defect of power in them to examine under oath, and to compel the production of papers, as well as upon the ground of the utter impracticability of a Court of Equity's com- pelling a suitable performance of such a stipulation between the parties.^ But, under a clause of this been made a rule of court. Cooke v. Cooke, Law Rep. 4 Eq. 77. See Hortoii V. Sayer, 4 H. & N. 643 ; Wallis v. Hirsch, 1 C. B. n. s. 316 ; Scott V. Corporation of Liverpool, 3 De G. & J. 334, Elliott v. Royal Ex- change Assurance Co., Law Rep. 2 Ex. 237; Lee v. Page, Law J. n. s. Ch. 857 ; Wood v. Robson, 15 Weekly Rep. 756.} 1 Ibid. ; Tattersall v. Groote, 2 B. & P. 131 ; Street v. Rigby, 6 Ves. 815, 818. 2 Coll. on P. B. 2, c. 3, § 1, p. 165-168, 2d ed. ; Street v. Rigby, 9 Ves. 815, 817, 818; Tattersall v. Groote, 2 B. & P. 131, 135, 136; Wellington V. Mcintosh, 2 Atk. 569 ; | Agar v. Macklew, 2 Sim. & St. 418 ; Darbey v. Whitaker, 4 Drew. 134. See Jackson v. Jackson, 1 Sm. & G. 184.} Gow on P. c. 2, § 4, p. 103, 104, 3d ed. ; 1 Story, Eq. Jur. § 670. —In the case of Street v. Rigby, 6 Ves. 815, Lord Eldon discussed the subject at large, upon a covenant of this nature, and said : "It has occurred to me, that in almost every case of this sort, the parties have adopted a fancy, that they can make any thing, in the contemplation of the court, fit to be consid- ered matter of dispute, upon which they think proper to dispute. That is not so. It must be that Avhich a Court will say is fairly and reasonably made matter of disjoute. Another circumstance is, that the parties do not frequently appreciate the effect of such a covenant. First, at law, in the case in the Court of Conunon Pleas, the Judges, Heath and Rooke, seemed to think it futile, and tantamount to a covenant to forbear suit. I take notice of the circumstance, as material with regard to Halfhide v. Penning ; for if the meaning of a covenant to refer is to forbear suit altogether, that covenant to refer, before }ou bring suit, and to suspend it in the mean time, would stand upon principles, pro tempore, that it would CHAP. X.] CONSTRUCTION OF ARTICLES. 353 nature, where the partners do actually refer matters to arbitrators, questions may arise as to the nature and be very difficult to say, do not apply to both those covenants. Sup- pose an action brought. The question would be, what the damages would have been, if the defendant had joined, and named an arbitrator, and evi- dence had been produced (and what would be, could by no means be cor- rectly proved), and an award had been made, giving some sujiposed sum, which no proof could ascertain. The effect, therefore, of such a covenant is, that, as the damages are not to be ascertained by evidence, nominal damages only can be got. Whose fault is it ? There are prudential ways of drawing these articles. There might have been an agreement for liqui- dated damages, to enforce a specific performance, if an action could not produce sufficient damages, or equity would not entertain a bill for a specific performance. If they had enforced their legal remedy by such a stipulated security, it would be very difficult to say, they would also have a remedy in equity. In the case from Astley's Theatre, Astley v. Weldon, 2 B. & P. 346, there was no dispute in the Court of Common Pleas, that the actress might have agreed upon a liquidated sum to be forfeited for non-attendance, &c. The Court were of opinion, very properly, that where there was a stipulated sum in the covenant, that was the stijjulated damages ; and the general sum of £200 for breach of any of the articles was a penalty ; but it was not doubted that sum might have been made the liquidated damages, if they thought proper. The party must put himself in a situation to have substantial damages. In this case, upon an action, they could have only Is. ; for they could not ascertain what more they were to have. Then, what can they have in equity ? There is considei-able weight as evidence of what the law is, in the circumstance, that no instance is to be found of a decree for specific performance of an agreement to name arbitrators ; or that any dis- cussion upon it has taken place in experience for the last twenty-five years. I was counsel in Price v. Williams, 3 Bro. Ch. 163 ; 1 Ves. Jr. 365, a case which justifies considerable doubts, whether the eulogia upon the domestic forum of arbitrators are well founded. That was a case before Lord Thur- low, upon a bill for specific performance of such an agreement, sending parties to arbitrators, who might or might not be able to come to a decision ; and Lord Thurlow was of opinion that the Court would not perform such an agreement. The Court, if it is not part of the agreement, cannot give them authority to examine upon oath ; and the agi-eement itseli' cannot authorize any person to administer an oath. A difficulty arises from the want of the conscience of the party. This court has given credit to itself, notwithstanding what has passed in the Court of King's Bench, in their rules upon attachments, as likely to decide as well as arbitrators ; and it re- quires a strong case to deprive a person of the right to a decision here. In Price V. Williams, the account came back very favorably to my client ; the result being, that a very small sum was due from him. A vast number of exceptions were taken ; and the Court felt that sort of difficulty of dealing 23 354 PARTNERSHIP. [CHAP. X. extent of the matters upon which the arbitrators may make their award. Thus, for example, if there should with the exceptions, that led to an arbitration ; though at first the Court would not hear of it ; and the party, who had not been able to establish any- thing before the Master, in that mode gained several thousand pounds. Then the difficulty occurred about the power of this Court to review the decision of arbitrators ; and in the end my client fared much worse than he would have done before the Master. That case and others led me to adopt a rule never to advise an arbitration afterwards. If such a bill never has been usually filed in this Court, and if in that instance Lord Thurlow was of opinion it could not be maintained, the jurisdiction would stand upon principles not very intelligible, if a party, who by the imbecility belonging to the covenant could recover only Is. damages in an action, coming to this Court for sub- stantial justice, to have an account taken, that person, who could not file a bill for a specific execution of the agreement to refer, can say, that though he admits, neither of them could recover more than Is. at law, and he can- not demand the relief by way of a specific performance, he can have it by pleading the covenant, if he is brought in "the character of a defendant ; and can compel the other to go to that tribunal, to which the defendant, com- ing in the character of plaintiff, could not oblige him to resort. It is very difficult to say, that should be the law of the Court. Then, is it so ? I look upon the case of Wellington v. Mcintosh as an authority, that at that time it was not the law of the Court. At that period the distinction, taken in later cases, had not obtained ; that the plea, though it might have been good as to the relief, is bad, if bad as to the discovery. As to that, the course of the later authorities seems to have altered the law of pleading. But quoad such a point as this, the plea, if good to the relief, must be good to the discovery; for this plea means this, if any thing; that the parties will not harass themselves by going to courts of justice ; but will state to each other what is in dispute, and refer that to arbitrators ; and entering into such a covenant they must be taken to mean, that they will be content with a decision upon such discovery as arbitrators can compel, without subjecting each other to the necessity for either to be examined upon oath before arbi- trators, who cannot examine them upon oath. They choose, therefore, that forum, exclusive of the jurisdiction of the country to all intents and pur- poses; meaning that arbitrators shall, from beginning to end, do that which they are enabled to do, viz., to decide between them as well as they can. It would be a breach of covenant, that would entitle them to nominal damages, to file a bill for discovery, as much as a bill for discovery and relief In Half hide v. Fenning, the whole of my argument, according to the report, amounts to taking the distinction between discovery and relief, and putting the case upon that distinction ; and if it was so argued, I am not surprised, that Lord Kenyon should take it, that the counsel thought, if not put upon that, it could not be supported. But it is not to be put upon that distinction but upon the ground I have stated. It is said, courts of law think these CHAP. X.] CONSTRUCTION OF ARTICLES. 355 be a submission to arbitrators of all matters in difference between the partners, the question may arise, whether it agreements very wise. Kill v. HoUister, however, shows, that courts of law are ready enough to say the agreement of the parties shall not oust their jurisdiction ; though they permit it to oust the jurisdiction of courts of equity. But they enforce the agreement, not as agreement, but by granting an at- tachment for breach of the rule. It is dealing a little imperiously to say, that an agreement which, made out of Court, would not bar an action, if made in Court, shall bar a bill. It was justly observed upon the passage in Atkyns, Wellington v. Mcintosh, 2 Atk. 569, that arbitrators cannot ad- minister an oath ; and the agreement will not enable them. We see in daily practice at law, the Court administers the oath ; and under that the parties go before the arbitrators. It is said, the party must have discovery some way. But if the distinction cannot be maintained between a bill for discov- ery only, and for both discovery and relief, It must be said, they are bound to go first before the arbitrators ; and the party must be brought there, and must refer ; the parties to be examined upon honor, for they cannot upon oath ; and then it is said, as in the argument of these cases, if it so turns out, then they ai'e come to this Court ; saying, there is then a failure of the jus- tice, for which they covenanted ; and therefore there is a jurisdiction in this Court. Till Half hide v. Fenning no such decree was ever heard of. Next, expressing it in terms of the highest respect and veneration for that noble and learned person, now no more, I doubt whether it is a very wise exercise of the jurisdiction of this Court, recollecting, that it is to give a relief be- yond the law, not to order the parties to go to law to take the effect of the stipulated remedy, but under a positive covenant, not a negative covenant, that they will not sue (upon which there would be considerable difficulty), to send them by way of experiment to that jurisdiction, so likely to miscarry, under the circumstance that it has not, unless received under the authority of the Court, a power to administer an oath, where the justice that tribunal can render is so insufficient, though they have not expressly bound themselves by covenant ; and, whether the court would not act more discreetly by say- ing, they are in a Court, where justice can certainly be done; and as they have not stipulated to the contrary, their fate shall be decided here, instead of sending them to so improvident a tribunal. I recollect passages, in which courts of justice, however full of eulogia upon these domestic forums, have recollected their own dignity sufficiently to say, they would not be ancillary to those forums ; that the parties should not be permitted to take their relief from them, coming here for discovery. It is enougii for me to say, it is not a necessary consequence of a covenant to refer, that the party thereby agreed to forbear to sue. I do not enter into the question of the effect at law of a covenant to forbear to sue. But, supposing it good, in strict law it cannot be maintained, that, having covenanted to refer, the party has cov- enanted to forbear to sue ; and if not, he has only left himself open to an action for damages, if he does not refer : which the suit does not prevent, if 356 PARTNERSHIP. [cHAP. X. is within the competency of the arbitrators to award a dis- solution of the partnership ; and it has been held, that thought advisable. It would be very strong to say, that vrhere the legal remedy they have provided for themselves is utterly incompetent to justice, this Court is precluded from granting its ordinary remedy by a covenant, which does not in terms express an undertaking not to resort: to this Court, and must hold that doctrine upon a plea ; in that shape permitting the de- fendant to have in substance a specific performance, which would have been refused to him as a plaintiff; at the hazard of doing substantial injustice, of a delay of justice almost of necessity, and where the examination cannot be addressed to the conscience of either the parties or the witnesses ; from which the subject cannot be debarred, unless by express terms, or necessary impli- cation. That this has not the effect of barring the legal remedy, is clear from the cases at law, which agree that it is still competent to him to take the legal remedy. Then why not the equitable ? The competency to take both stands upon the same principle." See also Wilks v. Davis, 3 Mer. 507. Mr. Collyer has remarked (Coll. on P. B.. 2, c. 3, § 1, p. 167, 168) : " This leads us to a more general consideration of clauses of this nature. There are many covenants, to which such clauses may be added with effect ; but there are others, the breach of which does not admit of compensation by liquidated damages, and to which, therefore, they cannot properly be ap- plied. Thus, on the one hand, if the covenant be such, that the breach of it must of necessity be uncertain in its nature and amount, then, if liqui- dated damages be reserved, they will be deemed the real damages, and a verdict in an action on the covenant will be found for the amount of the liq- uidated damages. On the other hand, if the breach of covenant be attended with certain damage, as, for instance, if it consist in the omission to pay a certain sum of money, in such case, although liquidated damages be reserved eo nomine, they will be considered by a jury only in the nature of a penalty, and the real damages will be measured by the sum omitted to be paid. In a late case, even where the real damage was uncertain, yet, as it was evi- dently far less than the amount of the liquidated damages, the Court of Common Pleas, although the language in which the liquidated damages were agreed to be paid was the strongest that could be employed, referred it to the prothonotary, to ascertain what damages, if any, the plaintiff had sus- tained, and how much, if any thing, ought to be paid to the plaintiff. Mr. Jarman, in commenting upon this case, observes, that, upon the reasoning there adopted by the Court, it is obvious, that a covenant to pay a sum of money as liquidated damages, on the breach of any one of a series of stipulations, must in all cases be nugatory, as the covenant necessarily em- braces acts of various degrees of importance, all which cannot with equal justice be compensated for by the payment of the same sum ; if it were sufficient in regard to some, it must be excessive as to others ; the conse- quence is, that, in order to give an effectual remedy for the recovery of a sum of money as stipulated damages in such a case, a distinct and separate CHAP. X.] CONSTRUCTION OF ARTICLES. 357 they may.^ So, upon a like broad submission, and also giving authority to arbitrators to dissolve the partnership, upon such terms and conditions as they might prescribe, it has been held, that the arbitrators may provide, that upon the dissolution, one partner shall not carry on the trade within a particular prescribed distance of the place where the remaining partners are to carry it on.^ So, upon a general submission by partners of all actions, notes, accounts, dealings, controversies, and demands, in law or equity, it has been held, that it is competent for the arbitrators to award that one of the partners shall take all the joint property, he paying to the other a sum in gross, and also discharging all the partnership debts. ^ amount should be assessed, as the measure of compensation on the breach of each several contract." ' Coll. on P. B. 2, c. 2, § 2, p. 152, 2d ed. ; Green v. Waring, 1 W. Bl. 475. 2 Coll. on P. B. 2, c. 2, § 2, p. 152, 2d ed. ; Green v. Waring, 1 W. Bl. 475; Morley i\ Newman, 5 Dowl. & R. 317. ^ Byers v. Van Deusen, 5 Wend. 268; {§ 299-301, and see Burton v. Wigley, 1 Bing. N. C. 665 ; Wood v. Wilson, 2 Cr. M. & R. 241 ; Wilkin- son «. Page, 1 Hare, 276. But it is said that an arbitrator cannot appoint a receiver. Cook v. Catchpole, 10 Jur. n. s. 1068 ; s. c. 34 L. J. n. s. Ch. 60.} 358 PART^'ERSHIP. [chap. XI. CHAPTER XI. REMEDIES BETWEEN PARTNERS. { § 216. Preliminary. 217. Remedies between partners. 218. Action lies for breach of stipulation in articles. 219. No action lies foi' money paid on partnership account. 220. Nor for money paid on account of torts affecting the partnership. 221. Reasons why no action lies. 222. Remedies in equity. 223. Roman law. 224. Enforcement of positive and negative obligations. 225-227. When an injunction will be granted. 228. Appointment of a receiver during the continuance of the partner- ship. 229. Whether an injunction wiU be decreed without a dissolution. 230. Roman law. 231. Appointment of a receiver. 232. Partnership declared void for fraud. 233. Relief against losses caused by misconduct. Rights lost by delay. } § 216. These are the most material considerations, which seem proper to be brought before the learned reader, as to the true interpretation and construction of partnership articles, so far as they have, as yet, come imder judicial cognizance and decision. They are ne- cessarily imperfect ; but at the same time they may serve, in some degree, as lights and guides, to direct our in- quiries in analogous cases, and to point out the diffi- culties to be surmounted, as well as the defects to be avoided. § 217. The next inquiry naturally presented is, as to the remedies, which belong to partners themselves, either at law or in equit}' , during the continuance of the partnership, either to enforce the particular stipu- CHAP. XI.] REMEDIES BETWEEN PARTNERS. 359 lations, contained in the articles of partnership, or other duties and obHgations which arise by operation and im- pHcation of law. A full exammation of this topic prop- erly belongs to a treatise on remedies and pleadings at law and in equity, and is beside the purpose of the pres- ent Commentaries ; but it may be found discussed at large in elementary works, devoted to the consideration of remedies at law and in equity.^ It may not, how- ever, be without use to bring together, in this place, some general suggestions and doctrines applicable to the subject, which may serve to explain other decisions, or to clear away lurking doubts. § 218. Wherever there is an express stipulation in the jDartnership articles, Avhich is violated by any part- ner, an action at law, either assumpsit, or covenant, as the case may require, will ordinarily lie, to recover dam- ages for the breach thereof."^ In many cases, indeed, such damages may be merely nominal, and inadequate for redress. But still we must take the law as we find it ; and in such cases, as in some other relations in life, we enter into the connection for better or for worse. ^ ' See Coll. on P. B. 2, c. 3, § 1-5, p. 162-257, 2d ed. ; Gow on P. c. 2, § 3, 4, p. 69-116, 3ded. 2 Gow on P. c. 2, § 3, p. 69-73, 3d ed. ; {Lind. on P. 730 ; Leighton v. Wales, 3 M. & W. o-lo ; Wliite v. Ansdell, Tyrw. & G. 785 ; Bagley v. Smith, 10 N. Y. 489 ; Glover v. Tuck, 24 Wend. 153 ; See Holyoke v. Mayo, 50 Me. 385 ; Capen v. Barrows, 1 Gray, 376 ; Addams v. Tutton, 39 Penn. St. 447; ]\Iullany «. Keenan, 10 Iowa, 224; Lock v. Purdon, 2 All. (Xew Bruns.) 33.} 3 Coll. on P. B. 2, c. 2, § 1, p. 131, 2d ed. ; Goodman v. Whitcomb, 1 Jac. & W. 589, 592; Wray w. Hutchinson, 2 Myl. & K. 235; 1 Story, Eq. Jur. §659-665; Gow on P. c. 2, § 3, p. 69-93, 3ded. — The action of account seems properly applicable only to cases where the partnership is ended. See 1 Story, Eq. Jur. § 659-665 ; Gow on P. c. 2, § 3, p. 68-70 ; Id. p. 73, 74, 3d ed. ; Wray v. Milestone, 5 M. & W. 21 ; Foster v. Allan- son, 2 T. R. 479 ; Duncan v. Lyon, 3 Johns. Ch. 351, 361, 362. Actions of tort can scarcely be maintained at law by one partner against the other, touching the partnership property ; even if one partner should wilfully destroy the property. Gow on P. c. 2, § 3, p. 89-93, 3d ed. ; Coll. on P. 360 PARTNERSHIP. [CHAP. XI. § 219. It is sometimes laid down by elementary writ- ers, that, during the continuance of the partnership, an action at law will lie by one partner against the others, for moneys advanced, or paid, or contributed, on account of the partnership, or of the debts and obligations in- curred thereby.^ But this doctrine, in the general terms in which it is laid down, is utterly untenable, and incon- sistent with the rights, and duties, and relations of the . partners with each other.^ It is true, that one partner B. 2, c. 3. § 8, p. 257, 268, 2d ed. The appropriate remedy seems to be in equity. {But see Liud. on P. 740 ; Mayhew v. Herrick, 7 C. B. 229 ; Barton V. Williams, 5 B. & Aid. 395, affirmed, sub nom. Williams v. Barton, 3 Bing. 139.} > See Gow on P. c. 2, § 3, p. 79-81, citing Abbot v. Smith, 2 W. Bl. 947, and what was said by Lord Kenyon in Merryweather v. Nixon, 8 T. R. 186, and by Mr. Justice Bayley in Ansell v. Waterhouse, 6 M. & S. 385, 390, and Holmes v. Williamson, 6 M. & S. 158* See also 1 Mont, on P. c. 4, p. 50 ; Gary on P. 65 ; [Hamilton v. Hamilton, 18 Penn. St. 20.] ^ Most of the cases which are supposed to inculcate this doctrine, turn upon other very distinct grounds. They are nearly all summed up in Mr. GoUyer's valuable Treatise. Goll. on P. B. 2, c. 3, § 2, p. 174-193; {Lind. on P. 728, Met. on Gontr. 130.} They are cases, (1.) where either the debt was a separate debt and not a partnership debt. Smith v. Barrow, 2 T. R. 476 ; {See next note} ; Gow on P. c. 2, § 3, p. 75-77, 3d ed. (2.) Or, a separate and distinct security, or negotiable instrument, was given by one partner to another, on the partnership account. Preston v. Strutton, 1 Anst. 50; Venning v. Leckie, 13 East, 7; [Gridley v. Dole, 4 Gomst. 486] ; {Van Ness v. Forrest, 8 Granch, 30; Rockwell v. Wilder, 4 Met. 556 ; Ghamberlain v. Walker, 10 All. 429. } (3.) Or, whei-e the contract was preliminary to the partnership, and merely in contemplation of it ; such as a promise to contribute so much to the partnership funds, in stock or money. Gale V. Leckie, 2 Stark. 107 ; Venning v. Leckie, 13 East, 7 ; Helme v. Smith, 7 Bing. 709; [Vance v. Blair, 18 Ohio, 532] ; {Elgie v. Webster, 5 M. & W. 518 ; Brown v. Tapscott, 6 M. & W. 119 ; French v. Styring, 2 C. B. N. s. 357 ; Gurrier v. Webster, 45 N. H. 226 ; Gurrier v. Rowe, 46 N. H. 72.} (4.) Or, where the case is one of part-owners or joint-con- tractors, and not of partners. Helme v. Smith, 7 Bing. 709 ; Graham v. Robertson, 2 T. R. 282; Sadler v. Nixon, 5 B. & Ad. 936; [French V. Styring, 2 G. B. n. s. 357 ; s. c. 40 Eng. L. & Eq. 274.] (5.) Or, where the money or funds have been voluntarily separated from the partnership stock or moneys, and appropriated to one partner, and he alone is interested in a contract touching the same. Goffee v. Brian, 3 Bing. 54 ; Jackson v. Stopherd, 2 Gr. & M. 361 ; Wilson v. Gutting, 10 CHAP. XI.] REMEDIES BETWEEN PARTNERS. 361 may maintain an action at law against the other part- ners, or any one or more of them, for moneys advanced, or paid, or contributed, at their request, for their sepa- rate and distinct account and benefit. But this is upon the plain ground, that it has no connection with the partnership concerns and liabilities ; and that the trans- actions or contracts are between the parties in theu' sev- Bing. 43G ; Sharp v. Warren, 6 Price, 131; {Caswell v. Cooper, 18 111. 532.} (6.) Or, where a balance has been struck, and a separate promise made to pay the same to one partner. {Whether an express promise to pay a balance is necessary to support an action, is a point on which the cases are in much conflict. To the effect that no express promise is necessary, are Wray v. Milestone, 5 M. & W. 21 ; Fanning v. Chad- wick, 3 Pick. 420 ; M'Coll v. Oliver, 1 Stew. 510. See Spear v. Newell, 13 Vt. 288 ; Van Amringe v. Ellmaker, 4 Penn. St. 281 ; Wright v. Cumpsty, 41 Penn. St. 102 ; Wycoff v. Purnell, 10 Iowa, 332. To the effect that an express promise is necessary are Westerlo v. Evertson, 1 Wend. 532; Pattison v. Blanchard, 6 Barb. 537; Chadsey v. Hai-rison, 11 111. 151; Course v. Prince, 3 Mills, Const. R. 416. See Gulick v. Gulick, 2 Green, 578} ; Moravia v. Levy, 2 T. R. 483, note; Foster v. Allanson, 2 T. R. 479; Preston v. Strutton, 1 Anst. 50; Brierly u. Cripps, 7 C. & P. 709,; Wray v. Milestone, 5 M. & W. 21 ; Henley v. Soper, 8 B. & C. 16 ; Winter v. White, 1 Brod. & B. 350. See also Gow on P. c. 2, § 3, p. 69- 97, 3d ed. ; Fromont v. Coupland, 2 Bing. 170; Carr v. Smith, 5 Q. B. 128, 138. But the mere fact that an account has been taken and balance struck between partners at a certain period during the partnership, would not entitle any partner to maintain an action therefor, unless agreed to generally by all the partners. See Morrow v. Riley, 15 Ala. 710. In Carr v. Smith, 5 Q. B. 138, Lord Denman said: "The case of Fromont v. Coupland, and other similar cases, seem to limit the action to a settlement of accounts on a final close of all partnership transactions ; but this case does not necessarily raise that question ; for at all events the settlement, in order to gi'ound an action, must be one which is binding and conclusive upon the partners. Now it does not appear here that the adjustment and settlement was ever agreed to by all the partners, nor indeed by the plain- tiff and the testator ; if, therefore, it were binding and conclusive on them, it must have been so by reason of the power confided to the persons who drew it up, and in that case it would be an award, and required a stamp. It would come within the authority of Jebb v. McKierman, rather than witliin Boyd v. Emmerson, Sybray v. White, and similar cases." {Lind. on P. 735, Holyoke v. Mayo, 50 Me. 385. See also Gibson v. Moore, 6 N. H. 547 ; Williams v. Henshaw, 11 Pick. 83 ; s. c. 12 Pick. 378 ; Dickinson t'. Gran- ger, 18 Pick. 315, 317 ; Sikes v. Work, 6 Gray, 433 ; Shattuck v. Lawson, 10 Gray, 405 ; Wiggin v. Comings, 8 All. 353 ; Warren w.Wheelock, 21 Vt. 323.} 362 PARTNERSHIP. [cHAP. XI. eral, distinct, and independent capacities, separate from the partnership. For there is no incompetency in part- ners to enter mto contracts with each other, as individ- uals, in matters dehors the partnership concerns and business.^ But this is very different from the case of a partner's entering into contracts with the partnership, as such, or of his paying moneys, or incurring liabilities on account thereof, he being in all such cases one of the parties in interest, and, as such, bound jointly with the others to contribute towards the discharge of the com- mon obligations of the partnership.^ § 220. This doctrine is not confined to cases of moneys paid, or debts incurred, or contributions made, ' Gow on P. c. 2, § 3, p. 75, 76, 3d ed. ; Coffee v. Brian, 3 Bing. 54; Smith V. Barrow, 2 T. R. 476 ; Nockels v. Crosby, 3 B. & C. 814 ; Coll. on P. B. 2, c. 3, § 2, p. 175-178, 2d ed. ; 1 Stmy Eq. Jur. § 664-666 ; Wats, on P. c. 8, p. 394-409, 2d ed ; {Cross v. Cheshire, 7 Exch. 43 ; Cham- berlain V. Walker, 10 All. 429; Paine v. Thaeher, 25 Wend. 450; Roberts V. Fitler, 13 Penn. St. 265; Wright v. Michie, 6 Gratt. 354; Edens v. Williams, 36 111. 252 ; Elder v. Hood, 38 111. 533. See Coleman v. Cole- man, 12 Rich. 183.} ^ Gow on P. c. 2, § 3, p. 77-79; Holmes v, Higgins, 1 B. & C. 74; ]Milburn v. Codd, 7 B. «& C. 419 ; [Caldicott v. Griffiths, 8 Exch. 898 ; s. c. 22 Eng. L. & Eq. 527] ; Xeale v. Turton, 4 Bing. 149 ; Teague v. Hubbard, 8 B. & C. 345; Geddes v. Wallace, 2 Bligh, 270; Coll. on P. B. 2, c. 3, § 2, p. 174-178, 2d ed. ; Worrall v. Grayson, Tyrw. & G. 477, 480; s. c. 1 M. & W. 166 ; Brown v. Tapscott, 6 M. & W. 119, 123; BoviU v. Ham- mond, 6 B. & C. 149; Pearson v. Skelton, 1 M. & W. 504; s. c. Tyrw. & G. 848; Sadler v. Nixon, 5 B. & Ad. 936; Haskell v. Adams, 7 Pick. 59 ; 1 Story, Eq. Jur. § 679-681 ; {Harris v. Harris, 39 N. H. 45 ; Ordiorne v. Woodman, 39 N. H. 541 ; White v. Harlow, 5 Gray, 463 ; Ives v. Miller, 19 Barb. 196 ; Crottes v. Frigerio, 18 La. Ann. 283 ; De Jarnette v. Mc- Queen, 31 Ala. 230. } [In a late English case. A., B., & C. were shareholders in a joint-stock mining company, and money being necessary to carry on the mine, a loan was made upon the joint and several promissory note of the three, and applied to the use of- the mine. A. being compelled to pay the whole note, was allowed to sue the others for contribution. Sedgwick V. Daniell, 2 H. & N. 319. So, also, if partners, by an express agreement, separate a distinct matter from the partnership dealing, and one party expressly agrees to pay the other a specific sum for that matter, assumpsit will lie on that promise, although the matter arose from their partnership dealing. CoUamer v. Foster, 26 Vt. 754.] CHAP. XI.] REMEDIES BETWEEN PARTNERS. 363 by one partner on account of liabilities of the partner- ship, resulting from contracts binding the same ; but it equally applies to moneys paid, and debts incurred, and contributions made, by one partner on account of negli- gences and torts, affecting the partnership.^ In the ordinary course of things there is not, indeed, as is well known, any right of contribution allowed by the com- mon law between joint wrong-doers, where one has paid the whole damages or expenses occasioned there- by.^ And this rule is just as applicable to partners as to other persons.^ But, then, the rule is to be under- stood according to its true sense and meaning, which is, where the tort is a known, meditated wrong, and not where the party is acting under the supposition of the entire innocence and propriety of the act, and the tort is merely one by construction or inference of law.^ In the latter case, although not in the former, there may be, and properly is, a contribution allowed by law, for such payments and expenses between the constructive wrong-doers, whether partners, or not." Still, however, the same difficulty occurs at law in such cases of con- structive torts, as in cases of contracts ; and no remedy at law is maintainable therefor between the partners. The remedy, as we shall presently see, must be admin- istered in another tribunal.'^ » Pearson v. Skelton, 1 M. & W. 504 ; s. c. Tyrw. & G. 848. ^ Merryweather v. Nixan, 8 T. R. 186. ' Pearson v. Skelton, 1 M. & W. 504 ; s. c. Tyrw. & G. 848. * Adarason v. Jarvis, 4 Bing. 66. ^ Ibid. « Pearson v. Skelton, 1 M. & W. 504; s. C. Tyrw. & G. 848. — lu this case Baron Parke is reported, in Tyrw. & G. 850, 851, to have said: " How were the profits divided? Did the partners divide the net profits, after the payment of all expenses, or the gross profits according to the number of miles tliat each partner horsed the coach ? If the latter was the case, there Avas no common fund, and you will be entitled to a rule ; but if there was a partnership fund, out of which losses were to be paid, your remedy is in equity. We will consult the Lord Chief Justice, and ascertain 364 PARTNERSHIP. [CHAP. XI. § 221. The ground, why at law, independent of any special covenant, or any distinct several contract, one partner cannot maintain a suit against the other part- ners, for moneys paid, or advanced, or contributed, or liabilities incurred, on account of the partnership/ may be readily explained in a satisfactory manner. In the first place, upon the mere technical principles of the common law, one partner cannot sue the others for a contribution or payment made for a just partnership liability ; for in such a suit all the partners, including himself, must be made defendants ; and it is clear, upon the acknowledged principles of pleading at the common law, that a party cannot at once be a plaintiff and a defendant in the same suit ; or, in other words, he cannot sue himself, either alone, or in conjunction with others.^ But a reason, far what evidence he has upon his notes, as to the existence of a pai'tnership fund. With respect to the first objection taken at the trial, it does not apply." On a subsequent day Parke, B., said, "that on consulting the notes of the Lord Chief Justice, it appeared that there was a partnership fund, out of which the expenses were first to be paid, and the residue divided among the partners ; consequently the nonsuit was right." See ante, § 61, and note. ' [Or for neglect of the partnership business. Capen v. Barrows, 1 Gray, 376.] 2 Coll. on P. B. 2, c. 3, § 2, p. 188-193, 2d ed. ; Bosanquet v. Wray, 6 Taunt. 597 ; MofFatt v. Van Millingen, cited 2 B. & P. 124, note ; Mainwaring V. Newman, 2 B. & P. 120; De Tastet v. Shaw, 1 B. & Aid. 664; Neale v. Turton, 4 Bing. 149; Teague v. Hubbard, 8 B. & C. 345; Brown v. Tap- scott, 6 M. & W. 119, 123; Holmes v. Higgins, 1 B. «fe C. 74 ; Malyne's Lex Merc. p. 310 ; Niven v. Spickermau, 12 Johns. 401 ; 1 Stoiy, Eq. Jur. § 664, 665, 679 ; Jones v. Yates, 9 B. «fe C. 532 ; [Rawlinson v. Clarke, 15 M. & W. 292; Cruikshank v. M'Vicar, 8 Beav. 106] ; {Met. on Contr. 131, 132.} — In this respect the Roman law, the law of France, and the law of Scotland, present a marked contrast to the common law. In the juris- prudence of each of these latter countries, the firm is treated, in its aggre- gate capacity, as having an independent existence, somewhat like a quasi corporation ; and the firm may, therefore, sue and be sued, by a single partner, without any repugnancy, exactly as a member of a corporation may sue and be sued by the corporation itself. In this respect there is an analogy to the proceedings in our Courts of Equity, where one CHAP. XI.] REMEDIES BETWEEN PARTNERS. 365 more satisfactory, because it is in no shape founded upon technical principles, is, that until all the partner- partner is entitled to sue all the other partners, for an adjustment of the partnership concerns, or for any transactions growing out of the same con- cerns. Mr. Bell (2 Bell, Connn. B. 7, p. 619, 620, 5th ed.) states the Scot- tish law as follows : " Some lawvers have considered the obliiration of the company as only the joint and several obligations of the partners. But this is not correct in the law of Scotland. The partnership is held as, in law, a separate person ; capable of maintaining independently the relations of debtor and creditor. As a separate person, the company is known and recognized in obligations and contracts by its separate name or firm, as its personal appellation. But it cannot hold feudal property in the so- cial name. It is a consequence of this separate existence of the company as a person, that an action cannot directly, and in the first instance, be maintained against a partner for the debt of the company. The demand must be made, first, against the company ; or the company must have failed to pay, or have dishonored their bill, before the partner can be called on. It also follows that the partners are guarantees or sureties for the company ; not proper or principal debtors. And so, although diligence may proceed against the partners directly, the company having failed to pay according to their obligation ; and although personal diligence necessarily can proceed only against the individuals, the estate of the partner can, in bankruptcy, be charged only with the balance remaining due, after what may be drawn from the company estate. Another consequence is, that the creditors of a part- ner, if they would attach his share, must arrest in the hands of the company as a separate person. Action or diligence seems to be legally competent by a company firm, or against the partnership by its firm ; though personal ex- ecution, of course, is possible only against the individuals. But so many doubts have been raised of late on these points, that the safer course is to use the names of the partners. Sequestration of the company's estate pro- ceeds in the name of the firm. In England, a doctrine prevails, which does not accord with the law of Scotland, and which, perhaps, is to be ascribed to a difference of principle, on the point now under discussion. At law, in England, there can be no debt between two partnerships, of each of which one person is a partner ; and this on the ground, that ' no man can con- tract with himself, and, therefore, cannot bind himself in the society of one set of persons to another, in which he is also a partner.' It is allowed that the contract is available in equity, but not in law. In Scotland, debts be- tween companies, in which the same individual is partner, are every day sustained as (juite unexceptionable." See Poth. de Soc. n. 135, 136. The Roman law, while it ordinarily gave the action pro socio only in cases of a dissolution of the partnership, excepted special cases. Nonnunquam necessa- rium est, et manente societate, agi pro socio ; veluti, cum societas, vectiga- lium causa, coita est, propterque varios contractus neutri expediat recedere a societate, nee refertur in medium, quod ad alterum pervenerit. D. 17, 2, 65, 15 ; Id. 17, 2, 52 ; Poth. Pand. 17, 2, n. 33. 366 PARTNERSHIP. [CHAP. XI. ship concerns are ascertained and adjusted, it is impossi- ble to know whether a particular partner be a debtor or a creditor of the firm ; for although he may have ad- vanced large sums of money on account thereof, he may be indebted to the firm in a much larger amount. Now, a settlement of all the partnership concerns is ordina- rily, during the continuance of the partnership, unat- tainable at law ; and even in equity it is not ordinarily enforced, except upon a dissolution of the partnership. If one partner could recover against the other partners the whole amount paid by him on account of the part- nership, they would immediately have a cross action against him for the whole amount, or his share thereof; and if he could recover only their shares thereof, then, in order to ascertain those shares, a full account of all the partnership concerns must be taken, and the part- nership itself wound up. This would manifestly be a most serious inconvenience, as well as a change of the original contract, from a joint contract of all the part- ners, in solido, to a several contract, each for his own aliquot part of the final balance, due to a particular partner upon a special transaction.^ And in cases of this sort the maxim may justly apply : Frustra petis, quod statim alteri redder e cogeris : ~ or, as it is some- times expressed, Frustra peieret, quod mox restiturus esset.^ § 222. But, although, in cases of the sort above men- tioned, no remedy lies at law, yet in equity an appro- priate remedy may and will be granted, wherever it is ex cequo et bono necessary and proper ; for, in equity, there is no difficulty in one partner's suing the other > Coll. on P. B. 2, c. 3, § 2, p. 174-193, 2d ed. ; Harvey v. Crickett, 5 M. & S. 336 ; Gow on P. c. 2, § 3, p. 69-77, 3d ed. ; Id. c. 2, § 4, p. 93-102 ; {Towle V. Meserve, 38 N. H. 9 ; Stoddard v. Wood, 9 Gray, 90.} ^ Branch, Maxims, p. 61, Am. Ed. 1824; Jenkins, Cent. 256. => Coll. on P. li. 2, c. 3, § 2, p. 175, 2d ed. ; 1 Story, Eq. Jur. § 664. CHAP. XI.] REMEDIES BETWEEN PARTNERS. 367 partners for money advanced, or contributions made, or liabilities incurred, simply on the ground that it has its foundation in a partnership transaction, if in other respects the suit is unobjectionable, as no technical difficulty occurs in equity, as to the joinder of all the proper parties to the suit.^ Indeed, the ordinary remedy now administered, in matters of account, or requiring an account between partners, is exclusively in equity.^ But this subject, which is rarely if ever acted upon in Courts of Equity, except upon a dissolution of the partnership, will more appropriately occur in another place.^ § 223. The Roman law did not to the same extent or precisely in the same manner as our law, recognize the distinction between remedies at law and remedies in equity, although it is very clear, that an analogous dis- tinction, between suits in the ordinary forum, and suits ex ceqiio et bono before the Praetor's forum, was well un- derstood, and fully acted upon. But, in cases of part- nership, owing to the complicated nature thereof, a special remedy was provided, commonly called the Actio pro socio, the nature, character, and operation whereof are fully explained in the Digest.'* § 22-i. And, here, a question, of a local and general > Coll. on P. B. 2, c. 3, § 2, p. 174-193, 2d ed. ; Id. c. 3, § 7, p. 245-249 ; Abbot V. Smith, 2 W. Bl. 947 ; Gow on P. c. 2, § 4, p. 93-102, 3d ed. ; 1 Stoiy, Eq. Jur. § 666-674 ; Id. § 079, 680 ; Pearson v. Skelton, 1 M. & W. 504 ; s. c. T\Tw. & G. 848. 2 Coll. on P. B. 2, c. 3, § 4, p. 197-232, 2d ed. ; Duncan v. Lyon, 3 Johns. Ch. 351, 361-363 ; Gow on P. c. 2, § 3, p. 73, 74, 3d ed. ; Id. c. 2, § 4, p. 93-102. 3 Ibid. ; post, § 228, 229 ; Forman v. Homfray, 2 Ves. & B. 329 ; Har- rison V. Armitage, 4 Madd. 143 ; Richards v. Davies, 2 Russ. & M. 347 ; Los- combe V. Russell, 4 Sim. 8 ; Knebell v. White, 2 You. & C. Ex. 15 ; Glassing- ton V. Thwaites, 1 Sim. & St. 124, and the Reporter's notes (a) and (b) ; Natusch V. Irving, Gow on P, App. 398, 3d ed. ; Wallworth v. Holt, 4 Myl. & C. 619, 635, 639. * Dig. 17, 2, 31-34, &c. ; Poth. Pand. 17, 2, n. 30-54. 368 PARTNERSHIP. [cHAP. XI. nature may arise, when, and under what circumstances, and to what extent, Courts of Equity will interfere to enforce either the express or implied duties and obliga- tions of partners inter sese. In respect to such duties and obligations as are of a positive and personal nature, it seems difficult to perceive how Courts of Equity can enforce a specific performance of them ; and, therefore, in case of a breach thereof, the injured party must be left to his remedy, if any, at law.^ But the same objec- tion does not seem to -apply to cases where the relief sought is to enforce the due observance of negative duties and obligations ; for, here, all that is required is, that the Court should restrain the partner from violat- ing them ; or. in other words, from doing acts which violate the express or implied obligation which he is under to forbear. Thus, for example, although a Court of Equity could not compel a partner to bestow his skill, and diligence, and services faithfully in the part- nership business, yet it may interpose by injunction to restrain him from wasting the partnership property, from misusing the partnership name, from interfering to stop the partnership business, or from fraudulent practices injurious or ruinous to the partnership, in vio- lation of his express duties or express contracts." 1 Kemble v. Kean, 6 Sim. 333 ; Clarke v. Price, 2 Wils. Ch. 157 ; Kimberley v. Jennings, 6 Sim. 340 ; [Downs v. Collins, 6 Hare, 418] ; Coll. on P. B. 2, c. 2, § 2, p. 142, 2d ed. ; Id. B. 2, c. 2, § 1, p. 131 ; 2 Story, Eq. Jur. § 722 a. 2 Ibid. ; Coll. on P. B. 2, c. 3, § 5, p. 233-240, 2d ed. ; Id. B. 2, c. 2, § 2, p. 142 ; 3 Kent, 60; Miles v. Thomas, 9 Sim. 606. — The comments of the Vice-Chancellor (Sir L. Shadwell) on this subject, in Kemble v. Kean, 6 Sim. 333, are so important, that they deserve to be cited at large. "In the case of a mere contract between two persons, who are both carrying on the same trade, that one shall not carry on his trade within a limited distance in which the party contracted with intends to carry on his trade, the whole agreement is of so genuine a kind, that the Court woidd enforce the performance of the agree- ment by restraining the party by injunction from breaking the agreement so made. In the case where the parties are partners, and one of the partners CHAP. XI.] REMEDIES BETWEEN PARTNERS. 369 § 225. A few illustrations of the general doctrine may be here properly introduced. Courts of Equity, contracts that he shall exert himself for the benefit of the partnership, though the Court, it is true, cannot compel a specific performance of that part of the agreement, yet, there being a partnership subsisting, the Court will restrain that party (if he has covenanted that he will not carry on the same trade ■with other persons) from breaking that part of the agreement. That is in case of a partnership. In the case of Morris v. Colman, 18 Ves. 437, the bill was filed by Morris against Colman for the purpose of having a question upon the articles of partnership determined, and for restraining Column from doing many acts which he was disposed to do ; and I think, in that case (for I was counsel for Colman from the beginning to the end), that Colman al- ways stood on the defensive. The only question was, whether Colman should be at liberty to do certain acts, which he insisted be was at liberty to do, and Morris contended that he was not. Now, I apprehend, that what Lord El- don says, in giving his judgment upon that point, must be taken with refer- ence to the subject that was before him ; and T perfectly well recollect the time when the injunction was granted to restrain Mr. Colman, but I am not quite sure it is exactly in the way in which the report represents. But Col- man insisted, generally, that he had a right to write dramatic jjieces for other theatres ; and then there was an injunction granted to restrain the represen- tation of one of the pieces which he had written, and which was intended to be represented, I think, at Covent-garden Theatre. In the argument jt was said, that the particular provision which is stated in the case, was a provision restraining Colman from writing dramatic pieces for any other theatre ; and in the argument it was said by the counsel for the plaintiflT, that that pi-ovi- sion was no more against public policy, than a stipulation that Mr. Garrick should not perform at any other theatre than that at which he was engaged, would have been. Now, with reference to what was said by counsel, upon arguing the case of a partnership, Lord Eldon says : ' If Mr. Garrick was now living, would it be unreasonable that he should contract with Mr. Col- man to perform only at the Haymai-ket Theatre, and Mr. Colman with him to write for that theatre alone ? Why should they not thus engage for the tal- ents of each other ? ' That mode of putting the question ajipears to me to show, that Lord Eldon is speaking of a case where the parties are in part- nership together ; because it would be a strange thing that one should con- tract to perform oidy at the Haymarket Theatre, and the other to write for that theatre alone, except in the case of a partnership, where both parties would be exerting themselves for their mutual benefit; because if they were not in partnership, the effect of such an agreement might be, that neither might exert his talents at all. In this case, however, there is no partnership whatever between the proprietors of Covent-garden Theatre and Mr. Kean ; but the contract is nothing more than this, that ^Ir. Kean shall, for a given remuneration, act a certain number of nights at Covent-garden Theatre, with a proviso, that in the mean time he shall not act at any other theatre. 24 370 PARTNERSHIP. [cHAP. XI. in interfering by way of injunction in cases of part- nership, act upon a sound discretion, and will not And it is quite clear, that this bill is filed for the purpose of" having the per- formance of an agreement with regard to his contract to act. [His Honor here stated the substance of the bill, and then proceeded] ; — So that it was an agreement to act at Covent-garden Theatre, a certain number of nights in the season, 1830-31, and that, in the mean time, the defendant should not act in London ; and the bill is filed for the purpose of enforcing the per- formance of that agreement, which mainly consists in the fact of his acting ; and it appears to me, that it is utterly impossible that this Court can execute such an agreement. In the first place, independently of the difficulty of compelling a man to act, there is no time stated, and it is not stated in what characters he shall act ; and the thing is altogether so loose, that it is per- fectly impossible for the Court to determine upon what scheme of things Mr. Koan shall perform his agreement. There can be no prospective declaration or direction of the Court, as to the performance of the agree- ment ; and, supposing Mr. Kean should resist, how is such an agreement to be performed by the Court ? Sequestration is out of the question ; and can it be said, that a man can be compelled to perform an agreement to act at a theatre by this Court sending him to the Fleet for refusing to act at all ? There is no method of arrivincj at that which is the substance of the contract between the parties, by means of any process, which this Court is enabled to issue ; and, therefore (unless there is some positive authority to the con- trary), my opinion is, that, where the agreement is mainly and substantially of an active nature, and is so undetermined that it is impossible to have performance of it in this Court, and it is only guarded by a negative pro- vision, this Court will leave the parties altogether to a court of law, and will not give partial relief by enforcing only a negative stipulation. I think, for the reasons which I have stated, that what Lord Eldon has said in the case of Morris v. Colman, bears upon this case. In Clarke v. Price, 2 Wils. Ch. 157 (in which, also, I was counsel), there was a positive stipula- tion, by Price, that he would write reports for Clarke the bookseller. Lord Eldon says, in his judgment, upon that case: 'The case of Morris v. Col- man is essentially different from the present. In that case, Morris, Colman, and other persons were engaged in a partnership in the Haymarket Theatre, which was to have continuance for a very long period, as long indeed as the theatre should exist. Colman had entered into an agreement, which I was verv unwilling to enforce, not that he would write for the Havinarket Theatre, but that he would not write for any other theatre. It appeared to me, that the Court could enforce that agreement by restraining him fi'om writing for any other theatre. The Court could not compel him to write for the Haymarket Theatre ; but it did the only thing in its power ; it induced him, indirectly, to do one thing by jn-ohibiting him from doing another. There was an express covenant on his part, contained in the articles of partnership. But the terms of the prayer of this bill do not solve the diffi- CHAP. XI.] REMEDIES BETWEEN PARTNERS. 371 incerfere to remedy any breaches of duty, unless they are of such a nature, as may produce permanent injury to the partnership, or involve it in serious perils or mischiefs in future. A mere fugitive, temporary breach, involving: no serious evils or mischiefs, and not endan- gering the future success and operations of the part- nership, will, therefore, not constitute any case for equitable relief.^ It is upon this ground, that Courts of Equity will not interfere in cases of frivolous vexa- tion, or for mere differences of temper, casual disputes, or other minor grievances between the parties ; but wall deem, as in some other more important relations in life, that the parties enter into them with a fair un- derstanding, that such infirmities are to be borne with, and that a separation of interests, or an injunction against acts, is not to be decreed, because one of the parties is more sullen or less good-tempered than the other.^ § 226. It was upon the same ground of the fugitive culty ; for, if this contract is one which the Court will not cany into execu- tion, the Court cannot, indirectly, enforce it by restraining Mr. Price from doing some other act.' His Lordship then proceeds to observe upon the express terms of the contract, and says, that he will not, in that case, inter- fere to enforce an implied negative stipulation ; for that is the utmost that can be made of his Lordship's observations in that case. For the reasons, which I have stated, I am of opinion, that, if this cause were now being heard, and the agreement were admitted to be such, as it appears to be, this Court could not make any decree, but must dismiss the bill." See 2 Story, Eq. Jur. § 958, and note. See also the docti'ine of the Roman law on this subject (ante, § 181), where it is stated, that the action j?ro socio for an account did not lie until after a dissolution of the partnership ; but it did in certain special partnerships, such as a partnership for collection of the public revenue (Causa Vectigalium). ' Coll. on P. B. 2, c. 3, § 5, p. 236, 2d ed. ; Charlton v. Poulter, 19 Ves. 148, n. ; Goodman v. Whitcomb, 1 Jac. & W. 589, 592 ; Miles v. Thomas, 9 Sim. GOG, 609. {See Petit v. Chevelier, 2 Beasl. 181. } 2 Goodman v. Whitcomb, iJac. & W. 589, 592 ; Coll. on P. B. 2, c. 2, § 2, p. 131, 2d ed. ; ante, § 218 ; {Cofton v. Horner, 5 Price, 537. See Anderson v. Anderson, 25 Beav. 190.} 372 PARTNERSHIP. [CHAP. XI, or temporary nature of the breach of the stipulation, that, where a covenant in the partnership articles pro- vided, that the business should be carried on in the joint names of all the partners, and that all contracts and engagements on account of the trade, and all checks and drafts drawn by them, and all receipts of money paid, should be in the joint names of all the partners, and some of them afterwards refused to fulfil the covenant, and to add the name of the plaintiff to certain contracts, entered into for and on account of the firm, the Court refused to interfere by way of in- junction.^ § 227. On the other hand, where one partner has improperly involved the partnership in debt, or has himself become insolvent, or has otherwise grossly misconducted himself. Courts of Equity will interpose, and restrain him from drawing, accepting, or indorsing, bills or notes in the name of the firm, or from contract- ing, or receiving partnership debts.^ So, an injunction will be granted against a partner, who grossly and wantonly obstructs, injures, or prevents the carrying on of the partnership business ; ^ or who designedly misapplies the property of the partnership to purposes not warranted by the articles or the objects of the 1 Marshall v. Colman, 2 Jac. & W. 266. "^ Coll. on P. B. 2, c. 3, § 5, p. 233, 234, and note (b), 2d ed. ; Williams v. Bingley, 2 Vern, 278, Mr. Raithby's note; Master v. Kirton, 3 Ves. Jr. 74 ; Lawson w. Morgan, 1 Price, 303; Hood r. Aston, 1 Russ. 412; Gow on P. c. 2, § 4, p. 108, 109, 3d ed. ; 1 Story, Eq. Jur. § 667; Miles v. Thomas, 9 Sim. 606 ; {England v. Curling, 8 Beav, 129.} ^ Charlton r. Poulter, 19 Ves. 148, note; {Smith v. Jeyes, 4 Beav. 503 ; Hall v. Hall, 12 Beav. 414 ; s. c. 20 Beav. 139 ; s. c. 3 Macn. & G. 79 ; Warder v. Stilwell, 3 Jur. n. s. 9 ; Anon. Z. v. X. 2 Kay. & J. 441 ; Lind on. P. 840. An injunction will be granted to restrain the taking away of part- nership books. Taylor v. Davis, 3 Beav. 388, note ; Greatrex v. Greatrex, 1 De G. & Sm. 692. See Morison v. Moat, 9 Hare, 241 ; Marshall v. Watson, 25 Beav. 501.} CHAP. XI.] REMEDIES BETWEEN PARTNERS. 373 trade.* If, therefore, a partnership negotiable security is misapplied, to the payment of the separate debt of one partner, an injunction will be granted to restrain its further negotiation, and to require it to be restored to the partnership, or cancelled, as the case may require, unless, indeed, it has passed into the hands of a bona fide holder, without notice of the misapplication.^ § 228. Independently of the administration of relief by Courts of Equity in the cases to which we have alluded, they will, it seems, in some instances, inter- pose and appoint a receiver of the joint effects, during the continuance of the partnership. But to authorize a partner to call for the appointment of a receiver of the stock of a subsisting partnership, he must be pre- pared to show a case of the grossest abuse and the strongest misconduct on the part of the managing partner ; for, except under such cu'cumstances, the Court will not interfere, inasmuch as the probable * Glassington r. Thwaites, 1 Sim. & St. 124, and the Reporter's note (a). {Stockdale v. UUery, 37 Penn. St. 486.} - Coll. on P. B. 2, c. 3, §5, p. 233-236, 245, 2d Marshall r. Colman, 2 Jac. & W. 266; Gow on P. c. 2, § 4, p. 111- 113, 3d ed. ; Coll. on P. B. 2, c. 3, § o, p. 236-238, 2d ed. ; Goodman v. Whitcomb, 1 Jac. & W. 589, 592 ; Loscombe v. Russell, 4 Sim. 8 ; Knebell V. White, 2 You. &C. Ex. 15 ; Bentleyr. Bates, 4 Jur. 552 ; Gow on P. Suppl. 1841, p. 2'4, 25 ; 1 Story, Eq. Jur. § 671. — On this point Mr. Gow (Gow on P. c. 2, § 4, p. Ill, 112, 3d ed.) says: " Courts of Equity will likewise in- terfere, where a breach of any of the covenants, contained in the articles of partnership, has been committed, if the breach be so important in its conse- quences as to authorize the party complaining to call for a dissolution of the partnership. One case of constant occurrence, falling under this head of equitable relief, is that of a partner raising money for his private use on the credit of the partnership firm. In a case so circumstanced, the Court inter- poses, because there is a ground for dissolving the partnership. But then the impending danger must be such, there must be that abuse of good faith between the members of the partnership, that the Court will try the ques- tion, whether the partnership should not be dissolved in consequence. Thus, where it has been covenanted, that all contracts entered into by any of the firm, and all checks, bills, and receipts for money, should be signed in the joint names of all the partners, a Court of Equity will restrain one partner from entering into any engagement in the name of ' himself and company,' or ' himself and partners,' or will dissolve the partnership. Were the Court not to lay down this rule for its guidance, separate suits might be successively instituted, praying for perpetual injunctions in respect of the breach of each particular covenant, which is a species of jurisdiction the Court has never decidedly entertained. So, if one partner exclude another from the benefits of the concern, the Court will interfere and dissolve the partnership ; and it assumes a jurisdiction on this ground, that if the partners will not allow the partnership to be carried on in the manner in which it ought to be, it is a reason for putting an end to it altogether. Neither will a Court of Equity assist in the management of the affairs of a company during its existence ; but if a sufficient case is made out to justify its interposition, it will appoint a manager in the interim, for the purpose of winding up and putting an end to the concern. But although the general principle of the Court is not to interfere in a partnership concern, unless the bill prays a dissolution ; yet there are cases of partnership for a term of years, in which it has been said the Court will interpose during the term, notwithstanding a dissolution be not prayed. Thus, where some of the members of a partnership or com- pany seek to embark one of their body in a business, which was not origi- nally part of the partnership concern, and they are unaljle to show that such partner either expressly or tacitly ac<|uiesced in the proposed extension of the concern, a Court of Equity would, it is apprehended, restrain them from proceeding in the execution of their intention, without dissolving the part- 376 PARTNERSHIP. [CHAP. XI. pending the partnership, Courts of Equity will not inter- fere to settle accounts and set right the balance between nership or company. So, where a member of a fii-m neglected to enter the receipt of partnership money in the books, and did not leave the books open for the inspection of the other partners, equity interfered without dis- solving the partnership. So, where there has been a studied, intentional, prolonged, and continued inattention to the application of one partner call- ing upon the other to observe the contract of partnership, the Court will grant an injunction against the breach of it. And, in general, circum- stances of the latter description must be disclosed, to induce a judicial inter- ference on a breach of the articles of partnership, unless a dissolution be prayed."' Mr. Collyer (Coll. on P. B. 2, c. 3, § 5, p. 236) says: "It seems clear, that a Court of Equity will sometimes award an injunction against one partner, without dissolving the partnership ; perhaps even where the delinquency of that partner is not sufficient to warrant a dissolution. At any rate, it certainly seems to have been held, that a Court of Equity will restrain the gross personal misconduct of a partner, without compelling a dissolution of the partnership before the expiration of the term. In Charlton V. Poulter, 19 Ves. 148, n., a bill was filed by Richard Charlton, senior, and junior, partners in a brewery, charging great misconduct by the de- fendant, the third partner, in disobliging and turning away the customers, prevailing on the servants to leave the brewhouse, assaulting and obstruct- ing them, causing them to quit their service, locking up the books, retaining as servants (without the plaintiff's consent) bruisers and boxers, who ob- structed the trade, threatening to ruin the trade, and refusing to account. The bill prayed, that, at the end of the partnership, the stock and utensils might be valued, and that the defendant might be compelled to receive one third part of the value, and for an injunction restraining the defendant from any act to the obstruction or the damage of the trade. On motion, after answer, for an injunction, it was ordered, that the defendant be restrained from using force, either by himself or any other person or persons, to the obstruction or interruption of the brewing trade in question, and from removing or displacing any of the servants hired or employed by the partners, or the major part of them, in carrying on the trade, without leave of the Court ; and from carrying away or removing out of the count- ing-house belonging to the partnership any partnership books or papers relating to the said trade ; and upon the plaintiff's submission, it was further ordered, that the plaintiffs be restrained in like manner. The opinion, that a partner's misconduct may be restrained by injunction, without the neces- sity of a dissolution, is sanctioned by Lord Eldon in the case of Goodman v. Whitcomb, 1 Jac. & W. 589. The parties in that case being partners in the business of carpet manufacturers, the bill was filed for a dissolution of the partnership, and the usual accounts. One of the grievances stated in the bill was, that the defendant had sold goods at an under price, and ex- CHAP. XI.] REMEDIES BETWEEN PARTNERS. 377 the partners, but await the regular wmdmg up of the concern.^ changed others for household furniture, which he had appropriated to his own use. Lord Ehlon said, that trifling circumstances of conduct were not sufficient to authorize the Court to award a dissolution. It was stated, that the defendant had exchanged carpets for household furniture ; that, perhaps, might be an improper act ; but still there might be a thousand reasons why the Court should not do more than restrain him in future from so doing; more particularly, as it was stated by the answer, that he did it, because he thought it the best thing that could be done. A Court of Equity, however, will be reluctant to award an injunction against a partner, unless there be grounds for a dissolution ; and in many cases such a course would be attended with obvious inconvenience to the parties. Marshall v. Colman, 2 Jac. & W. 266. And cases may arise where an injunction cannot with propriety be granted, whether the parties do, or do not, contemplate a dissolution of the partnership, and even though the party, against whom the Injunction is sought, may have acted contrary to the spirit of the part- nership arrangements. Thus, two persons agreed to work a coach from Bristol to London, one providing horses for a part of the road, and the other for the remainder. In consequence of the horses of one having been taken in execution, the other provided horses for that part which had been undertaken by the first. He aflerwards persisted in providing horses for the whole journey, and claimed the whole profits. Upon a motion for an injunction to restrain him from so working the coaches. Lord Eldon refused the injunction. ' It is difficult,' said his Lordship, ' to understand how such a case can be the proper subject of the jurisdiction of this Court by injunction. If I enjoin the defendant from bringing horses to convey the coaches between the limits in question, I must enjoin the plaintiff from not bringing horses there. I cannot restrain the defend- ant, unless I have the means of assuring him that he shall find the plain- tiff's horses ready. I should otherwise enjoin him from doing that, which if he omits to do, he will be liable to actions by every pei'son whom he has undertaken to convey from Bristol to London.' Smith r. Fromont, 2 Swans. 330. In this case Lord Eldon said, that a question might arise, whether the plaintiff, showing that his horses were always ready, would not be entitled to the same profit, as if they were used." See also Wilson v. Greenwood, 1 Swans. 471, where Lord Eldon said, that In the ordinary course of trade, If any one partner seek to exclude another from taking that part In the concern, which he Is entitled to take, the Court will grant a receiver. Mr. Collyer understands this declaration as applicable to cases where a dissolution is not sought. Coll. on P. B. 2, c. 3, § 6, p. 240, 241, ' Richardson v. Bank of England, 4 Myl. & C. 165, 172, 173 ; post, § 348 a. n. 378 PARTNERSHIP. [cHAP. XI. § 230. The Roman law contained doctrine, which in some measure proceeded upon similar considerations. 2d ed. [But this was shown not to be the true construction of that case, by the Lord Chancellor in Hall v. Hall, 3 Macn. & G. 79.] In the case of Loscombe v. Russell, 4 Sim. 8, the Vice-Chancellor (Sir L. Shadwell) said: "I take this to be a bill, which purposelj^ avoids the prayer for a dissolution ; and that it was not in the contemplation of the plaintiff, that the partnership should be put an end to. It would, therefore, be a surprise upon the parties to this record, if I were to deal with it, as if a dissolution were sought. Here the partnership is still subsisting ; and the bill is filed for an account merely of the dealings and transactions of the partnership. With respect to the law of this Court upon this subject, there is no instance of an account being decreed of the profits of a partnership, on a bill which does not pray a dissolution, but contemplates the subsistence of the partnership. The opinion of Lord Eldon upon this subject has been, from time to time, expressed both before and since the decision of Harrison V. Armitage. Suppose that the Court would entertain a bill like the pres- ent, and direct an account to be taken of the dealings of a partnership, and that it appeared, by the Master's report, that a balance was due from the defendant to the plaintiff; then, upon further directions, the plaintiff would ask for an order, that the balance might be paid to him ; it would, however, be competent to the defendant to file a supplemental bill, in order to show, that, since the account was taken, a balance had become due to him from the plaintiff, after giving the plaintiff credit for the amount found due to him by the Master ; and thus the matter might be pursued with endless changes, and supplemental bills might be filed every year, that the partnership con- tinued, and a balance would never be ascertained until the partnership ex- pired, or the Court put an end to it. This Court will not always interfere to enforce the contracts of parties ; but will, in some instances, leave them to their remedy at law; as in the cases of agreements for the purchase of stock, or for the building of houses. With respect to occasional breaches of agreements between partners, when they are not of so grievous a nature, as to make it impossible that the partnership should continue, the Court stands neuter. But when it finds, that the acts complained of are of such a chai'- acter as to show, that the parties cannot continue partners, and that relief cannot be given but by a dissolution, the Court will decree it, although it is not specifically asked. Here a dissolution is not prayed for ; and, if the Court were to do what is asked, it would not be final. Having regard, then, to the opinion expressed by Lord Eldon, both before and after the decision in Harrison v. Armitage, my settled opinion is, that this bill cannot be main- tained ; and, therefore, the demurrer must be allowed." In the recent case of Miles V. Thomas, 9 Sim. 606, 609, the same learned judge said: "I am of opinion, that the Court ought to interfere between copartners, when- ever the act complained of is one that tends to the destruction of the part- CHAP. XI.] REMEDIES BETWEEN PARTNERS. 379 Ordinarily the action 2^'''^o socio did not lie to enforce a right to a general account between partners until after nership property, notwithstanding a dissolution of the partnership may not be jirayed." Lord Cottenliam in the recent case of Wallworth v. Holt, 4 Myl. & C. 619, 635, 639, said: "When it is said that the Court cannot give relief of this limited kind, it is, I presume, meant that the bill ought to have prayed a dissolution, and a final winding up of the affairs of the couipany. How far this Court will interfere between partners, except in cases of dissolution, has been the subject of much difference of opinion, upon which it is not my purpose to say any thing beyond what is necessary for the decision of this case ; but there are strong authorities for holding that to a bill praying a dissolution all the partners must be parties ; and this bill alleges that they are so numerous as to make that impossible. The result, therefore, of these two rules would be, — the one binding the Court to withhold its jurisdiction except upon Ijills praying a dissolution, and the other requiring that all the partners should be 2>arties to a bill praying it, — that the door of this Court would be shut in all cases in which the partners or shareholders are too nu- merous to be made parties, which in the present state of the transactions of mankind, would be an absolute denial of justice to a large portion of the subjects of the realm, in some of the most important of their affairs. This result is quite sufficient to show that such cannot be the law ; for, as I have said upon other occasions, I think it the duty of this Court to adapt its prac- tice and course of proceeding to the existing state of society, and not by too strict an adherence to forms and rules, established under different circum- stances, to decline to administer justice, and to enforce rights for which there is no other remedy. This has always been the principle of this Court, though not at all times sufficiently attended to. It is the ground upon which the Court has, in many cases, dispensed with the presence of the parties who would, according to the general practice, have been necessary parties. In Cockburn v. Thompson, Lord Eldon says, ' A general rule, established for the convenient administration of justice, must not be adhered to in cases in which, consistently with practical convenience, it is incapable of application ; ' and again, ' The difficulty must be overcome upon this principle, that it is better to go as far as possible towards justice than to deny it altogether.' If, therefore, it were necessary to go much further than it is, in opposition to some highly sanctioned opinions, in order to open the door of justice in this Court to those who cannot obtain it elsewhere, I should not shrink from the responsibility of doing so ; but in this particular case, notwithstanding the opinions to which I have referred, it will be found that tliere is much more of authority in support of the equity claimed by this bill than there is against it. It is true that the bill does not pray for a dissolution, and that it states the company to be still subsisting ; but it does not pray for an account of partnership dealings and transactions, for the purpose of obtaining the sliare of profits due to the plaintiffs, which seems to be the case conteuqjlated in 380 PARTNERSHIP. [chap. XI. I a dissolution of the partnership. But in special cases, as, for example, in cases where the partnership was for the opinions to which I have referred ; but its object is to have the common assets realized and applied to their legitimate purpose, in order that the plain- tiffs may be relieved from the responsibility to which they are exposed, and which is contrary to the provisions of their common contract, and to every principle of justice. But whether the interest of the plaintiffs, in right of which they sue, arises from such responsibility or from any other cause, can- not be material ; the question being, whether some partners, having an inter- est in the application of the partnership property, are entitled, on behalf of themselves and the other partners, except the defendants, to sue such re- maining partners in this Court for that purpose, pending the subsistence of the partnership ; and if it shall appear that such a suit may be maintained by some partners on behalf of themselves and others similarly circumstanced against other persons, whether trustees and agents for the company, or stran- gers being possessed of property of the company, it may be asked why the same right of suit should not exist when the party in possession of such prop- erty haj^pens also to be a partner or shareholder ? In Chancey v. May, the defendants were partners. In the Widows' Case, before Lord Thurlow, cited by Lord Eldon, the bill was on behalf of the plaintiffs and all others in the same interest, and sought to provide funds for a subsisting establishment. In Knowles v. Houghton, 11th July, 1805, reported in Yesey, but more fully in CoUyer on the Law of Partnership, the bill prayed an account of part- nership transactions, and that the partnership might be established ; and the decree directed an account of the brokerage business, and to ascertain what, if any thing, was due to the plaintiff in respect thereof; and the Master was to inquire whether the partnership between the plaintiff and the defendant had at any time, and when, been dissolved ; showing that the Court did not consider the dissolution of the partnership as a preliminary necessary before directing the account. In Cockburn v. Thompson, the bill prayed a disso- lution ; but it was filed by certain proprietors on behalf of themselves and others, and Lord Eldon overruled the objection that the others were not parties. In Hichens v. Congreve, the bill was on behalf of the plaintiff and the other shareholders, against other shareholders who were also directors, not praying a dissolution, but seeking only the repayment to the company of certain funds alleged to have been improperly abstracted from the partner- ship property by the defendants ; and Sir Anthony Hart overruled a de- murrer, and his decision was affirmed by Lord Lyndhurst. In Walbum v. Ingilby, the bill did not pray a dissolution of partnership, and Lord Brough- am, in allowing the demurrer upon other grounds, stated that it could not be supported upon the ground of want of parties, because a dissolution was not prayed. In Taylor v. Salmon the suit was by some shareholders, on behalf of themselves and others, against Salmon, also a shareholder, to recover property claimed by the company, whicli he had ap])ropriated to himself; and the Vice-Chancellor decreed for the plaintifl", which was affirmed on ap- CHAP. XI.] REMEDIES BETWEEN PARTNERS. 381 the collection of the public revenue (causa vectigalmm), which jiartnership was held, on grounds of public pol- peal. The bill did not prav a dissolution, and the company was a subsisting and continuing partnership. That case and Hichens v. Congreve differ from the present in this only, that in those cases the partnerships Avere flourish- ing and likely to continue, whereas in the present, though not dissolved, it is. unable to carry on the purpose for which it was formed, an inability to be attributed in j^art to the withholding that property which this bill seeks to recover. So far this case approximates to those in Avhich the partnership has been dissolved ; as to which it is admitted that this Court exercises its jurisdiction. This case also differs from the two last-men- tioned cases in this, that the difficulty in which the plaintiffs are placed, and the consequent necessity for the assistance of this Court, is greater in this case; — no reason, certainly, for withholding that assistance. How far the principle upon which these cases have proceeded is consistent with the doctrine in Loscombe v. Russell, ' that in occasional breaches of con- tract between partners, when they are not of so grievous a nature as to make it impossible that the partnership should continue, the Court stands neuter, will be to be considered if the case should arise. It is not neces- sary to express any opinion as to that in the present case ; but it may be suggested that the supposed rule, that the Court will not direct an account of partnership dealings and transactions, except as consequent upon a disso- lution, though true in some cases, and to a certain extent, has been supposed to be more generally applicable than it is upon authority, or ought to be upon principle. It is, however, certain, that this supposed rule is directly opposed to the decision of Sir J. Leach, in Harrison v. Ai-mitage, and Rich- ards V. Davies. Having referred to so many cases, in which suits similar to the present have been maintained by some partners on behalf of themselves and others, it is scarcely necessary to say any thing as to the objection for want of parties; and as to the assignees of those shareholders who have be- come bankrupts, those assigriees are now shareholders in their places, for the purpose of any interest they have in the property of the company ; and, as such, are included in the number of those on whose behalf the suit is instituted. A similar objection was raised and overruled, in Taylor v. Sal- mon, as to the shares of Salmon. Upon the authority of the cases to which I have referred, and of the principle to which I have alluded, if it be neces- sary to resort to it, I am of opinion that the demurrer cannot be supported ; and that the usual order, overruling a demurrer, must be substituted for that pronounced by the Vice-Chancellor.'' [See this case explained in Hall V. Hall, 3 Macn. & G. 79.] In Fairthorne v. Weston, 3 Hare, 387, 391, Yice-Chancellor Wigram said : " The argument for the defendant turned wholly upon the proposition, that a bill praying a particular account is demurrable, unless the bill seeks and prays a dissolution of the partnership ; in support of which, the case of Loscombe v. Russell, and the cases there cited, were relied upon. That 382 PARTNERSHIP. [CHAP. XI. icy, not to be dissolved, even by the death of one part- ner, contrary to the common rule of that law, as to general partnerships,^ an action pro socio lay for an ac- count during the existence of the partnership. Nommn- quam necessarium est, et mcmente societate, agi pro socio. Veluti cum societas, vectigaVmm causa coit est {prop)terque varios contractus neutri expediat rece- dere a societate), 7iec refertur iii medium., quod ad al- terum pervenerit.^ § 231. Independently of the relief which Courts of Equity are thus disposed to grant by way of injunction, in order to prevent, suppress, or redress acts of miscon- duct, and breaches of duty, and positive engagements by any one partner, during the continuance of the partnership, there is another auxiliary authority, which is sometimes granted, and which, indeed, in many cases, there may be cases to which the rule there laid down is applicable, I am not pi-epared to deny, but the law as laid down in that case was never admitted to be a rule of universal application. Harrison v. Armitage ; Richards v. Davies. And the iniequivocal expression of the opinion of Lord Cotten- ham, in Taylor v. Davies and Walworth v. Holt, of the Vice-Chancellor of England, in Miles v. Thomas, and of Lord Langdale, in Richardson v. Hastings, shows that there is no such universal rule at the present day; and I cannot but add, that it is essential to justice that no such universal rule should be sustained. If that were the rule of the Court, — if a bill in no case would lie to compel a man to observe the covenants of a partner- ship deed, — it is obvious that a person fraudulently inclined might of his mere will and pleasure, compel his copartner to submit to the alternative of dissolving a partnership, or ruin him by a continued violation of the part- nership contract." See also 1 Story, Eq. Jur. § 667-672. {"Whatever doubt there may formerly have been upon the subject, it is clear that an injunction will not be refused simply because no dissolution of partnership is sought." Lind. on P. 840. In Anon. Z. v. X. 2 Kay. & J. 441, an injunc- tion was granted against partners, restraining them from preventing a co- partner, who had recovered from a temporary attack of insanity, from tran- sacting the business of the firm. In England v. Curling, 8 iieav. 129, and Hall V. Hall, 12 Beav. 414, s. c. 3 Macn. & G. 79, injunctions were granted, though no dissolution was sought. See § 231, note.} • D. 17, 2, 6o, 9; Id. 17, 2, 59; Poth. Pand. 17, 2, n. 56, 57. == D. 17, 2, 65, 15; Poth. Pand. 17, 2, n. 33; ante, § 182, 221, note. CHAP. XI.] REMEDIES BETWEEN PARTNERS. 383 is indispensable to the complete protection and security of the other partners, and that is, by the appointment of a receiver to collect the debts and receive the assets of the partnership.^ But this course is rarely advisable, and indeed is never granted by Courts of Equity, un- less where a case is made out of such gross abuse, and misconduct on the part of one partner, that a dissolu- tion ought to be decreed, and the affairs of the partner- ship wound up.^ ' Coll. on p. B. 2, c. 3, § 6, p. 240-244, 2(1 ed. ; ante, § 228, 229. [See Bailey v. Ford, 13 Sim. 495.] ^ Coll. on P. B. 2, c. 3, § 6, p. 240-243, 2d ed. ; Gow on P. c. 2, § 4, p. 114, 3d ed. {See § 228, 330.} — Mr. Gow has well summed up the leading doctrines upon this subject, in a passage, a part of which has been already cited (ante, § 228). He says: "Independently of the administra- tion of relief by a Court of Equity, in the cases to which we have alluded, it will, it seems, in some instances, interpose ; and, during the continuance of a partnership, appoint a receiver of the joint effects. But to authorize a party to call for the appointment of a receiver of the stock of a subsisting partnership, he must be prepared to show a case of the grossest abuse, and of the strongest misconduct, on the part of the managing partner ; for, ex- cept under such circumstances, the Court will not interfere, inasmuch as the probable result of its interposition is the destruction of the trade. Oliver v. Hamilton, 2 Anst. 453 ; Milbank v. Revett, 2 Mer. 405. In a note to the case of Glassington i\ Thwaites, 1 Sim. & St. 124, 129, it is questioned by the learned reporters, whether the Court will ever interfere on an interlocutory aiiplication for a receiver or injunction, in the case of a partnership, occa- sioned by the acts of the parties, unless on circumstances clearly established, of fraud, entire exclusion, or gross misconduct. Nor will a re(ei\er be appointed upon a summary application, where there is a covenant to refer, and no attempt has been made to submit the matter in dispute to arbitration. Waters v. Taylor, 15 Ves. 10. But if, in the ordinary course of trade, any of the partners seek to exclude another from taking that part in the concern which he is entitled to take, the Court will grant a receiver, because such conduct warrants a dissolution. Wilson v. Greenwood, 1 Swans. 471 ; s. c. 1 Wils. Ch. 223. See also Read v. Bowers, 4 Bro. Ch. 441; Charl- ton V. Poulter, 19 Ves. 148, n. The principle, indeed, upon wliicli t!ie Court of Chancery interferes between partners, by appointing a receiver, is merely with a view to the relief, by winding up and disposing of the con- cern, and dividing the product, but not for the purpose of carrying on the partnership. W^aters v. Taylor, 15 Ves. 10. Therefore, a receiver of a partnership Avill not be appointed upon motion, unless it appear that the jilaintiff will be entitled to a dissolution at the hearing ; for otherwise the 384 PARTNERSHIP. [cHAP. XI. § 232. To the foregoing enumeration of cases of reme- dial justice, administered by Courts of Equity between Court might make itself the manager of every trade in the kingdom. Good- man V. Whitcomb, 1 Jac. & W. 589 ; Chapman v. Beach, Id. 591 ; Harrison V. Armitage, 4 Madd. 143. And where it seems absokitely necessary that a receiver should be appointed of partnership property, the Court will always pause before it takes a step likely to be so ruinous to the parties. Waters v. Taylor, 15 Ves. 10; Peacock v. Peacock, 16 Ves. 49, 57. A Court of Equity, on an application properly substantiated, will appoint a receiver of a mine or colliery, as well as of an ordinary partnership in trade ; be- cause where persons have different interests in such a subject, and manufiicture and bring to market the produce of the land as one common fund, to be sold for their common benefit, it is to be regarded rather as a species of trade or partnership, than as a mere tenancy in common in the land. Jef- ferys v. Smith, 1 Jac. & W. 298 ; Story v. Lord Windsor, 2 Atk. 630 ; Crawshay ». Maule, 1 Swans. 495, 518; s. C. 1 Wils. Ch. 181 ; Williams v. Attenborough, Turn. & R. 70 ; Fereday v. Wightwick, Taml. 250. But if the claimant to an equitable interest, in such a concern, knowingly suffers great expense and risk to be incurred before he asserts his equitable right, and, keeping aloof while the undertaking is hazardous, seeks the intei-position of the Court only when it is attended with a profitable result, the Court will not interfere by appointing a receiver, on motion, and it is doubtful Avhether it would interpose in such a case, even by decree. Norway v. Rowe, 19 Ves. 144; Senhouse v. Christian, cited Id. 157. In particular cases, equity will restrain the improper conduct of a partner without appointing a receiver. Seeley v. Boehm, 2 Madd. 176 ; but see Smith v. Fromont, 2 Swans. 330, and Glassington v. Thwaites, 1 Sim. & St. 124. Where, by the partnership agreement, the concern was to be managed by a committee, the share of each proprietor dying or retiring, to be first offered to the committee, to be purchased for the general body, it was held, that the whole concern could not be sold but with the consent of all ; and that, where all but two out of thirty-one had agreed, and sold the concern, such sale did not pass the share of such two ; but in such a case there need be no previous offer to the com- mittee. Chappie V. Cadell, Jac. 537 ; " Gow on P. c. 2, § 4, p. 114-116, 3d ed. See also Peacock v. Peacock, 16 Ves. 49 ; Oliver v. Hamilton, 2 Anst, 453; Richards v. Davies, 2 Russ. & M. 347 ; {§ 228, 330; Liud. on P. 849. A receiver will not be appointed unless with the view of dissolving a partnership. Hall v. Hall, 3 Macn. & G. 79 ; Roberts v. Eberhardt, Kay, 148; Smith V. Jeyes, 4 Beav. 503; Henn v. Walsh, 2 Edw. Ch. 129; Walker v. House, 4 Md. Ch. 39. It is not necessary, however, that the plaintiff's bill should expressly pray for a dissolution, if the object of the suit is to wind up the partnership affairs. Shepperd v. Oxenford, 1 Kay & J. 491. See Madgwick v. Wimble, 6 Beav. 495. Sloan v. Moore, 37 Penn. St. 217. " In granting or refusing an order for a receiver, the court does not act on the same principles as when it grants or refuses an injunction ; it CHAP. XI.] REMEDIES BETWEEN PARTNERS. 385 partners, during the partnership, or in contemplation of the dissohition thereof, may be added the cases, in which rehef will be granted, where the partnership has been entered into by one partner, under circumstances of gross fraud or gross misrepresentation by the others ; for in such cases Courts of Equity will not only decree the same to be void, but will also interpose and restore the injured party to his original rights and property, as far as is practicable.^ In cases of this sort, Courts of Equity proceed upon the same general ground, as in other cases where a fraud has been perpetrated upon an innocent partner ; as, for example, in the case already suggested, where one partner sold out to the other for an inadequate consideration, in consequence of the fraudulent concealment by the latter of the real state of the funds ; " for fraud will infect with a fatal taint every transaction, however solemn ; and good faith and confidence, and frank and honorable dealing are, or being one thing to manage the affairs of a partnership oneself, and another to prevent a person who has ah-eady misconducted himself from interfering further witli the pai-tnership concerns. See Hall v. Hall, 3 Macn. & G. 79, 85. Another reason for drawing a distinction between an injunction and a receiver is, that whilst the former excludes only the person against whom it is granted, the latter excludes all the partners from taking part in the man- agement of the concern. It, therefore, does not follow that because the court will grant an injunction, it will also appoint a receiver, or that because it refuses to appoint a receiver, it will also decline to interfere by injunction. Although an injunction was granted, a receiver was refused, in Read v. Bowers, 4 Bro. Ch. 441 ; Hartz v. Schrader, 8 Ves. 317 ; Hall v. Hall, 12 Beav. 414, and 3 Macn. & G. 79." Lind. on P. 851. And see Garretson 17. Weaver, 3 Edw. Ch. 385, and § 229, note.} > Coll. on P. B. 2, c. 3, § 7, p. 244, 245, 2d ed. ; Gow on P. c. 2, § 4, p. 107, 3d ed.; Tattersall v. Groote, 2 B. & P. 131 ; Ex parte Broome, 1 Rose, 69; Hamil c. Stokes, 4 Price, 161; s. c. Daniell, 20; Oldaker v. Lavender, 6 Sim. 239; Green v. Barrett, 1 Sim. 45; Jones v. Yates, 9 B. & C. 532. {Rawlins r. Wickham, 3 De G. & J. 304.} — If third persons are interested and connected with such frauds, they also should be parties to the bill, as well as the offending partners. Coll. on P. B. 3, c. 2, § 7, p. 2-15, 246, 2d ed. ; Fawcett v. Whitehouse, 1 Russ. & M. 132. " Ante, § 172; Blain v. Agar, 2 Sim. 289 ; 1 Story, Eq. Jur. § 220. 25 386 PARTNERSHIP. [CHAP. XI. ought to be, emphatically the groundwork of all part- nership engagements. § 233. Upon similar grounds, Courts of Equity^ will hold each partner responsible to the other for all losses and injuries, sustained by his past misconduct, or negli- gences or misapplication of the partnership funds or credit.^ Hence, if any partner has withdrawn, or used the partnership funds or credit in his own private trade, or private speculations, he will be held accountable, not only for the interest of the funds so withdrawn, or credit misapplied, but also for all the profits which he has made thereby.^ On the other hand, if there are any losses incurred by him thereby, they must be borne ex- clusively by himself.'* * [But not courts of law. Capen v. Barrows, 1 Gray, 3 76, 382.] ' Caldwell V. Leiber, 7 Paige, 483. [Compensation will be given, substan- tially in the nature of unliquidated damages. Bury u. Allen, 1 Coll. 589, 604.] 3 Stoughton V. Lynch, 1 Johns. Ch. 46 7; s. c. 2 Johns. Ch. 209; Brown i\ Litton, 1 P. Wms. 140; Crawshay v. Collins, 15 Ves. 218; Somerville v. Mackay, 16 Ves. 382, 387, 389 ; 1 Story, Eq. Jur. § 667 ; Story on Ag. § 207. ^ [The Statute of Limitations strictly bars only legal remedies ; but Courts of P^quity, by their own rules, independently of any statute, give great effect to length of time, and refer frequently to the Statute of Limitations as fur- nishing a convenient measure for an equitable bar. Beckfbrd v. Wade, 17 Ves. 87, 96 ; Coll. on P. B. 2, c. 3, § 374, p. 339, Perkins's ed. In analogy to the statute, they have adopted in many cases the limit of six years. Sterndale V. Hankinson, 1 Sim. 393 ; Acherley v. Roe, 5 Ves. 565, note b, and cases cited, Sumner's ed. Though in cases of direct trust, no length of time bars the claim between the trustee and cestui que trust ; yet where there is a trust by implication, it must be pursued within a reasonable time. Ex parte Has- ell, 3 You & C. 617 ; Edwards v. University, 1 Dev. & Bat. Eq. 325. See Townshend w. Townshend, 1 Bro. Ch. 550, 554, and notes, Perkins's ed. ; Beck- ford V. Wade, 17 Ves. 87, and note, Sumner's ed. And there is high authority for a proposition that a Court of Equity will not, after six years* acquiescence, unexplained by circumstances, nor countervailed by acknowl- edgment, decree an account between a surviving partner and the estate of a deceased partner. Tatani v. Williams, 3 Hare, 34 7, 358 ; Barber v. Barber, 18 Ves. 286 ; Ault v. Goodrich, 4 Russ. 430 ; Bridges v. Mitchell, Gilb. Eq. 224 ; Martin v. Heathcote, 2 Eden, 169. But see Robinson v. Alexander, 8 Bligb, . N. s. 352; s. c. 2 CI. & Fin. 717. The cases, arising under the exception of Merchants' Accounts, in the Statute of Limitations, have been supposed to CHAP. XI.] REMEDIES BETAVEEN PARTNERS. 387 afford an analogy on questions between partner and partner. Tatam v. Williams, 3 Hare, 34 7. But it is doubtful whether this exception applies at law, where all dealings have ceased more than six years. Inglis v. Ilaigh, 8 M. & W. 769 ; Cottam v. Partridge, 4 Man. & G. 271 ; Spring v. Gray, 5 Mason, 505 ; Coster v. Murray, 5 Johns. Ch. 522; Bass v. Bass, 6 Pick. 362; s. c. 8 Pick. 187 ; Union Bank v. Knapp, 3 Pick. 96 ; Coll. on P. B. 2, c. 3, § 376, note, Perkins's ed.] {See, in addition to the cases cited in this note, Foster v. Hodgson, 19 Ves. 180; Scott v. Milne, 5 Beav. 215; Whitley v. Lowe, 25 Beav. 421; s. c. 2 De G. & J. 704; Bispham v. Price, 15 How. 162; King v. Wartelle, 14 La. Ann. 740; Massey u. Tingle, 29 Mo. 437; Lind. on P. 760.} 388 PARTNERSHIP. [CHAP. XII. CHAPTER XII. REMEDIES BY PARTNERS AGAINST THIRD PERSONS. { § 234. No action lies between firms which have a common partner. 235. This rule confined to the common law. 236. Jacaud v. French, 12 East, 317. 237. A ^partnership cannot sue on a bill on which one partner is liable. 238. A partnership cannot sue on a bill obtained by the fraud of a partner. 239. Whether husband and wife, partners abroad, can sue in England. 240. A partnership cannot sue if one partner be an alien enemy. 241. Joining of dormant and of nominal partners. 242. In the case of written instruments. 243. Partnei'ship contracts in the name of one partner. 244. Who must sue when the firm has been changed. 245-248. A surety or guarantor for advances by a firm discharged by change in the firm. 249. Continuing contracts terminated by a change. 250. Bonds "iven to a firm for good conduct of its agents. 251. Guaranty for a firm discharged by change. 252. Extension or release of a debt by one partner binds the firm. 253. When dealing with a new firm discharges a debt to the old firm. 254. Debt not assignable to a new firm, without the debtors' consent. 255. Suit, how brought, when an infant partner has disclaimed. 256-258. Actions by partnershi2:)s for torts. 259. Suits in equity by j^artuers. 260. Levy on separate property for partnershija debts. 261-263. Levy on partnership property for separate debts. 264. Injunction of sale by the sherifi". Trustee process.} § 234. We come, in the next place, to the remedies which belong to partners in their collective capacity, against third persons ; and this will detain us but for a very short time. And here, it may be laid down as a general rule, that, at law, partners in their collective capacity are entitled to the same remedies, to be ad- ministered in the same way, as individuals have for CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 389 the assertion of tlieir rights, and the redress of their wrongs.^ There are, however, some few exceptions, one of which is a remarkable exception, and is purely technical, and stands upon grounds peculiar to the common law. It is, where the suit is between the firm and one of its partners, or between one firm and another firm, in each of which one and the same per- son is a partner. In cases of this sort the common law requires, that all the persons jointly interested in the contract, or the wrong, should be made parties ; and it is treated as an unjustifiable anomaly, if not as an absurdity, that one and the same person should, in the same suit, at once sustain the twofold character of plaintifi" and of defendant, to enforce a right or re- dress a wrong, arising either from the contract, or act, or misconduct of those with whom he is jointly con- cerned, or jointly interested.^ It will make no differ- ence, in cases of this sort, whether the suit is brought in the lifetime of all the partners, or after the death of one of them ; because, in contemplation of law, no valid legal contract ever existed between the partners ; and therefore the death of any one of them cannot make the contract available at law.^ S 235. We have had already occasion to take notice, that this exception is peculiar to Courts of Common Law, and has no recognition whatsoever in Courts of ' Gow on P. c. 3, § 1, p. 117, 118, 3d ed. ; Coll. on P. B. 2, c. 3, § 2, p. 177, 188-193, 2d ed. ; Id. B. 3, c. 5, p. 457. ■' Gow on P. c. 3, § 1, p. 118, 119, 3d ed. ; ante, § 221 ; Coll. on P. B. 2, c. 3,§ 2, p. 177, 188-193, 2d ed. ; Id. B. 3, c. 5, p. 457 ; Jones v. Yates, 9 B. & C. 532; Bosanquet v. Wray, 6 Taunt. 597; Moffatt v. Van Millinnen, 2 B. & P. 124 n. ; De Tastet v. Shaw, 1 B. ifc Aid. G64 ; Teague v. Hubbard, 8 B. & C. 345 ; Harvey v. Kay, 9 B. & C. 356 ; Neale v. Turton, 4 Bing. 149 ; [Denny v. Metcalf, 28 Me. 389 ; Green v. Chapman, 27 Vt. 236.] 3 Gow on P. c. 3, § l,p. 119, 120, 3d ed.; Bosanquet v. Wray, 6 Taunt. 597. See Bailey v. Bancker, 3 Hill, (N. Y.) 188. 390 PARTNERSHIP. [cHAP. XII. Equity.^ In the latter Courts, indeed, all the parties in interest must join, and be joined in the suit ; but it is sufficient that all of them are on one side or the other side of the record ; and they need not be all plamtiffs or all defendants in the same suit, even where the controversy is between two firms, in each of which some of them are partners.^ We have also had occa- sion to see, that no such objection was recognized in the Roman jurisprudence ; and that it is unknown to the jurisprudence of Scotland and of France, and probably also of most, if not of all, of the commercial nations of continental Europe.^ § 236. Analogous in principle to the case already stated at the common law, is that of one firm, partly composed of a common partner in another firm, which seeks by a suit to enforce a security against a stranger, after satisfaction of that security has been obtained from the latter firm. In such a case, the money re- ceived by the one firm being paid, and accepted in satisfaction of the security, the common partner in each firm will not be permitted to contravene the receipt thereof for that purpose, nor will he be allowed to sue upon such security, as one of the firm, although he is personally ignorant of the circumstances which constitute the satisfaction.'* This turns upon the gen- 1 Ante, § 221, note; § 222. ■ Ante, § 221 and note, § 222 ; 1 Story, Eq. Jur. § 666-674. 3 D. 17, 2, 65, 15; Id. 17, 2, 52 ; Poth. Pand. 17, 2, n. 33 ; 2 Bell. Coram. B. 7, p. 619, 620, 5th ed. ; Poth. de Soc. n. 135, 136. — Mr. Bell, in the passage alread}' cited (ante, § 221, note (1), 2 Bell. Comm. 620, 5th ed.),says:. "In Scotland, debts between companies, in which the same individual is a partner, are every day sustained, as quite unexceptionable." It is to be lamented that the like rule has not been incorporated into the common law, treating the firm, for the purposes of the suit, as an artificial body, or quasi corporation. It would be highly convenient, and certainly conformable to the common sense of the commercial world. * Gow on P. c. 3, § 1, p. 120, 121, 3d ed. See Bailey v. Bancker, 3 Hill, (N. Y.) 183. CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 391 eral principle, that the receipt of a partnership debt by one partner is a full discharge thereof against the firm ; for each partner is, sui juris, competent to receive it on behalf of all, and duly to release and discharge the debtor.^ And when once payment or satisfaction has been made to one partner, it can be of no consequence that he is connected with another firm ; for this does not enable him to contravene his own act ; and if he has no personal knowledge thereof, the receipt by his partners is treated, in construction of law, as his own receipt, and his assent is bound up in theirs.^ There- fore, where A. was a partner with 13., in one mercantile house, and with C. in another, and, after the former house had indorsed a bill of exchange to the latter, B., acting for the firm of A. and B., received securities to a large amount from the drawer of the bill, upon an agreement by B., that the bill should be taken up and liquidated by B.'s house ; and, if not paid by the ac- ceptors when due, it should be returned to the drawer ; the Court of King's Bench held, that the deposited securities being paid, and the money, therefore, being received by B. in satisfaction of the bill, A. was bound by this act of his partner B., in all respects ; and, there- fore, he could not, in conjunction with C, his partner in the other house, maintain an action, as indorsees and holders of the bill, against the acceptors, after such satisfaction received through the medium of, and by agreement with B., in discharge of the same.^ § 237. Upon a similar ground, if a partnership be- come possessed of a negotiable security, whicli has been procured by one partner, upon the understanding, that he will punctually provide for the payment thereof » Ante, § 114, 120, 131. 2 Jaoaud v. French, 12 East, 317. " Ibid. 392 PARTNERSHIP. [cHAP. XII. at its maturity, the partnership cannot sue upon such security ; because the same partner must be made one of the plaintiffs, and, as it is clear in suct^ a case, that he could not maintain any suit in his own name thereon, the same objections will avail against him, as a co- plaintiff. Thus, where one partner in a banking house drew a bill in his own name upon a third person, who accepted the same, upon the condition that the partner would provide funds for the payment thereof at its maturity; and the bill was afterwards indorsed to the partnership, and a suit was thereupon brought by all the partners against the acceptor ; it was held, that the action was not maintainable ; because all the partners were bound by the acts of that partner, and as between him and the acceptor, there was no pretence of any right to recover.^ So, also, a partner holding a security of the firm, by indorsement from the payee or other indorser, cannot sue the indorser thereon.^ § 238. The same principle will apply to a case where all the partners sue upon an acceptance, or other security, procured fraudulently by one partner, without any participation or knowledge of the fraud by the other partners ; for he must still be made a party plain- tiff in the suit; and his fraud not only binds himself, but his innocent partners in that suit; for, unless all the plaintiffs are entitled to recover, the suit must fail.^ The case may even be put still more strongly; for if the security be a fraudulent contrivance between the guilty partner and the third person, in fraud of the partnership, there can be no suit against such third per- 1 Sparrow v. Cliisman, 9 B. & C. 241. 2 Bailey v. Bancker, 3 Hill, (N. Y.) 183. 3 Cow on P. c. 3, § 1, p. 120, 3d ed. ; Richmond v. Heapy, 1 Stark. 202, 204: Johnson?;. Peck, 3 Stark. 66; {Weavers. Rogers, 44 N. H. 112; John- son V. Byerly, 3 Head, 194.] CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 393 son at law, founded thereon, since the guilty partner is at law a necessary plaintiff in every such suit.^ ' Jones V. Yates, 9 B. & C. 532 ; Kilby v. Wilson, Ry. & Mood. 178 ; [Fel- lows V. Wyman, 33 N. H. 351, 358 ; Homer v. Wood, 11 Cush. 62, in which the subject is very clearly presented by Bigelow, J.] { Wallace v. Kelsall, 7 M. & W. 264 ; Greeley v. Wyeth, 10 N. H. 15 ; Miller v. Price, 20 Wis. 117.} Lord Tenterden, in delivering the judgment of the Court, in the case of Jones V. Yates, went fully into the reasoning, on which this doctrine of the common law is founded ; and, therefore, although somewhat long, the pas- sage is here inserted: '• These were two actions brought by the plaintiffs, as assignees of Sykes & Bury. The first was an action of trover to recover the value of three bills of exchange, which belonged to Sykes & Bury, and which Sykes had indorsed to the defendants, with whom he had been in part- nership, in part payment of a demand, due from him to the partnership of Sykes, Yates, & Young, and by him again immediately indorsed in the name of that partnership to Alzedo, who was a creditor of the firm. The second ac- tion was to recover money, drawn by Sykes from the funds of himself and Bury, and paid into the hands of Yates, in further discharge of the balance before mentioned, without the knowledge of Bury. Both the transactions were frauds by Sykes, on his partner, Bury, and it must be taken, that Yates (at least when the bills were indorsed and the money paid) knew the bills and money came from the funds of Sykes & Bury, without the knowledge of Bury. It may be doubtful, whether Young was actually privy to either tran- saction ; but in our view of the case, that point is not material. On behalf of the defendant, it was contended, that Sykes & Bury could not (if they had continued solvent) have maintained any action against Yates & Young, in re- spect of either of these transactions ; and that, if that were so, the plaintiffs, their assignees, could not sue, they having no better remedy at law than Sykes & Bury would have had. And we are of this opinion. It is unnecessary, there- fore, to advert to any of the other points, raised in argument at the bar. We are not aware of any instance, in which a person has been allowed, as plaintiff in a court of law, to rescind his own act, on the ground, that such act was a fraud on some other person ; whether the party seeking to do this has sued in his own name only, or jointly with such other person. It was well observed on behalf of the defendants, that where one of two persons, who have a joint right of action, dies, the right then vests in the survivor. So that, in this case (if it be held that Sykes and Bury may sue), if Bury had died before Sykes, Sykes might have sued alone, and thus for his own benefit have avoided his own act, by alleging his own misconduct. The defrauded partner may perhaps have a remedy in equity, by a suit in his own name against his partner, and the person with whom the fraud was committed. Such a suit is free from the inconsistency of a party suing on the o-round of his own misconduct. There is a great difference between this case and that of an action brought against two or more partners on a bill of e.vchanfre. fraudulently made or accepted by one partner in the name of the others, and 394: PARTNERSHIP. [CHAP. XII. § 239. Another exception may arise from the incom- petency of one of the partners to maintain the suit, from his or her own pecuhar national or other character ; for in all cases of suits brought by partners, all of the firm must be competent to sue. Thus, for example, it has been said by a learned writer, that, although the hus- band and wife are partners in a foreign country, by de'ivered by such partner to a plaintiff in discharge of his own private debt. In the latter case, the defence is not the defence of the fraudulent party, but of the defrauded and injured pai'ty. The latter may, without any inconsist- ency, be permitted to say in a court of law, that although the partner may for many purposes bind him, yet, that he has no authority to do so by accepting a bill in the name of the firm for his own private debt. The party to a fraud, he who profits by it, shall not be allowed to create an obligation in another, by his own misconduct, and make that misconduct the foundation of an ac- tion at law. Then, if Sykes & Bury could not sue, how could the plaintiffs, who rei)resent them here ? It was said in support of the argument, that the property did not pass from Sykes by his wrongful act, but remained in Sykes & Bury. This was ingeniously and plausibly put ; but as against Sykes the property did pass at law, and there was no remedy at law for Bury to recov- er it back again. He could not do so without making Sykes a party. Fur- ther, the right of the assignees to sue in this case was said to be analogous to the right of assignees to sue for, and recover back, property voluntarily given by a bankrupt to a particular creditor, in contemplation of his bank- ruptcy, in favor of such creditor, and in preference to him, in which case the bankrupt could not have sued, if no commission had issued, yet the assign- ees are allowed to do so. That is a case, where the representatives could, where the party represented could not, sue, and it is the only instance of the kind mentioned at the bar, that has occurred to us. But, if we attend to the principle on which the assignees are allowed to sue, we shall find there is no analogy between that case and the case before the Com't ; for the principle, on which assignees have been held entitled to recover in such cases, is not on the ground of fraud on any particular person, but on the ground that there has been fraud on the bankrupt laws, which are made for the purpose of ef- fecting an equal distribution of the insolvent's estate among all the creditors, and which purpose would be defeated, if a party on the eve of a bankruptcy, and with a view to it, could distribute his effects according to his own pleasure among some favorite creditors, to the total exclusion of the others. This is mentioned by Lord Mansfield, as the principle of the decisions in the early cases on this subject; Alderson v. Temple, 4 Burr. 2235 ; Harman v. Fishar, Id. 2237 ; s. c. Cowp. 117. For these reasons, we think the plaintiffs are not entitled to recover." But see Longman v. Pole, 1 Mood. & Malk. 223. Is this latter case distinguishable upon the ground that it was case for a tort V CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 395 whose laws they are competent to carry on partnership business with each other ; yet that they are incompe- tent to sue in an Enghsh Court of justice, as partners ; since the law of England does not recognize their capacity so to engage in trade, and enter into a com- mercial partnership.^ The doctrine here laid down is certainly not maintainable, as a doctrine of public law ; and the authority cited to support it by no means bears it out in its full latitude.^ § 240. A case far more unexceptionable, to illustrate the principle of this exception, is that of a partnership in a belligerent, or in a neutral country, where the suit is brought, which is composed in part of one or more partners domiciled in an enemy's country ; for, under such circumstances, during the war, no suit can be brought there to enforce any contract whatever in favor of the partnership. A state of war suspends all com- mercial intercourse between the belligerents, and shuts their Courts against all suits and proceedings, and all claims of persons, who have acquired and retain a hos- tile character.^ §241. Subject, however, to exceptions of this or a similar nature, which all stand upon peculiar grounds, the general rule is, as has been already mentioned, that partners, in their collective or social capacity, may bring any *suits, which it would be competent for any indi- vidual to bring. It is also a general rule, that in all > Coll. on P. B. 3, c. 5, p. 459, 2d ed., citing Cosio v. De Bernales, Ry. & Mood. 102. It is also reported in C & P. 266, * All that Lord Tenterden decided in the case, was, that he would not presume that ■d/cine coi'ert in a foreijin country could engage in a partnership ■with her husband, without some proof that such was the law of" the foreign country ; and no such proof being given, the plaintiffs were nonsuited. There seems nothing objectionable or inconvenient in this doctrine. * Gow on P. c. 3, § 1, p. 120; M'Connell i\ Hector, 3 B. & P. 113: Gris- wold r. Waddiiigton, 16 Johns. 438 ; The Julia, 8 Cranch, 181 ; Albrctcht v. Sussmann, 2 Ves. & B. 323 ; {§ 315, 316.} 396 PARTNERSHIP. [cHAP. XII. such suits at law all the partners should join.^ The rule, however, undergoes, or may undergo, an exception in cases of dormant partners ; for it is at the option of the plaintiffs in such cases, either to join the dormant partner in the suit, or to omit him (as in the correspond- ing case of the partners' being sued as defendants, it is at the option of the plaintiff to join the dormant part- ner or not), and the joinder or non-joinder will not con- stitute any objection to the maintenance of the suit in any manner whatsoever.^ The same exception applies a fortiori, where a man is merely a nominal partner ; for, as he has no real interest, there seems no necessity of his joining, as a party, in any partnership suit,^ although there is no doubt that he may so join.^ ' Gow on P. c. 3, § 1, p. 12 7, 128, 3d ed. ; [Oage v. Rollins, 10 Met. 348.] - Gow on P. c. 3, § 1, p. 128, 3d ed, ; Skinner v. Stocks, 4 B. & Aid. 43 7 ; Lloyd V. Archbowle, 2 Taunt. 324 ; Brassington v. Ault, 2 Bing. 177; Wilson V. Wallace, 8 S. & R. 53 ; Clarkson v. Carter, 3 Cowen, 84 ; Lord v. Baldwin, 6 Pick. 348, 352 ; Leveck v. Sbaftoe, 2 Esp. 468 ; Ross v. Decy, 2 Esj). 4 70, note ; Coll. on P. B. 3, c. 5, § 1, p. 465 ; LI. p. 4G8-470, 2d ed. ; Mawman v. Gillett, 2 Taunt. 325, note ; Alexander v. Barker, 2 Cr. & J. 133 ; [Wood v. O'Kelley, 8 Cush. 406 ; Jackson v. Alexander, 8 Tex. 109 ; Page v. Brant, 18 111. 37] ; Cothay t'. Fennell, 10 B. & C. 671. — The authorities here cited are not all exactly agreed upon this point, where the dormant partner is a party plain- tiff; but they all agree as to the point where such a partner is a party defendant. [And in' Secor v. Keller, 4 Duer, 416, it was held that a dormant partner must join with his active partner as plaintiffs in a suit by them for work and labor done for the firm] It seems exceedingly difficult to state any reasonable distinction between the cases ; and the text contaiijs what seems to me the true doctrine, founded upon the weight of authority. { That a dormant partner need not join as plaintiff, see Waite v. Dodge, 34 Vt. 181 ; Wood V. O'Kelley, 8 Cush. 406 ; Rogers v. Kichline, 36 Penn. St. 293. That he need not be joined as defendant, see Chase i\ Deming, 42 N. H. 274 ; Brown v. Birdsall, 29 Barb. 549; North v. Bloss, 30 N. Y. 374; Hopkins v. Kent, 17 Md. 72.} 3 Coll. on P. B. 3, c. 5, § 1, p. 470, 2d ed. ; Gow on P. c. 3, § 1, p. 128, 129, 3d ed. ; Parsons v. Crosby, 5 Esp. 199 ; Davenport v. Rackstrow, 1 C. & P. 89; Glossop V. Colman, 1 Stark. 25; Teed v. Elworthy, 14 East, 210; Kell V. Nainby, 10 B. & C. 20; {Hatch v. W^ood, 43 N. H. 633. See Bishop V. Hall, 9 Gray, 430.} But see Guidon v. Robson, 2 Camp. 302; Kieran V. Sandars, 6 Ad. & E. 515. * Guidon v. Robson, 2 Camp. 302. { Guidon v. Robson was a suit on a CHAP. XII,] REMEDIES AGAINST THIRD PERSONS. 397 § 242. In this respect, perhaps, there may be ground for a distmction between the cases of common unwritten contracts, and cases where a written instrument is made payable to certain persons by name, ahhough one of them is but a nominal partner. For it may well be said, that, in the latter case, as the promise is made to all, the suit thereon may and should be brought in the name of all, as proper parties to the contract.^ There can be no doubt, that, in a case of this sort, all the per- sons named may join in the suit ; ^ but it is quite a dif- ferent question, whether all must so join, Avhen all have not an interest in the contract.^ We all know, that there are many cases of written contracts, as for exam- ple, of policies of insurance, procured to be under- written by agents or brokers in their own names, in which, nevertheless, the suit for a breach thereof mav be brought either in the name of the principal, or of the agents or brokers."* Why the same rule might not well apply in other analogous cases of written contracts, it is not easy to say.^ It is proper, however, to add, that there is some apparent conflict in the authorities on this point.'' written contract. Mr. Lindley is of opinion that where a nominal partner need not join, he ought not to join. Lind. on P. 391. See Waite v. Dodge, 34 Vt.»I81.} ' Coll. on P. B. 3, c. 5, § 1, p. 465, 470, 2d ed. ^ Kell v. Nainby, 10 B. & C. 20. « Gow on P. c. 3, § 1, p. 122, 123, 3d ed. * Story on Ag. § 160-162. 5 Coll. on P. B. 3, c. 5, § 1, p. 465-468, 2d ed. ; Grove v. Dubois, 1 T. R 112; Cumming v. Forester, 1 M. & S. 494; Hagedorn v. Oliverson, 2 M. & S. 485 ; Garrett v. Handley, 4 B. & C. 664 ; Lucena r. Craufurd, 3 B. & P. 75 ; Gow on P. c. 3, § 1, p. 122, 123, 3d ed. ; Bell v. Ansley, 16 East, 141 ; Skinner v. Stocks, 4 B. & Aid. 437 ; Alexander v. Barker, 2 Cr. & J. 133, 138 ; Atkinson v. Laing, 1 Dow. & R. N. P. 16. ^ Guidon v. Robson, 2 Camp. 302. — On this occasion, the case being an action by Guidon alone against Robson, upon a bill of exchange, drawn iu the name of Guidon & Hughes (the latter being a mere clerk of Guidon) on 398 PARTNERSHIP. [cHAP. XII. § 243. And this naturally conducts us to the more enlarged consideration, in Avhat cases, and under what circumstances contracts are to be treated as partnership contracts, of which the firm may avail itself by way of suit. We have already seen,^ that, in order to bind the partnership in any contract with third persons, it is or- dinarily necessary that it should be made in the firm name ; and that, if made by one partner in his own name only, it will ordinarily be binding only upon himself, and not upon the partnership." There are, however, exceptions to this rule, where the contract is made by one partner in his own name, for and on behalf of the partnership, or for the benefit thereof, and yet the firm will be bound thereby.^ There is a Robson, and accepted by him, Lord Ellenborough said : " There being such a person as Hughes, I am clearly of opinion that he ought to have been joined as a partner. He is to be considered in all respects a partner, as between himself and the rest of the world. Persons in trade had better be very cautious how they add a fictitious name to their firm for the pur- pose of gaining credit. But, where the name of a real person is inserted with his own consent, it matters not what agreement there may be between him and those who share the profit and loss. They are equally responsible, and the contract of one is the contract of all. In tliis case the declaration states that the defendant promised to pay the money specified in the bill to the plaintiflT only, whereas she promised to pay it to the plaintiff jointly with another person. The variance is fatal." But see Kell v. Nainby, 10 B. & C. 20 ; Hall v. Smith, 1 B. & C. 407 ; Marchington v. Vernon, 1 B. & P. 101, n. ; Marsh v. Robinson, 4 Esp. 98; Walton v. Dodson, 3 C. & P. 162; Skinner v. Stocks, 4 B. & Aid. 437; Cothay v. Fennell, 10 B. & C. 671. In Alexander v. Barker, 2 Cr. & J. 133, 138, Baron Bayleysaid: " I am the less surprised, that the learned judge should have considered D. Alexander as the person with whom the defendant contracted, and who alone could maintain the action, because I remember that it was at one period the impression of Lord Ellenborough, that where money was lent by a partner, the action must, in all cases, be brought by the individual with whom the contract was made. But he was afterwards convinced of what is doubtless the true rule, viz., that, where a contract is made by one on behalf of others, the action may be brought in the name of the principals." 1 Ante, § 102, 136, 142. 2 Ante, § 102, 136, 142; Faith v. Richmond, 11 Ad. & E. 339. ' Ante, § 102 and note, § 142 ; [Burnley v. Rice, 18 Tex. 481.] CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 399 like enlarsrement of oblisration in many other cases of written and unwritten contracts, where the same doc- trine will reciprocally apply in favor of the partnership, as in the converse case is applied against it. Thus, for example, if a contract of guaranty should be entered into apparently with one partner, but in reality it should be intended to be for the indemnity of the firm for ad- vances to be made bv the firm ; an action misfht be maintained by all the partners, as upon a joint contract therewith, although the written papers, containing the guaranty, should be addressed to one partner, and he alone should conduct the negotiation.^ The same rule 1 Gow on P. c. 3, § 1, p. 121-123, 3cl ed. ; Coll. on P. B. 3, c. 4, § 1, p. 446, 447, 2d ed. ; Id. c. 5, § 1, p. 464, 465 ; Garrett v. Handler, 3 B. & C. 462; s. c. 4 B. & C. 664; Walton v. Dodson, 3 C. & P. 162. — Mr. Go w has summed uj) the authorities on this point as follows. "Partners sometimes seek to enforce a guaranty, given to secure the repayment of an advance to be made by the firm. In such a case the action must necessarily be brought by all the partners to whom the guaranty is given, and by whom the advance is made. And where a contract of that description is apparently entered into in favor of one partner only, yet in fact if it be intended as an indemnity to the firm, in respect of an advance to be made by them, a joint action may be maintained. Thus, in the late case of Garrett v. Handley, 4 B. & C. 664, which was an action on a guaranty by two, as the survivors of a firm of three partners, it appeared that the guaranty was addressed to one of the partners only ; but evidence was produced, which established that the advance to secure which the guaranty was entered into, was made by the firm, and that the guaranty was given for their joint benefit, and not to indemnify the single partner only. It was objected at nisi prius, and after- wards insisted upon on a motion to enter a nonsuit, that there was a misjoin- der ; for, as the guaranty was in terms given to one partner, to whom alone the promise could be construed to have been made, the action should have been brought by him only. But the Court of King's Bench held, that as the guaranty was proved to have been intended for the benefit of the firm, the action was properly brought by the surviving partners ; and, under such circumstances, it is not competent to the partner, to whom the guaranty may have been addressed, to treat the advance as one made by himself, on his individual account, and in that character to support a separate action. This was determined in a previous action on the same guaranty, and in which the plaintiff declared, that in consideration that he would advance a sum of money to A. B., the defendant promised that provision should be made for paying the plaintiff. At the trial it appeared, that the defendant 400 PARTNERSHIP. [CHAP. XII. would apply to a loan made by one partner in a bank- ing establishment, out of the banking fund, although the whole negotiation should be conducted by and in the name of that partner only.^ had given to the pLaintifF the guaranty stated in the dedaration, and that the latter was a partner with two other persons in a banking-house, and that the firm had advanced the money, and charged A. B. in account with the same ; and it was held, that the averment in the declaration, that the plaintiff had advanced the money, was not sustained by the proof, there being no evidence to show that the money had been advanced to the plain- tiff by the firm, and by him to A. B. It is not to be collected from either of the two preceding cases, nor was it in fact necessary to determine, whether the partner to whom the guaranty was actually given, could have maintained a separate action upon it, provided his declaration so truly and correctly stated the facts, as not to have been o2)en to the objection of a variance between the allegation and the proof. But judging from analogy to the rule, applicable to a policy of insurance, which allows the action to be brought, either by the party for whose benefit it was effected, or in the name of him who effected it, it would seem, that that partner, as being the party with whom the contract was made, might have supported such an action." Gow on P. c. 3, § 1, p. 121-123. ' Alexander v. Barker, 2 Cr. & J. 133, 138. See Robson v. Drum- mond, 2 B. & Ad. 303. — In Alexander v. Barker, Baron Bayley said: "I have no doubt in this case, but that this action is maintainable by the plain- tiffs ; and in that opinion I am fortified by the case of Garrett v. Handley. Here D. Alexander stood in the double capacity of an individual and a member of the firm. Barker wanted an advance of money, and to him it was quite immaterial by whom the advance was made, whether by D. Alex- ander alone, or by the house of which he was a member. He applies to D. Alexander to make the advance. He does not qualify tliat application, and say, you may be a member of a firm, and I will deal with you only, and will not be answerable to other persons ; but he makes his apjilication without any qualification. By thus applj'ing generally, he entitles D. Alexander, if he makes the advance, to jilace him in the situation of being answerable to him in either of his capacities, according to that in which he makes the ad- vance. From the testimony it appears, that the advance was made by D. Alexander, not individually, but with the money of the firm. He accepted, therefore, the application for the advance, not as an individual, but in his capacity as a member of the firm. In Garrett v. Handley, the contracting pai'tner first brouglit the action in his own name ; but it ajipeared that the advance was made l)y the house, and the Court said, you did not make the advance, and cannot maintain the action. Another action was then brought in the name of the firm, and the Court being of opinion that the guaranty was intended to apply to advances made by the firm, thought that the action was maintainable. The language of that guaranty was much more pointed CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 401 § 244. In the course of partnerships it not infre- quently happens, that new partners are admitted, or old partners retire, without any change of the firm name ; and upon such a change the contracts and effects and securities of the existing partnership are agreed to re- main, and become a part of the funds of the new firm. But in all such cases the contracts and securities must be sued for in the names of the original firm, unless, indeed, they are negotiable securities, and are indorsed over by the old firm to the new firm ; in which latter case the new firm may sue thereon in their own names, like any other holders ; for in all other cases no persons are permitted to sue thereupon at law, except the part- ners, who originally made the contract, or had an inter- est therein.^ Afortio?^ the same rule will be applied with more strictness, in cases where the contract is un- der seal ; for, then, ordinarily, the parties to the deed, and none others, can sue, or be sued thereon,^ In equity, the case may be far otherwise ; for assignees of than this letter. It was addressed to an individual, and was to this effect: — ' I understand from Mr. G., that you have had the goodness to advance £550, &c., upon my assurance, which I hereby give, that provision shall be made for repaying you this sum,' &c. But the advance was not made by the individual alone ; and it was holden, that the firm by whom the advance was made ought to sue. It appears to me, therefore, that the plaintiffs were the persons who might and ought to sue in this case." See also Co- thay V. Fennell, 10 B. & C. 671 ; Coll. on P. B. 3, c. 4, § 1, p. 44G-148, 2d ed. ; Id. c. 5, § 1, p. 465. {A partner had an account at a bank in his own name, but there was evidence that it was known to the bankers to be a " partnership account ; it was held that the firm might sue the bankers for not paying a check drawn on them by one partner for partnership purposes. Cooke V. Seeley, 2 Exch. 746.} » Coll. on P. B. 3, c. 5, § 1, p. 461-463, 465, 466, 2d ed. ; Osborne v. Harper, 5 East, 225 ; Wilsford v. Wood, 1 Esp. 182 ; Pease v. Hirst, 10 B. & C. 122, 127 ; Innes v. Dunlop, 8 T. R. 595 ; Ord v. Portal, 3 Camp. 239 ; Robson v. Drmnmond, 2 B. & Ad. 303 ; Radenhurst v. Bates, 3 Bing. 463, 470. '^ Coll. on P. B. 3, c. 5, § 1, p. 463, 464, 2d ed. ; Metcalfe v. Rycroft, 6 M. & S. 75. See also Pease v. Hirst, 10 B. & C. 122, 127. 26 402 PARTNERSHIP. [cHAP. XII. equities and equitable interests are competent to sue in equity in their own names, to enforce payment of the assigned debts, or other choses in action, although they may not be competent at law.^ § 245. Questions, also, of a very delicate nature may arise out of contracts and obligations by third persons, with a partnership, where the contracts or obligations are of a continuing nature, as to what is their true ex- tent and operation, when there has been any change of the partners by the retirement of an old partner, or the admission of a new one. Thus, for example, a guaranty for advances to be made, or credits to be given, from time to time, by a firm to a third person ; and some new advances or credits may have occurred, after a change of the original partners, in the manner above suggested. Under such circumstances, the question w^ould arise, whether the guarantor would be liable, either to the old firm, or to the new firm, for any such advances or credits, after any such change. It has been held, that the guarantor would not be liable therefor; and that no such guaranty ought to be extended be- yond the actual import of its terms ; but that it ought to be limited to advances and credits made by the orig- inal firm only.^ * 2 Story, Eq. Jur. § 1039, 1040 ; Tiernan v. Jacobs, 5 Pet. 580, 597. — If, after an assignment, the debtor should promise the assignees to pay them, a suit might then and upon that promise be maintained by the assign- ees against the debtor in a Court of Law. Coll. on P. B. 3, c. 5, § 1, p. 462, 463, 2d ed. ; Wilslbrd v. Wood, 1 Esp. 182 ; Moor v. Hill, 2 Peake, 10; Innes v. Dunlop, 8 T. R. 695. There may be cases, also, where, after the contract is made with partners, a severance may be made b_y the con- sent of all the parties in interest, and tlien each may sue for his own share. See Coll. on P. B. 3, c. 5, § 1, p. 467, 468, 2d ed. 2 Coll. on P. B. 3, c. 4, § 1, p. 443, 444, 2d ed. ; Myers v. Edge, 7 T. R. 254, 256 ; Cremer v. Higginson, 1 Mason, 323 ; Gow on P. c. 3, § 1, p. 123, 124, 3ded. ; Spiers v. Houston, 4 Bligh, N. s. 515; Ez parte Kensington, 2 Ves. & B. 79 ; Dry v. Davy, 10 Ad. & E. 30 ; s. c. 2 Per. & Dav. 249. { But see Parientet). Lubbock, 8 De G. M. & G. 5.} CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 403 § 246. The same doctriue will apply to more formal instruments, such as a bond given by a principal and surety to a firm, to secure advances made by the firm to the principal ; for, upon such a bond the surety will not be liable for any advances made after the with- drawal or death of one of the partners.^ l^ov is there, in this respect, any real diff"erence between the decisions of Courts of Law, and those of Courts of Equity, as to the construction or extent of the terms of the instru- ment. In each Court, the interpretation, put upon the terms of the contract, has precisely the same extent, and the same limitations.^ § 247. These decisions may, at fiii'st view, be deemed somewhat rigid, if not inequitable. But, in reality, they stand upon grounds capable of an entirely satisfactory and solid vindication. In the first place, it can never ' Stranger. Lee, 3 East, 484; Pemberton v. Oakes, 4 Russ. 154, 1C.7 ; {Chapman v. Beckinton, 3 Q. B. 703} ; Weston r. Barton, 4 Taunt. 673, 682. — In this last case, Sir James Mansfield, in delivering the opinion of the Court, said : " It is not necessary now to enter into the reasons of those de- cisions ; but there may be very good reasons for such a construction. It is very probable, that sureties may be induced to enter into such a security by a confidence which they repose in the integrity, diligence, caution, and accu- racy of one or two of the partners. In the nature of things there cannot be a partnership consisting of several persons, in which there are not some per- sons possessing these qualities in a greater degree than the rest ; and it may be, that the partner dying, or going out, may be the very person on whom the sureties relied. It would, therefore, be very unreasonable to hold the surety to his contract, after such change. And though the sum here is limited, that circumstance does not alter the case ; for although the amount of the indem- nity is not indefinite, yet £3,000 is a large sum; and even if it were only £1,000, the same ground in a degi-ee holds; for there may be a great deal of diiference in the measure of caution or discretion, with which different per- sons would advance even a thousand pounds. Some would permit one who was almost a beggar, to extend his credit to that sum ; others would exercise a due degree of caution for the safety of the surety. And, therefore, we are of opinion, that as to such sums only, which were advanced before the decease of Golding, can an indemnity be recovered by the plaintiffs ; and as to the sums claimed for debts incurred since his decease, the judgment must be for the defendant." ^ Pemberton v. Oakes, 4 Russ. 154. 404 PARTNERSHIP. [cHAP. XII. be said with truth or justice, that a guaranty or surety- ship for advances, to be made by A., B., & C, does prop- erly extend to any advances made by A. & B., or by A., B., & D. ; and therefore the guarantor, or surety, may, with all good faith and correctness, say, Non in hcEc fcedera veni. Besides, as has been well observed, the guarantor or surety may have very good reasons, why he might be willing to enter into an engagement with a fixed reliance upon the vigilance, fidelity, discretion, and skill of a particular partner, when he would not, if that partner were to withdraw, be willing to enter into, or to prolong any such engagement.^ § 248. It has been said, that guaranties for the pay- ment of the debts of third persons are not in general in- struments under seal, and that there is no technical rule, which, as to them, prevents a Court of Law from look- ing at the real justice and merits of the case.~ This is ^ Weston V. Barton, 4 Taunt. 673, 682; Simson v. Cooke, 1 Bing. 452. See also Russell v. Perkins, 1 Mason, 368 ; Strange v. Lee, 3 East, 484, 490. — Lord Ellenborough, in delivering the opinion of tlie Court in this last case, said : " The Court will, no doubt, construe the words of the obligation accord- ing to the intent of the parties to be collected from them; but the question is, what that intent was. The defendant's obligation is to pay all sums due to them, on account of their advances to Blyth. Now who are ' them,' but the persons before named, amongst whom is James Walwyn, who then constituted the banking house, and with whom the defendant contracted ? The woi-ds will admit of no other meaning. And, indeed, with respect to any intent which parties entering into contracts of this nature may be sup- posed to have, It may make a very material difference in the view of the obligor, as to the persons constituting the house, at the time of entering into the obligation, and by whom the advances are to be made to the party for whom he is surety. For a man may very well agree to make good such advances, knowing that one of the partners, on whose prudence he relies, will not agree to advance money Imj^rovldently. The characters, therefore, of the several jiartners may form a material ingredient In the judgment of the obligor upon entering into such an engagement." See Dry v. Davy, 2 Per. & Dav, 249 ; s.c. 10 Ad. & E. 30. 2 Coll. on P. B. 3, c. 4, § 1, p. 445, 446, 2d ed. ; and the observations of Mr. J. Park, in Ilargrave v. Smee, 3 Moo. & P. 573 ; s.c. 6 BIng. 244 ; and of Lord Tenterden, in Davey v. Prendergrass, 5 B. & Aid. 187 ; Pease v. Hirst, 10 B. & C. 122 ; Dry v. Davy, 10 Ad. & E. 30 ; s. c. 2 Per. & Dav. 249. CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 405 true. But it is equally true, that the language in every case is to be construed according to its fair and reason- able meaning, and is not to be strained to reach cases unforeseen or unprovided for ; for that would be to make, and not merely to construe, contracts. And in- deed, in all cases of this sort, the guarantor or surety has a right to insist, that he shall not be presumed to enter into engagements for events, which were never so submitted to his consideration or contemplation, and which, if considered or contemplated, might have in- duced him altogether to abstain from any engagement whatsoever. § 249. The same reasoning is equally applicable to another class of cases, where there is a continuing con- tract with a partnership, such as a contract to buy goods, or to hire them of the partnership from year to year, for a term of years ; for such a contract could hardly be entered into without some reference to the character, skill, and honesty of the existmg partners ; and it is scarcely presumable, that any man would be willing to have his contract, or his patronage, assigned over from time to time to mere strangers, of whom he knew noth- ing, and of whose competence and ability and fidelity he might have no adequate means of inquiry.^ § 250. But the most striking, as well as the most ' Robson V. Drummond, 2 B. & Ad. 303. — Qucere, whether it would make any difference, that the retiring partner was a dormant partner ; and that the ostensible partner still remained in the firm. See Dry v. Davy, 2 Per. & Dav. 249 ; s. c. 10 Ad. «& E. 30 ; Robson v. Drummond, 2 B. *& Ad. 303. {In Ste- vens v. Benning, 1 Kay & J. 168 ; s. c. 6 De G. M. & G. 223, it was held that an author was discharged from his contract with a firm of publishers, by a change in the firm and an assignment of the contract to persons of whom the author knew nothing. In Tasker v. Shepherd, 6 H. & N. 575, a contract be- tween A. and a firm of stone merchants that the firm would employ A. as their London agent for four years, was held to have been terminated by the death of one member of the firm within the four years, To the same effect is Stewart v. Rogers, 19 Md. 98. See Pariente v. Lubbock, 8 De G. M. «& G. 5.} 406 PARTNERSHIP. [CHAP. XII. usual, illustration of this doctrine, which occurs in actual practice, is, where bonds are given by sureties to part- ners, for the fidelity and good conduct of clerks, and other officers and agents, in the service and employment of the partnership. In all cases of this sort, the uniform rule of construction of the bond is, unless some clear language to the contrary is inserted, that the bond does not apply as a security, after any change of the mem- bers of the partnership by death, or otherwise.^ But language may be used in a bond, which shall clearly im- port a continuing liability, notwithstanding any change of the firm ; and if it does, there can be no question, that it will, both at law and in equity, have the most complete operation.^ § 251. The like doctrine equally applies to cases, where a guaranty is given by a firm on behalf of one person, or by one person on behalf of a firm, and after- wards another person is introduced into the business of that person, or a material change takes place in the firm ; for the guarantor or guarantors will not be liable thereon for any subsequent advances, made to such a person or firm, with a knowledge of the change.^ 1 Coll. on P. B. 3,c. 4, § 1, p. 435-442, 2d ed. ; Gow on P. c. 3, § 1, p. 123- 125, 3d ed. ; Wright i\ Russell, 3 Wils. 530 ; s. c. 2 W. Bl. 934 ; Dance v. (Jirdler, 4 B. & P. 34 ; Sti-ange v. Lee, 3 East, 484 ; Arlington v. Mei'ricke, 2 Saund. 411 ; University of Cambridge i'. Baldwin, 5 M. &W. 580; Simson «. Cooke, 1 Bing. 452,461. « Metcalf V. Bruin, 12 East, 400 ; Simson i\ Ingham, 2 B. & C. 65 ; Moller V. Lambert, 2 Camp. 548. — Barclay v. Lucas, 1 T. R. 291, was a case, which was supposed to contain language, importing a provision of this character ; but great doubts may well be entertained, whether the case can be maintained upon any such interpretation. See Coll. on P. B. 3, c.4, §l,p. 436, 437, 441, 2ded. ; Barker v. Parker, 1 T. R. 287 ; Strange v. Lee, 3 East, 484 ; Gow on P. c. 3, § 1, p. 124, 3d ed. ; Simson v. Cooke, 1 Bing. 452. 3 Gow on P. c. 3, §1, p. 123-125,3d ed.; Coll. on P. B. 3, c.4, § 1, p. 438, 442, 443, 2d ed. ; Wright v. Russell, 3 Wils. 530 ; s. c. 2 W. Bl. 934 ; Bellairs V. Ebsworth, 3 Camp. 53 ; Ex parte Watson, 19 Ves. 459; Simson v. Cooke, 1 Bing. 452,461 ; ante, § 245-247. {Separate property pledged by one part- \ CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 407 § 252. Hitherto we have been speaking of the orig- inal rights of partners against third persons, arising nnder general contracts, or special engagements with them, and the proper limitations and qualifications thereof. But many circumstances may subsequently occur, which will suspend, or defeat, or extinguish or vary these rights, of some of which it seems proper to take notice, in this connection. In the first place, if one of the partners should take an acceptance, or other security for any debt, payable at a future day, this will be construed to be an agreement to give time to the debtor, so as to suspend the right of action of the firm for the original debt, until such security shall be dis- honored or shall become due.^ We have already had occasion to take notice of the case of a security given to one firm, of which satisfaction has been obtained by another firm, each firm having one and the same com- mon partner, which will operate as an extinguishment of any further right of recovery upon such security.^ A fortiori, a release of a debt by one partner, at least if it be not a fraud, will amount to an extinction of the debt against the partnership.^ § 253. In the next place, subsequent dealings with a new firm will in many cases, diminish, or discharge, ner for future advances to be made to the firm, is not liable for advances made to the firm after the partner's death. Bank of Scotland v. Christie, 8 CI. & Fin. 21-4. A surety for the conduct of A., as agent, is not liable for the joint acts of A. and B., partners, as agents, A. and B. having always been employed as partners in the capacity of agents, and never A. alone. London Assurance Co. f. Bold, 6 Q. B. 514.} » Coll. on P. B. 3, c. 4, §2, p. 453, 2d ed. ; Tomlin v. Lawrence, 3 Moo. & P. 555. * Ante, § 236 ; Jacaud v. French, 12 East, 317. * Coll. on P. B. 3, c. 4, § 2, p. 453, 2d ed. ; Id. B. 3, c. 2. § 1, p. 311, 312 ; Id. c. 5,§ 5,p, 485 ; Wats, on P. p. 225, 2d ed. ; Perry r. Jackson, 4 T. R. 516, 519 ; Hawkshaw v. Parkins, 2 Swans. 539 ; Barker r. Richardson, 1 You. & J. 362, 365, 366 ; Gow on P. c. 2, § 2, p. 60, 61 ; ante, § 115. 408 PARTNERSHIP. [CHAP. XII. or satisfy a debt, due to the old firm by mere intend- ment and operation of law. Thus, for example, if one of several partners should die, or retire from the firm, and a balance should then be due to the firm, such balance will be gradually diminished, and may be ex- tinguished, by sums subsequently paid to the remain- ing partners, unless such sums shall be otherwise spe- cifically appropriated at the time of the payment.^ It 1 {See § 157. } [Alleott v. Strong, 9 Cush. 323 ; Farnum v. Boutelle, 13 Met. 159 ; Morgan v. Tarbell, 28 Vt. 498] ; CoU. on P. B. 3, c. 4, § 1, p. 4o^J-452, 2d ed. ; Id. c. 3, § 4, p. 422-424 ; Ex parte KendaU, 17 Ves. 514 ; Clayton's Case, in Devaynes v. Noble, 1 Mer. 529, 572 ; Bodenham v. Pur- chas, 2 B. & Aid. 39. — In this last case, Mr. Justice Bayley said : "I can- not distinguish this in principle from Clayton's Case. The decisions in the Courts of Law do not break in upon the distinction there taken. The prin- ciple established by those decisions is this, that where there are distinct ac- counts and a general payment, and no appropriation made at the time of such payment by the debtor, the creditor may apply such payment to which account he pleases. But where the accounts are treated as one entire ac- count by all parties, that rule does not apply. In this case the bond was given in 1801, for advances made or to be made in Havard"s lifetime ; at his death, the balance due was £4,404. The surviving partners might then have called for payment of that sum, or they might have treated it as an insulated transaction, and keiit that as a distinct and separate account. But instead of that, they blend it with the subsequent transactions ; for in the first account delivered after Havard's death, are included, several items, down to the 30th of June, and the payments after his death reduce the balance, at that time, to £1,420. They might even then have treated this balance as a distinct account, and as money due on the bond, if they had so chosen. Do they do so? Look to the next account; the parties balance their accounts every three months ; and in the next quarterly account, they bring forward the balance of £1,420, and make it an item in one entire account subsisting between these parties. The account goes on from 1810 till 1813 ; and the then balance is treated as one entire balance of one entire account, as the result of all the transactions between the parties in the intermediate time. The plaintiffs were not bound to have so treated it at Havard's death ; but having done so, there is not any authority for saying, that they are now at liberty to apjily the several payments in reduction of the debt incurred by the subsequent advances, to the exclu- sion of the bond debt. It certainly seems most consistent with reason, that where payments are made upon one entire account, such payments should be considered as payments in discharge of the earlier items. Clay- ton's Case, where all the authorities were fully considered by the Master p CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 409 has been supposed, that the same doctrine will apply in the case of an account current between a new firm, composed of the remaining partners of the old firm, and a new partner ; ^ but perhaps this may, in the present state of the authorities, be thought to admit of doubt, unless the balance is, with the consent of all the parties in interest, carried to the debit of the new firm ; for then the ordinary rule as to the appropriation of payments will apply.- But the mere fact, that a cred- of the Rolls, is directly against the plaintiff's right to make any such appropriation as he desires. That case does not break in upon any of the cases at law, and ought to govern our decision in the present instance ; and I am therefore of opinion, that there ought to be judgment for the defendant." ^ Pemberton v. Oakes, -i Russ. 154, 168. * Gow on P. c. 5, § 2, p. 244-246, 3d ed. ; Clayton's Case, in Devaynes V. Noble, 1 Mer. 572. See Copland v. Toulmin, 1 West, H. L. 164; s. c. 7 CI. & Fin. 349. In Pemberton v. Oakes, 4 Russ. 154, 168, Lord Lynd- hurst said: "The third question is. Whether the balance, due from Stokes to the bank at the time of Harding's death, has been discharged by his subsequent payments ; and that point is decided by Clayton's Case, and Bo- denham v. Purchas. It is true, that the facts here are not, in every respect, precisely the same with the circumstances of these two cases. But the decisions in them proceeded on a broad general principle, equally applica- ble to the state of circumstances existing here. Where divers debts are due from a person, and he pays money to his creditor, the debtor may, if he pleases, appropriate the payment to the discharge of any one or other of those debts ; if he does not approj)riate it, the creditor may make an appro- priation ; but if there is no appropriation by either party, and there is a cur- rent account between them, as between banker and customer, the law makes an appropriation, according to the order of the items of the account, the first item on the debit side of the account being the item discharged or reduced by the first item on the credit side. Here it is not pretended that any distinct appropriation of the payments was made by the parties. It was the practice of the bank to settle their accounts with Stokes c^uarterly ; transfer- ring, at the end of each quarter, the balance then due from him to the account of the next quarter. Harding died in the middle of a quarter ; but, on that occasion, no change took place in the mode of settling the accounts. At the end of the then current quarter, the balance was struck exactly as if Harding had been alive, and no notice was taken of his death. There being no distinct appropriation of the payments, either by the one party or the other, the law makes the appropriation with reference to the order of the items of the ac- count. If so, the debt which Stokes owed to the bank at the time of Hard- 410 PARTNERSHIP. [cHAP. XII. itor of the firm, knowing of the death of one of the firm, continues to deal as before with the survivors for any length of time, without requiring payment of the balance due to him from the firm at the time of the death, will not deprive such creditor of the remedy which he has in equity against the assets of the de- ceased partner for the debt ; but there must be other concurring circumstances establishing an abandonment of his claim against the deceased, and adopting the responsibility of the survivors for the debt instead thereof.^ ing's death, has been discharged by the subsequent payments. In Bodenham V. Purchas, a Coui't of Law confirmed the rule, which Sir William Grant had laid down in a Court of Equity. The point was again brought into discussion in Simson v. Ingham, 2 B. & C. 65 ; and the principle was again confirmed, though the particular circumstances of the transaction produced a different decision. In that case, two accounts were formed by a London bank at the death of one of the partners in a country bank, which dealt with them — the one was styled the old account — the other, the new ; and in the latter, the London bank entered all the payments, made to them by the country bank, after the death of that partner ; so that a distinct appropri- ation was made. The same question arose in Brooke v. Enderby, before the Common Pleas ; and there, too, the principle of Clayton's Case was adopted. Feeling myself bound by the force and authority of these de- cisions, and acquiescing completely in the reasoning of Sir William Grant, I must decide that there was no debt due to Oakes and Willington under the indenture of the 4th of January, 1802, at the time when the memorandum was indorsed on the bond." A somewhat different view seems to have been taken by Lord Abinger, in Jones v. Maund, 3 You. & ■ C. 347. > {§ 157, 158}; Winter v. Innes, 4 Myl. & C. 101, 108, 109. In this case Lord Cottenham said: "The question, therefore, is. Whether a creditor of a firm, who, knowing of the death of one of the firm, con- tinues to deal, as before, with the survivor for any length of time, with- out rec^uiring payment of the balance due to him from the firm at the time of the death, thereby loses the remedy which he had in equity against the estate of the deceased pai'tner; — particularly in a case in which there is not only no evidence of any intention to abandon such claim, and to adopt the individual responsibility of the surviving partner in its stead, but the total absence of any object or consideration for so doing, and conclusive evidence that the principal object of the forbear- ance was not to press upon or prejudice the estate of the deceased, of CHAP. XII.] REMEDIES AGAINST THIRD TERSONS. 411 § 254. Indeed, it may be laid down, as a general rule, that, when a debt is once contracted by a third person whose will the creditor was himself a trustee and executor, though he did not prove. It would, I think, be extraordinary, if there were authorities to be found in support of the affirmative of this proposition. I will shortly refer to some of the principal cases at law and in equity which bear upon this subject. The cases at law have necessarily arisen where the dissolution of the partnership has taken place by arrangement between the pai-tners, and not by death. It will be found that in some, even where it was clear that the creditor intended to take the separate security of the continuing partner in lieu of the joint liability of the dissolved firm, the retired partner was held not to be discharged, as in David v. Ellice, and Lodge v. DIcas, in which the creditor, with a knowledge that the continuing partner had agreed to pay all the debts, took his personal security for the debt ; but it was held that he had not thereby released the retiring partner, upon the ground of want of consideration for his so doing. These decisions have been considered as car- rying the doctrine very far, and undoubtedly they do ; and the true gi-ound appears to me to have been acted upon in Bedford v. Deakin, and Thomp- son V. Percival. In the former, it is laid down, that to discharge the retiring partner, it must appear, that the creditor accepted the separate security of the continuing partner, in discharge of the joint debt ; and in the latter case, although the creditor knew that the continuing partner had agreed to pay all debts, and with that knowledge had taken a bill from him, for the pay- ment of which, when due, he afterwards allowed two months, yet the Court, upon a motion for a new trial, ordered it, that it might be put to the jury whether the plaintiff* had agreed to take, and did take, the bill in satisfiiction of the joint debt. If, therefore, the cases in equity of claims against the es- tates of deceased partners are to be regulated by the same principle, there can be no doubt of the right conclusion in the present case, for there was no new security given ; and instead of an intention appearing, or any agree- ment being proved, to release the estate of Mr, Winter, all the evidence proves directly the reverse. It cannot be disputed now that the estate of a deceased partner is liable in equity to the creditors of the firm, although the legal remedy exists only against the survivors. When and by what means is that liability to terminate ? Sir William Grant, in YuUiamy v. Noble (and he had much considered the question in Sleech's Case in Devaynes v. Noble), has answered the question. He says, 'The deceased partner's es- tate must remain liable in equity until the debts which affected him at the time of his death have been fully discharged. There are various ways in which the discharge may take place, but discharged they must be before his liability ceases.' The discharge may be by direct payment, or by dealings with the continuing partner operating as payment of the joint debt, or, in the terms of Thompson v. Percival, the dealings may arise from the credi- tor's having agreed to take, and taking the security of the survivor in satis- faction of the joint debt ; or there may be an equitable bar to the remedy, •412 PARTNERSHIP. [chap. XII. with a partnership (it not being by a negotiable secu- rity), no mere private agreement between the partners will vary their rights against such third person, un- less it is assented to by the latter.^ Thus, for example, if upon any change of the firm, the existing partnership debts should be assigned over to the new firm, that alone would not give any title to the new firm at law to sue the debtors therefor. But if in such a case, after such an assignment, and with full knowledge thereof, the debtors should assent thereto, and promise payment to the new firm, that would amount, by operation of law, to an extinguishment of the liability to the old firm, and to a transfer of the debts to the new firm ; so that the old firm would no longer be entitled to sue therefor ; but the right would be exclusively vested in the new firm.^ for (as Lord Eldon expresses it in Ex i^arte Kendall) , ' As the right stands only upon equitable grounds, if the dealing of the creditor with the surviv- ing partners has been such as to make it inequitable that he should go against the assets of the deceased partner, he will not upon general rules and prin- ciples be entitled to the benefit of the demand/ In the present case there is a total absence of any such equitable defence to the claim upon the estate of Mr. Winter, as there is of any intention or contract to abandon it. The more modern cases of Cowell v. Sikes, Wilkinson v. Henderson, and Braith- waite V. Britain, in addition to the former authorities, leave no doubt that in this case nothing has taken place which can bar ]Mr. Baillie's claim (admitted to have at one time existed), to compel payment of so much of the debt due to him from the firm as remains unpaid." 1 Coll. on P. B. 3, c. 0, § 1, p. 466, 467, 3d ed. ; Eadenhurst v. Bates, 3 Bing. 463; Wilsford v. Wood, 1 Esp. 182. {Armsby v. Farnam, 16 Pick. 318 ; Gushing v. Marston, 12 Cush. 431 ; Richards v. Fisher, 2 All. 527 ; Stewart v. Rogers, 19 Md. 98. | 2 See 2 Story, Eq. Jur. § 1041-1046 ; Williams v. Everett, 14 East, 582 ; Yates V. Bell, 3 B. & Aid. 643; Grant r. Austen, 3 Price, 58; Tiernan v. Jackson, 5 Pet. 580, 597-601 ; Evans r. Silverlock, 1 Peake, 21 ; M'Lanahan v. Ellery, 3 Mason, 269; Harris v. Lindsay, 4 Wash. C. C. 271; {Wood v. Rutland Ins. Co., 31 Vt. 552.} See Gow on P. c. 3, § 1, p. 129, 130, 3d ed. — The case of King v. Smith, 4 C. & P. 108, turned upon other dis- tinct considerations. There it was agreed, upon a dissolution of the part- nership, tliut A. (one of the partners) should receive all the debts due to CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 413 § 255. In like manner, where a contract, originally made with a firm, is, by the consent of all the parties thereto, severed, and become a several contract with one of the parties, or, by assignment and consent of all the parties thereto, has been transferred by way of sub- stitntion to a third person, there would seem to be no doubt, that the liability to the partnership is extin- guished by mere operation of law.^ Why, in the case of an infant partner, who, before any action brought against a debtor to the firm, has disaffirmed his original connection with the firm, the contract should not, upon principle, be thereafter treated as a several contract with the remaining partners, it is not easy to say ; for thereby the contract would seem, as to the infant, to be void ah initio. But, upon the footing of authority, the point does not seem entirely free from difficulty." § 256. Hitherto, we have been considering the rights of action and remedies at law, which partners may have against third persons, founded upon contracts made with the firm ; and the manner in which the same may be qualified, suspended, severed, or extinguished, by the subsequent acts of one or all of the partners. Let us now proceed to the consideration of the rights of action and remedies, which partners may have against third the firm; and afterwards B., the other partner, drew a bill on C, a debtor of the firm, for the debt due to the firm, who accepted it; and it was held to be no defence to a suit by B. against C. on the acceptance, that there was the above stipulation on the dissolution ; for, notwithstanding such stipula- tion, either partner might release or collect the debts due to the firm. But it would have been otherwise, if all the debts of the firm had been assigned to A., and in consideration thereof, C. had promised to pay the debt to A., and then B. had sued lor the same in the partnership name. ' See Thompson v. Percival, 5 B. & Ad. 925. See M'Lanahan i\ Ellery, 3 Mason, 269; Hosack v. Rogers, 8 Paige, 229. ^ The authorities on this subject ai'e not easily reconcilable with each other. See Tccd v. Elworthy, 14 East, 210; Goode v. Harrison, 5 B. & Aid. 147; Thornton i\ Illingworth, 2 B. & C. 824; Whitney v. Dutch, 14 Mass. 457 ; Tucker v. Moreland, 10 Pet. 58 ; Kell v. Nainby, 10 B. & C. 20. 414 PARTNERSHIP. [CHAP. XII. persons, founded upon the torts of the latter. And, here, it may be laid down as a general doctrine, that whenever a joint injury or damage is done to the prop- erty, or rights, or interests of the partnership by third persons, whether it be misfeasance, or malfeasance, or negligence, or omission of duty, or by positive conver- sion of their property, an action will lie at law, by all the partners (and, indeed in such an action they ought all regularly to join), to obtain due recompense and re- dress in damages.^ Where, indeed, the injury is done to some, and not to all of the partners, they alone, who are injured, may bring an action therefor without join- ing the others ; for torts are, or at least may be, in their nature, joint, as well as several ; and. therefore, in con- templation of law, the rights of the parties vary accord- ingly.^ Hence, if a third person should fraudulently collude with one partner to injure the others, even though the act might in other respects be an injury to the partnership ; yet an action will lie by the other partners alone against such third person, so colluding, for the special damage occasioned thereby to them- selves.^ So, where words, which impute insolvency in trade, are spoken of one of the partners in a firm (which cannot fail in many cases to have some tendency to impair the credit of the firm itself), the injured partner may maintain a several action for the slander ; and it is not necessarily to be considered as an injury, for which a joint action only can be maintained by the firm."* » Coll on P. B. 3, c. 5, § 2, p. 473, 474, 2d ed. See also Addison v. Overend, 6 T. R. 766 ; Bloxam v. Hubbard, 5 East, 407 ; Sedgworth v. Overend, 7 T. R. 279 ; Gow on P. c. 3, § 1, p. 133, 3d ed. ; Id. p. 136. 2 Ibid. 3 Longman v. Pole, 1 Moo. & Malk. 223. {See Fox v. Rose, 10 U. C. Q. B. Rep. 16.} * Harris v. Bevington, 8 C. &,P. 708. {See Robinson v. Marclmnt, 7 Q. B. 918.} CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 415 § 257. On the other hand, there is not the slightest doubt, that a joint action may be maintained by the firm for any defamation of the firm, or for any libel upon the firm ; for this is, justly and properly speak- ing, a joint tort and injury, applicable to their collective rights and interests.^ But in such a case the damages ' Coll. on P. B. 3, c. 5, § 2, p. 473, 2d ed.; Cook v. Batcbellor, 3 B. & P. 150; Haytliom v. Lawson, 3 C. & P. 196. See Williams's note to Coryton V. Lithebye, 2 Saund. 112, 117, a. ; {Le Fanui;. Malcomson, 1 H. L. Cas. 637 ; Taylor v. Church, 1 E. D. Smith, 279 ; s. c. 4 Seld. 452 ; Lewis w. Chapman, 19 Barb. 252. In Metropolitan Saloon Omnibus Co. v. Hawkins, 4 H. & N^. 87, it was held, that an incorporated joint stock company might sue a share- holder for a libel, and Martin & Watson, B B., intimate that a suit against one partner who had libelled the firm might be maintained by the other partners.} Forster v. Lawson, 3 Bing. 452. — In this latter case Lord Chief Justice Best said : " An objection has been made to the declaration in this case ; namely, that the action has been brought by three persons jointly, and that they could not propei'ly join in sucli an action. The general rule of law is, as laid down in the case of Smith v. Cooker, Cro. Car. 512; namely, that whei-e several persons are charged with being jointly concerned in a murder, each of them must bring a separate action for it ; and the reason is, that they have no joint interest to be affected by the slander. Where, however, two persons have a joint interest affected by the slander, they may sue jointly ; and the case of Cook v. Batchellor is not the first case which has determined this point. In the note in Saunders, to which the Court has been referred, the learned editor states, that two joint tenants or coparceners might join in an action for slander of the title to their estate ; and the form of the declara- tion in such an action is to be found in Brownlow. This doctrine has also been recently considered and confirmed in the case of Collins v. Barrett, in which it was holden, that two persons might bring a joint action for a mali- ciously holding them to bail, if the comjjlaint in the declaration was con- fined to the expenses which they were jointly put to in procuring their liberty. It has been said, that, notwithstanding the judgment against the de- fendants in this action, if either of the plaintiffs has sustained any separate damage, he may still maintain a separate action. I cannot see how there can be any separate damage. The business injured is the joint business, and the libel only affects the plaintiffs through their business. If, however, a copartnership be libelled, and the libel contains something which particu- larly affects the character of one of that firm, I think a joint action may be maintained against the libeller, who would have less reason to com- plain of such proceedings than he would have if each partner brought a separate action for the injury done to the firm. Another objection raised by the defendant's counsel is, that the plaintiffs have not stated the pro- portion of interest, which each respectively had in their joint business. It 416 PARTNERSHIP. [CHAP. XII. must be strictly limited to the injury sustained by the firm in their joint trade or business ; and cannot be ex- tended to the injury done to the private feelings of the individual partners/ § 258. The same principle will apply to any other wrong, done by third persons, affecting the partnership trade or business ; such as obstructing their business and employment, seducing persons from their service, or wrongfully soliciting and inducing their customers to withdraw their patronage from them by fraud, or threats, or otherwise ; for in all such cases, a joint damage is done to the firm.^ is not necessary for them to do so ; with their several proportions the de- fendant has nothing to do. Any compensation they may recover "will belong to them generally, and it is nothing to the defendant, how it may be divided amonnj them. It has also been urged, that the words contained in the paragi-aph are not actionable. I have no hesitation in deciding, that to say of any bankers, that they have suspended payment, is action- able. For what can be the meaning of such a statement, except that they are no longer solvent? Saying that a banker has suspended payment, is saying that he cannot pay his debts. A temporary inability to pay debts is insolvency. The charge of suspending payment is a charge of insolvency. Such a statement will instautlv brins: all the creditors of a banking-house upon it, and completely stop their business by preventing any one from taking their bills. But here special damage is stated, and I think correctly stated. It has been objected, that the special damage is not set out with sufficient certainty. Even if that were so, advantage could be taken of it only by a sjjecial demurrer. In my opinion, however, the special damage is clearly and distinctly set out. The plaintiffs state that they had a number of promissory notes outstanding and in circulation, and that in consequence of these libels they were called upon and forced and obliged to pay those notes ; how or when was not material, it being sufficient that they declare that they have thereby lost all the benefit and advantage which would other- wise have accrued to them in their trade and business, from the notes re- maining outstanding and in circulation. The declaration goes even further ; it states that the plaintiffs have suffered and sustained a great loss in raising and procuring sufficient money to pay and satisfy their several notes. It appears to me, that the declaration is unobjectionable, and that the plaintiffs are entitled to judgment." ' Haythorn v. Lawson, 3 C. & P. 196. [See Robinson v. Marchant, 7 Q. B. 918.] 2 Weller r. Baker, 2 Wils. 414,423; Coryton v. Lithebye, 2 Saund. 112, llo, and Wilhams's note (2), p. 116. CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 417 § 259. In the next place, as to remedies in equity by partners against third persons. It may be stated as the general doctrine, that the same remedies in equity will lie for the "vdndication of the rights, and the redress of the wrongs of the partnership, as ordinarily belong to private individuals.^ Thus, for example, if one partner should collude with a third person to defraud the part- nership by wrongfully using the partnership name, or negotiating the securities, or applying the property thereof for improper purposes, a Court of Equity would, by an injunction, restrain him from so doing. '^ So, if a third person should violate a copyright or patent right, belonging to a partnership, an injunction would, in like manner, lie to restrain him from such illegal conduct. So, if a separate creditor of one partner should know- ingly aid in the misapplication of the partnership funds to the payment of his own debts, a Court of Equity would restrain him from so aiding in such misconduct ; and, if he had so improperly received the funds thereof, it would compel him to restore the same to the partner- ship.^ So, a Court of Equity will restrain a third per- son by injunction, who is injuring the partnership by vending an article of trade, similar to that manuflictured by the partnership, falsely, under the name of the part- nership, and as if manufactured by the same, and thus misleading the public, and diverting the patronage and custom from the partnership.'' The same rule will apply to any other false and wrongful use of the partnership name and reputation, by deceptive imitations of the » Coll. on P. B. 3, c. 7, p. 566, 2d ed. 2 Gow on P. c. 2, § 4, p. 107-109, 3d ed. ; Coll. on P. B. 2, c. 3, § 5, p. 234, 235, 2d ed. ; Hood v. Aston, 1 Russ. 412 ; 1 Story, Eq. Jur. § 667, 669 ; 2 Id. § 930-935. ' Ante, § 132, 133 ; Gow on P. c. 2, § 4, p. 108 ; Coll. on P. B. 2, c. 3, § 5, p. 234, 235, 2d ed. ; Jervis v. White, 7 Ves. 413. * 2 Story, Eq. Jur. § 951. 27 418 PARTNERSHIP. [CHAP. XII. labels, devices, or ornaments used by the partnership upon their own manufactured cutlery, or vehicles, or medicinal preparations, or otherwise in the course of their business.^ So, in like manner, an injunction will lie for a partnership to prevent a third person from publishing a magazine, or other periodical, in their names, after they have ceased to have any connection with it.^ § 260. These cases all stand upon doctrines equally applicable to all persons, whether they are partners, or private individuals. But there is one case, which is pe- culiar to partnerships, and which, therefore, requires a distinct consideration in this place ; and that is, the case of an execution levied upon the partnership property by a creditor, under a judgment for a separate debt against one partner. Where there is a joint suit and judgment against all the partners for a partnership debt, there is no doubt, at the common law, that the execu- tion issuing thereon may be levied upon, and satisfaction had, either out of the partnership effects, or out of the separate effects of either of the partners (exactly, as in the case of other joint debtors, not partners) ; ^ and if one is compelled to pay or satisfy the whole debt, his remedy for contribution therefor lies exclusively in equity.^ § 261. But the question, as to the right of seizure of partnership property for the satisfaction and discharge > 2 Story, Eq. Jur. § 951 ; Motley v. Downman, 3 Myl. & C. 1, 14, 15 ; Millington v. Fox, 3 Myl. & C. 338 ; Knott v. Morgan, 2 Keen, 213, 219 ; {§ 100.} ^ 2 Story, Eq. Jur. § 951 ; Hogg v. Kirby, 8 Ves. 215. 3 Ante, § 179, 189, 264; Coll. on P. B. 3, c. 6, § 10, p. 557; Ex paHe Ruffin, 6 Ves. 119, 126; Herries v. Jamieson, 5 T. R. 553, 554; Abbot v. Smith, 2 W. Bl. 947; Jones v. Clayton, 4 M. & S. 349; Dutton v. Mor- rison, 17 Ves. 193, 205, 206. {See Randolph v. Daly, 16 N. J. Ch. 313.} ■• Ibid. {See§ 263, note.} CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 419 of the separate debt of one of the partners, is a matter of a more complicated nature, and involves other con- flicting rights and equities of the other partners. It seems clear, at the common law, that the sheriff, upon an execution upon a judgment against one partner for his separate debt, may seize in execution the tangible property of the partnership,^ In such case, it has been said, that he should seize the whole or entirety of the goods, and not merely an undivided moiety or propor- tion thereof; for if he should seize only the moiety, or other proportion, the other partners would be entitled to their moiety or other proportion thereof.^ It would, perhaps, be more accurate (at least according to the modern notions on this subject) to say, that the slieriff may seize, and should seize, the interest of the separate partner in the property of the partnership ; and that, and that alone, he is at liberty to sell upon the execu- ' [But qucere, whether the sheriif can take such goods into his possession, to the exclusion of the other partner. See Hill v. Wiggin, 11 Fost. 292.] {It is undoubtedly the general law throughout the United States that the sheriif can take possession of the goods on an execution, or on an attach- ment on mesne process. 1 Am. Lead. Cas. 473-478, 4th ed. ; Reed v. Howard, 2 Met. 36 ; Readu. Shepardson, 2 Vt. 120 ; Whitney v. Ladd, 10 Vt. 165 ; Phillips V. Cook, 24 Wend. 389 ; Davis v. White, Houst. 228 ; Newhall v. Bucking- ham, 14 111. 405 ; White v. Jones, 38 111. 159 ; Atwood v. Meredith, 37 Miss. 635 ; Andrews v. Keith, 34 Ala. 722. See Burnell v. Hunt, 5 Jur. 650, 651. In New Hampshire, however, it is held otherwise. Gibson v. Stevens, 7 N. H. 352; Morrison v. Blodgett, 8 N. H. 238, 251 ; Dow v. Sayward, 14 N. H. 9 ; Treadwell v. Brown, 43 N. H. 290. In Pennsylvania the point seems not to have been directly decided, but the dicta in Deal v. Bogue, 20 Penn. St. 228, and Smith v. Emerson, 43 Penn. St. 456, render it doubtful whether the general rule would be there followed. See Reinheimer r. Ilerainijwav, 35 Penn. St. 432. In the matter of Smith, 16 Johns. 102, it was hold, that the part- nership property could not be taken on a domestic attachment in a suit against one partner. But see contra Burgess v. Atkins, 5 Blackf. 337 ; Reed v. Howard, 2 Met. 36; Read v. Shepardson, 2 Vt. 120; Whitney «. Ladd, 10 Vt. 165. See § 263, note.} " Heydon v. Heydon, 1 Salk. 392 ; Chapman r. Koops, 3 B. & P. 289, 290 ; Jacky V. Butler, 2 Ld. Raym. 871 ; Skipp v. Harwood, 2 Swans. 586, 587; Dutton V. Morrison, 17 Ves. 193, 205, 206. 420 PARTNERSHIP. [cHAP. XII. tion.^ What that interest is, or may be, it is impossible to ascertain in many cases, until a final adjustment of all the partnership concerns,^ Yet, Courts of Law have said, that the sheriff may go on to sell that interest un- der the execution, however inconvenient it may be, and the purchaser at the sale must be content to take such an interest therein, as a tenant in common with the other partners, as the partner himself had therein.^ For in every such case, the other partners have a lien upon the partnership property, as well for the debts due by the firm, as for their own shares and proportions thereof; and the judgment creditor, and the purchaser under him, must take it, subject to all such claims and liens. ^ 1 Coll. on P. B. 3, c. 6, § 10, p. 559-561, 2(1 ed. ; Chapman v. Koops, 3 B. & P. 289, 290 ; Button v. Morrison, 1 7 Ves. 193, 206. In the matter of Wait, 1 Jac. & W. 605, 608; Rice v. Austin, 17 Mass. 197, 206, 207; Wilson v. Conine, 2 Johns. 280 ; [Filley v. Phelps, 18 Conn. 294 ; Walsh v. Adams, 3 Denio, 125; SutcliiFe v. Dohi-man, 18 Ohio, 181 ; Deal r. Bogue, 20 Penn St. 228.] ^ 1 Story, Eq. Jur. § 667; Skipp v. Harwood, 2 Swans. 586 ; Nicoll v. Mumford, 4 Johns. Ch. 522 ; s. C. 20 Johns. 611. ' Coll. on P. B. 3, c. 6, § 10, p. 559-562, 2d ed. ; Fox v. Hanbury, Cowp. 445 ; Skipp t'. Harwood, cited in note to Burton o. Greene, 3 C. c%P. 309 ; [Haskins v. Everett, 4 Sueed, 531] ; Taylor v. Fields, 4 Ves. 396 ; Pope v. Haman, Comb. 217 ; Ex paiie Hamper, 17 Yes. 403, 407 ; The matter of Smith, 16 Johns. 102, 106, and the Reporter's note; Skipp v. Harwood, 2 Swans. 586 ; s. c. under the name of West v. Skip, 1 Ves. Sr. 239 ; Id. 456 ; Chapman v. Koops, 3 B. & P. 289 ; Holmes v. Mentze, 4 Ad. & E. 127 ; 1 Story, Eq. Jur. § 677, 678 ; Allen v. Wells, 22 Pick. 450. * This subject was much considered in the case of Taylor v. Fields, 4 Ves. 396. Lord Chief Baron Macdonald on that occasion, in delivering the opin- ion of the Court, said: "The right of the separate creditor under the exe- cution depends upon the interest each partner has in the joint property. With respect to that, we are of opinion that the corpus of the partnership effects is joint property, and neither partner separately has any thing in that corpus ; but the interest of each is only his share of what remains after the partnership accounts are taken. In Skip v. Harwood, 1 Ves. Sr. 239, by the name of West v. Skip, we see that whatever the right of the partnership may be, it is not affected by what may happen between the individual pai-tners. There is a distinction between the rights of the partners and the rights of the partnership. As between one partner and the separate creditors of the CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 421 § 262. Strictly, indeed, and properly speaking, the sale does not, at least in the view of a Court of Equity, other, they cannot affect the joint stock any further than that partner whose creditor they are could have alfected it. In Fox v. Hanbury, Cowp. 445, Lord Mansfield was led to the consideration of a point, that bears much upon this case ; and adverting to the case of Skip v. Harwood, he states a passage of Lord Hardwicke's judgment from his own note rather stronger than it appears in the report : ' If a creditor of one partner takes out execution against the partnership effects, he can only have the undivided share of his debtor ; and must take it in the same manner the debtor himself had it, and subject to the rights of the other partner.' What is the manner in which the debtor himself had it ? He had that which was undivided, and could only be divided by first delivering the effects from the partnership debts. He who comes in as his companion, as joint tenant with him, according to this doctrine of Lord Hardwicke, must take it in the same manner the debtor himself had it, subject to the rights of the other partners. Lord Mansfield having stated what, according to the course of the common law, as far as it respects trade between partners, is the rule, that a creditor taking out exe- cution against a partner, is directly in the place of the partner debtor, pro- ceeds to show that by the same rule, where a partner becomes bankrupt, the assignees are put in the place of the partner in whose right they come in, and by no means, as was argued by Mr. Plumer, by any rule arising out of the bankrupt laws ; for nothing is said in any one of those acts as to the creditors of a partnership, and the separate creditors of one partner ; but they only provide for the case of mutual debts, and accelerating a debt upon a security payable at a future day. But the same common law applied in the case where one partner becomes a bankrupt, provides that the assignee of the bankrupt shall be in the same situation as that in which a creditor taking out execution stood before those acts. This introduces all the cases of bankruptcy which Mr. Plumer wished to exclude, as not applicable to a case in which there was no bankruptcy ; and this case is to be considered as if no bankruptcy had taken place, as the execution was before the bank- ruptcy. In law there are three relations ; first, if a person chooses for val- uable consideration to sell his interest in the partnership trade, for it comes to that ; or if his next of kin or executors take it upon his death ; or if a cred- itor takes it in execution, or the assignees under a commission of bankruptcy. The mode makes no difference. But in all those cases the application takes place of the rule, that tlie party coming in the right of the partner, comes into nothing more than an interest in tlie partnership, which cannot be tangible, cannot be made available, or be delivered, but under an account between the partnership and the partner ; and it is an item in the account that enough must be left for the partnership debts. A great deal has been said of the inconvenience. What is the inconvenience ? It is true, the individual trusted to the partnership fund in his idea at the time he was lending the money; not that I believe that is very common. But it 422 PARTNERSHIP. [CHAP. XII. transfer any part of the joint property to the purchaser, so as to entitle him exdusively to take it or withhold may be dangerous in a thousand instances to have any thing to do with a trader ; as for instance, to purchase an estate ; for an act of bankruptcy may have been committed five years before, which will reach the estate. But look to the danger on the other side ; one partner giving a bond, and the creditors of the partnership looking to the stock itself. It is said, that in this case the joint creditors had done nothing; and this meritorious creditor has a right to be prefei'red on account of his early diligence. But what is that to which he is entitled? The estate of a partner is debtor to him. The question, therefore, recurs to the consideration, what it was that partner had; for the creditor cannot be entitled to anymore. It therefore argues nothing to say, he has the merit of diligence, till we see upon what that merit can attach. If the partner himself, therefore, had nothing more than an interest in the surplus beyond the debts of the partnership upon a division, if it turns out that at common law that is the whole that can be delivered to, or taken by, the assignee of a partner, the executor, the sheriff, or the assignee under a commission of bankruptcy, all that is delivered to the creditor, taking out the execution, is the inter- est of the partner in the condition and state he had it ; and nothing was due to this partner separately, the partnership being insolvent. The whole property was due to the partnersliip creditors, and not to either partner." See also Dutton v. Morrison, 17 Ves. 193, 205, 206. In the very recent case of Allen v. Wells, 22 Pick. 450, Mr. Justice Dewey, in delivering the opinion of the Court, said : " The conflicting claims of copartnership and separate creditors have been a fruitful source of litigation in England. The questions more usually have, arisen under the bankrupt law, and the decisions are mostly to be found in the Chancery Reports, but not exclu- sively so. The great number of cases in which this question has arisen, shows very clearly, that there could have been at the time no very well defined general principles, known and acknowledged as such, applicable to the adjustment of these conflicting rights. Even as regards the joint prop- erty of partners, the rule has varied. By the rules of law as formerly held in England, the sheriff, under an execution against one of two copartners, took the partnership effects and sold the moiety of the debtor, treating the property as if owned by tenants in common. Heydon v. Heydon, 1 Salk. 392; Jacky v. Butler, 2 Ld. Raym. 871. But the principle is now well settled in England, both at law and in equity, that a separate creditor can only take and sell the interest of the debtor in the partnership prop- erty, being his share upon a division of the surplus, after discharging all demands upon the cojiartnership. Fox v. Hanbury, Cowjd. 445 ; Taylor V. Fields, 4 Ves. 396. The same fluctuation in the rule, as to partnership property, has existed in the United States. The rule of selling the moie- ty of the separate debtor in the partnership property on an execution for his private debts, formerly prevailed in several of the States of the Union. CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 423 it from the other partners ; for that would be to place him in a better situation than the execution partner himself, in relation to the property.^ But it gives him a right to a bill in equity, calling for an account and settlement of the partnership concerns, and thus to en- title himself to that interest in the property, which upon the final adjustment and settlement of the partnership concerns, shall be ascertained to belong to the execution partner ; and nothing more.^ How utterly inadequate a Court of Law is to furnish suitable means for taking such an account, needs scarcely to be suggested ; and, indeed, the very difficulty of ascertaining what interest can be conveyed to the purchaser before such an ad- justment and settlement are made, has induced very learned minds to doubt whether a Court of Law is competent to order any sale, before the exact amount But the later decisions have changed the rule, and that now more gener- ally adopted is in accordance with the one prevailing in England, and which has been already mentioned. The State of Vermont still adheres to the doctrine, that partnership creditors have no priority over a creditor of one of the partners, as to the pai-tnership effects. Reed v. Shepard- son, 2 Vt. 120. The rule in Massachusetts, giving a priority to the part- nership creditor in such cases, was settled in the case of Pierce v. Jack- son, 6 Mass. 242, and has been uniformly followed since. The effect of the rule that the only attachable interest of one of the copartners by a sepa- rate creditor, was the surplus of the joint estate which might remain after discharging all joint demands upon it, necessarily was to create a preference in favor of the partnership creditoi-s in the application of the partner- ship property ; and this effect would be produced, although the original purpose of the rule might have been the securing the rights of the several copartners, as well as those of their joint creditors. Whatever may have been the object of the rule, the rule itself is now to be considered as well settled, as to the appropriation of the partnership effects." ' 1 Story, Eq. Jur. § 66 7. But see Burrall v. Acker, 23 Wend. 606. [And if he excludes the other partners from possession, they may have an action against him. Newman v. Bean, 1 Fost. 93; Page v. Carpenter, ION. H. 77; Morrison v. Blodgett, 8 N. H. 238, 245.] * 1 Story, Eq. Jur. § 677 ; Chapman v. Koops, 3 B. & P. 289, 290, 291; Button V. Morrison, 17 Ves. 193, 205, 206. 424 PARTNERSHIP. [CHAP. XII. of the interest of the partner therein is thus ascer- tained.^ § 263. In cases of this sort, therefore, the real posi- tion of the parties, relatively to each other, seems to be this. The partnership property may be taken in 1 Waters v. Taylor, 2 Ves. & B. 299, 301 ; Dutton v. Morrison, 17 Ves. 193, 206, 207 ; In the matter of Wait, 1 Jac. & W. 605, 608. — In the case of Waters v. Taylor, Lord Eldon said : " If the Courts of Law have followed Courts of Equity in giving execution against partnership eiFects, I desire to have it understood that they do not appear to me to adhere to the principle, when they suppose that the interest can be sold before it has been ascertained what is the subject of sale and purchase. According to the old law, I mean before Lord Mansfield's time, the sheriff, under an execution against partner- ship effects, took the undivided share of the debtor without reference to the partnership account ; but a Court of Equity would have set that right by taking the account, and ascertaining what the sheriff ought to have sold. The Courts of Law, however, have now repeatedly laid down that they will sell the actual interest of the partner, professing to execute the equities between the parties ; but forgetting that a Court of Equity ascertained, previously, what was to be sold. LIow could a Court of Law ascertain what was the in- terest to be sold, and what the equities, depending upon an account of all the concerns of the partners for years ? " And again. In the matter of Wait, 1 Jac. & W. 608, he said: "In my long course of practice, 1 have never been able to reconcile all the decisions which have taken place on partnership property with resjiect to joint and separate estate ; nor have I ever been able very clearly to see my way In the application of the doctrine which has been held in some of the late cases on this subject. I conceive originally the law was, that if there was a separate creditor of a partner, he might lay hold of any chattels belonging to the partnership, and take a moiety of them, or whatever other proportion that partner might be entitled to in the effects of the partnership. But at law, somehow or other, they now contrive to take an account which ascertains what is the Interest of the debtor in the effects taken in execution ; and when you put the question, what is that interest, nothing can be more clear than that it is that which would result to him when all the accounts of the partnership were taken. This equity, which has been transferred into the proceedings of a Court of Law, I apprehend, subsisted here long before ; a separate creditor applying for satisfaction of his debt out of the partnership estate by means of an equitable execution, must have taken it upon equitable terms. There has been a great deal of reasoning as to the rights of partners, with reference to the execution of a separate creditor ; but It always appeared to me that the interest of the in- dividual partner was all which a creditor of that individual could take, and that he must take it subject to all the partnership dealings." CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 425 execution upon a separate judgment and execution against one partner ; but the sheriff can only seize and sell the interest and right of the judgment partner therein, subject to the prior rights and liens of the other partners and the joint creditors therein.^ By such seizure the sheriff acquires a special property in the goods seized ; ^ and the judgment creditor himself may, and the sheriff, also, with the consent of the judg- ment creditor, may, file a bill against the other partners for the ascertainment of the quantity of that interest, before any sale is actually made under the execution.^ The judgment creditor, however, is not bound, if he does not choose, to wait until such interest is so ascer- tained; but he may require the sheriff immediately to proceed to a sale, which order the sheriff is bound by law to obey.'* In the event of a sale, the purchaser at the sale is substituted to the rights of the execution partner, quoad the property sold, and becomes a tenant m common thereof; and he may file a bill, or a bill may be filed against him by the other partners, to as- certain the quantity of interest, which he has acquired by the sale.^ ' Taylor v. Fields, 4 Ves. 396 ; ante, § 261, 262; Skipp v. Harwood, 2 Swans. 586, 587; Holmes v. Mentze, 4 Ad. & E. 127 ; Harvey v. Crickett, 5 M. & S. 336 ; Button v. Morrison, 17 Ves. 193, 205, 206. - Wilbraliam v. Snow, 2 Saund. 47, and Williams's notes. Ibid. ' {Nixon V. Nash, 12 Ohio St. 647.} * Parker v. Pistor, 3 B. & P. 288; Chapman v. Koops, 3 B. & P. 289, 390; Holmes v. Mentze, 4 Ad. & E. 127 ; [and he is not liable to the other partners for so selling. McPherson v. Pemberton, 1 Jones, (N. C.) 378.] = Chapman v. Koops, 3 B. & P. 289, 290 ; Ex jmrte Hamper, 17 Ves. 403, 407 ; Bevan v. Lewis, 1 Sim. 3 76 ; Skipp v. Harwood, 2 Swans. 586, 587 ; Taylor V. Fields, 4 Ves. 396 ; Barker v. Goodair, 11 Ves. 78, 85 ; Gow on P. c. 3, § 2, p. 144, 3d ed.; 1 Madd. Ch. Pr. 131 ; Eden on Injunct. 31 ; Coll. on P. B. 3, c. 6,§ 10, p. 557-565, 2d ed. [And if he sell the entire goods, he is liable to a subsequent trustee of the firm for a nioiet}' of the goods so sold. Latham V. Simmons, 3 Jones, (N. C.) 27.] {See Moore v. Pennell, 52 {Me. 162; Deal V. Bogue, 20 Penn. St. 228. The other partners may purchase at the 426 PARTNERSHIP. [CHAP. XII. § 264. In cases of the seizure of the jomt property for the separate debt of one of the partners, a question sheriiF's sale ; but their conduct must be perfectly fair, or they will be held as trustees for the jiartner whose share is sold. Perens v. Johnson, 3 Sni. & G. 419. See Evans v. Gibson, 29 Mo. 223. The purchaser has no right to exclusive possession. Andrews v. Keith, 34 Ala. 722. Nor can he maintain ejectment for his intei'est in the real estate. Clagett v. Kilbourne, 1 Black. 346. In Reinheimer v. Hemingway, 35 Penn. St. 432, it was held, that, as against the purchaser of a partner's share, the other partners were entitled to exclusive possession of the partnership property. See § 261, note.} In Massachusetts, it has been held, that an attachment of partnership goods, on a suit against one partner, is not valid against a subsequent attachment of the same goods by a creditor of the partnership. Pierce v. Jackson, 6 Mass. 242. On this occasion, Mr. Chief Justice Parsons said : " At com- mon law, a partnership stock belongs to the partnership, and one partner has no interest in it but his share of what is remaining after all the partnership debts are paid, he also accounting for what he may owe to the firm. Conse- quently all the debts due from the joint fund must first be discharged, before any partner can appropriate any part of it to his own use, or pay any of his private debts ; and a creditor to one of the partners cannot claim any interest, but what belongs to his debtor, whether his claim be founded on any contract made with his debtor, or on a seizing of the goods on execution. There are several cases by which these principles, so reasonable and equitable, are recognized and confirmed." The same doctrine prevails in New Hampshire. Tappan v. Blaisdell, 5 N. H. 190. [See Morton v. Blodgett, 8 N. H. 238 ; Thomjison v. Lewis, 34 Me. 167.] The doctrine, however, has not been applied to cases of mere dormant partners, against the creditors of the ostensible partners. Lord v. Baldwin, 6 Pick. 348 ; French v. Chase, 6 Greenl. 166 ; [Van Yalen v. Russell, 13 Barb. 590.] See, also. Church v. Knox, 2 Conn. 514 ; Brewster v. Hammet, 4 Conn. 540 ; Barber v. Hartford Bank, 9 Conn. 407; Doner v. Stauffer, 1 Penn. 198; Knox v. Summers, 4 Yeates, 47 7. Whether the like priority would be allowed at law, in favor of an execution by a joint creditor, against the execution of a separate creditor of one partner in England, does not appear to have been made a question for argument. But it is probably owing to the fact, that, at all events, in equity the priority would be sustained, where the partnership is insolvent, in a proper bill filed for the purpose. Could such a bill be filed by the joint creditor ? Or, should his rights be worked out through the equities of the other partners? See 1 Story, Eq. Jur. § 675 ; ante, § 97 ; Ex parte Ruffin, 6 Ves. 1 1 9, 1 26, 1 27 ; Ex parte Williams, 1 1 Ves. 3, 5. | The law on the post- ponement of executions against separate partners to those against the partner- ship is treated in a very clear and original method in 2 Lead. Cas. in Eq. 336, 3d Am. ed. " It is thoroughly well settled, that while a sale under an ex- ecution for the separate debt of a partner, will only pass his interest in the property, subject to the lien of his copartners and their equitable right to re- CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 427 has arisen, whether a Court of Equity ought to inter- fere, upon a bill for an account of the partnership, to quire that all the property of the partnership shall be applied, in the first in- stance, to the payment of its debts; Christian v. Ellis, 1 Gratt. 396 ; Renton v Chaplain, 1 Stock. 62 ; In the matter of Smith, 16 Johns. 102 ; Nicoll v. Mum- ford, 4 Johns. Ch. 522 ; Holmes v. Mentze, 4 Ad. & E. 127 ; Garbett v. Veale, 5 Q. B. 408 ; Johnson v. Evans, 7 Man. & G. 240 ; 1 Am. Lead. Cas. 473, 4th ed. ; an execution issued for a joint debt, will bind both the legal and equitable inter- rest of all the partners, and, consequently confer all the right and title of the firm on the purchaser, free from all claims, either of the partnership, or of the individual partners. Hence, when a levy for a separate debt is followed, before a sale, by an execution for the debt of the firm, an ajiparent conflict arises between two legal mandates, one of which binds the whole right and title of all the partners against whom it is issued, while the other has a prior lien or hold on the separate share or interest of one. The proper course, under these circumstances, undoubtedly is to sell under each writ separately, and without regard to the existence of the other ; when the purchaser under the first will become a tenant in common with the other partners at law, and be subject to a lien for the partnership debts and to an account in equity ; while those who buy under the second, will acquire the equities of the firm, as well as, and in addition to, the separate shares or interests of the partners, with the exception of the share of the partner against whom the first writ issued. The extent and value of the interests thus acquired, may obviously vary with the circumstances of each case in which the question arises ; but it would seem plain, that the right of the purchaser under the writ of the sepa- rate creditor, must extend as far as that of the partner for whose debt it issued, and cannot be a nullity unless the firm is insolvent, or the relation between its members is such that the whole of the assets would be approjmated by equity to the other partners. Reed v. Shepardson, 2 Vt. 120. For although the interest of the separate creditor is the interest of the partner in the state and condition in which the partner has it, and is, consequently, worth nothing unless the partnership assets are sufficient for the payment of its debts ; Tay- lor V. Fields, 4 Ves. 396 ; Commercial Bank f. Wilkins, 9 Greenl. 28 ; yet, for the same reason, it must necessarily have a real value, when the firm is solvent, and the partner is not indebted to the firm. Snodgrass' Appeal, 13 Penn. St. 471, 475. The sheriff should, therefore, as already stated, unless there is something more to the contrary than the fact that a levy for a separate debt has been followed by a joint execution, proceed separately to a sale under both writs, in the order of time in which he received them, and leave the rights of the partners to be decided subsequently by equity. But although this course is consistent with the legal rights of the purchaser under the separate writ, and even with principle (Moody v. Payne, 2 Johns. Ch. 548), and would seem to be that taken in England, it is attended with some inconveniences in practice, and among others, with that of making the extent of the interest exposed for sale depend on the solvency of the partnership ; and the state 428 PARTNERSHIP. [cHAP. XII. restrain the sheriff from a sale, or the vendee of the sheriff from an alienation of the property seized, until of the accounts between the partners, in manifest derogation of the certainty •which, as Lord Eldon observed in Waters w. Taylor, 2 Ves. & B. 299, should characterize every sale, especially when made by the law or by virtue of le- gal process. The proper remedy or preventive under these circumstances, lies in a levy by the joint creditors, either before or after the sale, followed by an appeal for aid to equity, which will give the complainants the full ben- efit of the equity of the partners, either by enjoining the sale, under the sep- arate execution, or by compelling the purchaser to submit to the result of an account between the partners, and applying the property to the payment of the partnership debts, if necessary for their liquidation. Witter r. Richards, 10 Conn. 37; Washburn «. Bank of Bellows Falls, 19 Vt. 278; Shedd v. Wil- son, 27 Vt. 478. But as such a bill must be founded on an allegation of the insolvency of the partnership, and cannot reach a final decision until that al- legation has been substantiated by proof, it may necessarily lead to a long and involved litigation, and prove of little benefit in fact, however perfect in theory. A different view has accordingly been taken in many of the States of the Union, and a levy for a debt due by the partnership, held to relate back to the equity of the partners, and thus obtain a priority over an- terior executions for the separate debts of the partners. ' A sale made under these circumstances, by virtue of the joint writ, consequently confers an abso- lute title on the purchaser, and the proceeds will be applied, in the first in- stance, to the payment of the joint debts, to the exclusion of the separate creditors, unless there is more than enough to satisfy the others. Pierce v. Jackson, 6 Mass. 242; Morrison v. Blodgett, 8 N. H. 250; Coover's Appeal, 29 Penn. St. 9 ; Jarvis v. Brooks, 3 Foster, 136, 146 ; Benson v. Ela, 35 N. H. 402; Tappan w. Blaisdell, 5 N. H. 190; Crane v. French, 1 Wend. 311; Dunham v. Murdock, 2 Id. 553 ; Commercial Bank v. Wilkins, 9 Greenl. 28 ; Douglas V. Winslow, 20 Me. 89 ; Trowbridge v. Cushman, 24 Pick. 310. The same view was taken, under somewhat different circumstances, in Lancaster Bank v. Myley, 13 Penn. St. 544, and a mortgage of the real es- tate of a partnership by the firm, held entitled to the whole of the proceeds of the land, in opposition to a prior judgment for the separate debts of one of the partners. In some of these cases, the partnership was proved or con- ceded to be insolvent, and a sufficient equitable ground, consequently, laid for treating the levy for the separate debt as a nullity, and awarding the whole of the proceeds to the joint creditor. Pierce v. Jackson ; Commercial Bank V. Wilkins ; Douglas v. Winslow ; but there are others in which this ingre- dient was wholly wanting ; Crane v. French ; Dunham v. Murdock ; Morri- son V. Blodgett ; Trowbridge v. Cushman ; Coover's Appeal ; and which seem to have been based on the principle, that a partner has no right or title to any specific portion of the partnership assets, and only a right to what may remain after the debts of the firm and the demands of his partners are satisfied; Gibson v. Stevens, 7 N. H. 352; Lovejoy v. Bowers, 11 Id. 404; CHAP. XIl] remedies AGAINST THIRD PERSONS. 429 the account is taken, and the share of the partner is ascertained. Mr. Chancellor Kent has decided, that an Deal V. Bogue, 20 Penn. St. 228 ; and that the claims of the separate credi- tors cannot rise higher in this respect than those of the partners ; Morrison V. Blodgett. But although this may be true as a principle of equity, it is not less true that a partner is legally entitled to the custody and possession of the partnership assets as a tenant in common as a means of securing and pro- tecting his equitable or resulting interest in the partnership, and that neither he, nor those who claim under him as creditors, can be deprived of this right, without a sacrifice of justice as well as of technical principle. Hence, any course of decision, which treats a separate execution as invalidated or super- seded by a subsequent levy under a joint writ, without proof of the insolven- cy of the firm, is unquestionably a departure not only from the course of the common law, but from equity ; the right of the separate creditors to obtain satisfaction out of the share of their debtor in the property of the firm, being equally valid under both systems, with that of the joint creditors to the joint or collective title of the partners; and the priority of the joint creditors a mere right to a remedy, and liable to be defeated altogether, by the superior diligence of the separate creditors, unless asserted in due season ; Russ v. Fay, 29 Vt. 381; Reed v. Shepardson, 2 Vt. 120; Haskins v. Everett, 4 Sneed, 531 ; Doner v. StauflFer, 1 Penn. 198 ; Snodgrass' Appeal, 13 Penn. St. 470. It has accordingly been held, in a number of instances, that the legal right of the separate creditors to proceed against the joint assets is indubitable, and will not be restrained by equity unless some specific cause is shown why it should not be exercised ; Cammack v. Johnson, 1 Green, Ch. 163; Moody w. Payne, 2 Johns. Ch. 548 : even when the partnership is insolvent, and when a sale of the share or interest of the partner must, consequently, be mere form, and will pass no beneficial interest. Russ i'. Fay, 29 Vt. 381. The better opinion would, however, seem to be, that insolvency constitutes a sufficient ground for an injunction in favor of the partners, or of joint creditors whose rights have been perfected by a judgment and levy, to prevent the sheriff from proceeding to a sale on an execution issued by a separate creditor, which will confer no real right on the buyer, and consequently ought not, as it would seem, to be made by the law. Witter w. Richards, 10 Conn. 37 ; 1 Story, Eq. Jur. 678 ; Skipp v. Harwood, 2 Swans. 586 ; 1 Ves. Sr. 239 ; Washburn v. Bank of Bellows Falls, 19 Vt. 278 ; Sheddu. Wilson, 27 Vt.478. But the American cases generally, as we have seen, cut the knot as too tedious to unloose, and postpone the separate creditors to the joint, whenever executions issued by both come in conflict, without other proof of the insolvency of the firm, or that there will be no surplus left for the separate creditor on a settlement of tlie partner- ship accounts, than the existence of the executions themselves, which may, per- haps, be regarded as prima facie evidence of the inadequacy of the partnership assets to satisfy all tlie demands against them. Tillinghast v. Chauij)lin, 4 II. I. 1 73, 1 90." See,also, Willis v. Freeman, 35 Vt. 44 ; Crawfurd v. Baum, 12 Rich. 75; Scudder v. Delashmut, 7 Iowa, 39; Hubbard v. Curtis, 8 Iowa, 1.} [It 430 PARTNERSHIP. [CHAP. XII. injunction for such a purpose ought not to issue to restrain a sale by the sheriff, upon the ground, that no harm is thereby done to the other partners ; and the sacrifice, if any, is the loss of the judgment debtor only.^ But that does not seem to be a sufficient ground upon which such an injunction should be de- is equally an interesting question whether the converse of the rule alluded to in the preceding sections is recognized at law ; that is, whether the pref- erence of a separate ci'editor of a partner, to be paid out of the sei3arate estate of his debtor, before the creditors of the partnership, can be enforced and secured at law. In some courts it is held, that the lien acquired by a partnership creditor, by an attachment of the separate property of one part- ner, cannot be defeated by a subsequent attachment of the same property, by a separate creditor of the partner owning such property. Allen v. Wells, 22 Pick. 450 ; Newman w. Bagley, 16 Pick. 570; {Baker v. Wimpee, 19 Ga. 87; Kuhne v. Law, 14 Rich. 18, overruling Roberts v. Roberts, 8 Rich. 15. But see Purple v. Cooke, 4 Gray, 120.} But a contrary view has been taken in more recent cases, and it has been thought to be a branch and member of the same equitable doctrine that the right of private creditors to look to jjrivate property, should be paramount to the right of joint creditors, although the latter might have commenced the first jDrocess against the pri- vate estate. Accordingly it was held, in a recent case, that where land of one partner had been* set off on execution for a debt due from the part- nership, and afterwards the same land was set off' on execution for a separate debt of the same partner, the separate creditor of such partner could recover the land from the creditor of the ^partnership by a writ of entry, Jarvis v. Brooks, 3 Eost. 136. And see Murrill v. Neill, 8 How. 414; Crockett v. Grain, 33 N. H. 542. {See, also, Tenney v. Johnson, 43 N. H. 144, and Gay V. Johnson, 45 N. H. 587. But the postponement at law of an execution by a partnership creditor against separate property, to a subsequent execu- tion by a separate creditor against the same property, seems to be confined to New Hampshire.} Whether such a preference is to be observed in equity, when there are no partnership funds, is more questionable. Bardwell v. Perry, 19 Vt. 292; Washburn v. Bank of Bellows Falls, Id. 278. In these cases it was held that in equity both sejiarate and partnership creditors have the same rights to the separate estate of the partners, after the partnership funds are exhausted, and thatsejiarate creditors cannot prevent joint creditors from sharing equally with them in the separate estate, when there are no part- nership funds. See the able judgments of Redfield, Chancellor.] * Moody V. Payne, 2 Johns. Ch. 548, 549. {So Brewster v. Hammet, 4 Conn. 540; Sitler v. Walker, Freem. Ch. 77. See Phillips v. Cook, 24 Wend. 389, 398; 3 Kent, 65.} CHAP. XIl] remedies AGAINST THIRD PERSONS. 431 nied. If the debtor partner has, or will have, upon a final adjustment of the accounts, no interest in the part- nership funds ; and if the other partners have a lien upon the funds, not only for the debts of the partner- ship, but for the balance ultimately due to them ; it may most materially affect their rights, whether a sale takes place, or not. For, it may be extremely difficult to follow the property into the hands of the various ven- dees ; and the lien of the other partners may, perhaps, be displaced, or other equities arise by intermediate hona fide salps of the property in favor of the vendees, or other purchasers without notice ; and the partners may have to sustain all the chances of any supervening insolvencies of the immediate vendees.^ To prevent multiplicity of suits, and irreparable mischiefs, and to insure an unquestionable lien to the partners, it would seem perfectly proper, in cases of this sort, to restrain any sale by the sheriff. And besides ; it is also doing some injustice to the judgment debtor, by compelling a sale of tiis interest under circumstances in which there must generally, from its uncertainty and litigious char- acter, be a very great sacrifice to his injury. If he has no right, in such a case, to maintain a bill to save his own interest, it furnishes no ground why the Court should not interfere in his favor, through the equities of the other partners. This seems (notwithstanding the doubts suggested by Mr. Chancellor Kent) to be the true result of the English decisions on this subject ; which do not distinguish between the case of an as- signee of a partner, and that of an executor or adminis- trator of a partner, or of the sheriff, or of an assignee in bankruptcy.^ ' See Skipp v. Harwood, 2 Swans. 586, 587. « See Taylor v. Fields, 4 Ves. 396-398 ; s. c. 15 Ves. 659, note ; Barker w. Goodair, 11 Ves. 78, 85-87 ; Skipp v. Harwood, 2 Swans. 586, 587 ; Franklyn 432 PARTNERSHIP. [CHAP. XII. V. Thomas, 3 Mer. 225, 234 ; Hawksbaw u. Parkins, 2 Swans. 539, 548 ; Parker V. Pistor, 3 B. & P. 288, 289 ; Eden on Injunct. 31 ; Coll. on P. B. 3, c. 6, § 10, p. 557-565, 2(1 ed. ; 1 Madd. Ch. Pr. 112. See also Brewster v. Ham- met, 4 Conn. 540. See also Matter of Smith, 16 Johns. 102, and the Reporter's learned note ; Gow on P. c. 3, § 2, p. 142, 3d ed. ; Id. e. 4, § 1, p. 203-211 ; Id. c. 5, § 2, p. 229 ; Id. § 3, p. 307, 308. See 1 Story, Eq. Jur. § 678. {And so are Place v. Sweetzer, 16 Ohio, 142 ; Newhall v. Buckingham, 14 111. 405 ; Hubbard v. Curtis, 8 Iowa, 1. And see Cammack V. Johnson, 1 Green, Ch. 163; Thompson v. Frist, 15 Md. 24; Moore v. Sample, 3 Ala. 319 ; White v. Woodward, 8 B. Mon. 484; 2 Lead. Cas. in Eq. 338, 3d Am. ed.} [Another question sometimes arising from the law of partnership is, how far a person indebted to a partnership, may be summoned into Court by process of foreign attachment, and be charged for goods, effects, or credits in his hands, as the trustee of one partner, in a suit by a separate creditor. {1 Am. Lead. Cas. 473-475, 4th ed. } It has been claimed that, since the separate creditor of each partner may levy his execution against one partner upon the joint estate of the partnership (when such estate consists of tangible property), and may sell on execution the interest of such partner, whatever it may be, in the partnership goods, the same rule applies to proceedings by foreign attachment, and that the interest of each partner in a debt due the partnership from the trustee may be re'ached by this process ; and some decisions countenance this view. Whitney v. Munroe, 19 Me. 42. And see Thompson v. Lewis, 34 Me. 167. {And so are Wallace v. Hull, 28 Ga. 68 ; and Berry v. Hawes, 22 Md. 38.} On the other hand, a juster rule has been more frequently adopted in other Courts, and it is now held by the current of authorities, that a trustee, under such circumstances, cannot be charged. To hold otherwise would be creating a severance of a joint debt, and would lead to great embarrass- ment and confusion in determining the rights of all parties. Fisk v. Her- rick, 6 Mass. 271 ; Lyndon v. Gorham, 1 Gall. 367 ; Hawes v. Waltham, 18 Pick. 451 ; Upham v. Naylor, 9 Mass. 490 ; Church v. Knox, 2 Conn. 514; Mobley v. Lonbat, 7 How. (Miss.) 318; Barber v. Hartford Bank, 9 Conn. 407 ; Pettes v. Spalding, 21 Vt. 66 ; Cook v. Arthur, 11 Ired. 407] ; {Johnson v. King, 6 Humph. 233; Towne v. Leach, 32 Vt. 747; Lucas v. Laws, 27 Penn. St. 211 ; See Maynard v. Fellows, 43 N. H. 255. In Tread- well V. Brown, 43 N. H. 290, it is said that a valid lien as against a partner may be acquired by attaching all his interest in the effects of the firm, and summoning the other partners as trustees ; but it was held, that such a lien is not acquired, so as to support a bill for an account by merely summoning the other partners as trustees.} CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 433 CHAPTER XIII. DISSOLUTION OF PARTNERSHIP. { § 265. Modes of dissolution. 266. Roman law. 267. Foreign law. 267 a. (1) Dissolution by act of partners. 268. Any jiartnership may be dissolved by consent of all the partners. 269. Any partnership not limited as to time may be dissolved at the will of any partner. 270. Roman and French law. 271. Will to dissolve may be expressed. 272. Or implied. 273. In the Roman law the will to dissolve must be exercised in a rea- sonable manner. 274. Foreign law on this subject. 275. Common law on this subject. Partnership for a time limited. 276. Roman and foreign law. 277. Whether a partnership is for a term, or at will. 278. Dissolution by expiration of term. 279. Nature of a partnership continued beyond the term. 280. Dissolution by completion of the objects of the partnership. 281. Roman law. 282. (2) Dissolution by a court of equity. 283. Roman law. 284. Foreign law. 285. Partnerships declared void ah initio. 286. Causes of dissolution. 287. Dissolution not decreed for trifling causes. 288. But decreed lor gross misconduct. 289. Roman law. 290. Impossibility of going on. 291. 292. Incapacity or inability of a partner. 293. Roman law. 294. French law. 295. Insanity of a partner. 296. Roman law. 297. Dissolution not decreed unless the insanity is confirmed. 298. Other causes of dissolution by decree. 299-301. Dissolution by award. 28 434 PARTNERSHIP. [cHAP. XIII. 302. (3) Dissolution by operation of law. 303. (a) By change in the status of a partner. 304. Outlawry or conviction of a partner. 305. Roman law. 30G. Marriage of a female partner. 307. (b) Dissolution by voluntary transfer of interest. 308. In case of a partnership for a time limited. 309. Roman law. 310. Assignment of the whole partnership property. 311. (c) Dissolution by involuntary transfer. 312. Sale of partner's share on execution. 313. Bankruptcy and insolvency. 314. From what time bankruptcy dissolves a partnership. 315. 316. (d) Dissolution by war. 317. (e) Dissolution by death. 318. Roman law. 319. Death is ipso facto a dissolution. 319 a. Effect of provisions in the articles concerning death.} § 265. Having considered the various topics belong- ing to the original formation of the contract of partner- ship, the rights of the partners in and over the partner- ship property and effects, the powers and authorities of each of the partners, relative to the partnership prop- erty, effects, and concerns ; the liabilities of the partners to third persons, and inter sese, and the various remedies and modes of redress by and against partners, existing at law and in equity, we come, in the next place, to the consideration of the modes, in which a partnership may be dissolved. And this part of our subject may be con- veniently discussed under three distinct heads. (1.) Dissolution by the act or agreement or consent of the parties, or of some of them ; (2.) Dissolution by the decree of a court of equity; (3.) Dissolution by the mere operation of law. § 266. The Roman law in like manner declared, that partnership might be dissolved in various ways ; as by the extinction of the thing held in partnership ; or of the persons forming it ; or of the rights of action grow- CHAP. XIII,] DISSOLUTION OF PARTNERSHIP. 435 ing out of it; or of the will of the parties to the con- tinuance of it. Societas solvltur ex personis, ex rebus^ ex vohmtate, ex actione. Ideoque, sive homines^ sive res, sive voluntas, sive actio interierit, distixilii videtur societas} Of course, any partnership whatsoever, whether it be for a definite period, or for an indefinite period, may be at any time dissolved, at the mutual will and pleasure of all the partners. Dlximiis (says the Digest), dlssensu solvi societatem ; hoc ita est, si omnes dissenfmnt.^ And the same rule must be recognized in the jurisprudence of every country, acting upon the mere dictates of reason and natural justice. § 267. According to Pothier, partnership is dissolu- ble under the old French law, (1.) By the expiration of the time, for which it is contracted ; (2.) By the ex- tinction of the thing, or the completion of the business ; (3.) By the natural or civil death of some one of the partners ; (4.) By his failure or bankruptcy ; or, (5.) By the voluntary expressed intention of being no longer in partnership.^ Substantially the like distinction ex- ists in the present Civil Code of France, and in that of Louisiana.^ The same causes of dissolution are also recognized in the Scottish law, the Spanish law, the law of Holland, and probably in that of the other conti- nental nations, which derive the basis of their jurispru- dence from the Roman law.^ This general coincidence of opinion, in assigning the same causes for the dissolu- tion of partnership, in so many countries, shows, that the doctrine has its true foundation in the general prin- > D. 17, 2, 63, 10; Potb. Pand. 17, 2, n. 54, 55, 62, 64, 70; ante, § 84, 85. * D. 17, 2, 65, 3 ; Poth. Pand. 17, 2, n. 64. 2 Poth. de Soc. n. 138. * Code Civil of France, art. 1865 ; Code of Louisiana, art. 2847. ' Ersk. Inst. B. 3, tit. 3, § 25 ; Johnson's Inst, of Laws of Spain, tit. 15, p. 232; Van Leeuwen, Comin. B. 4, c. 23, § 1. 436 PARTNERSHIP. [CHAP. XIII. ciples of natural justice and reason, rather than in the peculiar institutions of any particular age or nation. § 267 a} Let us, in the first place, consider the cases of dissolution, at the common law, by the act, or agree- ment, or consent of the parties themselves, or of some of them ; and this will properly include all cases, where the partnership is merely at will, or is for a prescribed period, which expires by efflux of time, or otherwise, according to its own limitation, or is voluntarily dis- solved by mutual consent within the prescribed or lim- ited period. § 268. In respect to all partnerships, whether they are for a limited period, or at will, it is very clear, that they may at any time be dissolved by the mutual pleas- ure clearly expressed of all the parties. And this is so consonant to reason and justice, that it would seem to require no authority to sujDport it. Nevertheless, the Koman law has expressly recognized it ; and only put the question, as worthy of inquiry, when and under what cu'cumstances the partnership might be dissolved at the will of one partner. Dixhnus (says the Digest) dissensu solvi societatem ; hoc ita est, si omnes dissen- tiunt. Quid ergo si unus renuntiet ? ^ But there is a technical principle of the common law, which seems to require, that, when the partnership is formed by deed for a definite period, it can properly, according to the common law, be dissolved only by deed ; for here the maxim is held to apply : Eodem modo, quo quid oritur, eodem 7nodo dissolvitur.^ The same rule w^ould seem ' {In the first two editions this section was by accident numbered 268. } 2 D. 17, 2, 65, 3; Poth. Pand. 17, 2, n. 68. » Ante, § 117; Bac. Abr. Belease, A. 1 ; 2 Saund. 47 ff, Williams's ed. ; Story on Ag. § 49 ; Coll. on P. B. 2, c. 2, § 2, p. 154, 155, 2d ed. ; Doe V. Miles, 1 Stark. 181 ; Rackstraw v. Imber, 1 Holt, 368 ; Countess of Rutland's Case, 5 Co. 25 b ; Blake's Case, 6 Co. 43 b ; 1 Mont, on P. Pt. 3, c. 1, p. 90, [113.] [Although the partnership agreement be under seal, it CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 437 to have been adopted in tlie Roman law. Thus, it is said in the Digest : Nihil tarn naturale est, quam eo ge- nere quidque dissolvere, quo coUigcdimi est Ideo ver- horimi ohiigcdio verbis toUitur ; nudi consensus ohlifjatio contrario consensu dissolmtur} Prout quidque con- tractum est, ita et solvi debet ; ut cimi re contraxerwius, re solvi debef.~ However this may be, it is very clear, that a dissolution actually made by the parties will be held in equity perfect and complete, to all intents and purposes, between the parties, and also as to third per- sons, having full notice thereof.^ § 269. In respect to partnerships, where no certain limit of their duration is fixed, they are deemed to be mere partnerships at will, and, therefore, are ordinarily at the common law dissolvable at the will of any one or more of the partners ; for in such cases, as the con- tract subsists only during the pleasure of all the part- ners, it is therefore naturally and necessarily dissolved by the pleasure of any one or more of them, like every other contract existing at the mere will of both parties.'^ seems, it is not necessary that an agreement ibr dissolution should be also under seal. Wood v. Gault, 2 Md. Ch. Dec. 433.] > D. 50, 17, 35; ante, § 118. ^ D. 46, 3, 80 ; Poth. Pand. 50, 17, n. 1388 ; Story on Ag. § 49, note ; ante,§ 118. 3 Coll. on P. B. 2, c. 2, § 2, p. 154, 155, 2d ed. * Ante, § 84 ; 3 Kent, 53 ; 1 jNlont. on P. Pt. 3, c. 1, p. 90, [113] ; Wats, on P. c. 7, p. 381, 2d ed. ; Master v. Kirton, 3 Ves. 74; Griswold v. Wad- dington, 15 Johns. 57 ; Heath v. Sansom, 4 B. & Ad. 172 ; Marquand v. Kew York Manuf. Co. 17 Johns. 525; Miles v. Thomas, 9 Sim. 606, 609; Nerot V. Burnand, 4 Russ. 247, 260. — Mr. Chancellor Kent (3 Kent, 53) says : "It is an established principle in the law of partnership, that, if it be ■without any definite period, any partner may withdraw at a moment's notice, when he pleases, and dissolve the partnership. The civil law contains the same rule on the subject. The existence of engagements with third persons does not prevent the dissolution by the act of the parties, or either of them, though those engagements will not be affected, and the partnership will still continue as to all antecedent concerns, until they are duly adjusted and settled. A reasonable notice of the dissolutioa might be very advantage- 438 PARTNERSHIP. [cHAP. XIII. The general rule, in all such cases, is, Dissociamur re- nuntiatione} ous to the company, but it is not requisite ; and a partner may, if he pleases, in a case free from fraud, choose a very unseasonable moment for the exer- cise of his right. A sense of common interest is deemed a sufficient security against the abuse of the discretion." In Peacock v. Peacock, 16 Ves. 49, 56, Lord Eldon said: "With regard to -what passed, since the question was much agitated at the Bar, -whether this partnership is now dissolved by the notice in writing from the defendant, that from and after the date of that notice the partnership should be considered dissolved. The plaintiff insists, that it is not dissolved ; and that it can be dissolved only upon reasonable notice. I have always taken the rule to be, that in the case of a partnership, not existing as to its duration by contract between the parties, either party has the power of determining it, when he may think proper ; subject to a qualification, that I shall mention. There is, it is true, inconvenience in this; but what would be more convenient? In the case of a partnership expiring by effluxion of time, the parties may by previous arrangement provide against the consequences ; but where the partnership is to endure so long as both parties shall live, all the inconvenience from a sudden determi- nation occurs in that instance, as much as in the other case. I cannot agree, that reasonable notice is a subject too thin for a jurj^ to act upon, as in many cases juries and courts do determine what is reasonable notice. With regard to the determination of contracts upon the holding of lauds, when tenancy at will was more known than it is now, the relation might be deter- mined at any time ; not as to those matters, which during the tenancy re- mained a common interest between the jiarties ; but as to any new contract the will might be instantly determined. When that interest was converted into the tenancy from year to year, the law fixed one positive rule for six months' notice ; a rule, that may in many cases be verj'' convenient ; in others, that of nursery grounds, for instance, most inconvenient. As to trades, in general, there is no rule for the determination of partnership ; and I never heard of any rule with regard to different branches of trade ; and, supposing a rule for three months' notice, that time might in one case be very large ; and in another, in the very same trade, unreasonably short. I have, therefore, always understood the rule to be, that, in the absence of express contract, the partnership may be determined, when either part}' thinks proper ; but not in this sense, that there is an end of the whole con- cern. Ail the subsisting engagements must be wound up ; for that purpose they remain with a joint interest ; but they cannot enter into new engage- ments. This being the impression upon my mind, I had some apprehension from the turn of the discussion here, that some different doctrine might have fallen from the Court at Guildhall ; but upon inquiry from the Lord Chief Justice, as to his conception of the rule, I have no reason to believe, that. ' 2 Bell, Comm. B. 7, c. 2, p. 631, oth ed. ; Poth. Pand. 17, 2, n. 54. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 439 § 270. The same rule equally prevails in the Roman law.^ Manet autem societas (say the Institutes) eo usque^ donee in eodem consensu jperseveraverint At cum ali- quis remmtiaverit societati, solvitur societas ; ^ or (as it is expressed in the Code), Tamdiu societas durat, quam- diu consensus j^artiimi integer perseverat.^ And Vinnius has remarked upon the coincidence, in this respect, of the contract of partnership with that of mandate. Societas et onandatum in eo conveniunt, quod proprio quodam jure, et suis quihiisdam modis solvantur, quos Justinianus, quoniam ah lis modis, quihus jure communi ohiigafio toIUfur, remoti sunt, exjjiicare voluit.'^ And, after alluding to the fact, that in common contracts the obligation thereof can be extinguished only by the con- sent of all the parties, he adds, that it is otherwise in relation to the contract of partnership. Sed illud pro- l^rium hujus contractus [societatis) est, quod etiain post- cfuam res Integra esse desiit, id est, postquam jam collatio et communicatio facta est, ah eo recedi et vel unius voluntate p)otest ; quomodo in specie dicitur socie- tas dissolvi renuntiatione.^ This also is the clear result if this notice ha(J been given before the trial, the jury would not have been directed to find that the partnership was, by the delivery of that paper, dis- solved." See also Featherstonhaugh r. Fenwick, 17 Ves. 298, 308, 309 ; Crawshay v. Maule, 1 Swans. 495, 508 ; Heath v. Sansom, 4 B. & Ad. 172. {See§ 275.} 1 Poth. Pand. 17, 2, n. 64; ante, § 84, 85. * List. 3, 26, 4. 3 Cod. 4, 37, 5; Poth. Pand. 17, 2, n. 69; Id. n. 64; Domat, 1, 8, 5, art. 1, 2; ante, § 84, 85. " Vinn. ad Inst. 3, 26, 4. ' Vinn. ad Inst. 3, 26, 4, Comra. Intr. n. 1 ; Poth. Pand. 17, 2, n. 64- 68. — Vinnius proceeds to give the reasons of this doctrine, and holds that it is so fundamental, that it cannot be varied by express agreement: *' Hoc in contractu societatis jure singulari receptura est contra regulas communes de dissolvendis obligationibus. Idque duplici de causa ; primum, quia socii officiuui inviccQi praistant, et accipiunt ; deinde quia non bene convenit cum natura et conditione societatis, quaj rationem ([uandam et jus fraternitatis habere creditur, aliquem invitum retinere in communione ; quippe cujus 440 PARTNERSHIP. [cHAP. XIII. of the French law, as Pothier has instructed us, under ordinary circumstances.^ Indeed, to so great an extent did the Roman law carry its doctrine, that (as we shall presently see) a positive stipulation against its dissolu- tion at the will of either of the partners was held to be utterly void, as inconsistent with the true nature, and interests, and confidence of that relation.^ § 271. A partnership at will is presumed to endure so long as the parties are in life and have a capacity to continue it.^ The dissolution of it, either by death or by a supervenient incapacity, will of course come under consideration when we speak of dissolution by mere operation of law. At present it is only necessary to say, that a dissolution may be made not only by a posi- tive or express renunciation thereof by one partner, but also by implication from his acts and conduct ; or as Vinnius expresses it: Porro autem renuntiatione disso- ciamur aut voluntate aperta^ aut tacita. Aperta, cum ceteris 7iuntiatur, ut res suas sibi haheant atque aganf^ Of express renunciation it scarcely seems necessary to say any thing, when the partnership is merely at will; since it can make no difference whether it originated by mere consent, or by verbal agreement, or by written materia discordias inter non consentientes excitare solet. Adeo autem visum est ex natura esse societatis, unius dissensu totam dissolvi, ut, quamvis ab initio convenerit, ut societas perpetuo duraret, aut nc liceret ab ea resilire invitis ceteris ; tamen tale pactum, tanquam factum conti'a natu- ram societatis, cujus in a3ternum nulla coitio est contemnere liceat. Nam, quod Paulus scribit, societatem etiam in perpetuum coiri posse, nihil aliud significat, c|uam sine ulla temporis prsefinitione, aut donee socii vivant ; quae conventio non hoc operatur, ut non liceat abire, sed ut solo lapsu temporis non finiatur societas." 1 Poth. de Soc. n. 149. 2 Ibid.; Poth. de Soc. n. 145; ante, § 85; D. 17, 2, 14; Poth. Pand. 17, 2, n. 68. 3 Coll. on P. B. 1, c. 2, § 1, p. 68, 2d ed. ; 2 Bell, Comm. B. 7, c. 2, p. 631, 632, 5th ed. ; Poth. de Soc. n. 65; ante, § 84. '' Vinn. ad Inst. 3, 26, 4, Comm. n. 1 ; ante, § 84, 85. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 441 ai'licles, or by any instrument under seal ; for in each and every of these cases the same doctrine will prevail, whether the renunciation be by parol, or in writing, or by declaration under seal.^ For the rule of the common law already referred to has here no just application, that the dissolution must be by an instrument of as high a nature as that by which it was created, according to the maxim : Eodem modo, quo quid constituihcr, eodem modo dissolvitur ; ^ or, as it is sometimes expressed : Nlliil tarn conveniens est naturali cequitati, quain imum- quodque dissolvi eo ligamine, quo ligatum est ;^ which is certainly open to much question as a doctrine of natural equity, if we are to understand thereby that it is the only effectual mode of working a dissolution thereof. § 272. As to dissolution by tacit renunciation, or by implication from circumstances,"* it may arise in various ways, as by the withdrawal of a partner from the busi- ness of the partnership, and engaging in other concerns, or by his refusal to act with the other partners in the business ; or by his assigning over his share in the part- nership ; ^ or by his doing any other act utterly incon- ' But see Doe d. Waitbman v. Miles, 1 Stark. 181. ^ Branch's Max. 47, 5th ed. 1824 ; Blake's Case, 6 Co. 43 b ; ante, § 268. ^ The Countess of Rutland's Case, 5 Co. 25 b ; Blake's Case, 6 Co. 43 b ; 2 Inst. 359; ante, § 268. * [Fellows V. Wyman, 33 N. H. 351.] * Marquand v. New York Manuf. Co. 17 Johns. 525; Ketcham v. Clark, 6 Johns. 144 ; Per Lord Chief Justice Denman, in Heath v. Sansom, 4 B. »& Ad. 172; Rodriguez v. Heffernan, 5 Johns. Ch. 417. {A proposal for a dissolution, not accepted, is not a dissolution; Hall v. Hall, 12 Beav. 414; but notice by two partners to the third that " we shall dissolve the partner- ship " on a certain day, operates as a dissolution on that day ; and this, although the partner to whom the notice is sent is a lunatic; Mellersh V. Keen, 27 Beav. 236. See Hart v. Clarke, 6 De G. M. & G. 232; Pearce v. Lindsay, 3 De G. J. & S. 139. Making up a stock account of a firm, and ascertaining the amount of the interest of one partner, and trans- ferring it to the credit of another firm of which he was a member, Avill not dissolve the firm. Russell v. Leland, 12 All. 349.} 442 PARTNERSHIP. [cHAP. XIII. sistent with the continuing relation of partnership. Vinnius has enumerated several modes under the Ro- man law, by which a tacit renunciation took effect, upon the ground of their inconsistency with the rela- tion of partnership; (1.) by a novation of the action, pro socio, effected by one of the partners ; (2.) by an action brought by one partner against the others for the purpose of dissolving the partnership ; (3.) by each partner separately engaging in business, and acting for his own sole account.^ This last ground is pointedly adverted to in the Koman law. Itaque, cum separatwi socii agere cceperint, et unusquisque eoriim. sibi nego- tietur, sine diibio jus societatis dissolvitur.^ § 273. And here the question was greatly discussed in the Roman law, whether the right of renunciation of a partnership could be exercised at any time by any partner at his mere will and pleasure, however unreasonable, or even injurious it might be to the other partners. It was held, that it was competent for any partner to renounce the partnership, whether it was a partnership at will, or for a fixed period of time, even although he had expressly stipulated to the contrary, provided he acted with good faith, and without any sinister motive, and provided, further, that the time chosen for the purpose was not unseasonable, or injuri- ous to the interests of the other partners; in other words. ^ Vinn. Inst. 3, 26, 4, Comm. n. 2. — The language of Vinnius is : " Tacita voluntas renuntiandi tribus his factis evidenter arguitur; (1.) novatione actionis pro socio ab uno ex sociis facta, quod etiam significat Ulpianus, cum dicit, societatem etiam ab actione, seu ab interitu actionis distrahi ; (2.) actione pro socio ab uno adversus alios instituta distrahendae societatis causa; (3.) cum separatim agere coeperint, et sibi quisque negotiari ; veluti, si typographi aliquot, qui antea communibus sumptibus libros imprimendos curabant, postca singuli domi sua; sibi imprimere coeperint, et commune impcndium facere desierint, tacite renuntiasse societati intelliguntur." 2 D. 17, 2, 64; Poth. Pand. 17, 2, n. 69. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 443 it was sufficient if the partner renounced for a reason- able cause, and at a reasonable time, and in a reasonable manner. Si convenerit inter socios, ne intra certum teminis communis res dividatiir, non videtur convoiisse, ne societate aheatur. Quid tamen, si hoc convenit, ne aheatur ; an valeat ? Eleganter Pom^^onius scri])sit^ frustra hoc convenire, nam etsi nbn convenit, si tamen intempestive reiiuntietur societati, essejiTO socio actionem. Sed etsi convenit, ne intra certum tempus societate ahea- tur, et ante temp>us renuntietur, p>otest rationem habere renuntiatio ; nee tenebitur pro socio, qui ideo renun- tiavit, quia conditio qucedam, qua societas erat co'ita, ei non prcestatur ; aut quid, si ita [injuriosus et^ damnosus socius sit, ut non exp)ediat eum j)ati f ^ • D.17, 2, 14; Poth. Panel. 17, 2, n. 64-68; 1 Story, Eq. Jur. § 668. — Domat has summed up the principal doctrines of the Roman law on this subject in the following articles. " 1. As partnership is formed by consent, so is it in the same manner dissolved ; and it is free for the partners to break off their partnership, and to give it over whenever they please, even before the end of the term which it was to have lasted, if they all agree to it. 2. The tie which is among partners, being founded on the reciprocal choice which they make of one another, and on the hopes of some profit, it is free for every one of the partners to break off partnership whenever he pleases ; whether it be because there is no good agreement among the partners, or that some necessary absence, or other affairs, make the partnership burden- some to him who is desirous to leave it ; or that he does not like a commerce which the partners are about to undertake ; or that he does not find his account in the partnership; or for other reasons. And he may give over partnership without the consent of the other partnei'S, and that even before the time at which it was to have ceased, and althoufrh it have been agreed that none of the partners should break off" the partnership till the time agreed on were expired. Provided, that the partner does not break off" with some sinister view ; as if he quits the partnership that he may buy for himself alone, what the whole community had a mind to purchase, or that he may make some other profit to the prejudice of the other partners, by his leaving them ; or pi'ovided he does not quit after some business is begun, or at an unseasonable time, which may occasion some loss or damage to the comnuinity. 3. The partner who breaks off partnership with an inifair design, disengages his copartners from all engagements to him, but does not disenffafre himself from his obliffations to them. Thus, he who should withdraw himself from an universal partnership of their whole estate, 444 PARTNERSHIP. [cHAP. XIII. § 274. By the old French law, a partnership, which was for an indefinite period, or without any limitation of time, might be dissolved at the mere pleasure of present and to come, that he alone might inherit a succession fallen to him, would bear the whole loss, if the succession which he alone inherits should prove burdensome ; but he would not deprive his copartners of the profit, if the succession should prove advantageous, and they have a mind to share in it. And in general, if a partner breaks off at an unseasonable time, v/liich occasions the loss of some profit to the community, which otherwise it might have made, or which causes any other damage, he will be bound to make it good ; as if he quits before the time to which the partnership was to have lasted, abandoning a business with which he was charged. And he who breaks off the partnership in this manner, shall have no share in the profits which shall happen to be made afterwards ; but he shall bear his part of what losses shall afterwards happen, in the same manner as he would have been bound to do if he had not quitted the partnership. 4. The partner who renounces the partnership at an unseasonable time, not only does not free himself from his engagements to his copartners, but is answer- able for all the losses and damages Avhich his unseasonable renunciation may have caused to the society. Thus, if a partner quits whilst he is on a journey, or engaged in any other business for the community ; or if his quitting obliges the partners to sell any merchandise before the time ; he shall be bound to make good the losses and damages which his leaving the jiartnership under these circumstances shall have occasioned. 5. In order to jvxdge whether the partner Avithdraws himself at an unseasonable time, it is necessary to consider what is most profitable for the whole community, and not for any one of the partners in particular. 6. If, after a fair and law- ful renunciation, the partner who has quitted the partnership, begins anew to carry on any commerce from which he reaps some profit, he will not be bound to share it with his former partners. 7. A fraudulent and unseason- able renunciation is never permitted, whether the contract of partnership has provided against it or not. For this would be repugnant to fidelity, which, being essential to the contract of partnership, is always understood to be comprehended in it. 8. The renunciation is of no use to the person who has made it, till it be made known to the other partners ; and if in the interval after the renunciation, and before it is known to the other pax'tners, he who has renounced makes any profit, he will be obliged to share it with his copartners ; but if he suffers any loss, it will all fall upon himself. And if in this space of time the other partners reajj any gain, he will have no share in it ; and if they suffer any loss, he must bear his part of it." Domat, 1, 8, 5, art. 1-8, by Strahan. See, also, Mr. Swanston's learned note to Crawshay v. Maule, 1 Swans. 509, note (a) ; Poth. Pand. 17, 2, n. 64-68 ; 2 Bell, Comra. B. 7, c. 2, p. 632, 633, 5th ed. ; 1 Story, Eq. Jur. § 668. CHAP. XITI.] DISSOLUTION OF PARTNERSHIP. 445 any one of the partners, under two qualifications or restrictions; (1.) that the renunciation should be in good faith; (2.) that it should not be made at an improper time.^ But partnerships, which by the origi- nal contract were to endure for a limited period, were deemed not to be dissoluble, until the expiration of that period, unless some just cause of dissolution should occur.^ In this latter event, any partner might, upon giving due notice, renounce the partnership. Some of the just causes here referred to were, that such partner was to be long absent in the service of the State ; another was some habitual infirmity, which dis- abled him from performing his duties.^ The modern Code of France, and that of Louisiana, have adopted the same rules."* Substantially the same principles pre- vail in the Scottish law.^ § 275. At the common law, there does not seem to be any such recognized limitation or qualification of the right of renunciation by any one partner, where > Poth. de Soc. n. 149, 150. " Poth. de Soc. n. 152, 153. ^ Poth. de Soc. n. 163, 154. See a like rule in the Roman law. Poth. Pand. 17, 2, n. 68. * Code Civil of Fi-ance, art. 1869-1871 ; Code of Louisiana (1825), art. 2855-2859. — The French Civil Code expresses the whole doctrine in the following brief terms : ' ' Dissolution of partnership by the will of one of the parties applies only to partnerships, the duration of which is unlimited, and is effected by a renunciation notified to all the partners, provided such renunciation be bona fide, and not made at an improper time. Renunciation is not made bona fide, where the partner renounces in order to appropriate to himself alone the profit, which the partners proposed to have drawn out in common. It is made at an improper time, where the things are no longer entire, and that it is of consequence to the partnership that its dissolution be deferred. Dissolution of partnerships for a term cannot be demanded by one of the partners before the term agreed, unless for just motives ; as where another partner fails in his engagements, or that an habitual infirmity renders him unfit for the affairs of the partnership, or other similar cases, the lawfulness antl weight of which are left to the arbitration of judges." * Ersk. Inst. B. 3, c. 3, § 26 ; 2 Bell, Comm. B. 7, c. 1, p. 532, 533, 5th ed. 446 PARTNERSHIP. [cHAP. XIII. the partnership is merely at will ; for in such cases, any partner, as we have seen, may dissolve it at his pleasure.^ In cases, where the partnership is by the ' Ante, § 269; Marquand v. X. Y. Manuf. Co. 17 Johns. 525.— Mr. Swanston, in bis learned note to Crawshay v. Maule, 1 Swans. 509-514, says: " The Editor is not apprised of any direct authorities in the English law on the distinction between seasonable and vinseasonable dissolution. But, in one instance, the Court of Chancery seems to have assumed jurisdic- tion to qualify the right of renunciation, by reference to that distinction. ' An application was made some years ago to the Court of Chancery for an injunction to inhibit the defendants from dissolving a commercial partner- ship ; tlie other side proposed to defer it, as not having had time to answer the affidavits ; but it was insisted that this was in the nature of an injunction to stay waste, and that irreparable damage might ensue. At length the Court deferred it, the defendants undertaking not to do any thing preju- dicial in the mean time. But no doubt arose concerning the general pro- priety of such an application. Chavany against Van Sommer, in Chancery, M. T. 11, G. 3;' 3 Wooddeson, Lect. 416, note. The register contains the following entry of the original application in this case. Peter Chavany, plaintiff, James Van Sommer, and others, defendants; 14th November, 1771. 'Whereas Mr. Solicitor-General, of counsel with the plaintiff, this day moved and offered divers reasons into this Court, that an injunction may issue to restrain the said defendants, James Van Sommer, &c., from dissolving or bi'eaking up the copartnership, now carrying on between the plaintiff and the said defendants, &c. ; or from doing any act whatever tending thereto, and also to restrain the said defendants, &c., from selling, or disposing of, or joining in the sale, conveyance, or assignment of the lease- hold estate, and interest belonging to the said copartnership, or contracting for the sale thereof, or joining in such contract, in the presence of Mr. John Cocks and ^Ir. Maddock, of counsel with the defendants, who prayed that the said notice might be saved ; whereupon, and upon hearing what was alleged by the counsel on both sides, it is ordered, that the benefit of the notice of the said motion be saved till the last day of this term, the defend- ants consenting not to do any thing contrary to what the plaintiff now prays, in the mean time ; and it is further ordei-ed, that the defendants do file their affidavits two days before.' Reg. Lib. A. 1771, fol. 6. The benefit of the notice was afterwards saved, till the first general seal ensuing the term (Id. fol. 7), and on the 25th of November, the defendants obtained an order for time to answer. Id. fol. 147. The register has been searched to the end of Trinity term, 1775, without discovering any further trace of this cause. In another case, the Court qualified the obligation to continue a partnership, by reference to the design of the contract ; and directing an inquiry whether the business could be carried on according to the true intent and meaning of the articles, expressed a determination to dissolve the partnership, if the Master reported in the negative. Baring v. Dix, 1 Cox, 213 ; 1 Mont, on CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 447 agreement to endure for a limited period of time, the question, whether it may within the period be dis- solved by the mere act or will of one of the partners, without the consent of all the others, does not seem to be absolutely and definitely settled in our jurispru- dence, although it would not seem, upon principle, to admit of any real doubt or difficulty. Whenever a stipulation is positively made, that the partnership shall endure for a fixed period, or for a particular adventure or voyage, it would seem to be at once inequitable and injurious to permit any partner, at his mere pleasure, to violate his engagement, and thereby to jeopard, if not sacrifice, the whole objects of the partnership ; for the success of the whole undertaking may depend upon the due accomplishment of the adventure or voyage, or the entire time be required to put the part- nership into beneficial operation.^ It is no answer to say, that such a violation of the engagement may entitle the injured partners to a compensation in dam- ages ; for, independently of the delay and uncertainty attendant upon any such mode of redress, it is obvious, that the remedy may be, nay, must be, in many cases utterly inadequate and unsatisfactory. If there be any real and just ground for the abandonment of the part- nership, a court of equity is competent to administer suitable redress. But that is exceedingly difierent from the right of the partner, sua sponte, from mere caprice, P. 90; and in Waters v. Taylor, 2 Ves. & B. 299, Lord Eldon declared a partnersliip dis.soIved by the conduct of the parties, rendering it impossible to conduct the undertaking on the terms stipulated. See Denisart, voce, Societe, s. 12, p. 539." But the right of a Court to decree a dissolution of the partnership is a very different thing from the right of the partner him- self to dissolve it sua sponte. {See Blisset v. Daniel, 10 Hare, 493 ; Feath- erstonhaugh v. Turner, 2.5 Beav. 382; Skinner v. Tinker, 3-4 Barb. 333.} ' Story, Eq. Jur. § 668. 448 PARTNERSHIP. [cHAP. XIII. or at his own pleasure, to dissolve the partnership.^ In short, the opposite doctrine, although perhaps in some measure countenanced by the Roman law, is founded upon reasons exceedingly artificial, if not indefensible. It proceeds upon a ground which cannot be maintained in common sense or justice, that any partner has a right to found his own claim to immediate indemnity and safety upon a known injury to the rights and interests of his copartners, whatever may be the nature or extent thereof.^ ' See 1 Story, Eq. Jur. § 668. {A partnership between two solicitors may be dissolved instanter, if one of" them fraudulently sells out trust funds and applies the produce to his own use. Essell v. Hayward, 30 Beav. 158 ; See AUhusen v. Borries, 15 Weekly Rep. 739. } ^ The opinion here maintained has the apparent support of the most respectable elementary writers, and has been either taken for granted, or partially upheld by many eminent judges. See Gow on P. c. 6, § 1, p. 218, 219, 226, 3d ed. ; Coll. on P. B. 1, c. 2, § 2, p. 68, 2d ed. ; Wats, on P. c. 7, p. 381, 2d ed. ; 1 Mont, on P. Pt. 3, c. 1, § 1, p. 90, [113] ; 3 Kent, 61. Lord Eldon in Peacock v. Peacock, 16 Ves. 49, and Crawshay V. Maule, 1 Swans. 495, took it for granted that one partner could not, of his own mere will, dissolve a partnership for a limited period. Mr. Justice Washington asserted the same doctrine in positive terms, in Pearpoint v. Graham, 4 Wash. C. C. 223. On that occasion he said : " Now it is perfectly clear, that one partner cannot, by withdrawing himself from the association before the period stipulated between the partners for its continuance, either dissolve the partnership, or extricate himself from the responsibilities of a partner, either in respect to his associates, or to third persons ; and if this be so, it would seem that he could not produce the same consequence by any other voluntary act of his own. This is not like those cases where, by the act of God, or by the opei'ation of law, the partnership is dissolved, as by the death or bankruptcy of a partner." The same doctrine seems to have been held in the unreported case of Chavany v. Van Sommer, 3 Wood- des. Lect. p. 416, note; 1 Swans. 512, note; ante, § 275, note; {and it was so held in Smith v. Mulock, 1 Robertson, (N. Y.) 569.} The case of Marquand v. N. Y. Manuf. Co. 17 Johns. 525, and the dictum of Mr. Justice Piatt, in Skinner v. Dayton, 19 Johns. 513, 538, are indeed to the contrary. Mr. Chancellor Kent (3 Kent, 54, 55, Id. 61) has summed up the reasoning on this side of the question, without, however, expressing his own opinion. He says : " But if the partners have formed a partnership by articles, for a definite period, in that case it is said, that it cannot be dissolved without mutual consent before the period arrives. This is the assumed principle of CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 449 § 276. Nor does the Roman law, or the foreign law, founded upon it, in cases of a partnership for a lim- Law by Lord Eldon, in Peacock v. Peacock, and in Crawshay v. iNIaide ; and yet in Marquand v. N. Y. Manuf. Co. it was held, that the vohmtary assignment, by one partner, of all his interest in the concern, dissolved the partnership, though it was stipulated in the articles, that the partnership was to continue until two of the partners should demand a dissolution, and the other partners wished the business to be continued, notwithstanding the assignment. And in Skinner v. Dayton, it was held by one of the Judges, that there Avas no such thing as an indissoluble partnership. It was revoca- ble in its own nature, and each party might, by giving due notice, dissolve the partnership, as to all future capacity of the firm to bind him by contract ; and he had the same legal power, even though the parties had covenanted with each other that the partnership should continue for such a period of time. The only consequence of such a revocation of the partnership power, in the intermediate time, would be, that the partner would subject himself to a claim of damages for a breach of the covenant. Such a power would seem to be implied in the capacity of a partner, to interfere and dissent from a purchase or contract about to be made by his associates ; and the commentators on the Institutes lay down the principle, as drawn from the civil law, that each partner has a power to dissolve the connection at any time, notwithstanding any convention to the contrary, and that the power results from the nature of the association. They hold every such conven- tion null, and that it is for the public interest, that no partner should be obliged to continue in such a partnership against his will, inasmuch as the community of goods in such a case engenders discord and litigation." He afterwards adds : "In some instances, Chancery will restrain a partner from an unseasonable dissolution of the connection, and on the same principle, that it will interfere to stay waste and prevent an irreparable mischief. And such a power was assumed by Lord Apsley, in 1771, without any question* being made as to the fitness of the exercise of it. In the civil law, it Avas held by the civilians to be a clear point, that an action might be instituted by, or on behalf of, the partnership, if a partner, in a case, in which no pro- vision was made by the articles, should undertake to dissolve the partnership at an unseasonable moment ; and they Avent on the ground, that the good of the association ought to control the convenience of any individual member. But such a poAver, acting upon the strict legal right of a party, is extremely difficult to define, and I should think rather hazardous and embarrassing in its exercise."' Vinnius has stated the general reasoning of the Roman law on this point in the passage already cited, ante, § 270, note. But his sole ground is, that otherAvise the partnership would be perpetual, Avhich can only apply to a case Avhere there is a covenant for its perpetual duration ; and even then it might be dissolved by a court of justice, for a reasonable cause. In the recent case of Bishop v. Breckles, HolF. Ch. oSi, the Vice- Chancellor (IloShian) of NeAv York examined all tlie authoi-ities ; and con- 29 450 PARTNERSHIP. [chap. XIII. ited period of time, properly considered, justify, or allow one partner to dissolve it at his mere pleasure, within that period. On the contrary, as we have seen,^ it annexes to the exercise of the right a positive condi- tion, that it shall be for a just cause and under reasona- ble circumstances. Pothier accordingly says, that in cases of partnership for a fixed period of time, there is an implied understanding, that it shall not be dissolved until the expiration of that period, at least unless some just cause for the dissolution shall have supervened; and, therefore, one partner cannot, without such just cause, dissolve the partnership, to the prejudice of the other partners. He cites the Roman law in support thereof: Qui socieicdem in tempus coit, emu ante tempus renunticmdo^ socmm a se, non se a socio lihercd;^ and he then proceeds to enumerate the particular cases which shall constitute just causes of dissolution. Moreover, this important qualification is annexed by the Roman law to the right of renunciation, that it is limited to cases where it is for the benefit, not of the particular partner, but of the partnership itself, that it should be dissolved ; eluded by saj'ing: "The law of the Court, then, requires something more than the mere will of one party to justify a dissolution. But it seems to me, that but little should be demanded. The principle of the civil law is the most wise. \\\\y should this Court compel the continuance of an union, when dissension has marred all prospect of the advantages contemplated at its formation ? By refusing to dissolve it, the power of binding each other, and of dealing with the partnership property remains, when all confidence and all combination of effort is at an end. The object of the contract is defeated." In truth, however, the Roman law carries in its own bosom a qualification, which shows that the dissolution must be for a reasonable cause, and under reasonable circumstances ; and then it seems most fit for the action of a court of justice, and not for one of the interested parties. Ante, § 273, and note; Poth. Pand. 17, 2, n. 64, 65 ; Poth. de Soc. n. 138, 146, 149-152. > Ante, § 273, 274 ; Poth. Pand. 17, 2, n. 64, 65, 68 ; 2 Bell, Conmi. B. 7, c. 2, p. 632, 633, 5th ed. = Poth. de Soc. n. 152; D. 17, 2, 65, 6; Poth. Pand. 17, 2, n. 64, 65; ante, § 273, note. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 451 otherwise it is deemed unseasonable. Hoc ita verum esse, si socieiatis iniersit non dirimi societatevi, semper enim, non id quod privaiim interest unius ex sociis, servari solet, sed quod societati expedit} So that, in eiFect, the whole difference in this view between the Roman and foreign law, and the common law, resolves itself into this, that in the former the partner may, by his own act, primarily insist upon a dissolution, which, however, is not valid, unless it be for a just cause, and is affirmed to be so by a Court of Justice ; ^ whereas the common law does not allow the dissolution to be complete or effective, until a Court of Justice has itself decreed the dissolution for a just cause. In substance, therefore, the rule is the same in both laAvs ; although it is varied in its actual application. The rule of the common law is, to say the least of it, quite as conven- ient as that of the Roman and foreign law, if, indeed, it be not more appropriate, and just, and equitable, than that of the latter. § 277. The question sometimes occurs, whether a partnership, under all the circumstances of the case, is properly to be treated as a partnership at will, or as a partnership for a limited period. It is by no means necessary, that there should be an express stipulation either way ; for its intended duration may often be as- certained by implications or presumptions, arising from the acts and conduct of the parties, and other accompa- nying circumstances. In the absence, however, of all acts or circumstances, which clearly rebut and control the inference, the conclusion of law is, that the partner- ship is intended to be at the mere will and pleasure of the parties. But acts and circumstances may greatly ' D. 17, 2, 65, 5; Poth. Pand. 17, 2, n. 65; Domat, 1, 8, 5, art. 4,5. * Poth. de Soc. n. 154. 452 PARTNERSHIP. [cHAP. XIII. qualify or even overturn this conclusion. Thus, the question has arisen, whether the purchase or lease of certain premises, for carrying on the trade or business of the partnership for a limited term of years, did, of itself, amount to presumptive proof, that there was an implied agreement between the partners, that the dura- tion of the partnership should be co-extensive with the term of the purchase or lease. It has been held, that it did not ; for it was not of itself decisive any way : but was readily reconcilable with the notion, that it was purchased for the mere accommodation of the trade or business, while it should endure, and then to be sold as part of the partnership effects ; and so it was not in- tended in any manner to indicate the period of its duration. Upon any other ground of reasoning, if the purchase was of an estate in fee-simple, it might be con- tended, that the partnership was to continue for ever which would be a wholly inadmissible doctrine.^ ' See Marshall v. Marshall, cited 2 Bell, Comm. B. 7, c. 1, p. 633, note 3 ; Crawshay v. Maule, 1 Swans. 495, 508, 521. In this last case. Lord Eldon said : " The general rules of j^artnership are well settled. Where no term is expressly limited for its duration, and there is nothing in the contract to fix it, the partnership may be terminated at a moment's notice by either party. By that notice the partnership is dissolved, to this extent, that the Court will compel the parties to act as partners, in a partnership existing only for the purpose of winding up the affairs. So death terminates a partnership, and notice is no more than notice of the fact that death has terminated it. With- out doubt, in the absence of express, there may be an implied contract, as to the duration of a partnership. But I must contradict all authority, if I say, that wherever there is a partnershijj, the purchase of a leasehold interest of longer or shorter duration is a circumstance from which it is to be inferred that the partnership shall continue as long as the lease. On that argument the Court holding that a lease for seven years is proof of partnership for sev- en years, and a lease of fourteen of a partnership for fourteen years, must hold, that if the partners purchase a fee-simple, there shall be a partnership for ever. It has been repeatedly decided, that interests in lands, purchased for the purpose of carrying on trade, are no more than stock in trade, I re- member a case in the House of Lords, about three years ago (the case of the Carron Company), in which the question was much discussed, whether, when partners purchase freehold estate for the purpose of trade, on dissolution, CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 453 § 278. In the next place, a partnership may expire by the mere efflux of the time, which limits and bounds its duration under the terms of the original contract, by which it is created. This is the natural, nay, the ne- cessary, result of the very design and terms of the con- tract; for the same consent, which originated, terminates it ; and the consent cannot be presumed to exist beyond the fixed period, since the presumption would be direct- ly contradictory to the actual limitation. Hence, if in fact continued, it must be continued by a new agree- ment, and not imder the old one.^ So Pothier lays down the rule. Lorsque la societe a eU contracUe pour iin certain temps limite, elle Jinit de plein droit par Vex- that estate must not be considered as personalty, with regard to the repre- sentatives of a deceased partner." Again he added : " It has also been in- sisted, that the purchase of leases must be considered as evidence of a con- tract for the continuance of the concern. Unquestionably partners may so purchase leasehold interest, as to imply an agreement to continue the part- nership as long as the leases endure ; but it is equally certain that there is no general rule, that partners, purchasing a leasehold interest, must be under- stood to have entered into a contract of partnership commensurate with the duration of the leases. For ordinary purposes a lease is no more than stock in trade, and as part of the stock may be sold ; nor would it be material, that the estate purchased by a partnership was freehold, if intended only as an article of stock ; though a question might, in that case, arise on the death of a partner, whether it would pass as real estate, or as stock, personal estate in enjoyment, though freehold in nature and quality. It is impossible, therefore, in my opinion, to hold that there being many leases, some long, some of short duration, and others intermediate, the partnership is to subsist during the term of the leases, or of the longest lease." See also 2 Bell, Comm. B. 7, c. 2, p. 633, 5th ed. ; Coll. on P. B. 1, c. 2, § 1, p. 68, 69, 2d ed. ; Gow on P. 0. 5, § 1, p. 225, 3d ed. { On an agreement by a partner with a stranger for a sub-partnership, there is no implication that the sub-partnership shall con- tinue as long as the original partnership. Frost v. Moulton, 21 Beav. 596. A partnership formed for mining and trading in California will be presumed to be intended to continue at least one mining season ; at least if such a part- nership engages men to work for a year, to be paid by a share of the profits, this is an implication that the partnership was intended to last a year, and it cannot be dissolved at will. Potter v. Moses, 1 R. I. 430. See Reade v. Bcntley, 4 Kay & J. 656.} ' 2 Bell, Comm. B. 7, c. 2, p. 631, 5th ed. ; Id. c. 3, p. 649-G55 ; U. S. Bank r. Binney, 5 Mason, 176, 185; 3 Kent, 53. 454 PARTNERSHIP. [CHAP. XIII. piration de ce temps} And he adds, that the prolonga- tion of it beyond that period must be proved by some act in writing, clothed with the proper formalities, which were required by law in its original formation.^ § 279. But the question may arise at the common law, when a partnership is actually continued by the parties after the expiration of the original term, pre- scribed for its duration, what is to be deemed the true effect and interpretation of the act '? Is it to be treated as a continuation of the partnership, upon all the origi- nal terms thereof, and for a like period ? Or, is it to be deemed a mere continuation of the partnership, dur- ing the will of the parties? The question does not, perhaps, admit of any uniform or universal answer. It may be affected by various considerations ; by the acts of the parties ; by the habits and changes of their busi- ness ; by implications from their omission to act upon certain terms of the original contract, and from appar- ent qualification and exceptions and restrictions of oth- ers, in their dealings and settlements with each other, or even with third persons. But, in the absence of all acts and circumstances whatsoever, to control or vary the original terms of the agreement, the just legal con- clusion seems to be, that the partnership is to be treated as a mere partnership during the joint will and pleasure of all the parties, and, therefore, dissoluble at the will of any one of them ; but that in all other respects it is to be carried on upon the original terms thereof, as to rights, duties, interests, liabilities, and shares of the profits and losses.^ » Poth. de Soc. n. 139; Code Civil of France, art. 1865, 1866; Code of Louisiana, 1825, art. 2848, 2849. * Ibid. ^ {See § 19 7, 198}; Featherstonhaugh v. Fenwick, 17 Ves. 298; U. S. Bank v. Binney, 5 Mason, 176, 185 ; 2 Bell, Comm. B. 7, c. 2, p. 632, 633, 6th ed. ; Gow on P. c. 5, § 1, p. 224, 225, 3d ed. ; Mifflin v. Smith, 17 S. & R. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 455 § 280. In the next place, a partnership may exph-e by its own express or implied limitation, whenever the 165. — Sir Wm. Grant (Master of the Rolls), in the case of Featherstonhaugh V. Fenwick, 17 Ves. 298, 307, discussed the subject somewhat at large ; and how far presumptions might arise from circumstances, as to the terms on which the partnership was to be deemed continued, he said : " The first ques- tion in this cause is, whether the partnership was dissolved on the 22d of November, 1804. The plaintiff contends that the defendants had no right to put an end to the partnership at that period; and that is contended on several grounds ; first, that as by the articles which formerly existed, but had expired, twelve months' notice was necessary to enable a partner to with- draw, the same notice was necessary for withdrawing from the partnership , which continued without articles. I do not agree to that proposition. The latter partnership was for an indefinite period, and therefore might be dis- solved at the will of the parties ; subject to the question, afterwards made, by what notice that will must be declared. Another ground on which the plaintiff contends against the dissolution on the 2 2d of November, is, that the lease of the premises in London, used in carrying on the concern, was then unexpired. That does not oppose any obstacle to the dissolution ; as it is not a necessary consequence, that partners, taking premises for the use of their trade for a definite period, contract a partnership for the same period. If any part of the term is unexpired at the end of the partnership, that is partnership property, and is to be distributed as such ; but I do not appre- hend that they are bound to continue the partnership on that account. A third ground is, that there were several contracts subsisting with their work- men, which had a considerable period of time to run. That argument goes considerably too far. It would go to this extent, that a partnership could not be dissolved, until all their contracts were completely ended and wound up ; and that can hardly be the case at any period, as persons are entering into contracts from day to day, which cannot all expire at the same period. It would on that ground be hardly possible to dissolve any partnership, as there must always be contracts depending. I do not conceive, therefore, that the existence of engagements with third persons, either for goods to be worked up, or engagements with their workmen, which had not come to a conclusion, can form an objection to the dissolution. The partners cannot, it is true, by a dissolution, relieve themselves from the performance of any engagements, which they may have contracted with third persons ; but, as among them- selves, the existence of such engagements cannot prevent a dissolution, either by mutual consent or by notice. The question then is, what sort of notice ought to be given for this purpose ? Until a very recent period, it had been, I believe, understood, that a reasonable notice should be given ; but upon the question, what is reasonable notice, much dilference of opinion may prevail. On the one hand, it may be extremely disadvantageous to parties to say, that a partnership shall be dissolved on a given day ; on the other, it must be extremely difficult for a Court of Equity, by a general rule, to ascertain 456 PARTNERSHIP. [CHAP. XIII, event has occurred, which the parties naturally or ne- cessarily contemplated as its just termination.^ This may arise in two ways; (1.) by the extinction of the thing, which constituted the sole subject-matter of the partner- ship ; (2.) by the completion or accomplishment of the entire business, for which the partnership was formed.^ ■what is reasonable notice ; and the question, whether the particular notice was reasonable or convenient, would be the subject of discussion in almost every instance of the dissolution of a partnership. Considerations of that sort, I believe, have led to a different rule; that in the case of a partnership, such as this, subsisting without articles, and for an indefinite period, any partner may say, ' It is my pleasure on this day to dissolve the partnership.' But, considering the principles on which the dissolution must take place, a partner can very seldom, if ever, have an interest to give notice of dissolu- tion at a period disadvantageous to the general interests of the concern ; as, where the articles do not prescribe the terms, the law ascertains what shall be the consequence of dissolution : viz., that the whole of the joint property must be sold off, and the whole concern wound up. Xo partner, therefore, can derive a particular advantage by choosing an unseasonable moment for dissolution ; as, upon the principles established in Crawshay v. Collins, and the authorities there referred to, he must sufier in proportion to the extent of his interest in the trade. I hold, therefore, that the dissolution of this part- nership took place on the 2 2d November." In U. S. Bank v. Binney, 5 j\Iason, 176, 185, the Court said: " Those articles (of partnership) expired by their own limitation in two years, and had force no longer, unless the parties elected to continue the partnership on the same terms. That is matter of evidence upon the whole facts. The natural presumption is, that, as the partnership was continued in fact, it was construed upon the same terms as before, unless that presumption is rebutted by the other circumstances in the case. There is no written agreement respecting the extension of the partner- shl}), and therefore it is open for inquiry upon all the evidence." ' 3 Kent, 52, 53. 2 3 Kent, 53 ; [Fellows v. Wyman, 33 K H. 351] ; Griswold v. Wadding- ton, 16 Johns, 438, 491. — On this occasion Mr. Chancellor Kent, in his most masterly judgment, used upon this point the following language : '• Pothier, in his treatise on Partnership, says, that every partnership is dissolved by the extinction of the business for which it was formed. This he illustrates, in his usual manner, by a number of easy and familiar examples. Thus, if a partnership be formed between two or more persons, for bringing together, and selling on joint account, the produce of their farms, or of their live-stock, and the produce of the stock of one of them should happen to fail or be destroyed, the partnership ceases, of course ; for there can be no longer any partnership, when one has nothing to contribute. So, if two persons form a CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 457 An example of the first kind may easily be suggested by a case, where two persons (not being otherwise part- iiers) should jointly buy a ship, to be employed by them for their joint and mutual profit as partners ; and the ship should afterwards be totally lost or destroyed. That would constitute a complete termination of the partnership, not merely by operation of law (although that ground might be fairly maintainable), but as an exact exposition of the actual intendment and under- standing of the parties.^ An example of the second kind is readily found in the common case of a joint en- terprise, voyage, adventure, or other commercial specula- tion, for the joint account and mutual profit of the par- ties concerned therein. Thus, for example, if two per- sons (not being otherwise partners) should hire a ship for a particular voyage, upon their joint account and for their mutual profit, and the voyage should be under- taken and completed, and the business thereof closed ; the partnership so formed would be dissolved by the mere lapse of time, and the occurrence of the event, by which it was originally intended by the parties that it partnership in a particular business, and the one engages to furnish capital, or the raw materials, and the other his skill and labor, and the latter becomes disabled by the palsy, the partnership is extinguished, because the object of the partnership cannot be fulfilled. So, again, if two or more persons form a partnership to buy and sell goods at a particular place, the partnership is dissolved, whenever the business is terminated. Poth. de Soc. n. 140-143. Extincto suhjecto. tollitur adjunctum, is the observation of Huberus, when speaking on this very point." 5 Duvergier, Droit Civil Franc. ^ 418-428. » See Poth. de Soc. n. 140, 141. — The Civil Code of France (art. 1867) declares : " Where one of the partners has promised to put in common the ownership of a thing, the loss of it, happened before the bringing in can be effected, operates a dissolution of the partnership in relation to all the part- ners. Partnership is in like manner dissolved in all cases by the loss of the thing, where the enjoyment alone has been put in common, and the owner- ship remains in the hands of the partner. But the partnership is not broken up by the loss of a thing, the ownership of which has already been brought into the partnership." j Claiborne v. Creditors, 18 La. 501.} 458 PARTNERSHIP. [CHAP. XIII. should terminate.^ The same doctrine would apply to the case of a jomt shipment of goods, upon the joint account and for the mutual profit of the shippers on a foreign voyage ; or a joint purchase of goods, to be sold for the joint benefit and profit of the purchasers thereof; or a joint undertaking by mechanics, to per- form work and labor, and find materials, to erect a dwelling-house for a third person, upon their joint account and for their mutual profit. For, in all such cases, the completion of the voyage, or adventure, or undertaking, or commercial speculation, naturally ter- minates the partnership contemplated by the parties.^ § 281. The same doctrine was formally promulgated in the Roman law ; and has been incorporated into the jurisprudence of all modern commercial nations, as in- deed it might naturally be presumed to be, since it is founded in common sense, and a just interpretation of the intention of the parties. Thus, in the Roman law it is said (as we have already seen),^ Societas solvitur ex personis^ ex rehus, ex voluntate, ex actione. Ideocfiie sive homines, sive res, sive actio interierit, distrahi vi- detur societas^ Res vero intereimt, cum aut nullce relin- quantur, aut conditiotiem midaverhit, neque enim ejus rei, qucejam nulla sit, quisquam socius est ; neque ejus, qucB consecrata publicatave sit.^ And again : Item ; si alicujus rei contracta societas sit, et finis 7iegotio impo- ' Ante, § 27, 30, 55, 267; Post v. Kimberly, 9 Johns. 470; Gow on P. c. 5, § 1, p. 218, 3d ed. ; Wats, on P. c. 7, p. 379, 2d ed. ; 1 Voet ad Pand. 17, 2, § 26, p. 761 ; 5 Duvergier, Droit Civ. Franc, tit. 9, § 411-420. ^ Ante, § 27, 30, 55, 267 ; Cumpston v. McNair, 1 Wend. 457 ; Poth. de Soc. n. 143 ; Coll. on P. B. 1, e. 1, § 1, p. 32, 2ded.; Wats, on P. c. 7, p. 379, 2d ed. ; 1 Voet ad Pand. 17, 2, § 26, p. 761 ; 5 Duvergier, Droit Civil Franc. §431. 3 Ante, § 266. * Poth. Pand. 17, 2, n. 54 ; D. 17, 2, 63, 10 ; Domat, 1, 8, 5, art. 11. * D. 17, 2, 63, 10 ; Poth. Pand. 17, 2, n. 62. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 459 situs est, finitur societas} Pothier, Vinnius, and other learned jurists, have done Httle more than to state the same doctrine, with a few appropriate illustrations.^ § 282. In the next place, as to the cases of dissolu- tion by the decree of a court of equity.^ It is obvious, from what has been already stated, that although a partnership may, by the original agreement, be formed for a stipulated period, and on that account may not be dissoluble at the mere Avill of either of the partners, without the concurrence of all the others ; ^ yet, that various cases may occur, in which it may become the duty of a judicial tribunal, either to declare the original partnership null and void ab initio, or to annul it in respect to all future operations ; otherwise the grossest injustice and most mischievous consequences might occur to some of the partners, without any fault or impropriety on their own part. Indeed, the remedial authority of a judicial tribunal, in order to be adequate and complete, ought not to stop here ; for many cases of unforeseen accident, or unsuspected mischief, may occur, which may make the further prosecution of the business of the partnership injurious, or improper, without the fault of any partner, and, indeed, where ' Inst. 3, 26, 6 ; D. 17, 2, 65, 10 ; Poth. Pand. 17, 2, n. 63 ; Domat, 1, 8, 5, art. 11. * Poth. de Soc. n. 140-143 ; Vinn. ad Inst. 3, 26, 6, Comm. ; Johnston's Civil Law of Spain, B. 2, tit. 15, p. 232 ; Van Leeuwen's Comm. B. 4, c. 23, § 11, p. 415 ; 2 Moreau & Carlt. Partidas 5, tit. 10, 1. 10, p. 773 ; Code Civil of France.art. 1865 ; Code of Louisiana (1825), art. 2847 ; Grisvcold v. Wad- dington, 16 Johns. 438, 491, 492, per Mr. Chancellor Kent. Vinnius puts the doctrine in brief but very clear terms. " Si societas certa; alicujus negotia- tionis causa inita sit, puta vini aut frumenti ad certam quantitatem emendi vendendique, sine negotio imposito, id est, empto distractoque vino aut fru- mento, societas extinguitur. Sed in eo nihil proprium videtur societatis ; ut- pote cui ea lex ab initio dicta sit. Idem est, si ad certum tempus contracta sit societas ; nam, exacto tempore, ea expirat." 3 3 Kent, 60. * Ante,§ 273, 276. 460 PARTNERSHIP. [cHAP. XIII. all of them are equally innocent. The Praetor's Fo- rum at Rome seems ordinarily to have exercised, or at least to have superintended the exercise of this authority, by controlling or confirming the acts of the partners, as to the right of dissolution, as the partic- ular case required its interposition ; and thus to have administered the appropriate relief. The Roman law (and the modern continental law has in a great meas- ure followed it) authorized, as we have seen, any part- ner to renounce such a partnership for any just and reasonable cause. But then the sufficiency of that cause was ultimately a matter for the decision of the proper judicial tribunal; and until that decision was had, his act could be deemed nothing more than a pre- liminary step, or conditional assertion of the right of dissolution.^ § 283. The Roman law also treated it as a clear case of dissolution, where action was brought by one partner against the others, for an account of the partnership business, and a judgment passed accordingly. [Societas) actione distrahitur, cum aut stipidcdione aid judicio viidcda sit causa societatis. Proculus enim ait, hoc ij^so, quod judicium ideo dictatum est, id societas distra- haiitr, renuntiatam societatem, sive totorum bonorum, sive unius rei societas co'ita sit.^ § 284. In England and America no jurisdiction whatever exists, to decree a dissolution of a partner- ship, for any cause whatsoever, in the Courts of Com- mon Law. It is confided exclusively to Courts of Equity ; and, indeed, as in many cases it must be a matter resting in the sound discretion of the Court, it seems most fit and proper to appropriate the juris- ' Ante, §273, 274, 276 ; Poth. de Soc. n. 154; Civil Code of France, art. 1871 ; Poth. Pand. 17, 2, n. 70. = D. 17, 2, 65 ; Poth. Pand. 17, 2, n. 70. CHAP. XTII.] DISSOLUTION OF PARTNERSHIP. 461 diction to those tribunals which constantly exercise a very large discretion in matters ex ceqiio et bono} This was precisely the case in suits in the Prsetor's Forum ; and for the most part it now also belongs to the higher tribunals of the different nations of continental Europe, where the strict distinction between law and equity, so well recognized in our municipal jurisprudence, is either unknown, or is repudiated. The principal dis- tinctions as to the exercise of this jurisdiction between our Courts of Equity and the tribunals of continental Europe, seem to be these. In the first place, in the latter tribunals, it is competent for one partner, in any case and at any time, to renounce the partnership sub modo, although not absolutely, for- any reasonable cause, which afterwards shall be sanctioned and approved by the proper tribunal ; whereas, in our law (as has been already suggested),^ a previous decree of the Court is necessary, however reasonable the cause may be.^ In the next place, in the Roman law and in the modern foreign law, certain causes are deemed ipso facto to amount to an actual dissolution ; whereas, in our law, they furnish proper grounds only for a decree of disso- lution. This will become more apparent in the subse- quent pages. § 285. The jurisdiction exercised by our Courts of Equity, to decree a dissolution of the partnership, during the term for which it was originally entered into, is of a most extensive and beneficial nature, and has the strongest tendency to prevent irremediable injuries, and often utter ruin to some of the partners. It may be exercised, as has been already suggested, in the first place, to declare partnerships utterly void ab • 1 Story, Eq. Jur. § 673 ; 3 Kent, 60. " Ante, §273, 274, 276. ^ Gow on P. c. 5, § 1, p. 221, 3d ed. 462 PARTNERSHIP. [cHAP. XIII. initio ; and, in the next place, to decree a dissolution from the time of the decree.^ The former remedial justice is usually applied to cases where there was fraud, imposition, misrepresentation, or oppression in the original agreement for the partnership.- The latter may arise in very different classes of cases, and be affected by very different considerations. § 286. Let us then proceed to the examination, in their order, of the various causes for which a Court of Equity will, or at least may, decree a dissolution of a partnership which was unobjectionable in its origin.^ They may be distributed under two general heads ; (1.) Causes arising subsequently to the formation of the contract, founded upon the alleged misconduct, or fraud, or violation of duty of one partner ; (2.) Causes arising subsequently to the formation of the contract, where no blame, laches, or impropriety of conduct, necessarily attaches to any of the partners. § 287. Under the first head, that of the misconduct, fraud, or violation of duty by a partner, it is proper to observe, that it is not for every trivial departure from duty or violation of the articles of partnership, or for every trifling fault or misconduct, that Courts of Equity will interfere and decree a dissolution. Thus, for ex- ample, Courts of Equity Avill not interfere in cases- of mere defects of temper, casual disputes, differences of opinion, and other minor grievances, which may be somewhat inconvenient and annoying, but do not essen- ^ Ante, § 232, 282. {On the date from -wbicli a dissolution shall be de- creed, see Durbin r. Barber, 14 Ohio, 311 ; Dumont i-. Ruepprecht, 38 Ala. 175.} 2 Ante, § 6; 1 Story, Eq. Jur. §222, 240 ; Coll. on P. B. 2, c. 3, § 7, p. 244, 2d ed. ; Gow on P. c. 3, § 1, p. 107, 3d ed. ; [Hynes v. Stewart, 10 B. Mon. 429.] See Lord Eldon's remarks in Tattersall r. Groote, 2 B. & P. 131, 135 ; Colt V. Woollaston, 2 P. Wms. 154 ; Green v. Barrett, 1 Sim. 45. ^ {On the return of a premium on dissolution, see § 203.} CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 463 tially obstruct or destroy the ordinary rights, interests, and operations of the partnership.^ § 288. On the other hand, if a case of gross mis- conduct, or abuse of authority, or gross want of good faith or dihgence, such as is and must continue to be productive of serious and permanent injury to the suc- cess and prosperity of the business of the partnership, or such as renders it impracticable to be carried on, or as is positively ruinous to its interests. Courts of Equi- ty will promptly interfere, and decree a dissolution.^ ' Coll. on P. B. 2, c. 2, § 1, p. 131, 2cl ed. ; Id. B. 2, c. 3, § 3, p. 193, 196 ; Goodman v. Whitcomb, 1 Jac. & W. 589, 592 ; AVray v. Hutchinson, 2 Myl. & K. 235 ; 1 Story, Eq. Jur. § 673 ; Gow on P. c. 3, § 1, p. 114, 3d ed. — In Goodman r. Whitcomb, 1 Jac. & W. 589, 592, 593, Lord Eldon said: "It may be a question whether the Court will not restrain a partner, if he has acted improperly, from doing certain acts in future. But if what he has done does not give the other party a right to have a dissolution of the part- nership, what right has the Court to appoint a receiver, and make itself the manager of every trade in the kingdom ? Where partners differ, as they sometimes do, when they enter into another kind of partnership, they should recollect that they enter into it for better and worse, and this Court has no jurisdiction to make a separation between them, because one is more sullen, or less good-tempered, than the other. Another Court, in the partnership to which I have alluded, cannot, nor can this Court, in this kind of part- nership, interfere, unless there is a cause of separation, which in the one case must amount to downright cruelty, and in the other, must be conduct amount- ing to an entire exclusion of the partner from his interest in the partnership. Whether a dissolution may ultimately be decreed, I will not say ; but trifiinof circumstances of conduct are not sufficient to authorize the Court to award a dissolution. It is said, that the plaintiff has made larger advances of capital than he was bound to do, and has received none of the profits. But that is no ground for a dissolution. It is then stated that the defendant has ex- changed carpets for household furniture. That may perhaps be an improper act ; but still there may be a thousand reasons why the Court should not do more than restrain him in future from so doing, and more particularly when he states in his answer that he did it because he thought it the best thing that could be done." 2 1 Story, Eq. Jur. § 673 ; Coll. on P. B. 2, c. 3, § 3, p. 195, 196, 2d ed. ; Goodman v. AVhitcomb, 1 Jac. & W. 589, 592, 593 ; Chapman v. Beach, 1 Jac. & W. 594, note ; Waters v. Taylor, 2 Ves. & B. 299 ; Loscombe v. Rus- sell, 4 Sim. 8 ; 3 Kent, 60, 61 ; Gratz v. Bayard, 11 S. & R. 41, 48, per Ch. Just. Tilghman ; 1 Mont, on P. Pt. 3, c. 1, p. 112 ; Adams v. Liardet, cited in 464 PARTNERSHIP. [cHAP. XIII. Habitual intoxication, gross extravagance, and gross negligence, and rash and reckless speculation, in the conduct of the business of the partnership, would prob- ably lead the Court to a like result.^ To justify such an extraordinary interposition, however, the Court always expects a strong and clear case to be made out of positive or meditated abuse. ^ It is not sufficient to show, that there is a temptation to such misconduct, abuse, or ill faith ; but there must be an unequivocal demonstration, by overt acts, or gross departures from duty, that the danger is imminent, or the injury already accomplished.^ For minor misconduct and grievances, if they require any redress, the Court ordinarily will go no further than to act upon the faulty party by way of injunction.^ Waters v. Taylor, 2 Ves. & B. 299, 300, 304, and in 1 Mont, on P. Pt. 3, c. 1, p. 99, and in Gow on P. c. 5, § 1, p. 227, 3ded. ; Gow on P. c. 3, § 1, p. 111- 115, 3d ed. ; [Fogg v. Johnston, 27 Ala. 432.] See also Littlewood v. Cald- well, 11 Price, 97, 99 ; Wats, on P. c. 7, p. 381, 382, 2d ed. ; Smith v. Jeyes, 4 Beav. 503; {Harrison w. Tennant, 21 Beav. 482; Watney ?;. Wells, 30 Beav. 56 ; Leary v. Shout, 33 Beav. 582 ; Baxter v. West, 1 Drew & Sm. 173. See Meaher v. Cox, 37 Ala. 201.} 1 Ibid.; 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed. '^ See Smith v. Mules, 9 Hare, 556 ; 10 Eng. L. & Eq. 103. ^ 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed. ; Glassington v. Thwaites, 1 Sim. & St. 124 ; Smith v. Jeyes, 4 Beav. 503. ■» Ante, § 224-228, 287 ; Marshall v. Colman, 2 Jac. & W. 266 ; Goodman V. Whitcomb, 1 Jac. & W. 589, 592, 593 ; Charlton v. Poulter, 19 Ves. 148, note (c) ; Gow on P. c. 3,§ 1, p. 111-115, 3d ed. — Mr. CoUyer has summed up the whole doctrine on this subject in the following terms : " Lord Thur- low once said, that as to misbehavior in one of the partners, he did not see what line could possibly be drawn, and what degree of misconduct was to be held a sufficient ground for dissolving the partnership. Liardet V. Adams, 1 Mont, on P. 112. And certainly, a Court of Equity will not dissolve a partnership on slight grounds ; as, for instance, because one partner may have conducted himself towards the other in an overbearing and insulting manner. ' The Court,' to use Lord Eldon's expressions be- fore adverted to, ' having no jurisdiction to make a separation between them, because one is more sullen or less good-tempered than the other.' Goodman v. Whitcomb, 1 Jac. & W. 592. See Wray v. Hutchinson, 2 Myl. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 465 § 289. The like doctrine is promulgated in the Roman law ; which permits any partner, at his election, to re- nounce the partnership, whenever the objects of the partnership are no longer attainable, or the misconduct of the other partner is so seriously injurious or mis- chievous to the partnership, that it ought not to be tol- erated. Etsi ante temptcs remmtietur, potest rationem habere renuntiatio. Nee tenehitur i^^^o socio, qui ideo & K. 235 ; [Blake v. Dorgan, 1 G. Greene, 537.] So again, want of prudence or ability on the part of the person seeking relief, is no just ground for a dissolution ; as, where he has made larger advances of capital than he is bound to do, and has received none of the jirofits. Goodman v. Whit- comb, supra. However, it may with safety be laid down, that not only wilful acts of fraud and bad faith, but gross instances of carelessness and waste in the administration of the partnership, as well as exclusion of the other partners from their just share of the management, so as to prevent the business from being conducted on the stipulated terms, are sufficient grounds for the dissolution of the contract by a Court of Equity. See Marshall v. Colman, 2 Jac. & W. 266 ; Goodman v. Whitcomb, 1 Jac. & W. 589; Chapman v. Beach, Id. 594; Norway v. Rowe, 19 Ves. 144; Waters v. Taylor, 2 Ves. & B. 299. So also it seems clear, that a habit on the part of one partner of receiving moneys, and not entering the re- ceipts in the books, or not leaving the books open to the inspection of the other partners, whether such conduct arises from a fraudulent intent or not, is good ground for a dissolution. Goodman v. Whitcomb, 1 Jac. & W. 589. So if a partner in a banking-house allows a customer to over- draw, and, by way of security, takes bonds from the customer, executed to himself separately and not to the firm, this is such misconduct as will warrant a Court of Equity in decreeing a dissolution. Master v. Kirton, 3 Ves. 74 ; R. L. 1796, B. 428. And although this relief will not be admin- istered for mere defects of temper in some of the parties, yet violent and last- ing dissension seems to be a ground upon which a Court of Equity will de- cree a dissolution ; as where the parties refuse to meet each other upon matters of business, a state of things which precludes the possibility of the partnership affairs being conducted with advantage. De Berenger v. Ham- mcl, 7 Jarm. Conv. p. 20. And it has been laid down, that though the court stands neuter with respect to occasional breaches of agreements between part- ners, which are not so grievous as to make it impossible for the partnership to continue ; yet when it finds that the acts complained of are of such a char- acter, that relief cannot be given to the parties except by a dissolution, the Court will decree a dissolution, though it is not specifically asked. Per Sir L. Shadwell, 4 Sim. 11." See also the language of Mr. Chancellor Kent on the same subject, 3 Kent, 60, 61 ; Gow on P. c. 5, § 1, p. 227,3d ed. 30 4:66 PARTNERSHIP. [cHAP. XIII. reniintiavit, quia conditio qucedam., qua societas erat co'ifa, ei non prcestakir, aut quid, si ita injuriosiis et dam- nosus socius sit, ut non exjjediat eum pati f ^ Such also is the French law.^ § 290. Let us now proceed to the other head, em- bracing the decree of a dissokition of the partnership for causes independent of any blame, laches, or impro- priety of conduct, necessarily attached to any of the partners. And here, in the first place, it will be a suffi- cient ground to decree a dissolution, that there exists an impracticability in carrying on the undertaking for which the partnership was formed.^ This may take place, either from the inability of one or all of the partners from carrying into effect the terms of the original con- tract ; or from the undertaking itself being in its char- acter visionary, or its operations absolutely impractica- ble. The case of an Opera House, where the conduct of the parties rendered it impossible to carry it on upon the terms originally stipulated, may serve to illustrate the former part of the position.'* The latter part of the 1 D. 17, 2, 14 ; Poth. Pand. 17, 2, n. 68. ^ See 5 Duvergier, Droit Civil Franc. § 447-452. ' Coll. on P. B. 2, c. 3, § 3, p. 199, 200, 2d ed.; Gow on P. c. 5, § 1, p. 226, 227, 3d ed. {See Meaher v. Cox, 37 Ala. 201.} * "Waters v. Taylor, 2 Ves. & B. 299 ; Griswold v. Waddington, 16 Johns. 438, 491 ; 5 Duvergier, Droit Civil Franc. § 420-428; Id. § 446-449. — In Waters v. Taylor, Lord Eldon said : " The real question here is quite dif- ferent from Adams v. Liardet ; which I take to be that in which Lord Thur- low's opinion 'was expressed. This question is, whether from the acts of Taylor himself, it is not manifest, that this partnership cannot be carried on upon the terms for which the parties engaged ; whether a single act has been done by him of late, that is not evidence, on his part, that he can no longer himself be bound by his contract, so as to observe the terms of it > when he excludes himself from the concern and the jjartnership, as far as it is to be conducted upon the terms on which it was formed, and says he will carry it on upon other terms. Taking that to be his conduct, this comes to the common case of one partner excluding the other from the concern ; is if one will not, because he cannot, continue it upon the terms on which it was formed, the consequence must be, that he says his part- CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 467 position may be readily illustrated in the not infrequent case, where the partnership is to work a mine, which turns out to be wholly unproductive, and ruinous in its expenses ; or for the introduction of a supposed newly invented machinery or manufacture, which proves to be a mere delusion, or incapable of being put into success- ful operation ; or for any other scheme of trade or oper- ation, which is a mere bubble, or wild speculation, or is founded in fundamental errors.^ ner shall not, because he cannot, carry it on upon those terms. That is the true amount of this case. The one cannot engage a performer with- out the other's consent ; having entered into stipulations only with refer- ence to agreement, they have given me no means of extricating them from the difficulties arising from non-agreement. Suppose an opera at this time requires more than £300 per week, or a new exhibition more than £500, if the plaintiff differs upon that, what is a judge to do but to look at the contract, as the only thing the Court can act upon ? and if both parties agree that the contract cannot be acted on, that furnishes the means of saying, there is an end of it ; and their interests are to be regarded as if no such contract had existed. The parties, by consent, determine that there is an end of the concern, which cannot be carried on upon the terms stipulated ; and the Court cannot substitute another contract." Mr. Chancellor Kent, in Griswold v. Waddington, 16 Johns. 438,491, said : " In speaking of the dissolution of partnerships, the French and civil law wi'iters say, that partnerships are dissolved by a change of the condition of one of the par- ties, which disables him to perform his part of the duty, as by a loss of liberty, or banishment, or bankruptcy, or a judicial prohibition to execute his business, or by confiscation of his goods. Inst. 3, 26, § 7, 8 ; Vinn. h. t. 3, 26, 4 ; Huberus in Inst. 3, 26, 6 ; D. 17, 2, 65 ; Poth. de Soc. n. 147, 148: Code Civil, No. 1865; Diet, du Dig. par Thevenot Dessaules, Art. Soc. No. 56. The English law of partnership is derived fi-om the same source ; and as the cases arise, the same principles are applied. The prin- ciple here is, that when one of the parties becomes disabled to act, or when the business of the association becomes impracticable, the law, as well as common reason, adjudges the partnership to be dissolved." ' 3 Kent, 60 ; Baring v. Dix, 1 Cox, 213 ; Pearce v. Piper, 17 Ves. 1, and Buckley v. Carter, referred to in 17 Ves. 11, 15, 16, and in Beaumont «. Meredith, 3 Ves. & B. 180, 181 ; Reeve v. Parkins, 2 Jac. & W. 390 ; Coll. on P. B. 2, c. 3, § 3, p. 193, 2d ed. ; Barr v. Speirs, cited in 2 Bell, Comm. 633, note (2), 5th ed. ; Gow on P. c. 5, § 1, p. 227, 3d ed. {In Jennings v. Baddeley, 3 Kay & J. 78, a dissolution was decreed of a part- nership, the business of which could not be carried on without further capital, each partner having contributed his share ; though it did not appear 468 PARTNERSHIP. [CHAP. XIII. § 291. In the next place, a partnership may be dis- solved by the decree of a Court of Equity, on account of the inabihty or incapacity of one partner to perform his obhgations and duties, and to contribute his skill, labor, and diligence in the promotion and accomplish- ment of the objects of the partnership. This inability or incapacity may arise in various ways ; and whenever its direct tendency is either necessarily to frustrate, or essentially to obstruct, or diminish, the objects of the partnership, it would seem clear upon principle, that it ought to furnish a complete ground for a dissolution by a court of justice ; for the further continuance of the partnership must be productive of serious inconvenience and injury to the other partners, and may end in their irremediable ruin, or the utter prostration of the enter- prise.^ § 292. Hence, if one of the terms of the partnership be, that the whole or a large portion of the capital stock shall be furnished by one partner, and skill and diligence are mainly relied on in the other, as the active partner ; and after the partnership is actually commenced, the partner who is to furnish the capital, should by misfortune become wholly unable to furnish it, or if the other partner, who is to furnish the skill and diligence, should be seized with a palsy, or any other disease, which should permanently incapacitate him from performing the required duties, such circum- stances would seem to present a fit case for the inter- position of a Court of Equity to dissolve the partner- ship.^ that the (;oncern was embarrassed. See Claiborne v. Creditors, 18 La. 501 ; Clough V. RatclilFe, 1 De G. & Sm. 164. } 1 3 Kent, 62; Gow on P. c. 5, § 1, p. 221, 3d ed. ; 5 Duvergier, Droit Civil Franc. § 446-450. " 3 Kent, 62; Domat, 1, 8, 5, art. 12; 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed. ; Ci-awshay v. Maule, 1 Swans. 495, 514, the Reporter's CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 469 § 293. The same doctrine is fully borne out by the true spirit and intendment of the Roman law, which note ; Jones v. Noy, 2 Myl. & K. 125, 129, 130 ; Wrexham v. Huddleston, 1 Swans. 514, note ; Waters v. Taylor, 2 Ves. & B. 299 ; Wray v. Hutch- inson, 2 Myl. & K. 235, 238. — Vmnius (Comm. ad Inst. 3, 26, 8) puts the doctrine in its true light, as to inability from poverty or misfortune. — " Postremo etiam egestate unius socii societas solvitur, egestate scilicet extrema, id est, bonorum omnium, aut tantum non omnium amissions. Nam cum societas contrahatur bonorum in commune quaerendorum causa, non magis bonis sublatis societati locus esse potest, quam sublata persona socii. Amittuntur bona aut civitate salva, veluti cessione, id est, si socius, sere alieno oppressus, bonis suis creditoribus cesserit. eaque a creditoribus distracta fuerint ; ac tum etiam "societatem dirimi placet, aut civitate una cum bonis amissa, ut in specie prsecedente ; nam jjublicatione bona amitti, ipsum verbum publicationis satis indicat ; eaque consideratione ilia quoque ad hanc rationem dissolvendse societatis referri potest. Sed et decoctione bona amittuntur et pereunt. Ceterum decoctione sola societatem solvi negat Stracha, nisi ea ad manifestam egestatem socium redegerit. Non puto autem, quod hie traditur de dissolutione societatis ob amissionem bonorum, locum habere eo casu, quo nihil pecuniae in societatem collatum est, aut quo ille, qui operam tantum contulit, bona salva civitate aniisit, nisi forte ob bona amissa speratam operam prtestare nequeat." See also Voet ad Pand. 17, 2, § 26, Tom. 1, p. 761. — Mr. Bell has made the fol- lowing striking remarks upon this subject: " Incapacity by disease. 1. If the partnership proceed in reliance on such aid from a partner, as any bodily illness he may be affected with may prevent, it would seem to be a justifiable cause for having the partnership judicially dissolved, or for re- nouncing the partnership, although there should be a fixed term of duration not yet arrived. 2. Insanity has the effect, not only of depriving the partner of the power of aiding the partnership by his exertions, but it pre- vents him from controlling, for his own safety, the proceedings of his co- partners. And, accordingly, where there are two partners, both of whom are to contribute their skill and industry, the insanity of one of them, by which he is rendered incapable of contributing that skill and industry, seems to be a good ground to put an end to the partnership. At the same time it may be observed, that these are cases of infinite delicacy. There is no line of distinction by which it shall be ascertained how long a term of inability shall justify measures of this description. A broken leg, or an accidental blow, may incapacitate a partner for a time as much as insanity, andthe one may be as temporary as the other; and, perhaps the nearest approximation to be made to a rule on the subject is, that a remedy and relief will Ije given only Avhere the circumstances amount to a total and important failure in those essential points on which the success of the part- nership depends. 3. Cases may be supposed of danger so innninent, from bad health, lunacy, habits of intoxication, etc., as to make the con- 470 PARTNERSHIP. [cHAP. XIII. adopts the like provision, enabling any party to re- nounce the partnership, whenever its objects are no longer attainable. The passage already cited estab- hshes this right, whenever the conditions of the part- nership are not capable of being fulfilled, or the fruits thereof cannot be properly enjoyed.^ Quia conditio qncedam,, qua societas erat co'ita, ei non prcestatur.^ Vel quod ea re frui non liceat, cujus gratia 7iegotiatio sus- cepta sit.^ The same doctrine is applied to the case of a partner who is grievously oppressed with debt, at least, when it amounts to insolvency. Item si quis ex sociis mole dehiti prcegravatiis, honis suis cesserit, et ideo projyter publica aut privata dehita substantia ejus veneat, solmtur societas^ Another of the causes tinuance of the partnership likely to prove ruinous to all concerned ; as in the case of uncontrollable habits of intoxication in the partner of a gun- powder manufactory. In cases of this description there can be no doubt that such perils will afford ground for judicial interference to dissolve the company. But it may be doubted, whether they would not justify the other partners in entering the act of dissolution In the books, to be followed up as soon as possible by judicial measures ; for such a state of things may occur at the commencement of a long vacation, when no proper opportunity can be had of dissolving by judicial interposition." 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed. > Ante, § 273, 289. ^ D. 17, 2, 14; Poth. Pand. 17, 2, n. 68; ante, § 273. 3 D. 17, 2, 15 ; Poth. Pand. 17, 2, n. 68 ; Poth. de Soc. n. 152. * Inst. 3, 26, 8; Domat, 1, 8, 5, art. 12. — Domat has in this place summed up the main principles of the Roman law on all these and the like incapacities. " If one of the partners (says he) Is reduced to such a con- dition, that he cannot contribute to the community what he is obliged to furnish, whether In money, or in labor, the other partners may exclude him from the society; as. If his goods are seized on, if he has relinquished them to his creditors ; If he labors under any infirmity or any other Incon- venience that hinders him from acting ; if he is excluded from the manage- ment of his concerns, as being a prodigal ; If he falls into a frenzy. For In all these cases, the partners may justly exclude from the partnership him, who ceasing to contribute to it, ceases to have a right to it. But this is to be understood only for the time to come ; and the partner who may chance to be excluded for any one of these causes, ought to lose nothing of the profits which may come to his share in proportion to the contributions which he had already made." CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 471 enumerated in that law for a dissolution of partnership, is the absolute poverty or total loss of the property of one partner. Dissociamur egestate} § 294. Pothier fully recognizes the same doctrine.^ He also puts the corresponding case of the partner becoming paralytic, or otherwise infirm, whose skill and diligence are relied on to conduct the business, or man- ufacture the articles of the trade ; and holds, that such an occurrence constitutes a sufficient ground for a dis- solution.^ In each of these cases, however, the asserted inability, or incapacity, does not, either in the Roman law, or the French law, constitute ^^er se a positive dissolution ; but it only confers the right of election upon the other partners, to do so at their pleasure by an open renunciation."* In this respect it is in perfect coincidence with the doctrine of the common law. • D. 17, 2, 4, 1 ; Poth. Pand. 17, 2, n. 54, 62 ; Domat, 1, 8, 5, art. 12. => Poth. de Soc. n. 141, 142, 148 ; Domat, 1, 8, 5, art. 12. ••' Poth. de Soc. n. 142, 152 ; Civil Code of France, art. 1871 ; Domat, 1, 8, 5, art. 12. * Domat, 1, 8, 5, art. 12, and note. Ibid. ; Poth. de Soc. n. 142, 152. — Pothier says: "The same thing may be said of the case of an habitual infirmity or disease, which occurs to one of the partners. It will be a just cause for him to renounce the partnership, if the business of the partner- ship be such that it requires his personal attention." Poth. de Soc. n. 152. The Civil Code of France (art. 1871), declares: "Dissolution of partner- ships for a term cannot be demanded by one of the partners, before the term agreed, unless for just motives, as where another partner fails in his engagements, or that an habitual infirmity renders him unfit for the affairs of the partnership, or other similar cases, the lawfulness and weight of which are left to the ai-bitratlon of Judges." Ante, § 274. See also Code of Louisiana (1825), art. 2858, 2859, which declares : " Although the part- nership may have been entered into for a limited time, one of the partners may, provided he has a just cause for the same, dissolve the partnership before the time, even although inconveniences might result for the partners, and although it might have been stipulated, that the partners could not desist from the partnership before the stipulated time. There is just cause for a partner to dissolve the partnersliip before the appointed time, when one or more of the partners fail in their obligations, or when an liabitual infirmity prevents him from devoting himself to the affairs of the partner- ship, which require his presence or his pei'sonal attendance." 472 PARTNERSHIP. [cHAP. XIII. § 295. An incapacity of a different sort, but which leads , directly to the same right of dissolution, is that of insanity ; for it is obvious, that, under such circum- stances, the business either cannot be carried on at all, or not as beneficially for all the parties, as was con- templated in the formation of the original partnership. Indeed, theoretically speaking, as insanity amounts to a positive incapacity of the party to contract during its continuance, and as the supposed agency and au- thority given by each partner to the others to transact the business of the partnership in the name of all, may be deemed during the like period to be suspended or revoked,^ the natural conclusion would seem to be, that ' Story on Ag. § 481. — The following note, appended to that section, may not be unimportant upon the point here under consideration. " This is clear, where the party's lunacy is established under an inquisition, or where he is put under guardianship. But some doubt seems to be entertained, whether, before such inquisition or guardianship, there is any implied sus- pension or revocation of the agent's authority. Mr. Bell (1 Bell, Comm. § 413, p. 395, 396, 4th ed. ; Id. p. 489, 5th ed.) considers Insanity, not so established, to be no suspension or revocation of the authority. He says : ' Insanity is to be judged of differently. There is here neither an implied natural termination to the authority ; nor Is there an existing will to recall the former appointment ; nor Is the act notorious, by which the public may be aware of such failure of capacity. It was to this Interesting question chiefly, that the metaphysical discussion, to which I have already alluded, was applied. But the strong practical ground of good sense, on which the question was disposed of, as relative to the public, was, that insanity Is con- tradistinguished from death by the want of notoriety ; that all general dele- gations of power, on which a credit is once raised with the trading world, subsist in force to bind the grantor, till recalled by some public act or individual notice ; and that, while they continue in uninterrupted operation relied on by the public, they are, in law, to be held as available generally ; leaving particular cases to be distinguished by special circumstances of mala fides. The question does not appear to have occurred in England ; but the opinion of very eminent English counsel was taken in a case, wlilch was tried in Scotland, and they held the acts of the procurator to be effectual to the public against the estate of the person by whom the procuratory was granted.' He states. In his note (1) the Scottish case, in the following words : ' Pollock against Paterson. The case in which this question occurred to be tried, was compromised, and I had imagined was not reported. CHAP. XIII. J DISSOLUTION OF PARTNERSHIP. 473 no valid act can be done, or contract can be made,* during the insanity of any partner, which should be binding upon the partnership. The common law, how- ever, does not in this respect follow out the theoretical principle ; but, upon grounds of public policy or con- venience, holds, that insanity does not ordinarily per se amount to a positive dissolution of the partnership ; but only to a good and sufficient cause for a Court of Equity to decree a dissolution.^ We say ordinarily ; But after I had prepared a note from my own papers, to subjoin here, I found the case well and ably reported In the Faculty Collection, to which I refer the reader. The opinions of the Judges are peculiarly worthy of pe- rusal ; not being confined to the narrow state of the question, as it occurred technically, but extending to a large and comprehensive discussion of the general question, as to the effect of Insanity on such powers. 10th Decem- ber, 1811, 14 Fac. Coll. 369.' In note (2), he refers to the opinions of counsel taken In England, in these words : ' After stating the terms of the procuration, as on this and the preceding page, and that, after the insanity of the grantor, the procui'ator had continued to carry on the busmess of a banker for the pi'incipal, the question put was. Whether, In these circum- stances, the transactions of Mr. John Patterson, under his father's procu- ration, are good to those who transacted with him from the date of It to the period of stopping.' The answer by Sir Vicary Gibbs (afterwards Lord Chief Justice of the Common Pleas), Sir Samuel Romilly, and Mr. Adam (now Lord Chief Commissioner of the Scottish Jury Court), was, 'We think they are good.' INlr. Chancellor Kent, in his Commentaries, Inclines to the same opinion. 2 Kent, 6-45. Would a deed or sale, executed per- sonally by a party manifestly insane at the time, be valid? If not, can his agent be in a better condition ? " ' Sayer v. Bennet, 1 Cox, 107 ; Pearce v. Chamberlain, 2 Ves. Sr. 33, 35;' [Leaf v. Coles, 1 De G. M. & G. 171 ; 12 Eng. L. & Eq. 117] ; Wrexham v. Huddleston, 1 Swans. 51-4, note, and see Ibid, the Reporter's note ; Waters v. Taylor, 2 Ves. & B. 299, 302, 303 ; KIrby v. Carr, 3 You. & C. 184 ; Jones v. Noy, 2 Myl. & K. 125 ; 1 Story, Eq. Jur. § 673 ; 3 Kent, 58 ; Wats, on P. c. 7, p. 382, 2d ed. ; Griswold v. Waddington, 15 Johns. 57, per Mr. Ch. Just. Spencer. {Anon. Z. t'. X. 2 Kay & J. 441. See Rowlands V. Evans, 30 Beav. 302. } In Sayer v. Bennet, 1 Cox, 107, 109, Lord Kenyon (then Master of the Rolls) said : "I think, indeed, it may be laid down aS a general rule (without considering tlie ])artieular circumstances of the case), that when partners are to contribute skill and Industry, as well as capital, if one partner becomes unable to contribute that skill, a Court of Equity ought to Interfere for both their sakes ; for both have stakes in tlie partnership, and are Interested In having it carried on properly ; and the 474 PARTNERSHIP. [cHAP. XIII. "for, where the insanity has been positively ascertained, under a commission of lunacy, or by the regular judi- Court ought to see, that the property of the party, unable to take care of himself, should be taken care of for him. It appears, that few people care to leave the management of their property to other persons ; and as a lunatic has no power of managing his own property, so a Court of Equity will not deliver it to persons to whom the party himself has not committed it. If, therefore, the defendant continued in the same situation as he has been, I should have no difficulty in saying that the partnership ought to be dissolved, though there may be no precedent for the purpose. As to what is said with respect to a substitute for defendant, that is what Sayer never intended by the partnership ; he never meant to take a partner from a Court of Equity. The next thing is, how far his present situation ought to in- fluence the Court. I think I may say, that, if it were clearly established, that Bennet had recovered his senses, and there was no probability of a relapse, it would be too much to dissolve the partnership ; (nor if it were otherwise, could this Court dissolve it with a retrospect to the time of the disorder's commencing ; for as his capital has been embarked, dur- ing all that time, he must have the profits of it) . If I was clearly satisfied, that Bennet was restored to a sound mind, and could afford the proper assistance to Sayer, the partnership ought not to be dissolved. In Hud- dleston's Case it does not appear, what was the extent of the dejection of mind. Everybody knows that it is very frequent for persons once mad to recover. And in this case I cannot find what the apothecary forms his opinion upon, as to the likelihood of Bennetts recovery. I am astonished that neither party examined Dr. Monro ; he ought to have had frequent and recent opportunities of seeing him. Every lunatic is supposed to have lucid intervals ; and it might be, that these were selected for his being seen by these witnesses ; at least it is not made to appear sufficiently to me. His family, with whom he has lived, ought to have stated it. Under these circumstances I have great difficulty. On the principle I have no doubt; but I cannot tell how the circumstances apply. I must, therefore, direct a new kind of inquiry, which is, the Master must inquire whether Bennet is now in such a state of mind as to be able to conduct this business in partnership with Mr. Sayer, according to the articles of copartnei'ship ; for if he has merely a ray of intellect, I ought not to reingraft him in his partnership, and that in mercy to both, for the property of both is concerned ; and he who cannot dispose of his property by law, must be restrained here. I have, therefore, no manner of doubt of the principle." In Waters v. Taylor, 2 Ves. & B. 299, 302, 303, Lord Eldon said: •'It was supposed that I had contradicted Lord Kenyon's doctrine in Sayer v. Bennet. Certainly I did not contradict that doctrine ; nor did I make any decree, which, duly considered, was an assent to it. The case was no more than this ; one partner becoming a lunatic, the others thought proper by their own act to put an end to the partnership ; which they had CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 475 cial appointment of a guardian to the lunatic, it may deserve consideration, whether it does not ^};so facto no right to do, if he had been sane ; and they continued to carry on the business with his capital ; not being able to state, what was his, as a cred- itor, and what was not his, as a partner. That, Lord Kenyon thought, afforded sufficient ground for saying the partnership was not determined; and he also held, that one partner cannot, on account of the lunacy of another, put an end to the partnership ; but that object must be attained through the decree of a Court of Equity. My decision was not intended either to support or impeach that, proceeding upon the particular circum- stances of the case before me. The question, whether lunacy is to be con- sidered a dissolution, is not before me. I shall therefore say no more upon it, than this. If a case had arisen, in which it was clearly established, as far as human testimony can establish, that the party was what is called an incurable lunatic, and he had by the articles contracted to be always actively engaged in the partnership, and it was therefore as clear as human testimony can make it, that he could not perform his contract, there could be no damages for the breach in consequence of the act of God. But it would be very difficult for a Court of Equity to hold one man to his contract, when it is perfectly clear that the other could not execute his part of it. It will be quite time enough to determine that case, when it shall arise ; for, as we know that no lunacy can be pronounced incurable, yet the dura- tion of the disorder may be long or short ; and the degree may admit of great variety. I would not, therefore, lay down any general rule by anticipation, speculating upon such circumstances. I agree with Lord Thurlow, that the jurisdiction is most difficult and delicate, and to be exer- cised with great caution." In Jones v. Noy, 2 Myl. & K. 125, 129, 130, Sir John Leach (Master of the Rolls) said: "It is clear upon principle, that the complete incapacity of a party to an agreement to perform that which was a condition of the agreement, is a ground for determining the contract. The insanity of a partner is a ground for the dissolution of the partnership, because it is immediate incapacity ; but it may not, in the result, prove to be a ground of dissolution, for the partner may recover from his malady. When a partner, therefore, is affected Avith insanity, the continuing partner may, if he think fit, make it a ground of dissolution. But in that case, I consider with Lord Kefiyon, that, in order to make it a ground of dissolution, he must obtain a decree of the Court. If he does not apply to the Court for a decree of dissolution, it is to be considered that he is willing to wait to see whether the incapacity of his partner may not prove merely temporary. If he carry on the partnership business, in the expectation that his partner may recover from his insanity, so long as he continues the business with that expectation or hope, there can be no disso- lution.'" See also Gow on P. c. o, § 1, p. 221, 3d ed. ; Besch v. Frolich, 1 Phil. 172 ; [Sander v. Sander, 2 Coll. 276.] 476 PARTNERSHIP. [CHAP. XIII. amount to a clear case of dissolution of the partnership by operation of law ; since it immediately suspends the whole functions and rights of the party to act per- sonally.^ The Roman law seems fully to have incul- cated the same doctrine, upon the ground that a mad- man has no capacity to contract.^ § 296. Under the Roman law the other partners not only had a right to renounce the partnership, where any one of the partners was a prodigal or a madman, if he was put under guardianship on account of his prodi- gality or insanity ; but his guardian also was clothed with the like authority, which, however, as he was at liberty to exercise it as his election, does not seem to have been understood as amounting |jer se to a dissolu- tion.^ Sancimus (says the Code) veterum duhitatione semota, licentiam habere furiosi curatorem dissolvere^ si maluerit, societatem furiosi, et sociis licere ei remin- tiare.^ > Storj' on Ag. § 481. —Mr. Collyer (Coll. on P. B. 2, c. 3, § 3, p. 195, 2d ed.) seems to think that a decree for a dissolution is still necessary, notwithstanding a commission of lunacy has found the partner a lunatic. The case of Milne i'. Bartlet, cited by him from the Jurist (Eng.), Vol. 3, p. 358, certainly seems to support the view which he takes of the subject. But, at the same time, it cannot escape observation, that the point was not made at the Bar, and that the decree would have been equally correct, if it had proceeded to decree an account upon the ground that the dissolution was already complete. I confess myself to have difficulty in comprehend- ing how a partnership can still exist, after one partner is put under guard- ianship by reason of insanity. See also 5 Duvergier, Droit Civil Franc, tit. 9, § 4-43-446. {In Isler v. Baker, 6 Humph. 85, it was held, that an inqui- sition of lunacy found against a partner ipso /"ac/o dissolved the partnership. } ^ In negotiis contrahendis alia causa habita est furiosorum, alia eorum, qui fari possunt, quamvis actum rei non intelligerent ; nam furiosus nullum negotium contrahere potest; pupillus omnia, tutore auctore, agere potest. (D. 50, 17, 5.) Furiosi, vel ejus cui bonis interdictum sit, nulla voluntas est. (D. 50, 17, 40.) 3 Domat, 1, 8, 5, art. 12, 13. * Cod. 4, 37, 7; Poth. Pand. 17, 2, n. 67; Domat, 1, 8, 5, art. 12, 13. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 477 § 297. But although insanity may thus constitute a sufficient ground to justify a Court of Equity in de- creeing a dissokition ; yet we are to understand this doctrine, and indeed, all other cases of personal infir- mity or disability, in a qualified sense, and with its appropriate limitations. It is not the mere fact of the existence of such insanity, infirmity, or other disability, supervening, that will justify the Court in the applica- tion of such an extraordinary remedy. But it must be of such a character, as amounts to a permanent or confirmed disqualification to perform the duties of the partnership. If the insanity, or infirmity, or other disability, be of a temporary or fugitive nature ; if it be merely an occasional malady, or accidental illness, or an insanity, admitting of long lucid intervals, or mild and gentle in its character, amounting to little more than a dejection of mind ; if there be a fair prospect of recovery within a reasonable time ; then, and in such cases, there is no fit ground for a Court of Equity to decree a dissolution ; for every partner- ship must be presumed to be entered into, subject to the common incidents of life, such as. temporary illness, infirmity, or insanity.^ The case must be far more stringent ; the hope of a recovery must be re- mote ; the character of the disease must be permanent and confirmed ; and the impracticability of resuming the partnership duties, until after a period of indefinite and doubtful duration, must be apparent and decisive.- » 2 Bell, Coram. B. 7, c. 2, p. 624, oth ed. 2 Gow on P. c. 5, § 1, p. 221, 222, 3d ed. ; Id. Suppl. 1841, p. 64 ; Wats, on P. c. 7, p. 382, 2d ed. ; Jones v. Nov, 2 iNIyl. & K. 12,"). — Mr. Gow has well said : " But, as the duration of the disorder may l)e protracted or circumscribed, and the degree may admit of variety, it is impossible speculatively to lay down any general rule on the subject ; since such a rule, in its application, nuist vary according as the malady is eitlier confirmed insanity, or mere temporary illness, or dejection of mind, and according as 478 PARTNERSHIP. [CHAP. XIII. Even when a Court of Equity will, on account of the insanity of a partner, dissolve the partnership, it will not give a retrospective effect to its decree, by carry- ing back the dissolution to the time when the insanity commenced, or even to the time of filing the bill ; but it will generally confine the dissolution to the time of the decree.^ § 298. There may be, and indeed are, various other circumstances and changes of state or condition which may, in like manner, justify a Court of Equity in dis- solving a partnership ; such, for example, as in the cases already hinted at,~ of the long absence of one partner in the public service ; or his protracted ab- sence abroad for mere personal or private objects ; or his change of domicile to another state or country ; ^ or his voluntary engagement in any other incompatible pursuits. In all such cases, if the business and inter- ests of the partnership will be thereby materially ob- structed, or suspended, or interfered with, to the preju- dice of the other partners, it will furnish a just and the prospect of recovery is speedy or remote. Each case must be governed and decided by its own peculiar circumstances. However, whatever may be the nature of the disorder, one partner cannot, in consequence of such an affliction, put an end to the partnership by his own act ; that object can only be attained through the medium of the decree of a Court of Equity." Sadler v. Lee, 6 Beav. 324; {Kirby v. Carr, 3 You. & C. Ex. 184; Anon. Z.v.X. 2Kay & J. 441. ' Besch V. Frolich, 1 Phil. 172, 176 ; [Sander v. Sander, 2 Coll. 276. But where by articles the partnership between two persons was to be dis- solved on either party giving the other six months' notice ; and one of the parties becoming deranged in his intellect, the other gave the required notice ; the partnership was declared to have been dissolved in pursuance of the notice, and not merely from the time of the decree, notwithstanding the insanity of the party to whom it was addressed. Robertson v. Lockie, 15 Sim. 285. See also Bagshaw v. Parker, 10 Beav. 532.] {So Mellersh v. Keen, 27 Beav. 236.} '^ Ante, § 274, 291, 292. 3 See Whitman v. Leonard, 3 Pick. 177, 179. [Explained and limited in Arnold v. Brown, 24 Pick. 89, 94.] CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 479 reasonable cause for a Court of Equity to dissolve the partnership. The Roman law on this point speaks at once the language of common sense and public conven- ience.^ There are other incapacities and disabilities, which operate, ipso facto^ a dissolution of the partner- ship, without any intervention of a Court of Justice ; but these will come properly under consideration, when we treat of the cases of dissolution by mere operation of law. § 299. Analogous to the cases of a dissolution by the decree of a Court of Equity, is that of a dissolution which is adjudged by the award of arbitrators, upon a proper submission of the case to them by the consent of all the partners. Where there is a direct submission of the very question to arbitrators by the express terms of the submission, there does not seem to be any, the slightest difficulty, in holding, that an award in the premises, directly awarding a dissolution, will, ipso facto ^ if unimpeached and unimpeachable, amount to a posi- tive dissolution.^ And this is so for two reasons ; the one of which is, that it is competent, in point of law, for the arbitrators to make such an award obligatory upon the parties, as the decree of a tribunal of their own choice.^ The other is, that the dissolution of the partnership may properly be treated, as made with the consent of all the partners.'* § 300. The question, however, may arise, and, indeed, has arisen, whether, when the arbitrators have not, in express terms, awarded a dissolution, it may neverthe- less be implied from the very nature and operation of ' D. 17, 2, 16; Poth. Pand. 17, 2, n. 68; Poth. de Soc. n. 152. ^ Wats, on P. c. 7, p. 383, 384, 2d ed. ; Coll. on P. B. 2, c. 2, § 2, p. 152. 153, 2d ed. ; Gow on P. c. 5, § 1, p. 230, 3d ed. ; Heath v. Sansom, 4 B. & Ad. 172; Street v. Rigby, 6 Ves. 815. » Heath V. Sansom, 4 B. & Ad. 172. * Ibid. 480 PARTNERSHIP. [cHAP. XIII. the actual clauses of the award itself. And it has been held, that it may, if the award admits of no other just and reasonable interpretation. Thus, for example, if it is awarded by the arbitrators, that the affairs of the partnership shall be w^ound up, or that all the partner- ship property shall be sold and delivered to the partner, w^ho shall become the purchaser ; or that one partner shall take all the property and pay all the debts of the partnership ; in thes6 and the like cases, it seems to be clear, that a dissolution of the partnership is positively intended by the arbitrators.^ § 301. The only other important question of a prac- tical nature under this head is, What terms in the sub- mission will amount to an implied authority to the arbi- trators to dissolve the partnership ? Thus, for example, where all matters in difference between the partners are referred to arbitrators, if they should award a dissolu- tion of the partnership, it may be made a question, whether the arbitrators, by such an award, have not exceeded their authority. In a case of this sort, the Court held, that under such a submission it was clearly within the scope of the authority of the arbitrators to award a dissolution of the partnership.^ § 302. We come, in the next place, to the considera- tion of the dissolution of partnership by mere operation of law. And this is divisible into vaiious heads. (1.) Dissolution by the change of the state (status) or con- dition of one or more of the partners. (2.) Dissolution by the transfer of the property of one or more of the partners, by their own act, or by the act of the law. (3.) Dissolution by the bankruptcy and insolvency of one or more of the partners. (4.) Dissolution by a * Heath v. Sansom, 4 B. & Ad, 172 ; Byers v. Van Deusen, 5 Wend. 208. 2 Green v. Waring, 1 W. Bl. 475; {§ 215.} CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 481 public war between the countries, of which the partners are respectively subjects. (5.) Dissolution by the death of one or more of the partners. These heads may seem somewhat to run into each other ; but a distinct consid- eration of them, in the order stated, may enable us to see the principles applicable to each in a more exact and comprehensive manner, than could otherwise be conveniently done. § 803. And first, as to dissolution by the change of the state or condition of one or more of the partners. This, of course, must arise, whenever the incapacity further to act sui juris ^ results by operation of law from such change of state or condition. To this head we might refer the case of persons, who, being partners, are put under actual tutelage or guardianship, and are by the local law disabled to act sui juris ; such as persons becoming insane, idiotic, spendthrifts, or otherwise, from excessive weakness or vice, being placed under tutelage or guardianship ; ^ for the continuance of the partner- ship contract would seem necessarily founded upon the personal capacity of the partner to act and bind him- self in the partnership transactions. We have already seen how this subject is dealt with in the Roman and foreign law.^ § 304. So, again, the same result will arise at the common law, where a party has lost his capacity to act sui juris, by reason of his outlawry, or conviction and attainder of felony, or treason.^ These two last cases are not only founded upon the personal incapacity of the parties ; but also upon the further consideration, ' Ante, § 295, 296 : Domat, 1, 8, 5, art. 12, 13 ; Cod. 4, 37, 7 ; Poth. Pand. 17, 2, n. 67 ; 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed. ; Gris- wold V. Waddington, 16 Johns. 438, 491. * Ante, § 295, 296. 3 CoU. on P. B. 1, c. 2, § 2, p. 71, 2d ed. 31 482 PARTNERSHIP. [CHAP. XIII. that by the attainder the crown becomes entitled to all the partnership effects, by virtue of its prerogative ; that is to say, to the moiety or share of the convict- partner, by way of forfeiture; and to the moiety or shares of all the other innocent partners, upon the ex- traordinary (if it does not deserve the stronger epithets of extravagant and oppressive) technical doctrine, that it is beneath the dignity of the crown to become a joint tenant, or a tenant in common with a subject, and, therefore, the king shall take the whole by his preroga- tive.' No such doctrine has ever been promulgated in ' Coll. on P. B. 1, c. 2, § 2, p. 71, 72, 2d ed. ; Wats, on P. c. 6, p. 377, 2d ed. ; Gow on P. c. 5, § 1, p. 216, 217, 3d ed.— Mr. Watson (p. 377, 378) has stated the reasons of the doctrine, and its hardship, in the following terms : " Before concluding this chapter upon the death of part- ners, it may be proper to consider the consequences of one partner becoming civilly dead, by outlawry or by attainder for treason or felony. The outlaw or convict, being dead in law, incapable of entering into any con- tract, bringing any suit, or holding any property, it is clear, that a part- nership, in which he was, is ipso facto dissolved. He is as incapable of the functions of a partner in trade, as if the breath had left his body. The effects of his delinquency are extremely severe upon his copartner, who re- mains a good and lawful man. And here is one of those instances, in which by our law the innocent suffer with the guilty ; which rather shock us at first sight, but which may be well contrived for the prevention of crimes, and the general good of the commonwealth. Upon the outlawry or attainder of one partner, all the partnership effects become vested in the crown. The share of the partner outlawed or attainted is, in the first place, forfeited to the crown ; whereby, if the king were capable of being so, he would become joint tenant or tenant in common of the partnership effects with the other pai'tner ; but as this would be inconsistent with the dignity of the monarch, he is strictly entitled to the whole. Sir Wm. Blackstone says : ' The king cannot have a joint property with any person in one entire chattel, or such a one as is not capable of division or separation. But where the titles of the king and the subject concur, the king is entitled to the whole ; in like man- ner, as the king cannot, eitlier by grant or contract, become a joint tenant of a chattel real with another person ; but by such gi'ant or contract shall become entitled to the whole in severalty. Thus, if a horse be given to the king and a private person, the king shall have the sole property ; if a bond be made to the king and a subject, the king shall have the whole penalty ; the del)t or duty being one single chattel ; and so if two persons have the property of a horse between them, or have a joint debt owing them on bond, CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 483 America ; and even in England it has become obsolete in practice, although it is still a subsisting prerogative, which may spring upon and produce the ruin of the innocent and unwary partners. § 305. The same result (that is, a dissolution of the partnership), without any of the odious features attached to prerogative, is, under the like circumstances, fully es- tablished in the Roman and foreign law, whenever, by a change of the state or condition, any one of the part- ners is disabled from the performance of the appropriate duties of the partnership, as by the loss of his personal liberty and power of action by banishment, or by bank- ruptcy, or by insolvency, or by a judicial prohibition to act in his business, or by a confiscation of his property, or by his civil death. ^ In the Roman law a distinction was taken between the cases of great, and intermediate, and of small disabilities. The two former dissolved the partnership ; the latter did not. Pariter (says Pothier, quoting the Digest) solmtur societas capitis diminutione and one of them assigns his part to the king, or is attainted, whereby his moiety is forfeited to the crown, the king shall have the entire horse and en- tire debt. For, as it is not consistent with the dignity of the crown to be partner with a subject, so neither does the king ever lose his right in any instance ; but, Avhere they interfere, his is always preferred to that of another person. From which two principles it is a necessary consequence, that the innocent, though unfortunate, partner must lose his share in both the debt and the horse, or in any other chattel in the same circumstances.' One good effect of this doctrine, with regard to partnership, is, that it may render a man cautious as to the persons with whom he forms this relation, and that it renders it his interest to strive to preserve them in the path of loyalty and virtue. Besides ; although such are the strict rights of the crown, in the mild spirit of modern times, they are not likely ever to be enforced, either against creditors or deserving partners." This is perhaps the best apology which can be made for the doctrine ; but it is impossible to disguise either its gross injustice, or its mischievous tendency. Why should innocent per- sons be at the mercy of the crown, whether they are to be involved in positive ruin or not ? The case of the late Mr. Fauntleroy would afford a striking instance of the terrific results of such a prerogative. » See Griswoldw. Waddington, 16 Johns. 438, 491. 484- PARTNERSHIP. [cHAP. XIII. socii maxhna cmt media. Hinc, " Puhlicatione quoque distrahi societatem dixwius. Quod videtur spectare ad universorum honorum puhlicationem^ si socii honapuh- licenMr. JVam cum 171 ejus locum, alius succedat, pro mortuo hahetur." ^ 3Iinima autem, capitis diminutione non solvitur. Quocirca, " Si fiUusfamilias societatem. coiei^it, deinde ertiancijjatus a patre fuerit^ apud Julia- num qucBritur, an eadem societas du7'et, an vero alia sit, si fo7'te p)ost emancip)atio7iem in societate duratum est f Jidianus scrip)sit [Lihro 14 Digestoruin)., ea7idem socie- tatem durare ; initium enim in his contractibus inspi- ciendum. Duahus autem actio7iibus agendum esse, una advei^sus patrein, altera adversus Jilium ; cu7n patre, de eo, cujus dies a7ite emancipatione7n cessit ; 7iam ejus temporis, quo p)ost emancipatio7iem societas duravit, nihil p)r(Estare pair em. oportet; eu7n jilio autem, de utroque teinpore, id est, de tota societate. Nam et si quid (inquit), socius filii, p)ost ema'ncipatione7njilii, dolo fece7nt, ejus, non patri, sed Jilio actio danda est." ^ Si- militer 7iec ad7^ogatio7ie socii solvetur societas; no7itamen ad adrogatorem trans ihit. Hoc docet JPaulus ; " Socie- tas queonadmodum ad heredes socii no7i traiisit, ita 7iec ad adrogatorem ; ne alioquin i7iviti(S quis socius efficia- tur, cui no7i vult. Ipse autem adrogatus socius perma- net ; nam et si Jiliusfcmiilias e7nancip)cdus fuerit, perma- nehit socius." ^ Aliud in servo ; 7iam cimi p)ersonam. 71071 haheat, 7iec nisi ex persona domi?ii socius esse pos- sit, sequitur quod hujus manumissione aut cdienatione solvatur societas. Hoc docet Ulpiaiius ; " Si se7^vus ineus societatem cum Titio coierit, et alie7iatus in eadem per^nanserit, potest did, alienatio7ie servi et prior em so- cietatem finitam, et ex i7itegro cdteram inchoatain ; atque ' D. 17, 2, 60, 12 ; Poth. Pand. 17, 2, n. 60. 2 D. 17, 2, 58, 2 ; Potb. Pand. 17, 2, n. 61. => Ibid. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 485 ideo et onihi et emptoin actionem pro socio compefere. Item, tam adversiis me, qiiam adversiis emptorern, ex his causis, quce ante alienationem inciderunt, dandarii actio- nem, ; ex reliquis, adversiis emptorem solum..'' ^ Pothier asserts the same to be the doctrine of the French law,^ and it is now positively affirmed by the Civil Code of France,^ and the Code of Louisiana.'* ' Poth. Pand. 17, 2, n. 60, 61; Domat, 1, 8, 5, art. 15; D. 17, 2, 65, 22; Id. 17, 2, 58, 3. — Vinnius and Heineccius have commented on this subject in their Commentaries to the Institutes, 3, 26, 7, p. 774, ed. 1777. The comment is as follows: " Quod Paulus, dicta L. actione, 65, § Publica- tione, 12 hoc tit. unde hie locus desumptus est, dicit, Publicatione bonorum socii distrahi societatem, hoc Modestinus et Ulpianus dixerunt, societatem solvi capitis deminutione, L. 4, § 1, d. L. verum. 63, § vJt. cod. Intelligunt enim capitis deminutionem maximam et mediam, cum socius severitate sen- tentiae aut in servitutem redigitur, aut in insulam deportatur, quo casu bona damnati publieari solent, L. 1, de bon. damn. L. 8, § 1 & 2, qui testam.fac. Poterat htec species dissociationis etiam ad praecedens genus referri, ad earn videlicet, qute morte socii contingit. Quibus enim libertas aut civitas ademp- ta est, hi jure civili pro mortuis habentur ; eoque pertinet, quod dicitur in d. L. verum. 63, § ult. homines interire aut morte, aut maxima et media capitis deminutione. Sed et alia ratione ad sequens genus referri potest. Vln'x. Atqui si obaeratus bonis cedit, bona non publicantur sed vendantur ; nee is pro mortuo habetur, cujus substantia veniit, sed cujus bona ob delictum consecrata publicatave sunt. Vide L. 63, § 10, L. 58, L. 65, § 1 (fc 2, ff. pro sac. Heixecc. ^ Poth. de Soc. n. 147, 148. ^ q^^^ q;,.;! ^f France, art. 1865. * Code of Louisiana (of 1825), art. 2847. — It has been held by the Su- preme Court of Massachusetts, that the absconding of one partner is a dis- solution of the partnership, between the parties, and as to third persons, who had notice thereof. Whitman v. Leonard, 3 Pick. 177, 179. [In Ar- nold V. Brown, 24 Pick. 89, 94, it is said : " Nor will the voluntary absence of one of the partners from the State, produce a dissolution. Some of the dicta in Whitman v. Leonard, 3 Pick. 177, certainly favor the plaintiff's po- sition. But they were not necessary to the decision of the case, and if they were, must be taken in connection with the circumstances of that case. There Avere facts enough to show the note to be grossly fraudulent, without relying upon the absconding of one of the partners. The Chief Justice says, * here was an absconding of one partner, which dissolved the partnership.' The absence was longer in that case than this, and attended with many cir- cumstances to distinguish it from this. It well might be that tlieve was such an absconding as would amount to a dissolution, and yet the temporary ab- sence in this not produce the same effect. In England the absconding would 486 PARTNERSHIP. [CHAP. XIII. § 306. Again ; the marriage of a female partner will, at the common law, for the like reason, create a disso- Intion of the partnership by mere operation of law ; for, in the first place, by the marriage, all her personal prop- erty and effects are transferred to and belong to her husband in his own right, unless indeed there be some reservation or valid contract to the contrary ; ^ and in the next place, the marriage creates a positive personal incapacity on her part any further to enter into, or to bind herself by any contract.^ § 307. In the next place, as to dissolution by a vol- untary assignment by one or more of the partners of all his right, title, and interest in the partnership prop- erty. It seems now well established at the common be an act of bankruptcy, and the bankruptcy, when determined by regular adjudication, would create a dissolution. But the absconding is never relied upon, there, as a dissolution. And we do not think that the absence of one of the partners, under the circumstances disclosed in this report, amounted to a dissolution of the partnership."] ' 1 Bl. Comm. 442-444; 2 Story, Eq. Jur. § 1367 ; {§ 10-14.} "' Ibid. ; Gow on P. c. 5, § 1, p. 226, 3d ed. ; Wats, on P. c. 7, p. 384 ; 2 Bell, Comm. B. 7, c. 2, p. 634, oth ed. ; Griswold v. Waddington, 15 Johns. 57, 82. — Mr. Gow and Mr. Watson treat the point as doubtful, al- though their opinions coincide with that expressed in the text. The point seems to have been directly decided by Lord Eldon in Xerot v. Burnand, 4 Russ. 247, 260. He there said : " The next question is, when did the part- nership terminate ? It was a partnership for no definite period ; and either party therefore might, at any moment, have put an end to it by notice. Miss Nerot married IVIr. Burnand, without consulting her brother, or, at least, without his assent. If she chose so to change her situation, as to make Mr. Nerot, in point of fact, if the partnership went on, a partner with Burnand, Mr. Xerot had a right, the moment he received notice of that step, to act upon it, and say, ' Your marriage has put an end to the partnership.' No delay took place in that respect ; for the bill was filed as early as Hilary term, 1820, the marriage having taken place towards the close of the preceding year, I agree, therefore, with the Vice-Chancellor, in saying, that the partnership was dissolved on the 16th of September, 1819." See also Gow's Supplement, 1841, p. 64. {In those states in which a married woman has the same rights and control over her property as if she remained single, there seems to be no reason why her marriage should dissolve a partnership of which she is a member. See § 12, note.} CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 487 law, that if one partner does make such a voluntary as- signment of all right, title, and interest in the partner- ship property and effects, that will at once dissolve the partnership, and convert the assignee or purchaser into a tenant in common with the other partners.^ If the assignment be bona fide, and unexceptionable in other respects, this would seem to be the necessary operation of law upon such an act ; for (as we have already seen), every partnership being founded in the voluntary con- sent of all the parties thereto, and that consent being founded upon a delectus pe7'sonarimi^ no partner has any right whatsoever to introduce a mere stranger into the firm, without the consent of all the other partners ;^ and if such consent is given, then it becomes, to all intents and purposes, the substitution of a new partnership for the old one. And this is equally the doctrine of our law, and of the E-oman law, and of the modern foreign law.^ The Roman law states the rule and the reason of it in very succinct and expressive terms. Cum enim societas consensu contrahatui\ socius mihi esse no7i2)otest, quern ego sockmi esse nolui.^ ^ Marquand v. N. Y. Manuf. Co. 17 Johns. 525 ; Ketcham v. Clark, 6 Johns, l-ii ; ante, § 272 ; 3 Kent, 59 ; Rodriguez v. HefFernan, 5 Johns. Ch. 417, 428 ; NicoU v. Mumford, 4 Johns. Ch. 522, 525. [But in such case the other partners may hold possession of the property as against the assignee, for the purpose of paying the debts and winding up the business of the con- cern. Horton's Apjieal, 13 Penn. St. 67.] {A conveyance, by a partner, of his interest in all the real and personal estate of the firm is evidence tending to show a dissolution, but is not in itself a dissolution. Taft i\ Bulfum, 14 Pick. 322. Nor does a mortgage, by a partner, of his interest in the person- al property of the firm constitute a dissolution. State i'. Quick, 10 Iowa, 451. So an assignment of a partner's interest as security, it being agreed that the assignor should act in the partnership business as agent of the as^ signee does not operate as a dissolution. Buford v. Neely, 2 Dev. Eq. 481. See also Bank v. Fowle, 4 Jones, Eq. 8. } ^ Ante, § 5 ; Inst. 3, 26, § 5, 8 ; 3 Kent, 59 ; Ex parte Barrow, 2 Rose, 252-254; Murray v. Bogert, 14 Johns. 318; Kingman v. Spurr, 7 Pick. 235. {See Merrick v. Brainard, 38 Barb. 574.} 3 Ante, § 5 ; Inst. 3, 26, 8. * D. 17, 2, 19 ; Poth. Pand. 17, 2, n. 28 ; ante, § 5. 488 PARTNERSHIP. [CHAP. XIII. § 308. Indeed, there never could be any doubt, that a general assignment by one or more partners will produce this effect, when the partnership is for an indefinite period, and determinable at will ; for, in such a case, the assignment per se operates at once as a dis- solution, upon due notice thereof by the party making or receiving the assignment. The only point open for discussion seems to be, whether the same conclusion ought to be admitted, when the partnership is for a fixed or definite period, and the assignment is made within that period, in contravention of the partnership articles. And it has been held, that if the assignment is made honafide, it operates, ipso facto ^ as a dissolution of the partnership, since the purchaser is not compel- lable to become a partner, nor, on the other hand, are the other partners compellable to admit him as such.^ ^ Per Lord Denman In Heath v. Sansom, 4 B. & Ad. 172 ; Marquand v. N. Y. Manuf. Co. 17 Johns. 525, 529, 535. — On this occasion Mr. Clian- cellor Kent said : " The suit was for a settlement of partnership accounts, on the ground of its dissolution by the act of Fitch, one of the partners. He became indebted to the Xew York Manufacturing Company, in a very large amount, which he was unable to pay, and accordingly on the 1-ith of April, 1814, he assigned over to them all his share, or undivided estate and interest in the copartnership between him and the appellants. In May fol- lowing. Fitch actually stopped payment, and became insolvent. It was con- tended on the part of the Manufacturing Company, that the copartnership was dissolved by the assignment in April, or, at least, by the insolvency in May. This was denied on the part of the appellants, on the ground, that by the original articles of copartnership, it was to continue until dissolved by the death of one of the parties, or until two of them should demand a dissolution. According to the construction given to the articles by the appellants, they had a right to keep the capital of Fitch in their trade or concern, notwithstanding any assignment of his property to his creditors, and notwithstanding an actual insolvency on his part. I was of opinion that the partnership was dissolved by the assignment, and that the appellants were accountable for all the interest of Fitch in the capital and in the profits of the concern. I do not mean to say, that a voluntary assignment by Fitch, of his property to his creditors, may not be a breach of his contract or cov- enant with his cojjartners. The question, as between them, under their arti- cles of agreement, it was not necessary to discuss. But the creditors of one copartner, who take his property by assigninciit, or on execution, cannot be CHAP. XIII.] DISSOLUTION OF PARTNEKSHIP. 489 § 309. The like rule seems to have prevailed in the Roman law ; for there an assignment, by a debtor involved against their consent in the responsibilities of a copartnership. The capital stock, or interest of a partner, is certainly liable to his separate debts. His creditors are entitled to it without the risk and burden of being partners. An act of bankruptcy, says Lord Mansfield (Cowp. 448), is a dissolution of the partnership, not only by virtue of the statutes of bankruptcy, but from the necessity of the thing, since assignees cannot carry on a ti-ade. According to the doctrine on the part of the appellants, a party may lock up his capi- tal in a mercantile house by such an agreement as the one in this case, and it must remain untouched without the consent of his copartners, during his life. If the creditors take it by assignment, they must become partners in the firm, and can only touch the yearly profits, and must be liable to the yearly losses, and for all the engagements of the firm. This doctrine appears to me to be too unreasonable, and too inconvenient, to be endured." This decree was afiirmed unanimously by the Court of Errors ; and on that occasion Mr: Justice Woodworth, in delivering the opinion of the Court, said: "An assignment made by the party himself, under circumstances like the present, produces the same result ; in both cases, they give rise to a state of things altogether incompatible with the prosecution of a partnership concern, commenced, and previously conducted by the bankrupt and his former copartner. It is perfectly clear, that a new partner cannot be ad- mitted without consent. This, ex vi termbii, implies, thatr even consent would be nugatory, unless the assignee elected to become a partner ; where he does not so elect, but (as in the present case) insists on a division of the property, the demand, according to acknowledged principles, cannot right- fully be denied. That a rule of this kind will, in some cases, and probably in the present, bear hard on the partners opposed to a dissolution, is not to be doubted. But its inconveniences are more than counterbalanced, by the superior benefits arising from its application. There is another insuperable difficulty opposed to a continuance of the partnership, and that arises frorfi the character in which the respondents are placed. How can they become partners with INIarquand & Barton ? They are a corporate body, and act as trustees for the benefit of the stockholders. The bank had no power to become partners with the appellants ; it was not within their corporate privileges. It will not be pretended, that in the situation Fitch was placed, he had not a right to assign his interest, and that it passed under the assign- ment to the respondents. I conclude, therefore, that the assignment by Fitch, per se, dissolved the partnership. In the case of Ketcham v. Clark, 6 Johns. 1-44, where one of the partners had executed an assignment of all his right in the partnership property and debts, it is said, that ' This act was, of itself, a termination of the partnership.' But there being no evidence of any public notice of the dissolution, nor any special notice to the party afterwards dealing with the firm, on that ground the partners were held liable. As between themselves, the pouit appeared to be conceded." See also 3 Kent, 59. 490 PARTNERSHIP. [CHAP. XIII. oppressed with debt, of all his title and interest in the property of the partnership, for the benefit of his creditors, was deemed a dissolution of the partnership. IteTTi (say the Institutes), si quis ex sociis, mole dehiti prcegravakis, honis suis cesserit, et ideo propter puMica aut prinata dehita substantia ejus veneat, solvitur socie- tas. Sed, hoc casu^ si adhuc coiisentiant hi societatem, nova videiur incipere societas} § 310. The authority of one partner voluntarily to assign a part of the partnership property in payment of, or as security for, the debts thereof, has been already considered, as also has been the authority of one partner to assign the entire partnership property for the payment of the debts due to all creditors of the partnership.^ No one can doubt, that the former is perfectly valid and obligatory ; and that thereby the property is severed from, and ceases to belong to, the partnership. If the latter be (as has been strenuously contended) also valid, but of which nevertheless serious doubts may be entertained, especially where the part- nership is for a term of years, as yet unexpired, then it must be admitted, that it will amount, by operation of law, to a dissolution of the partnership ; for the case then falls within the scope of the doctrine already stated, in cases where the entire thing, constituting the foundation and object of the partnership, is ex- tinct.^ § 311. The next question is as to the operation of an involuntary assignment, or an assignment in invitum, ^ Inst. 3, 26, 8; Vinn. Comm. ad Id., and ante, § 292, 293; Domat, 1, 8, 5, art. 12. ^ Ante, § 101, and note; Tapley v. Butterfield, 1 Met. 515. ^ Ante, § 101, and note, and § 280, 281; Havens v. Hussey, 5 Paige, 30, 31; Hitchcock v. St. John, 1 Hoffm. 511; Anderson v. Tompkins, 1 Brock. 456 ; Pearpoint v. Graham, 4 Wash. C. C. 232 ; Tapley v. Butterfield, 1 Met. 515 ; [Dana v. Lull, 17 Vt. 390.] CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 491 under judicial process and proceedings. We have already seen,^ that a separate creditor of any one partner may seize and sell the right, title, and interest of that partner in the partnership goods and effects, under a separate judgment and execution against him. The execution may be levied upon the whole of the tangible goods and effects of the partnership, or upon a part thereof ; and in each case it is good to the ex- tent of the judgment debtor's right, title, and interest therein, as it shall ultimately appear upon the final adjustment and settlement of the partnership concerns.^ But, as soon as the levy and sale are completed under the execution, the purchaser of the goods or effects be- comes, by mere operation of law, a tenant in common thereof with the other partners ; if the levy and sale be of a part only, then of that part ; if of the whole, then of the entirety.^ But in each case the legal result is the same, that is to say, it amounts to a dissolution of the partnership to the extent of the right, title, and interest, levied upon and sold under the execution. If the levy is of a part of the partnership property, there is a severance ijro tanto, of the partnership interest therein ; if of the whole, then there is a severance of the entirety.^ 1 Ante, § 261-263. « Ibid. 3 Ante, § 261-263; 1 Story, Eq. Jur. § 677, 678; Moody v. Payne, 2 Johns. Ch. 548; Dutton v. Morrison, 17 Ves. 193, 206; Allen v. Wells, 22 Pick. 450. •» Gow on P. c. 3, § 1, p. 229, 3d ed. ; 3 Kent, 59; Fox v. Hanbury, Cowp. 445 ; Skip v. Harwood, 2 Swans. 586, note ; Moody v. Payne, 2 Johns. Ch. 548 ; [Renton v. Chaplain, 1 Stock. 62 ; ] Nicoll v. Mumford, 4 Johns. Ch. 522; Rodriguez v. HefTernan, 5 Johns. Ch. 417, 428; {Haber- shon V. Blurton, 1 De G. & Sm. 121 ; Aspinall v. London & N. W. Railway Co., 11 Hare, 325; See Perens v. Johnson, 3 Sm. & G. 419}; Dutton z?. Morrison, 17 Ves. 193, 206. — In this last case Lord Eldon said: " Another question remains, of far more difficulty, and of as much importance, as any that has been decided. Where a creditor takes out execution against the 492 PARTNERSHIP. [chap. XIH. § 812. The doctrine, in this view of the matter, as presented by the common law, stands upon clear and satisfactory orrounds. If the sale is valid under the ex- ecution, it must, of course, subrogate the purchaser to all the rights of the partner himself in the property. Now, if such be the legal result, the purchaser is not bound to become a partner ; nor are the other partners bound to admit him into the partnership. He must, therefore, hold a common and undivided interest with them in the property ; and this can be only by treating it as a tenancy in common, created by operation of law. effects of an individual concerned in a partnership, it seems to be a very- difficult thing to determine with certainty, how he is to take his execution. The old cases, if they are to govern, go in this simple course ; that the creditor, finding a chattel, belonging to the two, laid hold of the entirety of it, considering it as belonging to the two ; and paying himself by the applica- tion of one halt', he took no further trouble. It is obvious, that it was very ditHcult to maintain this as an equitable proceeding, if a due proceeding at law ; that a creditor of one partner should, without any attention to the rights of the partners themselves, take one half of a chattel belonging to them; as if it was perfectly clear that the interest of each was an equal moiety. On the other hand, it may be represented, that the world cannot know what is the distinct interest of each ; and therefore it is better, that the apparent interest of each should be considered as his actual interest. But Courts of Equity have long held otherwise ; and long before the case of Fox v. Hanbury, I understand this Court to have said that was not equitable ; and to have held, as is the constant course at present, that upon an execution against one partner, or the quasi execution in bankruptcy, no more of the property, which the individual has, should be carried into the partnership, than that quantum of interest which he could extract out of the concerns of the partnership, after all the accounts of the partnership were taken, and the effects of that partnership were reduced into a dry mass of property, upon which no person except the partners themselves had any claim. In the case supposed by Lord Mansfield, a bill filed, where there was an execu- tion at law, a Court of Equity has no difficulty in managing it ; having the means of taking the complicated accounts of the partnership, and reducing the concern into that state, in which the property would be devisable as clear surplus. But the Court of King's Bench has repeatedly held, with consider- able doubt of late how the object is to be accomplished, that a creditor taking execution can take only the interest his debtor had in the property." {An attachment on mesne process does not dissolve a partnership. Arnold v. Brown, 24 Pick. 89.} CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 493 "Whether it might not have been better, as an original question, to have held at the common law, that no sep- arate creditor should be entitled to execute his judg- ment against the partnership property, leaving the lat- ter exclusively liable to the joint creditors, it is too late to inquire. Certain it is, that the doctrine has very many practical difficulties and mischiefs attending it, independent of the apparent wrong and injury which may be done to the other partners by a sudden dissolu- tion of the partnership at the instance of a third per- son, in violation of the obligations of the partners' own contract, that it shall endure for a limited period. It is a strange anomaly in jurisprudence, that third persons should be entitled to dissolve the solemn bona fide con- tracts of partners at their own caprice and pleasure, however ruinous may be the effects to the innocent partners ; for the partnership may be thus dissolved in the midst of the progress of the most successful adven- ture, and thus irreparable losses may ensue therefrom. However, this is not a peculiar feature of the common law ; for it is to be found equally recognized in the Roman law, at least where all the effects of the partner are sold to his creditors ; for it is said : Item, bonis a creditoribus venditis unius socii, distrain societatem Laheo ait} ' D. 17, 2, 65, 1 ; Poth. Pand. 17, 2, n. 62; Domat, 1, 8, 5, art. 12 ; 2 Kent, 59. — No case of this sort is mentioned by Pothier. He speaks only of the dissolution of the partnership by the failure or bankruptcy of one part- ner ; and (as it should seem) only of a sale of his effects consequent thereon. Poth. de Soc. n. 148. See also Domat, 1, 3, 5, art. 12, note. The Code Civil of France, art. 1865, and the Code of Louisiana (of 1825), art. 2847, speak only of a dissolution by failure or bankruptcy. See also 5 Duver- gier, Droit Civil Franc. § 443-445. It seems doubtful (to say the least), whether the Roman law contemplated any sale of the effects of one partner to be a dissolution of the partnership, except where the entirety was ordered to be sold by judicial process at the instance of his creditors, or by a cessio bonorum of all his effects for the benefit of his creditors. See 2 La Croix, 491 PARTNERSHIP. [CHAP. XIII. S 313. Passins: from this to the next case, which stands upon a close analogy, that of a dissolution of the partnership by the bankruptcy or insolvency of one or more of the partners, it may be remarked, that this nat- urally, and, indeed, upon just reasoning, necessarily produces this effect ; for the bankrupt partner is there- by disabled to perform his portion of the partnership contract, since all his property is, by operation of law, immediately upon the declaration of his bankruptcy or insolvency, devested out of him ; and it passes by as- signment to the persons who are duly designated as the assignees thereof, to dispose of the same, and to distrib- ute the proceeds among his creditors. The assignees are not, on the one hand, compellable to become part- ners, nor, on the other hand, are the other partners com- pellable to admit them into the partnership, for the reasons already suggested under the preceding head. But a more important, and an absolutely conclusive, ground is, that the further continuation of the partner- ship is utterly incompatible with the whole policy and objects of the bankrupt and insolvent systems. These systems contemplate an immediate sale and distribution of the assets among the creditors ; and the assignees have no authority whatever to enter into any further engagements in any trade or business on account of the creditors, or at their risk.^ Hence, the common law, the Roman law, and the modern foreign law all concur in the same general result, that bankruptcy or insol- La Clef des Lois Romaines, tit. Soc. p. 585. See also Mr. Chancellor Kent's observations in Griswold v. Waddington, 16 Johns. 491. 1 Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Coll. on P. B. 1, c. 2, § 2, p. 69-71 ; Id. B. 4, c. 1, p. 578, 579, 2d ed. ; Fox v. Hanbury, Cowp. 445; Ex parte Smith, 5 Ves. 295; Wilson v. Greenwood, 1 Swans. 471,482,483; Crawshay v. Collins, 15 Ves. 218, 223; Marquand v. N. Y. Manuf. Co. 17 Johns. 525; Griswold v. Waddington, 15 Johns. 57, 82; s. C. 16 Johns. 438, 4'Jl ; 3 Kent, 38, 39. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 495 vency is, of itself/ by mere operation of law, a complete dissolution of the partnership.^ A fortiori, the like doctrine applies, where all the partners become bank- rupt ; for then the whole property is devested out of all of them. § 314. Another question usually arises under this head ; and that is, from what time is the partnership dissolved by the bankruptcy or insolvency of one or more of the partners 1 Is it from the act of bank- ruptcy or insolvency ? Or from the judicial or other declaration of that fact, under the commission "? Or from the time of the assignment of the property to the assignees "? The rule now established, at least in the policy of the British system of bankruptcy, is, that the dissolution takes effect, immediately upon the declara- tion of the bankruptcy under the commission, by rela- tion back to the time, when the act of bankruptcy was committed ; so that from that period the bankrupt is deemed devested of all his property and effects ; and, by operation of law, as soon as assignees are appointed, it is vested in them by relation from the same period.^ ^ [In Massachusetts, the mere insolvency of one or both partners, mean- ing thereby their inability to pay their debts, will not, pei^ se, and without any assignment or legal proceedings, operate as a dissolution of the part- nership, although it might furnish sufficient ground for declaring a dis- solution. Arnold v. Brown, 24 Pick. 89, 93.] {So Siegel f. Chidsey, 28 Penn. St. 279.} '^ D. 17, 2, Go, 1 ; Poth. Pand. 17, 2, n. 62 ; Poth. de Soc. n. 148 ; Civil Code of France, art. 1865; 5 Duvergier, Droit Civil Franc. § 443; Code of Louisiana (1825), art. 2847; 2 Mor. & Carlt. Partidas, p. 773, 1. 10; 2 Bell, Coram. B. 7, c. 2, p. 643, 5th ed. ; Vinn. ad lust. 3, 26, 8, Coram. ; ante, § 309. 3 3 Kent, 58, 59, 4th ed. ; Wats, on P. c. 5, p. 302-312, 2d ed.; Gow on P. c. 5, § 3, p. 298, 299, 3d ed. ; Coll. on P. B. 4, c. 1, p. 583-590, 2d ed. ; Fox V. Hanbury, Cowp. 445; Hague v. Rolleston, 4 Burr. 2174; Ex i)arte Smith, 5 Ves. 295 ; Harvey v. Crickett, 5 M. & S. 336 ; Dutton v. Morrison, 17 Ves. 193, 203, 204; Barker v. Goodair, 11 Ves. 78,83; Thoraason v. Frere, 10 East, 418. {^y the United States Bankrupt Law, Act of March 496 PARTNERSHIP. [cHAP. XIII. How far, and to what intents and purposes, it suspends the rights and authorities of the other solvent partners over the partnership, will come under examination, when we come to consider what are the consequences of a dissolution. § 315. In the next place, as to dissolution by a pub- lic war between the countries, of which the partners are respectively subjects. Although this point does not seem to have been discussed in our courts of jus- tice until a comparatively recent period, yet it would seem to be a necessary result of principles of public law, well established, and clearly defined. By a decla- ration of war the respective subjects of each country become positive enemies of each other. They can carry on no commercial or other intercourse with each other ; they can make no valid contracts with each other ; they can institute no suits in the courts of either country ; they can, properly speaking, hold no commu- nication of an amicable nature wdth each other ; and their property is mutually liable to capture and confis- cation by the subjects of either country.^ Now it is obvious from these considerations, that the whole ob- jects and ends of the partnership, the application of the joint funds, skill, labor, and enterprise of all the partners in the common business thereof, can no longer be attained. The conclusion, therefore, would seem to be absolutely irresistible, that this mutual supervening 2, 1867, § 14, the assignment relates back to the commencement of the pro- ceedings in bankruptcy, not to the act of bankruptcy. } ' Potts V. Bell, 8 T. R. 548, 561 ; The Rapid, 8 Cranch, 155, 161 ; The Julia, 8 Cranch, 181, 194; The Hoop, 1 Rob. 196; Griswold v. Wadding- ton, 15 Johns. 57; s. c. 16 Johns. 438. — In this last case all the existing authorities upon the whole subject, foreign as well as domestic, were brought together, and critically examined with very great learning and ability. See also 2 Wheat. App. p. 27-37 ; 3 Kent, 62 ; Scholcfield v. Eichelberger, 7 Pet. 686. {See Clemontson v. Blessig, note, 11 Exoh. 135, § 9, ante.} CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 497 incapacity must, upon the very principles applied to all analogous cases, amount to a positive dissolution of the partnership. § 316. The law of nations does not even stop at the points already stated ; but it proceeds further. The question of enemy, or not, depends not upon the natu- ral allegiance of the partners, but upon their domicile. If, therefore, the partnership is established, and, as it were, domiciled in a neutral country, and all the part- ners reside there, it is treated as a neutral establish- ment, and is entitled to protection accordingly.^ On the other hand, if any one or more of the partners, in such a case, is domiciled in an enemy country, he is treated personally as an enemy, and his share of the partnership property is liable -to capture and condem- nation accordingly, notwithstanding the partnership establishment is in the neutral country.^ What, then, is the case, where the partnership is established, and, as it were, domiciled in an enemy country ? The rule, then, fully recognized as applicable to the case, is, that the partnership is to be treated throughout as a hostile establishment, and the whole partnership property is liable to capture and condemnation, as enemies' prop- erty, notwithstanding one or more of the partners may be domiciled in a neutral country. A fortiori^ if some of the partners are domiciled in one of the hostile countries, and the rest in the other, it is clear that the partnership is hostile, and the partners are also person- ally enemies.^ The just inference from all these con- siderations seems, therefore, to be, that, in all these 1 The Venus, 8 Cranch, 253 ; The Indian Chief, 3 Rob. 22 ; M'Connell V. Hector, 3 B. & P. 113; Griswold v. Waddington, 15 Johns. 57 ; s. c. 16 Johns. 438. ■ The Franklin, 6 Rob. 127. * The Vigilantia, 1 Rob. 1 ; Simpson's Case, cited in the Franklin, 6 Rob. 127 ; The Friendschaft, -i Wheat. 105 ; The San Jose Indiano, 2 Gall. 268. 32 498 PARTNERSHIP. [CHAP. Xllf. cases, there is an utter incompatibility, created by operation of law, between the partners, as to their respective rights, duties, and obligations, both public and private, and, therefore, that a dissolution must necessarily result therefrom, independent of the will or acts of the parties.^ ^ This -whole subject came successively before the Supreme Court of New York, and the Coui't of Errors of that State, in the case of Griswold v. Waddington, 15 Johns. 57 ; and s. c. 16 Johns. 438. The masterly judg- ments of Mr. Chief Justice Spencer, and Mr. Chancellor Kent, delivered on this occasion, exhaust the whole learning and reasoning upon it ; and are, indeed, judicial discussions of rare and exquisite ability, research, force, accuracy, and comprehensiveness. — The ultimate decision was, that the partnership was dissolved, by the occurrence of war between the countries. The following extract, from the opinion of Mr. Chief Justice Spencer, presents a clear though brief review of the principle. He said: "Upon the fullest reflection which I have been able to give to the subject, my opinion is, that the declaration of war between the United States and Great Britain produced a suspension during the war, or, ipso facto, a dis- solution of the partnership previously existing between the defendants, so that the one is not responsible upon the contract, express or implied, of the other. It will be perceived, that this proposition assumes the fact, that the partnership between the defendants had not become dissolved by the efflux of time, or the acts of either of the partners, although this point is, in itself, very questionable. The better conclusion from the evidence is, that the co- partnership expired by its own limitation during the war ; and the existence of the war would, at all events, dispense with the public notice, which is, in general, necessary to the valid dissolution of a partnership. The case dis- closes, that the firm of Henry Waddington »& Co. consisted of Henry and Joshua Waddington ; that Henry is a British subject, resident, before and during the war, in London, conducting the partnership concerns there, whilst the defendant was resident here. The negotiations, which gave rise to the present suit, took place in England, and exclusively with Henry Waddington, during the late war between this country and Great Britain. It was admitted on the argument, and so the fact undoubtedly is, that the proposition I have advanced, is neither supported nor denied by any judicial decisions or elementary writer of the common law ; but, if I mistake not, it is supported by the strongest reasons, and by necessary analogy with adjudged cases. The first inquiry is, what are the objects and ends of part- nerships? They are entered into Avith a view, that with the joint funds, skill, and labor, of the several partners, the interests of the concern may be advanced and promoted. There may be, and frequently are, different inducements influencing each partner ; one may have more capital and credit ; another may have more skill, activity, and experience. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 499 § 317. In the next and last place, as to a dissolution by the death of one of the partners. There is no The one may choose to be a dormant and inert partner, furnishing an equivalent for the services and skill of the other, and leaving the ])usiness entirely to his control and management. But unexplained as this partner- ship is, we must understand it to be an union with a view to the employ- ment of the joint capital, labor, and skill of both the partners, for the purposes of internal and external commerce between this country and Great Britain. That the object of the partnership embraced both these objects of internal and external trade, would seem to be unquestionable, from the local position of the partners. That the death, insanity, or bank- ruptcy of one of the partners operates as a dissolution, was not questioned in the argument ; and a respectable elementary ^vi'iter, Mr. Watson, is of opinion, that the marriage of a feme sole partner would produce the same consequence. The cases of Pearce v. Chamberlain, 2 Ves. Sr. 33, and Sayer v. Bennet, Wats, on P. 382, and several other cases cited by him, all go to establish the general principle, that death, insanity, and bankruptcy, work a dissolution of partnerships ; and they proceed on the principle, that the other partners are not bound to admit the representatives of a deceased or insane partner into the concern, the confidence having been originally placed in the personal skill and assistance of those no longer able to afford it. Let these principles be applied to the present case, and it would seem that the same result is inevitable. In what situation did the Avar put the defendants, as regarded each other? Most undeniably, the two nations, and all their citizens, or subjects, became enemies of each other, and the consequence of this hostility was, that all intercourse and communication between them became unlawful. This is not only the acknowledged principle of the law of nations, but is also a part of the municipal jurisprudence of every country. I need not cite cases in support of a position, which has so repeatedly been recognized in the English Courts, and in our o^vn, possessing, as well admiralty, as common law jurisdiction. Another consequence of the war was, that the shipments made by each of the partners would be liable to capture and condemna- tion by the cruisers of the government of the other. And another very serious evil attended them ; no debts, contracted in the partnership name, could be recovered in the courts of either nation ; they not having, in the language of the law, a persona standi itijudicio, whilst they were amenable to suits in the Courts of both nations. The Hoop, 1 Rob. 196, 201. It is true, the same disability to sue for debts due the firm, antecedent to the war, would exist. This, however, does not weaken the objection ; it remains still an important item, in considering whether a partnership exists, when the new debts created are to be liable to the same disability. It appears, that Joshua Waddington is a citizen of the United States ; and it has been already mentioned, that Henry Waddington is a British born subject. They owed different allegiances ; and it became part of their duty to lend 500 PARTNERSHIP. [CHAP. XIII. doubt, thati by the principles of the common law, the death of any one partner will operate as a dissolution of the partnership, however numerous the association may be, not only as to the deceased partner, but as between all the survivors.^ The reason is, that upon all their aid in a vigorous prosecution of the war, the one to the United States, and the other to Great Britain. And it appears to me, that it would not comport with policy or morality, that the law should imperiously continue a connection, when, by its very continuance, it would afibrd such strong inducements to a violation of that fidelity which each owes to his government. Again ; all communication and intercourse being ren- dered unlawful, and it being a well-established principle, that either part- ner may, by his own act, dissolve a partnership, unless restrained to con- tinue it for a definite period by compact, in what manner could such intentions be manifested during the war ? It might, indeed, be made known to the public of one of the countries, but it could not be notified to the public of the hostile country ; and thus, unless the war produced a dissolution, he would be responsible, notwithstanding he had the desire to dissolve the con- nection, merely from inability to make known that determination ; an ina- bility produced by events utterly uncontrollable. When the objects and intentions of an union of two or more individuals to prosecute commercial business are considered; when it is seen, that an event has taken place, without their fault, and beyond their control, which renders their respect- ive nations, and, along with them, the defendants themselves, enemies of each other ; that all communication and intercourse have become unlawful ; that they can no longer co-operate in the conduct of their common busi- ness, by affording each other advice, and are kept hoodwinked as to the conduct of each other ; that the trade itself in which they were engaged, has ceased to exist ; that if they enter into any contracts, they are incapa- ble of enforcing their performance by an appeal to the courts ; that their allegiance leads them to support opposite and conflicting interests ; I am compelled to say, that the law cannot be so unjust, as to pronounce that a partnership so circumstanced, when all its objects and ends are pros- trated, shall continue ; and, with the clearest conviction upon my mind, and in analogy to the cases to which reference has been made, I have come to the conclusion that the partnership between the defendants was, at least, suspended, and I incline to the opinion that it was ipso facto dissolved by the war, and consequently, that the defendant, J. W., is not liable to this ac- tion." Mr. Chancellor Kent's opinion is far more elaborate, and sifts and examines all the authorities, as well as the reasoning in support of them. It is difficult to abridge it without diminishing its cogency. He holds the war to be a positive dissolution. 1 Coll. on P. B. 1, c. 2, § 2, p. 72, 73, 2d ed. ; Wats, on P. c. 6, p. 358- 360, 2d ed. ; Gow on P. c. 5, § 1, p. 219, 220, 3d ed. ; Crawshay r. Maule, 1 CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 501 the theory of this branch of the law, the personal qualities, skill, diligence, and superintendence of each one of the partners, are justly presumed to enter into and to constitute a material consideration with all the other partners for engaging in the partnership. In short, it is a mutual and reciprocal engagement of each partner with all the others, that the partnership shall be carried on with the joint aid and co-operation of all ; and, therefore, the survivors ought not to be held bound to continue the connection without a new consent, when the abilities, skill, and character of the deceased partner either were, or at least might have been, a strong inducement to the original formation of the partnership.^ § 318. This is precisely the reason given in the Roman law for the promulgation and support of the like doctrine, not only as working a dissolution as to the deceased partner, but as between the survivors. Morte unius \socii\ societas dissolvitur, etsi consensu omnium cdita sit, plures vero siqjersint ; nisi in coeunda societate aliter convenerit.^ And again in the Institutes it is said : Solvifur adliuc societas etiam morte socii ; qtiia qui societatem contrahit, certain personam sihi eligit. Sed et si consensu plurium societas contracta Swans. 495, 509 ; Gillespie v. Hamilton, 3 Madd. 251 ; Vulliamy v. Noble, 3 Mer. 593, 614 ; Scholefield v. Eichelberger, 7 Pet. 586. {But if by the arti- cles of an unincorporated trading association, it appears that it was designed to consist of many members, who might from time to time cease to be inter- ested in the concern by voluntary withdrawal or death, and that the same business should be continued by those who should remain, and by such as might be added to their number, under the terms of the articles, the death of one of them does not relieve others from liability to contribute for debts subsequently contracted, without their consent or knowledge. Tyrrell v. Washburn, 6 All. 466. } ' 3 Kent, 55 ; Wats, on P. c. 6, p. 358, 359, 2d ed. ; Coll. on P. B. 1, c. 2, § 2, p. 72, 73, 2d ed. ; Pearce r. Chamberlain, 2 Ves. Sr. 33 ; Gow on P. c. 5, § 1, p. 219, 220, 3d ed. ; Scholefield v. Eichelberger, 7 Pet. 586, 594. '■ D. 17, 2, 65, 9; Poth. de Soc. n. 66. 502 PARTNERSHIP. [CHAP. XIII. sit, rnorteimius socii solvitur, etsi plures super siiit ; nisi in coeimda societate aliter convenerit} So strictly, indeed, was this doctrine held, that (as we have seen) even an express agreement, that the partnership shonld be prolonged beyond the life of a partner, and his heir or other representative should be admitted into the same, was held in the Roman law to be invalid, as defeating an essential ingredient in partnership, the right of delectus personce.^ The Digest says : Adeo morte socii solvitu?^ socieias, ut nee ah initio p)acisci possimus, ut heres etiam succedat societati.^ Pothier has still more fully expounded the reasons of the doc- trine, although he admits at the same time, that, so far as it respects the succession of the heir, or personal representative, it is not entkely decisive, and has more of subtilty than of solidity in it."* There is, indeed, an 1 Inst. 3, 26, 5. ^ Ante, § ; Crawshay v. Maule, 1 Swans. 495, 509, the Reporter's note (a) ; Gow on P. c. 5, § 1, p. 220, 3d ed. ; Domat, 1, 8, 5, art. 12. 3 D. 17, 2, 59; Poth. Pand. 17, 2, n. 56. •* Poth. de Soc. n. 144-146. — Vinnius also fully explains the doctrine: "Etiam morte unius socii societas solvitur. Et hoc genus distrahendse obligationis societatis proprium est, recedens ab illo communi, quo placet, heredem in eandem obligationem et idem jus, quod defuncti fuit, succedere. Sed admissum in societate ex natura hujus contractus ; atque eadem ratione, qua in mandate, quoque placet morte mandatarii solvi mandatum ; nimi- rum quia in societate non tantum rei familiaris, ut fere in aliis contractibus, vervmi insuper etiam fidei et industriaj, quaj ad heredes non transeunt, con- templatio versatur. Nam, ut in textu dicitur, qui societatem contrahit, certain personam sihi eligit, cujus scilicet fidem, industriam, res, et facultates sequatur. Usque adeo autem, morte socii dirimi societatem placet, ut nee ab initio pacisci possimus, ut heres in societatem succedat; quasi et tale pactum naturae societatis repugnet, ut quis invitus socius efficiatur, cum non vult. Exceptaj tamen sunt societates A'cctigalium, in quibus hujusmodi conventiones ob publicam utilitatem admissse ; manetque hoc casu societas etiam post mortem, nisi foi'te is mortuus sit, cujus contemplatione potis- simum societas coita, aut sine quo ea administrari non possit." Vinn. ad In.st. 3, 26, 5, p. 699, ed. 1726. Pothier says (n. 146) : " La raison est, que les qualit^s personnelles de chacun des associes entrent en consideration dans Ic contrat de societe. Je ne dois done pas etre oblige, lorsque Tun CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 503 exception to this doctrine in the Roman law, founded upon public policy, and that is, that the death of one partner does not generally dissolve the partnership, in cases where the partnership is by the farmers of the public revenue.^ In societate vectigalkmi nihilominus tnanet societas, et post mortem aliciijus ; seel ita de7num, sijKirs defuncti ad i^ersonam heredis ejus adscri2:)ta sit, ut heredi cjuocfiie eonferri oijorteat ; quod ipsum ex causa cestimandum est.^ But then, again, to this there is, or may be, an exception. Quid enim, si is mortuus sit, propter cujus oj^eram maxime societas coita sit? Aut sine quo societas administrari non p)ossit ?^ § 319. And, here, the question may arise as to the time from which the dissolution, by the death of any partner, takes effect ; whether it be from the occur- rence of that event, or from the period when the other partners have notice thereof. At the common law, the doctrine seems clearly established, that it takes effect in respect, as well to the other partners, as to third persons, from the time of the death, without any consideration, whether they have notice thereof, or not.^ The Roman law, on the other hand, pursued a de mes associes est mort, a demeurer en societe avec les autres, parce qu'il se peut faire, que ce ne soit que par la consideration des qualites personnelles de celui, qui est mort, que j'ai voulu contracter la societe. Ce principe souffre exception a Tegard des societes pour la ferme des revenus publics, lesquelles subsistent entre les survivans, lorsque Pun des associes vient a mourir ; lioc ita in privatis socielatibus in societate vectigalium manet societas et post moHem alicvjus .'''' » D. 17, 2, 59 ; Poth. Pand. 17, 2, n. 57 ; Poth. de See. n. 146. == D. 17, 2, 59, and 17, 2, 63, 8; Poth. Pand. 17, 2, n. 57. 3 Ibid. ; Vinn. ad Inst. 3, 26, 5, p. 699, ed. 1726. * Vulliamy v. Noble, 3 Mer. 593, 614; Gow on P. c. 5, § 1, p. 121, 3d ed. ; Coll. on P. B. 1, c. 2, § 2, p. 71, 74; Id. B. 3, c. 3, § 4, p. 419, 2d ed. ; 3 Kent, 56 ; 2 Bell, Comm. B. 7, c. 2, p. 639, 5tli ed. ; {§ 336, 343 ; Marlett v. Jackman, 3 All. 287. — In this case Bigelow, C. J., says : " It is certainly somewhat remarkable that no case can be found either in this country or in England, in which the (jucstion has arisen and been adjudi- 504 PARTNERSHIP. [cHAP. XTII. different course ; and as between the partners them- selves adopted the same rule, which it applied to cases cated, whether, in case a copartnership is dissolved by death, the surviving partners are bound to give notice of such dissolution, in order to avoid a liability occasioned by the subsequent misuse of the copartnership name by one of the firm. The adjudged cases have gone no further than to hold that neither the estate of the deceased partner, nor his heirs or personal representatives, can be held on a contract entered into in the name of the firm subsequently to his death, although no notice of the dissolution of the firm has been given. VuUiamy v. Noble, 3 Mer. 593, 614 ; Webster i\ Webster, 3 Swans. 490, and note; Caldwell v. Stileman, 1 Rawle, 212; Washburn v. Goodman, 17 Pick. 519, 526. Two text writers, however, of great learning and authority, have laid down the rule, that, where a copartnership is dis- solved by the death of one of the copartnei's, no notice of the dissolution is necessary, and that the surviving members are not boundby any new con- tract entered into by one of the firm in the copartnership name after such dissolution, although it is made with a person who had previously dealt with the firm, and had no notice or knowledge that it was terminated by the death of one of the members. 3 Kent, 63, 67; Story on P. § 319, 336, 339. The same doctrine is stated by the American editor of Coll. on P. § 120, 538, 3d Am. ed. On what principle, then, can it be maintained that the law fastens on persons an obligation to answer for contracts entered into in the name of a principal who has ceased to exist, by one whose authority to act is absolutely tei-minated? The only answer that can be made to this question by those who seek to sustain the obligation of such contracts on the surviving members of the firm is, that a duty is devolved on them to give notice of its dissolution by the death of one of their associates, and that an omission to give such notice renders them liable in the same manner as if the copartnership had not ceased to exist. This is doubtless the rule in cases where the dissolution is effected by the voluntary act of the parties, or results from any state of facts not public or notorious in their nature, and which are more peculiarly within the knowledge of the members of the firm. But it rests on the principle, that the copartnei'S are guilty of negli- gence in leaving the world in ignorance of such facts, which third persons cannot be supposed to have the means of ascertaining, and allowing them to infer that the copartnership continues, and to put faith and confidence in the name of the firm in consequence of such belief. 3 Kent, 66 ; Story on P. § 160. In determining on which of two parties a burden or a loss is to rest, the law always seeks to ascertain whether either has been guilty of any neglect or omission, which has misled the confidence or operated to deceive the other, and requires that the responsibility shall be placed on the one who has failed to do that which was necessary in the exercise of due diligence or fair dealing. But this salutary principle is not applicable to the case of a dissolution of a copartnership by the death of one of its mem- CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 505 of agency or mandate ; that is, the partnership is not dissolved by the death of any partner, until the other bers. The cause of such a termination of the copartnership is not the voluntary act of the members. It does not result from any private trans- action between them, nor from any occurrence or fact peculiarly within the knowledge of the surviving members of the firm. On the contrary, the death of a copartner may often occur under circumstances in which the knowledge of the event may not come to his associates for a long period of time. He may have been lost at sea, or have died in a distant land. In such a case, if the copartnership is held to continue as to the surviving copartners until notice of the death is given by them, it is obvious that they might be held liable on contracts entered into by one of their number long after the copartnership was dissolved among themselves by operation of law : after the estate and effects and personal credit of the deceased copartner had been withdrawn, and the power and authority of any of the firm to bind his associates had been revoked. And this, too, without any neglect or omission which could be imputed to them, and when they were in the position of innocent parties, who had done no act to mislead or deceive others, and had not ever made the contract on which they are to be held liable. " To parties thus situated, the more just and reasonable rule would seem to be applicable, that where two parties stand toward each other in cequali jure, and neither has been guilty of any negligence or want of good faith, their respective rights must be settled by the application of the strict rule of law, without reference to any supposed equities arising from the occur- rence of an event, which neither party anticipated or could prevent. Cer- tain it is, that the reason of the rule which requires, in cases of the dissolution of a firm caused by the voluntary act of the jiarties, or by circumstances which would necessarily come within the knowledge of the copartners, but might be unknown to third persons, that notice of it should be given, in order to relieve the members from future responsibility, does not apply where the copartnership is terminated by death. Nor can it make any difference as to this liability of the survivors, that they knew of the death of their copartner, and omitted to give notice of it to the person with whom the new contract was made. As the fact of death was not in its nature private or confined within the knowledge of the members of the fimn, the presumption is, that third persons also had notice of it. Therefore the liability of survivors upon a new contract, not entered into by themselves, but by one of their associates without their knowledge or assent in the name of the firm, cannot be made to depend on the question whether they had previous notice of the death. They ought not to be held liable for omitting to give notice of that which others ai'C supposed to know. And although the member of the firm who actually enters into a contract maj^ be responsible, as upon a contract made by himself individually, or on tlie ground that by making it in the name of the firm after its dissolution, he by implication represented a fact 506 PARTNERSHIP. [cHAP. XIII. partners have due notice thereof. Quod si, integris omnibus manentibus, alter decesserit, deinde tunc sequcdur res, de qua societatem co'ierunt, tunc eadem distinctione utemur, qua in mandato ; ut, si quidem ignota fuerit mors alterms, vcdeat societas ; si nota, non valeat} This also seems the doctrine of the French law, as laid down by Pothier.^ to be true which he knew to be false, or which he did not know to be true, and thereby caused loss or injury to an innocent third party, there is no good reason for holding the other copartners liable, who have remained passive, and done no act by which third parties have been deceived or misled, or induced to change their position, or to part with their prop- erty. ' ' The rule of the civil law which was referred to by the counsel for the plaintiff, is essentially different from that of the common law. The effect of the death of a principal under the civil law is not to revoke the authority of the agent. He can bind tlie estate of his deceased principal until notice of the death is siven. FoUowinjj out this analogv in cases of the death of a copartner, the rule of the civil law is, that the heirs of the deceased co- partner are liable on contracts made in the name of the firm by the sui-viving copartners, if they had no knowledge of the death of their associate, or if the persons with whom they dealt were ignorant of the dissolution. Poth. de Soc. § 156, 157. It is not necessary in the present case to deter- mine whether a surviving copartner, who enters into a contract in the name of the firm after its dissolution by death, can be held liable in any form to the person who in good faith, and in ignorance of the fact that the copart- nership is at an end, has acted and dealt on the credit of the firm. That is not the question which was raised at the trial. But we do decide, for the reasons we have given, that a surviving copartner cannot be held responsible on contracts made without his assent or knowledge by another copartner after the firm has been dissolved by the death of one of its members, al- though no notice of its dissolution has been given to the person with whom the contract was made." But see Bank of N. Y. v. Vanderhorst, 32 N. Y. 553.} ' D. 17, 2, 65, 10; Poth. Pand. 17, 2, n. 58; Story on Bailm. § 203- 205 ; Story on Ag. § 488-500; Domat, 1, 8, 6, art. 5. ^ Poth. de Soc. n. 156, 157. — It is a curious coincidence, that the Con- solato del Mare, in treating of persons who engage to build a ship together, treats death, before the building is commenced, as a dissolution of the con- tract ; and gives as one reason, not as the sole reason, that the day that any one dies, from that moment every partnership in which he is engaged is dissolved, because a dead man cannot be a partner. See Consolato del Mare, c. 4 [49] ; 2 Pardessus, Col. de Lois Mar. 51, 52. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 507 § 319 a. But, although, as we have seen, a dissolution of the partnership takes place by law upon the death of any one of the partners, this proposition must be understood with the limitation, that, by the articles of copartnership or other agreement between the part- ners, it is not otherwise stipulated by the parties. For it is entirely competent for the parties to vary this gen- eral result of law by an express agreement ; and if such an agreement exists, it will depend upon the par- ticular terms thereof, to what extent the estate of a deceased partner may be liable for debts contracted on behalf of the partnership after his death, whether his estate shall be generally liable for all the debts, or only to the extent of the property embarked and left in the partnership to be employed by the survivors.^ The like questions may sometimes arise in cases of testators, who direct the partnership to be continued after their death, if assented to by the surviving part- ners. A testator may so direct the continuance of the partnership that his whole estate shall be liable for the postmortuary debts, or only to the amount of his act- ual interest in the partnership debts at his decease ; and this sometimes becomes a question of great nicety in the construction of his words. ^ Nothing, however, but the clearest and most unambiguous language, show- ing in the most positive manner an intention on the part of the testator to render his general assets liable for debts contracted after his death, will justify a Court in extending the liability of his estate beyond the actual fund employed therein at the time of his death. And this rule obtains on account of the ex- * Burwell v. JMandeville's Ex'r, 2 How. 560, and the cases there cited. ^ Burwell v. Maiideville's Ext, 2 How. 560 ; Ex imrte Garland, 10 Ves. 110; Ex parte Richardson, 3 Madd. 138, 157; Thompson v. Andrews, 1 Myl. & K. 116 ; Pitkin v. Pitkin, 7 Conn. 307. {See § 201 «.} 508 PARTNERSHIP. [CHAP. XIII. ceeding inconvenience and difficulty which would other- wise arise in paying off legacies and distributing the surplus of the property. Thus, where A. died, while in partnership with B. ; and in his will, made during his partnership, he made sundry bequests of his per- sonal and real estate to different persons, and added, "And if my personal property should not cover the en- tire amount of legacies I have or may give, my executors will dispose of so much of my real estate as will fully pay the same ; " and in a codicil to his will, made also during the partnership, he said : "It is my will, that my interest in the copartnership subsisting between Daniel Cawood and myself, under the firm, &c., shall be con- tinued therein until the expiration of the term limited by the articles between us. The business to be contin- ued by the said Daniel Cawood, and the profit or loss to be distributed in the manner the said articles provide." But before the time limited for the partnership expired, Cawood, who carried on the business, having failed, a bill was brought against him and the executors of A. by a creditor of the firm, upon debts contracted with him by Cawood, on account of the firm after the death of A. It was held, that the general assets of the testator were not bound for the debts contracted after his death, by Cawood, on behalf of the partnership, but that the rights of any creditor in respect to such debts were exclusively restricted to the funds actually embarked by him in the trade, and to the personal responsibility of Cawood himself^ So, also, where the testator directed by his will that "all his interest and concern in the hat-manufacturing business, &c., as then conduct- ed under said firm, should be continued to operate in the same connection for the term of four years after his ' Burwell v. Mandeville's Ex'r, 2 How. 5G0. CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 509 decease ; " it was held, that the general assets of the testator were not liable to the claims of any creditors of the firm, who became such after the testator's death, and that such creditors had no lien on the estate in the hands of the devisees under the will, although they might eventually participate in the profit of the trade. ^ ' Pitkin V. Pitkin, 7 Conn. 307. See, also, Ex parte Garland, 10 Ves. 110, and Ex parte Eichardson, 3 Madd. 138. 510 PARTNERSHIP. [cHAP. XIV. CHAPTER XIV. EFFECTS AND CONSEQUENCES OF A DISSOLUTION. 1§ 320. Rights of partners on a dissolution. 321. (1.) Voluntary dissolution. 322. Dissolution terminates the powers of partners. 323. In England declarations of one partner after dissolution may bind the firm. 324. Difference of opinion in America. 324 a. Such declarations not binding in case of dissolution by death. 324 6. Pleading the Statute of Limitations after the death of a partner. 325. Powers remaining after dissolution. 326-328. Authority to pay and to collect debts. 329. Misconduct of a partner in winding up. 330. Appointment of a receiver. 331. Partner cannot act for his own benefit in winding up. 332. 333. French law. 334. Effect of dissolution on third persons. 335. French law. 336. Notice of a dissolution by operation of law unnecessary. 337. (2.) Dissolution by bankruptcy. 338. Joinder of assignees in actions by or against the partnership. 339-341. Bankrupt partner loses all his powers. Powers of the solvent partners. 342. (3.) Dissolution by death. 343. Surviving partners cannot continue the partnership. 344. But may wind it up. 345. Roman law. 346. Ownership of property in possession and of choses in action. 347. Equity will enforce a sale and settlement. 348. Accounts. 348 a. Advances only items in account. 349. Mode of taking accounts. 350. Sale of partnership property on dissolution. 351. Of taking property at a valuation. 352. Roman law. 353. 354. French law. 355. Superiority of the rule in equity. 356. (4.) Dissolution by decree.} CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 511 § 320. Having ascertained the various causes, which either positivel}', ijyso facto, produce a dissohition of the partnership, or may justify an application therefor to a Court of Equity, let us now proceed to the considera- tion of the effects and consequences of an actual dis- solution, as between the partners themselves, and also as between them and third persons. And first, as be- tween the partners themselves. Although these effects and consequences are in all cases of dissolution of partnership, however occasioned, in many respects gov- erned by precisely the same rules and principles, and affected by the same general considerations ; yet, as they are, at the same time, in particular cases, liable to be variously modified and afi"ected by peculiar circum- stances attendant upon them, it will here be proper, if not absolutely indispensable, to a full and accurate view of all the relations growing out of the subject, to ex- amine it under various heads. (1.) Dissolution by the mere voluntary stipulations or acts of the parties inter vivos. (2.) Dissolution by bankruptcy. (3.) Dissolu- tion by death. (4.) Dissolution by the decree of a Court of Equity. In each of these cases, it may be necessary to examine the effects and consequences as between the partners themselves, and also as between them and third persons. § 321. In the first place, then, as to a dissolution by the voluntary acts or stipulations of the parties inter vivos. This may arise in various ways ; as by the re- tirement of one partner from the partnership, or the admission of a new partner into the partnership ; or by the voluntary separation of all the partners, and their final relinquishment of the whole business thereof. The former is a virtual destruction of the old partner- ship, by the substitution of a new one among the part- ners remaining in, or those coming into the firm ; the 512 PARTNERSHIP. [cHAP. XIV. latter is a total destruction or extinguishment thereof. The same result will aiise (as we have seen), where the partnership is dissolved by the mere efflux of time, or by the voluntary change of the state or condition of one or more of the parties, or by an assignment of all the rights and interests of one or more of the part- ners therein.^ § 322. But in whatever manner the partnership is actually ended, there are certam efiects and conse- quences of its determination, which necessarily result from it as between themselves, and will equally affect their transactions with third persons, where the latter have notice of the dissolution, or where, as in cases of death and bankruptcy, notice is not by law required. In the first place, as between the partners themselves, the dissolution of the partnership puts an end to the joint poAvers and authorities of all the partners, any further to employ the property, or funds, or credit of the partnership in the business or trade thereof, sub- ject to the exceptions hereinafter stated. None of the partners can create any new contracts or obligations binding upon the partnership ; none of them can buy, or sell, or pledge goods on account thereof; none of them can indorse, or transfer the partnership securities to third persons,^ or in any other way make their acts the acts of the partnership. In short, none of them can do any act, or make any disposition of the partner- ship property or funds, in any manner inconsistent with ' Ante, § 278, 280, 303, 304, 306, 307. 2 [Fellows V. Wyman, 33 N. H. 351] ; {§ 328, 344 and notes ; Lind. on P. 329. A bill of exchange drawn by a partnership and sent to an agent for sale, but sold by the agent after dissolution to a purchaser having notice of the dissolution, does not bind the firm. Robb v. Mudge, 14 Gray, 534. In Parker v. Macomber, 18 Pick. 505, it was held that a partner authorized to settle the partnership concerns might receive, in payment of a debt due to the firm, a note payable to bearer and might transfer the same to a third person.} CHAP. XIY.] DISSOLUTION RIGHTS OF PARTNERS. 513 the primary duty, now incumbent upon all of them, of winding up the whole concerns of the partnership.^ ' Xational Bank v. Norton, 1 Hill, (X. Y.) 572; [Palmer n. Dodge, 4 Ohio St. 21] ; Gowou P. c. 5, § 2, p. 230, 240, oded. ; Id. p. 251, 252 ; Ex parte Williams, 11 Ves. 3, 5 ; Peacock v. Peacock, 16 Ves. 49, 57 ; Wilson v. Greenwood, 1 Swans. 471, 480 ; Crawshay v. Maule, 1 Swans. 495, 506 ; Whit- man V. Leonard, 3 Pick. 177 ; Coll. on P. B. 1, c. 2, § 3, p. 75, 2ded. ; Id. B. 2, c. 2, § 1, p. 130 ; 3 Kent, 63, 64 ; 2 Bell, Comm. B. 7, c. 2, p. 643, 644, 5th ed. ; Ivilgour v. Finlyson, 1 H. Bl. 155 ; Brisban v. Boyd, 4 Paige, 17 ; [Geortner v. Trustees of Canajoharie, 2 Barb. 625.] The remarks of Lord Eldon on this subject, in Crawshay v. Collins, 15 Ves. 218, 226, present this whole doctrine in a strong and just light. " Partnerships are regulated," said he, " either by the express contract, or by the contract, implied by law, from the relation of the parties. The duties and obligations arising from that relation, are regulated, as far as they are touched, by the express con- tract : if it does not reach all those duties and obligations, they are implied, and enforced by the law. In the instance of a partnership without articles, the respective proportions of capital contributed by the partners and the trade being carried on either for a certain period, or the connection dissolv- able at pleasure, the time being expired, or, in the other case, notice to de- termine being given, it cannot be contended, that, if the remaining part- ners choose to carry on the trade, they can consider the whole property as their own, to be taken at such valuation as they think proper to put upon it. That is not the law. The obligation implied among partners is, that they are to use the joint property for the benefit of all, whose property it is. Many complicated cases may arise. There may be a partnershij), where, whether the parties have agreed for the determination of it at a particular period, or not, engagements must, from the nature of it, be contracted, which cannot be fulfilled during the existence of the partnership ; and the consequence is, that for the purpose of making good those engagements with third pei'sons, it must continue ; and then, instead of being, as it was, a general partnership, it is a general partnership determined, except as it still subsists for the purpose only of winding up the concerns. Another mode of determination is, not by effluxion of time, but by the death of one partner; in which case the law says, that the jiroperty survives to the others. It survives as to the legal title in many cases ; but not as to the beneficial interest. The question then is, .whether the surviving partners, instead of settling the accounts, and agreeing with the executor as to the terms, upon which his beneficial interest in the stock is still to be continued, subject still to the possible loss, can take the whole property, do what they please, and compel the executor to take the calculated value. That cannot be without a conti'act for it with the testator. The executor has a right to have the value ascertained, in the way in which it can be best ascertained, by sale. If the implied obligation is, that partners are to use the property lor the bene- fit of those whose property it is, where is the hardship ? I concur, therefore, 33 514 PARTNERSHIP. [cHAP. XIV. § 323. And here the consideration natiu-ally arises (which has been ah'eady touched in another place^), whether (since it is incompetent to any of the partners, after a dissohition, by any new acts, duties, or obhga- tion, to bind the partnership) any acknowledgments, or declarations, or statements, subsequently made by any one of the partners, respecting the real or supposed with the judgment of Lord Rosslyn upon that point, in the case of Ham- mond V. Douglas ; though I agree with the doubt, expressed by Sir Samuel Romillv, upon the other point there determined, that the good-will survives. If the surviving partners think projoer to make that, which is in equity the joint property of the deceased and them, the foundation and plant of in- creased profit, if they do not think proper to settle with the executor, and put an end to the concern, they must be understood to proceed upon the principle which regulated the property before the death of their partner." {One partner, after dissolution, cannot give a note in the firm name for a debt due from the firm. Lockwood v. Comstock, 4 McLean, 383 ; Perren v. Keene, 19 Me. 355; Parker v. Macomber, 18 Pick. 505; Haven v. Goodel, Disney, 26 ; Chase v. Kendall, 6 Ind. 304 ; Conklin v. Ogborn, 7 Ind. 553 ; Fowler v. Richardson, 3 Sneed, 508 ; Bower v. Douglass, 2b Ga. 714 ; Cun- ningham V. Bragg, 37 Ala. 436 ; White v. Tudor, 24 Tex. 639. Nor re- new a partnership note. Lumberman's Bank v. Pratt, 51 Me. 563 ; Lusk v. Smith, 8 Barb. 570; Hurst v. Hill, 8 Md. 399 ; Parker v. Cousins, 2 Gratt. 372 ; Palmer?;. Dodge, 4 Ohio St. 21 ; Lauge v. Kennedy, 20 Wis. 279 ; Van Valkenburgh v. Bradley, 14 Iowa, 108, overruling Kemp v. Coffin, 3 Greene, 190. Nor accept a bill. Tombeckbee Bank v. Dumell, 5 Mason, 56. See post, § 344 ; Robb v. Mudge, 14 Gray, 534. But one partner, after dissolu- tion, may waive demand and notice. Darling r. March, 22 Me. 184. And one partner, after dissolution, may indorse the firm note, payable to himself, given before dissolution. Temple v. Seaver, 11 Cush. 314. If the part- ners on dissolution authorize the issuing and negotiation of notes in the name of the old firm, they will be bound. See § 160, note and cases there cited. In Pennsylvania it has been held that one partner, after dissolution, has authority to give notes in the firm name for partnership debts. Robinson V. Taylor, 4 Penn. St. 242. But this doctrine seems peculiar to that State. See Houser v. Irvine, 3 W. & S. 345 ; Estate of Davis & Desauque, 5 Whart. 530; Heberton y. Jepherson, 10 Penn. St. 124. In Lewis ». Reilly, 1 Q. B. 349, it was held that a bill drawn by two partners, payable to their own oi-- der, might be indorsed after dissolution in the name of both by one partner to a person who bad notice of the dissolution. But the con-ectness of this de- cision has been much questioned. See Lind. on P. 330, 334; Smith's Merc. Law, 88, 3d Am. ed.} • Ante, § 107 ; Tassey v. Church, 4 Watts & S. 141. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 515 transactions, or duties, or obligations of the partnership, during the continuance thereof, are binding as evidence or otherwise upon the other partners, who have not as- sented thereto.^ It seems difficult upon principle to perceive how they can be, any more than the declara- tions, or acts, or acknowledgments of any other agent of the partnership would be, after his agency has ceased.^ In the latter case, they are constantly held inadmissible by the Courts of common law, upon grounds which seem absolutely irresistible.^ And yet the contrary doctrine has been constantly maintained, as to partners, for a great length of time, in the Courts of common law in England, founded apparently upon a mere un- reasoned decision in the time of Lord Mansfield ; ^ and it is but recently that it has been overturned by an Act of Parliament,'' which has remedied some of the mis- chiefs inherent m it, but has still left behind some which are as yet without redress.*^ The doctrine has been es- pecially applied to, and, indeed, is most forcibly illus- trated by cases of the revival of partnership debts, which are barred by the Statute of Limitations, by the simple acknowledgment of one partner, even, when 1 3 Kent, 49-51 ; Parker?;. Mon-ell, 2 Phill. 453, 464, and note ; {Speake V. White, 14 Tex. 364.} ^ See the able case of Ellicott v. Nichols, 7 Gill, 85. ' Ante, § 134-138. See the reasoning of Sir Wm. Grant, in Fairlie v. Hastings, 10 Ves. 123, 126, and of Mr. Justice Kennedy, in Hannay v. Stew- art, 6 Watts, 487. See, also, Garth v. Howard, 8 Biug. 451 ; Story on Ag. § 135, 136, and note. * Whitcomb v. Whiting, Doug. 652. * Sec the remarks of Lord Tenterden against the decision in Whitcomb V. Whiting, Doug. 652, in his opinion in Atkins v. Tredgold, 2 B. & C. 23, 28, and of Mr. Justice Bayley, Id. p. 29, and of Mr. Justice Holroyd, Id. p. 30. « Coll. on P. B. 3, c. 1, § 4, p. 282-285, 2d ed. ; Id. B. 3, c. 3, § 4, p. 417, 418 ; 3 Kent, 50, 51, and note (b) ; St. of 9 Geo. 4, c. 14 (9th of May, 1828). See Braithwaite v. Britain, 1 Keen, 206; Winter v. Innes, 4 Myl. & C. 101, 111. 516 PARTNERSHIP. [cHAP. XIV. made at a great distance of time after all the dissolution of the partnership, and, indeed, long after the partner- ship business has been closed by an actual settlement thereof inter sese} § 324. In America no small diversity of judicial opinion has been expressed upon the same subject. In some of the States the English doctrine has been ap- proved ; in others it has been silently acquiesced in, or left doubtful ; ^ and in a considerable number it has been expressly overruled.^ The Supreme Court of the United States have not hesitated, after a most elaborate discussion, to overrule it, as unfounded in principle and analogy. In truth, the whole controversy must ulti- mately turn upon the single point, whether the ac- knowledgment is a mere continuation of the original promise, or whether it is a new contract, or promise, springing out of, and supported by the original consid- eration. It is upon the latter ground, that the Supreme Court have deemed the doctrine wholly untenable.^ 1 3 Kent, 49-51 ; s. p. Houser v. Irvine, 3 W. & S. 345. ^ Walton V. Robinson, 5 Ired. 341 ; {Ide v. Ingrahana, 5 Gray, 106 ; Gay V. Bowen, 8 Met. 100 ; Houser v. Irvine, 3 W. & S. 345. See Taunton Iron Co. V. Richmond, 8 Met. 434. } ^ 3 Kent, 49-51, where the principal authorities are collected. See, also. Levy iJ. Cadet, 17 S. &R. 126 ; Walden v. Sherburne, 15 Johns. 409 ; Baker V. Stackpoole, 9 Cowen, 420, 423 ; Brisban v. Boyd, 4 Paige, 17 ; Cady v. Shepherd, 11 Pick. 400; Bell w. Morrison, 1 Pet. 351; Belote v. Wynne, 7 Yerg. 534; Tassey v. Church, 4 Watts & S. 141; [Van Keuren v. Parmelee, 2 Comst. 523. In the last case, the decisions of the different States are reviewed by the New York Court of Appeals, and the doctrine of Lord Mansfield overruled.] {Exeter Bank v. Sullivan, 6 N. H. 124; Shoemaker v. Benedict, 1 Kern. 176; Payne v. State, 39 Barb. 634; Rep- l^ert V. Colvin, 48 Penn. St. 248. See Ostrom v. Jacobs, 9 Met. 454 ; Sage V. Ensign, 2 All. 245 ; Tappan v. Kimball, 10 Post. 136 ; Myers v. Standart, 11 Ohio St. 29.} * The doctrine was apparently first applied in the case of Whitcomb V. Whiting, Doug. 652, in the case of a joint and several note of several persons, not partners, upon the supposed analogy to the case of payment by one joint promisor. On that occasion Lord Mansfield dryly and briefly said : CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 517 § 324 a. But, however the doctnne may be after a dissolution, in cases where all the parties are living, it " Payment by one is payment for all, the one acting virtually as an agent for the rest. And in the same manner an admission by one is an admission by all ; and the law raises the promise to pay, when the debt is admitted to be duo." A more inconclusive and unsatisflictory mode of reasoning can scarce- ly be imagined. In the first place (as we see in the text), payment by an agent, after his authority is withdrawn by his principal, is a payment which binds the creditor, but certainly not the principal ; and the agent cannot re- cover the money so paid from his principal ; although he may not be entitled (unless, indeed, it is paid under a sheer and mutual mistake) to recover it back from the creditor. Nor is it true, that payment by one partner, after a dissolution, of any debt, as a supposed partnership debt, binds the other partners. On the contrary, they have a right to say, that it never was, or was not at the time of the payment thereof, an existing partnership debt. Suppose it had been already either paid, or extinguished, how is the partner- ship liable to pay it again ? It is assuming the very matter in controversy to assert, that a debt, once barred by the Statute of Limitations, is not ex- tinguished, if voluntarily revived by the acknowledgment of one partner. What right or power has an agent, after his authority is dissolved, to make any acknowledgment or promise ujjon my account, to bind me ? He may bind himself, if he pleases ; but it will require some other reasoning to show that he can bind me. The reasoning against the English rule will perhaps be found as fully stated in the case of Bell v. Morrison, 1 Pet. 351, 367-374, as in any other case. "It still remains (say the Court) to con- sider, whether the acknowledgment of one partner, after the dissolution of the copartnership, is sufficient to take the case out of the statute, as to all the partners. How far it may bind the partner making the acknowledgment to pay the debt, need not be inquired into. To maintain the present action, it must be binding upon all. In the case of Bland v. Haselrig, 2 Vent. 151, where the action was against four, upon a joint promise, and the plea of the Statute of Limitations was put in, and the jury found that one of the defend- ants did promise within six years, and that the others did not ; three Judges, against Ventris, J., held that the plaintiff could not have judgment against the defendant who had made the promise. This case has been explained upon the ground, that the verdict did not conform to the pleadings, and es- tablish a joint promise. It is very doubtful, upon a critical examination of the report, whether the opinion of the Court, or of any of the Judges, pro- ceeded solely upon such a ground. In Whitcomb v. Whiting, 2 Doug. 652, decided in 1781, in an action on a joint and several note, brought against one of the makers, it was held, that proof of payment, by one of the others, of interest on the note and of part of the principal, within six years, took the case out of the statute, as against the defendant, who was sued. Lord Mansfield said : ' Payment by one is payment for all, the one acting virtually for all the rest ; and in the same manner, an admission by one is 518 PARTNERSHIP. [cHAP. XIV. is very clear that no acknowledgment by the surviving partners after the death of one of them will revive the an admission by all, and the law raises the promise to pay when the debt is admitted to be due.' This is the whole reasoning reported in the case, and is certainly not very satisfactory. It assumes that one party, who has the authority to discharge, has, necessarily, also, authority to charge the other ; that a virtual agency exists in each joint debtor to pay for the whole ; and that a virtual agency exists, by analogy, to charge the whole. Now, this very position constitutes the matter in controversy. It is true, that a payment by one does inure for the benefit of the whole. But this arises, not so much from any virtual agency for the whole, as by operation of law ; for the payment extinguishes the debt. If such payment were made after a positive refusal, or prohibition of the other joint debtors, it would still operate as an extinguishment of the debt, and the creditor could no longer sue them. In truth, he, who pays a joint debt, pays to discharge himself; and so far from binding the others conclusively by his act, as virtually theirs also, he cannot recover over against them in contribution, without such pay- ment has been rightfully made, and ought to charge them. A^Tien the stat- ute has run against a joint debt, the reasonable presumption is, that it is no longer a subsisting debt ; and, therefore, there is no gi'ound on which to raise a virtual agency to pay that which is not admitted to exist. But, if this were not so, stiU there is a great difference between creating a virtual agency, which is for the benefit of all, and one which is onerous and preju- dicial to all. The one is not a natural or a necessary consequence from the other. A person may well authorize the payment of a debt, for which he is now liable ; and yet refuse to authorize a charge, where there at present exists no legal liability to pay. Yet, if the principle of Lord Mansfield be correct, the acknowledgment of one joint debtor will bind all the rest, even though they should have utterly denied the debt at the time when such ac- knowledgment was made. The doctrine of Whitcomb v. Whiting has been followed in England in subsequent cases, and was applied in a strong man- ner, in Jackson v. Fairbank, 2 H. Bl. 340, where the admission of a credi- tor to prove a debt, on a joint and several note, under a bankruptcy, and to receive a dividend, was held sufficient to charge a solvent joint debtor, in a several action against him, in which he pleaded the statute, as an acknowl- edgment of a subsisting debt. It has not, however, been received without hesitation. In Clarke v. Bradshaw, 3 Esp. 155, Lord Kenyon, at 7iisi prius, expressed some doubts upon it ; and the cause went off on another ground. And in Brandram v. "Wharton, 1 B. & Aid. 463, the case was very much shaken, if not overturned. Lord Ellenborough upon that occa- sion used language, from which his dissatisfaction with the whole doctrine may be clcai-ly inferred. ' This doctrine,' said he, ' of rebutting the statute of limitations by an acknowledgment, other than that of the party himself, begun with the case of Whitcomb v. Whiting. By that decision, where, however, there was an express acknowledgment, by an actual payment of a CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 519 debt ao-ainst the estate of the deceased partner, and no acknowledgment by the representative of the de- part of the debt by one of the parties, I am bound. But that case was full of hardship ; for this inconvenience may follow from it. Suppose a person liable jointly with thirty or forty others, to a debt ; he may have actually paid it, he may have had in his possession the document by which that pay- ment was proved, but may have lost his receipt. Then, though this was one of the very cases which this statute was passed to protect, he may still be bound, and his liability be renewed, by a random acknowledgment made by some one of the thirty or forty others, who may be careless of what mischief he is doing, and who may even not know of the payment which has been made. Beyond that case, therefore, I am not prepared to go, so as to deprive a party of the advantage, given him by the statute, by means of an implied acknowledgment.' The English cases, decided since the American Revolution, are, by an express statute of Kentucky, declared not to be of authority in theii- Courts ; and consequently Whitcomb v. Whiting, in Douglas, and the cases which have followed it, leave the question in Ken- tucky quite open to be decided upon principle. In the American Courts, so far as our researches have extended, few cases have been litigated ujion this question. In Smith v. Ludlow, 6 Johns. 267, the suit was brought against both partners, and one of them pleaded the statute. Upon the dissolution of the partnership, public notice was given, that the other partner was authorized to adjust all accounts ; and an account signed by him, after such advertisement, and within six years, was introduced. It was also proved, that the plaintiff called on the partner, who pleaded the statute, before the commencement of the suit, and requested a settlement, and that he then admitted an account, dated in 1797, to have been made out by him ; that he thought the account had been settled by the other defendant, in whose hands the books of the partnership were ; and that he would see the other defend- ant on the subject, and communicate the result to the plaintiff. The Court held, that this was sufficient to take the case out of the statute ; and said, that, without any express authority, the confession of one partner, after the dissolution, will take a debt out of the statute. The acknowledgment will not, of itself, be evidence of an original debt ; for that would enable one party to bind the other in new contracts. But the original debt being proved or admitted, the confession of one will bind the other, so as to pre- vent him from availing himself of the statute. This is evident, from the cases of Whitcomb v. Whiting, and Jackson v. Fairbank ; and it results necessarily from the power given to adjust accounts. ' The Court also thought the acknowledgment of the partner setting up the statute was sufficient, of itself, to sustain the action. This case has the peculiarity of an acknowledgment made by both partners, and a formal acknowledgment by the partner who was authorized to adjust the accounts after the dissolution of the partnership. There was not, therefore, a virtual but an express and notorious agency devolved on him, to settle the account. The correctness 520 PARTNERSHIP. [cHAP. XIV. ceased partner will revive the debt against the survi- vors.^ of the decision cannot, upon the general view taken by the Court, be questioned. In Roosevelt v. Mark, 6 Johns. Ch. 266, 291, Mr. Chancellor Kent admitted the authority of Whitcomb v. Whiting, but denied that of Jackson v. Fairbank, for reasons which appear to us solid and satisfactory. Upon some other cases in New York we shall have occasion hereafter to comment. In Hunt v. Bridgham, 2 Pick. 581, the Supreme Court of Mas- sachusetts, upon the authority of the cases in Douglas, H. Blackstone, and Johnson, held that a partial payment by the principal debtor on a note took the case out of the statute of limitations, as against a surety. The Court do not proceed to any reasoning to establish the principle, considering it as the result of the authorities. Shelton v. Cocke, 3 Munf. 191, is to the same effect ; and contains a mere enunciation of the rule, without any dis- cussion of its principle. Simpson v. Geddes, 2 Bay, 533, proceeded upon a broader ground, and assumes the doctrine of the case in 1 Taunt. 104, hereinafter noticed, to be correct. Whatever may be the just influence of such recognitions of the principles of the English cases in other States, as the doctrine is not so settled in Kentucky, we must resort to such recogni- tion, only as furnishing illustrations to assist our reasoning, and decide the case now, as if it had never been decided before. By the general law of partnership, the act of each partner, during the continuance of the partner- ship, and within the scope of its objects, binds all the others. It is consid- ered the act of each and of all, resulting from a general and mutual delega- tion of authority. Each partner may, therefore, bind the partnership by his contracts in the partnership business ; but he cannot bind it by any contracts beyoiid those limits. A dissolution, however, puts an end to the authority. By the force of its terms it operates as a revocation of all power to create new contracts ; and the right of partners, as such, can extend no further than to settle the partnership concerns already existing, and to distribute the remaining funds. Even this right may be qualified and restrained, by the express delegation of the whole authority to one of the partners. The question is not, however, as to the authority of a partner, after the dissolution, to adjust an admitted and subsisting debt ; we mean, admitted by the whole partnership, or unbarred by the statute ; but whether he can, by his sole act, after the action is barred by lajjse of time, revive it against all the partners, without any new authority ' Atkins V. Tredgold, 2 B. & C. 23 ; Slater v. Lawson, 1 B. & Ad. 396 ; Crallan v. Oulton, 3 Beav. 1, 7 ; Way v. Bassett, 5 Hare, 55, 67. {In Thomp- son V. Waithman, 3 Drew. 628, payments by a surviving partner, who was also executor of the deceased partner, were held to be made in his character of surviving partner, and not of executor, and therefore a debt due by the firm was not taken out of the statute as against the estate of the deceased partner. See Jackson v. WooUey, 8 E. & B. 778 ; Whitley v. Lowe, 25 Beav. 421, s. c. 2 De G. & J. 704. } CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 521 § 324 h. Another question has arisen ; and that is, whether, after the decease of one partner, the surviving communicated to bim for this purpose. We think the proper res- olution of this point depends upon another, and that is, whether the acknowledgment or promise is to be deemed a mere continuation of the original jiromise, or a new contract, springing out of and supj^orted by the original consideration. We think it is the latter, both upon principle and authority ; and, if so, as after the dissolution no one partner can create a new contract, binding upon the others, his acknowledgment is inoperative and void as to them. There is some confusion in the language of the books, re- sulting from a want of strict attention to the distinction here indicated. It is often said, that an acknowledgment revives the promise, when it is meant that it revives the debt or cause of action. The revival of a debt supposes that it has been once extinct and gone ; that there has been a period, in which it had lost its legal use and validity. The act which revives it, is what essentially constitutes its new being, and is inseparable from it. It stands not by its original force, but by the new promise, which imparts vitality to it. Proof of the latter is indispensable to raise the assumpsit, on which an action can be maintained. It was this view of the matter, which first created the doubt, whether it Avas necessary that a new consideration should be proved to support the promise, since the old consideration was gone. That doubt has been overcome ; and it is now held, that the original consideration is sufficient, if recognized, to uphold the new promise, although the statute cuts it off, as a support for the old. What, indeed, would seem to be deci- sive on this subject is, that the new promise, if qualified or conditional, re- strains the rights of the party to its own terms ; and if he cannot recover by those terms, he cannot recover at all. If a person promise to pay, upon con- dition that the other do an act, performance must be shown before any title accrues. If the declaration lays a promise by or to an intestate, proof of the acknowledgment of the debt by or to his personal rejjresentative will not maintain the writ. Why not, since It establishes the continued existence of the debt ? The plain reason is, that the promise is a new one by or to the administrator himself, upon the original consideration, and not a revival of the original promise. So, If a man promises to pay a jire-exlstlng debt, barred by the statute, when he is able, or at a future day, his ability must be shown, or the time must be passed, before the action can be maintained. AVhy ? Because It rests on the new promise, and its terms must be complied with. We do not here speak of the form of alleging the promise In the declaration, upon which, perhaps, there has been a diversity of opinion and judgment ; but of the fact Itself, whether the promise ought to be laid in one wa)-^ or another, as an absolute or as a conditional promise ; which may depend upon the rules of pleading. This very point came before the twelve Judges, in the case of Hyleing v. Hastings, 1 Ld. Raym. 389, 421, in the time of Lord Holt. There, one of the points was, ' whether the acknowledgment of a debt within six years would amount to a now prom- 522 PARTNERSHIP. [cHAP. XIV. partner can, in a suit brought to obtain payment of a debt due to a creditor of the firm out of the assets of ise, to bring it out of the statute ; and they were all of opinion, that it would not; but that it was evidence of a promise.' Here, then, the Judges manifestly contemplated the acknowledgment, not as a continuation of the old jiromise, but as evidence of a new promise ; and that it is the new promise, which takes the case out of the statute. Now, what is a new prom- ise, but a new contract ; a contract to pay, upon a pre-existing consideration, which does not, of itself, bind the party to pay, independently of the con- tract? So, in Boydell v. Drummond, 2 Camp. 157, Lord Ellenborough, with his characteristic precision, said, ' If a man acknowledges the existence of a debt, barred by the statute, the law has been supposed to raise a new promise to pay it ; and thus the remedy is revived.' And it may be affirmed, that the general cuiTent of the English, as well as the American authorities, conforms to this view of the operation of an acknowledgment. In Jones v. Moore, 5 Binn. 573, Mr. Chief Justice Tilghman went into an elabo- rate examination of this vfery point ; and came to the conclusion, from a review of all the eases, that an acknowledgment of the debt can only be con- sidered as evidence of a new promise ; and he added, ' I cannot comprehend the meaning of reviving the old debt, in any other manner than by a new promise.' There is a class of cases, not yet adverted to, which materially illustrates the right and powers of partners, afler the dissolution of the part- nership, and bears directly on the point under consideration. In Hackley V. Patrick, 3 Johns. 536, it was said by the Court, that, ' After a dissolu- tion of the partnership, the power of one party to bind the others wholly ceases. There is no reason, why his acknowledgment of an account should bind his copartners, any more than his giving a promissory note, in the name of the firm, or any other act.' And it was, therefore, held, that the plaintiff must produce further evidence of the existence of an antecedent debt, be- fore he could recover ; even though the acknowledgment was by a partner authorized to settle all the accounts of the firm. This doctrine was again recognized by the same Court, in Walden v. Sherburne, 15 Johns, 409, 424, although it was admitted, that in Wood v. Braddick, 1 Taunt. 104, a different decision had been had in England. If this doctrine be well found- ed, as we think it is, it furnishes a strong ground to question the efficacy of an acknowledgment to bind the partnership for any purpose. If it does not establish the existence of a debt against the partnership, why should it be evidence against it at all ? If evidence, aliunde, of facts within the reach of the statute, as of the existence of a debt, be necessary before the acknowl- edgment binds, is not this letting in all the mischiefs, against which the statute intended to guard the parties ; viz. the introduction of stale and dormant demands, of long standing, and of uncertain proof ? If the ac- knowledgment, 2^ei' se, does not bind the other partners, where is the pro- priety of admitting proof of an antecedent debt, extinguished by the statute as to them, to be revived without their consent ? It seems difficult to find a CHAP. XIY.] D;^S0LUTI0N RIGHTS OF PARTNERS. 52.3 the deceased partner, in which suit the surviving part- ner is made a party, set up the Statute of Limitations satisfactory reason, why an acknowledgment should raise a new promise, when the consideration, upon which alone it rests, as a legal obligation, is not coupled with it in such a shape as to bind the parties ; that the parties are not bound by the admission of the debt, as a debt ; but are bound by the acknowledgment of the debt, as a promise upon extrinsic proof. The doctrine in 1 Taunt. 104, stands upon a clear, if it be a legal ground ; that, as to the things past, the partnership continues and always must continue, notwithstand- ing the dissolution. That, however, is a matter which we are not prepared to admit, and constitutes the very ground now in controversy. The light in which we are disposed to consider this question, is, that after a dissolution of a part- nership, no partner can create a cause of action against the other partners, except by a new authority communicated to him for that purpose. It is wholly immaterial what is the consideration, which is to raise such cause of action ; whether it be a supposed pre-existing debt of the partnership, or any auxiliary consideration which might prove beneficial to them. Unless adopted by them, they are not bound by it. When the statute of limitations has once run against a debt, the cause of action against the partnership is gone. The acknowledgment, if it is to operate at all, is to create a new cause of action ; to revive a debt which is extinct ; and thus to give an ac- tion, which has its life from the new promise, implied by law from such an acknowledgment, and operating and limited by its purport. It is then, in its essence, the creation of a new right, and not the enforcement of an old one. We think that the power to create such a right does not exist, after a dissolution of the partnership, in any partner. There is a case in the Ken- tucky Reports, not cited at the bar, which coincides, as far as it goes, with our own views ; and if taken as a general exposition of the law, according to its terms, is conclusive on this point. It is the case of AA'^alker v. Du- berry, 1 ^Nlarsh. 189. It is very briefly reported, and the opinion of the Court was as follows. 'We are of opinion, that the Court below improp- erly admitted, as evidence against Walker, the certificate of J. T. Evans, made after the dissolution of the partnership, between Walker and Evans, acknowledging that the partnership firm was indebted to the defendant Duberry in the sum demanded, in the action brought by him in the Court below.' It cites 3 Johns. 536; 3 Munf. 191. It does not appear what was the state of facts in the Court below, nor whether this was an action in which the statute of limitations was pleaded, or only no7i assumpsit generally. But the position is generally asserted, that the acknowledg- ment of a debt by one partner after a dissolution is not evidence against the other. Whether the Court meant to say in no case whatever, or only when the debt itself was proved aliunde, does not appear. The language is general, and would seem to include all cases ; and if any qualification were intended, it would have been natural for the Court to express that qualification, and have confined it to the circumstances of the case. The only room for doubt arises from the citations of 3 Johnson, and 3 Mun- 524 PARTNERSHIP. . [CHAP. XIV. as a bar to a demand against the assets of the deceased ; and it has been held that he cannot.^ And it yet re- mains a matter of doubt, whether the representatives of the deceased partner can in such a suit set up the Statute of Limitations as a bar, so long as the surviving partner continues liable to the payment of the debt, as the deceased's estate is liable to be called upon by the surviving partner for contribution in case the latter pays the debt.^ ford. The former has been already adverted to ; and the latter, Shelton V. Cocke, 3 Munf. 191, recognized the distinction asserted in 3 Johns. 536, as sound. These citations may, however, have been referred to as mere illustrations, going to establish the proposition of the Court to a certain extent, and not as limitations of its extent. In any view, it leads us to the most serious doubts, whether the State Courts of Kentucky would ever adojjt the doctrine of Whitcomb v. Whiting, in Douglas ; es- pecially so, as the early case in 2 Vent. 151, carries an almost irresisti- ble presumption, that the Courts, at that time, held a doctrine entirely inconsistent with the case in Douglas." See also ante, § 107; {Bateman V. Finder, 3 Q. B. 574.} ' Winter v. Innes, 4 Myl. & C. 101. 2 Winter v. Innes, 4 Myl. & C. 101, 111. — Lord Cottenham said : " When the simple case shall occur of the representatives of a deceased partner setting up the Statute of Limitations against a claim by a creditor of the firm, it will be to be considered whether such a defence can prevail whilst the surviving partner continues liable, and the estate of the deceased partner continues liable to contribution at the suit of the surviving partner. If the equity of the creditor to go against the estate of the deceased partner is founded upon the equity of the surviving partner against that estate, it would seem that the equity of the creditor ought not to be barred, so long as the equity of the sur- viving party continues, as that would be to create that circuity, which it is the object of the rule to prevent. In Braithwaite v. Britain, the Master of the Rolls thought that the statute did not operate, although nine years had elapsed. In this case it is not necessary to consider that general question ; Mr. Bailie was himself a trustee and executor of the will of the deceased partner, and did not renounce till 1830 ; and Mr. Innes, who had the property, acted throughout on behalf of the estate of the deceased. And who now set up the Statute of Limitations ? Not the executors of the deceased partner, who are not bound to plead the statute, but may, if they please, pay a just debt, though barrable by the statute ; nor any one interested in his estate, but those who stand in the place of Mr. Innes as surviving partner. I think, there- fore, that their defence cannot prevail," [But see Way v. Bassett, 5 Hare, 55, 68 ; Braithwaite v. Britain, 1 Keen, 206, But after a dissolution of partnership, CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 525 § 325. On the other hand, notwithstanding the dis- solution of the partnership, there still remain certain rights, duties, powers, authorities, and relations between them, which the law recognizes and supports, because they are, or may be, indispensable to the complete arrangement and final settlement of the affairs of the partnership ; and, therefore, in a qualified and limited sense, the partnership may be said for those purposes to continue between the parties, until such arrange- ment and settlement take place. ^ Indeed, as has been well said by a learned author on this subject, from the very nature of the partnership, engagements may be con- tracted, which cannot be fulfilled during its existence, exposed as it is to sudden and arbitrary terminations ; and the consequence, therefore, must be, that, for the purpose of making good outstanding engagements, of taking and settling all the accounts, and converting all the property, means, and assets of the partnership, ex- isting at the time of the dissolution, as beneficially as may be for the benefit of all who were partners, accord- ing to their respective shares and proportions, the legal interest must subsist, although, for all other purposes, the partnership is actually determined.^ by death or otherwise, the surviving or continuing partners of the firm are, in a suit against them by persons claiming to be creditors of the partnership, en- titled to the protection of the Statute of Limitations, although as between themselves and retired partners, or the estates of deceased partners, the part- nership accounts are unsettled ; and the retired partners, or the executors of a deceased partner, are in such a suit against them entitled to the like protec- tion. Way V. Bassett, 5 Hare, 55, G8 ; Brown v. Gordon, 16 Beav. 302; 15 Eng. L. & Eq. 340. See ante, § 233, note.] ' Gow on r. c. 5, § 2, p. 231, 3d ed. ; Wilson v. Greenwood, 1 Swans. 471, 480, 481 ; Crawshay v. Maule, 1 Swans. 495, 506, 507 ; Peacock v. Pea- cock, 16 Ves. 49, 57; Ex parte Williams, 11 Ves. 3, 5; Ex parte Ruffin, 6 Ves. 119, 126, 127 ; post, § 328, note; Murray v. Mumford, 6 Cowen, 441 ; Cruikshank v. M'Vic'ar, 8 Beav. 106 ; [Geortner v. Trustees of Cauajoharie, 2 Barb. 625.] - Gow on P. c. 5, §2, p. 231. — Substantially the same language was 526 PARTNERSHIP. [CHAP. XIV. § 326. Besides ; as we have already seen/ each part- ner, upon the dissolution of the partnership, has a per- fect right, in the first place, to require that the partner- ship funds shall be directly and regularly applied to the discharge of the partnership debts and liabilities ; and, after these are discharged, to have his share of the residue of the partnership funds. ^ This right is a privi- lege or lien on those funds, fully recognized and en- forced by Courts of Equity; and, through this right of the partners themselves, is worked out the known equity of the joint creditors, to have a priority of pay- ment of their debts out of the same funds, in opposition and preference to the separate creditors of each part- ner.^ It is easy to perceive, that this right would be a used by Lord Eldon, in Crawshay v. Collins, 15 Ves. 226. See also Natusch V. Irving, Gow on P. App. p. 398, 404, 3d ed. ^ Ante, § 97, and note 1 ; 1 Story, Eq. Jur. § 675, 676 ; Ex parte Ruffin, 6 Ves. 119, 126; Ex parte Williams, 11 Ves. 3, 5; Holderness v. Shackel, 8 B. & C. 612 ; [Kirby v. Schoonmaker, 3 Barb. Ch. 46.] • Gow on P. c. 5, § 2, p. 235, 236, 3d ed. ^ Ex parte Ruffin, 6 Ves. 119; s. c. ante, § 97, note; Ex jJ^rte Fell, 10 Ves. 347 ; [Allen v. Center Valley Co. 21 Conn. 130] ; Ex parte Wil- liams, 11 Ves. 3,5. — In tbe latter case Lord Eldon said : " I have frequently, since I decided the case Ex parte Ruffin, considered it; and I approve that decision. In a subsequent case the dissolution took place only a week before the question arose ; and the true question, I thought, was upon the bona fides of the transaction ; whether that which had been joint estate, had become separate estate. The grounds upon which I went, in Ex parte Ruffin, were these. Among partners clear equities subsist, amounting to something like lien. The property is joint ; the debts and credits are jointly due. They have equities to discharge each of them from liability, and then to divide the surplus according to their proportions ; or, if there is a deficiency, to call upon each other to make up that deficiency, according to their proportions. But, while they remain solvent, and the partnership is going on, the creditor has no equity against the eifects of the partnership. He may bring an action against the partners, and get judgment ; and may execute his judgment against the effects of the partnership. But, when he has got them into his hands, he has them by force of the execution, as the fruit of the judgment ; clearly, not in respect of any interest he had in the partnership effijcts, while he was a mere creditor, not seeking to substantiate, or create, an interest by suit. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 527 mere dead claim or inert title, if the mere dissolution of the partnership would of itself prevent the partners from applymg the joint funds in an appropriate manner to those very purposes ; at least if a Court of Equity did not interpose to enforce it. And why should a Court be called upon to do the very acts, which, upon principles of common sense and common justice, the partners themselves might reasonably be left to do for themselves, without such a dilatory and inconvenient process ? § 327. Moreover, it is plain, that if a total extinction of all rights, powers, and authorities of the partners to deal with the partnership property, funds, and effects, immediately followed upon the dissolution of the part- nership, it would amount to a complete suspension of all right and authority to apply any part thereof to the payment and discharge of the existing partnership debts, or to collect the debts due to the partnership, or to adjust unsettled accounts, or even to close any out- standing adventures, or inchoate operations. The mis- chiefs, therefore, would be positive and irreparable, without the intervention of a Court of Equity to corn- There are various ways of dissolving a partnership ; effluxion of time ; the death of one partner ; the bankruptcy of one, which operates like death ; or, as in this instance, a diy, naked agreement, that the partnership shall be dissolved. In no one of these cases can it be said, that to all intents and purposes the partnership is dissolved ; for the connection still remains until the affairs are wound up. The representative of a deceased partner, or the assignees of a bankrupt partner, are not strictly partners with the survivor, or the solvent partner. But still, in either of those cases, that community of interest remains that is necessary, until the affairs are wound ujj ; and that requires, that what was partnershij) property before, shall continue for the purpose of a distribution, not as the rights of the creditors, but as the rights of the partners tliemselves require. And it is through the operation of administering the equities, as between the partners themselves, that the creditors have that opportunity ; as in the case of death, it is the equity of the deceased partner that enables the creditors to bring forward the distribution." See also Gow on P. c. 5, § 2, p. 235, 236, 3d ed. 528 PARTNERSHIP. [CHAP. XIV. pel the parties to do that, which the law has wisely allowed without compulsion, or to appoint a receiver, who should perform the like functions in a slow, and expensive, and, for the most part, a less active and skil- ful manner. § 328. Hence it is now the admitted doctrine of the common law, that although the dissolution of the part- nership disables any one of the partners from contract- ing new debts, or buying or selling or pledging goods on account of the firm, in the course of the former trade thereof; yet, nevertheless, it leaves every part- ner in possession of the full power (unless, indeed, upon the dissolution it has been exclusively confided and delegated to some other partner or person) ^ to pay and collect debts due to the partnership ; ^ to apply the partnership funds and effects to the discharge of their own debts ; to adjust and settle the unliquidated debts of the partnership ; to receive any property belonging to the partnership ; and to make due acquit- tances, discharges, receipts, and acknowledgments of their acts in the premises.^ For all these acts, if done 1 2 Bell, Comm. B. 7, c. 2, p. 643, 644, 5th ed. ; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Id. c. 5, § 3, p. 305, 306. ^ [And the msolvency of one partner, and his misapplication of the funds collected, will not affect the validity of a bona fide payment to him by a debtor of the firm. Major v. Hawkes, 12 111. 298.] 3 Coll. on P. B. 1, c. 2, § 3, p. 75; Id. B. 2, c. 2, § 8. p. 130; Id. B. 4, c. 1, p. 582-588, 2d ed. ; Fox v. Hanbury, Cowp. 445; [Ide v. Ingra- ham, 5 Gray, 106 ; Milliken v. Loring, 37 Me. 408] ; Harvey v. Crickett, 5 M. & S. 336 : Woodbridge t'. Swann, 4 B. & Ad. 633 ; Smith v. Oriell, 1 East, 368; 1 Mont, on P. App. Note 2 M. p. 135 ; 2 Bell, Comm. B. 7, c. 2, p. 643 ; Id. p. 637, 5th ed. ; Combs v. Boswell, 1 Dana, 473 ; Murray v. Mumford, 6 Cowen, 441 ; [Gannett v. Cunningham, 34 Me. 56] ; Houser v. Irvine, 3 Watts & S. 345 ; [Robinson v. Taylor, 4 Penn. St. 242] ; {§ 339, 341, 344; Lind. on P. 332; Butchart v. Dresser, 10 Hare, 453; s. c. 4 De G. M. & G. 542 ; Bobbins v. Fuller, 24 N. Y. 570 ; Huntington v. Potter, 32 Barb. 300; Bass v. Taylor, 34 Miss. 342. See Ault v. Good- rich, 4 Russ. 430. Xor can one partner by notice to the debtor deprive the other partner of power to receive payment, after dissolution, of a debt due CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 529 bona fide^ are for the advancement and consummation of the great objects and duties of the partners upon to the firm. Granger v. McGilvra, 24 HI. 152. It has been held in Penn- sylvania, that after dissolution one partner has power to boi'row money to pay the debts of the firm. Estate of Davis & Desauque, 5 Whart. .530. On the power of a partner after dissolution to bind the firm by negotiable paper, see § 322 ante.} In Harvey v. Crickett, 5 M. & S. 336-344, the question was much considered. On that occasion, Mr. Justice Bayley expounded the doctrine in the following manner: "If this action is main- tainable, the consequence would be, that after an act of bankruptcy com- mitted by one partner, the partnership-house must immediately be closed. But such a consequence is directly contrary to the cases of Fox v. Hanbury, and Smith v. Oriell. If several persons enter into partnership, either for a definite or an indefinite time, each partner is at liberty to apply the joint funds in payment of the partnershijD debts ; and each has a lieu on those funds for his own indemnity, limited to their being applied to the payment of partnership debts. When one of several partners becomes bankrupt, he puts himself by that act out of the ^partnership, and ceases to have any further control over the partnershijj property. The whole of his rights pass to his assignees. But this does not prevent the remaining jiartners from exercising the control, wliich rests with them over the property, to take care that it is duly applied in liquidation of the partnership debts. If this wei'e not so, in what a situation would the solvent partners be placed? For if, in this case, a creditor had applied to M. B. Harvey for pajinent of a partnership debt, and he were precluded by the bankruptcy of J. W. Harvey from paying it, the consequence would be, that having funds of the partnership in his liands, fully sufficient to satisfy the demand, he must, nevertheless, become liable to arrest, and to be detained in prison. And the creditor also would be in this dilemma, that, having funds to look to for the discharge of his debt, he could not obtain payment, because he could not properly receive what the other was unable to pay. The solvent partner would say, that he was liable to account with the assignees of the bankrupt partner, and thus leave the partnership creditor unpaid. This seems to me to be a consequence, the inconvenience of which is sufficiently obvious. It is argued, that a distinction is to be made in the present case, because both M. B. Harvey and the defendants were aware of the act of bankruptcy. But I ask, whether this was not a bona fide payment to a person who is entitled to receive it ? If it were, the knowledge which they possessed of the act of bankruptcy does not, as it seems to me, distinguish the case from those of Fox v. Hanbury, and Smith v. Oriell. In Smith 0. Oriell, Lord Kenyon considered that the whole, and not a moiety only, of the partnership property, delivered by the solvent partner in satisfaction of a partnership debt, passed by the transfer." The other Judges con- curred in his views. Mr. Bell (2 Bell, Comm. B. 7, c. 2, p. 643, 5th ed.) has summed up the general doctrine, both as to authority and prin- 34 530 PARTNERSHIP. [cHAP. XIV. the dissolution, to wind up the whole partnership con- cerns, and to divide the surplus, if any, among them, ciple, in the following terms. "When a partnership expires, whether by death, or by lapse of time, or by bankruptcy, the partnership is considered, in one sense, as determined, but in a sense also as con- tinued, that is, continued, till all the afiairs are settled. After this no act can be effectually done, or contract entered into, in the name of the firm, as in partnership ; but every act of administration, which is necessary for winding up the concern, may effectually be done. 1. A receipt to a debtor of the company, by the signature of the firm, seems to be valid, if no other mode of settling the affairs has been appointed and made known, 2. If by the dissolution and notice the debts are to be paid to a particular person, partner, or other receiver, no other can validly discharge the debt ; especially if there be any evident marks of collusion ; as paying by an offset against the partner, who grants the receipt. 3. After disso- lution, no valid draft, acceptance, or indorsation, can be made by the firm ; and it is no authority to do so, if one partner is in the notice empowered to receive and pay the debts of the company. The indorsation, draft, or acceptance, must be done by all the partners, or by one especially em- powered so to act for them. 4. If after dissolution a partner accept a bill in the name of the company, bearing date before the dissolution, it has been held in England, that the other partners are not bound. But a dis- tinction has been taken, where, before the dissolution, skeleton or blank bills have been signed by the firm, and those are filled up subsequently to the dissolution, but a date inserted prior to the dissolution ; in that case the bill has been held effectual to bind the partners. Such a case occurred in Scot- land, but it has not yet been decided, in which, after the dissolution, it ap- peared that certain skeleton bills, which the company had been in use of granting, were filled up and antedated, so as to fall within the period of part- nership." [On the other hand, in Buckley v. Barber, 6 Exch. 164, 181, 1 Eng. L. & Eq. 506, Baron Parke said : " In our law this rule (of the civil law) does not exist with respect to agents of deceased principals; and with respect to surviving partners, though there are expressions of text-writers (Story on P. § 344 ; 3 Kent, 63), and also of judges (Harvey v. Crickett, 5 M. & S. 336 ; Woodbridge v. Swann, 4 B. & Ad. 633 ; Beak v. Beak, 3 Swans. 627 ; Lord Nottingham's MSS., and 1 Swans. 507, note), which have that aspect, there is no clear, satisfactory authority that the surviving jiartner has a power, by virtue of the partnership relation onh', to transfer the legal title to the share belonging to the executors of the deceased, to a third person, leaving the executors to pursue their remedy against the survivor, if that authority is improperly exercised. It is clear that the legal title to the share of the survivor passes, and the purchaser therefore is at all events tenant in common with the executor ; and as the law allows no right of action to one tenant in common against another, so long as the subject of the tenancy exists, and is capable of recaption, that circumstance will exjilain all the decisions on the CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 531 after all debts and charges are extinguished.^ In cases of the dissolution of a partnership by the death of one of the partners, the same rights and duties (as we shall presently see) attach to the surviving partners. The survivors are entitled to close up the affairs of the fii'm, to collect and adjust the debts due to it, and to pay its debts and discharge its liabilities. They are also bound to apply the partnership property to the like purposes with reasonable diligence. If they are negligent in the discharge of their duties in these particulars, Courts of Equity will interfere, and, upon the application of the representatives of the deceased partner, appoint a receiver, and order a sale of the partnership property, and wind up the affairs of the firm.^ § 329. And here is seen the beneficial operation of the jurisdiction of Courts of Equity. While they will protect each partner in the due exercise of these rights and authorities, notwithstanding a dissolution ; they will, on the other hand, watch over and guard the interests of the partnership itself, and take care that subject, including Harvey v. Crickett, 5 M. & S. 336 ; see Woodbvidge v. Swann, 4 B. & Ad. 633. In Harvey v. Crickett, the dicta of the judges go much further; probably Mr. Justice Bayley mistook the opinion of Lord Kenyon in Smith v. Oriell, 1 East, 368, and we doubt whether surviving partners have a power to sell, and give a good legal title to the share belong- ing to the executors of the deceased partner, when they sell in order to pay the debts of the deceased and of themselves ; but, be that as it may, we think it clear, that the survivors could have no power to dispose of it otherwise than to pay such debts, certainly not to mortgage that share together with their own (for that is the real nature of this transaction), as a security for a debt principally due from the surviving partners, and in part only from the deceased, and in order to enable them to continue their trade. At all events, therefore, this transaction was not within the scope of any implied authority which the surviving partners may have, to wind up the affiiirs of the partner- ship ; and therefore this conveyance did not pass the share of the deceased to the plaintiffs, by virtue of any implied authority in the survivors."] ' Note, Ibid. ; [Drury v. Roberts, 2 Md. Ch. Dec. 157.] - Ibid. ; Evans v. Evans, 9 Paige, 178; post, § 344. 532 PARTNERSHIP. [CHAP. XIV. he shall not, by any misconduct, or abuse, or excess in the exercise of his own rights and authorities, prejudice those of the other partners. Hence, Courts of Equity will interfere and prohibit and control, by an injunction, any improper sale or other misapplication of the funds of the partnership by any partner to the payment of his own private and separate debts. So they will, in like manner, prevent him from subsequently trading with the partnership funds ; or from interfering injuri- ously with the settlement of the partnership affairs ; or from excluding the other partners from their just share of the management thereof;^ or from doing any other act, or making any use of the property of the partner- ship, inconsistent with the purpose of winding up the concerns thereof, in the manner most beneficial to all ' Gow on P. c. 5, § 2, p. 231, 232, 3d ed. ; Harding v. Glover, 18 Ves. 281 ; Crawshay v. Maule, 1 Swans. 495, 507 : Heathcote v. Hulme, 1 Jac. & W. 122, 128 ; Wilson u. Greenwood, 1 Swans. 471 ; Dacier. John, 1 McCle. 206 ; s. c. 13 Price, 446 ; Coll. on P. B. 2, c. 3, § 5, p. 235 ; Id. B. 4, c. 1, p. 579, 587, 509, 2d ed. ; De Tastet v. Bordenave, Jac. 516 ; 1 Story, Eq. Jur. § 671; Allen v. Kilbre, 4 Madd. 464; {Deveau v. Fowler, 2 Paige, 400. See § 99, 100, 344. In Davis v. Amer, 3 Drew, 64, and Marshall v. Watson, 25 Beav. 501, an injunction was refused.} — Mr. CoUyer (Coll. on P. B. 2, c. 3, § 7, p. 245, note b) seems to think, that a Court of Equity Tvould refuse an injunction to restrain the use of the partnership name by one partner after a dissolution ; and he founds himself upon the doctrine of Lord Thurlow, in Ryan v. Mackmath, 3 Bro. C. C. 15, that a Court of Eq- uity would not decree a written instrument to be delivered up and cancelled upon which no action could be maintained at law. Lord Thurlow's opinion upon the general doctrine seems now abandoned ; and the contrary rule, as to written instruments, generally established. See Mr. Belt's note (1) to 3 Bro. C. C. 15 ; 2 Story, Eq. Jur. § 699-702, and the cases there cited. But, as between partners, the doctrine of Lord Thurlow would seem (even if it were admissible in common cases) to be unsatisfactory, and inconsistent with sound principles ; for every such use of the partnership name after the dissolution may expose the other partners to the hazard of a suit at law, and perhaps to a recovery against them, where actual knowledge of the disso- lution could not be brought home to the holder, if it be a negotiable instru- ment. But see Webster v. Webster, 3 Swans. 490, note, and Lewis v. Langdon, 7 Sim. 421. See also ante, § 224-227. {Ante, § 99, 100 ; Chur- ton V. Douglas, H. 11. V. Johns. 174.} CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 533 the parties.' If any partner has, after the dissohition, misapplied the partnership funds, and made profits thereby, he will be made accountable for all such profits ; but the losses, if any, must be borne by him- self2 § 330. If it shall become expedient and proper more effectually to attain any or all of these purposes, Courts of Equity will appoint a manager or receiver to collect the partnership funds, and wind up the whole concern in the manner most beneficial to all the par- ties, either exclusive of all the partners, or by making one or more of them the exclusive managers or receiv- ers. To induce Courts of Equity, however, to interfere in this last strong and summary manner, some fraud- ulent breach of contract or duty must be shown, or some urgent and pressing necessity.^ ' Crawshay w. Maule, 1 Swans. 495, 507 ; Coll. on P. B. 2, c. 2, § 1, p. 130, 2d ed. 2 Ante, § 174, 233 ; {post, §349} ; Heathcotew. Hulme, 1 Jac. & W. 122; 128 ; Stoughton v. Lynch, 1 Johns. Ch. 467, 469, 471 ; Crawshay v. Collins, 15 Ves. 218; Gow on P. c. 5, § 4, p. 354, 3d ed. ; Brown v. Litton, 1 P. Wms. 140 ; Brown v. De Tastet, Jac. 284 ; 1 Yalin, Comiu. Lib. 2, tit. 8, art. 5, p. 578, ed. 1766 ; Willett v. Blanford, 1 Hare, 253, 263. {Post, § 331, 341, 343,. 349; Lind. on P. 830. See Watney v. Wells, Law Rep. 2 Ch. 250.} [But if the partners of a solvent partnership agree to dissolve and divide their joint property, and to own their respective parts in severalty, neither has any remedy in equity against the other, and no lien on the other part- ner, because of his liability for the debts of the firm, or his jiayment of them. Holmes v. Hawes, 8 Ired. Eq. 21 ; Lingen v. Simpson, 1 Sim. & St. 600 ; Hickerson v. McFaddin, 1 Swan, 258.] 3 Gow on P. c. 2, § 4, p. 114; Id. c. 5, § 2, p. 231, 232, 3d ed. ; Hard- ing «. Glover, 18 Ves. 281 ; Crawshay u. Maule, 1 Swans. 495, 507 ; Heathcote V. Hulme, 1 Jac. & W. 122, 128 ; Wilson «. Greenwood, 1 Swans. 471 ; Dacie v. John, McCle. 206 ; De Tastet v. Bordenave, Jac. 516 ; Coll. on P. B. 2, c. 3, § 6, p. 240-244; Id. B. 4, c. 1, § 2, p. 579, 587, 588, 2d ed. ; 1 Story, Eq. Jur. § 672 ; 2 Bell, Comm. B. 7, c. 2, p. 645, 5th ed.; ante, § 228, 229, 231. {Lind. on P. 852 ; post, § 344 ; Roberts v. Eberhardt, Kay, 148 ; Sheppard v. Oxenford, 1 Kay & J. 491 ; Blakeney r. Dufaur, 15 Beav. 40; Davis c. Amcr, 3 Drew, 64 ; Evans v. Coventry, 3 Drew, 75 ; s. c. 5 De G. M. & G. 911 ; Walker v. Trott, 4 Edw. Ch. 38; Drury v. Roberts, 2 Md. Ch. 157 ; Speights v. Peters, 9 Gill, 472 ; Chancellor Walworth held in Law 534 PARTNERSHIP. [CHAP. XIV. § 331. Courts of Equity proceed still further in the enforcement of their principles. If any partner, after the dissolution, should make any composition of the debts due to or from the partnership, he will not be at liberty to avail himself of any private benefit there- from, but it will properly belong to the partnership ; for whatever act he does, it is his duty to perform it not for his own personal advantage, but for the utmost advantage of the concern.^ Hence, also, if, under an agreement for a lease for the partnership, one partner, after the dissolution of the partnership, should obtain the lease in his own name, he will be restrained from disposing of it otherwise than for partnership pur- poses.^ So fixed, indeed, is this duty still to continue to act for the benefit of the partnership, that no partner is allowed to claim any particular reward or compen- sation for his trouble or services, in thus assisting in the arrangement and winding up of the concerns thereof, unless it be specially stipulated.^ V. Ford, 2 Paige, 310 ; and Marten v. Van Schaick, 4 Paige, 379, that on a disagreement between partners a receiver would be appointed of course, and these cases have been approved in Whitman v. Robinson, 21 Md. 30, but the courts of New Jersey have declined to follow them. Renton v. Chaplain, 1 Stock. 62 ; Birdsall v. Colie, 2 Stock. 63. Wilson v. Fitchter, 3 Stock. 71 ; Cox V. Peters, 2 Beasl. 39. See Gowan v. Jeffries, 2 Ashm. 296. In Hale V. Hale, 4 Beav. 369, on a bill for the dissolution of a partnership between brewers, there was no charge of misconduct, but the defendant denied that the plaintiff who was a clergyman could lawfully be a partner in such a busi- ness, a receiver was appointed. } ' Coll. on P. B. 2, c. 2, § 1, p. 130, 2d ed. ; Beak v. Beak, 3 Swans. 627 ; 1 Story, Eq. Jur. § 316 ; Gow on P. c. 5, § 2, p. 255 ; Crawshay v. Collins, 15 Ves. 218, 229 ; Beak v. Beak, Rep. Temp. Finch, 190 ; ante, § 174-186 ; {ante, § 329 ; post, § 343, 349 ; Lees v. Laforest, 14 Beav. 250 ; Perens v. John- son, 3 Sm. & G. 419.) ^ Coll. on P. B. 2, c. 3, § 5, p. 235, 2d ed. ; Alder v. Fouracre, 3 Swans. 489 ; Elliot v. [Brown, 3 Swans. 489, note ; Gow on P. c. 5, § 4, p. 349, 3d ed. ; ante, § 174-186; {Clegg v. Fishwick, 1 Macn. & G. 294; Clements v. Hall, 24 Beav. 333 ; s. c. 2 De G. & J. 173 ; Washburn v. Goodman, 17 Pick. 519; Leach v. Leach, 18 Pick. 68.} => Ante, § 182 ; Coll. on P. B. 2, c. 2, § 1, p. 130, 2d ed. ; Id. B. 2, c. 2, CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 535 § 332. The French law has, to a certain, but not to the full extent, adopted these doctrines of the common law. It treats the dissolution of the partnership, in whatever way it may happen, when brought to the knowledge of the partners, as a virtual determination of their powers to act for the partnership in any future operations ; unless, indeed, so far as may be necessary to complete acts and concerns already entered into on account of the partnership, but incomplete and in pro- gress at the time of the dissolution. These are treated as matters of positive and indispensable obligation; and they, therefore, may be finished by the same part- ner who was authorized to begin and complete them.^ And this is but following out the precept of the Ro- man law, which required, in such cases, where the dissolution was occasioned by the death of one partner, that the business begun by him should be completed by his heir. Heres socii, quamvis socius non est, § 2, p. 151 ; Heathcote v. Hulme, 1 Jac. & W. 122 ; Whittle v. M'Farlane, 1 Knapp, 311. — On tbis last occasion (which was an appeal from Jamaica) the Master of the Rolls (Sir John Leach) said : " It is impossible to main- tain the charge for commission, because it is in truth a charge by a partner for the collection of a partnership debt. How can a partner charge com- mission against a partner for the collection of a partnership debt, in which both of them are interested ? It is a misapprehension entirely, and there does not ajjpear any pretence for saying tliat there is any local usage in the island to sanction such a charge. If commission cannot be charged, of course interest upon commission cannot be charged. The Court will, there- fore, refer it back to the Court below, with a declaration, that no commis- sion could be charged, either for the collection of the debts of first or second partnership." See also Franklin v. Robinson, 1 Johns. Ch. 157; Bradford v. Kimberly, 3 Johns. Ch. 431 ; Thornton v. Proctor, 1 Anst. 94 ; Burden v. Burden, 1 Ves. & B. 170 ; Caldwell v. Leiber, 7 Paige, 483 ; {Stocken v. Dawson, 6 Beav. 371; Lyman v. Lyman, 2 Paine, C. C. 11; Washburn v. Goodman, 17 Pick. 519; Bradley v. Chamberliu, 16 Vt. 613; Dougherty v. Van Nostrand, HoiF. 68 ; Beatty v. Wray, 19 Penn. St. 516. See Newell v. Humphrey, 37 Vt. 265; Porter v. Wheeler, Id. 28L} 1 Poth. de Soc. n. 155, 156. 536 PARTNERSHIP. [cHAP. XIV. tamen ed, quce 'per defundiim inchoata simt, i^er heredem explicari dehent} § 333. But in other respects the French law does not seem to have followed out this just policy, and these enlarged principles of the common law, as to the rights of the partner upon the dissolution of the partnership. On the contrary, it seems silently, if not submissively, to have followed out the dictates of the E-oman law on the subject of mandates or agency, and the powers of partners ; ^ so that the dissolution of the partnership, in any manner whatsoever, is held to amount to a revocation of the implied powers and authorities of each partner, any further to admin- ister the concerns of the partnership, as the delegate or agent of the others. Accordingly, Pothier lays it down as clear, that, immediately after notice of the dissolution of the partnership, the power of each part- ner to act as the administrator thereof ceases ; and even a payment to one partner of the debts due to the partnership will be invalid, if the debtors have notice of the fact of the dissolution at the time of such pay- ment.^ Nay, the doctrine is pressed further ; and if the partnership expires by its own limitation, or by mere efflux of time, the like payment will be invalid, even without such notice ; because (it is said) those, who have any business with a partnership, ought to inform themselves of the tenure or duration of that partnership.'' So that, in fact, from the time of the dissolution, the partners become tenants in common of the property engaged in the partnership ; and if ♦ D. 17, 2, 40; Poth. Pand. 17, 2, n. 59. 2 Ante, § 95, 102, 109, and note ; Story on Ag. § 425-429 ; Poth. dc Soc. n. 156, 157. 3 Poth. de Soc. n. 157; Id. n. 155, 156. ♦ Poth. de Soc. n. 157. CHAr. XIV. 1 DISSOLUTION RIGHTS OF PARTNERS. 537 % the whole belonged to one, he is forthwith entitled to the whole profits and proceeds thereof.^ They can no longer proceed to administer the same separately ; and all that they can do is to require either an amicable and voluntary adjustment, and settlement, and division of the partnership concerns ; or, in default thereof, to apply to the proper tribunal for that remedial justice which is required to accomplish the same purpose. Each, therefore, has in effect an action or suit, like that of the Roman action, P7'o socio, or the Roman action, Commiciii dimdundo.^ Indeed, as we have seen, the Koman law did not, during the continuance of the partnership, clothe any partner, unless the power was specially delegated to him, with the power to adminis- ter the entire concerns and business of the partnership, or Avith any power to dispose of any part of the prop- erty thereof, except his own particular share.^ § 334. The foregoing considerations apply to the effects and consequences, as between the partners themselves, of a voluntary dissolution by their own mere act or will, or in conformity to their original stipulations. Let us, then, in the next place, proceed to consider the effects and consequences of such a dis- solution in relation to third persons. And, here, the preceding statements, respecting the liabilities of part- ners to third persons,'* will greatly abridge whatever might otherwise have been appropriate in this place. In the first place, the dissolution of a partnership, whether it be by the voluntary act or will of the par- ties, or by the retirement of a partner, or by mere 1 Poth. de Soc. n. 158, 160; Civil Code of France, art. 1865, 1872. 2 Poth. de Soc. n. 161-180; Civil Code of France, art. 1872; ante, § 223, 230. 3 Ante, § 95, 102, 109, and note ; Story on Ag. § 425-429. * Ante, § 126-168. 538 PARTNERSHIP. [cHAP. XIV. efflux of time, will not in any manner change the rights of third persons, as to any past contracts and transactions with, or on account of the firm ; but their obligation and efficacy and validity will remain the same, and be binding upon the partnership in the same manner, as if no dissolution had taken place. ^ In the next place, such a dissolution will not absolve the partners from liabilities to third persons, for the future transactions of any partners, acting for or on account of the firm, unless some one or more of the following circumstances occur. (1.) That the third persons dealing with, or on account of the firm, have due notice of the dissolution ; ^ or, (2.) That they have had no transactions whatsoever with the firm until after the dissolution;^ or, (3.) That the partnership was not general, but limited to a particular purchase, adventure, or voyage, and terminated therewith before the transaction took place ; ^ or, (4.) That the new transaction is not within the scope and business of the original partnership ; ° or, (5.) That it is illegal, or fraudulent, or otherwise void from its defective na- ture or character ; ^ or, (6.) That the partner, sought to be charged, is a dormant partner, to whom no credit was actually given, and who retired before the transac- tion took place.' ' Coll. on P. B. 1, c. 2, § 3, p. 75, 2d ed. ; Ault v. Goodrich, 4 Russ. 430 ; Gow on P. c. 5, § 2, p. 240, 241, 3d ed. * Ante, § 160-164 ; Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed. ; 2 Bell, Coram. B. 7, c. 2, p. 638-640, oth ed. ; Gow on P. c. 1, p. 20 ; Id. c. 5, § 2, p. 240, 248-251, 3d ed. ; Wats, on P. c. 7, p. 384, 385, 2d ed. ; Na- tional Bank v. Norton, 1 Hill, (N. Y.) 572 ; [Conro v. Port Henry Iron Co. 12 Barb. 27.] » Ante, § 160, 161. But see 2 Bell, Coram. B. 7, c. 2, p. 641, 642, 5th ed. See, also. Parkin v. Carruthers, 3 Esp. 248. * Ante, § 280, 321-323. ' Ante, § 126-128, 130. « Ante, § 130-132 ; Id. § 6. ' Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed. ; Id. B. 3, c. 3, § 3, p. 370, CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 539 § 335. The same rule as to the necessity of notice is adopted in the French law. And accordingly Pothier says, that if traders and artisans, who have been accus- tomed to furnish supplies to a partnership, continue, in good faith, after the dissolution of the partnership, of which they are ignorant, to furnish the like supplies to one of the partners on account of the partnership, all of the partners and their heirs will be bound therefor.^ It is observable, that Pothier puts, by implication, the very qualification which is insisted on in the preceding section ; for he confines the liability to the cases of per- sons, who had, before the dissolution, been accustomed to deal with the partnership. The same result, how- ever, would probably arise in all cases, where, notwith- standing the dissolution, the partners should still hold themselves out as partners, either expressly, or by allowing their names to stand openly as a part of the firm.^ § 336. In respect to the necessity of such a notice, the cases of a voluntary dissolution of the partnership, in any of the ways above mentioned, differ essentially from the cases of a dissolution by the death, or the bankruptcy (duly declared by public proceedings), of one or more of the partners ; for, in these latter cases, no notice whatsoever is necessary to be given of the dissolution to third persons, in order to exempt their estates from all responsibility for the acts and contracts of the other partners ; since the partnership is thereby dissolved by mere operation of law.^ The reason 371 ; Evans v. Drummond, 4 Esp. 89 ; Brooke v. Enderby, 2 Brod. & B. 70; Heath v. Sansoin, -4 B. & Ad. 172; Gow on P. c. 4, § 2, p. 251, 3d ed. ; ante, § 159. * Poth. de Soc. n. 157. - Ante, § 160, 161; Williams v. Keats, 2 Stark. 290; Parkin v. Car- ruthers, 3 Esp. 248. ' Coll. on P. B. 1, c. 2, § 2, p. 74; Id. B. 3, c. 3, § 4, p. 419, 2d ed. 540 PARTNERSHIP. [CHAP. XIV. seems to be, that the parties are thereby either totally incapable of acting at all, or at least of binding their estates ; and it is against public policy to allow the acts of the other partners to bind any persons, who are incapable either of acting at all, or of continuing any authority for such a purpose, or whose estates may otherwise be subjected to irreparable injury, or even to ruin. The same principle would probably be held to apply to other cases, creating by mere operation of law a positive incapacity ; such as the marriage of a female partner, or the attainder of a partner of felony,^ or the dissolution of the partnership by a public war.^ § 337. With these brief remarks, we may dismiss the consideration of the effects and consequences of a disso- lution of the partnership by the voluntary acts or stip- ulations of the partners, and may, in the next place, proceed to the consideration thereof in cases of bank- ruptcy.^ Bankruptcy (as we have seen) ]Duts an end Vullianiy v. Noble, 3 Mer. 593, 614; 2 Bell, Comm. B. 7, c. 2, p. 638, 639, 5tli ed. ; Gow on P. c. 5, § 2, p. 248 ; Id. c. 5, § 4, p. 348, 3d ed. ; ante, § 162. — Perhaps, in the case of bankruptcy, the reason why notice is not positively required to be given after the declaration of the bankruptcy, is its supposed notoriety, and that all the world are bound to take notice of it. Certainly there is no pretence to say, that a mere secret act of bankruptcy, upon which no public proceedings have been or can now be had, will produce the like effect, unless notice be given. See Lacy v. Woolcott, 2 Dow. & R. 458. See ante, § 313; 2 Bell, Comm. B. 7, c. 2, p. 641, 5th ed. ; Gow on P. c. 5, § 3, p. 306, 8d ed. ; Thomason v. Frere, 10 East, 418 ; Franklin V. Lord Brownlow, 14 Ves. 550, 557, 558 ; {ante, § 319 ; post, § 343 ; per Big- elow, C. J., in Marlett v. Jackman, 3 All. 287, 296 : " The true distinction is not that no notice is requisite when the dissolution takes place by opera- tion of law, but only when it is effected by circumstances or an event of a public or notorious nature, of which all men in the exercise of due dili- gence are required to take notice."} ' .Ante, § 303, 306. * Griswold v. Waddington, 15 Johns. 57 ; s. c. 16 Johns. 438 ; ante, § 303, 304, .306, 315. ^ It is not within the scope or objects of these Commentaries to treat of the various topics connected with the issuing of the commission in bank- ruptcy, the proof of debts, and other proceedings thereon. They properly CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 541 to the partnership by operation of law, and immedi- ately, upon the due declaration thereof, by relation back from the time when the act of bankruptcy was committed.^ From that period, therefore, the bankrupt ceases "to have any power or dominion over his prop- erty and effects in the partnership ; and it is trans- ferred to the assignees, who are appointed under the commission, and they succeed to all his rights and interests therein.^ From the same period also the as- signees are deemed tenants in common with the other partners in all such property and effects, subject to the rights and claims of the other partners.^ § 338. Another consequence, flowing directly from the preceding considerations, is, that all future actions at law, to be brought on account of the partnership property, or contracts, or rights, must be brought jointly in the names of the solvent partners, and the assignees of the bankrupt, who succeed equally to his rights of action, as well as to his rights of property ; for the assignment not only transfers the property of the bankrupt, but also all his rights of action, to the belong to a different Treatise, upon the practice in bankruptcy. The dis- cussion of the subject of joint and several commissions in bankruptcy, and the proceedings thereon, seems also properly to belong to sUch a Treatise. Those who wish for more information thereon, can consult Coll. on P. B. 4, c. 2, § 1-11, p. 595-678, 2d ed., and Id. B. 4, c. 3, § 1-8, p. 686-718, and Gow on P. c. 5, § 3, p. 256-348, 3d ed. ; {also Avery & Hobbs on the U. S. Bankrupt Law, § 36. | 1 Ante, § 313, 314; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Id. c. 5, § 3, p. 805-307; Coll. on P. B. 4, c. 1, p. 590, 591, 2d ed. ; Barker v. Goodair, 11 Ves. 78 ; Dutton v. Morrison, 17 Ves. 193 ; In re Wait, 1 Jac. & W. 605; Thomason v. Frere, 10 East, 418. {By the U. S. Bankrupt Law of 1867, § 14, the assignment relates back only to the commencement of the proceedings in bankruptcy. } " Ante, §313, 314; 3 Kent, 58; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Id. c. 5, § 3, p. 298, 299 ; Thomason v. Frere, 10 East, 418. 3 Ante, § 313, 314; 3 Kent, 58, 59; Gow on P. c. 5, § 3, p. 266, 267, 3d ed. ; Id. c. 5, § 3, p. 299, 305 ; Coll. on P. B. 4, c. 1, p. 579, 580, 2d ed. ; Holderness v. Shackels, 8 B. & C. 612. 542 PARTNERSHIP. [cHAP. XIV. assignees.^ On the . other hand, all actions at law by thh'd persons against the partnership, may be, and, indeed, ordinarily should be, brought against all the partners, including the bankrupt ; and the assignees should not in general be made parties thereto, since they are not liable thereto, but are to account only under the proceedings in bankruptcy.^ The case may be, and often is, very different in suits in equity, brought by or against the assignees.^ § 339. On the other hand, from the time of the act of bankruptcy, and by relation thereto, the bankrupt becomes incapable of acting for, or binding the part- nership by his acts ; and in a general sense, and with few exceptions, all his acts become from henceforth void and inoperative. He cannot in any manner sell, or otherwise dispose of the partnership effects ; he cannot contract debts or other engagements, binding on the partnership ; and he cannot compel any pay- ments to the firm, or give any receipt or release there- for.^ In respect to the other solvent partners, they 1 Gow on P. c. 0, § 3, p. 341, 3i2, 3d ed. ; Coll. on P. B. 3, c. 5, § 1, p. 471 ; Id. B. 4, c. 1, p. 579 ; Id. B. 4, c. 5, p. 696, 697, 701, 702, 2d ed. Thomason v. Frere, 10 East, 418 ; Graham v. Robertson, 2 T. R. 282 Franklin v. Lord Brownlow, 14 Ves. 557 ; 1 Chitty on PI. p. 27, 28, 6tli ed. Com. Dig. Bankrupt, D. 29 ; |U. S. Bankrupt Act of 1867, § 16.} - 1 Chitty on Pi. p. 62, 63, 6th ed. ; Id. p. 104 ; Id. p. 176 ; Wats, on P. c. 8, p. 434, 2d ed. ^ See Story, Eq. PL § 153-158, 439 ; Cook's Bankrupt Law, Vol. 1, c. 14, § 1-3, p. 553-561, 4th ed. ; Gow on P. c. 5, § 4, p. 352, 3d ed. ; Bailey v. Vincent, 5 Madd. 48. — The full consideration of this subject properly be- longs to a Treatise on Pleading, and is therefore omitted in this place. * Ante, § 313, 314; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Id. c. 5, § 8, p. 299, 304-306; Coll. on P. B. 4, c. 1, p. 589, 590, 2d ed. — Mr. Gow has very well stated the general doctrine, and cited some cases to illustrate it. " We have seen," says he, " in a former part of this work, that an act of bankruptcy committed by one partner, Avhen followed by a com- mission, dissolves the partnership by relation to the time when the act of bankruptcy was committed. The partner, therefore, who has committed the act oi" bankruptcy, cannot afterwards communicate to strangers any CHAP. XIY.] DISSOLUTION RIGHTS OF PARTNERS. 543 also are, by the bankruptcy, disabled from engaging in any new dealings in future on account of the part- nership.^ But in respect to past transactions, which rights, either against the firm, or the joint property ; because the commission and assignment retrospectively deprive him of all capacity of acting. They determine his power to bind the firm by relation to the date of his bank- ruptcy, and all his rights, from that time, passing to his assignees, he ceases to have any further control over the partnership, or the joint property. And the statutes concerning bankrupts make an entire, not a partial avoid- ance of the bankrupt's acts, as well in respect of his partner's moiety as his own. Therefore, where a partner, on the eve of his bankruptcy, volun- tarily deposited goods with a third person for a creditor of the firm, and the deposit falsely purported to be founded upon a supposed sale, the creditor, after the bankruptcy of the partner, having received information of the deposit, declared his acceptance of it ; and in an action of trover by the as- signees under a joint commission to recover the goods, it was held, that the creditor could not resist their claim, inasmuch as the deposit was not com- pleted until after the bankruptcy of the party depositing, at which time the partnership was at an end. So, where two of three partners affecting, but without authority, to bind ^the firm, by deed assigned a debt due to them from a correspondent abroad, without his privity, to a creditor at home, and afterwards, by the direction of such correspondent, drew a bill of exchange in the name of the firm, upon his agent here, which was accepted, payable to their own order, for the amount of the debt ; and then the two partners, having in the mean time committed acts of bankruptcy, indorsed such bill to the creditor of the firm in part satisfaction of his debt, and afterwards separate commissions were sued out against the two partners, who were declared bankrupts, and their effects assigned, the other partner being all the time abroad, it was held, that by such an indorsement of the bill by the two, after acts of bankruptcy committed by them, though before the commission issued, nothing passed to the creditor ; for the bankrupt partners had, by relation, ceased, at the time of such indorsement, to have any control over the joint stock as partners, and therefore could not bind either the property of their assignees, or of their solvent partner." Gow on P. c. 5, § 3, p. 304-306, 3d ed. ; Hague v. Rolleston, i Burr. 2174 ; Thomason v. Frere, 10 East, 418. But see Lacy v. Woolcott, 2 Dow. & R. 458 ; Coll. on P. B. 4, c. 1, p. 582-588, 2d ed. The exceptions to the gen- eral doctrine stand principally upon the statutes of bankruptcy, saving from the operation of the general rule bona Jide contracts, and payments made by the bankrupt to and with persons who have no notice of the act of bank- ruptcy. Coll. on P. B. 4, c. 1, p. 589, 590, 2d ed. ' Ante, § 313, 314 ; Gow on P. c. 5, § 3, p. 306, 307, 3d ed. ; Fox v. Han- bury, Cowp. 445; Harvey v. Crickett, 5 M. & S. 336; Murray v. Murray, 5 Johns. Ch. 60, 78; Hoxie v. Carr, 1 Sumn. 173; Coll. on P. B. 4, c. 1, p. 587, 588, 2d ed. ; Thomason v. Frere, 10 East, 418. 544 PARTNERSHIP. [CHAP. XIV. were consummated at the time of the bankruptcy, they are not prevented from exercising a due control over the partnership effects, and of applying them honajide to the payment and discharge of the partnership debts and obligations.^ § 340. Indeed, so completely does the bankruptcy of one partner sever the joint rights and interests of the partnership, that even an execution, issued against the partnership effects, subsequently to the act of bank- ruptcy, will be invalid and inoperative upon those effects ; for the act of bankruptcy overreaches the ex- ecution : and it is not competent for the execution creditors to disappoint the arrangements, made in bankruptcy, for the equal distribution of the effects of the partnership among all the creditors ; since it would defeat the just policy of the bankrupt laws.^ The sub- ject of the due administration of the partnership assets, and other incidental topics, will hereafter occur in another connection, when we come to treat of the final adjustment and settlement, and winding up of the part- nership concerns. § 341. As to the solvent partners, in case of the bankruptcy of one or more of the partners, it is clear, that they retain all their original rights, powers, and 1 Ante, § 325-328 ; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Coll. on P. B. 4, c. 1, p. 579-588, 2d ed. — It seems that the assignees of the bankrupt are clothed with the like reciprocal rights and authorities. Coll. on P. B. 4, c. 1, p. 578-580, 2d ed. See, also, Gow on P. c. 5, § 3, p. 298-300, 3d ed. ; Id. p. 308, 309; {Lind. on P. 950; Ex parte'Rohmson, 3 Deac. & Ch. 376 ; Fraser v. Kershaw, 2 Kay & J. 496 ; Morgan v. Marquis, 9 Exch. 145. But see Lind. on P. 948; Alien v. Kilbre, 4 Madd. 464.} " Coll. on P. B. 4, c. 1, p. 590-592, 2d ed. ; Gow on P. c. 5, § 3, p. 308, 309, 3d ed. ; Barker v. Goodair, 11 Ves. 78; Button v. Morrison, 17 Ves. 193; In re AVait, 1 Jac. & W. 605. {An attachment of the property of a partnership by the trustee process is not dissolved by the subsequent bank- ruptcy of one of the partners after a dissolution of the partnership. Fern V. Gushing, 4 Cush. 357.} CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 545 authorities over the management of the concerns of the partnership, excepting only, that they are not at liberty any further to carry on the business of the partnership, or to make any new contracts or other en- gagements, or to incur any liabilities on account there- of, or to employ the cajDital stock in trade. If they do, it will be a violation of duty, and at their own risk ; and they may, at the option of the assignees, be com- pelled to account for the profits, if any are thereby made, or be charged with interest upon the share of the bankrupt, and they must bear all the losses.^ But the 1 Coll. on P. B. 2, c. 3, § 4, p. 221-227, 2d ed. ; Gow on P. c. 5, § 3, p. 306-308, 3d ed. ; Crawshay v. Collins, 15 Ves. 218 ; s. c. 2 Russ. 325 ; Brown ?;. De Tastet, Jac. 284; {Lind. on P. 954-957} ante, §325-328. — In Brown v. De Tastet, Jac. 295, Lord Eldon used the following lan- guage : " The Master, in the execution of the decree, has, I am informed, proceeded upon the case of Crawshay v. Collins. In that case, three per- sons, Collins, Noble, and Boughton, carried on the business of pump and engine manufacturers in partnership together. In 1804, a commission of bankrupt issued against Noble, and in 1805 the bill was filed by his as- signees, claiming three-eighths of the profits of the business, which remained unaccounted for at the time of the bankruptcy, or which had accrued since, and also of two patents, and the profits derived from them. The question, therefore, was, whether the assignees of Noble were entitled to the same relief, that he Iiimself would have been entitled to, if he had not become a bankrupt ; a bankruptcy dissolving a partnership in the same manner as death, in this respect only, that assignees have rights somewhat similar to those which the representatives have, where the partnership is dissolved by death. It was argued, that in both cases the demand to be made by the rep- resentatives of a deceased partner, or the assignees of a bankrupt, was lim- ited to that sum of money, which, if the account had been taken at the dis- solution, would have been found due from the surviving or solvent partner, leaving all the propert}^ in their hands. On the other hand, it was argued that, in many cases, that could not be the law ; for instance, if immediately after the bankruptcy, all the stock, which in that case consisted of manufac- tured goods, pumps, and such things had been sold for a siun of money, three-eighths of which would have been more than what was due to the bank- rupt, taking the account as matter of debt, then the assignees, being certainly tenants in common till the stock was converted, and the identical stock being sold, and three-eighths of it yielding more than what was due to the bank- rupt at the time of his bankruptcy, as the calculated value, what pretence could there be for saying that the assignees should not have a proportion of 35 546 PARTNERSHIP. [cHAP. XIV. solvent partners have a lien upon the partnership prop- erty and effects for the payment of all the debts and charges due by the partners, as well as for their own distributive share of the surplus.^ They may, therefore, notwithstanding the act of the bankruptcy of the partner is known to them, proceed, bona fide, to make payments out of the partnership funds in discharge of the joint debts and other obligations of the partnership ; ^ al- though, if they are guilty of any excess, in this partic- ular, injurious to the rights of the assignees, they may be restrained by an injunction by a Court of Equity.^ § 342. In the next place, then, as to the effects and consequences of a dissolution by the death of one of the partners. This subject may properly be considered what it sold for ? But it is asked, Will you say, that in all cases, where there is a jjavtnership, such is to be the consequence of carrying on the busi- ness, that the profits shall be divisible in the same way as if the partner had not died, or had not become bankrupt ? I say, no ; I do not mean to say, that it will be so in all cases ; but on the other hand, I will not deny that it may be the law in some cases. The general principle, I should say, ought to be this ; that, as it is quite competent to the parties to settle the accounts and to mark out the relation between themselves, as creditors or debtors, so where there is a non-settlement of the account (though a settlement may sometimes introduce great hardships and difficulties), yet those who choose to employ the property of another for the purposes of their trade, exposing it to all the risks of insolvency or bankruptcy, have no right to say that the account shall not be taken, if it can be taken without incurring difficulties which might embarrass the house to such an extent as to make it unjust to demand it." [!N'eitber has the solvent partner an absolute legal right to the sole administration of the assets ; although a Court of Equity would ordinarily appoint him receiver, if his capacity and integrity were unquestioned. Hub- bard V. Guild, 1 Duer, 662.] {See Freeland v. Stansfeld, 2 Sm. & G. 479.} 1 Ante, § 326 ; {post, § 405-408; Parker v. Muggridge, 2 Story, 334.} 2 Coll. on P. B. 4, c. 1, p. 582-589, 2d ed.; Harvey v. Criekett, 5 M. & S. 336; ante, § 325-328, 339, and note. {In Murray v. Murray, 5 Johns. Ch. 60, it was held, that solvent partners have no right to have partner- ship funds in the possession of the assignee of a bankrupt partner given up to them, and that the equity of the assignee is at least as high as that of the solvent partners.} ' Ante, § 224, 225, 329, 341, and note. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 547 under two aspects ; (1.) As to the partners themselves; (2.) As to third persons. In the first place, as to the partners themselves. And, here, the remark already made becomes important ; that a partnership is not, strictly speaking, either a joint-tenancy or a tenancy in common ; and that it is an universally established principle of the whole commercial world, that the prop- erty and effects thereof do not belong exclusively to the survivors ; but they are to be distributed between them and the representatives of the deceased, in the same manner as they would have been upon a volun- tary dissolution 'hiter vivos.^ In short, the universally acknowledged maxim on this subject is : Jus accreseendi inter mevQatoresjpro heneficio commercii locum nonhabet.^ The maxinl has been since expanded, and is now con- stantly construed, so as to embrace all sorts of partner- ships between two or more persons for their joint ac- count and benefit, whether they are merchants or not, and whatever may be the nature of the trade, or busi- ness, or employment, in which they are engaged.^ » Aute, § 89, 90. ^ Qq Ljtt_ ^32^ a. ^ Ante, § 90 ; Jeffereys v. Small, 1 Vern. 217. [In a late case in the Ex- chequer, it was extended to manufacturers and to trade fixtures. Baron Parke, in a learned judgment observed : " In the earlier books we do not find any trace of the doctrine of survivorship inter mercatores, in chattels, but some against the now admitted doctrine of survivorship as to remedies or choses in action. The first cited is from the Year Book, 38 Edw. 3, 7, tit. 'Accompt' (which is the authority mentioned in Br. Ab., ' Joint-tenants,' pi. 11). There Kirton, a sergeant, arguing that in an action of account against a bailiff of two, not merchants, the executors of both ought to join, says, that if two merchandise in common, the executors of each shall have a moiety, so they ought in the case of an action. But Knyvet, J., says, ' It is not alike of a chattel in possession and a chattel in action, for the action can- not be severed, and his executors cannot join in the action with the other who survived.' The language indeed is ' I'aut ne poit my est' seve,' but ' I'aut' seems a false print — it may, however, mean the '.other,' or ' latter,' i. e., the chose in action. It is afterwards said that the writ, which was by the execu- tors of the survivor, was adjudged good ; and a sentence is added, which must be either a misprint, or refer to the right of action — it is said, ' and this is the 548 PARTNERSHIP. [CHAP. XIV. § 343. We have already seen, that a dissolution by death puts an end to the partnership, from the time of law of two merchants who have goods in common ; if one die, the other shall have the whole by survivorship.' The next authority is Lord Coke, 1 Inst. 182, a, who puts the joint wares and merchandise, debts and duties, of merchants on the same footing, and so does Noy, 55 ; and it is argued, that if they be on the same footing, as the remedy clearly survives, the title to the chattels does also. But Lord Coke clearly means, in the case of merchants, not to allow a survivorship in both wares and duties, but to disallow it in each ; and it was afterwards made a question, notwithstanding what is said in the Year Book, 38 Edw. 3, whether the survivor and executor of the deceased ought not to join in an action for a chose in action in the lifetime of the deceased. It was held by the Court, in Hall v. Huffam, 2 Lev. 188, in consideration of the authority of Lord Coke in this passage, that they ought to join in an ac- tion for goods sold by two joint merchants ; also, there is a precedent in Lutw. 1493, of an action by the executors of a joint merchant joining with the sur- vivor for taking the goods of the partnership in the life of the deceased. Subsequently, in the case of Martin v. Crompe, 1 Ld. Raym. 340 ; 1 Salk. 444, it was held to be clear, in accordance with the doctrine in the Year Book, 38 Edw. 3, that the right of action of two merchants survived, that the survivor should take the whole, and account to the administi-ator of the deceased, and that the administrator could not join ; for Lord Holt said that it would make strange confusion, that one should sue in his own right, and the other in another's ; and it has been undoubted law, ever since that decision that the remedy sui'vives. Lord Eldon, in Ex parte Ruffin, 6 Ves. 119, 126, says, that ' in the law of merchants, the legal title in some respects, in all the equi- table title, remains, notwithstanding the survivorship ; ' and the same doctrine was acted upon in the Court of lUng's Bench, in the case of The King v. The Collector of Customs at Liverpool, 2 M. & S. 223, which case proceeded entirely on the ground that the legal title did not survive in the case of a part- nershij) in ships. On the other hand, the authority is very slender, that the title survives at law, and that the executor of the deceased person can only claim in equity. The most direct is a note of Lord Tenterden's in his Trea- tise on Shipping (p. 97), in which it is said, the rule 't/w^ accrescendi inter mercatores locum nonhabet,' is only enforceable in a Court of Equity, — but there is no prior authority quoted for that position. Mr. Justice Story (p. 68, Am. ed. of Abbott) says that this note was not written by Lord Tenterden, but that seems not to be the case, from a note of my brother Shee (p. 97, c. 3, 7th ed.). This note may have been founded on the authority of the doc- trine in some equity reports where a Court of Equity has granted relief on survivorship. For instance, in Lake v. Gibson, 1 Ab. Ca. Eq. 291, the Master of the Rolls, Sir Joseph Jekyll, says, that 'in all cases of a joint undertaking, either in trade or any other dealing, the joint owners are to be considered as ten- ants in common, and the survivors as trustees for those who are dead ;' but this observation follows a statement respecting a joint pui-chase of land, where the CHAP. XIV. J DISSOLUTION RIGHTS OF PARTNERS. 549 the occurrence of that event, whether known or un- known, or whether third persons have or have not difference is pointed out between purchasing in equal shares, where there is a survivorship, and where the portions are not equal, where there is none in equity, however the legal estate may survive at law. The latter indicates that the joint-tenants do not mean to have an equal chance of survivorship, but that one shall hold • in trust for the other in proportion to his share. There is no dictum that there is a survivorship at law, in all cases, between merchants. A similar doctrine to that in Lake i'. Gibson had been laid down before in Jeffereys v. Small, 1 Vern. 21 7, a. D. 1 683, by Lord Keeper Guildford, who is e^^dently treating of equities only, and who states the rule of equity to be, that if two persons are joint-tenants by gift or devise, there is a survivorship ; the parties are liable to all the consequences of the law ; — but as to any joint un- dertaking, in the way of trade or the like, it was otherwise ; and he decreed that the plaintiff should be relieved. The dicta of judges in some subse- quent cases were cited, which admit of the same explanation. Lord Eldon, indeed, in Crawshay v. Collins, 15 Ves. 218, 227, speaking of partner- ship, says it determines ' by the death of one partner, in which case the law says that the property survives to the others. It survives as to the legal title in manij cases; but not as to the beneficial interest.' Now if Lord Eldon is speaking of choses in action, it is perfectly correct, and it is by no means clear that he meant any thing more. Upon the whole, there is no sat- isfactory authority for the position that the title to partnership chattels sur- vives at law, and the authorities the other way greatly predominate. It may be added that Mr. Justice Story on Partnership, § 342, treats it as the uni- versally acknowledged rule, that upon the dissolution of the partnership by death, the property and effects thereof do not belong exclusively to the sur- vivors, but they are to be distributed between them and the representatives of the deceased, in the same manner as they would have been upon a volun- tary dissolution inter vivos. We consider, therefore, that the first point made on the part of the plaintiffs ought to be decided against them. The next question is, whether the same law which excepts the goods of vierchants, for the benefit of commerce, from the general law of joint-tenancy, extends to those of manufacturers. At a very early period the term ' merchant' was very hberally construed — it was held to include shopkeepers. 2 Brownl. 99. The same principle of the encouragement of trade applies to manufacturers, in partnership and every other description of trade. Story, § 342. It is then said that it does not extend to fixtures. But trade fi.xtures, which are removable, are part of the stock in trade, and clearly fall within the rule as to partnership stock, and all these fixtures were of that character. There- fore we are of opinion that one third of the fixtures seized belongs to the executors of William, and that they would be seizable under an execution by^. fa. against his executor de bonis testatoi-is, if there were no other cir- cumstances in the case. But it was urged on behalf of the plaintiffs, that though the right to the chattels does not survive, the surviving partner or 550 PARTNERSHIP. [cHAP. XIV. notice thereof.^ So that it completely puts an end to the power and authority of the surviving partners to partners have of necessity a jus dispo7iendi, for the purpose of winding up the partnership concerns, and that the conveyance by Abraham was within the scope of that authority, and transferred the legal title in all. In the civil law such a jiis disponendi prevails, in the case of both agents and partners of deceased persons. ' Si, vivo Titio, negotia ejus administrare coepi, inter- mittere, niortuo eo, non debeo : nova tamen inchoare necesse mihi non est ; Vetera explicare, ac conservare necessarium est ; ut accidit, cum alter ex sociis mortuus est : nam qusecunque prioris negotii explicandi causa geruntur, nihilum refert, quo tempore consummentur, sed quo tempore inchoarentur.' D. 3, 5, 21, 2. In our law, this rule does not exist with respect to agents of deceased pi'incipals ; and with respect to surviving partners, though there are expressions of text-writers (Story on P. § 344 ; 3 Kent, 63) , and also of Judges (Harvey v. Crickett, 5 M. & S. 336 ; see Woodbridge v. Swann, 4 B. & Ad. 633 ; Beak v. Beak, 3 Swans. 627 ; Lord Nottingham's MSS., and 1 Swans. 507, note), which have that aspect, there is no clear, satisfactory authority that the surviving partner has a power, by virtue of the partnership relation only, to transfer the legal title to the share belonging to the executors of the deceased, to a third person, leaving the executors to pursue their reme- dy against the survivor, if that authority is improperly exercised. It is clear that the legal title to the share of the survivor passes, and the pur- chaser, therefore, is at all events tenant in common with the executor ; and as the law allows no right of action to one tenant in common against anoth- er, so long as the subject of the tenancy exists, and is capable of recaption, that circumstance will explain all the decisions on the subject, including Harvey v. Crickett, 5 M. & S. 836 ; see Woodbridge v. Swann, 4 B. & Ad. 633. In Harvey v. Crickett the dicta of the Judges go much further ; prob- ably Mr. Justice Bayley mistook the opinion of Lord Kenyon in Smith v. Oriell, 1 East, 368, and we doubt whether surviving partners have a power to sell, and give a good legal title to the share belonging to the executors of the deceased partner, when they sell in order to pay the debts of the deceased and of themselves ; but, be that as it may, we think it clear, that the survivors could have no power to dispose of it otherwise than to pay such debts, certainly not to mortgage that share together with their own (for that is the real nature of this transaction), as a security for a debt principally due from the surviving partners, and in part only from the de- ceased, and in order to enable them to continue their trade. At all events, therefore, this transaction was not within the scope of any implied authori- ty which the surviving partners may have, to wind up the affairs of the part- nership} ; and therefore this conveyance did not pass the share of the de- ceased to the plaintiffs, by virtue of any implied authority in the survivors." Buckley v. Barber, 6 Exch. 164 ; 1 Eng. L. & Eq. 506.] ' Ante, § 319, 336. — There seems to be an exception as to the necessi- ty of such a notice, when the surviving partners or one of them are execu- CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 551 carry on for the future the partnership trade or busi- ness, or to engage in new transactions, contracts, or liabiUties on account thereof.^ It is, therefore, the duty of the surviving partners henceforth to cease altogether from carrying on the trade or business thereof ; ^ and if they act otherwise, and continue the trade or business, it is at their own risk, and they will be liable, at the option of the representatives of the deceased partner, to account for the profits made thereby,^ or to be charged with interest upon the de- ceased partner's share of the surplus, besides bearing all the losses.'^ tors of the deceased partner ; for then, in order to exonerate bis estate from future liability, it is said, that due notice ought to be given of his death to the creditors of the firm, because in the absence of such notice, the executor partner, in his character of personal representative of the de- ceased, has power to bind his estate. Vulliamy v. Noble, S Mer. 593, 614. But is this doctrine maintainable, except in cases where the usual articles of agreement authorized the executor to carry on the partnership ? What au- thority otherwise can he have to bind the testator's estate ? ' Gow on P. c. 5, § 4, p. 351, 352, 3d ed. ; 2 Bell, Comm. B. 7, c. 2, p. 637, 638, 643, 644; 3 Kent, 63. 2 [See Travis v. Milne, 9 Hare, 141.] ^ [See Chambers v. Howell, 11 Beav. 6, when they will not be liable for profits.] * See Willett v. Blanford, 1 Hare, 253; Coll. on P. B. 2, c. 1, § 1, p. 79, 2d ed.; Id. B. 2, c. 3, § 4, p. 221-226; Booth v. Parks, 1 Molloy, 465; Crawshay v. Collins, 15 Ves. 218; s. c. 2 Russ. 325; Brown v. Litton, 1 P. Wms. 140; [Ogden v. Astor, 4 Sand. 311 ; Goodburn v. Stevens, 1 Md. Ch. Dec. 420;] Hammond v. Douglas, 5 Ves. 539; Brown v. De Tastet, Jacob, 284, 292; Heathcote v. Hulme, 1 Jac. & W. 122; 3 Kent, 64; ante, § 329; {§ 341, 349. On advantages derived from the partnership name and good-will see § 99, 100. See also Lind. on P. 830 ; Willett v. Blanford, 1 Hare, 253 ; Stocken v. Dawson, 6 Beav. 371 ; s. c. 9 Beav. 239; 17 Law J. n. s. Ch. 282; Rice v. Gordon, 11 Beav. 265; Wedderburn v. Wedderburn, 2 Keen, 722; s. c. 4 Myl. & C. 41 ; 22 Beav. 84; Featherstonhaugh v. Turner, 25 Beav. 382; Simpson v. Chapman, 4 De G. M. & G. 154; Townend v. Townend, 1 GifF. 201 ; Washburn v. Goodman, 17 Pick. 519 ; Shelly v. Hiatt, 7 Jones, Law, 509. } — Where an election is made to have a decree for a share of the profits, there it would seem that the surviving partners are, or at least may be, entitled to all just allowances and deductions, and even to some com- 552 PARTNERSHIP. [cHAP. XIV. § 344. But here, also, the same qualifications and limitations of the doctrine already stated, with refer- ence to the rights, duties, powers, and authorities of the partners, in cases of a dissolution by voluntary consent, or by efflux of time, or by bankruptcy, apply to cases of the surviving partners.^ Although, as to future dealings, the partnership is terminated by the death of one partner ; yet for some purposes it may be said to subsist, and the rights, duties, powers, and authorities of the survivors remain, so far as is neces- sary to enable them to wind up and settle the affairs of the partnership.^ And the ordinary rule is, that upon the dissolution of a partnership by death, the surviving parties are entitled to close up the afi"airs of pensation for their skill and personal services. {§ 331. } Lord Eldon, in Craw- shay V. Collins, 2 Russ. 325, 345, said : " And I cannot bring myself to think, that, if it be clearly made out, that a business is carried on with the property, which belonged to a deceased partner, for instance, by the surviving partner, and no particular circumstances occur to vary the rule, the mere accident of one man surviving the other can authorize him to say, ' I shall carry on the trade by the application of the funds of the partnership, at the hazard of the funds of the partnership, and I shall have the whole of the profits, and you shall have no share of them.' There may, undoubtedly, be occasion for making claims in the nature of just allowances; but I cannot bring myself to think, that the interest, which at law survives in a continuing partnership, survives in such a sense as to cut down the rule of equity, and that the con- tinuing partners shall have to account for nothing, but the value of what the share was at the time of the death or bankruptcy of the other partner. Even if you were to lay down the rule, in that way, still you would have to ask yourself, how is that value to be ascertained ? It cannot be done by the surviving partner choosing to say, ' I shall take it at such a value.' There must be some way of valuing it, so as to give the party retiring the complete value ; and there must be some way, in which this Court will direct that valuation to be made." See also the remarks of the same learned Judge in Crawshay v. Collins, 15 Ves. 218, 226-228, and 2 Russ. 325, cited ante, § 322, note, and ante, § 343, note ; Gow on P. c. 5, § 2, p. 254, 3d ed. ; Id. c. 5, § 4, p. 355 ; Coll. on P. B. 2, c. 3, § 4, p. 226, 228, 229, 2d ed. ^ Ante, § 324-328. {On the dissolution of a firm of attorneys by the death of one of the members, see McGill t'. McGill, 2 Metcalfe, (Ky.) 258.} " Evans v. Evans, 9 Paige, 178; ante, § 328 a. {See Bank of N. Y. v. Vanderhorst, 32 N. Y. 553; Hebcrton v. Jeijherson, 10 Penn. St. 124.} CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 553 the firm.^ They have, therefore, a right to receive the debts due to the partnership,^ and, on the other hand, to apply the partnership assets and effects in discharge of the debts and other obhgations due by it.^ However, if there be any danger of abuse or positive misappli- cation of those funds by the surviving partners, a Court of Equity will interpose, and restrain it by injunction, and even appoint a receiver, upon the application of the representatives of the deceased.'* * Evans v. Evans, 9 Paige, 178. 2 {Phillies V. Philips, 3 Hare, 281.} ' Ante, § 325-328, 341; 2 Bell, Comm. B. 7, c. 2, p. 637, 638, 643, 644, oth ed. and § 328, note, where the language of Mr, Bell is cited. Coll. on P. B, 2, c. 2, § 2, p. 130, 2d ed. ; Wood v. Braddiek, 1 Taunt. 104 ; Hutchinson v. Smith, 7 Paige, 26 ; Evans v. Evans, 9 Paige, 178. [See Buckley v. Barber, 6 Exch. 164; 1 Eng. L. & Eq. 506.] {In Missouri it has been held that a surviving partner can transfer a promissory note given to the partnership. Bredow v. Mutual Savings Inst. 28 Mo. 181. Secus, if the dissolution be voluntary and not caused by death, though one of the partners die after dissolution and before transfer. Mutual Savings Inst. v. Enslin, 37 Mo. 453. A note payable to the order of a firm was indorsed in the name of the firm by one of the partners who afterwards died : Held, that the delivery of such note by the surviving partner did not pass the title. Glasscock v. Smith, 25 Ala. 474. In Pennsylvania it has been held, that a surviving partner may sell goods consigned to the firm for sale before the death of his co-partner, so as to bind the estate of such partner for the price received for such goods. Heberton v. Jepherson, 10 Peun. St. 124. See § 322, and notes. } * Gow on P. c. 5, § 2, p. 230, 231, 3d ed. ; Id. c. 5, § 4, p. 356, 357; Philips V. Atkinson, 2 Br. C. C. 272, and Mr. Belt's note ; Coll. on P. B. 2, c. 3, § 4, p. 226, 2d ed. ; Id. B. 2, c. 3, § 5, p. 235 ; Id. B. 4, c. 1, p. 588 ; Hartz V. Schrader, 8 Ves. 317; Estwick v. Conningsby, 1 Vern. 118; Burden v. Burden, 1 Ves. &B. 170; 3 Kent, 63; 2 Bell, Comm. B. 7, c. 2, p. 645, 5th ed. ; 1 Story, Eq. Jur. §672; ante, § 228, 231 ; Evans r. Evans, 9 Paige, 178 ; {§ 330 ; Morison v. Moat, 9 Hare, 241 ; Madgwick v. Wim- ble, 6 Beav. 495 ; Hawkins v. Hawkins, 4 Jur. x. s. 1044 ; Walker v. House, 4 Md. Ch. 39 ; Bilton v. Blakely, 7 Grant, (U. C.) 214. If the estate of a deceased person consists of his share in a business which he was carrying on in partnership at the time of his death, and which the sui-viving partner continues to carry on, an administrator pendente life will not be appointed by the probate court against the wishes of such partner, unless a strong case is made, that he is dealing improperly with the business. Horrell v. Witts, Law Rep. 1 P. & D. 103.} 554 PARTxNERSHIP. [cHAP. XIV. § 345. And, here, we have an analogous rule promul- gated in the Roman law in the case of agency, as well as in the case of partnership. Si, vivo Titio^ negotia ejus adtninistra^^e coepi, interinittere, mortuo eo, non deheo. Nova tamen inchoare necesse mihi non est; Vetera exjjUcare ac conservare necessarium est ; ut acci- dit, cum alter ex sociis mortuus est. Nam qucecunque prioris negotii explicandi causa geruntur, niliHum refert, quo tempore consummentur, sed quo tempore inchoaren- iur} § 346. One of the consequences, then, of a dissolution of a partnership by death (under the qualification and limitations above suggested) is, that the personal repre- sentatives of the deceased become tenants in common with the survivors of all the partnership property and effects in possession.^ We say, the partnership property and efiects in possession ; for there is at the common law a material distinction between such property and effects in possession, and ehoses in action, debts, and other rights of action, belonging to the partnership. The latter, at law, belong to the surviving partners ; ^ and they possess the sole and exclusive right and remedy to reduce them into possession ; although, w4ien so recov- ered, the survivors are regarded as trustees thereof, for ' D. 3, 5, 21, 2; Poth. Pand. 3, 5, n. 50. * Gow on P. c. 5, § 4, p. 351, 3d ed. — What, properly speaking, constitutes partnership property, has been already in part considered, and will occur again incidentally in another connection hereafter. The subject as to the good-will of an establishment7~and of the right to use the firm name by the surviTing partners, after the death of one partner, has been already adverted to. Ante, § 98-100, and note, Ibid. ; Lewis v. Langdon, 7 Sim. 421. (^ ^ {And he may recover in trover against the administrator of the deceased ' partner for notes due the partnership which were in the possession of the deceased at the time of his death. Stearns v. Houghton, 38 Vt. 583. In a suit by a surviving partner, to recover a debt due to the firm, the defendant may set off a debt due to him from the surviving partner alone. Holbrook r . Lackey, 13 Met. 132.} CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 555 the benefit of the partnership, and tlie representatives of the deceased partner possess, in equity, the same right of sharing and participatmg in them, which the deceased partner would have possessed, if he had been Uving.^ ' Gow on P. c. 5, § 4, p. 348, 358, 3d ed. ; Martin v. Crompe, 1 Ld. Raym. 340 ; Coll. on P. B. 3, c. 5, § 2, p. 471, 2d ed. ; Id. § 2, p. 474, 2d ed."; 1 Story, Eq. Jur. § 676, 677; 2 Bell, Comm. B. 7, c. 2, p. 637, 638, 643, 644, 4tli ed. ; [Wilson v. Soper, 13 B. Mon. 411] ; {Felton v. Reid, 7 Jones, Law, 269. | — There is nothing in this doctrine peculiar to cases of partnership ; for the same rule applies to cases of several obligees, cove- nantees, and other joint contractees, having a joint interest in the contract; for in every such case, upon the death of one, the action must be brought in the name of the sui-vivors. Coll. on P. B. 3, c. 5, § 1, p. 471, 472, 2d ed. And reciprocally at law (for it is different in equity) an action lies solely against the survivors, at the suit of third persons, for any debt or other ob- ligation due by the partnership. Coll. on P. B. 3, c. 3, § 4, p. 404-413, 2d ed. ; 1 Story, Eq. Jur. § 676, 677, 679, 680 ; Scholefield v. Heafield, 7 Sim. 667 ; Gow on P. c. 5, § 4, p. 351, 352, 3d ed. ; Id. p. 356-358. ISIr. Gow (p. 358, 359, 3d ed.) has assigned the technical reasons for this doctrine (which seems not known in the Roman law, or in the modern law of continen- tal Europe), as follows: "The right of action must necessarily survive ; otherwise, according to the technicalities of law, there would be a failure of justice ; for the rights of the executor and of the survivor being of sev- eral natures, if they joined in the same suit, there consequently must be several judgments, which in a single action is not allowed. Substan- tially, however, the right of the representative of the deceased is not varied by this legal anomaly ; for, there being no survivorship in point of interest, the instant any joint chose in action is reduced into possession by the legal process of the survivor, the right of the representatives to their distributive portion attaches. So, with respect to joint contracts entered into by a firm, and from which a joint legal responsibility results, it can at law, after the death of one partner, be enforced against the survivor alone, and finally against the representatives of the last survivor ; for the law con- siders partnership contracts which are joint in form, as producing only a joint obligation, which, on the death of one, attaches exclusively upon the survivor. Indeed, the reason wliich has been advanced as operating to prevent personal repi'esentatives from asserting, jointly with the survivor, a right resulting to the partnership firm, applies Avith undiminished force, if a right accruing to a stranger from the firm should be attempted to be en- forced against them and the survivor. Executors or administrators, if legally responsible, could only contract such a responsibility by the assumption of their representative characters ; and it therefore follows, that they could only be charged de bonis testatoris, whereas the surviving partner would be liable de bonis propriis. So that the judgments must be different, as they applied either to the survivor, or to the representatives of the deceased y 556 PARTNERSHIP. [CHAP. XIV. However, the representatives of the deceased partner cannot, strictly speaking, be deemed partners with the survivors. But still a community of interest subsists between them, which is necessary for the windmg up of the affairs of the partnership, and requires that what was partnership property before, shall continue so, for the purpose of being applied to the discharge of all the proper debts and obligations thereof, and for a final dis- tribution of the surplus, according to the rights and shares of all the partners.^ § 347. It may be further remarked, that, as it becomes the duty of all the parties in interest, upon a dissolution by death, with all practicable diligence to wind up and settle the partnership concerns, to pay the partnership debts and obligations, and to distribute the surplus among those who are entitled to it, according to their respective shares therein, each party in interest has a right, in case of any improper delay, or danger of loss, or neglect of duty, to require the aid of a Court of Equity to enforce the duty, and to compel a full account and settlement of the whole concern.^ Hence the per- partner. And little inconvenience arises from the present rule ; for, not- withstanding the surviving partner is liable for the whole debt in the first instance, he can call upon the executor of his copartner for a contribution. Nor is there any hardship upon the creditor, since, in the event of the insol- vency of the surviving partner, we shall presently see that he has a remedy in equity against the estate of the deceased." ' Gow on P. c. 5, § 4, p. 351, 3d ed. ; Ex parte Williams, 11 Ves. 3, 5 ; Wilson V. Greenwood, 1 Swans. 471 ; Crawshay v. Maule, 1 Swans. 495, 606 ; Beak v. Beak, 3 Swans. 627 ; 2 Bell, Comm. B. 7, c. 2, p. 637, 638, 643, 644, 5th ed. ; 3 Kent, 63 ; ante, § 325-328 ; Evans v. Evans, 9 Paige, 178. {The executors of a deceased partner have no lien on the stock in trade substituted by the surviving partner who has continued the business in place of the partnership stock which he has sold. Payne v. Hornby, 25 Beav. 280.} * Evans v. Evans, 9 Paige, 178. — A bill of this sort strongly resembles the action, pro socio, of the Roman law, which was designed to effect the same and other purposes. 2 Bell, Comm. B. 7, c. 2, p. 646, 5th ed. ; Poth. Pand. 17, 2, n. 30-53; Poth. de Soc. n. 161. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 557 sonal representatives of the deceased partner have a right to insist upon the application of the joint prop- erty, in the hands of the survivors, to the payment of the joint debts, and a division of the surplus.^ And as this can ordinarily be done only by a sale and conver- sion of the property into money, they are entitled to have the property sold for this purpose.^ And if within a reasonable time the survivors do not account with them, and come to a settlement, a Court of Equity will entertain a bill for this purpose, and will, in aid thereof, if necessary, restrain the partners by injunction from disposing of the joint property, and from collecting the outstanding debts.^ So, the surviving partners have each against the others a like right to insist upon a final adjustment and settlement of the partnership ac- counts, and a distribution of the surplus ; but in such a suit the personal representatives of the deceased part- ners are necessary parties ; for they have an equal in- terest therein with the survivors, and would not be concluded by any decree made in the premises, unless they were made parties.^ 1 Ex parte Ruffin, 6 Ves. 119, 126 ; Gow on P. c. 5, § 4, p. 352, 3d ed. ^ Evans v. Evans, 9 Paige, 178; {post, § 350, 351.} ' Gow on P. c. 5, § 4, p. 352, 3d ed. ; Hartz v. Schrader, 8 Ves. 317 ; ante, § 329-330, 344 ; Coll. on P. B. 2, c. 3, § 4, p. 226, 227, 2d ed. * Gow on P. c. 5, § 4, p. 352, 3d ed. ; Coll. on P. B. 2, c. 3, § 4, p. 226, 227, 2d ed.— ]\Ir. Bell (2 Bell, Comm. B. 7, c. 2, p. 645) has summed the general results of the dissolution of the partnership, and the mode of settle- ment of the partnership concerns, as follows:- "Until the final settlement of the partnership affairs, and the payment of the joint debts, and distri- bution of the joint property, it cannot correctly be said, that the partnership is determined. 1. On the dissolution of partnership, the proj^erty is com- mon, to be divided according to the shares of the partners after the payment of debts. This consists of the following particulars : 1st, The stock in trade, as originally contributed, with all the additions made to it. 2d, Real estates acquired by the company ; leases of premises for the use of the company ; ships purchased or freighted on time. 3d, The good-will of a mercantile or literary establisliment seems to form a part of the common stock. 2. The partners, or either of them, may insist on a sale as the best 558 PARTNERSHIP. [CHAP. XIV. § 34:8. In taking the account between the partners upon any dissokition, each, of course, becomes charge- able with all the debts and claims, which he owes, or is accountable for, to the partnership ; with all interest accruing upon the same debts and claims ; and with all profits, which he has made out of the partnership effects during the partnership, or since the dissolution, either rightfully or by misapplication thereof.^ Similar provisions existed in the Roman law, which are labori- ously collected by Pothier, in his edition of the Pan- dects ; ~ and from that law they have been transferred into the modern law of France.^ § 348 a. If any partner has made advances to the firm, and others have received advances from it, these do not constitute debts, strictly speaking, until the con- criterion of the value of the property ; and this the Court may order, with- out waiting the final adjustment of interests, where it is manifest that there must be a dissolution. 3. The common property thus converted, with the pecuniary funds when collected, forms a fund, over which the creditors of the concern have a primary and preferable claim ; and it must be so applied, in the first place, before any partner, or his assignee or representatives, can claim a share. 4. In taking an account between the partners them- selves, the state of the stock is to be taken as at the dissolution (death for instance) , and the proceeds thereof until it is got in ; and each is to be allowed whatever he has advanced to the partnership, and to be charged with what he has failed to bring in, or has drawn out more than his just proportion. The partners are to be allowed equal shares of the profit and stock, if there be no other arrangement settled. But a different arrange- ment may be established either by contract or by the books and usage of the company. 5. The surviving partners are to wind up the affairs, unless some fault or abuse is chargeable against them, or some danger from their intromissions, which may require the appointment of a neutral person, or the requisition of caution. 6. The same confidence, which was placed in the partner, is not necessarily reposed in his representatives ; and, therefore, where both or all the partners die, the Court will appoint a receiver." 1 Gow on P. c. 5, § 12, p. 255, 256, 3d ed. ; Id. § 3, p. 302, 303; Id. § 4, p. 355 ; Coll. on P. B. 2, c. 2, § 1, p. 122, 123, 2d ed. ; Id. B. 2, c. 3, § 4, p. 221, 222 ; ante, § 329, 341, 343 ; Burton v. Wookey, 6 Madd. 367 ; Brown v. Litton, 1 P. Wms. 140 ; Crawshay v. Collins, 15 Ves. 218, 220. * Poth. Pand. 17, 2, n. 35-45. 3 Poth. de Soc. n. 167 ; Id. n. 109-132. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 559 cern is wound up, but only as items in the account be- tween the partners.^ § 349. In respect to the mode of taking the accounts between the partners, that must depend upon circum- stances." If the partners have by the articles of part- » Richardson v. Bank of England, 4 Myl. & C. 165, 172. — On this oc- casion Lord Cottenham said, speaking of debtor and creditor partners : " But though these terms ' creditor' and ' debtor' are so used, and sufficiently explain what is meant by the use of them, nothing can be more inconsistent with the known law of partnership than to consider the situation of either party as in any degree resembling the situation of those whose appellation has been so borrowed. The supposed creditor has no means of compelling pavment of his debt ; and the supposed debtor is liable to no proceedings either at law or in equity, assuming always that no separate security has been taken or given. The supposed creditor's debt is due from the firm of which he is a partner ; and the supposed debtor owes the money to himself in common with his partners ; and, pending the partnership, equity will not interfere to set right the balance between the partners. Lideed it could not do so with effect, inasmuch as immediately after a decree has enforced payment of the money supposed to be due, the party paying might, in exer- cise of his i^ower of a partner, repossess himself of the same sum. But if, pending the partnership, neither law nor equity will treat such advances as debts, will it be so after the partnership has determined, before any settle- ment of account, and before the payment of the joint debts or the realization of the partnership estate ? Nothing is more settled than that, under such circumstances, what may have been advanced by one partner, or received by another, can only constitute items in the account. There may be losses, the particular partner's share of which may be more than sufficient to ex- haust what he has advanced, or profits more than equal to what the other has received ; and until the amount of such profit and loss be ascertained by the winding up of the partnership affairs, neither party has any remedy against, or liability to, the other, for payment from one to the other, of what may have been advanced or received. In Crawshay v. Collins, Lord Eldon says, ' Where a sum is advanced as a loan to an individual partner, his profits are first answerable for that sum ; and if his profits shall not be sufficient to answer it, the deficiency shall be made good out of his capital ; and if both his profits and his capital are not sufficient to make it good, he is con- sidered as a debtor for the excess.' The money drawn out by any partner ceases to be part of the joint stock, so that, upon bankruptcy, the joint creditor cannot recall it, unless there had been a fraudulent abstraction ; Ex parte Younge. Again, in Foster v. Donald, Lord Eldon says, ' If a partner, as partner, receives money belonging to the firm, and, admitting that he has re- ceived it, insists that there is a balance in his favor, there is no pretence for making him pay it in.' " Ante, § 229. • {See Lind. on P. 659-664 ; Levi v. Karrick, 13 Iowa, 344.} 560 PARTNERSHIP. [CHAP. XIV. nership provided a particular mode, that will be held to furnish the true rule for the adjustment of the concern, and the winding up of all the affairs thereof; unless the partners, by their own acts and conduct, have waived, or abandoned it; for, in that event, the stipu- lation in the articles, as to the mode, will be held a nullity.^ In the absence, iiowever, of any positive stipulations, or the abandonment of them by the acts and conduct of the parties. Courts of Equity, as between the partners, will commence with the last stated account between them ; and deem that conclu- sive upon all antecedent transactions, unless, indeed, some gross and palpable error or fraud can be shown.^ If there has not been any stated account or any positive or implied settlement at any period, then, of course, the accounts must be taken from the period of the commencement of the partnership.^ If profits have accrued since the death of the partner, by the employ- ment of the capital or otherwise, that will be treated as an accession to the capital, and as joint property sub- ject to all just allowances and deductions.^ 1 Ante, § 192 ; Gow on P. c. 5, § 4, p. 353, 354, 3d ed. ; Jackson v. Sedg- wick, 1 Swans. 460, 469 ; Pettyt v. Janeson, 6 Madd. 146 ; 2 Bell, Comm. B. 7, c. 2, p. 645, 647, 648, 5th ed. * Ante, § 206. 3 Ante, § 206, 207, 347 ; Gow on P. c. 5, § 4, p. 354, 355, 3d ed. ; Beak V. Beak, Rep. Temp. Finch, 190 ; s. c. 3 Swans. 627 ; Coll. on P. B. 2, c. 2, § 2, p. 144, 145, 2d ed. ; Id. B. 2, c. 3, § 4, p. 212-214. {Gill v. Geyer, 15 Ohio St. 399.} * Willett V. Blanford, 1 Hare, 253, 265; ante, § 329, 341, 343, and note; Gow on P. c. 5, § 4, p. 354, 356, 3d ed. ; Brown v. Litton, 1 P. Wms. 140; Hammond v. Douglas, 5 Ves. 539; Crawshay v. Collins, 15 Ves. 218, and Hill v. Burnham, and Coxwell v. Bromet, cited there, p. 220, 223 ; Brown v. De Tastet, Jac. 284; Burden v. Burden, 1 Ves. & B. 170; Coll. on P. B. 2, c. 3, § 1, p. 165, 2d ed. ; Id. B. 2, c. 3, § 4, p. 221, 222 ; 2 Bell, Comm. B. 7, c. 2, p. 647, 648, 5th ed. ; {Bate v. Robins, 32 Beav. 73; AVat- ney tj. Wells, Law Rep. 2 Ch. 250; Tyng v. Thayer, 8 All. 391.} Many other matters, connected with the taking of the accounts between the partners, CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 561 § 350. Another question which ordinarily arises between the partners in cases of a dissohition by arise incidentally in the course of the adjustment, under the direction of Courts of Equity ; such, for example, as the allowance of interest for or against part- ners for advances made to or by them ; [see ante, § 182 «] ; so for separate debts due from the other partners to one partner. These and many similar questions will be found discussed in other elementary treatises ; but they are not within the scope of the present Commentaries, which do not purport to deal with the minute details fit for the consideration of an accountant. See, on this subject, Gow on P. c. 2, § 4, p. 105, 106, 3d ed. ; Id. c. 5, § 3, p. 236; Id. c. 5, § 4, p. 356-358; Coll. on P. B. 2, c. 3, § 4, p. 200, 212-221, 229-231, 2d ed. ; [Beacham v. Eckford, 2 Sand. Ch. 116.] Mr. Collyer has well remarked (p. 214): "In taking the partner- ship accounts, it is mainly to be considered, what was the value of the joint property, and what the amount of the joint debts at the time of the dissolution ; what was the share of the retired, deceased, or bankrupt partner, in the joint pi'operty ; whether, and to what extent, the joint capital has been employed, or joint debts incurred, since the dissolution; whether any of the joint property in specie has been sold since the disso- lution ; if so, what the gross amount, and what the interest of the profits ; on the other hand, whether any of the joint property in specie having been sold, the profits have been applied to the purchase of other property in specie; and generally, whether, and to what extent, the joint property has been traded with since the dissolution. These, with many other considera- tions bearing on each particular case, must be duly weighed in the arrange- ment of complicated partnership accounts. And it may here be remarked, that the account is founded on the same principles, in whateVier manner the dissolution may have taken place ; whether, therefore, the affiiirs are to be adjusted between the remaining and retiring partner, the surviving partner and the executors of the deceased partner, or the solvent partner and the assignees of the bankrupt partner." The following remarks of Vice-Chan- cellor Wigram, in Willett v. Blanford, 1 Hare, 253, 269-272, deserve to be here cited as to the mode in which profits are to be shared which are made after the death of one partner, as showing that no universal rule can be laid down. "The circumstances of some cases would almost exclude the possibility of making a decree in any other form than that which the plaintiffs claim in this case. Take, for example, the case suggested by Lord Eldon, in Crawshay i'. Collins, of the mere conversion into money, at a large profit, long after the testator's death, of the very property which belonged to the partnership at his death, and no other circumstance to embarrass the ques- tion. Again, the dissolution of a partnership prima facie prevents new contracts being made on the joint account of the partners ; but it necessarily leaves the old contracts of the partnership to be wound up. In the absence of circumstances to alter the case, it would be impossible to deny the right of the estate of a deceased partner to participate in the profits arising from 36 562 PARTNERSHIP. [CHAP. XIV. death (which is equally applicable, indeed, to other cases of dissolution), is, in what manner the partner- winding up of tlie old concerns ; and if, in such a case, the surviving partners should have so mixed up new dealings with the old, that the two could not be separated, the right of the estate of the deceased partner to share in the profits of the new dealings might unavoidably attach. In another case, a partnership may be formed, the substratum of which may consist of specific things of i^eculiar value in their use, as, for example, patents, the inven- tion or property of one of the partners ; and the profits made after the death of the patentee, or owner of the patent, may be derived wholly or principally from contracts subsisting at his death, but not wound up until long afterwards ; or contracts entered into after his death, of which con- tracts his specific property (the patents) may have been the media. In such a case, in the absence of special circumstances, it would be difficult to sug- gest a principle upon which the estate of the deceased partner should be refused the same proportion of the profits which he enjoyed in his lifetime. This appears to me to be the ground of the ultimate decision in Crawshay V. Collins. Again, the whole, or the substantial part, of a trade, may consist in good-will, leading to renewals of contracts with old connections. In such a case, it is the identical source of profit which operates both before and after dissolution ; and this appears to me to be the groundwork of Lord Eldon's reasoning, in Cook v. CoUingridge. Circumstances may be suggested of a very different kind. Take the case of a business, in which profit is made by the personal activity and attention with which the use of the money capital is directed, and the case may require a different determination. Brown v. De Tastet; Featherstonhaugh v. Fenwick. Or, there may be the case of two persons being partners together, in equal shares ; one finding capital alone, and the other finding skill alone ; and suppose the latter, before his skill had established a connection or good-will for the concern, should die, and the survivor, by the assistance of other agents, should carry on the concern upon the partnership premises, — it could scarcely be contended, afi;er a lapse of years, that the estate of the deceased partner was entitled as of course to a moiety of the profits made during that lapse of time after his death ; and if his estate would not be so entitled where the deceased partner had left no capital, itVould be difficult to establish a right to a moiety, only because he had some small share of the capital and stock in trade en- gaged in the business at his death, without reference to its amount, and the other circumstances of the case. If, on the other hand, the skill of an indi- vidual, without cai^ital, had been exercised as a partner in a concern, until it has created a connection and good-will, and, upon his death, his surviving partner. Instead of giving to the estate of the deceased the benefit of that good- will b}*a sale of the concern, should think proper to carry on the concern for his own benefit until the connection and good-will were lost ; it would not be difficult to justify a decree which, in such a case, should declare the estate of the deceased entitled to share any profits made after his death. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 563 ship effects and assets are to be divided, after all the charges and the debts and obligations due to third persons have been duly paid and discharged. In other words, how are the effects and assets, whether real, personal, or mixed, to be valued, so as to make an equal distribution of them among the partners, according to their respective shares thereof. In rela- tion to the real estate of the partnership, it seems to have been generally considered, that it ought to be decreed to be sold, as the only fair and just way (in the absence of any other ageeement between the par- ties) to ascertain its true value. ^ The same rule would If capital were to be taken as the basis upon which, in every case, the pro- portion of profits was to be calculated, much injustice would often ensue. In partnership cases, the agreed capital of a concern is considered in general as remaining the same, notwithstanding one partner may make ad- vances to, and the other abstract money from the concern. K, at the death of an acting partner,' he had abstracted or borrowed money from the part- nership exceeding the amount of his property in the concern, it would be any thing but justice to hold, as a rule of course, that his right to partici- pate in the profits after his death should continue to the same extent as if his accounts with the partnership were adjusted, and he had given his time and attention to the business. The distinction also between capital and stock in trade, which forms so material a subject of consideration in Craw- shay V. Collins, would often make it unjust to take the agreed amount of capital in partnership as a basis upon which to found a general rule applica- ble to the estate of a deceased partner. I consider myself, therefore, bound by authority and reason, to hold, that the nature of the trade, the manner of carrying it on, the capital employed, the state of the account between the partnership and the deceased partner at the time of his death, and the conduct of parties after his death, may materially affect the rights of the parties ; and that I must have more information than I now possess before I can safely decide this case." ' Coll. on P. B. 2, c. 3, § 4, p. 204-214, 2d ed. ; Id. p. 214-216 ; Cook V. Colliiigridge, Jac. 607 ; 2 Bell, Coram. B. 7, c. 2, p. 632, 645, 5th ed. ; 3 Kent, 64 ; Crawshay v. Collins, 15 Ves. 218, 227 ; Crawshay v. j\Iaule, 1 Swans. 495, 506, 523; Gow on P. c. 5, § 2, p. 234, 235, 3d ed. ; {Lind. on P. 857. A. and six others, who were jointly entitled to several leases of a colliery, worked it as partners. Held, on a dissolution, that A. could not in- sist on a partition, though there might be no debts ; but that the whole must be sold. Wild v. Milne, 26 Beav. 504. } 564 PARTNERSHIP. [CHAP. XIV. seem equally to apply to all cases of chattels and other personal property and effects, which are not capa- ble m themselves of being exactly divided, without reference to their positive and absolute value. ^ As to chattels and other personal property, capable of such a division, the same rule, as to a sale, may not neces- sarily and under all circumstances apply. But the true doctrine of Courts of Equity on this subject would seem to be, in all cases, to decree a sale of the partnership property, rather than a division thereof in kind, whenever a sale would be most beneficial for the interests of all the partners.^ § 351. The doctrine has sometimes been strenuously contended for, that upon the dissolution of the partner- ship by the retu-ement, or death, or bankruptcy of one partner, the others had a right to take the whole part- 1 Ibid. 2 Ibid. ; Rigden v. Pierce, 6 Madd. 353; Coll. on P. B. 2, c. 2, § 2, p. 146, U7, 2d ed. ; Id. B. 2, c. 3, § 4, p. 206-211, 214-216. —Mr. Gow (Gow on P. c. 5, § 2, p. 235, 237, 3d ed. ; Id. p. 252, 253) insists upon the right of any partner to insist on a sale in all cases. He says (p. 234) : "When the common property is ascertained, either partner may insist upon a sale of the whole concern. The rights of the partners respectively are then pre- cisely equal ; each may require the -whole concern to be wound up by a sale, and a division of the produce. One partner has no claim upon his individ- ual proportion of a specific article, nor can he insist upon an exclusive right in it ; but he is entitled only to a general arrangement of the partnership concerns, and for that purpose to an account of the produce of the aggre- gate joint effects. He cannot separate his share from the bulk of the joint property, nor compel his copartner to accept what, according to a valuation, his interest may be worth. That is not the mode in which a Court of Equity winds up the concerns of a partnership. But in every case, in which that Court interferes in closing the transactions of a firm, it directs the value of the whole of the joint property, whether real or personal, to be ascertained, in the way in which it can be best ascertained, viz. by a sale and its conversion into money." In Fereday v. Wightwick, Taml. 250, 261, Sir John Leach, •Master of the Rolls, said: "It is a princijile, that all property, whether real or personal, is subject to a sale on a dissolution of the partnership." Mr. Chancellor Kent lays down the same doctrine in his Commentaries. 3 Kent, 64. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 565 nership property and effects at a valuation. But this doctrine has been completely repudiated by Courts of Equity, as equally unfounded in principle and public policy.' In short, it would amount to a right of pre- 1 Gow on P. c. 5, § 2, p. 234, 235, 3d ed. ; ante, § 350; Coll. on P. B. 2, c. 3, § 4, p. 206-211, 2d ed. ; Crawshay v. Collins, 15 Ves. 218, 227 ; Crawshay v. Maule, 1 Swans. 495 ; Fox v. Hanbury, Cowp. 445 ; Feather- stonhaugh u. Fenwick. 17 Ves. 298; Wilson ij. Greenwood, 1 Swans. 471; Cook V. Collingridge, Jac. 607; Sigourney v. Munn, 7 Conn. 11. — In Featberstonhaugh v. Fenwick, 17 Ves. 298, 309, 310, Sir William Grant said : " The next consideration is, whether the terms upon which the defend- ants proposed to adjust the partnership concern, were those to which the plaintiff was bound to accede. The proposition was, that a value should be set on the partnership stock ; and that they should take his proportion of it at that valuation ; or, that he should take away his share of the property from the premises. My opinion is clearly, that these are not terms to which he was bound to accede. They had no more right to turn him out, than he had to turn them out, upon those terms. Their rights were precisely equal ; to have the whole concern wound up by a sale, and a division of the pro- duce. As, therefore, they never proposed to him any terms which he was bound to accept, the consequence is, that, continuing to trade with his stock, and at his risk, they come under a liability for whatever profits might be produced by that stock." In Crawshay v. Collins, 15 Ves. 218, 227, Lord Eldon (after making the remarks already stated, ante, § 322, note), added: "As to the case now before the Court, of the bankruptcy of one partner, supposing it the simple case of profit made by the mere sale of the proper- ty, there must be an account. It is said, a duty was imposed upon the as- signees to call for the account. That is true. It is further urged, that they could not be traders in new adventures. That also is in a sense true. But the proposition would be rash, that there can be no case in wdiich they could trade with consent of the creditors, or of the creditors and the bankrupt to- gether. If they had the consent of all persons interested, I do not know that other persons, with whom they might deal, could make the objection. The duty is not as between them and the other persons, who are not properly to be termed remaining or surviving partners, the destruction of one being, un- less it is otherwise provided, a dissolution of the whole partnership, as if by effluxion of time, or by death, except as it may be reasoned upon the ef- fect in bankruptcy of the substitution of assignees. It is, however, no more the duty of the assignees to settle with the others, than it is their duty to settle with the assignees. Is it possible, then, to say, that upon any rule of law the other partners can take, as sole owners, all the houses, buildings,, and stock in trade ? The consequence of the destruction and dissolution of the partnership is, that they became tenants in common in each and every article embarked in it, under an obligation to deal with the whole of the 566 PARTNERSHIP. [CHAP. XIV. eminence or superiority in some of the partners over the rest, upon any dissohition, to compel them to sub- mit to a particular mode of selling their rights in the property, upon such terms as the others should choose to prescribe ; a right utterly inconsistent with the ac- knowledged principles of the equality of rights and of powers and authorities of all the partners.^ § 352. The Roman law, in like manner, contained provisions for the due settlement and distribution of the partnership effects, as, indeed, every system of juris- prudence must, which aims at any moderate administra- tion of public or private justice. The action, Pi^o socio, seems properly to have applied to the due taking of the accounts of the partnership, and the action, Communi dividnndo, to the distribution of the effects.^ And cer- tain rules were laid down, as to what charges and allow- ances were to be made for or against each partner, and the reciprocal rights, which each has against the others stock, and every article, as the equitable title of the bankrupt and themselves requires ; and, according to the case of Fox v. Hanbury, the right is not to an individual proportion of a specific article, but to an account ; the proper- ty to be made the most of and divided." Mr. Collyer has summed up the general result of the cases in the following terms (p. 210) : "It appears, therefore, that in all cases of partnership at will, whether the contract was originally of that nature, or has become so by effluxion of time -or other circumstances, a Court of Equity will, upon a dissolution, decree a sale of the entirety of the partnership effects at the desire of any of the parties. And even in the case of a partnership with articles, supposing it to be dis- solved for the misconduct of one partner, a case might be stated, where a Court of Equity would decree a general sale and account, as of a partner- ship at will, notwithstanding express provisions in the articles, as to the pro- ceedings to be had upon a dissolution." ' Ibid. {But though a partner cannot insist on it as a matter of right, a Court of Equity may order his share to be taken at a valuation when it is most for the benefit of all concerned. Lind. on P. 858 ; Leaf v. Coles, 1 De G. M. &G. 171 ; Prentice w. Prentice, 10 Hare, app. xxii. ; Smith w. Mules, 9 Hare, 556, 572. } * D. 10, 3, 1-31 ; Id. 17, 2, 1. 52, 57, 65; Poth. Pand. 10, 3, n. 6; Id. 17, 2, n. 33-54; Poth. de Soc. n. 161. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 567 upon the final adjustment.^ But a special enumeration thereof would rather be a matter of liberal curiosity, than of practical utility or illustration of our jurispru- dence. § 353. The French law also contains a minute enu- meration of the mode of settling the accounts, and of making a distribution of the effects upon the dissolu- tion of partnerships.^ In some material respects, it 1 Poth. Pand. 17, 2, n. 35-49; Domat, 1, 8, 5, art. 16. 2 Poth. de Soc. n. 167-174. —Potbier says (167, 168): "Avant que de proceder au partage, on doit proceder au compte de ce que chacune des parties doit a la communaute, qui est a partager, et de ce qui lui est du par la dite communaute. On doit comprendre dans cet etat, non-seulement ce quV^le devoit a la societe lors de sa dissolution, mais ce qu'elle a pu devoir a la communaute dejjuis la dissolution, soit pour raison de ce qu^elle auroit retire du fends commun, soit pour raison du dommage cpi'elle auroit cause par sa faute dans les efFets de la communaute. Pareillement on doit comprendre dans Tetat de ce qui est du par la communaute a chacune des parties, non-seulement ce qui lui etoit du par la societe lors de sa dissolu- tion, mais ce qui a pu lui etre du depuis par la communaute a cause des debourses qu'eUe auroit faits utilement pour les affaires communes, ou pour les biens de la (jommunaute, depuis la dissolution de la societe. On doit compenser jusqu"a due concurrence le montant des sommes dont cha- cune des parties est debitriee de la communaute, au montant de celles, dont elle est creanciere, et arreter la somme dont elle se trouve, apres cette com- pensation faite, debitriee de la communaute, ou celle, dont elle se trouve, apres cette compensation faite, creanciere de la communaute. Observez que, dans le comte de ce, qui a ete regu ou mis pour la societe, le livre de societe tenu par I'un des associes fait foi entre eux; Lauterhacli. Apres ce compte fait, on dresse la masse, c'est-a-dire, un etat detaille de toutes les diffi^rentes choses dont la communaute est composee ; et on comprend dans cette masse, au nombre des dettes actives de la communaute, les sommes, dont quelques-unes des parties se sont trouvees, apres la compensation faite, debitrices de la communaute ; et au partage de la communaute, on la leur precorapte sur leur part. On dresse aussi un etat des dettes passives de la communaute, et on y comprend les sommes, dont quelques-unes des parties se seroient trouvees au comjjte de la communaute, apres compensation faite, creancieres de la communaute. Ces sommes doivent ^tre par eUes prelevees au partage de la communaute. Chacune des choses dont la communaute est composee, soit meubles, soit heritages, est port^e dans cette masse pour une certaine estimation. Les parties peuvent faire elles-memes cette estimation, lorsqu'elles sont en ^tat de la faire, qu'elles en sont d'accord, et qu'elles sont toutes majeures ; sinon Festimation se fait par un ou par plusieurs estimateurs 568 PARTNERSHIP. [CHAP. XIV. agrees with our law ; in others, again, it widely differs. It gives to every partner a right of action to enforce a due account and settlement ; but it requires, in such a case, that all the partners should be parties to the suit ; and if they are not, they may intervene, and make themselves parties.^ If the partners have fixed a par- ticular time after the dissolution for the account, that stipulation is to be followed. If there be no such stip- ulation, then an account is immediately demandable.^ And so, indeed, is the rule of the Roman law. Si con- veniat, ne omnino divisio Jiat, hujusmodi pactum nullas vires habere manifestissinucm est ; sin autem, intra cer- ium tempus, quod etiam ipsius rei qualitati prodest, valetJ In these and in many other respects there is an agreement with our law. § 354. But the French law differs from our law in a striking manner, as to the mode of distribution of the partnership effects, whether they are movable, or im- movable, or credits. It allows so mufh thereof to be sold, as may be necessary to discharge the debts and other obligations of the partnership.'* But it does not authorize a sale thereof for any other purposes, unless it be by the express consent of all the partners, or it be the only mode by which practically a division of a part thereof can be made.^ It provides, with these excep- tions, that a valuation thereof shall be taken, either by agreement of the parties, or, if they disagree, by the proper judicial tribunal.^ It further provides, that the movable or personal property shall be valued, and di- vided among them all in kind (eti nature) ; that for this dont elles conviennent ; et si elles n'en peuvent convenir, le juge du partage en nomme d'office." 1 Poth. de Soc. n. 162, 163, ^ Poth. de Soc. n. 165. => Poth. de Soc. n. 165; D. 10, 3, 14, 2. * Poth. de Soc. n. 169, 173. ^ Poth. de Soc. n. 109, 171. « Poth. de Soc. n. 168. CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 569 purpose it shall be put into lots of equal value, the lots to be drawn by the partners ; ^ that the real estate shall, in like manner, be valued and divided ; and, as it rarely will admit of being put into lots of equal value, the value of each lot is to be ascertained, and the partner, who draws any lot beyond or short of his share, is to pay or receive the surplus to or from the other partners, who respectively have the corresponding lots.^ As to debts due to the partnership, they are to be valued and di- vided in the like manner ; that is, each partner is to have his own share of each of such debts. ^ But, inas- much as great embarrassment must arise from each debt- or's being thus obliged to pay each partner his share of the debts, a custom has prevailed of putting up into lots such of the debts as are good, and of dividing them by lot, in the same way as other effects.^ As to debts due from the partnership to third persons, so far as they can- not be discharged by the application of the partnership effects, they also are divisible among all the partners, who thereby become liable inter sese to pay the same to the creditors ; but the rights of the creditors against all in solido are not thereby varied.^ § 355. It can scarcely escape observation, even from this brief enumeration, how much the rule of our Courts of Equity on this subject, by directing, in all cases of real complexity or difficulty, a sale, instead of a distribu- tion or division of the effects, excels that of the Roman and French law, in point of convenience, simplicity, and practical policy. The Scotch law has here also wisely ' Poth. de Soc. n. 169. * Poth. de Soc. n. 170. 3 Poth. de Soc. n. 172. * Poth. de Soc. n. 172. — In this respect the French law coincides with that of the Roman law. Ea, quce in nominibus sunt, non recipiunt divisi- onem. Cod. 3, 36, 6; D. 10. 2, 4; Poth. Pand. 10, 2, and 10, 3, n. 26; Poth. de Soc. n. 172. ' Poth. de Soc. n. 173. 570 PARTNERSHIP. [cHAP. XIV. abandoned the Roman law, and adopted the same rule of a sale as is adopted in our law.^ § 356. We come, in the next place, to the fourth and last consideration under this head, viz. the effects and consequences of a dissolution of the partnership by a decree of a Court of Equity. And here, as between the parties themselves, there is little room for any additional observations, since precisely the same effects and conse- quences follow, as ordinarily apply to a voluntary disso- lution by the partners, or to a dissolution by death. The only suggestion, which seems important in a prac- tical view to be made, is, that where a bill is filed for this purpose, and it is clear to the Court, that a dissolu- tion ought finally to be decreed, the Court will gener- ally at once put an end to the partnership trade or busi- ness, by directing a sale by an interlocutory order or motion, where that measure is manifestly required by the interest of the parties, and otherwise a serious or iiTeparable mischief might ensue.^ 1 2 Bell, Coram. B. 7, c. 2, p. 632, 633, 645, 5th ed. « Gow on P. c. 5, § 2, p. 235, 236, 3d ed. ; Crawshay v. Maule, 1 Swans. 495, 506, 523 ; Nerot v. Burnand, 2 Russ. 56. See, also, Goodman v. Wliit- comb, 1 Jac. & W. 589, 592. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 571 CHAPTER XV. DISSOLUTION EFFECTS AND CONSEQUENCES AS TO THE RIGHTS OF CREDITORS. {§ 357. Rights of creditors after dissolution. 358. Property may on dissolution be bona fide transferred to one partner free from partnership equities. 359. Though such partner assumes the payment of partnership debts. 360. Quasi lien of creditors on partnership projserty. 361. This quasi lien arises only on dissolution by death or bankruptcy. 362. Joint creditors may proceed in equity against the estate of deceased partner. 363. 364. Rights of joint and separate creditors against the estate of a deceased partner. 365. Roman law. 366. French law. 367. 368. What are joint and what separate debts. 369, 370. Conversion and extinguishment of joint and separate debts. 371, 372. AVhat is joint and what separate property. 373. Assignment of property by partner to the firm and vice versa. 374. Rights of creditors on dissolution by bankruptcy. 375. Rights of assignee in case of separate bankruptcy. 376. Joint debts payable out of joint, and separate debts out of separate property. 377. This rule finally settled. 378. Those cases in which joint creditors may ^sx& pari passu with sep- arate creditoi's. 379. (1.) When a joint creditor is petitioner for a separate commission. 380. (2.) When there is no joint estate and no living solvent partner. 381. (3.) When there are no separate debts. 382. Doubtful propriety of the general rule. 383. Joint creditors may prove their debts against the separate estate. 384. Joint and several creditors cannot prove against both estates. 385. Supposed analogy to joint and several executions at common law. 386. Analogy not real. 387. Proof allowed against two firms composed in part of the same members. 388. When double proof is allowed in case of negotiable paper. 389. How a secured creditor must prove. 390. The separate estate cannot prove against the joint estate. 572 PARTNERSHIP. [CHAP. XV. 391. Nor the joint estate against the separate estate. 392. Separate creditors may prove against the joint estate in case of fraud. 393. So in case of dormant partner. 394. So where some members of a firm carry on a separate trade. 395. No set-off of joint and separate debts. 396. Agreements as to disposition of property on dissolution avoided by bankruptcy. 397-404. Statute of reputed ownership. 405. Solvent partners cannot come into competition with joint creditors against the joint estate. 406. Nor against the separate estates. 407. Rights and powers of solvent partners. 408. Same rights in the case of a partnership for a single adventure. 490. Close of subject of pai-tnership. 410, 411. Part-ownership.} § 357. Hitherto we have been mainly considering the effects and consequences of a dissokition as between the partners themselves and then- representatives, and when and under what circumstances third persons, hav- ing no notice thereof, might, notwithstanding, have a remedy against all the partners upon subsequent trans- actions with some of the firm. We now come to the consideration of the rights of the creditors, who are such at or before the dissolution of the firm. These creditors may be either joint creditors of all the firm, or separate creditors of one or more of the firm. For the most part, the same considerations will apply to each class of cred- itors in all cases of distribution, whether by voluntary consent, or by mere operation of law, or by death, or by bankruptcy, or by the decree of a Court. There are, however, some particulars belonging to the case of bank- ruptcy, which will be reserved for a distinct and sepa- rate examination. But, unless some qualification is an- nexed, the doctrines hereinafter stated will generally apply to all other cases of dissolution. § 358. It has been already suggested, that the rights of antecedent creditors of the partnership are in no wise CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 573 varied by the dissolution of the partnership.^ It may be added, that, upon the dissolution, it is competent for the partners, in cases of a voluntary dissolution, to agree that the joint property of the partnership shall belong to one of them ; and if this agreement be bona jide^ and for a valuable consideration, it will transfer the whole property to such partner, wholly free from the claims of the joint creditors.^ The like result will arise from any stipulation to the same effect, in the original articles of copartnership, in cases of a dissolution by death, or by any other personal incapacity ; but not m cases of a dissolution by forfeiture for felony, or by bankruptcy. The reason of this is obvious. While the partnership is solvent, and going on, the creditors bave no equity, strictly speaking, against the effects of the partnership.^ Neither have they any lien on the partnership effects for their debts. All that they can, or may do, is to pro- ceed bv an action at law for their debts against the partners ; and having obtained judgment therein, they may cause the execution, issuing upon that judgment to be levied upon the partnership effects, or upon the separate effects of each partner, or upon both.^ There being, then, no lien, and no equity in favor of the cred- > Ante, § 334, 335 ; Ault v. Goodrich, 4 Kuss. 430 ; Gow on P. c. 5, § 2, p. 240, 241, 3d ed. ; Coll. on P. B. 1, c. 2, § 3, p. 75, 2d ed. ; 2 Bell, Comm. B. 7, c. 2, p. 638, 5th ed. - Gow on P. c. 5, § 2, p. 237-241, 3d ed. ; Coll. on P. B. 2, c. 1, § 2, p. 113, 114, 2d ed. ; Ex jjarte Peake, 1 Madd. 346 ; Ex parte Ruffin, 6 Ves. 119, 127; Ex parte Fell, 10 Ves. 347 ; Ex parte Williams, 11 Ves. 3 ; Ex parte Rowlandson, 1 Rose, 416 ; Campbell v. MuUett, 2 Swans. 551, 575 ; ante, § 97, and note ; ante, § 326, note ; [Ketchum v. Durkee, 1 Barb. Ch. 480 ; Sage v. Chollar, 21 Barb. 596; Bullitt v. Meth. Epis. Church, 26 Penn. St. 108.] ^ Ibid., and ante, § 97, note, and ante, § 326, note, and especially Ex paHe Williams, 11 Ves, 3, 5 ; [Waterman v. Hunt, 2 R. I. 298 ; Cook v. Beech, 10 Humph. 412.] * Ex parte Ruffin, 6 Ves. 119, 126, 127 ; JJa; paHe Williams, 11 Ves. 3 ; Ex parte Fell, 10 Ves. 347; Campbell v. Mullett, 2 Swans. 551, 575. 574 PARTNERSHIP. [CHAP. XV. itors against the partnership effects, until such execution is issued and levied thereon, it follows, that those effects are susceptible of being legally transferred, honafide^ for a valuable consideration, to any persons whatsoever, and as well to the other partners as to mere strangers.^ § 359. And this is equally true, although the whole or a part of the consideration of the transfer is, that the partners taking the property shall pay the whole or a particular part of the debts of the partnership ; for that will not aid the creditors. The reason is, that, in such a case, the retiring partner who so transfers his share, has no lien on the property for the discharge of those debts ; for by his voluntary transfer thereof he has parted with it, and trusted to the personal security and personal contract of the other partners.^ Even if he had, the lien would not pass to those creditors by operation of law, so as to become available in their favor.^ There may be, and indeed often is, a special ^ Ex parte Ruffin, 6 Ves. 119, 126, 127 ; Ex paHe Williams, 11 Ves. 3, 5 ; ante, § 97, and note : ante, § 326, note ; Campbell v. Mullett, 2 Swans. 651, 575 ; Ex parte Fell, 10 Ves. 347 ; [Ketchum v. Durkee, 1 Barb. Ch. 480; Allen v. Center Valley Co., 21 Conn. 130; Ferson v. Monroe, 1 Fost. 462; Howe v. Lawrence, 9 Cush. 553]; {post, § 371-373, 2 Lead. Cas. inEq. 329, 3d Am. ed. ; 21 Law Mag. 320; Kimball v. Thompson, 13 Met. 283; Baker's Appeal, 21 Penn. St. 76 ; Siegel v. Chidsey, 28 Penn. St. 279; Richardson v. Tobey, 3 All. 81; Dimon v. Hazard, 32 N. Y. 65; Potts V. Blackwell, 4 Jones, Eq. 58; Maries v. Hill, 15 Gratt. 400; Jones V. Lusk, 2 Metcalfe, 356 ; Mandel v. Peay, 20 Ark. 325. See Mechanics' Bank v. Hildreth, 9 Cash. 356. . On fraudulent transfers, see 2 Lead. Cas. in Eq. 330, 3d Am. ed. ; Wilson v. Robertson, 21 N. Y. 587 ; Ransom v. Van Deventer, 41 Barb. 307.} ^ Ex parte Ruffin, 6 Ves. 119, 126, 127 ; Ex par^e Williams, 11 Ves. 3, 5-8; {Croone v. Bivens, 2 Head, 389.} =* Gow on P. c. 5, § 2, p. 238-241, 3d ed. ; Id. p. 245 ; Id. p. 253, 254 ; Coll. on P. B.4, c. 2, § 1, p. 603-605; Ex jJarte Peele, 6 Ves. 602; Ex parte Williams, Buck, 13 ; Ex parte Freeman, Buck, 471 ; Ex parte Ruffin, 6 Ves. 119, 126, '127 ; Ex parte Williams, 11 Ves. 3 ; Campbell v. Mullett, 2 Swans. 551, 575 ; Ex parte Fell, 10 Ves. 347 ; {2 Lead. Cas. in Eq. 330, 3d Am. ed. ; Robb v. Mudge, 14 Gray, 534. Partnership property con- veyed on a dissolution to one of the partners, who agrees to hold and con- CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 575 agreement, subsequently entered into between the cred- itors and the partner, taking the transfer ; but then the case stands dryly upon such an agreement, and has no operation beyond it.^ § 360. Subject, however, to these exceptions, it may be generally stated, that, where the partners themselves vey one-half of it to his copartner after paying the firm debts, is to be ap- plied, in case of the insolvency of both partners, to the payment of the firm debts. Harmon v. Clark, 13 Gray, 114. See Wildes v. Chapman, 4 Edw. Ch. 669. In Tenney v. Johnson, 43 N. H. 144, upon a disagreement between partners, their differences were submitted to arbitration, and the award was that all the goods and assets of the firm should pass to one of the partnei's who should pay all the firm debts, and thereon such goods and assets were all attached by the separate creditors of such partner, and subsequently by the creditors of the firm, and it was held, that the latter were entitled to be preferred, even had the award been executed by a trans- fer in accordance with it. This is in accordance with prior New Hampshire cases. Ferson v. Monroe, 1 Fost. 462 ; Jarvis v. Brooks, 3 Fost. 136 ; Benson v. Ela, 35 N. H. 402, but the doctrine seems peculiar to that State. 2 Lead. Cas. in Eq. 328, 3d Am. ed. ; ante, § 261, note. But see Conroy v. Woods, 13 Cal. 626.} In Ex 2;'«r^e Williams, 11 Ves. 3, 6, Lord Eldon said: "The creditors are not injured by the agreement of partners to dis- solve the partnership ; and that, from that time, what was joint ^Jroperty shall become the separate property of one, notice of the dissolution being given ; as either a consideration is paid, or, which for this purpose is equal to a consideration, a covenant is entered into to pay the debts and indemnifj^ the retiring partner, so conceived as not to leave any lien ujjon the prop- erty. Upon any other principle the conclusion must be, that a partner could not retire from Child's house ; as the effects may be distributed twen- ty years hence among the creditors, if they remain so. If creditors do not like the arrangement, they must go to each of the partners, and de- sire payment. Another material ground is, that, where the possession of the property is delivered ov#r to the surviving partner, and he goes into the world as a sole trader ; he has all the credit belonging to him as such sole trader ; having the possession, and dealing with mankind as such. I qualify it so ; for I do not agree, that mere dissolution will work all this effect ; as that does no more than declare, that the partnership is not to be carried on any further, except for winding up the affairs, and he who has actual possession, has it clothed with a trust for the other, to apply the property to the debts ; and that will qualify the nature of his possession, so that it cannot be said, he has the sole possession of the specific effects, or the debts, to bring it within the operation of the Statute of King James, which certainly affects debts." ' See Gow on P. c. 5, § 2, p. 240, 245, 3d ed. ; Id. p. 254, where the prin- cipal cases are collected. 576 PARTNERSHIP. [CHAP. XV, have a lien upon the partnership effects for the dis- charge of all the debts and obligations thereof (as they have in all cases, where they have not parted with it),^ that lien may, in many cases, be made available for the benefit of the creditors. But then the equities of the creditors are to be worked out through the medium of that of the partners." They have, indeed, no lien ; but (as has been said) they have something approaching to a lien, of which, with the assent of the partners entitled to the lien, they may avail themselves in a Court of Equity against the partnership effects.^ The commu- 1 Ante, § 97, and note, and ante, § 326; 1 Story, Eq. Jur. § 675, 676 ; Holderness v. Shackels, 8 B. & C. 612. ^ [And if the contract of partnership is of such a nature, that the co- pai'tners can enforce no such right of lien as between themselves, the part- nership creditors can claim no such preference. Rice v. Barnard, 20 Vt. 479 ; Washburn v. Bank of Bellows Falls, 19 Vt. 278, and the able judgment of Redfield, Chancellor. In the late case of Tillinghast v. Champlin, 4 R. I. 1 73, it was held that the doctrine of the text was apjalicable only while the copartners are administering their own affairs, and did not apply, if one partner died, leaving the other insolvent, or when both partners become bankrupt, and their property is in the hands of assignees. But that in such a case an equitable lien would attach in favor of copartnership creditors upon joint property, and of separate creditors upon separate property, in the hands of the surviving partner, or assignees, as trustee for each class of cred- itors, which will be administered in equity against such trustees upon the direct application of the creditors. See the able opinion of Ames, C. J.] {2 Lead. Cas. in Eq. 329, 3d Am. ed. ; McNutt v. Strayhorn, 39 Penn. St. 269; Backus v. Murphy, 39 Penn. St. 397.} 3 Campbell v. Mullett, 2 Swans. 551, 575, 576 ; Ex paiie Ruffin, 6 Ves. 119, 126, 127 ; Ex paHe Fell, 10 Ves. 347 ; Ex ^Jrtj-^e Williams, 11 Ves. 3 ; ante, § 97, note, and ante, § 326, and note ; 3 Kent, 65 ; Ex paHe Kendall, 17 Ves. 514, 526. — In Ex parte Kendall, 17 Ves. 526, Lord Eldon said: "I do not recollect an instance, that this right to go in ujion the separate fund, not given by the legal contract, was extended beyond those who were creditors of the whole firm. Supposing that all those creditors could go in, the next question is, whether the creditors of the four can compel them to go in. With regard to that, though much artificial doctrine has been intro- duced in this Court, yet creditors, as such, independent of the effect of any special contract, have no lien or charge upon the effects of their debtor ; and in all these cases of distribution of joint effects, it is by force of the equities of the partners among themselves, that the creditors are paid ; not by force of their own claim upon the assets, for they have none." CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 577 nity of interest still remains, notwithstanding a dissolu- tion, so far as is necessary to wind up the affairs of the partnership ; and this requires, that what was partner- ship property before, shall (unless otherwise agreed) continue to be so for the purpose of a distribution, not as the rights of the creditors may suggest, but as the rights of the partners themselves require. And it is thus, through the operation of administering the equi- ties between the parties themselves, that the creditors have the opportunity of enforcing this quasi \\ei\} In short, in case of a dissolution, each partner holds the joint property, clothed with a trust to apply it to the payment of the joint debts, and, subject thereto, to be distributed among the partners according to their re- spective shares therein.^ ___ § 361. From the foregoing considerations, then, it is plain, that the joint creditors of the partnership, while all the partners are living and solvent, can enforce no claim against the joint effects or the separate effects of the partners, except by a common action at law.^ It is only in cases, where there is a dissolution by the death or bankruptcy of one partner, that the right of the joint creditors can attach, as a quasi lien upon the partnership effects, as a derivative subordinate right, under and through the lien and equity of the partners. 1 Ex parte Williams, 11 Ves. 3, 6 ; Ex parte Ruffin, 6 Ves. 119, 126, 127; ante, § 97, note; § 326, note; Ex parte Kendall, 17 Ves. 514, 626. [See Stocken v. Dawson, 9 Beav. 239, 246.] ^ Ibid. See Crallan v. Oulton, 3 Beav. 1, 7; {Harmon v. Clark, 13 Gray, 114.} 3 [In Allen v. The Center Valley Co., 21 Conn. 130, it was held, that although partnership creditors were entitled to pi'iority of payment as against individual creditors, out of partnership funds, so long as they con- tinued partnership funds, yet they have no specific lien thereon ; and while the partnership remains, and its business is going on, whether insolvent or not, there is no legal objection to a bona fide distribution of the partnership funds among the members of the firm, or a bona fide change of them from joint to separate estate.] 37 578 PARTNERSHIP. [CHAP. XV. In the former case (of death), the personal representa- tives of the deceased partner have a right (whether his estate be solvent or insolvent), to insist upon a due application of the joint effects, to pay the joint debts and fulfil the other purposes of the trust.^ At law, in- deed, the creditors have no remedy, except against the surviving partners for their debts ; ^ but in equity, as we shall presently see, it is far otherwise. In the lat- ter case (of bankruptcy) the like equity attaches to the solvent partners, and the assignees can stand only in the place of the bankrupt, and take his rights, and consequently they are entitled to nothing, except the surplus, after the discharge of all the joint debts, and of the claims of the other partners.^ So that, in each case, it is plain, that the joint creditors must be paid, in order to the due administration of justice between the partners themselves. Thus, we see at once, how the quasi lien or equity of creditors arises, and that it is a dependent and subordinate right. § 362. Another important consideration in cases of a dissolution by death is, as to the rights of the joint creditors against the estate of the deceased partner. We have seen, that at law,^ the sole right of action of the joint creditors is against the survivors. ° And the 1 Ex parte Euffin, 6 Ves. 119, 126, 127; Ex parte Williams, 11 Ves. 3, 6 ; ante, § 97, note; ante, § 326, 346, 347, note; Gow on P. c. 5, § 2, p. 235, 236, Sd ed. ; 1 Story, Eq. Jur. § 675, 676 ; Coll. on P. B. 3, c. 3, § 4, p. 404, 405, 2d ed.; Id. B. 3, c. 5, § 2, p. 503; 3 Kent, 65; Ex parte Kendall, 17 Ves. 514, 526 ; Wilcox v. Kellogg, 11 Ohio, 394. - Ibid. ; 1 Cbitty on PI. p. 39, 40, 3d ed. ; Bacon, Ab. Obligation, T>. 4 ; Com. Dig. Abatement, F. 8 ; Godson v. Good, 6 Taunt. 587 ; Bovill v. Wood, 2 M. & S. 23 ; Richards v. Heather, 1 B. & Aid. 29 ; Coll. on P. B. 3, c. 5, § 2, p. 503, 2d ed. ^ See authorities cited in the preceding notes. * [In Massachusetts a statute has changed this principle. Mass. Rev. Stat, c. 66, § 27] ; {Gen. Sts. c. 97, § 28. See In re Rice, 7 All. 112.} * Ante, § 361, note. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 579 inquiry here naturally presented is, whether they have any remedy in equity. The doctrine formerly held upon- this subject seems to have been, that the joint creditors had no claim whatsoever in equity against the estate of the deceased partner, except when the surviving part- ners were at the time, or subsequently became, insolvent or bankrupt.^ But that doctrine has been since over- turned ; and it is now held, that in equity all partner- ship debts are to be deemed joint and several ; ^ and consequently the joint creditors have in all cases a right to proceed at law against the survivors, and an election also to proceed in equity against the estate of the de- ceased partner, whether the survivors be insolvent, or bankriipt, or not.^ The consequence is, that the joint ^ See Lane v. Williams, 2 Vern. 292 ; Jacomb v. Harwood, 2 Ves. Sr. 265 ; Hankey v. Garratt, 1 "Ves. Jr. 236 ; Ex parte Ruffin, 6 Ves. 119, 126, 127 ; Ex parte Williams, 11 Ves. 3 ; Ex parte Kendall, 17 Ves. 514 ; Campbell v. Mullett, 2 Swans. 551 ; Gray u. Chiswell, 9 Ves. 118 ; Coll. on P. B. 3, c. 3, § 4, p. 404-408, 2d ed. ; Hamersley v. Lambert, 2 Johns. Ch. 508 ; Gowon P. c. 5, § 2, p. 359, 360, 3d ed. [This doctrine is still maintained in New York. See Lawrence v. Trustees of Orphan House, 2 Denio, 577.] - By the civil law of France, the rule as to the obligations of partners on their partnership contracts, does not seem to agree exactly with the rule of the common law. They are always understood to contract jointly, but not always severally. The general rule is, that each partner is considered as contracting only to the extent of his interest; and in any case, unless there be an express agreement by all the partners to bind themselves severally, the creditor can only recover from each his own proportion of the debt. One exception to this rule is indeed admitted in favor of commercial partnerships (soeietes de commerce), wherein the partners are liable jointly and severally (solidairement) for the debts of the partnership ; and this exception is created for the pur- pose of extending the credit of merchants. But in universal partnerships (soeietes universelles), and in all special partnerships (soeietes particulieres), which are not commercial partnerships, each partner, although he is presumed to contract in the name of the firm, only binds each one of his copartners for his pi'oportional part of the debt. When, indeed, a partner has contracted for the firm in his own sole name, he is solely responsible to the creditor, but he has a legal claim for indemnification and contribution therefor on each pai't- ner for his proportion, unless he have transgressed the limits of his authority, or been guilty of fraud. See Poth. de Soc. c. vi. § 1, No. 96, § 11 1, No. 103-106. 3 Coll. on P. B. 3, c. 3, §4, p, 407-413, 2d ed. ; Devaynes i: Noble, 1 Mer. 529 ; s. c. 2 Russ. & M. 495 ; Sumner v. Powell, 2 Mer. 30, s. c. Turn. & R.423 ; 580 PARTNERSHIP. [cHAP. XV. creditors need not now wait, until the partnership affairs are wound up, and a final adjustment thereof is made. But they may at once proceed, as upon a joint and several contract, in equity against the estate of the de- ceased partner ; although in any such suit the surviving partners must be made parties, as persons interested in taking the account.^ Wilkinson v. Henderson, 1 Myl. & K. 582 ; Thorpe v. Jackson, 2 You. & C. Ex. 553 ; Gow on P. c. 5, § 2, p. 358-360, 3d ed. ; Id. § 3, p. 290-292 ; 1 Story, Eq. Jur. § 676 ; 3 Kent, 64; Hamersley v. Lambert, 2 Johns. Ch. 508 ; Bel- knap V. Cram, 11 Ohio, 411 ; {Lind. on P. 295, 872; Rice v. Gordon, 11 Beav. 265; Brown v. Douglas, 11 Sim. 283; Kimball v. Whitney, 15 Ind. 280. See Clarke v. Bickers, 14 Sim. 639 ; Wilmer v. Currey, 2 De G. & Sm. 347.} In Devaynes v. Noble, 1 Mer. 529, 563, 564, Sir William Grant (Mas- ter of the Rolls), said : " It may be proper, however, to observe, that the common law, though it professes to adopt the Lex Mercatoria, has not adopted it throughout in what relates to partnership in trade. It holds, indeed, that although partners are in the nature of joint-tenants, there shall be no surviv- orship between them in point of interest. Yet with regard to partnership contracts, it applies its own peculiar rule ; and, because they are in form joint, holds them to produce only a joint obligation, which consequently attaches ex- clusively upon the survivors ; whereas, I apprehend, by the general mercan- tile law, a partnership contract is several, as well as joint. That may probably be the reason, why Courts of Equity have considered joint contracts of this sort (that is, joint in form), as standing on a different footing from others. The cases of relief on joint bonds may be accounted for on the ground of mis- take in the manner of framing the Instrument ; and it may be said that equity gives to them no other effect than it was the intention of the parties them- selves to have given to them. But how is it possible to explain the cases upon partnershiji notes, so as to distinguish them from ordinary partnership debts?" ' Coll. on P. B. 3, c. 3, § 4, p. 404, 405, 2d ed.; {Lind. on P. 874} ; ante, § 347; Wilkinsons. Henderson, 1 Myl. & K. 582, 588. On this occasion Sir John Leach (Master of the Rolls) said : " All the authorities establish, that, in the consideration of a Court of Equity, a partnership debt is several, as well as joint. The doubts upon the present question seem to have arisen from the general principle, that the joint estate is the first fund for the pay- ment of the joint debts, and that the joint estate vesting in the surviving part- ner, the joint creditor, upon equitable considerations, ought to resort to the surviving partner, before he seeks satisfaction from the assets of the deceased partner. It is admitted, that if the surviving partner prove to be unable to pay the whole debt, the joint creditor may then obtain full satisfaction from the assets of the deceased partner. The real question, then. Is, whether the joint creditor shall be compelled to pursue the surviving partner In the first CHAP. XV,] DISSOLUTION RIGHTS OF CREDITORS. 581 § 363. Still another inquiry may remain, in cases where the estate of the deceased partner is not suffi- cient to pay all his separate debts, and all the joint debts ; and that is, whether the debts are to be paid pari passu out of the assets of the deceased, or either is entitled to a preference. The general rule would seem to be (as it is in bankruptcy), that the joint creditors have a priority of right to payment out of the joint estate, and the separate creditors a like right of pri- ority to payment out of the separate estate ; and the surplus, if any, is divisible among the other class of creditors.^ In cases where there is both a joint estate instance, and shall not be permitted to resort to the assets of the deceased partner, until it is established that full satisfaction cannot be obtained from the surviving partner ; or whether the joint creditor may, in the first instance, resort to the assets of the deceased partner, leaving it to the personal repre- sentatives of the deceased partner to take proper measures for recovering what, if any thing, shall appear upon the partnership accounts to be due from the surviving partner to the estate of the deceased partner. Considering that the estate of the surviving partner is at all events liable to the full satisfaction of the creditors, and must first or last be answerable for the failure of the sur- viving partner; that no additional charge is thrown upon the assets of the de- ceased partner by the resort to them in the first instance, and that great inconvenience and expense might otherwise be occasioned to the joint creditors ; and, further, that according to the two decisions in Sleech's Case in the cause of Devaynes v. Noble, the creditor was pei-mitted to charge the separate estate of the deceased partner, which in equity was not primarily liable, as between the partners, without first having resort to dividends, which might be obtained by proof under the commission against the surviving part- ner, I am of opinion, that the plaintiff is entitled in this case to a decree for the benefit of himself, and all other joint creditors, for the payment of his debt out of the assets of Shepherd, the deceased partner." { So Vance v. Cowing, 13 Ind. 460.} [But see Lawrence v. Trustees of Orphan House, 2 Denio, 577 ; Patterson v. Brewster, 4 Edw. Ch. 352, where the case of Wilk-^ inson v. Henderson is examined and disapproved.] ' Gray v. Chiswell, 9 Ves. 118, 124, 125; Twiss v. Massey, 1 Atk. 67; Ex parte Cook, 2 P. Wms. 500 ; Ex parteQX&y, 6 Ves. 813 ; Coll. on P. B. 4, c. 2, § 1, p. 595, 2d ed. ; Id. § 3, p. 623, 624 ; 3 Kent, 64, 65 ; Murray v. Murray, 5 Johns. Ch. 60, lir-11 ; Tucker v. Oxley, 5 Cranch, 34, 44, 45 ; Gow on P. c. 5, § 3, p. 28G, 287, 3d cd. ; Id. p. 310-323 ; Payne v. :Matthews, 6 Paige, 19; Comm. Bank of Lake Erie v. AVestern Reserve Bank, 11 Ohio, 444, 451 ; [Bridge v. McCuUough, 27 Ala, 661 ; Rodgers v. Meranda, 7 582 PARTNERSHIP. [CHAP. XV. and a separate estate, the rule may not be unreason- able, as, at most, it only puts the joint creditors of the Ohio St. 179, 187, where the subject is very ably examined. Walker w. Eyth, 25 Penn. St. 216] ; {Lind.on P. 876; 1 Am. Lead. Cas. 480, 4th Am. ed. ; Ridgway v. Clare, 19 Beav. Ill; Lodge v. Prichard, 4 GifF. 294; 8. c. on appeal, 1 De G. J. & S. 610; Weyer??. Thornburgh, 15 Ind. 124; Moline Water Power Co. v. Webster, 26 111. 233 ; Pahlman v. Graves, Id. 405 ; Toombs V. Hill, 28 Ga. 371 ; post, § 376. } — This doctrine has not been univer- sally adopted in America. Mr. Chancellor Kent has collected the principal cases in his Note (b) to 3 Kent, 65. The subject was also very fully discussed by the same learned Judge, and all the then existing authorities were cited by him in Murray v. Murray, 5 Johns. Ch. 60, and by Mr. Chief Justice Tilghman, and Mr. Justice Gibson, and Mr. Justice Duncan in Bellu. New- man, 5 S. »& R. 78, 85-107. Still more recently this doctrine has been re- viewed at large by Mr. Chief Justice Shaw, in an elaborate opinion, in Allen V. Wells, 22 Pick. 450 ; and the conclusion to which he has arrived seems entirely well founded, that the doctrine is one that can be properly en- forced in equity only, and not at law. The comments of all these learned Judges upon the general doctrine are very instructive, and in a great measure exhaust the subject. {In the American note to the case of Silk V. Prime, 2 Lead. Cas. in Eq. 3d Am. ed. 313, this subject is treated with great learning and clearness. What seems to be the true reason for the prior rights of the separate creditors in the estate of a deceased partner is there given thus : " Whenever one partner dies in the life- time of another, the law casts all the obligations of the firm on the surviving partner, and the only recourse of the partnership creditors against the separate estate of the deceased partner being in equity, this estate will stand, so far as they are in question, on the footing of equitable assets, and be subject to the two principles which govern the distribution of such assets, first that legal priorities must be resjiected, and next, that the division among equi- table claimants must be equal. When, therefore, the estate of a deceased partner comes into equity for distribution, the separate creditors, whose right to the assets is legal, must be satisfied in the first instance, and then the resi- due distributed as equitable assets among the joint creditors." It is not to be denied, however, that the reason generally given in both the English and American cases for this distribution of the assets of a deceased partner is the , analogy of the proceedings in bankruptcy. See the cases cited in the note to Silk V. Prime, ubi sup. ; Lodge v. Prichard, 4 GifF. 294 ; s. c. on appeal, 1 De G. J. & S. 610. There is a theoretical advantage in supporting the distri- bution of a deceased partner's estate on acknowledged principles of equity jurisjirudence i-ather than on a practice in bankruptcy, the soundness of which has been seriously questioned, see §377; but, on the other hand, the latter method produces a uniformity in distributing the estates of both insolvent and deceased ])artiiers, which recommends it in practice. This is best seen in the administration of the assets of the last surviving partner. Both the CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 583 partnership to an election, whether they will proceed against the joint estate, or against the separate estate, where both estates are insolvent. But, where there is no joint estate, the case may seem to be involved in more nicety and difficulty ; since under such circum- stances the creditors would seem, as their contract is several, as well as joint, to be entitled, upon general principles, to claim paH passu with the separate creditors.^ However, it cannot be positively affirmed, that such is the settled doctrine in equity, in cases of deceased partners. On the contrary, there seems to be some conflict of opinion upon the point.^ In bank- joint and separate creditors have a legal claim on these assets, and therefore, according to the principles of the paragraph quoted above, ought to take pari passu, wliile in the estate of the partner who died first his separate credi- tors, according to the same principle, would have the priority, a difference which is at least inconvenient. Besides now in many of the States, the death of a joint debtor does not discharge his estate from his liability at law for the joint debts.} ' Coll. on P. B. 3, c. 3, § 4, p. 413, 2d ed. ; [Emanuel v. Bird, 19 Ala. 596.] ^ Cowell V. Sikes, 2 Russ. 191, 194, 196. — In this case Lord Gifford (Master of the Rolls) seemed to be of opinion, that the joint creditors under such circumstances could not come in, jyari jyassu, with the separate creditors. But Lord Eldon, under the circumstances of that particular case, thought otherwise. Mr. Collyer on this subject says : " We ought not to conclude this subject without adverting to the question, whether, when a partnership creditor has obtained a decree in equity for payment of his debt out of the estate of the deceased partner, he is entitled to receive payment jfd''^ passu with the separate creditors of that partner. If this point were decided on principle alone, and without reference to any supposed analogy between the practice in the Courts of Equity and the practice in bankruptcy, it seems clear, that the partnership creditor, as resting on his separate contract, Avould have a right to come in competition with the separate creditors. On the other hand, the cases of Gray v. Chiswell, and Cowell v. Sikes, tend to show, that, by analogy to the rule in bankruptcy, the partnership creditor will in such case be postponed to the separate creditors, unless there be no joint estate." Mr. Chajicellor Kent, in his Commentaries, seems to have laid down the doctrine in general terms, as equally applicable to all cases. His lan- guage is : " The joint creditors have the primary claim upon the joint fund, in the distribution of the assets of bankrupt or insolvent partners, and the 584 PARTNERSHIP. [cHAP. XV. ruptcy, where there is no joint estate, and there is no solvent partner, joint creditors are permitted to prove against the bankrupt's estate ^jari passu with the sepa- rate creditors.^ § 364:. Be this doctrine as it may, it seems certain, that the joint creditors cannot be compelled, in case of the death of one partner, and the bankruptcy of the survivors, to resort to the estate of the deceased partner for payment for the benefit of the fund in bankruptcy, in aid of creditors, who are creditors of partnership debts are to be settled before any division of the funds takes place. So far as tlae partnership property has been acquired by means of pai'tnershiji debts, those debts have in equity a priority of claim to be dis- charged ; and the separate creditors are only entitled in equity to seek payment from the surplus of the joint fund, after satisfaction of the joint debts. The equity of the rule, on the other hand, equally requires that the joint creditors should only look to the surplus of the separate estates of the partners, after payment of the separate debts. It was a principle of the Roman law, and it has been acknowledged in the equity jurisprudence of Spain, England, and the United States, that partnership debts must be paid out of the partnership estate, and private and separate debts out of the pri- vate and separate estate of the individual partner. If the partnership creditors cannot obtain payment out of the partnership estate, they cannot in equity resort to the private and separate estate, until private and separate creditors are satisfied ; nor have the creditors of the individual partners any claim upon the partnership property, until all the partnership creditors are satisfied. The basis of the general rule is, that the funds are to be liable, on which the credit was given. In contracts with a partnership the credit is supposed to be given to the firm; but those who deal with an individual member rely on his sufficiency." 3 Kent, 64, €5. The modern Code of Commerce of France provides (art. 534), that the creditor, holding a joint and several obligation of the insolvent and other persons, who are also insolvent, shall participate in the dividends of all their respective estates, until he shall be fully paid. See, also, 1 7 Duranton, Cours de Droit Franc. § 457, and 5 Duvergier, Droit Civil Franc. § 406, cited post, § 365 ; 4 Par- dessus. Droit Comm. § 1089, |See 2 Lead. Cas. in Eq. 323, 3d Am. ed. ; post, § 380. In Weyer v. Thornburgh, 15 Ind. 124, though there were no joint assets, yet the joint creditors were not allowed to share pa?v' passu in the estate of a deceased partner.} ' Ex parte Kensington, 14 Ves. 447; Ex parte Janson, 3 Madd. 229; Buck, 227 ; Ex parte Sadler, 15 Ves. 52 ; Coll. on P. B. 4, c. 2, § 3, p. 624, 626, 627, 2d ed. {See post, § 380.} CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 585 the survivors, and not of the old partnership.^ For the rule in equity, that, where one person can resort to two funds for payment, and another can resort to one only, the latter may compel the former to resort to the fund to which he may exclusively resort, in aid of the latter, applies only where both debts are due by precisely the same debtors.^ § 365. This principle of Equity Jurisprudence, that the joint creditors shall be entitled to a priority of payment out of the joint effects, and the separate creditors to a like priority out of the separate effects, before the other class of creditors shall be entitled to any portion of the surplus, is not, perhaps, under all its aspects, so purely artificial as it has sometimes been suggested to be ; at least, it has been often relied upon, as the dictate of natural justice.^ In the Roman law, if one man carried on two separate trades, it seems, that the creditors, who separately sup- plied goods or credit for the use of either of those trades, had a privilege or right of payment out of the prop- erty employed therein, in preference to the creditors in the other business. Ui'puta (says Ulpian), duas 7iegotiatlones exercehat (puta sagariatn et linteariam) et separates hahuit creditores? Pido, separathn eos in tributum vocari ; unusquisque enhn eorum merci magis, quam ipsi, credidit.^ Straccha lays down the like doc- trine in the case of the failure or insolvency of a mer- chant, engaged in two kinds of business. Si mercator duas negotiatlones exercuisset, pitta sagariam et lintea- ^ Ex parte Kendall, 17 Ves. 514, 526, 527 ; Coll. ou P. B. 4, c. 2, § 3, p. 629, 630, 2d ed. = Ibid.; 1 Story, Eq. Jur. § 558-560; Id. § 642-645 ; {House v. Thomp- son, 3 Head, 512.} ^ ExjJarie Elton, 3 Ves. 238, 242 ; [Rodgers v. Meranda, 7 Ohio St. 179.] * D. 14, 4, 5, 15 ; Poth. Pand. 14, 4, n. 8 ; 2 Emerigon, Contrat a la Grosse, c. 12, § 6, p. 582, ed. 1783 ; Inst. 4, 7, 3 ; 17 Duranton, Cours de Droit Franc. §457, p. 512-514. 586 PARTNERSHIP. [CHAP. XV. H«m, et separatos licibuerit creditores in dictis mercihus, sejKOYitos eos in trihutum vocari; et ilia ratio in prce- dictis redditur ; quia wmsqidsqiie creditor magis merci^ quam mereatori, credidit ; et ne ex alterius re merceve alii indemnes Jiant, alii damnum sentiant} § 366. Eraerigon holds the same doctnne ; and says, that where a person carries on two trades in different houses, the creditors who have given credit to one of these trades or houses, have a privilege upon the effects there found, to the exclusion of the creditors who have given credit to the other trade or house ; and these last creditors have also a like exclusive privilege upon the effects of the trade or house to which they have given credit.^ And he puts the very case of the joint credi- tors of a partnership, as clearly settled in the French law, saying, that the joint creditors of a partnership have a privilege or preference of payment out of the partnership effects, before the separate creditors of any one partner ; and that the respective creditors of two different partnerships have the like exclusive pri^dlege and preference upon the partnership effects of each partnership, although both firms are composed of the very same persons.^ And he gives the very reason as- signed therefor in the Roman law : Unusquisque enim eorum merci magis, quam ij^si, credidit^ This also seems to be the recognized doctrine in the modern jurisprudence of France ; and it has been so promul- gated by some of its most approved jurists.^ ^ Straccha de Decoctoribus, Pars Ultima, n. 21, p. 469, ed. 1669. " Emerigon, Contrat a la Grosse, c. 12, § 6, p. 582, ed. 1783. 3 Ibid. * Ibid. See, also, 2 Story, Eq. Jur. § 1221-1223, 1239, 1240. ' 17 Duranton, Cours de Droit Franc. § 457, p. 512-515 ; 5 Duvergier, Droit Civil Franc. § 405, 406; 4 Pardessus, Droit Comm. § 1089, 1207.— In relation to the correlative principle, that the separate creditors ought first to be paid out of the separate effects of the debtor partner, there CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 587 § 367. In relation to what properly constitute joint debts of the partnership, and what constitute separate debts of the particular partners, the considerations al- ready suggested in another place will, in a great meas- does not seem to be the same uniformity of opinion at present prevailing in France, although Duranton strongly inclines to hold it. His language is : " Mais il n'y a pas lieu de dire, en sens inverse, que les creanciers particuliers d'un associe doivent etre payes sur les biens personnels de cet associe, par preference aux creanciers qu'il a a raison de la societe, meme en ce qui concerne la part de ses coassocies dans ces meraes dettes, dans le cas ou ils en seraient tenus solidairement, soit parce que la societe serait en nom coUectif, soit parce que les associes se seraient obliges avec clause de solidarite ; car cet associe est oblige, a Tegard des uns comme a Tegard des autres, sur tous ses biens presens et a venir, par consequent sur ses biens particuliers comme sur ceux qu'il avait pour sa part dans la societe. Et de meme que les creanciers particuliers d"un heritier ne peuvent demander la separation de son patrimoine d'avec celui du defunt (art. 881), pour etre payes sur ses biens par preference aux creanciers de la succession, de meme les creanciers particuliers d'un associe ne doivent pas pouvoir demander la separation de ses biens personnels de ceux qu'il a dans la societe, pour etre payes sur ces memes biens par preference aux creanciers, qu'il a relative- ment aux affau-es de cette societe. II y a parite parfaite ; cet associe, en contractant la societe, et des dettes relativement a cette meme societe, a fait ce qu"il avait le droit de faire, comme un heritier, qui, en acceptant purement et simplement une succession oberee, a pris sur lui les dettes du defunt. Tout ce qu'on pourrait dire de plus juste, et telle est I'opinion de plusieurs personnes, c'est que si les creanciers de la societe demandent a etre paves par preference sur ses biens ils doivent souffrir que les creanciers particuliers de I'associe soient payes par preference k eux sur les biens per- sonnels de cet associe. La loi citee au n" precedent fournirait un ai'gument pour le decider ainsi. . On en trouverait un semblable dans la loi 3, § 2, S. de separationibus, od Papinien, contre le sentiment de Paul et d'Ulpien (dans la 5% au meme titre) , qui ne voulaient pas que les efFets de la sepa- ration pussent etre scindes, admettait bien les creanciers du defunt, qui avaient demande la separation des patrimoines, a se faire payer aussi sur les biens particuliers de Theritier, mais toutefois apres discussion prealablement faite de ceux du defunt, et, en outre, apres le paiement integral des creanciers particuliers de I'h^ritier ; decision qu'avait adoptee Domat, Lebrun, et Po- thier. -Comme le point en question n'est pas positivement prevu et regie par le Code Ci\il, les juges, en virtu de Tarticle 4, pourraient le decider de la sorte, en suivant les regies de Tequite, qui paraissent en effet vouloir une semblable decision." 17 Duranton, Cours de Droit Frangais, § 458, p. 515-517. M. Duvergier holds a different opinion. 5 Duvergier, Droit Civil Franc. § 406. 588 PARTNERSHIP. [CHAP. XV. ure, supersede any discussions here.^ It may, however, be generally stated, that wherever the original credit is giA^en to the partnership, that will constitute a debt against the partnership, notwithstanding the partner contracting the debt may also have given his own separate security therefor, or have also made himself personally liable therefor.^ And, on the other hand, wherever the original credit has been exclusively given to the partner contracting the debt, the partnership will not be liable therefor, but the individual partner only, although it has been applied to the use and benefit of the partnership.^ § 368. So, also, if the original debt is exclusively contracted by one partner on his own account, but it has been immediately assumed by the partnership, with the consent and approbation of the creditor, as a part- nership debt, it will henceforth be treated in his favor as a joint debt.^ So, if one partner is separately in- trusted with trust-money, and he, with the knowledge and consent of his partners, applies it to partnership purpo- ses, it will constitute a joint debt agaiust the partnership at the election of the cestici que trust, or beneficiary.^ ' Ante, § 126-155 ; Coll. on P. B. 4, c. 2, § 1, p. 613-622, 2d ed. {See, also, Tremlett v. Hooper, 10 Gray, 254 ; Fisher v. Minot, Id. 260.} " Ante, § 140 ; Gow on P. c. 5, § 3, p. 282-285 ; Wats, on P. c. 5. p. 274- 278, 2d ed. ; Ex parte Brown, cited 1 Atk. 225 ; Ex parte Emly, 1 Rose, 61 ; Ex parte Hunter, 1 Atk. 223. 3 Ibid. * Ante, § 142, 154; Gow on P. c. 5, § 3, p. 284-286, 3d ed. ; Ex parte Jackson, 1 Ves. Jr. 131 ; Ex parte Peele, 6 Ves. 602 ; Ex parte Williams, Buck^ 13 ; Ex jJarte Apsey, 3 Bro. Ch. 265 ; Coll. on P. B. 4, c. 2, § 1, p. 613-622, 2d ed. ; Ex parte Freeman, Buck, 471 ; Wats, on P. c. 6, p. 274, 275, 2d ed. ^ Gow on P. c. 5, § 3, p. 285, 3d ed. ; Ex paHe Watson, 2 Ves. & B. 414 ; Smith v. Jameson, 5 T. R. 601 ; Keble v. Thompson, 3 Bro. Ch. 112 ; Coll. on P. B. 4, c. 2, § 1, p. 616-622, 2d ed. ; Id. c. 2, § 5, 638, 639 ; Ex parte Clowes, 2 Bro. Ch. 5U5 ; Wats, on P. c. 5, p. 274-278, 2d ed.; {Lind. on P. 248 ; Trull v. Trull, 13 AU. 407. See ante, § 166.} CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 589 § 369. Cases also may arise in a more general form, involving the like considerations, whether debts, origi- nally separate, have been converted into joint debts ; or debts, originally joint debts, have been converted into separate debts, at any other period subsequent to their first creation ; and also, whether, if there has been such a conversion, the original debts have been thereby intentionally extinguished, or not.^ It is obvious, that the remedy of the creditors against the estates of the partners, either joint or several, may be materially af- fected by each of these facts, and especially by the lat- ter. Bv the conversion of debts, in the technical sense of the phrase, is meant the changing of their original character and obligation with the consent of the credi- tors ; so that, if they are originally joint debts of all the partners, they become, by consent, the separate debts of one partner ; or, if they are the separate debts of one partner, they become, by the like consent, the joint debts of all the partners. It is obvious, that this conversion may be with an intention, either to extin- guish the original debt, or merely to give the creditor an additional security therefor; and the law will give effect to it according to that intention. Where the original debts have been converted with an intention to extinguish them (which can only be where a suffi- cient consideration exists or passes between the parties), there, the creditors must rely solely on their debts in their new quality or form, and are entitled to receive compensation out of the joint estate or several estate, according to the nature of the conversion, and in con- formity to the principle already stated.^ But, where 1 Coll. on p. B. 4, c. 2, § 2, p. 613, 614, 2d ed. ; ante, § 155-157 ; Wats, on P. c. 5, p. 274, 275, 2d ed. 2 Coll. on P. B. 2, c. 1, § 2, p. 113, 2d ed. ; Id. B. 4, c. 2, § 2, p. 614; 1 Mont, on P. B. 2, c. 7, § 2, p. 226-232, Am. ed. ; Wats, on P. c. 5, p. 256, 257, 2d ed. ; Bolton v. Puller, 1 B. & P. 539. 590 PARTNERSHIP. [cHAP. XV. the original debts have been converted without any such extinguishment (which, also, can only be upon a sufficient consideration), the creditors can take advan- tage of the debts, according either to their new or their old form and quality.^ In other words, they may treat them as joint, as well as separate debts, and have their remedy against the joint or separate estate accordingly in their election. The creditors are, therefore, ordi- narily, in this latter case, in a far more beneficial con- dition than in the former ; ^ and this may be, especially in cases of bankruptcy, a right of no inconsiderable value. ^ § 370. The question, therefore, may become highly important to ascertain, what, upon any such conver- sion, will amount to a conversion of the original debt with any extinguishment ; and what will amount to a conversion thereof without such extinguishment. And here, again, what has been already stated may serve, in a great measure, to explain and solve most questions of this sort.'* In order to produce any con- version at all, either with or without an extinguish- ment, there must be a sufficient consideration, and also • Coll. on P. B. 4, c. 2, § 2, p. 614, 2d ed. ; Id. B. 2, c. 1, § 2, p. 113. ^ Ibid. 3 Coll. on P. B. 4, c. 2, § 5, p. 634-641, 2d ed. ; Gow on P. c. 5, § 3, p. 286-288, 3d ed. {The guaranty by a partnership of a debt of one of the partners, if made in contemplation of insolvency, cannot be proved against the joint estate by a creditor who knew the insolvency of the firm. Phillips tj. Ames, 5 All. 183.} * Ante, § 157-159 ; Coll. on P. B. 3, c. 3, § 3, p. 384-389, 2d ed. — See especially the cases already cited, ante, § 156-159, where, upon the re- tirement of one partner, there have been subsequent dealings by the joint creditors with the remaining partners, constituting a new firm, and new securities have been taken, and new credits obtained, and new accounts opened, and new stipulations entered into between them, with reference to the old debts, when and under what circumstances they will amount to a conversion of the old debts, and an extinguishment. Mr. Collyer and Mr. Gow have cited the cases at large in the passages above referred to. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 591 a deliberate and mutual assent of the creditors and debtors to such conversion. Both must concur ; and the offer and the acceptance must be upon the same conditions, stipulations, and limitations.^ In short, all the terms must be accepted and complied with.^ And it may be laid down, as a general rule, that where a separate creditor has taken a partnership bill, or note, or other security, in full discharge of his original claim, there, the separate debt is converted into a joint debt, and the original remedy is extinguished.^ The same rule will apply in the converse case, where a joint creditor has taken the separate bill, or note, or other security, in discharge of the joint debt. But, if the evidence goes only to show, that the bill, or note, or other security was given, not in discharge of, but as a collateral security for the original debt, in such a case the original debt and remedy will still remain.^ § 371. Another question may arise, and that is, as » Coll. on P. B. 4, c. 2, § 2, p. 617-620, 2d ed. ; Id. c. 2, § 1, p. 608, 609 ; {Dwight v. Mudge, 12 Gray, 23 ; Wild v. Dean, 3 All. 579 ; Backus V. Fobes, 20 N. Y. 204. } * Ibid. ; Ex parte Fairlie, 1 Montagu, 17 ; Ex parte Peele, 6 Ves. 602; Ex parte Williams, Buck, 13; Ex parte Freeman, Buck, 471; Ex parte Fry, 1 Glyn. & J. 96 ; Gow on P. c. 5, § 3, p. 284, 285, 8d ed. 3 Coll. on P. B. 4, c. 2, § 2, p. 614-618, 2d ed. ; Ex parte Seddon, 2 Cox, 49 ; Gow on P. c. 5, § 3, p. 282-286, 3d ed. ; Ex parte Lobb, 7 Ves. 692; Ex parte Roxby, 1 Mont, on P. 124; Ex parte Fairlie, 1 Montagu, 17; Ex parte Clowes, 2 Bro. Cli. 695; David v. EUice, 6 B. & C. 196; Gow on P. c. 5, § 4, p. 369-367, 3d ed. ; Id. c. 5, § 4, p. 360-366. * Coll. on P. B. 4, c. 2, § 2, p. 615, 616, 2d ed. ; Id. B. 8, c. 3, § 3, p. 384-388 ; Ex parte Seddon, 2 Cox, 49 ; Ex parte Lobb, 7 Ves.^592 ; Ex parte Roxby, 1 Mont, on P. 124 ; Ex parte Hodgkinson, Cooper, 99 ; Ex parte Hay, 15 Ves. 4; Ex parte Slater, 6 Ves. 146; Evans v. Drummond, 4 Esp. 89; Reed v. White, 5 Esp. 122; Thompson v. Percival, 5 B. «fe Ad. 925 ; Ex parte Whitmore, 3 Mont. & A. 627 ; Oakley v. Pasheller, 10 Bligh, N.S.548; s. c. 4 CI. & Fin. 207 ; Wats, on P. c. 5, p. 274-277, 2d ed. {Crooker v. Crooker, 52 Me. 267. So, if judgment has been recovered against one partner for a debt due from the firm, the creditor cannot prove against the joint estate ; Ex parte Higgins, 3 De G. & J. 33. } 592 PARTNERSHIP. [cHAP. XV. to what is to be deemed joint property of the partner- ship, and what separate property of the respective partners. This, not unfrequently, becomes a perplex- ing and compUcated inquiry in cases of bankruptcy ; and it is sometimes not wholly free from doubt in other cases. But, as with few exceptions, and these chiefly arising upon reputed ownership under the statutes of bankruptcy,' the same general principles apply to all classes of cases, we shall consider them (reserving the exceptions for a future discussion) in this place. 372. The joint estate of the partnership is that which belongs to the firm, and in which the partner- ship have a joint interest, either at law or in equity, at the time of the dissolution.^ The separate estate is that in which any of the partners has a separate inter- est, either at law or in equity, at the same period ; and it is not the less his separate estate, although it may be actually possessed and used by the partnership at the time, for partnership purposes, if in truth it is merely for the accommodation thereof, and the partnership have no interest whatsoever therein.^ The partners may, by their articles of partnership, agree as to what shall be deemed partnership property, and what shall be deemed > See Ex parte Enderby, 2 B. & C. 389 ; Ex parte Wood, De Gex, 134; Coll. on F. B. 4, c. 2, § 1, p. 597-600, 2d ed. ; Gow on P. c. 5, § 3, p. 267, 268, 271-274, 3d ed. ; Id. § 2, p. 232-234; Wats, on P. c. 5, p. 256-260, 2d ed. ; Id. p. 264-272. * Ante, § 88-100 ; [In re Rowland, Law Rep. 1 Ch. 421.} •'' Coll. on P. B. 4, c. 2, § 1, p. 595, 596, 2d ed. ; Ex parte Hamper, 17 Ves. 403, 412, 413 ; Gow on P. c. 5, § 3, p. 271-274 ; {Lind. on P. 551 ; Ex parte Owen, 4 De G. & Sm. 351. As to real estate, see § 93, note. In El- liot V. Stevens, 38 N. H. 311, it was held, that if partners by arrangement among themselves, owned each a separate part of the stock in trade on whicli the firm business was transacted, yet the stock would be regarded as partnership property for the payment of partnership debts, at least as to creditors who had no notice how the stock was owned. } CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 593 separate property, at the time of the dissolution. So they may, during the partnership, convert joint prop- erty into separate property, or separate property into joint property ; and the property will, at the dissolution, be held to possess that character, and that only, which is imposed upon it at the time.^ Hence, if upon a dis- solution, any partnership property be left in the posses- sion of one partner, but not for the purpose of carrying on the trade therewith, on his own account, it will be deemed partnership property, and retain its true char- acter, notwithstanding such partner shall subsequently, while it is in his possession, become a bankrupt.- The reason is, that the property is in his hands, merely as a trustee of the partnership ; and trust property is not deemed to be the reputed property of the bankrupt.^ § 373. In relation to the assignment of separate debts by a partner to the firm, or the assignment of joint debts by the firm to a separate partner (subject to the exceptions arising under the bankrupt laws),^ the debts will be treated as joint or several in equity, according to the intention of the parties, whether they are actu- ally reduced into possession, or whether actual notice has been given to the debtors or not. For such an as- signment will operate in equity as a complete transfer of the debts, if made honajide, and for a valid consider- ation. In respect to the assignment of other property, the transfer need be made only in the same way and > Coll. on P. B. 4, c. 2, § 1, p. 596, 597, 2d ed. ; Id. p. 600, 601, 603- 606; Ex imrte Ruffin, 6 Ves. 119; {Fisher?;. Minot, 10 Gray, 260; Mc- Cormick v. Gray, 13 How. 26.} ^ Coll. on P. B. 4, c. 2, § 1, p. 596, 597, 2d ed. ; "Wats, on P. c. 5, p. 314-320, 2d ed. ; [See also Stocken i\ Dawson, 9 Beav. 239.] •^ Winch V. Keely, 1 T. R. 619; Copeman v. Gallant, IP. Wms. 314; Ex parteYlyn, 1 Atk. 185; Ex parte^YiWiAms, 11 Ves. 3, 5, 6 ; Coll. on P. B.4, c. 2, § 1, p. 597-599, 2d ed. {And see Harmon v. Clark, 13 Gray, 114.} ^ Gow on P. c. 5, § 3, p. 275, 276, 3d ed. 38 594 PARTNERSHIP. [CHAP. XV. manner, as it ought to be, to be valid if made in favor of a third person. But, in all these cases, the transfer by assignment roust be complete, and all the conditions thereof fulfilled, otherwise it will not amount to a con- version of the property.^ § 374. We come, in the next place, to the considera- tion of the effects and consequences of a dissolution by bankruptcy upon the rights of creditors. It might at first view be supposed, that the doctrines upon this sub- ject, being the growth of the bankrupt system of Eng- land, were not of much importance to be examined or studied elsewhere. But, when it is considered, that the jurisdiction exercised by the Courts in cases of bank- ruptcy, is founded upon the general notion of adminis- tering the principles of equity and general justice be- tween the parties (although these principles may, per- haps, in some instances be administered upon artificial reasoning), it will be found, that they furnish many lights by which the corresponding systems of other na- tions in the analogous cases of insolvency, and the Ces- sio honorum, may frequently be illustrated and expound- ed. It is mainly upon considerations of this sort, that they are here brought under review.^ ' 2 Story, Eq. Jur. § 1039-1048 ; Coll. on P. B. 4, c. 2, § 1, p. 612, 613, 2d ed. ; Ex parte Ruffin, 6 Ves. 119 ; Govv on P. c. 5, § 3, p. 268-270, 3d ed. See and consult the cases cited by Mr. Collyer on P. B. 4, c. 2, § 1, p. 605- 610, 2d ed. ; Gow on P. c. 5, § 3, p. 268-281, 3d ed. ; which, though arising in bankruptcy, show what the general principle is, where there is no bankruptcy. {Ex parte Sprague, 4 De G. M. & G. 866 ; Hawkins v. Hawkins, 4 Jur, N. s. 1044 ; Armstrong v. Fahnestock, 19 Md. 58 ; Jones v. Neale, 2 P. efe II. 339. } '^ {The provisions in the United States Bankrupt Act of 1867 concerning partnerships are contained in the thirty-sixth section, which is as follows : " Where two or more persons who are partners in trade shall be adjudged bankrupt, either on the petition of such partners or any one of them, or on the petition of any creditor of the partners, a warrant shall issue in the man- ner provided by this act, upon which all the joint stock and property of the copartnership, and also all the separate estate of each of the partners, shall be taken, excepting such parts thereof as are hereinbefore excepted; and CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 595 § 375. It is obvious, that many of the considerations already suggested, as applicable to other cases of disso- lution, are also applicable to cases of bankruptcy.^ Thus, for example, the assignees, in the case of the separate bankruptcy of one partner, can affect the joint property no further than the bankrupt himself. They have no right to change the possession or to make any specific division of the joint effects. They take only such an undivided share or interest therein, as the bank- rupt himself had, and in the same manner as he held it ; that is to say, subject to all the rights and liens of the other partners ; and they are entitled only to the balance, which is ascertained to be due to the bankrupt, after all the partnership debts and the claims of the solvent partners are paid, and a division is made of the all the creditors of the company, and the separate creditors of each part- ner, shall be allowed to prove their respective debts : and the assignee shall be chosen by the creditors of the company, and shall also keep separate ac- counts of the joint stock or property of the copartnership and of tbe sepa- rate estate of each member thereof: and after deducting out of tbe whole amount received by such assignee the whole of the expenses and disburse- ments, the net proceeds of the joint stock shall be appropriated to pay the creditors of the copartnership, and the net proceds of the separate estate of each partner shall be appropriated to pay his separate creditors : and if there shall be any balance of the separate estate of any partner, after the payment of his separate debts, such balance shall be added to the joint stock for the payment of the joint creditors : and if there shall be any balance of the joint stock after payment of the joint debts, such balance shall be divided and appropriated to and among the sepa- rate estates of the several partners, according to their respective right and interest therein, and as it would have been if the partnership had been dissolved without any bankruptcy ; and the sum so appropriated to the separate estate of each partner shall be applied to the payment of his separate debts ; and the certificate of discharge shall be granted or refused to each partner as the same would or ought to be if the proceedings had been against him alone under this act ; and in all other respects the proceedings against partners shall be conducted In the like manner as if they had been commenced and prosecuted against one person alone. If such copartners reside in different districts, that court in which the petition is first filed shall retain exclusive jurisdiction over the case." } ' See Gow on P. c. o, § 3, p. 299, 300, 3d ed. 596 PARTNERSHIP. [CHAP. XV. surplus.^ But there are some doctrines, which are pe- culiar to the latter cases, and therefore require a distinct and separate examination. It is not the design of these Commentaries to enter into a general discussion of all the various topics belonging to the administration in bankruptcy of the joint and separate effects ; or to the administration in bankruptcy in cases under a joint commission against all, or a separate commission against one or more of the partners ; or of the practice and proceedings in matters of bankruptcy. A full and ex- act exposition of these subjects properly belongs to a regular Treatise on the principles, the proceedings, and the practice in bankruptcy, rather than to an element- ary Avork on the subject of partnership, which can dis- cuss but a single branch thereof." Our remarks will, therefore, be limited to a few prominent considerations of a general nature, which may principally serve to illustrate the doctrines in bankruptcy, as contradistin- guished from those which are commonly applicable to other cases of dissolution, or which may qualify or vary the latter. § 376. In the first place, then, it is a general rule in bankruptcy, that the joint debts are primarily payable out of the joint effects, and are entitled to a preference ' Gow on P. c. 5, §3, p. 300, 3d ed. ; Wats, on P. c. 5, p. 312, 313, 2d ed. ^ The learned reader will find very ample information upon the prac- tice and proceedings and administration of assets in bankruptcy, in Gow on P. c. 5, §3, p. 256-348, 3d ed. ; in Coll. on P. B. 4, c. 2, § 1-21, p. 595- 678, 3d ed. ; Id. c. 3, p. 686-716 ; in Wats, on P. c. 5, p. 243-356, 2d ed. ; in 1 Mont, on P. B. 2, c. 7, p. 226-233, Am. ed. ; and still more amply in Cook on Bankruptcy, Christian on Bankruptcy, Deacon on Bankruptcy, and Montagu & Ayrton on Bankruptcy. The doctrines stated in the text have in some few cases been qualified or modified by the recent Bankrupt Act in England. But it seemed unnecessary in the present work minutely to ex- amine them, as they involve no general principles of Equity Jurisprudence as administered in bankruptcy. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 59T over the separate debts of the bankrupt ; and so, in the converse case, the separate debts are primarily payable out of the separate effects of the bankrupt, and possess a like preference ; and the surplus only, after satisfying such priorities, can be reached by the other class of debts.^ For this purpose, the joint estate and the sepa- rate estate of the bankrupt constitute separate funds, to be administered separately by the assignees under 1 Gow on P. c. 5, § 3, p. 235, 236, 3d ed. ; Id. p. 281, 282, 299, 300 ; Coll. on P. B. 4, c. 2, § 3, p. 623, 2d ed. ; Id. B. 2, c. 1,«§ 2, p. 119 ; Twiss V. Massey, 1 Atk. 67 ; Ex imrte Cook, 2 P. Wms. 500 ; Ex parte Elton, 3 Yes. 238, 240 ; Ex parte Abell, 4 Ves. 837 ; Ex parte Clay, 6 Yes. 813 ; In re Plummer, 1 Phil. 56, 60 ; Bolton v. Puller, 1 B. & P. 539, 545 ; [Mur- rill V. Neill, 8 How, 414 ; Jackson r. Cornell, 1 Sand. Ch. 348 ; Woddrop v. Ward, 3 Des. Eq. 203; Jarvis v. Brooks, 3 Post. 136 ; Bridge r^McCulloiigh, 27 Ala. 661 ; Rodgers v. Meranda, 7 Ohio St. 179 ; Washburn v. Bank of Bellows Falls, 19 Yt. 278] ; Wats, on P. c. 5, p. 262, 263, 2d ed. ; Id. p. 324-334. — In Ex parte Field, in Bankruptcy, 3 Mont. D. & De G. 95, the Chief Judge (in Bankruptcy) said: "It appears to me that long known decisions have settled the point, that a joint debt cannot be proved against the separate estate of a bankrupt, so long as there are joint assets or a sol- vent partner." The rule equally applies to cases of co-contractors as of partners. Ibid.; Ex parte Islovr'is, Montagu, 218. {See 1 Am. Lead. Cas. 480, 4th ed. ; 2 Lead. Cas. in Eq. 313, 3d Am. ed. ; especially the latter, to which the learned reader is referred for an excellent discussion on the foun- dations, propriety, and limitations of this rule. Besides the cases there cited, see Holton v. Holton, 40 N. H. 77 ; Treadwell v. Brown, 41 N. H. 12 ; Weyer V. Thornburgh, 15 Ind. 124 ; Toombs v. Hill, 28 Ga. 371 ; N. Bank of Ken- tucky V. Keizer, 2 Duv. 169 ; Whitehead v. Chadwell's AdmV, Id. 432, and more particularly Black's Appeal, 44 Penn. St. 503 and Kuhne v. Law, 14 Rich. 18 ; also the recent English case Lodge v. Prichard, 4 GifF. 294 ; s. c. on appeal, 1 De G. J. & S. 610. See also U. S. Bankrupt Act, § 36 and ante, § 260-264, 363. The joint creditors are entitled to interest on their debts before the sur- plus is carried to the separate estates. Ex parte Ogle, Mont. 350 ; Ex parte Reeve, 9 Yes. 588. But when the separate creditors have been paid in full, the surplus is carried to the joint estate and the separate creditors are not entitled to interest. Ex parte Clarke, 4 Yes. 677 ; Ex parte Min- chin, 2 Gl. & J. 287 ; Ex parte Boardman, 1 Cox, 275; Ex parte Wood, 5 Jur. 1115 ; Ex parte Wood, 2 Mont. D. & De G. 283. Thomas r. Minot, 10 Gray, 263. But it would seem under the U. S. Bankrupt Act, 1867, § 36, that the joint and separate creditors must stand in the same position as to the allowance of interest. See Thomas v. Minot, ubi sup.} 598 PARTNERSHIP. [cHAP. XV. the commission, whether it be a separate commission against one partner, or a joint commission against all the partners.^ § 377, This rnle, although now firmly established, has occasioned much diversity of opinion among learned Judges at different times.^ It was established at an early period ; but was afterwards departed from, and was again re-established ; and it now stands, as much, » Gow on P. c. 5, § 3, p. 280-282, 3d ed. ; Id. p. 299, 300, 311, 312 ; Wats, on P. c. 5, p. 243-245, 2d ed. ; Id. p. 252-260 ; Id. p. 262, 263 ; [Purple V. Cooke, 4 Gray, 120] ; Bolton v. Puller, 1 B. & P. 539 ; Coll. on P. B. 3,c. 2, § 3, p. 624, 2d ed. —Lord Chief Justice Eyre, in delivering the opinion of the Court, in Bolton v. Puller, 1 B. & P. 539, 547, 548, said : " Bankruptcy, when it intervenes, may very much change the situation of these pai'ties. Mr. Justice Heath suggested this consideration at the close of the first argument. It is a very important consideration. If all become bankrupts, all the joint and all the separate property will vest in the assignees, whether the commissions are joint or several. If a sep- arate commission issue against one partner, his assignees will take all his separate property, and all his interest in the joint property. If a joint commission issues against all, the assignees will take all the joint prop- erty, and all the separate property of each individual partner. In the distribution to creditors, a rule of convenience has been adopted. To un- derstand it, we should see what the rights of creditors were as to execu- tion for their debts before bankruptcy. A separate creditor might take at his election the separate estate of his debtor, or his debtor's share of the joint estate, or both, if necessary. A joint creditor might take the whole joint estate, or the whole separate estate, of any one partner. But the rule of convenience, which has been adopted, restrains the separate creditor from resorting, in the first instance, to his debtor's share of the joint property ; and also restrains the joint creditor from resorting, in the first in- stance, to the separate property of his debtor. Bankruptcy has been called a statute execution ; but if it has any analogy to an execution, it is certainly very much modified, and, as I take it, by the authority of the Chancellor, who is to take order for the distribution of the effects of a bankrupt. Under the rule the separate creditors have a right to be satisfied for their debts out of the separate property in preference to the joint creditors. . But what shall be deemed separate property, or what eflfect the claims of third per- sons upon that, which (as between one partner and the partnership) would be separate property, are questions which neither bankruptcy nor the rule of distribution seem to touch. The assignees stand but in the place of the bankrupt, and take the effects subject to every legal and equitable claim upon those effects." * [See Cleghorn v. Insurance Bank, 9 Ga. 319.] CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 599 if not more, upon the general ground of authority and the maxim, stare decisis, than upon the ground of an equitable reasoning. In truth, it is precisely such a case, as may well justify a great deal of argument on each side ; and although it has been said, that the equity of this mode of distribution is very plain, because each estate ought to bear its own debts ; yet it is by no means clear, that this is not an artificial suggestion, cutting down the difficulty, and assuming the correctness of the rule, rather than showing, that it has its origin and foundation in the principles of natural justice, ex cequo et bono} ' Ante, § 363, 364. — Mr. Gow (p. 312-314) has summed up the doctrine of the authorities on this subject as follows : "In the time of Lord Hardvvicke, the rule adopted was to permit joint creditors to prove under a separate commission against one partner, or under separate commissions against all the partners, for the purpose of assenting to, or dissenting from, the certifi- cate ; and the joint creditors were considered to have an equitable right to any surplus of the separate estates, after payment of the separate creditors ; but the joint property was distributed under a joint commission taken out for that purpose, or a bill must have been filed for an account of the joint estate. Ex parte Baudier, 1 Atk. 98 : Ex parte Yoguel, 1 Atk. 132 ; Ex parte Oldknow, Cook's B. L. 233 ; Ex p)arte Cobham, Id. 234. See also Button r. Morrison, 17 Ves. 193, 207 ; Ex parte Farlow, 1 Rose, 421. This rule was broken in upon by Lord Thurlow, who expressed his decided opinion, that the contrary course was the best, as being the most legal ; and he, in several instances (^Ex parte Haydon, Cook's B. L. 234; s. c. 1 Bro. Ch. 454; Ex parte Copland, Cook's B. L. 236; s. c. 1 Cox, 420; Ex parte Hodgson, 2 Bro. Ch. 5 ; Ex parte Page, Id. 119 ; Ex parte Flintum, Id. 120), allowed the joint creditors to prove and take dividends under a separate commission ; his Lordship holding, that a commission of bank- ruptcy was an execution for all the creditors, and as the assignees under a separate commission might possess themselves, not only of the separate estate, but of the bankrupt's proportion of the joint estate, and as a joint creditor, having brought an action and recovered judgment against all his debtors, might have several executions against each, therefore the bank- ruptcy, preventing his action with effect, should be considered a judgment for him as well as the others, and consequently that no distinction ought to be made between joint or separate debts, but that they ought all to be paid ratably out of the bankrupt's property, which was composed of his separate estate, and his moiety or other proportion of the joint estate. See Button V. Morrison, 17 Ves. 193, 207. Lord Rosslyn acted for some time upon the 600 PARTNERSHIP. [cHAP. XV. § 378. What renders the foundation of the rule it- self as one of natural justice and equity, and not of practice established by Lord Tliurlow, but afterwards with some alteration ; and upon great consideration he restored the principle of the rule, which had been adopted by Lord Hardwicke. In the case of Ex i^arte Elton, 3 Ves. 238, 242, Lord Rosslyn says : ' The plain rule of distribution is, that each estate should bear its own debts. The equity is so plain, that it is of course upon a bill filed. The object of a commission is to distribute the effects with the least expense. Every order I make, to prove a joint debt upon the separate estate, must produce a bill in equity. It is not funda- mentally a just distribution, nor a convenient distribution ; because it tends to more litigation and more expense. Every creditor of the partnership would come upon the separate estate. The consequence would be, the assignees of the separate estate must file a bill to restrain the dividend upon all these proofs, and make the partners parties. But there is another circumstance ; it is a contrivance to throw this upon the separate estate ; for what hinders them from recovering at law this debt against the partner- ship, for it is money paid to one of the partners ? They have nothing to do but to bring an action against the partner. The affairs of the partnerships may be very much involved ; but if they are arrested, they would pay it. It is not stated as a case where there are no joint effects. Here it is only that there are two funds. Their proper fund is the joint estate, and they must get as much as they can from that first. I have no difficulty in order- ing them to be admitted to prove, but not to receive a dividend.' This rule was afterwards acted upon by Lord Rosslyn (Ex parte Abell, 4 Ves. 837), and was adopted and followed by Lord Eldon in many subsequent cases, not because he was convinced of its propriety, or of its being better calcu- lated to the due administration of justice than the doctrine introduced by Lord Thurlow ; but he adhered to it, because it was the practice, and to avoid the mischief arising from shaking settled rules. Ex parte Clay, 6 Ves. 813, and the cases cited Ibid, in note ; Ex parte Kensington, 14 Ves. 447 ; Ex parte Taitt, 16 Ves. 193. According to the rule, therefore, which these decisions have established, if there is a joint fund, or a solvent partner, a joint creditor is*not entitled to prove his debt under a separate commission for the purpose of receiving a dividend, without the Lord Chancellor's order. Mont. B. L. 230. And notwithstanding the joint property is of the most trivial amount, yet if there is such a fund of any, even the smallest, description, and it is capable of being realized, the rule is inflexible, and there will be no departure from it. Ex parte Peake, 2 Rose, 54. See also JwreLee, Iljid. in note. Lord Eldon, indeed, admitted this qualification of the rule, that ' If the property alleged to exist be of such a nature, and in such a situation, that any attempt to bring it within the reach of the joint creditors must be deemed a desperate, or, in point of expense, an unwarrantable attempt, that would authorize a departure from the rule ; as in truth there would then be no joint property.' Ibid. And joint estate has CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 601 mere -assumed convenience, somewhat more open to criticism and question, is the character of the excep- tions, to which it has given rise, some of which may be truly said to present the reasoning against it in a strong Hght, and to make it more difficult to be sus- tained. These exceptions allow a joint creditor to share, pari passu, with the separate creditors in every case, to which they are applicable. They are of three sorts; (1.) Where the joint creditor is the petitioner for a separate commission against the bankrupt partner ; (2.) Where there is no joint estate, and no living sol- vent partner ; (3.) Where there are no separate debts. In the tii'st case, the petitioning creditor may prove his debt, and share, ^;fl/'i ^^assii, with the separate cred- itors ui the separate estate ; in the second case, all the joint creditors enjoy the same privilege ; and in the third case, all the joint creditors share, ^«ri 2^«ssm, with each other. ^ § 379. The fu'st exception stands confessedly upon a ground of reasoning, which, if not purely artificial, applies at least with equal force in favor of the joint creditors in all other cases. The ground is, that a commission of bankruptcy is an action and an execu- tion in the first instance.^ To which it has been replied been said to mean such estate only as comes under the administration of the assignees to distribute, and not to extend to joint estate pledged for more than its value. Ex parte Hill, 5 B. & P. 191, n." See also Coll. on P. B. 4, c. 2, § 3, p. 623, 624, 2d ed. ; Ex parte Cobham, 1 Bro. Ch. 576, Mr. Belt's note (1). ' Coll. on P. B. 4, c. 2, § 3, p. 623-628, 634, 635, 2d ed. ; Ex parte Tate, Cook's B. L. 244. =* Twiss V. Massey, 1 Atk. 67; Ex parte Crisp, 1 Atk. 133; Coll. on P. B. 4, c. 5, § 3, p. 625, 626, 2d ed. ; {Lind. on P. 1002} ; Ex parte E\ton,-SVes. 238. — In this latter case Lord Loughborough (afterwards Earl of Rosslyn) said: " Antecedent to these authorities, I should have thought it perfectly clear it could not be done; and, that the utmost length they could go was, that a joint creditor, where there is a separate commission, is to be admitted 602 PARTNERSHIP. [cHAP. XV. with as great force, that it is true that a commission is an execution, but an execution for all the creditors ; to prove, only for the purpose of assenting to or dissenting from the cer- tificate, and receiving such surplus beyond the amount of the separate debts, as joint creditors would be entitled to claim, Avhere there are two commis- sions. I doubt, Avhether it is possible to innovate upon that, which was the law formerly ; for though a commission is an execution, and the joint creditor has such an interest as enables him to take out a separate commission, yet the consequence does not follow. There are cases antecedent to those cited. In Lord King's time it was determined, that a joint creditor might be a good petitioning creditor, though the commission is only against one partner ; that the joint creditor does no more in taking his execution, pass- ing over his action, than bringing the separate effects to be administered in bankruptcy. But it is not treated any longer as an execution at law ; for the effects taken under it are not disposed of as at law, but fall immediately by the direction of the statute under the administration of this Court ; ■which is to make an equitable distribution among the creditors, to admit all equitable claims upon the effects, and to divide them ratably. It has been long settled, and it is not possible to alter that, that each estate is to pay its own creditors. With regard to the creditor suing out the commission, the separate creditors cannot object to his having the effect of the execution he has taken out. He is precluded from suing at law; and it would be against all equity, having done it for their benefit, to refuse him the fruit of that for his own debt. But any other joint creditor is in exactly the case of a person having two funds ; and this Court will not allow him to attach himself upon one fund to the prejudice of those who have no other, and to neglect the other fund. He has the law open to him ; but if he comes to claim a distribution, the first consideration is, What is that fund from which he seeks it ? It is the separate estate, which is particularly attached to the separate creditors. Uiaon the siqiposition, that there is a joint estate, the answer is, ' Apply yourself to that ; you have a right to come upon it ; the separate creditors have not ; therefore do not affect the fund attached to them, till you have obtained what you can get from the joint fund.' There would be no great inconvenience, if he could put them in his situation as to the joint fund ; but I doubt very much whether that is possible. For suppose in the case of A. and B., partners, the former remains solvent, the latter becomes a bankrupt, and there Is a joint debt of £1,000. The creditor making his claim first against the sepai'ate estate, paying a dividend of 10s. in the pound, receives £500. Can the assignees claim against the solvent partner, what they have paid? His answer would be, they could only claim the same right the bankrupt could ; and as against the bankrupt he is entitled to retain ; he has paid his moiety of the partnership debt. If the case is turned the other way, and the creditor first sues the solvent partner, he recovers all the debt against him ; and he has a right to come in as a separate creditor of the bankrupt to the amount only of a moiety of CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 603 that if a joint creditor had brought an action against all the partners, he might have several executions against each, or at least a joint execution, which could be levied upon the joint property, and also upon the separate property of each of the partners.^ What makes it still that debt ; for a moiety only of the debt of the partnership he could have recovered against him if he had been solvent. That makes a very great difference to the separate creditors. I was led to consider another thing, — Is it possible to admit a separate creditor to take a dividend upon the joint estate ratable with the joint creditors ? No case has gone to that, and it is impossible ; for the separate creditor at law has no right to sue the other partner. He has no right to attach the partnership property. lie could only attach the interest his debtor had in that property. If it stands as a rule of law, we nuist consider, what I have always understood to be settled by a vast variety of cases, not only in bankruptcy, but upon general equity, that the joint estate is applicable to partnership debts, the separate estate to the separate debts. Another difficulty is, whether really it is just to put it to the assignees in behalf of the separate creditors, to assert the right of the creditor, making the claim, to go against the joint estate. The creditor coming in upon the separate estate is first to answer the question, why he does not go against the joint estate. It may be said, ' The law Is open to you ; it is not open to us. You put us to file a bill against the other partners to discover and apply the partnership fund. You have a much quicker remedy; sue the partnership. You need not wait the account. They will settle it rather than put you to that ; at all events, you have a legal execution against them.' Another consideration is, that the great object of the law in establishing this sort of authority. In which I now sit, is to make a speedy distribution, and to avoid suits. The necessary consequence of admitting a joint cred- itor to prove against the separate estate, is In every such case to make a chancery suit; and the right of the separate creditors to the administration of their fimd is frustrated." See, also, Ex parte Abell, 4 Ves. 837. {Where the attachment of the property of one partner by a partnership creditor was dissolved by the assignment In bankruptcy of that partner's estate, the creditor, on proving his debt and the costs of his suit against such estate, •was held entitled to be paid such costs before the payment of the partner's separate debts. Buck v. Burlingame, 13 Gray, 307. This was a decision under the Massachusetts Insolvent Law, the provisions of which were similar to those of the United States Bankrupt Act of 1867.} ' Ex parte Hodgson, 2 Bro. Ch. 5 ; Dutton v. Morrison, 17 Ves. 193, 207. — In this latter case. Lord Eldon went Into the reasoning of the various opinions, and said: "The case now before me must be regarded in this point of view. The question being as to the effect of the quasi execution, under a commission of bankruptcy against one partner, with reference to the interest of himself and two others, in a fund in the hands of the plaintllT. 604 PARTNERSHIP. [CHAP. XV. more artificial is, that if a joint creditor sues out a joint commission against all the partners, he can resort only to the joint funds of the partnership.^ The jurisdiction in bankruptcy being both legal and equitable, let us see, wliether we must not, of necessity, go a great way in this case ; or admit, that we have already gone much too far in bankruptcy. The opinion of Lord Hardwicke was, that joint creditors could prove under a separate commission only for the purpose of assenting to, or dissenting from, the certificate, but not to receive dividends ; and that they must file a bill for an account of the joint estate. The operation of that bill was to draw into the joint estate the share of that bankrupt partner, taken in execution, as fixr as bankruptcy can be so represented; and by the effect of the commission, the bill, and the decree, nothing could be divided among the separate creditors under the commission, but that which formed the separate share of the bank- rupt after the account, and an application of the joint estate to all demands against it. Lord Hardwicke, therefore, must either have thought, that upon such a case it was clearly fit to say, that execution against one partner should not aflE'ect the application of the joint fund to the joint demands ; or, as I rather believe, he found himself in a situation requiring him to cut the knot, and to make some rule that Avould, upon the whole, be most convenient. This subject took a different course at different periods, until the time of Lord Thurlow, who considered it with great anxiety, and, having consulted most of the Judges, expressed his decided opinion, that the contrary course was the best, as being the most legal ; and therefore held, that the joint creditors should be admitted to prove, and take dividends, under a separate commission ; that a commission of bankruptcy was an execution for all the creditors ; that, if a joint creditor had brought an action against all the debtors, he might have several executions against each ; and therefore the bankruptcy, preventing his action with effect, should be considered as a judgment for him as well as the other ; that he had a right to receive the dividends ; and it was upon the assignees of the separate estate to bring their bill to have the account settled. The question afterwards came to be considered by Lord Loughborough, who got back to the old rule, and abided by it firmly ; but great difficulties occurred of this sort. Lord Loughborough, adopting the principle of Lord Hardwicke's rule, did not adopt his practice ; not putting the joint creditors to file a bill, bringing before the Court the assignees and the solvent partners, and taking the account in their presence ; but taking this course, directing the assignees to take an account of the joint estate, and applying that to the discharge of the joint creditors, to ascertain the share of the residue, belonging respectively to the bankrupt and the solvent partners. From the nature of this proceeding, unless tlie solvent partners thought proper to come in and have the account taken befoi-e the commissioners, the Lord Chancellor, Ex parte Bolton, 2 Rose, 389, 390, cited in the preceding note. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS, 605 § 380. The second exception excludes the joint creditor, in all cases but one ; and in that case two in bankruptcy, had no power to compel them ; neither could the joint creditors, unless they thought proper to come in before the commissioners, be compelled, in that proceeding, to come in ; and if the other partners did not, or could not, as in the instance of residence abroad, make them- selves parties, the account upon ordinary principles could not bind them. I pressed the difficulty that would arise, if a joint creditor should bring an action and proceed to judgment. Would this Court interfere upon the ground, that there was an order in bankruptcy, to which he and the other joint creditors were not parties-; and, to enforce that order, grant an injunction against execution in that action? That would be a question of great im^iortance, if the law was as simple as it was supposed to be in the early cases upon this subject ; that the assignees were tenants in com- mon of a chattel with the solvent partner ; and the creditor might satisfy himself out of the apparent interest. But, taking the law to be, that no more should be applied than the result of a general account, the only effect of the execution would be, that the creditor would have subjected himself to the general account, that was going on in another proceeding. The question then came before me ; and upon consideration of all the authori- ties, I thought the best course for me to adopt (whether the best in prin- ciple I have often doubted) was, that the rule should continue to be applied, as it had been for some years in a course of application ; and, therefore, I have not disturbed the practice, as it has of late prevailed. The result is, that now it has been understood for fifteen years, that, under a separate commission of bankruptcy, the other partners remaining solvent, an account shall be directed of the joint estate in the absence even of the other part- ners ; and upon the application of any one joint creditor, whether the others choose it or not, the whole account being taken In the bankruptcy, the joint creditors shall be paid, pari passu, out of the joint estate ; and the residue shall then be distributed only according to the respective interest of the partners ; and, if the rule of law, where a creditor takes execution. Is the same, perhaps we ai-e not far wrong. In the course of this period there has been no instance of a creditor coming here, saying that he had a judgment, not executed, against a partner, and desiring to go on ; nor has the case occurred in bankruptcy of a joint creditor claiming to set aside the execution under the commission by a prior act of bankruptcy ; and desiring to have execution against all without any account. Such a case, if it occurred, must be dealt with upon much the same principle as this." I cannot find that Lord Thurlow's reasoning on the subject is any- where given at large. All that remains consists of these notes and com- ments. It is manifest that Lord Eldon equally doubted with him, as to the solid foundation of the rule. Ex piarte Clay, 6 Ves. 813 ; £a; parte Chandler, 9 Ves. 35 ; Ex parte Cobham, 1 Bro. Ch. 576, Mr. Belt's note (1) ; Ex jJarte Taitt, 16 Ves. 193, 195, 196 ; Gowon P. c. 5, § 3, p. 312-315, 3d ed. Again, 606 PARTNERSHIP. [cHAP. XY. circumstances must concur and co-exist ; (1.) That there is no joint estate ; and (2.) That there is no living solvent partner.^ If there is any joint estate, however small it may be, if it is an available joint fund, and not purely a desperate and nominal joint fund, then the in Ex parte Bolton, 2 Rose, 389, 390, Lord Eldon said : " Since the case of Ex parte Crisp, a decision now at least sanctioned by time, it has been clearly settled, that a joint creditor may take out a separate commission ; and, taking out that commission, he has a privilege of election, either to make his proof against the separate or the joint estate. By a joint commission, on the other hand, he binds himself to resort to the joint property. The rule at law, as to executions, affords some analogy. If a creditor take out a joint execution, he cannot afterwards take out a separate execution ; and a commission is in the nature of an execution ; a joint commission being as an execution against all, a separate commission as an execution against the individual. If a creditor deliberately resorts to the process of a joint commis- sion, he is, as a joint creditor, proceeding on a joint judgment and execution ; and having once elected so to do, he cannot alter it. No determination approaches a case like the present. Here are two separate commissions at the instance of the same creditor. If it were the case of one separate commission, thus awarded, the creditor might sav, I will take my debt out of either the joint or the separate estate ; but to get at the joint estate, there must be a special order of the Chancellor. The joint property is, therefore, reached by circuity ; and, being thus looked at, if the creditor says, I will rank under this commission as against the joint estate, and, so ranking, receives a dividend, say to the extent of fifteen shillings in the pound, he still re- mains the creditor of the solvent partner as to the five, and for that he may bring his action, or he may take out a commission; and taking out a commission, until he completely knows, and which until then he only indi- rectly knows, the state of the joint accounts under that commission, he cannot be said deliberately to have elected. I think, therefore, he is entitled to reconsider his mode of proof; and refunding the joint dividend with the interest, let the proof stand against the separate estate." See also Coll. on P. B. 4, c. 2, § 5, p. 634, 635, 3d ed. ' {The U. S. Bankrupt Act, 1867, § 36, provides that "the net proceeds of the joint stock shall be appropriated to pay the creditors of the copart- nership, and the net proceeds of the separate estate of each partner shall be appropriated to pay his separate creditors." An identical provision in the Insolvent Act of Massachusetts has been held peremptory, distinctly forbid- ding the apjjlication of this exception, and requiring the appropriation of the separate estate to the separate creditors, whether there be any joint estate or not. Howe v. Lawrence, 9 Cush. 553 ; Somerset Potters Works r.*Minot, 10 Cush. 592. See Weyer i-. Thornburgh, 15 Ind. 124 ; Weaver V. Weaver, 46 N. H. 188 ; ante, § 303. { CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 607 joint creditor is excluded. As for example, if the joint fund is absolutely worthless from the expenses of any attempt to get it in, or if it is pledged beyond its real value, it will be deemed a mere nullity ; but not other- wise.^ On the other hand, if there is no available joint fund, still, if there is a solvent partner, as the creditor has his risfht of action against him for a full satisfaction, it is said, that, therefore, he ought not to be allowed to come in competition with the separate creditors of the bankrupt." Why he may not, it is not easy to say upon general reasoning, especially as all partnership debts are now treated in equity as several, as well as joint. But here, again, there is a •peculiar qualification upon this part of the rule. The solvent partner must be living ; for if he is dead, although his estate is solvent, yet, the joint creditors may come in upon the separate estate of the bankrupt 'pari passu^ with the separate creditors.^ The like rule will apply to the case of joint debtors, who are not partners, under the like circum- stances.^ § 381. The third exception stands, if possible, in its actual application, upon more subtle and refined grounds. It is not necessary here to make out a case, where there are absolutely and literally no separate ^ Coll. on P. B. 4, c. 2, § 3, p. 626, 627, 2d ed. ; Ex parte Leaf, 1 Deac. 176 ; In re Lee & Armstrong, 2 Rose, 54 ; Ex parte Peake, 2 Rose, 54; Ex parte Hill, o B. & P. 191, a ; Ex parte Janson, 3 Madd. 229 ; Ex jjarte Kensington, 14 Ves. 447; [//i re Marwick, Daveis, 229]; {Lind. on P. 1002. Where there was a joint fund of £13, though it did not appear but that it would all be absorbed by costs, the joint creditors were excluded from the separate estate. Ex parte Kennedy, 2 De G. ]\I. & G. 228. So where there was a joint fund of £9. 3s. 6d., all of which would be required for expenses and costs. Ex parte Clay, 2 Christian's Bank. Law, 320 ; s. c. 2 De G. M. & G. 230, note. } ^ Coll. on P. B. 4, c. 2, § 3, p. 626, 627, 2d ed. ; Ex parte Sadler, 15 Ves. 52, 56; Ex paiie Kensington, 14 Ves. 447. * Coll. on P. B. 4, c. 2, § 3, p. 627, 2d ed. * Ibid. 608 PARTNERSHIP. [CHAP. XV. debts at all. It is sufficient, that tliev are few and inconsiderable in amount, and that the joint creditors undertake to pay them all, and do discharge them ; so that they no longer stand in their way as subsisting claims, impeding their rights.^ § 382. Such is the acknowledged state of the author- ities as to the general rule, and the exceptions to it as to the respective rights of joint creditors and separate estates of the bankrupt. After the repeated doubts which have been expressed upon the subject, by the most eminent judges, it is not, perhaps, too much to say, that it rests on a foundation as questionable and as unsatisfactory as any rule in the whole system of our jurisprudence. Such as it is, however, it is for the public repose, that it should be left undisturbed, as it may not be easy to substitute any other rule which would uniformly work with perfect equality and equity in the mass of intricate transactions connected with commercial operations. § 383. But although the joint creditors and the sep- arate creditors are not entitled to come in, imri jxissu, upon the joint and separate estates of a bankrupt, for a dividend thereof; yet they are in all cases entitled to come in and prove their debts against his estate, for the purpose of assenting to or dissenting from his cer- tificate ; but not to vote in the choice of assignees.^ 1 Coll. on P. B. 4, c. 2, § 3, p. 627, 2d ed. ; Ex parte Chandler, 9 Ves. 35 ; Ex ixirie Taitt, 16 Ves. 193 ; Ex parte Hubbard, 13 Ves. 42-1. [See also Kice v. Barnard, 20 Vt. 479.] {This seems, in truth, no exception at all ; it has never been doubted, that, if there be any surplus left of the separate estate after paying the separate creditors, that surplus goes to the joint creditors ; and, if there are no separate creditors, the whole of the sep- arate estate is such surplus. } * Gow on P. B. 5, § 3, p. 280, 2d ed. ; Id. p. 329 ; Ex parte Taitt, 16 Ves. 193; Wats, on P. c. 5, p. 334, 335, 2d ed. {By the U. S. Bankrupt Act of 1807, § 36, the assignee of both estates is chosen by the creditors of the partnership. } CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 609 And this is upon a principle of natural justice, since the certificate, when given, will operate as a discharge of the bankrupt equally against his joint and his separate creditors.^ § 38-i. The question often occurs in bankruptcy, as to the rights of creditors, who are at law both joint and several creditors of the partners, or, in other words, to whom the partners are in law jointly and severally indebted upon joint and several securities and con- tracts, whether they are entitled to prove both against the joint estates and against the separate estates of the bankrupt or bankrupts. And here the general rule is now firmly established, that they shall not in equity be allowed to prove their debts and take dividends upon the joint estate, and also upon the separate estate ; but they shall be restrained, and put to their election to prove and take dividends from the one or the other." When they have once made this election, they are ex- cluded from any dividend of the other fund, unless there remains a surplus after the discharge of all the debts having a preference thereon.^ However, before any such creditor can be put to his election, he is enti- tled to a reasonable time to inquire into and ascertain the true state of each fund ; and even after he has made an election, he will sometimes be allowed to recall it upon equitable circumstances, when it will not interfere with the positive rights actually acquired and fixed in others.'* » Ibid. ■ Gow on P. c. 5, § 3, p. 286, 287, 3d ed. ; Cook's B. L. 259, 4th ed. ; Ex parte Banks, 1 Atk. 106 ; Ex parte Rowlandson, 3 P.Wms. 40o ; Ex parte Bond, 1 Atk. 98 ; Coll. on P. B. 4, c. 2, § 8, p. 561, 2d ed. ; Id. B. 4, c. 2, § 4. p. 630-632 ; Id. p. 634-637 ; Wats, on P. c. 5, p. 289, 295, 2d ed. {Lind. on P. 1013; Ex parte Barnewall, 6 De G. M. & G. 795. But see Borden v. Cuyler, 10 Gush. 476.} 3 Ibid. * Gow on P. c. 5, § 3, p. 286, 288, 289, 3d ed. ; Ex parte Bond, 1 Atk. 39 610 PARTNERSHIP. [CHAP. XV. § 385. The doctrine thus established does not, any more than the preceding, seem to stand upon any sohd ground of equity or general reasoning. It has been supported upon some supposed analogy to the rule of law in cases of this sort, where the creditor may sue all the partners at law, and have a joint execution against all, or he may sue each partner separately at law, and have a separate execution against each. But he cannot do both ; that is, he cannot at law at the same time sue them all in a joint action, and each one separately in a separate action ; but he will be put to an election of his remedy by the very forms of pleading.^ And it is added, 98. — We are here to understand, that the election of the remedy by the creditor against the joint or the several estate is strictly confined to cases of one and the self-same debt ; and does not apply, where the creditor has two distinct debts, arising under separate and independent contracts. Coll. on P. B. 4, c. 2, § 4, p. 632, 2d ed. ; Id. § 5, p. 634-638, 2d ed. ; Ex parte Ed- wards, Mont. & McA. 116. ' Gow on P. C.5, § 3, p. 286, 287, 3d ed. ; Coll on P. B. 4, c. 2, § 4, p. 630, 631, 2d ed. ; Id. p. 634, 635 ; Ex parte Rowlandson, 3 P. Wms. 405, 406. — On this occasion Lord Talbot stated his opinion to be : " That as at law, when A. and B. are bound jointly and severally to J. S., if J. S. sues A. and B. severally, he cannot sue them jointly, and, on the contrary, if he sues them jointly, he cannot sue them severally, but the one action may be pleaded in abatement of the other ; so, by the same reason, the petitioner in the present case ought to be put to his election under which of the two commissions he would come ; and that he should not be permitted to come under both ; for then he would have received more than his share. But his Lordship said he would hear counsel, if they had any thing to object against this order." And again he added : "In the principal case, the bond upon which the petitioner would seek relief under the separate commission, was not only for the same debt, but given by both the parties ; and the plea in abatement would have been proper, had the bond been sued at the same time both as a joint and several bond, which cannot be where there is only a separate bond. Then taking this to be the rule at law, that a joint and several bond cannot be sued at one and the same time both jointly and sev- erally, but that the obligee must make his election ; so it ought to be (he said) in the principal case. And this would best answer the general end of the statutes concerning bankrupts, which provide that all debts shall be paid equally, as in conscience they are all equal ; that it is upon this foundation that debts of a partnership have been ordered to be first paid out of the part- nership elfects ; and that alterwards the joint creditors, when the separate CHAP, XV.] DISSOLUTION RIGHTS OF CREDITORS. 611 that the general end of the bankrupt laAvs is to provide for the payment of all debts equally, as in conscience all are equal ; and equality is equity.^ § 386. Now (to say the least of it), this is assuming the very ground of controversy, and not establishing it by any satisfactory reasoning. With what justice can it be said, that a contract, which is merely joint or merely several, shall stand upon an equal footing, as to right and remedy, with one that is both joint and sev- creditors are satisfied, may come in upon the separate effects, but not before ; and so vice versa, the separate creditors are to come first on the sejjarate eflfects of the partners, and if these are not sufficient then on the joint effects, after the partnership creditors are paid." And therefore, the Reporter adds, " That there might be an equality in the principal case, his Lordship ordered that the petitioner should make his election, whether he would come in for a satisfaction out of the partnership, or the separate effects, but not out of both at the same time ; however, his having received his dividend out of the joint effects, on the joint commission, whilst this matter was in suspense, was not to bind him ; and provided he brought that back again, he might come in for a satisfaction out of the separate effects, and he to have a month's time to make his election." Lord Hardwicke, in Ex i^aiie Bond, 1 Atk. 98, said : "It was objected upon the last day of petitions, that this would be con- trary to proceedings at law upon a joint and several bond, where the credi- tor may proceed against both obligors at the same time, till his debt is fully satisfied. And to be sure it is so at law ; but in bankrupt cases, this Court directs an equality of satisfaction. Consider it on the footing of a joint estate first ; joint creditors ai'e entitled to a satisfaction out of the joint estate, be- fore separate creditors ; but then they have no right to come upon the sep- arate estate for the remainder of their debts, till after separate creditors are satisfied. What would be the consequence, if the petitioners should bo ad- mitted to come on both estates at the same time? Why, then, these credi- tors would draw so much out of the separate estate, as would be a prejudice to other joint creditors, who have an equal right to come upon the separate estate with themselves ; and by that means I should give the petitioners a preference to other creditors, when the act of parliament and the equity of this court incline, that all persons should have an equal satisfaction, and not one more than another." See also Ex ^ar^e Wildman, 1 Atk. 109. ' Ibid. — The doctrine, compelling the creditor to elect, equally applies to the case of a joint creditor, who takes the separate jiersonal contract or security of one of the debtors, as collateral security for the joint debt. Ex parte Roxby, 1 Mont, on P. 124 ; Gow on P. c. 5, § 3, p. 287, 3d ed. ; Coll. on P. B. 4, c. 2, § 0, p. G35, 636, 2d ed. ; But see In re Plummer, 1 Phil. 56, 59 ; post, § 889. 612 PARTNERSHIP. [CHAP. XV. eral 1 The very object of the latter is to provide a su- perior remedy to enforce it ; and why should any Court deprive the creditor of the very benefit which the debt- ors had stipulated to give him, or restrain him from using all his rights 1 Courts of Equity generally act upon an opposite principle, and give a broader effect to joint partnership contracts in favor of the creditor, even when his remedy is, by the death of one of the partners, gone at law.^ However, the doctrine is now too firmly established in practice to be shaken.^ § 387. But, although, generally, where a creditor holds the joint contract or personal security of the firm, ^ Ante, § 384, 385, and note. — Lord Eldon held a pointed opinion against the whole doctrine ; but at the same time he considered it so well established in practice by authority, that he ought not to depart from it. In Ex jJarteBeva.!!, 9Ves. 223, 224, he said: "It is not necessary to de- cide the other question, as to the joint and several proof. If it was, I am not perfectly satisfied with the authority that has been stated. The reasoning goes upon this, that a joint and separate action could not be brought at law. But surely the distinction is thin, that where a joint and separate bond is given, and another security, several from each, there, as two actions might be brought, the rule in bankruptcy should be dif- ferent. I think I have heai'd, that in the case cited in Peere Williams, the only separate creditor was he who took out the commission ; and it appears by the book, that the joint creditors prayed that he might deliver over to them the effects, which was refused ; and it was said, that he should have the effects applied to his separate bond ; and if that is the case, the rule is quite right ; for he would have a right to take the separate effects, if not to the det-* riment of other separate creditors." And again, in £'a; parte Bevan, 10 Ves. 107, 109, he said : " The princij^le seems obvious ; yet in bankruptcy, for some reason not very intelligible, it has been said the creditor shall not have the benefit of the caution he has used. I never could see why a creditor, having both a Joint and a several security, should not go against both estates. But it is settled that he must elect. By his election to go against the joint estate, the effect to the joint creditors is very different from what it would have been if he had elected to go against the separate estate ; and the question is, wheth- er, if he elects to go against the joint estate, and thereby participates with the joint creditors, that participation, arising from his election, has not in practice been treated as a consideration for the rest of the joint creditors ; entitling them to go along with him upon the separate estate, when he after- wards goes against that estate." '^ {But see Borden v. Cuyler, 10 Cush. 476.} CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 613 and likewise the separate contract or personal security of individuals composing the firm, he is compelled, upon the bankruptcy of some of them, to elect, whether he will consider them as his joint or as his separate debtors, and proceed accordingly ; yet this rule is not without exceptions.^ For, where a creditor holds the joint con- tract or personal security of a firm, and also the several contract or personal security of some of its members, and the latter likewise form a distinct partnership inter sese^ there are cases where the creditor may have a double remedy. Thus, if A., 13., C, and D. trade under the firm of A., B., & Co., and C. and D. are in a distinct partnership, and the firm of A., B., & Co. draw bills upon C. and D., who accept them, the holder of such bills may prove them under the bankruptcy of C. and D., and afterwards may bring his action on the bills against A., B., & Co.^ So, if a creditor of A. and B. should take out a separate commission against A., and receive a dividend under that commission out of the joint estate, he may bring an action against the other partner for the resi- due.^ § 388. Cases sometimes occur upon written nego- tiable instruments, such as bills of exchange and prom- issory notes, where, in reality, all the parties are part- ' {"If any bankrupt shall, at the time of afljudication, be liable upon any bill of exchange, promissory note, or other obligation in respect of distinct con- tracts as a member of two or more firms carrying on separate and distinct trades, and having distinct estates to be wound up in bankruptcy, or as a sole trader and also as a member of a firm, the circumstance that such firms are in whole or in part composed of the same individuals, or that the sole con- tractor is also one of the joint contractors, shall not prevent jjroof and re- ceipt of dividend in respect of such distinct contracts against the estates re- spectively liable upon such contracts." U. S. Bankrupt Law of 1867, § 21.} * Ex j^nrte Parr, 1 Rose, 76, See also In re Plummer, 1 Phil. 56, 59 ; post, §389. ^ Heath V. Hall, 4 Taunt. 326 ; Young v. Hunter, 16 East, 252 ; Coll. on P. B. 4, c. 2, § 7, p. 645, 2d cd. ; Gow on P. c. 5, § 3, p. 289, 3d ed. 614 PARTISERSHIP. [CHAP, XV. ners, and the bills or notes are drawn, or indorsed, or accepted, upon their joint partnership account, and yet the parties appear only to be separately bound upon the face of the instrument, as drawers, or as indorsers, or as acceptors. In such cases, a question has been made, whether the creditor has a right in bankruptcy to prove his debt against the estates of all the respec- tive parties (which is called double proof), or must elect to prove against one only of the estates.^ It has been held, that if the creditor is, at the time of taking the negotiable instrument, ignorant of the actual connection between the parties in that instrument, he is entitled to the double proof.^ But, if he is not so ignorant, it seems doubtful, in the present state of the authorities, whether he is entitled to the double proof, or not.^ Be » {See U. S. Bankrupt Law of 1867, § 21.} 2 Coll. on P. B. 4, c. 2, § 8, p. 648, 649, 656, 2d ed. ; Gow on P. c. 5, § 3, p. 289, 3d ed. ; Ex parte Benson, Cook's B. L. 253 ; Ex parte La Forest, Id. 251 ; Ex parte Bonbonus, 8 Ves. 540. 3 Coll. on P. B. 4, c. 2, § 8, p. 649-651, 2d ed. ; Gow on P. c. 5, § 3, p. 288, 3d ed. — Mr. Collyer (Coll. on P. B. 4, c. 2, § 8, p. 648-651, 2d ed.) has stated the cases as follows. " The leading case on this subject is Ex parte La Forest, Cook's B. L. 251. There, Corson and Gordon, partners and turpentine manufacturers, entered into partnership with Whincup and Griffin, soap manufacturers. The latter business was carried on under the firm of Whincup & Griffin. A joint commission was issued against the four, under which they were found bankrupts ; and the assignees possessed themselves of the joint fund of the four, and also the joint fund of Corson & Gordon, and their respective separate estates. Corson & Gordon, in their partnership firm, drew bills of exchange upon the firm of Whincup & Griffin, who accepted such bills. The petitioners discounted many of these bills. The jictitioners alleged, that, at the time of such discount, they were ignorant of any partnership existing between the four ; but that they con- sidered Corson & Gordon, the drawers, and Whincup & Griffin, the accep- tors, as two distinct firms, and thought that they had the security of the funds of both those firms. The petitioners applied to the commissioners to be admitted to prove against the respective joint estates of Corson & Gordon, and of AVhincup & Griffin; but the commissioners refused, conceiving that the bills ouglit to be proved only against the joint estates of Whincup, GriOin, Corson, and Gordon. Lord Loughborough hold, that, admitting the allegation of ignorance on the part of the petitioners to be true, CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 615 this as it may, it is very certain, that the creditor cannot prove his debt against the joint and against the separate they were entitled to the proof which they required. Again, A., B., and C. were partners in a cotton manufactory, and B. ;>nd C. carried on a distinct trade in partnership, as grocers. The petitioner sold goods to B. and C. as grocers, for which they remitted to him a bill drawn by A. in their favor, upon one Z., and indorsed by B. and C. Z. accepted the bill; but it was protested for non-payment. The drawer, indorsers, and acceptor, all became bankrupts. The petitioner did not know that A. had any connec- tion in trade with B. and C. Lord Loughborough ordered that the peti- tioner should be at liberty to prove the amount of the bill against the joint estate of B. and C, and also against the separate estate of A., and be paid dividends upon both estates. Ex parte Benson, Cook's B. L. 253. Again, five persons, trading under the firm of C. & Co., drew a bill of exchange on two of the members of the copartnership, who carried on a distinct trade, as H. and G. The bill was accepted, negotiated, and, in the course of circu- lation, came into the hands of the petitioner, without any knowledge, on his part, of the connection between the parties. Upon the bankruptcy of C. & Co. the petitioner claimed to prove both against the drawers and acceptors. Lord Eldon held, that the petitioner, as ignorant of the connection of the parties, was entitled to such proof. Ex parte Adam, 2 Rose, 36. In all these cases, the partners, who appeared as distinct pai'ties to the bills, were also in distinct partnerships ; and yet the holders of the bills, in order to obtain double proof, were required to prove their ignorance, that these distinct partnerships also formed an aggregate partnership. Nevertheless, according to a learned writer. Lord Eldon has determined, that, where the firms are in fact distinct, it is not material that the ignorance of the holder, that the same parties were also united in one firm, should be requisite to entitle him to proof. Eden on Bankr. Law, 182. Now, although this remark does not seem to be supported by any express authority ; yet it is justified by several dicta of Lord Eldon, and by the case of Ex j^arte Walker, 1 Rose, 441, which is in point. There A., a sole trader, B. and C, partners, and D., also a sole trader, engaged in a joint adventure; and for a joint purchase of goods by them, the vendor, with a knowledge of their joint interest, received in payment a bill drawn by A. on, and accepted by B. and C. ; Lord Eldon held, that on the bankruptcy of A., and of B. and C., the vendor was entitled to prove the bill against both their estates. On other occasions, likewise, Lord Eldon appears to have adverted to double proof, without ever referring to the ignorance of the holder of the double security, that the distinct firms constituted one general firm. Ex parte Bonbonus, 8 Ves. 540. On the other hand, there is a recent case, in which Sir George Rose is reported to have said, that the holder of a bill is not entitled to double proof, if he knew the different persons whose names appear upon it to be all members of one joint firm. Ex parte Hill, 2 Deac. 249, 261. Upon the whole, it seems still open to contend, that where a bill is di'awn by some of the partners upon the others, or upon the whole firm, 616 PARTNEESHIP. [CHAP. XV. estates of the same parties ; but he must elect to go agamst the one, or the other.^ § 389. Another question may arise in bankruptcy, where a creditor has a pledge or mortgage or other se- curity upon the estate of the bankrupt for his debt, whether he can retain it, and proceed in bankruptcy for the amount, or not. And. here, a doctrine prevails, which seems equally consonant to justice and common sense ; and that is, that the creditor in such case may, if he chooses, surrender up the pledge or mortgage or other security, and come in under the commission, for his whole debt ; or, he may have the pledge or mort- gage or other security sold, and if it is insufficient to pay the whole debt, he may prove against the estate for the deficiency.^ But as the established rule in bank- ruptcy is, that the deduction of a pledge or mortgage or other security is never made, except when it is the property of the bankrupt, it has been held, as a conse- quence of that rule, that in the case of a separate pledge or mortgage or security of property made for a joint debt, either by a partner or by a third person, the secu- rity may be retained, although the whole joint debt be proved under the commission.^ or vice versa, and the bill purports, and the fact is, that the drawers and acceptors likewise constitute distinct firms respectively, in such case, the holder, whether ignorant or not of the aggregate connection of the parties, is entitled to pursue the contract appearing on the face of the bill, and to prove against both the estate of the drawer and that of the acceptors." See Wats, on P. c. 5, p. 274-276, 2d ed. ' Coll. on P. B. 4, c. 2, § 8, p. 651-654, 2d ed. {This whole subject of double proof is learnedly discussed in Lind. on P. 1018-1025. See Wick- ham V. Wickliam, 2 Kay & J. 478. Ex parte Goldsmid, 1 De G. & J. 257 ; s. c. affirmed in House of Lords, suh nom. Goldsmid v. Cazenove, 5 Jur. x. s. 1230, and an article in 3 Jiir. N. s. pt. 2, p. 27.} = Coll. on P. B. 4, c. 2, § 4, p. 633, 2d ed. ; Id. e. 2, § 7, p. 645, 646 ; Ex parte Geller, 2 Madd. 262 ; Ex parte Bennet, 2 Atk. 527 ; Ex parte Parr, 1 Rose, 76 ; Ex parte Goodman, 3 Madd. 373 ; In re Plummer, 1 Phil. 56, 59; {U. S. Bankrupt Law of 1867, § 20.} ^ Coll. on P. B. 4, c. 2, § 7, p. 645-647, 2d ed. ; Ex parte Parr, 1 Rose CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 617 8 390. It was also for a long time a matter of doubt, whether, if a firm be indebted to one of the partners, the creditors on the separate estate of that partner should be admitted as creditors on the partnership es- tate, in competition with the joint creditors ; Lord Hard- wicke conceived and held,^ that, where money had been lent to the partnership by a partner, who afterwards became bankrupt, the separate creditors of the latter might prove the amount of the loan, as a debt against the joint estate. Lord Thurlow, however, thought dif- ferently ; and in a subsequent case,^ he decided, that proof could not, ^^nder such circumstances, be made. He proceeded upon the principle, that the equities of the creditors, whether joint or separate, must be worked out through the medium of the partners ; and that it was a clear and well-established rule, that the individ- ual partner could not himself prove against the joint estate in competition with the creditors of the firm, who were in fact his own creditors, and thereby take part of the fund to the prejudice of those, who were not only creditors of the partnership, but of himself. Therefore, where there was a joint commission against two partners, and a separate commission against one of them, and the assignees under the separate commission petitioned to be admitted creditors under the joint com- mission for a sum of money brought by the bankrupt, whom they represented, into the partnership, beyond his share, and as being, therefore, a creditor upon the partnership, for that sum ; Lord Thurlow refused it, upon the ground, that proof of a debt due to an indi- 76; Ex parte Peacock, 2 Glyn & J. 27; In re Plummer, 1 Phil. 56, 59; Ex parte Bowden, 1 Deac. & Ch. 135 ; {Lind. on P. 990; Ex parte Leicester- shire Banking Co., De Gex, 292. Rolfe i'. Flower, Law Rep. 1 P. C. 27. But see Harmon v. Clark, 13 Gray, 114, 122.} 1 Ex parte Hunter, 1 Atk. 223. » Ex parte Lodge, Cook's B. L. 534 ; s. c. 1 Ves. Jr. 166. 618 PARTNERSHIP. [CHAP. XV. vidual partner could not be allowed to come in con- flict with the proofs of the joint creditors.^ The rule introduced by Lord Thurlow, has since his time been in many cases acted upon and confirmed.^ § 391. The like question may arise in the converse case, where the joint creditors seek to prove a debt, due from a single partner to the partnership, against the separate estate of that partner. And here, also, it is now the settled rule, that, where one partner has become indebted to the firm, or has taken more than his share out of the joint funds, the joint creditors are not to be admitted to prove against the separate estate of that partner, until his separate creditors are satis- fied, unless it can be shown, that in drawing out the money, the partner has acted fraudulently, with a view to benefit his separate creditors, at the expense of the joint creditors.^ ' Ex parte Burrell, Cook's B. L. 532; Ex parte Parker, and Ex parte Pine, Ibid.; Gow on P. c. 5, § 3, p. 290, 291, 3d ed. ^ Ex parte Reeve, 9 Yes. 588; Ex parte Adams, 1 Rose, 305; Ex parte Harris, Id. 437; Ex parte Sillitoe, 1 Glyn & J. 374, 382; Gow on P. c. 5, § 3, p. 290, 291, 3d ed. ; Rodgers v. Meranda, 7 Ohio St. 179, 193; Wats, on P. c. 5, p. 278-280, 3d ed. — In this and the three succeeding sections, 1 have followed for the most part literally the language of Mr. Gow, as at once full and accurate upon the points. {Lind. on P. 994 ; Ex parte Brown, 2 Mont. D. & De G. 71 8. A testator directed that it should be lawful for his wife to retain and emjiloy not exceeding £6,000 in the trade which he was carrying on at his death, and he appointed his wife and son executrix and executor. The widow carried on the trade, taking the son into partnership. Held, that the employment of £6,000 of the assets in the trade was authorized by the will, and gave no right of proof in competition with the joint creditors, and that the son being taken into partnership} made no difference. Ex parte Butterfield, De Gex, 570.} 3 Gow on P. c. 5, § 3, p. 316-318 ; Wats, on P. c. 5, p. 280-285, 2d ed. Mr. Gow on this point says : " The law sanctioned by the authorities of Lord Talbot, and Lord Hardwicke, formerly was, that if the debt, raised by the partners against an individual partner, arose out of contract, as upon a loan by the partnership to him, the joint creditors might be admitted to prove against the separate estate in competition with the separate creditors. But the opinicjns entertained by those learned Judges have been receded from in CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 619 § 392. But although in cases of contract, in which the joint estate is increased at the expense of the separate estate, the funds are administered as they are constituted at the time of the bankruptcy ; yet there are circumstances under which the separate creditors will be permitted to prove, against the joint estate, a debt due from the partnership to the individual part- ner.^ To induce a relaxation of the rule, however, it must be made out, that the separate effects, creating the debt, were obtained from the separate to augment the joint estate, either by actual fraud, or under cir- more modern times ; and the settled doctrine now is, tliat if the claim arise out of contract, the estates are to be administered jointly and separately, as they are actually constituted at the time of the bankruptcy ; the joint cred- itors not being permitted to recall into the joint fund, what one partner has by contract, express or implied, subtracted from the joint, and applied in augmentation of his separate estate. This rule was introduced by Lord Thurlow, who, having much considered the question, finally determined, that the assignees on behalf of the joint, could not prove against the separate estate, unless the partner had taken the joint property, with a fraudulent intent to augment his separate estate. Thus, where Feudal was a dormant partner with Lodge, and Lodge took money from the partnership to a con- siderable amount, without the knowledge of Feudal, who did not intermeddle in the partnership business. Lord Thurlow, after taking time to consider, thought he could not permit the assignees, under a joint commission, to prove against the sejjarate estate of Lodge, without deciding upon a principle, that must apply to all cases, and constantly occasion the taking an account be- tween the partners and the partnership in every joint bankruptcy. He said, that if the affidavits had gone the length of connecting the bankruptcy with the institution of the partnershiji trade, and that Lodge, with a view of swindling Feudal out of his property, had got him into the trade, and then taken the effects of the partnership into his own hands, with a view to his separate creditors, it might have been different; and the petition, on the part of the joint creditors, to prove against the separate estate, was dismissed. The principle established by Lord Thurlow's decision. has been acknowledged, and followed by Lord Eldon ; and it is now an indisputable rule in bank- ruptcy, that, where the debt from one partner to the partnership was incurred with the privity of his co-partners, proof by the joint against the separate estate will not be admitted." See also ante, § 384, 385, note. § 390; Lord Eldon's opinion in Ex parte Harris, 2 Ves. & B. 210, 212, 213, cited; {post, § 406 ; Lind. on P. 1004 ; Walton v. Butler, 29 Beav. 428.} ' Ex parte Harris, 1 Eose, 437 ; s. c. 2 Ves. & B. 210 ; Ex parte Yonge, 3 Yes. & B. 31 ; s. c. 2 Rose, 40 ; Ex parte Cust, Cook's B. L. 533. 620 PARTNERSHIP. [CHAP. XV. cumstances, from which the law will imply fraud ; and, in a legal sense, every appropriation by the firm, as contradistinguished from a taking either by con- tract, or by loan, is considered fraudulent, if it be made without the express or implied authority of the indi- vidual partner.^ 1 Ex parte Reid, 2 Rose, 84 ; Gow on P. c, 5, § 3, p. 292, 3d ed.; Wats. on P. c. 5, p. 280-282, 2d ed. ; Coll. on P. B. 4, c. 2, § 10, p. 666-672, 2d ed. ; Ex parte Harris, 2 Ves. & B. 210. — In Ex parte Harris, 2 Ves. & B. 210, 212, Lord Eldon said: " There has long been an end of the law which pre- vailed in the time of Lord Hardwicke ; whose opinion ajij^ears to have been, that, if the joint estate lent money to the separate estate of one partner, or if one partner lent to the joint estate, proof might be made by tlie one or the other in each case. That has been put an end to, among other principles, upon this certainly ; that a partner cannot come in competition with separate creditors of his own, nor as to the joint estate with the joint creditors. The consequence is, that if one partner lends £1,000 to the partnership, and they become insolvent in a week, he cannot be a creditor of the partnership, though the money was supplied to the joint estate ; so if the partnership lends to an individual partner, there can be no proof for the joint against the sepa- rate estate; that is, in each case no proof to affect the creditor, though the individual partners may certainly have the right against each other. The opinion of Lord Talbot seems also to have been in favor of this proof. But in and previously to the year 1790 great discussion took place at this bar; the result of which, according to Lord Thurlow's opinion, was expressed particularly in the case of Dr. Feudal and Lodge. The former, a physician, embarked a very large property, his whole fortune, in a partnership) with Lodge, whom he permitted to have the whole management ; and, a bank- ruptcy ensuing, Lord Thurlow held, that as it was with the knowledge and permission of Feudal, that the whole management of the property was with Lodge, he was authorized to do as he thought fit with the partnership prop- erty ; and Feudal, therefore, must abide the consequences of what had been done most improperly, but under his own authority most imprudently given ; and there could, therefore, be no proof. The law has been clear from that time, that, to make out the right to prove by the one estate, or the other, it must be established, that the effects, joint or separate, have been acquired by the one, or the other, improperly and fraudulently in this sense, that they have been acquired under circumstances from which the law implies fraud ; or in this sense, to increase the separate estate of one partner, that he meant fraudulently to increase his own means out of the partnership estate. Lord Thurlow by ' fraud ' intended to express what he thought necessary to dis- tinguish that from taking by contract, or loan, or without the express or implied authority of the other partner ; and that such act would amount to fraud. Upon this case, I formerly expressed my opinion ; and I now lay CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 621 § 393. Cases also may arise, independently of any fraud, in which the separate creditors will be entitled to relief, and to make proof of their debts against the joint estate. In cases of dormant partnership, it is a general rule, that the creditors who have dealt with the ostensible partner, not knowing that there is any dormant partner, have a right to treat their debts as joint debts, or as separate debts, and have an election to prove the same against the joint estate, or against the separate estate of the ostensible partner.^ Under such circumstances, if such creditors should elect to prove them against the separate estate of the ostensi- ble partner, the separate creditors of the latter will be entitled to prove their debts against the joint estate, and to receive an equivalent out of any surplus of the joint estate, which may remain after satisfying the joint debts ; for the same rule prevails in bankruptcy, as is adopted by Courts of Equity generally, that the mere election of a creditor, who has a right to resort to two funds, shall not deprive other creditors, who can resort but to one of those funds, of their just rights ; but the latter shall be allowed, by way of substitu- tion, to obtain the like benefit against the other fund, as the original creditor would have, if he had not made such an injurious election.^ Therefore, where a down, that, if in either the expressed or implied terms of an agreement for a partnership there is a prohibition of the act, and it is done without the knowledge, consent, j^i'ivity, or subsequent approbation of the other partner, before the bankruptcy, and to the intent to apply partnership funds to private purposes, that is, prima facie, a fraud upon the partnershijj." 1 Coll. on P. B. 4, c. 2, § 5, p. G39, 2d ed. ; Ex parte Reid, 2 Rose, 84 ; Ex parte Norfolk, 19 Ves. 455 ; Ex parte Watson, 19 Ves. 459 ; Gow on P. c. 4, § 1, p. 178, 179, 3d ed. ; Id. c. 5, § 3, p. 261, 262. [See Van Valen v. Russell, 13 Barb. 590.] {Cammack v. Johnson, 1 Green, Ch. 163. See § 263, note, and Elliot v. Stevens, 38 N. H. 311.} ^ Ex parte Reid, 2 Rose, 84; 1 Story, Eq. Jur. § 558-561 ; Id. § 663- 668; Gow on P. c. 5, § 3, p. 292, 3d ed. ; Coll. on P. B. 4, c. 2, § 5, p. 639, 2ded. 622 PARTIS ERSHIP. [CHAP. XV. joint commission issued against A. and B., A. being a dormant partner, and the joint creditors resorted to the separate estate of B., thereby diminishing that separate estate, and exonerating the joint estate of A. and B., so as to produce a surphis of it, it was held, that the separate creditors of B. had a hen upon that surphis to the extent to which their funds had been diminished by this election and resort of the joint creditors.^ § 394. Another relaxation of the rule, that a part- ner cannot prove against a fii'm, is admitted where there is a minor partnership, or house of trade, consti- tuted of persons who are members of a larger firm, and there are distinct dealings between the distinct houses of trade, and both firms become bankrupt, the one being indebted to the other in respect of such dealings ; in such a case proof may be made of the debt, in the same manner as if the dealings had been among strangers.^ But the question, wdiat is a deal- ing in a distinct trade, is always to be looked at with great care, for the proof is admissible on behalf of the separate trade against the aggregate firm, only in respect of dealings between trade and trade. If an individual partner, who is a separate trader, should lend money to his partnership, the strict rule would immediately apply to him, and shut him out from the benefit of proof; for if it were sufficient to state, in order to bring the case within the exception, that the partner would not have lent the money, but as a sep- arate trader, the general rule would be at an end. It is obvious, therefore, that the right of proof must be ' Ex parte Reid, 2 Rose, 84. ^ Ex parte Ilargreaves, 1 Cox, 440 ; s. c. cited 6 Ves. 123, 747, and 11 Ves. 414; Ex parte Ring, Ex parte Freeman, Ex parte Johns, Cook's B. L. 538 ; Ex x>aHe St. Barbe, 11 Ves. 413 ; Ex paiie Heshani, 1 Rose, 146 ; Ex paiie Catesby, 2 Christ. B. L. •82G, 2d ed. CHAP. XY.] DISSOLUTION RIGHTS OF CREDITORS. 623 confined to distinct dealings in the articles of distinct trades ; since a more extended relaxation of the rule would, in its consequences, lead to the destruction of the rule itself^ Therefore, where two partners of a large banking firm carried on a separate trade as iron- mongers, and a debt arose from the aggregate firm to the separate trade, in respect of moneys procured for the benefit of the aggregate firm, on the credit of the indorsement of the separate firm, it was held, that no proof could be made on behalf of the fi.rm of the two against the aggregate firm in respect of that debt.^ If the firm consists of two persons only, and one carry on a separate trade ; as they are both liable for the same joint debts, the solvent partner is not entitled to prove, under the commission against his copartner, a debt for goods sold by his distinct house to the firm, until the joint creditors have been satisfied. It would be otherwise in the case of a firm of A., B., C, and D., pro\ing against the firm of A., B., C, and E. ; for the former would not be liable for the joint debts of the latter firm.^ § 395. The subject of set-ofi" in bankruptcy, as ap- plicable both to separate debts and to joint debts, 1 lEz parte Williams, 3 Mont. D. & De G. 433.] " Ex parte Sillitoe, 1 Gl. & J. 374. {B., a banker, formed a partnership ■with M. and P., merchants, under the firm of M. & Co. There was an agreement that B. should accept bills for the firm at a commission, and that the firm should negotiate them and keep B. in funds to meet the acceptances. B., M., and P. all became insolvent. M., on behalf of M. & Co., claimed to prove against B.'s estate for £5,000 due to the firm on their account. Held, that the dealing between B. and M. & Co. was not such a separate trade as to allow the firm to prove against a partner's estate, and that the fact that all the pai'tners were insolvent, and therefore had no personal interest, made no difTcrence. Ex parte jMaude, Law Rep. 2 Ch. 550.} 3 Ex jmrte Adams, 1 Rose, 305 ; Gow on P. c. 5, § 3, p. 292, 293, 3d ed. ; Wats, on P. c. 5, p. 286-288, 2d ed. ; Coll. on P.B. 4, c. 2, § 9, p. 664, 665, 2d ed.; Id. B. 4, c. 2, § 10, p. 666-672; Id. p. 673-678; {Housears Appeal, 45 Penn. St. 484.} 624 PARTNERSHIP. [CHAP. XV. might be here introduced and expounded. But as it turns mainly on the positive provisions of the Statutes of Bankruptcy, as to mutual debts and credits, or on the doctrines, adopted by Courts of Equity, and founded upon the equities arising in particular cases, it seems more appropriate for Commentaries of a more extended character. It may, however, be stated, that at law, and in bankruptcy, and indeed in equity gen- erally, there can be no set-off of joint debts against separate debts, unless there be some special agreement between the parties to that effect, or some equitable cu'cumstances, creating it in the particular case.^ § 396. We have already seen, that in common cases of a dissolution, it is competent for the partners to agree between themselves, either originally by their articles of partnership, or by their arrangements at its dissolution, that one partner may or shall take the whole partnership property at a valuation ; and the assignment thereof, when made hona fide in either way, will be valid and obligatory upon the creditors.^ But in cases of bankruptcy, the rule is otherwise ; for the policy of the bankrupt laws intervenes, and prevents any effect being given to any such stipulations or ar- rangements. The assignees are entitled to the interest of the bankrupt in his property, whatever it may spe- cifically be, at the moment of the act of bankruptcy. And no agreement made between him and his part- ners, in contemplation of bankruptcy, is permitted to interfere with their rights. For, although the owner of property may generally, upon his own voluntary ' Coll. on P. B. 4, c. 2, § 11, p. 678-685, 2d ed. ; 2 Story, Eq. Jur. § 1430-1444; Wats, on P. c. 5, p. 339-350, 2d ed. ; Gow on P. c. 3, § 1, p. 137-139, 3d ed.; Id. c. 5, § 3, p. 331-340; {Lind. on P. 933-942; Wil- liams V. Brimhall, 13 Gray, 462.} * Ante, § 208, 358, 359, 372, 373. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 625 alienation of that property, qualify the interest of his alienee, by a condition to take effect upon the bank- ruptcy of the latter ; yet it would defeat the very objects of the bankrupt laws, to allow a party to qualify his own interest therein, while it remains his absolute property, by a like condition, determining or controlling it in the event of his own bankruptcy, to the disappointment, delay, or injury of his creditors ; for such an event, by mere operation of law, takes away from him entirely the jus disj^onendi, and transfers it to the assignees for the equal benefit of all his creditors.^ ' Gow on P. c. 5, § 3, p. 300, 301, 3d ed. ; Coll. on P. B. 2, c. 2, § 2, p. 146, 2d ed. ; Wilson v. Greenwood, 1 Swans. 471, 484. — I have stated . the doctrine positively in the text, deeming it the just result of the reason- ing in the authorities, whether the stipulation be in the original articles of partnership, or be made afterwards. ISIr. Gow and Mr. Collyer speak of it as a matter open to doubt, where the stipulation is in the original articles. In the case of Wilson v. Greenwood, 1 Swans. 471, 481, 482, Lord Eldon said: "In this case, the first question is, whether, supposing the original deed had provided for the dissolution of the partnership by bankruptcy, as it has provided for the dissolution by other means, that provision would be good. I will not say, that it would not; but I have heard nothing to convince me that it would. From the original deed, it is clear, that the intention of the parties was not, as the defendants insist, to apply the special provision to the event of dissolution by bankruptcy. After providing for other cases, it expressly declares that, in case of bankruptcy, the concerns are to be wound up in the same way as if no special provision was made. On this agreement, the parties proceed till the execution of another deed, which, in one sense, may be justly said to be made in contemplation of bankruptcy, because it is applicable to the event of bankruptcy alone. But I have no doubt, from the face of it, that it was, in a strict sense, in con- templation of bankruptcy ; for it contains a recital, which cannot be believed by any one, who looks at the original deed, that the parties to that deed intended the same provision in cases of bankruptcy and insolvency, as in the case of dissolution from other causes. I go further ; the incihcacy of the terms of the agreement, as applied to bankruptcy, affords another proof, that the application was not designed. In the event of dissolution by mis- conduct, the parties were to name a valuer, and the property was to be divided. If the partnership was dissolved by the death of a partner, what was to be done ? His executors or administrators were to name a valuer. The deed, then, contemplating bankrui)tcy and insolvency, the provision for insolvency is sufficient, because, while not yet become a bankrupt, the 40 626 PARTNERSHIP. [CHAP. XV. § 397. Passing from this subject, let us, in the next place, proceed to the consideration of another subject of inquiry, which constantly arises in bankruptcy ; and that is, what property, not strictly belonging to the bank- rupt, but yet in his possession and reputed ownership at the time of his bankruptcy, will pass to his assignees, in opposition to the claims of the real owner ? This inquiry is equally as applicable to cases of property owned by partners, as it is to property belonging to particular individuals. We have already seen,^ in what cases partnership property, upon a dissolution of the partnership, may pass by transmutation or conversion thereof to one or more of the partners, or to the sur- 'vivors or remaining members of the firm. But the point here proposed for consideration turns altogether upon the construction of a clause which was early in- troduced mto the English Statutes of Bankruptcy, and has continued substantially in force down to the pres- ent day, throughout all the modifications which the system has successively undergone. It was provided by the statute of 21 James 1 (c. 19, § 11), that, if any bankrupt, at the time of his bankruptcy, shall, by the insolvent retains all capacities of acting. But if he becomes bankrupt, it is impossible to contend, that, under this clause, he is to name the persons who are to value the interests of his assignees ; and no such authority is given to his assignees, for the word ' assigns ' is not to be found in the deed. I have no doubt, therefore, whether on general princi^jle, or on the construction of the deeds, that the law of this case is, that the part- nership was dissolved by bankruptcy ; and the property must be divided, as in the ordinary event of dissolution, without special provision. The consequence is, that the assignees of the bankrupt partner are become, quoad his interest, tenants in common with the solvent partner; and the Court must then apply the principle on which it proceeds in all cases, whei'C some members of a partnership seek to exclude other/ from that share to which they are entitled, either in carrying on the concern, or in winding it up, when it becomes necessary to sell the property, with all the advantages relative to good-will." See also the Reporter's note, ■181, note (a) ; ante, § 207, 208. ' Ante, § 358, 359, 372, 373, 396. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 627 consent and permission of the true owner or proprie- tary, have in his possession, order, or disposition, any goods or chattels, of which he shall be the reputed owner, and take upon him the sale, alteration, or dis- position thereof, as owner, the commissioners shall have power to sell and dispose of the same, to and for the benefit of the creditors, as fully as any other part of the estate of the bankrupt.^ § 398. The provision thus made was doubtless de- signed more fully to enforce the doctrines of the com- mon law, and to aid in the suppression of frauds, by preventing persons from giving an ostensible owner- ship of property to third persons, who might thereby acquire a false and collusive credit, to the »gross injury of their creditors. To a limited extent, this remedial justice might have been ordinarily obtained, either at the common law, or through the interposition of equity.^ But the statute has erected it into a positive rule, in order to prevent cavil, and to operate by way of pre- ventive and admonitory justice. § 399. The general question, then, arises, When, and under what circumstances, the bankrupt can be prop- erly said to have the possession, order, or disposition of any goods or -chattels, or the reputed ownership thereof, with the consent of the true owner? It has been well observed,^ that it is the principle of discoun- tenancing fictitious credit, and its concomitant frauds, which the statute enforces. Indeed there can be no 1 1 Cook's B. L. 60, 1th ed. ; Wats, on P. c. o, p. 272-274, 2d ed. The statute of 6 Geo. 4, c. 19, § 72, substantially re-enacts the same provision. {So does t*ie statute of 12 & 13 Vict. c. 106, § 125. There is no such pro- vision in the U. S. Bankrupt Act of 1867.} " See 1 Story, Eq. Jur. § 388-394; 1 Fonbl. Eq. B. 1, c. 3, § 4 ; Com. Dig. Chancery, 4, I. 3 ; Id. 4 W. 26 ; Storrs v. Barker, 6 Johns. Ch. 166, 169, 172 ; Pickard v. Sears, 6 Ad. & E. 469, 474. 3 Gow on P. c. 5, § 3, p. 272, 3d ed. 628 PARTNERSHIP. [CHAP. XV. other just ground, upon which one man's debts are to be paid out of the property of another. In further- ance of this principle it has uniformly been held, that such a possession as is calculated to give a delusive credit is a reputed possession, within the meaning of the statute. When, therefore, the fact of reputed own- ership is settled, the application of the statute is easy ; for, from the reputed ownership, false credit arises ; from that false credit arises the mischief; and to that mischief the remedy of the statute applies. But to make the statute available to the creditors of the party in whose visible possession the property has been, that pos- session must continue up to the time of the bankruptcy ; for, if withdrawn, bona fide, by the owner, at any time, however short, before the bankruptcy, the property cannot be reclaimed by the assignees.^ But a removal made in contemplation of bankruptcy being fraudulent, will not alter the possession in the consideration of law.^ And, to constitute a fraud on the part of the true owner, it is necessary that the property should be left in the order and disposition of the bankrupt, with his consent. Where this is not the case, it would rather be to encour- age than to check fraud, if what had been surreptitiously detained were to be divested from the innocent owner, and transferred to the assignees of the bankrupt.^ § 400. In general, it may be stated, that the mere fact, that the partnership property, after the dissolution of the partnership, remains in the possession of one partner, who afterwards becomes bankrupt, will not be sufficient, of itself, to make him, in the sense of the ^ Jones V. Dwyer, 15 East, 21 ; Ex jjarte Smith, 3 Madd, 63 ; s. c. Buck, 149 ; Storer v. Hunter, 3 B. & C. 368. ^ Ex parte Smith, 3 Madd. 63. ^ Ex parte Richardson, Buck, 480,488; Gow on P. c. 5, § 3, p. 272, 3ded. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 629 statute, the reputed owner thereof; for this is certainly in consonance with the rights of all the partners, as all and each of them are equally entitled to the possession and custody thereof The case must go further, and establish that the other partners have, by their own acts, or contracts, or conduct, conferred upon him the exclusive right, and order, and disposition thereof, be- yond the purposes belonging to the partnership. This results from the doctrine already stated, that all the other partners, upon the bankruptcy of any one of them, retain all their original rights and interests in the partnership effects.^ § 401. In cases of partnership, where the transfer of the joint property from the retiring partners to the con- tinuing partners is not made a matter of contract, it may be difficult to establish an actual consent to any change in the right to the property as taking place. But, although no actual consent can be proved, yet for this purpose the acts and conduct of the parties will warrant the presumption of an assent ; and this will be inferred, if, from the time of the dissolution down to the time of the bankruptcy, the retiring partners renounce their equity of having the partnership credits applied in discharge of the parfnership debts, and allow the continuing partners to deal as they think fit ^vlth the property, and to act with the world respecting it so as thereby to gain for themselves a false and delusive credit.- A dissolution on the eve of the retirement of a partner will not, of itself, convert into separate property the joint estate left in the possession of the partners continuing the business ; for such a possession is quali- fied, and is clothed with a trust to apply the property » Gow on P. c. 5, § 3, p. 267-269, 3d ed. ; Id. p. 271-278: Id. p. 299- 305; liolderness v. Sbackels, 8 B. & C. 612. 2 See West v. Skip, 1 Ves. Sr. 239, 2i2; Ex parte B.nmn, 6 Ves. 119. 630 PARTNERSHIP. [CHAP. XV. in discharge of the joint debts/ unless, indeed, the laches of the retiring partner has been such as to suffer the joint property to remain in the exclusive possession of the continuing partners for such a length of time as falsely to give them an appearance of substance.^ A foi^tiori, the statute will not apply to a case where the joint property is wrongfully withheld by one partner, against whom a bill in equity is filed for an account, and an injunction to restrain him from disposing of it, pending which he becomes a bankrupt.^ But if a new firm be constituted of some of the members of an old firm, either with or without the addition of others, and the whole of the stock in trade of the old firm be de- livered over to the new firm, and they be allowed to appear to the world as apparent owners of it, and after- wards become bankrupts ; in such a case all the efiects of the old partnership, found in specie amongst the property seized under the commission, will vest abso- lutely in the assignees ; and though there be outstand- ing debts of the former fii*m unsatisfied, these eff"ects, so found in specie, will not be considered as the joint es- tate of the former firm, either for the benefit of the joint creditors, or of the partners who have withdrawn from the firm.'* ' Per Lord Eldon, Ex parte Williams, 11 Yes. 3, 6. « Gow on P. c. 5, § 3, p. 272, 273, 3d ed. ; West v. Skip, 1 Yes. Sr. 239, 242. " Gow on P. c. 5, § 3, p. 273, 3d ed. ; West v. Skip, 1 Yes. Sr. 239, 242. * Ex parte Euffin, 6 Yes. 119, and Ex parte Williams, 11 Yes. 3, 6 ; Ex parte Fell, 10 Yes. 347 ; Gow on P. c. 5, § 3, p. 272, 273, 3d ed. — I have in this and the two following sections jrenerallv followed the lanjruafre of Mr. Gow, and he has illustrated the doctrine here stated by the following cases : " Therefore, where upon the dissolution of a partnership between a father and his son, it was agreed that, until the son was provided for, tlie father should allow him a third of the profits ; and the father afterwards formed a partnership with a third person, and carried into it the stock belong- ing to the former partnership ; on a commission of bankruptcy being CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 631 § 402. In cases of conditional transfers of the joint estate by some to the other partners, if the condition is not performed before the bankruptcy, the nature of the property is not changed by the simple force of the con- tract. But in such cases, and in cases in which the con- sideration for the transfer is not paid, the property will still pass, as separate estate under the statute, if from the time of the contract down to the date of the bank- ruptcy, the partners to whom it is assigned are permit- ted by the others to continue in the sole possession, and to carry on trade and acquire credit as sole owners thereof. There can. mdeed, under such circumstances, be no solid distinction between a permitted possession under a contract, incomplete as regards the persons con- tracting, and one which is tolerated by the parties inde- pendently of contract. The one must be as productive awarded against the father and son it was held, that their joint property, having been permitted by the son to become the visible propert^y of the new partnership, it must, in the first instance, be applied in satisfying the credi- tors of that partnership; and that if afterwards any surplus remained, the share of the father in it would be his own separate property, and, therefore, subject to the claims of his separate creditors. And again, on the dissolu- tion of a partnership between A., B., and C, three persons, as distillers, one of them (to whom the property in fact belonged) leased to C. and to one J. the distil-house and premises, and the several stills, vats, and utensils of trade specified in a schedule, as used by the former partnership ; and C. and J. were to carry on the business on the premises, which they accordingly did for some time, but afterwards became bankrupts ; whereupon a question was raised, whether such stills, vats, and utensils, so continuing in the pos- session of C. and J., and used by them in their trade, in the same manner as by the former partners, passed under the statute to the assignees, as be- ing in the possession, order, and disposition of the bankrupts at the time of their bankruptcy, as reputed owners ; and it was held that the stills, which were fixed to the freehold, did not 2;)ass to the assignees under the word goods and chattels in the statute ; but that the vats, &c., which were not so fixed, did pass to the assignees, as being left by the true owner in the pos- session, order, and disposition (as it appeared to the eye of the world) of the bankrupts, as reputed owners. So if a country partnership, consisting of three pai-tners, sell their goods in London, in the names of two of the firm, the property in London will, it seems, be in the order and disposition of the two." Ibid. 632 PARTNERSHIP. [CHAP. XV. of the mischief contemplated by the statute, as the other ; and both ought, therefore, to be held to be within its provisions. It has consequently been considered, that an exclusive possession, derived under a contract, which, as between the parties themselves, has not been performed, is sufficient to operate a conversion of the property, if the meaning of the transaction was to trans- mute it, and possession follows accordingly.^ § 403. With respect to the description of property affected by the statute, it is settled that no distinction exists between debts due to the partnership and other property ; for, notwithstanding debts are not assign- able at law, yet they are still within the scope of the statute.^ And where, upon the dissolution of a partner- ship, debts have been assigned by some of the partners to the others, although by the assignment the latter be- come the true owners of them ; yet they will remain in the^rder and disposition of the partnership, and form part of the joint estate, unless, prior to the bankruptcy, notice of the assignment has been given to the debtors.^ 1 Gow on P. c. 5, § 3, p. 274, 275, 3d ed. ; Ex parte Fell, 10 Ves. 347 ; Ex partey^WWams, 11 Ves. 3, 6. — In Ex parte Rowlandson, 1 Rose, 416, 419, Lord Eldon said : "If one partner puts another into the sole possession of the partnership estate and effects, and leaves them in his sole order and dis- position, giving him title under an instrument upon the face of it giving title, it -would be difficult to insist that he would have a lien upon that prop- erty for the consideration money, against the separate creditors of the other ; considering that he had by title, and by his own act, left this proper- ty in the sole order and disposition of the other. Previous to the dissolu- tion, the joint creditors had established no lien on this property. They could only sue and take out execution, either jointly or separately, against the joint effects or separate effects of their debtors. Till they had actually matured their process into an execution, they had no means of specifically attaching the partnership effects, and could only work out their equity through tl|ie partner himself." « Ex parte Ruffin, 6 Ves. 119, 128; Ex parte Williams, 11 Ves. 3, 6; Horn])lower v. Proud, 2 B. & Aid. 327 ; Ex parte Enderby, 2 B. & C. 389. * Ryall V. Rowles, 1 Ves. Sr. 348 ; s. c. 1 Atk. 165 ; Jones v. Gibbons, 9 Ves. 407 ; Ex parte Monro, Buck, 300. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 633 It is true, that a partner stands in a different situation from a stranger, to whom the debts might have been assigned ; because in his character of partner, and in- dependently of any assignment, he is personally com- petent to receive and discharge them. But it is also true, that, until notice be given to the debtors, the other partners are equally competent to receive and give acquittances for whatever may be due.^ Besides, the partners, who receive the assignment without informing the debtors of the transaction, would thereby enable the others, if they were so disposed, fraudulently to obtain a fictitious credit with the debtors ; and, therefore, so long as notice is withheld from them, the order and disposition of these debts must remain in the partner- ship. Upon this principle it has been held, that debts due to a partnership, which, upon a dissolution, are as- signed by a retiring partner to the continuing partners,^ or debts, which, by agreement, are, on a dissolution, to belong to one of the partners,^ continue in the order and disposition of the partnership, and consequently form part of the joint estate, unless, previously to their bankruptcy, the debtors are apprised of the assignment or agreement. And it is insufficient in such cases to notify the dissolution only ; for, unless express notice of the assignment be also given, the order and dispo- sition will not be altered.'* But the operation of the statute, and any question respecting the transmutation * Duffy. East India Co. 15 Ves. 198, 213. 2 Ex parte Burton, 1 Glyn & J. 207. ' Ex parte Usborne, 1 Glyn & J. 358. * Ex parte Harris, 1 Madd. 583, 587. — In Ex paiie Usborne, 1 Glyn & J. 358, a notice, stating the dissolution of the partnership by mutual agree- ment, and tliat all debts due to or from the concern would be received and paid by one of the partners, was inserted in the gazette. But Sir John Leach held such a notice ineffectual, and that the order and disposition of the debts owing by those debtors, who had not 'express notice of the agree- ment, remained in the partnership. 634 PARTNERSHIP. [cHAP. XV. of the property, may, in all cases, be avoided, upon the retirement of a partner, by his assigning to the remain- ing partners all the effects in trust to pay the debts ; because then, notwithstanding there may not be a subsisting joint possession, the property would continue subject to the joint demands, and would not, by the simple fact of possession, be converted into separate estate.^ § 404. Another question, however, still remains to be considered under this head ; and that is, how the statute, as to reputed ownership, affects dormant part- ners. After some fluctuation of judicial opinion, the ^ Ex parte Fell, 10 Ves. 347 ; and see ^x par^e Williams. 11 Ves. 3, 6; Exj^arte Martin, 19 Ves. 491 ; 8. c. 2 Rose, 331 ; Gow on P. c. 5, § 3, p. 275-277, 3d cd. — The Ship Register Acts have not affected this question of reputed ownership at all, as those statutes relate to transfers by the acts of the parties, and not to transfers by operation of law. Mr. Gow on this sub- ject says : " The statute of James is not repealed, and of course those sec- tions of the late general bankrupt act, in which the provisions in the statute of James have been embodied, are not rendered inoperative as to shipping, by the Ship Register Acts ; for these statutes relate to transfers made by the act of the party only, viz. from a former owner to a new owner, and where the transfer is capable of being effectuated in the ordinary way, by the mere operation of an instrument of assignment from the one party to the other, and do not relate to transfers deriving their effect by peculiar provision or operation of law, as assignments by commissioners of bank- ruptcy to assignees under the bankrupt laws do, or titles passing to exe- cutors or administrators in case of death. In these cases a title may be transmitted without any of the forms required by the statutes ; and as a title may be transmitted without these forms in the case of bankruptcy generally, it may be so done in a case falling within the scope and object of the statute of James. Therefore, where A., the owner of a ship, didy assigned his interest in it to B., and B. became the registered owner; but by his permission, A. continued to have the same in his possession, order, and disposition, until he became bankrupt, it was holden, that A.'s assignees were entitled to the ship. And under a commission of bank- rujDtcy against two partners, ships registered in the name of one of them, but in the ordering and disposition of both, form part of the joint estate. On the same principle, a ship registered in the name of two partners, but which is left in the order and disposition of one of them, will pa.'^s to the assignees of the latter on his bankruptcy." See also Gow on P. c. 5, § 3, p. 279 ; Kirkley v. Plodgson, 1 B. & C. 588. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 635 doctrine is now finally settled that, in cases of dormant partners, if the ostensible partners become bankrupt, the whole partnership property is to be deemed . to be in their reputed ownership, and the dormant partner is excluded from any right or title thereto, as against the assignees in bankruptcy.^ § 405. Hitherto we have been principally examining questions arising upon a dissolution by bankruptcy, so far as it affects the rights of creditors, either generally or in case of reputed ownership of property. Let us now look to some of the rights of the partners inter sese, consequent upon such a dissolution. And here it may be remarked that, generally, the partners are not entitled, in any case, to come in competition with the joint creditors upon the partnership funds, whatever may be the rights and equities which would otherwise attach between them against the bankrupt partner or partners.^ So, where all the partners become bank- > Gow on P. c. 5, § 3, p. 278-280, 3d ed.; Id. p. 300, 301 ; Kirkley v. Hodgson, 1 B. & C. 588 ; Ex jmrte Enderby, 2 B. & C. 389 ; {^Ex parte Wood, De Gex, 134.] {This doctrine is now overthrown. In Reynolds v. Bowley, Law Rep. 2 Q. B. 41, the Court of Queen's Bench acted on this doctrine, feeling bound by the authority of the decided cases, though they doubted whether those cases had been rightly decided, but, on appeal, the Court of Exchequer Chamber reversed the judgment, and held that where one partner bona fide allows the other to carry on the business ostensibly as his own, the dormant partner's share in the partnership stock in trade does not, on the bankruptcy of the ostensible partner, pass to the hitter's assignees, as in the possession, order, or disposition of the bankrupt, as reputed owner. Reynolds v. Bowley, Law Rep. 2 Q. B. 474.'} => Gow on P. c. 5, § 3, p. 293, 3d ed. ; Id. p. 321 ; Coll. on P. B. 4, c. 2, § 9, p. 655-658, 2d ed. ; ante, § 390-394; Ex parte Kendall, 17 Ves. 514, 521 ; Ex parte Adams, 1 Rose, 305 ; Ex parte Reeve, 9 Ves. 588. In Ex parte St. Barbe, 11 Ves. 413, 414, Lord Eldon said: "There have been cases of a trade carried on by tln-ce, and distinct trades by two, and by one of them, where this sort of proof of a debt, distinctly due from one partner- ship to the other, has been permitted as between the partners, so engaged in diffi'rent concerns. The course of tlie authorities has been, that a joint trade may prove against a separate trade ; but not a partner against a part- ner. In the case of Shakeshaft, Stirrup, and Salisbury, Lord Thurlow went 636 PARTNERSHIP. [cHAP. XV. rupt, the general rule is, that the separate estate of one partner shall not claim against the joint estate of the partnership, in competition with the joint credi- tors ; nor the joint estate against the separate estate, in competition with the separate creditors. And the creditors are not, in either case, considered as satisfied, nntil they have received the interest due upon their debts respectively, as well as the principal.^ § 406. In like manner a solvent partner cannot prove his own separate debt against the separate estate of the bankrupt partner, so as to come in com- petition with the joint creditors of the partnership ; for he is himself liable to all the joint creditors ; and therefore he ought not, in equity, to be permitted to take any of the funds of the bankrupt before all the creditors, to whom he is liable, are duly paid.^ Neither can a solvent partner prove against the separate estate of the bankrupt partner, in competition with the sepa- rate creditors of the bankrupt, unless and until all the joint creditors of the partnership are paid, or at least unless and until the joint estate is fully indemnified therefor;^ for if a dividend were reserved to him on such upon this distinction ; that where there is only one partnership arranging different concerns, belonging to them all, in different ways, for the benefit of different parts of that joint concern, as in that instance, the three part- ners carrying on the business of cotton manufacturers in Lancashire, and two of them in London, there could not be proof by the three against the two. But if the trades are perfectly distinct, then the three, as cotton manufacturers in Lancashire, might be creditors upon the separate concern of the two, as ironmongers in London. I am inclined to abide by that case and Ex jjarte Johns." • CoU. on P. B. 4, c. 2, § 10, p. 666-678, 2d ed. ; ante, § 390-393 ; |§376.} == Coll. on P. B. 4, c. 2, § 9, p. 655, 2d ed. ; Ex parte Reeve, 9 Ves. 588, 589. ' {A partner cannot prove against his copartner upon indemnifying the joint estate ; he must show that the claims against it are discharged or barred. Ex parte Moore, 2 Gl. & J. 166.} CHAP. XV.] -DISSOLUTION RIGHTS OF CREDITORS. 6137 proof, the joint creditors might he injured by such sol- vent partner stopping, in transUu, the surplus of the separate estate, which would otherwise be carried over to the joint estate ; or the separate creditors might be injured by their fimds being stopped prospectively, upon the faith of such partner being afterAvards able to pay the joint debts.' 1 Coll. on P. B. 4, c. 2, § 9, p. 655-658, 2d cd. ; Id. p. 660, 661, 662, 665; {Lind. on P. 1008. See Ex parte Maude, Law Rep. 2 Ch. 550; Hill V. Beach, 1 Beasl. 31.} In Ex parte Reeve, 9 Ves. 588, 589, Lord Eldon said : " All these cases were very fully discussed by Lord Thurlow, in the case of Lodge and Fendal. Dr. Fendal was a creditor of the partner- ship of himself and Lodge, for large sums advanced. They became bank- rupts immediately after the formation of the partnership ; and those advances formed the joint estate to be divided. There was a struggle by Fendal to be admitted a creditor for the amount of his advances, as against the part- nership. Lord Thurlow, after full consideration, was of opinion that all the authorities establish this : that those who, being in partnership, are themselves, or some of them, debtors to the creditors of every class, cannot come in competition with the creditors. After their demands are liquidated finally, the partners may be creditors upon each other; but not before. The course in bankruptcy has been, to stop the proof at the date of the commission, which is founded upon this ; that the debt to be proved is the debt due before the commission, taking the commission to follow rapidly upon the act of bankruptcy ; which, however, is frequently not the case. It is true, now, a great deal of debt accrued after the bankruptcy is paid under it ; for instance, all interest accrued, though after the date of the commission, if the state of the effects allows it, upon a sort of equitable principle, the interest being considered as a kind of adjunct or shadow of the principal debt, which was due before the bankruptcy. It is now, there- fore, clearly settled, that where there is a partnership and separate debts also, the partnership shall not be admitted a creditor upon any individual, or any individual upon the partnership, until the creditors of the individual and the creditors of the partnership are satisfied to the extent of 20s, in the pound, out of the respective estates; also, that where the separate creditors are paid 20s. in the pound, and there is a surplus, that surplus shall not go immediately to pay interest to the separate creditors ; but shall go to make the joint creditors equal with them as to the principal. No decision, how- ever, has gone this length ; that, if both the joint and the separate creditors are paid to the extent of 20*. in the pound, upon the payment to that amount to the creditors of each class, a partner shall not be admitted a creditor upon the partnership, or upon the individual. But I cannot dis- tinguish the cases ; for if the principle is, that neither the partnership nor the individual debtor shall claim in competition with the creditors, and if 638 '■ PARTNERSHIP. , [cHAP. XV. § J:(>7. Subject, however, to these exceptions in favor of the joint creditors and separate creditors, and also to that respecting reputed ownership, which has been pre- viously mentioned, the solvent partners retain their full right, power, and authority, over the partnership prop- the creditors are entitled to any interest, the interest is as much a debt as the capital ; and that principle will prevent either the partnership or the individual debtor ranking with the other creditors, until all their demand is satisfied ; which includes both the principal and interest of their debts." See also Ex jyarte Moore, 2 Glyn & J. 166. Mr. Coliyer on P. (p. 658, 659, 3d ed.) has on this subject added : " But the general rule in question, like all other general rules, is qualified in cases of necessity. Therefore, when the solvent partner, without his own default, is unable to procure a discharge from every joint creditor, — as, for instance, where one of the joint creditors is a lunatic, — in such case, it seems he will be permitted to prove against the separate estate, upon giving security for the debt which cannot be discharged, and paying the residue of the joint debts. Ex parte Yonge, 3 Ves. & B. 31. There are some cases, also, where, notwithstand- ing the retiring partner has not paid all the demands of the partnership, he has been permitted to prove against the joint estate, on the ground of the joint creditors' having assented to the arrangements made between the retiring and remaining partners, or being barred by length of time from objecting to the retiring partner's proof. Thus, where a partnership had been dissolved upon the terms of the retiring partner taking a security from the remaining partner for the balance due to him, and the remaining part- ner was treated by the joint creditors as their sole debtor, until he after- wards became bankrupt ; it was held that the retiring partner might prove his debt against the separate estate of the bankrupt, although some of the partnership debts were unpaid. Ex parte Grazebrook, 2 Deac. & Ch. 186. In this case it may be remarked, that the retiring partner had been a dor- mant partner. So, where upon the death of one of three partners, his executors carried on the trade with the surviving partners for a twelve- month, and then dissolved the partnership, upon which occasion the two continuing partners gave the executors a bond, to secure the balance due to them, and more than six years afterwards the two became bankrupt ; it was held that the executors had a right to prove the amount of the bond against the joint estate of the two continuing partners. Ex parte Hall, 3 Deac. 125. Again, where a person on the eve of bankruptcy induces another, by fraudulent means, to become his partner, and the latter advances capital to the concern, a case might be stated where the latter would be allowed to prove the amount of the capital so advanced, pari passu with the separate creditors of the bankrupt. However, such proof will not be al- lowed where the person defrauded has held himself out to the world as a partner, though only for a short time." CHAP. XV.] dissolution; RIGHTS OF CREDIIORS. 639 erty after bankruptcy, in the same manner and to the same extent as if no bankruptcy of a particuLar partner had occurred.^ Their lien, also, remains in full force, not only to have the partnership funds applied to the discharge of the partnership debts and liabilities ; but also to the discharge of all the debts due by the part- nership to them, or any of them, as well as for their own distributive shares in the surplus. Hence they have a right to priority of payment of the debts due by the bankrupt to the partnership, in preference to his sepa- rate creditors ; and if the joint funds should prove insuf- ficient to discharge the debt, they have a right to insist upon coming upon the separate estate of the bankrupt therefor, pari ixissii, with the separate creditors.^ In such a case the debt is deemed, in equity, a separate debt of the bankrupt, secured also by a lien on the joint fund.^ § 408. In cases of this sort there is no difference, whether the partnership is general or is only for a sin- gle adventure ; or, indeed, whether the parties are strictly to be treated as partners or as part-owners, if in the par- ticular adventure there is, either by contract, or by usage, or by custom, a lien of the co-adventurers upon the property engaged therein, and the produce thereof, for the proportion of the outfit and expenses incurred by one or more of them, for the common benefit.^ In ' Ante, § 341 ; Gow on P. c. 5, § 3, p. 300-305, 3d ed. ; Id. p. 321- 323; Wats, on P. c. 5, p. 302, 2d ed. ; Id. p. 314-321; Coll. on P. B. 4, c. 2, § 9, p. 655, 2d ed. ; Id. p. 661, 662. * Gow on P. c. 5, § 3, p. 321-323, 3d ed. ; Ex parte Terrell, Buck, 345 ; Coll. on P. B. 4, c. 2, § 9, p. 655, 656, 2d ed. ; Id. p. 661, 662 ; Fereday v. Wightwick, Taml. 250; Ex parte lleeve, 9 Ves. 588; Ex parte Drake cited 1 Atk. 225 ; Taylor v. Fields, 4 Ves. 396 ; s. c. 15 Ves. 559, n. ; Holderness v. Shackels, 8 B. & C. 612. {See Hill v. Beach, 1 Beasl. 31. } ' Many cases illustrative of this doctrine of the text will be found stated in Gow on P. c. 5, § 3, p. 321-327, 3d ed. * Gow on P. c. 5, § 3, p. 303, 304, 3d ed. 640 PARTNERSHIP. [cHAP. XV. every such case, the lien of the other co-adventurers thereon will be deemed to include all such outfits and expenses, as well as their own shares in the adventure.^ Hence, where the part-owners of a ship were engaged in the whale fishery, and the usual mode of managing the cargo in such cases was, that, on the arrival of the vessel at the homeward port, the whalebone was taken into the possession of the ship's husband, and sold by him, and the proceeds were applied towards the discharge of the expenses of the ship ; and the blubber was deposited in a warehouse belonging to one of the owners, but rented by all the owners of the ship ; and the oil produced from it was put into casks, each owner's share being weighed out, and placed separately in the warehouse, in casks, marked with his initials ; and, after the division, the practice was for the warehouseman to deliver to the order of each part-owner his share of the oil, unless notice was given by the ship's husband that the own- er's share of the disbursements had not been paid ; and, in that case, the warehouseman was accustomed to detain the oil until the demand had been satisfied ; it was held that the other co-adventurers had a lien, under such circumstances, upon all the undelivered oil in the possession of the warehouseman, for the unpaid disbursements ; that the assignees of the owner, who had become bankrupt, took the same oil subject to that lien, and that the lien was not divested by the separa- tion of the share of the bankrupt, and placing it in the casks marked with his name.~ ' Ibid. ^ Holderness v. Shackels, 8 B. & C. 612. Mr. Justice Bayloy, in deliv- ering his opinion in this case, fully expounded the general doctrine. " Where there is," said he, " a joint adventure, which produces certain goods, the proper course is, first to deduct all the expenses which have been incurred in order to obtain those goods, and then to divide the residue among the shareholders, in proportion to the sliares to which each is entitled respect- CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 641 § 409. These seem to be the most material consider- ations, respecting the effects and consequences of the ively. In this case the joint adventurers obtained a quantity of oil in bulk. No partner, or representative of a partner, has a right to his aliquot part of that oil, until he has paid his share of the expense of procuring it. That will be the case, whether the shareholder has become a bankrupt or con- tinues solvent. If he continues solvent, he may pay his share of the outfit and of the expense. If he does not pay it in money, the other part-owners have a right to see that an aliquot part of what has been gained in the ad- venture be retained, so as to pay that share of the outfit, which he ought to pay. In this case Foxton became bankrupt, and having become bankrupt, if he could have paid in money his share of the outfit there would have been twenty-nine tons of oil coming to him. He could not pay ; and, therefore, as it seems to me the justice and the law of the case is, that his shai-e of the expense should be paid out of the twenty-nine tons, and that, until he has paid his sliai'e of the expense, he cannot claim that quantity. It has been said that there has, in this case, been a delivery, and that in consequence of that delivery, the rights of Foxton and of his assignees ai-e different from what they otherwise would have been. But it seems to me that there has not been a perfect delivery.. It would have been perfect if the other part- owners had been dispossessed of the oil. That has not been done. The property still remained in the warehouse, and was the joint property of all. A part only has been removed. The removal of that part does not vary the right as to the residue. It is clear that the assignees cannot recover the twenty-nine tons before they pay Foxton's share of the expense. The other part-owners might say, there are twenty-nine tons allotted to you ; you may take possession of all to which you will be entitled, but you nnist first pay your share of the expense ; nine tons will be sufficient for that jjurpose ; you may, therefore, take away twenty tons. The right of the other part- owners is not varied by their having allowed the bankrupt to take away twenty tons. That being so, the plaintilfs are not entitled to recover. It has been urged that there has, in this case, been a change of possession, by reason of Locking's having debited the bankrupt in account, with a portion of the rent. But that portion of the rent must have been paid by the bank- rupt before he took away the oil, in specie ; or it might have been deducted out of his share of the produce, if he compelled the other shareholders to sell, in order to pay his shai-e of the expense. The usage being for the part-owners to detain the oil, until each part-owner's share of the expense has been paid, it seems to me that the foct of debiting the party with ware- house rent can have no effect. I think, therefore, that the plaintiifs have not made out their right to the residue of the oil." The part-owners of the ship would be deemed partners in this adventure (although not in the ship itself), as sharing the net profits of the adventure, upon the gi-ounds sug- gested in the preceding sections as to joint adventurers, and sharing the net profits. Ante, § 27, 34, oD, 40, 55. See also Mr. Bai'on Parke's Remarks 41 642 PARTNERSHIP. [CHAP. XV. dissolution of a partnership by bankruptcy, which are important to be brought before the reader, in order to explain and illustrate the oreneral distinction between the case of a dissolution by bankruptcy, and other cases of dissolution. A more minute inquiry into the various details of the system, would occupy a large space, alto- gether disproportionate to its relative usefulness in an elementary work of this nature, and serve to perplex and- obscure what might, otherwise, be justly applicable to the systems of bankruptcy and insolvency in other countries, which differ in some particulars from that of England. And, here, these Commentaries, so far as they respect the subject of Partnership, might be concluded ; for it is not within the scope thereof to examine at large the nature and extent of the remedies by or against partners, either at the common law, or in equity, whether they respect the government, or mere private individuals. Those topics properly belong to a Treatise of a very different character, where the principles of pleading, in its most general sense, are to be brought under review, and expounded with all their abstruse and intricate learning. § 410. The subject, however, of Part-ownership in goods and chattels, as contradistinguished from Part- nership, has come incidentally under discussion in several parts of the present Commentaries ; ^ and it has been commonly thought, from its close analogy to partnership, that a brief exposition of the general principles applicable thereto is peculiarly appropriate in such a connection. Pothier has, accordingly, thought it worthy to be separately discussed in an Appendix to his Treatise on Partnership. He considers every in Pearson v. Skelton, Tyrw. & G. 848; s. C, 1 M. & W. 504; [Ilawes v. Tillingliast, 1 Gray, 289.] ' Ante, § 89, 90. CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 643 community of property, or, as we should call it, every tenancy in common of property, not a partnership, or affected by any repugnant convention, to be a kind of quasi-conti'Rct, or g-i^^si-partnership ; whether it be a uni- versal community or a community of particular things. And he illustrates the subject by examples, which, al- though perfectly accurate in the foreign and Roman law, Avhere there may be a title by descent to every species of property, real as well as personal, are not so striking in our law ; to wit, by cases of a community of property {hiens) under a succession or descent to many heirs, and of legacies bequeathed jointly to many legatees.^ He states the distinction between such a community of interest in property and partnership, as principally consisting in these circumstances, that partnership is founded neces- sarily in the voluntary consent of the parties, and takes place by and under one and the same title ; whereas, in other cases of mere community of interest, these ingre- dients are not essential. Certainly, they are not. But they may (as Pothier admits), nevertheless co-exist in the latter cases ; ^ and, therefore, they do not seem to con- stitute, philosophically or logically, an appropriate dis- tinction. Thus, for example, two persons may agree to purchase a ship together in equal moieties, and to hold the same as tenants in common ; and they may take the ship at the same time by the same title deed.^ The true distinction seems to be, that there is no community of interest in the entirety of the property in the latter cases ; whereas, in partnership, there always is such a community of interest, founded upon the positive con- sent of the parties."* § 411. Following, therefore, the example of Pothier, ' Poth. de Soc. n. 2, 3 \ Id. App. n. 181-183; ante, § 3, 4. ^ * Poth. de Soc. n. 183. ^ ^^te, § 3, 4. * Ante, § 89-91 • Gow on P. c. 2, § 2, p. 32, 3d ed. 644 PARTNERSHIP. [cHAP. XV. as well as that of some of the most distinguished ele- mentary writers on Partnership at the common law, who have in the like manner discussed in supplementary tracts the leading outlines of this branch of the law,^ the present work will be concluded with a chapter devoted to the same purpose. 1 Coll. on P. B. 5, c. 4, p. 793, 2d ed. ; Wats, on P. c. 4, p. 227, 2d ed. ; 2 Bell, Comm. B. 7, c. 4, p. 655, &c., oth ed. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 645 CHAPTER XVI. PART-OWNERS RIGHTS, POWERS, AND LIABILITIES OF. §412. Part-ownership in real estate. 413. Personal property may be held in joint tenancy, or tenancy in common. 414. Rights of tenants in common of chattels. 415. Ships. 416. Acquirement and transfer of property in ships. 417. Ship-owners are tenants in common. 418. Employment of ships. Ship's husband. 419. Contribution to expenses incurred by common consent. 420. French law. 421. No right of contribution if no consent. 422. Alleged reasons of this rule. 423. Its doubtful propriety. 424. Contrary doctrine of many maritime jurists and codes. 425. Doctrine of the Consolato del Mare. 426. Of Pothier. 427. No right of employment against the consent of any owner. 428. Unless on living indemnity. 429. Roman and French law. 430. Law of other foreign nations. 431. Doubtful advantage of the English law. 432. Appointment of a master. 433. 434. Rights of majority and minority in the French law. 435. Equal division of ojiinion among the owners. 436. Foreign law. 437. Sale in case of disagreement as to employment. 438. The English Admiralty cannot decree a sale in such case. 439. Doctrine in America. 440. Liability for expenses incurred by common consent. 441. Part-owners have a lieu ou cargo shipped on joint account. 442-444. Lien on a ship lor advances. 445. Right to displace master. 446. Part-owner cannot insure, borrow money, or pledge. 447. Dissolution of connection between part-owners. 448. Molloy's opinion on constructive ownership. 449. Remedies of part-owners against each other. 450. 451. Roman law. 646 PARTNERSHIP. [CHAP. XVI. 452. FrencH law. 453. Part-ownei-s not bound by each other's declarations. 454. Joinder by part-owners in suits against third persons. 455. Rights of third persons against part-owners in cases of contract. 456. French and Dutch law. 457. Roman law. 458. In cases of tort. 459-461. Roman law. 462. Foreign law. 463. Closing remarks. } § 412. We have already seen, that persons may be- come part-owners (or, as Pothier clenommates them, quasi partners, qicasi-associes),^ of movable or personal property, as well as of real estate, without being part- ners." As to part-ownership in real estate, not held as partnership property or assets, it does not properly fall within the scope of the present Commentaries ; but it belongs rather to a Treatise, which is to unfold the general rights incident and appertaining to real prop- erty, in which the rights of persons holding real estate in joint-tenancy, in coparcenary, and in tenancy in com- mon, are discussed and distinguished. A very succinct, but at the same time an accurate account of that sub- ject, will be found in the elegant Commentaries of Sir William Blackstone.^ W^hat is proposed to be consid- ered in the present chapter, will simply relate to part- ownership in movable or personal property. § 413. The general distinctions between joint-ten- ancy, tenancy in common, and partnership, have already been sufficiently pointed out in the preceding pages ; ^ and, therefore, need not again be here adverted to. Movable or personal property may be held in joint- tenancy, which, of course, gives the jics accrescendi, or right of survivorship, of the whole property to the sur- 1 Poth. de Soc. App. n. 184-186. ^ ^^^.^^ g 3 . jj g 89-94. 3 2 Bl. Comm. 178-194. ■* Ante, § 89-91, 410. t CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 647 vivor, unless the joint- tenancy is severed in the Hfetime of the parties ; or it may be held in tenancy in com- mon, which gives to each tenant an undivided, but, at the same time, a distinct and independent interest therein, which does not pass to the survivor, but belongs to the personal representatives of the party upon his decease.^ But there can, strictly speaking, be no estate in coparcenary of movable or personal property at the common law ; because the latter title arises only by descent ; and, at the common law, there can be no descent of such property.^ § 414. In general, the rights, duties, obligations, authorities, and liabilities of part-owners are the same, in relation to every kind of personal property ; and therefore, whatever is affirmed in relation to one, will apply to all others, unless in cases, where, from the peculiar nature and uses of a particular species of such property, or the peculiar customs and usages apper- taining thereto, a different rule arises, by implication of law, to govern or affect it. Thus, for example, if two persons are tenants in common of a horse, or other per- sonal chattel, each has an equal right to the possession and use thereof; ^ and each can sell only his own un- divided share thereof"* If one tenant in common takes exclusive possession of a personal chattel, refusing to the other any possession or use thereof, the latter has no remedy whatsoever by action ; but he may take the chattel, if he can find it, from him who hath done him the wrong.^ In relation to expenses, it may be stated that neither of such owners has a right to incur any expense thereon, which shall bind the other to ' 2 Bl. Coram. 399 ; ante, § 89. * 2 Bl. Comm. 399. 3 Co. Litt. 200, a; 3 Kent, 153. * Coll. on P. B. 5, e. 4, § 4, p. 811, 2d ed. ; Abbott on Shipp. B. 1, c. 1, § 2, p. 3, 5th ed.; 3 Kent, 153, 154. s Co. Litt. 199 b, 200 a. 648 PARTNERSHIP. [CHAP. XYI. contribution therefor, ^Yithout some proof of an express or implied authority therefor, even when the expenses are absohitely indispensable for the due preservation thereof. This is unquestionably true at the common law, in the case of inanimate or dead chattels. But, probably, in the case of a tenancy in common of a horse, or other animal, in the absence of all controlling circumstances, a presumption would be sustained, that the necessary expenses of the keep thereof were to be borne bv the mutual contributions of both, from the very nature of the chattel, and the mutual use and benefit intended to be derived therefrom by the tenants in common. How^ever, if a positive or implied prohibi- tion were shown, the same rule would prevail as in the ordinary cases of dead chattels. § 415. But the most useful as well as the most various illustrations of this subject, may be derived from a class of chattels constantly found engaged in com- merce and navigation, that is to say, ships ; the fitting out and the employment of which have given rise to many important questions ; and, therefore, the doc- trines applicable to ships seem especially to require a full exposition in this place. In our subsequent in- quiries, the main topics discussed will be the rights, powers, duties, obligations, and liabilities belonging to part-owners of ships, as well inter sese, as in respect to third persons. § 416. Ships are strictly and technically denominated chattels, or personal property, at the common law, al- though they are distinguishable from most other kinds of personal property by the peculiar solemnities which belong to the mode in which the title thereto is ordina- rily acquired, transferred, and made susceptible of pledge, lien, or mortgage. Ordinarily, it is well known that the title to personal goods and chattels will pass by CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 6-i9 mere delivery and change of possession. But it is not generally so in respect to the title to ships. In most, if not in all, commercial countries,, the title thereto is now usually acquired, and transferred, and evidenced by written documents ; ^ and statute enactments in those ' Whether a delivery of a ship by parol, without any bill of sale or other written instrument of transfer, be sufficient to pass a good title to the ship, has been thought not quite settled in our law. It is true that a ship is a mere personal chattel, and personal chattels ordinarily may pass by delivery only, without any written evidence of contract or title. But the text shows that, from very early times, a different course has been pursued in respect to ships; and if the universal maritime usage has been to evidence a trans- fer of ships by written documents, that usage would seem, prima facie, to form a part of our municipal law, — the law merchant being a part of the common law. There is a dictum in the case of Lamb v. Durant, 12 Mass. 54, in which it is declared that ships may pass by delivery only, as well as any other chattel, so far as respects the property of the vessel. And a like expression fell from the Court in Taggard v. Loring, 16 ^lass. 336. But in neither of these cases was the point directly before the Court. On the other hand, there is no case in the English Jurisjjrudence in wliich it has been decided that a transfer by parol is sufficient to pass the title. The point was made in Rolleston v. Hibbert, 3 T. R. 406, by counsel; and Lord Kenyon then said : " It was first contended, that it was not necessary that the property in a ship should pass by a written instrument. On that point I give no opinion because it is not necessary." This language shows that no such point was, at that time, deemed settled in the common law ; otherwise it would at once have been recognized. Lord Stowell, on the other hand, in the case of The Sisters, 5 Rob. 155, manifestly shows his own opinion to be, that a bill of sale is necessary. His words are too re- markable to be omitted. "It has been contended in argument (says he), that the effect of a bill of sale alone would not be material, because this was a foreign ship, in respect to which it might not be requisite that it should pass by a bill of sale. It is said that the agreements to be found in these letters (i. e. in that case), and the actual delivery under it, would be suf- ficient to establish the equitable title ; and a reference has been made on this subject to some opinions at common law, which are said to have been given in favor of such a title. The opinions of gentlemen of that bar must undoubtedly be entitled to entire respect, on a question of munici2)al law. But this is a question of a more general nature, arising out of a system of more general law; out of the universal maritime law, which constitutes a part of the professional learning of this Court and its practisers. Accord- ing to. the ideas which I have always entertained on this question, a bill of sale is the proper title to which the maritime Courts of all countries would look. It is the universal instrument of transfers of ships in the usage of all 650 PARTNERSHIP. [CHAP. XVI. countries create many regulations, respecting the mode of acquiring, and transferring, and evidencing that title, as well for municipal purposes and policy, as for the due ascertainment and proof of the national character of the ship, and its right to protection and privileges upon the ocean. ^ § 417. Property in a ship may be acquired by two or maritime countries; and, in no degree, a peculiar title deed or conveyance known only to the law of England. It is what the maritime law expects; what the Court of Admiralty would, in its ordinary practice, require ; and what the legislature of this country has now made absolutely necessary, with regard to British subjects, by the regulations of the statute law." In Ex parte Halkett, 19 Ves. 474, Lord Chancellor Eldon said: " It is laid down that the ship may be bound by bill of sale, but it cannot be by parol." Mr. Jacobsen, in his Sea-Laws (B, 1, c. 2, p. 17, 21), manifestly considers a bill of sale indispensable, by maritime usage, to jiass the title. In the case of Ohl V. Eagle Ins. Co. 4 Mason, 172 ; s. c. Id. 390, the question underwent considerable discussion. See also Atkinson v. Maling, 2 T. R. 462, 466 ; Sutton V. Buck, 2 Taunt. 302, and particularly the argument of the defend- ant's counsel, 305; Abbott on Shipp. Pt. 1, c. 1, § 5, p. 12; Zouch, Adm. Jur. V. 103. {See 1 Pars. Mar. Law, 47; and also Metcalf v. Taylor, 86 Me. 28; Chadbourne v. Duncan, Id. 89; and McMahon v. Davidson, 12 Minn. 357 ; in all which a bill of sale was considered unnecessary.} 1 Abbott on Shipp. Pt. 1, c. 1, § 1, p. 1, 5th ed. ; Id. c. 2, § 1, p. 23; 1 Valin, Comm. Liv. 1, tit. 14, art. 1, p. 340, 341 ; Id. Liv. 2, tit. 10, art. 1, p. 601, 602. —The present British Ship Registry Act of 3 & 4 Wm. 4, c. 55, will be found at large in the Appendix to Mr. Sergeant Shee's very valuable edition of Lord Tenterden's Treatise on Shipping ; and the nature and objects and construction of the various clauses of the old Act will be found in Lord Tenterden's Text, Pt. 1, c. 2, p. 47-83, London ed. 1840. The American Ship Registry Acts will be found in the Appendix to the American edition of Abbott on Shipping (1829); and the nature, objects, and construction of the various clauses thereof, in the notes to chajiter sec- ond of the text to that edition, from p. 23 to 68. See also 3 Kent, 139-150. One of the most prominent differences between the British and the American system is, or at least was, that, by the former, no title could be ac({uired or transferred except in the manner prescribed by the Registry Act; but, in the latter, the transfer may be good and valid in law, although the requisites of the Registry Act are not complied with. But then, by such non-compliance, the ship will lose her American character and privileges as a registered ship. It is not within the design of these Commentaries to go into any details on this subject. They will properly find a place in a Avork on the Law of Ship- ping and Navigation. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 651 more persons, either by building it at their own ex- pense, or by the purchase of a part thereof of the sole owner, or by a joint purchase of the whole of another person.^ But, whether acquired by the joint building, or by a part purchase, or by a joint purchase, the par- ties, in the absence of all positive stipulations to the contrary, become entitled thereto, as tenants in common, and not as joint- tenants.^ In this respect, it will make no difference, whether the title is acquired at one and the same time, by and under one and the same instru- ment, or whether it is acquired at different times, and under different instruments,^ this is a natural, if not a necessary result of the doctrine, that the jus accre- scencU has no existence among merchants, or in the busi- ness of commerce and navigation. A different doctrine, which should introduce into the maritime law the nar- row doctrine of the common law, as to joint-tenancy and the right of survivorship, would be fatal to the in- terests of commerce, and overthrow the plain dictates of public policy. The whole course of commercial usage and opinion has settled the doctrine the other way ; and accordingly, upon the death of one of the part- owners, his executors and administrators become ten- ants in common of the ship, with the survivors.^ Of ' Abbott on Shipp. Pt. 1, c. 1, § 1, p. 1, 5th ed. ; Jacobsen's Sea-Laws, by Frick, c. 3, p. 36, 37, ed. 1818. 2 Abbott on Shipp. Pt. 1, c. 3, § 1, p. 68, oth ed. ; Id. § 9, p. 79, oth Am. ed. note (1) ; Abbott on Shipp. by Shee, Pt. 1, c. 3, § 5, p. 96, 6th ed. 18i0 ; [Macy v. De AVolf, 3 Wood. & M. 193.] » Coll. on P. B. 5, 0. -4, p. 793, 2d ed. ; Doddington v. Hallet, 1 Ves. Sr. 497 ; 3 Kent, 151 ; Nicoll v. Mumford, 4 Johns. Ch. 522 ; Wats, on P. c. 1, p. 54; Id. c. 2, p. 67; Id. 91; Ex parte Young, 2 Ves. & B. 242, 243; Jacobsen's Sea-Laws, by Frick, c. 3, p. 36, 37, ed. 1818. * Abbott on Shipp. Pt. 1, c. 1, § 1, p. 1 ; Id. c. 3, § 1 ; Nicoll i\ Mumford, 4 Johns. Ch. 522 ; s. c. 20 Johns. 611 ; Dunham v. Jarvis, 8 Barb. 88, 94. — In the 5th London edition of Abbott on Shipping, Pt. 1, c. 3, § 1, the fol- lowing note (a) occurs : " This is the most usual practice. If the interests are not severed and distinguished in this way, but the entire ship is granted 652 PARTNERSHIP. [CHAP. XVI. course, the general rule of law, as to the rights of ten- ants in common, prevails in regard to ships, that each part-owner can sell only his own share thereof;^ where- as, in cases of partnership (although not in cases of joint-tenancy), any one partner can sell the entirety of the ship.^ to a number of persons generally, it is apprehended they become joint-tenants at law, and that the rule Jus accrescendi inter mercatores locum non habet, which is applicable to a ship, is to be enforced only in a Court of Equity." To which the American Editor (1829) has subjoined the following comment : " This is not a note of the original author, but of his English editor. The point stated in it seems new, and is apparently contrary to what is laid down in Watson on Partnership, where he seems to consider the rule, as to the jus accrescendi, not applicable either to partnerships generally, or to owner- ship of vessels in shares, but as an exception created by the law merchant, and necessary for the advancement of commerce. In chajiter 1, p. 54, he says : ' If several either build or purchase a ship, they are part-owners or partners as to this concern.' And again, in chapter 2, p. 67 : ' There is no difference in the interest of partners in goods to be disposed of in the course of trade, and in a chattel, the keeping and employment of which constitute the object of the partnership. The part-owners of a ship are tenants in common with each other of their respective interests.' He afterwards says, in chapter 2, p. 91, that a part-owner of a ship can only dispose of his own share, and not of that of his co-owners, even if it be partnership property. The case of The King v. Collector of the Customs, 2 M. & S. 223, proceeds on the principle, that the same rule, as to non-survivorship, exists as to property in ships, as in common partnership pi'operty. No allusion was there made as to the necessity of a suit in equity by the representative of the deceased in any case ; and the particular shares of each party in the ship ai'e not stated or referred to as material facts. In America it has not been unusual to omit any specification of the shares of each part-owner, both in the register and bill of sale ; and it has never been yet decided, that such an omission made the parties joint-tenants Avith benefit of survivorship. Mr. Collyer entertains the like opinion with the American editor. Coll. on P. B. 5, c. 4, p. 793, 2d ed. It may be added, that this is now the general understanding of the doctrine in America. 3 Kent, 40; Id. 151. In Ohl V. Eagle Ins. Co., 4 Mason, 172, 390, the Court thought that if no other distinct shares appeared in the register or bill of sale, the jiarties must, in the absence of all other proof, be presumed to hold in equal moieties. See also. In the matter of Blanshard, 2 B. & C. 244; Ex parte Young, 2 Yes. & B. 242 ; Nicoll v. Mumford, 4 Johns. Ch. 622 ; s. c. 20 Johns. 611, and 615, note." * Hopkins v. Forsyth, 14 Penn. St. 34. Case of a steamboat. 2 Abbott on Shipp. Pt. 1, c. 1, § 2, p. 3, 5th ed. ; ante, § 89-91 ; 2 Bell, CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 653 § 418. It is. obvious, that a personal chattel, vested in several distinct proprietors, cannot be advantageously possessed or enjoyed, unless by common consent and agreement among them all.^ For. as each has an equal title to the possession and use thereof, no one can oust the others of that possession or use ; and, when once a struggle or controversy exists among them for the ac- complishment of purposes adverse to each other, the mischief must be immediate to the interest of some, and perhaps ultimately ruinous to that of all. This remark applies with pecuUar force to ships, which (as has been quaintly, but truly said) were " originally invented for use and profit, not for pleasure or delight ; to plough the sea, not to lie by the walls." ^ Hence, while the Comm. B. 7, c. 4, p. 655, 5th ed. ; Coll. on P. B. 5, c. 4, § 4, p. 811 , 2d ed. ; Jacobseii's Sea-Laws, by Frick, c. 3, p. 36, 37, ed. 1818. — Mr. Chan- cellor Kent (3 Kent, 54), has well stated the distinction between part- ownership in ships and partnership in ships. He says : "The cases recognize the clear and settled distinction between part-owners and partners. Part- ownership is but a tenancy in common, and a person who has only a part interest in a ship, is generally a part-owner, and not a joint-tenant or partner. As part-owner he has only a disposing power over his own interest in the ship, and he can convey no greater title. But there may be a partnership, as well as a co-tenancy, in a vessel ; and, in that case, one part-owner, in the character of partner, may sell the whole vessel ; and he has such an implied authority over the whole partnership effects, as we have already seen. The vendee, in a case free from fraud, will have an inde- feasible title to the whole ship. When a person is to be considered as a part-owner, or as a partner, in a ship, depends upon circumstances. The former is the general relation between ship-owners, and the latter the exception, and requires to be especially shown. But as the law presumes, that the common possessors of a valuable chattel will and desire whatever is necessary to the preservation and profitable employment of the common property, part-owners, on the spot, have an implied authority from the absent part-owners, to order for the common concern whatever is necessary for the preservation and proper employment of the ship. They are analo- gous to partners, and liable as such for necessary repairs and stores ordered by one of themselves ; and this is the principle and limit of the liability of part-owners." ' Abbott on Shipp. Pt. 1, c. 3, § 2, p. 68, 5th ed. 2 Molloy, B. 2, c. 1, § 2; Godolph. Adm. Jur. Intr. p. 13 ; The Apollo, 1 Hagg. Adm. 306, 312 ; 3 Kent, 151, 152. 654 PARTNERSHIP. [chap. XVI. possession, use, and employment of other personal chat- tels have been generally left to the free and unrestricted discretion of the proprietors thereof, and their own sense of the necessity of mutual co-operation and forbearance for their mutual benefit, it has been the policy of mari- time nations, from a very early period, to provide reg- ulations respecting the joint ownership of ships in order to prevent the obstinacy of one or more proprietors from interfering with the just rights and interests of the rest, as well as to promote the general advancement of com- merce and navigation, and to add to the resources of national wealth and national power. Hence in cases of ships, almost all maritime nations, in modern times, have provided regulations, by which some of the part-owners of the ship shall be at liberty, notwithstanding the dis- sent of others, to employ it in trade and navigation, for their own profit, and at their own expense and risk. Of course, if all are agreed, and all consent, the employment and the expenses and the profits are to be on the joint account and for the joint benefit. . In such cases, it is not unusual for all the owners, by common consent, or a fixed agreement among themselves, to appoint an agent (who may be either a part-owner, or a stranger) to superintend the management and concerns of the ship, who (as has been justly said), by a very intelligible figure of speech, is called the ship's husband, and who directs the repairs, appoints the ofificers and mariners, and generally conducts all the afi"airs and arrangements for the due employment of the ship in commerce and navigation.^ ' Abbott on Shipp. Pt. 1, c. 3, § 2, p. 68, 5th ed. ; Card v. Hope, 2 B. & C. GGl ; Coll. on P. B. 6, c. 4, § 4, p. 810, 2d ed. ; 3 Kent, 151, 156 ; 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 2, p. 503, 504, 5th ed. ; Jacobsen's Sea- Laws, by Frick, c. 3, p. 38, 39, ed. 1818. — Mr. CoUyer on this subject says: " In order to administer the affairs of the ship with unanimity, it is usual to appoint a ship's husband. He may be either a part-owner or a CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 655 § 419. It follows, of course, that wherever the ship is reasonably repaired, or necessary expenses are in- curred, by the consent of all the owners, for the common benefit, each part-owner is bound to contribute his share thereof; and, if the whole has been paid by one part- owner, he has a right at law to recover their several contributory shares from each of the others.^ Now, in this respect, the case differs from one of a mere partner- ship in a ship ; for in the latter case (as we have seen),^ no partner has any right of contribution against the others for any sums paid, or expenses incurred on the joint account, until all the partnership concerns are ad- justed ; and, then, only in equity.^ There is, on the other hand, in some respects, a coincidence between the cases ; for in each of them all the parties are at the common law jointly liable, in solido, for the whole debt stranger, and may be appointed by writing or parol. His duties are to see to the proper outfit of the vessel ; to have a proper master, mate, and crew ; to see to the furnishing of provisions and stores ; to see to the regularity of all the clearances from the custom-house ; to settle the contracts ; to enter Into proper charter-parties, or engage the vessel for general freight ; to settle for freight and adjust averages with the merchant ; to preserve proper certificates and documents In case of future disputes with insurers or freighters, and to keep regular books of the ship. But without special powers he cannot borrow money generally for the use of the ship, though he may settle accounts and grant bills for them, which will form debts against the concern. Nor can he, without special authoi'Ity, insure the ship." See also 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 2, p. 503, 504, 5th ed. ; Sims v. Brittain, 4 B. & Ad. 375 ; 3 Kent, 157 ; {post, § 443, 446 ; 1 Purs. Mar. Law, 97 ; Preston v. Tainplin, 2 H. & N. 363, s. c. affirmed on appeal, Id. 684. On the appointment and com- pensation of ship's husband, see Benson v. Heathorn, 1 You. & C, C. C. 326 ; Smith v. Lay, 3 Kay & J. 105 ; Ritchie v. Couper, 28 Beav. 344 ; Mil- ler V. Mackay, 31 Beav. 77 ; Same v. Same, 34 Beav. 295; Brenan v. Pres- ton, 10 Hare, 331, s. c. 2 De G. M. & G. 813. Semble, that if one of the part-owners acts as ship's husband, he Is not entitled. In the absence of ex- press or Implied agreement, to any commission. Miller v. Mackay, 31 Beav. 77.} » Abbott on Shipp. Pt. 1, c. 3, § 13, 15, p. 82, 84, 5th ed. ; {post, §440-444; See Chappell v. Bray, 30 Law J. n. s. Exch. 24; Starbuck V. Shaw, 10 Gray, 492.} 2 Ante, § 219, 220, 260. ' Ante, § 219-221, 260. Q56 PARTNERSHIP. [CHAP. XVI. to third persons, who have credited them for the repairs, or other expenditures, for the common benefit.^ § 420. The French law agrees with ours, so far as it makes all the part-owners liable in the like manner as partners, to contribute their proportion of all the ne- cessary debts and reasonable expenses, incurred for the common benefit. But, if one part-owner only has con- tracted with the creditor, the latter can have no re- course for the debt, except against the particular part- ner with whom he has contracted. However, upon payment of it, that party has his remedy over against the others for their contributory shares." On the con- trary, in cases of mere commercial partnerships, the French law makes each partner liable, iii soVido, to the creditor for the whole debt.^ If, indeed, all the part- owners have jointly contracted with the creditor, each will be liable to him in severalty for his own share of the joint debt ; "* and for that only, unless they have all agreed to be bound in sol'ido.^ The law of Holland is, in this respect, coincident with the French law, making the several part-owners in all cases chargeable for the repairs and other expenses upon the ship, only accord- ing to their respective interest in the ship.*^ In all cases of this sort, however, we are to understand, that the expenses are incurred with the consent of all, or at least of a majority of the part-owners ; for neither a single part-owner, nor a minority of the part-owners, have any right to make any such repairs, or incur any such expenses, against the will of the majority ; the 1 3 Kent, 156, {post, §455.} " Poth. de Soc. n. 187 ; Id. u. 185 ; Id. n. 86 ; Abbott on Sbipp. Pt. 1, c. 3, § 15, otb ed. ^ Poth. de Soc. n. 96 ; ante, § 102, 105, 109. * Poth. de Soc. n. 186, 187. ^ Poth. de Soc. n. 186, 187. « Abbott on Shipp. Pt. 1, c. 3, § 15, p. 84, 5th ed., who cites Vinn. in Peck- ium, p. 155. CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 657 latter having (as we shall presently see), a complete authority to regulate the whole concerns of the ship.^ § 421. Where, however, no common consent or agreement exists among the owners, as to the posses- sion, use, enjoyment, or preservation of the ship, it becomes necessary to ascertain, what, at the common law, are the ordinary rights, duties, obligations, and liabilities of the part-owners, either inter sese, or in respect to third persons. And in the first place, as between the part-owners themselves. The inquiry, w^iich is here first naturally presented, is. What are the rights, and duties, and liabilities of the part-owners of a ship to each other in respect to repairs and other expenditures, made by any of them for the proper or necessary preservation thereof? The general under- standing at the common law is, that, if there be no express or implied agreement between the owners, either by their conduct, or by their acts, sanctioning any such repairs or expenditures, although any one or more of the owners have a right to incur them ; yet they have no remedy over against the others for con- tribution thereto ; but they must themselves, whether they constitute a majority or minority of the owners, bear the whole charge.^ § 422. The reason, usually given for this doctrine, is, that no one part-owner has a right to compel another, against his will, to incur any burden or expense, even although necessary for the preservation of the common property ; but it should be left to his own free choice. For, otherwise, in case one part-owner were poor, it 1 Post, § 426, 427. - Abbott on Shipp. Ft. 1, c. 3, § 2, p. 69-71, 5th ed. ; 3 Kent, 153, 154 [Macy V. De Wolf, 3 W. & M. 193] ; {Brodie v. Howard, 17 C. B. 109 Curling v. Robertson, 7 Man. & G. 336 ; Hardy v. Sproule, 31 Me. 71 Stedman v. Feidler, 20 N. Y. 437. See Revens v. Lewis, 2 Paine, C. C. 202 Elder v. Larrabee, 45 Me. 590 ; post, § 455. } 42 658 PARTNERSHIP. [CHAP. XVI. might operate as a grievous evil, and compel him to sell his share by a sort of forced sale.^ Perhaps the doctrine may have been founded upon the analogy to cases of joint ownership of lands and woods, under the old common law, where no one owner was bound to contribute to the repairs of the fences and other melio- rations made upon the common property, although for the common benefit, unless done with the common con- sent and agreement of all the owners, or justified by a special custom.^ But there was an exception in cases of houses and mills, which being of a higher legal consideration, for the habitation of man, and for the general good of the realm, the common law required all the owners to contribute towards the necessary repairs thereof.^ There seems to be great good sense in this distinction ; and certainly it is not less applicable to the case of ships, which are for the use and habita- tion of man, and the general good of the country, than it is to houses and mills. The Roman law positively affirms the like doctrine of contribution, in respect to reparations of houses held in common.'* And, hence, ' Ibid. 2 Lewis Bowie's Case, 11 Co. 79, b. 82, b. ; Co. Litt. 200, b. ' Fitzh. Nat. Brev. 127; Id. 162; Co. Litt. 200, b.— Lord Holt is re- ported in Tenant v. Gold win, 2 Ld. Raym. 1089, 1093, to have said: " That the writ is grounded upon the custom of the place, and not upon the common law ; and there is such a custom in many places, and there is no other authority for it." It is not a little remarkable, that neither Lord Coke, nor Fitzherbert, in affirming the doctrine, makes any allusion what- ever to any such custom ; but they put it as a doctrine of the common law ; and put it upon the express ground, " that owners are in that case (as Lord Coke says) bound, pro bono publico, to maintain houses and mills, which are for the habitation and use of men." Mr. Chief Justice Parsons, in delivering the opinion of the Court in Carver ». Miller, 4 Mass. 509, 561, states it to be a clear doctrine of the common law. The like doctrine was affirmed by Mr. Justice Jackson, in delivering the opinion of the Court in Doane v. Badger, 12 Mass. 65, 70. But see Converse v. Ferre, 11 Mass. 325, 326. * D. 17, 2, 52, 10; Poth. Pand. 17, 2, n. 53 ; Domat, 3, 1, 5, art. 6-8. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 659 some maritime writers in modern times have, as we shall presently see, applied it by analogy to the case of part-ownership of ships. ^ § 423. Whether, indeed, this supposed doctrine of the common law, as to ships, is founded upon satisfac- tory principles or not, may perhaps be thought to de- serve more grave consideration than it seems hitherto to have received. If we look to the general policy of shipping and navigation, in all commercial nations, and the objects for which joint ownership in ships is allowed and encouraged, that is, to create a large and flourish- ing marine trade by the union of small capitalists, and thereby augmenting private wealth as well as national interests, we shall see at once why the ordinary rules with regard to joint ownership in other personal prop- erty have been made to yield in the case of ships, and have either been wholly set aside, or controlled by principles of a more equitable and liberal character. Now it is scarcely practicable to state a single reason, why the ordinary rules should have been relaxed in other cases, which is not strictly applicable to the case of repairs, necessary and proper for the due preserva- tion of the ship. In a just and reasonable sense, all such repairs are for the common benefit of all the owners, in order to prevent the utter ruin and destruc- tion of the common property ; and they also generally enhance the value, as well as preserve the sound state of the property. § 424. It is clear (as has been already suggested ),- that many of the maritime Jurists, as well as some of the positive codes of modern maritime nations, assert the doctrine that all the owners of a ship are bound to contribute according to their shares, for all expenses > Abbott on Shipp. Pt. 1, c. 3, § 2, p. 68, 69, 5th ed. post § 424, note. * Ante, § 422. 660 PARTNERSHIP. [CHAP. XVI. incurred in the necessary reparation thereof by any one of the owners ; and this duty may be enforced by suit in case of their neglect or refusal. Straccha af- firms this in positive terms, and in this he is followed by Roccus and other jurists.^ It has also the sanc- tion of the highest tribunals of Genoa, one of the most enlightened commercial states in the early progress of commercial enterprise in the Mediterranean.^ Nay, in some States and by some jurists the doctrine has been pressed further ; so that if the negligent owner did not, after due notice, within a limited time, pay his proportion of the repairs with interest, he forfeited his title to his share in the ship ; a severe and harsh regu- lation, which is scarcely consonant to the liberal spirit of maritime jurisprudence.^ 1 Straccha, de Nav. Pars 2, n. 8, ^. 420, ed. 1669 ; Roccus, de Nav. n. 22 ; 2 Emorig. Traite des Contrats a la Grosse, c. 4, § 4, p. 427-429, ed. 1783. ^ Decis. Rotie Genuse, Decis. 170, n. 3; Stracclia, de Merc. 285, ed. 1669. ^ Ibid. ; Straccha, de Nav. Pars 2, n. 8, p. 420, ed. 1669 ; Roccus, de Nav. n. 22 ; 2 Emerig. Traite des Contrats a la Grosse, c. 4, § 4, p. 427, ed. 1783. — Straccha, in the passage referred to, says : " Naves plerunque refectione egere, nemo est, qui nesciat ; et innuit Jurisc. (in 1. fin. ff. de exer.) Nee etiani longo tempore durant, licet novis tabulis reficiantur; ut scribit Ange. (in 1. foramen, ti". de ser. iirb. pra3.) Unde proxime accedit ad propositas quasstiones ilia dubitatio. Duos fingito exercitores, seu ejusdem navis do- minos ; alteram cessantem, et negligentem reficere ; alterum vero navim, quaj vitium fecerat, communi nomine refecisse. Puto, si intra quatuor menses so- cius cessans numos pro portione erogatos cum centesimis usuris, non restituerit consocio, qui refecerit, ex oratione Divi Marci reficienti jus dominii pro soli- do vendicare, vel obtinere decretum esse. (L. si. fratres. § idem respondit. Vers, idem resjjondit socius, qui cessantis. if. pro socio. 1. si. ut proponis. C. de sedifi. privat.) Quae jura singulariter notanda inquit Areti. (Inst, de act. § sequens. n. 13.) socium cessantem reficere rem communem. Si enira alter reficit, et cessans intra quatuor menses non restituit partem impensarum cum usuris, perdit dominium sua3 partis, et reficienti acquiritur. Probat et commendat ibidem Jason, (sub num. 48.) et idem Jason, (inrepet. 1. quo- minus. fF. de flum. n. 112, et in 1. creditor, n. 7. fF. si cert, peta.) Hoc idem placuit Voron. (in tract, de servi. urb. praxli. in tit. de refect, rub. 59. vers, quarto qua>ritur), subdens, id valde notandum esse. Et vide Mars. (sing. 359. mille)." The passage in the Digest (17, 2, 52, 10), is as follows: CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 661 § 425. Above all, the Consolato del Mare has ex- plicitly sanctioned the doctrine, and declared, that when the partowner-master (Patron, Senyor de la Xaii) finds that the ship needs repairs in the place of resi- dence of the owners, if all of them, upon notice, consent to have them made, he may repair the ship at the expense of all, and hire money on the share of any delinquent part-owner who fails to discharge his por- tion. If the owners deem the repairs improper, be- cause the ship is not worth repairing, then either the partowner-master or the other owners may compel a public sale of the ship. But if such master repairs the ship without the consent of the other part-owners, none of them will be liable to him for such repairs ; but he must reimburse himself, as he may, out of the earnings of the ship.^ § 426. Pothier has affirmed the general doctrine of the liability of every part-owner to contribution for all repairs, reasonably (utilement) made upon the common property, at least if he does not abandon his part of the property ; and he applies it to ships.^ He takes " Idem respondit : Socius, qui cessantis cessantiumve portiones insulte resti- tuerit, quamvis aut sortem cum certis usuris intra quatuor menses, postquam opus refectum erit, recipere potest, exigendoque privilegio utetur, aut deinceps propriam rem babebit, potest tamen pro socio agere ad hoc, ut conscciuatur, quod sua intererat. Finge enim, malle eum raagis suum consequi, quam do- minium insulae : Oratio enimD. Marci idcirco quatuor mensibus finit certas usuras, quia post quatuor dominium dedit." 1 Consolato del Mare, c. 200 [245] ; Id. c. 194 [239] ; Id. c. 197, [242]. I quote from Pardessus's edition, Tom. 2, p. 237-240 ; Id. p. 223-227 ; Id. p. 231-233. 2 Poth. de Soc. App. n. 187 ; Id. n. 192 ; Id. n. 86. His language is (n. 187) : " A regard des dettes contractees pour les affiiires de la comniunaute durant la comnuinaute, tel que seroit un marclie fiiit avec des ouvriers pour des re- parations a faire a quelque heritage commun, il n'y a que celui des quasi-asso- cies, qui les a conti'actees, cii^s cre- ditorum ohtineai, ita, id quod 2^lurihus 'placecd^ hoc sta- tuahir} And again, in the case of the arbitrators: tTudicmm mini integrum est, quod pluriviorinn sententiis comjjrohatur.^ And again : Majorem esse 'partem, pro modo dehiti, non p)ro numero per sonarum, placuit ;^ and again; Quod major pars Curice effecit, p)ro eo hahetur, ac si omnes egeriniJ And in answer to the question, what, in a just sense, may be deemed repairs or expenses for the common benefit, Valin does not scruple to declare, that they are such as are reasonable and fit, in order to put the ship in a state to earn freight, and to be suitably navigated during the contemplated voyage or adventure.^ § 430. The laws of other foreign maritime nations seem generally to coincide with these provisions of the French law, and abundantly show, that the doctrine is not founded upon any peculiar policy of France.^ The Ordinances of the Hanse Towns of 1591 and 1614, ex- pressly affirm the doctrme, stating it, in one place, to be conformable to ancient usage ; and, in another place, to be conformable to the ancient usages of the sea.'' 1 Cod. 7, 71, 8, cited 1 Valin, Comm. Liv. 2, tit. 8, art. 4, p. 575; D. 2, 14, 8; Kuricke, Jus Hanseat. tit. 5, art. 7, p. 758, 759. ^ Cited 1 Valin, Comm. 575. See also D. 50, 1, 19; Id. 4, 8, 17, 7; Id. 4. 8, 27, 3. 3 D. 2, 14, 8 ; cited 1 Valin, Comm. 576. * D. 50, 1, 19 ; cited 1 Valin, Comm. 577. See also the passage, D. 17, 2, 52, 10, referred to^ante, § 424, note. ^ 1 Valin, Comm. Liv. 2, tit. 8, art. 5, p. 579. * Styppman, Jus Mar. p. 416, n. 101-104; Scrip. Naut. Fascic. Heinec. p. 416, ed. 1740 ; Kuricke, Jus Hanseat. tit. 5, art. 7, p. 755, 758, 759 ; 1 BoulayPaty, Droit Comm. tit. 3, § 5, p. 344-346; Jacobsen's Sea-Laws, by Frick, c. 3, p. 40, 41, ed. 1818. ^ 2 Pardessus, Collect, de Lois Mar. p. 526 ; Droit Mar. de la Ligue Anse- CHAP. XTI.] RIGHTS AND INTERESTS OF PART-OWNERS. 669 The ordinance of Rotterdam of 1721;^ that of Ham- burg of. 1276 ; ^ that of Lubec of 1299 ; ^ and also atlque Reces. de 1591, art. 57 ; Id. Reces. de 1614, art. 7, p. 546; Abbott on Sbipp. Pt. 1, c. 3, § 3, p. 70; Cleirac, Us et Cout. Ordin. Hanseat. art. 59, p. 211, ed. 1661 ; Id. p. 107, ed. 1788; Malyne, Lex Merc. p. 128, ed. lGo6. — I copy from Pardessus's unrivalled edition, in tbis and tbe foUow- in'i' citations. Kuricke, in bis Commentaries on tbe Hanseatic Ordinance (Kuricke, Jus Hanseat. tit. 5, art. 7, p. 758, 759, ed. 1740), gives tbe general provisions of tbe principal ordinances of different countries. His laneuace is: "Jus Wisbvcen. art. 65, boc in casu, quando nimirum inter exercitorera et nauclerum conveniri non potest, statuit, nauclerum nibi- lominus posse navim illam ducere pro naulo, quod viri boni tequum esse judicaverint. Et art. 66, in genere sancitur, quod omnes exercitores, quid- quid in reparationem navis nauclerus impendent, vel etiam pro ejusdem necessitate emerit, ad obolum usque solvere teneantur. Jus Prutbenicum (1. 4, tit. 19, art. 4, § 3), generaliter vult, quod illi, qui minores partes in navi babent, sequi debeant eos, qui plus in eo possident. Jus vero Lube- cense (1. 6, tit. 4, art. 6), alternative idem statuit, nimirum illos, qui minus in navi possident, reliquos, qui plus tenent, aut sequi, aut totam navim certa pecunia a^stimare debere, optione aliis data, utrum tantumdem dare, aut accipere velint, emptoremque reliquis exercitoribus pecuniam istam intra sex bebdomadas postmodum solvere teneri. Jus Danicum art. 61, idem pra?cipit, et addit, quod si nulla ratione inter se convenire possint, navim tamen otiosam jacere non oporteat, sed exercitorum potior pars illam in suum commodum, suo periculo, e;xercere possit ; illis vero, qui exercere navem noluerunt, nulla vecturae portio danda sit. Eodem etiam tendunt Statut. Hamburg. (Part. 2, tit. 13, artic. 2, et Grot. d. intr. part. 23). Utut autem ba;c expediti sint juris eo in casu, ubi plures exercitores existunt, quaeri tamen potest, quid boc in casu, ubi duo tantum sunt exercitores, et quidem inter se dissentientes, juris sit? Certe quum prajvalere debet, qui navim navigare, quam otiosam domi manere mavult, inde concludi potest, quod Ulpianus dissertis verbis (in L 12, § 1 IT. de usufruct.) scribat : Xavis usufructu legato, navigatura mittendam navim, beet naufragii periculum immineat ; navim enim ad boc parari, ut naviget, dummodo tamen id apto et non adverso navigationis tempore fiat, navisque idoneis bominibus com- mittatur (1. 16, § 1, et 1. 36, in fin. ff. de R. V.) et gubernatore sit instructa (1. 13, § 2, ff. locat)." See also 2 Emerig. Traite des Contrats a la Grosse, c. 4, § 4, p. 427, 428, ed. 1783 ; Id. 454, 455, Ed. of Boulay Paty, 1826. 1 Ordin. of Rotterdam, 1721, art. 172 ; 2 Magens on Ins. 108 ; Abbott on Sbipp. Pt. 1, c. 1, § 3, p. 70, otb ed.; 3 Kent, 153. * Ordin. of Hamburg, 1276, art. 24; 3 Pardessus, Collect, de Lois Mar. p. 346. 3 Ordin. of Lubec, 1299, art. 25; 3 Pardessus, Collect, de Lois Mar, p. 410. 670 PARTNERSHIP. [CHAP. XVI. the laws of Wisbuy (although not printed in the com- mon editions)/ contain provisions to the same effect. § 431. It has been supposed by a learned writer upon this subject, that the common law has in this respect an important advantage over all these ordi- nances ; because, while it authorizes the majority in value to employ the ship upon any probable design, it takes care to secure the interest of the dissentient minority." Perhaps it may not be so very manifest, that such an advantage really exists ; for, although the majority are thus entitled to employ the ship, yet the minority cannot derive the slightest advantage from that employment ; and they may, and indeed must, be affected somewhat in their interest from the natural diminution of value of the ship, by the mere wear and tear of the voyage or adventure, even if no accident occurs to prevent her safe return. It is no- where affirmed, that the minority are entitled to any compensation for such diminished value ; and the general theory of the common law upon the rights of part-owners, certainly authorizes every part-owner to use the ship for his own purposes, without any liability to repair the natural or necessary waste or decay occa- sioned thereby. On the other hand, although the for- ' Laws of Wisbuy, 1841, art. 65, 66 ; 1 Pardessus, Collect, de Lois Mar. p. 522, 523. See also Pardessus's note to Tom. 1, p. 522, 523, notes 9, 10, and his note to Tom. 2, p. 526, n. (2). In these notes he states, that these articles are not found in the editions of 1505, or the MSS. of 1533 and 1537, but are in that of 1541, of Gripswald. The Consolato del Mare gives to the master- owner (Patron, Senyor de la Nau), who undertakes to build a ship, a right to compel other persons, who have engaged to take particular shares in the ship, to pay their pi'oportions of the expenses of building the same ; or, upon their default, to hire money on their shares for the same purpose. Consolato del Mare, c. 3, [48], as given in 2 Pardessus, Collect, de Lois Mar. p. 50. I have not discovered in that venerable collection any traces of the law as to the employment and outfits of the ship, when some of the owners dissent. See also Jacobsen's Sea-Laws, by Frick, e. 3, p. 40-43, ed. 1818. « Abbott on Shipp. Pt. 1, c. 3, § 4, p. 70. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 671 eign laws and ordinances give the majority the right to impose the burden of sharing the expenses upon the minority ; yet the latter are to share fully in the profits, if any, in the voyage or adventure, accord- ing to the well-known maxim : Secundum naturam est, commoda cujusque rei eum sequi, quern sequuntur in- commoda} § 43*2. The common law not only thus gives to the majority in interest of the part-owners the right and authority to employ the ship upon any proper voyage or adventure ; but also confers upon the majority the right and authority in all cases to appoint the master and officers and crew of the ships, and to displace them at their pleasure, even although the master should be a part-owner.- But, then, this authority must be exer- cised by a free and impartial judgment in the choice of the master and officers and crew, and especially in the choice of the master, who is intrusted wdth the manage- ment of the outfit, and with the navigation of the ship. Any contract, therefore, made by some of the part- owners only, which is calculated to have the effect of fettering their judgment, and of binding them to ap- point, or to concur in the appointment of particular persons as master and officers, is a violation of that duty. The violation of duty becomes greater and more odious, if the contract is founded upon motives of pecul- iar gain and advantage to the contractors ; for all the part-owners ought to share ratably in every profit that may be made of the ship. And if such contracts could » 1 Valin, Comm. Li v. 2, tit. 8, art. 5, p. 577-579; D. 50, 17, 10.— The Danish Ordinance, art. 61, according to Kuricke, is simihir to the law of Eno-land. See above, § 430, note ; Jacobseu's Sea-Laws, by Frick, c. 3, p. 37, 40-43. '^ This is also the rule of the French law. 1 Boulay Paty, Droit Comm. tit. 3, § 5, p. 340. {Post, §445.} 672 PARTNERSHIP. [cHAP. XVI. be allowed by law, they must operate as a discourage- ment to persons to become part-owners of ships. ^ In- deed, the duty is not owing singly to the other part- owners, and to charterers (if any), but also to all whose life or property may be embarked in her. Such a con- tract is, therefore, utterly void, as against public policy, and the true interests of commerce and navigation. Upon this ground a contract, made by two part-owners, who were the ship's husbands, with a third person to sell him a part of their shares, and he to be appointed master (they holding the majority of interests), and they to be continued as the ship's husbands, and he or they to have the appointment of his successor, as master, has been held to be utterly void.^ § 433. We have already seen that the French Ordi- nance declares, that the opinion of the majority of the owners of a ship, is to govern in every thing which con- cerns the common interest of the owners. [En tout ce qui concerne V inter et commun des proprUtaires.Y But the question, as to the extent of the power of the major- ity to bind the minoi^ty by their acts, or, in other words, what is to be deemed in the sense of the Ordinance for the common interest, is a matter still left open to con- struction and interpretation. Here, Valin is very ex- plicit ; and he declares that it extends not only to the repairs of the ship, but to the enterprise and voyage in which the ship is to be engaged, to the choice of the master, officers, and crew, and also to the outfits and engagements for the voyage. But it does not extend to any right to compel the dissenting owners to con- tribute their shares to a cargo for the ship for the same > Card.tJ, Hope, 2 B. & C. 661, 674, 675. I have followed nearly the very words of Lord Tcnterden, in his able judgment in this case. * Card V. Hope, 2 B. & C. 661, 674, 675. =» Ante, § 429. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 673 voyage.^ As to the repairs and other legitimate expen- ditures and charges for the voyage, if the dissenting own- ers refuse to contribute their shares, it is competent for the majority, after such refusal and due proceedings had, to take up the amount on bottomry for the account and risk of the dissenting owners.^ § 434. But suppose a majority of the owners are against any employment of the ship* upon any adven- ture or voyage whatsoever at a particular period, as not being for the interest of the concern, and the minority are, at the same time, ready and willing to employ the ship upon a particular adventure or voyage, the ques- tion then arises whether, in the sense of the Ordinance, the majority have still the right to control the minority, and prevent any such employment. The answer given by Valin, in the affirmative, seems entirely satisfactory in its reasoning, as a just exposition of the Ordinance.^ ' 1 Valin, Comm. Liv. 2, tit. 9, art. 5, p. 576-580, ed. 1766 ; 3 Pardessus Droit Comm. art. 621, p. 44, 45 ; 3 Kent, 156, 157. ^ 1 Valin, Comm. Liv. 2, tit. 8, art. 5, p. 576, 577, 579; 3 Pardessus, Droit Comm. art. 621, p. 44-46. ' 1 Valin, Comm. Liv. 2, tit. 3, art. 5, p. 582, 583 ; 1 Boulay Paty, Droit Comm. tit. 3, § 5, p. 344, 345-348 ; Kuricke, Jus Hanseat. tit. 5, art. 7, p. 758, 759, ed. Heinecc. Scrip. Naut. Fascic. ed. 1 740. Several of the mari- time Jurists of other countries entertain a different opinion. Mr. Chancellor Kent has summed up the opinions on each side with his usual ability and accuracy. " By the French law, the majority in interest of the owners control the rest, and in that way one part-owner may govern the manage- ment of the ship, in opposition to the wishes of fifty other part-owners, whose interests united are not equal to his. This control relates to the equipment and employment of the ship, and the minority must contribute. But they cannot be compelled to contribute against their will for the cargo laden on board, though they will be entitled to their portion of the freight. If the part-owners be equally divided on the subject, the opinion in favor of employing the ship prevails, as being most favorable to the interests of nav- in-ation. Many of the foreign Jurists contend, that even the opinion of the minority ought to prevail, if it be in favor of employing the ship on some foreign voyage. Emerigon, Ricard, Straccha, Kuricke, and Cleirac, are of that opinion. But Valin has given a very elaborate consideration to the sub- ject, and he opposes it on grounds that are solid, and he is sustained by the 43 674 PARTNERSHIP. [cHAP. XTI. "Whether the common law has adopted the like rule seems, in the present state of the authorities, doubtful, although the old writers manifestly lean in favor of it.^ § 435. A question far more nice and difficult, is to decide what is to be done where the part-owners have equal interests, and are equally divided as to the em- ployment of the ship upon any particular voyage or adventure. Within this predicament several cases may arise: (1.) Where the part-owners • are equally divided as to the employment of the ship upon any voyage or adventure whatsoever, one being in favor and the other against any such employment, upon the ground, that at the time it will be either unprofitable, or very hazardous, under all the circumstances ; (2.) Where each part-owner is equally willing to have the ship employed in some voyage or adventure, but they differ as to the voyage ; or, (3.) Where each part-owner is ready to take the whole ship for a voyage, to be planned by himself, but he will not engage with the other in any voyage whatsoever. What is to be done in such a case] An opinion has been expressed by certain learned writers that, in the first case, the part- owner who is willing to employ the ship for a voyage or adventure is entitled to have it delivered to him for that purpose, upon giving the usual security ; and this, indeed, seems to be the actual practice in the Admi- ralty of England.^ provisions of the old ordinance and of the new code. Boulay Paty follows the opinion of Yalin and of the codes, and says that the contrary doctrine would enable the minority to control the majority, contrary to the law of every association, and the plainest principles of justice. The majority not only thus control the destination and equipment of the ship, but even a sale of her by them will bind the riglit of privileged creditors after the perform- ance of one voyage by the purchaser, but not the other part-owners." 1 Willings V. Blight, 2 Pet. Adni. 288 ; Abbott on Shipp. Pt. 1, c. 3, § 4-6, p. 70-76 ; ante, § 427, 428. See The Elizabeth & Jane, 1 W. Rob. 278. 2 Abbott on Shipp. Pt. 1, c. 3, § 6, p. 75, 5th ed. ; 1 Mont, on P. B. 2, CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 675 § 436. Cleirac adopts the like opinion, in which he has also the support of other Jurists.^ Straccha, in particular, puts the case directly. Etegofinrjo t'lhi que- stionem : Duos esse Dominos nams^ alterum velle congmio tempore ad namganduni i2)sam navim navigatum mittei^e^ cdiermnvero malle in i^ortu i^ermanere ; et 'proeferendmn ilium existimo, qui rem ad usum 2')aratum, uti velit, et uti- liter agere, recusante socio." The reason seems to be, that ships are designed for navigation ; and, thus em- ployed, they support a great public commercial policy."^ The French Ordinance seems to justify the same course, leaving, however, the question, as to the propriety of the projected voyage, open for discussion.'* § 437. But the two last cases (there being an equal- ity of interests) have been thought by some distin- guished Jurists to be wdiolly unprovided for by the common law ; for, under such circumstances, there seems to be no ground for giving any preference to either part-owner.^ In cases of this sort, there is no c. 1. Molloy holds this opinion. Molloy, de Jure Mar. B. 2, c. 1, § 2, p. 308, 10th ed. 1778. But see The Elizabeth & Jane, 1 W. Rob. 278; {and 2 Pars. Mar. Law. 555, note.} * Cleirac, Us et Cout. Ordln. Hanseat. art. 59, p. 211, ed. 1G61. ^ Straccha, de Navib. Pars 2, n. 6, p. 420, ed. 1669. • 3 See Cleirac, Us et Cout. Ordin. Hanseat. art. 59, p. 211, ed. 1661 ; 1 Valin, Conim. Liv. 2, tit. 8, art. 5, p. 585, 586 ; Kuricke, Jus Hanseat. tit. 5, art. 7; Scrip. Naut. Fascic. p. 758, 759, ed. 1740; ante, § 429, 430, note. ■• 1 Valin, Coram. Liv. 2, tit. 8, art. G, p. 585, 586. ' Abbott on Shipp. Pt. 1, c. 3, § 5, p. 72-76, 5th ed.; Id. § 7, p. 75, 76; Ouston V. Hebden, 1 Wils. 101. — In this case a part-owner, possessed of a small share, instituted a suit in the Court of Admiralty, against the major part-owner, who was also master, and who insisted upon making a voyage with the ship, praying that the shi > might be sold, or the party have such other remedy as might be thought proper by the Admiralty ; and the other applied to the Court of King's Bench to prohibit the Admiralty from pro- ccedin .jects from the local, for the purpose of incorporating them into the general, marine code of the nation. That the 5th article is of this de- scription has not been questioned. It was no doubt copied from the Roman maritime code, which, having also provided for cases of disputes between the owners of unequal Interests, as well as between those having equal Interests in one event only. It would seem as if the Gth article had been introduced for the purpose of perfecting the system, by affording a remedy in another event, for which the Roman law had made no provision. It is most obvious, in short, that Valin, as well as other jurists, who have treated of these arti- CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 681 to order a sale of property, subjected to its jurisdiction, is clearly a matter within the competency of a Court cles, have considered them, not as parts of the common, but of the maritime law of France ; and we find provisions similar to them in principle intro- duced into the commercial code of that country. That the Ordinances of Louis XIV. are not of binding authority upon the maritime Courts of other countries, I freely admit ; but as aftbrdlnij evidence of the general maritime law of nations, they have been respected by the maritime Courts of all na- tions, and adopted by most, if not by all of them, on the continent of Europe. We are informed, that this code was compiled from the prevailing maritime regulations of France, and of other nations, as well as from the experience of the most respectable commercial men of France. And why should not such parts of it as are purely of a general maritime character, which are adapted to the commercial state of this country, and are not Inconsistent with the municipal regulations by which our Courts are governed, be fol- lowed by the Courts of the United States In questions of a maritime nature ? I leave this question to be answered by those, who would restrain the admi- ralty jurisdiction of the District Courts within the limits allowed by the Common Law Courts of England to be exercised by the High Court of Admiralty of that country. And why, let me again ask, shall the 6th article of this code be rejected in the case now under consideration ? Neither justice nor policy requires it; for it is manifest that the appellants must either surrender their property in this vessel, or rather the fruits of it, to the appellee, or their equal right to appoint the master, and to decide upon her destination, or that she must remain idle in port, until the subject in dispute is totally lost to both the owners. There is no other imaginable alternative, unless it be the one which the appellants ask for ; for if the appellee may now legally claim the right to take this vessel to sea, and, by giving security for her safe return, may take to himself, in exclusion of the other part- owners, all the earnings of the voyage, his right to emplo_y her, on the same terms, as long as she shall be in a condition to be navigated, will continue equally valid, and the exercise of it can no more be denied then, than now. Suppose, for the purpose of further Illustrating this part of the subject, these parties had filed cross petitions, setting forth the difference between them, respecting the appointment of a master, and each praying to be permitted to take the vessel to sea under the usual stipulations; since neither could entitle himself to a preference, what could the Court do, but dismiss both petitions, and thus leave the vessel unemployed, unprofitable to both parties and to the interests of commerce, and subject to all the injury to which such a state of things would expose her? Yet this is substantially the present case ; and if the Court has no power to decree a sale, it is clear that neither of the parties can take the vessel to sea, without a decree of the District Court authorizing him to do so. Upon the whole, considering the article of the French Code, which has so often been referred to, as constituting a part of the maritime law of nations ; that it is in itself a wise and equitable provision ; that it is not 682 PARTNERSHIP. [cHAP. XVI. of Admiralty, and, indeed, is familiar in practice, in order to prevent irreparable mischiefs or impending inconsistent with the commercial state of this country, or with any law which should govern this Court; I feel myself not only at liberty, but bound to adopt and apply it to the present case; and I shall, therefore, reverse the sentence of the District Court, and decree a sale of this vessel. My opinion, I acknowledge, was very different, when this cause was opened, from that which I now entertain. I had read that which was pronounced in the District Court by the learned Judge of that Court, with an entire conviction of its correctness. But the new evidence which has been introduced in this Court, presents, in at least one most essential particular, a different case from that which was submitted to the view of that Court." Davis v. The Seneca, 18 Am. Jurist, p. 486, 492-494. The decisions of the Courts of Common Law upon questions of Admiralty Jurisdiction ought, for many reasons, historically well known, to be received with great scruple and hesitation, especially when considering the times when these questions were principally agitated, during the hostile contro- versies between these Courts and the Court of Admiralty. Nor, indeed, considering the very slight means of knowledge then possessed by the Courts of Common Law upon the doctrines of commercial and maritime jurispru- dence, a system very little in consonance with the strict doctrines of the common law, is it at all a matter of wonder, that the decisions of these Courts upon this subject should have little in them to commend them for adoption in the present age, either in point of reasoning, or of principle, or of learning. How, indeed, it could be, that the Admiralty had undoubted jurisdiction in cases of disputes between part-owners themselves, and also between part-owners and the master, to dispossess one party and give pos- session to the other, thus acting in rem, in order to prevent irreparable mischief or ruin to the joint property ; and yet, that it could not, to prevent the like mischief and ruin, direct a sale thereof, if it were the only adequate means to attain the end, is a matter of no small difficulty to understand. Nothing is more clear or more common in the exercise of jurisdiction by Courts of Admiralty, than to decree a sale of ships and of other property in their custody, to prevent loss, or decay, or ruin. Even Courts of Equity, although their jurisdiction rarely acts in rem, will direct a sale of property subjected to claims within their cognizance, in order to adjust rights, and to distribute proceeds, where otherwise irreparable mischief might ensue, or no other sufficient remedy exists. This is very common in cases of a dissolution of partnership, and in cases of charges upon land, and even sometimes in cases of pledges of personal property. See 2 Story, Eq. Jur. § 1024-1028, 1033. See also Stevens v. The Sandwich, 1 Pet. Adm. 233, note ; De Lovio v. Boit, 2 Gall. 398, 463 ; 3 Kent, 153, 154, and notes. As to the jurisdiction of Courts of Admiralty in cases between part-owners, see the commissions to the Vice-Admiralty Courts in America (which in this respect are mere copies of the commission of the High Court of Admiralty in England), cited in De Lovio v. Boit, 2 Gall. 470, note; CHAP, XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 683 losses.^ Analogy, therefore, is clearly in its favor ; and unless some limitation or exception can be asserted to exist, either in the origin, or constitution, or practice of the Court itself, it will not be a very satisfactory mode of disposing of the question, for a Court of Com- mon Law to assert, upon its own mere dictum^ without any reasoning in support of it, that the Court of Ad- miralty has a right, in cases of disputes between part- owners of ships, to take a stipulation, but not to order a sale. Such language w^ould seem more like an edict than a judgment, and to promulgate an arbitrary dis- tinction, rather than a rational interpretation of the jurisdiction of another Court. § 440. Having thus considered the rights, duties, obligations, and liabilities of part-owners, as between themselves, in respect to the repairs, possession, aiid employment of the ship, and the authority of the ma- jority to direct and control the same, let us now pro- ceed to examine some other rights, duties, obligations, and liabilities, arising from the same relation, when all the part-owners act together, by common consent, for their mutual interest. In the first place, it may be convenient, here, to consider the rights and reme- dies, where one or more or all of the part-owners, by common consent, are employed in the general con- cerns of the ship, or of a part thereof, and expend moneys, or contract debts on account thereof. There can be no doubt, that, in such cases, all the part-own- Curtis on Merchant Seamen, p. 348, note (3) ; Godolph. Adin. Jur. c. 4, p. 43 ; Sir Leoline Jenkins's Works, Argument in the House of Lords on the Admiralty Jurisdiction, vol. 1, p. 7G, 80-84 -, Id. p. 792 ; 2 Bro. Civil & Adm. Law, p. 77, note (5) ; Id. p. 130-133. {In Tunno v. Tiie Betsina, 5 Am. Law Re 1 Valln, Comm. Liv. 2, tit. 8, art. 5, p. 578, ed. 1766. 2 D. 10, 3, 11; Id. 10, 3, 6, 2. » Cod. 3, 37, 4. * Ibid. * Ibid. 8 D. 10, 3, 8, 2 ; Poth. de Soc. n. 190. 702 PARTNERSHIP. [CHAP. XVI. § 452. Pothier has enumerated, in a general way, some of the duties and obligations which part-owners owe to each other. Among others, he enumerates the duty of each part-owner to pay his share of the debts and charges contracted for the common concern ; ^ to account with the other part-owners for their shares of the common earnings and profits in his hands ; and to pay the debts due by him to them, as well as the damages sustained by them by his acts or negligences.^ Some of these duties and obligations are so obvious, and so analogous to the like duties and obligations between partners, that it does not seem to be of any importance to dwell upon them, or even to enumerate them in detail. But here, again, we must not assume, as a matter of course, that any one or more of the part- owners is entitled, at the common law, to a compensa- tion for losses, sustained by the negligence or miscon- duct of the others in the management of the common property, where no special agency has been assumed, simply because the Roman law or the French law would seem, in the like cases, to justify it ; ^ for the common law authorities have not as yet recognized any such general doctrine ; and some of them may, perhaps, be thought to point to a different conclusion.'* § 453. We may. conclude this head with the con- sideration of the question, how far part-owners are bound by the statements or admissions of each other, where neither of them is the common ao-ent of the ship, or the separate agent of any one part-owner of the ship. We have already seen, that the statements and admissions of one partner, during the conthiuance of the partnership, will bind the others as evidence, ' Poth. de Soc. n. 187-189, 191, 192. ^ Poth. de Soc. n. 189, 190. ' Poth. de Soc. n. 190. ♦ Ante, § 450, 451. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 703 according to the common law.^ But the same doctrme has never been appHed to the case of part-owners.^ The reason sometimes assigned for this distinction is, that, in case of a partnership, every man knows who his partner is. But when one part-owner sells his share, the remaining part-owners, not being privy to the instrument, by which the new part-owner is created, may be entirely ignorant of the fact, who the person is, who has thus become a part-owner with them.^ But the truer and broader ground is, that there is no com- munity of interests, or of rights, or of authorities between part-owners ; and they are not, as m cases of partnership, agents of each other in the concerns of the ship, unless some special authority is expressly or impliedly delegated to them for the purpose. Part- owners are not, therefore, bound by the acts of each other, unless those acts are specially authorized ; and, hence, it follows, afot^tiori, that the mere admissions of one, without any such authority, ought not to bind the others. Even an act of one part-owner, which will ordinarily make the ship liable to condemnation, if done with the privity of the other owners, will not produce any such effect, except as to his own share, when it is done without such privity ; for that implies co-operation and consenf* § 454. Let us in the next place proceed to the consideration of the rights and remedies of part-owners of ships against third persons. These may arise, either from contracts made with such persons, or from torts committed by them upon the common property. > Ante, § 107. * Coll. on P. B. 4, c. 4, § 5, p. 819, 820, 2d ed. ; Jaggers v. Binnings, 1 Stark. 64. 3 Mr. Justice Bailey in Wilson v. Dickson, 2 B. & Aid. 2, 12, 13. * The Jonge Tobias, 1 Rob. 329 ; Coll. on P. B. 5, c. 4, § 5, p. 820, 2d ed. ; 2 Wheat. App. 37-40. {See The AVilliam Bagaley, 5 Wallace, 377.} 704 PARTNERSHIP. [CHAP. XVI. In respect to both, all the part-owners constitute in point of law but one owner ; ^ and, therefore, all con- tracts made by them, either personally, or through the instrumentality of an agent, or ship's husband, with third persons, are treated as entire joint contracts ; and the remedy for any breach thereof must be in the name of all the part-owners against the other contract- ing party. If the name of any one be omitted, it is ordinarily, upon the technical rules of pleading at the common law, fatal to the maintenance of the suit ; for by those rules all the contracting parties, who are plaintiffs, are positively required to join in the suit.^ > Abbott on Shipp. Pt. 1, c. 3, § 13, p. 81, 5th ed. * Abbott on Shipp. Pt. 1, c. 3, § 14, p. 82, 5th ed. ; Coll. on P. B. 5, c. 4, § 6, p. 820-822, 2d ed. ; 1 Bell, Coram. B. 3, Pt. 1, c. 4, § 5, p. 519, 520, 5th ed.; Skinner v. Stocks, 4 B. & Aid. 437; 1 Chitty on PI. p. 6-8, 3d ed. ; Baker v. Jewell, 6 Mass. 460; Coll. on P. B. 3, c. 5, § 1, p, 461, 462, 2d ed. ; 1 Mont, on P. B. 2, c. 1. — There may, perhaps, be an exception where one part-owner has received his own share of the money due on the con- tract, or has released his claim to it. At least, Lord Tenterden, in his work on Shipping, puts the case as open for consideration at the common law. There is, however, some reason to doubt, whether in such a case the remedy of the other part-owners is not exclusively in equity. Lord Ten- terden has stated the whole doctrine in the following terms : " In the case, however, of an action for the freight of goods conveyed in a general ship, all the part-owners ought to join, or if they do not, the defendant may avail himself of the objection by evidence at the trial, and without plea in abatement, according to the general rule of law and the distinction be- tween contracts and wrongs; unless, perhajis, some one should have received his own share, or have released his claim to it. The necessity of all the part-owners joining as plaintiffs in the suit, in this case, is founded ujion the consideration, that all of them are partners with respect to the concerns of the ship ; and upon this consideration, the present Lord Chancellor (Eldon), In a case of bankruptcy, wherein it appeared that the owners of a ship, upon a settlement of accounts with the master, who had become a bankrupt, were indebted to him, and that on the other hand he also was indebted to some of them severally upon separate and distinct concerns, refused to allow the latter to set off their respective demands against the claim of his assignees for their shares of the general debt." Abbott on Shipp. Pt. 1, c. 3, § 14, p. 82, 5th ed. ; Ex parte Christie, 10 Ves. 105 ; Coll. on P. B. 5, c. 4, § 6, p. 821, 822. {The right of action survives and the executors of a deceased part- owner need not be joined. Bucknam v. Brett, 35 Barb. 596; Bond v. CHAP. XVI.] RIGHTS AMD INTERESTS OF PART-OW:SERS. 705 In cases of tort, a more mitigated doctrine prevails ; for while all the part-owners are at the common law reqnired in strictness to join in every snit for any tort, committed against the common property, nevertheless, the omission to join any one or more of them can be taken advantasfe of onlv in a preliminarv stasje of the snit by a plea in abatement ; and if no snch plea is filed in the canse, it is a waiver of the objection, and will not affect the rights of the plaintiffs upon a trial of the merits.^ It is not, perhaps very easy to establish Hilton, 6 Jones, Law, 180. A part-owner may sustain a petitory suit in the admiralty against a merely fraudulent possessor without joining the other part-owners. The Friendship, 2 Curt. C. C. 426.} ' Abbott on Shipp. Pt. 1, c. 3, § 13, p. 81, 5th ed. ; 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 5, p. 519, 520, 5th ed. ; Child v. Sands, Salk. 31 ; Addison v. Overend, 6 T. R. 766 ; Sedgworth v. Overend, 7 T. R. 279; Rice v. Shute, 5 Burr. 2611 ; Eccleston v. Clipsham, 1 Saund. 153, and Williams's note (1), Id. p. 154; Baker v. Jewell, 6 Mass. 460; Hart v. Fitzgerald, 2 Mass. 509; Converse v. Symmes, 10 Mass. 377; Thompson u. Hoskins, 11 Mass. 419; Molloy, de Jure Mar. B. 2, c. 1, § 2; Coll. on P. B. 5, c. 4, § 6, p. 820-822, 2d ed. ; Heath v. Hubbard, 4 East, 110; Bloxam v. Hubbard, 5 East, 407 ; Wheelwrights. Depeyster, 1 Johns. 4 71, 486; Brotherson v. Hodges, 6 Johns. 108. — Upon this point Lord Tenterden, in his work on Shipping, has given the reasoning, on which the general rule is founded in cases of tort. The several part-owners of a ship make in law but one owner ; and in case of any injury done to their shiji by the wi-ong or negligence of a stranger, they ought regularly to join in one action at law for the recovery of damages, which are afterwards to be divided among themselves according to their respective interests ; for otherwise the party, who had committed the wrong, might be unnecessarily harassed with the expense of several suits to obtain the same end, which might be as well effected in one. But this rule of law is made for the ease of the wrong-doer ; and, therefore, the law requires, that he should avail himself of it at the very beginning of the cause, by pleading in abatement of a suit brought by one part-owner, that there are others living, who ought to be parties to it. For if the defendant does not do this, the single part-owner will recover damages for the injury proportionate to his share in the ship, whether the nature of his interest is made to appear upon evidence at the trial, or is originally stated by himself in the allegation of his cause of complaint. And if afterwards another part-owner sues for his own interest, the defendant can no longer avail himself of the objection, because the party to the first suit has no longer any matter of complaint. In the case of the death of any part-owner after an injury received, the right of action sur- 45 706 PARTNERSHIP. [CHAP. XVI. the soundness of this distinction npou any general reasoning. It seems, however, to proceed upon this ground, that, in cases of tort, the tort is treated as joint and several ; whereas in cases of contract, the contract is treated as an entirety, and as being incapable of sep- aration as to the plaintiffs. And yet a different rule prevails, even in cases of contract, as to the parties who are defendants in the suit ; for in the latter cases, the objection of the nonjoinder of all the proper con- tracting parties to the contract as defendants can be taken advantage of (as in the case of torts), by a plea in abatement only, and not upon the trial of the merits.^ § 455. In the next place, as to the rights and rem- edies by third persons against part-owners of ships. These properly are divisible into those arising from contract, or those arising from tort. In cases of con- tract, by the common law, all the part-owners are liable in solido to the other contracting party for the entij-ety of the debt or obligation, whether the contract be directly made by one or more of the part-owners with the consent of all, or be made through the instrumen- tality of the master of the ship, or of the ship's hus- band, or of any other agent.^ There is an exception, vives in general to the surviving part-owners, who must afterwards pay to the personal representatives of the deceased the value of his share." Abbott on Shipp. Pt. 1, c. 3, § 13, p. 81, 82, 5th ed. 1 Abbott on Shipp. Pt. 1, c. 3, § 15, p. 82, 83, 5th ed. ; 1 Mont, on P. B. 2, c. 1; Rice v. Shute, 5 Burr. 2611; Williams's note (1) to Eecleston v. Clipsham, 1 Saund. 153, 154 ; Coll. on P. B. 5, c. 4, § 6, p. 822, 2d ed. ; Id. B. 3, c. 5, § 2, p. 496, 497 ; Id. § 5, p. 513 ; Wright v. Hunter, 1 East, 20. " Abbott on Shipp. Pt. 1, c. 3, § 15, p. 83, 84, 5th ed. ; 3 Kent, 155, 156 ; 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 5, p. 520, 529, 537, 5th ed. ; Coll. on P. B. 5, c. 4, § 6, p. 817, 818, 2d ed. ; Rich v. Coe, Cowp. 636; Baldney v. Ritchie, 1 Stark. 338; Westerdell v. Dale, 7 T. R. 306 ; 1 Mont, on P. B. 2, c. 1 ; { Preston v. Tamplin, 2 H. & N. 363 ; s. c. Id. 684. See ante, § 421 ; 1 Pars. Mar. Law, 89 ; Brodie v. Howard, 17 C. B. 109 ; Myers v. Willis, 17 CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 707 indeed, which stands entirely in harmony with the general rule ; and that is, where an exclusive credit is knowingly and intentionally given to one or more of the part-owners, or to the master, or the ship's hus- band, or any other agent ; for in such cases, as it is competent for the creditor to give such an exclusive credit, he thereby exonerates all the other parties.^ What circumstances will, or will not, amount to giving such an exclusive credit, must, of course, depend upon the evidence in each particular case, and can admit of no universal exposition.^ But it may be generally stated, that merely receiving payment from one part- owner for his share, or charging the master, or ship's husband, or other agent, with the debt, will not, of itself, amount to giving an exclusive credit to them, which Avill discharge the owners.^ A fortiori, it will not, where none of the owners are known, or it is not known that there are other part-owners ; for, under such circumstances, there is no pretence to say, that any exclusive credit is intended to be given, since C. B. 77; s. c. 18 C. B. S8-6 ; Mackenzie v. Pooley, 11 Exch. 638; Mitch- eson V. Oliver, 5 E. & B. 419; Hardy v. Sproule, 29 Me. 258 ; Same v. Same, 31 Me. 71 ; Stedman v. Feidler, 25 Barb. 605, s. c. 20 N. Y. 43 7. j ' Abbott on Shipp. Pt. 1, c. 3, § 15, p. 82-84, 5th ed. ; Story on Ag. § 288-300; Chapman v. Durant, 10 Mass. 47; Scbemerhorn v. Loines, 7 Johns. 311; Muldon v. Whitlock, 1 Cowen, 290; Cox v. Reid, 1 C. & P. 602; Reed v. White, 5 E^p. 122; Wyatt v. Marquis of Hertford, 3 East, 147 ; Ex parte Bland, 2 Rose, 91 ; Coll. on P. B. 5, c. 4, § 5, p. 817, 2d ed. {1 Pars. Mar. Law, 91; Macy w. De Wolf, 3 Wood &M. 193; Elder v. Larrabee, 45 Me. 590.} * Story on Ag. § 288-291 ; Id. § 293, 294, 296-298. 3 Teed v. Baring, cited Abbott on Shipp. Pt. 1, c. 3, § 15, p. 83, 84, 5th ed. ; Ex parte Bland, 2 Rose, 91 ; Stewart v. Hall, 2 Dow. 29 ; James v. Bixby, 11 Mass. 34 ; Leonard v. Huntington, 15 Johns. 298; Marquand r. Webb, 16 Johns. 89 ; Story on Ag. § 288, 294-299; Coll. on P. B. 5, c. 4, § 5, p. 817, 818, 2d ed. ; Thompson v. Finden, 4 C. & P. 158; { Whitwell v. Perrin, 4 C. B. N. S. 412; King v. Lowry, 20 Barb. 532; Macy v. Wheeler, 30 N.Y. 231.} 708 PARTISERSHIP. [cHAP. XVI. there is no knowledge, or act, from which an election to give an exclusive credit can be inferred.^ We have already had occasion to state, that ordinarily all the part-owners should be joined in a suit brought on a joint contract by the creditor against them ; but that if not joined, the objection is not fatal at the trial upon the merits ; but was pleadable only in abatement. § 4ld6. The French law does not agree with the common law in making part-owners liable m solldo for all the debts contracted upon account of the ship, or other common property, even when the contract is made by all, or in the name of all, of them. But it restricts the liability of each part-owner to the pay- ment of his own share or proportion thereof, unless all expressly agree to be bound in solldo? In this ^ Story on Ag. § 290, 291, and note (2), Ibid.; Thomson v. Davenport, 9 B. & C. 78 ; Paley on Ag. by Lloyd, p. 245-250 ; Paterson i'. Gandese- qui, 15 East, 62. ^ Poth. de Soc. n. 187; 2 Emerigon, Traite des Assur. c. 4, § 11, p. 456, ed. 1783. — The law of Louisiana is the same as the law of France on this subject. David v. Eloi, 4 La. (Miller) 106; 3 Kent, 156; Civil Code of Louisiana (1825), art. 2796. IVIr. Justice Porter, in deHvering the opinion of the Court in David v. Eloi, 4 La. (Miller) 106, referring to the case of Kim- ball V. Blanc, said : " In the opinion delivered in that case, the Court took occasion to say, that as to the law previous to the adoption of the Louisiana Cod,e we were not left in doubt, since the decision in the suit of Carrol v. Waters. It was there settled, that joint owners of steamboats were only responsible for their virile share. That case was decided on the definition given in the Code of Louisiana of a particular partnership, and it is so ex- pressly stated in the opinion ; the majority of the Court being unable then, as they are now, to distinguish between the joint owners of a steamboat, and the joint owners of a house or of a plantation. It is an association, which relates to a specified thing, and to the use to be derived therefrom. Civil Code, 390, art. 12, The correctness of the construction was supposed to be forfeited by a reference to the rules prevailing in the greater number of commercial countries in relation to the responsibility of joint-owners. And so it appears to be. For after all that has been said in the argument of this cause, it is quite clear they are not responsible in solido, as they were in the Roman law. By the statutes of the majority of the commercial nations of Europe, owners of vessels are discharged from all responsibility by surren- dering their interest in them. This Court does not profess to understand CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 709 respect it differs from its own rule in cases of commer- cial partnerships ; for there all the partners are liable in solido} And where the contract is entered into by one part-owner alone on account of the ship, as for ex- ample, for supplies or outfits or repairs, that part-owner is solely responsible to the creditors for the whole amount of the debt ; but he has his remedy over against the other part-owners for contribution.^ In short, in such a case, the creditor is deemed to give an exclusive credit to the contracting part-owner. By the law of Holland, how the part-owner of a ship, who can free himself from responsibility for a debt, which may be ten times as great as his share in the vessel, by abandon- ing that share to the creditor, can be considered as personally responsible in solido for the whole debt. It thinks with Emerlgon, that his oblio-ation is more real than personal ; and that it depends on the amount of interest he has in the vessel, not on an obligation in solido as joint owner, whether he is bound for the whole amount of a debt contracted bv the master. 2 Emerloron, Traite des Assur. p. 454. It remains to consider, whether a change has been made in the law, as it stood previous to the adoption of the late amendments to our Code. By the 2796th article of the Louisiana Code, it is provided, that an association for the purpose of carrying personal property for hire in ships and other vessels, is a commercial partnership. In the case of Kim- ball V. Blanc, we decided that the bare circumstance of persons being joint owners of a boat did not make them responsible in solido : and this is still the opinion of the Court, because men may become joint owners of a boat for other purposes than carrying personal property for hire. She may be bought on speculation with an intention of selling her again. She may, as was said in the opinion delivered in the case of Kimball v. Blanc, be chartered out, and while she remains joint property, never be used to carry goods. In these and other cases, which may be supposed, there is no association for transporting per- sonal property for hire. From the argument in this case, we suppose it has been understood, that the Court, in the case alluded to, settled the principle, that joint owners, who used the boat in carrying the goods for hire, were not re- sponsible in solido. The general reasoning in that opinion, which went further than was necessary for a decision of the case, may have furnished some grounds for that belief; but nothing was fui'ther from our intention; so far from it, a contrary intimation was thrown out. It was there said: ' Owners would perhaps be bound in solido, if they held themselves out to the connun- nity as partners in the carrying trade ; but the bare circumstance of their being joint owners cannot have that effect.' " * Poth. de Soc. n. 187 ; ante, § 102, 103, 109. * Poth. de Soc. n. 187 ; ante, § 420. 710 PARTNERSHIP. [CHAP. XVI. the several part-owners are in all cases chargeable only according to their respective interests in the ship.^ * Abbott on Shipp. Pt. 1, c. 3, § 15, p. 84, 5th ed. ; Vinn. ad Peckium, p. 155, note (a), tit. De Exercit. Act. ed. 1647; Van Leeuwen, Comm. on Roman-Dutch Law, B. 4, c. 2, § 9. — Van Leeuwen, in his Commentaries, says : "A creditor, who had transactions with any one, to whom a ship was trusted by an owner, or wlio was placed by his master as factor or manager of any merchandise concerning the ship, or such merchandises alone, such creditor anciently had the option, whether he would call upon the owner of the ship, or his substitute, the merchant, or his manager, for payment, and prosecute them at law ; and if there were several owners or merchants, in that case each of them was bound for the whole. But this usage has not been adopted among us, it being prejudicial to trade ; and one is obliged always to call upon the owners, or the merchants themselves, and sue them at law. Neither is it in use in Holland (where trade is at present, and has for a long time since been prosperous), viz. that where there are many owners and partners, each shall be bound for the whole. But, on the con- trary, it was introduced, that many joint owners of a ship together may not be called upon for payment further than for the value of the ship, and the amount of the property which she contains ; and each is bound separately, and no further than for his respective share in the trade ; and it is sufficient if they deliver and bring up, what they have in common, in satisfaction of the decree for the whole ; and so it was decreed in the High Court of Hol- land." Van Leeuwen's Comra. B. 4, c. 2, § 9, English Translation, London, 1820, p. 320. Vinnius, in his Commentaries on Peckius, De Exercit. Act. (Lex. 4), p. 155, ed. 1647, says: "Si plures sint, qui navem exerceant, placet singulos ex contractu magistri in solidum teneri ; idque hac ratione, ne in plures adversaries distringatur, qui cum uno contraxit. (1. 1, par. ult, et 1. 2, hoc tit. fac. 1. et ancillarum, 27, § ult. inf. de pecul.) Quippe actio exercitoria, qua tenentur exercitores, ex solius magistri persona et facto nas- citur ; utpote cum quo solo, non cum ipsis exercitoribus, contractum est. Cum igitur in plures dividenda non sit obligatio, quag in unius persona originem habet, ne in plures distringatur, qui cum uno contraxit, ex eo satis intelligimus beneficio divisionis hoc casu locum non esse. (Bald, in rubr. C. eod. in fin.) Idem est, si contractum sit cum plurium institore. (1. habebat. 13, par. ult. et 1. seq. inf. de instit. act.) aut cum servo plurium voluntate dominorum navem exercente. (1. 6, par. 1, inf. hoc tit.) Ceterum hoc jus apud Hollandos receptum non est, apud quos singuli exercitores, pro sua duntaxat parte exercitionis conveniri possunt. Neque enim ut singuli in solidum teneantur, visum est aut naturali ajquitati convenire, quae satis habet, si pro suis singuli portionibus conveniantur ; neque publice utile esse, propterea quod deterrentur homines ab exercendis navibus, si metuant, ne ex facto magistri quasi in infinitum teneantur. Quin et hoc constitutum, ne exercitoria etiam univcrsi ampllus teneantur, quam ad asstimatiouem navis et eorum, quie in navi sunt, teste Grotio, lib. 3, intro- CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 711 § 457. The Roman law promulgates a similar doc- trine, where the contract is made by all the part-owners personally; that is to say, that they are not liable in soUdo ; but each is liable only for his own share and proportion of the debt, according to his interest in the ship. On the other hand, where one part-owner only makes the contract, he alone is held responsible to the creditor for the whole debt. But where the contract is made by the master, appointed by them, there all the part-owners are liable in solido} Thus, it is said by Ulpian in the Digest: Si tmnen plures per se navem exerceant, 2^^^o p7'02)07^tio7iihus exercltionis conveniuntur. JSfeque enim invicem sui magistri videntur. Sed, si plu- res exerceant^ nnum auterni de mimero suo magistruTn fecerint, liujus nomine in solidum pjoterunt conveniri. Sed si servus plurium navem exerceat voluntate eoricm, idem placuit^ quod in pluribus exercltorihus. Plane si unius ex omni voluntate exercuit, in solidum ille teneh- itur. Et ideo puto^ et in superiore casu. in solidum omnes teneri.^ § 458. In the next place, as to the rights and reme- dies of third persons against part-owners of ships for torts committed by them personally, or by the im- proper conduct or negligence of their agents in the management of the joint property. They are, without question, all responsible at the common law, severally, duct, ad jurisp. Bat. c. 1, et lib. 2, de jur. bell, et pac. c. 11, n. 13. Cete- rum Ilevia, p. 2, Cur. Phil. lib. 3, c. 4, n. 22, siuipliciter sequitur disposi- tionem juris communis." See also the Commentaries of Peckius upon the same title and law of the Digest ; from which, perhaps, it may be inferred, that principles similar to those of the Roman law pervade the jurisprudence of many of the continental nations. The Scottish law is certaiidy so. See 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 5, p. 519, 520, 537, 538, 5th ed. ; Ers- kine, Inst. B. 3, tit. 3, § 45. * Abbott on Shipp. Pt. 1, c. 3, § 15, p. 84, 5th ed. ; 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 5, p. 519-525, 5th ed. * D. 14, 1, 4, § 1, 2, 24, 25; Poth. Pand. 14, 1, n. 4, 10, 13. 712 PARTNERSHIP. [cHAP. XVI. as well as jointly, in solido, for all torts personally committed or authorized by them, or occasioned to third persons by the negligence of one or more, or all of them, or by that of the master of the ship, or ship's husband, or other agent thereof; but not for the wilful or malicious acts of the latter.^ The reason for this distinction between negligent and wilful or malicious acts is, that neither the master nor ship's husband, nor other agent, in doing such wilful or malicious acts, can properly be deemed to be acting within the scope of the authority confided to him by the owners, in the management of the ship or its concerns ; but cases of negligence may, and ordinarily do arise, in the very course of such management.^ The doctrine is clearly illustrated in the common case of a collision or run- ning down of ships on the high seas, or in port, whereby damage or loss is incurred. If the tort be by the wilful or malicious act or design of the master, or any other officer or agent of the ship, the owners are not liable therefor ; but the x^arty only, who commits the tort. But if it be by the negligence of the master, or any other officer or agent, then the owners are liable there- for in solido, jointly and severally. On the other hand, if a tort be committed by one part-owner of the ship, who is not employed by the others about the concerns of the ship, or authorized to act for them, but he is acting solely, suo jure, as part-owner, the other part-owners will not ordinarily be liable therefor, whether the act be wilful or malicious, or merely negligent, for the very reason that he is not intrusted » Storj^ on Ag. § 30.8-313 ; 452-457 ; ante, § 167, 168 ; 1 Mont, on P. B. 2, c. 1 ; Low V. Mumford, 14 Johns. 426 ; Patten v. Guruey, 17 Mass. 182. — Hence the suit may be commenced against all of them, or against any one or more of them. Ibid. ' Story on Ag. § 308-313 ; 452-457. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 713 by them with the management or concerns of the ship.^ § 459. The Roman law, in like manner, in many cases, made the principal liable for the torts and neg- ligences of his agents and servants.^ It has been sup- posed, that the Roman law never was in this respect as extensive in its reach as our law ; in other words, that it never did create a general liability of principals for the wrongs and negligences of their agents, but limited it to particular classes of cases ; and that the liability of principals, so far as it is recognized in that law, was mainly dependent upon the Praetor's edict ; and was not worked out of the original materials of the Roman jurisprudence. Whether this supposition be correct, or not, it is certain, that in certain classes of cases, the Praetor, by his edict, either introduced a new and more rigid liabilit}% or he gave to that, which pre- viously existed, an additional force, and, in some re- spects, a more onerous obligation. Thus, masters and employers of ships, innkeepers, and stable-keepers, were made responsible for the safety and due delivery of the goods committed to their charge ; and of course, if the loss or damage were occasioned by the negligence or wrong of their servants, and not by themselves, their responsibility was not varied.^ Alt Prcetor ; JSFautce, > Coll. on P. B. 5, c. 4, § 5, p. 820, 2d ed. ; Storj' on Ag. § 452-474. {A. and B. were part-owners of a ship ; A. defrayed all expenses and had the uncontrolled management of the ship. A. had two-thirds of the gross earnings and B. one-third: Held, that A. was a hirer of B.'s share, and not B.'s agent, and that B. was not liable for damages caused by A.'s negligence. Bernard v. Aaron, 9 Jur. n. s. 470, 11 C. B. K. 8. 889, Am. ed.} = Story on Ag. § 318. 3 Story on Ag. § 318 ; Story on Bailm. § 464, 465 ; D. 4, 9, 1, 3 ; Heinec. Pand. 4, 8, § 546-548; Poth. Pand.'4, 9, n. 1, 2, 8; Domat, 1, 16, 1, art. 8, 5; Id. 1, 16, 2, art. 2; Id. 1, 16, 3, art. 1. — Lord Stair, in his Insti- tutes (B. 1, tit. 13, § 3), seems manifestly to have considered this edict as introducing, for the first time, the liability of principals for the acts and 714 PARTNERSHIP. [CHAP. XVI. caupones, stahularii, quod ciijusque salvum fore recepe- defaults of their agents, and of making that liability more rigid, in many- cases, upon the ground of public policy. His language is: "In the civil law there is a depositation of a special nature, introduced by the edict, 'NautEe, caupones, stabularii, quod cujusque salvum foi-e receperint, nisi restituent, in eos judicium dabo.' By this edict, positive law for utility's sake hath appointed that the custody of the goods of passengers in ships, or strangers in inns, or in stables, shall be far extended beyond the nature of depositation, which obliges only for fraud, or siq)ine negligence, them, who have expressly contracted for their own fact. But this edict, for public utility's sake, extends it ; first to the restitution of the goods of pas- sengers and voyagers, and reparation of any loss or injury done by the mariners, or servants of the inn or stable. Whereas, by the common law, before that edict, in this and such other cases, there-was no such obligement ; much less are persons now obliged for their hired servant's fact or fault, except facts, wherein they are specially intrusted by them. But, because the theft and loss of goods is very ordinary in ships, inns, and stables, therefore this edict was introduced for the security of travellers. Secondly, the edict extends this obligement, even to the damage sustained by (the act of) other passengers or strangers in the ship, inn, or stable, for the which, the master of the ship, innkeeper, or keeper of the stable, could be no ways obliged, but by virtue of this edict. Thirdly, they were made liable for the loss or theft of such things absolutely, from which they were free by no diligence, but were not liable for accident or force ; that is, sea-hazard must always be excepted." See also, 1 Bell, Comm. § 398-402, 4th ed. See Story on Bailm. § 400-402, 458, 464-466. There are' certainly pas- sages in the Digest, which make principals responsible for the fliults and negligence of their agents and servants, beyond those specially pointed out in tlie Praetor's edict. This responsibility seems, however, to have been limited to cases where the pi'incipal was guilty of some negligence in employing negligent and improper agents and servants. Thus, in the Digest, the opinion of Pomponius is approved. Yideamus, an et servorum culpam, et quoscunque induxerit, prasstare conductor debeat ? Et quatenus prajstat, utrum, ut servos noxse dedat, an vero suo nomine teneatur? Et adversus eos quos induxerit, utrum prfestabit tantum actiones, an quasi ob propriam culpam tenebitur? Mihi ita placet, ut culpam etiam eorum, quos induxit, priestet suo nomine, etsi nihil convenit ; si tamen culpam in indu- cendis admittit, quod tales habuerit, vel suos, vel hospites. D. 19, 2, 11 ; Poth. Pand. 19, 2, n. 30, 31. See also D. 9, 2, 29, § 9, 11; Poth. Pand. 19, 2, n, 31. See Story on Bailm. § 401; Domat, 1, 4, 2, art. 5, 6; Id. 2, 8, 1, art, 1-9 ; Id. 2, 8, 4, art. 8. Again : Qui columnam transportandam conduxit, si ea dum toUitur, aut portatur, aut reponitur, fracta sit, ita id periculum pr^stat, si qua ipsius eorumque, quorum opera uteretur, culpa acciderit. Culpa autem abest, si omnia facta sunt, quae diligentissimus quisque observaturus fuisset. D. 19, 2, 25, 7 ; Poth. Pand. 19, 2, n. 32. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 715 rinf, nisi restituent^ in eos judichim daho} The reason assigned is, that the rule is well founded in public policy and convenience, and is the only means to prevent losses by fraud or connivance.^ A fortiori^ if the act was done with the consent of the principal, he was liable. Si ijyse alicui e nautis committi jussit, sine diibio deheat obUgari.^ The liability of the principal for the acts and negligences of his agents, as well as for his own, is fully proclaimed in the comments of the Roman law. Thus, for example, it is said, as to the owners or employers of ships : /Sz/^i^ quidcmi in iiavibiis, qui cusiodice gratia navihus j^rcqmnuntm^ id est,naviu7n custodes et dietarii. Si quis igitur ex his recej^erit, 2^uto in exercitorem dan- dam actionem ; quia is, qui eos Inijusmodi officio 2^rce- 2:)onit, committi eis j^crmittit^ The same doctrine is also applied to innkeepers. Caiqjo prcestcd factum eorum^ qui in ea caupona ejus Gau2:)once exercendce causa ihi sunt Item eorum, qui hahitandi causa ihi sunt. Via- torem autem factum non prcestat.^ The same doctrine is also applied to stable-keepers. Caujjones autem et stahidarios ceque eos accijnemus, qui cauponam vel sta- hidum exercent, institoresve eoi^um.^ Eodem modo te- nentur caupones et stahidarii, quo exercentes negotium ^suum recijiiuntJ And the whole doctrine is summed up in another passage, where it treats of the liability of such principals for the frauds, deceits, and thefts of their agents or servants, without their knowledge. Item ' D. 4, 9, 1; Poth. Pand. 4, 9, n. 1, 2; Domat, 1, 16, 1, art. 2, 4, 6 ; Id. 1, 16, 2, art. 2; Id. 1, 16, 3, art. 1-3; Ileinec. ad Pand. 4, 8, § 546- 648, 551. * Story on Ag. § 318, and note ; Domat, 1, 16, 1, art. 7. » D. 4, 9, 1, 2 ; Poth. Pand. 4, 9, note (2) ; Story on Ag. § 318, note ; Domat, 1, 16, 1, art. 5. ♦ D. 4, 9, 1, 3 ; Poth. Pand. 4, 9, note (2) ; Domat, 1, 16, 2, art. 1-4. » D. 47, 5, 1, 6 ; Poth. Pand. 47, 5, n. 3 ; Domat, 1, 16, 1, art. 3, 6, 6 D. 4, 9, 1, 5 ; Poth. Pand. 4, 9, n. 2; Domat, 1, 16, 1, art. 3. 7 D. 4, 9,3,2; Poth. Pand. 4, 9, n. 3. 716 PARTNERSHIP. [cHAP. XVI. exercitor nams, aut cauponce, aut stahidi, de dolo aut furto^ c£iiod in navi, aut caupona, aut stahulo^ factum erit, quasi ex maleficio teneri videtur, si modo ipsius nidlum est tnaleficium, sed alicujus eorum, quorum opera iiavem, aid cauponam, aut stahidum exercet. Cum e?iim neque ex maleficio, neque ex contractu, sit adversus eum constitida hcec actio, et aliquatenus culpce, reus est, quod opera malorum liominum lUeretur ; ideo, quasi ex male- ficio, teneri videtur} Here we have the rule of the liability of owners and employers of ships and stable- keepers, and the reason for it. They are responsible for the tort and fraud of their agents and servants, al- though they are not parties to it, quasi ex maleficio, as if they themselves were wrongdoers ; because they have made use of the services of such bad agents and servants in their employment. § 460. And here, again, the like limitations to this liability were recognized in the Roman law, as exist in ours. The principal was not liable for the torts or negligences of .his agents or servants, except in cases within the scope of their employment. Thus, for ex- ample, the innkeeper was liable only for the torts, or thefts, or damages, of his servants, done or committed in his inn, or about the business thereof; and not for ^ Inst. 4, 5, 3 ; Domat, 1, 16, 1, art. 7 ; Id. 1, 16, 2, art. 1-4. —The same rule is laid down in the Digest. In eos, qui naves, caupones, stabula exerce- bunt, si quid a quoquo eorum, quosve ibi habebunt, furtum factum esse di- cetur, judicium datur; sive furtum ope, consilio exercitoris, factum sit; sive eorum cujus, qui in ea navi naviganda causa esset. Navigandi autem causa accipere debemus eos, qui adhibentur, ut navis naviget, hoc est, nautas. D. 47, 5, 1, Intr. and § 1; Poth. Pand. 47, 5, n. 1, 3. Quaecunque de furto diximus, eadem et de damno debent intelligi. Non enim dubitari oportet, quin is, qui salvum fore recipit, non solum a furto, sed etiam a damno reci- pere videatur. D. 4, 9, 5, 1 ; Poth. Pand. 4, 9,n. 8; D. 14, 1, 1,2; Poth. Pand. 14, 1, n. 6 ; Heinec. Pand. Ps. 1, Lib. 4, tit, 8, § 551-554; Story on Bailm. § 464-468 ; Ersk. Inst. B. 3, tit. 1, § 28, 29 ; Id. B. 3, tit. 3, § 43- 45 ; 1 Bell, Comm. B. 3, c. 4, § 5, p. 465-476, 5th ed. ; Domat, 1, 16, Intr.; Story on Bailm. § 401. CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 717 such torts or thefts committed in other phices. Eodem modo tenentur caiipones et stabidarii^ quo exercentes necjo- tium suum reciiy'mnt. Ceterum, si extra nerjotiinn rece- perint, non tenebuntur} So, the owner or emi)loyer of a ship was not hable for the torts, or thefts, or damages, of the mariners, unless done or committed in the ship, or about the business thereof. Debet exercitor omnium nautarum suonim, sive llheri, sive servi^ factum prce- stai^e. Nee immerito factum eorum prcestat^ cum i2:)se eos suo pericido adliibuerit. Sed non alias I'^^^^^^^^'-U quam si in ipsa nave damnum datum sit. Ceterum, si extra navem, licet a nautis, non prcestahit.^ § 461. Similar princij^les were applied in the Ro- man law to the ordinary agents employed in the common business of trade and commerce, called Insti- tores ; ^ and also in the case of domestic servants and persons belonging to the family. Prceter ait de his, qui dejecerint, vel effuderint. Unde in eum locum, quo volgo iter fiet, vel in quo consistefur, dejectum vel effusum quid erit, quantum ex ea re damnum datum factumve erit, in eum, qui ihi hahitaverit, in duplimi judicium daho^ Si servus, insciente do7nino,fecisse dicetur, in judicio adjlciam, aut noxam dedere.^ These seem to be the most important cases, specially and positively provided for in the Roman law. That law does not seem to have recognized, to the full extent, the general maxim. Respondeat Superior, inculcated by our law.*^ » D. 4, 9, 3, 2 ; Poth. Pand. 4, 9, n. 3. 2 D. 4, 9, 7 ; Poth. Pand. 48, 5, n. 1 ; Domat, 1, 16, 1, art. 7 ; Id. 1, 16, 2, art 1-4. ' Story on Ag. § 8 ; Domat, 1, 16, 3, art. 1 ; D. 14, 3, 5, § 1-9 ; Potb. on Oblig. n. 121, 453, by Evans; Id. in French ed. n. 121, 489. * D. 9, 3, 1 ; Id. 9, 3, 27, 11 ; 1 Bl. Comm. 431 ; Inst. 4, 5, 1 ; Ersk. Inst. B. 3, tit. 3, § 46; D. 19, 2, 11 ; Domat, 2, 8, 1, art. 1-9. ' D. 9, 3, 1 ; Poth. Pand. 9, 3, n. 1 ; Inst. 4, 5, § 1, 2. « See 1 Stair's Inst. B. l,tit. 13, § 3; Story on Ag.§454,n. 1. — Mr. Holt, in a passage cited in Story on Ag. § 454, n. 1, says, that, " In the civil law the 718 PARTNERSHIP. [cHAP. XYI. § 462. The modern nations of continental Europe have adopted the doctrine of the Roman law to its full extent, and some of them, at least, seem to have carried it further. Pothier lays down the rule in the following broad terms: " Xot only is the person, who has committed the injury, or been guilty of the negli- gence, obliged to repair the damage, which it has occasioned ; those who have any person under their authority, such as fathers, mothers, tutors, preceptors, are subject to this obligation, in respect of the acts of those who are under them, when committed in their presence, and generally when they could prevent such acts, and have not done so. But if they could not prevent it, then they are not liable : KuUmn crimen jKititur is, qui non prohibet, quum 2)rohihere non ^^otesf. (I. 109,^. de reg.jur.) Even when the act is committed in their sight, and with their knowledge ; Culpa caret, qui scit^sed p)i^oliiherenon p)otest. (I. oO, ff. d. t.) Mas- ters are also answerable for the injury occasioned by liability was narrowed to the person standing in the relation of a pater-famiUas to the wrong-doer." It is also observable, that Mr. Le Blanc and Mr. Mar- shall, in arguing the case of Bush v. Steinman (1 B. & P. 404, 405), assert, that, " the liability of the principal to answer for his agent is founded in the superintendence and control which he is supposed to have over them (citing 1 Bl. Comm. 431). In the civil law, that liability was confined to the person standing in the relation of pater-familias to the person doing the injury." For which they cite Inst. 4, 5, 1, and D. 8, 3. These citations clearly prove, that the pater-familias is liable for the wrongful acts and negligences of his domes- tics ; but they do not prove, negatively, that other persous were not liable, as principals, in any other cases, for the wrongs and faults of their agent. The text shows, that in many other cases, besides that of a pater-familias, the prin- cipal was in the civil law liable for such wrongs and faults. The learned counsel seem to have misunderstood the true meaning of the text of Black- stone's Commentaries, which by no means insists upon any such limitations. Mr. Justice Heath, ia the same case, seems to have entertained the notion, that the Roman law was or might be as limited as the learned counsel sup- posed. But he added: " Whatever may be the doctrine of the civil law, it is perfectly clear, that our law carries such liability much further." s. c. 1 B. & P. 409. See also Story on Bailm. § 454-459. CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 719 tho wrongs and negligences of their servants. They are even so, when they have no power to prevent them, provided such wrongs or injuries are committed in the exercise of the functions, in which tlie servants are employed by their masters, although in the mas- ter's absence. This has been established, to render masters careful in the choice of those whom they employ. With regard to their wrongs, or neglects not committed in these functions, the masters are not responsible." ^ The doctrine of the Roman law seems to be followed with more scrupulous exactness in the laws of Spain ^ and Scotland,^ where the specific enu- merations of the Roman law are to be found followed out in treating of the liability of principals for the acts of their agents.'* § 463. These are the most material considerations, which seem necessary to be presented to the learned reader in order to illustrate the leading distinctions be- tween cases of partnership, and cases of part-ownership. And, here, these Commentaries, according to their orig- inal design, are brought to their appropriate conclusion. In reviewing the whole subject of partnership, it cannot escape the attention of any careful observer, how many of the doctrines of the jurisprudence of the common law are coincident wdth those of the Roman law, and those of the modern commercial nations of continental Europe. This circumstance affords no shght proof, that they are ' roth, on Oblig. by Evans, n. 121,453; in the French ed. n. 121, 489. 2 2 Moreau & Carleton, Partidas 5, tit. 8, 1. 26, p. 743 ; Story on Bailm. § 465-468. =» Ersk. Inst. B. 3, tit. 3, § 43-46; 2 Bell, Coram. § 398-406, 4th ed.; 1 Stair, Inst. B. 1, tit. 13, § 3. * These last four sections are copied literally from Storj' on Ag. § 458-461. The object in re-insertiug them here is the desire to make each work inde- pendent of the other ; and it seems indispensable to a full exposition of this branch of the subject, to present the Roman and foreign law with fuhiess and exactness. 720 PARTNERSHIP. [cHAP. XVI. essentially founded in the principles of general justice, sound policy, and public convenience. If it should be objected, that the common law on this subject contains some very subtle, artificial, and even arbitrary doctrines, having- no just foundation in an enlarged and liberal equity, and not susceptible of any satisfactory vindica- tion, except as mere positive or technical rules, the same objection lies, at least to an equal extent, against the system of the Roman law upon the same subject, and the jurisprudence of modern Europe, built upon it. In truth, it is impracticable to establish any universal rules, which shall equally suit the habits and institutions, the policy, and the various employments of all commercial nations. Every branch of municipal law must have a close affinity to all others, belonging to the same com- mon system, which attempts to regulate and enforce the rights, the liabilities, and the remedies by and against particular persons in their various social relations. The positive and technical rules, applicable to one branch, must in a great measure pervade the whole, in order to make the administration of justice by the public tribu- nals at once safe, easy, certain, and satisfactory. It would, therefore, be a matter of wonder, if in the diver- sities of pursuits, of occupations, of interests, and even of political arrangements, in different countries, we should not find ingrafted upon each system some pecu- liarities, which, in a philosophical sense, might seem to be either incongruities or defects. Human wisdom never yet has achieved any thing perfect ; and the most, that can be expected from the most enlightened juris- prudence, is, that it shall contain within itself near ap- proximations to the soundest equity and moral justice, and in its adaptations be fitted to the wants, the spirit, and the policy of the age. In this respect the common law, especially in the department of commercial juris- CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 721 prudence, which has grown up and expanded with the increasing intercourse between different nations, and the enterprise, and skill, and necessities of navigation and trade, may justly challenge competition with any other system in ancient or in modern times. It has been nourished by the genius, and learning, and independ- ence of Judges, whose labors, like those of Ulpian, and Gains, and Paul, and Papinian, are destined to the same immortality as the Law itself. Its highest praise is, that its principles receive an almost universal homage, not as the positive dictates of authority, but as the per- suasive and irresistible influence of reason. Valent jyro ratione, non j^ro introducto jure. 46 INDEX. Section ABATEMENT OF SUIT. in cases of contract 239 nonjoinder of all contractors defendants . . 160, 454 nonjoinder of all plaintiffs fatal on trial as well as in abatement 235, 236, 244, 245, 454 in cases of tort 167 nonjoinder of all plaintiffs 167, 454 nonjoinder of all defendants 167 (See Partners — Fraud.) ABSENCE FROM THE COUNTRY. ■when a good cause of dissolution of partnership or not . . 298 ACCEPTANCE. of separate security of one partner, when debt of firm extinguished by or not .... 165, 156, 157, 254, 255 ACCOUNT. annual, under articles, effect of 206, 207, 208 all profits to be accounted for in 175, 181, 349 how taken on dissolution 344-354 between part-owners, how and when taken .... 449, 451 by suit at law 449, 450 by bill in equity 449, 451 when running account with new firm discharges the old or not 154-158 will be compelled of fraudulent gains by partner . . 175-180 each partner bound to keep proper accounts 181 whether account decreed between partners without a prayer for dissolution 334 ACCOUNTS. will not be taken generally in equity pending the part- nership or the balance set right 229, 349 ACKNOWLEDGMENT OF PARTNERS. when it binds the firm or not 107 of debt 107, 323, 324, 324 a, 324 b 724 INDEX. Section ACIQfOWLEDGMENT OF ONE PAKT-OWXER. when it binds the other owners or not 453 ACT OF BAXKRUPTCY. effects and consequences of 313, 314, 374-408 (See Bankruptcy.) ACTIONS BY PART-OWNERS 454 against part-owners 455—462 effect of nonjoinder as plaintiffs 235, 236, 244 effect of nonjoinder as defendants 235 ACTIONS BY PARTNERS. all must join in 235, 236, 244 against partners, all should be joined 235 ACTIONS BY AND AGAINST PARTNERS. (See Partners and Partnership.) between partners 216-228 232 against third persons 23Jr-264 ADMINISTRATION OF PARTNERSHIP. who have a right to, generally 181 who under articles 204 equity will enforce and protect the right of 204 ADJ^URALTY, COURT OF. jurisdiction in cases of part-owners 428 in case of an equal division of interests and opinions . . 435-439 ADMISSION OF PARTNER. when it binds the firm or not 107 of debt 107 whether it binds after dissolution or not 323, 324 of part-owner, when it binds others 453 ADVANCES. by partner, how considered 219, 328 AGENT. every partner agent of the firm 1 when agent, sharing profit as a compensation, a part- ner or not 32, 33, 34, 35-52 distinction between sharing of gross and net profits . . 35-80 part-owner when agent or not, and how far 89, 412-414. 419-422, 440, 446 AGREEMENT TO FORM PARTNERSHIP. when forced in equity 188, 189 articles of partnership, when and how enforced . . . 188, 189 (See Articles.) ALIENS. when they may be partners or not 9 friends may be 9 alien enemies not 9, 240 dissolution of partnership} by war 9 INDEX. 725 Section ALLOWANCE TO PARTXER FOR SERVICES. when allowed or not 182, 185, 186 AXXUITY. when receiving an annuity makes a person a partner or not 66-69 APPROPRIATION OF PAY:\IENTS. effect of upon and after change of firm .... 157, 253, 254 how made 157 ARBITRATION. (See Partxeks — Paktxersiiip.) one partner cannot bind firm by 114 articles to refe:^ to, cannot be enforced in equity .... 215 when arbitrators maj^ award a dissolution on an arbitra- tion 215, 299, 300, 301 ARTICLES OF PARTNERSHLP. (See Paktxekship.) construction of, generally 187-215 construction of special articles 198-202 duties under 172-185 partners bound to conform to 173 when courts of equity will decree specific articles to form a partnership 188, 189 what articles after partnership will be specifically decreed to be performed . 187, 189 how and when waived, controlled, or "varied 192, 199 ASSETS PARTNERSHIP, what are 92, 93 (See Partxeks axd Paktxership.) distribution of, on dissolution 350, 355 ASSIGNEES IN BANKRUPTCY. rights, powers, and interests of 375 ASSIGNMENT OF PARTNERSHIP PROPERTY. when and what assignment good by one partner . 101, 309, 310 to i^ay partnership debts 101, 309, 310 whether general assignment by one partner good without consent of all 101 when one partner may assign his interest in partnership or not 183,307,308 dissolution of partnership, when by 307, 308, 309 when assignment to partner good or not . . . 358, 372, 373, 396 involuntary, effect of. (See Baxkruptcy.) ' involuntar}-, effect of by seizure in execution of. , . . 311, 312 assignment to one partner in cases of bankruptcy, when valid or not 396 ASSUMPSIT. (See Actiox — Remedies.) ATTAINDER OF FELONY, OR TREASON. dissolution of partnership by 304, 305 AUTHORITY AND POWERS OF PARTNERS to bind each other 101-125 AWARD. (See Arbitratiox.) 114,215,299,301 726 INDEX. B. Section BANKRUPTCY. (See Partners and Partnership.) effects and consequences of . 313, 374-396 dissolution of partnership by 313 from what time ol-t rights of joint creditors on 374-409 rights of several creditors on 374-409 reputed ownership in cases of, what is 397-404, 407, 408 rights of creditors in respect to dormant partners in cases of 393 rights and powers of solvent partners in cases of . 338, 339, 407, 408 rights of creditors having a security 389 BILLS AND NOTES. {See Promissory Notes.) when partners may make or indorse in name of firm . 102, 102 a, 126, 127 when partnership not bound by 126, 127 BOND TO PARTNERS. for fidelity of clerks, &c., how and when extinguished . . 245-251 by one partner, when binding the firm or not . . . 117-122 a BOOKS OF PAHTNERSHIP. effect of entries in 24, note, 191 c. CAPITAL STOCK. one partner may supply, and another labor and services 15, 16, 17 community of interest of partners in 15, 16, 17, 27 how and when partners contribute to 15, 16, 17 when community of interest creates a pai'tner or not in . 27-29 of what it may consist 15-58 a, 88-100 construction of articles as to advance of ... . 203, 204, 205 CHANGE OF FIRM, effect of 153, 160 notice of, when necessary 159-163 CLANDESTINE BUSINESS AND PROFITS. every partner responsible to partnership for 177, 178 CLUB, when exclusive credit given to or not 144, 145 COLLUSION OF ONE PARTNER. when it binds firm or not. (See Fraud.) 108, 109, 131, 132, 133, 133 a, 162, 163, 164, 237, 238 COMMANDITE. partnership in, what is 78 how formed 87 INDEX. '' 727 Section CCMMENCEMEXT OF PARTNERSHIP. when it takes effect 191 COMMISSIONS. when participation in, makes a partnership or not 24, 37, 38, 41 COMMUNITY OF INTEREST. in profits. (See Profits.) 18-23 when it makes parties partners 53-69 when not. (See Partxp^rsiiip.) 30-52 COMPENSATION OF AGENT. when sharing profits makes agent a partner or not . . . 33, 34 partners cannot claim unless by special agreement 182, 185, 186 allowed to partner for expenditures and losses on ac- count of fii'in 185, 186 COMPOUNDING AND COMPROMISING debt of firm by one partner, when valid 115, 116 COMPROMISE AND COMPOUNDING of debt by one partner valid 115, 116 CONCEALMENT BY PARTNER INJURIOUS TO PARTNTERSHIP. when he is liable for 172 when his contracts with firm voidable for 172 CONTINUANCE OF PARTNERSHIP. construction of articles as to 195 after death of a partner by his agreement . . . 180, 199-201 a by representatives or appointees 180, 199-201 a how far debts contracted after his death bind his assets . . 201 a CONTINUING CONTRACTS how affected by change of firm 243, 245-251 in cases of guaranty .... 243, 244, 245, 248, 249, 250, 251 in cases of suretyship 246, 248, 249 in cases of bonds for fidelity of clerks, &c 249, 250 CONTRACT. partnership founded in 2-6 {See Partxership.) what are deemed partnership contracts or not 134, 137, 138, 154, 243-256 by what contract one partner can bind the firm 102-109, 142, 143 when firm not bound 110, 113, 117, 118, 142-146 not unless made in firm name 102, 102 <7, 142 nor if by deed 117-122 a exceptions to rule 120-122, 243, 244 not where exclusive credit given to one partner . . . 134-145 Avith partners, how extinguished . . . 154-157,253,254,255 {See Extinguishment.) what deemed of the partnership or not 243, 244 how sued upon when one partner retires 244 728 INDEX. Section COXTKACT — continued. continuing, how construed 245-251 of guaranty to or by firm 245-248 of suretyship for clerks by or to firm 245-251 COXTRACTS partnership, are deemed joint and several in equity . . . 362 COXTRIBUTIOXS BETWEEX PARTXERS. when right exists to 169-173 when it may be had at law or not 218,219,220,221 when in equity ' . 222, 223, 224 when in cases of tort or not 220 COX VERSION OF DEBTS. (See ExTiNGuismrEXT.) what is 369, 370 effect and consequences of 369, 370, 397-404 CONVEYAXCE OF PARTXERSHIP PROPERTY. by one partner, when good or not 106, 309, 310 {See AssiGXMEXT.) CORPORATION. * whether a, may be a partner 20 COURTS OF EQUITY. {See Partners.) remedial power between partners 176-183 in cases of fraud or clandestine business or bargains 174-183, 287 injunctions when granted by . . .178, 179, 209-212, 225-233 when a receiver appointed by 228-231 when a dissolution decreed by . . . 176, 232, 282, 286-298 when the specific performance of articles of partner- ship will be decreed 188, 189 when specific performance'of articles of partnership decreed or not 204-210 bill inequity between partners to account lies in . . . 347-351 so between part-owners to account 449 when equity will interfere to restrain one partner violating the articles of partnership, the bill not praying a dissolution 229 whether and how far they will interfere between partners, unless a dissolution is prayed by the bill . . . 229 CREDIT. when exclusive credit is given to one partner, the partnership is not bound 134-145, 154, 243 what is exclusive credit or not 134-145, 158 when credit to new firm discharges old firm . 154-158, 253-255 CREDITORS. when persons are partners as to, although not inier sese. {See Partnership.) 53-70 when persons not partners as to 30-52 INDEX. 729 _ Section CPEDITORS, RIGHTS AXD PRIVILEGES OF. (See JoiXT Creditors.) joint . . . 361-365, 390, 391 several 363, 390, 391 joint and several 384-386 equities and quasi lien of 326, 357-361 rights of creditors against partners generally .... 120-168 in cases of death of one pai-tner 3G1, 362 against survivors 361, 362 against estate of deceased partner 361, 362 what debts are joint and several 367, 373 of bankruptcy 376, 377, 384, 386 D. DAIMAGES. liability of partners to contribution for . . 169-173, 220, 221 when a partner liable to firm for 185 DEATH. dissolution of partnership by 317, 318, 319 a {See Partners and Partnership.) from what time 319 effects and consequences of 342-356 rights of survivors 344-347 rights of representatives 342-346 rights of creditors 361,362 DEATH OF PARTXER. when partnership continued by his agent for a period after his death, how far his assets are liable for debts con- tracted after his death 201 a DEBT OF SEPARATE PARTNER. pajinent of, when misapplication of partnership funds or not 132, 133 when debt binds partnership, which is contracted before it is formed, or not 146, 147-152 when incoming partner bound or not 152, 153 DEBTS DUE BY PARTNERSHIP. (See P.uitnership.) when joint and several 262 conversion of, what. is, and when it takes place .... 369, 370 effects of conversion 369, 370, 397-403 DEBTS OF PARTNERSHIP ARE JOINT AND SEVERAL. DECLARATION OF PARTNER. when it binds the finn or not . . . .107, 323, 324, 324 a, 324 b whether after dissolution or not 323-324 6 of one part-owner, when it binds others 453 DECREE IN EQUITY OF A DISSOLUTION. effects and consequences of 356 730 INDEX. Section DECREE m EQUITY OF A DISSOLUTION — con^mwed. when made 176, 232, 282, 286 receiver, when appointed 228-231, 330 DEED. one partner cannot bind the firm by deed .... 101, 117-122 a exceptions to the rule 120-122 DEFAMATION OF PARTNERSHIP. action lies for 256-258 DELECTUS PERSONS, when essential in partnership 5 DILIGENCE, DUE, when required of every partner in partnership business 182-186 DISCHARGE OF PARTNERSHIP DEBT. (See Extinguishment.) what is or is not 155-158, 253-255 DISSOLUTION OF PARTNERSHIP 265-319 (See Partners and Partnership.) when decreed in equity 232, 286, 287, 288 when for fraud 232, 285-288 when decreed for gross misconduct .... 232, 233, 285-288 when not 286, 287, 288 how produced 265-319 by act or consent of parties 265, 268, 270, 274 by decree of court of equity 232, 265, 282-285, 295 by operation of law 265 when by efflux of time 278, 279 when at will 269-277 by extinction of the thing 280 by accomplishment of the entire business 280 on account of the impracticability of the undertaking . . . 290 on account of incapacity of partner . , . 294, 295, 298, 304 on account of insanity of partner 295-297 by award of arbitrators 299, 300, 301 by change of condition of a partner ,. 302-306 by absence from the State 298 by outlawry 304 by attainder 304, 305 by marriage of a female partner 306 by assignment of all share and interest in partnersliip . . 307-310 by involuntary assignment. (See Bankruptcy.) . . . 313, 314 by seizure of partnership property in execution .... 311, 312 by public war 315, 316 by death of partner 317, 318 from what time 314, 319, 319 a effects and consequences as to partners 320-356 (See Partners and Partnership.) INDEX. 731 Section DISSOLUTION OF PARTNERSHIP — conimwed. effects and consequences as to creditors and third persons 357— ill (See Partners and Partnership.) effects and consequences of, by voluntary act .... 320-337 by bankruptcy 320, 337-341, 374-396 by death 320, 342-355 by decree in equity 320, 356 when notice of, necessary or not 334-336 in cases of voluntary dissolution 357-361 in cases of bankruptcy 337, 374-394 in cases of death 302 riffhts atrainst survivors 362 rio-hts against estate of deceased 362, 364 rights of joint creditors 365-395 rights of several creditors 365-395 DISTRIBUTION of partnership effects 350-356 DORMANT PARTNER. (See Partnership.) 80 liability of, to third persons 63, 64 bound by acts and contracts of ostensible partners .... 103 not bound after his retirement from the firm 159 when necessary party to a suit or not 241 liabilities of, in cases of bankruptcy 393 when dormant partner should join or be joined in a suit 241 DOUBLE PROOF, what is, and when allowed 384-387 DURATION OF PARTNERSHIP. (See Partntsrship.) ... 84 at will 84, 197, 201, 277, 297 for a fixed time 84, 195, 278, 279 what is presumed as to 84 when deemed to be for life 271 construction of articles as to 195, 196, 198-200 in case of death of a partner 195 when deemed to be renewed 197, 198 effect of renewal indefinitely 197, 278, 279 construction of articles, as to continuation of, on death of a partner 198-200, 279 DUTIES AND RIGHTS OF PARTNERS 169-186 (See Partners and P.vrtnership.) implied 169-186 express. (See Articles.) * 187-215 E. EFFLUX OF TBIE, dissolution of partnership by 278, 279 (See Dissolution.) 732 INDEX. Section ELECTION OF CREDITORS to prove debts in bankruptcy 884-388 of joint creditors 884-388, 891, 892 . of joint and several creditors 384-388, 393, 394 of creditors having a pledge or security 389 in cases of dormant partnershijj 393 ENTRIES IN BOOKS OF PARTNERSHIP, effect of . . *. 24, n., 191 EQUITY, COURTS OF. (-See Courts of Equity.) 178 whether courts of equity will interfere between partners and appoint a receiver, except the bill prays a dissolu- tion. (See Myl. & Craig, 635, 639.) 229 when specific performance of articles to form a partnership will be decreed by 188, 189 when specific performance of articles after partnership will be decreed by 204-210 when injunction granted by or not 178, 179, 209-213, 221-233 receiver, when appointed by 228-231 when dissolution decreed by 176, 232, 282, 286 bill for account between part-owners, when it lies in . . 449- EVIDENCE. (-See Admission, Acivxowledgjient, Declaratiox.) when and what acts or acknowledgments of one partner bind the others, or not 107 EXECUTION AGAINST PARTNERSHIP EFFECTS ON A SEPARATE JUDGMENT AGAINST ONE PARTNER, when good for the separate debt of one partner . . . 261-264 how far the right of the cz-editor extends 261-264 what may be seized on 261-264 whether sheriff can sell on 262, 268 when injunction lies by the other partners against sale by sheriff 264 effects of seizure on, in dissolving partnership . . . 311,312 EXECUTORS AND ADMINISTRATORS OF PARTNERS. (See Partners and Partnership.) rights and duties of 342-347 EXPENDITURES BY PARTNER in business of firm to be allowed him 185 EXPIRATION OF PARTNERSHIP. {See Dissolution of Partnership.) 265-319 a EXTINGUISHMENT* OF PARTNERSHIP DEBT. what is, or not 153-158, 251-255 upon change of firm 153-157 upon reth'ement of a partner 155, 156, 158, 159 upon giving credit to new firm .... 157, 158, 253, 264, 265 by conversion of partnership debt . . . 369, 370, 397-404 INDEX. 733 F. Section FELONY, ATTAINDER OF, is a dissolution of partnership 304, 305 FEME COVERT. when she can be a partner or not 10,11 in case of abjuration or exile of husbaml 10, 11 in case of special custom 10-12 not without consent of her husband 10-12 when and how far bound as a partner 10, 11 powers of, in equity, under nuptial contracts, or other agreements 11 when treated as a feme sole 11, 12 when a partner under a foreign law 239 marriage of a feme sole, when a dissolution of prior partnership 306 FIRM, STYLE OF. construction of articles as to 202 all the partners bound to conform to it 202 use of, necessary to bind firm to contracts 102, 134-136, 142, 143 exceptions to the rule 142, 143 FISHERIES, when parties in, partners or not 42 FOREIGN LAW. when it governs the rights of the partnership .... 239, 240 FRAUD OF A PARTNER. when it binds the other innocent partners 108, 109, 131^ 163, 164, 236, 237, 238 when not 128,129,131,132 of retiring partner binds him to pay debts 162, 163 to injury of partnership, he is liable for 172, 173 what acts of a partner are frauds on the partnership . 172, 175 how remediable in equity 176 dissolution when decreed for 233, 287 FRAUDS, STATUTE OF. how it affects partnership in lands 83, 93 G. GENERAL PARTNERSHIP. what is 74 {See P.VRTXERSHIP.) GOOD-WILL OF A TRADE. whether it is partnership property or not 99, 100 what passes by agreement to convey it to one partner . 211, 212 how equity will enforce right to 212 734 INDEX. Section GUARANTY. when partnership bound by, or not 111,112,127 ■when guaranty to partnership extinguished or not .... 243 effect of change of fii-m on existing 245-250 H. HUSBAND AKD WIFE. {See Feme Covert.) 10-12 when wife may, or not, be a partner 10-12 when husband bound by acts of wife, as partner, or not . 10-12 when they may sue as partners under foreign law .... 239 I. ILLEGAL PARTNERSHIP. void , 6 what is illegal 6 {See Partxership.) IMPRACTICABILITY OF THE UNDERTAKING. aground for dissolution of partnership 290- INCAPACITY OF A PARTNER. {See Dissolution of Partnership.) when a ground of dissolution of partnership .... 292, 293 US^COMING PARTNER. rights and responsibility of ^ . 152, 153 4 INFANT. partnership contract does not bind 7 partnership by, voidable, not void 7, 255 INJUNCTION. when granted in equity between partners 178, 179, 192-202, 209-212, 222-233 not granted for fugitive and temporary breaches of duty 225, 286, 287, 288 when granted against third persons 258-260 in cases of fraud . . .' 258, 259, 285-288 in case of gi'oss misconduct 258-260, 285-288 in other cases 258-260 in cases of separate execution against effects of firm . 260-264 whether equity will restrain sale by sheriff on sepa- rate execution 264 INSANITY OF A PARTNER. when a good ground of dissolution of partnership . . . 295-297 INSOLVENCY OF A PARTNER. construction of article for dissolution of partnership on 214, 215 INTEREST. when allowed between partners 182 a INDEX. 735 Section INTERESTS AND RIGHTS OF PARTNERS in partnership property 88-100 (See Partneksiiip.) J. JOINDER OF PARTNERS. (See Nonjoinder op Partners.) all should join as plaintiffs 235, 236, 244, 245 objection of nonjoinder fatal at trial . . . 235, 236, 244, 245 all should be joined as defendants 235 but nonjoinder only pleadable in abatement . 235, 236, 241, 242 JOINDER OF PART-OWNERS in cases of contract 454, 455 in cases of tort 454, 455 of all part-owners as plaintiffs should be in cases of con- tract 454, 455 omission of, fatal 454, 455 in tort all should be joined 454 but the omission is only pleadable in abatement 167 JOINT ADVENTURERS, when partners or not 33, 34 JOINT CREDITORS, RIGHTS AND PRIVILEGES OF. (See Partners and Partnership.) against joint effects 361-365, 390 against separate effects 361-365 equities and quasi lien of , . 97, 326, 357-361 what property deemed joint, and what several 369, 370, 397-404 JOINT DEBTS, what are 145-153, 376-387 what are joint and several 387, 389, 391-394 how payable in cases of bankruptcy 376-387 in cases of dormant partnerships 393 JOINT PROPERTY. what deemed joint, and what several .... 369, 370, 397-404 JOINT STOCK COMPANIES, liability of 164 liable like common partners 164 rights and powers of 213 rights of majority to govern 213 L. LAND, how statute of frauds affects partnership in 83 partnership property in 92, 93 736 INDEX. T A ., Section LAND — continued. how treated in equity 92, 93 one partner can transfer only his own share therein, un- less authorized by deed by other partners .... 117-122 a LEASE in name of one partner, when the benefit of belongs to the firm 174 LETTER OF CREDIT, when partnership bound by, or not 127 LU.BILITY AND EXEMPTIONS OF PARTNERS ON CON- TRACTS. {See Partnership.) as between themselves 169-186 as to third persons 126-169 on contracts 126-165, 168 a on torts 166-168 a LIBEL OF FIRM, action lies for 256, 257 by firm, action lies for 257 LIEN OF PARTNERS on partnership property 97, 98, 360, 361 upon dissolution 360, 361 LIEN OF CREDITORS, when they have a quasi lien or equity, and what 97, 326, 357-361 LIMITATIONS, STATUTE OF. admission of debt by a partner before dissolution, whether it revives debt or not 107 whether it does, when made after dissolution of partnership 323, 324 in case of misrepresentation 108 when a bar to an account between partners 233 a when a bar, after dissolution of partnership to creditors . . 324 c admission by one part-owner, when it binds the other part- owners, or not 323, 325, 453 LOSSES, when and how community in, essential to partnership, or not 19-22, 60-62 when share of profits makes a person a party, although he bears none of the losses 60-62 how losses borne in absence of any special agreement . . 20-27 validity and effect of special agreement, as to . . . . 60-63 by neghgence, when a partner responsible for ... . 169-173 by one partner for the firm to be compensated for .... 185 LUNACY of a partner, when cause for dissolution 7 LUNATIC, whether a, may become a pai'tner 7 INDEX. 737 M. Section MAJORITY IN CASES OF PARTNERSHIP. rights and powers of 123 (See Paktners.) when entitled to govern 123, 12i, 125, 213 when not 125, 213 construction of articles as to rights and powers of ... . 213 MAJORITY IN CASES OF PART-0^\^ERSHIP. rights and powers of 413, 418-426 as to repairs of ship .'418-423 as to employment of ship 426-434 as to furnishing cargo 433, 434 as to appointing officers 432, 445 MARRIAGE OF FEME PARTNER. a dissolution of partnership 306 MINING BUSINESS. when partnership bound by acts in, or not 126 MINORITY IN CASES OF PART-OWNERSHIP. rights and powers of 428-431 MISAPPLICATION OF PARTNERSHIP FUNDS. when it binds partners .... 108, 109, 130, 131, 133, 134 when not 128, 129, 132 to pay the separate debt of one partner, when binding or not 133, 134 MISCONDUCT OF PARTNER. when a ground for an injunction 226, 227 when for a dissolution 233, 287, 288 MISREPRESENTATION BY PARTNER 107, 108 when it binds the partnership, or not 107, 108 when he is liable for, to his partners 172, 173 when it is ground for a dissolution 228-233 MORTGAGE. when one partner may mortgage partnership property, or not 94-96 when and how a creditor, holding a mortgage, may prove in bankruptcy 389 N. NMIE OF FIRM. construction of articles as to 100, 202 must be used to bind partnership 102, 134, 135, 136, 142, 143 effect of its being the sole name of one partner .... 139 NEGLIGENCE. when partner liable for 1G9-172 47 iob INDEX. Section NEGLIGENCE — coniinued. when partners liable for inter sese 169, 173, 348, 349 when to third persons 166, 167, 168 when part-owners liable for inter sese 449, 452 when to third persons 445-460 NOMINAL PARTNERS. who are 80 liability of 64, 65 (See Partnership.) whether they must join and be joined in suits . . . 241, 242 NONJOINDER OF PARTNERS. {See Joinder of Partners.) effect of, if plaintiffs 235, 236, 244, 245 effect of, if defendants 166, 235, 236, 240, 241 in cases of contract 240, 241, 242 in cases of torts 167 of dormant partner, effect of 240, 241 of nominal partner, effect of 242 NONJOINDER OF PART-OWNERS. effect of, as plaintiffs, in cases of contract 454 as plaintiffs, fatal at trial 454 effect of, as defendants 167 pleadable only in abatement in cases of defendants . . . 197 in cases of tort 167 as plaintiffs 454 as defendants 167 NOTICE. when acts of a partner in violation of duty known to third persons will exonerate partnership 127-134 of retirement of pai'tner, when necessary or not . 159-163, 334, 335, 336, 343 what is sufficient ^ 161, 162, 163 when necessary on dissolution of partnership .... 159-163 when not 159, 160, 162, 336 not in cases of death 162, 336, 343 not in cases of bankruptcy 336 when notice to one partner binds the firm, or not . . 107, 108 0. OSTENSIBLE PARTNERS, who are 80 liability of 64, 65 {See Partnership.) when bound after retirement 160 when notice of retirement necessary 160 what notice sufficient 161, 162 INDEX. 739 Section OUTLAWRY. a dissolution of partnership 334 OWNERS OF SHffS. rights, powers, duties, and lial)ilitics of. (See Part- ^ OAVNEiis.) 412-460 how ships held by part-owners 416, 417 no right of survivorship among 417 OWNERSHIP, REPUTED. in cases of bankruptcy, what is or not .... 397-404, 407 P. PARTNERS. are both principals and agents 1 who may be 7-14 persons sui juris 7, 8 alien friends 9 feme covert in special cases 10, 11, 12 infant, when at his own election bound 7,8 ■who may not be 7-14 infimts generally 7, 8 alien enemies 9 married women 10, 11, 12 special exceptions by custom 12, 13, 14 different sorts of 80 ostensible partners 80 dormant partners 80 secret partners 80 rights of, in partnership property 88-100 difference between partners and part-owners .... 89 whether they are tenants in common or joint- tenants 88-91 no difference of rights in equity, whether prop- erty is personal or real 92, 93 powers and authorities of partners over partnership property 94-96 power to sell or pledge partnership property .... 94-96 liens and rights of partners on partnership property . . 97-99 powers and authorities of partners generally . . . 101-125 to assign property generally or specially 101 to assign property for benefit of creditors 101 to buy or sell or pledge goods 102, 102 a, 126 to borrow money 102 to draw bills and notes 102, 102 a to negotiate and indorse bills or notes .... 102, 102 a to draw checks 102, 102 a 740 INDEX. Section PARTNERS — continued. to procure insurance 102 to do any acts authorized by usage of the trade or business 102, 102 a, 103, 126 the like powers exist in cases of dormant partners 103 and of trustees who are partners 105, 106 to do all acts appropriate to and within the scope of the partnership business .... 107, 108, 113, 126, 127 how powers and authorities are to be exer- cised and executed by 102 powers should be executed in the name of the firm 102 right of majority of, to govern 123, 213 representations and admissions of, when they bind the firm 107, 108, 109 when not 107, 108, 109 when notice to one pai-tner binds the firm 107 when fraud of one partner binds the firm 108 release of one partner binds the firm 115, 116 so compromise of debt 115, 116 so guaranty within scope of the trade or busi- ness Ill, 127 what contracts are deemed partnership contracts, or not 134, 137, 138, 154, 243 when the acts of a partner do not bind the firm 110-113, 117, 142, 145 not, when in business beyond scope of partnership . 110, 111, 112 not, when in acts not incident to the business or trade 112, 113 one partner cannot bind the firm in cases of sale of real estate 101 one partner cannot bind the firm by submission to arbitration 114 one partner cannot generally bind another by deed, unless authorized by deed 117-122 exceptions to the rule 120-122 one partner cannot bind the firm by contract with a third jDcrson, who knows that he is acting in fraud of the firm or without authority .... 110-113, 128-131 nor by a guaranty not within business of the firm . . .111,127 nor, ordinarily, by an appropriation of partnership property to his private debts 132, 133 incases of disagreement between partners, the ma- jority governs '. . . 123 INDEX. 741 Section PARTNERS — continued. exceptions to the rule 123, 124, 125 liabilities and exemptions of partners to third persons . 126-1G8 when all are liable in solido ... 102-109, 456 partners bound only for acts done -within scope of business of firm 106,107,108,109,126,127 not bound where act is fraudulent and known to the other party 110-113, 128-133 not bound where credit is exclusively given to one partner 134-139, 153, 154, 243 what is sufficient evidence of exclusive credit, or not 138-144, 243 not bound, where debt is contracted before partner- ship is formed 146-150 not bound by preliminary steps taken to form a part- nership 150, 151 incoming partner not bound for debts of the old firm . . . 152 unless contract is changed by consent 152, 153 not bound, where the credit is not given to the firm, but to one partner ' 154, 243 how discharged from contracts by subsequent acts 155, 156, 253- 255 by acceptance of the security of one partner in extinguish- ment of the debt of the firm 155-158, 254, 255 when giving credit to the firm after retirement of one part- ner discharges a prior debt, or not . . . 156-158, 253-255 how payments are to be appropriated 157, 253 when partner after his retirement is discharged from future debts, or not 159, 160, 162, 163 when and to whom notice of retirement is necessary . . 160-163 notice of dissolution of partnership when necessary to discharge partners, or not 160-163 what notice is sufficient or not 161 , when partners liable for new debts, notwithstanding a no- tice of retirement or dissolution 163 when in cases of fraud 163 in joint-stock companies liable as in common partnei'ships . 164 whether partners in joint-stock companies can limit their liability 164, 165 right of, to govern in cases of joint-stock companies . . . 213 when partners liable for torts of each other to third per- sons 166-168 Rights, Duties, and Obligations of Partners between them- selves 169-186 duties as to diligence and care and skill . . 169, 170, 171, 182, 183 7-i2 INDEX. Section PARTXERS — continued. partners liable for gross negligence .... 169-171, 233 partners liable for frauds 171, 172, 182 duty to conform to stijiulations of articles of partner- ship 173, 187 duty to abstain from clandestine and secret trade inju- rious to partnership 174-179, 209-212 duty to act for benefit of partnership 175-177 duty to abstain from improper speculations .... 177 duty not to be interested in rival partnerships . . . 175, 180 duty to keep precise accounts and disclose all part- nership transactions to all the partners 181 duty not to violate rights of other partners .... 182-184 duty to allow and pay all proper expenditures on partnership account 185, 186 Construction of Partnership Articles 187-215 {See Partxership.) specific performance of articles, when decreed, or not . 188, 189, 193, 217-227, 232 remedies between partners at law and in equity . 193, 217-227, 232 when injunction gi-anted, or not .... 193-202, 215, 224-227 when receiver appointed, or not 228, 229, 331 remedies by partners against third persons 234-264 when at law or not 234-241, 256-258 when in equity only 234, 235, 244, 259, 260 all partners must join as plaintiffs in a suit, otherwise it is a fatal defect 235, 236, 244 exceptions to the rule 241, 242 all partners should be joined as defendants ; but the ob- jection only matter of abatement 235 remedy in equity only, where one and the same person is partner in two firms 234-236 partners cannot maintain suit at law upon a security, where there is a good bar against one partner 237, 238 or Avhere there is fraud or misrepresentation by one partner 237,238 all partners must be competent, or at law no action lies by them 239 what constitutes Incompetency to sue 230, 240 being a. feme covert 239 being an alien enemy 240 what contracts are deemed partnership contracts, or not . . 243 how contracts are to be sued, when one partner retires 254, 255, 356, 357 construction of continuing contracts by or to .... 245-251 INDEX. 743 Section PARTXERS — continued. contracts to, for fidelity of clerk, when binding, or. not, on change of firm 245-250 continuing contracts of guaranty to, when binding after change of the firm 245, 2-18-251 remedies by partners at law against third persons for torts . 256 and for frauds 256 and for defamation of firm 257 and for obstructions and injuries to their business . 258 remedies by partners in equity against third persons . 234, 235, 244, 259 by injunction 259 in cases of execution against one partner and seizure of partnership effects 260-264 whether equity will restrain sale of the effects by sheriff in such a case 264 Dissolution of Partnership 265-270 by act of parties 265, 268, 269, 279 by efflux of time 267, 278 by tacit renunciation 272 by performance of business or voyage 280 by extinction of the partnership property 280 by a decree of court of equity 282-285 for what causes decreed 286-298 for causes at time of formation of partnership . . 286, 287 for causes subsequent to formation of partnership . . 286 for fraud 285,286 for gross misconduct 288, 289 for impracticability in the undertaking 290 for incapacity or inability of a partner .... 291-294 for insanity 295-297 for absence from the State 298 when dissoluble by arbitrators, or not . . . 215, 299, 300 when dissoluble at pleasure, or not 268-270, 274-277, 307, 308 when deemed to endure for life 271 when deemed to be prolonged or renewed beyond original term 84, 85, 271, 272, 279 by operation of law 302-316 by change of state or condition of party .... 302-305 by marriage 306 by voluntary assignment of all interest in partner- ship 307-310 by involuntary assignment of interest 311-313 by execution against all the partnership effects . . 311,312 by bankruptcy and insolvency 313, 314 744 INDEX. PARTNERS — con^mwecZ. ^''*'°'* at what time dissolved by bankruptcy or insolvency . . 314 by war between countries or partners 316, 316 by death of one partner 317, 318 from what time dissolution by death takes place . . . 319 notice of, when necessary or not 159-163, 334-336, 342, 343 .effects and consequences of dissolution generally 320-411 between the partners 326-356 in cases of voluntary dissolution 320-322 lien of partners on eifects 360, 361 what powers and authorities are extinguished by dissolution .... 322-324, 329, 344, 445, 446 what power and authorities remain . . 320-328, 331, 344-346 when receiver will be appointed . . 228, 229, 231, 330 accounts between partners, how taken .... 346-353 representatives of, entitled to an account . . . 343, 361 when a sale of partnership effects will be ordered, or not 350 all profits to be accounted for 349 valuation of partnership effects, when and how made 350-355, 396 valuation when not allowed 358, 359, 373 when effects may be assigned to one partner on dissolution, or not 358, 359, 396 assignment not allowed in cases of bankruptcy . . 396 effects and consequences of dissolution by bank- ruptcy 337-341 rights and powers of partners on bankruptcy . . 337-343 rights of assignees in bankruptcy 378 by death, effects and consequences of . . . . 342, 357, 358 rights and powers of the survivors 344-347 rights and powers of representatives of ... . 342-346 lien of the survivors 361 by decree of a court of equity 356 effects and consequences of such a decree 356 sale of effects, when ordered by court of equity 350, 356 dissolution of partnership, effects and consequences as to third persons 334, 337-411 rights of creditors on dissolution 358 equity of creditors upon partnership effects, when and what 326, 358-360 creditors have no lien, but a quasi lien in certain cases 326, 358-360 how this quasi lien is enforced 326, 358-361 rights of joint creditors of 361-365, 390 INDEX. 745 Section PARTNERS — contimied. debts of joint and several creditors 3G2 equities of joint creditors as to separate eflfeots 3G3, 3G5, 390, 392 remedies of joint creditors 361,362,390-392 against survivors 362 against representatives of deceased partners .... 362 rights and remedies of separate creditors 363, 364, 390, 391 remedies of joint creditors in cases of death of one, seid bankruptcy of the other partner . . 364-366, 367, 378 rights and remedies of a partner, who is a creditor of the firm 390-392, 405-407 rights of creditors, who are both joint and several creditors 384, 385 what debts treated as joint and several 367-373 what is a conversion of joint or of several debts . . 367-373 Avhat property is deemed joint and what several 369, 370, 397-403 rights of joint creditors in cases of bankruptcy . . 376-378 exceptions to the general rule 378-381, 392-394 where creditors are joint and several creditors, they are bound to elect 384-386 exceptions to the rule 387-394 rights of a partner, who is creditor of the firm in bankruptcy 390 set-off in banki-uptcy, what debt or claim is good, or not, by way of 895 rights of pledgee and mortgagee 389 dissolution by bankruptcy, valuation not allowed on . . 396 reputed ownership in bankruptcy, what is, or not . . 397-403 PARTNERSHIP, what constitutes 1, 2 founded in consent 3, 4, 5, 6 in contract 6 what is legal or illegal 6 community of interests in . . . . _ 15, 16, 27 community of property in 16, 17, 27 community of profits in 16, 18, 24 profits how shared 16, 24, 26 property how shared 18-24, 27-29 what constitutes between the parties 15-29 what constitutes as to third persons 30, 53-70 by sharing profits generally 18-24, 33, 34 by sharing profits as such 33, 34, 35, 53-62 by sharing net profits . . . .33, 34, 35, 38, 39, 40, 42, 43, 47, 53, 56-62 746 INDEX. PARTNERSHIP — conimMetZ. ^*'°'' by sharing profits as a dormant partner 63 by holding out to the world, that one is a partner . . 64r, 65 by receiving a part of the profits, as profits, as an annuitant 66-69 by taking the profits as trustee for others 70 when it does not exist as to third persons 30-52 by mere joint purchase 30, 31 by mere joint sale 30, 31 by share of profits as agent . . 32-34, 38, 40, 41, 42, 47-52 by share of gross earnings 33-36, 41, 42-47 bj- share in fisheries 42 by shipment on half profits 43^ 44 by portion of profits in lieu of rent 43 by share of gross earnings instead of wages , . . 44^-47 by receiving an annuity out of the profits, not as profits, but as a fund for pajTuent 67, 68 different sorts of. universal partnership 71 , 72, 73 general partnership 71. 74 special or limited partnership 71, 75, 408 private partnership 76 public company 76, 77, 79 in commandite . 78 when deemed at will, or not 227 when deemed to be continued, or not, after expiration of the original term 271, 279 business of partnership . 81, 82, 83 in trade 81, 82 in purchase and sale of lands 82, 83 in collieries 82, 83 how formed 84, 85 for what period 84, 85, 277 ^br Ufe 84, 85, 271 for years 84, 85, 277 indefinitely 84, 85, 271 when deemed to be renewed 279 in what mode formed. by express or implied agreement . . ... . , . 86,87 by written s,rticles 86, 87 by parol 86, 87 right of majority to govern in 123, 213 rights and interests to partners in partnership prop- erty 88-100 (See Partners.) partnership property, what is 92 INDEX. 747 Section PARTNERSHIP — continued. no difference between real and personal property, as to rights of 92, 93 Avliether real estate of partnership is deemed dis- » tributable as personal property or not .... 92, 93 whether good-will of a trade is partnership property, or not 99, 100 powers and authorities of partners in partnei'ship property 9-i {See Partners.) Hens of rights and partners on partnership property . 97-99 powers and authorities of partners generally . . . 101-125 (/See Partner>s.) liabilities and exemptions of partnerships upon con- tracts 123-lG8a (/See Partners ^vxd Partnership.) partnership not bound for acts of one partner not within the scope of the partnership business 106, 107, 112, 113, 126, 127 not bound for fravidulent acts, known to be such by the other party 110-113, 128-131, 133 not bound, where credit is exclusively given to one partner 134, 137 what is proof of an exclusive credit, or not . . . 138-144 not bound for debts contracted before the partner- ship is formed 146-151 unless specially agreed to 152 not bound upon preliminary contracts in contempla- tion of a future partnership 149-151 new partnership not bound for debts of the old fii'm . . 152 unless specially agreed to 153 when discharged from a contract by subsequent acts or contracts 155 when acceptance of negotiable security of one part- ner discharges the partnership 155-158 when giving credit to a new firm discharges the old firm 156-159 how payments made after dissolution of old firm, and new finn is formed, are appropriated 157 when a partner, after retirement, is discharged, or not, from future debts of 159-163 when notice of retirement or dissolution necessary, or not 160-162 what notice of retirement or dissolution is sufficient, or not 161 when are partners liable, after retirement or dissolu- tion, for new debts, notwithstanding notice . . . 162, 163 748 INDEX. Section PARTXERSHIP — continued. when liable in cases of fraud 162, 163 joint-stock companies, liability of partners in ... . 164 whether shareholders can limit their liability to the funds 164, 166 liable for torts generally 166-168 when liable for torts, or not, of one partner .... 166 rights, duties, and obligations of partners between themselves 179-186, 331-333 (See Partners.) duty to make no secret or private gains against part- nership interests 174-186 rights and duties of partners under articles of . 173, 187-215 construction of articles of partnership 187-215 specific performance of articles, when decreed or not 188, 189 rules of construction of articles of 190, 191 covenants in, when construed to be several, as well as joint 190, 191 how and when articles are superseded, or waived, or qualified 192-199 effect of entries in books of partnership . . . 24, note, 191 construction of articles as to the commencement thereof . 194 debts of partners, when joint and several 362 construction of articles as to the duration thereof. . 195, 196 construction of articles as to partnership, continued after the stipuhited term 197 construction of articles as to continuance thereof after death of a partner, by his appointee or representa- tives 199-201 a, 275 construction of articles as to the name and signature of fii-m 202 construction of articles as to carrying on other trade . 174, 179, 209, 210 construction of articles as to advance of capital stock . 203 construction of articles as to management of part- nership by one or more partners 204 construction of articles as to what shall be deemed partnership property 205 construction of articles for annual accounts and set- tlements 206 construction of articles as to winding up concerns upon a dissolution thereof . 207 construction of articles as to one partners taking the property at a valuation on a dissolution . . 206-208, 396 in cases of a bankruptcy 206-208, 396 INDEX. 749 Section PARTNERSHIP — continued. construction of articles as to business beins car- ried on by one of the partners alone after dis- solution 210,211,212 • construction of articles as to right of majority or select number to govern 213 construction of articles as to right to expel a partner 214 construction of articles to settle disputes by arbi- tration 215 remedies to compel specific performance of an agree- ment to form a partnership 187-189, 202 remedies for violation of articles at law, or in equity 193, 216-228, 282 when by injunction 193, 202, 224, 225, 227 when not by injunction 215, 217, 224, 225 when receiver will be appointed . . 228, 229, 231, 330, 331 when specific performance of, decreed . . 187, 188, 189, 202 dissolution of 265-319 by acts of parties 265, 267 by efflux of time 267, 278 by tacit renunciation 272 by performance of voyage on business 280 by extinction of partnership property 280 by decree of a court of equity 282-285 for what causes 232,233,286-299 by decree for causes at time of formation of part- nership 233, 286 for subsequent causes 286 for fraud 233, 285, 286, 287 for gross misconduct 233, 288 for impracticability of the undertaking 290 for incapacity or inability of partner 292-294 for insanity 295-297 for absence fi-om the state 298 when dissoluble by arbitration 299, 300 when dissoluble at pleasure or not . 268-271, 274-277, 307, 308 when deemed to endure for life 271 when deemed to be prolonged or renewed beyond original term 85, 86, 271, 272, 304 when dissolved by operation of law 302-306 by change of state or condition of party . . 302, 303, 305 by marriage 306 by voluntary assignment of all interest in part- nership " 307-310 by involuntary assignment of partnership property 311-313 T50 INDEX. FARTNERSmF — contijiued. ^''"°° by execution and levy on all partnership) prop- erty 311,312 by bankruptcy and insolvency 313,314 at what time dissolved by bankruptcy and in- solvency 314 by war between countries of partners 315, 316 by death of one partner . . . 317-319 at what time dissolved by death 319 when notice of dissolution necessary or not 159-163, 335, 336 what notice sufficient, or not 161 162 no notice in case of death 336 343 or of bankruptcy qqq or to new customers 160 in cases of dormant partners 159 dissolution of, effects and consequences of 320-411 between the partners themselves 320-356 in cases of voluntary dissolution 320-322 lien of partners on effects 360 361 what powers and authorities remain 322, 323, 324, 324 a, 324 b, 328, 344 what not 322, 323, 344 no power to trade anew 322-324 329 what admissions and acknowledgments of part- ners bind or not . . . .107, 323, 324, 324 a, 324 &, 333 what powers over partnership property remain after 324-328, 383 to pay debts of partnership 324-328 to wind up the affiiirs 324-328 to make compositions 331 when receiver appointed 228, 229, 231, 330 accounts how taken 346-349, 352, 353 representatives of partner entitled to account and share of property 342, 343, 361 when sale directed or not .... 206, 207, 349, 350, 356 all property to be accounted for 349 when effects may be taken at a valuation or not . 350, 351, 352, 353, 354, 355, 396 when and how effects may be assigned to one partner on dissolution, or not .... 357, 358, 359, 396 not allowed in cases of bankruptcy 396 dissolution of, effects and consequences of as to third persons ^ . 334, 335^ 357-411 when notice of dissolution necessary, or not, as to third persons 159-163, 334, 335, 336, 343 no notice necessary to new customers 160 INDEX. 751 Section PARTNERSHIP — continued. nor in cases of bankruptcy 336 nor in cases of tleatli 336, 343 dissolution in cases of bankruptcy, efFects and conse- quences of 337, 374, 375 all powers of bankrupt gone 338, 339, ,340 powers of solvent partners . . . 338, 339, 340, 407, 408 powers to settle and pay debts, collect property, &c., remain 339-341 to wind up affairs 340, 341 but not to contract new debts 338, 339, 343 whether assignment or valuation in favor of one partner in bankruptcy good or not 358, 373 rights and powers of assignees 375 dissolution by death, effects and consequences of . . . 343-356 takes effect from time of death without notice thereof 336, 343 no new contract can be made 343, 344 representatives of deceased partner entitled to ac- account 343, 361 lien of, on partnership effects 361 right to share property as tenants in common 343, 346 powers and authorities of survivors 344 survivors may collect and pay debts . . . 344, 346, 347 and wind up affairs 346, 347 lien of surviving partners 360, 361 when sale of effects decreed 349 when effects taken at valuation, or not .... 350-354 how accounts taken 346-351, 352, 353 dissolution by decree of court of equity, effects and consequences of 356 the same as in other cases 356 sale of effects ordered by 356 dissolution, effects and consequences as to third per- sons 334, 335, 357-411 when notice of dissolution necessary or not, as to third persons 159-163, 335, 336, 343 rights of creditors on dissolution 357, 358 when and what equity of creditors in partnership effects 357, 358, 359 when creditors have a lien on partnership effects or not 326, 358-361 when creditors may enforce a lien or claim against partnership effects in equity 326, 358-361 joint creditors, rqmedy of, when all partners are living 361 75.2 INDEX. Section PARTNERSHIP — continued. when one or more partners are dead . . , 361, 362 against surviving partners 346, 362 when they have a quasi lien .... 326, 361, 390 remedy in equity against deceased partner's estate 361, 362 debts of partnership held to be joint and several . . 362 equities of, as to sejjarate effects of partners, when one partner is a creditor of partnership . . 390 joint creditors, rights of, in respect to separate creditors 363, 364 joint creditors entitled to priority out of joint effects, but not of separate effects 363-366 separate creditors entitled to priority out of separate effects 363, 364, 365 in cases of death of one partner and bankruptcy of survivors, whether joint creditors compellable to proceed against the estate of deceased partner in aid of bankruptcy 364, 365 partner, who is a creditor of firm, cannot come in comjietition with other joint creditors against partnership effects 405-407 what property is deemed joint, and what several .... 372 what debts treated as joint, and what as several 367, 368* 369, 373 conversion of joint debts into several, and e contra, what is, and when it exists 369, 370, 391-394 joint creditors, rights of, in cases of bankruptcy .... 376 joint creditors have a priority out of joint estate, and separate creditors out of separate estate .... 376-378 foundation of the rule 378 exceptions to the rule 378-381 where joint creditor is petitioner in bankruptcy . . 379 where there is no joint estate and no solvent partner 378, 380 where there are no separate debts 378, 381 effect of persons being at once joint and separate creditors of partners in bankruptcy 384-386 they can only elect to prove against the joint or several estate, and not against both 384-387 exceptions to this rule 387-394 doctrine in bankruptcy as to creditors holding pledges or mortgages 389 when and how a partner, who is a creditor of the firm is entitled as against the joint or separate effects of other partners 390,391,405-408 whether the separate creditors of a partner, who is cred- itor of firm, may prove against the joint estate .... 390 INDEX. 753 Section PARTNERSHIP — continued. whether the joint creditors may prove against the sepa- rate estate of a partner, indebted to the firm 391 exceptions to the rule, that creditors cannot prove in either case 392, 393, 394 in cases of fraud 392 in cases of dormant partners 393 in cases of minor partnership constituted of persons of a larger firm 394 set-ofi in bankruptcy, when and how allowed 395 not generally allowed of joint debts against several debts, or the contrary 395 agreement of parties to take at a valuation in cases of bankruptcy not allowed 396 what in cases of bankruptcy is treated as property in the reputed ownership of bankrupt, or not 397-404 PARTNERSHIP PROPERTY. (See Partners and Partnership.) what is to be deemed or not 92, 93, 205 what property is deemed joint, and what several 371-373, 397-404 when the good- will of a trade deemed to be 99, 100 rights and powers of partners in and over 94 when and how it may be assigned to one partner, or not 101, 309, 314, 396 how distributed on dissolution 350-355 reputed ownership in, what is, or not 397-404 PART-OWNERS. rights, powers, and liabilities of, in general . . . 89, 412-453 when they may bind each other, or not . . . 419, 440, 441, 446 in cases of ships 415-418 no right of survivorship among 417 one part-owner of ship can sell only his own share, and not the entirety 417 rights of, as to possession, use, and employment of ships 418, 427, 428, 434, 435 right of majority to govern 418-422, 427, 428 rights of minority 427-432 contribution may be claimed for repairs made by common consent 419, 420, 440, 441 but not against part-owners, who dissent 411-425 rights of part-owners, when equally divided in opinion and interest 435 right of minority to employ ship, if majority decline . . 428-439 whether a sale can be decreed of the ship, where part- owners are equally divided 435-439 whether part-owners have a lien on the ship for ex- penses and advances and materials furnished for a voy- age 441-444 48 754 INDEX. Section PART-OWXERS — continued. part-owners engaged in joint adventure are entitled to the same equities and liens as partners 407, 408 part-owners engaged in joint adventure are treated as partners, as to such adventure 75, 407, 408 appointment of master and officers belongs to majority of ship-owners 432 remedies of part-owners against each other 449 remedies against third persons 454, 455 right and duty of, to account for ship's earnings . . . 449-452 declarations and admissions of one part-owner, when they bind the others 453 remedies by part-owners upon contracts 454 remedies by part-owners for torts 454 remedies against part-owners upon contracts 455-457 remedies against part-o^vners upon torts 458-460 part-owners, when liable in solido upon contracts . . ' . 445—457 when liable in solido for torts 458-460 when liable for torts of their agents 458-462 when not liable for torts of their agents 458-462 PART-OWNERSHIP, how it differs from partnership 89, 90, 410-414 how it may be dissolved 447, 448 PAYMENT, when good, out of partnership effects, by one partner, or not 132, 133 after dissolution of pai'tnership 328 when payment of his separate debt good, or not . . . 132, 133 how appropriated 157 PERFORMANCE, SPECIFIC, in equity, when decreed of partnership duties or ar- ticles 187-193, 204-210, 216-227, 232, 233 when of articles to form partnership 187-189 PLEDGE. when partners have power to pledge partnership property, or not 94-96, 101 creditor, holding pledge, how and when he can prove in bankruptcy 389 POWERS AND AUTHORITIES OF PARTNERS . 94-97, 101-125 {See Partners xsv> Partnerships.) limitations of 126-133 of part-owners 89, 90, 412-453 {See Part-owners.) PRIVATE PARTNERSHIP, what is 76 PROFITS. meaning of 21 INDEX. 755 Section PROFITS — continued. coinmnnity of interest of partners in 22, 23, 24, 28 (See Pautneus.) when participation in profits makes a person a partner 18, 1!>, 23, 30-47, 52-69 when not 30-47 distinction between sharing gross and net profits 24, 25, 33, 34, 37, 38, 39, 41 how shared in absence of special agreement . . . 20-22, 24-27 partner cannot appropriate any to himself exclusive of the partnership 174 all must be accounted for 175, 180, 349 PROHIBITION TO EXGAGE IN OTHER TRADE. when implied 178, 179, 209, 210, 211 when expressed in articles 210 when courts of ecpity will enforce 210, 211, 212 PROMISSORY NOTES. when one partner may bind the firm by signing, or in- dorsing , 102, 102 a, 136-139, 142, 143 when not 110-113, 127, 129, 130, 132, 133 PROPERTY OF PARTNERS IN PARTNERSHIP PROP- ERTY. {See Partnership.) 88-100 PUBLIC PARTNERSHIP OR CO:\IPANY, what is 76 PURCHASE, BY ONE PARTNER, when it binds the firm, or not 102, 111, 112, 113 R. REAL ESTATE, partnership property in 95, 93 (/See Partnership.) how treated in equity 93 RECEIVER, when a court of equity will appoint or not . . . 228-231, 330 REFERENCE TO ARBITRATORS. {See Arbitration.) one partner cannot bind by a 114 agreement for, will not be enforced in equity 215 when award may include a dissolution of partnership , . . 215 RELEASE. one partner may in his own name release a debt due to the firm 114, 115, 252 when release not binding on the firm 132 release to one partner discharges all 168 REINIEDIES BETWEEN PARTNERS 193, 216-233 {See Partners and Partnership.) 756 INDEX. REMEDIES BETWEEN FARTHERS — continued. ^''*""' when at law or not 218, 219, 234-241, 256-258 when in equity 222-233, 235, 236, 259-261 by partners against third persons 234-264 when at law, or not 234-242 when in equity 234, 235, 259-261 when in cases of tort 256, 257 when taken away by fraud or misrepresentation of one partner 237, 238 RENEWAL OF PARTNERSHIP. (See Partnership.) when and how renewed 279 effect of tacit renewal 279 REPAIRS, when part-owners liable for, or not 419-426, 440 REPRESENTATION OF PARTNER, when it binds the firm, or not 107,108,109 REPUTED OWNERSHIP, in bankruptcy, what is, and what is not . . 397-404, 407, 408 RETIREMENT OF PARTNER. (See Retiring P.ujtnek.) RETIRING PARTNER. when discharged from old debts, or not 154-161 when discharged from new debts, or not 159-163 when notice of retirement of, discharges from iuture debts 159-161 what is due notice of retirement of .161-163 bound in cases of fraud 162, 163 RIGHTS AND DUTIES OF PARTNERS between themselves 169-186 (See Partners.) to third persons 126-128 RIGHTS AND INTERESTS OF PARTNERS IN PART- ' NERSHIP PROPERTY 88-100, 122, 126 (See Partnership.) s. SALE OF PARTNERSHIP PROPERTY. when and how directed in equity . , . 206, 207, 349, 350, 356 SECURITY, SEPARATE, of one partner, when it discharges the firm, or not . , . 142, 143 of new firm when it discharges the old . . . 134-144, 154-158 SEPARATE CREDITORS. rights of, in general 376-388 rights of, in bankruptcy 370-394 SET-OFF, in partnership, what is allowable or not 395 in bankruptcy 395 INDEX. 757 Section SHIPS. (See Part-owners.) 412-460 rights, powers, duties, and liabilities of owners of . . 412-46U SHIP'S HUSBAND, meaning of the phrase 418 powers and authorities of 418, 446 duties of • 418, 419 lien of 441, 443 what powers and authorities he has not 446 SIGNATURE OF FIRM, articles respecting i . . . . 202 necessary in general to bind the firm in case of contract 102, 134, 135, 142, 143 SLANDER, ACTION FOR. by the firm 255, 256, 257 against the firm 256, 257 SOLVENT PARTNERS. rights and powers of, on bankruptcy . • . 337-341, 407, 408 SPECIAL PARTNERSHIP, what is 75 (See Partnership.) SPECIFIC PERFORMANCE, when compelled in equity, or not, of partnership duties or articles .... 187, 188, 189, 204-215, 216-228, 232 to form a partnership, when decreed, or not . . 187, 188, 189 SPECULATIONS, partner bound to abstain from 178 SI?B-PARTNER, liability of 121 SURETYSHIP, how affected by change of firm 243-248 SURVIVING PARTNERS. rights, powers, and authorities of 342-347 SURVIVORSHIP, does not exist in cases of partners 88-91, 343 nor in cases of part-owners 417 T. TENANTS IN COMMON, rights of 90 TORTS, liability of partners to third persons for 166-168 a liability for, of one partner 166 liability of third persons to partners for . . 234, 235, 256-259 deemed several, as well as joint 167 when partners are not liable for 168 758 INDEX. Section TORTS — continued. remedies for, by part-owners against third persons .... 454 remedies by third persons against part-owners . . . 455-460 part-owners liable for, when and how far 166-168 a partners liable severally, as well as jointly, for . 167, 458-462 suit for, should, regularly, be brought by all the part- ners 167, 454 suit for, should be regularly brought against all the partners 167, 458-462 releaseof torts to one partner discharges all 168 liability of third persons to part-owners for 454 by part-owners to third persons for ... 458, 462, 463 of one part-owner to the others for 449, 450 TROVER, between part-owners, when it lies, or not 449 TRUSTEE PROCESS, when debt due a partnership, can be attached on .... 264 TRUSTEES, when liable as partners. (5ee Partxership.) ... 70, 106 u. USAGE OF TRADE, effect on partnership 127 when partnership bound by 127 V. VALUATION OF PARTXERSHIP EFFECTS. agreement for, when and how decreed in equity 207, 208, 246, 247, 248, 358, 359, 360, 373 when not 208, 396 not in cases of bankruptcy 208, 396 w. WAGES. when a person receiving part of profits in lieu of wages is a partner or not 32-51 WAR, effect of, on partnership 9, 240 when it dissolves partnership 315, 316 3 Sin UNIVERSITY OF CAUFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. APR 1 5 1978 APR 1 7 1978 MAR 2 3 2000 k JfiHt $ m M NOV 01 200: PSD 1916 8/77 ^^ 000 516 301 *:f '' '•'.'■•■.'■ ^iiiiiiii. 'iliitei;;'