It Si UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY VER% vjdOS-ANGEIfj^ 1 o v-sm^ WOTAINIl-HWV- [VERSy^ vjcLOS-ANGELfj^, V-SOl^ "^OTAINiTJW^ >s" \m-0s ^U1BRAR> %HITCHtf % o F* Z5V THE LAW OF PARTNERSHIP. A TREATISE ON THE LAW OF PARTNERSHIP. FIFTH ENGLISH EDITION. BY THE RIGHT HONORABLE SIR NATHANIEL LINDLEY, Knt. } ONE OF THE LORDS JUSTICES OF HER MAJESTY'S COURT OF appeal; ASSISTED BY WILLIAM C. GULL, M.A., of Lincoln's inn, esq., barrister-at-law, vtnerian scholar in the university of oxford, 1883, AND WALTER B. LIKDLEY, M.A., OF LINCOLN'S INN, ESQ., EARRISTER-AT-LAW. SECOND AMERICAN EDITION. EDITED AND ANNOTATED BY MARSHALL D. EWELL, LL.D. IN TWO VOLUMES. VOL. I. CHICAGO: CALLAGHAN AND COMPANY, 1888. Entered according to the Act of Congress, in the year 1888, by CALLAGHAN AND COMPANY, In the office of the Librarian of Congress, at Washington, D. C. DA VI I > AT WOOD, rniNTF.li and Stereotypes, Madison, wis. AUTHOR'S PREFACE. The present volume is the fifth edition of a portion of the author's former " Treatise on the Law of Partnership, in- cluding its application to Companies." When that treatise was first published, viz., in 1860, the law of companies was being developed by legislative enactment and judicial decis- ion out of the law of partnership; and it appeared to the author desirable to trace that development, and to endeavor in one treatise to investigate the law of partnership and to determine the extent to which its principles were applicable to companies. But in the course of the last quarter of a century company law has been developed to such an extent as to justify, if not to require, separate treatment; and with a view to convenience and expense, advantage has been taken of the opportunity afforded by the demand for a fifth edition, to divide the former treatise into two parts, each of which shall be complete without the other, viz., the law of partnership proper, and the law of companies, in so far as it has any connection with the former. This volume is de- voted to the first of these parts, viz., the law of partnership proper. The volume relating to companies is in course of preparation and will be published shortly. In arrangement, the order of treatment previously adopted has been retained, with the exceptions that the causes of dissolution, the right to retire, and the right to expel, have VI AUTHOR S PREFACE. been transferred to the chapter on dissolution in Book IY. This modification will, it is hoped, be considered an im- provement. Great pains have been taken to render this edition deserv- ing of the favorable reception accorded to those which have preceded it. Several very important cases, and especially Kendall v. Hamilton, Scarf v. Jar dine, and The Yorkshire Banking Company v. Beatson, have been decided since the publication of the last edition. There has also appeared the Digest of the Law of Partnership bv Mr. Frederick Pollock, which is full of observations of the greatest value; and the third edition of which the author has constantly consulted. In the appendix to it will be found the draft of a bill to con- solidate and amend the law of partnership. It is much to be regretted that this branch of the law should not be put into shape and codified by legislative authority. Mr. Pol- lock's remarks on this subject in the preface to the third and fourth editions of the digest deserve the serious attention of the legislature. But this is not the place to enlarge on the many advantages which would accrue to this country if its laws were gradually revised on the model of the Indian codes. The whole of the present treatise has once more been carefully revised throughout; whatever is obsolete has been omitted, or, if retained as being still useful, has been printed in small type. The author's increased experience has suggested additions and alterations; and many por- tions have been rewritten and adapted to the most recent decisions. Notwithstanding, however, the labor bestowed upon the work, and the anxiety of the author to render it a trust- AUTHOK S PREFACE. Vll worthy guide to the subject to which it relates, the multi- plicity and difficulty of the questions with which he has had to deal are such that he dare not venture to hope that he has always avoided error, or that his work is free from serious faults; and, although it has engaged his unremitting attention for more than thirty years, he is painfully aware that it is even now but an imperfect production. The author's thanks are due to Mr. "W. C. Gull and Mr. "W. B. Lindley for their assistance in revising the sheets, and to the former gentleman also for his aid in pre- paring materials, in examining American and Irish reports and authorities on doubtful points, and for the preparation of the indexes. Royal Courts of Justice, 1st March, 1888. EDITOR'S PREFACE TO THE FIRST AMERI- CAN EDITION. The English edition of Lindley on Partnership has *ong enjoyed an enviable reputation with the profession; and only the fact that no American edition has been published in many years, and the high cost of the English edition, have prevented its securing the place in the libraries of American practitioners which its great value deserves. In order to supply what is believed to be a felt want, this edi- tion is presented to the profession. The English law of partnership, from which we have derived the greater part of our American law upon this subject, is more exhaust- ively treated by our author than by any other; and in the preparation of this edition it has been the aim of the editor to present in the notes the substance of the American law upon the subject of partnership down to the time of going to press. It has been thought inadvisable to publish in this edition the chapter upon the English Bankruptcy Act, and also the latter part of the second volume pertaining to the winding up of companies under the English statutes, there being no corresponding legislation in this country. To have included them in this edition would have rendered neces- sary a third volume, thereby largely increasing the cost of the book to the practitioner without any corresponding benefit. In their place a chapter has been inserted upon EDITOK S PREFACE. American unincorporated joint-stock companies, which it was thought would be of more value to the American prac- titioner than the matter omitted. The editor desires, in this connection, to acknowledge his obligation to Mr. Adelbert Hamilton, of the Chicago Bar, for valuable assistance in reading the proof, verification of the cases cited, and in the preparation of the Table of American Cases. Marshall D. Ewell. Union College of Law, Chicago, May 3, 1881. EDITOR'S PREFACE TO THE SECOND AMERICAN EDITION. In the preparation of this edition the notes of the pre- ceding edition have been retained, and the cases, American, Canadian and Colonial, decided since its publication have been brought down to date. Cases deciding well-settled principles have been simply cited, while those deciding new questions or points of more than ordinary interest have been digested in the notes, with the view of making the notes as useful as possible to practitioners. M. D. E. Chicago, May 1, 1888. ANALYSIS OF CONTENTS. [the references are to the marginal pages.] Author's Preface v Editor's Prefaces ix-xi Authorities Cited by the Author See Volume II Authorities Cited by the Editor See Volnme II Introductory 1 Book I.— Of Contracts of Partnership 7 Book II.— Of the Rights and Obligations of Partners as Regards Non-Partners 124 Book III.— Of the Rights and Obligations of the Members of Partnerships Between Themselves . . . 301 Book IV. — Of the Dissolution and Wlnding-up of Partner- ships 570 Index 757 INTEODUCTOKY. 1. Meaning of the word partnership 1 2. Distinction between partnerships, corporations, and companies 4 BOOK I. OF CONTRACTS OF PARTNERSHIP. CHAP. I.— The Nature of the Contract Determined ... 7 Preliminary observations 7 Sect. 1. — Of true partnerships 10 1. Partnership is the result of an agreement to share profits and losses 10 2. Partnership is prima facie the result of an agree- ment to share profits although nothing may be said about losses, and although there may be no common stock 12 8. Partnership is prima facie the result of an agree- ment to share profits although community of loss is stipulated against 15 xiii XIV ANALYSIS OF CONTENTS. 4. Partnership is not the result of an agreement to share gross returns 17 5. Partnership is not the result of an agreement which is not concluded 19 6. Partnership is not the result of an agreement to share profits so long as anything remains to be done before the right to share them ac- crues 20 Application of this principle to — Ordinary partnerships '20 Promoters of companies 23 Sect. 2.— Of quasi- partnerships 25 1. By sharing profits 25 Of the doctrine that persons who share profits are liable for each other's acts as if they were partners — 1. State of the law anterior to Cox v. Hickman . 26 2. Modifications introduced by Cox v. Hickman . 30 8. The act of 28 and 29 Vict. eh. 86 .... 35 2. By holding oneself out as a partner .... 40 Sect. 3. — Of sub-partnerships 48 Sect. 4.— Of general and particular partnerships .... 49 Sect. 5.— Of clubs and societies not having gain for their ob- ject 50 Sect. 6.— Of co-ownership as distinguished from copartner- ship 51 Note on the remedies between co-owners ... 57 CHAP. II.— Of the Consideration of a Contract of Part- nership 63 Of the return of premiums 64 CHAP. III.— Of the Persons Capable of Entering into Part- nership 70 Sect. 1.— Of their number 70 Sect. 2. — Of their capacity 71 1. Aliens 72 2. Felons and outlaws 73 3. Infants 74 4. Lunatics 76 5. Married women 77 6. Corporations and companies 78 CHAP. TV.— Of the Evidence by which a Partnership or Quasi-Partnership May be Proved ... 80 The statute of frauds 80 The facta to be proved 83 The means of proving it 84 ANALYSIS OF CONTENTS. XV CHAP. V. — Op Illegal Partnerships 91 Sect. 1. — What partnerships are illegal — In general 91 By particular statutes, and herein of — Bankers 95 Brokers . . 97 Insurers 97 Medical practitioners 98 Newspaper proprietors 99 Patentees 99 Pawnbrokers 99 Solicitors 100 Theatrical managers, etc 101 Unincorporated joint-stock companies with transferable shares 101 Unregistered partnerships 101 Sect. 2. — Consequences of illegality 102 Especially as regards actions between the part- ners ... 104 CHAP. VI.— Of the General Nature op a Partnership . . 110 Sect. 1. — Of the mercantile and legal notion of a firm . . 110 Sect. 2. — Consequences of the non-recognition of the firm as distinguished from the persons composing it . 118 1. Generally as regards its name 112 2. In legal proceedings 115 3. Partnership disabilities 116 4. As regards sureties and securities, and in particu- lar of the effect produced on them by a change in the firm 117 CHAP. VII. — Of the Duration of Contracts of Partner- ship 121 Of partnerships at will and for a term .... 121 [As to causes of dissolution, see Bk. IV.] BOOK II. ON THE RIGHTS AND OBLIGATIONS OF PARTNERS AS RE- GARDS NON-PARTNERS. CHAP. I. — Of the Liabilities of Partners for the Acts of Each Other 124 Sect. 1. — General principles of agency as applied to ordinary partnerships 124 XVI ANALYSIS OF CONTENTS. Sect. 2. — Liability of partners in respect of acts which are neither torts nor frauds 128 And herein of the implied powers of partners in mat- ters relating to — 1. Accounts 128 2. Admissions 128 8. Agents 129 4. Arbitration 129 5. Banking accounts , 129 6. Bills of exchange and promissory notes . . 129 7. Bonds 131 8. Borrowing money 131 9. Checks 133 10. Contracts 134 11. Debts 134 12. Deeds 136 13. Distress 137 14. Extension of business 137 15. Guarantees 138 16. Insurances 139 17. Interest % 139 18. Judicial proceedings 139 19. Leases 139 20. Mortgages and pledges 139 21. Notice 141 22. Payments 143 23. Penalties 143 24. Purchases 144 25. Receipts 145 26. Releases 145 27. Representations 146 28. Sales 146 29. Servants 147 30. Ships 147 Sect. 8. — Liability of partners in respect of torts and frauds . 147 1. Torts 149 2. Frauds 150 Liability of partnerships for the misapplication of money by their members 150 Liability of partnerships for the false represen- tations of their members 162 Sect. 4. — Liability of partners in respect of acts which are un- authorized, and are known so to be 167 SECT. 5. — Effect of the form of a contract on the liability of partners in respect of contracts not entered into on behalf of the firm, or not so in proper form . 176 ANALYSIS OF CONTENTS. XVii 1. Contracts under seal 177 2. Ordinary contracts not under seal 177 3. Bills of exchange and promissory notes . . . 180 Bills in the name of the firm 180 Not in the name of the firm 184 Promissory notes 187 Sect. 6. — Liability of partnerships in respect of contracts not binding on them, but of which they have had the benefit 18!> CHAP. II. — Op the Natuee, Extent and Dueation of the Lia- bility of Paetnees to Ceeditoes .... 192 Sect. 1. — Nature of the liability, and herein of joint and sev- eral liability — 1. As regards contracts 193 2. As regards torts and frauds 19S Sect. 2.— Extent of the liability 200 Sect. 3.— Duration of the liability 201 1. Commencement of liability 201 Liability of firm for acts preceding its formation 202 Liability of incoming partners for debts con- tracted before they join the firm 205 2. Termination of liability 210 A. As to future acts 210 1. Without notice of dissolution 211 Death 211 Bankruptcy 212 Retirement of dormant partners . . . 213 2. By notice of dissolution or retirement . . . 213 The effect of such notice 215 When there is a continued holding out notwithstanding the notice . . . 216 With reference to the doctrine that a partnership, though dissolved, sub- sists so far as is necessary for the winding up of its affairs .... 217 What amounts to notice 221 And herein of tiie distinction between old customers and other people . . 221 B. As to past acts 223 And especially by — 1. Payment 225 Of the appropriation of payments . . 226 Where there is a single current account 228 Where there are several distinct ac- counts .231 Vol. I— b XV111 ANALYSIS OF CONTENTS. 2. Release 237 3. Substitution of debtors and securities . 239 (a) By agreement 239 A. Where a retired partner has not been discharged — a. No new partner having been introduced . . . . . . 242 b. Although a new partner has been introduced .... .245 B. Where a retired partner has been discharged 247 Discharge of the estate of a de- ceased partner 249 (6) By merger and judgment .... 254 And herein of the effect of taking fresh securities for an old debt . 254 4. Lapse of time and the statutes of limita- tion 257 CHAP. III.— Of Actions Between Partners and Non- Partners. Sect. 1. — Of actions by and against partners 264 1. General observations 264 2. Where no change in the firm has occurred since the right accrued 273 A. Actions in respect of legal rights .... 273 ',a) Actions by the firm 273 Actions ex contractu 273 Actions ex delicto 278 (6) Actions against the firm 280 Actions ex contractu 280 Actions ex delicto 283 B. Actions in respect of equitable rights . . . 283 3. Where a change in the firm has occurred since the right accrued 284 Sect. 2.— Of set-off 290 Sect. 3. — Of execution against partners for the debts of the firm 298 BOOK III. OF THE RIGHTS AND OBLIGATIONS OF THE MEMBERS OF PARTNERSHIPS BETWEEN THEMSELVES. CHAP. I.— Of the Right to Take Part in the Management of the Affairs of the Firm 301 ANALYSIS OF CONTENTS. XIX CHAP. II.— Of the General Duties of Partners to Observe Good Faith 303 Sect. 1. — Preliminary remarks 308 Sect. 2.— Of the obligation of partners not to benefit them- selves at the expense of their copartners . . . 305 Sect. 3.— Of the powers of a majority of partners .... 313 1. In matters arising in the ordinary course of busi- ness • • 314 2. In matters involving a change in the nature of the business 315 CHAP. III.— Of the Capitals of Partnerships 320 CHAP. IV.— Of Joint and Separate Property 322 Sect. 1. — Of joint estate 323 Sect. 2. — Of separate estate 327 Sect. 3.— Of the conversion of joint estate into separate, and vice versa 334 CHAP. V.— Of Shares in Partnerships 339 SECT. 1.— Of the nature of a share and the rules which govern its devolution in case of death 339 Of the doctrine of non-survivorship between part- ners 340 Of the doctrine that shares are personal estate . . 348 SECT. 2. — Of the amount of each partner's share .... 348 The presumption in favor of equality .... 348 SECT. 3.— Of the lien which each partner has on the property of the firm, and on the shares of his copartners. 351 Sect. 4. — Of the mode in which a share is taken in execution for the separate debts of its owner .... 356 1. The duty of the sheriff 350 2. The position of the purchaser from the sheriff . 358 3. The position of the execution debtor .... 359 4. Modifications introduced by the Judicature Acts 361 Sect. 5. — Of the transfer of shares 363 [N. B. — As to the relinquishment and forfeiture of shares, and as to the right to retire and ex- pel, see infra, Bk. IV. chap. I, § 1.] CHAP. VI.— Of Contribution and Indemnity 367 Sect. 1. — General observations 368 1. Foundation of the right to contribution . . . 368 2. Of the right of agents and trustees to indemnity from their principals and cestuis que trustent 369 3. Of some former differences between contribution at law and in equity 374 4. Of contribution between wrong-doers .... 377 XX ANALYSIS OF CONTENTS. Sect. 2. — Of compensation for trouble 380 Sect. 3. — Of outlays and advances 381 Sect. 4. — Of debts, liabilities and losses 385 Sect. 5.— Of interest 389 CHAP. VII.— Of the Division of Profits 393 CHAP. VIII.— Of the Accounts of Partnerships ... .396 Sect. 1. — Of the mode of keeping partnership accounts . . 396 Sect. 2. — Of the duty to keep and the right to inspect them 404 CHAP. IX. — Of Partnership Articles 406 Sect. 1. — General observations 406 1. Partnership articles are not intended to define all the rights and duties of partners 406 2. Partnership articles are to be construed with ref- erence to the objects of the partners . . . 407 3. And so as to defeat fraud 407 4. And to prevent unfair advantages 408 5. Any clause, however express, is capable of being abandoned by the tacit consent of all the part- ners 408 6. Articles of partnership are presumed to apply so long as the parties to them remain partners . 410 Sect. 2. — On the usual clauses in articles of partnership, and especially of those relative to — 1. The nature and place of the business . . . 412 2. The time of the commencement of the partner- ship 412 3. The name or style of the firm 413 4. The duration of the partnership 413 5. The premium 413 6. The capital and property of the firm .... 414 7. Interest, allowances, etc 418 8. Conduct and powers of the partners .... 418 9. Partnership books 420 10. Accounts 420 11. Retiring 422 12. Dissolving 405 13. Expelling 426 14. Valuation of shares 429 15. Transmission of shares and introduction of new partner 433 16. Annuities to widows 435 17. Prohibitions against carrying on business . . 436 18. Good-will 439 19. Getting in debts 448 ANALYSIS OF CONTENTS. XXI 20. Assignment of share by retiring partner . . 449 21. Indemnities 450 22. Arbitration clauses 451 23. Penalties and liquidated damages 454 CHAP. X.— Of Actions Between Partners 456 Sect. 1. — General observations 456 1. Law before the Judicature Acts 456 2. Effect of the Judicature Acts 458 Sect. 2. — Parties to actions between partners 459 1. General rule as to partnership actions .... 459 2. Where some partners may sue or be sued on be- half of themselves and others 461 SECT. 3. — Cases in which courts will not interfere between partners 464 1. Of the rule not to interfere except with a view to a dissolution 464 2. Of the rule not to interfere in matters of inter- nal regulation 466 3. Of the rule not to interfere at the instance of those who have been guilty of laches . . . 466 Sect. 4. — Actions for specific performance 475 Sect. 5. — Actions for misrepresentation and fraud .... 479 1. General observations 479 2. Actions for damages 481 3. Actions for rescission of contract 482 Sect. 6. — Actions for dissolution, account, etc 491 1. Of account and discovery 492 (a) Of account and discovery generally . . . 492 As to account 492 As to discovery and production of docu- ments 501 As to payment into court 505 (&) The defenses to an action for an account and discovery 506 1. Denial of partnership 507 2. The statute of limitations 508 3. Account stated 512 4. Award 514 5. Payment. Accord and satisfaction . . 515 6. Release 516 (c) The judgment for a partnership account . . 516 Just allowances 519 The period over which the account is to ex- tend 519 Account of profits since dissolution . . . 521 XX11 ANALYSIS OF CONTENTS. The evidence upon which the accounts are to be taken 536 2. Of injunctions 538 3. Of receivers 545 4. Of the sale of partnership property under the order of the court 555 Sect. 7. — Other miscellaneous actions 559 1. Between persons who have agreed to become partners 559 2. Between partners 560 Note on the law as it stood before the Judica- ture Acta 562 BOOK IV. OF THE DISSOLUTION AND WINDING UP OF PARTNERHIPS. CHAP. I.— Causes of Dissolution 570 Sect. 1. — The will of any partner 571 1. Of the right to dissolve ......... 571 2. Of the right to retire 573 3. Of the right to expel 574 Sect. 2. — The impossibility of going on; in consequence of — 1. The hopeless state of the partnership business . 576 2. Insanity 577 3. Misconduct and destruction of mutual confidence 580 Sect. 3. — The transfer of a partner's interest 583 [N. B. — As to Death and Bankruptcy, see below.] Sect. 4. — The occurrence of some event which renders the continuance of the partnership illegal .... 585 CHAP. II.— Consequences of Dissolution 586 1. As regards the creditors of the firm 586 2. As regards the partners themselves 587 CHAP. III.— Of Death and its Consequences 590 Sect. 1. — As regards the surviving partners and the executors of the deceased 590 Sect. 2. — As regards joint creditors 594 1. With reference to what occurred before death . 594 And herein of actions against executors of de- ceased partners by creditors of the firm . . 599 2. With reference to what has occurred since death 604 And herein of the effect of a trust to employ assets in the business of the firm .... 607 ANALYSIS OF CONTENTS. XXI 11 Sect. 3.— As regards the separate creditors, legatees and next of kin of the deceased 610 1. Of the rights of the separate creditors and lega- tees, etc., generally 610 2. When the share of the deceased is not got in . 614 3. Of shares specifically bequeathed 619 CHAP. IV.— Of Bankruptcy 622 Preliminary observations 622 Sect. 1.— Adjudications of bankruptcy against partners . . 625 1. Acts of bankruptcy 625 And herein particularly of fraudulent convey- ances 627 2. The petitioning creditor's debt 633 3. Of joint and separate adjudications .... 637 And herein of annulling and consolidating ad- judications 640 4. Choice of trustee 644 And herein of inspectors to protect special in- terests 645 Sect. 2. — The property which vests in the trustee and the consequences of such vesting 646 1. Generally 646 2. Property divisible amongst the creditors . . . 650 3. Of set-off and mutual credit 654 4. Of the time from which the title of the trustee dates 663 And herein of the consequences of the doc- trine of relation back as regards — (a) Transactions with the bankrupt partners 666 (b) Transactions with the solvent partners 669 (c) Execution creditors 674 Sect. 3.— Of the doctrine of reputed ownership .... 676 1. Generally 676 2. Particularly as regards partners 683 Where there has been a change in'the firm . 685 Where there is a dormant partner . . . 689 Sect. 4. — The administration of the bankrupt's estates . . 691 1. General principles 691 2. Of joint estate and of separate estate .... 697 3. Of joint, separate, and joint and separate debts 701 4. Of the proof and payment of partners' debts generally 707 Of secured creditors and the rule in Ex parte Waring 709 XXIV ANALYSIS OF CONTENTS. A. Proof against the joint estate 720 The joint creditors 720 The partners 721 The separate creditors 728 B. Proof against the separate estates .... 729 The separate creditors 730 The joint creditors 730 The partners 737 C. Proof against both estates 743 General rule as to election 743 Cases in which double proof is allowed . 747 Cases where a secured creditor may split his demand 749 Sect. 5. — The bankrupt's order of discharge 751 Sect. 6. — Arrangements with creditors 754 CHAP. V.— Joint-Stock Companies in the United States . 757 THE LAW OF PARTNERSHIP. INTRODUCTORY. 1. Meaning of the word partnership. To frame a definition of any legal term which shall be both positively and negatively accurate is possible only to those who, having legislative authority, can adapt the law to their own definition. Other persons have to take the law as they find it; and rarely indeed is it in their power to frame any definition to which exception may not justly be taken. All that they can usefully attempt is to analyze the meanings of the words they use, and to take care not to employ the same word in different senses where so to do can possibly lead to confusion. Without attempting, then, to define the terms partners and partnership, it will suffice to point out as accurately as possible the leading ideas involved in those words. The terms in question are evidently derived from to part, in the sense of to divide amongst or share, and this at once limits their application, although not very precisely ; for persons may share almost anything imaginable, and may do so either by agreement amongst themselves or otherwise. But in order that persons may be partners in the legal accepta- tion of the word, it is requisite that they shall share some- thing by virtue of an agreement to that effect, and that that which they have agreed to share shall be the profit arising from some predetermined business engaged in for their common benefit. An agreement that something shall Vol. I — 1 1 *2 INTRODUCTORY. [*2] be attempted with a view to gain, and *that the gain shall be shared b}^ the parties to the agreement, is the grand characteristic of every partnership, and is the lead- ing feature of nearly every definition of the term, (a) Partnership, although often called a contract, is in truth the result of a contract ; the relation which subsists between persons who have agreed to share the profits of some busi- ness rather than the agreement to share such profits. By some writers associations which have not gain for their object are occasionally termed partnerships ; and even in the Companies Act, 1862, partnerships having gain for their object are referred to, and the reader is thereby led to suppose that there may be partnerships of some other kind, (b) But to use the word partnership to denote a so- ciety not formed for gain is to destroy the value of the word, and can lead only to confusion, (c) Nor is it consistent with modern usage. Lord Hale and older writers use copartner- ship in the sense of co-ownership, but this is no longer cus- tomary ; and as will be shown hereafter, there are many important differences between the two. (d) Although for the reasons already stated the writer has not attempted to give a definition of the term partnership, he appends for the consideration of the reader the following definitions taken from works of celebrity : Civil Code of New York. — Partnership is the association of two or more persons for the purpose of carrying on business together, and di- viding its profits between them, (e) l (a) Moll wo, March & Co. v. Court an adventure or business, or in the of Wards, L. R. 4 P. C. 436 ; R. v. profits as affected by losses. Robson, 16 Q. B. D. 137. When the same persons carry on (o) See sec. 4 of the act. the same business as partners in (c) See as to clubs, infra, chap, two different places and under dif- 1, § 5. ferent firm names, there is in law (d) See infra, chap. 1, § 6. but a single partnership, and the (e) Civil Code of the State of New assets of both nominal firms are York, § 1283. equally applicable to the payment 1 In Chapman v. Devereux, 32 Vt. of all the creditors. Campbell v. 616, partnership is denned to be a Colorado Coal & Iron Co. 9 Colo. 60. joint interest in the net profits of From the facts of this case, held MEANING OF THE WORD PARTNERSHIP. *3 Code civil. — La societe est un contrat, par lequel deux ou plusieurs personnes conviennent de mettre quelque chose en corntnun, dans la vue de partager le benefice qui pourra en resulter. (/) Collyer. — [Partnership as between the parties themselves is a volun- tary contract between two or more persons for joining together their money, goods, labor and skill, or any or all of them, under an understand- ing that there shall be a communion of profit between them, and for the purpose of carrying on a legal trade, business or adventure.] 1 Dixon. — A partnership is a voluntary unincorporated association of in- dividuals standing to one another in the relation of principals for carry- ing out a joint operation or undertaking for the purpose of joint profit, (g) Domat. — La societe est une convention entre deux ou plusieurs per- sonnes, parlaquelle ils mettent en commun entre eux ou tous leurs biens ou une partie, ou quelque commerce, queique ouvrage, ou quelque autre affaire, pour *partager tous ce qu'ils pourront avoir de gain [*3] ou souffrir de perte de ce qu'ils auront mis en societe. (7i) Kent. — Partnership is a contract of two or more competent persons to place their money, effects, labor and skill, or some or all of them, in lawful commerce or business, and to dn'id^ the profit and bear the loss in certain proportions. (£) Indian contract act. — Partnership is the relation which subsists be- tween persons who have agreed to combine their property, labor or skill in some business, and to share the profits thereof between them, (k) Parsons. — Partnership is the combination by two or more persons of capital, or labor, or skill, for the purpose of business for their common benefit. (I) Pollock. — Partnership is the relation which subsists between persons who have agreed to share the profits of a business carried on by all or any of them on behalf of all of them, (rn) Pothier (1). — Le contrat de societe est un contrat par lequel deux ou plusieurs personnes mettent, ou s'obligent de mettre, en commun quelque hose, pourfaire en commun un profit honnete, dont ils s'obligent recip- roquement de se rendre compte. (n) that the vendor of goods was en- (g) Dixon's Law of Partnership, 1. titled to treat the vendee either as (//,; Domat, les Louis Civiles, liv. partner or sole owner of a branch i, tit. 8, § 1. store for which the goods were (i) ?> Kent's Comm. 23. bought, and hence liable for the (k) Indian Contract Act, § 239. price of the goods. Woodward v. (!) Parsons' Part. chap. 2, § 1. Clark, 30 Kan. 78. This definition is inaccurate. The (/) Code Civil, § 1832. word denotes a combination of per- 1 Setzer v. Beale, 19 "W. Ya. 274 ; sons, not a combination of capital. Cogswell v. Wilson, 11 Oreg. 371; (?,/) Pollock's Digest of the Law of Tillar v. Cook, 77 Va. 477 ; Tyler on Partnership, g 4, ed. 3. Part. p. 11. (n) Pothier, Traite du Contrat de *4 INTKODUCTOKY. Pothier (2). — Societas est contractus de conferendis bona fide rebus aut operis, animo lucri quod honestum sit ac licitum in commune faci- endi. (o) Prussian code— Ein Vertrag durcb welchen mehrere Personen ihr Vermogen oder Gewerbe oder auch ihr Arbeiten und Bemiihungen ganz oder zum Theil zur Erlangung eines gemeinschaftlichen Endzwecks vereinigen, wird ein Gesellschaftsvertrag genannt. (p) Pufendorf. — Le contrat de societe se fait lorsque deux ou plusieurs personnes mettent en commun leur argent, leurs biens, ou leur travail, a la charge de partager entr'eux le gain et de supporter les pertes qui en arriveront, chacun a proportion de ce qu'il contribue du sien. (q) Rutherford. — When two or more persons join money, or goods, or labor, or all of these together, and agree to give each other a common claim upon such joint stock, this is partnership, (r) Story. — Partnership, often called copartnership, is usually 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 commerce or business, with the understanding that there shall be a com- munion of the profits thereof between them, (s) Thibaut. — Verbinden sich mehrere zur Erreichung eines ihnen [*4] gemeinschaftlichen *Endzwecks so wird diesz ein Gesellschafts- vertrag (societas Mascopei, Magenschaft) genannt. Geschieht diese Verbindung zu eigenniitzigen Zwecken so nennt man sie societas quozs- tuaria, oder negotiatoria, sonst aber non quazstuaria. (t) Vinnius.— Societas est contractus, quo inter aliquos res aut operae communicantur, lucri in commune faciendi gratia, (u) Voet. — Societas est contractus jurisgentium, bonas fidei, consensu con- 6tans semper re honesta, de lucri et damni communione. (x) Watson. — Partnership is a voluntary contract between two or more persons for joining together their money, goods, labor and skill, or either or all of them, upon an agreement that the gain or loss shall be divided proportionably between them, and having for its object the advance- ment and protection of fair and open trade, (y) Societe, § 1. There is a useful Eng- (s) Story on Partn. § 2. lish edition of this work by O. D. (t) Thibaut, System des Pandek- Tudor, Esq. ten Rechts, § 467, edition 9. This (o) Pothier, Pand. lib. xvii, tit. 2, division of partnerships into part- § 1, art. 1. nerships having gain for their ob- (X>) Allgem. Landsrecht fur die ject, and other partnerships, is Preuss. Staat. th. i, tit. 3, § 169. noticed by most German writers on (q) Pufendorf, Le Droit de la the civil law. Nat. et des Gens, ed. Barbeyrac, (u) Vinn. Inst, iii, 26. liv. v, chap. 8, § 1. (x) Voet. Comm. ad Pand. lib, (r) Inst, of Nat. Law, bk. i, c. 13, xvii, tit. 2, Pro Socio, § 1. § 9- (V) Watson, Partn. p. 1. This CORPORATIONS AND COMPANIES. *5 All the above definitions, however, with the exception of Mr. Dixon's, are, with reference to the law of England, too wide; for they include not only partnerships in the proper sense of the word, but also many corporations and com- panies which differ from partnerships in several important respects, and which it is better therefore not to denote by the same word. Mr. Dixon's definition avoids this error, but the relation of principals to which he refers is not altogether free from objection, (s) If partnership is defined so widely as to include incor- porated and other companies, partnerships must be sub- divided into (1) ordinary and (2) extraordinary partnerships as in the Indian Contract Act. (a) But it is more in accord- ance with ordinary usage to confine the word to unincorpo- rated societies not governed by any special statute or custom. 2. Distinction between p>art?ierships, corporations and companies. Corporations. — A corporation is a fictitious person, cre- ated by special authority (by the law of England by the Crown or by parliament), and endowed by that author- [*5] ity with a capacity to acquire rights and incur obliga- tions, as a means to the end for the attainment of which the corporation is created. 1 A corporation, it is true, consists of a number of individuals, but the rights and obligations of these individuals are not the rights and obligations of the fictitious person composed of those individuals; nor are the rights and obligations of the body corporate exercisable by or enforceable against the individual members thereof, either jointly or separately, but only collectively, as one ficti- tious whole. As the civilians neatly express it — Si quid definition is copied by Gow in his (a) See § 266. work on partnership. 1 See Pilcher's Succession, 1 So. (z) See the observations of the Rep. 929; New Orleans v. Gauth- Master of the Rolls on the above reaux, 32 La. Ann. 1128. definitions in Pooley v. Driver, 5 Ch. D. 471 et seq. 5 *5 INTRODUCTORY. tmiversitati debetur singulis non debetur, nee quod debet uni- versitas singuli debent. With partnerships the case is otherwise; the members of these do not form a collective whole, distinct from the indi- viduals composing it; 1 nor are they collectively endowed with any capacity of acquiring rights or incurring obliga- tions. The rights and liabilities of a partnership are the rights and liabilities of the partners, and are enforceable by and against them individually: 2 Si quid societati debetur singulis debetur et quod debet societas singuli debent. (b) 1 A partnership is not a legal en- tity having as such a domicile, al- though for purposes of taxation and for similar purposes it may be treated by statute as having a locality. Eicker v. American Loan & Trust Co. 140 Mass. 345; S. P. Faulkner v. Hyman, 143 Mass. 53. In Iowa a partnership is a legal entity, and for jurisdictional pur- poses may be considered as having a residence in every county in which it does business, though neither partner rosides in such county. Fitzgerald v. Grimmell, 54 la. 261. See, also, Rosenbaum v. Hayden, 36 N. West. Rep. (Neb.) 147. Under the law of Louisiana, a commercial partnership, so far as jurisdiction is concerned, stands in the same category as a corpora- tion. Liverpool Navigation Co. v. Agar, 4 Woods, 201. 8 An association which does busi- ness under an unsuccessful attempt to incorporate, or before the com- pletion of the corporation, is a part- nership composed not only of the directors but of the subscribers to the articles. Coleman v. Coleman, 78 Ind. 344 ; Smith v. Warden, 86 Mo. 382; Ridenour v. Mayo, 40 Ohio St. 9; Richardson v. Pitts, 71 Mo. 128; Whipple v. Parker, 29 Mich. 369; Flagg v. Stowe, 85 111. 164; Pettis v. Atkins, 60 Til. 454; Haslett v. Wotherspoon, 2 Rich. Eq. 395 ; Hodgson v. Baldwin, 65 111. 532; Jessup v. Carnegie, 12 Jones & Sp. 261 ; Garnett v. Rich- ardson, 35 Ark. 144; Martin v. Fewell, 79 Mo. 401; Farnum v. Patch, 60 N. H. 294; S. C. 49 Am. Rep. 313; Connor v. Abbott, 35 Ark. 365. See, also, Farmers' Bk. v. Smith, 26 W. Va. 541, where, from the particular facts of the case, certain parties were held liable as part- ners, notwithstanding the fact of organization as corporation for the purpose of carrying on the same business. In the absence of a statutory provision making shareholders lia- ble in case of failure to comply with the requirements of the char- ter or act under which the com- pany is incorporated, persons who have contracted with a de facto (b) See Lloyd v. Loaring, 6 Ves. B. 180; Ryhope Coal Co. v. Foyer, 7 773; Beaumont V. Meredith, 3V.& Q. B. D. 498. 6 CORPORATIONS AND COMPANIES. *5 Companies — 1. Unincorporated. — The fundamental dis- tinction between partnerships and unincorporated compa- corporation cannot deny its corpo- rate existence in order to charge its shareholders individually as partners. Stout v. Zulick, 7 Atl. Rep. (N. J.) 362. An association claiming to be a corporation took out a policy of insurance on personal property which it claimed to own. Held, that as, if not a corporation, it was a partnership, and as such could hold personal property and make contracts in the name it assumed, it was immaterial, so far as con- cerned the validity of the policy, whether it was or was not a cor- poration. Holbrook v. St. Paul F. and M. Ins. Co. 25 Minn. 229. A corporation cannot be sued for the debts of the firm out of which it has been organized, even though there is no difference in member- ship. McLellan v. Detroit File Works, 56 Mich. 579. A suit and judgment against an imperfectly organized corporation, as between plaintiffs and defend- ant corporation, will bar the same plaintiffs from recovering from the members of the corporation as partners in the same cause of ac- tion. Cresswell v. Oberly, 17 Bradw. 281. Persons associated for the pur- pose, not of gain or profit, but to secure the extension and grading of the public streets, with the in- tention to become incorporate, but who have failed to perfect an in- corporation, while individually lia- ble upon a contract authorized by them, do not constitute a partner- ship proper with implied authority in each member to bind all the associates by any act within the scope of the business undertaken. Johnson v. Corser, 34 Minn. 355. Persons held meetings and sub- scribed for stock in a proposed cor- poration for running a particular steamboat ; but, failing to obtain a charter, it was finally agreed to form a limited partnership; but the provisions of the act in relation to such partnership had not been complied with. Held, that such persons were not liable, as general partners, for debts contracted in the meantime by the owner of the boat for repairs. West Point Foundry Association v. Brown, 3 Edw. Chy. 284. The "New England Express Company," being a copartnership and not a corporation, any stock- holder subscribing for shares, and paying in part of his subscription, becomes a member of the company and liable for its debts, although he never attended any meetings, or received any certificate of stock, or knew of the contract of plaint- iff. A statute of New York, re- quiring a suit to be brought against the officers of a copartnership, be- fore the private stockholders could be sued, relates only to the remedy, and is not in force in Massachu- setts. Boston, etc. R. R. Co. v. Pearson, 10 Reporter, 81. As to the creditors, each mem- ber of an insolvent voluntary asso- ciation is liable for all the debts, the same as in ordinary partner- ships. Hodgson v. Baldwin, 65 111. 532. Where two or more parties agree to form a corporation, some put- *5 INTRODUCTORY. nies is, that a partnership consists of a few individuals known to each other, bound together by ties of friendship ting in machinery and patents, and others money and labor, but no corporation is formed by reason of a failure to comply with the stat- ute, if the parties are entitled to share in the profits and losses, it will constitute a gutm-partner- ship, although the title to the property put in, whether real or personal, may not be changed. Flagg v. Stowe, 85 111. 164. But in such case, the persons so operating together will not become jointly entitled to the property itself, but simply to its use, except as to the money advanced. If the party furnishing the machinery withdraws and files his bill for an account and a sale of the property, he will be liable to account to the party advancing the money for any loss that has occurred. Flagg v. Stowe, supra. In accounting in such case, it is error to allow a certain per cent, for the use of the machinery. It should be the fair value of its use as situated, and not what it might have been worth if used at some other place. Flagg v. Stowe, supra. Associates in forming, and stock- holders in, a company, assuming to be a corporation, but without legal corporate existence, are liable as copartners upon contracts made in the name adopted as its corporate name, although the parties deal- ing with the company believed it to be a corporation and dealt with it as such ; and although the asso- ciates and stockholders did not in- tend to become copartners and liable as such. Jessup v. Carnegie, 12 Jones & Sp. 261. In Merchants, etc. Bank v. Stone, 38 Mich. 779, however, it was held that where a body professing to be a corporation has been dealt with expressly as such, those who have so dealt with it cannot question its corporate existence for the pur- pose of charging its members indi- vidually as if they were partners. To the same point see Planters' Bank v. Padgett, 69 Geo. 159 ; Staf- ford Bk. v. Palmer, 47 Conn. 443. Actions upon a promissory note dated June 3, 1867, made by one of the defendants as agent of the Utica Steam Woolen Mills Com- pany, a corporation whose charter had expired by statutory limita- tion on February 27, 1866, in igno- rance of which fact the business had thereafter been carried on by the trustees as usual. The action was brought against certain of the stockholders, plaintiff claiming that they were liable as copartners for the debts contracted after the expiration of the charter. Held, that the action could not be main- tained ; that the business must be deemed to have been carried on by the directors acting as trustees, and that persons dealing with the said officers must be considered as contracting with them in their rep- resentative capacity, and as relying upon their responsibility in such capacity. Central, etc. Institution v. Walker, 5 Hun, 34. Evidence that the officers of a corporation did business as if they were partners was held inadmis- sible where the party dealing with them had not been misled by their neglect to observe corporate for- 8 C0RP0KATI0NS AND COMPANIES. and mutual confidence, and who, therefore, are not at lib- erty, without the consent of all, to retire from the firm and substitute other persons in their places ; whilst a com- pany consists of a large number of individuals not neces- sarily nor indeed usually acquainted with each other at all, so that it is a matter of comparative indifference whether changes amongst them are effected or not. (c) Nearly all the differences which exist between ordinary partnerships and unincorporated companies will be found traceable to the above distinction. Indeed it may be said that the law of unincorporated companies is composed of little else than the law of partnership modified and adapted to the wants of a large and fluctuating number of members. 1 2. Incorporated companies. — Incorporated com- panies are societies consisting usually of *many per- [*6] sons, having transferable shares in a common fund, malities, and in a suit against them he was required to establish a cor- porate liability. New York Iron Mine v. Negaunee Bank, 39 Mich. 644. Stockholders in a' rnannf acturing corporation who, upon the expira- tion of its charter, agree to continue the business in the name of the corporation, and appoint one of their number as managing agent to carry on the business, and who agree to furnish money when called for by him in proportion to the number of shares held by each of them in the corporation, are lia- ble to third persons, as partners, upon commercial paper made by such agent for the benefit of the firm, and signed with the name of the former corporation by him as agent. National, etc. Bank v. Landon, 45 N. Y. 410. Several persons formed an asso- ciation, making no provision for future incorporation, by which they severally agreed to furnish certain sums, respectively, towards a joint adventure, and afterwards the "directors" of the association obtained an act of incorporation, varying considerably the terms of the original agreement. Held, that members of the association who did not assent to the incorpo- ration were absolved from their agreement, and could not be com- pelled to pay in the sums sub- scribed by them. Southern Steam Packet Co. v. Magrath, 1 McMull. Ch. 93. (c) See per James, L. J. , in Smith v. Anderson, 15 Ch. D. 273. 1 Joint stock associations, except as otherwise provided by statute, are partnerships, and a creditor must proceed against the surviving shareholders before an action can be maintained against the representa- tives of a deceased shareholder. Moore v. Brink, 6 Thomp. & C. 22; S. C. 4 Hun, 402. See last chapter. 9 *6 INTRODUCTORY. but incorporated by Koyal Charter or by act of Parliament. They are not pure partnerships, for their members are rec- ognized as -an aggregate body; nor are they pure corpora- tions, for their members are more or less liable to contribute to the debts of the collective whole. Incorporated com- panies are intermediate between corporations known to the common law and ordinary partnerships, and partake of the nature of both; and the law relating to these companies depends as well on the principles which govern ordinary partnerships as on those which are applicable to corpora- tions strictly so called, (d) The present volume is confined to partnerships in the ordinary sense. Incorporated companies and companies which, although unincorporated, consist of numerous mem- bers and are governed by special statutes or by special cus- toms, e. g., Cost Book Mining Companies, will be dealt with in another volume. (d) See the judgments in 5 Ch. Pharmaceutical Soc. v. The London 431 and 732. As to when corpora- and Provincial Supply Assoc. 5 Q. tions are persons within the mean- B. D. 310, aff. 5 App. Ca. 857. ing of acts of Parliament, see The 10 BOOK I. OF CONTRACTS OF PARTNERSHIP. CHAPTER I. THE NATURE OF THE CONTRACT DETERMINED. PRELIMINARY OBSERVATIONS. Agreement to share profits the essence of a partner- ship. — The basis of all partnerships is an agreement to share the profits arising from some business or undertaking. Usually, but not necessarily, partners have a joint capital or stock, by the employment of which the profits to be shared are expected to arise ; and in ordinary partnerships, but not in companies, each partner usually takes an active part in the prosecution of the partnership business. Nothing, perhaps, can be said to be absolutely essential to the existence of a partnership except a community of interest in profits re- sulting from an agreement to share them. But, although this is so, the usual characteristics of an ordinary partner- ship are a community of interest in profits and losses, a community of interest in the capital to be employed, and a community of power in the management of the business engaged in. 1 1 In Nebraska R. R. Co. v. Lett, 8 sponsibility for the partnership Neb. 251, it is said that the two contracts. leading features of partnership are In Culley v. Edwards, 44 Ark. a common interest in the stock of 423 ; S. C. 51 Am. Rep. 614, the rule the company and a personal re- that participation in profits of a 11 *8 CONTRACTS OF PARTNERSHIP. [BOOK Profits and losses — Gross profits — Net profits. — Profits (or net profits) are the excess of returns over advances; the excess of what is obtained over the cost of obtaining; it. Losses, on the other hand, are the excess of advances over returns; the excess of the cost of obtaining over what is obtained. Profits and net profits are for all legal purposes synonymous expressions; but the returns themselves are often called gross profits; hence it becomes necessaiy to call profits net profits in order to avoid confusion. In [*8] the *present treatise, however, the word profits will be used in the sense of net profits ; and the expression gross profits will be avoided as much as possible. Persons who share both advances and returns, and also persons who share the difference between them, whatever business was the test of partnership as to liability to creditors is said to have been abandoned in England and generally in America; and the test is now stated to be, whether the business has been carried on in behalf of the person sought to be charged as a partner; i. e., did he stand in relation of principal to- wards the ostensible traders by whom the liabilities were incurred and under whose management the profits have been made. As be- tween the parties themselves the test of partnership has always been their actual intent. The relationship of partnership does not exist between persons as- sociated in a common undertaking unless each has the right to man- age the whole business and to dis- pose of the entire property involved in the enterprise for its purposes, in the same manner and with the same power as all can when act- ing together. Ashby v. Shaw, 82 Mo. 76. Mere agency, however, does not constitute a partnership. Thus, an agreement by which a manufact- uring firm give another firm, to whom they are largely indebted, the entire control and management of their business, assigning all their machinery and tools to the latter firm, and authorizing them to col- lect all moneys due the former, and therewith to pay said indebtedness, at their pleasure, does not consti- tute the two firms copartners. Brundred v. Muzzey, 25 N. J. L. 268. So, an agreement to appoint a person to manage a mine until the proceeds pay the creditor does not make latter liable as partner of debtor. Davis v. Patrick, 30 U. S. L. 1090. An arrangement between B. and C. for "mutually keeping house," by which C. is to pay the house- rent and butcher's bill, and B. is to pay the other bills for the fam- ily expenses, does not, as matter of law, make B. and C. partners, or authorize C. to bind B. to third parties for the rent. Austin v. Thompson, 45 N. H. 113. 12 CS. I.] NATURE OF CONTRACT DETERMINED. *8 that difference may be, necessarily share both profits and losses ; profits, if the returns exceed the advances ; losses, if the advances exceed the returns. But persons who share profits, i. e., the excess of returns over advances, do not necessarily share losses ; for profits may be shared by those who make no advances ; and persons may stipulate for a division of gain, if any, and yet some one or more of them may by agreement be entitled to be indemnified against losses by the others ; so that whilst all share profits, some only bear losses. Sharing gross returns.— The actual or gross returns obtained by advances obviously include profits if profits have been made. But those returns do not include losses, if losses are incurred ; for losses are the excess of the ad- vances over the returns, and come out of the advances and not out of the returns. Hence, persons who share gross returns necessarily share profits, but they do not by sharing the returns share losses, for these fall entirely on those mak- ing the advances. Moreover, although a division of gross returns is a division of profits, if there are any, it is so only 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 division of gross returns, what- ever is returned must be divided, whether there be profit or not. On the other hand, if the persons sharing gross returns also share the advances by means of which the returns are made, there is necessarily community both of profit and of loss ; community of profit if the returns exceed the advances; community of loss if the advances exceed the returns. Distinction between sharing profits and gross returns. The above remarks have appeared necessary in order to explain the reasons for the distinction made by English law- yers between agreements to share profits (i. e., net profits and profits as such) on the one hand, and agreements to share gross returns (sometimes called gross profits) on the other; and in order to account for the rule that whilst an 13 *9 CONTRACTS OF PARTNERSHIP. [BOOK I. agreement to share profits creates a partnership, an [*9] agreement to share gross ^returns does not. 1 The rea- sonableness, however, of the above distinction is very questionable, at least where there is any community of cap- ital or common stock; and the rule itself is probably attribu- table less to the difference which exists between net profits and gross returns than to the doctrine which so long con- fused the whole law of partnership in this country, and ac- cording to which all persons who shared profits incurred liability as if they were really partners. When this doctrine was rife, the distinction between sharing net profits and gross profits (i. e., returns) had considerable practical value ; but, as will be seen hereafter, the doctrine in question is now wholly exploded, and the distinction alluded to is of little importance. Quasi-partnerships. — The doctrine to which reference has been made renders it necessary to caution the reader against an ambiguity in the word partnership as used by English lawyers. Partnerships are by them divided into partnerships (properly so called), and partnerships as regards third persons, which are not in fact partnerships at all, and should never be so styled. 2 What is called a partnership i See this distinction, approved in 10 Atl. Rep. (N. J.) 392 ; S. C. 8 Turner v. Bissell, 14 Pick. 192; Cent. Rep. 643. Everett v. Coe, 5 Den. 180 ; Heim- 2 Parties may often be adjudged street v. Howland, id. 68; Ambler partners as to third persons, when v. Bradley, 6 Vt. 119; Bowman v. they could not be so regarded as Bailey, 10 id. 170; Mason v. Potter, between themselves. Stanchfield 26 id. 722; Patterson v. Blanchard, v. Palmer, 4 G. Greene, 23; Gill v. 5 N. Y. 186; Moore v. Smith, 19 Kuhn, 6 Serg. & R. 333; Kellogg Ala. 774. See, also, Sankey v. Co- v. Griswold, 12 Vt. 291. lumbus Iron Works, 44 Geo. 228, Where two persons agree to raise explaining section 1880, Revised together a crop of corn, and divide Code ; Wood v. Valette, 7 Ohio St. the product, the agreement consti- 172. See post. tutes a partnership. Allen v. Davis, See, however, contra, Denny v. 13 Ark. 28. Cabot, 6 Mete. 82; Pars, on Part. But a contract by which A. *88, and note. See post. agreed to let B. have all the pine Parties manufacturing a product timber on his lands suitable for and dividing the proceeds, held, to good lumber, and B. agreed to pay be copartners. Teas v. Woodruff, A. therefor annually, in money, 14 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *10 as regards third persons (^wasa-partnership) is nothing more than a number of persons, who, in consequence of certain acts done by them, are held liable for each other's conduct, as if they had entered into a contract of partnership amongst themselves. "What these acts are will be considered here- after; but the reader is requested to bear in mind that, for the present, partnerships properly so called, and not quasi- partnerships, are intended to be spoken of. Having made these preliminary observations, it is pro- posed to consider what agreements do, and what do not, result in a partnership in the proper sense of the word. ^Section I. — Of True Partnerships. [*10] 1. — Partnership is the result of an agreement to share profits and losses. Agreements to share profits and losses. — Whether an agreement creates a partnership or not depends on the real intention of the parties to it. (a) x If the agreement is not one-Sfth of the lumber sold and and obligations of partnership is collected by him, does not consti- necessary. Hedge's Appeal, 63 Pa. tute A. and B. partners inter sese. St. 273. Fail v. McKee, 36 Ala. 61. The facts that several persons as- (a) Moll wo, March & Co. v. Court sociated together to run a line of of Wards, L. R. 4 P. C. 419 ; Pooley stage-coaches ; that they had a gen- v. Driver, 5 Ch. D. 460 ; Walker v. eral meeting, and that debts were Hirsch, 27 Ch. D. 460 ; Ross v. Par- contracted on account of the com- kyns, 20 Eq. 331, and otber cases pany, do not prove a partnership cited infra, p. 13, note (r). as between them. Chandler v. 1 Whether two or more persons Brainard, 14 Pick. 285 ; Clark v. associating in business are partners Reed, 11 id. 450. as between themselves depends The defendants signed articles of upon their intentions as legally as- association in trade under the name certained. Salter v. Ham, 31 N. Y. of " The Farmers' and Mechanics' 321; Stevens v. Faucet, 24 111. 483; Store," by which it was provided Nichoff v. Dudley, 40 111. 406 ; Macy that any stockholder might with- v. Combs, 15 Ind. 469 ; Gray v. draw upon giving six months' no- Gibson, 6 Mich. 300; Hazard v. tice, and that the business of the Hazard, 1 Story, 371. See, also, company should be done pursuant Manhattan B. Manufg. Co. v. Sears, to a major vote of those present. 1 Sweeny, 426. See post. The defendants subscribed a certain Voluntary consent to the relation sum, and a by-law provided that 15 *10 CONTRACTS OF PARTNERSHIP. [BOOK I. in writing the intention of the parties must be ascertained from their words and conduct. If the agreement is in writ- each subscriber should become a partner. Held, that the defendants ■were partners in the company. At- kins v. Hunt, 14 N. H. 205. A., who was the remaining part- ner of a manufacturing firm which had been dissolved, said to B. that, as his business was so extensive, it was necessary for him to have a partner, so that in case of his de- cease there would be some one who could go on and close up the con- cern without the delay arising from an administration of his estate, and proposed to take him (B.) as such partner, saying he should have $1,500 the first year, and the next year an interest in the business ; to which B. assented, and thereupon an agreement was drawn and signed by them as follows: "Co- partnership. The subscribers have this day formed a copartnership under the style of A. & Co. , and will hereafter carry on the business formerly conducted by A. & C." Public notice of this agreement was given subsequently, and until the death of A., which occurred before the expiration of the first year, all purchases, sales and consignments of goods were made, and all drafts were drawn, and promissory notes given by A. & B. in the name of A. & Co. ; and each of them exercised the full power of a partner in rela- tion to all their business. Held, that they were partners, and that after A.'s death, B., as surviving partner, had power to commence proceedings in insolvency which should include the estate of the firm. Adams Bank v. Rice, 2 Allen, 480. L. and G. agreed in writing to " have the right to use the name of each other as a firm name," and G. did " grant that L." should " have the right to go to any of the whole- sale markets and purchase goods, and sell the same at W." and G. did "do this for the benefit of L., not claiming any of the profits arising from the sale of any goods or articles sold at W." It was also agreed that " all money furnished to enable the said firm L. & G.," etc.," to each other," should be held at the rate of seven per cent." Held, that this agreement consti- tuted L. and G. partners. Hen- drick v. Gunn, 35 Ga. 234. B. orally agreed to contribute his inchoate interest in an invention, and S. to furnish the money neces- sary to make that invention avail- able in the form of a patent, both to contribute their services to make it remunerative. Held, to be an agreement for a partnership and not a contract for the sale of goods, wares and merchandise, within the statute of frauds. The patent when obtained would be in equity part- nership property, no matter in whose name it might be taken out. Somerby v. Buntin, 118 Mass. 279. An agreement between two firms that one should furnish the money to build wagons and the other do the work, make the sales, repay the money to the first firm and di- vide the profits, does not constitute the two firms copartners. Clark v. Barnes, 34 N. West. Rep. (la.) 419. A contract whereby A. was to furnish money to B. to obtain title to property in his own name 16 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *10 ing its true construction must be determined ; but, as will be more fulty shown in a subsequent chapter, even a written and manage it for compensation, and when enough land has been sold to pay the advances made by A., the remainder of property to be divided between them, does not cre- ate a partnership. Blair v. Schaef- fer, IT. S. C. C, W. D. Mo., 1887. Where persons desiring to secure provisions for themselves, without the cost of middlemen, associate themselves together without incor- poration, open a store under the name of "Bridgeport Co-operative Association," and conduct business through their own managers, who are authorized to go into the market and buy provisions under such name, which shall be resold at cost to the members and the public generally, the members of such association are liable as indi- viduals for goods so bought by managers, although they never held themselves out as partners and credit was never given to them as such or as individuals. Davidson v. Hold en, 10 Atl. Rep. (Conn.) 515; S. C. 4 N. Eng. Rep. 818. An agreement forming an asso- ciation to be known as "The Grant's Pass Real-Estate Associa- tion," stating that the association was for the mutual benefit and profit of the parties thereto, and that its business should be the buy- ing, selling, renting, leasing and mortgaging of real estate, and spec- ifying the interest of each party therein, constitutes the parties sign- ing it partners inter se. Kelley v. Bourne, 16 Pac. Rep. (Or.) 40. A contract between A. & B. and C. , by which the former were to furnish the latter goods at cost, to hawk and peddle, adding seven per cent, at such time as C. might re- quire, C. to furnish a wagon and to devote his whole time to peddling the goods, the expense of the li- cense, traveling expenses, etc., to be deducted from the amount of the sales, and the balance or profits to be divided, two-fifths to C, and three-fifths to A. & B., the goods and merchandise, as well as the notes received on the sale of the goods, to be at the risk of the par- ties, in the proportion of two-fifths to C, and three-fifths to A. &B., makes the parties, as between themselves, partners. Emanuel v. Draughn, 14 Ala. 203. An agreement to engage in the business of prospecting for and the development of lode mining prop- erty, for the joint use of all, is in the nature of a partnership agree- ment, and under it each party thereto becomes the agent of the other. Lawrence v. Robinson, 4 Col. 567. Where a manufacturing business connection, carried on for many years by a father and his four sons, had all the elements of a partnei-- ship except the father's consent, held, that there was no partner- ship ; but the supreme court allowed the bill praying a dissolution and account to be retained in order that the question might be pre- sented whether such a state of facts appeared from the record as would entitle the complainant (one of the sons) to compensation on the principle of a quantum meruit, and to have the cause remanded, with leave to amend the bill for Vol. 1 — 2 17 10 CONTRACTS OF PARTNERSHIP. [BOOK I. contract may be departed from and modified by a new ver- bal agreement between all the partners proved by conduct inconsistent with the written document, (b) that purpose. Phillips v. Phillips, 49 111. 437. If two persons enter into a joint contract in writing to perform cer- tain labor and furnish certain ma- terials for another, which contract does not define the relations of such persons between themselves, and if, by the understanding be- tween themselves, one is to perform one part of the labor and the other another, and each is to receive a proportional sum of the money paid for the whole, the relation of partners does not by reason of these facts exist between them. Smith v. Moynihan, 44 Cal. 53. A. and B., by a written contract, agreed to carry on a trade or busi- ness in partnership, and in the same instrument B. and C. agreed to carry on a different trade or business in partnership. Held, that the relation of partners was not created between the three, so as to enable a person dealing with A. & B., or with B. & C, to commence an action against the whole. El- derkin v. Winne, 1 Chand. 27. The joint prosecution of a law- suit does not, per se, create a part- nership between the parties as to the subject-matter in dispute. Wilson v. Cobb, 28 N. J. Eq. 177. An agreement between a sawyer in Wisconsin and a lumber mer- chant in Chicago, whereby the lat- ter was to advance $10,000 to be used by the former in sawing, etc., and the former to deliver all the lumber produced to the latter at $1 per M. less than the market rates at the time of the arrival of each cargo in Chicago, does not create a partnership. Freese v Ideson, 49 111. 191. A. made the following written agreement with B. : "Sold B., on joint account with A., two thou- sand boxes of candles at twenty- six cents, six months from delivery; B. to be allowed two and one-half per cent, on sales ; on all sales not approved by A., B. is to guaranty the same, receiving a commission of two and one-half per cent. ; for half of the sales made by B. he is to pass over the paper to A. ; there are to be no charges for storage ; property in store to be covered by insurance by B. for joint account and expense." A. delivered the candles to B. under this agreement, and received from time to time, as the candles were delivered, eight notes of B. for half the value of the candles, payable in six months, two of which were paid by B. at maturity, and the others indorsed and negotiated by A., and after- wards paid by him, B. having be- come insolvent. Held, that these facts showed a sale of an undivided half of the candles by A. to B., and not a partnership between A. and B. with regard to the candles ; and therefore that A. had no lien on B.'s half of the candles as against B.'s assignees in insolvency. Hawes v. Tillinghast, 1 Gray, 289. A., having given his note to cer- tain creditors of a partnership for (6) Infra, Book III, c. 9. 18 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. '10 But an agreement to share profits and losses may be said to be the type of a partnership contract. Whatever dif- debts due to them from the part- nership, gave a written agreement to one of those creditors that he would not enforce the amount of said notes against the partnership until said creditors should have been fully paid all sums then due and thereafter to be due from the partnership, and that the amount of his notes " as to all said creditors should remain as part of the business capital of " the part- nership for three years. Held, that this agreement did not make A. a copartner, nor prevent his proving against the estate of the partner- ship in insolvency a note given to him by them, in consideration for his said notes. Wall v. Balcom, 9 Gray, 92. Where the plaintiff and one P. purchased a mail contract from the original contractors, and executed to them a bond for the performance of the contract, and procured four of the five defendants to sign with them as sureties; and afterwards the plaintiff sold his interest in said contract to P. and took from him a like bond, signed by the remaining defendant, with one of the others as sureties ; and afterwards, P. hav- ing failed to perform the contract, the plaintiff and five defendants signed a contract which recited that the "undersigned" had taken charge of said property, and by which they constituted the plaint- iff their " agent or superintendent " on said mail route, for which he was to " receive a reasonable compensa- tion, and by which they bound themselves to indemnify all per- sons who might assist the plaintiff in the execution of said business ; and also to pay the bills which had accrued under the plaintiff and P., — it was held that the plaint- iff did not thereby become a part- ner with the defendants, but might sustain an action against them on the contract. Stearns v. Haven, 16 Vt. 87. An instrument in the following form : " The following is the prop- erty owned jointly or as described below, by G. F. and J. W. One hundred acres in, etc., bought from O. W., and since sold for $7,500 to V. S., $2,100 paid, out of which J. W. received $1,000. Two acres on the hill, etc. ; each paid half in full, and sold by G. F. for $2,600, no part of which has been given to J. W. Six lots in, etc., one-third undi- vided belongs to J. W. , as per deed on record. Nineteen acres on, etc., bought of D. U., the whole of the purchase money was paid by J. W. G. F. paid A. B. $50 for getting the land. See the deed for partic- ulars. The titles to the above lands are in the name of G. F. and on record, which the deeds will ex- plain. I certify that the above statement is correct, except the taxes and other expenses. (Signed) " G. F." Held, not to show a partnership between G. F. and J. W. in pur- chasing and selling lands. White v. Fitzgerald, 19 Wis. 480. A bill in equity, filed before St. of 1857, ch. 214, alleged that the parties made an oral agreement that the defendant should advance the requisite money to purchase a tract of land, and to build ware- 19 ■10 CONTRACTS OF PARTNERSHIP. [BOOK I. ference of opinion there may be as to other matters, per- sons engaged in any trade, business or adventure upon the houses thereon, in consideration that the defendant should be paid from the proceeds all the money so advanced by him, with interest and five per cent, commission for the use and advancement of the money ; that, for greater security, a deed of the land was made to the de- fendant, which, although absolute on its face, conveyed the land to him as security for the money to be so advanced, and in trust for the plaintiff; that warehouses were erected on the land with money so advanced by the defendant, and money advanced by the plaintiff ; that portions of the property were sold, and the proceeds received by the defendant; and that a part of the property remained unsold ; and prayed for a conveyance of this part of the property, and for an ac- count. The answer denied the al- legations in the bill, and averred that the actual agreement was that a partnership, of which the defend- ant was a member, should advance the money, and receive from the proceeds the amount advanced, with interest and five per cent, commission for advancement, and six per cent, commission on all amounts received by them there- from ; and that the surplus, if any, should be paid to the plaintiff, and averred performance of the agree- ment on the part of the defendant and his partner. Held, that this agreement did not constitute a part- nership between the parties; that it could not be enforced as a trust, nor as a case of constructive fraud, and that the complainant could not, without amending his bill, avail himself of the agreement ad- mitted in the answer. Buck v. Dowley, 16 Gray, 555. The Washington Medical College of Baltimore executed on the 24th of July, 1835, a deed of trust, con- veying to certain trustees therein named, upon the trust therein ex- pressed, a leasehold interest in a lot of ground in the city of Balti- more. The deed recites "that towards erecting a building on said lot, the sum of $50,000 has been agreed to be contributed by vari- ous persons, who are to be identi- fied by being the owners of certifi- cates therein described, and that said college has agreed with said persons to secure the reimburse- ment of their respective contribu- tions, and the payments of the dividends arising thereon in the manner therein pointed out." The form of the certificate is then pre- scribed, each being for the sum " of $60, part of said $50,000, to be entitled to a dividend proportioned to its amount, when the same shall arise, payable semi-annually, by the treasurer, for the time being, of the college ; said sum to be ac- cepted by the party to whom the certificate is issued or his assigns, in discharge to that extent of said deed, and of his claim to the prop- erty thereby conveyed, when tend- ered at any time after the 4th of July, 1845, by the grantors or their assigns." The trusts are : 1st. That the grantor shall occupy and use the property, and receive the rents and profits thereof until sold and disposed of, as therein provided. 2d. That if the dividends on said 20 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *10 terms of sharing the profits and losses arising therefrom, are necessarily to some extent partners in that trade, busi- ness or adventure; x nor is the writer aware of any case in certificates shall be in arrear and unpaid for one year from the date thereof, then it shall be lawful for the grantees to sell the property, and out of the proceeds pay and re- imburse the owners of said certifi- cates the full amount of the prin- cipal moneys mentioned in them, and all dividends that shall have accrued thereon, and pay over the residue, if any, to the grantor, or its successors or assigns. Held, that this deed does not place the contributors and corporation in the relation of partners with each other, or among themselves; that it provides simply for a loan of money by the contributors to the corporation, to secure the repay- ment of which the latter gave them a lien upon the lot and prem- ises in question, and that, conse- quently, they have superior rights to any creditor of the corporation becoming such after the execution of the deed. Conkling v. Washing- ton University, 2 Md. Ch. 497. Several persons signed articles of association, fixed the amount of the capital stock, chose officers, and issued certificates of stock, intend- ing to form a corporation under St. of 1866, Ch. C. 290. but the associ- ation failed to become a corpora- tion. Some of the members of the association subscribed for stock and received certificates therefor, and others did not subscribe. A. and B., two of the subscribers, who had been chosen president and treas- urer, respectively, took possession of real estate, authorized to be pur- chased by a vote of the association, and carried on the business in- tended to be cai-ried on by the cor- poration when formed, as agents of the proposed corporation, bor- rowing money on their own notes and putting it into the business, with the knowledge of the other members, buying goods from the other subscribers and from persons who had not subscribed, and in- tending to turn over the busiuess to the corporation upon its organi- zation. Held, on a bill in equity by A. and B. against all the other sub- scribers, as partners, for a settle- ment of the alleged partnership affairs, that neither the defendants who had subscribed to the stock of the proposed corporation, nor those who had not subscribed, were partners with A. and B. Ward v. Brigham, 127 Mass. 24. 1 Scott v. Colmesnil, 7 J. J. Marsh. 416 ; Miller v. Hughes, 1 A. K. Marsh. 181 ; Brown v. Robbins, 3 N. H. 64 ; Parviance v. M'Clintle, 6 Serg. & R. 259 ; Winship v. Bank of -United States, 5 Pet. 529; Cump- ston v. M'Nair, 1 Wend. 457 ; Perry v. Butt, 14 Ga. 699; Solomon v. Solomon, 2 Ga. 18; Gregory v. Dodge, 14 Wend. 593; Belknap v. Wendell, 21 N. H. 175 ; Nicoll v. Mumford, 4 John. Ch. 522; Meador v. Hughes, 14 Bush, 652; Bulfinch v. Winchenbach, 3 Allen, 161 ; Mar- tin v. Tidwell, 36 Ga. 332; Smith v. Small, 54 Barb. 223; Pierce v. Shippee, 90 111. 371; Eldridge v. Troost, 6 Robt. 518; Johnson v. Fowler, 12 West. Rep. (Mich.) 437; 21 *10 CONTRACTS OF PARTNERSHIP. [BOOK I. which persons who have agreed to share profits and losses have been held not to be partners, (c) But it does not fol- Aultman v. Fuller, 53 Iowa, GO; Ai-guimbo v. Hillier, 49 N. Y. Super. Ct. 253; Cogswell v. Wil- son, 11 Oreg. 371 ; McGill v. Dow- dle, 33 Ark. 311 ; Mayrant v. Mars- ton, 67 Ala. 453; Harriss v. Hille- grass, 51 Cal. 463; Kuhn v. New- man, 49 la. 424; Priest v. Chouteau, 12 Mo. App. 252; Jones v. Call, 93 N. C. 170; Morris v. Litchfield, 14 Bradw. 83; Chapman v. Lipscomb, 18 S. C. 222 ; Wilcox v. Dodge, 12 Bradw. 517 ; Mauney v. Coit, 86 N. C. 463 ; Sailors v. Nixon-Jones Pub- lishing Co. 20 Bradw. 509 ; Bohrer v. Drake, 33 Minn. 408; Flint v. Mar- ble Co. 53 Vt. 669 ; Day v. Stevens, 88 N. C. 83; S. C. 43 Am. Rep. 732; Pierce v. Shippee, 90 III. 371 ; Mo- hawk Nat. Bk. v. Van Slyck, 29 Hun, 188. See, also, Adee v. Cor- nell, 25 Hun, 78; S. C. 93 N. Y. 572. Where there is no joint expense, no joint property, no joint fund, no joint losses, no joint profits, and no arrangement to share profit and loss, there is no partnership. A communion of profit is of the very essence of the contract of partner- ship, for, without this communion of profit, a partnership cannot, in contemplation of law, exist. Irvin v. Nashville, Chattanooga & St. Louis R'y Co. 92 111. 103. See, also, McDonough v. Bulloch, 2 Pearson (Pa.), 191. So, even though the parties in- tend to become partners. Sailors v. Nixon-Jones Publishing Co. 20 Bradw. 509. ■ Community of loss is not, how- ever, essential to the partnership relation. Kayser v. Maugham, 8 Colo. 232. Mere participation in the profits and loss does not necessarily con- stitute a partnership. In addition to the community of interest ex- tending to both profit and loss, in order to constitute a partnership, the parties must stand to each other in the relation of principals, and not of master and servant. Hunt v. Erikson, 57 Mich. 330 (Wells v. Babcock, 56 Mich. 276, distinguished); Newburger v. Friecle, 23 Mo. App. 631 ; Kellogg Newspaper Co. v. Farrell, 88 Mo. 594; Clifton v. Howard, 89 Mo. 192; McDonald v. Matney, 82 Mo. 358. Where, by the contract, one might gain and the other lose, there is no partnership. Flint v. Marble Co. 53 Vt. 669. Provision for sharing profits and losses, which, in an ordinary trad- ing association, where there is a community of capital and stock and a common undertaking, is conclu- sive evidence of a partnership, is, nevertheless, not a conclusive test of the partnership where there is an extraordinary adventure between two partnerships presenting a well (c) In Mair v. Glennie, 4 M. & S. profit and loss did not apply to the 240, the expression profit or loss person as to whom the question of seems to have been used for gross partnership or no partnership was retains. And in Geddes v. Wallace, raised. 2 Bligh, 270, the arrangement as to 22 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. 10 low that each of several persons who share profits and losses has all the rights which partners usually have. For exam- defined and well known separation of interests and ownerships. The way in which the profit is to be participated in is the essence of the matter ; and when the right to call for a proportion of the profits arises by virtue of express contract to that effect, which would not otherwise flow from the relations of the parties, the right exists qua debt, and not by virtue of the partnership. Merchants' Bank v. Thompson, 3 Out, 541. An arrangement with a firm by which A. was to buy standing tim- ber, cut, pile and ship it, being paid its cost and a certain sum per thousand, and the firm was to sell it, and, after paying all expenses, to divide the net proceeds equally with A., who was to bear one-half the losses, but had nothing to do with disposing of it after ship- ment, and the firm had no control over it before shipment, does not amount to a partnership, as to the unshipped lumber at least, and the parties concerned cannot be taxed as a firm upon such lumber. Mon- roe v. Greenhoe, 54 Mich. 9. Railroads doing business to- gether, sharing profits, and sending freight over one or the other of the combined lines at their pleasure or the shipper's request, may make themselves jointly liable to the shipper. Barrett v. Railroad Co. 9 Mo. App. 226. Same rule laid down as to sev- eral steamboats advertised as form- ing a line under a common name. In this case companies doing busi- ness by a common name and a common agent were held partners. Sun Insurance Co. v. Kountz Line, 122 U. S. Rep. 585. An agreement between railway companies forming a continuous line, and last carrier collecting charges and dividing freights, etc., does not constitute them partners inter se or as to third persons. In- surance Co. v. Railroad Co. 104 U. S. 146; Irvin v. Nashville, etc. Railway Co. 92 111. 103; Watkinsu. Terre Haute, etc. R'y, 8 Mo. App. 570; Hot Springs R. R. Co. v. Trippe, 42 Ark. 465. See, aho, Wright V. Delaware, etc. Canal Co. 40 Hun, 343. The sale of a through ticket over a route formed by the connecting lines of several railroads, and the checking of baggage to the end of the route, without other evidence of the relations between the com- panies or the basis through which business was done by them, fails to show such a community of in- terest as to make them partners inter se or as to third persons. Atchison, etc. R. R. Co. v. Roach, 35 Kan. 740. An agreement between two rail- road corporations that any injuries to persons or goods shall be paid for by the corporation on whose road it may occur, and that when the damage cannot be traced to either of the corporations it shall be paid for by each in the propor- tion it shares in the through price of carriage, does not make the two corporations partners. Aigen v. Railroad Co. 132 Mass. 423. To constitute a partnership it is not essential that all the parties should be liable to share indefinitely 23 no CONTRACTS OF PARTNERSHIP. [BOOK I. pie, a person may share profits and losses and yet have no right actively to interfere with the management of the busi- in the losses. If they participate in the profits and are liable to bear or be affected by the losses to only a limited extent, it will be suffi- cient. Nor, in a general partner- ship, is it essential that they should be proportionate joint owners of the property of the concern. The whole capital may, by a stipulation to that effect, be the property of one only of the parties, while the joint participation of all in the net profits may be such as to make them general partners. Brigham v. Dana, 29 Vt. 1. If parties, after they become part- ners, have a common interest in the unsettled business of a former concern, or in its profits and losses, they are, as between themselves, partners in that business. McGill v. Dowdle, 33 Ark. 811. An agreement between parties in regard to the transaction of a cer- tain business, wherein all furnish specified proportions of the capital, jointly own the property pur- chased, which is to be sold for their joint and mutual benefit, and each is to contribute his skill and assist- ance to the business, and share in specified proportions in the final profit or loss thereof, which are to be ascertained at the close of the business, will, as between the par- ties themselves, although they may not have been aware that such %vas its legal effect, create a partner- ship. Duryea v. Whitconib, 31 Vt. 393. An agreement between two part- ners, on the dissolution of their firm, to the effect that one should take all the goods on hand, and the notes and accounts due the firm, and, in consideration of the other's interest therein, should pay all the outstanding debts of the firm " and give him, from that time forward, one-third interest in the profits arising from the sale of said goods," the latter "agreeing to share one-third of the. losses that might accrue from said sale of said goods, and to act as clerk in the sale of said goods " for the former, ; — constitutes them partners inter sese. Scott v. Campbell, 30 Ala. 728. A written contract, by which the defendant was to, and did, receive of the plaintiff $250, with which to go to California to engage in gold- digging, for two years, during which time his earnings were to be divided with the plaintiff, con- strued as making the return of the money advanced dependent upon the result of the adventure, and as thus constituting the parties joint adventurers, if not strictly part- ners. Brigham v. Dana, 29 Vt. 1. The contract in this case men- tioned no other business than that of gold-digging, in which the de- fendant engaged upon arriving in California, but he abandoned it soon after and engaged in teaming and trading, in the profits of which the plaintiff claimed an interest. Held, from the correspondence be- tween the parties, etc., that the plaintiff was entitled to an interest therein, as well as in the profits of the gold-digging. Brigham v. Dana, supra. Where two persons entered into an agreement to engage together 24 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *11 ness ; (d) or he may have no such right to dissolve as an ordinary partner has; (e) or he may have no right *to [*il] in a mining adventure, under a firm name, and to share the profits and losses equally, and as a firm they purchased a mine, and paid a note given in the firm name for a poition of the price, held, that the contract was one of partner- ship in the ordinary sense, as dis- tinguished from what is known as a " mining partnership," and that either partner had the same au- thority to bind the firm as if it were an ordinary trading partner- ship. Decker v. Howell, 42 Cal. 636. See, also, Duryea v. Burt, 28 Cal. 569; Stapleton v. King, 33 Iowa, 28. A contract, however obscurel)' or inartificially drawn, by which the parties agree to contribute mer- chandise to "a certain concern," one to be the salesman, the other to pass as proprietor, and both to share equally in the expenses and profits, will be a partnership. Marks v. Stein, 11 La. Ann. 509. An agreement provided that the party of the first part should ob- tain in his own name, but for the joint account of himself and the parties of the second part, a lease of a railroad, and manage the same at a designated salary, for their mutual benefit; and that the par- ties of the second part should fur- nish the money necessary to carry out the enterprise, to be reim- bursed, with interest, out of its an- nual profits; and then declared that, after the payment of the capi- tal thus invested and interest, the annual profits should be equally divided between all the parties, and that all losses should be equally borne between them. Held, that the agreement constituted a partnership. Beauregard v. Case, 91 U. S. 134 Where creditors agreed with each other to advance the moneys neces- sary to continue and carry on the business of then* debtor for their own profit, they to contribute the funds necessary for the purchase of stock for the business in equal proportions, and the profits to be realized to belong to the creditors advancing the moneys equally, the losses of the business being borne by them in the same proportion, held, that a copartnership relation in respect to such enterprise was established between the parties. Wills v. Simmonds, 51 How. Pr. 48. Where two agree that one shall furnish the land and stock and the other the labor, and both share the expenses and the crop equally, they are inter sese partners. Holifield v. White, 52 Ga. 567. (Holloway v. Brinkley, 42 Ga. 226; and Smith v. Summerlin, 48 Ga. 425, distin- guished.) A., the owner of an invoice of goods in the city of New York, sold one-half of his interest therein to (d) As in Walker v. Hirsch, 27 Ch. D. 460. (e) See as to this Moore v. Davis, 11 Ch. D. 261; Pawsey v. Arm- strong, 18 Ch. D. 698, in both of which the right to dissolve was held to exist. But qu. whether Pawsey v. Armstrong did not go too far. 25 11 CONTRACTS OF PARTNERSHIP. [BOOK I. share the good- will of the business on a dissolution ; and other instances of restricted rights may be suggested. "What B., who was to proceed to San Francisco and there dispose of the goods on joint account. Held, that this constituted them partners. Soule v. Hayward, 1 Cal. 345. A joint undertaking and com- munity of profit and loss, in the results of the business, constitute a partnership, although each part- ner retains the exclusive ownership of the separate property contributed by him to the use of the partnership. McCrary v. Slaughter, 58 Ala. 230. A., in a letter to G., stated the re- sult of conversations agreed upon, thus : G. was to go to Canton and reside there for five years, to buy or hire a factory for the business A. was about to engage in ; to trans- act no other business except that and commission business ; to incur no liability as factor or for goods, unless authorized by A. in writing ; G. to have one-fifth and A. four- fifths of the commissions ; G. to be at liberty to speculate in goods for their use in Canton, to not over $100,000 per year, for the joint ac- count and risk of A. and G. — one- fii'th for the latter and four-fifths for A. ; A. to advance $500,000 for the business in money and ships, and to charge interest on advances, the profits to remain in the trade, except $2,000 a year to G. out of his share, and in the end A. was to have four-fifths and G. one-fifth of the net profits; A. was to place to the account of this business all net commissions arising from consign- ments to him at New York from Canton ; and each was to render to the other a yearly account of the transactions alluded to. G., at the foot of a duplicate of this letter, bound himself to abide by and comply with its terms and condi- tions. Held, to constitute A. and G. partners inter sese. Ogden v. Astor, 4 Sandf. 311. Stone purchased a permit to cut timber and paid for it. He after- wards agreed to share profit and loss with Sawtelle, who helped him to get out the lumber. Dwinel, who appears to have been an indi- vidual creditor of Sawtelle's, sum- moned Stone as trustee in an action against Sawtelle. Stone defended on the ground that one partner cannot be charged as trustee of an- other. Held: 1. That Sawtelle's labor having been performed upon the lumber, and its price and value having become incorporated with the lumber, there were no funds, no effects, no means for profit and loss separate from the lumber, or capital or subject-matter of the agreement to share profit and loss, and that therefore there could be no profit and loss or interest sepa- rate from the capital or subject- matter in which there was a com- munity of interest. 2. That the title to the subject-matter or capi- tal, i. e., to the permit and lumber, was in Stone alone, and that be- tween Stone and Sawtelle there was no community of interest in it. That there being no community of interest in either capital or in a separate profit and loss, there was no partnership between Stone and Sawtelle. Dwinel v. Stone, 30 Me. 384. See, also, National Union Bank v. Landon, 66 Barb. 189; Chase v. Barrett, 4 Paige, 148. 26 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *11 in any given case the rights of a particular partner are de- pends on the agreement into which he has entered; but Sharing in the profits and loss of a business is not decisive in invest- ing and imposing upon two parties, as between themselves, the rights and liabilities of copartners ; it may be merely an arrangement with a view to compensation for services rendered by one in the employ- ment of another, the amount of compensation to depend on the success of the business in which they are engaged or interested. Morgan v. Stearns, 41 Vt. 405. See post. Where two wool firms agreed to furnish each a stated proportion of a quantity of wool to be sold to a certain vendee, and to share profit and loss in the transaction, but the contract to furnish the wool was made by one of the firms, and the other was not originally a party to it, but the contracting firm after- wards applied to the other firm for a part of the wool necessary to en- able it to fill the contract which was furnished under the above stated arrangement, held, that they were not partners inter sese in the transaction, and could not jointly sue the vendee for non-fulfillment of his contract. Snell v. De Land, 43 111. 323. Where two mercantile firms agree to make contracts in the names of their respective firms, for the pur- chase and sale of merchandise, to be executed with their separate funds, and to share profit and loss on such contracts, they are not co- partners, either as between them- selves or with respect to third per- sons. Smith v. Wright, 5 Sandf. 113. A. & M., partners, owned three- fourths of a vessel, and B. & K., partners, owned the one-fourth; they agreed to fit her out on a voy- age from New York to Laguira. A. & M. purchased three-fourths of the cargo, and chiefly, if not wholly, with notes lent and advanced to them by P. & E., commission mer- chants. B. & K. purchased the other one-fourth of the cargo, for which they paid their own money, and shipped the same on board the vessel ; but it was not distinguished from the rest of the cargo by any particular marks; and the whole cargo was to be sold at Laguira for the joint account and joint benefit of the owners, A. & M. and B. & K. M. went out as the supercargo and agent, and, having sold the cargo at Laguira, he invested the proceeds in a return cargo, with which the vessel set sail for New York, but was obliged, by stress of weather, to put into Norfolk, where M. sold the return cargo, except a small parcel of coffee, and for the avails received bills of exchange, which he indorsed and remitted with the parcel of coffee to P. & R., to whom A. & M. were jointly indebted, and M. on his private account to a greater amount for advances made at the time of the purchase of the outward cargo. P. & R. collected the bills and sold the coffee so remitted, and applied the same to the payment of the debts so due to them from A. & M. P. & R. had notice, if not at the time of the shipment of the out- ward cargo, certainly before the bills remitted by M. were collected, 27 ^11 CONTRACTS OF PARTNERSHIP. [book I. unless the word partner is to be deprived of all definite meaning its proper application to persons who share profits and losses can hardly be questioned, (f) and the coffee sold and converted into money, that B. & K. were in- terested in and owned one-fourth of the cargo so sold by M. ; and B. & K. demanded of P. & R. their proportion of the proceeds so re- mitted by M. after deducting com- missions, etc. , but P. & R. refused to pay or deliver the same, alleging their right to retain the same for the payment of the debt due to them from A. & M. Held, that no partnership existed between A. & M. and B. & K. so far as to render the disposition of the return cargo by M. binding, as the act of a part- ner, on B. & K. That there was no agreement constituting a part- nership in the purchase of the out- ward cargo or to share jointly in the ultimate profit and loss of the adventure, and though there might be a partnership, so far as respected the transportation and selling of the outward cargo, for the joint profit and loss of the owners, yet it terminated with the sale of the outward cargo, and their interest in the return cargo was separate and distinct, each being entitled to his respective proportion of it, without any concern in the profit or loss which might ultimately arise ; and that P. & K. not having received the bills in the course of trade, and knowing of the interest of B. & K. before the bills were paid, had no right to retain their share for the payment of the debt of A. & M., but must account to B. & K. for their proportion. Post v. Kim- berly, 9 Johns. 470. Defendants received merchandise on consignment and for sale on plaintiff's account in New Orleans, where all parties resided, and agreed to charge no commission for purchasing or selling, and to allow plaintiff out of the proceeds interest for his advances in buying the merchandise, the profit or loss from the adventure to be equally divided. With defendants' consent the merchandise was shipped to New York, where it was sold at a sacrifice. Held, that defendants, whether agents or partners in an adventure, were not liable for the loss. Shaw v. Gandolfo, 9 La. Ann. 32. A man who buys and ships for a firm of another city, whose funds are used, the profits or loss to be divided, and each shipment to be a distinct venture, is not a partner, and the firm can sustain a libel on a policy indorsed to them, without prejudice from his orders or mis- takes. Marsh v. Northwestern Ins. Co. 3 Biss. 351. Certain cattle were delivered to plaintiff and two other persons, to be kept for a time, at the expira- tion of which they were to be sold by defendant. After deducting the first cost of the cattle, defendant was to retain one-half of the re- mainder of the proceeds, the other half to be equally divided between the plaintiff and the other persons. (/) See, however, the judgment of Cotton, L. J., in Walker v. Hirsch, 27 Ch. D. 460. 28 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *11 Accordingly in Green v. Beesley, (g) a partnership was held to result from an agreement that the plaintiff should horse a mail cart and be paid by the defendant dl. per mile per annum for so doing, and that the plaintiff and the defendant should share the expenses of repairing and re- placing the carts and the moneys received for the convey- ance of parcels and the losses occasioned by their loss or damage. So in Brett v. BecJavith, (h) a partnership was held to exist between underwriters, one of whom had agreed to take a joint share of the underwriting risks of the other, paying or receiving sums according to the result of the accounts. These authorities are sufficient to show that an agreement to share profit and loss is an agreement for a partnership, although the words partners or partnership do not occur in the agreement, (i) Partnership not intended. — Cases which present most difficulty are those in which persons agree to share profits and losses and at the same time declare that they are not to be partners. The question then arises, What do they really mean? If they have in fact stipulated for all the rights of partners, an agreement that they shall not be partners is a useless protest against the consequences of their real agree- ment, (k) But a clause negativing a partnership mav- throw light on other clauses, and rebut inferences which might be Held, that in this there was no for the failure of the defendant to partnership, for there was no corn- perform his part of the contract in munity of profit and loss, or of respect to selling the cattle, and ownership in the subject of the dividing the proceeds of the sale, contract. Beckwith v. Talbot, 2 Beckwith v. Talbot, supra. Col. 639. (g) 2 Bing. N. C. 108. Upon performance of such con- (h) 3 Jur. N. S. 31, in the Rolls, tract by the three persons named (i) See, too, Greenham v. Gray, 4 therein, who were to have the care Ir. Com. L. Rep. 501. and herding of the cattle, each be- (fc) See Ex parte Delhasse, 7 Ch. came entitled to his separate share D. 511 ; Moore v. Davis, 11 Ch. D. of the proceeds of the cattle, and 261. See, also, Pooloy v. Driver, 5 each could have his separate action Ch. D. 460. *12 CONTRACTS OF PARTNERSHIP. [BOOK I. drawn from them alone. In practical life such questions do not arise in any abstract form. Some definite dispute has to be determined, e. g., liability to creditors, [*12] *or the right of one party to the agreement to some particular thing or to some particular relief as to which the agreement itself is the true guide. 2. — Partnership is prima facie the result of an agreement to share profits, although nothing may he said about losses, and although there marj be no common stock. Agreements to share profits only. — Except in cases specially provided for by statute, an agreement to share profits, nothing being said about losses, amounts prima facie to an agreement to share losses also; (I) for it is but fair that the chance of gain and of loss should be taken by the same persons; and it is natural to suppose that such was their intention if they have said nothing to the contrary, (m) It follows from this, that, where no statute interferes, an agreement to share profits is prima facie an agreement for a partnership; 1 and accordingly it has been held, that, un- (Z) Greenham v. Gray, 4 Ir. Corn. Pool, 84 N. C. 37; S. C. 37 Am. Law Rep. 501; Dry v. Boswell, 1 Rep. 607; Wells v. Babcock, 56 Camp. 330; Heyhoe v. Burge, 9 Mich. 276; Lockwood v. Doane, C. B. 440, per Parke, B. 107 111. 235. See, also, Morse v. (m) This prima facie inference Richmond, 97 111. 303; S. C. 6 was held to be excluded by the Bradw. 166. rules of the building societies which Participation in profit does not of were considered in Brownlie v. itself make one a partner. Beecher Russell, 8 App. Ca. 235, and Tosh v. Bush, 45 Mich. 188 ; S. C. 40 Am. v. North British Build. Soc. 11 App. Rep. 465. Ca. 489. Thus, where two firms agreed to 1 In re "Ward, 2 Flip. C. Ct. 462 ; divide equally the profits of their Thayer v. Augustine, 55 Mich. 187; business after excluding a certain Meehan v. Valentine, 29 Fed. Rep. portion thereof to cover expenses, 276; Parchen v. Anderson, 5 Mont, it being stipulated also "that the 438; S. C. 51 Am. Rep. 65; Fourth business of their respective firms Nat. Bk. v. Altheimer, 91 Mo. 190 ; should be conducted entirely sepa- S. C. 3 So. West. Rep. 858 ; Philips rate," neither being bound to con- v. Samuel, 76 Mo. 657; Staples v. tribute anything to the expenses Sprague, 75 Me. 458 ; Reynolds v. or losses of the other, such agree- 30 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *12 less an intention to the contrary can be shown, persons eno-ao-ed in anv business or adventure and sharing the prof- its derived from it, are partners as regards that business or adventure, (n) 1 ment does not make the two firms have been held not to be copartners, partners inter se. Mayrant v. Mar- ston, 67 Ala. 453. While mere participation in the profits does not constitute a part- nership, yet it is not necessary in order to constitute a partnership that there be an express agreement that each party should bear a share of any losses which may occur. This may be inferred from the other provisions of the contract and from other circumstances. Richards v. Grinnell, 63 la. 44; S. C. 50 Am. Rep. 727. An agreement to share the net profits necessarily implies a sharing of the losses and therefore consti- tutes the parties partners. Wilcox v. Dodge, 12 Bradw. 517. See, also, Huguley v. Morris, 65 Ga. 666; Camp v. Montgomery, 75 Ga. 795; Epping v. Aiken, 71 Ga. 682; Coth- ran v. Marmaduke, 60 Tex. 370; Fisher v. Sweet, 67 Cal. 228. See, however, Darrow v. St. George, 9 Pac. Rep. 791. To constitute a partnership be- tween persons sharing in the prof- its, the interest in the profits must be mutual ; each must have a spe- cific interest in them as a principal trader. Sodiker v. Applegate, 24 W. Va. 411 ; S. C. 49 Am. Rep. 252. See next note, infra. (n) See Pooley v. Driver, 5 Ch. D. 458. 1 Where two or more engage in business, having no mutual inter- est in the capital invested, and no stipulation for mutual loss, they though there be an agreement to share profits. Vanderburgh v. Hull, 20 Wend. 70; Patterson v. Blan- chard, 5 N. Y. 186:* Fitch v. Hall, 25 Barb. 13; Cummings v. Mills, 1 Daly, 520; Loury v. Brooks, 2 McCord, 421. Sharing profits is not invariably a test of partnership. The liability of one partner for the contracts of another is founded on, the relation they sustain of each being princi- pal and also agent as towards the other. Harvey v. Cliilds, 28 Ohio St. 319. In order to constitute a partner- ship each person must have an in- terest in the profits as a principal in the joint business; a mere re- ception of a portion of the profits is insufficient. Campbell v. Dent, 54 Mo. 325; Benedict v. Hettrick, 35 N. Y. Superior Ct. 405 ; Harvey v. Childs, 28 Ohio St. 319; Sodiker v. Applegate, 24 W. Va. 411 ; S. C. 49 Am. Rep. 252. See, also, Loomis v. Marshall, 12 Conn. 69. The allegation of a partnership between the master and mate of a vessel is not sustained by proof that the mate shipped for a share of the profits, unattended by other cir- cumstances and without proof of what that share was to be. The Crusader, 1 Ware, 448. Where three parties enter into an agreement and intrust the invest- ment and management of a certain sum from a common fund in an enterprise to one of them, with a 31 *12 CONTRACTS OF PARTNERSHIP. [book I. Community of profit as a test of partnership. — Indeed, it has often been said that community of profit is the test vances as might be procured on said pork, and B. was to attend per- sonally to the purchase and ship- ment, and out of the proceeds of the sale, after deducting the costs, expenses and disbursements of every kind, A. was to be reim- bursed the amount advanced by him, with interest, and the residue, being the net profits, was to be equally divided between them, held, to constitute a partnership. Miller v. Price, 20 Wis. 117. An agreement between two par-- ties to carry on a particular busi- ness, in which real estate belonging to one of them is to be used, will be held to constitute a partnership, if the owner of the real estate is to be compensated for its use by a percentage of the profits of the business. And it is immaterial that, in the written contract between the parties, such compensation is de- scribed as rent. Dalton City Co. v. Dalton Manuf. Co. 33 Ga. 243. "Where all the parties had, by a contract entered into, a right to share in the profits of a business, and to use the capital invested, and an inchoate title to it, a part- nership exists between them. Vas- sar v. Camp, 14 Barb. 341. Where two persons agree to burn lime on shares, one to fill a kiln with stone, and the other to burn the kiln and furnish the wood, the lime to be equally divided between them, held, that a technical part- nership existed between the par- ties. Musier v. Trumpbour, 5 Wend. 275. The owners of a ship agreed to fit her out for a voyage at the stipulation that they shall share equally in the profits after detluct- ing the amount of the investment, such agreement constitutes a co- partnership, and an accounting may be had. Harris v. Hillegass, 5 Pacific Coast L. J. 240; 54 Cal. 463. Plaintiff and defendant agreed as follows: Plaintiff was to furnish the capital to carry on the business of manufacturing and selling wood- enware, defendant to receive one- third and plaintiff two-thirds of the profits, nothing being said as to any losses. Held, that the mere fact that no provision was made in the agreement, whereby defendant was bound to pay his proportion of the losses, if any, did not prevent the parties to the agreement from be- coming partners inter sese. Munro v. Whitman, 15 N. Y. Supreme Ct. 553. Where, however, by an arrange- ment between certain parties, one was to furnish money and the other was to buy cattle with it for the market, and the party furnishing the money was to have his capital returned, with five per cent, inter- est thereon, together with one-half the profits on the sale of the cattle, it was held that the parties to this arrangement were not partners, as the one furnishing the money was exposed to no hazard of loss. Adams v. Funk, 52 111. 219. An arrangement between A. and B. for buying and selling on their joint account in the name of A. and B. a certain quantity of pork, by which A. was to furnish what- ever money should be necessary in the business, aside from such ad- 32 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. »12 of partnership, (o) This, however, is not accurate. Whether persons are realty partners or not is a question of intention, joint expense, and for the joint profit of both. Held, that they were partners in the ship as well as in the cargo; and the ship having been sold, under an authority given to the master, one of the owners, to whose hands the proceeds had come, was allowed to retain for so much as he had paid more than his share of the outfit, repairs, during the voyage, etc., though the other partner had made an assignment of his share before the proceeds of the ship were received. Mumford v. Nicoll, 20 Johns. 611. A. & B. agreed by parol as fol- lows : A. was to erect a steam saw- mill on the land of B. and to man- age the same at his own cost, and B. was to deliver at the mill, at his cost, all the timber growing on a certain tract of land belonging to B., and they were to divide the prof- its of the sawing between them. The contract was complied with on both sides until B.'s death, and then his administratrix declined to go on with it. Held, that this was a copartnership which was dis- solved by B.'s death. Jones v. McMichael, 12 Rich. 176. A. & B. agreed to work together in the business of manufacturing marble. B. was to furnish the marble, and A. was to pay him one-half the cost of it. B. was to board A., and both were to contrib- ute their labor and skill in the business, and the products and avails of the business were to be equally divided between them. Held, that they became partners as between themselves. Griffith v. Buffum, 22 Vt. 181. An agreement between T., a tin- ner owning a shop, and D., a plumber of large experience, to work together, T. to be allowed out of the profits of the business ten per cent, on his stock invested, and the remainder of the profits to be di- vided equally between them, held, to constitute a partnership, though the business proceeded in T.'s name, and D.'s share of the profits remained in the concern. Tyler v. Scott, 45 Vt. 261. An agreement whereby W. leased to B. for five years a manufactory, B. to furnish capital and personal labor, the net profits to be shared by the parties, the accounts to be open to the inspection of W. and periodical settlements to be made, held, to constitute a partnership, and a breach of the terms to be a sufficient ground for equitable re- lief by a decree of dissolution. Wood v. Beatt, 23 Wis. 254. An agreement to purchase and run a ferry-boat to be owned by the subscribers, in proportion to the amounts subscribed by each, the toll to be applied to pay ex- penses, and the balance, if any, to be divided among them pro rata, each subscriber to have the right to sell his stock, the purchaser to have all the rights of an original subscriber, and the association to continue as long as a majority of subscribers shall determine, con- Co) Heyhoe v. Burge, 9 C. B. 446 ; Fox v. parte Langdale, 18 Ves. 300. Vol. I — 3 33 Clifton, 9 Bing. 115; Ex ■12 CONTRACTS OF PARTNERSHIP. [COOK to be decided by a consideration of the whole agreement into which they have entered, and ought not to be made to turn on one or two only of the clauses in it. (p) l A good instance of this is afforded by the Irish case of Barklie v. See Day v. Stevens, 88 N. C. 83; 43 Am. Rep. 732. An agreement by which L. was to furnish machinery and appli- ances for raising a sunken steamer, P. to do the labor and to fur- nish supplies, etc., material to be saved from the wreck to be turned over to L., who was to control and sell the same for their joint ac- count, first repaying P. the amounts paid by him, constitutes the parties partners in the enter- prise both inter se and as to third persons. Lynch v. Thompson, 61 Miss. 354. An agreement between two per- sons that each shall furnish a horse to do certain work, and one to do the work and the other pay all the expenses, and divide the earnings equally, held, to constitute a part- nership. Gilbank v. Stevenson, 31 Wis. 592. (p) See ante, p. 10, and the cases in the next note but one. *An agreement between two persons to share in the profits of an adventure or concern does not nec- essarily constitute them copartners in respect to the concern or ad- venture from which the profits arise. Rice v. Austin, 17 Mass. 197 ; Newman v. Bean, 21 N. H. 93; Lamb v. Grover, 47 Barb. 317. See, also, Ferguson v. Alcorn, 1 B. Mon. 160. A series of independent transac- tions, wherein W. selects lands and B. furnishes money and buys them, and they divide the profits on sell- ing them again, do not in them- stitutes the subscribers partners. Whitman v. Porter, 107 Mass. 522. One who had been sent by Kan- sas creditors of a merchant of Salt Lake City to collect their claims, arranged with him, with their con- sent, to take payment in flour, salt, etc., ship the same to Mon- tana, and there sell the same; but owing to a decline in prices the venture resulted in a loss. Held, that the creditors became partners, and should share the loss pro rata. Stettauer v. Carney, 20 Kan. 474. A., being the owner of a zinc mine, entered into a written agree- ment with B., by which he agreed to furnish him a certain quantity of ore per annum for three years, on being paid therefor $10 per ton, and B. agreed to provide suit- able buildings and machinery for its conversion into paints, etc., and to divide with A. the profits of the enterprise in the proportion of one- fourth to himself and the remain- der to A. ; the cost of the buildings and machinery to be paid out of the profits after a specified time. Held, that this constituted A. and B. partners. Wadsworth v. Man- ning, 4 Md. 59. Where one furnishes land, team and its feed, and another gives time and attention, and meets the expenses requisite to the making of the crop, under an agreement that the gross products are to be evenly divided between the parties, a partnership is thereby constituted between them. Curtis v. Cash, 84 N. C. 41. 34 CH. I. SEC. I.] NATURE OF CONTRACT DETERMINED. *12 Scott, (q) There a father paid a sum of money as his infant son's share of the capital of a partnership, and it was agreed selves establish a partnership; nor would an accumulation of such purchases and the holding of the larnl for suitable opportunity to sell or for lumbering. Wells v. Babcock, 56 Mich. 276. A mere participation of profits will not make the parties partners inter sese, unless such is their inten- tion. Hazard v. Hazard, 1 Story, 371. See, also, ante, note. M. took a job of finishing a church at a certain price. After- ward H. agreed to do it with him, the work of each to offset that of the other, and the expense of ma- terials and of other help to be deducted from the contract price, and the balance divided equally between them. They did it ac- cordingly, H. working thirty days more than M. Held, that they were not partners as between themselves, and that H. could maintain assumpsit for the balance due him from M. Hawkins v. Mclntyre, 45 Vt. 4S6. Where a certain portion of the profits of a concern was set apart to pay the debt of A. B., by a stip- ulation in their articles, A. B. being no party to the articles, held, that A. B. was not a partner. Drake v. Ramey, 3 Rich. 37. Where an agreement is made be- tween two parties that one shall furnish a farm with a certain amount of teams and labor, and the other shall manage the farm and give certain labor, the crops to be divided between them, a part- nership is not constituted. Blue v. Leathers, 15 111. 31. See, also, Burdick v. Washburn, 36 How. Pr. 468. A contract, by which one party agrees to furnish wheat to stock a mill, and the other party, with money advanced by the first, to purchase the wheat and convert it into flour, and, after deducting the original cost of the wheat, and two and a half per cent, thereon, to receive the proceeds of the sale of the flour, does not constitute a partnership. Johnson v. Miller, 16 Ohio, 431. An agreement by a firm of spice dealers with an outside party, that, in consideration that his represent- ations as to certain means of knowledge shall prove true, and that he will obtain for them from a congressional committee infor- mation of the rate of duties to be adopted on certain articles, they will purchase with their own means a specified quantity thereof, sell on joint account, and pay him half the net profits, does not create a partnership with him. Strong v. Place, 4 Robt. 385. A contract between the owner of land-warrants and a locator to locate the warrants for a certain portion of the lands, each party to contribute a share of the expenses, does not create a partnership be- tween them. M' Arthur v. Ladd, 5 Ohio. 514. (q) 1 Huds. & Br. 83. Compare shares into his infant son's name Reid's Case, 24 Beav. 318, where was held a contributory, the father who had transferred 35 *13 CONTRACTS OF PARTNERSHIP. [book I. [*13] *that during the son's minority the profits should be accounted for to the father; it was held that the farm, that the landlord shall fur- nish stock enough to eat the hay, oats and corn raised on the de- mised premises, the tenant to feed the stock, and upon sale being made the landlord to be repaid his purchase money first out of the proceeds, and the remainder to be equally divided between the par- ties, does not constitute them part- ners in respect of stock bought and fed under the agreement. Musser v. Brink, 68 Mo. 242. The occupancy and cultivation by one of the farm of another, under an agreement that the crops raised shall be divided between them in a certain proportion, does not necessarily constitute them co- partners. Donnell v. Harshe, 67 Mo. 170. An agreement, by which one is to furnish a circular saw-mill, and men and horses to keep it in opera- tion, and another is to furnish the logs, and feed for the hands and horses, the lumber to be equally divided between them, such agree- ment having in view separate and distinct sales by each person on his own account, and no commu- nity of profit in the sales, does not constitute a partnership. Stoal- lings v. Baker, 15 Mo. 481. A., being the owner of a number of land-warrants, agreed with B. that the latter should locate the warrants, and take the agency of the lands as A.'s attorney, and sell and dispose of the same, paying all necessary expenses of surveying and recording deeds. The title was to remain in A. until the lands should be sold, and the first pro- An agreement by S. to divide his commissions for purchasing cotton with T., in consideration of T.'s having procured for S. the agency from the principal, held, not to constitute S. and T. part- ners. Southworth v. Thompson, 10 Heisk. 10. Upon principles settled in Moore v. Smith, 19 Ala. 774, and approved in Fail v. McKee, 36 Ala. 61, aeon- . tract by two parties, by which one agreed to erect and operate a saw- mill for a given time, during which the other was to supply it with logs to keep it running, the lum- ber sawed, or the proceeds thereof, after sale, to be equally divided between them, does not create a partnership. Robinson v. Bullock, 58 Ala. 618. A contract between a land owner and laborer by which the latter is to cultivate the former's land for a year, and receive half the crop, does not constitute the parties partners. Halloway v. Brinkley, 42 Ga. 226. An agreement, by the terms of which one party, in consideration of one-half the proceeds, undertakes to farm certain land of the other and to render him regular ac- counts, each party to furnish one- half the stock, and the former to furnish all the working stock and farming implements, pay the road tax and half the other taxes, con- stitutes a letting on shares and not a partnership. Brown v. Jacquette, 10 Reporter, 318. An agreement between land- lord and tenant, as a part of the consideration for the lease of a 36 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *13 father was not himself a partner, that clearly not being the intention of the parties to the agreement. ceeds of sale were to be applied to reimburse to A. the cost of the land, with ten per cent, interest; afterwards B. was to be reim- bursed for expenses paid by him, and the residue of the proceeds was then to be equally divided be- tween A. and B. It was further agreed that B. was to be the sole agent for selling said lands; that they should all be sold within four make, use and sell, at the defend- ant's expense, and on his own account, within the British domin- ion, certain machines which the plaintiff had invented, and to sell the right to others to make, use and sell the same, the defendant undertook and agreed to procure from the British authorities letters patent to the plaintiff for the ma- chines, and to pay over, quarterly, years, and if any remained unsold to plaintiff, one-half the proceeds at the expiration of that time that B. should make no claim to any interest in such lands. B. further agreed to guaranty to A. the re- turn of his capital with interest. By a subsequent contract between the same parties, in reference to other lands, it was agreed that B. should "take the agency "of the latter lands upon the terms men- tioned in the former contract. A. died before the expiration of the four years, and before all of the lands had been sold. Held, that the contract did not create a part- nership, nor did it invest B. with any equitable interest in the land ; also, that the relation of the par- ties was that of principal and agent. Ellsworth v. Pomeroy, 26 Ind. 158. A writing: "Received of G. $2,000, to invest in wool, said G. to receive two-thirds of the net orofits on the sale of the wool, of all sales made by him. Held, not a contract of partnership. Wheeler v. Farmer, 38 Col. 203. A. and B. entered into a contract for the manufacture and sale of hat-bodies; B. was to furnish the wool and sell the hats, charging nothing for his time in selling; each was to pay half the expense of extra labor, wood, and use and wear of the machinery; A. was to manufacture and charge nothing for his time while so engaged ; and B., after selling the hats, was to retain from the proceeds the cost of the wool, and the profits, after paying for the wool, were to be equally divided. Held, that this did not create a partnership be- tween the parties. Mason v. Potr ter, 26 Vt. 722; and see Tobias v. Blin, 21 Vt. 544. Where a partner disposed of his share of the good-will, and the new firm agreed to allow him a and O. one-third. (Signed) O." percentage upon the gross sales of Held, not to establish a partner- ship inter sese, there being no pro- visions for sharing losses. Ruddick v. Otis, 33 Iowa, 402. In consideration of the right granted him by the plaintiff, to the firm, held, that this percent- age did not constitute him a mem- ber of the new firm. Gibson v. Stone, 43 Barb. 285; S. C. 28 How. Pr. 468. The receipt of a share of the 37 >13 CONTRACTS OF PARTNERSHIP. [COOK I. Servants, etc., sharing profits. — Other illustrations of the same principle are afforded by those cases in which profits of a concern does not neces- sarily create a partnership in the stock as between the parties. Mc- Cauley v. Cleveland, 21 Mo. 438. By an agreement between A. and B., A. was to supply B. with stock to be manufactured into cloth, at his mill, on A.'s account, and B. was to manufacture the stock into cloth, and to deliver the cloth to A., for a certain sum per yard. A. also engaged that, if B. should fulfill his said agreement to manufacture and deliver the cloth, A. would pay him one-third part of the net profits of the business. Held, that this agreement did not make A. and B. partners, either between themselves or as to third persons. Denny v. Cabot, 6 Mete. 82. Two parties agreed that for three years one should furnish lumber at a given place and of a certain kind and quantity; and carry the ar- ticles manufactured to a railroad station, and the other should man- ufacture the lumber into doors and blinds, be allowed a certain price therefor, and manage the business of selling them, and divide the profits, after payment of the freight and expenses, with the first party. Held, that this did not make the parties partners among themselves; that the first party was entitled to his share of the profits within a reasonable time after the other had received the money for sales, without waiting until the expiration of the three years, and mighl recover it by ac- tion for money had and receive]. Hitching? r. Ellis, 12 Gray, 449. A., having made a contract with B. to manufacture certain articles for him, from materials to be fur- nished by the latter, and B. having agreed to pay therefor such an amount as should arise from the profits of the business, together with ten per cent, on the amount of sales of goods manufactured, held, that the terms of the contract did not constitute A. and B. partners, and that articles manufactured under it, and in the shop of A. , were not liable to attachment as his property. Judson v. Adams, 8 Cush. 556. An agreement to purchase gooils at a fixed price, and to allow the seller a certain portion of the profit of their resale by the purchaser, does not constitute the parties part- ners. The purchaser is the agent of the seller in respect to the lat- ter's interest in the profits. Don- ley v. Hall, 5 Bush, 549. See Ed- wards v. Tracy, 62 Pa. St. 374. Where two parties enter into a contract to cut certain timber, one to furnish money, teams and sup- plies, and the other his own serv- ices, the latter to have one-fourth of the profits, and the former to have three-fourths, beside stump- age and interest on his advances, held, that this did not constitute a copartnership, if one of the par- ties had not, by the terms of the contract, an unqualified right to dispose of his own share of the lumber, nor any right to dispose of the remainder, on any terms what- soever. Braley v. Goddard, 49 Me. 115. Appleton, J., dissenting. A. made an agreement with B. 38 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *13 managers and clerks are paid salaries proportionate to the profits of the business in which they are employed. 1 The by which A. was to purchase a certain quantity of hides and de- liver them at B.'s tannery, and B. was to tan them at his own ex- pense, being answerable for all damage the hides should sustain while they remained in his care; after which A. was to send them to market and sell them at his own expense, and B. was to have one-half of what the hides should bring more than the original cost of them. Held, that this agree- ment did not constitute a partner- ship between the parties, and that a. subsequent agreement, that each party might use such portion of the leather as he desired, keeping an account of it, did not change the case in this respect. Clement v. Hadlock, 13 N. H. 185. So, where a party furnished hides to another to be tanned and returned to the consignor, who was to sell them and to pay one- half the profits to the tanner, after deducting all charges, including a stipulated price for tanning, held, that no partnership was thereby created between the parties, which would enable the tanner, while the leather was in his possession, solely for the purposes of the contract, to sell it, and which would protect a purchaser from him as against the consignor. Fawcett v. Osborn, 32 111. 411. The complaint alleged that de- fendant agreed to manufacture into cheese, at his own factory, milk to be furnished by plaintiff, and to sell the cheese and pay plaintiff the proceeds, less two cents per pound ; that plaintiff de- livered the milk and defendant manufactured it into cheese, which he sold ; and that plaintiff's share of the product is a specified sum, which defendant refuses to pay, etc. The answer alleged that the milk so delivered was to be and was mixed with milk belonging to defendant and to other persons and then made into cheese ; that each person furnishing milk was to have his proportion of the cheese made according to the quantity of the milk by him furnished, after pay- ing the cost of manufacturing ; that defendant and plaintiff, and others so furnishing milk, were partners therein and in the cheese so made ; that plaintiff and other patrons of the factory made defendant their agent to sell said cheese ; that he sold it and deposited the money in a certain bank, which failed ; that there was no negligence on defend- ant's part in regard thereto; and that, except as above admitted, he denies all allegations of the com- plaint. Held, that the answer did not state any facts showing a part- nership, nor otherwise state a de- fense. Sargent v. Downey, 45 "Wis. 498. See, also, Hawley v. Keeler, 62 Barb. 231. 1 A party who, without any in- terest in the property, is, by agree- ment, to receive as compensation for his services, and only as com- pensation therefor, a certain pro- portion of the profits, and is neither held out to the world as a partner, nor through the negligence of the owner permitted to hold himself out as partner, is not a partner, either as to the owner or third per- *13 CONTRACTS OF PARTNERSHIP. [BOOK I. act, 2S and 29 Victoria, chapter 86, which will be noticed hereafter, expressly provides for such cases as these; but sons. Burton v. Goodspeed, 69 111. 237; Commonwealth v. Bennett, 118 Mass. 443; Butler v. Finck, 10 N. Y. Weekly Dig. 163 ; Shepard v. Pratt, 16 Kan. 209; Miller v. Chandler, 29 La. Ann. 88; Cbaf- fraix v. Price, id. 176 ; Bell v. Hare, 12 Heisk. 615 ; Crawford v. Austin, 34 Md. 49; Meserve v. Andrews, 104 Mass. 360; Kerr v. Potter, 6 Gill, 404; Norwent v. Hull, 1 Humph. 320; Voorhees v. Jones, 29 N. J. L. 270 ; Bradley v. White, 10 Met. 303 ; Blanchard v. Coolidge, 22 Pick. 151 ; Smith v. Bodine, 74 N. Y. 30; Smith v. Perry, 29 N. J. L. 74; Bull v. Schubert, 2 Md. 38 ; Taylor v. Sotolingo, 6 La. Ann. 154; Reed v. Murphy, 2 G. Greene, 574 ; Mason v. Hackett, 4 Nev. 420 ; Atherton v. Tilton, 44 N. H. 452; Nutting v. Colt, 7 N. J. Eq. 539 ; Burckle v. Eckhart, 1 Den. 337 ; 3 N. Y. 132; Merwin v. Playford, 3 Robt. (N. Y.) 702; S. P. Shropshire v. Shepperd, 3 Ala. 733; Hanna v. Flint, 14 Cal. 73; Hodges v. Daws, 6 Ala. 215 ; Hodgman v. Smith, 13 Barb. 302; Dunham v. Rogers, 1 Pa. St. 255; Brockway v. Burnap, 16 Barb. 309; Good v. McCartney, 10 Tex. 193; Ambler v. Bradley, 6 Vt. 119; Richardson v. Hewitt, 76 N. Y. 55 ; Miller v. Bartlett, 15 S. & R. 137; Sankey v. Columbus Iron Works, 44 Geo. 228; Loomis v. Marshall, 12 Conn. 69; Webb v. Leggett, 6 Mo. App. 345 ; Clark v. Gilbert, 32 Barb. 576; Nicholaus V. Thielges. 50 Wis. 491 ; Holbrook v. Obirne, 56 la. 324 ; Clark v. Smith, 52 Vt. 529; McDonnell v. Battle House Co. 67 Ala. 90; S. G 42 Am. Rep. 99 ; Brown v. Hicks, 24 Fed. Rep. 811; reversing S. C. 8 id. 155; Cothran v. Marmaduke, 60 Tex. 370 ; Halliday v. Bridewell, 36 La. Ann. 238; Partridge v. Kingsman, 130 Mass. 476; Darrow v. St. George, 8 Colo. 592 ; In re Ward, 2 Flip. C. Ct. 462; Le Fevre v. Castagnio, 5 Colo. 564; State v. Donnelly, 9 Mo. App. 519; Reddington v. Lanahan, 59 Md. 429 ; Vinson v. Beveridge, 3 MacArthur (D. C), 597; S. C. 36 Am. Rep. 113; Wass v. Atwater, 33 Minn. 83; Pond v. Cumins, 50 Conn. 372; Sangston v. Hack, 52 Md. 173; Whiting v. Leakin, 66 Md. 255; Cogswell v. Wi'lson, 11 Oreg. 371; Mauney v. Coit, 86 N. C. 463; Sodiker v. Applegate, 24 W. Va. 411 ; S. C. 49 Am. Rep. 252; Stevens v. Gainesville Nat. Bank, 62 Tex. 499 ; Gill v. Ferris, 82 Mo. 156; Maunsell *>. Willett, 36 La. Ann. 322 (compensation by a cer- tain part of the gross receipts) ; Einstein v. Gourdin, 4 Woods, C. Ct. 415; Tayloe v. Bush, 75 Ala. 532; Buzard v. Greenville Bank, 67 Tex. 83. See, also, Hall v. Edson, 40 Mich. 651; Price v. Alexander, 2 G. Greene, 427; Whitehall v. Shickle, 43 Mo. 538 ; Covington v. Leak, 88 N. C. 133 ; King v. Fraser, 23 S. C. 543. An agreement purporting on its face, however, to be a copartner- ship agreement, and providing that the parties thei-eto shall shai'e equally in expenses, losses and gains, cannot be treated as a mere contract of employment. Smith v. Walker, 57 Mich. 457. Payment for the use of a hotel of a sum equal to one-third of the gross receipts and gross earnings 40 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. '13 independently of that act no partnership subsists between persons thus paid and those who pay them, where it appears does not constitute the owner and lessee partners. Beecher v. Bush, 45 Mich. 188; S. C. 40 Am. Rep. 465. An agreement between two par- ties by which one is to receive a certain per cent, net upon all claims against the United States procured by him for the other, who was to have a certain per cent, for collect- ing the same, does not create a partnership between them. Logie v. Black, 24 W. Va. 1. Participation in the profits of a business is strong presumptive evi- dence of a partnership in it. This rule and the reason apply as well to a party who receives a sum equal to a certain share of the profits of a business as to a party receiving such share of profits by the name of profits. There are cases, how- ever, where money received may appropriately be regarded as a sum measured by profits rather than as profits themselves ; but whether it shall be so regarded depends upon no arbitrary use of phrases, but upon the nature of the contract and the real consideration upon which the money is received. A share of profits paid to agents to secure ex- ertion is not such a participation in profits as to make the agent liable as partner, and in such cases the money so paid is spoken of as a sum equal to or measured by profits, rather than as a share in the profits themselves. Parker v. Canfield, 37 Conn. 250. See, also, cases above cited. Where A., residing at a distance from a factory of cloths occupied by B., entered into an agreement with B. by which A. was to fur- nish a full supply of wool for the factory for two years; B. was to manufacture such wool into cloths in a good and workmanlike man- ner, and to devote the entire use of the factory to that purpose for such term ; and the net proceeds of the cloths, after deducting inciden- tal expenses and the charges of sale, were to be divided so that A. should have fifty-five per cent, and B. forty-five per cent, thereof; 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 ; the expense of insurance effected on wool or cloths was to be borne by A. and B. in the same ratio as their interest was in the final divis- ion of the avails of the cloths ; and in case of the destruction of any wool or cloth by fire, the amount to be received from the insurers was to be divided between A. and B. according to the loss sustained by each. In an action brought by C. for work and labor done in the factory, against A. and B., as part- ners, it was held that B. had no other interest in the profits than a compensation for his labor and ma- terials by a percentage on the avails of the cloths; and, conse- quently, that A. and B. were not liable as partners. Loomis v. Marshall, 12 Conn. 69. A contract whereby one is to furnish land, team and tools to make a crop, and another to work the land and make the crop for a specified portion of it, does not constitute a partnership, but simply 41 *13 CONTRACTS OF PARTNERSHIP. [book I. from the whole agreement that a partnership was not in- tended. (•/•) The observations on agreements to share profits fixes a rule of compensation for services. Gardenhire v. Smith, 39 Ark. 280; Christian V. Crocker, 25 Ark. 327; Romero v. Dalton, 11 Pac. Rep. 8G3. See, also, Randle v. State, 49 Ala. 14. A certain contract for the use of property upon payment of a certain sum quarterly, provided the net profit realized a certain sum, al- lowing §100 per month compensa- tion hefore arriving at the net profit; and if the net profit was more than the rent, the surplus to go to the lessee, less the rent to be rebated to that amount, etc., held, not to create a partnership, but to create the relation of landlord and tenant. National Bank of Augusta v. Bones, 75 Ga. 246. See, also, Brown v. Jaquette, 94 Pa. St. 113. An agreement, however, be- tween the owner of a farm and another, by which the latter and his wife in conjunction with the owner shall together work the farm, proceeds of their joint work and labor to be shared together, creates a partnership, and is not a contract for hire and wages. Plummer v. Frost, 81 Mo. 425. A contract whereby one party is to furnish a certain number of la- borers to work in a brick yard, is to receive therefor one-half of the bricks made, to have the option of purchasing a fixed number at a stated price, the other party to make the bricks and to defray all other expenses, does not consti- tute a partnership. Chapman v. Lipscomb, 18 S. C. 222. Where one person, as agent of another, agrees to manufacture and sell a medical compound o .vned by the latter for a certain commission, and to account for proceeds, less expenses; and it was also agreed that after a specified sum had been paid the recipe should belong jointly to the parties, and the stip- ulated sum was paid, held, that between themselves the parties were not partners. Walker v. Spencer, 86 N. Y. 162. An agreement between two per- sons about to give public exhi- bitions that one should provide audience room, etc., the other fur- nish articles to be exhibited, the first to receive all the money and to pay the second party one-half of (r) Ex parte Tennant. 6 Ch. D. 303, where a father claimed to be a partner with his son; Ross v. Parkyns, 20 Eq. 331; Rawlinson r. Clarke, 15 M. & W. 292; Stocker v. Brocklebank. 8 Mc. &G. 250 : Shaw r. Gait, 16 Ir. C. L. 897; Radcliffe r. Rushworth, ;'.:'. 1'. a v. -1S4, where there was a holding out and a deed executed by the allege I partners, in which they were described as carrying on business together. See, also, Geddes v. Wallace, 2 Bligh, 270. In R. v. Macdonald, 7 Jur. N. S. 1127, a servant, paid by a share of profits, was convicted of embezzlement, which he could not then have been if he had been a partner. In Withington v. Herring, 3 Moo. & P. 30, an agent paid by a salary and a share in the profits was thought to be a partner, but the question was not decided. 43 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *13 and losses {ante, p. 10) are applicable to agreements to share profits only; but with this difference, viz., that in the latter all the gross receipts, does not con- stitute a partnership. McDonough v. Bullock, 2 Pearson (Pa.), 191. An agreement between landlord and tenant whereby the landlord furnishes the stock and the tenant feeds the stock, and upon a sale the landlord is first repaid his purchase nioney and the remainder is to be equally divided, does not constitute them partners as to the stock. Musser v. Brink, 80 Mo. 350; af- firming S. C. 68 Mo. 242. Where a contract was entered into between L. and the law firm of "J. & J.," whereby the latter agreed to transact such legal busi- ness as L., by the use of their names, should be able to turn into their hands, to charge fair prices therefor, and divide the fees there- for, giving L. one-third and re- serving two-thirds to themselves, held, that J. & J. and L. did not under such contract become co- partners in the general practice of the law, but only in such legal business as L. should turn over to J. & J. Heshion v. Julian, 82 Ind. 576. An arrangement between A. and B. to operate a saw-mill owned by A., whereby it is agreed that B. shall assist A. to run the mill, fur- nish means to run it and support A.'s family, that A. and his sons are to operate the mill, B. to sell the lumber, and, after deducting from the proceeds thereof the means furnished by him and pay for his services, the net surplus to be applied to the payment of a debt due from A. to B., does not cjnstitute a partnership inter se be- tween A. and B. Dils v. Bridge, 23 W. Va. 20. A special agreement by which P. was to contribute a certain sum to- wards the founding of a newspa- per, and the appellees a certain other sum, under an agreement that P. was to conduct the business and the other subscribers pay their subscriptions as required, P. to have the px-ivilege of refunding all or any of the sums subscribed and paid in, within one year, with in- terest, and thereupon to assume sole proprietorship of the paper, but until such sums should be re- funded they should stand as so much stock in the business, held, to constitute a partnership, and a con- ditional sale of the appellee's share to P. , and that the interest of the parties in the profits was in pro- portion to the amounts paid in. Pierce v. Scott, 37 Ark. 308. A contract by which the plaintiff agreed to serve the defendant as an overseer for one year, to fur- nish a certain number of hands and horses, which were to be worked on defendant's plantation with his hands and horses, to defray the ex- penses of himself, his hands and horses, and to receive one-fourth part of the crop raised as his com- pensation, does not make the par- ties partners inter sese. Moore v. Smith, 19 Ala. 774. One who is working a plantation on an agreement that he is to re- ceive a fixed share of the crop, ir- respective of profits or losses, is not a partner but an employee, and may be discharged for cause. His loss of health, preventing him from 43 *13 CONTRACTS OF PARTNERSHIP. [book case it is easier than in the former to come to the conclu- sion that a partnership was not intended to be formed. superintending the work, is cause justifying a discharge; but he is entitled to compensation for the time prior to the discharge ; and a proper mode of computing it is to divide the total value of the crop by the number of days in the year, and allow him to share according to the number of days he served. Jeter v. Penn, 28 La. Ann. 230. See, also, Gurr v. Martin, 73 Ga. 529. A. and B., having entered into a contract with a turnpike corpora- tion to make and complete a cer- tain road, afterwards made an agreement 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 completing the same ; the one-half of it to be taken from A.'s part, and the other from B.'s part." Held, not to create a partnership between A., B. and C., but a mode of paying C. for his help and labor. Muzzy v. Whit- ney, 10 Johns. 225. ■ In an action for damages for a breach of contract the complaint alleged that, at a certain date, the plaintiff and the defendant had ex- ecuted a written contract, by the terms of which the defendant was to furnish all the buildings, ma- chinery, power and capital, and the plaintiff was to perform all the labor necessary for manufacturing all the raw material of a certain kind, which could be purchased at a certain place by the plaintiff, at a price not exceeding the ruling market price at a certain other place; that such contract should terminate at a specified time ; that the defendant should make all sales of the manufactured article, and collect the pay therefor; and that he should pay to the plaintiff, as compensation for his services, a certain proportion of the net profits which should be realized. Held, that the parties to the contract did not thereby become partners. Boyce v. Brady, 61 Ind. 432. Although the amount which a seaman is to receive for his labor is made to depend upon the amount of fish caught, still he is not on that account a partner in the en- terprise, and need not join any of the crew with him as plaintiffs in an action to recover his share of the proceeds. Holden v. French, 68 Me. 241. See, also, Coffin v. Jenkins, 3 Story, 108; Baxter v. Rodman, 3 Pick. 435. An action at law is proper to re- cover for services rendered a co- partnership, under an agreement providing for a payment of a share of the net profits of the firm busi- ness as a compensation for the serv- ices-; the fact that an accounting is necessary to ascertain the amount of the compensation does not re- quire an equitable action, and plaintiff, not being a partner, could not bring such an action; an ac- counting is proper in the action at law, and the introduction of the requisite evidence does not change the nature of the action. Smith v. Bodine, 74 N. Y. 30. An agreement between W. and R., dated October 2, 1865, provided that W. should enter into and carry on for three years, from April 17, 44 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. '13 If the servant sharing profits has also an interest in the partnership capital or stock, this additional circumstances goes far to show that a partnership was, in fact, intended, (s) 1865. the business of manufactur- ing oils and candles, "under the name, style and firnv' of the X. Company; furnish the necessary capital to a limited amount : let the company have the use of his coal land and mining apparatus, with the right to take coal, for which he was to be paid by the company a certain sum per ton, and be allowed interest on the capital stock in- vested in said company ; that R. should be employed as the general agent and manager of said busi- ness, devote himself wholly thereto, receive "in payment for his said services" a certain sum per year, and one-half the net profits of the business; let to the company his oil works, tools and apparatus at a certain rent, and allow to the com- pany, free of charge, the benefit of all trade-marks and patents used by him; that annual settlements should be made, and all sums due thereon to R. should be paid, or, if not paid, credited to him and in- terest allowed thereon; that "all the operations of the late limited partnership of R. since April 17, 1865, are to be considered done and performed under this agreement, so far as the business of the com- pany is concerned, and this agree- ment relates back to said April 17." R., in 1867, brought an action of contract against W., declaring on this agreement and alleging that W. excluded R. from the manage- ment and profits of the business, refused to make annual settle- ments, and, although continuing the business on the premises and with the tools of R., and making large profits, refused to recognize that R. had any rights under the agreement. Held, a partnership and the action not maintainable. Ryder v. Wilcox, 103 Mass. 24. A. and B. entered into an agree- ment, in writing, by which the former agreed to employ the latter as salesman and clerk in his store, and allow him for his services one- fourth of the net profits of the busi- ness, and which further declared that thereby the said B. was not made a partner in trade of the said A., but that the allowance of one- fourth of the net profits, after de- ducting expenses, etc., was a com- pensation for the services of the said B. in lieu of clerk hire. Held, that however B. might be held lia- ble as to third pex - sons he had none of the rights and equities of an actual partner, and, therefore, had no more right to call for the inter- position of a court of equity, on the ground of lien, than any other creditor of A. Kerr v. Potter, 6 Gill, 404. Owner of a vessel, which the master runs for a share of the net profits, should not join in an action for freight due on an agreement in which the master only was known to the shipper. Board man v. Keeler, 2 Vt. 67. A contractor for carrying the (s) See Reid v. Holinshead, 4 B. 469; Gilpin v. Euderby, 5 B. & A. & C. 867; Ex parte Chuck, 8 Bing. 954. 45 *13 CONTKACTS OF PARTNERSHIP. [book I. Partnerships in profits only. — It is not, however, essen- tial to the existence of a partnership that there shall be mail agreed with a subcontractor thai he should perform one-half the service and be entitled to one- half the compensation. Held, that this agreement did not constitute a partnership between the parties. Wilkinson v. Jett, 7 Leigh, 115. B. and J., having chartered cer- tain vessels to proceed to the Lobos Islands for guano, agreed by con- tract, in consideration of -valuable services rendered "them," in re- spect to the obtaining access to and procuring said guano, by K., "to pay him a sum or sums of money equal to the quarter part of the net profits on each and every vessel so chartered." Held, that this con- tract did not make K. a partner in this enterprise. Benson v. Ketchum, 14 Md. 331. The bankrupt entered into a con- tract with one S., by which he un- dertook to carry on the butchering business for S. as his agent and salesman. The contract provided that the "offal, feet, and the com- mission on bides and the usual slaughter-house perquisites," were to go to S. , and the bankrupt was to receive in lieu of wages all he could make over and above the current price of cattle bought, after deducting all expenses. It was provided that the bankrupt should account daily with S. and pay over to him all moneys received until S. w r as fully reimbursed for the stock and expenses. Held, that the agree- ment did not create a partnership. In re Blu men thai, 18 Bk. Reg. 555. An agreement between two per- sons, whereby one delivers to the other certain hay, which the latter agrees to transport to another market, and there sell the same if he can, at not less than a given price per ton, of which he is to re- ceive a specified sum per ton for his freight and trouble, and to pay over the balance to the other party ; and if he sells at a higher price- than the minimum price named, the excess is to be divided equally between them ; and if he fails to make sale he is to store the hay for the other party, and to wait for his freight till the hay is sold, does not constitute the parties partners. Morrison v. Cole, 30 Mich. 102. Where A., B. and C. became partners under the written stipula- tion that C. might elect to receive a certain sum of money, as salary, in lieu of a third of the net pro- ceeds of the business, held, that the relation between A. and B. was not disturbed bj* the election of C. to receive the salary. Bid well v. Madison, 10 Minn. 13. One hiring or renting property — a still, tubs, etc. , in this case — may contract for speculative compensa- tion; and this will not constitute him a partner. England v. Eng- land, 57 Tenn. 108. An agreement by a landlord with his tenant to take a share of the profits of the demised premises, by way of rent, does not constitute a partnership between them, so as to prevent an action at law by the landlord against the tenant for the rent. Perrine v. Hankinson, UN. J. L. 181. The fact that a negro trader, in whose sales-house slaves are ex- hibited for sale and sold by the 46 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. ^13 any joint capital or stock. If several persons labor to- gether for the sake of gain, and of dividing that gain, they will not be partners the less on account of their laboring with their own tools. 1 Thus in Fromont v. Coiipland, (t) owner, charges half commission for the use of his house, does not con- stitute him a partner with the owner in the sale. Dillard v. Scruggs, 36 Ala. 670. By an agreement between the parties, dated February 11, 1861, reciting that they had agreed to continue the connection between them for three years from January 1, 1861, in the same way as there- tofore, it was stipulated that the arrangement made with the plaint- iff was to share the profits or losses of the defendant's business in the above mentioned time, at the rate of seventeen and one half per cent. ; but that it was not to convey to the plaintiff the right of partnership in the defendants' firm, of signing the firm name, etc., and that he was to superintend as salesman the department of gen- eral dry goods; that the plaintiff should be at liberty to draw $2,500 a year in monthly instalments for his personal and other expenses; that the capital then standing to his credit on the books of the firm, as well as the surplus of profits for the next three years, if any, should remain in the business, to his credit, at seven per cent, interest, during the term of the agreement ; that in case of the death of either of the defendants during the three years, the agreement was to remain in force with the surviving partner if he should continue the business, and that in case of the death of the plaintiff, the books of the firm might be balanced either on the 31st of December, or on the 30th of June, whichever date might follow after his death, and the balance due him should be paid to his represent- atives. Held, not to constitute a partnership inter sese, however it might be as to third persons. Osbey v. Reiner, 49 Barb. 265. A. and B. made an agreement in writing, by which B. was to fur- nish a vessel and cargo, and A. was to take charge of the same and prosecute a certain voyage upon the following terms: "Monthly wages, $50, and one-fifth interest in the voyage, he furnishing $1,000 towards the one-fifth." A. received and acted upon a letter of instruc- tions from B., saying, "Your in- terest in the vessel and cargo is one-fifth part."' Other voyages were made with the same and another vessel, and A. received and acted upon another letter of instructions from B., saying: " For your serv- ices you are to receive $50 per month, and one-fifth interest in all the vessels and cargoes I may send to you." The accounts of all the voyages were kept as partnership accounts, which A. knew. At the end of the transactions A. claimed one-fifth of the property. Held, that A. and B. were partners. Julio v. Ingalls, 1 Allen, 41. 1 A partnership in profits may exist without including title in all the partners in the property out of (t) 2 Bing. 170. See, too, Lovegrove v. Nelson, 3 M. & K. 1. 47 - *u CONTRACTS OF PARTNERSHIP. [BOOK I. two persons who horsed a coach and divided the profits [-14] *were held to bo partners, although each found his own horses, and the other had no property in them. which such profits are made. Moore v. Huntington, 14 N. Y. Supreme Ct. 425 ; McCrary v. Slaughter, 58 Ala. 230; ante, p. 18, note. See, also, Hankey v. Becht, 25 Minn. 212. See, however, Dwinel v. Stone, 30 Me. 384; Chase v. Barrett, 4 Paige, 148, infra. A father conveyed to his three sons all his estate, in consideration that they should pay his debts then existing, and give him and his wife a life support. One of the sons took from the others a power of attorney to hold the property, man- age the farm and fulfill their joint promise, and by virtue thereof paid the debts, furnished the life sup- port, and carried on the farm, sup- posing that if it should yield a profit over his expenditures they should share it equally, otherwise share the loss. Held, that if there was a partnership created between them, it was at most only in the profits and losses in carrying on the farm. Howe v. Howe, 99 Mass. 71. A contract provided that K. should furnish and replenish a stock of merchandise which N. was to take charge of and sell, deduct- ing from the proceeds the expenses of the business and a certain fixed sum for himself, the profits of the business to be divided equally, and N. to take his share thereof, at the expiration of the contract, out of the merchandise on hand. Held, that the contract created a partner- ship, notwithstanding a stipulation that the goods were to remain the property of K., and that K. could not maintain replevin for the goods until after a settlement. Kuhn v. Newman, 49 Iowa, 424. Equity having exclusive juris- diction of partnership settlements, evidence to show that N. had no interest in the merchandise, be- cause no profits had accrued, was not admissible in the action of re- plevin. Kuhn v. Newman, supra. B. and H, sole managers of the business of a brewing, malting and distilling company, received for their services five per cent, on all sales, which commission, by an ar- rangement between themselves, they divided, three per cent, to H., and two per cent, to B. They paid bills rendered to them in the firm name of B. & H. , and in order to raise money to pay for purchases made in the name of B. & H. they gave their joint and several notes signed in their individual names. Held, to be a partnership. Heise v. Barth, 40 Md. 259. Where A. B., being the owner of several farms in 1827, entered into articles of agreement with three of his sons and his son-in-law, wherein it was agreed that the three sons and son-in-law should work and carry on the farms owned by A. B., for the term of five years, in such manner as might be thought by A. B. most discreet and prudent, and should put on the same all such implements of hus- bandry as they owned, and A. B. agreed to put on to the said farms, for the use thereof, all such teams and implements of husbandry as he owned; and it was further agreed that other teams and imple- 48 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *u So, in French v. Sit/ring, (u) where two co-owners of a race-horse agreed to share its winnings and the expenses of its keep, although there was some doubt as to whether they were partners or not, the court had no hesitation in ad- mitting that they might have been partners in the profits although not in the horse itself, (x) The ordinary agreement between publishers and authors, to the effect that the author shall contribute the manuscript, and the publisher shall, in the first instance, defray the expenses of publication, and repay himself out of the pro- ceeds of the sale of the work, and that then the profits shall be divided, furnishes another instance of a partner- ship confined to profits only, (y) Again, it frequently happens that one person has prop- erty and another skill, and that they agree that the latter shall have the control of the property for the benefit of ments of husbandry which might be necessary should be purchased from the products of the farms, and that each of the parties should have his proper living and expenses out of such products; and A. B. also agreed that at the expiration of said term of five years his said three sons and his son-in-law should have one-half of his personal prop- erty and one-half of the products of the farms ; and A. B. further agreed that, in case the three sons and son-in-law faithfully per- formed the agreement on their part, he would convey to them by deed, in fee-simple, one-half of all such farms; and at the time of making the agreement A. B. owned considerable personal property ; and his son-in-law was then in ill- health and unable to work until his death, which took place a few weeks thereafter, — held, the agree- ment did not constitute the parties copartners, so as to entitle the representatives of the son-in-law to a share of the property. Chase v. Barrett, 4 Paige, 147. See, also, Dwinel v . Stone, 30 Me. 384. (u) 2 C. B. N. S. 357; noticed again infra, p. 18. (x) See, also, Steel v. Lester, 3 C. P. D. 126. The dictum in Syers v. Syers, 1 App. Ca. 181, to the effect that a partnership in profits is a partnership in the assets by which they are made, is by no means universally true. See infra, note (&). (y) See Gardiner v. Childs, 8 C. & P. 345 ; Reade v. Bentley, 3 K. & J. 271, and 4 id. 656; Wilson v. Whitehead, 10 M. & W. 503; Gale v. Lackie, 2 Stark. 107; Venables v.Wood, 3 Ross, L. C. on Com. Law, 529. This last case is an authority for the proposition that authors and publishers are not partners at all, and qu. whether this is not the. correct doctrine. Vol. 1 — 4 49 *15 CONTRACTS OF PARTNERSHIP. [BOOK I. both, and that the profits shall be divided. 1 In such cases it may be difficult to say whether a partnership is or is not created. In Stocker v. Brocklebank, (s) it is clear that no partnership was intended and none was created. In the Irish case of Oreenham v. Gray, {a) it was thought that the whole agreement could only receive a reasonable construc- tion by holding a partnership to exist, and a partner- [*15J ship was held to exist accordingly, although the *mills, and machinery, and buildings, by means of which the business was carried on, clearly belonged to one partner only. Other instances of partnership in profits, although there is no community of interest in the capital or stock produc- ing them, will be noticed when the subject of partnership property is examined, (b) 3. — Partnership is prima facie the result of an agreement to share profits, although community of loss is stipulated against. Sharing profits but not losses. — Persons who agree to share the profits of an adventure in which they engage are prima facie partners, although they stipulate that the}' will not be liable for losses beyond the sums they engage to subscribe, (c) 1 See Holt v. Kernodle, 1 Ired. L. qucere whether he was entitled to 199 : Simpson v. Feltz, 1 McCord, all he got. Ch. 124 ; Dob v. Halsey, 16 Johns. (a) 4 Ir. Com. L. Eep. 501. The 34; Gregg Township v. Half-Moon real truth here seems to have been Township, 2 Watts, 342; Potter v. that the plaintiff intended to create Moses, 1 R. I. 430 ; Winship v. Bank a partnership, whilst the defendant of United States, 5 Pet. 529 ; Tib- did not. batts v. Tibbatts, 6 McLean, 80 ; (b) In Meyer v. Sharpe, 5 Taunt. Bearce v. Washburn, 43 Me. 564; 74, the distinction between an in- Wood v. Vallette, 7 Ohio St. 173. terest in profits and an interest in (z) 3 Mc. & G. 250. The servant the goods by the sale of which claimed a right to take an active those profits were to be produced part in the management of the was held to be clear and manifest, business. So in Walker v. Hirsch, See, too, Smith v. Watson, 2 B. & 27 Ch. D. 460. In Pawsey v. Arm- C. 401. strong, 18 Ch. D. 698, the clerk (c) Brown v. Tapscott, 6 M. & shared losses a3 well as profits, but W. 119. 50 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *16 Stipulations against community of loss. — The inference that where there is community of profit there is a partner- ship is so strong that, even if community of loss be ex- pressly stipulated against, partnership may nevertheless subsist. In Coope v. Eyre, (d) Lord Loughborough is re- ported to have said: "In order to constitute a partnership communion of profits and loss is essential." But there is nothing to prevent one or more partners from agreeing to indemnify the others against loss, or to prevent full effect from being given to a contract of partnership containing such a clause of indemnity, (e) 1 Contracts of loan compared with contracts of partner- ship without community of loss.— The true effect of such a complex agreement would, it is apprehended, be to entitle each of the partners to a share of the excess of the returns over the advances, while some of the partners would be en- titled to be indemnified by the others for all losses lieyond the advances. If this were not the result of the agreement, and if the persons indemnified were indemnified not only against losses beyond the advances, but *also [*16] against the loss of the advances themselves, the con- tract would lose its character of a contract of partnership and become a contract of loan, (f) Usurious loans confounded with partnerships. — Whilst the laws against usur}^ were in force, a tendency was some- (d) 1 H. Blacks. 48. its renders one liable as a partner (e) See Bond v. Pittard, 3 M. & to third persons, the partners may W. 357; Geddesu. Wallace, 2 Bligh, stipulate, as between themselves, 270. that one shall not be liable for the 1 An agreement whereby one debts of the firm. Pollard v. Stan- party is to have for his share of the ton, 7 Ala. 761. profits ten per cent, per annum for A stipulation exempting a part- advancements of capital and the ner from losses, for a fair and just use of his name as partner, and is equivalent, is valid as to the part- to be kept harmless from all losses ners inter se. Consolidated Bank by other partner, constitutes a part- v. State. 5 La. Ann. 44. nership between parties. Clift v, (/) See Pothier, Contrat de So- Barrow (N. Y.), 10 Cent. Rep. 715; ciete. g§ 21, 22. Compare Pooley S. C. 15 N. E. Rep. 327. v. Driver, 5 Ch. D. 458, noticed Although the perception of prof- infra, % 2. 51 *16 CONTRACTS OF PARTNERSHIP. [BOOK I. times manifested to treat what was in truth a loan at usuri- ous interest, and therefore illegal, as a contract of partnership and therefore legal, (g) This view of the transaction had the merit of apparently holding the parties to their bar- gain; but in truth the bargain to which they were held was very different from that which they themselves had contem- plated; and by treating such transactions as partnerships and not as loans, an amount of confusion was introduced into this branch of the law which even the repeal of the usury laws failed to remove. The leading cases on this sub- ject are Gilpin v. Enderby {h) and Fereday v. Hordern. (*) They decided that a loan of money on the terms that the lender should share the profits of the borrower rendered the lender liable to third persons, as if he were a partner with the borrower, and that, by reason of such risk, the loan was not usurious. The judgments in these cases show that the borrower and lender were regarded by the court as partners inter se. These cases, however, cannot now be relied upon ; for, as will be seen hereafter, the mere fact that a lender of money shares profits with the borrower will not make the lender liable as a partner; and as between the borrower and the lender the question of partnership or no partnership turns on the real agreement between them, (k) 1 (g) See Bloxham v. Pell, cited 2 able, they to return to him, in any Wm. Blacks. 999 ; and compare event, his advances, and if the ad- Morse v. Wilson, 4 T. R. 353, and venture proved profitable one-third 9 Byth, Conv. p. 163, edit. 2. of the profits in lieu of interest on 'h) 5 B. & A. 954. the money loaned, but no provision (i) Jac. 144. See, also, Ex parte was made for his bearing any ex- Briggs and Ex parte Notley, 3 D. pense or loss, nor was any time & Ch. 3G7. fixed for the termination of the ad- (fc) See the cases of servants shar- venture. Held, that this did not ing profits, ante, pp. 12, 13. constitute a partnership. Lintner lAn agreement was made by v. Millikin, 47 111. 178. See, also, manufacturers and a banker, Emmons V. \Ve3tfield, 97 Mass. 230, whereby the latter was to furnish where stock and materials were ad- the former money wherewith to vanced by a capitalist to the manu- uianufacture as many articles as facturer; also Gallop v. Newman, they might think safe and prodt- 7 Pick. 282; In re Ward, U. S. 52 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. •16 Dist. Ct. W. D. Term. 8 Reporter, 136; Smith v. Garth, 32 Ala. 368; Richardson v. Hughitt, Ct. of Ap. of N. Y. 8 Reporter, 177; Cassidy v. Hall, 97 N. Y. 159; Curry v. Fowler, 87 N. Y. 33 ; S. C. 41 Am. Rep. 343; 46 N. Y. Super. Ct. 195; Magovern v. Robertson, 40 Hun, 166 ; Darling v. McLelland, 2 Rus. & Ches. (Nov. S.) 164; S. C. 76 N. Y. 55 ; Hart v. Kelly, 83 Pa. St. 286 ; Everett v. Coe, 5 Den. 180. See, also, post. An agreement to loan money or indorse notes for a certain amount in consideration of a certain per cent, of the net business profits, the borrower agreeing to conduct his business to the best advantage and keep accurate accounts thereof, to be at all times open to the exam- ination of the lender, does not make the parties copartners either as be- tween themselves or a third person. Boston, etc. Smelting Co. v. Smith, 13 R. I. 27 ; S. C. 43 Am. Rep. 3. See, also, Swann v. Sanborn, 4 Woods, C. Ct. 625 ; In re Ward, 2 Flip. C. Ct. 462; Eager v. Craw- ford, 76 N. Y. 97. In the case of Rosen field v. Haight, 53 Wis. 260 ; S. C. 40 Am. Rep. 770, on the other hand, an agreement, by which one loans an advance to a firm. $5,000, in consid- eration of which the firm was to devote their whole time and skill to the business, keep accurate ac- counts, which were to be open at all times to the inspection of the cred- itor, and in consideration of the use of the money the firm was to pay the creditor at stated intervals a certain proportion of the profits of the business, guarantying that such proportion should amount at least to a certain sum, and as se- curity for the money advanced the firm gave a lien upon tue assets of the firm, and the firm agreed to contract no debts outside of busi- ness during the term of the agree- ment, and to use no funds or other property of the firm except what might be necessary for their sup- port, a violation of the contract by said firm, to be regarded as an end to the loan, authorizing the cred- itor to take possession of the prop- erty and by sale satisfy his debt, was held to constitute the creditor a copartner with the firm and make him liable upon a note executed by them. Where N. furnished money to P. to conduct business, the latter to let him have goods at cost, noth- ing being said as to interest, or profits and losses, this constitutes a loan and not a partnership. Slade v. Paschal, 67 Ga. 541. A written contract, in which party of the first part did not par- ticipate in profits or losses, but re- ceived interest semi-annually upon the amount loaned, construed to create the relation of creditor and debtor and not partnership. New- lin v. Bailey, 15 Bradw. 199. A loan was made for two years, with interest payable quarterly, at a rate above six per cent., and to be made equal to one-fourth of the profits of the borrower's business at the end of the term. Held, not to constitute the lender a partner with the borrower. Lord v. Proc- tor, 7 Phil. 630. A. & B. of the one part, and G, D., E. & F. of the other, made an agreement in writing, whereby A. & B. sold to C. the exclusive right to manufacture and sell a certain article secured by letters patent, to- 53 L 1G CONTRACTS OF PARTNERSHIP. [BOOK I. gether with all the stock and fixt- ures then on hand pertaining to the business, in consideration that thirty-seven and one-half percent, of the net profits realized should be paid to them; and in order that profits might arise out of it, D., E. & F. were to furnish $15,000 as cap- ital for carrying on the same, A. & B. agreeing that they would neither make nor sell the said article, nor in anywise interfere with the man- agement of the business, which was agreed should be left exclu- sively with C. as superintendent, who was to receive a certain stipu- lated salary and twenty-five per cent, of the net profits for his serv- ices, the party of the second part guarantying to A. & B. the pay- ment of said thirty-seven and one- half per cent, after all expenses should be paid, such expenses to include twenty per cent, on the capital furnished by D., E. & F., to be paid to them for the use of the money, and which capital it was agreed they might at any time withdraw with the consent of C. Held, that this agreement did not constitute a partnership between A. & B. and the other parties. Smith v. Vanderburg, 46 111. 34. Agreement under seal between A. and B., by which B. was to loan A. $5,000 for one year, or indorse his note for that amount for that time, and also indorse his notes to an additional amount not exceed- ing $2,000, if B. thought such sums required for A.'s business. For this A. was to pay B. ten per cent, of his net business profits of the year, and two per cent, of his net profits for each $1,000 indorsed for him over said sum of $5,000. A. also agreed to conduct his business to the best advantage, and to keep accurate accounts thereof, to be at all times open to B.'s examination. Held, an executory agreement, which, if carried into effect, would make A. and B. copartners neither as between themselves nor as to third persons. Held, further, that the lenders, having no voice in the management of the business, and no interest in the capital, the agree- ment was for a loan of money or credit, in which a percentage of profits took the place Of interest. Held, further, that such contract did not, according to the later Eng- lish cases, create a partnership at common law. Boston & Col. S. Co. v. Smith, 23 Alb. Law Jour. 232; 13 R. I. 27. Where money is loaned for the benefit of a business, and is to be refunded absolutely, without re- gard to the profits, the fact that the lender is to receive a share of the profits, to apply on the indebt- edness, does not make him liable to creditors as a partner ; to have that effect the payment of the ad- vancement must depend upon the profits. Eager v. Crawford, 7G N. Y. 97. See, also, cases next above cited. Defendant C. advanced to de- fendant G. money to purchase the stock and fixtures of a business, which G. stated he could pay soon. C. was secured by chattel mortgage upon the property, conditioned that the sum loaned should be paid on demand, and G. agreed to pay over to him one-half of the net receipts of the business. In an action by a creditor of G. , who sought to chax-ge C. as a partner, held, that C. could not be held liable; that the legal presumption was that the share of 54 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *16 Dormant partners. — At the same time even now a per- son who is really a partner, although dormant (*, e., a part- ner taking no part in the management of the partnership), 1 receipts so paid over was to be ap- plied in payment of the loan. Eager v. Crawford, 76 N. Y. 97. When a party advances money to another, and for the use of the money he is to share in the profits of the transaction, besides the in- terest upon the sum loaned, he cannot be held liable as a partner to third persons who deal with the borrower of the money. Curry v. Fowler, 10 N. Y. Weekly Dig. 105. B. L. & L., by an instrument dated July 1, 1860, reciting that they composed the firm of S. & Co., agreed that as II. A. S. had loaned them $100,000, to be used as capital for the term of two years, and sub- ject to all the risks of their busi- ness, so far as creditors of the firm were concerned, they would pay him interest at the rate of seven per cent., and that as a bonus for the good-will of the business (in which he had formerly been a partner) they would allow him half-yearly one per cent, of the gross sales of the firm, " he having no interest in the commission, guaranty, or profit and loss, and in nowise a partner, or to be allowed to have any part or control in the business of the house." Held, that H. A. S. was not a partner with S. & Co., nor liable as such to their creditors. Gibson v. Stone, 43 Barb. 286. Participation in the profits is, however, prima facie strong evi- dence of a partnership in it. In re Ward, 8 Reporter, 136. On the other hand, where de- fendant H. loaned to the firm of P. & Co. $2,000, to be used in the business for one year, under an agreement that he was to receive one-third of the profits, which were to be settled half-yearly, and at the end of the year, if he did not con- clude to become a partner, he was to be repaid his $2,000 out of the concern, held, that the money so invested was used by the firm for the benefit of H. ; that he had an interest in the profits as such, not as a measure of compensation, but as a result of the capital and in- dustry ; and that as to the creditors of the firm he was a partner, and jointly liable with the others for the partnership debts. Leggett v. Hyde, 58 N. Y. 272. 1 A dormant partner is one whose name is not mentioned in the title of the firm, or embraced in some general term, as company, sons, etc. Jones v. Fegely, 4 Phil. 1. See, also, Waite v. Dodge, 34 Vt. 181 ; Oppenheimer v. Clemmons, 18 Fed. Rep. 886. Where two or more persons pur- chase one or more specific lots or parcels of property on joint ac- count, for the purpose alone of sale and profit, and there is no fraud or concealment as to the manner of purchase, the mere fact that one of the partners or joint owners is intrusted with the possession does not constitute the others dormant partners. Cochran v. Anderson County National Bank, 83 Ky. 36. A secret partnership exists where one is really participating in the profits and loss of an enterprise carried on by another, and with- 55 M6 CONTEACTS OF PARTNERSHIP. [BOOK I. will be treated as such, although he may have endeavored to conceal his true character under the cloak of being a holds a knowledge of the fact from the public. An ostensible partner- ship exists where one who lias no actual interest in the firm says he is a partner, or knowingly permits the firm to use his name in any manner in order to obtain credit. Harris v. Sessler, 3 S. W. R. 316. A partner is not to be deemed dormant because his name does not appear in the firm style, nor is it necessary to constitute one a dor- mant partner that his membership is universally unknown. It is suf- ficient if he is not an ostensible partner. Metcalf v. Officer, 2 Fed. Eep. 640. A dormant partner is liable for all the partnership debts contracted during his connections with the firm. Lee v. Guice, 21 Miss. 656; Lindsey v. Edmiston, 25 111. 359; Bigelow v. Elliott, 1 Cliff. 28; Gavin v. Walker, 14 Lea, 643; Op- penheimer v. Clemmons, 18 Fed. Rep. 886. So, whether credit is given exclu- sively to the ostensible partner or not. Lea v. Guice, supra. This liability is founded on his participation in the profits. Lea v. Guice, supra. The active members of a firm have authority without the knowl- edge of a dormant partner to create a lien on the firm property for the benefit of the firm to relieve the firm property from attachment. Arnold v. Morris, 7 Daly, 498. "Where there are two firms in the same community of the same name, and each consisting of the same persons, though engaged in differ- ent kinds of business, one of which contains a dormant partner, and the other not, and a suit is brought on a promissory note bearing the signature of the common firm name, the presumption is that it is the note of the firm not containing the dormant partner. To recover against the dormant partner the plaintiff must prove either that the money for which the note was given was borrowed on the credit of the firm in which the dormant partner was interested, or that it was used in the business or for the benefit of that firm ; and the fact that the money was borrowed on the credit of that firm may be proved by representations by the ostensible partners at the time of the transaction, or by circum- stances. Fosdick v. Van Horn, 40 Ohio St. 459. The fact that plaintiff sold goods to a partnership in ignorance of the existence of a secret partner will not prevent a recovery against such secret partner for goods sold. McDonald v. Clough, 14 Pac. Rep. (Colo.) 121. A secret partner who was inter- ested in some transactions of his copartner, and not in others, is re- sponsible for a transaction at which he is shown to have been present, and in which he participated. Lindsey v. Edmiston, 25 111. 359. A secret partner is liable upon a note of the partnership, independ- ent of any charge or proof of a fraudulent collusion between the partners to conceal his liability. Bradshaw v. Apperson, 36 Tex. 133 ; St. Armand v. Long, 25 La. Ann. 167. 56 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *16 mere lender of money. (/) "Whether a person advancing money and sharing profits is a creditor or a dormant p t artner In a suit against G. for goods al- leged to have been sold and deliv- ered by the plaintiff to said G. and his partners, the following facts were established : B. and C. , prior to 1875, bad been engaged as part- ners under the firm name of B. & C., ostensibly in carrying on a re- tail store in Baltimore. Upon a credit wbich they bad established in this manner, they purchased goods during certain months of said year, from wholesale dealers in different cities, and among them the plaintiff, upon credit and osten- sibly for their said retail business. These goods were shipped to Balti- more and deposited in warehouses, whence B. & C. secretly, and under cover of a number -of fictitious names, shipped them, in the orig- inal packages, to the defendant G. , who used said fictitious names in receiving, reshipping and selling said goods. Held, that at the time the plaintiff sold the goods to the firm of B. & C. the defendant G. was a member of said firm, and therefore liable, ex contractu, as a member of said firm, to the plaint- iff for goods by him sold to said firm, though he may not then have known that said G. was a member of it : as a dormant partner, when discovered, is liable for the debts of the firm the same as an ostensible one. Gilmore v. Merrell, 62 Ind. 526. A written acknowledgment, signed and given to the complain- ant by the respondent, that they had on that day purchased the quantity of land described in it, the complainant paying for the same the sum of $3,000, for which the respondent received the deed, but acknowledging and agreeing that the complainant was to be paid back his $3,000 with interest, and receive as his share of the profits, if any there should be, two-thirds, and he one-third, and, if a loss should be sustained, they were to bear it in the said proportion ; and in con- sideration of his receiving the deed he executed that day a judgment bond for $3,000, for which he held himself accountable until the prop- erty should be sold, when the pro- ceeds of such sale should go to pay off said bond. And it was also at the same time agreed between them, though not stated in the ac- knowledgment, that in the mean- time judgment should not be en- tered on the bond, and which was not done until five years and three months thereafter, nor until after most of the land had been sold, and the agreement had been denied and repudiated by the respondent. The land referred to lay in the city of Wilmington, and the latter pro- ceeded, soon after the purchase of it, to have it surveyed and laid off into city lots, and to erect houses and make other improvements upon them at his sole expense, and from time to time to sell and con- vey the same as his own property. Held, in the absence of any direct and positive evidence to the con- trary, that the agreement consti- tuted a valid and bona fide contract (Z) See Pooley v. Driver, 5 Ch. D. 458, noticed infra, § 2. 57 *17 CONTRACTS OF PARTNERSHIP. [BOOK I. [*17] *is often a very difficult matter to determine, and can only be decided by a careful study of the whole agree- ment between the borrower and the lender, and especially by examining what rights are conferred on or taken from the person making the advance. 1 The right of a lender is to be repaid his money with such interest or share of profits as he may have stipulated for; and his right to a share of profits involves a right to an account and to see the books of the borrower, unless such right is expressly excluded by agreement. If, however, a lender stipulates for more than this (e. g., for a right to control the business or the em- ployment of the assets, or to wind up the business), or if his advance is risked in the business, or forms part of his capital in it, he ceases to be a mere lender and becomes in effect a dormant partner. In illustration of these remarks reference may be made to Jlollwo, March <& Co. v. Court of Wards (m) on the one hand, and Pooley v. Driver (n) on the other, (o) In both there was an advance of money of partnership of a special character between them, and that the $3,000 paid by the complainant for the land was an advance of capital by him on account of the partnership, and was not a usurious loan of that amount of money to the respond- ent, under a false and fraudulent pretense of such a partnership con- tract, for the purpose of evading the prohibition of the statute against usury, without adequate hazard or risk of the principal, or any part of it, in the undertaking; nor a grossly inequitable, hard or unconscionable contract for exorbi- tant profits on the amount of mqney embarked by him in it, without adequate risk or hazard of incur- ring any loss by it ; and that there- fore the complainant was entitled to receive, not only the amount of the bond with interest, but the respondent was bound to account to him for two-thirds of the net profits realized from the sale of the lots, independent of the im- provements made upon them by him, and of the increased value of the land still retained and held by him. Plunkett v. Dillon, 4 Houst. 338. 1 Where A. gave B. money to purchase sheep with, and stated that he was to have half the profits, but to have no interest on his money if there were losses, and de- clared to a witness that he and B. were partners, such transactions do not constitute a loan, but the parties thereto are partners as to the whole subject in controversy. New- brau v. Snieder, 1 W. Va. 153. (to) L. R. 4 P. C. 419. See below, p. 38, note (d). (n) 5 Ch. D. 458. (o) They are referred to more at length hereafter, in § 2. 58 CU. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *18 and a stipulation for a share of profits; and in both the lender had unusual powers; but in the former case the court came to the conclusion that a loan on security was all that was really intended; whilst in the latter the court consid- ered that the lender was really a dormant partner, although he had done his best to avoid the liabilities incident to that position. 4. — Partnership is not the result of an agreement to share g?*oss returns. Sharing gross returns. — Although, as has been already pointed out, those who share gross returns share profits, if any there be, for gross returns include profits, and although at common law an agreement to share profits is prima facie an agreement for a partnership, yet it has long been held that a partnership is not the result of an agreement to share gross returns, (p) Co-owners sharing gross returns. — If several persons make advances for a common object and agree to share the gross returns in proportion to their advances, *this [*18] does not create such a community of interest in profit or loss as to make such persons partners. 1 Thus, in Gibson v. Lupton, (q) where two persons joined in the purchase of wheat with the intention of paying for it and dividing it equally, it was held that they were not partners. So, if two work- men agree to divide their wages, that, per se, does not make them partners, (r) But the strongest illustrations of this doctrine are afforded by those cases in which co-owners of chattels divided the earnings of the chattel. The distinc- tion between co-owners and copartners will be noticed hereafter, but as an instance in which co-owners have been (p) Seethe preliminary remarks, to joint purchasers, Coope v. Eyre, ante, pp. 8, 9. 1 H. Blacks. 37; and Hoare v. » See Day v. Stevens, 88 N. C. Dawes, 1 Doug. 371, and post, § 6. 83; S. C. 43 Am. Rep. 732; Curtis (r) See Finkle v. Stacey, Select v. Cash, 84 id. 41. Ca. in Ch. 9. (q) 9 Bing. 397. See further, as 59 *19 CONTRACTS OF PARTNERSHIP. [BOOK I. held not to be partners, although they agreed to divide the returns obtained by the use or employment of the thing owned, reference ma} 7- be made to French v. Styring. (s) There the plaintiff and defendant were entitled in common to a race-horse. It was agreed that the plaintiff should keep, train and have the management of the horse, that thirty-five shillings a week should be allowed for the ex- penses of his keeping, that the plaintiff should pay the expenses of entering the horse and conveying him to the different races, and that one-half of the horse's keep and other expenses and his winnings should be equally divided between the plaintiff and the defendant. This agreement was held not to create a partnership. It was no more a partnership than if two tenants in common of a house had agreed that one of them should have the general manage- ment and provide funds for necessary repairs, so as to ren- der the house fit for the habitation of a tenant, and that the net rent should be divided amongst them equally, (t) So where two persons were respectively lessee and man- ager of a theater, and they shared the gross receipts equally, the manager paying the expenses out of his share, it was held that no partnership subsisted between them, {it) Wages payable by a share of produce. — Again, in [-19] whaling voyages the sailors are usually paid a *certain proportion of the produce of the oil obtained, but even before the act of 28 and 29 Victoria, chapter 86, they were not therefore partners, either with each other or with their employers, (x) In such cases as this partnership was (s) 2 C. B. N. S. 357. equal to twelve per cent, on the net (t) See the judgment of Willes, proceeds, after deductiug certain J., 2 C. B. N. S. 366. expenses. He brought an action (u) Lyon v. Knowles, 3 B. & S. for what was due to him, and re- 556. covered, but no question of part- (x) Mair v. Glennie, 4 M. & S. nership arose. Some of the customs 240; Wilkinson v. Frazier, 4 Esp. established amongst whalers will 182 ; and see Perrott v. Bryant, 2 be found in Fennings v. Grenville, Y. &C. Ex. 61. See also Stavers v. 1 Taunt. 241, where it was held Curling, 3 Bing. N. C. 355, where that one of two tenants in common the captain was to be paid a sum of a whale could not maintain 60 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *19 clearly not intended ; and even when persons who shared profits were held to incur liabilities as if they were part- ners, it was held that persons who merely divided gross returns did not incur an}' such liabilities, (y) A fortiori it was impossible to regard them as partners inter se. The act of 2S & 29 Vict., c. 86, which will be noticed hereafter, renders this even clearer than before. 5, — Partnership is not the result of an agreement which is not concluded. Unconcluded agreements. — In order that partnership may result from any agreement, it is necessary that the parties to the agreement shall have mutually assented to the same propositions; otherwise there is no contract at all, but merely a treaty from which each party is at liberty to retire. 1 If, therefore, A. proposes to B. that a partnership trover against his co-tenant for half of the blubber, etc., yielded by the whale. (y) Post,§2. 1 An agreement by the members of a firm to admit a person into their business on condition that the firm shall become incorporated, and that he shall pay into the firm for its use a certain sum of money to be paid into the corporation, it being understood that no change shall be made in the name or char- acter of the firm until the forma- tion of the corporation, and the subsequent payment of the agreed sum, do not make such person a member of the firm or give him an interest in the partnership property in advance of the creation of the corporation. Drennen v. London Assurance Co. 113 U. S. 51 ; S. C. 20 Fed. Rep. 657. Where a complaint for a dissolu- tion of a partnership alleges that on a certain day the parties were partners doing a certain business and entitled to share the profits and losses in a certain ratio, but there was no allegation of any exe- cuted partnership agreement be- tween them, held, on demurrer, that the allegation that the parties were partners was an allegation of a conclusion of law, and that such complaint did not state facts suffi- cient to constitute a cause of ac- tion. As between the partners, the ultimate facts whence a partner- ship is deduced are, first, the agree- ment, and second, its execution. Summed up as the executed agree- ment, there can be no partnership between parties, so far as they solely are concerned, without a consent thereto and fulfillment thereof. Grooves v. Tollman, 8 Nev. 178. M. , a sutler in Virginia, said to E. as E. was about starting for Vermont: "If you will come back I will take you and S. in, 61 *20 CONTRACTS OF PARTNERSHIP. [book shall be formed between them on certain terms, and B. either does not accept the proposal or accepts it on other terms than those offered, A. and B. are not yet agreed and no partnership subsists between them. ]STor is B. bound by his qualified acceptance; for that is merely a counter offer on his part which he is at liberty to retract until A. has as- sented to all its terms without qualification. There are many decisions illustrating these principles, but they relate more particularly to agreements to take shares in companies, and it is unnecessary to consider them here, (s) [*20] *Cases in which there is no contract, because there has never been a mutual assent to the same terms, must not be confounded with cases in which a valid contract has been entered into, but which, being conditional, and not having been performed on the one part, is not binding on the other. These will be considered hereafter. and give each of you one-fourth and take one-half myself, and I will furnish all the capital." E. replied that he would come back, but S. was not present and knew nothing about the matter. Upon arriving in Vermont E. purchased the boots in question of the plaint- iff upon his own credit, as he sup- posed, directing the plaintiff to send them to " F. Evans, George- town, D. C," and at the same time told the plaintiff that he was going into business with M. and S. The plaintiff charged the boots to F. Evans & Co. Soon after E. re- turned to Georgetown he took the boots, sold one case of them, and took the remainder to his sutler's tent, where E. and S. worked for eight weeks, nothing being agreed upon as to how they were at work there. At the expiration of this period, and when the boots, except six pairs, had been sold, and the money received for them put into his drawer, M., E. & S. formed a copartnership from that date, with no reference back, M. fur- nishing the whole capital. Held, that they were not jointly liable for the boots purchased by E. If, when the copartnership was formed, M. then became liable to pay for those on hand, or to ac- count for the avails of those pre- viously sold, his liability was to E. and not to the plaintiff. Davis v. Evans, 39 Vt. 182. (z) See the next page. In Mc- Clean v. Kennard, 9 Ch. 336, an agreement to become partners with executors was held to create a partnership with those only who proved. 02 Cn. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *20 6. — Partnership is not the result of an agreement to share profits so long as anything remains to he done before the right to share them accrues. Contemplated partnerships.— It is important to distin- guish between actual and contemplated partnerships. Per- sons who are only contemplating a future partnership, or who have only entered into an agreement that they will at some future time become partners, cannot be considered as partners before the arrival of the time agreed upon, (a) l It is not always easy to determine whether an agreement (a) Per Parke, J. , in Dickinson v. Valpy, 10 B. & C. 141, 2. 1 See Moody v. Ratkburn, 7 Minn. 89; Ckapman v. Watson, 1 Rob. (Va.) 267; Adams Bank v. Rice, 2 Allen, 480; Cook v. Carpenter, 34 Vt. 121, and the cases below cited. An inchoate partnership must become complete before liability to creditors can attach. Irwin v. Bid- well, 72 Pa. St. 244. In order to render partners liable as such to third parties there must be not only an agreement to share the profits and losses, but an en- tering upon some business there- under. Lucas v. Cole, 57 Mo. 143. A mere promise to "go halves" in a purchase of land, if not car- ried into effect, does not make the promisor a partner so as to bind him to pay a note executed by the grantee in both of their names for improvements thereon. Huckabee v. Nelson, 54 Ala. 12. Evidence of an agreement be- tween a surviving partner and a deceased partner, that, upon the death of the deceased partner, his brother should become a partner in the concern, and be entitled to a share of the profits, is not sufficient to establish a partnership. Brink v. New Amsterdam Fire Ins. Co. 5 Robt. 104. A partnership maybe contracted to take effect at a future time or on certain conditions. Avery v. Lauve, 1 La. Ann. 457. Unless the condition on which a partnership is formed is a condi- tion precedent its non-fulfillment does not annul the contract. Mur- ray v. Johnson, 1 Head, 353. A. and B. executed a contract on the 17th day of April, 1855, which they entitled "articles of copart- nership," by which they declared their intention to form a copart- nership for the purpose of trade, which should continue for three years from the 1st day of May, 1855. The contract declared the parties to be equal owners of a cer- tain stock of goods, of which a schedule was annexed, and that they were to continue to be owners of the same in the same propor- tions, and contained various pro- visions with regard to the mode of conducting the partnership busi- ness. Held, that the term of the copartnership was not to com- mence until the 1st day of May, 1855, and until then the contract was merely an executory one, 63 *20 CONTRACTS OF PARTNERSHIP. [book I. amounts to a contract of partnership or only to an agree- ment for a future partnership. The test, however, is to as- which either party had the power to refuse to perform, such refusal constituting only an ordinary breach of contract, for which the party was liable in damages, and not a dissolution of an existing copartnership. Reboul v. Chalker, 27 Conn. 114. Where a proposed partnership, evidenced by a letter, contemplates in its terms but one transaction, at the conclusion of which the profits are to be divided, and the same letter which makes the offer to enter into the transaction on the joint account sets a limit on the quantity of stock to be purchased for it, prescribes that it be bought on a joint credit, and requires that the stock when purchased shall be sent by particular persons to be sold in a particular market under the supervision of the party mak- ing the offer, and the party re- ceiving the letter so acts as to fulfill no one of the requirements con- tained in it, there is no partnership, and, in the event of loss, the party receiving the offer cannot main- tain a bill for an accounting as partners and contribution. Met- calf r. Redman, 43 111. 264. An agreement was entered into by which the plaintiff, for a fixed annual compensation, was to ren- der service for the defendant in a factory of which he had recently become owner. If certain incum- brances on the property were paid as they became due from the prof- its of the business, and if the plaintiff's notes on demand were paid, then the defendant was to convey to the plaintiff one-half of the property and business, and not otherwise. Held, not a partner- ship, on the ground that the agree- ment was executory. Haskins v. Burr, 106 Mass. 48. Where an existing partnership takes in a new partner by a writ- ten instrument signed by the old members and the new, which writ- ten instrument recites the payment of a certain sum by the incoming partner, and conveys to him one- third interest in the assets, and consents that he shall have a third interest in the profits, the new partnership is complete on the ex- ecution of the instrument, not- withstanding it may be agreed that an account of the stock shall be taken, and if it exceeds a certain sum the new partner shall pay one- half of that sum. Phillips v. Nash, 47 Ga. 218. The existence of a partnership does not depend upon the fact that each partner has in all things com- plied with his agreement. If the contract has been made, property and labor contributed, and the part- nership business commenced, there is a partnership until legally dis- solved. Hartman v. Woehr, 18 N. J. Eq. 383. Where it is clear from the arti- cles that the parties contemplate an immediate commencement of business as a firm, a failure of one of them to pay in his part of the capital as agreed does not render him any the less a partner as of the date of the execution of the articles. Southern White Lead Co. v. Haas, 35 N. West. Rep. (la.) 494; S. C. 33 N. West. Rep. 657. 64 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. f 20 certain from the terms of the agreement itself whether any time has to elapse or any act remains to be clone before the right to share profits accrues ; for if there is, the parties will not be partners until such time has elapsed or act has been performed, (b) The general principle, that so long as an agreement to form a partnership is executory, no partnership is formed, applies as well to ordinary partnerships as to projected companies, and it will be useful to consider it with reference to each in turn. A contract for constituting a partnership, assigning the perform- ance of certain things to put the business to be carried on into opera- tion, constitutes a partnership at the signing of the contract, not from the commencement of the business itself. Aspinwall v. Will- iams, 1 Ohio, 38; Austin v. Will- iams, 2 id. 282 ; Crary v. Williams, 2 id. 284. An advance of money to a per- son engaged in business, and which was used by him for the purchase of goods, does not create a partner- ship, although it may be made in anticipation of a future partner- ship, which is never consummated. Hulbell v. Woolf, 15 Ind. 204. Under an agreement that Y. should furnish a certain sum to be used by H. in buying and selling certain kinds of goods until a speci- fied day, and that each should have one-half of the profits, and that Y. was then to be "received into full partnership" in the busi- ness on contributing a certain fur- ther sum, held, 1. That this did not constitute them partners inter sese during the period first men- tioned. 2. That it was H.'s duty, at the end of that period, to render Vol. 1 — 5 65 a statement of the purchases and sales, with a view to a division of the profits. 3. That his refusal to do so excused Y. from entering into the partnership which was then to be formed. Haile v. York, 27 Wis. 209. Articles of partnership purport- ing to be between the complainant on the one part, and the defendant and a minor brother on the other, but which were executed only by the two, held, not to have made the minor brother a partner. McGunn v. Hamlin, 29 Mich. 476. Where goods are purchased by several parties, under an agree- ment to hold them in aliquot shares, and with no arrangement for a joint sale, but with the intention of subsequently forming a copartner- ship in regard to the goods, until the partnership agreement is actu- ally made the purchasers are not copartners, but only tenants in com- mon. Baldwin v. Burrows, 47 N. Y. 199. (6) See, in addition to the cases cited below, Drennen v. London Ass. Co. 6 Davis, Sup. Ct. Rep. 25; Osborne v. Julian, 3 Brew, 596, where the partnership (?) depended on the result of experiments.. *21 CONTRACTS OF PARTNERSHIP. [BOOK I. (a) Application of the principle to ordinary partnerships. Option to become a partner. — It is not unusual for a person who contemplates joining another in business to agree that such business shall be carried on upon certain [""21] terras not themselves creating a partnership, '-and to stipulate for an option to become a partner either at a specified time, or at any time the person having the option may choose. Such agreements, if bona fide, and not mere colorable schemes for creating a partnership, and at the same time concealing it, (c) do not create a partnership until the person having the option has exercised it, and elected to become a partner. 1 A strong illustration of this is afforded by Ex parte Davis, (d) where a creditor had a right to nominate himself as a partner with his debtor but had not exercised the right. Again, in Gabriel v. Euill, (e) it was agreed between the defendant and two others that the defendant should enter (c) See Courtenay v. Wagstaff , money paid in cash is furnished by 16 C. B. N. S. 110. another under an agreement that 1 An agreement by A. with B. he shall become a partner if the that on the payment of a settled lessee acquires possession, this does eum B. shall participate in the not constitute a partnership be- profits of A.'s business gives B. no tween them, possession never hav- interest as between themselves in ing been obtained. Snodgrass v. A.'s stock in trade, when it appears Reynolds, 79 Ala. 452. that it is the intention that he shall (d) 4 De G. J. & Sm. 523. The have no such interest. London agreement was in the form of a Ass. Co. v. Drennen, 116 U. S. 461. bond, and was, as Lord Westhury Where an agreement is made be- remarked, "an ingenious piece of tween several persons to form a mechanism." Such an agreement, partnership, and one reserves a however, cannot be relied upon as right for a fixed time to decide affording protection against third whether or not he will be a part- parties. ner, although not meanwhile an (e) 9 M. & W. 297, and Car. & actual partner, he has the right to Marsh. 358. See, too, Ex parte become one within the time speci- Turquand, 2 M. D. & D, 339, which fied. Handlin v. Davis, 81 Ky. 34. turned on the same agreement. Where a lessee of land contracts See, also, Re Hall, 15 Ir. Ch. 287, a in his own name, but one-half the similar case. 66 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. *22 into partnership with them, and bring in 1,000/. in cash, and 1,000Z. in goods, and that the partnership should date retro- spectively from the 1st of January ; but the defendant re- served to himself the option of determining at any time within twelve months from that day whether he would be- come a partner or not. The defendant advanced the 2,0001., and several other acts were done in execution of the agree- ment; but within the twelve months the defendant declared his option not to become a partner, and it was held that he never did in fact become one, and that he had not incurred any liability as if he had. (./) In Price v. Groom, (g) a debtor's business was carried on by him under an inspectorship deed, which authorized the trustees to carry on the business themselves, and to take the profits, if they chose. Their interest in the profits, however, did not commence until the debtor's interest determined ; and it was held that whilst he carried on the business there was no partnership between him and them, they and [*22] he not being entitled to the profits at the same time. Share not yet taken. — In Howell v. Brodie, (A) the de- fendant, intending to become a partner in a scheme for making and letting out a market-place, advanced consider- able sums of money, and ultimately, on the completion of the market, took one-seventh share in it. It was sought to make him liable for the expense of erecting the market, on the ground that he was a partner with those by whom the plaintiff had been employed; but the court held that there was no partnership between them and the defendant until the share was taken by him. 1 (/) Compare this case with Jef- (g) 2 Ex. 542. ferys v. Smith, 3 Russ. 158. There (h) 6 Bing. N. C. 44. A. agreed to purchase B.'s share in i On the formation of a partner- afirin; A. acted and was treated ship for the purpose of speculating as a partner by the other members, in Indian lands, certain rules and but afterwards i - escinded the con- regulations were adopted at a meet- tract with B. : it was held that a ing of the company, by which the partnership nevertheless subsisted number of shares was fixed, and between A. and B.'s copartners. his interest assigned to each part- 67 *22 CONTKACTS OF PARTNERSHIP. [BOOK I. Share of profits expected in lieu of salary.— In Burnell v. Hunt, (?) an agreement was come to between A. and B. that A. should take premises and purchase machinery and materials to carry on the business of a silk lacemaker, and that B. should manage the business and receive half the protits as soon as any accrued, and should, in the meantime, be paid 2Z. a week. It was held that so long as the 21. per week continued payable there was no partnership, (k) Partnership articles to he drawn up.— Persons who agree to be partners may be partners although they con- template signing a formal partnership deed and never sign it. (I) But if they are not to be partners until they sign formal articles of partnership, and if they do not so act as to waive the performance of such condition, they will not be partners until it has been performed. Where, how- ever, two persons agreed to become partners from a subse- quent day, upon certain terms to be embodied in a deed to be executed on that day, it was held that the partnership began on the day mentioned, although the deed was not exe- cuted until afterwards, and although alterations were made ner; and by which it was required it, was liable as a partner, at least that a specified sum should be paid as to third persons who afterwards on each share; that relinquish- dealt with the company, although ments should be executed to the he was not present at the meeting, company of all interests in any of did not pay the instalment on the the lands embraced in their con- share assigned to him, did not exe- tract; that any service should be cute the relinquishments, and did performed for the company in not perform any of the services re- furtherance of its business when quired by the rules and regulations, called upon by a resolution of the Grady v. Robinson, 28 Ala. 289. company ; and that a failure to (i) 5 Jur. 650, Q. B. The real comply with any of these requisi- point here was whether B. had any tions, or any violation of good faith interest in the goods, which he to the interest of the company, clearly had not, and would not should forfeit to it the interest of have had even if there had been the person so offending. Held, that profits to divide. a person to whom an interest in the (7c) See, too, Ex parte Hickin, 3 company was assigned at this meet- De G. & S. 662. ing, and who assented within a (1) As in Syers v. Syers, 1 App. reasonable time afterwards to take Ca. 174. 63 CH. I, SEC. I.] NATURE OF CONTRACT DETERMINED. "*23 in it immediately before its execution, (m) In this case, however, the ^parties did in fact commence [*23] business as partners on the day named, and it was wholly immaterial (as regarded the question before the court) what the terms of the partnership were. (b) Application of the principle to promoters of companies. Promoters of companies not partners. — Promoters of companies are not partners; they are, it is true, engaged in a common object, and that object is ultimately to share profits; but their immediate object is the formation of a company, and they are only in. the position of persons who intend to become partners after the company is formed. It Avas indeed said, in Holmes v. Higgins, (n) that the project- ors of a railway were partners, they being associated for the purpose of procuring the act of parliament necessary to form the company and subscribing mone} 7 'for that purpose; and, in Lucas v. Beach, (o) the court held that persons associated for the purpose of passing a turnpike act, and who had sub- scribed for shares in the proposed road, were partners. But in each of these cases the real question was whether the plaintiff was entitled to recover from the defendants, by virtue of any implied contract, any remuneration for serv- ices rendered by him for the joint benefit of himself and them. It was held that he was not ; and if the court had likened the case to one of partnership, instead of saying that the plaintiff and the defendants were partners, there would be no room for criticism. As it is, however, the cases are apt to be considered, and are sometimes cited, as authorities for the proposition that persons engaged in passing through parliament bills to authorize the establishment of a com- pany are partners. In Lucas v. Beach it was asked in argu- (m) Battley v. Lewis, 1 Man. & (n) 1 B. & C. 74. Gr. 155 ; and see Wilson v. Lewis, (o) 1 Man. & Gr. 417. Barnett v. 2 id. 197. Compare Ellis v. Ward, Lambert, 15 M. & W. 489, was a 21 W. R. 100, where the intended similar case, partners quarreled before they signed the deed. 63 *21 CONTRACTS OF PARTNEHSHIP. [BOOK I. ment, "What is there to prevent a number of individuals from entering into a partnership with the limited object, in the first instance, of procuring an act of parliament, and with an ulterior object in view when the act has passed?" (p) The answer is, that to call persons so asso- ciated partners is to ignore the difference between a contract of partnership and an agreement to enter into such a con- tract, to confound an agreement with its result, and [*24r] to hold persons to be partners ^although they have not yet acquired any right to share profits. It cannot be contended that the right to share profits would, under such an agreament as is supposed, accrue before the passing of the act; and if not, how can the parties to such an agree- ment be partners at an earlier period? Later authorities. — For these reasons it is conceived that Holmes v. Higgins and Lucas v. Beach cannot be relied upon as authorities on the question of partnership or no partnership, (q) Nor are they on this point reconcilable with later decisions. In Eei/nell v. Lewis, {r) and Wyld v. Hopkins, (r) in which the question was much discussed, it was held that no partnership subsisted between persons who had subscribed for the purposes of forming a railway com- pany and of procuring the necessary act of parliament; and this, which is the correct doctrine, was also distinctly stated by Lord Cranworth, in Capper's Case, (s) and has been rec- ognized on many other occasions, (t) Subscribers to inchoate companies not partners. — It is a necessary result of the principles established above that (p) See, too, per Lord Brougham (t) e. g., Batard v. Hawes, and in Hutton v. Upfill, 2 H. L. C. G91. Batard v. Douglas, 2 E. & B. 287; (q) They are authorities for the Walstab v. Spottiswoode, 15 M. & point actually decided, viz., that a W. 501; Forresters. Bell, 10 Ir. person doing work for the joint Law R. 555; Hutton v. Thompson, benefit of himself and others can- 3 H. L. C. 161; Bright v. Hutton, r.ot recover compensate n from 3 H. L. C. 368; Hamilton v. Smith, them by virtue of any implied 5 Jur. N. S. 32; Norris v. Cottle, promise to pay him. 2 H. L. C. 647; Besley's Case, 3 (r) 15 M. & VV. 517. Mac. & G. 287; Tanner's Case, 5 (,s) 1 Sim. N. S. 178. De G. & S. 182. 70 CH. I, SEC. II.] NATURE OF CONTRACT DETERMINED. *25 persons associated for the purpose of forming a joint stock company are not partners, (u) They clearly are not part- ners in the company to be formed ; and for reasons already given they cannot be considered as members of a partner- ship formed to start the compan}'. Conditional contract.— It also follows from the same principles, that if persons enter into an agreement to take shares in a company formed for certain purposes and upon certain conditions, those persons are not bound to take shares in a company formed for different purposes or upon other conditions ; and are not partners in such a company, unless they have accepted shares therein and *pre- [*25] eluded themselves from objecting to the variation of their agreement. A leading case on this subject is Fox v. Clifton, (x) which, with other cases of the same class, will be found in the volume relating to companies and contribu- tories. Section II. — Of Quasi-partnerships. Quasi-partnerships. — Having now examined the nature of those agreements which are, properly speaking, contracts of partnership, it is necessary to advert to the doctrines by virtue of which persons who are not partners at all are, nevertheless, made subject to liabilities as if they were partners. In other words, it is necessary to explain what it is that creates a #wasi-partnership, or, as it is usually called, a partnership as regards third persons. 1 This will involve an examination of the liability which a person incurs: 1. By sharing profits. 2. By holding himself out as a partner. (u) Wood v. Argyll, 6 Man. & either he must have permitted his Gr. 928; Hamilton v. Smith, 5 Jur. name to be used as one of the firm, N. S. 32 ; Hutton v. Thompson. 3 thereby holding it out as a security H. L. C. 161 ; Bright v. Hutton, id. to the community, or he must have 568. participated in the profit or loss. (x< 6 Bing. 776. Osborne v. Brennan, 2 Nott & M. 1 To charge a defendant as a part- 427. ner one of two things s necessary: 71 *25 CONTRACTS OF PARTNERSHIP. [BOOK I. 1. By sharing profits. In the year 1775, De Grey, C. J., laid down the proposi- tion in Grace v. Smith, {y) that " every man who has a share of the profits of a trade ought also to bear his share of the loss." Eighteen years afterwards, viz., in 1793, this doctrine was discussed and approved in the celebrated case of Waugh v. Carver ; (s) and ever since that time until 1860 it was considered as clearly established, that, by the law of England, all persons who shared the profits of a business incurred the liabilities of partners therein, although no part- nership between themselves might have been contemplated. 1 too > Clegs v ' Cle SS> 3 (d) Co. Lit. 2006, and 172a. Giff. 322, ante, p. 57, note (p) ; (e) The remedy at law was by an Carter v. Home, 1 Eq. Ca. Ab. 17, action of account and not by an as to sharing benefits derived by action for money had and received, one. Thomas v. Thomas, 5 Ex. 28; (i) Co. Lit. 2006; Martyn v. Jacobs v. Seward, L. R. 5 H. L. 464. Knowllys, 8 T. R. 145. See the (/) Teasdale v. Sanderson, 33 last sentence in the judgment. 137 *60 CONTRACTS OF PARTNERSHIP. TlJOOK I. co-tenant from committing destructive waste, (k) but not from [*60] cutting timber in a *proper and judicious manner ; nor, it is con- ceived, from mining in a similar way. (Z) 10. If one of several joint tenants, or tenants in common of a house, lays out money in necessary repairs, his outlays will be taken into account upon a partition or sale ; (m) but he cannot enforce contribution by an action for damages (n) " unless he and his co-tenants are under some duty or obligation to others to repair : " see the authorities in notes (m) and (n) ; nor has he any lien on the house or on the interest of his co-tenants therein for their shares of the expense, (o) 2. With respect to chattels. Co-owners of chattels. — Ships are by far the most important chat- tels usually owned in common. But great care is required in applying the rules which govern ships to other chattels ; for, in the first place, the principles enforced in the court of admiralty differ in many im- portant respects from those by which the ordinary courts are governed ; and, in the next place, the stringent provisions of the ship registry acts have frequently rendered it impossible to apply to ships those general doctrines of equity which are applicable to other kinds of property. 1 See, as to injunctions to restrain waste, Twort v. Twort, 16 Ves. 128. (fc) Arthur v. Lamb, 2 Dr. & Sm. 428; Wilkinson v. Haygarth, 12 Q. B. 837. (I) Arthur v. Lamb, 2 Dr. & Sm. 428; Wilkinson v. Haygarth, 12 Q. B. 837. (to) See Leigh v. Dickson, 15 Q. B. D. 60. (it) Ibid., where the passage in Co. Lit. 200a, and F. N. B. 162, and the old writ of contribution, are explained. (o) Re Leslie, 23 Ch. D. 252. See, also, Kay v. Johnston, 21 Beav. 536 ; Teasdale v. Sanderson, 33 Beav. 534. 1 To the point that joint owner- ship of a vessel, in the absence of special agreements, does not create a partnership, see Hopkins v. For- syth, 14 Pa. St. 34 ; Ward v. Bode- inan, 1 Mo. App. 272; Holmes v. U. S. Ins. Co. 2 John. Cas. 329 ; Phillips v. Purington, 15 Me. 425. See, also, Macy v. De Wolf, 3 Woodb. & M. 193. As to what acts of part owners of a vessel will render them liable to be sued as partners, see Bacon v. Cannon, 2 Houst. 47. The interest of all the joint own- ers are not barred by a sale on execution against part. Hopkins v. Forsyth, 14 Pa. St. 34. Where a part owner of a steam- boat, built by partners, sells the whole of the boat, and delivers possession to the purchaser, a sale by the other owner is the sale of a chose in action merely, or a right to sue, which could not be trans- ferred to the vendee; and such vendee will not be protected by a court of equity as an innocent bona fide purchaser, but the first sale will be confirmed, as more money was obtained by the sale than would have been got under 138 CH. I, SEO. VI.] NATURE OF CONTRACT DETERMINED. *G1 For the purpose, therefore, of avoiding error in pursuing the present subject of inquiry, ships must be distinguished from other chattels. 1. Ships. — A considerable portion of the law which regulates the mutual rights and obligations of part owners of ships is based upon the assumption that it is particularly for the benefit of the public that ships should not lie idle, (p) Hence it is that a majority of the part owners of a ship can employ her against the will of the others, upon giving them security to the value of their shares; (q) a course which cannot be taken by a majority of the part owners of any other chattel. Where a ship is sent on a voyage by some of the part owners against the will of the others, the dissentients are not entitled to share the profits of the voyage, (r) nor are they liable to contribute to its losses, (s) But where a ship is employed by all the part owners, or by some of them, but not against the will of the others, (t ) they all share her gross earnings, and contribute to the expenses incurred in obtaining them ; l and in such a case there is little, if any, difference between the account which is taken between the part owners, and that which would be taken if they were actually partners. *Before any division of profits amongst the part owners, the gross |*61] freight or earnings of the adventure must be applied in payment of the expenses of the voyage yielding them, including the costs of repairs and outfit for that voyage, (w) Lord Hardwicke went further, and held that each part owner had a lien on the ship itself, and on the proceeds of its sale, for the balance due to him from the other owners on the joint account, and had a right to a sale of the ship as if it were part- nership property, (x) But Lord Eldon thought this was going too far ; and he reversed Lord Hardwicke's decision ; and it is now settled that there is no such lien or right, (y) Lord Eldon's view, however, has not prevailed in America, (z) a sale by decree, and the proceeds l See, however, Macy v. De Wolf, will be applied to settling up the 3 Woodb. & M. 193. partnership affairs. Hewitt v. Stur- (w) Green v. Driggs, 6 Ha. 395; devant, 4 B. Mon. 453. Lindsay v. Gibbs, 22 Beav. 522, and (p)SeeMaclachlanontheLawof 26 id. 51, and 3 De G. & J. 690; Merchant Shipping, p. 90, ed. 2. Alexander v. Simms, 18 Beav. 80, (q) Ibid. p. 94. and 5 De G. M. & G. 57. (r) Anon. 2 Ch. Ca. 36 ; Davis v. (x) Doddington v. Hallet, 1 Ves. Johnston, 4 Sim. 539. S. 497, and see A.-G. v. Borrodaile, (s) Horn v. Gilpin, 1 Ambl. 255. 1 Price, 148, and per Lord Eldon, Davis v. Johnston, 4 Sim. 539, is not 2 V. & B. 243. opposed to this. The marginal note, (tj) Ex parte Young, 2 V. & B. however, is calculated to mislead. 242 ; Ex parte Harrison, 2 Rose, 76. (t) Strelly v. Winson, 1 Vern. 296, (z) See Story on Part. § 444. as corrected by Horn v. Gilpin, 1 Amb. 255. 139 *62 CONTRACTS OF PARTNERSHIP. [BOOK I. 2. Other chattels. — Passing from ships to other chattels, the position of a part owner not in possession was at law most disadvantageous; for, 1, he could not obtain possession otherwise than by taking the thing itself if he had the chance; (a) 2, he could not obtain the value of his share unless the thing had been actually or virtually destroyed ; (6) and 3, these rules applied as well to the produce of the thing as to the thing itself, (c) Whether, if one tenant in common of a chattel sold it, the other had any remedy at law for his share of the money produced by the sale was doubtful, (d) l unless the sale had conferred a good title to the entirety upon the purchaser, when a remedy clearly existed, (e) The obligation of a co-owner of a chattel to account for the gain which he might have derived from its use may therefore be said to have been hardly, if at all, recognized at law. In equity the case was other- wise ; but it is surprising how little direct authority there is upon the subject of co-ownership if the decisions relating to ships and the wind- ing up of partnerships are excluded from consideration. The principles, however, upon which these decisions are based may safely be applied to other cases if the anomalies introduced by the ship registry acts, and the fact that the rights of partners and those claiming under them depend upon contract, are borne in mind. When the profits derived by one part owner of a chattel are not at- tributable to his own industry and exertions, but are simply what he receives from others in respect of it (e. g., dividends of stock, or shares, or money paid for hire) — or where the profits are produced in the [*62] ordinary ^courses of nature (e. g., by breeding) — there is no diffi- culty in coming to the conclusion that his co-owners are entitled to make him account to them for their shares of what their property may have produced. Further, when one co-owner of a chattel derives gain from its use, and those gains are attributable, mainly, or in part, to his own industry and exertions, justice to the other owners and to him requires either that the gains made by him shall be shared by all, they making him a proper allowance for his trouble and reimbursing him his expenses ; or that he shall be allowed to keep the whole profits, paying the other owners a proper sum for the use of their property. Of (a) Lit. § 323, and see 2 Wms. Ex. 145; Barton v. Williams, 5 B. Saund. 47o. & A. 395 ; and Williams v. Barton, (6) Co. Lit. 200 ; Jacobs v. Sew- 3 Bing. 139. ard, L. R. 5 H. L. 464. * See, generally, Cooley on Torts, (c) See Fennings v. Grenville, 1 455, where the subject will be Taunt. 241, where a whale had found fully considered. been converted into blubber and (e) See Jacobs v. Seward, L. R. 5 oil. H. L. 464, and the cases in the last (d) See Heath v. Hubbard, 4 note, and per Willes, C. J., in East, 110; Mayhew v. Herrick, 7 Wheeler v. Horn, Willes, 208. C. B. 229; Morgan v. Marquis, 9 140 CH. I, SEC. VI.] NATURE OF CONTRACT DETERMINED. *G2 these two modes of adjusting the rights of the parties the first seems to be most in accordance with the course usually adopted in analogous cases. Notwithstanding, therefore, the little direct authority upon the point, the writer ventures to submit that, as a general rule, where one owner of a chattel derives gain from its use, he is, independently of any contract, bound to account to the other owners for their respective shares, he being allowed all proper charges and expenses. (/) Co-owners of patents and copyrights.— Cases may, nevertheless, arise in which justice may be done by allowing each co-owner to make what he can and to keep what he may get. This may occur where the chattel is such that each co-owner can, in fact, enjoy his rights to the full extent without the concurrence of the other owners (e. g., where the chattel is a patent for an invention). In the case of a patent, belonging to several persons in common, each co-owner can assign his share and sue for an infringement, (g) and can also work the patent himself, and give licenses to work it, and sue for royalties payable to him for its use ; (h) and it is now settled that he is entitled to retain for his own benefit whatever profit he may derive from the working, although it is perhaps still open to question whether he is not liable to account for what he receives in respect of the licenses. {%) l The mutual right of co-owners of a copyright, not being partners, have not been much discussed ; but it has been decided that a license to represent a dramatic entertainment, granted by one only of several co-owners of the copyright in it, does not bind the others, nor prevent them from recov- ering their shares of the penalties imposed by statute on persons who infringe the copyright, (k) (/) See the judgment of V.-C. > Persons may be joint owners of Wigram in Green v. Briggs, 6 Ha. a patent-right and not be partners 395^ and Strelley v. Winson, 1 in the business of selling interests Vern. 297. See, also, 1 Story's Eq. in the same. Manhattan B. Mfg. Jur. § 466. Co. v. Sears, 1 Sweeny (N. Y.), 426. (g) See Dunnicliff v. Mallett, 7 C. See, also, Parkhurst V. Kinsman, 1 B. N. S. 209, and Walter v. Lava- Blatchf. 488. ter, 8 id. 162. As to tenants in The mere conveying an undi- common of trade-marks, see Dent vided interest in a patent to each v. Turpin, 2 J. & H. 139. of four parties does not make ' (h) Sheehan v. Great East Rail, them partners, yet if they agree to Co. 16 Ch. D. 59. make a common interest to sell, (i) Mathers r. Green, 1 Ch. 29, re- and divide the net proceeds equally, versing S. C. 34 Beav. 170. The a partnership is created. Penni- same point was discussed, but not man v. Munson, 26 Vt. 164. decided, in Hancock v. Bewley, (k) Powell v. Head, 12 Ch. D. Johns. 601. See, also, Russell's 686. See some observations on the Patent, 2 De G. & J. 130; Horsley indivisibility of copyright in 4 H. v. Knighton's Patent, 8 Eq. 475. L. C. 992. 141 ^2 CONTRACTS OF PAETNERSHIP. [BOOK avo a If part owners of an ordinary chattel cannot agree who ought to hs it, or how it ought to be employed, the only remedy (if any) appear to be by an action for an injunction or a receiver and a sale. (I) (I) See Jud. Act, 1873, § 25, cl. 8. 142 ♦CHAPTER II. [*63] OF THE CONSIDERATION OF A CONTRACT OF PARTNERSHIP. Consideration for a partnership. — Agreements to share profits, like all other agreements, require to be founded on some consideration in order to be binding. Any contribu- tion in the shape of capital or labor, or any act which may result in liability to third parties, is a sufficient considera- tion to support such an agreement, (a) l (a) See The Herkimer, Stewart's Adrc. Rep. 23; Anderson's Case, 7 Ch. D. 75. !The consideration of the con- tract of partnership in this case consists of the mutual covenants and promises of the copartners, and the acts they respectively engage to perform. Hence, although the business of the partnership was the buying and selling of slaves, it cannot be said that the considera- tion of the partnership contract was the purchase of slaves. Belcher v. Conner, 1 S. C. 88. When an agreement to become stockholders in specified shares in a partnership, and to pay the amount subscribed, is signed by a number of persons, with the num- ber of shares and the aggregate amount thereof annexed to their names, though no promise is named in the agreement, in effect each party promises to the others to pay the amount ; and the promises of the others are a consideration for the promise of each, and the par- ties are sufficiently definite. Kirn- mins v. Wilson, 8 W. Va. 584. When such subscribers organize a company and appoint a treasurer, and, by agreement of the parties, one makes a promissory note, pay- able to the person appointed treas- urer, for his unpaid share, the previous liability and agreement constitute an adequate considera- tion for the note. Kimmins v. Wilson, supra, A contract of partnership be- tween two physicians, F. and S., provided that they should - divide equally the gross receipts of their joint business in a certain town; that F. might be absent six months in the year, or for any remaining portion of the year, and S. might be absent when he pleased, but neither, if absent more than two days at a time, should have any part of the income derived from the business of the other during that time ; that, before either party should withdraw from the contract, any horse or carriage purchased for the joint business should be sold, and the loss sustained by the party withdrawing; that if F. should withdraw and cease to do 143 *Ci CONTRACTS OF PARTNERSHIP. [BOOK I. A bona fide contract of partnership is not invalidated by the unequal value of the contributions of its members, for they must be their own judges of the adequacy of the con- sideration of the agreement into which they enter. As observed by Vice-Chancellor Wigram, "If one man has skill and wants capital to make that skill available, and another has capital and wants skill, and the two agree that the one shall provide capital and the other skill, it is per- fectly clear that there is a good consideration for the agree- ment on both sides, and it is impossible for the court to measure the quantum of value. The parties must decide that for themselves." (b) Profits to be shared, but losses not. — It often happens that persons agree that all profits shall be shared ratably, and, nevertheless, that all losses shall be borne by some or one of them exclusively. Such an agreement is not neces- sarily invalid as a nudum pactum; for it is nothing more than an agreement providing, amongst other things, that some or one of the partners shall indemnify the others against losses; and the very fact that these latter become, or agree to become, partners is quite sufficient consideration to give validity to a contract that they shall be indemnified. Such agreements appear, moreover, to be reasonable [*6i] where the partners ^indemnified leave the whole management of the concern to their copartners, (c) business in that town, without prise, without anything being fur- having shared the benefit of the nished by the latter to accomplish business at all, then S. should pay the object of the copartnership, is him a certain sum. Held, that, so without mutuality, and accord- long as the contract was executory, ingly is void. Mitchell v. O'Neale, there was no evidence of any con- 4 Nev. 504. sideration for the agreement to pay (b) Dale v. Hamilton, 5 Ha. 393. the sum mentioned, apparent on (c) Geddes v. Wallace, 2 Bli. 270, the face of the contract itself, is an instance of such an agree- Frothingham v. Seymour, 118 Mass. ment. However, in Brophy v. 489. Holmes, 2 Moll. 1, the L. C. Hart A copartnership agreement in expressed an opinion that an agree- which one of tho partners promises ment between A. and B. that A. to give the other partner an equal should advance capital, that B. interest in the profits of the enter- should be sole manager, and that 144 CH. II.] CONSIDERATION. *65 Of the return of premiums. Premiums. — It frequently happens, when one person is admitted into partnership with another already established in business, that it is agreed that the incoming partner shall pay the other a premium, *. e., a sum of money for his own private benefit. Such an agreement is valid; and if the premium is not duly paid it may be recovered by an action, provided the plaintiff has been ready and willing to take the defendant into partnership as agreed, (d) The consideration for the premium is not only the crea- tion of a partnership between the person who takes, and him who parts with, the money, but also the continuance of that partnership; and if a person on his entry into a partnership pays a premium and then the partnership is determined sooner than was expected, the question arises whether any, and if any what, part of the premium ought to be returned? In order to determine this point it is necessary, in the first place, to ascertain whether the agreement for the pre- mium was or was not tainted with fraud. Premiums returnable in cases of fraud.— If a person has been deluded into becoming a partner by false and fraudulent representations, and has paid a premium, he may take one of two courses, viz. : either abide by the contract and claim compensation for the loss occasioned by the fraud, which he may do in taking the partnership accounts; or he may disaffirm the contract and thereby entitle himself to a return of the whole of the money he has paid, (e) And *in a case of this sort, in the event of the bank- [*65] they should divide the profits (d) Walker v. Harris, 1 Anstr. equally, but that all losses should 245, where it was held that no fall on B., was, as regards the last partnership deed need be ten- stipulation, void, as being nudum dered. pactum; and his lordship thought (e) See infra, pp. 65 et seq.; and that under such an agreement the as to rescinding for fraud, infra, losses should be born equally. But book iii, c. 10. see, as to such partnerships, ante, pp. 15 et seq. Vol. I— 10 145 *65 CONTRACTS OF PARTNERSHIP. [BOOK I. ruptcy of the defrauding partner, the amount of the pre- mium paid to him is a debt provable against his estate in competition with his separate creditors. (/) Return of premium where the consideration for it lias failed. — But if the agreement by virtue of which the part- nership was entered into, and the premium became pay- able, is not tainted by fraud, then the proper mode of dealing with the premium is not so easy to determine. In the first place, assuming the partnership to have been in fact created, it is clear that there has not been a total fail- ure of consideration for the premium; and, consequently it cannot be recovered as money paid for a consideration which has failed, (g) In the next place, persons who enter into partnership know that it may be determined at any time by death and other events; and unless they pro- vide against such contingencies, they may fairly be con- sidered as content to take the chance of their happening, and the tendency of modern decisions is to act on this principle, (h) Apportionment of premium when partnership ceases sooner than was expected. — On the other hand, if a per- son receives a premium for taking another into partnership, which is to endure for a certain time, and then himself does anything which determines the partnership before that time has elapsed, he may be fairly considered as having pre- cluded himself from insisting on his strict right to retain or be paid his whole premium. Moreover, where there has been no misconduct, a premium paid for a partnership for a term of years has been held apportionable in the event of a pre- mature determination of the partnership by an unforeseen (/) Ex parte Turquand, 2 M. D. (g) See Taylor v. Hare, 1 Bos. & & D. 339. And see Bury v. Allen, Pul. N. R. 260. 1 Coll. 589. The case of Ex parte (h) Whincup v. Hughes, L. R. 6 Broome, as reported in 1 Rose, 69, C. P. 78 ; Ferns v. Carr, 28 Ch. D. is opposed to this; but see on that 409. See, also, Akhurst v. Jack- case the note in 1 Coll. 598, and the son, 1 Swanst. 85; Bond v. Mil- observations at the end of the judg- bourn, 20 W. R. 197. ment, id. p. 607. 146 CIT. II.] CONSIDERATION. *QQ occurrence. The fact that the consideration for the pre- mium has partially failed has been considered sufficient to render it inequitable to retain or obtain payment of the whole premium. (?') *The principles applicable to cases of this descrip- [*66'] tion are not even yet well settled ; nor are the de- cisions upon them easy to reconcile. The following rules are, however, submitted to the reader as guides on this subject: 1. Partnerships at will. — Where a partnership is en- tered into for no specified time, and there is no agreement for a return or an apportionment of the premium in the event of an unexpected determination of the partnership, no part of the premium is returnable on the happening of such event. A case of fraud must be dealt with on its own demerits; and a person taking another into partnership for no definite time cannot, as soon as he has received the pre- mium, dissolve the partnership and retain what has been paid as the consideration for it. (k) But laying aside fraud, and supposing there to be nothing except a partnership created for no specified time and determined soon after its creation, it is difficult to hold that it was in fact entered into for a longer time, and that the person who came in, paying a premium, has not got all for which he stipulated. (I) 2. Partnerships for a time — Agreements to dissolve. — Where a partnership is entered into for a specified time, and is determined prematurely, the first matter for consid- eration is whether the parties have come to any agreement on the dissolution. If they have, and if they have also (i) Similar views have been taken 78, and Ferns v. Carr, 28 Ch. D. with, respect to what is right in 409. cases of a similar kind, arising on (k) Featherstonhaugh v. Turner, the death of a solicitor who has 25 Beav. 382. See, also, Hamil v. been paid a premium by an arti- Stokes, Dan. 20, and Burdon v. cled clerk. See Hirst v. Tolson, 2 Barkus, 4 De G. F. & J. 42, per L. Mac. & G. 134 ; Ex parte Bayley, J. Turner. 9 B. & C. 691. But these cases (Z) See per Lord El don in Tatter- have been since disapproved. See sail v. Groote, 2 Bos. & P. 134. Whincup v. Hughes, L. R. 6 C. P. 147 *67 CONTRACTS OF PARTNERSHIP. [BOOK 1. provided for the premium, it must be dealt with according to the agreement; but if the agreement on dissolution is silent with respect to the premium, the inference is that the parties did not intend to deal with it, nor to vary their rights to it under the original agreement for its pay- ment, (m) [*67] *Where, however, no agreement is come to on the dissolution, then the cause of dissolution must be con- sidered. Premature termination, (a) By death.— Death is a contingency which all persons entering into partnership know may unexpectedly put an end to it. If, therefore, they do not expressly guard against this risk, they may rea- sonably be treated as content to incur it; and, if death should unexpectedly happen, no return of premium not ex- pressly provided for can, it is apprehended, be demanded, (n) But even in this case, if a person knows himself to be in a dangerous state of health, and conceals that fact, and induces another to enter into partnership with him, and to pay him a premium, and shortly afterwards dies, the fraud so prac- ticed will entitle the partner paying the premium to a return of part of it; and he can obtain such return in an action for a partnership account : he need not rescind the contract in toto. (o) (b) By bankruptcy. — Bankruptcy of the partnership as distinguished from the bankruptcy of one of the partners cannot, it is apprehended, be a ground for apportioning a premium; for it is a contingency which every one may fairly be taken as contemplating, (p) But the bankruptcy of a part- ner receiving a premium is a ground for its apportionment if he was embarrassed when the partnership commenced, (m) See Lee v. Page, 30 L. J. Ch. (?i) See Whincup v. Hughes, L. R. 857, and 7 Jur. N. S. 768. A mere 6 C. P. 78; Ferns v. Carr, 28 Ch. D. consent to dissolve may leave all 409. questions of this sort open, as in (o) Mackenna v. Parkes, 36 L. J. Astle v. Wright, 23 Beav. 77 ; Wil- Ch. 366, and 15 W. R. 217. son v. Johnstone, 16 Eq. 606; Bury (p) See Akhurst v. Jackson, 1 v. Allen, 1 Coll. 589. Swanst. 85. 148 C H. n.] CONSIDERATION. *68 and this fact was not known to his copartner; (q) but not if it was. (/•) What the effect would be if he became em- barrassed after the commencement of the partnership has not been decided. The bankruptcy of the partner paying the premium cannot entitle him or his trustee to a return of any part of it, unless he has been made bankrupt by his copartner who has received the premium, (s) (c) Lunacy. — The lunacy of a partner causing a dissolu- tion would perhaps be considered as a ground for apportion- ing the premium. *(d) Disagreements. — Disagreements between the [*68] partners resulting in a dissolution have given rise to much difficulty. The tendency of modern decisions is to apportion the premium in these cases not only where neither partner is to blame, (t) but a fortiori where the partner receiving the premium has so misconducted himself as to give the partner paying it a right to have the partnership dissolved ; (u) and it matters not that the latter may him- self not be altogether free from blame; (aj) nor is the rule altered by the fact that the partners have consented to dis- solve since the institution of legal proceedings, (y) Misconduct. — But where a partner has paid or agreed to pay a premium, and has so misconducted himself as to in- duce the court to dissolve the partnership on that ground, he cannot recover any part of the premium if he has paid (q) Freeland v. Stansfeld, 2 Sm. was the party to receive the pre- & G. 479. mium. (r) Akhurstu. Jackson, 1 Swanst. (x) Atwood v. Maude, 3 Ch. 369, 85. • where the partner paying the pre- (s) As in Hamil v. Stokes, Dan. mium was plaintiff; Astle v. 20, and 4 Price, 161. In this case Wright, 23 Beav. 77 ; Pease v. it is to be observed that the con- Hewitt, 31 Beav. 22. Compare tract of partnership was not re- Airey v. Borham, 29 Beav. 620, scinded on the ground of fraud. where nothing was returned. (t) Atwood v. Maude, 3 Ch. 369. (y) Bury v. Allen, 1 Coll. 589; (u) Builock v. Crockett, 3 Giff. Astle v. Wright, 23 Beav. 77; Wil- 507. See, also, Rooke v. Nisbet» son v. Johnstone, 16 Eq. 606. Com- 50 L. J. Ch. 588, where the part- pare Lee v. Page, 7 Jur. N. S. 768, ner dissolving was in fault, and and 30 L. J. Ch. 857. 149 *69 CONTRACTS OF PARTNERSHIP. [BOOK I. it, nor avoid paying it if it is due and it is still unpaid, (s) In Wilson v. Johnstone, (a) Y.-C. Wickens held that the mis- conduct must be such as to amount to a complete repudia- tion of the contract of partnership; but he did not lay down any rule for determining what misconduct amounts to such a repudiation, and the statement in the text is in accordance with the latest decision on the subject, (b) 3. Amount to be returned.— There is no definite rule for deciding in any particular case the amount which ought to be returned. The time for which the partnership was entered into, and the time for which it has in fact lasted, are the most important matters to be considered; but [*69] other circumstances must often be taken into *ac- count in order to decide what is fair between the parties. (84 selves the evidence relied on, where no written agreement is forthcoming, is their conduct, the mode in which they be received. Bonnafee v. Fenner, 14 Miss. 20; Hastings v. Hopkin- son, 28 Vt. 108; Price v. Hunt, 59 Mo. 263 ; Field tt Tenney, 47 N. H. 513. Iu an action to charge two per- sons as partners upon a note exe- cuted by one of them in the firm name, parol evidence is admissible to show that at the time of their executing a contract with the plaintiff, on which such note was based, it was understood between the parties that no partnership was formed, but not to show that one of them was not to be bound by the performance of the contract. Piano Mfg. Co. v. Frawley, 68 Wis. 577; S. C. 32 N. West. Kep. 768. W. entered into a parol contract of copartnership with defendants, but when the articles were pre- pared the son of W. was, at his request, permitted to sign them, upon his assurance that he was to remain the real party to the agree- ment, the name of the son being used only to conceal his association with the firm from public knowl- edge. The conditions of the parol contract were fully performed, while the son's connection with the partnership was in fact treated as a nullity. Held, that W. was liable as a partner. Wilson tt Lovelace, 49 Iowa, 558. Mere general reputation, rumor or hearsay is inadmissible to prove the existence of a partnership or mem- bership therein. Sager v. Tupper, 38 Mich. 258 ; Taylor v. Webster, 39 N. J. L. 102 ; Tomlin v. Goldsmith, 40 Ga. 221 ; Southwick tt McGov- ern, 28 Iowa, 533 ; Sinclair v. Wood, 3 Cal. 98; Brown v. Crandall, 11 Conn. 92 ; Earl v. Hard, 5 Blackf . 248; Grafton Bank v. Moore, 13 N. H. 99 ; McGuire tt, O'Hallaran, Hill & D. Supp. 85 ; Inglebright v. Hammond, 19 Ohio, 337; Scott v. Blood, 16 Me. 192; Halliday v. M'Dougal, 20 Wend. 81 ; Lockridge v. Wilson, 7 Mo. 560; Carter v. Douglass, 2 Ala. 499; Smith v. Griffith, 3 Hill, 333; Joseph v. Fisher, 3 Scam. 137; Carlton v. Ludlow Woolen Mills, 27 Vt. 496 ; Bowen v. Rutherford, 60 111. 41; Central R. R. Co. v. Smith, 76 Ala. 572; Humes v. O'Bryan, 74 id. 64; Cleveland v. Duggan, 2 Tex. App. (Civ.) 65 ; White tt Whaley, 1 id. 41; Waldo v. Beckwith, 1 New Mex. 97 ; Boyd v. Ricketts, 60 Miss. 62; Cook tt Slate Co. 36 Ohio St. 135; S C. 38 Am. Rep. 568 (reports of mercantile agency inadmissible) ; Brown v. Rains, 53 la. 81; Buz- ard v. Jolley, 6 So. West. Rep. (Tex.) 422; Marble v. Lypes, 82 Ala. 322; Rabbitte v. Orr, 3 S. W. Rep. (Ala.) 420; Wilson v. Colman, 1 Cranch, C. C. 408. See, also, Campbell v. Hastings, 29 Ark. 512; Turner v. Mcllhaney, 8 Cal. 575. See, however, Halliday v. McDou- gall, 22 Wend. 264. However, in Benjamin v. Covert, 47 Wis. 375; S. C. 55 id. 157, it was held that, in an action to charge two persons as partners, if plaintiff shows that a partnership existed between them at a certain time, and was known to the public at the place of business of the firm, and that no notice of dissolution was ever given, he may further show that, at the time of t the trans- 179 '8± CONTRACTS OF PARTNERSHIP. [book I. have dealt with, each other, and the mode in which each has, with the knowledge of the other, dealt with other peo- ple. This can be shown by books of account, by the testi- mony of clerks, agents and other persons, by letters and admissions, and, in short, by any of the modes by which facts can be established, (r) l action in question, such partner- ship, to plaintiff's knowledge, was generally reputed to continue, and that the debt was contracted in the firm name, and upon the credit of the firm, though after a dissolution in fact, it being then for the jury- to determine whether the retiring partner had so acted after the dis- solution as to hold himself out as still a partner, and has thus rendered himself liable. So held where the firm name was the same as the individual name of the per- son who continued the business, and where the plaintiff had never done business with the firm during its actual existence. See, also, Gaffney v. Hoyt, 10 Pac. Rep. 34; Humes v. O'Bryan, 74 Ala. 74; Rizer v. James, 26 Kan. 221 ; Boyd v. Ricketts, 60 Miss. 62. While evidence of general repu- tation may not be admissible to prove a partnership, still it may be competent upon the issue as to whether a member of a firm is a dormant partner. Metcalf v. Offi- cer, 2 Fed. Rep. 640. The reports of a commercial agency are not admissible to prove a partnership, unless knowledge, or means of knowledge, of them is brought home to the party at- tempted to be charged. Cook v. Slate Co. 36 Ohio St. 135 ; S. C. 38 Am. Rep. 568; Campbell v. Hast- ings, 29 Ark. 512 ; Bonnell v. Cham- berlain, 26 Conn. 487. Evidence that a person was fre- quently seen in the counting-house of another, transacting business as principal, and that he was gener- ally supposed, believed and under- stood to be a partner in the house of such other, was held insufficient to prove that he was a partner with such other person. Bryden v. Tay- lor, 2 Har. & J. 396. Evidence that it was not gener- ally known, in the place of the partnership, that the defendant was a partner of a certain house is admissible to the jury, where the question is whether the plaintiff knew that the defendant was a partner, in order to make him liable. Bernard v. Torrance, 5 Gill & J. 383. (r) As to the presumption arising from the joint retainer of solicitors, see Robinson v. Anderson, 20 Beav. 98, and 7 De G. Mc. & G. 239; Webster v. Bray, 7 Ha. 159; McGregor v. Bainbrigge, id. 164. And for cases in which a partner- ship has been inferred from a num- ber of circumstances, see Nerot v. Burnand, 4 Russ. 247, and 2 Bli. N. S. 215 ; Jacobsen v. Hennekinius, 5 Bro. P. C. 482 ; Nicholls v. Dowding, 1 Stark. 81 ; Peacock v. Peacock, 2 Camp. 45. See, as to obtaining evi- dence from the solicitors of the al- leged partners, Williams v. Mudie, 1 Car. & P. 158. 1 The books of a firm are evidence of the partnership as between the 180 OH. IV.] EVIDENCE. *85 ^Informal documents. — An agreement for a part- [*85] nership may be evidenced by informal documents; members. Feick v. Barbour, 64 lar time, it will be presumed to con- Pa. St. 120; McCall v. Moscowitz, 10 N. Y. Civ. Proc. 107; South- mayd's Appeal, 6 Cent. Rep. 555. So in an action by creditors against the partners. Champlin v. Tilley, 1 Brunner, 71; S. C. 3 Day, 303. See, however, Robbins v. Warde, 111 Mass. 244, where, however, the suit was by a creditor. The sign upon a store in which the business of an alleged firm was done was " S. & Co.," and an en- try in the books of S., reciting the formation of a partnership, was made by his alleged partner with- out the knowledge or consent of S. Held, insufficient, as against S., to sustain a finding that a partner- ship existed. Lindsay v. Guy, 57 Wis. 200. When an administratrix of one estate brought a claim against an- other estate, and the defense gave evidence tending to show that the decedents were in partnership, and that defendant's intestate kept the accounts, a book of accounts in the latters handwriting, and containing entries purporting to have been made in the presence of the other partner, was held ad- missible as tending to prove the co- partnership and the condition of the accounts. Howard v. Patrick, 38 Mich. 796. See, also, Hale v. Brennan, 23 Cal. 511. The books of a firm may be given in evidence to fortify or discredit a witness who swears to the part- nership. Moyes v. Brumeaux, 3 Yeates, 30. The existence of a partnership having been proved at the particu- tinue until a dissolution is proved, and to have been on equal terms until the contrary is shown. Rey- bold v. Dodd, 1 Harr. 401; Irbey v. Brigham, 9 Humph. 750; Butler v. Henry, 3 S. W. Rep. 878 ; Mann v. Clapp, 1 Tex. App. (Civ.) 249. In an action upon a note an issue arose whether a partnership existed between the defendants. Partnership articles were offered in evidence. Held, that they were not admissible, because they only showed that a partnership ex- isted in January, 1857, when the note was made in October, 1858, as it was proper that the jury should have the articles before them that they might decide when the part- nership terminated. Pursley v. Ramsey, 31 Ga. 403. Where one was a partner in a firm in 1855 and 1857, but alleged that in 1856 he was not a partner, and that his withdrawal was evi- denced by a deed which was lost, and it turned out that the deed had been destroyed by himself, and he answered delusively about it, and it appeared that he had acquiesced in certain acts of his partner, treat- ing him as a partner, held, that he was to be considered as a part- ner for the year 1856 also. Clem- ents v. Mitchell, 6 Jones' Eq. 171. Upon the question whether the defendants are partners here, evi- dence that they were partners in Europe is not so entirely irrelevant that its admission vitates the ver- dict. Martin v. Ehrenfels, 24 111. 187. Evidence that A. was a partner 181 *85 CONTRACTS OF PARTNERSHIP. [book as, for example, an unsigned memorandum or draft agree- ment acted on by the partners, (*) l or a series of letters. in a certain company in September, and, as such, signed contracts re- citing a contract made by the com- pany in March, is not competent in order to charge him upon a debt contracted by the company in July. Butler v. Henry, 3 S. W. R. 878. The existence of a partnership does not depend upon the fact that each partner has, in all things, complied with his agreement; if the contract has been made, prop- erty and labor contributed, and the partnership business com- menced, there is a partnership until legally dissolved. Cogswell v. Wilson, 11 Oreg. 371. Evidence to show a continuance of a partnership after it has been dissolved, with notice to the par- ties, must be as satisfactory as that required to show its establishment. Alcott v. Strong, 9 Cush. 323. Proof that alleged partners acted as such before and after the date of a note is proper evidence to be left to the jury in determining the fact of partnership at that time. Gilbert v. Whidden, 20 Me. 367. "Where it is sought to be proved in au action that a certain part- nership existed at a given time, evidence of its existence some three months after that time is ad- missible in connection with other evidence, and will be considered. Fleshman v. Collier, 47 Ga. 253. See, however, Ruhe v. Burnell, 121 Mass. 450, where it was held that, on the issue whether two per- sons were partners at the date of an alleged sale of goods to them, evi- dence of writings thereafter exe- cuted between them, and of one's declaration to the other, is inad- missible. Persons entering into an agree- ment in carrying on a plantation may afterwards modify or rescind it ; but a rescission or modification of it cannot be proven by loose declarations or conversations, es- pecially when their subsequent con- duct accords with their original contract. Autrey v. Frieze, 59 Ala. 587. (s) Baxter v. West, 1 Dr. & Sm. 173 ; Worts v. Pern, 3 Bro. P. C. 548 (vol. i, p. 270, in folio edit.); Williams v. Williams, 2 Ch. 294. See, as to mutual insurance socie- ties, ante, p. 80, note (a). 1 A written agreement which alone would not constitute a part- nership may yet be put in evi- dence, together with proof that the parties have considered it to constitute one, and have acted ac- cordingly. Williams v. Soutter, 7 Iowa, 435. A contract is not competent evi- dence to fix the liability of one as a partner, unaccompanied by evi- dence that the plaintiff knew of its existence and gave credit upon the face of it. Denithorne v. Hook, 112 Pa. St. 240; S. C. 17 Weekly Not. Cas. 369. Notice of dissolution and of the continuance of the business by one partner is admissible to show who conducted the business after dis- solution and in whose possession the firm property remained. Kelly v. Murphy, 70 Cal. 560; S. C. 12 Pac. Rep. 467. In a suit against four defend- ants as copartners it is the privi- 182 OH. IV.] EVIDENCE. *85 Moreover, an agreement between A. and B. may disclose a trust for C, and be evidence for him and show him to be a partner, (t) A prospectus or advertisement issued by one person and assented to b} r another is abundant evidence of a contract upon the terms contained in the prospectus or advertise- ment, (u) Acts of iilleged copartner. — When it is sought to make a person liable as if he were a partner, evidence must be adduced of his acts, or of what has been done by other people with his knowledge or with his consent, 1 and the lege and duty of the plaintiffs to establish the connection of each one of the defendants with the firm, and for this purpose an un- signed partnership agreement be- tween the defendants, and in the handwriting of one of them, is admissible against him. Beall v. Poole, 27 Md. 645. After receiving the services of one as a partner, and recognizes him as such for several years, it is too late to set up either the non- payment of his portion of the capital stock, or the non-execution of articles of partnership, as proof that no partnership existed. Camp- bell v. Whitley, 39 Ala. 172. In an action against several as copartners, parol evidence to show that articies of copartnership ex- ecuted by them were to go into operation only upon a contingency was held inadmissible. Dix v. Otis, 5 Pick. 38. The fact that C & S. entered into a written contract with F. & P. to excavate a certain tunnel is not conclusive evidence that S. was a member of the association known as C. & Co., who did actually prosecute the work on the tunnel ; C. & Co. may have been subcon- tractors under C. & S. Sargent v. Collins, 3 Nev. 260. In proving articles of associa- tion, where there is no provision or condition as to the number who shall sign it to make it valid, it is sufficient to prove the signatures of those associates who are parties to the suit against whom it is of- fered in evidence. Beach v. Van- dewater, 1 Sandf. 265. (t) As in Dale v. Hamilton, 2 Ph. 266. See, also, Murray v. Flavell, 25 Ch. D. 89 ; Page v. Cox, 10 Ha. 163. (w) Fox v. Clifton, 6 Bing. 797, 8. 1 A partnership between the de- fendants may be implied from cir- cumstances. The manner in which the busi- ness is conducted, authority exer- cised by an alleged partner in buy- ing and selling, and all the facts and circumstances, are admissible in proof of partnership. Wood v. Samuels, 1 Tex. App. (Civ.) 519; Manville v. Parks, 7 Colo. 128;, Kelleher v. Tisdale, 23 111. 495; Gil- 1 pin v. Temple, 4 Harr. 190; Whit- ing v. Leakin, 66 Md. 255. See Ligare v. Peacock, 109 111. 94. Where, in an action against a partnership, the existence of the partnership may be inferred from 183 *85 CONTKACTS OF PAKTNEKSHIP. [BOOK I. plaintiff must prove a holding out to himself. (%) The statements and acts of the defendant's alleged copartners indirect evidence, a finding of that fact will not be disturbed for want of direct evidence thereof. Hen- shaw v. Root, 60 Ind. 220. Plaintiff seeking to establish co- partnership by parol with one de- ceased will, however, be held to strict proof. Kelly v. Devlin, 47 N. Y. Super. Ct. 555 ; S. C. 58 How. Pr. 487. The fact that persons conduct business jointly as copartners is prima facie evidence of the exist- ence of a copartnership between them. Forbes v. Davison, 11 Vt. 660; Winslow v. Cheffelle, 1 Harp. Eq. 25; McMullan v. Mackenzie, 2 G. Greene, 368; Bonner v. Camp- bell, 48 Pa. St. 286. Evidence of specific acts of inter- meddling in the affairs of a firm is admissible to prove a partnership ; but the general evidence that a person has intermeddled is not ad- missible. Lewis v. Post, 1 Ala. 65. Partnership or joint liability be- tween two persons living together upon a farm may be inferred from evidence that one of them has been in the habit of ordering goods for their common use, labor and ma- terials for the improvement of buildings in their joint occupancy, and mechanic's work ordinarily in- cident to farming operations, and that the debts contracted by him have in various instances been paid by the products of the farm, in the sale of which both participated; and from the admission of one of them that on some occasions the other had authority to act for both, although he reserved the right to disavow such acts as he might deem disadvantageous. Farr v. Wheeler, 20 N. H. 569. On the trial of an action against B., upon an issue as to whether one W. and B. were partners, there was evidence that W. and B. were together, and had certain stock to- gether; that B. carried a note to bank to be discounted, with a written request from W. that it should be done; that B. said that the money was for himself and W. ; that they were buying stock to- gether, and that the money was to be used in buying stock; that B. afterwards referred to the debt he and W. owed in bank, etc. Held, that the jury were warranted in finding that a partnership existed between W. and B. Dobson v. Chambers, 78 N. C. 334. In an action against a member of an unincorporated company to recover for services rendered to the company from August 10 to De- cember 12, 1868, there was evidence that the articles of association of the company provided that none but stockholders should be trustees ; that in 1867 the defendant was chosen trustee, and subsequently acted as such; that he had said that he had an interest in the com- pany, having subscribed for stock in the name of a firm of which he was a member, and paid an assess- ment on this stock; that he was "off and on" at the office of the company ; that the company began business in August, 1868; that in December, 1868, the defendant said he was an officer of the company, (a;) Dickinson v. Valpy, 10 B. & C. 140, ante, p. 42. 184 CH. IV.] EVIDENCE. *85 are no evidence against him until he and they are shown to have been connected in some way with each other; x and authorized to make contracts for it; and that in November and De- cember, 1868, he wrote to one of the original subscribers of the com- pany as to what "we" wanted to do about the affairs of the com- pany. The defendant did not offer any testimony to explain this evi- dence. Held, that a jury would be warranted in finding that the defendant was a member of the company at the time the plaintiff's services were rendered. Taft v. Warde, 111 Mass. 518. See, also, Scranton iu Rentfrow, 29 Ga. 341. In an action by A. against B. & C, as the owners, in partnership, of a race-course, for work done on the course, C. denied, under oath, the partnership; and after proof of a written agreement between B. & C. for the construction of the course at joint expense and profit, A. offered to prove that although he was employed by B. to do the work, yet that C. was often pres- ent, giving orders and directions concerning it, and shared the profits of the course after it was completed. Held, that the proof was admissible as tending to estab- lish the partnership, and their joint liability as partners for the work. Perry v. Randolph, 14 Miss. 335. Evidence that one was often in the store conducted in the name of another; that he bought, sold and bartered goods there ; inspected the books and made charges, and went to Boston and bought goods for the store, — is evidence to prove that he was a partner, he having for- merly been a partner, and the old sign of the firm still remaining upon the building. State v. Wig- gin, 20 N. H. 449. Where a party has been a mem- ber of a defendant firm, but has erased his name from the articles, it is competent for plaintiff to show that without pretense of agency he continued active in the business, sued out a writ in the name of all the defendants for injury to their joint property, and swore to a sim- ilar bill in chancery, and held a deed of an undivided portion of the partnership mill. Carlton v. Lud- low, 28 Vt. 504. Where two persons, as intended partners, purchase a stock of goods, and agree to give their notes there- for, and, on receiving the goods at the time fixed, one of them, the other being absent, signs and de- livers the notes in their joint names, the notes thus given are firm notes, and the agreement and its consummation present a strong prima facie case of partnership in an action against them on a con- tract made by one of them with an- other party in the name of the firm. Drennan v. House, 41 Pa. St. 30. In an action, in which it was sought to charge defendants as partners owning a mill, the plaint- iff introduced evidence tending to show that one of them exercised authority about the mill. Held, that, by waj" of rebutting the infer- ence that he was interested as a copartner, it was proper to show that others gave like directions; but not to prove his statements dis- claiming such interest. Sager v. Tupper, 38 Mich. 259. iSee Campbell v. Hastings, 29 185 *85 CONTRACTS OF PARTNERSHIP. [book I. it is obviously reasoning in a circle to infer a partnership from acts of theirs, unless he and they can be connected by other evidence admissible against him. (y) Ark. 512; Gay v. Fretwell, 9 Wis. 186 ; Hudson v. Simon, 6 Cal. 453. In an action of assumpsit against several persons as partners, a part of the defendants filed a plea deny- ing the partnership; and on the trial the court permitted to be read in evidence a paper in the hand- writing of a former clerk of the association, purporting to contain a list of stockholders in a mercantile association, in which list the names of the defendants appeared. No proof was offered that the defend- ants had any knowledge of such paper, or that it was in the hand- writing of the clerk of the defend- ants. Held, that the paper was in- admissible in evidence. Yocum v. Benson, 45 111. 435. In a suit against F. & S., two millers, as partners, to recover for wheat sold them, F. offered to show by sundry witnesses, who were cus- tomers at the mill, that they were in the habit of selling grain to S., but that they never knew that F. had anything to do with buying the grain, or that the partnership extended to that business. Held, that this evidence was inadmissible. Folk v. Wilson, 21 Md. 538. Where a partnership was at- tempted to be proved between two persons as innkeepers, etc., by the admission of one of the alleged partners, and by the course and circumstances of their business, and their joint use of the property connected with the tavern-house, held, that an assignment of the tavern furniture and accounts, by the other alleged partner to a third person, for the payment of the as- signor's debts, might be given in evidence, as tending to rebut the testimony on the part of the plaint- iff, and to show that the alleged partners had not been in the joint receipt of the alleged income of the tavern. Callender v. Sweat, 14 Vt. 160. When it was proved that A. was in a store and sold goods for cash and on credit, in order to raise the presumption that A. was a partner, held, that it was proper to ask wit- ness if it is not customary for clerks to sell in this way as well as principals. Perry v. Butt, 14 Ga. 699. When a witness has stated what he has seen and heard which tended to show the existence of a partnership, he may be asked what he has seen and heard to the effect that there was no partnership, in order to prove negatively that he had no information or knowledge that there was no partnership. Conklin v. Barton, 43 Barb. 435. The possession of a note by one of two joint payers is not evidence that the payers are partners, but is simply prima facie evidence of the title disclosed upon the face of the note. Eyhiner v. Feickert, 92 111. 305. Two persons signing a note jointly is no evidence of a partner- fa) See 1 Tay. Ev. § 753, edit. 8; Edmundson v. Thompson, 2 Fos. & Fin. 564, and 8 Jur. N. S. 235; Grant v. Jackson, Peake, 268. 186 CH. IV.] EVIDENCE. *86 Registers, etc.— Upon this principle it has been held that the registers of ships are no evidence of ownership ex- cept as against the persons upon whose affidavit the entries in the registers were made; (3) that entries in the office in Somerset House for licensing stage-coaches are no evi- dence to prove that the persons named in the license are the owners of the coach ; (a) and that the acts, letters and statements of one promoter of a company are no evidence against another, who cannot be shown to have authorized them, (b) *It need scarcely be observed that the principle now [*86] under discussion does not apply to exclude the testi- mony of a person deposing to the existence of a partner- ship between himself and another. Such testimony was not excluded even before the alteration of the law relating: to the competency of witnesses, (c) and there is no pretense for excluding such testimony now. If a partnership is alleged to exist between A. and B., and A. is called to prove it, and he denies it, then, although the person calling A. as a. witness cannot adduce evidence to show that his testi- mony is generally unworthy of credit, yet such person may ship between them. Hopkins v. fraudulently, and for the purpose Smith, 11 Johns. 161. of covering the property of one Evidence that legal services were from his creditors, is not ad mis- rendered in the joint names of an sible. Thomas v. Moore, 71 Pa. St. attorney-at-law and another per- 193. son is not sufficient to prove a (z) Tinkler v. Walpole, 14 East, partnership between them, and 226 ; Flower v. Young, 3 Camp. 240. thus defeat an action for such serv- And see Mclver v. Humble, 16 East, ices brought by the attorney alone. 174. Bishop v. Hall, 9 Gray, 430. (a) Str other v. Willan, 4 Camp. Evidence that a person was "in- 24 ; Weaver v. Prentice, 1 Esp. 369. terested" in a certain business is (b) See Drouet v. Taylor, 16 C. B. not sufficient to prove a partner- 671; Burnside v. Dayrell, 3 Ex. 224; ship. Levy v. McDowell, 45 Tex. Watson v. Charlemont, 12 Q. B. 220. 856. This will be again alluded to In a question of partnership evi- in a subsequent chapter, dence that the connection between (c) Hall v. Curzon, 9 B. & C. 646 ; alleged partners had been formed Blackett v. Weir, 5 id. 385. 187 *87 CONTRACTS OF PARTNERSHIP. [BOOK I. adduce other evidence to show that the partnership denied by the witness does in point of fact exist, (d) Acts of copartners after prima facie evidence of part- nership has been given. — Further, it is to be observed that, notwithstanding the principle above stated, after sufficient evidence has been given to raise a presumption that several persons are partners, then the acts of each of those persons are admissible as evidence against the others for the pur- pose of strengthening the prima facie case already estab- lished. Thus, in Norton v. Seymour, (e) in order to prove a partnership between the defendants Seymour and Ayres, the plaintiff called a witness who deposed that Ayres had in conversation admitted the partnership, and then the plaintiff gave in evidence a circular and invoice issued by Seymour, and headed Seymour & Ayres, and stating that the busi- ness would in future be carried on in those names. Ayres objected to the admissibility of this document, there being, as she contended, no evidence to connect her with it; but the court held it to be admissible; for, before the document was put in, evidence of a partnership had been given, and the document tended to confirm that evidence. So, in Nicholls v. Dowding, (/) prima facie evidence of a part- nership having been given, the declarations of one of the defendants were inquired into for the purpose of binding the others, and it was held that such evidence was admissi- ble, a foundation for it having been previously laid, (g) [*87] *Proof of articles, etc., not necessary. — A person may be made liable as if he were a partner without the proof of any partnership articles or deed which he may have executed, (h) And although, in order to prove an actual partnership, it may be necessary by the law of some (d) Ewer v. Ambrose, 3 B. & C. (h) Alderson v. Clay, 1 Stark. 746. 405, where a person was proved to (e) 3 C. B. 792. be a member of a company with- (/) 1 Stark. 81. out the production of the com- (<7) See, too, Alderson v. Clay, 1 pany's deed. Stark. 405. 188 CH. IV.] EVIDENCE. *87 other country to show that some formality has been ob- served, the non-observance of that formality will not pre- vent persons who in fact trade as partners from being so treated in this country in questions arising between them and third parties, (i) Admissions. — An admission made by any one that he is a member of a particular partnership is evidence of that fact against him; (&) 1 and such an admission renders it un- (t) Shaw v. Harvey, Moo. & Mai. 22; Thornton v. Kerr, 6 Ala. 823; 526 ; Maudsley v. Le Blanc, 2 C. & Teller v. Patten, 20 How. 125 ; Reed P. 409, note. v. Kremer, 111 Pa. St. 482; S. C. 17 (k) Sangster v. Mazarredo, 1 Weekly Not. Cas. 233; Central R. Stark. 161 ; Studdy v. Saunders, 2 R Co. v. Smith, 76 Ala. 572 ; Bever- D. &Ry. 347; Clay v. Langslow, 1 idge v. Hewitt, 8 Bradw. 467; Moo. & Mai. 45. Winchester v. Whitney, 138 Mass. 1 The separate admission or dec- 549 ; Filley v. McHenry, 71 Mo. 417 ; laration of each member of an Flournoy v. Williams, 68 Ga. 707; alleged partnership is competent White v. Whaley, 1 Tex. App. evidence against him to prove the (Civ.) 41 ; Johnston v. Clements, 25 partnership, but not against the Kan. 376 ; Rimel v. Hayes, 83 Mo. other supposed members if absent 200 ; Roth v. Kirchoff , 12 Mo. App. at the time it was made, unless sub- 599 : Burpee v. Smith, 4 Pugs. & B. sequently assented to or ratified by (N. B.) 408; Clark v. Taylor, 68 them. See Taylor v. Henderson, 17 Ala. 453 ; Chambers v. Groat, 63 la. Serg. &R. 453; Palmer v. Pinkham, 342; Cleveland v. Duggan, 2 Tex. 33 Me. 32 ; Thomas v. Wolcott, 4 Mc- App. (Civ.) 65 ; Humes v. O'Bryan, Lean, 365 ; Fenn v. Timson, 4 E. D. 74 Ala. 64; Brown v. Rains, 53 la. Smith, 276; Wallace v. Berger, 14 81 ; Scull's Appeal, 19 Weekly Not. Iowa, 183; Chaffee v. Rentfroe, 32 Cas. 70; S. C. 5 Cent. Rep. 869; 7 Ga. 477; Vance v. Funk, 2 Scam. Atl. Rep. 588; Sanquoit's Appeal, 263; Grafton Bank v. Moore, 14 9 Atl. Rep. 77 ; Ackroyd's Appeal, N. H. 142 ; Currier v. Sillioway, 1 9 Atl. Rep. 77 ; Johnston's Appeal, Allen, 19; Gordon v. Bankard, 37 id. 76; McCall v. Moscowitz, 10 111. 147 ; Drennen v. House, 41 Pa. N. Y. Civ. Proc. 107 ; Ford v. Ken- St. 30; Cross v. Langley, 50 Ala. 8; nedy, 64 Ga. 537; Rogers v. Suttle, Converse v. Shambaugh, 4 Neb. 19 Bradw. 163; First Nat. Bank v. 376; Smith v. Collins, 115 Mass. Conway, 67 Wis. 210; King v. Bar- 388; Porter v. Wilson, 13 Pa. St. bour, 70 Ind. 35; Swann v. San- 641 ; McPherson v. Rathbone, 7 born, 4 Woods, C. Ct. 625 ; Oppen- Wend. 216; Yancey v. Mariott, 1 heimer v. Clemmons, 18 Fed. Rep. Sneed, 28; Cowan v. Kinney, 33 886; Bott v. Stoner, 2 Penny. Ohio St. 422 ; Johnson v. Gallivan, (Pa.) 154. See, also, Nicholaus v. 52 N. H. 143; Smith v. Hulett, 65 Thielges, 50 Wis. 491; McLeod v. 111. 495; Nelson v. Lloyd, 9 Watts, Ballard, 84 N. C. 515; Scully's Ap- 189 '87 CONTRACTS OF PARTNERSHIP. [BOOK I. necessary, for the purpose of fixing him with the liabilities of a partner, to show that he executed any document whereby he became a partner. (I) l peal, 11 East. Rep. (Pa.) 713; En- twistle v. Mulligan, 12 Atl. Rep. (Pa.) 766; Buzard v. Jolly, 6 S. W. Rep. (Tex.) 422. See, also, Jenkins v. Barrows, 35 N. W. Rep. (la.) 510. Signing of contracts by one per- son in his own name and that of another, as partners, incompetent as against such other in the absence of knowledge on his part of such act. Buzard v. Jolly, 6 So. West. Rep. (Tex.) 422. Application of certain members of a firm for a revenue license, which purports to set out the names of the members of the firm, but which is not made in the pres- ence of the other members, is not competent evidence to prove their membership. Boyd v. Ricketts, 60 Miss. 62. A published notice of dissolution stating that the party would con- tinue the firm under a certain name, admitting certain other named parties to interests from date, held, not to warrant the in- ference that such parties had been admitted as partners. Scully's Appeal, 11 East, Rep. (Pa. St.) 713. The acts and declarations of a deceased person when in possession of goods in carrying on business, so far as they were explanatory of his possession as indications whether the goods were his own or claimed by him as partner with another, are admissible (not as against another alleged to be a partner) as part of the res gestae in proof of partnership. Humes v. O'Bryan, 74 Ala. 64. Upon the issue of partnership, conversations and declarations of the plaintiff to third persons in the ordinary course of business, which were reported by the plaintiff to the defendants, are part of the res gestce and properly admissible in evidence. McCall v. Moscowitz, 10 N. Y. Civ. Proc. 107. Declarations of a partner made after dissolution are admissible to rebut presumption of partnership arising from the use of the firm name. Nichols v. White, 41 Hun (N. Y.), 152. The declarations of one partner that another person is a partner, while not admissible to establish the fact of partnership, are admis- sible for the purpose of proving that goods were sold in the faith that such person was a copartner. Greenwood v. Sias, 21 Hun(N. Y.), 391. Where evidence has been given sufficient to raise a presumption of the continuance of the partnership after an alleged dissolution, the acts and admissions of one mem- ber of the firm are admissible as against the others to strengthen the prima facie case so established. Gilchrist v. Brande, 58 Wis. 184. The fact that on some occasions one party speaks of another, en- (Z) Harvey v. Kay, 9 B. & C. 356 ; see Tredwen v. Bourne, 6 M. & W. Ralph v. Harvey, 1 Q. B. 845. And 461. 1 See Wallace v. Berger, supra. 190 CH. IV.] EVIDENCE. '87 Admissions, however, are not necessarily conclusive, and little weio-ht ought to be attached to them if it is shown gaged by him and paid for his serv- ices by a share of the profits, as his partner, there being no ques- tion of estoppel involved, is not conclusive as to question of part- nership ; and other proof showing clearly that there was no partner- ship, there is no error in court tak- ing that question from the jury. Nicholaus v. Thielges, 50 Wis. 491. Admissions by one partner that when certain mortgages were given partnership had been termi- nated are no evidence of that fact as against the other partners. Southern White-Lead Co. v. Haas, 35 N. West. Rep. (la.) 494; S. C. 33 id. 657. One partner dealing in the name of a firm cannot deprive another partner of his interest in the firm assets by representations to others with whom he deals that such per- son is not a member of the firm, where the latter neither authorizes nor knows of such statements. Rush o. Thompson, 112 Ind. 158. Before the admissions of one can be received against the other, inde- pendent proof of the partnership must be made. Cross v. Langley, supra; Converse v. Shambaugh, supra. Such admissions to third parties are not admissible on the issue whether the alleged partners rep- resented themselves as partners to a person of whom they were alleged to have borrowed money as such partners. Smith v. Collins, supra. But the successive acts and declarations of each of several de- fendants, showing their partner- ship, are equivalent to a joint dec- laration to that effect by all, and may be given in evidence. Haughey v. Strickler, 2 Watts & S. 411 ; Welsh v. Speakman, 8 id. 257. In a suit against L. as a partner in a firm known by the name of L. & B., letters written in the name of the firm by L., and entries made by him in the books of L. & B., are prima facie admissible in evidence to charge him as partner. Lewis v. Post, 1 Ala. 65. Plaintiffs advised defendants of a purchase made by one A. claim- ing to be a partner in their firm. Defendants answered, promising to settle plaintiff's account, saying, " we will make the arrangement," etc. ; " we thought it settled before, as we sent the money by A. last winter," etc. Held, that these ad- missions, as tending to show a part- nership, were sufficient to entitle the plaintiffs to recover. Cleghorn v. Johnson, 11 Iowa, 292. Although the bare declarations of B. & C. that A. was their partner are insufficient to charge him, their acknowledgments that articles of copartnership existed between them and A., which they refused to produce upon the trial, after due notice, were held evi- dence from which a jury might reasonably infer that, if produced, they would have shown the fact of a partnership. Whitney v. Ster- ling, 14 Johns. 319. An inventory filed in court by one partner after the death of the other partner, purporting to con- tain the assets of the partnership, is no more than an implied admis- sion of the partnership, made after 191 '87 CONTRACTS OF PARTNERSHIP. [BOOK I. that they were made under erroneous suppositions. This seems to have been the true ground of the decision in the its dissolution, and is not evidence either to prove the partnership as against the decedent, or to bind the creditors of the partnership as against the individual creditors of the decedent. Bond v. Nave, G2 Ind. 506. If defendants, sued as copart- ners, introduce in evidence a re- ceipt taken by them in their copartnership name of the plaint- iffs, this is an admission of the co- partnership. McFarland v. Lewis, 2 Scam. 344. In an action on an account stated, evidence that the defend- ants admitted that they were doing business as partners should be allowed to go to the jury, even if not specifically confined to the time within which the account accrued. Sager v. Tupper, 38 Mich. 258. Where it appears from the plead- ings that the several defendants were jointly employed by the plaintiff, the admission of one of the defendants is competent to charge the other defendants as his copartners, and it is immaterial whether such admission is made in a judicial proceeding or otherwise. And objection to such evidence on the ground of want of previous proof of partnership is removed by subsequent testimony tending to prove that fact. Fogerty v. Jordan, 2 Robt. 319. The defendant's acknowledg- ment of the partnership of the plaintiff i is sufficient evidence of such partnership. Bisel v. Hobbs, 6 Blackf. 479. In an action against A. and B. as partners, A. was defaulted, and B. pleaded the general issue. Held, that letters written by A., in the partnership name, could not be read in evidence by B., to show that he was not a partner with A., but that the letters of the plaintiff were good evidence to show that he did not consider B., as a partner. Champlin v. Tilley, 3 Day, 303; S. C. 1 Brunner, 71. In determining whether a part- nership as to third persons exists, all the declarations, by word or act, of the supposed partners, the rights they have exercised, and every circumstance attending the transaction, may be proved by third persons, and must be consid- ered in determining what is the true relation between the supposed partners. Pierson v. Steinmyer, 4 Rich. 309. The acts and declaration of a person not a partner are not ad- missible to charge him as a part- ner without showing that they were brought home to the plaint- iff's knowledge. Fitch v. Harring- ton, 13 Gray, 4G8. Where two persons purchased a mill and house, which they com- menced to remove, but, before the removal, one of them died, held, that the general declarations of the deceased that they had bought the mill in partnership, no terms of partnership being stated, did not afford satisfactory evidence of the existence of a partnership, as such declarations might well con- sist with there being nothing more than a tenancy in common. Greg- ory v. Martin, 78 111., 38. 192 en. rv.] EVIDENCE. *88 much debated case of Vice v. Anson, (m) There the de- fendant supposed herself to be a shareholder in a mine; she had in private letters, and in private society, written and spoken of herself as a shareholder; she had received cer- tificates stating that her name was registered in the act- book of the mine, and that she was entitled to share the profits of it; and lastly, she had paid deposits on her shares. But Lord Tenterden held that she had not in point of fact any interest in the mine, and that, as she never represented to the plaintiff that she was a shareholder therein, she could not be made liable to him simply because of her erroneous suppositions and admissions. *The inconclusive nature of an admission was dis- [*88] tinctly recognized in Ridgway v. Philip, (n) where Parke, B., said: "It frequently happens, in cases where the The plaintiff sought to charge a party as a partner in running a line of stages, and gave evidence of his declaration at different periods; at the earliest admitting the partnership, and at the latter denying it. The plaintiff further offered to show that, at the time of the defendant's denial, another line had been started on the same road, and that in consequence of the competition the charge for passen- gers had been greatly reduced. Held, that this latter testimony did not impair the weight of the declaration last made by the de- fendant, but, being irrelevant, was consequently rightly rejected. An- derson v. Snow, 9 Ala. 247. The testimony of a witness that he has paid notes to the firm, in which were the individual names of the members, and the declara- tions of the members made prior to the institution of the suit, are evi- dence for parties to show a part- nership between them. Woods v. Quarles, 10 Mo. 170. Under the plea of non est factum, involving the existence of a part- nership, the declaration of the de- fendant to third persons, before the execution of the instrument in question, that no partnership ex- isted, is not evidence. What the defendant said when the note was offered to him for payment would be evidence, such declaration being a part of the res gestae. England v. Burt, 4 Humph. 399. (m) 7 B. & C. 409, and Moo. & M. 98. See, on this case, Owen v. Van Uster, 10 C. B. 318, and qu. if it is law ; for though the defendant had no legal interest in the mine, was she not entitled as a partner to share the profits obtained by work- ing the mine? and what more was necessary to make her liable to the supplier? (n) 1 Cr. M. & R. 415. Vol. 1 — 13 193 *88 CONTRACTS OF PARTNERSHIP. [BOOK I. liability of persons as partners comes in question, that juries are induced to give too much effect to slight evidence of admissions. An admission does not estop the party who makes it; he is still at liberty, as far as regards his own in- terest, to contradict it by evidence." In that case one of the defendants was allowed to explain an admission made by him to the effect that he was in partnership with the others, (o) So where the freighters of a ship addressed a letter to the captain, instructing him, on his arrival at the Cape, to call upon th.Mr managing partner, Mr. W. G. An- derson, it was held competent to the freighters to show that Mr. Anderson was not a partner of theirs, (p) Even where a person has executed a deed describing him as a partner the admission is not necessarily conclusive against him. (q) An admission by one person that he and another are partners may be open to the explanation that they are partners to some limited extent, or with respect to some particular transaction, but not to the extent or with respect to the business necessary to sustain the case made against him. (/') Retrospective articles, etc.— Again, persons may agree that as between themselves the partnership between them shall be deemed to have commenced at some time before its actual commencement. Proof of such an agreement as this would not enable a stranger to make the parties to it liable to him as partners for what took place before the partnership in point of fact began. As to third parties (o) See, too, Newton v. Belcher, have been had he been a partner. 12 Q. B. 921 : Newton v. Liddiard, See Mant v. Mainwaring, 8 Taunt, id. 925, as to the admissions made 139 ; Brown v. Brown, 4 id. 752. by promoters of companies as to (q) See Radcliffe v. Rushworth, their liabilities. 33 Beav. 485 ; Empson's Case, 9 Eq. (p) Brock bank v. Anderson, 7 597. Man. & Gr. 295. The real question (r) See Ridgway v. Philip, 1 Cr. was whether Anderson was an in- M. & R. 415; and De Berkom v. terested witness, which he would Smith, 1 Esp. 29. 194 CH. IV.] EVIDENCE. *89 such an agreement is res inter alios acta, which does not affect them in any way; {s) and it is obvious that an admission of -the existence of a partnership might be [*89] explained as true only in this limited sense; in which case the admission might be worth nothing. Usual evidence of partnership. — The following is the kind of evidence usually had recourse to for the purpose of proving the existence of an alleged partnership or quasi- partnership: Agreements in writing and deeds,! showing the right to share profits. If the signature to a deed is proved its due execution is inferred, {t) (s) Wilsford v. Wood, 1 Esp. 183; Vere v. Ash by, 10 B. & C. 288. This subject will be more fully ex- amined in book ii, ch. 2, § 3. 1 A mortgage deed of a partner- ship relating to partnership busi- ness, executed by one of the firm, in the firm name, is evidence com- petent to be given to prove the exist- ence of the partnership, though the deed was for a purpose foreign to the particular transaction or con- tract in the suit, where such evi- dence is sought to be introduced. Crow ell v. Western Eeserve Bank, 3 Ohio St. 406. The defendant made a written lease of a stable to certain persons, described in the lease as "S. F. Ripley & Co." Previous to this the plaintiffs, being respectively pro- prietors of separate lines of stage- coaches, agreed to hire and keep a stable in common for their coach horses ; they took possession of the stable, and furnished money in cer- tain agreed proportions to pay the rent to the defendant and the hostler's wages. While thus in pos- session of the stable they made certain repairs on it, under an agreement with the defendant that he should pay for them. Held, that there was competent evidence that the pla'ntiffs were partners under the firm name of S. F. Rip- ley & Co. Held, also, that it was no objection to the partnership that it was limited to this single trans- action; and that it was no objec- tion to the verdict that the court declined to instruct the jury whether the plaintiffs would be liable for the rent in case the stable should be untenantable. Ripley v. Colby, 23 N. H. 438. Defendant G. and one D. , in his life-time, were equal copartners in the hotel business, and valuable property employed therein, being also, at the death of the latter, seized and possessed of a leasehold interest in certain premises de- mised for hotel purposes for a defi- nite term of years, which had not then expired. On the death of the decedent the partnership affairs were left in an unsettled condition, with large assets and liabilities, the former of which, however, were greatly in excess of the latter. De- cedent left, as next of kin, three (t) Grellier v. Neale, 1 Peake, 198. 195 *89 CONTRACTS OF PARTNERSHIP. [book To prove who constituted a firm of A. & Co., the attorney of B. & Co. cannot be compelled to produce an agreement made between A. & Co. and B. & Co., if he objects on the ground of professional confi- dence, (u) Admissions, (x) as to which, see ante, pp. 87, 83. children and his widow, Mrs. D., the other appellant, defendants herein, who claimed an interest in such firm property. Thereupon all the defendants entered into a writ- ten agreement with each other for the purpose, as therein declared, of settling all disputes between them concerning said partnership busi- ness and property, definitely fixing their respective interests therein, and continuing said business as therein provided, and which con- tained mutual covenants, stipulat- ing among other things in substance as follows: That said business should be continued to the end of the lease by said G., as surviving partner of the said D. , using therein the capital and property employed by the old firm, and paying its debts; G.'s share and interest in said business and property was fixed at one undivided half part thereof, and each of the other ap- pellant defendants at one undivided eighth part thereof. Mrs. D. was to furnish, to be invested in said business, some $14,000, to be reim- bursed to her, with interest, out of the accruing profits. Each party was to share in the profits accord- ing to his interest in the business and property as fixed by the agree- ment, and the same were to be di- vided and apportioned annually. Upon the termination of the busi- ness such property and its proceeds were to be divided in like manner. The business was to be under the management and control of said G., subject in part to the counsel and direction of Mrs. D., each of whom was to receive compensation therefor. A full inventory of all the assets and property of the busi- ness concern was to be made. New books of account were to be opened and kept, showing all the transac- tions in said business, and contain- ing a stock account, and showing the amount of property invested therein, and the interests of the re- spective parties therein as fixed by said agreement, and these were subject to inspection at all times by any of the parties, through an agent agreed upon and designated. Provision was also made for the renewal of furniture and for re- pairs, and prohibiting the with- drawal of any money from the business, except to the extent and upon the conditions therein men- tioned. Held: 1. That the legal effect of these stipulations was to create a partnership between the defendants as to third parties deal- ing with them, with knowledge of the agreement, and upon the faith of its provisions. 2. That as to such parties said defendants were es- topped from denying the existence of the state of facts assumed by the agreement. Delaney v. Dutcher, 23 Minn. 373. (u) Harris v. Hill, Dowl. & Ry. N. P. Ca. 17. (x) Sangster v. Mazarredo, 1 Stark. 161 ; Harvey v. Kay, 9 B. & C. 356 ; Ralph v. Harvey, 1 Q. B. 845 ; Clay v. Langslow, 1 Moo. & M. 45. 196 CH. IV.] EVIDENCE. *89 Advertisements, prospectuses, etc., containing the names of the al- leged partners, (y) and names over doors, (z) and on carts, (a) 1 (y) Lake v. Argyll, 6 Q. B. 477; Bourne if. Freeth, 9 B. & C. 632; Maudsley v. Le Blanc, 2 C. & P. 409, note ; Reynell v. Lewis, 15 M. & W. 517; Wood v. Argyll, 6 Man. & Gr. 928. In Ex parte Matthews, 3 V. & B. 125, an advertisement of dissolution was relied on. {z) Williams v. Keats, 2 Stark. 290. See, too, Pott v. Eyton, 3 C. B. 32, ante, p. 30. (a) Stables v. Eley, 1 C. & P. 614, as to which, see ante, p. 47. 1 An instruction to the jury that the presumption of a partnership, from the use of a name such as is commonly used where a partner- ship exists, is slight and easily rebutted, affords no ground of ex- ception. Charmanv. Henshaw, 15 Gray, 293. One not a partner is not estopped to deny that his name was so used as to lead others to suppose that he was such, unless it appears that his name was so used with his knowl- edge or consent. Cole v. Butler, 24 Mo. App. 76. Proof of the existence of a cer- tain sign, which it is not shown the plaintiffs evei* knew of or saw, is insufficient to authorize a recov- ery by said parties as partners. Cassidy v. Hall, 97 N. Y. 159. As to what evidence is admis- sible to rebut the presumption of partnership arising from the use of a firm name, see Nichols v. White, 41 Hun (N. Y.), 152. It seems that, where the exist- as prepared to do a certain line of business, is admissible in evi- dence. Yerkes v. Rodrock, 15 Weekly Not. Cas. 315. A paragraph in a newspaper, which states that a certain person is a member of a certain partner- ship, but does not purport to have been inserted by the partnership, is not admissible to charge him as such, merely on proof that he was a subscriber to the paper at that time, and never requested the ed- itor to deny any such statement. Potter v. Greene, 9 Gray, 309. A. and B. held themselves out as partners by advertisements. A. purchased of one, who supposed them to be partners, goods within the business of the pretended firm, though, as matter of fact, A. did not intend to bind B. by the pur- chase. Held, that B. was liable, unless the vendor knew that B. was not concerned in the purchase. Booe v. Caldwell, 12 Ind. 12. To prove a partnership, parol evidence of the contents of printed cards cannot be given unless traced to the defendants. Wilson v. Col- man, 1 Cranch, C. Ct. 408. See, also, Williar v. Irwin, 11 Biss. 57. When in an action on a note, signed by a firm, the defense is that no such firm existed, the fact that printed hand-bills, with the name of the firm signed thereto, were posted at various places in the town where the defendant was residing, and that one of them was ence of a partnership is in issue, a posted on the door of the house public advertisement in a news- where he boarded, is competent paper in the name of the firm, hold- evidence ing themselves out to the public jury in 197 is to be submitted to the determining the fact >89 CONTRACTS OF PARTNERSHIP. [BOOK I. Answers in chancery containing admissions, (p) l Bills to customers 2 '] Circulars I containing the names of the alleged partners, (c) Invoices whether or not a partnership ex- isted. Tomlin v. Goldsmith, 40 Ga. 221. See, also, Barcroft v. Haworth, 29 Iowa, 462. In order to prove the existence of a partnership it is competent to show how the supposed firm made out their accounts, kept their books, and even marked boxes of merchandise; but, to make such proof available, it must be shown that the party against whom it is offered had some agency in these acts, or impliedly or expressly sanc- tioned or approved them. McNeill v. Reynolds, 9 Ala. 313. In assumpsit against A., B., and C, as partners under the firm of A. & Co., for goods sold, the ques- tion being whether B. and C. were partners of A. , who had purchased the goods, and B, and C. appear- ing to have had a storehouse in another town, held, that a wit- ness might be asked whether he saw boxes of goods marked A. & Co. at the storehouse of B. and C, the evidence having a connection, though very slight, with the mat- ter in controversy. Chapman v. Wilson, 1 Rob. (Va.) 267. In an action of replevin for goods attached under an execution against A., the defense was that the goods belonged to a firm con- sisting of A. and the plaintiff. Held, that evidence that the ad- vertisement of the store in which the goods were found, the receipts given and taken, and the bills for goods, were in the plaintiff's name alone, and that the business was conducted in his name and upon his credit, was sufficient to entitle him to recover, if there were no circumstances impeaching or rebutting the presumption aris- ing from these facts. Davis v. White, 1 Houst. 228. (b) Studdy v. Saunders, 2 D. & Ry. 317; Grants. Jackson, 1 Peake, 208. 1 On the trial of an action brought against several as partners, only one of whom has been served with process, on the question who con- stituted the partnership, the record of a former action against the de- fendant served with process, in which he pleaded in abatement the non-joinder of the present de- fendants, is competent evidence. McClelland v. Lindsay, 1 Watts & S. 300. 2 See McNeill v. Reynolds, 9 Ala. 313 ; Davis v. White, supra, note (2). Where a person has tuffered his name to be held out to the world as a member of a mercantile firm, and permitted persons to deal on the credit of the firm, he cannot object to the admission in evidence, as proof of the partnership, of books kept and accounts rendered in the name of the firm. Chidsey v. Porter, 21 Pa. St. 390. The books of a firm, in the ab- sence of other evidence, are not ad- missible to prove the connection of a person with the partnership. Bryce v. Joynt, 63 Cal. 375 ; S. C. 49 Am. Rep. 94; Abbott v. Pear- (c) Young v. Axtell, 2 H. Blacks. 212 ; Norton v. Seymour, 3 C. B. 792. 198 CH. IV.] EVIDENCE. *S9 Bills of exchange. — The mode in which these have been drawn, ac- cepted or indorsed has frequently been relied on with success, (d) 1 130 Mass. 191. See, also, ments. which were filled up by him son, McNamara f. Draft, 40 la. 413. But evidence tending to show his membership having first been introduced, and it appearing that he had access to the books during a considerable period covering the dates of the transactions in ques- tion, and that he examined them on several occasions, as well as bal- ance sheets taken therefrom, the books and entries in them are com- petent evidence of his member- ship. Bryce v. Joynt, supra. The headings in a measurer's ab- stract book, showing that the de- fendant was charged for the work measured, as debtor to the plaint- iff and another, are inadmissible as evidence for the defendant for to the plaintiff, a store-keeper, for the amount due laborers of B. , and the laborers received goods to the amount from the plaintiff. There being evidence of partnership be- tween B. and M., such assignments dated afterwards were evidence in a suit against the firm. Thomas v. Moore, 71 Pa. St. 193. A person cannot be made a part- ner in fact or appearance, so as to bind him, unless by his consent, admissions or acts. The declara- tions or acts of others can have no such effect unless authorized or ratified by him. Bishop v. George- son, 60 111. 484. To establish the fact of an al- leged partnership, the manner in the purpose of proving a technical which the books of a third person partnership between the plaintiff seeking to charge one as a partner and such other party, there being no offer to connect them with other evidence going to show the existence, at any time, of such partnership. Green v. Caulk, 16 Md. 556. (d) Spencer v. Billing, 3 Camp. 310; Guidon v. Robson, 2 id. 302; Duncan v. Hill, 2 Brod. & Bing. 682 ; Gurney v. Evans, 3 H. & N. 122. 1 Cook v. Frederick, 77 Ind. 406 ; Thomas v. Moore, 71 Pa. St. 193. B. sold part of a coal lease with the personal property to M., who constituted O. his attorney ; orders drawn for goods by B. on a firm, '' B. & Co.," in favor of the plaint- iffs, accepted by O., and goods fur- nished accordingly, were evidence of partnership between B. and M. Thomas v. Moore, 71 Pa. St. 193. B. when alone kept blank assign- were kept is not competent evi- dence. McNamara v. Draft, 40 Iowa, 413. In an action against several per- sons, upon an account arising from stock transactions claimed by plaintiff to have been joint trans- actions on the part of defendants, but claimed by one of the defend- ants to have been several, held, that evidence that said defendant had a private account running at the same time was competent as a circumstance tending to show that the other account was joint and not several. Quincey v. White, 63 N. Y. 370. In an action against D. and M. , where the question of their part- nership was in issue, held, that bills of goods made out against D. alone, and found in a drawer in 199 *90 CONTRACTS OF PARTNERSHIP. [BOOK I. Drafts of agreements which have been acted upon, (e) l Letters'* and memoranda, showing an intention to give a person a share of profits, coupled with evidence that such intention was acted on. (0 [*90] * Usual evidence of partnership. — Meetings.— Attending and taking part in them ; (g) requiring them to be called. (7i) 3 the room where the business was carried on, were inadmissible on behalf of M. to prove that no co- partnership existed between them. McNamara v. Draft, 33 Iowa, 385. (e) Worts v. Peru, 3 Bro. P. C. 558. 1 In an action against P. and B. as partners, evidence was intro- duced to show that B. signed a contract to do work on a railroad in the name of P. & Company; that a bill for work on the same road was signed by B. in the same name; that several receipts were signed by B. at about the same period in the same name, and others by P. in the same name; and that notes signed P. & Com- pany were discounted at a bank and paid; no proof being ad- duced that the defendants were not at one time partners in the business of railroad contracting, the evidence was held sufficient to establish the existence of a part- nership for that purpose. Holmes v. Porter, 39 Me. 157. 2 Upon the issue of the existence of a partnership, letters written by the plaintiff in the current business of the parties, after consultation of one of the defendants, are ad- missible in evidence. McCall v. Moschcowitz, 10 N. Y. Civ. Proc. 107. (/) Heyhoe v. Burge, 9 C. B. 431 ; Baxter v. West, 1 Dr. & Sni. 173, where a partnership for seven years was proved by an unsigned memorandum on which the parties had acted. (g) Lake v. Argyll, 6 Q. B. 477, and Wood v. Argyll, 6 Man. & Gr. 928 ; noticed ante, p. 41. See, also, Peel v. Thomas, 15 C. B. 714. (h) Tredwen v. Bourne, 6 M. & W. 461. 3 On the issue whether A. and B. were partners, in 1875, in an unin- corporated lumber manufacturing company, established in 1865, there was evidence that the articles of association of the company re- quired the election of a president, clerk, treasurer, and agent, the two latter being required to give bonds to the president for the faith- ful discharge of their duties, and to render accounts semi-annually ; that the business of the company was required to be and was con- ducted by the treasurer and agent, who received salaries and devoted their entire time to it ; that meet- ings of the members were to be called by written notice from the clerk; that meetings of the com- pany were regularly called, and the records of the same kept by the clerk ; that any member could sell his interest to a stranger, such sale carrying with it the right to mem- bership and to a participation in the future profits of the business ; that A. was regularly admitted a member; that the treasurer, who was a member of the company, died in 1868, and a new treasurer was immediately chosen; that at 200 CH. IV.] EVIDENCE. •90 Payment of money into court— When, in an action against two per- sons as partners, they pay money into court, this does not amount to an admission of the partnership alleged to exist between them ; but only of a joint liability to the extent of the amount paid in. (i) Recitals in agreements, (k) Registers. — These do not affect a person whose name is in them unless he can be proved to have authorized the use of his name ; (l) or unless there is some statute applicable to the case. An entry in custom-house books, made by one of three alleged partners, to the effect that he and the other two were jointly interested in certain goods, though conclu- sive as between them and the crown, is not so as between them and other persons, (m) Release executed by all the alleged partners, (w) Shares. — The acceptance of shares in a projected company is by no means conclusive, even when followed by the payment of deposits, (o) 1 a subsequent meeting, at which A. was chosen clerk, it was voted that the treasurer continue the business of manufacturing and selling lum- ber; that A. attended all subse- quent meetings, and recorded other votes to hire money and carry on the business, and to empower one of the members to close up the business in the best manner for all concerned; that B., soon after the death of the treasurer, purchased the interest of an original member, agreeing to assume all his liabili- ties; that B. was subsequently present at a meeting of the com- pany, of which he was notified by the clerk, at which it was voted to raise money to carry on the busi- ness ; that B. called himself a sur- viving partner of the deceased treasurer in an answer to a bill in equity brought by the latter's ad- ministrator against the other mem- bers and the original member whose interest he bought ; that B. signed a note with the other mem- bers to raise money for the busi- ness, and also signed a power of attorney, authorizing the agent to sell real estate for the benefit of the company ; and that B. said he would like to have the thing settled, and would pay his pro- portion if he could find out what it was. Held, that the evidence would warrant a finding that A. and B. were partners in the com- pany. Machinists' Nat. Bank v. Dean, 124 Mass. 82. (i) Charles v. Branker, 12 M. & "W. 743. (fc) Leiden v. Lawrence, 2 N. R. 283. (Q Fox v. Clifton, 6 Bing. 776. As to joint-stock companies, see the volume on that subject. (in) Ellis v. Watson, 2 Stark. 453. (n) Gibbons v. Wilcox, 2 Stark. 43. (o) See Vice v. Anson, 7 B. & C. 409 ; Bourne V. Freeth, 9 B. & C. 632 ; Fox v. Clifton, 6 Bing. 776 ; Pitchford v. Davis, 5 M. & W. 2. Compare Lawler v. Kershaw, Moo. & M. 93. 1 Subscribers for the capital stock of an unincorporated joint-stock company, on proof of their respect- ive payments, without objection, of assessments for the shares set opposite their names, and without 201 *90 CONTRA JTS OF PARTNERSHIP. [BOOK I. It becomes important, however, when coupled with other facts showing an interference by the sharehplder with the management of the con- cern, ip) Verdict.— A verdict of a jury finding the existence of a partnership upon the trial of an issue directed out of chancery was held by Lord Kenyon conclusive evidence against the partners in a subsequent action brought against them by a creditor, (q) 1 any showing by whom their names were subscribed, are liable as co- partners for the debts of the con- cern. Tyrrell v. Washburn, 6 Allen, 466; Spear v. Crawford, 14 Wend. 20 ; Frost v. Walker, 60 Me. 468. To prove a partnership, subscrip- tion to the stock of a company in the partnership name may be given in evidence. Allen v. Ros- tain, 11 Serg. & R. 362. (p) Tredwen v. Bourne, 6 M. & W. 461 ; Peel v. Thomas, 15 C. B. 714. See the next chapter. (q) Whately v. Menheim, 2 Esp. 60S. Qu. if this can be supported? See Coll. Part. 532, quoting Mr. Starkie's comments on the case. i Where an action is brought against several persons as partners, and they omit to make any defense, and allow judgment to be taken against them by default, the record of such judgment, it has been held, is proper evidence of the existence of the partnership in another ac- tion afterwards brought against the same persons by different plaintiffs. Marks v. Sigler, 3 Ohio St. 358; Cragin V. Carleton, 21 Me. 492; Fogg v. Greene, 16 Me. 282; Ellis v. Jameson, 17 Me. 235. But when the action is not founded on an instrument of writ- ing purported to be signed in firm name, execution of which can only be denied by a sworn plea, and the general issue is pleaded, or other general plea denying their liability, a judgment against the defendants is not admissible evi- dence against either of them, in a subsequent action by a third per- son, as an admission of the partner- ship. Central R. R. etc. Co. v. Smith, 76 Ala. 572. See, however, Burgess v. Lane, 3 Me. 165, where it was held that a verdict, and judgment thereon, are not admissible evidence of a co- partnership, even where that fact was expressly put in issue by the pleadings, unless the action in which such evidence is offered is between both parties to the former suit. In an action against parties as partners, the record of a foreclosure against one of them in favor of the other is inadmissible on question of partnership. Cook v. Frederick, 77 Ind. 406. In an action by an attorney for professional services, evidence that the defendants were described in the writ in the former suit as part- ners is not sufficient to charge them jointly in the present case, without proof that they had notice of the existence of the former suit during its pendency. Prentiss v. Kelley, 41 Me. 436. In a suit against a firm on a promissory note, purporting to be signed by the firm name, a co- partner pleaded that he was not a member of the firm at the time the note bore date. Held, that 202 CH. IV.] EVIDENCE. *90 Use of property by several jointly, (r) Witness. — A witness may be asked not only who compose such and such a firm, but also whether named individuals do so. (s) To prove a partnership between A. in England, and B. in Spain, it has been held not enough to show that A. once dwelt in a town in Spain, and that B. resides there and carries on business there under the name of A., B. & Co., and that there is no one there of the name of A. (i) evidence of suits and judgments, 369. See as to co-owners who are in which he was joined as a part- not partners, ante, pp. 58 et seq. ner, by and against the copartner- (s) Acerro v. Petroni, 1 Stark, ship, prior to the date of the note, 100. was inadmissible to rebut this plea. {t) Burgue v. De Tastet, 3 Stark. Collier v. Cross, 20 Ga. 1. 53. (r) Weaver v. Prentice, 1 Esp. 203 [*9i] ^CHAPTER V. OF ILLEGAL PARTNERSHIPS. Illegal partnerships. — In order that a partnership may- result from a contract such contract must not be illegal. This gives rise to two questions which it is proposed to dis- cuss in this chapter, viz.: 1. What partnerships are illegal; and 2. What are the consequences of their being so. Section 1. — What Partnekships aee Illegal. Illegality never presumed. — Illegality is never pre- sumed, but must always be proved by those who assert its existence; and in order to show that a partnership is illegal it is necessary to establish either that the object of the partnership is one the attainment of which is contrary to law, or that, the object being legal, its attainment is sought in a manner which the law forbids. But proof that a firm has been guilty of an illegal act is not sufficient to bring the firm within the class of illegal partnerships; for if this were enough, every partnership which does not pay its debts, or which commits any tort, or is guilty of culpable negligence, would be illegal, which is obviously absurd, (a) Neither does it by any means follow that because one or more clauses in a contract of partnership are illegal the partnership is itself illegal. (J) 1 [*92] "Grounds of illegality — Public policy. — 1. A partnership may be illegal upon the general ground (a) See Armstrong v. Armstrong, (6) See R. v. Stainer, L. R. 1 Cr. 3 M. & K. 64 and 65; Sharp v. Ca. Res. 230; General Co. of Land Taylor, 2 Ph. 818; Brett v. Beck- Credit, 5 Ch. 863. with, 3 Jur. N. S. 31, M. R. ; Long- *See Lane v. Thomas, 37 Tex. worth's Ex. Case, 1 De G. F. & J. 157; Pfeifter v. Maltby, 38 id. 523. 17. See the judgment of Lord Campbell. 204 CH. V SEC. I.] ILLEGAL PARTNERSHIPS. *92 that it is formed for a purpose forbidden by the current notions of morality, religion, or public policy. 1 A partner- x See Bartle v. Coleman, 4 Pet. 184. Partners may modify, alter or dissolve the copartnership contract as between themselves, either in whole or in part, provided they do not violate any principle of law or public policy. Solomon v. Solo- mon, 2 Ga. 18. A partnership formed for legiti- mate purposes will not be held illegal or immoral by reason of 6harp or fraudulent practices em- ployed by the parties in prosecution of such business. Shriver v. Mc- Cloud, 20 Neb. 474. One partner cannot, through legal process, recover from another a share of gains made by violation of law, even though the defendant was the more immediate partici- pant in such fraud. Currans v. Downs, 7 Mo. App. 329; S. C. 3 id. 468. Thus, where two executors united in the misuse of funds in their hands, one executor was de- nied an account and a decree for proportionate share of the profits. Bowen v. Richardson, 133 Mass. 293. A contract of partnership in ef- fect that — the parties being about to bid for the construction of a public work — the appellant should withhold a lower bid than that which the appellee proposed to make, in consideration that the appellant should be taken in part- nership and permitted to share in the profits of the contract, is against public policy and void, and appellant can receive no aid from the court in forcing a division of the profits. Hunter v. Pfeiffer, 6 West. R. 403. See, also, Kelly v. Devlin, 58 How. Pr. 487 ; S. C. 47 N. Y. Super. Ct. 555. After a partnership, confessedly against public policy, has been car- ried out, and money contributed by one of the parties has passed into other forms, a partner in whose hands the profits are, after the results of the partnership enterprise are completed, cannot refuse to account for and divide on the ground of the illegal character of the original contract. Pleuffer v. Maltby, 54 Tex. 454; S. C. 38 Am. Rep. 631. See, also, Attaway v. National Bank, 15 Mo. App. 578. Where partners successfully cor- nered the wheat market, and after the close of the deal the share of one was, by his request, invested in another enterprise by the other, he must account for the money, although the wheat deal was il- legal under the Illinois statute. Wells v. McGeoch, 35 N. West. Rep. (Wis.) 769. The fact that plaintiffs and other buyers of farm products at a cer- tain village were combined in a secret partnership is no» ground for the recovery of damages by one who has sold them produce, from time to time, in ignorance of the partnership, where it appears that there was, nevertheless, a healthy competition in the trade at such village, and that the plaintiffs in fact paid defendant a fair market price (measured by the prices in other like places) for his products delivered to them. Fairbanks V. Newton, 50 Wis. 628. 205 *92 CONTRACTS OF PARTNERSHIP. [l)OOK I. ship, for example, formed for the purpose of deriving profit from the sale of obscene prints, or of books reviling or ridiculing the established religion, or for the procurement of marriages, or of public offices of trust, would be un- doubtedly illegal, (c) In the time of Charles II. it seems to have been held that a contract for sharing the profits derived from the public exhibition of a human monster was illegal; (d) but the writer is not aware of any modern case to the same effect, and the decision alluded to would not probably now be followed upon grounds of public policy. War. — "Whilst two countries are at war it is, by the law of each country, illegal for persons resident in either to have dealings with persons resident in the other. A part- nership, therefore, formed between persons resident in this country for the purpose of trading with an enemy's country is illegal; and a fortiori is such a partnership illegal if one of the members of it is resident in that country, and is therefore an alien enemy, (e) l But a partnership in this Partners in a lease of the peni- ton, 9 C. B. 110; and as to associa- tentiary can make no contract for tious for promulgating irreligious the use or hire of the negro con- opinions, see Pare v. Clegg, 29 victs except in the employments Beav. 589; Thornton v. Howe, 8 required by law. Any contract, Jur. N. S. 663. express or implied, for any other (d) See Herring v. Walround, 2 use is against public policy and Ch. Ca. 110. The thing exhibited cannot be enforced; and all items was a pair of female children, hav- for such services in the liquidation ing"two heads, four arms, four of the partnership must be struck legs, and but one belly, where their from the account between the two bodies were conjoined."' partners. Pratt v. McHatton, 11 (e) See Evans v. Richardson, 3 La. Ann. 260. Mer. 469. An agreement may, as to the 1 Where in an action by two par- parties, be usurious, and yet make ties against the defendant, claim- them liable as partners to third ing an interest in the profits of a persons. Pierson v. Steinmyer, 4 contract for the purchase of cotton Rich. 309. upon unprohibited territory, dur- (c) See the title, Illegal Contracts, ing the continuance of the procla- in Chitty's and Pollock's treatises mation of August 16, 1861, one on the Law of Contracts ; and as party died during the trial, and the to the sale of offices, Sterry v. Clif- suit was continued, under order of 206 CII. V, SEC. I.] ILLEGAL PARTNERSHIPS. f 92 country for running a blockade established by one belliger- ent nation in the ports of another is not illegal; for, subject to the risk of capture, a neutral may lawfully trade with a belligerent, (f) Trading under an assumed name. — In this country a person may legally carry on business under a name not his own; 1 and when a firm has an established reputation, and the court, by the other party, a loyal citizen, as survivor, held, that the rights of the latter were protected, notwithstanding the in- validity of the contract in respect to the deceased partner on account of his disloyalty, and that he could recover his share of the profits. Leftwich v. Clinton, 4 Lans. 176. See post . (/) Ex parte Chavasse, 4 De G. J. & Sm. 655 ; The Helen, L. R. 1 Ad. & Ecc. 1. 1 Ordinarily a firm must bind it- self by its proper firm name, but to this there are exceptions. If the firm has by use adopted a name somewhat different from that stip- ulated in the articles, and under that name borrows money for the benefit of the firm, a recovery may be had against the firm by the name under which it executed the security sued on. Moffat v. McKis- sick, 8 Baxter (Tenn.), 517. The style of a partnership is wholly conventional, and in the absence of a restrictive statute a firm may adopt any name it sees fit. Where a note is made payable to order, and the name used is em- ployed as the style or designation of an actual person, firm or com- pany, the payee is not fictitious. Edgerton v. Preston, 15 Bradw. 23. The provision of the act of New York of 1833, in reference to trans- acting business under fictitious names, which prohibited a person from transacting business under the name of a partner not inter- ested in the business, and which requires that, where "& Co." is used, it shall represent an actual person, does not apply to or include the use of the real name of an act- ual partner, although such partner is under a disability at the time. Where, therefore, a firm is com- posed of a husband and wife, the latter being represented by the "& Co." in the firm name, in the absence of intention to impose upon the public by obtaining undue credit, and conceding that a mar- ried woman cannot be a partner of her husband, this is not a violation of the statute. Zimmerman v. Erhard, 83 N. Y. 74; S. C. 58 How. 11; 60 How. Pr. 163; 38 Am. Rep. 396; 8 Daly, 311. The intention of this act was to pi - otect a person giving credit on the faith of the fictitious designa- tion, not to protect those obtaining credit from such firm. To consti- tute a violation of the act such designation must be used in the transaction of some business, and although the firm may be doing business, generally, in violation of the statute, a violation thereof may not be predicated of any transac- tion in which the false designation was not used. Where, therefore, in a bond given to a firm which 207 *92 CONTRACTS OF PAKTNEKSUIP. [BOOK I. one of its members dies, it is not deemed wrong for the survivors to continue the business under the old name, al- used the "& Co.," although the rented a vacant portion of their building, the fact that one of the partners whose name appeared in the firm name was dead at the time of such lease does not bring the case within the meaning of the New York statute prohibiting any- one from transacting business in the name of a partner not inter- ested in the firm, leasing of a part of their premises not being an or- dinary incident of their business, but done because it happened to be vacant. Sparrow v. Kohn, 109 Pa. St. 359. A note made in a transaction isolated and separate from the gen- eral business carried on under a name, the use of which is prohib- ited by statute, does not fall within the purview of the act. Pollard v. Brady, 48 N. Y. Super. Ct. 4T6. Where the articles between plaintiff and defendant provided that the former should be a secret partner, and should employ one Keefe " as his agent to act for him " in all matters pertaining to the partnership, and that the firm name should be Hardy & Keefe, and business is carried on under this agreement until the expiration of the term affixed, when Hardy as- sumed to be the sole owner of the assets, and excluded the plaintiff from the business and denied that he had any interest therein, held, in an action for an account, that the agreement was not void as being in violation of the statute of 1883. Ryan v. Hardy, 26 Hun (N. Y.), 176. Where one purchases from the assignee of a firm the trade-mark, same represented no actual part- ner, to secure a credit given by the firm, names of the actual partners were stated ; also, that they alone constituted the firm, and this was known to all the obligors. — held, that the case was not within the intent of the statute, and that the use of the fictitious designation was not a defense to an action upon the bond. Gay v. Seibold, 97 N. Y. 472 ; S. C. 49 Am. Rep. 533. Continuing the name of a de- ceased partner in the firm name is a violation of the statute providing that no person shall transact busi- ness in the name of a partner not interested in his firm ; and the firm cannot recover for goods sold, al- though the use of such name was without a wrongful intent, the ex- ecutors having carried on the busi- ness in conjunction with the surviving partners in obedience to the requirements of the will. Lane v. Arnold, 13 Abb. N. C. 73; re- versing S. C. 63 How. Pr. 40. See, also. Arnstaedt v. Blumenfeld, 13 Daly, 354. The New York statute of 1833 forbidding, under a penalty, the transaction of business in the name of a partner not interested in the firm, being highly penal in its character, is to be strictly con- strued and not extended beyond its plain and obvious meaning so as to include a transaction which is not an ordinary incident of the busi- ness in which the firm is engaged. Sparrow v. Kohn, 109 Pa. St. 359. Where a Philadelphia firm, hav- ing a branch house in New York, 208 CH. V, SEC. I.] ILLEGAL PARTNERSHIPS. *92 though, perhaps, the reputation of the firm may have been due mainly, if not entirely, to the ability and integrity good-will, etc., of the business, such purchase does not, in view of the statute against doing business in fictitious names, confer on the purchaser the right to do business under the name of the former firm, but only as the successor of that firm. Hegeman v. Hegeman, 8 Daly, 1. Where, upon the dissolution of a firm, the defendant bought the plaintiff's interest in the firm prop- erty, and became the assignee of the unexpired term of the lease of the rooms occupied by the firm, in which he continued the business, using signs bearing his name, fol- lowed by the words "Successor to Morgan & Schuyler," the former firm name, and there was nothing in the agreement of dissolution prohibiting the plaintiff from en- gaging in business, and it was understood that he was to open an office for that purpose in an- other part of the city, which he did, lield, in an action to restrain defendant from using plaintiff's name, that the defendant did not acquire by agreement of dissolu- tion any good-will in the business, except such as was incident to his sole ownership of the partnership property and his exclusive right to occupy the rooms of the late firm. That he was not authorized to use the firm name, nor to declare him- self successor to the late firm. It seems, however, that the defend- ant would have the right to de- scribe his rooms as those formerly occupied by Morgan & Schuyler, and himself as formerly or late of that firm. Morgan v. Schuyler, 79 N. Y. 490; S. C. 34 Am. Rep. 543. The provisions of this statute do not apply to a contract made in an- other state. Stoddart v. Key, 63 How. Pr. 137. Neither do they apply to com- mercial copartnerships located and doing business in foreign countries, which are permitted to use their st3 7 les or firms of their houses in this state. Ross v. Wigg, 34 Hun (N. Y.), 192. Under the statute it is not enough that the partnership had business relations with foreign countries, or had for the period of five years or upwards carried on business in this state under the name which is con- tinued ; but the requirement of the statute in respect to filing and publishing certificate, etc., must also be complied with. Lunt v. Lunt, 8 Abb. N. C. 76. The use of such names as the " Alderney Manufg. Co." or " Eu- reka Mfg. Co." is not prohibited by the statute. Lauferty v. Wheeler, 11 Daly, 194; Gay v. See- bold, 97 N. Y. 472. The use of a fictitious name will not work a forfeiture in any case. Wood v. Erie R. R. Co. 72 N. Y. 196. See, also, generally, Pollard v. Brady, 48 N. Y. Super. Ct. 476 ; Thompson v. Gray, 11 Daly, 183; Sparrow" v. Kohn, 109 Pa. St. 359. A similar statute exists in Loui- siana. See sees. 2668 and 2669, Rev. Code La. ; Kent v. Mojonier, 36 La. Ann. 259. In Massachusetts the use of the name of a retired partner or of the representatives of a deceased part- VOL. 1 — 14 209 *93 CONTRACTS OF PARTNERSHIP. [BOOK I. [*93] of *tbe deceased partner. The legal view of such conduct is in accordance with established usage, and ner without their written consent is prohibited. See, generally, Morse v. Hall, 109 Mass. 409; Rogers v. Taintor, 97 id. 291; Sohrer v. Johnson, 111 id. 238. Upon the retirement of a partner whose name formed a part of the firm name, he consented that the remaining partners might use the same name " under which to trade in the future." Held, that this did not amount to a consent, within section 6, Public Statutes, chapter 76, that a person who afterwards became a member of the firm might use the same name on his becom- ing the sole member. See, gen- erally, as to what amounts to a consent under said statute, Lodge v. Wild, 139 Mass. 499. A record in some public office of the names of the partners is re- quired by statute in some states as a condition precedent to the main- taining of any action by the firm, or preventing the effects of non- joinder where the firm is sued. See, generally, as to the effect of these statutes, Sweeney v. Stan- ford, 67 Cal. 635 ; Cheney v. New- berry, id. 126; Byers v. Bourret, 64 id. 73; McCord v. Scale, 56 id. 262 ; Ralph v. Lockwood, 61 id. 155 ; Fabian v. Callahan, 56 id. 159; Tucker v. Adams, 63 N. H. 361; S. C. 1 New Eng. Rep. 241 ; Pinker- ton v. Ross, 33 U. C. Q. B. 508. The certificate required by the Civil Code of California, section 2466, as to doing business under a fictitious name, may be executed by a person acting under proper power of attorney, although such power of attorney was executed prior to the enactment of said stat- ute. Goldtree v. Swinford, 16 Pac. Rep. (Cal.) 493. Provisions of General Laws, chapter 117, sections 1 and 2, re- quiring every firm to file with the town clerk a certificate of their names and residences, do not affect a suit against a partner upon a cause of action not arising out of the affairs of his firm. Tucker t\. Adams, 63 N. H. 361; S. C. 1 N. Eng. 241. The sections of the Civil Code prohibiting persons doing business as partners from maintaining any action upon or on account of con- tracts or transactions in their part- nership name until they have filed and published a certificate showing the names and residences of all the partners do not preclude the as- signee of such partners from main- taining an action thereon. Wing Ho v. Baldwin, 70 Cal. 194. By the California statute every partnership, except commercial and banking partnerships estab- lished and transacting business in a place without the United States, transacting business in the state under a fictitious name or a desig- nation not showing the names of the partners, is required to file with the clerk of the county in which its principal place of busi- ness is situated a certificate stating the names in full of all the part- ners and their places of residence, and publish the same, etc. As to the necessary allegations in the pleadings in a suit by such part- nerships, see Sweeney v. Stanford, 67 Cal. 635. 210 CH. V, SEC. I.] ILLEGAL PARTNERSHIPS. *93 it has been accordingly held not to be illegal for surviving partners to continue to carry on business under the old name, (g) Speaking generally, and excluding cases especially pro- vided for by statute, (h) a partnership is not illegal simply because it carries on business under a name which does not disclose its members, e. g., under such a name as " The City Investment and Advance Company." (i) It is indeed said that it is illegal at common law for persons not incorporated to assume to act as if they were, and that to trade under such a name as the above is assuming to act as a corpora- tion ; but even if assuming to act as a corporation is an offense at common law, which is very doubtful, (k) the Section 2468 of the code, requir- ing partners doing business under a fictitious name to file and publish a certificate of copartnership before they can maintain an action on the partnership demands, does not prevent an assignment by them of a valid partnership claim, although they have not filed or published the required certificate. Cheney v. Newberry, 67 Cal. 126. The name on a business sign on the front of a house in which a mercantile business is conducted does not per se fix conclusively the ownership of the goods in him whose name appears on the sign, to make them liable for his debts under section 1300, code of 1880. Wolf v. Kahn, 62 Miss. 814. The effect of section 1300, code of Mississippi of 1880, is to make all the property used or acquired in the business transacted by one as a trader or otherwise, with the addition of the words "agent," "factor," or "and company," the property of him who transacts such business, and liable for his debts, without regard to the sign under which the business is con- ducted, unless by a proper sign, in letters easy to be read, etc., the name of the owner or partner in the business is disclosed. Loab v. Morton, 63 Miss. 280. Under said section 1300, property used in a bar and billiard-room conducted under the sign only of "Empire Saloon" is liable to exe- cution on a judgment against em- ployee for part of the profits, who conducts the business under a written contract with the owner that it should be carried on under the name of employee "& Co.," in which name the city license is ob- tained. Quinn v. Myles, 59 Miss. 375. (g) See Buun v. Guy, 4 East, 190; Aubin v. Holt, 2 K. & J. 66; Lewis v. Langdon, 7 Sim. 421; and com- pare Thornbury v. Bevill, 1 Y. & C. C. 554. (7i) See, as to pawnbrokers, infra. (i) See Maughan v. Sharpe, 17 C. B. N. S. 443 ; Garrard v. Hardey, 5 Man. & Gr. 471 ; Ex parte Grise- wood, 4 De G. & J. 544. (k) See 6 Man. & Gr. 107, and the. volume on companies. 211 *91 CONTRACTS OF PARTNERSHIP. [BOOK I. offense is not committed by trading under a name which is by usage as applicable to an unincorporated as to an incor- porated body. (I) Profits of crime.— 2. A partnership is illegal if formed for the purpose of deriving profit from a criminal offense, e. g., from smuggling, robbery, theft, etc. (m) A curious instance of a partnership between two highwaymen is said to have come before the courts in the last century, and to have been referred to by Lord Kenyon. As the case is not to be found in the reports, an abridged note of it is [*94] given below; (ra) but there *is some doubt whether it (Z) See the cases in the last note but one. An unincorporated society was held to have no right to be provisionally registered under 7 and 8 Victoria, chapter 110, under a name which necessarily denoted a corporation, e. g., the Sea, Fire, etc., Insurance Corporation. R. v. Whitmarsh, 14 Q. B. 803. (m) See Biggs v. Lawrence, 3 T. R. 454 ; and Stewart v. Gibson, 7 CI. & Fin. 707, as to smuggling. The last case is instructive on ac- count of the care taken to conceal the true nature of the illegal trans- actions. {n) Everet v. Williams (2 Pothier on Obligations, by Evans, p. 3, note citing Europ. Mag. 1787, vol. 2, p. 360) is said to have been a suit instituted by one highwayman against another for an account of their plunder. The bill stated that the plaintiff was skilled in dealing in several commodities, such as plate, rings, watches, etc. ; that the defendant applied to him to become a partner ; that they entered into partnership, and it was agreed that they should equally provide all sorts of necessaries, such as horses, saddles, bridles, and equally bear all expenses on the roads and at inns, taverns, alehouses, markets and fairs ; that the plaintiff and the defendant proceeded jointly in the said business with good success on Hounslow Heath, where they dealt with a gentleman for a gold watch ; and afterwards the defendant told the plaintiff that Finchley, in the county of Middlesex, was a good and convenient place to deal in, and that commodities were very plenty at Finchley, and it would be almost all clear gain to them ; that they went accordingly, and dealt with several gentlemen for divers watches, rings, swords, canes, hats, cloaks, horses, bridles, saddles, and other things ; that about a month afterwards the defendant informed the plaintiff that there was a gen- tleman at Blackheath, who had a good horse, saddle, bridle, watch, sword, cane, and other things to dispose of which he believed might be had for little or no money ; that they accordingly went and met with the said gentleman, and after some small discourse they dealt for the said horse, etc. ; that the plaint- iff and the defendant continued their joint dealings together until 212 CH. V, SEC. I.] ILLEGAL PARTNERSHIPS. *94 actually occurred. Real or fictitious, it is a good illustra- tion of an illegal partnership of the class in question, (o) Partnerships illegal by special statutes.— 3. A partner- ship is also illegal if formed for a purpose forbidden by stat- ute, although independently of the statute there would be no illegality. 1 At one time a distinction was taken between mala prohibita and mala in se; but this distinction has very properly long ceased to be recognized as of any value for legal purposes. A\ T hat judicial tribunals have to regard is the law they are called on to administer; and what is for- Michaelinas, and dealt together at several places, viz., at Bagshot, Salisbury, Hampstead, and else- where to the amount of 2.000Z. and upwards. The rest of the bill was in the ordinary form for a partner- ship account. The bill is said to have been dismissed with costs to be paid by the counsel who signed it; and the solicitors for the plaint- iff were attached and fined 50?. apiece. The plaintiff and the de- fendant were, it is said, both hanged, and one of the solicitors for the plaintiff was afterwards trans- ported. See 20 Eq. 230, note. (o) The case was referred to by Jessel, M. R., in 11 Ch. D. 195. 1 Where the city ordinance pro- vided that every proposal for work for the city should contain the names of all persons who are inter- ested, and prohibited any secret agreement or understanding that any one not named should become interested in any contract, held, Xhi.t a secret partnership made by two persons, that they were to be equally interested in the contract for work obtained by one of the two partners, was illegal, being against public policy and contrary to positive law. Kelly v. Devlin, 58 How. Pr. 487. Where, with the consent of both partners, one of whom was town- ship treasurer, the public funds were deposited to the firm's credit with their own funds and checked out indiscriminately, held, that, as the two partners were particeps criminis in this transaction, the law would aid neither of them as against the other; and upon a dis- solution of the firm, one partner having paid the liability of the firm to the township partly out of firm assets and partly out of his own means, leaving a large balance in his favor, the assets being insuffi- cient for that purpose, held, that the illegal transaction being con- summated he had no right to a con- tribution from his copartner for the money so advanced. And that, on the other hand, his copartner hav- ing parted with all his interest in the partnership by the contract of dissolution, reserving only a right to one-half the surplus, was not en- titled to an account which rejected such payments made by his co- partner. Davis v. Gelhaus, 44 O. St. 69. 213 *95 CONTRACTS OF PARTNERSHIP. [BOOK I. bidden by that law is illegal, whether it is also forbidden by the laws of morality and religion or not. (p) Observations on such acts. — Whether a partnership is illegal by virtue of any particular statute obviously depends upon the construction of the statute in question. With ref- erence, however, to those statutes which prohibit un- [*95] qualified persons from carrying on certain trades *or businesses, it may be observed that such statutes are not infringed by an unqualified person who does nothing more than share the profits arising from those trades or businesses, if they are in fact carried on by persons who are duly qualified. The unqualified person is not within the mischief of the statutes in question, and the partnership of which he is a member is not therefore illegal, (q) Prohibitory and penal acts. — Again, although a statute may in terms apparently prohibit an act or omission, and affix a penalty in case of disobedience, it does not neces- sarily follow that all transactions to which the penalty at- taches are illegal. They are so if the statute is really prohibitory ; (r) but they are not so if the true construction of the statute is that the penalty is, as it were, the price of a license for doing what the statute apparently forbids, (s) Therefore, it was held in Brown v. Duncan, (t) that a firm of distillers was not illegal, although one of the firm carried on business as a retail dealer in spirits within two miles of the distillery (contrary to 4 Geo. 4, ch. 94, §§ 132, 133), and was not registered as one of the firm in the excise books (as required by 6 Geo. 4, ch. 81, § 7). It may, however, be (p) See Aubert v. Maze, 2 Bos. & Crowland Gas & Coke Co. 10 Ex. P. 371. 293. (q) See Raynard v. Chase, 1 Burr. (s) Smith v. Mawhood, 14 M. & 2, and infra under the heads of W. 452 ; Swan v. The Bank of Scot- Medical Practitioners, Solicitors. land, 2 Mon. & Ayr. 661 ; Johnson (r) Mellissr. Shirley Local Board, v. Hudson, 11 East, 180. 16 Q. B. D. 446 ; Cope v. Row- (t) 10 B. & C. 93. And see Smith lands, 2 M. & W. 149 ; Bartlett v. v. Mawhood, 14 M. & W. 452. Vinor, Carth. 252; Taylor v. The 214 <3H. V, SEC. I.] ILLEGAL PARTNERSHIPS. *96 doubted whether the statutes in question were properly ■construed by the court, (u) The most important instances of partnerships rendered illegal by statute are as follows : (a?) Attorneys and solicitors. 1 — See infra, Solicitors. Bankers.— By 7 and 8 Victoria, chapter 32, section 21, (y) all bankers are required on the 1st day of January, in every year, to make a return to the stamp office of their names, residences and occupations, or, in the case of a company or partnership, of the name, residence and occupation of every member of the *company or partnership, and [*96] in default a penalty of 501. is inflicted. Upon this act a question might arise as to the legality of a banking part- nership, or company, composed in part of members whose names are not returned. By two statutes, which have since been considerably modified, it was made unlawful for banking firms of more than six members to issue in London, or within sixty-five miles thereof, notes payable on demand or within six months after date, (z) (u) See Pawnbrokers, infra. and parts of sections 9 and 23 are (x) For a list of trades, etc., regu- repealed by 37 and 38 Victoria, lated by statute, see Pollock on chapter 96. Contracts, ed. 4, App. F. note. (z) 39 and 40 Geo. 3, ch. 28, § 15; 1 There is nothing in the nature 7 Geo. 4, ch. 46. See further, as to or essence of a partnership which the issue of notes, 9 Geo. 4, ch. 23 ; requires that it should be confined 3 and 4 Win. 4, ch. 83, and ch. 98; to ordinary trade and commerce or 7 and 8 Vict. ch. 32; A.-G. v. Birk- to dealings in personal property, beck, 12 Q. B. D. 605; Broughton It may exist between attorneys, v. Manchester & Salford Water- conveyancers, mechanics, owners works Co. 3 B. & A. 1 ; Bank of of a line of stage-coaches, artisans, England v. Anderson, 3 Bing. N. C. or farmers, as well as between 589 ; Bank of England v. Booth, 2 merchants and bankers, and it may Keen, 466. And on appeal, Booth exist between dealers and specu- v. Bank of England, 6 Bing. N. C. lators in real estate, without be- 415, and 7 CI. & Fin. 509. The coming void by operation of the joint effect of the above enactments statute of frauds. Chester v. Dick- seems to be that: (1) The Bank •erson, 45 How. Pr. 325; 54 N. Y. 1. of England can issue, in London, (y) Sections 8 and 29 of this act or within three miles of it, notes 215 *97 CONTRACTS OF PARTNERSHIP. [BOOK I. Upon these statutes it was held that a banking company of more than six persons associated for the purpose of issu- ing notes payable on demand, or within six months after date, was not illegal unless it was proved that the company issued such notes within sixty-five miles of London, {a) Upon a similar statute relating to Ireland, (b) it was held that in order to establish the illegality of a banking company upon the ground that its houses of business had been,, from the time of the formation of the company until the commence- ment of the suit, and then were, at places in Ireland within fifty miles of Dublin, it was necessary to prove the [*97] existence of a place of business *within that limit for the whole time alleged, (c) The statutes in ques- tion, moreover, have been held only to affect partnerships formed for the purpose of carrying on the business of a banker, and not to interfere with the issue of notes by firms not carrying on such business. Brokers. — The statutes imposing penalties upon brokers who acted as such in the city of London without being duly admitted so to do by the mayor and aldermen have been repealed by 47 Victoria, chapter 3. Although unqualified brokers could not recover their commission, (d) yet they could recover from their principals money paid for them payable to bearer on demand, tween the Bank of England and (2) Beyond that limit such notes banking firms of less than six mem- may be issued by bankers who bers, lawfully issuing notes before were lawfully issuing them before May, 1844. (3) The district more May, 1844, under a license, but by than sixty-five miles from London, no other bankers ; and not, there- in which the monopoly is divided fore, by any banking firm of more between the Bank of England and than six persons carrying on the banking firms of six or more or less business of bankers within sixty- members, lawfully issuing notes five miles of London. In other before May, 1844. [words there are three limits: (1) (a) Ransford v. Copeland, 6 A. & London and three miles round, E. 482. in which the Bank of England has (6) 6 Geo. 4, ch. 42, § 10. an exclusive monopoly. (2) The (c) Hughes v. Thorpe, 5 M. & W. district more than three, but within 656. sixty-five, miles of London, in (d) Cope v. Rowlands, 2 M. & "WV which the monopoly is divided be- 149. 216 CH. V, SEC. I.] ILLEGAL PARTNERSHIPS. *93 by their directions or in conformity with the usages of the share market, (e) Discovery by unlicensed brokers. — Liability to penalties under the repealed statutes did not protect a broker from answering interrogatories relating to his dealings and trans- actions if he was sued in respect of them by his princi- pal. (/) Marine insurers. — By a statute now repealed it was made unlawful for any society or partnership (except the two corporations mentioned in the act) to carry on the business of maritime insurance or to lend money on bot- tomry, {g) This enactment gave rise to numerous decisions which are frequently referred to as illustrating the conse- quences resulting from an illegal contract of partnership; and they will be noticed hereafter when those consequences are examined. In the present place, however, it is not nec- essary to do more than collect them in a note for facility of reference, (h) The marine policy stamp act, 30 Victoria, chapter 23, prevents marine insurances being effected otherwise than by written policies *duly stamped, (i) Conse- [*98] quently, if the members of a mutual insurance com- pany insure each others' ships without any policies, the insured has no remedy against the insurers in case of a loss, (k) (e) Smith v. Lindo, 4 C. B. N. S. rison v. Millar, id. 340, note; Everth 305, and 5 id. 587 ; Pidgeon v. Bur- v. Blackburne, 2 Stark. 66 ; Ex slem, 3 Ex. 465 ; Jessopp v. Lut- parte Bell, 1 M. & S. 751 ; Aubert wyche, 10 Ex. 614. V. Maze, 2 Bos. & P. 371 ; Watts v. (/) Green v. Weaver, 1 Sm. 404; Brooks, 3 Ves. 612; Knowles v. Robinson v. Kitchin, 8 De G. Mc. Haughton, 11 id. 168. & G. 88, and 21 Beav. 365. (i) They can now be stamped (g) 6 Geo. 1, ch. 18, repealed by 5 after their execution on payment Geo. 4, ch. 114, § 1, as to insur- of a penalty (39 Vict. ch. 6, § 2); ances. but a written policy is still neces- (h) The following are the decis- sary. ions on the above enactment : (k) See Edwards v. Aberayron Mitchell v. Cockburn, 2 H. Blacks. Mutual Soc. 1 Q. B. D. 563; Ex 379; Booth v. Hodgson, 6 T. R. parte Hargrove, 10 Ch. 542 ; Fisher 405; Lees v. Smith, 7 id. 338; Har- v. Liverpool Marine Insur. Co. L, 217 *99 CONTRACTS OF PARTNERSHIP. [BOOK I. Medical 'practitioners. — By 55 George 3, chapter 194, section 14, unqualified medical men are prohibited from practicing; and by the medical act, 1858, (I) it is enacted (§ 32) that no person shall be entitled to recover any charge in any court of law for any medical or surgical advice, at- tendance, or for the performance of any operation, or for any. medicine which he shall have both prescribed and sup- plied, unless he shall prove upon the trial that he is regis- tered under the act. By the same act (§ 40) penalties are inflicted on all persons who wilfully and falsely pretend to be, or take, or use, the name or title of a physician, doctor of medicine, licentiate in medicine and surgery, bachelor of medicine, surgeon, general practitioner or apothecary, or any name, title, addition or description implying that he is registered under the act, or is recognized by law as a physi- cian, etc. Upon the above acts it has been decided that agreements contrary to 55 George, 3 are illegal and cannot be en- forced; (m) but that a medical practitioner may maintain an action for attendances, etc., although not registered when they took place, it being sufficient that he should be registered at the time of the trial ; (n) and there is nothing illegal in one member of a firm being registered in one character and another in another; nor in their respectively attending to their appropriate branches of the profession ; nor in their jointly suing in respect of the services ren- dered by each in his own branch, (o) It has also [*99] *been intimated by high authority, that, if only one member of a firm is duly registered, the requisitions of the statute are complied with; (p) but the unregistered R. 9 Q. B. 418; Smith's Case, 4 Ch. Soc. v. Lon. Supply Assoc. 5 App. 611 ; Brett v. Beckwith, 3 Jur. N. Ca. 857. S. 31; Bromley v. Williams, 32 (m) Davies v. Makuna, 29 Ch. D. Beav. 177. "With these cases com- 596. pare Martin's Case, 14 Eq. 148. (n) Turner v. Reynall, 14 C. B. (I) 21 and 22 Vict. ch. 90. As to N. S. 327. chemists and druggists, see 31 and (o) Ibid. 32 Vict. ch. 121, and Pharmaceutical (p) Per Erie C. J., id. Compare 218 CH. V, SEC. I.] ILLEGAL PARTNERSHIPS. *99 partner cannot lawfully act as a physician, surgeon or apothecary, (q) Newspaper proprietors. — By 44 and 45 Victoria, chapter 60, section 8, the titles of newspapers, and the names, occupa- tions and residences of their proprietors, are required to be registered with the registrar of joint-stock companies, and penalties are payable on default. Patentees. — Prior to 1852 a patent for an invention con- tained a proviso to the effect that the patent should be void if more than twelve persons became interested in it as part- ners. (/') But now there is no limit placed upon the num- ber of persons who may be interested in a patented invention. Pawnbrokers. — By 35 and 36 Victoria, chapter 93, section 13, ever}' pawnbroker is required to have his name legibly printed over the door of every shop or place where he car- ries on his business. Under the previous act, 39 and 40 George 3, chapter 98, an agreement to carry on a pawn- broking business in partnership was illegal if it was part of the agreement that the names of some of the partners should be concealed, or, in other words, if it was part of the agreement that some of the partners should be dormant, (s) Whether these decisions apply to the present act is open to some doubt (see § 51), but they probably do. It is con- ceived, however, that pawnbroking may be legally carried the cases in the next note. See, fur- (r) Hindmarch on Patents, 66. ther, De la Eosa v. Prieto, 16 C. B. See Duvergier v. Fellowes, 5 Bing. N. S. 578; and as to pretending to 248; and on appeal, 10 B. & C. 826, be a legally qualified practitioner, and 1 CI. & Fin. 39. see Pedgrift v. Chevallier, 8 C. B. (s) See Lewis v. Armstrong, 3 N. S. 240 and 246; Ellis v. Kelly, 6 M. & K. 53; Armstrong v. Lewis, H. & N. 222. The cases decided 2 Cr. & M. 274 ; Gordon v. Howden, upon the Apothecaries Acts, 55 Geo. 12 CI. & Fin. 237 ; Fraser v. Hill, 1 3, ch. 194, and 6 Geo. 4, ch. 133, M'Queen, 392. Compare Brown v. will be found in 1 Chitty's Statutes. Duncan, 10 B. & C. 93, where one (q) Howarth v. Brearley, 19 Q. B. of a firm of distillers was not li- D. 303 ; Davies v. Makuna, 29 Ch. censed as required by the excise D. 596; Pharmaceutical Soc. v. laws. Lon. Supply Assoc. 5 App. Ca. 857. 219 *100 CONTRACTS OF PARTNERSHIP. [book on by a registered company, if the name of the company is properly painted up. [*100] '^Solicitors. 1 — By several statutes it has long been unlawful for any person, not duly qualified, to act by himself or another as a solicitor, or to suffer his name to be made use of upon the account, or for the profit, of an unqualified person, (t) Upon these statutes questions have arisen as to how far it is lawful for a qualified solicitor to share the profits of his business with a person who is not qualified ; and it has been held that there is no illegality in this where the non-qualified person does not share the prof- its in consideration of his acting in any manner as a solic- itor, (u) For example, there is nothing illegal in an agreement that a surviving partner of a firm of solicit- 1 A partnership for the practice of the law is legal, and, as in other partnerships, the act of one partner in the professional business is the act of all the partners. Every re- sponsibility incident to other part- nerships in general attaches to legal partnerships, as well as cor- responding rights. Smith v. Hill, 13 Ark. 173. See, also, Livingston v. Cox, 6 Pa. St. 360. Partnership may exist between a counselor-at-law and an attorney in their professional business, but the attorney must have the sole and entire, superintendence of the attorney's business, for which he is responsible ; and no person on the ground of such copartnership can take any part in the conduct of a suit whose office is at a different place from that of the attorney. "Woodward's Case, 4 John. 289. In New Jersey, under a statute declaring that no man should pros- ecute his suit except by himself or by a licensed attorney-at-law, it was held that a party could not prosecute by two or more attorneys in partnership, since they could not bring themselves within the de- scription and make one licensed attorney-at-law. Wilson v. Wil- son, 5 N. J. Law, 791. In New York, where a partner- ship exists between two attorneys, and a suit is prosecuted by one of them in the name of one of the partners only as the attorney of record, an action may be main- tained in their joint names against their client for the recovery of the costs of the suit. Warner v. Gris- wold, 8 Wend. 665. (t) See 6 and 7 Vict. ch. 73, §§ 2, 26, 32; 23 and 24 Vict. ch. 127, § 26; and 37 and 38 Vict. ch. 68, § 12. See as to partnerships between town clerks and other solicitors, Hughes v. Statham, 4 B. & C. 187 ; and as to prosecutions by partners of clerks of the peace, see 5 and 6 Will. 4, ch. 76, § 102, and R. v. Fox, 1 E. & E. 729. (u) Scott v. Miller, Johns. 220, is a strong case on this head. 220 CH. V, SEC. I.] ILLEGAL PARTNERSHIPS. *101 ors shall share his profits with the widow of a late part- ner, {x) But an agreement for a partnership in the ordinary sense of the word between a person duly qualified and one who is not is clearly illegal; (y) and if the agreement is in writing, and is for a present partnership, parol evidence cannot be admitted to show that it was not to take effect until both parties were qualified, (z) But an agreement be- tween a solicitor and his articled clerk that the latter, when a solicitor, shall become a partner with the former and share his profits retrospectively, is not illegal, (a) However, the statutes cannot be evaded by an agreement to the effect that the unqualified person shall receive a share of the profits as a salary, and that he shall not be a partner with, the other, (b) Nor can a solicitor's clerk (unless him- self qualified) act as a solicitor under cover of his *princi pal's name, (c) It was, however, held that a [*101] person who had been duly examined, sworn and ad- mitted, but who- had not taken out his annual certificate, was not unqualified within the meaning of the act of George 2; (d) and since the act 6 and 7 Victoria, chapter 46, it has been held not unlawful for a qualified solicitor to act upon the usual agency terms as the solicitor of another solicitor who has not taken out his certificate, (e) It is illegal for two persons, one qualified and the other unqualified, to hold themselves out as partners, and to put both their names to bills of costs and other documents in (x) Candler v. Candler, Jac. 225, 145 ; Re Jackson, 1 B. & C. 270. See, and 6 Madd. 141 ; Sterry v. Clifton, too, Re Clark, 3 D. & R. 260 ; Hop- 9 C. B. 110. And see Aubin v. Holt, kinsonu. Smith, 1 Bing. 13. Quaere, 2 K. & J. 66. See also ante, Med- the effect on these cases of the act ical Practitioners. 28 and 29 Vict. ch. 86, ante, pp. 35 (y) Williams v. Jones, 5 B. & C. et seq. 108. See Scott v. Miller, Johns. (c) Hopkinson v. Smith, 1 Bing. 220. 13 ; Re Palmer, 2 A. & E. 686. (z) Williams v. Jones, 5 B. & C. (d) Re Hodgson, 3 A. & E. 224. 108. And see Hodgkinson v. Mayer, 6 (a) Ex parte Joyce, 4 Ch. D. 596. A. & E. 194 (p) Tench v. Roberts, 6 Madd. (e) Ex parte Foley, 11 Beav. 456. 221 *102 CONTRACTS OF PAKTNEKSHIP. [liOOK I. which their names ought not to appear, unless they are qualified solicitors, (f) Theatrical representations. — By several statutes now re- pealed (g) it was unlawful to act any play for gain except under certain restrictions. Partnerships, therefore, for sharing profits to be derived from acting plays otherwise than in accordance with these acts were illegal, (h) Unincorporated joint-stock companies with transferable shares. 1 — The question whether unincorporated companies with transferable shares were illegal at common law or under the Bubble Act of 1719 (6 Geo. 1, ch. 18) will be found discussed in the volume on Companies. The question has now onlv a historical interest. Unregistered partnerships, etc. — By the Companies Act, 1862, section 4, all banking partnerships of more than ten members, and all other partnerships of more than twenty members formed after the 2d of November, 1862, {%) must be registered under that act unless formed in pursuance of some special act, charter or letters patent, or for work- ing mines in the Stannaries; and any partnership [*102] required to be registered, and not registered, is illegal, (k) This subject will be found more fully examined in the volume on Companies. (/) Edmonson v. Davis, 4 Esp. Boisgerard v. Wall, 1 Smed. & M. 14. Ch. 404. (g) 10 Geo. 2, ch. 28 ; 25 id. ch. 36 A partnership may own and (made perpetual by 28 id. ch. 19) ; operate a street railway as well as and 28 Geo. 3, ch. 30; repealed by a corporation. O'Neil v. Lamb, 6 6 and 7 Vict. ch. 68. As to what is N. W. Rep. 59. a theater within this act, see Davys (i) See, as to this, Shaw v. Sim- v. Douglas, 4H.&K 180. mons, 12 Q. B. D. 117; and as to (7i) Ewing v. Osbaldiston, 2 M. & what associations need not be reg- Cr. 53 ; De Begnis v. Armistead, 10 istered, Smith v. Anderson, 15 Ch. Bing. 107. D. 247. 1 See last chapter of this work. (k) Jennings v. Hammond, 9 Q. An unincorporated body of men, B. D. 225; Shaw v. Benson, 11 id. associated for the purpose of bank- 563 ; Ex parte Poppleton, 14 Q. B. ing, is but a partnership, the mem- D. 379 ; Padstow Total Loss Assoc, bers having the same rights and 20 Ch. D. 137; Sykes v. Beadon, 11 subject to the same liabilities. Ch. D. 170, although overruled by 222 CH. V, SEC. II.] ILLEGAL PARTNERSHIPS. *103 Section II. — Consequences of Illegality. Consequences of illegality. — If a partnership when it is formed will be illegal any contract to form it must be illegal also. Upon this ground it was held, in Duvergier v. Fellovjes, (I) that a bond for the payment of money upon the formation by the obligee of an illegal company was invalid; and in Williams v. Jones, (m) that no action lay for the recovery of a premium agreed to be paid by the defendant, on being taken into partnership with the plaint- iff, and which partnership was illegal. Enforcing agreement. — An agreement for an illegal partnership will not be enforced even if it has been partly performed. Ewing v. Osbaldiston (n) is a good instance of this. There the plaintiff and the defendant agreed to be- come partners in a theater. The plaintiff advanced part of the money, and the defendant applied it in part payment for a lease of the theater. The lease was afterwards as- signed to him alone. The defendant did not perform his part of the agreement, and the plaintiff accordingly filed a bill against him. The bill prayed that it might be declared that the plaintiff and the defendant were partners in the theater and in the lease thereof, and that the agreement made between the plaintiff and the defendant might be per- formed, and, if necessary, that the partnership might be dissolved and the usual accounts taken. The agreement, however, was illegal, by 10 George 2, chapter 28, and the bill was dismissed. It was decided, on appeal, that the agreement being illegal it was impossible for the court to decree its specific performance; and that if the plaintiff sought to recover back *the money he had [*103] paid, he could not do so in that suit, as (even if he Smith v. Anderson, 15 Ch. D. 247, (I) 5 Bing. 248; 10 B. & C. 826; on the necessity of registration, and 1 CI. & Fin. 39. would have been rightly decided if (m) 5 B. & C. 108. the association had required regis- (n) 2 M. & Cr. 53. tration. *103 CONTRACTS OF PARTNERSHIP. [BOOK I. bad a lien on the property for the money, which the court denied) the bill did not seek to enforce such lien. Actions by an illegal partnership. — If a partnership is illegal its members cannot maintain any action in respect of any transaction tainted with the illegality. 1 For exam- ple, if a partnership is formed for selling smuggled goods, it cannot recover the price of any smuggled goods which it may have sold, (p) So an illegal loan society cannot re- cover money it has lent, {p) But an illegal partnership can prosecute a person stealing its property, (q) Actions against an illegal partnership. — The illegality of a partnership affords no reason why it should not be sued. It cannot indeed be effectually sued by any person who, being aware of all the facts, seeks to enforce a demand arising out of a transaction tainted with the illegalit}' which affects the firm; (r) but the illegality of the firm does not per se afford any answer to a demand against it, arising out of a transaction to which it is a party, and which trans- action is legal in itself. Unless the person dealing with the firm is particeps criminis there can be no turpis causa to bring him within the operation of the rule ex turpi causa non oritur actio; and he, not being implicated in any ille- gal act himself, cannot be prejudiced by the fact that the persons with whom he has been dealing are illegally asso- ciated in partnership, (s) So, if a partnership or company has been established by 1 Where persons enter into a co- (p) Shaw v. Benson, 11 Q. B. D. partnership with the fraudulent 563; Jennings v. Hammond, 9 id. purpose of hindering or delaying 225. the creditors of one of the parties (q) See R. v. Frankland, L. & C. in the collection of their debts, such 276; 9 Jur. N. S. 388; 32 L. J. persons cannot maintain an action M. C. 69. of trespass quare clausum f regit (r) Re South Wales Atlantic jointly against a person who forci- Steamship Co. 2 Ch. D. 763. bly enters the storehouse and seizes (s) See the judgment of Mellish, the goods. McPherson v. Pember- L. J., in the last case, and Brett v. ton, 1 Jones, L. 378. Beck with, 3 Jur. N. S. 31, M. R. (o) See Biggs v. Lawrence, 3 T. R. 454. 224 CH. V, SEC. 11.] ILLEGAL PARTNERSHIPS. *10± fraud, and persons have been induced, to join it by false and fraudulent representations, still the fraud so perpetrated affords no answer to a creditor of the firm, (t) unless that creditor has himself been party to the fraud, (u) Moreover, where a company has been established by fraud, and where it has been engaged in illegal transactions, the inno- cent shareholders *are nevertheless liable amongst [*1(M] themselves to contribute if necessary to the payment of the debts of the company; for such shareholders are not so in delicto as to preclude any one of them from call- ing on the others to share the losses to which he and they are liable, (a?) Actions for contribution, etc. — Waiver of illegality. — The most important consequence, however, of illegality in a contract of partnership is that the members of the part- nership have no remedy against each other for contribution or apportionment in respect of the partnership dealings and transactions. 1 However ungracious and morally reprehen- sible it may be for a person who has been engaged with another in various dealings and transactions to set up their illegality as a defense to a claim by that other for an ac- count and payment of his share of the profits made thereby, such a defense must be allowed to prevail in a court of jus- tice. Were it not so, those who — ex hypothesi — have been guilty of a breach of the law would obtain the aid of the law in enforcing demands arising out of that very breach ; and not only would all laws be infringed with impunity, but, what is worse, their very infringement would become (t) Henderson v. The Royal Brit, and on settlement one partner is Bank, 7 E. & B. 356. charged the price of them, and au- (m) See Batty v. M'Cundie, 3 C. & thorized to pay certain debts in- P. 203. curred in their purchase, the other (x) See Longworth's Ex. Case, partner, when sued for contribu- Johns. 465, affirmed 1 De G. F. & tion, cannot set up the liquor law J. 17. in defense of the items paid for 1 Where articles of partnership such debts. McGunn v. Hamlin, contemplate the sale of liquors, and 29 Mich. 476. stock on dissolution contains them, Vol. 1 — 15 225 *105 CONTRACTS OF PARTNERSHIP. [BOOK I. a ground for obtaining: relief from those whose business it is to enforce them. For these reasons, therefore, and not from any greater favor to one party to an illegal transac- tion than to his companions, if proceedings are instituted by one member of an illegal partnership against another in respect of the partnership transactions, it is competent to the defendant to resist the proceedings on the ground of illegality, (y) There are indeed some old cases in which this defense was not allowed to prevail; (z) but they have -been long overruled, (a) Moreover, if the illegality is brought to the notice of the court, it will of its own accord decline to interfere between the parties, although there may be no desire on their part to urge such an objection, (b) Illegality a defense at law.— When partnerships [*105] of marine insurers were illegal, it was *held that if one member of a firm of such insurers paid all the losses sustained by the firm he could not recover any part of the money paid from his copartners; (c) and that if the premiums were received by one only, the others could not obtain their shares from him. (d) So, where there was an express covenant to pay such shares, the covenant was held to be invalid by reason of the illegality which tainted it; (e) and even where an arbitrator had awarded what was to be paid by one partner to the other, it was held that the award could not be enforced. (/) These cases are of un- doubted authority, and are always referred to as such. although the particular ground of illegality on which they rested no longer exists. It has indeed been held, in one or two cases of illegal partnership, that if one partner has paid losses at the special request of the other, who promised to pay his share afterwards, an action for such share may (y) SeeSykea v. Beadon, 11 Ch. D. (b) Evans v. Richardson, 3 Mer. 170; Holnian v. Johnson, 1 Cowp. 469. 341 ; Thomson v. Thomson, 7 Ves. (c) Mitchell v. Cockburn, 2 H. 470; Cousins v. Smith, 13 Ves. 544. Blacks. 380. (z) Dover v. Opey, 2 Eq. Ca. Ab. (d) Booth v. Hodgson, 6 T. R. 403. 7; Watts v. Brooks, 3 Ves. 611. (e) Lees v. Smith, 7 T. R. 338. (a) See the cases cited infra. (/) Aubert v. Maze, 2 Bos.& P. 371. 226 CII. V, SEC. II.] ILLEGAL PARTNERSHIPS. *106 be sustained; (g) but these cases cannot be reconciled with others, and must be taken to be overruled. In De Begnis v. Armisfead, (A) the plaintiff and the defendant entered into an illegal agreement for bringing out an opera and dividing the profits arising from it. By the agreement the plaintiff was to pay the singers, and the defendant was to provide a theater and pay the dancers. This was done; but instead of profits there were losses, and on the whole account a balance was found due to the plaintiff. A bill for the balance was given by the defendant, and it was proved that the balance was made up of different sums paid by the plaintiff at the defendant's request. It was never- theless held that, the original agreement being illegal, the plaintiff could not recover the balance in question, either on the bill or the common money counts. Illegality a defense to an account. — Nor can an action for an account be sustained bv one member of an illegal partnership against another in respect of its dealings and transactions, (i) 1 Thus if an association is *ille- plOG] (g) See Petrie v. Hannay, 3 T. R. Parties in Brownsville, in 1864, 418; Faikney v. Reynous, 4 Burr, made a partnership for purpose of 2070. shipping merchandise from Mata- (?i) De Begnis v. Armistead, 10 moras, in Mexico, to Texas, with a Bing. 107. See Fisher v. Bridges, view to obtaining cotton. In 1866 3 E. & B. 643, reversing S. C. 2 id. the parties on settlement adjusted 118. their accounts, one executing his (i) Knowles v. Haughton, 11 "Ves. notes to the others. Held, that the 168; Armstrong v. Armstrong, 3 M. vice of illegality would not follow & K. 45 ; Harvey v. Collett, 15 Sim. into the notes, nor be a defense to 332. an action thereon. De Leon v. 1 After a partnership contract Trevino, 49 Tex. 89. confessedly against public policy If a part of a partnership busi- has been carried out, and money ness be legal and a part illegal, the contributed by one of the partners court, in an action to settle the af- has passed into other forms, a part- fairs of the partnership, may take ner, in whose hands the profits are, charge of that which is legal, and cannot refuse to account for and appoint a receiver therefor. An- divide them, on the ground of the derson v. Powell, 44 Iowa, 20. illegal character of the original One cannot sustain an action contract. Brooks v. Martin, 2 Wall, against his partner for an account 70. See Crescent Ins. Co. v. Baer, and recovery of profits made in 1 So. Rep. 318. Confederate money transactions; 227 *106 CONTRACTS OF PARTNERSHIP. [COOK I. gal by reason of non-registration under the Companies Act, 1862, an action cannot be sustained by its members against its trustees for the execution of their trust, nor to make them responsible for losses arising from breaches of trust, (k) Concealed illegality. — Moreover, if it can be shown that the purpose with which a partnership was formed was ille- gal, the consequences of illegality will follow, however skilfully the true purpose may have been concealed; {I) and parol evidence may be given to show the existence of the illegality, however formally the partnership agreement may have been drawn up, and however successful the par- ties may have been in making that agreement legal on the face of it. (m) Illegality, when not a defense. — In order, however, that illegality ma} 7 be a defense, it must affect the contract on which the plaintiff is compelled to rely, in order to make out his right to what he asks. 1 It by no means follows, from the circumstance that money has been obtained in breach of some law, that therefore whoever is in possession of such money is entitled to keep it in his own pocket. Effect of illegality on the right to recover back sub- scriptions. — If money is paid by A. to B. to be applied by nor can such an action be sustained 707 ; Armstrong v. Armstrong, 3 M. in respect of profits which may & K. 53. have been realized on dealings of (m) See Collins v. Blantern, 2 a lawful character, when the latter Wils. 341, and 1 Sm. L. Ca., and were so blended with Confederate the notes there, money dealings that it is impossible 1 When one partner, without the to so separate the one class from knowledge of the other, borrows the other as to give effect to the money at usurious interest, and ex- legal transactions alone. Zane v. ecutes a note in the name of the Thomas, 37 Tex. 157. See, how- firm, and afterwards pays the usu- ever, to the contrary, Pfeiffer v. rious interest, and the other part- Maltby, 38 Tex. 523. ner, ignorant of the payment of the (fc) Sykes v. Beadon, 11 Ch. D. usury, executes his own note in 170, is an authority for this propo- lieu of the other, he cannot, when sition, although overruled on an- sued upon it, set up as a defense other ground, ante, p. 101. the payment of usury by his part- (l) Stewart v. Gibson, 7 CI. & Fin. ner. Jones v. Jackson, 14 Ala. 186. 228 CH. V, SEC. II.] ILLEGAL PARTNERSHIPS. *107 him for some illegal purpose, it is incompetent for A. to re- quire B. to band back tbe money if be, B., has not already- parted with it, (n) and the illegal purpose has not been car- ried out. (o) Although, therefore, the subscribers to an illegal company have not a right to an account of the deal- ings and transactions of that company and of the profits made thereby, they have a right to have their subscriptions returned; (p) and even though the moneys sub- scribed have been laid out in the purchase of *land [*107] and other things for the purpose of the company, the subscribers are entitled to have that land and those things reconverted into money, and to have it applied as far as it will go in payment of the debts and liabilities of the concern, and then in repayment of the subscriptions. In such eases no illegal contract is sought to be enforced; on the contrary, the continuance of what is illegal is sought to be prevented. (r the * money received by them on behalf of the company and for the use of its members. Illegality set up by executors. — An executor or admin- istrator of a deceased partner cannot protect himself from accounting for the estate of the deceased by setting up against his creditors, legatees, or next of kin, the illegality of the transactions in which the deceased may have been concerned, (it) That has nothing to do with their claims; and the reasons upon which the maxim ex turpi causa noti oritur actio is founded evidently have no application to such a case. Even if the executor was one of the deceased's copartners, and was thus mixed up with him in the illegal transactions, still if the share of the deceased in the gains arising from them has actually been placed to his credit in the partnership books and has come or might have come to the hands of the executor as such, he must account for that share, (x) But if there has been no account settled it (s) 2 Ph. 801, recognized in Sbep- (u) See Joy v. Campbell, 1 Sen. paid v. Oxenford. 1 K. & J. 491. & Lef. 339; Hale v. Hale, 4 Beav. Compare Sykes v. B?adon, 11 Ch. 369. I). 170. (x) See Joy v. Campbell, 1 Sch. & (0 1 K. & J. 491. See, too, Butt Lef. 328. v. Monteaux, id. 93. 230 CH. V, SEC. II.] ILLEGAL PARTNERSHIPS. *109 would seem that the executor may in his character of part- ner rely on illegality and decline to come to any account in respect of the gains in question, (y) Illegal trusts. — But notwithstanding Tenant v. Elliot, Sharp v. Taylor, and other cases of that class, illegal trusts will not be enforced. Sykes v. Beadon, (z) already referred to, is a clear authority for this proposition. Another au- thority is Ottley v. Browne, (a) There A., who was a share- holder with B. and others in two companies, wished to become a banker ; and in order to evade a statute which rendered it illegal for a banker to be a partner in commer- cial undertakings, (5) A. assigned his shares to B. in trust for himself. B., who carried on a separate trade, was made bankrupt, and his assignees sold all his shares in the above companies, and also the shares held by him in trust for A. A. then filed a bill against B.'s assignees, praying that they might be declared trustees of these last shares for him, A., and that they might be ordered to pay the value -thereof to him, or that he might be at liberty to [*109] prove for such value against B.'s estate; but the bill was dismissed with costs, on the ground that it sought to enforce a secret trust, which was directly against a positive law. (c) Indictment. — Before quitting the subject of the conse- quences of the illegality of a partnership the risk of crim- inal prosecution ought to be mentioned. Persons engaged in an illegal business, whether partners or not, and whether incorporated or not, are liable to be punished criminally; (d) and even where the object of a society is not illegal, its (y) See Ottley v. Browne, 1 Ball (c) The same principle is illus- & Bea. 360; and compare Sharp v. trated by Thomson v. Thomson, 7 Tayloe, 2 Ph. 801. Ves. 470, which, however, was not (z) 11 Ch. D. 170, ante, p. 105. a partnership case. (a) 1 Ball & Bea. 360. And see (d) See the title Conspiracy in Ex parte Mather, 3 Ves. 373. Russell on Crimes, and Archbold's (b) 29 Geo. 2, ch. 16 (Irish). Criminal Law. 231 *109 CONTRACTS OF PARTNERSHIP. [BOOK I. directors and managers will do well to bear in mind that, if they wilfully violate the provisions of an act of parlia- ment, they are guilty of a misdemeanor, and are liable to be indicted accordingly, (e) (e) See Lord Campbell's observations in Longwortb's Ex. Case, 1 DeG. F. & J. 81. ^CHAPTER VI. [*U0] OF THE GENERAL NATURE OF A PARTNERSHIP. Section I. — Of the Mercantile and the Legal Notion OF A FlKM. Mercantile view of a firm. — Partners are called collect- ively a firm. Merchants and lawyers have different no- tions respecting the nature of a firm, (a) Commercial men and accountants are apt to look upon a firm in the light in which lawyers look upon a corporation, i. e., as a body dis- tinct from the members composing it, and having rights and obligations distinct from those of its members. Hence, in keeping partnership accounts, the firm is made debtor to each partner for what he brings into the common stock, and each partner is made debtor to the firm for all that he takes out of that stock. In the mercantile view, partners are never indebted to each other in respect of partnership transactions, but are always either debtors to or creditors of the firm. Owing to this impersonification of the firm there is a tendency to regard its rights and obligations as unaffected by the introduction of a new partner, or by the death or retirement of an old one. Notwithstanding such changes among its members, the firm is considered as continuing the same ; and the rights and obligations of the old firm are (a) See on this subject Cory's need of its legal recognition," in Treatise on Accounts (2d ed. 1839, the second volume of the Papers Pickering), a valuable work, but, it read before the Juridical Society, is believed, not so widely known as page 40. To both of these the it should be. See, too, a paper by writer desires to acknowledge his J. M. Ludlow, Esq., "On the mer- obligations, cantile notion of the firm, and the 233 Ill CONTRACTS OF PARTNERSHIP. [book regarded as continuing in favor of or against the new [*111] firm as if no changes had '-occurred. The partners are the agents and sureties of the firm : its agents for the transaction of its business; its sureties for the liqui- dation of its liabilities so far as the assets of the firm are insufficient to meet them. The liabilities of the firm are regarded as the liabilities of the partners only in case they cannot be met by the firm and discharged out of its assets. Legal view of a firm.— But this is not the legal notion of a firm. The firm is not recognized by lawyers as distinct from the members composing it. (b) l In taking partnership (b) Ex parte Gliddon, 13 Q. B. D 43; Hoare v. Oriental Bank Cor- poration, 2 App. Ca. 589, illustrate this. And see per James, L. J., in Ex parte Corbett, 14 Ch. D. 12G. 1 Authority to tax all persons ex- ercising any profession may be executed by taxing each member of a law firm separately. The member cannot require that the firm shall be taxed and not him- self, though he does not practice otherwise than as a partner. Lanier v. The Mayor, 59 Ga. 187. Personal property belonging to a firm is assessable in the locality where it is, if the firm has its place of business there. Williams V. Saginaw, 51 Mich. 120. Before the value of the interest of decedent in a firm has been as- certained, and before any account- ing between the executors and the firm of which decedent was a mem- ber, the executors cannot be as- sessed for taxes for the interest of decedent in said firm, within the meaning of chapter 392, Statutes of 1883, or section 3 of Revised Statutes (7th edition), 982, defining what property shall be subject to taxation. People v. Coleman, 44 Hun (N. Y.\ 20. Where the special tax for one year required by Revised Statutes of United States, section 3232, has been paid by a firm of brewers, which, before the expiration of the year, was dissolved by the retire- ment of one partner, the other may carry on the same business in the same place for the remainder of the year without again paying such tax or any part thereof. United States v. Glab, 99 U. S. 225. The amount of a tax assessed upon the property of a firm after its dissolution, paid under protest by one partner, cannot be recovered back by him if the facts do not show that, at the time the tax was assessed, affairs of the firm had been wound up or that there was no taxable property of the firm un- disposed of. Oliver v. Lynn, 130 Mass. 143. As to the place of business for purposes of taxation of a firm hav- ing factories in several places, see Barker v. Watertown, 137 Mass. 227. Township taxes assessed on the personal property of the partnership can only be assessed in the town- ship where the firm has a place of business (Comp. L., sec. 978). McCoy r. Anderson, 47 Mich. 502. 234 CH. VI, SEC. I.] GENERAL NATURE OF A PARTNERSHIP. "112 accounts and in administering partnership assets, courts have to some extent adopted the mercantile view, and actions may now be brought by or against partners in the name of their firms; (c) but speaking generally, the firm as such has no legal recognition. The law, ignoring the firm, looks to the partners composing it; any change amongst them destroys the identity of the firm; what is called the property of the firm is their property, and what are called the debts and liabilities of the firm are their debts and their liabilities. In point of law a partner may be the debtor or the creditor of his copartners, but he cannot be either debtor or creditor of the firm of which he is himself a member, (d) A member of an ordinary partnership fills a- double char- acter: he is both a principal and an agent. As a principal he is bound by what he does himself and by what his co- partners do on behalf of the firm, provided they keep within the limits of their authority; as an agent he binds them by what he does for the firm, provided he keeps within the limits of his authority. But a partner is not the surety of the firm. Every member of an ordinary partnership, how- ever numerous the partners may be, is liable as a principal to have his private property seized for a partnership debt, whether the firm has assets to pay it or not; and not only so, but the property of the firm is liable to be seized for the private debts of any of *the partners com- [*112] posing it. (e) This non-recognition of the firm, in the mercantile sense of the word, is one of the most marked differences between partnerships and incorporated com- panies. (c) Rules of Sup. Ct., Orel, xvi, England, 4 M. & Cr. 171, 172; and rule 14; Bank. Act, 1883, § 115, and De Tastet v. Shaw, 1 B. & A. 664. Bank. Rules, 18S6, r. 259. (e) See Execution, in book ii, (d) See Lord Cottenham's judg- ch. 3, g 4. ment in Richardson v. The Bank of 235 112 CONTRACTS OF PARTNERSHIP. [BOOK I. Section II. — Consequences of the Non-recognition of the Firm in the Mercantile Sense. 1. Generally as regards its name. Name of a firm. — It follows from the foregoing remarks that the name under which a firm carries on business is in point of law a conventional name applicable only to the persons who, on each particular occasion when the name is used, are members of the firm. (/) When a firm is spoken of by its name or style, evidence is admissible to show who in fact constituted the firm at the time in question; (g) and if persons trade or carry on business under a name, style or firm, whatever may be done by them under the name is as valid as if real names had been used. 1 This is seen every ( f) A firm is usually described in legal proceedings as certain persons trading or carrying on business under, and using tbe name, style, and firm of, etc. As to the suffi- ciency of this description, see Smith v. Ball, 9 Q. B. 361. (g) Carruthers v. Sheddon, 6 Taunt. 15; Bass v. Clive, 4 M. & S. 13; Stubbs v. Sargon, 2 Keen, 255, and 3 M. & Cr. 507; Latouche v. Waley, Hayes & Jones (Ir. Ex.), 43. 1 The partnership name repre- sents the constituents of the firm, and when it is rightly pledged the respective partners are jointly bound. Gates v. Fisk, 45 Mich. 522. The parties to a copartnership may give it just such a name as they please, and all contracts or obligations or notes, made with or given to such firm, may be prose- cuted in the individual names of its members. Crawford v. Collins, 45 Barb. 2G9; S. C. 30 How. Pr. 398. See Fii-st Nat. Bank v. Freeman, 47 Mich. 408. A firm may do business under the name of one of the partners alone, and can sue in all their names on contract made in the name cf such one alone. Martin v. John- son, 8 Daly, 541; Mohawk Nat. Bank v. Van Slyck, 29 Hun, 188. Where a partnership business is done in the name of an individual member of the firm, the burden is upon one seeking to charge the co- partnership upon a note given for money loaned, executed in the name of such individual member, to show that the money was bor- rowed for or appropriated to the use of the firm, or at least that the name was in fact used for the firm. Gernon v. Hoyt, 90 N. Y. 631. Where there is no statute prohib- iting the use of a name or abbrevi- ation other than that of the indi- vidual, there is no presumption of partnership from the use of " & Co." after dealer's name. Bren- nan v. Paid ridge, 11 West. Rep. (Mich.) 542; S. C. 35 N. West. Rep. 85. One who contracts debts in a 236 CH. VI, SEC. II.] GENERAL NATURE OF A PARTNERSHIP. '112 day in the case of bills of exchange and promissory notes; and even in the case of more formal instruments, there is no firm name and receives the benefits to be derived from a partnership name cannot divest himself of the burdens incident thereto as respects the right to bring an action in the county in which the alleged firm was doing business, although the firm consists of himself alone. Roseubaum v. Hayden, 36 N. West. R p. Neb.) 147. A company claiming to have been incorporated under the laws of an- other state commenced doing busi- ness in this state under its assumed corporate name; subsequently an- other company became incorpo- rated by the same corporate name as the former, under the laws of this state, and commenced business in the same city in which the for- mer company was already estab- lished. The company organized under the laws of this state sought to restrain the persons composing the other company from continu- ing to do business under the corpo- rate name, alleging that the de- fendant's pretended corporation no longer existed ; but it was held that was not sufficient ground for the relief sought. If the defendants were no longer incorporated, or if their original organization as a cor- poration was illegal, they still had a right to prosecute their business as partners, and under any name they might adopt. Ottoman Cah- vey Company v. Dane, 95 111. 203. Persons doing business under a corporate name, if not a corpora- tion, are, it is said, a partnership. Hoi brook v. St. Paul F. & M. Ins. Co. 25 Minn. 229. The mere assumption by a firm of a name appropriate for a corpo- ration is no violation of section 220 of the Criminal Code; nor would the putting forth of a sign or ad- vertisement in which a corporate name is assumed constitute such a violation if not done for the pur- pose of soliciting business. Edger- ton v. Preston, 15 Bradw. 23. The mere fact that an abbrevi- ated form, as " Chas. & Wm. Feickert," instead of "Charles Feickert and William Feickert," is used in describing the payees of a note, does not as a matter of law authorize the public to assume they were partners. Ryhiner v. Feick- ert, 92 111. 305. It is not necessary that a firm name should be agreed upon in partnership articles. If there was evidence of an agreement to buy and sell on joint account for mut- ual profit, and if one, with the knowledge and assent, express or implied, of the other, was in the habit of using a certain name, it is sufficient to fix the liability of the firm upon a note signed with that name. Parsley v. Ramsey, 31 Ga. 403. It is not necessary that two firms in different localities, entering into an agreement in express terms cre- ating a partnership for the carrying on of a special business, should adopt any partnership or firm name. Wright v. Hooker, 10 N. Y. 51. There is no presumption of law or fact that a firm name includes more than one person ; and if it is desired that the names of plaintiffs should be shown, the fact of part- 237 ■112 CONTRACTS OF PARTNERSHIP. [BOOK I. doubt of their validity, although some of the executing par- ties may be described as A. & Co. (A) 1 So partners may be nership must be put in issue by verified plea. Robinson v. Magar- ity, 28 111. 423. The use of " and company " after a firm name creates a presumption that there is a partner not named, which, however, may be overcome by positive proof. "Whitlock v. McKechnie, 1 Bosw. 427. An assignment of a note and mortgage to third persons named, constituting the firm of W. & P., stating that it assigned the instru- ment to the "said W. & P.," etc., the indebtedness intended to be secured being to the firm of W. & P., is an assignment to the firm and not to its individual members. Potter v. Strausky, 48 Wis. 235. A partnership alleged to be com- posed of two persons under the name of " McCormick & Lewis," and a partnership alleged to be composed of three, "McCormick, Lewis & Co.," will not be presumed to be the same firm in the absence of allegation or proof of their identity. Harrison v. McCormick, 69 Cal. 616. The rights and liabilities of a partnership, as a rule, are not affected by a change in its name unaccompanied by a change in its members. Gill v. Ferris, 82 Mo. 156. In New York the use of a firm name not representing actual ex- isting partners is by statute made illegal, except by the remaining members of a former firm, who shall file a certificate with the county clerk showing who the re- maining partners are, etc. A firm cannot enforce a contract made by them while using such illegal firm name. Lunt v. Lunt, 10 N. Y. Weekly Dig. 329. See ante. Where a husband and wife had formed a partnership and done business under the name of A. & Co., held, that they had not vio- lated the statute (L. 1883, ch. 281) to prevent persons from transact- ing business under fictitious names, and that they could recover in a suit in their joint names for goods sold and delivered by them in such partnership name. Zimmerman v. Erhard, 8 Daly, 311. (h) See Maughan v. Sharpe, 17 C. B. N. S. 443, a mortgage ; Brut- ton v. Burton, 9 Chitty, 707, a war- rant of attorney ; Evans v. Curtis, 2 C. & P. 296, an agreement for a lease ; Moller v. Lambert, 2 Camp. 548, a bond ; Gorrie v. Woodley, 17 Ir. Com. L. Rep. 221, a guaranty; Latouche v. Waley, Hayes & Jones (Ir. Ex.), 43. How far the firm is bound by instruments on which its true name does not appear will be seen hereafter. And see as to the parties to sue on a covenant with a firm, Metcalf v. Rycroft, 6 M. & S. 75, noticed infra, book ii, ch. 3. iUpon the formation of a part- nership, until a firm name is adopted, the presumption must be that in the transaction of the firm business each member is the agent of the others to transact the busi- ness, even to the signing of the names of the several members of the firm to writiugs executed in the legitimate business of the firm. Kitner v. Whitlock, 88 111. 514. By a partnership agreement be- 238 CH. VI, SEC. II.] GENERAL NATURE OF A PARTNERSHIP. *113 registered as shareholders in the name of their firm; (i) and under the Copyright Act, 5 and 6 Victoria, chapter 45, *and Engravings Act, 8 George II, chapter 13, [*113] section 1, it is sufficient to register a book in the name of the firm, (j) or to print the name of the firm of proprietors under the engravings. (Jc) Effect of change amongst the partners — Legacy to a firm. — But as the name of the firm is only a conventional mode of designating the persons composing it, any varia- tion amongst these persons is productive of a new significa- tion of the name. If, therefore, a legacy is left to the firm, the legacy is payable to those who compose the firm at the time the legacy vests ; (!) and if a legacy is left to the representatives of an old firm, it will be payable to the exec- utors of the last survivor of the partners constituting the firm alluded to, and not to its successors in business. {?ri) Advances to a firm. — Again, if trustees are authorized to lend money to a firm, and, after the death or retirement of one of the members, the trustees lend to the remaining members, this, it seems, would be a breach of trust on the part of the trustees. (;i) tween two, no firm name was ex- Ontario Bank v. Hennessey, 48 N. pressly adopted, but one partner Y. 545. was to give his personal attention (i) Weikersheirn's Case, 8Ch. 831. to and have entire control and (j) Weldon v. Dicks, 10 Ch. D. management of the business, with 247. authority to arrange and negotiate (k) Rock v. Lazarus, 15 Eq. 104. the acceptance of drafts, the other {I) See Stubbs v. Sargon, 2 Keen, to incur no risks and to assume no 253, and 3 M. & Cr. 507. In May- responsibility. Held, that it might berry v. Brooking, 7 De G. M. & G. be inferred that the copartnership 673, a legacy of a debt due to A. business was to be done in the was held to pass A.'s interest in a name of the first partner, and the debt due to him and his copartners, other be held liable upon a draft See, also, Ex parte Kirk, 5 Ch. D. drawn by him in his individual 800. name, procured to be discounted (m) Leak v. MDjwall, 3 N. R. by him for the benefit of the firm, 185, M. R. ; Kerrison v. Redding- and avails applied to its use; al- ton, 11 Ir. Eq. 451. See Greville though at the time the draft was v. Greville, 27 Beav. 594. discounted the second partner was (n) See Fowler v. Raynal, 2 De not known to the payee as such. G. & Sm. 749, and 3 M. & G. 500. 239 *114 CONTRACTS OF PARTNERSHIP. [book I. Agency. — An authority given to two partners to insure in their names does not authorize an insurance in the names of themselves and a third person afterwards taken into partnership with them, (o) So, if there be a firm, A., B. and C, and it has an agent D., and C. retires from the firm, though D. may continue the agent of the firm, he is no longer the agent of C, but only of A. and B. (p) 1 In Tosher v. Shepherd, two partners had appointed an agent for four years and a half. One of the partners having died before the expiration of that time, it was held that the sur- viving partner was under no obligation to continue the agent in his employ. The court held that the appointment ["114] had reference to the existing partnership only, *and that the contract was intended to be for four years and a half, provided the parties so long lived, {g) (o) Barron v. Fitzgerald, 6 Bing. N. C. 201. But of course a con- tinuance of the authority may be inferred from the dealings of the person giving it with the changing firms. See Pariente v. Lubbock, 8 De G. Mc. & G. 5. (p) See Jones v. Shears, 4 A. & E. 832. lr The agent of a partnership is not the agent of the partners indi- vidually, but of the firm collect- ively. Johnston v. Brown, 18 La. Ann. 330. Dissolution revokes the power of any agent previously acting for the firm. Bank of Montreal v. Page, 98 111. 109. A revocation of the agency is effected by the death of the prin- cipal or a member of the firm, even though the agency arises from the fact of tbe existence of a partner- ship between the principal and agent. Travers v. Crane, 15 Cal. 12; Marlett v. Jackman, 3 Allen, 287; Johnson v. Wilcox, 25 Ind. 182. See, however, Bank of N. Y. v. Vanderhorst, 32 N. Y. 553, where it was held that where an agent of a firm, authorized to draw its moneys from the bank and apply the same to the uses of the firm, continues to do so after the death of one of the members thereof, without knowledge on his part, or on the part of the bank, of such death, he acts within the scope of his authority, and his acts bind the firm. See, also, "Wilson v. Stew- art, 5 Pa. L. J. Rep. 450. So a dissolution of a partner- ship revokes a power of attorney given by the firm. Schlater v. Winpenny, 75 Penn. St. 321. But a mere change in the name of a firm, when the firm under a new name is composed of tbe same members as that under the old one, does not revoke an agency con- ferred upon it. Billingsley v. Daw- son, 27 Iowa, 210. (q) Tasker v. Shepherd, 6 H. & N. 575. 240 CH. VI, SEC. II.] GENERAL NATURE OF A PARTNERSHIP. *114: Offices held by a firm. — Upon the same principle — namely, that the name of the firm is only a conventional name for its members — if a firm is appointed by its mer- cantile name to any office, e. c/., the office of trustee, guard- ian or executor, the partners in the house at the time of its appointment to the office are the persons who, in point of law, are considered as filling it. (r) The firm, as such, can- not hold an office; nor can rights, personal to the members of a given firm, be exercised by new members who may be introduced into it, (s) nor by its successors in business; (f) unless they are clearly intended to exercise them. Protection of name. — The name by which a firm is known is not of itself the property of the firm, and there is nothing at common law to prevent persons from carrying on business in partnership under any name they please l (unless perhaps it purports to be the name of a corpora- tion), (u) But one firm is not at liberty to mislead the public by so using the name of another firm as to pass off themselves or their goods for that other, or for the goods of that other, (x) (r) De Mazar v. Pybus, and Knud- the firm's name, is no defense to son v. Pybus, 4 Ves. 649. an action by such owner against a (s) See Barron v. Fitzgerald, 6 railroad corporation for loss of or Bing. N. C. 201 : Stevens v. Ben- damage to the property while in ning, 1 K. & J. 168. transit. The said act, being highly (t) Hole v. Bradbury, 12 Ch. D. 886. penal, will not be extended by im- 1 See ante. plication or construction to cases The law of Louisiana, prohibit- not within the terms of the act ing an individual from doing busi- fairly interpreted. Wood v. Erie ness under a firm name, does not Railway Company, 72 N. Y. 196. affect a person residing in another (u) See as to this, mite, p. 93. state. Succession of Bofenchen, (x) See Lee v. Haley, 5 Ch. 155 ; 29 La. Ann. 711. Massam v. Thorley's Cattle Food The fact that the owner and ship- Co. 12 Ch. D. 748, reversing S. C. per of property is doing business 6 Ch. D. 574 ; Burgess v Burgess, 3 in the name of a firm in violation D. G. M. 896. See, also, Singer of the provisions of the act of New Machine Manufactures v. Wilson, York (ch. 281, Laws of 1833), "to 3 App. Ca. 376, and Singer Man. prevent persons transacting busi- Co. r. Loog, 18 Ch. D. 395, and 8 ness under fictitious names," and App. Ca. 15 ; Braham v. Beachim, that the property is marked with 7 Ch. D. 848. Vol. I— 16 241 *115 CONTRACTS OF PARTNERSHIP. [BOOK I. Moreover, an established firm can prevent a company from registering itself under the name of the firm, (y) Name and trade-mark. — The name of a firm may more- over be registered as a trade-mark for particular classes of goods (46 and 47 Yict. ch. 57, §§ 64 and 65) ; and if so regis- tered it is capable of being assigned in connection with the good-will of the firm (§ 70). Eegistration is equiva- [*115] lent to antecedent use (§ 75). Provision is made *to prevent the improper registration of the same trade- mark by several persons (§ 72). Changes and mistakes in name of a firm. — Speaking generally, the rights and liabilities of a firm cannot be af- fected by a change in its name unaccompanied by a change amongst its members. Kegarded as a trade-mark, and in connection with good-will, a change in name may be at- tended by important consequences, but in other respects it matters little ; for so long as there is no change amongst the members, the different names they assume all denote the same persons. It must not, however, be concluded that one partner can bind his copartners by using a name under which he and they do not carry on business, and the use of which they have not sanctioned ; and as will be seen hereafter, he has no power so to bind them. 0) Moreover, a mistake in the name of a firm may be important; e. g., under the Copyright Act, if the owners of a copyright carry on business in partnership and are not registered properly, they cannot sue for an infringement, (a) 2. In legal proceedings. Actions by and against firms. — The non-recognition of the firm, in a mercantile sense, was very apparent when it had to sue or be sued at law, for: (y) Hendriks v. Montagu, 17 Ch. ton, 9 M. & W. 284, and other cases D. 638. The Copyright Acts have of that class, noticed infra, book ii, no application to mere names. See ch. 1, § 5. Maxwell v. Hogg, 2 Ch. 307. (a) Low v. Routledge, 1 Ch. 42. (z) See as to this, Kirk v. Blur- 242 CH. VI, SEC. II.] GENERAL NATURE OF A PARTNERSHIP. *116 1. A firm could neither sue nor be sued otherwise than in the names of the partners composing it. (5) 2. Consequently, no action could be brought by the firm against one of its partners, nor by one of its partners against it; for in any such action one person, at least, would appear both as plaintiff and as defendant, and it was considered absurd for any person to sue himself even in form, (c) 3. For the same reason, one firm could not bring an action ^against another if there were one or more [*116] partners common to both firms, (d) So, if one member of a firm drew a bill on the firm, and the bill was accepted in the name of the firm, the drawer could not sue the firm on such a bill ; for he, as one of the firm, was liable as an acceptor, and ought, therefore, to be a defendant to the action in which he was plaintiff, (e) The extent to which these rules have been modified by modern legislation will be examined hereafter, {f) They are alluded to here in order to show the logical conse- quences which flow from the non-recognition of any such entity as a firm. In bankruptcy, however, the firm is often recognized, as will be seen hereafter. Effect of change in a firm on its rights and liabilities. — Another most important consequence of the principle that on any change amongst the persons composing a partner- ship there is in fact a new partnership, and not a mere con- tinuation of the old one, is that although, upon a change in a firm, it may be agreed between the members of the old and new firms that the rights and obligations of the old (&) See infra, book ii, ch. 3. A (d) Bosanquet v. Wray, 6 Taunt, corporation may sue in a name it 597 ; Mainwaring v. Newman, 2 has acquired by reputation. The Bos. & P. 120. Dutch West India Co. v. Moses, 1 (e) See Neale v. Turton, 4 Bing. Str. 612. As to actions by individ- 149. Compare Beecham v. Smith, uals who have assumed to act as a E. B. & E. 442, where the note sued corporation, see Coochu. Goodman, upon was the several note of the 2 Q. B. 580. defendants. (c) De Tastet v. Shaw, 1 B. & A. (/) See infra, book ii, ch. 3. 664; Richardson v. The Bank of England, 4 M. & Cr. 171, 172. 243 *117 CONTRACTS OF PARTNERSHIP [BOOK I. shall devolve upon the new partners, this has no effect upon third parties unless they accede to it. As to them it is res inter alios acta; and there is no principle by virtue of which the existing rights or obligations of non-partners can be affected, either for better or for worse, by agreements to which they are strangers. This subject will be alluded to hereafter. (g) 3. Partnership disabilities. Disabilities of one partner affecting the firm. — Speak- ing generally, no person can do by his agent what he can- not do himself; and although each member of a, firm is a principal as regards his own conduct, he is the agent of his copartners; and he cannot therefore do for the firm what they cannot do. In other words, the disability of one of the partners affects the whole firm. Illustrations of [*117] this doctrine will *be found in book II, chapter III, section 1, relating to defenses to actions by partners. Further illustrations are afforded by those cases which pre- clude a firm of solicitors or any of its members from doing work which one of the members cannot do. (h) Again, there are rules in bankruptcy which prevent the partners of the trustee, registrar or official receiver from doing various acts which they might do if they were not in partnership with him. (i) By 50 and 51 Yictoria, chapter 58, section 40, no inspector of a coal mine can be a partner in it, nor can a partner of any land agent, mining engineer, etc., be an inspector. 4. As regards sureties and securities. Effect of change in a firm on the position of its sure- ties. — It is a principle of the law of suretyship that any act on the part of the principal creditor which alters the (g) See infra, book ii, ch. 2, § 3. (i) See Bank. Act, 1883, §§ 88, 116 (h) See Duke of Northumberland (2): sched. 1, r. 26; Bank. E. 1886, v. Todd, 7 Ch. D. 777, as to swear- r. 56 (2), 113, 114. ing affidavits. 244 CH. VI, SEC. II.] GENERAL NATURE OF A PARTNERSHIP. *118 risk of the surety without his consent discharges him from future liability, (k) Sureties to a Arm. — If, therefore, a person becomes surety to a firm, it is important to ascertain whether he clearly contemplated changes in the firm and agreed to be- come surety to a fluctuating body or not. If he did, his liability is not discharged by any change amongst the mem- bers constituting the partnership at the time he became surety ;(l) but if no such intention can be shown, then a contract of suretyship entered into with a firm will be deemed to be binding so long only as the firm remains un- changed (see 19 and 20 Vict. ch. 97, § 4, on the next page); "-and consequently any change in it, whether [*118] by the death (m) or the retirement (n) of a partner, or by the introduction of a new partner (o), immediately puts an end to the surety's liability so far as subsequent events are concerned. 1 In all such cases the surety's posi- (7c) See, as to sureties, the note to Arlington v. Merrick, 2 Wms. Sauna". 414. As to the discharge of apprentices and their sureties by a change in the firm to which they are bound, see Lio\ T d v. Blackburne, 9 M. & W. 363 ; R. v. St. Martin's, 2 A. & E. 655. (0 Pease v. Hirst, 10 B. & C. 122; Metcalf v. Bruin, 12 East, 400, and 2 Camp. 422. And see Barclay v. Lucas, 1 T. R. 291, note; Kipling v. Turner, 5 B. & A. 261. In Pari- ente v. Lubbuck, 8 Da G. Mc. & G. 5, an authority to a firm of con- signees, to recognize the consign- or's son as his agent, was held to continue, notwithstanding changes in the firm, as long as the consignor continued his business connection with the firm. (m) Holland v. Teed, 7 Ha. 50; Strange v. Lee, 3 East, 484 ; Weston v. Barton, 4 Taunt. 673; Pemberton v. Oakes, 4 Russ. 154; Sinison v. Cooke, 1 Bing. 452; Chapman v. Beckington, 3 Q. B. 703; Backhouse v. Hall, 6 N. R. 98, Q. B. (u) Myers v. Edge, 7 T. R. 254 ; Dry v. Davey, 10 A. & E. 30. And see Solvency Mutual Guarantee Co. v. Freeman, 7 H. & N. 17. (o) Wright v. Russell, 2 Wm. Blacks. 934. 1 Where a mortgage is given to a firm to secure advances and the firm was subsequently dissolved by death and a new firm formed by the surviving partner and others, such mortgage will not inure to the benefit of the successor of the old firm, notwithstanding a verbal agreement to extend the obligation of mortgage so as to include debts incurred to the new firm. Taylor v. Post, 30 Hun (N. Y.), 446. A mortgage given to partners to secure them for goods sold and to be sold by them to a party, which, after dissolution, was assigned to 245 *118 CONTRACTS OF PARTNERSHIP. [BOOK I. tion and risk are altered, and whether he has in fact been damnified by the change or not, he has a right to say non in hceo feeder aveni. Sureties for a firm. — Similar doctrines apply to cases where a person becomes surety for the conduct of a firm, (p) 1 Moreover, a person who becomes surety for another is not necessarily surety for his conduct as a partner, and obvi- ously not for the conduct of himself and his copartner, (q) Effect of incorporation. — Again, if a person becomes surety to several people for the conduct of a servant in their employ, and those people are afterwards incorporated, the surety is discharged ; for the person created by the act of incorporation is different from the persons in whose em- ploy the servant was, and with whom the surety con- tracted, (r) On precisely similar grounds it is conceived that a person who becomes surety to a corporation for the conduct of one of its servants would be discharged by the amalgamation of that corporation with another; for the two one of the partners as his share of ing the time of payment without the assets, under an agreement the assent of B., quaere, whether that it should also secure such B. is not to be regarded as having partner for goods thereafter sold been a mere surety for the debt, by him to the mortgagor, held, to and as released by the taking of the be a valid security when enforced notes. Gates v. Hughes, 44 Wis. by foreclosure, both for the firm 333. debts and individual debts subse- A sui-ety on a note given after quently contracted by the mort- the dissolution of a firm, by one of gagee upon the security of the the members of the firm, in re- mortgage. Ferry v. Meckert, 32 newal of a note of the firm, on N. J. Eq. 38. ■ which also he was surety, may re- (p) Bellairs v. Ebsworth, 3 Camp, cover of the other member of the 53; University of Cambridge v. firm money which he has paid in Baldwin, 5 M. & W. 580 ; Simson discharge of the renewal note. v. Cook, 1 Bing. 452; 19 and 20 Leabo v. Goode, 67 Mo. 126. Vict. ch. 97, § 4. (q) The London Assurance Co. v. i Where, after dissolution of the Bold, 6 Q. B. 514; Montifiore v. firm of A. and B., A. assumes as Lloyd, 15 C. B. N. S. 203, where between himself and B. payment the partnership was known to the of a firm debt, and the creditor, surety. with knowledge of that arrange- (r) Dance v. Girdler, 1 Bos. & ment, accepts notes of A. postpon- Pull. N. R. 34. 246 CH. VI, SEC. II.] GENERAL NATURE OF A PARTNERSHIP. *119 together would be a different body from either of its amal- gamated members, (s) But a mere change of name conse- quent on registration with limited liability has not this effect, (t) *Mercantile Law Amendment Act. — The doctrines [*119] established in the foregoing cases have been ex- pressly sanctioned by the legislature; it being enacted by the Mercantile Law Amendment Act (u) that : " No promise to answer for the debt, default or miscarriage of another, made to a firm consisting of two or more persons, or to a single person trading under the name of a firm, and no promise to answer for the debt, default or miscarriage of a firm consisting of two or more persons, or of a single person trading under the name of a firm, shall be binding on the person making such promise in respect of anything done or omitted to be done after a change shall have taken place in any one or more of the persons constituting the firm or in the person trading under the name of a firm, unless the intention of the parties that such promise shall continue to be binding notwithstanding such change shall appear either by express stipulation or by necessary implication from the nature of the firm or otherwise." Effect of a change in firm on its securities. — Questions nearly akin to those just alluded to, arise where securities have been deposited with bankers to secure future advances, and a change has occurred in the banking firm before the making of some of the advances. Prima facie, the securi- ties extend only to those advances which are made by the firm whilst its members continue the same as when the securities were deposited, (x) And similarly, if a partner pledges his separate property for future advances to be made to his firm, and he afterwards dies, an advance made after his death to his surviving partners will not be chargeable (s) In The Eastern Union Rail. Co. (t) Groux's Soap Co. v. Cooper, 8 v. Cockrane, 9 Ex. 197, and The C. B. N. S. 800. London, Brighton & South Coast (u) 19 and 20 Vict. ch. 97, § 4. Rail. Co. v. Goodwin, 3 Ex. 320, See, on this section, Backhouse v. the surety was not discharged; but Hall, 6 B. & Sm. 507, and 6 N. R. the statute amalgamating the two 98, Q. B. companies contained an express (x) See per Lord Eldon in Ex provision on the subject. parte Kensington, 2 V. & B. 83. 247 *120 CONTRACTS OF PARTNERSHIP. [BOOK L against the property pledged, {y) It has even been held that if a person deposits deeds as a security for advances to be made to him, the security does not cover advances made to him and his partners, (z) Equitable mortgagees.— However, it is established that an equitable mortgage by deposit of title deeds may be ex- tended, even by parol, to cover advances made after a change in the firm with which the deeds are lodged, {a) And [*120] although a legal mortgage to a firm ^cannot be con- verted into an equitable mortgage merely by parol, (b) it may be so converted by a written agreement, and may as an equitable mortgage become available as a security for advances made after a change in the firm to which the legal mortgage was originally given, (c) Owing to these doctrines a security given to a firm for advances to be made by it is, upon a change in the firm, readily made a continuing security; and a slight manifestation of intention on the part of the borrower that it should so continue will enable the new firm to hold the securities until the advances made by itself as well as those made by the old firm have been repaid, {d) Lien of solicitors.— The lien which a firm of solicitors has on the deeds, etc., of its clients is not lost by a mere change in the firm, (e) But a solicitor's lien only attaches where the papers on which the lien is claimed have come to the possession of the very persons to whom the client is legally indebted ; whence it follows that papers which come (y) Bank of Scotland v. Christie, And see Ex parte Nettleship, 2 M. 8 CI. & Fin. 214. D. & De G. 124. (z) Ex parte Mackenna, 3 De G. (6) Ex parte Hooper, 2 Rose, F. & J. 629; Ex parte Freen, 2 Gl. 328. <> Muss, agent for his copartner to Indorse . r )H ( .). other than partnership paper, nor When a promissory nolo not. pur- paper OUtside the BOOpe of the firm porting to have been executed by a business. Bowman v, Cecil Bank, partnership is shown (<> have been 8 Grant, Cos. 88 ; Newman u. Rich- signed by One partner in renewal ai'dson, 4 Woods, C. C. 81 ; S. C. 9 of a nolo given for the debt, of Fed. Rep. 866. another firm, of which that partner The assent of a partner to the done was a member, the burden is Indorsement by bis copartner of a on the plaintiff to show the assent note given out of the course of of the other partners to its execu- the partnership business must be i.ion. Tyree v. Lyon, 67 Ala. L proved, not presumed. Morceinv. Upon an arrangement by which Andrews, 10 Wend. 461. 0. is to do certain work ami P. or The indorsement by one member P. & S. to supply the means, a of a. Inn. of a firm nole alter it note tor the necessary equipments, lias passed from the possession of signed by the former with P.'s the firm and is the property of knowledge, "C & Co.," will bind another, without the knowledge or P, Brown v. Piokard, 1) Pao. R. consent of Ins oopartners, will not 678. bind them. South Bend Iron Where A., in the storage business Works v. Paddock, 10 Pao. Rep. and a grain dealer, made an ar- (Kan.) 574. rahgement with the owner to store Whereabank received a cheek corn with the privilege of buying by one partner in tin* firm name, the same, and afterwards formed a with notice he was using firm as- parlnership with li. before the corn sets to pay his own debt, it took was delivered, and, alter Belling the risk of the assent of the other and Shipping the grain, Agave * partner; and where the transaction note in the firm name for the price, was in fraud of that partner he It was held that the prior arrange- cannot be held. Qraham v. Tag- ineni did not Limit his power as gart, 10 Cent. Rep. (Pa. St.) 84; partner, and thai the giving of the S. C. li Mi. Rep. 868. linn note lor price amounted to Where tin* paper of a firm is a purchase lor the linn and made given by One member on business B. liable on the note. Johnson v. not pertaining to the partnership, Barry, 83 ill. 188. it is presumptive evidence of want Eaoh partner lias the Same right Of authority; and if the person to to raise money for the use of the whom the paper is passed knows linn by indorsement of negotiable the fad at, (ho lime, lie is charge- paper as to do so by ineansof paper able with notice of want of au- alreody issued. The public would thority. Sometimes the face of ,,,,t be affected by any private re- the contract is notice to the holder, st i kI ion on the power of each part- and sometimes the authority of 21)2 on. I, SBC. ii.] LIABILITIES <>K PARTNBB8. f 130 oik' person i<> i >i n<> tin- circumstances. In every such established from facts and circum- case the burden is again upon the stances. Miller v. limes, 15 9a. plaintiff, though be may have 197. Bee, also, Osgood v. Glover, parted with value, to satisfy the 7 Daly, 867; post, 829, note; Oha- jury, either that the circumstances /.mums v. Edwards, :; Pick. 5; of the case did not constitute ntf- CJnion, etc. Bank v. dnderhill, 10 tice to him, or that if they did, N. y. Weekly Dig. 108. tlio other members of the firm as in the oaseof St. Nicholas Hank sented to the transaction. v. Bavery, the following proposi- :*. Whenthe fact, though exisfc- i ion . were laid down, and their tag, that suoh name was not signed legal oonclu Ions beld. The first or Indorsed in the course of the and second were beld to be is full regular business of the firm ia not acoord with the general rule ap- apparent from the faceof tho in- plicable to Individual indorsers, strument, and the nature of the and the third wasfounded on the transaction appears to bave been law merohant: of such a character as to give the i. When a party takes negotiable plaintiff a right to Buppose that it paper made, accepted or indorsed was a partnership transaction, the by one oi' several partners in or members contesting their liability with the partnership name, ami must not only show that in fact fft the faot that suoh name was not did not constitute such a transae> signed <»r indorsed In the regular tion, but also that the plaintiff had (•Mm coi the business of the firm in some way actual notice thereof. Is apparent on the face of the to- In every suoh oase the burden is strument or oece sarily implied in shifted on the defendant to estab the nature of the transaction, suoh lish suoh notice. See Nicholas parly eaimot, though be mas have l'.auk r. Savery, 18 Jones it S. 97; parted with value on the faith of S. 0. Abb. Vr. Book, 1880, 829. the paper, oharge the other mem- Where a partnership is limited bera of the firm, except upon proof bj articles to a particular business, that they assented to the transao- if one partner make a note in the tion. in every such case he Is partnership name for other than chargeable, as matter of law, with suoh business, it lies with the per- n, ,i ice of want of authority in the Hon suing the note to show an a* Individual partner to bind the firm sent, express or implied, on the without their express assent. part of the other partners to the 2. When the faot, though exist- transaction; a disclaimer of It to tag, that such name was not signed any other than the party to whom or indorsed in the regular course of the note was given oannot be the business of the firm is not shown in evidence. Waller v. apparent from ll,,- lac, of the in- Keyes, G Vt. 857. strument, and the nature of the W hem A., B. and C. were pari transaction appears to bo BUBcepfi- ners doin- business in New York, ble of different conclusions, the where A. resided, and in P. in "Vir* question of notice is one of fad, to ginla, Where B. and 0. resided, ami be determined by the jury upon all A. indorsed a note in Now York in 298 *130 EIGHTS AND OBLIGATIONS. [BOOK II. the partnership name, without the consent or knowledge of B. and C.,as the mere surety of D., for a debt previously due from D. to the indorsee, the partnership having no interest in the transaction, held, in an action by the indorsee against all the partners as indorsers, that the plaintiff could not recover, al- though the jury should find that he had no knowledge, express or implied, of A.'s want of authority. New York Fire Ins. Co. v. Bennett, 5 Conn. 574. M. and J. were partners in the storage business. M., the manag- ing partner, gave a firm note for the value of grain which he had received and receipted for in the firm name and which had since been lost or converted. Accounts in the transaction kept by M. in his own name, and letters showing that he had separate dealings with the payee, were held not sufficient evidence to relieve J. from liability on the note as an obligation of the firm ; the onus to prove it not to be such an obligation resting upon J. Pierce v. Jackson, 21 Cal. 636. Where a promissoiy note is exe- cuted by a member of a partner- ship in the name of the firm and with the firm signature, and there is nothing to show that the note was not executed by the firm except a want of knowledge on the part of a book-keeper of the firm of the due execution of the note, and of the consideration therefor, and nothing to show under what cir- cumstances or upon what consid- eration the holder of the note re- ceived it, it will be presumed that the note was duly executed by the firm. Adams v. Ruggles, 17 Kan. 237. A., the second indorser of a promissory note made by B., pay- able to his own order and by him indorsed, procured it to be dis- counted by a bank, and at the same time, and as part of the same trans- action, delivered to the bank, as col- lateral security for the note then discounted, a note payable to A., signed in the firm name of a part- nership by one of the partners without the knowledge and in fraud of the firm, and given to A. as security for the note of B., which had been previously ob- tained by A. from the firm, and had been passed by him to C, the president of the bank, as security for a loan from C, and was in pos- session of the latter at the time it was discounted. On the back of the note of the firm, at the time it was delivered to the bank, was a memorandum signed by A., stating that the note was held by him as security for the note of B. Both notes were dated on the same day, were for the same amount, and were payable at the same time. The bank had no knowledge of the dealings between A. and the firm. Held, in an action by the bank against the firm on the note of the latter, that the bank was charged with notice that the note in suit was given as security only for the payment of the note of B. ; and that the action could not be main- tained against all the members of the firm without proof that the note was given with their consent or in the regular course of the part- nership business security. Bank v. McDonald, 127 Mass. 82. L., a member of the firm of S. & Sons, and also of the firm of P. & Co., made in his own name two 294 CH. I, SEO. II.] LIABILITIES OF PARTNERS. *130 promissory notes, payable to the order of the latter firm, and in- dorsed the name of the firm of S. & Sons upon them in fraud of that firm. D., a member of the firm of P. & Co., indorsed the name of his firm upon the notes as first in- dorsers. Both notes were presented to a bank before maturity for dis- count, the one by a broker, and the other by D., who was known by the officers of the bank to be a member of the firm of P. & Co. The bank discounted both notes. Held, in an action upon the notes by the bank against S. & Sons, as second indorsers, that neither the form of the notes, nor the fact that one was presented by a broker, nor the fact that the other was pre- sented by D., was conclusive notice to the bank, as a matter of law, of the invalidity of the indorsements. Atlas National Bank v. Savery, 127 Mass. 75. Since the statutes of 1874, chap- ter 404, if one partner signs, as maker, a promissory note in his individual name, payable to a third person, and in fraud of his partner, signs the firm name on the back of the note, above the name of the payee, a person who buys the note before maturity has notice from the form of the note of the con- ditional liability of the other mem- bers of the firm and cannot main- tain an action against them upon the note. National Bank of Com- monwealth v. Law, 127 Mass. 72. An individual acceptance of an order on two firms, to pay what might be in their hands, or in the hands of any partner, by a partner of both, intrusted with the settle- ment of all accounts with the drawer, is presumed to be upon consideration of having the funds under his control, and is therefore valid. Prentiss v. Foster, 28 Vt. 742. An acceptance of an order by one member of a firm will not bind the company, where there is no allegation that the defendants were partners, unless the partnership be proved. Meachen v. Batchelder, 3 Chand. 316. A note in common form, signed by an individual in whose name a partnership is carried on, and who at the same time openly transacts business on his own account, does not, prima facie, bind his copart- ners. Manufacturers', etc. Bank v. Winship, 5 Pick. 11; Yorkshire Bank v. Beatson, 22 Alb. Law Jour. 9. But where the name of the indi- vidual and of the firm is the same, and the individual carries on no business apart from the firm, the presumption, in the absence of evi- dence to the contrary, is that a bill bearing such a name is the bill of the firm. There is no difference in this respect between a dor- mant and an ostensible partner. Yorkshire Bank Co. v. Beatson, supra. To support an action against two as acceptors of a draft in their partnership name, the plaintiff must prove the partnership, and that one, at least, of the defend- ants accepted the draft. Head v. Sleeper, 20 Me. 314. A promissory note made by one member of a firm in the firm name is valid against the firm in the hands of a bona fide holder for value, although not made in the partnership business, and although the other partners did not consent 295 130 EIGHTS AND OBLIGATIONS. [BOOK II. to and did not know of the making of the note. The note is presump- tive evidence that it is valid busi- ness paper, and was given for a debt due from the makers to the payee. First National Bank v. Morgan, 73 N. Y. 593 ; Duncan v. Clark, 2 Rich. 587; Haldeman v. Bank of Middletown, 28 Pa. St. 440 ; Collier v. Cross, 20 Ga. 1 ; Rich v. Davis, 4 Cal. 22; S. C. 6 Cal. 141 ; Hawes v. Dunton, 1 Bailey, 146; Marsh v. Thompson Nat. Bank, 2 Brad. (111.) 217 ; Boardman r. Gore, 15 Mass. 331; Walworth v. Hen- derson, 9 La. Ann. 339; Roth v. Colvin, 32 Vt. 125. The rule is the same as to an ac- commodation note or indorsement. First Nat. Bank v. Morgan, supra; Austin v. Vandermark, 4 Hill, 259; Maudlin v. Branch Bank, 2 Ala. 502; Stall v. Catskill Bank, 18 Wend. 466; Wells v. Evans, 20 id. 251; S. C. 22 id. 324; Bank of St. Albans v. Gilliland, 23 id. 311; Emerson v. Harmon, 14 Me. 271 ; Catskill Bank v. State, 15 id. 364 ; Gildersleeve v. Mahony, 5 Duer, 383 ; Whaley v. Moody, 2 Humph. 495. See, also, Pooley v. Whit- more, 10 Heisk. 629. One partner cannot bind the firm by an accommodation indorsement executed without his knowledge or consent, the creditor having no- tice of that fact. Moynahan v. Hanaford, 42 Mich. 329. See post. One partner has no right for his own benefit to indorse the firm name on a note made by himself payable to the order of the firm ; and the other partners will not be liable thereon to one having knowl- edge of the facts. Federal Bank v. Northwood, 7 Ont. 389; S. C. 21 C. L. J. (N. S.) 55. Where one partner indorses a note in the name of the firm, for the accommodation of a third per- son, without express authority from his copartners, they will not be bound thereby as against the partner indorsing the note ; and the latter having paid the note, a judg- ment on the note recovered by an innocent holder against all the members of the firm, is not evi- dence to charge such copartners with contribution. Berrybill v. McKee, 1 Humph. 31. A security or payment made by one partner, in the name of the partnership, for a debt known by the person taking the same to be his individual debt, and without the consent of the other partners, whether by firm note, indorsement or otherwise, is not binding upon the partnership. Livingston v. Roosevelt, 4 Johns. 251; Poin- dexter v. Waddy, 6 Munf. 418; Ferguson v. Thacher. 79 Mo. 511 ; Roberts v. Pepple, 55 Mich. 367; Himmelright v. Johnson, 40 Ohio St. 40 ; Howell v. Sewing Machine Co. 12 Neb. 177 ; Atlantic State Bk v. Savery, 18 Hun, 36; S. C. 82 N Y. 291 ; Tyree v. Lyon, 67 Ala. 1 Guice v. Thornton, 76 Ala. 466 Spaulding v. Kelly, 43 Hun, 301 Fordice v. Scribner, 108 Ind. 85 Allen v. Cary, 33 La. Ann. 1455 Mechanics', etc. Co. v. Richardson 33 La. Ann. 1308; S. C. 39 Am Rep. 290. Where a firm habitually leaves the management of the business to one member and permits him, whenever he wants goods, to take them and charge them to himself, the firm will be bound for goods purchased by such partner for which he executes the note of 296 CH. I, SEC. II.] LIABILITIES OF PARTNERS. : "130 the firm. Hayner v. Crow, 79 Mo. 293. Money was borrowed on the credit of a firm and used for the purposes of the firm, but the indi- vidual note of one partner was given for it, and by mistake of the lender was accepted. Afterwards, when the mistake was discovered, the lender demanded and received from that partner the note of the firm in lieu of his own note. Held, that this was not the giving of a partnership note for an individual debt, and that the latter note was binding on the firm. Meader v. Malcolm, 78 Mo. 550. A partner who has given his in- dividual note payable to the order of the firm for a debt contracted in the firm business due by him to the firm has power, the note hav- ing been indorsed and discounted by the firm and proceeds used in the firm business, to renew the note, and the firm's indorsement thereon, so as to bind the other partners, notwithstanding the new paper was indorsed in the firm name by the maker and delivered by him directly to the indorsee. Wilson v. Kichards, 28 Minn. 337. Where a partnership agreement provides that an existing individ- ual debt of one partner shall be assumed and paid by the firm, either partner may execute a note of the firm to secure such indebt- edness. Randall v. Hunter, 66 Cal. 512. It is the duty of a party tak- ing a promissory note from one member of an existing firm in payment of the debt of a prior firm', before taking the note, to as- certain affirmatively that all the members of the latter firm as- sented to its issue. Kaiser v. Fen- drick, 98 Pa. St. 528. Such assent may be express or implied ; but mere silence when informed of the existence of the note is not evidence of assent. Tyree v. Lyon, 67 Ala. 1. See, also, Todd v. Lorah, 75 Pa. St. 155. A partnership was established composed of the members of an old firm and others, and did business, under different firm names, at Tuscaloosa, Mobile and New York. The new partnership was indebted to the old. A member of the old firm drew a bill in the name of the firm at Mobile, in payment of a debt of the old firm, on the house at New York, which was accepted in the firm name by a member of the old firm. Held, that this was like the payment of any other in- debtedness of the partnership, and noi like one partner giving a part- nership note for his individual debt. Hester v. Lumpkin, 4 Ala. 509. If a partner give a negotiable note in the name of the partner- ship for his own private debt, a bona fide indorsee of the note, who had no notice of the purpose for which it was given, may recover the amount of the copartnership. Munroe v. Cooper, 5 Pick. 412; Chazournes v. Edwards, 3 id. 5; Livingston v. Roosevelt, 4 Johns. 231 ; Mechanics' Bank, etc. v. Foster, 19 Abb. Pr. 47 ; S. C. 29 How. Pr. 408 ; Atlantic State Bank v. Savery, 18 How. 36; S. C. 82 N. Y. 291. So all the partners are liable on a note indorsed in the name of the firm, who are the payees, to a bona fide indorser, although the firm's name be used by one of the part- ners without authority. State, etc. Bank v. Thompson, 42 N. H. 369. 297 '130 EIGHTS AND OBLIGATIONS. [BOOK II. Where a partner makes a note in the name of his firm, without the knowledge or consent of his partner, and not in the course of partnership business, one seeking, as indorsee, to recover the amount of the note against the other part- ner, must show that he took it before maturity, for value and in good faith, and mere proof that the note " was passed to the plaint- iff for goods sold " is not sufficient. Clark v. Dearborn, 6 Duer, 309. When one partner makes his in- dividual note to his own order, in- dorses thereon his own name and the name of the firm, and appropri- ates proceeds to his own use, the firm being duly notified, will be liable to an indorsee who, in good faith, for an adequate considera- tion, purchases the same before maturity without notice of the circumstances affecting its valid- ity. The form of the note in such case is not notice that it was given for the maker's accommoda- tion and in fraud of the firm. Red- Ion v. Churchill, 73 Me. 146; S. C. 40 Am. Rep. 345. See contra, Spaulding v. Kelly, 43 Hun, 301. A. and B., being partners in trade with S. and others, A. made a promissory note in the name of the firm, payable to B., to secure an alleged balance due from the firm to B., without the knowledge or consent of S. B. indorsed the note to a third person. Held, that though no action would have lain by B. , yet the indorsees might bring an action against the firm as makers. Smith v. Lusher, 5 Cow. 688. A partnership note was made. after the dissolution of a firm, by one of the partners, accepted by the payee with knowledge of the fact, and transferred by him in pay- ment of an antecedent debt, under an agreement that, if the note could not be collected, he would be liable for a part of the original debt. Held, that the assignee was not a bona fide holder in that sense which would enable him to main- tain a suit on the note against the partners. Bristol v. Sprague, 8 Wend. 423. Indorsers of a note made in the name of a firm by a member thereof, without the assent of his copartner, and passed by him for his individual debt, are not liable for its payment to a holder with notice. Williams v. Wal- bridge, 3 Wend. 415. See, also, Chazournes v. Edwards, 3 Pick. 5; Livingston v. Hastie, 2 Cai. 246; Hager v. Mounts, 3 Blackf. 261. See, however, Bovven v. Mead, 1 Mich. 432. A. was a member of two firms ; he wrote a note to himself, signed the name of one firm, indorsed it by his own name, and by the name of the other firm. Held, that these facts were not such as required a holder for value before maturity to prove that the partners assented to the indorsement, or that the j>roceeds were used for their bene- fit. Ihmsen v. Negley, 25 Pa. St. 297. There were three successive part- nerships; the first composed of two persons, A. and B., and styled A. & B. ; the second of three per- sons A., B. and C, and styled A. B. & Co. ; the third of two persons, A. and B., and styled A. & B. But A. in the third firm was not the same person, but had the same name, as A. in the first and second firms. B. was in all the three 298 OH. I, SEC. II.] LIABILITIES OF PARTNERS. 130 firms. B. gave a note by the name of the first and third firms, A. & B. Held, that the note was prima facie the note of the firm existing when the note was given, and so not binding on A. of the first firm ; but if it was in fact given on ac- count of the first firm, to a cus- tomer, without notice, A. of the first firm would be bound ; and the court remanded the cause to be tried again. Pomeroy v. Coons, 20 Mo. 598. An affidavit of defense to an action on a firm note, given by a partner for borrowed money, which avers no facts that ought to have put the plaintiff on inquiry as to whether the money was for the in- dividual use of such partner, is fatally defective, and the firm is liable. Potter v. Price, 3 Pittsb. 136. The rule that a note given by one partner in the partnership name for his individual debt is good against the firm in the hands of a bona fide holder applies only to notes of mercantile partner- ships, and does not apply to those of partnerships for keeping tavern. Cocke v. Branch Bank, 3 Ala. 175. If one of two partners indorse a note in the name of the firm as an accommodation for a third person, without the authority or consent of his partner, the latter is not bound by such indorsement as to a person who takes the note with notice that the indorsement was made in the character of surety; and the burden of proving author- ity or consent of the copartner, in such a case, rests on the person holding the note. Hendrie v. Ber- kowitz, 37 Cal. 113; Darling v. March, 52 Me. 184; Lang v. War- ing, 17 Ala. 145; Chenowith v. Chamberlin, 6 B. Mon. 60; Laverty v. Burr, 1 Wend. 529; Mechanics' Bank v. Livingston, 33 Barb. 485 ; Tutt v. Addams, 24 Mo. 186 ; Hef- fron v. Hanaford, 40 Mich. 305. See, however, Flemming v. Pres- cott, 3 Rich. 307 ; Freeman v. Ross, 15 Ga. 252. The fact that such a note is found by a third person in the hands of the maker is notice to such third person that the firm in- dorsement was for the accommo- dation of the maker. Hendrie v. Berkowitz, 37 Cal. 113. Accommodation notes made to the order of a firm at the request of one of its members are prima facie for the accommodation of the firm ; the question whether plaintiff had notice that they were not so intended is for the jury. Clapp v. Brown, 11 Weekly Not. Cas. 206. Where an accommodation note is made payable to one partner with the understanding that it is for the firm's benefit, and it is by him fraudulently appropriated for his own use, such an appropriation is not a sufficient defense as against an innocent holder for value. Leatherman v. Hecksher, 12 Atl. Rep. (Pa.) 485. A firm will be liable to a party who makes an accommodation indorsement of the promissory note of one of the partners, the proceeds of which are received and used by the firm in their business. Ellis V. Gregory, 70 Ind. 140. An indorsement by a partner of his separate accommodation note, with the name of his firm, is a sufficient indication of the nature of the transaction to make it the 299 ^130 RIGHTS AND OBLIGATIONS. [BOOK II. duty of the bank which discounts it to inquire into his authority to use the firm name for the occasion, unless there are circumstances from which the authority can be implied. Tanner v. Hall, 1 Pa. St. 417. A. and B. were partners. A. was the active partner, and B. was in the habit of frequenting the store, but not managing the business. A. was accustomed to indorse the partnership name as sureties for third persons, and notices of the coming due of such liabilities were often left at the store, but it was not proved that they were ever brought to the knowledge of B. ex- cept in one instance, when he de- nied A.'s authority so to use the name of the firm. Held, that the facts were not sufficient to charge B. in an action on one of such notes. Andrews v. Planters' Bank, 15 Miss. 192. A note was given by a debtor to an execution creditor to obtain a release from a levy, and was in- dorsed in the name of a firm by one of the partners. There was no showing that the firm received any consideration, or that one of the partners consented to the indorse- ment. Held, that it must be presumed that it was merely an accommodation indorsement, and that the creditor, who of course was not a bona fide holder, was privy to all the facts. Heffron v. Hanaford, 40 Mich. 305. Where one partner made an accommodation note in the firm name without the knowledge of his copartner, which was discounted by plaintiffs without notice of the irregularity, and subsequently plaintiffs, with notice, after the maturity of the note, took a re- newal signed in the same way, held, that the partner not signing was not liable on such renewal. Union Bank v. Bulmer, 7 Can. L. T. 277. A partnership note continues binding on the firm, although re- newed with the signature of one partner only, when no change in the liabilities of the parties is in- tended. Horsey v. Heath, 5 Ohio, 858. A member of a firm may renew a note originally given for money to be applied to his individual uses, but which was signed with the firm name by his only partner, with the understanding that the loan was made on the credit of the firm. Tilford v. Ramsey, 37 Mo. 563. In an action against A. on a promissory note executed by B., in the name of himself and A., in renewal of a prior joint note exe- cuted by them, the court instructed the jury that if from the evidence they believed that A. & B. had been carrying the note alleged to have been renewed, and that A. had in- formed the payee's agent that if it became necessary to renew the note B. had authority to execute the renewal in the name of both A. and B., and that the note in suit had been so executed prior to any revocation of such authority, A. was bound thereby. Held, on evi- dence tending to show such a state of facts, that the instruction was correct. Pate v. First National Bank, 63 Ind. 255. Where the note was given in renewal of another made by the same partner who signed the last, which itself was in renewal of a 300 CH. I, SEC. II.] LIABILITIES OF PARTNERS. mo Joint and several notes.— A joint and several promis- sory note signed by one partner for himself and copartners does not bind them severally ; (a) but it does bind them and him jointly (h) and himself separately, (c) l note by a different firm of which the signer had been a member, upon a plea of non est factum by the copartner the onus of showing authority to sign is on the plaintiff. Bryan v. Tooke, 60 Ga. 437. A renewal note given in the firm name after dissolution, by a part- ner without his copartner's assent, and bearing a higher rate of inter- est than the note renewed, may be regarded as divisible and held valid to the extent of the old note at the old rate of interest, and in- valid as to the excess of interest. Wilson v. Forder, 20 Ohio St. 89. (a) See Perring v. Hone, 4 Bing. 32; 2 Car. & P. 401. {b) Maclae v. Sutherland, 3 E. & B. 1. (c) See Elliot v. Davis, 2 Bos. & P. 338 ; Gillow v. Lillie, 1 Bing. N. C. 695. 1 Each member of a firm has the implied right and power to make bills to raise money to carry on the business, and in making such bills, whether the style of the firm or some other style is used, it does not change the legal rights of creditors nor the legal responsibility of each of the partners. Bacon v. Hutch- ings, 5 Bush, 595. See, also, Kins- man v. Dallom, 5 T. B. Mon. 382. Upon the formation of a part- nership, until a firm name is adopted, the presumption must be that in the transaction of the firm business each member is the agent of the others to transact the busi- ness, even to the signing of the names of the several members of the firm to promissory notes exe- cuted in the legitimate business of the firm. Kitner v. Whitlock, 88 111. 513. See, also, Holden v. Bloxum, 35 Miss. 381; Nelson v. Neely, 63 Ind. 195. A note payable to partners in their individual names, and as- signed by one of the partners in the name of the firm, may be given in evidence by the assignee in a suit against the maker, without proof of the authority of the part- ner who assigned it, although "non-assignment" is pleaded. Mick v. Howard, 1 Ind. 250. A note signed by two partners with their individual names is suf- ficient to bind the firm. Maynard v. Fellows, 43 N. H. 255. See the form of the contract considered, post. One partner may legally author- ize a clerk of the firm to accept bills and sign and indorse notes in the name of the company. Tillier v. Whitehead, 1 Dall. 269. The acceptance and indorsement of a note by a partner, payee of the note, does not prove that the note executed by the clerk in the name of the firm was signed by the au- thority of the firm. Miller v. House, 67 la. 737. Any partner in a firm may be the agent of a third person in drawing bills in favor of the firm for advances made to such thud person under an express authority. Baring v. Tyman, 1 Story, 396. 301 mo EIGHTS AND OBLIGATIONS. [BOOK II. Powers of attorney to draw bills, etc. — In consequence of the doctrine that every member of an ordinary trading partnership has authority to draw, accept and indorse bills in its name, if a member of such a partnership goes abroad and gives his copartner a power of attorney to manage his affairs, and draw, accept or indorse bills in his name, this authority warrants the attorney in putting his principal's name to non-partnership bills only; his authority to put the partnership name to partnership bills being independent of, and unaffected by, the letter of attorney, (d) Bills, etc., of non-trading partnerships. — With respect to partnerships which are not trading partnerships, the question whether one partner has any implied authority to bind his copartners by putting the name of the firm to a negotiable instrument depends upon the nature of the part- nership, (e) l In the absence of evidence showing necessity (d) Attwood v. Munnings, 7B. & C. 278. (e) See Dickinson v. Valpy, 10 B. & C. 128. 1 One partner in a non-trading partnership cannot bind his copart- ner by a bill or note, drawn, ac- cepted or indorsed by him in the firm name, even though it be for a debt of the firm, unless either he has express authority therefor from his copartner, or the giving of such instruments is necessary to the car- rying on of the partnership busi- ness, or is usual in similar partner- ships ; and the burden is upon the party suing on such note or bill to prove such authority, necessity or usage. Smith v. Sloan, 37 Wis. 285; Bau v. Cole, 53 Conn. 53; Deardorf v. Thacher, 78 Mo. 128; S. C. 47 Am. Rep. 95; Webb v. Allington, 27 Mo. App. 559. See, also, Prince v. Crawford, 50 Miss. 344. The rule which authorizes one member of a copartnership to bind the firm by commercial paper is only applicable to business of a trading or commercial nature, or the ordinary business of buying or selling for a profit. It has no ap- plication to partnerships formed for agricultural purposes or others of a similar character. Ulerg v. Ginrich, 57 111. 531; Hunt v. Chapin, 6 Lans. 139; McCrary v. Slaughter, 58 Ala. 230, a partner- ship for farming ; Benton v. Rob- erts, 4 La. Ann. 216, where land was cultivated by joint owners in partnership. But where a partnership was formed for the purpose of carrying on a farm and a steam saw-mill, and the firm also engaged in trade, as the jury found, and the manag- ing partner drew bills in the name of the firm on an accommodation acceptor to raise money, held, that the firm were bound by them. Kimbro v. Bullitt, 22 How. 256. 302 CH. I, SEC. II.] LIABILITIES OF PARTNERS. ■131 or usage, the power has been denied to one of several mining adventurers, (/) quarry workers, (g) *farm- [*131] Where persons are engaged as copartners in the business of run- ning a vessel, paper indorsed by any of them in the firm name, re- ceived in the regular course of the business, to be made payable to any of the firm, will bind the other partners. First National Bank v. Freeman, 47 Mich. 408. Where a firm, by a violation of their contract of agency, become liable for their principal to the amount of certain notes taken by them as agents, it was held that either party had authority in the settlement of the claim of the principal to bind the firm by sign- ing its name to the notes as co- makers, although the execution of notes was no part of the firm busi- ness. Brayley v. Hedges, 62 la. 623. A partnership in the business of buying cattle and slaughtering them for sale, and dealing in vege- tables and like commodities, is a commercial partnership, each mem- ber of which has the right to draw, accept or indorse bills of exchange in the firm name, and bind the partnership as to third persons, dealing fairly and in good faith as to matters usually incident to the business; and it is immaterial in such a case, as to a person thus dealing with one of the partners, that the other was not informed of the transaction and repudiated it as soon as it came to his knowl- edge. Wagner v. Simmons, 61 Ala 143. A partner gave the note of the firm for a debt contracted by him in the cultivation of sugar upon a plantation of the firm which had been previously used for the culti- vation of cotton. It was contended that there was no evidence that the copartners had consented to this change in the business, and that the making of the note was there- fore unauthorized, there being no partnership articles or agreement restricting the business to the cul- tivation of cotton. Held, that it was a question of the continuance of the partnership, and upon the evi- dence that it did not appear that the partnership, and the conse- quent power of one partner to bind the firm, had ceased. Burnley v. Rice, 18 Tex. 481. Two persons were partners in the milling business, one owning the mill, and the other furnishing the money for carrying on the busi- ness, but having no interest in the mill. The former, without the knowledge, consent or ratification of the latter, gave the firm note to a third person for a lightning-rod put up on the mill. These facts being proved on a trial of an action on the note against the makers, wherein the partner who furnished the money answered under oath denying the execution of the note, held, that there could be no recov- (/) Brown v. Byers, 16 M. & W. 252 ; Dickinson v. Valpy, 10 B. & C. 128. Compare Brown v. Kidger, 3 H. & N. 853. (g) Thicknesse v. Bromilow, 2 Cr. & J. 425. 303 131 EIGHTS AND OBLIGATIONS. [book II. ers, (A) solicitors, (i) l Where two firms agreed to accept each other's drafts, and to share the profits arising from their sale, it was held that one of these firms was not liable to a person who had purchased a bill drawn on it by the other firm, but which the drawees had not accepted, (k) If, however, a member of a non-mercantile firm concurs in drawing, or authorizes his partner to draw, a bill in the name of the firm, 2 he impliedly authorizes its indorse- ery thereon against him, the trans- action not being one within the scope of the ordinary affairs of the partnership. Graves v. Kellen- berger, 51 Ind. 66. Where one member of a firm had put in as stock his saw-mill and a quantity of saw-logs, against a money equivalent put in by the other, held, that a firm note the former had given for a balance due upon the saw-logs would not bind the firm although it had received the benefit of the logs, no acqui- escence of the copartner being shown. Wittram v. Van Wormer, 44 111. 525. The mere fact that the business of a firm is that of commission merchants to sell cotton is not suf- ficient to raise the presumption that one partner has authority to accept a bill in the name of the firm where they have not funds of the drawer in their hands. Hib- bler v. De Forest, 6 Ala. 92. So there is nothing in the busi- ness of a firm of coffee brokers from which it can be implied, as a matter of law, that one partner has authority to bind the other by nego- tiable paper in the name of the firm. Third National Bank v. Sny- der, 10 Mo. App. 211. A partner in the practice of physic has no power to bind his copartner by the execution of a note in the name of the firm for the purpose of raising money foi his own accommodation. Cros- thwait v. Ross, 1 Humph. 23. One attorney has no authority to bind his firm by bill or promissory note. Wilson v. Brown, 6 U. Can. App. 411; S. C. 1 Can. L. T. 609; Breckenridge v. Shrieve, 4 Dana, 375. A partnership between steve- dores is not a commercial but only an ordinary partnership, and one partner cannot bind the firm by promissory note in the firm name without authority from his copart- ner. Benedict v. Thompson, 33 La. Ann. 196. (/i) Greenslade v. Dower, 7 B. & C. 635. (i) Hedley v. Bainbridge, 3 Q. B. 316; Levy v. Pyne, Car. & Marsh. 453; Harman y. Johnson, 2 E. & B. 61, and 3 Car. & Kir. 272. 1 See Friend v. Duryee, 17 Fla. Ill; S. C. 35 Am. Rep. 89; Smith v. Sloan, 37 Wis. 285; S. C. 19 Am. Rep. 757. See, however, Miller v. Hines, 15 Ga. 197. (fc) Nicholson v. Ricketts, 2 E. & E. 497. 2 Where three persons were en- gaged in carrying on a steam saw- mill in copartnership for a specified term, and during its continuance 304 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *131 ment in the same name for the purpose for which it was drawn. (I) the note of the firm was given, with the concurrence of two of the partners, for necessary supplies or- dered by one of them for the hands engaged in carrying on the busi- ness, the partnership was held bound by it. Johnston v. Dutton, 27 Ala. 245. An accommodation indorsement, with several prior indorsers, was given by a firm, with assent of all the members, on a note which was discounted by the plaintiff with knowledge of the facts; and the firm's name, with assent of all the members, was indorsed on several successive notes given in renewal, on which changes and omissions were occasionally made in the names of some of the prior indors- ers. Held, that the members of the firm were all liable on an in- dorsement by one of their mem- bers on a note subsequently given in renewal, from which one of the previous indorsers was omitted, which had been on the previous notes, without proof of their as- sent to the particular indorsement, under such a change of circum- stances. Dundass v. Gallagher, 4 Pa. St. 205. Where a note was given for money loaned to a firm, and for wheat sold, which was used in erecting their mill and in making flour for the use of the firm, and the amount thereof was entered in the firm books as an indebtedness of the firm, which books were ex- amined from time to time by a partner denying the execution of a note by him, it was held, if he was informed of the making of the note, and made no objection, he was estopped from denying its va- lidity, even if his name was in fact signed by a copartner. Kitner v. Whitlock, 88 111. 513. A note was executed by one partner in the name of the part- nership. Afterwards the other partner, on presentation of the note to him, promised to pay it, not denying that it was a partner- ship note. In a subsequent suit on it he denied by answer that it was a partnership note, alleging that it was executed for the separate debt of the other partner, without his knowledge or consent. Held, that the execution of the note was the only matter in issue, and that the promise to pay was admissible to prove it, and was not inadmissible as a parol promise to pay the debt of another. McGill v. Dowdle, 33 Ark. 311. If one of the partners of a firm has been in the habit of indorsing the name of the firm on bills of ex- change, it is a fact from which the jury may legally infer that he had authority from the other partners to do so. Bank of Kentucky v. Brooking, 2 Litt. 41. A single bill, executed by one partner in the name of the firm, binds the firm if he had authority to execute it; and this may be shown by the consideration, bene- ficial to both, and their course of dealing in reference to other such bills. Fant v. West, 10 Rich. 149. Where a note is made in the partnership name by one member (0 See Garland v. Jacomb, L. R. 8 Ex. 216; Lewis v. Reilly, 1 Q. B. 349. Vol. 1 — 20 305 •131 RIGHTS AND OBLIGATIONS. [BOOK II. Authority to transfer bill.— It must be borne in mind that a person who has no authority to use the name of an- other, so as to render him liable on a bill or note, may nevertheless have sufficient authority to transfer the prop- erty therein. (-/??) l without the authority of the other, who, however, makes no objection when informed thereof, he is, if benefited as partner, jointly bound. Otherwise where, in the absence of authority, he has not impliedly ratified or been bene- fited by the transaction. Stewart v. Caldwell, 9 La. Ann. 419. (to) See, on this subject, Smith v. Johnson, 3H.&N. 222; Heilbut v. Nevill, L. R. 5 C. P. 478, where, however, the property was held not to pass. i P. was authorized by E. to sell a patent-right in five counties, and account to E. for one-half the pro- ceeds, and was authorized to in- dorse such notes as were received upon sales, for the purpose of turn- ing them into money. The parties in no way held themselves out as partners. As a part of the con- spiracy to defraud E., P., without the knowledge of E., indorsed the name of P. and E., as accommoda- tion indorsers, on a note received in the business. Held, that the agreement did not constitute P. and E. partners, and, even if they were so, the indorsement was entirely outside of the apparent authority of P., and E. was not v> liable thereon, even to an innocent ' holder for value. Hotchkiss v. English, 6 Thomp. & C. 658 ; S. C. 4 Hun, 369. The indorsement of a promissory note by one of a firm, even with- out the knowledge of the other partner, vests the title in the in- dorsee when it is made to pay a debt of the firm, and it is, as be- tween them, a lawful application of the partnership property. Com- mercial Bank of Manchester v. Lewis, 21 Miss. 226. Where the individual note of a partner, made after the dissolution of the partnership, was transferred by the holder to the firm in pay- ment of a debt, held, that such note, being payable to bearer, might be legally transferred to a third person by another partner, who was authorized to settle the accounts of the partnership. Par- ker v. Macomber, 18 Pick. 505. An assignment of a note payable to a partnership, in the name of one of the partners, will not pass a legal interest in the note. M'Intire v. M'Laurin, 2 Humph. 71. Where a note is made by a firm payable to a member of the firm, who indorses it, the indorsee takes only such rights as the indorser had, and cannot enforce it against the partnership until after the pay- ment of the partnership debts. Simrall v. O'Bannons, 7 B. Mon. 608. See, however, Blake V. Wheaton, 1 Tayl. 70. One member of the firm may order the contents of a note, made payable to the firm or order, to be paid to himself, and maintain a suit in his own name. Burnham v. Whittier, 5 N. H. 334. A copartner has not only au- CH. I, SEC. II.] LIABILITIES OF PARTNERS. *131 Before leaving the subject of negotiable instruments it may be observed that it is often difficult to say whether they purport to be the paper of a firm, or only that of some one or more of the partners. Unless the paper purports to be the paper of a firm, no one whose name is not on the paper is liable to be sued on it. (n) This subject will be adverted to hereafter. 7. Bonds. — See Borrowing Money and Deeds. 8. Borrowing money — General power to borrow. — One of the most important of the implied powers of a partner is that of borrowing money on the credit of the firm. 1 The thority to indorse notes in the name of the firm, but also to waive notice of non-payment, or direct any particular mode of dishonor, and such indorsement and waiver is binding upon the firm, if the holder did not know that they were fraudulently done; and it makes no difference that the note in suit was not running at the time of the waiver. But a partner has no right as against his copartners to waive notice upon a note in- dorsed by him for his own benefit. Windham County Bank v. Ken- dall, 7 R. I. 77. Where a note is indorsed by a partnership in the partnership name, an agreement by one of the partners to receive notice at a par- ticular place is binding upon his copartners. Nutt v. Hunt, 12 Miss. 702. A partner may waive grace upon a firm note given by him. Pierce v. Jackson, 21 Cal. 636. Where a bill of exchange, ac- cepted by a firm, and indorsed in the name of the payee, is, before its maturity, put in circulation by one of the partners, his act is to be considered the act of his copart- ners, and estops them, when sued on the bill, from denying the gen- uineness of the indorsement. Sprague v. Zunts, 18 Ala. 382. (n) Bills of Ex. Act, 1882, § 23. 1 In ordinary commercial part- nerships, each partner has the right to pledge the partnership property, or to borrow money and give notes in the firm name for part- nership purposes and for no other. Gregg v. Fisher, 3 Bradw. 261 ; McConnell v. Wdkins, 13 U. C. App. 438 ; Deitz v. Regner, 27 Kan. 94 : Benninger v. Hess, 41 Ohio St. 64; Morse v. Hagenah, 32 N. W. Rep. 634; Walsh v. Lennon, 98 IU. 27 ; S. C. 38 Am. Rep. 75 ; Holt v. Simons, 16 Mo. App. 97 ; Palmer v. Scott, 68 Ala. 380. And when credit is extended to a partnership within the scope of its business, it will bind all the part- ners, notwithstanding any secret arrangement they may have among themselves, unknown to those giving the credit. Gregg v. Fisher, supra; Beninger v. Hess, supra; Deitz v. Regner, supra. A partner, unless he is a mem- ber of a commercial firm, or one engaged in general promiscuous *131 RIGHTS AND OBLIGATIONS. [BOOK II. sudden exigencies of commerce render it absolutely neces- sary that such power should exist in the members of a trading, has no implied authority to bind his firm by borrowing money and executing promissory notes, mortgages or other securi- ties, unless the money is necessary for the business, and such pledge of the credit of the firm is usual. Davis v. Richardson, 45 Miss. 499. However, in Haskinsonv. Elliott, 62 Penn. St. 393, it was held that the rule that the partnership is liable for money borrowed by one of its members on the credit of the firm, within the general scope of its authority, and according to the usual course of its business, applies as well to partnerships formed for mechanical or manufacturing pur- poses as to commercial partner- ships, and to special as well as general partnerships. So, in Leffier u. Rice, 44 Ind. 103, it was held that money may prop- erly be borrowed by a partner to purchase middlings and grain for a mill owned by the partnership, and the latter will be liable therefor. See, also, Morse v. Hagenah, 68 Wis. 603. When a loan is made by two members of a commercial firm, in a matter foreign to the business of the firm, and in disregard of the express opposition of the third member, the two members making the loan are justly chargeable with its amount. Cooke v. Allison, 30 La. Ann. 963. One who in good faith, at the request of a partner, advances money to pay what is apparently a firm debt, may recover from the firm. Blinn v. Evans, 24 111. 317. A note given by two partners, jointly, for money borrowed for, and used in, the firm business, is a partnership liability, notwith- standing they signed the note be- fore commencing the firm business, and in their several names. So held in reference to application of assets to debts in bankruptcy. In re Thomas, 17 Bankr. Reg. 54. See, also, Ex parte Nason, 70 Me. 363; Re Thomas, 8 Biss. 139 ; Carson v. Byers, 67 id. 606 ; Berkshire Woolen Co. v. Juillard, 75 N. Y. 535; Ex parte First Nat. Bank, 70 Me. 369. See post. One partner has not, however, implied power to charge a copart- ner by borrowing money in the name of the firm to pay debts in- curred before the copartner en- tered the firm, and which he has in no way assumed or made himself liable for. Elkin v. Green, 13 Bush, 612. Where H., as managing partner of a firm, in order to procure a loan from a third party, brought to plaintiffs a note payable to such third party, and signed by himself individually, and, to induce them to become sureties of the firm for such loan, represented that the proposed loan was on partnership account and for its use, and that his partner would also sign said note individually, which he subse- quently did, that being the usual mode of their executing partner- ship obligations, and upon the faith of such representations the plaint- iffs became liable as sureties by signing said note on the credit of the partnership, and the money is borrowed, received and used in its 308 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *131 trading partnership, and accordingly in a comparatively early case this power was clearly recognized, (o) It has business held, that this created a partnership liability, and plaintiffs became sureties of such partner- ship. McKee v . Hamilton, 33 Ohio St. 7. If a partner borrows money upon the security of his firm's ac- ceptance of another's draft, the ac- ceptance, in the absence of matter ■which will avoid it, establishes the relation of debtor and creditor to the amount of the draft between the firm and the lender. Saltmarsh v. Bower, 22 Ala. 221. A note given in the name of the firm by one of its members, for moneys collected by him as agent of the payee, is a valid note against the firm where such moneys were in the nature of a loan to the firm. Whitaker v. Brown, 16 Wend. 505. C, about to go into business with his brother J., put in "as stock for the purpose of forming a partnership with equal shares" cer- tain "gold dust" sent to his wife from his brother R., for which C. subsequently gave his individual note. After the dissolution of the partnership and the death of C, R. brought suit against the surviving partner for the loan to C, claim- ing it to be a firm debt. On the trial it was proved that J. used the "gold dust" to buy goods; that he encouraged C. to embark it as cap- ital, and had advised the plaintiff to permit his brother-in-law, C. , to put it in the firm as such, but there was no evidence that J. ever as- sumed any responsibility in regard to it. Held, that the loan was a personal credit to C. , and not a loan to the firm ; hence J. was not liable as surviving partner. Donnelly v. Ryan, 41 Pa. St. 306. A. and B. , being copartners, A. upon his individual credit obtains a loan from C. of $1,200, which is used in the partnership business, but is credited to A. personally on the partnership books, and so re- mains with A.'s knowledge and without any dissent on his part for five years ; at the end of that time A. and B. enter into an agreement for the settlement of the partner- ship affairs, by which B., among other things, agrees in one year to satisfy and dischai'ge all the liabil- ities of the firm. Held, that the loan of $1,200 was personal to A., and that B. was not obliged, under his agreement, to pay the amount to C, A.'s claims against the firm having been expressly excepted from it. Gibbs v. Bates, 43 N. Y. 192. Where one agent of a firm signs a note in his own name, and an- other agent indorses it in blank in the name of the firm, and a check payable to the firm is delivered to the agent, who signs individually, this is prima facie loan to firm. (o) See Lane v. Williams, 2 Vern. 277, 292; Rothwell v. Humphries, 1 Esp. 406; Denton v. Rodie, 3 Camp. 493 ; Lloyd v. Freshfield, 2 Car. & P. 333 ; Ex parte Bonbonus, 8 Ves. 540. See, too, De Ribeyre «. Barclay, 23 Beav. 125; Gordon v. Ellis, 7 Man. & Gr. 607 ; Brown «. Kidger, 3 H. & N. 853. 809 *131 EIGHTS AND OBLIGATIONS. [book II. been already seen that one partner can bind the firm by a bill or note, upon which money may be obtained, by the Neal v. Wilson, Sup. Ct. Ga., Oct. 4, 1887. Where at the time of obtaining the loan the reason for the loan and the uses to which it was to be applied were distinctly stated to be for a partnership, and so under- stood by both borrower and lender, and the money was in fact so used, the inference is a fair one that the advance was on the credit of the partnership. Maffet v. Leuckel, 93 Pa. St. 468 ; S. C. 8 Weekly Not. Cas. 513. A person giving credit to an in- dividual has no equity against the firm of which the debtor is a mem- ber. Scoville Mfg. Co. v. Lindsey, 4 Atl. Rep. (N. J.) 98. See, also, cases next cited. Where money has been borrowed by one partner from his wife the mere fact that it has been bona fide applied to partnership purposes is not sufficient to warrant him in debiting the partnership and cred- iting her with the amount on the firm books, where this is done without her consent or the consent of his copartner. Silver v. Silver, 1 Russell's Eq. 169. See, also, Pritchell v. Pollock, 82 Ala. 169. Declaration by one borrowing money that he intends to use it in the business or for the benefit of the firm of which he is a member is not evidence that he borrows upon the credit of the firm. Fisher v. Hume, 8 Cent. Rep. (D. C.) 725. But where a married woman lent money to her husband for the firm of which he was a member on his representation that it was bor- rowed for the firm, it was held that she might recover it from the firm. Gould v. Gould, 36 N. J. Eq. 380; S. C. 35 id. 37. A. and B., in 1847, were partners in buying wheat. One C. let A. have $300, and a few days after- wards took his individual note for it. The money was used to pay for grain that A. had purchased. In the fall of 1848 A. failed, and in the winter following paid part of the note, and gave his note for the balance, $198. In 1849 C. sold the note last named to D. for $140, which D. then paid him. After D. had kept the note some time, C, by an instrument in writing, assigned to D. all his claim against A. and B. for moneys loaned them in the spring of 1847. The consideration expressed in the instrument was $193.25, but no new consideration was then received. Held, that C. at the time of the sale of the note to D. had a valid claim against the partners A. and B. , and that this claim was transferred by the sale of the note; or, if not, that it passed by the subsequent assign- ment. Rose v. Baker, 13 Barb. 230. The complainant avers, in sub- stance, that on, etc., S., as partner in the then existing firm of W. & S., borrowed from the plaintiff, for and on account of and for the use of the said firm, a certain sum, which loan was evidenced by a note for the amount, signed by S., dated on the same day ; and that the money so loaned was expended for the use of the firm. Held, that under these averments plaintiff may show that the money was 310 •CH. I, SEC. II.] LIABILITIES OF PARTNERS. 132 every*day process of discounting; and the power [*132] of one partner to pledge partnership goods for ad- loaned by him to and upon the credit of the firm. There is no ad- mission that the note was taken in payment; and the complaint is good on demurrer. Hoeflinger v. Wells, 47 Wis. 628. Where partners borrow money to be used in the business which they are jointly carrying on, it becomes a partnership fund, and no matter how they stand on the security given to the lender, they are ac- countable to one another as part- ners. Bailey v. Brownfield, 20 Pa. St. 41. Where an administrator, who is a member of a partnership, applies to the partnership concerns money which belongs to the estate of his intestate, and afterwards gives the note to the creditor of the intestate to whom such money was due, in discharge of such creditor's claim on the estate of the intestate, the firm is bound to pay the note, al- though the money was not in the hands of the firm when the note was given. Richardson v. French, 4 Mete. 577. If a partner carries on a private and a partnership business in the same name, and borrows money in that name, it is deemed to be bor- rowed for the partnership, no evi- dence being given to the contrary. Mifflin v. Smith, 17 Serg. & R. 165. This power of borrowing may extend to other things than money. Thus, where two parties are jointly interested in the opera- tion of buying and shipping oats, one party may bind both in bor- rowing oats to be paid in oats, in their common business and for their common benefit. Adee v. Demorest, 54 Barb. 433. A partner may borrow a note or bill for the purpose of raising money for the use of the firm, pro- vided not more than legal interests be paid for such note or bill. , Hutchins v. Hudson, 8 Humph. 426. Where the managing partner of a concern who had been in the habit of borrowing checks for the purpose of meeting the firm's lia- bilities, a short time before the firm dissolved called at the office of S. and requested his check, which he received, at his request, made payable "to currency," promising to return the amount within an hour or so, until he col- lected some bills of the firm, which he failed to do, held, that the other partner was liable to pay it, the check having been borrowed on the credit of the firm, though the pro- ceeds were not appropriated to the business of the firm. Stark v. Corey, 45 111. 431. B. , who was a partner in a firm, obtained from R. three bonds of the United States, which were made payable to bearer, to be used by the firm, and to be returned to R. upon request. B. was on his way to San Francisco to purchase a stock of goods for the firm at the time the bonds were delivered to him, and he proposed pledging them, or in some other way raising money upon them, and to use the money so obtained in the purchase of goods. B. lost his life before reaching San Francisco, and the bonds were lost. Held, that the 311 132 EIGHTS AND OBLIGATIONS. [BOOK II. vances is equally well established, (p) At the same time the power of borrowing money, like every other implied firm was liable to R. for the amount of the bonds. Roney v. Buckland, 4 Nev. 45. A misapplication, by one part- ner, of the funds borrowed, con- stitutes no defense to suit for pay- ment of the note given therefor, unless it be shown that the plaint- iff at the time he loaned the money had knowledge or reasonable grounds to believe that the same was to be used for other than part- nership purposes, or the circum- stances were such as to put him upon inquiry, and he neglected to inquire. Wagner v. Fresche, 56 N. H. 495 ; Gregg v. Fisher, 3 Brad. (111.) 261; Hay ward v. French, 12 Gray, 453; Onondaga Bank v. De Puy, 17 Wend. 47 ; Whitaker v. Brown, 16 id. 505; Steel v. Jen- nings, Cheves, 183; Church v. Sparrow, 5 Wend. 223; Haldeman v. Bank of Middletown, 28 Penn. St. 440; Gavin v. Walker, 14 Lea, 643 ; Bartholow v. St. Joseph Lead Co. 12 Mo. App. 587; Lindth v. Crowley, 29 Kan. 756; S. C. 26 id. 47. Whei-e a person became surety to a bond, given to secure money borrowed by one partner profess- edly for the firm, and so under- stood by the lender and the surety, but, in truth, for the individual use of the borrower, held, that though the creditor could not re- -cover the money from the firm, for want of authority in the partner to bind the firm by deed, yet the surety, upon paying the bond, even voluntarily and without suit, might recover the amount from the firm. Wharton v. Wood burn, 4 Dev. & B. Eq. 507. So the partnership is liable if one of the firm borrows money, not expressly on his individual credit, if it was used for the benefit of the firm. Church v. Sparrow, 5 Wend. 223. If one partner, in negotiating a loan for the partnership, deceives his copartner without the privity of the lender, by inserting in the se- curity a private debt of his own, the remedy of such copartner is against the fraudulent partner only. Dowdall v. Lenox, 2 Edw. 267. Upon a dissolution of partnership a new firm was formed, consisting of the same partners except one. The debts of the old firm were not assumed by the new firm ; but one of the partners induced the plaint- iff to furnish him with money to purchase notes of the former firm, representing that they could be bought at a discount. Instead of buying up such notes, the partner mentioned made and indorsed, in the name of the old firm, antedated notes, which he delivered to the plaintiff as notes bought by him in the market; and, depositing the money received from the plaintiff in bank to the credit of the new firm, afterwards drew it out in the firm name and applied it to the payment of the debts of the old firm. The other partners had no knowledge of the transactions be- tween the partner mentioned and the plaintiff. Held, that the new firm was not liable upon the notes, (p) See infra, Mortgage and Pledge. 312 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *132 power of a partner, only exists where it is necessary for the transaction of the partnership business in the ordinary way; in an action upon them by the Leg. Intel. 434 ; Norwalk Nat. Bk. plaintiff. Dounee v. Parsons, 45 N. Y. 180. "Where one of two copartners ob- tained money on a note payable at a future day, signed by him with the name of the firm and with a forged indorsement of a third per- son, the lender was held entitled, on discovering the forgery, to an ac- tion for money had and received, even before the maturity of the note, against the partners to whose use the money had gone. Manu- facturers' & Mechanics' Bank v. Gore, 15 Mass. 75. See, also, Board- man v. Gore, 15 Mass. 331, where there was no evidence that the money went to the use of the firm. Though the payee of a partner- ship note believed that the proceeds of the note were to be applied to the individual debts of one of the firm, the note would still be bind- ing on the firm if the proceeds were in fact used by the firm. Hamilton v. Summers, 12 B. Mon. 11. A firm is not rendered liable for money lent or goods furnished to a member upon his individual credit by the fact that the money or goods were afterwards applied to the benefit of the firm. Union, etc. Bank of Memphis v. Day, 12 Heisk. 413; Peterson v. Roach, 32 Ohio St. 374 ; Clark v. Taylor, 68 Ala. 453; Robertson v. Jones, 4 Pugs. & B. (N. B.) 267; Guice v. Thornton, 76 Ala. 466; McLinden v. Wentworth, 51 Wis. 170; Cof- fin's Appeal, 15 Weekly Not. Cas. 52; S. C. 15 id. 191; 14 id. 140; 40 v. Sawyer, 38 Ohio St. 339. See, also, Brock v. Brock, 19 Weekly Not. Cas. 356; S. C. 9 Atl. Rep. 486. And the rule is not different where the money is loaned for the purpose of enabling such partner to pay to the firm his portion of a specified sum which each partner has agreed to contribute in order to increase the firm's capital. Nor- walk National Bank v. Sawyer, 38 Ohio St. 339. The question in such cases is, To whom was the credit given? Clark v. Taylor, 68 Ala. 453. See, also, cases above cited. The fact that a member of a firm in giving a note for money bor- rowed used the form, " I promise to pay," and subscribed his own name, and then the firm name under- neath it, is a circumstance to be considered by the jury in deter- mining whether the lender had notice that the money was bor- rowed for the partner's individual use; the other partners are not necessarily holden on the note. Sherwood v. Snow, 46 Iowa, 481. Money obtained on the personal credit of a partner which goes into the firm funds and is used for the exclusive benefit of the firm is, however, a good consideration for a subsequent promise of the firm to pay the debt. Siegel v. Chidsey, 28 Pa. St. 279; Lint v. Shultz, 38 Leg. Intel. 426. One partner cannot bind the firm for money borrowed by him to pay for his share of the capital stock, 13 *132 EIGHTS AND OBLIGATIONS. [BOOK II. and consequently, if money is borrowed by one partner for the declared purpose of increasing the partnership capital, (q) or of raising the whole or part of the capital agreed to be subscribed in order to start the firm, (r) or if the busi- ness is such as is customarily carried on on ready-money principles, e. g., mining on the cost-book principle, (V) or without borrowing, as in the case of solicitors (t), the firm will not be bound unless some actual authority or ratifica- tion can be proved. Still less will the firm be bound where borrowing is prohibited and the person advancing the money is aware of the prohibition, (u) especially where the lender knows the purpose for which the money- is borrowed. McLinden v. Went- worth, 51 Wis. 170. Where money has been loaned to a party individually, such party being at the time a member of the partnership, he is the one who owes the debt therefor, no matter what representations he made at the time as to how or for what purpose it was to be used. Ah Lep v. Gong Choy, 9 Pac. R. 483. Where the individual note of one partner is taken for a loan made at the time to the firm, the presump- tion is that it was not taken as pay- ment. Hoeflinger v. Wells, 47 Wis. 628. A member of a commercial firm has no implied authority to bind the firm by a promissory note ex- ecuted for the purpose of borrow- ing money to protect and retire dishonored paper of the customers of the firm where the payee of the note has notice of such fact. McConnell v. Wilkins, 5 Can. L. T. 580. The liability of a partner for the acts of his copartner done in behalf of the firm cannot be held to ex- tend to illegal contracts; and, therefore, where money was bor- rowed at usurious interest, by one member, without the knowledge or consent of the other, the member not participating in such contract is not responsible for the money borrowed. Hutchins v. Turner, 8 Humph. 415. But a partner who knowingly and without objection allows the financial partner to continually raise money at usurious rates thereby impliedly gives his author- ity to bind the firm to pay usurious interest, from which he can only escape by pleading usury. Hurd v. Haggerty, 24 111. 171. (q) Fisher v. Taylor, 2 Ha. 218. (r) Greenslade v. Dower, 7 B. & C. 635. (s) Hawtayne v. Bourne, 7 M. & W. 595 ; Burmester v. Norris, 6 Ex. 796; Ricketts v. Bennett, 4 C. B. 686. (t) Plumer v. Gregory, 18 Eq. 624, as to the 1,700?. (u) Worcester Corn Exchange Co. 3 De G. M. & G. 180. See, also, the cases in the next note. 314 CH. I, SFC. II.] LIABILITIES OF PARTNERS. *133 Overdrawing banking account. — Overdrawing a bank- ing account is borrowing money, (a?) 1 Increasing capital. — Connected with the subject of bor- rowing money is that of increasing capital. A sole trader who borrows money for the purpose of his trade cannot with propriety be said to increase his capital; but if two or more persons are in partnership, and each borrows money on his own separate credit, and the money is then thrown, into the common stock, the capital of the firm, as distin- guished from the separate capitals of the persons composing it, may with propriety be said to be increased. But, in this case, the firm is not the borrower, nor is it debtor to the lender for the money borrowed. If a firm borrows money so as to be itself liable for it to the lender, the capital of the firm is no more increased than is the capital of an ordi- nary individual increased by his getting into debt. "When, therefore, *it is said that one partner has no [*133] implied power to borrow on the credit of the firm for the purpose of increasing its capital, what is meant is that one partner, as such, has no power to borrow, on the credit of himself and copartners, money which each was to obtain on his individual credit, and then to bring into the common stock, (if) Unless the expression means this it means nothing, (s) (x) Blackburn Building Soc. v. shown by such surrounding cir- Cunliffe, Brooks & Co. 22 Ch. D, cumstances as would put a reason- 61, and 9 App. Cas. 827; Waterlow able man on inquiry, if such in- v. Sharp, 8 Eq. 501; and Re Cefn quiry would have resulted in actual Cilcen Mining Co. 7 Eq. 88, contra, notice. Darlington v. Garrett, 14 must be considered as overruled. Bradvv. 238. 1 In case of an overdraft drawn The mere fact that overdrafts payable to the order of one partner, are payable to the member making where the power exists to overdraw them is not sufficient notice of such in the name of the firm, notice to partner's bad faith. Darlington v, the drawee of bad faith in the part- Garrett, 14 Bradw. 238. ner overdrawing is necessary in or- (y) See Greenslade v. Dower, 7 B. der to release the defrauded part- & C. 635 ; Fisher v. Taylor, 2 Ha. ners from liability on the draft. 218, as to the power of one partner Darlington v. Garrett, 14 Bradw. 238. to do this. Such notice may, however, be (z) See Bryon v. Metropolitan Sa- 315 *134 EIGHTS AND OBLIGATIONS. [iJOOK II. Difference between borrowing and obtaining goods, etc., on credit. — There is a practical difference between borrowing money and procuring works and materials on credit, which requires notice. The difference consists in this: that he who possesses power to borrow on the credit of another has a much more extensive, and therefore more easily abused, trust reposed in him than one who is empow- ered only to pledge the credit of another for value received when the pledge is given. A power, therefore, to incur debt, which is necessarily incidental to almost every part- nership, by no means involves a power to borrow money; and the cases which show that adventures in cost-book mines are liable for supplies furnished to the mine, (a) but not for money borrowed for the purposes of* the mine, (b) show that the difference here alluded to is judicially recog- nized. The effect of having had the benefit of money improp- erly borrowed will be noticed hereafter. See infra, § 6. See, further, as to borrowing money, infra, Mortgages and Pledges. 9. Checks} — One partner has implied power to bind the firm by checks, not post-dated, (c) drawn on the bankers of the firm in the partnership name; (d) and if one partner directs the bankers of the firm not to pay a check [*134] of the firm, the ^bankers incur no liability to the firm if they follow such directions, (e) l loon Omnibus Co. 8 De G. & J. (c) See Forster v. Mackreth, L. R. 123. 2 Ex. 163 ; Bull v. O'Sullivan, L. R. (a) Tredwen v. Bourne, 6 M. & W. 6 Q. B. 209. 461 ; Hawken v. Bourne, 8 id. 703. (d) Laws v. Rand, 3 C. B. N. S. (6) Hawtayne v. Bourne, 7 M. & 442 ; Backhouse v. Charlton, 8 Ch. W. 595 ; Burmester v. Norris, 6 Ex. D. 444. As to checks drawn by 796; Ricketts v. Bennett, 4 C. B. directors, see Re Gloucester, Abe- 686 ; Brown v. Byers, 16 M. & W. rystwith, etc. Rail. Co. 18 Jur. 815, 252. See, also, Beldon v. Campbell, L. J. 6 Ex. 886. (e) Before the Jud. Acts, an ac- 1 See ante. Bills and Notes. tion for dishonoring the check l \i a partner consents that a check individual debt of his copartner he of the firm may be applied on an may at any time before such appli- 316 CH. I, SEC. II.] LIABILITIES OF PAETNEES. nu must have been brought in the names of all the partners, and in the case supposed such an action could not have been sustained. See infra, book ii, ch. 3. It is con- ceived that the statement in the text is correct, notwithstanding the modern rules as to parties. cation is in fact made, or the rights of third parties intervene, with- draw such consent, and after notice by him not to so apply the check it cannot be so applied. National Bank of Jacksonville v. Mapes, 85 111. 67. When a banker has the funds of a firm deposited with him for the purpose of its special business, and knows that one of the firm is en- gaged in individual speculations, and transfers these funds to the separate account of this member, and with a knowledge that the lat- ter appropriates the funds to such speculations, the banker is liable to the firm for the funds thus mis- applied, unless they first assure him of their consent. Billings v. Meigs, 53 Barb. 272. A firm whose articles require that all negotiable paper shall be executed in the firm name will not be liable upon a check drawn upon the firm by one partner for his own private purposes and ac- cepted, not in the firm name, espe- cially where the evidence shows that the holder did not acquire it in good faith. Hovey v. Cassels, 30 U. C. C. P. 230. See, also, Fer- guson v. Thacher, 79 Mo. 511. If a bank pays out the money of a partnership to one of the part- ners upon his check, in fraud of the rights of the other partners, an action at law cannot be main- tained in the firm name against the bank, but resort must be had to a court of equity for the relief of those partners claiming to be in- jured. Church v. First National Bank, etc. 87 111. 68. See Miller v. Price, 20 Wis. 117, as to the neces- sary parties. G., a member of a firm, made a check in the firm name, payable to H. or bearer, for the purpose of paying an account due from the firm to H. ; but, instead of using the check for that purpose, paid H.'s account by an account which he held individually against H., and by payment of the balance in cash, and subsequently transferred the check to the plaintiff to pay an individual debt. Held, that as it appeared that the check was drawn in good faith to pay a partnership debt, an action would lie upon it against the firm. Gale v. Miller, 44 Barb. 420. Where there are two establish- ments in the same place for carry- ing on the same business, both conducted by the same person, in one of which he is a partner, and in the other sole proprietor, and he obtains money from a bank on checks drawn by him and signed with his own name as agent, in an action by the bank against the firm they may show that they are not indebted to the bank, if they did not know the mode in which the checks were drawn. Mechanics', etc. Bank v. Dakin, 24 Wend. 411. A person who is a member of two firms gives the check of one firm to pa3 T the note of the other, which had been deposited with a banker for collection. In this case a mutual understanding between the 317 *13A EIGHTS AND OBLIGATIONS. [BOOK II. 10. Contracts. — One partner can bind his copartners by varying a contract made with both in the ordinary course of business, (f) 1 firms may well be presumed, and the person receiving the proceeds of the note is not liable in an action by the former firm to restore them. Nor is the notorious insolvency of the member who drew the note and the check constructive notice of his want of authority. Murphy V. Camden, 18 Mo. 122. (/) Leiden v. Lawrence, 2 N. R. 283, Ex. 1 A partner's consent to the can- cellation of an insurance policy in which the firm is interested is con- clusive on the firm. Hillock v. Traders' Ins. Co. 54 Mich. 532. An instruction that one partner cannot bind the firm by agreement to rescind a contract cannot be sus- tained where it is not shown by undisputed testimony that the busi- ness done under the contract was the whole business of the firm, and that a rescission thereof would work a practical dissolution of the firm. Shellito v. Sampson, 61 la. 40. One member of a firm of paving contractors cannot, by his subse- quent individual contract, vary or affect the joint obligations which have been already incurred, though he may bind himself thereby. Detroit v. Robinson, 42 Mich. 198. One partner in a firm not com- mercial has no authority to consent to a material alteration of a prom- issory note made by the firm so as to bind his copartner. Horn v. Newton City Bank, 32 Kan. 518. Where one of four partners as- sumed an indebtedness of another partner to the firm, the partners so dealing together will have no right to credit the debtor partner to the amount of his indebtedness on the books of the firm, unless it is actually paid into the firm, or is in some way authorized or ratified by the other two partners ; nor can such indebtedness be charged or transferred to a new firm not com- posed of the same members, with- out the consent or ratification of all the partners. McCall v. Moss, 112 111. 493. One partner has a right to bind the firm to any extent by contracts within the scope of the partner- ship. Bank v. Gore, 15 Mass. 75; Boardman v. Gore, id. 331 ; Gallo- way v. Hughes, 1 Bailey, 553 ; Win- ship v. Bank, 5 Pet. 529; Storer v. Hinkley, Kirby, 147. A contract to convey lands be- longing to a firm, signed with the firm name by one partner, under a verbal authority from the other partner, is binding on both. Law- rence v. Taylor, 5 Hill, 107. See Ewell's Evans on Agency, *17, note. Contract of firm, for rent, will not be implied from use and occu- pation had under express contract with partner. Brooks v. Allen, 5 N. Eng. Rep. (Mass.) 747. Unless one partner has express authority to promise to pay for medical services of employees, or such authority is usually incident to like partnerships, the other part- ner is not bound thereby. Wood- ruff v. Scaife, 3 So. Rep. (Ala.) 311. 318 CH. I, SEC. II.] LIABILITIES OF PARTNERS. -134 Payment to one partner [or by one partner]. 1 — 11. Debts. — If a debt is owing to a firm, payment by the debtor to any one partner extinguishes the claim of all, each partner being ostensibly the agent of all the rest to get in debts owing to the firm, {g) 2 After a dissolution, payment Where two persons as partners in the erection of buildings have dealt largely with a person in the roofing business, and one of the partners employs such person in and about a building of his own, and tbe person doing such work has no notice that the work is for the individual partner, but does the work upon the credit of the firm as in prior dealings, a recov- ery by him for his services against the firm will not be disturbed. Bartlett v. Powell, 90 111. 331 ; Spru- hen v. Stout, 52 Wis. 517. 1 One partner may discharge a liability of a firm. Hardy v. Nor- folk Mfg. Co. 80 Va. 404. One of two joint makers of a promissory note, the two makers being partners, cannot discharge himself from liability thereon by paying the money due to the payee to the other partner upon his in- forming him that he is the agent for the payee. Nelson v. Tumlin, 74 Ga. 171. One member of a firm who has paid a judgment recovered on a firm debt against the members of the firm cannot keep the judg- ment alive and enforce it against his copartners, either in his own name or in that of a third person to whom he may cause it to be as- signed, unless, perhaps, under spe- cial circumstances disclosing some equity entitling him to hold it as security to the extent of the sum which may be found due to him from his copartners on an account- ing. Booth v. National Bank, 74 N. Y. 228. See, however, Brown v. Black, 96 Pa. St. 482. A member of an ordinary firm who contracts a partnership debt, and who is the financier and busi- ness manager of the firm and the only member having an individual credit, should he pay this debt with his own money, cannot legally avoid such payment on the ground of not knowing at the date of the contract that he was only bound for his virile share and not the whole of the debt. Schmidt v. Foucher, 38 La. Ann. 93. (g) Anon. 12 Mod. 446. 2 Each partner is the agent and trustee of the firm and of the other partners as to the collection of its assets for payment of its debts. Prentice v. Elliott, 72 Ga. 154. Payment of a debt to one part- ner of a firm is good against the other partners, and a release by one partner to a debtor of the firm is obligatory on the others. Scott v . Trent, 1 Wash. (Va.) 77 ; Salmon v. Davis, 4 Binn. 375; Gregg v. James, Breese, 167; Yandes v. Lefavour, 2 Blackf. 371 ; White t>. Jones, 14 La. Ann. 681 ; Vander- burg v. Bassett, 4 Minn. 242 ; Allen v. Farrington, 2 Sneed, 526; Rowell v. Fuller, 5 N. Eng. Rep. (Vt.) 217. Where one of two partners re- ceives money on an executory contract, and the other partner subsequently ratifies the contract, 319 *m RIGHTS AND OBLIGATIONS. [BOOK II. to any one of the partners discharges the debtor, (A) even thouo-h a third person is appointed to collect the debts owing to the firm, and the creditor is aware of that fact, (i) l both are liable, if the contract is not fulfilled, though the money may not have been paid over from one partner to the other. Lawrence v. Taylor, 5 Hill, 107. Where several persons, either as copartners or joint contractors, have done work under an agree- ment with a railway company, a payment to one of them in town- ship aid bonds binds the rest, if with full knowledge of the fact they decline to repudiate the pay- ment and make a distinct claim upon the company. Mich. Air Line R'y Co. v. Mellen, 44 Mich. 321. One partner has authority, on be- half of the firm, to agree with a debtor of the firm as to the appli- cation to be made of payments of money by the debtor on demands owing to the firm. Wittkowsky v. Reid, 82 N. C. 116. If a partner receives more than he is entitled to within the scope of the partnership the firm must refund the same. Williams v. Whitmore, 9 Lea (Tenn.), 262. (h) Duff v. The East India Co. 15 Ves. 198 ; Brasier v. Hudson, 9 Sim. 1. See Phillips v. Phillips, 3 Ha. 281, as to the receipts of a surviv- ing partner. (t) Bristow v. Taylor, 2 Stark. 50 ; Porter v. Taylor, 6 M. & S. 156; King v. Smith, 4 Car. & P. 108. i Neither the insolvency of the partner receiving the money nor the application he makes of it af- fects his right to receive it. Major v. Hawkes, 12 111. 298; Heartt v. Walsh, 75 III. 200. A. and B. were partners, and on a dissolution of the firm trans- ferred to C. all the partnership ef- fects for the purpose of paying and collecting the debts of the firm. C. afterwards transferred the partner- ship property to B. D., a debtor of the firm, after notice of the transfer to C, paid his debt to A. B. sued D. for the debt. Held, that as C. was not vested with the title of the partnership effects as assignee, payment to A. , as one of the firm, was a good discharge of the debt. Gordon v. Freeman, 11 111. 14. After the dissolution of a firm which had indorsed a note, the maker paid a sum of money to one of the late partners, and took a re- ceipt signed with the firm name, by which it was agreed that the money should be applied to the payment of the note. Held, that another partner was not liable on this receipt for the misapplication of the money, the maker of the note not being a dealer with the firm, and being bound to take no- tice of its dissolution. Sanders v. Ward, 23 Ark. 241. A power of attorney for the sale of land was transmitted through the hands of a partner to the at- torney. The attorney sold the land, and afterwards, in the settlement of his accounts with the partner- ship, accounted for the money re- ceived for the land with the part- ner from whom he had received the papers, and took from him a receipt, signed as if for the partner- ship, which had been dissolved. Held, that the partnership was not 320 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *m But if on a dissolution a debt due to the partnership is assigned to one of the partners, and the debtor has notice liable for the money. Hutchins v. Gilinan, 9 N. H. 359. Conversely, payment of a firm debt by one member of the firm is a payment by the firm. Thus, if one member of a partnership sign a note representing a partnership debt, all the other partners are, as between themselves, under the same obligation to pay the note as the signer. Consequently a pay- ment of the note by a partner other than the signer, although from his private funds, extinguishes the note ; nor will it be revived by a bare promise, made by the signer to the partner who paid the note, to pay the same. Sprague v. Ains- worth, 40 Vt. 47. See, also, Woods v. Woods, 127 Mass. 141. Where the members of a firm gave a bond, individually, for a debt of the firm, and property was delivered by them and accepted as a payment thereof, held, that the bond was thereby discharged, and that it was not in the power of one of the obligors, by agreement with the obligee, to withdraw the pay- ment, and thus again put the bond in force. Jarman v. Ellis, 7 Jones, L. 77. Where one member of a copart- ship pays a judgment rendered upon a firm debt against the mem- bers of the firm, he cannot keep the judgment alive and enforce it against his copartners, either in his own name or in that of a third per- son to whom he may cause it to be assigned; unless, perhaps, under special circumstances disclosing some equity entitling him to hold it as 6ecuritv to the extent of the sum which may be found due to him from his copartners on an ac- counting. Prima facie the judg- ment was discharged by the pay- ment, and in the absence of proof of such special circumstances it will be held to be satisfied. Booth v. Farmers' Bank, 74 N. Y. 228. A promissory note was executed by three of four members of a firm, and indorsed by the fourth, for the purpose of raising money for the firm business ; it was dis- counted by defendant and its pro- ceeds were so used. An action was brought thereon against the makers and indorser, judgment was per- fected against the makers, and sub- sequently a separate judgment was entered against F., the indorser. F. procured the judgment to be as- signed to plaintiff, who had notice of the character of the judgment. Plaintiff paid nothing to the defend- ant for the assignment, but trans- ferred to F. an interest in certain real estate. F., at or subsequent to the time of the assignment, paid to defendant the amount of the judgment. The assignment pro- vided that it should not affect F.'s liability to defendant. Defendant subsequently executed a satisfac- tion of the judgment, which was discharged of record. In an action to recover damages, held, that the payment by F. had the same effect as if there had been but one joint judgment against all the partners, and inured to the benefit of all; that if payment was made after the assignment it none the less oper- ated to discharge the judgment, and the receipt of it by defendant,. Vol. 1 — 21 321 *135 EIQHTS AND OBLIGATIONS. [BOOK II. of the assignment, he can only pay the assignee, (k) ' If there are two firms with one common partner, and a bill of exchange is given to one firm and is indorsed by it to the other, payment to the first firm is an answer to an action brought on the bill by the second. (/) Payment to one partner of debt not due to firm. — Moreover, when it is said that payment to one partner is payment to all, it is supposed that the payment is made in discharge of a debt due to the firm. If it is due, not to the firm, but to one of the partners, the rule does not hold. Therefore, if an owner of goods sells them, the purchase money must be paid to him or his agent; and payment to a person interested with him in the profits accruing from the sale will not do; for though the two may be liable as if they were partners by reason of their community of [*135] interest in the profits, it does not there*fore follow that he who is to share the profits is entitled to re- ceive the proceeds of the sale of the goods themselves which belong exclusively to the other, (m) So, where a court orders payment to be made to one partner by name, the order must be strictly obeyed, and payment to the part- not being in violation of its con- firm, held, that the draft should tract, did not render it liable to be considered as having been given plaintiff ; nor did the giving of in part payment for the goods, and the satisfaction piece, as he could allowed for in settlement. Getchell not have enforced the judgment v. Foster, 106 Mass. 42. against any of the partners, at least (k) See Duff v. East India Co. 15 in the absence of an indebtedness Ves. 213. from them to F. on the partnership l If one partner receives from a accounts. Booth v. Farmers' Bank, third person payment of a debt supra. owing by him to the firm, whicli A party who had entered into a has been allotted to his copartner, contract for the sale of goods with the latter may maintain an action one of the members of a firm who against him to recover the amount was acting for the firm drew a so received. Crosby v. Nichols, 3 draft on that member of the firm Bosw. 450. before any payment was due on the (I) See Jacaud v. French, 12 East, contract, who in turn gave a draft 317. on his partners, which was ac- (m) See Smith v. Watson, 2 B. & cepted. In an action to recover C. 401. the price of the goods against the 322 CH. I, SEC. II.] LIABILITIES OF PARTNERS. ^135 ner of the person named in the order will not suffice, though both are defendants in the action in which the order is made, (n) Receipts given by one partner. — As one partner can accept payment of a debt due to the firm, so he can effect- ually release (o) l and give a valid receipt for such debt, (p)" 2 It is, however, to be remembered that although one partner has implied authority to get in debts owing to the firm and to give discharges for them, still a receipt is not conclusive evidence of payment; so that if one partner gives a receipt in fraud of his copartners it will not preclude the firm from recovering the money, (q) Nor will a release given by one partner bind the firm if the releasing partner acts in fraud of his copartners and in collusion with the debtor, (r) Assent to creditors' deed. — If one of several partners assent to a deed executed by a debtor of the firm in favor of his creditors the firm is bound by the deed; (s) and the (n) See Showier v. Stoakes, 2 Dowl. & L. 3. As to payments by the paymaster-general to one of several partners, see Supreme Court Fund Rules, 18S6, rule 63. (o) See Hawkshaw v. Parkins, 2 Swanst. 539, and post, Release. 1 See ante. The law firm of T. & A. rendered service for S., and A. charged them on the books of the firm. T. made a several claim for the same services after the death of S., against his estate, which was allowed and paid, T. executing a release under seal in the name of T. & A. Held, that the release was binding on the firm, as no collusion between T. and the administrator of S. was shown, although the release was made long after the dissolution of the firm of T. & A., and T. was in embarrassed circumstances, and had no attachable property. Thrall V. Seward, 37 Vt. 573. (p) Henderson v. Wild, 2 Camp. 561. 2 A receipt being signed by a firm, and the question being whether the members were bound or only the one signing it, in the absence of all explanatory evi- dence the court should give it the construction which will operate most strongly against those pur- porting to be bound by it. Hogan v. Reynolds, 8 Ala. 59. (q) Farrar v. Hutchinson, 9 A. & E. 641; Henderson v. Wild, 2 Camp. 561. (r) Aspinall v. The London & N. W. Rad Co. 11 Ha. 325. And see post, Release. (.s) See Morans v. Armstrong, Arms. M'Art. & Ogle, Ir. N. P. Rep. 25 ; Dudgeon v. O'Connell, 12 Ir. Eq. 566. 323 *136 EIGHTS AND OBLIGATIONS. [dOOK II. doctrine that one partner has no implied authority to bind his copartners by an instrument under seal has no applica- tion to such a case, (t) Assent to transfer of debt.— One partner can bind the firm by assenting to a transfer of a debt due to it, as, for example, to a transfer of the firm's account from their banker to his successor in business, (u) So where a cred- itor of the firm assigns the debt due to him, and [*136] *one of the partners recognizes the transfer and promises to pay the transferee, the firm is bound by this promise, (a?) Taking bill in payment. — Again, one partner may re- ceive a bill in payment of a debt due to the firm, and so preclude the firm from suing for the debt so long as the bill is running, (y) Payment to an agent of a firm of a bill drawn in his own name and payable to his own order in respect of a debt due to the firm is not payment to the firm unless he has authority to draw in that way, or the firm gets the money, (s) Settling debts. — Although, each partner has power to receive payment of a partnership debt, and to give a dis- charge for it on payment, it does not follow that he has power to compromise or settle the debt in any way he likes without payment. 1 As a general proposition, an authority (t) Dudgeon v. O'Connell, 12 Ir. party. Noyes v. New Haven, etc. Eq. 566. R. R. Co. 30 Conn. 1 ; Doremus v. (u) Beala v. Caddick, 2 H. & N. McCormick, 7 Gill, 49 ; Hawn v. 326. See, also, Backhouses. Charl- Land Co. 16 Pac. Rep. (Cal.) 196. ton, 8 Ch. D. 444. Where one member of the firm (x) Lacy v. McNeile, 4 Dow. & has taken a chattel mortgage on a Ry. 7. stock of goods to secure a debt to (y) See Tomlins v. Lawrence, 3 the firm, he has authority as part- Moo. & P. 555. ner to take goods in payment of (z) See Hogarth v. Wherley, L. the debt and to create an agency R. 10 C. P. 630. for their sale by putting them in 1 A partner has power to com- the mortgagor's charge ; and if he promise and discharge a claim of thinks that keeping up the stock is the partnership against a third the best way to sell the goods to 324 CH. I, SEC. II. J LIABILITIES OF PARTNERS. *136 to receive payment of a debt does not include an authority to settle it in some other way ; (a) and a partner has no advantage, slight evidence of his partner's assent is sufficient to make the firm responsible for the agent's acts in purchasing goods for that purpose. Banner Tobacco Co. v. Jenison, 48 Mich. 459. In the case of a partnership in a single contract it is beyond the power of one partner, in closing up the firm affairs, to take a note for money due under the contract to himself alone, and to extend the time of payment without interest ; the giving of such note is no de- fense to an action by the firm on the original debt before the expira- tion of the extension. Lamiette v. Starr, 33 N. West. Rep. (Mich.) 832 ; S. C. 10 West. Rep. 213. A partner cannot compromise by receiving land from a debtor in- stead of money, money being due. Russell v. Green, 10 Conn. 269. Where one partner makes a set- tlement of matters due the firm by taking a note for the sum due, his misapplication of the note will not invalidate the settlement unless fraudulently made by the other party to enable a fraud to be prac- ticed on the firm. Heartt v. Walsh, 75 111. 200. If a member of a commercial firm receives from a debtor of the firm the note of a stranger, receipt- ing therefor in firm name and giv- ing him the receipt to collect and return the proceeds to the debtor less the amount of his debt, this does not bind his partners who have (a) See the last note, and Pearson «, Scott, 9 Ch. D. 198; Young v. White, 7 Beav. 506; Underwood v. no notice of the transaction, al- though he applies the proceeds to firm debts. Pickels v. McPherson, 59 Miss. 216. A settlement by one partner with a debtor of the firm is not binding on the firm, so as to call upon the other partners to falsify it by par- ticular allegations of mistake or fraud, when it compromises indi- vidual transactions, which the par- ties engaged in the settlement knew should not enter into the firm ac- counts. Rust v. Hanselt, 41 N. Y. Superior Ct. 467. See next note, infra. B., C. & Co. having a claim on a railroad company, under a contract for the construction of the road, which was payable in stock of the company, assigned it to W. to se- cure an indebtedness to him of about $10,000, with full power to collect of the company the whole amount due. The railroad com- pany and W. were afterwards fac- torized by certain creditors of B. , C. & Co., whose claims amounted to about $28,000. After finishing the work all the members of the firm except B. went away to dis- tant parts, having first given writ- ten notice to the railroad company not to pay any money or stock, or dispose of any property of the firm, upon the authority of B. Some- time after, B., assuming to act for B., C. & Co., W., as assignee of their claim, the attaching creditors and the railroad company made a Nicholls, 17 C. B. 239; Story on Agency, § 98. 325 •130 EIGHTS AND OBLIGATIONS. [BOOK II. implied authority to discharge a separate debt of his own by agreeing that it shall be set against a debt due to his firm. (l>) ' general settlement of the affairs of B., C. & Co. with the railroad com- pany, in which the attaching cred- itors assigned their claims to W., the railroad company transferred to W. $30,000 of the stock of the road, and B., C. & Co., by B., re- leased the railroad company from all further claim under the contract. The settlement was made by all parties fairly, and B. intended to benefit B. , C. & Co. and did in fact benefit them by the settlement. All the stock received by W. was applied in payment of his own claim and the claims so assigned to him. The other members of the firm, three years afterwards, in the name of the firm, assigned to an- other creditor their claim on the railroad company and on W. on a bill in chancery brought by him against the railroad company and "W. , praying that the settlement be 6et aside, and that the accounts be adjusted, it was held, dismissing the bill, that B. had full power to make the settlement, and that the notice of the other members of the firm that nothing should be paid out on the authority of B. could not affect the right already pos- sessed by W. under the assignment previously executed by the firm, t > receive the full amount of the claim from the railroad company. Whether, if the other members of the firm had given notice to the railroad company that they should not assent to any settlement made by B., a settlement made by him should be binding on them, quere? Cannon v. Wildman, 28 Conn. 472. A. was member of the firms A. and B., and A. and C, and was managing partner in both concerns. Both firms had dealing with the firm of D. and E. The firm of A. and B. was dissolved by the death of B., and was, at the time, largely indebted to A. and C, who were also indebted to D. and E. A., after B.'s death, having done the same thing before, transferred the in- debtedness of A. and C. to the firm D. and E., from the account be- tween them to the account between D. and E., and A. and B., and credited the same amount to the last-named firm, on the account between A. and B., and A. and C. Held, that A. had, under the cir- cumstances of the case, authority to do this. Peyton v. Stratton, 7 Gratt. 380. One member of a firm of at- torneys, authorized by his client, has authority to compromise a case without the co-operation or consent of his copartner. Jeffries v. Mutual Life Insurance Co. of N. Y. 110 U. S. 305. The creditors of an insolvent firm, believing one of the partners to be a special partner only, but who was a general partner, in con- lb) Piercy v. Fynney, 12 Eq. 69. S^e, also, Kendal v. Wood, L. R. 6 Ex. 243. Compare Wallace v. Kel- sall, 7 M. & W. £6i. 1 A partner cannot employ the partnership property, whether credits or otherwise, to pay or secure his own pre-existing debt, CH. I, SEC. II.] LIABILITIES OF PARTNERS. '136 Promise by one partner to pay a debt of the firm. — A promise by one partner to pay a debt owing by the firm sideration of his note for twenty- five per cent, of their demands against the firm, assigned him those demands. His note was duly paid. Held, that the creditors could not hold him responsible as general partner for the de mands so assigned to him. Allison v. Abend- roth, 15 N. E. Rep. (N. Y.) 606; S. C. 11 Cent. Rep. 278. without the express or implied as- sent of the other partners. Rogers v. Batchelor, 12 Pet. 221; Pierce v. Pass, lPort. 232; Dobu. Halsey, 16 Johns. 34; Leonard v. Winslow, 2 Grant, Cas. 139; Purdy v. Powers, 6 Pa. St. 492 ; McKinney v. Brights, 16 Pa. St. 399 ; Sauntry v. Dunlap, 12 Wis. 364; Bur well v. Spring- field, 15 Ala. 273 ; Nail v. Mclntyre, 31 Ala. 532; Filley v. Phelps, 18 Conn. 294 ; Bourne v. Woolbridge, 10 B. Mon. 492; Jackson v. Hollo- way, 14 id. 133; Jones v. Lusk, 2 Mete. 356 ; Minor v. Gaw, 19 Miss. 322 ; Buck v. Mosley, 24 Miss. 170 ; Goode v. McCartney, 10 Tex. 193; Gallagher's Appeal, 114 Pa. St. 353 ; Deeter v. Sellers, 102 Ind. 458; Higgins v. Cartwright, 25 Mo. App. 609; Bartholow v. Harvey, 12 Mo. App. 588; Chase v. Buhl Iron Works, 55 Mich. 139; Sanger v. Ker, 1 Tex. App. (Civ.) 612; Noble v. Metcalf, 20 Mo. App. 360 ; Davis V. Smith, 27 Minn. 390 ; S. C. 29 id. 201 ; Thomas v. Stetson, 62 la. 537; S. C. 49 Am. Rep. 148; Johnson v. Crichton, 56 Md. 108; Buchanan v. Meisser, 105 111. 638; Binns v. Waddell, 32 Gratt. 588; Hagar v. Graves, 25 Mo. App. 164; Manhat- tan Co. v. Laimbeer, 5 N. Eng. Rep. (N. Y). 712; Roberts v. Pep- ple, 55 Mich. 367 ; Moline Wagon Co. v. Rummel), 2 MeCrary, C. Ct. 307; S. C. 14 Fed. Rep. 155; 12 id. 658. See, also, post. A firm may make an agreement that a debt due the firm shall be offset against a debt by one part- ner to the firm debtor. Morrill v. Merrill,-3 N. Eng. R. 160. Whoever deals with a partner, who uses the partnership name to direct the partnership property to be applied to his individual pur- poses is put on his guard by the very nature of the transaction, which is beyond the scope of partnership authority. If he carries out such instruction he does so at his peril. Carter v. Galloway, 36 La. Ann. 730. See, also, Cannon v. Lindsey, 3 So. Rep. (Ala). 676. A partner cannot bind the part- nership for his private debts with- out the assent of his copartners; and if such assent is given it is the province of the jury to judge of the extent of it, and it is error for the court to rule upon the point as a question of law. Noble v. M'Clintock, 2 Watts & S. 152. The burden in such case is on the creditor to show the con- sent of the other partners. Davis v. Smith, 27 Minn. 390; S. C. 29 id. 201. If the other partners, on becom- ing aware of such appropriation, adopt and ratify the act, the firm will be bound. The other partners may also by their conduct estop themselves from claiming that there has been no adjustment of 327 13G EIGHTS AND OBLIGATIONS. [book II. undoubtedly binds the firm, (c) How far a promise by one partner will prevent the statute of limitations from running in favor of the others will be seen hereafter, (d) the debt owed to the firm. Noble v. Metcalf, 20 Mo. App. 360. An agreement by a partner that goods purchased of the firm may be applied in payment of the indi- vidual debt of his copartner to the purchaser is not within the statute of frauds and may be established by parol. Rhodes v. McKean, 55 la. 547. A custom on the part of the sev- eral members of a firm that when a member was indebted his ac- count would be taken in and charged against him on the books of the firm does not authorize one of the partners to dispose of the goods of the firm in payment of his private debt. Forney v. Adams, 74 Mo. 138. The consent of one partner to the application by the other part- ner of the price of firm goods in payment of the individual debt of the latter to the buyer will not be inferred from the mere knowledge of the transaction. Todd v. Lorah, 75 Pa. St. 155. See, also, Tyree v. Lyon, 67 Ala. 1. If a partner consents that a check of the firm may be applied on an individual debt of his copartner, he may at any time before such application is in fact made, or the rights of third parties intervene, withdraw such consent, and after notice by him not to so apply the check it cannot be so applied. Na- tional Bank of Jacksonville v. Mapes, 85 111. 67. The defendant's agent sold and delivered to one of the partners of a grocery firm, to which the de- fendant was indebted for groceries, certain cattle belonging to the de- fendant, agreeing to receive the price thereof in groceries at the store of the firm, and that the amount already due should be in- cluded as part payment of such price. Held, that such agreement was not binding upon the firm, without affirmative proof of their knowledge and consent thereto, and that, in the absence of such proof, their assignee in insolvency might recover against the defend- ant the whole amount of his ac- count. Cadwallader v. Kroesen, 22 Md. 200. An attempt by one partner to sell his interest in partnership property in payment of his indi- vidual debt is a breach of the part- nership agreement; and if the purchaser knew that the property conveyed was partnership prop- erty, he is deemed to have had notice of the trust, and is held to have purchased only what his vendor could i equitably convey, i. e., the legal estate of the vendor, subject to the state of the partner- ship accounts. Ross v. Henderson, 77 N. C. 170. An agreement between one mem- (c) Anon. v. Layfield, Holt, 434; Lacy v, McNeile, 4 Dow. & Ry. 7. (d) A promise to one inures for the benefit of all. White v. Will- iams, Willm. WolL & Hod. 52. 328 CH. I, SEC. II.] LIABILITIES OF TARTNEKS. "136 ber of a mercantile partnership funds belonged to the partnership. and a practicing physician, who has knowledge of the partnership, that the latter shall obtain goods from the partnership in payment for professional services rendered and to be rendered to such partner individually, is outside of the part- nership business, and beyond the partner's authority; and such agreement is not binding on his copartner, or the partnership, un- less expressly authorized or sub- sequently ratified. In such case, an offer by the other partner, when trying to collect the account due to the partnership, to allow the physician's as a credit or set-off, if he will pay the balance in money, is not a ratification of the un- authorized agreement under which the account was contracted. Hust v. Clarke, 56 Ala. 19. One of the partners being in- debted to the plaintiff, it was agreed that he might take goods out of the store in payment of the debt, and that the same should be charged to the individual partner. Upon dissolution the partner originally indebted transferred his interest to his copartner, who after- wards assigned for the benefit of creditors. Held, that the assignee was not entitled to recover for goods sold before the assignment, but that for those sold afterwards he could recover, unless it was shown that they were sold by him in pursuance of the original agree- ment. Woodward v. Horst, 10 Iowa, 120. If a partner applies partnership funds to the payment of his own debts, the money, it is said, may be recovered back although the creditor did not know that the 3 Moriarity v. Bailey, 46 Conn. 592; Bartholow v. Harvey, 12 Mo. App. 588; Binnsu.Waddill, 32Gratt. 588. See contra, Wiley v. Allen, 26 Geo. 568. But this rule would seem to need some qualification to prevent in- justice to a creditor who has re- ceived payment of his debt, and parted with security held for it, while having no knowledge or rea- son to suspect that the debt was paid with partnership funds. Mo- riarity v. Bailey, supra. Where a private debt thus paid was a note payable to A. or order, and A. had it discounted upon his indorsement at a bank, and the maker paid it to the bank when due with partnership funds, it was held that it was not chargeable with the partnership funds thus used, although he was indorser of the note and interested in its pay- ment, the money having been re- ceived by the bank and not by him. Moriarity v. Bailey, supra. If a partner transfers goods of the firm in payment of his private debt, without the consent of his copartner, the firm may, it is held, treat the transaction as a sale by the firm and recover the value of the goods from any one receiving them with the knowledge of their true ownership. Forney v. Adams, 74 Mo. 138. Where one partner uses the effects of the firm in the payment of his private debts, with the consent and knowledge of his co- partner, an action by the firm, for the price of these effects, will be barred. Carter v. Beaman, 6 Jones, L. 44. See post. It is competent for partners in *136 EIGHTS AND OBLIGATIONS. [BOOK II. trade, who have taken a note of a customer for goods sold, to make an agreement, while they still hold the note, that it shall be satisfied by work done by the maker for one of the partners individually. If one of the partners make this agreement and the other assents, and the customer does work enough to cover the note, the note is im- mediately thereby discharged. Camp v. Page, 42 Vt. 739. The assent of a partner cannot be implied, from the partnership relations, to the payment by his co- partner of his individual indebted- ness out of the partnership funds. Such assent must be proved by ex- traneous evidence. And in the ab- sence of such assent, such payment will pass no property to the sepa- rate creditor as against the partner without whose assent the payment was made, whether he knew that the payment was made out of part- nership funds or not. Brewster v. Mott, 4 Scam. 378. A contract by one of two part- ners in the business of budding houses, made without the knowl- edge of the other, to build a house in payment of a private debt of his own, is a fraud upon the partner- ship and void, if the creditor knows that the two are partners in that business ; and if both partners actually do the work, they or their assignee in insolvency may recover therefor of such creditor, without proving the terms of their copart- nership, or that the partner who made the contract agreed that the work should be done by the part- nership. Williams v. Brimhall, 13 Gray, 462. See, however, Greeley v. Wyeth, 10 N. H. 15, where it was held that where one partner, without the knowledge of his copartner, makes a special contract to per- form labor or sell goods of the partnership, and to take in pay specific articles for his own use, and the contract is executed by the parties who make it, an action cannot be maintained in the name of the partners, to recover the value of the goods so sold or labor performed, on the ground that the partner has no authority to make such contract. Neither can a member of a firm apply a debt due from his cred- itors to the firm of which he is a member, to cancel his private debt, without the assent or ratification of the other partners. Pierce v. Pass, 1 Port. 232; Pierce v. Hick- enburg, 2 id. 198; Norment v. Johnson, 10 Ired. L. 89; Jones' Case, 1 Overt. 455 ; McNair v. Piatt, 46111. 211 ; Halls v. Coe, 4 McCord, 136; Sims v. Smith, 12 Rich. 685; Harper v. Wrigley, 48 Ga. 570; Thomas v. Pennich, 28 Ohio St. 55; Everingham v. Ensworth, 7 Wend. 326. See, however, Beck- ham v. Perry, 2 Bailey, 133. In Homer v. Wood, 11 Cush. 62, it was held that if one member of a partnership settles a demand duo from him individually, by setting off and discharging a demand due from his creditor to the partner- ship, although this is a fraud upon the partnership, no action at law can be maintained in the name of the partnership to recover the de- mand due it from such creditor, the latter having acted in good faith. In Strong v. Fish, 13 Vt. 277, at- torneys who were partners ren- dered services for a client, and af ter- 333 CH. I, SEC. II.] I.IA BILITIE8 OF PARTNERS. *136 wards an agreement was made be- promissory note, the property of tween one of the partners and the firm, in settlement of his in- such client that the services so rendered, and services thereafter to be rendered, should be applied in payment of a debt due from such partner alone to the client, which agreement was not known to the other partner, and it was held, after the death of the part- ner making the agreement, that the surviving partner could not re- cover for services rendered by the firm after such agreement ; but as the agreement was executory and without consideration as to the services previously rendered, he could recover for them. Strong v. Fish, 13 Vt. 277. After the dissolution of a part- nership, A., one of the partners, bought a horse of B. . and gave his note for the price, agreeing that if anything should be due from B. to the firm, A.'s note should be ap- plied as a credit on the copart- nership debt. It appeared that the partnership claims on B. had been •deposited with C, another partner, for collection after the dissolution, but prior to the sale of the horse ; but there being no proof that B. had notice of this trust, or even of the dissolution, held, that A.'s contract with B. was binding. Combs v. Boswell, 1 Dana, 473. The rule that when a member of a partnership settles a demand, due from him individually, by set- ting off and discharging a demand due from his creditor to the part- nership, such settlement cannot be rescinded in a suit at law in the name of the firm, was also applied in Craig v. Hulschiger, 34 N. J. L. 363, to a case where one partner indorsed a partial payment upon a dividual indebtedness to the maker, A credit given to one partner on his own separate account is not a discharge, pro tanto, of a demand against the partnership, unless it were intended or accepted as such ; and if a creditor receive the effects of one of the partners, which he may apply to the payment of his demand against the partnership, yet, if he relinquish and restore the property, he may still hold all the partners. Barker v. Blake, 11 Mass. 16. Where it appeared that one part- ner received of the plaintiff certain promissory notes to collect, for which he gave a receipt in his own name, and the plaintiff, to evince the liability of the partners, by showing that the transaction had relation to the partnership business, offered to prove that such notes were delivered to the partner while he was attending to other concerns of the partnership, to be collected and applied in satisfaction of a note due from the plaintiff to the part- nership, and that that partner did accordingly collect one of such notes, and indorse the avails on the plaintiff's note to the partnership, held, that such evidence was ad- missible. Brown v. Lawrence, 5 Conn. 397. Arrangements between one of a firm, on his individual account, and the maker of a note owned by the firm, that the former, in con- sideration of a sale to him by the latter of a lumber interest, should pay and take up the note, in the absence of any agreement by the firm to accept their partner as debtor in place of the maker and 331 -136 EIGHTS AND OBLIGATIONS. [BOOK II. indorser of the note, cannot operate partner, who also knew that the as a novation to discharge such maker and indorser. Lewis V. Westover, 29 Mich. 14. An ordinary partnership cannot be held liable for the individual debt of one of its members because of an agreement to that effect be- tween that member and his cred- itor, unless it be proved that the member was authorized to make the agreement by his copartners, or that his agreement was ratified by them, or that the partnership was benefited by the transaction. Hamilton v. Hodges, 30 La. Ann. 1290. Where one of two attorneys, who were partners, received his own notes in part payment of a demand left for collection, and gave the receipt of the firm to the debtor for the claim, and a suit was brought against the attorneys for the amount of the demand, held, that one partner could not show that the other had received his own notes in payment. Cook v. Blood- good, 7 Ala. 683. A partner may make a valid ar- rangement, with the consent of his copartner, with a creditor of the former, that a debt due by the creditor to the partnership may be discharged by crediting it as a pay- ment upon the debt of the partner to him. Bates v. Halliday. 3 Ind. 159. Where one of two partners was individually indebted, and his creditor charged the debt to the firm and informed both partners that he had done so, and subse- quently the indebted partner de- livered to the creditor property of the firm in payment of the debt, and this was known to the other creditor supposed that he was re- ceiving the property in payment of the debt, held, in an action on book account, brought by the firm against the creditor, and in which they claimed to recover for the property so delivered, that the creditor was entitled to be allowed for the charge thus made by him against the firm. Miller v. Dow, 17 Vt. 235. Where B. is indebted to A., and A. is indebted to the firm of which B. is a copartner, and it is agreed between A. and B. that the one de- mand shall be set off or extin- guished by the other, held, that such an agreement is binding upon a subsequent assignee of A.'s de- mand against B., if the assent thereto, express, implied or to be inferred, of the other members of the firm can be shown. Wilson v. Dargan, 4 Rich. 544. Partners proved to have known, or to have had good reason to know, that a creditor has relied upon an agreement of one of the firm to allow his individual debt to be applied as a credit on the indebt- edness of the creditor to the firm, will not be permitted to repudiate it, unless they show that they had given notice, at the earliest practi- cable period after it had come to their knowledge, that they would not sanction the arrangement. Casey v. Carver, 42 111. 225. Where an indebtedness from an individual partner to a third person is canceled by passing a like sum to the credit of such third person in the books of the firm, he may recover the amount in an action of assumpsit against the firm, if the transaction was had with the 332 Cn. I. SEC. II.] LIABILITIES OF PARTNERS. *137 Tender. — If a debt is owing to a firm, tender to one partner is tender to all; 1 and if a debt is owing by a firm, tender by one partner is tender by all; (e) and if, after tender by a firm, the creditor demands the sum tendered, a refusal to pa} r , made by the partner on whom the demand is made, is a refusal by the firm, (f) 12. Deeds. — One partner has no implied authority to bind *his copartners by deed; (g) 2 but a release of [*137j knowledge or ratification of the other partners. Corbin v. McChes- ney, 26 111. 231. Where two firms have dealt with each other, and each firm has dealt with the members of the other, under an understanding and agree- ment of the firms and all the mem- bers that the individual account of any partner with the other firm should be considered and treated as matter of firm account against his firm, and dealings and settle- ments have from time to time been made on this basis, the balance found on such a settlement, made in good faith on the strength and in pursuance of such antecedent agreement and practice, is a legiti- mate demand as between the par- ties, on behalf of the creditor firm against the other, for which an ac- tion will lie. Such an understand- ing is not within the provision of the statute of frauds as to promises by one party to answer for the debt of another; purchases and sales made in strict pursuance and on the faith of such an agreement are entitled to be considered as original transactions on the part of the members of the firm charged. Davis v. Dodge, 30 Mich. 267. A surety for a firm, who is also surety for one of its members indi- vidually, receiving funds belong- ing to the firm, has no right to apply them to the payment of the individual debt without the con- sent of the other partner; if he does so, and afterwards pays the firm debt with his own money, he will be considered as having paid it with the partnership funds. Downing v. Linville, 3 Bush, 472. 1 Wyckoff v. Anthony, 9 Daly, 417. (e) Douglas v. Patrick, 3 T. R. 653. (/) Peirse v. Bowles, 1 Stark. 332. (g) Harrison v. Jackson, 7 T. R. 207 ; Steiglitz v. Eggington, Holt, 141. As to presuming an authority given by deed, see Holt, 141. 2 One partner cannot bind his co- partner by deed without special authority, or unless executed in his presence and by his consent. Fitch- burn v. Boyer, 5 Watts, 159 ; Mac- kay v. Bloodgood, 9 Johns. 285 ; Little v. Hazard, 5 Harr. 291; United States v. Astley, 3 Wash. 508; Fleming v. Dunbar, 2 Hill (S. C), 532; Modisett v. Lindley, 2 Blackf. 119; Posey v. Bullitt, 1 id. 99; Donaldson v. Kendell, 2 Ga. Dec. 227; Napier v. Catron, 2 Humph. 534; Morris v. Jones, 4 Harr. 428 ; Trimble v. Coons, 2 A. K. Marsh. 375 ; Lambden v. Sharp, 9 Humph. 224; Snyder v. May, 19 Penn. St. 235 ; Blackburn v. McCal- 333 *137 EIGHTS AND OBLIGATIONS. [BOOK II. a debt or demand stands on a peculiar ground, and will bind the firm though executed by one partner only, (h) ' lister, Peck (Term.). 371 ; Gerard v. Basse, 1 Dall. 119; Hartr. Withers, 2 N. J. L. 285 ; Button v. Hampson, Wright, 93; McDonald v. Eggles- ton, 26 Vt. 154; Pierson v. Hooker, 3 Johns. 68; Baldwin v. Richard- son, 33 Tex. 16; Hobson v. Porter, 2 Col. Ter. 28; Person v. Carter, 3 Murph. 321 ; Lay ton v. Hastings, 2 Harr. 147 ; Doe v. Tupper, 12 Miss. 261 ; Morse v. Bellows, 7 N. H. 550 ; Lucas v. Saunders, 1 McMull. 311; Lee v. Onstott, 1 Ark. 206 ; Mont- gomery v. Boone, 2 B. Mon. 244; McCart v. Lewis, id. 267 ; Cummins v. Cassily, 5 B. Mon. 74; Bentrinv. Zierlin, 4 Mo. 417; Turbeville v. Ryan, 1 Humph. 113; Herzog V. Sawyer, 61 Md. 344 ; Walsh v. Len- non, 98 111. 27; S. C. 38 Am. Rep. 75; Weeks v. Rake Co. 58 N. H. 101 ; Printup v. Turner, 65 Ga. 71 ; Stroman v. Varn. 19 S. C. 307; Sut- live v. Jones, 61 Ga. 676; Sibley v. Young, 2 S. East. Rep. (S. C.) 314. See, however, Donnelly v. Elsee, 6 S. West. Rep. (Tex.) 563. See, also, Allen v. Cheever, 61 N. H. 82 (fol- lowing Morse v. Bellows, 7 id. 549), where it was held that one partner may, without special authority, bind his firm by an agreement, under seal, of compromise or re- lease to a joint debtor of a partner- ship claim. The rule that one partner cannot bind his associate by an instrument under seal does not apply to an in- strument which would be equally operative without a seal; as, for example, a bill of sale under seal of partnership property in dis- charge of a partnership debt, there being no delivery of the property at the time. Patten v. Kavanaugh, 11 Daly, 348. So where a promissory note is executed in the firm name by one partner and a seal affixed thereto, whether the partner not executing the note is or is not liable on the note, he will still be liable for the (h) See Hawkshaw a Parkins, 2 Swanst. 539; and, as to creditors' deeds, Dudgeon v. O'Connell, 12 Ir. Eq. 566. See, in cases of fraud, ante, p. 135, note (r), and infra, Release. 1 See Pierson v. Hooker, 3 John. 68; Bruen v. Marquand, 17 Johns. 58; Smith v. Stone, 4 Gill & J. 310; Morse v. Bellows, 7 N. H. 549; Beach v. Ollendorf, 1 Hilt. 41; Crutwell v. Da Rossett, 5 Jones, L. 263; McBride v. Hogan, 1 Wend. 826; Dyer v. Sutherland, 75 111. 584. See, also, post. A partner, by an instrument under seal, ma}- authorize a third person to discharge a debt due to the firm. Wells v. Evans, 20 Wend. 251 ; 22 id. 324. Where one of two partners, who had entered into a contract to do a job of work according to specifi- cations, executed an instrument under seal certifying that the con- tract was forfeited on their part, and that there had been a settle- ment and payment to him of a certain sum as a" present," held, that such instrument amounted to a release, and took away the cause of action as to both partners. Gates v. Pollock, 5 Jones, L. 344. 334 CH. I, SEC. II.] LIABILITIES OF PARTNERS. ■137 A deed executed by one partner in the name and in the pres- ence of his copartners is deemed an execution by them; (?) ' partnership debt for which the note is given. Pelzer v. Campbell, 15 S. C. 581. Where a partner possessing power to borrow money for firm purposes and to secure the same upon firm property mortgages his own individual land upon which are erected buildings and other im- provements occupied for firm pur- poses and erected at the expense of the firm, such mortgage will bind the mortgaged property and also the firm, whatever its rights in the property and improvements may be. Chittenden v. German- American Bank, 27 Minn. 143. A sealed instrument executed by one partner in the name of the firm may be treated as the deed of all the partners, upon proof that prior to the execution the others had authorized him to execute the instrument, or had, after execu- tion, with full knowledge, acqui- esced in what he had done. Stro- man v. Vara, 19 S. C. 307 ; Rumery v. McCulloch, 54 Wis. 565 ; Wilcox v. Dodge, 12 Bradw. 517; Gibson v. Warden, 14 Wall. 244; Jeffreys?;. Coleman, 20 Fla. 536. See, also, Grady v. Robinson, 28 Ala. 289. Prior assent, or subsequent rati- fication, may be implied from the acts and declarations of the parties whose liability is sought to be es- tablished, and from other proper (£) Ball v. Dunsterville, 4 T. R. 313; Burn V. Burn, 3 Ves. 578. See as to ratifying a deed executed by one person for another, Tupper v. Foulkes, 9 C. B. N. S. 797. In Orr v. Chase, 1 Mer. 729, a bond evidence. In the absence of such assent or ratification the party who signed the instrument is alone liable upon it. Wilcox v. Dodge, 12 Bradw. 517. One party cannot bind the other by executing an appeal bond for both under his general authority. People v. Judges of Duchess, 5 Cow. 34; Charman v. McLane, 1 Oreg. 339. Where, however, property of a partnership was levied upon under a judgment against a part of the firm for trespass committed by the active and managing members, and the latter, to save the prop- erty, procured the plaintiff to unite with them in an appeal bond, whereby he was compelled to pay the judgment, it was held that each member of the firm became liable to him for the amount so paid to their use, whether they all united in the appeal or not, and that no proof of a promise to pay on the part of one of them not sued, and who did not join in the appeal, was necessary, as the law implied a promise, and that in such case the validity of the judgment appealed from was wholly imma- terial. Durant v. Rogers, 87 111. 508. And where on appeal from the disallowance of a claim of partners in their firm name the appeal bond executed by one partner in the name and on behalf of the firm was held to be the bond cf the firm. And see Palmer v. Justice Assurance Soc. 6 E. & B. 1015. 1 See note, supra. 335 *137 RIGHTS AND OBLIGATIONS. [BOOK II. and if one partner executes a warrant of attorney in the partnership name, with the consent of his copartner, the is executed in the firm name, the presumption, in the absence of all proof, is that it was so executed as to bind both partners, and the mode of execution is approved. Kasson v. Blocker, 47 Wis. 79. See, contra, Frees v. Baker, 6 So. West. Rep. 5G3. A partner cannot bind his co- partners by warrant of attorney, under his hand and seal in the name of the firm, without previous authority or subsequent ratifica- tion. Ellis v. Ellis, 47 N. J. L. 69; Heft v. Bosford, 43 Leg. Intel. 414. Where one partner signs the partnership name to a forthcom- ing bond, in a case in which the partnership is defendant, the bond is void as to the partners not sign- ing it. Doe v. Tupper, 12 Miss. 261 ; Turbeville v. Ryan, 1 Humph. 113. A partner is not bound by the execution of a replevin bond by his copartner as surety, in his own name, without affirmative evi- dence of authority so to bind him. Butterfield v. Hemsley, 12 Gray, 226. A bond given for the purpose of obtaining a dissolution of an at- tachment of partnership property, and executed in the name of the firm by only one of two partners named as principals therein, can- not be enforced against a surety without evidence of the assent of the other partner to its execution. Russell v. Annable, 109 Mass. 72. See, however, Donnelly v. Elser, 6 So. West. Rep. (Tex.) 563. See post. The plea of non est factum will be sustained to a bond executed by one partner, in his own name and that of his copartner, under an au- thority from such copartner, not under seal, to execute a note in his name. Henry County v. Gates, 26 Mo. 315. A sealed note signed by one of two partners cannot be given in evidence to establish " an account stated "in a suit brought against the partner who did not sign it. Heath v. Gregory, 1 Jones, L. 417. One partner has not the power to bind his copartner by the execu- tion of a bond in his own name, although the bond was a forthcom- ing bond for property in which the firm were interested, and the pro- ceeds of which it afterwards re- ceived. Moore v. Stevens, 60 Miss. 809. One partner has not the power to convey the realty of the firm by deed or assignment, nor to make contracts about it specifically en- forceable against the others. Ruff- ner v. McConnell, 17 111. 212. Where one partner conveys the joint interest of the firm in prop- erty, and the deed is signed in the name of the firm, but acknowl- edged by only one partner as his act and deed, it is necessary for the party receiving the conveyance to show that the partner had the authority thus to convey, other- wise the deed will only pass the individual interest of the signing partner. Walton v. Tosten, 49 Miss. 569. A conveyance of lands executed by one partner in the partnership name conveys only his undivided 336 CH. I, SKC. II.] LIABILITIES OF PARTNERS. 137 court will not set it aside on the ground that the latter did not execute it. (/„■) interest, and the subsequent verbal assent of the other partners does not divest them of the legal title. Brunson v. Morgan, 76 Ala. 593. See the subject of partnership property in real estate considered, post. Where two of three partners were present, and one wrote and the other sealed a note given in the name of the firm, it is compe- tent to go to the jury on the joint execution. It is not material to the liability of the two that they used the name of the firm without the third partner's assent. Potter v. McCoy, 26 Pa. St. 458. Where a partner executes a bond in the name of the firm, and, upon being informed that it did not bind the partners, with the consent of the obligee removes the seal and redelivers it with the intent to bind the company, it is effectual as their promissory note. Horton v. Child, 4 Dev. L. 460. A deed executed by one partner in the name of the firm is, how- ever, binding upon the partner who executed it, and upon all other members present or consent- ing to its execution. Sutlive v. Jones, 61 Ga. 676; Kasson v. Brocker, 1 N. W. Rep. N. S. 418 ; James v. Bostvvick, Wright, 142; Day v. Lafferty, 4 Ark. 450; Lee v. Oristoll, 1 Ark. 206; Henderson v. Barbee, 6 Blackf. 26; Price v. Alexander, 2 G. Greene, 427 ; Pettes v. Bloomer, 21 How. Pr. 317. See, also, cases at beginning of this note. However, in Fisher v. Pender, 7 Jones, L. 483, it was held that where upon the face of an instru- ment it appeared that one signed, sealed and delivered it in order to bind the firm of which he was a member, and not as his own indi- vidual deed, he was not individ- ually bound. A sealed instrument, executed in the firm name by an individual partner, may become obligatory on the other partners, upon the prin- ciples of estoppel or ratification, whatever objection might be taken originally, on the ground that one partner cannot bind his firm by a sealed instrument. Mann v. Etna Ins. Co. 40 Wis. 549; Baldwin v. Richardson, 33 Tex. 16 ; Shirley v. Fearne, 33 Miss. 653. But authority to execute the deed, or a ratification, must be proved before the deed will be ad- missible as evidence. Shirley v. Fearne, supra. The prior authority to execute the deed, or the subsequent ratifi- cation, may be verbal. Pike v. Bacon, 20 Me. 280 ; Cady v. Shep- erd, 11 Pick. 400 ; Clement v. Brush, 3 Johns. Cas. 180; Swan v. Sted- man, 4 Mete. 548; Fox v. Norton, 9 Mich. 207 ; Gwinn v. Rooker, 24 Mo. 290; Smith v. Kerr, 3 N. Y. 144; Gram v. Seaton, 1 Hall, 262 Bond v. Aitkin, 6 Watts & S. 165 Johns v. Rattin, 30 Pa. St. 84 Lowery v. Drew, 18 Tex. 786 ; Wil- son v. Hunter, 14 Wis. 683 ; Grady v. Robinson, 28 Ala. 289 : Herbert v. Hanrick, 16 Ala. 581; Drum- (k) Brutton v. Burton, 1 Chitty, 707. Vol. I — 23 337 *137 RIGHTS AND OBLIGATIONS. BOOK II. wright v. Philpot, 16 Ga. 424; Haynes v. Seachrest, 13 Iowa, 455; Ely v. Hair, 16 B. Mon. 230. The assent of the other partners may be implied from circumstan- ces. Person v. Carter, 3 Murph. 321 ; Lucas v. Sandars, 1 McMull. 311; Lee v. Onstott, 1 Ark. 206. And such assent may be subse- quent to the execution of the deed. Person v. Carter, 3 Murph. 321; Doe v. Tupper, 12 Miss. 261; McCart v. Lewis, 2 B. Mon. 267. But see Layton v. Hastings, 2 Harr. 147, and Turbeville v. Ryan, 1 Humph. 113. An action brought by a partner- ship upon a sealed instrument ex- ecuted by one of the partners in the partnership name is an adop- tion of the instrument, and the defendant cannot object that it is not the deed of the partnership. Dodge v. M'Kay, 4 Ala. 346. Where, in the agreement of partnership under seal, each part- ner was authorized to bind his co- partners by deed, and such agree- ment expired by its own limitation and was continued by a written agreement not under seal, held, that the continuation did carry with it the power, and that a mort- gage of real estate executed by one of the firm to secure the partner- ship did not bind the other mem- bers. Napier v. Catron, 2 Humph. 534. Though one partner cannot bind another by deed or bond by virtue of the partnership relation merely, yet a declaration alleging that the partners " made their certain writ- ing obligatory signed by their firm name," " and sealed with their seal," etc., is good on demurrer; if it was the deed of but one it must be shown by plea on the part of the partner who did not execute the bond. Massey v. Pike, 20 Ark. 92. A bond given by one partner for a simple contract debt due from the partners to the creditor, and accepted by him, is, by operation of law, a release of the other part- ner and an extinction of the sim- ple contract debt, both at law and in equity; and ignorance on the part of the creditor as to the con- sequences of his acceptance is no ground for relief, but the bond is obligatory on the obligor. Will- iams v. Hodgson, 2 Har. & J. 474. See, also, Jacobs v. McBee, 2 McMull. 348; Baxton v. Bell, 19 Hun, 367. Where a partner, without the consent of his copartner, gave the security of the firm, under seal, for a partnership debt, and the cred- itor afterwards released the copart- ner from all partnership debts, held, that, the simple debt being merged in the specialty, the copart- ner was released, but the specialty still bound the partner who had signed the partnership name. Clement v. Brush, 3 John. Cas. 180. It has been held, however, in sev- eral cases, that a bond given in the partnership name by one of the partners for a simple contract debt due by the firm does not, unless accepted as the individual obliga- tion of the partner making it, ex- tinguish the original debt as to the firm. Flemming v. Lawhorn, Dud- ley, 360; Dickinson v. Legare, 1 Dessau. 537; Bond v. Aitkin, 6 Watts &S. 165; Haskinson v. El- liot, 62 Penn. St. 393. So it has been held that the exe- cution of a bond without author- ity, by one of several partners, in 338 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *137 the name of the firm, creates no presumption that the bond was re- ceived in satisfaction of the joint liability of all the members of the firm. Doniphan v. Gill, 1 B. Mon. 199; Brozee v. Poyntz, 3 id. 178. So it has been held that in an ac- tion against partners upon a note under seal made in the names of the firm by one of its members, al- though such note may not, because of the scrawl, be operative as a partnership obligation, yet, it be- ing alleged and proved that the consideration for which the note was given went to the use of the firm, and was received by them, they are liable upon the original consideration. Daniel v. Toney, 2 Mete. (Ky.) 523. A bond made by one of the. part- ners of a firm for goods sold and delivered may be evidence of the time for payment or of the amount (as any other statement of one of the partners would be), but it cer- tainly does not amount to plenary proof of the consideration, so as, of itself, to entitle the plaintiff to recover of the firm for goods gold and delivered. Fronebarger v. Henry, 6 Jones, L. 548. See post, 337, note. A bond given by one partner for rent of real estate leased for the use of the partnership is properly payable out of the partnership ef- fects, and, having been so paid, creditors of another partner cannot be substituted to the rights of the landlord on the bond. Christian v. Ellis, 1 Gratt. 396. A bond by two partners to one of them as obligee may be obligatory on the other partner. O'Bannon v. Simrall, 1 B. Mon. 287. The rule that one partner cannot bind his copartner by deed does not apply where one partner conveys by deed property of the firm which he might have conveyed without deed. Tapley v. Butter- field, 1 Mete. 515; Purviance v. Sutherland, 2 Ohio St. 478. A partnership contract which would be good without a seal will still be valid as a simple contract, although the partner who executed the instrument had no special au- thority to put the partnership name to such paper. Human v. Cuniffe, 32 Mo. 316. See, also, Woodruff v. King, 47 Wis. 261. See, however, contra, Schmertz v. Shreeves, 62 Penn. St. 457, which was a sealed contract to deliver merchandise at a future time for a certain price. Though one partner cannot bind his copartners by deed, yet an assignment under seal, executed by one partner, of the effects of the firm, which would be valid and binding on the others if there were no seal, will be enforced in equity. McCollough v. Sommerville, 8 Leigh, 415. However, in Dillon v. Brown, 11 Gray, 179, a sealed lease executed by one partner only, in the name of the partnership, though for a term which required no seal, was held not to pass the estate of the other partners, without evidence of previous authority, or subsequent ratification by them. Where one partner, in the ab- sence of his copartner, executed a bill of sale, under seal, of all the partnership effects, the sale being bona fide and for the full value of the property, and made to pay a pressing debt of the absent partner, held, that the sale was binding 339 *137 EIGHTS AND OBLIGATIONS. [dOOK II. A joint and several bond executed by one partner in the name of himself and copartners binds him separately al- though it is invalid against them; (I) 1 and it has been held that a deed purporting to be made by all the partners of a firm, and to assign all their property to trustees for credit- ors, is operative against a partner who executes it, although his copartners ultimately decline to execute it also, (m) [12^. Delivery. — A delivery in good faith to one partner according to the terms of a contract, is a delivery to both, each having authority to receive it. 2 ] 13. Distress. — If several partners grant a lease, any one of them may distrain, or appoint a bailiff to distrain, in the name of all; and a distress by one partner, or by the bailiff appointed by him, will be lawful, although the other part- ners are no parties to the distress and do not assent there- to, (n) 14. Extension of business. — It follows from the princi- ples investigated at the commencement of the present chap- ter, that one partner has no implied power to bind the upon the absent partner, and passed payment of a note for the purchase the whole title of the firm to the money of a steamboat, involving property. Forkner v. Stuart, 6 the question of delivery, held, Gratt. 197. that a transfer by bill of sale and One partner may execute a char- delivery to only one member of a ter-party under seal, so as to bind firm was to the firm, and not to the the other party. Straffin v. Newell, individual,— the evidence show- T. U. P. Charlt. 163. that it was in accordance with and (I) Elliott v. Davis, 2 Bos. & P. fulfillment of the original contract 338, of purchase made by both mem- i See note, supra. bers of the firm. Byington v. Gaff, (??i) Bowker v. Burdekin, 11 M. & 44 111. 510. W. 128 ; Cumberledge v. Lawson, 1 In a suit against partners in a C. B. N. S. 709. And compare distillery and in the purchase of Latch v. Wedlake, 11 A. & E. 959, corn, the plaintiff may give in and Lascaridi v. Gurney, 9 Jur. evidence the receipt of one of the N. S. 303 C. P. defendants, acknowledging the de- 2Kenney v. Atwater, 77 Penn. livery of a certain quantity of St. 34; Henry v. Anderson, 77 Ind. corn to him by the plaintiff. Bisel 361 (delivery of a deed to one v. Hobbs, 6 Blackf. 479. partner). («) See Robinson v. Hofman, 4 In an action upon a guaranty of Bing. 562, and the cases there cited. 340 Cn. I, SEC. II.] LIABILITIES OF PAETXERS. •138 firm with respect to matters not falling within the scope of the business which it ostensibly carries on or was formed to carry on. (o) [Ua.— Gifts. 1 ] ••15. Guaranties, etc. — How far one partner can [*138] bind the firm by a guaranty obliging the firm to pay if some other person does not has been much disputed. The later cases, however, decide that unless it can be shown that the giving of guaranties is necessary for carrying on the business of the firm in the ordinary way, one of the members will be held to have no implied authority to bind the firm by them; for, generally speaking, it is not usual for persons in business to make themselves answerable for the conduct of other people. 2 The subject was much con- Co) Ante, p. 124 et seq. 1 Where a partner made a gift of two-thirds of a crop of corn to his son, who took it and appropriated it to his own use, held, in an action by the other partner in the name of the firm, for his own use, to re- cover his share of the value of the corn, that a partner cannot make a valid gift of partnership property, to the prejudice of his partner, and that assumpsit can be maintained against the donee for the value of the partnership property so given. Daniel v. Daniel, 9 B. Mon. 195. 2 One partner cannot, by his in- dividual act, bind the firm as the guarantor of the debt of another, or as a party to a note or bill made for the accommodation or as the surety of another, without author- ity specially given him for the pur- pose, or implied from the common course of business of the firm, or from the previous course of deal- ings between the parties; unless the act of such partner be after- wards ratified by the others. The burden of proving the authority and consent of the other partners lies on the holder of the note. Sweetser v. French, 2 Cush. 309; Rollins v. Stevens, 31 Me. 454; Bank of Rochester v. Bowen, 7 Wend. 158; Foot v. Tabir, 19 Johns. 151; Boyd v. Clum, 7 Wend. 309; Langan v. Hewitt, 21 Miss. 122; Andrews v. Planters' Bank, 15 Miss. 192 ; Schermerhorn v. Schermer- horn, 1 Wend. 119: Eolston v. Click, 1 Stew. 526: Mayberry v. Barniton, 2 Harr. 24; Maudlin v. Branch Bank, 2 Ala. 502; Selden v. Bank of Commerce, 3 Minn. 166; Hamill v. Purviss, 2 Pa. 177 ; Sut- ton v. Irwine, 12 Serg. & E. 13; McQuewans v. Hamlin, 35 Pa. St. 517 : Marsh v. Thompson Nat. Bank, 2 Brad. (HI.) 217; Davis v. Black- well, 5 id. 32 ; Avery v. Eowell, 59 Wis. 82; National Security Bank v. McDonald, 127 Mass. 82 (a note executed as collateral security to another note); Mutual Nat. Bk. v. Eichardson, 33 La. Ann. 1312; S. C. 29 id. 546 ; 39 Am. Eep. 293 ; 341 '138 RIGHTS AND OBLIGATIONS. [book II. sidered in Brettel v. Williams, (p) There the defendants, who were railway contractors, made a subcontract for the Osborne v. Thompson, 28 N. W. Rep, 260; S. O. 35 Minn. 229; Os- borne v. Stone, 30 Minn. 25; Davis r. Blackwell, 5 Bradw. 32; Spurck v. Leonard, 9 Bradw. 174; Moyna- hon v. Ilanaford, 42 Mich. 329. Each partner is, however, the general agent of the firm, and has authority to bind it by a contract of guaranty, if such contract is within its scope of business ; and no under- standing between the partners can effect the right of the guarantee to recover. First Nat. Bank v. Car- penter, 41 Iowa, 518. A sale with guaranty of stock cattle purchased by the firm for the purpose of sale is not in excess of the implied power of the part- ner. Jordan v. Miller, 75 Va. 442. Where a note is executed as the individual note of one of the part- ners, and the guaranty of the firm is indorsed thereon, it is prima fade evidence of an individual debt, and the burden of proof is upon the party seeking to enforce its pay- ment to show that it was in fact a partnership transaction; Davis v. Blackwell, 5 Brad. (111.) 32. Since the statute of 1874, chapter 404, if one partner signs, as maker, a promissory note in his individ- ual name payable to a third person, and in fraud of his partners signs the firm name on the back of the note above the name of the payee, the person who buys the note before maturity has notice from the form of the note of the conditional lia- bility of the other partners and cannot maintain an action against them upon the note. National Bank of Commonwealth v. Law, 127 Mass. 72. Where a firm had authorized a partner to borrow money for it, and allowed him frequently to lill up notes over their blank signa- tures, and to sign the names of the members of the firm to obligations, and such partner borrowed money for the use of the firm, upon his note, with the names of his copart- ners indorsed thereon as guaran- tors, held, that it did not matter even if their names were so signed by such partner, as he was held out to the world as haviug author- ity to do what he did, and that he had power to consent to an altera- tion of the note, as to the place of payment, at the time he delivered the same and obtained the money thereon, and that the other part- ners were liable on such guaranty. Pahlman v. Taylor, 75 111. 629. If on the face of the paper it appears that the firm purports to execute it, not as a principal, but as a mere surety or guarantor for some other person, the party taking the paper has actual notice of the fact that it is not signed in (p) 4 Ex.623. See, also, Hasle- of Lord Eldon in Ex parte Gardom, ham v. Young, 5 Q. B. 833; Craw- ford v. Stirling, 4 Esp. 207 ; Duncan V. Lowndes, .3 Camp. 478. The dictum of Lard Mansfield in Hope V. Cast, 1 East, 53, and the decision 16 Ves. 286, are opposed to these authorities, but cannot be relied on after the decision in Brettel v. Will- iams. 342 CH. I, SEC. II.] LIABILITIES OF PAETNEKS. 138 performance of part of some work they had undertaken. The subcontractor required a quantity of coal, and one of the ordinary course of the partner- ship business, and he must at his peril ascertain that there was a special authority given the partner to use the firm name as such guar- antor, or that the paper was in fact given in the course of the partner- ship business. Marsh v. Thompson Nat. Bank, 2 Brad. (111.) 217; Mut- ual Nat. Bk. v. Richardson, 33 La. Ann. 1312; S. C. 29 id. 546; S9 Am. Rep. 293. That one partner was authorized to subscribe the firm name as ac- commodation sureties for a third person may be proved by circum- stances. Butler v. Stocking, 8 N. Y. 408. The power to sign the firm name, by indorsement, for accommoda- tion purposes, would not authorize the signature of the firm name in the face of the note as an uncondi- tional and distinct surety. McGuire v. Blanton, 5 Humph. 361; Early v. Reed, 6 Hill, 12. In Wilkins v. Pearce, 5 Den. 541, it was held that an agreement, made by one partner of a mercan- tile firm, in the partnership name, to indemnify a third person for ac- cepting, for the accommodation of the firm, a draft drawn upon him by such a partner, is valid, al- though another of the partners at the time dissented from the agree- ment. The right of a partner to sign the firm name to a contract of indem- nity in favor of third persons must be strictly proved, but not neces- sarily by a written authority to him. Mcran v. Prather, 22 Wall. 492. An attorney at law cannot bind his partner by his promise to in- demnify an officer for committing a person to jail; but the partner- ship is a circumstance from which, with other circumstances, it may be inferred he intended to act for both ; and where the partner, sub- sequently to the commitment, rati- fied the promise, it is binding on such partner. Marsh v. Gold, 2 Pick. 285. Where one partner signs the firm name to an undertaking, given for the purpose of securing the discharge of an attachment of the goods of another firm, without the knowledge or sanction of his copartners, the latter will not be bound thereby ; but where it ap- pears that a partner knew of the signature made by his firm to the undertaking at the time, and even directed the delivery of the under- taking, he cannot afterwards ob- ject that the partnership name was improperly used. Cockroft v. Claflin, 64 Barb. 464. In the case of Tessier v. Crowley, 1? Neb. 207, it was held that an undertaking in an attachment suit signed by the attachment plaintiff as principal and the firm as surety is prima facie good. One partner cannot, without special authority, bind his copart- ners jointly with himself to pay the debt of another. Shaaber v. Bushong, 105 Pa. St. 514 ; S. G 14 Weekly Not. Cas. 352. Where a person lends his name to a firm as indorser to a note to raise money to cany on the firm 343 *139 EIGHTS AND OBLIGATIONS. [iiOOK II. the defendants, in the name of the firm, guarantied to the plaintiffs, who were coal merchants, payment for coals to be supplied by them to the subcontractors. It was held that this guaranty did not bind the partners of the contractor signing it. In Sandilands v. Marsh, (q) a firm was held bound by a guaranty given by one of the partners, but in that case there was evidence of adoption and ratification by the firm of the contract of which the guaranty was part. In Ex parte Harding, (r) the guaranty was several as well as joint, and therefore bound those who signed it. These cases cannot therefore be considered as opposed to those in which it has been held that one partner has no implied power to bind the firm by guaranties in its name. Statute of frauds. — With respect to the statute of frauds, a guaranty signed by one partner in the name of the firm is sufficient to bind all the partners if authority from them can be proved, (s) But no partner is liable for a false and fraudulent repre- sentation as to the solvency of another person unless such representation is in writing and signed by himself, (t) [*139] ^Promise to provide for bill. — If one partner, in consideration that a person will accept a partnership bill, promises that the firm will put him in funds to meet the bill when due, this promise binds the firm, (u) But this is not guarantying payment of the debt of another within the rule above discussed. 16. Insurances. — One partner can bind the firm by an business, either partner authorized (r) 12 Ch. D. 557. to raise money for the purpose (s) See Duncan v. Lowndes, 3 may make terms upon which the Camp. 478. accommodation is obtained and (t) 9 Geo. 4, ch. 14, § 6 ; Swift V. give such personal security to the Jewsbury, L. R. 9 Q. B. 301 ; re- indorser as the firm may have to versing Swift v. Winterbotham, L. give. Hopkins v. Thomas, 28 N. E. 8 Q. B. 244. W. R. 147. (u) Johnson v. Peck, 3 Stark. 66. (g) 2 B. & A. 673. 344 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *139 insurance of the partnership goods. (v) 1 And if one in- sures for all he may give notice of an abandonment for all. (%) (v) Hooper v. Lusby, 4 Camp. C6. See Arrnitage v. Winterbottom, 1 Man. & Gr. 130. *Penn. Ins. Co. v. Murphy, 5 Minn. 36; Graves v. Boston, etc. Ins. Co. 2 Cranch, 439 ; Clement v. British- Am. Ass. Co. 141 Mass. 298. One partner has authority to settle a loss with the insurance company. Brink v. Ins. Co. 5 Robt. (N. Y.) 104; Brown v. Hart- ford, etc. Ins. Co. 117 Mass. 479. He can also bind his firm by con- senting to the cancellation of a policy. Hillock v. Traders' Ins. Co. 54 Mich. 531. Where insurance is effected by one partner in the firm's name on firm property and the premium is paid with firm moneys, though charged by such member to him- self, the insurance will be for the benefit of the firm notwithstand- ing the partner effecting it intended it for his own benefit. Tebbetts v. Dearborn, 74 Me. 392. If a limited partnership contains but one general partner, C, in whose name the business is carried on, it is no objection, in the ab- sence of fraud or deceit, to a proof of loss made to an insurer, that it states the property insured belongs to C. and that no other person or party has an interest therein; in an action upon such a policy C. is entitled to recover the full amount of the loss and not merely the value of his interest. Clement v. B. A. Insurance Co. 141 Mass. 298. Such a change of title of a stock of goods as is made by the incom- ing of a new partner will render void a policy of insurance contain- ing a provision that if the property is sold or transferred, or any change made in the title of possession, without the consent of insurers, the policy should become void. Malley v. Atlantic Ins. Co. 51 Conn. 222. See, however, Cowan v. Iowa Ins. Co. 40 Iowa, 551; 20 Am. R. 583. A policy of insurance stipu- lated that if the interest of the assured be other than the entire unconditional and sole ownership of the property for the use and benefit of the assured, it must be so expressed in the policy, other- wise it shall be void. A stock of goods was insured by the policy in which the estate of the deceased partner of the assured had an in- terest which existed at the date of their destruction by fire and which was not referred to in the policy. Held, that the survivor could not recover on the policy. Crescent Insurance Co. v. Camp, 64 Tex. 521. The dissolution of a partnership and the transfer of one part- ner's interest in the property to another person is not such a trans- fer of interest as to avoid a policy of insurance containing a clause that the policy should become void by the sale or transfer or any change in the title or possession of the property insured. Dresser v. United Firemen's Ins. Co. 45 Hun (N. Y.), 298. (x) Hunt v. The Royal Exchange Assurance Co. 5 M. & S. 47. 345 *139 BIGHTS AND OBLIGATIONS. [HOOK II. 17. Interest.— An admission by one partner that a debt of the firm bears interest at a given rate is prima facie bind- ing- on the firm, (y) See further, ante, under the head Debts. 18. Judicial proceedings. — The power of one partner to act for the firm in legal proceedings will be noticed here- after, when treating of actions (Bk. II, ch. 3, § 1), and bank- ruptcy (Bk. IV, ch. 2). 19. Leases. — One partner, as such, has no authority to contract on behalf of the firm for a lease of a house for partnership purposes, (s) ' Where a lease is made by several partners jointly, a notice to quit, given by one on behalf of all. is sufficient, (a) 20. Mortgages and Pledges — (a) By partners. — A legal mortgage cannot be made of partnership real estate without the concurrence of all the partners. (J) 2 Where a partnership to whom a fire insurance policy was issued was dissolved before the fire, and the retiring partner's interest was transferred to his copartner to con- tinue the business, and the com- pany paid a dividend to him after such transfer, held, that they by the payment waived any objection they might have had on that score. Combs v. Mutual Fire Insurance Co. 34 N. J. Eq. 403. (y) See Fergusson v. Fyfe, 8 CI. & Fin. 121. (z) Sharp v. Milligan, 22 Beav. 606, where, however, specific per- formance was decreed against the firm, the contract having been rati- fied by the other partners. 1 A partnership may be held jointly liable for rent of premises leased to and in the name of one member only, on proof that they were hired for and used by the firm. Penn v. Kearney, 21 La. Ann. 21. See ante. (a) Doe v. Hulme, 2 Man. & Ry. 433 ; Doe v. Summersett, 1 B. & Ad. 135; Goodtitle v. Woodward, 3 B. & A. 689. See Right v. Cuthell, 5 East, 491. (b) See ante, heading Deed. In Juggeewundas v. Keeka Shah v. Ramdas Brijbooken Das, 2 Moo. In. Ap. 487, a mortgage by one partner was under peculiar circum- stances held to bind the firm. 2 See post. One partner may execute a chat- tel mortgage of the firm property to secure a partnership debt with- out the consent of his copartner; and his attaching a seal to the in- strument, being unnecessary, will not affect its validity. Gates v. Bennett, 33 Ark. 475 ; Woodruff v. King, 47 Wis. 261; Holt v. Sim- mons, 16 Mo. App. 97. One partner has authority, with- out the consent or knowledge of his copartner, to mortgage the whole stock in trade of the firm to 846 CH. I. SEC. II.] LIABILITIES OF PARTNERS. •139 It being, however, decided that a member of an ordinary trading partnership has power to borrow money on the Bscure a particular creditor of the firm. Tapley v. Butterfield, 1 Mete. 515. See, also, Woodruff v. King, 2 N. W. Rep. N. S. 452 ; Willett v. Stringer, 17 Abb. Pr. 152 ; McClel^ land v. Remsen, 3 Abb. App. Dec. 74; Morrison v. Mendenball, 18 Minn. 232 ; ante, p. 269, note. In equity a binding pledge can be made of the interest of the pledgor in a partnership to be sub- sequently created, so as to secure to the partnership a priority of lien against other creditors of the pledgor. The existence of the sub- ject of the pledge at the time the contract is made, or delivery thereof, is not as necessary; if it comes into existence afterwards it is affected in equity at once by the lien stipulated for. Collins' Ap- peal, 107 Pa. St. 590; S. C. 15 Weekly Not. Cas. 5; 46 Leg. Intel. 55. One partner may execute a valid mortgage of a vessel owned by the firm by signing the individual names of the members of the firm. Patch v. Wheatland, 8 Allen, 102. The execution of a mortgage of personal property of a partnership by one partner in his individual name passes no title. Clark v. Houghton, 12 Gray, 38. A mortgage signed with the partnership name, but in the body of which it is recited that it was the act of one of the partners, and given as a security for his indi- vidual debt, is not, on its face, a partnership act. Scott v. Dansby, 12 Ala. 714. Under Wagner's (Mo.) Statutes, 281, requiring mortgages of per- sonal property to be acknowledged as conveyances of land are by law required to be, a mortgage by a partnership may be signed and ac- knowledged by anyone of the part- ners with the firm name, although his name does not appear in the style of the firm. Keck v. Fisher, 58 Mo. 532. A partner recognizing a chattel mortgage on the partnership prop- erty, executed by his partner, is estopped to deny its validity. Rich- ardson v. Lester, 83 111. 55. See, also, Hawkins v. Hastings Bank, 1 Dill. 462. That individual property is not embraced by a mortgage executed by partners on their property, un- less specifically set forth and de- scribed, see Reid v. Godwin, 48 Ga. 527. Where chattels owned by one partner, but used by the firm with- out being converted into firm as- sets, were mortgaged by the other partner without the owner's knowledge, and sold by the mort- gagee under the mortgage, a former mortgagee from the owner can maintain trover against the latter mortgagee for their conver- sion. Cutler v. Hake, 47 Mich. 80. See, also, Bates v. Bennett, 33 Ark. 475 ; Dowell v. Mitchell, 105 U. S. 430. Although a mortgage by a part- ner of firm property, without his copartner's consent, to secure his individual debt, will not be per- mitted to operate as a mortgage, yet if, on a payment of the firm debts and a division of the assets of the firm, such mortgaged prop- 347 140 RIGHTS AND OBLIGATIONS. [BOOK II. credit of the firm, it follows almost necessarily that be should have power to pledge partnership property as a [*140] security for advances. *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 there- fore 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, (c) Pledges of chattels. — The implied authority of a partner who has power to borrow to pledge the personal property of the firm for money borrowed is beyond dispute; (d) 1 erty falls to the mortgagor, it be- ness cannot be lawfully executed comes operative and can be en- forced. Smith v. Andrews, 49 111. '28. (c) In Be Clough, 31 Ch. D. 324, an equitable mortgage by a surviv- ing partner for a partnership debt was held valid. See, further, Ex parte National Bank, 14 Eq. 507; Patent File Co. 6 Ch. 33; Ex parte Lloyd, 1 Mont. & Ayr. 494. Com- pare 7 T. R. 210, per Lord Kenyon. (d) See Ex parte Bonbonus, 8 Ves. 540; Butchart v. Dresser, 10 Ha. 453, and 4 De G. M. & G. 542; Brownrigg v. Rae, 5 Ex. 489 ; Gor- don v. Ellis, 7 Man. & Gr. 607. See, also, Langmead's Trusts. 20 Beav. 20, and 7 De G. Mac. & G. 353 ; and as to ships, Ex parte Howden, 2 M. D. & D. 574. 1 Gregg v. Fisher, 3 Brad. (111.) 261. One member of a firm may exe- cute a deed of trust on personal property to secure the creditors generally of the partnership. Scruggs v. Burruss, 25 W. Va. 670. A chattel mortgage not in fur therance of the partnership busi- by either partner without the con- sent of the firm. Osborne v. Barge, 29 Fed. Rep. 725. M. gave money to R. to invest in leaf tobacco, with a verbal agreement that they should share the profits equally, saying nothing about losses. R. used the money to pay his own debts and bought tobacco in the name of M., giving his own acceptances for the pur- chase money, and pledging the tobacco for the payment of the acceptances to the defendants, who gave a bill of sale receipted in the name of M. M. was unknown to the defendants, and they were in- formed by R. that the purchase was for himself though made in M.'s name. Held, that M. and R. were to be regarded as partners in the purchase of the tobacco, and that M. was bound by the agree- ment of R. pledging the tobacco to secure the payment of his ac- ceptances for the purchase money ; that the defendants are not respon- sible to M. for the misapplication by R. of the money he had received 348 CH. I, SEC. II.] LIABILITIES OF PARTNERS. 'Ul and the power is not confined to cases in which there is a general partnership; for, if several join in a purchase of goods to be sold for their common profit, a pledge of those goods by one of the persons interested is binding on them all. («?) The implied power to pledge, moreover, extends to pledges for antecedent debts, (f) Redemption. — Any partner may, on behalf of the firm, redeem a pledge of the firm; but he alone is not the proper person to bring an action to recover the thing pledged, [g) Factors' Acts. — A question of some importance arises as to the effect, if any, of the Factors' Acts (h) on the power of one partner to sell and *pledge the goods [*141] of the firm. The writer is not aware of any author- ity upon this subject, but he conceives that those acts neither extend nor abridge the power in question. The Fac- tors' Acts do not apparently render valid any sale or pledge by one partner of partnership goods, which is not valid, independently of the acts, upon the principles of the com- mon law. that there the goods pledged were not partnership property when the pledge was made. In Ex parte Copeland, 2 Mont. & Ayr. 177, it was questioned whether a pledge by one partner was valid if the pledgee had notice that the pledgor was not the only owner ; but this it is conceived could only be material where the pledge is not made for ostensible partnership purposes. (/) Patent File Co. 6 Ch. 83; Re Clough, 31 Ch. D. 324. And see Story on Partn. § 101. (g) See Harper v. GoJsell, L. R. 5 Q. B. 422. (7i) 4 Geo. 4, ch. 83; 6 Geo. 4, ch. 94 ; 5 and 6 Vict. ch. 39 ; 40 and 41 Vict. ch. 39. See, upon them, Navul- shaw v. Brownrigg, 2 De G. M. & G. 441; Kaltenbach v. Lewis, 10 App. Ca. 617. from M. ; that the receipted bill given by the defendants in the name of M., on the receiving the acceptances of R. was open to ex- planation, and did not estop the defendants from holding the to- bacco to secure the payment of the acceptances according to their agreement with R. Miller v. Sul- livan, 1 Cincinnati, 271. One partner has no authority to agree that private property of the other partner, pledged by him for a firm debt, shall also stand as security for further advances. Beardsley v. Tuttle, 11 "Wis. 74. See post. (e) Reid v. Hollinshead, 4 B. & C. 867; Re Gellar, 1 Rose, 297; Raba v. Ryland, Gow, N. P. 133; Tupper v. Haythorne, id. 135. But see Barton v. Williams, 5 B. & A. 395, p. 405, per Best, J., and note 349 *l-il EIGHTS AND OBLIGATIONS. [BOOK II. (b) To partners. — One partner has implied authority to accept, in the ordinary course of business, security for a debt due to his firm; and where one member of a firm of bankers accepted as security for money due to the bank shares in a company, and caused them to be registered in the name of the bank, it was held that he had implied au- thority so to do, although the consequence was that he thereby rendered himself and his copartners liable as con- tnbutories of the company, (i) 21. Notice. — Questions frequently arise as to whether notice to one partner is notice to all. General rule. — As a general rule, notice to a principal is notice to all his agents; (k) and notice to an agent of mat- ters connected with his agency is notice to his principal. (I) 1 Consequently, as a general rule, notice to one partner of an}' matter relating to the business of the firm is notice to all the other members; (ra) and if two firms have a common partner, notice which is imputable to one of the firms is imputable to the other also, if it relates to the business of that other, (n) 2 (i) Weikersheiin's Case, 8 Ch. ser v. Norwood is a strong author- 831. ity that in commercial transactions (Jc) See Mayhew v. Eames, 1 Car. he is. & P. 550, and 3 B. & C. 601 ; Willis » See Ewell's Evans on Agency, v. The Bank of England, 4 A. & E. 159 et seq. 21. (m) Alderson v. Pope, 1 Camp. (T) Dresser v. Norwood, 17 C. B. 404 ; Porthouse v. Parker, id. 82 ; N. S. 466, reversing the decision Bignold v. Waterhouse, 1 M. & S. below, 14 C. B. N. S. 574. Per 259. And see Salomons v. Nissen, Ashhurst, J., Fitzherbert v. 2 T. R. 647. Mather, 1 T. R. 16; Le Neve V. Le (n) See Steele v. Stuart, 2Eq. 84; Neve, 1 Ves. Sr. 64; Collinson v. Porthouse v. Parker, 1 Camp. 82; Lister. 7 De G. M. & G. 634, and 20 Worcester Corn Exch. Co. 3 De G. Beav. 356. See, generally, on this M. & G. 180; Jacaud v. French, 12 maxim, Blackburn, Low & Co. v East, 317 ; Powles v. Page, 3 C. B. Vigors, 17 Q. B. D. 553 (reversed 16. by the house of lords in 12 App. 2 Howland v. Davis, 40 Mich. 546; Ca. 531). Whether a principal is Fitch v. Stamps, 7 Miss. 487; San- affected by notice acquired by the ders v. Ruddle, 2 T. B. Mon. 139 ; agent, but not in that character, is Barney v. Currier, 1 D. Chip. 315; perhaps scarcely yet settled. Dres- Smith v. Hall, 5 Bosw. 319; Her- 850 CH. I, SEC. II.] LIABILITIES OF PARTNEES. *141 bert V. Odlin, 40 N. H. 267 ; Bank of America v. Shaw, 2 N. Eng. R. 572 ; U. S. Nat'l Bank v. Burton, id. 206; Marietta, etc. R. R. Co. v. Mowry, 28 Hun, 79; Bigelow v. Henniger, 33 Kan. 362; Tucker v. Cole, 54 Wis. 539; Patterson v. Seaton, 70 la. 689; King v. Rem- ington, 36 Minn. 15; Fourth Nal'l Bank v. Altheimer. 91 Mo. 190. See, also, Manwaring v. Griffin, 5 Day, 561. Thus where a transfer of a note is made to a firm, one of whose members is a trustee of the com- pany owning the note, the firm has constructive notice of want of authority in the company to make the transfer. Smith v. Hall, supra. Where a partnership seeks to re- cover as a bona fide purchaser of a promissory note alleged to have been fraudulently procured, the burden is upon it to show that all the members of the firm were ig- norant of the fraud at the time of the purchase. Frank v. Blake, 58 la. 650. Purchase of lands in the name of one partner, made simultaneously with the forming of the firm, held to be a partnership transaction, so that notice of the rights of others in the land had by one partner was notice to the other. King v. Rem- ington, 29 N. W. R. 352. One partner agreed, on behalf of the firm,' to accept a mortgagee's interest in certain lands in satis- faction of a debt due to the firm, with full knowledge of the mort- g Igor's title, took an absolute deed to the firm, and, after receiving from the mortgagor the sum due on the mortgage, conveyed his share to a copartner. Held, that notice to him was notice to the firm, and that a reconveyance to the mortgagor might be decreed. Barney v. Currier, 1 D. Chip. (Vt.) 315. Where property is purchased by a partnership, notice to one is no- tice to all the partners ; yet, if one of two persons about entering into partnership purchase of the other an undivided interest in property owned by him, to be held by the two for the use of the firm, this principle as to notice does not ap- ply. Herbert v. Odlin, supra. Each member of a firm is charge- able with notice of the transaction of the others within scope of the partnership business, but not with notice of the sale by a partner of his individual interest in partner- ship property or of his representa- tions in making ? uch sale. Liddell v. Grain, 53 Tex. 549. The fact that one member of the firm had formerly been the agent of appellants, and had knowledge of an agreement between the mem- bers that the new firm should not deal in goods sold by appellants, does not constitute knowledge on the part of appellant of such agree- ment. His knowledge of such agreement was acquired as a mem- ber of the new firm and not as agent of appellant. Aultman & Taylor Co. v. Webber, 4 Brad. (111.) 427. If A. and B. are partners, and A. is employed as the agent of C, who claims an interest in certain lands, to look after such interest, and B., the other partner, pur- chases an outstanding title to the land for the benefit of the partner- ship, inasmuch >as the title to the land does not vest in the partner- ship, but in the individual partners, 351 *142 EIGHTS AND OBLIGATIONS. [LOOK II. [*142] *Firm affected by its agent's knowledge.— In conformity with these principles, if a firm claims the benefit of a transaction entered into by one of its mem- bers, it cannot effectually set up its own ignorance of what that member knew, so as to be in a better position than he himself would have been in had he been dealing on his own account as a principal, (o) Thus in Gollinson v. Lister, (p) it was held that a banking company was not entitled to the benefit of a mortgage given to it by its own manager in his character of an executor. For the mortgage was given as a security for money borrowed by the manager as exec- utor, and advanced by himself as manager for improper purposes, and in breach of the trusts which, as executor, he had to perform; and the company, in taking the mortgage, knew that their manager was giving a security on his tes- tator's estate for money previously taken by him from the funds of the company, and which moneys he had been re- C. will be entitled to treat A. as his trustee as to his half of such title, and as holding it for his use. But he cannot hold B. liable in the same way, as B. is not chargeable with notice of A.'s agency merely from his relation to him as partner. Hardenburgh v. Bacon, 33 Cal. 356. Notice to a firm cannot affect a member thereof in his individual rigbts or interests disconnected with those of the firm. Boling v. Anderson, 60 Tenn. 551. Upon trial of a case involving the extent of a water privilege claimed by copartners under an alleged appropriation, their notice of location, shown to have been prepared with the knowledge of some of them, and seen by them as a posted notice, and to have been so posted that it " must have been seen" by the others, was held admissible in evidence as part of the res gestce. McKinney v. Smith, 21 Cal. 374. The fact that one partner was in- formed at the time that a note was transferred to the firm by another partner, and that the note was given without consideration, being merely lent to the latter, is wholly immaterial. Ross v. Whitefield, 1 Sweeny, 318. As to notice where a person is a member of plaintiff's and of an- other firm, see Glass v. McDonald, 4 Can. L. T. 139. Where a bill is drawn by one and accepted by the other of two firms having one common partner, formal notice of protest to the ac- ceptors is not necessary. Wood- bury v. Sackrider, 2 Abb. Pr. 402. (o) See ante, p. 116, and the cases below. (p) 7 De G. M. & G. 634, and 20 Beav. 356. 352 CH. I, SEC. II.] LIABILITIES OF PARTNERS. * 143 quested to replace or give security for. Under these cir- cumstances it was treated as clear that the bank could stand in no better position than the manager would have done had he advanced the money himself and taken a mortgage for it from himself. Meaning of phrase notice to one is notice to all. — When it is said that notice to one partner is notice to all, what is meant is (1) that a firm cannot, in its character of principal, set up the ignorance of some of jts members against the knowledge of others of whose acts it claims the benefit, or by whose acts it is bound ; and (2) that when it is necessary to prove that a firm had notice, all that need be done is to show that notice was given to one of its members as the agent and on behalf of the firm. The expression means no more than this; and although every person has notice of what he himself does, it would be absurd to hold that a firm has notice of everything done by each of its members. Where one member is acting beyond his powers, or is com- mitting a fraud on his copartners, or is the person whose duty it is to give his firm notice of what he himself has done, in all such cases notice on his part is not equivalent to notice by them, (q) *In Blgnold v. Waterhouse, (r) one of a firm of [*143] carriers entered into an agreement to carry valuable parcels free of charge, but under such circumstances as to render the agreement not binding on the other partners. A parcel known to the partner who made the agreement to be of value was sent, but was not entered or paid for as a valu- able parcel. The other partners were held to be unaffected with the notice which their copartner had of the nature of the parcel, and were held not to be liable for its loss. Breaches of trust. — So, if one partner is a trustee, and he improperly employs the trust funds in the partnership business, his knowledge that he is so doing is not inimitable (q) See the judgment of Jessel, (r) 1 M. & S. 255. M. R., in Williamson v. Barbour, 9 Ch. D. 535 et seq. Vol. 1 — 23 353 *143 RIGHTS AND OBLIGATIONS. [BOOK II. to the firm ; and therefore, to affect the other partners with a breach of trust, further evidence must be adduced, (s) Notice to clerks. — Moreover, in cases of this kind, no- tice on the part of the clerks of the firm of what the fraud- ulent partner is doing is no more than notice to him. It is not sufficient to affect his copartners, (t) Ratification. 1 — These cases show, what indeed is obvious of itself, viz., that if a partner exceeds his authority, and (s) See Ex parte Heaton, Buck. (t) See Lacey V. Hill, 4 Ch. D. 537 (affirmed by the House of Lords under the name of Read v. Bailey, 3 App. Cas. 94), and Williamson v. Barbour, 9 Ch. D. 536. 1 See the general doctrine of rati- fication considered at length in Ewell's Evans on Agency, chapter 7. A few cases touching upon the edge of his copartner, converts to the use of the firm money re- ceived by him as a United States deputy collector of internal rev- enue, held, that a bond of the firm, given to indemnify the sure- ties of the collector, was valid as a partnership obligation. Whar- ton v. Clements, 3 Del. Ch. 209. Payment of money, by one part- ner, toward the expenses of an at- subject of ratification by partner- torney employed by another part ships will, for want of a more con- venient place, be referred to in this connection. A contract executed by one mem- ber of a firm without the scope of the partnership business may be- come binding upon the firm by ratification of the other members. Clark v. Hymen, 55 la. 14. Ratification by a firm is equiva- lent to antecedent authority in the partner acting for the firm. Cer- tain transactions held to constitute a ratification of the act of one partner. Lynch v. Flint, 56 Vt. 46. See, also, Rust v. Hanselt, 46 N. Y. Super. Ct. 22. While a partner is not at liberty to use a fund belonging to his co- partner individually in payment of a partnership claim to his injury, yet a subsequent ratification by the latter will make the act valid. Evans v. Howell, 84 N. C. 460. Where a partner, with the knowl- ner, in a matter not strictly part- nership business, but in the interest of the firm, will amount to a rati- fication of the act of such other partner in employing such at- torney. Holmes v. Kortlander, 31 N. W. R. 532; S. C. 7 West. R. 842. Non-repudiation, when called on to pay the same, of a note signed by defendant and another, between whom a partnership is alleged to have existed, and a promise to pay the same, is sufficient evidence to make the defendant liable on the note. Murphy v. Whitlow, 1 Ariz. 340. If a firm, in the absence of fraud or concealment, maintains silence when it should repudiate the un- authorized act of a partner, it will be estopped from repudiating such act. Campbell v. District of Co- lumbia, 19 Ct. of CI. 160. Where S., a partner, had con- tracted in writing in the firm name 354 CH. I, SEC. II.] LIABILITIES OF PARTNERS. >U3 it is contended that the firm is bound by what he has done, on the ground that it has ratified his acts, evidence must be to sell certain timber limits belong- ing to the firm, but standing in his name only, and M., his copartner, when informed thereof, did not dissent, but shortly afterwards fur- nished information to the purchaser which he was only entitled to ask for as such purchaser, held, that the firm was bound by the con- tract. Reid v. Smith, 2 Ont. 69; S. C. 2 Can. L. T. 305 ; 18 Can. L. J. (N. S.) 205. The mere knowledge, on the part of a firm, that one of its members had given a firm note, will not be construed to imply a knowledge on their part that the note was a fraud upon them, and until such knowledge of the fraud has been brought home to them the firm cannot be held to have ratified the transaction. Hayes v. Baxter, 65 Barb. 181. As to the effect of the receipt of profits arising from speculations beyond the scope of the firm busi- ness, see Biggs v. Hubert, 14 S. C. 620. The mere fact that a partner, upon being informed that his co- partner has given a firm note for his individual debt, does not deny his liability thereon, does not, per se, amount in point of law to a ratification or adoption of the note, though it may be a circumstance tending to show assent. Reubin v. Cohen, 48 Cal. 545. Where a member of a firm drew a check in the firm name in favor of a bank to which he was individ- ually indebted, and the other mem- bers within a month had knowl- edge of the misapplication of the check to his private account, but omitted to repudiate the act till four years afterward, when the firm brought suit for the money, such omission was held to be tan- tamount to a ratification and to bar recovery. Marine Co. v. Carver, 42 111. 66. One partner of a firm, without the knowledge or assent of the other, subscribed for certain stock in the firm name. Held, that the omission of the other partner to express his dissent to such sub- scription, when demand of pay- ment for the stock was made of the firm, did not make him a stock- holder or render him liable to pay for stock so subscribed for. Bar- nard v. Lapeer, 6 Mich. 274. Subsequent ratification of a part- ner's authority to bind the firm as sureties upon a note may be proved by circumstantial evidence. First Nat. Bank v. Breese, 39 Iowa, 640. Where one, without authority, purchases goods for persons about to enter into partnership, and in their name and on their credit as partners, and they receive the goods and dispose of them for their own purposes, after being informed that the goods were so purchased, whether they are partners in fact or not, they are liable as partners to the seller for the value of the goods. Pike v. Douglas, 28 Ark. 59. Where one of two partners, with- out the knowledge or consent of the other, made an amicable set- tlement of and terminated a busi- ness transaction with another, re- ceiving a sum in cash and a promis- 355 *143 EIGHTS AND OBLIGATIONS. [BOOK II. given to prove that at the time of the alleged ratification his copartners knew of those acts. It would be absurd if sory note for the amount due the firm, the use of the cash by the firm and the acceptance of the amount of the note by the other partner, after knowledge of the settlement, constitutes a ratifica- tion by him of such settlement. Levick's Appeal, 2 Atl. R. 532. The fact that the other member of the firm, when a note — signed by one partner as an individual, and guarantied by him in the firm name — was presented for pay- ment, indoi'sed thereon a waiver of notice, protest, etc., for the pur- pose of saving expense, cannot be considered a ratification or adop- tion by the firm of the unauthor- ized act of the partner in making such guaranty; nor is the failure to make prompt denial of firm lia- bility, on such note being presented for payment, sufficient to establish a ratification or an admission of liability. Marsh v. Thompson Nat. Bank, 2 Brad. 217. J. T., a member of the firm of T. & F., whose business was the lay- ing of wooden pavement, accepted a draft drawn in favor of the plaintiffs, signing his name " J. T., for T. & F." There was evidence that F., the other partner, had been shown the draft, and made offers as to its payment. Held, that this was sufficient evidence of a ratifi- cation by F. to send the case to the jury. Held, further, that evidence tending inferentially to disprove the alleged admission of liability by F. (e. g., that the firm received no consideration) was inadmissible. Filbert v. Bickel, 7 Weekly Notes of Cases, 217. A partner assented to the signing of the firm name to a proposition for the sale of land, and verbally agreed to be bound by the acts of his partners in carrying it out ; they made a contract and signed the firm name in his absence ; he signed a deed in pursuance of that con- tract. Held, that if he had not authorized he had ratified the making of the contract, and was therefore bound by it. Waterman v. Dutton, 6 Wis. 265. A partner said he would settle a note which was signed in the firm name, but which was not given for partnership purposes, " if he could get the books, notes and accounts from " the partner who signed the note. Held, that he did not become liable on the note, especially as the condition of this promise never happened. Burleigh v. Parton, 21 Tex. 585. Where a member of a partnership had indorsed his own note with the name of the firm, for his own ex- clusive benefit, without authority from the other copartner, and the indorsee took the note with full knowledge of the facts, held, that no independent consideration was required to support a subsequent ratification and promise, by the second copartner, to pay the note. Commercial Bank v. Warren, 15 N. Y. 577. A promissory note executed by one partner after the dissolution of the partnership may be ratified by the other partners, and will then be binding upon the firm. Carter v. Pomeroy, 30 Ind. 438. To constitute a ratification by 356 CH. I, SEC. II.] LIABILITIES OF PARTNERS. ■144 in such a case knowledge by him was equivalent to knowl- edge by them, (u) A retired partner is not affected with notice on the part of the continuing partners of what has occurred since the partnership if the agency subsisting between them has been dissolved, {x) Nor is an incoming partner affected with no- tice of what occurred before he joined the firm, (y) 22. Payments. — See ante, under the head Debts. 23. Penalties. — One partner may bind the firm under a '-penalty to observe a contract which he is [*144] authorized to enter into on its behalf, (z) 24. Purchases. — It has been long decided that every member of an ordinary trading partnership has implied power to purchase on the credit of the firm such goods as are or may be necessary for carrying on its business in the usual way. (a) 1 This cannot be more strongly exemplified one partner of the use by another partner, after dissolution, of the firm name, in the renewal of a part- nership note, there must be some act on the part of the former fairly implying a willingness to affirm what had been done. Hatton v. Stewart, 2 Lea (Tenn.), 233. («) See ace. the last note. (x) Adams v. Bingley, 1 M. & W. 192. (y) See per Jessel, M. R., in "Will- iamson v. Barbour, 9 Ch. D. 536. (z) Beckham v. Drake, 9 M. & W. 79. (a) Hyatt v. Hare, Comb. 383. 1 Where one member of a firm makes a purchase within the scope of the firm business the firm will be liable. Alabama Fertilizer Co. v. Reynolds, 79 Ala. 497; Clark v. Johnson, 90 Pa. St. 442. So notwithstanding the goods are diverted by such purchasing partner to other uses, and never came into possession of the firm. Clark v. Johnson, 90 Pa. St. 442; Dickson v. Alexander, 7 Ired. L. 4; Venable v. Levick, 2 Head, 351. The purchase of a stone store- house and a lot of stationery by a trading firm held to be within the scope of the firm business. Davis v. Cook, 14 Nev. 265. So as to the purchase, by a mem- ber of a brewing company, of the lease of a brewery. Stillman v. Harvey, 47 Conn. 26. Dealing in futures is not pre- sumed to be incident to the busi- ness of cotton buyers and commis- sion merchants. Gruner v. Stucken, 3 So. Rep. (La.) 338. Where several persons put up a building as partners, and one of them buys brick for the purpose, without an express understanding with the vendor that it was an in- dividual purchase, and the brick was used in the building, partners are liable therefor. Stecker v. Smith, 46 Mich. 14. 357 *144 EIGHTS AND OBLIGATIONS. [book II. than by the case of Bond v. Gibson, (b) There two persons carried on business as harness-makers ; one of them bought Where a partner has contributed to the capital of a firm goods which have been conditionally sold to him by a stranger, the other partner, if without knowledge of the adverse claims, will not be lia- ble for them to the real owner. Boynton v. Isaac, 37 Leg. Intel. 232. As to the authority of one part- ner in a firm of bankers and bro- kers to bind the firm by contract for the purchase of bonds, see Johnson v. Trask, 40 Hun (N. Y.), 415. One partner in a firm of commis- sion merchants cannot bind the other by purchase on his own ac- count on credit in the partnership name. Alabama Fertilizer Co. v. Reynolds, 79 Ala. 497. The purchase of the entire stock of a competing road is not within the scope of the authority of a partner of an association organized to build, equip and operate a cer- tain railroad. Roberts' Appeal, 92 Pa. St. 407; S. C. 9 Weekly Not. Cas. 118. A partner in the firm of iron mas- ters and coal miners owning prop- erty of these descriptions has no implied authority to purchase a rolling-mill in the name of the firm ; and his partner, who is absent and has not authorized the transaction, is not liable on notes given for the purchase money. Clay v. Carter, 16 Weekly Not. Cas. 385. The plaintiff bought of one part- ner stock in a corporation, and took from the firm a power of attorney authorizing him to procure a trans- fer on the books of the corporation. The firm then had a large number of shares to its credit on the books of the corporation. The plaintiff delayed presenting his power of at- torney for some months, till after the firm had sold all its shares -to other persons, who obtained certifi- cates from the corporation. Held, that the plaintiff was not entitled, in equity, as against a partner who had no knowledge of the transac- tion, to a decree for the delivery to him of a certificate of the shares in the stock, which had risen in value, but was entitled to a decree for the money paid, with interest. Wonson v. Fenno, 129 Mass. 405. If there be an agreement of partnership, common or special, for the purpose of purchasing prop- erty at certain sales, all the pur- chases made at such sales by either of the partners will be considered as made on the partnership ac- count, although the advances by one exceed those of the other. Taylor v. Taylor, 2 Murph. 70. Wherever the original credit was given to the partnership, that will constitute a debt against the partnership, notwithstanding the partner contracting the debt may have given his own separate secu- rity, or made himself personally liable therefor. Barcroft v. Snod- grass, 1 Coldw. 430. A sale of goods on credit to one partner in the course of the busi- ness of the partnership is a sale to the firm, unless it be made con- trary to an express notice by the (b) 1 Camp. 185. 358 CH. I, SEC. II.] LIABILITIES OF PARTNEKS. *1U on the credit of the firm a number of bits to be made up into bridles; but instead of using the bits for the partner- other partner not to trust the firm on his account, in which case he alone will be liable who made the purchase, and an action to recover the price cannot be maintained against the firm. Feigley v. Spone- berger, 5 Watts & S. 567. A copartnership is not chargeable for goods sold to one of his partners for his separate use, although he ordered them to be charged to the firm, if the vendor knew, at the time, that they wei'e for the sole use of that partner. Gullat v. Tucker, 2 Cranch, C. Ct. 33; Bird v. Lanius, 7 Ind. 615. K. and M. were partners in the hotel business; K. and P. were partners in the grocery business; it was doubtful whether either had a well-settled firm name, and there was evidence that each sometimes used and recognized the name of K. & Co. Held, that one selling goods to K. and taking reasonable care to ascertain for which firm K. was dealing, and believing that firm to be K. and M., and the goods being adapted to the business of that firm, could hold that firm for the price of the goods. Baker v. Nappier, 19 Ga. 520. When a partnership has entered a credit for an article bought by one partner in his private capacity the vendor has a right to look to the partnership for payment. Dishon v. Schorr, 19 111. 59. To bind a partnership to the pay- ment for goods delivered to third persons it is not enough to show that one of the partners requested the furnishing of the goods to such third persons. Pinckney v. Keyler, 4 E. D. Smith, 469. Where one who boarded hands in the employ of a partnership was authorized by a partner to take up goods on account of the firm for his family use in that business/ and, on his representation to that effect, goods were furnished him on the credit of the firm, though, for convenience, merely charged in the first instance to him, and after- wards transferred to the account of the firm, held, that the firm was liable therefor, and that he was a, competent witness for the plaintiffs to show the liability; a fortiori if he were a partner as well as an agent. Scott v. Shep- herd, 3 Vt. 104. In assumpsit against partners, under the common counts, proof of a promise by one in the name of the firm is not sufficient; there must be proof of a joint promise or of the existence of the partner- ship. Findlay v. Stevenson, 3 Stew. 48. Although a purchase of goods by one partner is made in violation of the articles, yet, if the goods come to and are used by the partnership, the firm is liable. Johnson v. Bern- heim, 76 N. C. 139. Judicial notice is taken Of the mercantile custom of mutual cred- its, under which business establish- ments furnish each other's clerks i or customers with goods, and t charge them to each other. It is within the authority of the man- aging partner to authorize such dealings, and when so authorized 359 *144 EIGHTS AND OBLIGATIONS. [BOOK II. ship business he pawned them for his own use. 1 The seller of the bits was nevertheless held entitled to recover their price in an action against both partners. Goods supplied to one partner. — The firm is liable although the goods may have been supplied to one only of they are binding until notice to the contrary. Cameron v. Blackman, 39 Miss. 108. A firm is not exonerated from liability to pay for articles pur- chased by one member for its legit- imate use and business — planta- tion supplies in this case — merely because another member has noti- fied the sellers not to extend credit to the former on account of the partnership. Campbell v. Bowen, 49 Ga. 417. If articles of partnership between three persons expressly deny to one partner power to purchase without the written consent of the other two, sales made to the one, for use of the partnership, without such consent, by persons having full no- tice of the stipulation, will be held to be made on the individual credit of the partner, and not on the credit of the firm. Radcliffe v. Varner, 55 Ga. 427. Where defendant was at the same time a partner of the plaint- iff's and of another firm, and pur- chased from the latter firm on behalf of the plaintiff's firm a quantity of lumber which was not needed and was never used, held, that the burden was on the defend- ant to show that the lumber was required for the plaintiff's firm, and not having done so its price was properly disallowed to him in taking firm account. Same ruling also made as to an expensive ma- chine bought by defendant in his own name for firm purposes, with- out consulting the plaintiff, but never actually placed on partner- ship premises. Glass v. McDonald, 4 Can. L. T. 139. Where a trading firm consists of a husband, his wife, and his wife's father, the wife having separate estate, and her father living with the husband and wife without any account being kept between them, these facts are evidence to show that an indebtedness which in- cluded store and family expenses was a firm indebtedness. Haben v. Harshaw, 49 Wis. 379. Though a purchase made by a member of a commercial firm is one outside of its ordinary opera- tions, yet if made for the benefit of the firm and brought to the knowledge of the other partner, who does not repudiate it, but promises to pay the note given in the firm name for the price, he will be bound ; and without the written memorandum required of a prom- ise to pay the debt of a third per- son. Succession of Arick, 22 La. Ann. 501. 1 If a partner purchase goods in the name of the firm, although he applies them to his individual use, the partnership is liable for the j)rice to the vendor. Clark v. John- son, 90 Pa. St. 442; Dickson v. Alexander, 7 Ired. L. 4; Venable v. Levick, 2 Head, 351. 360 CH. I, SEC. If.] LIABILITIES OF PARTNERS. U6 EIGHTS AND OBLIGATIONS. [BOOK II. by him as to bis authority to do that which the nature of the business of the firm does not impliedly warrant, (p) The liability of partnerships for false and fraudulent rep- resentations will be discussed in the next section of this chapter. See further on this subject ante, under the head Admis- sions. [Retainer}] 28. Sales. — Any person can dispose of any of the part- nership goods ; (q) 2 and in one case it was even held that he could make a valid sale of the partnership books. (/•) with usury, that the debt repre- sented by the notes was all right, and would be promptly paid, are binding on the firm, and estop them from setting up usury in de- fense to a suit on the notes. French v. Rowe, 15 Iowa, 563. One of a firm of warehousemen falsely represented to a person who advanced money on the faith of such representation that the one to whom the money was advanced, and to whom he had given receipts in the firm name, had on storage with the firm a certain quantity of grain. The innocent partners were held bound by the representation, and responsible for the money ad- vanced. Griswold v. Haven, 25 N. Y. 595. Where one of a firm makes rep- resentations that certain flour was bought on account of a third per- son, and that the firm's interest is limited by the amount advanced by them in making the purchase, the firm cannot assert their ownership as against one who has purchased of said third person. Bemis v. Becker, 1 Kan. 226. "Where one of two partners makes fraudulent representations, whereby goods are obtained and consigned to his partner, replevin in the cepit lies against both. Olmsted v. Hotailing, 1 Hill, 317. (p) Ex parte Agace, 2 Cox, 312. 1 Where a partnership exists be- tween two attorneys, and one of them receives a retainer's fee, con- ducts the trial of the cause, and charges the fee therefor upon the firm books, the presumption is that of a retainer of the firm, and that the fee accrued to the firm ; but such presumption is liable to be rebut- ted. Harris v. Pearce, 5 Bradw. 622. (q) Lambert's Case, Godb. 244. 2 One partner may sell the whole of the partnership property if the sale be free from fraud on the part of the purchaser; and such sale dissolves the partnership, although the term for which it was formed has not expired. Whitton v. Smith, 1 Freem. Ch. 231 ; Deckard's Case, 5 Watts, 22; Arnold v. Brown, 24 Pick. 89; Williams v. Barnett, 10 Kan. 455; Hyrschfelder v. Keyser, 59 Ala. 338; Williams v. Roberts, 6 Coldw. 493 ; Schneider v. Sansom, (r) Dore v. Wilkinson, 2 Stark. 287. 366 CH. I, SEC. II.] LIABILITIES OF PARTNERS. ■146 62 Tex. 201; Avery v. Fisher, 28 Hun, 508 ; Ellis v. Allen, 80 Ala. 515; Christ v. Firestone, 10 Cent. Rep. (Pa.) 67; S. C. 11 Atl. Rep. 395 (assignment of a patent-right). See, however, to a greater or less extent contra, Kimball v. Hamil- ton, etc. Ins. Co. 8 Bosw. 495; Reid v. Smith, 2 Ont. 69 ; S. C. 2 Can. L. T. 305; 18 Can. L. J. (N. S.) 205; Drake v. Thyng, 37 Ark. 228; Hunter v. Waynick, 67 la. 555; Blaker v. Sands, 29 Kan. 551 ; Liberty Sav. Bk. v. Campbell, 75 Va. 534; Harkey v. Tillman, 40 Ark. 551; Myers v. Moulton, 71 Cal. 498. If such sale is consummated without notice to the other partner and works wrong or injury to him his relief is in equity ; but if he ac- quiesces in it or declines to dissent, a partnership creditor cannot as- sail it except on grounds which would avoid a sale by the firm. Ellis v. Allen, 80 Ala. 515. Even if such sale is held not valid against a copartner not consenting thereto, it is binding upon the part- ner making the sale, who thereby disposes of all his interest in the joint property of the partnership. Blaker v. Sands, 29 Kan. 551. Where a partner, in the absence of his copartner, who has fur- nished the capital, sells the partner- ship effects and business at a sacri- fice to parties having a knowledge of the interest of the copartner, and where there is no necessity for the sale, a trust will attach to the prop- erty in the hands of the purchasers, and they and the vendor will be held to a rigid accountability to the copartner. Drake v. Thyng, 37 Ark. 228. Under section 2430, subdivision 3, Civil Code, California, providing that a partner as such has no au- thority to dispose of the whole of the partnership property at once, unless it consists entirely of mer- chandise, a stallion kept for breed- ing purposes is not merchandise. Myers v. Moulton, 12 Pac. R. 505. A sale of the whole property of the firm in fraud of the rights of his copartner to a purchaser in good faith transfers the title to the whole property. Crites v. Wilkin- son, 65 Cal. 559. In the absence of fraud, one member of a firm may, notwith- standing the protest of his partner, transfer all the property of the partnership, in consideration of the promise of the purchaser to pay its debts, though not yet due. Graser v. Stellwagen, 25 N. Y. 315. See, also, Chadwick v. Burrows, 42 Hun, 39. But a sale of all the partnership property by one of the partners against the prohibition of the other partner is suspicious ; and the pur- chasers at such a sale, with knowl- edge of the circumstances, purchase it at their peril. Williams v. Rob- erts, 6 Cold. 493. The mere fact that one member of an ordinary planting partner- ship is intrusted with the manage- ment of the plantation in Louisi- ana will not authorize him to make a dation en paiement of certain property of the partnership to one of the partnership creditors, and thus place the interest of his co- partner in said property beyond the reach of the other creditors of the partnership. Bass v. Messick, 30 La. Ann. 373. The active partner of a mercan- tile partnership may transfer its 367 : 146 EIGHTS AND OBLIGATIONS. [BOOK II funds. Piatt v. Oliver, 3 McLean, 27. The appropriation of the partner- ship funds by the active partner to the rebuilding of a house for purposes of speculation transcends the range of partnership transac- tions, and unless sanctioned by the copartner the funds so expended would be properly charged to the active partner as so much appro- priated to his private use, and the rents of the house would belong to him ; otherwise the rents would be accounted for as partnership as- sets. Roberts v. Totten, 13 Ark. (509. Upon a bill to reach property of a debtor, the fact that certain stock which he had in a canal company was partnership property, in which another person was interested, and that the stockholders were person- ally liable for the debts of the com- pany, was held to be no objection to granting an injunction to re- strain him from parting with it. Eager v. Price, 2 Paige, 333. If A. be a silent partner with B. he is the only person who can ob- ject to the validity of a sale by B. alone of goods owned in common by them as partners. Derby v. Gallup, 5 Minn. 119. One partner cannot maintain an action of any kind against a person who purchases from a copartner the partnership effects, though such sale was made by the copart- ner in fraud of the partnership rights, and to satisfy his own indi- vidual debt. Wells v. Mitchell, 1 Ired. L. 484. One partner cannot sell or mort- gage his undivided interest in a specific part of the property be- longing to the partnership. Love- joy v. Bowers, 11 N. H. 404. A member of a copartnership Bold and assigned to another "all his interest in and to the property, goods, wares and merchandise, and debts belonging to the firm." Held, that a debt owing by himself to the firm did not pass by the assign- ment, the interest of the assignor being only what remained over and above the amount of his indebt- edness to the firm. Van Scoter v. Lefferts, 11 Barb. 140. The mere fact that persons are- mercantile partners does not em- power one of them to execute an agreement for the sale of real es- tate in the name of both. Mc- Whorter v. McMahan, 1 Clark, 400. Where the object of a partner- ship is to purchase, improve and own a certain tract of land, and there is no express agreement that either party shall have the power to alienate any part of the land ac- quired, no such power can be im- plied from the nature of the scope of the partnership business. Berry v. Folkes, 60 Miss. 576. While it is competent for one partner to bind the other by a sale of the good-will of the business, it is out of his power to bind his part- ner by a contract not to go into the same business. Morean v. Ed- wards, 2 Tenn. Ch. 347. Although one partner can trans- fer the property of the firm to its creditors in discharge of its indebt- edness he cannot apply the part- nership property, funds or securi- ties, either by way of sale, pledge or mortgage, to the discharge or security of his own private debt, without the consent of the other partners, either express or implied. Caldwell v. Scott, 54 N. H. 414; Hyrschfelder v. Keyser, 59 Ala. 368 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *146 338; Stegall v. Co ley, 49 Miss. 761 ; Geery v. Goi kro t, 33 N. Y. Supe- rior Ct. 147; Williams v. Barnett, 10 Kan. 455; Post v. Kimberly, 9 John. 470; Cochran v. Nat. Bk. 83 Ky. 36 ; Liberty Sav. Bk. v. Camp- bell, 75 Va. 534; Stebbins v. Will- iard, 53 Vt. 665. See, also, ante, note. Where a partner, with the assent of his copartner, appropriates firm property to the payment of his in- dividual debts, he will, notwith- standing such assent, be held to account to his copartner for the property so appropriated. Currier v. Bates, 62 la. 527. The rule that a partner cannot, without his copartner's consent, appropriate the firm property to the payment of his individual debts, is not affected by the fact either of the creditor's knowledge or ignorance of the partnership ownership. Geery v. Cockroft, supra; Rogers v. Batchelor, 12 Pet. 221 ; Ackles v. Stockle, 56 Mo. 558. See, however. Flannagan v. Alexander, 50 Mo. 50. If, however, one partner pur- chases property with the partner- ship effects, and sells such property to a bona fide purchaser without notice, the other partners, it is held, cannot follow the property in the hands of such purchaser. Chipley v. Keaton, 65 N. C. 534. One who, in ignorance of a co- partnership, takes in payment of the individual note of a member, given for his private debt, notes of third parties running to such mem- ber, but in fact the property of the copartnership, will be protected as a bona fide holder for value. Kellogg v. Fancher, 23 Wis. 21. See, also, Nichols v. Sober, 38 Mich . 678; ante, 266, note. Where a partner who is author- ized to close up the affairs of the firm, and who has advanced his private funds in payment of its debts, in good faith disposes of property of the firm to an amount less than the sum so due him, and in satisfaction of a debt due from him to a third person acting in like good faith, and believing the sale authorized by the firm, such disposition of the property cannot be avoided by another member of the firm so long as all the other debts of the firm are paid or se- cured. Corwin v. Suydani, 24 Ohio St. 209. One partner, acting in good faith, sold the partnership property to satisfy his individual indebtedness, and an action of replevin was brought by the purchaser against a creditor of the firm who had at- tached the property, after the sale and delivery, as the firm property, and for the firm debt. Held, that the right of the purchaser was su- perior. Stokes v. Stevens, 40 Cal. 391. A sale by a partner, in payment of his own debt, of goods which are in fact goods of the partner- ship, but which the partnership has so intrusted to hirn as to en- able him to deal with as his own, and to induce the public to believe to be his, and which the creditor receives in good faith and without notice that they are the goods of the partnership, is valid against the partnership and its creditors. Locke v. Lewis, 124 Mass. 1. A partner cannot appropriate the partnership effects to the pay' Vol. 1 — 24 369 *146 EIGHTS AND OBLIGATIONS. [BOOK II. ment of his individual debts ; but he may say to a hotel-keeper, " buy your groceries of us, and we will take it out in whole or in part, in the board either of ourselves or of our clerks ; " and this contract will hind the firm. Perry v. Butt, 14 Ga. 699. On the failure of a partnership an appropriation of the joint prop- erty by one partner to pay his in- dividual debt is fraudulent and void as against the pai'tnership creditors. Second Nat. Bank v. Fair, 9 East. Rep. 821 ; S. C. 6 Cent. Rep. 321; 7 Atl. Rep. 892; Yale v. Yale, 13 Conn. 185; French v. Lovejoy, 12 N. H. 458; Hartley v. White, 94 Pa. St. 31 ; S. C. 9 Weekly Not. Cas. 286. A partner cannot appropriate partnership assets on the ground of indebtedness of the partnership to himself without assent of the co- partners. Saylor v. Mockbie, 9 Iowa, 209. A bona fide sale of partnership property for the benefit of the partnership is good as against a mortgage of the same property by one of the partners to secure an individual debt. Shaw v. McDon- ald, 21 Ga. 395. If a partner buys a chattel for his private use, and agrees to pay for it in goods to be delivered by his firm on the order of the seller, and the firm is changed by the ad- dition of a new member, but con- tinues the business of the old firm in the old place, and subsequently the goods are delivered according to the agreement, the firm cannot maintain an action for the price of the goods, though the other mem- bers of the firm were ignorant of the agreement. Tay v. Ladd, 15 Gray, 296. Where one member of a firm received stolen property, knowing that such property had been stolen, and, in order to prevent a prosecu- tion for the felony, he paid the value of the stolen goods out of the partnership funds unknown to his copartner, held, that the in- nocent copartner could not main- tain an action against the person re- ceiving the money to recover such money back. He was affected by the act of his co-plaintiff in the suit. Johnson v. Byerly, 3 Head, 194. If a partner sells goods it raises an implied promise on the part of the vendee to pay the partnership for them, subject, however, to be controlled by any express contract which may have been made be- tween the vendee and all the part- ners that the former was not to pay the partnership, but to credit the amount of the goods on an in- dividual claim against the partner who sold the goods in favor of the vendee. Broaddus v. Evans, 63 N. C. 633; Ramey v. McBride, 4 Strobh. 12. As to the proper remedy, where one has applied partnership funds and effects to the payment of his individual debt without his part- ner's consent, see Viles v. Bangs, 36 Wis. 131 ; Estabrook v. Messer- smith, 18 id. 545. A forced sale by one partner of the property of the firm, not in the course of its business, confers no title on the purchaser who buys with notice of the nature of the transaction. Wallace v. Yeager, 4 Phil. 251. A stipulation in partnership arti- 370 CH. I, SEC. II.] LIABILITIES OF PARTNERS. *146 cles that the farm produce of the partnership business is all to be sent to certain factors, and held till sold by consent of all the part- ners, will affect whoever has notice of the same ; and a sale by one part- ner, in violation of the stipulation, will pass to a purchaser having such notice no title as against the partnership. And proceeds of partnership property realized by the plaintiffs by a wrongful sale by them of such property are not the subject of set-off in favor of some of the partners in a suit at law against them only, without bring- ing in the other partner as a party, and alleging all the equitable facts requisite to entitle the defendants to the relief they claim. Radcliffe v. Varner, 55 Ga. 427. Where a member of a firm of dealers in dry goods sold a judg- ment in favor of the firm for corn, held, that this was a misappli- cation of the effects of the partner- ship; that the purchaser was chargeable with a knowledge of the fact ; and that, by his contract, he took no right to receive the pro- ceeds of the judgment. Vance v. Campbell, 8 Humph. 524. L., W. & B. were partners deal- ing in cattle. L., on behalf of the firm, sold some eighty head to F., who knew of the partnership, and had had dealings with it. B. claimed to have purchased the cattle from his firm some months prior to the sale to F. Held, that if there was no change in the pos- session or control of the cattle at the time of B.'s purchase, and if F., without any knowledge of such prior purchase, or of any facts cal- culated to arouse suspicion and put him on inquiry, and finding the cattle in the possession of the firm, bought in good faith for a valuable consideration and in the ordinary course of business, his title would be good against B., and that notwithstanding the latter's purchase was also in good faith and for a valuable consideration. Such case is determined by the laws of partnership rather than by the pro- vision of the statute of frauds. Birks v. French, 21 Kans. 238. Subsequently to the time of B.'s purchase, but prior to that of F., L., on behalf of the firm, turned the cattle over to F. , under a feed- ing contract, by the terms of which the latter was to take the cattle to a certain place and there feed them until the succeeding July; then the cattle were to be sold, a certain sum to be paid to the firm, and the balance, if any, di- vided between the firm and F., and T. was not to remove or dispose of the cattle without the consent of the firm. This contract was as- signed by L. for the firm to F. at the time of his purchase. Subse- quently, but before July, B. took the cattle from T. under a writ of replevin. Thereafter he settled with T. paying him his charges for feeding, and the latter sold his in- terest in the cattle. After this F. brought this action against B. to recover the possession of the cat- tle. Held, that F. could main- tain the action and was entitled to the possession, and that any ad- verse rights of possession created by the feeding contract were de- stroyed by the transactions be- tween B. and T. Birks v. French, supra. Want of authority in a firm of lawyers to sell claims held for col- 371 147 EIGHTS AND OBLIGATIONS. [book II. If by any event the partners become mere tenants in common of the partnership goods, and one assumes to sell them, the purchaser, although he may only become tenant in common with the other partners, will, nevertheless, if he gets possession of the goods, be able to retain them as against his co-tenants; for no action lies by one tenant in common against another for the recovery of the goods belonging to both, (s) [*147] *The question whether a partner's power to sell is in any way affected by the Factors' Acts has already been noticed, (t) 29. Servants. — One partner has implied authority to hire servants to perform the business of the partnership, (u) l and the writer presumes that one partner has also implied au- thority to discharge them, although he cannot do so against the will of his copartners. (%) 2 lection is no defense to a suit against one partner to recover money paid the other by a pur- chaser for claims which he has not received. Pierce v. Jarnagin, 57 Miss. 107. (s)Litt. g 323; Fox v. Hanbury, Cowp. 445. And see Buckley v. Barber, G Ex. 182; ante, p. 61. (*) Ante, p. 140. («) Beckham v. Drake, 9 M. & W. 79. A servant of the firm is a servant of each of the partners, and may be described accordingly in an indictment for stealing the separate property of one of the partners. R. v. Leech, 3 Stark. 70. 1 Where two persons as partners in the erection of buildings have dealt largely with persons engaged in the roofing of buildings, and one of the partnership employ such person in and about a building of his own, and the person doing such work has no notice of the fact that the work is for the individual part- ner, but doec the work on the firm credit as in prior dealings, a recov- ery by him for his services against the firm will not be disturbed. Bartlett v. Powell, 90 111. .331. A contract by one partner to pay stipulated wages to an employee binds the partners to pay for such services as may thereafter be ren- dered under such contract, though some of such services were rendered after a third person had become a copartner in the firm business. Froun v. Davis, 97 Ind. 401. (x) Donaldson v. Williams, 1 Cr. & M. 345. But see Dixon on Part. 139, contra. 2 Where an agreement was made in writing by one partner, signing the name of the firm, in which it was agreed that the firm should pay to the brother of the partner making the agreement a salary for services to be rendered by him; and the evidence showed that the party thus employed was unfit to 37i CH. I, SEC. III.] LIABILITIES OF PARTNERS. *147 30. S/u'ps. — Where necessary, one partner may bind the firm by chartering a ship on its behalf, and one partner mav mortgage a ship belouging to the firm. (?/) [31. Storage of firm property}} Section III. — Liability of Partners in Respect of Torts and Frauds. Liability of principals for the torts and frauds of their agents. — If it were necessar}^, in order that one person should be liable for the tort or fraud of another, that the former should have authorized the commission of such tort or fraud, it would be a comparatively easy matter to deter- mine in any particular case whether a tort or fraud coin- discharge the duties imposed on him by the agreement, and that the agreement was kept from the knowledge of the other partners, held, that under such circum- fctances no effect should be given to the agreement as an evidence of indebtedness against the creditors of the partnership. Beste v. Cred- itors, 15 La. Ann. 55. Three partners took a nephew ten years old ; he lived with them sev- enteen years and worked for them ; they agreed to pay him wages all the time he stayed with them. After the death of one partner the survivors settled with the nephew and paid him what they thought due. Held, that the facts consti- tuted a valid contract, and that the estate of the deceased partner was liable for a, third of the amount. Moister's Appeal, 74 Pa. St. 166. If agents of an unincorporated joint stock company, acting within the scope of their employment, hire a mechanic to do work for the com- pany, its members, as partners, are liable to him for his work, although they did not know by whom the work was done, nor exactly what was to be done, and as between themselves their articles of associ- ation had not been complied with, and those articles gave no author- ity in terms to anybod}' to incur a debt for the company. Bodwell v. Eastman, 106 Mass. 525. (//) See, as to chartering, Thomas v. Clarke, 2 Stark. 451 ; and as to mortgaging, Ex parte Hovvden, 2 M. D. & D. 574. The circumstance that a person is registered as a part owner does not, per se, ren- der him liable for the acts of the other owners. Myers i\ Willis, 17 C. B. 77, and 18 id. 886 ; Brodie v. Howard, 17 C. B. 109. 1 The storage in a warehouse by one partner, without the consent of the others, of partnership goods, as his own individual property, will not change the right of posses- sion or title of the partnership, the possession of one being the posses- sion of all, and either may receive the goods and discharge the bailee. Crosswell v. Lehmann, 54 Ala. 363. 73 *148 EIGHTS AND OBLIGATIONS. [BOOK II. mitted by an agent could or could not be imputed to his principal. But as a principal is bound not only by the authorized acts of his agent, but also by such unauthorized acts as fall within the scope of the authority apparently conferred upon him, the question whether a tort or fraud committed by an agent is or is not imputable to his princi- pal becomes one of considerable difficulty; for it is obvious that it does not follow from the circumstance that such tort or fraud was not authorized, that therefore the principal is not legally responsible for it. (s) [*148] ^General principles.— In order that responsibility may attach to the principal in respect of a tort or fraud, it is necessary : 1. That he shall have authorized it in the first instance ; l or, 2. That it shall have been done on his behalf and he shall have ratified it; (a) 2 or 3. That it shall have been committed for his benefit by the agent in the course and as part of his employment, (b) 3 (z) Pollock on Torts, 63 et seq. ; Story on Agency, § 452 ; Paley on Agency, 294 et seq. 1 See post. (a) Ratification can only be of an act done for the person ratifying. Wilson v. Tuniman, 6 Man. & Gr. 236. 2 The assent of one of two part- ners to what is being done by a person acting as a deputized con- stable in the service of an execu- tion in favor of the firm is suffi- cient to bind them both. Harvey v. McAdams, 32 Mich. 472. "Where one partner of a firm acting as agents for the owner of demised property committed a trespass in expelling the tenant and removing his goods from the premises, held, that the other part- ner, who took no part in the act and knew nothing of it at the time, and neither advised nor di- 374 rected it, could not be rendered liable on the mere ground of his subsequent approval and sanction- ing of the act after its commission. Grand v. Van Vleck, 69 111. 478. Where one partner has an attach- ment made on account of a firm debt, and the goods are afterwards sold under an execution in the same suit, and the proceeds are applied to meet the debt, this is proof of a ratification of the at- tachment by all the partners ; and if it be wrongful they will all be liable in an action of tort. Gurler v. Wood, 16 N. H. 539. See post. (?)) As to the meaning of this ex- pression, see Burns v. Poulson, L. R. 8 C. P. 563; Pollock on Torts, 72 et seq. 3 See, generally, Ewell's Evans on Agency, *465 et seq. Cil. I, SEC. III.] LIABILITIES OF PARTNERS. *149 That this last is sufficient is obvious from those cases in which masters have been held liable for the negligence of their servants; (c) litigants for irregularities committed by their solicitors in the course of the litigation to conduct which they are retained; (<2) merchants for frauds com- mitted by their factors and brokers whilst acting on their behalf ; (e) and shop-keepers for the illegal acts o*f their' shopmen whilst in the sfcop and attending to its business. (/) Exceptions to the rule respondeat superior.— On the other hand, a principal is not liable for the torts or frauds of his agent, except upon one or other of the three above- mentioned grounds. Thus, a principal is not liable for the wilful acts of his agent, if not done in the course of his em- ployment and as part of his business; (g) l and this is true not only of assaults, batteries, libels, and the like, but also of frauds. The maxim respondeat superior does not render a principal liable for the frauds of his agent, if the agent has been dealt with as a principal, (h) nor unless the frauds have been committed by the agent for the benefit of his principal, and in the course and as part of his own employ- ment, {i) Further, a principal is not bound by a contract which is a *fraud on him, and is known to be so by [*149] the person entering into the contract, (k) Having made these preliminary observations, it is pro- posed, in the present section, to examine the liability of partners for torts and frauds, as distinguished from contracts. (c) See the last case, and Patten J See Cooley on Torts, 535, 536 ; v. Rea, 2 C. B. N. S. 606. Ewell's Evans on Agency, *480, (d) Collett v. Foster, 2 H. & N. and note. 356. (h) Ex parte Eyre, 1 Ph. 227. (e) Hern v. Nichols, 1 Salk. 289. (i) Grant v. Norway, 10 C. B. 665; (/) Grammar v. Nixon, 1 Str. Coleman v. Riches, 16 id. 104. 653 ; Amory v. Delaniirie, id. 505. (k) British and American Tel. Co. (g) McManus v. Crickett, 1 East, v. Albion Bank, L. R. 7 Ex. 119; 106 ; Croft v. Alison, 4 B. & A. 590 ; Phosphate of Lime Co. v. Green, L. A.-G. v. Siddon, 1 Cr. & J. 220. R. 7 C. P. 43. And see, as to the ef- Compare Limpus v. Lon. Gen. Om. feet of having benefited by such a Co. 1H.&C. 526. contract, id. p. 55. 375 ■149 EIGHTS AND OBLIGATIONS. [BOOK II. First, as regards torts. Torts of partners. — It follows from the principles of agency, coupled with the doctrine that each partner is the ag^nt of the firm for the purpose of carrying on its busi- ness in the usual way, that an ordinary partnership is liable in damages for the negligence of any one of its members in conducting the business of the partnership. 1 It has accord- i The members of a firm are in- dividually liable in actions of tort for the acts of the firm, their agents and servants, within the scope of the partnership, and for such acts may be sued individually. Stockton v. Frey, 4 Gill, 406 ; Hall v. Younts, 87 N. C. 285 ; Wiley v. Stewart, 11 West. Rep. (111.) 91 ; S. C. 14 N. East. Rep. 835. See, also, Cunningham v. Wood bridge, 76 Ga. 302. The other partners are liable for the tortious acts of one partner in the course of the firm business, even if they did not assent to the same. Mode v. Penland, 93 N. C. 292. Thus a person may be liable for a trespass upon land committed by his partner for the benefit of the firm, and of which he had the benefit, although he himself never went upon the land. Gerhardt v. Swaty, 57 Wis. 24. The penalty of twelve and one- half per cent, damages, and that the attorneys' names should be stricken from the rolls upon return of execution indorsed nulla bona, for failure to pay over money col- lected, does not apply to a member of a firm who did not participate in the receipt or wrongful appro- priation of the money. Such pen- alty can only be inflicted upon a party derelict in duty and person- ally guilty of wrong. Porter v. Vance, 14 Lea (Tenn.), 629. See, also, Ex parte Flood, 23 New Br. 86. An action for slanderous words spoken of the plaintiff by a mut- ual aid association, of which he was then a member, will not lie against the association as a part- nership, but against the individual wrong-doers. Gilbert v. Crystal F. Lodge, S. C. Ga., Nov. 1, 1887; 4 S. E. Rep. 905. If a limited partnership, organ- ized under the act of June 2, 1874, by its manager or authorized agent, knowingly trespasses upon the land of another and mines coal therefrom, trespass may be main- tained against the association to recover double or treble the value of the coal mined or converted, under the provisions of the act of May 8, 1876, authorizing such ac- tion against any person or corpora- tion. Oak Ridge Coal Co. v. Rogers, 108 Pa. St. 147; S. C. 16 Weekly Not. Cas. 855; 42 Leg. Intel. 336. All torts are joint and several. Where one partner commits a tort in the prosecution of firm business the injured party may, at his elec- tion, sue all the partners or any one or more of them. Mode v. Pen- land, 93 N. C. 292; Roberts v. Johnson, 58 N. Y. 613. A tort committed by one partner 376 CH. I, SEC. III.] LIABILITIES OF PARTNERS. 449 ingly been held that a firm of coach proprietors is answer- able for the negligent driving of a partnership coach by one will not bind the partnership or the other copartner, unless it be either authorized or adopted by the firm, or be within the proper scope and business of the partnership. Graham v. Meger, 4 Blatchf. 129; Heirn v. McCaughan, 32 Miss. 17 ; Taylor v. Jones, 42 N. H. 25 ; Einst- man v. Black, 14 Brad. 381. Defendants were partners en- gaged in the business of apotheca- ries; the plaintiff came to their store and called for extract of dandelion. One of the partners undertook to put up for him a quantity of the drug, and in doing so by mistake put up extract of belladonna and delivered same to plaintiff, none of which, however, was taken by the plaintiff. The plaintiff, at the time, helped him- self to a dose of the medicine from the jar standing on defendants' counter and was thereby injured. Held, that if it be admitted that one of the defendants was negli- gent in permitting plaintiff to help himself, without paying for it, to a dose of medicine which was proved not to be the medicine intended, but a poison, yet, as giving away medicine was not a part of the firm business, the other partner would not be liable for such negligence. Gwynn v. Duffield, 66 la. 708; S. C. 61 la. 64. One partner in a firm engaged in dealing in furniture and draperies is not, merely because of being a partner, liable for a libel published by another partner or a servant of the firm by placing a placard on a piece of furniture, the property of the firm, and offering it for sale. Woodling v. Knickerbocker, 31 Minn. 268. Partners are liable in solido for the torts of one of their number if committed by him in the course of the business of the partnership : but if a partner commit a tort, not as a partner, but as an individ- ual, in respect to a matter entirely foreign to the business of the part- nership, the other partners are not liable. Schwabacker v. Riddle, 84 111. 517. Where, therefore, one partner induces a stranger to purchase the interest of the other partners in the firm business, by fraudulent rep- resentations, the parties selling are not liable for such false represen- tations, unless they instigate or approve them, or the partner mak- ing them is acting as their agent in making them. The mere fact of their relation as partners will not make them liable. Schwa- backer v. Riddle, supra. All the members of a partner- ship are liable for an injury oc- casioned by the negligence of one of them, or of servants employed by the partnership while transact- ing business of the firm. Linton v. Hurley, 14 Gray, 191 ; Haley v. Case, 7 N. E Rep. 877; McCar- ragher v. Gaskell, 42 Hun, 451. Thus partners in the practice of medicine are all liable for an injury to a patient resulting from the negligence, either of omission or commission, of any one of the partners within the scope of the firm business ; but from an injury resulting from the act of one part- ner outside of the common busi- 377 *149 EIGHTS AND OBLIGATIONS. [BOOK II. of the firm, the coach being driven for the firm in the or- dinary course of business ; (0 and that two partners are lia- ness, offending partner alone is re- sponsible. Hyrne v. Erwin, 23 S. C. 226. So the owner of a horse bor- rowed by a partner to be used in the firm business, and lost through his neglect or other wrong doing, rnay recover therefor against the partnership. Witcher v. Brewer, 49 Ala. 119. An action was brought against B. as surviving partner of the firm of B. & C, and it was shown that each of the partners was engaged in separate business on his own ac- count besides the business of the firms. C. being about to go to San Francisco to purchase goods for the firm, R. delivered to him a package of United States treasury notes and securities. On the way to that city C. lost his life. After- ward R. tried to collect his claim from C.'s estate. It did not ap- pear what had become of the notes and securities after their delivery to C. Held, that the es'idence was too meager to justify the conclu- sion that B. was chargeable as a copartner of C. Roney v. Buck- land, 5 Nev. 219. The direction to levy execution upon a particular subject, being an incident to the obtaining payment of the legal process, when a part- ner gives such direction while act- ing in the collection of a debt due the partnership, the presumption is that he had the countenance and assent of the other partner; and both are presumptively liable for the trespass if the levy is wrong- ful. Chambers v. Clearwater, 1 Abb. App. Dec. 341. It is not necessary there should be a joint conversion in fact in order to implicate all the partners, as such a conversion may arise by construction of law. An assent by some of the partners to a conver- sion by the others will make them wrong-doers equally with the rest, provided the conversion was for their use and benefit, and that they were in a situation to have origi- nally commanded the conversions. Loomis v. Barker, 69 111. 360. Where property is sold upon ex- ecution under a void judgment in favor of a firm, trover will lie not only against the constable who seized the property, but against the judgment creditors if they took part in the proceedings after judg- ment. So held where one partner received the property and refused to give it up, while the other de- clined to do anything about it, but referred the owner to his partner. Whatever one partner does in the collection of a firm debt is presum- ably done with the other's consent. Rolfe v. Dudley, 58 Mich. 208. If one partner, without express authority from his copartners, be- gins a suit by attachment for the recovery of a partnership debt, and goods of a stranger are wrongfully seized, all the copartners will be liable. Kuhn v. Weil, 73 Mo. 213. Where one partner placed a claim in the hands of a constable {I) Moreton v. Hardern, 4 B. & C. Lester, 3 C. P. D. 121. 223. And see, as to ships, Steele v. 378 CH. I, SEC. III.] LIABILITIES OF PARTNERS. *H9 ble for not keeping the shaft of a mine in proper order, although one of them only actually superintended it. (m) for collection, and under which property of a stranger to the pro- cess was seized and sold under at- tachment or execution, and the other partner was present at the sale and bid on the property, and treated and spoke of the property as having been taken and sold on the process issued upon a claim due the firm, and he received the proceeds of the sale as a payment on such claim, held, in an actipn of trover by the owner against the partners, that they were both liable for the conversion. Loomis v. Barker, 69 111. 360. If a member of a firm in the due course and within the scope of the business of the partnership com- mits a tort by seizing and taking the property of another, and the same is appropriated to the use and benefit of the firm, thereby in- creasing its assets, the other part- ners will be liable for the same. Durant v. Eogers, 87 111. 508; Re Ketchum, 1 Fed. Rep. 815; Rubin- son v. Goings, 63 Miss. 500. So even though the proceeds of the property be converted to the use of the individual partner. Todd v. Jackson, 75 Ind. 272. See, also, Gilchrist v. Brande, 58 Wis. 184. If a firm, acting through an agent or one of the partners, while en- gaged in the regular course of the business of the firm, innocently or wrongfully appropriates chattels, other than money, or what has the quality of money, and sells them and receives and uses in its busi- ness the proceeds, or, without a sale, uses them in the firm's business, the firm is liable for conversion ; and it is wholly immaterial that all or any of the members of the firm were ignorant of the wrong com- mitted, or innocent of any wrong- ful intent. In re Ketchum, 1 Fed. Rep. 815. The firm is liable for the misap- propriation of money under such circumstances, where the innocent partner on the facts proved appears to have no equity to avail himself of the payment of the money to the firm, as a payment between himself and his copartner of money in settlement or adjustment of any balance due to him on account of the partnership business, or as a payment of money to him upon any consideration whatever, in re- ceiving which he relied upon his copartner's possession as proof of ownership, where, by reasonable inquiry, such innocent partner could have discovered the source from which the misappropriated money came. In re Ketchum, 1 Fed. Rep. 815. A partner, innocent in fact, may be charged for conversion by his copartners, in the regular line of firm business, the profits and com- missions thereon having gone to the firm account. Castle v. Bul- (m) Mellors v. Shaw, 1 B. & Sm. 437 ; Ashworth v. Stanwix, 7 Jur. N. S. 467, and 3 E. & E. 701. See, as to irregular executions of writs by one of two partners, Duke of Brunswick v. Slowman, 8 C. B. 317. 379 *149 EIGHTS AND OBLIGATIONS. [BOOK II. So a partnership is liable for the negligence of its servants acting in the course of their employment by the firm, (n) x Breach of revenue laws.— If one partner, in conducting the business of the firm, is guilty of a breach of the revenue laws, all the partners are jointly and severally answerable for the consequent penalties, although they may not them- selves have authorized or been parties to the illegal conduct of their copartner, (o) 2 lard, 23 How. 172. See, also, Fletcher v. Ingram, 46 Wis. 193. A conversion by one of a firm to which goods have been sent to be made up does not excuse the owner from paying the other part- ners, and therefore he may bring trover against the guilty partner alone. Stevens v. Faucet, 24 111. 483. (m) Stables v. Eley, 1 Car. & P. 614. 1 If a firm of attorneys prac- ticing only in Baltimore receive a note for collection in Carroll county with the privity of both partners, and they employ an attorney in Carroll count} - , they are responsi- ble for his default. Brent v. Davis, 9 Md. 217. An action for injuries sustained through the negligence of an em- ployee of a firm may be brought against any one or more, or all, of its members. Roberts v. Johnson, 58 N. Y. 613. (o)R. v. Stranyforth, Bunb. 97; A.-G. v. Burges, id. 223; A.-G. v. Weeks, id. ; R. v. Manning, Comyn, 616. See, also, Mullins v. Collins, L. R. 9 Q. B. 292 ; A.-G. v. Siddon, 1 Cr. & J. 220. Compare Newman V. Jones, 17 Q. B. D. 132. 2 Every partner is civilly liable for violations of the revenue law by his copartners, whether he knew of, or consented to, such violations or not. United States v. Thomas- son, 4 Biss. 99. Tort committed by a fraudulent undervaluation of goods at the custom-house is joint and several, and on proof of the debt in bank- ruptcy the United Slates is entitled to priority out of any of the pro- ceeds of either of the joint or sev- eral estates, without reference to what may be the particular claim of priority in its proof of debt. In re Vetterlein, 20 Fed. Rep. 109. Partners are jointly and sever- ally liable for the circulation of change bills by their clerk, in vio- lation of the Alabama Revised Code, section 3G43. although they did not jointly assent thereto, and did know when the bills were emitted. Barnett v. State, 54 Ala. 579. Where two persons composing a partnership make and sign, in their partnership name, a false return to the assessor of internal revenue, they may be jointly indicted there- for. United States v. McGinnis. 1 Abb. U. S. 120. Fraudulent misconduct of a part- ner, from which the constructive liability to pay money may arise as against the firm, is not suffi- cient to justify an order to strike a solicitor from the rolls in whom 380 CH. I, SEC. III.] LIABILITIES OF PARTNERS. *150 Wilful torts.— As a rule, however, the wilful tort of one partner is not imputable to the firm. 1 For example, if one partner maliciously prosecutes a person for stealing partnership property, the firm *is not answerable ["150] unless all the members are, in fact, privy to the ma- licious prosecution, (p) But a wilful tort committed by a partner in the course, and for the purpose, of transacting the business of the firm, may make the firm responsible. (?) there has been no personal mis- conduct. In re McCaughey, 3 Ont. 425. Fraudulent conduct of one part- ner will not warrant an order of arrest against his copartner, on the ground of intent to dispose of their property with intent to defraud their creditors, where no such con- duct is proved as against the per- son to be arrested. Scott v. Reed, 8 N. Y. Civ. Proc. 269. As to the criminal liability of one member of a firm for wrongful conversion of public funds by the firm of which he is a member, though he was absent from the state when the money was re- ceived, see People v. Lyon, 33 Hun (N. Y.), 623. A conviction of A. and B., who were in partnership, for an offense several in its nature, namely, keep- ing intoxicating liquor for sale, adjudging that they for said offense should forfeit and pay $50, and, in default of payment, be imprisoned for forty days, is bad ; a penalty ought to be imposed upon the parties severally. Ex parte How- ard, 25 N. Brum 191. A dry -goods firm held not re- sponsible for the penal acts of their agent, done without their knowl- edge, in pirating a copyrighted photograph and attaching the copies to goods as labels. Schreiber v. Sharpless, 6 Fed. Rep. 175. A partner in a dram-shop is criminally liable for the illegal sale of liquor by his partnership to a minor, although he was absent at the time of the sale and had no knowledge of it. Robison v. The State, 38 Ark. 641. i See Ewell's Evans on Agency, *480, and note; Rosenkrans v. Earlier, 115 111. 331. Where, therefore, one partner, without the knowledge of the other, maliciously procures the arrest of the debtor of the firm, and such act fails to be of any benefit to the firm, the partner not participating in the unlawful act will not be liable for the arrest and imprisonment. Rosenkrans v. Barker, 115 III. 331. (p) Ar buckle v. Taylor, 3 Dow. 160. (g) See Limpus v. Lon. Gen. Om. Co. 1 H. & C. 526; PoUock on Torts, 80 et seq. 381 *150 RIGHTS AND OB LIGATIONS. [hook ii. Secondly, as regards frauds. Frauds of partners.— An ordinary firm is liable for frauds committed by one of its members whilst acting for the firm and in transacting its business; and the innocent partners cannot divest themselves of responsibility on the ground that they never authorized the commission of the fraud. 1 On the other hand, the firm is not liable for the other 1 A fraudulent act or representa- tion by one partner, or deceit prac- ticed by him, within the scope of the general partnership authority, will make the other partners liable, although ignorant thereof. Durant V. Rogers, 87 111. 508; Wolf V. Mills, 56 111. 360; Chester v. Dick- erson, 54 N. Y. 1 ; Rogers v. Ayde- lotte, 1 Cincinnati, 81 ; Locke v. Stearns, 1 Met. 560; Manufactur- ers', etc. Bank ?>. Gore, 15 Mass. 75, 81 ; Boardman v. Gore, id. 331 ; 1 [awkins v. Appleby, 2 Sandf. 421 ; Reynolds v. Waller, 1 Wash. 164; Doremus v. McCormick, 7 Gill, 49; Tenney v. Foote, 95 111. 101; Bradner v. Strong, 89 N. Y. 299; S. C. 23 Hun, 445; Scott v. Haynes, 12 Mo. App. 597; Peck ham Iron Co. v. Harper, 41 Ohio St. 100 Coleman v. Pearce, 26 Minn. 123 Strang v. Bradner, 114 U. S. 555 Thvving v. Clifford, 136 Mass. 482 Wilson-O'Bear Grocery Co. v. Cole, 26 Mo. App. 5. But the firm is not chargeable for the fraud of one partner com- mitted outside the scope of the firm business. Pierce v. Jackson, 6 Mass. 242; Sherwood v. Marwick, 5 Me. 295. Where A., on entering into part- nership with B., purchases an in- terest in a stock of goods held by B., and the goods are afterwards seized on attachment as the prop- erty of a third person, and, in an action by A. and B. against the at taching officer, it appears thai the goods wen- Bold to B, by the at- tachment debtor, and that snob sale wbb fraudulent and void as to the attaching creditor, A. and B. cannot recover any part of the goods on the ground that A. pur- chased his interest without knowl- edge of the fraud. Eatabrook v. Messersmith, 18 Wis. 54fi. A firm is bound by the frauds or illegal acta Of a partner done in tho course of the firm bu Iness. So, where a firm was Conned by A. and B. for engaging in the commission business, A. to furnish the capital, and B. generally did all the trading of the firm, and B. made a con- tract with another in the course of the firm business, and in its name, for trading for a commission on the board of trade, which was il- legal, as relating to option or gam- ing contracts, all the dealings pred- icated upon such contract will be under legal condemnation, and a note given in consideration of a balance due under such contract to the firm will be void as against the firm, or an assignee with notice, although A., the other partner, had no knowledge of the illegality of the contract. Tenney v. Foote, 95 HI. 101. Where the fraud alleged is the 382 Cn. I, SEC. HI.] LIABILITIES OF PARTNERS. *150 frauds of its members, unless it has, in fact, sanctioned such frauds or the transactions of which they form part. It will be convenient to examine this subject first with reference to misapplications of money, and secondly with reference to false representations by partners. Liability of partnerships for misapplication of money by their members. In order that a firm may be liable for the misapplication of money by one of its members some obligation on the part of the firm to take care of the money must be shown. A receipt of the money by the firm prima facie imposes this obligation; but where there is no receipt by the firm there is prima facie no obligation on its part with respect to the money in question. It becomes important, therefore, to determine accurately when money is to be considered as received by the firm. Upon this point the following obser- vations suggest themselves: 1. The firm must be treated as receiving w T hat any part- ner receives as its real or ostensible agent, i. e., in the course of transacting the business of the firm. 2. In a case of this sort it is immaterial whether the other partners know anything about the money or not, for, ex hypothesis it is in the custody of one who must be regarded as their agent. (/•) 3. The firm cannot be treated as receiving what one purchase of goods when the firm had any sum so invested, is not is hopelessly insolvent, the conceal- within the statute of frauds (sec. ment of such fact, and the intent 4909, R. S. 1881). St. John v. Hen- not to pay for the same, each part- drickson, 81 Ind. 350. ner will be presumed to be ac- In an action upon contract quainted with the accounts and against partners to justify an arrest affairs of the firm. Bacon v. Ken- of any defendant it is necessary to dall, 49 N. Y. Super. Ct. 123. prove tbat he actually and indi- An oral representation by per- vidually participated in the fraud sons in partnership, falsely or which is alleged to be connected fraudulently made, that each of with the contracting of the liabil- them had $800 invested in the ity. Bacon v. Kendall, 49 N. Y. business, whereby another was in- Super. Ct. 123 ; Re Benson, 10 Daly, duced to invest that sum and be- 166. come a partner, when none of them (r) See infra, rules 1, 2, 3. 383 151 EIGH l- AM) OBLIGATIONS. [book ir. partner receives otherwise than as its real or ost.n- [*151] sibleagent, unless •■the money actually comes into the possession or under the control of the other partners, (s) 4. Agency being excluded in such a case as the last, the money cannot be considered as in the possession or under the control of the innocent partners, unless they know that it is so, or unless they are culpably ignorant of the fact, (t) These principles will be found to reconcile most, if not all, of the numerous decisions upon the important subject now under consideration, and to warrant the following rules deduced from them. 1. Liability of firm for money received by one partner in the course of business. — When oru partner, acting within the scope of his authority, as < videnc d by tht business of the frm, obtains money and misapplies it. the firm is an- swerable for it. 1 (s) See rules 3 and 4. (t) Compare rule 2 with rules 3, 4 and 5, and see infra, p. 101 ; and as to culpable ignorance, compare Marsh v. Keating, 2 CI. & Fin. 289; Sims v. Brutton, 5 Ex. 802: Ex parte Geaves, 8 De G. M. & G. 291 ; Cleather v. Twisden, 28 Ch. D. 340. 1 Brown v. Watson, 4 Leg. News. 404. See ante. A firm of lawyers, V. and A., received a note for collection. A. was administrator of an estate which was indebted to one of the makers of the note in an amount larger than the note. Upon a set- tlement A. retained the amount of the note and executed a receipt in the name of the firm for the note and interest. Upon failure to pay, upon motion, it was held that V. was liable for the amount although he knew nothing of the receipt of the note for collection or the set- tlement. Porter v. Vance, 14 Lea (Tenn.), ('.29. Where an attorney, while in partnership with another attorney, brought suit for a client, and after the dissolution of the firm collected a large sum and retained the whole, and more than five years after the dissolution the client applied for an order to compel the attorney to pay over the amount collected, held, that the fact that there was an un- settled account between the said partners, involving a comparatively small sum, was not a sufficient ground for refusing the order against the attorney who naJp.the collection alone. Jeffries v. Laurie, 23 Fed. Rep. 786. Where an executor of an estate loaned certain securities to the firm, and they were converted to the firm's use, a special partner who was as to the public, by non- compliance with the statute, a gen- 384 CH. I, SEC. III.] LIABILITIES OF PARTNERS. f 151 In Willett v. Chambers, (u) two persons carried on busi- ness as solicitors and conveyancers in partnership. One of . them received money from a client to invest on mortgage, and misapplied it. The other partner was held liable to repay it to the client. Lord Mansfield relied upon the fact that the bill for the fictitious mortgage was made out in the name of the firm, and was paid to the innocent partner. eral partner, and knew of at least one such loan, is liable as a general partner of the estate, although he neither participated in nor knew of the fraudulent conversion. Such knowledge as to one irregular loan is sufficient to put him upon in- quiry as to the manner in which the business of the firm was being conducted. Guillon v. Peterson, 89 Pa. St. 163. An innocent partner is liable for the fraudulent application by his copartner of bonds as security for a partnership loan, which bonds are subsequently sold by the pledgee and the proceeds credited upon indebtedness of the firm. Fripp v. Williams, 14 S. C. 502. Where a claim was placed in the hands of two attorneys, who were partners in the practice of law, for collection, and judgment was ob- tained, land of the debtor sold under execution, and redemption from the sale made by paying the money to the sheriff, who paid it over to one of the attorneys, but prior to the redemption the copart- nership between the attorneys was dissolved, held, that both of the partners were liable to the client for the money thus received by one of them after the dissolution. Smyth v. Harvie, 31 111. 62; S. P. Poole v. Gist, 4 McCord, 259. Where money was fraudulently obtained by a partner in the name of the firm, and in business trans- actions such as the firm was en- gaged in, held, that the firm might be liable therefor, although the transactions were unknown to the other partner ; but that, if the per- son dealing with such partner knew that the latter was acting in violation of his duty to the firm, the latter would not be liable. Alexander v. State, 56 Ga. 478. (u) Cowp. 814. See, also, Atkin- son v. Mackreth, 2 Eq. 570; St. Aubyn v. Smart, 5 Eq. 183, and 3 Ch. 646 ; Dundonald v. Masterman, 7 Eq. 515. Compare Cleather v. Twisden, 28 Ch. D. 340; Viney v. Chaplin, 2 De G. & J. 483, and Bourdillon v. Roche, 27 L. J. Ch. 681, and Harman v. Johnson, 2 E. & B. 61 ; Plumer v. Gregory, 18 Eq. 621, noticed infra. These cases show that whilst it is the ordinary business of a solicitor to receive money from a client for investment on a specific security, it is not part of his ordinary business to receive money for investment generally, nor to keep negotiable securities for his clients, nor, without express authority from them, to receive money for them on the payment off of a mortgage, or on a sale. See, also, Be Bellamy & Met. Bd. of Works, 24 Ch. D. 387. Vol. I — 25 385 *152 BIGHTS AND OBLIGATIONS. [BOO! IT The transaction therefore was clearly a partnership trans- action, and the defendant, although perfectly innocent of the fraud himself, was liable for the consequences. In Brydges v. Branfill, (x) one of several solicitors con- nived at a fraud committed by a client of the firm [*152] in obtaining money *out of the court of chancery. The money was received by the one partner under a power of attorney, and was handed over to the client. The other partners were entirely innocent, and were, in fact, ignorant of the transaction. It was nevertheless held that they were jointly and severally liable to make good the money to those to whom it really belonged, (y) In these cases the receipt of the money by one of the partners was the receipt by the firm; and the firm was liable, although in fact the other partners never received the money or knew of its receipt. (2) 2. Liability of firm for money in its custody in the course of business. — Where a firm in the course of its busi- ness {a) receives money belonging to other people, and one of the partners misapplies that money whilst it is in the custody of the firm, t/ie firm must make it good} In Devaynes v. Noble, Clayton's Case, (b) some exchequer (x) 12 Sim. 369. See, too, Todd (a) See infra, prop. 3 and 5, as to v. Studholrne, 3 K. & J. 324. the importance of this qualifiea- (y) Although solicitors who are tion. partners are responsible for the acts l The Boston fire-relief committee of each other, the court will not gave a firm a sum of money to be exercise its summary jurisdiction used " in re-establishing their busi- against a solicitor to whom person- ness," taking a note therefor, which ally no blame is attributable. See was not to be paid if the money Re Lawrence, 2 Sm. & G. 367 ; Ex should be devoted to such purpose* parte Gould, 2 Mon. & A. 48 ; Dixon One member applied the money to v. Wilkinson, 4 Drew. 614, and 4 pay a pre-existing debt of the firm De G. & J. 503; and Re Ford, 8 to his father. Held, that a decree Dowl. 684. But where a firm of was properly granted that the solicitors are the solicitors on the money should be refunded to the record, see Norton v. Cooper, 3 Sm. remaining partner. Stanley v. & G. 375. Stark, 115 Mass. 259. (z) See St. Aubyn v. Smart, ubi (b) 1 Mer. 575. supra. CH. I, SEC. III.] LIABILITIES OF PARTNERS. *153 bills, deposited by their owner with, a firm of bankers, were sold by one of the partners without the owner's knowledge; the money produced by the sale was applied by the firm to its own use; and it was held to be clear that the money having been received by the partnership, the amount became a partnership debt whether all the individual partners were or were not privy to the sale. In Devaynes v. Noble, Baring's Case, (e) the firm was held liable for stock of its customers standing in the name of one of the partners "of the firm, and wrongfully sold out by him. For the stock was standing in his name alone, in accordance with the ordinary practice of the firm; the produce of the sale of the stock had been received by the firm, and had thus become a partnership debt; and the firm, in the accounts rendered by *it to its customer, had [*153] falsel\ T represented the stock as still standing in the name of the partner who had sold it, and had given credit for the dividends as if the stock had still been there. In Ex parte Biddulph, (d) trust money in the hands of a firm of bankers was drawn out and misapplied by one of the firm, and it was held that all the partners were liable to make it good. In Sadler v. Zee, (e) the members of a banking firm were authorized jointly and severally to sell out stock standing in the name of a customer, and one of the partners exer- cised the power and sold out the stock and the firm was credited with the proceeds of the sale. These were after- wards misapplied by one of the partners, and it was held that the firm was answerable for the money. Another well-known case illustrating the same principle is Blair v. Bromley, (f) There two persons were in part- nership as solicitors. A client intrusted one of them with money to invest on mortgage, and was told by him that it (c) 1 Mer. 611. See, too, Warde's (e) 6 Beav. 324. Case, id. 624, and Vulliamy v. (/) 5 Ha. 542, and 2 Ph. 354. Noble, 3 Mer. 593. See, also, Eager v. Barnes, 31 Beav- (d) 3 De G. & Sm. 587. 579, a somewhat similar case. 387 *154 RIGHTS AND OBLIGATIONS. [BOOK II. had been invested; whereas, in truth, the partner who had received the money had misapplied it. For many years the client was regularly paid interest by the solicitor who at- tended to the matter, and the fraud was not discovered until he became bankrupt. The other partner, who knew nothing whatever of the fraud, was nevertheless held liable to make good the money. It had been placed to the part- nership account at the bankers' of the firm; the representa- tion that it had been duly invested was within the scope of the duty of one partner with reference to the transaction in question ; and it was held that the innocent partner could not divest himself of his liability by showing that he had no control over the account at the bankers', and did not in fact attend to the monetary transactions of the firm. In Be Rlbeyre v. Barclay, ({/) the defendants were [*154:] in partnership as stockbrokers, and were in the habit of receiving moneys from the friends and connec- tions of the firm, and of the individual partners, for the purposes of investment. They also seem to have been in the habit of keeping for their customers the securities on which the investments were made. The plaintiff had some Portuguese bonds, held by one of the partners for the plaint- iff as a customer of the firm. The plaintiff married, and these bonds were assigned to trustees, of whom that part- ner was one. The bonds remained in his custody as before, and were in fact deposited (and, as it seemed, with other securities belonging to other customers) with the bankers of the firm. The bonds were afterwards converted by the same partner into other bonds, which were deposited as the first had been. He acted in this matter as a stockbroker, in conformity with the usual course of business of the firm, and advised the plaintiff from time to time in the name of the firm of what had been done. The bonds were after- wards misapplied by him. It was held that they were (g) 23 Beav. 107. Compare this Jersey, 2 Drew. 143; Coomer v. case with Ex parte Eyre, 1 Ph. Bromley, 5 De G. & Sm. 532, 227 ; Bishop v. The Countess of noticed infra, p. 159. 388 CH. I, SEC. III.] LIABILITIES OF PARTNERS. *155 originally clearly in the custody of the firm, and not in the custody of one only of its members, simply as trustee. It was further held that the assignment of the bonds did not take them out of the custod}^ of the firm, and that the firm was therefore liable for the loss consequent on their unau- thorized removal. In the same case the firm was held liable for the loss of other bonds and securities bought by them for the plaintiff, and left in their custody in the usual way, and for money borrowed in the name of the firm, but from which the firm derived no benefit; and the fact that the plaintiff dealt only with one partner was held immaterial, the business trans- acted being the ordinary and regular business of the firm, and appearing as such in its books and accounts. Principle of foregoing cases. — The principle of these cases is that the firm has in the ordinary course of its busi- ness obtained possession of the property of other people, and has then parted with it without their authority. Under such circumstances the firm is responsible; and the fact that the property has been improperly procured and placed in the custody of the firm by one of the partners does not lessen the liability of the firm; for whether the firm is or is not liable for the original fraud by which the prop- erty got into his hands, it is responsible for the sub- [*155] sequent misapplication thereof by one of its mem- bers. This was decided in the cases arising out of the notorious Fauntleroy forgeries. (A) Fauntleroy, who was a partner in the banking house of Marsh & Co., forged powers of attornev for the sale of stock belonging to the customers of the bank. Marsh & Co. had an account with Martin Stone & Co., and the broker who sold out the stock under the (h) Stone v. Marsh, 6 B. & C. 551, 570 ; Hume v. Bolland, Ry. & Moo. and Ry. & Moo. 364 ; Keating v. 371, and 1 Cr. & M. 130. This last Marsh, 1 M. & A. 582; Marsh v. case is hardly consistent with Stone Keating, .1 Bing. N. C. 198, and 2 v. Marsh, Marsh v. Keating, or Ex CI. & Fin. 250; Ex parte Bolland, parte Bolland. Mont. & McAr. 315, and 1M.&A. 389 *156 BIGHTS AND OBLIGATIONS. [liOOK II. forged powers of attorney remit ted the proceeds of the sale to the credit of Marsh & Co. with Martin Stone & Co. Faunt- leroy then drew out those moneys by a check signed by him in the name of his linn, and applied them to his own use. The firm of Marsh & Co. was, however, held liable for them, although none of the partners except Fauntleroy had any hand in his forgeries or frauds, or in fact knew anything of what had taken place. The liability of the firm was based upon the ground that to sell stock for its customers and to receive the proceeds of the sale fell within the scope of its business; that the sale took place and the money was received in the usual way; that the fraud of Fauntleroy in the subsequent appropriation of the money afforded no defense after the money had once been in the custody of the firm; and that if the other partners knew nothing of the receipt of the money they might have known it, and would have ascertained the source from which it had been derived, if they had used ordinary dili- gence, and had not placed such implicit confidence in their copartner. (?') 3. Liability of firm for money received, but not in ordinary course of business. — If a partner, in the course of some transaction unconnected with the business of [*156] the firm, or not with in thescope of such ^business, ob- tains money and then misapplies it, the firm, is not without more (j) liable to make good the loss, (k) In liar man v. Johnson, (I) one of several solicitors was intrusted with money for the purpose of investing it on (i) In Stone v. Marsh and Ex the receipt of the money by the parte Bolland, Fauntleroy's part- firm the cases cited in the next ners did know that the stock was four pages. sold by their broker, but did not (j) As to the effect of knowl- know that the powers of attorney edge on the part of the other part- were forged. In Marsh v. Keating ners, see Cleather v. Twisden, 28 they do not seem to have known Ch. D. 340, noticed infra, and anything either of the sale of the prop. 5, infra. stock or of the receipt of the pro- (fc) See, also, prop. 4, infra. ceeds of the sale. Compare as to (/) 2 E. & B. 61 : 390 €11. I, SEC. III.] LIABILITIES OF PARTNERS. *157 mortgage when a good opportunity offered. He misap- plied it, and it was held that his copartner was not liable, inasmuch as there was no evidence to show that it was part of the business either of the firm in question or of solicitors generally to act as scriveners, i. e., as depositaries of money waiting for investment. The court intimated that if it had been shown that the money was given to the defaulting solicitor for the purpose of being invested on some specified mortgage, his copartner would have been liable for its mis- application. In Plumerv. Gregory, (m) one of a firm of solicitors bor- rowed money without the knowledge of his copartners from a client, saying that the firm wanted to lend it to another client on mortgage. The other partners were held not liable for this money, although two of them had bor- rowed money from the same client before. In Cleather v. Tvnsden, (n) bonds payable to bearer were placed for safe custody by trustees in the hands of one of a firm of solicitors and he misappropriated them. The other partners were held not liable; it being no part of their business to accept such securities for safe custody, and they not, in fact, knowing that their partner had them. The decision would have been the other way if it had been proved that the innocent partners had in fact known that the bonds were in the custody of their copartner as rep- resenting the firm. Had such knowledge been proved, they would have been held to have had the bonds in their own custody, and would have been liable for them, (o) The case of Sims v. Brutton {p) must be referred to this head *if its authority is to be upheld. There [*157] the defendants Brutton and Clipperton were in part- nership as solicitors. Brutton received 500^. from a client (m) Plumer v. Gregory, 18 Eq. (n) 28 Ch. D. 340. 621, as to the 1,7007. Compare this (o) See infra, prop. 5, p. 160. and the last case with Willett v. (p) 5 Ex. 802. See, also, Coomer Chambers, and other cases cited v. Bromley, 5 De G. & Sm. 532, ante. p. 151, note (u). noticed infra, p. 159. 391 *157 BIGHTS AND OBLIGATIONS. [B ( II. to invest on a mortgage, and the money was duly invested. The mortgage deed remained with the defendants, and the money secured by it was ultimately repaid to Clipperton, who then gave up the deed to the mortgagor. Shortly after this Clipperton relent 300/., part of the 500/., and again received back the mortgage deed as a security, and ulti- mately this 300/. was repaid to him and the mortgage deed was again delivered up to the mortgagor. Clipperton had no authority to receive payment of the 500/. from the mortgagor, nor to relend the 300/., nor to receive repayment of it, and he acted throughout the whole of these transactions without the knowledge of his copartner or of the mortgagee, the client of the firm. The books of the firm, however, showed the receipt of the 500/. in the first instance; its loan and repayment; and also the loan and repayment of the 300/. The client was, moreover, credited from first to last with the receipt of interest on the whole 500/., and was debited with the same interest, which was in fact regularly paid to his agent. Clipperton misapplied the whole 500/., and the court held that Brutton, his partner, was not liable to make it good. The defendants, it was said, discharged their duty by laying out the money as directed, and they had no au- thority receive it back. Therefore the repayment to Clip- perton, though treated by him as a partnership transaction, was not so in point of law, and did not create any partner- ship responsibility. The entries in the books were only evidence of knowledge on the part of Brutton, and the case stated for the opinion of the court expressly found that he had no knowledge of the facts. Upon this case it is to be observed that if, as appears to have been the case, the 500/. when paid off was placed to the credit of the firm with its bankers, the. decision is diffi- cult to reconcile with Stone v. Marsh and Marsh v. Keat- ing, (g) (q) The statute of limitations priety of the decision in that respect afforded a good defense to the ac- is untouched by the observations tion in Sims v. Brutton. The pro- in the text. 392 CH. I, SEC. III.] LIABILITIES OF PARTNERS. *15S 4. Liability of firm for frauds of partner acting on his own account. — A fraud committed by a partner lohilst act- ing on his own separate account is not imputable to the firm, although had he not *been connected with [*158J the firm he might not have been in a position to com- mit the fraud. 1 This is little more than another mode of stating proposi- tion 3; and the cases just alluded to may also be referred to under this head. In addition to them the following deserve notice: In Ex parte Eyre, (r) the customer of a firm of bankers deposited with them a box containing securities belonging to himself, and he authorized one of the firm to take out some of the securities, replacing others, however, in their place. The partner so authorized, after obtaining the secu- rities he was authorized t to take and substituting others, clandestinely withdrew these last, and applied them to his own use. It was held that the firm was not liable for this act, and was not bound to make good the consequent loss; for it did not appear that the firm had any authority to open the box or to examine its contents, and the abstrac- tion of the securities was a tortious act committed by one partner, who had been specially authorized to open the box, and who took out the securities, not for the partnership, nor for any partnership object, but in his separate character and for his own individual and separate purposes. In Bishop v. The Countess of Jersey, (s) one of a firm of bankers advised the plaintiff, a customer of the bank, to sell out some stock, telling her that there was an opportunity to place out 5,000^. on a good security at 51. per cent, to be 1 Where a firm bought and paid part of the other members of the for certain property and the vendor firm, no responsibility attached to deposited the money with one them in consequence thereof. Bat- member of the firm to be held un- tie v. Street, 2 So. West. R. 384. til the purchasers should be satis- (r) 1 Ph. 227, affirming S. C. 2 fied with the title, held, that in the M. D. & D. 66. absence of any knowledge of or (s) 2 Drew. 143. connection with such deposit on the 393 *159 EIGHTS AND OBLIGATIONS. [iJOOK II. given by his son. She accordingly authorized the sale, and the money produced was placed to her credit at the bank. She then drew a check for 5,000/. which she gave to the partner with whom she had been in communication. No security was ever given; the money was lost; the partner in question absconded. Interest, however, on the 5,000Z. was for some time placed to the credit of the plaintiff in her account with the bank, but by whom did not appear. The other partners know nothing of what had taken place until after the fraud had been committed, and it was held that they were not answerable. The transactions had noth- ing to do with the business of the partnership, and if they had not taken place at the bank there would have [*159] been no pretense for saying that the one ^partner was acting otherwise than in a separate affair of his own. A more difficult case, but one turning mainly on the same principle, is to be met with in Coomer v. Bromley, (t) There the defendants, William and Joseph Bromley, were solic- itors. The plaintiffs were their clients, and were trustees of some navy 5/. per cent, annuities, in which they were themselves beneficially interested for their lives. William Bromley was associated by the plaintiffs with them as trustee of these annuities. Upon their reduction from 51. to U. per cent, the annuities were sold at the request of the plaintiffs, and it was arranged that the money arising from the sale should be invested on mortgage to be taken with the plaintiffs' consent in William Bromley's name alone. The annuities were sold; the money arising from the sale found its way to the credit of the firm at its bankers, but was not invested on mortgage as intended, and was appar- ently used as partnership money. William Bromley pre- tended that he had invested the money, and he paid interest accordingly. Ultimately, and with the plaintiffs' knowledge, a mortgage, of which William Bromley was sole mortgagee, (t) 5 De G. & Sin. 532. See, too, ante, p. 156. Compare St. Aubyn Sims v. Brutton, 5 Ex. 802, noticed v. Smart, 5 Eq. 183, and 3 Ch. 646. 394 •CH. I, SEC. III.] LIABILITIES OF PAETNERS. *160 was appropriated as a security for the money in question. This mortgage was sufficient in point of value to cover the amount realized by the sale, and was for that amount, less a few pounds, which the plaintiffs divided between them. The security thus appropriated was afterwards realized by William Bromley, and he misapplied the money, but it was not placed to the credit of the firm, nor did Joseph Brom- ley know anything of its receipt or application. Under these circumstances it was held that Joseph was not liable to the plaintiffs for the loss, for the plaintiffs dealt with William Bromley as a trustee and not as a partner; they authorized him to take a mortgage in his own name alone; they acquiesced in the appropriation to their money of a security which was of sufficient value, and Joseph's duty was then at an end. The plaintiffs could not hold him liable for the loss of the mortgage money arising subse- quently from the fraud of the mortgagee. 'Distinction between these cases and those no- [*160] ticed on pages 152-155. — In these cases it will be observed that although the money in question had at one time been in the custody of the firm, such was not the case when the money was misapplied. This circumstance dis- tinguishes the cases last referred to from De Eibeyre v. Barclay (u) and other cases of that class, the leading facts in which have been already stated, (v) 5. Liability of firm for trust moneys. — If a partner -, being a trustee, improperly employs the money of his cestui que trust in the partnership business, or in payment of the partnership debts, this alone is not sufficient to entitle the cestui que trust to obtain repayment of his money from the firm,} (u) 23 Beav. 107. creditor a creditor of the firm, un- (v) Ante, p. 153. less it is applied with the knowl- 1 "Where one partner holds money edge and privity of his copartners. in trust for another, or borrows Jaques v. Marquand, 6 Cow. 497; money on his individual credit and Logan v. Bond, 13 Ga. 192; Tail- applies it to the use of the firm, madge v. Penoyer, 35 Barb. 120; this does not make the original Willett v. Stringer, 17 Abb. Pr. 395 *160 RIGHTS AND OBLIGAJ I' \ B. K II. In Ec parte Apsey, {x) one of two assignees in bankruptcy was in partnership, and lie applied part of the assets of the 153: Guillon v. Peterson, 7 Weekly Notes of Cases, 268. See ante, 299, note. In WeJker v. Wallace, 31 Ga. 362, however, where a member of a firm applied to its business money which he held as agent of a third party, it was held that the firm was liable, whether the other part- ners knew at the time that the money belonged to such party <>r not. Where one partner, to whom a third person has intrusted money, applies the money to the purposes of the firm with the 1 consent of all the partners, but without the con- sent of the owner of the money, SUOh owner may elect to consider the firm his debtor, instead of the separate partner. Hutchinson v. Smith, 7 Paige, 26. Where an administrator, a mem- ber of the partnership, used the funds of the estate in the firm business, and the other members had notice thereof, held, that the firm and its members became jointly and severally liable for such funds. In re Jordan, 2 Fed. Rep. 319. Where in such a case the admin- istrator died, and an administra- trix de bonis was appointed in his place, and the firm of which the former was a member became bankrupt, held, that she might prove the claim for such fund against both estates. In re Jordan, 2 Fed. Rep. 319. Where one partner collected money for a third party and com- mingled it with the firm moneys, ami it was used by the firm in their general business, a partner- ship liability i> thereby created al- though the money was so com- mingled and u-.'-, 1 without the knowledge of the other partner. Palmer v. Scott, 68 Ala. 880. Where one of two pai tnei - was township treasurer, and, with the knowledge and consent of his co- partner, tbe public funds were de- posited to the firm's credit in com- mon with the linn funds and checked out indiscriminately, held, that both partners, having par- ticipated in such art-, were alike guilty of unlawful conversion of the public money, and that the partnership was liable to the pub- lic authorities therefor. Davis v. Qelhaus, -14 O. St. 69. See, also, Denton v. Men ill, 48 Hun. 284, Where (J. and S. and W., the three New York members of a firm, contrary to the articles of a copart- nership, and without the knowl- edge of P., the Philadelphia mem- ber, went into stock speculations with the trust funds of an estate of which S. was an executor, and involved the estate in a large loss, held, that a legatee thereof could not recover against P. for the loss. Guillon v. Peterson, 9 Phil. 225. After a dividend is declared by a partnership, and the partner holding the share of an absent member, under a resolution of the company, pays it over in extin- guishment of a debt clue the com- pany by another partner who (ar) 3 Bro. C. C. 265. See, also, Ex parte White, 6 Ch. 397. 396 CH. I, SEC. III.] LIABILITIES OF PARTNERS. *161 bankrupt in paying partnership debts. On the subsequent bankruptcy of the partnership it was held that the amount so applied was not provable against the joint estate. In Ex parte Heaton, (y) a father and his sons were part- ners; the sons were trustees of a will, and instead of apply- ing the trust moneys according to the trust they appropriated them to partnership purposes ; but on the bankruptcy of the partnership it was held that the amount of the mone} 7 s so appropriated was not provable against the joint estate, un- less it could be shown that they were employed for the use of the partnership trade with the knowledge of the father, that they were trust funds, and an inquiry as to that was directed. (3) Where firm knows of the breach of trust. — It may at first sight be thought that these cases are opposed to Marsh v. Keating, and the other authorities before referred to, (a) in which the firm was held liable for money which came to its hands. But in those cases the money came to the hands of the firm in the ordinary course of its business; (b) whilst in *the cases now under consideration it is [*161J supposed to come otherwise. Liability must there- promised to settle with the absent are in equity liable to C. therefor, partner, all the members present, jointly and severally. Wentworth not dissenting from the resolution, v. Raiguel, 9 Phil. 275. are jointly liable for the amount of (y) Buck. 386. the dividend. Peters v. Horbach, (z) Ex parte Clowes, 2 Bro. C. C. 4 Pa. St. 134. 595, is not opposed to tbe cases in Where one member of a firm of the text, for there the joint and real estate brokers receives money separate estates were consolidated, with which to purchase land for (a) Ante, pp. 152-155. the person advancing the same, (b) This may be thought incor- and passes it over to his partner, rect with respect to Marsh v. Keat- who deposits it to the credit of ing ; but it was the business of the the firm, and the proof fails to firm there to sell, through their show that it was invested as broker, stock belonging to their agreed, the firm will be liable, customers, and to receive and re- Kerr v. Sharp, 83 111. 199. mit the proceeds; and the money Where assets of a firm of A., B. for which the firm was held an- and C. are applied to pay the swerable did arise from the sale of debts of a former firm of A. and the stock of a customer, though it B. without C.'s consent, A. and B. was sold under a forged power of 397 *1G1 EIGHTS AND OBLIGATIONS. [iJOOK U. fore attach to the firm, if at all, on wholly different princi- ples, and the fact that the firm has had the benefit of the trust moneys is not sufficient to render it responsible for them. To be liable the firm must be implicated in the breach of trust, and this it cannot be unless all the partners either knew whence the money came, or knew that it did not belong to the partner making use of it. Knowledge on the part of one partner will not affect the others, for the fact to be known has nothing to do with the business of the firm ; and the case of Ex parte Ileato?i, already referred to, shows that in cases of this kind the liability as for a breach of trust does not extend to those who are ignorant of the matters before mentioned. But if knowledge of these mat- ters can be imputed to the other partners; if they know, or ought to be treated as knowing that trust moneys are being employed in the partnership business, they will be held bound to see that the trust to which the money is subject authorizes the use made of it, and will be answerable for a breach of trust in case of its misapplication or loss, (c) It is important to bear this in mind when one partner has died; for if the surviving partners deal with his property, know- ing that it belongs to his estate, knowledge of the trust on which the property is held will be imputed to them, and they may be thus involved in all the consequences of a breach of trust, (d) But this doctrine can hardly extend to the case of incoming partners, who do nothing except leave matters as they find them when they enter the firm, (e) Liability for breach of trust, joint and several — Bor- rowing trust money. — If partners are implicated in a breach attorney ; and although Fauntle- 601 ; Keble v. Thompson, 3 Bro. C. roy's partners knew nothing of the C. 112. And compare Ex parte receipt of the money, their igno- Geaves, 8 De G. M. & G. 291 ; Ex ranee was considered culpable and parte Barnewall, 6 De G. M. & G. of no avail. 801 ; Ex parte Burton, 3 M. D. & (c) See Ex parte Woodin, 3 M. D. 364. D. & D. 399; Ex parte Poulson, De (d) See infra, book iv, ch. 3, § 3. Gex, 79 ; Ex parte Watson, 2 V. & (e) See Twyford v. Trail, 7 Sim. B. 414; Smith v. Jameson, 5 T. R. 92. 398 CH. I, SEC. III.] LIABILITIES OF PARTNERS. *1G2 of trust, their liability is joint and several; (/) and a decree for costs will be made *against them all, al- [*162] though they may not be all equally to blame, (g) But persons who borrow trust money from executors or trustees are only liable to repay it with interest; and although the lenders may have no authority to lend the money, the bor- rowers are not liable to account for the profits which they may have realized by its employment, (h) Following trust money.— Although a firm is not liable to make good trust money applied to its use by one of its members in breach of the trust reposed in him, unless the firm can be implicated in the breach of trust, this doctrine will not preclude a cestui que trust from following his own money into the hands of the firm, and demanding it back, if he can show that the firm still has it, and the firm did not come by it by purchase for value without notice. The true owner of money traced to the possession of another has a right to have it restored, not because it is a debt, but because it is his money. His right is incidental to his owner- ship; and whether the money is traced to the hands of a single individual, or to the hands of a firm, is wholly im- material. (i) 1 if) Re Oxford Benefit Building (g) Lawrence v. Bowie, 2 Ph. 140. Soc. 35 Ch. D, 502 ; Imperial Mer- (ft) Vyse v. Foster, L. R. 7 H. L. cantile Credit Assoc, v. Coleman, 318; Stroud v. Gwyer, 28 Beav. 130. L. R. 6 H. L. 189; Devaynes v. (i) See, as to tracing money, Noble, Sleech's Case, 1 Mer. 563 ; Lewin on Trusts, edit. 8, ch. xxx, Baring's Case, id. 614; Sadler v. § 2 ; Re Hallett's Estate, 13 Ch. D. Lee, 6 Beav. 324; Brydges v. Bran- 696; Re West of England Bank, 11 fill, 12 Sim. 369 ; Blair v. Bromley, Ch. D. 773 ; Brown v. Adams, 4 Ch. 2 Ph. 359; Wilson v. Moore, 1 M. & 764; Pennell v. Deffell, 4 De G. M. K. 127 and 337 ; Ex parte Poulson, & G. 372 ; Frith v. Cartland, 2 Hem. De Gex, 79. Compare Ex parte & M. 417 ; Scott v. Surman, Willes, Burton, 3 M. D. & D. 364. It how- 400; Taylor v. Plumer, 3 M. & S. ever by no means follows that on 562 ; Small v. Attwood, Young, 507 ; the bankruptcy of the firm there Pannell v. Hurley, 2 Coll. 241. can be a proof against the joint as J Price v. Mulford, 36 Hun, 247 ; well as against the separate estate. Bush v. Bush, 33 Kan. 557. See Ex parte Barnewall, 6 De G. A. and B. were jointly interested M. & G. 801. This will be discussed in a claim which was ultimately in the chapter on Bankruptcy. decided in their favor. Before the 399 *1G2 KIGIITS AND OBLIGATIONS. [iJOOK II. decision was made A. formed a partnership with C, and the money- was remitted to the firm of A. and C, and placed to A.'s credit on the books of the firm. A. died insolv- ent, largely indebted to C. It ap- peared that C, previously to form- ing the partnership with A., had full knowledge of the interest of B. in the claim. Held, that C. could not apply the money to the satisfaction of his debt against A., and that B. was entitled to recover his proportion of all the money re- ceived on account of the claim. Vanderwick v. Summerl, 2 Wash. 41. The rule that trust property may be followed into whatsoever hands it goes with notice of the trust does not apply in cases where an officer of a bank, being a member of a partnership, without due security lends to his linn funds of the hank which become mingled with the other partnership property. Case v. Beauregard, 1 Woods, 125. If funds of a married woman, held in trust under the code by her husband, are mingled by him with the funds of a partnership of which he is a member, the partnership funds are not charged with the part, either during the life of the husband or after his death. Dent v. Slough, 40 Ala. 518. The contribution of trust prop- erty to the capital stock of a co- partnership at the time of its for- mation, by a trustee, as his own property, and so contributed, with- out notice or knowledge to the other copartners of the fact of its being trust property, is closely analogous to its sale and purchase. There is but little, if any, differ- ence in principle. In such case the cestui que trust seeking his property (thus converted) from partnership assets can only claim and take therefrom what his trustee would be entitled to take had he been vested with absolute ownership of the funds invested by him in the copartnership, instead of holding the same, as he did, merely in trust. The equities of the copartners of a trustee, dealing with him as the absolute owner of the property contributed by him to the copart- nership, and without notice or knowledge of any trust relations in regard to the same, are para- mount to those of the cestui que I rust in regard to such property. 1 [ollenback v. More, 44 N. Y. Supr. Ct, 107. Where a guardian puts his ward's funds into the business of the firm, with the full knowledge of his co- partner, he is liable to account to his ward for only such profits as he actually received, and not for those received by his partner. Se- quin's Appeal, 103 Pa. St. 139. A partner who fraudulently ap- propriates money of the partner- ship to the purchase of real estate, taking the conveyance in his own name, and of policies of life insur- ance payable to his wife, may be charged in equity as trustee for the partnership; and, as to the policies made payable to his wife, she, also, may be charged as trustee. Shaler v. Trowbridge, 28 N. J. Eq. 595. See, also, Renf row v. Pearce, 68 111. 125. One partner took money from the partnership funds, which he put into a new partnership. Held, that, upon the insolvency of the new partnership, the former part- nership could not follow the funds 400 CH. I, SEC. III.] LIABILITIES OF PARTNERS. : 162 Liability of partnerships for the false representations of their members. 1 In considering the liability of a firm for the false repre- sentations of one of its members, it is necessary to dis- so taken, so as to give it a priority over other creditors. Ramsay v. Deas, 2 Dessau. 239. 1 If one partner, in the name of his firm, makes a false representa- tion as to a fact, under circum- stances precluding him from dis- puting it, the firm and its members will be equally precluded if the fact is such a one that tbe repre- sentation would be binding on the firm if true, and is also one con- cerning the truth of which the firm and its members possess peculiar means of knowledge not enjoyed by the party to whom the repre- sentation is made. Coleman v. O'Neil, 1 N. W. Rep. 846. One partner is liable for the acts of another partner whereby decep- tive appearances are created in land which is the subject of the partnership, and whereby the part- nership realizes the proceeds of the fraud. Chester v. Dickerson, 52 Barb. 349; 54 N. Y. 1. A representation made by one member of a firm to a person who subsequently purchases commer- cial paper of the firm from a third party, without any intimation that the latter intends to make such purchase, does not render the part- ners liable individually, although it is false. In re Schuehardt, 15 Bankr. Reg. 161. Representations of the active partner, made at the time of bor- rowing money in the course of the firm business, are admissible against the dormant partner. Gavin v. Walker, 14 Lea (Tenn.), 643. A silent partner who did not know nor assume to know as to the truth of a statement of the condi- tion of the firm, made by one of his copartners to a person who pur- chased an interest in the firm on the faith of such statement, is not liable for damages to such person arising from fraud in the state- ment. Chamberlin v. Prior, 1 Abb. App. Dec. 338. Partners selling their interest in the concern are not liable to the purchaser for fraudulent represen- tations in relation thereto made by one partner without their instiga- tion or approval. Such purchaser, executing a note in the name of the new firm for an amount greater than the invoice price, and after- wards, by reason of the insolvency of his partner, compelled to pay the whole note, can only recover, in an action against the deceiving party for such fraud, his proportion of the excess of the rote over the value of the property actually pur- chased. Schwabackcr v. Riddle, 84 111. 517. In an action against a partner- ship for fraudulent representations made by one of its members, a dec- laration alleging that he, acting in behalf of the firm, procured a writ of replevin to be brought in the name of a third person and signed his own name to the re- plevin bond as surety, and that lie declared to the plaintiff, who was a deputy-sheriff, that the firm was responsible, and that his signature to the bond bound the firm, and Vol. 1—26 401 *103 EIGHTS AND OBLIGATIONS [BOOK II. tinguisb actions for mere damages from actions to rescind contracts, and to recover money, or property, obtained by the firm by misrepresentation. (' X "1G3] * Actions for deceit. — An action for damages for misrepresentation cannot, as a general rule, be main- tained unless the misrepresentation is fraudulent, i. ut it was held that he was bound by the acts and representations of his partner, Parry, and could not be allowed to say that those transactions were fictitious which Parry represented to be real. The plaintiff was adjudged entitled to retain the 130,000Z. remitted to him, and to recover back the ad- vances for the supposed purchases in respect of which there had been no remittance. Again, where one of several partners in a patent induced the plaintiff, by false and fraudulent representations, to pay 3,000/. for part of the profits to be obtained by its work- ing, all the partners were held liable to repay the money, all hough there was no evidence of fraud on the part of more than one. (p) [*1G5] *TUe case of Blair v. Bromley, (o) already alluded to, is another instance in point, and was in fact de- cided by the lord chancellor expressly npon the ground that persons who, having a duty to perform, represent to those who are interested in the performance of it that it has been performed, make themselves responsible for all the conse- quences of non-performance; and as one partner may bind another as to any matter within the limits of their joint business, so he may by an act which, though not constitut- ing a contract by itself, is on equitable principles considered as having all the consequences of one. False accounts rendered by one partner.— Whether accounts rendered by one partner in the name of the firm, and showing that money is in the hands of the firm, when in truth he has misapplied it, are to be treated as represen- tations by the firm, is a question which has given rise to much discussion, and upon which the cases are not uniform. But upon the whole it is conceived that if the accounts re- (p) Lovell v. Hicks, 2 Y. & C. (q) 5 Ha. 543, and 2 Ph. 354, ante, Ex. 46 and 481. p. 153. 404 CB. I, SEC. III.] LIABILITIES OF PARTNERS. *166 late to matters within the scope of the partnership business the firm is bound by them, (r) Statutory exceptions. — By 9 George IV., chapter 14, section 6, a firm is not liable for a false and fraudulent rep- resentation as to the character or solvency of any person unless such representation is in writing, signed by all the partners. The signature of one partner in the name of the firm will not bind any one but himself. (V) Liability of firm for untrue statement as to authority. If a partner, acting apparently beyond the limits of his authority, untruly represents that he is acting with his co- partners' consent, they are not bound by this representa- tion, nor are they liable for what may be done on the faith of it. Therefore, in Ex parte Agace, (t) where one partner gave partnership bills in payment of his own separate debt, and, on "being asked whether his copartner [*1GG] was acquainted with the transaction, untruly replied that he was, and that he consented to it, it was held that the bills were not provable against the joint estate of the firm, they not being in the hands of a bona fide holder for value without notice of the circumstances under which they had been given. In this case the partner who gave the bills did that which was clearly not within the scope of his authority, and the person who took them knew it. The lat- ter was, it is true, misled by the false answer to his ques- tion, but that answer was not referable to a matter within the scope of the partnership business; and the other part- ner did nothing to lead to the supposition either that ho (r) See the two last cases, and (s) See Swift v. Jewsbury, L. R. Rapp v. Latham, 2 B. & A. 795, 9 Q. B. 301, reversing Swift v. ante, p. 164; Marsh v. Keating, 2 Winterbotham, L. R. 8 Q. B. 244 CI. & Fin. 250: Devaynes v. Noble, In this case the letter was signed Baring's Case, 1 Mer. 611; De by A. B., manager, but the words Ribeyre v. Barclay, 23 Beav. 107. of the statute, as construed by the See, on the other hand, Hume v. court of appeal, warrant the state- Bolland, 1 Cr. & M. 130; Sims v. ment in the text. Brutton, 5 Ex. 802. (t) 2 Cox, 312. 405 *1G7 RIGHTS AND OBLIGATIONS. [BOOK II. was a consenting party, or that he had authorized his co- partner to say that he was. (u) Untrue statement as to nature of business. — A ques- tion of more difficulty arises when a partner alleges that the business of the firm is more extensive than it really is, or that it is different from what it is. But even in this case the firm would probably be held not liable for such a mis- representation. Ex hypothesi the representation is not referable to anything falling within the scope of the part- nership business; and it would probably be contended in vain that each partner was impliedly authorized by his co- partners to answer questions as to what business they really carried on in partnership. If the person seeking to make the firm liable knew anything of the firm and of its busi- ness as ordinarily carried on, then Ejc parte A: be liable, even though the person seeking to charge it had no notice of the real authority possessed by the partner with whom he dealt. 1 Notice of want of authority. — The immateriality of notice of want of authority in the last case, and its materi- ality in the former, is a necessary consequence of the law of agency. A firm can only be made liable for what is done by one of its members on the supposition that the act in question was authorized by the other members. Now, as by law they are held prima facie to authorize all acts necessary for carrying on the business of the firm in the usual way, they cannot escape liability for any act of this character unless they can show that the apparent authority to do it did not exist, and was known not to exist. But ■when it is sought to make the firm liable for some act not prima facie authorized by it, an actual authority by it must be shown; and if this cannot be done no case is made out against the firm, however ignorant the person seeking to charge it may have been of what was authorized and what was not. In the case now supposed the firm did not mis- an employment of the firm, and and the transaction inures to the the client is not affected by an un- benefit of the partnership, the derstanding between the partners, partnership is liable. Johnson v. without his knowledge, that each Bernheim, 76 N. C. 139. should act and receive compensa- 1 A party who deals with a part- tion separately in the particular ner in matters outside the business business to which the employment of the firm can acquire no claim relates. Williams v. More, 63 Cal. against the partnership unless he 50. can prove a previous authority for, In a special partnership the or a subsequent ratification of, the power of each partner in regard to partner's act ; and this cannot be dealings with third persons who implied from the mere fact of have notice of the terms is special, partnership. Selden v. Bank of If, however, the terms are violated, Commerce, 3 Minn. 166. See ante, 403 CH. I, SEC. IV.] LIABILITIES OF PARTNERS. *1G9 lead him; and if he was misled by the representations of the partner with whom he dealt his remedy is against that partner; (s) just as when an agent untruly represents his authority, a person dealing with him acquires no right against the principal, but must look to the agent for in- demnity, (a) From the above observations it follows that actual notice of excess of authority becomes important only where the firm seeks to escape liability for some act done by one of its members with the apparent, but without the real, au- thority of the others. So long as one partner does nothing beyond the scope of his apparent authority, as determined by the principle already explained, so long is the firm re- sponsible for his conduct, although he ma} r have acted beyond or in direct violation of the authority within which his copartners may have attempted to confine him. Re- strictions placed by the partners upon the powers which each shall exercise do not affect non--partners, [*169] w r ho act bona fide and without notice of the restric- tion, (b) If, for example, the business of a firm requires a subdivision of labor, and it is agreed between the partners that one shall attend to one department and another to another, the firm will nevertheless be bound by the acts of one of the partners out of his department, provided they are such as, on the principles already explained, would be binding on the firm, (o) Cases of fraud on firm, but no notice of it. — So, if one partner acts in fraud of his copartners, still the} 7 will be bound if he has not exceeded his apparent authority, and (z) Ante, p. 164 et seq. See, too, the others he will not be bound by Lloyd v. Freshfield, 9 Dowl. & Ry. their acts. See Gleadon v. Tink- 19. ler, Holt, N. P. Ca. 586. It is other- (a) See, as to the liability of the wise where there is notice. See agent in such a case, Collen v. Ex parte Holdsworth, 1 M. D. & Wright, 7 E. & B. 301, and 8 id. D. 475. 617. And ante, p. 163, note (&). (c) Morans v. Armstrong, Arm. (o) As regards such persons, it is McArt. & Ogle, Ir. N. P. Rep. 25. of no use for one partner to tell 409 *170 RIGHTS AND OBLIGATIONS. [BOOK II. if the person dealing with him had no notice of the fraud. Thus, in Bond v. Gibson, (d) where one partner ordered goods on the credit of the firm, and immediately pawned them for his own benefit, the firm was held liable for the price of the goods. So if one member of an ordinary trad- ing partnership draws, accepts or indorses a bill in the name of the firm, but for some private purpose of his own, and in fraud of his copartners, they will be liable upon the bill at the suit of any holder for value, without notice of the fraud, (e) So, as has already been seen, if one partner fraudulently misapplies money for which the firm is answer- able, the firm is liable to make it good, although the other partners may have been grossly deceived, and may them- selves have been morally blameless. (/) [*170] "Liability of retired partner in the absence of notice. — Upon the same principle, if a person known to be a partner retires, and does not notify his retirement, he will continue to be bound by the acts of his late part- ners as if his partnership with them continued, (g) Cases of restricted authority and notice of it. — On the other hand, a person who has notice that the authority of a partner is restricted cannot hold the firm liable if he chooses to deal with that partner in a matter beyond his (d) 1 Camp. 1S5. the firm, the holder cannot recover (e) Ex parte Bushell, 3 M. D. & against the firm unless he can show D. 615; Ex parte Meyer, De Gex, that he gave value for the bill. 632 (an accommodation bill); Lane Hogg v. Skene, 18 C. B. N. S. 426, v. Williams, 2 Vera. 277 ; Wintlo explaining Musgrave v. Drake, 5 v. Crowther, 1 Cr. & J. 316; Thick- Q. B. 185, which was supposed to nesse v. Bromilow, 2 id. 425 ; Rid- be to the contrary. See, also, ley v. Taylor, 13 East, 175 ; Sander- Bailey v. Bidwell, 13 M. & W. 73 : sonu. Brooksbank, 4 Car. & P. 286 ; Smith v. Braine, 15 Jur. 287, Q. B. Lewis v. Reilly, 1 Q. B. 349 ; Sutton and 16 Q. B. 244 ; Harvey v. Towers, v. Gregory, 2 Peake. 150; Swan v. 6 Ex. 656; Berry v. Alderman, 14 Steele, 7 East, 210. See, as to the C. B. 95; Heath v. Sansom, 2 B. & plea of non accepit, Jones v. Cor- Ad. 291. bett, 2 Q. B. 828. It is now set- (/) Ante. p. 151 et seq. tied that if a bill is drawn or ac- (g) This subject will be alluded cepted by one partner in fraud of to hereafter. See ch. 2, § 3. 410 CH. I, SEC. IV.] LIABILITIES OF PARTNERS. *170 authority as restricted. (A) 1 Therefore, where the defend- ant, who was in partnership, sent the plaintiff a circular telling him not to supply goods to the firm without the defendant's written order, and the plaintiff, notwithstand- ing, supplied goods to the defendant's partner, it was held that the defendant was not liable for the goods. (?') So the {h) Alderson v. Pope, 1 Camp. 404, stated and observed upon here- after. 1 Knox v. Buffington, 50 Iowa, 320 ; N. Y. F. Ins. Co. v. Bennett, 5 Conn. 597 ; Chapman v. Devereaux, 32 Vt. 108; Baxter v. Clark, 4 Ired. L. 127; Coleman v. Bellhouse, 9 U. C. (C. P.) 31 ; Radcliff v. Var- ner, 55 Ga. 427; Williams v. Bar- nett, 10 Kan. 455; Boardman v. Gore, 15 Mass. 339; Combs v. Bos- well, 1 Dana, 473; Wilson v. Rich- ards, 28 Minn. 337; Pollock v. Will- iams, 42 Miss. 88; Mason v. Part- ridge, 66 N. Y. 633 ; Dow v. Say- ward, 12 N. H. 271; Cargill v. Corby, 15 Mo. 425; Bromley v. El- liot, 38 N. H. 287; Nolan v. Love- lock, 1 Mont, 224. If a firm consists of but two part- ners, each having an equal voice in the direction and control of the common business, either may pro- tect himself against liability on a future contract by giving notice of his dissent to the person with whom it is about to be made ; and where the partnership consists of more than two persons, one of whom gives notice of his dissent, the party contracting with the others acts at his peril, and cannot hold the dis- senting party liable, unless his lia- bility results from the articles or from the nature of the partnership. See Johnston z>. Dutton, 27 Ala. 245 ; Monroe v. Conner, 15 Me. 178 ; Mat- thews v. Dare, 20 Md. 248 ; Leavitt v. Peck, 3 Conn. 124; Yeager v. Wallace, 57 Penn. St. 365; and the cases cited below. If one of two attorneys consti- tuting a firm, practicing only in the city of Baltimore, receives from one aware of this limitation a note for collection in Carroll county, the firm will not be responsible unless the privity of the other partner is shown. Brent v. Davis, 9 Md. 217. One partner cannot, in violation of known stipulations in the articles of partnership, bind the firm even for money which is applied in liqui- dation of the debts of the firm. Langan v. Hewett, 21 Miss. 122. C. and H. were partners; C. was to furnish the capital, H. the labor. W., who knew of the agreement between the partners, agreed with H. to perform labor for the use and benefit of the partnership. Held, that C. was not liable for the value of the labor performed by W. Pollock v. Williams, 42 Miss. 88. Where, in a partnership to work a farm, it was agreed that each partner was to supply and pay for Ins portion of labor, and a laborer who contracted with one partner had knowledge of such agreement, held, that he could not recover against the partnership in an action for services rendered on the farm. Urquhart v. Powell, 54 Ga. 29. (0 Willis v. Dyson, 1 Stark. 164; Minnit v. Whitney, Vin. Ab. Partn. A. PI. 12, and 5 Bro. P. C. 489. See, 411 *171 RIGHTS AND OBLIGATIONS. [BOOK II. authority of any partner to accept bills in the partnership name may be determined by a public notice, and such notice will affect those whom it reaches, subject to the qualification that an indorsee with notice may avail him- self of the ignorance of his indorser. (k) In Galavmy v. Mathew, {I) the defendants, Mathew and Smithson, were partners; Smithson caused an advertise- ment to be published warning all persons not to give credit to Mathew on his, Smithson's, account, and stating that he would not be liable for any bills or notes issued by Mathew in the name of the partnership. The plaintiff had seen this advertisement, but he was nevertheless prevailed upon by Mathew to accept a bill for the accommodation of the firm, taking in exchange a promissory note drawn by Mathew in the name of the firm. Mathew got the bill dis- counted, and bona fide applied almost all of the money thus procured in payment of the debts of the firm. The plaintiff paid his acceptance at maturity, and then [*171] ^brought an action against the firm on the note. But it was held that, having seen the advertisement, he could not recover. Restricted powers not inconsistent with continuance of partnership. — It will be observed that in these cases the notices were effectual though the partnership w 7 as not de- termined. The continuance of the partnership is not in- consistent with a notice by one partner that as to some particular matter he will not be bound by the acts of his copartner. (?n) too, Vice v. Fleming, 1 Y. & J. without authority. See further, 227; Ex parte Holdsworth, 1 M. on this point, infra, p. 174. D. & D. 475. ('«■) See, in addition to the cases (fc) Rooth v. Quin, 7 Price, 193. cited in the last few notes, the (0 1 Camp. 402, and 10 East, 264. judgment of L. J. Bramwell in See, too, Ex parte Holdsworth, 1 Bullen v. Sharp, L. R. 1 C. P. M. D. & D. 475, where the drawer pp. 125-6, and. the judgment in of bills accepted by the firm had Vice v. Fleming, 1 Y. & J. 227. notice that they were accepted 412 CII. I, SEC. IV.] LIABILITIES OF PARTNERS. '171 Bills accepted in name of firm for private debt. — Again, a person who knows that a partner is using the name or assets of the firm for a private purpose of his own knows that he is prima facie committing a fraud on his copartners. Therefore, notwithstanding the implied power of a member of an ordinary trading firm to accept bills or make notes, if one partner accepts a bill or makes a note in the name of the firm, and gives the bill or note in pay- ment of a private debt of his own, the creditor who takes the bill or note, knowing the circumstances under which it has been accepted or made, will not be able to enforce it against the firm, unless it was, in fact, given with the au- thority of the other partners, which it is for the creditor to prove, (n) l And if a bill is drawn by one partner in the (n) Leverson v. Lane, 13 C. B. N. S. 278, and 3 Fos. & Fin. 221 ; Re Riches, 4 De G. J. & S. 581, and 5 N. R. 287. See, also, Ellston v. Deacon, L. R. 2 C. P. 20. Older cases to the same effect are Wells v. Masterman, 2 Esp. 731 ; Green v. Deakin, 2 Stark. 347; Ex parte Thorpe, 3 M. & A. 716; Ex parte Austen, 1 M. D. & D. 247; Arden v. Sharpe, 2 Esp. 524; Ex parte Agace, 2 Cox, 312; Miller v. Doug- las, 3 Ross, L. C. 500; Ex parte Bonbonus, 8 Ves. 540; Frankland v. M'Gusty, 1 Knapp, 274. And see post, p. 173. 1 Ranst v. Hanselt, 41 N. Y. Su- perior Ct. 467 ; Clay v. Cottrell, 18 Penn. St. 408; King v. Faber, 22 Penn. St. 21 : Bank of Commerce v. Selden, 3 Minn. 155; Taylor v. Hillyer, 3 Blackf. 433; Hickman v. Reineking, 6 id. 388; Maudlin v. Branch Bank, 2 Ala. 502; Robin- son v. Aldridge, 34 Miss. 352; Hickman v. Kunkle, 27 Mo. 401; Stainer t\ Tysen, 3 Hill, 279; Mil- ler v. Manice, 6 id. 115; Weed v. Richardson, 2 Dev. & B. L. 535; Baird v. Cochran, 4 Serg. & R. 397 ; Porter v. Gunnison, 2 Grant, Cas. 297; Burleigh v. Parton, 21 Tex. 585; Huntington v. Lyman, 1 D. Chip. 438 ; Cotton v. Evans, 1 Dev. & B. Eq. 284; Lanier v. McCabe, 2 Fla. 32 ; Munroe v. Cooper, 5 Pick. 412; Williams v. Wallbridge, 3 Wend. 415; Davenport v. Runlett, 3 N. H. 386; Gansevoort v. Will- iams, 14 Wend. 133; Wilson v. Williams, id. 146; Foster v. An- drews, 2 Pa. 160 ; Powell v. Messer, 18 Tex. 401 ; Williams v. Gilchrist, 11 N. H. 535; Tompkins v. Wor- yard, 5 W. Va. 216. See, also, Wagner v. Clay, 1 A. K. Marsh. 257; Cooper v. McClurkan, 22 Penn. St. 80; Rutledge v. Squires, 23 Iowa, 53; ante, note. One partner cannot bind his firm by signing the partnership name in renewal of a premium note given by such partner in the name of the firm for a policy of insurance upon his individual property. Lime Rock, etc. Ins. Co. v. Treat, 58 Me. 415. If money is borrowed by a part- 413 171 Kl< i UTS AND OBLIGATIONS. [BOOK IX. name of the firm in fraud of his copartners, and is accepted by the drawee, and is afterwards indorsed by the drawer ner in his own name and on his own credit, and his individual note is given therefor, it is no fraud afterwards to execute the note of the firm in renewal, provided the money goes into the business of the firm. Union Bank v. Eaton, 5 Humph. 490. If it is within the ordinary course of a partnership business for one partner to borrow money on the credit of a firm, proof that a loan is made to the firm, at their place of business, through one of the partners, at six per cent., upon a statement by the latter that the firm could use the money to ad- vantage at that rate; that the lender took a transfer of bank stock as collateral security; and that he knew that the partner with whom he transacted the business owned real estate, in which the firm was not interested, — is not sufficient to affect the lender, if he acted in good faith, with construct- ive notice of fraud in such partner in procuring the money for his own personal use. Warren v. French, 6 Allen, 317. It is not competent to charge a firm for the act of a partner in giving firm security for an indorse- ment of his individual note by evidence that at the time of ob- taining the indorsement the part- ner stated that the money was wanted for the use of the firm. Uhler v. Browning, 28 N. J. L. 79. In an action upon a note, signed by one of two partners, in the part- nership name, for a purpose not connected with the partnership, and without the knowledge of the other partner, testimony tending to show a subsequent recognition of the note by the latter is within the exclusive jurisdiction of the jury to weigh. Jones v. Booth, 10 Vt. 268. Where one of two partners, dur- ing the existence of the partner- ship, gave a promissory note in the name of the firm for his private debt; and the other partner after- wards, knowing these facts, by a promise to pay the note, induced the holder to forbear attempting to collect it, held, that a jury would be warranted in returning a verdict against both in an action on the note, without expressly finding that the note had been ratified by the other partner. Wheeler v. Rice, 8 Cush. 205. The rule stated in the text is the same in the case of an accommoda- tion indorsement by one partner in the name of the firm. Bank of Tenn. v. Safforans, 3 Humph. 597 ; Fielden v. Lahens, 9 Bosw. 436; Whitmore v, Adams, 17 Iowa, 567 ; Elliott v. Dudley, 19 Barb. 320. Where one member of a partner- ship, in order to pay his individual debt, makes his promissory note and indorses it in the firm name, without the knowledge or consent of his copartners, and his creditor, with knowledge of the facts, re- ceives the note, and in order to bind the firm transfers it before maturity to a bona fide holder, the creditor is guilty of a fraud and is liable therefor. But the fraud is not upon the firm ; it is only upon those who did not consent to the indorsement. Hence, the cause of 414 CH. I, SEC. IV.J LIABILITIES OF PARTNERS. 171 in the name of the firm, the acceptor may successfully deny the indorsement, although he cannot deny the draw- ing. 0) action arising therefrom is no part of the assets of the firm, although the note has been paid out of such assets; and title thereto does not pass by a general assignment of all the property and effects of the firm, nor is any interest therein con- veyed by an assignment made by one of the parties injured of his right and interest in the partner- ship assets. Calkins v. Smith, 48 N. Y. 614. B., a member of a firm of which he and A. were partners, fraudu- lently made a promissory note in the name of the firm and delivered it to C, who had knowledge of the fraud. C. delivered it to D. , an innocent holder, for value. The firm was aftervva)-ds dissolved and a receiver appointed. D. brought an action at law upon the note. A. then brought a bill in equity against B. and C, the prayer of which was that C. might be ordered to pay, take up and cancel the note and restrained from enforcing it. Held, that the bill could not be main- tained. Fuller v. Percival, 126 Mass. 381. B., a member of a firm of which he and A. were partners, fraudu- lently made a promissory note in the name of the firm, and delivered it to C, who had knowledge of the fraud. The firm was afterwards dissolved and a receiver appointed. A., after the note became due, and while it was still in the hands of C, no suit having been begun on it, brought a bill in equity against B. and G, the prayer of which was that C. might be ordered to pro- duce and cancel the note and be restrained from enforcing it. Held, that the bill could be maintained. Fuller v. Percival, supra. One partner, without r-onsent of his copartner, cannot indorse a partnership note, belonging at the time to the firm, in payment of an individual debt. Fletcher v. An- derson, 11 Iowa, 228; Fall River, etc. Bank v. Sturtevant, 12 Cush. 372. Where a promissory note belong- ing to a partnership is transferred or paid over by an individual mem- ber thereof in satisfaction of his own private debt, it is incumbent on the plaintiffs, in a suit brought on the note, to show the assent of the other partner in order to bind him ; and such knowledge and as- sent must be clearly shown, and not left to be inferred from vague and slight circumstances. Kemeys v. Richards, 11 Barb. 312; Mecut- chen v. Kennady, 27 N. J. L. 230. One partner cannot, without the express concurrence of his copart- ner, make a note of the firm pay- able to himself, and charge the firm therewith. Brown v. Haynes, 6 Jones, Eq. 49. Where a partner in two firms draws a bill by one firm on the other, payable to himself, for his individual debt, which is accepted by the firm, such bill cannot be re- covered by the payee against the (o) Garland v. Jacomb, L. R. 8 Ex. 216. 415 •171 incurs and obligations. [book II. Again, although a partner may be a bona fide holder, for his own separate use, of the paper of his firm, yet, if he drawers or acceptors. Babcock v. Stone, 8 McLean, 172. If a partner draws notes in tin- name of the firm, payable to him- self, ami then indorses them to a third party for a personal, and not a partnership, consideration, the first indorsee cannot maintain an action on them against the linn, if lie knew (hat the notes were an- tecedent. Smyth v. Strader, 4 How. 101. An indorsee of a note, indorsed by one of several partners, in the partnership name, for his individ- ual purposes, without the consent or knowledge of the other partners, cannot avail himself of such note to subject the partnership, even if lie did not know that it was in- dorsed under Buch circumstances, where his ignorance arises from gross negligence. New York Firo Ins. Co. v. Bennett, 5 Conn. 574. An indorsee who received, six months after date, as collateral security, from the payee, a note on demand, given in the name of a partnership to one of the firm, takes it subject to all the equity existing against it in the hands of the payee. Thompson v. Hale, 6 Pick. 259. A note was indorsed by a firm and pledged by them as collateral security to a creditor, whose claim was afterwards paid by A., one of the firm, with his own money, and the note was delivered by the cred- itor to him. Subsequently, and after the dissolution of the partner- ship, but before the maturity of the note, A. delivered it, with the partnership indorsement still re- maining thereon, to B., in pay- ment of his own individual debt, // M.. taking from M. in exchange therefor a note of the same amount, executed by M. in t he partnership name, the plaint- iff supposing that his note was to be used for the benefit of the firm. M., however, without the knowl- edge of his partner, indorsed it in the partnership name and deliv- ered ittoG. in payment of a private debt, (i. taking it with full knowl- edge of all the facts. When the plaintiff's note fell due he learned the facts with regard to the fraud- ulent use made of it. He, how- ever, gave a new note to G. for the amount due and took up the for- mer one, surrendering also to M. the note which he held against M. & H., and taking a new note of the same amount with his own, ex- ecuted by M. in the name of the firm. The plaintiff afterwards paid his note when it fell due. In a suit brought by him against M. & H. on the note last taken by him and for money paid to their use, it was held: 1. That the arrangements between M. & G., under which the latter received the original note of the plaintiff, indorsed in the part- nership name, in payment of his 416 •OH. I, SEC. IV.] LIABILITIES OF PARTNERS. *172 gives such paper in payment of a separate debt of his own, this is prima facie an irregular proceeding and a fraud on his copartners. Consequently the creditor taking the paper ^must rebut this prima facie inference be- [*172] fore he can compel the firm to pay. (p) A bona fide holder for value without notice is of course in a different position, (q) Pledge of partnership goods for private debt. — As a partner has no implied authority to pledge the partnership name for purposes of his own, so neither has he, for similar purposes, any implied power to pledge its goods. There- fore, if two firms are jointly interested in consignments, and one of them pledges the bills of lading with its bankers as a security for advances on its separate account, the bank- ers cannot hold those goods against the other firm if they knew when the goods were pledged what the real facts were respecting them, (r) So, if one partner pays a sepa- rate debt of his own with money of the firm, and the cred- itor who is paid is aware of the facts, he cannot retain the money as against the firm, unless he can prove that the payment was authorized by the other partners, or unless they have estopped themselves from den} 7 ing the author- ity, oo private claim against M., was a as money had to the use of the fraud on the other partner, and firm. Mix v. Muzzy, 28 Conn. 186. that G. obtained thereby no right (p) See Leverson v. Lane, 13 C. to the note, either against the firm B. N. S. 278, and Re Riches, 4 De or the plaintiff. 2. That as the G. J. & S. 581, and 5 N. R. 287, plaintiff had full knowledge of the qualifying Ex parte Bubhell, 3 M. facts when he gave his new note, D. & D. 615, and Ridley v. Taylor, and took a new note in the name 13 East, 175, in which the contrary of the firm, he could not recover doctrine was countenanced, upon the latter note against the (q) See ante, p. 169. firm. 3. That as the plaintiff was (r) Snaith v. Burride, 4 Taunt, not legally liable to pay G. the note 684. originally given by him, his pay- (s) Kendal v. Wood, L. R. 6 Ex. ment of the same, either in cash or 243; Heilbut v. Nevill, L. R. 4 C. by giving a new note, would give P. 354, and 5 id. 478. See further, him a right to recover the amount as to such cases, ante, pp. 165, 166. Vol. 1 — 27 417 *173 EIGHTS AND OBLIGATIONS. [lJOOK II. Private bargain by one partner. — Another case, illus- trating the want of authority of one partner to bind the firm by transactions inuring only to his advantage, is afforded by Bignold v. Waterhouse. (t) There the defend- ants were proprietors of a coach running between London and Norwich, and they, by notice affixed in their office, stated that they would not be accountable for any parcel above the value of 51., unless the same was entered and paid for accordingly. The plaintiffs were bankers at Nor- wich, and one of the defendants, for a consideration mov- ing to him alone, agreed that the plaintiffs' parcels should always go free by the coach. This agreement was acted on for some time, but it did not appear that the other de- fendants were aware of its existence, or of the fact that the plaintiffs were treated differently from other people. A parcel of the plaintiffs' sent by the coach being lost. [*173] it was held that the contract entered into by *the one defendant was not binding on the others, and that they were not liable for the loss of the parcel, its value not having been declared as required by the notice. Fraud on incoming partners. — The same principle was acted upon in the important and well-known case of Shirreff v. Wilks. (u) There the plaintiffs sold some porter to Bishop and Wilks, who were partners; and the porter was entered in the plaintiffs' books in the names of Bishop and Wilks. Afterwards Robson became a partner with Bishop and Wilks, and the plaintiffs, knowing this, drew a bill on all three partners for the price of the porter, and Bishop ac- cepted the bill in the name of the three. It was held that Robson was not liable on this bill, there being no evidence to show that he knew anj'thing of it. Lord Kenyon went so far as to say that the transaction was fraudulent on the face of it; but that is going rather far, as it is not uncom- mon for incoming partners to agree to take upon themselves the existing liabilities of the firm. When such an agree- (t) 1 M. & S. 255. (u) 1 East, 48. 418 CH. I, SEC. IV.] LIABILITIES OF PARTNERS. *174: ment is entered into, the incoming partner can hardly say he has been defrauded if a bill in the name of the new firm is accepted for a debt of the old firm without any specific authority on his part. But if the creditor cannot show an authority on the part of the incoming partner for the accept- ance of a bill in his name for a debt of the old firm, the principle acted on in Shirrejfv. Wilks will apply, for that case is clear law, and has often been followed as such, (x) Liability of retired partners after notice. — The doctrine that a person who deals with a partner, knowing that he is exceeding his authority, cannot impute the acts of that partner to the firm, is further illustrated by the decisions establishing the non-liability of a retired partner for acts done by his copartners after notice of his retirement. These decisions will be examined at length hereafter. Notice of private stipulations of partners. — 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 stipula- tions entered into between the partners themselves. *In Galway v. Mathew, (y) Lord Ellenborough is [*174] reported to have said, "It is not essential to a part- nership that one partner should have power to draw bills and notes in the partnership firm to charge the other: They may stipulate between themselves that it shall not be 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 Alder son v. Pope, (s) 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 par- ticipate in profit and loss, and should not be liable as a (.r) See ante, p. 171, and Ex parte 9 Dowl. Pr. Ca. 18, sub nomine Goulding, 2 Gl. & Jam. 118; Wil- Wilson v. Bailey, son v. Lewis, 2 Man. & Gr. 197, and (y) 10 East, 264. (z) 1 Camp. 404 419 *175 KIGHTS AND OBLIGATIONS. [BOOK II. partner, C. was not liable as such to those who had notice of this stipulation." Principle examined. — These dicta appear to authorize the statement that, if partners stipulate amongst themselves that certain things shall not be done, no person who is aware of the stipulation is entitled to hold the firm liable for what may be done by one of the members contrary to such stipu- lation. 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, (a) Now notice of an agreement between the mem- bers that one of them shall not do certain things is by no means necessarily equivalent to notice that the firm will not be answerable for them if he does. For there is nothing in- consistent in an agreement between the members 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 an agreement had been entered into. It is immaterial to a stranger what stipulations partners may make amongst themselves, so long as they do not seek to restrict their re- sponsibility as to him; and it is only when knowledge of an agreement between partners necessarily involves knowl- edge that they decline to be responsible for the acts [*175] of each other within the ^ordinary limits, that a stranger's rights against a firm can be prejudiced by what he may know of the private stipulations between its members. In Galway v. 3Iathew, (h) the plaintiff's knowledge of want of authority was derived, not from notice of any agreement between the partners, but from an advertisement published (a) See, as to the sufficiency of (6) 1 Camp. 403, and 10 East, 264, such notices, Vice v. Fleming, 1 Y. and ante, p. 170. & J. 227. 420 CH. I, SEC. IV.] LIABILITIES OF PARTNERS. *175 by one of them, warning all persons that he would no longer be liable for drafts drawn by the others on the partnership account, (c) The passage, therefore, in the judgment ex- tracted above was by no means necessary for the decision of the case. With respect to Alderson v. Pope, (d) 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 presents no difficulty ; but if anything more than this was meant the authority of the decision becomes at least doubtful; for it has been held in another case that a person who holds himself out as a part- ner with others with whom he has no concern is liable for their acts, even to persons having notice of the true state of affairs; and the decision 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 between him and those with whom he as- sociates his name, (e) Private stipulations restrictive of liability. — 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. 1 Such an agreement, coupled with notice of it on the part of a person dealing with the firm, is by no means equivalent to a contract be- (c) Distinct notice to the same to third persons without notice effect existed in Minnit v. Whit- thereof, and therefore evidence as ney, 16 Vin. Ab. 244, and 5 Bro. to ouch agreement is irrelevant. P. C. 489 ; Willis v. Dyson, 1 Stark. Maltby v. Northwestern, etc. R. R. 164. Co. 16 Md. 422; Cargill v. Corby, (d) 1 Camp. 404. 15 Mo. 425 ; Perry v. Randolph, 14 (e) Brown v. Leonard, 2 Chitty, Miss. 335; Nichols v. Cheairs, 4 120. Sneed, 229; Tillier v. Whitehead, 1 1 A private agreement between Dall. 269 ; Devin v. Harris, 3 Iowa, partners in relation to a particular 186 ; Barber v. Mann, 5 Bush, 672 ; transaction, although binding as Lawrence v. Kinsting, 1 Mont between themselves, does not af- Ter. 290; Everett v. Chapman, 6 feet their liability to the public or Conn. 347. See ante. 421 *17G BIGHTS AND OBLIGATIONS. , [BOOK II. tween him and it that he shall not hold the members re- sponsible beyond the amount which they may have agreed between themselves to contribute respectively. {/) [*176] "Contracts on the basis of such stipulations. — The writer is not acquainted with any case in which it has been decided that persons who are aware of the terms upon which partners have agreed together to carry on busi- ness are deemed to contract with them upon the basis of the agreement come to amongst the partners themselves. In all cases of this description the real question to be de- termined seems to be whether there was distinct notice that the firm would not be answerable to strangers for acts which, without such notice, would clearly impose lia- bility upon it; and whenever there is any doubt upon this point the firm ought clearly to be liable, the onus being on it to show sufficient reason why liability should not attach to it. {g) Section V". — Of the Liability of Partners in Respect of Contracts Not Entered into on Behalf of the Firm, or Not so in Proper Form. Observations on foregoing propositions. — The general proposition that a partnership is bound by those acts of its agents which are within the scope of their authority, in the sense explained in the foregoing pages, must be taken with the qualification that the agent whose acts are sought to be imputed to the firm was acting in his character of agent, and not as principal. If he did not act in his char- acter of agent, if he acted as a private individual on his own account, his acts cannot be imputed to the firm, and he alone is liable for them, even though the firm may have (/) See Greenwood's Case, 3 De mine, though the prospectus of G. M. & G. 476. the mining company stated that (g) See Hawken v. Bourne, 8 M. all goods were to be bought for & W. 703, where the defendant was cash prices and no debt was to be held liable for goods supplied to a incurred. 422 CH. I, SEC. V.] LIABILITIES OF PARTNERS. M77 benefited by them. Whether a contract is entered into by •an agent as such, or by him as a principal, is often, but not always, apparent from the form of the contract. With reference to the forms of contracts it will be con- venient to consider — 1. Contracts under seal. 2. Ordinary contracts not under seal. 3. Bills of exchange and promissory notes. *1. Contracts under seal. [*177J 1 . Covenants, etc. — A distinction is taken between deeds and other instruments with respect to the person bound bv them. If a deed is executed by an agent in his own name, he and he only can sue or be sued thereon, although the deed may disclose the fact that he is acting for another, (h) 1 (h) Appleton v. Binks, 5 East, 148; Pickering's Case, 6 Ch. 525. And see next note. 1 See the cases collected in Ewell's Evans on Agency, *172, note. See also, generally, ante and post, notes. In an attachment suit brought by a firm, the attachment bond is properly executed by signing the firm name. Gray v. Steedman, 63 Tex. 95. An instrument executed by one partner in the firm name and legally binding upon the partner- ship, and entitled to be recorded under the registry statutes of Flor- ida, may be admitted to record upon the acknowledgment of the partner who executed it. McCoy v. Boley, 21 Fla. 803; Sanders v. Pepoon, 4 Fla. 465, approved. The certificate of acknowledg- ment of an instrument executed in the name of a firm should show by which member of the firm the sig- nature was made and acknowl- edged. If the signing and acknowl- edgment purported to have been done by the firm and in the firm name, the instrument will not be entitled to record. Sloan v. The Owens, etc. Mch. Co. 70 Mo. 206. Where a contract of sale, which must by law be in writing, is made in writing under seal with one part- ner, who gives his bill single for the price of the thing purchased, the other partner cannot be sued upon the consideration. Harris v. Miller, 1 Meigs, 158. If one partner borrows money on his own credit, and gives his sealed note for the amount, the firm is not liable, though the money be used in the partnership transactions. Willis v. Hill, 2 Dev. & B. L. 231. So, where a partner buys real es- tate in his own name, and gives his individual bond and mortgage in part payment therefor, the firm is not liable to the seller for the un- paid purchase money, though it ap. pear by the firm books that the 423 177 RIGHTS AND OBLIGATIONS. [BOOK II. Therefore, where a partner covenants that anything shall be done, he and he only is liable on the covenant, and the firm land was bought on firm account, and a declaration of trust was afterwards executed by the pur- chaser but not recorded, declaring that the money paid was partner- ship funds, and that the land was held by him in trust as partnership property. North Pennsylvania Coal Co.'s Appeal, 45 Pa. St. 181. See, also, Williams v. Gillies, 75 N. Y. 197; Patterson v, Brewster, 4 Edw. 352. A lease from one of the copart- ners, sealed with his seal, and, in terms, binding himself only, is not admissible evidence to support an avowry laying a demise by the co- partners, notwithstanding the deed is expressed as " for himself and his partner," and it is proved that the other party knew of the de- mise and was satisfied with it. Tut- tle v. Eskridge, 2 Munf. 330. Two partners took an assignment of a lease of certain rooms, and afterwards one of them, A. , by an agreement under seal, without the knowledge of the other, sublet a part of the room and granted other privileges to the plaintiff for a term of three months beyond the ter- mination of the lease. Subse- quently the other partner sold his interest to B. A. and B. received rent from the plaintiff. At the ter- mination of the first lease the plaintiff was dispossessed, and '/brought an action of assumpsit against A. and B. for the damage he had sustained. Held, that the agreement under seal was not evi- dence in the action ; that from the receipt of rent by A. and B. no contract could be implied against B., the incoming partner; and that none such was to be implied from, the partnership. Bewley v. Tarns, 17 Pa. St. 485. A. brought assumpsit against B. and others, whom A. claimed to be copartners of B., for goods fur- nished them under a sealed agree- ment executed by A. and B. Held, that an action would not lie as against B. A,'s claim rested on a specialty, and as B. alone could not be made liable in assumpsit, so B. in company with others could not be held in assumpsit. Semble, that if a partnership ex- isted between B. and his co-defend- ants, the partners who did not exe- cute the sealed agreement could only be reached by a bill in equity filed by A. Boston & Col. S. Co. v. Smith, 22 Alb. L. J. 232 ; 13 R. I. 27. A lease under seal, executed by one partner in the name of the firm as lessees, the firm occupying thereunder for two years, paying rent directly to the lessor, has been held to be evidence of an agree- ment for a lease, which, as they have had the benefit of it, will be enforced against the surviving partners after the death of him who executed it. Kyle v. Roberts, 6 Leigh, 495. A writing under seal, executed by one partner in the name of the firm, is held admissible in an action of assumpsit to prove a promise by the firm, if made on sufficient consideration. Fagely v. Bellas, 17 Pa. St. 67. A contract was made, under seal, with a partnership, for build- ing a dam ; but it was executed by 424 CH. I, SEC. V.] LIABILITIES OF PARTNERS. 177 is not bound thereby to the covenantee, (a) A person who has to execute a deed as an agent should take care that the one only of the partnership, and without any authority from the other. The work was duly per- formed. Held, that assumpsit would lie against such partner, the work being within the scope of the partnership, and the supposed con- tracts with the firm having no legal existence as such. Van Deusen v. Blum, 18 Pick. 229. A partner who has pleaded non est factum to a note under seal, executed by a partner without au- thority, is thereby estopped to deny his responsibility in a joint suit against himself and partners for the demand in assumpsit. Doni- phan v. Gill, 1 B.-Mon. 199. If one partner, for the benefit of the partnership, executes a bond, with surety, which the surety is compelled to pay, he does not thereby acquire a right of action against the other partners. Tom v. Goodrich, 2 Johns. 213. See ante, note. Where money was lent to a firm, and the partner who conducted the transaction by mistake exe- cuted a penal bond for the sum, in the name of the firm, instead of giving a promissory note therefor, held, that, though at law the cred- itor had no remedy on the bond except against the partner who executed it, yet equity would cor- rect the mistake, and hold all the partners bound for the debt. Gait v. Calland, 7 Leigh, 594. A vendor of goods, taking the bond of the vendee for the price, may afterwards file a bill for relief, on the ground that the purchase was on account of a partnership, of which the obligor was one. Spear v. Gillet, 1 Dev. Eq. 466. So, where one partner hired slaves in his individual name, but in fact for the use of the firm, which had the benefit of their labor, and he gave his individual bond with surety for the hire, on which judgment was subsequently recovered, and paid by the surety, who then filed his bill against his principal and his copartners, on which it appeared that the princi- pal in the bond was a non-resident of the state and insolvent, held, that the surety was entitled to a decree against his copartners for the amount paid by him. Weaver v. Tapscott, 9 Leigh, 424. In an action by a surviving part- ner on an obligatory writing given to a firm, the plea was that the bond was not given to the firm, but to the deceased partner in the firm's name. At the trial the court instructed the jm-y that, if they believed " from the testimony that the bond in evidence was given for a debt contracted prior to the dissolution of the partner- ship, the name of the partnership could be used after the dissolution, and the suit maintained by the surviving partner." Held, that this instruction was unexception- able. Stillwell v. Gray, 17 Ark. 473. See Survivorship, post. A joint obligation under seal, (i) Hancock v. Hodgson, 4 Bing. 269; Hall t\ Bainbridge, 1 Man. & Gr. 42. 425 *178 EIGHTS AND OBLIGATIONS. [BOOK II. deed and the covenants in it are expressed to be made not by him, but by the person intended to be bound. Thus, if A. is the principal and B. his agent, the deed and covenants should not be expressed to be made by B. for A., but by A. ; and the execution in like manner should be expressed to be made by A. by his agent B. (k) 2. Ordinary contracts not under seal. 2. Ordinary simple contracts.— When a person enters into a contract as the agent of another, the name of that other may be either disclosed or not. If it is disclosed the contract is treated as that of the principal and not as that of the agent; (I) 1 whilst if it is not disclosed the contract is considered as that of the agent. 2 But in this last case the person dealing with the agent can, when he discovers the undisclosed principal, hold him liable instead of the agent, (m) 3 [*178] *Firm liable though not named — Written con- tracts. — If, therefore, one partner only enters into a written contract, the question whether the contract is con- fined to him, or whether it extends to him and his copart- executed by all the members of a 5 Ex. 173 ; Calder v. Dobell, L. R. firm, in its business and for its 6 C. P. 486. benefit, will be regarded as a co- J See Ewell's Evans on Agency, partnership obligation and payable *177, note. out of the firm assets, although 2 Edged v. Macqueen, 8 Mo. the firm name is not mentioned App. 71. therein, and it appears upon its (m) See Paterson v. Gandasequi, face to be simply the obligation 15 East, 62; Thompson v. Daven- of the copartners, contracted in port, 9 B. & C. 78 ; and the note to their individual names. Berkshire those cases in 2 Smith, L. C. If a Woolen Co. v. Juillard, 75 N. Y. man contracts for " my principal," 535 ; Carson v. Byers, 67 la. 606. the principal, although undisclosed, (fc) Combe's Ca?e, 9 Co. 76&; and not the agent, is liable, unless Wilks v. Back, 2 East, 141. there is some special custom ren- (l) Fairlie v. Fenton, L. R. 5 Ex. dering the agent personally liable. 169 ; Ex parte Hartop, 12 Ves. 352 ; But if there be such a custom the Russell v. Reece, 2 Car. & Kir. 669. agent will be liable. See Fleet v. But even in this case the contract Murton, L. R. 7 Q. B. 126. may be so worded as to bind the 3 See Ewell's Evans on Agency, agent. See Paice v. Walker, L. R. *304, 308, 442, and notes. 426 CH. I, SFC. V.] LIABILITIES OF PARTNERS. '178 ners, cannot be determined simply by the terms of the contract. For supposing a contract to be entered into by one partner in his own name only, still if in fact he was acting- as the agent of the firm, his copartners will be in the position of undisclosed principals; and the} r may therefore be liable to be sued on the contract although no allusion is made to them in it. 1 This was expressly decided in the iSee Burnley v. Rice, 18 Tex. 481 ; Everett v. Chapman, 6 Conn. 347; Snead v. Barringer, 1 Stew. 134; Mann v. Clapp, 1 Tex. App. (Civ.) 249; Franklin v. Hardie, 1 Tex. App. (Civ.) 700; Gribble v. Harry, 2 Tex. App. (Civ.) 702. A., B. and C. entered into part- nership in the business of tanning hides, stipulating, in the articles, that A. should furnish hides for one-half of the stock necessary to keep the tannery in operation, and should receive and make market for one-half of the leather, and that B. and C. should furnish the other half of the stock, and receive and make market for the other half of the leather; and that in making purchases each should use his own credit separately. B. purchased of D., in another state, a quantity of hides, which D., being ignorant of the partnership, charged to B. in- dividually. These hides were re- ceived at the tannery and manu- factured into leather for the joint benefit of the partners. In an ac- tion of book debt brought by D. against A., B. and C, as partners, to recover the value of these hides, it was held that the manner in which the goods were in fact pur- chased and charged did not pre- clude the seller from resorting to the partnership when discovered. Everett v. Chapman, 6 Conn. 347. A written contract, in its cap- tion, named "Charles W. Weeks" as one of the parties ; in the body he was called "the said Charles Weeks," and in the subscription, at the end, he, as well as the other party, employed only the initials of his Christian name. In neither the body of the contract nor in the signatures was there any indication that it was the contract of a co- partnership. At the date of the contract C. W. Weeks was a part- ner in a firm doing business under the name of C. W. Weeks, but the matters included in the contract did not relate to the partnership business. There was no proof that the other party to the contract knew that C. W. Weeks repre- sented a partnership firm until after the execution of the contract. The contract was drawn by Weeks, and in all the correspondence, etc., relating to it, the personal pronoun "I" was employed by him; the words " firm" or " we " not at all. Held, that this was the individual contract of C. W. Weeks, and not that of the firm of which he was a member. Marvin v. Buchanan, 62 Barb. 468. Where there are two firms hav- ing the same firm name, with the names of all the partners on the letter-heads, the first firm being composed of A., B. and C, and the second firm of A., B., C. and D., but the business of the two firms i3 427 IT- RIGHTS AND OBLIGATIONS. [BOOK II. well-known case of Beckham v. Drake, (n) There Drake, Knight 'and Sturgey were in partnership as type-founders; but Drake was a secret partner. A written agreement rel- ative to the partnership business was entered into between kept distinct, the second firm keep- ing no bank account, and borrow- ing from first firm when necessary, and one of the partners of the first firm made a note in firm name and discounted it, in an action upon it by the bank advancing the money the jury found that the loan was made exclusively upon the credit of the original three partners, and it appeared that the money was net borrowed or used for the benefit of the latter firm. Held, that the addi- tional partner was not liable upon such note. Hastings Bank v. Hib- bard, 48 Mich. 452. Conversely, such undisclosed principals may sue upon such con- tract. See E well's Evans Agency, *308, note. Thus, where one partner enters into a simple contract, though in writing, in his individual name, but in fact for his firm, although that fact is not known to the other contracting part}', an action may be maintained on it in the name of the firm, by alleging that it was entered into by the firm by the name and style of the name of the one partner, each partner being the agent of the firm. Havana, etc. R. R. Co. v. Walsh, 85 111. 58. Two partners may maintain a suit in the name of both for breach of a contract to transport property of the firm, though the same was executed only in the name of one, and the partners had sometimes 6igned in the name of both. Illi- nois, etc. R. R. Co. v. Owens, 53 111. 391. A. orders goods of B. by letter - T the copartnership of which B. was a member forwarded the goods to A., without a bill or letter, who re- ceived them, supposing them to have been forwarded by B. indi- vidually. Held, that the copart- nership might maintain an action for goods sold and delivered against A. Child v. Wofford, 3 Ala. 564. In an action brought b} r a tan- nery firm for a false warranty of a mule bought by one member thereof, without mention that it was for the firm, held, that the burden of proof was on the defend- ant to sustain his motion for a non- suit, although there was no show- ing that the mule had ever been used in the tannery. Little v. Ham- ilton, Phill. Law, 30. A mechanic's claim for a lien may be filed by a firm, one of whose members is named as the contractor. Chambersburg, etc. Manfg. Co. v. Hazelet, 3 Brews. 98. A partner insured firm property in his own name, being assured by the agents of the company that this would cover the interest of the firm. Afterwards the agents re- fused to correct the policy. Held, that the firm were entitled to have the policy reformed. Snell v. At- lantic, etc. I. Co. 18 Am. Law Reg. (N. S.) 79. (n) 9 M. & W. 79, and 11 M. & W. 315, overruling Beckham v. Knight, 4 Bing. N. C. 243. 428 CH. I, SEC. V.] LIABILITIES OF PARTNERS. *179 the plaintiff and Knight and Sturgey, and for a breach of this agreement by them the action was brought. Drake's name did not appear in the agreement; he did not sign it; nor when the contract was made was he known to the plaintiff to be a partner. It was nevertheless held that all three partners were liable jointly for a breach of the agree- ment, inasmuch as the agreement itself was clearly entered into by the firm, and Drake, like any other undisclosed principal, was liable to be sued as soon as his position was discovered. Parol contracts. — In conformity with the same prin- ciple, if one partner, acting in fact for the firm, orders goods, and they are supplied to him, the firm will be liable to pay for them, although no mention was made of his copart- ners, (o) and they were unknown to the seller of the goods, (p) l So if A., in his own name only, underwrites a policy of insurance, but the profit or loss arising from the transaction is to be divided between him and B., both A. and B. will be liable to the insured, (q) Liability of dormant partners. — These cases establish the important proposition that dormant partners are liable for the debts of the firm, notwithstanding [*179] their connection with the firm was unknown to its creditors when the debts were contracted. 2 (o) City of Lond. Gas Lt. and Coke land, 4 Cow. 2S2; Roth v. Moore, Co. v. Nicholls, 2 Car. & P. 365 ; 19 La. Ann. 80 ; Tucker v. Peaslee, Whitwell v. Perrin, 4 C. B. N. S. 36 N. H. 167; Baxter v. Clark, 4 412. Ired. L. 127; Given v. Albert, 5 (p) Ruppell v. Roberts, 4 Nev. & Watts & S. 333 ; Bisel v. Hobbs, 6 Man. 31 ; Robinson v. Wilkinson, 3 Blackf. 479; Griffith v. Buffum, 22 Price, 538: Bottomley v. Nuttall, 5 Vt. 181 ; McNair v. Rewey, 62 Wis. C. B. N. S. 122. 167. 1 To the point that partners are See, however, Watt v. Kirby, 15 liable for goods furnished for the 111. 200 ; Sinklear v. Lambert, 5 use of the firm, though the vendor Phila. 36. supposed himself dealing with and (q) Brett v. Beckwith, 3 Jur. N. S. giving credit to an individual part- 31, M. R. ner, not knowing of the existence 2 A partnership for the manufact- of the firm, see Poole v. Lewis, ure of iron was composed of four 75 N. C. 417 ; Reynolds v. Cleve- persons, the names of two of whom 429 '179 EIGHTS AND OBLIGATIONS. [BOOK II. One partner only liable, he only being dealt with.— On the other hand, if one partner only is dealt with, and the circumstances are such as to show that he was acting and was dealt with on his own account, i. e., as a principal, and not as the agent of the firm, he alone is responsible, (r) 1 did not appear, and these lived at a distance. The two acting part- ners bought land in their own name for the purpose of obtaining from it wood to be used in the manufacture of iron ; and, so far as it was paid for, it was paid for out of the partnership effects. Held, that the land was partnership property, and, the partnership hav- ing failed, the two dormant part- ners were liable to the vendor for the balance of the purchase money. Brooke v. Washington, 8 Gratt. 248. See, however, contra, as to the liability of dormant partners in land, Gray v. Palmer, 9 Cal. 616. (r) See, in addition to the cases cited below, Ex parte Eyre, 1 Ph. 227. 1 A copartner may contract on his own account and make him- self alone liable for merchandise bought for the copartnership ac- count, if the vendor choose to accept him. Merchants' Bk. v. Thompson, 3 Ont. 541; Sylvester v. Smith, 9 Mass. 119; McDonald v. Parker, Ky. Dec. 245; Smith v. Hoffman, 2 Cranch, C. C. 651 ; Sink- lear v. Lambert, 5 Phila. 36. See Jenkins v. Davis, 54 Wis. 253; Payne v. James, 36 La. Ann. 476. One who, as a member of a firm, has contracted with another for the performance of a certain thing, is not thereby prevented from mak- ing a verbal promise as an individ- ual concerning the same matter. Pond v. Starkweather, 99 N. Y. 411. When no credit is given and there is no expectation, originally, of looking to one partner for debts incurred by the other, no recovery against the former can be had. Chapman v. Devereux, 32 Vt. 616 ; Floyd v. Wallace, 31 Geo. 688. See, also, Watt v. Kirby, 15 111. 200. Defendant's being a partner in a firm charged in book account is- not, of itself, conclusive of his lia- bility in an action thereon ; for it may be shown by parol on whose account the articles charged were delivered; and the parties were competent witnesses for them- selves or each other to that point. Burton V. Ferris, Brayt. 78. The fact of the creditors keeping their books and stating their ac- counts in the names of the firm with whom their dealings were had, without mentioning the defendant, who was also interested in the transaction, does not alone exon- erate the defendant from his lia- bility to them nor manifest an in- tention to waive their claim upon him. Baring v. Crafts, 9 Metcl 380. The plaintiff was employed by the defendant, on his credit alone, to open and develop a coal mine on lands owned by the defendant with others. It not appearing that the other proprietors requested the de- fendant to engage in this enter- 430 CH. I, SEC. V.] LIABILITIES OF PARTNERS. *179 Examples. — Thus, where persons work a coach in part- nership, each having his own horses, and one of them orders fodder on his own account, he alone is liable for it. (s) So, in the ordinary case of an agreement between an author and a publisher, to the effect that the publisher shall pay for the paper, printing and other expenses of publication, and that after reimbursing himself and deducting: a com- mission the profits shall be divided equally, the author is not liable for the paper or printing which may have been supplied and executed for the publisher, (t) Form of written contracts. — With respect to contracts in writing it is to be observed that a contract or other in- prise, or authorized him to employ the plaintiff to perform this serv- ice, held, that the mere fact that they were co-tenants with the de- fendant in the land was not enough to warrant the presumption that they were partners with him in his scheme to develop a coal mine upon it. Stannard v. Suiith, 40 Vt. 513. Where one copartner makes a sale or disposition of the partnership property in his own name, and without disclosing the name of his copartner or copartners having an interest therein, at the same time warranting the soundness thereof, also in his own name, suit may be maintained against him for a breach of this warranty without joining his copartner in the action. Cookingham v. Lasher, 38 Barb. 656 ; Clark v. Holmes, 3 John. 148. Where a debt is contracted by one partner in his own name alone, in order to charge the firm it must appear that the consideration was used by the firm with the knowl- edge and approbation of the de- fendant, or that the debt was sub- sequently assumed by the firm. Nichols v. English, 3 Brews. 260. Where money is loaned to mem- bers of a partnership on their in- dividual contract, the fact that it is applied to the payment of part- nership debts does not constitute the lender a creditor of the firm. National Bank v. Thomas, 47 N. Y. 15. A contract executed by one member of a copartnership, signing his name as superintendent of the firm business, it being inferable from the contract that it was his intent to bind the firm, is binding upon the copartnership. Pearson v. Post, 2 Dak. 220. (s) Barton v. Hanson, 2 Taunt. 49. Mr. Colly er treats this as an exception depending on particular custom, but this view is not cor- rect. The law is the same in Scot- land. See Jardine v. M'Farlane, 3 Ross. L. C. on Com. Law, 575. (t) See the Scotch case of Ven- ables v. Wood, 3 Ross. L. C. on Com. Law, 529 ; Wilson v. White- head, 10 M. & W. 503. But see Gardiner v. Childs, 8 C. & P. 345, where the paper was supplied for the specific book. 431 M.80 EIGHTS AND OBLIGATIONS. [BOOK II. strument required by statute to be in writing, and signed by the party to be charged, only binds those parties who actually sign it; (u) but if signature by the party to be charged, or his agent, is sufficient, the signature of one part- ner, in the name or on behalf of the firm, will bind all the partners, (v) It is often a matter of difficulty to determine whether a particular contract is entered into by the firm through one of the partners or by that one partner only. There is nothing to prevent one person from entering into a contract as a principal, and yet for and on behalf of another ; (x) [*180] and when A. enters *into a contract for B. it may not be easy to say whether it is B. who contracts, or whether it is A. for B.'s benefit. And yet the true answer to this question determines whether B. is or is not liable on the contract. 1 The cases on this subject relate principally (it) Swift v. Jewsbury, L. R. 9 1S2 them, even although dishonestly given. (/) At the same time, if they can show that he gave the bills as his own and not as the bills of the firm, they will not be liable even to a lona fide holder for value. This was decided by the court of appeal in The Yorkshire Banking Co. v. Beatsoii, ((/) in which the law on this subject will be found exhaustively examined. In that case an accommodation acceptance given by one partner in his own name was held not binding on his dormant partner, as the acceptance was not intended to bind him, and was, in truth, a private transaction, and was not entered in the books of the firm. The fact that the plaintiffs took the bill as the bill of the persons, who- ever they were, who might be associated with the partner Avhose name was on the bill, was held immaterial. The plaintiffs never knew or gave credit to any one else. tion signed by such individual, the legal presumption is that it is the note of the individual and not of the partners. The plaintiff, to re- cover against the partners, must not only prove the execution of the note, but go further, and prove either that the money for which the note was given was borrowed on the credit of the partnership, or that, when obtained, it was used in the business of the partnership. Oliphant v. Mathews, 10 Barb. 008; Mercantile Bank v. Cox, 38 Me. 500; Chemung Bank v. Ingraham, 58 Barb. 290. See, also, U. S. Bank v. Binney, 5 Mason, 176. On the formation of a partner- ship between S. & I. under the firm name of " J. S.," a note was made by J. S. in his own name, which he procured to be discounted by the plaintiff for the purpose of enabling him to pay in his share of the capital. S. did not represent to the plaintiff that it was a firm note, and the payees, as officers of the plaintiff's bank, knew, or had good reason to believe, that the note was not the note of the firm, but was the individual note of S. Held, that I. was not liable as a party to the note in any form ; and no recovery could be had against him by the plaintiff as holder thereof; that if the lender did not know of the partnership, or if the money was loaned on the individ- ual credit of the maker of the note, the fact that the money was applied to the business of the firm did not create a liability on the part of the firm, or constitute the lender a creditor of the firm. Chemung Bank v. Ingraham, 58 Barb. 290. (/) See 5 C. P. D. 123 and 124. (g) 5 C. P. D. 109, affirming S. C. 4 id. 204, but on different grounds. N. B. — The court set aside the ver- dict of the jury. See, also, South Carolina Bank v. Case, 8 B. & C. 427 ; Ex parte Law, 3 Deac. 541. 437 *]83 EIGHTS AND OBLIGATIONS. [BOOK II. If A., B. & C. are partners, and A. draws a bill of ex- change on B., and he accepts the bill, A., B. & C. cannot be sued upon it; and this is so whether A., B. & C. have a busi- ness name or not; (h) and even although the bill may have been used for the joint benefit of the three partners. (*) Even if it is agreed that the business of the three [*183] shall be carried on in the name *of one of them, it will not follow that all bills accepted by him will bind all the three partners. The question remains, whose bill is it? This was decided by the court of appeal in chancery in Miles' claim, (j) There four firms, F. & Co., M. & Co., M. & L., and A. & Co., engaged in a joint adventure, and agreed to carry on business under the name of F. & Co., and to divide profits and losses in equal shares. They also agreed that funds for the adventure should be raised by the drafts of any one of the four firms on the others; bills were drawn by M. & Co. on A. & Co., on M. & L., and on F. & Co., and were duly accepted. It was held that none of these bills bound all four firms jointly. As regard the bills drawn on A. & Co., and on M. & L., the case presented no diffi- culty, for it is plain that these bills were not drawn or ac- cepted in the name in which the joint adventure was carried on. As regards the bills accepted by F. & Co., which was the name under which the joint adventure was carried on, there was an ambiguity ; but the court held that this name, used as it was, really meant the separate firm F. & Co., and not the four firms engaged in the adventure, and that there was no sufficient reason for holding it to mean anything else. Again, in Hall v. West, (Jc) three brothers of the name of Dawson carried on in partnership, under the name of Daw- (h) See Nicholson v. Ricketts, 2 exchequer, and afterwards in the E. & E. 497, and Miles' Claim, 9 exchequer chamber, in June, 1875. Ch. 635. The above note of the case is taken (i) Ibid. from shorthand-writer's notes of (j')9Ch. 635. the judgments. (Jc) A special case decided in the 438 CH. I, SEC. V.] LIABILITIES OF PAETNEKS. *18-t son <& Sons, the business of millers, farmers, coal and corn dealers, and bone crushers. The defendant was a dormant partner in the bone-crushing business only. Dawson & Sons overdrew their account with their bankers, who knew noth- ing of West, nor of his connection with the bone business. Having, however, discovered this, they sued him for the amount of the overdrawn account. He was held not liable; for in point of fact the balance due to the bankers was not in respect of any debt contracted by Dawson & Sons in con- nection with the bone-crushing business; it was not, there- fore, as between the partners themselves, a debt of the firm of which the defendant *was a member; [*184:] and there was no apparent as distinguished from real authority on which the bankers could rely as against West. In the same case bills were drawn by West on and ac- cepted by Dawson & Sons. With one exception these bills were drawn for purposes unconnected with the bone busi- ness. On the facts stated (but which it is unnecessary here to detail) the court held that all these bills had in fact been paid; it became unnecessary, therefore, to consider whether West could have been sued as an acceptor. It was contended, on the authority of Baker v. Charlton, (I) that he was liable; but the court of exchequer (m) dissented from that case and expressed a clear opinion that West could not have been liable as an acceptor of the bills, with the exception of the (l) In Baker v. Charlton, Peake, the other ; but Lord Kenyon de- ll 1 (ed. 3), two firms carried on clared the defense invalid. Hav- business under the name of J. ing traded with persons under the King & Co. The defendant was style of "J. King & Co.," the de- partner in one of them only, but fendant was liable on bills drawn his copartners were members of by them in that name. See, also, both firms ; the defendant was sued Davidson v. Robertson, 3 Dow. 218 ; by an indorsee on a bill drawn by McNair v. Fleming, 1 Mont. Part his copartners in the name of " J. 37, and 3 Dow, 229. But Baker v. King & Co. ; " the defendant re- Charlton cannot now be relied on. sisted the action on the ground (m) i. e., Kelly, C. B., and Am- that the bill was not drawn by the phlett, B. firm to which he belonged, but by 439 ; 184 EIGHTS AND OBLIGATIONS. [BOOK II. one which had been given for the purposes of the bone business in which he was a partner. The court of excheq- uer chamber expressed no opinion on this point, it being unnecessary to do so. (b) Bills not in name of firm. — Secondly, as regards bills not drawn, accepted or indorsed by the firm in proper form , In the absence of evidence to the contrary, a partner has no authority to use for partnership purposes any other name than the name of the firm; (n) and if he does, and there is any substantial variation which cannot be shown to be authorized by his copartners, the firm will not be liable. If, however, there is no substantial variation, the firm will be bound. 1 (n) Kirk v. Blurton, 9 M. & W. 284; Hambro' v. Hull and London Fire Inaur. Co. 3 H. & N. 789. 1 Where the partners of a firm have a copartnership name which they ordinarily use, they will not be bound by the use of a new name, unless it be shown that all the partners have assented to the use of such new name, or that the partner who was intrusted with the control and management of the business of the firm had so as- sented. Palmer v. Stephens, 1 Den. 471. A member of the firm of "Charles G. Ramsay & Co." signed a promissory note " Chas. G. Rani- say & Co." Held, in a suit upon the note against the firm, that it was a question of fact whether there was any substantial differ- ence between the signature and the firm name, and that the jury were well warranted in finding that the name and signature were the same. Til ford v. Ramsey, 37 Mo. 563. A., B., C. and D. were partners under the style of A., B. & Co. C. executed a note, signing the names of each of the firm. Held, on a plea of non est factum filed by A., B. and D., that C. had no power to bind them by such signature ; but that it constituted the note prima facie an individual transaction. Crouch v. Bowman. 3 Humph. 209. See, also, Ellinger's Appeal, 7 Atl. Rep. 180. However, in McGregor v. Cleve- land, 5 Wend. 475, it was held that a promissory note given by one of two partners in the business of farming and coopering, signed "A., B. & C. D.," was binding upon both. Where the priority of different creditors attaching the property of a firm is to be determined by the individual or partnership character of their respective claims, the mere fact that a promissory note is signed by the individuals who com- pose the firm is insufficient to show that it is a partnership debt. Gay v. Johnson, 45 N. H. 587. A note, however, signed by three partners individually, rather than by their partnership name, for money used in their partnership 410 CH. I, SEC. V.] LIABILITIES OF PARTNERS. *185 In Faith v. Richmond, [p) persons carrying on business in ^partnership under the name of The [*185] Newcastle and Sunderland Wallsend Coal Company were held not liable on a note issued in the name of The Newcastle Coal Company; and in Kirk v. Blurton, (p) where two persons carried on business under the name of John Blurton, one of them was held not liable on a bill drawn and indorsed by the other in the name of John, Blurton db Co. On the other hand, in Norton v. Seymour, {q) where the name of the firm was Seymour c& Ayres, a promissory note signed by one of the partners thus: " Thomas Seymour <& Sarah Ayres," was held to bind both. Effect of frequent use of wrong name. — In the above cases of Faith v. Richmond and Kirk v. Blurton, the name used was not the name of the firm sought to be made liable, nor was there any evidence to show that the firm was in the habit of making use of the name in question. If there had been such evidence the firm would have been liable; for whatever the name used may be, if it is that ordinarily employed by a partner whose business it is to attend to the business, on account of the prefer- drawn, not only in an action for ence of the payee, is a partnership money lent, but also as a party to note. Kendrick v. Tarbell, 27 Vt. the bill. Wright v. Hooker, 10 512. See, also, Dunnica v. Clink- N. Y. 51. scales, 73 Mo. 500. Also, ante, See ante. note. (o)ll A. & E. 339. Where two firms in different lo- (p) 9 M. & W. 284. This case calities enter into an agreement, in was decided on the right principle ; express terms, creating a partner- but most persons will probably ship for the purpose of carrying on agree with Martin, B., in thinking the legitimate freighting business, that the principle was not prop- and, adopting no partnership name, erly applied, and that it should carry on the business in each local- have been left to the jury to say ity under the name of the firm whether John Blurton and John there established, a bill of exchange Blurton & Co. did not in fact mean drawn by one firm upon the other, the same thing. See per Martin, the proceeds of which are applied B., 5 H. & N. 517. to the partnership business, will (g) 3 C. B. 792. bind the firm against which it is 441 *1SG EIGHTS AND OBLIGATIONS. [BOOK II. bills and notes of the firm, the other partners will not be heard to say that such name is not the name of the firm for the purpose for which he has habitually used it. Therefore, where the name of a firm was Hapgood & Co., but the managing partner was in the habit of indors- ing bills of the firm in the name of Hapgood & Fowler, which had formerly been the name of the firm, it was held that such indorsement was valid, although the other part- ners were not shown to have authorized the use of the name in question, (r) Liability of persons using the wrong name.— Again, although in Faith v. Richmond and Kirk v. Blurton the firm was held not bound in consequence of the name of the firm not being used, those members of the firm who actually made use of the names in question were held liable; for the name used was made theirs by their own [*186] act. 0) Upon the *same principle, if blank bills are drawn and indorsed by a firm, and before they are negotiated one partner dies and the name of the firm is changed by the surviving partners, and the bills previously drawn and indorsed are then negotiated, these bills will be binding on the new firm, although the name on the bills is that of the old firm and not that of the new. (t) Cases in which error in name is unimportant — Drawee and acceptor not identical.— A bill drawn on a firm by a wrong name and accepted in its right name binds the firm; (u) and a bill drawn on a firm and accepted by one partner in his own name only has been held to bind the firm on the ground that the word " accepted," if written by (r) Williamson v. Johnson, 1 B. and by a mistake a contract is en- & C. 146. tered into with it in its old name, (s) So in Wild v. Keep, 6 C. & P. the members of the new firm may 235, a person of the name of Joseph sue op it, provided the other party Keep was held liable on a bill ac- is not prejudiced by their so doing, cepted by himself in the name of Mitchell v. Lapage, Holt, N. P. Ca. John Keep & Co. 253. But see Boulton v. Jones, 2 (t) Usher v. Dauncey, 4 Camp. H. & N. 564. 97. If a change is made in a firm, (u) Lloyd v. Ashby, 2 B. & Ad. 23. 442 CH. I, SEC. V.] LIABILITIES OF PARTNERS. : 186 one of the partners, is sufficient without any signature; and that his signature, if affixed, may be treated as redun- dant, (a;) l But there is no other case in which a firm is liable on a negotiable instrument, made, drawn or indorsed in the name of one of the partners only, {y) unless, indeed, his name is the name of the firm, (z) Even a bill drawn on one partner and accepted by him on behalf of the firm does not bind the firm, the other partners not being drawees, (a) 2 (x) Mason v. Rumsey, 1 Camp. 384 ; Jenkins v. Morris, 16 M. & W. 879; Byles on Bills, 43 and 45, ed. 11; p. 47 et seq., ed. 14. In such a case the acceptor may also be sued alone. See infra. 1 Beach v. State Bank, 2 Ind. 488 ; Panned v. Phillips, 55 Geo. 618; Tolman v. Hanrohen, 44 Wis. 133. Contra, Heenan v. Nash, 8 Minn. 407. The act of drawing a bill by one partner in his own name on the firm of which he is a member, for the use of the partnership, is in law an acceptance by the drawer in behalf of the firm; and an ac- tion may be maintained against the firm as on an accepted bilk Dou- gal v. Cowles, 5 Day, 511. If a partner, acting under the authority of the firm, given by parol, to take up money on joint account and draw therefor on A., does draw a bill of exchange in his own name, but directs the amount to be charged to account of the firm, and the parties, knowing the facts, receive the cargo, purchased with the funds so raised, without objection, the payee may recover of the partners as on a partnership draft, or a draft guarantied to the holder by them. Reirnsdyk v. Kane, 1 Gall. 630. A firm did business in Richmond under the name of D. M. & Co., all the members residing there except A., who was in London, where he carried on business in his own name. B. drew a bill of exchange on A. in London, " on account of D. M. & Co.," which was accepted by A. Held, in a suit by B., the drawer, that this was the individ- ual acceptance of A., who alone was liable thereon, though the firm of D. M. & Co. might be liable for the amount of the bill on proof that the bill was drawn on account of money contracted to be paid by D. M. & Co. Cunningham v. Smithson, 12 Leigh, 32. A draft drawn by one only of three partners, but on their joint credit and for their joint benefit, may be recovered as an item in an account against the firm. Beebe v. Rogers, 3 Iowa, 319. (^)Emly v. Lye, 15 East, 7; Ex parte Bolitho, Buck, 100 ; Lloyd v. Ashby, 2 C. & P. 138; Williams v. Thomas, 6 Esp. 18. (z) As to which, see ante, pp. 182, 183. (a) Nicholls v. Diamond, 9 Ex. 154 ; Mare v. Charles, 5 E. & B. 978. 2 One of the members of a part- nership carrying on business in Virginia resided in London, but no house was established in London. The plaintiff drew a bill on the 443 *1S7 EIGHTS AND OBLIGATIONS. [BOOK II. A bill drawn on a firm and accepted by one partner in the name of the firm and in his own name does not bind him separately if the firm is bound by his acceptance. (5) But if he has no authority to bind the firm he is himself liable on the bill. This was held in Owen v. Van Uster, (c) where a bill was drawn on " The Allty- Crib Mining [*187] Company? and was ^accepted "per proa. The Allty- Crib Mining Company, W. T Van Uster, Lon- don, Manager^ It was held that Yan Uster was personally liable on this bill, he being one of the company on which the bill was drawn, and therefore one of the drawees, and also an acceptor. (c) Promissory notes.— Thirdly, as regards promissory notes. 1 With respect to promissory notes the following rules are deducible from the cases : Promise by one partner.— 1. If a partner promises for himself, and not for himself and copartners, he only is liable member of the firm residing in London, expressed to be "on ac- count of " the partnership. The bill was accepted by the drawee in his own name. Held, that the partner- ship was not liable on the accept- ance. Cunningham v. Smithson, 12 Leigh, 32. (b) Re Barnard, 32 Ch. D. 447 ; Malcolmson v. Malcolmson, L. R. Ir. 1 Ch. D. 228. (c) 10 C. B. 318. The company in this case was a mere partnership. 1 See, generally, Ewell's Evans on Agency, *177, 186 et seq., and notes. The mere form of an instrument is not conclusive as to its character as being either a separate or joint debt. In re Waldron, 98 N. Y. 671. Generally, however, when a member of a firm makes a note or draws a bill in his own name, though it is known to be on the partnership account, the firm will not be bound. Be Warren, Davies, 320; Farmers' Bank v. Bayless, 35 Mo. 428 ; Foster v. Hall, 4 Humph. 346. A note, given in the individual name of one partner, is prima facie deemed his individual obligation, unless his partner be a dormant partner. Scott v. Colmesnil, 7 J. J. Marsh. 416 ; Graeff V. Hitchman, 5 Watts, 454 ; City Bank's Appeal, 54 Conn. 269; Davis v. Blackwell, 5 Bradw. 32. Conversely, where money is loaned to one partner and not to the firm, the fact that the several members signed the note given therefor does not make the note a partnership transaction, nor does the fact that the partner borrow- ing applied the greater part of the money in payment of the partner- ship indebtedness. Lill r. Egan, 89 111. 609. If, on the sale of partnership 414 CII. I, SEC. V.J LIABILITIES OF PARTNERS. : '1S7 on the note, though he may promise to pay a partnership debt, (d) property, a promissory note due at a future day is given for the price, and made payable to the oi - der of one of the partners as an individ- ual, the partnership having a name different from that of the payee of the note, the note, though part- nership property, cannot be in- dorsed by another partner in the name of the payee so as to pass the legal title with the incidents of ne- gotiable paper transferred before due, without more authority than that resulting by operation of law in the partnership relation. Mc- Cauley v. Gordon, G4 Ga, 221. The taking, not as payment, of the individual note of one partner for money loaned, though it may be evidence that the loan was not made to the firm, is not conclusive of that fact. Where such individ- ual note of one partner is taken for a loan made at the time to the firm, the presumption is that it was not taken as payment. Hoef- linger v. Wells, 47 Wis. 628. It has been held that to bind a partner by a note drawn by his co- partner in his own individual name it must appear that such individual name was the style of the firm. Macklin v. Crotcher, 6 Bush, 401. The signature of one partner to negotiable paper, however, binds all, though he signs only his own name, if, from the paper itself, it appears to be on partnership ac- count, and to be intended to have a joint operation. Crozier v. Kirker, 4 Tex. 252. See, also, Seekell v. Fletcher, 53 la. 330. Where only one member of a firm signs his individual name to a note, the firm will be bound thereby if they, as partners, made the contract, and the credit was given to them as such. Puckett v. Stokes, 58 Tenn. 442. See, also, Seekell v. Fletcher, supra. In order to make a note, signed in the individual name of one of the partners, binding upon the firm, it must be made to appear, affirmatively, that it was given and received as a firm note, binding upon all the partners. Hubbell v. Woolf, 15 Ind. 204; Buckner v. Lee, 8 Ga. 285; Staats v. Howlett, 4 Den. 559; Seekell v. Fletcher, supra; Anderson v. Norton, 15 Lea, 14. Whether a note in suit arose from the indebtedness of the firm or of an individual partner is a question for the jury. Roberts v. Pepple, 55 Mich. 367. When a partnership is sued upon a promissory note, signed by one partner only in his individual name, which was not the firm style, the burden of proof is on the plaintiff to show that the note was, in fact, a partnership transaction; and the partnership will not be made liable by proof that the money was borrowed for the use of the firm, and was so used by them, and that the parties to the note were aware of those facts, if (rf)Siffkin v. Walker, 2 Camp. 9! 308 ; Murray v. Somerville, 2 Uamp. 1 445 ), note. And see Ex parte Harris, Madd. 583. : 1S7 MGIITS AND OBLIGATIONS. [book II. Promise hy several partners.— 2. If several partners sign a note in this form, "I promise to pay," all who sign the note are liable on it, jointly and severally, (e) it also appears that the money was advanced on the personal credit of the individual partner, and the parties knew that the note was to be negotiated as the individual note of the maker. Farmers' Bank v. Bayliss, 41 Mo. 275. A note payable to several per- sons not partners can only be trans- ferred by the joint indorsement of all: but when payable to two or more as partners it may be trans- ferred by the indorsement of any one of them. Ryhineru. Feickert, 92 111. 305. Where one partner keeps the bank account of the firm in his own name, with the knowledge and consent of the others, all part- nership debts and accounts being paid by checks drawn and signed by him alone, the firm is liable upon such a check drawn in its business. Crocker v. Colwell, 46 N. Y. 212. Where a firm, consisting of three members, is engaged in business as a private bank, and has been so en- gaged for about a year, with M., one of the partners, as resident and managing partner, and F., who has been in the habit of dealing with the bank, goes into its ordinary place of business, and, intending to deal with it, hands over the coun- ter, to such manging partner, $50, in the usual manner for deposit, and receives therefor, upon a printed blank in the name of the bank, a certificate of deposit signed by M., and nothing is said about any personal loan to M., and no in- timation given of any other than, as F. intended, a transaction with the bank, and F. has no knowledge of any agreement between the part- ners as to the form of the firm's blanks or the manner of the firm's signature, held, that such certifi- cate is binding upon the firm, and that notwithstanding that M. did not affix to his signature to the certificate any such words as " cashier'' or " managing partner,"' and although M. intended to take it as a loan to himself and did not enter the transaction in the books of the firm, nor pass over to its credit the money, but appropriated the same to his own use, and al- though the blank form used for the certificate was not the one gener- ally used by the bank after the formation of the partnership, but that used by M. while carrying on by himself the business of banking prior thereto in the same place and under the same name. Lemon v. Fox, 21 Kan. 152. C, one of the partners of the firm of A. , B. and C. , executed the following note: "Dec. 7, 1835. One day after date, due J. Sithens 267 dollars and 87 cents, for work done on West River bridge for the company of A., B. and C. By me, C." Held, that this note bound the firm. Caldwell v. Sithens, 5 Blackf. 99. Where two persons, by virtue of (e) Clarke v. Blackstock, Holt, N. P. C. 474; March v. Ward, 1 Peake, 177 (ed. 3j. 446 CH. I, SEC. V.] LIABILITIES OF PARTNERS. 187 Promise by one in name of firm. — 3. If one partner prom- ises in the name of the firm to pay that for which he, and not the firm, is liable, the promise binds him at all events. As an illustration of this, reference may be made to Shipton v. Thornton. (/) There the defendant, a partner in the house of Thornton & West, was solely liable to the plaint- iff for certain freight, and he gave the plaintiff a note in this form : I hereby engage to pay the amount of freight, etc. I am, etc., R. & R. Thornton & West. On this note the defendant was held separately liable. an agreement, become partners as to third persons without any firm name, and one of the parties who transacted the business gave a note signed in his own individual name for goods purchased, and the payee was ignorant of the relations of the parties, held, that the dormant partner was not liable on the note. Palmer v. Elliott, 1 Cliff. 63. Under the law of Virginia an action may be maintained upon a promissory note against a secret partner who did not sign it ; but he is not liable unless the money came to the use of the firm. Bank of Alexandria v. Mandeville, 1 Cranch, C. Ct. 575. A member of a firm, which was well known, purchased a horse, for which he gave his individual note. Held, that the partnership was not liable, although the avails of the horse when sold went into the part- nership fund. Holmes v. Burton, 9 Vt. 252. A note given to one partner may be evidence of a settlement with his firm, he being in the habit of taking in his own name notes due the firm. Boffandick v. Raleigh, 11 Ind. 136. A declaration which states that the defendants A. and B. formed a copartnership, and agreed between themselves that A. should buy cer- tain goods for the firm and execute his own note in payment, on which they should be jointly liable, where- upon A. bought the goods; that in consideration of the acceptance of A.'s note in payment, and the deliv- ery of the goods to the firm, the defendants promised to pay the amount of the note when it fell due, shows a good consideration for the promise of B., and that it was an original undertaking and not a promise to pay the debt of another. Hotchkiss v. Ladd, 36 Vt. 593. "Where merchandise Was deliv- ered by partners in payment of a note signed by one of the partners, but given for a partnership trans- action, held, that the vendors could not recover the value of the mer- chandise of the vendees, on the ground that it was not a note of the partnership. Owings v. Trotter, 1 Bibb, 157. (/) 9 A. & E. 314. See, too, Hud- son v. Robinson, 4 M. & S. 475. 447 *188 EIGHTS AND OBLIGATIONS. [BOOK II. Joint and several notes. — 4. One partner has no author- ity, as such, to bind himself and copartners jointly and sev- erally, (g). But if some members of a firm make a joint and severed promissory note they will be personally liable, although they may have signed only on behalf of themselves and copartners; and persons signing notes in the following forms have been held liable on them as makers, [*188] *and not merely incidentally as members of the com- pany to -which they belonged : * We jointly and severally promise to pay, etc., value received, for and on behalf of the Wesleyan Newspaper Association. Parker Story, > Directors . (h) James "Ware, > We, the directors of the Royal Bank of Australia, for ourselves and other shareholders of this company, jointly and severally promise to pay, etc., value received on account of the company. T. W. Sutherland, J. Connell, M. Boyd, A. Duff, Directors, (i) Midland Counties Building Society. We jointly and severally promise to pay, etc. W. R. Heath, ) ^. . > Directors. S. B. Smith, ) W. D. Fisher, Secretary, (fc) Promise for self and copartners. — 5. If a partner prom- ises for himself and copartner this amounts to a promise (g) Maclae v. Sutherland, 3E.& (h) Healey v. Story, 3 Ex. 3, in B. 1, which shows that a joint and which Story and Ware were sued several promissory note is valid as jointly. a joint note, though it is not bind- (0 Penkivil v. Connell, 5 Ex. 381, ing, as a several note, on any per- in which Connell only was sued, son who does not sign it. (fc) Bottomley v. Fisher, 1 H. & •See the cases collected in C. 211, in which Fisher only was EwelL'g Evans on Agency, 177, 186 sued. et seq. 448 OH. I, SEC. VI.] LIABILITIES OF PARTNERS. *189 by the firm. (I) Accordingly the firm has been held liable on notes in the following form : Sixty days after sight I pay A. or order £200, value received. For J. Matthew, T. Whitsmith, T. Smithson, J. Matthew, (to) And, contrary to an older decision, (n) the firm has been held liable on notes in the following form: *Leicester and Leicestershire Bank. [*189] I promise to pay the bearer on demand £5, value received. For John Clarke, Eichard Mitchell, Joseph Phillips, Thomas Smith, Richard Mitchell, (o) Section YI. — Liability of Partnerships in Respect of Contracts Not Binding on Them, but of which They Have Had the Benefit. Effect of having had the benefit of a contract. — It is an erroneous but popular notion that if a firm obtains the benefit of a contract made with one of its partners it must needs be bound by that contract. Now, although the cir- cumstance that the firm obtains the benefit of a contract entered into by one of its members tends to show that he entered into the contract as the agent of the firm, (p) such circumstance is no more than evidence that this was the case; and the question upon which the liability or non- (l) Smith v. Bailey, 11 Mod. 401 ; signed A. B.," and which was held Lane v. Williams, 2 Vern. 277 and to bind A. B. separately. 292 ; Smith v. Jarves, 2 Lord Ray- (o) Ex parte Buckley, 14 M. & mond, 1484. W. 469, and 1 Ph. 562; and Ex (in) Galway v. Mattew, 1 Camp, parte Clarke, De Gex, 153, revers- 4 °3- ing Ex parte Christie, 3 M. D. & (n) Hall v. Smith, 1 B. & C. 407, D. 736. where the form was "I promise to (p) Per Rolfe, B., in Beckham v. Pay for A. B., C. D. and E. F., Drake, 9 M. & W. 99, 100. Vol. 1 — 29 449 *190 EIGHTS AND OBLIGATIONS. [BOOK II. liability of the firm upon a contracts depends is not, Has the firm obtained the benefit of the contract? but, Did the firm, by one of its partners or otherwise, enter into the contract? (q) A leading case on this head is Emly v. Lye. (r) There a partner drew bills in his own name and sent them to an agent of the firm in order that he might get them dis- counted. They were discounted, and the money obtained was remitted by the agent and was paid to the account of the firm. It was held that the firm was neither liable for the amount of the bills on the bills themselves, nor for their proceeds on the common counts. There was no loan to the partnership; no contract with it; and no liability at- tached to the firm by the fact that the partner who [*190] alone was liable had applied the money after *he got it for the benefit of his copartners as well as for the benefit of himself. Money borrowed Iby one partner. — Again, in Bevan v. Lewis, (s) one partner borrowed money and executed war- rants of attorney to confess judgment. The money which he obtained was applied by him for the benefit of the part- nership, and was obtained in part with the knowledge of his copartner in order that it might be so applied. But it was held that the partnership was not liable for the money, the loan having been clearly made to the one partner, against whom alone judgment was to be entered, and not to the firm through him. So, in ordinary cases, when one part- ner borrows money without the authority of his copartners, the contract of loan is with him and not with the firm ; and the nature of that contract is not altered by his appli- cation of the money. The lender of the money has, there- fore, no right to repayment by the firm, although the (q) Per Rolfe, B., ubi supra. See, fit of a contract does not show con- too, Kingsbridge Flour Mill Co. v. clusively that the firm is not bound. The Plymouth Grinding Co. S Ex. Ex parte Bonbonus, 8 Ves. 544. 718; Ernest v. Nicholls, 6 H. L. C. (r) 15 East, 7. 423. Similarly, the fact that one (s) 1 Sim. 376. partner only has obtained the bene- 450 CH. I, SEC. VI.] LIABILITIES OF PARTNERS. *191 money may have been applied for its benefit, (t) unless he can bring himself within the equitable doctrine referred to below. Goods supplied to one partner. — The same rule applies to goods, services and works supplied to or done for one partner, either on his own account, or, if for the firm, at the request of one of the members acting beyond the limits of his apparent as well as of his real authority. The firm does not, in any case of this sort, enter into any contract, express or implied, with the person dealing with the partner in question, and does not incur any obligation towards that person by reason of the circumstance that it gets the benefit of what he has done, (u) The principle of these decisions governs those cases in which one partner, in breach of trust, but without the knowledge or con- sent of his copartners, ^applies trust money over [*191] which he has control as a trustee to the purposes of the firm. The fact that the firm has been benefited by the money in question does not necessarily render it liable to the owners of the money, (a?) Equitable doctrine in these cases. — Where, however, money borrowed by one partner in the name of the firm, but without the authority of his copartners, has been applied in paying off debts of the firm, the lender is entitled in equity to repayment b}' the firm of the amount which he can show to have been so applied; and the same rule ex- (f) See Smith v. Craven, 1 Cr. & 2 Ex. 718 : Lloyd v. Freshfield, 2 J. 500 ; Hawtayne v. Bourne, 7 M. Car. & P. 325, and 9 Dowl. & R. 19 ; & W. 595 ; Burmester v. Norris, 6 Galway v. Matthew, 10 East, 264 ; Ex. 796 ; Ricketts v. Bennett, 4 C. Kilgour v. Finlyson, 1 H. Blacks. B. 686; The Worcester Corn Ex- 155; Ex parte Wheatly, Cooke's change Co. 3 De G. M. & G. 180; Bank. Law, 534, ed. 8; Ball v. Fisher v. Tayler, 2 Ha. 218. In all Lanesborough, 5 Bro. P. C. 480; these cases the firm got the benefit Ex parte Peele, 6 Ves. 603, 604 ; of the money borrowed and yet Ex parte Hartop, 12 id. 352. was not liable to repay it. ( x ) Ex parte Apsey, 3 Bro. C. C. (u) See, in addition to the cases 265 ; Ex parte Eteaton, Buck, 386. already cited, Kingsbridge Flour g ee ante, p. 160. Mill Co. v. Plymouth Grinding Co. 451 *191 EIGHTS AND OBLIGATIONS. [BOOK II. tends to money bona fide borrowed and applied for any other legitimate purpose of the firm, (y) This doctrine is founded partly on the right of the lender to stand in equity in the place of those creditors of the firm whose claims have been paid off by his money, and partly on the right of the borrowing partner to be indemnified by the firm against liabilities bona fide incurred by him for the legiti- mate purpose of relieving the firm from its debts or of carrying on its business. (3) The equitable doctrine in. question is limited in its application to cases falling under one or other of the principles above indicated, (a) (y) The leading cases on this sub- ject are Ex parte Chippendale (The German Mining Co.'s Case), 4 De G. M. & G. 19; The Cork and Youghal Eail. Co. L. R. 4 Ch. 748; Blackburn Building Soc. v. Cun- liffe, Brooks & Co. 22 Ch. D. 61, and 9 App. Ca. 857, and 29 Ch. D. 902; Baroness Wenlock v. River Dee Co. 19 Q. B. D. 155. The case of infants is analogous : an infant is liable for necessaries, but he was not liable at law for money lent, though applied in the pur- chase of necessaries. Darby v. Boucher, 1 Salk. 279. But other- wise in equity. Marlow v. Pitfield, 1 P. W. 558. So, a husband was not at law liable for money lent to his wife to enable her to obtain necessaries, and applied by her for that purpose. Knox v. Bushell, 3 C. B. N. S. 333. But see, in equity, Jenner v. Morris, 1 Dr. & Sm. 218, and 3 De G. F. & J. 45 ; Deare v. Soutten, 9 Eq. 151; and observe that in the last case the plaintiff had no ground for suing in equity except his inability to recover at law. See, also, Baroness Wen- lock v. River Dee Co. 36 Ch. D. 674, which is now under appeal. (2) See infra, book iii, ch. 6, § 3, p. 381 et seq.; also post, p. 193, note (fc). (a) See, in addition to the case3 cited in note (y), National Perma- nent Benefit Building Soc. 5 Ch. 309; Magdalena Steam Nav. Co. Johns. 690; Athenaeum Life Ins. Soc. v. Pooley, 3 De G. & J. 294. 452 ^CHAPTER II. [*192] OF THE NATURE, EXTENT AND DURATION OF THE LIABIL- ITY OF INDIVIDUAL MEMBERS OF PARTNERSHIPS TO CREDITORS. Nature and extent of a partner's liability. — Having examined in the preceding pages the liabilities of a firm for the acts of its members, it is proposed in the present chapter to investigate the liability of the individual part- ners in respect of such obligations as upon the principles already discussed are binding on them all. Section I. — Nature of the Liability. 1. As regards contracts. No several liability on contracts binding the firm. — An agent who contracts for a known principal is not liable to be himself sued on the contract into which he has avow- edly entered only as agent. Consequently, a partner who enters into a contract on behalf of his firm is not liable on that contract except as one of the firm; in other words, the contract is not binding on him separately, but only on him and his copartners jointly, (a) l One partner may render (a) See Ex parte Buckley, 14 M. 346 ; Coleman v. Elmore, 81 Fed. & W. 469; Re Clarke, De Gex, 153; Rep. 391. Ex parte Wilson, 3 M. D. & D. 57. One who brings suit against 1 Firm debts are joint and not partners must show the existence joint and several obligations, and of a joint contract or joint promise, hence are not secured by a mort- express or implied. Sager v. Tup- gage conditioned for the payment per, 38 Mich. 258. of the indebtedness of one of the In an action against several as partners. First National Bank v. partners, although but one of the Tarbox, 38 Hun (N. Y.), 57. See, defendants be brought into court, also, Exchange Bk. v. Ford, 7 Col. if he appears and pleads the gen- 814; Mulhall v. Gillespie, 89 111. eral issue, the plaintiff is not 453 *192 EIGHTS AND OBLIGATIONS. [BOOK II. himself separately liable by holding himself out as the only member of the firm ; (J) or by so framing the contract as entitled to recover, unless he es- tablishes a joint liability of the defendants. Halliday v. McDou- gal, 20 Wend. 81 ; 22 id. 264 ; Bos- with v. West, 68 Ga. 825. Where, in an action on an ac- count against a partnership, the plaintiff dismissed as to one part- ner, it was held to be in effect a dismissal against the firm, and that the court had no jurisdiction to render judgment against the re- maining partner individually. Storm v. Roberts, 54 la. 677. Where the liability of copartners for the firm indebtedness is con- sidered joint and several, a judg- ment may be rendered against any one or more of the copartners without the joinder of the others. Simpson v. Schulte, 21 Mo. App. 639. Where two persons were sued as partners, and, both having been served with process and having appeared in the suit, judgment was rendered against them in their firm name, held, that such judg- ment was joint and several, and upon an execution issued upon it the officer might lawfully seize and sell partnership property of both and the individual property of either defendant. Stout v. Baker, 82 Kan. 113. Where an action is brought upon partnership liability against a firm alleged to consist of three persons, and upon a trial it appears that one of them is not a partner, but that the other two are members of the firm, upon proof of the alleged partnership liability judgment may be properly entered against the firm of two members. Gen. St. 1878, ch. 66, sec. 266; Miles v Wann, 27 Minn. 56. A personal judgment against one partner for a partnership liability is not void and hence cannot be collaterally attacked. Wells v. Clarkson, 5 Mont. 336. Where, in an action against part- ners on a partnership obligation, separate judgments are rendered against each of the defendants in- stead of a joint judgment against all, this is an irregularity merely ; and the court has no power to set aside the judgments on motion un- less motion is made within one year after their rendition. Judd Linseed Oil Co. v. Hubbell, 76 N. Y. 543. See, also, Marsh v. Mead, 57 la. 535. In Texas, where two parties are sued jointly for a debt alleged to be due upon a sale of goods, upon proof of the account as against one of the defendants judgment may be rendered against such defendant alone. Congdon v. Monroe, 51 Tex. 540. Under section 1134 of the code of 18S0, which makes all liabilities of partners joint and several, an unsatisfied judgment against one partner is not a bar to an action against the other. Hyman v. Stad- ler, 63 Miss. 362. Judgments bind the partners or joint contractors served, and the (6) Bon field v. Smith, 12 M. & W. 405 ; De Mautort v. Saunders, 1 B. & Ad. 398. 454 CH. II, SEC. I.] LIABILITY OF MEMBERS. *192 to bind himself separately from his copartners as well as jointly with them ; (c) but unless there are some special co- partnership assets, but not mem- bers who are not served; as to their individual estate they stand as though no judgment had been rendered against them. Ells v. Bone, 71 Ga. 466; Farris v. Seis- field, 1 Tex. App. (Civ.) 149 ; Printup v. Turner, 65 Ga. 71 ; Patten v. Cunningham, 63 Tex. 666. See, also, Hensley v. Bagdad Sash Fac- tory Co. 1 Tex. App. (Civ.) 329; Jackson v. Litchfield, 18 Can. L. J. of R. & Co. *S. retired. R. continued the busings in the old name and took another person into partnership with him. J. was a customer of the old firm; he had no notice of S.'s retirement, and he continued to deal with and became a creditor of the new firm. J. then was made acquainted with the fact that S. had retired ; but J. nevertheless sued the new firm for their debt to him, and on their bankruptcy he proved against their estate. He then sought to recover the same debt against S. ; but it was decided that S. was not liable. It was held that J. had the option of suing the new firm or S., but that J. could not sue the new firm and S. jointly ; and that having elected to sue the new firm, he could not afterwards sue S., who was not in fact a member of it. The importance of this case turns on the grounds on which it was held that J. could not have sued S. jointly with the members of the new firm. The reason why he could not have done so was that J. did not in fact contract with the new firm upon the faith that S. was a member of it. (b). If it had been proved that J. had so contracted he could, it is apprehended, have sued S. and the other members of the new firm, and have proved S. to have been a partner by estoppel. 2. As regards torts and frauds. Torts create joint and several liabilities. — For torts imputable to a firm all the partners are liable jointly and severally, (d) 1 To this general rule an exception occurs (z) Waugh v. Carver, 1 H. Bl. 235, (d) Mitchell v. Tarbutt, 5 T. R. and other cases of holding out, 649; 1 Wms. Saund. 291,/ and g; ante, p. 40 et seq. Com. Dig. Abatement, F. 8. (a) 7 App. Ca. 345. l See Cooley on Torts, 133. See 7 App. Ca. 350, per Lord An action on the case for neg- Belborne, and 357-8, per Lord ligence occasioning the loss or de- Blackburn, struction of a slave hired by 464 CH. II, SEC. I.] LIABILITY OF MEHERS. *199 where an action ex delicto is brought against several persons in respect of their ownership in land, for then they are lia- ble jointty, and not jointly and severally, (e) Distinction between torts and breaches of contract. — Breaches of trust impose joint and several liabilities. Al- though for general purposes it may be convenient to dis- tribute acts and forbearances which give rise to obligations under the heads breach of contract and tort, it would not be difficult to show the impossibility of always distinguishing between the two. {/) And yet if a breach of a con- tract binding *on the firm imposes a joint liability [*199] only on its living members (as to w T hich see ante, pp. 192, 193), whilst a tort imputable to the firm imposes a joint and several liabilit} 7 , the importance of being able accu- rately to distinguish between a breach of contract and a tort becomes apparent. The difficulty, however, of doing so is increased by the doctrine that there are cases in which the same breach of an obligation may be regarded from two dif- ferent points of view; and may, at the option of the person injured, be made the foundation either of an action ex con- tractu or of an action ex delicto, (g) Suppose, for example, that property is intrusted to a firm of bankers for the pur- pose of sale and investment, and that some member of the plaintiff to a copartnership may and is necessarily joint, not several, be maintained against one of the Harris v. Schultz, 40 Barb. 315. members of the firm without join- An action will not lie against two ing the other partners. So if the defendants jointly and severally negligence be that of an agent of for one penalty for non-registra- the copartnership. White v. tion of partnership. Bernard v. Smith, 12 Rich. 595. Gaudry, 4 Leg. N. (Montreal). 385. Where partners assign prop- (e) See 1 Wms. Saund. 291, / erty to a creditor as security for and g. the debt, and he intrusts such prop- (/) See Pollock on Torts, ch. 13. erty to the partners to sell, as his (g) See, on this subject, Brown v. agents, and to pay over the pro- Boorman, 11 CI. & Fin. 1, and the ceeds to him, they do not become cases there referred to. See, also, liable upon sale of the property as Bryant v. Herbert, 3 C. P. D. 383 ; tortfeasors, as upon an unauthor- Fleming v. Manchester, Sheffield ized disposal thereof. Their liability and Lincolnshire Rail. Co. 4 Q. B. rests upon contract, not upon tort, D. 81. Vol. 1 — 30 465 *200 EIGHTS AND OBLIGATIONS. [BOOK II. banking firm misapplies the property so intrusted. This breach of duty is a breach of the contract which was tacitly, if not expressly, entered into by the bankers when they received the property. But the misapplication of the property is a wrong independently of any contract; amount- ing in effect to a conversion or destruction of that which belonged to the customer. In equity the misapplication of the money is a breach of trust and imposes a joint and several liability on all the partners; on the ground that each partner is bound to see to the proper application of what is intrusted to the firm, (h) In such cases as these the several liability of each partner to the creditors of the firm is not affected by the circumstance that the act imposing such liability was done by one only of the members of the firm, without the knowledge or consent and in fraud of the others. If the act in question imposes a liability which upon the principles of agency can be imputed to the firm, each member thereof is in equity severally liable for such act, just as much as if there had been no fraud in the case ; (i) and it is well established in equity that a breach of [*200] trust which is imputable to several ^persons im- poses upon them a liability which is both joint and several, (k) The effect of the Judicature Acts on this subject has not yet been judicially determined; but probably breaches of contract which are also breaches of trust will be held to impose several as well as joint liabilities, both at law and in equity. In Ex parte Adamson, (I) a partnership debt (h) See Re Oxford Benefit Build- v. Noble, Sleech's Case, 1 Mer. 563; ing Soc. 35 Ch. D. 502; Ex parte Baring's Case, id. 614; Brydges v. Adamson, 8 Ch. D. 807; and ante, Branfill, 12 Sim. 3G9; Wilson v. p. 161, note (/ ). Moore, 1 M. & K. 127 and 337. (i) See Ex parte Adamson, 8 Ch. Compare, however, Parker v. Mc- D. 807 ; Vulliamy v. Noble, 3 Mer. Kenna, 10 Ch. 123, and Vyse v. 619; Clayton's Case, 1 Mer. 576; Foster, L. R. 7 H. L. 318, as to Warde's Case, id. 624. liability for profits arising from (k) Re National Funds Assur. Co. breaches of trust. 10 Ch. D. 118. See, also, the cases (t) 8 Ch. D. 807, per James and in the last two notes, and Devaynes Baggallay, L. JJ., Lord Bramwell 466 CH. II, SEC. II.] LIABILITY OF MEMBEES. *200 contracted by fraud was held to be joint and several, and to be provable in bankruptcy against the joint estate of the firm or against the separate estates of its members, at the option of the creditor. Section II. — Extent of Liability. Extent of partner's liability at common law. — By the common law of this country every member of an ordinary partnership is liable to the utmost farthing of his property for the debts and engagements of the firm. The law, ig- noring the firm as anything distinct from the persons com- posing it, treats the debts and engagements of the firm as the debts and engagements of the partners, and holds each partner liable for them accordingly. 1 Moreover, if judg- dissenting. See, as to breaches of trust, Ex parte Sheppard, 19 Q. B. D. 84 ; and ante, note (7t). 1 Collins v. Charlestown M. F. Ins. Co. 10 Gray, 155 ; Medbury v. Soper, 17 Kan. 369 ; Judd, etc. Co. v. Hubbell, 76 N. Y. 543; Nebraska R. R. Co. v. Colt, 8 Neb. 251. Cases upon this point might easily be multiplied. In an action to charge several persons as joint partners in a stock speculation in whicb tbe plaintiffs were employed as brokers, and in which the defense was that each of the defendants was, by special agreement, liable for his own share only, held, that it was competent for the plaintiffs to show that one of the defendants had a separate stock account with them. Binney v. Young, 5 Daly, 327. In Louisiana commercial part- ners are bound in solido for the debts of the firm, while ordinary partners are liable only in respect of their shares. See Villa v. Jones, 17 La. Ann. 9; Moores v. Bates, 13 id. 40 (a partnership in a con- tract for the building of railroads) ; Beauregard v. Case, 91 U. S. 134. But to the extent of their shares of the partnership debts a debt con- tracted by an ordinary partner, even without authority of the others, binds them if it be proved that the partnership was benefited by the transaction. Beauregard v. Case, 91 U. S. 134; Logan v. Cra- gin, 27 La. Ann. 352; Lallande v. McRae, 16 id. 193. Each is bound in proportion to the number of partners, without any attention to the proportion of the stock or profits each is entitled to. But where the recourse of the creditor is had on account of the benefit conferred upon the partner- ship by a contract not its own the rule is different, and each partner's share is to be fixed in proportion to the interest which he has in the concern, and to the benefit which he has in consequence derived. Lallande v. McRae, supra. Where the evidence shows that 467 -200 EIGHTS AND OBLIGATIONS. [BOOK II. merit is obtained against the firm for a debt owing by it, the judgment creditor is under no obligation to levy execu- tion against the property of the firm before having recourse to the separate property of the partners; nor is he under any obligation to levy execution against all the partners ratably, but he may select any one or more of them, and lew execution upon him or them until the judgment is sat- isfied, leaving all questions of contribution to be settled afterwards between the partners themselves, (m) the two individual signers of a merely joint note were, at the date of the note, commercial partners, and that the consideration of the note was money borrowed for, and used by, the partnership, each of the makers will be liable on the note in solido. Mitchell v. Dar- mond, 30 La. Ann. 396. A law partnership is an ordinary one, and the partners are bound jointly, and not in solido. Dyer v. Drew, 14 La. Arm. 657; Jones v. Caperton, 15 id. 475. A partnership for doing work of construction on a railroad is an or- dinary partnership, and does not impose solidary liability on the partners. Hardeman v. Tabler, 36 La. Ann. 555. Where a suit is brought against commercial one, a judgment ren- dered against the parties in so- lido will not be disturbed on the ground that a joint judgment was claimed in the petition. Taylor v. Hancock, 14 La. Ann. 693. The liability of a partner to a third person is not increased by the fact that an individual debt of his has been assumed by the partner- ship of which he is a member. Bogereau v. Gueringer, 14 La. Ann. 478. The stockholders of a corpora- tion do not become liable as part- ners on notes given by the treas- urer of the corporation merely be- cause, after organizing under the act of incorporation, no corporate business was transacted, or be- cause the notes were given for persons bound jointly and severally debts beyond the corporate author- ity of the company. Trowbridge v. Scudder, 11 Cush. 83. Under the statute making the stockholders of an incorporated as- sociation, at the time of its dissolu- tion, liable for the debts due from according to law, as commercial partners, a judgment rendered against them carries solidarity with it, even when not expressed in it. Bell v. Massey, 14 La. Ann. 831. Planting partners are bound jointly, each for one-half of a debt the company to the amount of their contracted by them for the benefit of the partnership. Dupre v. Body, 23 La. Ann. 495. When there is a prayer in the pe- tition for general relief, and the partnership sued is alleged to be a stock, the stockholders will be bound to pay a debt which was binding upon the company. Slee v. Bloom, 20 Johns. 669. {m) See per De Grey, C. J., in Abbott v. Smith, 2 Wm. Blacks. 468 CH. II, SEC. II.] LIABILITY OF MEMBERS. *201 * Attempts to limit liability. — Various attempts [*201] have been made from time to time to form partner- ships without exposing their members to ruin in the event of loss. 1 But the only effectual method of accomplishing this 949, and Wooley v. Kelley, 1 B. & C. 68; Com. Dig. Execution, H. See further, on this subject, infra, ch. 3, § 3. x The cases upon the subject of limited partnership, which exists by statute in most of the United States, may properly be considered in this connection. The first stat- ute upon the subject in this coun- try was enacted in the state of New York and was substantially copied from the French Code of Com- merce. See 3 Kent, Com. 35. The statute of New York, in turn, has served as the basis of the stat- utes upon the subject in the other states. See the nature, origin and history of limited partnerships ex- amined at length by the court in Ames v. Downing, 1 Bradf. 321 ; Joacquin v. Buisson, 11 How. Pr. 385. No partnership attempted to be formed under these statutes with a limited liability of some of the partners is limited, but all the partners are liable as general part- ners, unless the statutes upon the subject are strictly, or, as some cases say, substantially complied with. The rule is the same in the case of renewals. Richardson v. Hogg, 38 Penn. St. 153; Pierce v. Bryant, 5 Allen, 91 ; Haviland V. Chace, 39 Barb. 283; Holliday v. Union B. & P. Co. 3 Colo. 342; Vandike v. Rossbram, 67 Penn. St. 330; Henkel v. Heyman, 91 111. 96; Pfirman ». Henkel, 1 Bradw. 146; Bowen v. Argall, 24 Wend. 496; Smith v. Argall, 6 Hill, 479; 3 Den. 435; Andrews v. Schott, 10 Penn. St. 47; Van Ingen v. Whitman, 62 N. Y. 513; Madison County Bank v. Gould, 5 Hill, 309; Haddock v. Grinnell Mfg. Co. 109 Penn. St. 372 ; S. C. 16 Weekly Not. Cas. 96, 549; 42 Leg. Intel. 100, 426; Pears v. Barnes, 1 Atl. Rep. 658; Metro- politan Bank v. Gruber, 16 Phila. 198; S. C. 40 Leg. Intel. 465; 14 Weekly Not. Cas. 12; Maloney v. Bruce, 94 Penn. St. 249 ; S. C. 38 Leg. Intel. 435 ; Conrow v. Graven- stine, 17 Weekly Not. Cas. 204; Smith v. Warden, 86 Mo. 382; Guillon v. Peterson, 89 Penn. St. 163. See, also, Ulman v. Briggs, 32 La. Ann. 657; Bement v. Brick Machine Co. 12 Phil. 494. In Carhart v. Killough, 1 Tex. App. (Civ.), it is said that a mere formal defect in complying with the statute will not make the lim- ited partner liable as a general partner. See, also, the cases above cited. M. entered a firm upon the un- derstanding that he was to be a special partner, with limited liabil- ity. He paid a specified sum tow- ard the capital stock, upon which he was to receive legal interest and one-fourth of the profits. The statute in relation to limited part- nerships was not complied with, but M.'s name did not appear in the firm, and he took no part in the management of the business. M. was induced to enter the firm by the fraudulent representations of 469 '201 EIGHTS AND OBLIGATIONS. [BOOK II. object is to stipulate with each creditor that he shall only be paid out of the funds of the partnership, and that he his partners, and -withdrew as soon as he discovered the fraud. Held, that M. was a general part- ner, and as such was liable for the contracts of the firm while he so remained. Tournade v. Hagedorn, 5 Thomp. & C. 288; Tournade v. Methfessel, 3 Hun, 144. Under the law of Pennsylvania the omission to post a sign in a con- spicuous place, giving the names both of general and special part- ners, is a fatal defect. Conrow v. Gravenstine, 17 Weekly Not. Cas. 204. A special partner who, by failing to comply with the law regulating limited partnerships, becomes a general partner as to the public, remains a special one as to his copartners. Guillon v. Peterson, 89 Penn. St. 163. The limited partnership act of Pennsylvania assimilates the com- pany to a corporation, which is held strictly to its charter. Special privileges are conferred upon the company, and it is at its peril that it transcends those privileges. In re Gautier Steel Co. 18 Weekly Not. Cas. 346; Patterson v. Tidewater- Pipe Co. 12 Weekly Not. Cas. 452, See, however, Lennig v. Penn. Morocco Co. 16 Weekly Not. Cas. 114. In Greenwood v. The Hampshire Ml j. Co. 41 Leg. Intel. 14, the court considered a limited partnership as a partnership with a limited liabil- ity, and that it was its duty to apply to it no restrictions not ex- isting as to other partnerships ex- ii.pt by Bpeoial regulation or neces- -ii y implication. Special partners have not the custody of, nor the general right to inspect, the books and papers of the firm, and are not bound by entries therein. Milne's Appeal, 17 Weekly Not. Cas. 559 ; Patterson v. Tidewater Pipe Co. 12 Weekly Not. Cas. 452. As to what amounts to a suffi- cient compliance with the law of Louisiana relative to partnership in eommendam to protect such a partner from the obligations of a general partner, see Ulman v. Briggs, 32 La. Ann. 657. A partner in eommendam may have with the firm with which he is thus connected all the business transactions which a partner could have, without thereby taking part in the affairs of said firm and ren- dering himself liable for its debts. Rayne v. Terrell, 33 La. Ann. 812. A partner in eommendam, con- sulting once with one of the gen- eral partners and advising third persons that the firm is all right, cannot be considered as having taken an active part in the affairs of the firm and cannot be held re- sponsible for its debts. Ulman v. Briggs, 32 La. Ann. 657. Under the Missouri statute a limited partnership is deemed to be formed only when the statement, after having been duly recorded, shall have been published as re- quired by statute ; while, under the statute of New York and Massa- chusetts, the formation is deemed complete upon the statements hav- ing been duly recorded. Selden v. Hall, 21 Mo. App. 452. As to the manner of making 470 CH. II, SEC. II.] LIABILITY OF MEMBERS. *201 shall not be entitled to require the individual partners to pay more than a certain amount of those funds. Such stip- publication of a special partner- ship, see Manhattan Co. v. Phillips, 53 N. Y. Super. Ct. 84. The change of the name of one of the newspapers in which the notice was directed to be published, after the publication commenced, does not affect the validity of the pub- lication. The identity of the paper is not lost by the change of name. Metropolitan Bank v. Sirret, 97 N. Y. 320; S. C. 15 Abb. N. Cas. 318. An omission to state in the notice published all the details of the partnership is not a failure to com- ply with the provisions of section 9 of said act, requiring publication of the terms of said partnership, if the publication contains all the facts required by section 4 of the act to constitute a partnership. Said provision is satisfied by publi- cation of the terms of the certifi- cate. Metropolitan Bank v. Sirret, 97 N. Y. 320; S. C. 15 Abb. N. Cas. 318. Where a special partnership was formed under the statute, and, in the advertisements in one of the two newspapers required by the statute, the sum contributed by the special partner was, by mistake of the printer, stated at $5,000, in- stead of $2,000, which latter was the true sum, the partners were all held liable as general partners. Argal v. Smith, 3 Den. 435; S. C. 6 Hill, 479. In an action to charge special partners as indorsers, it appeared that the published notice stated that the partnership would com- mence November 16, 1837, whereas the certificate filed stated October 16, 1837. Held, that unless the error of the publication was de- signed to deceive, or the indorse- ment made before November 16, 1837, the special partners were not liable. Madison County Bank v. Gould 5 Hill, 309. A publication of the terms of a limited partnership within three days after the registry thereof is a compliance with the statute. Bowen v. Argall, 24 Wend. 496. Where any alteration is made in the capital or shares of a limited partnership, and the partnership is carried on, in any way, before the notice has been published four weeks, the special partner incurs all the liability of a general part- ner. Beers v. Reynolds, 11 N. Y. 97 ; 12 Barb. 288. Where the assumed limited part- nership carries on the business of commission merchants in New York county, and such is stated to be its business in a certificate there filed, and it is also engaged in the business of tanning in another county, no copy of said certificate being filed in said county, no lim- ited partnership is formed and the parties are liable as general part- ners. Loomis v. Hoyt, 52 N. Y. Super. Ct. 287. As to the form of acknowledg- ment of certificate of partnership, see Fabian v. Callahan, 56 Cal. 159. Where the articles of copartner- ship describe the business of a special partnership as a general produce and commission business, and the publication stated it to be a general commission business, held, that a certificate stating it to 471 -201 EIGHTS AND OBLIGATIONS. [BOOK II. ulations, however, are never made in practice except where the partners are numerous; and in modern times they are be a general commission business, buying and selling grain, flour and produce on commission, described the business of the firm with rea- sonable certainty. Manhattan Co. v. Phillips, 53 N. Y. Super. Ct. 84. Where persons forming a limited partnership file in due time the prescribed certificate, and the clerk neglects to record it, such persons are not liable as general partners by reason of the clerk's negligence. Manhattan Co. v. Laimbeer, 15 N. E. Rep. (N. Y.) 712; S. C. 53 N. Y. Super. Ct. 22; 1? Abb. N. C. 123; 11 Cent. Eep. 329. The statute of Illinois requires the certificate, acknowledgment and affidavit to be filed and left in the office of the clerk of the county court, and not merely left tempo- rarily for record and then with- drawn. If taken away voluntarily, on the neglect of the clerk to re- cord the same, no limited partner- ship will be formed. And even if the object of filing such papers was temporary, for the purpose of being recorded, if they are voluntarily taken away before being recorded, the neglect to file and record being attributable to the clerk, and the partners knowing such fact, no limited partnership will be created. Henkel v. Heyman, 91 111. 96: Pfir- man v. Henkel, 1 Bradw. 145. Where the certificate of the formation of a limited partnership described the general partners as of "B. ," and the special partner as " <>l" J. C," held, that this was a sufficient statement of the resi- dences of the parties under the statute. Lachaise v. Marks, 4 E. D. Smith, 610. As to the unauthorized use of the words " and company " in the firm name of a limited partnership, under the acts of 1836, 1865 and 1868, see Metropolitan Bank v. Gruber, 40 Leg. Intel. 465; 14 Weekly Not. Cas. 12 ; 16 Phila. 198. The statute authorizing the crea- tion of limited partnerships (1 R. S. N. Y. 764, as amended by Laws 1862, ch. 476) does not require that the certificate provided for in the act should be filed cotempora- neously with its execution or with the formation of the partnership, in order to make the partnership a limited one as to those parties whose claims against the partner- ship accrue after the certificate is actually filed. Levy v. Lock, 5 Daly, 46 ; S. C. 47 How. Pr. 394. An unrecorded certificate of a limited partnership agreement, ex- ecuted under New York laws, has no tendency to prove a general partnership, or any kind of part- nership whatsoever, without evi- dence aliunde. Gray v. Gibson, 6 Mich. 300. A special partnership will, in New York, become a general part- nership, and the special partners liable as general partners, if the place of business is removed from the county in which it was estab- lished, without filing a new certifi- cate in the clerk's office of the county to which it has been re- moved. Riper v. Poppenhausen, 43 N. Y. 68. If, after the expiration of the time limited for the duration of the 472 CH. II, SEC. II.] LIABILITY OF MEMBERS. *201 practically confined to insurance and other companies formed before the passing of the Companies Act, 1862. limited partnership, it is desired to renew the limited partnership, there must be a new certificate, publication, etc. ; and if this is oniitted, the partnership will be- come a general one. Andrews v. Schott, 10 Penn. St. 53; Lachaise v. Marks, 4E.D .Smith, 620; Had- dock v. Grinnell Mfg. Co. 109 Pa. St. 372. See, also, Beers v. Rey- nolds, 12 Barb. 288; S. C. 11 N. Y. 97. During any period intervening between the expiration of a limited partnership and the day of its re- newal, such partnership is general, and the special partners of the old firm are liable for all debts incurred during that period. Haddock v. Grinnell Mfg. Co. 109 Pa. St. 372. An interval of six days between the expiration of the original arti- cles of the limited partnership and the execution and recording of articles of renewal does not inval- idate renewal, when name, mem- bers and capital remain unchanged and no business has been done meanwhile. Hirsch v. Vanuxen, 15 Weekly Not. Cas. 467. Under section 11 of the New York act the limited partnership may be renewed by filing and re> cording papers containing the same statements that are contained in the Original papers. Ropes v. Col- gate, 17 Abb. N. C. 136. If the renewal certificate and affidavit are in proper form the penalty, imposed by section 11, of general partnership liability, is not incurred by the falsity of the state- ment therein. So held where the statement that the capital contrib- uted by the special partner re- mained wholly unimpaired was untrue. Ropes v. Colgate, 17 Abb. N. C. 136. See infra. An existing partnership may be changed into a limited one under the limited partnership act (1 R. S. 763). Metropolitan Bank v. Sirret, 97 N. Y. 320; S. C. 15 Abb. N. Cas. 318. Where a limited partnership fails to record in the manner prescribed by acts of the assembly an agree- ment for a renewal of the partner- ship, the liability of the special partner becomes general. Guillon v . Peterson, 7 Weekly Not. Cas. 268. If, at the moment a limited part- nership is formed by the act of filing the certificate required by section 4 of the limited partnership aGt, all the statements in the cer- tificate are true, there is both a substantial and literal compliance with the statute, and the special partner does not incur the liability of a general partner. It is imma- terial that, at the date of the cer- tificate and at the time it was signed by one partner, the special capital had not been paid in as therein stated, since the paper in- strument does not become the cer- tificate referred to in section 8 until it is a completed instrument, made, acknowledged, filed and recorded so as to create a partnership. Ropes v. Colgate, 17 Abb. N. Cas. 136; Manhattans. Colgate, 13 Daly, 544. An affidavit to accompany a cer- tificate of a limited partnership need not follow the exact words of the statute. If it clearly estab- lishes the facts required by the 473 *201 EIGHTS AND OBLIGATIONS. [book n. The cases on this subject will be found collected in the volume relating to companies, (n) The statute under which statute it is sufficient. And where the affidavit refers to the certifi- cate it may be explained by the statements of the certificate. John- son v. McDonald, 2 Abb. Pr. 290. Thus, a statement in an affidavit that the special partner has actually paid in " his proportion of the cap- ital" is equivalent to stating that he has paid it in cash. Johnson v. McDonald, supra. If the matters which the statute requires to be contained in the cer- tificate and affidavit to be made and filed in order to create a lim- ited partnership are stated therein untruly, such a partnership is not formed, and he who sought to con- fine his liability to that of a special will become liable as a general partner. Durant v. Abendroth, 41 N. Y. Superior Ct. 53; Maginn v. Lawrence, 13 Jones & Sp. 235; S. C. 45 N. Y. Super. Ct 235. In an action where a special part- ner is sought to be held liable under the provision of the statute, the affidavit, and other papers required by the statute, are presumptive evidence of the formation of a limited partnership; but, after evi- dence has been given tending to falsify the affidavit, it cannot. Oper- ate as rebutting proof. Van Ingen v. Whitman, 62 N. Y. 513. To bring the special partner within the provisions of the statute of New York (sec. 8) making all liable as general partners in case of any false statement in the affidavit required to be made and filed (sec. 7), it is not necessary that the state- ment be intentionally false. The object of the statute is to gi^e reasonable security to those likely to deal with the copartnership, and this is thwarted by an uninten- tional as well as by an intentional untruth. Van Ingen v. Whitman, supra. Where the statute requires the special partner's capital to be paid in cash, if the affidavit that the special partners have paid in cash their amount of the capital is false they will become liable as general partners. Haviland v. Chace, 39 Barb. 283. The statute of Missouri requires that the amount contributed by each special partner must be in cash, but such contribution need not be actually made prior to the formation of the partnership. The Missouri statute differs in this re- spect from the statute of New York and Massachusetts. Selden v. Hall, 21 Mo. App. 452. Where the payment of the con- tribution by the special partner is made subsequent to the making of the statement, but prior to the formation of the partnership, and the averment of the statement is that the contribution had, at the time of its making, been paid, the statement is not false within the meaning of section 3404, and, (n) The leading cases on this sub- ject are Halket v. Merchant Trad- ers' Loan Assoc. 13 Q. B. 960; Hassell v. Same, 4 Ex. 525 ; Hallett v. Dowdall, 18 Q. B. 2; Durham's Case, 4 K. & J. 517 ; Re Athenaeum Soc. Johns. 80, and 3 De G. & J. 660. 474 CH. II, SEC. II.] LIABILITY OF MEMBERS. *201 a person may share profits without incurring the liability of a partner has been already alluded to. (p) although not literally true, is true in every substantial respect. Sel- den v. Hall, 21 Mo. App. 452. A special partner's payment in whole or in part of his amount of the capital, in goods, is not a com- pliance with the statute requiring such payment to be in cash. Hav- iland v. Chace, 39 Barb. 283 ; Rich- ardson v. Hogg, 88 Penn. St. 153; Van Ingen v. Whitman, 62 N. Y. 513; Re Merrill, 12 Blatch. 221; S. C. 13 Nat. Bank. Reg. 91. Nor is a delivery to the firm of promissory notes, which are re- ceived and treated as cash, such payment. Pierce v. Bryant, 5 Al- len, 91. The words "an actual cash pay- ment as capital " by a special part- ner, in Massachusetts General Stat- utes, chapter 55, section 2, to ex- empt him from liability for the firm debts, does not apply to his merely authorizing the firm, at a future time, to use United States bonds by him deposited in a bank, without notice to the bank of such authority, even after the recording of the certificate required by sec- tion 3, and such appropriation of the bonds. Haggerty v. Foster, 103 Mass. 17. Giving post-dated checks for the special partner's share of the capi- tal does not warrant the affidavit required by the statute, that the sum has been paid in cash, but the special partner is liable as general partner. So, although the checks were promptly paid at the outset of the firm business. Durant v. Abendroth, 69 N. Y. 148; S. C. 41 N. Y. Super. Ct. 53. So the uncertified checks of the special partners upon a bank in which, at the date of the checks, they have not money sufficient to meet and pay their checks, cannot be deemed cash, although before the checks were presented they had arranged or provided funds to pay the same and they were paid. Ma- ginn v. Lawrence, 45 N. Y. Super. Ct. 235. To the same effect, see McGinnis v. Flynn, 23 Blatch. 465 ; McGinnis v. Farrelly, 27 id. 33; Durant v. Abendroth, 97 N. Y. 132; Hennesey v. Farrelly, 13 Daly, 468. In the case of Durant v. Abend- roth, 97 N. Y 132, it was held that, notwithstanding such a misstate- ment, the partnership was in form a limited partnership and subject to all the rules applicable to such partnership. The payment by a certified check on a bank in good standing, which the bank actually pays, is a good mode of payment under the law of limited partnership ; and the mere fact that a special partner has paid his contribution by such a check does not make him a general part- ner. Lineweaver v. Slagle, 64 Md. 465. See McGinnis v. Farrelly, 27 Fed. Rep. 33. The affidavit that the special capi- tal of a limited partnership has been actually and in good faith paid in, and in cash, is false, and all the parties are liable as general part- ners where checks for the amount (o) 28 and 29 Vict. ch. 86, ante, book i, ch. 1, § 2. 475 -201 EIGHTS AND OBLIGATIONS. [book n. Section III. — Dubation of Liability. In a preceding chapter it was shown that every member of an ordinary partnership is the general agent of the firm of the capital are drawn by special partners and deposited to the credit of the new firm, which thereupon drew and delivered its checks for a like amount in favor of said special partners, it further appearing that these checks were given to pay- moneys due them from a former partnership which the same parties had endeavored to form, but failed because of the failure to make and file affidavit of payment of special capital. Loomis v. Hoyt, 52 N. Y. Super. Ct. 287. Where payment of his contribu- tion was made by the special part- ner in money, which was deposited in the bank to the credit of the new firm, and immediately thereafter, without the knowledge or consent of the special partner, by check in the name of the new firm paid to the old firm, held, that the special partner was not liable as a general partner. Manhattan Co. v. Phillips, 53 N. Y. Super. Ct. 84. While a special partner, who is a member of a firm engaged in carry- ing on the same business intended to be conducted by the limited partnership, may not put in his stock in the old concern upon a valuation as his contribution to the capital in the new firm, if he has paid in his share in cash, the new firm is not prohibited from pur- chasing in good faith the stock of the old firm, or from paying for it out of the capital so contributed, although it may happen that the Ial partner is entitled to receive the whole of the purchase money, and so is placed substantially in the same position as if originally he had put in the stock as capital in- stead of money. And this is so al- though there was an expectation on the part of the special partner and the other members of the old firm, at the time of the formation of the limited partnership, that it should purchase with the money so contributed the stock of the old firm. It seems, however, that this expectation must not amount to an agreement by which the limited partnership obligates itself to pur- chase the stock of the old firm. The question of the good faith of such purchase is for the jury. Met- ropolitan Bank v. Sirret, 97 N. Y. 320; S. C. 15 Abb. N. Cas. 318, 334. See, also, Ropes v. Colgate, 17 Abb. N. C. 136. An increase in the amount of capital contributed by a special partner at the expiration of the term of a special partnership and its renewal for a new term, in con- templation of law creates a new partnership and not a renewal or continuance of the old one. And the right of the special partner to hold the position of -the special part- ner in the new partnership is in no- wise aided or affected by the fact that he was such in the old one. The capital to be contributed by the special partner on the forma- tion of the new partnership must be contributed in cash, and when contributed in the shape of debt? 476 CH. II, SEC. III.] LIABILITY OF MEMBERS. "201 for the purpose of carrying on its business in the ordinary way. In the present section it is proposed to ascertain the a special partner without becoming one. Bulkley v. Marks, 15 Abb. Pr. 454. and accounts due the firm, and not collected until some time after the new firm has been in operation, this cannot be regarded as an equiv- alent for the cash which the law requires; and the statement in the certificate and affidavit of the con- tribution of a certain sum, when so made, is, in legal contemplation, a false statement, and upon the fail- ure of the firm such special partner is liable to the creditors of the new firm as a general partner. Line- weaver v. Slagle, 64 Md. 465. The affidavit of a general partner on a renewal, that a sum stated to have been paid by the special part- ner in former articles has been so contributed and remains in the common stock, without stating in what condition it thus remains, is insufficient. So far as the special capital is concerned, it must ap- pear, in order to obtain benefit of an act by renewal of the original agreement, that the capital is in the same condition as when the partnership was originally formed, unimpaired and available for cred- itors. These facts must appear in the affidavit of the general partner. Haddock v. Grinnell Mfg. Co. 109 P;i St. ,,872; 16 Weekly Not. Cas. 549 ; affirming S. C. 16 id. 96; 42 Leg. Intel. 100, 426. See, also, Ropes v. Colgate, 17 Abb. N. C. 136; Eliot v. Himrod, 108 Pa. St. 569; S. C. 16 Weekly Not. Cas. 189; 15 id. 77; 42 Leg. Intel. 352. It is not a sufficient payment when a part of the sum to be contributed by the special partner has been paid by another person with the inten- tion of securing the advantages of No matter how the special part- ner has acquired the money he con- tributes, if it is his property, and he pays it in under the forms pre- scribed by the statute, and leaves it absolutely to the risks of the business, the law requiring it to be paid in good faith in cash is satis- fied. Laurence v. Merrifield, 42 N. Y. Super. Ct. 36. In Colorado the statute does not require that the capital should be paid in cash, but when it is paid in property it should be so stated and its cash value given. Holli- day v. Union B. & P. Co. 3 Colo. 342. Where property has not been contributed, scheduled and valued as the act of Pennsylvania of 1876 directs, there is no payment of the capital. The general description of the extent of the property, or a lumping valuation, is not such a schedule as the act requires. Ma- loney v. Bruce, 94 Pa. St. 249 ; S. C. 38 Leg. Intel. 435. A statement in the certificate for a limited partnership that one of the stockholders contributed in full of his subscription the right of way and privilege, etc., whereas, as a matter of fact, no right of way had been obtained, but he was under contract with the association to se- cure it and to pay therefor himself, is not a compliance with the stat- ute, and the stockholders are liable individually as general partners to any one deceived thereby. Appeal of Hite Nat. Gas Co. 12 Atl. Rep. 477 *201 RIGHTS AND OBLIGATIONS. [BOOK II. duration of such agency, or, in other words, when it begins and when it ends. The mode whereby a partner becomes (Pa. St.) 267; S. C. 10 Cent. Rep. 805. Connecticut General Statutes, title 49, section 8, — relating to limited partnerships, and provid- ing that all advancements to the capital stock by special partners shall be in cash, and shall not be withdrawn during the period of the partnership, "nor shall any- special partner," etc., "be consid- ered a creditor or allowed to claim as a creditor in case of the insolv- ency or bankruptcy of the partner- ship," — relates to funds furnished by the special partner as capital stock, and not to independent debts contracted with him as an individ- ual in good faith and in the course of business. Capp v. Lacey, 35 Conn. 463. Where a partnership was formed between B. and C, wherein it was stipulated that the partnership should be special ; that C. should be the special partner, and should con- tribute a certain sum " as capital to the common stock for carrying on the business," which was to be con- ducted in the name of B. & Co. ; and the sum was paid in and in- vested in goods, and the goods were sold and other goods purchased in their place with the proceeds of their sales, held, that, whether the partnership was special or general, the goods became firm property, the firm becoming debtor to the partner advancing the capital to the amount advanced. Bradbury v. Smith, 21 Me. 117. Under the provisions of the Penn- sylvania limited partnership act of 1836, where the general partner misappropriates the contribution of a special partner, the latter is not liable as a general partner for the debts of the partnership, where he is not privy to the misappropria- tions. Seibert v. Bakewell, 87 Pa. St. 506. A limited partnership was formed between three, one as special part- ner. The certificate was published and sworn to by one of the general partners, the amount contributed by the special partner being therein set forth and stated to have been paid in. The firm soon became in- solvent, and the general partners made an assignment to the plaint- iffs in trust for the benefit of all the firm creditors. The plaintiffs brought their bill in equity to com- pel the special partner to pay in the amount of his capital, to be used in the payment of partnership debts, and the bill was sustained. Robin- son v. Mcintosh, 3E. D. Smith, 221. The special contribution, under the act of 1836, is a fund for the payment of partnership debts, which cannot be withdrawn or di- verted either directly or indirectly to the detriment of firm creditors. Coffin's Appeal, 106 Pa. St. 280; S. C. 15 Weekly Not. Cas. 52; id. 191; 14 id. 140; 40 Leg. Intel. 434; 41 id. 356. Therefore, a confession of judg- ment by the general partners in favor of individual creditors of the special partners who have loaned money to him, to be contributed as special capital, is void as against partnership creditors. Coffin's Ap- peal, supra. A provision in the certificate 478 OH. II, SEC. III.] LIABILITY OF MEMBEES. *201 discharged from liabilities incurred by him will then be considered, and thus the liabilities of incomino- and outo-oino- partners to creditors will be determined. general partners purchasing with it real estate and taking a convey- ance of it to all the partners, gen- eral and special, is in violation of the statute, the consequence of which is that the special partner shall be deemed as general partner. Ward v. Newell, 42 Barb. 485. Where there is an agreement for a special partnership between mem- bers of a firm, but the statute on the subject has not been substan- tially complied with, the knowl- edge, by creditors, of the existence of the special partnership agree- ment, at the time the contracts were made, does not discharge the special partner from his general liability; and an allegation, in an affidavit of defense, of such knowl- edge in the creditors, and that they trusted to the credit of the firm and of the general partners, and not to the special partner, does not amount to an averment of a special contract which will discharge the special partner from a general lia- bility to such creditors. Andrews v. Schott, 10 Pa. St. 47. See, however, Hastings v. Hop- kinson, 28 Vt. 108; Ensign v. Wands, 1 John. Cas. 171. Special partners are general part- ners, except as to those points wherein their liability is expressly limited by the statute. Hayes v. Bement, 3 Sandf. 397 ; Lachaise v. Marks, 4 E. D. Smith, 610. See, also, Hog v. Ellis, 8 How. Pr. 473. A statute respecting limited part- nerships does not apply to a part- nership which is general, so far as the liabilities of the partners to authorizing the special partner to draw interest upon his capital monthly is not a violation of the provision of section 15 of the New York act, which permits the special partner " annually " to receive law- ful interest. Metropolitan Bank v. Sirret, 97 N. Y. 320; S. C. 15 Abb. N. Cas. 318. If a special partner withdraws his capital in part, upon the subse- quent insolvency of the firm he is liable to creditors for such amount and interest. La Chomette v. Thomas, 1 La. Ann. 120; Bulkley v. Marks, 15 Abb. Pr. 454. See, also, Beers v. Reynolds, 12 Barb. 288; S. C. 11 N. Y. 97; Lachaise v. Marks, 4 E. D. Smith, 610. In Bell v. Merrifield, 28 Hun (N. Y), 219, it was held that a spe- cial partner who, in violation of statute, withdraws his capital or any profits from the firm, thereby reducing its original capital, may, in New York, not only be treated as a general partner, but also com- pelled to account for such moneys as the trustee for the benefit of the firm creditors. Where no time is stipulated in the contract of partnership for the payment of the amount to be con- tributed by a partner in commen- dam, the latter will be responsible to the creditors of the partnership for interest on the amount unpaid from judicial demand only. De Li- zardi v. Gossett, 1 La. Ann. 138. Arguendo, the court say that the withdrawal by a special partner of a part of the capital which he had contributed, and together with the 479 *201 EIGHTS AND OBLIGATIONS. [BOOK II. 1. Commencement of Liability. Commencement of agency — Liability of partners who defer the execution of articles. — The doctrine that each, partner has implied authority to do whatever is necessary third persons were concerned, and limited only in respect to the nature and scope of the business to be carried on. Taylor v. Webster, 39 N. J. L. 102. See, also, Jackson v. Alexander, 8 Tex. 109. A special partner in a firm in Cuba, who has complied with the laws of Spain relating to special partnerships, so far as to protect himself from partnership liability in Cuba, is exempt from liability, as a general partner, in transac- tions of the firm in Cuba with citizens of the state of New York. The transaction is governed by the laws of Spain. King v. Sarria, 14 N. Y. Supreme Ct. 167 ; S. C. 69 N. Y. 24. Where goods were ordered from New York for a firm in Cuba, partly by letter and partly by a general partner personally in New York, held, that the contract must be considered as made in New York; but, the special partner re- maining in Cuba, his authority to bind the firm depended upon the laws of Cuba. Barrows v. Downs, 9 R. I. 146. See, also, King v. Sawin, 14 N. Y. S. C. 167. The same principle of law that protects a general partnership against liability upon contracts by individual partners, out of the scope of the partnership business, protects the capital of special part- ners in a limited partnership against liability upon like contracts by general partners. Taylor v. Rasch, 11 Bankr. Reg. 91. All persons dealing with a lim- ited partnership are chai'geable with notice of the scope of the partnership business, as specified in the articles of copartnership, when the articles have been duly filed and published as required by law. Taylor v. Rasch, supra. No departure by general part- ners, no matter how common or long continued, if not consented to, or known and acquiesced in, by the special partners, can have the effect to change or enlarge the scope of the partnership business as specified in the articles of co- partnership. Taylor v. Rasch, supra. Where the chairman of the board of managers [of a limited partner- ship sold to plaintiff certain goods at a price for which the board of managers had a short time before refused to sell, held, that the sale was not binding upon the partner- ship unless it was shown that the chairman had expressed or implied authority to make it. Pittsburg Melting Co. v. Reese, 12 Atl. Rep. (Pa. St.) 362 ; S. C. 10 Cent. Rep. 914. A limited partnership cannot loan its credit to one of its mem- bers. Liggett's Appeal, 111 Pa. St. 291. The limited partnership act (1 R. S. 763, sec. 1 et seq.) does not prohibit a limited partnership from buying goods for its business from 480 CH. II, SEC. III.] LIABILITY OF MEMBERS. •201 to carry on the partnership business in the usual way is based upon the ground that the ordinary business of a the special partner; nor are such purchases, when fairly conducted, inconsistent with the purposes or objects of such a partnership. Met- ropolitan Bank v. Sirret, 97 N. Y. 320; S. C. 15 Abb. N. Cas. 318. Where the articles of an associa- tion of a limited partnership, under the act of 1874, provide that part of the business shall be the refin- ing of oil, and for that purpose the association may hold and own such real and personal property as may be necessary for the purpose, the managers may purchase the stock of an oil-refining company, by the control of which the business of refining is to be carried on. Pat- terson v. Tidewater Pipe Co. 12 Weekly Not. Cas. 452. General partners in a limited partnership, under the act of March 21, 1836, cannot, without consider- ation, lawfully assume a debt cre- ated by the special partner in pro- curing the money which he paid into the firm as his special con- tribution. Coffin's Appeal, 106 Pa. St. 280; S. C. 41 Leg. Intel. 356. An affidavit of defense to a ne- gotiable promissory note, in the name of a limited partnership, stating that the note was not given for any purpose within the scope of the partnership business, but was given by one partner without the knowledge and consent of his co-members and in fraud of the company, is sufficient to warrant the court in refusing to enter judg- ment for the plaintiff for want of a sufficient affidavit of defense. Lerch Hardware Co. v. Bank of Columbia, 109 Pa. St. 240; S. C. 16 Weekly N. Cas. 184; 5 Atl. Rep. 778. ' A., B. and C. were in partner- ship. C who was a special part- ner, by a failure to comply with the law regulating limited partner- ships became a general partner as to the public, but remained a spe- cial one as to his partners. B., who was the executor of an estate, loaned certain of its securities to the firm, and they were converted to the firm's use. There was evi- dence that C. knew of at least one loan made by B. to the firm. Held, that although there was no evi- dence to show that C. participated in or knew of the fraudulent con- version, he was liable as a general partner to the estate. (xuillon v. Peterson, 89 Pa. St. 163. When one partner in a limited partnership affixes the name of the firm to a promissory note during the existence of the partnership the partners are prima facie liable thereon ; and if any member thereof seeks to avoid his liability the bur- den of proof lies upon him to make out his defense. Jenison v. Deal- ing, 41 Ala. 283: Holmes v. Porter, 39 Me. 157. If one, carrying on a limited partnership in his individual name, borrow money, representing it to be for the use of the partnership, the dormant partners are liable without proof that the money went to the use of the partnership. Otherwise if he borrow without such representation. Etheridge v. Binney, 9 Pick. 272. To charge a limited partnership with the payment of articles nofe- Vol. 1 — 31 481 *202 EIGHTS AND OBLIGATIONS. [boox n. firm cannot be carried on either to the advantage [*202] *of its members or with safety to the public unless within the scope of the business of the firm it must be proved that they were furnished for the benefit of the firm, or that they assented to the purchase. Goode v. Lin- ecuni, 2 Miss. 281. Where one who has given credit to a partnership which he believes to be a limited partnership, and which is known to the public as such, afterwards seeks to charge all the partners as general partners, the burden of proof is upon him to show a general partnership. Whill- din v. Bullock, 4 Weekly Not. Cas. 234. In Darrow v. Bruff, 36 How. Pr. 479, it was held that a general as- signment for the benefit of cred- itors of a limited partnership, executed and acknowledged by the resident partner in person, for him- self, for the firm, and as the at- torney in fact of the non-resident partners, is sufficiently executed. Non-resident members of a firm are not necessarily iucluded in the statutory requirement of a per- sonal execution and acknowledg- ment by each of the assignors. Darrow v. Bruff, 36 How. Pr. 479. In Singer v. Kelly, 44 Penn. St. 145, it was held that the special partner cannot be affected by any assignments of the assets of the firm, if he had not assented thereto ; and where there is no offer to prove that assent, but only that the gen- eral partners had made them, it is properly rejected. Singer v. Kelly, 44 Pa. St. 145. See further as to the power of limited partners or general or special partners to make an as- signment for the benefit of credit- ors with or without preferences, George v. Grant, 97 N. Y. 262 ; S. C. 20 Hun, 372; 28 Hun, 69: Schwartz v. Soutter, 5 Cent. Rep. 620. See, also, Almon v. Hamilton, 100 N. Y. 527; S. C. 82 id. 291; ante, Assignments. As to the power of an insolvent special partner, his firm being also insolvent, to secure, by mortgage upon his individual property, a loan to him. see George v. Grant, 97 N. Y. 262; S. C. 20 Hun, 372; 28 id. 69. A special partner who is a party to a transfer of all the assets of his firm to one creditor for the benefit of the creditors of the firm becomes liable to such creditors as a general partner under the gen- eral statutes, chapter 55, section 7. Farnsworth v. Boardman, 131 Mass. 115. A special partner will be hel 1 liable as a general partner for pur- chases made under his representa- tions that such is his interest. Barrows v. Downs, 9 R. I. 146. So if his name is used in con- tracting with his consent. Madi- son County Bank v. Gould, 5 Hill, 309; Jonau v. Blanchard, 2 Rob. (La.) 513. If a special partner buys out the entire firm property during the ex- istence of a limited partnership, and continues the business in his own name and for his own account, he interferes with the firm busi- ness, contrary to the provisions of section 17 of the act relating to limited partnerships (1 N. Y. R. S. 482 CH. II, SEC. III.] LIABILITY OF MEMBERS. : -202 such a doctrine is recognized, ship is, therefore, evidently 764); and renders himself liable as a general partner from the very commencement of the partner- ship. First Nat. Bank v. Whitney, 4 Lans. 34. By written articles of agreement three persons entered into a special partnership, to continue for a cer- tain limited period; one was a special partner, the others were general partners, and the business was to be conducted in the joint names of the general partners. In a short time afterwards, and be- fore the limited period, a second agreement was entered into be- tween them, by which it was agreed that one of the general partners should sell out to the special partner, and should with- draw from all active participation in the business, and that the special should become a general partner, but that the partnership should not be dissolved until certain notes given by the firm should be paid ; and that in the meantime the part- ner who sold out should allow his name to be used as one of the firm for business purposes, purchasing goods, etc., and giving notes there- for, and the business was con- tinued without any change in the name of the firm. Goods were purchased and notes were given therefor by the two remaining part- ners in the original name of the firm, before the expiration of the time limited for the continuance of the original partnership, and before the payment of all the notes mentioned in the second agree- ment, Held, that the second agree- ment made all three of the parties The existence of a partner- presupposed; and although partners as to third persons until the notes alluded to therein should be paid ; and that all three parties were liable on the notes thus given for goods purchased by the new firm. Buckley v. Dingman, 11 Barb. 289. The receipt of a dividend under an order on an accounting in pro- ceedings on an assignment for the benefit of the creditors of the firm, as a limited partnership, and an ap- pearance in said proceedings, does not estop the creditor from suing for the balance of his claim against all the partners, including a special partner. Benedict t'. Hutchinson, 53 N. Y. Super. Ct. 486. Where a creditor has assigned his claims against a firm to a special partner therein, without knowledge that the latter has ren- dered himself liable as a general partner, he cannot thereafter en- force such liability against the special partner. Allison v. Abend- roth, 38 Hun, 586. The interest of a partner in a limited partnership is not subject to attachment. Wetherald v. Shupe, 15 Weekly Not. Gas. 366. Where a limited partnership makes a division of its profits and gives its note to a partner for his share thereof, he agreeing to repay the same at maturity, such profits belong to such partner, and his agreement to repay the same is without consideration. Liggett's Appeal, 111 Pa. St. 291. A provision in the articles that the special partner should bear a proportionate share of the losses is not a violation of the New York 483 : -202 EIGHTS AND OBLIGATIONS. [iJOOK II. persons negotiating for a partnership, or about to become partners, man be the agents of each other before the- may act. Metropolitan Bank v. Sir ret, 97 N. Y. 320 ; S. C. 15 Abb. N. Cas. 318. A bona fide compromise of a suit to compel the settlement of a partnership, and the special part- ner's receipt of what he may be- lieve due him, does not make him a general partner of an expired partnership. Puseyu. Dusenbury, 75 Pa. St. 437. Special partners are postponed in their claims upon the partnership assets until every other partner- ship creditor is paid; and those who advance money to the special partner for the purpose of such contribution are in no better po- sition than the special partners themselves. Coffin's Appeal, 106 Pa. St. 280; 15 Weekly Not. Cas. 52; S. C. 15 id. 191; 14 id. 140; 40 Leg. Intel. 434. See, also, Jaffe v. Krum, 88 Mo. 669; Dunning's Ap- peal, 44 Pa. St. 150; White v. Hack- ett, 20 N. Y. 17S. A special partner may make a loan to the firm without becoming necessarily liable as a general part- ner. Walkenshaw v. Perzel, 4 Robt. 426 ; 32 How. Pr. 233. A special partner in a limited partnership, under the statute of New Jersey, cannot recover against the general partners on a note given by them to him for good con- sideration, if the partnership is in- solvent. Ward v. Newell, 42 Barb. 482 ; 28 How. Pr. 102. Where a limited partnership be- comes insolvent, and the special partner therein is a general part- ner in another firm to which the limited partnership is indebted, the debt due such firm is to be placed on the same footing with, and is not to be postponed to, the claims of other creditors of said limited partnership in the distribu- tion of its assets. Hayes v. Hcyer, 35 N. Y. 326. If A., being a special partner in a firm , takes a deed of trust from such firm, being then insolvent, to secure a debt to a firm of which he is a member, he thereby, in Pennsylvania, renders himself lia- ble as a general partner. McAr- thur v. Chase, 13 Gratt. 683. Where a limited partnership, of which A. was a special partner, conveyed all its property in trust to pay a debt to a firm of whicli A. was a member, at a time when the partnership was insolvent, the deed was held void as to the other creditors of the firm. Confessions of judgments in favor of some creditors, under similar circum- stances, are void as to the other creditors. McArthur v. Chase, 13 Gratt. 683. A. was a special partner in one firm, and a general partner in an- other firm. The latter firm was a large creditor of the former, and among the debts was a note made by a member of the formar firm, and indorsed by the latter firm, on which a judgment was obtained, which was unsatisfied, except a small dividend declared by the assignee of the former firm, which had failed. Held, on a bill by the former firm to postpone the debts of the latter, that those debts ought not to be postponed under the statute of New York regulat- 484 Cn. II, SEC. III.] LIABILITY OF MEMBERS. *202 partnership commences, such agency, if relied on, must be established in the ordinary way, and is not to be inferred ing limited partnerships. If the same person is a general partner in two firms, his interest in one can be reached by the creditors of the other by calling it to an account, and by the same rule the solvent firm can recover its debt from the insolvent firm. Hayes v. Bement, 3 Sandf. 394. Under the statute of Missouri the assets of a limited partnership are a trust fund in a sense in which those of an ordinary partnership are not ; and a court of chancery may distribute such fund equi- tably among the creditors at the suit of a contract creditor who has not reduced his claim to judgment. Batchelder v. Altheiner, 10 Mo. App. 181. Whenever the assets of a limited partnership are distributed among its creditors, a firm which has among its members a special part- uer in the other firm is entitled to a ratable proportion ; but the share of said special partner, having been ascertained by a commissioner, will be retained and applied to satisfy the creditors of the limited partner- ship. McArthur v. Chase, 13 Gratt. G83. On the insolvency of a limited partnership the partnership prop- erty becomes a trust for the benefit of the creditors ; and if the partners neglect to place it in the hands of a trustee for immediate distribution among all the creditors ratably, any creditor may file a bill, on be- half of himself and all other cred- itors, for distribution of the part- nership funds, without first obtain- ing judgment at law. Innes v. Lansing, 7 Paige, 583. See, also, Jackson v. Sheldon, 9 Abb. Pr. 127; Whitewright v. Stimpson, 2 Barb. 379. Until an order is made for the appointment of a receiver the property of an insolvent limited partnership is liable to the execu- tion of a creditor recovering judg- ment otherwise than by confession, and he may thus obtain a prefer- ence. Van Alstyne v. Cook, 25 N. Y. 489. Pending an action by a single creditor of an insolvent limited partnership to charge the special partner as a general partner, where such special partner denies his lia- bility, and the question can only be determined after a protracted litiga- tion, an order for an injunction and the appointment of a receiver of the assets of the firm, during the litigation, and for the benefit of such creditor alone, will not be granted. Lachaise v. Marks, 4 E. D. Smith, 612, note (a). A court of equity will enjoin parties who have not a prima facie title from acting or claiming to act as managers of a partnership asso- ciation organized under the act of June 2, 1874. Tidewater Pipe Co. v. Satterfield, 12 Weekly Not. Cas. 457. It is not the duty of the special partner to care for or to collect the assets of the firm after failure. Singer v. Kelly, 44 Pa. St. 145. A mortgage given by an insolv- ent special partner, who by his acts had become liable as a general partner, and who executed the mortgage with intent to give the 485 ■202 EIGHTS AND OBLIGATIONS. [BOOK II. from the mere fact that the persons in question were en- gaged in the attainment of some common end, or that they drove is started. Bently v. White, 3 B. Mon. 263. So, in Illinois, if A. enter into a limited partnership with three other parties for a specified object, advancing all the capital, with the accomplishment of that object it ceases to be partnership property, and if then deposited with one of the partners to the use of A. he may recover it of such partner. Myers v. Winn, 16 111. 185. In New York a limited partner- ship cannot be dissolved by the act of the parties until four weeks after publication of the notice of dissolution. Bnlkley v. Marks, 15 Abb. Pr. 454; Buckley v. Lord, 21 How. Pr. 455. The dissolution of a limited part- nership, by filing notice with tho county clerk, and publication for four weeks, under 1 Revised Stat- utes, 767, section 24, is not opera- tive until the performance of both those acts. Fanshawe v. Lane, 16 Abb. Pr. 71. In Haggerty v. Taylor, 10 Paige, 201, it was held that the publica- tion of notice, at the commence- ment of a limited partnership, under the statute, stating the dura- tion of the partnership, is suffi- cient to prevent the general part- ners from charging the firm with new debts after the expiration of the partnership. The certificate of the dissolution of a limited partnership, where one is required, must comply with the statute, or such partnership will continue. Re Terry, 5 Biss. 110. Under New York Revised Stat- utes, 767, section 24, requiring no- mortgagees therein (who were in- dividual creditors of the mort- gagor) a preference over firm cred- itors, is void. George v. Grant, 20 Hun, 372. Where the rules of a limited partnership prescribed a particular form for the transfer of stock, and provided that no change of owner- ship could be accomplished in any other mode, and an owner of stock assigned it for a valuable consider- ation, not in the prescribed mode, but by an instrument in writing, in- cluding an irre vocable power of attorney, held, that the rule was for the benefit of the company, and that the assignment passed the title of tbe assignee as against the as- signor and therefore against his at- taching creditors. Tidewater Pipe Co. v. Kitchenman, 108 Pa. St. 630; S. C. 16 Weekly Not. Cas. 101 ; 42 Legal Intel. 374. Limited partnerships formed under the statute are governed, and the mutual rights, duties and lia- bilities of the partners are regu- lated, by the common law, in every respect not taken out of the general rule by the statute. The death of the special partner within the pe- riod fixed for the duration of the agreement dissolves it. Ames v. Downing, 1 Bradf. 321 : Jac- quin v. Buisson, 11 How. Pr. 385. See, also, Jaffe v. Krum. 88 Mo. 069. A limited partnership may, in Kentucky, be formed to buy for a single adventure, as a drove of cat- tle, which done, the power of one partner to bind the other by addi- tional purchases ceases when the 486 CH. II, SEC. III.] LIABILITY OF MEMBERS. *202 have subsequently become partners. This is shown by the cases already referred to, when the difference between part- nerships and inchoate partnerships was being discussed. tice of dissolution of any limited partnership, previous to the time specified in the certificate of its formation, to be published " once in each week, for four weeks," the day of the week which is taken for the first publication must be taken for each of the subsequent publica- tions. Re King, 5 Ben. 453; 7 Bankr. Reg. 279. vidual rights growing out of the partnership. Qucere, whether the use or omission of the special part- ner's name in any action is not a mere matter of choice. Spalding v. Black, 22 Kan. 55. As to the manner of bringing actions against a limited partner- ship, and as to whether a special partner is a necessary party to legal As to the proceedings to vacate a proceedings against the firm, see, decree of dissolution of limited partnership association under the act of June 2, 1874, see In re Gautier Steel Co. 18 Weekly Not. Cas. 346. Actions by or against the firm must be brought by or against the general partners, unless the special partners are, by reason of non- compliance with the statute, also liable as general partners, in which case they also may be joined. Law- rence v. Batchellor, 131 Mass. 504 ; Schulten v. Lord, 4 E. D. Smith, 206; Artisan's Bank v. Treadwell, 34 Barb. 553. See, also, Wetherell v. McClosky, 28 W. Va. 195. Section 19, chapter 74, General Statutes of Kansas, provides that " actions respecting the business of such partnership may be prose- cuted by and against the general partners only, in the same manner as if there were no special part- ners." This limitation on the use of the name of a special partner in actions by and against a limited partnership extends onty to actions respecting the business of the part- nership, and does not include ac- tions inter sese, or against third parties, brought to enforce indi- further, Durant v. Abendroth, 97 N. Y. 132: McCahan v. Gensemer, 3 Luzerne L. Reg. 40 ; Spalding v. Black, 22 Kan. 55. Where, from non-compliance with the statute, a special partner has become liable as a general partner in an action against the firm upon a partnership debt, it is not necessary for the plaintiff to allege in his complaint the attempt to form a limited partnership, and the defects which render the special partner liable ; it is sufficient to charge him as a general partner, and upon the trial to show that as to creditors he is 6uch. Sharp v. Hutchinson, 100 N. Y. 533; S. C. 49 N. Y. Super. Ct. 50 ; Brown v. Benner Go. 18 Weekly Not. Gas. 114. See, also, Loomis v. Hoyt, 52 N. Y. Super. Ct. 287. A decree at the instance of a creditor of the firm against a special partner, ordering him to pay a certain sum into court to be ap- plied to the payment of claims that should be established against it, cannot be made the foundation for an action at law at the instance of the creditor to compel him to do so. Corbin v. Graves, 27 Fed. Rep. 644. 487 *202 EIGHTS AND OBLIGATIONS. [BOOK II. Almost all those cases, in fact, arose in consequence of at- tempts made to fasten liability on the defendants by reason of some act done by other persons alleged to be their part- ners; and each of those cases in which the plaintiff failed is an authority for the proposition that so long as there is no partnership there is no implied authority similar to that which exists after a partnership is formed, (p) But al- though this is undoubted law, still if persons agree to be- come partners as from a future day, upon terms to bo embodied in a deed to be executed on that day, and the deed is not then executed, but they nevertheless commence their business as partners, they will all be liable for the acts of each, whether those acts occurred before or after the ex- ecution of the deed, (q) l For the question in such a case is not, When was the deed executed? but rather this, When did the partners commence to carry on business as such? The agency begins from that time, whether they choose to execute any partnership deed or not. (p) See the cases ante, pp. 19 et seq. and 43 et seq. ; and especially Edmundson v. Thompson, 2 Fos. & Fin. 564 ; Gabriel v. Evill, 9 M. & W. 297. (q) Battley v. Lewis, 1 Man. & Gr. 155. 1 Notes given in the name of a partnership to commence at a fut- ure day, and for goods to form the stock in trade of such partnership, and received upon the credit of an individual intending to become a member of such partnership, are collectible against such member, even though the partnership never was actually formed. Stiles v. Meyer, 64 Barb. 77; S. C. 7 Lans. 190. Thus, upon the representation of one of the partners that M. was taken into the firm of J. L. B. & Co. at a certain day, in which rep- resentations M. joined, the plaint- iffs sold and delivered goods for the new firm, to be paid for after the day named ; the new firm was not formed, and notice of this fact was not given to the plaintiffs, who, after the day, took the note of J. L. B. & Co. for the goods. Held, that M. was jointly liable with the partners for the goods. Bliss v. Swartz, 7 Lans. 187. A. and B. entered into partner- ship, and agreed that the partner- ship should have relation back to a time specified, and that the firm should be responsible for the debts contracted for goods by A. in the intermediate time. Held, that the firm was liable for money appro- priated to that purpose by A. dur- ing the time mentioned, which he held as treasurer of the county. Hutchinson v. Smith, 7 Paige, 28. 488 CH. II, SEC. III.] LIABILITY OF MEiLBEES. *203 Where there is an agreement for a partnership, and there is nothing- to lead to the conclusion that the partnership was intended to commence at any other time, it will be held to commence from the date of the agreement, (r) Firm not liable for what a partner does before he joins it. — The agency of each partner commencing with the part- nership, and not before, it follows that the firm is not liable for '-what may be done by any partner before [*203] he becomes a member thereof. So that if several persons agree to become partners, and to contribute each a certain quantity of money or goods for the joint benefit of all, each one is solely responsible to those who may have sup- plied him with the money or goods agreed to be contrib- uted by him ; (s) and the fact that the money or goods so supplied have been brought in by him as agreed will not render the firm liable, (t) l (r) See Williams v. Jones, 5B. & C. 108. (s) See Greenslade v. Dower, 7 B. & C. 635 ; Dickinson v. Valpy, 10 B. & C. 141-2; Fisher v. Taylor, 2 Hare, 229, 230 ; and the cases in the next note. (t) Heap v. Dobson, 15 C. B. N. S. 460 ; Smith v. Craven, 1 Cr. & J. 500. 1 See Brooke v. Evans, 5 Watts, 196; Baxter v. Plunkett, 4 Houst. 450. By the formation of a partner- ship the firm does not become liable for the individual contracts of one of its members or to pay his debts. Even if the firm promises to fulfill such contracts, there must be shown a new consideration to support the promise, and the individual mem- ber must be released. If, after the formation of the partnership, two of its members expressly cov- enant with the third member to perform his contract, made before its formation with a third party, the latter can maintain no action for a breach of such contract against the firm, or the two part- ners so covenanting, for the reason that the plaintiff is no party to such covenant. Goodenowu. Jones, 75 111. 48. See, however, Colt v. Wilder, 1 Edw. 484. Appellee H. bought cattle of ap- pellant, but they were not delivered until after the formation of a part- nership between appellees H. and D. There was some conflict in evi- dence as to whether the cattle were sold to the firm, or to H. alone, but it appeared that they were taken by the firm, killed, sold, and the money went into the firm account for its benefit. Held, that the cattle remaining with appellant until taken by the firm, unless the jury should believe that it was the in- tention of the parties that the title should pass to H. at the time the contract was made, the title re- 489 *203 EIGHTS AND OBLIGATIONS. [BOOK II. Upon this principle, apparently, it was held, in Wilson v. Whitehead, (u) that the author and publisher of a work- were not liable for the paper supplied for it; the paper hav- ing- been ordered by and supplied to the printer, who was to share the profits of the work. The agreement between the parties was that one should be the publisher and make and receive general payments; that another should be ed- itor; and that the third should print and find the paper for the work, charging it, however, to the account of the three at cost price. The profits were to be equally di- vided amongst the three. It was therefore urged that all were liable for the paper supplied; but it was held that they were not; for the printer was not authorized to buy the paper except on his own account, and when he had bought it he might have used it for some other book. The case was likened to that of coach proprietors, where each horses the coach for one or more stages, and each agrees to bring into the concern the work and labor of his horses, and none of the others has any interest in them, though all share the profits. (%) The propriety of the decision in this case has been doubted, (y) and it is not easily reconcilable with a similar mained with appellant until they It was error to refuse the admis- were received by the firm, and the sion in evidence of the partnership firm receiving them would be liable books, so that the jury might see therefor. If the title had passed to whether H. ever received credit H., and the cattle still remained by the cattle by the firm, and also with appellant unpaid for, it was show the state of the account of D. competent for H. and appellant to and H. with the firm. Smith v. annul such purchase, and for H. to Hood, supra. receive the cattle on the partner- (u) 10 M. & W. 573. See the ship account, he being a member observations of Wightman, J., on of the firm, and having authority this case, in Kilshaw v. Jukes, 3 B. to make such purchase ; and if H. & Sm. 847. and D. received the cattle from ap- (x) Barton v. Hanson, 2 Taunt, pellnnt, and the firm did not receive 49, which shows that in such a case them from H., then they would be each is alone liable for hay, etc., liable, no matter what contract ex- supplied to his own horses, isted between H. and appellant. (y) See per Wightman, J., in 3 Smith v. Hood, 4 Brad. 360. Best & Sm. 871. 490 CH. II, SEC. III.] LIABILITY OF MEMBERS. *204 case decided at nisi prius. (3) But the writer submits that upon principle Wilson v. Whitehead is perfectly cor- rect; for *the publisher had no real authority to [*204] buy the paper on the author's credit, and no author- ity so to do ought to be implied in favor of a person who knew nothing of the author or of any partnership or quasi- partnership existing between him and the publisher, (a) The two well-known cases of Saville v. Robertson (b) and Gouthwaite v. Duckworth (c) further illustrate the principle now in question. These cases closely resemble each other in many respects; for in each there was an agreement for a joint adventure in goods; in each an attempt was made to compel a person who did not order the goods to pay for them, on the grounds that he was in partnership with the person who did order them, and that they were supplied and used for the joint adventure; and in each the defense was that the goods were ordered before any partnership commenced, so that the defendant was not liable for the purchase made by his copartner. In Saville v. Robertson the defense was proved, and prevailed, whilst in Gouthwaite v. Duckworth the defendant was compelled to pay. In order to explain the apparent conflict between the two cases it is necessary to state shortly the material facts in each. In Saville v. Robertson, id) several persons agreed to share the profit and loss of an adventure in goods of a kind to be fixed by a majority; but no one was to have any share or proportion in the adventure except to the amount of the goods ordered and shipped by himself; and no adventurer was to be answerable for anything ordered or shipped by any co-adventurer. One of the adventurers having ordered goods and not paid for them, it was contended that his co- adventurers were liable for them on the ground that he (z) Gardiner v. Childs, 8 Car. & (c) 12 East, 421. P. 345. (d) 4 T. R. 720. See, also, Hut- Co) See Kilshaw v. Jukes, 3 Best ton v. Bullock, L. R. 8 Q. B. 331, ft Sm. 847, and ante, p. 31. and 9 id. 572; Kilshaw v. Jukes, 3 (b) 4 T. R. 720. Best & Sm. 847. 491 *205 EIGHTS AND OBLIGATIONS. [BOOK II. and they were partners. But the court held that no part- nership commenced until the goods were on board; each partner was to bring in his share only, and his copartners were not liable to persons who supplied him with the means which enabled him to bring in such share. [*205] *In Gouthwaite v. Duckworth, (e) Browne and Pow- ell, who were in partnership, were indebted to Duck- worth, and it was agreed that all three should join in an adventure in the purchase and sale of goods; that the goods should be bought, paid for, and shipped by Browne and Powell, and that the proceeds of the sale should be remitted to Duckworth, who should deduct thereout the amount of his debt, and then share the profit of the adventure with Browne and Powell. It was also agreed that in the event of a loss Duckworth should share it. In consequence of this agreement Browne bought goods for the adventure on credit, and it was held that all the three, viz., Browne, Pow- ell and Duckworth, were liable to pay for them; for the goods were bought in pursuance of the agreement for the adventure, and although it was never intended that Duck- worth should pay for the goods, yet it was thought that the adventure commenced with the purchase of the goods, and that Duckworth was therefore liable. There is considerable difficulty in supporting this decision if rested on the ground of partnership and implied agency resulting therefrom; for it is not easy to see how any part- nership existed prior to the purchase of the goods. But if rested on the ground of agency, independently of partner- ship, there is not the same difficulty. For although the goods were to be paid for by Browne and Powell, that might be regarded as nothing more than a stipulation to take effect as between them and Duckworth; it did not necessarily exclude the inference that, as Browne and Powell (e) 12 East, 421. Kilshaw v. Jukes, accordance with Saville v. Robert- 3 B. & Sm. 847, was certainly very son. See ante, p. 31. like this case, but was decided in 492 CH. II, SEC. III.] LIABILITY OF MEMBERS. *206 were to buy for the adventure, they were at liberty to pro- cure the goods on the credit of all concerned, (f) Liability of incoming partner. — As the firm is not liable for what is done by its members before the partnership be- tween them commences, so, upon the very same principle, a person who is admitted as a partner into an existing firm does not by his entry become liable to the creditors of the firm for anything done before he became a partner. Each partner is, it is true, the agent of the firm ; *but, [*206] as before pointed out, the firm is not distinguishable from the persons from time to time composing it; and when a new member is admitted he becomes one of the firm for the future, but not as from the past, and his present con- nection with the firm is no evidence that he ever expressly or impliedly authorized what may have been clone prior to his admission. It may perhaps be said that his entry amounts to a ratification by him of what his now partners may have done before he joined them, (g) But it must be borne in mind that no person can be rendered liable for the act of another on the ground that he has ratified, confirmed or adopted it, unless, at the time the act was done, it was done on his behalf, (h) l Therefore, in Young v. Hunter, (*) where Hunter & Co. had ordered goods of the plaintiff for sale in the Baltic, and afterwards it was agreed between Hunter & Co. and Hoffham & Co. that the latter should join in the adventure, and share the profit and loss, it was held to be clear that Hoffham & Co. were not liable to the plaintiff to pay for the goods. So, in Ejo parte Jackson, (j) a person who was indebted by bond for money borrowed to carry on a trade took two other persons ostensibly into partnership. After two years a joint commission of bankruptcy issued against the three ; (/) See Young v. Hunter, 4 i See Ewell's Evans on Agency, Taunt. 522, judgment of Gibbs, J. *54 and note. (g) See Horsley v. Bell, 1 Bro. C. (i) 4 Taunt. 582. C. 101, note, per Gould, J. (j) 1 Ves. Jr. 131. (h) Wilson v. Tumman, 6 Man. & Gr. 236. 493 " x "207 EIGHTS AND OBLIGATIONS. [BOOK II. and it was hold that the bond debt was not provable as a partnership debt against the joint estate, but remained what it was originally — the separate debt of the obligor. Application of principle to promoters of companies. — Again, in Beale v. Ifouls, (h) the members of a provisional committee of a company entered into a special agreement with the plaintiff for the manufacture of a steam carriage. Afterwards, but before the contract was completed, the de- fendant Mollis became a member of the committee, and interested himself in the completion of the carriage. Sev- eral alterations and payments on account were also made whilst he was a member, and with his knowledge. The carriage was completed, but the committee then re- [*207] fused to take it or to pay for it. In *an action brought against Mouls and the other members of the committee it was held that Mouls was not liable. He was not liable on the special contract, for he was no party thereto by himself or any agent; and he could not be made liable on any implied contract, for the existence of a special agreement excluded any implied contract relative to the same subject-matter. It follows from the principles on which this case was determined, that if the carriage had been accepted by the committee Mouls would not have been liable to pay for it. The delivery and acceptance in such a case would have been in pursuance of the contract to which ex hypothesi he was no party; and no liability could attach to him by virtue of any implied contract to pay that which became payable by virtue of an express contract made with other people. It has, indeed, been expressly decided, that, if several members of a committee order goods and then a new member joins the committee, he is not liable to pay for the goods though they are delivered after he joined it. (I) (fr) 10 Q. B. 976. See, too, Brem- 921; Whitehead v. Barron, 2 Moo. ner r. Charnberlayne, 2 Car. & & Rob. 248. In Beech v. Eyre. 5 Kir. 569; Kerridge v. Hesse, 9 C. Man. & Gr. 415, the goods were & P- 20'J. both ordered and supplied at a (/) Newton v. Belcher, 12 Q. B. time when there was evidence to 494 CH. II, SEC. III.] LIABILITY OF MEMBERS. *208 New contract. — Cases, however, of this kind must not be confounded with those in which a new though tacit con- es tract is made alter the introduction of a new partner. Dyke v. Brewer (m) illustrates the distinction alluded to. In that case the plaintiff agreed with A. to supply him with bricks at so much per thousand, and the plaintiff began to supply them accordingly. B. then entered into partnership with A., and the plaintiff continued to supply bricks as be- fore. It was held that both A. and B. were liable to pay, at the rate agreed upon, for the bricks supplied to both after the partnership commenced. The ground of this de- cision was that, as A. had not ordered any definite number of bricks, each delivery and acceptance raised a new tacit promise to pay on the old terms; although if all the bricks delivered had been ordered by A. in the first instance he alone would have been liable to pay for them, (n) "Incoming partner taking debts on himself. — If [*208] an incoming partner chooses to make himself liable for the debts incurred by the firm prior to his admission therein there is nothing to prevent his so doing. But it must be borne in mind that even if an incoming partner agrees with his copartners that the debts of the old shall be taken by the new firm, this, although valid and binding be- tween the partners, is, as regards strangers, res inter alios acta, and does not confer upon them any right to fix the old debts on the new partner, (o) l In order to render an in- show that the defendant was one coming partner and the copartners, of the committee. that the former shall share the lia- (m) 2 Car. & Kir. 828. bility for the debts of the concern, (n) Helsby v. Mears, 5 B. & C. does not entitle the creditors to sue 504, is another case turning on the him. To warrant this there must same principle as is explained by be some agreement between him Lord Denman in Beale v. Mouls, 10 and the creditors, and it must be Q. B. 976. founded on a sufficient consider- (o) See per Parke, J., in Vere v. ation. Morehead v. Wriston, 73 N. Ashby, 10 B. & C. 208; Ex parte C. 398; Pleiffer v. Hunt, 75 Ga. 513; Peele, 6 Ves. 602; Ex parte Will- Morris v. Marqueze, 74 id. 86; Peters iams, Buck, 13. v. McWilliams, 78 Va. 567; Para- 1 An agreement between an in- dise v. Gerson, 32 La. Ann. 532 ; 495 *20S EIGHTS AND OBLIGATIONS. [book II. coming partner liable to the creditors of the old firm there must be some agreement, express or tacit, to that effect Edick v. Green. 38 Hun, 202; Hei- denheinier r. Franklin, 1 Tex. App. (Civ.) 481; Hatchett v. Blanton, 72 Ala. 423; Bracken v. Dillon, 64 Ga. 243; Ayres v. Gallup, 44 Mich. 13; Miller v. Stone, 34 N. W. Rep. (Wis.) 907; Serviss v. McDonnell, 9 Cent. Rep. (N. Y.) 841 ; S. C. 14 N. East. Rep. 314; Butler v. Henry, 48 Ark. 551 : Ringo v. Wing, 5 So. West. Rep. 787 ; First Nat. Bk. v. Newton, 14 Pac. Rep. (Colo.) 428. See, also, McLinden v. Wentworth, 51 Wis. 170; Citizens' Bk. v. Hine, 49 Conn. 236 ; Farnsvvorth v. Board- man, 131 Mass. 115; Re Furness, 15 Phila. 430; S. C. 39 Leg. Intel. 83; Keller v. West, 39 Hun, 348; also, x>ost. See, however, Colt v. Wilder, 1 Edw. 484; Poole v. Hin- trager, 60 la. 180; Arnold v. Nichols, 64 N. Y. 117; McCracken v. Milhous, 7 Bradw. 169. I. bought the interest of H. in the firm of H. & W., and with W. gave H. a bond of indemnity against all debts of the old firm, covenanting to pay them: held, that the creditors of the old firm had no right of action against the new firm upon the bond, for want of privity thereto. Hicks v. Wyatt, 23 Ark. 55. A. and B. having been partners, C. purchased the interest of A. in the firm, agreeing to pay one half of the partnership debts of A. and B., and B. and C. then formed a partnership. Afterwards, differ- ences having arisen between A. on the other part, and B. and C. on the other part, they submitted the differences to arbitration, and an award was made setting forth, infer alia, that C. had purchased from A. an undivided one-half of the property, etc., of the firm of A. and B., and had engaged in the purchase to pay half of the debts of said firm, etc. Held, that the partnership debts of A. and B. did not become debts of the firm of B. and C. by the terms of the award. Hyer v. Norton, 26 Ind. 269. F., by an agreement in writing, purchased the interest of S. in the firm of S. & O., and bound him- self " to assume all the debts and liabilities of said S. in the late firm, and to save him harmless on account of all debts whatever of said firm." Held, that a creditor of the firm was entitled to be sub- stituted to a personal judgment against F., on his agreement in favor of S., the latter assenting thereto. Francis v. Smith, 1 Duv. 121. See next note infra. As to whether such agreements are within the statute of frauds there is some difference of opinion. In Poole v. Hintrager, 60 la. 180, it was held an incoming partner may, in consideration of the property acquired by the purchase of an in- terest in the firm, bind himself to pay the firm debts, and that such agreement is not within the statute of frauds, and may be enforced by the creditors of the firm though total strangers to the agreement. So,, where one firm purchased the assets of another and verbally agreed to pay the debts out of the purchase money, it was held that the creditor, being beneficially in- terested in the contract, can main- 490 CH. II, SEC. III.] LIABILITY OF MEMBERS. *208 entered into between him and the creditors, and founded on some sufficient consideration. 1 If there be any such agree- tain an action in his own name, and that such contract is not within the statute of frauds. Wynn v. Wood, 10 Weekly Not. Cas. 345. In Paradise v. Gei-son, 32 La. Ann. 532, on the other hand, it was held that verbal evidence is not admissible to prove that the new partnership has promised to pay a debt of the former, which is clearly a third party. See post. One G. held a lease from plaint- iff of a store in which he was doing business: the unexpired term was over two years. He entered into a copartnership agreement with defendant for the term of one year and one month. In the prelimi- nary negotiations it was agreed by parol that, in consideration that G. should put the lease into the partnership, the rent for the whole unexpired term should be regarded as a partnership liability, and as one of the debts created on account of the firm. By the written agree- ment it was stipulated that each partner should be equally liable for all " debts and liabilities suffered or created by or on account of " the firm business. No mention was made in this agreement of the lease. The firm continued busi- ness for about eight months, and then dissolved, and soon there- after the business was assigned to another, who went into possession. In an action to recover an instal- ment of rent accruing more than a year after the formation of the partnership, held (Reynolds and Johnson, CO., dissenting), that defendant was not liable: that he was not liable as assignee of the lease, for the reason that such liability, if it ever existed, con- tinued so long only as the privity of estate continued, and ceased upon the transfer and surrender of possession ; that the rent could not be made a firm debt by parol agreement, as such a term could not be created or assigned by parol (2 R. S. 135, § 8), and that the agreement to pay the rent for the whole time was void, and by its terms it could not be performed within a year (2 R. S. 136, § 2). Durand v. Curtis, 57 N. Y. 7. Where A. rents and takes pos- session of a warehouse, and after- wards associates himself in busi- ness with B. and C, the two latter do not become jointly liable with A. for the rent by occupying the building with him for partnership purposes. Pierce v. Alspaugh, 83 N. C. 258. See, ho%vever, Wilgus v. Lewis, 8 Mo. App. 336. An incoming partner who, upon a sufficient consideration, expressly or by implication adopts, while executory, a contract previously 1 There is no presumption that one who becomes a member of an existing firm assumes liability for previous debts or contracts of the firm. Fuller v. Rowe, 56 Barb. 344. But, on the contrary, the pre- sumption of law is that an incom- ing partner is not liable for debts of the firm contracted before he entered. Kountz v. Holthouse, 85 Pa. St. 235. And as a general rule a new partner is not bound for the Vol. I — ; 497 f 208 EIGHTS AND OBLIGATIONS. [book n. ment the incoming partner will be bound by it, but his lia- bilities in respect of the old debts will attach by virtue of made by the other partner, which contract is treated by both con- tracting parties as one made with the firm, will be liable the same as if the contract had been made in the first instance with the new firm. Lucas v. Coulter, 104 Ind. 81. Where the bailee of grain stored for the owner, upon entering into partnership with others in the grain business, receives credit for the grain so stored with him as so much capital, the firm will sustain the same relation with the bailor as the original bailee, and on a sale thereof by the firm all its members will be liable to the bailor for the proceeds. Rankin v. Shep- hardson, 89 111. 445. Where a broker who is liable for the sale of his principal's bond subsequently forms a copartner- ship with his employees under agreement that the broker shall contribute to the firm all the assets in his former business, and such firm subsequently renders to the principal a statement of such transaction admitting a liability thereon less than that claimed by the principal, but admit in their answer that they assumed the sum therein named as a part of the liabilities of the original business, they thereby adopt the whole trans- action as their own and are liable for the whole amount due the principal. Bate v. McDowell, 49 N. Y. Super. Ct. 106. See, also, Anderson v. Freeman, 75 Ga. 93. An incoming partner's interest in a crop to be raised by the firm upon which an equitable lien had been created prior to his accession to the firm will be subject to such lien. Mayer v. Taylor, 69 Ala. 403. A judgment creditor of one part- ner has a lien on the partnership property prior to the members of a new firm to whom the partner- ship property is conveyed under an agreement that they shall pay off the debts of the old firm. Dill v. Voss, 94 Ind. 590. An agreement with an incoming partner to assume with the remain- ing partner debts of the old firm will, of course, be vitiated by fraud. Morris v. Marqueze, 74 Ga. 86. debts of the firm contracted before he became a member. Babcock v. Stewart, 58 Pa. St. 179; Deere v. Plant, 42 Mo. 60 ; Harp v. Tomlin- son, 2 Vt. 103; Adkins v. Arthur, 33 Tex. 431 ; Atwood v. Lockhart, 4 McLean, 350. Where, however, a wife becomes a copartner in the place of her de- ceased husband, the presumption will be indulged that she becomes liable lor his partnership debts, and a mortgage executed therefor is sustained by a good considera- tion. Preusser v. Henshaw, 49 Iowa, 41. The cases generally lay down the rule that an incoming partner does not become liable for ante- cedent debts of the firm without an express undertaking to that effect upon a sufficient considera- tion. Meador v. Hughes, 14 Bush, 652; Wright v. Brosseau, 73 111. 381 ; Parmalee v. Wiggenhorn, 6 Neb. 322; Fagan v. Long, 30 Mo. 498 CH. II, SEC. III.] LIABILITY OF MEMBERS. *208 the new agreement and not by reason of his having become a partner. 222; Stenburgu. Callanan, 14 Iowa, 251. See ante. While, however, an incoming partner is not liable for the prior debts of the firm, without a special promise, yet very slight testimony will be sufficient to prove an as- sumption by him of those debts. Cross v. Burlington Nat. Bank, 17 Kan. 336. See, also, Wheat v. Hamilton, 53 Ind. 256. In Shoemaker Piano Co. v. Ber- nard, 2 Lea (Tenn.), 358, the rule is more correctly laid own, that, in order to hold an incoming partner bound for the pre-existing debts of a firm, he must become liable for such debts by either expressly as- suming them upon proper con- sideration, or by otherwise dealing with the creditor in such a manner as to create an implied obligation and duty to pay the same in com- mon with the old firm. And in either aspect of the rule the assent of the party to be charged and the consent of the creditor to accept the new liability are necessary to the new partner's liability. See, also, Fagan v. Long, 30 Mo. 222. In other words, an incoming partner will not be liable to a firm creditor for an old debt of the firm, unless there is a novation of the debt by a new promise by the en- tire new firm upon a valid consid- eration, and a discharge of the old firm upon the old debt Sten- burg v. Callanan, 14 Iowa, 251. As to what amounts to a nova- tion between the creditors of one partner and a new firm formed upon the withdrawal of such part- ner, see York v. Orton, 65 Wis. 6. 499 See, also, generally, Shafer's Ap- peal, 99 Pa. St. 246; Simonds v. Pierce, 51 Vt. 467 ; White v. Thiel- ens, 106 Pa. St. 173; Parsons v. Tillman, 95 Ind. 452. There must be the concurrent consent of three parties — the cred- itors, the old firm and the new. Spaunhorst v. Link, 46 Mo. 197. In Updike v. Doyle, 7 E. I. 446, the rule is stated tbat the assump- tion by incoming partners of pre- existing debts of the concern may, both at law and in equity, either be proved by their express cove- nant or contract, or be inferred from the terms of it, or from the treatment of such debts by the firm, to the knowledge of the in- coming partners, as the debts of the new firm. If the drawee of a draft given in payment for goods, before its acceptance, forms a partnership with others, and the partners agree that the goods shall be used in the partnership business, and be paid for by the firm, and the partner who is the drawee accepts the draft for the firm, the acceptance is binding on the paitner. Mark- ham v. Hazen, 48 Ga. 570. A partner who on a dissolution buys his copartner's interest, tak- ing the assets, is bound, though not so originally, for a debt which, from entries in the books made the basis of their settlement, it ap- pears was assumed by the firm. The settlement ratifies the unau- thorized assumption. Hopkins v. Johnson, 2 La. Ann. 842. Where a party purchases an in- terest in a commercial house, enti- *208 EIGHTS AND OBLIGATIONS. [BOOK II. Evidence of agreement to do so. — An agreement by an incoming partner to make himself liable to creditors for tling him "to an equal undivided one-third interest and ownership, and to all stock of merchandise, bills receivable, and debts in book accounts on hand, due or owing to the firm on a given day (over and above the payment of the liabilities of said firm)," he is responsible for the debts of the house existing at the time of purchase. Hughes v. Waldo, 14 La. Ann. 348. "Where a retiring partner sold his interest in the firm to A., who un- dertook to be responsible for the firm's debts to the extent of the vendor's liability, and he became a member of the firm, and the new firm did pay some of the old firm's debts, and the assets which the re- tiring partner left were sufficient to pay all the firm's debts, held, in a suit by the retiring partner to com- pel an application of the firm's as- sets to the payment of the old firm's debts, that the undertaking b} r the new firm to pay the old firm's debts would be implied; but, as no fraud was, proved, that the complainant was only entitled to be repaid that which he had been compelled to pay as partner. Peyton v. Lewis, 12 B. Mon. 356. A., being a member of a firm, and having contributed to the stock of the company less than he had agreed on forming the partner- ship, sold out his interest to B., with the assent of the other part- ners, and was released by them from all liability to pay any of "the debts due by, or demands which might be brought against, said establishment." Held, thatB., succeeding to the interest of A., took upon himself the liability of A. to contribute to the other mem- bers of the firm. Conwell v. San- didge, 5 Dana, 210. Two consignees became partners for the transaction of commission business, and, circumstances tend- ing to show that they turned their separate consignments into com- mon stock, both were held liable for the proceeds. Dix v. Otis, 5 Pick. 38. "Where a party stores grain in the cribs of one buying grain for him- self, but which grate is simply taken for storage and not mixed with other grain of the bailee, and the bailee afterwards, upon enter- ing into partnership with others in the business, receives credit for the grain so stored with him as so much capital, the title to the corn will not pass to them as in the case of a purchase from a warehouse- man when the corn is commingled with other grain, but the firm will sustain the same relation to the bailor as the original bailee, and on a sale of such corn by the firm all its members will be liable to the bailor for the proceeds. Rankin v. Shephardson, 89 111. 445. A copartner cannot make an in- coming partner liable for the pre- existing debts by giving the note of the new firm therefor. Fagan v. Long, supra. A commercial partnership is not liable on the obligations contracted by one of the partners previous to the formation of the partnership, notwithstanding the fact that the partnership was to continue the 500 CH. II, SEC. III.] LIABILITY OF MEMBERS. *208 debts owing to them before he joined the firm may be, and in practice generally is, established by indirect evidence. same business in which the obliga- tions were contracted and that specified portions thereof were as- sumed by the individual members. Mosseau v. Thebens, 19 La. Ann. 516. Where, however, in an action on a promissory note given in the name of a firm by one of its mem- bers to the plaintiff, the consider- ation of which was in part goods sold to a former firm, composed of different members, although carry- ing on the same business, there was evidence that, at an interview lasting an hour, at which the plaintiff's account was presented and examined and the note signed therefor, J. S., a member of both firms, was present, although he did not join in the conversation and had no charge of the financial business of the firms ; and that the account was made out to the new firm, although many of the items were due from the old firm ; but there was no evidence of any in- tentional deception on the part of the plaintiff, it was held that the evidence justified the jury in find- ing an assent by J. S. to the giving of the note. Shaw v. McGregory, 105 Mass. 96. A. agreed in writing to deliver two thousand cords of wood, at a specified price per cord, to the plaintiff. Afterwards he formed a copartnership with B. and C. in the lumber and wood business, and, through the firm, he delivered a part of the wood, the firm taking the pay in their name and remit- ting the same to A., after deduct- ing commissions. Held, in a suit by the plaintiff against the firm for failing to deliver the balance of the wood, that B. & C. were not liable. Goodenow v. Jones, 75 111. 48. A contract between two firms to pack pork on joint account did not have the effect of consolidating the two firms or of making either liable for the antecedent debts of the other. Meader v. Hughes, 14 Bush, 652. The assignment of its assets for the benefit of its creditors, made by a defunct partnership to an in- dividual member of a new partner- ship succeeding to the former business of the old concern, will not make the new partnership liable to the defunct partnership for the value of any of its assets, and therefore not amenable to a garnishment at the suit of any creditor of the defunct concern. Bancker v. Harrington, 30 La. Ann. 136. Where the purchaser of a lot of mules upon credit, which were to be delivered to him at a future time, before their delivery formed a partnership with another person, with the agreement that the mules were to be put into the joint stock and sold on joint account, and they were so sold, held, that the surety on the notes given by the purchaser for the mules, who had been com- pelled to pay the notes, could not hold the partner liable as a joint purchaser. Duncan v. Lewis, 1 Duv. 183. Where a partnership between at- torneys was dissolved after a suit 501 : "208 EIGHTS AND OBLIGATIONS. [BOOK II. The courts, it has been said, lean in favor of such an agree- ment, and are ready to infer it from slight circumstances, (p) 1 and they seem formerly to have inferred it whenever the incoming partner agreed with the other partners to treat such debts as those of the new firm. (//) But this cer- tainly is not enough, for the agreement to be proved is an agreement with the creditor; and of such an agreement begun, and a new partnership formed by one of the former part- ners and a new partner, whicii in turn was dissolved before the money in the suit was collected, an action for detaining the amount collected cannot be maintained against the new partner, the other alone having been attorney of rec- ord in that suit. Ayrault v. Chani- berlin, 26 Barb. 83. Where debts of an old firm are charged to the new firm on its books, the rule that entries on the books of a firm shall bind the firm has no application to the liability of the new partner for debts of the old firm so charged, unless lie had access to the books and was thereby enabled to know what had been done. In such case his consent to be bound will be implied if he fail to object at the time when he first has notice of such entries. Shoe- maker Piano Co. v. Bernax-d, 2 Lea (Tenn.), 358. Goods were purchased by one person for whicb a promissory note was given. Afterwards he entered into partnership with another, and by consent of both partners and of the holder of the note the words " and company " were added to the signature of the maker, to make the note stand against the firm. Held, that the note was binding on the partnership. Crum v. Abbott, 2 McLean, 233. A new firm, though composed entirely of a portion of the mem- bers of a former firm which is dis- solved, cannot be sued jointly in their partnership name for the debt of the old firm. Shorter v. High- tower, 48 Ala. 526. (p) Ex parte Jackson, 1 Ves. Jr. 131 ; Ex parte Peele, 6 Ves. 602. See, also, Rolfe v. Flower, L. R. 1 P. C. 27. 1 As to what evidence is compe- tent to show that a new firm has by promissory note assumed the debts of a prior firm, see Kaiser v. Fendrick, 98 Pa. St. 528. When the dissolution of an old firm has occurred and a new firm has agreed to assume the liabilities of the old, but slight circumstances are required to justify finding an intention on the part of a creditor of the old firm who has notice of the dissolution and of such agree- ment to accept the liability of the new firm in place of that of the old. Facts in this case held to show such an intention on the part of the creditor of the old firm. Reg. ester v. Dodge, 61 How. Pr 107; S. C. 19 Blatch. 79; 6 Fed. Rep. 6. (q) See Cooke's Bank. Law, 534 (8th ed.), citing Ex parte Bingham 502 CH. II, SEC. III.] LIABILITY OF MEMBERS. *209 an arrangement between the partners is of itself no evi- dence, (r) As an instance where an incoming partner made himself liable for debts contracted by the firm before he joined it, reference may be made to Ex parte Whitmore. (s) In that *case Warwick and Clagett became partners. [*209J Warwick, who had had dealings with merchants in America, informed them that he had taken Clagett into partnership, and requested them to make up their accounts and transfer any balance due to or from him (Warwick) to the new firm. These instructions were repeated and con- firmed by Warwick and Clagett, and were acted on. A debt owing from Warwick was placed to the debit of the new firm, and a bill was drawn on the firm for the amount of the debt, and was accepted, but was dishonored. On the bank- ruptcy of the firm it was held that the debt in question had become the joint debt of Warwick and Clagett, and not only so, but that the joint liability of the two had been ac- cepted in lieu of the sole liability of Warwick. Bills by old partners for old debts a fraud on new part- ner — Account stated in respect of old debt. — Before leaving this subject it may be as well to observe that, as an incoming partner does not, by the fact of entering the firm, take upon himself the then existing liabilities thereof, if, after he has joined the firm, his copartners give a bill or note in their and his name for a debt contracted by them alone, this is prima facie a fraud upon him, and con- sequently he will not be liable to a holder with notice, (t) For similiar reasons an incoming partner will not, it is apprehended, be liable to pay a debt contracted before he became a partner, merely because his copartner has after- and Re Staples; Ex parte Clowes, 2 (s) 3 Deac. 365. See, also, Rolfe Bro. C. C. 595. v . Flower, L. E. 1 P. C. 27, which (r) Ex parte Peele, 6 Ves. 602 ; was a stronger case. Ex parte Parker, 2 M. D. & D. 511. (t) See Shirreff v. Wilks, 1 East, See, also, Ex parte Freeman, Buck, 48, ante, p. 173. 471; Ex parte Fry, 1 Gl. & J. 96; Ex parte Williams, Buck, 13. 503 *210 EIGHTS AND OBLIGATIONS. [BOOK II. wards stated an account with the creditor, and thereby admitted that the debt in question is due from the firm, (u) But, as will be seen hereafter, an incoming partner, unless he takes care, may find himself liable to pay the balance of an open running account, commencing before he joined the firm and continued afterwards, although payments have been made since he joined the firm sufficient to liquidate that part of the account for which he is directly respon- sible, (a?) [*210] *2. Termination of Liability. When a partner's liability ends. — Before examining the circumstances which put an end to a partner's liability to creditors of the firm, it is necessary to draw attention to the distinction between a partner's liability for what may be done after his copartners have ceased to be his agents, and his liability for what may have been done whilst their agency continued. It is obvious that there may be many circumstances which have no effect upon a liability already accrued, but which, nevertheless, may prevent any liability for what is not yet done from arising ; and in order to de- termine with accuracy the events which put an end to a part- ner's liability to creditors, it is necessary to distinguish his liability for the future from his liability for the past. A. Termination of liability as to future acts. A partner's agency ends by notice. — The agency of each partner in an ordinary firm, and his consequent power to bind the firm, i. e., himself and his copartners, may be de- termined by notice at any time during the continuance of the partnership; (y) for his power to act for the firm is (u) See, as to accounts stated, Jur. N. S. 559, noticed infra, French v. French, 2 Man. & Gr. under the of Appropriation of Pay- 644, and Lemere v. Elliott, 6 EL & ments. N. 656. (y) See Vice v. Fleming, 1 Y. & (x) See Beale v. Caddick, 2 H. J. 227 ; Willis v. Dyson, 1 Stark. & N. 326, and Scott v. Beale, 6 164; Rooth v. Quin, 7 Price, 193; 504 CH. II, SEC. III.] LIABILITY OF MEMBERS. *211 not a right attaching to him as partner independently of the will of his copartners; and although any stipulations amongst the partners themselves will not affect non-part- ners who have not notice of them, yet if any person has notice that one member of the firm is not authorized to act for it, that person cannot hold the firm liable for anything done in the teeth of such notice, (s) * With one or two exceptions, which will be mentioned presently, the agency of each partner, and his consequent power to bind his copartners, can only be effectually deter- mined by giving notice of its revocation. The authority imputed to each partner must continue until some event happens to put an end to it, and this event ought to be as generally known as that which conferred the au- thority upon *him. The same reason which leads [*211] to the imputation of the power to act for the firm at all demands that such power shall be imputed so long as it can be exercised and is not known to have been deter- mined, (a) To this principle there are exceptions which may be con- veniently disposed of before the principle itself and its application are discussed. Effect of death. — 1. When a partner dies. 2 Notice of death is not requisite to prevent liability from attaching to Galway v. Mathew, 1 Camp. 402, (a) As to the liability of an out- and 10 East, 264. going partner for the acts of his (z) This subject has been already late partners and a new partner, discussed. See ante, p. 170 et seq. see Scarf v. Jardine, 7 App. Ca. 1 When property was bailed to a 345, noticed ante, pp. 46 and 197. partnership for no definite time, 2 Contracts for the service of at- and the bailor could have removed torneys who are partners in busi- it at his pleasure, one of the part- ness calling for professional skill ners, upon retiring from the part- entitle the client to the service of nership, may give the bailor notice each partner, and are determined of his retiring and require him to by the death of either partner, remove the property, and absolve McGill v. McGill, 2 Mete. (Ky.) 258. himself from any liability for loss The firm of T. & Co. contracted of property occurring after his re- with M. for the manufacture of tirement. Winston v. Taylor, 28 boilers. Before thej» were deliv- Mo. 82. See post. ered, T., a member of the firm of 505 *211 EIGUTS AND OBLIGATIONS. [liOOK II. the estate of a deceased partner in respect of what may be done by his copartners after his decease, (b) l For, by the law of England, the authority of an agent is determined by the death of his principal, whether the fact of death is known or not. (c) 2 The death of one partner does not, however, determine an authority given by the firm through him before his death ; and consequently, if, after his death, such an author- ity is acted on, the surviving partners will be liable for it. In Usher v. Dauncey, (d) bills were drawn and indorsed in blank by a partner in the name of the firm, and were given by him to a clerk to be filled up and negotiated as occasion might require. The partner in question died, and after his death, and after the name of the firm had been altered, one of the bills was filled up and negotiated. Lord Ellenbor- ough held that the bill was binding on the surviving part- ners, considering that the power to fill up the bill emanated T. & Co., died. The boilers were sent to the survivors of the firm, who continued the business in the old name, and they executed notes for the price in the old firm name. Subsequently the surviving part- ners purchased T.'s interest in the business, and afterwards made a general assignment for the benefit of creditors. Held, on a proceeding in chancery by M. against the ad- ministrators of T. and the surviving partners to enforce the payment of his claim by the estate of T., that this was an indebtedness subsisting against the firm of T. & Co. in T.'s life-time, and contracted before the firm was dissolved by T.'s death, the notes executed by the surviv- ors being mere evidence of the amount of the debt and the time of payment, and the debt existing in- dependent of the notes, and that said indebtedness was a debt for which the separate estate of T. was responsible. Mason v. Tiffany, 45 111. 392. (6) Devaynes v. Noble, Houlton's Case, 1 Mer. 616; Johnes' Case, id. 619; Brice's Case, id. 620; Webster v. Webster, 3 Swanst. 490. See Vulliamy v. Noble, 3 Mer. 614; Brown v. Gordon, 16 Beav. 302, as to the power of surviving partners, who are the executors of the de- ceased partner, to bind his estate. ^ee Dickinson v. Dickinson, 25 Gratt. 321 ; Williams v. Mathews, 14 La. Ann. 11. (c) See Blades v. Free, 9 B. & C. 167; Smout v. Ilbery, 10 M. & W. 1; Campanari v. Woodburn, 15 C. B. 400. 2 See E well's Evans on Agency, *87 and note. (d) 4 Camp. 97. 506 CH. II, SEC. III.] LIABILITY OF MEMBERS. '"212 from the partnership and not from the individual partner who had died. 1 Contribution after death.— Moreover, it does not follow- that, because a creditor has no remedy against the estate of a deceased partner in respect of debts contracted by his co- partners since his death, his estate is not liable to contribute to such debts at the suit of the ^surviving [*212] partners. That is a different matter altogether, and depends on the agreement into which he entered with his copartners, as will be seen hereafter when the subject of dissolution is under consideration, (e) Effect of bankruptcy. — 2. "When a firm becomes bank- rupt the authority of each member to act for the firm at once determines. 2 If one partner only becomes bankrupt his authority is at an end, and his estate cannot be made liable for the subsequent acts of his solvent copartners. At the same time, if, notwithstanding the bankruptcy of one partner, the others hold themselves out as still in partner- ship with him, they will be liable for his acts, as if he and they were partners; (f) and although the estate of a bank- rupt partner does not incur liability for the acts of the other partners done since the bankruptcy, yet the solvent part- ners have power to bring the partnership transactions to an end and to dispose of the partnership property. This subject will be examined hereafter in the chapter on Bank- ruptcy, to which the reader is therefore referred, (g) Effect of retirement of dormant partner. — 3. Another apparent but not real exception to the rule is that, if a dor- 1 See Bank of N. Y. v. Vander- Hamer's Devisees' Case, 2 De G. M. horst, 32 N. Y. 553 ; Wilson v. & G. 366. Stewart, 5 Pa. L. J. R. 450 ; EvvelTs 2 See Dickinson v. Dickinson, 25 Evans on Agency, *87, note. Gratt. 321. (e) For instances where the estate (/) See Lacy v. Woolcot, 2 Dowl. of a deceased shareholder has been & Ry. 458. held liable to contribute to debts (g) See Fox v. Hanbury, Cowp. incurred since his decease, see 445; Morgan v. Marquis, 9 Ex. Baird's Case, 5 Ch. 725 ; Blakeley's 145. Executor's Case, 3 Mc. & G. 726; 507 *213 EIGHTS AND OBLIGATIONS. [HOOK II. mant partner (i. e., one not known to be a partner) (A) ! retires, the authority of his late partners to bind him ceases on his retirement, although no notice of it be given. 2 But this is because he never was known to be a partner at all, and the reason for the general rule has therefore no appli- cation to his case. The following decisions illustrate this exception: In Carter v. WhaUey, (i) the defendant Saund- ers was a partner in the " Plas Madoc Colliery Co." but there was nothing to show that the plaintiff or the public ever knew that such was the case. Saunders withdrew from the company, but no notice of his withdrawal was given either to the plaintiff or to the public. After his [*213] withdrawal the company became indebted to *the plaintiff, and it was held that Saunders was not liable for the debt, because the name of the company gave no in- formation as to the parties composing it, and Saunders him- self was not known either to the plaintiff or to the public to have belonged to the company before he withdrew. In Heath v. Sansom, (k) the defendants Sansom and Evans (h) A du/mant partner, known to a few persons to be a partner, is not dormant as to them. See the cases cited infra, note (r). 1 When there is an existing part- nership under a fixed firm name, and a new partner is taken in, and there is no change in the firm name, the new partner is to be considered a dormant partner, un- less it appears that his connection with the firm is, by publication or other acts, made known to the pub- lic. Phillips v. Nash, 47 Ga. 218. Where two were concerned to- gether in business, but the busi- ness was done in the name of one, and it was not generally known that they were partners, held, that the other was a dormant partner. Kelley v. Hurlburt, 5 Cow. 534. One who is a member of a part- nership, trading under the firm name of R. M. & Co., does not be- come a dormant partner by reason of the creditor being ignorant of the name of the copartner of R. M. Deford v. Reynolds, 36 Pa. St. 325. 2 Kelley v. Hurlburt, 5 Cow. 534; Edwards v. McFall, 5 La. Ann. 1G7; Warren v. Ball, 37 111. 76; Scott v. Colmesnil, 7 J. J. Marsh. 416; Ma- gill v. Merrie, 5 B. Mon. 168 ; De- ford v. Reynolds, 36 Pa. St. 325; Oppenheimer v. Clemmons, 18 Fed. Rep. 886. See, however, Park v. Wooten, 35 Ala. 242. In the case of creditors who knew him to be a member, notice of retirement is necessary. Oppen- heimer v. Clemmons, supra; Ewing v. Frippe, 73 Ga. 776. (i) 1 B. & Ad. 11. (fc) 4 B. & Ad. 172. 508 CH. II, SEC. III.] LIABILITY OF MEMBERS. '"213 carried on business as partners under the style of Philip Sansom dk Co., but Evans was not known to be a partner. They dissolved partnership by mutual agreement, but did not notify the fact. After the dissolution Sansom gave the plaintiff a promissory note, on which he sued Sansom and Evans. The court decided that Evans was not liable, for when his right to share profits ceased he could not be held responsible for the subsequent acts of his copartner, unless he authorized those acts or held himself out as still con- nected with him, and he had done neither. (Z) Effect of lunacy. — With the three exceptions which have been noticed the general proposition above stated holds good. Thus, if a partner becomes lunatic, and his lunacy is not apparent or made known, his power to bind the firm and his liability for the acts of his copartners (m) will re- main unaffected. Effect of dissolution of which no notice is given. — So if a partnership is dissolved, or one of the known members retires from the firm, until the dissolution or retirement is duly notified the power of each to bind the rest remains in full force, although as between the partners themselves a dissolution or a retirement is a revocation of the author- ity of each to act for the others, (w) 1 Thus, if a known (J) See, too, Evans v. Druramond, iv, chapter 1, section 2, to show 4 Esp. 89. This doctrine seems not that the lunacy of one partner to apply to Scotland. See Hay v. does not dissolve the firm. See, Mair, 3 Ross, L. C. on Com. Law, further, on this subject, Story on 639. The case of The Western Bank Agency, section 481, and note of Scotland v. Needell, 1 Fos. & there. See, also, Drew v. Nunn, Fin. 461, seems at first sight op- 4 Q. B. D. 661. posed to the authorities in the text, (n) See Mulford v. Griffin, 1 Fos. But it is conceived that in that case & Fin. 145 ; Faldo v. Griffin, id. there must have been evidence to 147, and the cases in the next note, show that the defendant was l Tabb v. Gist, 1 Brock. 33 ; South- known to the plaintiffs to have wick v. McGovern, 28 Iowa, 533; been a partner before he retired. Bradley v. Camp, Kirby, 77 ; Ken- (m)See Molton v. Camroux, 2 Ex. nedy v. Bohannon, 11 B. Mon. 118; 487, and 4 id. 17; and Baxter v. Amidown v. Osgood, 24 Vt. 278; The Earl of Portsmouth, 5 B. & C. Lamb v. Singleton, 2 Beav. 490; 170, and the cases cited post, book Heroy v. Van Pelt, 4 Bosw. 60 ; 509 *214 RIGHTS AND OBLIGATIONS. [BOOK II. [*214] partner ^retires, and no notice is given, he will be liable to be sued in respect of a promissory note made Schurten v. Davis, 21 La. Ann. 173; Dickinson v. Dickinson, 25 Gratt. 321 ; Southern v. Grim, 67 111. 106; Howell v. Adams, 68 N. Y. 314; Benjamin v. Covert, 47 Wis. 375; S. C. 55 id. 157; S. C. 2 N. W. Rep. N. S. 625; Buffalo City Bank v. Howard, 35 N. Y. 500 ; Hunt v. Hall, 8 Ind. 215; Newcomet v. Brotzman, 69 Pa. St. 185; Price v. Towsey, 3 Litt. 423 ; Ketcham v. Clarke, 6 Johns. 144; Merrit v. Pol- lys, 16 B. Mon. 355 ; Grady v. Rob- ison, 28 Ala. 289 ; Holt v. Simmons, 16 Mo. App. 97 ; Richards v. Butler, 65 Ga. 593; Richards v. Hunt, id. 342; Long v. Garnett, 59 Tex. 229; Coggswell v. Davis, 65 Wis. 191 ; Uhl v. Harvey, 78 Ind. 26: St. Louis Electric Lamp Co. v. Man- hall, 1 S. E. Rep. 430 ; Clement V. Clement, 35 N. West. Rep. (Wis.) 17 ; Foellinger v. Leh, 9 West. Rep. (Ind.) 75; Bloch v. Price, 32 Fed. Rep. 562; Spears v. Toland, 1 A. K. Marsh. 203; Thurston v. Perkins, 7 Mo. 29 ; Princeton, etc. Turnpike Co. v. Gulick, 16 N. J. L. 161 ; Ber- nard v. Torance, 5 Gill & J. 383. See. also, Woodruff v. King, 47 Wis. 261. See, however, Brisban v. Boyd, 4 Paige, 17, where it was held that a contract by a customer of a part- nership with one of the partners, on account of the firm, after a dis- solution, but without notice of the dissolution, will not bind the firm, unless, by the avoidance of the contract, the customer would suffer a loss, or be put in a worse situa- tion than he would have been in had he been advised of the dissolu- tion before making the contract. Where one of three partners re- tires from or a new partner comes into the firm, or both, and notice thereof is given, but the business continues to be carried on in other respects as before, those partners as to whom no notice was given will be presumed to hold the same relation to the concern afterwards that they did before. Howe v. Thayer, 17 Pick. 91. Where two individuals compos- ing a firm divide the stock between them, and carry on separate estab- lishments in the firm name, and either of them purchases goods on credit in the firm name, in the ab- sence of personal or public notice to the creditor that the firm is dis- solved, either or both partners may be held for the debt. Moline Wagon Co. v. Rummell, 2 McCrary, C. Ct. 307; S. C. 14 Fed. Rep. 155; 12 id. 658. Where partners have dealt as such with a vendor, and after be- coming incorporated continue to deal as before, having their bills made in the same way without giving any notice of their altered condition, they will continue to be liable as partners until the sellers have knowledge thereof derived from some other source. Martin v. Fewell, 79 Mo. 401. To establish the liability as part- ners of defendants who have dis- solved partnership it must appear: 1, that the plaintiff, at the time the contract was made under which his account accrued, knew that the defendants had been in partner- ship; 2, that he was ignorant of their dissolution; and 3, that he 510 OH. II, SEC. III.] LIABILITY OF MEMBERS. *214 since his retirement by his late partner, even though the plaintiff had no dealings with the firm before the making made the contract supposing he was contracting with the defend- ants as partners, and in reliance upon their joint liability. Pratt V. Page, 32 Vt, 13; Benton v. Cham- berlain, 23 Vt. 711. After dissolution and notice the power of each to bind the others ceases. See the cases already cited ; also Crowly v. Bank of Ky. 18 B. Mon. 405; Whitesides v. Lee, 1 Scam. 548 ; Lane v. Tyler, 48 Me. 252. A bill of exchange drawn by a partnership and sent to an agent for sale, but sold after notice to the agent and the purchaser that one partner has retired, binds the remaining partner only. Robb v. Mudge, 14 Gray, 534. The principle that, after a part- nership is dissolved, one partner, dealing with a person who has no notice of the dissolution, may bind his copartner, applies only to trans- actions in the usual course of busi- ness. Whitman v. Leonard, 3 Pick. 177. If, after dissolution, one partner executes a note in the individual names of both partners (not the firm name), for goods in the line of their business sold to him on the firm's credit by one who dealt with the firm and had no knowledge of the dissolution, the note will bind both. Iddings v. Pierson, 100 Ind. 418. Where a firm executes a continu- ing guaranty for the payment of a sum by another the guaranty is joint, and notice to the guarantee of the dissolution of the firm de- termines its right to make further advances on the faith of such guai-anty, or to make further re- newals of existing obligations. City National Bank v. Phelps, 86 N. Y. 484; S. C. 16 Hun, 158. A firm ordering merchandise which was forwarded by the vend- ors before they knew of the disso- lution of the firm will be liable therefor in an action for goods sold and delivered, notwithstanding they accept a note made in the firm name by the remaining part- ner after the dissolution. Good- speed v. South Bend Plow Co. 45 Mich. 237. A., a stage proprietor, engaged B. to board a person in A.'s em- ployment. Afterwards A. sold half his interest in the stage prop- erty to C, and A. and C. became partners. The person so in the employment of A. continued in the employment of the partners, and continued to board with B., but no notice was given to B. of the terms of said partnership, nor was B. in- formed by A. that he should not pay such person's board after the formation of such partnership. Held, that B. might recover against A. after the formation of the part- nership as well as before. Taggart v. Phelps, 10 Vt. 318. A party, after his withdrawal from a firm, suffered his name to appear in the firm name for some time after his withdrawal, and his name appeared before his with- drawal in the business card of the firm published in a newspaper to which he was a subscriber. It ap- peared he had admitted that he still had an interest in the firm, and that 511 *2U EIGHTS AND OBLIGATIONS. [BOOK II. of the note, (p) And in determining which was first in point of time, viz., notice of the dissolution or the making his name was used as before, and that he was liable to the same ex- tent he had been. He continued for more than a year after his withdrawal at his place in the firm. No notice of dissolution was given. Held, that from these facts the jury were fully war- ranted in finding him liable as a member of the firm. Ellis v. Bronson, 40 111. 455. See, also, Hixon v. Pixley, 15 Nev. 475 ; Stim- son v. Whitney, 130 Mass. 591. Mere publication of a notice of dissolution does not preclude proof that, in fact, a partnership contin- ued thereafter. Its continued ex- istence may be inferred from cir- cumstances; and entries in the books, made by one of the firm after the alleged dissolution, are admissible in evidence as against him. Gilchrist v. Brande, 58 Wis. 184. After the dissolution of a firm, and on assignment of its property, a debtor settled with one of the partners without actual notice of the assignment. Held, that the set- tlement was binding on the as- signee, because one partner has au- thority to settle firm debts after dis- solution, in the absence of an agree- ment to the contrary known to the debtor ; and because the dissolution was not sufficient to put the debtor on inquiry as to whether there was any such agreement or any assign- ment. Huntington v. Potter, 32 Barb. 300. One member of a firm, without the knowledge of his partner, signed a draft with the partnership name and delivered it to a third party for his accommodation. The latter filled in his own name as payee and that of his own firm as drawees in the presence of the plaintiff, and, having indorsed it, procured it to be discounted by the plaintiff. Held, that the plaintiff was not chargeable with notice that it was accommodation paper ; and that the partner of the drawee was liable, although, in fact, the firm had been dissolved a short time before. No notice of such dissolution had come to the plaint- iff. Chemung, etc. Bank v. Brad- ner, 44 N. Y. 680. A firm doing business in A. was dissolved, but no notice of the dis- solution was published in a news- paper. About the time of the dis- solution B. , a member of the firm, gave a note in the name of the firm to a bank at C, which note was, after the dissolution, renewed by an agent acting under a sealed power of attorney given by B. in the name of the firm. Held, that the notice of the dissolution was insufficient so far as the bank at C. was concerned; that the firm were liable on the note, whether given before or after the dissolu- (o) See Parkin v. Carruthers, 3 Esp. 248; Williams v. Keats, 2 Stark. 290; Brown v. Leonard, 2 Chitty, 120; Dolman v. Orchard, 2 C. & P. 104, in which three last cases, however, there was a con- tinual holding out. See, as to or- dering such a bill to be delivered up, Ryan v. Mackmath, 3 Bro. C. C. 15. 512 CH. II, SEC. III.] LIABILITY OF MEMBERS. *2U of the note, effect must be given to the presumption that the instrument was made and issued on the day it bore date, unless some reason to the contrary can be shown, (p) tion ; that, if the renewal was void, the bank had the right to recover on the original note, which it had retained ; that an assignee of the firm, for the payment of the debts thereof, had properly paid this debt to the bank, although he, the assignee, may have had the requisite notice of the dissolution and that the debt was contracted afterwards. Hammond v. Aiken, 3 Rich. Eq. 119. Two partners in a mill and cot- ton factory in a small town dis- solved their partnership, and posted up written notices of the dissolu- tion in four or five places in the town. Soon after one of the part- ners gave a note in the name of the firm to a bank in a town twelve miles distant. Held, that the court could not say that the notice was sufficient, nor disturb a verdict for the bank, which implied that it was insufficient, as being contrary to evidence. Mitchum v. Bank of Kentucky, 9 Dana, 166. A. brought an action as indorsee on a note made in October, 1836, in renewal of a note made in July, 1834, by the firm of B. and C. B. had formed a partnership with D. in January, 1834. but the new firm retained the books of B. and C. and collected their debts. Held, that the liability of a member of the firm to pay the note depended on their partnership when the first note was given ; that, to show their dissolution, so as to take away B.'s rights, some notice to A. must be clearly proven ; that the fact of forming a new connection, when the new firm occupied the old store, and used the old firm's books, and collected their debts, was not sufficient evidence of a dissolution, as the old firm might have been continued for the pur- pose of settling its affairs. Brown v. Clark, 14 Pa. St. 469. A partnership in Mobile, Ala., was broken up by violence which was notorious, and public notice of the dissolution was given. The following year one of the partners set up business under the same firm name, which indicated by name only himself, in Milwaukee, and dealt with persons in New York who had formerly dealt with the old firm in Mobile. Upon one of his notes these New York dealers strove to hold his former partners in Mobile liable. Held, that the circumstances of the case were such as to put the New York dealers upon their inquiry, and that they could not be allowed to hold the defendant. Clapp v. Up- son, 12 Wis. 492. Where a note was signed by one of the members of a commercial firm, with the addition of the words, "in liquidation," held, that such a note was a notice to the payee that the firm was dissolved, and that, without a special author- ization to the partner signing the note, from his copartner, the note was not binding on him. Speake V. Barrett, 13 La. Ann. 479. (p) See Anderson v. Weston, 6 Bing. N. C. 296. Vol. 1 — 33 513 *214 EIGHTS AND OBLIGATIONS. [BOOK II. Torts after dissolution. — A partner who retires and does not give sufficient notice exposes himself to the risk of being Where the plaintiffs, who were lawyers, drew a writ in favor of three persons who had been part- ners, describing one of them as late partner of a certain firm, held, that this was sufficient proof that the plaintiffs, at the time of the draw- ing of the writ, knew that the one described as late partner has ceased to be a member of the firm. Cahoon v. Hobart, 38 Vt. 244. Notice of dissolution of a part- nership may be shown either by di- rect or circumstantial evidence sufficient to establish the fact that the person seeking to enforce the partnership liability knew of the dissolution. Laird v. Ivens, 45 Tex. 622. See, also, Lovejoy v. Spafford, 93 U. S. 430 ; Coddington v. Hunt, 6 Hill, 595; Mauldin v. Branch Bank, 2 Ala. 502. Circumstances such as leave no rational doubt on the mind that one knew of the dissolution of a partnership are as satisfactory as direct and positive proof. Irby v. Vining, 2 McCord, 379. See, however, Pitcher v. Bar- rows, 17 Pick. 361, where it was held that where notice of the dis- solution of a partnership has not been published in a newspaper, or brought home to the knowledge of the party to be affected by it, evi- dence of the mere notoriety of the dissolution is not admissible to prove such notice. A change of the partnership name which in itself indicates who the individual partners are may be sufficient evidence of a dissolu- tion ; but where the name under which the business is transacted gives no indication of the names of the persons composing the firm, a change in such name is not notice of the retirement of a person pre- viously known to have been a part- ner. Coggswell v. Davis. 65 Wis. 191. Where the old sign remains and the old business is carried on at the old stand through the wife of the old proprietor, who receives the entire proceeds and carries on the business with the assistance of her husband and sons, the jury would be warranted in inferring that the father owned the business or was a partner, notwithstanding he has nominally assigned the business to his sons. Tregerthen v. Lohrum, 6 Mo. App. 576. A father sold out to his sons, who continued in the business, no change being made in the names or signs about place of business. The son bought goods of the plaint- iff, who had formerly dealt with the father, but who had notice that the father had retired. Held, that the father was not liable for goods sold to the son. Gathright v. Burke, 101 Ind. 590. When, after the death of a mem- ber of a firm of millers, his s6n, without new articles of copartner- ship, entered actively into the busi- ness under the old style, and a promissory note was given in the firm name to a party in the regular course of business, the son was lia- ble as a partner to a bona fide holder of the note without notice, even though another person has meanwhile taken his place in the business and given him an indem- 514 CH. II, SEC. III.] LIABILITY OF MEMBERS. : 214 sued for torts committed subsequently to his retirement by his late copartners or their agents ; and in the absence of nity bond against the debts of the old firm. Swift v. Mead, 28 N. W. R. 844. One dealing with a partnership and continuing so to deal with it until their suspension, without no- tice that they had ceased to be a firm and had become incorporated, may hold the members of the firm liable to him as partners notwith- standing their incorporation. And the receipt by him of a portion of his debt from the assignee of the corporation will not transfer liabil- ity from the firm to the corpora- tion. Johns v. Brown, 1 Tex. App. 568. Where it is material to know the exact time of the dissolution of a firm, evidence that one had notice of such dissolution at a certain time is not admissible. Shaffer v. Snyder, 7 Serg. & R. 503. A partnership to expire in Janu- ary appointed an attorney to " buy and sell goods, sign notes and perform all acts concerning the business." Held, that one hav- ing notice at the beginning of the partnership of the time of ending could not charge the firm with goods sold to the attorney after the expiration. The dissolution was a revocation. Schalter v. Winpenny, 75 Pa. St. 321. A person who takes a partner- ship note, knowing that the part- nership articles provide for its dis- solution in case of the withdrawal of the capital, is put upon inquiry as to whether such dissolution has taken place. Smith v. Vander- burg, 46 111. 34. In an action to charge two de- fendants as partners with the pay- ment of plaintiff's services in run- ning a shingle mill previously owned by both as a firm, but then belonging to one only, reports of a scaler employed by plaintiff, wherein the mill is described by the name of the one defendant alone, and which were made for the purpose of enabling the plaint- iff to settle with the boom com- pany for boom charges, are admis- sible in evidence as tending to show notice to plaintiff that the mill business was being carried on on such defendant's individual ac- count, and not as formerly by the firm. Robinson v. Warden, 33 Mich. 316. The mailing of a notice of disso- lution, properly directed, to the party sought to be charged with such notice, is not sufficient alone to relieve the retiring partner; it raises a presumption of notice, but one which may be repelled by proof that the notice was not in fact received. Austin v. Holland, 69 N. Y. 571. If a partnership note has been given, payable on demand to the order of one of the firm and in- dorsed by him, a retiring partner cannot defend an action thereon, brought by the indorsee against him and his late partners, by proof of the execution by them and his successor in the firm of a bond to him to pay all the debts and liabil- ities of the late firm. Richards v. Fisher, 2 Allen, 527. Notice of dissolution is necessary where the outgoing partner holds himself out as the representative 515 *2U EIGHTS AND OBLIGATIONS. [BOOK II. proof of the true state of things he would be held liable for them, (q) Case of dormant partner.— Moreover, if a dormant part- ner is known to certain individuals to have been a partner, he is as to them no longer in the situation of a dormant partner, and must therefore give them notice of his retire- ment if he would free himself from liability in respect of the future transactions between them and his late part- ners. (r) 1 of the firm, but not where he acts exclusively for himself. Taylor v. Young, 3 Watts, 339. A member of a firm who retired therefrom without publishing no- tice of the dissolution is not liable on a note signed in the firm name by another member and given to a new customer eleven years after the retirement. Farmers', etc. Bank v. Green, 30 N. J. L. 316. Persons having no knowledge of a partnership are not entitled to notice of its dissolution. Chamber- lain v. Dow, 10 Mich. 319; Bloch v. Price, 24 Mo. App. 14. See further, as to evidence of no- tice of dissolution, Buxton v. Ed- wards, 134 Mass. 567. The notice of dissolution of a firm, and that one of the members would thereafter conduct the busi- ness, is evidence of the facts therein contained, and admissible on the question who was conduct- ing the business and in whose pos- session the firm property remained after dissolution. Kelly v. Murphy, 12 Pac. Rep. 467. (q) Stables v. Eley, 1 Car. & P. 614. In this case such proof was given, and the defendant was nev- ertheless held liable on the ground of holding out. This, however, was a wrong application of that doctrine. See ante, p. 47, and Pol- lock, Dig. 25, ed. 3. (r) Farrar v. Deflime, 1 Car. & K. 530. See, too, Evans v. Drum- mond, 4 Esp. 89, and Carter v. Whalley, 1 B. & Ad. 14. 1 The duty of a retiring dormant partner to give notice of the disso- lution of the partnership is a duty which he owes to those who, be- fore that time, had some knowl- edge of his connection with the firm. To strangers having no such knowledge he o%ves no such duty ; as to them he can only be charged as a partner, when in fact he was not, by showing that he in some way misled them ; as, that he held himself out to the world as such, or that he so held himself out to them. Nussbaumer v. Becker, 87 111. 281 ; Cregler v. Durham, 9 Ind. 375. A partner whose name has not appeared in the firm will be liable to persons dealing with the part- nership after his retirement from it, if he was known to such persons as a member of the firm, either by direct transactions or public noto- riety, and they have not been noti- fied of the dissolution of the con- nection. Davis v. Allen, 3 N. Y. 168. B. having been a dormant part- ner with T., under the style of 516 CH. II, SEC. III.] LIABILITY OF MEMBERS. *2l'5 Importance of notifying dissolution — Each partner has a right to notify it. — It is obvious, therefore, that on the dissolution of a firm or the retirement of a partner it is of the greatest importance to notify the fact; and each partner has a right to notify it. If his copartners prevent him from exercising that right they will be compelled to do what may be necessary to enable notice to be given, e. g., to sign advertisements for publication in the " Ga- zette." (.9) *Effect of notice of dissolution. — Subject to two [*215] exceptions, which will be examined hereafter, notice of dissolution of a firm or the retirement of a partner, duly given, determines the power previously possessed by each partner to bind the others. 1 Hence, after the dissolution of a firm or the retirement of a member and notification of the fact, no member of the previously existing firm is, by virtue of his connection therewith, liable for goods supplied to any of his late partners subsequently to the notification ; (t) nor is he liable on bills or notes subsequently drawn, accepted or indorsed by any of them in the name of the late firm ; (u) even although they may have been dated before the disso- lution, (x) or have been given for a debt previously owing " The Atlantic Forge Company," partner. Holdane v. Butterworth, the firm was dissolved, and a new 5 Bosw. (N. Y.) 1. firm was formed by T. with a third (s) Hendry v. Turner, 32 Ch. D. person under a different name to 355; Troughton v. Hunter, 18 conduct the same business at the Beav. 470. same place ; and the new firm sent l There can be no business carried notice by mail to all persons who on by partnership after dissolution had transacted business with the and the appointment of a receiver, old firm. A person who had never Lennig v. Lennig, 11 "Weekly N. dealt with the old firm sold goods Cas. 18. nominally to T. and took the note (t) Minnit v. Whinery, 5 Bro. P. of the new firm therefor. The C. 489. jury found that the dissolution and (u) Paterson v. Zachariah, 1 formation of the new firm were Stark. 71 ; Abel v. Sutton, 3 Esp. matters of public notoriety. Held, 108; Spenceley v. Greenwood, 1 that the retiring partner was not Fos. & Fin. 297. liable for the goods so sold, al- (x) Wrightson v. Pullan, 1 Stark, though the vendor, at the time of 375 ; S. C. Wright v. Pulham, 2 the sale, supposed him still to be a Chitty, 121. 517 *215 EIGHTS AND OBLIGATIONS. [BOOK II. from the firm (y) by the partner expressly authorized to get in and discharge its debts, (z) 1 (y) Kilgour v. Finlyson, 1 H. Blacks. 156; Doltnan v. Orchard, 2 Car. & P. 104. (z) Kilgour v. Finlyson, 1 H. Blacks. 156. See Lewis v, Reilly, infra, note (c). 1 As a general rule, after a disso- lution of a partnership, neither part- ner can make a new contract or in- cur new responsibilities in the firm name binding on the othei's with- out express authority ; and no note, draft or acceptance so executed in the name of the firm will be valid if the party with whom the con- tract is made had notice of the dis- solution. Easter v. Farmers' Nat. Bank, 57 111. 215; Curry v. White, 51 Cal. 530 ; Brown v. Broach, 52 Miss. 536; Maxey v. Strong, 53 Miss. 280; Smith v. Shelden, 35 Mich. 42; Floyd v. Miller, 61 Ind. 225; Bacon v. Hutchings, 5 Bush, 595; Montague v. Reakert, 6 id. 333; Gale v. Miller, 1 Lans. 451; Whitworth v. Ballard, 56 Ind. 279; Meyer v. Atkins, 29 La. Ann. 586 ; Vaccarou. Toof, 9Heisk. 194; Con- rad v. Buch, 21 W. Va. 396; Bank of Montreal v. Page, 98 111. 109; Goodspeed v. So. Bend Plow Co. 45 Mich. 237; First Nat. Bank v. Ells, 68 Ga. 192; Roots v. Salt Co. 27 W. Va. 484; Spurck v. Leonard, 9 Bradw. 174; Dunlap v. Limes, 49 la, 177; Hier v. Odell, 18 Hun, 314; Goodspeed v. Wiard Plow Co. 45 Mich. 322; Walter v. Davis, 59 la. 103. It is competent, in an action against the partnership, to show that, notwithstanding the with- drawal of a partner and the change of the firm name, the partnership has remained practically the same and the business conducted by the same persons both before and after the withdrawal and change. Mel- linger v. Parsons, 51 la. 58. Where one engaged in business under the firm name purchases goods from plaintiffs from time to time, and afterwards sells the busi- ness and property to a son, who continues the business under the same name, and under such name purchases similar goods from the plaintiffs, who have no knowledge of the transfer, the former is liable to plaintiffs for the goods thereafter so purchased by the son. Elverson v. Leeds, 97 Ind. 336; S. C. 49 Am. Rep. 458. Where a partnership owns farm- ing property either party has a right after dissolution to incur a reasonable expense in protecting it from injury. Holloway v. Turner, 61 Md. 217. In New York it has been held that a solvent partner, in closing up the firm business upon a disso- lution of the firm by the insolvency of his copartner, may execute in the firm name a chattel mortgage upon all the stock of goods of the firm and fixtures in the store to a creditor of the firm to secure pay- ment to him within three months of the amount due to him for money loaned and goods sold the firm. Ogden v. Aruot, 29 Hun (N. Y.), 146. Where one of two copartners, after the dissolution of the partner- ship, gave a note in the name of the firm for his own private debt, the creditor knowing that the part- 518 CH. II, SEC. III.] LIABILITY OF MEMBERS. *215 Cases in which notice is immaterial. — There are, it is true, cases to be met with in which, notwithstanding a dis- nership was dissolved; and this note being afterwards sued, and the party who made it having be- come bankrupt, the other partner compromised the suit by giving his own note for half the debt and all the cost, part of which note he afterwards voluntarily paid, held, that the making and acceptance of the first note was a fraud upon the absent partner, and that the second note was therefore void. Stearns v. Burnham, 4 Me. 84. To charge one partner on a firm note made by another partner without special authority, after the dissolution of the firm, a ratifi- cation with knowledge of the facts must be shown. McElroy v. Melear, 7 Coldw. 140. After dissolution only the liqui- dating partner may, without ex- press authority from his fellows, borrow money to pay a firm debt and give a firm note for it. McCowin v. Cubbison, 72 Pa. St. 358. A promissory note executed in the name of a commercial firm and signed " John Bishop & Co. in liq- uidation," by an agent of one of the former partners, after the disso- lution of the firm, is not binding on the former members who have not given any specific authority for the execution of the note. Dodd v. Bishop, 30 La. Ann. 1178. A declaration alleging that a note was made in the name of the firm by one of the partners after a dissolution, unless for the purpose of settlement, and given for a pre- existing debt of the firm, does not show a partnership liability, but does show the liability of the part- ner making the note in his separate capacity. Fontaine v. Lee, 6 Ala. 889. It has been held that a partner, after dissolution of the firm, with notice to its creditors, cannot re- new a partnership note of his late partnership. Moore v. Lackman, 52 Mo. 323. See, also, Haddock v. Crocheron, 32 Tex. 276 ; First Nat. Bk. v. Ells, 68 Ga. 192 ; Bank of Toronto v. Nixon, 4 U. C. App. 346, reversing S. C. 43 U. C. R. 447; Rose v. Coffield, 53 Md. 18 ; S. C. 36 Am. Rep. 389; Brown v. Chan- cellor, 61 Tex. 437; Sanborn v. Stark, 31 Fed. Rep. 18; Daniel v. Be Graffenreid, 14 Lea, 385. See, however, Taylor v. Hill, 36 Md. 494. So, after dissolution, one partner cannot bind the others by a prom- issory note or acceptance for a prior debt of the firm, nor by a guaranty upon the renewal of an original note. Spurck v. Leonard, 9 Bradw. 174; Rose v. Coffield, 53 Md. 18; S. C. 36 Am. Rep. 389. See, also, cases above cited. If, however, a person having a claim against a partnership takes in payment a promissory note of the successors of the firm, without knowledge that the old firm had been dissolved, and supposing that the note was that of the old firm, he may maintain an action on the debt without showing that he was fraudulently induced to take the note. Buxton v. Edwards, 134 Mass. 567. But where a firm was under ob- ligation to execute a guaranty, and 519 *215 EIGHTS AND OBLIGATIONS. [BOOK II. solution and notice, a bill or note in the name of the firm has been held to bind those who were members thereof prior to one partner, after the dissolution, executed it, held, that the other members of the firm were bound thereby, and that they should not have been permitted to testify that the guaranty was not authorized by them. Star Wagon Co. v. Swezey, 59 la. 609; S. C. 52 id. 391. A verbal guaranty, made at the request of a firm to certain of its creditors, to pay certain subsisting demands against the partnership, followed by payment, though made after and with notice of the dissolution of the firm, constitutes a good cause of action against the firm. Lee v. Stowe, 57 Tex. 444. Where, however, the only re- quest was made by one of the firm after dissolution, the other partner would not be liable, unless, before the dissolution, there had been a similar course of business between the firms, and the payments were made without notice of the dis- solution. Lee v. Stowe, 57 Tex. 444. After dissolution one partner cannot transfer a chose in action belonging to the firm without spe- cial authority, express or implied, from the other partners. Stair v. Richardson, 108 Ind. 429. When, in the advertisement of the dissolution of a copartnership, power is given to the continuing partner to settle the business of the firm and for that purpose to use the partnership name, the jury may infer, from the transactions of trade, and the usage and cus- tom of merchants, as well as from the advertisement itself, whether this power extends to the signing of the partnership name to renew- als of a note which had been dis- counted in bank previous to the dissolution ; and it is not necessary that the authority should be given by a special power of attorney or other written instrument. Myers v. Huggins, 1 Strobh. 473. In First Nat. Bk. v. Ells, how- ever, a general power in one part- ner to settle up the firm business was held not to authorize the in- dorsement of a new draft and its substitution for an old one previ- ously indorsed by the firm. The same point was also ruled in Brown v. Chancellor, 61 Tex. 437. Where a partner, after the part- nership had been dissolved by the absconding of his copartner, gave a note in the name of the firm, payable on demand, in lieu of a note given by the firm which had not become payable, with a view to enable the ci-editor to secure his debt by an attachment of property, held, that the other partner was not bound by the transaction, be- cause the giving of the new note was not in the usual course of deal- ing, and that the attachment was void as to other creditors. Whit- man v. Leonard, 3 Pick. 177. A partner drew a check in the name of his firm, retained it in his possession, and after the dissolution of the firm transferred it to a cred- itor in payment of his individual indebtedness. In an action brought by the latter thereon, held, that after the dissolution of the firm one partner could not, by trans- ferring a check previously signed, 520 CH. II, SEC. III.] LIABILITY OF MEMBERS. -216 the dissolution; but in each of these cases there was some circumstance taking it out of the ordinary rule. In Burton v. Issitt, (a) the continuing partner had authority to use the name of the retired partner in the prosecution of all suits for the recovery of partnership property. This was held to authorize the giving of a promissory note for six- pences, payable under the Lords' Act, and the retired part- ner was therefore held bound by a note given by his late partner in payment of those sixpences. In Smith v. Win- ter, (b) the continuing partner had express permission to use the name of his late partner, who was, therefore, justly held liable on a bill given in the name of the old firm after his retirement. The only case, *indeed, of this [*216] description which presents any difficulty is Lewis create a liability against it. Gale v. Miller, 54 N. Y. 536. A dissolution revokes all author- ity to make new contracts, such as the giving or indorsing of a promis- sory note or the acceptance of a bill or draft, although it may be for a prior debt. Bank of Montreal v. Page, 98 111. 109; Carlton v. Jenness, 42 Mich. 110. See post. After the dissolution of a part- nership, however, a note made in the firm name, with the assent of the partners, for a debt due by the firm, is a valid obligation. The debt due by the firm, particularly when an extension of the time of its payment is secured by giving the note, is a sufficient considera- tion therefor. Randolph v. Peck, 1 Huu, 138. Written authority to one of the partners to use the firm name after the partnership is dissolved, so as to be binding on all, is not required ; it may be given by parol. Easter v. Farmers' Nat. Bank, 57 111. 215. The mere fact, however, that the other partners have for some rea- son paid certain other notes exe- cuted by him in the firm name after dissolution is not of itself sufficient evidence of authority in such partner to execute the note in question. Easter v. Farmers' Nat. Bank, supra. An authority to one of a partner- ship to settle the affairs, receive and pay the debts, does not war- rant his drawing a bill or giving a note in the partnership name after dissolution of the firm. Martin v. Walton, 1 McCord, 16; Bank of S. C. v. Humphreys, id: 388. Where one of the surviving members of a partnership an- swered under oath to a suit upon a due-bill, signed in the firm name, denying its execution and the ex- istence of such a firm, a reply that after its execution he ratified the act of his partner in signing it was held to be good on demurrer. Pat- tison v. Norris, 29 Ind. 165. (a) 5 B. & A. 267. (6) 4 M. & W. 454. 521 *216 RIGHTS AND OBLIGATIONS. [BOOK II. v. Reilly (c) There two partners drew a bill payable to their own order, and afterwards dissolved partnership. One of them then indorsed the bill in the name of both to the plaintiff, who knew of the dissolution. It was held, in an action by him against both partners, that he was entitled to recover on the bill, and that it was immaterial whether he knew of the dissolution or not. The precise ground of this decision does not distinctly appear. The court seems to have proceeded on the supposition that an indorsement by one of several payees in the name of all is sufficient; but the writer has been unable to find any previous authority for such a doctrine, save where the indorsers are partners, which, in the case in question, they were not, as the plaintiff was found by the jury to have known. The case is cer- tainly anomalous and requires reconsideration, (d) Exceptions to rule. — The exceptions alluded to above as qualifying the rule that the agency of each partner is de- termined by dissolution (or retirement) and notice are: When a partner continues to hold himself out. — First, where a partner who has retired and notified his retirement nevertheless continues to hold himself out as a partner; and secondly, where what is done only carries out what was begun before. Effect of not preventing use of name. — 1. If a partner retires and gives notice of his retirement, and he neverthe- less allows his name to be used as if he were still a part- ner, he will continue to incur liability on the principle of holding out, explained in an earlier part of this treatise. 1 (c) 1 Q. B. 349. tinued in the name and style of the (d) See Story on Bills. § 197, and firm formed by his former copart- Abel v . Sutton, 3 Esp. 108. The ners, with his knowledge, sanction cases go further than is suggested and approval, held, that he was in Garland v. Jacomb, L. R. 8 Ex. liable on the contracts and obliga- 220, for the notice of dissolution is tions of the firm so using his name what creates the difficulty. See as if he had actually continued as infra, p. 220, note (s). a member and partner thereof. 1 Where the relations of a part- Freeman v. Falconer, 44 N. Y. Sup. ner to his copartners have been Ct. (12 Jones & Sp.) 132. See, also, terminated, yet his name was con- Ellis v. Bronson, 40 111. 455; Speer 522 CH. II, SEC. III.] LIABILITY OF MEMBERS. *216 In Williams v. Keats, (e) after a partner had retired, and after notice thereof had been given by advertisement, a bill v. Bishop, 24 Ohio St. 598; Stimson v. Whitney, 130 Mass. 591; Hixon v. Pixley, 15 Nev. 475; Gammon v. Huse, 100 111. 234 ; S. C. 9 Bradw! 557; Richards v. Hunt, 65 Ga. 342. A retiring partner who gives notice by publication in a news- paper that he has ceased to be a partner, but who after that allows his name to appear in the firm as a partner, and continues in its em- ployment, is liable as a partner to one who deals with the firm, and is misled by the appearances, and has no notice that he is not a part- ner, although the fact is generally known at the place where the con- tract is made. Wait v. Brewster, 31 Vt. 516. It is competent, in an action against a partnership, to show that, notwithstanding the withdrawal of a partner and a change of the firm name, the partnership had remained practically the same, and the business was conducted by the same persons both before and after the withdrawal and change. Mellinger v. Parsons, 51 Iowa, 58. The mere fact that a partnership name has been kept over the door after the dissolution of the partner- ship is not of itself sufficient to au- thorize one who holds a note signed in the partnership name to recover upon it. Boyd v. McCann, 10 Md. 118. Two surviving partners publish notice " that the business of the late firm will for the present be carried on in the same name, under the charge of J. H." (one of the partners), " who will continue, and who is duly authorized, to adjust and settle matters relative to the same." Held, that the surviving partners held out to the world that they would continue to transact business under that name, and that a note given by J. H. in the name of the firm was binding upon both. Casco Bank v. Hills, 16 Me. 155. The members of a firm, in the publication of notice of their disso- lution, used the following lan- guage; " Either of the parties are authorized to use the name of the firm in liquidation only of past business." Held, that this did not authorize the parties to renew a note given by the firm for a part- nership debt, nor confer upon any of the parties powers which they did not possess by law. Martin v. Kirk, 2 Humph. 529. A copartnership was incorpo- rated and transferred their prop- erty to the corporation, and, by a by-law, the business was to be car- ried on in the name of the copart- nership. Held, that, though the partnership was thus dissolved, the members were liable as partners upon contracts subsequently made with third persons having no notice of the dissolution. Goddard v. Pratt, 16 Pick. 412. If a retiring partner, after publi- cation of notice of dissolution in a newspaper, holds himself out to the world as a partner, he must, in order to relieve himself from lia- (e) 2 Stark. 290. See, too, Dolman v. Orchard, 2 Car. & P. 104; Em- met v. Butler, 7 Taunt. 600. 523 * X '217 RIGHTS AND OBLIGATIONS. [BOOK II. was accepted by his copartner in the names of himself and late partner. The names of both still remained painted up over their late place of business, and Lord Ellenborough held that the partner who had retired was liable on this bill notwithstanding the advertisement; for there was no [*217] evidence to show -that the plaintiff in fact knew of the dissolution. (/) Upon this, however, it is to be observed that the only evidence that the retired partner authorized the continued use of his name was the fact that he had not prevented it. Now, authorities are not wanting to show that if a partner retires, and notice of his retire- ment is given by advertisement, he will not continue to incur liability by the acts of his copartners, simply because they continue to carry on business in the old name, and he does not take steps to stop them, (g) His forbearance in this respect does not necessarily amount to an authority to use his name as before; and unless his name is used by his authority he is not liable on the ground that he holds him- self out as a partner. (A) But although it may be doubtful whether in Williams v. Keats there was a sufficient holding out, it is clear that if a partner retires and does still hold himself out as a partner, this is in fact signifying that he is willing to incur the responsibilities of a partner for the sake of those with whom his name is associated; and therefore he will continue to be answerable for their conduct, even to persons dealing with them with knowledge of his retire- ment. This was decided in Brown v. Leonard, (i) in which the plaintiff sued on a promissory note made in the name Spring, Leonard and Bush. Before the note was made bility on account of such publica- (h) As to a retiring partner's tion, prove that knowledge of such right to an injunction to restrain notice of dissolution came to the the continuing partners from carry- actual notice of the plaintiff, ing on business in the old name, Hixon v. Pixley, 15 Nev. 475. see De Tastet v. Bordenave, Jac. (/) See, as to this, Brown v. 516 ; Webster v. Webster, 3 Swanst. Leonard, 2 Chitty, 120, infra. 490, note ; Lewis v. Langdon, 7 (g) See Newsome v. Coles, 2 Sim. 421. Camp. 617. (i) 2 Chitty, 120. 524 OH. II, SEC. III.] LIABILITY OF MEMBERS. "218 Bush had retired from the firm, and the plaintiff, before he took the note, was told by Bush that he had ceased to be a partner with Leonard and Spring, but that his name was to continue for a certain time. Bush was held liable on the note; for, notwithstanding his retirement, his name was continued, and with it his responsibility, (k) Agency continuing for purposes of winding up. — 2. It is said that a firm, notwithstanding its dissolution, continues to exist so far as may be necessary for the winding up of its business. (J) This doctrine requires consideration. *No doubt after, as well as before, dissolution, each [*218] partner can pay, 1 or receive payment of, a partner- ship debt; for it is clearly settled that payment by one of several joint debtors, or to one of several joint creditors, (m) extinguishes the debt irrespectively of any question of part- nership. So, again, as regards dealing with the partnership assets, it has been held that the power of a continuing or surviving partner to sell or pledge partnership assets is as extensive as that of a partner in a going concern, (n) 2 But (k) Bush, however, seems to so although the partnership was have undertaken that the note dissolved. Stebbins v. Williard, should be provided for. See the 53 Vt. 665. judgment. (m) *■ e., if they are not trustees. (I) Ex parte Williams, 11 Ves. 5 ; Payment to one of several trustees Peacock v. Peacock, 16 id. 57 ; is no discharge. Webb v. Ledsam, Oawshay v. Collins, 15 Ves. 227, 1 K. & J. 385. and 2 Russ. 342; Wilson v. Green- (?;) See Fox v. Hanbury, Cowp. wood, 1 Swanst. 480; Crawshay v. 445; Smith v. Stokes, 1 East, 363; Maule, id. 507 ; Butcbart v. Dresser, Smith v. Oriell, id. 368 ; Harvey v. 4 De G. M. & G. 542. N. B.— The Crickett, 5 M. & S. 336; Morgan diet a of Lord Eldon were not made v. Marquis, 9 Ex. 145 ; Butchart v. in any case in which the power of Dresser, 4 De G. M. & G. 542 ; Re one partner to bind the others after Clough, 31 Ch. D. 324. a dissolution was before him for 2 In the absence of evidence to decision. the contrary it will be presumed 1 Where one pays a decree for that one of the members of a dis- the foreclosure of a mortgage on solved firm has the power to dis- firm property for the benefit of one pose of the articles of firm prop- of the partners and by his procure- erty left in his possession either nient, such payment does not ex- for himself or the firm. Bach v. tinguish the mortgage ; and this is State Ins. Co. 64 la. 595. 525 f 218 EIGHTS AND OBLIGATIONS. [book II. when questions of a different sort arise, considerable diffi- culty is experienced, and this difficult}' is rather increased than diminished by the loose statement that a partnership which is dissolved is nevertheless deemed to continue so far as may be necessary for winding up its affairs. 1 1 Generally a dissolution of part- nership leaves every partner in possession of the full power (unless upon the dissolution it has been ex- clusively confided and delegated to some other partner or person) to adjust and settle its affairs; to pay and collect debts due to the part- nership; to apply the partnership funds and effects to the discharge of the partnership debts; to adjust and settle the unliquidated debts of the partnership ; to receive any property belonging to the partner- ship; to make due acquittances, discharges, receipts and acknowl- edgments of their acts in the premises, and to divide the pro- ceeds of the partnership property among the parties entitled thereto. Ruff ner v. Hewett, 7 W. Va. 585 ; Robbins v. Fuller, 24 N. Y. 570; Heart v. Walsh, 75 111. 200; Nickels v. Mooring, 16 Fla. 76; Riddle v. Etting, 32 Penn. St. 412; Ward v. Barber, 1 E. D. Smith, 423 ; Granger v. McGilvra, 24 111. 152; Mayor v. Hawkes, 12 111. 298 ; Gannett v. Cun- ningham, 34 Me. 56; Milliken v. Loring, 37 Me. 408 ; Dowry v. Rob- erts, 2 Md. Ch. 157 ; Hall v. Clagett, 48 Md. 225 ; Conrad v. Buck, 21 W. Va. 396 ; Bank of Montreal v. Page, 98 111. 109; Buxton v. Edwards, 134 Mass. 567 ; Dunlap v. Limes, 49 la. 177. Where a book-keeper is neces- sary, one of the partners after dis- solution, in the absence of any sufficient reason to the contrary, may continue the employment of the book-keeper of the firm for the purpose of keeping the books dur- ing process of liquidation. Hollo- way v. Turner, 61 Md. 217. The statute of Missouri regulat- ing the administration of partner- ship estates does not prohibit a surviving partner from winding up and settling the partnership concerns unless he first gives bond with security for the faithful dis- charge of his duties. Bredow v. Mutual Savings Institution, 28 Mo. 181. A solvent partner of a firm which has been dissolved by the separate insolvency of the other partners is not entitled as of right to adminis- ter the partnership assets and settle its affairs. Hubbard v. Guild, 1 Duer, 662. A dissolution of partnership re- vokes the authority of one partner to bind the other in respect to any new contracts, and restricts it to the settlement of the partnership concerns. Bell v. Morrison, 1 Pet. 351 ; Neal v. Hassan, 3 McCord, 278 ; Chase v. Kendall, 6 Ind. 304; Pal- mer v. Dodge, 4 Ohio St. 21 ; Perrin v. Keene, 20 Me. 355; Ellicott v. Nichols, 7 Gill, 85 ; Hurst v. Hill, 8 Md. 399 ; Speake v. White, 14 Tex. 364 ; Bank of Port Gibson v. Baugh, 16 Miss. 290; Sutton v. Dillaye, 3 Barb. 529 ; Whitehead v. Bank of Pittsburg, 2 Watts & S. 172 ; Dun- 526 CH. II, SEC. III.] LIABILITY OF MEMBEKS. : "218 Lyon v. Haynes (o) is a strong authority to show that when an unincorporated company is dissolved by a resolution lap v. Limes, 49 Iowa, 177. See, also, Bennett v. Buchan, 61 N. Y. 222. See ante. Where a plaintiff in a judgment given him by a firm composed of three members, for liabilities in- curred upon notes discounted for their use, continues his liability as accommodation drawer or indorser of new notes given by the firm, after he knows that one member has retired, he cannot in a sci. fa. to revive his judgment, in which the two surviving members of the old firm and the administrator of the retiring partner, who died after suit brought, are defendants, re- cover for the new liabilities as- sumed after the dissolution, unless they are renewals of the notes of the old firm. Hartley v. Kirlin, 45 Pa. St. 49. No liability can be created on the credit of a firm which has been dissolved unless the firm name is used in making purchases. Kirby v. Hewitt, 26 Barb. 607. After dissolution of the partner- ship one partner cannot be sub- jected to liability for use of the money of a third party by his part- ner, when he himself has derived no advantage from its use, nor ratified the act of the partner in using it. Dunlap v. Limes, 49 Iowa, 177. The remaining partners, after a dissolution, are entitled to the pos- session of the effects for the pur- pose of settling up the concern, and without interference, unless for good cause shown, on the part of strangers who may have purchased the shares of retiring partners. Reece v. Hoyt, 4 Ind. 169. Though a partnership for a single transaction, as in a contract upon a canal, mutually terminates with the completion of the purposes for which it was formed, yet, as be- tween the partners themselves and others, it continues for the purpose of winding up its affairs. Petriken v. Collier, 1 Pa. St. 247. It is competent for partners after dissolution to carry out a contract previously made and in part per- formed. Holmes v. Shands, 27 Miss. 40. For the purpose of carrying out a contract, intended to be fulfilled after dissolution, the partnership continues after the dissolution. Western Stage Co. v. Walker, 2 Iowa, 504. If, during the existence of a firm, the firm requests the plaintiff to pay certain bills at maturity, which he pays after the dissolution with notice thereof, the partnership will be liable unless there has been a revocation of the request. Lee v. Stowe, 57 Tex. 444. On the dissolution of a law firm, (o) 5 Man. & Gr. 504. The ques- the company had been dissolved. tion in this case was whether an action would lie by a shareholder against directors for not applying the assets of the company as pre- scribed by a resolution made after It was held that such action did not lie, although the directors had assumed to wind up the company under the authority of the resolu- tion. 527 *218 KIGUTS AND OBLIGATIONS. BOOK II. of a meeting competent to dissolve it the power of a ma- jority of shareholders to bind the minority is at an end; in the absence of a contrary agree- ment, either partner may give his attention to, and, in the absence of the other, control, any unfinished cases of the firm. As to such un- finished business they are still part- ners. Williams v. Whitmore, 9 Lea (Tenn.), 262. If a claim is placed in the hands of two attorneys practicing in partnership, and, before any steps are taken in the collection of the claim, the firm dissolves, and one of the members takes charge of the claim, and renders all the services in its collection, and sues individu- ally the owner of the claim for his fees in so doing, the jury will be justified in inferring that it was part of the contract of dissolution between the partners that the one who has rendered the services should attend to the claim and re- ceive the compensation, and their verdict to that effect will be upheld. Anderson v. Tarpley, 12 Miss. 507. After the dissolution of a part- nership, and a sale by one partner of his interest to the other, who undertook to pay all the partner- ship debts, held, that an account rendered by the acting partner or his clerk, after the dissolution, showing a balance due from the partnership, was binding on the re- tired partner. Garland v. Agee, 7 Leigh, 362. See, however, Wood- worth v. Downer, 13 Vt. 522; also Eoots v. Wellford, 4 Munf. 215, where it was held that one partner, after the dissolution of the partner- ship, cannot bind the rest without their consent by settling accounts with, or allowing credits to, cus- tomers of the firm. In Vinal v. Burrill, 16 Pick. 401, it was held that, in an action against partners upon an alleged partnership ac- count, it is competent for the plaintiff to prove that one of the partners, after the dissolution of the copartnership, acknowledged the account to be correct, and di- rected that a balance against a copartner, on a separate account with the plaintiff, should be trans- ferred to the debit of the partner- ship, stating that it was all one concern. Where a partnership is dissolved and one partner assigns all his in- terest to the other, such assignee takes all the rights of the firm, and may exercise them in the firm name for all purposes necessary to their enforcement and for closing up the joint business. An action may be maintained in his own name unless objection for want of the other as a party be distinctly made. Molen v. Orr, 44 Ark. 486. Copartners, upon dissolution of the firm, may appoint one of their number a special agent for winding up its affairs, and this having been done, third persons who, with no- tice of the arrangement, deal, in matters connected with the liqui- dation, with the partner other than the one thus authorized, are sub- ject to the equitable rights of the other partners. Hilton v. Vander- bilt, 82 N. Y. 591. Upon the dissolution of partner- ship between attorneys at law, an agreement by one of the partners to wind up the business of the firm and pay the other his share of the 528 CH. n, SEC. III.] LIABILITY OF MEMBEES. *218 and that, even as regards the mode of winding up the concerns of the defunct company, the majority of its fees collected is not without con- sideration or void, and not within the statute of frauds, although at the time it was made the partner did not expect that all the business would be wound up within the year. Osment v. McElrath, 68 Cal. 466. An agreement of the partners that one of their number shall wind up the business does not en- large his powers so as to enable him to impose any new liability of the firm or create any cause of ac- tion against the partners. Conrad v. Buck, 21 W. Va. 396. The sole remaining solvent part- ner has the right to demand and take from his insolvent copartner liquidation of the affairs of the firm. This right to administer is a personal privilege, and if the solv- ent partner permits his insolvent partner, or his representative, to administer the assets, he thereby waives his privilege. Vetterlein V. Barnes, 6 Fed. Rep. 693. The authority to act as liquidat- ing partner does not require an express and specific appointment. Where one so acts with the knowl- edge of his late copartners, their permission may be presumed, and they may be bound as to third per- sons by his acts. Fulton v. Central Bank, 92 Pa. St. 112; S. C. 38 Leg. Intel. 355. After the dissolution of a, firm a liquidating partner may bind his late copartners by a note given by him in the firm name for money which he borrows to pay a debt of the firm and which he so applies. Express authority in liquidating partner need not be proved; au- thority may be implied by the con- tinuance of its exercise for a con- siderable period of time with the knowledge of his late copartners. Siegfried v. Ludwig, 102 Pa. St. 547; Fulton v. Central Bank, 92 Pa. St. 112; S. C. 38 Leg. Intel. 355. Where a firm had been in the habit of selling upon credit, and by the articles of dissolution the liqui- dating partners were given full discretionary powers in the collec- tion of debts, they ought not to be surcharged with loss arising from private sale upon credit of goods of the firm made without bad faith to an irresponsible purchaser. Such liquidating partners have power to make private sale upon credit. Petry's Appeal, 2 Penny. (Penn.) 404; S. C. 11 Weekly Not. Cas. 512". After the dissolution of a part- nership, one partner, though he is authorized to settle the partnership concerns, has no right to receive goods consigned to the partnership for sale prior to the dissolution; and a purchase of the goods by a person having knowledge of the facts, to pay a debt due him from the partner-hip, is void, Stierner- mann t». Cowing, 7 Johns. Ch. 275. After a dissolution each partner need not be put separately in de- fault on a contract made before. So any partner may accept delivery of goods sold to the firm ; and the price may be demanded of any partner. White v. Kearney, 2 La. Ann. 639. One who has power to wind up a partnership in which he was con- VOL. 1 — 34 529 r*218 EIGHTS AND OBLIGATIONS. [book n. shareholders cannot bind either a dissentient minority or absentees. cerned. by selling the merchandise belonging to the firm, has also power to receive payment, unless .restrained by some special terms of the agency. Lamb v. Salters, 3 Brev. 130. The receipt of property is not in itself a payment of a debt, and can only become so by an agreement to receive such property as payment. Such an agreement is a new con- tract, and will not be binding on the firm if made by a former part- ner after the dissolution without the assent of his copartner. Kirk v. Hiatt, 2 Ind. 322. A partner who undertakes to collect the debts of the dissolved firm is bound to the diligence of a collecting agent. He is responsible for all that it can be shown he col- lected, or might have collected with reasonable diligence. Phelan v. Hutchinson, Phill. Eq. 116; Pratt v. McHatton, 11 La. Ann. £60. See, also, Knox v. Spreecher, 68 Pa. St. 415. Although one partner remains in possession of the books and papers of a firm after its dissolution he is not thereby made responsible for debts which he neglects to collect. Wilder v. Morris, 7 Bush, 420. The sale by one of two copart- ners of all his interest in the firm assets to the other, and the assump- tion by the latter of its liabilities, confers upon the latter by implica- tion all the usual powers of adjust- ment of claims, and, among other? , that of disposing of them by arbi- tration. Becker v. Boon, 61 N. Y. 317. The plaintiffs, A. and B., were partners. A. suddenly disposed of all his property and sold his inter- est in the firm, except the accounts, to G., and absconded from the state, leaving the partnership book of accounts, embracing the account in suit, in the hands of G., with directions to collect them. B. immediately notified the defendant to pay no one but himself, and de- manded the company books of G., who refused to surrender them or give him a copy of the accounts. B. then brought this suit, after which the defendant paid the debt to G. and took from him a release of it. G. subsequently informed A. of what he had done, and A. approved it. Held, that G.'s dis- charge of the debt constitutes no defense to this suit. Ayer v. Ayer, 41 Vt. 346. A surviving partner is not bound by an agreement of a deceased partner to apply the company ef- fects in payment of his individual debt, but which was not carried out before his decease. Stearns v. Houghton, 38 Vt. 583. In respect to their creditors, co- partners, after dissolution, are joint debtors and nothing more. What the joint makers of a promissory note may not do to enlarge, pro- long or continue existing liabilities, or to create a new one in regard to the debt, copartners, after dissolu- tion, may not do. Payne v. Slate, 39 Barb. 634. A partner, after the dissolution of a copartnership, although au- thorized to adjust the debts of the firm and to settle the partnership concerns, has no power to bind his 530 CH. II, SEC. III.] LIABILITY OF MEMBERS. -218 Other cases, which have been already referred to, (p) clearly show that after the dissolution of an ordinary copartners by giving a promissory note; and this is so even though the note is given for a partnership debt. Lusk v. Smith, 8 Barb. 570 ; Lockwood v. Comstock, 4 McLean, 383; Van Valkenburg v. Bradley, 14 Iowa, 108; Long v. Story, 10 Mo. 636 ; Conklin v. Ogborn, 7 Ind. 553; Draper v. Bissell, 3 McLean, 275; Cunningham v. Bragg, 37 Ala. 436 ; Burr v. Williams, 20 Ark. 171 ; Chamberlain v. Bancroft, 24 Ga. 310; Richardson v. Moies, 31 Mo. 430; Lansing v. Gaine, 2 Johns. 300; Graves v. Merry, 6 Cow. 701 ; National Bank v. Nor- ton, 1 Hill, 572 ; Galliott v. Plant- ers', etc. Bank, 1 McMull. 209; Bank of South Carolina v. Hum- phreys, 1 McCord, 388; Loomis v. Pearson, 1 Harp. 470; Foltz v. Powrie, 2 Dessau. 40; Isler v. Baker, 6 Humph. 85; Lange v. Kennedy, 20 Wis. 279 ; Woodworth v. Downer, 13 Vt. 522 ; Morrison v. Perry, 18 N. Y. Supreme Ct. 33; Bank of Montreal v. Page, 98 111. 109; Carlton v. Jenness, 42 Mich. 110. See, however, Robinson v. Taylor, 4 Pa. St. 242 ; Petriken v. Collier, 1 Pa. St. 247, Although a partner cannot, after dissolution, bind his copartner to the payment of a debt by note, yet he may give a note as evidence of indebtedness by previous account, as by so doing he does not create a debt. McPherson v. Rathbone, 7 Wend. 216; S. C. 11 Wend. 96; Ward v. Tyler, 52 Pa. St. 393. A note made during partnership, but not delivered until after disso- lution, does not bind the partners not delivering it. Woodford v. Dorwin, 3 Vt. 82; Scott v. Ship- herd, id. 108. A bill drawn on a firm, but not accepted till after a dissolution of the partnership, publicly an- nounced, binds only the partner who accepts. Tombeckbee Bank v. Dumell, 5 Mason, 56. A partner authorized to settle the business of his firm after its dissolution has no authority to ac- cept, in the firm name, a draft drawn for money borrowed by him to pay the debts of the firm. Hamilton v. Seaman, 1 Ind. 185. After dissolution, the partner who is authorized to settle up the busi- ness of the partnership cannot re- new a note in the partnership name, which was given before the dissolution, so as to bind the other partner. Parker v. Cousins, 2 Gratt. 372 ; Myatts v. Bell, 41 Ala. 222. See, also, Clement v. Clem- ent, 35 N. West. Rep. (Wis.) 17. A surety on a note, given by one of the partners after the dissolu- tion of the copartnership, duly notified, he being authorized to settle the affairs of the firm, to a creditor of the firm, in the part- nership name, has no claim to in- demnity from the other partner for any loss he may sustain. Palmer v. Dodge, 4 Ohio St. 21. One partner may bind the others, (p) Ante, p. 215. Especially Kil- gour v. Finlyson, 1 H. Blacks. 156, and Abel v. Sutton, 3 Esp. 108. See, too, Pinder v. Wilks, 5 Taunt. 611. 531 *219 EIGHTS AND OBLIGATIONS. [book II. [*219] partnership, no *one aware of the dissolution is en- titled on any ground of implied agency to hold the after dissolution, by a note, if he a firm, which either could execute, have express authority so to do and which could only expire by from tiie other partners standing the extinguishment of the debts to by. Bower v. Douglass, 25 Ga. 714. The defendant was a partner in several firms of merchants, which, upon his withdrawal therefrom, was largely indebted to the plaint- which it relates, or notice to the bank that he would no longer be bound; and the taking into the firm of a new partner, after the execution of the power, in no re- iff for moneys borrowed for the spect affects the liability of the use of the tirms, of which defend- ant, as a partner, had received his proportionate benefit. Upona dis- solution of the old firms by the retirement of the defendant, the business was carried on by the other defendant. Bank of Mobile v. An- drews, 2 Sneed, 535. If, after the dissolution of a co- partnership, one of the partners give a note in behalf of the former copartnership, and the other part- members of said firms, who had ner pay a part of the note, such assumed the debts and notified the plaintilf thereof, as also of the dissolution. Tiiey applied to the plaintiff for "renewals and ex- tensions" of the debts, which the plaintilf agreed to grant upon con- dition that the liability of the de- fendant should be continued; the payment is prima facie evidence of an existing partnership, or of an authority to give the note. Eaton v. Taylor, 10 Mass. 54. The settling partner of a firm may give the note of the firm, after its dissolution, to release their prop- erty from an attachment for a just defendant thereupon executed and debt, and a surety signing such delivered to the plaintilf the follow- a note, with notice, is responsible. instrument: "The Bank of Mobile Kemp v. Coffin, 3 Iowa, 190. (the plaintiff) holds certain promis- All the partners in a firm are sory notes of E. L. Andrews & Co.. bound by a note given by one of and Andrews & Brothers, of which the partners, after the dissolution of firms I was a member until 30th the partnership, for a debt con- September last. Tins is to witness tracted before the dissolution, if that E. L. Andrews and Z. An- the giving of notes for debts of the drews, or either of them, is author- firm was customary while the part- ized to sign any notes with the name of the firm in liquidation for the extension or renewal of said obligations, and I agree to continue nership continued, and the creditor had no notice of the dissolution. Pecker v. Hall, 14 Allen, 532. After dissolution of a partner- my liability on such renewals or ship one partner cannot, without extensions as if I yet continued a authority from the others, indorse a member of said firm." Held, that note belonging to the firm. Fel- this instrument is an unqualified lows v. Wyman, 33 N. H. 351; San- personal power, given to either of ford v. Mickles, 4 Johns. 224; the firms as individuals and not as Humphries v. Chastian, 5 Ga. 16G; 632 CH. II, SFC. III.] LIABILITY OF MEMBERS. *219 members of the late firm responsible for acts done by each other subsequently to the dissolution ; and every one must White v. Tudor, 24 Tex. 639 ; Bo- gerau v. Gueringer, 14 La. Ann. 478. A valid title to a negotiable prom- issory note, payable to a copartner- ship firm, may however, be trans- ferred by an indorsement made in the name of the firm by one of the copartners, though after the disso- lution of the copartnership, if such dissolution was unknown to the in- dorsee. Cony v. Wheelock, 33 Me. 3GG. A firm dissolved in May, giving notice by publication, and author- izing T., as the liquidating partner, to use the firm name for that pur- pose. In August, without the knowledge of his fellows, he drew notes payable to the firm, indorsed them with the firm name, and had them discounted by bankers with whom the firm had never had deal- ings. The proceeds of the notes passed to the individual credit of J. There was evidence that the proceeds were applied to firm debts. Held, that if the notes were bona fids for liquidation, and the pro- ceeds applied to payment of firm debts, the other partners would be liable. Lloyd v. Thomas, 79 Pa. St. 68. One partner cannot bind his co- partners by indorsing, in the firm name, a note given after the disso- lution of the partnership to renew a note given before the dissolution. Lumberman's Rink v. Pratt, 51 Me. 563. Where one of two partners, after dissolution of the partnership, be- ing authorized to settle the affairs of the firm, indorses, " without re- course," in the partnership name, a promissory note payable to the firm, such indorsement con veys the legal title to the note. Waite v. Foster. 33 Me. 424. If a note made payable to a firm is indorsed by one of the partners after dissolution, and without au- thority from the others, their sub- sequent ratification will supply the deficiency of authority. Leonard v. Wildes, 36 Me. 2G5. One partner of a firm, even after dissolution, may indorse the note of the firm payable to himself, given before dissolution. Temple v. Seaver, 11 Cush. 314. Under authority, though by parol only, given to one partner by the others, after the dissolution of the partnership, to sell a negotiable note made to the firm before dis- solution, he may indorse such note " without recourse," in the name of the firm. Yale v. Eames, 1 Mete. 486. One of the members of a dissolved partnership may receive back a promissory note which they have wrongfully put into circulation while the partnership existed, and bind the other partners by such act. Torrey v. Baxter, 13 Vt. 452. Where a note has been indorsed by a partner in the partnership name, one of the partners has au- thority to waive demand and no- tice after a dissolution and before the note becomes payable. Dar- ling v. March, 23 Me. 184. A promise made by a partner, after the partnership has been dis- solved, to pay a note on which the firm are indorsers, no notice of dis- 533 *219 EIGHTS AND OBLIGATIONS. [BOOK II. feel the force of Lord Kenyon's observation in Abel v. Sut- ton, that, if the contrary doctrine were to prevail, a man honor having been given, is not binding upon the other members of the firm. Schoneman v. Fegley, 7 Pa. St. 433. A partnership, though dissolved, is treated as still in existence so far as respects demand, protest, and notice thereof ; and the acts of one partner in such cases are bind- ing on all. Fourth National Bank v. Altheimer, 91 Mo. 190. A partner, after dissolution and publication of notice thereof, may therefore waive notice of demand and non-payment of a note indorsed by and discounted for the firm. Seldner v. Mount Jackson Nat. Bk. 66 Md. 488; S. C. 10 E. R. 602. In Mauney v. Coit, 80 N. C. 300, however, it was held that where a settling partUer, after dissolution of the firm, gives a draft in payment of a partnership debt, he cannot waive protest so as to bind his former copartner, especially when the latter has been a dormant mem- ber. . The firm having indorsed a note, one. of the partners may, after the dissolution of the firm, consent to the holder's compounding with and releasing the maker, and his con- sent will also bind the other part- ner, and make the firm liable for the balance due. Union Bank v. Hall, Harp. 245. Generally each partner has the right to apply any of the partner- ship moneys in his hands to the satisfaction of the partnership debts. But the court may, in a proper case, direct a partner who has partnership moneys in his hands to pay the same into court to be applied to the payment of the debts, and in his relief or otherwise, as may be just. Carper v. Hawkins, 8 W. Va. 291. After a dissolution and pending a liquidation a partner cau do no act, still less use the partnership funds, in a manner inconsistent with a just and proper settlement. Grid- ley v. Conner, 2 La. Ann. 87. The dissolution of a partnership destroys the right of one partner to dispose of the partnership prop- erty absolutely, or otherwise than according to the terms of the dis- solution. Baldwin v. Johnson, 11 N. J. Eq. 441. On January 1, 1875, a firm con- sisting of four members, two of the name of McPherson, and two of the name of Horton, was dissolved, and all the property divided, ex- cept certain accounts and an ice- house, which house it was agreed should be separated into two parts by a partition, and- one-half be oc- cupied by the McPhersons and the other by the Hortons for the term of one 3 T ear. The Hortons were to collect the outstanding credits, and apply them to the payment of the firm debts. On July 30, 1875, while the parties were in the occu- pation of the ice-house under this agreement, one of the McPhersons, without the knowledge of the Hortons, and without special au- thority from either of the members of the firm, transferred the house to the plaintiff. In an action by the plaintiff against the defend- ants, the Hortons, to recover the house, with damages for its deten- tion, held, that the authority of 534 OH. II, SEC. III.] LIABILITY OF MEMBERS. *219 could never know when he was to be at peace and freed from all the concerns of the partnership. McPherson to transfer the firra property was not terminated by the dissolution of the firm, and that the plaintiff was entitled to recover. Van Daren v. Horton, 19 Hun, 7. Where the articles of copartner- ship provide that, on the dissolu- tion of the copartnership, its effects ehall be divided among the part- ners, the partners become on such dissolution merely tenants in com- mon, and no one of them can set off or sell the share of the other without his consent. Phillips v. Reeder, 18 N. J. Eq. 95. See, also, Hagendobler v. Lyon, 13 Kan. 27G. Ordinarily, during the existence of the partnership, one partner, acting withing the scope of the partnership's business, may sell and dispose of the entire interest in the partnership's effects; but when the firm, though not form- ally dissolved, has closed its busi- ness, and reduced all its assets to the shape of two notes payable to the firm, if one partner fraudu- lently transfers these, the pur- chaser takes them subject to the other partner's equity. Halstead v. Shepard, 23 Ala. 558. After the dissolution of a copart- nership, one of the partners cannot dispose of the partnership chose in action without the authority or assent of the other, so as to make him liable upon any covenants or obligations which he assumes on 6uch transfer. Bennett v. Buchan, 53 Barb. 578. After the dissolution of a copart- nership, one partner has not au- thority to make a general volun^ tary assignment of the effects of the partnership for the benefit of creditors against the express dis- sent of his copartners. Deckert v. Filbert, 3 Watts & S. 454. After the dissolution of a part* nership, one partner, without the consent of the other, cannot assign the partnership effects for the bene* fit of preferred creditors. Egberts v. Wood, 3 Paige (N. Y.), 517. Sea ante. Assignment. When goods are consigned to joint factors, and the partnership is dissolved, one retiring and the other remaining, and he who re- mains sells the goods and receives the avails, an action lies against both. Briggs v. Briggs, 20 Barb. 477. During the existence of the part- nership either partner may make a valid assignment of the goods of the firm to secure debts due there^ from; but if the partnership, by mutual consent, is dissolved, and the debts, accounts and goods placed in the hands of a third per-: son to wind up and settle the firm business, neither partner can there: after make a valid disposition of them. Mygatt v. McClure, 3 Head, 495. After the dissolution of a part- nership and an assignment by one partner to the other of all his in- terest in the book debts and de» mands of the firm, with power to collect them for his own benefit, an attempt by the partner so as- signing to control one of those de- mands against himself, and to direct that it should not be allowed 535 *ai9 RIGHTS AND OBLIGATIONS. [iJOOK II. Extent of the doctrine.— The doctrine now in question cannot, it is submitted, be carried further than this, viz., in set-off, can have no effect. Davis v. Briggs, 39 Me. 304. A power of attorney, executed on the dissolution of a firm by two partners to a third, authorizing him to ask, demand and receive the debts of the firm, and declaring the appointment irrevocable, does not operate as an assignment of such debts, and consequently does not render inoperative a release subsequently executed by one of the other members of the firm to one of its debtors. Napier v. M'Leod, 9 Wend. 120. After the dissolution of a part- nership, one of the partners, who has authority to collect the debts, may transfer to himself a debt due to the firm. Oxley v. Willis, 1 Cranch, C. Ct. 436. The implied power of a partner, after dissolution, to settle outstand- ing business of the firm, does not extend to authorize him to appear for his copartner in a suit brought against the partners, though upon a firm indebtedness. Hall v. Lan- ning, 91 U. S. 160. See post. But where one member of a partnership has, after dissolution thereof, defended and appealed from a judgment rendered in a suit against the firm, all the mem- bers are liable to a surety on the appeal bond, who is afterwards compelled to pay the judgment. Gard v. Clark, 29 Iowa, 189. After dissolution one partner can compromise and settle a judgment valid against the late firm, and the others must contribute to the amount paid though they did not assent to the compromise, and claim, but fail to show, that they could have settled on better terms. Bass v. Taylor, 34 Miss. 342. After dissolution of the partner- ship, one partner cannot discharge the debt of a third person to the firm by a receipt given for the re- lease of his individual indebted- ness to such person, particularly where the debtor had notice not to pay such partner. Sims v. Smith, 11 Rich. 565. After the dissolution of a part- nership by agreement, the partner who is authorized to settle the es- tate may borrow money on the credit of the firm for the purpose of paying the debts of the firm; and if the credit is given in good faith, though with a knowledge of the dissolution, and the money 'is faithfully applied to the liquida- tion of the joint debts, the creditor has a claim against the firm, and is not to be considered as a creditor merely of the partner borrowing. Estate of Davis & Desauque, 5 Whart. 530 ; Prudhomme v. Henry, 5 La. Ann. 700. The admissions of a partner, made after the dissolution of the partnership, are not admissible in evidence to bind the partnership. Bispham v. Patterson, 2 McLean, 87; Mercer v. Sayre, Anth. 119; Barringer v. Sneed, 3 Stew. 201 ; Lansing v. Gaine, 2 Johns. 300; Burns v. McKenzie, 23 Cal. 101; Daniel v. Nelson, 10 B. Mon. 316; Hamilton v. Summers, 12 id. 11 ; Pope v. Risley, 23 Mo. 185 ; Bank of Vergennes v. Cameron, 7 Barb. 143 ; Meggett v. Finney, 4 Strobh. 220; Berryhill v. McKee, 1 Humph. 31. 536 CH. II, SEC. III.] LIABILITY OF MEMBERS. *219 that, notwithstanding dissolution, a partner has implied au- thority to bind the firm so far as may be necessary to settle and liquidate existing demands, and to complete transac- Thus the admission of one part- ner as to the existence of a debt against the firm, made subse- quently to the dissolution of the partnership, is not binding on the other partners. Wilson v. Torbet, 3 Stew. 296 ; Chardon v. Oliphant, Treadw. Const. 685; S. C. 3 Brev. 183; Yandesv. Lefavour, 2 Blackf. 371; Brady v. Hill, 1 Mo. 315; Ward v. Howell, 5 Har. & J. 60 ; Shelton v. Cocke, 3 Munf. 191; White v. Union Ins. Co. 1 Nott & M. 55S; Hackley v. Hastie, 3 Johns. 536; Gleason v. Clark, 9 Cow. 57; Brewster v. Hardeman, Dudley, 138; Conery v. Hayes, 19 La. Ann. 325. See, however, Simpson v. Geddes, 2 Bay, 533; Kendrick v. Campbell, 1 Bailey, 522. The cases are not, however, en- tirely harmonious upon the subject of admissions. Thus, it has been held that the admissions of a part- ner, made after the dissolution of the partnership, are competent evidence against the firm as to any contract made prior to such disso- lution. Mann v. Locke, 11 N. H. 246. See, also, Taylor v. Hillyer, 3 Blackf. 433. In Gay v. Bowen, 8 Mete. 100, it was held that, in an action to re- cover the amount of a draft drawn on the plaintiff by partners, and accepted by him, the admissions of one of the partners, made after the dissolution of the partnership, that the draft was accepted by the plaintiff for the accommodation of tbe firm, may be given in evidence to charge the other partner. The admission by one partner of the satisfaction of a debt due to the firm has been held to bind the partnership, although made after dissolution, unless his want of au- thority be proved. Beckam v. Peay, 1 Bailey, 121. So, in Cady v. Shepherd, 11 Pick. 400, it was held that the admissions of one partner, made after the dis- solution of the partnership, in re- lation to a demand against the partnership not barred by the statute of limitations, are com- petent, though not conclusive, evidence against a copartner, the joint contract being first proved aliunde. Entries made after the dissolution of a partnership in the partnership books may be given in evidence against the party who made them. Simonton v. Boucher, 2 Wash. 473 ; Taunton Iron Co. v. Richmond, 8 Mete. 434. On the other hand, in Pringle v. Leverich, 97 N. Y. 181; S. C. 48 N. Y. Super. Ct. 90 ; 49 Am. Rep. 522, it was held that while the re- tiring partner is liable to previous customers of the firm for new ob- ligations of the new firm until no- tice of the change, yet he cannot be bound by admissions made after his retirement by the remaining partners in reference to such obli- gations, whether the dealer to whom admissions were made knew of the retirement or not. So held 537 *'220 RIGHTS AND OBLIGATIONS. [BOOK II. tions begun, but unfinished, at the time of the dissolution, (q) Even Butchart v. Dresser, (r) which goes further than any- other case, does not carry the doctrine beyond this. In that case two persons in partnership as sharebrokers contracted to buy shares. Before paying for them they dissolved part- nership, and that fact was known to their bankers. After the dissolution one of the partners pledged the shares to the bankers for money to pay for their purchase, and au- thorized the bankers to sell tho shares to indemnify them- selves. The other partner contended that this was done without his authority, and that as the bankers knew of the dissolution they could not retain the shares against him. The vice-chancellor, however, held that the partner who pledged the shares had authority, after the dissolution, to complete the contracts previously made by the firm; that he therefore necessarily had authority to raise the funds to pay for the shares in question, and that he had not gone beyond his authority in raising the money by pledging them with the bankers as he had done. The lords justices took the same view. " The general law," it was said, " is clear that a partnership, though dissolved, continues for the pur- pose of winding up its affairs. Each partner has, after and notwithstanding the dissolution, full authority to receive and pay money on account of the partnership, and has the same authority to deal with the property of the partner- [*220] *ship for partnership purposes as he had during the continuance of the partnership. This must neces- sarily be so. If it were not, at the instant of the dissolution it would be necessary to apply to this court for a receiver in every case, although the partners did not differ on any one item of the account." with reference to entries upon the (r) 10 Ha. 453, and 4 De G. M. & books of the new firm. G. 452. Re Clough, 31 Ch. D. 324, (q) See in Lyon v. Haynes, 5 Man. was a similar case, only the pledge & Gr. 541, and in Smith v. Winter, was for an old debt. 4 M. & W. 461, 462; Pollock, Dig. 83, ed, 3. 538 CH. II, SEC. III.] LIABILITY OF MEMBERS. *221 It is to be observed that in Butchart v. Dresser nothing was done except for the purpose of completing a transac- tion unfinished at the time of the dissolution. The case did not require the statement of so general a proposition as that, until the affairs of a partnership are wound up, the agency of each partner continues to be as extensive as if no dissolu- tion had taken place. At the utmost the case under con- sideration decides that, in the event of a dissolution, it is competent for one partner to dispose of the partnership as- sets for partnership purposes, (s) But neither Butchart v. Dresser nor any other case shows that a person who knows that a partnership is dissolved can hold one partner liable for acts of his late copartners done subsequently to the dis- solution and without authority; and if in Butchart v. Dres- ser the money to pay for the shares had been raised by a bill, it could not, consistently with prior decisions, have been held that the dissolved firm was liable either upon the bill itself or for the money raised by its means. Before leaving this subject it is necessary to notice Ault v. Goodrich, (t) which is sometimes supposed to go much further than it really does. In that case, two persons, Wil- cox the elder, and Wilcox the younger, partners as timber merchants, entered into a joint speculation with the plaint- iff and another in the purchase and sale of some trees. Wil- cox the younger had the chief management of the affair, and before the adventure was closed the two Wilcoxes dis- solved partnership. Wilcox the younger seems to have misapplied some of the moneys received by him on the joint account, and it was considered clear that Wilcox the elder was responsible for the ^dealings and trans- [*221] actions of Wilcox the younger during the continu- ance of their partnership. It was also considered that as there was no evidence of any new agreement between any (s) Qu. if Lewis v. Reilly, 1 Q. B. proceeded on it. But see Smith v. 349, and mite, p. 216, can be sup- Winter, 4 M. & W. 454. ported on this principle? Lord (t) 4 Russ. 430. Denman's judgment seems to have 539 *221 EIGHTS AND OBLIGATIONS. [BOOK II. of the parties upon the dissolution of partnership between the Wilcoxes, the other parties to the adventure were to be treated as having continued to rely on the joint responsi- bility of the two Wilcoxes in respect of the dealings of Wilcox the younger. Wilcox the elder was accordingly declared to bo responsible for the conduot of Wilcox the younger after the dissolution. Upon this case it may be observed, first, that the facts are not satisfactorily stated; and, secondly, that the judg- ment leads to the inference that the responsibility of Wil- cox the elder for the conduct of Wilcox the younger did not turn upon the circumstance that they were partners, but upon the circumstance that they were jointly intrusted with the management of the tree speculation. In this view of the case it was obviously immaterial whether the Wil- coxes had dissolved partnership or not. Notice in case of retirement of dormant partner.— What amounts to notice of dissolution. — It has been already seen that when a dormant partner retires he need give no notice of his retirement in order to free himself from lia- bility in respect of acts done after his retirement, (u) The reason is that, as he was never known to be a partner, no one can have relied on his connection with the firm, or truly allege that, when dealing with the firm, he continued to rely on the fact that the dormant partner was still con- nected therewith. Notice in case of retirement of ostensible partner — Old customers entitled to special notice.— But when an ostensible partner retires, or when a partnership between several known partners is dissolved, the case is very differ- ent; for then those who dealt with the firm before a change took place are entitled to assume that no change has occurred until they have notice to the contrary, (x) And even those who never had dealings with the firm, and who only knew of its existence by repute, are entitled to (u) Ante, p. 213. (#) See per Lord Selborne in Scarf v. Jardine, 7 App. Ca. 349. 540 CH. II, SEC. III.] LIABILITY OF MEMBERS. -ooo assume that it still exists until something is done to notify publicly that it exists no longer, (y) An old cus- tomer, however, is entitled to a more •■specific no- [*222] tice than a person who never dealt with the linn at all; (V) 1 and in considering whether notice of dissolution (y) Farkin v. Carruthers, 3 Esp. 348. (z) Graham V- Hope, Peake, 154. 1 Upon dissolution, or where a change takes place in a firm by some members retiring, and where the same firm name is still used, the former partners or retirin Zollar v. Janvrin. 47 N. H. 324; Vernon v. Manhattan Co. 17 Wend. 521; Ward well v. Haight, 2 Barb. 549; Como v. Port Henry Iron Co. 12 id. 27; Felbretcli v. Armstrong, 5 Root. 339; "Williams v. Birch, 6 Bosw. 299; Schieffelin v. Stevens, 1 V. "ins. (N. C.) L. 103; Little v. members c:m only relieve them- Clarke, 3(5 Pa. St. 114; White v, selves from liability by giving act- ual notice of such fact to former creditors who continue to deal with the firm. As to them the partnership is presumed to con- tinue the same as it was when they commenced to deal with it, until they in some way have actual no- tice that a change has taken place Murphy, 3 R.ch. 3J9; Hutchins v. Hudson, 8 Humph. 420; Kirk- man v. Snodgrass, 3 Head, 370; Tudor v. Wiiite. 27 Tex. 581; Pren- tiss v. Sinclair, 5 Vt. 1-19; Deering V. Flanders, 49 N. H. 2^5 ; Nichol- son v. Moog, 05 Ala. 471; Polk v. Oliver, 50 Miss. 533; Rose v. Cof- field, 53 Md. 18; S. C. 30 Am. Rep. Holtgreve V. Wintker, 85 111. 470; 389; Mann v. Clapp, 1 Tex. App Stall v. Cassady, 57 ind. 284; Davis V. Willis, 47 Tex. 154; Dickinson v. Dickinson, 25 Gratt. 321; Ken- ney v. At water, 77 Penn. St. 34; Carmichael v. Greer, 55 Ga. 110; Re Krueger, 2 Lowell, 03; Holland V. Long. 57 Ga. 30; Stewart V. Sonneborn, 51 Ala. 120; Shamburg v. Ruggles, 83 Pa. St. 148 ; Austin v. Holland, 09 N. Y. 571 ; Bank of (Civ.) 249; Gilchrist v. Brande, 58 Wis. 184; Backus v. Taylor, 84 Ind. 503: Meyer v. Krohn, 114 III. 574; Ewing u. Trippe, 73 Ga. 776; Spurck v. Leonard, 9 Biadw. 174; Strecker v. Coon, 90 Ind. 409. See, however, Vaccaru v. Toof, 9 Heisk. 194. The burden of proof as to the withdrawal and notice of with- the Commonwealth v. Mudgett, 44 drawal is upon the defendant. Uhl N. Y. 514; Polk v. Oliver, 50 Miss. Vm Birigaman, 78 Ind. 365. 566; Denman v. Dosson, 19 La. Ann. 9 ; Pope v. Risley, 23 Mo. 185 ; Epps v. Dillaye, 6 Bub. 244 ; John- son v. Totten, 3 Cal. 343 ; Page v. Brant, 18 111. 37 ; Williams v. Bow- ers, 15 Cal. 321 ; Ennis v. Williams, 30 Ga. 691 ; Lowe v. Penny, 7 La. Ann. 356; Skannel v. Taylor, 12 id. 773 ; Reilly v. Smith, 16 id. 31 ; To render a retiring partner lia- ble on transactions occurring after the dissolution, on the ground of want of notice thereof, the cus- tomer must have been either a regular or a recent customer of the firm. Bloch v. Price, 24 Mo. App. 14. The notice which a retiring part- 541 *222 RIGHTS AND OBLIGATIONS. [book n. or retirement is or is not sufficient, a distinction must be made according as the person sought to be affected by no- tice was or was not a customer of the old firm. ner is required to give must be a reasonable one ; whether such one is so given is a question of fact for the jury. Strecker v. Conn, 90 Ind. 469 ; Polk v. Oliver, 56 Miss. 566. An old customer of the firm is entitled to actual notice of the dis- solution, although at the time of the dissolution the firm was in- debted to him. Elkinton v. Booth, 143 Mass. 479. Notice may be implied from cir- cumstances. Mann v. Clapp, 1 Tex. App. (Civ.) 249. See, also, Gilchrist v. Brande, supra. Notice of tbe dissolution of a firm may be inferred from the nat- ure and purposes of the transaction at the time the partnership was entered into, if the transaction be ended and closed. Williams v. Con- nor, 14 S. C. 621. So, notoriety of a dissolution, or, perhaps, of the non-existence, of a partnership may be shown to charge the party with implied no- tice of the fact, but not to charge a party residing in a distant city, without proof of other facts tend- ing to show that he had opportuni- ties of hearing the common report. Humes v. O'Bryan, 74 Ala. 64. Mere fact that withdrawal of a partner was of general notoriety is not sufficient as to one who had no actual notice thereof, no public no- tice being given. Strecker v. Conn, 90 Ind. 469. Creditors who extend credit to the firm are not bound to regard public rumors of dissolution if the partners continue to use the part- nership name and avail themselves of the partnership credit. Moline Wagon Co. v. Rummell, 2 McCrary, C. Ct. 307; S. C. 14 Fed. Rep. 155; 12 id. 658. Proof of the mailing of notices of dissolution and retirement, prop- erly addressed, to persons having had prior dealings with the firm, is prima facie evidence of the re- ception of such notices, but such presumption may be rebutted. Meyer v. Krohn, 114 111. 574; Eck- erly v. Alcorn, 62 Miss. 228. In an action against the firm upon the issue whether the plaint- iff had notice of its dissolution, a published notice of dissolution in connection with other evidence tending to show plaintiff saw and read the notice is competent. Smith v. Jackman, 138 Mass. 143. Upon such issue, bills or state- ments, or account for goods sold and delivered to one of the part- ners by the plaintiff at various times after the cause of action had accrued, are competent evidence as to the question of notice. Smith v. Jackman, 138 Mass. 143. To prove notice to plaintiff of withdrawal of C. from the firm, letters sent him by the remaining partners headed as follows: "E., under firm name of C, B. & Co.," were admissible. Swift v. Carr, 5 N. Eng. Rep. (Mass.) 512. A partner who retires from the firm before the 1st day of May, and thereafter takes no part in the management of its affairs and re- tains no interest in its property, is not liable under the general etat- 542 CH. II, SEC. III.] LIABILITY OF MEMBERS. *222 When a known partner retires, or a partnership is dis- solved, notice of the fact is usually given to the world at utes (ch. 11, sec. 15) for a tax as- sessed on that day upon the personal property of that firm, and the fact that no notice is given by retiring partner of the dissolution of the firm does not affect his liability. Washburn v. Walworth, 133 Mass. 4y9. Where a firm had been dealers with a bank in their copartnership business, and their character as partners was known to the bank, and it was in the bank-book of the firm that a note was entered as having been discounted on their behalf, the signature of the firm being indorsed thereon, held, in a 6uit to charge the firm as indorsers of the note, that the relation of the firm to the bank was such as to re- quire notice of dissolution to be given to the bank; and that an advertisement of dissolution in a newspaper was not sufficient to re- lieve one of the partners from his liability upon the note. Bank of the Commonwealth v. Mudgett, 45 Barb. 663. A person in the employment of a firm at the time of dissolution, who continues to serve without having notice of the dissolution, can hold the retiring partner liable for his compensation. Austin v. Holland, 69 N. Y. 571. See, how- ever, Costello v. Nexdorff, 9 Mo. App. 501. The fact that sufficient time to give public notice had not elapsed between the dissolution of a firm and the subsequent making of a note by one of the late partners will not excuse the partners from their liability to pay such note in the hands of a bona fide holder. Bristol v. Sprague, 8 Wend. 423. Want of notice of a dissolution of partnership will charge the firm on a subsequent accommodation indorsement, the holder having had previous dealings with the firm, in the same manner as if the firm continued to exist. Dundass v. Gallagher, 4 Pa. St. 205. That a bank has discounted notes bearing the names of a partnership does not constitute them dealers so as to require actual notice of dis- solution to exonerate a retiring partner. City Bank of Brooklyn v. McChesney, 20 N. Y. 240; Same v. Dearborn, id. 244. See, how- ever, Mechanics' Bank v. Livings- ton, 33 Barb. 458. Upon the dissolution of a firm, a bank with which it has kept its deposits is entitled to actual notice of the dissolution, and until such notice members of the firm will be liable as partners. National Shoe & Leather Bank v. Herz, 89 N. Y. 629 ; S. C. 24 Hun (N. Y.j, 260. Where a small amount of goods has been sold to a partnership with- out any fixed period of credit, but not paid for till some months after the sale, the vendors of the goods are properly dealers with the part- nership, and must receive actual notice of the retirement of a mem- ber to release him from his liability to them as a partner upon sales to the partnership subsequent to his retirement. Clapp v. Rogers, 12 N. Y. 283. See, also, Clapp v. Rogers, 1 E. D. Smith, 549. A single cash sale of cattle to a partnership firm dealing in cattle 543 *222 JJIUIITS AND OIJLIOATIONS. [BOOK II. large by advertisement, and to old customers by some spe- cial communication. does not make the seller such a dealer as entitles him to actual notice of the dissolution of the partnership, or, through lack of such notice, to hold both partners on a sale made two years there- after, and eighteen months after the dissolution of the firm, where the actual dealings are had with only one of the former partners. Merritt v. Williams, 17 Kan. 287. The defendants had been part- ners previous to March, 1S."37, at which time they dissolved partner- ship and advertised the dissolution in a newspaper published in the town where they hail done busi- ness. The business was continued by one of the partners, who, in the fall of 1857, bought coal of the plaintiffs, which the latter sold with no knowledge of the dissolution, and on the credit of the partnei- ship. The plaintiffs had sold coal in one instance to the defendants before the dissolution, which was the only dealing they had had with them, but the defendants had been regular customers of a firm which sold coal at the same place, and to which the plaintiffs had succeeded, the former firm having consisted of one of the plaintiffs and one A., and the present firm of the same plaintiff and one B., who had for some jears been a clerk of the former firm. Held, that the plaint- iffs were to be regarded as having had " former dealings " with the defendants, and that they could be affected only by actual notice of the dissolution. Held, also, that the lapse of time between the dis- solution and the purchase of the coal, the fact that the plaintiffs were doing business in the same town with the defendants, and the fact that an advertisement of the plaintiffs stood next to the adver- tisement of the dissolution in the newspaper, although to be con- sidered in determining whether the plaintiffs had actual notice, were of no avail in law against the fact that they had no actual knowledge of the dissolution. Lyon v. John- son, 28 Conn. 1. It makes no difference how notice is given of a change in the firm, whether by the retiring member or by any other means, so that actual notice of the fact is brought home to the former correspondents. Holtgreve v. Wintker, 85 111. 471 ; Uhl v. Bingaman, 78 Ind. 365. No formal or precise announce- ment of the dissolution of a part- nership, either by publication or otherwise, is necessary to bind a dealer with the firm ; but knowl- edge of any fact, however acquired, sufficient to put an ordinarily pru- dent man upon inquiry, will charge them with notice of whatever other facts a reasonable investiga- tion would have disclosed. Persons who have dealt with a partnership are effected with notice of its dis- solution, if a statement of the fact that they have dissolved (though informal, and not signed by any member of the firm) has reached them in any way which advised them of the fact, and was suffi- cient to put them on inquiry. Young v. Tibbitts, 32 Wis. 79. See, also, Ransom v. Loyless, 49 Ga. 471. In an action on a note signed by 544 CH. II, SEC. III.] LIABILITY OF MEMBERS. *222 Public notice by advertisement — Such notice not in- dispensable. — Public notice given by advertisement in the a firm, evidence that one partner told several persons, prior to the execution of the note, that the firm was dissolved, is inadmissible to prove a dissolution when no notice is shown to the plaintiff, the payee. Pursley v. Ramsey, 31 Ga. 403. Notice of dissolution given to an agent of the customer, whose duty and authority embraced an inquiry into the financial condition of per- sons and firms with whom his principal was dealing, and to as- certain who were members of sucb firms, etc., is sufficient notice of dissolution. Miller v. Schneider, 2 Tex. App. (Civ.) 321. To charge a principal with notice of the dissolution of a mercantile partnership, on the ground that notice was given to his agent, it must be shown that the agent was authorized to represent his princi- pal in that particular. Stewart v. Sonneborn, 49 Ala. 178. Notice of dissolution, published in a newspaper and accidentally reaching a bank director, will not affect the bank. National Bank v. Norton, 1 Hill (N. Y.), 572. Where goods are ordered by one member of a firm, and the other has not been accepted nor the goods shipped until after a notice of its dissolution, and the shipment varies from the terms of the order, the retiring partner will not be bound by it. Goodspeed v. Wiard Plow Co. 45 Mich. 322. Notice of the dissolution of a partnership by publication in some newspaper of general circulation is sufficient notice to all persons Vol. 1—35 who have not had dealings with the firm. Shurlds v. Tilson, 2 McLean, 458; Watkinson v. Bank of Pennsylvania, 4 Whart. 482; Gallicott v. Planters' & Mechanics* Bank, 1 McMull. 209; Mauldin v. Branch Bank, 2 Ala. 502 ; Lucas ?>. Bank of Darien, 2 Stew. 280 ; Lans- ing v. Gaine, 2 Johns. 300; Pren- tiss v. Sinclair, 5 Vt. 149; Graves v. Merry, 6 Cow. 701; Polk v. Oliver, 56 Miss. 566; Simonds v. Strong, 24 Vt. 642; Martin v. Searles, 28 Conn. 43; Martin v. Walton, 1 McCord, 16; Nicholson v. Moog, 65 Ala. 471 ; Polk v. Oliver, 56 Miss. 566 ; Backus v. Taylor, 84 Ind. 503; Meyer v. Krohn, 114 111. 574; Ewing v. Trippe, 73 Ga. 776; Strecker v. Conn, 90 Ind. 469. See, also, Grinman v. Baton Rouge Co. 7 La. Ann. 638. But as to those who have had dealings it shall not be so consid- ered, unless, under the circum- stances, it appears satisfactory to the jury that it operated as a no- tice. Martin v. Walton, 1 McCord, supra. See next note supra. Such notice of the dissolution is sufficient as is likely to make the fact generally known in the locality concerned, and to those with whom business is done. Solomon v. Kirk- wood, 55 Mich. 256. A current report is not admissi- ble to show partnership, but is competent on the subject of notice to the plaintiff of the partner's withdrawal. Uhl v. Harvey, 78 Ind. 26. Mere stopping by retiring part- ner of a publication of an adver- tisement of his partnership, when 545 *222 RTGHTS AND OBLIGATIONS. [book II. "Gazette" is sufficient, not only against all who can be shown to have seen it, but also as against all who had no he learned of it, was not enough to relieve him from liability ; he is bound to publish unequivocal no- tice of his withdrawal. Uhl v. Harvey, 78 Ind. 26. Merely dropping the name of a director from the publishing list of the directors of a partnership doing a banking business is not sufficient notice of withdrawal. Clark v. Fletcher, 96 Pa. St. 416 ; S. C. 37 Leg. Intel. 241. The rule that notice of dissolution must be given to previous dealers with the firm does not require actual notice to those with whom the firm has never dealt, although such persons may have acquired a knowledge of the members of such partnership as the clerks or sales- men of one with whom the firm did have dealings. Nor does such rule require notice to those who as agents represent the person with whom the firm deals, but only that it be given to the principal. Rich- ardson v. Snider, 72 Ind. 425 ; S. C. 37 Am. Rep. 168. A retiring partner is not required to give notice so as relieve himself from liability to those who for the first time deal with the firm after the dissolution takes place, unless he permits his name to be used in the transaction of the business, or so conducts himself with reference to the firm transactions as to in- duce the belief in those dealing with the firm that he is still a member. Garr v. Huggins, 12 Bush, 259. Two partners of a firm resided in New York, and the third resided in Norwich, in Connecticut, their usual place of doing business. Upon dissolution, notice was given for several weeks successively in two newspapers, one printed at Norwich and the other at New London in the vicinity of Norwich. One of the New York partners afterwards indorsed a bill of ex- change in New York with the company name, but whether the indorsee had or had not actual no- tice of the dissolution, or whether he had ever been a correspondent of the company, did not appear. Held, that these facts constituted reasonable notice to him, and to every person not a correspondent of the company. Mowatt v. How- land, 3 Day, 353. The character of the notice to affect subsequent dealers must be such as to advise the public as to the dissolution of the firm — as by changing the firm name on the sign and in business transactions, publication in a newspaper, or otherwise ; and a private notice to the former dealers is not alone suf- ficient to affect subsequent ones; and generally whether the proper notice has been given is a question of fact for the jury. Polk v. Oli- ver, 56 Miss. 566. A., having had no previous deal- ings with a firm, but having heard of its existence, and who composed it, sold goods to one of the part- ners, and received in payment therefor a draft by him drawn upon the firm, and accepted in his name. At the time of the transac- tion the firm was in fact dissolved; but A. had no notice thereof. Held, that, in order to protect a retired 546 CH. II, SEC. III.] LIABILITY OF MEMBERS. *222 dealings with the old firm, whether they saw it or not. (a) But an advertisement in any other paper is no evidence against any one who cannot be shown to have seen it. (b) If, however, it can be shown that he was in the habit of taking the paper, (c) that is evidence to go to the jury of his having seen not only the particular paper containing the advertisement, but also the advertisement itself; (d) 1 and partner against such acceptance of the draft at the suit of A., evidence tending to show a public and no- torious disavowal of the continu- ance of the partnership is admissi- ble. Lovejoy v. Spafford, 93 U. S. 430. A commercial partnership was dissolved in New Orleans without notice, and the partners under the same name established a planting partnership in a country parish, where they resided. They with- drew wholly from mercantile busi- ness, and nothing showed that the old mercantile name, as such, was afterwards used, or that plaintiff, who resided near them, ever dealt with the New Orleans firm, or looked to it for his indemnity as surety for the partners. Held, that he could not hold them liable as commercial partners. Stewart v. Caldwell, 9 La. Ann. 419. An act of Canada in relation to the registration of notice of disso- lution of a firm does not affect the rights of the Vermont plaintiffs in a suit brought in that state against members of a Canada firm on a note payable in Montreal. Wait v. Brewster, 31 Vt. 516. (a) Godfrey v. Turnbull, 1 Esp. 371 ; Wrightson v. Pullan, 1 Stark. 375 ; Godfrey v. Macauley, 1 Peake, N. P. 209; Newsome v. Coles, 2 Camp. 617. (6) Leeson v. Holt, 1 Stark. 186 ; Boydell v. Drummond, 2 Camp. 157, and 11 East, 144n. (e) Showing that the paper circu- lated in his neighborhood goes for nothing alone. Norwich and Low- estoft Co. v. Theobald, M. & M. 153. (d)See Jenkins v. Blizard, 1 Stark. 418, where, however, the plaintiff had a verdict ; Rowley v. Home, 3 Bing. 2. 1 The publication of the notice of dissolution of a partnership in a newspaper taken by the plaintiffs is a fact from which the jury may infer actual notice. Treadwell v. Wells, 4 Cal. 260; Page v. Brant, 18 111. 37. See, also, Hutchins v. Bank of Tennessee, 8 Humph. 418. A party will not be affected by notice of the dissolution of a part- nership by the certificate merely of the editors of a newspaper that a notice of the dissolution was pub- lished in it, without proof that the party sought to be affected took or read the paper. Boyd v. McCann, 10 Md. 118. Where, in an action on a book ac- count against two copartners, one defended on the ground of a disso- lution of the partnership and no- tice to plaintiff before goods bought, proof of advertisement of dissolu- tion in a paper which plaintiff did not take, or of defendant's declara- tions to plaintiff that he was going out of the firm, but that his money would remain in it, will not amount 547 *223 RIGHTS AND OBLIGATIONS. [liOOK II. if the jury are satisfied that he saw the advertisement that will be sufficient, although no advertisement was inserted in the " Gazette." (e) An advertisement, moreover, is not in- dispensable; its place may be supplied by something else. Thus a change in the name of a firm 1 painted on its count- ing-house, accompanied by a removal of the business of the old firm (for the purpose of winding up), and coupled with announcements of the change by circulars sent to the old customers, was held to be sufficient without any adver- tisement, as against a person who had not been an old cus- tomer, and who was not proved to have had any distinct notice, (f) [*223] *Special notices.— As against persons who dealt with the firm before an}?- change in it took place, an advertisement without more is of little or no value, whether it be in the ' k Gazette " or elsewhere. (ooka of a new firm, see McCall v. (z) City Discount Co. v. Maclean, Moss, 1 12 111. 493. L. R. 9 C. P. 692. See ante, p. 230. 560 CH. II, SEC. III.] LIABILITY OF MEMBERS. *235 that the payment was a dividend on all debts; (a) from the representations of the parties; (!>) and from other cir- cumstances, (c) An instructive case on this head is Wickham v. Wick- ham, (d) which in substance was as follows: A firm of Finch & Sons, as agents of the plaintiffs, supplied goods to the firm of Smith & Willey upon the terms that the latter should become debtors to the plaintiff in respect of such goods. Finch & Sons also supplied Smith & Willey with other goods on their own behalf. In the accounts between Finch & Sons and Smith & Willey no distinction was made between goods supplied by Finch & Sons on their own be- half and those which they supplied as agents of the plaint- iffs. Smith & Willey made payments generally on account ; and, applying the rule in Clayton's Case, nothing was due from Smith & Willey in respect of the goods supplied to them on behalf of the plaintiffs. However, Edward Finch was a partner in both firms, and representations were made to the plaintiffs by the firm of Finch & Sons to the effect that a large debt was due to the plaintiffs from the firm of Smith & Willey, and Finch & Sons undertook that Edward Finch should use his influence as a partner in the firm of Smith & Willey to secure the reduction of such debt. Upon the faith of this representation and undertaking, the plaint- iffs forebore to sue Smith & Willey. It was held that the firm of Smith & Willey was precluded from treating its debt to the plaintiffs as liquidated by the payments made by it to the firm of Finch & Sons; for it was not competent to the two firms so to arrange their accounts as to liquidate a debt which a person who was a partner in both firms represented to the plaintiffs as still owing to them. (a) Ante, p. 228. B. 792. Compare Be Boys, 10 Eq. (6) Wickham v. Wickham, 2 K. 467. & J. 478; Meniman v. Ward, 1 J. (d) 2 K. & J. 478. See, too, Mer- & H. 371. riman v. Ward, 1J. & H. 371. (c) See Henniker v. Wigg, 4 Q. 567 *236 EIGHTS AND OBLIGATIONS. [BOOK II. Application of the rule in cases of fraud. — Upon the same principle, viz., that the rule in Clayton's Case is founded on the presumed intention of the parties, it follows that it cannot be applied as against a person who is a [*236] ^creditor in respect of a fraud committed on him and of which he is ignorant. This in fact was deter- mined in Clayton's Case itself. For Clayton, in addition to the claim which was held to have been discharged by the operation of the rule noticed above, (e) had another claim upon Devaynes' estate, arising out of a breach of trust committed by a fraudulent sale of some exchequer bills, and of which sale he was kept in ignorance. The payments made to Clayton since Devaynes' death were more than sufficient to satisfy both claims; but it was held that the claim arising out of the concealed sale of the bills w r as not affected by those payments. (/) So if one partner fraudu. lently overdraws his account with the firm and keeps pay- ing money in and drawing money out, so that his fraudulent overdrawing is never discovered, it will not be treated as having been made good so long as there is a balance against him. {y) Imputation of payment where debts are owing to a firm and to a member of it. — Before leaving the subject of ap- propriation of payments it may be as well to advert to a question of some difficulty which arises when a person in- debted to a firm, and also to an individual member of it, pays him a sum of money under such circumstances that it cannot be ascertained on account of which debt the pay- ment was made. In such a case ought the payment to be applied in liquidation of the debt due to the partnership or of that due to the individual member? Pothier (A) says that good faith requires that the partner receiving the money should apply it proportionally to both demands. The w r riter (e) Ante, p. 228. (g) Lacey v. Hill, 4 Oh. D. 537. (/) See Clayton's Case, 1 Mer. (/i) Pothier, " Societe," § 121. 572-580. 568 CH. II, SEC. III.] LIABILITY OF MEMBERS. •237 is not aware of any decision on this subject, but he appre- hends that, as between the partner and the debtor, the pay- ment might be applied to either debt at the option of the partner, whilst, as between the partner and his copartners, good faith would require that the payment should be ap- plied wholly to the partnership debt, (i) 1 f 2. Release. [-237] Belease of one partner is a release of the firm — Cov- enant not to sue has a different effect. — A release of one partner from a partnership debt discharges all the others; {J&) % for, where several persons are bound jointly, (i) See Thompson v. Brown, Moo. & M. 40, and Nottidge v. Prichard, 2 CI. & Fin. 379. 1 Upon the general subject of appropriation of payments, Mr. Greenleaf in his valuable work on Evidence, volume 2, section 529, says: " In regard to the ascription or appropriation of payments, the general rule of law is that a debtor owing several debts to the same creditor has a right to apply his payment, at the time of making it, to which debt he pleases. But this rule applies only to voluntary pay- ments, and not to those made under compulsory process of law. If he makes a general payment without appropriating it the creditor may apply it as he pleases. And where neither party appropriates, the law will apply it according to its own view of the intrinsic justice and equity of the case." Respecting the exceptions to the right of appropriation by the cred- itor, where the debtor makes none, the same author, in section 531a, says: "The principle on which these and other exceptions [stated in section 531] are founded seems to be this : That the debtor, by waiving his right of appropriation in favor of the creditor, could not have in- tended that it should be exercised to his own injury ; but, on the con- trary, that he relied on the cred- itor's making an appropriation to which he could not reasonably or justly object. The creditor, there- fore, never acquires the right to apply a payment with a view merely to his own interest or con- venience, unless the debtor has had an opportunity to direct its appli- cation by having the money pass through his own hands or under his own control." (k) Bower v. Swadlin, 1 Atk. 294; Ex parte Slater, 6 Ves. 146; Cheetham v. Ward, 1 Bos. & P. 630; Cocks v. Nash, 9 Bing. 341. 2 See Gray v. Brown, 22 Ala. 262; Williamson v. McGinnis, 11 B. Mon. 74; Tudarman v. Newhall, 17 Mass. 581 ; American Bank v. Doo- little, 14 Pick. 126; Brown v. Marsh, 7 Vt. 327; Willings v. Con- sequa, Pet. C. C. 307 ; United States v. Thompson, Gilpin, 614; Benson 569 '237 EIGHTS AND OBLIGATIONS. [BOOK II. or jointly and severally, a release of one is a release of them all. (I) But in this respect a covenant not to sue dif- fers from a release; for although, where there is only one debtor and one creditor, a covenant by the latter never to sue the former is equivalent to a release, it has been de- v. Kincaid, 3 Pa. St. 57. See, how- ever, Grant v. Holmes, 75 Mo. 109 ; Williams v. Hitchings, 10 Lea, 326. The Code of Civil Procedure of New York permits joint debtors to compound separately a joint debt in all cases except where a partner- ship exists not dissolved, and does not require a strict common-law release, but is satisfied by any in- strument which exonerates the compounding debtor alone from liability. Marx v. Jones, 8 N. Y. Civ. Proc. 49. Release of surviving solvent partner possessed of partnership property held to release the repre- sentative of the deceased partner from liability by reason of the partnership. Murray v. Fox, 39 Hun (N. Y.), 108. On the other hand it has been held that the discharge of the es- tate of the deceased partner neither affects the liability of the survivor nor changes the character of the debt as a partnership liability. Espy v. Comer, 76 Ala. 501. An indenture releasing and dis- charging an outgoing partner from all sums in which he is individually indebted to the partnership con- strued in Lathrop v. Page, 129 Mass. 19. A parol agreement to release one partner does not operate to dis- charge a debt as against the other. To have that effect it must be under seal. Evans v. Carey, 29 Ala. 99; ShotweUr. Miller, Coxe, 5 181 ; Walker v. McCulloch, 4 Mo. 421 ; Shaw v. Pratt, 22 Pick. 305 ; Harrison v. Clare, 2 John. 449; Rowley v. Stoddard, 7 id. 207; Catskill Bank v. Messenger, 9 Cow. 37; De Zeng v. Bailey, 9 Wend. 336 ; Lunt v. Stevens, 24 Me. 534. A partner cannot avail himself of a promise by a creditor of his firm to release him from his liabil- ity if he has paid the creditor nothing, and has not parted with any security, or acted upon the faith of the promise. Fagg v. Ham- bel, 21 Iowa, 140. A creditor who has accepted his proportion of an assignment made by a firm, and given the firm a re- lease, has no right of action against a former partner of the firm who retired before the assignment was made, and received from the firm a bond of indemnity against all debts. Bank of Wilmington v. Almond, 1 Whart. 169. Where a firm debt is contracted in Pennsylvania, and judgment therefor is recovered in that state against one partner alone, and afterwards a release is executed to the other partner in another state, the effect of the release upon the judgment is to be determined by the law of Pennsylvania. Green- wald v. Raster, 85 Pa. St. 45. (I) See the last note ; and as to joint and several obligations, Co. Litt. 232, a; Lacy v. Kinaston, 1 Ld. Raymond, 690; Kiffinr. Evans, 4 Mod. 379. r ,0 CH. II, SEC. III.] LIABILITY OF MEMBERS. 237 cided on several occasions that a covenant not to sue does not operate as a release of a debt owing to or by other per- sons besides those who are parties to the covenant, (m) Releases in form held to be covenants not to sue. — If a release is so drawn as to show that it was intended to inure only for the benefit of the releasee personally, and not to avail even him in an action by the releasor against the releasee, jointly with other people, then persons jointly liable with him in respect of the debt released will not be discharged therefrom. In such a case the deed will itself show that it was not in fact intended to operate as a re- lease. 1 (m) Clayton v. Kyuaston, 2 Salk. signed all his property to the in- 573 ; Lacy v. Kynaston, 1 Ld. Ray- mond, 6S8, and 2 Salk. 575; Hut- ton v. Eyre, 6 Taunt. 289 ; Dean v. Newhall, 8 T. R. 168; Walmesley v. Cooper, 11 A. & E. 216. And see Price v. Barker, 4 E. & B. 760. l See Greenwald v. Kaster, 85 Pa. St. 45; Parmelee v. Lawrence, 44 111. (Callaghan & Co.'s ed.) 405 and note; Seymour v. Butler, 8 Iowa, 304; Kirby v. Taylor, 6 John. Ch. 242; Clagett v. Salmon, 5 Gill & John. 351; Lysaght v. Phillips, 5 Duer, 116; Wiggin v. Tudor, 23 Pick. 444 ; R. M. Charlt. 267; Gardner v. Baker, 25 Iowa, 343 ; Bank of Chenango v. Osgood, 4 Wend. 607 ; Hosack v. Rogers, 8 Paige, 229; Couch v. Mitts, 21 Wend. 424; Chandler V. Herrick, 19 John. 129; Shed v. Pierce, 17 Mass. 623; Goodnow v. Smith, 18 Pick. 416 ; Mason v. Jonett, 2 Dana, 107; McClellanu. Cumberland Bk. 24 Me. 566. The payee of a bill of exchange, drawn by a firm of which he was a member, indorsed the same to his creditor in trust to pay certain other creditors. He afterwards as- dorsee for the benefit of all his creditors, with a stipulation for a release from them. The assignee, in his private capacity, executed such release to the debtor. Held, that this did not i-elease his claim upon the other members of the partnership as indorsee of the bill. Hazelhurst v. Pope, 2 Stew. & P. 259. The plaintiff and defendant were partners, and the defendant, hav- ing received money on the part- nership account, mingled it with money held by him and A. in trust, and allowed it to pass into A.'s hands. The plaintiff afterwards, having been wrongfully kept in ignorance by the defendant of the receipt and disposition of the money, released A. Held, that the defendant was accountable to plaintiff for the money so received, notwithstanding the release to A. Mumford v. Murray, 6 Johns. Ch. 452. Where a partnership closed up its business, and all the goods, ef- fects and credits were left with P., one of the partners, for the pur- 571 *238 EIGHTS AND OBLIGATIONS. [BOOK II. In Solly v. Forles, (n) the defendants Forbes and Eller- man were partners, and were indebted to the plaintiffs, and had stopped payment. In consideration of a sum paid by Ellerman, the plaintiffs released him from all further demands, but it was declared in the release (to which, how- ever, Forbes was not a party) that nothing therein con- tained should affect the plaintiffs' rights against Forbes, either separately or as partner with Ellerman, or against the joint estate of the two; and that it should be lawful for the plaintiffs to sue Ellerman, either jointly with [*23S] Forbes, or separately, for the purpose of obtaining satisfaction of their debt,, either out of the joint es- tate of the two or from Forbes. In an action brought by. the plaintiff against Forbes and Ellerman to recover the debt owing by them it was held that this deed was no bar to the action. Again, in Hartley v. llanton, (o) where a bill was drawn by a firm on, and was accepted by, one partner, it was held that a release of the drawers did not discharge the acceptor, pose of paying off the debts, and paid by one of several partners, this partner entered into an agree- upon a compromise made by him rnent with some of the creditors for his release from a debt owing that they should take P.'s notes, by the firm under the New York indorsed by R., who was not a act of 1838, authorizing an individ- member of the firm, for forty ual member of a partnership to cents on the dollar of their indebt- compromise his individual liability edness, and the creditors thereupon in case of a dissolution, was taken released to P. all right to resort to out of the copartnership funds any of the goods and effects, and which he had in his hands, will the goods were mortgaged to R. to not make such release inure to secure his indorsement, and a cov- the benefit of the other members enant was entered into by the cred- of the firm, or deprive the creditor itors not to sue P. for twenty of the protection of the statute, years, and P. and R. afterwards Stitt v. Cass, 4 Barb. 92. disposed of the goods, held, that (n) 2 Brod. & Bing. 38. See, too, the other partners were liable to Price v. Barker, 4 E. & B. 760 the creditors to the amount of the Thompson v. Lack, 3 C. B. 540 partnership indebtedness to them, Willis v. De Castro, 4 C. B. N. S. 216 less the notes for forty per cent. Bateson v. Gosling, L. R. 7 C. P. 9. Roberts v. Strang, 38 Ala. 566. (o) 5 Q. B. 247. The fact that the consideration 572 CH. II, SEC. III.] LIABILITY OF MEMBERS. *238 the object of the release being to discharge the joint liabil- ity of the firm, but not to affect the several liability of the accepting partner. Recitals of releases. — In construing releases particular attention must be paid to the recitals; for, however gen- eral the operative words of the deeds may be, they will be confined so as to not affect more than the parties appear from the deed itself to have contemplated, (p) Removing seal. — If several persons are bound by a bond jointly, or jointly and severally, and their creditor removes the seal of one of them from the bond, all the others are dis- charged ; but if the obligors are only bound severally, then the removal of the seal of one of them does not affect the liability of the others, (q) Arrest. — Before arrest for debt was abolished (as it now is except in a few special cases) an arrest of a debtor, fol- lowed by a discharge of him by the arresting creditor, was equivalent to a release b} r the creditor of his debt; whence it followed that if a creditor of a firm obtained judgment against it, and arrested the partners, and then let one of them go, the others were entitled to be discharged from cus- tody, (r) l Composition in bankruptcy. — If a creditor accepts a composition in bankruptcy in respect of a joint debt he is not precluded from suing one of the debtors who may be separately liable to him in respect of the same debt, (s) 2 (p) See, for illustration of this the ground that such partner had rule, Lindo v. Lindo, 1 Beav. 496 ; fraudulently disposed of firm prop- Payler v. Honiersham, 4 M. & S. erty with the intent to defraud its 423; Simons v. Johnson, 3 B. & Ad. creditors. Hanover Vulcanite Co. 175; Boyes v. Bluck, 3 C. B. 652; v. Nathanson, 38 Hun (N. Y.), 488. Lampon v. Corke, 5 B. & A. 606. (s) Simpson v. Henning, L. R. 10 (q) See Collins v. Prosser, 1 B. & Q. B. 406 ; Megrath v. Gray, L. R. C. 682. 9 C. P. 216. Wilson v. Lloyd, 16 (r) Ballam v. Price, 2 Moo. 235. Eq. 60, contra, must be considered 1 See Abel v. Forgue, 1 Root, 502. as overruled on this point. Cragoe An order for the arrest of one v. Jones, L. R. 8 Ex. 81, was a case partner may be granted in a suit of a surety. by a creditor against the firm, upon 2 See Hill v. Trainer, 47 Wis. 537. 573 *239 EIGHTS AND OBLIGATIONS. [BOOK II. [*239] "Receipt in full. — A receipt given to one partner in satisfaction of all demands against him will not discharge his copartners unless that also was intended, (t) 3. Substitution of debtors and securities. A liability which is originally joint, or joint and several, may be extinguished by being replaced by a liability of a different nature; and this may happen in one of two ways, viz., either by an agreement to that effect come to between the parties liable and the person to whom the} 7 are liable, (u) or by virtue of the doctrine of merger, independently of any such agreement. (a) Of substitution by agreement. Extinction of liability by substitution of debtors. — In order that one liability may be extinguished by being re- placed by another by agreement, it is essential that the person in whom the correlative right resides should be a party to the agreement, or should, at all events, show by some act of his own that he accedes to the substitution. If A., being indebted to B., transfers his liability to C.,and B. does not assent to the transfer, his rights are wholly un- affected; he will neither acquire any right against C. nor lose his former right against A. As regards B., the agree- ment between A. and C. is res inter alios acta, and it does not in any way benefit or prejudice him. But if B. assents to the arrangement come to between A. and C, and adopts C. as his debtor instead of A., then A.'s liability to B. is at end, and B. must look for pa} 7 ment to C, and to him alone, (x) l (t) Ex parte Good, 5 Ch. D. 46, word, 1 Ch. D. 322, per James, where one partner was a nominal L. J. partner, and not, therefore, liable (x) See per Euller, J., in Tatlock to indemnify the others. v. Harris, 3 T. R. 180. («) Sometimes called novation, J See ante; Hayes v. Knox. 41 but nothing is really gained by Mich. 529; Rawson v. Taylor, 30 using this word. See, as to this Ohio St. 389 ; Rice v. Wolff, 65 Wis. 574 CH. II, SEC. III.] LIABILITY OF MEMBERS. *239 Agreement between partners does not affect creditors. To apply this to cases of partnership, let it be supposed that a firm of three members, A., B. and C, is indebted to D. ; 1; In re Stewart, 62 la. 614; Lisso V. Navra, 34 La. Ann. 1111 ; Laucks v. Martin, 8 Cent. Rep. (Pa.) 420, and the cases cited below. When a partnership is dissolved by the retirement of one of the partners, and is succeeded in busi- ness by a new partnership, com- posed pertly of the remaining part- ners, the retiring partner is not discharged from liability for the debts of the old partnership, in the absence of an agreement, express or implied, with the creditors; and neither the failure of a creditor to demand payment of him, for a pe- riod of time less than that pre- scribed as a bar by the statute of limitations, nor a demand of pay- ment from the new firm, nor the receipt of interest, or even a par- tial payment of his debt from the new firm, nor all these facts com- bined, necessarily establish such an agreement ; though they are proper evidence to be submitted to the jury, under appropriate instruc- tions from the court, as relevant to the question whether such agree- ment in fact existed. Hall v. Jones, 56 Ala. 493. See, also, Knox v. Hayes, 2 N. W. Rep. (N. S.) 670. "Where one member of a firm, by way of renewal, gives his individ- ual obligation and takes up the firm notes, this does not extinguish the firm debts evidenced by such notes, such not being the intention of the parties. Loveridge v. Larned, 7 Fed. Rep. 294. As to the renewal of partnership notes with corporate paper, see McLellan v. Detroit File Works, 56 Mich. 579. In an action against the retiring partner by a creditor of the old co- partnership, the onus is on the defendant to prove his discharge either by express agreement or by facts from which an agreement will be implied. Hall v. Jones, 56 Ala. 493. Such an agreement need not be in writing. Hopkins v. Carr, 31 Ind. 260; Schwindler v. Euell, 45 How. Pr. 33. The promise of one partner to pay a debt for which he is already bound is no consideration for agree- ment to release the other partner. Early v. Burt, 68 la. 716. A., of London, gave a letter of credit to B. & C, of Boston, who thereupon drew bills on A., which he accepted and paid. B. had other accounts with A., in which C. had no concern; C. had funds in the hands of B., and requested B. to remit to A. and close the account of B. & C. B. afterwards made a remittance to A., and advised him by letter of other forthcoming re- mittances, and requested him to apply the sum which was actually remitted to B.'s account generally, and place the bills which A. had accepted and paid for B. & C. to B.'s debit. This letter was shown to C. before it was forwarded to A. A. replied that he had received B.'s letter and "noted the contents." This letter was also shown to C. Before this letter was received B. failed, being largely indebted to 575 *240 EIGHTS AND OBLIGATIONS. [BOOK II. that A. retires, and B. and C, either alone or to- [-240] gether with a *new partner, E., take upon themselves the liabilities of the old firm. D.'s right to obtain C. ; and in about seventy days after the letter was written A. suspended payment, not having, in his corre- spondence, again alluded to B.'s re- quest to debit with him the bills accepted and paid for B. & C. About four and a half months after said letter was written A. for- warded his account against B. & C, and it was put in suit. Held, that A. had not, by the terms of his letter to B., agreed to discharge C, and look for payment to B. alone ; that there was no consider- ation for such agreement if it had been made; and that A. was en- titled to recover of B. & C. Wildes v. Fessenden, 4 Mete. 12. Defendant O., a commission mer- chant of Milwaukee, received from plaintiff, a resident of Minnesota, a quantity of wheat and grass seed on consignment, with directions to hold in store, to sell when ordered, and to account for the proceeds, after deducting the usual commis- sion chax-ges and advances made thereon. Before any order for a sale was given the defendant P. became a partner in the business with O. Notice of this fact was thereupon given to plaintiff both by the firm and by P. in person, and plaintiff was given to under- stand and made to believe by ac- counts rendered in the name of the firm from time to time, and other- wise, by the defendants, that the account between him and O., to- gether with the property which was the subject of the consignment, had been transferred to the firm, and that the latter was holding and carrying it for him under the orig- inal instructions given to O. Re- lying upon this state of facts, be- lieved to be true, plaintiff, from the receipt of the notice of the partner- ship, ceased to regard O. as his fac- tor in respect to the consignment, and ever afterwards looked to and treated the firm as alone occupying that relation in place of O. Trust- ing to the responsibility of the firm alone, he withheld any order for a sale for some months, when, upon giving it, he was informed for the first time by P. that O. had then become insolvent, and that the firm had then become insolvent, and that the firm had never, in fact, taken possession of the wheat as represented, but that it had been converted by O. to his own use prior to the formation of the co- partnership. Held, in an action against the defendants for a con- version of the wheat as copartners, that they were both estopped from denying the truth of the facts thus falsely represented, upon the faith of which the plaintiff had acted. Coleman v. O'Neil, 1 N. W. Rep. 846. The fact that one member of a partnership which has executed its promissory note has, with the con- sent of the payee, retired from the firm, and has transferred his inter- est to the other members, who have assumed the firm debts, does not relieve him from liability on the note. Clark v. Billings, 59 Ind. 508. "Where a partnership is dissolved, 576 CH. II, SEC. III.] LIABILITY OF MEMBERS. *240 payment from A., B. and C. is not affected by the above arrangement, and A. does not cease to be liable to him for the debt in question, (y) But if, after A.'s retirement, B. and the partner continuing the business assumes the liabilities of the firm, and publishes notice that he will pay them, the other part- ners are nevertheless liable to a creditor who did not present his claim in the manner directed by the notice. TJmburger v. Plume, 26 Barb. 461. A. and B. dissolved partnership, and by the agreement of dissolu- tion A. was to pay the debts of the concern. "C, a creditor of the firm, assented to this arrangement, and promised to give up the part- nership note and take that of A. alone, but this was not done. Held, that B. was not released. Fren- tress v. Markle, 2 G. Greene, 553. On the dissolution of a partner- ship it was agreed between the partners that one of them should assume and pay the partnership debts. A creditor, on being after- wards informed of the arrange- ment, replied that he was satisfied with it. Held, that such reply was not such evidence as would war- rant the jury in finding that he had discharged the other partner. Chase v. Vaughan, 30 Me. 412. Where, after the dissolution of a partnership between W. and C, a creditor of the firm stated an ac- count in which they were charged with certain goods purchased by them, and at the same time stated a separate account of his dealings with W., who had assumed the adjustment of the partnership con- cerns, in which account W. alone was charged with another partner- ship debt, held, that C. was not discharged from such other part- nership debt thereby: but that, whether he was discharged or not, no one but C. could avail himself thereof; and a note given by C, either by way of security or satis- faction of such debt, would be founded on a good consideration. Averill v. Lyman, 18 Pick. 346. A. and B. were partners, and, upon the dissolution of the firm, B. retained the assets and agreed to pay the debts of the firm. A. alleged that, by an agreement be- tween him and the agent of the creditor, a judgment rendered against the firm was to be in his control for the purpose of collect- ing it from the property of B. Held, that A. had the burden to sustain the agreement, and that, under the facts of the case, A.'s property would be liable for the satisfaction of the judgment. Aiken v. Thompson, 43 Iowa, 506. The plaintiff was employed by the firm of A. & B. to procure or- ders for certain machinery, of which they were manufacturers, upon the agreement that he should have a certain commission on the amount of all orders procured through him. The plaintiff com- menced negotiations with D. for a sale to him of such machinery, and (y) Smith v. Jameson, 5 T. R. 601; Rodgers v. Maw, 4 Dowl. & L. 66 ; Dickenson v. Lockyer, 4 Ves. Vol. I — 37 5 36; Cummins v. Cummins, 8 Ir. Eq. 723. 77 *240 EIGHTS AND OBLIGATIONS. [BOOK IT. accepts as his sole debtors B. and C, or B., C. and E. (if E. enters the firm), then A.'s liability will have ceased and D. must look for payment to B. and C. or to B., C. and E., as while they were pending A. and B. dissolved partnership, and, by- agreement between them, A. as- sumed (for his sole benefit) per- formance of all copartnership engagements theretofore entered into by the firm and remaining unperformed. Subsequently A. formed a partnership with C, and the firm of A. and C. obtained from D. an order for machinery in consequence of the original nego- tiations of the plaintiff with him. Held, that the plaintiff was entitled to his commissions on the order, and could maintain an action against A. therefor; that the fact that A. had associated another person in the business with him had no ef- fect on his liability, and that he was liable to the same extent as if he had gone on alone in the busi- ness. Sinclair v. Galland, 8 Daly, 508. Under statutes of 1865, chapter IIS, a creditor's proof of his claim and acceptance of a dividend under an order distributing among the joint and several creditors alike the estate in insolvency of a partner, who, on the dissolution, had agreed to pay the partnership's outstand- ing debts, bars any right of action on the debt against the other part- ner, although, after the dissolution, he has changed his domicile to the creditor's state. Bucklin v. Buck- lin, 97 Mass. 256. Where one partner sells his share in the partnership stock to a stran- ger, and receives payment there- for, and , the purchaser becomes a partner in the concern, such pur- chase and payment will not have the effect to relieve the share of the stock of the remaining partner from liability for the debts of the old firm. Nixdorf v. Smith, 16 Pet. 132. A. and B., as copartners, gave a note to C, and afterwards the copartnership was dissolved, B. agreeing to pay all the debts, and B. and C. formed a copartnership. Held, that this did not operate as an extinguishment of the note, unless it was so expressly agreed between B. and C. at the time their copartnership was formed, and although it was alleged that this note was to form a part of C.'s stock in the firm. Mitchell v. Dob- son, 7 Ired. Eq. 34. Where the individual debts of one partner are assumed by the firm (being insolvent), proof beyond controversy will be required that the transaction was honest, for a valuable consideration, and for the benefit of the partnership. Even then the power is doubtful. Keith v. Fink, 47 111. 272. A judgment was confessed by D., in favor of a firm consisting of A., B. and C, to secui-e future ad- vances. Three years afterwards C. withdrew from the firm, A. and B. purchasing his interest. The new firm continued to make advances, charging them and giving credit for payments, etc., as before, no change being made in the books. The judgment was entered up by A. and B., and was the first lien on 578 CH. II, SEC. III.] LIABILITY OF MEMBERS. *240 the case may be. "When, therefore, a partner has retired, and a creditor of the firm continues to deal with the con- tinuing partners and such other persons, if any, as may have become associated with them in partnership, it is of great importance to ascertain whether the creditor has or not accepted the new firm as his debtors in lieu of the old firm. If he has, the retired partner's liability will have ceased, whilst if he has not, it will still continue. Liability not got rid of by transferring share. — Nothing used to be more common than for promoters of companies to put forward a prospectus in which it was said that all liability on the part of a shareholder would cease on a transfer of his share ; but the hope thus held out was as false and delusive as that intended to be raised by the as- sertion that the liability of the shareholders would be lim- ited to the amount of their shares, (z) It cannot be too often repeated that, merely by retiring, a partner or a shareholder gets rid of no liability as to past transactions, unless there is some statutory enactment applicable to his case; and the same observation applies to a total dissolution. To use the words of Mr. Justice Heath, " when a partner- ship is dissolved, it is not dissolved with regard to things past, but only with regard to things future. With regard D.'s land. Held, that the judgment should not be excluded on the secured the advances made by the ground that the plaintiff must old and the new firm. Shenk's prove an acknowledgment of in- Appeal, 33 Pa. St. 371. debtedness on the part of the de- In an action by a surviving part- fendant ; and that it was competent ner. where the declaration con- for the jury to find from the facts tained the usual common counts, proved whether there was an as- in the form prescribed by the act signment or transfer of the ac- of 1856, chapter 112, and a special counts from the old firm to the count on an agreement, the evi- new, and whether the defendant dence consisted of accounts be- assented to it, and promised, ex- tween the original firm of the pressly or -impliedly, to pay the plaintiff and its successors, acting balance to the plaintiff. Stewart as agents of the defendant, and the v. Rogers, 19 Md. 98. defendant, and the written agree- (z) See Blundell v. Winsor, 8. ment. Held, that the accounts Sim. 613. 579 *2il EIGHTS AND OBLIGATIONS. [BOOK II. to things past the partnership continues, and always must continue." (a) The cases which bear upon the question of discharge by virtue of a substitution by a creditor of one debtor [*241] for another *will be found, notwithstandiag some conflict between them, to be all professedly based on the foregoing principles and on a few simple rules, the most important of which are as follows: Creditors not presumed to discharge outgoing part- ners. — 1. There is no d priori presumption to the effect that the creditors of a firm do, on the retirement of a part- ner, enter into any agreement to discharge him from lia- bility, (b) Creditor may agree to look only to continuing part- ners. — 2. An agreement by a creditor of several persons, liable to him jointly, to discharge one or more of them and look only to the others, is not necessarily invalid for want of consideration, (c) Effect of doctrine that a release of one partner is a re- lease of all. — 3. Except under special circumstances, a creditor who releases one partner discharges all. (d) Con- sequently, if a creditor discharges a retired partner and ac- quires no fresh right to obtain payment from the others, either alone or with a new partner, the creditor will be alto- gether remediless. One test, therefore, by which to deter- mine whether a retired partner has been discharged is to see whether the creditor has obtained a new right to demand payment; for if he has not, no discharge can possibly be made out b}^ any evidence which fails to establish an ex- tinguishment of the creditor's demand altogether. (a) Wood v. Braddick, 1 Taunt. Roebuck, 7 Taunt. 157 ; Graham v. 104. Therefore, partners continue Whichelo, 1 Cr. & M. 188. liable on the covenants entered into (b) Such an agreement must be by them in a lease of the partner- proved. See Benson v. Hadfield, 4 ship premises, although the firm Ha. 37. may have been dissolved since the (c) Lyth v. Ault, 7 Ex. 669. lease was granted. See Hoby v. (d) Ante, p. 237. 580 CH. II, SEC. III.] LIABILITY OF MEMBERS. *242 Classification of cases. — It is proposed now to examine the cases relating to the liability of retired partners for debts incurred before their retirement. They may be con- veniently classified thus: A. Cases in which a retired partner has not been discharged; (a) No new partner having been introduced into the firm. (i>) Although a new partner has been introduced into the firm. B. Cases in which a retired partner has been discharged. After these cases have been examined, the analogous cases relating to the discharge of the estate of a deceased partner will be noticed. *Class A a. — Cases in which a retired partner [*242] HAS NOT BEEN DISCHARGED, NO NEW PARTNER HAV- ING BEEN INTRODUCED INTO THE FIRM. Promise to look only to continuing partners. — The strongest cases of this class are Lodge v. Dicas (e) and David v. Ellice. (/) In each of these a partnership had been dis- solved, one member retiring and the other continuing the business and agreeing to pay the debts of the old firm. In each case the plaintiff knew of the arrangement, and his debt was transferred with his consent to the books of the new firm. In each case, moreover, there was strong evi- dence to show that the plaintiff had agreed to discharge the retired member, and to look only to the others. But in each it was held that the retired partner continued liable, and that the plaintiff had done nothing to discharge him; and the fact that no person had become liable to the plaint- iff who was not so originally was relied upon by the court as showing that there was no consideration for the alleged discharge, (g) Observations on these cases.— These two cases have been much criticised, (A) and they certainly went too far; (e) 3 B. & A. 611. (g) See, too, Thomas v. Shillibeer, (/) 5 B. & C. 196, and 1C.&P. 1 M. & W. 124. 369. (h) See 5 B. & Ad. 933 ; 2 Cr. & M. 623; 2 M. & W. 493. 581 #243 EIGHTS AND OBLIGATIONS. [BOOK II. for the proposition that a creditor of a firm cannot, for want of consideration, abandon his right against a retiring partner and retain it against the others, unless they give some fresh security, has been shown to be erroneous and is now exploded ; 0") and there can be little doubt that if similar cases were to arise again, and the jury found for the defend- ant, the verdict would not be disturbed. This appears from Thompson v. Percival. (k) In that case the defendants, Charles Percival and James Percival, had as partners become indebted to the plaintiff. The partnership was dissolved, and it was agreed that the business should be carried on by James, and that he should receive and pay all debts, and assets sufficient to pay debts of the firm were left in his hands. The plaintiff, on applying to James [*243] for pay*ment, was told that he must look to him, James, alone, and the plaintiff accordingly drew a bill on James, and the bill was accepted by him. The bill being afterwards dishonored, the plaintiff sued both James and Charles for the original debt and obtained a verdict for the full amount ; but the defendants had leave to move for a nonsuit if the court should be of opinion that Charles had been discharged. The court, without deciding that point, held that the question ought to have been left to the jury, and a new trial was therefore directed. The court held that the facts proved raised a question for the jury whether it w T as agreed between the plaintiff and James that the former should. accept the latter as his sole debtor, and should take the bill of exchange accepted by him alone by way of satisfaction for the debt due from both. If it was so agreed the court thought that the agreement and receipt of the bill would be a good answer on the part of Charles by way of accord and satisfaction. (I) (<) Ante, p. 241, note (c). 122, a retiring partner was held (k) 5 B. & Ad. 925. discharged on the ground here re- (Z) In Evans v. Drummond, 4 ferred to. See post, p. 247. Esp. 89, and Reed v. White, 5 id. 582 CH. II, SEC. III.] LIABILITY OF MEMBEKS. *244 Effect of the above cases. — It is not unusual to represent Lodge v. Dicas and David v. Ellice as altogether overruled by Thompson v. Percival and other cases. This, however, is not quite correct. The three cases together establish (J) that a creditor who treats the continuing partners as his debtors does not necessarily abandon his right to resort to a retired partner for payment ; (2) that whether he does or does not is a mixed question of law and fact, which ought to be submitted to a jury ; 1 and (3) that their verdict will not be disturbed by the court upon the grounds acted on in Lodge v. Dicas and David v. Ellice. Treating continuing partners as debtors. — That a cred- itor who treats the continuing partners as his debtors does not without more discharge a retired partner is shown by other cases, and especially by those in which the continu- ing partners have paid interest on the old debt at a rate, or in a manner, differently from that previously adopted. 2 An old case on this head, and one often referred to, is Heath v. Percival, (m) in which two partners indebted to the plaintiff on a bond dissolved partnership. One of them continued to *carry on the business, and took [*244] upon himself the partnership debts, and public notice was sriven that the creditors of the firm were either to come in and be paid their debts or to look for payment to the continuing partner only. The plaintiff came in, but instead of being paid off he kept the bond, receiving, interest at 61. instead of 51. per cent. It was held that he did not thereby discharge the retired partner from his liability to pay the bond with interest at 51. per cent. Taking a new security from them. — Moreover, if the continuing partners give a new security for the old debt, this will not operate to discharge the retired partner, unless the creditor intended that such should be the case, or unless the new security is of such a nature as to merge the original *See Knox v. Hayes, 2 N. W. Hawk v. Johnston, 5 Cent. Rep. Rep. (N. S.) 670; also infra, note. 468; S. C. 6 Atl. Rep. 725. 2 See Hall v. Jones, 56 Ala. 493 ; (m) 1 P. Wins. 682, and 1 Str. 403. 583 •244 EIGHTS AND OBLIGATIONS. [book II. debt. 1 In Bedford v. Deahin, (n) three partners were in- debted to the plaintiff on bills of exchange. They dissolved 1 A promise by vendor of goods to a firm to release the retiring partner from further liability and to look to the other partner alone for payment must, in order to be binding, be founded on some new consideration ; and where it was made after the dissolution, and not as an inducement to or in consider- ation of it, and no new partner is introduced into the firm or as- sumes liability for the debt, and no additional or different security therefor is given, and the evidence of the debt is not taken up and new paper given, and no change is made in the firm, terms or time of the debt, and no other fact appears than the dissolution and agreement between the partners, the promise is a mere nudum pactum. Eagle Mfg. Co. v. Jennings, 29 Kan. 657 ; S. C. 44 Am. Rep. 668. See, also, Walstrom v. Hopkins, 103 Pa. St. 118 ; S. C. 13 Weekly Not. Cas. 461 ; 40 Leg. Intel. 172 ; Wood v. Franks, 67 Cal. 32: Laucks v. Martin, 9 Atl. Rep. 279; Bowyerv. Knapp, 15 W. Va. 278 ; Warren v. Farmer, 100 Ind. 593 ; Ludington v. Bell, 77 N. Y. 138 ; Bays v. Conner, 105 Ind. 415. A partner who receives an as- signment of firm assets and enters into an agreement with his retiring partner to assume and pay partner- ship debts is not liable upon a debt from the firm to a creditor without evidence of an express or implied assent by him to pay the same to the creditor as his private debt. Wild v. Dean, 3 Allen, 579; Fowle v. Torrey, 131 Mass. 289. See, however, Warren v. Farmer, 100 Ind. 593. Where the survivors form a new firm, taking the assets of the old firm and assuming its liabilities, a specific agreement to accept the new firm to the exclusion of the representative of the deceased part- ner must be satisfactorily proven, and there is no presumption at law favoring it. Fogarty v. Cullen, 49 N. Y. Super. Ct. 397. Mere knowledge and approval of the disssolution of a firm by firm creditor, continued dealings with successor, apparently ignor- ing existence of retiring partner, rendition of the accounts of the old firm and the new, making the items designating them as separate liabilities, will not discharge retir- ing partner. Birkett v. McGuire, 7 U. C. App. 53 ; S. C. 31 U. C. C. P. 430; 1 C. L. T. 107; 19 Can. L. J. (N. S.) 275. The pleadings and papers in an action of attachment against a new partnership are admissible to show the intention to release a member of a prior dissolved partnership. Baura v. Fryrear, 85 Mo. 151. Where a defendant is sued as an individual, recoverv cannot be had (n) 2 B. & A. 210. See, too, Swire v. Redman, 1 Q. B. D. 536, where the plaintiff had not expressly re- served his rights against the re- tired partner. See, also, Feather- stone v. Hunt, 1 B. & C. 113; Spenceley v. Greenwood, 1 Fos. & Fin. 297. Compare Evans v. Drum- mond, 4 Esp. 89, noticed infra, p. 247. 584 CH. II, SEC. III.] LIABILITY OF MEMBERS. *244 partnership and arranged between themselves that one of them should pay the plaintiff. The plaintiff was informed against him as a partner ; and if he set up a contract with plaintiffs whereby they agreed for a consid- eration to relieve him from liability and look to the firm for payment of his indebtedness to them, it can- not be replied in a suit against him individually that he was a member of that partnership. Champion v. Wilson, 64 Ga. 184. An agreement between a retiring partner and his copartners that the latter continue the business, assum- ing the old firm debts and taking all their assets to be used in paying such debts, constitutes the new firm trustee of the assets for the benefit of the creditors of the old firm, and the interest of the new firm and their creditors is confined to what remains, if anything, after payment of those debts. Such agreement constitutes an express trust, and the statute of limitations does not apply. Bowman v. Spald- ing, 2 S. W. Rep. 911. A note given by one partner, after dissolution, for a debt of the firm, is not an extinguishment or satisfaction of the original debt, so as to discharge the other partner, unless such was the agreement when the note was given ; and this is a fact for the determination of a jury. Ellswanger v. Coleman, 7 Mo. App. 583; Mason v. Wicker- . sham, 4 Watts & S. 100 ; Bernard V. Torrance, 5 Gill & John. 383; Davis' Estate v. Desauque, 5 Whart. 530; Leabo v. Goode, 67 Mo. 126; Folk v. Wilson, 21 Md. 538. See, also, Tyner v. Stoops, 11 Ind. 22; Bowyer v. Knapp, 15 W. Va. 278; In re Parker, 19 Nat. Bank. Reg. 340; Hill v. Marcy, 49 N. H. 265; Townsends v. Stevenson, 4 Rich. 59; Landolfo v. Appleton, 40 N. Y. 533. See, however, Harris v. Lind- say, 4 Wash. 98, 271 ; Arnold v. Camp. 12 John. 409, where, how- ever, the firm note was surren- dered. The rule is the same even though such note is signed by a surety. Varnell v. Anderson, 14 Miss. 619. Where the creditor of a firm takes the notes of the surviving partners for the amount of his claim, or a judgment against them for the same, he does not release the estate of the deceased partner, unless it is so agreed at the time. Collier v. Leach, 29 Pa. St. 404; Titus v. Todd, 25 N. J. Eq. 458. The onus of showing that it is an extinguishment lies upon those who allege it ; and it is not neces- sary for them to show a special contract to that effect, or that the joint note was given up ; and even where that is the case, the pre- sumption may be rebutted by countervailing proof. Estate of Davis v. Desauque,. supra. To convert a partnership into a partner's separate debt the inten- tion so to do must clearly appear. There must be a deliberate and mutual assent of creditor and debtor. The creditor may take the partner's separate liability without necessarily extinguishing that of the firm. Montross v. Byrd, 6 La. Ann. 519. The taking of a renewal note from one who had dormant part- ners when the original was given, after the termination of the part- 585 >2U EIGHTS AND OBLIGATIONS. [BOOK II. of this arrangement, and took from one of the partners his separate promissory note, indorsed by a third party, for the nership, and without any intention to discharge the dormant part- ners, does not discharge the claim against the copartnership. Parker v. Canfield, 37 Conn. 250. Where the new notes are signed like those first given, and the cred- itor is ignorant of any change in the partnership, no agreement to discharge can be inferred. Bernard v. Torrance, supra. "When, however, such is the agreement, the taking of the indi- vidual note, draft, etc., of one part- ner, with or without security, oper- ates as a discharge of the original debt. See the cases first above cited ; also, Dages v. Lee, 20 W. Va. 584 ; Ricker v. Adams, 59 Vt. 154 ; 10 East. Rep. 102 ; S. C. 3 N. Eng. Rep. 823; Bower v. Knapp, 15 W. Va. 278; Field v. Fisher, 9 West. Rep. (Ind.) 305; Bank v. Green, 40 Ohio St. 431 ; Luding- ton v. Bell, 77 N. Y. 138; revers- ing S. C. 43 N. Y. Super. Ct. 557 ; Rusk v. Gray, 83 Ind. 589; Espy V. Coiner. 80 Ala. 333; S. C. 76 id. 501. See, also, Mair v. Cana- van, 8 Daly, 272. Such agreement may be implied from the acts of the parties. Bank v. Green, 40 Ohio St. 431. Where, after the dissolution of a firm, and with notice thereof, a creditor accepted the individual drafts of one of the partners for a firm debt, and extended the time of payment without the knowledge or consent of the retiring partner, held, that the latter was thereby released from such debt. Louder- back v. Lilly, 75 Ga. 855. The onus to show that a new note is taken from a new firm as a substitute for and in discharge of a joint debt of the old firm is upon the joint debtor who claims it. Kirnberly's Appeal, 5 Cent. R. 460; S. C. 7 Atl. Rep. 75. Where a creditor of the firm of F. & S. had, after its dissolution, refused to accept the paper of S. and discharge F., his receiving and retaining what purported to be the paper of the late firm of F. & S., without knowing that it was signed by S. alone in the firm name without authority, is not such an acceptance and discharge, when he had not accepted any paper as payment nor unduly de- layed enforcing his claim. Adler v. Foster, 39 Mich. 87. A new promissory note given by a new firm upon taking up a note of the old firm, comprising mem- bers not in the new firm, operates as payment upon condition that the note proves to be productive; and if the creditor makes an abso- lute sale and transfer of the note or of a judgment upon it, without the assent of the old firm, and then treats it as his own, he must be deemed to have elected to take it as payment, even if he receive less than the amount clue upon it. Hill v. Marcy, 49 N. H. 265. A. and T. were partners. It was claimed that the firm had been virt- ually dissolved, but there was no evidence of the cancellation of the partnership agreement, nor any sufficient evidence of public or pri- vate notice of its dissolution to per- sons trading with T. T. gave to S. his individual note, upon which 586 CH. II, SEC. III.] LIABILITY OF MEMBERS. *24J amount of the debt, but expressly reserved his right to look to all three partners for payment, and the plaintiff retained this action against A. was brought. It was in evidence that A. recog- nized the existence of a liability upon him for the debt, he having repeatedly promised to pay the whole debt, and having, partly with his own and partly with means of the firm, paid nearly half of it, and having appropriated to his own use a portion of the pro- ceeds of the cattle, which were the consideration upon which the note was given. Held, that the note was given and accepted, not merely as the individual promissory note of T., but was meant as an obligation for and on* behalf of the firm for the price of the cattle, and that its acceptance did not exonerate A. by merging the firm liability in the note of the individual partner. Smith v. Turner, 9 Bush, 417. Pending the dissolution of a part- nership a creditor received the notes of the several partners for their respective portions of a part- nership debt standing on an open account, agreed to release each partner from any other portion of the debt than that covered by his note, and accepted the notes as a full discharge of each partner from the lesidue of the account. Held, that the contract was binding on the creditor, and that he could not maintain a suit on the account against a partner who had paid the note so accepted for his share of the debt. Maxwell v. Day, 45 Ind. 509; Crooker v. Crooker, 52 Me. 267; Luddington v. Bell, 77 N. Y. 138; Bowyer v. Knapp, 15 W. Va. 278. As between a copartnership and a creditor thereof, a note given in the firm name, without authority, by one partner, after dissolution, for a debt of the firm, the parties to the note intending to bind, and believing the note was binding on, the firm, will not extinguish the firm debt. Gardner v. Conn, 34 Ohio St. 187. See, also, Turnbow v. Broach, 12 Bush, 455. As between the partners them- selves, such transaction will not discharge the non-consenting part- ner from liability to make contri- bution to the partner paying the debt. Gardner v. Conn, supra. Where a retiring partner sur- rendered all the assets of the firm at its dissolution to the continuing partner, under an agreement that the latter should pay the debts of the firm, and notified the creditors of the firm of such dissolution and agreement, held, that he was thereafter liable for the firm debts only as security, and that a firm creditor who accepted from the remaining partner his individual notes for a portion of his debt dis- charged the retiring partner from further liability for the debt. Mair v. Canavan, 8 Daly, 272. See, also, Thurber v. Corbin, 51 Barb. 216; Thurber v. Jenkins, 36 How. Pr. 66, post. Where a partnership liability for a debt is once fixed, the giving of a note in renewal by one partner alone, with the same sureties as on the original debt, who sign such renewal as sureties on the faith of representations that it is necessary in the business of the firm, and on the promise by him that his copart- 587 *244 EIGHTS AND OBLIGATIONS. [BOOK II. the bills already in his possession. The notes when clue were taken np by other bills, and they in their turn were ner will also sign as a principal, does not, as against such sureties, operate as a payment of the orig- inal debt: and upon payment of such renewal note by the sureties they may recover against the part- ners although such copartner did not sign such renewal note. Mc- Kee v. Hamilton, 32 Ohio St. 7. Prior and up to September 23, 1850, the firm of Evans, Davis & Lownd owed plaintiff $14,069.38, for money advanced to it, and for which he held their notes. That firm dissolved that day, and Evans and Davis formed a new firm with Dodge under the name of Davis, Evans & Dodge. Plaintiff gave up the notes of the old firm and took two new notes of $7,500, dated September 23, 1850, payable "on demand after date," one of which was signed by Evans, and the other by Davis, of the firm of Evans, Davis & Lownd. Plaintiff signed the partnership agreement of Davis, Evans & Dodge ; that stated that the amount of $15,000, due to the plaintiff from the old firm, " is to remain in the new concern during the continu- ance of the copartnership," he re- ceiving interest at the rate of seven per cent, per annum. Un- der the same date, Davis, Evans & Dodge and the plaintiff signed a paper stating they received from plaintiff $15,000, "being the amount contributed by him as spe- cial partner to the concern of Davis, Evans & Dodge." Davis, Evans and plaintiff signed another paper of same date, stating that they had formed a limited partner- ship under the name of Davis, Evans & Dodge, the nature, of its business, the residence of the part- ners, that plaintiff is the special partner, and as such has contrib- uted $15,000 cash, and that Davis, Evans & Dodge were the general partners. Enough was not done to create a limited partnership. The new firm failed, and was dissolved within a year, and before this suit was brought, owing some $30,000 more than it could pay. This suit is upon the $7,500 note given by Davis to plaintiff when the new firm was formed. On that note, and also on the other note for a like sum given by Evans, there is indorsed: "This note is given as security to Levi Brown (the plaint- iff) for one-half of the $15,000 ad- vanced to Davis, Evans & Dodge. Robert Davis." Held: 1. The plaintiff never discharged Davis and Evans from liability for the amount the firm of Davis, Evans & Lownd owed him, but took the note of each for one-half that sum. 2. Though that sum was continued in the assets which represented it as a loan to the firm of Davis, Evans & Dodge, it was not placed, as between themselves, at the risk of its business, nor lent on an agreement to look solely to the new firm for payment. 3. The note in suit became due on demand of pay- ment made after the new firm had actually dissolved, and plaintiff could sue on the note without first having sued and exhausted his remedies by action against the new firm. 4. The evidence given is in- sufficient to establish an intent of 588 OH. II, SEC. III.] LIABILITY OF MEMBERS. *244 several times renewed. Ultimately the plaintiff sued all the three partners on the original bills, and he was held en- Davis, Evans & Dodge and of the plaintiff, by an arrangement in re- spect to a limited partnership, to defraud the public, or that they knew their acts were invalid, or that they were done with an im- proper motive. 5. The plaintiff is entitled to a judgment on the ver- dict. Permitting such a recovery will not withdraw from the legal or equitable process of the courts any property which should be appro- priated to the creditors of the new firm, though held to be composed of Davis, Evans, Dodge and the plaintiff, as general partners. A judgment by such creditors against the four, and appropriate ulterior proceedings, will reach all the in- dividual property of each as well as all the effects of the new firm. Brown v. Davis, 6 Duer, 549. Where a partnership was dis- solved and a new firm was formed, consisting in part of the same mem- bers, a creditor of the old firm with notice of the dissolution, taking in liquidation of his claim drafts of the old firm upon the new, ac- cepted by the latter and drawn by a member of both, cannot, upon failure of the new firm, claim pay- ment of the members of the old, unless he can show their assent to the making of the drafts. Patter- son v. Camden, 25 Mo. 13. "Where a creditor of the former partnership drew on those persons who continued the social style of the late firm for account of a bal- ance due him by the former part- nership, and his drafts were pro- tested for non-payment, and paid by the drawer supra protest, a member of the former partnership, who is sued for such balance, can- not maintain that there was a no- vation of the debt ; the drafts are to be held as having been drawn on his agents by his authority. Skannel v. Taylor, 12 La. Ann. 773. A. and B., being partners, pur- chased goods of C. for the partner- ship, and gave each his separate note, with his separate surety, for a moiety of such goods. A. after- wards went out of the concern, and B. agreed to pay both notes. A.'s was therefore canceled, and B. gave a new note, with the surety who was on his other note. Sub- sequently, B., failing to pay these debts, received the surety on his note into partnership in the busi- ness, and entered into articles of agreement with him, by which the surety was to receive all debts due to B. and the former partnership, and all produce taken in discharge of debts ; and the surety agreed to appropriate the same to the pay- ment of the "debt originally con- tracted by A. and B. with" C. Held, that this applied to both the original notes and the note substi- tuted for A.'s. Gordon v. Joslin, 4 Hayw. 115. A. drew a bill on B., C. & Co., which was accepted, and by him negotiated to a bank. At maturity the draft was paid by a like bill drawn on B. alone, the firm in the mean time having been dissolved, which last bill A., as indorser, was compelled to take up. Held, that he could not maintain an action against the firm to reimburse the 589 *244 EIGHTS AND OBLIGATIONS. [book II. titled so to do, never having discharged any of them either intentionally or otherwise. Liability same in equity as at law. — Nor was there any difference in such cases as these between the liability of a retired partner at law and in equity. In Oalcford v. Euro- pean and American Steam Ship Company \ (o) a partner re- tired, and the continuing partners indemnified him against all claims that might be made against him as a member of the firm. Disputes afterwards arose between the continu- ing partners and a company respecting a contract entered Springer v. amount thus paid. Shirley, 11 Me. 204. "Where one of the partners takes the firm assets and agrees to pay the firm debts, partnership cred- itors may prove against his estate in bankruptcy and share par i passu with the separate creditors. In re Lloyd, 22 Fed. Rep. 88. Creditors of a firm consisting of three consented to give them an extension on condition that one partner should retire from the firm. When the dissolution took place the sum of $1,198 stood on the partnership books to the credit of the retiring partner, but noth- ing was said at the time as to this claim. Held, that it was not prov- able against the estate of the con- tinuing partners on their insolv- ency. In re White, 4 U. C. App. 416. An agreement by a creditor of a firm to release the retiring partner from liability on a firm debt, and look to the continuing partner for payment, will not be binding on the firm creditor, where it was pro- cured by a fraudulent concealment of facts which, if known, would have prevented the granting of such release. Clark v. Taylor, 27 N. W. R. 493. Liability of the partner continu- ing the firm business on dissolution upon accommodation notes exe- cuted to a firm of which the out- going partner was a member, in pursuance of the agreement of dis- solution, determined in Morrison's Appeal, 93 Pa. St. 326. Contract by retiring partner to pay or secure his proportion of the losses construed, and the considera- tion thereof and complaint thereon considered. Lee v. Davis, 70 Ind. 464. A., B. and C. being partners, and all believing the firm to be solvent, C. withdraws, A. and B. paying him a certain sum as his capital and continuing the business. A. and B. borrowed money of a bank on the notes of the new firm, part of which was used to pay C, and then failed, owing the money so borrowed. The old firm was in- solvent at the time of its dissolu- tion, and C. contributes towards the discharge of its liabilities and amount in excess of the capital drawn out by him. In a suit in equity by the bank to charge the old firm with the money loaned to the new firm, held, that the old firm was not liable. Pennsylvania Bank v. Furness, 114 U. S. 376. (o) 1 Hem. & M. 182. 590 CH. II, SEC. III.] LIABILITY OF MEMBERS. *245 into before the retirement. These disputes were *partly adjusted. Those unadjusted were referred [*245] to arbitration pursuant to a clause in the contract. The reference was afterwards revoked ; and an action upon the contract was then brought against the continuing part- ners and the retired partner. The retired partner sought to have this action restrained by injunction, upon the ground that his retirement and indemnit}'" had placed him in the position of a surety only for the due performance of the contract; and that what had taken place since the retire- ment which was known to the company had discharged him. But it was held that his liability continued, and his bill was dismissed, with costs. Position of dormant partners. — The principle of the above cases applies to dormant partners even more strongly than to others; for a creditor who has a security of which he is unaware cannot intentionally give up that security. Therefore, if A. and B. are partners, and the two become indebted to a creditor who knows only of A., and then B., the dormant partner, retires, no dealings between the cred- itor and A. will discharge B. from his liability to be sued when discovered, unless those dealings extinguish the orig- inal debt, not only as against B., but also as against A. (p) Class A b. — Cases in which a retired partner has not BEEN DISCHARGED, ALTHOUGH A NEW PARTNER HAS BEEN INTRODUCED INTO THE FIRM. Effect of introduction of new partner on the liability of a retired partner.— The introduction of a new partner has no effect on the liability of a retired partner, unless the liability of the former is substituted by the creditor for that of the latter, which cannot be the case unless the cred- itor can, as of right, hold the new partner liable for the old debt. This, moreover, he cannot do by virtue of any agree- ment between the partners themselves; and even if the (p) Robinson v. Wilkinson, 3 Price, 538. 591 *245 EIGHTS AND OBLIGATIONS. [BOOK II. new firm adopts the old debt and pays interest on it, this is prima facie only in pursuance of some agreement be- tween the partners themselves ; and a creditor who does no more than allow the partners to carry out that agree- ment does not debar himself of his right to look for pay- ment to those originally indebted to him. 1 the new firm, and instructs them to sell the goods and remit the pro- ceeds, this fact, unexplained, ab- solves the old firm from liability for this portion of the goods, but not for the residue. Hall v. Jones, 56 Ala. 493. The practice of the old firm " to make monthly reports or returns to persons consigning goods to them " does not legitimately tend to show notice to the plaintiff, a creditor of the old firm, of the changes in the partnership; but business letters written to him by the new firm are admissible evi- dence for that purpose. Hall v. Jones, 56 Ala. 493. A firm consisting of two persons was dissolved and a new firm or- ganized with the addition of J. The new firm gave a trust deed of property acquired partly with money contributed by J., to secure an indebtedness of both firms to a bank, with the understanding that J.'s interest should be applied to secure the indebtedness of the new firm. Held, that equity would en- force this intention for the benefit of the creditors of the new firm. Day v. Wetherby, 29 "Wis. 363; Smith v. Peters, 20 How. Pr. 121. Where a partnership was dis- solved and a new firm was formed, including, with one exception, the members of the former concern, held, that, as between the latter firm and the retiring partner, it 1 See ante. G. and S. were partners. G. re- tired from the firm, and S. there- upon formed a new copartnership with E. S. then agreed with E. that all the property of the old firm should be transferred to the new, and that the new firm should as- sume and pay all of the debts of the old firm. Held, that it was a valid agreement founded on a good con- sideration, and although not in writing was not within the statute of frauds. Schindler v. Euell, 45 How. Pr. 33. See, also, Hopkins v. Carr, 31 Ind. 200. To a suit upon a promissory note made to the plaintiff by the de- fendants, J., one of them, severs and pleads that soon after making said note they dissolved partner- ship; that T., the other defendant, assumed the debts of the firm, gave his note to J. for the stock, with the plaintiff as his security for its pay ment, and that the plaint- iff immediately after said dissolu- tion became a partner with T., the other defendant, in similar busi- ness. On demurrer, held, that the facts stated in the plea did not show a release from liability on the note, and that the plea was not good in bar of the action. Gulick v. Gulick, 16 N. J. L. 186. If the plaintiff, having consigned goods for sale to the old partner- ship, is notified that a portion of his goods has been turned over to 592 CH. II, SEC. III.] LIABILITY OF MEMBERS. *246 *A leading case on this head is Kirwan v. Kir- [*246] wan. (q) There three partners, C, M. and K, were indebted to the plaintiff. C. retired, and M. and N. con- tinued in partnership together and agreed to discharge the debts of the old firm. M. afterwards retired, and N. took in a new partner. The plaintiff's account was transferred from the books of the old to the books of the new partner- ship, and interest was paid, and accounts were rendered to him as before. The plaintiff was informed of the dissolu- tion, and had stated to one of the retired partners that he was aware he had no further claim upon him. But it was held that. the three original partners remained liable, as there was nothing to show that the security of the new firm had been substituted for that of the old, and the statement above referred to could not be regarded as an agreement to discharge the retired partner. In Gough v. Davies, (r) three persons were partners as bankers, and were indebted to the plaintiff. One of the partners retired; a new partnership was formed between the continuing partners and other persons; the plaintiff's debt was transferred to the books of the new firm, and he assented to such transfer. Moreover, the plaintiff continued to deposit money with the new firm, and was paid by it in- terest on the old debt and new deposits, as if they all formed one debt. But it was held that there was nothing in all this to show any agreement by the plaintiff to dis- charge the retired partner, and he was consequently held liable for the old debt. Blew v. Wyatt (s) is another case to the same effect. A clerk lent money to his employers, who were in partnership as brewers, and took an acknowledgment for it. Several changes took place in the firm, one of the original partners would not be presumed that debts (g) 2 Cr. & M. 617. of the latter firm were contracted (r) 4 Price, 200. for payment of debts of the former (s) 5 Car. & P. 397. one. Chaffin v. Chaffin, 2 Dev. & B. Eq. 255. Vol. I — 38 593 *2-±7 EIGHTS AND OBLIGATIONS. [BOOK II. retiring and other persons from time to time coming in and going out. The clerk remained in the employ of the firm notwithstanding these changes, and was aware of them, and was always paid interest by the firm for the time being. He was nevertheless held entitled to sue the two original partners for the money he had lent them. Right to sue new firm wot inconsistent with right to sue the old firm. — Whether in these cases of Kir- [*24Y] wan v. Kirwan, Gough v. *Davies, and Blew v. Wyatt, the creditor could have sued the new firm may per- haps be open to doubt, (t) If he could not, it would be absurd to contend that the liability of the new firm was substituted for that of the old; whilst if he could, the evi- dence was not sufficient to show an intention on his part to deprive himself of the security afforded by the undoubted liability of the original firm before any change in it took place. It by no means follows that a creditor who assents to an arrangement by which a new person becomes liable to him consents to abandon his hold on another person clearly liable to him already; and, unless a substitution of liability can be established, the old liability remains, (w) Class B. — Cases in which a retired partner has been DISCHARGED. In all these cases it will be found that the court or a jury has come to the conclusion that the creditor has in fact, either expressly or impliedly from his course of dealing with the continuing partners, adopted them as his sole debtors, and thereby in fact discharged the retired part- ner, (a?) (t) See per Bolland, B., 2 Cr. & there is nothing to prevent a firm M. 628 ; Daniel v. Cross, 3 Ves. 277 ; from stipulating with any creditor Fergusson v. Fyffe, 8 CI. & Fin. that he shall look only to the mem- 121. bers of the firm for the time being. (u) See Harris v. Farwell, 15 Beav. Dig. 30, ed. 3. See Hort's Case and 31. Grain's Case, 1 Ch. D. 307. (aj) Mr. Pollock says truly that 594 CH. II, SEC. III.] LIABILITY OF MEMBERS. *248 Retired partner may be discharged though no new part- ner comes in. — That a retired partner may be discharged by the creditor's adoption of the other partners as his sole debtors, although no new partner has been introduced into the firm, is clear from the case of Thompson v. Percival, (y) already noticed. In Evans v. Drummond, (s) a firm of two partners gave a partnership bill for goods supplied them. One of the partners retired, and the bill when due was not paid, but was renewed by another bill given by the partner who con- tinued the business. The creditor took this bill knowing of the change in the firm. Lord Kenyon held that by so doing the creditor had relied on the sole security of the continuing partner, and had discharged the [*248] other. Reed v. White (a) is a similar case and to the same effect. Effect of introduction of new partner. — The inference that a retired partner has been discharged is greatly facili- tated by the circumstance that a new partner has joined the firm and become liable to the creditor in respect of the debt in question, (b) But this is not necessarily conclusive, for there may be circumstances showing that such was not the intention of the parties, (c) At the same time, in the absence of any such evidence, the acceptance by the cred- itor of the liabilit}'" of a new partner will practically pre- clude him from afterwards having recourse to the retired partner, (d) In Hart v. Alexander, (e) the plaintiff, an officer in the (y) 5 B. & Ad. 925 ; ante, p. 242. new security when no new partner (z) 4 Esp. 89. Compare Bedford comes in, see ante, p. 244. v. Deakin, 2 B. & A. 220, noticed (e) 7 C. & P. 746, and 2 M. & W. ante, p. 244. 484. See, also, Wilson v. Lloyd, (a) 5 Esp. 122. 16 Eq. 60 ; Oakeley v. Pasheller, 4 (p) See, as to this, ante, p. 205 CI. & Fin. 207, noticed infra, et seq. p. 251. Compare Commercial Bank (c) See infra, p. 254, and Keay v. Corp. of India and the East, 16. Fen wick, 1 C. P. D. 745. W. R. 958, and Ex parte Gibson, 4 (d) As to the effect of taking a Ch. 662. 595 *249 EIGHTS AND OBLIGATIONS. [BOOK II. East India Company's service, had in 1813 opened an ac- count with the bouse of Alexander & Co., of Calcutta, which failed in 1832. The defendant retired from the firm in 1S22, when a new partner was introduced, and since that time other changes had taken place, some of the old part- ners retiring and new ones coming in. The defendant's retirement was advertised, and there was evidence to show that the plaintiff was aware of the fact. The new firms from time to time accounted with the plaintiff and paid him interest, sometimes at one rate and sometimes at another. On the bankruptcy of the firm in 1832 the plaintiff proved the amount of his debt against its joint estate. The plaint- iff afterwards sued the defendant; and the case was tried before Lord Abinger, who is reported to have said to the jury: " To ask you if there was an agreement by the plaintiffs to discharge the defendant is to put the case upon a false issue — the agreement, if any, being an agreement raised by construction of law ; the true ques- tion being whether the plaintiff did not go on dealing with the new firm, and making up fresh accounts with them, so as to discharge the defendant. I take the law to be this : Where a debtor who is a partner in a firm leaves that firm, and any person trading with the firm [*249] has notice of it, and he goes on dealing *with the firm and mak- ing fresh contracts, that discharges the retiring partner, though no new partner comes in. So it is if the creditor draws for part of his balance and sends in more goods ; so, if the creditor strike a fresh bal- ance with the new partners for a different rate of interest ; so, if a new partner comes in and the creditor accept an account in which the new partner is made liable for the balance — that discharges the old firm, as both firms cannot be liable at once for the same debt. This is the law as laid down in several cases, in which indeed there is some contra- diction; however, I believe that what I have stated is the result of them." (/) The jury found for the defendant. A new trial was moved for on the ground that there was no evidence to go to the jury to show that the plaintiff had agreed to dis- charge the defendant from his liability, but the court {g) (/) The learned judge was (g) Bolland, B., dissentiente. scarcely warranted by those cases in going so far as he did. 596 CH. II, SEC. III.] LIABILITY OF MEMBERS. *250 thought that there was abundant evidence to show that the plaintiff knew of the defendant's retirement, and a new trial was refused. To this class of cases also belong those already noticed, in which the joint liability of old and new partners has been substituted for that of the old partners only, (h) Release by estoppel.— A creditor may so conduct him- self as to be estopped from saying that a retired partner is still liable to him. But it is not often that this can be es- tablished. A settlement by partners of their accounts on the footing that one of them only is liable to a creditor will not affect him unless he has been guilty of some fraud, or has done some act or made some statement in order to induce the partners, or one of them, to settle their accounts on the faith that one of them is no longer liable, (i) Discharge of estate of deceased partner.— Closely al- lied to the subject which has just been discussed is that which relates to the discharge of the estate of a deceased partner from the liabilities to which he was subject as a part- ner at the time of his death. The position of the estate of a deceased partner, with reference to the question of discharge by reason of a creditor's dealings with the surviving *partners, is very similar to the position of a retired [*250] partner. The same principles are applicable to both, and the authorities which are in point as regards the one are so also as regards the other. The parallel between the two would be complete were it not that before the Judica- ture Acts the estate of a partner who died in the life-time of his copartners was liable for the joint debts of the firm in equity only ; (k) and there might have been circumstances to induce a court of equity to hold that estate discharged, (h) Ex parte Whitmore, 3 Deac. 1 B. & C. 113, a case of alleged 365 ; Rolfe v. Flower, L. R. 1 P. C. fraud. 27, noticed ante, pp. 208, 209. (fc) As to the nature of this liar (t) See Davison v. Donaldson, 9 bility, see ante, p. 194. Q. B. D. 633 ; Featherstone v. Hunt, 597 *250 EIGHTS AND OBLIGATIONS. [book II. although the same circumstances would not, in the case of a retiring partner, have operated as a discharge at law, {I) and vice versa, (m) It has been decided in equity that if a creditor of a firm knows of the death of one of the firm and continues to deal as before with the survivors, he does not lose the remedy which he had against the estate of the deceased partner, unless there is evidence showing an intention to abandon the right of having recourse thereto for pay- ment; (n) and an attempt by the creditor-to obtain payment from the survivors is not sufficient evidence of such an in- tention. Thus, if he sues the survivors, and obtains judg- ment against them, this will not necessarily deprive him of his right to obtain payment out of the estate of the de- ceased, (o) l So, proving in bankruptcy against the estate of the new firm is not, per se, sufficient to preclude the cred- itor from afterwards having recourse to the assets of the (Z) See Ex parte Kendall, 17 Ves. 522 and 525. (m) Jacomb v. Harwood, 2 Ves. Sr. 2G5. (n) Winter v. Innes, 4 M. & Cr. 101. And see Devaynes v. Noble, the heir is bound by judgment against the executor of the de- ceased partner and the surviving partner, upon a bill filed to subject the partnership land to the satis- faction of the judgment; and he Sleech's Case, 1 Mer. 539 ; Clayton's cannot require the plaintiff to re- Case, id. 579; Palmers Case, id. 623 ; Braithwaite v. Britain, 1 Keen, 206. (o) Jacomb v. Harwood, 2 Ves. Sr. 265; and mite, p. 195, and infra, p. 257. 1 A judgment against the surviv- ing member of a firm does not con- clude the representatives, real or personal, of the deceased partner. Buckingham v. Ludlum, 37 N. J. establish the debt unless by direct proceeding the judgment is at- tacked on the ground of fraud, ac- cident or mistake, sufficient to avoid it. Logan v. Greenlaw, 25 Fed. Rep. 299. As to the effect of a judgment of the supreme court determining the right of a party to share ratably with individual creditors of the decedent in the assets of the estate Eq. 137 ; Bennett v. Cram, 41 Hun, in the surrogate court, which were 183. insufficient to pay both the firm It results from the equitable doc- creditors and the individual cred- trine or conversion of partnership itors in full, see Lockwood v. real estate into personalty, that Carr, 4 Dem. (N. Y.) 515. 598 CH. II, SEC. III.] LIABILITY OF MEMBERS. *251 dead partner, (p) Still less will any dealing with the sur- viving partner if induced by his fraud, (q) Liability not discharged by dealing with new persons. Even where a new partner has been introduced, a creditor of the old firm who continues to deal with the new firm as he dealt with the old, and is paid interest by the new firm *as if the debt was its own, does not thereby [*251] deprive himself of his right to be paid out of the estate of a deceased member of the old firm. (/•) In Harris v. Harwell, (s) a banking firm consisting of three partners became indebted to a customer on a deposit note ; one of them died, and the survivors took his son into partnership with them. The new partnership paid interest on the note for some time, and then became bankrupt. The plaintiff proved against the new firm for the amount of his debt, and was paid a dividend out of its estate. It was held that he had done nothing which precluded him from having re course to the estate of the deceased partner. Effect of administering the estate.— On the other hand, if, after the death of a partner, a creditor of the old firm knows of the death and does not take any steps to obtain payment from the estate of the deceased, if the creditor lies by and allows that estate to be administered as if he had no claim upon it, and if he continues to deal with the surviv- ing partners as if they and they alone were his debtors, in that case the creditor will not be allowed to resort to the assets of the deceased. 1 Oakeley v. Pasheller and Brown v. Gordon may be referred to as illustrating this doctrine. ( p) Sleech's Case, 1 Mer. 570 ; tomer first knew of the change in Harris v. Ear well, 15 Beav. 31. the firm. Compare Bilborough v. But compare Brown v. Gordon, 16 Holmes, 5 Ch. D. 255, a somewhat Beav. 302, and Bilborough v. similar case, where the estate of jthe Holmes, 5 Ch. D. 255, infra, deceased partner was held to be note (s) discharged. The proof, however, (q) As in Plunier v. Gregory' 18 there was for money lent to the Eq. 621. new firm. (r) Daniel v. Cross, 3 Ves. 277. 1 A partnership creditor, after (s) 15 Beav. 31. It does not ap- the death of one partner, may con- pear from the report when the cus- tinue to deal with the survivor, and 599 *252 EIGHTS AND OBLIGATIONS. [BOOK II. In Oalteley v. Pasheller, (t) two partners, A. and B., exe- cuted three joint and several bonds to the plaintiff to secure repayment of money lent. A. died, and B. took in C. as a partner with him. An agreement was come to between A.'s executors and B. and C. that the latter should take the assets and liabilities of the old firm, and indemnify A.'s estate from those liabilities. Of this the plaintiff had no- tice, (w) He was paid interest on his bond by the new firm, and received accounts from it in which the old debt and the debts contracted by the new firm were blended to- [*252] gether. On two occasions the plaintiff *had agreed to give, and had given, the new firm considerable further time to pay the bonds, but A.'s executors had no notice of this. Ultimately the plaintiff took from B. and C. an assignment of some policies as a collateral security for payment of the bonds, expressly reserving his rights against A.'s estate. It was, however, held that A.'s estate had been discharged from its liability from what had previously taken place. The court thought that A.'s estate had be- come, as it were, surety only for payment of the debt, and that it had bsen discharged by the long indulgence granted by the plaintiff to the other debtors, (a?) 1 The true ratio receive partial payments from him, marginal note states that he had without prejudice to his right to not. resort to the assets of the deceased (x) This guasi-suretyship is surely partner ; an J he does not lose this a false analogy unless the creditor right by delay in calling upon the has assented to such a change in Burvivor for payment. Hamersley his debtor's position. See, on this v. Lambert, 2 Johns. Ch. 508. point, Oakford v. European, etc. See ante. Ship Co. 1 Hem. & M. 182, ante, (Q 10 Bli. N. S. 548, and 4 CI. & p. 244; Swire v. Redman, 1 Q. B. Fin. 207. See on it, Swire v. Red- D. 537. See, also, Rodgers v. Maw, man, 1 Q. B. D. 543. In Wilson v. 4 Dowl. & L. 66. Lloyd, 16 Eq. 60, this case was fol- 1 Where a creditor of a partner- lowed, though no new partner ship, after dissolution thereof, joined the firm, but Wilson v. knowing that one or several of the Lloyd cannot be relied upon. See copartners have agreed with the Simpson v. Henning, L. R. 10 Q. B. others to assume and pay the debts 406. of the firm, takes the negotiable (ti) See 4 CI. & Fin. 212. The notes of those who should pay in 600 CH. II, SEC. III.] LIABILITY OF MEMBERS. *252 decidendi, however, was that the plaintiff had accepted B. and C. as his sole debtors. In Brown v. Gordon, {if) the plaintiff deposited money with a banking firm consisting of three partners, A., B. and C. ; D. afterwards became a partner. A. died, having made a will containing a trust for payment of his debts. After A.'s death, his son, who was also bis executor and residuary devisee and legatee, became a partner in the bank. Some time afterwards B. and C. died. The bank had been con- tinued, first, by B., C, D., and A.'s son; then by D., C, and A.'s son, and lastly by D. and A.'s son ; but it ultimately stopped payment, and the two surviving partners were ad- judged bankrupts. Interest had been paid to the plaintiff by the successive firms, and the plaintiff's debt was proved in the bankruptcy court. On a bill filed for the purpose of payment of his debt, and thus ex- tends the time of payment, he thereby discharges the other part- ners. Millerd v. Thorn, 56 N. Y. 402; Stone v. Chamberlain, 20 Ga. 259; Dodd v. Dreyfus, infra; Hoopes v. McCan, 19 La. Ann. 201. The dissolution of the partner- ship and the retirement of one partner, together with the assump- tion by the other partners of the debts of the old firm, constitutes such retiring partner merely a surety for the payment of such debts; and the extension of the time for the payment of such debts, made by creditors with a knowl- edge of all the circumstances, and without the consent of the retired partner, has the effect of discharg- ing him from liability therefor. Dodd v. Dreyfus, 57 How. Pr. 319; S. C. 17 Hun, 600. See, also, ^Etna Ins. Co. v. Peck, 28 Vt. 93. "Where such a debt is a note, and the payee has received from the new firm a chattel mortgage of the partnership property, sufficient, if applied, to satisfy the debt, he may, with the assent of the retir- ing partners, release the mortgage, and return the property or its avails to the new firm, without im- pairing his rights against all the joint obligors on the note, even though he had such notice of the subsequent contract between the partners. Rawson v. Taylor, 30 Ohio St. 389. A partner, to whom a note due the firm was assigned by the other partner on a dissolution of the partnership, subsequently took a new note of the debtor, payable in twelve months. Held, that the other partner was thereby dis- charged from all liability as surety for the payment of the note. "Wilde v. Jenkins, 4 Paige, 481. (y) 16 Beav. 302 ; Bilborough v. Holmes, 5 Ch. D. 255, a similar case, but not so strong. See ante, note (s). 601 •*253 EIGHTS AND OBLIGATIONS. [BOOK II. obtaining payment out of A.'s estate, it was held that the plaintiff, by neglecting for sixteen years to make any claim against the assets of the deceased, and by treating the suc- cessive firms as his debtors, had discharged the estate of the deceased, and that he could not be considered as a creditor of the deceased, so as to avail himself of the trust in the will . for payment of debts. Cases of fraud. — In whatever way a creditor may [*253] have dealt with the surviving ^partners, he cannot be held to have adopted them as his sole debtors in respect of a demand arising out of a fraudulent transaction, of which he has been constantly kept in ignorance, (z) Recapitulation.— Before leaving this subject it may be useful shortly to review the effect of the numerous cases which have been noticed in the preceding pages. Those cases establish that — 1. An express agreement by the creditor to discharge a retired partner, and to look only to a continuing partner, is not inoperative for want of consideration; for Lodge v. Diaas (a) has, as to this point, been overruled by Thomjjson v. Percival. (b) 1 (z) See Clayton's Case, 1 Mer. 579 ; should assume certain debts, and ante, pp. 235, 236. also to divide and dispose of the (a) 3 B. & A. 611. firm assets; to which submission a (b) 5 B. & Ad. 925. • creditor assented, and agreed to be i Where M. and B., copartners, bound by the award, which was ordered a certain piece of work of that one party should take the C, held, that an agreement made assets and pay all the debts. Held, between C. and M., after the disso- that the surrender by the other lution of the copartnership, that M. partner of his interest in the assets, should be released from his liability and the consent of the creditor to for the work already performed, the submission, was a considera- was void for want of consideration, tion for his promise, and that the B. not having promised to assume copartner was released thereby the liability. Otherwise had B. from the claim. Backus v. Fobes, so promised, one debt being substi- 20 N. Y. 204. tuted for the other. Collyer v. Where, upon the dissolution of a Moulton, 9 R. I. 90. copartnership, one partner assumes The affairs of a partnership were a liability, he does it prima facie, submitted to an arbitrator, who upon sufficient consideration, leav- was to designate which partner tag his copartners liable only as 602 CH. II, SEC. III.] LIABILITY OF MEMBERS. "254 2. An adoption by the creditor of the new firm as his debtor does not by any means necessarily deprive him of his rights against the old firm, either at law (c) or in equity, {d) 3. And it will certainly not do so if, by expressly reserv- ing his rights against the old linn, he shows that by adopt- ing the new firm he did not intend to discharge the old firm, (e) 4. And by adopting a new firm as his debtor a creditor cannot be regarded as -having intentionally discharged a person who was a member of the old firm, but was not known to the creditor so to be. (,/) 5. But the fact that a creditor has taken from a continu- ing partner a new security for a debt due from him and a retired partner jointly is strong evidence of an intention to look only to the continuing partner for payment, (g) 6. And a creditor who assents to a transfer of his debt from an old firm to a new firm, and goes on dealing with, tlae latter for many years, making no demand for payment against the *old firm, may not unfairly be [*254] inferred to have discharged the old firm. If a jury finds that he has done so the court will not disturb the ver- dict; (A) and if the question arises before a judge, e. g., in bankruptcy or in the administration of the estate of a de- ceased partner, the court will consider all the circumstances sureties ; and they may take meas- id. 579 ; Palmer's Case, id. 623 ; ures to have the claim assigned and Braithwaite v. Britain, 1 Keen, collected from the partner liable. 206 ; Winter v. Innes, 4 M. & Cr. ^Etna Ins. Co. v. Peck, 28 Vt. 93. 101. (c) David v. Ellice, 5 B. & C. 196; (e) Bedford v. Deakin, 2 B. & A. Thompson v. Percival, 5 B. & Ad. 210; Jacomb v. Harwood, 2 Ves. 925 ; Heath v. Percival, 1 P. W. Sr. 265. 682, and 1 Str. 403 ; Kirwan v. Kir- (/) Robinson v. Wilkinson, 3 wan, 2 Cr. & M. 617 ; Gough v. Price, 538. Davies, 4 Price, 200; Blew v. (g) Evans v. Drummond, 4 Esp. Wyatt, 5 C. & P. 397. 89 ; Reed v. White, 5 id. 122. (d) Oakford v. European, etc. (h) Hart v. Alexander, 2 M. & Ship Co. 1 Hem. & M. 182 ; Sleech's W. 484. Case, 1 Mer. 539; Clayton's Case, 603 - ;: 254 EIGHTS AND OBLIGATIONS. [BOOK II. of the case, and will infer a discharge if, upon the whole, jus- tice to all parties so requires, (i) But the small number of cases in which relief has been refused, compared with those in which it has been granted, shows that the leaning of the court is strongly in favor of the creditor. (b) Of the effect of merger and judgment recovered. Merger of one security in another.— Having now ex- amined the mode in which a partner may be discharged from liability, by reason of a substitution of some other person in his place with the creditor's assent, it is necessary to advert to a doctrine by which a partner occasionally finds himself discharged, simply because his creditor has obtained a security of a higher nature than that which he previously possessed. Bills, etc., create no merger.— If a person solely in- debted enters into partnership with another, and the two give a joint note or bill for the debt of the first, and the note or bill is not paid, the creditor is not precluded from demanding payment from his original debtor, (JS) un- less it can be shown that the bill or note was taken in sat- isfaction of the original demand. (I) 1 So if two partners (t) Ex parte Kendall, 17 Ves. composed in part of the same per- 523-5; Oakeley v. Pasheller, 4 CI. sons; and the latter firm may & Fin. 207; Wilson v. Lloyd, 16 negotiate the note to third persons. Eq. 60; Brown v. Gordon, 16 Beav. Fulton v. Williams, 11 Cush. 108. 302. There being two outstanding (k) Ex parte Seldon, 2 Cox, 49; mortgages of certain lands, X. and Ex parte Lobb, 7 Ves. 592; Ex Y., partners, bought with partner- parte Meinertzhagen, 3 Deac. 101 ; ship funds one-half of the senior ExparteHny, 15 Ves. 4; Ex parte mortgage interest, and the entire Kedie, 2 D. & C. 321. legal interest in the land, taking (t) As in Ex parte Whitmore, 3 the former in the name of X. and Deac. 365 ; Ex parte Kirby, Buck, the latter in the name of Y. In a 511 ; Ex parte Jackson, 2 M. D. & contest between the holders of the D. 146. first mortgage and junior mort- l g ee ante, g a n ee > held, that there was no The joint and several note of a merger of the legal and equitable partnership is not extinguished by estates so purchased ; there being a transfer thereof to another firm an intervening estate by the sec- 604 CH. II, SEC. III.] LIABILITY OF MEMBERS. *255 are indebted on the partnership account, and one of them gives a bill or note for the debt, and that bill or note is dis- honored, the creditor who took it will not be precluded from having recourse to both partners for pay- ment, (?n) unless it can be *shown that he intended [*255] to substitute the liability of the one for the joint liability of the two. (n) l Securities of a higher nature do —Judgment recovered. But when a creditor obtains from his debtor a security of a higher nature than he had before, and does not care to ac- cept it as a collateral security, (o) the original debt is merged in the higher security and can no longer be made the foun- dation of an action or of proof in bankruptcy; {p) and this ond mortgage, the taking of the purchased estates in different names showing an intention to keep them distinct, and the trans- action not being injurious to the junior mortgagee. Scott v. Web- ster, 44 Wis. 185. (m) Keay v. Fenwick, 1 C. P. D. 745 ; Bottomley v. Nuttall, 5 C. B. N. S. 122; Whitwell v. Perrin, 4 C. B. N. S. 412; Ex parte Hodg- kinson, 19 Ves. 291. See, too, Ex parte Raleigh, 3 M. & A. 670; Bed- ford v. Deakin, 2 B. & A. 210, no- ticed ante, p. 244. (n) As the jury found was the case in Evans v. Drummond, 4 Esp. 89, and Reed v. White, 5 id. 122. Compare the cases in the last note. 1 See Melane v. Spencer, 6 Ired. L. 423 ; Wilson v. Jennings, 4 Dev. L. 90. See %nit, Although the acceptance of a security of a higher dignity merges and extinguishes the original cause of action, yet if one partner, who has executed in the name of the firm a single bill for the amount of a debt which the firm owes, after- wards gives a promissory note in the name of the firm, a recovery may be had thereon against the firm. The partnership debt, which was extinguished by the acceptance of the single bill, is thereby re- vived. Davidson v. Kelly, 1 Md. 492. Where a creditor of a former commercial firm sues its individual members for goods sold to the firm, and declares in his petition on the itemized account of the goods, and also on a promissory note of the firm given in liquida- tion of the account by one not authorized to sign for the firm, he will be entitled to recover for the goods on the unopposed proof of their sale and delivery. Dodd v. Bishop, 30 La. Ann. 1178. (o) As in Ex parte Hughes, 4 Ch. D. 34, note. (p) Ex parte Oriental Financial Corporation, 4 Ch. D. 33 ; Higgen's Case, 6 Co. 44b; Owen v. Homan, 3 Mc. & G. 378 ; Price v. Moulton, 10 C. B. 561 ; Shack v. Anthony, 1 M. & S. 573. A judgment on a 605 ^255 EIGHTS AND OBLIGATIONS. [book ir. doctrine is as much applicable to joint as to several obliga- tions. And there is no mean authority for saying that if two parties are jointly indebted by simple contract, and one of them gives his bond for payment of the debt, the joint debt is at an end; (q) but there are recent decisions to the contrary, (r) 1 and the question cannot be considered as yet Brozee v. Poyntz, 3 B. Mon. 178; Calk v. Orear, 2 id. 420; Horton v. Child, 4 Dev. L. 460. So a promissory note given by a firm is not merged in a bond and mortgage, executed at the same time and for the same debt by one partner in the name of the firm, but without the knowledge of his copartners. Pierce v. Cameron, 7 Rich. 114. The mere acceptance of a bond and a deed of trust to secure it by a creditor from one member of the firm after dissolution, for a part- nership debt due by simple con- tract, destroys the right of the creditor to proceed at law against the other member; but a court of equity will look at the attendant circumstances of the case, and will not absolve the firm from liability unless it appears from those cir- cumstances, or otherwise, that the higher security was accepted as a substitute for the simple contract of the firm. Niday v. Harvey, 9 Gratt. 454. A partnership assigned the part- nership effects for the benefit of such creditors as should sign the deed of assignment and receive their dividends; and in consider- ation thereof, and that they would release the other partners, the senior partner covenanted to pay the balance due such creditors after exhausting the property assigned. Held, that the prior claims of the covenant in a mortgage does not affect the right of the mortgagee to foreclose. Popple v. Sylvester, 22 Ch. D. 98 ; Ex parte Fewings, 25 Ch. D. 338. (q) Basset v. Wood, 11 Vin. Ab. Exting. B. 8. And see Owen v. Homan, 3 Mc. & G. 407; Ex parte Hernaman, 12 Jur. 642, and 17 L. J. Bk. 17. (r) Sharpe v. Gibbs, 16 C. B. N. S. 527; Ansel 1 v. Baker, 15 Q. B. 20; and infra, note (c). 1 A debt made by partners under general authority as partners is still a partnership debt and binding on the partner who did not join in giving the bond, notwithstanding one or more of the other partners gave their bond to the party with whom they made the contract. Jordan v. Miller, 75 Va. 442. The sealed individual note of an ostensible partner does not extin- guish the original cause of action as against a dormant partner, whose connection as partner was unknown to the creditor at the time the note was executed. Cham- berlain v. Madden, 7 Rich. 395. See, also, Watson v. Owens, 1 id. 111. Contra, Ward v. Motter, 2 Rob. (Va.) 536. See, also, Anderson v. Levan, 1 Watts & Serg. 334. The execution of a sealed note for a debt due by partners, by one of them in the firm name, without authority, does not merge the joint liability on the simple contract. 606 CH. II, SEC. III.] LIABILITY OF MEMBERS. -255 settled. If a joint creditor obtains judgment against one of the partners only, he loses his remedy against the others, even if not known to him. (s) l But this rule does not apply A bill against dormant partners, after judgment recovered agains the ostensible partners, cannot be sustained without showing special cause for relief ; as, that the plaint- iff was kept in ignorance of the partnership by undue means ; that he has used due diligence to in- form himself, etc. Penny v. Mar- tin, 4 Johns. Ch. 566. Where one of several partners unites with a third person in mak- ing a note to a creditor of the firm for a partnership debt, which, by agreement, is made and accepted, not for the debt, but a collateral se- curity merely, a judgment upon the note will not merge or affect the original indebtedness even as to the partner signing the note. In such a case the agreement prevents the merger. Hawks v. Hinchcliff, 17 Barb. 492. Judgment against one partner upon a contract, upon its face his sole and individual contract, is no bar to a subsequent action upon it as a partnership contract. Scott v. Colmesnil, 7 J. J. Marsh. 416. Where a state statute provides that in suits against two or more jointly indebted the judgment shall be evidence, as against those not served with process, only of the extent of the plaintiff's demand, the original demand against the parties not brought into court is not merged in the judgment against those who were. Mason v. Eldred, 6 Wall. 231. The fact that a judgment was rendered against part of the mem- bers of a firm does not affect the creditors who became parties to the agreement were extinguished and merged in the covenant of the senior partner. Hosack v. Rogers, 8 Paige, 229. (s) Kendall v. Hamilton, 4 App. Ca. 504; King v. Hoare, 13 M. & W. 494; Ex parte Higgins, 3 De G. & J. 33. See, as to dormant part- ners, Cambefort v. Chapman, 19 Q. B. D. 229, noticed in the addenda. In Baddeley v. Consoli- dated Bank, 34 Ch. D. 536, the surety had not recovered judg- ment, and this rule did not apply. A colonial judgment creates no merger. Bank of Australasia v. Nias, 16 Q. B. 717. See ante, p. 193, note(fc). 1 When a judgment is obtained against one of two partners on a joint contract, the contract is merged in the judgment, and an action at law cannot be maintained thereon against the partners. Se- dan v. Williams, 4 McLean, 51 ; Smith v. Black, 9 Serg. & R. 142. Contra, Williams v. Rogers, 14 Bush, 777. The ostensible partner of a firm gave notes in the partnership name, which was his own name, for goods purchased for the use of the part- nership, upon which the payee, in ignorance of the partnership, sued and recovered judgment against the ostensible partner alone. Held, in an action afterwards brought against the dormant partner, that his liability upon the notes was ex- tinguished by the judgment. Moale v. Hollins, 11 Gill & J. 11. See, also, Smith v. Black, supra. 607 *256 EIGHTS AND OBLIGATIONS. [BOOK II. when the other partners are abroad, and cannot therefore be sued here with effect, (t) If one partner only is sued, and judgment is given for him, the creditor is not precluded from afterwards suing the others, unless the first action failed for a reason which applies equally to the second, (u) It has been already seen that a judgment recovered against continuing partners and an incoming part- [-256] ner is a defense to an ^action against a retired part- ner who might have been sued with the continuing partners in the first instance, (a?) Merger of joint and several obligations. — With respect to obligations which are joint as well as several there is more difficulty. A joint and several obligation arising ex delicto is extinguished by a judgment recovered against any one of the persons obliged; (y) but as regards joint and sev- eral obligations arising ex contractu, although a joint judg- ment against all the persons obliged extinguishes the sep- arate liability of each, for nemo debet bis vexari pro eadem causa, yet a judgment obtained against one of them only equitable right to have the part- itors;the relief which equity will nership property subjected to its give is to subject the whole assets payment. Equity does not regard to the payment of such debts. How the form of the judgment, but the v. Kane, 2 Chand. 222. substance of the debt. Martin v. (t) See 19 and 20 Vict. ch. 97, Davis, 21 Iowa, 535. § 11; Ex parte Waterfall, 4 De G. Where a partnership exists be- & S. 199. tween two persons, one of whom is (u) Phillips v. Ward, 2 Hurlst. a dormant partner, and the cred- & C. 717. itors of the firm have obtained (x) Scarfe v. Jardine, 7 App. Ca. judgments against the ostensible 345, ante, pp. 46 and 197. See, also, partner, founded on debts created Cambefortu. Chapman, 19 Q. B. D. on the partnership account, upon 229, noticed in the addenda. See which executions have been issued ante, p. 193, note (k). and returned nulla, bona, a bill in (?/) Brinsmead v. Harrison, L. R. equity against both partners will be 6 C. P. 584, aff. 7 id. 547; Brown sustained upon the allegation that v. Wootton, Cro. Jac. 73; Buckland the dormant partner has, by fraud- v. Johnson, 15 C. B. 145. And see, ulent connivance with the osten- as to the plea of another suit de- sible one, obtained the possession of pending, Boyce v. Douglas, 1 and laid claim to all the partner- Camp. 61. ship assets in fraud of the cred- 608 CH. II, SEC. III.] LIABILITY OF MEMBEKS. *256 does not extinguish the separate liability of the others, (s) l In order that this effect may be produced the judgment must be satisfied, (a) 2 As regards joint and several liabili- ties arising from breaches of trust, a joint judgment does not preclude proof in bankruptcy against the separate estates of the judgment debtors, (b) Further, if several persons are jointly liable, and one of them afterwards gives a separate collateral security on which judgment is recovered against him, this will not merge the prior joint liability, (c) Effect of doctrines of merger on securities for future advances. — The rule that a bond or judgment merges any (z) Ex parte Christie, Mon. & Bl. 352. See, also, Ansell v. Baker, 15 Q. B. 20. 1 A judgment recovered in Mis- souri, where by the law all con- tracts are construed as joint and several, against one of three co- partners who had drawn bills upon the plaintiffs, which were accepted in this state and paid for accom- modation without funds, is not a merger of the right of action against the other partners in this state. Reed v. Girty, 6 Bosw. 587. An action against partners is not barred by a judgment in an action by one partner against the others, dissolving the firm, appointing a receiver, etc. Honegger v. Wett- stein, 47 N. Y. Super. Ct. 125. Where a decree has been ren- dered upon a bill filed by a firm, the estoppel thereby created cannot be avoided by another suit insist- ing upon the same rights in the individual name of one of the partners. Croft v. Johnson, 8 Bax. (Tenn.) 390. No estoppel is worked against a firm by the fact that a member thereof proved as his own debt a note once held by the firm. Melt- zer v. Doll, 91 N. Y. 365. As to estoppel of partners by declarations in the court of claims, as to their interest in a claim prose- cuted there by another partner, from setting up their interest in the property sought to be recov- ered, see Hobbs v. McLean, 117 U. S. 567. One copartner, as between him- self and the firm creditors, eannot estop himself, by any dealing with the other partner, from claiming partnership assets. In re Gorham, 9 Biss. C. Ct. 23. (a) Higgen's Case, 6 Co. 46a; King v. Hoare, 13 M. & W. 494. And see Drake v. Mitchell, 3 East, 251. 2 And such is believed to be the better opinion also in respect to joint and several obligations arising ex delicto. Cooley on Torts, 136-139. (6) Be Davison, 13 Q. B. D. 50. (c) Drake v. Mitchell, 3 East, 251. See, too, Re Clarkes, 2 Jo. & Lat. 212 ; Ex parte Bate, 3 Deac. 858. Compare Cambefort v. Chapman, 19 Q. B. D. 229, noticed in the addenda. See ante, p. 193, note (fc). Vol. 1 — 39 609 *257 EIGHTS AND OBLIGATIONS. , [liOOK II. simple contract debt in respect of which it may have been given or obtained only applies if the simple contract debt existed first in order of time, and if the specialty creditor is the same as the simple contract creditor. So that if a bond is given or a judgment is obtained (under a warrant of attor- ney) as a security for future advances; (d) or if a [*257] simple contract debtor gives a bond or -confesses a judgment to a trustee for his creditor, (e) in neither of these cases will there be any merger. Estates of deceased partners. — It must also be borne in mind that, as regards the liability of the estate of a de- ceased partner, at law, when a partner died, his liability on contracts survived to his copartner, who alone could be sued in respect of them. Hence a judgment recovered against the surviving members of a firm does not preclude the judg- ment creditor from obtaining payment of his original debt from the estate of the deceased partner in equity; (/) nor does proof against his estate afford a defense to an action against the surviving partners, (g) Merger not an extinction of the debt. — Further, it is to be observed that merger does not, properly speaking, extin- guish a debt; for, notwithstanding the fact that a debt is merged in a higher security, the merged debt is sufficient to support an adjudication of bankruptcy against the debtor. (7t) Proof in bankruptcy. — Again, proof in bankruptcy against the estate of one partner in respect of a partnership debt does not preclude the proving creditor from afterwards suing the solvent partners and recovering from them what he may have failed to obtain in the bankruptcy, (i) (d) Holmes v. Bell, 3 Man. & Gr. v. Walker, 4 De G. & J. 24. See, 213, and the note there. also, Rawlins v. "Wickham, 3 De G. (e) Bell v. Banks, 3 Man. & Gr. & J. 304, ante, pp. 195, 250. 258. In such a case equity would (g) Re Hodgson, 31 Ch. D. 177. probably follow the law, ut res (h) Re Davison, 13 Q. B. D. 50; magis valeat quavi pereat.- Re Griffiths, 3 De G. M. & G. 174, (/) Jacomb v. Harwood, 2 Ves. and the cases there cited. Sr. 265; Liverpool Borough Bank (i) Keay v. Fenwick, 1 C. P. D. G!0 CH. IIj SEC. III.] LIABILITY OF MEMBERS. -258 4. Lapse of Time. Statutes of limitation.— By a number of well-known enactments, usually referred to as the statutes of limitation, a certain definite time has been prescribed within which, if at all, a person having a demand against another must en- force it. 1 These statutes apply as well to partners as to other persons; and it becomes, therefore, necessary to ad- vert to them in the present work. The principal statutes are the following: (7j) 21 Jac. 1, *ch. 16; 4 and 5 Anne, ch. 16; 3 and 4 Wm. [-258] 4, ch. 27; 3 and 4 Wm. 4, ch. 42; 19 and 20 Vict, ch. 97; 37 and 3S Yict. ch. 57. 745; Whitwell V. Pen-in. 4 C. B. N. S. 412; Bottopiley v. Nuttall, 5 C. B. N. S. 122. 1 If one sues a partnership and is nonsuited he cannot recom- mence his action against one of the partners individually within six months after, so as to prevent the 6tatute of limitations from attach- ing, under section 2932 of the code. Ford v. Clark, 75 Ga. 612. Otherwise in North Carolina, where the first suit was defeated by reason of the non-joinder of co- partners, the second suit being properly brought. Martin v. Young, 85 N. C. 15(3. Where one member of a firm is dead, and no suit is instituted on an open account against such firm for more than four years after it becomes due, and no reason ap- pears why suit was not brought against the survivor, the action is barred as to him, and, he being primarily liable, this laches of the plaintiff will discharge the admin- istrator of the deceased partner. McNaught v. Bostick, 71 Ga. 782. Representatives of a deceased Gl partner cannot set up a statute of limitations against a firm creditor so long as the surviving partner continues liable for the debt and has a l-ight to contribution from the estate of the deceased partner. Buckingham v. Ludlum, 37 N. J. Eq. 137. A creditor of a firm cannot main- tain an action against one partner for money had and received upon a firm account barred by the stat- ute of limitations upon the ground that, when the partners settled, upon defendant's misrepresenta- tion to his partner that he had paid plaintiff's claim, he was allowed the amount of it in such settle- ment. Libby v. Robinson, 79 Me. 168. The action authorized by section 4 of the act of February 22, 1816, against partners, is barred in ten years after the right of action ac- crued. Hawkins v. Lasley, 40 Ohio St. 37. (k) The principal act relating to Ireland is 16 and 17 Vict. ch. 113. See § 20. *253 RIGHTS AND OBLIGATIONS. [BOOK It Times limited for bringing actions. — Neglecting those provisions of the statutes of limitation which are of little importance to partners, the times prescribed for the prose- cution of actions are as follows: Twelve years for the recovery of legacies, of rent, of money charged on lands, of money due on judgments, bonds and mortgages, and for the redemption of mortgages. 3 and 4 Ira. 4, ch. 27, §§ 28 and 40; 3 and 4 Ira. 4, ch. 42; 37 and 38 Vict. ch. 57. Six years for the recovery of arrears of rent and of in- terest on money charged on land (3 and 4 Win. 4, ch. 27, §§ 41 , 42) ; and for the recovery of seaman's wages (4 and 5 Anne, ch. 16, § 17) ; and of money due on bills of ex- change, promissory notes, or in respect of any other con- tract which is not under seal (21 Jac. 1, ch. 1G, § 3); and of money due on awards where the submission is not under seal (3 and 4 Wm. 4, ch. 42, § 3); and for the institution of actions or suits for an account. 21 Jac. 1, ch. 16, § 3, and 19 and 20 Vict. ch. 97, § 9. Four years for the recovery of damages in respect of an assault, battery or false imprisonment. 21 Jac. 1, ch. 16, §3. Two years for the recovery of damages for words of them- selves defamatory (21 Jac. 1, ch. 16, § 3); and for the re- covery of penalties, damages or sums given by statute to the party grieved. 3 and 4 Wm. 4, ch. 42. Further time. — There are provisions extending these pe- riods in favor of persons who, when their right to sue accrues, are within the age of twenty-one, under the dis- ability of coverture, or of unsound mind;(£) and also in favor of those whose demands are against persons beyond (0 21 Jac. 1, ch. 16, § 7 ; 3 and 4 §10; Cornill v. Hudson, 8 E. & B. Win. 4, ch. 42, § 4; 3 and 4 Wm. 4, 429; Pardo v. Bingham, 4 Ch. 735. ch. 27, § 16, etc. ; 37 and 38 Vict. The absence beyond the seas of one ch. 57, § 3. The imprisonment or of several joint creditors did not absence beyond the seas of acred- enlarge their time for suing under itor does not now enlarge his time the old law. Perry v. Jackson, 4 for suing. 19 and 20 Vict. ch. 97, T. K. 516. 612 CH. II. SEC. III.] LIABILITY OF MEMBERS. *259 the seas. (?«■) But the absence beyond the seas of one of several joint debtors does not now, as it did formerly, en- large the time for suing the others, (n) "Account between merchants. — By the statute [*259] of James, actions "for such accounts as concern the trade of merchandise between merchant and merchant, their factors or servants," were excepted from limitation, 1 but this exception no longer exists; (o) and actions for an ac- count, or for not accounting, must be brought within six years, {p) General rules applicable to the statutes of limitation. — In applying the statutes of limitation to any particular case it is important to bear in mind one or two principles appli- cable to them all. Foreign debts.— 1. Although a debt may have been con- tracted abroad, any person who attempts to enforce it in this country must do so within the time limited by the Eng- lish statutes; for it is by them, and not by the law of the place where the debt was contracted, that English courts are governed in a matter of this description, (q) Continuous running of time. — 2. When once time has begun to run, no subsequent disability or inability to sue (ro)4 and 5 Anne, ch. 16, § 19, (p) See 19 and 20 Vict. ch. 97, and 3 and 4 Wm. 4, ch. 42, § 4. § 9, and 21Jac. 1, ch. 10, § 3. This (n) 19 and 20 Vict. ch. 97, § 11. branch of the subject will be ex- See, as to what is beyond the seas, amined more at length in that part § 12 ; and as to the old law, Fan- of the work which treats of ac- nin v. Anderson, 7 Q. B. 811 ; Towns counts between partners. The prin- v. Mead, 16 C. B. 123. cipal cases on the exception relat- 1 Running accounts with a part- ing to merchants' accounts are : ner, though he be a surviving part- Inglis v. Haigh, 8 M. & W. 769 ; ner, and as such has the collection Cottam v. Partridge, 4 Man. & Gr. of partnership assets, cannot be 271 ; Robinson v. Alexander, 8 Bli. called an account with the firm, N. S. 352 ; Forbes v. Skelton, 8 Sim. and can therefore be of no avail to 335. See Webber v. Tyvill, 2 Wms. stop the running of the statute Saund. 124, and the note there, against a partnership claim. Stew- (q) See The British Linen Co. v. art's Appeal, 105 Pa. St. 307; S. C. Drummond, 10 B. & C. 903; Huber 14 Weekly Not. Cases, 442. v. Steiner, 2 Bing. N. C. 202. (o) 19 and 20 Vict. ch. 97, § 9. 013 : 230 FJGIITS AND OBLIGATIONS. [BOOK II. slops it,*(r) except where a defendcant dies and there is no representative to sue. (s) When time begins to run. — 3. Time begins to run from the moment the right to sue arises; (t) but in a case ^260] of concealed fraud, from the moment -'when the per- son acquiring the right first becomes aware of it. (u) x Cases of trust. — 4. The claim of a cestui que trust against his trustee in respect of a breach of an express trust is not barred by mere lapse of time; (x) although it is otherwise if the trust is only constructive, {y) In consequence of the first branch of this rule, if a partner dies, having made a will containing a trust for payment of his debts, his estate will be liable to the demands of creditors of the firm much Ion o-er than if there were no such trust in the will, (z) (>•) See Rhodes v. Smethurst, 4 M. & W. 42, and G id. 331 ; Goodall v. Skerratt, 3 Drew. 21G; Wych v. East India Co. 3 P. W. 309. There is, however, an exception to this rule, where an action brought in time becomes abated, and another is afterwards commenced. See Sturgis v. Darrell, 4 H. & N. 622, and 6 id. 120. See, as to how far merely landing at an English port is a return, so as to make time be- £in to run, Gregory v. Hurrill, 5 B. & C. 341, and 1 Bing. 324. (s) Swindell v. Bulkeley, 18 Q. B. D. 250. {t) This was so at law, even in cases of concealed fraud. The Im- perial Gas Co. v. The London Gas Co. 10 Ex. 39; Hunter v. Gibbons. 1 H. & N. 459. See Bree v. Holbech, Dougl. 655. But see now, Jud. Act, 1873, § 24; Jud. Act, 1875, ?• 10, cl. 11, and the cases in the next note. (u) Gibbs r. Guild, 9 Q. B. D. 59: Smith Sea Co. v. Wyrnondsell, 3 P. \V. 143; Blair v. Bromley, 2 Ph. 354. and 5 Ha. 542 ; Petre v. Petre, 1 Drew. 397. The fraud in Urqu- bart v. Macpherson, 3 App. Ca. 838, was not alleged to have been con- cealed. 1 Where a county treasurer mis- applied court money deposited with him to the benefit of the firm of which he was a member, the six years' statute of limitations is a good defense as to another member of the firm in an action for money had and received, such member not having been guilty of fraud. Price n Mulford, 9 Cent. Rep. (N. Y.)SGG; S. C. 36 Hun (N. Y.), 247. (x) See Jud. Act, 1S75, § 10, cl. 2. (y) Banner v. Berridge, 18 Ch. D. 254 ; Beckford v. Wade, 17 Ves. 87. (2) See Ault v. Goodrich, 4 Russ. 430 ; Braithwaite v. Britain, 1 Keen, 206; Brown v. Gordon, 16 Beav. 302. See, also, Pare v. Clegg, 29 Beav. 589. where a society's prop- erty was on its dissolution sub- jected to a trust for the payment of its creditors. G14 CH. II, SEC. III.] LIABILITY OF MEilBEES. *261 Reyival of debts. — 5. After time has begun to run, and even after it has run, a debt may be revived by a written promise to pay it; or by an acknowledgment in writing, from which a promise to pay it may be inferred; (a) or bj r a payment on account of the principal or interest due, (I) from which a similar promise may be implied, (c) Application of these rules to partners — Old law. — In order that the application of these general rules to partners may be fully understood, it becomes necessary to consider the extent to which one partner can affect the other by ac- knowledging and promising to pay, or by making payments on account of a partnership debt. The old law upon this subject was materially altered by the Mercantile Law Amendment Act, -but in order to understand its [*261] provisions a short allusion to the law as it previously stood is necessary. Prior to the act in question it was held that: Admissions by one partner. — 1. An admission by one of several joint debtors that their debt was still due was not sufficient to take the case out of the. statutes as against the others; 1 nor even as against the person making the admis- sion, unless it were in writing signed by him. (d) (a) See Tanner v. Smart, 6 B. & Ch. D. 254; Quincey v. Sharpe, 1 C. 603. The cases upon the ques- Ex. D. 72 ; Prance v. Syrnpson, Kay, tion, What is a sufficient acknowl- GTS. A letter from one partner edgnient? are innumerable. The to another will. not avail a creditor following are selected for refer- whose debt is mentioned and recog- ence: Green v. Humphreys, 26 Ch. nized in it. Be Hindmarsh, 1 Dr. & D. 47-4: Mitchell's Claim, 6 Ch. 822, Sm. 129. a letter without prejudice; Bourdin (b< See Whitcomb v. Whiting, 1 v. Greenwood, 13 Eq. 281, a mem. Smith, L. C, and the note there, on a prom, note; Bush v. Martin, (c) See Morgan v. Rowlands, L. 2 H. & C. 311, entry by a committee E. 7 Q. B. 493. in their minutes ; letter asking for l SeeHensley v. Bagdad Sash Fac- an account, or admitting a liability tory Co. 1 Tex. App. (Civ.) 392; to account; Banner v. Berridge, 18 Wilson v. Waugh, 101 Pa. St. 233; (d) 9 Geo. 4, ch. 14, § 1 ; Hyde v. George 4. chapter 14. See Man- Johnson, 2 Bing. N. C. 777; Bris- dertson r. Robertson, 4 Man. & Ry. tow v. Maxwell, 11 Ir. Law Rep. 440. As to admissions by one part- 4G1. It was otherwise before 9 ner, see ante, p. 128. 615 *261 EIGHTS AND OBLIGATIONS. [BOOK II. Promise by one partner.— 2. An actual promise by one of 'several joint debtors that the debt should be paid was of no validity against any person except him who made it. 1 and not even against him unless it were in writing and signed by him. (e) Payment by one partner.— 3. But as regards payment (f) it was held that if one of several joint debtors paid any S. C. 40 Leg. Int. 242 ; Rice v. Pen- nypacker, 5 Del. 279. Otherwise where the partner making such acknowledgment has taken the stock and become the liquidating partner. Wilson v. Waugh, 101 Pa. St. 233; S. C. 40 Leg. Int. 242. The mere agreement on the dis- solution of a firm that one of the partners should take the assets and pay the liabilities of the firm, no particular firm debts being speci- fied, does not, however, prevent the running of the statute of lim- itations upon debts due third per- sons; and admissions or promises made by the partner continuing the business, as to the payment of the firm debts, will not, under these circumstances, bind the re- tiring partner whei*e notice of the dissolution has been given. Folk v. Russell, 7 Bax. (Tenn.) 591. 1 After the dissolution of a part- nership, an acknowledgment and promise to pay, made by one of the partners, will not revive a debt against the firm which is barred by the statute of limitations. Van Keuren v. Parmelee, 2 N. Y. 523 ; Walsh v. Cane, 4 La. Ann. 533; Kauffman v. Fisher, 3 Grant. Cas. 302; Reppert v. Colvin, 48 Pa. St. 248. See, also, Levy v. Cadet, 17 Serg. & R. 126; Yandis v. Lefa- vour, 2 Blackf. 371 ; Tate v. Clem- ents, 16 Fla. 339; Folk v. Russell, 63 Tenn. 591 ; Ford v. Clark, 72 Ga. 760. Some cases, however, hold that the acknowledgment of a partner- ship debt by one of the partners after the dissolution is sufficient to take the debt out of the statute. Smith v. Ludlow, 6 Johns. 267; Ward v. Howell, 5 Har. & J. 60 ; Neal v. Hassan, 3 McCord, 278; Greenleaf v. Quincy, 11 Me. 11. See, also, Carroll v. Gayarre, 15 La. Ann. 671. Under Revised Statutes, Wiscon- sin, section 4244, a promise or ac- knowledgment within the period of limitation by one member of a firm previously dissolved is not binding upon another member un- less such dissolution was not known to the payee of the promissory note at the time such acknowledg- ment was made. Clement v. Clem- ent, 35 N. West. Rep. (Wis.) 17. Where one of several partners, after the dissolution of the part- nership, assumed a partnership debt, but afterwards pleaded the statute of limitations, jointly with the other partners, to an action upon such debt, it was held that the promise of such partner might be given in evidence, for the plea admitted that they did once as- sume. Brockenbrough v. Hackley, 6 Call, 51. (e) See last note. (/) As to payment by bills, see 616 C1I. II, SEC. III.] LIABILITY OF MEMBERS. *2G2 money on account of the principal or interest due from them all, such payment was sufficient to take the debt out of the statute, not only as against the person making the payment, but as against all the others jointly liable with him. ((f) 1 But even before the Mercantile -Law [*2G2] decisions went the length of bind- ing the firm even in this extreme case. See the excellent judgment in Bell v. Morrison, 1 Peters, 351, set out in Story on Part. § 324, note. 1 A payment made upon a simple contract debt of a partnership after its dissolution, by a partner author- ized to settle the concerns of the partnership, and before the debt is already barred by the statute of limitations, is such an acknowledg- ment of the debt as will take it out of the statute as to all the copart- ners. Houser v. Irvine, 3 Watts & S. 345. Payment by one partner upon a partnership note which is a joint contract, within the period of the statute of limitations, will not bind the other partner where the firm has previously dissolved to the payee's knowledge. Gates v. Fisk, 45 Mich. 522. See, also, Cronkhite v. Herrin, 15 Fed. Rep. 888. In an action against a firm upon a draft accepted by the cashier of a bank, who was a member of the firm, and who made a partial payment on the same, held, that, to remove the statutory bar of statute of limitations, the burden was on the plaintiff to show in what capacity the acceptor acted in making such payment, whether as cashier or as a partner. Wood v. Barber, 90 N. C. 76. After a firm has been dissolved, partial payment on a firm debt, made by one partner to a party Gowan v. Forster, 3 B. & Ad. 507 ; Irving v. Veitch, 3 M. & W. 90; Turney v. Dodwell, 3 E. & B. 136. (gr) See Whitcomb v. Whiting, 2 Dougl. 652, and 1 Sm. L. C. ; 9 Geo. 4, ch. 14, § 1. The doctrine that payment by one partner took a debt out of the statute as against all was generally rested on the ground that the partner making the payment acted virtually as the agent for the rest. But the right of one of several co-debtors (whether they are pa: t lers or not) to make a payment on account of the joint debt is not derived from any au- thority conferred by the other debtors, for they have no right to prevent their co-debtor from l-eliev- ing himself from a liability to which he is subject as much as they. Moreover, admitting that the doctrines of agency are appli- cable to payments made by one of several co-debtors, it is impossible to justify, on that ground, the de- cisions which have just been no- ticed. They were all, it is said, based upon this, that a part pay- ment is evidence of a new promise to pay more (Bateman v. Pinder, 3 Q. B. 574). But upon what prin- ciple can it be held that, after a partnership is dissolved, one part- ner has any implied authority from his late partners to bind them by a fresh promise to pay an old debt? Assuming the debt to be already barreJ, the question can admit of no satisfactory answer, and yet the 617 *262 EIGHTS AND OBLIGATIONS. [BOOK II. Amendment Act payment by a surviving partner did not prejudice the estate of a deceased partner (A) any more than a payment by the executors of the deceased prejudiced the partners who survived; (i) for the excutors of a de- ceased partner are not liable jointly with the surviving partners. But if one of the surviving partners was an executor of the deceased, then a question of a different nature arose, turning not only on the effect of the payment as such, but on whether it was made by the survivors as surviving partners only, or as to one of them in his char- acter of executor also. (Jc) who has had dealings with the count, and is not such an acknowl- edgment of indebtedness as will bind the other copartners in refer- ence to the statute of limitations. Turner v. Ross, 1 R. I. 88. S., being liable for the debts of a firm, whether as a partner inter sese or as to third persons, after the firm went into liquidation gave to a partner of the firm an amount of money, to be applied by liini towards the, payment of the debts of the firm, such partner agreeing to pay the debts in full ; such part- ner made a part payment on a claim against the firm. Held, suf- ficient to take the case out of the statute of limitations as to S., though the claimant may have re- ceived no part of the identical money furnished by S., and though the whole of the money so fur-- nished may have been applied to the payment of other firm liabili- ties before any payment on the claims in suit. Burnet v. Snyder, 13 Jones & Sp. 577. (h) Atkins v. Tredgold, 2 B. & C. 23. (i) Slater v. Lawson, 1 B. & Ad. 396. (fc) See Braithwaite v. Britain, 1 firm and has had no notice of the dissolution, is evidence against all the partners to prevent the run- ning of the statute of limitations. Kenniston v. Avery, 16 N. H. 117; Buxton v. Edwards, 13-1 Mass. 567; Forbes v. Garfield, 32 Hun, 389. A statute of Rhode Island pro- vides that, "whenever any copart- nership shall be dissolved, it shall and may be lawful for any individ- ual who was embraced in such co- partnership to make a separate composition or compromise with any one or all of the creditors of such copartnership ; and such com- position or compromise shall be a full and effectual discharge to the debtor making the same of the whole of said debt, and be taken and considered, in reference to the other copartners, as actual payment of such debtor's proportion of the debts, whether the full amount of liis proportion of said debt be actu- ally paid or not." It also saves the creditor's action against the other copartners for ths balance due. Held, that a payment and compro- mise made by any one copartner is wholly on his own individual ac- 618 CII. II, SEC. III.] LIABILITY OF MEMBERS. : "263 Liability in equity of estate of deceased partner.— The effect of the statutes of limitation upon suits in equity against the executors of a deceased partner was not well settled. In Winter v. Lines, (I) Lord Cottenham expressed a doubt whether the executors could set up the statute where the surviving partner continued liable and had a right of contribution against them ; but in Way v. Bassett (m) the statute was successfully relied upon as a defense by the ex- ecutors of a deceased partner, although the surviving part- ners had by various payments kept the debt alive as against themselves. The law now is in accordance with the latter decision, (n) Alterations introduced by 19 and 20 Yictoria, chapter 97._By the Mercantile Law Amendment Act, 19 and 20 Victoria, chapter 97, it is enacted as follows: § 13. In reference to the provisions of the acts of 9 George 4, chapter 14, sections 1 and 8, and 16 and 17 Victoria, chapter 113, sections 24 and 27 (Irish), an acknowledgment or promise made or contained by or in a writing signed by an agent of the party chargeable thereby, duly author- ized to make such acknowledgment or promise, shall have the same effect as if such writing had been signed by such party himself. Payments by one of several co-debtors.— § 14. In reference to the provisions of the acts 21 James 1, chapter .16, section 3; 3 and 4 William 4, chapter 42, section 3, and 16 and 17 Victoria, chapter 113, section 20 (Irish), when there shall be two or more co-contractors or co-debtors, whether bound or liable jointly only, or jointly and severally, or exec- utors or administrators of any co-contractor, no such co-contractor or co-debtor, executor or administrator shall lose the' benefit of the said enactments, or any of them, so as to be charge*able in [*263] respect or by reason only (o) of payment of any principal, inter- est or other money, by any other or others of such co-contractors or co-debtors, executors or administrators. Effect of above statute on partners.— The above stat- ute, it will be observed, has materially altered the law as Keen, 206, where the payment pre- (/) 4 M. & Cr. 101. vailed ; Way v. Bassett, 5 Ha. 55 ; (m) 5 Ha. 55. .Brown v. Gordon, 16 Beav. 302, (n) 19 aDd 20 Vict. ch. 97, § 14, where it did not. See, further, infra. Griffin v. Ashby, 2 Car. &Kir. 139; (o) See, as to this word, Cockrill Atkins v. Tredgold, 2 B. & C. 23. v. Sparks, 1 H. & C. 699. 619 ^2G3 EIGHTS AND OBLIGATIONS. [BOOK II. regards the effect of acknowledgments and part payments. An acknowledgment by an agent being now sufficient to affect bis principal, acknowledgment by one partner will, it is apprehended, be regarded as an acknowledgment by the firm; and notwithstanding section 14 a part payment by a partner will probably be regarded as a part payment by the firm, (p) But after a dissolution a part payment by a continuing or a surviving partner will not prevent a retired partner, {q) or the executors of a deceased partner, (r) from availing themselves of the statute; and the same is true of an ac- knowledgment, (s) (pJSee Goodwin v. Parton, 42 L. T. 568; Watson v. Woodman, 20 Eq. p. 730. (q) Ibid. 721. (r) Thompson v. Waithman, 3 Drew. 028, in which the surviving partner was the sole executor of the deceased. In this case section 14 of the act in question was treated as having a retrospective operation, and as destroying the effect of a payment made before the act passed. This, however, was a mistake. In every other re- spect the case is good law. As to the non-retrospective operation of section 14 of the statute, see Jack- son v. Woolley, 8 E. & B. 773; Flood v. Patterson, 29 Beav. 295. (s) If in any case it could be 6hown that a continuing or sur- viving partner was in point of fact authorized to act for the late part- ner or his executors in making ac- knowledgments or payments, the case would be different. 620 ^CHAPTER III. [* 26 ±] OF ACTIONS BETWEEN PARTNERS AND NON-PARTNERS. General observations.— In order to complete the sub- jects discussed in the preceding chapters it is necessary to examine the remedies by which rights and obligations be- tween partners and non-partners can be enforced. It is unnecessary to dwell upon criminal prosecutions, for although partners may be prosecutors or prosecuted, in re- spect of criminal offenses, the fact that they are partners has little, if any, effect on their position in a criminal point of view. The remedies which alone are of sufficient importance to require consideration in a treatise like the present are ac- tions, defenses by way of set-off, proceedings to enforce judgments, and proceedings in bankruptcy. The subject of bankruptcy will be discussed hereafter, and the present chapter will therefore be confined to actions, set-off and execution. Section I. — Actions by and against Paetnees. General observations. The Judicature Acts, 1873 and 1875, and the rules of the supreme court, 1883, have materially altered and improved legal proceedings by and against partnerships and unincor- porated companies. 1. There is now no distinction between legal and equi- table rules as regards parties to sue and be sued, (a) 2. No action can be defeated by reason of the misjoinder (a) See Supreme Court Rules, 1883, Order xvi. 621 •205 PJGIITS AND OBLIGATIONS. [BOOK II. or non-joinder of parties; (7>) and picas in abatement are abolished, (c) If too many or too few persons join [' X '2G5] as plaintiffs, and the defendant can show that he is thereby prejudiced, he can apply to have the im- proper plaintiffs struck out or the proper plaintiffs joined, as the case may be. (d) l {!>) Orel, xvi, r. 11. See ante, p. 193, n. (k). (c) Orel, xxi, r. 20. If one only of several joint con- tractors is sued lie can require the others to be made defendants. Pilley v. Robinson, 20 Q. B. D. 155. (d)Ord. xvi, r. 11. 1 The partners must all join as plaintiffs in an action at law to en- force a partnership claim ; and this whether the action is brought be- fore or after the dissolution of the partnership. No others should be joined as plaintiffs. Gallot v. McCluskey, 18 La. Ann. 259; Cochran v. Cunningham, 1G Ala. 448; Dob v. Halsey, 10 Johns. 34; Snodgrass v. Broadwell, 2 Litt. 353: Wright v. Williamson, 3 N. J. L. 978; Shutts v. Chaffee, 48 Wis. 617, Gage v. Rollins, 10 Mete. 348; Holt v. Kernodle, 1 Ired. L. 199; Wiley v. Logan, 95 N. C. 358; Bigelow v. Reynolds, 36 N. W. Rep. 95; S. C. 12 West. Rep. 659; Venal v. W. Va. Oil Co. 110 U. S. 215; Clapp v. Pawtucket Institution, 4 New Eng. Rep. (R. I.) 97; Bischoff v. Blease, 20 S. C. 4G0 ; Coffee v. Eastland, 1 Brunner, 216; Fish v. Gates, 133 Mass. 441 ; Hammersmith v. Hil- ton, 8 Mo. A pp. 564; Slutts v. Chafee, 48 Wis. 617. See, also, Moore v. Watts, 81 Ala. 261 ; Pear- son v. Parker, 3 N. H. 3G6. In a suit by a partnership upon a contract it must appear that all who sue were partners at the time of making the contract; one sub- sequently admitted to the firm can- not join in the action although it were agreed as between the part- ners that he should become equally interested with the others in all the existing property and rights, unless at his admission a new and bind- ing promise has been made to pay to the new firm. This principle applies with great strictness where the contract is by specialty. Fire- men's Ins. Co. v. Floss, 67 Md. 403. Where plaintiff, being a member of a copartnership, brings suit in his own name for goods shipped by the firm and mixed with some of his own, if, before trial, it was shown that he acquired title from the copartnership to the goods in question, he can maintain the ac- tion. Lance v. D^^acon, 15 Phil. 318; S. C. 39 Leg. Intel. 178. Where, however, a publication is libelous per se as to a partnership, one partner may maintain an indi- vidual action for the injury to him- self therefrom. Rosenwaldi'. Ham- merstein, 12 Daly, 377. One of two partners cannot, in his own name, recover full dam- ages for a tort resulting in an in- terruption to the joint business. Farnum v. Ewell, 59 Vt. 327. Where a client retains one mem- ber of a firm of attorneys alone an action for the fees is properly 622 Cn. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. -205 3. All persons may be joined as plaintiffs or as defend- ants, in or against whom the right to any relief claimed is brought by the firm. Jackson v. Bohrman, 59 Wis. 40'2. So, if property held by a firm under pledge is taken from the manual possession of one partner he alone cannot replevy it. The action must be in the name of the firm. Saul v. Kruger, 9 How. Pr. 569. Where one of several partners, to whom an indemnity is given, is compelled by legal proceedings to pay out moneys on account of a demand against his firm, the ac- tion to recover back the moneys thus paid may be brought in the name of all the members of the firm. Hill v. Packard, 5 Wend. 375. Four persons formed a partner- ship in the ice business under the name of G., H. & Co., and trans- acted their business in Charles- town. Mass. The same persons and 0. afterwards, by written arti- cles, formed a partnership under the name of C. & Co. in the busi- ness of shipping ice to Mobile, Ala., and selling it there. By these arti- cles G., H. & Co. were to ship ice to Mobile consigned to C. & Co., and C. was to devote his personal attention to the sale of the ice there, and C. & Co. were to pay from the proceeds of the sales, to G., H. & Co., a certain price per ton for the ice shipped at Charles- town, and also to pay rent for an icehouse in Mobile, and all freights and expenses on the ice shipped, and all expenses of discharging and transporting it from the vessels to the icehouse, and all other expenses of taking care of and selling it ; and the proceeds of the sales, after de- ducting all said expenses, were to be equally divided between C. and the firm of G., H. & Co. R. made an agreement with the firm of G. . H. & Co. to transport a cargo of ice for them from Charlestown to Mobile, but did not fulfill his agree- ment, and the four members com- posing that firm brought an action against him to recover damages for breach of that agreement. Held, that the action could not be maintained without joining C. as plaintiff. Gage v. Rollins, 10 Mete. 348. One partner cannot recover against a sheriff for levying upon the firm property on an execution against his copartner. Hughes v. Boring, 16 Cal. 81. Where a written contract is en- tered into by an individual to do certain work, in a suit by him to recover the price of the work the defendant may show that the plaintiff hod a partner in the job, and that the partner had been paid in full. Shepard v. Ward, 8 Wend. 542. A firm may do business under the name of one partner alone, and can sue in all their names on a contract made in the name of such one alone. Martin v. Johnson, 8 Daly, 541. A complainant filed a bill for strict foreclosure against a town- ship claiming under a sale of land for taxes, and stated that he bought and held the premises as trustee for a partnership composed of him- self and two other persons whom he made defendants. Held, that 623 *265 EIGHTS AND OBLIGATIONS. [BOOK II. alleged to exist, whether jointly or severally, or in the al- ternative, {e) they should have been complain- ants instead of defendants. Jewell v. West Orange, 36 N. J. Eq. 403. Where a mortgage on a schooner was given to one partner individu- ally for the benefit of the firm, and by him transferred to the other partner, and the firm had possession of the vessel, an action of the firm for freight earned was held to be properly brought. Lord v. Bernier, 4 Legal News (Mon- treal), 182. (See S. C. R. '81). Where the plaintiffs, three in number, claimed personal property under a mortgage of it to the firm , whose name was identical with that of one of them, but there was no evidence that the plaintiffs composed such firm, or that any interest in the mortgage had been assigned to the other two, held, that misjoinder of parties was a good defense. Matthews v. Snif- fen, 10 Daly, 200. Where, upon a writ issued against the firm of '• R. & Co.," R. only appeared, and a verdict and judgment was taken against R., 6ued as "R. & Co.," the plaintiffs cannot subsequently have the judgment amended so as to include C, a member of the firm of R. & Co. The 'plaintiff must be taken, although he acted in ignorance of the facts, to have elected to sue R. alone, and was concluded by the form of the proceedings subse- quent to the appearance. Munster v. Cox, 10 L. R. App. Cas. 680; S. C. 55 L. J. R. (N. S.) Q. B. 108; 34 W. R. 461; 53 L. T. (N. S.) 474; S. C. nom. Munster v. Railton, 11 L. R. Q. B. D. 435: S. C. 19 Can. L. J. (N. S.) 370; 52 L. J. R. (N. S.) Q. B. 409; 31 W. R. 880: 48 L. T. N. S. 624; reversing S. C. 10 L. R. Q. B. D. 475. In a suit on an obligation pay- able to himself " & Co.," plaintiff, who carries on business as a firm, using after his name "& Co.," must allege and prove that he alone is interested in the business, or he will be nonsuited. Ferguson v. King, 5 La. Ann. 642. So, where a suit was brought in the name of certain persons, as composing a commercial firm, and the defendant excepted to the peti- tion upon the ground that all the members of the firm had not been joined in the action, held, that where it was shown that the name of one of the persons used in the style of the firm was omitted, the burden of proof was on the plaint- iffs to show that they alone com- posed the firm. Rugely v. Gill, 15 La. Ann. 509. After a guaranty had been made to a firm, one of its members re- tired, and the other partners paid the whole debt that the grantor had stipulated to relieve the firm of. Held, that the late partner was not an improper party to a suit on the guaranty. Brown v. Haven, 37 Vt. 439. If partners, as partners, are sure- ties for one who died insolvent, and a judgment against them on the note is satisfied by levy on the separate estate of one of them, the (e) Ord. xvi, rr. 1 and 4. 624 CH. Ill, SEC. I.] .ACTIONS BETWEEN PARTNERS. *265 4. A plaintiff may at his option join, as parties to the same action, all or any of the persons severally, or jointly claim against the estate of the de- ceased principal is correctly made by and in the name of the part- ners. Parker v. Gregg, 23 N. H. 416. A promise to one of a firm to re- fund money belonging to the firm inures to the benefit of the firm, and an action for it should be brought by the firm. Creel v. Bell, 2 J. J. Marsh. 309. Where a vessel was built by sev- eral individuals, and advances were made by two part owners who were partners out of the part- ner-hip funds, the liability of the other owners for such advances is to the firm and net to the several members of it. Stevens v. Lunt, 19 Me. 70. Where, after the institution of suit in the names of the members of a firm, one of them dies, it is not error to file subsequently a decla- ration in the names of all of them, and then suggest the death of the deceased member. Byrne v. Schwing, 6 B. Mon. 199. A commercial firm cannot de- mand in the same suit the payment of two promissory notes, although they are dated at the same place and on the same day, and both payable to the firm under its firm name, where it is shown that such firm was composed of different persons, when the indebtedness was created which formed the con- sideration of one note, from those persons who composed the firm when the indebtedness was in- curred which formed the consider- ation of the other note. It would be a case of distinct creditors join- ing in the same action their sepa- rate and distinr-t demands against the debtor. Dyas v. Dinkgrave, 15 La. Ann. 502. The rule first above stated is the same although the defendant, at the time of the purchase, was ig- norant of the existence of the partnership. Bennett V. Scott, 1 Cranch, C. C. 339. A dormant partner, however, need not be joined in a suit in favor of the firm against their debtor. Waite v. Dodge, 34 Vt. 181 ; Hilli- ker v. Loop, 5 Vt. 116; Wood v. O'Kelly, 8 Cush. 406 ; Clarkson v. Carter, 3 Cow. 84 ; Clark v. Miller, 4 Wend. 628; Rogers v. Kichiine, 36 Pa. St. 293; Curtis v. Belknap, 21 Vt. 433; Sylvester v. Smith, 9 Mass. 119; Wilson v. Wallace, 8 Serg. & R. 55 : Cleveland v. Wood- ward. 15 Vt. 302; Blin v. Pierce. 20 id. 25; Hagar v. Stone, id. 106; Speake v. Prewitt, 6 Tex. 252; Desha v. Holland, 12 Ala. 513. See, also;)fcookingham v. Lasher, 39 N. Y. 454; Bird v. McCoy, 22 Iowa, 549; Hines v. Dean, 1 Tex. App. (Civ.) 379; Pinchower v. Hanks, 18 Nev. 99: Boehm v. Calisch, 3 So. West. R. 293. See, however, Secor v. Keller, 4 Duer, 416. And it has been held that an ostensible partner may maintain an action in his own name without joining a dormant partner, although the latter was known to the defendant when the debt was contracted, and actually sold him the goods for the price of which the action was brought. Monroe v. Ezzel, 11 Ala. 603. If A., a member of a firm, deal Vol. 1 — 40 625 *265 EIGHTS AND OBLIGATIONS. [BOOK II. and severally, liable on any one contract, including parties to bills of exchange and promissory notes. (/) in his own name in business of the firm with B., who is ignorant of the partnership, B. may be sued for a demand against him arising from such dealing, either by A. alone or by the firm. And in a suit by the firm for such demand, B.'s right of set-off is the same as if B. had sued alone. Ward v. Leviston, 7 Blackf. 466. One of two partners of a law firm may maintain an action where the business respecting which a suit is brought is uniformly done in the name of the party suing. A set-off will be allowed in such suit of a demand against the firm. Piatt v. Halen, 23 Wend. 456. If a partnership, upon its dissolu- tion, convey all its effects to one of the firm, and after such dissolution and transfer a dehtor of the firm promise to pay the individual part- ner, he may maintain an action in his own name on the promise. Howell v. Reynolds, 12 Ala. 128. The liquidating partner of a commercial firm may' sue in his own name, by representing the claim sued on as arising out of the business of the late firm, so as not to deprive the defendant of any means of defense to which he would be entitled in a suit in the name of all the partners. White v. Jones, 14 La. Ann. 681. But it is held that, notwithstand- ing the firm business is done in the name of one partner, he alone can- not sue for the price of the goods sold by the firm, but the other acting and ostensible partners can- not join the co-plaintiffs. Wilson v. Wallace, 8 Serg. & R. 53. Where two partners were sub- jected to the payment of a debt of a third person, the one as surety and the other as the heir of a co-surety, which debt was paid from the partnership funds, held, that a separate action might be maintained by each against the principal for a moiety of t lie money paid. Gould v. Gould, 6 Wend. 263. No rule of pleading or practice authorizes a recovery by an indi- vidual member of a firm, in his own name, on what his partners agree is his share of a debt due the firm. In all cases of indebtedness to a firm the action must be brought by the members of the firm, nor does an agreement to divide the claims among them- selves change the right. American Cent. R. R. Co. v. Miles, 52 III. 174. But where two partners agree to divide a partnership debt, and the debtor consents to it, and promises one of the partners to pay a moiety to him, such partner may maintain an action for his moiety against the debtor. Blair v. Snover. 10 N. J. L. 153. A bill cannot be maintained by one member of a firm, before there has been a settlement of the part- nership accounts, against the mem- bers of another firm, for the pay- ment of complainant's share of an indebtedness by the lattei*. firm to the firm of which he is a member. Corner v. Gilman, 53 Md. 364. A dissolution of a partnership by (/) Ord. xvi, r. 6. 626 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. *265 5. Claims by plaintiffs jointly may be joined with claims by them or any of them separately against the same may be entitled to the proceeds, if the claim itself has not been ap- plied to extinguish the debt due such partner. White v. Savery, 50 the death of one of the partners, or otherwise, and an adjustment of the partnership concerns, will not bs such a severance of a joint de- mand in favor of the partnership as will entitle either partner, or his executor or administrator, to sue alone for his share, without the consent of the debtor to such sev- erance ; but all the partners, if liv- ing, must join in the action; and if any of them be dead the action must be brought by the survivor or survivors. Peters v. Davis, 7 Mass. 257; Austin v. Walsh, 2 id. 405. Whei*e, after the dissolution of the firm, one partner bi'ought suit in his own name for breach of con- tract made with the firm, and the allegations of his petition as to his right to sue in his own name were vague, but it was proved at the trial that the firm had been dis- solved by agreement and that the plaintiff as continuing partner suc- ceeded by the terms of the agree- ment to all the rights of the firm, held, that the evidence implied a defect in the petition. Milne v. Douglass, 5 McCrary, C. Ct. 401 ; S. C. 17 Fed. Rep. 482. One partner cannot maintain an action to recover a debt due to the firm, although he agreed to be re- sponsible to the other partner for the payment of the debt, there hav- ing been no settlement between the partners making the claim a separate one. Cushing v. Marston, 12 Cush. 431. An action on a claim due a firm may be maintained in the firm name, although one of the partners Iowa, 515. Where a suit is brought by sev- eral as partners, and one of them proves not to have been a partner and not a proper party, a verdict for all cannot be sustained. Travis v. Tobias, 8 How. Pr. 333. Where one partner, who is agent of his copartners, makes a contract in his own name, he may sue on that contract without joining his partners. Elancy v. French, 1 Blackf. 353. An action for goods mortgaged to one partner to secure an indebt- edness to the firm of which he is a member is rightly brought in the name of the mortgagee alone. Trott v. Irish, 1 Allen, 481. A partner who, by express stip- ulation in the articles of partner- ship (for the cultivation of a farm for a term of years), has " a lien on the produce of the said farm, and upon the stock and mules on said farm, to secure the payment of " his copartner's notes for a half in- terest in them, and is authorized "to control the crops grown on said farm exclusively, and to sell the cotton," may maintain an ac- tion of detinue for the cotton in his own name. Pierce v. Jackson, 56 Ala. 599. In an action upon a note payable to the order of the plaintiff alone he was nonsuited, on the ground that the evidence showed that the money for which the note was given was advanced, and the note 627 '265 EIGHTS AND OBLIGATIONS. [BOOK II. defendant, (g) provided no inconvenience is thereby occas- ioned. (A) 6. Parties required by a defendant to be joined for his in- demnity or relief by way of contribution may be brought before the court. (?') 1. Where there are numerous parties having the same in- terest in one action, one or more of them may sue or be sued on behalf of all. (/.:) 8. Any two or more persons claiming or being liable as co- partners may sue or be sued in the names of the firms of which thev were members when the cause of action accrued; (I) 1 given, in pursuance of a contract been several changes in the plaint- between the defendants and a firm of which the plaintiff was a mem- ber ; and that therefore the plaintiff could not maintain an action alone, even if his partner, as between themselves, had no interest in the note. Held, that the nonsuit was error. Mynderse v. Snook, 53 Barb. 234. A partner making a sale is not a necessary party to an action by one memb'er of a dissolved partnership against a purchaser from the other of certain partnership property, in which the plaintiff denies the right of his former partner to convey the entire interest in the property and sues for the value of his interest. Hagendobler v. Lyon, 12 Kan. 276. As to when objection for defect iff firm, see German Bank v. Schloth, 59 la. 316. As to parties to a bill filed by a copartnership in which parties other than the partners have an in- terest by purchase or otherwise, see Ruffner v. Hewitt, 14 W. Va. 737. Upon a debt due to a partnership of four persons, two of the part- ners recovered judgment. Held, that the four partners might main- tain an action to vacate a fraudu- lent conveyance by the judgment debtor which in appearance pre- vented the judgment from being a lien on the land. Fuller v. Nelson, 28 N. W. R. 511 ; S. C. 35 Minn. 213. (g) Ord. xviii, r. 6. (h) Id. r. 7. (£) Ord. xvi, r. 48, et seq. Seo of parties plaintiff in an action on Birmingham Land Co. v. L. & N. a contract by partners must be taken, see Davis v. Chouteau, 33 Minn. 548. "Where, in the title of a cause, the individual names of partners are given, followed by the word " partners," it is unnecessary to re- peat the names in the body of the petition. King v. Bell, 13 Neb. 409. As to who should file a claim for a mechanic's lien where there have W. Rail. Co. 34 Ch. D. 261. (k) Ord. xvi, r. 9. (I) Id. rr. 14 and 15. 1 Partners cannot sue nor be sued in their copartnership name; the individual names must be stated in full. Blackwell v. Reid, 41 Miss. 103; Tomlinson v. Burk, 10 N. J. L. 295; Seeley v. Schenck, 2 N. J. L. 75; Crandall v. Denny, id. 137; Burns v. Hall, 3 N. J. L. 984; Bent- 628 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. ^265 and provision is made for the discovery of the individuals so suing or being sued, (m) ley v. Smith, 3 Cai. 170; Tomlinson v. Burke, 10 N. J. L. 295 ; Porter v. Cresson, 10 Serg. & R. 257 ; Pate v. Bacon, 6 Munf. 219 : Marshall v. Hull, 8 Yerg. 101 : Smith v. Can- field, 8 Mich. 493; Barber v. Smith, 41 Mich. 138; Davis v. Hubbard, 4 Blackf. 50 ; Hughes v. Walker, id. 50 : Faulkner v. Whitaker, 15 N. J. L. 438; Livingston v. Harvey, 10 Ind. 218: Holland v. Butler, 5 Blackf. 255; Richardson v. Smith, 21 Fla. 336; Adams v. May, 27 Fed. Rep. 907 ; Bannerraan v. Quacken- bush, 11 Daly, 529. See, also, Bischoff r. Blease, 20 S. C. 460. Non-joinder of proper defendants in an action against the partner- ship can only be raised by plea in abatement. Rutter v. Sullivan, 25 W. Va. 427 ; Coffee v. Eastland, 1 Brunner, 216. In New York the objection must be taken by answer or demurrer. Wotherspoon v. Wotherspoon, 49 N. Y. Super. Ct. 152. When a suit is brought in the firm name, the individuals com- posing the firm being stated in the petition, no necessity exists of proving who composes the firm, unless the partnership is denied under oath. Lindsay v. Jaffray, 55 Tex. 626. One cannot maintain an action in his own name for services ren- dered both in his individual capac- ity and also while a member of a firm, on the dissolution of which he had acquired the interest of the retiring partner. Mosgrove v. Gol- den, 101 Pa. St. 605; S. C. 13 Weekly Not. Cas. 133; 40 Leg. Intel. 201. Where an agent employs another to aid him in his agency the person so employed does not become a partner of the agent as to the prin- cipal, and the agent may sue the principal for commissions without joining such person with him. Flournoy v. Williams, 68 Ga. 707. Where plaintiff, assuming to act not as a corporation, but as a part- nership, sues by a name importing a corporation, the point may be raised by an answer alleging want of parties in interest to the suit. Heaston v. Cincinnati, etc. R. R. Co. 16 Ind. 275. Where partners sue, if their in- dividual names appear in the peti- tion the name of the firm may be used in the citation. Andrews v. Ennis, 16 Tex. 45. A summary process in South Carolina, brought in the mercan- tile name of a firm, without setting out the partnership or the Christian names of the partners, is bad upon exception by plea, but not on mo- tion for nonsuit. Martin v. Kelly, Cheves, 215. A declaration in behalf of or against a partnership, by the name of "firm," without mentioning the names of the partners, is good after verdict. Pate v. Bacon, 6 Munf. 219; Seitz v. Buff urn, 14 Pa. St. 69; Wolf v. Lamborn, 17 Weekly Not. Cas. 425; Davis v. Kline, 76 Mo. 310. Compiled Laws of Michigan, sec- (m) Ord. xvi, rr. 14 and 15, and law, Woolf v. City Steamboat Co. Ord. vii, r. 2. See, as to the old 7 C. B. 103. 629 *265 EIGHTS AND OBLIGATIONS. [book n. Actions in the mercantile name. — With reference to this last rule it is to be observed that the firm's name, when used tion 5307, permits a partnership suit to be instituted in the firm name if the names of the partners are not known, and allows of amendment at any time before pleadings are closed by inserting the names of the partners. Held, that this applies to cases of actual partnership only; and where a writ of replevin was issued in a firm name and the amendment showed that there was only one plaintiff, the action failed. Stir- ling v. Heintzman, 42 Mich. 449. An action in which judgment was rendered was brought in Nevada, and the complaint therein described the plaintiffs as partners ; pending the action the partnership was dissolved and the judgment was rendered in favor of the plaint- iffs individually. Held, that the judgment was valid. Stewart v. Spaulding, 72 Cal. 264. Section 2468, Criminal Code of California, forbidding the mainte- nance of actions by partners who have failed to file the certificate required by that section, does not apply to actions for torts. Ralph v. Lockwood, 61 Cal. 155. Entry of appearance by defend- ants, four partners, in the name of "The Turner Casing Company," held to be an appearance not only by the company but also by its members. Packing & Pro- vision Co. v. Casing Co. 34 Kan. 340. A complaint brought in a firm's name, but not stating the names of the members of the firm as plaintiffs, is defective and can be demurred to, but the defect cannot be availed of by appeal. Gilinan v. Cosgrove, 22 Cal. 356. Where a foreign firm is sued in its firm name, and answers, and a verdict is taken upon the defense set up in the answer, without ob- jection to the irregularity, they will be deemed to have waived their strict legal right to object. Brownson v. Metcalfe, 1 Handy (Ohio), 188. A judgment against a partner- ship in its firm name alone will support an action against an indi- vidual member of the firm to en- force his individual liability for the firm debts. Cox v. Harris, 48 Ala. 538. It is not competent for parties, by articles of agreement between themselves, to invest such person as a majority of them shall after- wards appoint with power to sue in his own name for moneys agreed to be contributed by each partner to the general fund. Fortune v. Brazier, 10 Ala. 791. In an action by a partnership the record must show the individ- ual names of the several partners, although the statute (Code of 1876, § 3038) dispenses with the necessity of proving them unless denied by plea verified by affidavit, and also (§ 2904) authorizes a suit against a partnership by its firm name. Moore v. Burns, 60 Ala. 269. In a suit by a partnership the names of the partners who compose the firm should be distinctly stated. Therefore, when in such a suit the record does not show the Christian names or surnames of the persons composing the firm, nor anything 630 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. *265 in any action, is merely a convenient method of expressing the names of those who constituted the firm when the cause else upon which an amendment may be based, it is error to render judgment by default. Lanford v. Patton, 44 Ala. 584. By Nebraska Code, section 24, a partnership not incorporated may sue in its firm name, but the course indicated by sections 25 and 26, must be strictly followed ; in partic- ular it must be shown that the com- pany is formed for business pur- poses, etc., and is not incorporated, and security for costs must b3 given. Burlington, etc. R. R. Co. v. Dick, 7 Neb. 242. Suit in the name of "Hanson Gregg, Albert Torrian and Mason Gregg, late copartners, under the firm name and style of Gregg, Tor- rian & Co., plaintifTs," held, on demurrer, not brought under the provisions of section 24, chapter 57, General Statutes, and it was not necessary that plaintiffs should state that such partnership " was formed for the purpose of carrying on trade or business, or for the purpose of holding any species of property in this state." Smith v. Gregg, 2 N. W. Rep. (N. S.) 459; S. C. 9 Neb. 213. A proper construction of section 1 of the " act regulating suits by and against companies and part- ners," authorizing suits by and against companies not incorporated in the firm name, limits its opera- tion to companies formed for and doing business or holding property within this state. Haskins v. Al- cott, 13 Ohio St. 210. In Iowa, where a note is made payable to a firm by its name, it is advisable to declare thereon in the name of the firm ; but if the names of the several partners are set out it is not necessary to prove them. Gordon v. Janney, 1 Mori-. 182; Bernard v. Parvin, id. 309. In Iowa and Ohio partnership may be sued in the individual names of its members, as well as in its copartnership name. Mark- ham v. Buckingham, 21 Iowa, 494 ; Johnson v. Smith, 1 Morr. 105; Abernathy v. Latimore, 19 Ohio, 28G. The statute of Alabama, which authorizes an action at law against a partnership by the common name without mentioning the names of the individual partners, applies to actions commenced by attachment. McCaskey v. Pollock, 82 Ala. 174 ; S. C. 2 So. Rep. 674. Under the Illinois attachment law partners may be sued in their firm name. U. S. Express Co. v. Bedbury, 34 111. 459. In an action by partners it is not necessary to describe them as such in the writ. Tarlton v. Her- bert, 4 Ala. 359. Describing the plaintiffs in a title to an action as partners is surplus- age where the suit is not upon a partnership matter ; and an allega- tion of compliance with the law relative to filing and publishing notice of the partnership is un- necessary. Lee v. Orr, 11 Pac. Rep. 745. Where an action was brought against "Albany Lodge, No. 24, Free and Accepted Masons," and "Albany Chapter, No. 15, Royal Arch Masons," without alleging either that the defendants were 631 *265 EIGHTS AND OBLIGATIONS. [BOOK II. of action accrued. The rule does not incorporate the firm;(n) so that if A. is a creditor of a firm, B., C. and corporations, or that the members were partners, held, that there was no party defendant, and a de- murrer was properly sustained. Barbour v. Albany Lodge, 73 Ga. 474. Where plaintiffs sue as partners, their right to sue as such depends upon the existence of a partner- ship, which therefore is an issuable fact and must be alleged in the declaration. Bischoff v. Blease, 20 S. C. 460. An averment that the plaintiffs for several years past have been and now are copartners, doing busi- ness under the firm name and style of "A. Pfister & Co.," is a suffi- cient averment of copartnership. Pfister v. Wade, 69 Cal. 133. In a complaint stating that " the plaintiffs complain of the defend- ants and say that they are part- ners," etc., the personal pronoun was held to refer to the plaintiffs, and the complaint in this respect was held sufficient on demurrer. Moore v. Beem, 83 Ind. 219. As to the form of complaint in an action by or against partners doing business under a fictitious name, see Phillips v. Goldtree, 13 Pac. R. 313; 15 id. 451; Lee v. Orr, 70 Cal. 398. See further as to the manner of describing plaintiffs in an action by a partnership, McCord v. Seale, 56 Cal. 262 ; Sweet v. Erwin, 54 la. 101; Smith v. Gregg, 9 Neb. 212 (under sec. 24, ch. 57, Gen. Stat. Neb.) ; Putnam v. Wheeler, 65 Tex. 522 ; Moses v. Hatfield, 3 So. East. Rep. 538; Wise v. Williams, 72 Cal. 544. In an action against pei'sons for a cause of action which arose while they were partners, plaintiff may sue them in their late firm name, although the partnership was dis- solved before the writ was issued. Wilson v. Roger, 10 Ont. Pr. 355; S. C. 4 Can. L. T. 548. As to the verification of the an- swer in an action against paitners, see Lacy v. Wilkinson, 7 N. Y. Civ. Proc. 104. As to the description of a de- fendant firm in a declaration, see Morrissey v. Schindler, 18 Neb. 672. As to the manner of describing the defendants in a bill against the members of a firm after its disso- lution, see Vance v. Kirk, 29 West Va. 345; S. C. 1 So. East. Rep. 717. Partners, as a general rule, may be declared against as other .joint contractors, only care must be taken that all the causes of action be alleged to be joint. Hawley v. Hurd, 56 Vt. 617. Pleadings upon a complaint charging a partnership, and ask- ing for an accounting, considered. McMahon v. Thornton, 4 Mont. 36. Defendants were sued as a cor- poration. There was no such cor- poration, but there was a copart- nership under the same name as the alleged corporation. Process was served on one partner as treas- (n) See per James, L. J., in Ex was taken, see Bullock v. Caird, L. parte Blain, 12 Ch. D. 533. As to R. 10 Q. B. 276. the Scotch law from which the rule 632 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. *265 D., and D. retires and E. takes bis place, and the name of the firm continues unchanged, A. cannot maintain an urer of the alleged corporation and the defendants appeared and pleaded nul tiel corporation; the court allowed the plaintiff to amend his writ by setting up the defendant company as a copartner- ship, naming the copartners. Held, that this was error. Sawyer v. N. Y. St. Clothing Co. 2 Atl. R. 483. Where a firm, upon a change of its membership, adds the word "limited" to the firm name, and thereafter brings an action for a debt due to the firm as newly con- stituted, but without using that word in the petition, the petition may be corrected during the trial by adding the word to the plaint- iff's name. Paine v. Waterloo Gas Co. 28 N. W. R. 560. Where a firm has received money, and, after its dissolution, a bill is filed against the persons who con- stituted the firm to compel them to refund the money, although it is usual, it is not necessary to de- scribe them as lately doing business under a certain name. "Vance v. Kirk, 1 S. E. R. 717. In an action by partners of the same surname, it is not error if it is not added to every Christian name. Chance v. Chambers, 2 N. J. L. 384. Plaintiffs may join in one suit several demands for debts con- tracted with them by the defend- ant under different firm names. Messner v. Lewis, 20 Tex. 221. As to multifariousness in joining distinct causes of action against different firms, see Sanborn v. Dwinell, 135 Mass. 236. Where a note or bill is payable to a firm, strict proof is required that the firm consists of the plaint- iffs on the record. M'Gregor v. Cleveland, 5 Wend. 475. In an action against D. and M., the writ described them as late co- partners under the firm name and style of " D. & Co.," and the decla- ration alleged that they made a promissory note signed D. & Co. D. alone appeared and filed a gen- eral denial. Held, that the signa- ture to the note was alleged to be that of D., and that under the stat- ute of 1877, chapter 103, the genu- ineness of the signature was ad- mitted, and it was not necessary for the plaintiff to prove that D. was a member of the firm of D. & Co. Haskins v. D'Este, 133 Mass. 356. As to the manner of declaring upon a partnership note and put- ting its execution in issue, see, also, Lucas v. Baldwin, 97 Ind. 471 ; McRobert v. Crane, 49 Mich. 483., As to what allegations in a plea admit the existence of a partner- ship, see Porter v. Graves, 104 U. S. 171. As to when a plea of non est fac- tum is necessary in a suit against partners, see Palmer v. Scott, 68 Ala. 380. See, also, King v. Bar- bour, 70 Ind. 35. One partner cannot assign his interest in an open account due to the firm to his copartner, and the latter may become the real party in interest so as to maintain a suit on the account in his own name. Swails v. Coverdill, 17 Ind. 337; Cook v. Beach, 10 Humph. 412. But see Horbach v. Huey, 4 Wc.tts, 455. One partner cannot maintain an 633 *2Q6 EIGHTS AND OBLIGATIONS. [book II. [*266] -action against B., C. and E. in the name of the firm, unless B., C. and E. have become or are content to be treated as his debtors. In the case supposed an action against the firm would mean an action against B., C. and D., *. e., A.'s real debtors. Where there have heen no changes in the firm. — Where there have been no changes amongst the members of a firm since the cause of action accrued there is no difficulty in following the rules. The writ may be served either upon any one or more of the partners, or at the principal place of business of the firm, upon any person having the control or management of the partnership business there. (<>) Appear- ances are entered by the partners in their own names, but subsequent proceedings continue in the name of the firm, (p) If all the members of the firm have properly appeared, judgment may be entered up against the firm, (q) but not otherwise, {r) action in his own name alone to recover a partnership debt, al- though his copartners' interest has been assigned to him, without showing that the debt to the firm has been extinguished, and a new liability assumed to the plaintiff alone; and if a new contract be made it must be declared on spe- cially. De Grott v. Darby, 7 Rich. 118. An indorsement by one partner in his individual name, to his co- partner, of a promissory note pay- able to both of them or order, will not enable the indorsee to sue thereon in his own name. Esta- brook v. Smith, 6 Gray, 570. In a suit by the plaintiff as as- signee of a firm on a promissory note against the maker, the decla- ration need not state the names of the persons composing the firm. Smith v. Blatchford, 2 Ind. 184. A judgment in favor of "L. & M.," trading as a firm, is valid, and is competent evidence, in a suit brought by the firm, that the judg- ment was recovered by the part- nership, their individual names being set out in full. Lash v. Ar- nold, 8 Jones, L. 91. (o) Ord. ix, r. 6. See, as to foreign firms, Pollexfen v. Sibson, 16 Q. B. D. 792 ; Baillie v. Goodwin, 33 Ch. D. 604; and as to lunatics, Fore Street Warehouse Co. v. Durrant & Co. 10 Q. B. D. 471. (p) Ord. xii, r. 15. (q) Id. ; Jackson v. Litchfield, 8 Q. B. D. 474. (r) Adam v. Townend, 14 Q. B. D. 103; Jackson v. Litchfield, 8 Q. B. D. 474 : Minister v. Cox, 10 App. Ca. 680, affirming Munster v. Rail ton, 11 Q. B. D. 435. As to execution, see infra, § 3. 634 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. " :: "2G7 Where there have been changes. — Where changes have occurred amongst the members of the firm since the cause of action accrued, little, if any, advantage is derived from using the name of the firm. If an action is brought against a firm, which the plaintiff knows has been dissolved before the commencement of the action, the writ must be served upon all the persons sought to be made liable, (s) If, as sometimes happens, the plaintiff sues a firm and obtains judgment against it, without having discovered that any changes have occurred in it since the cause of action ac- crued, he may find himself in a difficulty when he seeks to enforce his judgment. In such a case it may well happen that the person against whom he seeks to enforce it is not one of those mentioned in Ord. XLII, r. 10, and is, in fact, not liable to execution without further proceedings, if at all. (t) A debt due from a firm under a judgment recov- ered against *it in its mercantile name cannot be [*2G7] attached under the garnishee orders, (u) Two firms with common partner. — It frequently hap- pens that there are reasons which prevent the joinder as plaintiffs of all who pri/nafacie ought to be joined; in such a case those who cannot be so joined may be made defend- ants. 1 Thus, if a firm has a cause of action, and one meni- (s) Ord. xvi, r. 14. executed an assignment to his as- (t) See Munster v. Cox, 10 App. signee, his insolvent partners and Ca. 680, and infra, § 3, as to execu- such assignee must join in an ac- • tion. tion to collect a claim due to the (a) Walker v. Rooke, 6 Q. B. D. firm. Browning v. Marvin, 22 631. Hun (N. Y.), 547. 1 Where a demand exists in favor If one partner is omitted as of a partnership, and one of the plaintiff and made a party defend- part ners refuses to join in an ac- ant with another person not a tion for its enforcement, he may partner and not representing the be made a defendant with the interests of one, the court will not partnership debtor in a suit brought have equity jurisdiction as it re- by his copartner. Hill v. Marsh, spects the latter. Reed v. Johnson, 46 Ind. 218. 24 Me. 322. After one member of a firm has A decree of foreclosure against been adjudged a bankrupt and has the members of a partnership, as 635 •267 EIGHTS AND OBLIGATIONS. [BOOK II. ber has improperly released it, the other members can never- theless maintain the action, joining him as a defendant, so that justice may be done both to the plaintiffs and to their opponents, (a?) Again, there appears to be no reason why an action should not now be maintained for the recovery of a debt due from one partner to the firm; (y) nor why, if two firms have a common partner, an action should not be main- tained by one firm against the other; 1 not, perhaps, in their such, all the known memhers not being made parties to the suit, does not bind the firm. Lippincott v. Shaw Carriage Co. 25 Fed. Rep. 577. Where there were one hundred partners, who had executed mort- gages individually to the partner- ship to secure the debts of the concern, and some of the partners were dead, leaving numerous rep- resentatives, held, that assignees of such mortgages might foreclose by separate suits against each partner, without making the others parties. Boisgerard v. Wall, 1 Smed. & M. Ch. 404. (x) See the cases in the next note. (y) Piercy v. Fynney, 12 Eq. 69; Taylor v. Midland Rail. Co. 28 Beav. 287, and 8 H. L. C. 751, show that suits in equity would lie in these cases in aid of legal rights. See, also, Luke v. South Kensington Hotel Co. 11 Ch. D. 121; William- son v. Barbour, 9 Ch. D. 536, per Jessel, M. R. As to contracts with partners, which, although joint in form, are in point of law joint and several owing to the separate interests of the partners, see Palmer v. Mallet, 36 Ch. D. 411, a case of a contract by an assistant not to carry on business without the consent of the partners. 1 Where two companies are composed in part of the same in- dividuals no action at law can be maintained by one against the other. Portland Bank v. Hyde, 11 Me. 196 : Green v. Chapman, 27 Vt. 236; Griffith v. Chew, 8 Serg. & R. 30; Eastman v. Wright, 6 Pick. 321 ; Burley v. Harris, 8 N. H. 235; Graham v. Harris, 5 Gill & J. 489; Rogers v. Rogers, 5 Ired. Eq. 31 ; Beacannon v. Liebe, 11 Or. 443; Cal- vin v. Markham, 4 Miss. 343; Haven v. White, 39 111. 509 ; Englis v. Furniss, 4 E. D. Smith, 587. See, also, Denny v. Metcalf, 28 Me. 389. A balance of account due from one partnership to another, where the two partnerships are composed in part of the same individuals, may be assigned, and the assignee maintain an action at law to re- cover such balance, unless it ap- pears that a general accounting is necessary between the two firms to ascertain the same. Beacannon v. Liebe, 11 Or. 443. See, also, Pitcher v. Barrows, 17 Pick. 361 ; Scott v. Green, 89 N. C. 278. A complaint upon an assigned partnership account, which does not state the consideration for the assignment and does not aver a settlement of the partnership af- fairs, is sufficient upon a motion in 036 OH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. : -2cr mercantile names, but by those members of one firm which are not common to both against the members of the other firm; e. g., if there are two firms, A., B. and C. and A., D. and E., an action may, it is conceived, be now maintained by A., B. and C. against D. and E., or by B. and C. against A., D. and E., or vice versa, (s) Defenses to actions by partners founded on the conduct of one of them. — As a general principle, what a person has no right to do himself he cannot acquire a right to do by associating others with him. ((() Thus, it being a rule that a trustee cannot claim from his cestui que trust compensa- tion for trouble, or loss of time in the execution of the arrest of judgment. Kious v. Day, 94 Ind. 500. Plaintiff and D. were partners, and so were D. and defendant. The first firm owned a building which it rented to the second under a contract made between D. for the second firm, and plaintiff for the first, to the effect that de- fendant should pay plaintiff one- half the rent of the building. This contract defendant ratified. Held, that the plaintiff might recover the half rent from defendant with- out an assignment from D. ; that defendant's ratification dated back to the time it was made, and that plaintiff need not resort to equity for relief. Hernott v. Kersey, 69 la. 111. An action at law cannot be main- tained by the members of a firm on a written obligation for the pay- ment of money to them where one of the obligors is a member of the firm. Tindal v. Bright, Minor, 103. Under the statute of Mississippi, declaring all notes joint and sev- eral, a member of a firm may be a co-plaintiff in a suit on a promis- sory note against another firm of which he is a partner, provided he is not also joined in the action as defendant. Morris v. Hillery, 8 Miss. 61. The rule first above stated has been modified by statute in Penn- sylvania. See McFadden v. Hunt, 5 W. & S. 468; Hepburn v. Curt?, 7 Watts, 300 ; Tassey v. Church, 5 W. & S. 468 ; McConkey v. Rogers, Brightley, N. P. 450. (z) Before the Judicature Acts such actions could not be main- tained. Bosanquet v. Wray, 6 Taunt. 59S; 1 Wins. Saund. 2917*. But suits in equity could. See the cases in the last note. See as to the non-application of this rule at law to companies, Bosanquet v. Wood- ford, 5 Q. B. 310. As to estimating damages sustained by one firm by reason of being prevented from completing a contract made with another firm, some members being common to both, see Waters v. Towers, 8 Ex. 401. (a) See, in addition to the cases cited infra, ante, pp. 116, 117, and Salomons v. Nissen, 2 T. R. 674. 637 *268 EIGHTS AND OBLIGATIONS. [BOOK II. [*268] trust, it has been held that if one *of a firm of solicitors is a trustee, and the firm acts as solicitors in the matter of the trust, the firm cannot claim payment for its services; the disability of one of its members thus extending to them all. (b) So if one member of a firm is guilty of fraud in entering into a contract on behalf of the firm, his fraud may be relied on as a defense to an action on the contract brought by him and his copartners; for their innocence does not purge his guilt, (c) So if one partner resident abroad sells partnership goods, and he knows they are to be smuggled into this country, and he is privy to their being so smuggled, then, although his copartners are innocent, the firm cannot recover the price of such goods, (d) So if one of several partners draws a bill in his own name, and the bill is accepted upon condition that he will provide for it when due, he cannot, by indorsing that bill to the firm to which he belongs, entitle himself and his copartners to sue upon it. (e) In Astley v. Johnson, one of three part- ners purchased a bill in the partnership name, and under- took to pay for it at the end of a month. He remitted the bill to his copartners in England, and they sued upon it. The bill, however, had not been paid for as agreed, and it was held that the plaintiffs were not entitled to recover, and were in no better position without their copartner than they would have been had he been a co-plaintiff in the action. (/) Surviving partners prejudiced by conduct of deceased partner. — In such cases4as these the inability of the firm to sue is not removed by the death of the partner who has (&) See Broughton v. Broughton, (c) See Kilby v. Wilson, Ry. & 2 Sm. & G. 422, and 5 De G. M. & Mood. 178. G. 160; Christophers v. White, 10 (d) Biggs v. Lawrence, 3 T. R. Beav. 523; Collins v. Carey, 2 id. 454. 128; Matthison v. Clark, 3 Drew. 3. (e) Sparrow v. Chisman, 9 B. & See the exception in cases of litiga- C. 241 ; and see Richmond v. Heapy, tion, Cradock v. Piper, 1 Mc. & G. 1 Stark. 202. 664, and Re Corsellis, 34 Ch. D. (/) Astley v. Johnson, 5 H. & N. 675. 137. 638 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. *269 created the inability. Thus, in Ex parte Bell, (g) one of a firm advanced money of the firm to a stranger for an illegal purpose ; and it was held, after the death of the part- ner who advanced the -money, that the survivors [*269] could not recover it from the person to whom it was lent. So if a firm has become bankrupt, its trustee is in general in no better position than the partners themselves would have been in, and is therefore frequently liable to be defeated on similar grounds, (h) But the trustee of a bank- rupt partner can disaffirm and avoid such of his acts as are fraudulent as against his creditors, and consequently acts of this nature afford no defense to an action by the trustee and the solvent partner. Thus, in Ileilhut v. Wevill, (i) a solv- ent partner and the assignees of a bankrupt partner success- fully maintained an action for a bill of the firm, given by the bankrupt to a creditor of his own, under circumstances which amounted to a fraudulent preference. Frauds l)y one partner on the firm.— Owing to the old technical rules relating to the joinder of parties to actions, the principle above discussed was, moreover, applied at law to cases where it produced great injustice, viz., to cases where one partner acted in fraud of his copartners. For example, where a partner pledged partnership property, and in so doing clearly acted beyond the limits of his authority, still, as he could not dispute the validity of his own act, it was held at law that he and his copartners could not recover the property so pledged. (&) So although a partner has no right to pay his own separate debt by setting it off against a debt due from his creditor to the firm, yet if he actually agreed that such set-off should be made, and it was made accordingly, it was held at law that he and his copartners could not afterwards recover the debt due to the firm. (I) (g) 1 M. & S. 751. See, abo, (k) Brownrigg v. Rae, 5 Ex. 489. Brandon v. Scott, 7 E. & B. 237, (I) See Wallace v. Kelsall, 7 M. & and compare Innes v. Stephenson, W. 264; Gordon v. Ellis, 7 Man. & 1 Moo. & Rob. 147. Gr. 607. Compare Kendal v. Wood, (h) Jones v. Yates, 9 B. & C. 532. L. R. 6 Ex. 243, where the techni- (i) L. R. 4 C. P. 354. cal difficulty did not arise. 639 *270 EIGHTS AND OBLIGATIONS. [BOOK II. So where a firm of three partners deposited goods upon the terms that they were not to be parted with except on the joint authority of all three partners, and they were never- theless given up to one of them, it was held at law that the firm could sustain no action for the recovery of the goods, (rn) In such cases, as observed by Lord Tenterden in [""270] Jones v. Yates, (?i) there is no 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." In such cases as these, however, relief might have been had in equity ; (o) and it is apprehended that the cases at law above referred to can no longer be relied upon, the Judicature Acts having removed the technical difficulties which led to their decision. If a partner in collusion with a debtor to the firm gives him a receipt for his debt, although no payment or anything equivalent to payment is made, an action for the recovery of the debt is nevertheless maintainable by the firm, i. e., by the partner giving the receipt and his copartners, (p) For a receipt does not preclude the person giving it from showing that the money therein expressed to be received was not in fact received, (q) nor does it discharge the debt. Again, a right of set-off which might be pleadable to an ac- tion brought by one partner is not pleadable to an action by him and his copartners; (r) nor if one partner covenants not to sue for a partnership debt will this preclude him from joining with his copartners in an action for the re- (m) Brandon v. Scott,7 E. & B. 234. (p) Henderson v. Wild, 2 Camp. (ri) 9 B. & C. 532. And see Rich- 561 ; Farrar v. Hutchinson, 9 A. & mond v. Heapy, 1 Stark. 202. E. 641. (o) Piercy v. Fynney, 12 Eq. 69 ; (g) Skaife v. Jackson, 5 Dow. & Midland Counties Rail. Co. v. Tay- Ry. 290, and 3 B. & C. 421. lor, 8 H. L. C. 751, affirming Taylor (r) See infra, book ii, ch. 3, § 2. v. Midland Counties Rail. Co. 28 Beav. 287. 640 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. *271 covery of that debt, (s) In each of these cases there is only a right of cross-action against the one partner; and al- though such right might be relied on as a defense to an. action by him alone, it is held not to affect the firm to which he belongs. Result of the decisions. — The conclusion to be drawn from the foregoing cases appears to be that the conduct of one partner affords a defense to an action by him and his copartners, or by them without him, where they are bound by his act, either by adopting and seeking the bene- fit of it, (t) or upon the ground that it is on*ordinary [*271] principles of agency the act of the firm, and bind- ing upon him and his copartners accordingly. But the cases at law which go further than this cannot, it is submitted, be now relied upon. Power of one partner to act for the firm. — The power of one partner to act for the firm in legal proceedings may be conveniently noticed in the present place. One partner suing in the name of the firm. — A part- ner may sue in the name of himself and copartners without their consent; (u) 1 but if he sues against their consent he (s) See Walmsley v. Cooper, 11 A. partner. Ward v. Barber, 1 E. D. & E. 216. Smith, 423. (t) As in Ex parte Bell, 1 M. &S. Any member of a firm has the 751 ; Broughton v. Broughton, 5 De right to use the name of the firm G. M. & G. 160. in perfecting a mechanic's lien to (u) Whitehead v. Hughes, 2 Cr. which the firm is entitled ; and the & M. 318. And see Harwood v. validity of the lien is not impaired Edwards, Gow on Part. 65, note, by the fact that before the filing of where it was held by Chappie, J., the account for that purpose, in the that the action must be considered firm name, one of the members of as brought by all. See below, the firm has become sole owner of note (z). the claim and the account contains 1 Kuhn v. Weil, 73 Mo. 213. a recital of that fact, and declares The right of a partner to collect that he alone is entitled to the the debts of the partnership, and benefit of the lien. Jones v. Hurst, to commence suits for that pur- 67 Mo. 568. pose, is an incident to the partner- A defendant sued with another ship which survives the dissolu- as partners has no power to make tion, and is inherent in either his co-defendant, against his con- Vol. I — 41 641 >271 EIGHTS AND OBLIGATIONS. [BOOK II. must indemnify them against the costs, (x) So, one part- ner may defend an action brought against the firm, indem- nifying the firm against the consequences of so doing, if he acts against the will of other partners, (y) sent, a party to an appeal from an award in the latter's favor. Mono- han v. Lloyd, 2 Luzerne L. Reg. 140. (x) Whitehead v. Hughes, 2 Cr. 6 M. 318. (y) In Goodman v. De Beauvoir, 12 Jur. 989 and 1037, a solicitor em- ployed by a managing committee to defend a suit was held author- ized to enter an appearance for a member of a provisional commit- tee, who had made the managing committee his agents. See, fur- ther, as to the authority of one partner to enter an appearance for his copartner, Harrison v. Jackson, 7 T. R. 207 ; Morley v. Strombom, 3 Bos. & P. 254; Goldsmith v. Levy, 4 Taunt. 299. The author- ity has been doubted in America. See Hall v. Lanning, 1 Otto, 160. 1 When a suit is commenced against a firm one of the partners has power to employ an attorney to attend to the suit ; and an ap- pearance, entered by such attorney, will be binding upon the other partners. Bennett v. Stickney, 17 Vt. 531 ; Messinger's Appeal, 43 Leg. Intel. 101. See, also, Wheat- ley v. Tutt, 4 Kan. 240. The employment of counsel to • litigate the title to a mine does not, however, come within the limited powers vested in a mining partner ; but this rule does not ap- ply to incorporated mining associa- tions nor to partnerships formed under the statutes. Charles v. Eshleman, 5 Colo. 107. One member of a dissolved part- nership has no authority, unless specially given, to retain an attor- ney to defend the other members of the late firm in an action brought against them. Such authority does not result from the partnership it- self. Bowler v. Huston, 30 Gratt. 266. And after the dissolution of a partnership one of the parties can- not authorize an appearance for the other. Haslet v. Street, 2 McCord, 311; Loomis v. Pearson, Harp. 470. A declaration was served on one partner only, and he employed an attorney, and authorized him to give a cognovit, which he did for both, in good faith. The attorney being responsible, the court refused to set aside the judgment, but per- mitted the partner who had not been brought in to contest the validity of the claim. Grazebook v. McCreedie, 9 Wend. 437. The rule is different where the attor- ney is irresponsible. Groesbeck v. Brown, 2 How. Pr. 21. In an action against partners, on only a part of whom process has been served, a plea filed for defend- ants generally, without naming them, will not be considered as the plea of all. Boyce v. Watson, 3 J. J. Marsh. 498. The entry, by an attorney, of his general appearance for the defend- ants, in an action against a part- nership, must be construed to be an appearance for the partners as 642 CH. Ill, SEC. I.] ACTIONS BETWEEN PARTNERS. *272 One partner staying proceedings. — But if it is competent for one partner to sue for the firm, it is as competent to any other partner to stay proceedings, 1 or to put an end to the action altogether by means of a release ; and although the court will not allow this to be done by collusion with the defendant for the purpose of defrauding the other part- ners of their rights (see ante, p. 145), a release will be effect- ual where there is no fraud in the case. In Harwood v. Edwards, (2) one of three partners, with- out the knowledge or consent of the other two, brought an action in his name and theirs for the recovery of a debt due to the firm. The other two afterwards agreed with the defendant that proceedings should be stayed ; and the court held that this agreement bound all three; and pro- ceedings were stayed accordingl} r , although the partner who promoted the action disputed the validity of the agreement, and, by the partnership articles, it had been agreed between the partners that one *of them should [*272] not give a release without the assent of the others. Consenting to arbitration. — If an action is brought for the recovery of a debt due to the firm, one of the part- ners cannot bind the firm by consenting to a judge's order referring all matters in difference between the plaintiffs and the defendant to arbitration, (a) partners, and for the purpose of merit for the benefit of creditors, defending the action against the will not bind the other partners, partnership, and not as an appear- Atchison Savings Bank v. Templar, ance for the partners individually, 26 Fed. Rep. 580. severally and personally, so as to * A discontinuance of a suit by one render a judgment against the of two copartners will not be per- partnership, in such action, bind- mitted if done in fraud or in collu- ing on an individual partner in an- sion with the defendant or to the other jurisdiction, by whom such co-plaintiff's injury. Arnold v. appearance was not authorized. Green, 5 Atl. R. 503; S. C. 2 N. Phelps v. Brewer, 9 Cush. 390. Eng. R. 894. The entry by one partner of an (2) Gow on Part. 65, note, appearance for the firm after a dis- (a) Hatton v. Royle, 3 H. & N. solution thereof, and an assign- 500. 643 *272 EIGHTS AND OBLIGATIONS. [book II. Consenting to judgment, etc. — In an action against a firm it has been held that one partner has no authority to bind the firm by consenting to an order for judgment against it; (b) or by giving a cognovit to pay the debt and costs. (TEKS. *292 which is really involved in the last, also prevailed before the Judicature Acts, both at law and in equity, (s) and was 146; Ladue v. Hart, 4 Wend. 583; Seaton v. Merchants' Bank, 6 Can. L. T. 442 ; Love v. Rhyne, 85 N. C. 576; Clark v. Taylor, 68 Ala. 453; Coates v. Preston, 105 111. 470; Coleman v. Elmore, 31 Fed. Rep. 391; Ingols v. Plympton, 16 Pac. Rep. (Colo.) 155; Nipper v. Jones, 27 Mo. App. 538; International Bank v. Jones, 9 N. E. Rep. 885; S. C. 7 West. Rep. 693; Rush v. Thompson, 112 Ind. 158; Wood v. Brush, 72 Cal. 224 ; Watts v. Sayre, 76 Ala. 397; Boehm v. United States, 20 Ct. CI. 142; Weil v. Jones. 70 Mo. 560; Payne v. O'Shea, 84 Mo. 129. See, also, Donnell v. R. R. Co. 76 Me. 33. The holder of a claim against an individual member of a firm, who purchases from such member what he knows to be partnership goods, cannot, in an action by the part- ners or their assignee for the amount of such goods, plead such claim either in payment or set-off against the partners, unless, by their assent, the copartnership property was delivered in payment of the individual partner's debt. Wise v. Copley, 36 Ga. 508. See, also, Warder v. Newdigate, 11 B. Mon. 174 ; ante, 277, note. Partners may set off claims held jointly, but not individually. Sager v. Tupper, 38 Mich. 259. See, how- ever, Jones v. Jones, 12 Ala. 244. A member of a firm may, with the assent of his copartners, set off, in an action against them individ- ually, a debt due to the firm by the plaintiff in the action. Proof of the account and of the assent of partners to its use are all that is required; it is not necessary that the account should be assigned to the defendant. Montz v. Morris, 89 Pa. St. 392. In suit by three plaintiffs, as partners, defendants may plead that two of plaintiffs only were partners, and may set up a coun- ter-claim against them. Rush v. Thompson, 112 Ind. 158. The individual debt of a partner cannot be charged to a firm with- out its consent, which, however, may be shown by agreement, ac- ceptance or acquiescence. Camp- bell v. District of Columbia, 19 Ct. of CI. 160. According to the construction placed upon the statute of Ala- bama, allowing partners to be sued severally, it does not authorize a demand due by the firm to be set off against a separate debt due to one of the partners. Hoyt v. Mur- phy, 18 Ala. 316. In an account between the ad- ministrator of a. partner deceased, insolvent, and a surviving partner, the individual claim of the sur- vivor against the deceased cannot be taken into the account and de- ducted from the balance in the survivor's hands. Berry v. Powell, 18 111. 98. By operation of law a partner- ship debt is not extinguished or compensated by the indebtedness of the creditor to one of the part- (z) It cannot be done in equity even in cases of fraud. v. Pollock, 20 Eq. 515. 681 See Middleton •292 EIGHTS AND OBLIGATIONS. [book II. of great importance to partners. It scarcely requires to be pointed out that to allow a set-off of such debts would be to ners ; although such partner may, by way of defense or by exception, as it is termed in the practice of Louisiana, offset or oppose the compensation of his demand to that of the creditor. Beauregard v. Case, 91 U. S. 134. Defendant purchased cerbain cattle of plaintiff, supposing that they were the property of E. and the plaintiff as copartners. At the request of E. he subsequently took up a note signed by both E. and the plaintiff as makers, al- though in fact plaintiff was but a surety. As a matter of fact there was no copartnership existing be- tween E. and the plaintiff. Held, 1. That E. and the plaintiff were not bound to join in an action for the purchase price of the cattle. 2. That the defendant should have made inquiry whether in fact the plaintiff was principal on the note. 3. That there being no partnership in fact, defendant could not set off his payment of the debt of E. against the claim of plaintiff. Enix v. Hays, 48 Iowa, 86. It has been held that a defendant may set up in his defense, under the general issue, that the plaintiff is one of a partnership, and that the firm is indebted to him in a larger sum than that which the plaintiff demands, it being a part of the same transaction. Bucking- ham v. Burgess, 3 McLean, 364. A., the partner of B., assigned all his interest in the partnership effects to B., with power to settle and compromise. Held, that B. might set off a debt due to the firm against a debt due by himself alone. Craig v. Henderson, 2 Pa. St. 261. Where one partner executed a bond in the name of the firm, under seal, for a debt due by the firm, in an action by the obligee on such bond, held, that a debt due by the obligee to the firm was a good set-off, notwithstanding the plaintiff was allowed to enter a nol. prus. as to one of the firm, and proved that only the partner re- tained as defendant signed the instrument. Sellers v. Streator, 5 Jones' L. 261. The plaintiff, one partner of a firm, upon disso'.utk n thereof sold all his interest in the property and debts due the firm to the defendant, the other partner, and the defend- ant gave the plaintiff a promissory note and a bond of indemnity against the liabilities of the firm. Held, that the defendant could not set off against said note an account due from the plaintiff to the firm at its dissolution. Lesure v. Norris, 11 Cush. 328. Where a partner retired from the firm, and a new firm was formed, which undertook to pay the debts of the old firm, but failed, leaving debts of the old firm unpaid, which the retiring partner had to pay, held, that he might set off such payment against a bond which he had given to the new firm, and which they had assigned to A. for value. Hupp v. Hupp, 6 Gratt. 310. In an action by the members of an alleged special partnership, for the proceeds of goods claimed to have been sold by defendants for 682 OH. Ill, SEC. II.] ACTIONS BETWEEN PARTNERS. *292 enable a creditor to obtain payment of what is due to him from persons in no way indebted to him. As a rule, there- plaintiffs, defendants may show in defense that the pretended partner- ship was a sham to prevent the creditors of the active partner from reaching his property ; and that he is in fact the sole person interested in the business; and by way of offset may set up an individual indebtedness of such active partner to the defendant. Rosenberg v. Block, 102 N. Y. 255; reversing S. C. 50 N. Y. Super. Ct. 357. Where the assignee of an insolv- ent firm sought to recover from the defendant moneys held in trust for one partner, to the possession of which he had become entitled after the assignment, and the indi- vidual debts of the partners had been paid out of their private prop- erty, and at the time of the assign- ment the firm was indebted to defendant for trust moneys depos- ited with it, held, that the defend- ant was entitled to set off the amount due from the firm against the amount due to said partner. Shipman v. Lansing, 25 Hun (N. Y.), 290. In an action upon a note belong- ing to the estate of a decedent, claims growing out of partnership dealings between the decedent and defendant are not a proper subject of set-off where there has been no accounting or final settlement. Tomlinson v. Nelson, 49 Wis. 679. See, also, Love v. Rhyne, 86 N. C. 576. As to the duty of one partner in paying a firm debt to set off a debt from the creditor to the firm, see Cockrell v. Thompson, 85 Mo. 510. One who has sold stock and leased a store to a firm, and has then taken an interest in the busi- ness, can offset the amount due him on such sale and lease in an action brought against him by the firm, and need not leave it to a partnership accounting already pending. Kinney v. Robison, 52 Mich. 389. As a general rule set-offs must be mutual ; but in Texa-, where one of a plaintiff firm is insolvent, the defendant in an action by the firm may set off a claim against the in- solvent partner. Hahn v. Cook, 1 Tex. App. (Civ.) 378; Singer Mfg. Co. v. Wood, 1 Tex. App. (Civ.) 972. See, also, Greathouse v. Great- house, 60 Tex. 597. In Pennsylvania a member of a firm may, with the assent of his copartners, set off, in an action against him individually, a debt due to the firm by the plaintiff in the action; proof of the account and of the assent of the partners to its use are all that is required ; it is not necessary that the account should be assigned to the defend- ant. Montz v. Morris, 89 Pa. St. 392. Action by two, as partners, for goods sold and delivered. The de- fendant showed that both had boarded together with him, and each had told him that "what one might call for would be the same as if both should order it," and filed his counter-claim for liquors and cigars furnished each while they were boarding with him, and it was allowed in defense, pro tanto. Hartung v. Siccardi. 3 E. D. Smith, 560. In Jones v. Blair, 57 Ala. 457, the 683 ^93 EIGHTS AND OBLIGATIONS. [book II. fore, a debt owing by one of the members of a firm cannot be set off at law against a debt owing to him and his co- partners; (a) nor can a debt owing to one of the members of a firm be set off against a debt owing by him and his co- partners, (b) And this rule applies even where one [*293] partner only has been dealt with, and *the debts sought to be set against each other are a debt owing by him and a debt owing to him and others, but arising out of transactions with him* alone. This last point is well illustrated by Gordon v. Ellis, (c) There an action was brought by three partners for the re- covery from the defendant of moneys received by him for goods of the plaintiffs sold by the defendant on their ac- count. The defendant pleaded, in effect, that he had been employed by A. only, that A. sent the goods for sale as if they were his own, and that the goods were sold by the defendant as A.'s goods, and that A. was indebted to the defendant in a larger amount than that sought to be recov- court disapproves the intimation in Taylor v. Bass, 5 Ala. 110, that the mere assent of the other partners to the exclusive use and appropria- tion of a debt due the firm by one of the partners may convert such debt into a proper subject of set-off by liim, when sued alone on an in- dividual liability. Against the separate debt by promissory note between two part- ners, the maker cannot, in the ab- sence of special circumstances, set off in equity the balance due him from the firm on the settlement of its account. Glover v. Hembree, 82 Ala. 324. In an action brought by the as- signees of a person who is a bank- rupt individually, but a member of a solvent firm, against the other member of the firm for an account- ing, the defendant may properly claim to his credit amount ad- vanced by him individually to such bankrupt. Warren v. Burnham, 3t Fed. Rep. 579. In an action for labor and serv- ices, an equitable set-off of a judg- ment assigned to a defendant against plaintiff and other mem- bers of a defunct and insolvent firm may properly be allowed. Seligmann v. Heller Bros. Cloth- ing Co. 34 West. Rep. (Wis.) 232. (a) Gordon v. Ellis, 2 C. B. 821 ; France v. White, 8 Scott, 257. (o) Arnold v. Bainbridge, 9 Ex. 153; McGillivray v. Simson, 2 Car. & P. 320 ; Boswell v. Smith, 6 C. & P. 60. (c) 2 C. B. 821. And see the same case, 7 Man. & Gr. 607, where it will be observed the plea was ma- terially different. 684 OH. Ill, SEC. II.] ACTIONS BEi'WEEN PARTNERS. " X "294 ered in the action. It was admitted that if B. and C. had, by their conduct, induced the defendant to believe that A. was the sole owner of the goods in question, and to deal with A. on that supposition, the defendant would have had a o-ood defense to the action ; but it was held that, as the de- fendant did not allege that such had been the case, his plea was a mere attempt to set off a debt due from one member of the firm against a debt due to the firm itself, and was bad. In strict analogy to the above rule, it has been decided in equity that if the members of a firm have separate private accounts with the bankers of the firm, and a balance is due to the bankers from the firm on the partnership account, the bankers have no lien for such balance on what may be due from themselves to the members of the firm on their respective separate accounts; and that the debt due to the bankers from the partners jointly cannot be set off against the debts due from the bankers to the partners sepa- rately, (d). Effect of Judicature Acts. — The Judicature Acts have extended the equitable principles of set-off to all actions in the high court; (e) and, notwithstanding the rules relating to joint and to several claims, (/) the old rule precluding the set-off of a joint against a separate debt, or vice versa, is still in force, (g) ^Exceptions to general rule. — To the general [*294] rule which precludes the set-off of a debt due to a firm against a debt owing by one of its members, and vice versa, there are, however, a few exceptions. Agreement. — If it can be shown that all the parties concerned have expressly or impliedly agreed that a debt (d) See Watts v. Christie, 11 D. 540. However, in Manchester, Beav. 546 ; Cavendish v. Geaves, 24 Sheffield & Line. Rail. Co. v. id. 173. Brooks, 2 Ex. D. 243, a separate (e) See §§ 24 and 25 (6) (11) of the debt was allowed to be pleaded by Judicature Act, 1873. way of set-off to an action for a (/) Odr. xvi, rr. 1, 4, 6, ante, joint debt. This can hardly have p. 282. been right. (g) Bowyear v. Pawson, 6 Q. B. 685 *295 EIGHTS AND OBLIGATIONS. [BOOK II. owing by one of them only shall be set off against a debt owing to them all, or vice versa, effect will be given to that agreement, and the application of the general doctrine in question will thereby be precluded. Eegard, therefore, must be had to any agreement which the parties themselves may have come to, and to their course of dealing with each other, (h) So, if a joint and several promissory note is made by part- ners, and one of them sues the payee for some separate demand, the defendant can set off the note; for, exhypothesi, it is the several note of the partner suing him. (i) An agreement by one partner that a debt due from him- self separately 'shall be set off against a debt due to him and to his copartners jointly is prima facie a fraud on them; and a set-off founded on such an agreement cannot, it is ap- prehended, be maintained in the absence of special circum- stances, rendering such an agreement binding on the other partners, (k) Another exception occurs where one partner has been allowed by his copartners to act as if he were a principal and not an agent of the firm. Set-off where there is a dormant partner. — It has been seen that dormant partners may join their copartners in sums: on contracts entered into in form with the latter only. But dormant partners cannot, by coming forward and suing on such contracts, deprive the defendant of any right of set-off of which he might have availed himself if the non-dormant partners only had been plaintiffs. [*295] This was held by *Lord Kenyon in Stracey v. Deey, (I) (h) See Vulliamy v. Noble, 3 Mer. of pleading, which are now abol- 593 ; Downam v, Matthews, Prec. ished. See ante, p. 269 ; Piercy v. in Ch. 580; Cheetham v. Crook, Fynney, 12 Eq. 60; Nottidge v. McLel. & Y. 307 ; Kinnerley v. Pritchard, 2 CI. & Fin. 379. Hossack, 2 Taunt. 170. (1) 7 T. R. 361, note, and 2 Esp. (i) See Owen v. Wilkinson, 5 C. 469. See, too, Teed v. Elworthy, B. N. S. 526. 14 East, 212, and De Mautort v. (k) Wallace v. Kelsall, 7M.&W. Saunders, 1 B. & Ad. 398, over- 264, is the other way, but is to be ruling Dubois v. Ludert, 5 Taunt, explained by the old technical rules 609. 686 OH. Ill, SEC. II.] ACTIONS BETWEEN PARTNERS. •295 where the plaintiffs, Stracey, Eoss, and others, were in partnership as grocers, and Ross was the only person who appeared to the public as concerned in the partnership business. The defendant had dealt with Ross, and had become indebted for grocery supplies by him. On the other hand, the defendant had expended money for Ross, and had done so on the supposition that the moneys thus expended could be set off against what was due for the grocery. The plaintiffs, however, contended that this set-off could not be made; but Lord Kenyon held that as the defendant had a good defense by way of set-off against Ross, and had been by the conduct of the plaintiffs led to believe that Ross was the only person he contracted with, they could not pull off the mask and claim payment of debts supposed to be due to Ross alone, without allowing the defendant the same ad- vantages and equities in his defense as he would have had in an action brought by Ross solely, (m) In this case, all the partners except Ross were dormant and by the terms of the agreement, into which all had entered, Ross alone was to be the apparent trader. His copartners were therefore simply in the position of undis- closed principals, and were treated accordingly by the court. Cases where one partner only has been dealt with.— In Gordon v. Ellis, (n) which has been before referred to, an attempt was made to extend the principle on which Lord Kenyon decided Stracey v. Deey to all cases in which one partn er only transacts the business of the firm, and be- comes himself indebted to the person with whom he deals. But it was held, and rightly, that a person liable to be sued by a firm cannot set off a debt due from one only of its members, on the ground that he only was dealt with by the defendant, unless it can be shown that the other members of the firm induced the defendant by their conduct to treat (m) See Cooke v. Eshelby, 12 App. 359; Borries v. Imperial Ottoman Ca, 271 ; George v. Clagett, 7 T. R. Bank, L. R. 9 C. P. 38. (n) 2 C. B. 821, ante, p. 293. 687 *29G EIGHTS AND OBLIGATIONS. [BOOK II. their copartner as the only person with whom the defend- ant had to do. (p) l [*296] - *But here again it is to be observed that if the debt due from one partner can be treated as due from the firm, that debt may be set off against another debt due to it. This is illustrated by the same case of Gordon v. Ellis, (p) where, in an action by a firm for money due to it from the defendant for goods of the firm sold by him, the latter was held entitled to set off a debt due to him for an advance made by him to one of the partners on account of those goods. The court thought that, although the money was advanced to one partner only, the defendant had a rio-ht to treat it as an advance to the firm made on that partner's requisition, whilst acting within the scope of his apparent authority as agent of the firm. In point of fact, the defendant, instead of waiting until he had sold the goods, and then handing over the money produced by their sale, made a payment on account; and he sought nothing more than to have the amount so prepaid deducted from the sum for which he sold the goods. Attempt to avoid set-off by suing one partner. — It sometimes happens that, in order to avoid a defense of set- off, a plaintiff who is indebted to a firm sues one of its members alone for a debt owing to the plaintiff by the firm. In such a case the defendant may require his copart- ners to be joined, (q) Again, if a firm holds the note of a person to whom it is itself indebted, and in order to deprive him of his right of set-off indorses the note to one of its members, and he alone sues on it, a defense disclosing the (o) See Ramazotti v. Bowring, 7 suing, a set-off will be allowed of C. B. N. S. 851 ; Bon field v. Smith, a demand against the firm. Piatt 12 M. & W. 403; ante, p. 280; and v. IJalen, 23 Wend. 456. Baring v. Corrie, 2 B. & A. 137. (p) 7 Man. & Gr. 607. i Where an action is brought by (q) Ord. xvi, r. 11. See Stack- one of two partners of a law firm wood v. Dunn, 3 Q. B. 823, and for business which has uniformly Bonfield v. Smith, 12 M. & W. been done in the name of the party 405. 688 CH. Ill, SEC. II.] ACTIONS BETWEEN PAKTNEKS. *297 facts and setting off the debt owing to the defendant by the firm will be good, (r) Set-off where there has been an assignment.— The pro- vision of the Judicature Acts relating to the assignment of debts (ante, p. 285) has greatly facilitated defenses by wa}' of set-off where there has been a change in a firm. The principles applicable to such cases are well illustrated by the following decision. In Cavendish v. Geaves, (s) the plaintiff was indebted on bonds to a firm of bankers. Many changes in the firm took *place, and the bonds in question were on [*297] each change assigned by the old to the new firm. The plaintiff had an account with the bank as one of its customers, and when the bank stopped payment a balance was owing to him on that account; but the bonds had been previously assigned to third parties, without notice, how- ever, to the plaintiff. The question then arose, whether, notwithstanding the various changes in the firm, and the assignment of the bonds, the plaintiff was entitled to set off against the debt due from him on the bonds the amount due to him as a customer of the bank, and it was held that he was. The judgment in this case is peculiarly instructive, and the following extract from it is submitted to the reader without apology. Effect of assignments and of changes in Arm on right of set-off— " If a customer borrow money from his bankers and give a bond to se- cure it, and afterwards, on the balance of his general banking account, a balance is due to the customer from the same bankers, who are the obligees of the bond, a right to set off the balance against the money due on the bond will exist both at law and in equity, (t) "If the firm were altered and the bond assigned by the original obligees to the new firm, and notice of that assignment were given to (r) Puller v. Roe, 1 Peake, N. P. debt after notice of the assignment, 260. Watson v. Mid-Wales Rail. Co. L. (s) 24 Beav. 163. See, also, Jef- R 2 C. P. 593. ferys v. Agra and Masterman's (t) Roxburghe v. Cox, 17 Ch. D. Bank, 2 Eq. 674 ; and as to set-off 520. at law as against the assignee of a Vol. 1 — 44 689 *298 EIGHTS AND OBLIGATIONS. [BOOB. II. the debtor, and if after this a balance were due to him from the new firm (the assignees of the bond), then no right of set-off would exist at law, because the assignment of the chose in action would be inoperative at law, and the obligees of the bond, and the debtor on the general ac- count, would be different persons ; but as in equity the persons entitled to the bond, and the debtors on the general account, would be the same persons, a right to set-off would exist in this court, and the customer would in equity be entitled to set off the balance due to him against the bond debt due from him. " If after the bond had been given it had been assigned to strangers, and no notice of that assignment had been given to the original debtor (the obligor of the bond), then his rights would remain the same. Thus, if the assignment had been made to the stranger before any alteration of the firm, then the right of set-off would still remain at law, where the obligees of the bond and the debtors on the general account would be the same persons, and in equity, also, if the matter on account were brought here, as the assignees of the chose in action would be bound by the equities affecting their assignors. "But if notice of that assignment had been given to the original debtor, no right of set-off would exist in this court for the balance sub- sequently due by the bankers to the obligor ; because the persons enti- tled to the bond would, as the obligor knew, be different persons from the debtors to him on the general account with whom he had continued to deal. "If the assignment of the bond had been made to the new firm [*298] with *notice to the obligor, they would, if debtors on the general account, be liable to the same rights of set-off in equity as if they had been the obligees. Effect of assignments and changes in firm on right of set-off.— "If, after the alteration of the firm and after the assignment of the bond to the new firm, with notice to the debtor or obligor of that assign- ment, an assignment had been made of the bond to strangers, and no notice of that second assignment given to the obligor, then the rights of set-off would still remain to him in equity as against the first assignees, of whose assignment he had notice, and the second assignees would in equity be bound by it, because, as I have stated, the assignees of the bond take it subject to all the equities which affect the assignors." The court, after laying down these general propositions, came to the conclusion, on the evidence in the case, that the plaintiff was informed that the successive firms with which he dealt as customers were his creditors in respect of the bonds, but that he had no notice of their as- signment by the firm which stopped payment to the holders of them, and that therefore he was entitled, even as against such holders, to set off what was due to him as a customer of the bank when it stopped payment. 690 CH. Ill, SEC. III.] ACTIONS BETWEEN PARTNERS. *299 The above decisions are sufficient to show that, in allow- ing debts to be set off against each other, courts of equity went far beyond courts of law, although they did not t intro- duce any new principle of set-off. The truth of this was still more apparent from the cases in which set-off was not allowed, one of the debts being joint and the other sev- eral only. Section III. — Of Execution against Partners for the Debts of the Firm. Execution against partners.— If a judgment has been obtained against several persons sued jointly, the writ of execution founded on the judgment must be against all of them, and not against some or one of them only; for the judgment does not warrant such a writ, (u) x But, although the writ of execution on a joint judgment must be joint in form, it may [when the rights of individual creditors are not involved 2 ] be levied upon all or any one or more of the persons named in it; for each is liable to the judgment cred- itor for the whole, and not for a proportionate part of the *sum for which judgment is obtained, (x) 3 [*299] (it) See Penoyer v. Brace, 1 Lord J. Eq. 313; Stout v. Baker, 32 Kan. Raymond, 244; Clarke v. Clement, 113. See Clayton v. May, 68 Ga. 6 T. R. 526; 2 Wins, Saund. 72Z; 27: also ante. Bac. Ab. Exec. G. 1. As to the manner of serving an 1 As to the rights of creditors to execution against firm levied upon levy upon goods belonging to a a crop belonging to the firm, and partnership entered into by a hus- mortgaged by one partner as to his band with money furnished by his interest, see Sheehy v. Graves, 58 wife, see Clay v. Vanwinkle, 75 Cal. 449. Ind. 239. Where one party claims title to 2 Preston v. Colby, 6 West. Rep. personal property under a sale from 33_ one of two partners, such title is (x) See per De Grey. C. J., in good as against a title under an Abbot v. Smith, 2 Wm. Blacks, execution against the firm levied 949 ; and Herries v. Jamieson, 5 after the sale. Blakey v. Douglass, T. R. 556, per Lord Kenyon. 5 Cent. R. 274. 3 See Foster v. Barnes, 81 Penn. Where a sheriff, attaching firm St. 377 ; Randolph v. Daly, 15 N. goods as the property of one part- 691 *299 EIGHTS AND OBLIGATIONS. [BOOK II. The consequence of this is that the sheriff may execute a writ issued against several partners jointly, either on ner, takes a receipt therefor from another partner and leaves them with the firm, the paramount part- nership title is a defense in an ac- tion upon the receipt. Tucker v. Adams, 63 N. H. 301; S. C. 1 N. Eng. 241. : Money raised by sale of firm property upon executions against the firm should be applied to these in preference to other executions against the individual members of the firm jointly, but not against them as a partnership. Commer- cial Bank v. Mitchell, 58 Cal. 42. An execution on a judgment ren- dered against a firm sued by its firm name under the statute, with- out naming the individual part- ners, can be levied only on the firm property. Yarbrough v. Bush, 69 Ala. 170. A levy upon and sale of firm property under a joint judgment against all the members of a firm, recovered upon a claim out- side of the firm business, is good as against a subsequent levy un- der a judgment against the firm. Saunders v. Reilly, 10 East. Rep. 459. Where A., B. and C. enter into an agreement whereby A. and B. are to have one-half the net profits of a certain business which was to be carried on in the name of C. alone, and they permit C. to have the ostensible ownership of the ' whole property, and he obtains credit on the strength of his pre- sumed ownership, A. and B. can- not prevent levy and sale of such property for C.'s debts on a judg- ment against him alone. Callender v. Robinson, 96 Pa St. 454. A levy by firm creditors on the interest of one partner does not give them priority over a deed of trust on the personal property of the firm executed by a member of the firm for the benefit of its cred- itors generally, even though at- taching creditors have no notice of such deed. Scruggs v. Burruss, 25 W. Va. 670. Where a partnership owns stock in an insolvent corporation, amem- ber of the firm will be liable to an execution against himself individ- ually as a stockholder upon the motion of a creditor of the corpora- tion in all cases where the firm would be subject to such liability. Bray v. Seligman, 75 Mo. 31. So long as the legal title of the partnership property remains in the copartners, a creditor of the firm may pursue his remedy against it. in an action at law, in the same manner as against an individual debtor. But if the legal title has been conveyed to a third person bona fide, the creditor can pursue the property only by a bill in equity to marshal the assets and enforce his equitable lien. Stokes v. Stev- ens, 40 Cal. 391. Judgment was obtained and exe- cution issued against an individual doing business in his own name, but who had at the time a secret partner; afterwards a judgment was obtained and an execution is- sued against both partners. Held, that the property of the partner- ship was liable to pay both debts, 692 OH. Ill, SEC. III.] ACTIONS BETWEEN PARTNERS. '299 their joint property or on the separate property of any one or more of them, or both on their joint and on their respective but that the creditor whose execu- tion was first in the hands of the sheriff had priority. Brown's Ap- peal, 17 Pa. St. 480. A judgment was recovered against a partnership on confession of one of the partners. Execution was issued thereon, and the part- ners paid the amount to the sheriff after a levy on partnership prop- erty. Afterwards the judgment was reversed as to the party who was not a party to it. Held, that the plaintiff in execution was entitled to recover of the sheriff the amount received by him on the execution. Harper v. Fox, 7 Watts & S. 142. S. and T., trading as partners, made several assignments, each of his private property and interest in the firm, on successive days, to the same assignees, who accepted both trusts. Afterward a firm creditor issued execution and levied upon the partnership property. Held, that, in the absence of proof to the contrary, the assignment of the firm property to assignees by one of the firm was assented to by the other, and that the partnership property vested in the assignees, and could not be levied upon by the sheriff after the assignments had been made and accepted. McNutt v. Strayhorn, 39 Pa. St. 269. The mere insolvency of a part- nership does not, of itself, work such a legal or equitable appropria- tion of its effects, in the absence of any proceedings for a pro rata distribution, as to prevent a judg- ment creditor from making his debt out of the effects by execu- tion, or to prevent him from re- moving fraudulent obstructions or assignments intended by the debtor to hinder the execution. Greene v. Breck, 32 Barb. 73. A., residing in the country, and B. in the city of New York, both produce dealers, made an arrange- ment by which they carried on their business in connection, the profits at both places to be divided between them, intentionally con- cealing the arrangement made. B. incurred a debt to C. in the course of his business, confessed a judg- ment, and the execution was lev- ied on the property used in the business carried on by B. A. claimed the property as partner- ship property. Held, that the levy was just and legal, the creditor C. having a right to look to the prop- erty of A. to pay his debt. Van Valen v. Russell, 13 Barb. 590. M. and K., in their articles of partnership, agreed that K. should furnish at first all the necessary capital, and have the exclusive ownership of it until M. should contribute certain sums as agreed on. Before M. had contributed any funds, T. obtained a judgment against K., which was levied on the whole property constituting the capital stock; and afterward the York County Bank obtained a judgment against M. & Co., which was levied on the same property. The property was sold for less than T.'s debt and the money paid into court for distribution. Held, that T. was entitled to the whole of 693 : 299 EIGHTS AND OBLIGATIONS. [BOOK II. separate properties; and so long as there is, within the sher- iff's bailiwick, any property of the partners or any of thera, a return of nulla bona is improper, (y) Of course, if the judgment creditor has had execution and satisfaction against one of the partners, he cannot afterwards go against any of the others; (z) but the important point to observe is that the sheriff is not bound to levy on the goods of the firm before having recourse to the separate properties of its members, and that they cannot require the sheriff to exe- cute the writ in one way rather than another. Similar rules are applicable to attachments of debts under the Common Law Procedure Act, 1854 (17 and 18 Yict. ch. 125, § 61), it having been determined that a judgment cred- itor of three persons can, under the act in question, attach debts owing to anyone or more of his judgment debtors, (a) The extent to which to levy execution against the effects of a firm is affected by bankruptcy will be examined here- after. it. Appeal of York County Bank, 32 Pa. St. 446. Where, by articles of dissolution of a partnership between A. and B., A. took the property of the partnership and agreed to pay the debts of the firm, and a creditor of the partnership having obtained a judgment against the firm for a debt, levied his execution upon the real and personal estate of both A. and B. , and afterward assigned the judgment to C, the father-in-law of A., and A. afterward sold his personal estate so levied on to D. , and C, by writing under seal, re- leased his interest therein to D. with full knowledge of the terms of dissolution, held, that the judg- ment could not be enforced against B. Bell v. Hall, 5 N. J. Eq. 477. A judgment obtained by one firm against another, each of which is constituted in part of members be- longing to both firms, thus being both plaintiff and defendant, can- not be executed by a levy upon the separate property of an individual member of the defendant firm. Tassey v. Church, 6 Watts & S. 465. An attorney holding moneys be- longing to a late firm of three per- sons is chargeable on trustee pro- cess in a suit against a new firm comprising two members of the old firm and another person, unless some interposing claim be made by the creditors of the old firm. Bur- nell v. Weld, 59 Me. 423. (y) See Jones v. Clayton, 4 M. & S. 349. (z) See Com. Dig. Execution, H. (a) Miller v. Mynn, 1 E. & E. 1075. 694 CH. Ill, SEC. III.] ACTIONS BETWEEN PARTNERS. *300 The procedure on a judgment against a firm (b) is regu- lated by order XLII, rule 10, which is as follows: Execution against partners on judgment against firm.— Where a judgment or order is against a firm, execution may issue : (a) Against any property of the partnership. (6) Against any person who has appeared in his own name under order XII, rule 15, or who has admitted on the pleadings that he is, or has been adjudged to be, a partner. (c) Against any person who has been served as a partner with the writ of summons, and has failed to appear. If the party who has obtained judgment or an order claims to be en- titled to issue execution against any other person as being a member of the firm, he may apply to the court or a judge for leave so to do ; and the court or judge may give such leave if the liability be not dis- puted, or, if such liability *be disputed, may order that the lia- [*300] bility of such person be tried and determined in any manner in which any issue or question in an action may be tried and determined. It is not clearly said in this rule that execution must first be levied against the joint estate of the firm before having recourse to the separate estates of the members; and, having regard to the previous well-established practice, the rule cannot be construed as rendering such a course neces- sary. The proper mode of entering up judgment has been al- ready considered, ante, p. 2G6. Execution on judgment against firm.— If judgment is entered up against a firm in its mercantile name, execution can only issue without leave against the property of the firm, (c) or against those persons specially mentioned in order XLII, rule 10 ; other persons sought to be made lia- ble must be proceeded against in some other way, and some judgment or order must be obtained against them establish- ing their liability before execution can issue against them, (d) An action founded on the judgment may be brought against (b) The firm here means the part- tion must be made to the court, ners when the cause of action ac- Kewney v. Attrill, 34 Ch. D. 345. crued. Ante, p. 265. (d) Davis v. Morris, 10 Q. B. D. (c) If there is a receiver, applica- 436. 695 *300 EIGHTS AND OBLIGATIONS. [BOOK II. them, and it is not necessary to proceed by an issue and an order under the rule, (e) But the judgment cannot be made the foundation of a debtor's summons in bankruptcy against them if they dispute their liability; for in the case supposed their liability in respect of the judgment has not yet been established, (f) The mode of taking in execution the share of one part- ner on a separate judgment against him will be examined hereafter (see bk. Ill, ch. 5, § 4). (e) Clark v. Cullen, 9 Q. B. D. 124; Ex parte Blain, 12 Ch. D. 522, 355. where the alleged debtor was a (/) Ex parte Young, 19 Ch. D. foreigner residing abroad. 696 *BOOK III. [ * 301] OF THE EIGHTS AND OBLIGATIONS OF MEM- BERS OF PARTNERSHIPS BETWEEN THEM- SELVES. CHAPTER I. OF THE RIGHT TO TAKE PART IN THE MANAGEMENT OF THE AFFAIRS OF THE FIRM. Each member of partnership entitled to take part in its management.— In partnerships the good faith of the partners is pledged mutually to each other that the business shall be conducted with their actual personal interposition, so that each may see that the other is carrying it on for their mutual advantage, (a) In the absence of an express agreement to the contrary the powers of the members of a partnership are equal, even although their shares may be unequal; and there is no right on the part of one or more to exclude another from an equal management in the concern. (J) l \ Moreover, if two (a) Per Lord Eldon, in Peacock v. sonal services of a particular part- Peacock, 16 Ves. 51. ner, and he fails to perform them, (6) Rowe v. Wood, 2 Jac. & W. it is a breach of contract; yet the 558. See, too, Lloyd v. Loaring, 6 damages for such breach will be Ves. 777. but nominal if another party shall 1 In law partnerships either perform the duty with due profes- partner may attend to business in- sional skill and without injury to trusted to the firm. But if a firm the client. Smith v. Hill, 13 Ark. contract with a client for the per- 173. 697 EIGHTS AND OBLIGATIONS. [BOOK III. persons are in partnership, and one of them mortgages all his share and interest therein to the other, the latter will not be permitted, during the continuance of the partner- ship, to avail himself of his rights as a mortgagee and to exclude his copartner from interference in the partner- ship, (c) Indeed, speaking generally, it may be said that nothing is considered as so loudly calling for the interfer- ence of the court between partners as the improper exclu- sion of one of them by the others from taking part in the management of the partnership business, (d) [*302] ^Unless otherwise agreed. — It need, however, hardly be observed that it is perfectly competent for partners to agree that the management of the partnership affairs shall be confided to one or more of their number exclusively of the others ; and that where such an agree- ment is entered into it is not competent for those who have agreed to take no part in the management to transact the partnership business without the consent of all the other partners. 1 But, as was seen in an earlier part of the treat- ise, every member of an ordinary firm is prima facie its (c) Rowe v. "Wood, 2 Jac. & W. Evidence, both direct and cir- 558. cumstantial, is admissible to prove (d) See, in addition to the cases that the sole power of conducting last cited, Goodman v. "Whitcomb, the business of a firm has been 1 Jac. & W. 589 ; Marshall v. Col- given to one partner. Such power man, 2 id. 266. may be inferred from the conduct 1 If any one of the partners of of the partners for a series of years, a copartnership give his assent to as that one has exclusively con- the acts of their agent, such assent ducted the business of the firm, would be good evidence affecting and the other partner has never the rest, unless, by the articles or questioned his acts or assumed to constitution of the company, the conduct the business himself. It whole concern and management is proper to show any reason exist- should be intrusted to a committee ing or expressed by the partners or board of managers, in which why it was not desirable or desired case the assent must be proved to that the other should conduct the have been given by them, or some business, as that he had little inter- of them, pursuant to the authority est in the concern, while the inter- delegated to them by the company, est of the managing partner was Odiorne v. Maxcy, 13 Mass. 178 ; S. large. Anthony v. Wheatons, 7 R. C. 15 id. 39. I. 49. 698 MANAGEMENT. 502 CH. I.] agent for carrying on its business in the usual way ; (e) and persons dealing with a partner within the limits of his ap- parent authority are entitled to hold the firm answerable for his conduct unless such persons had distinct notice that his real authority was less extensive than they had a right to assume it to be. (e) Ante, book ii, ch. 1. 699 [*303] ^CHAPTER II. OF THE GENERAL DUTY OF PARTNERS TO OBSERVE GOOD FAITH. Section I. — Preliminary Remarks. High standard of honor requisite among partners, and among- those about to become partners, and among those who have ceased to be partners. — In societatis contracti- hus fides exuberet. (a) — The utmost good faith is due from every member of a partnership towards every other mem- ber; and if any dispute arise between partners touching any transaction by which one seeks to benefit himself at the expense of the firm, he will be required to show, not only that he has law on his side, but that his conduct will bear to be tried by the highest standard of honor, (b) 1 (a) Cod. iv, tit. 37, 1. 3. (b) See Blisset v. Daniel, 10 Ha. 522, 536. Compare Cassels v. Stew- art, 6 App. Ca. 64, noticed infra, which shows how difficult it is to apply this general principle. 1 See, generally, First Nat. Bk. t'. Bissell, 2 McCrary, 73 ; S. C. 4 Fed. Rep. 694, and the cases cited below. A partner who makes a profit from the use of partnership funds must account therefor to the firm. Gill v. Wilson, 2 Tex. App. (Civ.) 330. Partners stand in the relation of trustees to each other, and can ac- quire the property of the firm only for the benefit of the firm; and purchasers from them, charged with notice of the fact, occupy no better position than their vendors. Lamar v. Hale, 79 Va. 147. The rights of a firm, under a mortgage held by it, are not af- fected by the purchase of the equity of redemption by one of the partners for himself. Gordon v. Tyler, 53 Mich. 629. Where patents belonging to the firm are taken in the name of one or more members, such members or their personal representatives, upon their decease, may be com- pelled in equity to transfer the same to the surviving partners. Berolzheimer v. Strauss, 51 N. Y. Super. Ct. 96; S. C. 7 Civ. Proc. (N. Y.) 225. It is a question to be submitted 700 CH. II, SEC. I.] DUTY TO OBSERVE GOOD FAITH. *303 Thus, if one partner knows more about the state of the partnership accounts than another, and, concealing what he 4 to the jury, where there is evidence to raise it, whether the acts of the majority were in bad faith towards, and in wanton violation of the rights of, the minority. "Western Stage Co. v. Walker, 2 Iowa, 504. Where one partner, who is in sound health, is made sole agent of the partnership by another who is not, and who relies on him wholly for true accounts, and the party thus made agent manages the business at a distance from the other, communicating to him no information, the relation of part- ners, whatever it may be in gen- eral, becomes fiduciary, and the law governing such relations ap- plies. Brooksg. Martin, 2 Wall. 70. -fe~arT action against a partner- ship, if process be served on one partner and judgment recovered, and execution levied on the part- nership property, it is the duty of such partner to give notice of it to his copartners, and a neglect to do so subjects him to an action. De- vall v. Burbridge, 6 Watts & S. 529. Two partners carry on an exten- sive business, embracing various subjects, and they keep no regular set of books. One of them attends exclusively to the outdoor busi- ness, makes the contracts and ex- ecutes notes for the firm, of which no regular account is kept. They at length quarrel, and the indoor partner insists upon a dissolution of the partnership, and there is a proposition to buy or sell. The outdoor partner, in making an esti- mate of the value of the partner- ship property, for his own guid- ance in any proposition he may make or receive, attempts to make out a list of the debts due from the concern, and he estimates them at about one-half what they turn out to be, but it does not appear that he represents them to his copartner at any amount, or that his partner did or would have confided in any representation that he made after making his estimate ; he makes an offer to sell or buy at a specific price, and his partner agrees to buy at the price offered; and the contract is executed. Held, that under the circumstances the sell- ing partner was bound to the ut- most good faith on his part. He was bound not only to disclose truly any information in his pos- session that might be called for, but if he perceived that the pur- chasing partner was laboring un- der incorrect views in reference to the amount of the debt due by the concern, by which he might be misled into too high an offer for the interest to be sold, it was his duty to furnish all the data he might have by which such views might be corrected and the mis- chief prevented; and in this case he does not appear to have violated his duty. Sexton v. Sexton, 9 Grat. 204. A. and B. being partners, A., without the consent of B., bor- rowed money at an extra rate of interest, on the credit of the com- pany, to pay his private debts, and credited the company with the money so applied and the legal in- terest only. Held, that the excess of interest thus paid by the com- 701 503 EIGHTS AND OBLIGATIONS. [BOOK III. knows, enters into an agreement with that other, relative to some matter as to which a knowledge of the state of the accounts is material, such agreement will not be allowed to stand, (c) This obligation to perfect fairness and good faith is, moreover, not confined to persons who actually are part- ners. It extends to persons negotiating for a partnership, but between whom no partnership as yet exists; {d) 1 and also to persons who have dissolved partnership, but who have not completely wound up and settled the partner- ship affairs; (e) 2 and most especially is good faith re- pany beyond the amount credited to the company was a proper charge against A. Tomlinson v. Ward, 2 Conn. 396. Where one member of a copart- nership made a promise to another firm having dealings and open ac- counts with his firm, in which he individually had an interest ad- verse to that of his firm, that upon closing the accounts certain con- cessions would be made by his firm favorable to the other parties, held, that such promise, being made without the knowledge of his co- partners, and made clearly in his own interest, and to the pecuniary prejudice of his copartners, was not binding upon them; it appear- ing that the accounts had been reg- ularly rendered, and the charges made in the accounts were the same as those against other dealers with the firm. Goodwin v. Ein- stein, 51 How. Pr. 9. Equity will scrutinize agree- ments between partners closely and watchfully, and will not per- mit them to stand, if it appears that they were brought about by concealment, unfairness or other unconscionable conduct. The sup- pression of material facts by one partner, though there may be no intent to defraud, will, in equity, be sufficient to warrant relief against a transfer from one part- ner to the other. Hasberg v. Mc- Carty, 13 Daly, 415. (c) See Maddeford v. Austwick, 1 Sim. 89. (d) See Hichens v. Congrove, 1 R. & M. 150; Fawcett v. White- house, id. 132. 1 It is not contrary to equity for partners in an existing firm, upon taking in a new member, to put in the stock and machinery of the old business at a price fixed arbitrarily between the parties, as one of the conditions of the new arrange- ment. There is no confidential re- lation between parties until the partnership is formed. In the ne- gotiations concerning it the parties deal as strangers. Uhler v. Semple, 20 N. J. Eq. 288. See post. (e) See Lees v. Laforest, 14 Beav. 250; Clegg v. Fish wick, 1 Mac. & G. 294; Perens v. Johnson, 3 Sm. & G. 419; Clements v. Hall, 2 De G. & J. 173. 2 After a dissolution of copart- 702 CH. II, SEC. I.] DUTY TO OBSEEVE GOOD FAITH. 304 quired to be observed when one *partner is endeav- [-304] oring to get rid of another or to buy hiin out. (/) nership each partner becomes a trustee for the others as to the partnership funds in his hands in order to effect a fair settlement and just distribution of the effects, and he will not be allowed to make a bargain with his former copart- ners advantageous to himself; but before dissolution no such relation- ship exists. Stephens v. Orman, 10 Fla. 9. See ante. If partners, during the existenca of the partnership, are trustees for each other, that relation certainly ceases when the firm is dissolved and the business is closed. Pierce v. McClellan, 93 111. 245. See, however, ante. In Farman v. Brooks, 9 Rich. 212, it was held that a settlement by an insurance broker with the admin- istrators of his former principal or partner will be sustained, if it is not actually or constructively fraudulent, although advantageous to the party ; in this he differs from one who is strictly a trustee, such a one being scarcely allowed to purchase at all of his cestui que trust. Where one of two copartners sold out his interest in the copart- nership assets to the other, taking back an agreement that the pur- chaser would pay the partnership debts, and the latter, instead of paying them, caused them to be bought up in the name of a con- federate, and judgment to be ob- tained thereon, on which the lands of the other copartner were sold to such confederate, held, that those sales should be set aside as fraudu- lent and void on behalf of one to whom the owner had conveyed the lands, and that it was not neces-^ sary for the complainant to show that he had purchased and paid a valuable consideration for the lands. Reed v. Wessel, 7 Mich. 139. M. and A. formed a partnership to set up a flour mill in W. and bought machinery for it, but aban- doned the project, and agreed that A. should take the property at cost provided he used it in business in W. He gave up entering into busi- ness, sold the property, and ren- dered an account, accounting for a sale of an engine and boiler at $4,000; whereas he had sold them to P. to resell and divide the profits, which P. did for $5,250, and di- vided the profits. Held, that A. was M.'s trustee, and must account for the profits of the resale. Math- ewson v. Allen, 10 R. I. 156. After the dissolution of a firm, one of its members cannot act as the agent of a creditor of the firm, in holding obligations due the firm, as collateral security for a note due from the firm to such creditor, and taking a conveyance of land in set- tlement of such an obligation ; and, in such a case, the creditor, in an action on the firm note, is not bound to account for the value of such land, or of such alleged col- laterals, where it appears they were (/) Blisset v. Daniel, 10 Ha. 493 Maddeford v. Austwick, 1 Sim. 89 Perens v. Johnson, 3 Sm. & G. 419 Chandler v. Dorsett, Finch, 431. As to withholding information, see McLure v. Ripley, 2 Mac. & G. 274. 703 *304 EIGHTS AND OBLIGATIONS. [BOOK III. Each must do his duty. — Notwithstanding the universal application to partners of the rule requiring perfect good faith, if one partner repudiates the contract of partnership and will not perform his duty towards his copartners, he cannot justly complain if they in return decline to treat him on a footing of equality with themselves, (g) As ob- served by Lord Eldon in Const v. Harris, " A partner who complains that the other partners do not do their duty to- wards him must be ready at all times and offer himself to do his duty towards them." (h) But if a partner has been set at defiance by his copartners; if they have denied that he is a partner, and that he has any right to interfere in the partnership, they can derive no advantage from the circum- stance that he has not performed his duty to them, (i) A partner whose rights are denied should be prompt in asserting them or he may be seriously prejudiced. This subject will be further adverted to in that part of the work never in his possession, that he never authorized such alleged agent to hold them for him, and never received any payments thereon, and that the land was not conveyed to him, but to such al- leged agent. Pray v. Morse, 41 Wis. 343. Where one partner, after the dis- solution of the firm by the death of a copartner, falsely, with the intent to prevent a proposed settle- ment, represented to the other sur- viving copartners that he had be- come the owner of the interest of the deceased and thus prevented the purchase by them of such in- terest, it was held that he could not compromise a suit brought by one to whom the interest of his deceased partner was assigned against all the surviving copart- ners for an accounting, acquire the interest of the deceased and main- tain, for his own benefit, a suit against the remaining members of the firm to enforce the claim for the full amount of the profits which would have been due to the estate of the deceased copartner. The purchase of the deceased's in- terest in such case must be held to have been made for the benefit of the plaintiff and defendants, and, after repaying the amount ex- pended by the plaintiff in compro- mising the claim, the residue of the profits should be divided among all the survivors according to their respective interests. Warren v. Schainwald, 62 Cal. 56. (g) See McLure v. Ripley, 2 Mac. & G. 274; Reilly v. Walsh, 11 Ir. Eq. 22. (h) Turn. & R. 524. (i) See Dale v. Hamilton, 2 Ph. 276. 704 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. *305 which relates to the defenses to actions between part- ners, (k) Principle of good faith the basis of the internal law of partnership. — The foregoing general principles may be regarded as the basis of the law of partnership, so far as it relates to the rights and obligations of partners as between themselves, and they will be found to be more or less illus- trated throughout the whole of the present book. Those cases, however, which more especially relate to the obliga- tion of partners not to benefit themselves at the expense of their copartners, and to the rights of majorities, require to be specially noticed. *Section II. — Of the Obligation of Partners Not [-305] to Benefit Themselves at the Expense of Their Copartners. No partner allowed to benefit himself at the expense of the firm. — Good faith requires that a partner shall not ob- tain a private advantage at the expense of the firm. He is bound in all transactions affecting the partnership to do his best for the common body, and to share with his copartners any benefit which he may have been able to obtain from other people, and in which the firm is in honor and con- science entitled to participate: 1 Semper enim turn id quod (k) Infra, ch. 10, § 3. 301 ; Coursen's Appeal, 79 id. 220; 1 See Todd v. Rafferty, 30 N. J. Solomon v. Solomon, 2 Ga. 18, and Eq. 254 ; Gray v. Portland Bank, 3 the cases cited below. Mass. 364 ; Lockwood v. Beckwith, Where one of two copartners 6 Mich. 168 ; Kilbourn v. Latta, 5 having the means to pay his share Mack. (D. C.) 304; Hodge v. Twitch- of a note given on the joint pur- ell, 33 Minn. 389 ; Anderson v. chase of land, in order to force the Whitlock, 2 Bush, 398 ; Lowry i>. forfeiture of the contract, and Cobb, 9 La. Ann. 592 : Stoughton without notice to his copartner of v. Lynch, 1 John. Ch. 467 ; S. C. 2 his intent not to pay his share, id. 209 ; Herrick v. Ames, 8 Bosw. places the sum due in the hands of 115 ; Eason v. Cherry, 6 Jones' Eq. a third party to enable him to take 261; Lane v. Carpenter, 30 Ind. advantage of the forfeiture and 284 ; Scruggs v. Russell, McCahon, purchase the right forfeited, a 39 ; Bart's Appeal, 70 Penn. St. fraud is thereby committed on the Vol. I — 45 705 *305 EIGHTS AND OBLIGATIONS. [BOOK III. privatim interest unius ex sociis servari solet, sed quod soci- etati expedit. (I) co-obligor, and the third party purchasing with knowledge of the facts would be so far a party to the default that he cannot hold the rights purchased as against the parties defrauded. Hulett 17. Fair- banks, 40 Ohio St. 233. If, on the dissolution of a firm, one partner sells the assets by pub- lic auction to a person who after- wards, in pursuance of a secret arrangement made with him be- fore the sale, reconveys to him, he must account to the other partner as if no sale had been made, not- withstanding such partner was present at the sale and made a bid for the assets himself. Jones v. Dexter, 130 Mass. 380 ; S. C. 39 Am. Rep. 459. A partner cannot by purchase become the owner of an outstand- ing note against the partnership; such a transaction amounts to the payment of the note. Easton v. Strother, 57 la. 506. Where one partner, after disso- lution, but before settlement of ac- counts, buys in an obligation of the firm for less than its face value, he cannot claim credit for its full amount upon the final account, but only for the amount paid there- for. Filbrun v. I vers, 92 Mo. 388. The purchase of partnership lia- bility by a member of the firm, un- der ordinary circumstances, oper- ates as a payment, and gives him no right against his copartners, except to demand an accounting and contribution according to his outlay, and lawful interest. Under some circumstances, however, when it can be done without preju- dice to firm creditors, a partner who has purchased its obligations may keep them alive in order to obtain the benefit of securities in- cident thereto, but not for an amount greater than his outlay and lawful interest. Coleman v. Coleman, 78 Ind. 344. Where a prospecting partnership has been dissolved by mutual con- sent there is no implied duty upon any of the partners to go on and complete defective locations, and having done so they are not charge- able as trustees of the others. Page v. Somers, 12 Pac. Rep. 120. As to the duty of disclosure by one partner to another of grounds of suspicion against a third, see Pardee v. Markle, 111 Pa. St. 548; S. C. 17 Weekly Not. Cas. 211. Where there has been an actual breach of the articles of copart- nership by one partner, the act may sometimes be affirmed by the innocent partners, who may de- mand an accounting and a share in whatever benefits the partner breaking the articles may have derived from their violation. See Moritz v. Phelps, 4 E. D. Smith, 135. It is a general rule of partnership that the partners shall devc fce their time, labor and skill to the benefit of the firm and not to themselves, and that such partners cannot pur- chase for their own use articles in which the firm necessarily deals, and if they do so they do it at the (I) Dig. xvii, tit. 2, pro socio, 1. 65, § 5. 706 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. -305 There are two modes in which, more especially, partners attempt unfairly to acquire gain at the expense of their co- risk of having the same, and the profits arising therefrom, claimed by the firm as belonging to them. American Bank Note Co. v. Edson, 56 Barb. 84; S. C. 1 Lans. 388. One partner will not be allowed to stipulate, clandestinely, for a private advantage or benefit to himself to the exclusion of his partners, in matters in which he has been dealing on behalf of the the firm. McMahon v. McCleman, 10 W. Va. 419 ; Whitman v. Bow- den, 2 So. East. Rep. (S. C.) 630. And though the articles allow a dissolution at the will of either partner, yet a partner will not be allowed in equity to dissolve the firm for the purpose of securing to himself an advantage which he has gained in such dealing; but the other partners may enforce a right to participate in the beuefit on contributing to the expense. McMahon v. McCleman, 10 W. Va. 419. The plaintiff and defendant be- ing part owners of a vessel of which the defendant was master, and being jointly concerned in a whaling voyage undertaken by such vessel, the defendant, in the course of the voyage, landed some prisoners from a privateer, and also saved some articles from a wreck, for each of which services he received a compensation. On his return he settled up the voy- age, but without rendering any account of these two items of com- pensation. Held, that the plaint- iff could recover her proportion of the same in assumpsit. Fanning v. Chad wick, 3 Pick. 420. If two persons agree to divide the profits of a certain transaction, it is fraud for one to receive any commissions thereon from third parties apart from joint profits. Dunlop v. Richards, 2 E. D. Smith, 181; Whitman v. Bowden, 2 So. East. Rep. (S. C.) 630. Plaintiff sold defendants, his partners, his one-third interest in certain partnership property for $400, and conveyed it to them by deed. The defendants the same day conveyed by deed, placed in escrow, the same property to a third party, concealing from the plaintiff at the time of his sale to them that such negotiations were pending. Held, that the conceal- ment of the negotiations was a fraud upon the plaintiff, and that defendants should account to him for one-third of the proceeds of the sale. Jennings v. Rickard, 15 Pac. Rep. (Colo.) 677. See, also, Caldwell v. Davis 15 Pac. Rep. (Colo.) 696. But where plaintiff and defend- ant jointly purchase certain land for resale, plaintiff having an un- divided one-third and defendant a two-thirds' interest, and defendant formed a syndicate of eight per- sons, including himself, to which he turned over his interest at a profit, and there was no agreement be- tween plaintiff and defendant re- straining either from disposing of his share, held, affirming S. C. 9 Ont. Rep. 139, that assuming plaintiff and defendant to have been partners, no part of the part- nership property had been alien- ated or taken away from the pur- 707 505 EIGHTS -AND OBLIGATIONS. [BOOK III. partners, viz., 1, by directly making a profit out of them ; and 2, by appropriating to themselves benefits which they poses of the firm, and therefore plaintiff was not entitled to par- ticipate in the profits made by the defendant on the sale of his undi- vided share. Mitchell v. Gormully, 7 Can. L. T. 189; S. C. 21 Can. L. J. (N. S.) 220; 23 Can. L. J. (N. S.) 129; 14 Ont. App. 55; 5 Can. L. T. 283. Evidence that the defendant made $2,100 during six months that he kept a boarding-house alone, and that the expenses were less and the receipts more than when it was kept by the plaintiif and himself together, was held not to be admissible to prove that the plaintiff was guilty of a fraud in returning a less sum as the profits for six months in which it was kept by them together. Thayer v. Barney, 12 Minn. 502. One of two partners is not enti- tled to share in the fees received by the other as administrator, merely because that other is shown to have intended to share such fees with him. King v. Whiton, 15 Wis. 684. Where a partnership was formed by two individuals for the purpose of cutting and conveying to mar- ket pine timber, and all the pine timber upon certain lots of land was purchased in the name of one member of the firm, for the bene- fit of the firm, and paid from the property of the firm, and the contract contained a provis- ion that the timber should be cut and taken from the land by a time specified, which was not done, but the owner of the land did not insist upon any forfeiture, but subsequently conveyed the land, for the mere price of the land exclusive j of the timber, to the member of the firm with whom the original contract was made. Held, that the timber remaining upon the land still continued the property of the firm, and that the avails of timber subsequently cut upon the land by the one who made the purchase, exclusive of expenses, must be accounted for by him as firm assets. Washburn V. Washburn, 23 Vt. 577. A. and B. entered into a written partnership agreement concerning a herd of cattle furnished by A., and to be cared for by B. A. also advanced money for further invest- ment in the enterprise, a portion only of which B. used for that purpose. A. told B. to invest the remainder in "something that would pay, and not let it be idle." B. afterwards rented land in his own name, raising crops of wheat and barley, upon which a judg- ment creditor of B. levied. A. brought an action to enjoin a sale under the levy, setting forth his partnership with B. in the cattle venture, and claimed that tiie crops levied on were part of the assets raised for and on account of the partnership. Held, that the partnership did not extend to the crops raised by B. Brown v. O'Brien, 4 Neb. 195. One of three partners who de- clines to pay over a sum claimed by each of his other partners cannot relieve himself from the payment of interest thereon pending the adjustment of the claim, if it ap- pears that he has meanwhile used i08 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. *305 ought to have acquired, if at all, for the common advantage of the firm. It will be convenient to advert to each of these modes in turn. 1. Deriving profit from dealings with the firm — Sale to firm. — In the first place, then, it may be laid down as a general rule that one partner is not allowed to derive profit at the expense of the firm from any dealings between him and the partnership, unless it is clearly agreed that he is to have such profit. For example, if a partner is buying or selling for a firm, he cannot sell to it or buy from it at a profit to himself. 1 the money for his own purposes. Coddington v. Idell, 30 N. J. Eq. 540. Where a firni whose business was " a general produce business " owned a mortgage on real estate, which real estate itself the firm desired to purchase under the mortgage, and intrusted the sub- ject generally to one of the firm, held, that the legal obligation of the partner intrusted being only to get payment of the mortgage, he might make an arrangement for his own benefit for a third per- son, without the knowledge of his partners, by which such third per- son should buy the mortgaged estate, giving him, the intrusted partner, an interest in it; and if the mortgage debt was fully paid by such partner into the firm ac- count, that there was no breach of partnership or other fiduciary re- lation in the transaction; or at least, that no partner could recover from him a share of profits made by a sale of the real estate; all parties alike having been originally engaged in a scheme to get the real estate by depreciating its value through a process of entering judgment for a large nominal amount and by deceiving or "bluffing off" other creditors. Wheeler v. Sage, 1 Wall. 518. A partner in possession of firm property must pay taxes thereon, which are a joint liability on the property ; and he is not discharged from so doing by copartner's state- ment that he would not repay him. Chapin v. Streeter, 124 U. S. (31 L. ed.) 475; S. C. 26 Cent. L. J. 468. A partner, renting his copart- ner's share of the firm property, and permitting it to be sold for taxes of the latter and af terwarda renting it from the tax purchaser, cannot be allowed rent paid the latter in an action by copartner to recover rent due him. Chapin v. Streeter, 124 U. S. (31 L. ed.) 475. 1 See, generally, Ewell's Evana on Agency, ch. Ill; Hodge v. Twitchell, 33 Minn. 389. Although one partner may sell the property of th e firm and give a good title to a third party, he cannnot sell to himself. Such a sale is simply void ; no right or in- terest passes; the legal and equi- table title remains as it was before the attempted transfer. Comstock 709 *305 RIGHTS AND OBLIGATIONS. [BOOK III. In Bentley v. Craven, (m) one of the several partners was employed to purchase goods for the firm. He, unknown to v. Buchanan, 57 Barb. 127 ; Nelson v. Hayner, 66 111. 487. Thus, where stock belonging to a copartnership was surrendered by one of the partners, without ,the knowledge or consent of his partner, to the company, he rep- resenting to the secretary that he had authority from and the con- sent of his partner to do so, and procured new scrip to be issued to him in his own name, in lieu thereof, held, that the transfer was fraudulent and void. Corn- stock v. Buchanan, supra. The trust relation existing be- tween partners is not terminated by dissolution but continues until a final settlement of the partner- ship affairs. Filbrum v. Ivers, 92 Mo. 338; Kimball v. Lincoln, 5 Bradw. 316. One purchasing at a judicial sale for a surviving partner and trans- ferring to him renders surviving partner liable to account. Klotz v. Macrudy, 2 So. Rep. (La.) 203. So, a purchase by a surviving partner from the administrator of the deceased partner's interest in the firm is subject to the liabiiity of being set aside at the suit of the heirs-at-law, and such purchase cannot be set up as a bar to a bill brought for an accounting of the partnership assets and business. Kimball v. Lincoln, 5 Bradw. (III.) 316. If a member of a partnership enters into a transaction in his own behalf, which is within the scope of the partnership business, his copartner may claim the bene- fits resulting from it; this right, however, belongs to the partner alone; third parties cannot avail themselves of it, when no such claim has been asserted, to fix a liability on the partnership. Lock- wood v. Beckwith, 6 Mich. 168. Where a bill is filed by a partner against his copartner for an ac- count, and one of the partners is appointed receiver, and uses the money received as such by him, on which he makes a profit, the Other partner is not entitled to a share of such profits, the money not being held as partner, but as receiver. Whitesides v. Lafferty, 3 Humph. 150. Where a partner fraudulently, without the consent of his copart- ners, applies the partnership funds to his private purposes and profit, or invests the same in his own name and for his own use, his co- partners may, if they can distinctly trace the investment, follow it, and treat it as trust property, held for the benefit of the firm by the part- ner, or by any person in whose hands it may be, except a bona fide purchaser without notice. Kelleyy. Greenleaf, 3 Story, 93; Croughton v. Forrest, 17 Miss. 131. Profits made by a partner in the purchase and sale of merchandise, in which his copartners are entitled to share, give them no privilege. Shropshire v. Russell, 2 La. Ann. 961. So where, after the death of a partner, the survivors, one of (m) 18 Beav. 75. 710 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. ' :: 306 his copartners, supplied them, at the market price, with goods previously bought by himself when the price was lower, and he so made a considerable profit. But it was held that the transaction could not be sustained, and that he was accountable to the firm for the profit thus made. The master of the rolls, in delivering judgment, observed: "The case is this: Four partners established a partnership- for refining sugar; one of them is a wholesale grocer, and from his business is peculiarly cognizant with the variations in the sugar-market, and has great skill in buying sugar at a right and proper time for the business. Accord- ingly the business of selecting and purchasing the [*306] sugar for the sugar refinery is intrusted to him. He being the person to buy, it is his duty and business to em- ploy his skill in buying for the sugar refinery at the time he thinks most beneficial. Having according to his skill and knowledge bought sugar at a time when he thought it likely to rise, and it having risen, and the firm being in want of some, he sells his own sugars to the firm without letting the partners know that it was his sugar that was sold." Being the agent for the firm for buying sugars he whom was the executor of the will ing firm, although said firm took of the deceased partner, formed the coal to fill contracts for delivery themselves into a new firm, and at a larger price than they paid for purchased from themselves the it. Freck v. Blackiston, 83 Pa. St. whole of the interest of the de- 474. ceased at ten per cent, below its A firm made and sold stoves appraised value, to be paid for in containing improvements covered four equal instalments, in six, by patents owned by a member of twelve, eighteen and twenty-four the firm, under circumstances im- months, without interest or secu- plying a license to do so. Upon rity, the sale was held void. Nelson dissolution the receiver was pro- v. Hayner, 66 111. 487. ceeding to sell the stoves made by A member of one firm sold coal the firm before its dissolution, thereof to another firm of which when a copartner, owning the he was a member, with notice to patents, filed a bill to enjoin him his partner, and at the full market from so doing. Held, that the in- value. Held, that he was not lia- junction ought not to have been ble to account for profits received granted. Montross v. Mabie, 24 by him as partner in the purchas- Blatch. 282. 711 *307 EIGHTS AND OBLIGATIONS. [BOOK III. sold his own sugars to the firm and made a profit, and the firm was held entitled to that profit accordingly. Purchase from firm. — In Dunne v. English, (n) the plaintiff and the defendant had agreed to buy a mine for 50,000/., with a view to resell it at a profit. It was ulti- mately arranged that the defendant should sell it to certain persons for 60,000/., and that the profit of 10,000/. should be equally divided between the plaintiff and the defendant. The defendant, however, in fact sold the mine for much more than 60,000/. to a company in which he himself had a large interest. The plaintiff was held entitled to one-half of the whole profit made by the resale. Full disclosure necessary. — There was in this case some evidence that the plaintiff knew that the defendant had some interest in the purchase beyond his share of the known profit of 10,000/.; but the plaintiff did not know what that interest was, and the real truth was concealed from him. It was held that the defendant being the plaintiff's partner, and expressly intrusted with the conduct of the sale, was bound fully to disclose the real facts to the plaintiff, and not having done so, could not exclude him from his share of the profits which the defendant realized by the sale, (o) Authority to sell at a given price no waiver of share of higher price. — This case also shows, what indeed is obvious enough without authority, that one partner who authorizes another to sell partnership property at a given price does not thereby deprive himself of his right to share a higher price if a higher price should be realized. ( p) [*307] *2. Obtaining benefits which in honor belong to the firm. — The same principles apply to attempts made by partners to secure for themselves benefits which it was their duty to obtain, if at all, for the firm to which they belong, (q) (n) 18 Eq. 524. 10 Ch. 96, and De Bussche v. Alt, (o) See, also, Imp. Merc. Credit 8 Ch. D. 286. And see id. p. 317, Assoc, v. Coleman, L. R. 6 H. L. as to a custom authorizing such a 189. practice. Cp) See, also, Parker v. McKenna, (q) Parker v. Hills, 5 Jur. N. S. 712 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. *307 Thus, in Carter v. ffor?ie, if) the plaintiff and the defend- ant agreed for the purchase of an estate in moieties between them. The estate was subject to several incumbrances, which were to be discharged out of the purchase money. The defendant had abatements made to him by some of the incumbrancers of several sums due for interest and other- wise, which they, in consideration of services and friend- ship, agreed should be to his own use. However, on a bill brought against him by his co-purchaser for an account of the rents and profits, the court would not allow the defend- ant the exclusive benefit of these abatements, but held that he must account for them; the purchase being made for the equal benefit of both parties, and on a mutual trust between them. Renewing leases — Clandestine renewal. — It has been decided more than once that if one partner obtains in his own name, either during the partnership or before its assets have been sold, a renewal of a lease of the partnership property, he will not be allowed to treat this renewed lease as his own and as one in which his copartners have no in- terest. 1 This was laid down and acted on by Sir ¥m. 809, is not opposed to these cases, Loughery, 6 Cent. Rep. 278 ; S. C. for there the money was paid for a 8 Atl. Rep. 36. lease which was held to belong to The fact that a lease of premises one partner only. used by a firm for copartnership (r) 1 Eq. Ab. 7. See, also, De purposes is to one of the copart- Bussche v. Alt, 8 Ch. D. 286 ; Mori- ners does not authorize him to son v. Thompson, L. R. 9 Q. B. 480, take a renewal thereof in his own as to the right of a principal to name and for his own benefit; profits made by his agent or sub- such renewal will inure to the agent. Compare Great Western benefit of the firm. Mitchell v. Insur. Co. v. Cunliffe, 9 Ch. 525, and Read, 84 N. Y. 556; S. C. 19 Hun Baring v. Stanton, 3 Ch. D. 502, (N. Y.), 418. where the agent's profits were part So, where the firm is dissolved, of his remuneration. and after such dissolution the part- iSee Anderson v. Lemon, 4 ner causing the same procures a Sandf. 552 ; S. a 8 N. Y. 236 ; renewal of such leases in his name Struthers v. Pearce, 51 N. Y. 357 ; and the name of a new partner, Mitchell v. Read, 61 Barb. 310; without the consent of the other S. C. 61 N. Y. 123 ; Mitchell v. partners, such lessees will hold the Read, 19 Hun, 418; Johnson v. term as trustees for the firm, and 713 *307 EIGHTS AND OBLIGATIONS. [BOOK III. Grant in the celebrated case of Feather stonhaugh v. Fen- wick, (s) where two partners, having obtained in their own this though the original lease con- tained no covenant of renewal. Spiess v. Rosswog, G3 How. Pr. 401 ; S. C. 48 N. Y. Super. Ct. 135; Loughery v. Johnson, 42 Leg. Intel. 425. See, however, Pierce v. McClellan, 93 111. 245 ; Chittenbeck v. Witbeck, 50 Mich. 401. The fact that the landlord would not have granted the new lease to the other partners or to the firm is immaterial. Mitchell v. Reed, 61 N. Y. 123. A purchase by one partner of property hired by the partnership inures to the benefit of all on pay- ment of their shares of the pur- chase money. Laffan v. Naglee, 9 Cal. 662. Thus, where a copartnership oc- cupies real estate under a lease for years, and one partner, secretly, while the other partner, with his concurrence, is negotiating to buy it for the firm, purchases it for himself, lie will be decreed to hold it in trust for the firm. Anderson v. Lemon, 8 N. Y. 236. If a partner take a lease of lands in his own name for the purposes of the partnership he will be con- sidered in equity a trustee of such lease for himself and his copart- ners. But in Otis v. Sill, 8 Barb. 102, where a lease was taken by one member of a firm in his own name, there being no evidence that it was taken for the firm and with express reference to its business, beyond the fact that the partner- ship commenced at the date of the lease and was carried on upon the demised premises, it was held that the lease did not belong to the firm ; and it was also held that parol evidence was inadmissible to show that the lease was executed for the benefit of the firm, for the reason that by such evidence it was sought to create a trust in real es- tate by parol which was prohibited by statute. Chamberlain v. Cham- berlain, 44 N. Y. Super. Ct. (12 Jones & Sp.) 116. Where one partner during the partnership negotiates respecting, and obtaius the exclusive use of, a right in which the firm was inter- ested, he will be declared to hold such use in trust for the firm. Weston v. Ketcham, 39 N. Y. Super. Ct. 54. A member of a partnership pur- chased from one of its employees the patent-right in an article of use and value in the firm business, and, without disclosing or being asked to disclose the terms upon which he had purchased, offered to sell it, at an advance, to the firm ; the firm declined to buy, preferring to pay a royalty for the use of the article, which it did. Held, that the rights, if any, which the firm originally had to claim the purchase as for its benefit could not be insisted on after its dissolution. American Bank Note Co. v. Edson, 56 Barb. 84; 1 Lans. 388. Where one partner expends the (s) Featherstonlnugh v. Fen wick, 17 Ves. 298. In such cases the other partners cannot restrain the landlord from granting the lease to the one partner only. Their remedy is to treat the lessee as a trustee for the firm. Alder v. Fouracre, 3 Swanst. 489. 714 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. *307 names a renewal of the lease of the partnership premises, immediately dissolved the partnership, and sought to ex- purchase roust have been made at the time with partnership funds, or on partnership responsibility. The payment, incidentally, out of those funds, of an instalment due upon an antecedent contract on in- dividual responsibility, does not raise such a trust, or give title to anything but reimbursement. Wheatly v. Calhoun, 12 Leigh, 264. On a sale of partnership land, under an execution against the firm, one partner cannot, by pur- chasing at such sale, extinguish the title of the other partner. Farmer v. Samuel, 4 Litt. 187. See, how- ever, Baird v. Baird, 1 Dev. & B. Eq. 524. A. and B. being partners, A., under a power of attorney from B., executed a bond for a partnership debt, with warrant of attorney to confess judgment. B. afterwards sold land bound by the judgment, and, upon a subsequent dissolution of the partnership, funds were de- posited in the hands of A. for pay- ment of the partnership debts, and especially of the bond aforesaid. Judgment was subsequently en- tered upon the bond, and the land sold by B. having been sold upon an execution upon the judgment, A. became the purchaser. Held, that his purchase must be presumed to have been made with the part- nership funds, and that it would inure to the benefit of B.'s grantee. Swift v. Dean, 6 Johns. 522. Where one partner buys in a paramount or outstanding title to lands of the partnership, the rule is that he buys in behalf of all; and the others, on contributing to partnership funds in the purchase of property in his own name, he will hold the same in trust for the partnership. Evans v. Gibson, 29 Mo. 223 ; Smith v. Ramsey, 1 Gilm. 373; Coder v. Huling, 27 Pa. St. 84; Catron v. Shepherd, 8 Neb. 308; Phillips v. Crammond, 2 Wash. C. C. 441. The rule is the same even though the purchasing partner takes the title in the name of his wife. Partridge v. Wells, 30 N. J. Eq. 176. C. and S. were in partnership in the business of fattening cattle, C. conducting the sales and receiving the money. About the 6th of April, 1875, C. having a consider- able amount of partnership funds in his hands and being about to sell all the stock owned by the partnership, purchased a claim against S. for about twenty-five cents on the dollar, and in his set- tlement with S., sought to apply it against the amount of partnership funds in his hands due S. at its face value. In an action on the claim, held, that C. could recover no more than he paid for the claim. Catron v. Shepherd, supra. A partner may, however, pur- chase with his own funds, and outside of the partnership business, a judgment or other evidence of indebtedness against his copartner and enforce its collection by a levy upon, and sale of, the interest of the other in the firm assets. McKenzie v. Dickinson, 43 Cal. 119. In order to raise an implied trust in favor of the partnership by a joint purchase of real property, the 715 *30S EIGHTS AND OBLIGATIONS. [BOOK III. elude the plaintiff, their copartner, from all interest in the new lease; but in taking the accounts of the partnership the new lease was held to be part of the assets of the firm. Clegg v. Fishwich (I) is another case to the same [*308] effect. *There the plaintiff was the administratrix of one of several partners in a coal mine, and she filed a bill, some years after the death of the deceased, against the surviving partners, for an account and a disso- lution, and for a declaration that a renewed lease, which had been obtained by the defendants, might be declared subject in equity to a trust for the benefit of the partner- ship. A twofold defense was set up, viz. : first, that the old partnership ended with the old lease, and that the plaintiff could not therefore claim any interest in the new lease; and secondly, that she had, some time before the filing of the bill, assigned all the share of the deceased to his chil- dren; and that she, therefore, at any rate, had no right to institute proceedings respecting such share. It was, how- ever, decided first, that the old lease was the foundation for the new one, and that parties interested jointly with others the cost, are entitled to the benefit A member of an insolvent firm, of the purchase. This rule applies while acting as agent for the cred- ia favor of heirs of a deceased itors in the settlement of the part- partner. Forrer v. Forrer, 29 nership affairs, assisted another Gratt. 134. party to purchase from the cred- A. and B., owning land in part- itors their claims, together wfth nership, agreed to purchase an out- their rights to certain pledged standing title ; A. purchased and assets of the firm. Held, that the paid for it, and took the convey- purchase did inure to the benefit "ance to himself ; B. having then of the firm, and that the transac- done, or advanced for the firm, tion did not come within the oper- more than his share, refused to tion of the general rule of equity pay anything. Held, that the title that a trustee cannot buy trust taken by A. was taken for the property for himself, or act as partnership; and that B.'s refusal agent in buying it for another per- to pay a part of the purchase son. "Westcott v. Tyson, 38 Pa. St. money did not deprive him of the 389. right of having the benefit of the (t) 1 Mac. & G. 294. See, too, purchase, nor was it evidence of Clements v. Hall, 2 De G. & J. 173, a dissolution of the partnership, and 24 Beav. 333. Eakin v. Shumaker, 12 Tex. 51. 716 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. "309 in a lease could not take the benefit of a renewal to the exclusion of those others ; and secondly, that what had been assigned by the plaintiff was the share of the deceased in the partnership, which share had never been ascertained; and that the effect of the assignment was merely to consti- tute her a trustee of the share for the assignees after she had got it in, and not to deprive her of her power to call for a realization of the partnership property. Open renewal. — In both of these cases the renewal of the lease was clandestine. Bat that is not an essential feat- ure. In the more recent and very important case of Clegg v. Edmo?idson,(u) the partnership was at will; the manag- ing partners gave notice of dissolution and of their intention to renew the old lease for their own benefit. They after- wards did so, the other partners protesting, and there was evi- dence to show that the landlord objected to renew to any persons except the managing partners, (x) It was held, however, that it was not competent for the managing part- ners thus to acquire for themselves alone the benefit of the renewed lease, (y) Right to reject renewed lease. — A partner, by re- newing a lease against the will of his co*partners, [*309] cannot force it on them and compel them to treat the property comprised in it as acquired by the firm, unless there is some agreement binding them so to do. (s) Benefits derived from use of partnership property.— The principle which precludes a partner from retaining for himself benefits which he ought to share with his copart- ners is applied to cases in which unfairness and misconduct are by no means so apparent as in those just cited. A high standard of honor requires that no partner shall derive any exclusive advantage by the employment of the partnership (u) 8 De G. Mc. & G. 787. plaintiffs. On this point the case {x) See as to this, Fitzgibbon n. will be noticed hereafter. See book Scanlan, 1 Dow. 269. iii. ch. 10, § 3. (y) At the same time relief against (z) Clements v. Norris, 8 Ch. D. them was refused on the ground of 129, where an attempt of this sort laches and delay on the part of the was defeated. 717 #310 EIGHTS AND OBLIGATIONS. [BOOK III. property, or by engaging in transactions in rivalry with the firm. Profits of tally-shop.— Thus, in Burton v. WooTcey, (a) the plaintiff and the defendant were partners as dealers in lapis calaminaris. The defendant, who was also a shop-keeper^ lived near the mines in which the ore was got, and he pur- chased it of the miners. Instead, however, of paying them with money, he paid them with shop goods, and in his ac- count with the plaintiff charged him as for cash paid to the amount of the selling price of the goods. The plaintiff con- tended that the price of the ore ought, as between himself and the defendant, to be considered as being the cost price of the goods given in exchange for it, and that the profit made by the exchange ought to be accounted for to the partnership. The court adopted this view, holding that it was the duty of the defendant to buy the ore at the lowest possible price, and to charge the partnership with no more than he actually gave for the goods bartered for the ore. An account of the profit made by the defendant in his bar- ter of the goods was decreed accordingly. Part owners of ships. — Again, in Gardner v. MoCutcn- eon, (b) a ship of which the plaintiffs and the defendant were part owners and the defendant was master was [*310] employed for the common benefit of all in *trading and carrying under charter. The defendant, during the time the ship was thus employed, traded on his own ac- count and made considerable profit. It was held that he was bound to account for the profits thus obtained. He was bound to trade to the best of his ability for the joint (a) 6 Madd. 367. were held to belong to him who (6) 4 Eeav. 534. See, too, Benson made them. In Moffatt v. Farqu- v. Heathorn, 1 Y. & C. C. C. 326, harson, 2 Bro. C. C. 338, a part and 2 Coll. 309; Miller v. Mackay, owner of a ship was held to be ex- 31 Beav. 77; Shallcross v. Oldham, clusively entitled to money paid 2 J. & H. 609 ; and as to commis- him for his vote in the appoint- sions, Holden v. Webber, 29 Beav. ment of a master. But see on tbat 117. Compare Miller v. Mackay, case the note to it in Mr. Belt's edi- 34 Beav. 295, where the profits tion. See infra, ch. 4, § 1. 718 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. "310 interest of himself and co-owners; he had no right to em- ploy the partnership property in a private speculation for his own benefit; and although he alleged that the profits were made solely by the employment of his own private capital, and that by custom masters of ships were allowed to trade for their own benefit, the court declined to recog- nize an}' such custom, and considered that the profits had been made by the employment of what was not the defend- ant's exclusively, and that the plaintiffs had therefore a rijrht to share them. Benefits resulting from connection with the firm. — A partner, moreover, is not allowed, in transacting the part- nership affairs, to carry on for his own sole benefit any sep- arate trade or business which, were it not for his connection with the partnership, he would not have been in a position to carrj' on. 1 Bound to do his best for the firm, he is not at liberty to labor for himself to their detriment; and if his connection with the firm enables him to acquire gain, he cannot appropriate that gain to himself on the pretense that it arose from a separate transaction with which the 1 Where a partner in the ware- of a special contract or custom, to house business also owns and man- share in sums realized by the other ages the wharf-boat, receiving fees as commissions for sales of stock from steamboats in matters not in a railroad company, nor for connected with the warehouse busi- sums realized in services other ness, the other partner in the than those which belong to their warehouse business will have no professional relations. Where he joint claim upon the fund arising alleges that a sum was realized by from such fees. Northrup v. Phil- his copartner for professional serv- lips, 99 111. 449. ices the burden of proof is upon Where an attorney -at-law re- him to establish it. Where, how- fuses to act as partner, or as such ever, such sales of stock are em- to prosecute a cause intrusted to braced in the ordinary usages and his firm, and repudiates his obliga- customs of the business of attor- tion, he is not entitled to any part neys-at-law, in the locality where of the fees subsequently earned by it is carried on, each partner has a his partners in the cause. Denver right to share in the commissions. v. Roane, 99 U. S. 355. Sanderson v. Sanderson, 17 Fla. One of two partners as attorneys- 820 ; S. C. 20 Fla. 292. at-law has no right, in the absence 719 *311 EIGHTS AND OBLIGATIONS. [BOOK III. firm had nothing to do. This is well exemplified by the cases as to renewed leases which have been already referred to, (c) and by Russell v. Austwick, which also shows that the same principles apply wherever there is an agreement to share profits. Carriers not partners inter se. — In Russell v. Aust- wick, (d) several persons agreed to carry on business as car- riers between London and Falmouth; but they expressly stipulated that no partnership should subsist between them, and that each should have a certain portion of the road over which he was to carry. Business was commenced and carried on by the parties to this agreement under the name of Messrs. Russell & Co., and they were employed to carry bullion from Falmouth and Plymouth to London. [*311] On the *issue of a new silver coinage by the Bank of England, Austwick, who appears to have been the London agent of the carriers, entered into a contract with the master of the mint for the carriage of the new coin to towns on the road between London and Falmouth. Shortly afterwards he entered into another contract with the mas- ter of the mint for the conveyance of more new coin to towns in Middlesex and the adjoining counties. None of these last towns lay on the road leading from London to Falmouth, and many of them were only accessible by cross country roads, and in consequence of the increased risk of carriage along these roads the mint authorities agreed to pay 7s. 6d. per cent, for all the coin sent from the mint, in- stead of 5s. per cent., which was the remuneration agreed on in the first contract. Austwick contended that he was entitled to the whole benefit of this second contract, be- cause (except as to the extra 2s. 6d.) it had nothing to do with the carrying business between London and Falmouth; and because, as to the 2s. Qd., that sum, although calculated on all (c) Ante, p. 307. situate in his own land, but used (d) 1 Sim. 52. See, also, as to for the mine, Clegg v. Clegg, 3 benefits derived by one co-owner Giff. 322. of a mine from the use of a shaft 720 CH. II, SEC. II. 1 DUTY TO OBSERVE GOOD FAITH. *312 the coin carried, whether under the first or second agree- ment, was in fact paid by the mint in consideration only of the extra risk attending the carriage to the towns specified in the second contract. On the other hand it was contended and held that the second agreement ought to be considered as made on account of all the persons interested in the first agreement; because, although the common concern had no connection with the provincial roads which were the occa- sion of the second agreement, yet this agreement was en- tered into by the officers of the mint as connected with, and a continuation of, the first agreement, and in confidence of the responsibility of the parties to it. This case of Russell v. Austwick shows how difficult it is for a partner to benefit himself exclusively by dealings which in honor he ought not to have engaged in except for the common benefit of the firm. Distinct businesses. — Lock v. Lynam,, which came before the court of chancery in Ireland, affords another instructive example of the application of the same wholesome doctrine. In this case (e) the plaintiff *and the de- [*312] fendant had agreed to share the profit and loss aris- ing from contracts taken by the defendant for the supply of meat and bread to Her Majesty's forces in Ireland. Whilst this agreement was in force the defendant entered into secret agreements with other persons to share with them the profit and loss accruing in respect of similar contracts entered into and taken by them. The plaintiff claimed a share in the profits made by the defendant under these secret agreements; whilst the defendant contended that he was entitled to retain them for his own exclusive benefit. The lord chancellor observed that in all cases of this kind the real question was whether, from the nature of the transaction between the partners, there was any express or implied contract against other dealings of a like character; (e) Lock v. Lynam, 4 Ir. Ch. 188. 295 ; and see Somerville v. Mackay, Compare this and the last case 18 Ves. 382. with Miller v. Mackay, 34 Beav. Vol. I — 46 721 "312 EIGHTS AND OBLIGATIONS. [BOOK III. and that although there was no engagement not to enter into any other partnership of the same kind, still it never could have been in the contemplation of either of the par- ties that one partner should, in his own name or in that of any other person, adopt contracts to the prejudice of the other's interest. A decree was accordingly made directing an inquiry whether, during the period for which any part- nership between the plaintiff and the defendant existed, the defendant, either alone or jointly with any other person or persons, separately from the plaintiff, entered into, or was beneficially interested in, any other contract or dealing of the like nature with those in which the plaintiff and the defendant were engaged as partners. One partner competing with firm. — After the decisions to which attention has now been drawn, there can be little doubt that a partner cannot, either openly or secretly, law- fully carry on for his own benefit any business in rivalry with the firm to which he belongs.^) 1 But where a partner carries on a business not connected with or com- peting with that of the firm, his partners have no right to (/) See Glassington v. Thwaites, and fixtures, and the other should 1 Sim. & Stu. 124; England v. keep the books and devote himself , Curling, 8 Beav. 129, in which, his time and talents, to the busi- however, there was something ness. Buildings were furnished more than mere rivalry. and the business prosecuted until 1 Equity will enjoin one of sev- these were fully occupied with cot- eral partners in a business enter- ton stored; and the partner who prise, who by the partnership con- engaged for the buildings declined tract has undertaken to superin- to supply any more for an increase tend and manage the business, of business. The other partner from carrying on the same busi- then put up buildings at his own ness, at the same place, in a sepa- expense, and received cotton in rate establishment for his sole bene- store in them upon his individual fit, even though there be no express account ; he did not, however, at covenant restraining him from so all neglect the partnership stores doing. Marshall v. Johnson, 33 and business. Held, that this was Ga. 500. no breach of good faith, nor was A partnership was formed for a his copartner entitled to share in commission and warehouse busi- the profits of the individual store, ness, the agreement being that one Parnell v. Robinson, 58 Ga. 26. partner should furnish buildings 722 CH. II, SEC. II.] DUTY TO OBSERVE GOOD FAITH. *313 the profits he thereby makes, even if he has agreed not to carry on any separate business, (g) -Buying share. — Again, it has been held compe- [*313] tent for one partner to acquire for himself the share of a copartner in the partnership business without inform- ing the other partners of the purchase and without giving them an opportunity of acquiring it. (A) The articles of partnership did not forbid such a purchase, nor was it any part of the business of the firm to buy the shares of its members. Partnership not yet formed. — The same obligation to act with good faith exists between persons who have agreed to become partners; and if one of them, in negotiating for the acquisition of property for the intended firm, receives a bonus or commission, he must account for it to the firm when formed. (*') l He cannot retain it for himself on the ground that it was paid him for personal services rendered to the vendor before any partnership existed. Having ob- tained the benefit whilst negotiating for himself and his future partners he must share such benefit with them, (k) (g) Dean v. Macdowell, 8 Ch. D. an association, or are dealing in 345. An injunction might have contemplation of one, then they been obtained, and perhaps dam- stand in a confidential relation to ages for a breach of covenant. each other and to all who may (h) Cassels v. Stewart, 6 App. Ca. subsequently become members; 64. and they cannot purchase any (i) Fawcett v. "Whitehouse, 1 R. property and sell it to the com- & M. 132. pany at an advance, without a full 1 The owner of any property may disclosure of all the facts. If they form an association or partnership do so, the company may compel with others and may sell the them to account for the profit, property to the company at any Densmore Oil Co. v. Densmore, price agreed on, provided there be supra. See, also, Short v. Steven- no fraudulent representations made son, 63 Penn. St. 95; Doris v. by them, and no such confidential French, 4 Hun, 292; S. C. 6 Thomp. relation arises as to make them & C. 581. See Ewell's Evans on liable to account for any profits Agency, *283. realized on such sale. Densmore (k) Ibid. See, also, Hichens v. Oil Co. v. Densmore, 64 Pa. St. 43; Congreve, 1 R. & M. 150, and other S. C. 9 Am. Law Reg. (N. S.) 96. cases of that class, relating to pro- But where persons have formed moters of companies.- 723 *314: EIGHTS AND OBLIGATIONS. [BOOK III, Section III. — Of the Powers of a Majority of Partners. Disputes between partners. — In the event of a differ- ence arising between partners, it becomes necessary to con- sider whether there is any method of determining which of them is to give way to the other. It is not uncommonly supposed that the minority of the partners, if they are un- equally divided, must submit to the majority. But this is by no means the case ; for, as will be seen presently, the majority cannot oblige the minority except within certain limits. How to be settled. — The first point to determine is whether the partnership articles do or do not contain any express provision applicable to the matter in question; for if they do, such provision ought to be obeyed. (I) l [*314] If they do not, then the nature of the *question at issue must be examined ; for there is an important distinction between differences which relate to matters in- cidental to carrying on the legitimate business of a part- nership, and differences which relate to matters with which it was never intended that the partnership should concern itself. 1. Disputes on matters arising in ordinary course of business. — With respect to the first class of differences re- gard must be had to the state of things actually existing ; for, as a rule, if the partners are equally divided, those who forbid a change must have their way: in re communi potior est conditio prohibentis. (m) Upon this principle it is that one partner cannot either engage a new or dismiss an old servant against the will of his copartner; (n) 2 nor, if the (Z) As to the construction of part- ping, p. 82, ed. 9, and p. 58, ed. 12 ; nership articles, see infra, ch. 9. and as to completing contracts al- 1 See Waterbury v. Express Co. ready entered into, Butchart v. 50 Barb. 157; 3 Abb. Pr. (N. S.) Dresser, 4 De G. M. & G. 545. 163. (n) See Donaldson v. Williamson, (m) But see as to the employ- 1 Cr. & M. 345. ment of a ship, Abbott on Ship- 2 As to when one subscriber is 724 CH. II, SEC. III.] DUTY TO OBSERVE GOOD FAITH. ( -3i4 lease of the partnership place of business expires, insist on renewing the lease and continuing the business at the old place, (o) Tower of majority in such cases.— If, however, in a case of this description, unprovided for by previous agree- ment, the partners are unequally divided, the minority must, the author apprehends, give way to the majority, {p) l liable for the services of one em- ployed by less than a majority of the subscribers, in an agreement to join in the boring of oil wells, see Still v. Holbrook, 23 Hun (N. Y.), 517. (o) Clements v. Norris, 8 Ch. D. 129. N. B.— The partnership had not expired. (p) See Gregory v. Patchett, 33 Beav. 595; Const v. Harris, T. & R. 518; Robinson v. Thompson, 1 Vern. 465 ; as to opening accounts, Morgan's Case, 1 M. & G. 235. !In directing the business of a partnership a majority shall gov- ern, notwithstanding the dissent of the minority. Peacock v. Cu tu- rnings, 5 Phila. 253; 46 Pa. St. 434; Kirk v. Hodgson, 3 John. Ch. 400 ; Waterbury v. Express Co. 50 Barb. 157; S. C. 3 Abb. Pr. (N. S.) 163; Peacock v. Cummings, 46 Penn. St. 434; Johnston v. Dutton, 27 Ala. 245; Campbell v. Bo wen, 49 Ga. 417. See, also, Livingston v. Lynch, 4 John. Ch. 573; Western Stage Co. v. Walker, 2 Iowa, 504 ; Irvine v. Forbes, 11 Barb. 587. See, however, Yeager v. Wallace, 57 Penn. St. 365. In the absence of fraud the ma- jority of a firm can make a valid sale of its property without the consent of a minority. Staples v. Sprague, 75 Me. 458. The members of a private asso- ciation, as a telegraph company, are not partners. They are ten- ants in common of the property and franchise belonging to the company, and the majority cannot bind the minority unless by spe- cial agreement. Irvine v. Forbes, 11 Barb. 587. Three persons, acting together, borrowed a sum of money from a bank, and shipped a lot of cattle to market consigned to another person to sell, who, after making sale, and paying expenses and charges and a mortgage on the cattle, held about half of the pro- ceeds in his hands. One of the partners directed him to pay this balance to the bank, and he agreed to hold it subject to the order of the partners, and he paid it to one of the partners by his and the di- rection of another, they two con- stituting a majority. Held, that the direction of one partner to pay to the bank, and what he said, gave the bank no lien on the fund. The agent was authorized to pay it as he did, under the direction of the other two partners ; and as he paid the money before the bank filed their bill to enforce payment out of the fund, there was nothing upon which an equitable lien could attach. Steele v. First Nat. Bank, 60 111. 23. A copartnership had been estab- 725 *315 EIGHTS AND OBLIGATIONS. [BOOK ECTJ This is the rule applicable to companies whether incorpo- rated or unincorporated;^) it is the rule adopted in the Indian Contract Act; (r) and it is practically reasonable and convenient. The only alternative is to hold that if part- ners disagree, even as to trifling matters of detail, the minority can forbid all change, and, perhaps, bring the business of the firm to a dead-lock, for which the only rem- edy is a dissolution. At the same time the author is not aware of an} 7 clear and distinct authority in support of the proposition that even in such matters a dissentient partner must give way to his copartners. ($) However, a majority cannot, against the will of [*315] the minority, ^delegate to a manager the right to sign the partnership name; (t) and it is doubtful whether a majority can decide where the partnership busi- ness shall be carried on when the lease of its place of busi- ness expires, (u) All partners entitled to be heard. — A very important rule respecting the powers and votes of majorities is that a majority, to have any weight, must act and be constituted lished to purchase Cherokee lands, bona fide, and without notice, for and to work them for mining, etc., value, from such fourth partner; as partners. One of the speciflca- ail they can ask is an account from tions in the agreement of copart- the fourth partner. Rhea v. Van- nership was to be that such noy, 1 Jones' Eq. 283 ; id. 290. disposition was " made of their (q) See Stevens v. South Devon property as a majority should deem Rail. Co. 9 Ha. 326; Simpson v. advisable." Two of the partners Westminster Palace Hotel Co. 2 having become insolvent, and a De G. F. & J. 141 ; Kent v. Jack- third nearly so, and all having son, 2 De G. M. & G. 49, and 14 abandoned the work and neglected Beav. 367. payment of the instalments for (r) Sec. 253, cl. 5. the purchase money, leaving the (s) Pollock's Dig. § 36, adopts the whole burden upon the fourth author's view, but apparently on partner, neither of these three his authority. partners has a right to complain in (t) See Beveridge v. Beveridge, equity that the fourth partner, in L. R. 2 Sc. App. 183. order to relieve his sureties, has (u) See Clements v. Norris, 8 Ch. disposed of the land without the D. 129, but note there the firm con- concurrence of a majority. Espe- sisted of two members only, cially is this true as to a purchaser 726 CH. II, SEC. III.] DUTY TO OBSERVE GOOD FAITH. "'310 with perfect good faith ; for every partner has a right to be consulted to express his own views, and to have those views considered by his copartners. In the language of Lord Eldon, "that is the act of all which is the act of the major- ity, provided all are consulted, and the majority are acting hona fide, meeting not for the purpose of negativing what any one may have to offer, but for the purpose of negativ- ing what, when they are met together, they may, after due consideration, think proper to negative. For a majority of partners to say, We do not care what one partner may say; we, being the majority, will do what we please, is, I appre- hend, what a court of equity will not allow." (a?) Majorities at meetings. — Moreover, where powers are conferred on a majority present at a meeting of not less than a certain number of persons, unless such meeting be duly convened and the requisite number bo present at the meeting the powers in question cannot be exercised; and although it may be true that the required number of per- sons was summoned, and that the absentees could not have turned the scale, this will not render valid the acts of the majority of those actually present, for that is not such a majority as was originally contemplated, (y) 2. Disputes on matters involving a change in the nat- ure of the business — One dissentient can forbid a change. — Passing now to the second class of differences, viz., those which relate to matters with which the partner- ship was never intended to concern itself, it has been over and over again decided that no majority, however large, can lawfully engage the partnership in such matters against the will of even one dissentient partner. 1 Each partner is entitled to say to the *others, " I became [*316] (a?) Const v. Harris, Turn. & R. D. 223; Howbeach Coal Co. v. 525 ; and see id. 518, and Blisset v. Teague, 5 H. & N. 151 ; Ex parte Daniels, 10 Ha. 493 ; Great Western Morrison, De G. 539. Rail. Co. v. Rushout, 5 De G. & l See Abbott v. Johnson, 32 N. H. Sm. 310. 9 ; Livingston v. Lych, 4 John. Ch. (?/) See Re London & Southern 573. Counties Freehold Land Co. 31 Ch. 727 *316 EIGHTS AND OBLIGATIONS. [uOOK III. a partner in a concern formed for a definite purpose, and upon terms which were agreed upon by all of us, and you have no right, without my consent, to engage me in any other concern, nor to hold me to any other terras, nor to get rid of rae, if I decline to assent to a variation in the agreement by which you are bound to me and I to you." Nor is it at all material that the new business is extremely profitable, (z) In companies as well as in partnership. — This princi- ple is applicable to all partnerships and companies, whether great or small, and is evidently one which requires only to be stated to be at once assented to as being just. 1 No cases upon this subject can be referred to with greater advantage than Natusch v. Irving and Const v. Harris, both of which were decided by Lord Eldon. (a) Fire and life insurance company turning into a mar- itime insurance company. — In Natusoh v. Irving, (b) a company was formed in the early part of the year 1824 for granting fire and life assurances. The capital was 5,000,000/., divided into fifty thousand 100/,-shares. The plaintiff was one of the original subscribers, and held fifteen shares, in respect of which he had paid the required deposit, but he had not executed the company's deed of settlement. In conformity with the rules of the company he had effected a policy with it on his life for 1,500/. In the summer of 1824 the act of 6 George 1, prohibiting companies from carry- ing on the business of marine insurance, was repealed, and shortly afterwards advertisements appeared in the news- papers stating that the company would commence the busi- ness of marine insurance. The plaintiff, in answer to an inquiry whether this announcement was authorized by the (z) A.-G. v. Great Northern Rail, ville, 1 Taunt. 241 ; Glassington v. Co. 1 Dr. & Sm. 154. Thwaites, 1 Sim. & Stu. 131. 1 See Ang. & Ames on Corp. (b) Gow on Partnership, App. 398, $§ 391, 536 et seq. ed. 3. See, also, The Phoenix Life (a) See, too, Davis v. Hawkins, 3 Ins. Co. 2 J. & H. 441. M. & S. 488; Fennings v. Gren- 728 CH. II, SEC. III.] DUTY TO OBSERVE GOOD FAITH. : '317 directors, was informed that it was, and that if he objected to the course about to be pursued he might receive back his deposit with interest, and have his policy canceled and the premium returned. In reply to this the plaintiff stated that he was ready to execute any deed which was in conformity with the prospectus; that he conceived it competent for him to insist that the business in which he was a partner should be carried *on according to the [*317] agreement which united the partners together; that he could not think his doing so would entitle the managers of that partnership to pay him out his capital, and deprive him of a share in a concern of which he had the highest opinion; that he therefore required the directors to abstain from any contracts or engagements relating to marine in- surance, as not being contemplated by himself and those who joined the company upon the terms of the prospectus, and that he required an undivided attention on the part of the directors to the objects defined therein. The plaintiff afterwards attended at the office of the company to execute its deed of settlement, but finding that it contained provis- ions enabling the company to carry on the business of marine insurance, he refused to execute it, as not being con- formable to the terms on which the company was formed. In pursuance of the advertisements the company had com- menced, and it was carrying on, the business of marine insurance; but there was no evidence to show acquiescence on the part of the plaintiff, and there was evidence to show continued opposition by him to the carrying on of such business. The plaintiff applied for an injunction to restrain the directors from effecting marine insurance, and an in- junction was granted, (c) The judgment of Lord Elclon, as (c) The bill was filed by the to restrain the defendants from ef- plaintiff on behalf of himself and fecting marine insurances in the all others the shareholders of the name and on account of the corn- company against the directors, and pany, and from using the name prayed a dissolution, and, if neces- and from applying the capital of sary, a receiver, and an injunction the company for such purposes. 729 *318 EIGHTS AND OBLIGATIONS. [COOK IIT. far as it relates to the power of a majority, is particularly valuable, and tbe following extracts from it are constantly referred to: Answer to objection that dissentient can retire — Dissentient need not accept an offer of indemnity.— With respect to the liberty given to the plaintiff to retire his lordship said: "An offer is made to the plaintiff that he may receive back his deposit, with interest from the date of the payment, and he is desired to consider himself as having re- ceived notice thereof. But it is not, I apprehend, competent to any number of persons in a partnership (unless they show a contract render- ing it competent to them) formed for specified purposes, if they propose to form a partnership for very different purposes, to effect that forma- tion by calling upon some of their partners to receive their subscribed capital and interest and quit the concern; and in effect, merely by compelling them to retire upon such terms, so to form a company. This would, as to partnerships, be a most dangerous doctrine. [*318] *Where a partnership is dissolved (even where it can be in a sense dissolved the instant after notice to dissolve is given, if there be no contract to the contrary), it must still continue for the purpose of winding up its affairs, of taking and settling all its accounts, and con- verting all the property, means and assets of the partnership, existing at the time of the dissolution, as beneficially as may be, for the benefit of all who were partners, according to their respective shares and inter- ests ; and the other partners cannot say to him to whom they have given an offer of his deposit and interest, Take that, and we are a new company, keeping the effects, means, assets and property of the old as the property of the new partnership. The company will indemnify the plaintiff against loss by its transactions already had, or hereafter to be had, not for the specified purposes of the institution. But the right of a partner is to hold to the specified purposes his partners whilst the partnership continues, and not to rest upon indemnities with respect to what he has not contracted to engage in. A dissatisfied partner may sell his shares for double what he originally gave for them. But he cannot be compelled to part with them for that reason ; it may be his principal reason for keeping them, having the partnership concern car- ried on according to the contract. The original contract and the loss which his partners would suffer by a dissolution is his security that it shall be so carried on for him and them beneficially, and with augmented improvement in the value of his shares and their shares." Answer to argument that the change was warranted by statute.— "With respect to the alteration of the law enabling companies to carry on the business proposed his lordship observed : " The repeal of the act 6 George 1, which merely made it lawful for societies or partnerships, however numerous their members might be, to insure against marine 730 CII. II, SEC. III.] DUTY TO OBSERVE GOOD FAITH. *319 risks, could not make it lawful for companies or societies, which were formed for specified purposes of insurance upon lives and against fire, to insure against marine risks, unless the contracts by which such com- panies were formed, either expressly or impliedly (where individual partners did not consent to embarking in new projects, either originally or subsequently to the formation of the companies), created an author- ity in some part of the body to bind all the body to the adoption of such new undertakings." Observations on powers of majorities. — With respect to the power of a majority his lordship laid it down that, " If six persons joined in a partnership of life assurance, it seems clear that neither the majority nor any select part of them, nor five out of the six, could engage that partnership in marine insurances, unless the contract of partnership expressly or impliedly gave that power; because if this was otherwise, an individual or individuals, by engaging in one specified concern, might be implicated in any other concern whatever, however different in its nature, against his consent. But if a part of the six openly and publicly professed their intention to engage the partnership in another concern, and clearly and distinctly brought this to the knowledge of one or more of the other partners, and such one or more of the other part- ners could be clearly shown to have acquiesced in such intention, and to have permitted the other partners to have entered upon, and to have engaged themselves and the body in such new projects, and thereby to have placed their partners so engaged in difficulties and embarrassments unless they were permitted to proceed in the farther execution of such projects, if a court of equity would not go the length of holding that such conduct was *consent, it would scarcely think parties [*319] so conducting themselves entitled to the festinum remedium of injunction." . . . " Courts must struggle to prevent particular mem- bers of those bodies from engaging other members in projects in which they have not consented to be engaged, or the engaging in which they have not encouraged, assented to, or empowered, or acquiesced in, ex- pressly or tacitly, so as to make it not equitable that they should seek to restrain them. The principles which a court would act upon in the case of a partnership of six must, as far as the nature of things will admit, be applied to a partnership of six hundred." . . . "They who seek to embark a partner in a business not originally part of the part- nership concern must make out clearly that he did expressly or tacitly acquiesce." Altering principle on which profits should he dealt with. — In Const v. Harris, (d) the proprietors of Covent Garden Theater agreed that the profits should, be exclusively appropriated, to certain definite purposes. Afterwards, the (d) Turn. & R. 496. 731 *319 EIGHTS AND OBLIGATIONS. [BOOK III. proprietors of seven out of eight shares entered into an agreement to apply the profits in a different manner, but they had not consulted the owner of the other eighth share, and he disapproved of the alteration. It was held by Lord Eldon that the majority had no power to depart from the terms of the original agreement; and upon a bill filed by the one dissentient partner for a specific performance of that agreement, a receiver of the profits was appointed. In a long and elaborate judgment Lord Eldon distinctly rec- ognized the principle that articles which had been agreed on to regulate a partnership cannot be altered without the consent of all the partners, (e) In modern times the same principle has been constantly recognized and followed. Indeed it is never now disputed, although its application frequently gives rise to controversy. The decisions bearing on this subject relate, however, to companies, and are not, therefore, further noticed in the present treatise, (f) (e) See Turn. & R. 517, 523. The felt it necessary to make extracts whole judgment is well worthy of from it. attentive perusal; but being much (/) Auld v. Glasgow Working to the same effect as that in Na- Men's Building Soc. 12 App. Ca. tusch v. Irving, the writer has not 197, is one of the most recent cases. 732 ♦CHAPTER III. [*320] OF THE CAPITAL OF PARTNERSHIPS. Capital of partnerships. — By the capital of a partner- ship is meant the aggregate of the sums contributed by its members for the purpose of commencing or carrying on the partnership business, and intended to be risked by them in that business. The capital of a partnership is not therefore the same as its property: the capital is a sum fixed by the agreement of the partners; whilst the actual assets of the firm vary from day to day, and include everything belong- ing to the firm and having any money value. Moreover, the capital of each partner is not necessarily the amount due to him from the firm; for not only may he owe the firm money, so that less than his capital is due to him, but the firm may owe him money in addition to his capital, e.g., for money advanced by him to the firm by way of loan, and not intended to be wholly risked in the business. The dis- tinction between a partner's capital and what is due to him for advances by way of loan to the firm is frequently very material: e. g., with reference to interest; with reference to clauses in partnership articles fixing the amount of capital to be advanced and risked, and prohibiting the withdrawal of capital; and above all with reference to priority of pay- ment in the event of dissolution and a deficiency of as- sets, (a) The amount of each partner's capital ought, there- fore, always to be accurately stated, in order to avoid disputes on a final adjustment of account; l and this is more (a) See on this subject, infra, manner of paying it in, may be book iii, ch. 8, § 1, on partnership proved by other evidence than the accounts. articles of copartnership. Boyers !The amount of capital furnished v. Elliott, 7 Humph. 204. by each partner in a firm, and the The capital of a firm may consist 733 !20 EIGHTS AND OBLIGATIONS. [BOOK III. important where the capitals of the partners are unequal, for if there is no evidence as to the amounts contributed of the mere use of the property owned by one member of the firm. "Whiting v. Leakin, G6 Md. 25.1. In estimating the profits of the business in partnership, amounts expended in permanent improve- ments to the real estate of the firm should be regarded as capital and not as expenditures. Braun's Ap- peal, 105 Pa. St. 414. A testator by will directed trustees to hold the residue of his property invested, as they may re- ceive the same, or at their discre- tion to sell or exchange. Testator was a member of a firm whose articles provided that if any mem- ber should die the testator should be entitled to his share of the prof- its up to the time of the second semi-annual account after his death. The articles also declared that as the business required no capital, none was contributed, but provided for loans to the firm by the partners, when needed, at a specified rate of interest. At the time of his death he had lent the firm a large sum of money. Held, that the profits received by the trustees over and above interest on the loans should be treated as cap- ital and not as income. Mudge v. Parker, 139 Mass. 153. Avails of discounted notes, under the particular circumstances of the case, held to be capital. Mohawk Nat. Bank v. Van Slyck, 29 Hun, 188. Partnership agreements con- strued as respects the amount of property put by one partner into the firm. Sexton v. Lamb, 27 Kan. 420. In the construction of a will, ac- cumulated earnings of a firm, of which the testator was a partner, which remained invested in its business, held, equally with the sums originally put in, to consti- tute its capital. Thomas v. Lines, 83 N. C. 191. "Outstanding accounts" con- tributed as part of the capital of the firm construed. White v. Wa- gann, 65 Wis. 86. The term " present capital," used in a will, construed. Dean v. Dean, 54 Wis. 23. In the case of a partnership agreement, by which A. sells to B. for a certain sum a one-half inter- est in a business previously con- ducted by A. alone, the sum paid is not B.'s contribution to the cap- ital, but belongs to A. individually. Ball v. Farley, 1 S. & R. 253. The mention in a bill for winding up a partnership of a sum of money as capital invested by one of the partners, held, not to mean anything more than that it was money advanced by him for the use of the firm, and that such char- acterization would not preclude him from the right to interest on such sum. McMillan v. James, 105 111. 194. Where, in a suit for a dissolution of a partnership, it appeared that there was a mistake as to the amount of capital put in by the complainants, and it appeared that more was put in than was origi- nally stated, but how much more was uncertain, held, that the bur- den of proof was upon them, and that they should be restricted to 734 en. in. j CAPITAL OF PARTNERSHIPS. : 320 by them, the shares of the whole assets will be treated as equal, (b) the smallest amount proved, espe- cially as one of the complainants was the book-keeper, and should have kept the books so as to show the true state of the affairs. Moon v. Story, 8 Dana, 22G. A partnership consisting of four partners was dissolved, two assign- ing their shares to one of the others and the remaining two formed a new partnership. In their arti- cles they agreed that, of the prop- erty on band, a sufficient amount should be set apart and appropri- ated to paying the debts of the old firm ; and another amount for im- provements made on real estate, and that the remainder should be deemed the capital stock of the firm. Held, that the amount set apart for improvements made on real estate did not make a part of the capital stock. Mathers v. Pat- terson, 33 Pa. St. 485. Where a former clerk is taken into copartnership by a firm which was indebted to him, and the amount of such indebtedness is placed to his credit upon the new books, to which, on dissolution of the firm, is added his share of the net profits, such indebtedness will not be regarded as capital put in by the new member, but rather as a loan to the firm to be repaid him, with his share of the profits. Top- ping V. Paddock, 92 111. 92. An incoming partner paid the two original members of the firm money as indicated in the receipt : " Received of E. $2,000 for and in consideration of one-half interest in one safe, two desks, two pair of scales, one stove and pipe: also the undivided half of our trade and good-will, and the benefit accruing therefrom; also one-half of the contract of potatoes for future de- livery, and the benefits of the same as per contract of copartnership made this date between H., E. and M. : " Held, that the money so paid belonged to the original part- ners, especially if it was credited on the books in equal amounts to their stock account. Evans v. Han- son, 42 111. 234. Two persons agreed to form a planting partnership with a third, and, for that purpose, to sell him for his portion of the capital one- third of a plantation, the price to be paid out of his share of the prof- its. Held, that the joint owner- ship was not to be treated as if acquired from different vendors, but as subsidiary to a partnership to whose terms it was subject ; and that as by those terms the vendee could not take his capital out of the partnership until payment of the price, neither he, his creditors, nor his representatives, could take his third interest until the other partners were fully reimbursed. Thompson v. Mylne, 6 La. Ann. 80. Where, by the terms of the agreement, the defendant furnished the capital stock, and the plaintiff contributed his skill and service, and the profits of the copartnership were to be equally divided, the plaintiff is not to be entitled to any part of the capital stock on a set- Co) See as to the equality of shares, infra, book iii, ch. 5, § 2. 735 *'321 EIGHTS AND OBLIGATIONS. [BOOK III. [*321] ''Increase and diminution of capital. — When the agreed amount of capital of a partnership has been exhausted and the business cannot be carried on to a profit, the partnership may be dissolved, as will be pointed out hereafter, (c) A partner cannot be compelled to furnish more capital than he has agreed to bring in and risk; although he cannot, by limiting the amount of his capital, limit his liability for debts incurred by the firm, (d) On the other hand, a partner who has agreed to furnish a certain amount of capital is bound not only to bring it into the firm, but also to leave it in the business until the firm is dissolved. It follows from these considerations that the agreed cap- ital of a partnership cannot be either added to or withdrawn except with the consent of all the members of the partner- ship;^) and this rule is perfectly consistent with the ob- vious fact that the assets and liabilities of a partnership are necessarily liable to fluctuation, and that the value of each partner's share of such assets constantly fluctuates also. Borrowing money and increasing capital. — The differ- ence between borrowing mone} r on the credit of a firm and increasing its capital has been already adverted to; {/) and it has been seen that, although each member of an ordinary tlement of the affairs of the part- consideration to support it. The nership. He had no interest in rights and benefits resulting to any part of the capital, excepting partners constitute the considera- so far as in the progress of the tion he receives for the capital he business the same may have been may advance ; he receives the con- converted into profits. Conroy v. sideration for his capital by being Campbell, 45 N. Y. Super. Ct. 326; admitted a partner. Stafford v. Shea v. Donahue, 15 Lea, 160. See, Fargo, 35 111. 481. also, Manley v. Taylor, 50 N. Y. (c) Infra, book iv, ch. 1, § 2. Super. Ct. 26. (d) Ante, p. 200. A note given by a partner to his (e) See Heslin v. Hay, 15 L. R. Ir. copartner, as collateral security for 431, where an attempt was made to the capital advanced by the latter, violate this rule ; and see the obser- being intended simply as a receipt vations of Lord Bram well in Bouch for the money, and to secure the v. Sproule, 12 App. Ca. 405. return of the capital in the event (/) Ante, pp. 132, 133. that no loss occurred, is without 736 CH. III.] CAPITAL OF PARTNERSHIPS. *32i trading partnership can pledge its credit for money bor- rowed in order to carry on its business, he cannot render it liable to repay money borrowed by him to enable him to furnish the amount of capital which he has agreed to bring in - iff) (g) Ante, pp. 132, 133. Vol. I — 47 737 [*322] ^CHAPTER IV. OF JOINT AND SEPARATE PROPERTY. Partnership property. — The expressions partnership property, partnership stock, partnership assets, joint stock, and joint estate, are used indiscriminately to denote every- thing to which the firm, or, in other words, all the partners composing it, can be considered to be entitled as such, (a) The qualification as such is important; for persons may be entitled jointly or in common to property, and the same per- sons may be partners, and yet that property may not be partnership property; e. g., if several persons are partners in trade, and land is devised or a legacy is bequeathed to them jointly or in common, it will not necessarily become part- nership property and form part of the common stock in which they are interested as partners, (b) l Whether it does so or does not depends upon circumstances, which will be examined hereafter. Importance of distinguishing partnership property from the separate property of the partners. — It is often a difficult matter to determine what is to be regarded as partnership property, and what is to be regarded as the separate property of each partner. The question, however, is of importance not only to the partners themselves, but also to their creditors; for, as will be seen hereafter, if a (a) The expression joint estate Eq. 197 ; S. C. on appeal under the sometimes has a wider significa- name of Re Littles, 10 id. 375. tion, including all property which, l The fact that a negotiable note on the bankruptcy of the firm, is is payable to two or more persons distributable amongst its creditors, jointly is no evidence that it is See post, book iv, ch. 4, sec. 3, Re- owned in partnership; nor is the puted Ownership. fact that such note is in the actual (b) Morris v. Barrett, 3 Y. & J. possession of one of the parties 884; and see the judgment in Ex such evidence. Haydon v. Nico- parte The Fife Banking Co. 6 Ir. letti, 18 Nev. 290. CH. IV, SEC. I.] JOINT AND SEPARATE PROPERTY. "323 firm becomes bankrupt the property of the firm and the separate property of each partner have to be distinguished from each other, it being a rule to apply the property of the firm in the first place in payment of the creditors of the firm, and to apply the separate properties of the partners in the first place to the payment of their respective separate creditors. *It is proposed, therefore, to examine the rules by [*323] which to determine what is the property of the firm and what the separate property of its members. Question determined by agreement. — It is for the part- ners to determine by agreement amongst themselves what shall be the property of them all, and what shall be the sep- arate property of some one or more of them. Moreover, it is competent for them by agreement amongst themselves to convert what is the joint property of all into the separate property of some one or more of them, and vice versa. The determination, therefore, of the question, What is, and what is not the property of the firm? involves an inquiry into the three following subjects, viz.: Joint estate. Separate estate. Conversion of one into the other. Each of these will be examined in order. Section I. — Of Joint Estate. 1. Property of the firm. — Whatever at the commence- ment of a partnership is thrown into the common stock, and whatever has from time to time during the contin- uance of the partnership been added thereto or obtained by means thereof, whether directly by purchase or circui- toush^ by employment in trade, belongs to the firm, unless the contrary can be shown, (c) 1 (c) See Crawshay v. Collins, 2 V. Burnand, 4 Russ. 247, and 2 Bli. Russ. 339, as to the patents; Nerot N. S. 415 ; Bone v. Pollard, 24 Beav. 1 See post, Partnership Realty. property is a mixed question of law Whether property is partnership and fact. Bacon v, Lloyd, 1 Tex. 739 '323 KIGHTS AND OBLIGATIONS. [BOOK III. Property paid for by the firm.— The mere fact that the property in question was purchased by one partner in his 283. See, also, as to co-owners of of partnership money on the sepa- mines not being copartners, Clegg rate property of one partner, see v. Clegg, 3 Giff . 322. As to outlays infra, § 2. App. (Civ.) 116; Smith v. Harris, 76 Ind. 104. Property purchased with firm moneys for firm purposes is part- nership property. Way v. Steb- bins, 47 Mich. 296 ; Seiler v. Bren- ner, 3 S. West. Rep. (Ky.) 796. See, also, Way v. Stebbins, 47 Mich. 296. The circumstance that the pay- ment was made out of partnership funds, especially if the property be necessary in the ordinary opera- tions of the partnership and be so employed, will afford a very strong presumption that it was intended to be held as partnership property, and, in the absence of proof to the contrary, will be decisive. Rice v. Pennypacker, 5 Del. 279. Where a tenant is a firm the tenant's right of renewal of the lease is a partnership asset. John- son v. Loughery, 6 Cent. R. 278; S. C. 8 Atl. R. 36. The mere fact that two persons use certain machinery in a business in which they are partners does not prove that it is partnership prop- erty. If no account is taken of it in settling the firm business the more natural inference is that it is owned in common. Browning v. Cover, 42 Leg. Intel. 396. F. and W. formed a partnership into which F. put certain machin- ery, covered by an unrecorded mortgage previously given by F. W. sold his interest in the partner- ship to three others, who continued the business with F. Held, that, upon the formation of the partner- ship, F. ceased to have any indi- vidual interest in any portion of the mortgaged machinery, and that, as the mortgage was unre- corded, the mortgagee's only rem- edy was against whatever portion of the partnership assets might re- main as F.'s share after all claims against the firm were settled. Ringo v. Wing, 5 So. West. Rep. (Ark.) 787. A partner in a firm engaged in purchasing live-stock on commis- sion died after certain commissions were partly earned. The surviving partner completed the transactions and received the money. Held, that such commissions should be treated as partnership assets, but that the surviving partner was en- titled to have an allowance for his time and expenses in completing the transactions. Newell v. Hum- phrey, 37 Vt. 265. A judgment in a suit by two for a trespass alleged to be on firm property is firm assets. Collins v. Butler, 14 Cal. 223. On the termination of a partner- ship formed to plant and sell oys- ters, planted oysters remaining in the beds after payment of all part- nership debts are the common property of both partners, of which, as in case of any personal property held in common, one ten- ant in common cannot dispose of the share of the other without his 740 CH. IV, SEC. I.] JOINT AND SEPARATE PROPERTY. 524 own name is immaterial, if it was paid for out of the partner- ship moneys, for in such a case he will be deemed to hold the property in trust for the firm, unless he can show that he holds it for himself alone, (d) 1 Upon this *prin- [*324] authority. Ruckman v. Decker, 23 N. J. Eq. 283. If such tenant in common turn over such property to a firm of which he becomes a member such firm is accountable to the other tenant in common of the property for the value of his share of the property so turned over and used by the new firm. Ruckman v. Decker, supra. Where C. and B. formed a part- nership for the purpose of making, selling and letting chronometers, C. contributing all the capital and B. giving labor only and receiving a salary and a share of the profits, and C. agreed to put into the stock of such partnership certain chro- nometers which were his property, upon a stipulation " that they should be taken at a fair valuation as a stock in trade, so that upon a sale of them at the usual market price the profit usual in that branch of business might be made upon them;" but this agreement never was reduced to writing as was intended, nor was a valuation ever fixed upon ; and after dissolu- tion of the firm both partners re- mained in the store they had occu- pied as partners, and C. let the chronometers in his own name and kept his own accounts of them, and there was some evidence that it was understood between the par- ties that C. was to take stock and pay the debts, held, that after such dissolution the chronometers. were the property of C, and that his lessee of one of them could recover it from B., who had taken it away from him. Upon such an agree- ment the chronometers did not be- come the property of the firm, but continued always the property of C, the firm having permission to use them. Penny v. Black, 9 Bosw. 310. One of two partners cannot com- mit a trespass, larceny, embezzle- ment or burglary as to the property or house of the firm. Jones v. The State. 76 Ala. 8 : Alfele v. Wright, 17 Ohio, 238; State v. Butman, 61 N. H. 511. (d) See per Lord Eldon in Smith V. Smith, 5 Ves. 193; Robley v. Brooke, 7 Bli. 90; Morris v. Bar- rett, 3 Y. & J. 384. See, also, Hel- more v. Smith, 35 Ch. D. 436. 1 Where a firm exclusively en- gaged in the collection of rents de- posit the same as collected in a bank in the name of one of the partners, from which account the rents are paid to the parties enti- tled, by the check of such partner, the fund so constituted is partner- ship property as to a judgment creditor of the firm for rents col- lected by them, seeking to reach such fund by a creditor's bill against the surviving partner. Le Roy v. Mathewson, 47 N. Y. Super. Ct. 389. If a person buys goods for a firm of which he is a member the goods bought become the property of the firm, though he does not at the time disclose the name of his 741 *324 KIGHTS AND OBLIGATIONS. [BOOK III. ciple it is held that land purchased in the name of one partner, but paid for by the firm, is the property of the firm, although there may be no declaration or memoran- dum in writing disclosing the trust, and signed by the part- ner to whom the land has been conveyed, (e) l So, if shares in a company are bought with partnership money, they will be partnership property, although they may be standing in the books of the company in the name of one partner only, and although it may be contrary to the company's deed of settlement for more than one person to hold shares in it- if) partner. Scott v. McKinney, 98 Mass. 344. Where two members of a firm engaged in buildiug a mill bought, with their own means, lumber for that purpose and delivered it on the ground where the mill was building, and the other partner, who had personal charge of the work, took possession of the lum- ber and applied it to the partner- ship uses as it was needed, with the knowledge of the two former, and without objection, these facts are enough to prove a conversion of all the lumber so bought and de- livered into partnership property. Person v. Wilson, 25 Minn. 189. A judgment upon a warrant of attorney given to one member of a partnership to secure a debt due the partnership will be held by him, as trustee, for the benefit of the firm ; and payment of the judgment will satisfy the partner- ship debt. Chapin v. Clemitson, 1 Barb. 811. Where one permits another to buy stock on their joint account, in anticipation of forming a part- nership, and immediately after- wards repudiates the agreement to become a partner, he is not entitled to any of the property bought, nor are his individual creditors. Rice v. Shuman, 43 Pa. St. 37. A special contract between part- ners respecting the ownership, sale and application of the proceeds of certain railroad bonds construed. Simonton v. Sibley, 122 U. S. 220. As to when real estate is partner- ship property, see post. (e) Forster v. Hale, 5 Ves. 308, and 3 id. G96. 1 Where it appeared that real es- tate had been used by a partnership for a long series of years in the manufacture of iron, and that upon the death of any partner his heirs at law, to whom the land descended, came into the partnership in his place, and there was no proof of any articles of partnership, held, that the whole partnership estate, whether consisting of real or per- sonal property, was to be regarded in equity as a consolidated fund, to be appropriated primarily and ex- clusively to the satisfaction of partnership debts. Good burn v. Stevens, 5 Gill, 1. (/ ) Ex parte Connell, 3 Deac. 201 ; Ex parte Hinds, 3 De G. & S. 613. 742 OH. IV, SEC. I.] JOINT AND SEPARATE PROPERTY. *325 Ships. — As regards ships there was often a difficulty aris- ing from the ship registration acts. For as it was clearly settled that a ship belonged, both at law and in equity, to the person or persons who were registered as her owners, and to no one else, it followed that if a ship had been bought with partnership money, had been used as partnership prop- erty, and had always been treated as such by all the part- ners, yet, if she was registered in the name of one partner only, there was no method by which that one could be pre- vented from effectually asserting an exclusive right to the ship, and depriving his copartners of all their interest in her. iff) The provisions of the present merchant shipping acts differ, however, in several material respects from the enactments previously in force, and now, in the case above supposed, the registered partner would be deemed a trustee for the firm, (h) •Cases where property paid for by the firm does [*325] not belong to it. — Strong as is the presumption that what is bought with partnership money is partnership prop- erty, the presumption may be rebutted; e. g., by showing that the money was lent by the firm to one partner, and so was not in fact partnership money when invested, (z) More- (g) See Slater v. "Willis, 1 Beav. firm, see Ex parte Howden, 2 M. 354; Battersby v. Smyth, 3 Madd. D. & D. 574. 110; Camden v. Anderson, 5 T. R. (h) 17 and 18 Vict. ch. 104, g§ 37 709; Curtis v. Perry, 6 Ves. 739; and 43, and 26 and 26 Vict. ch. 63. Ex parte Yallop, 15 Ves. 60; Ex §3. Upon the construction of the parte Houghton, 17 Ves. 251 ; and former act, see Hughes v. Suther- astothe old law relating to equi- land, 7 Q. B. D. 160; Liverpool table interests in ships, see an article Borough Bank v. Turner, 1 J. & by the author in the Law Magazine H. 159, and 2 De G. F. & J. 502. for May, 1862, vol. xiv, p. 70, N. A ship may be registered in the S. If a ship was registered in the name of a company, though some name of two partners the shares of its members are foreigners. See in which they were interested 17 and 18 Vict. ch. 104, § 18, and might have been shown. See Ex R. v. Arnaud. 9 Q. B. 806. parte Jones, 4 M. & S. 450. As to (t) As in Smith v. Smith, 5 Ves. the right of one partner to sell or 193. See, also, "Walton v. Butler, mortgage a ship belonging to the 29 Beav. 428; Ex parte Emly, 1 Rose, 64. 743 *326 EIGHTS AND OBLIGATIONS. [liOOK III. over, it is to be observed that property which has been used and treated as partnership property cannot be presumed to belong to one partner only, simply because he paid for it; for the presumption in such a case is, rather, that the prop- erty in question was his contribution to the common stock, (j) This subject will be adverted to more at length in the next section. Secret benefits obtained by one partner. — It has been al- ready seen that one partner will not be allowed to retain, for his own exclusive benefit, any property which he may have acquired in breach of that good faith which ought to regu- late the conduct of partners inter se. Whatever property has been so acquired will be treated as obtained for the benefit of all the partners, and as being part of the assets of the firm; and this rule applies to property obtained by a continuing or surviving partner in breach of the good faith which he is bound to exercise towards a retired partner and the representatives of a deceased partner, so long as their interest in the partnership assets contin- ues, (k) Money paid to one partner for his exclusive benefit. — At the same time, if an advantage which has been obtained by a partner is wholly unconnected with partnership af- fairs, or, being connected with them, has been conferred upon him with a view to his own personal benefit, he can- not be called upon to account for it to the partnership. For example, where a ship, belonging to a Frenchman and two Americans, as partners, was captured by a British cruiser, and compensation was made to the Americans, but to them only, the Frenchman being expressly excluded, it was held that the sum awarded to the Americans belonged to them alone, and that the Frenchman had no interest in [*326] it. (I) So, if one partner is *the lessee of property (j) See Ex parte Hare, 1 Deac. 551. See, also, Burnand v. Rodo 25, per Sir J. Cross. canachi, 7 App. Ca. 333 ; Thompson (fc) See ante, p. 305 et seq. v. Ryan, 2Swanst. 565, n; Moffatt v. (Z) Campbell v. Mullett, 2 Swanst. Farquharson, 2 Bro. C. C. 338. See 744 CH. IV, SEC. I.] JOINT AND SEPARATE PROPERTY. *326 to which the firm is only entitled so long as the part- nership continues, and, on the dissolution of the partner- ship, the lease is sold or renewed, the price of the sold lease, or the renewed lease, as the case may be, will belong, not to the firm, but to that partner in whom the lease is, by hypothesis, exclusively vested. (?n) Property acquired after dissolution.— As regards prop- erty acquired after a dissolution, but before the affairs of a dissolved partnership have been wound up, such property is not necessarily to be considered as partnership property, even though the partner acquiring it has continued to carry on the business of the dissolved firm without the consent of his late partners. This was decided in Nerot v. Bur- nand. (n) In that case, in effect, an hotel-keeper bequeathed his business to his son and daughter. After the death of the testator the daughter continued to carry on the busi- ness. She afterwards transferred it to a new house in Clif- ford street, and this house was conveyed to her in fee. She continued to carry on the business there for some time, and ultimately she married. During the greater part of the time which had elapsed since the death of the testator his son had been abroad, and, on his return, he insisted that he ought to be considered as a partner with his sister, and that, as such, he was entitled to have the new house taken by her, and all the stock in trade and effects purchased by her in order to carry on the business, treated as partnership property. The vice-chancellor decided that the testator's son and daughter had become partners, but that the part- nership between them had been dissolved on her marriage. He also held that the new house and all the goods, furni- ture, plate, linen, china, wines, stock in trade, implements and other effects, being in and about the premises, formed the note on this case in Belt's edi- (n) 4 Russ. 247, and 2 Bli. N. S. tion of Brown's reports. 215. See, too, Payne v. Hornby ^ (w) See Burdon v. Barkus, 3 Giff. 25 Beav. 280. 412 ; aff . on appeal, 4 De G. F. & J. 42. 745 *327 EIGHTS AND OBLIGATIONS. [BOOK III. a part of the partnership property. Upon appeal this de- cision was affirmed so far as it related to the existence and subsequent dissolution of partnership, but was varied so far as it related to what ought to be considered as [*327] partnership property. *Upon this head the lord chancellor's judgment w T as as follows: '•It appears to me satisfactorily made out from all the circumstances that the house in Clifford street was bought with the partnership prop- erty ; bought, in the first instance, partly with the partnership property, partly with money borrowed by Miss Nerot and afterwards repaid out of the partnership effects, and partly upon the credit of the house that belonged to the partnership, and I think that part of the vice-chancel- lor's decree by which he directs the house to be sold must be affirmed. "There is a part of the decree, however, in which I cannot concur. The dissolution of the partnership took place in September, 1819. The vice-chancellor has directed all the property to be sold which was in the house in Clifford street at the time when the decree was pronounced, several years after the dissolution of the partnership, as if all the prop- erty which at the time of the decree existed in the house was, without inquiry, to be considered as partnership property. Lord Eldon doubted greatly whether that part of the decree could be sustained; and in my opinion it must be varied by directing the master to take an account of the particulars of the partnership property which were in the house in Clifford street at the time of the dissolution, and of the value of the property at that time ; and to inquire whether any part of that property still remains in the house." (o) Good-will. — The good-will of a partnership, in so far as it has a pecuniary value, is partnership property, unless the contrary can be shown. This subject, however, will be more conveniently discussed hereafter when treating of partnership articles, (p) 1 (o) See, also, Ex parte Morley, 8 paper, when published by more Ch. 1026, where a surviving partner than one, is partnership property : continued the business, sold the old and when one of the partners die stock in trade, and it was held that it does not survive to the surviving the new stock in trade formed part partner, but belongs to, or is ad- of his separate estate. ministered as part of, the joint es- (p) See infra, book iii, ch. 9, § 2. tate. Holden v. M'Makin, 1 Pars. 1 The subscription list of a news- Sel. Cas. 270. 746 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. *323 Section II. — Separate Estate. 2. Property of the individual partners. — The preced- ing inquiry into what constitutes the property of the firm has rendered it unnecessary to inquire at length into what constitutes the separate property of its members. A few additional observations, pointing out the danger of reiving too much on circumstances which are often regarded as decisive, may, however, be usefully added. *That which produces partnership profits may [*328] belong to one partner only. — It by no means fol- lows that persons who are partners by virtue of their par- ticipation in profits are entitled as such to that which produces those profits. For example, coach-proprietors who horse a coach and divide the profits may each make use of horses which belong to himself alone and not to the firm of proprietors, (q) 1 So, where a merchant employs a (q) As in Frornont v. Coupland, 2 Bing. 170; Barton v. Hanson, 2 Taunt. 49 ; and see Wilson v. White- head, 10 M. & W. 503, as to an author's interest in paper supplied for his work to the publisher. 1 Where two persons were en- gaged in the livery business, each individually owning a portion of the property used therein, the only community of interest being in the profits, the property was not partnership property in such sense as to prevent the owners from claiming it as exempt from execu- tion. Root v. Gay, 64 la. 399. Where S. furnished the capital and owned all the stock of the firm, and R. contributed his labor and experience and had "a work- ing interest " only, receiving a share of the net profits for his serv- ices, the property did not become partnership property and was lia- ble to be sold to satisfy the individ- ual debts of S. Stumph v. Bauer, 76 Ind. 157. Personal property purchased by one partner with his own funds, to be used for partnership purposes, in the absence of any understanding to the contrary remains the prop- erty of the purchaser. If such property be destroyed in the use of the partnership and replaced, the property replaced belongs to the partner who owned the original property. Kelly v. Clancey, 16 Mo. App. 550. If partners, by arrangement among themselves, own each a separate part of the stock in trade on which the partnership business is transacted, the stock will never- theless be regarded as partnership property for the payment of part- nership debts, at least as to cred- itors who have no notice that the 17 J2S EIGHTS AND OBLIGATIONS. [BOOK III. broker to buy goods for him and to sell them again on his account, although it may be agreed that the profits are to Elliot stock is owned in that way v. Stevens, 38 N. H. 311. Articles of partnershqj for manu- facture of carriages provided that the entire stock should be fur- nished by one partner; that the other was to have no interest or ownership in the capital stock, but 6hould give his personal attention exclusively to the business; and that the net pi'ofits and losses should be equally divided. Held, that stock and tools of the factory manufactured by it in the course of its business was not the sole property of the partner furnishing the capital, but was joint property. Snyder v. Lunsford, 9 W. Va. 223. Plaintiffs and defendant were engaged in carrying on business as partners, the articles of copartner- ship providing that the capital con- tributed by the plaintiffs should belong to them respectively and exclusively. The plaintiffs pur- chased a lathe and other machin- ery, which were put in the shop in the custody of the defendant, who was to carry on the business, and one-half the cost of which machin- ery was, by one of the plaintiffs, credited to each of them upon the books of the firm. Held, that, by the credit of the cost of the ma- chinery to the plaintiffs, the ma- chinery became the property of the firm, and that the same having been removed by the defendant, the plaintiffs could not maintain trover therefor. Robinson v. Gil- fillian, 15 Hun, 267. An entry in the partnership books by one of the partners in the business of a saw-mill, charging himself with a boat which he had built at the mill, may be intro- duced by him as evidence inter alia to prove the boat to be his individ- ual property. Reno v. Crane, 2 Blackf. 217. A., B. and C. agreed to engage in the shipment and sale of such cattle as either might from time to time purchase on his own account and offer to the others at cost for the purpose of shipment and sale on joint account, but it was pro- vided that when the party pur- chasing delivered a lot of cattle to the place of shipment the others had the option to take an interest or decline, but if they accepted, the lot so offered became partner- ship property and was sold on joint account; but if they did not, it re- mained the property of the buyer and was shipped and sold on his own account. H., to whom this arrangement was unknown, sold cattle to A. on his individual credit, to be paid for on his receiving re- turns of sales, but he failed to pay as agreed. Held, that the cattle did not become partnership property till delivered at the place of ship- ment and accepted to be shipped and sold on joint account; that at the time the cattle were sold and delivered to A, B. and C. did not acquire an interest therein inde- pendent of their consent, and were not liable by operation of law for the debt thus contracted. The fact that they or either of them subse- quently elected to take an interest in the cattle under said agreement did not create a liability against them as partners on such pui- 748 CH. IV, SEC. II.] JOINT AND SEPAEATE PROPERTY. *328 be divided, the goods themselves, and the money arising from their sale, are the property of the merchant and not the joint property of himself and the broker; (r) and it not un frequently happens that dormant partners have no inter- est in anything except the profits accruing to the firm to which they belong, (s) Property used for partnership purposes not necessarily partnership property. — Again, it by no means follows that property used by all the partners for partnership purposes is partnership property. For example, the house and land in and upon which the partnership business is carried on often belongs to one of the partners only, either subject to a lease to the firm, or without any lease at all. (t) So it sometimes happens, though less frequently, that office fur- niture, (u) and even utensils in trade, {x) are the separate property of one of the partners, subject to the right of the others to use them as long as the partnership continues. chase. Valentine v. Hickle, 39 Ohio St. 19. Money paid by a person for a half interest in an existing business, under an agreement for a partner- ship between him and the proprie- tor, does not belong to the firm but to the former proprietor. Ball v. Farley, 81 Ala. 288. Individual assets of one partner hypothecated by him for a firm debt do not thereby become firm assets. Fay v. Finley, 14 Phila. 206 ; S. C. 38 Leg. Intel. 222. A mortgage given by one part- ner to secure any balance that may be due to the other is not a firm asset but should be distributed to the individual creditors of the mortgagee. Niagara Bank v. Lord, 33 Hun (N. Y.), 557. (r) Smith v. Watson, 2 B. & C. 401 ; Meyer v. Sharp, 5 Taunt. 74 ; Burnell v. Hunt, 5 Jur. 650, Q. B. (s) See Ex parte namper, 17 Ves. 404, 405; Ex parte Chuck, Mont. 373. {t) See Burdon v. Barkus, 3 Giff . 412, aff. on appeal, 4 De G. F. & J. 42, as to a lease of a coal mine ; Ex parte Murton, 1 M. D. & D. 252 ; Balmain v. Shore, 9 Ves. 500 ; Row- ley v. Adams, 7 Beav. 548 ; Doe v. Miles, 1 Stark. 181, and 4 Camp. 373. If there is no lease and the firm is dissolved, the owner can eject his late partners without no- tice to quit. Doe v. Bluck, 8 C. & P. 464; Benham v. Gray, 5 C. B. 138 (an action of trespass). As to an injunction in such cases, see Elliot v. Brown, 3 Swanst. 489, n.; Hawkins v. Hawkins, 4 Jur. N. S. 1044, V.-C. Stuart. (u) Ex parte Owen, 4 De G. & Sm. 351. See Ex parte Hare, 1 Deac. 16 ; Ex parte Murton, 1 M. D. & D. 252. (a?) Ex parte Smith, 3 Madd. 63. 749 *329 EIGHTS AND OBLIGATIONS. [BOOK III. If, however, a partner brings such property into the com- mon stock as part of his capital it becomes partner- [*329] *ship property, and any increase in its value will belong to the firm, (y) Property bought with the money of the firm. — It does not even necessarily follow that property bought with the money of the firm is the property of the firm. For it some- times happens that property, although paid for by the firm, has been, in fact, bought for one partner exclusively, and that he has become debtor to the firm for the purchase money. (?) Agreement of the partners the true test. — It is obvi- ous, therefore, that the only true method of determining as between the partners themselves what belongs to the firm, and what not, is to ascertain what agreement has been come to upon the subject. If there is no express agree- ment attention must be paid to the source whence the prop- erty was obtained, the purpose for which it was acquired, and the mode in which it has been dealt with. The follow- ing cases, in which there was very little evidence to show what agreement had been made, may be usefully referred to on this subject. Stock in trade and furniture. — In Ex parte Owen, (a) one Bowers, who was a grocer, provision dealer and wine merchant, and who possessed stock in trade and household furniture at his place of business, took two partners, with- out any agreement except that they were to participate in the profits of the concern. They brought in no capital and paid no premium, and no deed or agreement was exe- cuted. Bowers bought with his own money, but in the name of the firm, new stock required for the business. (y) Robinson v. Ashton, 20 Eq. 25. (a) 4 De G. & Sin. 351. See, also, (z) See Smith v. Smith, 5 Ves. Pilling v. Pilling, 3 De G. J. & S. 193; Walton v. Butler, 29 Beav. 162. As to a lease of salt-works 428; Ex parte Emly, 1 Rose, 64. belonging originally to one partner. Compare the case of The Bank of but which became the property of England, 3 De G. F. & J. 645, the firm, Parker v. Hills, 5 Jur. noticed infra, p. 330. N. S. 809, and on appeal, 7 id. 833. 750 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. *330 Upon the bankruptcy of the firm the question arose to whom the stock in trade and furniture belonged. The court, coming to the best conclusion it could from such materials as were before it, held that there was an agree- ment between the three, expressed or implied, that all the stock in trade should become the property of the three, subject to an account, in *which the partner- [*330J ship would be debited in favor of Bowers for the value of the articles which belonged to him or for which he paid. But the court thought there was not the same ground for such an inference as to the household furniture, and that, therefore, was held to have continued and to re- main the separate estate of Bowers. Outlays on property. — Sometimes a firm lays out money on property which belongs exclusively to one partner; or some of the partners lay out their own moneys on the prop- erty of the firm; and in such cases the question arises whether the money laid out can be considered as a charge on the property on which it has been expended, or whether the owners of the property obtain the benefit of the outlay. The agreement of the partners, if it can be ascertained, de- termines their rights in such cases. But where, as often happens, it is extremely difficult, if not impossible, to ascer- tain what was agreed, the only guide is that afforded by the burden of proof. It is for those claiming an allowance in respect of the outlay to establish their claim. On the other hand an intention to make a present of a permanent improvement is not to be presumed. Houses built on partnership property. — In Be Streat- Jleld, Lavrrence & Company, (b) two partners bought an estate with partnership money. The land was conveyed to them in undivided moieties to uses to bar dower, and each (6) Bank of England Case, 3 De G. erected on the separate property of F. & J. 645. In Pawsey v. Arm- one of the partners. See, also. Bur- strong, 18 Ch. D. 698, an inquiry donr. Barkus, 3 Giff. 412, and4De was directed as to buildings paid G. F. & J. 42, where a pit was sunk for out of partnership moneys, but by the firm in a partner's property. 751 *<331 RIGHTS AND OBLIGATIONS. [BOOK III. partner built a house on the land with money of the firm, but charged to him in his private account. An account was opened in the partnership books, and in this account the purchased estate was debited with all moneys of the partnership expended in the purchase. At the time of the purchase the land was in lease, but the tenant surrendered to the partners those portions which they wanted, they re- ducing his rent. The rents, viz., both that paid by the tenant for what he held, and that paid to him for what he gave up, were treated in the books of the firm as paid to and by it. There was evidence to show that the partners intended to come to some arrangement respecting [*331] the division of the estate, but *they became bank- rupt before doing so. It was held that both the land and the houses on it were the joint property of the firm, and not the separate properties of the partners. Appointments. — In Collins v. Jackson, (c) two persons were in partnership as solicitors, and one of them held sev- eral appointments; he was clerk to poor law guardians, superintendent registrar of births, marriages and deaths, treasurer of a turnpike trust, steward of a manor, treasurer of a charity and receiver of tithes. The question arose whether the profits of these offices belonged to the partner- ship or not. There was no written agreement specifically applying to these offices, but there was a memorandum re- lating to some others reserved by the father of one of the partners when he retired from business, and the master of the rolls held that all the offices in question were to be treated as held on behalf of both partners, and not for the exclusive benefit of the partner who actually filled the offices, (d) l (c) 31 Beav. 645. an agreement with a neighboring (d) See, also, Smith v. Mules, 9 postmaster, by which the office was Ha. 556 ; and Ambler v. Bolton, 14 to be kept at the store of the firm, Eq. 427, as to the mode of deal- and the contracting partner was ing with such offices on a dissolu- appointed deputy ; but the business tion. was transacted by the clerks of the 1 One of two partners entered into store indiscriminately, no separate 752 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. *332 Cases where co-owners share profits. — The cases, how- ever, which present most difficulty are those in which the co-owners are partners in the profits derived from their common property, (e) Suppose, for example, that two or more joint tenants, or tenants in common, of a farm or a mine work their common property together as partners, contributing to the expenses and sharing all profits and losses equally, there will certainly be a partnership; and yet, unless there is something more in the case, it seems that the land will not be partnership property, but will be- long to the partners as co-owners, just as if they were not partners at all; (f) and the result may even be the same if they purchase out of their profits other lands for the pur- pose of more conveniently developing their business, (g) Land acquired by devise farmed in common. — In Mor- ris v. Barrett, (h) lands were devised to two persons *as joint tenants. They farmed those lands together [*332] for twenty years, and kept their money in one com- mon stock to which each had access, but they never came to any account with each other. Out of their common stock they bought other lands, which were conveyed to one of them only, but were farmed by both, like the first lands. It was held that the devised farms were not partnership property, but that the purchased farms were. 1 books were kept, the money went (/) See Crawshay v. Maule, 1 into the partnership funds, and all Swanst. 523, and Roberts v. Eber- payments on account of the post- hardt, Kay, 159. See, also, Will- office were made out of the funds iams v. Williams, 2 Ch. 294, where of the firm. Held, that the profits the partnership had expired, but an of the postoffice belonged to the agreement to divide the property firm, especially as the partners had was held to have been come to. made two settlements between (g) Steward v. Blakeway, 4 Ch. themselves, without any separate 603, and 6 Eq. 479, a case of a farm claim to those profits having been and quarry. But compare Morris set up by the partner who con- v. Barrett, Phillips v. Phillips, and tracted fur the business. Caldwell Waterer v. Waterer, cited below. v. Leiber, 7 Paige, 483. {h) 3 Y. & J. 384. Compare Wat- te) As to the distinction between erer v. Waterer, infra, p. 333. co-ownership and partnership, see l Whether real estate shall be con- ante, p. 51 et seq. sidered as partnership property, as Vol. 1 — 48 753 *332 EIGHTS AND OBLIGATIONS. LBOOK III. Joint tenants by devise partners in profits.— In Brown v. Oakshot, (i) a brewer devised his real estates to trustees between the partners, depends largely upon their intention. See Ludlow v. Cooper, 4 Ohio St. 1; Smith v. Jackson, 2 Edw. 28; Wheatly v. Calhoun, 12 Leigh, 2G4; Tarbell v. Bradley, 7 Abb. N. C. 273; Shafer's Appeal, 106 Pa. St. 49; S. C. 15 Weekly Not. Cas. 407; 39 Leg. Intel. 304 ; 42 id. 267 ; Rice v. Pennypacker, 5 Del. 279; Rank v. Grote, 50 N. Y. Super. Ct. 275; Providence v. Bullock, 14 R. I. 353; Holmes v. Self, 79 Ky. 297. Such intention may be shown by parol and by the acts and declara- tions of the parties. Shafer's Ap- peal, 106 Pa. St. 49 : S. C. 15 Weekly Not. Cas. 407; 39 Leg. Intel. 304, and 42 id. 267. Payment from the partnership funds is only prima facie evidence of the intention. Providence v. Bullock, 14 R. I. 353. Where one of two partners pur- chased real estate and paid for the same with a note of the firm, with the expenses of the purchase, dis- count on the note and renewals thereof, and the taxes on the lot were charged to his individual ac- count by the direction of the other partner, held, that the property was purchased on individual ac- count, and the profits arising from its sale went to him and not to the firm. Hay's Appeal, 91 Pa. St. 265. Where real estate is conveyed to a firm, or to the copartners in their individual names for the use and benefit of the firm, or in payment of debts due to the firm, in the ab- sence of any agreement or under- standing to the contrary the grantees become at law tenants in common of the land ; and upon the death of either the legal title to his undivided share descends to his heirs at law. Buchan v. Sumner, 2 Barb. Ch. 165 ; Caldwell v. Palmer, 56 Ala. 405; Wood v. Montgomery, 60 Ala. 500 ; Anderson v. Tompkins, 1 Brock. 456; Willey v. Carter, 4 La. Ann. 56; Arnold v. Stevenson, 2 Nev. 234; Donaldson v. Bank of Cape Fear, 1 Dev. Eq. 103 ; Ensign v. Briggs, 6 Gray, 329; Galbraith v. Gedge, 16 B. Mon. 631 ; Divine v. Mitchum, 4 id. 488; Coles v. Coles, 15 John. 159; Block v. Seipt, 12 Phila. 360; Slaughter v. Doe, 67 Ala. 494; McMillan v. Hadley, 78 Ind. 590 ; Berry v. Folkes, 60 Miss. 576; Espy v. Comer, 76 Ala. 501; Sutlive v. Jones, 61 Ga. 676; Santa Clara Mining Ass'n v. Quicksilver Mining Co. 17 Fed. Rep. 657 (hold- ing that mining partners are ten- ants in common); Percifull V. Piatt, 36 Ark. 456; Abernathy v. Moses, 73 Ala. 381. See, also, Cot- tle v. Harrold, 72 Ga. 830; Thomp- son v. Bowman, 6 Wall. 316; Blake v. Nutler, 19 Me. 16. Where real estate is conveyed to persons who are partners, the face of the conveyance determines as to judgment creditors the nature of the title. When, therefore, real estate is conveyed to partners as tenants in common, judgments against individual partners become a lien on their interest in the land. Parol testimony that the property (i) 24 Beav. 254. 754 CH. IV, SEC. II.] JOINT AND SEPARATE PKOPERTV. -332 for a terra of five hundred years, upon trust, to pay certain annuities, and to divide the surplus rents between his sons, was bought for the firm with firm assets and actually used by the firm will not alter this result. Holt's Appeal, 98 Pa. St. 257; S. C. 37 Leg. Intel. 430. So, where land is purchased by partners with partnership funds, but not for the use and convenience of the partnership business, or in the legitimate line of their partner- ship business, they become invested with the title as tenants in common, and their respective interests there- in are several. Price v. Hicks, 14 Fla. 565; Russell v. Miller, 26 Mich. 1. But where land is purchased with partnership funds and conveyed to the partners by name, although in law they are considered as tenants in common, and no notice is taken of the equitable relations arising out of the partnership, yet in the absence of an express agreement, or of circumstances showing an in- tent that such estate shall be held for their separate use, in equity the partnership property will be de- voted to partnership purposes, and a trust is created for the security of the partnership debts. If the partnership becomes insolvent the property is primarily liable to the payment of the partnership debts, to the postponement of the cred- itors of the several partners. Rcss v. Henderson, 77 N. C. 170; Robert- son v. Baker, 11 Fla. 192. See, also, infra, in this note. But where a deed of lands was made to A., B. andC, "doing busi- ness as A., B. & Co., their heirs and assigns," it was held that the grantees took the legal estate in joint tenancy, and a judgment con- fessed by all of them in their in- dividual names with the same words, "doing business," etc., added thereto, is a lien upon the land, and will bind it in the hands of subsequent purchasers from the firm. Lauffer v. Cavett, 87 Pa. St. 479. The appearance of real estate on partnership books to the extent necessary to carry on the business of the firm is not inconsistent with the partners' title to the real estate as tenants in common. Grobb's Appeal, 66 Pa. St. 117. Although the proposition that when a partnership ceases the part- ners become tenants in common of the partnership property then un- disposed of is generally true, yet it is not universally true. So long as partnership debts remain unpaid partnership property continues such for the purpose of being ap- plied to the payment of such debts. Rice v. McMartin, 39 Conn. 573. Partners may by contract stipu- late that the ownership of property may remain in one, while the firm shall have only the use of the same, as between themselves, or any other regulation in regard to ownership of the property used, not prohibited by law. Taft v. Schwamb, 80 III. 289. While there may be partnerships in the business of milling, mining or farming, unless the intent of the joint owners to throw their real estate into the fund as partnership stock is distinctly manifested, or unless the real property is bought out of the social funds for partner- 755 *332 EIGHTS AND OBLIGATIONS. [BOOK III. and he devised the same estates subject to this term to his sons as joint tenants. The sons carried on their father's ship purposes, it must still retain its character of realty. Wheatly v. Calhoun, 12 Leigh, 264. Where land purchased with part- nership funds is conveyed to the partners by a deal which would or- dinarily make them tenants in com- mon thereof, it will be deemed in equity converted into personal prop- erty, and may be administered upon as such, in winding up the affairs of the concern, unless from the books or other sources it ap- pears that business profits were thus invested to pay a dividend to the partners. The intention of the partners in making the purchase, as shown by the evidence in the case, should govern the construction of the conveyance. Collumb v. Read, 24 N. Y. 505. A mere agreement to use real property for partnership purposes, or as partnership property, is not sufficient to convert it into partner- ship stock in the absence of any evidence of such intention. The mere fact that the property held by the firm as tenants in common is used in and for the partnership business, or a mere agreement to use it for partnership purposes, is not of itself sufficient to convert it into partnership stock. There must be some evidence of further agree- ment to make it partnership prop- erty. Alexander v. Kimbro, 49 Miss. 529; Thenot v. Michel, 28 La. Ann. 107 ; Shafer's Appeal, 106 Pa. St. 49 ; S. C. 15 Weekly Not, Cas. 407; 39 Leg. Intel. 303; 42 id. 467. See, however, Osborn v. McBride, 16 Bank. Reg. 23, as to the pre- sumption upon the question. Thus, the mere fact that partners carry on partnership business on a lot of land belonging to the mem- bers of the partnership does not necessarily impress it with the character of partnership property, unless they have, by agreement or otherwise, purposely impressed upon it that character. Ware v. Owens, 42 Ala. 212 ; Pecot v. Anne- lin, 21 La. Ann. 667. A contrary presumption prevails when the title is not in the firm, and, to rebut that presumption, it must appear either that the prop- erty was paid for with the firm's money, or was by agreement act- ually brought into the common stock. Shafer's Appeal, 106 Pa. St. 49 ; S. C. 15 Weekly Not. Cas. 407 ; 39 Leg. Intel. 304, and 42 id. 267. Even where real estate is brought into the common stock by agree- ment it is within the power of the partners to withdraw it and to re- convert it into the separate prop- erty of the individual partners; such a reconversion would be bind- ing as between the partners, and, in the absence of fraud, upon their joint and respective creditors. Sha- fer's Appeal, 106 Pa. St. 49 ; S. C. 15 Weekly Not. Cas. 407 ; 39 Leg. Intel. 304, and 42 id. 267. An oral agreement of two per- sons to sell lands of each and em- ploy the proceeds as capital for going into business as partners is valid; and a ferry and franchise purchased by one with the pro- ceeds is partnership property, Knott v. Knott, 6 Oreg. 142. Real estate acquired with part- nership funds for partnership pur- 756 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. *332 business in partnership together, and used the real estates devised to them for the purposes of the business; but it poses must be considered as part- nership property and liable to all the incidents attending that de- scription of property. Sigourney v. Munn, 7 Conn. 11; Matlock v. Matlock, 5 Ind. 403 ; Abbott's Ap- peal, 50 Penn. St. 234; Hoxie v. Carr, 1 Sumn. 173 ; Pugh v. Carrie, 5 Ala. 446 ; Lancaster Bank v. My- lie, 13 Penn. St. 544; Brooke v. Washington, 8 Gratt. 248; Spal- ding v. Wilson, 80 Ky. 589 ; Berry v. Folkes, GO Miss. 576; Priest v. Chouteau, 12 Mo. App. 252; Caus- ler v. Wharton, 62 Ala. 358; Mes- ser v. Messer, 59 N. H. 375; Allen v. Withrow, 110 U. S. 119; Roberts v. Eldred, 15 Pac. Rep. (Cal.) 16. See, also, Sutlive v. Jones, 61 Ga. 676. See, however, Smith v. Jack- son, 2 Edw. 28. The fact that a conveyance of land is made to partners and that it may be used, after being thus con- veyed, for partnership purposes does not necessarily impress upon it the character of partnership property. Griffie v. Maxey, 58 Tex. 210. Actual, open and notorious oc- cupation of land by a firm for part- nership purposes is notice to all the world of the equitable rights of the firm ; and the fact that a convey- ance is not actually made to the firm by the partner holding the title till after the firm ceased to occupy the lot will not make the grantee, as against the partners other than the one holding the title, a pur- chaser in good faith. Bergeron v. Richardott, 55 Wis. 129. The possession and use of land by a firm is not notice to purchas- ers that the land is partnership as- sets, where the requisite title shows that the partners were tenants in common, holding undivided one- half interests therein. Hammond v. Paxton, 58 Mich. 394. As to the requisites of a convey- ance of land to members of a firm, to charge individual creditors and others with notice that the land is held as partnership property, see Kepler v. Erie Savings Bank, 101 Pa. St.- 602; S. C. 13 Weekly Not. Cas. 21. Where the value of a lot of land used for partnership purposes was charged to the partnership on the books of the firm, and credited to M., the partner holding the legal title, it will be treated in equity as partnership property. And where, on the dissolution of that firm and the formation of a new one as its successor, the lot was credited to the old firm on the books of the new with the knowledge of M., it must be treated in equity as the property of the new firm as against M. and his grantee with notice. Bergeron v. Richardott, 55 Wis. 129. A partnership "for the purchase of lands " does not, however, neces- sarily contemplate sales of land so as to make the land stock in trade, but it passes to the heir as real es- tate, and not to the administrator. Dilworth v. May field, 36 Miss. 40. Two persons took a lease of a coal mine as tenants in common. Afterwards they associated them- selves in the business of coal-min- ing, shipping and selling as part- ners, the business to be carried on 757 *332 EIGHTS AND OBLIGATIONS. [BOOK III. was nevertheless held that the reversion in fee continued to be vested in them jointly, and not in common, as would have been the case had it become partnership property. from the proceeds of the demised premises for the whole period of the lease. Held, that the leasehold became partnership property. Pat- terson v. Silliman, 28 Pa. St. 304. See, also, Morton v. Ostrom, 33 Barb. 256. Where partners purchased a leasehold estate with partnership property, gave a deed of trust upon it, and the trustee, after the death of one of the partners, sold the es- tate under the power in the deed, a surplus remaining, held, that the surplus was to be considered as partnership property, upon which the surviving partner was entitled to administer. Carlisle v. Mulhern, 19 Mo. 56. Real property, an undivided half interest in which was bought and paid for by each of two partners, who, with partnership funds, com- pleted, repaired, improved and pro- tected it, and who used it for part- nership purposes, becomes thereby partnership property. Roberts v. McCarty, 9 Ind. 16. Two persons, who were partners in the business of fishing and sell- ing fish, bargained for a block of land, gave their note to the defend- ant for the price, and took the de- fendant's bond for a deed in pay- ment of a note, and paid one year's interest before the note fell due. One of the partners having died, the other, claiming to act as surviv- ing partner, assigned the bond and the land to the plaintiff two years after the note fell due, no adminis- tration being had, and it being a disputed question whether the land was purchased for partnership pur- poses. In a suit by the assignee for specific performance, held, that the question of fact, whether the land was purchased for partnership purposes, could not be ultimately settled so as to bind the heirs of the deceased partner in a suit where neither the heirs nor the representatives of the deceased partner were made parties; and that the defendant should not be required to convey to the assignee of the survivor unless he has rea- sonable grounds of certainty on that question. Knott v. Stevens, 3 Oreg. 269. Real estate purchased for, and appropriated to, or intended to be used for, partnership purposes, and paid for out of partnership funds, is partnership property, although the legal title is taken in the indi- vidual names of the partners, or in the name of one of the partners, or in the name of a third person, equity will hold the party holding the legal title, or his heirs, in case of his death, as trustee for the firm. Fairchild v. Fairchild, 64 N. Y. 471; S. C. 5 Hun, 407; Faulds v. Yates, 57 111. 416; Little v. Sned- cor, 52 Ala. 167 ; Hewitt v. Rankin, 41 Iowa, 35 ; Smith v. Tarleton, 2 Barb. Ch. 336; Drewry v. Mont- gomery, 28 Ark. 256; Johnson v. Clark, 18 Kan. 157; Hogle v. Lowe, 12 Nev. 286; Boyers v. Elliott, 7 Humph. 204; McGuire v. Ramsey, 9 Ark. 518; Indiana, etc. Co. v. Bates, 14 Ind. 8 ; Fowler v. Bailie}', 14 Wis. 125; Owens v. Collins, 23 Ala. 837; Lacy v. Hall, 37 Penn. 758 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. *332 Public houses devised to partners in a brewery.— In Phillips v. Phillips, (k) public houses were devised to two St. 360; Erwin's Appeal, 39 id. 535; Jarvis v. Brookes, 27 N. H. 37; Cil- ley v. Huse, 40 id. 358 ; Fall River Whaling Co. v. Borden, 10 Cush. 458; Dupuy v. Leavenworth, 17 Cal. 262; Price v. Hicks, 14 Fla. 565 ; Uhler v. Semple, 20 N. J, Eq. 288; Abbott's Appeal, 50 Penn. St. 234; Lime Rock Bank v. Phette- place, 8 R. I. 56; Lancaster Bank v. Myerley, 13 Penn. St. 544; His- cock v. Phelps, 49 N. Y. 97; King v. Weeks, 70 N. C. 372; Owens v. Collins, 23 Ala. 837; Dewey v. Dewey, 35 Vt. 555 ; Chamberlain v. Chamberlain, 44 N. Y. Super. Ct. 116; Matlack v. James, 13 N. J. Eq. 126; Smith v. Tarleton. 2 Barb. Ch. 336; Delmonico v. Guillaume, 2 Sandf. Ch. 366; Cos v. McBur- ney, 2 Saudf. 561 ; Buchan v. Sum- ner, 2 Barb. Ch. 165 ; Whitney v. Cotton, 53 Miss. 689; Buffuin v. Buffuin, 49 Me. 108. See, also, Rammelsburg v. Mitchell, 29 Ohio St. 22; Holmes v. Moon, infra; Deming v. Colt. 3 Sandf. 284; Bird v. Morrison, 12 Wis. 138; Deven- ney v. Mahoney, 23 N. J. Eq. 247 ; McGuire v. Ramsey, 9 Ark. 518; Paige v. Paige, 71 la. 318; Cottle v. Harrold, 72 Ga. 830; Brown v. Beecher, 12 Atl. Rep. 68; Spal- ding v. Wilson, 80 Ky. 589 : Bark- ley v. Tapp, 87 Ind. 25; Rank v. Grote, 50 N. Y. Super. Ct. 275; Railsback v. Lovejoy, 116 111. 442; Martin v. Morris, 62 Wis. 418 (a sur- viving partner) ; McCulley v. McCul- ley, 73 Va. 159; Hardy v. Norfolk Mfg. Co. 80 Va. 404; Norwalk Nat. Bk. v. Sawyer, 38 Ohio St. 339; Wiegand v. Copeland, 7 Savvy. 442 : S. C. 14 Fed. Rep. 118 (in this case the realty was put in as capital but the tide held by one partner as security); Tarbell v. Bradley, 7 Abb. N. C. 273; Smith v. Jones, 18 Neb. 481; Shanks v. Klein, 104 U. S. 18; S. C. 11 Fed. Rep. 767; Rice v. Pennypacker, 5 Del. 279 ; Page v. Thomas, 43 Ohio St. 38; Hatchett v. Blanton, 72 Ala. 423; Ballantine v. Frelinghuysen, 38 N. J. Eq. 266; Bennett v. Ben- nett, 102 Iud. 86; Van Staden v. Kline, 64 la. 180; Davis v. Davis, 60 Miss. 615; Diggs v. Brown, 78 Va. 292; Sprague Mfg. Co. v. Hoyt, 29 Fed. Rep. 421 ; Williams v. Shel- don, 28 N. W. Rep. 115; Pepper v. Thomas, 4 So. W. Rep. 297. See, also, Blocks. Seipt, 12 Phila. 360; King v. Remington, 29 N. W. Rep. 352. A partner holding land in trust for the partnership, upon its disso- lution holds in trust for its individ- ual members. Tenney v. Simpson, 37 Kan. 579. Where the title to land occupied for partnership purposes was held by two out of three partners, and the articles set forth that upon ful- (fc) As stated in Bisset on Part- conclusion that the devised prop- nership, p. 50. The report in 1 M. erty was not in fact partnership & K. 649, is silent as to the prop- property, the question of conver- erty devised. Mr. Bisset considers sion would not arise. Compare the" decision as an authority on the Waterer v. Waterer, 15 Eq. 402, point of conversion. But if, as he infra. represents, the court came to the 759 *332 EIGHTS AND OBLIGATIONS. [BOOK III. persons who carried on a brewery in partnership, and it was held that such houses did not become partnership prop- fillment of certain terras by the third partner, including the pay- ment by him of one-thhd of the price of the land, they would con- vey him an equal undivided one- third, it was held that the partner- ship articles did not make the lands ' partnership property, and hence they did not come in account, but remained the property of the part- ners holding the title, one of whom could mortgage his interest there- for, and in a suit for an accounting such land would not be treated as partnership property as against the mortgagee. Gordon v. Gor- don, 49 Mich. 501. A bill for relief against an heir holding in trust a partnership in- terest in lands should show the partnership character of the inter- est. Jenness v. Smith, 58 Mich. 281. A trust in land cannot be predi- cated upon proof of an agreement to create a partnership for the pur- pose of purchasing, handling or improving the same, the partner- ship relation not having existed prior to acquisition of title, and no partnership funds having been in- vested in the property. Kayser v. Maugham, 8 Colo. 232. Where a member of a firm bought land at a sheriff's sale, tak- ing conveyance to himself, paying ten per cent, in cash, giving his {own obligation for the residue, and ' the ten per cent, was drawn from the partnership funds, as also sub- sequent payments, and such part- ner was charged on the partnership books with the payments so made, and for expenses paid by the firm on account of the real estate, and credited with sundry sums received by the firm from the real estate, held, that under such circum- stances there was no trust of the real estate in favor of the firm. Harvey v. Pennypacker, 4 Del. Ch. 445. The execution of an agreement by the partner holding firm real estate, by the request of his copart- ner for his benefit, to convey the property to a third person within a given time, upon certain condi- tions, which, not being performed, the agreement, by its terms, be- comes null and void, is not a bar to a bill in equity by the other partners to have the property de- creed to be held by his associate in trust for the firm. Sherburne v. Morse, 132 Mass. 469. A conveyance of land to a part- ner in payment of a firm debt, the word "trustee" being written in the deed after the partner's name, the understanding being that the deed was made to him as a matter of convenience, instead of to the firm, authorizes the partner to bind his fellow-pai'tners by sale of the land through an attorney in fact, appointed by him for that purpose; the word "trustee" nei- ther enlarges nor restricts his pow- ers, the property being regarded as personal assets of the firm, as to which one partner may bind the rest by a contract in the scope of the partnership. Paton v. Baker, 62 la. 704. When a partner devotes his in- dividual property, or the usufruct thereof, to the uses of the partner- 760 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. : "332 erty, though used for the purposes of the partnership. In the same case some mortgage debts secured on public ship, the title remaining in him, and there is no express contract of lease, the use ceases on the termi- nation of the partnership, and does not pass to an assignee of the firm assets. Rapier v. Gulf City Paper Co. 64 Ala. 330. The partner holding the title is a trustee for the firm and its cred- itors, and when the trust is dis- charged by the payment of the debts and the settlement of the claims between the partners, char- acter of realty again revives. Rank v. Grote, 50 N. Y. Super. k Ct. 275, and cases above cited in this note. C. bargained for a grist-mill and appurtenances, paid $1,000 down, and took a bond for a deed ; made a verbal contract to sell it to D. and received $1,300 of him in part payment; D. took the possession, laid out a considerable sum in re- pairs and improvements, and car- ried on the business a short time, when he and C. made a verbal con- tract of copartnership in the grist- mill business, and carried it on to- gether at this grist-mill for two years, neither of the parties claim- ing rent ; the grist-mill was taxed to the company, and one year's taxes were paid out of the com- pany's funds, and payments were made on C.'s notes named in the bond for a deed which he held, by giving credit to the parties to whom payments were made on the com- pany's books. A dam tax of $75 was paid in the same manner. At the end of the two years C. gave D. notice that he was going to dis- solve the copartnership ; D. pro- posed that it should" be mutual, and that they should bid for choice of the mill property. C. does not deny that he told D. that he would shortly say what he would give or take, but he did not do this; yet a few days afterwards he took a deed of the mill property to himself, dis- charged the bond, excluded his co- partner, mortgaged the mill prop- erty to secure some partnership debts, and some of his own, and the balance of the purchase money remaining due, and brought this bill in equity to close the partner- ship affairs. The bill and answer both admit the existence of the partnership. It is satisfactorily proved that the verbal contract for the sale of the mill from C. to D. was abandoned by mutual consent when they went into partnership, and that the un- derstanding between them was that the purchase of the mill prop- erty should be completed on part- nership account, the sums pre- viously paid and expended by the partners severally toward the pur- chase or in the improvement of the mill property to be regarded as so much contributed by them respect- ively to the partnership funds. Held, that there is nothing in the statute of frauds to prevent part- nership equities from attaching to the grist-mill property, and that it should stand charged, as between these parties, for the payment of partnership debts, and any balance that may be found due to either of the partners upon the final adjust- ment of the partnership accounts ; the legal title not to be disturbed except as may be necessary for 761 *332 EIGHTS AND OBLIGATIONS. [liOOK III. houses were bequeathed to the two partners, and the} T after- wards purchased the equities of redemption, and paid for these purposes. Collins v. Decker, 70 Me. 23. Where real and personal property is held in trust by one partner for the benefit of the firm, and upon an agreement that he will not dis- pose of it without the consent of the others, he cannot be compelled to convey to one of the other part- ners his share in the property until such partner shall have first paid to him his share of indebtedness for advances made. Cheeseman v. Sturges, 6 Bosw. 520. Where partners own each in severalty the real estate where the business is carried on, and buildings have been erected and improve- ments made thereon by the firm, the lands, on a dissolution, will be treated as partnership assets. Smith v. Dan vers, 5 Sandf. 6(39. Where B., owning a saw-mill property, formed a partnership with F. in the lumber business, agreeing by parol that the mill es- tate should constitute part of the partnership fund, and F. paid a part of the consideration in cash, the rest to be paid out of the profits of the business, held, that the title of B. did not pass to the firm, al- though F. went into possession with B., and improvements were made upon the property out of the firm funds. McCormick's Appeal, 57 Pa. St. 54. M. and C. entered into partner- ship, M. contributing real estate at an estimated value, which was car- ried into the firm stock account to his credit, he reserving his right on dissolution not to be bound by the estimated value and to withdraw the property. During the partner- ship the buildings were burned and rebuilt by the firm funds. Held, that the real estate was, in equity, partnership property with the legal title in M. ; that his reservation was a provision to correct the valu- ation ; that M. withdrawing it on dissolution would take it at its then value; and that the property with its accretions belonged to the firm, to be accounted for as firm assets. Clark's Appeal, 72 Pa. St. 142. Where one of a firm of four brothers purchased, in his own name, a lot. and leased it to the firm, and the firm erected its oil refinery thereon, held, that his three brothers could not, in an equity proceeding, afterwards claim that the lot should be treated as firm property, although he had acted in bad faith in procuring the conveyance to himself rather than to the firm, — his act having been long acquiesced in by the three others without an investigation of the false and flimsy reason he had assigned therefor. Slemmer's Ap- peal, 58 Pa. St. 1G8. There is, however, no presump- tion that a leasehold standing in the name of one of several copart- ners, and used by the firm for their business, constitutes partnership assets. The presumption is other- wise; its mere use for partnership purposes does not operate to divest or affect the legal title. Chamber- lain v. Chamberlain, 44 N. Y. Supr. Ct. (12 Jones & Sp.) 116. Where, however, all the mem- bers of a partnership join in a deed 762 CH. IV. SEC. II.] JOINT AND SEPARATE PROPERTY. #009 them out of the funds of the partnership, but it was held that the property thus acquired did not form part of the of land, the presumption is, in the absence of proof, that the consid- eration money goes to the use of the firm. Lincoln v. White, 30 Me. 291. A partnership, as such, cannot hold the legal title to real estate. But where a deed was made to Jarrett, Moon & Co., it not appeai - - ing whether the firm was composed of Jarrett & Moon and others, or Jarrett Moon (one person) and others, held, that in the former case the legal title vested in Jarrett and Moon, and in the latter in Jar- rett Moon, in trust for the part- nership; the uncertainty arising from the omission of the Christian names of grantees might be re- moved by parol proof. Holmes v. Moon, 7 Heisk. 506. See, also, Tidd v. Rives, 2 N. W. Rep. (N. S.) 497. A conveyance of real estaet to "J. L. S. & Co." vests the legal title in J. L. S. individually, clothed, however, with a trust for the benefit of the partnership. Moreau v. Saffarans, 3 Sneed, 595; Gilie v. Hunt, 35 Minn. 357; Perci- full v. Piatt, 36 Ark. 456. See, also, Tidd v. Rines, 26 Minn. 201. If the conveyance is made to a partnership name which expresses the name of no party, it vests in no one. So held in an action of eject- ment. Percifull v. Piatt, 36 Ark. 456. In the case of The Chicago Lum- ber Company v. Ashworth, 26 Kan. 212, it was held that where a mort- gage was executed to a firm under the name of "The Chicago Lum- ber Company,'* the absence of the names of the individual members from the mortgage did net inval- idate it; and that same might be foreclosed upon proper allegations in the petition as to the constitu- tion of partnership and the owner- ship of the note and mortgage. See, also, Printup v. Turner, 65 Ga. 71. In Kelley v. Bourne, 16 Pac. Rep. (Or eg.) 40, it was held that while a deed to a partnership, un- der the name of "The Grant's Pass Real Estate Association/' might be insufficient to convey the legal title to the partnership, it was valid as a contract to convey, and vested such an equitable title in the partner- ship as would defeat a subse- quently acquired title. See, also, Baker v. Thompson, 36 Minn. 314. In Brunson v. Morgan, 76 Ala. 593, it was held that when real es- tate is conveyed to a partnership by name a legal title does not vest in the firm, but in the several part- ners as tenants in common. See, also, Davis v. Davis, 60 Miss. 615; Slaughter v. Doe,. 67 Ala. 494 ; Al- len v. Whetstone, 35 La. Ann. 846 ; McMurray v. Fletcher, 28 Kan. 337; Printup v. Turner, 65 Ga. 71. Tax deed issued to partners in the firm name is not void for want of grantee. Sherry v. Gilmore, 58 Wis. 324. Where one partner invested a portion of the partnership funds in lands for his own use, it was held that this created a resulting trust, and that the other partners might follow it and claim their portion of the specific property. King v. 763 *332 RIGHTS AND OBLIGATIONS. [BOOK III. partnership property, the equities of redemption following the mortgage debts. But in this very case it was held that Hamilton, 16 111. 190. See, also, Edgar v. Donnally, 2 Munf. 387. If one partner purchase land to his own use with money taken out of the joint fund, the lands have been held not to be joint stock. Goodwin v. Richardson, 11 Mass. 469 ; Pitts v. Waugh, 4 id. 424. In Louisiana real estate owned by commercial partners does not enter into their commercial assets. As regards that species of property they are joint owners. Guilbeau v. Melancon, 28 La. Ann. 627. Under the laws of Louisiana pro- hibiting a commercial partnership from owning immovable property, if immovable property is purchased with partnership funds by one of the partners in his own name, and without the consent of his copart- ners, the property itself belongs to the partner purchasing, but its value at the time of the purchase belongs to the partnership. No de- cree of a court could be rendered to vest the title of property so pur- chased in the partnership, for the partnership is incapable of acquir- ing title. McKee v. Griffin, 23 La. Ann. 417. "Where the title to land belong- ing to a partnership is vested in one of the partners, the fact that it is partnership property may be estab- lished or rebutted by parol. Zook v. Clemens, 41 Iowa, 95; Sherwood v. St. Paul, etc. R. R. Co. 21 Minn. 127; Bird v. Morrison, 12 Wis. 138 Fairchild v. Fairchild, 64 N. Y. 471 In re Farmer, 18 Bank. Reg. 207 Black's Appeal. 89 Pa. St. 201 Block v. Seipt, 17 Weekly Notes of Cases, 565 ; Thompson v. Egbert, 3 Thomp. & C. 474; S. C. 1 Hun, 484. See, also, Little v. Snedcor, 52 Ala. 167 ; Hewitt v. Rankin, 41 Iowa, 35 ; Drewrey v. Montgomery, 28 Ark. 256; Fall River Whaling Co. v. Borden, 10 Cush. 458; Hauff v. Howard, 3 Jones' Eq. 440; Paige v. Paige, 71 la. 318. See, also, Collins v. Decker, 70 Me. 23. As to strangers, however, it is held in Pennsylvania that p'artners' agreements to make real estate common stock must be in writing, and ought to be on record. It is not competent to show by parol that real estate conveyed to two as tenants in common is partnership property. Lefevre's Appeal, 69 Pa. St. 122. See, also, Ebbert's Appeal, 70 Pa. St. 79; Jones' Appeal, id. 169 ; and Hale v. Henric, 2 Watts, 143; Ridgway's Appeal, 15 Penn. St. 177; Otis v. Sill, 8 Barb. 102. Where there is a conveyance to one partner by a deed absolute on its face, and it is attempted to be shown by parol that it was in fact a conveyance to him for the use of himself and his copartner as ten- ants in common, it is competent to rebut this evidence by showing by parol evidence that it was owned by them as partnership property. Black's Appeal, 89 Pa. St. 201. Improvements upon land owned by one partner, or by several part- ners as tenants in common, made with partnership funds, are part- nership property. Lane v. Tyler, 49 Me. 252; Kendall v. Rider, 35 Barb. 100; Hiscock v. Phelps, 44 N. Y. 97. See, also, Deveney v. Mahoney, 23 N. J. Eq. 247. Permanent improvements upon 764 <3H. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. *332 other public houses purchased by the partners out of the partnership funds, and used for the purposes of its trade, did form partnership property to all intents and purposes. (I) real estate owned by one partner will, however, notwithstanding the real estate is used as the place of business of the firm, be presumed to be the individual property of such partner until it is proved that such improvements were erected by the firm and paid for out of firm assets, or contributed as firm cap- ital by such partner. Goepper v. Kinsinger, 39 Ohio St. 429. . Where real estate is purchased by one of two partners, and paid for out of his individual funds, and improvements are made thereon with the partnership funds, be- tween the time of the giving of a judgment by one of the partners as a security for future responsibil- ities, and the incurring of such responsibilities by the judgment creditor, the equitable interest of the other copartner to be reim- bursed his share of the partnership funds applied to the making of such improvements is prior in point of time to the lien of the judgment, upon the principle that an incumbrance which intervenes between a partnership and further advances takes priority over the latter. Averillu. Loucks, 6 Barb. 19. Employing partnership funds in making permanent improvements upon real property owned by the partners, and appropriated to the partnership business is not neces- sarily a fraud upon the creditors of the firm if no intent to defraud is shown. Parker v. Bowles, 57 N. H. 491. Where real estate is owned in undivided interests by the individ- uals who compose a partnership which has only the use of it, trade fixtures set up by the partners do not become realty, and when their occupation ceases they may remove them. They are not covered by mortgages on the premises if their owners do not plainly mean them to be so. Robertson v. Corsett, 39 Mich. 777. In equity partnership real estate is treated as mere personalty, and is governed by the rules and gen- eral doctrines applicable to that species of property. See Arnold v. Wainwright, 6 Minn. 358 ; Davis v. Christian, 15 Gratt. 11 ; Mauck v. Mauck, 54 111. 281 ; Scruggs v. Blair, 44 Miss. 406; Nicoll v. Ogden, 29 111. 323 ; Hill v. Beach, 12 N. J. Eq. 31 ; Ludlow v. Cooper, 4 Ohio St. 1 ; Moderwell v. Mullison, 21 Penn. St. 257 ; Day v. Perkins, 2 Sandf . Ch. 359 (a leasehold); Andrews v. Brown, 21 Ala. 437 ; Black v. Black, 15 Geo. 445; Whitney v. Cotton, 53 Miss. 689; Galbraith v. Gedge, 16 B. Mon. 631 ; Divine v. Mitchum, 4 id. 488; Coles v. Coles, 15 Johns. 159; Piatt v. Oliver, 3 McLean, 27; Davis v. Smith, 82 Ala. 198 ; Mur- tagh v. Castello, 7 Law Rep. (Ir.) 428; Re Ransom, 17 Fed. Rep. 331 ; Leaf's Appeal, 105 Pa. St. 505 ; S. C. 14 Weekly Not. Cas. 507; 41 Leg. Intel. 450; Causler v. Wharton, 62 Ala. 358 : Tarbell v. Bradley, 7 Abb. N. C. 273 ; Trowbridge v. Cross, 117 111. 109 ; Shanks v. Klein, 104 U. S. (I) 1 M. & K. 649. 765 f 333 EIGHTS AND OBLIGATIONS. [BOOK III. Devisees of a trade and of land for the purpose of car- rying it on. — On the other hand, in Jackson v. [*333] Jackson, (m) a testator had *devised to his two sons 18; S. C. 11 Fed. Rep. 767; Rank v. Grote, 50 N. Y. Super. Ct. 275 ; Rice v. Pennypacker, 5 Del. 279; Flannagan v. Shuck, 82 Ky. 617; Grissom v. Moore, 106 Ind. 296; Godfrey v. White, 43 Mich. 171; Espy v. Comer, 76 Ala. 501; Re Codding, 9 Fed. Rep. 849 ; Breen v. Richardson, 6 Colo. 605; Priest v. Chouteau, 85 Mo. 398; S. C. 12 Mo. App. 252; Brewer v. Browne, 68 Ala. 210; Brunson v. Morgan, 76 Ala. 593; Diggs v. Brown, 78 Va. 292 ; Sprague Mfg. Co. v. Hoyt, 29 Fed. Rep. 421 ; Mallory v. Russell, 32 N. W. Rep. 102; Taylor v. Farmer, 6 West. Rep. 710 ; Pepper v. Thomas, 4 So. W. Rep. 297 ; Lenow v. Fones, 4 So. W. Rep. 56. See, also, Morgan v. Olney, 53 Ind. 6; Rammelsberg v. Mitchell, 29 Ohio St. 22; Foster v. Barnes, 81 Penn. St. 377; West v. Hickory Mining Ass'n, 80 id. 38. See, however, Ferguson v. Hass, Phill. Eq. 113. But this rule grows out of the peculiar nature of the partnership relation, and is adopted for the pur- pose of doing justice between part- ners, or between them and others having dealings with them, and for the purpose of properly adjusting the relations between them, or be- tween them and others having dealings with or relations to the partnership. It is not an arbitrary rule, by which a court of equity transmutes real estate into personal property when it is onco owned and possessed by a partnership, and causes it to take that character outside of and independent of the exigencies of the partnership. Black v. Black, 15 Ga. 445. Although a court of equity con- siders and treats real property, purchased with the partnership funds, and held for the purposes of the firm, as constituting part of the stock of the partnership, it leaves the legal title undisturbed, except so far as may be necessary to pro- tect the equitable rights of the re- spective partners. Lang v. Waring, 25 Ala. 625. The real estate of a partnership is held as personalty for the pur- poses of the partnership, but where not needed for such purposes it descends as other real estate to the heir. Williamson v. Fontain, 7 J. Baxt. (Tenn.) 212. See, also, Mc- Grath v. Sinclair, 55 Miss. 89; Yeatman v. Woods, 6 Yerg. 20; Gaines v. Catron, 1 Humph. 514; Piper v. Smith, 1 Head, 93; Sum- mey v. Patton, 1 Wins. (N. C.) Eq. (No. II) 52. See, however, McAl- lister v. Montgomery, 3 Hayw. (Tenn.) 94. The widow of a deceased partner cannot, therefore, treat the part- nership real estate as personal property, but it goes to the heir. Williamson v. Fontain, supra. Where, after the dissolution of a firm by the death of a partner, the firm and the individual partners are all insolvent, the widow of the deceased partner cannot recover a (m) 9 Ves. 591, and 7 id. 535. 24 Beav. 254, noticed supra. Compare this with Brown v. Oakshot, 766 OH. IV, SEC. II.] JOINT AND SEPARATE , PROPERTY. "333 jointly, his trading business and lands used by him for the purpose of carrying it on. The sons took the busi- distributive share of the firm realty, and the administrator of the deceased partner cannot, while the firm creditors are unsatisfied, appropriate a share of the property to satisfy the creditors of the de- ceased, although they may have become creditors on the faith that decedent had an individual interest in such realty. Paige v. Paige, 71 la. 318. Where the legal title to lands purchased and held for partnership uses is in the partners individually, they are nevertheless subject to an implied trust that they shall be ap- plied to the payment of the part- nership debts ; and the widow of a deceased partner is not entitled to dower therein until the trust is fully executed. Bopp v. Fox, 63 111. 540; Price v. Hicks, 14 Fla. 565; Uhler v. Semple, 20 N. J. Eq. 288; Campbell v. Campbell, 30 id. 415; Howard v. Priest, 5 Mete. 582; Simpson v. Leech, 86 111. 286; Stroud v. Stroud, Phill. L. 525; Robertshaw v. Hanway, 52 Mass. 713; Be Ransom, 17 Fed. Rep. 331; Trowbridge v. Cross, 117 111. 109; Mallory v. Russell, 71 Iowa, 63; Paige v. Paige, 32 N. W. Rep. 360 ; Martin v. Smith, 25 W. Va. 580; Dumble v. Mcintosh, 8 Ont. 225; Lenow v. Fones, 48 Ark. 557. See, also, Hudson v. Neil, 41 Ind. 505; Pepper v. Thomas, 4 S. W. Rep. 297; Strong v. Lord, infra in this note; Cook v. Watson, 30 N. J. Eq. 345. The right to a homestead exemp- tion stands on no higher ground than dower. Robertshaw v. Han- way, supra; Terry v. Berry, 13 Nev. 514; Commercial & S. Bank v. Corbett, 5 Sawy. 543; Trow- bridge v. Cro.s, 117 111. 109; Lind- ley v. Davis, 6 Mont. 453; Holmes v. Winchester, 138 Mass. 542; Hoyt v. Hoyt, 69 la. 174: Van Sta- den v. Kline, 64 la. 180 ; Drake v. Moore, 66 la. 58. See, however, contra, Swearin- gen v. Bassett, 65 Tex. 267; Hun- nicutt v. Summey, 63 Ga. 586. After the settlement of the af- fairs of the firm, partnership realty undisposed of will resume its original character, and the widow be entitled to her dower or share in it as realty. Lenow v. Fones, 48 Ark. 57. See, also. Rank v. Grote, 50 N. Y. Super. Ct. 275, and the cases above cited. Where real estate has been de- voted by a husband to the use of the firm of which he is a member his wife's inchoate interest therein, in the absence of her joining in a conveyance, is not affected ; but, as to the improvements placed thereon for partnership purposes, she is merely entitled to take as any other heir. Crissom v. Moore, 106 Ind. 296. A widow is entitled to dower in partnership land conveyed by the partners to a third person. Bow- man v. Bailey, 20 S. C. 550. A Nation en paiement, made by a partner to his wife, of the prop- erty of the firm, in satisfaction of her claim against the firm for her paraphernal funds, held by it, is valid. Murrell v. Murrell, 33 La. Ann. 1233. Partnership real estate can only be conveyed as real estate by those 767 '333 EIGHTS AND OBLIGATIONS. [BOOK III. ness and carried it on in partnership, and it was held that the lands formed part of the partnership property, and did holding the legal title. Davis v. Christian, 15 Grat. 11. Neither partner can alone con- vey more than his undivided inter- est therein. Anderson v. Tompkins, 1 Brock. 456 ; Willey v. Carter, 4 La. Ann. 50 ; Arnold v. Stevenson, 2 Nev. 234 ; Donaldson v. Bank of Cape Fear, 1 Dev. Eq. 103. See, also, Weld v. Peters, 1 La. Ann. 432. A mortgage executed by an in- dividual member of a firm upon land, the legal title of which is vested in him, but which is, in fact, owned and used by the firm as partnership property, is " real es- tate security " within the clause in a will directing such security to be taken for money loaned. Miller v. Procter, 20 Ohio St. 442. However, land purchased by sev- eral for the purpose of sale for profits only, and not for permanent use, will be regarded in equity as personal property among the part- ners in the speculation, and one of them, it is held, may release his interest in the same orally. Morrill v. Colehour, 82 111. 618. And where land is partnership stock it never becomes personalty, even during the continuance of the firm, so as to give one partner power to dispose of the firm inter- est in it. Foster's Appeal, 74 Pa. St. 391. There is nothing, however, in the statute of frauds, to prevent one partner from giving to another partner, by verbal contract, a lien upon his interest in the real estate af th< Srm, to secure moneys ad- vanced for the payment of his pro- portion of the firm debts. Taylor v. Farmer, 6 West. R. 710. Real property purchased with partnership funds for partnership purposes, and which remains after paying the debts of the firm and adjusting the equitable claims of the different members of the firm, as between themselves is consid- ered and treated as real estate. Buckley v. Buckley, 11 Barb. 43; Scruggs v. Blair, 44 Miss. 456. See, however, Thayer v. Lane, Walk. Ch. 200. And, in the settlement of the es- tate of a deceased copartner, any real estate of the partnership re- maining after the fulfillment of all partnership obligations is to be treated as realty. Wilcox v. Wil- cox, 13 Allen, 252. Real estate owned and used by a partnership may be deemed per- sonalty, not only for ^purposes of the partnership, but for distribu- tion also, when the intention of the partners that it should be so treated appears. In the absence of their agreement, express or im- plied, to this effect, it should only be so regarded for the purposes of the partnership, and, after these are answered the surplus should be held to be real estate for . all other purposes. Lowe v. Lowe. 13 Bush, 688; McAvoy's Estate, 12 Phila. 83; Lenow v. Fones, 4 S. W. Rep. 56 ; Brewer v. Browne, 68 Ala. 210 ; Re Codding, 9 Fed. Rep. 849; Espy v. Comer, 76 Ala. 501; Leaf's Appeal, 105 Pa. St. 505; S. C. 14 Weekly Not. Cas. 507; 41 Leg. Intel. 450; Logan v. Green- low, 25 Fed. Rep. 299; Martin v. 68 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. -333 not belong to the sons as mere joint tenants. In this case, not only was there some evidence to show that the sons con- Morris, 63 Wis. 418; Way v. Steb- bins, 47 Mich. 296. See, also, Col- lins v. Decker, 70 Me. 23; Scruggs v. Blair, 44 Miss. 406. Compare Bank of Louisville v. Hale, 8 Bush, 672; Cornwall v. Cornwall, 6 id. 369. When land, held as personalty stock, and therefore deemed per- sonalty, is sold by the firm, the land becomes land again in the hands of the purchaser, and the proceeds personalty, but only to the extent of accomplishing the purposes of the conversion, namely, the equity of the partners to have the joint debts and their own ad- vances paid before any part goes to the other partners or their separate creditors. The time of reconver- sion is the moment the partnership is wound up, either by decree, judgment or agreement, and it is determined to be no longer partner- ship stock nor required for its pur- poses. Foster's Appeal, 74 Pa. St. 391. See the cases next above cited. In a court of equity real estate belonging to a firm, purchased with the partnership funds and treated as partnership property, is considered as personal property to this extent at least : that it is liable to pay the debts of the firm ; and the surviving partner, although the legal title does not devolve upon him, has a claim on it for that purpose which is superior to the title of the widow and heirs at law of the deceased partner. An- drews v. Brown, 21 Ala. 437; Aber- nathy v. Moses, 73 Ala. 381. The equitable interest of a part- nership under a contract to convey land to the firm may be subjected to the partnership debts by proper proceeding against the surviving partner. McCaskell v. Lancashire, 83 N. C. 393. A surviving partner is entitled to use the real estate of the part- nership as firm assets so far as it is needed to settle the affairs of the firm, and decedent's heirs hold the legal estate only as trustees for the equitable purposes of the firm. Merritt v. Dickey, 38 Mich. 41 ; Du- puy v. Leavenworth, 17 Cal. 262. See, also, Matthews v. Hunter, 67 Mo. 293. A surviving partner cannot con- vey by deed the title of a deceased partner to his interest in lands be- longing to the partnership. McNiel v. First Congregational Society, 66 Cal. 105. While the deed of a surviving partner conveying partnership real estate for the purpose of paying debts does not pass the legal title as against the heirs of the deceased, it conveys an equity through which the purchaser may compel the conveyance of the legal title by them. Davis v. Smith, 82 Ala. 198; Shanks v. Klein, 104 U. S. 18. See, also, Breen v. Richardson, 6 Colo. 605. Where, however, the articles of copartnership expressly declare that the real estate of the firm shall be considered as part of the joint stock and funds of the firm, and as possessing all the incidents and liabilities of partnership funds and personal property, and fully impressed by the parties with such incidents and liabilities, and these Vol. 1 — 49 769 *333 EIGHTS AND OBLIGATIONS. [BOOK III. sidered the land as part of their property as partners, but there was also this peculiarity, that a trading business was articles are duly probated as part be sold, and the debt paid out of of the will of a deceased partner, the deed of the surviving partner, though not executed for the pur- Wise of paying the debts of the firm, conveys a perfect legal title as against the heirs of the deceased. Davis v. Smith, 82 Ala. 198; S. C. 2 So. Rep. 897. The doctrine of survivorship in respect to estates in partnership in real property is limited, as it seems, to the extent to which equity stamps the character of per- sonalty upon such estates ; and that is so far, and no farther, as they are required to pay partner- ship debts; so that whatever re- mains after the debts of the com- pany shall have been discharged is held in common and subject to dower or curtesy, and descends to the heirs or devisees. Strong v. Lord, 107 111. 25. A firm creditor, where all the members of the firm are dead, may, to satisfy his debt, on proper proof by a surrogate's order, procure a sale of the real estate of the one who survived the other, although the latter is shown to have left abundant assets to meet all de- mands against the estate. Bridge v. Swain, 3 Redf. 487. The heirs of deceased partners are not necessarily parties to an •action to subject the real property 'of the firm to the claims of its creditors. McCaskell v. Lanca- shire, 83 N. C. 393. Partnership real estate which cannot be divided or is required to pay partnership debts may, upon a decree of dissolution, be ordered to the proceeds, surplus to be divided between the partners. Wiegand v. Copeland, 7 Sawyer, 442; S. C. 14 Fed. Rep. 113. As to what circumstances will justify the exercise of the power of a court of equity to authorize a surviving partner to sell at private sale realty owned by an insolvent firm, see Mauck v. Mauck, 54 111. 281. Where real estate is purchased with partnership funds, the title taken in the partnership name, and the property held for partnership purposes, and, on the death of one of the partners, the firm being in- solvent, the surviving partner con- veys the lands, with all the other partnership property, to an as- signee, in compromise and settle- ment of the claims of creditors, who assent to it, the assignee may maintain a bill in equity against the heirs of the deceased partner to compel a divestiture of the legal title and have the lands applied to the payment of the partnership debts. Murphy v. Abrams, 50 Ala. 293. An administrator cannot be held liable for not receiving and ac- counting for funds arising from the sale of his intestate's partnership interest in real estate, when the whole property was needed to sat- isfy the debts of the firm, and the sale was made to the surviving partner in order to transfer to him the legal title, to be used in settling the business. Merritt v. Dickey, 38 Mich. 41. If rents and profits accrue from 770 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. •333 left to them, and that the land was accessory to that trade; so that it was very difficult, as observed by the lord chan- The rule is the same though the title stands in an individual part- ner or in several partners as ten- ants in common. Lime Rock Bank v. Phetteplace, 8 R. I. 56; Watlock v. James, 13 N. J. Eq. 126 ; Jarvis v. Brooks, 27 N. H. 37 ; Cilley v. Huse, 40 id. 358 ; Gordon v. Ken- nedy, 36 Iowa, 167; Fall River Whaling Co. v. Borden, 10 Cush. 458 ; Paige v. Paige, 32 N. W. Rep. 360 ; Page v. Thomas, 43 Ohio St. 38; Bowen v. Billings, 13 Neb. 439; Collins v. Decker, 70 Me. 23. The rule is the same in the case of improvements upon such realty. Hiscock v. Phelps, 49 N. Y. 97. See, also, Deveney v. Mahoney, 23 N. J. Eq. 247. In the absence of proof of joint ownership of land occupied for firm purposes, or representations or conduct of the individual partner holding the legal title such as will mislead creditors, and, as to them, estop him from denying the owner- ship of the firm, the right of the creditors to subject such property to the payment of firm debts in preference to the individual debts of such partner must depend upon the right of partners as between themselves. Goepper v. Kinsinger, 39 Ohio St. 429. A partnership at its dissolution was much in debt and the estate of a deceased partner was insolvent. Held, that the fact that a piece of land which was owned in common by the partners was presumptively a part of the firm assets was suffi- cient ground to grant an injunction in favor of the surviving partner,, forbidding the administrator of the the real partnership assets while in the hands of a surviving member of a firm, such rents and profits are personal property, and any sur- plus would go to the personal rep- resentative of the deceased part- nt,r. The heir would only be enti- tled to the realty or its surplus, if sold, as it stood at the death of his ancestor. Griffey v. Northcutt, 5 Heisk. 746. Where land is held by a firm by deed expressing that it is partner- ship stock an incumbrance against a member of the firm is not a lien upon any interest in it so as to pre- vent the firm conveying it to a pur- chaser clear of the incumbrance. Meily v. Wood, 71 Pa. St. 488. In such case the land is personal property, to be applied, according to the equities between the part- ners, in payment of partnership debts in the first instance, so that an execution by a separate creditor would sell, not an interest in realty, but the balance due his debtor, with right by bill in equity to compel a settlement. Meily v. Wood, supra. Partnership real estate must be first applied to the satisfaction of the partnership debts. Matlock v. Matlock, 5 Ind. 403; Winslow v. Chiffelle, 1 Harp. Ch. 25 ; Hunter v. Martin, 2 Rich. 541 ; Overholt's Appeal, 12 Penn. St. 222 ; Marvin v. Trumbull, Wright, 386; Bryant v. Hunter, 6 Bush, 75; Cornwall v. Cornwall, id. 369; National Bank of Metropolis v. Sprague, 20 N. J. Eq. 13; Uhler v. Semple, id. 288; Diggs v. Brown, 78 Va. 292 ; Bowen v. Billings, 13 Neb. 439. 771 •333 BIGHTS AND OBLIGATIONS. [book III. cellor, to sever the profits from the land and to hold the devisees to be partners as to the former, but not as to the latter. deceased partner from proceeding to sell such land to pay the separate debts of his intestate under a li- cense from the county court. Will- iams v. Moore, Phill. Eq. 211. A., B. and C. were partners in the lumber business. A deed granting them a quarter-section of land re- cited that an undivided half was granted to A., an undivided quarter to B., and an undivided quarter to C, adding, " this being the propor- tional undivided interest of each of the above partners in the lumber firm and land of Milo A. Skinner & Co." A. mortgaged his interest to secure money loaned him person- ally. Held, that such recital in the deed was not notice to the mort- gagee that such land was, in fact, partnership property and primarily liable for partnership debts. Van Slyck v. Skinner, 1 N. W. Rep. (N. S.) 971. A. and B. were tenants in common of a saw-mill, with the land and appurtenances conveyed to them by separate deeds, each owning an undivided half and each furnishing the purchase money for the share conveyed to him. They subse- quently formed a copartnership and entered into a parol agreement to consider the real estate partner- ship property, using it in their partnership business. Held, that it was not liable in equity to the payment of the partnership debts as against the separate creditors of the copartners, who had given credit and taken security thereon from them upon the strength of their owning the property as ten- ants in common. Parker v. Bowles, 57 N. H. 491. Upon the sale of real estate of one of two partners, and the ap- propriation of the proceeds to the payment of a judgment against both, a subsequent judgment cred- itor of that partner whose separate estate was sold is not entitled to be substituted as plaintiff in the judg- ment to which the money was ap- propriated, so as to enable him to proceed against the other partner, unless it shall be made to appear that he whose separate property was sold was-, at the time, a cred- itor partner of the firm. Sterling v. Brightbill, 5 Watts, 229. The legal title of partnership real estate vests in the several partners as tenants in common, and all must join in a conveyance in order to pass the title. Espy v. Comer, 76 Ala. 501. See cases cited at the beginning of this note. One partner in a water-right, ac- quired by appropriation, cannot convey away the interest of his partner therein. Henderson v. Nicholas, 67 Cal. 152. Where one partner of a firm and his wife deeded to the other part- ner of the firm the undivided one- half of the land used in the busi- ness, and upon the death of the grantor his wife fraudulently de- stroyed the deed before it was re- corded, the grantee has the right to have restored to him the evi- dence of his interest in the prop- erty occupied by the defendant. Wallace v. Wallace, 6 West. R. 113. 772 CH. TV, SEC. II.] JOINT AXD SEPARATE PROPERTY. T ""333 Devisees of mines. — Upon this last ground it was held* in Crawshay v. Jfaule, (??.) that mines devised to several per- See, also, Mette v. Feldman, 45 Mich. 25. No partner or proportion of part- ners can sell or transfer the real estate of the firm outright for money, or by way of mortgage, as to assignees in trust for debts, with- out the consent and authority of the other partners. A conveyance made by one partner, purporting to convey lands belonging to the firm, passes only the grantor's undivided interest. Goddard v. Renner, 57 Ind. 532. See, also, Jackson v. Stanford, 19 Ga. 14; Layton v. Hastings, 2 Harr. 147; Jones v. Neale, 2 Patt. & H. 339 ; Elicott v. Dycke, 78 Ala. 150. It has been held, however, that if one partner make an assignment of the real estate belonging to the firm the legal title will be held by the firm in trust for the assignee. Baldwin v. Richardson, 33 Tex. 16. A surviving partner cannot alone convey real estate belonging to the firm. Galbraith v. Gedge, 16 B. Mon. 631. Where a note for a firm debt was made by a surviving partner who executed, to secure it, a mortgage on real estate which was the indi- vidual property of his deceased partners, it was held, on a bill to foreclose the mortgage, that the bill should be dismissed without prejudice, there being a complete remedy at law to enforce the pay- ment of the note. Dowell v. Mitch- ell, 105 U. S. 430. Where a surviving partner exe- cutes a mortgage of the partnership assets to secure a firm liability, a complaint to foreclose the mort- gage is sufficient as against an as- signee appointed subsequent to the execution of the mortgage without showing any compliance with the statute by such surviving partner. Hadley v. Milligan, 100 Ind. 49. Where the surviving partner of a firm which had been engaged in gambling, and had purchased and used a house for gambling pur- poses, sought to impeach the title by which a grantee of his partner held it, on the ground that it was used for unlawful purposes, he was held to be estopped by his privity to the grantor. Watson v. Fletcher, 7 Gratt. 1. Mortgage by a firm as a continu- ing security and indemnity con- strued. National Bank of New- burgh v. Bigler, 83 N. Y. 51; af- firming S. C. 18 Hun (N. Y.), 400. As to the legal effect of a mort- gage to a surviving partner who is at the same time administrator of the deceased partner, describing the grantees as A., the surviving partner, and the estate of B., the deceased partner, see Look v. Ken- ney, 128 Mass. 284. A partnership may take security by way of mortgage in the firm name to secure a partnership debt. Kellogg v. Olson, 34 Minn. 103. Two partners holding unequal interests, having foreclosed a mort- gage upon real estate taken to in- demnify the partnership against a certain securityship, bid in the property, and the land was con- (n) 1 Swanst. 495. 773 *333 EIGHTS AND OBLIGATIONS. [BOOK III. sons for the express purpose of being worked by them in partnership, and which were worked accordingly, were part- nership property. veyed to them jointly, without designating their respective inter- ests. Held, that each took a moiety of the legal title, but that in equity they would hold according to their respective interests ; and that a con- veyance by the executor of the partner holding the greater interest " of all the right, title and interest which the testator had at the time of his decease," would pass to the grantee the legal title to one half the land and the equitable title to the additional interest held by the testator; and that one holding under this grantee, without notice of the non-payment of the pur- chase money of the equitable inter- est, would hold it discharged of the vendor's lien. Putnam v. Dobbins, 38 111. 394. A bona fide purchaser of real estate from a member of a copart- nership, for a valuable considera- tion and without notice of the partnership character of the prop- erty, purchasing only to the extent of the grantor's legal title, will take the title freed from the equitable claims of others, partners or credit- ors of the firm. Dupuy v. Leaven- worth, 17 Cal. 262; Page v. Thomas, 43 Ohio St. 38; Norwalk National B'k v. Sawyer, 38 id. 339 ; Seeley v. Michell, 4 S. W. Rep. 190 ; Bowen v. Billings, 13 Neb. 439 ; McMillan v. Hadley, 78 Ind. 590 (an execution sale); McNiel v. Cong. Soc'y, 66 Cal. 105. When, however, the legal title to real estate belonging to a partner- ship is vested in one of its members the lien acquired by a judgment against him individually, in favor of a creditor of the company, is subject to the equities already ex- isting over the property; and a judgment against the company it- self would not operate as an effi- cient lien on the land. Coster v. Bank of Georgia, 24 Ala. 37. In Jones v. Fletcher, 42 Ark. 422, it was held that a partner has such an interest in partnership lands as is subject to a lien of judgment against him and as may be levied on and sold under execution. Where S., one of two partners, executed a release deed of land to himself, and M., the other partner, for a nominal consideration, "re- ceived of S. and M., merchants in trade under the firm of S. & Co.," "to be held by them in such pro- portions as is agreed on between them," it was held that the record of this deed, the singularities of which were calculated to awaken attention, conveyed constructive notice to an incumbrancer under M. that the land was partnership property. Sigourney v. Munn, 7 Conn. 324. Where one partner holds the legal title to the undivided half of certain real estate, the whole of which is, in equity, partnership property, the conveyance by him of his undivided half to a creditor of the firm, in payment of a part- nership debt, vests in the grantee a good title thereto, notwithstand- ing the firm is insolvent and the other partner is ignorant of the conveyance. Van Bront v. Apple- gate, 44 N. Y. 544. 774 CH. IV, SEC. II.] JOINT AND SEPARATE PROPERTY. ^333 Devise of nursery grounds. — In Waterer v. Waterer, (o) a nurseryman who carried on business with his sons, although not in partnership, left his residuary estate, including the So a conveyance by one partner of real estate owned by the part- nership, in trust to secure a cred- itor of the partnership, passes a good title, both at law and in equity, to an undivided moiety of such estate; and such creditor is entitled to priority over all other creditors of the firm. But when such property is conveyed by one partner in trust to secure his indi- vidual creditors, the property re- mains subject to the payment of the partnership debts. Jones v. Neale, 2 Patt. & H. 339. A person who loans the entire capital to an individual partner for the purpose of commencing busi- ness acquires an equity equal to that of the creditors of the partner- ship; and if the money is used in purchasing lands, which are after- wards mortgaged to the lender by the individual partner to secure the loan, the former will acquire an equity superior to that of the cred- itors of the partnership, but subject to the lien of the other partner, if he purchases with notice of his equitable title to an undivided half. Reeves v. Avers, 38 111. 418. In Snyder v. Lunsford, 9 W. Va. 223, however, it was held that a deed of lands owned and used by a partnership, made by one partner only, who, however, was sole owner of the capital stock, to a person from whom he had bor- rowed the money which he had contributed as capital, was null and void as against creditors of the firm. A conveyance by one member of a solvent firm of his undivided in- terest in the real estate of the part- nership to a stranger, whether made upon a sale or by way of payment of his individual debt, is valid as against the copartners; and they cannot maintain an ac- tion to have it set aside on the ground that it was made without their consent and impairs the credit of the firm. Treadwell v. Williams, 9 Bosw. 649. If creditors do not object, the purchaser takes a good title, and it does not lie with the other mem- bers of the firm to object; or, at least, to enable them to do so they must show that the partnership debts exceed the assets, and that there is need of the property in question to provide for the defi- ciency and equalize the interests of the partners. Treadwell v. Will- iams, supra. If land devoted to the uses of a partnership business is owned by the partners, each holding the legal title to an undivided share, a mort- gage by one of his interest is valid, and takes precedence over the title of a purchaser at a sale on an execution on behalf of partner- ship creditors, unless the purchaser can show that the land had, in fact, been made partnership prop- Co) Waterer v. Waterer, 15 Eq. 402. Ch. D. 813, a similar case. 775 See, also, Davies v. Games, 12 *333 EIGHTS AND OBLIGATIONS. [BOOK III. good-will of his business, to his sons in common; they, after his death, carried on the business in partnership, and bought more land for the purposes of the business, and paid for it out of his estate; then one son died, and the others bought his share and paid for it out of money raised by mortgage erty, and that the mortgagee had notice of this before lending. John- eon v. Clark, 18 Kan. 157. The patent for certain land was issued to S. & R. , who composed a firm. S. executed a power of at- torney to V. to sell and convey any property belonging to the firm. Within three months thereafter, V., as attorney for S. & R., per- sonally executed a conveyance of the land as partnership property. Forty-five years elapsed without complaint on the part of S., or any one representing him. In an action of ejectment against a third party by one claiming under this convey- ance, it was held that the acquies- cence of S. in the treatment of the land as partnership property would be presumed. Wilkerson v. Allen, 67 Mo. 502. A firm has no less power than any other holder of property to rent its realty. Williams v. Shel- don, 28 N. W. Rep. 115. A lease by one partner of part- nership real estate in his own name inures to the benefit of the firm. Moderwell v. Mullison, 21 Penn. St. 257. A lease to certain parties, copart- ners, under which the lessees were to build houses on the leased prem- ises, held, to vest the lease in them as copartners and not as tenants in common. Rust v. Chisolm, 57 Md. 376. A lease of mining property for a term of ninety-nine years is part- nership assets as to third parties, although the recorded title is not in the partnership name. Cham- berlain v. Dow, 16 Weekly Not. Cas. 532. A firm composed of father and son, using real estate of the father for the firm business, under a parol lease, may recover damages for injury to their leasehold, business, machinery, etc., caused by appro- priation of a part of the real estate by a railway company. Getz v. Phila. etc. R. R. Co. 15 Weekly Not. Cas. 357. It is competent, however, for partners to agree among them- selves that certain real estate owned by the partnership shall be leased, and that each shall be en- titled to his proportion of the rent, shall collect, and may discharge it. A party renting with knowledge of the agreement contracts with each to pay him his proportion of the rent, and he may sue for it in his own name. And one partner may be witness for another in such suit. McDougald v. Banks, 13 Ga. 451, If one partner occupy alone a house belonging to the copartner- ship, he will be liable to the firm for rent on account of it, although there was no special agreement to that effect, and no charge was made against him on the books of the firm during his life-time. Holden v. Peace, 4 Ired. Eq. 223. See, also, Stoughton v. Lynch, 2 John. Ch. 209. 776 CH. IV, SEC. III.] JOINT AND SEPARATE PROPERTY. "331 of the nursery ground, and out of their father's estate. On the death of one of the surviving sons intestate, it was held that all the land thus acquired had become partnership prop- erty, and that the share of such son was to be treated as personal and not as real estate. Land acquired for the purposes of trade. — By a slight extension of the same principle, if several persons take a lease of a colliery, in order to work the colliery as partners, and they do so work it, the lease will be partnership prop- erty, (p) So, if co-owners of land form a partnership, and the land is merely accessory to their trade, and is treated as part of the common stock of the firm, the land will be partnership property, (q) ^Result of foregoing cases. — Upon the whole, [*334] therefore, it seems that land acquired, whether gra- tuitously or not, for the purpose of carrying on a partner- ship business, and used for that purpose, is to be considered as property of the partnership; but that fund which is not so acquired, but which, belonging to several persons jointly or in common, is employed by them for their common profit, does not become partnership property unless there is some evidence to show that it has been treated by them as ancil- lary to the partnership business, and as part of the common stock of the firm, (r) Section III. — Conversion of Joint Estate into Separate Estate, and Vice Yersa. 3. Agreement sufficient to alter the ownership of prop- erty. — It is competent for partners by agreement amongst themselves to convert that which was partnership property into the separate property of an individual partner, or vice ( p) Faraday u. Wight wick, Tarul. Compare Steward v. Blakeway, 4 250, and 1 R. & M. 45. See Bentley Oh. 603, and 6 Eq. 479. v. Bates, 4 Y. & C. Ex. 182. (r) See Steward v. Blakeway, 4 Ch. (q) Essex v. Essex, 20 Beav. 442. 603, and 6 Eq. 479, and cases ante, p. 332. 777 *334 RIGHTS AND OBLIGATIONS. [BOOK III. versa, (s) 1 And the nature of the property may be thus al- tered by anj^ agreement to that effect; for neither a deed (s) Ex parte Ruffin, 6 Ves. 119 ; Ex parte Williams, 11 id. 3; Ex parte Fell, 10 id. 348; Ex parte Rowlandson, 1 Rose, 416. 1 See Bullitt v. M. E. Church, 26 Penn. St. 108; Hickson v. McFad- din, 1 Swan, 258; Sage v. Chollar, 21 Barb. 500; Dirnon v. Hazzard, 32 N. Y. 65; Crosby v. Nichols, 3 Bosw. 450; Evans v. Hawley, 35 Iowa, 83; City of Maquoketa v. Wil- ley, 35 Iowa, 323; Whitworth v. Benbow, 50 Ind. 194; Upson v. Arnold, 19 Ga. 190; Harkey v. Till- man, 40 Ark. 551; Beckwith v. Manton, 12 R. I. 442; Swearingen v. Bassett, 65 Tex. 267 ; McKinney v. Baker, 9 Oreg. 74; Maybin v. Moorman, 21 S. C. 346; Boozer v. Webb, 25 S. C. 82; Kendall v. Hackworth, 66 Tex. 499. As to what evidence is sufficient to establish the fact of conversion into partnership property of prop- erty bought by one of the partners, see Person v. Wilson, 25 Minn. 189. Such agreement may be implied from an acquiescence by the firm in such use of the firm property by one partner as would withdraw his interest in it from the common burden. Swearingen v. Bassett, 65 Tex. 267. Where partners have agreed to dissolve their copartnership, and have divided the partnership prop- erty according to their separate in- terests, the portion allotted to each becomes his separate property, and neither of them, unless he can es- tablish that fraud was committed in procuring the division, has, by reason of his liability for the part- nership debts, or his payment of them, any lien upon the others' portions. He has no remedy, there- fore, in equity. Holmes v. Hawes, 8 Ired. Eq. 21 ; Whitworth v. Ben- bow, supra. Two partners, on settlement with a creditor of their firm, after disso- lution, gave their separate bonds to the creditor, each for one-half the debt, and agreed that the amount which might be recovered on a certain chose in action, in the hands of the creditor, which be- longed to the firm, should be ap- plied to the payment of the bonds. Held, that the joint interest of the partners in the chose in action was severed by agreement, and that one partner afterwards had a right to direct his half to be applied to the payment of his bond, and that the creditor had a right so to apply it. Rowand v. Fraser, 1 Rich. 325. Debts due to a firm may be as- signed to either of the partners, and a note given to the assignee for the amount due by a debtor to the firm extinguishes the debt to the partnership. Lamkin v. Phil- lips, 9 Port. 98. A note in favor of a partner, but entered many months before his death on the partnership books to the credit of the maker, a debtor and customer of the firm, will be treated as a partnership asset. Gillisse v. Gibson, 6 La. Ann. 125. Where a note indorsed in blank by a copartnership remains after dissolution of the same in the hands of a partner, who transfers it iu payment of his individual debt, in default of showing to the 778 CU. IV, SEC. III.] JOINT AND SEPARATE PROPERTY. *334: nor even a writing is absolutely necessary; (t) but so long as the agreement is dependent on an unperformed condi- tion, so long will the ownership of the property remain un- changed, (u) Creditors not entitled to be consulted.— Moreover, as the ordinary creditors of an individual have no lien on his cantrary it will be presumed to be his individual property. Fletcher v. Anderson, 11 Iowa, 228. Where a member of a partner- ship allows his private property to be mingled with that of the firm, and to be sold with their property as part thereof, the purchaser will be liable for the price only to the firm. White Mountain Bank v. West, 46 Me. 15. Where a copartnership, to which a lien has accrued for work done and money expended upon ma- chinery, is dissolved, and the in- terest in the lien assigned to one partner, the lien is not lost, but may be enforced by such partner in the firm name. Busfield v. Wheeler, 14 Allen, 139. Where one of the partners buys a horse with his private funds, under an agreement to allow his copartner to elect to take him at the cost price, and for some days the horse is kept and used with the horses of the partnership, until the partner, in the exercise of his election, sells him, such sale is not a partnership transaction. Hatch v. Foster, 27 Vt. 515. In June, 1871, A., B. and C. bought in partnership and on spec- ulation certain realty; A. and B. to furnish the capital needed; C. to manage the speculation and to sell the land, receiving as his com- pensation one-third of the net profits and bearing one-third of the loss. The title to the land was taken by A. and B. In June, 1872, C. agreed to take a portion of the land as his share of the profits, and gave to A. and B. his receipt for such share, specify- ing the amount, and describing it as received by an agreement from A. and B. to convey such portion to him subject to the conditions of the contract of partnership. A. and B. gave to C. an agreement to convey on demand to C. or his legal representatives the portion of land fixed upon. Held, that by this agreement the portion of land specified was taken out of the part- nership account; and that A. and B. held the receipt of C. as repre- senting so much money subject to the partnership account and the equities of the copartners. Beck- with v. Manton, 12 R. I. 442. (f)See Pilling v. Pilling, 3 De G. J. & Sm. 162 ; Ex parte Will- iams, 11 Ves. 3; Ex parte Clark- son, 4 D. & C. 56, per Sir G. Rose ; Ex parte Owen, 4 De G. & Sm. 351. None of these cases, however, turned on the effect of an un- written agreement relating to land. See, as to a transfer by a partner of his shares in the partnership property when it consists wholly or in part of land, post, ch. 5, § 5. (u) Ex parte Wheeler, Buck, 25 ; Ex parte Cooper, 1 M. D. & D. 358; Hawkins v. Hawkins, 4 Jur. N. S. 1044. 779 *335 EIGHTS AND OBLIGATIONS. [BOOK III. property, and cannot prevent him from disposing of it as he pleases, so the ordinary creditors of a firm have no lien on the property of the firm so as to be able to prevent it from parting with that property to whomsoever it [*335] "-chooses. 1 Accordingly it has frequently been held that agreements come to between partners convert- 1 See Wilcox v. Kellogg, 11 Ohio, 394; White v. Parish, 20 Tex. 688; Gwin v. Selby, 5 Ohio St. 96 ; Sigler v. Knox Co. Bank, 8 Ohio St. 511 ; Potts v. Black well, 4 Jones' Eq. 58; Field v. Chapman, 15 Abb. Pr. 434 ; Robb v. Mudge, 14 Gray, 534; Allen v. Centre Valley Co. 21 Conn. 130; Schmidlapp v. Currie, 55 Miss. 597 ; Pfirrman v. Koch, 1 Cincinnati, 460; Reeves v. Ayers, 38 111. 419; Reese v. Bradford, 13 Ala. 837; Mayer v. Clark, 40 id. 259 ; State v. Thomas, 7 Mo. App. 205; Shackle- ford v. Shackleford, 32 Gratt. 481 ; Rankin v. Jones, 2 Jones' Eq. 169; Miller v. Price, 20 Wis. 117 ; Weaver v. Ashcroft, 50 Tex. 428 : Locke v. Lewis, 124 Mass. 1 ; Case v. Beaure- gard, 99 U. S. 119; S. C. 1 Woods, 127; Barnes v. Vetterlein,, 16 Fed. Rep. 759; Martin v. Evans, 6 Ont. 238; Beckwith v. Manton, 12 R. I. 442 ; Trentman v. Swartzell, 85 Ind. 443 ; Dietrich v. Huntington, 29 So. W. Rep. 247; Tracy v. Walker, 1 Flip. C. Ct. 41 ; Level v. Farris, 24 Mo. App. 445 ; Rose v. Gunn, 79 Ala. 411 ; Woodmansie v. Holcomb, 34 Kan. 35; Austin v. Seligman, 18 Fed. Rep. 519; Saunders v. Reilly, 105 N. Y. 12; reversing S. C. 34 Hun, 457; State v. Thomas, 7 Mo. App. 205 ; Allen v. Grissom, 90 N. C. 90 ; Couchman v. Maupin, 78 Ky. 33 (overruling, as to this point, O'Ban- non v. Miller, 4 Bush. 25, and How- ell v. Com. Bank of Ky. 5 id. 93); Farley v. Moag, 79 Ala. 148; Scott v. Kenan, 94 N. C. 296 ; Jewett v. Meech, 101 Ind. 289; Atkins v. Saxton, 77 N. Y. 195. See, also, Lord v. Devendorf, 54 Wis. 491 ; Wein- rich v. Koelling, 21 Mo. App. 133; Hewitt v. Northrup, 75 N. Y. 508; Crook v. Rindskoff, 105 N. Y. 476. See, however, In re Sautlioif, 8 Biss. 35. A partnership creditor who has obtained a lien by attachment upon the partnership property before the same has been appropriated to the debt of a separate creditor, who has before then levied on all the part- nership property, has a right to have the proceeds of the property applied to payment of the firm debt; it is immaterial that the sep- arate creditor obtain a lien first, so long as the property has not been sold before the lien of the firm creditor attached ; rights of the par- ties in this case determined by peti- tion without the necessity of resort- ing to an action in equity. Powers v. Powers, 35 N. W. Rep. (Wis.) 53. A partnership may assume the individual debts of one of its mem- bers, and none but existing cred- itors can question the transaction. Haben v. Harsh aw, 49 Wis. 379. A mortgage of firm goods to se- cure a partner's sureties on his bond as guardian is not available as against the creditors of an insolvent firm. Rothell v. Grimes, 35 N. W. Rep. (Neb.) 392. 780 CH. IV, SEC. III.] JOINT AND SEPARATE PROPERTY. •"335 ing the property of the firm into the separate estate of one or more of its members, and vice versa, are, unless fraudu- As to when the firm or one part- ner may, as against creditoi's, apply the partnership property to the payment of the individual debts of one partner, see, generally, Huis- kamp v. Moline Wagon Co. 121 U. S. 310; Woodmansie v. Holcomb, 34 Kan. 35; Jewett v. Meech, 101 Ind. 289; Farwell v. Metcalf, 63 N. H. 276; Schoverling v. Kovar, 15 Neb. 306; Mayer v. Garber, 53 la. 689; David v. Birchard, 53 Wis. 492; Sherrill, etc. Engine Co. v. Harwood, 30 Hun, 9; Lowman v. Lowman, 19 Bradw. 481 ; George v. Wamsley, 64 la. 175. A corporation formed by and consisting of the members of a partnership for the purpose of tak- ing the partnership property and conducting the partnership busi- ness takes such property freed from partnership equities, all of which are extinguished by the transfer. Francklyn v. Sprague, 121 U. S. 215. Partnership property cannot be divided between partners and then claimed under the exemption laws so as to defeat the partnership cred- itors. Gill v. Lattimore, 9 Lea ona fide purchases from one partner [*354] specific chattels belonging to the firm acquires a good title to such chattels, whatever liens the other partners might have had on them prior to their sale, (b) l In Re Lang 'mead 's Trusts a partnership between A. and P. was dissolved. A. retired, and by deed agreed to exe- cute an assignment to B. of the partnership assets (part of which consisted of a policy of which the partners were as- signees), and B. agreed to covenant to pay the partnership debts, and indemnify A. against them. No further instru- ment was executed. A. died, and B. afterwards assigned the polic} 7- by way of mortgage to a person who had notice of the deed. A.'s executors were afterwards compelled to pay partnership debts which ought to have been discharged by B., and B. became bankrupt. The policy being adversely claimed by the mortgagee, by A.'s executor, and by a pur- chaser from B.'s assignees, it was held that, even if A. and his executors had been entitled to pursue any portion of the partnership property in the hands of B., and to have it ap- plied in payment of the partnership debts, yet that they satisfied before a mortgage given not bona fide purchasers of it for by the new partners on the share value. Wade v. Rusher, 4 Bosw. bought by them to the retired part- 537; Meridan Nat. Bank v. Brandt, ner could be paid out of the part- 51 Ind. 56; Williams v. Love, 2 nership effects ; that advances made Head, 80 ; Pierce v. Wilson, 2 Iowa, subsequently to the date of the 20; Addison v. Burckmyer, 4 Sandf. mortgage must he postponed to it ; Ch. 498. and that on a bill to foreclose such One partner cannot, by a convey- mortgage all the members of the ance in trust for the payment of his partnership are necessary parties, individual and partnership debts, Conwell v. Sandidge, 8 Dana, 273. defeat the lien of the other partner (b) See Re Langmead's Trusts, 20 on the partnership funds. Bank Beav. 20, and 7 De G. M. & G. 353. of Kentucky v. Herndon, 1 Bush, 1 The partner to whom a balance 359. is due has a lien upon the partner- Parties, however, who have pur- ship property and upon other prop- chased and in good faith paid for erty into which it may have been the stock of a partnership concern converted by the debtor partner, are not liable for the debts of that not only as against him, but as concern, nor are the goods liable, against all assignees of it who are Frank v. Peters, 9 Ind. 343. 831 creditor and the copartner of the debtor interplead; but that if the execution creditor denied the part- nership he was bound to indemnify the sheriff. 2 See Bardell v. Perry, 19 Vt. 292. 839 *358 EIGHTS AND OBLIGATIONS. [book III. ners. Spalding v. Black, 22 Kan. 55. Upon an execution against one partner the sheriff should take pos- session of the partnership property and sell the interest of the execu- tion debtor; and he may deliver the possession of the entire prop- erty to the purchaser who becomes a tenant in common with the other partner. Such seizure, sale and delivery is not a conversion of the other partner's interest although at the time of the levy and sale the execution debtor would have had no interest in the partnership prop- erty had there been an accounting between the partners. Wright v. Ward, 65 Cal. 525; Kaufman v. Schoeffel, 46 Hun, 571. See, also, Lee v. Wilkins, 65 Tex. 295 ; Traf- ford v. Hubbard, 6 East. Rep. 693; S. C. 8 Atl. Rep. 690 ; 4 Atl. Rep. 762; 2 New Eng. Rep. 617; 3 New Eng. Rep. 865. See post, note 1. The power of the sheriff to take possession of the whole property is merely incidental to the right to reach the debtor's interest, and is to be exercised as far as possible in harmony with, not in hostility to, the rights of the other partners. When, therefore, the sheriff ex- ceeds this limit, and instead of levying on the debtor's interest levies upon and seizes the property as the sole property of the debtor, he is a trespasser. Atkins v. Sax- ton, 77 N. Y. 195; Daniel v. Owens, 70 Ala. 297; Snell v. Crowe, 3 Utah, 26. See, however, Lee v. Wilkins, 65 Tex. 295. Where an officer levying upon the interest of one partner in part- nership property gives notice that he will sell the entire property, but does not do so, but afterwards de- livers the property to the receiver at the instance of the complaining party, he does not by giving such notice become liable to the plaintiff in attachment in an action for damages. Hershfield v. Claflin, 25 Kan. 166; S. C. 37 Am. Rep. 237. The interest of one partner in the partnership property may be at- tached, or taken and sold on execu- tion, for his separate debt. See Sitler v. Walker, 1 Freern. Ch. (Miss.) 77; Place v. Sweetzer, 16 Ohio, 142; James v. Stratton, 32 111. 202: Newhall v. Buckingham, 14 id. 405; White v. Jones, 38 111. 159; Dow v. Say ward, 14 N. H. 9; S. C. 12 id. 271 ; Marston v. Dew- berry, 21 La. Ann. 518; Nixon v. Nash, 12 Ohio St. 647; Chopin v. Wilson, 27 Ln. Ann. 444; Saunders v. Bartlett, 12 Heisk. 316; Wilson v. Strobach, 59 Ala. 488; Weaver v. Ashcroft, 50 Tex. 428 ; Peoples' Bank v. Shryock, 48 Md. 427 ; and the cases above cited. See, also, Meyberg v. Steagall, 51 Tex. 351. An execution against firm prop- erty on a judgment confessed by one partner against himself, for a debt alleged to be due by the firm, is irregular and will be set aside. Vandegrif t v. Redheff er, 10 Weekly Not. Cas. 484. Replevin lies against an officer who has attached partnership prop- erty on the writ against one part- ner. Fay v. Duggan, 135 Mass. 242. Injunction is the proper remedy by copartners to protect their in- terest against the improper seizure of partnership property to satisfy the separate debt of one partner. Brown v. Young, 1 Tex. App. (Civ.) 712. An attachment of the goods of the firm by creditors of one part- 840 CH. V, SEC. IV.] SHARES IN PARTNERSHIPS. f 358 ner is not valid against a subse- quent attachment of the same goods by partnership creditors. Adams v. Hunter, 42 Leg. Intel. 205. So the attachment of partnership assets by an individual creditor is illegal and must be dissolved and the attached property surrendered to the liquidator of the partnership. New Orleans v. Gauthreaux, 32 La. Ann. 1126. The interest of a copartner in the partnership property may, in Rhode Island, be attached by an indi- vidual creditor of such copartner. In such case the sheriff may seize a chattel and deliver it to the pur- chaser of the interest attached, who becomes a tenant in common of such chattel with the other part- ners, but subject to the partnership debts and equities. Randall v. Johnson, 13 R. I. 338. That the defendant copartner has overdrawn his account with the firm does not invalidate an attach- ment of his interest. Trafford v. Hubbard, 6 E. R. 693; S. C. 8 Atl. R. 690 ; 4 Atl. R. 762 ; 2 N. Eng. R. 617; 3N. Eng. R. 865. Creditors of a partner may reach his interest in the firm property, but cannot satisfy their demands out of his copartner's interest. Dieckmann v. St. Louis, 9 Mo. App. 9. Where an attachment is issued against partners separately a writ should be levied on the land owned by them respectively, and no title will pass by the levy of a writ issued against one on the land of another. Armistead v. Cocke, 62 Miss. 198. A creditor of an individual part- ner has a right to sell on execution, and the purchaser acquires on such sale, only that partner's interest in the firm property, that is, what of the partnership property belongs to the debtor partner after paying the debts due by the firm and his own debt to the firm. Merrill v. Rinker, 1 Baldw. 528; Lyndon v. Gorham, 1 Gall. 367; White v. Dougherty, Mart. & Y. 309 ;M'Carty v. Emlen, 2 Yeates, 190; Dower v. Stauffer, 2 N. J. L. 198; Knox v. Schepler, 2 Hill (S. C), 595; Knox v. Summers, 4 Yeates, 477 ; Tappan v. Blaisdell, 5 N. H. 189; Pierce v. Jackson, 6 Mass. 242 ; Fish v. Her- rick, 6 id. 271; Place v. Sweetzer, 16 Ohio, 142; Witler v. Richards, 10 Conn. 37; Jones v. Thompson, 12 Cal. 191 ; Filley v. Phelps, 18 Conn. 294; Gibson v. Stevens, 7 N. H. 352; Brewster v. Hammett, 4 Conn. 540; Menagh v. Whitwell, 52 N. Y. 146; Williams v. Gage, 49 Miss. 777; Hutchinson v. Dubois, 45 Mich. 143; Mitchusson v. Wadsworth, 1 Tex. App. (Civ.) 546; Farley v. Moag, 79 Ala. 148 ; Boro v. Harris, 13 Lea,. 36 (real estate); Wallace's Appeal, 104 Pa. St. 559; S. C. 14 Weekly Not, Cas. 164; Schley v. Hale, 1 Tex. App. (Civ.) 523 ; Deane v. Hutchinson, 40 N. J. Eq. 83; Daniel v. 0«-eiis, 70 Ala. 297 ; Clem- ents v. Jessup, 36 N. J. Eq. 569. See, also, Peck v. Schultze, 1 Holmes, 28, and cases there cited ; Ploss v. Thomas, 6 Mo. App. 157; Richard v. Allen, 9 Cent. Rep. (Pa.) 596; S. C. 11 Atl. Rep. 552. And it makes no difference whether the company creditor, at the time of giving the credit, knew of the existence of the partnership or not ; for the effect of the credit given to increase the funds of the partnership is the same whether it 841 *358 EIGHTS AND OBLIGATIONS. [BOOK III. be a known or a dormant partner- ship. Witler v. Richards, 10 Conn. 37. The limit of the assessment of value in a proceeding under the sheriff's act, where the property of a firm has been seized under an ex- ecution against one of the partners, is the value of the debtor partner's interest. Ploss v. Thomas, 6 Mo. App. 157. In an action against the members of a firm an attachment was issued against S., one of the partners, which was levied upon the firm property. The firm was at the time insolvent, and soon after made an assignment to defendant. Judgment was thereafter obtained and execution issued in the attach- ment suit, under which the sheriff sold •'all the right, title and inter- est which " S. had in the property at the time of the levy of the at- tachment. Plaintiff was the pur- chaser. In an action brought to determine the title to the property, held, that, as the firm assets were insufficient to pay its debts, the in- terest of S. therein was nothing, and plaintiff took nothing by his purchase. (Van Brunt v. Apple- gate, 44 N. Y. 544, distinguished.) Staats v. Bristow, 73 N. Y. 265. Equity will interfere to prevent a separate creditor levying on firm effects from standing in any better position than that of his debtor. Thompson v. Frist, 15 Md. 24. Where an execution against one of two partners for his individual debt was levied upon partnership goods, and the goods were sold at a constable's sale, and the other partner replevied the goods from the purchaser, held, that the meas- ure of damages against the plaintiff in replevin was only the value of the interest of the debtor partner in the goods at the time of the sale ; that is, his share of the surplus after all demands against the firm should be paid. Sutcliffe v. Dohr- man, 18 Ohio, 181. Where partnership property is sold under separate executions against the partners individually the proceeds represent the several interests of the partners and not that of the partnership, and the fund should be distributed accord- ingly. Vandike's Appeal, 57 Pa. St. 9. See, also, Cooper's Appeals, 26 Penn. St. 262. The interest of a partner who contributes only time, labor and skill in the partnership property may be levied on and sold by exe- cution against him as an individ- ual. Knight v. Ogden, 2 Tenn. Ch. 473. It is not an interest in any par- ticular piece of property, but in the firm assets after the settlement of the firm accounts, that is liable for a partner's separate debts. At- wood v. Meredith, 37 Miss. 635 Hutchinson v. Dubois, 45 Mich. 143 Daniel v. Owens, 70 Ala. 297 Gerard v. Bates. S. Ct. 111. March 28, 1888; Tait v. Murphy, 80 Ala. 440. See, however, Carillon v. Thomas, 6 Mo. App. 574. The specific credits of a partner- ship cannot be seized under execu- tion against oue of the partners or surviving partner. The entire in- terest of a partner may be seized and sold; but no specific asset, credit or property of the partner- ship is liable to seizure under exe- cution against one of the partners. Levy v. Cowan, 27 La. Ann. 556 ; Marston v. Dewberry, 21 id. 518; 842 CH. V, SEC. IV.] SHAKES IN PARTNERSHIPS. '60t Daniel v. Owens, 70 Ala. 297; Stumph v. Bauer, 76 Iud. 157; Gerard v. Bates, supra. The purchaser at the sale of a specific article does not acquire the right to hold possession of the property purchased as against the other members of the firm. Daniel v. Owens, 70 Ala. 297. In Kansas an officer holding an attachment against the property of an individual partner may levy the same on his interest and take the partnership property or a portion thereof into his possession and sell the interest of the partner in such property. Hershfield v. Claflin, 25 Kan. 166; S. C. 37 Am. Rep. 237. In Alabama an execution issued on a judgment against A. and B., composing the firm of "A. & B.," may be levied on property belong- ing to the partnership or to either of the parties individually. Lein- kauff v. Munter, 76 Ala. 194. An execution against a surviving partner for a firm debt will be good as respects him and firm property in his hands, but a nullity as re- spects the individual estate of a de- ceased partner. Duquesne National Bank v. Mills, 22 Fed. R. 611. A debt due to a partnership is not liable to attachment at the suit of a creditor of one of the partners, where the partnership is a continu- ing one, and where there has been no adjustment of the partnership affairs. Peoples' Bank v. Shryock, 48 Md. 427 ; Lyndon v. Gorham, 1 Gall. 367; Bulfinch v. Winchen- bach, 3 Allen, 161 ; Sweet v. Reed, 12 R. I. 121. See post. A. was garnished as a debtor of B., who was a member of a firm, and A. confessed that he did owe B., but, in fact, the debt was due the firm. Held, in an action by the firm to recover this debt, that, as the property of the firm could not be attached for the private debts of its members, A.'s confession and payment of the debt was no dis- charge of the partnership debt. Cook v. Arthur, 11 Ired. L. 407. P. and L. made a contract by which L., who owned a patent- right, authorized P. to sell the same in certain states of the Union, and it was agreed that P. was to sell the same ; that out of all prop- erty and money received by P., by means of such sales, the expenses thereof should first be paid, and the remainder should be equally divided between P. and L., and that this division should be made as early as reasonably could be, and from time to time, whenever any such money or property should be received. The transaction of the business thus provided for neces- sitated the incurring of expenses, which did not apply solely to any particular sale, but to the whole business together. Held, that un- der this contract the proceeds of the sales previous to a settlement of the.r expenses belonged to P. and L. jointly, and no part thereof to either of them severally, and that individual creditors of neither party could by means of the trustee pro- cess attach such party's interest in any of their joint property in the hands of a third person, whether such property was tangible, or was a debt due from such third person to P. and L. Towne v. Leach, 33 Vt. 747. In Maine, however, it is held that the debtor of a firm can be holden as trustee of one of the partners in an action in which that 843 -358 EIGHTS AND OBLIGATIONS. [book III. partner is principal defendant, if neither the creditor of the firm nor any partner interpose. Thompson v. Lewis, 34 Me. 167. In Maine, also, it is held that a creditor of one of a firm may attach such partner's interest in a specific portion of a stock of goods belong- ing to the firm, and is not required, in order to render the attach- ment regular, to take the partner's interest in the entire stock of goods. Fogg v. Lawry, 68 Me. 78. See, also, Carillon v. Thomas, 6 Mo. App. 574. A valid lien as against a debtor who is a member of a partnership may be acquired by attaching all his interest in the effects of the firm and summoning the other partners as trustees ; and such lien may be preserved by notice to the parties concerned, and such other acts de- signed to give notoriety to the at- tachment as the nature of the prop- erty will admit, although posses- sion cannot be taken and the prop- erty removed to the exclusion of the other partners. Treadwell v. Brown, 43 N. H. 290. A judgment lien against one of the partners of a firm individually has been held to constitute a lien on the interest of that partner in the partnership property, which entitles the purchaser of it, when sold, to possession, divested of liens for firm debts not reduced to judgments. Green v. Ross, 24 Ga. 613. Partnership property may be at- tached for the individual debt of one of the partners after the dis- solution of the partnership, and after a receiver has been appointed by a decree of a court of equity in a sister state, to get in and dispose of the assets. Schatzill v. Bolton, 2 McCord, 478. In Louisiana, however, a creditor of partners in a state of liquidation cannot, for a debt not due by the partnership, seize a partnership asset, nor acquire any rights by seizing the interest therein of the individual partners. Smith v. Mu- Micken, 3 La. Ann. 319. Such a creditor must await the liquidation of the partnership; but he may meanwhile lay hold of his debtors' residuary interest in the partnership generally, by levying a seizure in the hands of the part- nership or its representative charged with its liquidation. Smith v. McMicken, supra; Davis v. Carroll, 11 La. Ann. 705. It has been held that upon ex- ecution against one partner the sheriff may levy on that partner's undivided interest in goods, and take the goods into his exclusive possession, and that though the firm debts exceed the firm effects. Andrews v. Keith. 34 Ala. 722. See, however, post, 690, 691, note. A sheriff who has levied upon the interest of one partner on the suit of his separate or individual creditor may release the levy when the partnership is insolvent, and the sale of the partner's interest would have been unproductive of any- thing to satisfy the execution. On a motion against the sheriff for his failure to collect the money due on the judgment, it is competent for him to prove the insolvency of the partnership. Wilson v. Strobach, 59 Ala. 488. In Massachusetts, however, if an officer attach and take possession of personal property of a firm on a writ against one partner who has 844 CH. V, SEC. IV.] SHARES IN PARTNERSHIPS. *358 no equitable interest in such prop- erty, he is a trespasser. Cropper v. Coburn, 2 Curt. 465. And see post, 691, note; Warren v. Wallis, 38 Tex. 225. To a bill brought under Mas- sachusetts General Statutes, chap- ter 113, section 2, clause 11, by a creditor of one rnember of a firm against all the partners, to reach and apply the amount found due such member on liquidation, the debtors of the firm cannot be made parties. Tobey v. McFarlin, 115 Mass. 98. A sheriff cannot, upon an execu- tion issued in an attachment suit brought against the members of a limited partnership, levy upon, and sell, the right, title and interest of a special partner in the goods, chattels, assets and accounts of the firm. Harris v. Murray, 28 N. Y. 574. Under Georgia code, section 1919 — making the firm property first liable to pay the firm debts — the undivided interest of a partner therein is not liable to levy and sale, even after dissolution, but must be reached by process of garnishment. Anderson v. Chenney, 51 Ga. 372. A partner's wrongful appropria- tion of the partnership property does not take the same out of the provisions of the Georgia code, section 1919, exempting a partner's interest in the assets from levy and sale. Holifield v. White, 52 Ga. 567. See, also, holding that a part- ner is entitled to an exemption in partnership property, Blanchard v. Paschal, 68 Ga. 32 ; S. C. 45 Am. E. 474; Harris v. Visscher, 57 Ga. 229 ; Hunnicutt v. Summey, 63 id. 586; Russell v. Lennon, 39 Wis. 570 ; S. C. 20 Am. Rep. 60 ; O'Gorman v. Fink, 57 id. 649 ; S. C. 46 Am. Rep. 58; McNair v. Rewey, 62 id. 167 Chipman v. Kellogg, 60 Mich. 438 Skinner v. Shannon, 44 Mich. 86 S. C. 38 Am. Rep. 232; Waite v. Mathews, 50 id. 392; Swearingen v. Bassett, 65 Tex. 267; Stewart v. Brown, 37 N. Y. 350; Scott v. Kenan, 94 N. C. 296; Evans v. Bryan, 95 N. C. 174 ; McCoy v. Bren- nan, 28 N. W. Rep. 129. See, also, Stout v. McNeill, 3 S. East. Rep. (N. C.) 915. The rule laid down by the weight of authority, however, is that part- nership property, or an interest therein, cannot be claimed by one partner as exempt from sale on ex- ecution for a partnership debt. Spiro v. Paxton, 3 Lea, 75 ; State v. Emmons, 99 Ind. 452; Gill v. Lat- timore, 9 Lea, 381 ; Smith v. Har- ris, 76 Ind. 104 : Giovanni v. Nat. Bank, 55 Ala. 305; S. C. 28 Am. Rep. 723; Terrell v. Hurst, 76 id. 588; Levy v. W T illiams, 79 id. 171; Guptil v. McFee, 9 Kan. 30; Bishop v. Hubbard, 23 Cal. 514; Kingsley v. Kingsley, 39 id. 665; Stauffer's Succession, 21 La. Ann. 520 ; Pros- ser v. Hartley, 35 id. 340; Robert- shaw v. Hanway, 52 Miss. 713; Bonsall v. Comly, 44 Pa. St. 442; State v. Spencer, 64 Mo. 355; 27 Am. Rep. 244; Julian v. Wright- man, 73 id. 569; Chalfant v. Grant, 3 Lea, 118; Gaylord v. Imhoff, 26 Ohio St. 317; S. C. 20 Am. Rep. 762 ; Till's Case, 3 Neb. 261 ; Wise v. Frey, 7 id. 134; S. C. 29 Am. Rep. 380; Lininger V. Raymond, 9 id. 40; State v. Bowden, 18 Fla. 17; Terry v. Berry, 13 Mo. 514; Drake v. Moore, 66 Iowa, 58 ; Hoy t v. Hoyt, 6i id. 174 ; Ex parte Hop- kins, 104 Ind. 157; Richardson v. Adler, 46 Ark. 43 ; Trowbridge v. 45 f 358 EIGHTS AND OBLIGATIONS. [BOOK III. Cross, 117 111. 109; Pond v. Kim- ball, 101 Mass. 105 ; Holmes v. Win- chester, 138 id. 542; Re Stewart, 13 Bank. Reg. 295; Woolridge v. Irving, 23 Fed. R. 676 ; Commercial, etc. Bank v. Corbett, 5 Saw. 513; Re Handlin, 3 Biss. 290 ; S. C. 12 Bk. Reg. 49; Re Hughes, 16 Bk. Reg. 464; Re Croft, 8 Biss. 188; S. C. 17 Bk. Reg. 324; Re Hughes, 8 Biss. 107; Baker v. Sheehan, 29 Minn. 235 : Short v. McGruder, 22 Fed. R. (Va.) 46 (homestead); Pros- ser v. Hartley, 35 Minn. 340. In an assignment of partnership property by the firm, a reservation of such property as is exempt from levy and sale under execution is inoperative because the firm, as such, is not entitled to any exemp- tions, and such reservation does not, therefore, render the assign- ment void for uncertainty. McNair v. Rewey, 62 Wis. 167. When one partner sells out his interest or part of the partnership property to the other, without res- ervation, the effects become the exclusive property of the pur- chaser, discharged from any lien on account of partnership debts, and he may claim an exemption in them as against the partnership creditors, if the sale was bona fide. Levy v. Williams, 79 Ala. 171; State v. Thomas, 7 Mo. App. 205; Burton v. Baum, 32 Kan. 641. Where, however, a retiring part- ner invests assets withdrawn by him in a homestead, if the fund remaining is insufficient for the payment of firm debts the court of equity will compel its surrender for the benefit of the creditors, even where no fraud is intended. In re Sauthoff , 8 Biss. 35. A waiver of exemption of per- sonalty contained in a note signed by one partner in the partnership name, without the authority of his copartner, is effectual only against him and his individual property. Terrell v. Hurst, 76 Ala. 588. As to when the widow's right to claim an exemption in the partner- ship estate is waived or lost, see Little v. McPherson, 76 Ala. 552. Where there is a surviving part- ner an allowance will not be made for the support of the family of deceased out of the funds which are, or which are claimed to be, partnership property. Burroughs v. Knutton, 5 N. Eng. Rep. (R. I.) 875. The creditors of a firm have the right to follow the firm assets into land bought with the purchase money of other land in which the assets were first invested, and the partner making the investment cannot claim a homestead exemp- tion in such land as against firm creditors. Chalfant v. Grant, 3 B. J. Lea, 118. A judgment against a partner individually is a lien upon real estate held by the firm; subject, however, to the payment of the firm debts and the equities of his copartners. Johnson v. Rogers, 15 Bankr. Reg. 1. Land was bought and held by a firm for partnership purposes ; and W., one of the partners, gave his individual judgment to the vendors for his proportionate share of the purchase money. He afterwards sold and conveyed his interest to the other partners, and they sold and conveyed the whole to a third party. Subsequently, within five years from the date of its entry, a scire facias was issued to continue 846 CH. V, SEC. IV.] SHAKES IN PARTNERSHIPS. *358 the lieu of the judgment against W., and the purchasers from the firm were summoned as terre ten- ants. Held, that the individual interest of W. was real estate, and hence bound in the hands of the terre tenants by the lien of the judgment against him, subject to the superior equitable lien of the partnership debts. Mead v. With- erow, 8 Phil. 517. A joint-stock company, consti- tuted for the purpose of trading in land, is a partnership; and land owned by the company is not subject to judgment and execution in behalf of a separate creditor of a member of the company. Kra- mer v. Arthurs, 7 Pa. St. 165. The levy of an execution against one partner on a piece of land be- longing to the firm gives the ex- ecution purchaser no title, legal or equitable, to the land ; the levy should be on the partner's interest in the joint stock; and a sale thereof would give the purchaser a right to an account and division. Clagett v. Kilbourne, 1 Black, 346. Where an execution against the individuals composing a mercan- tile firm is levied on certain lots as the property of the firm, and the sheriff's deed conveys to the purchaser all the estate, right, title and interest in the firm, the inter- est in the firm being that which is sold, the interest of the individual partners will not pass by the sale. Rogers v. Bradford, 56 Tex. 630. Where a partnership creditor ob- tains judgment against one of the firm, and partnership land is sold under execution on such judgment, though the sheriff's deed should cover the whole property, the pur- chaser acquires only the interest of the partner who was defendant in the execution. Price v. Hunt, 11 Ired. L. 42. A purchaser under an execution against one partner in his separate capacity becomes a tenant in com- mon with the other partners in an undivided share of the land which he purchases, and holds it subject to all the rights of the other part- ners, and can have no claim but upon the separate interest of the individual partner in the residue which may remain after the part- nership debts are paid. Gilmorev. North American Land Co., Pet. C. Ct. 460. A partner who permits the sepa- rate creditor of his copartner to set off lands on execution to sat- isfy such copartner's debt, and to recover judgment in ejectment for his possession, without asking, be- fore the levy, for an account of the partnership effects, cannot after- wards disturb the levy on the ground that the land was partner- ship property. Clark v. Lyman, 8 Vt. 290. The fact that the partnership real estate stands in the name of one of the partners does not pre- vent a separate creditor of another partner from attaching his interest therein. Hill v. Beach, 12 N. J. Eq. 31. Real estate purchased and used for partnership purposes, but held in the names of the partners indi- vidually, may be subjected in equity to the payment of partner- ship debts, but cannot be sold un- der execution at law against the surviving partner, as such. The sheriff's deed to the purchaser at execution sale against such surviv- ing partner conveys only his undi- 84'i *358 EIGHTS AND OBLIGATIONS. [boos III. Sale of execution debtor's share.— The sheriff, having seized the property of the firm, proceeds to sell the interest of the judgment debtor in the chattels seized and to assign the same to the purchaser, (?■) Formerly the sale had to be by auction, but now it may be made by private con- tract. (6') Rights of the other partners. — It is to be observed that the sheriff seizes, sells and assigns; but he has no business to take the goods of the firm out of the possession of the solvent partners; (t) 1 and if the sheriff sells, not the share Cald vided interest in the lands, well v. Parmer, 56 Ala. 405. Individual interests in real estate conveyed to a firni are subjected by attachments to the payments of individual liabilities, although such real estate be conveyed to, and held in, the firm name, if it is not made to appear that it was purchased for partnership purposes, and appropriated to these purposes, and paid for by partnership funds. In a proceeding to levy upon and sell under execution against a member of a firm, for his private debt, his interest in the firm, the directions of the act of April 8, 1878, must be conformed to. Kaine's Appeal, 92 Pa. St. 273; Hare v. Commonwealth, 92 Pa. St. 141 ; S. C. 8 Weekly Not. Cas. 121 ; 30 Leg. Int. 5. In Iowa, where a separate cred- itor of the partner levied upon and Bank of Louisville v. Hall, 8 Bush, sold firm property without suing 672. to determine the partner's interest, Where real estate was originally as provided by section 3054 of the purchased by one of two partners, code, the sale was held invalid as and paid for out of his individual against a creditor of the firm sub- funds, and the only interest of the sequently levying upon the same partnership in the premises was on property. Aultman v. Fuller, 53 account of improvements made thereon with the funds of the part- nership, the actual interest in the premises of the partner advancing the purchase money — at least his De G. & Sm. 121. Iowa, 60. As to attachment and garnish- ment, see post. (r) See Habershon v. Blurton, 1 individual interest therein — is lia- ble to be sold on an execution against him. Averill v. Loucks, 6 Barb. 19. As to the procedure under the act of June 2, 1874, on the sale on execution of the interests of one member in a partnership associa- (s) See Ex parte Villars, 9 Ch. 432. (t) See per Patteson, J., in Bur- ned v. Hunt, 5 Jur. 650, Q. B. 1 Garvin v. Paul, 47 N. H. 158 Gibson v. Stevens, 7 N. H. 352 Morrison v. Blodgett, 8 N. H. 238 Newman v. Bean, 21 N. H. 93 tion, limited, see Moore v. Peerless Hill v. Wiggin, 31 N. H. 292. See, Manufg. Co. 18 Weekly Not. Cas. 24. however, Andrews v. Keith, 34 CH. V, SFC. IV.] SHARES IN PARTNERSHIPS. *358 of the execution debtor, but the goods themselves, he is ac- countable to the solvent partners for so much of the pro- ceeds of the sale as is proportional to their share in the partnership, (u) l Ala. 722. See, also, Phillips v. Cook, 24 Wend. 389, where it is said that the sheriff may deliver possession of the property sold to the purchaser. See, also, Carillon v. Thomas, 6 Mo. App. 574; ante, 358, note 1. After the levy and previous to the sale of the interest of a mem- ber of a firm in the copartnership goods, the sheriff may hold joint possession with the other members of the firm. Bnrrall V. Acker, 23 Wend. 606; 21 id. 605. The power of the sheriff, for the purpose of rendering the levy upon the interest of one partner in the copartnership property effectual, to take possession of the whole property, is merely incidental to the right to reach the debtor's in- terest, and is to be exercised, as far as possible, in harmony with, not in hostility to, the rights of the other partners. Atkins v. Saxton, 77 N. Y. 195. Complainant, in an action against a sheriff, alleged that plaintiff was the owner, and enti- tled to the possession, of a certain undivided interest in certain per- sonal property, possession of which had been unlawfully taken, and was unlawfully detained by the defendant, etc. Held, sufficient, but that proof of seizure by the defendant of the undivided inter- est of plaintiff's co-owner would not sustain the action. Schenck v. Long, 67 Ind. 579. A purchaser at the sale upon an execution against one partner, lev- ied upon his interest in partnership property, does not acquire any title to the property entitling him to delivery of it, nor, if it be a debt, entitling him to collect it. The title to the property or the debt still remains in the partnership, and the purchaser acquires only a right to call the partnership to an accounting. Barrett v. McKenzie, 24 Minn. 20; Lothropv. Wightman, 41 Pa. St. 297 ; Deal v. Bogue, 20 id. 228 ; Reinheimer v. Hemingway, 35 id. 432 ; Smith v. Emerson, 43 id. 456; Wilson v. Strobach, 59 Ala. 488: note 1, supra. See, however, Phillips v. Cook, and Carillon v. Thomas, supra. As to the measure of damages in an action by the purchaser upon an execution sale of the interest of one member of the partnership in partnership property against an- other member of the firm, see Carter v. Roland, 53 Tex. 540. (u) Mayhew v. Herrick, 7 C. B. 229. i In Walsh v. Adams, 3 Den. 125, it was held that- where a sheriff sells the property of a partnership as the individual property of one partner, on an execution against such partner individually, he is liable in trover to another partner thereof; and the plaintiff is en- titled to recover his individual share in the property so sold with- out regard to the state of the part- nership accounts. See, also, At- kins v. Saxton, infra. Vol. 1 — 54 849 *358 EIGHTS AND OBLIGATIONS. [BOOK III. 2. Of the position of the purchaser from the sheriff. 2. Of the purchaser from the sheriff.— If the purchaser is a stranger unconnected with the firm, he acquires for his own benefit all the judgment debtor's interest in the prop- So, in Spalding v. Black, 22 Kan. 55, it was held that where an officer with an execution against one member of any partnership, gen- eral or limited, levies upon the partnership property, and sells the ■whole property instead of the exe- cution debtor's interest therein, the remaining partners may treat him as a trespasser ab initio, and bring their action against him therefor, and to such action the execution debtor is not a necessary party. See, however, White v. Wood- ward, 8 B. Mon. 484, where it is said that the only remedy for the other partner is in equity. Where a partnership had failed, and was in a condition necessarily to be immediately wound up, which the defendant must have known, but nevertheless attached the goods of the partnership, sold them, and applied them to his own debt against one of the partners individually, held, that the de- fendant was bound, under the ch - - cumstances disclosed, to take notice of the rights of a partner who was a creditor living in another town, and that he would be held to account for the value of the goods, notwithstanding the partner did not interfere and pre- vent the sale. Miner v. Pierce, 38 Vt. 610. It seems that a seizure and levy by a sheriff under an attachment or execution against one person upon the entire property of a firm as the sole property of the debtor is not justified by showing that the debtor has an interest in the property as a copartner. Atkins v. Saxton, 77 N. Y. 195. In an action against a sheriff to recover the possession of certain property, defendant justified under two attachments against B. The property formerly belonged to a firm composed of plaintiff and B. Plaintiff's evidence was to the effect that prior to the seizure the firm was dissolved and the personal rn-operty divided be- tween tne partners; that B. sold his portion to third persons, and all had been removed save a small portion left by one of the purchas- ers in plaintiff's care. Defendant seized all the goods of the late firm in plaintiff's possession as the sole property of B. Defendant con- ceded the partnership, but contro- verted the dissolution and division. The court charged that if the jury believed there was a nominal as- signment by B. of his interest in the property seized to plaintiff, with intent to defraud B.'s cred- itors, and with knowledge on plaint- iff's part, then the property was liable to the attachments. Held, error. Even if a fraud is perpe- trated the whole property does not become liable to seizure upon attachments at the suit of an in- dividual creditor; nothing more than the debtor's interest in the property can in any event be liable. When, therefore, the sheriff ex- ceeds this limit, and, instead of 850 CH. V, SEC. IV.] SHARES IX PARTNERSHIPS. ^359 erty comprised in the bill of sale, and becomes, as regards such property, tenant in common with the judgment debtor's copartners, (x) l The next step, therefore, is to adjust the conflicting rights of the purchaser and these partners. !Now it is clear from the nature of the lien which each partner has on the partnership property that a partner holds a part- nership chattel with his copartner, subject to all *the equities which that copartner has upon it, (y) [*359] and subject, therefore, to his right to have all the creditors of the firm paid out of the assets of the firm, and consequently, pro tanto, out of the chattels seized by the sheriff, (z) It is equally clear that in this respect the pur- chaser from the sheriff is in no better position than the partner whose undivided share has been sold, (a) 2 Before the Judicature Acts, therefore, a suit in equity became neces- sary, in order that the partnership accounts might be taken, and the partnership property duly applied, (h) 3 levying upon the debtor's interest, levies upon and seizes the property as the sole property of the debtor, he is a trespasser. Atkins v. Sax- ton, supra. (x) See Helmore v. Smith, 35 Ch. D. 436. 1 Latham v. Simmons, 3 Jones' L. 27; United States v. Williams, 4 McLean, 236; Gilmore v. N. A. Land Co. Pet. C. C. 460, where the thing sold was an undivided share in land ; Williams v. Gage, 49 Miss. 777; Knight v. Ogden, 2 Tenn. Ch. 473. If such purchaser sells the goods entire, he is liable in assumpsit to a subsequent trustee of the firm for a moiety of the goods so sold. Latham v. Simmons, 3 Jones' L. 27. (y) Barker v. Goodair, 11 Ves. 85. (z) See the next note. (a) Skipp v. Harvvood, 2 Swanst. 586; Taylor v. Fields, 4 Ves. 396; Young v. Keighly, 15 Ves. 557; Dutton v. Morrison, 17 Ves. 205-6; Ex parte Hamper, id. 404-5 ; Re Wait, 1 J. & W. 608. 2 See Renton v. Chaplain, 9 N. J. Eq. 62 ; Tredwell v. Roscoe, 3 Dev. L. 50; Menagh v. Whitwell, 52 N. Y. 146 ; People's Bank v. Shry- ock, 48 Md. 427. (&) See Parker v. Pistor, 3 Bos. & Pul. 288. 3 Under the common law a cred- itor may seize his debtor's interest in the partnership property, sub- ject to the prior rights of the other partners and partnership creditors ; and may, after the seizure and be- fore the sale, sue the other part- ners to ascertain the amount of the interest seized ; or may sell and leave it to the purchaser to ascer- tain it. Broadnax v. Thomason, 1 La. Ann. 384. See, also, Knight v. Ogden, 2 Tenn. Ch. 473. 851 *359 EIGHTS AND OBLIGATIONS. [BOOK III. Injunction.— The right of the partners of the judgment debtor being of the nature described, and it being incom- patible with that right that the partnership property seized bv the sheriff should be removed or sold by him, the court of chancery would, before the Judicature Acts, on a bill filed by the judgment debtor's copartners against the judg- ment debtor and his creditor and the sheriff, direct the partnership accounts to be taken, and restrain the sheriff from selling the property and appoint a receiver, (c) l The judgment debtor may elect to have an account taken before the sale, by applying to a court of equity therefor. Hacker v. John- son, 66 Me. 21. If a sale of partnership property, under a separate execution against one partner, be fraud- ulent, and there be collusion be- tween the purchaser and the insolvent partner in order to de- prive the other partner of his rights under articles of copartnership, the court will lend no aid to the purchaser. Renton v. Chaplain, 9 N. J. Eq. 62. When the entire interest of a partner in the partnership assets is levied upon and sold, the purchaser at the sheriff's sale, on a bill for an account, will be entitled to a de- cree for one-half of the proceeds of the entire partnership property ; but when a partner's interest in certain specified articles of personal property is sold under execution, it will be error to decree him the entire interest of the debtor part- ner. Gerard v. Bates, Sup. Ct. 111. March 28, 1888. (c) See Bevan v. Lewis, 1 Sim. 376. As to an injunction against the sheriff, compare Newell v. Townsend, 6 Sim. 419, with Garstin v. Asplin, 1 Madd. 150, and Jack- son v. Stanhope, 10 Jur. 676. And see Story on Partn. § 264. And as to making the sheriff a party, see Lord Eldon's observation in Frank- lyn v. Thomas, 3 Mer. 235, and Hawkshaw v. Parkins, 2 Swanst. 549. 1 See Place v. Sweetzer, 16 Ohio, 142. If one of several partners has an interest in the assets of the part- nership over and above the claims of his copartners and those of the creditors of the partnership, there is no reason for the court to inter- fere by injunction to restrain a sale of his interest in the partnership property upon execution on a judg- ment against such partner individ- ually. Mowbray v. Lawrence, 13 Abb. Pr. 317 ; 22 How. Pr. 107. See, also, Hardy v. Donellan, 33 Ind. 501. It has been held that an action will lie by a partner to enjoin an individual judgment creditor of the copartner of the plaintiff from selling upon execution the interest of the copartner in the partnership assets, where it is made to appear by the complaint that the copart- ner whose interest has been seized has in fact no interest in the assets, and the plaintiff offers to submit to an accounting to show this to be 852 CH. V, SEC. IV.] SHAKES IN PARTNERSHIPS. *359 3. Of the position of the execution debtor. 3. Of the execution debtor.— With respect to the execu- tion debtor, it is to be observed that, in the first place, the the case. Turner v. Smith, 1 Abb. Pr. (N. S.) 304. In Massachusetts a court of equity will not, on a bill of the mem- bers of a partnership, decree the return of partnership property at- tached in a suit of a creditor of one of the partners against him, and enjoin the attaching officer from further interferi.Bg with the property, unless it appears that it is needed to satisfy the claims of the partnership creditors, or that the partner sued has not an interest in the surplus which may remain after payment of the partnership debts. A bill which does not show this is bad upon demurrer. Peek v. Schultze, 1 Holmes, 28. It is held, however, in Minnesota, that where an execution in favor of an individual creditor of one of the members of any insolvent part- nership is levied upon his interest in certain goods belonging to the firm, by taking possession of such goods, and threatening to sell such interest, an action will not lie at the suit of the other partner or partners for a perpetual injunction restraining any further proceedings under the levy, even though the officer making the levy and the creditor directing it have notice of such insolvency. Wickham v. Da- vis, 24 Minn. 167. In Brewster v. Hammett, 4 Conn. 540, A. and B. , being partners, C. brought an action against A. for a debt due from him individually, and attached an undivided moiety of the partnership stock, A. hav- ing no interest therein except as a partner. At this time A. was in- solvent; the partnership also was insolvent. A. and B., claiming that the creditors of the partnership had a priority of right to the partner- ship funds, and that they ought not to be taken for the payment of A.'s individual debt, then brought a bill in chancery to restrain proceedings in the action brought by C. and for a restoration of the property at- tached. Held, that the plaintiffs were not entitled to the relief sought, as they were not invested with the rights of the partnership creditors, and as the effect of a decree in their favor would be to leave the partnership funds so pro- tected from the claims of the at- taching creditors, subject to the disposition of the insolvent part- ner — a result from which the cred- itors of the partnership would de- rive no benefit. And in Sitler v. Walker, 1 Freem. Ch. (Miss.) 77, it was held that equity would not restrain the sale of the interest of one partner on execution for his separate debt until the partnership accounts were taken. Partnership creditors, whose de- mands are not due, have no equity to enjoin separate and individual creditors of a partner from attach- ing his individual property. Hen- derson v. Haddon, 12 Rich. Eq. 393. As to who should be made party to a bill filed by one member of a firm against another member of the firm for an injunction against 853 ^360 EIGHTS AND OBLIGATIONS. [book III. execution generally (d) operates as a dissolution of the part- nership, (e) l In the next place, the assignment by the [*360] sheriff to the purchaser transfers to the purchaser whatever the sheriff had power to assign, and did assign, but no more; and as, under &fi.fa., the sheriff may not have power to sell everything which, as between the partners, is to be considered partnership property, it by no means follows that the assignment has transferred to the creditor all the judgment debtor's share and interest in the partnership, (f) In a case, therefore, where a stranger purchased from the sheriff the execution debtor's interest, and then assigned it to the other partners, it was held that the execution debtor was still entitled to an account from them, the sale by the sheriff not having divested him of all his interest in the concern, (g) the collection of a judgment on a a receiver with power to liquidate partnership debt, see Davidson v. Wilson, 3 Del. Ch. 307. (d) Not necessarily in all cases. See Helmore v. Smith, 35 Ch. D. 436, where the solvent partner (in effect) paid out the sheriff with partnership moneys. (e) Aspinall v. The London & N. W. Rail. Co. 11 Ha. 325; Haber- 6hon v. Blur ton, 1 De G. & Sm. 121 ; Skipp v. Harwood, 2 Swanst. 587. *A levy of an execution upon the interest of an insolvent partner and a sale thereunder operate as a dissolution. Renton v. Chapman, 9 N. J. Eq. 62; Carter v. Roland, 53 Tex. 540. See Choppin v. Wil- son, 27 La. Ann. 444. A mere attachment or mesne process does not, however, dissolve the partnership. Arnold v. Brown, 24 Pick. 38. The mere levy of an execution neither dissolves the partnership nor authorizes the appointment of the partnership affairs. A creditor of an individual partner is not en- titled to wind up the firm to reach the interest of such partner with- out first fixing a lien by process. Lincoln Savings Bank v. Gray, 12 Lea (Tenn.), 459; Choppin v. Wil- son, 27 La. Ann. 444. Execution sale of the interest of one member of a firm in the part- nership property makes the pur- chaser a tenant in common with remaining members. Carter v. Roland, 53 Tex. 540; Wright v. Ward, 65 Cal. 525. A purchaser of partnership prop- erty in execution sale cannot be made liable for a loss in conduct- ing the business after sale, and is not entitled to share in the profits. Carter v. Roland, 53 Tex. 540. (/) See Helmore v. Smith, 35 Ch. D. 436. (g) Habershon v. Blurton, 1 De G. & Sm. 121. 854 CH. V, SEC. IV.] SHAEES IX PARTNERSHIPS. *361 Purchase of his interest by his copartners. — Upon a sale by the sheriff of the interest of one partner in the property seized there is nothing to prevent a purchase of that interest by his copartners. But the copartners pur- chasing of the sheriff must act with perfect fairness. If they do anything to conceal the true value of the share, so as to enable themselves to buy it for less than it would' otherwise have fetched, the sale will not be allowed to stand. In Perens v. Johnson, (k) the share of a partner in a leasehold collier} 7 was sold by the sheriff under a fi. fa. The sale was by auction. The other partners bought the share; the execution creditor was paid off; and a balance was handed over by the sheriff to the execution debtor. It appeared, however, that before the sale took place it was expected that a valuable seam of coal would be reached ; that the solvent partners had removed the gear so as to prevent any one going down the mine; that they had also removed some ironstone recently raised, so as to lead per- sons visiting the mine to believe that coal was not so nearly within reach as it was; and that a few days after the sale, and after only one day's working, a rich seam of coal was actually discovered. The execution debtor thereupon filed a bill against his late copartners, praying that the sale might be set aside on the ground that the purchase from the sheriff was contrary to that good faith which should be observed by one partner towards another; and a decree was made in his *favor setting the sale aside [*361] upon repayment of the purchase money, with inter- est at 51. per cent. Purchase with partnership moneys. — Again, if the solv- ent partners buy the execution debtor's share in the goods seized, and pay for it out of the partnership moneys, they cannot hold the share for their own benefit and treat the (h) Perens v. Johnson, and John- Ch. 412, V.-C. W., where a sale by son v. Perens, 3 Sm. & G. 419. See, the sheriff was also set aside, also, Smith v Hai'rison, 26 L. J. 855 #362 EIGHTS AND OBLIGATIONS. [BOOK III. execution debtor as no longer a partner or interested in the share purchased, (i) Right of the execution creditor. — The execution cred- itor has no title to goods seized under a fi. fa. issued by him unless he purchases them from the sheriff. Consequently, where, under a fi. fa. issued against one partner for a pri- l vate debt, the sheriff seized the goods of the firm, which afterwards became bankrupt, and the assignees sold the goods seized, it was held that an action by the execution creditor against the assignees for money had and received to his use would not lie; first, because he had no title to the goods; and secondly, because if he had, his interest in them could not be ascertained without taking the accounts of the partnership, (k) 4. Modifications introduced by the Judicature Acts. The Judicature Acts and rules promulgated under them do not, unfortunately, contain any directions applicable to the subject now under consideration. Nor has the new practice under them yet been reduced to shape. The writer can only, therefore, offer the following suggestions with reference to their combined effect: 1. The practice must be the same in all divisions of the high court. 2. The old practice must be adhered to so far as it is con- sistent with the modern procedure. 3. Some form of procedure must be adopted which shall have the effect of a suit for an account and an injunction and a receiver. 4. There appears to be no reason why the sheriff should not proceed to seize the partnership goods, and sell the exe- cution debtor's share as before; and there is in strict- [*362] ness no more *necessity for him to interplead now than before; (I) and yet, as no order for his with- (t) Helmore v. Smith, 35 Ch. D. (7c) Garbett v. Veale, 5 Q. B. 408. 436, where the assignment by the (I) See ace. W. N. 1875, p. 204. sheriff was set aside. CH. V, SEC. IV.] SHAKES IN PARTNERSHIPS. *362 drawal can be made in his absence, a proceeding by him in the nature of an interpleader summons, bringing all parties interested before the court, would probably be the most convenient course to adopt. 5. Upon a seizure by the sheriff the partners of the exe- cution debtor should obtain an order dissolving the partner- ship, directing the sheriff to withdraw, and directing the accounts of the partnership to be taken, and the value of the execution debtor's interest in the property seized by the sheriff to be ascertained, and appointing a receiver. 6. After the accounts have been taken and the above value ascertained, the receiver should be directed to pay the amount of such value to the purchaser from the sheriff, if any, and the rest of the share of the execution debtor in the assets of the partnership to him. If the share has not been sold the execution creditor must be paid out of or to the extent of the above value. The receiver can then be dis- charged. 7. Whether all this can be done without a transfer to the chancery division is not clear; but probably it very often may be done; and practically a sale by the sheriff will probably be frequently dispensed with. A sale usually produces great hardship, as the value of the share sold is unknown; and its sale seldom answers any useful purpose except that of getting rid of the sheriff, (m) Suggested alteration of the law. — The truth, however, is that the whole of this branch of the laws is in a most unsatisfactory condition, and requires to be put on an en- tirely new footing. The statutory enactments relating to charging orders should be extended to all cases in which the share of a partner is sought to be taken in execution for a separate debt of his own. 1 (to) See a suggested form of order against the property of partner- in Seton on Decrees, 1214, n. (ed. 4), ships may be considered in this referred to in Whetham v. Davey, connection. In order to warrant 30 Ch. D. 579. the issuance of an attachment 1 The subject of attachments against a firm, grounds therefor 857 *363 EIGHTS AND OBLIGATIONS. [BOOK III. [*363] ^Section V. — Of the Transfer of Shares. Transfer of shares. — When persons enter into a con- tract of partnership their intention ordinarily is that a part- nership shall exist btween themselves and themselves alone. The mutual confidence reposed by each in the other is one of the main elements in the contract, and it is obvious that must, according to the better opin- ion, be shown against every mem- ber thereof. Leach v. Cook, 10 Vt. 239; Wiley v. Sledge, 8 Ga. 532; Curtis v. Hollingsher.il, 14 N. J. L. 402; Faulkner v. Whitaker, 15 id. 438 ; Boorum v. Ray, 72 Ind. 151 ; Edwards v. Hughes, 20 Mich. 289; Cowdin v. Hurford, 4 Ohio, 132; Taylor v. McDonald, 4 id. 149; Williams v. Mutherspaugh, 29 Kan. 730; Starr v. Mayer, 60 Ga. 546; Hanson v. Watson, 12 Weekly Not. Cas. 368; Bogart v. Dart, 25 Hun, 395. See, also, Fielding v. Lucas, 22 Hun, 22; Wilson-0"13ear Grocery Co. v. Cole, 26 Mo. App. 5. See, however, contra, Re Chipman, 14 John. 217; S. C. 16 id. 102; Scruggs v. Blair, 44 Miss. 406. See, also, Adams v. Hauter, 42 Leg. Int. 205; Still v. Focke, 66 Tex. 715. An attachment against a part- nership by its firm name, without mention of the names of the indi- vidual partners, can only be levied on firm property. Watts v. Rice, 75 Ala. 289; Mason v. Rice, 66 Iowa, 174. But if levied upon the individual property of one partner the partner whose property is seized cannot maintain an action on an attach- ment bond running to the firm alone. Mason v. Rice, 66 la. 174. An unsettled partnership account cannot be attached. Laughlin v. Maybin, 15 Phila. 68. See, also, Bertwhistle v. Woodward, 17 Mo. App. 277. No valid attachment is created against partnership property by a trustee writ sued against only one member of the firm. Peabody v. Maguire, 12 Atl. Rep. (Me.) 630. In some jurisdictions, where it is sought to subject a debtor's sbare in partnership property to the payment of his individual debts, the better course is said to be to proceed by trustee process or gar- nishment. Snell v. Crowe, 3 Utah, 26 ; Morrison v. Blodgett, 8 N. H. 238; Dow v. Say ward, 12 N. H. 277; Lyndon v. Gorham, 1 Gall. 370. The question in any proceeding by way of garnishment of the in- terest of the debtor in the firm garnished is for the jury. Armand v. Burrum, 69 Ga. 758. If a partner of an insolvent firm appropriates firm moneys to pay- ment of his individual debts, this is a fraud upon the firm creditors and ground for an attachment. Keith v. Armstrong, 65 Wis. 225. As to what is necessary to show to sustain a foreign attachment by the executrix of one partner against the other partner, see Davis v. Tingley, 9 Atl. R. 32 ; S. C. 7 Cent. Rep. 889. As to attachment against one partner on a partnership account under section 3276 of the code, see Connon v. Dunlap, 64 Ga. 680. 858 CH. V, SEC. T.] SHARES IN PARTNERSHIPS. *363 persons may be willing enough to trust each other, and yet be unwilling to place the same trust in any one else. Hence it is one of the fundamental principles of partnership law that no person can be introduced as a partner without the consent of all those who, for the time being, are members of the firm. 1 If, therefore, a partner dies, his executors or As to the liability of a firm to at- tachment where one partner gives the check on a bank without funds to meet it, see Easton Nat. B'k v. Wilson, 12 Weekly Not. Cas. 336. What is due a partnership cannot be subject to garnishment as a credit due one partner. In an ac- tion against one partner a debtor to the firm cannot be made a gar- nishee. Trickett v. Moore, 34 Kan. 755; Seaton v. Brooking, 1 Tex. App. (Civ.) 585; Ripley v. Savings B'k, 18 Bradw. 430; People's Bank v. Shryock, 48 Md. 427; Crescent Ins. Co. v. Baer, 1 So. Rep. 318; Lyndon v. Gorham, 1 Gall. 367; Bulfinch v, Winchenbach, 3 Allen, 161 ; Foot v. Hawkins, 14 Allen, 15 ; Sweet v. Reed, 12 R. I. 121; Win- ston v. Ewing, 1 Ala. 129 ; Branch v. Adams, 51 Ga. 113 ; Thomas v. Lusk, 13 La. Ann. 277. See, also, Brande v. Bond, 63 Wis. 140; Fen- ton v. Black, 10 Mo. App. 536. A debtor of the firm " F. & Co." cannot be garnished upon a claim due from him to the firm fi F. L. & Co. ; " but if all the members of the firm to whom the garnishee is indebted are before the court, the mistake in giving the name of the firm will not prevent the plaintiff from obtaining judgment against the garnishee. Field v. Malone, 102 Ind. 251. A justice of the peace in gar- nishee proceedings, issued upon a judgment against one partner, has no right to settle the equities be- tween the partners; but having jurisdiction, and no appeal being taken, such judgment is conclu- sive and canuot be attacked collat- erally. Howard v. McLaughlin, 98 Pa. St. 440. In Kentucky, where a partner in a dissolved firm takes the note of a debtor to the firm to himself alone for the amouut which he claims is due him, ignoring his partner's right, and sues out an attachment thereon and attaches all the debt, or's property, his copartner may come in as a party to the suit and ascertain his interest to such note. Snow v. Burnett, 1 So. West. Rep. 634. A partner who has elected, under the wrongful acts of defendant, to dissolve the partnership, has a right as a creditor to collect the amount due him from his copartner, and, having issued attachment, is enti- tled, as against parties who had sold goods to the firm without the knowledge that plaintiff was a co- partner, to the priority of his supe- rior diligence. Strong v. Stapp, 15 Pac. Rep. (Cal.) 835. 1 A partner cannot introduce a new member into the firm without the consent of the other members, nor make them members of an- other firm. When made acquainted with the facts, the members should dissent or they will be bound. Mason v. Connell, 1 Whart. 381 ; 859 -363 RIGHTS AND OBLIGATIONS. [BOOK III. devisees have no right to insist on being admitted into part- nership with the surviving partners, unless some agreement to that effect has been entered into by them, (m) l Effect of transfer — Effect of assignment.— Still less can a partner by assigning his share entitle his assignee to take his place in the partnership against the will of the other members, (n) 2 The assignment, however, is by no Murray v. Bogart, 14 Johns. 318; Freligh v. Miller, 16 La. Ann. 418; Channel r. Fassitt, 16 Ohio, 166; Freeman v. Bloomfield, 43 Mo. 391 ; Bennett v. Snyder, 76 N. Y. 344; Love v. Payne, 73 Ind. 80 ; McHale v. Oertel, 15 Mo. App. 583. The assent of each member of a copartnership is necessary to bind him as a member of a new firm, but his express assent need not be proved to bind him ; it may be in- ferred from circumstances; it is sufficient to show that he knew of such new arrangement and made no objection thereto. Tabb v. Gist, 1 Brock. 33; Rosentiel v. Gray, 112 111. 282. Where a partner assigned a por- tion of his interest, constituting his vendee by assignment a "partner in the firm " to the amount of one- eighth of all its profits and losses from the time the firm began busi- ness, the assignee was received as a partner, but there was no change in the firm or its books, nor any- thing indicative of the purpose of distinguishing the business of one firm from that of the other, it was held that the assignee was liable as a partner upon a firm note, given after the admission of the new partner, in renewal of the former note, consideration of which was services rendered the old firm. Earon v. Mackey, 106 Pa. St. 452 ; S. C. 16 Weekly Not. Cas. 10 ; 42 Leg. Intel. 110. Where one buys a stranded ves- sel, and agrees to give another an interest therein, the latter has no interest he can transfer without the former's consent. It is an agreement to take in a partner, and gives the second party no right to impose an unknown partner on the first. Taylor v. Penny, 5 La. Ann. 7. (m)Pearce v. Chamberlain, 2Ves. Sr. 33; Crawford v. Hamilton, 3 Madd. 354 : Bray v. Fromont, 6 id. 5; Crawshay v. Maule, 1 Swanst. 495; Tatam v. Williams, 3 Ha. 347. 1 Chittenden v. Witbeck, 50 Mich. 401. (n) See Jeff erys v. Smith, 3 Russ. 158. 2 Merrick v. Brain ard, 38 Barb. 574. See cases cited supra. An assignment by copartners, for the benefit of their creditors, of the entire firm assets, except prop- erty exempt from execution, dis- solves the firm ; and the subsequent delivery by the assignees to their assignors of such portions of the exempt property as were respect- ively owned by them and used in the business of the firm does not revive or continue the partnership. Wells v. Ellis, 68 Cal. 243. The purchaser of an interest of one of several partners has no right 860 OH. V, SEC. V.] SHARES IN PARTNERSHIPS. *361 means inoperative; on the contrary, it involves several im- portant consequences, more especially as regards the dis- solution of the firm and the right of the assignee to an account, (o) 1. As regards dissolution. — As regards dissolution it is remarkable that there should be so little authority to be found. It is generally stated that if a member of an ordi- nary partnership transfers his share he thereby dissolves the partnership; but this proposition requires qualification. The true doctrine, it is submitted, is that, if the partnership is at will, the assignment dissolves it; (p) and if the part- nership is not at will, the other members are entitled to treat the assignment as a cause of dissolution. It can hardly be that a partner who has himself no right to dis- solve or to introduce a new partner can, by assigning his share, confer on the assignee a right to have the accounts of the firm *taken, and the affairs thereof [*36i] wound up, in order that he may obtain the benefit of his assignment. 2. As regards account. — Although a partner cannot by transferring his share force a new partner on the other members of the firm without their consent, there is nothing to prevent a partner from assigning or mortgaging his share without consulting his copartners; 1 and if a partner to interfere personall}' in the affairs entitled to upon a settlement of of the partnership, and a refusal the pai-tnership accounts; and, of the remaining partners to per- until the affairs of the partnership mit him to do so will not entitle him are thus wound up, the partner to the interference of a court of who did not sell is entitled to the equity by injunction, or the ap- possession of the property. Miller pointment of a receiver. McGlen- v. Brigham, 50 Cal. 615. sey v. Cox, 5 Pa. Law J. Rep. 203. (o) In Marshall v. Maclure, 10 Where one of two partners sells App. Ca. 325, a surrender of a part- to a third person his interest in the ner's share in property mortgaged goods owned by the partnership was held, under special circum- the purchaser cannot maintain an stances, to include the firm's share, action to recover his interest in the (p) See Heath v. Sansom, 4 B, & goods, but must sue for an ac- Ad. 172. counting, and will recover what- J The sale by a partner of his in- ever his assignor would have been terest is not a wrong to his partner, 861 *364 EIGHTS AND OBLIGATIONS. [BOOK III. does assign or mortgage his share, he thereby confers upon the assignee or mortgagee a right to payment of what, and if the damage results to his partner by such sale it is damnum sine injuria. Mitchell v. Gormley, 9 Ont. 139; S. C. 5 Can. L. T. 283; 21 Can. L. J. 220. As to the assignment by one partner of his interest in a firm not in existence at the date of the assignment, see Hulse's Estate, 39 Leg. Intel. 129. One partner may sell his interest in the partnership property to his copartner, and if the sale be fair he will take the exclusive title thereto. Reese v. Bradford, 13 Ala. 837. One partner may purchase, on his own account, at a public sale, the interest of his copartner in real estate, and will hold the purchased property as a stranger might. Bradbury v. Barnes, 19 Cal. 120. When a firm is insolvent a sale by one partner to another of his interest for a valuable considera- tion does not of itself constitute a fraud. Russell v. McCord, 2 Flip. 139. It seems that to sustain a sale of partnership property by one part- ner to another, as against the cred- itors of the firm, it must appear that the firm was insolvent at the time of such sale. David v. Birch- ard, 53 Wis. 492. A sale by one partner to his co- partner, and a mortgage back of the seller's share of the partnership property, upon which there is a policy of insurance against loss by fire, issued to the firm, do not con- stitute a breach of the condition of the policy that it should be void if the property shall be sold without the written assent of the insurers. Powers v. Guardian Insurance Co. 136 Mass. 108. A bona fide mortgage, given by a member of a firm to the firm, is valid, and in no sense a mortgage to the grantor himself. Galway v. Fullerton, 17 N. J. Eq. 389. As to necessary allegations of a bill to foreclose a mortgage given by one partner upon the sale of his interest to the other, see Clay- ton v. May, 67 Ga. 769. A mortgage by one partner upon his individual interests in a firm creates no actual lien upon the firm property. Such mortgage by a partner of his interest in real es- tate is not a mortgage of the prop- erty itself nor an undivided inter- est therein, but of his interest in the copartnership after its affairs are settled. Tarbell v. Bradley, 7 Abb. N. C. 273. So a mortgage by one partner of his interest in firm real property cannot prevent the copartners from disposing of the real estate for the legitimate purposes of the copart- nership; and the title given by them will be unaffected by the mortgage. Tarbell v. Bradley, 7 Abb. N. C. 273. As to the equities between mort- gagee of the undivided interest of partners in an executory contract, and the subsequent mortgagee of the legal estate, see Edwards v. McKernan, 55 Mich. 520. A mortgage by one member of a firm of his interest in partner- ship real estate is subject to all the equities of the partnership, 862 CH. V, SEC. V.] SHAKES IN PAKTNEKSHIPS. *3G4 upon taking the accounts of the partnership, may be due to the assignor or mortgagor, (q) x But the assignee or whether existing at the time of the mortgage or arising subse- quently thereto; and the mort- gagee will only be entitled to the mortgagor's interest after all these equities are fully adjusted, which can only be determined upon a full partnership account. Churchill v. Proctor, 31 Minn. 129. A mortgage by one partner of a specific number of bales of cotton, out of partnership crop, for the payment of his individual debt, gives the mortgagee, who has no- tice of the partnership, no right to the specific property, but only a right to the ultimate interest of the mortgagor in the partnership effects after all his debts are paid — to the value of the cotton at the time of the mortgage. Nichol v. Stewart, 36 Ark. 612. In the case of a pledge by a part- ner of his interest in the firm, to secure a loan of money put into the firm as part of such partner's capital, the pledgor may, by agree- ment, retain possession. In such case the pledgee's right is superior to the claims of general creditors, and all others claiming under the pledgor, except purchasers for •value without notice. Wallace's Appeal, 104 Pa, St. 559; S. C. 14 Weekly Not. Cas. 164. When a partner sells his interest in the firm it is presumed that he sells only his legal interest ; and it cannot be assumed, in the absence of any stipulation to that effect, that he sold or intended to sell his indebtedness to the firm. Over v. Hetherington, 66 Ind. 365. A partner's sale of his interest and assets of the firm does not, it seems, assign his personal indebt- edness thereto, unless the instru- ment of transfer expressly includes it. Gardiner v. Fargo, 58 Mich. 72. As to what passes under a special agreement for the sale of the inter- est in partnership business, see Al- bright v. Voorhies, 36 Hun, 436. The sale by one of two partners of his interest to one, who becomes his successor in the firm, does not destroy the priority of the right of a creditor of the original firm to payment of his debt out of the partnership property of the orig- inal firm to the extent of the other original partner's interest in such property. Spurr v. Russell, 59 N. H. 338. An assignment by a member of a firm of all his property to an as- signee, for the benefit of his credit- ors, will convey not only all his in- dividual property, but his interest in the company property. Fellows v. Greenleaf, 43 N. H. 421. (q) Whetham v. Davey, 30 Ch. D. 574; Glyn v. Hood, 1 Giff. 328, and 1 De G. F. & J. 334. See, also, Cassels v. Stewart, 6 App. Ca. 73. *See Rodriguez v. Heffernan, 5 John. Ch. 417; Nicholl v. Mum- ford, 4 id. 522; Miller v. Brigham, 50 Cal. 615 ; Menagh v. Whitwell, 52 N. Y. 146 ; Still v. Focke, 2 So. West. Rep. 59; Wallace's Appeal, 104 Pa. St. 559: S. C. 14 Weekly Not. Cas. 164; Rosentiel v. Gray, 112 111. 282. A purchaser of the interest Of a partner acquires only a right to an account, save in the case of a bona fide purchaser for value, without 863 *36J: EIGHTS AND OBLIGATIONS. [BOOK III. mortgagee acquires no other r subject to the rights of the notice of partnership land, the legal title to which is either in the grantor alone, or in him and others apparently as tenants in common. Tarbell v. West, 86 N. Y. 280. The assignee of an individual cannot sue to ascertain whether one is not liable with his assignor as partner ; he is not the assignee of a partnership, and it is not part of his duty to maintain sucli suit. Grant v. Crowed, 9 Atl. R. 201. Four persons entered into co- partnership in 1832, in the business of manufacturing cotton cloths, for the term of five years, and in 1833 the partnership was dissolved, and afterwards by their deed they assigned to A. " all their right and title to all and singular the rights, privileges and interest secured " to them by the articles of copartner- ship. A part of the property taken ight than this, (r) and he takes other partners, 1 and will be was the property of the partners, and a part of the partnership stock when the partnership was formed, and the residue was afterwards purchased by the partners with the general partnership funds. Held, that all the property passed, wdiich at the time of the transfer was partnership property, to be held and used by A. for the residue of the five years, and that the operation of the assignment was not effected by the dissolution, it not being made by all. Caswell v. Howard, 16 Pick. 562. By the terms of a contract dis- solving a partnership between A. and B. in a certain store, the for- mer sold the latter " all the right, title and interest of said A." in said store, with all the notes and ac- counts due, the latter assuming the payment of all debts and claims against said firm. Held, (r) Smith v. Parkes, 16 Beav. 115. 1 Where the interest of one part- ner in the partnership property passes to another person it is im- material whether that transfer be effected by a sale by the partner himself for a valuable considera- tion, by a sale of his interest on execution, by his death and the succession of his executor or administrator, or by assignment under the bankrupt or insolvent laws. In all these cases the party coming into the right of the part- ner comes into nothing more than an interest in the partnership, which cannot be tangible, made available, or delivered, except under an account between the partner and the partnership; and it is an item in the account that enough must be left for the part- nership debts. Baker's Appeal, 21 Pa. St. 76; Fourth National Bank v. Carrollton Railroad, 11 Wall. 624 ; Mords v. Gleason, 64 N. Y. 204; Miller v. Brigham, 50 Cal. 615. Where real estate held by the members of a partnership as part- nership property is mortgaged by one of the partners to secure his individual debt, the mortgagee only acquires a lien upon what may be the share of the mortgagor after settlement of the partner- ship accounts and the payment of all partnership debts. Conant v. Frary, 49 Ind. 530. 864 CH. V, SEC. V.] SHARES IN PARTNERSHIPS. 5G4 affected by equities arising between the assignor and his copartners subsequently to the assignment, (s) Even if the that the contract raised the pre- sumption that the parties intended a complete settlement of all the partnership affairs ; that a balance standing to the credit of the firm in a bank was embraced in the " accounts due the firm," and that there was no latent ambiguity in the contract. Burress v. Blair, 61 Mo. 133. W. bought all the interest of M. in the property of the firm of R. & M., and then formed a partnership with R. , agreeing to put in all the property he received from M. Held, that a bank deposit in the name of R. & M., of which both parties were ignorant at the time, became the partnership property of the new firm, W. & R. Cram v. Union Bank, 1 Abb. App. Dec. 461. In an agreement between part- ners it was agreed that for the purpose of disposing of the joint stock of the firm, " as detailed in " a prior inventory thereof, all the property of the firm excepting cer- tain specified items, and excepting " the book accounts and receiv- ables," should be put up and bid upon by the partners: this was done, and plaintiff became the purchaser. In an action for an accounting it appeared that after the inventory and prior to the bid- ding certain chattels of the firm had been sold. Held, that the sale did not include said chattels or the money or debts obtained therefor ; that the statement as to the inven- tory was simply by way of refer- ence, and in the nature of a recital or matter of inducement. Deering v. Metcalf, 74 N. Y. 501. A sale by a partner to his copart- ner of all his interest in the prop- erty, effects, claims, assets and debts of a firm does not pass to the purchaser an account standing upon the books of the firm against the partner making the sale, nor, as it has been held, the seller's in- terest in the capital originally con- tributed by him to the firm. Cof- fing v. Taylor, 16 111. 457. See, also, Hasselman v. Douglass, 52 Ind. 252; Owen v. Hetherington, 66 Ind. 365. In Owen v. Hetherington, supra, in a suit upon a promissory note, the defendant answered that him- self, B. and C. were partners; that B. and defendant bought out C.'s interest in the concern, each to pay one-half the amount agreed upon ; that the note in suit was executed by defendant to C. in discharge of his half ; that when C. retired from the firm he was indebted to it in a certain sum on his individual ac- count, which indebtedness C. had fraudulently concealed from the defendant; that defendant subse- quently bought out B., and became thereby the owner of the entire claim against C, and asked that such claim be allowed as a set-off against the note. Held, that such (s)See Cavander v. Bulteel, 9 Ch. 78 ; Lindsay v. Gibbs, 3 De G. & J. 690 ; Guion v. Trask, 1 De G. F. & J. 379, per Turner, L. J. See, Vol. 1 — 55 865 also, Re Knapman, 18 Ch. D. 300 ; Bergmann v. McMillan, 17 id. 423; Morris v. Livie, 1 Y. & C. C. 380. '364 EIGHTS AND OBLIGATIONS. [BOOK III. assignee gives notice of the assignment he cannot (if the partnership is for a term) acquire a right to the assignor's claim did not constitute a set-off. When a partner sells his " interest in the concern" it must be pre- sumed that he sells only his legal interest in the firm ; and it cannot he assumed, in the absence of any stipulation to that effect, that such partner sold or intended to sell his indebtedness to the firm. Held, also, that it would be assumed that C.'s indebtedness to the firm ap- peared upon its books, and that such books were open to the exam- ination of the defendant, and his alleged ignorance of the existence of such indebtedness was the result of his own inexcusable negligence. But where, by the articles of partnership, it was provided that the accounts of each partner to the firm " shall stand due to the con- cern in the same manner as any other account due by a party un- connected with the business," and upon the dissolution of the firm, under the written terms thereof, one of the partners " agreed to purchase all right and interest of the other partner in the stock, cash, notes, book-accounts, and every- thing connected with the firm," held, that the account of the firm against the partner selling out was canceled and extinguished in the agreement of dissolution and pur- chase. Murdock v. Mehlhop, 26 Iowa, 213. So, where one partner, having a large pecuniary interest in the firm, but being individually a debtor thereto for a certain amount, as appeared by entries on their books, sold and conveyed to the other partner " all his right, title and in- terest in and to all the property and estate, real, personal and mixed, belonging to, or which of right ought to belong to, said firm," held, that such conveyance trans- ferred to the other partner only his interest in the concern which re- mained after deducting such in- debtedness, and that the amount so charged to him individually could not thereafter be collected of him. Beckley r. Munson, 22 Conn. 299 : S. P. Finlay v. Fay, 17 Hun, 67. Where one of two partners sold out to the other, the purchaser taking all the assets and assuming the payment of all the liabilities; and where, in proceedings between the two, under a submission to arbitrators, the arbitrators found that in the keeping of the books of the firm there had been mistakes, and that the vendor had received credits and cash with which he was not charged, amounting to the sum of $1,900 — among which was the following item: "For credits en- tered, which he is not entitled to, $1,431.84" — which sum was awarded to the vendee of the part- nership interest; and where it was claimed that the vendee was enti- tled to recover for only one-half of the said sum of $1,431.84, held, that the vendee was substituted to all the rights of the partnership, and whatever either was owing to the firm belonged to him. Tomlin- son v. Hammond, 8 Iowa, 40. A partnership was dissolved by articles of dissolution, dated 9th of February, 1839, by which the com- plainants were to become possessed of all the stock, debts and assets of 866 CH. V, SEC. V.] SHARES IN PARTNERSHIPS. *3G± share as it stands at the time of the assignment or notice, discharged from subsequent!} 7 arising claims of the other the firm, and pay to defendant a certain sum, and these conditions being complied with the parties wero mutually to release all claims against each other. An account was found on the books charging defendant with $2,100 for various items, balanced by an entry of credit for that sum " for expenses," dated the 1st of February, 1839. Upon a bill attacking this entry as unauthorized by the terms of the partnership, and fraudulently made pending the negotiation for a dissolution, held. 1. If the de- fendant had stood charged on the books with the $2,100 at the time the terms of the dissolution were agreed upon, the settlement would have released the indebtedness. 2. But if the terms of dissolution were settled on the supposition that defendant's account had been properly balanced, when in fact the credits had been improperly and fraudulently entered, the com- plainants were entitled to recover the amount of the debit in defend- ant's account. 3. In the absence of all proof on the subject it must be assumed that complainants dealt with defendant under the belief that the books had been fairly and correctly kept, and the credit being proved improper they were entitled to relief against it. Trump v. Baltzell, 3 Md. 295. Where a partner sells his interest in his firm, including the stock and excepting the accounts and indebt- edness due it, to his copartners, the sale covers amounts which the vendees have failed to pay in as partners to make their respective shares of the capital stock equal to the capital paid in by him, as well as their liability for moneys with- drawn from the firm by them. Flynn v. Fish, 7 Lans. 117. Where certain persons by a writ- ing signed by them formed an association for publishing a daily and weekly newspaper, and therein and thereby agreed that said news- paper, and the good-will thereof, and all the other goods, etc., of the association, "as they shall from time to time exist, shall be divided into, and shall always consist of, one hundred equal shares, to be called capital stock ; " and in what proportions such stock should be- long to them in severalty; and thereby, by the sixth article thereof, also agreed that each party should have the right to sell any of his said stock, but, before doing so, should offer the same to the asso- ciation, and give it the refusal thereof for ten days, and that no " purchaser shall acquire any in- terest whatever in the profits of said papers till he shall receive a certificate or scrip for his said shares, signed by all the parties hereto, and duly registered in a book to be kept for that purpose," which scrip shall certify that the holder of it " is entitled to partici- pate, in proportion to his shares, only in that portion of the profits which may be assigned to the party selling to such purchaser, and shall not be entitled to any voice or agency whatever in the conduct, control, management or affairs of said company or of said news- papers." Held, 1. That the plaint- 867 : -3G4 KIGIITS AND OBLIGATIONS. [BOOK III. partners, (t) 1 The assignment cannot deprive them of their rio-ht to continue the partnership, and consequently to bring iff, who purchased thirty shares of the stock from a prior and regis- tered purchaser thereof, was, as between him and his vendor, the owner thereof, and as such equi- tably entitled to any dividends of profits ascertained and declared while he was such owner, and credited on the books of the asso- ciation to such stock as its just pro- portion of such ascertained profits, although such stock was so pur- chased by the plaintiff without a previous offer of it by his vendor to the association or to either of his associates. 2. A sale and assignment by the plaintiff, after such a dividend of profits, of tbe said " thirty shares of capital stock," "and all future benefits and dividends thereof," with full authority, as the attorney of the plaintiff and of his vendor, to sell for them " all or any part of said stock," did not pass to the plaintiff's vendee any right to the dividend so previously declared and credited to the said thirty shares. 3. A written notice signed by one of the associates, and served (on all persons interested in the capital stock) after such a dividend of profits had been made, declaring the association dissolved ; and the institution by him of a suit to ob- tain a judgment declaring it to be dissolved, etc., operated as a disso- lution of the association, and made plaintiff's legal title to the profits so allotted and credited to his thirty shares perfect and absolute, and completed his right to sue the asso- ciates and recover from them such ascertained and declared profits, unembarrassed by any of the con- ditions and provisions contained in the sixth article of association. 4. But there would be deducted from such declared profits three- tenths of a debt owing by the asso- ciation when the dividend was de- clared and subsequently paid by it, but not then considered, because its amount was not then known or capable of being ascertained. Har- per v. Raymond, 3 Duer, 29. A. and B., partners in trade, made a written agreement whereby the former, in consideration of a certain sum of money to be paid him, and of a certain amount of {t)See Bergmann v. McMillan, 17 Ch. D. 423: Cavander v. Bulteel, 9 Oh. 78; Kelly v. Hutton, 3 Ch. 703; Redmayne v. Forster, 2 Eq. 467. 1 See, however, Mosely v. Garrett, 1 J. J. Marsh. 212, where it was held that if a partner mortgage his interest in partnership property the other partner cannot apply it in discharge of the firm debt. "Where the interest of one of the partners in the property of a part- nership is assigned by him as se- curity for his individual debts, and such assignee permits the business to go on in its ordinary course, such security becomes subject to the fluctuations of the business, and upon the subsequent dissolu- tion is only entitled to what re- mains to such partner after the payment of the debts of the firm. Bank v. Fowle, 4 Jones, Eq. 8. 868 Cn. V, SEC. V.] SHARES IN PARTNERSHIPS. *364' subsequent dealings and transactions into account. It seems, however, that an assignee of a share in a partnership can goods to be withdrawn by him from the stock of the firm, and of the assumption by the latter of all contracts and debts of the firm, sold and transferred to B. all the interest of A. in the assets of the firm, including money on hand, notes, accounts, stock, machinery and material; the instrument recit- ing that the object and purport of the contract was the withdrawal of A. from the firm, and the release of A. by B. " from any and all lia- bilities on account thereof," and that if B. should fully perform the agreement and release A. in ac- cordance with the provisions of the contract, the sale should be valid in law, else void and of no effect. Held, in an action by A. against B. on said contract to recover said sum of money as stipulated therein, that A. was released from all lia- bility on account of any claim against him or debt due from him in favor of said firm, as well as re- leased from and secured against any liability of the firm to any otlier person. Headley v. Shelton, 51 Ind. 388. Where one partner purchases of his copartner his interest in the partnership property under a mis- take as to the true condition of the partnership accounts, but without fraud in the partner selling, there is no legal consideration for a prom- ise of the latter to make up the amount of the mistake. Eakin v. Fenton, 15 Ind. 59. One partner sold to his copartner his interest in the partnership ef- fects, and afterwards it was dis- covered that the inventory and es- timate of the effects which the par- ties had before them at the time of the sale was erroneous, and that the effects were in fact less than appeared from the inventory. The sum paid for the selling partner's interest was, however, considerably less than his share of the amount of the inventory. Held, that, while the sale remained in force, an ac- tion could not be maintained to re- cover the difference between the actual amount of the effects and the amount stated in the inventory. Wood v. Johnson, 13 Vt. 191. One of two copartners, without the knowledge of the other, mort- gaged an undivided half of part- nership property to secure his pri- vate debt. A third party bought the property, promising to pay the mortgagee one-half its value ; but, being garnished by a firm creditor, he was obliged to pay over the en- tire value. Held, that his prom- ise to pay the mortgagee could not be enforced, the consideration hav- ing failed. Sauntry v. Dunlap, 12 Wis. 364. A bona fide transfer of an inter- est in a partnership may be made without writings or vouchers. Re Great Western Tel. Co. 5 Biss. 363. A notice to one partner in pos- session of the partnership property of the purchase of another partner's interest is a sufficient delivery to constitute a valid sale. Whigham's Appeal, 63 Pa. St. 194. A partner sold his interest, which was one-half, in the business to his copartners for a given sum; pro- viding further that, when the in- debtedness of the firm was ascer- 869 f 3G5 EIGHTS AND OBLIGATIONS. [BOOK Mi compel the other partners to come to an account with him; (w) but the analogy furnished by sub-partnerships leads to the inference that the assignee must, to use Lord Elclon's language, be satisfied with the share of the profits arising and given to the assignor. (%) Transfers allowed by agreement. — If partners [*3G5] choose to agree that any of them shall be at ^"lib- erty to introduce any other person into the partner- ship, there is no reason why they should not; nor whv, having so agreed, the}'' should not be bound by the agree- ment, (y) l Persons who enter into such an agreement con- tained, if it did not amount to over #9,000, they were to execute to him their note for $1,500, or if the debts of said firm should amount to over $9,000, then the said note to be proportionately less according to the increase in the amount of said indebtedness. It being ascer- tained that the indebtedness was in excess of $9,000, held, that the ex- cess should reduce the amount of the note in the one-half amount of such excess. Murchison v. Warren, 50 Tex. 27. One of the partners in the busi- ness of brewers executed an agree- ment for the sale of " his whole in- terest in the brewery at," etc., "consisting of stock on hand, per- sonal property, real estate," etc., describing certain town lots, " for the sum of," etc. Held, that this agreement, taken according to its terms, did not dispose of moneys on hand or on deposit belonging to the partnership, or of bills receiv- able or accounts in favor of the firm. Gamier v. Gebhard, 33 Ind. 225. (»)Nee Whetham v. Davey, 30 Ch. D. 574; Glyn v. Hood and Kelly v. Hutton, ubi supra. But Kelly v. Hutton appears to have been a case of co-ownership in the newspaper and a partnership in its profits. (a?) See ante, p. 48, and Brown v. De Tastet, Jac. 284, where the bill was dismissed against the other partners. (y) Lovegrove v. Nelson, 3 M. & K. 20. 1 It was agreed by articles of copartnership that any partner might transfer his share by a writ- ten certificate, which, when lodged with the clerk, should give the as- signee all the privileges, and sub- ject him to all the liabilities, of an original partner. Held, that such certificate was not material to a sale. Alvord v. Smith, 5 Pick. 232. The members of a partnership received from their treasurer cer- tificates of stock, containing the provision that no shares should be transferred without consent of the treasurer and directors. A share was assigned to the plaintiff with- out such consent, and he brought a bill to compel the company to ac- count, alleging himself to be a partner. Held, that he was not a partner, and that the bill must bo 870 CH. V, SEC. V.] SHARES IN PARTNERSHIPS. *365 sent prospectively and once for all to admit into partnership any person who is willing to take advantage of their agree- ment, and to observe those stipulations, if any, which may be made conditions of his admission. Such an agreement as this is the basis of every partnership the shares in which aie transferable from one person to the other. Those who form such partnerships, and those who join them after they are formed, assent to become partners with any one who is willing to comply with certain conditions, (s) As observed in Lovegrove v. Nelson, (a) "To make a per- son a partner with two others their consent must clearly be had, but there is no particular mode or time required for giving that consent; and if three enter into partnership by a contract which provides that, on one retiring, one of the remaining two, or even a fourth person who is no partner at all, shall name the successor to take the share of the one retiring, it is clear that this would be a valid contract, which. Kingman v. Spurr, 7 dismissed Pick. 235. Relief in equity may be had by A. against B. and C. for non-per- formance of an agreement in writ- ing by which A., with B.'s consent, assigned to C. all A.'s share in a partnership between A. and B., and B. and C. covenanted to as- sume the debts of that firm, and liabilities. Certain partners as- signed their stock, but did not transfer it in the manner prescribed by the articles. Their assignees were, however, received and treated as partners by the other members, who ceased to regard the assignors as partners. In an ac- tion, more than four years later, to compel the assignors to share a A. and B. agreed with C. that such company loss, held, that they were debts should not exceed a certain amount. Scovill v. Kinsley, 13 Gray, 5. The articles of a joint-stock com- pany provided that a partner wish- ing to dispose of his interest should first offer his stock to the company, and second, pay up so much of it as should have been called for, after which he might absolutely transfer the stock on the company books, and the company were bound to receive his assignee and look to him for all subsequent 871 not liable, and that the stock was assigned so as to discharge the as- signors from liability for the debts of the company, although the mode prescribed by the articles was not pursued, the company having rec- ognized the assignees as partners, and' having ceased to regard the assignors as such. Wells v. Wilson, 3 Ohio, 425. (z) See Fox v. Clifton, 9 Bing. 119. (a) 3 M. & K. 1. "'306 EIGHTS AND OBLIGATIONS. [BOOK III. the court must perform, and that the new partner would come in as entirely by the consent of the other two as if they had adopted him by name." Effect of transfer where there is a right to assign.— Where a partner has an unconditional right to transfer his share he may transfer it to a pauper, and thus get rid of all liability as between himself and his copartners in respect of transactions subsequent to the transfer and notice thereof given to them, (b) But even in this case the transfer alone does not render the transferee a member of the partnership, and liable as between himself and the other members to any of the debts of the firm, (c) In order to render him a partner with the other members they must acknowledge him to be a partner or permit him to act as such, (d) Effect on continuity of firm. — As an ordinary partner- ship is not distinguishable from the persons compos- [*366] ing it, and as every change amongst those *persons creates a new partnership, it follows that every time a partner transfers his share to a non-partner the continuity of the firm is broken. 1 In this respect such companies as are not mere partnerships on a large scale differ from or- dinary firms, their continuance not being interrupted by changes amongst their members, (e) Mining partnerships. — An apparent exception to the rule that a share in a partnership cannot be transferred without the consent of all the partners exists in the case of mining partnerships. Mines are a peculiar species of prop- erty, and are in some respects governed by the doctrines of real property law, and in others by the doctrines which regulate trading concerns. Regarding them as real prop- erty and their owners as joint tenants or tenants in com- (b) Jefferys v. Smith, 3 Russ. 158. to the contrary, that as between (c) Ibid. themselves the partnership con- (d) Ibid. tinues with only a change in the 1 Where one partner sells out to proportions of their interests. Fred- another, and the remaining ones erick v. Cooper, 3 Iowa, 171. continue the business, it will be (e) See Mayhew's Case, 5 De G. presumed, in the absence of proof M. & G. 837. 872 CH. V, SEC. V.] SHARES IN PARTNERSHIPS. *366 mon, each partner is held to be at liberty to dispose of his interest in the land without consulting his co-owners; and a transfer of this interest confers upon the transferee all the rights of a part owner, including a right to an account against the other owners, (f) But even here, if the per- sons originally interested in the mine are not only part ow T ners, but also partners, a transferee of the share of one of them, although he would become a part owner with the others, would not become a partner with them, in the proper sense of the word, unless by agreement express or tacit, {g) Ships. — Similar observations apply to transfers of shares in ships. (/) See Bentley v. Bates, 4 Y. & (g) As in Jefferys v. Smith, 3 C. Ex. 182; Redmayne v. Forster, Russ. 158; Crawshay v. Maule, 1 2 Eq. 467. Swanst. 518. 873 [*367] ^CHAPTER VI. OF CONTRIBUTION AND INDEMNITY* WITH REFERENCE TO PARTNERSHIP. Subject of present chapter. — In this chapter it is pro- posed to consider the nature of those expenses and losses which, as between the members of a firm, are chargeable to the firm, and also the nature of those which are properly chargeable against some one or more of the members ex- clusively of the others. In other words, it is proposed to investigate the principles upon which, in taking the accounts of a firm, a given expense or loss is to be placed to the debit of the firm, or to the debit of one or more of its members separately. In connection with this subject it must always be borne in mind that every member of an ordinary firm is, to a cer- tain extent, both a principal and an agent. He is liable as a principal to the debts and engagements of the firm, and in respect of them he is entitled to contribution from his copartners; for they have no right to throw on him alone the burden of obligations which, ex hypothesis are theirs as much as his. (a) Again, each member, as an agent of the firm, is entitled to be indemnified by the firm against losses and expenses hona fide incurred by him for the benefit of the firm, whilst pursuing the authority conferred upon him by the agreement entered into between himself and his copartners. On the other hand, a partner has no right to charge the firm with losses or expenses incurred by his own negligence or want of skill, or in disregard of the authority reposed in him. ilj) (a) See Robinson's Case, 6 De G. (b) Thomas v. Atberton, 10 Ch. M. & G. 572; Spottiswoode's Case, D. 185; Bury v. Allen, 1 Coll. 604. id. 345; Lefroy v. Gore, 1 Jo. & Lat. 571. 874 OH. VI, SEC. I.] CONTRIBUTION AND INDEMNITY. . *368 The above general principles are the basis of the whole of this branch of partnership law; but, in order to apply them ^correctly to the infinite variety of cir- [*368] cumstances which occur in the ordinary course of life, it will be convenient to notice- the leading doctrines on the subject of contribution and indemnity generally, and then to allude more particularly to the rights of partners with respect to compensation for trouble ; outlays and ad- vances; debts, liabilities, and losses and interest. Section I. — General Observations. Foundation of the right to contribution. The right of contribution. — Whether a person who has suffered loss is entitled to be indemnified wholly or partly by others is a question which cannot be decided in the negative merely upon the ground that no agreement for contribution or indemnity has been entered into. An agree- ment may undoubtedly give rise to a right to indemnity or contribution ; but the absence of an agreement giving rise to such a right is by no means fatal to its existence. The general principle which prescribes equality of burden and of benefit is amply sufficient to create a right of contribu- tion in many cases in which it is impossible to found it upon any genuine contract, express or tacit. The common feat- ure of such cases is that one person has sustained some loss which w T ould have fallen upon others as well as upon himself, but which has been averted from them at bis ex- pense ; for example, where one tenant in common repairs the common property, and so saves it from destruction ; (c) where one of several sureties pays a debt for which all are liable; (d) where one person has his goods thrown overboard in order to save the ship and the rest of its cargo, (e) In (c) Ante, p. 60. (e) Abbott on Shipping, part iv, (d) Dering v. Winchelsea, 1 Cox, ch. 10 ; and part vi, ch. 1, ed. 12. 318. 875 *369 EIGHTS AND OBLIGATIONS. [BOOK III. all these cases a right of contribution arises, not by virtue of any contract, but because the safety of some cannot justly be purchased at the expense of others; and all must therefore contribute to the loss sustained. {/) [*369] * Again, where one man's goods have been lawfully seized for the debt of another, the owner of the goods has a right to redeem them and to be indemnified by the debtor, (g) Exclusion of right by agreement. — But although a right to contribution may exist where there is no contract upon which it can be founded, it cannot exist if excluded by agreement; and it is so excluded whenever those who would otherwise be contributories have entered into any contract, express or tacit, amongst themselves which is in- consistent with a right on the part of one to demand con- tribution from the others. (A) This is too obvious to require comment, but it must be borne in mind as qualifying the common saying that the right to contribution is independ- ent of agreement. Exclusion of right by fraud. — Again, a right to con- tribution may be excluded by fraud, as in the case where a person induces another by false and fraudulent representa- tions to join him in partnership. In such a case the person defrauded has a right to rescind the contract of partner- ship, and, as between himself and copartner, to throw all the partnership losses upon the latter alone, (i) (/) Lefroy v. Gore, 1 Jo. & Lat. De G. & S. 421 ; Re The Worcester 571 ; Spottiswood's Case, 6 De G. M. Corn Exchange Co. 3 De G. M. & & G. 345 ; Ashurst v. Mason, 20 Eq. G. 180. 225, a case of co-directors. See, (i) See Newbigging v. Adam, 34 too, the cases in lEq. Ca. Ab., Con- Ch. D. 582; Pillans v. Harkness, tribution and Average, and in the Colles, 442; Rawlins v. Wickham, note to Averall v. Wade, LI. & 1 Giff. 355, and 3 De G. & J. 304* Gould (temp. Sug.) 264. noticed hereafter under the head (g) Edmunds v. Wallingford, 14 Rescission of Contract. See, too, Q. B. D. 811. Carew's Case, 7 De G. M. & G. 43] (h) As in Gillan v. Morrison, 1 876 CH. VI, SEC. I.] CONTRIBUTION AND INDEMNITY. ^369 Of the rigid of agents, trustees [and partners'] to indemnity from their principals, cestuis que trustent [and the firm 1 ]. A gent's right to indemnity. — In order to clear the way for the discussion of the right of a partner to be inderani- 1 See the general subject consid- ered and the cases collected in Ewell's Evans on Agency, *353 et seq., and notes. Where partners retire from the firm, their successors agreeing to pay the firm debts, as between themselves the remaining partners are primarily liable and the retir- ing partners their sureties. Will- iams v. Boyd, 75 Ind. 286; Johnson v. Young, 20 W. Va. 614; Chandler v. Higgins, 109 111. 602; Barber v. Gillson, 18 Nev. 89; Sizer v. Ray, 87 N. Y. 220. The relation of surety also exists where the retiring partner is liable, by reason of non-notice of retire- ment, for debts contracted after his retirement; and upon payment may recover from his principals the amount paid in assumpsit. Shamburg v. Abbott, 17 Weekly Not. Cas. 298. It follows from the above that a retiring partner may be discharged by giving time to the continuing partner. Buckell v. McGuire, 17 Can. L. J. (N. S.) 63. The surety may protect himself by paying the indebtedness for which he is liable at any time. Barber v. Gillson, 18 Nev. 89. In such case, where the defend- ants, who continued the business, gave their notes to the plaintiff for their rent in arrears, which were accepted on the express stipulation that the liability of the former partners should not thereby be re- leased, and with the reservation of his right against them, held, that this was not such an extension of time as discharged the retired part- ners, even if they were considered sureties. Palmer v. Purdy, 83 N. Y. 144. Plaintiff leased certain premises to a firm. Two of the partners subsequently retired, the partners remaining, by valid contract, as- suming payment of the rent sub- sequently accruing. In an action brought against the original mem- bers of the firm to recover the rent, it appeared that the plaintiff was informed that the two part- ners were going out and that the others were to remain and would pay the rent, but it did not appear that he was advised of any agree- ment by which those remaining were bound to pay the rent, or by which the legal relation of the re- tiring members of the firm to the common liability was changed. Held, that the evidence failed to establish the right of the retiring partners to be treated as sureties. Palmer v. Purdy, 83 N. Y. 144. On a judgment against all, the sureties may advance the money to the creditor and have his judg- ment assigned to a'third party, and thus kept alive for their indemnity. Chandler v. Higgins, 109 HI. 602. As to what amounts to a request by retiring partner to a creditor to sue the continuing partner, see Mair v. Canavan, 8 Daly, 272. *3C9 EIGHTS AND OBLIGATIONS. [BOOK III. fied by his firm it is necessary to avert shortly to the right of agents and trustees to be indemnified by their principals and cestuis que trustent " Every member of an ordinary firm is, to a certain extent, both a principal and an agent. He is lia- ble, as a principal, to the debts and engagements of the firm, and, in respect of them, he is entitled to contribution from his copart- ners, for they have no right to throw on him alone the burden of obligations which are theirs as much as his." See Forbes v. Web- ster, 2 Vt- 58 ; Kalbach's Estate, 2 Woodw. Dec. (Pa.) 415; Scott v. Bryan, 3 So. East. Rep. (N. C.) 235. After the dissolution of a part- nership a judgment upon a part- nership debt was rendered against the partners, and execution was levied upon lands belonging to them severally. Held, that a part- ner who redeemed the lands from the execution was entitled, in equity, to contribution. Downs v. Jackson, 33 111. 464. Two partners had been engaged in purchasing cattle ; most of them were sold, and it was agreed that the residue should be taken by one of them at a specified price. They settled their partnership accounts and divided the assets. For some of the cattle sold a note was given to the firm, which was received by the plaintiff, who indorsed it in the name of the firm, had it dis- counted, and applied the proceeds to tbe credit of the firm. The debtor failed to pay the note. The plaintiff paid it and brought this action against the other partner for contribution. Held, that nothing short of an agreement mutually releasing each other from liability on the note would produce such effect, and no such agreement was proved. Kelly v. Kauffman, 18 Pa. St. 351. Where a note was given by the defendant, the surviving partner, to the decedent for advances by the latter under the articles, by the terms of which he was to furnish the capital and the defendant to devote his time to the business, and, after allowing the former for his capital invested, with interest on a certain portion of it, and de- ducting expenses, the profits were to be equally divided, held, that the debt was a charge on the partner- ship property first, and, for a fail- ure of assets to satisfy the whole debt, the defendant should then be personally liable for one-half the balance. Turner v. Turner, 5 So. West. Rep. (Ky.) 457. Where a partner executed a note in the firm name to raise his share of the capital stock, and such note was executed to a person ig- norant of that fact, the firm was held responsible for the note, and the other partner entitled to his bill for contribution. His bill for contribution could be defeated, however, by proof under appropri- ate pleadings showing that the de- fendant had paid his proportion of the debts of the firm. Fletcher v. Brown, 7 Humph. 385. Where, after division of the as- sets of a late firm, one partner is compelled to pay outstanding debts, he may sue for contribution. Eskins v. Knox, 6 Rich. 14. See, also, Maginnis v. Crosby, 11 La. 878 CH. VI, SEC. I.] CONTRIBUTION AND INDEMNITY. '369 "With respect to agents the following cases have to be considered : 1. "When the agent having instructions executes them. Ann. 490; Forbes v. Webster, su- pra. Where one partner contributes only money, and the other time, labor and skill, but no money, each contribution is to be set against the other, and, in case of failure, each loss is to be borne exclusively by the loser, without any right of con- tribution from the other, though the member contributing money has only one-fourth " interest in the business," and the member contributing time, etc., has three- fourths. The rule, however, is not inflexible, and each case is to be decided upon its own circum- stances and the intent of the par- ties to be deduced therefrom. Man- ley v. Taylor, 50 N. Y. Super. Ct. 26. See, also, Morris v. Neil, 3 So. East. Rep. (Ga.) 643. Where each partner agrees to contribute a certain sum of money as capital, and the enterprise proves a failure, the partner who has brought in nothing must make good to his copartners the propor- tionate share which he agreed to fur- nish. Sangston v. Hack, 52 Md. 173. One partner who pays the debt of a firm with transferable shares cannot maintain a bill in equity for contribution against the other partners. Phillips v. Blatchford, 137 Mass. 510. Upon the dissolution of a part- nership M. took all the assets and assumed all the debts. There ap- peared upon the books certain de- posits to the credit of E., and also an indebtedness by E., the balance in his favor being $700, which it was understood by the three part- ners was the real indebtedness of the firm to E. These deposits by E. being trust funds, judgment was recovered against the three partners for the full amount thereof. In an action by M. against the other partners for con- tribution, E. being insolvent, held, that M. was liable for $700 of this judgment, and the three partners jointly for the balance. McLucas v. Durham, 20 S. C. 302. The act of April 22, 1856, provid- ing for contribution and subro- gation to protect equities of par- ties, does not apply to the case of a judgment against copartners, where the firm accounts are un- settled and the liabilities of the respective parties unascertained. Fulton's Appeal, 95 Pa. St. 323. Where the dealings between two partners embrace but few items, anfl there are no such transactions as to make a settlement difficult, and all the partnership affairs are settled except only an accounting between them, the claim of one partner against the other for money is such a one that a remedy at law for contribution is admissi- ble. Clark v. Mills, 13 Pac. R. 569. A partner in the location of land warrants, on adjusting a demand occasioned by the personal default of his copartner, is entitled against him to contribution. Noel v. Bowman, 2 Litt. 46. To entitle one partner to recover at law of another partner contri- bution for his proportion of the debts of the firm paid since disso- 879 *370 RIGHTS AND OBLIGATIONS. [BOOK III. [*370] *2. When the agent having instructions does not follow them. 3. When the agent having no instructions acts neverthe- less for his principal. lution by the former, it must ap- pear that the latter was notified of such payment before suit. Dakin v. Graves, 48 N. H. 45. In an action by one partner against his copartnership for con- tribution for a partnership debt paid by the plaintiff more than six years after the general assignment of the partnership effects for the benefit of their creditors, the pre- sumption is that the partnership accounts are settled, and the bur- den is upon the defendant to show the contrary. Brown v. Agnew, 6 Watts & S. 235. Where a surviving partner, after exhausting the partnership assets, is compelled to pay the residue of the partnership debts out of his own means, he is entitled to re- cover from the estate of the de- ceased partner a moiety of "the amount thus paid. Olleman v. Reagan, 28 Ind. 109. See, also, Wheeler v. Arnold, 30 Mich. 304. Where a suit is brought by a surviving partner, as such, if he fails, the estate of the deceased partner is liable to contribute to the costs. Allen v. Blanchard, 9 Cow. 631. The representatives of a deceased partner who had paid the whole of a partnership debt will be substi- tuted in the place of the creditor in order to recover a contribution from the surviving partner or his estate. Sells v. Hubbell, 2 Johns. Ch. 394. There is no principle on which, after the satisfaction of a judg- ment for a partnership debt by one of the partners sued, equity ought to extend or preserve the vitality of the legal security under the guise of an assignment so as to charge the bail of the other part- ner. Hinton v. Odenheimer, 4 Jones' Eq. 406. Where several judgments are recovered for the same debt against the surviving partners and the administratrix of a deceased partner, she cannot, by paying the judgment against her and taking an assignment of the other, have execution thereon in the name of the plaintiff in order to her reim- bursement. Bartlett v. M'Rea, 4 Ala. 688. Pending an action against A. for breach of a contract, which was in fact the contract of the firm of A. and B., the partners had a settle- ment of all the partnership deal- ings, except the sum to be paid by B. to A. upon the determination of such action. At the time of the settlement the firm owned certain lots of land, of which the title was in A. , and A. testified that B. pro- posed a division of the lands into two parcels and the execution of a deed by A. to him of one parcel, to be determined by lot ; that A. ob- jected on the ground that said ac- tion was not yet settled; that B. asked in reply, " Am I not man enough for that suit? " that a third person interposed the remark that B. was "good enough for that 880 OH. VI, SEC. I.] CONTRIBUTION AND INDEMNITY. *370 1. When he obeys his instructions. — With respect to the first of these three classes of cases nothing is clearer than that an agent who has instructions to act in a certain manner is entitled to be reimbursed by his principal for all amount, and there was no need of any writing between them in re- gard to it ; " and that A. thereupon assented to what was said and exe- cuted a deed of B.'s parcel of the lands. Held, that the evidence sus- tained a finding that B. promised to repay to A. the former's share of whatever the latter might be com- pelled to pay in said action, and that A. conveyed the land to B. upon faith of such promise. Gauger v. Pantz, 45 Wis. 449. An award required the partner taking charge of the assets to in- demnify his copartner against the firm liabilities. Held, that even if such had not been the terms of the award, a court of equity should have required such indemnity ; and, therefore, whether the award was correct or not, it was proper not to dissolve an injunction which had been granted without impos- ing such indemnity as a condition. Cook v. Jenkins, 35 Ga. 113. If one partner pays an award against the firm the amount of the award is conclusive upon the ques- tion of contribution by the others. Evans v. Clapp, 123 Mass. 165. Where property owned by two partners is subject to a mortgage, and, as between the two, it is the duty of one to discharge it, and the other pays the debt on condition that the mortgage shall inure to his benefit, an equity arises in his favor entitling him to indemnity through the mortgage. Laylin v. Know, 41 Mich. 40. A member of a partnership who has sold and delivered to his co- partners his interest in the partner- ship property and choses in action, in consideration of their payment to him of a stipulated sum, and their agreement to pay off the part- nership indebtedness, may, if he bt* compelled to pay off such indebted- ness, recover the same of them. Vanness v. Dubois, 64 Ind. 338. See, also, Hinkle v. Reid, 43 Ind. 390 ; Myers v. Smith, 15 Iowa. 181. Such an agreement is not within the statute of frauds, and is upon a valuable consideration. Vanness v. Dubois, supra. See, also, Gauger v. Pantz, 45 Wis. 449. Members of a copartnership asso- ciation who have assigned their in- terest therein to other solvent par- ties with the assent of their copart- ners, and who accept such assignees as copartners in their stead, and rec- ognize and treat them as such, are not, as between themselves, liable for the debts of the copartnership existing at the time of such assign- ment, and they cannot be required to contribute for their payment to those continuing partners who have been required to pay the same. Savage v. Putnam, 32 N. Y. 501. Where a member of a copartner- ship retires by consent there is an implied promise on the part of the remaining partners to pay the debts of the firm and save the retiring partner harmless to the extent of the assets received, but no further; if the assets are insufficient to in- Vol. 1 — 56 881 *370 EIGHTS AND OBLIGATIONS. [BOOK III. outlays made in pursuance of these instructions, and to be indemnified for any loss sustained by executing them, (k) Even if what the agent does is unlawful he is entitled to indemnity; (I) unless, indeed, the act be one which the agent must have known his principal could under no cir- cumstances justify; for then the maxim in pari delicto melior est positio defendentis applies, and the agent can ob- tain no indemnity from a court of justice, (m) demnify him. he is entitled to con- tribution from those of his former copartners who are solvent. Hobbs v. Wilson, 1 W. Va. 50. H., who was of the firm of H. & G., and also of the firm of H. & E., drew in the name of H. & G. in favor of H. & E., and, after accept- ance, indorsed the draft in the name of H. & E. The draft was discounted, and H. received the proceeds. The acceptor was not in- debted to either firm ; the draft was not for the benefit of either firm, and the whole transaction was without the authority or knowl- edge of any of his partners. The bank which discounted the draft recovered the amount from H. & E. Held, in a suit by H. & E. against H. & G., that the latter were not liable for contribution. Grubb v. Cottrell, 62 Pa. St. 23. A partner who goes out of a part- nership, and, for a valuable con- sideration, is indemnified by his partners against all debts and lia- bilities of the firm, stands in the attitude of a stranger as against a creditor of one of the partners for v his individual debt where judg- ment has been obtained since his outgoing, and is entitled to subro- gation for a debt of the firm paid him, for which he was not liable as between himself and partners at the time of leaving the firm. Scott's Appeal, 88 Pa. St. 173. As to the liability of one partner to another to indemnify the second against loss which he might sustain by reason of the conduct of a third party, see Pardee v. Markle, 111 Pa. St. 548; S. C. 17 Weekly Not. Cas. 211. An agreement with a partner by one not partner to indemnify him against firm debts cannot be en- forced by the firm creditors. Berry v. Brown, 9 Cent. Rep. (N. Y.) 896. (fc) Story on Agency, § 335 et seq. ; Paley on Agency, ch. 2; Smith, Merc. Law, pp. 119, 120, ed. 9; Curtis v. Barclay, 5 B. & C. 141. See, also, Ireland v. Livingstone, L. R. 5 Ho. Lo. 416, as to ambigu- ous instructions. As to costs of actions unsuccessfully defended, see Broom v. Hall, 7 C. B. N. S. 503. (I) Adamson v. Jarvis, 4 Bing. 66; Betts v. Gibbins, 2 A. & E. 57; per Tindal, C. J., in Collins v. Evans, 5 Q. B. 830. See, as to con- forming to an illegal custom un- known to the principal, Perry v. Barnett, 15 Q. B. D. 388. (m) See Merry weather v. Nixan, 2 Sm. L. C. ; Collins v. Blantern, 1 id. ; Josephs v. Pebrer, 3 B. & C, 639 ; Shackell v. Rosier, 2 Bing. N. C. 634. 882 OH. VI, SEC. I.] CONTRIBUTION AND INDEMNITY. *371 2. When he disobeys his instructions. — It is equally clear that, speaking generally, an agent who acts contrary to his instructions is not entitled to any indemnity or re- imbursement for losses or expenses incurred whilst so act- ing, (n) Even although the instructions may have been given by the principal under a misapprehension of facts, and the agent, being aware that such was the case, may have acted bona fide for the benefit of his principal, (o) still the agent will not be entitled to indemnity; for it is the duty of an agent to obey and not to disregard his orders. But if the principal chooses to ratify the agent's conduct, the latter acquires a right to be considered as having acted in pursuance of instructions, and to be entitled to reimbursement and indemnity Accordingly, for the [*371] principal cannot, whilst ratifying the agent's con- duct so far as it is beneficial, repudiate it so far as it is onerous, (p) Effect of revocation of authority. — The position of an agent who has already acted on his instructions, and has thereby incurred a legal obligation to third parties, is dif- ferent. The better opinion is that in this case he is not bound on the command of his principal to stop short and refuse to perform the obligation incurred. There is no doubt that, as between himself and his principal, an agent is entitled to obey the counter-order, and to obtain a full in- demnity from the consequences of so doing. But it is ap- prehended that he is at liberty so far to carry out the instructions on which he has begun to act as may be neces- sary to relieve himself from all the legal liabilities incurred before notice of the countermand, and, having done so, to insist upon indemnity and reimbursement as if the princi- pal had not changed his instructions. Nemo potest mutare consilium suum in alterius injuriam is the maxim of the (n) See Stokes v. Lewis, 1 T. R. (o) Howard v. Tucker, 1 B. & Ad. 20; Galway v. Mathew, 10 East, 712. 264; Child" v. Morley, 8 T. E. 610; (p) Story on Agency, § 250. Warwick v. Slade, 3 Camp. 127. 883 *372 EIGHTS AND OBLIGATIONS. [BOOK III. civil law, and expresses the correct principle for the decis- ion of these cases, (q) 3. When he acts without instructions. — There remains the third class of cases, viz., where the agent, having no in- structions to guide him, acts for his principal and then seeks to be indemnified by him. Now here, as in the last class of cases, ratification by the principal removes all dif- ficulty and may be excluded from consideration. Again, an agent, having no specific instructions, may yet have an implied authority to act in a given way for his principal; and, in the absence of orders to the contrary, an agent always has an implied authority to act in the manner in which he has been accustomed to act with the approval of his principal, and to act with respect to any matter as other persons situate like himself usually act with respect to sim- ilar matters, and to take all those steps which are [*3T2J usual and necessary to enable *him duly to execu te his instructions, (r) It may therefore well happen that an agent who has no positive instructions may, never- theless, act within the limits of his real authority; and so long as he keeps within those limits he is entitled to reim- bursement and indemnity, (s) The principle applicable to the first class of cases applies here; but if the agent claims an indemnity against loss sustained by the commission by him of an illegal act he must be prepared with very strong evidence to show that such acts fell within the limits of his (g) See Bead v. Anderson, 13 Q. Camp. 127, the agent was only B. D. 779; Seymour v. Bridge, 14 bound in honor, id. 460 ; Loring v. Davis, 32 Ch. D. (r) Story on Agency, ch. 6. 625. The position in the text is (s) Curtis v. Barclay, 5 B. & C. supported by Bothier, Mandat. No. 141 ; Sutton v. Tatham, 10 A. & E. 121, and Story, Agency, § 465. etc., 27. See, too, 1 Wms. Saund. 2646; and by Balsh v. Hyham, 2 B. W, Bettman v. Keble, 15 Jur. 38; 453; Sutton v. Tatham, 10 A. & E. Wolfe v. Horncastle, 1 Bos. & B. 27, and the cases already cited. On 323, per Buller, J. This was also the other hand, see 2 Kent, Com. the principle applied in B. v. Es- 644. In Child v. Morley, 8 T. R. sex, 4 T. R. 591, and referred to by 610, and Warwick v. Slade, 3 Lord Cottenham in A.-G. v. The Mayor of Norwich, 2 M. & Cr. 424. 884 CH. VI, SEC. I.] CONTRIBUTION AND INDEMNITY. *373 authority. (t) In a case of doubt no authority to commit an unlawful act can be inferred. Rights of a person who, unasked, acts for another. — The greatest difficulty arises when an agent acts without any authority, express or tacit, but honafide for the benefit of his principal. There is a leaning in many minds in favor of the agent in such cases, and it cannot be denied that cir- cumstances may occur which render officious conduct justi- fiable and even benevolent. On the other hand, culpa est immiscere se, rei ad se non pertinently (u) and, by the law of England, a person who chooses, unasked, to incur expense for another must, speaking generally, trust rather to grati- tude than to judicial aid for reimbursement, (x) The only established exceptions to this rule seem to be — 1, where one person alone sustains a loss or incurs expense for the relief of himself and others from some risk or obligation common to all; and 2, where one person does for another that which the latter is legally bound to do, but either can- not or will not do himself. The first class of exceptions has been already alluded to. The second may be illustrated by those cases in which executors and husbands are held liable for the expenses of funerals, although they gave *no orders for them, and took no part in them; (y) [*373] and by cases in which one man's goods have been lawfully seized for another man's debt, (s) General rule. — The general rule, certainly, is that the officious conduct of one person imposes no obligation on another to compensate him for, or indemnify him from, the consequences of his own spontaneous act ; and even although {t ) See, as to unreasonable or il- tiorum gestor of the Roman law, legal customs not known to the Dig. Ill, tit. 5, De Negot. Gest., principal, Perry v. Barnett, 15 Q. Thibaut's System des Pand. Recht, B. D. 388. § 558, ed. 9. (u) Dig. L. tit. 17, De Reg. Jur. {y) See Ambrose v. Kerrison, 10 L. 36. C. B. 776 ; Rogers v. Price, 3 Y. & (x) See Falcke v. Scottish Imp. J. 28 ; Jenkins v. Tucker, 1 H. Bl. 91. Ins. Co. 34 Oh. D. 248 ; Re Leslie, (z) Edmunds v. Wallingford, 14 23 Ch. D. 552. See as to the nego- Q. B. D. 811. 885 *374 EIGHTS AND OBLIGATIONS. ' [BOOK III. the other may be benefited, he cannot on that ground alone be compelled to pay for what he never sought to obtain, (a) A very strong illustration of this is afforded by the case of Edmiston v. Wright, (b) There the defendant was the owner of some estates in Georgia, and of some negroes in Jamaica. The plaintiff's partner was the defendant's agent and the general manager of his West Indian estates. The negroes in Jamaica were shipped for Georgia, and seized by custom-house officers in consequence of the captain of the ship having neglected to procure some necessary docu- ments. The plaintiff, for the purpose of redeeming the negroes from the authorities who had seized them, paid the sum of 1,200Z., and the negroes were then allowed to pro- ceed to the defendant's estate in Georgia. The plaintiff sued the defendant for the sum of 1,200^ as money paid to his use, but Lord Ellenborough held that it was a voluntary payment made by the plaintiff, and one which he could not recover from the defendant. Right of trustees to indemnity. — The right of a trustee to indemnity from his cestui que trust very closely resem- bles the right of ah agent to indemnity from his principal. 1. A trustee is clearly entitled to be indemnified out of the trust property against all costs, charges and expenses properly incurred, and against all losses sustained by him in the execution of his trust; (c) and if the trust property is not sufficient for the purpose of indemnifying him [*374] in respect of such matters, *his cestui que trust, if under no disability, is personally liable to indemnify (a) 1 Wins. Saund. 264a; 6 B. & losses which may never arise, C. 444, per Bayley, J. ; Stokes v. Hughes-Hallett v. Indian Mam- Lewis, 1 T. E. 20; Child v. Morley, moth Gold Mines Co. 22 Ch. D. 8 T. R. 610. 561 ; Hobbs v. Wayet, 36 Ch. D. (b) 1 Camp. 88. 256 ; and as to the right of indem- (c) Be Bleckley, 35 Beav. 449, nity where trustees hold two funds where this rule was applied in favor for different sets of people, but of a trustee for a company against under the same instrument, Fraser its debenture-holders. See, as to v. Murdoch, 6 App. Ca. 855. . Williard, 53 Vt. 665. A partner who refuses inimedi- a'ely to wind up a partnership upon its dissolution, as provided by the articles, has no claim against the firm for extra compensation for services in carrying on the business after the death of the other part- ner. O'Neill v. Duff, 11 Phila. 244. In the absence of agreement, one partner cannot charge his copart- ner for services rendered about the copartnership business, even when the services of the respective part- ners have been very unequal. Cook v. Phillips, 16 Bradw. 446. Failure in duty as a partner may be ground for dissolving the part- nership, but not for a claim by dil- igent partners for compensation. Godfrey v. White, 43 Mich. 171. Survivor winding up a partner- ship business between attorneys after dissolution by the death of one of the firm is not entitled to any allowance for such labor other than his share of the fees as speci- fied by agi-eement between the parties before dissolution. Denver v. Roane, 99 U. S. 355. Attorneys undertaking jointly the defense of an action become, as to their case, special partners; in the absence of an agreement to the contrary, they are entitled to share equally in the compensation, and it does not matter that one may do more work than the other ; this will not entitle him to charge as for extra services, nor will he have any remedy against the other by dissolution of the partnership, or otherwise, for failure to perform his full duty. Henry v. Bassett, 75 Mo. 89. Unless the surviving partner of a firm of attorneys makes a new contract he cannot claim addi- tional compensation from a client for conducting to a conclusion the defense to a chancery suit which the firm began before the death of the other partner, and for which it was paid the entire fee agreed upon. Dowd v. Troup, 57 Miss. 204. An agreement among partners to draw no more money for their per- sonal use unless as should be abso- lutely necessary for the support of their family, not to exceed $100 per month, the residue of the prof- its to be applied to the firm busi- ness, is not an agreement for the payment of compensation, but a limitation upon the division of profits. Gerard v. Gateau, 15 Bradw. 520. Where, by agreement, the part- ners allow one of their number compensation for services, the agreement cannoi be rescinded by one without the assent of all. Askew v. Springer, 111 111. 662. 896 CTI. VI, SEC. II.] CONTRIBUTION AND INDEMNITY. *380 B. and C, and of its successors, B. and C, this last firm could not charge a commission for collecting the debts due Wh"re an agreement is made for compensation of one partner, the fact that no claim is made therefor during continuance of the firm will not preclude him from claim- ing the same on a final settlement of the partnership account. Askew v. Springer, 111 111. 662. An arrangement by which one person is to share the profits of the business with another does not make him a general partner in such sense as to deprive him of his right to certain additional, specific compensation which has been agreed upon. Hamper's Appeal, 51 Mich. 71. "Where a partnership is dissolved and the managing partners con- tinue the business with the vendee of the other partner, who permits the business to continue without interruption or any new agree- ment, upon the final settlement the active partners will be allowed compensation for their services ac- cording to the original stipulation in the formation of partnership. Wilson v. Lineberger, 83 N. C. 524. Particular agreement for com- pensation of one member of the } artnership, who was its general manager, construed in Brauns Ap- peal, 105 Pa. St. 414. A partner in the purchase and permitting of lands, who, by agree- ment, puts his personal services against the furnishing of capital by his copartner, has the right to charge against the partnership any sums necessarily expended by him for the personal services of others in and upon the common Vol. 1 — 57 39 property. Burleigh v. White, 70 Me. 130; S. C. 64 id. 23. Thus a copartner has no claim against the other member of the firm for personal services in pre- paring and superintending a mill for the firm, where it is not shown that such services were outside of the joint dealings of the firm ; and it does not affect such a claim that the title to the land on which the mill is located is in said other member of the firm. Cunliff v. Dyerville, etc. Co. 7 R. I. 325. An attorney at law, who is also a partner of a mercantile firm, is not entitled to charge commissions for collecting the notes and ac- counts of that firm as against his copartner, in the absence of any special agreement to that effect. The legal presumption is that he was to collect the debts due the firm, as a partner, for the benefit of the concern. Vanduzer v. Mc- Millan, 37 Ga. 299. In an action for the liquidation of the affairs of a partnership, when one partner, the plaintiff, sets up a claim under express con- tract for compensation for extra services or labor, testimony is in- admissible to prove the value of the services of the other partner under a claim by reconvention on a quantum valebant. Hill v. Matta, 12 La. Ann. 179. In an agreement of copartnership between two, U. and W., " U. bar- gains and agrees to give the said W. $450 to manage the business." Held, that this salary must be paid out of the copartnership funds. Weaver v. Upton, 7 Ired. L. 458. *380 EIGHTS AND OBLIGATIONS. [BOOK IIT. to the two preceding firms, (o) So a partner employed to buy or sell goods for the firm cannot charge it with any commission for so doing, (p) A provision in a partnership that one partner shall have the sum of $5 per day, and, in addi- tion, one-fourth of the net profits of the firm, construed to mean that the $5 per day shall be charged to expense, and not to the other partner individually. Cook v. Phillips, 16 Bradw. 446. Where a person entered into part- nership with several other persons for the purpose of erecting a dam and mill, and, after having spent some money and several months' work, left the partnership without reasonable cause for dissatisfaction. Held, that this was a dissolution of the partnership, and that though he could claim no specific interest in the mill, which had been fin- ished by the remaining partners, he might recover a fair compensa- tion for the money he had advanced and the work he had done. Beaver v. Lewis, 15 Ark. 138. By one of the articles of a part- nership agreement a partner bound himself "not to take out of the business or stock in trade of the partnership more than $700 per annum in goods or money, or both." Held, that this article could not be construed as an agreement that this partner should have a salary of $700 per annum in con- sideration of his giving his atten- tion to the business of the firm. It was evidently designed to pro- tect the capital from diminution during the continuance of the firm, and the authority to draw annually a sum not exceeding $700 was to be regarded as a restriction on the rights of the partner to appropriate beyond that amount his proportion either of the capital or profits until the partnership should expire. Trump v. Baltzell, 3 Md. 295 ; S. C. 1 Md. Ch. 517. Where the articles of partnership provided that the active partner should be entitled to one-fourth of the net profits, and, if his share did not amount to $3,000 at the end of any one year, that the other partner should pay him whatever sum might be necessary to make up that amount ; that each partner might invest in the partnership, as capital, an amount not exceeding $10,C00, but should not draw out during the year, without the con- sent of his copartner, any portion of the capital thus invested ; that each might from time to time draw out of the money of the partner- ship, for his private use, a specified sum per month, and that the books should be balanced and a balance- sheet made out at the end of each year, — held, that the resident part- ner was entitled to receive $3,000 at the end of each year, although the business of the year resulted in a loss to the firm; and that although he allowed his share of the profits at the end of the first year to re- main to his credit on the books of the firm, it was not thereby in- vested in the partnership, but re- (o) Whittle v. Knapp, 311. McFarlane, 1 (p) See Bentley v. Craven, 18 Beav. 75. CH. VI, SEC. II.] CONTRIBUTION AND INDEMNITY. : 380 Rule applies though the partners may have worked unequally. — Even where the amount of the services ren- dered by the partners is exceedingly unequal, still, if there mained his private property, and might be used or withdrawn by him at any time. Dumont v. Ruep- precht, 38 Ala. 175. A. made a written agreement, dated February 1, 1869, with B. and C, partners, to work for the firm during the ensuing year for a salary of $1,800, and, in addition, one-fourth of the net profits of the business, and that in computing these profits no deduction should be made for bad debts, but interest on the capital, which was wholly furnished by B. and C, should be deducted. In an action by A. against them to recover his one- fourth, they offered evidence to show that he had worked for them during the year preceding Febru- ary 1, 1869, under a written agree- ment for a salary of $1,800, and, in addition, one-fourth of the net profits; that for said year they re- ceived for their own salaries from the net profits the sum of $3,300; and that articles of partnership, dated February 1, 1869, were en- tered into between them, contain- ing a provision which was known to him, that for the ensuing year B. should have a salary of $1,800 and C. a salary of $1,500, before determining the profits to be di- vided between them. Held, that the evidence was admissible, and, being uncontrolled, showed that the salaries of A., B. and C. were to be deducted from the gross profits, in order to determine the net profits in which A. was to share. Fuller v. Miller, 105 Mass. 103. In March, 1876, the plaintiff and defendant, having been doing busi- ness as a partnership for several years, agreed in writing to extend the partnership business another year, the plaintiff to receive $1,500 salary, and "the profits of the busi- ness after that payment to be di- vided equally." Subsequently the plaintiff, by written indenture, as- signed to defendant all interest, claim and demand to the goods belonging to the firm, "all and singular the debts and sums of money owing to the plaintiff sever- ally or jointly with the defend- ant;" " also all and singular bills, bonds, specialties and writings whatsoever for and concerning the debts of the late copartner- ship ; " and in consideration thereof the defendant covenanted to save the plaintiff harmless from all debts and liabilities of the firm; and thereupon the parties stipu- lated that the partnership be dis- solved and the agreement of March, 1876, be canceled. Held, that the plaintiff could not maintain an ac- tion at common law to recover for his services under the agreement of March, 1876, that having been canceled, and that whatever rem- edy the plaintiff had was upon the covenants of the latter indenture. Wright v. Troop, 70 Me. 346. If, by the terms of a partnership agreement, each partner is to de- vote his whole time and labor to the business of the firm, pay his own personal expenses and receive an equal share of the profits, a partner who, previously to the for- *3S0 EIGHTS AND OBLIGATIONS. [BOOK III. is no agreement that their services shall be remunerated, no charge in respect of them can be allowed in taking the part- nership accounts. In such a case the remuneration to be mation of the partnership, has en- Defendant, a skilled culturist, tered into contracts and performed service in regard to them, which contracts became the property of the firm on its formation, is not entitled to compensation for such services ; nor is he entitled to com- pensation for his services in closing up the affairs of the firm, after the purpose for which it was formed has been accomplished. Dunlap v. Watson, 124 Mass. 305. The sickness of a partner is one of the risks incidental to partner- ship business, and does not give another partner any claim for per- sonal services in conducting the entire business, if the partnership articles do not provide for any ; where, therefore, a surviving part- ner procured from the executrix of the deceased the transference to him of a certain partnership claim in compensation for his serv- ices in conducting the entire busi- ness during decedent's illness, and suppressed this claim from the in- ventory of the partnership estate, held, that this transaction operated as a fraud in law. Heath v. Waters, 40 Mich. 457. Whether a partner is entitled to remuneration for services rendered the firm depends upon the inten- tion of the parties — an express agreement is not necessary; and in order to ascertain whether such compensation should be allowed, the circumstances which sur- rounded the parties, and their rel- ative situations towards each other, should be considered. Cramer v. Bachman, 68 Mo. 301. entered into partnership with plaintiff for the growing of grapes and the manufacture of wine. Plaintiff purchased a tract of land for such purpose, an undivided one-half of which was to be deeded to defendant, the amount paid for same by plaintiff being refunded to him out of profits realized. Nothing further was agreed upon at the time of the formation of the partnership. Defendant built a dwelling-house and wine-cellar, expended labor and capital of his own, and made a fruitful vineyard and extensive orchard on the tract. Plaintiff was engaged almost ex- clusively in an independent busi- ness of his own. Subsequently, defendant, dissatisfied with the failure of plaintiff to convey to him the undivided half of the premises, sent the key of the wine- cellar to the plaintiff, and made preparations to return to St. Louis, from whence he, at plaintiff's re- quest, had come, when plaintiff made the deed and handed defend- ant a written agreement, signed by himself alone, which writing gave recognition to the idea that defend- ant was entitled to remuneration for both prior and subsequent labors in the interest of the firm. This writing the defendant refused to sign, not regarding the compen- sation therein specified as suffi- cient, but returned again to his labors, in which he continued until the present proceeding resulted in a decree for dissolution. A referee' having been appointed, took an ac- 900 CH. VI, SEC. II.] CONTRIBUTION AND INDEMNITY. *381 paid to either for personal labor exceeding that contributed by the other is considered as left to the honor of the other; and where that principle is wanting a court of justice can- not supply it. (q) *WiIful inattention to business. — But where, as [*381] is usually the case, it is the duty of each partner to attend to the partnership business, and one partner in breach of his duty wilfully leaves the others to carry on the partnership business unaided, they are, it would seem, en- titled to compensation for their services. 1 In Airey v. Bor- count and made report, which was approved, except in one particular, which was the allowance to defend- ant for services to the firm, there being no articles of copartnership and no writing or express agree- ment for the allowance of such compensation. Held, that the al- lowance was properly made. Cramer v. Bach man, 68 Mo. 310. If a partner is appointed agent of the firm for a special purpose he has been held to be entitled to the usual compensation therefor. Philip v. Turner, 2 Dev. & Bat. Eq. 123; Bradford v. Kirnberly, 3 John. Ch. 431. Where a third person purchases half the share of a partner and be- comes the general manager of the business, inasmuch as he is not in partnership with the partner who retains the original interest in the firm, he may, as against such part- ner, claim a reasonable compensa- tion for his services. Newland v. Tate, 3 Ired. Eq. 226. A partner is entitled to fair com- pensation for the services of his son or daughter, provided he or she was employed about the business and rendered valuable service; but the apprentices must be regarded as apprentices of the firm; and no charge can rightfully be made save for their board, clothing and other necessary expenses. Zim- merman v. Huber, 29 Ala. 379; Holloway v. Turner, 61 Md. 217. See, also, Galbraith's Estate, 12 Phila. 20. (q) See per Wigram, V.-C, in Webster v. Bray, 7 Ha. 179. In that case an allowance for trouble was made to the defendant, but it was offered by the plaintiff. In Robinson v. Anderson, 20 Beav. 98, which was a similar case, no allow- ance was offered, nor was any given by the court. 1 Where an attorney at law re- fuses to act as partner or to per- form the functions of such in the prosecution of a cause which has been intrusted to his firm, and re- pudiates his obligations, he is not entitled to any part of the fees sub- sequently earned by his partners in the cause. Denver v. Roane, 99 U. S. 355. On a settlement of the firm ac- counts a partner is chargeable with the value of personal services with- held, although the promise to ren- der them was only a verbal one, and the partnership articles were in writing. Marsh's Appeal, 69 Pa. St. 30. 901 *381 EIGHTS AND OBLIGATIONS. [BOOK III. ham, (r) two partners had agreed to devote their whole time to the partnership business; they quarreled, and one of them only afterwards attended to it; the partnership was ultimately dissolved, and an inquiry was directed for the purpose of ascertaining what allowance ought to be made to him for having carried on the business alone. Rule as to services rendered after a dissolution. — The rule, moreover, which precludes a partner from charging his copartners with payment for his services does not apply to services rendered in carrying on the business of the firm after its dissolution; 1 and it has been held that a surviving partner who carries on the business of the firm for the benefit thereof is entitled to remuneration for his trouble in so doing, (s) unless there be some special reason to the con- trary, 2 as where he is the executor of his deceased partner, (t) 3 (r) Airey v. Borham, 29 Beav. 620. 1 See, however, Dunlap v. Wat- son, ante, *380, note ; also next note infra. (s) Featherstonhaugh v. Turner, 25 Beav. 382; Brown v. De Tastet, Jac. 284; Crawshay v. Collins, 2 Russ. 347. See, also, Mellersh v. Keen, 27 Beav. 242, where one partner became lunatic and the business was continued by the others. 2 A partner, in the absence of an agreement for compensation, is not entitled to charge for services ren- dered in discharging his duties as member of the firm; and it makes no difference whether the services are rendered before or after the dis- solution of the firm. Brown's Ap- peal, 89 Pa. St. 139; Cameron v. Francisco, 26 Ohio St. 190; Hell- man v. Mendel, 8 Am. Law Record, 360 ; Kimball v. Lincoln, 5 Bradw. (111.) 316. See ante, p. 774 and note. Nor is the rule affected by the fact that the partner closing up the affah-s of the firm after dissolution is a special partner. Hellman v. Mendel, supra. But where a surviving partner is (0 Burden v. Burden, 1 V. & B. 172; Stocken v. Dawson, 6 Beav. 371. 8 Where an intestate and his ad- ministrator had been partners in building a mill, held, that the ad- ministrator had no right to retain of the assets for work done on the mill after the death of his intestate. Shelly v. Hiatt, 7 Jones, L. 509. A surviving partner, in the ab- sence of any stipulation entitling him to compensation, being ap- pointed receiver at his own in- stance, claiming the right to wind up the firm business, is entitled to no compensation as receiver. Berry v. Jones, 11 Heisk. 206. 902 CU. VI, SEC. II.] CONTRIBUTION AND INDEMNITY. *381 Indian allowances. — In India an executor is allowed a percentage on the assets collected by him; and a surviving under no obligation to continue the business, but does so at his own peril, of the representatives of the deceased partner elect to share in the profits a reasonable allowance may be deducted from such profits as a compensation to the survivor for his services. Cameron v. Fran- cisco, 26 Ohio St. 190. Where a firm was dissolved by the death of one of its members, and the surviving partners, for the preservation of the good-will, and to enable the entire property and business of the firm to be sold as a going concern, continue to carry on the business at their own risk until such sale was effected, held, that the amount thus saved to the firm from the good-will was in the nat- ure of profits, and that, on settle- ment of the partnership, an allow- ance might be made therefrom to the surviving partners for their services in continuing the business after dissolution. Cameron v. Fran- cisco, 26 Ohio St. 190. A surviving partner was held en- titled to a reasonable compensation for his services in settling up the partnership business in Royster v. Johnson, 73 N. C. 474, and Schenke v. Dana, 118 Mass. 236. Contra, unless stipulated for by contract. Cooper v. Reid, 2 Hill (S. C), Ch. 549; Cothran v. Knox, 13 S. C. 496 ; Cooper v. Merrihew, Riley, Eq. 166; Brown v. McFar- land, 41 Penn. St. 129; Beatty v. Wray, 19 Penn. St. 516; Lyman v. Lyman, 2 Paine, C. C. 52. In Brown v. McFarland, supra, it was held that the executor of a deceased partner cannot employ the surviving partner for that pur- pose at the expense of the deced- ent's estate, unless he is expressly authorized so to do by the testa- tor's will. In Schenke v. Dana, supra, the surviving partner of a firm manu- facturing weapons of war was held entitled to compensation for his personal services devoted, with the assent of the administrator of the deceased partner, to finishing exist- ing contracts with the government, and entering upon new ones, em- ploying the patents and machinery of the firm. In Hite v. Hite, 1 B. Mon. 177, it was held that compensation might be allowed to a surviving partner for performing perplexing and ex- traordinary services in settling the business of the firm, but only to an amount barely sufficient to remu- nerate him for services necessarily rendered. Where a surviving partner con- ' tinued the business after the death of his partner, and settled up the business of the concern, but no charge was made for compensation for such services until nearly six years after a settlement of accounts between the executors of the part- ners, held, that such charge could not be allowed. Patton v. Cal- houn, 4 Gratt. 138. Where on the hearing of a bill in chancery, praying for an account between partners, it appeared that, after one of the members of the firm had made a voluntary assign- ment of his estate to a trustee, for the benefit of his creditors, another member of said firm paid out ef 903 ^382 RIGHTS AND OBLIGATIONS. [book III. partner who is the executor of his deceased copartner has been allowed this percentage even on the amount due from the partnership to the estate of the deceased, (u) Section III. — Of Outlays and Advances. Outlays and advances made by one partner. — In taking a partnership account each partner is entitled to be allowed against the other everything he has advanced or brought in as a partnership transaction, and to charge the other in the account with what that other has not brought in, [*382] *or has taken out more than he ought; and nothing is to be considered as his share but his proportion of the residue on the balance of the account, (x) Although, therefore, a partner is not entitled to compensation for trouble, he is entitled to charge the partnership with sums bona fide expended b} r him in conducting the business thereof, (y) l Thus, where the managing director of a cost- the partnership funds sundry lia- bilities and indorsements of the firm, and charged in his individual account the sum so paid, and also charged for his time and services in collecting and paying out said money, but did not further inter- meddle with the partnership prop- erty, except to preserve it from injury, held, that such charges were properly made, and should be allowed. Utley v. Smith, 24 Conn. 290. Where a firm of attorneys made an agreement providing for a dif- ferent mode of division of the fees in cases unfinished at the time of the death of either of them from that adopted as to cases finished during their joint lives, the sur- vivors are entitled to no allowance for winding up the business other than their share of the fees as spec- ified in said agreement. Denver v. Roane, 99 U. S. 355. (n) Cockerell v. Barber, 2 Russ. 585, and 1 Sim. 23. (x) Per Lord Hardwicke in West v. Skip, 1 Ves. Sr. 242. (y) Burden v. Burden, 1 V. & B. 172, where a surviving partner, who was also executor, was al- lowed to charge expenses actually incurred, but not time and trouble. Compare Hutcheson v. Smith, 5 Ir. Eq. 117, ante, p. 3S0, note (n). J See King v. Hamilton, 16 111. 190; Savage v. Carter, 9 Dana, 408. Taxes levied on the business of a partnership form part of the ex- penses of the business, and when recovered back from the govern- ment are to be distributed among the partners according to the terms by which the expenses were shared. Harris' Succession, 2 So. Rep. (La.) 39. Advances by one partner to carry on the partnership business are generally on the credit of the 904 CH. VI, SEC. III.] CONTRIBUTION AND INDEMNITY. *382 book mining company advanced money for the purpose of enabling the business of the company to be carried on, he was held entitled to be reimbursed by the company, -there being no question as to his authority to carry on the busi- firni and not on the separate credit of the copartner. Reimbursement of advances by one partner in- volves, therefore, a settlement of partnership accounts. Elliott v. Deason, 64 Ga. 63. A partner to whom the firm is indebted for advances made by him is entitled, in a settlement of its affairs, to charge the firm with the amount paid by him as dis- count on notes payable to the firm ; and is not chargeable with the amount of a premium received by him on a draft payable in gold, if he has credited the firm with all he received on the draft. Fletcher v. Reed, 131 Mass. 312. A. and B. entered into partner- ship in the publishing business. A. was largely indebted to B. and others, which indebtedness it was agreed A. should pay out of the profits of the business after the ex- penditures necessary to keep up the stock and payment of a stipu- lated sum per month to each part- ner. It was also agreed between them that after the debts of A. were paid the stock on hand and all of A.'s stock and fixtures were to be equally divided or the value thereof credited to each. A. in- duced B. to advance enough to pay C. , one of A.'s said creditors; A. failed to pay B. and some others. On dissolution B. took all the stock and fixtures and claimed credit against them for the amount due him by A., and also for the amount he had advanced to pay C. Held, that B. was entitled to be paid in full the amount advanced to pay C, and was entitled to his pro rata share with A.'s said other creditors on the said amount A. owed him. Zell's Appeal, 111 Pa. St. 532. A provision in the articles that in case of the absence of one part- ner the other shall carry on the business, but shall not, without the other's consent, incur debts for the firm exceeding its cash assets, does not throw on the managing part- ner the burden of the daily and necessary expenses of carrying on the business, but merely prevents his incurring debts for the pur- chase of additional property in or- der to extend the firm business. Richie v. Levy, 6 So. West. Rep. (Tex.) 685. The defendant, while returning from California, was taken sick, and in consequence thereof was subjected to expenses and loss of time after his return. Held, that in accounting for the net earnings he was entitled to an allowance for the expenses but not for the lost time. Brigham v. Dana, ,29 Yt. 1. Where it was provided, in arti- cles of copartnership between the plaintiffs and the defendants, that the services of one member of the firm should be rendered at a stipu- lated price, and such partner in- curred expenses in the appropriate business of the firm at Porto Rico, it was held that such expenses were ^382 EIGHTS AND OBLIGATIONS. [book III. ness on credit, (s) So, where the directors of a mining company advanced money to keep the mine at work, and it a proper charge against the copart- nership, and that he had not for- feited his right to the same by- withholding from the other mem- bers of the firm the proceeds of the partnership business for the period of one month after his re- turn to this country, and until re- quested by his copartners to make a settlement of said business. Pond v. Clark, 24 Conn. 370. A partner, though bound to transact the outdoor business and superintend the sale of all articles manufactured by the partnership, is entitled to credit for such charges for commissions to others for sales as have been regularly entered on the books as a charge against the firm during its exist- ence, unless the entries be made in error or fraud. It is the con- struction placed by the parties themselves on their contract. Pratt v. McHatton, 11 La. Ann. 260. In a proceeding between partners to settle their accounts, items for clearing and improving their joint land and for receipt of rents should not be considered; such items should be settled upon a pro- ceeding for partition. Jones v. Jones, 23 Ark. 212. In such a proceeding the court refused to allow an individual de- mand of one partner against the other any further than to extin- guish a claim by the latter for partnership funds remaining in the former's hands. Jones v. Jones, 23 Ark. 212. Where a partner contracts in his individual name, and makes dis- bursements on account of such contracts, in a contest with his co- partners in settling the affairs of the copartnership he will be bound to prove that such contracts were made on account of, and for the benefit of, the firm in order to be allowed for his disbursements. Eodes v. Rodes, 6 B. Mon. 400. A partner who undertakes to wind up the firm business stands in the place of an executor, and can establish disbursements only by vouchers properly authenti- cated. Clements v. Mitchell, Phill. Eq. 3. K. bought of F., for the account of himself and W., certain prop- erty, paying for it partly in cash and partly by his notes which were indorsed by W. The business of F. was continued by K. & W., and afterwards M. purchased a one-third interest in the partner- ship, being admitted from the date of the purchase, and signing his name to the notes previously given to F. W. paid one-third of the whole purchase money, including the amount of the notes, to F., and K. paid the balance. Subsequently K. sold to W. & M. all his interest in the firm. Held, that if the ex- cess paid by K. over his just pro- portion was an advance to the firm, his claim therefor was extin- guished by the sale of his interest in the firm. If it was an advance to M., W. could not be liable in any way for it ; consequently a suit against the firm to recover such excess must fail. Kimball v. Walker, 30 111. 482. (z) Ex parte Sedgwick, 2 Jur. N. S. 949. 906 CII. VI, SEC. III.] CONTRIBUTION AND INDEMNITY. *383 would otherwise have been drowned, they were held en- titled to be reimbursed, although they had no power to borrow money on the credit of the company, (a) Payments on account of debts. — So a partner is clearly entitled to charge the firm with whatever he may have been compelled to pay in respect of its debts, (J) or in re- spect of obligations incurred by him alone at the request of the firm, as, where he is compelled to pay a bond given by himself alone, but for the benefit of the firm and as a trustee for it;^) 1 or where he sacrifices a debt due to himself in order to enable the firm to obtain a debt due to it. (d) Useless outlays. — It need hardly be observed that an outlay made by one partner with the approbation of his co- partners and for the benefit of the firm must be made good by the firm, however ^useless the outlay [*383] may have been. For example, if a firm purchases a patent which is paid for by one member individually, he is entitled to charge the purchase money to the firm, how- ever worthless the patent may ultimately prove to be. (