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SCHOOL OF LAW
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COMMENTARIES
LAW OF PARTNERSHIP,
AS A BRANCH OP
COMMEECIAL AND MARITIME JUEISPRUDENCE,
OCCASIONAL ILLUSTRATIONS FROM THE CIVIL AND
FOREIGN LAW.
By JOSEPH STORY, LL.D.,
♦•/
ONE OF THE JUSTICES OS THE SUPREME COURT OF THE UNITED STATES, AND DANE
PROFESSOR OF LAW IN HARVARD UNIVERSITY.
SIXTH EDITION.
By JOHN C. GRAY, Jr.,
OF THE BOSTON BAR.
" In Societatis Contractibus Fides exuberet." — Corf. Lib. 4, tit. 37, 1. 3.
" Semper enim. non id, quod priyatim interest unius ex Sociis, servari solet, scd quod Societati
expedit." — Dig-. Lib. 17, tit. 2, 1. 65, § 5.
"Gaudeo nostra jura ad naturam accommodari ; Majoruiuque Sapientia adraodum delector." —
Cic. de Legibus, Lib. 2, c. 25.
BOSTON:
LITTLE, BROWN, AND COMPANY.
1868.
T
St764p
Entered according to Act of Congress, in the j^ear 1859, by
WILLIAM W. STOUY,
in the Clerk's Office of the District Court of the District of Massachusetts.
Entered according to Act of Congress, in the year 1S68, by
WILLIAM W. STUKY,
in the Clerk's Office of the District Court of the District of Massachusetts.
C!AMiiitin<;K :
I'llESB OF .lOIlN W1J,SI>N ANU PON.
PREFACE TO THE SIXTH EDITION.
The basis of this edition of Stoiy on Partnership is tlie
Second Edition ; which was the first published after the author's
death, and is said in the preface to have been prepared princi-
pally from his private copy. Subsequent additions have been
placed in the notes, inclosed in brackets, [ ] ; those made by
the present editor being distinguished by including them in
braces, | \ . About nine hundred cases have been for the first
time added, and considera])le pains has been taken to verify
and correct the citations made by the author and by previous
editors. The later works on the subject have been consulted ;
and acknowledgment is especially due to Mr. Lindley's Treatise,
and to the notes to the American Leading Cases and the Lead-
ing Cases in Equity.
JOHN C. GRAY, Jr.
BosTOx, June Ist, 1868.
6714B3
TO THE HONORABLE
SAMUEL PUTNAM, LL.D.
one of the justices of the supreme judicial court
of massachusetts.
Sir:
It is with great satisfaction that I dedicate this work to you.
It is devoted to the exposition of a branch of that great Sys-
tem of Commercial Law, which constituted a favorite study in
your early professional life, and which, since your elevation to
the bench, you have administered with eminent ability and
success. No one, therefore, is better qualified than yourself,
to appreciate the importance and difficulty of such a task, and
the indulgent consideration, to which even an imperfect exe-
cution of it may be fairly entitled. But I desire, also, that
this Dedication may be deemed, on my part, a voluntary trib-
ute of respect to your personal character, adorned, as it is, by
the virtues, which support, and the refinements, which grace
the unsullied dignity of private life. I recollect, with pride
and pleasure, that I was your pupil in the close of my pre-
paratory studies for the Bar ; and, even at this distance of
time, I entertain the most lively gratitude for the various in-
struction, ready aid, and uniform kindness, by which you
smoothed the rugged paths of juridical learning, m mastering
which, an American student might then well feel no little dis-
couragement, since his own country scarcely afforded any
means, either by elementary Treatises or Reports, to assist
VI DEDICATION.
him ill ascertaining what portion of the Common Law
was here in force, and how far it had been modified by local
usages, or by municipal institutions, or by positiYe laws.
I trust that you may live many years to enjoy the honors of
your present high station ; and I may be allowed to add, that,
out of the circle of your own immediate family, no one will be
more gratified than myself, in continuing to be a witness of
the increasing favor, with which your judicial labors are
received by the public, and of your possession of that solid
popularity, which (to use the significant language of Lord
Mansfield) follows, and is not run after, in the steady adminis-
tration of civil justice.
I am, with the highest respect, truly
Your obliged friend,
JOSEPH STORY.
Cambridge, Massachusetts,
November, 1841.
PREFACE.
In offering another volume of the series of my professional
labors to the indulgent consideration of the Profession, I
desire to say a few words in explanation of the plan and its
execution. The subject is one confessedly of a complicated
nature, containing many details, and not unattended with
difficulties in its exposition, sometimes from the character of
the abstruse and subtile doctrines belonging to it, and some-
times from the occasional conflict, more or less direct, of
various adjudications to be found in English and American
Jurisprudence. I have endeavored, as far as I could, to
ascertain and state the true result of the authorities, and the
reasoning, by which they are respectively supported ; and I
have added explanatory commentaries, sometimes briefly in
the text, but in general more largely and critically in the
notes, in order to assist the student in his inquiries, and to
aid the younger members of the Profession, who may be
desirous of extending their researches beyond the boundaries
of their own limited libraries. I have not hesitated, upon
important occasions, to make large extracts in the notes from
the opinions of eminent Judges and elementary writers, be-
lieving that it is the most effectual mode of making the
reasoning upon which particular doctrines are founded, as
well as the learning by which they are supported, more clear,
exact, and satisfactory than the necessary brevity of the text
would allow. I trust, also, that I shall not be deemed to have
^1U PREFACE.
misused the privilege of a commentator, by occasionally ques-
tioning, in the notes, the authority of a particular case, or the
soundness of a particular doctrine, or by suggesting the im-
portance of a more critical inquiry into the true bearing and
value thereof. Unambitious, and even facile and superficial,
as this portion of my labors may seem, it has been attended
with much embarrassment and exhaustion of time and thought ;
far more, indeed, than a careless observer might suppose could
properly belong to it.
I have in the present, as in my former works, endeavored to
illustrate the principles of our jurisprudence by a comparison
of it with the leading doctrines of the Roman Law, and with
those of the systems of the modern commercial States of
Continental Europe, and especially with that of France, which
may fairly be deemed to represent and embody the main prin-
ciples of all the others in a precise and elaborate form. Pothier
and Yalin, among the earlier Jurists, and Pardessus, Boulay-
Paty, Duranton, and Duvergier, among the later Jurists, in
their Comments upon the Civil and Commercial Codes of
France, have furnished many higlily useful materials. Mr.
Bell's excellent Commentaries upon the Commercial Law of
Scotland are at once learned, comprehensive, and exhausting,
and have afforded me very great assistance. I have also freely
used the able Treatises of Mr. Watson, Mr. Gow, and Mr.
Collyer on the subject of Partnership, and have everywhere
cited the pages of the latest editions of their works in the
margin, so that the learned reader may have the means of
verifying the citations, and of extending liis own researches
by the further lights afforded by the diligence of these accom-
plished authors. Mr. Chancellor Kent's Commentaries have
upon this, as upon all other occasions, been diHgcntly con-
sulted ])y me ; and I need scarcely add, tliat they have never
failed to instruct me, as well as to lighten my labors.
PREFACE. IX
The Roman Law is an inexhaustible treasure of various and
valualjle learning ; and the principles applicable to the Law of
Partnership are stated with uncommon clearness and force in
the leading title of the Listitutes (De Societate), and those of
the Digest and the Code of Justinian (Pro Socio), and in the
very able Commentaries of Yinnius, Heineccius, and John
Yoet thereon. A slight glance at them will at once show the
true origin and basis of many of the general doctrines, incor-
porated into the modern jurisprudence of Continental Europe,
as well as into that of the Common Law. Indeed, it would be
matter of surprise, if the Roman Law, which may be truly
said to be the production of the aggregate wisdom and experi-
ence of the most eminent Jurists of a vast Empire, did not,
upon this subject, abound with principles, not only founded in
natural justice, but well adapted to the convenience and policy
of commercial nations in all ages. It is curious to observe,
how distinctly many of these principles may be traced in the
early ordinances of the Maritime States of modern Europe,
and especially in that venerable collection of the laws and
usages of the sea, the Consolato del Mare.
But, after all, the Law of Partnership owes its present com-
parative perfection and comprehensive character and enlight-
ened liberality mainly to the learned labors of the English Bar
and Bench. America, while it has derived from the parent
country all the elements of that law, has also contributed its
own share towards expounding and enlarging them, so as to
meet the new exigencies and progressive enterprises of a widely
extended international commerce.
Cambridge, Massachusetts,
November, 18il.
CONTENTS.
Index to Cases Cited p
AGE XV
CHAPTER I.
Section
Partnership — What constitutes 1-6
CHAPTER II.
"Who may be Partners 7-14
CHAPTER III.
Partnership between the Parties — Community of Interests . 15-29
CHAPTER IV.
Partnership as to Third Persons 30-70
CHAPTER V.
Partnership — Different sorts of 71-87
CHAPTER VI.
Rights and Interests of Partners in Partnership Property . 88-100
XU CONTENTS.
CHAPTER VII.
Section
Powers and Authorities of Partners 101-125
CHAPTER VIII.
Liabilities and Exemptions of Partners as to Third Per-
sons 126-168 a
CHAPTER IX.
Rights, Duties, and Obligations of Partners between
themselves 169-186
CHAPTER X.
Rights, Duties, and Obligations of Partners under the
Articles of Partnership 187-215
CHAPTER XI.
Remedies between Partners 216-233
CHAPTER XII.
Remedies by Partners against Thii-d Persons 234-264
CHAPTER XIII.
Dissolution of Partnership 265-319
CHAPTER XIV.
Effects and Consequences of a Dissolution, as between the
Partners 820-356
CONTENTS. xiii
CHAPTER XV.
Section
Dissolution — Effects and Consequences of, as to the
Rights of Creditors 357-411
CHAPTER XVI.
Part-owners of Chattels — Rights, Powers, and Liabilities of 412-463
Index page 723
INDEX TO CASES CITED.
A.
Abbot V. Bayley
V. Smith
Abbott's Appeal
Abbott V. l)exter
V. Johnson
Abel V. Sutton
Abell, Ex parte
Acherley v. Eoe
Adam, Ex parte
Adams, Ex parte,
V. Bankart
V. Liardet
Adamson v. Jarvis
Addaras v. Tutton
Addison v. Overend
Section
10
219, 222, 260
93
114
125
160
376, 377, 379
233
388
390, 394, 405
114, 115
288, 290
220
218
256, 454
Agace, Ex parte 102, 110, 132, 133, 154
Agar V. Macklew 215
Airey v. Borham 203
Akhurst V.Jackson 203
Albrotcht V. Sussmann 240
Alcoc'k V. Taylor 84
Alder V. Fouracre 98, 331
Alderson v. Pope 130
V. Temple 238
Alexander v. Barker 241, 242, 243
Allcott V. Strong 157, 253
Allen V. Center Valley Company
326, 358, 361
V. Davis 27
V. Kilbre 329, 339
V. Wells 261, 263, 311, 363
Allhnsen v. Borries 275
Alliance Bank v. Tucker 102 a, 127
American Linen Thread Co. v.
Wortendyke 161
Aniidown v. Osgood 161
Anderson v. Anderson 225
V. Lemon 174
V. Maltby 163
V. Tompkins 92, 93, 101, 122,
310
V. Wallace 212
Andrew v. Boughey 155
Andrews v. Brown 92, 93
Section
Andrews v. Keith 201, 263
V. Planters' Bank 127
Anon. 189
Anon. Z. v. X. 227, 229, 295, 297
Anonymous v. Layfield 123
Ansell V. Waterhouse 219
Anthony v. Butler 120
Apollo, The 418, 428, 438
Apsey, Ex parte 368
Arden v. Sharpe 132
Arlington v. Merricke 250
Armsby v. Farnani 254
Armstrong v. Armstrong 6
V. Fahnestock 373
1". Lewis 6
V. Robinson 114
Arnold v. Brown 298, 305, 311, 313
Arthur v. Dale 141
Arton V. Booth 115
Aspinall v. London & N. W. Rail-
way Co. 115, 311
Astle V. Wright 203
Astley V. Weldon 215
Atherton v. Tilton 47
Atkins V. Hunt 150
r. Tredgold 328, 324 a
Atkinson v. Laing 242
V. Mackreth 102 a, 108
V. Maling 416
Attorney-Gen. v. Burges 106, lt)7
V. Davy 125
V. Stannyforth 166
Atwood V. Meredith 12, 261
Aubin V. Holt 6
Ault V. Goodrich 233, 328, 334, 358
Austen v. Boys 99
Austin V. Thomson 30
Ayrault v. Chamberlin 152, 159
B.
Backus V. Fobes
V. Murjjhy
Bagley v. Smith
370
860
218
XVI
INDEX TO CASES CITED.
Section
297
234, 236, 237
34,56
228, 231
338
133
65
358
106
454
324
263
455
93
107
Ball V. Dunsterville 120
Balmain v. Shore 93, 196, 199
Bank of Australasia v. Breillat 126
Bank of the Commonwealth v.
Mudfrett 160
Bank v. Towle 307
Bank of X. Y. v. Vanderhorst 319, 344
Bank of Rochester v. Bowen 127
V. Monteath 142
Bank of St. Mary's r. St. John 80
Bank of Scotland v. Christie 157, 251
Bank of Unite<l States v. Binney
(See U. S. Bank v. Binney)
Banlvs, Ex parte
V. Gibson
Bagshaw i-. Parker
Bailev v. Bancker
V. Clark
V. Ford
V. Vincent
Baird v. Cochran
1-. Planque
Baker's Appeal
Baker v. Ciiarlton
r. Jewell
V. Stackpoole
V. Wimpee
Baldney v. Ritchie
Baldwin r. Johnson
V. Leonard
99,
268,
384
100
233
264
■ 250
101
263
63
275, 290
1
Barber t-. Barber
V. Harrtbrd Bank
Barclay v. Lucas
Barcroft v. Snodgrass
Banlwell v. Perry
Baring r. Crafts
'■ V. Dix
V. Lvman
Barker v. Goodair 263, 264, 314, 337, 340
V. Highley 446
V. Parker 70, 2-30
V. Richardson 115, 252
Barklie i'. Scott 70
Barnardiston c. Chapman 449
Barnewall, Ex parte 384
Barr v. Speirs 290
Barrett v. Swann 139
Barrow, Ex parte 5, 70, 307
Barry r. Xesham 36
Bartle '-. Xutt 6
lianiett v. Jones 27, 41
Barton v. Hanson 58, 141, 154
r. Williams 101, 218
Bass V. Bass 233
V. Tavlor 828
Bate V. Robins 849
Batcman v. I'iiider 824
Hattlcy V. Lewis 146
P.audier, Er parte 377
B:i.\tor V. Mrown 93
>•. Conollv 99
'•. Rodina'n 42, 45
V. West 288
Baylis v. Dineley
Beach v. State Bank
Beacham v. Eckford 182,
Beak v. Beak [328, 331, 342,
Beale v. Mouls
Beard v. Webb
Beatty v. Wray
Beaumont v. ileredith
Beck V. Kantorowicz
Beckford v. Wade
Beckham v. Drake
V. Knight
Bedford v. Deakin
Belknap v. Cram
Bell V. Ansley
V. Humphries
V. Morrison
V. Nevin
V. Newman
V. Phyn
Bellairs ;•. Ebsworth
Belote 1-. AYynne
Benjamin v. Porteus
Bennet, Ex parte
Bennett r. Stickney
Benson, Ex parte
j;.Ela
V. Hadfield
V. Heathorn
V. Ketclium
63,
155,
Bentley v. Bates
V. Craven
Berkeley r. Hardy
Berry v. Hawes
Berthold v. Goldsmith
Besch V. Frolich
Bevan, Ex parte
V. Lewis
Biddlecome i'. Bond
Biddulph, Ex parte
Bignold V. Waterhouse
Bilton V. Blakely
Binney r. Le Gal
Bird I'. Morrison
Birdsall r. Colie
Bisliop V. Breckles
V. Countess of Jersey
V. Hall
liispham v. Price
Black's Ajjpcal
Black V. Black
Blair v. Agar
r. Bromley
Blake's Case
Blake r. Dorgan
?•. Xutler
Plakeiey's Ex'rs, .^.r parte
Hlakeney v. Dufaur
Bland, Ex parte
V. Haselrig
niansliaril, In re
Hli'w t'. Wvatt
Bligli L\ Brent
10
Section
7
102, 108
191, 349
346, 349
152
10
182, 331
290
174
233
103, 120
103, 120
158, 253
'362
242
446
107, 324
195
863
93
251
324
32,41
208, 389
114
388
263, 359
155
418
41
229
175
117
264
41.49
295, 297
386
140, 263
214
108
107, 130
844
114
93
330
275
168
241
233
376
92, 93
232
I, 108, 168
268, 271
288
92, 93
201 a
228, 330
455
324
417, 428
158
98
INDEX TO CASES CITED.
XVll
Blisset V. Daniel
Bloxani v. Hubbard
Bloxham v. Pell
Blue V. Leathers
Blundell v. Winsor
Boardnian, Ex parte
V. Gore
Bodenham v. Purcbas
Boo;gett V. Frier
Bolitho, Ex parte
Bolton, Ex parte
V. Puller
Bonbonus, Ex parte
Bond, Ex parte
V. Aitkin
V. Hilton
V. Pittard
Bonfield v. Smith
Bonsteel i-. Vanderbilt
Booth V. Parks
Borden v. Cuyler
Bosanquet, Ex parte
V. Wray
Bottomiey v. Xuttall
Bouldin v. Page
Bourne v. Freeth
Boussmaker, Ex parte
Bovill V. Hammond
V. Wood
Bowden, Ex parte
Bower v. Douglass
Bowie V. Maddox
Bowker v. Burdekin
Bowles's (Lewis) Case
Bowman v. Bailey
Bowyer v. Anderson
Boyce v. Coster
Boyd V. Emmerson
V. McCann
Boydell v Drummond
Boyers v. Elliott
Boyington v. Boyington
Bradbury v. Dickens
Bradford v. Kimberly
Bradley v. ChamberUn
V. White
Braithwaite v. Britain
V. Skofield
Section
172, 2U, 275
256, 449, 454
68
41, 46
164
376
108
253
10
106, 140, 142
379
154, 369, 376
132, 133, 134, 388
384, 385
122
454
19,21,23,31,34,42,55,
56, 59, 60, 61, 64, 69
64, 134
40
150,
198, 343
384, 386
117, 122
221, 234
155
107
151
9
219
361
389
322
65
117
422
34,41
41, 43
92
219
161
324
93
114
99, 100
182, 185, 331
198, 331
34, 41, 43, 49
253, 323, 324 b
150, 151
41, 43
208
Briggs, Ex parte
V. Briggs
Brigliam v. Dana
Bright V. Hutton
Brisban v. Boyd
Brockway v. I3umap
Brodie v. Howard
Bromley v. Elliot
Brooke v. Enderby
V. Washington
Brooks I'. Martin
Broom v. Broom
Broome, Ex parte
Broph}' I'. Holmes
Brotherson v. Hodges
Brown, Ex parte
V. Birdsall
V. Byers
V. De Tastet
V. Douglas
V. Gordon
V. Leonard
V. Litton
114.
Braley i-. Goddard
Brandon r. Robinson
Brandram i-. Wharton 324
Brassington v. Aidt 241
Bray v. Fromont 70
Breckinridge v. Shrieve 102 o
Bredow v. Mut. Savings Inst. 344
Brenan v. Preston 418, 428
Brett V. Beckwith 30
Brettel v. Williams 111, 113, 127
Brewster v. Hamniet 263, 264
Bridge v. McCullough 363, 376
Bridges v. Mitchell 233
Brierly v. Cripps 219
Section
68
159
34,45
151
107, 322, 324
33
421, 455
27, 30, 49
157, 253, 334
63, 83, 93
6
93
232
27
454
140, 367, 390
241
102 a
329, 341, 343,
349
362
158, 324
130, 160
173, 233, 329, 343,
348, 349
V. McFarland 182
V. Oakshot 93
V. Tapscott 219, 221
V. Tarkington 6
Browne v. Gibbins 148
Bruen v. Marquand 114, 115
Brundred v. Muzzy 70
Brutton v. Burton 114
Brydges v. Branfill 108
Bryson v. Whitehead 99
Buchan v. Sumner 92, 93, 94
Buchanan r. Curry 114
Buchoz V. Grandjean 114
Buck V. Burlingame 379
V. Winn 93
Buckingham v. Hanna 86
Buckley, Ex parte 148
1-. Barber 328, 342, 344
V. Buckley 93
V. Carter 290
Bucknam v. Barnum 49
V. Brett 454
Buckner v. Lee 68, 105, 106, 139
Buftum V. Bufium 93
; But'ord V. Xeely 307
Bulkley ;•. Dayton 115
Bull V. Schuberth 47
Bulien V. Sliarp 49, 60, 70
Bullitt V. Meth. Ep. Church 358
Bullock v. Crockett 203
Burckle v. Eckart 41, 49
Burden v. Burden 182, 185, 331,
344, 349
Burdon v. Barkus 93, 205
Burfield v. Kouch 207
Burgess v. Atkins 261
! : V. Burgess 100
! Burke i-. Winkle 10
xvm
INDEX TO CASES CITED.
Burleigh v. Stott
Burls V. Smith
Burn r. Burn
Burnell v. Hunt
Burnley v. Rice
Burnside v. Merrick
Burrall v. Acker
Burreil, Ex parte
Burton, Ex jxirte
V. Greene
V. I>>sitt
V. Wijiley
V. Wookev
175, 17"
Burwcll V. Mandeville's Ex'r
■ V. Springfield
-. Allen
'•. Steinman
Bury
Bush
Bushell, Ex parte
Butcliart v. Dresser
Butler V. Stocking
Buttcrficld, Ex parte
I'. Hemsley
Buxton V. Lister
Byers v. Van Deusen
Section
107
144
120
261
243
92, 93
2(52
390
403
261
160
215
178, 348
201 a,
319 «
132
203, 233
461
132
328
127
390
122, 127 I
189
215, 300 I
Section
343
88, 49, 58
229
379, 381
231, 288
246
130
261, 262, 263
419, 446
213, 231
225, 227, 228,
229, 231, 288
27, 34, 36, 43
241
322
Chavany v. Van Sommer 275
Cheap 1-. Cramond 15, 16, 32, 34, 36, 41,
44, 56, 59, 60, 61
Chambers v. Howell
Champion v. Bostwick
Ciiancey v. May
Chandler, Ex parte
Chapman v. Beach
V. Beckinton
V. Devereux
V. Durant
V. Koops
Chappell V. Bray
Cliapple V. Cadell
Charlton v. Poulter
Chase v. Barrett
V. Deming
V. Kendall
Caddick v. Skidmore
Cadwallader v. Kroesen
Cady V. Shepherd
Cakiicott v. Griffiths
Caldwell i\ Leiher
V. Stileman
Cam mack r. Johnson
Campliell v. Mullett
r. Steen
r. Thomson
Candler r. Candjer
Capen v. Burrows
Card V. Hope
Carlisle v. Mulhern
Carr v. Smith
Carrol ??. lilencow
Carroll v. Waters
Carron Company (Case of the)
Carter v. Beaman
V. Home
V. Whallcy
83,93
113
120, 122, 324
144, 219
182, 233, 331
319
263, 264, 393
358, 359, 360, 362
446
24
6
218, 221, 233
418, 428, 432
93
219
10
456
Cheetham r. Ward
Child V. Sands
Chippendale, Ex jxirte
Christian i\ Ellis
Christie, Ex parte
V. Craig
Christy v. Sherman
Chuck, Ex jiarte
Church V. Knox
V. Sparrow
168
454
113, 182
263
143, 442, 454
428
114
45, 68, 69
263, 264
126, 140
99, 100, 329
Churton v. Douglas
City Bank of Brooklyn v. McChes
ney
Clagett V. Kilbourne
Claiborne v. Creditors
Clajjp V. Rogers
-^ V. Upson
Clark V. Blackstock
V. Gilbert
I'. Leach
Clarke, Ex parte
, In re
— — ^ V. Bickers
V. Bradshaw
V. Price
160, 161
82. 263
280, 290
160
161
143
47
198
376
143
362
321
224
241
106
Carver v. Miller
Castelli v. Cook
Castle I'. Bullard
Caswell V. Cooper
Catesby, Er parte
Catskill Hank r. Gray
V. Stall
Catt V. Howard
Cecil '• .luxon
Cliadbonrne v. Duncan
Cliadscy V. Harrison
Clianilicrlain r. Dow
V. Walker
133
174
159, 160
422
428
166
219
394
14, 43, 49
127
152
11
4111
21 '.I
l.V.i
219
Clarkson v. Carter
Clavering v. Westley
Clay, Ex jnirte 363, 376, 377, 379, 380
V. Cottrell 132
Clegg V. Fish wick 174, 331
Clegliorn v. Insurance Bank 377
Clement »'. Brush 117
V. Hadlock 27, 32
Clements v. Hall 174, 331
Clemontson v. IMessig 9, 315
Cleveland r. Woodward 134
Cleworth r. Picktbrd 114
Clough 1-. Ratclifie 290
t-lowes, ICx parte 370
Cobliam, Ex parte 377, 379
(^)(kburn r. Thompson 229
("ockerell r. Aucomptc 144
Cocks V. Nasli 168
1 Coder v. Huling 98
i:SDEX TO CASES CITED.
XIX
Coffee V. Brian
Coffin V. Jenkins
Cof'ton (-. Horner
Colbeck, In re
Coleman v. Coleman
Coles V. Coles
1-. Trecothick
Collamer v. Foster
Collins V. Barrett
V. Jackson
V. Warren
Collumb V. Read
Colt r. Woollaston
Combs V. Boswell
Commercial Bank of Lake
I'. AYestern Reserve Bank
Commercial Bank v. Warren
V. Wiikins
Commonwealth v. Smith
Section
219
42
225
69
219
92, 93, 94, 98
117
219
257
24
93
93
285
328
Erie
363
133
263
14
27,49
322
Conklin v. Barton
V. Og^born
Conkling v. AVashington University 14,
70
Connecticut River Bank v. French 131
Conro V. Port Henry Iron Co. 334
Conroy v. Woods
Const V. Harris
Converse v. Ferre
V. Symmes
Cook, Ex parte
V. Arthur
^ V. Batchellor
' V. Beecli
V. Catchpole
V. Collingridge
Cooke, Ex parte
V. Cooke
V. Seeley
Cookson V. Cookson
Coomer v. Bromley
Coope V. Eyre 3,
Cooper V. Hood
V. Watlington
Coover's Appeal
Copeman v. Gallant
Copland, Ex parte
V. Toulmin
Coppard v. Page
Corbett v. Poelnitz
Corpe 1-. Overton
Coryton v. Litliebye
Cosio r. De Bernales
Coslake v. Till
Coster V. Clarke
V. Murray
Cothay v. Fennell
Cottam V. Partridge
Cotton V. Evans
Couch V. Mills
Course v. Prince
Coursen v. Hamlin
Coventry v. Barclay
363,
241
Cowell V. Sikes
Watt
Cox V. Delano
V. Hickman
V. McBurney
V. Peters
v. Reid
Coxwell V. Bromet
Crallan v. Oulton
Crane i'. French
Crawford v. Hamilton
V. Stirling
Cra\vfurd v. Baum
Crawshay i'. Collins 99,
198, 233, 313, 322, 325,
342, 343, 348, 348 a
V. Maule
359
123, 192
422
454
76
264
257
358
215
99, 207, 349, 350,
351
208
215
243
82, 93, 207
168
19, 30, 45, 63, 147 |
99
210
263
372
377
24, 157, 253
42, 59
101
7
257, 258
10, 239 !
99
93
233
242, 243
:>33
114
168
219
182
192, 206
195, 196, 201, 231, 269,
292, 317, 318, 322, 325,
Cregler v. Durham
Cremer v. Higginson
Crisp, Ex parte
Crockett v. Grain
Crofi V. Pyke
Crooker v. Crooker
Cronne v. Bivens
Gross V. Cheshire
Crosthwait v. Ross
Grottes v. Frigerio
Cruikshank v. M'Vicar
Crusader, The
Cruttwell V. Lye
GuUum V. Bloodgood
Gumming v. Forester
Cummings v. INIills
Parish
Cumpston v. McXair
Gunningliam v. Bragg
Curling v. Robertson
Currier v. Rowe
V. AYebster
Gushing v. Marston
Gust, Ex parte
Gustance v. Bradshaw
Gutbush V. Cutbush
Cutler V. AYinsor
Gutter V. Fanning
D.
Section
253, 363
83
30, 49
1, 49. 70
92, 93
330
455
349
324 a, 360
263
195
127
263
100, 175, 191,
329, 331, 341,
, 349, 350. 351
]2, 84. 93, 189,
273, 275, 277,
329, 330, 346,
350, 351, 356
159
245
379
263
97
93, 370
359
219
102 a
219
221, 325
42
99
101
242
21
117
280
322
421
219
219
254
392
93
201 a
34, 41, 44, 45
166
Dacie v. John
329, 330
Dale V. Hamilton
15, 82, 83, 93
Dana v. Lull
101, 310
0. Stearns
7
Dance v. Girdler
250
Daniel r. Gross
158
,. T^-^.-.^.»
122
Darbey v. AA'hitaker
215
Darbv o. Baines
428
,. l^.-...!,,.
82, 93
Darling v. 31arch
133, 322
XX
INDEX TO CASES CITED.
Section
Dartmouth College, Trustees of v.
Woodward 76
Davenport r. Rackstraw 241
Davev r. Freiulergrass 248
David r. EUice 155, 156, 253, 370
V. Eloi
Davies v. Hawkins
V. Hodgson
Davis & Desauque, Estate of
Davis V. Allen
V. Anier
V. Christian
V. Evans
V. Johnston
V. Jones
V. Tiie Seneca
V. White
Davison v. Robertson
Deal V. Bogue
Dean v. McFaul
De Begnis i'. Arniistead
De Berenger v. Hainmel
De Berkoni v. Smith
Deckert v. Filbert
Deford v. Reynolds
De Gaillon v. L'Aigle
De Jarnette r. McQueen
Delauney r. Strickland
Delmonico v. Guillaume
Deloney v. Hutciieson
De Lovio v. Boit
De Mautort v. Saunders
Deming v. Colt
Denny v. Cabot
V. Metcalf
Dent V. Turpin
Denton v. Rodie
De Kibeyre r. Barclay
Deslia r. Smith
De Tastet v. Bordenave
V. Shaw
Devay nes v. Noble 108, 150, 157, 253, 362
Deveau y. Fowler 32'J
Dewey v. Dewey 93
Dexter v. Arnold 182
Dickerson v. Wheeler 117
Dickinson v. Dickinson 207
V. Gninger 219
V. Legare 101
I,-. Valpy 65, 102 «, 113, 12n,
150, 151
55
93, 122
93
35H
215
'.):',
194
41, 45, 56, 61
422
456
125
99
322, 328
160
329, 330
93, 201 a
147, 150
428, 446
194
437, 439
261
106
261, 263
159
6
288
132
101
80, 159
10
219
144
92, 93
93
438, 439
134
101
34, 41, 46, 49
234
99, 100
140, 154
108
182
329, 330
221, 234
Digby, Ex parte
Dillon !». Brown
Dilworth '•. Mayfield
Dimon v. IIa>:ard
DiniMiale r. Robertson
Divine '•• Mitcimm
Dix V. Otis
Dixon V. Coo|)er
Duane v. Badger
Do!) V. Halsey 15, 27, 32, 36. 43, 56, 5H,
127, 132, 133
Doddington t-. Ilallet 417, 412, 441
Section
Doe V. Miles 268, 271
Dolman v. Orchard 160
Dommett v. Bedford . 208
Donald v. Hewitt 446
Donaldson v. Williams 128
Donelson i\ Posey 24
Doner ;;. Staufler 263
Donnally r. Ryan 148
Doremus v. McCormick 108
Doty V. Bates 102
Doubleday v. Muskett 150
Dougherty v. Van Nostrand 99, 174,
185, 331
Douglas V. Winslow 263
Dow V. Savward 261
Downs V. Collins 189, 199, 201, 224
Drake, Ex parte 407
V. Beckham 120
V. Ramey 70
V. Rogers 101
Drumright r. Philpot 122
Drurv v. Rolierts 328, 330
Dry V. Boswell 19, 32, 34, 41, 44, 45,
46, 56
V. Davy 245, 247, 248, 249
Dubois' Appeal 122
Dudgeon v. O'Connell .117
Dufft'. East India Company 403
Duhring v. Duliriiig 93
Dumont v. Ruepprecht 285
Duncan v. Lewis 147
V. Lowndes 111, 127, 133
V. Lycm 218, 222'
Dunham v. Jarvis 417, 444
V. Murdock 263
V. Rogers 43, 46, 49
Dupuy V. Leavenworth 93
Durbin v. Barber 285
Duryea v. Whitcomb 30
Duryee v. Elkins 42
Dutton V. Morrison 260, 261, 262, 263,
311, 314, 337, 340, 377, 379
V. Woo(lman 64
Dwight V. IVIudge 370
Dwinel r. Stone 27,30,44
Dyer v. Clark 92, 93
E.
Eager v. Barnes
Eccleston /•. Clipsham
Edens r. Williams
Kdmondson r. Davis
Edwards, /,'/• purlr
r. .McFall
— ; V. I'ilzer
V. Stevens
c. University
I'ygberts V. Wood
El<Ier V. Hood
I'. Larrabee
108
454
219
167
384
159
114
12
233
101
219
421, 455
INDEX TO CASES CITED.
XXI
Section
Elgie V. Webster 219
Elizabetli and Jane, The 428, 434,
435, 437, 439
EUicott V. Nichols 323
Elliot V. Davis 119
V. Stevens 372, 393
Elliott V. Brown 93, 98, 331
V. Holbrook 114
V. Roj'al Exch. Ass. Co. 215
Ellison y. Dezell 115
Ellsworth V. Pomeroy 30, 41
V. Tartt 40
Elton, Ex parte 365, 376, 377, 379
Ely V. Hair 122
Emanuel v. Bird 363
V. Draughn 61
Emiy, Ex parte 134, 140, 367
V. Lye 136, 140, 154
Enderbv, Ex parte 371, 403, 404
England v. Curling 178, 189, 192,
227, 229
Ensign u. Briggs 93
Erwin's Appeal 93
Essell V. Hayward 275
Essex V. Essex 93, 198
Estwick V. Conningsby 344
Etheridge v. Binney 63, 105, 106, 139
Evans v. Coventry 330
V. Drumraond 155, 156, 158,
159, 334, 370
V. Evans 328, 344, 346, 347
V. Gibson 263
V. Philadelphia Club 214
V. Silverlock 254
Everett v. Coe 55, 58
Everit v. Strong 122
V. Watts 12
Everitt v. Chapman 27, 31, 58
Evernghim v. Ensworth 132, 133
Ewing V. Osbaldiston 6
Exeter Bank v. Sullivan 324
Eyre, Ex parte 166, 168
F.
Fairlie, Ex parte
V. Hastings
Fairtliorne v. Weston
Faith V. Richmond
370
323
229
102, 136, 142,
202, 243
Fall River Union Bank v. Sturtevant 132
Whaling Co. v. Borden 82,
83, 92, 93
Fanning v. Chadwick . 219
Farlow, Ex parte 377
Farmers' Bank v. Bayless 138, 140, 142
Farnum v. Boutelle 253
Farr v. Johnson 24
V. Pearce 99
Farrar v. Beswick 24
V. Deflinne 156, 159
. — V. Hutchinson 110, 132
Section
304
114
27
174, 232
Featherstone v. Hunt 158
Featherstonhaugh v. Fenwick 84, 98,
99, 174, 176, 198, 2U7,
269, 279, 351
Fauntleroy (Case of)
Faver v. Briggs
Fawcett v. Osborn
Whiteliouse
■ V. Turner
Felichy v. Hamilton
Fell, Ex parte
Fellows V. Wyman
Felton V. Reid
Fenn v. Harrison
Fennings v. Lord Grenville
Fereday v. Hordern
V. Wightwick
Fern v. Cushing
Person v. Monroe
Field, Ex parte
Figes V. Cutler
Filley v. Piielps
Finckle v. Stacey
Fisher v. Minot
V. Murray
V. Pender
V. Tayler
Fisk V. Herrick
Fitch V. Hall
Harrington
182, 203,
275, 343
18, 147
326, 358, 359, ;,60,
401, 402, 403
238, 272, 280, 321
346
132
42
23, 45, 68
82, 93, 231,
350, 407
340
358, 359
376
215
261
18, 30, 59
367, 372
101
119
102, 122 a
264
41
49,65
7'
144
377
372
288
107, 140
,127, 133
101
65
93
101
■ 222
151
83, 93
257
102 a
93
218, 219
848
233
446
93
322
Fox V. Clifton 64, 150, 151
V. Ilanburv 94, 126, 261, 311, 313,
314, 328, 339, 351
V. Norton 122
V. Rose 256
Frankland i'. McGusty 133
Franklin v. Lord Brownlow 336, 338
Fitts V. Hall
Flemyng v. Hector
Flintum, Ex parte
Flyn, Ex parte
Fogg V. Johnston
Folk V. Wilson
Foot V. Sabin
Forbes v. Scannell
Ford V. Whitmarsh
Forde v. Herron
Forkner i'. Stuart
Fornian v. Homiray
Forrester v. Bell
Forster v. Hale
V. Lawson
V. Mackreth
Forsyth v. Clark
Foster v. Allanson
V. Donald
V. Hodgson
V. U. S. Ins.
Co.
Fowler t'. Bailley
V. Richardson
XXll
INDEX TO CASES CITED.
Franklin r. Robinson
, The
Franklyn v. Thomas
Eraser v. Kershaw
Frederick v. Cooper
Freeland v. Stansfeld
Freeman, Er parte
V. Carhart
V. Carpenter
French v. Backhouse
V. Chase
r. Rowe
V. Stvring
Friendschaft", The
Friendship, The
Frink c. Branei;
Fromont i\ Coupland
Frost V. Moulton
Fry, Ex parte
Furnival v. Weston
Furze i'. Sharwood
G.
182,
Section
185, 331
9, 316
264
339
93
203, 341
359, 368, 370, 394
114
113
446
263
108
, 30, 219
316
454
93
, 58, 219
277
370
114, 115
106, 139
Section
Gilpin V. Enderbey 23, 55, 60, 61,
68,69
Glasscock i-. Smith 344
Glassington r. Thwaites 178, 179, 209,
213, 222, 227, 231, 288
Glossop V. Colman
Glover r. Tuck
Goddard v. Pratt
Godfrey v. TurnbuU
Godson r. Good
Goldsmid, Er parte
i\ Cazenove
Goodburn v. Stevens
27, 57,
103,
Gabriel v. Evill
Gage V. Rollins
Gaines r. Catron
Gainsborough r. Stork
Gaibraith i-. Gedge
Gale V. Leckie
V. Miller
Gal way (Lord) v. Matthew
Gannett i\ Cunningham
Gansevoort v. Williams
Garbett v. Vealc
Gardiner r. Childs
Gardner v. McCutcheon
Gardom, E.r parte
Garey v. Pyke
Garland, Ex jmrte
Garret i: Taylor
Garrctson r. Weaver
Garrett v. Handley
Gartli V. Howard
Gay V. Bowen
(•. Johnson
Geddes v. Wallace
Gellar, Ex parte
Geller, Ex parte
Geortner ?'. Trustees of Canajoha-
rie 322, 325
German Mining Co., In re 182
Gibbons v. Wilcox 41
Gibson V. Lupton 3, 30, 145
V. Moore 219
r. Stevens 70, 2C1, 2<;3
?'. Stone 67
(iililersleeve v. Mahony I.'*:!
(fill r. (Jeyer 349
(iillespie v. Hamilton 317
150
241 i
92'
190 I
92, 93
219
133
102, 123,
130, 143 !
328
132, 133
263
147, 149
174
111, 126, 127
32
70, 201 o, 319 (/
155
231
242, 243
323
324
263
30,32, 59, 61. 63,
191, 192, 219
27, 59
389
241
218
159
65. 160
361
388
388
93, 343
Goode V. Harrison 7, 64, 255
Goodman, Ex parte 389
V. Whitcomb 181, 218, 225,
229, 231, 287, 288, 356
Goodwin v. Richardson 93
Gordon r. Bankard 107
V. Howden 6
Gorham v. Thompson 160
Gough V. Davis 158
Gould V. Gould 24
V. Horner 198
Goulding, Ex parte 132, 133
Gouthwaite v. Duckworth 147, 148,
150
Gowan v. Jeffries 330
Grace v. Smith
19, 36, 48, 49, 56, 58,
59, 60, 61, 66, 67, 68
Graham v. Hope 65, 160
V. Robertson 219, 338
Gram v. Caldwell 132
V. Seton 120, 122
Granger v. McGilvra 328
Grant v. Austen 254
Graser v. Steihvagen 101
Gratz V. Bayard 195, 196, 201 a, 288
Gray v. Chiswell
V. Ward
Grazebrook, Ex parte
Greatrex v. Greatrex
Greeley v. Wycth
Green v. Barrett
V. Beals
V. Beesley
V. Briggs
1'. Chapman
V. Dcakin
V. Miller
1'. Tanner
V. Waring
Greene v. (Jraham
: I'. Greene
Greenham i-. (Jray
Greenslade v. Dower
Greenwood's Case
Ciregory v. I'anl
(iridley v. Dole
Griffith ;;. Buffum
Grindley v. Barker
362, 363
102 a
406
227
238
232, 285
117
19, 30, 41, 42, 45,
55, 57, 58, 60
441, 442
234
132, 133
125
134, 140
215, 301
93
93
27
102 rt, 126, 147,
148
130, 164
10
219
63, 64
. 125
INDEX TO CASES CITED.
XXIU
Section |
Gnswold i\ Haven 108
V. Waddineton 9, 65, 240,
269, 280, 281, 290, 295, 303, 305,
306, 312, 313, 315, 316, 336 j
Grosvenor v. Lloyd 159 |
Grove v. Dubois 242
Guidon v. Robson 65, 241, 242 ,
Gulick V. Gulick 21^
H.
Habershon v. Blurton 311
Hackley i-. Patrick 324
Hagar v. Stone 134
Hagedorn v. Oiiverson 242
Hague V. RoUeston 314, 339
Hale V. Hale 330
V. Henrie 83, 93
V. Plunimer 93
Half hide v. Fenning 215
Halkett, Ex parte 416
Hall, Ex parte 406
, Re 150
V. Barrows 99, 100
V. Digby 90
V. Hall 99, 227, 229, 231, 272
V. Huffam 342
V. Leigh 3, 27, 30
V. Smith 102, 143, 242
Hallack f. March 114
Hallet V. Desban 41, 49
Hallett V. DowdaU 164
Halls V. Coe 132
Halsey v. Whitney 115, 120
Haly V. Goodson 428
Hambidge ;;. De la Croue'e 114, 115
Hamersley v. Lambert 362
Hamil v. Stokes 232
Hamill v. Purvis 127
Hamilton v. Hamilton 219
Hammond v. Douglas 99, 100, 343, 349
Hamper, Ex parte 27, 32, 35, 36, 38,
45, 69, 261, 263, 372
Hanff ?;. Howard 83, 93
Hankey v. Garratt 362
V. Hammock 201 a
Hanna i'. Flint 41
Hannay v. Stewart 323
Harding v. Foxcroft 80, 45
V. Glover 329, 330
Hardy v. Sproule 421, 455
Hargrave r. Smee 248
Hargreaves, Ex parte 394
Harman v. Fishar 238
V. Johnson 102 a, 108
Harmon v. Clark 359, 360, 372, 389
Harrington I?. Higham 114
B.SiVvis'l Ex parte 130, 390, 391, 392,
403, 442
V. Bevington 256
V. FarweU 155, 156, 158
V. Harris 219
Section
Harris v. Lindsay 155, 158, 254
Harrison v. Armitage 222, 229, 231
V. Gardner 99, 211
V. Jackson 114, 117, 119, 122,
126
V. Sterrv 24, 101, 122
V. Tennant 280
Hart V. Alexander 155, 156, 158
Hart V. Clarke 272
V. Fitzgerald 454
Hartley v. Manton 168
Hartz V. Schrader 231, 344, 347
Harvey v. Crickett 221, 263, 314, 328,
339, 341, 342
V. Kay 150, 234
Harwood i-. Edwards 114
Hasbrouck v. ChUds 24, 25, 26
Hasell, Ex parte 233
Haskell v. Adams 219
Haskins v. Everett 261, 263
Hasleham v. Young 111, 127
Hastings v. Hopkinson 128
Hatch V. Wood 241
Hatton V. Royle 114
Haven v. Goodel 322
Havens r. Hussey 101, 310
Hawes v. Tillinghast 46, 408
V. Waltham 264
Hawken v. Bourne 101, 126
Ha\\(iiins v. Appleby 108
V. Hawkins 344, 373
Hawkshaw v. Parkins 115, 119, 252, 264
Hawtayne v. Bourne 113, 126
Hay, Ex parte 370
Haydon, Ex parte Bll
Hayes v. Heyer 101
Haynes v. Seachrest 93, 122
Haythorn v. Lawson 257
Haywood v. Harmon 107
Hazard v. Hazard 30, 32, 35, 55
Heap V. Dobson 30
Heath v. Hall 387
V. Hubbard 449, 454
V. Sansom 159, 160, 269,272, 299,
300, 308, 334
Heathcote v. Hulme 329, 330, 331, 343
Heberton v. Jepherson 322, 344
Hedley v. Bainbridge 102 a
Heenan v. Nash 102
Heimstreet v. Howland 41
Helme u. Smith 219
Helsby v. Mears 107, 152
Henderson v. Hudson 93
Henecy, Ex parte 208
Henley v. Soper 219
Henn v. Walsh 231
Hennessy v. Western Bank 101
Henry v. Gates 117
Herbert v. Hanrick 122
V. Odlin 107
Hercy v. Birch 89
Herrick v. Ames 178
Herris v. Jamieson 260
XXIV
INDEX TO CASES CITED.
Section
Hesham, Ex parte 304
Hesketh v. Bianchard 16, 27, 32, 40, 43,
45, 53, 57, 58, 63
Ilewett I'. Buck 446
Heydon v. Heydon 261
Hevhoe v. Biirge 34
Hiard v. Big? 141, 154
Hibbert V. Hibbert 189
Hicbens v. Congreve 174, 220
Hickerson v. McFaddin 329
Hickman v. Cox 70
Higgins, Ex parte 155, 370
Higinbotiiam v. Holme 20S
Hill, Ex parte 208, 377, 380, 388, 442
V. Beach 406, 407
V. Bumham 349
V. King 182
V. Voorhies 63, 155
V. Wiggin 261
Hinton, Ex parte 208
Hitcbcock V. St. John 101, 310
Hitcbings v. Ellis 27, 46
Hoare v. Dawes 3, 19, 30, 53, 55, 63,
64, 80, 138
Hobyt,'. Roebuck 153
Hodi^es V. Parker 182
Hodgkinson, Ex parte 32, 53, 55, 56, 370
Hodgman v. Smith
Hodgson, Ex parte
Hogg V. Kirby
V. Skeen
Holbrook v. Lackey
Holdane v. Biitterworth
Ilolilen V. M'Makin
Holderness v. Shackels
30
208, 377, 379
4*259
133
346
160, 161
99
326, 337, 360,
400, 407, 408, 441, 442
Holland v. Fuller 93
V. King 201
Holloway v. Holloway 100
Holmes v. Blogg 7
V. Hawos 329
r. Higgins 219,221
r. Mentze 261, 2f)3
Old Colony R. R. Co. 43,49
r. Porter
V. Unit. Ins. Co.
V. Williamson
Ilolroyd v. Ilolroyd
Holt /•. Kernodle
lloltoii V. Ilolton
Holyliiml V. De Mendez
llolyoke v. Mayo
iloiner v. VVooil
Ilomlray v. Kotborgill
llonorc i\ (.'olmesnil
Hood /'. iVston
Hooj), Tlie
Hooper v. Lushy
Hope '■. CuHt 102, 111, 127, 132^ 13:',
Hopkins w. Forsyth 417
V. Ken't 241
V. Watt 172
Jlopkinson ?). Marquis of ICxotcr 214
139
3, 30, 55, 56
219
93
47
376
68
218, 219
238
207
1K2
227, 259
315, 316
102,4 16
Ipo
Hopkinson v. Smith
Hornblower v. Proud
Horneffer v. Duress
Horrell v. Witts
Horton v. Saver
V. Wikle
Horton's Appeal
Hosack V. Rogers
Houghton V. Houghton
House V. Thompson
Houseal's Appeal
Houser v. Irvine
Houston V. Darling
Howard v. Priest
Howden, Ex parte
Howe V. Lawrence
Howell V. Brodie
Hoxie IK Carr
Hubbard, Ex parte
V. Curtis
V. Guild
Hubbell V. Woolf
Hughes I'. Ellison
Human v. Cuniffe
Hume V. Bolland
Hunt V. Benson
V. Bridghara
Hunter, Ex parte
V. Parker
Huntington v. Potter
Hurst V. Hill
Ilutcheson v. Smith
Hutclunson v. Smith
Hutton v. Thompson
Hjat V. Hare
Hyleing t'. Hastings
Hynes v. Stewart
Ide V. Ingraham
Indian Cliicf, The
Inglis V. Haigh
Innes v. Dunlop
Irvin V. Conklin
Irvine v. Forbes
Isler V. Baker
Ives V. Miller
Jacaud v. French
Jackson, Ex pitrte
, lie
V. Alexander
V. Cornell
)'. Fairbank
r. Jackson
;'. Robinson
IK Scilgwick
IK Stanford
V. Stoplicrd
140,
120,
Section
59
403
12
344
125
114
307
255
93
364
394
322, 323, 324, 328
42
92, 93
102
358, 380
150, 151
82, 92, 93, 339
381
263, 264
341
139
101
122
108
93
324
367, 390
121, 122
328
322
182
344
151
126
324
285
324, 328
9, 316
238
244
65
164
295
219
236, 252
152, 368
6
241
376
324
90, 92, 93, 98, 215
3, 30
191, 192, 213, 349
<»4
219
INDEX TO CASES CITED.
XXV
Section
Jackson v. Woolley 324 u
Jacky V. Butler 261
Jaconib v. Harwood 3(32
Jaggers v. Binnings 453
James v. Bixby 455
Janes v. Whitbread 70
Janson, Ex parte 363, 380
Jaques v. Marquand 140, 142
Jarman r. Ellis ■ 119
Jarvis v. Brooks 92, 93, 263, 359, 376
V. Noyes 449
Jebb V. McKierman 219
Jeffereys v. Small 90, 93. 342
Jefferys v. Smith 82, 150, 183, 231
Jennings v. Baddeley 290
Jervis v. White 227, 259
Jestons f. Brooke 18
John and Siegniund, The 445
John of London, The 428
Johns, Ex parte 894, 405
V. Battin 122
Johnson v. Byerly 238
V. Evans 263
V. Helleley 99
V. King 264
V. Miller 46
V. Peck 238
Johnston v. Button 123
Jones V. Clayton 260
V. Dwyer 399
V. Gibbons 403
V. Jones 182
V. Lusk 358
V. Maund 253
V. McMichael 27, 83
V. Moore 324
V. Neale 82, 92, 93, 373
V. Noy 292, 295, 297
V. Yates 221, 23^, 234, 238
Jonge Pieter, The 9
Tobias, The 447
Jordan v. Wilkins 31, 61
Joseph V. Pebrer 164
Judson V. Adams 41, 43, 46
Juggeewundas Keeka Shah v.
Ramdas Brijbooken Das 93
Julia, The 9, 240, 315
Julio V. Ingalls 27, 30, 44
K.
Karthaus v. Ferrer 114
Kay V. Duchesse de Pienne 10
Keating!'. Marsh 108
Keane v. Boycott 7
Keble v. Thompson 368
Kell V. Nainbv 241, 242, 255
Kelley v. Hurlburt 138
Kellogg V. Griswold 46
Kelluni V. Emerson 449
Kemble v. Kean 224
Kemeys v. Richards 132
Section
101
322
253,360,361,362,
364, 405
380
99
Kensington, Ex parte 245, 363, 377, 380
Kemp V. Carnley
V. Coffin
Kendall, Ex parte
Kennedy, Ex parte
V. Lee
Kent, The
Kershaw o. Mathews
.Ketcham v. Clark
Ketchum v. Durkee
Kieran v. Sanders
Kiffin V. Willis
Kilby V. Wilson
Kilgour V. Finlyson
Kill V. HoUister
Kilshaw v. Jukes
Kimball v. Blanc
V. Hamilton Ins
V. Thompson
Whitney
166,
160, 322,
Co.
Kimberley v. Jennings
Kimbro v. Bullitt
Kmg V. Chuck
V. Faber
V. Hamilton
V. Lowry
V. Wartelle
V. Smith
(The) V. Beeston
V. Collector
Customs
Kingman v. Spurr
Kirby v. Carr
— V. Ingersoll
V. Schoonmaker
Kirk V. Blurton
V. Hodgson
Kirkham v. Newstead
Kirkley v. Hodgson
Kirkman v. Booth
V. Snodgrass
Kirwan v. Kirwan
Knebell v. White
Knight V. Coates
I'. Marjoribanks
Knott V. Morgan
Knowles v. Houghton
Knox V. Summers
Kramer u. Arthurs
Kuhne v. Law
L.
Lacy V. Hall
V. McNeile
V. Woolcott
La Forest, Ex parte
Lake v. Craddock
V. Duke of Argyll
V. Gibson
Lamb v. Durant
445
201
160, 272, 307, 308
134, 146, 153, 358
241
168
238
396
215
49
456
101
358
362
224
102 a
198
138
182
455
233
254
125
the
342, 417
of
B07
295, 297
101
97, 326
102, 142
123
155
403, 404
201a
161
152, 155
222, 229
449
172
100, 259
229
263
82,93
263, 376
93
107
336, 339
388
92, 93
65, 150
342
416
XXVI
INDEX TO CASES CITED.
Lamb v. Grover
Lambden v. Sbarp
Lanipbir i-. Crcod
Lancaster Bank v.
Lane ;•. Williams
Lang V. Waring
Langan v. Hewett
Langdale, Ex parte
Myley
Lange r. Kennedy
Lansing r. Gaine
Latham i\ Simmons
Laughlin v. Lorenz's Adm'r
Laverty v. Burr
Law, /i.r parte
V. Ford
Lawrence v. Taylor
V. Trustees of Orphau
Section
46
122
11
82, 92, 263
362
92, 93, 132
127
19, 32, 35, 36, 56,
60, 61, 64
322.
127, 133, 160
263
199, 201 a
127
139
330
93
House
Lawson v. Bank of London
V. Morgan
■ Layfield, v.
Leacli ;-'. Leach
Leaf, Ex parte
V. Coles
Lean v. Schutz
Leary v. Shout
Lee, In re
V. Laslibrooke
V. Page
Lees V. Lat'orest
Le Fanu v. Malcomson 257
Lefever v. Underwood 169
Leicestershire Banking Co., Ex
parte, 889
Leighton v. Wales 218
Leonard r. Huntington 455
Le Boy v. Johnson 102, 126, 130, 134,
160
362
100
227
123
331
380
295, 351
10
288
377, 380
182
203, 215
331
Leveck v. Shaftoe
Leverson i'. Lane
Levi V. Carrick
Levy V. Cadet
Lewis V. Chapman
V. Langdon
V. MoHc'tt
Heilly
241
133
182, 349
3-4
257
6,100, 202, 329, 346
182
Liardet v. Adams
Linger! v. Simpson
Linton v. Hurley
Little V. Clarke
('. Ilazzaril
Littlewood v. Caldwell
Livingston
TJoyd, h'x jiorlr
r. Archliowle
V. Aslihy
322
288
329
166
161
122
227, 288
81
127, 133
125
Pittsburgh K.K. Co. 113
Ralli 215
Koosevelt 102,126,127,
132, 133
93
241
153
V. Cox
V. Ilastie
V. Lynch
Lloyd V. Bellis
V. Freshfield
V. Loaring
Lobb, Ex parte
Lock V. Lynam
V. Pardon
Locke, V. Stearns
Lockwood i\ Comstock
Lockyer v. Savage
Lodge, Ex parte
V. Dicas
V. Prichard
Logan V. Mason
Section
166
130, 133, 134, 140
123, 125
370
178
218
108
322
208
390
155, 156, 253
363, 376
157
London Assm-ance Co. v. Bold 251
Long V. Majestre
Longman v. Pole
Loomis V. Marshall
Lord V. Baldwin
V. Davison
V. Parker
Loscombe v. Russell
Loudon Society v. Hagerstown Bank
113
263
120
458
93
122
449
107
264
Lucena v. Craufurd 242
Ludlow V. Cooper 82, 92, 93
Lumberman's Bank v. Pratt 322
Lusk V. Smith 322
Lyman v. Lyman 72, 182, 331
Lyndon v. Gorhara 264
Lyon V. Johnson 160
V. Knowles 34, 43
Lyth V. Ault 155, 156
Lovejoy v. Bowers
Lovelace's (Lord) Case
Low V. IMumford
Lowe V. Alexander
Lowery v. Drew
Lowthorp V. Smitli
Lucas V. De la Cour
. V. Laws
178
238, 256
34, 35, 45, 49
241, 263
12
12
222, 229, 288
9S
M.
Mabbett v. Winto
Mackay v. Bloodgood
Mackenzie v. Poolcy
Maclae v. Sutherland
Macy V. Combs
V. De Wolf
V. Wheeler
Maddeford v. Austwick
Madgwick r. Wimble
Mainwaring /•. Newman
Mair v. Glennie 27,
Major V. Ilawkes
Malt by r. N. W. Va. R. R.
Maiidel v. Peay
Manning r. Wadsworth
Manuf. and Mech. Rank v.
101
120
455
143
41
417, 421, 441,
444, 455
455
172
201, 231, 844
221
30, 32, 41. 42,
46, 56
328
113
868
189
108
Co.
Gore
V. Winship 106
INDEX TO CASES CITED.
XXVI 1
Section
March v. Ward 143
Marcliine;ton v. Vernon 242
Marengo, The 428, 449
Marine Bank v. Ogden 14
Markliain v. Merrett 93
Maries v. Hill 358
Marlett v. Jackman 319, 336
Marquand v. N. Y. Mannf. Co. 269, 272,
275, 307, 308, 313
V. "Webb 455
Marsh v. Hutchinson 10
r. Robinson 242
Marshall v. Colnian 202, 226, 229, 288
V. Marshall 277
V. Watson 227, 329
Marten v. Van Schaick 99, 330
Martin, Ex parte 403
i: Crompe 342, 346
V. Heathcote 233
Martyn v. Gray 64
Marwick, In re 380
Mason v. Potter 46
V. Rumsey 102
Massey v. Tingle 233
Master i'. Kirton 227, 269, 288
Matliewson v. Clark 5
Matlack v. James 93
Matlock V. Matlock 93
Maude, Ex pcnie 394, 406
Mawman v. Gillett 241
Mayhew v. Merrick 218
Maynard v. Fellows 264
McAlister v. Montgomery 93
IMcAllester v. Sprague 168
M'Alpine v. Mangnall 70
McClelland v. Remsen 101
M'CoU r. Oliver 219
M'Connell v. Hector 240, 316
McCormick v. Gray 372
McCreadj' v. WoodhuU 446
M'Cullough V. Sommerville 101
M'Dermot v. Laurence 93
McDonald v. Eggleston 117, 122
V. Millaudon 67
McDougald v. Banks 192
McGill V. McGill 344
M'Gregor v. Bainbrigge 24
McGuire v. Ramsey 92
M'lver V. Humble 36, 55, 64
McKnight v. Ratcliff 166
M'Lanahan v. Ellery 254, 255
McMahon v. Davidson 416
McNaughten v. Partridge 117, 155
McNeillie v. Acton 201 a
McNutt V. Strayhorn 360
McPherson v. Pemberton 6, 263
McQuewans v. Hamlin 114, 127
Meaghan, In re 208
Mealier v. Cox 27, 288, 290
Mechanics' Bank v. Hildreth 358
V. Livingston 160
Mellersh v. Keen 99, 272, 297
IMerrick v. Brainard 307
Section
Merrick v. Gordon 34, 40, 58 a
Merrill v. Bartlett 444
Merryweather v. Nixan 6, 219, 220
Metcalf V. Bruin 250
V. Taylor 416
Metcalfe v. Rycroft 115, 119, 244
MetropoHtan Omnibus Co. v. Haw-
kins ■ 257
Meyer v. Sharpe 15, 27, 41, 55, 56, 57
Meyers v. Field 30
Mifflin V. Smith 106, 138, 139,
198 279
Milbank v. Revett 228,' 231
Milburn v. Codd 219
r. Guyther 449
Miles V. Thomas 202, 224, 225, 227,
229 269
Millar v. Craig 180,' 182
Millaudon v. Sylvestre 182
Miller v. Bartlet 35, 41, 45, 49
V. Hughes 30
V. Mackay 418
V. Price 238
V. Sims 7
Milliken v. Loring 328
Millington v. Fox 100, 259
Mills V. Barber 101
Milne V. Bartlet 295
Milton V. Mosher 122
Minchin, Ex parte 376
Minnit v. Whinery 123, 130
Mitchell V. Dall 80
V. Tarbutt 166
Mitcheson v. Oliver 455
Mobley v. Lombat 264
Moderwell v. MuUison 93
Moffatt V. Farquharson 449
V. Van Millingen 221, 234
Mohawk & Hudson R. R. Co. v. Niles
41, 58 a
Moline Water Power Co. v. Web-
ster 363
Moller V. Lambert 250
Molton V. Camroux 7
Monro, Ex parte 403
Moody V. Buck 449
V. Payne 263, 264, 311
Moor V. Hill 244
Moore, Ex parte 406
V. Bare 24
V. Pennell 263
V. Sample 264
V. Smith 41, 46
Moran v. Palmer 93
Moravia v. Levy 219
Moreau v. Saifarans 92, 93
Moreton v. Hardern 166
Morgan v. Marquis 339
V.Richardson 114
V. Tarbell 253
Morison v. Moat 227, 344
Morley v. Gaisford 166
V. Newman 215
XXVlll
INDEX TO CASES CITED.
Morris, Ex parte
V. Allen
r. Barrett
r. Colman
V. Harrison
V. Kearsley
Morrison v. Blodgett
^lorrow V. Riley
Morse v. Wilson
Morton v. Blodgett
Motley V. Downinan
Muirliead v. Salter
Muldon V. Whitlock
jVIuUany v. Keenan
Mullett V. Hufhinson
Mumt'ord v. Xlcoll
Munson v. Sears
Murphy, In re
Murray v. Bogert
V. Mumford
V. Murray
V. Somerville
Murrill v. Xeill
Musier v. Trompbour
Mutual Savings Inst. v.
Muzzy i;. Whitney
Myers v. Edge
V. Standart
V. Willis
Section '
876
182
92, y.s
224
201
93 I
261, 262, 263
219 :
69 [
2631
100, 259
61
455
218
126
59, M4 =
30
208
307 i
325, 328 I
339, 341, 363 i
134;
263, 376 [
27, 31
Enslin 344
32, 43, 45 !
245
324
455
Norfolk, Ex parte
North V. Bloss
V. Mudse
Section
393
80, 241
114
North Bank of Kentucky i". Keizer 376
Northern Coal Mining Co., In re 201 a
Northern Penn. Coal Co.'s Appeal 93
Norway v. Rowe 231, 288
Nottidge V. Prichard 115
Noyes v. Cushman 2, 8, 4
V. N. H., N. L., & Stonington
R.R. Co. 115,123
N.
Napier v. Catron
V. MeLeod
National Bank v. Norton
Natusch V. Irving 125,
Neal V. SiieaflBeld
Neale v. Turton
Nerot V. Burnand
Nesbitt V. Meyer
New Draper, The
Newell V. Humphrey
Newhall v. Buckingham
Newman v. Bagley
V. Bean
New march v. Clay
Newsome v. Coles
Newton v. Belcher
I'. Boodle
New York Fire Ins. Co.
nett
Niciiolson I'. Ricketts
Nicoll i;. Glennie
V. Mumford
V. f)Kden
Niday v. Harvey
Niven v. Spickerman
Nixon i». Nash
Nockel.t V. Crosby
Nokes, Ex parte
Nolle, Ex parte
117, 122
115
322, 334
193, 222, 325
117
219, 221, 234
269, 306, 356
189
445
331
261, 264
263
41, 262
155, 157, 159
160
151
102, 142, 202
V. Ben-
127, 130
102 a, 142
166
261, 263, 307,
311,417
98
155
221
2r,3
219
84
111, 127
o.
Oakford v. Eur. & Am,
Co.
Oakley v. Pasheller
Ocean, The
Ogden V. Aster
Ogle, Ex parte
Old V. Eagle Ins. Co.
Olcott V. Wing
Oldaker v. Lavender
Oldknow, Ex parte
Oliphant v. Mathews
Oliver v. Gray
V. Hamilton
Ord V. Portal
Ordiorne v. Woodman
Orleans (Steamboat) v.
Orr V. Chase
Osborne v. Harper
V. JuUiun
Ostrom V. Jacobs
Otis V. Sill
Ouston V. Hebden
Owen, Ex piaiie
V. Body
V. Van Uster
Owens I'. Collins
Owston V. Ogle
Oxley, Ex parte
P.
Page, Ex parte
V. Brant
V. Carpenter
V. Cox
Paldman t'. Graves
Paine v. Thachcr
Palmer v. Dodge
V. Myers
V. Stephens
Pariente v. Lubbock
Park I'. Wooten
Parker, Ex jKirte
V. Barker
V. Cousins
V. Gossage
Steamship
158
156, 158, 370
449
343
376
416, 417
88
206, 232
377
139
30
228, 231
244
219
Phoebus 427,428
119
244
150
142, 324
98
437, 438
372
70
86, 143, 151
93
449
208
377
161, 241
262
201
368
219
322
101
142
245, 249
159
390
64
322
214
INDEX TO CASES CITED.
XXIX
Parker v. IMacomber
V. Monell
V. Muggridge
V. Pistor
V. Ranisbottom
Parkhurst i". Muir
Parkin v. Carruthers
Parr, Ex parte
Parry, Ex parte
Parsons v. Crosby
V. Ha V ward
Patch V. Wheatland
Patten v. Gurnej'
Patterson i-. Blake
V. Brewster
V. Gandasequi
V. Silliman
Pattison v. Blanchard 3, 34, 40, 58, 219
Payne v. Hornby 346
V. Ives 127
V. Matthews 363
V. State 324
Peacock, Ex parte 389
V. Peacock 15, 24, 32, 59, 84,
181, 231, 269, 275, 322, 325
Peake, Ex parte 163, 358, 377, 380
Pearce v. Chamberlain 195, 196, 295,
Section
321, 322
823
341
263, 264
163
228
65, 140, 160,
334, 335
887, 389
444
241
198
102
458
93
362
455
214
83,
V. Lindsay
V. Piper
Pearpoint v. Graham
Pearson v. Skelton
Pease v. Hewitt
V. Hirst
Peck V. Fisher
Peel V. Thomas
Peele, Ex parte
Pemberton v. Oakes
Penninian v. Munson
Penny v. Black
Perens v. Johnson 172, 263
Perren r. Keene
Perrine v. Hankinson
316, 317
272
290
101, 275, 310
34, 61, 219, 220
222, 408
203
244, 248
92, 93
151, 164
152, 359, 368, 370
246, 253
311
Perrott v. Bryant
Perry v. Butt
V. Jackson
Petit V. Chevelier
Pettee v. Orser
Pettes V. Spalding
Pettyt V. Janeson
Peyton r. Lewis
Phelps V. Brewer
Philips V. Philips
Phillips r. Ames
V. Atkinson
V. Clagett
I'. Cook
r. Phillips
Pickard v. Sears
Pierce v. Jackson
V. Trigg
41
205
331
322
38, 43
41, 42, 55, 59
15, 30
252
225
101
264
191, 349
15b
114
344
369
344
114
261, 264
98
. 398
261, 263
93
Pierce v. Wood
Pierson v. Hooker
Steinmeyer
30,
Pigott V. Bagley
Pine, Ex parte
Pinkney v. Hall
Piper V. Smith
Pitchford v. Davis
Pitkin V. Pitkin
Pitt, The
Pittam r. Poster
Pitts V. Waugh
Place V. Sweetzer
Plumer v. Lord
Plummer, In re
Pollock V. Paterson
Pond V. Clark
Ponton V. Dunn
Pope V. Haman
V. Risley
Porter v. M'Clure
Porter v. Wheeler
Post V. Kimberly
Potter V. Greene
V. McCoy
V. Moses
Pott V. Evton
Potts V. Bell
r. BlackweU
Powell V. Messer
Pow^les V. Page
Pratt V. Langdon
V. Page
Prentice v. Prentice
Preston v. Strutton
V. Tamplin
Price V. Barker
V. Groom
V. Williams
Pugh V. Currie
Purdy V. Powers
Purple V. Cook
Purviance r. IM'Clintee
1-. Sutherland
Putnam v. Dobbins
V. Wise
Section
108
115
33, 49, 67
201
390
132
93, 182
150
201 a, 319 a
428
107
83, 93, 138
264
12
376, 385, 387, 389
295
182
200
261
107, 160, 161
3, 45
331
45, 56, 61, 147,
280
64
120, 155
277
86, 41, 43
9,315
358
133
160, 164
49
160
351
219
418, 455
168
70
215
93
138
263, 376
49
122
93
5,43
R.
Raba v. Ryland
Rackstraw r. Imber
Radclif^e v. Rushworth
Radenhurst v. Bates
Randall v. Randall
Randolph v. Daly
Ransom v. Van Deventer
Rapid, The
Rapp V. Latham
Rathbone v. Drakeford
Rawlins v. Wickham
Rawlinson i;. Clarke !
107
126
268
30
244, 254
82, 93
260
358
9, 315
108, 166
114
232
41, 43, 47,
49, 221
XXX
INDEX TO CASES CITED.
Raynard i'. Chase
Read v. Bowers
Reade c. Bentley
Reboul V. Chalker
Reed v. Howard
V. Hussey
V. Sliepardson
Section
6
231
277
194
261
42
261, 263
V. White 155, 156, 158, 870, 455
Reeve, Ex parte 376, 390, 405, 406. 407
V. Parkins 290
Reeves c. Avers 93
Reid, Ex pake 392, 393
r. HoUinshead 15, 66, 27, 126
Reiliy v. Smith 161
Reinheimer v. Hemingway 261, 263
Remington v. Cummiugs 117
Rentan i-. Chaplain 263, 311, 330
Reppert v. Colvin 324
Revens v. Lewis 421, 428
Robbins v. Fuller
Robertson v. Baker
V. Lockie
r. Quiddington
166
122
166
166
166
151
404
49, 70
182
34, 44, 56
362
41, 42, 43. 45, 261
72, 92, 93, 360, 381
343, 362
454
455
222, 229, 231
254
361
Richardson, Ex jxirte 201 a, 319 a, 399
V. Bank of England
229, 348 a
r. Farmer
V. Hastings
V. Moics
f.Tobey
Riflimond v. Heapy
Ricketts v. Beiuiett
Rex V. Almon
V. Inliab. of Austrey
V. Marsh
V. Pearce
i-'. Tophara
Reynell v. Lewis
Reynolds v. Bowley
V. Hicks
V. Mardis
V. Toppan
Rice, In re
V. Austin
V. Ijaniard
V. Gordon
V. Siiute
Rich I'. Coe
Richards v. Davies
V. Fisher
V. Heather
Ridgely v. Carey
Riilgway's Appeal
Ridgway r. Clare
Ridley v. Taylor
Rigilen i;. Pierce
Ring, Ex piirle
liipley V. Cronker
V. Watorworth
Ritchie v. Coupor
Roa(;h v. Perry
Roberts v. Ebcrhardt
V. Fitlcr
V. McCarty
r. I{()bcrt8
'•. Strang
]{obb V. Mudge
138
229
160
358
238
126
97
92, 93
363
133
207, 350
394
449
98
418
24
93, 231, 330
219
92
263
16«
321, 322, 359
Robbins v. Laswell
Robinson, Ex parte
I'. Aldridge
V. Alexander
V. Anderson
V. Crowder
V. Gregory
V. Marchant
V. Taylor
V. Wilkinson
Section
328
93
297
99, 100
23,27
339
133
233
24
101
101
256, 257
322, 328
138, 158
24
243, 244, 249
219
Robley v. Brooke
Robson V. Druramond
Rockwell V. Wilder
Rodgers i-. Meranda 363, 365, 376, 390
Rodriguez v. Hefl'ernan 272, 307, 311
Roe V. Galliers 208
Rogers v. Batchelor 132, 133
I'. Harvey 93
V. Kichline 241
Rolfe V. Flower 152, 389
Rolleston v. Hibbert 416
Rollins V. Stevens 127
Roosevelt v. Mark ' 324
Pvooth V. Quin 123
Ross V. Decy 241
V. Drinker 45
Roth V. Colvin 133
Roth well r. Humphreys 126
Rowe r. Wood 181
Rowland, In re 372
V. Boozer 93
Rowlands t*. Evans 295
Rowlandson, Ex parte 35, 45, 53, 55,
56, 358, 384, 385, 402
Rowley v. Adams 93
Roxby, Ex parte 370, 385
Ruddock's Case 115
Ruffin, Ex parte 97, 260, 263, 325, 326,
342, 347, 358, 359, 360, 361, 362, 372,
373, 401, 403
Russ r. Fay 263
Russell V. Austwick 174
V. Leland 272
i\ Pelligrini 215
I'. Perkins 247
Rutland's (Countess of) Case 268, 271
l?yall r. Rowlos 403
Ryan v. Mackmath 329
S.
Sadler, Ex parte
V. Lee
V. Nixon
Sage V. Ciiollar
(». Ensign
V. Sherman
363, 380
108, 168 a, 207
219
358
162, 324
82, 92, 103
INDEX TO CASES CITED.
XXXI
St. Aubvn V. Smart
St. Barbe
Sale V. Disliman's Ex'rs
Salmon v. Davis
Sander v. Sander
Sandilands v. Marsh
Section
108
394, 405
122
115
295, 297
Sawyer v. Freeman
V. Goodwin
Sayer v. Bennet
Sciieiffelin v. Stevens
Sclieraeliorn v. Loines
Scholefield v. Eichelberger
V. Heafield
102, 103,- 111
127, 131
San Jose Indiano, The 316
Saville v. Kobertson 34, 56, 138, 14G,
147, 148
446
108
295, 316
161
455
9, 195,
201 a, 315, 317
346
215
215
6
233
263
7
241
370
219
256, 454
445
231
127
93
437, 439
231
Fulton Bank
Scott V. Avery
V. Liverpool
V. Miller
V. Milne
Scudder r. Delashmut
Seaver v. Phelps
Secor V. Keller
Seddon, Ex parte
Sedgwick v. Daniell
Sedgwortli v. Overend
See Renter, The
Seeley v. Boehm
Selden v. Bank of Commerce
Selkrig v. Davies
Seneca, The
Senhouse ?•. Christian
Servante v. James
Sexton V. Sexton
Shackle v. Baker
Sharon Canal Co.
Sharp V. Milligan
V. Warren
Shattuck i\ Lawson
Shedd r. Bank of Brattleboro
V. Wilson
Shelly r. Hiatt
Shelton v. Cocke
Shepperd v. < )xenford
Sheridan v. Medara
Shipton V. Thornton
Shirreff y. Wilks 127
Shoemaker v. Benedict
Shott V. Strealfield
Sichel V. Mosenthal
Siegel V. Chidsey
Sifikin V. Walker
Sigourney v. Munn
Sikes V. Work
Silk V. Prime
Sillitoe, Ex parte
Simpson's Case
Simpson v. Chapman
V. Feltz
V. Geddes
Sims V. Brittain
449
172
99
14
93
219
219
114
263
343
324
231, 330
67, 69
202
132, 133, 152
324
65
189
313, 358
136,
140, 154
:, 93, 351
30, 219
363
390, 394
316
343
182
324
418
Sims V. Brutton
V. AVilling
Simson r. Cooke
V. Ingham
Section
108
27, 30, 145
247, 250, 251
157, 250, 253
416
264
Sisters, The
vSitler V. Walker
Skinner v. Dayton 117, 119, 120, 122,
275
V. Stocks 241, 242, 454
V. Tinker 275
Skii)p V. Harwood 97, 261, 263, 264,
311
Skirving v. Williams 199
Skrine v. The Sloop Hope 439
Slater, Ex parte 370
V. Lawson 324 a
Sloan 1-. Moore 101, 231
Smead v. Lacey 152
Smith, Ex parte 205, 313, 314, 399
, In re 261, 263, 264
— ■ V. Barrow 219
V. Black 155
V. Burnham 88, 93, 138
I'. Cooker 257
V. Craven 142, 147
V. Danvers 92
V. De Silva 441, 444
V. Emerson 261
V. Everett 99, 100
r. Fromont 229, 231
V. Hill 59
V. Jackson 93
V. Jameson 868
V. Jeyes 191, 227, 231, 288
V. Kerr 122
V. Lay 418
V. Ludlow 324
V. :\Iules 214, 288, 351
V. Mulock 275
V. Oriell 328, 342
V. Rogers 158
V. Smith 68, 64, 93, 205
V. Tarlton 83, 93
V. Watson 27, 30, 40, 41, 42. 56
V. Wigley 157
V. Winter 120, 160
V. Wright 3, 30, 32
Snaith v. Burridge 132
Snodgrass' Appeal 263
Snow r. Howard 143
Snvder v. May 117
Solly V. Forbes 168
Somerset Works v. Minot 380
Somerville v. Mackay 233
Soule' i\ Hayward 27
Southard v. Steele 114
South Carolina Bank v. Case 102,
106, 139, 140, 142
South worth v. Smith 428
Sparrow r. Carruthers 10
V. Chisman 237
Spaulding v. Ludlow Woollen Mill 107
Speake v. White 323
XXXll
INDEX TO CASES CITED.
Section
211)
228, 330
245
373
233
143
65
128
134
70
157, 199, 201 a
419, 441, 449
107
307
114, 115
427, 428
346
421, 455
121
155
153
157, 233
6
249
27, 166
439
203
24, 191, 192
6
455
249, 254, 444
Stockdale v. Ullery 227
Stocken v. Dawson 180, 182, 331, 343,
360, 372
Stocker v. Brockelbank 27, 32, 41,
45, 56
Stockton V. Frey 166
Stock well V. Diilingliatn 139
Stoddard r. Wood 221
Stone 1-. Marsh 108, 166
Storer v. Hunter 399
Storrs c. Barker 398
Story c. L(jrd Winsor 82, 231
Stoughton V. Lynch 173, 176, 178,
182, 233, 329
Strange ". Lee 246, 247, 250
Strangtbrd n. Green 114
Street r. Highy 215, 299
Sunitney v. I'atton 93
Sumner v. Ilampson 93
V. I'Mwell 362
SutclilU- r. Dohrtnan 261
Sutton /•. Irwine 127
V. Buck 416
Swan /'. Stechnan 122
V. Steele " 102, 103, 106, 126.
133
Sweetscr v. rrencii 127
Sweetzer r. Mead 122
Sylray v. Wiiite 219
Syhx'bter v. Smith 134
Spear v. Newell
Speiglits V. Peters
Spiers c. Houston
Sprague, Ex parte
Spring V. Gray
Staats v. Howlett
Stables r. Eley
Stainer v. Tysen
Stansfeld v. Levy
Stanton Iron Co., Re
Stanwood v. Owen
Starbuck v. Shaw
State v. Linaweaver
V. Quick
Stead V. Salt
Steamboat Orleans v.
Phoebus
Stearns r. Houghton
Stedman r. Feidler
Steiglitz v. Eggington
Stephens v. Tliompson
Sternburg v. Callanan
Sterndale v. Ilankinson
Sterry v. Clifton
Stevens v. Benning
;•. Faucet
V. The Sandwich
V. Yeatman
Stewart v. Forbes
V. Gibson
V. Hall
i". Iiosrers
T.
Taft V. Buffum
Taggard i'. Loring
Taitt, Ex jxiite
Tapley v. Butterfield
Tappan v. Bailey
V. Blaisdell
V. Kimball
Tasker v. Bartlett
V. Sheplierd
Tassey i\ Church
Tatam v. Williams
Tate, Ex parte
Tattersall v. Groote ,
Taunton Iron Co. v. Eichmond
Taylor, Ex parte
V. Church
V. Coryell
('. Davies
V. Davis
V. Fields
u. Hillyer
V. Jones
V. Kicliards
V. Salmon
V. Terme
Teague v. Hubbard
Teed v. Baring
V. Elworthy
Temple v. Seaver
Tenant v. Gold win
Tench v. Roberts
Tenney v. Johnson
Terrell, Ex parte
Terrett v. Taylor
Thicknesse v. Bromilow
Thomas ;;. Minot
Thouiason
Section
307
41, 44, 416
377, 379, 381, 383
93, 101, 122, 310
102 rt
263
162, 324
122
249
323, 324
233
378
215, 232, 285
324
7
257
114
229
227
261, 263, 264, 407
133
166
428
229
49
219, 221, 234
455
241, 255
322
422
6, 32, 56, 59, 61
263, 359
407
76
106, 126
376
Frere 314, 336, 337, 338,
3:;9
Thompson r. Andrews 201 a, 319 a
c. Franks 113
V. Frist 264
V. Waithman 324 a
Thomson r. Campbell's Trustees 24
V. Davenport 138, 455
V. Finden 455
V. Iloskins 454
V. Lay 7
V. Lewis 263, 264
V. Percival 155, 156, 158, 253,
255. 370
V. Snow
V. Williamson
Thornbury v. Be v ill
Thornton v. Di.xon
I', lllingworth
V. Proctor
Thori)e, Ex parte
(,'. Jackson
Til)l)atts V. Tibl)atts
Tiernan r. Jackson
'i'ilford i\ l{amsey
Tillingliast v. Champlin
34,45
24
6
93
255
182, 185, 831
132
362
46
244, 254
13:!, 142
93, 263, 360
INDEX TO CASES CITED.
XXXUl
Tobias v. Blin
Todd V. Emly
Tombeckbee Bank v. Dumell
Tonilin v. Lawrence
Toombs V. Hill
Towle V. Meserve
Towne v. Leach
Townend v. Townend
Townsend v. Devaj'nes
Townshend v. Towusliend
Travis v. Milne
Treadwell v. Brown
V. "Williams
Tredwen v. Bourne
Tremlett v. Hooper
Trougliton v. Hunter
Trowbridge v. Cushman
Trueman v. Loder
Trull V. Trull
Tucker v. Moreland
Oxley
Section
41
144
160, 322
252
363, 376
221
264
180, 343
98
233
343
261, 264, 376
93
126, 151
367
162
263
134, 142
368
7,255
363
439, 449
126
122
Tunno v. The Betsina
Tupper V. Haythorne
Turbeville v. Ryan
Turner v. BisseU 32, 34, 35, 36, 41, 42,
43, 45, 46
V. Major
Tutt V. Adams
Twiss V. Massey
Tyng V. Thayer
Tyrell v. Washburn
99
127
363, 376, 379
349
( 317
u.
Union Bank v. Knapp 233
United States i>. Astley 117
United States Bank v. Binney 63, 72,
80, 101, 102, 103, 105, 106, 126, 138,
139, 140, 198, 278, 279
University of Cambridge v. Bald-
win 250
Upham V. Naylor 264
Usborne, Ex parte 403
V.
Van Amringe v. EUmaker 219
Vance v. Blair 219
V. Cowing 362
Vanderburgh v. Hull 47
Van Keuren v. Parmelee 324
Van Kuren v. Trenton Co. 14
Van Ness v. Forrest 219
Van Sandau v. Moore 189
Van Valen v. Russell 263, 393
Van Valkenburgh v. Bradley 322
Venable v. Levick 132
Venning v. Leckie 219
Venus, The 316
Vere Ex parte 208
V. Ashby 152, 153
Section
Vice V. Anson
151
V. Fleming
123
Victoria, The
445
Vigers v. Pike
133 rt
Vigilantia, The
316
Voguel, Ex parte
377
Voorhees v. Jones
43, 49
Vulliamy v. Noble
162, 195,
253, 317,
319
336,343
w.
Wade V. Jenkins
Wadsworth v. Manning
Waggoner v. Gray
Wait, In re
V. Brewster
V. Dodge
Waite V. Foster
Waithman v. Miles
Waland v. Elkins
Walburn v. Ingilby
Walden v. Sherburne
Walker, Ex parte
V. Duberry
V. Eyth
V. House
V. Trott
Balcom
99
27
182
261, 262, 337, 340
161
80, 241
160
271
58
164, 229
59, 324
388
324
363
231, 344
330
67
264
115, 121, 238
215
222, 228, 229
115
261
391
242, 243
324
27,44
227
160
24
75, 83, 93, 142, 202
159
131
219
Washburn v. Bank of Bellows
Falls 263, 360, 376
V. Goodman 319, 331, 343
Waterman r. Hunt 358
Waters r. Taylor 228, 231, 262, 263,
275, 288, 290, 292, 295
Wall V
Wallace v. Hull
?'. JvelsaU
Wallis V. Hirsch
Walhvorth v. Holt
Walmsley ?■. Cooper
Walsh V. Adams
Walton V. Butler
V. Dodson
V. Robinson
Ward V. Thompson
Warder v. Stilwell
Wardwell v. Haiglit
Warner v. Smith
Warren, In re
V. Ball
V. French
V. Wheelock
Watney v. Wells
Watson, Ex parte
V. Fletcher
182, 288, 329, 349
32, 35, 36, 41, 45,
64, 251, 368, 393
6
154
2, 15, 16, 18, 30,
32, 34, 36, 48, 49, 53, 55, 58, 59,
60, 61, 64, 66, 67, 68, 147
Way V. Bassett 324 a, 324 6
Waydell«. Luer 155
Watt V. Kirby
Waugh V. Carver
XXXIY
INDEX TO CASES CITED.
Section
Weaver v. Rogers 238
V. Weaver 380
Webster v. Brav 24
V. Webster 100, 202, 319, 329
WecMerbiirnr.Weclderburn 99, 180,343
Welch V. Knott 100
Weller r. Baker 258
Welles r. March 101
Wellington v. jNIcIntosh 215
102
107
114
90, 97, 261, 401
175
455
219
Wells V. Masterman
V. Turner
Wesson v. Newton
West V. Skip
Westc'ott V. Tyson
AVesterdell v. Dale
Westerlo v. Evertson
AVestern Bank of Scotland v.
Needell
Western Stage Co. v. Walker
Weston r. Barton
Wetniore ?•. Baker
Weyer v. Thornburgh
WlioMtcrot't r. Hickman
Wheatley i'. Calhoun
Wheeler v. Rice
Sage
159
123
246, 247
58
363, 376, 380
70
93
133
174
454
132
107, 323, 324
218
Wheelwright v. Depeyster
Whitaker v. Brown
Whitc'omb r. Whiting
White V. Ansdell
V. Harlow 219
V. Jones 261
V. Smith 167
V. Tudor 322
V. Woodward 264
Whitehead v. Chadwell's Adm'r 376
Whitewright v. Stirapson 228
Whitley I'. Lowe 233,324 a
Whitman r. B. & M. R. R. Co. 93
V. Leonard 65, 298, 305, 322
V. Robinson 330
Whitmore, Rr parte 152, 370
Whitnev r. Dutch 255
V. Ladd 261
V. Munroe 264
Whittenton Mills v. Upton 14
Whittle V. M'Farlane 182, 185. 331
Whitwell V. Perrin 455
Whifworth r. Harris 189
Wickham r. Wickliam 107,388
Wiggin /•. Cumings 219
V. Tudor 168
Wightman v. Townroe 70
Will.raham r. Snow 263
Wilcox r. Ivellogg 361
r. Wilcox 93
Wild /•. Dean 370
'•. Mihic «■')()
Wilde V. Keep 142
NN'ildcs I'. (,'hai)maii 35')
Wildes V. FesHcndeii 155
Wildman, Kr jmrli' KH5
Wilkins V. iVarcv 103
Wilkinson v. Frasier
r. Henderson
V. Page
Wilks V. Davis
Willett.f. Blanford
V. Chambers
William Bagaley, The
Williams, Ex jiarte
Section
82,42
253, 362
215
215
329, 343, 349
74, 75, 108,
132
453
97, 263, 322,
325, 326, 346, 358, 359, 360,
361, 362, 368, 370, 372,
394, 401, 402, 403
Attenborough 82, 231
Barton
V. Bingley
V. Branihall
V. Brimhall
V. Butler
V. Everett
1\ Henshaw
V. Jones
V. Keats
V. Love
V. Soutter
V. Williams
V. Wilson
Williamson v. Fox
r. Johnson
Wilhngs V. Blight
Wilhs V. Dyson
Freeman
Willison V. Patteson
Wilmer v. Currey
Wilsford V. Wood
Wilson V. Conine
V. Cutting
V. Dickson
i'. Fitchter
V. Greenwood
218
227
132
395
86
254
219
6, 146, 152, 194
160, 335
93
67
212
99
161
142
428, 434
123, 130
93, 268
9
862
244, 254
261
219, 449
453
330
207, 208, 228,
229, 231, 313, 322, 325, 329,
330, 346, 396
V. Hunter
V. Reed
V. Robertson
V. So])er
V. Wallace
V. Whitehead
V. Williams
Winch V. Keeley
Winship v. Bank of U. S.
93, 122
449
358
101, 346
241
148, 149
127, 132, 133
372
55, 63,
Winsor v. Cutts
Savage
Winter v. Imies
r. White
Wintle r. Crowther
Wish r. Small
Withington r. Herring
Wiflmell r. (Jartham
Wider V. Richards
Woddrop V. Ward
AVolliiTt I'. Harris
Wood, h'.r jHirte
102, 103, 105
44
182
158, 253, 323, ?24 b
219
133
32, 41, 45
41,46
126
263
376
228
371, 376,404
INDEX TO CASES CITED.
XXXV
Wood V. Braddick
V. Duke of Argyll
V. Gault
V. Holbeck
V. Merritt
V. O'Kelley
V. Pennell
V. Robson
V. Rutland Ins. Co.
V. Scoles
V. Shepherd
V. A^allette
V. Wilson
Woodbridge v. Swann
Woodward v. Cowing
Wooldridge v. Wilkins
Worrall v. Grayson
Wray v. Hutchinson 218
V. Milestone
Wren v. Kirton
Wrexham v. Huddleston
Section
324, 344
65, 1.50
268
133
449
241
65
215
254
182
114
38, 49, 67
215
328, 342
75, 89, 94
93
219
219, 287,
288, 292
218, 219
82
292, 295
Wright V. Cumpsty
V. Hiuiter
V. Michie
I'. Pulliara
Russell
Wrightson v. Pullan
Wyatt V. Marquis of Hertford
WycofFt'. Purnell
Wylie V. Wylie
250,
Section
219
454
219
160
251
160
455
219
93
Yale V. Eames
Yarnell v. Anderson
Yates V. Bell
Yeatman v. Woods
Yonge, Ex parte
Young, Ex parte
208,
V. Axtell
V. Hunter
160
158
254
93
181, 892, 406
348, 417, 442,
443, 444
61, 64, 65, 68
147, 150, 387
LAW OF PARTNERSHIP.
COMMENTARIES
PARTNERSHIP.
CHAPTEK I.
PARTNERSHIP WHAT CONSTITUTES.
{ § 1. Partnership and agency.
2. Definition of partnership.
3. Partnership founded in contract.
4. Roman law.
5. Delectus personarum.
6. Partnership must be founded in good faith, and for a lawful purpose.}
§ 1. Having completed our Review of the Law of
Agency, we are naturally conducted, in the next place,
to the consideration of the Law of Partnership ; for
every Partner is an agent of the Partnership ; and his
rights, powers, duties, and obligations, are in many re-
spects governed by the same rules and principles, as
those of an agent. A partner, indeed, virtually em-
braces the character both of a principal and of an
agent. ^ So far as he acts for himself and his own inter-
est in the common concerns of the partnership, he may
^ { " The law as to partnership is undoubtedly a branch of the law of prin-
cipal and agent; and it would tend to simplify ajid make more easy of
solution the questions which arise on this subject, if this true principle were
more constantly kept in view. Mr. Justice Story lays it down in the first
section of his work on Partnership." Per Lord Wensleydale, in Cox v.
Hickman, 8 II. L. Cas. 268, 312.}
4 PARTNERSHIP. [cHAP. 1.
properly be deemed a principal ; and so far as lie acts
for his partners he may as properly be deemed an
agent/ The principal distinction between him and a
mere agent is, that he has a community of interest with
the other partners in the whole property and business
and responsibilities of the partnership ; whereas an
agent, as such, has no interest in either. Pothier con-
siders partnership, as but a species of mandate, saying :
Contractus societatis, non seats ac contractus man-
datl.^
§ 2. Partnership, often called copartnership, is usu-
ally defined to be a voluntary contract between two or
more competent persons to place their money, effects,
labor, and skill, or some or all of them, in lawful com-
merce or business, with the understanding, that there
shall be a communion of the profits thereof between
them,^ Pufendorf has given a definition substantially
the same. Contractus societatis est, quo duo pluresve
inter se pecuniam, res, aui operas conferunt, eo fine, ut
quod inde redit lucri inter singulos pro rata dividatur^
Pothier says, that partnership is a contract, whereby two
or more persons put, or contract to put, something in
common to make a lawful profit in common, and recip-
rocally engage with each other to render an account
thereof:^ or, as he has expressed it in another place,
Societas est contractus de conferendis bona fide rebus
aut 02')eris, animo lucri quod lionestum sit ac licitum
in cornmwie faciendi.^ Domat says, that partnership
' Baring v. Lyman, 1 Story, 390. " Poth. Pand. 17, 2, Intr.
' 3 Kent, 23, 24 ; Wats, on P. 1, 2d ed. ; Gow on P. 1, 3d ed. ; Coll. on
P. B. 1, c. 1, p. 2, 2d ed.; Mont, on P. B. 1, Pt. 1, p. 1, 2d ed. [Noyes v.
Cushnian, 25 Vt. 390.]
♦ Puf. Law of Nat. B. 5, c. 8, § 1 ; Wats, on P. 2, 2d ed. ; Gow on P. c. 1,
p. 1, 3d i;d.; Waugh v. Carver, 2 IL Bl. 235, 240.
' Poth. de Soc. art. prel. n. 1. « Poth. Paud. 17, 2.
CHAP. I.] WHAT CONSTITUTES. 5
is a contract between two or more persons, by which
they join in common either their whole substance or
a part of it, or unite in carrying on some commerce,
or some work, or some other business, that they may
share among them all the profit or loss, which they may
have by the joint stock, which they have put into part-
nership.^ Vinnius says : Societas est contractus, quo in-
ter aliquos res aut o^^erce commimiccmtur, lucri in com-
mune faciendi gratia.^ The Civil Code of France defines
it thus : Partnershi]) is a contract, by which two or more
persons agree to put something in common, with a view
of dividing the benefit which may result from it.^ Lan-
guage nearly equivalent has been adopted by many other
foreign writers."^
§ 3. Let us consider some of the more important ingre-
dients, which are involved in this definition or description
of partnership, and may be said to constitute its essence.
In the first place, it is founded in the voluntary contract
of the parties, as contradistinguished from the relations
which may arise between the parties by mere operation
of law, independent of such contract.^ Vinnius on this
point says : Societas est consortium voluntarlum ; nisi
enhn consensu et tractatu de ea re hahito communio sus-
cepta sit, non est societas.^ There are many cases in which
' Domat, Civ. Law, 1, 8, 1, art. prel. - Vinn. ad Inst. 3, 2G, Intr.
^ Code Civil, art. 1832.
* J. Voet, Coram. 17, 2, § 1 ; Ersk. Inst. B. 3, tit. 3, § 18 ; Tapia, Elem.
de Jur. Merc. p. 86, § 1, ed. Madrid, 1829 ; 5 Duvergier, Droit Civil Franc,
tit. 9; Contr. de Soc. c. 1, n. 17, p. 31, 32; Persil, des Soc. Coram, n. 2,
p. 6, 7; 2 Bell, Coram. B. 7, p. 611, 5th ed. ; -1 Pardessus, Droit Comra. art.
966 ; Van Leeuwen's Coram, c. 23, § 1 ; Asso & Manuel, Inst, of Laws of
Spain, B. 2, tit. 15.
* 4 Pardessus, Droit Comra. art. 969, 973; 5 Duvergier, de Soc. n. 33,
39, 40, 65; 17 Duranton, Droit Franc, Liv. 3, tit. 9, art. 320; Coll.
on P. B. 1, c. 1, § 1, p. 4, 2d ed. ; Wats, on P. c. 1, p. 5, 6, 2d ed. ;
Id. 27.
« Vinn. ad Inst. 3, 2G, Intr.
6 PARTNERSHIP. [cHAP. I,
a community of interest is created by law between par-
ties, as, for example, in cases of joint tenancy or tenancy
in common in lands, or goods, or chattels, under devises
and bequests in last wills and testaments, and deeds and
donations inter vivos, and inheritances and successions.
But no partnership arises therefrom ; for they are not
strictly founded in contract, although they may exist by
the original or subsequent consent of the parties who re-
ceive the benefit thereof.^ It has been well said by
Pothier, that partnership and community are not the
same thing. La societe et la co7nmunaute 7ie sont pas
nieme chose.^ The first is founded upon the contract of
the parties, which thus creates the community ; the last
may exist independent of any contract whatsoever. And
Pothier goes on to illustrate the distinction by putting the
cases of joint heirs and joint legatees, where there is
a community of interest, but there is no partnership.^
Another illustration may be seen in the case of the part-
owners of a ship, who are treated as tenants in common
thereof, each having a distinct although an undivided in-
terest in the whole. They thus may properly be said to
have an undivided interest in the ship ; and yet that inter-
est does not make them partners.'^ So, if two joint own-
ers of the merchandise should consign it for sale abroad
to the same consignee, giving him separate instructions,
each for his own share, their interests are several, and
' See 2 Bl. Comm. 180-188 ; Id. 399, 400; Com. Dig. Estates, K. 1, K.
6 ; Story on Ag. § 39 ; Wats, on P. c. 1, p. 5, G, 2d ed. ; 3 Kent, 25.
* Poth. de Soc. n. 2. See 5 Duvergier, de Soo. n. 33-35, 40 ; 4 Par-
dessus, Droit Comm. art. 969 ; 17 Duranton, Droit Fi-anc. art. 320.
3 Poth. de Soc. n. 2, n. 182-184; Voet, ad Pand. 17, 2, n. 2, Tom.
1, p. 748.
* Abbott on Ship. Pt. 1, c. 3, p. 68, ed. 1829 ; Wats, on P. c. 1, p. 5, 6;
Id. c. 2, p. 67, 2d ed.; 3 Kent, 25 ; Ersk. Inst. B. 3, tit. 3, § 18 ; 2 Bell,
Comm. p. 655, 5th ed. ; 1 Stair, Inst. B. 1, tit. 16, § 1, p. 156 ; Porter v. M'-
Clure, 15 Wend. 187. [Noyes v. Cushman, 25 Vt. 390.]
CHAP. I.] WHAT CONSTITUTES. 7
they are not to be treated as partners in the adven-
ture.^ The same result takes place, where a purchase
is made for several distinct persons by a broker or other
agent of certain goods, each being to take a certain por-
tion, or quantity, but they are not to be sold for their
joint account or profit. In such a case no partnership
exists, although there is a community of interest in the
goods purchased.^ In short, every partnership is founded
in a community of interest ; but every community of in-
terest does not constitute a partnership ; or, as Duranton
expresses it : La sociefe aussi produit une communaute ;
en un mot, toute soeiete est bien une communaute ; mais
toute communaute n'est point une soeiete. Ilfaut pour
cela la volonte des parties?
§ 4. The Roman Law has recognized the same distmc-
tion : Ut sit pro socio actio, societatem intercedere oportet;
nee enim sufficit rem esse communem, nisi societas inter-
cedit. Communiter auteon res agi jjotest etiam citra socie-
tatem ; ut puta, cum non affectione societatis iyicidimus in
communionem, ut evenit in re duohus legata; item si a
duohus simul empta res sit ; aut si hereditas vel donatio
communiter nobis obvenit ; aut si a duobus separati7n
emimus p)artes eorum,non sociifuturi} JSfam cum trac-
tatu hahiio societas co'ita est, j^ro socio actio est; cum
sine tractatu in re ipsa et negotio, communiter gestum
' Hall V. Leigh, 8 Cranch, 50 ; Jackson v. Robinson, 3 Mason, 138. {See
§ 27, 30. 1 [So, where two persons agree to divide the profit and loss upon
the purchases and sales of certain articles of merchandise, each person to
make his own purchases and sales, and entirely with his own funds, and in
his own name, they are not partners either to third persons, or inter sese.
Smith V. Wright, 5 Sand. 113. And see Pattison v. Blanchard, 1 Seld. 186.]
* Hoare v. Dawes, Doug. 371 ; Coope v. Eyre, 1 H. Bl. 37 ; 3 Kent, 25 ;
Gibson v. Lupton, 9 Bing. 29 7; Holmes v. Unit. Ins. Co. 2 Johns. Cas.
329, 331.
* 17 Duranton, Droit Franc, art. 320; Potli. de Soc. n. 2.
* D. 17, 2, 31 ; Poth. Pand. 17, 2, n. 30 ; Vinn. ad Inst. 3, 26, lutr.
8 PARTNERSHIP. [cHAP. I.
videiur} And again: Qui nolunt inter se contendere,
Solent per nuntium rem emere in commune, quod a socie-
tate longe remotum est.^
§ 5. Hence it is an established principle of the com-
mon law, that as a partnership can commence only by
the voluntary contract of the parties, so, when it is once
formed, no third person can be afterwards introduced into
the firm, as a partner, without the concurrence of all the
partners, who compose the original firm.^ It is not suffi-
cient to constitute the new relation, that one or more of
the firm shall have assented to his introduction ; for the
dissent of a single partner will exclude him, since it
would, in effect, otherwise amount to a right of one or
more of the partners to change the nature, and terms,
and obligations of the original contract, and to take away
the delectus personce, which is essential to the constitu-
tion of a partnership.^ So stubborn indeed is this rule,
that even the executors and other personal representa-
tives of a partner do not, in that capacity, succeed to the
state and condition of that partner.^ The Roman law is
direct to the same purpose. Qui admittitur socius, ei
tantum socius est, qui adynisit; et recte; cum enim sod-
etas consensu contrahatur, socius mihi esse non potest,
quem ego socium esse nolui. Quid ergo, si socius mens
eum admisit f Ei soli socius est.^ It even pressed the
' D. 1 7, 2, 32 ; Poth. Pand. 1 7, 2, n. 30. See also 1 Swans. 609, note (a).
^ D. 1 7, 2, 33.
' I See § 307-309, and note at end of chap. iv. } [But if the term of the
partnership has expired, the interest of one partner therein may be assigned
to a stranger, and such assignee may maintain a bill for an account against
the other partners. Mathewson v. Clarke, 6 How. 122.]
* Coll. on P. B. 1, c. 1, § 1, p. 4, 5, 2d ed. ; Ex parte Barrow, 2 Rose, 252,
255 ; Crawshay v. Maule, 1 Swans. 50S, 509, and the learned note of the
Reporter, n. (a), p. 509 ; Putnam v. Wise, 1 Hill, (N. Y.) 234.
s Ibid.
« D. 17, 2, 19 ; Poth. Pand. 17, 2, n. 28 ; 1 Domat, 1, 8, 2, art. 5; Poth.
de Soc. n. 145. See 1 Swans. 509, note (a).
CHAP. I.] WHAT CONSTITUTES. 9
rule to a still further extent, and held, that a positive
stipulation between the partners at the commencement
of the partnership, that the heir or personal representa-
tive of a partner should succeed him in the partnership,
was inoperative and incapable of being enforced. Adeo
morte soc'ii solvUur societas, ut nee ah initio pacisci pos-
sumus, lit heres succedat societcUi. Nemo potest societa-
tem heredl sico sic parere, ut ip)se heres socius sit} The
common law, however, treats such a stipulation as valid
and obligatory.^ This also, according to Pothier, was
the doctrine of the old French law ; ^ and the modern
code of France has expressly adopted it, in opposition
to the Roman law.^ Such also is the law of Scotland.-^
§ 6. It is also upon the like ground, that partnership
is a contract founded purely upon the consent of the
parties, that jurists are accustomed to attach to it the
ordinary incidents and attributes of contracts. It is ac-
cordingly treated by them, as in its very nature and
character a contract arising from and governed by the
principles of natural law and justice.^ Accordingly it
must, in the first place, be founded in good faith and the
positive consent of the parties ; secondly, it must be for
a lawful object and purpose ; and thirdly, it must be
between parties sui juris and competent to enter into
such a contract. John Voet therefore affirms : Societas
est contractus juris gentium, home Jidei, consensu con-
sta7is, super re honesta, de lucri et damni commimione ;
quam inire possunt omnes libeixini hahentes rerum
» D. 1 7, 2, 59 ; Id. 1 7, 235 ; Poth. Panel. 1 7, 2, n. 56, 35 ; 1 Domat, 1 , 8, 2, art. 4.
2 Coll. on P. B. 1, c. 1, § 1, p. 5, 6, 2d ed. ; 2 Bell, Comm. G34,
5th ed. {See §196.}
* Poth. de Soc. n. 145.
* 1 Locre, Esprit du Code de Comm. tit. 3, art. 18, n. 3, p, 10&; Code
Civil, art. 1868; 17 Duranton, Droit Franc, de Soc. n. 471; 5 Duvergier,
Droit Civil Franc, de Soc. n. 433, 444.
* 2 Bell, Comm. 620, 5th ed. « Poth. de Soc. n. 4.
10 PARTNERSHIP. [cHAP. I.
suarum adminisirationem} Hence, if the contract be
founded in fraud or imposition, either upon one of the
parties, or upon third persons, it is utterly void.- And
on this point the Roman law speaks the general sense
of nations. Societas, si dolo mcdo, cad frcmdandi causa
co'ita sit, ipso jure mdlius momenti est; qida fides bona
contraria est fraudi et dolo.^ And again: Qida nee
societas aid mandatum flagitiosce rei ullas vires hahet^
The same rule applies to cases, where the partnership
is for immoral or illegal purposes," or is in contravention
of the positive law,^ or of the public policy of the
country. Thus, if the partnership be for illegal gaming,'
or illegal insurances, or wagers, or to carry on contra-
band trade, or to support a house of ill-fame or de-
bauchery ; in these and the like cases, the contract will
be deemed a mere nullity, and is equally denounced, as
such, by the Roman law, and the foreign law, and the
common law.^ The Roman law is very expressive on
' 1 Voet, Comm. 1 7, 2, § 1 . See also Poth. de Soc. n. 4.
^ 1 Story, Eq. Jur. § 222-240. {See § 285.}
3 D. 17, 2, 3, 3; Poth. Pand. 17, 2, n. 1.
* D. 18, 1, 35, 2; Poth. Pand. 18, 1, n. 15; Id. 17, 2, n. 5 ; 1 Voet, ad
Pand. 17, 2, n. 7, p. 750.
* [See McPherson v. Pemberton, 1 Jones, (N. C.) 378.]
« [Gordon v. Howden, 12 CI. & Fin. 237.]
' [See AVatson v. Fletcher, 7 Gratt. 1.]
8 Gow on P. c. 1, p. 4, 5, ed. 1837 ; Coll. on P. B. 1, c. 1, § 1, p. 29-54,
2d ed. ; Wats, on P. c. 1, p. 35-46 ; 3 Kent, 28 ; Poth. de Soc. n. 14; Storj-,
Confl. of Laws, § 2-14-260; 1 Bell, Comm. p. 297-306, 5th ed. ; Code Civil
of France, art. 1833; 17 Duranton, Droit Civil Franc, de Soc. tit. 9, c. 1, § 1,
n. 327; 5 Duvergier, Droit Civil Franc. 9, de Soc. c. 1, n. 24, 25, { See
Lind. on P. 136-162. A traditionary case of a bill in equity brought by one
highwayman against another for an account is given in 2 Poth. on Obi.
(Evans' ed.) 3, n. The use of a fictitious name is not illegal. Aubin v. Holt,
2 Kay & J. 66; Lewis v. Langdon, 7 Sim. 421. But see Thornbury v.
Bevill, 1 You. & C. C. C. 554. Under a statute requiring every person car-
rying on the business of pawnbroking to have his name printed over the door
of his shop, an agreement for a pawnbroking partnership with dormant mem-
bers was held illegal. Armstrong v. Armstrong, 3 Myl. & K. 45, 53 ; Arm-
CHAP. I.] WHAT CONSTITUTES. 11
this point. Nee enim ulla socieias 7nalejiciorum^ vel
communicatio justa damni ex malejicio est} Again:
Quod autem ex furto vel ex alio malejicio qumsitum
est, in societatem non opo7'tere conferri, 2Jcdam est ; quia
delictorum tiirpis atque fceda commwiio e'st.^
strong V. Lewis, 2 Cr. & M. 274. Under a statute forbidding any person,
not duly qualified, from acting as an attorney, it has been held, that an
unqualified person may receive a share of an attorney's profits, if he does not
receive them in consideration of acting as an attorney, e. g. if such person is
the widow of a deceased partner. Candler v. Candler, Jac. 225 ; Sterry v.
Clifton, 9 C. B. 110; Scott v. Miller, H. R. V. Johns. 220. See Raynard v.
Chase, 1 Buit. 2. But an agreement between a qualified and an unqual-
ified person to carry on the business of attorneys is illegal ; Williams t'. Jones,
5 B. & C. 108, even if the agreement be that the unqualified person shall re-
ceive a share of the profits as salary, and shall not be a partner. Tench v.
Roberts, 6 Madd. 145; Re Jackson, 1 B. & C. 270. On the question
whether joint stock companies are illegal, see § 164.
The members of an illegal partnership have no remedies against each
other in respect to the illegal transactions; either at law, De Begnis v.
Armistead, 10 Bing. 107; or in equity, Stewart v. Gibson, 7 CI. & Fin. 707;
Ewing V. Osbaldiston, 2 Myl. & C. 53 ; Bartle v. Nutt, 4 Pet. 184. How far
this rule applies to collateral transactions the immediate consideration of
which is not illegal seems not clearly settled. Metcalf on Contr. 262-269.
Merry weather v. Nixan, and notes, 2 Sm. Lead. Cas. 456. See Brooks v.
Martin, 2 Wallace, 70; Brown v. Tarkington, 3 Wallace, 377.}
' D. 27, 3, 1, 14 ; Poth. Pand. 17, 2, n. 5.
D. 17, 2, 53 ; Poth. Pand. 17, 2, n. 18.
12 PARTNERSHIP. [CHAP. II.
CHAPTEE II.
WHO MAY BE PARTNERS.
{ § 7. Infants and lunatics.
8. Foreign law.
9. Aliens.
10. Rights of married women at law.
11. In equity.
12. Whether a married woman can be a partner.
13. Roman law.
14. Foreign law.
Note. — Corporations. |
§ 7. In the next place, as to the persons who are
capable of entering into a partnership. The general
rule of the common law is, that every person of sound
mind, sui jiiris,^ and not otherwise restrained by law,
may enter into a contract of partnership.^ As to infants,
they are not by the common law incapable of enter-
ing into a partnership, since it cannot be universally
affirmed, that it may not be for their benefit.^ And
here we have another illustration of the analogy between
partnership and other common contracts ; for although
the contract of partnership by an infant is not abso-
' { A partnership is not dissolved by the lunacy of a partner, see § 295-
297; therefore a lunatic may he a partner. Whether a contract by a lunatic
to become a partner can in all cases be avoided by him, is perhaps unsettled.
In England it is held, that if one contracts with a lunatic, not knowing him to
be so, and the contract is executed, the lunatic cannot avoid it. Molton v.
Camroux, 2 Exch. 487; s. c. 4 Exch. 17; but this doctrine has not been
universally adopted in America. Seaver v. Phelps, 11 Pick. 304.}
2 Coll. on P. B. 1, c. 1, § 1, p. 8, 2d ed. ; Gow on P. c. 1, p. 1, 2, 3d ed.
1837; 1 Story, Eq. Jur. § 222-239.
* See Goode v. Harrison, 5 B. & Aid. 14 7, 156-159; 1 Story, Eq. Jur.
§ 240-243 ; [Dana i'. Stearns, 3 Cush. 3 7 2. J
CHAP. 11.] WHO MAY BE PARTNERS. 13
lutely void ; yet it is not, on the other hand, positively
binding upon him, but is voidable, and may be avoided
by him, when he comes of age, according to the known
distinction, so well stated by Lord Chief Justice Eyre,
that such contracts made by an infant, as the Court may
pronounce to be to his prejudice, are merely void ; such
as are of an uncertain nature as to the benefit or pre-
judice, are voidable only, and it is at the election of the
infant to affirm them or not ; and such as are clearly
for his benefit (as a contract for necessaries), are valid
and obligatory.^ If an infant, however, engages in a
partnership, he must at or within a reasonable time
after his arrival of age notif}^ his disaffirmance thereof,
otherwise he will be deemed to have confirmed it, and
will be bound by subsequent contracts made on the
credit of the partnership.^ If, upon his arrival of age,
he elects to continue the partnership, and does continue
it, he will be then held liable as a partner.^ Indeed,
if an infant should hold himself out as a partner during
his infancy, although in reality not so, and should not
after his arrival of age notify his disaffirmance thereof,
he would be liable to third persons, trusting the part-
nership, to the same extent, as if he were actually a
partner; for his conduct would, under such circum-
stances, amount to a delusion or deceit upon such third
' Keane v. Boycott, 2 H. Bl. 511, 514, 515; Comyns, Dig. Enfant, B. 5,
6, C. 1-4, 9 ; Holmes v. Blogg, 8 Taunt. 35 ; Id. 508 ; 1 Story, Eq. Jur. §
240-242; Baylis v. DIneley, 3 M. & S. 477; Tucker v. Moreland, 10 Pet. 58,
66-70 ; 2 Kent, 233-245.
* {If an infant pays a premium on entering a partnership, and before com-
ing of age disaffirms the contract, he cannot recover the premium back. Ex
parte Taylor, 8 De G. M. & G. 254. But see Corpe v. Overton, 10 Bing.
252.}
3 Goode V. Harrison, 5 B. & Aid. 147, 156-160; Holmes v. Blogg, 8
Taunt. 35 ; Thompson v. Lay, 4 Pick. 48 ; 2 Kent, 233-245 ; [Miller v. Sims,
2 Hill, (S. C.) 479.]
14 PARTNERSHIP. [cHAP. II.
persons ; and where one of two innocent parties must
suffer, he ought to do so, whose negligence or misconduct
has occasioned the loss.^
§ 8. The like principle will be found recognized in
the foreign law. The essence of the contract of part-
nership, like that of other contracts, consisting in con-
sent, it follows, that if a person is incapable of giving
his consent, he is not bound by the contract.^ And
Pothier says, that this rule equally applies to cases of
partnership, as to other cases of contract.^ Hence per-
sons of unsound mind, or in a state of drunkenness, or
under guardianship, or otherwise incapable, as are luna-
tics, minors, and prodigals, cannot become partners.^
The French law holds minors and persons under guar-
dianship as rather incapable of binding themselves by
contract, than incapable of contracting. They may
oblige others to them ; although they cannot oblige
themselves to others ; ^ and so is the doctrine of the
Institutes. JSfamque i^lacuit 7nello7'em quidem condi-
tionem Ucere eis facere, etiam sine tutoris auctoritaie.^
The Scottish law adopts a similar doctrine.^
§ 9. As to aliens, there is no doubt, that alien friends
may lawfully contract a partnership in one country,
although some or all of the partners are resident in
another country. But alien enemies are disabled dur-
ing war from entering into any partnership with each
other, as indeed they are from entering into any other
commercial contract.® A state of hostility puts an end
' Goode V. Harrison, 5 B. & Aid. 147, 152, 157, 158. See also Fitts r.
Hall, 9 N. H. 441 ; [Bingham on Infancy (Bennett's ed.) and note.] {On
the question whether if an infant partner disaffirms a contract, the conti'act
can be treated as the separate contract of the other partners, see § 255.}
2 Poth. Obi. n. 49-53.
•■' Poth. de Soc. n. 77; 17 Duranton, Droit Franc, n. 321.
" Poth. Obi. n. 49-53. * Poth. Obi. n. 52. « Inst. 1, 21, Intr.
7 2 Bell, Comm. 024, 5th ed. « Coll. on P. B. 1, c. 1, p. 9, 2d ed.
CHAP. II.] WHO MAY BE PARTNERS. 15
to the rights of commercial intercourse, trade, and busi-
ness between the respective subjects of the belligerent
nations, who are domiciled therein.^ Nay, the principle
goes further, and an antecedent partnership, existing
between persons domiciled in different countries, is
dissolved by the breaking out of war between those
countries ; for the whole rights, duties, obligations,
relations, and interests of the partnership, as such,
become changed thereby, and the objects of the partner-
ship are no longer legally attainable, or capable of exe-
cution.^
§ 10. As to married women, they are by the com-
mon law incapable of forming a partnership, since they
are disabled generally to contract, or to engage in
trade.^ It sometimes, however, happens in practice,
that, with the consent of their husbands, they become
entitled to shares in banking partnerships, and other
commercial establishments ; but in such cases their
husbands are entitled to their shares, and become part-
ners in their stead.^ There are, however, some excep-
tions to this rule, even at the common law. Thus, for
example, by the custom of London, a married woman
' 1 Kent, 66-69 ; Potts v. Bell, 8 T. R. 548 ; Willison v. Patteson, 7
Taunt. 439; The Indian Chief, 3 Rob. 22; The Jonge Pieter, 4 Rob. 79;
The Franklin, 6 Rob. 127; Griswold v. Waddington, 15 Johns. 57; s. c. 16
Johns. 438; Ex parte Boussmaker, 13 Ves. 71 ; The Rapid, 8 Cranch, 155;
The Julia, Id. 181 ; Scholefield v. Eichelberger, 7 Pet. 586.
* Griswold r. Waddington, 16 Johns. 438. — The masterly judgment of
Mr. Chancellor Kent in this case examines and exhausts the whole learning
on the subject. See also, 1 Domat, 1, 8, 5, art. 11, 12, 15. {See § 315, 316,
and Clemonston r. Blessig, 11 Exch. 135, n.}
^ 2 Kent, 54-64. {Marriage of a female partner dissolves a partnership,
§306.}
* Gow on P. 2, 3d ed. 1837; Coll. on P. B. 1, c. 1, § 1, p. 9, 10, 2d ed. ;
Coslo V. De Bernales, 1 Car. & P. 266 ; s. C. Ry. & M. 102 ; 1 Story, Eq. Jur.
§ 243 ; 2 Ibid. § 136 7-13 73 ; 1 Bl. Comm. 442-444 ; Wats, on P. c. 7, p. 384,
2ded.
16 PARTNERSHIP. [cHAP. II.
is authorized to carry on trade as a feme sole / and
thence it has been inferred, that she may enter into a
partnership in her trade in that city.^ So, a wife may
acquire a separate character and power to contract by
the civil death of her husband, as by his exile, banish-
ment, profession, or abjuration of the realm. ^ The
same rule has been applied, where the husband has, in
pursuance of a criminal sentence, been transported to
foreign parts for a term of years.^ The ground of these
exceptions is, that, by operation of law, the husband
is disabled to return ; and his matrimonial rights are
therefore consequently suspended during his exile, ban-
ishment, or transportation.'* In the cases of abjuration
and profession he is treated as cmU'iter mortuus.^ The
same rule has also been applied in England to the
case of a woman, the wife of a foreigner, who had
never been in England, who was thereby held entitled
to contract, and to sue and be sued as 2ifeme sole.^
§ 11. Such is the doctrine of the common law in
respect to married women. But a far more extended
rule is adopted in Courts of Equity, where, if the wife
possesses or is entitled to any property for her sole and
separate use, either by agreement with her husba,nd, or
> Coll. on P. B. 1, c. 1, § 1, p. 10. See Beard r. W^ebb, 2 B. & P. 93 ;
Burke v. Winkle, 2 S. & R. 189 ; 2 Roper on Husb. & W. c. 16, § 5, p.
126, 127.
2 Beard v. Webb, 2 B. & P. 93, 105; Lean v. Sehutz, 2 W. Bl. 1195 ; 1
Bl. Coram. 443 ; 2 Roper on Husb. & AV. c. 16, § 5, p. 123, 124.
' 2 Roper on Husb. & W. c. 16, § 5, p. 123, 124 ; Sparrow v. Carruthers,
cited 2 W. Bl. 1197, and in Corbett v. Poelnitz, 1 T. R. 5, 7, and in De Gail-
Ion V. L'Aigle, 1 B. & P. 357 ; Carrol v. Blencow, 4 Esp. 27; s. C. cited in
Boggett V. Frier, 11 East, 303 ; Marsh v. Hutchinson, 2 B. & P. 226, 231-233 ;
Clancy on Married Women, c. 4, p. 54-56, 63; Co. Litt. 133 a, 133 b ;
Gregory v. Paul, 15 Mass. 31 ; 2 Kent, 154-164.
* Ibid. * Marsh v. Hutchinson, 2 B. & P. 231.
^ De Gaillon v. L'Aigle, 1 B. & P. 35 7 ; Kay v. Duchesse de Pienne, 3
Camp. 123 ; Gregory v. Paul, 15 Mass. 31 ; Abbot v. Bayley, 6 Pick. 89.
CHAP. II.] WHO MAY BE PARTNERS. 17
otherwise, she is generally treated, as to such property,
as a feriie sole, and may dispose of the same accordingly,
and bind herself by contract touching the same.^ A
full discussion of this topic properly belongs to a trea-
tise on the jurisdiction of Courts of Equity.^ It may,
however, be proper here to state, that if, by an ante-
nuptial or postnuptial agreement for a valuable con-
sideration, the husband contracts to allow his wife to
carry on trade for her sole and separate rise, if the
property is vested in trustees, it will be held secure
against the husband and his creditors even at law ; and,
if no trustees are interposed, it will be open to the like
protection in equity.^ If the agreement is voluntary,
it will be good, and will be enforced in equity against
the husband ; but not against his creditors.^ In like
manner, if a husband should desert his wife, and she
should be enabled, by the aid of her friends, to carry
on a separate trade (such as that of a milliner) for her
own support, and that of her family, her earnings in
that trade will, in equity, be held to belong to her sepa-
rate use, and be enforced accordingly against the claims
of her husband.^
§ 12. Although, as we have seen,*" it has been thought,
that a /erne covert, having authority to carry on trade
as a, feme sole, by the custom of London, may enter into,
a partnership in such trade ; yet it does not appear
1 2 Story, Eq. Jur. § 1370-1402 ; 2 Kent, 162-172.
2 2 Story, Eq. Jar. § 1370-1402.
3 2 Story, Eq. Jur. § 1385, 1387; 2 Roper oa Husb. & W. c. 18, § 4,
p. 16 7-175.
* 2 Story, Eq. Jur. § 1386, 1387; 2 Roper on Husb. & W. c. 18, § 4,
p. 167-175.
' 2 Story, Eq. Jur. § 1387; 2 Roper on Husb. & W. c. 18, § 4, p. 174,
175 ; Cecil v. Juxon, 1 Atk. 278 ; Lamphir v. Creed, 8 Ves. 599 ; Comyns'
Dig. Chancery, 2 M. 11.
8 Ante, § 10.
2
18 PARTNERSHIP. [CHAP. II.
ever to have been decided, that the authority of a ferae
covert to carry on trade as a feme sole, arising from the
consent or agreement of her husband, positively entitles
her to engage in a partnership in the trade. If, indeed,
the trade cannot otherwise be carried on, either neces-
sarily, or conveniently, or beneficially, his consent to the
partnership might, perhaps, be inferred. But the con-
sent of the husband, that his wife may carry on trade
for her sole and separate use, does not necessarily im-
port, that she may involve herself in the complex trans-
actions, responsibilities, and duties of partnership. In
cases where the law treats the marriage as suspended,
and entitles her to act as ^fertie sole (as in cases of ban-
ishment, abjuration, or transportation), there may be
just ground to presume, that, as she is thereby generally
restored to her rights as ?i feme sole, she may enter into
a partnership in trade. But the question never having
undergone any direct adjudication, must be deemed still
open for discussion and decision.^
§ 13. In the Roman law the same positive union
and unity of rights and interests between husband and
wife are not recognized, which exist under the common
law ; ^ for in the Roman law, the husband and wife
' { Under a statute of Massachusetts, Gen. Sts. c. 108, §1,3, which pro-
vides that a married woman may sell her separate property, enter into any
contracts in reference to the same, and carry on any trade or business on her
sole and separate account in the same manner as if she were sole, it has been
held, that a woman may belong to a trading partnership, if her husband is not
a member thereof, but not if he is a member. Plumer v. Lord, 5 All. 460 ;
s. c. 7 All. 481 ; s. c. 9 All. 455; Lord v. Parker, 3 All. 127 ; Lord v. Davi-
son, Id. 131 ; Edwards v. Stevens, Id. 315. If a married woman invests her
separate property in a partnership business to be conducted by her and others,
and property is bought and delivered to such partners, a mere trespasser can-
not defend himself by denying her capacity to carry on such partnership busi-
ness. Horneffer v. Duress, 13 Wis. 603. See Everit v. Watts, 10 Paige, 82 ;
Atwood V. Meredith, 37 Miss. 635. See post, § 239.}
2 1 Burge, Col. & For. Law, Pt. 1, c. 7, § 1, p. 263, 264; Poth. Pand. 1, 6,
n. 9, 21.
CHAP. II.] WHO MAY BE PARTNERS. 19
constitute separate and distinct persons, and are sepa-
rately capable of contracting, under certain limitations
and restrictions, with each other, as well as with third
persons.^ Mr. Justice Blackstone has expressed the
same doctrine still more broadly, and says : " In the
civil law the husband and wife are considered as two
distinct persons, and may have separate estates, con-
tracts, debts, and injuries."^ Hence, the contracts of
the husband did not bind the wife, unless she ex-
pressly assented thereto. Frustra disjmtas (says the
Code) de contractibiis, cum marito tuo habitis, utrumne
jure steterint, an minime : turn tibi siifficicd, si 2'>T02:)rio
nomine nulhim cordr actum hahuisti, quominus pro marito
tuo conveniri jjossis.^
§ 14. In the modern foreign law the same principle
has been adopted with various modifications, adapted to
local institutions, usages, and policy. The law of Scot-
land most nearly approaches the English law. Inde-
pendently of special contract, the husband and wife, by
entering into marriage, are joined in the strictest society
or partnership, which draws after it a communication of
their mutual civil interests, styled, in that law, the com-
munion of goods, and, in the foreign law generally, the
property in community. During the marriage, the wife
is placed under the dkection of the husband, who has,
jure mariii, the sole authority of administering the prop-
erty in communion ; and so absolute is this right, that he
may solely dispose of the property, and it may be attached
by his creditors. In consequence of this right and power,
the husband becomes liable also to the personal debts of
1 See Domat, 1, 0, 6, art. 1-7 ; 1 BI. Comm, 444 ; Ayliffe's Pand. B. 2,
tit. G, p. 81, 82 ; 1 Bro. Civ. & Adm. Law, 82 ; 1 Burge, Col. & For. J.a\v,
B. 1, Pt. 1, c. 7,§ 1, p. 2G3, 269, 272-274.
2 1 Bl. Comm. 444. => Cod. 4, 12, 1.
20 PARTNERSHIP. [cHAP. II.
his wife.^ The wife does not seem entitled to enter into
any contract independent of his consent. The law of
France recognizes still more extensively the distinct char-
acters and rights of the husband and wife. The husband
and wife, independently of any special convention, hold
their property in community, and the husband is the sole
administrator of the property of the community.^ The
wife can do no act in law without the authority of her
husband, even though she shall be a public trader, or not
in community, or separate in her property.^ Hence, she
is incapable of contracting without his authority and con-
sent.^ She cannot become a sole trader without his con-
sent.^ But, if authorized by him to act as a sole trader,
she may make herself liable for all the concerns of her
mercantile transactions ; and in that case she also renders
her husband liable, if there be a community of goods be-
tween them.*" It has thence been supposed that his consent
and authority may extend to a contract of partnership by
her in trade."^ The law of Louisiana coincides with that of
France.^ The law of Holland and of Spain, and proba-
bly that also of most of the continental states of Europe,
contains provisions in many respects similar.^
1 Ersk, Inst. B. 1, tit. 6, § 12-18; 1 Bell, Comm. 631-G35, 5th ed. ; 1
Burge, Col. & For. Law, Pt. 1, c. 7, p. 423-462.
2 Code Civil, art. 1400, 1421.
^ Code Civil, art. 215, 217; Locrd, Esprit du Code de Comm. art. 4,
p. 27-30.
* Poth. Obi. n. 52.
5 Locre, Esprit du Code de Comm. tit. 1, art. 4, p. 26-29, 36-38, 42.
^ Code de Comm. art. 4, 5 ; Code Civil, art. 220.
7 Poth. de Soc. n. 77. « q^^^ of Louisiana, 1825, art. 121-131.
9 1 Burge, Col. & For. Law, Pt. 1, c. 7, § 2, p. 276, 293-303; Id. § 4,
p. 413, 418-423.
{ Note. — There are dicta that a corporation cannot be a member of a
partnership; Sharon Canal Co. v. Fulton Bank, 7 Wend. 412; Marine Bank
V. Ogden, 29 111. 248. See Angell & Ames on Corp. § 272. In Van
Kuren v. Trenton Co. 2 Beasl. 302, the point was raised, but not decided. In
CHAP. II.] WHO MAY BE PARTNERS. 21
Whittenton Mills v. Upton, 10 Gray, 582, it was held, that a manufacturing
corporation established under the laws of Massachusetts could not be a mem-
ber of a partnership ; and the reasoning of the court seems applicable to all
corporations. See Comm. v. Smith, 10 All. 448, 4.'>6. In Catskill Rank v.
Gray, 14 Barb. 471, it was held, that a corporation might make itself liable to
thii'd persons by sharing the profits of a jjartnership; but in Whittenton Mills
V. Upton, ubi sup., where a corporation and an individual had held themselves
out as partners, it was held, that the corporation and the individual could not,
on the petition of the latter, be put Into insolvency as a partnership. See,
further, Conkling v. Washington University, 2 Md. Ch. 497.}
22 PARTNERSHIP. [cHAP. III.
CHAPTER III.
PARTNERSHIP BETWEEN THE PARTIES COMMUNITY OF
INTERESTS.
I § 15. Contribution of property or labor.
16. Community of partnership property.
1 7. Foreign law.
18. Communion of profit.
19. Whether communion of losses is necessary.
20. Roman law.
21. Modern law.
22. Statement of Pothier.
23. Equal sharing in profit and loss not necessary.
24. Presumption of equality.
25. Roman and foreign law.
26. French law.
27. There may be community of profits without community of property.
28. Doctrine of Pufendorf.
29. Doctrine of Pothier and of the Roman law.}
§ 15. In the next place, every partnership presupposes
that there must be something brought into the common
stock or fund by each party.^ But it is not necessary,
that each should contribute or contract to contribute mon-
ey, goods, effects, or other property, towards the common
stock ; for one may contribute labor or skill, and another
may contribute property, and another may contribute
money, according as they shall agree." And for this there
is good reason ; and it is well put in the Roman law :
' 3 Kent, 24, 25.
2 Coll. on P. B. 1, c. 1, § 1, p. 10, 2d ed.; Peacock v. Peacock, 16 Ves.
49; Reid v. HoUinshead, 4 B. & C. 878; Meyer v. Sharpe, 5 Taunt. 74;
Waugh V. Carver, 2 H. Bl. 235, 246; 2 Bell, Coram. B. 7, c. 1, p. 614, 5th
ed. ; 1 Stair, Inst. B. 1, tit. 16, § 2; Domat, 1, 8, 1, art. 7; Dob v. Halsey, 16
Johns. 34. [Dale v. Hamilton, 5 Hare, 393 ; Perry v. Butt, 14 Ga. 699.]
CHAP. III.] COMMUNITY OF INTERESTS. 23
Plerumque enim tanta est indiistria socii, ut plus societati
conferaf, quam pecimia ; item, si solus navlget, si solus
peregrinetur, jjericula subeat solus} Sometimes it hap-
pens, that each partner contributes only skill or labor, or
services for the common benefit ; as, for example, house-
wrights, or shipbuilders, or riggers, who are partners ;
or commission merchants, brokers, or other agents, whose
partnership only extends to the profits of their business,
and who have no capital stock embarked in the enter-
prise.^ But all must contribute something; and thus
join together either money, or goods, or other property,
or labor, or skill ; ^ or, as Pothier expresses it : II est de
r essence du contrat de society, que chacune des parties ap-
porte ou s' oblige d'apporter quelque chose a la societe ;
ou de Vargent, ou d'autres effets, ou son travail et son
industries The Roman law pronounces the same rule :
Societatem, uno j^ecuniam conferente, alio operam, posse
contrahi, magis ohtinuit.^ And, indeed, it may be said to
be universally adopted in modern times.^
§ 16. In the next place, from what has been already
said,^ it is apparent, that in every case of partnership
there is a community of the property of the partnership
J D. 17, 2, 29, 1 ; Potb. Panel. 17, 2, n. 3; Inst. 3, 26, 2; Domat, 1, 8,
1, art. 7.
2 Coll. on P. B. 1, c. 1, § 1, p. 10, 11, 2d ed. ; Cheap v. Cramond, 4 B. &
Aid. 663 ; Waugh v. Carver, 2 H. Bl. 235.
3 Coll. on P. B. 1, c. 1, § 1, p. 10, 11, 2d ed.; 3 Kent, 24, 25. In Waugh
V. Carver, 2 H. Bl. 235, 246, Lord Chief Justice Eyre said: "A case may be
stated, in which it is the clear sense of the parties to the contract, that they
shall not contribute ; that A. is to contribute neither labor nor money, and, to
go still farther, not to receive any profits. But if he will lend his name as a
partner, he becomes as to all the rest of the world a partner."
* Poth. de Soc. n.'8-lO; 4 Pardessus, Droit Comra. art. 983, 984.
^ Cod. 4, 37, 1 ; Poth. Pand. 17, 2, n. 2; Inst. 3, 26, 2; Vinn. ad Inst. 3,
26, 2, u. 3,
« See 2 Bell, Comm. B. 7, p. 611, 5th ed.; Poth. de Soc. n. 8-10 ; Vinn.
ad Inst. 3, 26, Intr. p. 693 ; Domat, 1, 8, 1, art. 7.
7 Ante, § 3.
24 PARTNERSHIP. [cHAP. III.
between the parties, as soon as it becomes part of the
common stock, although it may before that time have ex-
clusively belonged to one or more of them.^ In this
case, however, it is to be understood, that we are speak-
ing of a partnership, designed to be such between the
parties themselves; and not merely of a partnership
which may by construction of law exist as to third per-
sons, although not intended between the parties, of which
more will presently be said.- Partners, therefore, are to
be treated, in a qualified sense, as joint-tenants of the
partnership property, having an interest therein j9er m?/
et per tout (as the phrase of our ancient law is), that is,
having an interest therein by the half or moiety, and by
all ; or, more accurately speaking, they, each of them,
have an interest in, and the entire possession, as well of
every parcel, as of the whole. ^
§ 17. This principle is equally recognized in the for-
eign law ; and indeed seems to result directly from the
nature of the contract of partnership, which supposes,
that the property brought into it is put into community
by the joint consent of the parties, xiccordingly Pothier
insists upon this as a leading distinction. La societe est
le contratpar lequel deux ou jjlusieicrs j^ersonnes convien-
nent de mettre quelque chose en cornmiin;^ and the same
distinction is fully supported by other jurists.^ Mr. Bell
says, that the property of the partnership is common,
' 3 Kent, 24-26; 4 Pardessus, Droit Comm. art. 969-972. | But prop-
erty employed ia partnership transactions may belong to one partner only,
§ 27. On what is partnership property, see § 98, 99, 371-373.}
* Waugh V. Carver, 2 H. Bl. 235, 246 ; Hesketh v. Blanchard, 4 East,
144; Cheap v. Cramond, 4 B. & Aid. 663; Reid v. Hollinshead, 4 B. &
C. 867.
3 2 Bl. Comm. 182.
* Poth. de Soc. n. 2; Poth. Pand. 17, 2, Intr. to n. 1.
* 5 Duvergier, Droit Civ. Franc, tit. 9, n. 33-40 ; Vinn. ad Inst. 3, 26, Intr.
p. 693.
CHAP. III.] C•OMMU^'ITY OF INTERESTS. 25
and held^?"o indiviso by all the partners as a stock and
in trust. ^ So Vinnius says : Ut sit societas, 7iecesse est ali-
quicl niutuo conferri et commmiicari: nisi quid idrinque
in commune conferatur, societas non intelUgitur.^ The
Roman law adopted the same prmciple. In societate
omnium honorwn omnes res^ quae coeuntimn sunt, con-
timio communicantur .^
§ 18. In the next place, every real partnership, so in-
tended between the parties tliemselves, imports, ex m
termini, a community of interest in the profits of the
business of the partnership, that is to say, a joint and
mutual interest in the profits thereof, or a communion
of profit. And this is of the very essence of the con-
tract ; for, without this communion of profit, a partner-
ship cannot, in the contemplation of law, exist."* And
> 2 Bell, Comm. B. 7, c. 1, p. G12, 613, otli ed. ; Stair, Inst. B. 1,
c. 16, § 1.
2 VInn. ad Inst. 3, 26, Intr. p. 693.
3 D. 17, 2, 1 ; Id. 17, 2, 3, 1 ; Both. Band. 17, 2, n. 13, 14; Uomat, 1
8, 1, art. 2.
* Coll. on B. B. 1, c. 1, § 1, p. 11, 2d ed. ; 4 Pardessus, Droit Comm. art.
969 ; 5 Duvergier, Droit Civ. Franc, tit. 9, n. 11 ; 3 Kenl^ 24, 25 ; Wats, on
B. c. 1, p. 33-35; Id. p. 56, 57, 2d ed. ; Felichy v. Hamilton, 1 Wash.
C. C. 491; Gow on B. c. 4, p. 153, 154, 3d ed. — Mr. CoUyer expresses
the doctrine in the following terms. " To constitute a partnership between
the partners themselves, ther3 must be a communion of profit between them.
A communion of profit implies a communion of loss ; for every man, who has
a share in the profits of a trade, ought also to bear his share of the loss."
Again : " By a communion of profit is intended a joint and mutual interest
in profit." Coll. on B. B. 1, c. 1, § 1, p. 11, 2d ed. By joint interest, as he
afterwards explains, he means a joint interest in the profits arising from the
sale of the goods; and by mutual interest, that each party has a specific in-
terest in the profits, as a principal trader. Id. p. 1 1 , 1 7. Mr. Collyer after-
wards states a curious case from Select Cases In Chancery (p. 9), where
work was jointly undertaken by two persons, and they were to divide the
money therefor ; and they were held not to be partners. His language is :
" Ao-ain, upon principles similar to those of the foregoing cases, if two persons
jointly agi'ee to do a particular piece of work, but the money received for
such work is not to be employed on their joint account, the persons so con-
tracting are not partners. Thus, in the case of Finckle v. Stacey (Sel.
Ca. 5), joint articles were entered into by the plaintiff and defendant for
26 PARTNERSHIP. [cHAP. III.
SO Pothier has laid down the doctrine. II est de T essence
de ce contrat, que la societe soit contractee pour V inter et
commun des parities} If the contract be for the sole and
exclusive benefit of one party, it is not properly a case of
partnership, but must fall under some other denomina-
tion, such as a mandate.^ Hence, if in a pretended
contract of partnership, it should be agreed, .that one of
the parties should take all the profit, without the others
having any share thereof, it would be a mere nullity,
and constitute no partnership.^ The Roman jurists
"doing a particular piece of work for tlie Duke of Marlborough, on account
of which several sums of money had been jointly received by them, and im-
mediately divided between them. There being a sum demanded by them
in arrear, which the duke refused to pay, as being unreasonable, Stacey
applied to Finckle to join him in a suit to recover what was in arrear ; which
he refused to do, declaring that he had several advantageous works under
the duke, which he should lose, should he join in a suit ; on which Stacey
applied, and got his own half of the sum, which was due to the two. A bill was
then brought for a moiety of the money so received ; and it was insisted it
should be considered as a partnership in trade, and this money as so much
received on the joint account. But the court were of opinion it was not to
be considered as a partnership, but only an agreement to do a particular act,
between which there is great difference ; and that it is so is plain, for the
money, which they had received, they immediately divided, and did not /a?/
out on a common account. The bill was dismissed with costs. Upon this
case, however, it is to be observed, that if no application had been made
to the plaintiff to sue the duke, a bill for an account, supposing an account
necessary, would clearly have been sustainable against the defendant on
other grounds than those of partnership. Here, however, the plaintiff, for
his own private ends, had absolutely refused to join in suing for the money ;
and the court observed : ' It is pretty extraordinary, that he sliould come here
to have the benefit of another's act, in which he refused to join ; which
refusal was with a corrupt view for his own advantage, and not on a common
account, the money due on which he would rather sacrifice than forego
his own particular advantage. And here is no insolvency in the duke ; if
there had been, perhaps it would have deserved consideration.' "
' Poth. de Soc. n. 11.
2 Poth. de Soc. n. 12 ; Waugh v. Carver, 2 H.BI. 235, 246.
3 Poth. de Soc. n. 12; 3 Kent, 29, 30; D. 17, 2, 30; Poth. Pand. 17, 2, n. 3 ;
Vinn. ad Inst. 3, 26, Intr. p. 693 ; Jestons v. Brooke, Cowp. 793. In many
cases of this sort the contract would be treated as a mere cover for usury.
Ibid. ; Poth. de Soc. n. 22.
CHAP. III.] COMMUNITY OF INTERESTS. 27
branded such a contract with the odious epithet of Soci-
etas Leonina, in aUusion to the fable of the lion, who,
having entered into a partnership with the other wild
beasts for hunting, appropriated the whole prey to him-
self^ And the Roman law declared, Societatem talem
coiri 7ion posse^ ut alter Iticrum tantum, alter damnum
sentiret ; et hanc societatem leoninam solitum appellare.
Et nos conseiitimus talem societatem nullum esse, ut
alter lucrum, sentiret, alter vero nullum lucrum, sed
damnum sentiret; Liiquissimum enim genus societa-
tis est, ex qua quis damnum, non etiam lucrum, spec-
tet.^ The modern Code of France has expressly pro-
mulgated the same doctrine. It declares that the
contract, which shall give to one of the partners the en-
tirety of the profits, is nuU.^ Nay, it has gone further,
and added, that it is the same of a stipulation, which
shall free from all contribution to losses the moneys or
effects brought into the partnership fund by one or more
partners.'*
§ 19. So strong and inflexible is this rule, that it is
often laid down in elementary works, as well as in the
common law authorities, that to constitute a partnership
there must be a communion of profits and losses between
the partners.^ And this in a qualified sense is perfectly
true, when it is understood with the proper limitations
1 Poth. de Soc. n. 12 ; 3 Kent, 29, 30.
2 D. 17, 2, 29, 2; Poth. Panel. 17, 2, n. 3; Poth. de Soc. n. 19; Domat,
1, 8, 1, art. 6-10; Id. 1, 8, 2, art. 12.
3 Code Civil, art. 1855. * Code Civil, art. 1855.
* See Coll. on P. B. 1, e. 1, § 1, p. 11 ; Gow on P. c. 1, p. 1, 3d ed.
3 Kent, 23, 24 ; Mont, on P. B. 1, Pt. 1, p. 2 ; Grace v. Smith, 2 W. Bl. 998
Wats, on P. c. 1, p. 1; Id. p. 56, 2d ed. ; Ersk. Inst. B. 3, tit. 3, § 18
1 Domat, 1, 8, 1, art. 1 ; Poth. de Soc. n. 19, 20; 1 Stair, Inst. B. 1, tit. 16
§ 3; Coope v. Eyre, 1 H. Bl. 37; Bond v. Pittard, 3 M. & W. 357, 360
4 Pardessus, Droit Comm. n. 996 ; 5 Duvergier, Droit Civ. Franc, n. 17 ; Ex
parte Langdale, 18 Ves. 300; Green v. Beesley, 2 Bing. N. C. 108, 112;
Dry V. Boswell, 1 Camp. 329 ; Hoare v. DaAves, Doug. 371.
28 PARTNERSHIP. [CHAP. III.
belonging to the statement. The doctrine will be found
in the E-oman law. Societas cum contrahitur, tarn
hcan quam damni commmiio initur} Sicuti lucrum ita
damnum quoque commune esse oi^ortet.^ Modern foreign
jurists often use expressions to the same effect.^ The
Roman law carried this equitable presumption still fur-
ther, and declared, that if the partners expressly men-
tioned their shares in one respect only, either solely as
to the profit, or solely as to the loss, their shares of that,
which was omitted, should be regulated by what was ex-
pressed. Illud expeditum est ; si in una causa pars fuerit
expressa^ vehiti in solo lucro, vel in solo damno, in altera
vero omissa^ in eo quoque, quod j)i"(^€te7^inissuni est, ean-
dem partem servari.'^ But all this language is to be
interpreted in a limited and qualified sense ; and so
understood, it admits of no real dispute.
§ 20. In the first place, every partnership imports,
in the absence of all contrary stipulations, that the profit
and loss are to be borne by all the partners, according
to their respective proportions thereof.^ And the ques-
tion was much discussed in the Roman law, whether a
stipulation, that one partner only should bear all the
losses, and both should share the profits, was valid or
not. It was finally settled, according to the opinion of
Servius Sulpitius, that it was valid,*and that one partner
might, by agreement, be entitled to share in the profits,
and not be accountable for any part of the loss.^ But
1 D. 17, 2, 67; Poth. Pand. 17, 2, n. 38; Domat, 1, 8, 1,-art. 1.
2 D. 17, 2, 52, 4 ; Poth. Pand. 17, 2, n. 39 ; Domat, 1, 8, 1, art. 1.
2 5 Duvergier, Droit Civ. Franc, tit. 9, n. 13-18; 4 Pardessus, Droit
Comm. art. 996.
4 Inst. 3, 26, 3 ; Vinn. ad Inst. 3, 26, 3 ; Domat, 1,8, 1, art. 5.
" Wats, on P. c. 1, p. 59, GO, 2d ed. ; Coll. on P. B. 1, c. 1, § 2, p. 105, 106,
2d cd.; 1 Voet, ad Pand. 17, 2, n. 8, p. 751 ; Domat, 1, 8, 1, art. 7, 8.
6 Inst. 3, 26, 2; Wats, on P. c. I, p. 56, 57, 2d ed. ; Domat, 1, 8, 1,
art. 6-9.
CHAP. III.] COMMUNITY OF INTERESTS. 29
then every such stipulation was understood to be with
this reserve, that the losses were first to be deducted
from the profits ; and that if profits accrued from one
species of things, and losses from another, what remained
only after the losses were deducted was to be deemed
profits.^ So that, in fact, each partner in this way, who
shared a part of the profits, shared, by deduction from
the gross profits, his proportion of the losses also, as far
as there were any profits. Ita coiri societatem posse
(says the Digest), ut niillius partem damni alter sentiat,
lucrum vero commune sit, Cassius ^jz^/«/. Quod ita
demum valehit (id et Sahinus scribit), si tanti sit opera,
quanti damnum est.^ And again : Mucius scribit, non
posse societatem coiri, ut aliarii damni, aliam lucri par-
tem socius ferat. Servius in notcdis Mucii ait, nee posse
societatem ita contraJii ; neque enim lucrum intelligitur,
nisi omni damno deducto ; neque damnuin, 7iisi omni
lucro dediicto. Sed potest coiri societas ita, ut ejus
lucri, quod reliquum in societate sit, omni damno de-
ducto, pars cdia feratur ; et ejus damni, cpiod similiter
relinquatur, pars alia capiatur.^ The Institutes express
the same doctrine still more succinctly : Et adeo, contra
Quinti Mutii sententiam obtinuit, ut illud quocpue con-
stiterit, posse convenire, id quis lucri partem ferat, de
damno non teneatur. Quod tamen ita intelligi oportet,
ut si in alia re lucrum, in alia damnum illcdum sit,
Gompensatione facta, solum, cpiod superest, intelUgatur
lucro esse.^
§ 21. It is in this sense, that the proposition has been
generally understood by jurists in modern times, and
adopted into the common law ; that each partner must
' Domat, 1, 8, 1, art. 7, 8.
^ D. 17, 2, 29, 1 ; Poth. Pand. 17, 2, n. 3.
3D. 17, 2, 30; Poth. Pand. 17, 2, n. 3: Poth. de Soc. n. 21; Domat,
1, 8, 1, art. 7-9.
* Inst. 3, 26, 2.
30 PARTNERSHIP. [cHAP.
III.
at all events share in the losses, so far, at least, as they
constitute a charge upon, and diminution or deduction
from, the profits ; and in this sense it is regularly true.^
» Coll. on P. B. 1, c. 1, § 1, p. 11, 2d ed. ; Potli. de Soc. n. 13, 19, 21 ; 5
Duvergier, Droit Civ. Franc, n. 13-18; Id. n. 220-222; Bond «. Pittard, 3
M. & W. 35 7, 360; Vinn. ad Inst. 3, 26, 2; 4 Pardessus, Droit Comm. QdQ-
999; 1 Stair, Inst. B. 1, tit. 16, § 3. {See Cummings v. Mills, 1 Daly, 520.
Mr. Lindley explains clearly the different meanings of the word " profits."
(Lind. on P. 10.) "By ■writers on Political Economy, the word profit is
used to denote the difference between the value of advances, and the value
of returns made by their employment. Profits are divided by these writers
into gross or net ; gross profits being the whole of the above difference, and
net profits being so much of that difference as is attributable solely to the
capital employed. The remainder of the difference, or in other words the
gross profits, minus the net profits, has no particular name, but it represents
the profits attributable to industry, skill, and enterprise. (As will be noticed
hereafter, lawyers are accustomed to call gross returns gross profits.)
" If the term profit be used to denote the difference between the value of
advances and the value of returns, the profit arising from any trade, business,
or adventure will be a positive or a negative quantity, or neither, according as
the value of the returns is greater or less than, or equal to, the value of the
advances. Using the term pi'ofit in this sense, persons who share the profits
of any business necessarily share its losses, if losses are incurred ; for if they
do not, what they share is not the difference above alluded to, but something
else ; as, for example, that difference if it happens to be a gain.
" But the word profit is generally used in a less extensive signification, and
presupposes an excess of the value of returns over the value of advances.
Using the word profit in this more limited and popular sense, persons who
share profits do not necessarily share losses, for they may stipulate for a
division of gain, if any, and yet some one or more of them may. by agree-
ment be entitled to be indemnified against losses by the others ; so that
whilst all share profits, some only bear losses.
" The actual or gross returns obtained by advances obviously include profits
(in the sense of gain), if profits have been made. But those returns do
not include losses, if losses are incurred ; for_losses are the excess of the
advances over the actual returns, and come out of the advances, and not
out of the returns. Hence, persons who share gross returns share profits
in the sense of gain ; but they do not, by sharing the returns, share losses,
for these fall entirely on those making the advances. Moreover, although
a division of gross returns is a division of profits, if there are any, it is only
so incidentally, and because such profits are included in what is divided ;
it is not a division of profits as such ; and under an agreement for a divi-
sion of gross returns, whatever is returned must be divided, whether there
be profit or loss, or neither.
" These considerations have led to the distinction in Entrlish law between
CHAP. III.] COMMUNITY OF INTERESTS. 31
§ 22. Potliier states this doctrine with uncommon
clearness and accuracy. After remarking, that, consist-
ently with equity, it may be agreed between the part-
ners, that one should bear a less proportion, or even no
part of the loss of the partnership, he adds, that this is
not to be understood in the sense, that one partner is
to have a share of the profit of each particular trans-
action, which shall be advantageous to the partnership,
without contributing any thing to the losses, which the
partnership may sustain from other transactions, which
shall be unprofitable to it ; for that would manifestly )
be unjust. But it is to be understood in this sense, that,'
after the dissolution of the partnership, an account is to
be taken of all the profits of the partnership, and a like
account of all the losses on all the business undertaken
by the partnership ; and if the totality of the profits
exceeds the totality of the losses, the partner shall take
his share of the excess. And if, on the contrary, the
totality of the losses exceeds that of the profits, the
partner shall have neither profit nor loss.^ And this is
in accordance with the Roman law : Neque enhn lucrum
intelligitur, nisi omni damno deducto ; neque damnum^
nisi omni lucro deducto.^
§ 23. Hence it may be laid down, as a general rule of
agreements to share profits and agreements to sliare gross returns, and to the
doctrine that whilst an agreement to share profits creates a partnership, an
agreement to share gross returns does not."
An agreement, by one or more partners, to indemnify the others against
loss entitles each of the partners to a share of the excess of the returns over
the advances, while it entitles some of the partners to be indemnified by the
others for all losses beyond the advances. If the parties are indemnified, and
indemnified not only against losses beyond the advances, but also against the
loss of the advances themselves, the contract becomes one of loan, and
ceases to be one of partnership, at least as between the parties themselves,
though it may be so as to third persons. See Lind. on P. 17.}
' Poth. de Soc. n. 21. See 5 Duvergier, Droit Civ. Franc, n. 13-18.
- B. 17, 2, 30; Poth. Pand. 17, 2, n. 3.
32 PARTNERSHIP. [CH.^
AP. III.
the common law, that, in order to constitute a partner-
ship, it is not essential that the partners should equally
share the profits and losses. It is sufficient, if they are
to share in the profits of the business, after a deduction
of the losses ; or, in other words, that they should share
in the net profits according to their respective propor-
tions. It is, therefore, competent for the partners by
their stipulations to agree, that the profits shall be divided,
and if there be no profits, but a loss, that the loss shall
be borne by one or more of the partners exclusively, and
that the others shall, inter sese, be exempted therefrom.^
So, the proportion in which they are to share the profits,
or losses, may be varied at their pleasure, whether they
contributed equally to the common stock, or not; and
the same rule is applicable to the proportions in which
they are to bear the losses.^ Thus, they may agree, that
one or more partners shall take a greater proportion of
the profits than the others, and shall, if there be no prof-
its, share a less proportion of the losses, or even be wholly
exempted therefrom.^ The reason of all this is, that the
inequality of skill, of labor, or of experience, which the
partners may bring into the particular business, may not
only justify, but positively require this inequality of com-
pensation, and of exemption from loss, as a matter of
justice and equity between the parties. And the law has,
therefore, wisely not prohibited it ; but has left it to the
parties to exercise their own discretion in these matters,
taking care that no fraud, imposition, or undue advan-
1 Coll. on P. B. 1, c. 1, § 1, p. 11, 2d ed. ; Gow on P. c. 1, p. 9, 3d ed. ;
Bond V. Pittard, 3 M. & W. 357, 359; Gilpin v. Enderbey, 5 B. & Aid.
954. {Bobbins v. Laswell, 27 111. 365.}
^ Wats, on P. c. 1, p. 56, 57, 2d ed.
3 Coll. on P. B. 1, c. 1, § 1, p. 11, 2d ed.; Gow on P. c. 1, p. 9, 3d ed.;
Gilpin V. Enderbey, 5 B. & Aid. 954, 964 ; Bond v. Pittard, 3 M. & W.
357, 360; Wats, on P. c. 1, p. 56,57, 2d ed. ; Fereday v. Hordern, Jac.
144.
CHAP. III.] COMMUNITY OF INTERESTS. 33
tage is taken of the other side.^ In fact (as has been
well observed by a learned writer), by the common law,
the various stipulations and provisions relating to the com-
mencement of the partnership, the manner in which the
business is to be conducted, the space of time for which
the partnership is to endure, the capital which each is to
bring into the trade, the proportion in which the profits
and losses are to be divided, the time and manner agreed
upon for settling the accounts, the powers and duties of
the partners in regard to conducting the business, and
entering into engagements which may affect the partner-
ship, the mode in which the partnership may be dissolved,
together with the various covenants adapted to the cir-
cumstances of each particular case, are purely and en-
tirely the subject of personal and private agreement and
arrangement ; and in whatever way they may ultimately
be settled, they cannot be impeached, unless they inter-
fere with, or contravene some rule or principle of law.'^
§ 24. In the absence, however, of all precise stipula-
tions between the partners, as to their respective shares
in the profits and losses, and in the absence of all other
controlling evidence and circumstances, the rule of the
common law is, that they are to share equally of both ;
for in such a case equcility would seem to be equity.^
And the circumstance that each partner has brought an
unequal amount of capital into the common stock, or
that one or more has brought in the whole capital, and
^ See Poth. de Soc. n. 18, 19. See also, 5 Duvergier, Droit Civ. Franc,
n. 13-18 ; 4 Pardessus, Droit Comm. n. 997 ; Van Leeuwen's Comm. B. 4, c.
23, § 10.
* Gow on P. c. 1, p. 9, 3d ed.
3 Wats, on P. c. 1, p. 59, 60, 2d ed. ; Coll. on P. B. 1, c. 1, § 2, p. 105, lOG,
2d ed.; 3 Kent, 28. [Roach u. Perry, 16 111. 37; Donelson v. Posey, 13 Ala.
752.] Gould V. Gould, 6 Wend. 263. But sec Thompson v. Williamson, 7
Bligh, N. s. 432; s. c. xuh nam. Thomson v. Campbell's Trustee's; 5 W. &
Shaw, 16; 2 Moreau & Carl. Partidas, Pt. 5, 1. 3, 4, p. 766, 767.
3
34 PARTNERSHIP. [CHAP. III.
the others have only brought industry, skill, and experi-
ence, would not seem to furnish any substantial or deci-
sive ground of difference, as to the distribution. On the
contrary, the very silence of the partners, as to any par-
ticular stipulation, might seem fairly to import, either,
that there was not, all things considered, any real ine-
quality in the benefits to the partnership in the case, or
that the matter was waived upon grounds of good-will, or
affection, or liberality, or expediency.^ It is true, that it
has sometimes been asserted, that in cases of this sort,
there is no natural presumption that the partners are to
share equally ; and that it is a matter of fact to be settled
by a jury, or by a court, according to all the circum-
stances, what would be a reasonable apportionment.
Thus, it was held by Lord Ellenborough, that if a father
and son should be partners, no presumption would arise,
that they were to share in moieties in the absence of all
positive stipulations ; but, that the shares were to be as-
certained by a jury, if the case were at law.^ But this
doctrine was afterwards positively disapproved of by Lord
Eldon, who held that even in the case of a father and
son, who are partners, if no distinct shares are ascer-
tained by force of any express contract, they must of ne-
cessity be equal partners, and are entitled to moieties.^
» Coll. on P. B. 2, c. 1, § 2, p. 105-107, 2cl ed. ; 3 Kent, 28 ; Wats, on P.
c. 1, p. 56-60, 2d ed ; Gould v. Gould, 6 Wend. 2G3. See Van Leeuwen's
Comm. B. 4, c. 23, § 10.
* Peacock v. Peacock, 2 Camp. 45.
^ Peacock v. Peacock, 16 Ves. 49, 56 ; [Webster v. Bray. 7 Hare, 159, 1 79] ;
Farrar v. Beswick, 1 Moo. & R. 527; Coll. on P. B. 1, c. 1, § 2, p. 105, 106,
2d ed. ; Gow on P. c. 1, p. 8, 9, 3d ed. ; 2 Bell, Comm. B. 7, c. 1, p. 614,
615, 5th ed. — In Farrar v. Beswick, 1 Moo. and R. 527, Mr. Justice Parke
held the same doctrine as Lord Eldon, and said : " Where a partnership is
found to exist between persons, but no evidence is given to show in what
proportions the parties are interested, it is to be pi-esumed, that they are
interested in equal moieties." It is true, that in the case of Thompson v.
Williamson, 7 Bligh, N. s. 1, 432 ; s. c. 5 W. & Shaw, 16, a doubt was thrown
CHAP. III.] COMMUNITY OF INTERESTS. 35
However, it must be still deemed an open question in
England, since a recent decision in the House of Lords
upon this doctrine, as a doctrine of the common law, by Lord Wynford and
Lord Brougham ; but I cannot think, that it is successfully maintained by the
reasoning contained in their opinions. Each of these learned judges ad-
mitted on that occasion, that if there is nothing to guide the judgment of the
court to give unequal shares, there is no rule for them to go by, but to give in
equal shares. What is this but affirming, that in the absence of all controll-
ing circumstances, leading to a different conclusion, the presumption of law
is, that the partners are to take in equal shares? But it is not an irresistible
presumption ; for where there are circumstances, which demonstrate, that the
partners in the particular case did in fact intend, or from the general habit
and custom of their trade and business, under the like circumstances, must be
fairly presumed to have intended, to share in a different proportion, there
is not the slightest difficulty in admitting, that the presumption of law ought
to yield to the presumption of fact, as legal presumptions ordinarily do in
other cases. And this is what seems to have been intended by Lord Eldon,
in his opinion in Peacock t). Peacock, 16 Ves. 49, 56; and was explicitly
avowed by Mr. Baron Parke, in Farrar v. Beswick, 1 Moo. & R. 527. The
real difficulty lies in holding, that, where there is an inequality in the stock,
or skill, or services, or experience of the different partners, any one or more
of those circumstances alone, or in conjunction with other circumstances,
equally indeterminate and equivocal, should overcome the ordinary presump-
tion of law of equality of shares between the partners. Now, Lord Ellen-
borough, in Peacock v. Peacock, 2 Camp. 45, seems to have acted upon the
ground, that, in every such case of inequality, there was no such presump-
tion of law whatever to govern it; but that it was open for the jury to take
into consideration all the circumstances, if the suit were at law, or for the
court, if the suit were in equity, and to adjudge the proportions, not upon
any supposed contract between parties actually established, but as it were ex
cequo ei bono, as upon a quantum meruit. It was in this view, that Lord Eldou
seems to have expressed his disapprobation of the doctrine ; because it
assumed to overthrow a presumption of law (and it would not have been
materially different, if it were a presumption of fact), upon indeterminate
circumstances, which might be urged with more or less effect to a jury, but
which carried no certainty, as to the positive intent or contract of the parties.
His Lordship on that occasion said : " The father employed his son in his
business; and, as is frequently done by a father, meaning to introduce his
son, the business was carried on in the name of ' Peacock and Co.' It
appeared to me, that the son, insisting that he had a beneficial interest,
must be entitled to an equal moiety, or to nothing; that, as no distinct share
was ascertained by force of any express contract between them, they must of
necessity be equal partners, if partners in any thing. In that view the re-
sult of the issue, that was directed, appears to be extraordinary. The propo-
sition being, that the son was interested in some share, not exceeding a
36 PARTNERSHIP. [cHAP. III.
has questioned, if it has not shaken, the doctrine of Lord
Eldon, and affirmed that of Lord Ellenborough.^ In
moiety, the jury in some way, upon the footing of quantum meruit, held him
entitled to a quarter. I have no conception, how that principle can be
applied to a partnership. The parties, however, consider themselves bound
by that verdict." If, by the custom of any particular trade or business under
the like circumstances, the rule was general to give a fi.xed proportion, as,
for example, a fourth to one partner, and three fourths to another, on
account of the inequality of capital, or skill, or experience, or age, or the
relation of parent and child, that might properly control the presumption of
law ; for it would amount to strong presumptive evidence, that the partners
intended to contract upon the usual terms. But where there are no such
circumstances, and nothing determinate in the evidence, but all rests upon
conjecture, at best admitting of various force and application, what ground is
there to presume a contract for a quantum meruit ? The more reasonable
ground would seem to be, that the parties meant to treat with each other
upon a footing of equality, or to waive the inequality, as a matter of liber-
ality', or bounty, or parental or filial affection, or proximity of blood or
personal friendship. There seems also to be very great uncertainty in the
application of the doctrine; for from such indeterminate and A'ague circum-
stances very different conclusions might be drawn by different juries and
different courts; and it seems far more convenient to adopt a general rule of
interpretation of the intention of the parties, in the absence of any express
or implied agreement or usage, as to the apportionment of the profits. Cases
may indeed arise, where the presumption fairly would be, that the parties
were to share the profits only in moieties, and not the capital ; as, for example,
in the case of a partnership between a father and a son, where the father
supplied the whole capital. However this may be, the Judges of the Scot-
tish Court of Session adopted the doctrine of Lord Eldon, in the case of
Thompson v. Williamson, 7 Bligh, N. s. 432; s. c. 5 W. & Shaw, 16; 7
Shaw & D. No. 333 ; but it was overturned in the House of Lords by the de-
cision of Lords Wynford and Brougham. Mr. Bell and Mr. Erskine main-
tain the same doctrine as the Court of Session (2 Bell, Comm. B. 7, c. 1, p.
614, 615, 5th ed. ; Ersk. Inst. B. 3, tit. 3, § 19). Nor does it appear to me
that the doctrine of Lord Stair (1 Stair, Inst. B. 1, tit. 16, § 3), is intended to
be different, notwithstanding the suggestion of Lord Wynford. In Gould v.
Gould, 6 Wend. 263, the Court of Errors of New York held, that, in the ab-
sence of all proof to the contrary, partners will be presumed to be equally
interested in the partnership funds. See Harrison v. Sterry, 5 Cranch, 289.
' Thompsons. Williamson, 7 Bligh, n. s. 432; s. C. 5 W. & Shaw, 16.
[Rut see a later decision by Vice Chancellor Wigram, Webster v. Bray, 7
Hare, 159, 177, and another by Lord Cottenham, Stewart v. Forbes, 1 Hall &
Tw. 461, 4 72 ; .s. c. 1 Macn. & G. 137. In the latter case the Lord Chancellor
refers to Peacock v. Peacock, and says : " In that case it was properly held,
that, in the absence of any contract between the parties, or any dealing from
CHAP. III.] COMMUNITY OF INTERESTS. 37
America the authorities, as far as they go, seem decidedly
to favor the doctrine of Lord Eldon.^
which a contract might be inferred, it would be assumed, that the parties had
carried on business on terms of an equal partnership But what would
have been the decision in Peacock v. Peacock, if the books and accounts,
instead of absolute silence as to the shares of the partners in each year, had
described the shares in which the partners were interested in the business,
and had attributed to the plaintiff four sixteenths only of the shares of the
business ? These entries are as conclusive of the rights of the parties, as if
they had been found prescribed in a regular contract."] { Thompson v. Wil-
liamson (7 Bligh, N. s. 432) was a decision on the Scotch, not on the
En<rlish law. From the report of this case in the Scotch Court of Session
(au6 nom. Campbell v. Thomson, 7 Court of Sess. cases, No. 333, p. 650)
it appears that the defender contended " that there was no universal rule of
law establishing a presumption of equality in partnership ; that it was a ques-
tion of circumstances to be decided by a jury," while the pursuers maintained
"that in the absence of any written evidence to establish the extent of a
partner's share, the presumption by the law of Scotland was equality." The
court found for the pursuers, and as Lord Wynford says (7 Bligh, x. s. 433)
"took upon themselves to declare that when there is no express contract"
the partnership property and profits must be equally divided, or in the words
of Lord Brougham (7 Bligh, N. s. 440) they decided that "unless there be
a special contract to exclude the legal presumption, the legal presumption
shall give him [the partner] an equal share of the profits, and shall exclude
all evidence of the fact ; excluding all consideration of the particular circum-
stances of the case." It was this decision "taking it simply as a question of
Scotch law, deciding nothing further, as it is our rule, or ought to be our rule,
in no case to go further than the simple question before us," (7 Bligh, N. s.
446) which was reversed ; and that Thompson v. Williamson has not been con-
sidered as deciding that there is no presumption of equality seems clear from
several more recent cases which have decided that there is such a presump-
tion, without an intimation that such decision is in conflict with the judgment
of the House of Lords. Collins v. Jackson, 31 Beav. 645; Robinson v. An-
derson, 20 Beav. 98, s. c. 7 De G. M. & G. 239. In this latter case. Sir
J. L. Knight-Bruce, L. J., says : " The evidence satisfies us that the result of
it cannot be represented more favorably for the defendant, than that the
statements on one side neutralize those on the other. So putting it, I con-
ceive that the presumption of law remains, which is equality ; " and Sir G. J.
Turner, L. J. : " In the absence of evidence of an agreement for a different divi-
sion, the presumption is in favor of equality." See, also, Lind. on P. 573-576 ;
Robley r. Brooke, 7 Bligh, n. s. 90; M'Gregor i\ Bainbrigge, 7 Hare, 164, n.;
Copland V. Toulmin, 7 CI. & Fin. 349 ; Warner v. Smith, 1 De G.J. & S. 337.}
' 3 Kent, p. 28; Gould v. Gould, 6 Wend. 263. { Donelson v. Posey, 13
Ala. 752; Roach v. Perry, 16 III. 3 7. Fan- r. Johnson, 25 III. 522 ; Moore
0. Bare, 11 Iowa, 198. But see dissenting opinion of Hoffman, J., in Ilas-
brouck V. Childs, 3 Bosw. 105.}
38 PARTNERSHIP. [cHAP. III.
§ 25. The Roman law promulgates the like doc-
trine. If no express agreement were made by the
partners concerning their shares of the profit and loss,
the profit and loss were shared equally between them.
If there was any such agreement, that was to be faith-
fully observed. Et quidem (say the Institutes), si nihil
de j^artihiis lucri et damni nomincdim convenerit, cequales
scilicet partes et in lucro et in damno spectantur. Quod si
ex2Jresscefu€rint2)artes, hce servari dehent} So the Digest.
Si non fiierint partes societati adjectce, cequas eas esse con-
stat.^ This also seems to be the rule adopted into the mod-
ern commercial law ; but then it is received, not without
some modifications and qualifications.^ Thus, Vinnius
says, that this doctrine is commonly and rightly under-
stood to be true, when the partners have contributed
an equal amount to the capital stock ; for if they have
contributed unequal amounts, then they are to share
according to the proportions furnished by each. Pufen-
dorf and Noodt adopt the like interpretation ;'* although
it must be admitted, that there are other jurists, who
construe the Roman law as indiscriminately applicable to
all cases, whether of equal or of unequal contributions,
either in capital or stock, or in labor or services, or in a
mixed proportion of each.^
1 Inst. 3, 26, 1 ; 1 Voet, ad Pand. 17, 2, n. 8, p. 751 ; Vinn. Sel. Quest.
Jur. c. 53, 54 ; Domat, 1, 8, 1, art. 4.
" D. 1 7, 2, 29 ; Poth. Pand. 1 7, 2, n. 7.
^ See Vinn. ad Inst. ed. Ileinecc. 3, 26, 3, p. 695, Comm. ; Van Leeu-
wen's Comm. B. 4, c. 23, § 10.
* Puf. on Law of Nat. B. 5, c. 8, § 1 , 2 ; 2 Noodt, Opera, Comm. ad Dig. 1 7,
2, 29, 2, p. 297, 298, ed. 1767. But see Vinn. Sel. Quest. Jur. c. 53, 54; Vinn.
ad Inst. 3, 26, 2. See Asso & Manuel's Inst, of Laws of Spain, B. 2, tit. 15.
^ Ibid.; 5 Duvergier, Droit Civ. Franc, n. 224. — lieineccius pays this
beautiful tribute to the memory of Noodt, speaking of his then recent death :
" Quern eximium jure consultum, dum hsec scribo, ad Superos e.xcessisse, non
sine dolore audio. Mortuum saltern nemo dixerit, qui tot egregiis operibus
immortalem sibi gloriam peperit, et jam vivus, quodammodo interfuit posteri-
tati." Ilein. Vinn. ad Inst. 3, 26, 1, note. {See Hasbrouck v. Childs, 3
Bosw. 105.J
CHAP. HI.] COMMUNITY OF INTERESTS. 39
§ 26. Pothier himself, while he admits the correctness
of the general rule of the Roman law, suggests some
modifications, or rather qualifications of it, in its actual
application.^ Where each partner has contributed mon-
ey or effects of a value fixed between them at the time,
there, he says, that they are to share in proportion to the
value so fixed ; and that they are to share equally, only
when no such value is fixed. Where the money or effects
brought into the partnership are so estimated at a fixed
value, his opinion is, that it ought to make no difference
as to the partners sharing in proportion to such value,
although one may also bring a higher, or peculiar skill
or industry into the firm.^ The Civil Code of France
provides that the share of each partner in the profits or
losses is, in the absence of any other agreement in the
articles of partnership, to be in proportion to what he
brings into the partnership funds ; and in the like case,
if one partner brings skill only, his share of the profits
or losses is regulated, as if what he brought in had been
equal to that of the partner who has brought the least.^
The Code of Louisiana more closely adheres to the Ro-
man law, and declares, that when the contract of part-
nership does not determine the share of each partner in
the profits or losses, each one shall be entitled to an
equal share of the profits, and must contribute equally
to the losses.^
1 Potli. de Soc. n. 15-20; Id. n. 73.
^ Poth. de Soc. n. 15-21 ; Id. n. 7.3. See also, 5 Duvergler, Droit Civ.
Franc, n. 12, n. 224; 13 TouUier, Droit Civ. Franc, n. 411, 412.
3 Code Civil, art. 1853. {See Hasbrouck v. Childs, 3 Bosw. 105.}
*■ Code of Louisiana (1825), art. 2896. — Mr. Watson has made some re-
marks on this subject, which show the difficulty of making a suitable appor-
tionment of profits, in many cases, where there is no express agreement
between the parties, and that presumptions of very different force and
importance may arise from the circumstances, often nicely balancing each
other. "But with respect to the profit and loss" (says he), "to be derived
from a partnership, the subject of which comprises the capital, stock, and
I
40 PARTNERSHIP. [CHAP. III.
§ 27. These two circumstances, that there is a commu-
nity of interest in the capital stock, and also a commu-
interest of each partner therein, together with the labor and skill to be em-
ployed, and the division thereof, what natui-ally occurs on point of distribu-
tion seems to be this, that if each partner contributes an equal proportion
of capital, stock, and labor, and skill, then each must, according to justice,
receive an equal share in the profit and loss; but where they contribute
imequally, certain rules should be prescribed according to the circumstances
of the partnership, for the purpose of adjusting the respective shares of all
the partners. For instance, if one partner furnishes labor, and the other
money, whatever the produce of such partnership trade may amount to, it
should seem right to divide it, after deducting the sum advanced, in the
proportion of the interest of the money to the wages of the labor, allowing
such a rate of interest as money might be borrowed for upon the same species
of security, and such wages or allowance as a skilful workman would be
entitled to, for the same degree of labor and a similar trust, according to the
principle laid down in the civil law, which says, that no man doubts, but
that partnership may be entered into by two persons, when one of them
only finds money, inasmuch as it often happens, that the work and labor of
the other amounts to the value of it, and supplies its place. For in partner-
ships, where on the one side labor is contributed, and on the other, only the
use of money, that partner, who contributed the money, does not always
admit the other to a share of the principal, but only to his share of the
profit, which such labor and money joined together might produce. And if
A. for instance, who furnishes labor only, hath no title to any part of the
money advanced upon dissolving the partnership, so B. alone should be liable
to the risk of the money, as owner thereof; for in such a case it is not
the money itself, but the risk, which it runs, and the probable gain, which
may accrue from it, that are to be compared with the labor. Therefore,
when the profits of such a partnership are to be shared, it would be out of
all proportion in point of reciprocal advantage, if the labor were to be com-
pared with the principal sum advanced ; and the only fair criterion to judge
by is a true comparison between the value of the labor on one side, and the
risk and hazard which the money advanced is exposed to on the other.
And perhaps the better way in forming partnerships of this sort, is to rate
the risk of the principal, and the hopes of the profit, according to the in-
terest that is generally given for money so borrowed upon risk. Suppos-
ing, then, this interest to be £5 per cent ; if one party contributes labor
worth £50, and the other advances £1,000 in money, each partner will share
equally the profit. According to this rule, if there should be nothing
gained by the partnership concern, A. would lose his labor, and B. his in-
terest, which would be equal and just. And should the original stock be
diminished, by the same rule A. loses only his labor, whereas B. would lose
his interest and a part of the principal ; for which eventual disadvantage B.
is compensated by having the interest of his money computed at five pounds
CHAP. III.] COMMUNITY OF INTERESTS. 41
nity of profit and loss, in the sense already stated, in all
the partners, where they exist, are decisive that the case
per cent in the division of the profits, where there are any. But it some-
times happens in partnershij) concerns, that labor and money are so blended
or interwoven together, as to give to him, that contributed only his labor, a
share in the principal; the labor contributed by one partner, and the
money advanced by the other, being so intermixed as to make one general
mass. As for example, one partner spends the money advanced by him in
buying up unwrought materials, and the other furnishes personal skill and
labor to work them up and manage them, which very ol'ten happens in large
manufacturing towns. Thus, again, if I supply a weaver with £100 to buy
wool, and he makes cloth of it, computing his labor at £lOO, it is manifest,
that here both of us have an equal interest in the cloth, and when it is sold,
the money must be equally divided ; nor in fairness could I deduct the £100
contributed at first, and then divide the remainder with him. This rule
obtains in other things as well as money ; as when one allows ground for a
building, on condition that he, who builds thereon, shall have a moiety ; or,
when one trusts a flock to be fed on condition, that, if it be sold within a
limited time, the money shall be proportionably divided amongst the part-
ners. Therefore, the profit or loss to be derived from trade by partners
ought always to be arranged and provided for at the commencement of
their partnership, according to certain agreed proportions." Wats, on P. c.
1, p. 57-59, 2d ed. See also on the same jwiut Voet, ad Pand. 17, 2, n. 8 ;
and Vinn. Sel. Quest. Jur. c. 53, 54 ; Duvergier, Droit Civil Franc, n. 244-
288; 17 Duranton, Droit Civil Franc, n. 415-433; Poth. de Soc. n. 15-20 ;
Coll. on P. B. 2, c. 1, § 2, p. 106, 107, 2d ed., cites Puf. Lib. 5, c. 8 ; Van
Leeuwen's Comm. B. 4, c. 23, § 10; Asso & Manuel's Inst, of Laws of Spain,
B. 2, tit. 15. Mr. Rutherforth, in his Institutes (B. 1, c. 13, § 32-3(i), has
fully discussed the subject; and his remarks are so just and appropriate, that
they are here cited. " In partnerships of trade, goods, or money, or labor,
under which I Include skill, or management, ai-e by the consent of their re-
spective owners, united into one common stock. Each partner has in view a
benefit to be received for a benefit which he gives. The separate stock of any
of the partners alone might be too small to trade with, in the manner pro-
posed ; or the nature of the undertaking may require not only more goods
or more money than any one of them could supply, but more labor or more
skill than any one of them is equal to. The gain, arising from the common
stock of goods or money, is the price obtained for the use of those goods or
money ; and the gain, arising from their joint labor, is the wages obtained
for such labor. If we consider the gain in this view, it is easy to determine
what proportion of it each partner ougiit to receive. In whatever proj)or-
tion the use of one partner's goods is more valuable than the use of the other
partner's goods, so much more of the gain belongs to the former, than to the
latter. I do not mean, that in dividing the gain, any regard is to be had to
the particular share of it, which arose accidentally from the goods contrib-
42 PARTNERSHIP. [cHAP. III.
is one of real partnership between the parties them-
selves.^ But it is not essential in all cases, to constitute
uted by this or that partner ; but that after the goods are united in a joint
stock by agreement, each partner has a claim to the gain arising from it, in
proportion to what was the probable value of the use of his goods, if he had
traded with them separately. And as the probable value of the use is in
proportion to the value of the goods themselves, each partner's claim upon
the gain will be in the same proportion. In like manner, where there is a
joint labor, since the profits arising from it are the wages of that joint labor,
each partner has a claim, not to that particular part of the gain which his
labor earned, for then it would be no partnership, but to such a compara-
tive share out of the common wages or gain, as is proportional to the value
of his labor, when compared with the labor of the other. As the gain of
each partner, so likewise the loss of each ought to be proportionable to the
value of what he contributes. As much as the goods, which one partner
contributes, exceed in their value the goods, which the other contributes, so
much greater is the claim of the former upon the joint stock, than the claim
of the latter. Since, therefore, their respective claims upon the whole stock
are in jiroportion to the share of that stock, which came originally from
each of them, their claim upon each part of the whole must be in the same
proportion. And, consequently, if any part of the stock is lost, each part-
ner having a claim upon such part lost in proportion to his original share,
loses a claim in the same proportion, that is, the loss of each is in proportion
to the original share which he contributed towards the common stock. This,
then, is the rule for adjusting the gain and loss in partnerships, where no ex-
press agreement has been made to the contrary. Each partner is to receive
such a share of the gain, or to bear such a share of the loss, as has the same
proportion to what any other of the partners receives or bears, that the share
contributed by the former has to the share contributed by the latter. The
interest or claim of each upon the whole stock is in this proportion; and, con-
sequently, the interest or claim of each in the increase or decrease of it, in any
part added to it by way of gain, or in any part taken from it by way of loss,
ought to be in the same proportion. If the parties agree, that one of them
shall have a share in the gain, but shall bear no share in the loss, the contract
is a mixed one ; it is partly partnership, and partly insurance. As they are
all of them to have a share in the gain, it is partnership ; but he or they, who
are to bear all the loss, insure the principal stock of him who is to bear none
of it. To adjust the shares, which each party, in such a mixed contract, is to
receive in the gain, we are to consider what it is worth to insure his principal,
■who is not subject to any loss. And when the value of such insurance is de-
' Dob V. Halsey, 16 Johns. 34 ; 3 Kent, 24 ; Coll. on P. B. 1, c. 1, § 1, p.
11-17; 2d ed. ; Ex parte Gellar, 1 Rose, 297. [See also Rawlinson v. Clarke,
15 M. & W. 292 ; Allen v. Davis, 8 Eng. (Ark.) 28.] {As to what constitutes
persons partners inter sese, as well as to third persons, see the next chapter. }
CHAP. III.j COMMUNITY OF IN'TERESTS. 43
such a partnership, that both should concur, that is, that
there should exist, as between the parties themselves, a
ducted from the whole gain, and assigned to those who were to have borne
all the loss, if there had been any, the remaining portion is to be divided, in
proportion to each party's share in the capital stock. It is generally main-
tained to be contrary to the nature of partnerships, that, where a capital stock
is made by mutual consent, the parties so forming a capital stock should agree,
that one of them should have all the gain, and the other bear all the loss.
And certainly such an agreement is contrary to the nature of partnership, if
we define partnership} to be a contract, which gives the parties a common claim
to the joint stock ; because, where they have a common claim to the stock,
they must, in consequence, have a common claim to the gain arising from it,
and to the losses sustained in it. But such an agreement, though it may be
inconsistent with the nature of partnership, is not inconsistent with the law of
common justice. A man wants five hundred pounds capital stock, to enter
upon a certain branch of trade ; he has only three hundred pounds of his own.
I agree to let him have two hundred pounds to make up his capital, upon con-
dition, that he shall have all the advantage arising from the whole ; that, if
he saves the whole capital, my money shall be returned, but that if any part
of it is lost. 1 will bear the loss, as far as the two hundred pounds, which
I have advanced. There can, I think, be no question, whether the law of
nature would allow of such an act of humanity as this. You may say, that
such an agreement is contrary to the law of partnership. I grant it is, and
therefore am satisfied, that it should not be called a partnei-ship. I only
insist, that the agreement is not contrary to the law of nature, and leave it
to you to call it by what name you please. Perhaps you may have no name
for it; but a contract is not the more unlawful for wanting a name. In
partnership, where work is contributed on one side, and money on the
other, the partner, from whom the money comes, may contribute either the
use only of the money, or the property of it. If he contributes only the use
of it, and still keeps his property in the principal, so that the joint stock is
to be considered as made up of the labor of one partner, and of the use of
the other's money; it is plain, that, supposing the principal to be safe, it be-
longs to him, and that, supposing it to be lost, he alone is to bear such loss.
The other partner, who contributes work, since, as the case is put, he had
no claim to the principal money, or to any part of it, cannot be obliged to
make good any part of that loss, or to bear any share in it. But if he con-
tributes the property of his money, so that the joint stock, upon which each
of them has a common claim, is made up of his principal money, and of the
other's labor, then the partner, who labors, has a claim upon the principal
money itself; and, consequently, whenever the partnership is dissolved, if
the principal money, or any part of it is safe, he ought to have a share in it ;
and if the principal is lost, he is a sufferer by losing such share. In the
former case, where he, from whom the money comes, still keeps his jjroj)-
erty in it, and has a right to the whole principal, you may ask, what it is,
44 PARTNERSHIP. [cHAP. III.
community or communion of interest in the capital stock,
and also in the profit and loss.^ For, if the whole capital
stock, embarked in an enterprise or adventure, belongs to,
and is, by agreement, to remain the exclusive property of
one of the parties ; yet, if there is a community of profit
or of profit and loss, in the enterprise or adventure, be-
tween all the parties, they will be partners in the profit,
or the profit and loss, between themselves, as well as to
third persons, although not partners in the capital stock.^
The one does not necessarily include the other, and there-
fore we are carefully to distinguish between the cases.
Where there is a positive agreement between the parties
■which he contributes. But the answer is obvious. He contributes the use
of his money ; that is, he contributes the clear gain, which he might proba-
bly have made of it himself. This, however, is not all. He contributes,
besides this, the hazard of his principal; because, if the whole or any part of
it should be lost, the loss is his. In order, therefore, to adjust the share
which each partner ought to have in the gain, if there is any, you are to
value the work of one, and the use and hazard of the other's money; and
in proportion to the value contributed by each of them, upon such an esti-
mate, their respective gains are to be settled. In the other case, where he,
from whom the money comes, contributes the property of it, and the other
contributes his labor, in adjusting their respective shares of the gain, you are
to value the money of one and the labor of the other. And when the com-
parative values of what each has contributed are thus settled, their respective
shares in the gain are to be in the same proportion."
1 {Meaheru. Cox, 37 Ala. 201.}
« Ex parte Hamper, 17 Ves. 403. {See § 55-58, 205; Lind. on P. 16,
17, 551 ; Greenham v. Gray, 4 Ir. C. L. 501 ; Fromont v. Coupland, 2 Bing.
170 ; French v. Styring, 2 C. B. N. s. 357 ; Ward v. Thompson, 22 How. 330 ;
Bromley v. Elliot, 38 N. H. 287, 309; Stevens v. Faucet, 24 III. 483; Rob-
bins r. Laswell, 27 111. 365; Fawcett v. Osborn, 32 111. 411 : Bartlett t\ Jones,
2 Strobh. 471 ; Jones v. McMichael, 12 Rich. Law, 176. This doctrine is de-
nied in Dwinel v. Stone, 30 Me. 384. Chase v. Barrett, 4 Paige, 148, is also
sometimes referred to as an authority in opposition to the views of the text.
But it is to be observed that, though Chancellor Walworth saj's that to con-
stitute a partnership there must be a joint ownership of the partnership funds,
yet the point decided was, that A., an alleged partner, could not share in the
capital stock, and the decision can be sustained not only on the ground that
A. was not a partner, but also on the ground that though he was a partner,
yet that the capital stock remained, in the words of the text, " the exclusive
property" of his copartner. See Conklin v. Barton, 43 Barb. 435.}
CHAP. III.] COMMUNITY OF INTERESTS. 45
on this point, that "will govern ; where there is no such
agreement, and no implication from the circumstances of
the particular case, leading to a different conclusion, there
will be presumed to be a community of interest in the
property, as well as in the profit and loss.^ Where the
property of one partner only is, by agreement, actually
put into community, as partnership property, there, in the
absence of any controlling stipulations, the like commu-
nity in the profit and loss will be intended to exist between
the parties, as incident to the community of property.®
But where the agreement merely in terms expresses that
the property is furnished by one partner, and the parties
are to have a community of interest, and share in the prof-
it and loss, the like inference is not ordinarily or necessa-
rily deducible.^ And accordingly it has been held at the
common law, that if A. is the owner of goods, and agrees
with B., that B. shall be interested in a particular por-
tion of the profit and loss of the adventure or voyage
abroad, in which the goods are to be embarked, such an
agreement will not alone make A. and B. partners in the
goods, as between themselves, but only partners in the
profits.^ But, if the goods themselves are purchased on
joint account, or are treated as a joint concern, or both
parties are, by their agreement, to be interested therein ;
there, a very different inference will arise, and the parties
will be treated as partners in the goods, as well as in the
' Coll. on P. B. 2. c. 1, § 2, p. 106-113, 2cl ed. See Brophy v. Holmes,
2 Molloy. 1. {See Julio v. Ingalls, 1 All. 41.}
2 Reid v. HoUinshead, 4 B. & C. 867.
3 Coll. on P. B. 2, c. 1, § 2, p. 106-112, 2d ed. ; Mair v. Glennie, 4 M. &
S. 240.
" Meyer v. Sliarpe, 5 Taunt. 74: Smith v. Watson, 2 B. & C. 401 ; Coll.
on P. B. 2. c. 1, § 2, p. 107-112, 2d ed. ; Hesketh v. Blanchard. 4 East. 144 ;
Ex parte Hamper, 1 7 Ves. 403 ; ]\Iair v. Glennie, 4 M. & S. 240; [E.xplained
In Stocker r. Brockelbank, 3 Macn. & G. 250 ; 5 Eng. L. & Eq. 67]; Hall v.
Leigh, 8 Craneh, 50; [Clement v. Hadlock, 13 N. H. 185.]
46 PARTNERSHIP. [cHAP. III.
profits and losses.^ The like doctrine will apply, where
each of the parties contributes labor and services and
materials in the manufacture of any articles of trade, and
the articles, when made, are to be equally or proportion-
ably shared between them ; they will be deemed partners,
inter sese ; for the articles manufactured, and so to be
divided, may well be deemed the profits or losses of their
joint undertaking and business. It is not a mere division
of a capital stock jointly purchased, but of a capital
stock in new proceeds or products."
§ 28. The like distinction is recognized and maintained
by foreign jurists. Pufendorf says : " Upon breaking up
of partnership, if each party only contributed money, it
is plain, upon a division, that each must receive accord-
ing to his contribution. But if both money and labor
were contributed, it must be considered after what man-
ner the contribution or collection was made ; for when
labor is contributed on one side, and only the use of mon-
ey on the other, he who contributed the money, does not
admit the other to a share in the principal, but only to
his proportion of the gain that might be made of the
money and labor joined together. And in this case, as
he that contributed only labor, has no title to any part of
the money, when they break off" partnership, so the other
alone, as owner, is concerned in the risk that the money
is exposed to ; and in such a partnership as this, not the
money itself, but the risk that it runs, and the gain, that
may be probably expected from it, is compared with the
labor." ^ He afterwards adds : " But sometimes the labor
> Reid V. Hollinshead, 4 B. & C. 867 ; Coll. on P. B. 2, c. 1, § 2, p. 112,
113, 2d ed.; Ex parte Gellar, 1 Rose, 297; [Soule v. Ilayward, 1 Cal. 345];
{Sims V. Willing, 8 S. & R. 103.}
* Rlusier v. Trumpbour, 5 Wend. 274 ; Everitt v. Chapman, 6 Conn. 34 7 ;
[Wadsworth v. Manning, 4 Md. 59] ; 3 Kent, 24, 25. {But see Hitchings v.
Ellis, 12 Gray, 449.}
^ Puf. B. 5, c. 8, § 2, by Kennet, and Barbeyrac's note.
CHAP. III.] COMMUNITY OF INTERESTS. 47
and money are so interwoven together, as to give him that
contributed only his labor, a share even in the principal ;
the labor of the one, and the money of the other, being in
a manner united into one mass. As when one lays out his
money upon unwrought commodities, and another spends
his labor in working them up, and managing them.
Thus, if I give a weaver £100 to buy wool, and he makes
cloth of it, computing his labor at £100, it is manifest
that here both of us have an equal interest in the cloth ;
and, when it is sold, the money must be equally divided.
Nor ought I to subtract the money that I contributed at
first, and then divide the remainder with him." ^
§ 29. The like distinction is asserted by Pothier.
" When " (says he) " two persons contract a partnership
between themselves, to sell in common certain goods,
which belong to one of them, and to share the proceeds,
it is necessary carefully to examine what is their inten-
tion. If the intention is to put the very goods into part-
nership, the partnership will extend to the same ; and if
a part of the goods perish before the sale proposed by the
parties is made, the loss will be borne as a common loss.
But, if the intention is to put into partnership, not the
goods themselves, but the price which shall be obtained
therefor, the entire loss will fall upon the partner to whom
the goods belonged." ^ And Pothier adds, that the like
rule will apply to the case of two merchants, who are
associated for the sale of merchandise, which each of
them has in his own shop. It will depend upon the na-
ture of their agreement, as to the goods being brought
into partnership, or only the proceeds, when sold, wheth-
er, if a loss takes place, it is to be borne by both as a
common loss, or by the original owner only.^ The Ro-
man law was equally direct and expressive. Cum ires
' Puf. B. 5, c. 8, § 2, by Konnct, and Barbeyrac's note.
* Toth. de Soc. n. 54. ^ Ibid.
48 PARTNERSHIP. [cHAP. III.
equos haberes, et ego imum, societatem coimus, itt, accepto
equo uneo^ quadrigam vender es, et ex pretio quartam mihi
redderes. /Si igitur ante venditionem equus mens mor-
tuus sit, non putare se, Celsus ait, societatem, manere,
nee ex pretio equoruni tuorutn partem deheri ; nee enim
habendoi quadrigae, sed vendendce coitam societatem.
Ceterum, si id actuin dicatur ut quadriga Jieret, eaque
commimicareticr, tuque in ea tres partes haheres, ego
quartam, non duhie adhuc socii sumus} We here see
the distinction clearly laid down between a partnership
in the capital stock, and a partnership in the profits or
losses arising from the sale. Ulpian also says : Coiri
societatem et simpliciter licet ; et si non fuerit distinc-
tum, videtur coita esse universorum, qum ex qucestu
veniunt ; hoc est, si quod lucrum ex em2)tione, venditione,
locatione, conductione, descendit.^ Vinniiis has put the
same distinction in a clear light : Possunt igitur duo so-
cietatem sic coire, ut unus ^^ec^wziom conferat, unde
merces emantur et negotiaiio exerceatur ; alter operanfi
duntaxat, qui proficiscatur ad merces emendas, emat et
vendat, ut sic deinde lucrum commune sit. Ceterum hcec
collationon icno modojii ; nam aut opera confertur cum
solo p>ecunim usu, quo casu sors domino peril, et si salva
est, domino salva est ; aut oj^era confertur cum ipso do-
minio j^ecunice, quo casu qui operam impendit,p)articepsjit
sortis. In 2')rima specie comparatur cum opera non sors,
sed pericidum amittendce sortis, et lucrum, quod ex ea
prohahiliter sperari poierat. In altera operoi pretium,
hahetur, quasi sorti adjectum, et pro eo, quod valet, in
ipsa sorte partem hahet, qui operam j)rcestat.^
' D. 17, 2, 58; Id. 17, 2, 58, 1 ; Poth. Pand. 17, 2, n. 22; Domat, 1, 8, 4,
art. 14 ; Coll. on P. B. 1, c. 2, § 2, p. 109, 2d cd.
2 D. 17, 2, 7 ; Poth. Pand. 17, 2, n. 20; Domat, 1, 8, 3, art. 2.
' Vinn. ad Inst. 3, 26, 2, n. 3, p. 697.
CHAP. IV.] AS TO THIRD PERSONS. 49
CHAPTER IV.
PARTNERSHIP AS TO THIRD PERSONS.^
30. Community of property does not of itself constitute a partnership.
31. Cases where it may constitute a partnership.
32. Community of profit does not of itself constitute a partnership,
33. When participation in the profits makes one a partner.
34. Meaning of an interest in the profits, as profits.
35. Lord Eldon on the rule that interest in the profits, as profits, makes
one a partner.
36. Remarks on the rule.
37. Roman and foreign law.
38. That participation in the profits makes one a partner is a presumptive
rule only.
39. The cases will be found in harmony.
40. Cases of joint shipment and purchase.
41. Cases of brokers and other agents.
42. Cases of masters and seamen of vessels.
43. American cases.
44. American cases of masters of vessels.
45. 46. American cases of the manufacture of goods.
47. American cases of agency.
48. A mere agent is not a partner.
49. The intention of the parties should govern.
50. Roman law.
51. French law,
52. The distinction of the common law defensible.
53. Liability of a partner to third persons.
54. Classification of cases of such liability.
55. (1) Community of profit and loss, though not in property.
56-58. Illustrative cases.
59. (2) Community of profit and loss, where there is no property.
60. (3) Participation in profits, but not in losses.
61. Illustrative cases.
62. Roman law.
63. These three classes include dormant partnerships.
64. (4) Holding out as partner.
' {In this chapter, notwithstanding its title, the author treats not only of
cases in which persons are partners as to third parties, but also discusses
largely the cases in which they are partners inter sese. \
4
50 PARTNERSHIP. [cHAP. IV.
§ 65. How such holding out may arise.
66. (5) Loans and annuities.
67. Test of liability in such cases.
68. 69. Illustrative cases.
70. Liability of trustees and executors as partners.
Note. — Subpartnership.}
§ 30. In considering the question, when and under
what circumstances a partnership may exist, as to third
persons, although not between the parties themselves,
we are led to the remark, that there may be a community
of interest in property, without any community in the
profits thereof, as well as a community of interest in the
profits, without any community in the property, out of
which they are to arise. ^ The absence of both ingre-
dients is necessarily decisive that no real partnership
exists. But a nice and difficult question may arise, and,
indeed, often does arise. When and under what circum-
stances, notwithstanding the absence of one of these in-
gredients, the presence of the other will still be deemed
to create a partnership between the parties themselves ; ~
or, if not between themselves, yet it will be deemed to
1 {That a partnership may exist without community in property, see§ 27. |
^ { Who are partners inter sese. The community of both profit and loss
constitutes a partnership. Green v. Beesley, 2 Bing. N. C. 108; Brett v.
Beckwith, 3 Jur. x. s. 3L In Duryea v. Whitcomb, 31 Yt. 395, an agree-
ment to jointly own property and to share in the profit and loss of the busi-
ness was held to be by necessary legal construction an agreement for part-
nership, though nothing was said by the parties about a partnership, and
though they were not aware that the legal effect of the agreement was to
create one. See Meyers v. Field, 37 Mo. 434. Mr. Lindley (Lind. on P. 13)
says, he " is not aware of any case in which persons who have agreed to
share profit and loss have been held not to be partners." The only case in
the Supreme Court of any of the United States in which such persons seem
held not to be partners is Dwinel v. Stone, 30 Me. 384. There persons who
shared profit and loss were held not to be partners, for the reason that they
had no community of interest in the property (a reason not supported by the
•weight of authority, see § 27.) The facts in Dwinel v. Stone are not
fully disclosed, and it is possible that the agreement to share profit and loss
■was really an agreement to share gross returns, as Mr. Lindley suggests to
have been the case in Mair v. Glennie, 4 M. & S. 240 ; if this was so, the
CHAP. IV.] AS TO THIRD PERSONS. 51
exist as to third persons.^ It may be laid down as a
general rule, that in all such cases no partnership will
be created between the parties themselves, if it would
be contrary to their real intentions and objects. And
none will be created between themselves and third per-
sons, if the whole transactions are clearly susceptible of
a different interpretation, or exclude some of the essen-
tial ingredients of partnership.^ Thus, for example, as
has been already intimated, if two persons should agree
decision that no partnership existed was in accordance with the current of
authority; vide infra. See Smith v. Wright, 5 Sand. 113.
Though nothing be said about losses, yet an agreement to share profits is
presumptively an agreement to share losses also, and therefore constitutes a
partnership. Hodgman v. Smith, 13 Barb. 302; Cox v. Delano, 3 Dev. 89;
Perry v. Butt, 14 Ga. 699 ; Miller v. Hughes, 1 A. K. Marsh. 181 ; Lind. on
P. 13. But even though indemnity against losses is stipulated tor, yet prima
facie an agreement to share profits is an agreement for j^ai'tnership. Lind.
on P. 1 7. Whether persons are to be partners, at any rate inter sese, in this
class of cases depends on intention. To determine whether the intention was
to create a partnership or not, the fact whether a community of property has
or has not been created is strong though not conclusive evidence. Lind. on
P. 16 ; Julio V. Ingalls, I All. 41 ; Ellsworth v. Pomeroy, 26 Ind. 158. Per-
sons may not be partners although they call themselves so. R-idclitfe v. Rush-
worth, 33 Beav. 484; Oliver v. Gray, 4 Ark. 425.
The chief classes of cases in which sharino; in profits has been held not to
make persons partners inter sese are — 1. Sharing in gross returns (see §
34) ; 2. Sharing in joint shipments and purchases ; 3. Sharing by agents ;
4. Sharing by seamen and masters of vessels; 5. Sharing by landlords;
6. Sharing by manufacturers of goods ; 7. Sharing by carriers (classes
2-7 are considered in § 40-47, 58 a); 8. Sharing by lenders and annui-
tants (see § 66-69) ; 9. Sharing by creditors, trustees, &c. (See § 70.)
See further on the subject, § 146-151.
As persons who are partners inter sese are liable as partners to third per-
sons, cases in which persons have been held not liable as partners to third
persons are a fortiori authorities to show that they were not partners inter
sese. Cases in which persons who are not partners inter sese have yet been
held liable as such to third persons will be considered infra. Note to § 49.}
' See Gibson v. Lupton, 9 Bing. 297; Post r. Kimberly, 9 Johns. 4 70;
Geddes r. Wallace, 2 Bligh, 270; Hazard v. Hazard, 1 Story, 371. See 1
Sm. Lead. Cas. 504, &c., 2d ed., note to Waugh v. Carver.
* {This rule of the author is disapproved by Mr. Justice Bell in Bromley
V. Elliot, 38 N. H.287, 306, "as laid down by a plausible writer, but often
superficial thinker."]
52 PARTNERSHIP. [cHAP. IV.
to purchase goods on joint account in certain propor-
tions, without any intention to sell them on joint account,
or to be jointly concerned in the future sale, this will
give them a community of interest in the property, when
purchased, but will not make them partners ; and they
will be joint tenants or tenants in common thereof, ac-
cording to circumstances.^ And it will make no differ-
ence, whether the purchase is made in their joint names,
or in the name of one of them, or through the instru-
mentality of an agent." In cases of this sort one essen-
tial ingredient, that of a communion of profit and loss,
is wanting.^ Upon similar principles, if two persons
agree to do a particular piece of work, but the money
received for the work is not to be employed on their
joint account, or for their joint benefit, the persons so
contracting are not partners, but merely joint contract-
ors.^ So, if two joint owners of merchandise should
consign it to the same consignee for sale, informing him,
that each owns a moiety thereof, and should give him
separate and distinct instructions, each for his own share,
as to the sales and returns, they would not be partners
in the adventure ; but each would be deemed entitled to
' Ante, § 3 ; 3 Kent, 25, 2G ; Coope t'. Eyre, 1 H. Bl. 37 ; Gow on P. c. 1,
p. 10, 11, 3d ed. ; Id. c. 4, p. 153, 154 ; Smith v. Watson, 2 B. & C. 401 ;
Harding i\ Foxcroft, 6 Greenl. 76 ; Jackson v. Robinson, 3 Mason, 138. {So
a joint purchase of land, Sikes v. Work, 6 Gray, 433 ; Munson r. Sears, 12
Iowa, 1 72. Tenants in common of a race-horse who share liis winnings and
divide the expenses of his keep are not partners in the horse. French v.
Styring, 2 C. B. N. s. 357. See Oliver v. Gray, 4 Ark. 425.}
* 3 Kent, 25, 26; Hoare v. Dawes, Doug. 371 ; Coope v. Eyre, 1 H. Bl.
37; Post r. Kimberly, 9 Johns. 470 ; Holmes v. Unit. Ins. Co. 2 Johns. Cas.
329 ; Harding v. Foxcroft, 6 Greenl. 76.
=• Coope V. Eyre, 1 H. Bl. 37; Gow on P. c. 1, p. 10, 3d ed. ; Coll. on P.
B. 1, c. 1, § 1, p. 11-15, 2d ed.; Gibson v. Lupton, 9 Bing. 297. {A club
is not a partnership. See § 144. See also Austin v. Thomson, 45 N. H.
113.}
* Coll. on P. B. 1, c. 1, § 1, p. 15, 16, 2d ed. ; Finckle v. Stacey, Sel. Ca. 9 ;
[Dwinel v. Stone, 30 Me. 384.]
CHAP. IV.] AS TO THIRD PERSONS. 53
a separate account, and a separate action against the
consignee, if he should disobey his own orders.^
§ 31. But cases may nevertheless occur, where a com-
munity of interest in the property may draw after it the
establishment of a partnership between the parties,
although a sale of the property for the joint profit may
not be contemplated by the parties. Thus, as in the ex-
ample already suggested, if two persons should agree
together, to furnish an equal quantity of materials to
manufacture articles of a particular description, and to
employ their mutual skill, labor, and services, in man-
ufacturing the articles ; and then the articles were to
be equally divided between them, and sold by each on
his separate account, there, a partnership in the prop-
erty and manufactured articles would be deemed to
exist.^
§ 32. On the other hand, there may be a community
of interest in the profits between the parties, without
any community of interest in the property itself.^ But
this participation in the profits will not (as we have
seen"*) create a partnership between the parties them-
' Hall V. Leigh, 8 Cranch, 50; Jackson v. Robinson, 3 Mason, 138. {A.,
B. and C. agreed that each should furnish 3,000/. worth of goods to be shipped
on joint adventure, the profits to be divided in proportion to the shipments.
Held, no partnership. Heap v. Dobson, 15 C. B. x. s. 460. But see Sims v.
Willing, 8 S. &R. 103.}
- Ante, § 27; Musier v. Trumpbour, 5 Wend. 274 ; Everitt v. Chapman,
6 Conn. 347; Bond v. Pittard, 3 j\I. & W. 357 ; 3 Kent, 24-26. See also,
Jordan r. Wilkins, 3 Wash. C. C. 110.
' [Thus, when two mercantile firms agree to share profits and loss upon
contracts for the purchase or sale of merchandise in a particular branch of
their business, to be made by each firm separately in its own name, and to be
executed with its separate fund, this does not constitute them partners, cither
as between themselves or to third persons ; since each firm would be sepa-
rately bound to fulfil its own contracts, and there would be no union of funds,
services, or property, but only a division of profit and loss. Smith v. Wright,
5 Sand. 143.]
* Ante, § 27, 28 ; Hazard v. Hazard, 1 Story, 371. In this case the court
said : " Now, upon the point, whether there was a partnership or not between
54 PARTNERSHIP. [CHAP. IV.
selves, as to the property, as well as the profits, contrary
to their intentions.^ Nor will it necessarily create such
a partnership in all cases, as to third persons. The
these parties in the factory business, under the agreement, it is necessary to
take notice of a ■vvell-known distinction between cases, where, as to third
persons, there is held to be a partnership, and cases where there is a partner-
ship between the parties themselves. The former may arise between the
parties by mere operation of law against the intention of the parties ; whereas,
the latter exists only when such is the actual intention of the parties. Thus,
if A. and B. should agree to carry on any business for their joint profit, and to
divide the profits equally between them, but B. should bear all the losses,
and should agree, that there should be no partnership between them ; as
to third persons dealing with the firm, they would be held partners, although
inter sese, they would be held not to be partners. This distinction is often
taken in the authorities. It was very fully discussed and recognized in Waugh
V. Carver. 2 H. Bl. 235; Cheap v. Cramond, 4 B. & Aid. G63; Peacock v.
Peacock, 16 Ves. 49; Ex parte Hamper, 17 Ves. 403; E'a; parte Hodgkinson,
19 Ves. 291 ; Ex parte Langdale, 18 Ves. 300 ; Tench v. Roberts, 6 Madd,
145, note ; Hesketh r. Blanchard, 4 East, 144 ; jMuzzy v. Whitney, 10 Johns.
226 ; Dob v. Halsey, 16 Johns. 34. The question before us is, not as to the
liability to third persons ; but it is solely whether between themselves the
agreement was intended to create and did create a partnership. I have
looked over the agreement carefully, and my opinion is, that no partnership
whatsoever was intended between the parties; but that Benjamin Hazard
was to be employed as a mere superintendent, and not as a partner ; and was
to be paid the stipulated portion of the profits for his services as superintend-
ent. This, it is said, in the agreement, was to be the sole reward for his
services ; and, if there were no profits, then he was to submit to lose the value
of his services. It is not anj'where said in the agreement, that the parties
are to be partners in the business ; nor that Benjamin Hazard is to pay any
part of the losses. But language is used, from which, I think, it may fairly
be inferred, as the full understanding of the parties, that the whole capital
stock was to be held by T. R. Hazard, as his sole and e.\clusive property,
and that the stock was to be furnished by him, and the proceeds thereof were
to be delivered and sold by him, and charged to him, as his individual prop-
erty, and debts and credits. Now, if this be so, there is no pretence to say,
that the parties intended a partnership. A mere participation in the profits
will not make the parties partners inter sese, whatever it may do as to third
persons, unless they so intend it. If A. agrees to give B. one-third of the
profits of a particular transaction in business, for his labor and services
> Wish V. Small, 1 Camp. 331, note; Dry v. Boswell, 1 Camp. 329, 330;
Mair V. Glennie, 4 M. & S. 240 ; [Explained in Stocker v. Brockelbank, 3
Macn. & G. 250, 5 Eng. Law & Eq. 6 7 ; Clement v. Hadlock, 1 3 N. H. 1 85] ; post,
§ 41, 42.
CHAP. lY.] AS TO THIRD TERSONS. 55
various cases, in which a partnership may exist, as to
third persons, although not between the parties them-
selves, will presently come under our consideration ; '
and therefore, what is here said, will principally respect
the question, when no partnership is created either way.
Thus, if a party has no interest whatsoever in the capital
stock, and as between himself and the other parties has
also no rights as a partner, or no mutuality of powers
and duties, but is simply employed as an agent, and is
to receive either a given sum out of the profits, or a pro-
portion of the profits, or a residuum of the profits
therein, that may make both liable to third persons as partners; but not
as between themselves. This was the very point adjudged in Hesketh v.
Blanchard, 4 East, 144, where Lord Ellenborough said: 'The distinction
taken in Waugh v. Carver and others, applies to this case. Quoad tliird
persons it was a partnership, for the plaintiff was to share half the profits.
But, as between themselves, it was only an agreement for so much, as a com-
pensation for the plaintiff's trouble, and for lending R. his credit.' The same
doctrine was fully recognized in Muzzy r. "Whitney, 10 Johns. 226. It is not
necessary, in the present case, to decide, whether Benjamin Hazard was,
under the agreement, a partner as to third persons. That question may be
left for decision, until it shall properly arise in judgment. And before it is
decided, it might be necessary to examine a very nice and curious class of
cases, standing, certainly, upon a very thin distinction, if it is a clearly dis-
cernible distinction, between cases of partnership as to third persons, and
cases of mere agency, where the remuneration is to be by a portion of the
profits. This distinction is alluded to by Lord Eldon, in Ex parte Hamper,
17 Ves. 403, and by Lord Chief Justice Abbott in Cheap v. Cramond, 4 B. &
Aid. 663, 670. In the latter case, the Chief Justice said: ' Such an agree-
ment is perfectly distinct from the cases, put in the argument before us, of
remuneration made to a traveller, or other clerk or agent (in proportion to
the profits), by a portion of the sums received by the master or principal, in
lieu of a fixed salary, which is only a mode of payment adopted to increase
or secure exertion.' It was also acted upon in Muzzy v. Whitney, 10 Johns.
226; Dry v. Boswell, 1 Camp. 320; Wish v. Small, Id., note ; Benjamin v.
Porteus, 2 H. Bl. 590; Wilkinson v. Frasier, 4 Esp. 182; and Mair v.
Glennie, 4 M. & S. 240, 244. My judgment is, that in the present case
the parties never intended any partnership in the capital stock ; but a mere
participation of interest in the profits ; and that the one-third or one-fourth
of the profits, allowed by the agreement to Benjamin Hazard, was merely a
mode of paying him as agent for his superlntendency of the factories."
1 Post, § 53-70.
66 PARTNERSHIP. [CHAP. IV.
beyond a certain sum, as a compensation for his labor
and services, as agent of the concern, and not otherwise ;
he will not be deemed a partner in the concern from that
fact alone ; not a partner with the others inter sese, for
that would be contrary to their intentions and objects ; ^
nor as to third persons, because the transaction admits
of a different interpretation, and may justly be deemed a
mere mode of ascertaining and paying the compensation
of an agent, as in a naked case of agency. In such a
case, it may be properly enough said, that the agent is
entitled to a share or portion in the profits, liquidated
or unliquidated, and, therefore, that he has, in a certain
sense, a community of interest therein, with the actual
partners. But he does not participate therein, as an
owner ^:>ro tanto, or as possessed thereof, ^er my et per
tout, or as clothed with the rights, and powers, and duties
of a partner. He has only a limited interest therein,
either as entitled to a fixed sum, to be paid out of the
profits, or as entitled to a lien thereon, or as possessed
of an undivided portion thereof as a tenant in common.
§ 33. The distinction between the cases, where a par-
ticipation in the profits will make a man liable to third
persons, as a partner, or not, is sometimes laid down by
elementary writers in different language. Thus it has
been said by a learned writer : " A distinction, however,
prevails between an interest in the profits themselves, as
profits, and the payment of a given sum of money in
proportion to a given quantum of the profits, as the re-
ward of, and as a compensation for, labor and services." ^
1 Gow on P. c, 1, p. 10, 11 ; Gecldes v. Wallace, 2 Bligh, 270; Benjamin
V. Portcus, 2 H. Bl. 590; Dry v. Boswell, 1 Camp. 329, 330; Wish v. Small,
1 Camp. 331, note; Ex parte Watson, 19 Ves. 459; Muzzy v. Whitney, 10
Johns. 22G; Turner v. Bissell, 14 Pick. 192. See Garey v. Pyke, 10 Ad. &
E. 512; post, § 33-36, 38-40,
« Gow on P.O. 1, p. 18,3d ed. ; [Brockway v. Burnap, 16 Barb. 309;
Pierson v. Steinmyer, 4 Rich. 309.]
CHAP. IV.] AS TO THIRD PERSONS. 57
Another learned writer has expressed himself in the fol-
lowing terms: "In order to constitute a communion of
profit between the parties, the interest in the profit must
be mutual, that is, each person must have a specific in-
terest in the profits as a principal trader. He is not a
partner, if he merely receives out of the profits a com-
pensation for his trouble, in the character of an agent or
servant of the concern." ^
§ 34. The distinction, as thus presented, does certainly
wear the appearance of no small subtlety and refine-
ment, and scarcely meets the mind in a clear and unam-
biguous form ; ^ for the question must still recur ; when
may a party properly be said to have " an interest in the
profits, as profits " ^ When also may it properly be said,
that " the interest in the profits is mutual," and that
" each person has a specific interest in the profits, as a
pi^incipal trader " ? No absolute test is given to distin-
guish the cases from each other, and it is not easy to
grasp it, when stated in so abstract a form. The true
meaning of the language, " an interest in the profits, as
profits (which has probably been borrowed from the
subtle and refined statement of an eminent judge ),^ seems
to be, that the party is to participate, indirectly at least,
in the losses, as well as in the profits, or, in other words,
that he is to share in the net profits, and not in the gross
profits.^ If he is to share in the net profits, which sup-
poses him to have a participation of profit and loss, that
will constitute him a partner ; if in the gross profits,
then it will be otherwise.^ Thus, where an agreement
was made between the owner of a lighter, and B., a
1 Coll. on P. B. 1, c. 1, § 1, p. 17, 18, 2(1 ed.
"^ Coll. on P. B. 1, c. 1, § 1, p. 23, 2d ed.
=> Lord Eldon. " Post, § 56.
* Bond V. Pittard, 3 M. & W. 357; post, § 220, and note; post, § 41,
42, 48.
58 PARTNERSHIP. [CHAP. IV.
lighter-man, that, in consideration of his working the
hghter, he should have half her gross earnings, it was
held to be only a mode of paying B. wages for his labor,
and not a partnership ; but, that if the profits were to be
equally divided between them, there the participation of
the parties of the profit and loss would make the agree-
ment a partnership/
§ 35. Lord Eldon has adverted to the like distinc-
tion, and disapproved of it in strong terms. On one
occasion his Lordship said : " The cases have gone fur-
ther to this nicety, upon a distinction so thin, that I
cannot state it as established upon due consideration ;
that if a trader agrees to pay another person, for his
labor in the concern, a sum of money, even in propor-
tion to the profits, equal to a certain share, that will not
make him a partner ; but, if he has a specific interest
in the profits themselves, as profits, he is a partner." ^
On another occasion, he said, referring to the case be-
fore him, " That it was impossible to say, that as to
» Dry V. Boswell, 1 Camp. 329, 330; Cheap v. Cramond, 4 B, & Aid. 663,
670. See also Waugh v. Carver, 2 H. Bl. 235, 246, 247; Saville v. Robert-
son, 4 T, R. 720; Bond v. Pittard, 3 M. & W. 357; Pearson v. Skelton, 1 M.
& W. 504; s.c. Tyrw. & G. 848; {Hej'hoe v. Burge, 9 C. B. 431.} See
also Cutler v. Winsor, 6 Pick. 335; Bailey v. Clark, 6 Pick. 372; Turnery.
Bissell, 14 Pick. 192 ; Chase v. Barrett, 4 Paige, 148, 159 ; Brigham v. Dana,
29 Vt. 1,9; post, § 53-69, 220. — In this case the distinction is clearly pointed
out between participation in the gross profits and participation in the net
profits. See post, § 220, note ; |§ 21, note ; Lind. on P. 19 ; Lyon v. Knowles,
3 B. & S. 556 ; Bowman v. Bailey, 11 Vt. 170 ; Pattison v. Blancluird, 1 Seld.
186 ; Merrick v. Gordon, 20 N. Y. 93.} See 1 Sm. Lead. Cas. 504, 2d ed.,
note to Waugh v. Carver. The case of Thompson v. Snow, 4 Greenl. 264,
seems to be contrary ; for it makes no distinction between sharing the net
earnings and sharing the gross earnings; post, § 44, and Reynolds v. Toppan,
15 Mass. 3 70. See also Loomis v. Marshall, 12 Conn. 69 ; post, § 45 ; [Denny
V. Cabot, 6 Met. 82; Bradley w. White, 10 Met. 303]; {Parsons on P. p. 88,
n. (q.)}
* Ex parte Hamper, 17 Ves. 403 ; Coll. on P. B. 1, c. 1, § 1, p. 23, 24, 2d
ed. ; Ex parte Watson, 19 Ves. 459 ; Turner v. Bissell, 14 Pick. 192; Loomis
V. Marshall, 12 Conn. 69 ; 1 Sm. Lead. Cas. 504, note, 2d ed.
i
CHAP. IV.] AS TO THIRD PERSONS. 59
third persons, they (the parties) were not partners, the
ground being settled, that if a man, as a reward for his
labor, chooses to stipulate for an interest in the profits
of a business, instead of a certain sum proportioned to
those profits, he is, as to third persons, a partner ; and
no arrangement between the parties themselves could
prevent it." ^
§ 36. But however nice the distinction may be in
itself, and however difficult it may be successfully to
apply it to the circumstances of particular cases, it is
by no means clear, that there is not a very just and
satisfactory foundation on which it may well rest.^ The
question in all this class of cases is first to arrive at the
intention of the parties inter sese ; and secondly, if
between themselves there is no intention to create a
partnership either in the capital stock, or in the profits,
whether there is any stubborn rule of law, which will
nevertheless, as to third persons, make a mere partici-
pation in the profits conclusive, that there is a partner-
ship. If there is any such rule of law, the next inquiry
is, as to the nature, and foundation, and true extent
thereof. Now, it is incumbent upon those who insist
that a partnership exists between the parties, as to
third persons, by mere operation of law, in opposition
to their own intention, to establish, that in the given
case, under all the circumstances, there is such a rule,
and that it is strictly applicable. What then is the rule
of law relied on for the purpose "? It is said, that the
true criterion is, whether the parties are to participate
in profit ; ^ or, according to the language used on an-
> Ex parte Rowlandson, 1 Rose, 89, 91, 92 ; Coll. on P. B. 1, c. 1, § 1,
p. 24-29, 2d ed. ; Ex parte Langdale, 18 Ves. 300. See also the remarks of
Mr. Chief Justice Gibson in Miller v. Bartlet, 15 S. & R. 137, See Hazard
V. Hazard, 1 Story, 371-376; ante, § 32, note.
" See 3 Kent, 33, 34.
^ Lord Eldon in Ex parte Langdale, 18 Ves. 300.
60 PARTNERSHIP. [CHAP. IV.
other occasion, "Every man, who has a share in the
profits of a trade, ought also to bear his share of the
loss as a partner." ^ In a just sense this language is
sufficiently expressive of the general rule of law ; but
it is assuming the very point in controversy to assert,
that it is universally true, or that there are no qualifi-
cations, or limitations, or exceptions to it. On the
contrary, the very cases alluded to by Lord Eldon, in
the clearest terms establish, that such qualifications,
limitations, and exceptions do exist; and are either
contemporaneous with the promulgation of the general
rule, or are necessary to its just application and use.
It is, therefore, far from being universally true, that a
mere participation in the profits constitutes the party
a partner ; at most, it is true only sub modo. Indeed,
as an original question, it might admit of very grave
doubt, whether it would not have been more con-
venient, and more conformable to true principles, as
well as to public policy, to have held, that no partner-
ship should be deemed to exist at all, even as to third
persons, unless such were the intention of the parties,
or unless they had so held themselves out to the pub-
lic.^ But the common law has already settled it
otherwise ; and therefore it is useless to speculate upon
the subject^
' Grace v. Smith, 2 W. Bl. 998, 1000; Ex parte Hamper, 17 Ves. 403;
Ex parte Watson, 19 Ves. 459, 461 ; Waugh v. Carver, 2 H. Bl. 247 ; Tur-
ner u. Bissell, 14 Pick. 192.
' See the remarks of Mr. Chancellor Walworth, in Chase v. Barrett, 4
Paige, 148, 159, IGO ; post, § 48, 49.
3 The ground upon which the participation in the profits of a trade, although
no partnership is intended to exist between the parties, shall make them
partners as to third persons, is thus stated by Lord Chief Justice De Grey, in
Grace v. Smith, 2 W. Bl. 998, 1000. " Every man, who has a share of the
profits of a trade, ought also to bear his share of the loss. And if any one
takes part of the profit, he takes a part of that fund on which the credi'tor
relies for his payment. If any one advances or lends money to a trader, it
CHAP. IV.] AS TO THIRD PERSONS. 61
§ 37. The Roman law and the modern foreign law
do not appear to have created a partnership between
the parties, as to third persons, without their consent,
is only lent on his general personal security, and yet the lender is generally
interested in those profits. He relies on them for repayment." Now, to
say the least of it, this reasoning is very artificial ; for if the creditor trusts
to the personal security of his debtor generally, for advances made, or
goods sold, and he has no lien on the property or profits of the trade for
repayment, it seems difficult to perceive why other persons should be liable
to him on account of their receipt of a portion of the profits, there being
no privity of contract and no partnership existing In the advances of money
or goods sold between the parties. Why should a mere participant in the
profits, contrary to the intent of the agreement between himself and his co-
contractor, be held responsible to a creditor of the latter, when the latter has
trusted to his personal security, and only had a general confidence, that he
was doing a profitable business? Why should the creditor's contract displace
the contract of the immediate parties ? The rule might have some show of
equity, if the party were only held liable to the extent of the profits re-
ceived by him. But the rule makes him liable to pay all the losses, and all
the debts, whether he has recived any profits or not. There is great force on
this point in the argument of the counsel for the defendants in Waugh v.
Carver, 2 H. Bl. 244, 245. It was there said : " The profits are not a capital,
unless carried on as capital, and not divided. Ship agents are not traders,
but their employment is merely to manage the concerns of such ships in
port as are addressed to them. Suppose two fishermen were to agree to
share the profits of the fish that each might catch, one would not be liable for
mending the nets of the other. So, if two watermen agree to divide their
fares, neither would be answerable for repairing the other's boat. Nor would
any artificers, who entered Into similar agreements to share the produce of
their separate labor, be obliged to i)ay for each other's tools or materials.
And this is not an agreement as to the agency of all shijis, with which the
parties were concerned, for such as came to the particular address of one
were to be the sole profit of that one. It was, indeed, clearly the intent of
the parties to the agreement, and is so expressed, that neither should be
answerable for the losses, acts, or deeds of the other, and that the agreement
should not extend to their separate mercantile concerns. It must, therefore,
be a strong and invariable rule of law, that can make the parties to the
agreement responsible for each other, against their express intent. But all
cases of partnership, which have been hitherto decided, have proceeded ou
one or other of the following grounds : — 1. Either there has been an avowed
authority given to one party to contract for the rest ; 2. Or, there has been
a joint capital or stock ; 3. Or, in cases of dormant partners, there has
been an appearance of fraud in holding out false colors to the world." See
also' post, § 48-52. However, the doctrine is (as is fully stated in the text)
completely established, upon the very ground asserted in Grace r. Smith.
62 PARTNERSHIP. [cHAP. IV.
or against the stipulations of their own contract ; and,
therefore, the common law seems to have pressed its
principles on this subject to an extent not required by,
even if it is consistent with, natural justice.^ Indeed,
the Roman law deemed all contracts to be made only
between the immediate parties thereto ; and no direct
remedy was generally furnished to or against third per-
sons, even where one of the immediate parties was a
mere agent of such third persons, and it required the
interference of the Preetor to enlarge the remedy by an
equitable extension to reach them.^
§ 38. Admitting, however, that a participation in the
profits will ordinarily establish the existence of a part-
nership between the parties in favor of third persons,
in the absence of all other opposing circumstances, it
See Waugh v. Carver, 2 H. Bl. 235, 246, 247 ; Cheap v. Cramoiid, 4 B. &
Aid. 663; Dob v. Halsey, 16 Johns. 34; M'lver v. Humble, 16 East, 169,
174, 175; 3 Kent, 24, 25, 27; Ex parte Langdale, 18 Yes. 300; [Pott v.
Eyton, 3 C. B. 32; Barry v. Nesham, Id. 641.] |"I hope I shall stand
excused, if I venture to discuss the reasoning in Waugh v. Carver. What
was it? It was that ' he who takes a share of the profits of a business, takes
part of the fund on which creditors rely for payment.' Can any thing be con-
ceived more false ? Creditors neither can nor do rely on profits for payment.
Profits do not exist until ci'editors are paid. Look at any individual transaction.
A. sells goods to B. for lOOZ. ; B. resells them for llOl. There is 10/. profit.
Does the creditor look to this 10/. for the payment of his 1 00/. '? No : he looks to
the 100/. That sum would pay him, and is the proper fund to pay him. The
10/. would not. The 10/. evidently belongs to B., and is the fund to enable
him to pay the outgoings of his trade and subsist himself and his family."
Testimony of Mr. Commissioner Fane before a Committee of the House of
Commons, given in Lind. on P. 40, n. (/.). In fact, what a creditor does rely
on as a fund of payment are the gross returns, not the net profits. Yet it is
declared that one who shares gross returns is not, while one who shares net
profits is, a partner, because the latter takes from the fund on which creditors
rely. Perhaps there is no other instance in commercial law, where so many
confessedly harsh decisions have been based on so obvious a fallacy. }
' See Domat, 1, 8, 2, art. 1 ; Id. 1, 8, 4, art. 18; Civil Code of France,
art. 1862-1865 ; Vinn. ad Inst. 3, 26, 2, n. 3 ; 17 Duranton, Droit Civil, n.
328-331 ; 5 Duvergier, Droit Civ. Franc, n. 45 ; Id. n. 385-387 ; 4 Pardessus,
Droit Comm. n. 96i) ; post, § 50.
* Story on Ag. § 165, 261, 271, 425.
CHAP. IV.] AS TO THIRD PERSONS. 63
remains to consider, whether the rule ought to be
regarded, as any thing more than mere presumptive
proof thereof, and therefore hable to be repelled, and
overcome by other circumstances, and not as of itself
overcoming or controlling them.^ In other words, the
question is, whether the circumstances, under which
the participation in the profits exists, may not qualify
the presumption, and satisfactorily prove, that the por-
tion of the profits is taken, not in the character of a
partner, but in the character of an agent, as a mere
compensation for labor and services. If the latter be
the true predicament of the party, and the whole trans-
action admits, nay, requires, that very interpretation,
where is the rule of law, which forces upon the trans-
action the opposite interpretation, and requires the
Court to pronounce an agency to be a partnership, con-
trary to the truth of the facts, and the intention of
the parties ] Xow, . it is precisely upon this very
ground, that no such absolute rule exists, and that it is
a mere presumption of law, which prevails in the ab-
sence of controlling circumstances, but is controlled by
them, that the doctrine in the authorities alluded to is
founded. If the participation in the profits can be
clearly shown to be in the character of agent, then the
presumption of partnership is repelled. In this way
the law carries into eff"ect the actual intention of the
parties, and violates none of its own established rules.
It simply refuses to make a person a partner, who is
but an agent for a compensation payable out of the
profits ; and there is no hardship upon third persons,
since the party does not hold himself out as more than
' [In Wood V. Vallette, 7 Ohio St. 172, it was held that a contract be-
tween parties to share in the net profits of a business, to the carrying on of
which they respectively contribute, necessarily makes them partners as to third
persons dealing with the firm.]
64 PARTNERSHIP. [cHAP. IV.
an agent. This qualification of the rule (the rule itself
being built upon an artificial foundation) is, in truth,
but carrying into effect the real intention of the parties,
and would seem far more consonant to justice and
equity, than to enforce an opposite doctrine, which
must always carry in its train serious mischiefs or ruin-
ous results, never contemplated by the parties. In this
view the distinction, taken in the authorities above
alluded to, has a reasonable and just foundation, and is
entirely consistent with the equities, which ought to pre-
vail in all reciprocal contracts.^
' Mr. Chancellor Walworth has expressed himself in favor of the distinc-
tion as well founded, in the case of Champion v. Bostwick, 18 Wend. 175, 184.
He there said : " There is a class of cases, in which it has been held that a
person, who merely receives a compensation for his labor in proportion to
the gross profits of the business in which he is employed, is not a partner
with his employer even as to third persons. The distinction appears to be
between the stipulation for a compensation proportioned to the profits, and
a stipulation for an interest in such profits, so as to entitle him to an account
as a partner (1 Rose, 91) ; a distinction, whieh Lord Eldon says is so thin,
that he cannot state it as settled upon due consideration. But he says,
it is clearly settled as to third persons, though he regrets it, ' that if a
man stipulates, that as the reward of his labor he shall have, not a specific
interest in the business, but a given sum of money, even in proportion to
the quantum of profits, that will not make him a partner ; but if he agrees
for a part of the profits, as such, giving him a right to an account, though
having no property in the capital, he is as to third persons a partner; and
no arrangement between the parties themselves can prevent it.' Ex parte
Hamper, Stark's Law of P. 137. Cary, however, defends the principle,
upon which this distinction is based. He insists, that as the person, who is
to receive a compensation for his labor in proportion to the profits of the
business, without having a specific lien upon such profits to the exclusion of
other creditors, it is for their interest that he should be compensated in that
■way, instead of receiving a fixed compensation, whether the business pro-
duced profits or otherwise ; on the other hand, that, if he stipulates for an
interest in the profits of the business, which would entitle him to an account,
and give him a specific lien or a preference in payment over other creditors,
and giving him the full benefit of the increased profits of the business, with-
out any corresponding risk in case of loss, it would operate unjustly as to
other creditors ; and therefore that it is perfectly right in principle, that he
should be holden to be liable to third parties, as a partner in the latter case,
but not in the first. Cary on P. 11, note i. I am inclined to think this
CHAP. IV.] AS TO THIRD PERSONS. G5
§ 39. Keeping this distinction in view, all the sup-
posed repugnancy or difficulty of the various decided
cases vanishes, and they are in harmony with each other,
distinction is a sound one, as regards the rights of third persons. But as
between the parties themselves, it is perfectly competent for them to agree,
that one shall have his full share of the anticipated profits, as a compensa-
tion for his labor or skill, without running any risk of absolute loss, except
as to third persons, if instead of producing profits the business should prove
a losing concern. Many of the cases cited by the counsel for the plaintiffs
in error, were those, in which the question arose between the immediate
parties to the agreement, which was supposed to make them partners as
between themselves ; and they may therefore be reconciled with other cases,
in which they were held to be liable as partners to third persons upon the
principles before stated." ]\Ir. Gary in the passage alluded to says : " It is
not within the original object of this work to enter into any contested points,
or to broach an opinion not immediately sanctioned by judicial decisions.
In the pi'esent case, however, it may be allowable to depart from this rule,
as the principle, on which the above distinction is grounded, seems to the
author of this work perfectly clear and just. On the one hand, suppose a
person is to receive a proportion of a given quantum of profits, by way of
recompense for his labor, this cannot be productive of injustice to any of the
creditors of the trader, for the trader's own interest will not suffer him to
give a greater proportion of the profits than the particular adventure will
well afford. As if the risk is worth ten per cent he will not be satisfied
with securing five per cent only as his own return, but will probably offer
an equal share of the profits above the five per cent. But suppose the
adventure fails, and there is none or very little profit to be divided, the cred-
itor is obviously in a better condition than if a sum certain had been given
as wages ; for as every undertaking must be attended with some expense,
and it is usual to pay agents or servants before any return of profit can be
fairly calculated upon, it would be unreasonable to say, that an agent or
servant shall not be paid, until the trader's other creditors are satisfied, and
whether those Avages are paid by a proportion of the profits, or by a sum
certain, which must be deducted from the profits, cannot be very material
to the creditors. On the other hand, if the agent agrees for a part of the
profits as such, and stipulates for an interest in the profits of a business,
instead of a certain sum proportioned to those profits, he obtains the right
of an account, and to the prejudice of the creditors may institute a suit
against his employer, not for the recovery of his wages, but for an account
of profits; and supposing him not to be thereby constituted a partner,
might take his full share of the profits, having an obvious advantage over
the other creditors ; for in case of the trader's insolvency, his claim (still
supposing him not to be a partner) would be prior to that of other creditors,
whereas in the former case he has not a determinate interest in the profits,
but on the event of the trader's becoming bankrupt, would be on the same
5
66 PARTNERSHIP. [CHAP. IV.
as well as with common sense.^ Let us proceed then to
illustrate the doctrine by adverting to some of the more
striking cases, in which it has been judicially recognized
and confirmed.
§ 40. Thus, where A., having neither money nor
credit, offered to B., that if he would order certain goods
to be shipped with A., upon adventure to foreign parts,
if any profit should arise therefrom, B. should have one-
half for his trouble ; and B. accepted the offer, and the
goods were purchased accordingly, and charged to both
A. and B. as joint debtors; and B., having been after-
wards compelled to pay the whole debt, brought a suit
against A.'s executors, to recover the value of the goods
so purchased; on an objection taken, that A. and B.
were partners in the adventure, and the action was not
therefore maintainable, the court overruled the objec-
tion, and held, that quoad third persons, this was a part-
nership, for the plaintiff B. was to share half the profits ;
but, as between themselves, it was only an agreement for
so much, as a compensation for the plaintiff's trouble,
and for lending A. his credit.^ In this case the purchase
was on joint account, for the purpose of selling the same
goods and dividing the profits ; and therefore it might
well be deemed a partnership, as to third persons, as for
example, in favor of the seller of the goods, consistently
with the distinction above stated.^
footing with other simple contract creditors." See also Perrine v. Hankorson, •
6 Halst. 181 ; 3 Kent, 25, note (b), where the learned commentator adopts
■with approbation the doctrine of Mr. Chancellor AValworth. See also Story
on Contracts, § 352, 353, 357, and note.
' See Mont, on P. B. 1, Pt. 1, p. 10-12, 2d ed., where many of the cases
are collected.
« Hesketh v. Blanchard, 4 East, 144, 146 ; Smith v. Watson, 2 B, & C.
401 ; Post, § 5G, 57.
' [So where several persons Avere engaged in running a line of stages
from A. to B., and by the agreement between them one was to run at his
own expense a portion of the route, and the others, in like manner, the
residue ; each being authorized to collect fare over the whole or any part of
CHAP. IV.] AS TO THIRD PERSONS. G7
§ 41. But a case, bringing the distinction to its strict-
est test, may easily be put, of factors, brokers, and other
agents, who are employed to sell goods on account of
their principals, and are to receive a commission out of
the profits, or a proportion of the profits, or a particular
percentage out of the price, or a part or the whole of
the price, beyond a certain sum, for which the goods are
sold, as a compensation for their services. In all such
cases it has been constantly held, that the factors, brok-
ers, and other agents, are not partners with their prin-
cipals, as to third persons, and a fortiori^ not between
themselves and their principals.^ It might be different,
as to third persons (as we shall hereafter see), if the
factor, broker, or other agent, were not only thus to
receive a proportion of the profits, but also to bear
a proportion of the losses.^ So, where a lighterman
the route ; the parties to settle monthly, and the fare so received to be
divided in proportion to the length of each one's route, the party found to
have received more than his share, to pay over to the other the balance on
each monthly settlement, this was held not to constitute a partnership be-
tween the parties, whatever it might be as between them and third persons.
Pattison v. Blanchard, 1 Seld. 186. And see Ellsworth v. Tartt, 26 Ala.
733: Bonsteel ?;. Vanderbilt, 21 Barb. 26] ; {Merrick v. Gordon, 20 N. Y.
93. See§58«.}
1 Coll, on P. B. 1, c. 1, § I, p. 18-29. See Dixon v. Cooper, 3 Wils. 40 ;
Benjamin v. Porteus, 2 H. Bl. 590 ; Meyer v. Sharpe, 5 Taunt. 74 ; Rice v.
Austin, 17 Mass. 197, 206; 3 Kent, 33 ; 2 Bell, Comm. B. 7, p. 623, 5th ed. ;
Withington v. Herring, 3 Moo. & P. 30 ; Gibbons v. Wilcox, 2 Stark. 43 ;
[Tobias v. Blin, 21 Vt. 544] ; Gow on P. c. 1, p. 18-20, 3d ed. ; Ex parte
•Watson, 19 Ves. 459; Turner v. Bissell, 14 Pick. 192; [Denny v. Cabot, 6
Met. 82; Bradley v. White, 10 Met. 303; Judson v. Adams, 8 Cush. 556;
Pottr. Eyton,3 C. B. 32; Burckle r. Eckart, 1 Denio,337; s. c. 3 Comst. 132];
{Fitch V. Hall, 25 Barb. 13 ; Hanna t'. Flint, 14 Cal. 73; Berthold v. Gold-
smith, 24 How. 536 ; Hallet v. Desban, 14 La. An. 529 ; Ellsworth v. Pomeroy,
26 Ind. 158. See also Braley v. Goddard, 49 Me. 115; Benson r. Ketchum,
14 Md. 331.}
* Smith r. AVatson, 2 B. & C. 401 ; Coll. on P. B. 1, c. 1, § 1, p. 19, 2d ed. ;
Green v. Beesley, 2 Bing. N. C. 108. But see Mair v. Glennie, 4 M. & S.
240 ; [Explained in Stocker v. Brockelbank, 3 Macn. & G. 250, 5 Eng. L. &
Eq. 67] ; Perrott v. Bryant, 2 You. & C. Ex. 61, 67, 68.
68 PARTNERSHIP. [CHAP. IV.
agreed with the owner of a lighter to work the
lighter, and to receive half of the gross earnings, as his
compensation therefor, he was held not to be a partner,
even as to third persons ; but it was merely a mode of
compensation of his services.^ So, where a person
agreed to give his attendance and services in a grocery
store, and for such attendance and services he was to
receive a fixed salary, and also a commission of seven
per cent upon the profits of the business, from the
owners, it was held, that this did not constitute him a
partner, upon the ground, that a commission on the
profits was distinct from an interest in the profits.^ It
might perhaps be more accurately said, that it was a
mere mode of compensation for an agency. The like
rule would apply, where a person should agree to de-
pasture cattle on the lands of another, who was to be
repaid for fattening the same, by equally dividing all the
profits with the owner, above £20, the estimated value
of the cattle, uj)on a resale.^
' Ante, § 34 ; Dry t\ Boswell, 1 Camp. 329 ; Coll. on P. B. 1, c. 1, § 1,
p. 21, 2(1 ed. ; Gow on P. p. 19, 20, 3d ed. ; Taggard v. Loring, 16 Mass. 336 ;
Cutler V. Winsor, 6 Pick. 335; Cheap v. Cramond, 4 B. & Aid. 663, 670;
[Heirastreet r. Howland, 5 Denio, 68.] See also Mohawk & Hudson R. R.
Co. V. Niles, 3 Hill, (N. Y.) 162 ; {Bowman v. Bailey, 10 Vt. 170; Bowyer
V. Anderson, 2 Leigh, 550.}
* Miller v. Bartlet, 15 S. & R. 137 ; [Pott v. Eyton, 3 C. B. 32] ; {New-
man i\ Bean, 1 Fost. 93 ; Bartlett v. Jones, 2 Strobh. 4 71 ; Macy v. Combs,
15 Ind. 469.}
3 Wish V. Small, 1 Camp. 331, note; Gow on P. p. 19, 20, 3d ed. ; [Raw-
linson v. Clarke, 15 M. & W. 292. And where A. agrees to furnish a
farm with a certain amount of teams and labor, and B. is to manage the
farm, and give certain labor, the crops to be divided between them, this does
not constitute a partnership. Blue v. Leathers, 15 111. 31 ; {Moore v. Smith,
19 Ala. 774; post, § 46, note.} So, where a patentee of an article con-
tracted with tlie defendant to act as manager of the business of manufacturing
the article which was to be marked with the patentee's name, the defendant
furnishing all the capital, but the patentee having the management of the
work, employing the workmen, making the purchases, &c., and was to receive
a remuneration equal to forty per cent on the capital stock, deducting all
CHAP. IV.] AS TO THIRD PERSONS. G9
§ 42. It is upon the like ground, that if the master of
a ship contracts with the owner to receive a certain pro-
portion of the profits of the voyage, in Heu of wages and
primage, this alone will not constitute him a partner
with the owner m the adventure inter sese, whatever may
be the case as to third persons.^ So, seamen engaged
liabilities, but by express terms was not to be a partner with the defendant,
this was held not to make the patentee a partner with the defendant, although
his remuneration depended distinctly upon the amount of profits. Stocker
V. Brockelbank, 3 Macn. & G. 250, 5 Eng. L. & Eq. 67, But if the joint
owners of a patent agree to make a common interest to sell, and to divide the
net proceeds equally, a partnership is thereby created. Penniman v. Munson,
26 Vt. 164 ; and see Noyes v. Cushman, 25 Vt. 390.]
' Mair v. Glennie, 4 M. & S. 240. — In this case, by agreement, the
master of the ship was to have, in lieu of wages, primage, &c., one-fifth
share of the profit or loss of the intended voyage on ship and cargo, and
was to follow the instructions of the owner of the ship and cargo, and do
all the business himself that he could do, and for the rest make the best
bargains he could. The voyage was to Havana, and to take in a return
cargo for the Baltic. The owner became bankrupt during the voyage, and
had mortgaged the ship to A. & Co. for advances ; who had not taken pos-
session of the ship upon her return, and had also become bankrupts. The
ship and cargo had been sold, and the suit was by the assignees of the
owner against the assignees of the mortgagees, for the proceeds. One
question was, whether the master, under the agreement, was a partner
in the ship and cargo, for the voyage. The court held that he was not.
On this occasion Lord EUenborough said : " And upon this point, it has
been contended, that the caj^tain was virtually a partner. But on what
ground has it been so contended? The ground is, because payment of
the captain's wages was to depend, as to its amount, upon a reference to the
value of the cargo, but, according to that mode of argument, every seaman
in a Greenland voyage would become a partner in a fishing concern. There
is no pretence, therefore, for saying, tliat the captain was a partner, because
his wages were to be regulated and paid by reference to a calculation on the
profits of the adventure." [This case was commented upon and approved
in Stocker v. Brockelbank, 3 Mac. & G. 250, 5 Eng. L. & Eq. 67.] This
language is certainly very general ; and perhaps in its application it ought
to be limited to the very case before the court, which involved the point
only whether there was a partnership between the parties ; not whetlier there
was a partnership as to third persons. It is indeed difficult, even with this
qualification, to reconcile this case with the doctrine pronudgated in some
other cases ; for as the master was to share both in the profit and losses of
the voyage, it would seem that the owner and master were, i7iter sese, part-
ners in the ship and cargo for the voyage, as well as in regard to tliird
70 PARTMERSHIP. [cHAP. IV.
in the whale fisheries, who are to receive a certain pro-
portion of the profits or proceeds of the voyage after the
sale thereof, in lieu of wages, are not deemed inter sese,
or as to third persons, partners with the owner and
master therein ; but their shares are treated, as in the
nature of wages, unliquidated at the time, but capable of
being reduced to a certainty, on the sale of the oil or
fish, when it has taken place ; and thus they become en-
titled to wages to the extent of their proportion in the
produce of the voyage.^ It would be manifestly against
the common understanding in all such voyages, to con-
sider them partners inter sese.^ And it would be equally
against the common usage to treat them as partners as
to third persons, and liable thereby for the outfits, ad-
vances, and other charges for the voyage to third per-
sons, who should give credit for them. On the contrary,
in all such voyages the owner of the ship is treated as
solely responsible therefor, and the masters, officers, and
crew are not even deemed tenants in common in the
persons. At least there are authorities which sustain this view of the matter.
See ante, § 27, 32, 34, 41 ; post, § 43, 44, 55-58. {But in Mair v. Glennie,
the expression profit or loss seems to have been used for gross returns. See
§ 30, note} ; Smith v. Watson, 2 B. & C. 401 ; Bond v. Pittard, 3 M. & W.
357; Green v. Beesley, 2 Bing. N. C. 108; Perrott v. Bryant, 2 You.
& C. Ex. 61, 68 ; Coll. on P. B. 1, c. 1, § l,|p. 20-24, 2d ed.
' Wilkinson v. Frasier, 4 Esp. 182 ; Baxter v. Rodman, 3 Pick. 435,
438, 439 ; Turner v. Bissell, 14 Pick. 192, 195 ; {Coffin v. Jenkins, 3 Story,
108 ; The Crusader, Ware, 437 ; Reed v. Hussey, Bl. & Howl, 525 ; Duryee
V. Elkins, Abbotts, Adm. 529. }
'^ Rice V. Austin, 17 Mass. 197, 205, 206. — Mr. Justice Putnam, in de-
livering the opinion of the court in this case, said : "It cannot, however, be
true, that all who participate in the profits are to be considered as partners,
in respect to the concern or adventure, from which the profits of the voyage
arise. Seamen, for example, who are employed in the whale fisheries, are
usually compensated for their services by a certain part of the profits of the
voyage. Nevertheless, it has not been supposed, that this circumstance
made the mariner a partner with the ship-owner, so as to render it lawful
for a creditor of the mariner to take the whole cargo of oil for his private
debt." See also Turner v. Bissell, 14 Pick. 192.
CHAP. IV.] AS TO THIRD PERSONS. 71
voyage ; but are rather deemed entitled to several and
distinct proportions of the proceeds thereof, as in the
nature of wages, and in no sense as partners.^ The case
therefore is one where the seamen are to participate in
the profits, if any, but are to bear no part of the losses,
if the profits are not sufficient to repay the owner.^ In
like manner, where persons, who are engaged as dredg-
ers in the oyster fisheries, have no interest in the boats,
nor in the fish caught, but the latter belong wholly to
' See Fennings v. Lord Gi'enville, 1 Taunt. 241. — In Baxter v. Rodman,
3 Pick. 435, 438, Mr. Chief Justice Parker, in delivering the opinion of the
court, it being a case growing out of a contract for a. whaling voyage, said :
" The first objection is, that as by virtue of the contract, on which the
master and crew engage in the voyage, they are to receive their pay out of
the proceeds of the oil, they are joint owners and quasi partners, and so
ought all to have joined in the action. If this were the law, it would be
found to be exceedingly inconvenient, and would, no doubt, entirely break
up the peculiar mode of conducting these voyages, which have been found
to be so beneficial to those who carry them on, and to the country. That
every seaman should be tenant in common with all the other seamen, the
master, and the owners of the vessel, in all the oil, which may be taken on
a whaling vo3'age, so that no action could be brought respecting it without
joining all, and none could be sued without the whole, giving every seaman
a right to discontinue the action, or to release the claim, or to receive pay-
ment for the whole, would be a state of things not suspected by the wise
and enterprising men who have carried on the whale fishery. But we think
it is not the law. The owners of the vessel and projectors of the voyage
are the owners of the product of the voyage. The true meaning of the
shipping contract is, that the men shall be paid out of the proceeds in a
stipulated proportion. It is an agreement as to the mode of compensation,
and gives them no property in the oil, but only regulates the amount of
compensation." In the common cod fisheries a different usage seems to
prevail. There the fishermen generally share the fish caught, and the pro-
ceeds thereof, when sold by the owner, in certain fixed proportions. This
has never been supposed to constitute them partners inter sese, or as to third
persons, in the adventure. At most they could be deemed no more than
tenants in common of the fish caught with the owner. The act of Congress
manifestly contemplates them as having rights and interests in severalty,
and gives each fisherman a several remedy against the vessel for his share of
the fish caught, and of the proceeds when sold. Act of 19 June, 1813, c. 2.
See Houston v. Darling, 16 Me. 413.
* See Coppard v. Page, Forrest, 1 ; Perrott v. Bryant, 2 You. & C. Ex.
61, 67, 68.
72 PARTNERSHIP. [cHAP. IV.
the owners of the boats ; and the dredgers are to receive
a share of the profits ; such persons are not deemed
partners in the adventure, either inter sese, or as to third
persons ; but it is treated as a mere mode of calculating
the amount of wages due to them from the owners of
the boats.^ But it might be otherwise, if the dredgers
were to share in the profits and losses according to
certain agreed proportions.^
§ 43. In America the doctrine has been applied to
other analogous cases, and pressed somewhat further.
Thus, where a party was to receive, by way of rent, a
portion of the profits of a farm or tavern, let to hire by
him, it was held, that he ought not to be deemed a part-
ner in the concern ; but that it was to be treated as a
mode of receiving compensation only.^ Upon the like
analogy, where A. advanced his funds to be invested by
B. in live oak in Florida, to be procured, cut, and trans-
ported at the expense of B., but on account and risk of
A., to the navy yard of the United States, and for his
services and disbursements, B. was to receive half the
profits, and A., for his risk and advances, was to have
the residue of the profits ; it was held, that the parties
were not partners in the timber, nor could third persons
be at liberty to treat it as partnership property. On
that occasion the court said, that it was not true, that all,
who participated in the profits, are to be considered as
partners in respect to the concern or adventure, from
which the profits arise. And the case was put of ship-
' Perrott v. Bryant, 2 You. & C. Ex. 61, 67.
* Coppard V. Page, Forrest, 1 ; Perrott v. Bryant, 2 You. & C. Ex. 61, 68.
But see Mair v. Glennie, 4 M. & S. 2-40; [Stocker v. Brockelbank, SMacn.
& Q. 250, 5 Eng.. L. & Eq. 67.]
3 Perrine v. Hankinson, 6 Ilalst. 181; 3 Kent, 33; {Lyon v. Knowles,
3 B. & S. 556 ; Putnam v. Wise, 1 Hill, (X. Y.) 234 ; Bowyer v. Anderson,
2 Leigh, 550; Chase v. Barrett, 4 Paige, 148. But see Catskill Bank v.
Gray, 14 Barb. 471. |
CHAP. IV.] AS TO THIRD PERSONS. 73
ments to India upon half profits (which are so generally
practised in this country), in which it has never been
supposed, that thereby the shippers and the owners of
the ship became answerable for each other, or were in
any way interested, as partners, in respect to the pro-
perty, which constituted the original adventure, and
w^hich was undertaken to be carried to India for half
profits, or in the return cargo, in which the proceeds
were invested ; but that the half profits were treated
only as a mode of compensation for freight, disburse-
ments, and charges in the course of the voyage.^ So,
where A. and B. having entered into a contract with a
turnpike company to make and complete a certain road,
afterwards agreed w^ith 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 aflforded in complet-
' Rice V. Austin, 17 Mass. 197, 206 ; Turner v. Bissell, 14 Pick. 192,
195 ; 3 Kent, 3-1 ; {Braley i'. Goddard, 49 Me. 115. } [So, where an agree-
ment was entered into between D. and W., under which D. was to furnish
goods for a store, and pay all the expenses, and W. was to transact the
business of the store, and receive half of the profits, as a compensation for
his service, it was held that they were not partners, and that D. only was
liable for goods furnished. Bradley v. White, 10 Met. 303. See also Pott
V. Eyton, 3 C. B. 32; Dunham v. Rogers, 1 Penn. St. 255; Rawlinson v.
Clark, 15 M. & W. 292. The like rule was followed, where A. agreed to
manufacture articles for B., who agreed to furnish the raw materials, and to
pay A. such amount as should arise from the profits of the business, de-
ducting the materials and incidental expenses of B., together with ten per
cent on the amount of sales. Judson v. Adams, 8 Cush. 556. So where a
railroad corporation leased to A. a public house, owned by the company, he
paying a certain sum annually out of the net profits for the use of the fur-
niture, and " one-half of the net proceeds arising from keeping the house
as a hotel," and keeping an account, open to their inspection, and giving
his own time and attention, and having free passage over their road for
himself and all persons employed by him, and all articles used by him in
keeping the house, it was held, that the corporation did not thereby become
a partner, and liable for supplies furnished the house by third persons.
Holmes v. Old Colony Railroad Co., 5 Gray, 58. The question does
not seem to have been raised in this case, whether the railroad company had
any corporate power to engage in the business of hotel keeping.]
74 PARTNERSHIP. [cHAP. IV.
ing the same, the one-half to be taken from A.'s part,
and the other half from B.'s part ; it was held, that this
agreement did not create a partnership between A., B.,
and C, but was only a mode of paying C. for his help
and lab or. ^
§ 44. So, where the master of a ship agreed with
the owner to take her for the purpose of getting
employment in the freighting business, and engaged
to victual and man her, and pay half the port charges,
pilotage, &c. ; and the owner was to pay the other half,
together with eight dollars per month for one man's
wages, and to put the vessel in sufficient order for busi-
ness ; and all the money so stocked in the vessel was to
be equally divided between the master and the owner,
each party accounting for the above ; it was held, that
the master was, ^9ro hac vice, owner for the voyage un-
dertaken, and the owner was not a partner, even as to
third persons ; for the agreement amounted to no more
than a compensation out of the earnings of the vessel,
after deducting certain fixed charges.^ In this case the
deduction was from the gross earnings. In another case
the same principle was applied to the case of the net
earnings. Thus, w^here the vessel was let to charter to
the master for the season, and she was by the agreement
to be at the risk of the owner, and after deducting the
first cost of the lumber, or whatever she might carry, the
owner was to receive two-fifths of the net proceeds,
' Muzzy V. Whitney, 10 Johns. 226. — In this last case, as in Hesketh v.
Blan chard, 4 East, 144, the real question before the court was, whether the
parties were partners inter sese ; and the court did not decide, whether
the pai'ties were partners as to third persons, as the court did in Ilesketh
V. Blanchard. But the inference deducible from the language of the court
leads to the conclusion that they were not partners either way. 3 Kent, 34.
But see Dob v. Ilalsoy, 16 Johns. 34; jVoorhees v. Jones, 5 Dutch. 270.}
" Cutler V. Winsor, 6 Pick. 335 ; Taggard v. Loring, 16 Mass. 336. See
Dry V. Boswell, 1 Camp. 329, 330; [Dwinel v. Stone, 30 Me. 384.]
CHAP. IV.] AS TO THIRD PERSONS. '75
and the master was to purchase the cargoes at his
own expense, to victual and man the vessel, and to
pay the two-fifths at the end of each trip ; it was
held, that the master was, p?*o hac vice, owner for the
season ; and that the general owner was not liahle
to third persons, as a partner on account of other
shipments, not made within the scope of the agree-
ment.^
§ 45. Other cases have arisen, where the same dis-
tinction has been still more strikingly adopted. Thus,
where A., residing at a distance from a factory of cloths,
occupied by B., entered into an agreement with B., in
substance as follows : A. was to furnish a full supply of
wool for the factory for two years ; and B. was to man-
ufacture such wool into broadcloths and satinets, in a
good and workmanlike manner, according to the direc-
tions of A., and to devote the entire use of his factory
to that purpose for the term ; and the net proceeds of
the cloths, after deducting the incidental expenses and
charges of sale, were to be divided, so that A. should
have fifty-five per cent, and B. forty-five per cent
thereof ; and in the manufacture of satinets from such
wool, A. was to pay fifty-five per cent, and B. forty-five
per cent of the cost of the warp ; and the expense of
insurance on the work and cloth was to be borne by A.
and B., in the same ratio as their interest was in the
final division of the avails of the cloths ; and in case of
' Reynolds v. Toppan, 15 Mass. 370. — This case seems to have turned
upon its own peculiar circumstances ; otherwise, it might not seem easy at
first view to reconcile it with the doctrine of Lord EUenborough, in Dry v.
Boswell, 1 Camp. 329, 330, where the distinction is expressly taken between
sharing the gross earnings and sharing the net earnings. The former is
not, the latter is, the case of a partnership. Ante, § 34, and note ; post,
§ 56. See also Cheap v. Cramond, 4 B. & Aid. 6G3, 668, cited post, § 56,
note; {Ward v. Thompson, 22 How. 330; Winsor v. Cutts, 7 Greenl. 261.
But see Julio v. Ingalls, 1 All. 41.}
76 PARTNERSHIP. [cHAP. IV.
the destruction of any work or cloth by fire, the amount
received of the insurers was to be divided between A.
and B., according to the loss sustained by each ; it was
held, that under this agreement, A. and B. were not
partners, either inter se, or as to third persons, and that
B. had no other interest in the profits, than a compen-
sation for his labor and materials by a percentage on the
avails of the cloths.^
' Loomis V. Marshall, 12 Conn. 69. — The general reasoning of the cases
on this subject was so fully gone into upon this occasion, that it may be
acceptable to the learned reader to have an opportunity to examine it. Mr.
Justice Huntingdon, in delivering 'the opinion of the court, said: "That
the parties to this agreement did not intend to create a partnership, either
as between themselves or thii'd persons, is, we think, very obvious from the
facts set forth in the motion, connected with the stipulations contained in
the agreement ; and if they are liable as partners, they are made so by
construction of law. Those who were to furnish the wool, supposed they
alone were responsible for the purchase-money ; and those who were to
perform the labor and provide the materials necessary to complete the man-
ufacture of it, believed they alone were liable for the price of the labor and
materials. If they are all jointly liable, their liability arises from the fact,
that they have entered into a contract, which, as between themselves and
the plaintiff, controls their clear intention, if not express stipulation, to the
contrary. And it is undoubtedly true that a person may expressly refuse
to be responsible as partner, and yet, in the same instrument which con-
tains that refusal, may agree to such terms as will in law constitute him a
partner. Whether these defendants have entered into such terms, is to be
determined by a fair construction of the agreement which they have executed.
While, on the one hand, we should be careful to adopt no rule of construction,
which would enable parties, who are interested in the profits of business, as
profits, to deprive the creditors of any portion of the fund, on which they
have a just claim for the payment of the debts due to them ; so, on the other
hand (to use the language of Kent, C. J., in Post v. Kimberly, 9 Johns.
504), ' we must be careful not to carry the doctrine of constructive partner-
ship so far as to render it a trap for the unwary.' We must in this, as other
cases, look to the entire transaction, in order to judge correctly of its nature
and tendency. And we think (as is said by Gould, J., in Coope v. Eyre,
1 H. Bl. 44), 'Cases of this nature should stand on broad lines, not on
subtleties and refinements, the source of litigation and disputes.' A com-
munity of interest in land does not, of itself, constitute a partnership ; nor
does a mere community of interest in personal estate. There must be some
joint adventure, and an agreement to share in the profit of the undertaking.
Porter v. M'Clure, 15 Wend. 187 ; Green v. Beesley, 2 Bing. N. C. 108 ;
CHAP. IV.] AS TO THIRD PERSONS. 77
§ 46. The like decision was made under the follow-
ing circumstances. By a written agreement A. agreed
to furnish B. for one year with wool to be worked into
Fereday r. IIordoiTi, Jac. 144. This community of profit is the test to tlu-
termine whether the contract be one of partnership ; and to constitute it, a
partner must not only share in the profits, but share in them as a principal ;
for the rule is now well established, that a party, who stipulates to receive a
sum of money in proportion to a given quantum of the profits, as a reward
for his labor, is not chargeable as a partner. The cases are collected and
well arranged by Collyer, in his Treatise on Partnership, 14, 15, et seq.,
and by Gary (on Partn.), 8-11. They embrace factors and brokers, who
receive a commission out of the profits of the goods sold by them ; masters
of vessels, who share in the profit and loss of the adventure in lieu of
wages ; seamen employed in the whale fisheries ; shipments from this country
to India on half profits ; those who receive, in the form of rent, a portion of
the profits of a farm or tavern ; and a variety of other adventures, to which
it is unnecessary particularly to refer. Dry v. Boswell, 1 Camp. 329 ; AVish
V. Small, 1 Camp. 331, note; Hesketh v. Blanchard, 4 East, 144; Mair v.
Glennie, 4M. & S. 240 ; Dixon v. Cooper, 3 Wils. 40 ; Withington v. Herring,
5 Bing. 442 ; Rice v. Austin, 17 Mass. 197 ; Baxters. Rodman, 3 Pick. 435 ;
Cutler V. Winsor, 6 Pick. 335 ; Turner i'. Bissell, 14 Pick. 192 ; Muzzy v.
Whitney, 10 Johns. 226 ; Ross v. Drinker, 2 Hall, 415 ; Harding v. Foxcroft,
6 Greenl. 76 ; Thompson v. Snow, 4 Greenl. 264 ; Miller v. Bartlet, 15 S. &
R. 137. The rule, which these and other cases establish, is founded on the
distinction which has been taken between agreements, by which the parties
have a specific interest in the profits themselves, as profits, and such as give
to the party sought to be charged as a partner, not a specific interest in the
business or profits, as such, but a stipulated proportion of the profits, as a
compensation for his labor and services. Ex parte Chuck, 8 Bing. 469.
We are aware that this distinction has not received the approbation of Lord
Eldon, Avho says, in Ex parte Hamper, 17 Ves. 403: 'The cases have gone
further to this nicety, upon a distinction 'so thin, that I cannot state it as
established upon due consideration, that if a trader agrees to pay another
person for his labor in the concern a sum of money even in proportion to
the profits, equal to a certain share, that will not make him a partner; but
if he has a specific interest in the profits themselves, as profits, he is a partner.
It is clearly settled, though I regret it, that if a man stipulates, that, as the
reward of his labor, he shall have, not a specific interest in the business, but a
given sura of money, even in proportion to a given quantum of the profits,
that will not make him a partner ; but if he agrees for a part of the profits, as
such, giving him a right to an account, though having no property in the
capital, he is, as to third persons, a partner.' Id. 412 ; Ex ^yarte Rowlandson,
1 Rose, 91 ; Ex parte Watson, 19 Ves. 459. We do not propose to examine
the reason-ableness of the doubts expressed by this distingui;ihed judge.
Such inquiry we consider closed by a series of precedents, which we do
78 PARTNERSHIP. [CHAP. IV.
satinets, and B. was to deliver to A. all the satinets,
which the wool would make, and to find and pay for
warps for the same ; A. was to pay B., for working the
wool, finding the warps, &c., forty per cent on the sale
of the satinets ; each was to pay half the charges ; A.
was to have the whole direction of the sales, and if he
should make sales himself, he was to have one and a
half per cent upon forty per cent of the sales. It
was held, that A. and B. were not partners inter sese, or
as to third persons.^
not feel at liberty to disregard. They have settled principles, which have
for a long period regulated the agreements of parties, in cases to which
they are applicable ; and they ought not now to be questioned. The dis-
tinction, to which we have referred in our opinion, embraces the present
case. The object of Marshall and his associates was to have the wool man-
ufactured into cloth. They resided at a distance from the factory occupied
by French and Hubbell, and were unacquainted with the business of manu-
facturing. They were willing to avail themselves of the opportunity, which
the possession of the factory by French afforded, of having their wool
worked into cloth, and of the skill of French and Hubbell, to prepare it for
market. To secure and increase exertion, they agreed to give them, as a
reward for their services and the materials, which they should furnish,
a certain proportion of the ' net proceeds of all the cloths, after deducting
incidental and necessary expenses of transporting and other proper charges
of sale.'' It is not expressed, in terms, to be for such compensation ; but
this is its legal meaning. In many of the cases, to which we have referred,
the language of the agreements was not more explicit than in the one now
under consideration ; but looking at the entire transaction, such was con-
sidered the obvious meaning of the parties. French and Hubbell had no
other interest in the profits than such as arose from the agreement to pay
them for their labor, &c., in a specific proportion of the amount of the sale
of the manufactured article." [See Brigham v. Dana, 29 Vt. 1, 9.]
' Turner v. Bissell, 14 Pick. 192. — On this occasion Mr. Justice Wilde,
in delivering the opinion of the court, said: " The question submitted is,
whether the defendants are liable in this suit as partners. It is admitted,
that they were not partners inter se ; for by the terms of their agreement,
they had not a mutual interest in the profits and loss of the business, to
which it related, which is essential to render a partnership complete. But
the plaintiff 's counsel contend, that both of the defendants participated in
the profits of the business, and were thereby chargeable with respect to
third persons. And it is certainly a well-established principle, that whoever
participates in the profits of a trade, or has a specific interest in the profits
CHAP. IV.] AS TO THIRD PERSONS. 79
§ 47. So, where a person was employed as an agent
in conducting the husiness of a foundry for iron cast-
ings, at a fixed salary of ^300, and in addition thereto,
he was to receive one-third of the profits of the foundry,
themselves, as profits, is chargeable as a partner with respect to tliird
persons. Gow on P. 14. But it is equally well established, that, where a
party is entitled to or receives a given sum of money, in proportion to a given
quantum of the profits, as a compensation for his labor and services, he is
not thereby liable to be charged as a partner. Gow on P. 19. Thus,
in Dry v. Boswell, 1 Camp. o29, the proprietor of a lighter agreed with a
person to work his lighter, and to allow him therefor one-half of the gross
earnings, as a compensation for his labor ; and it was ruled by Lord Ellen-
borough, that such an agreement did not constitute a partnership. The cases
of the seamen employed in the whale fisheries, and of shipments to India on
half profits, come witliin the same distinction. So factors and other agents,
who receive commissions in proportion to the amount of sales, are inter-
ested in the profits, but as they have no interest in them, excepting so far
as they may determine the amount of compensation for their services, thev
do not thereby become partners. And we are of opinion, that the present
case falls within this distinction. The object of Bissell was to have his
wool worked into cloth, and he agreed to allow Root, as compensation for
manufacturing, an amount of money to be regulated by the amount of
sales ; and in no other manner was Root interested in the profits. The
circumstance, that Root was to find warps, does not affect the principle, upon
which the distinction as to compensation is founded. If Bissell had agreed
with Root to pay him a certain sum for his services, and for supplying the
warps, there could be no pretence for holding them as partners ; and we can
perceive no difl'erenee in principle, arising from the circumstance, that the
compensation was to be determined according to the amount of sales."
[And see Hawes v. Tillinghast, 1 Gray, 289; {Denny v. Cabot, 6 Met. 82;
Judson V. Adams, 8 Cush. 556; Hitchings v. Ellis, 12 Gray, 4-49; Kellogg
V. Griswold, 12 Vt. 291 ; Mason v. Potter, 26 Yt. 722 ; Lamb v. Grover,
47 Barb. 317 ; Dunham v. Rogers, 1 Penn. St. 255 ; Johnson v. Miller, 16
Ohio, 431. See § 41.} So where A. agreed to serve B. as overseer on
his farm for one year, A. to furnish a certain number of hands and horses,
and to defray his and their expenses himself, and they were to be worked
on B.'s farm in connection with B.'s hands and horses, and A. was to have
one-fourth of the crop for his compensation, this was held to constitute no
partnership inter sese, as A. was to share only in the gross profits, and not
at all in the loss. Moore v. Smith, 19 Ala. 774 ; {Blue v. Leathers. 15 111.
31; ante, § 41, note.} But where A. gave B. possession of a stock-farm
for a term of years to improve, B. to have one-third of tiie profits, and to
pay no rent, the current expenses to be paid by the concern, and six per
cent interest to be allowed on advances made by either party, this contract
was held to be a partnership. Tibbatts v. Tibbatts, G McLean, 80.]
80 PARTNERSHIP. [cHAP. IV.
if any were made, and he had nothing to do with the
losses ; and his employers were to find all the capital
stock, and he was to give his services ; it was held,
that the agent was not, either as to his employers, or
as to third persons, a partner ; but that the case fell
within that class of decisions, where the agent was to
receive a share of the profits as a compensation for his
labor and services.^
§ 48. These may suffice as illustrations of the dis-
tinction above alluded to. The whole foundation, on
which it rests, is, that no partnership is intended to be
created by the parties inter sese ; that the agent is not
clothed with the general powers, rights, or duties of a
partner ; that the share in the profits given to him is
not designed to make him a partner, either in the
capital stock, or in the profits, but to excite his dili-
gence, and secure his personal skill and exertions, as
an agent of the concern, and is contemplated merely
as a compensation therefor. It is, therefore, not only
susceptible of being treated purely as a case of agency ;
but in reality it is positively and absolutely so, as far
as the intention of the parties can accomplish the
object. Under such circumstances, what ground is
there in reason, or in equity, or in natural justice, why
in favor of third persons this intention should be over-
thrown, and another rule substituted, which must work
a manifest injustice to the agent, and has not operated
either as a fraud, or a deceit, or an intentional wrong
upon third persons ? Why should the agent, who is by
this very agreement deprived of all power over the
capital stock, and the disposal of the funds, and even
» Vanderburgh v. Hull, 20 Wend. 70. See 1 Smith, Lead. Cas. 504,
and note, 2d ed. ; [Ilawlinson v. Clarke, 15 M. & W. 292] ; {§ 41 ; Clark
V. Gilbert, ^2 Barb. 57G ; Atherton v. Tilton, 44 N. H. 452; Bull v. Schu-
bcrth, 2 Md. 38. But see Holt v. Kernodle, 1 Ired. 191).}
CHAP. IV.] AS TO THIRD PERSONS. 81
of the ordinary rights of a partner to a levy ^ thereon,
and an account thereof, be thus subjected to an un-
Hmited responsibihty to third persons, from whom he
has taken no more of the funds or profits (and, indeed,
ordinarily less so) than he would have taken, if the
compensation had been fixed and absolute, instead of
being contingent?^ If there be any stubborn rule of
law, which establishes such a doctrine, it must be
obeyed; but if none such exists, then it is assuming
the very ground in controversy to assert, that it flows
from general analogies or principles. On the contrary,
it may be far more correctly said, that even admitting
(what as a matter unafl"ected by decisions, and to be
reasoned out upon original principles, might well be
doubted ^), that where each party is to take a share of
the profits indefinitely, and is to bear a proportion of the
losses, each having an equal right to act as a principal,
as to the profits, although the capital stock might belong
to one only,^ it shall constitute, as to third persons, a
case of partnership ; yet that rule ought not to apply to
cases, where one party is to act manifestly as the mere
agent for another, and is to receive a compensation for
his skill and services only, and not to share as a partner,
or to possess the rights and powers of a partner.
§ 49. In short, the true rule, ex cecfiio et bono, would
seem to be, that the agreement and intention of the
parties themselves should govern all the cases. If they
intended a partnership in the capital stock, or in the
profits, or in both, then, that the same rule should
apply in favor of third persons, even if the agreement
> { Qu. lien ? }
« Gary on P. 11, note (i) ; ante, § 37, note (1).
=» Ante, § 36, 37.
* Grace v. Smith, 2 W. Bl. 998 ; Waugh v. Carver, 2 II. Bl. 235 ; ante,
§ 27, 28.
82 PARTNERSHIP. [cHAP. IV.
were unknown to them. And, on the other hand, if no
such partnership were intended between the parties,
then, that there should be none as to third persons,
unless where the parties had held themselves out as
partners to the public, or their conduct operated as a
fraud or deceit upon third persons. It is upon this
foundation, that the decisions rest, which affirm the
truth and correctness of the distinction already con-
sidered, as a qualification of the more general doctrine
contended for. And in this view it is difficult to per-
ceive, why it has not a just support in reason, and
equity, and public policy. Wherever the profits and
losses are to be shared by the parties in fixed propor-
tions and shares, and each is intended to be clothed
with the powers, and rights, and duties, and responsi-
bilities of a principal, either as to the capital stock, or
the profits, or both, there may be a just ground to
assert, in the absence of all controlling stipulations and
circumstances, that they intend a partnership. But
where one party is stripped of the powers and rights
of a partner, and clothed only with the more limited
powers and rights of an agent, it seems harsh, if not
unreasonable, to crowd upon him the duties and
responsibilities of a partner, which he has never as-
sumed, and for which he has no reciprocity of reward
or interest. It has, therefore, been well said by Mr.
Chancellor Kent, in his learned Commentaries, that
" to be a partner, one must have such an interest in
the profits, as will entitle him to an account, and give
him a specific lien or preference in payment over other
creditors. There is a distinction between a stipulation
for a compensation for labor proportioned to the profits,
which does not make a person a partner ; and a stipu-
lation for an interest in such profits, which entitles the
CHAP. IV.J AS TO THIRD PERSONS. 83
party to an account, as a partner." ' And Mr. Collyer
has given the same doctrine in equally expressive
terms, when he says, that in order to constitute a com-
munion of profits between the parties, which shall
make them partners, the interest in the profits must be
mutual ; that is, each person must have a specific inter-
est in the profits, as a principal trader.^
' 3 Kent, 25, note (b) ; Gary on P. 11, note (i) ; ante, § 37, note (1) ;
post, § 57. [See Rawlinson v. Clarke, 15 M. & W. 292.]
* Coll. on P. B. 1, c. 1, § 1, p. 17, 2d ed.; Id. p. 11; Id. p. 23. {The
doctrine that participation in profits makes one liable as a partner to third
persons by operation of Into, first distinctly enunciated in Waugh v. Carver, 2
H. Bl. 235, after being disapproved by almost all text-writers, reluctantly
followed by courts and broken in upon by subtle exceptions and limitations,
has been finally overthrown in England. A series of cases has decided that
the law of partnership is a branch of the law of agency ; that the test to
determine the liability of one sought to be charged as a partner, is whether
the trade is carried on in his behalf; and that participation In the profits is
not decisive of that question, except so far as it is evidence of the relation of
principal and agent between the persons taking the profits and those actually
carrying on the business. Cox v. Hickman, 18 C B. 617; s. c. 8 H. L. C.
2G8; Kilshaw i'. Jukes, 3 B. & S. 847; Bullen v. Sharp, (Exch. Ch.) Law
Rep. 1 C. P. 86.
In the last case Mr. Justice Blackburn says, p. 109: "The first point
therefore to be determined In the present case, is what really was the effect
of the decision of the House of Lords in Cox v. Hickman, 8 H. L. C. 268.
Prior to that decision, the dictum of De Grey, C. J., In Grace v. Smith, 2 W.
Bl. 998, 'that every man who has a share of the profits of a trade ought
also to bear a share of the loss," had been adopted as the ground of judgment
In Waugh v. Carver, 2 H. Bl. 235, where It was laid down 'that he who
takes a moiety of all profits Indefinitely shall, by operation of law, be made
liable to losses if losses arise, upon the principle that, by taking a part of the
profits, he takes from the creditors a part of that fund which Is the proper
security to them for the payment of their debts.' This decision had never
been overruled. The reasoning on which It proceeds seems to have been
generally acquiesced In at the time : and when, more recently. It was dis-
puted, it was a common opinion (in which I for one participated) that the
doctrine had become so Inveterately part of the law of England that it would
require legislation to reverse It. In Cox r. Hickman, the creditors of a trade
had agreed that their debtor's trade should be carried on for the purpose of
paying them their debts out of the profits; and the composition deed, to wliich
they were parties, secured to them a property In the profits. The rule laid
down In Waugh v. Carver, if logically followed out, led to the conclusion
84 PARTNERSHIP. [cHAP. IV.
§ 50. The Koman law fully recognized the same dis-
tinction, treating the case as a mandate, and not as a
thai all tlie creditors ■who assented to this deed, and by so doing agreed
to take the profits, were individually liable as partners; but, when it was
sought to apply the rule to such an extreme case, it was questioned whether
the rule itself was really established. There was a very great difference of
opinion amongst the judges who decided the case in its various stages below,
and also amongst those consulted in the House of Lords. In the result, the
House of Lords, — consisting of Lord Campbell, C, and Lords Brougham,
Cranworth, Wensleydale, and Chelmsford, — unanimously decided that the
creditors were not partners. The judgments of Lord Cranworth and of
Lord Wensleydale bear internal evidence of having been written. Lord
Campbell, C, and Lords Brougham and Chelmsford said a few words
expressing their concurrence. It is, therefore, in the written judgments, and
more especially in the elaborate judgment of Lord Cranworth, that we must
look for the 7-atio decidendi. Now, we find Lord Cranworth says, 8 H. L. C.
306 : ' It was argued, that, as they would be interested in the profits, therefore
they would be partners. But this is a fallacy. It is often said that the test,
or one of the tests, whether a person not ostensibly a partner is nevertheless,
in contemplation of law, a partner, is, whether he is entitled to participate, in
the profits. This, no doubt, is in general a sufficiently accurate test; for a
right to participate in profits affords cogent, often conclusive, evidence that
the trade in which the profits have been made was carried on in part for or
on behalf of the person setting up such a claim. But the real ground of the
liability is, that the trade has been carried on by persons acting on his behalf;
when that is the case, he is liable to the trade obligations, and entitled to its
profits, or to a share of them. It is not strictly correct to say that his right to
share in the profits makes him liable to the debts of the trade. The correct
mode of stating the proposition is, to say that the same thing which entitles
him to the one makes him liable to the other, viz. the fact that the trade has
been carried on on his behalf, i. e. that he stood in the relation of principal
towards the persons acting ostensibly as the traders by whom the liabilities
have been incurred, and under whose management the profits have been
made. Taking this to be the ground of liability as a partner, it seems to me
to follow that the mere concurrence of creditors in an arrangement under
which they permit their debtor, or trustees for their debtor, to continue his
trade, applying the profits in discharge of their demands, does not make
them partners with their debtor or the trustees. The debtor is still the
person solely interested in the profits, save only that he has mortgaged them
to his creditors. He receives the benefit of the profits as they accrue,
though he has precluded himself from applying them to any other purpose
than the discharge of his debts. The trade is not carried on by or on
account of the creditors ; though their consent is necessary in such a case ;
for, without it, all the property might be seized by them in execution. But
the trade still remains the trade of the debtor or his trustees ; the debtor or
CHAP. IV.] AS TO THIRD PERSONS. 85
partnership, unless the hitter was the intention of the
parties themselves, where one person was employed to
the trustees are the person by or on behalf of whom it is carried on.' He
afterwards adds, 8 H. L. C. 309 : ' The authorities cited in argument did
not throw much light upon the subject. I can find no case in which a
person has been made liable as a dormant or sleeping partner, where the
trade might not fairly be said to have been carried on for him, together with
those ostensibly conducting it, and when therefore he would stand in the
position of principal towards the ostensible members of the firm as his agents.'
And Lord Wensleydale says, 8 H. L. C. 312: 'A man who allows another
to carry on trade, whether in his own name or not, to buy and sell, and
to pay over all the profits to him, is undoubtedly the principal, and the
person so employed is the agent, and the principal is liable for the agent's
contracts in the course of his employment. So, if two or more agree that
they shall carry on a trade, and share the profits of it, each is a principal, and
each is an agent for the other; and each is bound by the other's contracts in
carrying on the trade, as much as a single principal would be by the act of
an agent who was to give the whole of the profits to his employer. Hence,
it becomes a test of the liability of one for the contract of another that he is
to receive the whole or a part of the profits arising from that contract, by
virtue of the agreement made at the time of the employment. I believe this
is the true principle of partnership liability. Perhaps the maxim that he who
partakes the advantage ought to bear the loss, often stated in the earlier cases
on the subject, is only the consequence, not the cause, why a man is made
liable as a partner. Can we, then, collect from the trust deed that each of
the subscribing creditors is a partner with the trustees, and by the mere sig-
nature of the deed constitutes them his agents for carrj'ing on the business on
the account of himself and the rest of the creditors ? I think not.' And
he afterwards gives as the reason of his decision, that in the particular case,
there was not 'such a participation of profits as to constitute the relation of
principal and agent between the creditors (the defendants) and the trustees,
who actually made the contract sued on.'
"I think that the ratio decidendi is, that the proposition laid down in
Waugh V. Carver, viz. that a participation in the profits of a business does of
itself, by operation of law, constitute a partnership, is not a correct state-
ment of the law of England ; but that the true question is, as stated by Lord
Cranworth, whether the trade is carried on on behalf of the person sought to
be charged as a partner, the particij)ation in the profits being a most im-
portant element in determining that question, but not being in itself decisive ;
the test being, in the language of Lord Wensleydale, whether it is such a par-
ticipation of profits as to constitute the relation of principal and agent between
the person taking the profits and those actually carrying on the business."
And in the same case, p. 125, Mr. Baron Bramwell says: "They
say that the defendant is a partner with his son ; and that, if not part-
ners inter se, they are so as regards third parties. A most remarkable
86 PARTNERSHIP. [CHAP. IV.
sell the goods of another, and was to receive for his ser-
vices a portion of the profits, or the whole or a part of
expression ! Partnership means a certain relation between two parties. How,
then, can it be correct to say that A. and B. are not in partnership as
between themselves, they have not held themselves out as being so, and yet
a third person has a right to say they are so as relates to him V But that
must mean vifer se, for partnership is a relation inter se, and the word
cannot be used except to signify that relation. A. is not the agent of B. ; B.
has never held him out as such ; yet C. is entitled, as between himself and B.,
to say that A. is the agent of B. ! Why is he so entitled, if the fact is not so,
and B. has not so represented? But 'partnership,' and a 'right to call
persons partners as regards third parties' are words, and the tJiing must
be looked at, viz. the taking or sharing of profits, which it is said gives C. a
right as against B., to say B. is a partner of A. Why should it ? I trust,
that, in the present state of authority, this question may be freely handled
without presumption, and that the goodness of such a rule may be examined ;
because, though we are bound to administer the law as we find it, yet, when
we are considering what is the law, we may not improperly inquire into the
reasonableness of that suggested. Why, then, does a taking or sharing of
A.'s profits by B. entitle C. to demand payment by B. of A.'s debts in the
trade ? How, if there is such taking or sharing in this case, does it prove
that the defendant ' subscribed the policy and became an insurer ' ? If A.
agrees with B. to share profits and losses, but not to interfere with the busi-
ness, and not to buy nor sell, and does not interfere, nor buy nor sell, and C.
knowing this, deals with B., he would have no claim on A. AVhy should he,
if he does not know of it ? Why, upon finding out something between A.
and B., which has in no way affected or influenced him, should he who has
dealt with B. have a claim on A. ? It is said, because profits are what the
creditor trusts to, they are his fund for payment. This would be a bad
reason, if true in fact. A man who trusts another generally, has a claim on
his profits and capital too. How does a man who trusts the former only more
afiect the creditor's fund ? But, further, it really is not true in substance,
only in words. It is not a receipt of profits, in substance, that makes a man
liable. If I agree to receive a sum in proportion to profits, as, for instance,
a sum equal to a tenth, I am not liable. If I receive a tenth, I am. What
is the difference, except in words, at least as far as creditors are concerned ?
How can one set of words between A. and B., give C. a right, and the same
thing in other words not? How many men in a thousand, not lawyers,
could be got to understand, that, of the two servants of a firm, the one who
received a tenth of the profits was liable for its debts, and the other who
received a sum equal to a tenth was not? This Mr. Justice Story calls
'satisfactory.' Story on P. § 32. Satisfactory in what sense? In a practi-
cal business sense ? No ; but in the sense of an acute and subtle lawyer,
who is pleased with refined distinctions, interesting as intellectual exercises,
though unintelligible to ordinary men, and mischievous when applied to the
CHAP. IV.] AS TO THIRD PERSONS. 87
the excess of price beyond a given sum.^ Si margarita
tibi vendenda dedei^o, ut, si ea decern vendidisses, red-
ordinary affairs of life. Lord Eldon did not think it satisfactory. Ex parte
Hamper, 17 Ves. 404. Such a law is a law of surprise and injustice, and
against good policy. It fixes a liability on a man contrary to his intent and
expectation, and without reason, and gives a benefit to another which he did
not bargain for and ought not to have, and prevents that free use of capital
and enterprise which is so important. It is said that this is true of a dor-
mant partner. It is not : his existence may be unknown to the creditor ; but
the dormant partner knows he is liable, and means to be ; and the creditor
trusts all such persons ; he means to deal with all real persons. It may be
said, that, if this reasoning is right, a man might bargain to receive all the
profits of a business, and not be liable. The answer is, the thing is impossi-
ble. There never was, and never will be, a bona fide agreement by one man
to carry on a business, bear all its losses, and pay over all its profits. Should
such an agreement appear, it would obviously be colorable. Where there is
a chance of profit to the trader, there such an agreement may be honest ;
and, where honest, ought not to make him liable who is certainly to receive
some of the profits, and perhaps all.
"I have hitherto dealt with the case on principle. I proceed to examine
the authorities. The labor formerly needful is now rendered unnecessary by
Cox V. Hickman, 8 H. L. C. 268. That case has settled the law, I may be
permitted, I hope, to say, in a perfectly satisfactory manner. . . . But,
even if we assume that the law supposed to exist before Cox v. Hickman,
remains untouched, that is to say, the supposed law of Waugh v. Carver, 2
H. Bl. 235, I think the same conclusion ought to be come to. Lord Wensley-
dale does not notice that case. Lord Cranworth does, and, with submission,
gives a better reason for the decision than is to be found in the case itself.
The Chief Justice there says the question is whether they have not consti-
tuted themselves partners in respect to other persons, and puts his decision on
the ground that, ' he who takes a moiety of all the profits indefinitely, shall by
operation of law be liable to losses.' Let us hope that this notion is over-
ruled, — one which I believe has cau.sed more injustice and mischief than
any bad law in our books. ... I hope I shall not be charged with arro-
gance for the way in which I have spoken of bygone opinions. The law had
drifted into the condition from which it was rescued by Cox v. Hickman.
No one in particular was responsible for, and probably no one person could
have put it at once in the position it was in. But the true line had been de-
parted from, at first but a little, and for a good reason ; and every subse-
quent move took it further away in a wrong direction, till it was happily
brought back by Cox v. Hickman."
In America there is much conflict among the authorities. It has been
generally considered that a mere participation in the profits, even the net
profits, will not necessarily constitute one a partner ; and even the Pennsyl-
' Ante, §37.
88 PARTNERSHIP. [cHAP. IT.
deres mihi decern ; si 2^^uris^ quod excedit tit haheres ;
mihi videtur (says Ulpian) si animo contr^ahendce socie-
vania courts, though they have complained greatly of the rule that a commis-
sion on profits is not such an interest as constitutes partnership, have yet
followed it. Miller v. Bartlet, 15 S. & R. 137 ; Dunham f. Rogers, 1 Penn.
St. 255. But this doctrine has not been universally received. In a case in
Maryland, in 1815, Taylor v. Terme, 3 Harr. & J. 505, the plaintiff con-
tended that an agent who received a share of the profits was liable as a
partner; the defendant admitted that the English cases were so, but con-
tended that as they were decided since the revolution they should not govern
in this country. The court gave judgment for the plaintiff. There is no
opinion. The Supreme Court of Ohio in Wood v. Vallette, 7 Ohio St. 172,
say, "that even an agent cannot stipulate with his employer to receive an
interest in the profits, other than of gross profits, as a remuneration for
his services, without thereby becoming a partner as to third persons." In
this case, however, the agreement between the parties was probably such as
to constitute them partners it^tei' sese. In Bromley v. Elliot, 38 N. H. 287,
the Supreme Court of New Hampshire say that the case in which the person
dealing with the alleged partners knows or ought to know that they are not
partners "seems the only exception which can be admitted to the general
rule that he who shares profits must share losses and responsibilities, with
safety to the public, or to those who deal with such parties." "It is said, they
must share the profits as profits, to render them liable. The principle thus
cited rests on a distinction long since disapproved as too thin to be satisfac-
tory." " Again it is said, that a person may receive a share of the profits of
a business, by way of salary or compensation for services, without being held
liable as a partner to third persons. This principle has not been adopted
here, and, unless received with the qualification that the true character of the
agreements between the parties is made known to those who may have deal-
ings with them, or the apparent relations of the parties are so evidently those
of principal and agent, or rather of master and servant, that no person could
be misled or defrauded in consequence of the connection, it seems to us
it would be of most unsafe and dangerous tendency, and wholly unfit to
be adopted." These remarks seem, however, to be uncalled for, as the court
was of opinion that the facts constituted the defendants partners inter sese.
In Pierson v. Steinmeyer, 4 Rich. 309, 319, it is said that the only excep-
tion to the rule that he who shares profits is liable as a partner to third per-
sons, is in the case of agents and servants, and the court refused to extend
the exception to cover the case of one who had made advances to the firm.
On the other hand, some cases come very near, if not quite up to the
modern English rule. In the leading case of Loomis v. Marshall, 12 Conn.
69 (see § 45, ante), the court say, " a partner must not only share in the
profits, but share in them as a principal," and in Bucknam v. Barnum, 15
Conn. 67, 73, attention is called to the fact that the decision in Loomis i'. Mar-
shall was placed on this ground. So in Hallet v. Desban, 14 La. An. 529,
and Berthold v. Goldsmith, 24 How. 636, though in this case the actual
CHAP. IV.] AS TO THIRD PERSONS. 89
tads id actum sit^j^^o socio actionem; si minus ^ j'^'^^^'
scriptis verbis.^ In short, the Roman law seems prin-
relations betweon the alleged partners were known to third persons. See
Burckle v. Eckhart, 3 Comst. 132.
In some American cases, he who shares in profits is said to be liable
to third persons, on the ground that he takes a part of the fund on which
creditors rely. Purviance v. M'Clintee, 6 S. & R. 259 ; see ante, § 36.
The test, however, commonly proposed in the American cases is, whether
the alleged partner has a specific lien on the profits to the exclusion of
other creditors, and the i-ight to an account. This is laid down in Cham-
pion V. Bostwick, IS Wend. 175, § 38, ante; and is followed by a series of
decisions in Massachusetts. Denny v. Cabot, 6 Met. 82 ; Bradley v. White,
10 Met. 803 ; Holmes v. Old Colony R. R. Co. 5 Gray, 58 ; Fitch v. Har-
rington, 13 Gray, 468 ; Pratt v. Langdon, 12 All. 544. In this last case
it is said that "the decisive fact is, that each had a lien on the stock for
his share of the profits." So, Catskill Bank v. Gray, 14 Barb. 471; Voor-
hees V. Jones, 5 Dutch. 270; Reynolds v. Hicks, 19 Ind. 113. See Cox v.
Delano, 3 Dev. 89 ; Conklin v. Barton, 43 Barb. 435.
Undoubtedly the fact that a person has a lien on the profits is " cogent,
often conclusive, evidence" that he is a partner; but it maybe doubted
whether, as an ultimate test to be applied in all cases, it is entirely satis-
factory. It is said in the leading case of Champion v. Bostwick, 18 Wend.
175, in language which has been often adopted in subsequent decisions,
that if one stipulates for an interest in the profits of a business which would
entitle him to an account, and give him a specific lien or a preference in
payment over other creditors, giving him the full benefit of the increased
profits without any corresponding risk in case of loss, it would operate
unjustly as to other creditors. But the creditors to whom he is preferred
are only the separate creditors of the actual partners ; he has no preference
over the partnership creditors, for there are no profits till they are paid,
and it is only out of the profits that his remuneration is to come. Why
should the fact that he has a priority over one set of creditors, make him
liable " to his last shilling" to another set of creditors? A second mort-
gagee has a priority over the mortgagor''s general creditors ; but has it
been ever ai'gued that ^/^ej-e/bre his whole property, of every kind, sliould be
liable for the first mortgage debt ? Yet the cases would seem very analogous.
And though a partner is entitled to an account, yet a person may well be
entitled to an account, and yet not be a partner. If he is to receive a
sum equal to a share of the profits, he is, by the great weight of authority,
clearly no partner ; yet how can he secure the payment of the compensa-
tion agreed upon unless he has an account? See also Holmes v. Old
Colony R. R. Co., 5 Gray, 58. See 2 Am. Law Rev. 1, 193. }
* D. 17, 2, 44 ; Poth. Pand. 17, 2, n. 4, and note, ibid. ; 17 Duranton, Droit
Franc, de Societe, n. 332; Poth. de Soc. n. 13; 5 Duvergier, Droit Civil
Franc, n. 45.
90 PARTNERSHIP. [cHAP. IV.
cipally, if not altogether, to have treated the case of
partnership only as between the parties themselves, and
does not even affect to give rights to third persons
against them, founded upon any responsibility not con-
templated by the partnership contract.^ Voet, in
speaking on the subject, manifestly deems every part-
nership, whether express or implied, to be a matter of
consent between the parties. Societas dwiditur j^Timo
(says he) in eoc/pressam^ quce, expressa conventione fit^ et
tacitam, quce re contrahi dicitur, dum rehus ipsis et
factis, simulemendo, vendendo, lucra et damna dividendo,
socii ineundce societatis voluntatem declarant^
§ 51. The same distinction is well known and fully
recognized in the French law. Pothier has not, indeed,
spoken with his usual clearness, or exactness, on the
subject.^ But Pardessus has expressed his opinion in
the most direct and satisfactory manner. Thus (he
says), whenever a merchant, instead of a fixed salary,
agrees to give his agent a certain part of the annual
profit, the agent is a letter of his services under an
aleatory condition ; but he is not a partner. He can-
not make claim in that quality to any proprietary in-
terest in the merchandise, bought with the funds of his
principal, although he partakes of the profits thereof.
He cannot, at least without an express stipulation,
have any voice in the deliberations of the partnership ;
and he will not be subjected to the contracts of the
partnership in respect to third persons, unless, indeed,
he has exceeded his powers, and then he is responsible
as a mandatary.^ So, when one person has trusted
> See 17 Duranton, Droit Franc, de Societe, n. 334; Poth. Pand. 17, 2,
n. 30-40; ante, § 37.
^ Voet, ad Pand. 1 7, 2, § 2.
' See Potb. Pand. 17, 2, n. 4, and Pothier's notes, ibid. Poth. de Soc. n.
13 ; 5 Duvergier, Droit Civ. Franc, n. 45 ; ante, § 37.
* Pardessus, Droit Comm. Tom. 4, n. 969 ; Id. Tom. 2, n. 560.
CHAP. IV.] AS TO THIRD PERSONS. 91
goods to another to be sold for him, and has agreed
to give him the whole or a part of the price, which
shall exceed a certain sum, this will not create a part-
nership between them ; but only be a salaried man-
date, or commission to the agent, thus undertaking the
business.^ Duvergier holds the same opinion, and has
reasoned out the grounds thereof with uncommon
acuteness and ability.^ And, indeed, it seems to be
^ Pardessus, Droit Comm. Tom. 4, n. 969. See, also, Id. Tom. 2, n. 306 ;
Id. Tom. 3, n. 702.
^ 5 Duvergier, Droit Civ. Franc, n. 48-56. — The following quotation
clearly exhibits his views. " Enfin, il y a un usage fort repandu parmi
les commercans, qui consiste a donner, a titre d'appointemens, a leur
commis ou employes, une quote part des benefices de leur commerce. Cette
stipulation semble, au premier coup-d'ceil, reunir tons les elemens de la
societe ; elle a d'un autre cote, beaucoup d'analogie avec le mandat salarie.
On comprend combien il est utile de savoir a laquelle de ces deux classes
de contrats elle appartient reellement. II est inutile de citer d'autres exem-
ples. Ceux que je viens de presenter montrent assez, qu'il est tres difficile
de demeler le veritable caractere de ces conventions qui paraissent partici-
per egalement de la societe, du mandat salarie, et du louage d'ouvrage.
Recherchons maintenant les principes, qui doivent diriger dans cette appre-
ciation. La definition qui a ete precedemment donnee du contrat de societe,
me semble jeter sur ces delicates questions une lumiere suffisante. Elle pre-
sente deux idees principales ; elle montre dans le contrat de societe deux
elemens essentiels ; d'abord, un fonds commun compose des mises particu-
lieres ; en second lieu, une participation aux benefices produits par le fond
social ainsi forme. Si done j'analyse une convention, et que je ne voie point,
qu'elle ait fait des choses, dont chacun des contractans etait proprietaire
exclusif, une chose commune k tous, je suis autorise a conclure, qu'elle n'est
point une societe. Je suis conduit a la meme consequence, quoique un droit
de propriete soit etabli par I'efTet de la stii^ulation, si les contractans n'ont
point eu en vue de se partager des benefices resultant de I'etat de commu-
naute, qu'ils ont cree. II ne suffit done pas, qu'ils aient mis leurs proprietds
en contact, sans les confondre, et qu'ils se soient procures par h\ certains
avantages, pour qu'ils soient associes; il ne suflit pas meme, que les pro-
prietds soient confondues, et que cette communication de droits ait acciden-
tellement des resultats profitables ; il faut que ce soit precisement en vuo de
ces resultats que la convention ait ^te formee. L'application de ces princi-
pes aux diverses hypotheses, dont il vient d'etre parl^, montre que, dans
aucune d'elles, il n'y a societe. Entre le proprietaire de pierrerics ou
d'autres objets, et celui qui se charge de les vendre, moyennant la portion
du prix, qui e.xc^dera une limite ddterminee, il n'y a point de propri^td com-
92 PARTNERSHIP. [cHAP. IV.
the established doctrine of the French tribunals. This
coincidence of doctrine, founded upon gejieral reason-
mune. L'industrie de I'un s'exerce sur une chose, qui ne cesse point d'ap-
partenir a I'autre. II n'y a point, a proprement parler, de benefice, qui se
partage entre eux; la somme totale, moyeunant laquelle la vente est faite,
est le prix des objets vendus ; elle est la representation, d'abord de la valeur
intrinseque de ces objets, et en second lieu des peines, des soins et meme des
frais qui ont pu etre necessaires pour les fairs parvenir a un acheteur. Dans
toute vente, le prix se compose de ces deux elemens ; lorsque les marches se
concluent, sans intermediaire entre I'acheteur et le vendeur, ce dernier
touche les deux parties du prix ; au cas contraire, I'une est pergue par le
proprietaire, I'autre par I'entremetteur. On devrait en dire autant, alors
meme, que le salarie de I'agent place entre le vendeur et I'acheteur, con-
sisterait en une certaine quotite du prix, a quelque somme qu'il s'elevat.
C'est precisement ce qui se passe, tons les jours, dans les ventes ou autres
negociations, qui se font par I'intermediaire de (tourtiers. La commission ou
droit de courtage est de tant pour cent sur le produit des operations ; et Ton
n'a jamais songe a voir la des soeietds, parce qu'on a bien senti, que la chose
dont la vente est faite, ne devient point la copropriete du vendeur et du
courtier ; qu'il n'y a point de benefices proprement dits dans une pareille
operation, car il n'y a point augmentation de valeur produite par I'eifet
d'une mise en communaute ; que seulement, il y a vente et distribution du
prix entre deux personnes, qui y ont droit, a titre different. Lorsque qua-
tre chevaux appartenant a deux maitres sont reunis pour etre vendus, la
propriete de chacun restant separee, il est egalement e'vident, qu'il n'y a
point de societe ; car il n'y a rien de mis en commun, il n'y a point de copro-
priete formee par la reunion de proprietes distinctes. A la verite, la com-
binaison des contractans a pour but et pour resultat d'augmenter la valeur
venale des choses, qui leur appartiennent ; mais la societe suppose I'existence
d'une masse commune de benefices, k laquelle chacun vient puiser selon son
droit. Ici, chacun et reste proprietaire de ce, qui lui appartenait avant la
convention, il profile seulement de I'excedant de valeur, qui est survenu a
sa chose. Dans la troisieme espece, oil Ton a voulu voir une societe, il n'y
a reellement qu'un mandat, ou I'etablissement d'un etat de communaute
transitoire. Le fait, sur lequel s'explique la loi romaine citee par Pothier,
n'est pas presente avec une precision parfaite, et lorsqu'on veut indiquer ses
consequences avec I'exactitude convenable, on est oblige d'admettre une
distinction. Si les deux voisins, qui ont eu la pensee d'acheter un fonds
place pres de leurs heritages, sont d'accord sur la portion, que chacun y doit
prendre ; celui qui fait I'acquisition agit, pour partie, en son nom personnel,
et, pour partie, comme mandataire. II n'y a pas I'apparence d'une societe ;
il n'y a pas meme communaute, puisque le partage est fait a I'avance. Si
le lot de chacun n'est pas determine, la propriete du fonds sera indivise;
mais, on le sait, I'indivision ne suffit point pour constituer la societe ; elle
6tablit seulement une communaute. Ce n'est pour les contractans qu'un
CHAP. IV.] AS TO THIRD PERSONS. 93
ing, between foreign jurists and the municipal juris-
prudence of the common law, as to the propriety of
etat transitoire ; leur but est le partage, et non la perception des b^n^fices,
que la chose commune peut produire. L'avantage que trouve cliafiue ache-
teur, dans la reunion a son heritage d'une partie du fonds acquis en com-
mun, n'est pas un veritable benefice social. II est meme possible, qu'il y ait
pour eux perte materielle dans I'acquisition, que le fonds ne vaille pas ce
qu'ils I'ont pave et cju'ils aient sciemment fait un marche desavantageux,
pour eloigner un voisinage desagreable, ou pour executer des ameliorations
purement voluptuaires. On ne saurait trop insister sur la necessite de con-
server au mot benefices son sens exact et rigoureux ; car c'est parce que
Ton regarde benefices et avantages comme des expressions equivalentes, que
Ton se meprend sur le caractere d'une foule de conventions. Si toutes
celles qui procurent quelques avantages aux contractans, etaient des societes,
cette qualification conviendrait a un nombre infini de contrats. L'arrange-
ment que font les commer^ans avec leurs commis, lorsqu'ils donnent a ceux-ci,
au lieu d'appointemens, une portion des benefices de leur maison, parait, plus
que tout autre, reunir les elemens constitutifs de la societe. L'industrie du
commis ne forrae-t-elle pas sa mise ? Ne prend-il point part aux benefices,
dans la veritable acception du mot ? Ne concourt-il pas aux pertes, puisque
s'il n'y a pas de benefices il perd son travail ? Malgre cette reunion de oir-
constances, les auteurs et les tribunaux decident, qu'il ne faut pas confondre
un commis interesse avec un veritable associe. lis font ressortir les diffe-
rences, qui existent entre leur position et leurs droits. Le commis n'a point,
disent-ils, la copropriete du fonds social ; il n'en dispose point librement et
en maitre ; il reste soumis a I'autorite et aux ordres de son patron ; il peut
etre renvoye par lui, sauf dedommagement ; il ne participe point aux pertes ;
il n'est point person nellement tenu envers les tiers ; ainsi il n'a ni les pre-
rogatives ni les obligations d'un associe. Ces observations sont justes ;
eependant seules elles ne seraient pas decisives et Ton pourrait, a la rigueur,
concevoir un associe redult, par des conventions particuliercs, a une situa-
tion k peu pr. s semblable a celle qui vient d'etre decrite. Rien n'empeche,
en effet, de stipuler, que les choses mises dans la societe resteront la pro-
priete de I'un des associes, et que I'administration lui sera exclusivement
reservee ; que I'autre participera aux pertes, en ne recevant rien pour son
travail; et qu'en cas d'insuffisance du fonds "social, il ne sera point person-
nellement oblige au paieraent des dettes. INIais la reunion de ces clauses
fort extraordinaires n'etablirait pas encore une similitude parfaite entre
I'associe et le commis. D'une part, lors meme que les choses mises en
societe restent la propri6te de celui, qui les y apporte, leur jouissance au
moins est mise en commun et chacun des associes y a droit. Or le commis
interesse n'est point coproprietaire des capitaux de celui qui I'emploie, quoi-
que ces capitaux soient fournis en pleine propriete, et non pas seulement
pour la jouissance. D'un autre cote, I'associe, qui donne son Industrie comme
mise sociale, s'engage a faire un travail determine mais independant ; il a
94 PARTNERSHIP. [CHAP. IV.
the distinction above stated, certainly affords no slight
confirmation of its accuracy and entire conformity to the
true principles, which ought to regulate the subject.
§ 52. Thus much, at least, seemed proper to be said
in vindication of the distinction at the common law,
and the cases in support of it, which have been treated
by some learned minds (as we have seen), as founded
in too much subtlety and refinement, and as not recon-
cilable with acknowledged principles, or just juridical
reasoning.^ The charge might be fairly retorted, and
the reasoning pressed, that the rule itself, to which
the distinction is applied as an exception, is open
to the same objection, and to others of a more serious
nature.
8 53. But waivinsr all such discussions, let us now
proceed to the consideration of the various cases, in
which the parties have been held to be partners, as to
third persons, even when they were clearly not so, as
between themselves.^ It is unnecessary to consider the
cases, where the parties intend a partnership between
themselves ; for in such cases they clearly are, or at
des devoirs a rempllr envers la soeiete, mais il n'a point d'ordres ^ recevoir
de ces co-associes. Le commis, au contraire, s'oblige a executer la volonte
du chef de la maison ; il est, relativement a lui, dans un etat d'inf(£riorite et
de subordination incompatible avec le caract^re et les droits d'un associe.
Ce rapprochement, qu'il serait facile de pousser plus avant, montre que,
sous des apparences semblables, sont cachees des differences bien tranchees ;
qu'il ne faut pas, encore une fois, voir dans la participation a des benefices,
un sigue infallible de I'existence d'une soeiete. L'associe et le commis
interesse ont cela de commun, qu'ils sont I'un et I'autre appeles a recueillir
une portion de benefices; mais la nature de leurs droits et la source A
laquelle ils les puisent, n'en restent pas moins distinctes et separees; I'un
participe au gain, parce qu'il est copropriefaire de la chose qui le produit ;
et I'autre, parce qu'il a fait un travail pour lequel on lui a promis cette
esp^ce de salaire." See also the decisions of the French tribunals, cited by
Duvergier, Id. p. 68, n. (2). See also Duranton, Droit Civ. Franc. Tom.
17, n. 320-331.
1 Ante, § 48-51. M^ee § 49, note.}
CHAP. IV.] AS TO THIRD PERSONS. 95
least may be held to be partners, as to third persons.^
The converse rule, however, does not reciprocally apply
at the common law ; for persons are often held part-
ners, as to third persons, where, either expressly or by
just implication, they are not to be deemed partners
between themselves.^
§ 54. The cases in which this liability as partners
as to third persons exists, may be distributed into the
following classes.^ First, where, although there is no
^ Ex parte Hodgkinson, 19 Ves. 291, 294.
" Mr. Collyer seems to entertain some doubt as to the terms, nature, and
extent of the doctrine on this point, and says : " In the preceding cases,
although the parties manifested, by their agreement, an intention not to
contract the relation of partnership, yet it was held, that such intention
could not prevail against an exj)ress stipulation to share the profits ; a
stipulation, which, as we have already seen, is the primary test of a part-
nership between the parties, and renders them liable to third persons. But
the authorities have gone still further, and it has even been held, that an
agreement to share the profits of an adventure, although not so expressed as
to create a partnership between the parties, may nevertheless create a part-
nership, as between them and the world. In Waugh v. Carver, there are
several expressions of Lord Chief Justice Eyre, which lead to this conclu-
sion ; and on the authority of those expressions, the case of Hesketh v.
Blanchard was decided, in which it was held, that the agreement might con-
stitute the parties as partners, quoad third persons, although under the cir-
cumstances it did not place them in that situation inter se." And again :
" Upon the Avhole, notwithstanding the doctrine laid down in Hesketh v.
Blanchard, and some other cases, the general result of the authorities seems
to be, that persons, who share the profits of the concern are prima facie
liable as partners to third persons ; but they may repel the presumption of
partnership by showing that the legal relation of partnership inter sese does
not exist. With reference to the last of these two positions, it may be ob-
served, that, in Hoare v. Dawes, the defendants, who were charged as dor-
mant partners, rebutted the presumption of partnersliip, by showing that they
had no communion of profit with the broker. So, where a person was
charged as a dormant partner in the profits of a lighter, but it turned out,
that he was to have only half the gross earnings as wages, it was held, that
he was not a partner with the lighter-man, and therefore not liable for the
repairs." Coll. on F. B. 1, c. 1, § 3, 4, p. 59, 60, 2d ed. It does not aj)pear
to me, that the authorities (juite justify the conclusion of !Mr. Collyer, how-
ever reasonable it may seem to be. See post, § 56-59 ; Ex parte llowland-
son, 1 Rose, 89-91 ; Waugh v. Carver, 2 II. Bl. 235, 246.
^ {Though the author pi'ofesses, in the preceding section, that he is pro-
96 PARTNERSHIP. [cHAP. IV.
community of interest in the capital stock ; yet the
parties agree to have a community of interest or par-
ticipation in the profit and loss of the business or
adventure, as principals, either indefinitely, or in fixed
proportions. Secondly, where there is, strictly speak-
ing, no capital stock ; but labor, skill, and industry are
to be contributed by each in the business, as principals,
and the profit and loss thereof are to be shared in like
manner. Thirdly, where the profit is to be shared
between the parties, as principals, in like manner ; but
the loss, if any occurs beyond the profit, is to be borne
exclusively by one party only. Fourthly, where the
parties are not in reality partners ; but hold themselves
out, or at least are held out by the party sought to be
charged, as partners to third persons, who give credit
to them accordingly. Fifthly, where one of the parties
is to receive an annuity out of the profits, or as a part
thereof.
§ 55. And first, as to cases where there is no com-
munity of interest in the capital stock ; but there is a
community of interest or participation in the profit
and loss of the business or adventure, as principals.^
It is this circumstance, that the parties are to act and
share, as lyrincipals^ which forms a prominent distinction
between this class of cases and that where an agency
exists, with a compensation therefor out of the profits.
But the other circumstance is also important, that the
ceeding to consider the cases " in which the parties have been held to be
partners as to third persons, even when they were clearly not so as between
themselves," it would seem that in the first two classes the parties are partners
inter scse, as well as to third persons. See § 30, note. As to the third class,
see § 60, note.)
' {See § 54, note} ; Coll. on P. B. 1, c. 1, § 1, p. 25 ; Id. § 2, p. 53-55,
58, 2d ed. ; Wat. on P. c. 1, p. 11, 12, 2d ed. ; Id. p. 33 ; Ex parte Digby, 1
Deac. 341 ; s. C. 2 Mont. & A. 735 ; 3 Kent, 31, 32 ; Ex parte Ilodgkinson,
19 Yes. 291 ; Winship v. Bank of U. S. 5 Pet. 529, 561 ; Ex parte Rowland-
son, 1 Rose, 89; Hazard v. Hazard, 1 Story, 371.
CHAP. IV.] AS TO THIRD PERSONS. 97
parties are to share in the loss, as well as in the profit.
Indeed, this is ordinarily laid down, as the true test of
partnership in this class of cases. ^ A communion of
profit generally implies a communion of loss in the
limited sense already suggested, that is, that there can
be no ascertained profits, until after all the losses are
deducted therefrom.^ There may, however, be, and
often is, a stipulation in partnership contracts, that all
the losses beyond what^ the profits will meet, shall be
borne by one party only, or borne in a different pro-
portion between the parties, from what they take in
the profits.^ But where the agreement either expressly,
or by fair implication, admits, that the parties are to
share in losses, as well as in profits, that circumstance
will ordinarily, at the common law, be held to make
them partners as to third persons, and in many cases
also between themselves, upon the ground, that such
is the proper and essential accompaniment of a part-
nership, and that it is inconsistent with the notion, that
the share of the profits is designed to be a mere remu-
neration for services.'*
§ 56. A few examples may serve to illustrate the
principle. Thus, if the owners of a ship, owned by
them as tenants in common, should employ the ship in
a particular trade or adventure upon joint account, and
were to participate in proportion to their interests in the
profits and losses of the trade or adventure ; they would
* Green r. Beesley, 2 Bing. N. C. 108; Waugh r. Carver, 2 H. Bl. 235,
247; Holmes v. Unit. Ins. Co. 2 Johns. Cas. 329, 331 ; Perrott v. Bryant, 2
You. & C. Ex. 61, 68; Meyer v. Sharpe, 5 Taunt. 74.
- Ante, § 20-23.
' Ante, § 23, 24; Coll. on P. B. 1, c. 1, § 1, p. 11, 2d cd. ; Gilpin v.
Enderbey, 5 B. & Aid. 954; Bond v. Pittard, 3 M. & W. 357.
♦ Coll. on P. B. 1, c. 1, § 1, p. 19; Green v. Beesley, Bing. N. C. 108;
M'lver V. Humble, 16 East, 173 ; 3 Kent, 26 ; [Everett v. Coe, 5 Denio,
180.]
98 PARTNERSHIP. [cHAP. IV.
be partners in the adventure inter sese, as well as to
third persons, although they might still remain tenants
in common of the ship.^ The like result would arise,
if several tenants in common of goods should ship them,
to be sold on joint account, and their respective shares
in the proceeds were to be invested in other goods on
their several and not joint account, on the return voy-
ages, they would be partners in the adventure on the
outward voyage, but not in the return voyage, unless
the return goods were to be sold on joint account.^ So,
if the owner of a ship should agree with the master,
that the vessel should be employed on a particular ad-
venture or voyage for the benefit of both parties, and
they were to share the profits and losses (not the gross
profits or proceeds), indefinitely, or in certain fixed pro-
portions ; there, although the owner would still remain
sole owner for the adventure, or the voyage, yet as both
were to share the losses, as well as the profits thereof,
they would be deemed partners.^ The same doctrine
' Mumford v. Nicoll, 20 Johns. 611; Post v. Kiniberly, 9 Johns. 470;
Saville V. Robertson, 4 T. R. 720, 725 ; Coll. on P. B. 1, c. 1, § 1, p. 16, 17,
2ded.
* Holmes v. Unit. Ins. Co. 2 Johns. Cas. 329, 331, 332.
' Ante, § 34, 42, 44 ; Dry v. Boswell, 1 Camp. 329, 330. But see Mair v.
Glennie, 4 M. & S. 240 ; [Stocker v. Brockelbank, 3 Macn. & G. 250, 5 Eng.
Law & Eq. 67] ; Cheap r. Cramond, 4 B. & Aid. 663, 668-670. — In this
last case (which was one of sharing commissions), Lord Chief Justice Abbott,
in delivering the opinion of the court, said: "And such an agreement is
perfectly distinct from the cases, put in the argument before us, of remune-
ration made to a traveller, or other clerk or agent, by a portion of the sums
received by or for his master or principal, in lieu of a fixed salary, which is
only a mode of payment adopted to increase or secure exertion. It is dis-
tinct also from the case of a factor receiving for his commission a percentage
on the amount of the price of the goods sold by him, instead of a certain
sum proportioned to the quantity of the goods sold, as was the case of
Dixon V. Cooper, 3 Wils. 40, wherein it was held, that the factor was a
competent witness to prove the sale. It differs also from the case of a per-
son receiving from a trader an agreed sum, in respect of goods sold by his
recommendation, as one shilling per chaldron on coals, or the like, for there
there is no mutuality ; and such a case resembles a payment made to an agent
CHAP. IV.] AS TO THIRD PERSONS. 99
would apply, if the parties were to share the profits or
the net profits ; for in each of these cases there must be
a deduction first made of all the charges and losses.^ So,
if two persons sliould enter into an agreement, that the
one should buy goods on account of the other, and
should proceed abroad with them, and there sell them,
and they were to be equally interested in the profit and
loss of the adventure ; this would constitute a partner-
ship between them.^ So, if a person should agree with
a broker, that the latter should purchase goods for the
former, and should receive for his trouble a certain pro-
portion of the profits arising from the sale of the goods,
and should bear a certain proportion of the losses ; such
an agreement, although it would not vest any property
in the broker in the goods so purchased, or in the pro-
ceeds thereof, would yet, by reason of his participation
in the profits and losses, render him liable, as a partner,
to thu'd persons.^
§ 57. Upon the like ground, where A., having neither
money nor credit, offered to B., that if he would order
for procuring orders, and has no distinct reference in the terms of the agree-
ment to any particular coals purchased by the coal merchant for resale,
upon which a third person may become a creditor of the coal merchant,
and probably could not in any instance be shown to apply in its execution
to any such particular purchase." But see Reynolds v. Toppan, 1.') Mass.
370, cited ante, § 44, note.
» Cheap V. Cramond, 4 B. & Aid. 663, 668-670 ; Ex parte Rowlandson, 1
Rose, 89, 91, 92; Ex parte Hodgkinson, 19 Ves. 291,294; Grace v. Smith,
2 W. Bl. 998, 1000 ; Tench r. Roberts, 6 Madd. 145, note ; BaQey v. Clark,
6 Pick. 372; Dob v. Halsey, 16 Johns. 34; ante, § 34; post, § 57, 58;
Bond V. Pittard, 3 M. & W. 357, 360, 361.
* Ex parte Rowlandson, 1 Rose, 89-91. — In this last case Lord Eldon
said : "It was impossible to say, as to third persons, they wore not partners,
the ground being settled, that if a man, as a reward for his labor, chooses
to stipulate for an interest in the profits of a business, instead of a certain
sum proportioned to those profits, he is as to thii'd persons a partner, and
no arrangement between the parties themselves could prevent it."
* Smith V. Watson, 2 B. & C. 401 ; Meyer v. Sharpe, 5 Taunt. 74; Ex
paiie Langdale, 18 Yes. 300; S. c. 2 Rose, 444.
100 PARTNERSHIP. [CHAP. IV.
with him certain goods from C. to be shipped upon a
foreign adventure, and sold by A. abroad, if any profits
should arise from them, B. should have half the profits
for his trouble ; and the goods were accordingly ordered
and charged by C. to their joint account ; it was held
that B. was jointly liable with A., as a partner to C.
And the court there took the distinction, that quoad
third persons it was a partnership, for B. was to share
half the profits ; but as between themselves, it was only
an agreement for so much, as a compensation for B.'s
trouble, and lending A. his credit.^ So, where A. agreed
with B. to convey by horse and cart the mail between
particular places, at a certain price per annum, and to
pay his proportion of the expense of the cart, &c. ; and
the money received by the carriage of parcels was to be
divided between the parties, and the damage occasioned
by the loss of parcels was to be borne in equal propor-
tions ; it was held, that they were partners inter sese, as
well as to third persons. And upon that occasion Lord
Chief Justice Tindal observed : " I have always under-
stood the definition of partnership to be a mutual par-
ticipation of profit and loss."^
§ 58. Upon the like ground, where one person ad-
vanced funds for carrying on a particular trade, and
another furnished his personal services only in carrying
on the trade, for which he was to receive a proportion
* Hesketh v. Blanchard, 4 East, 144, 146; s. c. ante, § 40; Meyer v.
Sharpe, 5 Taunt. 74. See Coll. on P. B. 1, c. 1, § 2, p. 50, 59, 60, 2d ed. —
Mr. CoUyor thinks, that in Hesketh v. Blanchard, 4 East, 144, the parties
were partners inter sese, as well as to third persons ; and there is certainly, in
other authorities, strong ground to support that opinion. {Such is Mr. Lind-
ley's opinion (Lind. on P. 732), at any rate the remark of Lord Ellen-
borough that they were partners quoad third persons was only a dictum,
unnecessary to the decision of the case. } Ante, § 42, and note ; post, § 68.
* Green v. Beesley, 2 Bing. N. C. p. 108. See also Fromont v. Coup-
land, 2 Bing. 170; Coll. on P. B. 1, c. 1, § 1, p. 19, 2d ed.
CHAP. IV.] AS TO THIRD PERSONS. 101
of the net profits ; it was held, that they were partners
inter sese^ as well as to third persons.^ And the princi-
ple was there fully recognized, which had been estab-
lished in prior cases, that he, who is to take a part of
the profits, shall by operation of law be made liable to
losses, as to third persons; because by taking a part of
the profits, he takes from the creditors a part of that
fund which is the security for the payment of their
debts.^ So, where A., B., and C. entered into partner-
ship in the business of tanning hides, and it was stipu-
lated that A. should furnish one-half of the stock, to
keep the tannery in operation, and should market
and receive one-half the leather, and that B. and C.
should furnish the other half of the stock, and receive
and market for the other half of the leather, and that in
making purchases each should use his own credit sepa-
rately ; it was held, that they were partners as to third
persons, as well as between themselves, as to stock sold
to one of the partners ; for the stipulation, as to the di-
vision of the manufactured article specifically among the
partners, was equivalent to a participation of profit and
loss.^ So, where three persons ran a line of coaches
from one place to another, the route being divided
among them into three sections, the occupant of each
section furnishing his own carriages and horses, hiring
drivers, and paying the expenses of his own section, and
the money received from the passengers, as fare, deduct-
ing the tolls of the turnpike gates, was divided among
them in proportion to the number of miles of the
route run by each ; it was held, that they were part-
' Dob V. Halsey, 16 Johns. 34, 40 ; Everett v. Coe, 5 Denio, 180 ; 3 Kent,
24, 25; Coll. on P. B. 1, c. 1, § 2, 2d ed. ; ante, § 34.
"" Ibid. ; Grace w. Smith, 2 W. Bl. 998, 1000 ; Waugh v. Carver, 2 H. Bl.
235, 245 ; Hesketh v. Blanchard, 4 East, 144 ; ante, § 27, 30, 32.
' Everitt v- Chapman, 6 Conn. 347.
102 PARTNERSHIP. [cHAP. IV.
ners as to third persons, as well for torts, as upon
contracts.^
' Champion v. Bostwick, 18 Wend. 175. [Explained in Pattison v.
Blanchard, 1 Sel. 186.] — Mr. Chancellor Walworth on this occasion said:
"It is not necessary to constitute a partnership, that there should be any
property constituting the capital stock, which shall be jointly owned by the
partners. But the capital may consist in the mere use of property, owned
by the individual partners separately. It is sufficient to constitute a part-
nership, if the parties agree to have a joint interest in, and to share the profits
and losses arising from, the use of property or skill, either separately or
combined. Here the capital, which each (.-ontributed or agreed to contribute
to the joint concern, was the horses, carnages, harnesses, drivers, &c.,
which were necessary to run his part of the route, and to be fed, repaired,
and paid at his own expense. The only debts or expenses, for which they
were to be jointly liable as between themselves, were the tolls upon the
whole line ; and the joint profits, which they were to divide, if any remained
after paying the tolls, was the whole passage money received upon the entire
line. Although it may be fairly inferred, that each party supposed, that the
expenses of running his part of the line, exclusive of the tolls, would be
equal to the distance run by him, it by no means follows, that any of them .
supposed, that the actual passage money or pi-ofits of the different parts of
the line, would be in the same proportion ; as it is a well-known fact, that
the number of passengers, who travel in public conveyances, increase as
you approach large market towns, or other places of general resort. The
only object of the agreement to divide the passage money earned upon the
whole line, among the different proprietors, must have been to give to those,
who ran that part of the line, where there was the least travel, a portion of
the passage money on other parts of the route, as a fair equivalent for their
equal contribution of labor and expense for the joint benefit of all. And
as all the owners of the line were thus interested in every part of the route,
and were liable to the passengers, if they were unreasonably detained on
the way, I am inclined to think, that, if the driver of either had refused to
carry on the passengers over his jiart of the line without any sufficient ex-
cuse, either of the other parties, who happened to be present, might have
employed another driver at the common expense to proceed with the team to
the end of that route, although as betAvcen themselves the owner of that
part of the line would be bound to pay such extra expense. And the same
right would have existed, if the driver, by reason of intoxication or other-
wise, was incapable of discharging his duty with safety to the passengers.
Although the title to the coach and horses for the time being might not be
so far vested in the partners, as to authorize any of them to take them out
of the general owner himself under similar circumstances, the passengers
might imquf'stionably be sent on by either of the others at his expense ; or
at the expense of all the owners of the line, who were interested in having
it done, if he was unable to pay the expense." See also Waland v.
CHAP. IV.] AS TO THIRD PERSONS. 103
§ 58 a. On the other hand, where there was an agree-
ment by a raih'oad company with certain persons, who
were engaged in transporting merchandise from New
York to various places in the West, by way of Hudson
River and canals, that these carriers should deliver up
their freight to the company at particular places, and
the company should transport the goods from thence to
their destination, and that the carriers should pay the
company therefor a certain portion of the freight, ac-
cording to certain distances ; it was held, that this agree-
ment did not make the company partners with the car-
riers in the transportation of the goods, either inter sese,
or as to third persons.^ The ground of this decision
seems to have been, that there was no community of
interests, or division of the profits of a joint concern,
between the parties. The railroad company had no
interest in the profits or losses of the transportation
company, on that part of the route which the latter
were to accomplish ; nor the transportation comjiany,
in the profit or loss in the railroad portion of the trans-
portation. Each company was to receive a fixed pro-
portion of the freight, whether the other would lose or
gain on its own portion of the route, so that there was
no community of. profit or loss. Many other cases
might be cited to the same eff"ect ; but those, which
have been referred to, are sufficient to illustrate the doc-
trine already suggested under this head.
§ 59. In the next place, as to the class of cases,
where, strictly speaking, there is no capital stock, but
labor, skill, and industry are to be contributed by each
Elkins, 1 Stark. 272, and Barton v. Hanson, 2 Taunt. 49 ; Wetmore v.
Baker, 9 Johns. 307. See Fromont v. Coupland, 2 Bing. 170; Green
V. Beesley, 2 Bing. N. C. 108. [See the last two cases coiumented upon,
in Pattison v. Blanchard, 1 Seld. 186.]
» Mohawk & Hudson Railroad Co. v. Niles, 3 Hill, (N. Y.) 1G2 ; {Mer-
rick V. Gordon, 20 N. Y. 93.}
104 PARTNERSHIP. [cHAP. IT.
party in the trade or business, as principals, and the
profit and loss are to be shared in certain proportions
between them.^ In this class of cases the like rule ap-
plies ; and the parties are treated as partners, not only
as to third persons, but also inter sese, upon the plain
ground, that it is a trade or business carried on upon
joint account, and that there is a complete communion
of interest, both in the profit and loss thereof between
them. It has, therefore, every distinctive mark of part-
nership. One or two cases will abundantly serve to
present this doctrine in a clear and satisfactory light.^
Thus, if A. and B. should agree to employ their joint
labor and services and skill in business, as insurance
brokers, and to divide the profits and losses between
them, they would to all intents and purposes be held
partners in that business. So, if A. and B. should
agree to carry on the business of solicitors upon joint
account, and to divide the profits and losses thereof in
certain proportions between them, this would make
them partners, not only as to third persons, but inter
sese.^ Nor would the result be varied, if the parties
agreed to share the profits between them, omitting any
express provision as to losses ; for in such cases they
could by mere operation and intendment of law share
the losses, upon the ground, that the losses must first be
deducted before the profits can be ascertained ; and also
upon the more general ground which is so often recog-
nized in the authorities, that every man who has a share
of the profits of a trade or business, ought also to bear
his share of the loss."^ Indeed, all the authorities at the
' {See §54, note.}
^ See the reasoning of Lord Chief Justice Eyre in Waugh v. Carver,
2 H. Bl. 235.
' See Hopkinson v. Smith, 1 Bing. 13 ; Tench v. Roberts, 6 Madd. 145 ;
[Smith V. Hill, 8 English, 173.]
* Grace v. Smith, 2 W. Bl. 998, 1009 ; Ex parte GeUar, 1 Rose, 297 ;
CHAP. IV.] AS TO THIRD PERSONS. 105
ccmmon law take the rule to be, that sharmg the losses
and the profits constitutes such a communion and mu-
tuality of interest therein, as creates a clear partnership,
as to third persons ; and, in the absence of all contrary
or inconsistent stipulations, as between themselves also.^
Hence all the adventurers in a fishing voyage, who are
to share in the profits and losses of the adventure ac-
cording to certain proportions, and to contribute towards
the outfit, are deemed partners in the adventure to all
intents and purposes.^ So, where a merchant in Lon-
don was by agreement to recommend consignments to
a merchant abroad, and the commissions on all sales of
goods, recommended by the one to the other, were to
be equally divided between them, without allowing any
deduction for expenses ; it was held, that they were not
only partners in that business, as to third persons, but
also as between themselves.^
§ 60. In the next place, as to the class of cases,
where the parties are to share the profits between
them, if any, as principals ; but the losses are to be
borne exclusively by one party.'* It is here that the
Waugh V. Carver, 2 H. BI. 235 ; Cheap v. Cramond, 4 B. & Aid. 663 ; Bond
V. Pittard, 3 M. & W. 357, 360, 361. See Finckle v. Stacey, Sel. Cas. 9 ; Gow
on P. c. 1, p. 14, 15, 3d ed. ; Coll. on P. B. 1, c. 1, § 2, p. 54, 2d ed. ; ante,
§ 19-24.
^ Geddes v. Wallace, 2 Bligb, 270 ; Peacock v. Peacock, 2 Camp. 45 ; Gow
on P. 12, 13, 3ded.
* See Coppard v. Page, Forrest, 1 ; Perrott v. Bryant, 2 You. & C. Ex.
61, 68; ante, §42.
» Cheap V. Cramond, 4 B. & Aid. 663, 669, 670 ; Waldeu v. Sherburne,
15 Johns. 409, 421,422.
* { See § 30, note. In only two of the leading cases referred to under
this class, viz., Waugh v. Carver, 2 H. Bl. 235, and Cheap v. Cramond, 4 B.
& Aid. 663, was it distinctly said that the alleged partners were not so inter
sese, although they were so as to third persons. Waugh v. Carver must be
considered as overruled by BuUen v. Sharp, Law Rep. 1 C. P. 86, and other
recent cases, see § 49, note ; and Cheap v. Cramond is distinctly placed on
Waugh V. Carver, see § 61, note.} Wats, on P. c. 1, p. 17-27, 2d ed. ;
ante, § 57.
106 PARTNERSHIP. [cHAP. IV.
pressure of the general doctrine, that a participation in
the profits, as profits, creates a partnership between
them, is most severely felt, and is most difficult to main-
tain upon general reasoning. In all this class of cases
it is the intention of the parties, that no partnership
should exist between themselves ; and the common law,
in this respect, gives full force and eff'ect to that inten-
tion. But in regard to third persons, the common law
holds, that the mere right to participate in the profits
creates a partnership between the parties, notwithstand-
ing there is no participation in the losses, ultra the
profits, and it is not their intention to be partners.^ The
doctrine here seems to be founded in part upon the con-
sideration, that even in such a case there is incidentally,
and to a limited extent, a participation in the losses, as
well as in the profits ; for before it can be ascertained,
that there are any profits, the losses must first be de-
ducted, and the residue only shared as profits.^ But
the main reason is, that, which has been already advert-
ed to, as the first foundation of the doctrine, to wit, that
every man, who has a share of the profits of the trade or
business, ought also to bear his share of the loss ; for if any
one takes part of the profit, he takes a part of the fund,
on which the creditor of the trade relies for his payment.^
» [See§ 49, note.}
2 Ante, § 19-25, 55-57 ; Cheap v. Cramond, 4 B. & Aid. 663 ; Gilpin v.
Enderbey, 5 B. & Aid. 954 ; Ex parte Langdale, 2 Rose, 444 ; s. c. 18 Ves.
300, 301 ; Bond v. Pittard, 3 M. & W. 357.
« Ante, § 27, 28, 32, 36, notes ; Grace v. Smith, 2W.B1. 998, 1000. —Lord
Eldon, in Ex parte Langdale, 18 Ves. 300, s. c. 2 Rose, 444, said : " The
true criterion is, -whether they (the parties) are to participate in the profit.
That has been the question ever since Grace v. Smith." Lord Chief Jus-
tice Eyre, in Waugh v. Carver, 2 H. Bl. 235, 247, approved the doctrine, so
promulgated in Grace v. Smith, as standing upon the fair ground of reason.
Whether it does so, may certainly, if the question were new, admit of a good
deal of argument. See ante, § 48-51, and note 3. The point, however,
now stands dryly upon the maxim, Ita Lex scripta est. See Green v. Bees-
ley, 2 Bing. N. C. 108 ; ante, § 57.
CHAP. lY.] AS TO THIRD PERSONS. 107
i
Without inquiring into the true force of this mode of
reasoning, a task, which would be a matter of superero-
gation, since, so far as the authorities go, it seems ab-
sohitely established, it may be useful to illustrate it by
reference to some of the leading cases, in which it has
been discussed and recognized.
§ 61. Thus, for example, if one person should en-
gage with another in any trade or business, under an
arrangement to divide the profits between them ; but
if there should not be any profits, but a loss, then that
the loss should be borne by one only ; that would make
them partners, as to third persons, at all events.^ On
the like ground, if two solicitors should carry on busi-
ness on joint account, and one should be entitled to
receive a fixed sum, and also a share of the profits, and
not be liable for any losses, they would be partners
intei' sese, as well as to third persons.^ So, where two
merchants agreed to enter into partnership for a certain
term of years, and each was to furnish the same amount
of capital, and one was to receive a certain annual sum
out of the profits, if any, and if none, out of the capital,
and at the expiration of the term he w^as to receive his
full original capital by instalments ; it was held, that
they were partners intet^ sese, and also as to third per-
sons,^ So, where two ship agents, at different ports,
entered into an agreement with each other to share in
certain proportions the profits of their respective com-
missions, and discount on tradesmen's bills, employed
by them in repauing ships confided to their care, but
neither was to be answerable for the acts or losses of
^ Ex parte Langdale, 18 Ves. 300, 301 ; Geddes v. Wallace, 2 Bligh, 270 ;
Jordan v. Wilkins, 2 Wash. C. C. 482 ; Gow on P. c. 1, p. 16, 3d ed. ; Gilpin
V. Enderbey, 5 B. & Aid. 954 ; Bond v. Pittard, 3 M. & W. 357.
^ See Bond v. Pittard, 3 M. & W. 357, 360 ; Tench v. Roberts, 6 Madd.
145, note.
' Gilpin. r. Enderbey, 5 B. & Aid. 954.
108 PARTNERSHIP. [CHAP. IV.
the other, but each was to bear his own ; it was held,
that they were partners as to third persons, although
not as between themselves.^ So, where a commission
1 Waugh V. Carver, 2 H. Bl. 235 ; Cheap v. Cramond, 4 B. & Aid. 663,
668 ; [Emanuel v. Draiighn, 1-4 Ala. 303.] — In Waugh v. Carver, Lord Chief
Justice Eyre said : " Whether these persons were to interfere more or less
with their advice and directions, and many small parts of the agreement, I
lay entirely out of the case ; because it is plain upon the construction of
the agreement, if it be construed only between the Carvers and Giesler,
that thej' were not, nor ever meant to be, partners. They meant each house
to carry on trade without risk of each other, and to be at their own loss.
Though there was a certain degi'ee of control at one house, it was without
an idea that either was to be involved in the consequences of the failure of
the other, and without understanding themselves responsible for any circum-
stances that might happen to the loss of either. That was the agreement
between themselves. But the question is, whether they have not, by parts
of their agreement, constituted themselves partners in respect to other
persons ? The case therefore is reduced to the single point, whether the
Carvers did not entitle themselves, and did not mean to take a moiety of the
profits of Giesler's house, generally and indefinitely as they should arise,
at certain times agreed upon for the settlement of their accounts. That
they have so done is clear upon the face of the agreement ; and upon the
authority of Grace v. Smith, he who takes a moiety of all the profits in-
definitely, shall, by operation of law, be made liable to losses, if losses arise,
upon the principle that, by taking a part of the profits, he takes from the
creditors a part of that fund which is the proper security to them for the
payment of their debts. That was the foundation of the decision in Grace
V. Smith, and I think it stands upon the fair ground of reason. I cannot
agree, that this Avas a mere agency, in the sense contended for on the part
of the defendants, for there was a risk of profit and loss : a ship agent employs
tradesmen to furnish necessaries for the ship, he contracts with them, and is
liable to them, he also makes out their bills in such a way as to determine
the charge of commission to the ship-owners. With respect to the commis-
sion indeed, he may be considered as a mere agent, but as to the agency
itself, he is as much a trader as any other man, and there is as much risk of
profit and loss to the person with whom he contracts, in the transactions with
him, as with any other trader. It is true that he will gain nothing but his
discount ; but that is a profit in the trade, and there may be losses to him as
well as to the owners. If therefore the principle be true, that he who takes
the general profits of a partnership must of necessity be made liable to
the losses, in order that he may stand in a just situation with regard to the
creditors of the house, then this is a case clear of all difficulty. For though,
with respect to each other, these persons were not to be considered as part-
ners, yet they have made themselves such with regard to their transactions
with the rest of the world." In this case, it seems that the Court considered
CHAP. IV.] AS TO THIRD PERSONS. 109
merchant in London agreed with another commission
merchant in Rio Janeiro, equally to divide between
them the commissions on the sale of all goods recom-
mended by the one house to the other ; it was held,
that as to third persons, they were partners in this busi-
ness.^
•'commissions to mean profits; and that the net commissions, and not the
gross commissions, were divisible." Coll. on P. B. 1, c. 1, § 1, p. 30.
^ Cheap V. Cramond, 4 B. & Aid. 663. — In this case, it is not clear,
whether the Court treated the case as one where the gross comnn'ssions, or
the net commissions were to be divided, although the commissions were
treated as if the word had been profits, and therefore undistinguishable
from profits. The language of Lord Chief Justice Abbott, in delivering
the opinion of the Court, was as follows : " And in support of this propo-
sition, the case of Waugh v. Cai'ver was cited and relied on. And we are
all of opinion, that the present case cannot be distinguished in principle
from that, and that our decision must be governed by it. It is true, that in
that case a definite part of the commission was, by agreement of the parties,
to be deducted as compensation for the charges and expenses before a
division took place ; and also that each party was to share in some specified
measure Avith the other, in other parts of the profits of their respective
business, such as warehouse rent, and discount upon tradesmen's bills. And
it was contended, in this case, on the part of the plaintiffs, that the bank-
rupts and Ruxton were to be considered as dividing the gross proceeds
only, and not the net proceeds or profits of each other's agency or factorage ;
and that a division of gross proceeds does not constitute a partnership.
We think, however, that the previous deduction of a definite part of the
commission before the division in the case cited, is an unimportant fact. It
cannot have the effect in all cases of leaving the remainder as clear profit,
because the expense and charge cannot be in all cases uniformly the same,
but must vary with the particular circumstances of each transaction ; so that
in effect a part only of the gross commission, or proceeds of the agency,
and not the whole, was to be divided in that case ; and taking the definite
deducted part at a fifth, or any other aliquot part, the absent house, instead
of receiving one-half, as in the case at bar, would, by the agreement, receive
two-fifths, or some other definite part of the whole gross sum, and not an
indefinite part thereof, depending upon the actual and clear profit of the
transaction. And although, in the case of Waugh v. Carver, the agreement
was not confined to a division of the commission, but extended also to the
moneys received in certain other parts of the transactions of the two houses,
yet the principle of the decision is not affected by that circumstance, the
principle being, that where two houses agree that each shall share with
the other the money received in a certain part of the business, they are, as to
such part, partners with regard to those who deal with them therein, though
110 PARTNERSHIP. [cHAP. IV.
§ 62. We may conclude this head with the remark,
that the Roman law did not (as we have seen) ordi-
they may not be partners inter sese. By the effect of such an agreement,
each house receives from the other a part of that fund on which the creditors
of the other rely for payment of their demands, according to the language
of Lord Chief Justice De Grey, in the case of Grace v. Smith. And such
an agreement is perfectly distinct from the cases put in the argument before
us of remuneration made to a traveller, or other clerk or agent, by a por-
tion of the sums received by or for his master or principal in lieu of a fixed
salary, which is only a mode of payment adopted to increase or secure
exertion. It is distinct also from the case of a factor receiving for his
commission a percentage on the amount of the price of the goods sold by
him, instead of a certain sum proportioned to the quantity of the goods sold,
as was the case of Dixon v. Cooper, wherein it was held, that the factor
was a competent witness to prove the sale. It differs also from the case of
a person receiving from a trader an agreed sum, in respect of goods sold
by his x'ecommendation, as one shilling per chaldron on coals, or the like,
for there is no mutuality ; and such a case resembles a payment made to an
agent for procuring orders, and has no distinct reference in the terms of the
agreement to any particular coals purchased by the coal merchant for re-
sale, upon which a third jjerson may become a creditor of the coal merchant,
and probably could not in any instance be shown to apply in its execution
to any such particular purchase. But it is to be observed, that, even on a
case of this nature, the inclination of Lord Mansfield's opinion, in Young
V. Axtoll, cited 2 H. Bl. 242, was, that such an agreement might constitute
a partnership. Of the case of Muirhead v. Salter, referred to in the argu-
ment, we have neither the facts nor the ground of decision brought before
us with sufficient accuracy, to enable us to consider it as an authority on
the present question. It may have been, that the division of the commission
between the two insurance brokers was a solitary instance ; that the assured
had recognized the second broker, as being the person employed by him-
self; or that the court did not think fit, under all the circumstances of the
particular case, to disturb the verdict of a jury of merchants, as to the effect
of a division of the commission in that particular species of agency, the
divided commission being, as I understand, payable for effecting the policy,
and not for receiving the money from the underwriters, in the event of the
loss, and payable whether any loss had occurred or not. So that we cannot
consider that case as having contravened or weakened the authority of the
decision in Waugh v. Carver. Upon the authority of this latter case, and
for the reasons already given, Ave think the direction of the learned judge
at the trial, and the verdict of the jury, are right, and that the rule for a
new trial ought to be discharged." There is certainly some obscurity in
that part of the opinion, which refers to the question as to the gross or the
net commissions. If the learned judge meant to say, that a division of
the gross commissions would make them partners, the case certainly is in
CHAP. IV.] AS TO THIRD PERSONS. Ill
narily contemplate cases to be cases of partnership ex-
cept where the parties intended to create a partnership,
and the losses, as Avell as the profits, were to be shared
in some proportions by each of them. The usual inter-
pretation was, that if the agreement provided either for
a distribution of the profits alone, or of the losses alone,
in certain proportions, the other, which was omitted,
would be presumed to be intended to be shared in the
same proportion. lUud expedifum est, si in una causa
pars fuerit expressa (veluii in solo lucro, vel in solo
damno) in altera vero o^nissa ; in eo quoque, quodprce-
termisswn est, eandem partem servari} And unless
some provision was found in the agreement itself, touch-
ing the matter, the Roman law presumed, as a natural
result from the contract, that the partners were to share
in both, and to share equally. Nam sicuti lucrum, ita
damnum quoque commune esse oportet ; quod non culpa
socii contingit.^ Quoniam societas, cum contrahitur,
tam lucri, quam damni communio initur.^ Still, how-
ever (as we have seen), the Roman law, if the parties
clearly intended a partnership, did not prevent them
from agreeing, in consideration of peculiar services or
credit in aiding the partnership, that the partners should
share the profits between them, if any, and that the one
rendering such services, or credit, might be exempted
conflict Avith other authorities. But if he meant, that the division was to be
of the net connnissions, deducting all charges, then it Avould be in harmony
with those authorities. See ante, § 34, 44, 5o-60. Sec Pearson t'. Skelton,
1 M. & W. 504. The same case is much more fully reported in 1 Tyrw. &
G. 848, where the distinction between an interest in the gross profits, and
that in the net profits, is clearly stated. His language on that occasion is
quoted, post, § 220, note. Mr. Collyer understands Cheap v. Cramond,
4 B. & Aid. 663, to have decided that there is no difference between a
division of the gross and a division of the net commissions.
1 Inst. 3, -IQ, 3; Domat, 1, 8, 1, art. 5; ante, § 27, 50.
* D. 17, 2, 52, 4; Poth. Pand. 17, 2, n. 39; Domat, 2, 1, 1, art. 1.
» D. 17, 2, 67, Intr. ; Domat, 1, 8, 1, art. 1, 3, 4.
112 PARTNERSHIP. [CHAP. lY.
from all losses beyond the profits.^ But it does not ap-
pear, that the Roman law ever established a partnership
in favor of third persons, against the intention of the
parties, from the mere participation of profits, and a for-
tiori^ where there was an express provision against one
party being liable for any losses.^
§ 63. The principles established in these three classes
of cases ^ are commonly applied to dormant and secret
partnerships, where the ostensible partners only are
known or act, and yet other persons, who are to share
the profits, are held responsible as partners to third
persons, although they may not be so chargeable inter
sese} Thus, for example, if A. and B. should agree
to carry on any trade or business for their joint and mu-
tual account, to divide the profits and losses between
them, and A. alone was to be known in the trade and
business, and to be solely responsible for the debts and
contracts thereof, and B. was to be a secret dormant
partner, B. would nevertheless be deemed a partner as to
third persons, and responsible to them for all the debts
and contracts growing out of such trade or business.^
The same rule would apply to a case, where it was even
expressly agreed between the parties, that there should
be no partnership between them ; but they were merely
to share the profits and losses, or the profits only, and
one was to bear all the losses.^
» D. 17, 2, 29, 1 ; Domat, 1, 8, 1, art. 9 ; ante, § 37, 50.
" Ante, § 50. 3 ^^^6, § 55, 59, 60.
* 3 Kent, 32, Winship v. Bank of U. S. 5 Pet. 529 ; Etheridge v. Binney,
9 Pick. 272.
* Hoare v. Dawes, 1 Doug. 371 ; Winship v. Bank of U. S. 5 Pet. 529;
S. c. sub nom. U. S. Bank v. Binney, 5 Mason, 176 ; Coope v. Eyre, 1 H. Bl.
37 ; Geddes v. Wallace, 2 Bligh, 270 ; {Beckham v. Drake, 9 M. & W. 79 ;
8. C. 11 M. & W. 315 ; Lind. on P. 273} ; [Baring v. Crafts, 9 Met. 380;
Brooke v. Washington, 8 Gratt. 248.]
6 Gow on P. c. 1, p. 12-18, 3d ed.; Coll. on P. B. 1, c. 1, § 1, p. 11-27,
2d ed.; Id. § 2, p. 53-67; Id. B. 3, c. 3, § 3, p. 368, 370, 371; Wats.
CHAP. IV.] AS TO THIRD PERSONS. 113
§ 64. In the next place, as to the class of cases, where
the parties are not in reality partners, but are held out
to the world as such in transactions affecting third per-
sons. In such cases, they will be clearly held partners,
as to such persons.^ Tms doctrine turns upon no pecu-
liar principles of municipal jurisprudence ; but is founded
in the enlarged principles of natural law and justice, ex
cBcjuo et bono. For, wherever one of two innocent per-
sons must suffer from a false confidence or trust reposed
in a third, he who has been the cause of that false con-
fidence, or trust, and is to be benefited by it, ought to
suffer, rather than the other ; and this must apply a
fortiori, where the credit is given to a party solely upon
the faith of the fraudulent allegation of a fact, which is
known to such party at the time to be untrue. The
reason of the doctrine is fully expounded by a late emi-
nent judge in the following terms. " The definition of
a partnership cited from Pufendorf is good, as between
the parties themselves, but not with respect to the world
at large. If the question were between A. and B.,
whether they were partners, or not; it would be very
well to inquire, whether they had contributed, and in
what proportions, stock, or labor, and on what agree-
ments they were to divide the profits of that contribu-
tion. But in all these cases a very different question-
arises, in which the definition is of little service. The
question is generally, not between the parties, as to what
on P. c. l,p. 17-27, 2d ed. ; Hesketh v. Blancliard, 4 East, 144; [Smith
V. Smith, 7 Fost. 244 ; Hill v. Voorhies, 22 Penn. St. 68 ; Brooke v. Wash-
ington, 8 Gratt. 248 ; Grilfith v. Buffiim, 22 Vt. 181.]
' 3 Kent, 32, 83 ; Post v. Kimberly, 9 Johns. 4 70, 489 ; Ex parte Watson,
19 Ves. 459, 469; Fox v. Clifton, 6 Bing. 7 76 ; Coll. on P. B. 1, c. 1, § 2, p.
60-64, 2d ed. ; Parker w. Barker, 1 Brod. & B. 9 ; Goode v. Harrison, 5 B.
& Aid. 147; Bond v. Pittard, 3 M. & W. 357; 2 Bell, Comm. B. 7, c. 2, p.
G23, 624, 5th ed. See Bonfield v. Smith, 12 M. & W. 405, the eonverse case,
where the firm name was A. & Co., and the defendant held himself out as
the sole partner then in the firm.
114 PARTNERSHIP. [cHAP. IV.
shares they shall divide, but respecting creditors, claim-
ing a satisfaction out of the funds of a particular house,
who shall be deemed liable in regard to these funds.
Now, a case may be stated, in which it is the clear sense
of the parties to the contract, that they shall not
be partners ; that A. is to contribute neither labor nor
money, and, to go still further, not to receive any profits.
But if he will lend his name as a partner, he becomes, as
against all the rest of the world, a partner, not upon the
ground of the real transaction between them, but upon
principles of general policy, to prevent the frauds, to
which creditors would be liable, if they were to suppose,
that they lent their money upon the apparent credit of
three or four persons, when in fact they lent it only to
two of them, to whom, without the others, they would
have lent nothing.^ Upon so clear and natural a doctrine,
it seems unnecessary to cite at large the authorities in its
support. They are uniform and positive to the purpose.^
§ 65. This last class of cases may arise from the
express acknowledgments of the parties, or by impli-
cation or presumption from circumstances. Thus, if a
person should expressly hold himself out as a partner,
and thereby should induce the public at large, or par-
ticular persons, to give credit to the partnership, he
would be liable as a partner for the debts so contracted,
although he should in reality not be a partner.^ On
• Lord Chief Justice Eyre in Waugh v. Carver, 2 H. Bl. 235, 246.
2 Coll. on P. B. 1, c. 1, § 5, p. 53-64; Gow on P. c. 1, p. 10, 3d ed. ;
Wats, on P. p. 83, 34, 2d ed. ; 3 Kent, 31-33 ; Hoare v. Dawes, 1 Doug. 371 ;
Young V. Axtell, cited 2 H. Bl. 242 ; Ex parte Langdale, 2 Rose, 444 ; s. c.
18 Ves. 300, 301 ; M'lver v. Humble, 16 East, 169 ; Bond r. Pittard, 3 M.
& W. 357, 359; {Martyn v. Gray, 14 C. B. N. s. 824; Dutton ». Wood-
man, 9 Cush. 255; Potter v. Greene, 9 Gray, 309,}
3 Wats, on P. c. 1, p. 6, 2d ed. ; Id. p. 33 ; Gow on P. c. 1, p. 10-13, 3d
ed.; Id. p. 23, 24; Coll. on P. B. 1, c. 1, § 2, p. 53-67, 2d ed. ; Guidon v.
Robson, 2 Camp. 302; Young v. Axtell, cited 2 H. Bl. 242. {To charge
a defendant with liability as a partner on the ground of representation of
CHAP. lY.] AS TO THIRD PERSONS. 115
the other hand, if a known partner should silently
withdraw from the partnership, without giving any
notice thereof, he would still remain liable to persons,
who should continue to deal with it upon the faith and
confidence, that he still remained a partner ; for his
silence, under such circumstances, would be equivalent
to an affirmation of a continuing partnership/ But
this subject will naturally occur in other connections
in a subsequent part of these Commentaries, and needs
not here be further dwelt upon.^
§ 66. In the next place as to the class of cases
where one of the parties is to receive an annuity out
of the profits, or as a part thereof. And here it may
be generally stated, that a person, who lends money to
a firm, and is to receive therefor a fixed interest
(whether usurious, or otherwise, is not material), or an
annuity, certain as to amount and duration, will not
thereby become, as to third persons, a partner in the
firm ; for, in such a case, there is no mutuality of profit
with the firm, and no general participation in the
himself as a partner, it must be proved either that he has ' represented
himself as a partner to the plaintiff, or has made such a public repre-
sentation of himself in that character as to lead the jury to conclude
that the plaintilT, knowing of that representation, and believing the defend-
ant to be a partner, gave him credit under that belief. Ford v. Whitmarsh,
Hurlst. & Walm. 53. This rule, in spite of the remark in Young v. Axtell,
cited 2 H. Bl. 242, seems now well settled. Dickinson v. Valpy, 10 B. & C.
128, 140. Wood V. Duke of Argyll, 6 M. & G. 928, 932 ; Lake v. Duke of
Argyll, 6 Q. B. 477; Shott v. Strealfield, 1 M. & Rob. 8; Baird r. Planque,
1 Fost. & Finl. 344; Fitch v. Harrington, 13 Gray, 468; Wood r. Pennell,
51 Me. 52 ; Irvin v. Conklin, 36 Barb. 64 ; Bowie v. Maddox, 29 Ga. 285 ;
Lind. on P. 41-52; Metcalf on Contr. 113; 1 Sm. Lead. Gas. (6th Am. ed.)
1190; Smith's Merc. Law, (5th ed.) 23, note (r.)}
' Coll. on P. B. 3, c. 3, § 3, p. 368-376, 2d ed. ; Godfrey v. Turnbull, 1
Esp. 371 ; AVhitman v. Leonard, 3 Pick. 177; Griswold v. AVaddington, 15
Johns. 57 ; Parkin v. Carruthers, 3 Esp. 248; Stables v. Eley, 1 Car. & P.
614 ; Graham v. Hope, 1 Peake, 154.
* {See § 158-163.}
116 PART>'ERSHIP. [chap. IV.
casual and indefinite profits, which, as we have seen,
constitutes one of the ingredients of partnership.^
Cases of this kind often occur upon the retirement of
a partner, leaving money or funds in the hands of the
firm, and upon the decease of a partner, who bequeathes
an annuity to his widow out of the profits ; and in
neither case will the retiring partner, or the widow, be
held a partner as to third persons, as he or she cer-
tainly is not, as to the partners themselves.^ It is
true, that it may be said, that the retiring partner or
widow has, in a certain sense, an interest in the profits.
But the same suggestion may be made as to creditors
of the firm. If any one advances or lends money to a
trader, it is only lent on his general personal security.
It is no specific lien upon the profits in the trade ; and
yet the lender is generally interested in those profits.
He relies on them for repayment. And there is no
difference, whether money be lent de novo, or be left
behind in the trade by a retiring partner ; or, whether
the terms of the loan be kind, or be harsh.^
§ 67. The true criterion, by which we are to distin-
guish cases of this kind from cases in which there is a
partnership as to thhd persons, is to ascertain, whether
the retiring partner, or lender, or annuitant, is to
receive a share of the profits, as profits, or whether the
profits are relied on only as a fund of payment ; or, in
other words, whether the profit, or premium, or annuity,
is certain and defined, or is casual, indefinite, and de-
pending on the accidents of trade. In the former case,
it is a loan ; in the latter, a partnership. The hazard
of profit or loss is not equal and reciprocal, if the retir-
' Coll. on P. B. 1, c. 1, § 1, p. 26. 2d ed.
= Coll. on P. B. 1, c. 1, § 1, p. 26, 27, 2d ed. Grace v. Smith, 2 W. Bl.
9 98, 1000; Waugh v. Carver, 2 H. Bl. 235, 245.
=> Grace v. Smith, 2 W. Bl. 998, 1000.
CHAP. IV.] AS TO THIRD PERSONS. 117
ing partner, or lender, or annuitant, can receive a
limited sum only for the profits of the loan or other
fund ; and therefore the law will not deem him or her
a partner, since there is an utter want of mutuality of
right and interest in the profit.^
§ 68. There may be, and indeed sometimes is great
nicety in the application of the doctrine ; but, never-
theless, the distinction itself is ordinarily clear and
satisfactory. Thus, if a person is to receive an annuity
in lieu of profits, he will not be held to be a partner as
to third persons ; because such words negative the
presumption, that the annuity is to be paid out of the
profits ; since it is not to vary in its amount with the
profits, nor to depend, as to its duration, on the term
or continuance of the partnership.- But if he is to
receive a certain percentage on the profits, or on the
amount of the business done, he will clearly be, as to
third persons, a partner, since the amount to be
received would rise and fall with the amount of the
profits or business.^ So (it has been said), if a retiring
» Grace v. Smith, 2 W. Bl. 998, 1000; Waugh i-. Carver, 2 H. Bl. 235,
247. {In McDonald v. Millaudon, 5 La. (Miller), 403 ; Sheridan v. Medara,
2 Stockt. 469 ; Pierson v. Steinmeyer, 4 Rich. 309 ; and Wood v. Vallette,
7 Ohio St. 172, persons who had lent money for a share in the profits were
held liable as partners. In the first two cases the contracts, unless they
■were contracts for partnership, were usurious ; see note infra. In the last
case, the one who advanced the money also furnished services, and the con-
tract is said by the court to be not a contract of loan, but of actual partner-
ship. In Pierson r. Steinmeyer, p. 319, the court recognized the distinction
between participation in the profits as profits, and the receiving of a sum
proportionable to the profits in cases of agency, but they refused to apply
the distinction in the case of a loan. O'Xeall, J., dissented.
On the other hand, in Gibson- r. Stone, 43 Barb. 285, and Williams i:
Soutter, 7 Iowa, 435, a loan for a share of profits was held not to create
liability as a partner. See § 49, note ; § 70, note ; Wall v. Balcom, 9
Gray, 92.}
* Coll. on P. B. 1, c. 1, § 1, p. 27, 28, 2d ed.
» Young V. Axtell, cited 2 H. Bl. 242; Waugh v. Carver, 2 H. Bl. 235,
246, 247 ; [Buckner v. Lee, 8 Ga. 285, 288.]
118 PARTNERSHIP. [CHAF. IV.
partner is entitled to receive a certain interest on the
funds, which he leaves in the partnership, and also a
fixed annuity for a certain number of years, if the
partner shall so long live, in lieu of the profits of the
trade, with a right to inspect the books of the partner-
ship, he will be deemed a partner ; for, taking the
whole transaction together, it is apparent, that he is to
be paid out of the profits.^
§ 69. It is upon a similar ground, that, where a
person is to receive an annuity of a fixed sum out of
the profits of a trade or business, he is held to be a
partner as to third persons ; for in such a case the
1 Bloxham v. Pell, cited 2 W. Bl. 999 ; Coll. on P. B. 1, c. 1, § 1, p. 28,
2d ed. ; Id. § 2, p. 54. — This case seems to stand upon the utmost verge of
the law, even if it be at all maintainable. It differs from Grace v. Smith, 2
W. Bl. 998, principally in the circumstance, that the annuity was determina-
ble upon the contingency of the death of the partner, and there was a right
to inspect the books. But as the interest was fixed, and the annuity for a
determinate term, although liable to be defeated by the happening of the
contingency of the death of the party, it does not seem easy to see, how
either the interest or the annuity can be properly treated as a payment to be
made exclusively out of the profits. The right to inspect the books may
seem more strongly to indicate a partnership ; but ought it to be decisive ?
See Gow on P. c. 1, p. 21, 22, 3d ed. ; Gary on P. p. 3, 14, 171. Certainly
an annuity of a fixed sum, determinable on the death of the annuitant, or of
the partner, cannot, per se, be treated as creating a partnership as to third
persons, when payable in lieu of the profits of the trade ; for there is no
mutuality in the profits, and no sharing of profit and loss ; as it is not made
payable out of the profits exclusively. See Ex parte Chuck, 8 Bing. 469 ;
Young V. Axtell, cited 2 H. Bl. 242; Holyland v. De Mendez, 3 Mer. 184;
Watson on P. c. 1, p. 11, 12, 2d ed. {In Grace v. Smith, 2 W. Bl. 998, the
judgment in which " has always been regarded as the great authority for the
proposition, that a person who shares profits shall be liable to third parties
as if he were in fact a partner," the decision was that an annuitant was not,
under the circumstances, liable as a partner. Mr. Lindley regards the cases
of Gilpin V. Enderbey, 5 B. & Aid. 954, and Fereday v. Hordei-n, Jac. 144 as
decisions on the law of usury rather than on the law of partnership, and the
case of Bloxham v. Pell, 2 W. Bl. 999, as resting on the reason given by
Lord Mansfield that " it shall not lie in the defendant Pell's mouth to say it is
usury and not a partnership," and on the maxim Quum quod ago non valet ut
agam, valeat quantum valere potest. Lind. on P. 18, 35. See Ex parte
Briggs, 3 Deac. & Ch. 3G7 ; ante, § 49, note.}
CHAP. IV.] AS TO THIRD PERSONS. 119
annuity will be payable out of the net profits, and will
rise and fall accordiiig to the profits, if there be not
enough profits to pay the annuity ; and there will also
be a lien on the profits therefor.^ In short, in all cases
of this kind, the real question to be solved is, whether
the party is in effect to participate in the rise or fall of
the profits, and has an interest in the profits, as such ;
or, whether he only looks to profits as a fund for pay-
ment of the annuity ; but not exclusively to that fund.
In the former case he is a partner ; in the latter he is
not. Questions of this sort also sometimes arise in
cases where a simulated partnership is resorted to,
in order to disguise a loan upon usurious interest;
and then the court will look astutely to the real
nature of the transaction. It may be clearly a case
of usury between the parties, which will create no
legal partnership as between themselves, although
they may as clearly be liable as partners to third
persons.^
§ 70. We may conclude this part of our subject with
the remark, that persons may not only be partners as
to third persons, but also inter sese, where they are not
interested personally, but are concerned in an official
capacity only in the partnership, for the use and
benefit of others. Thus, where a trustee for third
persons is concerned in a partnership, but derives no
profit personally therefrom, or an executor or adminis-
trator is, in pursuance of partnership articles, admitted
into the partnership after the death of a deceased
partner, he will be deemed to all intents and purposes,
as to the other partners, as well as to third persons, a
> Bond i: Pittard, 3 M. & W. 357, 361 ; In re Colbeck, Buck, 48 ; Ex parte
Chuck, 8 Bing. 469; Ex parte Hamper, 17 Ves. 403, 412; ante, § 66, 67.
- Gilpin r. Enderbey, 5 B. & Aid. 954 ; Morse i\ Wilson, 4 T. R. 353 ;
Coll. on P. B. l,c. 1, § 1, p. 38-41, 2d ed. See also Poth. de Soc. n. 22-27 ;
{Sheridan v. Medara, 2 Stockt. 469.}
120 PARTNERSHIP. [CHAF. IV.
partner.^ But if a person is not in the firm, and has
no control or authority or interest, either in the capital
stock or in the profits thereof,^ and his cestui qite trust
is the party in interest (whether he be infant or an
adult), the mere reservation to such person of a right
to an account of the profits, and that the partnership
shall be governed by his advice, will not (it should
seem) constitute him a partner in any respect whatso-
ever. Thus, where it appeared, that a father, on the
formation of a partnership, invested a sum of money in
the partnership firm on behalf of his son, who was a
minor ; and it was stipulated, that the other partners
should account with the father, as the trustee of his son,
for one-third profit of his son's capital, or any loss, that
might accrue, and should be governed and directed by
his advice in all matters relative to the business ; it was
determined, that this did not constitute the father a
partner, the jury having found, that the money was not
invested by him for his own benefit, and that he had
not reserved to himself the power of drawing out the
principal or profits, as trustee for his son.^
' Gow on P. c. 1, § ], p. 16, 3d efl. ; Wightman v. Townroe, 1 M. & S.
412; Ex parte Garland, 10 Ves. 110; Barker v. Parker, 1 T. R. 287, 295;
Coll. on P. B. 3, c. 3, § 4, p. 427, 428, 2d ed. ; Owen v. Body, 5 Ad. & E. 28.
{But see Gibson v. Stevens, 7 N. H. 352. If a debtor assigns his property to
trustees for the benefit of creditors, with power in the trustees to carry on the
business, and divide the net profits among the creditors in proportion to their
debts, the creditors becoming parties to the deed are not liable as partners for
debts contracted by the trustees in carrying on the business. Cox v. Hickman,
8 H. L. C. 268, s. c. sub nom. Wheatcroft iJ. Hickman, 9 C. B. n. s. 47, revers-
ing Hickman v. Cox, in the Exchequer Chamber, 3 C. B. N. s. 523,>which
affirmed the judgment of the Court of Common Pleas in the same case, 18 C. B.
617. See Re Stanton Iron Co. 21 Beav. 164 ; Owen v. Body, 5 Ad. & E. 28 ;
M'Alpine V. Mangnall, 3 C. B. 496 ; Janes v. Whitbread, 11 C. B. 406 ; Sul-
len V. Sharp, Law Rep. 1 C. P. 86 ; ante, § 49, note ; Conkling v. Washington
University, 2 Md, Ch. 497 ; Drake v. Ramey, 3 Rich. 37 ; Brundred v. Muzzy,
1 Dutch, 268.}
2 [See Price v. Groom, 2 Exch. 542.]
^ Barklie v. Scott, 1 Huds. & Br. 83, cited Gow on P. Suppl. London,
1841,c. l,§l,p. 1.
CHAP. IV.] AS TO THIRD PERSONS. 121
{Note. Sub-partnership. — If several persons are partners, and one of
them agrees to share profits with a stranger, this does not make the stranger
a partner in the principal firm. Ex parte Barrow, 2 Rose, 252 ; Bray v.
Fromont, 6 Madd. 5 ; Lind. on P. 52 ; Coll. on P. (3d Am. ed.) § 194 ; 3
Ross, Lead. Cas. 697. See Drake v. Ramey, 3 Rich. 37.
Whether a sub-partner is liable to third persons for the debts of the prin-
cipal firm is not clearly settled. Mr. Collyer (Coll. on P. 3d Am. ed. § 194)
and Mr. Lindley (Lind. on P. 53) are of opinion that a sub-partner Is not
liable, and it is so held in Reynolds v. Hicks, 19 Ind. 113. In Fitch v.
Harrington, 13 Gray, 468, A. and B. were members of a firm, and an action
was brought against A., B., and C. for a partnership debt ; it was alleged that
C. shared profits with B., and was liable as a partner. The jury was in-
structed that " if there was a sub-partnership between B. and C, by which C.
was to share in the profits of the firm, to which profits B. was entitled, this
alone would not make C. liable for the debts of the firm." The jury returned
a verdict in favor of C, and the plaintiff excepted. The exceptions were
sustained on the ground that this instruction, " given, as it was, without any
explanation, may have misled the jury." The court say : " An agreement
between one copartner and a third person, that he shall i^articipate in the
profits of the firm, as profits, renders him liable, as a partner, to the creditors
of the firm, although, as between himself and the members of the firm, he is
not their copartner ; but if such third person, by his agreement with one
member of the firm, is to receive compensation for his labor, services, &c., in
proportion to the profits of the business of the firm, without having any
specific lien on the profits, to the exclusion of other creditors, he is not liable
for the debts of the firm." But can a joartner give a stranger a specific lien on
the profits of the partnership to the exclusion of other creditors ? In Sir Charles
Raymond's Case,' as cited by Lord Eldon in Ex parte Barrow, 2 Rose, 252, 255,
it was held that a sub-partner " had no demand against it [the partnership],
had no account in it, and that he must be satisfied with a share of the profits
arising and given " to the sub-partner with whom he had entered into tho
sub-partnership. And see § 49, note.}
122 PARTNERSHIP. [CHAP. V.
CHAPTER V,
PARTNERSHIP DIFFERENT SORTS OF.
{§71. Preliminary.
72. Universal partnerships.
73. In the Roman law;
74. General partnerships.
75. Special partnerships.
76. Private partnerships and public companies.
77. Unincorporated companies and corporations.
78. Classification of partnerships in the French law.
79. In the Scottish law.
80. Ostensible, nominal, and dormant partners.
81. Objects of partnership.
82. Partnerships concerning land.
83. PecuHar character of such partnerships.
84. Duration of partnership.
85. Roman law.
86. Mode of formation of partnerships.
8 7. Foreign law. }
§ 71. Having thus ascertained the true nature of the
contract of partnership ; the persons who are in law
capable of being partners, or not ; and what will con-
stitute a partnership inter sese, and what merely as to
third persons ; we may now proceed to other consider-
ations touching the subject, which seem necessary to be
adverted to, as preliminaries to the more full discussion
of the rights, duties, interests, powers, and responsibili-
ties of partners, as well iiitei" sese, as in respect to thu'd
persons.
§ 72. Partnerships then at the common law may, in
respect to their character and extent, be divided into
three classes ; universal partnerships ; general partner-
ships ; and limited or special partnerships. By univer-
sal partnerships we are to understand those, where the
CHAP. Y.J DIFFERENT SORTS OF. 123
parties agree to bring into the firm all their property,
real, personal, and mixed, and to employ all their skill,
labor, services, and diligence in trade or business, for
their common and mutual benefit, so that there is an
entire communion of interest between them. Such con-
tracts are within the scope of the common law ; but
they are of very rare existence.^
§ 73. The Roman law fully recognized the same classi-
fication. Societates confraJmnfur, sive imiversorum bo-
norum, sive negotiationis aliciijus, sive vectigalis, sive
etiam rei unius.^ And in neither case was it necessary
that the parties should contribute in equal proportions.
Societas autem co'iri i^otest^ et valet etiam inter eos, qui
non sunt cequis facultatlhus, cum plerumque 2^ai(perior
opera suppleai^ quantum ei per comparationem i^citri-
monii deest.^ In that law universal partnerships were
distinguished into two sorts ; first, those, which were of
all the property of the parties, present and future ( Uni-
versorum honorum^) ; and, secondly, those which extend
only to all the gains, earnings, and profits of all the
busmess done by them. ( Universorum^ quae ex qucestu
^ [Lyman v. Lymau, 2 Paine, 11 ; Rice r. Barnard, 20 Yt. 479. — In this
case the partnership was said to be, " not strictly a partnership, but rather a
universal hotchpot of all the property and liabilities, present and prospective,
of both the persons concerned."] In U. S. Bank v. Binney, 5 Mason, 176, 183,
the court said : " In respect to the general law regulating partnerships, there
does not seem any real dispute or difficulty. Partnerships are usually divided
into two sorts, general and limited. The former is, where the parties are
partners in all their commercial business ; the latter, where it is limited to
some one or more branches, and does not include all the business of the part-
ners. There is, probably, no such thing as a universal partnership, if, by the
terms, we are to understand, that every thing done, bought, or sold, is to be
deemed on partnership account. Most men own some real or personal estate,
which they manage exclusively for themselves."
^^ D. 17, 2, 5; Both. Pand. 17, 2, n. 11 ; Inst. 3, 26.
3 D. 17, 2, 5; Poth. Pand. 17, 2, n. 12.
" Poth. de Soc. n. 28, 29, 43 ; D. 17, 2, 5-12; Poth. Pand. 17, 2, n. 13-18 ;
Domat, 1, 8, 3, art. 1, 4.
124 PARTNERSHIP. [CHAP. V.
veniiint}) The former sort was never deemed to be in-
tended, unless it was explicitly stipulated ; the latter
was ordinarily presumed from the mere formation of a
partnership.^ In societate omnium honorum omnes
res, qucB coeuntium sunt, continuo commiinicantur.^
Cowl societatem et shnpUciter licet. Et si non fuerit
distinctum, videtur coita esse universorum, quce ex quces-
tu veniunt ; hoc est, si quod lucrum ex einj^tione, vendi-
tione, loccdione, conducfione descendit^ Qucesius enim
inteUigitur, qui ex opera cujusque descendit.^ Sed et si
adjiciatur, ut et qucesius et lucri socii sint, verum est,
non ad aliud lucrum, qicam quod ex qucestu venii, hanc
quoque adjectionem pertinere.^
§ 7-i. General partnerships are properly such, where
the parties carry on all their trade and business, what-
ever it may be, for the joint benefit and profit of all the
parties concerned, whether the capital stock be limited
or not, or the contributions thereto be equal or unequal.^
But where the parties are engaged in one branch of
trade or business only, the same appellation is ordinarily
applied to it. Thus, if two merchants are engaged in
mercantile commerce and business on joint account,
and also in manufacturing and other business solely on
joint account, it is properly a general partnership. But,
if the same merchants carry on no other business than
that of commerce on joint account, they would be usu-
1 Poth. de Soc. n. 43 ; Domat, 1, 8, 3, art. 2 ; 1 Voet, ad Pand. 17, 2, n. 4,
p. 749 ; Vinn. ad Inst. 3, 26, Intr.
2 Poth. de Soc. n. 29, 43; Domat, 1, 8, 3, art. 2, 3; Poth. Pand. 17, 2,
n. 20, 21.
D. 17, 2, 1 ; Poth. Pand. 17, 2, n. 13.
* D. 17, 2, 7; Poth. Pand. 17, 2, n. 20; Poth. de Soc. n. 29, 43.
* D. 17, 2, 8; Poth. Pand. 17, 2, n. 20.
« D. 17, 2, 13 ; Poth. Pand. 17, 2, n. 20 ; Domat, 1, 8, 3, art. 2, 3 ; Poth.
de Soc. n. 43-45.
' Willett V. Chambers, Cowp. 814, 816; 2 Bell, Comm. B. 7, c. 2, p. 621,
5th ed.
CHAP, y.] DIFFERENT SORTS OF. 125
ally spoken of as engaged in a general partnership.
The former case approaches very nearly to that of a
general partnership in the Roman law, universorum^
quce ex qi(cestu venhmt} The latter would be distin-
guished by the Roman law, as a particular partnership,
negotiafionis almijus. The like distinctions prevail in
the foreign law.^
§ To. Special partnerships, in the sense of the com-
mon law, are those which are formed for a special or
particular branch of business, as contradistinguished
from the general business or employment of the parties,
or of one of thera.^ They are more commonly called
limited partnerships, when they extend to a single trans-
action or adventure only ; such as the purchase and sale
on joint account of a particular parcel of goods, or the
undertaking of a voyage or adventure to foreign parts
upon joint account.^ But the appellation may be ap-
plied indifferently, and without discrimination to both
classes of cases. They therefore fall within the denomi-
nation of the Roman law, Societas sive negotiationis
alicKJus, sive vectigalis, sive eticmi rei unius.^
§ 76. At the common law partnerships are also some-
' Ante, § 73, Poth. de Soc. n. 43.
2 Ante, § 73 ; Poth. de Soc. n. 54, 55 ; Domat, 1, 8, 3, art. 1 ; Wats, on P.
c. 1, p. 1, 2d ed. ; 2 Bell, Coram. B. 7, c. 2, p. 621, 5tli ed. ; 1 Yoet, ad Pand.
17, 2, n. 5, p. 750 ; Yinn. ad Inst. 3, 26, Intr.; 3 Kent, 30, note (a) ; Civil
Code of France, n. 1836-1842 ; Civil Code of Louisiana, art 2795-2805.
=* Willett V. Chambers, Cowp. 814, 816 ; 2 Bell, Coram. B. 7, c. 2, p. 621,
5th ed.; \_In re Warren, Daveis, 320, 323.]
* {Partnerships in commandite as established by the laws of the several
States are often called limited partnerships. See § 78. }
5 Ante, § 73 ; Poth. de Soc. n. 54 ; 1 Voet, ad Pand. 17, 2, n. 5, p. 750.
[But an association of pereons, who agree in writing to pay a particular sum
for the erection of a house of worship, or other public building, whicii wlien
complete is to be owned by the subscribers in proportion to the amount paid
by each, is not even a special partnership. Woodward v. Cowing, 41 Mo. 9.]
{See§ 144.}
126 PARTNERSHIP. [CHAP. V.
times divided into other kinds. (1.) Private partner-
ships, which are composed of two or more partners for
some merely private undertaking, trade, or business ;
and (2.) Public companies, where a large number of
persons are concerned, and the stock is divided into a
large number of shares, the object of the undertaking
being of an important nature, and often embracing pub-
lic, as well as private interests and benefits.^ The latter
are also subdivided, (1.) into unincorporated companies,
or associations ; and (2.) into incorporated companies,
fraternities (or guilds, as they were anciently called),
and corporations existing under a charter of the crown
or government, and having special powers and rights
conferred thereby." In both cases, however, the part-
nership, although commonly called a public company or
association, is not, in contemplation of law, more than a
mere private partnership ; for in the sense of the law no
company is a public company or association, whose in-
terests do not exclusively belong to the public, and are
not exclusively subject to the regulation and government
of the legislature, or other proper public functionaries.
Thus, for example, a college, a bank, a turnpike com-
pany, a bridge company, a manufacturing company, a
company for mining, or for foreign trade or commerce,
whether incorporated or not, is still but a mere private
association.^ Whereas a town, a parish, a hundred, a
board of trade, or a treasury department, created by
the government for public purposes, and exclusively
regulated thereby, would be strictly a public company,
whether incorporated or not.
' Wats, on p. c. 1, p. 3, 4, 2d ed. ; Coll. on P. B. 5, c. 1-3, p. 721-793, 2d
ed. ; Gow on P. c. 1, p. 2-4, 3d ed.
2 Wats, on P. c. 1, p. 3, 4, 2d ed. ; Comyn's Dig. Trade, B. D.
' Trustees of Dartmouth College v. Woodward, 4 Wheat. 518; Terrett
V. Taylor, 9 Cranch, 43, 52.
CHAP. Y.] DIFFERENT SORTS OF. 127
§ 77. Unincorporated companies and associations dif-
fer in no material respect, as to their general powers,
rights, duties, interests, and responsibilities, from mere
private partnerships, nnless otherwise expressly provid-
ed for by statute, except that the business thereof is
usually carried on by directors, or trustees, or other
officers, acting for the proprietors or shareholders ; and
they usually extend to some enterprise, in which the
public have an ultimate concern.^ But incorporated
companies, or corporations, are governed strictly, as to
their powers, rights, duties, interests, and responsibili-
ties, by the terms of their respective charters ; and the
shareholders, or stockholders, are not personally or in-
dividually liable in their private capacities, unless
expressly so declared by their charters, for the acts, or
doings, or contracts of the officers, or members of the
company, or corporation ; ^ whereas in unincorporated
companies and associations the shareholders and stock-
holders are personally responsible in their individual
capacities for all acts of the officers and company, or
association, in the same manner, and to the same extent,
as private partners are.^
§ 78. In the French law, partnerships are distin-
guished into three sorts. (1.) Partnerships under a
collective name, that is, where the trade or business of
the partnership is carried on under a particular social
name or firm, containing the names of some or of all
» Wats, on P. c. 1, p. 3, 4, 2d ed. ; Coll. on P. B. 5, c. l,§4,p. 764-7 71,
2d ed. ; Id. c. 1, § 2, p. 734 ; 2 Bell, Comm. B. 7, c. 2, p. 627, 628, 5th ed.
" Wats, on P. c. 1, p. 4, 2d ed.
3 Wats, on P. c. 1, p. 3, 4, 2d ed. ; Coll. on P. B. 5, c. 1, § 1-4 : Id. c. 2 :
Id. c. 3, p. 721-783, 2d ed. — Mr. Collyer, in the chapters above cited, has
given a very full view of joint-stock companies, both at common law, and by
statute, as well as of mining companies. See also 2 Bell, Comm. B. 7, c. 2,
p. 627-630, 5th ed.
128 PARTNERSHIP. [cHAP, V.
of the partners.^ (2.) Partnerships in commandite^ or
in commendam, that is, limited partnerships, where the
contract is between one or more persons, who are gen-
eral partners, and jointly and severally responsible, and
one or more other persons, who merely furnish a par-
ticular fund or capital stock, and thence are called cotii-
7)iandataire, or commandataires^ or partners in com-
mandite; the business being carried on under the social
name, or firm of the general partners only, composed of
the names of the general or complementary partners,
the partners in commcindlte being liable to losses only to
the extent of the funds or capital furnished by them.^
(3.) Anonymous partnerships are, where all the partners
are engaged in the common trade or business, but there
is no social name or firm, but a name designating the
objects of the association, and the trade or business is
managed by directors.^ They correspond with our ordi-
nary joint-stock companies, and other unincorporated
associations. Similar distinctions are adopted in many
other foreign countries, and in the Laws of Louisiana.*
Special partnerships i7i commandite have also been re-
cently introduced by statute into the jurisprudence of
several States in the Union.^ But the regulations ap-
plicable to such partnerships vary in different countries
and States, and are strictly local, and therefore seem
unnecessary to be brought further under examination in
the present Commentaries.
§ 79. In the Scottish law, partnerships are sometimes
' Code of Commerce, art. 20, 21 ; Wats, on P. c. 1, p. 2, 2d ed.; Poth.
de Soc. n. 57.
2 Code of Commerce, art. 23, 24 ; Wats, on P. c. 1, p. 2, 2d ed. ; Poth. de
Soc. n. 60, 102.
3 Code of Commerce, art. 29, 30; Wats, on P. c. 1, p. 2, 2d ed.
* Code of Louisiana, art. 2796, 2810, 2883.
* 3 Kent, 34, 35 ; {Parsons on P. 526.}
CHAP, v.] DIFFERENT SORTS OF. 129
divided into ordinary partnerships, acting under a social
name or firm ; and joint adventures, where no firm is
used ; and public companies. But in truth the two
former are generally governed by the same rules. And
therefore it may be properly said, that, in the Scottish
law, partnerships are divisible into three classes; (1.)
Ordinary partnerships ; (2.) Joint-stock companies ;
(3.) Public companies.^ In the former, the firm consti-
tutes a distinct person in contemplation of law, capable
independently of maintaining with third persons, as
well as with the individual partners, the relation of
debtor and creditor ; and the partners, although jointly
and severally liable for all the debts and contracts of
the firm, are so, not as primary or principal debtors or
contractors, but rather as guarantors or sureties of the
firm.^ Such a partnership may be either general or
special. By general partnership the Scottish law does
not intend the societas universorinn honoriun of the
Roman law, but a partnership in the whole trade or
manufacture carried on by the parties.^ By special
partnership, in the Scottish law, is intended a partner-
ship limited to a particular branch of business, or ex-
cluding a particular branch, which would otherwise be
included in a general partnership.^ The second class,
joint-stock companies, difi"ers in several respects from
the former class. (1.) By the credit raised with the
public being placed entirely on the joint-stock of the
company, as indicated by its descriptive name. (2.) By
a diff"erence in the management and operation of the
association, as conducted, not by the shareholders per-
sonally, but by directors or other ofiicers appointed by
1 2 Bell, Comm. B. 7, p. 612, 621, 649, 656, 5th ed.
2 2 Bell, Comm. B. 7, p. 619, 620, 5th ed.
3 2 Bell, Comm. B. 7, p. 621, 5th ed.
* 2 Bell, Comm. B. 7, p. 621, 5th ed.
9
130 PARTNERSHIP. [cHAP. V.
the association, and made publicly known. (3.) By the
shares being made transferable. In joint-stock compa-
nies, the liability of the shareholders to creditors is, by
the common law of Scotland, limited to the amount of
their respective shares, and they are not, as in ordinary
partnership, jointly and severally responsible for all the
debts of the firm.^ The third class, public companies,
embraces such as are created by royal or parliamentary
authority ; and therefore they have conferred upon them
such powers, privileges, and exemptions only, as by the
charter and by law properly belong to them.^
§ 80. In this connection it seems proper also to
advert to the various denominations given to partners,
and which in our subsequent inquiries should be kept
steadily in view, to prevent any mistakes and embar-
rassments in the application of cases and principles.
Partners, then, are ordinarily divided as follows: (1.)
Ostensible partners, or those, whose names are made
known and appear to the world as partners, and who
in reality are such.^ (2.) Nominal partners, or those
who appear, or are held out to the world as partners ;
but who have no real interest in the firm or business.^
(3.) Dormant partners, or those whose names are not
known, or do not appear as partners, but who never-
theless are silent partners, and partake of the profits,
and thereby become partners, either absolutely to all
intents and purposes, or at all events, in respect to
third persons.^ Dormant partners, in strictness of lan-
guage, mean those who are merely passive in the firm,
• 2 Bell, Comm. B. 7, p. 627, 628, 5th ed.
2 2 Bell, Comm. B. 7, p. 656, 5th ed.
3 Coll. on P. B. 1, c. 1, § 1, p. 3, 2d ed. ; 1 Mont, on P. c. 2, § 1, 2 ; Gow
on P. c. 1, p. 12, 3d ed.; 3 Kent, 31. " Ibid.
5 Ibid ; {North v. Bloss, 30 N. Y. 374 ; Mitchell v. Dall, 2 Harr. & G. 159,
172; Waite v. Dodge, 34 Vt. 181 ; Deford v. Reynolds, 36 Penn. St. 325.}
CHAP, v.] DIFFERENT SORTS OF. 131
whether known or unknown, in contradistinction to
those who are active, and conduct the business of the
firm, as principals.^ Unknown partners are properly
secret partners ; but in common parlance, they are us-
ually designated by the appellation of dormant partners.^
' [And it has been thought that although some of the partners are active
managing partners, and have given public notice of their interest in the
firm, yet if the business is conducted under the individual name of one of
the firm, the others are dormant partners; so far at least, that it is not
necessary to join them in a bill to enforce a debt due the firm, contracted by
one ignorant of their interest in the concern ; Bank of St. Marys v. St. John,
25 Ala. 566.]
2 Coll. on P. B.l, c. 1, § 1, p. 3, 2d ed.; 1 Mont, on P. c. 2, § 1, 2; Gow
on P. c. 1, p. 12, 3d ed. ; 3 Kent, 31 ; Hoare r. Dawes, 1 Doug. 371 ; U. S.
Bank v. Binney, 5 Mason, 176, 185. — In this last case the Court said: "It
has been said, that this is the case of a secret partnership ; that it was the
intention of the Binneys, that their connection with it should be kept secret,
and that the management of the business in the name of 'John Winship'
shows this intention. In point of fact, there is no covenant or declaration in
the articles of copartnership, by which the partners have bound themselves
to keep it secret; or that the names of the Binneys should never be disclosed
to any persons dealing with Winship in the partnership concerns. In point
of fact, too, if the evidence is believed, Winshiji, immediately after its forma-
tion, and during its continuance, constantly avowed it, and made it known,
and obtained credit in the business of the firm thereby. He stated the
Binneys to be partners ; and this statement was generally known and
believed by the public, and especially by persons dealing with Winship
in respect to the business of the firm. If the jury believe this evidence,
then in point of fact, whatever was the original intention of the parties, this
was not a secret partnership in the common meaning of the terms. I under-
stand the common meaning ef secret partnership to be, a partnership where the
existence of certain persons as partners is not avowed or made known to the
pubHc by any of the partners. Where all the partners are publicly made
known, whether it be by one, or all the partners, it is no longer a secret partner-
ship ; for this is generally used in contradistinction to notorious and open part-
nership. And it makes no difierence in this particular, whether the business of
the firm be carried on in the name of one person only, or of him and com-
pany. Even if some of the partners intend to be such secretly, and their
names are disclosed against their wishes and intentions ; still, when generally
known and avowed by any other of the partners, the partnei-ship is no longer
a secret partnership. If, therefore, in the present case, Winship, against the
wishes and intention of the Binneys, did in the course of the business of the
firm make known that they were partners, and who all the partners were, so
that they became public and notorious, I should say, it was no longer a
132 PARTNERSHIP. [CHAP. V.
Similar designations also prevail in the Scottish
1
aw/
§ 81. In respect to the objects of partnerships, it
may be generally stated, that they are not confined to
mere commercial business or trade ; but may extend to
manufactures, and to all other lawful occupations and
employments, and to professional and other business ; ^
as, for example, they may embrace the business of at-
torneys, solicitors, conveyancers, surgeons, apothecaries,
physicians, mechanics, artisans, engineers, owners of
stage-coaches, farmers, drovers, brokers, bankers, factors,
consignees, and even of artists and sculptors and paint-
ers. They may extend to all the business of the par-
ties ; or to a single branch thereof, or to a single adven-
ture, or even to a single thing.^ And so (as we have
seen) stood the doctrine in the Roman law. Societates
contraliuntur sive universorum bonorum, sive negotia-
tionis aliciijus, sive vectigalis, sive etiam rei iiniiis}
But there cannot lawfully be a partnership in a mere
personal ofiice, especially when it is of a public nature,
and involves a distinct personal confidence in the skill
and integrity of the particular party. ^
§ 82. There may also be a partnership in some cases
touching interests in lands, or in a single tract of land,
secret partnership in the common sense of the terms ; if secret in any sense,
it must be, under such circumstances, in a peculiar sense. Sometimes dor-
mant and secret partners are used as synonymous. But I take it, that dor-
mant is generally used in contradistinction to active, and secret to open
or notorious. However, nothing important turns in this case upon the accu-
racy of definitions, since it must be decided upon the principles of law appli-
cable to such a partnership as this in fact was, and is proved to be, whatever
may be its denomination."
1 2 Bell, Comm. B. 7, c. 2, p. 622, 623, 5th ed.
- 3 Kent, 28 ; Coll. on P. B. 1, c. 1, § 1, p. 29-32, 2d ed.; Gow on P. c. 1,
p. 5, 3d ed. ; [Livingston v. Cox, 6 Penn. St. 360, 364.]
3 Ante, § 73. ■> D. 17, 2, 5; Poth. Pand. 17, 2, n. 11-26.
* Coll. on P. B. 1, c. 1, § 1, p. 31, 32, 2d ed.
CHAP, v.] DIFFERENT SORTS OF. 133
which will be governed by the ordinary rules, applica-
ble to partnership in trade or commerce.^ Thus, for
example, there may be a partnership in the working of
a mine ; for Courts of Equity constantly treat the Mork-
ing of a mine as a species of trade ; and apply the same
remedial justice to such cases as they do to ordinary
partnerships.^ So, real estate, held for general partner-
ship purposes, has attributed to it the common qualities
of partnership property, in whosesoever name the title
may stand in law.^ In short (as has been well ob-
served), in the working of mines (such as a colliery),
it seems difficult to establish, that there is an interest
in the land, distinct from the partnership in trade ; a
mere interest in land, in which a partition could take
place. For, when persons, having purchased such an
interest, manufacture and bring to market the produce
of the land, as one common fund, to be sold for their
common benefit, it may fairly be contended, that they
have entered into an agreement, which gives to that
interest the nature, and subjects it to the doctrines, of a
partnership in trade.'*
' '[See Fall River Whaling Co. v. Borden, 10 Cush. 458, 474 ; Jones i'.
Neale, 2 P. & H. 339]; {Darby i-. Darby, 3 Drew. 495; Kramer v. Arthurs,
7 Penn. St. 165; Heirs of Ludlow v. Cooper's Devisees, 4 Ohio St. 1;
Clagett i: Kilbourne, 1 Black, 346.}
" Coll. on P. B. 5, c. 3, p. 783, 784, 2d ed. ; Williams v. Attenborough,
Turn. & R. 70, 73 ; Story r. Lord Windsor, 2 Atk. 630 ; Wren r. Kirton,
8 Ves. 502; Crawshay v. Maule, 1 Swans. 495; Fereday v. Wightwiok,
Taml. 250; [Sage v. Sherman, 2 Comst. 417]; Jefferys v. Smith, 1 Jac. &
W. 298; 1 Story, Eq. Jur. § 674.
3 Gow on P. c. 1, p. 32-35, 3d ed. ; Id. c. 5, § 2, p. 232; Id. § 4, p. 340 ;
Coll. on P. B. 2, c. 1, § 1, p. 82-102, 2d ed.; 3 Kent, 37-39; Randall v.
Randall, 7 Sim. 271 ; Cookson v. Cookson, 8 Sim. 529; Sigourney v. Munn,
7 Conn. 11 ;. Hoxie v. Carr, 1 Sumn. 173, 182, 186; [Dale t'. Hamilton, 5
Hare, 369 ; Lancaster Bank v. Myley, 13 Penn. St. 544.]
•• Per Lord Eldon, in Crawshay v. Maule, 1 Swans. 518, 523, 526, 527.—
Mr. Collyer has a valuable chapter on the subject of partnerships in mines,
which contains a summary of the general doctrines of Courts of Ecpiity
touching them. See Coll. on P. B. 5, c. 3, p. 783-792, 2d ed.
134 PARTNERSHIP. [CHAP. V.
§ 83. But although there is no positive incompetency
at th-e common law of creating a partnership in the buy-
ing and selling of lands on joint account, and for the
joint benefit of the parties, by way of commercial spec-
ulation and commercial adventure ; yet such a contract
must, from the nature of the case, and the positive
rules of law and the Statute of Frauds, be reduced to
writing ; and then the stipulations of the parties will
constitute the sole rule to ascertain their intent, and to
enforce their respective rights.^ The general rules of
law, applicable to ordinary commercial partnerships, are
not applied to them ; ^ nor are the ordinary remedies
thereof enforced either at law, or in equity, inter sese,
or as to third persons.^ Thus, for example, the ordinary
doctrine of the liability of dormant partners does not
extend to partnerships formed for speculations in the
purchase and sale of lands. "* The present Commenta-
' Smith V. Burnham, 3 Sumn. 435, 458-471 ; [In re Warren, Daveis, 320,
323. In England, the Vice-Chancellor, in an elaborate judgment, reviewing
the authorities, has sustained an agreement for such a partnership, without any
writing within the Statute of Frauds. Dale v. Hamilton, 5 Hare, 369. See
also Smith v. Tarlton, 2 Barb. Ch. 336 ; Fall River Whaling Co. v. Borden,
10 Cush. 458, 474] ; { Dale v. Hamilton was affirmed by Lord Cottenham, c. 2,
Phil. 266. See also Forster v. Hale, 3 Ves. 696 ; S. C. 5 Ves. 308, Cowell v.
Watt, 2 Hall & Tw. 224. But in Caddick v. Skidmore, 2 De G. & J. 52,
Lord Cranworth, C, says that an agreement between A. and B. to become
partners in a colliery for the purpose of demising it in royalties to be divided
between them would be within the operation of the Statute of Frauds. See
Lind. on P. 82-84. See also Hale v. Henrie, 2 Watts, 143; HaniFt'. How-
ard, 3 Jones, Eq. 440; Jones v. McMichael, 12 Rich. 176. In this last
case a partnership agreement was held void, both "because it was not to be
performed within a year and because it related to interests in land. See § 93,
note (V. 1, A.)}
2 [Patterson v. Brewster, 4 Edw. Ch, 352.]
' [In Olcott V. AVing, 4 McLean, 15, it was held that the same principles
governed partnerships for buying and selling land as ordinary partnerships,
and that a Court of Equity would decree a sale of the lands after dissolution,
and a division of profit or loss, according to the terms of the partnership.]
* Pitts V. Waugh, 4 Mass. 424 ; Smith v. Burnham, 3 Sumn. 435, 470, 471.
[But see Brooke v. Washington, 8 Gratt. 248, contra.']
CHAP, v.] DIFFERENT SORTS OF. 135
lies are designed to treat principally of partnerships in
the ordinary business of trade, navigation, commerce,
manufactures, and arts ; and other cases will be inci-
dentally discussed by way of illustration only, or to
distinguish them from the general rules belonging to
common partnerships.
§ 84. And here it may be proper to say a few words,
as to the extent and duration of partnerships in point
of time, and also as to the different modes, in which
they may be formed. As to the first point, as partner-
ships are formed by the voluntary consent of the par-
ties, they may be for life, or for a specific period of time,
or conditional, or indefinite in their duration, or for a
single adventure or dealing ; and therefore dependent
upon the mutual will or pleasure of the parties.^ The
period may be fixed by express stipulation, or it may
be implied from circumstances.^ If no particular period
is fixed by the parties for the duration of a partnership,
it is deemed to exist during their mutual pleasure only,
and of course is dissoluble by either of them, at any
time when he chooses to withdraw therefrom.^ When
a particular term is fixed, it is presumed to endure until
that period has elapsed ; when no term is fixed, it is
presumed to endure for the life of the parties, unless
previously dissolved by some act or notice of one of the
parties, or by operation of law. But in no case will the
law presume, that the partnership is intended to con-
tinue beyond the life of the parties ; and therefore if
1 Wats, on p. c. 7, p. 379, 2d ed. ; Coll. on P. B. 1, c. 2, § 1, p. 68, 2d ed. ;
Gow on P. c. 5, p. 219-22G, 3d ed. ; Poth. de Soc. n. 64; 3 Kent, 52-54;
2 Bell, Comm. B. 7, c. 2, p. 630-633, 5th ed.
" Coll. on P. B. 1, c. 2, § 1, p. 68, 2d ed. ; Crawshay v. Maule, 1 Swans.
495, 521, 525 ; Alcock v. Taylor, Taml. 506.
3 Ibid.; Featherstonhaugh v. Fenwick, 17 Ves. 298, 307, 308; Ex parte
Nokes, cited in Wats, on P. c. 7, p. 380, 2d ed. ; Peacock c. Peacock, 1 6 Ves.
49 ; 2 Bell, Comm. B. 7. c. 2, p. 630-634, 5th ed.
136 PARTNERSHIP. [cHAP. V.
such is the object, it must be provided for by some ex-
press stipuhition.^ The causes, which will constitute a
dissolution, or a cause of dissolution, will naturally come
under review in our subsequent pages.
§ 85. The Koman law fully recognized the like prin-
ciples. Tamdiu societas durat, quamdiu consensus
partium integer perseverat.^ So, in the Institutes it is
said: Manet cmtem societas eo usque, donee in eodem
consensu 2)e7'severaverint. At, cum aliquis renunciaverit
societati, solvitur societas.^ And again in the Digest:
Societas co'iri potest vel in perpetumn, id est, dmn vi-
vunt, vel ad tempus, vel ex tempore, vel sub conditioned
The Roman law went further than ours; and positively
prohibited the duration of any partnership beyond the
life of the parties ; and therefore a provision, that the
heir of one should share in the partnership, was held
wholly void. JSfidla societatis in cdernum coitio est.^
Nemo potest societatem hcEredi suo sic parere, ut ipse
hceres socius sit.^ Idem [Pa^nnianus) resjjondit, socie-
tatem non posse ultra mortem porrigi? The French
law, and in general the law of the other nations of con-
tinental Europe, adopt similar principles.^
§ 86. In the next place, as to the different modes in
which partnerships may be formed. At the common
law, no particular forms or solemnities are required to
constitute a partnership between the parties. It is suf-
1 Crawsbay v. Maule, 1 Swans. 495, 521 ; s. c. 1 Wils. Ch. 181. { See § 196.}
- Cod. 4, 37, 5; Domat, 1, 8, 5, art. 1, 2; Id. 1, 8, 3, art. 8, 9.
^ Inst. 8, 26, 4.
■* D. 17, 2, 1 ; Poth. Pand. 17, 2, n. 10 ; Poth. de Soc. n. 64, 65 ; Domat,
1, 8, 5, art. 1, 2; Id. 1, 8, 13, art. 8, 9.
s D. 17, 2, 70; Poth. Pand. 17, 2, n. 10; 1 Swans. 509, note (a); Vinn.
ad Inst. 3, 26, § 4, n. 1, p. 698.
« D. 17, 2, 35; Poth. Pand. 17, 2, n. 56 ; Domat, 1, 1, 2, art. 2-5.
'' D. 17, 2, 52, 9 ; Poth. Pand. 17, 2, n. 56, 57.
8 Civ. Code of France, art. 1865-1871; Poth. de Soc. n. 64, 65; Id. u.
146-154.
CHAP, v.] DIFFERENT SORTS OF. 137
ficient, that it is formed by the voluntary consent of
the parties, whether that be express or implied ;
whether it be by written articles, or by unsolemn writ-
ings ; or whether it be by tacit approbation, or by parol
contract, or even by mere acts.^ It is indeed usual to
have some writings pass between the parties, when a
partnership is formed for a specific term, or even during
the pleasure of the parties, if the business is expected
to be of a permanent nature, or of long duration. But
this is a matter resting in the mere discretion and choice
of the parties, and is by no means made indispensable
by the law. And this also seems to have been the rule
of the Roman law. Sociefatem co'tre et re, et verbis,
et ^;er nuntium, i^osse nos, duhium non est^ Voet
has expressed the same doctrine in broader language.
Societas dividitur primo in expressam, quce ex expressa
conventione fit, et tacitam, quce re contrahi dicitur, dum
rebus ijjsis et factis, shnul emendo, vendendo, hccra et
damna dimdendo, socii ineundoi societatis voluntatem
declarant.^
§ 87. The old French law required, that all general
partnerships and partnerships in commandite should be
reduced to writing and registered, unless when the
concern was under one hundred livres in value.'* And
' {The creation of a partnership by an agent without authority, if ratified
by the person so made a partner, establishes that relation, and will cut off
the intervening rights of third persons, if the doctrine is applied for the pro-
tection of a superior equity ; and the partnership assets must be first ajjplied
to the payment of the partnership debts. Williams v. Butler, 35 111. 544.
See also Buckingham v. Hanna, 20 Ind. 110} ; Coll. on P. B. 1, c. 1, § 1, p. 2,
3, 2d ed.; Wats, on P. c. 1, p. 4, 5, 2d ed. ; GowonP. c. 1, p. 4, 5,3d ed.;
2 Bell, Comm. B. 7, c. 2, p. 621-623, 5th ed. [And it is sufficient evidence to
prove a person to be in partnership, that he and others had agreed to form
a company, and that business had been carried on, on the basis of such agree-
ment. Owen V. Van Uster, 10 C. B. 318 ; 1 Eng. L. & Eq. 39G.]
" D. 17, 2, 4 ; Potb. Pand. 14, 2, n. 6 ; Domat, 1, 8, 3, art. 6.
^ 1 Voet, ad Pand. 17, 2, § 2, p. 748 ; ante, § 50.
■» Poth. de Soc. n. 79-81.
138 PARTNERSHIP. [CHAP. V.
r
this continues in substance to be the rule under the
modern Code of France.^ Similar regulations are to
be found in the laws of some other nations ; but the
Roman law seems more generally to have been fol-
lowed.-
* Code of Commerce, art. 39-44.
2 3 Kent. 24, note (a) ; 2 Bell, Comm. B. 7, c. 2, p. 621-623, 5th ed. ;
1 Voet, ad Band. 1 7, 2, § 2, p. 748 : 1 Tapia, Elem. de Jur. Merc. Lib. 2, c.
2, § 1, p. 83, 84 ; Van Leeuwen's Comm. B. 4, c. 23, § 1, 3.
CHAP. VI.] PARTNERSHIP PROPERTY. 139
CHAPTER VI.
RIGHTS AND INTERESTS OF PARTNERS IN PARTNERSHIP
PROPERTY.
{ § 88. Preliminary.
89. Joint tenancy, tenancy in common.
90. Partnership neither of the two.
91. Partners are joint owners of partnership property.
92. 93. Real estate of a partnershijj.
94. Power of pai'tners over partnership property.
95. Roman law.
96. Scottish law.
97. Lien on the partnership property.
98. What constitutes partnership property.
99. Good-will of the partnership.
100. Right to use the firm name.}
§ 88. Having disposed of these preliminary matters,
we shall next proceed to the consideration of the rights
and interests, powers and authorities, duties and obh-
gations, liabilities and exemptions, of partners between
themselves, as well as in relation to third persons. In
treating of these points, so far as respects the partners
themselves, we shall keep mainly in ^dew cases where
a real partnership exists according to the intention of
the parties, and there is a community of interest in the
property, as well as in the profits of the trade or busi-
ness, without any special stipulations, which may vary
the application of the general principles of law. Of
course, where any such stipulations exist, which are
lawful in their nature or character, they properly con-
stitute exceptions to those principles, and ^j?'o tanto
may create new and peculiar relations and obligations.^
1 Ante, § lG-29.
140 PARTNERSHIP. [cHAP. VI.
§ 89. And first in relation to the rights and inter-
ests of the partners inter sese, in the partnership capital,
stock, funds, and effects. Partners differ from mere
part-owners of goods and chattels in several respects.
The latter are either joint owners, or tenants in com-
mon, each having a distinct, or at least an independent,
although an undivided interest in the property ; and
neither can transfer or dispose of the whole property,
or act for the others in relation thereto ; but merely for
his own share, and to the extent of his own several
right and interest.^ In cases of joint-tenancy of goods
or chattels, indeed, the joint-tenants are said to be seised
or possessed ^9er my et 2^er tout, by the half or moiety
and by all ; that is, they each of them have the entire
possession, as w^ell of every parcel, as of the whole ; ^
or, as Bracton has expressed it : Quilihet totiim tenet, et
nihil tenet; scilicet, totum in communi, et nihil se'pa-
ratim ])er se? Hence it is said, that in joint-tenancy
there is a fourfold unity, unity of interest, unity of title,
unity of time, and unity of possession ; "^ and the right to
the whole belongs to the survivor.^ But still each joint-
tenant has an independent, and, in a certain sense, a
distinct right and interest in the property during his
lifetime, which cannot be disposed of by the other
joint-tenant, but which he may severally himself dispose
of, and thus sever the joint-tenancy ; and he may now
by statute, although not at common law, have an action
of account against the other for his share of the profits
* Com. Dig. E&lale, K. 1-10 ; Litt. § 321 ; Co. Litt. 200, a; [Woodward i\
Cowing, 41 Me. 9, 12.]
2 2 Bl. Comm. 182, 399 ; Litt. § 288 ; Co. Litt. 1 86, a ; Bac. Abr. Joint-ten-
ancy and Tenancy in Common (C).
^ Bracton, Lib. 5, tr. 5, c. 26, p. 430 ; Co. Litt. 186, a.
* 2 Bl. Comm. 180, 399.
" 2 131. Comm. 183, 184 ; Com. Dig. Estate, K. 3, 4 ; Litt. § 281, 282 ; Co.
Litt. 181, 182, a.
CHAP. YI.] PARTNERSHIP PROPERTY. 141
deriYed from the common property.^ On the other
hand, tenants in common hold undivided portions of
the property by several titles, or in several rights,
although by one title ; but they have their possession
in common and undivided ; so that there may be an
entire disunion of interest, of title, and of time among
them.^ Hence it is said, that tenants in common
properly take by distinct moieties, and have no
entirety of interest; and therefore there is no sur-
vivorship between them ; but the share of the deceased
tenant in common goes to his personal or real repre-
sentative.^
§ 90. From the resemblances thus existing between
cases of joint-tenancy and tenancy in common and part-
nerships, it has been sometimes said, that partners are
' 2 Bl. Coram. 183 ; Com. Dig. Accompt, B. — There is no small subtlety
in tlie language of our Law Books on this subject. Thus, Blackstone uses
language to the effect, that the interest of two joint-tenants is not only equal
or similar, but it is one and the same ; that survivorship is the natural and
necessary consequence of the union and entirety of their interests ; that one
has not a distinct moiety from the other ; and that if by any subsequent act,
as by alienation or forfeiture of either, the interest becomes separate and
distinct, the joint-tenancy instantly ceases. 2 Bl. Coram. 183, 184. And
yet it is palpable, that one joint-tenant may transfer or alien his own right
severally, and thereby sever the joint-tenancy. And therefore it has been
well observed by Lord Coke, after quoting the language of Bracton (already
cited), that joint-tenants hold per my et per tout: "And albeit they are so
seised, yet to divers purposes each of them hath but a right to a moiety, as to
enfeoff, give or demise, or to forfeit." Co. Litt. 186, a. And afterwards he
adds : " And where all the joint-tenants join in a feoffment, every one of
them in judgment of law doth but give his part. If an alien and a subject
purchase land jointly, the king upon office found shall have a moiety ; and
Littleton afterwards in this chapter (§ 291) saith, that one joint-tenant hath
one moiety in law, and the other the other moiety." Co. Litt. 186, a. Now,
what is this but admitting, that joint-tenants have in reality distinct and
independent interests, capable of a distinct alienation ; and that each has but
a moiety, concurrent and undivided, with tiie other in the property, with
a right of survivorship in case no severance takes place ?
2 Com. Dig. Estate, K. 8 ; 2 Bl. Coram. 192 ; Litt. § 292 ; Co. Litt. 188, b.
' Com. Dig, Estate, K. 8 ; 2 Bl. Comui. 194, 309; Abbott on Ship. c. 3,
p. 68, Am. ed. 1829.
142 PARTNERSHIP. [cHAP. YI.
either tenants in common of the partnership effects, or
joint-tenants without the benefit of survivorship.^ But
this language is by no means accurate ; and perhaps
no case could better exemplify the truth of the maxim,
jSfidhnn simile est idem. Partnership differs from joint-
tenancy in two important particulars. In the first
place, joint-tenants cannot dispose of the interest of
each other in the joint property, although they hold
jjer my et per tout ; but each has the sole power of dis-
posing of his own interest therein ; ^ whereas, in cases
of partnership, each partner is not only a joint owner
with the others of the partnership property, but he
also has full power to dispose of the entire right of all
the partners therein, for the purposes of the partner-
ship, and in the name of the firm. In the next place,
there is no survivorship in cases of partnership, as there
is in joint-tenancy. This has been the doctrine of the
common law for more than three centuries, and indeed
is probably coeval with the business of joint trade and
commerce in England. Thus, Lord Coke, in speaking
of joint-tenancy in chattels and debts, contracts and
duties, where the right of survivorship ordinarily exists,
adds : " An exception is to be made of two joint mer-
chants ; for the wares, merchandises, debts, or duties,
that they have as joint merchants, or partners, shall
not survive, but shall go to the executors of him, that
deceaseth ; and this is ^:)e?' legem mercatoriam^ which
(as hath been said) is a part of the laws of this realm
for the advancement and continuance of commerce and
trade, which is ^;ro hono j^uhlico ; for the rule is, that
Jus accrescendi inter mercatores 2)ro heneficio co7nmercii
» Wats, on P. c. 2, p. 65, 2d ed. ; Gow on P. c. 2, § 1, p. 32, 3d ed. ;
West V. Skip, 1 Ves. Sr. 239, 242; 3 Kent, 36, 37,
'^ Co. Litt. 186, a; Litt. § 291 ; ante, § 89, note b; West v. Skip, 1 Ves.
Sr. 239, 242.
CHAP. VI.] PARTNERSHIP PROPERTY. ^ 143
locum non habet." ^ It might be added, that otherwise
partnerships would never have been formed for purposes
of trade, since the death of either partner might bring
want or ruin upon his family, and the whole business
would be full of perils and hazards, which might occa-
sion losses far beyond any hope of reasonable gains
and profits. Within the benefit of the rule, all persons
engaged in any trade, foreign or domestic, were origin-
ally deemed merchants ; ^ and now it is applied to all
employments and business between two or more per-
sons on joint account and benefit, whether they fall
under the denomination of merchants, or not.^ So
strong is this doctrine, that even where persons are
clearly joint-tenants of any property, and it is after-
wards by them deliberately embarked in trade and
business on joint account, as partners, such property
will cease to be held by them in joint-tenancy, and will,
in case of the decease of either, be no longer subject to
the jus accrescendi ; for the joint-tenancy is thereby
severed, and a partnership established in the property
in lieu thereof'* Partnership differs quite as much
from a tenancy in common ; for in a tenancy in com-
mon each party has a separate and distinct, although
an undivided interest, and possesses (as it is technically
expressed) the whole of an undivided moiety of the
property, and not an undivided moiety of the whole
property ; ^ whereas in partnership the partners are
' Co. Litt. 182, a; Com. Dig. Merchant, D. ; 2 Brownl. 99 ; Coll. on P.
B. 2, c. 1, § 1, p. 80, 81, 2d ed.; Jackson v. Jackson, 7 Ves. 535; s. C. 9
Ves. 591.
* 2 Brownl. 99 ; Com. Dig. Merchant, A.
^ Jackson v. Jackson, 9 Ves. 591, 596, 597; Jefferys r. Small, 1 Vern.
217 ; Coll, on P. B. 2, c. 1, § 1, p. 76, 7 7, 80-82, 2d ed. ; 2 Bl. Comm. 404.
* Jackson v. Jackson. 7 Ves. 535; S. C. 9 Ves. 591 ; Hall r. Digbv, 4
Bro. P. C. 224 ; s. c. 4*Bro. P. C. by Tomlins, 577 ; CoU. on P. B. 2, c. 1, §
1, p. 80, 81, 2d ed.
* 2 Bl. Comm. 182, 191-19 3.
144 ^ PARTNERSHIP. [cHAP. VI.
joint owners of the whole property. A tenant in com-
mon can dispose only of his own share in the property ;
whereas (as we have seen), each partner may, in the
partnership name, dispose of the entirety of the prop-
erty for partnership purposes.
§ 91. The true nature, character, and extent of the
rights and interests of partners in the partnership
capital, stock, funds, and effects, is, therefore, to be
ascertained by the doctrines of law applicable to that
relation, and not by the mere analogies furnished by
joint-tenancy, or by tenancy in common. It may,
therefore, be said, that in cases of real partnerships,
unless otherwise provided for by their contract, part-
ners are joint owners and possessors of all the capital,
stock, funds, and effects belonging to the partnership,
as well those which" are acquired during the partner-
ship, as those which belong to it at the time of its first
formation and establishment.^ So, that, whether its
stock, funds, or effects be the product of their labors or
manufactures, or be received or acquired by sale, barter,
or otherwise, in the course of their trade or business,
there is an entire community of right and interest
therein between them ; each has a concurrent title in
the whole, or, as Bracton says : Tenet toimn in commu-
nis et nihil separatim j^er se.^
§ 92. Nor is there in reality, as between the partners
themselves, any difference, whether the partnership
property, held for the purposes of the trade or busi-
ness consists of personal or movable propert}% or of
real or immovable property, or of both, so far as their
ultimate rights and interests therein are concerned.^
> 3 Kent, 36, 37 ; Coll. on P. B. 2, c. 1, § 2, p. 76, 77, 2d ed, ; Wats, on
P. c. 2, p. 66, 2d ed.
2 Ante, § 89 ; Bract c. 26, p. 430 ; Coll. on P. B. 2, c. 1, § 2, p. 78, 2d ed.
3 Wats, on P. c. 2, p. 72-77 ; Gow on P. c. 2, § 1, p. 32-36, 3d ed. ; Sage
V. Sherman, 2 Comst. 417. — There are some differences, however, arising
CHAP. VI.] PARTNERSHIP PROPERTY. 145
It is true, that at law, real or immovable propertv is
deemed to belong to the persons, in whose name the
title by conveyance stands. If it is in the name of a
stranger, or of one partner only, he is deemed the sole
owner at law ; ^ if it is in the names of all the partners,
or of several strangers, they are deemed joint-tenants,
or tenants in common,^ according to the true in-
terpretation of the terms of the conveyance.^ But,
however the title may stand at law, or in whose-
from the very nature and character of the particular property. Each partner, as
we shall presently see (and indeed, as has been already intimated), may sell or
dispose of the entirety of any personal property of the partnei-ship in the
name of the firm. But if real estate has been conveyed to both partners for
the partnership account, they ordinarily become tenants in common thereof
at law, and each can convey by deed only his own share or moiety, and not
that of the other. So, that while one partner may in the name of the firm
sell the whole of any goods or articles belonging to the partnership, both
must join in order to convey the entirety of the real estate thereof. Coles
V. Coles, 15 Johns. 159, 161 ; Wats, on P. c. 2, p. 72, 73, 2d ed. ; 2 Bell,
Comm. B. 7, c. 1, p. 613-615, 5th ed. ; Coll. on P. B. 2, c. 1, § 1, p. 82-101,
2ded.
' [Cox v. McBurney, 2 Sand. 561. — In equity he might be considered
as holding in trust for the partnership, if the property is paid for from
partnership funds. McGuire i-. Ramsey, 4 Eng. (Ark.) 518 ; Peck v. Fisher,
7 Cush. 386 ; Jarvis v. Brooks, 7 Fost. 37. The legal title, however, is un-
disturbed, except so far as to protect the equitable rights of the respective
partners. Lang v. Waring, 25 Ala. 625. And see Black v. Black, 15 Ga.
445; Galbraith v. Gedge, 16 B. Mon. 631.]
" [See Lancaster Bank v. Myley, 13 Penn. St. 544; Jones v. Neale, 2 P.
& H. 339. In Massachusetts it is settled that real estate conveyed to and
held by partners as tenants in common, although purchased with partnership
funds, and for partnership use, is to be considered at law as the several
property of the individual partners, and liable to be levied on for their
separate debts ; but if so taken, it will be considered in equity as held by the
creditor in trust, to be applied, so far as may be necessary, to the payment of
partnership debts. Peck v. Fisher, 7 Cush. 386 ; see Burnside r. Merrick. 4
Met. 537 ; Dyer c. Clark. 5 Met. 562; Howard v. Priest, 5 Met. 582.]
^ Anderson v. Tompkins, 1 Brock. 456, 465. See Blake v. Nutter, 19
Me. 16. [And parol evidence has been held inadmissible to show that real
estate conveyed to two as tenants in common was purchased and paid for by
them as partners, and was partnership property. Ridgway's Appeal, 15 Penn.
St. 17 7.]
10
146 PARTNERSHIP. [CHAP. VI.
soever name or names it may be, the real estate
belonging to the partnership will in equity be treat-
ed as belonging to the partnership, like its personal
funds, and disposable and distributable accordingly ;
and the parties, in whose names it stands, as owners
of the legal title, will be held to be trustees of the part-
nership, and accountable accordingly to the partners,
according to their several shares and rights and inter-
ests in the partnership, as cestuis que trust, or beneficia-
ries of the same.^ Hence in equity, in case of the death
of one partner, there is no survivorship in the real estate
of the partnership ; but his share will go to his proper
representatives.'''
§ 93. Indeed, so far as the partners and their cred-
itors are concerned, real estate belonging to the part-
nership is in equity treated as mere personalty, and
governed by the general doctrines of the latter.^ x\nd
so it will be deemed in equity, to all other intents and
purposes, if the partners themselves have, by their
agreement or otherwise, purposely impressed upon it
* 1 Story Eq. Jur. § 674; Coll. on P. B. 2, c. 1, § 1, p. 82, 83, 2d ed. ;
Hoxie V. Carr, 1 Sumn. 173; Gaines t'. Catron, 1 Humph. 514; [Smith r.
Danvers, 5 Sand. 669 ; Boyce v. Coster, 4 Strobh. Eq. 25 : Fall River Whal-
ing Co. V. Borden, 10 Cush. 458; Andrews v. Brown, 21 Ala. 437; Ludlow
V. Cooper, 4 Ohio St. 1 ; Roberts v. McCarty, 9 Ind. 16 ; Buchan v. Sumner,
2 Barb. Ch. 165; Delmonico v. Guillaume, 2 Sand. Ch. 366; Rice r. Bar-
nard, 20 Vt. 479 ; Moreau r. SafFarans, 3 Sneed, 595.]
2 Lake v. Craddock, 3 P. Wm. 158 ; s. C. 1 Eq. Cas. Abr. 290 ; Morris v.
Barrett, 3 You. & J. 384 ; Jackson v. Jackson, 9 Ves. 591 ; Coll. on P. B. 2
c. 1, § 1, p. 82-102, 2d ed. ; Wats, on P. c. 2, p. 72-77, 2d ed. ; 1 Story Eq.
Jur. § 674; 3 Kent, 37, 38.
3 Thornton v. Dixon, 3 Bro. Ch. 199, and Mr. Belt's note (1); Balmain
V. Shore, 9 Yes. 500, 507-509 ; [Matlock v. Matlock, 5 Ind. 403] ; Ripley v.
Waterworth, 7 Ves. 425; [Rice v. Barnard, 20 Vt. 479]; Cookson v. Cook-
son, 8 Sim. 529; Fereday i-. Wightwick, 1 Russ. & M. 45; Houghton v.
Houghton, 11 Sim. 491 ; [Buchan v. Sumner, 2 Barb. Ch. 165, 200] ; 1 Story
Eq. Jur. § 674. [And a lease thereof by one partner in his own name will
enure for the benefit of the firm. Moderwell v. MuUison, 21 Penn. St. 257.]
CHAP. VI.] PARTNERSHIP PROPERTY. 147
the character of personalty.^ But a question has been
made whether, in the absence of any such agreement,
or other act, affectmg its general character, real estate,
held as a part of the partnership funds, or stock, ought
to devolve upon, or descend, as real estate, to the heir
or devisee, or ought to belong as personalty to the exe-
cutor or administrator, upon the death of the partner.
Upon this point there has been a diversity of judicial
opinion, as well as of judicial decision ; some judges
holding, that in such a case it retained its original char-
acter of real estate, and passed to the heirs or devisees
accordingly; and others holding, that it was to be
treated throughout, as partnership property, and there-
fore as personalty, and belonged to the executor or ad-
ministrator. The doctrine under these circumstances
must be considered as open to many distressing doubts.^
^ [But it seems the property should be purchased for partnership uses
as well as with partnership funds, in order to constitute it personalty. Gal-
braith v. Gedge, 16 B. Mon. 631 : Coder v. Ruling, 27 Penn. St. 84. And
see 10 Cush. 458. But see Ludlow v. CoojDer, 4 Ohio St. 1, 9.]
^ Lord Thurlow held the former opinion in Thornton v. Dixon, 3 Bro.
Ch. 199. and Belf s note (1) ; and Sir AVilliam Grant, in Bell r. Phyn,
7 Yes. 4o3, and Balmain v. Shore, 9 Ves. oUO, adopted the same opinion.
On the other hand. Lord Eldon, in Selkrig v. Davies, 2 Dow, 230, 242,
held the opposite opinion, that all property, involved in a partnership
concern, ought to be considered as personal ; and again affirmed it in
Townsend v. Devaynes, reported in 1 Mont, on P. Appx. 97 ; 3 Bro. Ch.
199, Belt's note (1 ) . Sir John Leach, in Fereday v. Wightwick, 1 Buss. & M.
45, and Phillips v. Phillips, 1 Myl. & K. 649, and Broom v. Broom, 3 Myl.
& K. 443, was of the same opinion as Lord Eldon. Mr. Baron Alderson,
in ^Morris v. Kearsley, 2 You. & C. Ex. 139, acted on the same opinion. More
recently, Yice-Chancellor Shadwell has upheld the doctrine of Sir Wm.
Grant. Cookson v. Cookson, 8 Sim. 529. Mr. Collyer, in his valu.ible
Treatise on Partnership, has discussed at large the whole learning applicable
to this point. See Coll. on P. B. 2, c. 1, § 1, p. 82-102. Mr. Bell has
summed up the Scottish law on these points as follows : " The property of
the company is comuion ; held p?o indiviso by all the partners, as a stock,
and in trust ; responsible for the debts of the concern ; and subject, after
the debts are paid, to division among the partners according to their agree-
ment. This is a great point in the doctrine of partnership, and important
1-iS PARTNERSHIP. [cHAP. YI.
§ 94. In virtue of this community of rights and in-
terests in the partnership stock, funds, and effects, each
consequences are deducible from it. The common stock includes all lands,
houses, ships, leases, commodities, money; whatever is contributed by the
partners to the company use. It comprehends also -whatever is created by
the joint exertions of the company, or acquired in the course of the employ-
ment of their capital, skill, and industry. All this, by the operation of law,
and the nature and effect of the contract, becomes common property ; is held
by all the partners jointly for the uses of the partnership ; and is directly
answerable as a stock for the payment of its debts. 1. Vesting of the
Stock. — The stock or common fund is held by the i>a.rtneTS pro indiviso.
And, 1. This^^ro indiviso right implies, as between the parties themselves,
a right of retention in each partner over the stock, for any advances, which
he may have made to the company, or for any debt due by the company,
for which he may be made responsible. 2. It also implies, in relation to the
public at large, creditors of the company, a trust in the several partners, as
joint trustees for payment, in the first place, of the company debts. And
on this point rests, (1), the preference, which the creditors of the company
have over the company funds ; none of the partners, nor any one in their
right, as individual creditors or otherwise, being entitled to more than the
reversion after the purposes of the trust are fulfilled: and, (2), the peculi-
arity, that hereditable subjects belonging to and held by a company, are
considered not as hereditable in succession, but as movable ; consisting of
the jus crediti only. 3. In this respect, the contract of partnership has the
effect of a direct conveyance of property to the company, of whatever is
engaged to be given, or by clear evidence is contributed to the use of the
company by any of the partners, to whom it belongs. The contract does
not indeed supersede the necessity of the completion of the transference by
tradition or otherwise ; but it operates as a conveyance (fittdii.s transferendi
dominii), which, when followed by tradition, possession, intunation, and the
other methods of completing a transference by law, vests the property in
the partners, jointly for the purposes already expressed. ' Society,' says
Lord Stair, ' is not so much a permutative as a commutative contract, whereby
the contractors communicate to each other some stock, work, or profit.
The effect of society is, that thereby something, which before was proper,
becometh, or is continued to be, common to the copartners.' He adds :
' Yet this communication is not effectual to transfer the property in part, or
to comnmnicate it without delivery or possession, by which property by
positive law is transferred.' This distinction is of some consequence. Where
the question is between the parties and their representatives, as to what
shall be considered as the estate of the company, but without involving any
competition with third parties, Avhatever falls under the fair construction of
the contract will, as a personal right, belong to the company and its creditors.
But where there arises a competition depending on the question of real
right, it will be determined according to that criterion of real right, which
CHAP. VI.] PARTNERSHIP PROPERTY. 149
partner possesses full power and authority to sell,
pledge, or otherwise to dispose of the entirety of any
the law has appointed in cases of transference. But in determining what
shall amount to an engagement to contribute, and consequent conveyance
of a particular subject, it is not always the use of the subject that will settle
the point. In one case, certain subjects, of which the use was given to the
company, were held to be fairly intended as part of the stock, from the way
in which they were mentioned in the inventories. In another nearly similar
case, the same inference was avoided, the partnership not being of a perma-
nent character, but a momentary joint adventure merely. In respect to
movables, all commodities comprehended within the partnership, and in
possession of the partner, to whom they previously belonged, are held, as
by traditio brevis manns, to be vested in the company ; for the partners
having power to hold for the company as prcspositi, their possession will be
presumed to be for the common behoof. But money due by a third party
to an individual partner, or commodities in the hands of third parties, con-
tributed by the owner as part of his stock, will not be transferred without
delivery or intimation. The creditors of the owner, using attachment by
diligence before intimation of the partnership, would attain a preference
over the company. Ships must be transferred according to the directions
of the statute. 4. As to land and other property, which, by the forms of
territorial conveyance, require to be transferred by deed, the partnership
will acquire by the contract nothing more than the jus ad rem. If, for
example, a cotton-mill is, by the agreement, contibuted as his share of stock,
on the part of the owner, this will not feudally transfer to the company the
property of the mill, so as to entitle them to exclude the adjudication of
the separate creditors of the projjrietor trusting to the record. But it will,
like a general disposition, confer on the company a jus ad rem, by virtue of
which they may, in a declarator and adjudication in implement, have that
property declared and adjudged to the partners jointly, or to a trustee, as
part of the stock of the concern. 5. Such personal property as may have
been acquired in the name of the society, becomes eo ipso the property of
the partnership, although purchased by an individual partner with his own
money. He is prcepositus of the company, and entitled to advance money
and acquire projierty directly for the common behoof. 6. Such personal
property as a partner acquires, even in his own name, provided it be bene-
ficial acquisition and in the company's line of trade, is, according to the
spirit of the contract of partnership, to be held as acquired for the com-
pany ; and the company will be entitled to claim it. But it would rather
seem, that in such a case the property would pass to the partner in real
right, with a jus ad rem to the company and its creditors. 7. A partner,
who binds himself to pay a sum or fungible into the stock, is debtor to
the company ; and the loss of the money or fungible, beibre being put into
stock, is his private loss. If he has engaged to put in a specific subject
into stock, and it perish, the loss is to the company, unless the partners shall
150 PARTNERSHIP. [CHAP. VI.
particular goods, wares, merchandise, or other personal
effects belonging to the partnership, and not merely of
be in mora.''' 2 Bell, Comm. B. 7, c. 1, p. 613-615, 5th ed. Mr. Chancel-
lor Kent, in his learned Commentaries (Vol. 3, 37-40), has discussed the
subject at large ; and after referring to the American authorities, which are
as much in conflict with each other as the English, he e.xpresses his own
opinion to be, that the weight of authority is, that equity will consider the
person, in whom the real estate is vested, as trustee for the whole concern,
and the property will be entitled to be distributed as personal estate. 3 Kent,
37-39 ; and the authorities cited in the notes, Id. See Gow on P. c. 2, p.
32-35, 3d ed. ; Wats, on P. c. 2, p. 81-89, 2d ed. ; Gow on P. Suppl. 1841,
to 3d ed. c. 2, § 1, 8-13.
{Real Estate of a Partnership. — I. The interest of a partnership
in real estate can only be equitable. The legal title must be either in all
the partners as individuals, or in one or more of them, or in a stranger.
Coles V. Coles, 15 Johns. 159; 1 Am. Lead. Cas. 494, 4th ed. The
holders of the legal title may be either joint-tenants or tenants in common,
according to the terms of the conveyance to them. JefFereys v. Small, 1 Vern.
217; Elliott ?;. Brown, 3 Swans. 489. The equitable interest of a partner in
real estate cannot of course be availed of in ejectment. Collins v. Warren,
29 Mo. 236 ; Lowe v. Alexander, 15 Cal. 296. In Moreau v. SafFarans,
3 Sneed, 595, it was held, that a conveyance to J. S. & Company vested the
legal title in J. S. On the partition of partnership real estate, see Greene v.
Graham, 5 Ohio, 264; Patterson v. Blake, 12 Ind. 436. See also Ensign
V. Briggs, 6 Gray, 329; Whitman v. Boston & Maine R. R. Co., 3 All.
133.
II. The equitable interest of a partner in partnership real estate is the
right to have the use of it, the right to have it employed, if necessary, for
the payment of partnership debts, and of any balance due him from his copart-
ners, and after such payments, a share in it proportional to his interest in
the partnership. 1 Am. Lead. Cas. 494, 4th ed. ; 1 Lead. Cas. in Eq.
229, 230 [152-154], 240, 3d Am. ed. and cases there cited. Thus, though
the partners are at law joint-tenants, there will be no jus accrescendi allowed
in equity. Lake v. Craddock, 3 P. Wm. 158. If one of the partners has
a one-third interest and the other a two-thirds intei'est in the partnership,
they will have that same proportionate interest at equity in partnership
lands, though the lands were conveyed to them in equal shares as tenants in
common. Putnam v. Dobbins, 38 111. 394. So one holding the legal title
to partnership real estate, cannot be compelled in equity to convey a moiety
of the estate to his copartner, when the balance of accounts is against the
latter. Williams u. Love, 2 Head, 81.
III. 1. As in all cases of real estate held on trust, one who purchases
real estate ffrom the partner having the legal title, with notice that it is
partnership property, will take the land subject to the equities of the part-
ners and partnership creditors ; but a purchaser who has no such notice will
CHAP. VI.] PARTNERSHIP PROPERTY. 151
his own share thereof, for purposes within the scope of
the partnership.^ In respect to his own sluirc thereof,
take the land discharged of such equities. 1 Am. Lead. Cas. 497 4th ed. ;
1 Lead. Cas. in Eq. 240, 3d Am. ed. ; Hoxie v. Carr, 1 Sumn. 173 ; Til-
linghast v. Champliu, 4 R. I. 173; Frink v. Branch, 16 Conn. 260; Buchan
V. Sumner, 2 Barb. Ch. 165 ; M'Dermot v. Laurence, 7 S. «& R. 438 ; Mat-
lack V. James, 2 Beasl. 126 ; Forde v. Herron, 4 Munf. 316 ; Divine v.
Mitchum, 4 B. Mon. 488 ; Buck v. Winn, 11 B. Mon. 320 ; Reeves v. Ayers,
38 111. 418. But see Treadwell v. Williams, 9 Bosw. 649.
2. So, also, as in other trdsts, partnership equities will be enforced
against the heirs, devisees, or widow of the partner who held the legal title.
Burnside v. Merrick, 4 Met. 537 ; Dyer v. Clark, 5 Met. 562 ; Howard v.
Priest, 5 Met. 582; Sumner v. Hampson, 8 Ohio, 328. In Smith v. Jack-
son, 2 Edw. Ch. 28, the claim for dower, of the widow of a deceased partner
who held the legal title to partnership real estate, was held paramount to
the equities of the other partners ; but this decision stands alone, and finds
no support in the other cases. But though the claim of the widow for
dower must yield to the trust for the partnership, yet if the land is purchased
by one without notice of the partnership, and is therefore held discharged
of the trust, the right of the vendor's widow to dower revives, and will be
enforced against the purchaser. Markham v. Merrett, 7 How. Miss. 437.
But when partnership land is conveyed for a partnership debt, the party to
whom it is conveyed will hold it free from any claim of dower by the widow
of one of the partners. Duhring v. Duhring, 20 Mo. 174.
3. Partnership real estate will be held bound to the partnership creditors
in preference to the creditors of the separate partners. 1 Am. Lead.
Cas. 497, 498, 4th ed. ; 1 Lead. Cas. in Eq. 240, 3d Am. ed. ; Crooker
V. Crooker, 46 Me. 250 ; Jones v. Neale, 2 P. & H. 339. At law the sepa-
rate creditor will not be postponed to a partnership creditor. Blake v.
Nutter, 19 Me. 16. See Goodwin v. Richardson, 11 Mass. 469. But a
separate creditor who has levied at law will hold the land in trust for the
partnership. Peck v. Fisher, 7 Cush. 386.
In Hale v. Henrie, 2 Watts, 143, and Ridgway's Appeal, 15 Penn. St.
177, it was held, that if the land be recorded as owned by A. and B., and
1 Wats, on P. c. 2, p. 91-93, 2d ed. ; Gow on P. c. 2, § 2, p. 51-54, 3d
ed. ; Coll. on P. B. 3, c. 1, § 1, p. 263-268, 2d ed. ; Id. B. 2, c. 1, § 2, p.
113; Fox V. Hanbury, Cowp. 445; 3 Kent, 44; [Woodward v. Cowing, 41
Me. 9.] Of course we are to except from this doctrine all cases, where,
although the property originally belonged to the partnership, it has become
the property of an individual partner by the consent of the firm ; for in such
cases, the property is to all intents and purposes to be treated as the private
property of that partner, and is disposable by him alone accordingly in the
same manner, as if it never had belonged to the partnersliip. Coll. on P.
B. 2, c. 1, § 2, p. 113, 114, 2ded.
152 PARTNERSHIP. [cHAP. VI.
he may be properly deemed to do all acts of this sort,
as owner ; in respect to the shares of his copartners, he
there is no notice on record that A, and B. are partners, a separate creditor
of A. can hold A.'s undivided moiety of the land against the creditors of
the partnership. Contra, Fall River Whaling Co. v. Borden, 10 Cush. 458.
Hale V. Henrie and Ridgway's Appeal are questioned, and it would seem
with reason, in 1 Lead. Cas. in Eq. 241, 3d Am. ed., as contravening the
general rule that creditors can take only the equities of their debtors.
IV. 1. A partner cannot, of course, give a good legal title to that part
of the partnership real estate in which he has only an equitable interest.
Dillon V. Brown, 11 Gray, 179; Davis v. Christian, 15 Gratt. 11. And a
purchaser of such interest takes it subject to all equities, though unknown
to him. Kramer v. Arthurs, 7 Penn. St. 165.
A surviving partner, however, has authority over the real estate of the
firm, and can sell it for partnership debts ; and, if he has only the equitable
interest, equity will compel the heir of the deceased partner to convey the
legal title. Andrews' Heirs v. Brown's Administrators, 21 Ala. 437 ; Del-
monico v. Guillaume, 2 Sand. Ch. 366 ; Pierce's Adm'r v. Trigg's Heirs,
10 Leigh, 406 ; Galbraith v. Gedge, 16 B. Mon. 631. Though the purchaser
is not obliged to see to the application of the purchase-money, yet if he is
cognizant that the action of the surviving partner is fraudulent, he will not
be protected in his purchase. Tillinghast v. Champlin, 4 R. I. 173 ; Hol-
land V. Fuller, 13 Ind. 195 ; Lang v. Waring, 25 Ala. 625. In Dujjuy v.
Leavenworth, 17 Cal. 262, where one partner had absconded, the other
partner was Jield authorized to sell the partnership real estate, and a bona
fide purchaser from him could compel a conveyance from one who had pur-
chased with notice from the absconding partner. See Moran v. Palmer,
13 Mich. 367.
2. Whether a conveyance by one partner of the real estate of the
partnership for a firm debt without the assent of the other partners is valid
is a question which arises in two classes of cases which do not seem suffi-
ciently distinguished in the books.
First. When the partner has the legal title to a part only of the real
estate, as when he is tenant in common with his copartners. In this case he
can convey only so much as he has title to, for the legal title can be conveyed
only by deed, and one partner cannot bind the others by deed. § 117-122 ;
Dillon V. Brown, 11 Gray, 179; Haynes v. Seachrest, 13 Iowa, 455. The
assent of the other partners may be proved to have been given before the
conveyance, or they may be proved to have ratified it afterward. Juggee-
wundas Keeka Shah v. Ramdas Brijbooken Das, 2 Moo. Ind. App. 487 ;
Lowery v. Drew, 18 Tex. 786 (which was the case of a bond for a deed) ;
Wilson V. Hunter, 14 Wis. 683.
Secondly. When the partner has the legal title to the whole estate.
There is no technical obstacle to such a partner conveying the title to a
partnership creditor, and the only objection is that indicated in § 94 of the
CHAP. VI.] PARTNERSHIP PROPERTY. 153
may be properly deemed to do such acts, as their agent,
and as the accredited representative of the firm. The
text of a fundamental difference in the power of partners over real and
personal estate. In spite of the statement in the text, which has been fol-
lowed by the text-books generally, it may be doubted whether this distinc-
tion exists. The authority cited in the text is Coles v. Coles, 15 Johns.
159, but in that case the partners were at law tenants in common. The
other cases commonly cited in support of this doctrine are Anderson v.
Tompkins, 1 Brock. 456 ; Tapley v. Butterfield, 1 Met. 515 ; Dyer v.
Clark, 5 Met. 562 ; Tillinghast v.' Champlin, 4 R. 1. 173 ; but none of these,
when examined, will be found to decide the point. In Sharp v. Milligan, 22
Beav. 606, there is a semhle that if a partnership is formed for no fixed
period, a partner cannot bind the firm by a lease for twenty-one years, but
the remark is not based on any thing in the peculiar nature of real estate.
Lawrence v. Taylor, 5 Hill, (N. Y.) 107. On the other hand, there is a
dictum in Jones v. Neale, 2 P. & H. 339, that a conveyance by a partner
having the legal title to a partnership creditor passes the property to the
land as against other pai-tnership creditors. Mr. Lindley (Lind. on P.
229) says, " The writer is not aware of any decision in which an equitable
mortgage made by one partner by a deposit of deeds relating to partnership
real estate, has been upheld, or the contrary ; he can therefore only venture
to submit, that such a mortgage ought to be held valid in all cases in which
it is made by a partner having an implied power to borrow on the credit of
the firm. See Ex parte Lloyd, 1 Mont. & Ayr. 494." On the whole, it is
submitted that the rule as laid down in the text is co-extensive only with
the rule that one partner cannot bind another by deed, and that an attempt
to push it beyond such latter rule to a case in which a partner having the
legal title to partnership property sells or pledges it for a partnership debt
has no support either in the decided cases or on principle. In Moderwell
V. Mullison, 21 Penn. St. 257, 259, Woodward, J., says : " Partners are the
agents of each other in partnership transactions ; and when real estate is
brought into the partnership business, it is treated in equity as personal
estate ; and a lease of it by one partner is as much a partnership transaction,
as a sale of partnership goods by him would be."
V. The chief question which has arisen with regard to partnership real
estate is to determine wlien land becomes partnership property.
1. Real estate 2)tircJtased ivith partner shiiJ funds.
A. Real estate purchased by the partnership funds for partnership pur-
poses is partnership property, and this whether the legal title is taken in the
name of one or of all of the partners. Lind. on P. 555 ; 1 Am. Lead.
Cas. 495, 4th ed. ; 1 Lead. Cas. in Eq. 231, 232 [155, 156], 3d Am. ed. ;
Phillips V. Phillips, 1 i\Iyl. & K. 649 ; Fereday v. Wightwick, 1 Russ. &
M. 45 ; Townsend v. Devaynes, 1 Mont, on P. App. 97 ; Broom r. Broom,
3 Myl. & K. 443 ; Morris v. Kearsley, 2 You. & C. Ex. 139 ; Bligh v. Brent,
154 PARTNERSHIP. [CHAP. VI.
law, however, treats each partner, without any nicety
of discrimination of this sort, as possessing a dominion
Id. 268; Houghton v. Houghton, 11 Sim. 491 ; Hoxie v. Carr, 1 Sumn. 173,
181 ; Burnside v. Merrick, 4 Met. 537 ; Dyer v. Clark, 5 Met. 562 ; How-
ard V. Priest, 5 Met. 582 ; Crooker v. Crooker, 46 Me. 250 ; Buffum v. Buf-
fum, 49 Me. 108 ; Jarvis v. Brooks, 7 Fost. 37 ; Willis v. Freeman, 35 Vt.
44; Delmonico v. Guillaume, 2 Sand. Ch. 366; Buchan v. Sumner, 2 Barb.
Ch. 165 ; Smith v. Tarlton, 2 Barb. Ch. 336 ; Matlack v. James, 2 Beasl.
126 ; Baldwin v. Johnson, Saxt. Ch. 441 ; Abbott's Appeal, 50 Penn. St.
234; Robertson v. Baker, 11 Fla. 192; Greene v. Greene, 1 Ohio, 535;
Matlock V. Matlock, 5 Ind. 403. See Fall River Whaling Co. v. Borden,
lOCush. 458; Carlisle's Adm'rs v. Mulhern, 19 Mo. 56. In Duhring v.
Duhring, 20 Mo. 174, where the case states that the land was bought with
partnershijj funds, " to be held as an investment," until the firm closed busi-
ness, the land was held to be partnership property; but it is plain from the
report that the firm occupied part of the premises, and that the main use of
the land was for partnership purjioses, and the land was finally sold for a
partnership debt.
So if land is bought with partnership funds with the intention of using
it for partnership purposes, though in fact it is never so used, it is partner-
ship property. Erwin's Appeal, 39 Penn. St. 535. A partnership consisted
of four members, two of whom were dormant, the ostensible partners
bought lands to be used in the partnership business in their own name. A
small part only of the price was paid ; but what little was paid came out of
the partnership funds. The partners, (including the dormant members)
were held liable for the remainder of the purdhase-money. Brooke v.
Washington, 8 Gratt. 248. On the other hand, in N. Penn. Coal Co.'s Ap-
peal, 45 Penn. St. 181, land was bought by one partner in his own name,
and he gave a bond and mortgage for part of the price, the remainder of
the price was paid out of the partnership funds, and the land was used in
the business of the firm ; yet, on the ground that the vendor had given
credit to the individual partner, the firm was held not liable for the unpaid
purchase-money. See also Pitts v. Waugh, 4 Mass. 424. See Forsyth v.
Clark, 3 Wend. 637 ; Dewey v. Dewey, 35 Vt. 555 ; Lacy v. Hall, 37 Penn.
St. 360; Boyers v. Elliott, 7 Hump. 204; infra 2. B.
B. Real estate purchased with partnership funds, but not for partnership
purposes, is presumed to belong to the partners in proportion to their in-
terest in the partnership. (In New York, however, it is otherwise, implied
trusts having been abolished by statute. Cox v. McBurney, 2 Sand. 561.)
But this presumption may be rebutted ; and it may be shown that the real
estate belongs to the partner in whose name the legal title was taken.
Smith V. Smith, 5 Ves. 193. See Hunt v. Benson, 2 Humph. 459.
Though real estate purchased with partnership funds, but not for part-
nership purposes, belongs to the partners, in the absence of evidence to
CHAP. VI.] PARTNERSHIP PROPERTY. 155
over the entirety of the property, and not merely over
his own share, and, therefore, as clothed with all the or-
the contrary, yet it seems to be tlie better opinion that the land lielongs to
the partners separately, and not to the partnership. Wooldridge v. Wil-
kins, 3 How. Miss. 360.
There are dicta to the same effect in Bell v. Phyn, 7 Ves. 453; Randall
V. Randall, 7 Sim. 271 ; Sigourney v. Munn, 7 Conn. 11 ; Coder v. Haling,
27 Penn. St. 84, Lind. on P. 552 ; Am. 1 Lead. Cas. 495, 4th ed. ; 1
Lead. Cas. in Eq. 235, 236, [159-162], 241, 3d Am. ed. On the other
hand, in Galbraith v. Gedge, 16 B. Mon, 631, land purchased with partner-
ship funds, though there was no evidence that it was bought for sale, and
though apparently it was not used for partnership purposes, was considered
as partnership property ; and in Buck v. Winn, 11 B. Mon. 320, it is said
that land bought with partnership funds, not for the firm use, but as a specu-
lation, or a safe investment, is partnership property. In Sumner v. Hamp-
son, 8 Ohio, 328, and Andrews' Heirs v. Brown's Adm'r, 21 Ala. 437,
it does not appear whether the land was used for partnership purposes or
not.
In Fall River ^Vhaling Co. v. Borden, 10 Cush. 458, 467, 470, lands were
purchased by partners, and the deed taken to them as tenants in common.
" The cost of the purchase went into the partnership accounts. The estates
were entered into the company books as company property. As portions
were sold for profit, from time to time, the proceeds were merged in the
general funds of the copartnership. These lands were avowedly purchased
for speculation." It was held, that the lands were partnership property.
The court say : "In order to affect lands with partnership equities, it is not
necessary that such land should be the incident merely of a commercial
partnership ; but it may be in part, at least, the distinct substratum of a co-
partnership." See Hoxie v. Carr, 1 Sumn. 173 ; Dilworth v. Mayfield, 36
Miss. 40.
When land is bought by a commercial partnei-ship from partnership funds
for the purpose of selling to pay firm debts, it is partnership property. Ileii's
of Pugh V. Currie, 5 Ala. 446. And when land is taken for a partnership debt,
it becomes partnership property, though it be not used in partnership business.
Buchan v. Sumner, 2 Barb. Ch. 165 ; Collumb v. Read, 24 N. Y. 505 ; Put-
nam V. Dobbins, 38 111. 394. See Moran v. Palmer, 13 Mich. 367. Contra,
Goodwin v. Richardson, 11 Mass. 469. But this last case seems partly-
based on a State statute, and was a decision at law. See the comments of
Story, J., in Hoxie v. Carr, 1 Suran. 173, 185.
2. Heal estate not purchased icith part nershijJ funds.
A. A partnership may be formed by an oral agreement ; and though
the Statute of Frauds requires that an agreement concerning land should be
in writing, yet if the existence of a partnership be once proved, whether by
writing or by parol, and the fact that land has been purchased by partner-
156 PARTNERSHIP. [CHAP. VI.
dinary attributes of ownership.^ This doctrine, indeed,
seems indispensable to the security and convenience of
ship funds be also proved, whether by writing or parol, then a trust for the
partnership attaches to such land, because it comes within the general class
of implied trusts, which it has long been settled (whether wisely or not it
would be now vain to inquire) are excepted out of the statute.
But in those cases in which the purchase is not made from partnership
funds, and there is therefore no resulting trust, it becomes important to
consider the effect of the Statute of Frauds.
If a partnership is formed under written articles which provide for the
purchase of land, it may be shown by parol evidence that land standing in
the name of one of the pai'tners was bought for partnership purposes, and
was partnership property. Frederick v. Cooper, 3 Iowa, 171. And in
Fall River Whaling Co. v. Borden, 10 Cush. 458, it is said that if a part-
nership be proved to exist by any memorandum in writing, or by books
or other written transactions, a partnership trust will attach to land
treated as partnership property ; but in this case it would seem that the
land was purchased with partnership funds, and therefore came within the
general class of resulting trusts. Though a partnership for the purchase
and sale of lands must be evidenced originally by writing, yet the fact of
the substitution of two partners in the place of two of the original partners
may be proved by parol. Rowland v. Boozer, 10 Ala. 690. In Bird v.
Morrison, 12 Wis. 138, the question is very fully discussed, and the court
conclude that whatever may be the law where the alleged partners are
tenants in common of the land, or where the land is an incident to the part-
nership, yet that a partnership, to consist in dealings in real estate, cannot
be proved by oi-al evidence so as to affect lands purchased by one of the
alleged partners in his own name, even though the alleged partners are, in
fact, partners in a commercial partnership under written articles. In Fowler
V. BaiUey, 14 Wis. 125, it does not appear whether the partnership was
' 3 Kent, 44. — Mr. Chancellor Kent here says : " With respect to the
power of each partner over the partnership property, it is settled that each one,
in ordinary cases, and in the absence of fraud on the part of the purchaser,
has the complete jus disponendi of the whole jDartnership interests, and is
considered to be the authorized agent of the firm. He can sell the effects, or
compound or discharge the partnerehip debts. This power results fi-om the
nature of the business, and is indispensable to the safety of the public, and the
successful operations of the partnership. A like power in each partner exists
in respect to purchases on joint account ; and it is no matter ynih what frau-
dulent views the goods were purchased, or to what purposes they are applied
by the purchasing partner, if the seller be clear of the imputation of collusion.
A sale to one partner, in a case within the scope and course of the partner-
ship business, is, in judgment of law, a sale to the partnershiji."
CHAP. VI.] PARTNERSHIP PROPERTY. 157
the public, as well as to the facility of transacting com-
mercial business. But in respect to real estate a difFcr-
formed by written articles ; the question of the application of the Statute of
Frauds was not raised.
The cases of Forster v. Hale, 3 Ves. 696 ; s. c. 5 Ves. 308, and Dale v.
Hamilton, 5 Hare, 369 ; s. c. 2 Ph. 266, are commonly cited as authorities to
prove that lands may be affected with a trust in favor of a partnership,
though the partnership was formed by parol, and the land was not purchased
with partnership funds. But in Forster v. Hale, the case was decided both
by the Master of the Rolls and on appeal, on the ground that there was a
written declaration of trust. Lord Chancellor Loughborough says (5 Ves.
314) : " The case appears proved in the strictest manner by the written evi-
dence ; " it would seem, also, that the court was of opinion that the purchase
was made out of the partnership funds. Dale v. Hamilton, it is true, was
decided by Vice-Chancellor Wigram (5 Hare, 369), without regard to the
fact that there was a written memorandum ; but Lord Chancellor Cotten-
ham, on appeal, made a decree in favor of the plaintiff, distinctly on the sole
ground of the existence of a written memorandum (2 Ph. 266) ; and the
Vice-Chancellor's judgment in Dale v. Hamilton, 5 Hare, 369, must be con-
sidered as weakened, if not overruled, by the case of Caddick v. Skidmore,
2 De G. & J. 52. The marginal note in this case is as follows : " An agree-
ment between A., a lessee of a mine, and B. to become partners in the
mine, paying the reserved rent, subletting the mine at a royalty, and dividing
the proceeds. Held, to be within the Statute of Frauds, and not sufficiently
proved by a receipt signed by A. and given to B. for a sum as B.'s share of
the head-rent of the mine, the sum being exactly half of that rent."
In Henderson v. Hudson, 1 Munf. 510, an agreement to form a partner-
ship, for the purpose of purchasing land, was held within the statute, and it
was so held by Judge Story, in a very well-considered case. Smith v. Burn-
ham, 3 Sumn. 435, Pitts v. Waugh, 4 Mass. 424 ; In re Warren, Davies,
320; Deloney v. Hutcheson, 2 Rand, 183. See Bird v. Morrison, 12 Wis.
138 ; Fall River Whaling River Co. v. Borden, 10 Cush. 458. In this last
case the court say: "The cost of the purchase went into the partnership
account," which would seem to mean that the purchase was made with part-
nership funds.
The only American cases in which lands have been allowed to be affected
with a partnership trust, when neither was the existence of the partnership
evidenced by writing, nor the lands purchased with partnership funds, seem
to be Dilworth v. Mayfield, 36 Miss. 40, and Hanff v. Howard, 3 Jones,
Eq. 440 ; and in the former of these cases no (piestion as to the Statute of
Frauds was raised. In Black v. Black, 15 Ga. 445, it was held, that an
agreement between a partnership and a stranger, that the latter should have
an interest in the profits arising from the sale of the partnership lands was
within the Statute of Frauds. If A. and B., who are in partnership as
attorneys, agree by parol to engage in the business of buying lauds, though
158 PARTNERSHIP. [cHAP. VI.
ent rule prevails, founded upon the nature of the prop-
erty and the provisions of the common law applicable
such agreement may be void as between themselves, yet the holders of a
note signed by them both, and given in the course of such business, are
entitled to proceed against the partnership assets in preference to the sep-
arate creditors. In re Warren, Davies, 320.
B. Real estate not purchased with partnership funds will of course
become converted into partnership j^roperty by express agreement. When
there is no express agreement, Mr. Lindley (Lind. on P. 555) sums up the
rule as follows : "It seems that land acquired, whether gratuitously or not,
for the purpose of carrying on a jjartnership business, and used for that
purpose, is to be considered as property of the partnership ; but that land
which is not so acquired, but which, belonging to s&veral 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 ancillary to their partnership business, and as part of the
common stock of the firm." Crawshayu. Maule, 1 Swans. 495, 522 ; Roberts
V. Eberhardt, Kay. 148 ; Morris v. Barrett, 3 You. & J. 384 ; Brown v. Oak-
shot, 24 Beav. 254; Phillips v. Phillips, 1 Myl. & K. 649 ; s. c. Bisset on P.
50 ; Jackson v. Jackson, 7 Ves. 535, s. c. 9 Ves. 591 ; Fereday i\ Wightwick,
Taml. 250; Essex v. Essex, 20 Beav. 442. See also, Caddick v. Skidmore,
2 De G. & J. 52 ; Burdon v. Barkus, 2 Giff. 412. The American cases
hold generally that real estate not purchased with partnership funds does
not become partnership property, though used for partnership purposes
unless there is some agreement that it shall be so considered, 1 Am. Lead.
Cas. 496, 4th ed. Wheatley's Heirs v. Calhoun, 12 Leigh, 264 ; Frink v.
Branch, 16 Conn. 260; See Divine v. Mitchum, 4 B. Mon. 488; Owens v.
Collins, 23 Ala. 837. In Boyers v. Elliott, 7 Humph. 204, and Fall River
Whaling Co. v. Borden, 10 Cush. 458, the land seems to have been pur-
chased with partnei'ship funds. See Pitts v. Waugh, 4 Mass. 424. In
Forsyth v. Clark, 3 Wend. 637, it was held, that land did not become part-
nership property, though jiartnershij) funds were employed by a ^sartner in
its purchase, if it was not agreed at the time of the purchase, that it should
be made with j^artnei'ship funds ; but in Dewey v. Dewey, 35 Vt. 555, where
land was purchased by one partner for partnership use, and was so used ibr
twenty-six years, the fact that the partner purchasing took the title in his own
name, and gave his individual note for the amount, without the knowledge
of the other partner, the note being j^aid out of partnershiji i'unds, did not
prevent a resulting trust arising for the other partner in a moiety of the
land ; and in Lacy v. Hall, 37 Penn. St. 360, where one of two partners,
acting as the financial member of the firm, purchased land to promote the
partnership business, though the purchase was made in his own name, and
with his own money, and where the firm afterwards expended money and
made valuable improvements on the land, the purchase was held that of
the firm, and enured to its benefit.
CHAP. VI. J PARTNERSHIP PROPERTY. 159
thereto. Each partner is required, both at law and in
equity, to join in every conveyance of real estate, in
VI. Real estate which has once been partnership proj)erty niav by
agreement he changed into separate property. Rowley v. Adams, 7 Beav.
548, 1 Lead. Cas. in Eq. 237, [162], 3d Am. ed.
VII. The remaining question on the subject is whether the property of
a partner in partnership land is real or personal estate. If it is the former,
it is liable to dower, and goes, on the partner's decease, to his heir ; if the
latter, it is free from dower, and goes to his personal representatives. The
question is complicated in the cases with that previously discussed, viz.
whether the real estate has become pai*tnership property ; if it has not, there
can be no question that it is liable to all the incidents, and has all the qual-
ities of real estate. The cases in England are conflicting; but the result is
well summed by Mr. Lindley in the following passage. (Lind. on P. 565.)
" If a share of a partner is nothing more than his proportion of the part-
nership assets after they have been turned into money and applied in liqui-
dation of the partnership debts, it necessarily follows that in equity, a share
in a partnership, whether its property consists of land or not, must, as
between the real and personal representatives of a deceased partner, be
deemed to be personal and not real estate. And although the decisions
upon this point are conflicting, the authorities which are in favor of the
above conclusion certainly preponderate over the others. Tliornton v.
Dixon, 3 Bro. Ch. 199 ; Bell r. Phyn, 7 Ves. 453 ; Randall v. Randall,
7 Sim. 271 ; Cookson v. Cookson, 8 Sim. 529, are all cases in which part-
nership realty was treated as realty. On the other hand, Ripley v. Water-
worth, 7 Ves. 425 ; Townsend v. Devaynes, 1 Mont, on P. note 2a. Appx.
p. 97 ; Phillips v. Phillips, 1 Myl. & K. 649 ; Broom v. Broom, 3 Myl. & K.
443 ; Morris v. Kearsley, 2 You. & C. Ex. 139 ; Houghton v. Houghton,
11 Sim. 491 ; Essex v. Essex, 20 Beav. 442, and Darby v. Darby,. 3 Drew,
495; Holroyd v. Holroyd, 7 Weekly Rep. 426, all support the statement
in the text.
"In Thornton v. Dixon, 3 Bro. Ch. 199, the court recognized the rule,
that partnersliip property must be considered as personal estate ; but held,
that the lands which Avere there in question could not be so considered, as
they had been conveyed to all the partners in connnon, and there was no
agreement for a sale.
" In Bell V. Phyn, 7 Ves. 453, partners in trade purchased, with the funds
of the firm, a share in a plantation, and kept the accounts relating to the
estate in the partnership books ; and it was held, upon the authority of the
last case, that, assuming the land to have become partnershij) 2>roi)erty, it
ought not to be regarded as personal estate.
" In Randall v. Randall, 7 Sim. 271, the partners were farmers, maltsters,
and biscuit makers. They bouglit land for the farming business, and it was
held, that, as it was not acquired for the purpose of any partnersliip in trade,
the land could not be treated as personalty.
160 PARTNERSHIP. [CHAP. VI.
order to pass the entirety thereof to the grantee ; and
if one partner only executes it, whether it be in his
" In Cookson v. Cookson, 8 Sim. 529, a father, who was seised in fee of
land on which he carried on business as a bottle manufacturer, took his son
into partnership, and conveyed a share in the land to him. The land was
declared by the articles of partnership to be partnership property. But on
the death of the flither, it was held, that his share in the land was to be
treated as real estate, no sale being required for the payment of the part-
nership debts, or for any other purpose.
" These are the cases which militate against the rule under discussion.
The following are those which support it : —
" In Ripley v. Waterworth, 7 Ves. 425, partnership land was conveyed to
trustees upon trust, upon a dissolution of the partnership, to sell and pay
the partnership debts, and divide the residue of the money arising from the
sale amongst the partners ; and it was held, upon the death of one of them,
that his share in the land was personal estate, although the land was not in
fact sold, and the deceased's share in it was purchased by the surviving part-
ners, under a clause enabling them so to do, and contained in the convey-
ance to the trustees.
"In Townsend v. Devaynes, 1 Mont, on P. note 2a. Appx. p. 97; see
too, 11 Sim. 498, note ; two persons in partnership as paper makers, pur-
chased paper-mills for the use of the firm, and paid for them out of its funds.
It was agreed that, on the death of either, the survivor should have the op-
tion of purchasing his share. One of the partners died, and his share was
purchased by the survivor. It was held, that the whole of the purchase
money formed part of the personal estate of the deceased, although most
of the money was paid in respect of the interest of the deceased in the
mills.
" In Phillips V. Phillips, 1 Myl. & K. 649, two persons in partnership
as brewers purchased public houses for the purposes of their trade,
and had them conveyed to both in fee. On the death of one of them,
it was held, that his share in the houses was to be treated as personal
estate.
" Broom v. Broom, 3 Myl. & K. 443, is a decision to the same effect as the
last, and decided on its authority.
" In Morris v. Kearsley, 2 You. & C Ex. 139. A partnership of brewers
was possessed of real estate conveyed partly to the partners as tenants in
common, and partly to one or more of the partners, in trust for the firm ;
and it was decided that the several lands, hereditaments, and premises
belonging to the partnership, ought to be considered as personal estate.
The report does not state how, when, or for what purpose, the property
was originally acquired.
" In Houghton v. Houghton, 11 Sim. 491, two brothers, A. and B., were
partners as soap boilers. They purchased land for the purposes of their
trade, took a conveyance to themselves as tenants in common, and mort-
CHAP. VI.] PARTNERSHIP PROPERTY. 161
osvn name, or in that of the firm, the deed will not
ordinarily convey any more than his own . share or in-
terest therein.^
gaged the land for the purchase money. They then built on the land, in-
sured the buildings, and paid the expenses and the intei-est of the mortgage
debt out of the partnership funds. A. died intestate, and B. took another
brother, C, into partnership. B. and C. paid off the mortgage, and took a
reconveyance to themselves as joint tenants in fee, and expended money in
building and insurance, defraying the expense, as Avell as providing the mort-
gage money, out of the funds of the partnership. On B.'s death it was held
that the land and buildings had clearly become partnership property, and
that it ought, therefore, to be treated as personal estate.
" In Darby r. Darby, 3 Drew, 495, two brothers embarked in joint specu-
lations in land. Their scheme was to buy land, convert it into building sites,
and then sell it at a protit. This was done on several occasions, the land
being generally conveyed to one of them only. On the death of that one,
it was held that his interest in all the land bought by both, and still unsold,
was personal and not real estate.
" In Essex v. Essex, 20 Beav. 442, two brothers were, under the will of
their lather, seized of freehold lands. They agreed to become partners as
curriers and tanners for fourteen years, and to carry on their business on
those lands. It Avas stipulated that if either died during the copartnership
term, the other should take his share in the freeholds, and that the entirety
thereof, including the plant and tan-pits, should be valued at £5,000. The
fourteen yeai's expired, but the partnership was continued as before. On
the death of one of th^partners, it was held that his share in the freeholds
was to be regarded as personal estate.
" There are also various dicta of Lord Eldon in favor of the broad principle
that partnership property is to be regarded as personal and not as real estate.
See the judgment of V. C. Kindersley, in Darby ». Darby, 3 Drew, 498, &c.
" Upon the whole, therefore, it is submitted : — 1. That, notwithstanding
Thornton v. Dixon, Bell v. Phyn, and Randall v. Randall, the true rule is,
as stated by the vice-chancellor, Kindersley, in Darby v. Darby, 3 Drew,
506, ' that whenever a partnership purchase real estate for the partnership
purposes, and with the partnership funds, it is, as between the real and per-
sonal representatives of the partners, personal estate.' See, in addition to
the cases referred to above, Holroyd v. Holroyd, 7 Weekly Rep. 426.
" 2. That, notwithstanding Cookson y.Cookson, no satisfactory distinction,
Avith reference to the question of conversion, can be drawn between land
purchased with partnership moneys, and land acquired in any other way.
See per Lord Eldon, in Jackson v. Jackson, 9 Ves. 593 : ' It is very diflicult
to make a distinction between a joint tenancy by will, by a gratuitous deed.
^ Coles V. Coles, 15 Johns. 15!i, IGl ; [Jackson v. Stanford, 19 Geo. 14];
ante, § 93, note.
11
162 PARTNERSHIP. [CHAP. VI.
§ 95. The Roman law does not seem, ordinarily, to
have conferred upon partners the same extensive
or a purchase, the law of merchants, if it applies to one, must apply to
all ; ' and that the question of conversion, like the question of survivorship,
turns only on whether the land is or is not to be deemed property of the
firm in the true sense of that expression.
" If, indeed, the property is not partnership property in the true sense of
the phrase {i. e. the property of the firm, or, in other words, of all the part-
ners, as such), the rule has no application. Therefore, in a case where two
out of three partners were owners of land occupied by the firm, and for
which the fii'm paid a rent, and the land was in fact kept distinct from the
joint property of the three pai-tners, it was properly held, on the death of
one of the two partners to whom the rent was paid, that his interest in
the land was not to be considered as personal, but as real estate. Rowley
V. Adams, 7 Beav. 548; Balmain v. Shore, 9 Ves. 500; see, too, Phillips v.
Phillips, ante. So, if land belongs to all the partners as tenants in
common, but not as partners, and that land is used by them for partnership
pui'poses, but is nevertheless intended to remain vested in them as tenants
in common, and not to form part of the assets of the firm, the share of each
partner will be real and not personal estate. In the case now supposed,
co-owners of land are partners : but the co-ownership continues unaffected by
the partnership. But it is not possible on this ground to uphold Thornton
V. Dixon, Bell v. Phyn, Randall v. Randall, and Cookson v. Cookson. In
each of these four cases the land had become part of the assets of the firm,
or it had not ; if it had, these four cases are in direct conflict with those
which have just been alluded to ; whilst, if it had not, they are in no less
direct conflict with other cases which are authorities on the question what is
and what is not property of the firm. The doctrine of conversion which has
just been considered, merely amounts to this, that on the death of a partner,
his share in the partnership is, as between his real and personal representa-
tives, to be treated in equity as money and not as land. The crown cannot
avail itself of the doctrine, and require probate duty to be paid, upon the
assumption that the share of the deceased actually consisted of money.
Custance v. Bradshaw, 4 Hare, 315. And if the shares of the partners in
partnership realty are of sufficient value, they are not precluded by the
doctrine in question from voting in respect of those shares at elections for
members of Parliament. Baxter v. Brown, 7 Man. & Gr. 198. See, too,
Rogers v. Harvey, 5 C. B. N. s. 3." But see 23 Law Mag. 98.
The subject has been often alluded to in the American courts, and the
books are full of dicta on the matter ; but there seem to be but few cases in
which the point has arisen directly for decision between the widow or heirs
on one side, and the personal representatives on the other. In several of
the cases where the widow's claim for dower has been allowed, the case
seems to have turned not on the point that partnership land was to be re-
garded as real estate as between the widow and next of kin, but on the
CHAP. VI.] PARTNERSHIP PROPERTY. 1G3
powers and mutual rights over the disposition of the
partnership property, as is given by the common law,
point that the real estate in question never became partnership property.
Wooldridge v. Wilkins, 3 How. Miss. 360 ; Markham v. Merrett, 7 How.
Miss. 437. See Dilworth v. Mayfield, 36 Miss. 40.
In the following cases it has been held, that, as between the widow and
heirs of a deceased partner on one side, and the personal representatives on
the other, partnership real estate goes, in the absence of agreement for an
absolute conversion into personalty, to the former. Wilcox v. Wilcox, 13
All. 252 ; Buckley v. Buckley, 11 Barb. 43 ; Goodburn v. Stevens, 5 Gill, 1 ;
s. c. 1 Md. Ch. 420; Hale v. Plummer, 6 Ind. 121; Summey v. Patton,
1 Winst. Eq. 52; Dilworth v. Mayfield, 36 Miss. 40; Piper v. Smith, 1
Head, 93. In this latter case, however, the Court say that the weight of
authority is the other way, " and it should be so held, if the question were
an open one " in tljat State, but they declare themselves concluded by the
earlier cases of McAlister v. Montgomery, 3 Haywood, 94 ; Yeatman v.
Woods, 6 Yerg. 20.
In Wilcox V. Wilcox, 13 All. 252, Wells, J., says: "We are unable to
see how the equities, which spring from the relation of copartnership, and
are raised for the protection of the rights of the several copartners, intei'
sese, and of their joint creditors, can, by any principle of law or equity, be
invoked by one class of the representatives of a deceased copartner against
another class of representatives of the same copartner, each claiming the
same interest and right. The legal estate passes to the heirs, with the
incident of dower to the widow. Equity interferes for equitable purposes
only. This right of each copartner to hold the real estate of the firm as
security through him for the partnership debts, and to him for his advances
and for the amount of his interest in the final results of the joint business,
is often called an equitable lien. Now, when the joint debts are all paid,
all balances between the several copartners fully adjusted, and there remains
undivided real estate in which they are tenants in common, the legal title of
each corresponding to his interest or share in the partnership, lor what can
one partner have any lien upon the share of the other in such real estate ?
For what pui'poses, and upon what grounds, can he ajipeal to a court of
equity to decree its sale? Certainly in Massachusetts, where equitable
jurisdiction is given only ' where the parties have not a plain, adequate, and
complete remedy at the common law,' such an appeal must fail ; a fortion,
Avould the executor or administrator fail of any right to come into ecjuity for
such a purpose."
It is generally admitted, that, if there is an agreement that the land shall
be considered as personal property, such agreement will be enforced be-
tween the real and personal representatives. See Goodburn v. Stevens,
ubi supra; Hale v. Plummer, ubi supra; Galbraith v. Gedge, 16 B. Mon.
631. And it is held, that an agreement to buy and sell lands and share in
the profits of the sale is such an agreement as will convert the lands abso-
164 PARTNERSHIP. [CHAP. VI.
unless, indeed, a particular partner was specially clothed
with the authority of all the partners, as the general
agent of the partnership in the administration of its
affairs. Hence, one partner could not ordinarily, in
virtue of that relation alone, contract debts, which
would be binding on all the partners, or alienate more
than his share of the partnership property. Accord-
ingly it is laid down in the Digest : Nemo ex sociis plus
parte sua potest alienare, etsi totorum honorum socii
sint} And again : In re communi neminem dominorum
lutely into personalty as between heir and administrator. Heirs of Ludlow u.
Cooper's Devisees, 4 Ohio St. 1. See NicoU v. Ogden, 29 111. 323; Coster
V. Clarke, 3 Edw. Ch. 428 ; Wylie v. Wylie, 4 Grant, Cfi. (u. c.) 278. But
see Dilworth v. Mayfield, 36 Miss. 40.
The case of Dyer v. Clark, 5 Met. 562, is commonly cited as an authority
against the doctrine of absolute conversion ; but the question as to right
of heir and administrator in the partnership real estate does not seem to
have been presented to the court. There are numerous dicta sustaining the
same view as in Buchan v. Sumner, 2 Barb. Ch. 165 ; Galbraith v. Gedge,
16 B. Mon. 631 ; Lang v. Waring, 25 Ala. 625 ; but in none of these cases
does the precise point seem to have arisen for decision.
On the other hand, in Pierce v. Trigg, 10 Leigh, 406, 427, is a dictum to
the contrary, and the opinion of Chancellor Kent (3 Kent, 39, note h), and
of Judge Story (1 Story, Eq. Jur. § 674), were in favor of the absolute
conversion. See also Hoxie v. Carr, 1 Sumn. 173 ; Piper v. Smith, uhi
supra.
On the whole, the law does not seem to have advanced much beyond its
condition when the author declared it open to many distressing doubts. If
the doctrine that partnership real estate should pass to the widow and heirs
of the partner, is finally adopted, many curious questions may arise, as
Whether this doctrine applies to a partner who had no legal, but only an
equitable interest in the land ? Whetlier, if partnership land is sold for the
payment of debts, any surplus goes to the heir or to the executor, and if it goes
to the heir, whether it goes as i-eal or personal property .^ Whether equity
will compel the partnership creditor to exhaust the personal assets before
proceeding against the real estate ? There do not seem to be any decisions
touching these points, except those under the general doctrines of equitable
conversion and marshalling of assets. The avoidance of tliese and other
similar difhcult questions seems to be a practical reason for adopting the
doctrine of absolute conversion.}
» D. 17, 2, G8 ; Poth. Pand. 17, 2, n. 26, 27 ; Poth. de Soc. n. 89 ; Domat,
1, 8, art. 16.
CHAP. VI.] PARTNERSHIP PROPERTY. 165
jure facere quicquam^ invito altero^ posse : uncle man-
ifeshim est j^^ohlhendi jus esse} Those, who were
specially appointed to administer the affairs of the part-
nership, were called inagistri societatis — ita maglstri
ai^pellantur." Similar principles prevail in our day in
the foreign law of many countries, whose jurisprudence
is founded on the Roman law ; and especially in that
of France.^ However, by the modern code of France,
the partners are deemed to have given reciprocally to
each other the power of administering one for the
other, in default of any special stipulations as to the
mode of administration.'* This, of course, leaves the
rights of the partners to be governed by the general law
of France, where such stipulations exist, although they
may be unknown to third persons, and, of course, it
may expose the latter to some hazards of loss or incon-
venience, if they trust to their confidence in a single
partner, not notoriously authorized to administer for the
partnership.
§ 96. The Scottish law has avoided this difficulty,
and followed the general doctrine of the common law.
By the Scottish law, it is implied from the very nature
of partnership, that each partner is clothed with the
complete power of administering the property and
affairs of the partnership, as 2^^((^p>ositus negotlls socie-
tatis, to the eff"ect not only of holding possession of the
property for the company, and of acquiring property for
them in the course of their trade and business, but also
to the eifect of entering into contracts on behalf of the
company, and binding the company by all acts in the
1 D. 10, 3, 28; Poth. Pand. 17, 2, n. 27.
2 D. 2, U, 14; Id. 50, 16, 57; Domat, 1, 8, 4, art. 16; 2 Bell, Comm.
B. 7, p. 615, 5tli ed.
3 Poth. de Soc. n. 66-72.
* Code Civil, art. 1856, 1860.
166 ■ PARTNERSHIP. [cHAP. VI.
ordinary administration of such trade and business.^
And it will make no difference in this respect, that
there are private stipulations between the partners
themselves prohibiting or restraining this right or
authority ; for, as a general institorial power, it will
still be deemed to exist in favor of third persons, who
are ignorant of any such prohibitions or restrictions.^
§ 97. Besides this community of interest in the
capital stock, funds, and effects of the partnership,
each partner has certain rights, liens, and privileges
thereon. In the first place, no one partner has any
right to share in the partnership property, except
what remains thereof after the full discharge and pay-
ment of all debts and liabilities of the partnership ;
and, therefore, each partner has a right to have the
same applied to the due discharge and payment of all
such debts and liabilities, before any one of the part-
ners, or his personal representatives, or his individual
creditors, can claim any right or title thereto.^ In
short, as between the partners themselves, the debts
and liabilities of the firm to creditors and third per-
sons are a fund appropriated, in the first instance, to
the discharge and payment of such debts and liabil-
ities, and there is, JDroperly speaking, as between them,
a lien thereon, or at least an equity, which may be
worked out through the partners in favor of the credi-
tors, although it may not directly attach in the creditors
by virtue of their original claims, in all cases."* Each
> 2 Bell, Coram. B. 7, p. 615, 5th ed.
2 2 Bell, Comm. B. 7, p. 615, 5th ed.
=* Coll. on r. B. 2, c. 1, § 1, p. 77, 2d ed.; West v. Skip, 1 Ves. Sr. 239,
242; Ex parte Ruffin, 6 Ves. 119.
* Ex parte Ruffin, 6 Ves. 119, 126. — In this case Lord Eldon said:
" It is the case of two partners, who owed several joint debts, and had joint
effects. Under these circumstances their creditors, who had a demand ujion
them in respect of those debts, had clearly no lien whatsoever upon the
CHAP. VI.] PARTNERSHIP PROPERTY. . 167
partner also has a specific lien on the present and future
property of the partnership, not only for the debts and
partnersliip effects. They had power of suing, and by process creating
a demand, that would directly attach upon the partnership effects. But
they had no lien upon or interest in them in point of law or equity. If any
creditor had brought an action, the action would be joint; his execution
might be either joint or several. He might have taken in execution both
joint and separate effects. It is also true, that the separate creditors of
each, by bringing actions, might acquire a certain interest even in the part-
nership effects ; taking them in execution in the way, in which separate
creditors can affect such property. But there was no lien in either. The
partnership might dissolve in various ways ; first, by death ; secondly, by
the act of the parties ; that act extending to nothing more than mere disso-
lution ; without any special agreement as to the disposition of the property,
the satisfaction of the debts, much less any agreement for an assignment from
either of the partners to the others. The partnership might also be dissolved
by the bankruptcy of one or of both, and by effluxion of time. If it is dis-
solved by death, referring to the law of merchants, and the well-known
doctrine of this Court, the death being the act of God, the legal title in some
respects, in all the equitable title, would remain, notwithstanding the survi-
vorship ; and the executor would have a right to insist, that the property
should be applied to the partnership debts. I do not know that the partner-
ship creditors would have that right ; supposing both remained solvent. So
upon the bankruptcy of one of them there would be an equity to say, the
assignees stand in the place of the bankrupt ; and can take no more than he
could ; and consequently nothing until the partnership debts are paid. So,
upon a mere dissolution, without a special agreement, or a dissolution by
effluxion of time ; to wind up the accounts the debts must be paid, and the
surplus be distributed in proportion to the different interests. In all these
ways the equity is not that of the joint creditors, but that of the partners
with regard to each other, that operates to the payment of the partnership
debts. The joint creditors must of necessity be paid, in order to the
administration of justice to the partners themselves. When the bankruptcy
of both takes place, it puts an end to the partnership certainly ; but still it
is very possible, and it oftens happens in fact, that the partners may have
different interests in the surplus ; and out of that a necessity arises, that the
partnership debts must be paid : otherwise the surplus cannot be distributed
according to equity; and no distinction has been made with reference to
their interests, whether in different proportions, or equally. Many cases
have occurred upon the distribution between the separate and joint estates ;
and the principle in all of them, from the great case of ]\Ir. Fordyce, has
been, that if the Court should say, tliat what has ever been joint or separate
property shall always remain so, the consequence would be, that no part-
nership could ever arrange their affairs. Therefore a honajidc transmuta-
tion of the property is understood to be the act of men acting fairly, wind-
168 PARTNERSHIP. [cHAP. VI.
liabilities due to third persons, but also for his own
amount or share of the capital stock, and funds, and for
all moneys, advanced by him for the use of the firm,
and also for all debts due to the firm'for moneys ab-
stracted by any other partner from such stock and
funds beyond his share.\/ It follows from this principle,
that if an}^ partner takes the whole or a part of his
share out of the partnership stock, the stock so taken,
if identified, is applicable to the payment of what
shall, upon an account taken, be found due from him
to the partnership, before any of it can be applied to
the payment of his debts, due to his own separate cred-
itors ; for such partner has an interest in the stock only
to the amount of the ultimate balance due to him, as
his share of the stock.^ The same rule will apply to
any other property, into which the partnership prop-
erty may have been converted, so far and so long as its
original character and identity can be distinctly traced.^
Hence it may be stated, as a general corollary from the
foregoing considerations, that no separate creditor of any
partner can acquire any right, title, or interest, in the part-
nership stock, funds, or effects, by process or otherwise,
merely in his character as such creditor, except for so
much as belongs to that partner, as his share or balance,
after all prior claims thereon are deducted and satisfied.^
ing up the concern, and binds the creditors ; and therefore the Court always
lets the arrangements be, as they stand, not at the time of the commission,
but of the act of bankruptcy." s. p. Ex pa?-fe Williams, 11 Ves. 3, 5;
[Kirby v. Schoonmaker, 3 Barb. Ch. 46.]
1 Coll. on P. B. 2, c. 1, § 1, p. 77, 2d ed. ; West v. Skip, 1 Ves. Sr.
239, 242 ; Ex parte Paiffin, 6 Ves. 119.
^ Coll. on P. B. 2, c. 1, § 1, p. 78, 79, 2d ed. ; West v. Skip, 1 Ves. Sr. 239,
240, 242 ; Skipp v. Harwood, 2 Swans. 586 ; Croft v. Pyke, 3 P. Wms. 180 ;
Wats, on P. c. 2, p. 66, 2d ed.
3 Coll. on P. B. 2, c. 1, § 1, p. 78, 79, 2d ed. ; Ridgely v. Carey, 4 Har.
& McII. 167.
* {See § 261-264, and c. xv.}
CHAP. VI.] PARTNERSHIP PROPERTY. 169
§ 98. What properly constitutes partnership prop-
erty may be, in some particular cases, an inquiry of no
inconsiderable embarrassment and difficulty, although,
when all the facts are established, the principles of law
applicable to it are generally clearly defined. So far as
personal property is concerned, not only the capital,
stock, funds, and other effects originally put into the
partnership, but all the property subsequently acquired
by the firm, by sale, barter, or otherwise, and all the
debts and other claims arising in the course of the trade
and business thereof, are deemed part of the partner-
ship capital, stock, funds, and effects/ So, all real es-
tate, purchased for the partnership, and paid for out of
the funds thereof, in whosesoever name it stands,^ is
treated in the same manner.^ Leases of land, also, oris:-
inally granted to or for the partnership, or subsequently
renewed during the partnership, for the purposes there-
of, fall under the like predicament.^ In short, whatever
property, whether real, or personal, or mixed, is pur-
chased for the use and purposes of the partnership, and
is chargeable to the same, is in the contemplation of
courts of equity, even if not of courts of law, treated
as a part of the effects thereof.^
§ 99. There is a peculiar species of interest, which
arises in cases of partnership, and is often treated as in
some sort a part of the partnership property. It is
what is commonly called the good-will of the trade or
' Coll. on P. B. 2, c. 1, § 1, p. 76-78, 2d ed. {But the capital stock may
remain the property of one partner. See § 27. }
^ [But see Otis v. Sill, 8 Barb. 102, 122, as to such a rule at law, if the
title is in only one partner.]
3 Coll. on P. B. 2, c. 1, § 1, p. 82, 83, 2d ed. ; Jackson v. Jackson,
7 Ves. 535; 9 Ves. 591. {See § 93.}
" Coll. on P. B. 2, c. 1, § 1, p. 83, 84, 101, 2d ed. ; Elliot v. Brown,
3 Swans. 489, note ; Alder v. Fouracre, 3 Swans. 489 ; Featherstonliaiigii v.
Fenwick, 17 Ves. 298 ; Gow on P. c. 2, § 1, p. 32-34,3d ed. ; Coles v. Coles,
15 Johns. 159, 161.
* Story, Eq. Jur. § 674.
170 PARTNERSHIP. [CHAP. VI.
business. This good-will may be properly enough de-
scribed to be the advantage or benefit, which is acquired
by an establishment, beyond the mere value of the cap-
ital, stock, funds, or property employed therein, in con-
sequence of the general public patronage and encour-
agement, which it receives from constant or habitual
customers, on account of its local position, or common
celebrity, or reputation for skill or affluence, or punctu-
ality, or from other accidental circumstances or necessi-
ties, or even from ancient partialities or prejudices.
Thus, an inn, a nursery of trees and shrubs, a favorite
fashionable stand, or a newspaper establishment, may,
and often does enjoy a reputation, and command a price
beyond the intrinsic value of the property invested
therein, from the custom, which it has obtained and
secured for a long time ; and this is commonly called
the good-will of the establishment.^ Lord Eldon upon
one occasion said, that a good-will of this sort was noth-
ing more than the probability, that the old customers
will resort to the old place.^ It is certainly not a visi-
ble, tangible interest, or a commodity, upon which a
definite or fixed allowance can be made;^ nor, perhaps,
would a contract, touching the conveyance thereof, be
decreed to be specifically performed in equity."* It is
' See Cruttwell v. Lye, 17 Ves. 335; Coslake v. Till, 1 Riiss. 376;
Dougherty v. Van Nostrand, 1 Hoflf. 68-70. See also an able review of the
doctrine in 16 Am. Jur. 87-92 ; {Churton v. Douglas, H. R. V. Johns. 174 ;
Austen v. Boys, 2 De G. & J. 626. }
2 Cruttweil V. Lye, 17 Ves. 335, 346.
3 Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. {The value of the
good-will assigned exclusively to one partner on a dissolution, is what it would
have produced if sold in the most advantageous manner, and at the proper
time. Mellersh v. Keen, 28 Beav. 453. On the value of good-will in a part-
nership of limited duration see Austen v. Boys, 24 Beav. 598 ; s. c. on ap-
peal, 2 De G. & J. 626.}
* Baxter v. Conolly, 1 Jac. & W. 576 ; Coslake v. Till, 1 Russ. 376, 378 ;
Shackle v. Baker, 14 Ves. 468. {Cooper v. Hood, 26 Beav. 293; Robert-
son V. Quiddington, 28 Beav. 529.}
CHAP. VI.] PARTNERSHIP PROPERTY. 171
not, therefore, strictly speaking, a part of the partner-
ship effects, of which, upon a dissohition thereof, a di-
vision can be compelled, unless, indeed, in cases, where
a sale of the whole premises and stock will be ordered ;
and then the good- will will accompany such sale, and
may create a speculative value in the mind of a pur-
chaser, of which each partner will be entitled to his
share of the benefit.^ But the term " good-will " is
sometimes applied to another case, where a retiring
partner contracts not to carry on the same trade or
business at all, or not within a given distance. This is
an interest, which may be valued between the parties,
and may therefore be assigned with the premises and
the rest of the effects to the remaining partner, as an
accompaniment of the ordinary good-will of the estab-
lishment.^ Good-will, in the former sense, is therefore
> Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. ; Id. c. 3, § 4, p. 214-218 ;
Crawshay v. Collins, 15 Ves. 218, 227; Crutwell ?J.»Lye, 1 Rose, 123;
Featherstonhaugh v. Fenwick, 17 Ves. 298, 809, 310 ; Dougherty v. Van
Nostrand, 1 HofF. 68-70 ; Gow on P. c. 5, § 4, p. 349, 350, 3d ed. — Lord
Rosslyn, in Hammond v. Douglas, 5 Ves. 539, held, that the good-will of a
trade, carried on without articles, survives, and is not to be considered as
partnership stock, to Avhich the representatives of a deceased partner have
any right. But Lord Eldon, in Crawshay v. Collins, 15 Ves. 227, expressed
doubts of the propriety of that determination, considering it difficult to
draw any solid distinction between the lease of the partnership premises,
and the good-will, which consists in the habit of the trade being conducted
on those premises. Gow on P. c. 5, § 4, p. 349, 3d ed. ; Coll. on P. B. 2,
c. 1, § 1, p. 102, 103, 2d ed. {On a sale of partnership property and busi-
ness, the good-will will be included. Williams v. Wilson, 4 Sand. Ch. 379 ;
Holden's Adm'rs v. M'Makin, 1 Pars. Eq. Cas. 270 ; Marten v. Van Schaick,
4 Paige, 479. In this last case a receiver was appointed to carry on a news-
paper for the purpose of preserving the good-will, but to sell without delay.
The right to use the name of a periodical must be sold for the benefit of a
partnership on its dissolution. Bradbury v. Dickens, 27 Beav. 53. See
]\Iellersh v. Keen, 28 Beav. 453 ; Turner v. Major, 3 Giff. 442. The estate
of a deceased partner participates in the good-will.. Smith v. Everett, 27
Beav. 446, Wade v. Jenkins, 2 Giff. 509. See Wedderburn r. Wedderburn,
22 Beav. 84, 104 ; Davies v. Hodgson, 25 Beav. 177, and the following note. }
= Coll. on P. B. 2, c. 1, § 1, p. 102, 103, 2d ed. ; Id. c.'3, § 4, p. 214-
218, and note ; Bryson v. Whitehead, 1 Sim. & St. 74 ; Harrison v. Gard-
172 PARTNEI^SHIP. [chap. YI.
an advantage arising from the mere fact of sole owner-
ship of the premises, stock, or establishment, without
ner, 2 Madd. 198 ; Cruttwell v. Lye, 17 Ves. 335 ; Gow on P. c. 5, § 4, p.
349, 3d ed. — Lord Eldon, In Kennedy v. Lee, 3 Mer. 441, 4:32, speaking
on this subject, used the following language: " AYhere two persons are
jointly interested in trade, and one by purchase becomes sole owner of the
partnership property, the very circumstance of sole ownership gives him an
advantage beyond the actual value of the property, and which may be
pointed out as a distinct benefit, essentially connected with the sole owner-
ship. In the case of the trade of a nursery-man, for instance, the mere
knowledge of the fact, that he is sole owner of the property, and in the
sole and exclusive management of the concern, gives him an advantage
which the other partner, supposing him to carry on the same trade, with
other property, not the partnership property, would not possess. In that
sense, therefore, the good-will of a trade follows from, and is connected
with, the fact of sole ownership. There is another way, in which the good-
will of a trade may be rendered still more valuable ; as by certain stipula-
tions entered into between the parties at the time of the one relinquishing
his share in the business ; as by inserting a condition, that the withdrawing
partner shall not carry on the same trade any longer, or that he shall not
carry it on within a certain distance of the place, whei-e the partnership
trade was carried on, and where the continuing partner is to carry it on
upon his own sole and separate account. Xow it is evident, that in neither
sense was the good-will of this trade at all considered, as among the sub-
jects of the valuation to be made by either party. It was not so considered
by the plaintiff, when he wrote his letter of the 21st of October. The
words ' concern ' and ' inheritance ' are used inartificially, and cannot be
construed as having any reference but to the actual subjects of valuation.
And when the plaintiff offers to take the business himself, he could not have
forgotten, that the defendant's own estate of Butterwick, lay contiguous to
the partnersliip property, and therefore his introducing no stipulation, with
reference to the fact of its contiguity, is a clear intimation, that when he
wrote this letter, he had no intention, in offering to take the paitnership
property, to purchase with it the good-will, in the sense of restricting the
defendant from carrying on the trade in its vicinity. In that sense, at least,
therefore, the good-will of the trade was not the subject of contract, or
treaty even, between the parties." {If a partnershijD is dissolved, each part-
ner, in the absence of agreement, can carry on business in the name of the
old firm. Banks v. Gibson, 34Beav. 566. See Dent v. Turpin, 2 John. &
Hem. 139. The surviving partner can carry on the same trade. Davies v.
Hodgson, 25 Beav. 177. Hence, though the estate of a deceased partner par-
ticipates in the good-will (see previous note), yet as the surviving partner,
afler the sah; of the partnership business, can at once set up a similar business
in the same place, the good-will will often sell for but little. Lind. on P. 710 ;
Smith V. Everett, 27 Beav. 446 ; Davies v. Hodgson, 25 Beav. 177 ; Cook v.
CHAP, yi.] PARTNERSHIP PROPERTY. 173
reference to other persons, as rivals ; and in tlie latter
sense, as an advantage arising from the fact of exclud-
ing the retiring partner from the same trade or busi-
ness, as a rival. ^ It seems that good-will can constitute
a part of the partnership effects or interests only in
cases of mere commercial business or trade ; and not
in cases of professional business, which is almost neces-
sarily connected with personal skill and confidence in
the particular partner.^
§ 100. Under this head a curious question has arisen;
and that is, whether the right to use the firm name is
a part of the good-will belonging to the partnership,
Collingridge, Jac. 607. The form of the decree in Cook v. Colliiiuridge is
given at 27 Beav. 456. In Churton v. Douglas, H. R. V. Johns. 17-t, Wood,
V. C, says that, on a sale, by the retiring partner to the other partner of the
good-will, the retiring partner may set up a precisely similar business next door,
provided he sets it up distinctly as a separate business. In Hall v. Barrows,
10 Jur. N. s. 55; s. c. 33 L. J. n. s. Ch. 204, Lord AVestbury, C, held
that under a stipulation in articles that the surviving partner should have
the option of taking all the partnership stock on paying to the rej)resenta-
tive of the deceased partner the value of his share, the good-will must be
included in the valuation, but on the footing that the surviving partner was
at liberty to set up and carry on the same business as that of the partner-
ship. See Johnson v. Helleley, 34 Beav. 63 ; s. c. on appeal, 2 De G. J. &
S. 446. In Hall v. Hall, 20 Beav. 139, a retiring partner was not allowed
to share in the value of the good-will, though the stipulations of the articles
were nmch like those in Hall v. Barrows : the decision seems hardly to be re-
conciled with that case. It thus appears that the good-will of a partnership
is of little value after dissolution, lor lack of power in the courts to restrain the
former or surviving partners from carrying on a similar business. In Wil-
liams V. Wilson, 4 Sand. Ch. 379, the court assumed this power, and on a
sale of partnership jjroperty and the good-will of the business, ordered that
either of the former partners might lie a purchaser ; but that, except they
purchased, they should be restrained from conducting the same business,
directly or indirectly, in the same city. See § 100, 210-212, Turner v.
Major, 3 Giff. 442. }
> Coll. onP. B.2,c. 1,§1, p. 102, 103, 2d ed.; Gow on P. c. 5, § 4, p. 349,
350, 3d ed.
=^ Fan- V. Pearce, 3 Madd. 74, 76; Coll. on P. B. 2, c. 1, § 1. p. 103,
104, 2d ed. ; Gow on P. c. 5, § 4, p. 349, 350, 3d ed. ; {Austen v. Boys, 2
DeG. &. J. 626.}
174 PARTNERSHIP. [CHAP. VI.
or whether in case of the dissokition thereof by the
death of the partner, it belongs to the survivors. That
the right to use the name of a known and celebrated
firm, especially in the case of manufactures, is often a
very valuable possession, is unquestionable ; and, there-
fore, courts of equity will often interpose to protect the
right against the abuse of third persons, in using it for
their own advantage.^ But it has been thought, that
this right, however valuable, does not fall within the
true character and nature of good-will ; but that it
belongs to the surviving partner,^
^ Eden on Injunct. c. li, p. 314, 315 ; Motley v. Downman, 3 MyL & C.
1, 14, 15 ; Millington v. Fox, 3 Myl. & C. 338 ; 2 Story, Eq. Jur. § 951 ;
Knott V. Morgan, 2 Keen, 213, 219 ; Webster v. W^ebster, 3 Swans. 490, n. ;
Gow on P. c. 2, § 4, p. 109, 3d ed. {The name of a fii-m may be a trade-
mark. HoUoway i\ Holloway, 13 Beav. 209 ; Lawson v. Bank of London,
18 C. B. 84 ; ^Velcli v. Knott, 4 K. & J. 747 ; Burgess v. Burgess, 3 De G.,
Macn. & G. 896 ; Hall v. Barrows, 9 Jur. x. s. 483 ; s. c. 32 L. J. n. s. Cli.
548; on appeal, 10 Jur. n. s. 55, s. c. 33 L. J. x. s. Ch. 204; Bradbury
U.Dickens, 27 Beav. 53.}
* Lewis V. Langdon, 7 Sim. 421. — La this case Vice-Chancellor Shad-
well said: "The question in this case depends on the right, in the surviv-
ing partner, to carry on the business under the name of the partnership. Lord
Eldon, certainly, has expressed a doubt, in the case of Crawshay v. Collins,
15 Ves. 227, upon what has been understood to be the proposition laid down
by Lord Rosslyu, in the case of Hammond v. Douglas, 5 Ves. 539. It is
true, that the question might have been, to a cei'tain degree, whether, hav-
ing regard to what had taken place, the money should be considered to be-
long to one party, rather than to another ; and it is also observable, that
Lord Eldon might have been throwing out his observations with reference to
a supposed connection between the place where the business was carried on,
and the good-will. But it occurs to me, that if the good-will is to be con-
sidered as a salable article, which belongs to the partnership, then this con-
sequence must follow ; namely, that the surviving partner must be under an
obligation to carry on the trade for some time after his partner's death, in or-
der that the thing, which is said to be salable, may be preserved until it can
be sold. If a partnership were carried on between A. and B. under the
name of Smith & Co., and the surviving partner chose to discontinue the busi-
ness, and to write to the customers, and say, that his partner was dead, and
that the business was at an end, the effect would be, that that, which is said
to be salable, would cease to exist. Now, what power is there in a court of
equity, to compel a jiartner to carry on a trade after the death of his co-
CHAP. VI.] PARTNERSHIP PROPERTY. 175
pa.'tner, merely that, at a fhture time, the good-will, as it is called, may be
sold ? It is plain, that, unless tliei'e is such a power in this court, it must
be in the discretion of the surviving partner to determine, what shall be done
with the good-will ; and, if that is the case, it must be his property. I can-
not but think, when two partners carry on a business in pax'tnership together
under a given name, that, during the partnership, it is the joint right of
them both to carry on the business under that name, and that, upon the
death of one of them, the right which they before had jointly, becomes the
separate right of the survivor." See also Webster v. Webster, 3 Swans.
490, n. {If a partnership is dissolved, each partner, in the absence of
agreement, can carry on business in the name of the old firm. Banks v.
Gibson, 34 Beav. 566. See Dent v: Turpin, 2 John. & Hem. 139.
The firm name survives to a surviving partner, and cannot, therefore,
be sold as part of the partnership assets. Robertson v. Quiddington,
28 Beav. 529. See Smith i\ Everett, 27 Beav. 446. J. D., a member of
a firm styled J. D. & Co., assigned his interest in the business and
the good-will thereof to his late partners, who continued to carry on the
business under a new name with the addition " late J. D. & Co." J. D. took a
partner and set up in the same neighborhood in a similar business under the
name of J. D. & Co. He was restrained by injunction. Churton v. Douglas,
H. R. V. Johns. 174. Mr. Lindley, (Lind. on P. 710,) says: "In the event
of dissolution by death, it has been said that the good-will survives. But
this is not correct, if ^it is meant that the value of the good-will, as such, be-
longs to the survivor. It undoubtedly may happen that the survivor may ob-
tain the benefit of the good-will, without paying for it ; for he is at liberty,
(unless restrained by agreement) to carry on business on his own account,
and, it is said, in the name of the late fii-m. See Webster v. Webster, 3
Swans. 490, and Hammond v. Douglas, 5 Ves. 539. But see contra, Smith
V. Everett, 27 Beav. 446. The executor of the deceased partner has
no right to do this. Lewis v. Langdon, 7 Sim. 421. Under these circum-
stances, if, on the death of a partner, the good-will is put up for sale, it will
produce nothing if it is known that the surviving partner will exercise his
rights. He will, therefore, acquire all the benefit of the good-will ; but he
does not acquu-e it by survivorship, as something belonging to him exclu-
sively, and with which the executors of the deceased partner have no concern ;
for if he did, he might sell the good-will for his own benefit, and this he can-
not do. See Smith v. Everett, 27 Beav. 446 ; Wedderburn v. Wcdderburn,
22 Beav. 84, 104. (Hammond v. Douglas, 5 Ves. 539 is not consistent with
the statement in the text, but this case has been much doubted, and is against
all principle.) When, therefore, it is said that, on t)je death of one partner,
the good-will of the firm survives to the other, what is meant is, that the sur-
vivor is entitled to all the advantages incidental to his former connection
with the firm, and that he is under no obligation, in order to render those
advantages salable, to retire from business himself." See § 99.}
176 PARTNERSHIP. [cHAP. VII.
CHAPTER VII.
POWERS AND AUTHORITIES OF PARTNERS.
{§ 101. Power over the partnership property. General assignments.
102. Partners have all powers incident to the trade.
102 a. Power to give negotiable paper.
103, 104. Necessity of general powers in partners.
105. Misconduct of partner does not affect liability to third parties.
106. Nor does the constitution of the partnership.
107. Representations and admissions of a partner.
108. Liability for frauds by a partner.
109. Power of partners in the Roman and Fi'ench law.
110. Limitations on a partner's jjower.
111. 112. Powers confined to the scope of the ordinary business of the
partnership.
113. Determination of this scope.
114. A partner cannot submit to arbitration.
115. Though he may compromise or release a debt.
116. Roman law.
117. One partner cannot bind the others by deed.
118. Roman law.
119. Illustrative cases.
120. Limitation of the rule.
121. Whether authority to seal must be given under seal.
122. 'American doctrine.
122 a. A partner cannot bind a firm before its establishment.
123. Power of a majority.
124. Roman law.
125. Majority cannot change the partnership articles.}
§ 101. As to the powers and authorities of the part-
ners during the existence of the partnership (for their
powers and authc^-ities upon the dissohition thereof will
be considered hereafter, in another place), they have
been in part already suggested. In the first place, when-
ever there are written articles, or particular stipulations
between the partners, these will regulate their respect-
ive powers and authorities inter sese, although not, if
CHAP. VII,] POAVERS AND AUTHORITIES. 177
unknown, in their dealings with third persons.^ But,
indeijendently of any such articles or stipulations ex-
pressed, each partner is PrceposHus negotiis societatls,
and each partner, virtute officii, possesses an equal and
general power and authority in behalf of the firm, to
transfer, pledge, exchange, or apply or otherwise dis-
pose of the partnership property and effects, for any and
all purposes within the scope and objects of the partner-
ship, and in the course of its trade and business.^ Or,
as was said by a learned judge upon a recent occasion,
" One partner by virtue of that relation (of partner-
ship) is constituted a general agent for another as to
all matters within the scope of the partnership deal-
ings, and has communicated to him, by virtue of that
relation, all authorities necessary for carrying on the
partnership, and all such as are usually exercised by
partners in that business, in w^hich they are engaged.
Any restriction which, by agreement amongst the part-
ners, is attempted to be imposed upon the authority
which one possesses as a general agent for the other, is
operative only between the partners themselves, and
does not limit the authority as to third persons, who
acquire rights by its exercise, unless they know that
such restrictions have been made." ^ The power ex-
tends also to assignments of property of the firm, as a
security for antecedent debts, as well as for debts there-
after to be contracted on account of the firm."* Nor
will it make any difference, whether the assignment be
• 3 Kent, 40-42 ; U. S. Bank r. Binney, 5 Mason, 176 ; s. c. 5 Pet. 529 ;
Coll. on P. B. 3, c. 1, p. 259, 260, 2d ed.
* 3 Kent, 40-46 ; Story on Ag. § 37, 39, 124 ; Coll. on P. B. 2, c. 2, § 1, p.
129, 2d ed. ; Gow on P. c. 2, § 2, p. 36, 51-53, 3d ed. ; 2 Bell, Coram. B. 7,
c. 1, p. 615, 616, 5th ed.
3 Hawken v. Bourne, 8 M. & W. 703, 710.
■• Harrison v. Sterry, 5 Cranch, 289 ; Anderson v. Tompkins, 1 Brock. 456 ;
Tapley v. Butterfield, 1 Met. 515,
12
178 PARTNERSHIP. [CHAP. Til.
for the benefit of one creditor, or of several, or of all
of the joint creditors.^ But it may well admit of some
doubt, whether this power extends to a general assign-
ment of all the funds and effects of the partnership by
one partner, for the benefit of creditors ; for such an
assignment would seem to amount of itself to a sus-
pension or dissolution of the partnership itself.^ The
' Ibid.
2 Pearpoint v. Graham, 4 Wash. C. C. 232 ; [Dana v. Lull, 17 Vt. 390;
Cullura V. Bloodgood, 15 Ala. 34; Deming v. Colt, 3 Sand. .284; Hayes
V. Heyer, 3 Sand. 284; Wilson v. Soper, 13 B. Mon. 411; Fisher v.
Murray, 1 E. D. Smith, 341; Mabbett v. White, 2 Kern. 442; Kemp v.
Carnley, 3 Duer, 1; Kirby v. Ingersoll, 1 Dougl. (Mich.), 477, Harrington,
Ch. 1 72. If, however, one partner has abandoned all control of the business,
an assignment by the other is valid, if an equal distribution is thereby
secured. Kemp v. Carnley, 3 Duer, 1] ; Deckert v. Filbert, 3 W. & S. 454. —
In this case, it was held, that after a dissolution of partnership, one partner
could not make a voluntary assignment of the effects of the partnership for
the benefit of creditors . against the express dissent of his copartner. In
Anderson v. Tompkins, 1 Brock. 456, Mr. Chief Justice Marshall affirmed
the authority of one partner to assign all the partnership effects for the pay-
ment of the creditors thereof On that occasion, he said: " It will be readily
conceded, that a fraudulent sale, whether made by deed or otherwise, would
pass nothing to a vendee concerned in the fraud. But, with this exception, I
feel much difficulty in setting any other limits to the power of a partner,
in disi^osing of the effects of the company, purchased for sale. He may sell
a yard, a piece, a bale, or any number of bales. He may sell the whole of
any article, or of any number of articles. This power certainly would not be
exercised in the presence of a partner, without consulting him ; and if it were
so exercised, slight circumstances would be sufficient to render the transac-
tion suspicious, and, perhaps, to fix on it the imputation of fraud. In this
respect, every case must depend on its own circumstances. But with respect
to the power, in a case perfectly fair, I can perceive no ground on which it
is to be questioned. But this power, it is said, is limited to the course of
trade. What is understood by the course of trade ? Is it that which is act-
ually done every day, or is it that which may be done whenever the occa-
sion for doing it presents itself? There are small traders, who scarcely ever,
in practice, sell a piece of cloth uncut, or a cask of spirits. But may not a
partner in such a store sell a piece of cloth, or a cask of spirits ? His power
extends to the sale of the article, and the course of trade does not limit him
as to (|uantity. So with respect to larger concerns. By the course of trade
is understood dealing in an article in which the company is accustomed to
deal ; and dealing in that article for the company. Tompkins and Murray
CHAP. VII.] POWERS AND AUTHORITIES. 179
doctrine, however, is strictly confined to personal prop-
erty, and does not extend to real estate held by the
sold goods. A sale of goods was in the course of their trade, and within the
power of either partner. A fair sale, then, of all or of a part of the goods
was within the power vested in a partner. This reasoning applies with
increased force, when we consider the situation of these partners. The one
was on a voyage to Europe, the other in possession of all the partnership
effects for sale. The absent partner could have no agency in the sale of
them. He could not be consulted. He could not give an opinion. In leav-
ing the country, he must have intended to confide all his business to the
partner, who remained, for the purpose of transacting it. Had this then been
a sale for money, or on credit, no person, I think, could have doubted its ob-
ligation. I can perceive no distinction in law, in reason, or in justice, between
such a sale and the transaction which has taken place. A merchant may
rightfully sell to his creditor, as well as for money. He may give goods in
payment of a debt. If he may thus pay a small creditor, he may thus pay a
large one. The quantum of debt, or of goods sold, cannot alter the right.
Neither does it, as I conceive, affect the jjower, that these goods were con-
veyed to trustees to be sold by them. The mode of sale must, I think,
depend on circumstances. Should goods be delivered to trustees for sale,
without necessity, the transaction would be examined with scrutinizing eyes,
and might, under some circumstances, be impeached. But if the necessity
be appai-ent, if the act is justified by its motives, if the mode of sale be such
as the circumstances require, I cannot say, that the partner has exceeded
his power. This is denominated a destruction of the partnership subject, and
a dissolution of the partnership. But how is it a destruction of the subject ?
Can this appellation be bestowed on the application of the joint property to
the payment of the debts of the company '? How is it a dissolution of the
partnership '? A partnership is an association to carry on business jointly.
This association may be formed for the future before any goods are acquired.
It may continue after the whole of a particular purchase has been sold. But
either partner had a right to dissolve this partnership. The act, however, of
applying the means of carrying on their business to the payment of their
debts, might suspend the operations of the company, but did not dissolve the
contract, under which their operations were to be conducted." In Egberts v.
•Wood, 3 Paige, 517, 523, 524, Mr. Chancellor Walworth said: "It appears
to be the better opinion, that one of the partners, at any time during the
existence of the partnership, may assign the partnership effects, in the name
of the firm, for the payment of the debts of the company, although by such
assignment a preference is given to one set of creditors over another. In
the case of Dickinson v. Eegare and others, cited by the complainant's
counsel from the Equity Reports of South Carolina, 1 Desaus. 537, the Court
of Chancery of that State decided against the validity of an assignment of all
the partnership eflects, made by one of the partners, without the knowledge
or consent of the other, to pay the debt of a particular creditor. Chancellor
180 PARTNERSHIP. [CHAP. VII.
partnership ; for in such a case the partner, who exe-
cutes the deed of conveyance, can transfer no more title
Matthews, who delivered the ojjinion of the court in that case, admits, that it
was a question of the first impression, no case analogous to it having come
under the view of the court. That assignment, however, was made under
very peculiar circumstances. The company during the revolutionary war
were doing business in this country. And while one of the partners was on
a voyage to France, he was taken by a British ship of war, and carried as a
prisoner to England, where he was prevailed upon by a creditor residing
there, to give him a general assignment of all the partnership funds, which
funds were then in this country, to secure the payment of his particular debt
against the firm. Although the decision was put upon the general ground,
that one partner had not the right to assign the partnership funds in this
manner, without the consent of his copartner, there is no doubt that the par-
ticular circumstances, under which that assignment took place, had a very
considerable influence in bringing the mind of the Chancellor to that result.
The assignment in that case being made by a citizen of one of the United
States, during the existence of the war, to an alien enemy and in an enemy's
country, was probably void by the laws of war, so far at least as to prevent
its being carried into effect by any of the courts of this country. And cer-
tainly it could not be considered as made according to any mercantile usage.
That decision, however, has been recently overruled by the Court of Appeals
in the same State, in the case of Robinson v. Crowder, 4 McCord, 519;
where it was held, that an assignment by one partner of all the effects of the
firm in payment of the partnership debts was valid, as against his copartners.
In Pearpoint v. Graham, 4 Wash. C. C. 232, in the Circuit Court of the United
States for the district of Pennsylvania, Judge Washington doubted the right
of one of the partners, without the consent of the others, to assign the whole
of the partnership effects in such a manner as to terminate the partnership.
But he declined expressing any decided opinion upon this question, which he
consitlered unnecessary to the decision of the cause then befoi'e him ; as, in
that case, the copartner had subsequently assented to the assignment. In
Mills V. Barber, 4 Day, 428, the Supreme Court of Errors in Connecticut
decided, that one partner, without the knowledge of the other, might make a
valid assignment of partnership funds, to secure the payment of a debt due
from the firm. See Forkner v. Stuart, 6 Graft. 197. And in Harrison v.
Sterry, 5 Cranch, 289, the Supreme Court of the United States decided, that
one of the partners might assign the partnership effects to a trustee, for the
security or payment of the creditors of the firm, without the concurrence of
his copartners. I do not intend, in this case, to express any opinion in favor
of the validity of such an assignment of the partnership effects to a trustee
by one partner, against the known wishes of his copartner, and in fraud of
his i-ight to participate in the distribution of the partnership funds among the
creditors, or in the decision of the question, which of those creditors should
have a preference in payment, out of the effects of an insolvent concern.
CHAP. VII.] POWERS AND AUTHORITIES. 181
than he possesses ; and he cannot transfer the property
belonging to the firm, whether it was conveyed directly
As a Court of Equity, upon a proper application, would protect the rights of
the several partners in this respect, before an assignment had actually been
made, and if they could not agree among themselves, would appoint a receiver
of the effects of the partnership, and would apply them in payment of all
the debts due from the firm ratably, it might perhaps apply the same rule to
the case of an assignment to a trustee for the payment of the favorite credi-
tors of one of the partners only, where the equitable rights of the parties had
not in fact been changed by any proceedings under the assignment." — But
in the subsequent case of Havens v. Hussey, 5 Paige, 30, 31, the Chancellor
greatly quahfied that ojiinion. On that occasion he said: "In the case of
Egberts v. Wood, 3 Paige, 517, I had occasion to refer to most of the cases
relative to assignments of partnershij? effects made by one of the copartners.
And I then arrived at the conclusion, that, from the nature of the contract
of copartnership, one of the partnership might make a valid assignment of
the partnership effects, or so much thereof as was necessary for that purjDOse,
in the name of the firm, directly to one or more of the creditors in payment
of his or their debts ; although the effect of such assignment was to give a
preference to one set of creditors over another. But as it was not necessary
for the decision of that case, I did not express any opinion, as to the validity
of an assignment of the partnership effects by one partner, against the known
wishes of his copartner, to a trustee, for the benefit of the favorite creditors
of the assignor; in fraud of the rights of his copartner to participate in the
distribution of the partnership effects among the creditors, or in the decision
of the question as to which of the creditors, if any, should have a preference
in payment out of the effects of an insolvent concern. The present case
presents that point distinctly for the decision of the court. And upon the most
deliberate examination of the question, I am satisfied, that the decision of the
Vice- Chancellor is correct ; that such an assignment is both illegal and inequit-
able, and cannot be sustained. The principle, upon which an assignment by
one partner in payment of a partnership debt rests, is, that there is an implied
authority for that purpose from his copartner, from the very nature of the
contract of partnership ; the payment of the company debts being always a
part of the necessary business of the firm. And while either party acts fairly
within the limits of such implied authority, his contracts are valid, and bind-
ing upon his copartner. One member of the firm, therefore, without any
express authority from the other, may discharge a ])artnership debt, either
by the payment of money, or by the transfer to the creditor of any other of
the copartnership effects ; although there may not be sufficient left to pay an
equal amount to the other creditors of the firm. But it is no part of the
ordinary business of a copartnership, to appoint a trustee of all the part-
nership effects, for the purpose of selling and distributing the proceeds
among the creditors in unequal proportions. And no such authority as
that can be implied. On the contrary, such an exercise of power by one
182 PARTNERSHIP. [CHAP. VII.
to the firm, or held in trust ; for it belongs to the part-
ners as tenants in common, and neither of the partners
can convey more than his undivided interest.^
of tlie firm, without the consent of the other, is in most cases a virtual
dissolution of the copartnership ; as it renders it impossible for the firm to
continue its business. The case of Harrison v. Sterry, 5 Cranch, 289, which,
perhaps, has gone as far as any other on this subject, was not sustained as
an assignment of all the partnership effects to a trustee for the payment of
preferred creditors. It professed to be the transfer of a certain specific
portion of the partnership property, for the purpose of saving the credit of
the firm, and to raise funds to carry on the partnership business. And upon
the ground that it was not in fact what it professed to be, but was merely
intended to give a preference to particular creditors, the court held the
assignment void, as a fraud upon the bankrupt laws. It was only upon
the supposition, that the assignment was in fact what it professed to be, that
Chief Justice Marshall held it to be within the power usually exercised by a
managing partner." In Hitchcock v. St. John, 1 Iloff. 511, Mr. Vice-
Chaucellor Hoffman decided against the authority of one partner to make
any general assignment, allowing preferences, and said : " The power to
make a sale of the partnership effects resides in each partner while the
relation exists. The power to bind the firm upon a purchase equally exists in
each, although the goods never came into joint stock. All these instances
of authority, as well as that to make negotiable paper, flow from the principle,
that each is the agent of the whole. But for what is he such agent ? For
the purposes of carrying on the business of the firm, and because the
authority to do the act is implied from the nature of the business. Best, J.,
In Barton v. Williams, 5 B. & Aid. 395, 405. Now a transfer of all the effects
of a firm for payment of its debts, is a virtual dissolution of the partner-
ship. It supersedes all the business of the firm, as such. It takes from
the control of each all the property with which such business is conducted.
The purposes of the business then clearly do not require that such a power
should be implied. What other reason is there for holding, that by the
contract of partnership it is to be inferred ? I do not think that the principle
insisted upon by the counsel for the defendant is the true one, namely, that
such a transfer is only invalid, when it operates as a fraud upon the other
partner; when, for example, it is made against his wishes, and to give
preferences, which he is unwilling to give. It strikes me that the principle,
upon which the invalidity is established, lies deeper. I consider that neither
during the existence, nor after the dissolution of a partnership, can such
a transfer be made, because of want of power in any one partner to make
it. A direct payment of money, or a transfer of property to an acknowl-
edged creditor, is an admitted and a necessary power, during the existence
of the partnership. We probably are compelled by authoi'ities to go so far
Anderson v. Tompkins, 1 Brock. 456, 463. {See § 94.}
CHAP. YII.] POWERS AND AUTHORITIES. 183
§ 102. Each partner may, in like manner, enter into
any contracts or engagements on behalf of the firm in
the ordinary trade and business thereof; as for example,
by buying, or selling, or pledging goods, ^ or by paying,
or receiving, or borrowing moneys, or by drawing, or
negotiating, or indorsing, or accepting bills of exchange,
and promissory notes, and checks, and other negotiable
securities, or by procuring insurance for the firm, or by
doing any other acts, which are incident or appropriate
as to say, that it is a necessary surviving power after a dissolution, in what-
ever way that is effected. All that is requisite to test the transfer is the
amount of debt, and the extent of the fund assigned. But upon an assign-
ment of the property of a firm to a trustee, a complication of duties and
responsibilities is involved. An agent is appointed to control and dispose
of the whole. The capacity, integrity, and industry of another are brought
to the management ; and the fitness of the party selected is judged of solely
by one member of the firm. From what part or principle of the partnership
relation can such an authority emanate ? It is impossible to uphold a rule,
which would rob every member of a firm of a voice and share in this last,
and probably most important act of a foiling house. It is no contradiction of
this doctrine, that, where the assignment is made after insolvencv, and divides
the funds with perfect equality among all the creditors, it will be supported.
It is clear, that either partner might file a bill, obtain an injunction and
receiver, and insure an equal distribution of all the funds. An assignment
fairly securing the same equality is an object of favor in this court. In the
absence of any indication on the part of the copartner of a contrary inten-
tion, it may well be inferred, that he consents to do justice. A serious
question might indeed arise in a case in which, after such an assignment
by one partner, the other should make a transfer of a specific piece of
property, in payment of a just debt of the firm." There is no small difficulty
in supporting the doctrine, even with these qualifications, that one partner
may make a general assignment of all the partnership property. {Graser v.
Stellwagen, 25 N. Y. 315 ; Welles v. March, 30 N. Y. 344; Robinson v.
Gregory, 29 Barb. 560 ; McClelland v. Remsen, 36 Barb. 622 ; Palmer v.
Myers, 43 Barb. 509 ; Pettee v. Orser, 6 Bosw. 123 ; Kimball v. Hamilton
Fire Ins. Co. 8 Bosw. 495; Hennessy v. Western Bank, 6 W. & S. 300;
Sloan V. Moore, 37 Penn. St. 217 ; M'Cullough v. Sommerville, 8 Leigh,
415 ; Hughes v. Ellison, 5 Mo. 463 : Drake v. Rogers, 6 Mo. 317 ; Forbes
V. Scannell, 13 Cal. 242 ; Barcroft v. Snodgrass, 1 Coldwell, 430 ; 1 Am.
Lead. Cas. 444, 4th ed.}
1 {One partner may execute a valid mortgage of a vessel owned by the
firm. Ex parte Howden, 2 Mont. D. & De G. 574 ; Patch v. Wheatland, 8
All. 102.}
184 PARTNERSHIP. [CHAP. YII.
to such trade or business, according to the common
course and usages thereof.^ So each partner may con-
' 3 Kent, 40-42 ; Story on Ag. § 37, 124 ; Coll. on P. B. 3, c. 1, § 4, p.
282, 2d ed. ; Id. B. 2, c. 2, § 1, p. 128, 129 ; Id. B. 3, c. 1, p. 259 ; Id. § 1,
p. 263, 268-293 ; Gow on P. c. 2, § 2, p. 36-69, 3d ed. ; Id. c. 4, § 1, p.
146, 147; Wats, on P. c. 4, p. 167, 2d ed. ; Id. p. 195. — The cases on
this subject are exceedingly numerous. Many of them will be found col-
lected in the elementary wi-iters in the pages above cited. See also Swan
V. Steele, 7 East, 210 ; Hope v. Oust, cited by Lawrence, J., in 1 East, 53 ;
Sandilands v. Marsh, 2 B. & Aid. 673; U. S. Bank v. Binney, 5 Mason,
176 ; s. c. 5 Pet. 529 ; South Carolina Bank v. Case, 8 B. & C. 427 ; Liv-
ingston V. Roosevelt, 4 Johns. 251 ; Fisher v. Tayler, 2 Hare, 218, 229.
In Winship v. Bank of U. S. 5 Pet. 529, 561, Mr. Chief Justice Marshall,
in delivering the opinion of the court, said: " Partnerships for commercial
purposes, for trading with the world, for buying and selling from and to a
great number of individuals, are necessarily governed by many general
principles, which are known to the public, which subserve the purpose of
justice, and which society is concerned in sustaining. One of these is,
that a man, who shares in the profit, although his name may not be in the
firm, is responsible for all its debts. Another, more applicable to the subject
under consideration, is, that a partner, certainly the acting partner, has
power to transact the whole business of the firm, whatever that may be, and
consequently to bind his partners in such transactions, as entirely as himself.
This is a general power, essential to the well conducting of business ; which
is implied in the existence of a partnership. When, then, a partnership is
formed for a particular purpose, it is understood to be in itself a grant of
power to the acting members of the company to transact its business in the
usual way. If that business be to buy and sell, then the individual buys
and sells for the company, and every person, with whom he trades in the
way of its business, has a right to consider him as the company, whoever
may compose it. It is usual to buy and sell on credit ; and if it be so, the
partner, who purchases on credit in the name of the firm, must bind the firm.
This is a general authority held out to the world, to which the world has a
right to trust. The articles of copartnership are perhaps never published.
They are rarely if ever seen, except by the partners themselves. The
stipulations they may contain are to regulate the conduct and rights of the
parties, as between themselves. The trading world, with whom the company
is in jierpetual intercourse, cannot individually examine these articles, but
must trust to the general powers contained in all partnerships. The acting
partners are identified with the company, and have power to conduct its
usual business, in the usual way. This power is conferred by entering
into the partnership, and is perhaps never to be found in the articles. If it
is to be restrained, fair dealing requires that the restriction should be made
known. These stipulations may bind the partners ; but ought not to affect
those to whom they are unknown, and who trust to the general and well
CHAP. VII.] POWERS AND AUTHORITIES. 185
sign goods to an agent or factor for sale on account of
the firm, and give instructions and orders relating to
the sale.^ All such contracts and engagements, acts and
things, he has authority to make and do in the name of
the firm, and, indeed, in order to bind the firm, they
must ordinarily be made and done in the name of the
firm; otherwise they will bind the individual partner
only, who executes them, as his own private acts, con-
tracts, or other things.^ And this is entirely in coinci-
establisbed commercial law." See also Hooper v. Lusby, 4 Camp. G6 ; Le
Roy V. Johnson, 2 Pet. 186, 198 ; Ex parte Agace, 2 Cox, 312 ; 2 Bell,
Coram. B. 7, p. 615-618, 5th ed. ; {1 Am. Lead. Cas. 407, 4th ed.}
' 3 Kent, 40-45.
'^ {See § 134-151, 202} ; Kirk v. Blurton, 9 M. & W. 284 ; Faith v. Rich-
mond, 11 Ad. & E. 339 ; Story on Ag. § 37, 39, 41, 147, 155, 161 ; Coll. on
P. B. 3, c. 1, § 4, p. 277, 278, 282, 2d ed. ; Id. B. 8, c. 2, § 2, p. 315-323,
2d ed. ; Pothier on Oblig. n. 83, and note by Evans ; 3 Kent, 41-44. —Mr.
Chancellor Kent, in his learned Commentaries, in the passage above cited,
has summed up the doctrine in the following terms: "In all contracts
concerning negotiable paper, the act of one partner binds all ; and even
though he signs his individual name, provided it appears on the face of
the paper to be on partnership account, and to be intended to have a
joint operation. But if a note or bill be drawn by one partner, in his
own name only, and without appearing to be on partnership account, or
if one partner borrow money on his own security, the partnership is not
bound by the signature, even though it was made for a partnership pur-
pose, or the money applied to a partnership use. The borrowing partner
is the creditor of the firm, and not the original lender. If, however, the
bill be drawn by one partner in his own name, upon the firm or partnership
account, the act of drawing has been held to amount, in judgment of law,
to an acceptance of the bill by the drawer in behalf of the firm, and to
bind the firm as an accepted bill. And though the partnership be not bound
at law in such a case, it is held, that equity will enforce payment from it, if
the bill was actually drawn on partnership account. Even if the paper was
made in a case, which was not in its nature 'a partnership transaction, yet
it will bind the firm, if it was done in the name of the firm, and there be
evidence that it was done under its express or implied sanction. But if part-
nership security be taken from one partner, without the previous knowledge
and consent of the others, for a debt, which the creditor knew at the time
was the private debt of the particular partner, it would be a fraudulent
transaction, and clearly void in respect to the partnership. So, if I'rom the
subject-matter of the contract, or the course of dealing of the partnership,
the creditor was chargeable, with constructive knowledge of that fact, the
186 PARTNERSHIP. [CHAP. VII.
dence with the rule of the Roman law, as to jomt em-
ployers of ships, against w^hom the exercitorial action
partnership was not liable. There is no distinction in principle upon this
point, between general and special partnerships ; and the question, in all
cases, is a question of notice, express or constructive. All partnerships are
more or less limited. There is none, that embraces, at the same time, every
branch of business ; and when a person deals with one of the partners in a
matter not within the scope of the partnership, the intendment of law will
be, unless there be circumstances, or proof in the case, to destroy the pre-
sumption, that he deals with him on his private account, notwithstanding the
partnership name be assumed. The conclusion is otherwise, if the subject-
matter of the contract was consistent with the partnership business ; and the
defendants in that case would be bound to show that the contract was out of
the regular course of the partnership dealings. When the business of a
partnership is defined, known, or declared, and the company do not appear
to the world in any other light than the one exhibited, one of the partners
cannot make a valid partnership engagement, except on partnership account.
There must be at least some evidence of previous authority beyond the mere
circumstance of partnership, to make such a contract binding. If the pub-
lic have the usual means of knowledge given them, and no acts have been
done or suffered by the partnership, to mislead them, every man is presumed
to know the extent of the partnership, with whose members he deals ; and
when a person takes a partnership engagement without the consent or au-
thority of the firm, for a matter that has no reference to the business of the
firm, and is not within the scope of its authority, or its regular course of
dealing, he is, in judgment of law, guilty of a fi-aud. It is a well-established
doctrine, that one partner cannot rightfully apply the partnership funds to
discharge his own pre-existing debts, without the express or implied assent of
the other partners. This is the case, even if the creditor had no knowledge
at the time, of the fact of the fund being partnership property. The author-
ity of each partner to dispose of the partnership funds, strictly and rightfully,
extends only to the partnership business, though in the case of hona fide pur-
chasers, without notice, for a valuable consideration, the partnership may, in
certain cases, be bound by the act of ope partner. But, if the negotiable
paper of a firm be given by one partner on his private account, and that
paper, issued within the general scope of the authority of the firm, passes
into the hands of a bona fide holder, Avho has no notice, either actually or
constructively, of the consideration of the instrument ; or if one partner
should purchase, on his private account, an article, in which the firm dealt,
or which had an immediate connection with the business of the firm, a differ-
ent rule applies, and one, which requires the knowledge of its being a pri-
vate, and not a partnership transaction, to be brought home to the claimant.
These are general principles, which are considered to be well established in
the English and American jurisprudence." In some cases, however, it is a
matter of great nicety to decide, whether the partner alone is bound, or the
CHAP. YII.] POWERS AND AUTHORITIES. 187
lay. Si 2^lures navjem exerceant, cum quoUhet eoruin in
solidum agi potest. JVe in plures adversarios destrin-
gatur, qui cum uno contraxerit} Jure societatis per
socium cere alieno socius non ohligatur, nisi in commu-
nem arcam pecimice versce sunt} This is also the rule
of the French law,^ and of the Scottish law.^ Pothier
partnership. Thus if a bill is drawn upon a firm, and is accepted by one of
the firm in his own name, it will be treated as an acceptance of the firm.
Wells V. Masterman, 2 Esp. 731; Mason v. Rumsey. 1 Camp. 384; Beach
V. State Bank, 2 Ind. 488; Coll. on P. B. 3, c. 1, § 2, p. 274, 275, 2d ed.
{But see Heenan v. Nash, 8 Minn. 407.} So, where a note was drawn, " I
promise," and was signed " for A. B. & C. — A." it was held to bind the
partnership. Hall v. Smith, 1 B. & C. 407 ; Coll. on P. B. 3, c. 1, § 2, p. 277,
278, 2d ed. ; Lord Galway v. Matthew, 1 Camp. 403. See also Story on Ag.
§ 154, 275, 276 ; Doty v. Bates, 11 Johns. 544 ; Gow on P. c. 2, § 2, p. 40-
42, 3ded. ; Id. p. 49, 50. Wats, on P. c. 4, p. 214, 2ded. ; U. S.Bankr.Bin-
ney, 5 Mason, 176 ; s. c. 5 Pet. 629 ; Faith v. Richmond, 3 Per. & Dav. 187.
1 D. 14, 1, 25; Id. 14, 1, 2; Poth. Pand. 14, 1, n. 10; Domat, 1, 16,
3, art. 6, 7; D. 14, 1, 4, § 1, 2; Domat, 1, 8, 4, art. 16; Story on Ag.
§ 124, note.
2 D. 17, 2, 82; Domat, 1, 8, 3, art. 10.
^ Poth. on Oblig. n. 83.
^ 2 Bell, Comm. B. 7, c. 1, p. 615, 5th ed. ; Ersk. Inst. B. 3, tit. 3, § 20.
— Mr. Erskine says : " It hath been much disputed, how far an obligation,
signed by one of the partners, affects the company or copartnery by the Ro-
man law ; as to which, a variety of distinctions hath been imagined by Doc-
tors, to reconcile the different expressions of the Roman jurisconsults.
According to our present practice, the partners in private companies gener-
ally assume to themselves a firm or name, proper to their own company, by
which they may be distinguished in their transactions ; and in all deeds
subscribed by this name of distinction, every partner is, by the nature of co-
partnery, understood to be intrusted with a power from the company of bind-
ing them. Any one pai'tner, therefore, who signs a bill, or other obligation, by
the company's firm, obliges all the other partners : but where he subscribes a
deed by his own proper subscription, the creditor, who followed his faith
alone in the transaction, hath no action against the company, unless he shall
prove, that the money lent or advanced by him was thrown into the common
stock." Lord Stair savs : " The same question is incident here, that before
hath been touched concerning mandates, when one or more of the parties
act in the matter of the society, whether thereby the whole society be obliged
by the obligations of these ? Whether obligations, made to these, constitute
the society creditor ? Or whether real rights, acquired by these, are ipso
facto common to the society, or if there be but an obligation upon the actors
to communicate the property always remaining in the actors, till they effect-
uallv communicate ? The resolution of this beinjj the same with that in
188 PARTNERSHIP. [CHAP. VII.
says : Whatever may be the authority of a partner, in
order tliat a debt contracted by him should bind his
partners, it is necessary that it should be contracted in
the name of the firm.^
§ 102 a. In the remarks which have been already
made, in respect to the power of each partner to bind
the firm by bills of exchange, promissory notes, checks,
and other negotiable instruments, we are to understand
that this doctrine is not applicable to all kinds of part-
nership, but is generally limited to partnerships in trade
and commerce, for in such cases it is the usual course of
mercantile transactions, and grows out of the general
customs and laws of merchants, which is a part of the
common law, and is recognized as such.^ But the same
reason does not apply, or at least may not apply to oth-
er partnerships, unless indeed it is the common custom
or usage of such business to bind the firm by negotiable
instruments, or it is necessary for the due transaction
thereof.^ Hence, attorneys who are in partnership have
mandates, we refer you thither, and say only this m general, that when these
parties only act in the name of the society, and by its express warrant, or by
what they have been accustomed to do, in so far they are not only partners,
but mandators, and it hath the same effect, as if the society had acted itself.
But when they act not so, there doth only arise an obligement upon the
partners-actors to communicate ; in the mean time the property remaineth
in the actors ; and if transmitted to others before this communication, the
society will be thereby excluded, but the actors will remain obliged for rep-
aration of the damage and interest of the society. And this will hold,
though things be bought or acquired by the common money of the society ;
but all the natural interest, birth, fruits, and profit of the society, is of it-
self and instantly, common to the society." Stair's Inst. B. 1, tit. 16, § 6,
p. 159.
> Both, de Soc. n. 100, 101. [But see Xewton v. Boodle, 3 C.B. 795;
post, § 202.]
2 Hedley v. Bainbridge, 3 Q. B. 316, 321 ; {Tappan v. Bailey, 4 Met.
529.}
=» {Dickinson v. Valpy, 10 B. & C. 128; Brown v. Byers, 16 M. & W.
252 ; Greenslade v. Dower, 7 B. & C. 635 ; Nicholson v. Ricketts, 2 E. & E.
497 ; Crosthwait v. Ross, 1 Humph. 23 ; Gray v. Ward, 18 111. 32 ; Lind. on
P. 214. See Kimbro v. Bullitt, 22 How. 256.}
CHAP. VII.] POWERS AND AUTHORITIES. 189
110 implied authority to become parties to negotiable
instruments, and to bind the firm thereby.^ The author-
ity to do such acts must in such cases be either express-
ly given, or be recognized as proper and necessary, or
in the usual course of the particular business of that
firm.-
§ 103. This doctrine of the common law, as to the
general right and authority of each partner to bind the
firm, and act for the firm in all partnership transactions,
equally applies to all cases of partnership in trade,
whether the partners be all known, or some be secret
or dormant partners.^ It doubtless has its foundation in
' [So an attorney has no implied power, as such, to bind his partner
by receiving money to lay out on security for the depositor, and to hold
the money in his hands until an opportunity offers for laying it out. Har-
man v. Johnson, 2 E. & B. 61, 18 Eng. L. & Eq. 400;] {Breckinridge v.
Shrieve, -i Dana, 375. See Atkinson v. Mackreth, Law Rep. 2 Eq. 570 ;
Alliance Bank i'. Tucker, 15 Weekly Eep. 992. See § 126. An attorney
has no implied authority to bind his copartners by a post-dated check, drawn
in the firm name. Forster v. Mackreth, Law Rep. 2 Ex. 163.}
2 Hedley v. Bainbridge, 3 Q. B. 316, 321.
^ Dormant partners ai'e bound by the written unsealed contracts of the
ostensible partners, as much as by their parol contracts ; but not, for tech-
nical reasons, by their sealed contracts. {See § 117-122.} Beckham v.
Drake, 9 M. & W. 79, s. c. 11 M. & W. 315, overruling Beckham v. Knight,
4 Bing. N. C. 243 ; s. c. 1 Man, & G. 738. See Swan v. Steele, 7 East, 210 ;
Sandilands r. Marsh, 2 B. & Aid. 6 73; U. S. Bank v. Binney, 5 Mason,
176; s. c. 5 Pet. 529; Coll. on P. B. 3, c. 1, p. 259, 2d ed. The whole
doctrine is well summed up by Mr. Chief Justice Marshall, in the case of
Binney v. U. S. Bank, 5 Pet. 529, 561, where he states the reasons of the
general rule, and the application of it to dormant partnershiji. Immediately
after the passage already cited (ante, § 102, note), he added as follows: " The
counsel tor the plaintifi' in error supposes, that though tliese principles may
be apphcable to an open avowed partnership, they are inapplicable to one
that is secret. Can this distinction be maintained ? If it could, there would
be a difference between the responsibility of a dormant partner, and one
whose name was to the articles. But their responsibility, in all partnership
transactions, is admitted to be the same. Those who trade with a firm on the
credit of individuals, whom they believe to be members of it, take upon
themselves the hazard that their belief is well founded. If they are mistaken,
they must submit to the consequences of their mistake ; if their belief be
verified by the fact, their claims on the partners, who were not ostensible, are
190 PARTNERSHIP. [cHAP. VII.
common convenience and public policy in regard to
all commercial operations, if indeed in a general view
it might not be deemed almost a matter of moral neces-
sity in the enlarged intercourse and trade of modern
nations. If it were not admitted, then, it would be ne-
cessary, that every partner should expressly agree to or
confirm every transaction affecting the partnership be-
fore it could acquire any absolute obligation, or be con-
clusive upon the partnership. The absence, or illness,
or remote residence, of a single partner might greatly
delay and retard, if it would not prostrate the best con-
certed enterprise or bargain ; and before any negotiation
could be completed, it would be indispensable, that the
other contracting party should first by inquiry ascertain
who all the parties were in any particular firm, and
as valid as on those whose names are in the firm. This distinction seems to
be founded on the idea, that, if partners are not openly named, the resort to
them must be connected with some knowledge of the secret stipulations be-
tween the partners, which may be inserted in the articles. But this certainly
is not correct. The responsibility of unavowed partners depends on the
general principles of commercial law, not on the particular stipulation of the
articles. It has been supposed, that the principles laid down in the third in-
struction, respecting these secret restrictions, are inconsistent with the opinion
declared in the first ; that in this case, where the articles were before the
court, the qnestion, whether this was in its origin a secret or an avowed part-
nership, had become unimportant. If this inconsistency really existed, it
would not affect the law of the case; unless the judge had laid down principles,
in the one or the other instruction, which might aifect the party injuriously.
But it does not exist. ♦ The two instructions were given on different views of
the subject, and apply to different objects. The first respected the parties to
the firm, and their liability, whether they were or were not known, as mem-
bers of it ; the last applies to secret restrictions on the partners, which
change the power held out to the world, by the law of partnership. The
meaning of the terms ' secret partnership,' or the question, whether this did
or did not come within the definition of a secret partnership, might be unim-
portant ; and yet the question, whether a private agreement between the
partners, limiting their responsibility, was known to a person trusting the
firm, might be very important." See also Watson on P. c. 5, p. 168-174, 2d
ed. Furze v. Sharwood, 2 Q. B. 388, 417; [and it exists so long as the
relation continues, notwithstanding the objection of the other partners.
AVIlkins v. Pearce, 5 Denio, 541 ; Sage v. Sherman, 2 Comst. 417.]
CHAP. VII.] POWERS AND AUTHORITIES. 191
whether they had all deUberately assented thereto. The
arrangements of commerce, which are now accomplished
in a single hour or day, might thus require whole weeks,
or even months, before they could be matured or estab-
lished.^ To avoid this difficulty, the common law has
adopted a very satisfactory, and at the same time a very
facile rule. It decides, that in the absence of any known,
controlling stipulation between the parties, each partner
shall be deemed invested by the consent of all of them
with an equal and complete power of administration of the
whole partnership property, funds, and affairs. It gives
to all and each of the partners, what the Roman law
allows to be delegated to one by a special authority, the
entire administration of all the partnership business, and
thereby, as such admistrator, he may act for the whole,
and in the name of the whole. Si ijlures exerceanU
unmn autem de numero suo raagistrwni fecerint^ hujus
nomine in soUdum j^otenmt conveniri.^
§ 104. It has, therefore, been well remarked by a
learned writer, that, " Although the general rule of law
is, that no one is liable upon any contract, except such
as are privy to it ; yet this is not contravened by the
liability of partners, as they may be imagined virtually
present at, and sanctioning the proceedings, they singly
enter into in the course of trade ; or, as each is vested
with a power, enabling them to act at once as principals,
and as the authorized agent of their copartners. It is
for the advantage of partners themselves, that they are
thus held liable, as the credit of their firm in the mer-
cantile world is hereby greatly enhanced, and a vast fa-
cility is given to all their dealings ; insomuch, that they
may reside in distant parts of the country, or in different
1 Wats, on p. c. 4, p. 16G, 1G7, 2d cd. ; Gow on P. c. 2, § 2, p. 36, 37. 3d
ed. ; Coll. on P. B. 2, c. 2, § 1, p. 128, 129:
2 D. 14, 1, 4, 1 ; Civil Code of France, art. 1836, 1857.
192 PARTNERSHIP. [cHAP. VII.
quarters of the globe. A due regard to the interests of
strangers is at the same time observed ; for, where a
merchant deals with one of several partners, he goes
upon the credit of the whole partnership, and therefore
ought to have his remedy against all the individuals who
compose it."^
§ 105. Whenever, therefore, credit is given to a firm,
within the scope of the business of that firm, whether
the partnership be of a general or of a limited nature, it
will bind all the partners, notwithstanding any secret
reservations between them, which are unknown to those
who give the credit. And no subsequent misappUcation
of the fund by the partner procuring it, to which the
creditor is not a party, or privy, will exonerate them
from liability. Thus, for example, if one partner should
borrow money on the credit of the firm, which he should
subsequently misapply to his own private purposes with-
out any knowledge or connivance on the part of the
lender, the firm would be bound therefor.^
§ 106. Nor will it make any diff'erence in cases of
this sort, as to third persons, whether the partnership
is carried on for the benefit of the partners themselves
alone, or for the benefit of others, who are the cestids
que trusty or beneficiaries. In each case the trustees
and the cestuis que finest, or beneficiaries, will be equally
bound by the acts of a single partner, and equally liable
therefor to third persons.^ The same rule applies,
whether the partnership is carried on in a firm or com-
1 Wats, on p. c. 4, p. 167, 168. See also Gow on P. c. 2, § 2, p. 36, 37,
3d ed.
* U. S. Bank v. Binney, 5 Mason, 176, 187, 188; Etheridge v. Binney, 9
Pick. 272, 274, 275; Winship v. Bank of U. S. 5 Pet. 529; [Buckner v.
Lee, 8 Ga. 285, 291.]
^ Coll. on P. B. 3, c. 1, p. 260; Thicknesse v. Bromilow, 2 Cromp. & J.
425; Clavering v. Westley, 3 P. Wms. 402; Furze v. Sharwood, 2 Q. B.
388, 417, 418. {But see § 70.}
CHAP. VII.] POWERS AND AUTHORITIES. 193
pany name, or in the name of one partner only. If in
the name of the partner only, it will, however, be ne-
cessary to show, that the transaction was in the business,
or upon the credit of the partnership, and not of that
partner alone. ^
§ 107. The like rule applies to other acts, done by any
partner, touching the partnership business, and to any
acknowledgments, representations, declarations, admis-
sions, or undertakings of any partner relating thereto.
Thus the representation of any fact, or a misrepresen-
tation of any fact, made in any partnership transaction,
by one partner, will bind the firm.^ So, the acknowl-
edgment of one partner, during the continuance of the
partnership, of a debt, as due by the partnership, will
amount to a promise, binding on the firm. So, the ad-
mission of any fact, by one partner, material as evidence
in a suit, will, under the like circumstances, be deemed
the admission of all the partners.^ So, a part payment
of a debt of the firm, by one partner, will not only
extinguish 2^'f'o tanto the partnership debt, but will,
under the like circumstances, operate as an admission
of the existence of the residue of the debt, binding on
' Coll. on P. B. 3, c. 1, § 2, p. 270-277, 2d ed. ; Baker r. Charlton, 1
Peake, 80; 1 Mont, on P. p. 37, note (c) ; 2 Bell, Comm. B. 7, p. 615-618,
5th ed. ; Swan v. Steele, 7 East, 210; {Davison v. Robertson, 3 Dow. 218.}
U. S. Bank i-. Blnney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; [Buckner v. Lee, 8
Ga. 285]; Etheridge v. Binney, 9 Pick. 272; Ex parte Bolitho, Buck, 100;
South Carolina Bank v. Case, 8 B. & C. 427; Manuf. & Mech. Bank v.
Winship, 5 Pick. 11 ; Mifflin v. Smith, 17 S. & R. 165; Furze v. Sharwood,
2 Q. B. 388, 417, 418. This last case involved the same point as was
decided in U. S. Bank v. Binney, 5 Mason, 176, and it was decided the same
way. {See §139.}
- Gow on P. c. 2, § 2, p. 55, 3d ed. ; Id. 129, 130; Rapp v. Latham, 2 B.
& Aid. 795 ; Coll. on P. B. 3, c. 1, § 4, p. 290 ; Id. § 5, p. 296-298, 2d ed. ;
Lucas V. De la Cour, 1 M. & S. 249 ; [Blair v. Bromley, 5 Hare, 542.]
3 [Pope V. Risley, 23 Mo. 185]; {Wickham v. Wickham, 2 K. & J. 478 ;
Folk t'. Wilson, 21 Md. 538; Gordon v. Bankard, 37 111. 14 7. See Wells v.
Turner, 16 Md. 133.}
13
194 PARTNERSHIP. [cHAP. VII.
the partnership.^ So, the acts of joint proprietors of
stage coaches, in relation to their partnership concerns,
will be deemed the acts of all of them, and binding on
ali.^ So, notice to or by one of a firm is deemed notice
to or by all of them. ^
§ 108. The principle extends further, so as to bind
the firm for the frauds committed by one partner in the
course of the transactions and business of the partner-
ship, even when the other partners had not the slight-
est connection with, or knowledge of, or participation
in the fraud ; "* for (as has been justly observed), by form-
ing the connection of partnership, the partners declare
themselves to the world satisfied with the good faith
and integrity of each other, and impliedly undertake to
be responsible for what they shall respectively do withm
the scope of the partnership concerns. •" Hence, if in
the business of the partnership, money is received, partly
by one of the firm and partly by another, to be laid out
1 Coll. on P. B. 3, c. 1, § 4, p. 282-286, 290, 2d ed. ; Lacy v. M'Neile, 4 Dowl.
& R. 7; Pittam v. Foster, 1 B. & C. 248; Burleigh v. Stott, 8 B. & C. 36.—
The authorities are all agreed on this })oint, during the existence of the
partnership. But whether such an acknowledgment or admission, or promise,
or payment by one partner, after the dissolution of the firm, will bind the
others, is a matter upon which there are conflicting authorities ; and the point
will be hereafter discussed in another connection. See Bell v. Mori-ison, 1
Pet. 351, 373; 3 Kent, 49, 50; Whitcomb r. Whiting, 2 Doug. 652; Brisban
V. Boyd, 4 Paige, 1 7. { On the law under the jjresent Statutes of Limitations
in England, see Lind. on P. 370-379.}
2 Coll. on P. B. 3, c. 1, § 4, p. 287, 288, 2d ed.; Helsby v. Hears, 5 B.
& C. 504.
=» Coll. on P. B. 3, c. 1, § 4, p. 290-292, 2d ed. ; Bignold v. Waterhouse,
1 M. & S. 255 ; [Haywood i'. Harmon, 17 111. 477 ; Bouldin v. Page, 24 Mo.
594] ; { Spaulding v. Ludlow Woollen Mill, 36 Vt. 150 ; State v. Linaweaver,
3 Head, 51 ; Lind. on P. 230-232. See Baldwin v. Leonard, 39 Yt. 260;
Herbert v. Odlin, 40 N. H. 267.}
« [Pierce v. Wood, 3 Post. 519; Locke v. Stearns, 1 Met. 560]; {See
§ 131, 166.}
5 Gow on P. c. 2, § 2. p. 55, Id. c. 4, § 1, p. 146-148, 3d ed. ; Coll. on P.
B. 3, c. 1, § 5, p. 293-304, 2d ed. ; Wats, on P. c. 4, p. 1 75, 2d ed.
CHAP. Yll.] POWERS AND AUTHORITIES. 195
Upon a mortgage, and a mortgage is forged by one part-
ner, without the knowledge of the other, the innocent
partner will be liable for the whole money. ^ So, if repre-
sentations of certain facts, as existing, are fraudulently
made by one partner, unknown to the others, in the
partnership business, and the facts never existed, but
the whole statement is a mere fiction, the firm will be
bound to the same extent, as if it were true, and the
facts existed.^ This whole doctrine proceeds upon the
intelligible ground, that, where one of two innocent
persons must suffer by the act of a third person, he
shall suffer, who has been the cause or occasion of the
confidence and credit reposed in such third person.
§ 109. The French law has adopted a rule essential-
ly the same as that of the common law. The admin-
istration of the affairs of the partnership may be
delegated or intrusted to one or more of the partners.^
But in the absence of any stipulation to this effect, the
partners are deemed to have given reciprocally to each
1 {§ 166, 168}; Willett v. Chambers, Cowp. 814; Stone v. Marsh, Ry. &
Moo. 364; 6 B. & C. 551 ; Hume v. Bolland, Ry. & Moo. 371 ; Keating v.
Marsh. 2 CI. & Fin. 250 ; Manuf. & Mech. Bank v. Gore, 15 Mass. 75 ; Board-
man V. Gore, 15 Mass. 331 ; [Blair v. Bromley, 5 Hare, §42, s. c. 2 Phil. 354.
But see Sims v. Brutton, 5 Exch. 802, 1 Eng. L. & Eq. 446]; {Devaynes v.
Noble, 1 Mer. 572, 611; Brydges v. Branfill, 12 Sim. 369. Ex parte Bid-
dulph, 3 De G. & Sm. 587; Sadler v. Lee, 6 Beav. 324; De Ribeyre v.
Barclay, 23 Beav. 107; Eager v. Barnes, 31 Beav. 579; Atkinson v. Mack-
reth, Law Rep. 2 Eq. 570 ; Sawyer v. Goodwin, 15 Weekly Rep. 1008 ; s. c.
36 L. J. Ch. 578, St. Aubyn v. Smart, Law Rep. 5 Eq. 183, But see § 168,
note; also Harman v. Johnson, 2 E. & B. 61.}
- Rapp V. Latham, 2 B. & Aid. 795 ; Hume v. Bolland, Ry. & Moo. 371 ;
[Beach v. State Bank, 2 Ind. 488 ; Doremus v. McCormick, 7 Gill, 49 ; Sweet
V. Bradley, 24 Barb. 549 ; Hawkins v. Appleby, 2 Sand. 421] ; { Griswold v.
Haven, 25 N. Y. 595 ; French v. Rowe, 15 Iowa, 563.} [And in Eipiity the
limitation in bar of the claim in such Ccises does not begin to run until the time
of the discovery of the fraud. Blair v. Bromley, 5 Hare, 542, s. c. 2 Phil.
354. See Sims v. Brutton, 5 Exch. 802, 1 Eng. L. & Eq. 446.]
* Code Civil, art. 1856, 1857; Poth. de Soc. n. 66, 67, 89, 90, 96, 98;
Poth. on Oblig. n. 83; Code of Louisiana (of 1825), art. 1841.
196 PARTNERSHIP. [cHAP. VII.
other the power of administering the one for the other ;
and what each one does is vaHd even for the share of
his partners, without his having obtained their consent.^
» Code Civil, art. 1859; Poth. de Soc. n. 90-100; Poth. on Oblig. n. 83,
89. — Pothier (on Oblig. n. 83) has expounded tlie reason of this doctrine
exactly as it would be stated at the common law. " We are also deemed to
contract by the ministry of our partners, when they contract, or are regarded
as contracting for the affairs of the partnership. For, by entering into the
partnei-ship with them, and permitting them to transact the business of it, we
are deemed to have adopted and approved beforehand of all the contracts,
which they may make for the affairs of the partnership, as if we had con-
tracted jointly with them, and we have acceded beforehand to all the conse-
quent obligations. A partner is deemed to contract for the affairs of the
partnership, whenever he adds to his signature the words, and Company,
although afterwards the contract does not turn to the benefit of the pai'tner-
ship. For instance, if he borrows a sum of money, for which he gives a note
with the words, and Company^ added to his signature, although he has em-
ployed the money in his private affairs, or lost it at play, he is still deemed to
have contracted for the affairs of the partnership, and consequently obliges
his partners as having borrowed the money jointly with him, and as having
contracted by his ministry. For his partners must take the consequence of
having entered into their engagement with such a person ; but those, who
contract with him, ought not to be deceived and suffer by his want of fidelity.
The signature, and Company, does not, however, oblige my partners, if it
appears by the very nature of the contract, that it does not concern the
affairs of the partnership ; as if I put that signature to the lease belonging to
myself and not to the company. AVhen the partner does not sign and
Company, he is deemed to have only contracted for his own private affairs,
and does not bind his partners, unless the creditor shows by other proof, that
he contracted in the name of the partnership, and that the contract actually
related to the partnership affairs." See also Story on Ag. § 124, note (1),
and Poth. on Oblig. n. 44 7, 448; Poth. de Soc. n. 96. Mr. Bell in his
learned Commentaries (2 Bell, Comm. B. 7, p. 611, 5th ed.) has made some
very appropriate remarks on the state of the Roman law. " Partnership is
thus a contract involving important relations to the public, as well as to the
contracting partners. In the infancy of trade it is little regarded or under-
stood ; and no proofs perhaps are more decisive of the low state of
mercantile intercourse in Rome, than the very imperfect state of the
Roman jurisprudence with respect to partnership. In the simple view of
partnership as a mere society, in all that relates to the shares of parties
accidentally associated as joint proprietors, or the rules of contribution
and division in the management of a common stock or concern, there is
no defect in the Roman law. But the subject is never contemplated in
that more delicate and important light, which presents for decision the
interests and dealings of the company with third parties, and the powers
CHAP. VII.] POWERS AND AUTHORITIES. 197
In these respects the French law differs (as has been
already suggested) from the Roman law ; for the latter
did not ordinarily clothe one partner (any more than
any other agent) with the power of generally adminis-
tering the affairs of the partnership, unless it was
especially delegated and confided to him. Under other
circumstances, each one could act only for his own
share, and so bind himself.^ Nemo ex sociis plus parte
sua p)otest aUenare, efsi totofntm honorum socii sint.^
Item magistri societatum p)actum et p)Todesse et ohesse
constat.^ Si socius p)^^opriam. pecuniam mutuam dedit,
omnimodo creditam, [jpemniam^ faeiL licet ceteri dissen-
serint. Quod si coinmunem [^pecuniani] numeravit, non
of partners to pledge the stock and credit of the society with the indi-
vidual responsibility of the partners. In modern times, the effects of this
contract, in its relations to third parties, are by far the most important.
The question in this view is, not what share or profit, or what proportion
of loss, upon a common stock, each partner is to gain or to suffer; but
what are the rights of those, who deal with the company, in claiming
preferably on its common stock, and what responsibility is undertaken by the
several j^ai'^ners for contracts bona fide entered into by third parties ? In
this inquiry, be the reciprocal rights and liabilities of the partners what they
may in respect to each other, they each, in their relation to the public, hold
an authority, which no force of private stipulation can alter or restrain ; and
by means of which, in the face of the most express injunctions or prohibitions
of their contract, the several partners, or even those jjerhaps, who may long
have left the partnership, may, by the act of any one of the number, be made
responsible to third jjarties to the whole extent of their private fortune. It
is in this view chieliy, that definitions of partnership (which, like all others,
are proverbially dangerous, seldom useful) are to be received with peculiar
caution, if borrowed or derived from the writings of the civilians; who neg-
lect almost entirely the implied power and unlimited mandate of the partners
to bind the rest. Even in the writings of some modern lawyers, this limited
character appears in their definitions of partnership, while their doctrine ex-
tends to consequences which are not presented prominently in the descrip-
tion." See post, last note of this section.
' Poth. Pand. 17, 2, n. 26-29; Domat, 1, 8, 4, art. 16; D. 17, 2, 68;
Story on Ag. § 124, note (1) ; Id. § 425-427 ; ante, § 102.
'- D. 17, 2, 68; Poth. Pand. 17, 2, n. 26, 27.
* D. 2, 14, 14; Poth. Pand. 2, 14, n. 46; Domat, 1, 8, 4, art. 16; Poth.
de Soc. n. 89.
198 PARTNERSHIP. [CHAP. VII.
alias creditam efficit^nisi ceteri quoque consentiant ; quia
Slice j^a^tis tantutn alienatlonem hahuit} This delega-
tion of the administration of the partnership, or assent
to any contract made by one partner, need not, under
the Roman law, be express ; but might be implied from
circumstances. But it has been a matter of no small
discussion among the civilians, what circumstances were
sufficient for such a purpose.^
^ D. 12, 1, 16; Poth. Pand. 12, 1, n. 12; Domat, 1,8, 4, art. 16.
^ Story on Ag. § 124, n. (1); Poth. de Soc. n. 96. — In these respects
the Roman law seems to have followed out its own doctrines respecting
the rights, duties, and obligations of principals and agents. The follow-
ing statement of the general provisions of that law on this subject may
not be unacceptable. By the Roman law, as it originally stood, the prin-
cipal could not ordinarily sue or be sued on the contract made through the
instrumentality of his agent ; but the latter was generally treated as the
proper and sole contracting party. This was subsequently altered by the
edicts of the Praetor, so far as it respected the rights of third persons to
institute suits against the principal, in cases falling within the reach of the
exercitorial and institorial actions. But the exercitorial action did not lie
in favor of the owner or employer {exerciloi') against the other contracting
party. He was not, however, without a remedy ; for, if there was a con-
tract of hire with the master, the owner or employer might recover the
hire in a direct action ex locato ; if it was a gratuitous contract, he might
maintain an action ex mandato. So the Digest has declared. Sed ex con-
trarioy exercenti naveni adversus eos, qui cum magistro contraxerunt, actio
non pollicetur, quia non eodem auxilio indigebat ; sed. aut ex locato cum
magistro, si mercede operam ei exhibet ; aut si gratuitam, mandati agere
potest. The institorial action was, also, in its terms apparently limited to
suits against the principal, ^quum Prcelori visum est, sicut commoda sen-
timus ex actu institorum, ita etiam ohligari nos ex contractibus ipsorum et
conveniri. But no like action lay against the other contracting party by the
principal. However, he was not without remedy ; since, by a cession of the
right of action from the institor, he might, in some cases, maintain a suit
founded thereon against the other party. Sed non idem facit circa eum,
qui institorem prceposuit, ut experiri possit: sed, si quidem servum proprium
institorem habuit, potest esse securus, acquisitis sibi action ibus ; si autem
vel alienum servum, vel etiam Jwminem iiherum, actione dejicietur. Ipsum
tamen institorem, vel dominum ejus convenire poterit, vel mandati, vel
negotiorum gestorum. It is added : Marcellus autem ait, debere dari
actionem ei, qui institorem prceposuit, in eos, qui cum eo contraxerint. And
Gains held, that the principal might maintain the suit, if he could not other-
wise vindicate his right ; Eo nomine, quo institor contraxit, si modo aliter rem
CHAP. YII.] POWERS AND AUTHORITIES. 199
§ 110. The limitations at the common hiw, upon this
authority of each partner to bind the partnership, may
siiam servare non potest. In special cases, also, where the contract, made
through an agent, was declared to be directly obligatory between the princi-
pal and the other contracting party (as, for example, in case of a sale), the
principal might maintain a direct action thereon. Thus, the Digest puts it :
Si prociwato?- vendiderit, et caverit emptori ; quceritur, an domino, vel adversus
dominum actio dari debe.at ? Et Papinianus (Lib. 3, Responsorum)/jM^o/, cu7n
domino ex empto agi posse utili actione, ad exemplum institorim actionis si mode
rem vendendam mandavit ; ergu et per contrariuyn, dicendum est^ utilem ex empto
actionem domino competere. But, except in these and a few other cases, the
general rule seems to have prevailed in the Roman law, that reciprocal
actions lay in cases of agency only between the direct and immediate
parties thereto. The modern nations of continental Europe seem, with
great wisdom, to have adopted the general doctrine of allowing reciprocal
actions between the principal and the other contracting parties, where it
is not excluded by the nature, or express terms of the contract. The
rights of principals against third persons, arising from the acts and con-
tracts of their agents, may be further illustrated by the consideration of
payments made to or by the latter. And, first, in relation to payments
made to agents. Such payments are good, and obligatory upon the prin-
cipal in all cases, where the agent is authorized to receive payment, either
by express authority, or by that resulting from the usage of trade, or from
the particular dealings between the parties. In such cases, the maxim of
the Roman law is justly apj^lied ; Quod jussu alterius solvifw, pro eo est,
quasi ipsi solutitm esset. But, the principal may intercept such payment,
by giving notice to the debtor not to pay to the agent, before the money
is paid ; and, in such a case, if the agent has no superior right, from a lien
or otherwise, any subsequent payment, made to the agent, will be invalid,
and the principal may recover the money from the debtor. Story on Ag.
§ 425-429; Id. § 163, 261, 271. See, also, on this subject, Poth. on Oblig. n.
54-84, and especially n. 82, 83, 447, 448. Pothier (n. 82) says: " AVe con-
tract through the ministiy of another, not only when a person merely lends
us his ministry by contracting in our name and not in his own, as when we
contract by the ministry of a tutor, curator, agent, &c., in their quality as
such. We are also deemed to contract by the ministry of another, though
he contracts himself in his own name, when he contracts in relation to the
affairs which we have committed to his management ; for we are supposed to
have adojited and approved, beforehand, of all the contracts, which lie may
make respecting the affairs committed to him, as if we had contracted our-
selves, and are held to have acceded to all the obligations resulting therefrom.
Upon this principle is founded the actio exercitoria, which those, who have
contracted with the master of a ship for matters relative to the conduct
of such ship, have against the proprietor, who has ai)pointed the master.
Upon the same principle is founded the actio institoria, which tliose, who
200 PARTNERSHIP. [cHAP. VII.
be readily deduced from what has been ah'eady stated.
The authority can be exercised only in cases falling
within the ordinary business and transactions of the
firm, where the other party has no knowledge or
notice, that the partner is acting in violation of his
duties and obligations to the firm, or for purposes
disapproved of by the firm, or in fraud of the rights
thereof.^
§ 111. In the first place, the authority, to be valid,
must be exercised in cases within the scope of the
ordinary business and transactions of the firm.^ Thus,
for example, in cases of factorage, it is a common, al-
though not an invariable usage, to guaranty the solven-
cy of the purchasers on sales made by the factor, and
to receive therefor a commission del credere ; and this
would be deemed an authority within the scope of a
partnership, formed for factorage purposes, although it
could not be shown, that the partners had stipulated
for that power in their articles of partnership, or even
if they had excluded it by such articles, if it was un-
known to the principal, for w^hom they were dealing.^
have contracted with the manager of a commercial concern, or a manu-
factory, have against the employer {le commettant) ; and the actio utilis
insliloria, which relates to contracts made with a manager, of any other
kind. Observe, there is a difference between these managers, and tutors,
curators, syndics, &c. When these managers contract, they contract
themselves, and enter into a personal obligation. Their employers are only
regarded as accessory to their contracts, and to the obligations resulting
from them ; whereas the others do not contract themselves, but only afford
their ministry in contracting, and therefore do not oblige themselves, but
only those who contract by their ministry." See ante, first note of this
section.
> Coll. on P. B. 3, c. 1, p. 259-282, 2d ed.; Story on Ag. § 125; Ex
parte Agace, 2 Co.x, 312; Wats, on P. c. 4, p. 180, 2d ed.; Farrar v. Hutch-
inson, 9 Ad. & E. 641.
2 Wats, on P. c. 4, p. 180, 194, 2d ed. ; Sandilands v. Marsh, 2 B. & Aid.
673, 679. {See § 126, 127,}
3 See Sandilands v. Marsh, 2 B. & Aid. G73 ; Coll. on P. B. 3, c. 1, § 3,
p. 27'J-281 ; Hope v. Cust, 1 East, 53 ; Ex parte Nolte, 2 Glyn & J. 295.
CHAP. VII.] POWERS AND AUTHORITIES. 201
So, it is the common course of business for persons
engaged in the purchase and sale of horses, to give a
warranty on sales made by them ; and therefore a war-
ranty, made in the course of such business by one
partner, would bind the partnership, notwithstanding
the articles prohibited such warranty, if the purchaser
were unacquainted therewith.^ On the other hand,
where it is not the common course of the business, in
which a partnership is engaged, to give letters of
guaranty or of credit, if one partner should give such
a letter of guaranty or credit, it would not be binding
on the firm, although given in the name thereof.^
§ 112. For the like reason, if one partner should in
the name of the firm make purchases of goods, not
connected with the known business of the firm, such
purchases would not bind the partnership. Thus, for
example, if a partnership is engaged in the mere busi-
ness of selling dry goods by wholesale or retail, uncon-
nected with navigation, a purchase of a ship by one
partner, in the name of the firm, would not be binding
on the other partners, unless they should assent thereto.
So, if persons are engaged in the mere business of tal-
low chandlers, as partners, a purchase of a cargo of
flour, or of pepper, or of coff"ee, or of other things by
one partner, wholly beside the business of the firm,
would not bind the other partners. But if the articles
were such as might be applied or called for in the
1 Coll. on p. B. 3, c. 1, § 260; Sandilands v. Marsh, 2 B. & Aid. 673,
679, per Abbott, C.J.
« Coll. on P. B. 3, c. 1, § 3, p. 279, 280 ; Hope v. Cust, 1 East, 53 ; Dun-
can V. Lowndes, 3 Camp. 478: [Hasleliam v. Young, 5 Q. B. 833. And
although sucli guaranty might be convenient and reasonable for accomplish-
ing the objects of the partnership, it would not be binding upon the other
partners without their recognition or adoption, unless it was reasonably
necessary for the business of the partnership. Brettel v. Williams, i Exch.
623. Overruling whatever is contrary in Ex parte Gardora, 15 Ves. 286.]
{See§ 127.}
202 PARTNERSHIP. [cHAP. VII.
ordinary course of their business, the purchase of such
articles would bind the firm, even though they were
unnecessary at the time, or were bought contrary to
the private stipulations between the partners, or were
not designed to be used in the partnership at all, if the
vendor were not acquainted with the facts.
§ 113. The real difficulty in many cases of this sort
is to ascertain what contracts, engagements, and acts
are properly to be deemed within the scope of the par-
ticular partnership, trade or business ; for these are not
exactly the same in all sorts of trade or business.^ On
the contrary, in many cases, rights, powers, and author-
ities over the partnership property and partnership
concerns exist either by usage, or by general under-
standing, or by natural implication, which are wholly
unknown in others. To answer the inquiry, then, sat-
isfactorily, it is not enough to show, that in other trades
or other business, certain rights, powers, and authorities
are incident thereto, and may be lawfully exercised by
each of the partners ; but we must see, that they ap-
propriately belong to, or are, by usage or otherwise,
implied or incidental to the particular trade or business
in which the partnership is engaged.-
§ 114. Having enumerated some of the general
powers and authorities, which ordinarily belong to
partnerships, and the general limitations thereof (a
' {1 Am. Lead. Cas. 407, 442, 4th ed. Some of the later cases in
■which questions as to the scope of a partnership business have arisen are
London, &c., Society v. Hagerstown, &c.. Bank, 3G Penn. St. 498 ; Thompson
V. Franlcs, 37 Penn. St. 327 ; Livingston v. Pittsburgh R. R. Co. 2 Grant's
Cas. 219 ; Maltby v. N. W. Va. R. R. Co. 16 Md. 422 ; Cadwallader v.
Kroesen, 22 Md. 200; Freeman v. Carpenter, 17 Wis. 126.}
^ Dickinson v. Valpy, 10 B. & C. 128. {Mr. Lindley is of opinion that
such powers nuist be necessary in order that the firm may be bound. Lind.
on P. 193-195 ; and see Brettel v. Williams, 4 Exch. 623 ; Hawtayne v.
Bourne, 7 M. & W. 595 ; Ex jmrte Chippendale, 4 De G. M. & G. 19. }
CHAP. VII.] POWERS AND AUTHORITIES. 203
subject which will more fully occur hereafter in other
connections), it may be proper here to state, in further
illustration of the foregoing remarks, what powers and
authorities are not ordinarily deemed to be within the
scope of partnerships, and which therefore require some
special delegation or solemn instrument to confer them.
And, in the first place, it may be laid down as a gen-
erally recognized principle, that one partner has no
power or authority to submit or refer to arbitration
any matters whatsoever, concerning or arising out of
the partnership business.^ The reason assigned is, that
it is not within the scope of the ordinary business or of
the powers or authorities necessary or proper to carry
on the business of the partnership.^ Another reason is,
that the award may call upon the partners to do acts,
which they might not otherwise be compellable to per-
form.^ But the soundest reason seems to be, that, as it
' Com. Dig. Arbitrament, D. 2 ; 2 Bell, Comm. B. 7, p. 618, 5th ed. ;
Stead V. Salt, 3 Bing. 101 ; Hambidge v. De la Crouee, 3 C. B. 742 ; Ad-
ams V. Bankart, 1 Cr. M. & R. 681 ; {Hatton v. Royle, 3 H. & N. 500} ;
Kartbaus v. Ferrer, 1 Pet. 222, 228; Strangford v. breen, 2 Mod. 228;
[Buchoz r. Grandjean, 1 Mich. 367 ; Harrington v. Higham, 13 Barb. 660;
Abbott V. Dexter, 6 Cush. 108 ; Armstrong v. Robinson, 5 Gill & J. 412] ;
Buchanan v. Curry, 19 Johns. 137 ; [Wood v. Shepherd, 2 P. & H. 442] ;
{1 Am. Lead. Cas. 452, 4th ed. See, also. Wesson v. Newton, 10 Cush.
114 ; Horton v. Wilde, 8 Gray, 425 ; McQuewans v. Hamlin, 35 Penn. St.
517} ; 3 Kent, 49; Ersk. Inst. B. 3, tit. 3, § 23. —In Pennsylvania and
Kentucky a different doctrine is established ; that one partner may by an
unsealed instrument refer any partnership matter to ai'bitratioii, which will
bind the partnership. Taylor v. Coryell, 12 S. & R. 243 ; Southard v. Steele,
3 Monr. 435. {So in Illinois, Hallack u. March, 25 111. 48.} See Cotton u.
Evans, 1 Dev. & Bat. Eq. 284; per Lord Abinger in Cleworth v. Pickford,
7 M. & W. 314, 321.
2 Ibid.
3 Gow on P. c. 2, § 2, p. 66 ; Adams v. Bankart, 1 Cr. M. & R. 681. [It
has been decided, that one partner has no implied authority to consent to
an order for judgment in an action against himself and his copartner. Ham-
bidge V. De la Crouee, 3 C. B. 742 ; Binney v. Le Gal, 19 Barb. 592 ;
& Morgan v. Richardson, 16 Mo. 409. {See Rathbone v. Drakeford, 4 Moo.
P. 57 ; Brutton v. Burton, 1 Chitty, 707, 1 Am. Lead. Cas. 452, 4tii ed. Among
204 PARTNERSHIP. [CHAP. VII.
takes away the subject-matter from the ordmary cog-
nizance of the estabHshed courts of justice, which have
the best means to investigate the merits of the case by
proper legal proofs and testimony, and the means of
arbitrators to accomplish the same purposes are very
narrow, and often wholly inadequate, it ought not to
be presumed, that the partners mean to waive their
ordinary legal rights and remedies, unless there be
some special delegation of authority to that eifect,
either formal or informal.^
the later American cases on this point are Shedd v. Bank of Brattleboro',
32 Yt. 709 ; Christy v. Sherman, 10 Iowa, 535 ; Xorth v. Mudge, 13 Iowa,
496. But see Edwards v. Pitzer, 12 Iowa, 607 ; EHiott v. Holbrook, 33
Ala. 659.} And service of a writ on one partner, after dissolution, will not
authorize judgment against the other. Faver v. Briggs, 18 Ala. 478. An
acknowledgment of service of a writ written by one partner in presence of
the other, and with his consent, binds the firm. Freeman v. Carhart, 17
Ga. 348. {See Lind. on P. 227.} An appearance in a suit entered by
an attorney, employed by one of the partners, will be binding and con-
clusive upon the other partners. Bennett v. Stickney, 17 Vt. 531. But
such appearance by an attorney employed by one partner, has been constraed
to be only an appearance for the partners, as partners, and for the purpose
of defending the action against the firm, and not as an appearance for the
partners, individually and severally, and such an appearance will not bind
one partner individually, who is without the jurisdiction, was not served
with process, and did not authorize the appearance, so as to render the
judgment evei-yichere conclusive against him. Phelps v. Brewer, 9 Cush.
390.]
' See Adams v. Bankart, 1 Cr. M. & R. 681 ; Bruen i-. Marquand, 17
Johns. 58 ; 3 Kent, 44 ; [Boyington v. Boyington, 10 Vt. 107.] — Mr. Gow,
in the Supplement to his Treatise on Partnership, London, 1841, c. 2, § 2,
p. 17, says : " In the case of Boyd v. Emmerson, 2 Ad. & E. 184, one ques-
tion was, whether a partner could bind his copartners by a parol submission
to arbitration. But the case being disposed of on other points, it became
unnecessary to decide that question. However, Sir F. Pollock, who had to
maintain the affirmative, in the course of his argument observed, that the
point might be considered as res Integra, and admitted that ' one partner
cannot bind another in a matter of arbitration, where the submission is by
deed ; because, in general, he cannot bind his partner by any deed.' Harrison
V. Jackson, 7 T. R. 207. But it does not follow that one of several persons,
who are general partners, cannot in any way bind the rest by a submission
to arbitration, upon a specific matter of partnership right. One partner
CHAP. YII.] POWERS AND AUTHORITIES. 205
§ 115. It may not perhaps seem very easy to see,
since one partner alone may release, or even compound,
or compromise a partnership debt,^ in what essential
respect the latter power differs from that which re-
spects a submission to arbitration. A release by one
partner certainly binds all the partners, as indeed a
receipt for the debt would ; because, as a debtor may
lawfully pay his debt to one of them,^ he ought also
to be able to obtain a discharge upon due pay-
may bring, or settle an action on behalf of the rest. Furnival v. Weston,
7 J. B. Moore, 356 ; Harwood v. Edwards, Gow on P. 65, note (g), 3d ed.
Why may he not enter into an agi'eement to refer the subject-matter ? And
if so, why may not one agree, on behalf of the rest, to be governed by an
opinion, in which both they and the opposite party may confide? In Strang-
ford V. Green, 2 Mod. 228, the submission appears to have been by arbitra-
tion bond, and therefore the partner could not be bound. In Stead v. Salt,
3 Bing. 101, the parties were not partners generally, but only in the dealings,
to which the award related ; the matter was twice referred. In the first
instance, four partners signed the agreement of i-eferenee ; the arbitration
went off, and the new agreement was signed by three only. In the absence
of any explanation, it was reasonable to suppose, that, if both agreements
were signed by the authoi-ity of all the partners, the second would have been
executed by the same number as the first. The passage cited in that case,
from Com. Dig. Arbitrament, J). 2, from which it was implied that a partner
cannot bind his copartner, probably refers to submissions by deed. There
is no ground in reason for sajing, that, in the case of a general partnership
in a banking firm, one partner cannot submit, on behalf of all, to such a
mode of settling a dispute upon a partnership concern as was adopted here.
Suppose the question had been a practical one, as to something to be done
in the course of business, might not a partner have agreed to take the judg-
ment of an experienced person, as a custom-house oflicer, a dock-master,
or an eminent merchant? And if so, why not the opinion of counsel in the
present case ? To hold, that the opinion could not be so taken, would throw
great impediments in the way of a very common, useful, and economical
mode of settling such disputes." See post, § 122, note.
^ See Gow on P. c. 2, § 2, p. 61, 3d ed., and Ellison v. Dezell, there cited ;
Metcalfe v. Rycroft, 6 M. & S. 75 ; Coll. on P. B. 3, c. 2, § 1, p. 311, 312, 2d
ed. ; [Hambidge v. De la Crouee, 3 C. B. 742] ; {Wallace v. Kelsall, 7 M.
& W. 264 ; Lind. on P. 221, 222. See Nottidge v. Prichard, 2 CI. & Fin.
379. Payment to one partner is a defence to an action at law by the firm,
though the other partner has given notice to the debtor not to pay to such
partner. Koyes v. 2^ew Haven, New London, »& Stonington R. R. Co. 30
Conn. 1. }
206 PARTNERSHIP. [cHAP. VII.
ment.^ There is another technical reason, applicable to
such a case ; which is, that the release certainly operates
as against the partner himself; and if so, since no suit
could be brought for the debt without uniting him as
plaintiff, the release of one plaintiff would necessarily
bar the action as to the others.^ The compromise of
a debt, by taking less than its nominal amount, seems
to be an incident to the collection of the debt, and may
fairly, therefore, be deemed within the discretion con-
fided to each partner ; and indeed in practice it is so
ordinarily treated. These cases, therefore, seem clearly
distinguishable from that of a submission to arbitra-
tion, since they steer wide of the objections, which
have been already mentioned, as applicable to the
latter.
§ 116, The Roman law coincides in many respects
with ours on this subject. It admits a release or dis-
charge by one joint creditor to the debtor, or a release
1 Stead V. Salt, 3 Bing. 101 ; Coll. on P. B. 3, c. 2, § l,p. 313, 314; Id.
B. 3, c. 4, § 2, p. 452, 453 ; Id. B. 3, c. 5, § 5, p. 485, 2d ed. ; Pierson v.
Hooker, 3 Johns. 68 ; Wats, on P. c. 4, p. 225, 2d ed. ; Story on Ag. § 49.
■ See Adams w.^Bankart, 1 Cr. M. & R. 681 ; Wats, on P. c. 4. p. 222, 2d
ed. ; Coll. on P. B. 3, c. 2, § 1, p. 311, 312, 2d ed. ; Hawkshawr. Parkins,
2 Swans. 539 ; Halsey v. Whitney, 4 Mason, 206 ; Pierson v. Hooper, 3
Johns. 68 ; Bulkley v. Dayton, 14 Johns. 387 ; Bruen v. Marquand, 17
Johns. 58 ; Ruddock's Case, 6 Co. 25 a ; Salmon t'. Davis, 4 Binn. 375 ;
Napier u. McLeod, 9 Wend. 120. {Arton v. Booth, 4 Moore, 192; Furni-
val V. Weston, 7 Moore, 356 ; Phillips v. Clagett, 11 M. & W. 84. If the re-
lease has been obtained by fraudulent collusion with one of the partners, it
will not be a defence to an action. See § 132 ; Barker v. Richardson, 1 Y. &
J. 362 ; Aspinall v. London & X. W. R. R. Co., 11 Hare, 325 ; 1 Am. Lead.
Gas. 453,4th ed.} But although one partner may release a debt of the
partnership in his own name alone ; yet, if he enters into a covenant in his
own name with a debtor of the partnership, not to sue him therefor, that
is no release of the debt ; and will not prevent a suit from being maintained
by a partner, in the names of all the partners for the debt. The remedy
for tlie debtor in such a case is by a suit against that partner for breach of
his covenant. Walmsley v. Cooper, 3 Per. & Dav. 149 ; s. c. 11 Ad. & E.
216; post, §323, 324.
CHAP. YII.] POWERS AND AUTHORITIES. 207
01" discharge to one joint debtor by the creditor, to be
an extinguishment of the entire contract. Cum duo
eandem pecunimn aut promiser'mt^ aut stijmlati sunt,
ipso jure et singuli in soUdimi dehentur, et singidi de-
hent. Ideoqiie jietltione cicceptilatione unius tota solmtur
ohligatio} And yet by the Roman law it is not compe-
tent for one of two creditors, or for one of two partners,
to compromise a suit, or to submit a controversy touch-
ing their joint demands to arbitration, without the con-
sent of both ; for in such a case each can act only as
the agent of the other ; and a general authority is not
deemed to include such a right. Mandato generali non
contineri etiam trcmsactlonem decidendi causa interpo-
sitam.^ The same doctrine is fully recognized in the
law of France,^ and probably in that of many other
nations of continental Europe.
§ 117. In the next place it is a general rule of the
common law, that one partner, from that mere relation,
cannot bind the others by a deed or instrument under
seal, either for a debt or any other obligation, even
when contracted in the course of their commercial
dealings and business, and within the scope thereof;
unless indeed the authority be expressly given under
the seals of the other partners, and include the very
act done under seal.'' The reason of this rule seems to
• D.45, 2, 2.
'^ D. 3, 3, 60; Domat, 1, 15, 3, art. 11.
3 Poth. de Soc. n. 68.
* Wats, on P. c. 4, p. 218-222, 2ded. ; Coll. on P. B. 3, c. 2, § 1, p. 308-
312, 2d ed. ; Gow on P. c. 2, § 2, p. 57-60, 3d ed. ; 3 Kent, 47-49 ; Story
on Ag. § 49-51 ; Dickerson v. ^Vheeler, 1 Humph. 51 ; Napier v. Catron, 2
Humph. 534; McXaughten v. Patridge, 11 Ohio, 223; [McDonald v. Eg-
gleston, 26 Vt. 154; Snyder «. May, 19 Ponn. St. 235; Henry v. Gates, 26
Mo. 315 ; Remington v. Cummings, 5 Wis. 138] ; {Bowker i\ Burdekin, 11
M. & W. 128 ; Met. on Contr. 124 ; 1 Am. Lead. Cas. 449, 4th ed. But see
Dudgeon v. O'Connell, 12 Jr. E<j. 566. See also Cummings v. Parish, 39
Miss. 412.}
208 PARTNERSHIP. [cHAP. VII.
be purely technical ; and has its origin in the general
doctrine of agency at the common law ; where it is
held, that an agent or attorney cannot execute a deed
or sealed instrument, in the name of his principal, so
as to bind him thereby, as the proper party thereto,
unless the authority is conferred upon him by an in-
strument of equal dignity and solemnity, that is by one
under seal.^ And yet the common law does not seem
in all cases to follow out its own principle ; for it is not
required to execute any instrument or writing, not un-
der seal, that the authority to an agent, or attorney, or
partner, should be in writing. It may be by parol, or
even be implied from circumstances.^ Ordinarily, also,
the dissolution of a contract is required by the common
law to be by an instrument of the same dignity and
solemnity, as that by which it is created.^ Eodem modo^
quo oritur^ eodem modo dissolvitur^
§ 118. The Roman law seems to have acted upon
one uniform principle, if not in the formation of con-
tracts, at least in the dissolution of contracts ; that is to
say, that they might and ought to be dissolved in the
same mode in which they were created. Nihil tarn
naturale est, cfiiam, eo genere quidque dissolvere, quo
coUigatum est. Ideo verhorimi ohligatio verbis tollitur ;
nudi consensus ohligatio contrario consensu dissolvitur.^
1 Story on Ag. § 49 ; Co. LItt. 48, b. ; Harg. note 2 ; Harrison v. Jack-
son, 7 T. R. 207 ; Paley on Ag. by Lloyd, 157, 158 ; 2 Kent, 613 ; 3 Kent, 47,
48; Green v. Beals, 2 Caines, 254; Clement v. Brush, 3 Johns. Cas. 180;
Skinner I). Dayton, 19 Jolms. 513; Berkeley v. Hardy, 5 B. & C. 355;
Gow on P. c. 2, § 2, p. 58-60, 3d ed. ; U. S. v. Astley, 3 Wash. C. C. 508 ;
\_Ex parte Bosanquet, 1 De Gex, 432.]
2 Story on Ag. §50, 51 ; Coles v. Trecothlck, 9 Ves. 234, 250; 2 Kent,
613, 614.
^ Story on Ag. § 49.
•* Bac. Abridg. Release, A. ; Neal v. Sheaffield, Cro. Jac. 254. {See
§268.}
^ D. 50, 17, 35; Both. Oblig. n. 571-580.
CHAP. VII.] POWERS AND AUTHORITIES. 209
Again : Prout quidque contractum est, ita et solvi debet;
ut cum re contraxerimus, re solvi debet} And again:
Et cimi verbis aliquid contraxiinus, vel re, vel verbis,
obligatio solvi debeat ; verbis, veluti cum acceptum
promissori fit ; re, veluti cur)% solvit, quod promisit.
^que, cum emptio, vel venditio, vel locatio contracta
est; quoniam consensu nicdo contrahi p>otest, etiam
dissensu contrario dissolvi potest.^ But a distinction
was taken in the Roman law between mere consensual
contracts, and other civil obligations, which resulted
from real contracts or stipulations under that law. The
former might be discharged by a simple agreement ; but
to discharge the latter, 2)leno jure, it was necessary for
the act to be done by the formality of an acceptilation.^
' D. 46, 3, 80; Poth. Pand. 58, 17, n. 1388.
2 D. 46, 3, 80.
^ Inst. 3, 30, § 1, 2. — Pothier has expounded this doctrine in his Treat-
ise on Obligations, n. 571, and says : " According to the principles of the
Roman law, there was a difference between civil obligations resulting from
consensual contracts, which were contracted by the mere consent of the
pai'ties, and other civil obligations, which resulted from real contracts, or
from stipulations. With respect to those contracted by the consent of the
parties, the release might be made by a simple agreement, by which the
creditor agreed with the debtor to hold him acquitted, and such agreement
extinguished the obligation pleiio jure. With respect to other civil obliga-
tions for the release to extinguish the obligation pleno jure, it was necessary
to have recourse to the formality of an acceptilation, either simple, if the
obligation resulted from a stipulation, or Aquilian, if from a real contract.
A simple agreement by the creditor to acquit the debtor, did not extinguish
such obligations 2yleno jure ; but only gave the debtor an exception, or Jin
de non re^evoir, against the action of the creditor, demanding the payment
of the debt, contrary to the faith of the agreement. This distinction and
these subtilties are not admitted in the law of Fi'ance, in which we have no
such form as an acceptilation ; and all debts, of whatever kind, and in what-
ever manner contracted, are extinguished, pleno jure, by a simple agreement
of release between the creditor and debtor, provided the creditor is capable
of disposing of his property, and the debtor is not a person to whom the
creditor is prohibited by law from making a donation. Therefore all that is
said in the title, ff. de Accept, concerning the form of an acceptilation, and
particularly that acceptilation cannot be made under a condition (L. 4, ff. de
Accept.), has no ap})lication in the law of France. With us there is notliing
to prevent the creditor making the release of tlie debt depend upon a con-
14
210 PARTNERSHIP. [cHAP. VII.
§ 119. Upon the ground of the general principle of
the common law, it has been held, that a bond, signed
by one partner in the course of the partnership busi-
ness, without an authority under seal, binds only the
partner, who signs and seals it, although it is signed
and sealed in the name of the firm.^ Thus, a bond,
given in the name of the firm at the custom-house, for
the payment of the duties on goods imported for and
belonging to the partnership, will not bind the part-
nership, but only the partner signing and sealing the
same.^ A fortiori^ if a deed be made by one partner in
dition, and the eflfect of such a release is to render the debt conditional,
the same as if it had been contracted under the opposite condition to that of
the release."
^ In Harrison w. Jackson, 7 T. R. 207, 210, Lord Kenyon said: "The
law of merchants is part of the law of the land ; and in mercantile transac-
tions, in drawing and accepting bills of exchange, it never was doubted,
but that one partner might bind the rest. But the power of binding each
other by deed is now for the first time insisted on, except in the nisi prius
case cited, the facts of which are not sufficiently disclosed to enable me to
judge of its propriety. Then it was said, that, if this pai'tnership were con-
stituted by writing under seal, that gave authority to each to bind the others
by deed. But I deny that consequence, just as positively as the former ;
for a general partnership agreement, though under seal, does not authorize
the partners to execute deeds for each other, unless a particular power be
given for that purpose. This would be a most alarming doctrine to hold out
to the mercantile world ; if one partner could bind the others by such a
deed as the present, it would extend to the case of mortgages, and would
enable a partner to give to a favorite creditor a real lien on the estates of
the other partners." See 3 Kent, 47, 48. {But see Orr v. Chase, 1 Mer.
729. In Fisher v. Pender, 7 Jones, Law, 483, it was held, following the pre-
vious course of decision in North Carolina, that, when it appeared on the face
of an instrument that A. signed, sealed, and delivered it, in order to bind the
firm of which he was a member, and not as his individual deed, they
were not individually liable. But see contra, 1 Am. Lead. Cas. 451, 4th
ed. See, also, Jarman v. Ellis, 7 Jones, Law, 77.}
"- Metcalfe v. Rycroft, 6 M. & S. 75 ; Elliot v. Davis, 2 B. & P. 338 ;
Hawkshaw v. Parkins, 2 Swans. 539 ; Harrison v. Jackson, 7 T. R. 207 ;
Skinner v. Dayton, 19 Johns. 513. — To cure this very difficulty. Congress
have been compelled to pass an act, providing, that such a bond given and
sealed in the name of the firm, or partners, under his seal (see Hawk-
shaw V. Parkins, 2 Swans. 539), shall be binding on all of them. Act of
1st March, 1823, c. 149. § 25.
CHAP. VII.] POWERS AND AUTHORITIES. 211
the name of the firm, conveying away the real estate
of the firm, it will be invalid to convey the title of the
other partners, since the law requires, that every con-
veyance of real estate should be by the deed of the
party himself, who possesses the title ; and another
person cannot convey it in his name, except by an
authority under seal.^
§ 120. This doctrine seems peculiar to the common
law ; and, as has been suggested, seems mainly founded
on technical reasoning. It has, however, been some-
times maintained, as founded in public policy ; and that
it would be a dangerous power, and enable one partner
to give undue preferences to favorite creditors. But
this power now exists, as to all personal property and
funds of the partnership ; and, as an original founda-
tion of the doctrine, seems at once inadequate, and
unsatisfactory. Indeed, a strong inclination has been
exhibited in our day to get rid of the doctrine, or to
qualify and limit it so far, that, practically speaking, it
would have little operation and influence. One excep-
tion is, that if the deed is executed by one partner in
the presence of and with the assent of all the partners,
it shall be deemed the deed of all.~ But, perhaps, this
is not so properly an exception, as it is an application
of an old rule of the common law, which makes a deed,
executed by an agent in the presence of his principal,
the deed of the latter, although the authority to do it
is merely by parol.^ The case of a release by one part-
1 {See§ 94.}
* Ball V. Dunsterville, 4 T. R. 313 ; Burn v. Burn, 3 Ves. 573 ; Mackay
V. Bloodgood, 9 Johns. 285 ; Halsey v. Whitney, 4 Mason, 206 ; Coll. on P.
B. 3, c. 2, § 1, p. 308-310, 2d ed. See Smith v. Winter, 4 M. & W. 454.
See Hunter r. Parker, 7 M. & W. 322; {Anthony v. Butler, 13 Pet. 423;
Potter V. McCoy, 26 Penn. St. 458.}
^ Lord Lovelace's Case, W. Jones, 268 ; Story on Ag. § 51 ; Gow on P.
c. 2, § 2, p. 59, od ed.
212 PARTNERSHIP. [CHAP. VII.
ner, either in his own name, or in that of the firm, of a
partnership debt, may also be thought to constitute
another exception. But, in fact, it turns, as we shall
presently see, upon another distinct consideration, that
a release by one joint creditor discharges the action as
to both ; and such a deed of one partner is clearly
operative as to himself.^
§ 121. But the main struggle has been, not so much
to contest the doctrine of the common law, that an au-
thority to execute a sealed instrument does not flow
from the ordinary relation of partnership, as to con-
test the doctrine, that it requii-es a prior authority
under seal, or a subsequent ratification under seal, to
make the execution valid.^ The old authorities, and
indeed the whole current of decisions in England, estab-
lish the rigid doctrine in its fullest extent. They assert,
that no prior authority, or subsequent ratification, either
verbal, or by writing, without seal is sufficient to give
validity to the instrument, as the sealed contract of the
party.^ This is reducing the rule itself to its true
technical character, and stripping it of all pretence of
being founded in public policy. The American courts
have in this view strongly inclined to repudiate it in all
cases, where an express, or an implied authority or
confirmation could be justly established, not under
seal, whether it be verbal, or in writing, or circum-
stantial.''
1 Gow on P. c. 2, § 2, p. 60, 3d ed. ; Coll. on P. B. 3, c. 2, § 1, p. 308-
312, 2d ed. ; Cady v. Shepherd, 11 Pick. 400; Gram v. Seton, 1 Hall, 262;
Skinner 15. Dayton, 19 Johns. 513 ; Story on Ag. § 49 ; ante, §114; Beckham
V. Drake, 9 M. & W. 79, 91-94. {Beckham v. Drake, 11 M. & W. 315.}
Beckham r. Knight, 1 Man. & G. 738 ; ante, § 115.
2 3 Kent, 47, 48.
3 Gow on P. c. 2, § 2, p. 58-60, 3d ed. ; Steiglitz v. Eggington, Holt N.
P. 141 ; Hunter v. Parker, 7 M. & W. 322, 342 ; Wallace v. Kelsall, 7 M. &
W. 264, 272.
* 3 Kent, 47, 48.
CHAP. VII.] POWERS AND AUTHORITIES. 213
§ 122. Some of the American decisions may be sup-
ported upon the general ground, that the act, if done
by an unsealed instrument, would have been within the
scope of the business of the partnership, and the pow-
ers and authorities belonging to each partner.' In such
cases there does not seem any solid reason, why the
act, when done, should be vitiated by being under the
seal and signature of the firm.^ There seems nothing
incongruous in such a case in holding, that it is binding
on the individual partner, as his sealed instrument, and
on the other partners as their agreement or assignment,
made by their authorized agent.^ Thus, a purchase of
' Tapley v Butterfield, 1 Met. 515.
* [Purviance v. Sutherland, 2 Ohio St. 478 ; Sweetzer v. Mead, 5 Mich.
107]; {Milton v. Mosher, 7 Met. 244; Dubois' Appeal, 38 Penn. St. 231 i
Daniel v. Toney, 2 Metcalfe, 523; Human v. CunifFe, 32 Mo. 316; Met. on
Contr. 125; 1 Am. Lead. Cas. 450.}
^ See Harrison v. Sterry, 5 Cranch, 289 ; Cady v. Shepherd, 11 Pick. 400.
— In Anderson v. Tompkins, 1 Brock. 456, 462, Mr. Chief Justice Marshall
said : " It is said, this transfer of property is by a deed, and that one partner
has no right to bind another by deed. For this a case is cited, which, I
believe, has never been questioned in England, or in this country. Harrison
V. Jackson, 7 T. R. 207. I am not, and never have been satisfied with the
extent to which this doctrine has been carried. The particular point decided
in it is certainly to be sustained on technical reasoning, and perhaps ought
not to be controverted. I do not mean to controvert it. That was an action
of covenant on a deed ; and if the instrument was not the deed of the de-
fendants, the action could not be sustained. It was decided not to be the
deed of the defendants, and I submit to the decision. No action can be sus-
tained against the partner, who has not executed the instrument, on the deed
of his copartner. No action can be sustained against the partner, which rests
on the validity of such a deed, as to the person who has not executed it.
This principle is settled. But I cannot admit its application In a case where
the property may be transferred by delivery, under a parol contract, where
the right of sale is absolute, and the change of property Is consummated
by delivery. I cannot admit, that a sale, so consummated, is animlled by
the circumstance, that It Is attested by, or that the trusts under which it Is
made, are described In a deed. No case goes thus far; and I think such a
decision could not be sustained on principle." See also Sale v. Dishman's
Executors, 3 Leigh, 548; Coll. on P. B. 3, c. 2, § 1, p. 313, 2d ed. ; s. P.
Hunter v. Parker, 7 M. & W. 322. [In Ex parte Bosanquct, De Gex, 432,
the Chief Judge in Bankruptcy said: " As to the objection, that the security
214 PARTNERSHIP. [cHAP. VII.
goods, in the course of the trade and business of the
partnership, under the seal of the lirm, has been held
binding on the firm.^ But the more general doctrine,
and, indeed, that which is principally relied on, is, that
a prior authority, or a subsequent ratification, not un-
der seal, but either express or implied, verbal or written,
is sufficient to establish the deed, as the deed of the
firm, and binding upon it as such.^
being effected by a deed executed by one partner could not bind the firm, it
might be true that the instrument would not take effect as the deed of the firm;
but the transaction itself was one within the authoi'ity of the partner, and the
circumstance of a deed being executed would not invalidate the contract."
See also Everit v. Strong, 7 Hill, (N. Y.) 585.]
* Cady V. Shepherd, 11 Pick. 400.
2 Skinner v. Dayton, 19 Johns. 513; Cady v. Shepherd, 11 Pick. 400;
Gram v. Seton, 1 Hall, 262; [Herbert v. Hanrick, 16 Ala. 581; Smiths.
Kerr, 3 Comst. 144; McDonald v. Eggleston, 26 Vt. 154; Drumright v.
Philpot, 16 Ga. 424; Swan v. Stedman, 4 Met. 548; Ely v. Hair, 16 B.
Monr. 230.] The whole reasoning on which this doctrine depends, as well as
the authorities on which it is founded, were most ably and elaborately re-
viewed in the case of Cady v. Shepherd, 11 Pick. 405, 406, and in Gram v.
Seton, 1 Hall, 262. In the latter case especially, all the English, as well as
the American authorities, were examined at great length by Mi*. Chief
Justice Jones, and his judgment is worthy of a most attentive perusal. On
that occasion he said : " The principle, that a partner cannot, by virtue of
the authority he derives from the relation of copartnership, bind his co-
partner by deed, has been too long settled to be now shaken. It is the
technical rule of the common law applicable to deeds, which has been in-
grafted into the commercial system of the law of partnership ; and unless
the charter-party in question can, under the circumstances of this case, be
construed to be the deed of Bunker, the defence must prevail. The reasons
for the restrictions are not very satisfactory ; for all the mischiefs, which the
expositors of the rule ascribe to the authority of members of a copartnership
to seal for their copartners, may flow almost as extensively, and nearly with
equal facility, from the use of the name and signature of the copartnership.
The dangers of allowing the use of a seal to the members of a copartnership
are supposed to consist in these two attributes of the seal ; that it imports a
consideration, and that it is competent to convey absolutely, or to charge and
encumber real estate. But negotiable paper, by which the partner may bind
the firm, efjually imports a consideration with a seal ; and upon general prin-
ciples, the use of the seal of the copartner, equally with the signature of the
copartnership, would, if permitted, be restricted to copartnership purposes
and copartnersiiip operations solely ; and the joint deed of the copartners,
CHAP. VIl] powers AND AUTHORITIES. 215
§ 122 a. In the next place, although one partner may
procure advances of money to carry on the business of
executed by the present for the absent members, be held competent to con-
vey or to encumber the copartnership property alone, and to have no oper-
ation upon the private funds or separate estate of the copartners. With
these restrictions upon the use and operation of the seal, is not the power of
a partner to bind his copartner, and to charge and encumber his estate, as
great and as mischievous, without the authority to use the seal of the absent
partner, as it would be with that authority ? Those powers undeniably
place the fortune of the members of a general copartnership, to a great de-
gree, at the disposal of any one of the copartners ; but it is necessary to the
beneficial management of the joint concern, that extensive powers should be
vested in the members who compose it ; and when the copartners live re-
motely from each other, their joint business concerns cannot be advanta-
geously conducted or carried on, without a latitude of authority in each, which
is inconsistent with the perfect safety of the other copartners. It cripples
the operation of a partner, whose distant residence precludes a personal co-
operation, to deny him the use of the seal of his copartner for instruments
requiring it, and which the exigencies of their joint concerns render expe-
dient or beneficial to them. He must be clothed with the power to execute
deeds for his copartner when necessarily required for the purposes of the
trade ; and if that authority is not inherent in the copartnership, it must be
conferred by letter of attorney, and it must be general, or it will be inade-
quate to the ends of its creation. A copartnership, especially, which is em-
ployed in foreign trade, and has occasion to employ ships for the transporta-
tion of merchandise, or to borrow money on respondentia, if its members are
dispersed, as is often the case, must be seriously embarrassed in its operations
by the application of the rule, that requires every copartner, who is to be
bound by the charter-party or the respondentia bond, to seal it personally,
or by attorney duly constituted for that specific purpose, with his own seal.
Similar difliculties would arise out of the same rule, when the operations of
the house required the copartnership to execute other deeds. Can it then
be, that this stern rule of the common law, which has its appropriate sphere
of action, and a most salutary operation on those relations of society, where
men, not otherwise connected, are the owners of undivided property, is to
be applied in all its force, and to govern, with unbending severity, in the
concerns of copartners, whose intimate connection and mutual interest re-
quire such large power and ample confidence in the integrity and prudence
of each other, to give to their operations efficiency, vigor, and success ?
The pressure of these considerations has induced a relaxation of the com-
mon-law rule, to adapt it to the exigencies of commercial copartnerships,
and other associations of individuals operating with joint funds for the com-
mon benefit. The rule itself remains ; but the restrictions it imposes are
qualified by the application of other principles. The general authority of
a partner, for example, derived from his relation to his copartners, does not
216 PARTNERSHIP. [cHAP. VII.
an established partnership, and thereby bind the firm ;
yet if the partnership is not estabhshed, one partner has
not an implied authority to bind the firm for advances
in the incipient state thereof to raise capital therefor.^
§ 123. These seem to be the principal exceptions to
the authority of one partner to bind the partnership by
his own acts and contracts, done within the scope of
partnership trade and business, and for the purposes
thereof. But another question may arise ; and that is,
whether in cases of partnership the majority is to gov-
ern in case of a diversity of opinion between the part-
ners, as to the partnership business and the conduct
thereof; or, whether one partner can, by his dissent,
arrest the partnership business, or suspend the ordinary
powers and authorities of the other partners in relation
empower him to seal an instrument for them, so as to make it binding upon
them without their assent, and against their will. This is the fair import of
the modern cases, and is, I apprehend, the principle courts are disposed to
apply to the use of a seal in joint contracts for copartnership purposes. An
absent partner is not bound by a deed executed for him by his copartner,
without his previous authority or permission, or his subsequent assent and
adoption. But the previous authority or permission of one partner to an-
other to seal for him, or his subsequent adoption of the seal as his own, will
impart efficacy to the instrument as his deed ; and that previous authority or
subsequent adoption may be by parol. These are the results, which I de-
duced from the judicial decisions, especially those of our own courts, on the
subject ; and if I am correct in my deduction, the conclusion must be favor-
able to the validity of this charter-party, as the deed of both the partners."
{Bond V. Aitkin, 6 W. & S. 165 ; Johns v. Battin, 30 Penn. St. 84. The
same rule has been extended to instruments affecting real estate. Haynes v.
Seachrest, 13 Iowa, 455 ; Wilson v. Hunter, 14 AVis. 683. Lowery v. Drew,
18 Tex. 786. The previous authority or subsequent ratification must be
proved. Dillon v. Brown, 11 Gray, 179. Butterfield v. Hemsley, 12 Gray,
226. Fox r. Norton, 9 ]\lich. 207. In Delaware authority cannot be proved
by parol. Little v. Hazzard, 5 Harring. 291. Nor perhaps in Tennessee. Tur-
beville v. Ryan, 1 Humph. 113 ; Napier v. Catron, 2 Humph. 534; but see
Lambden v. Sharp, 9 Humph. 224. The several partners may use one and
the same seal. Tasker v. Bartlett, 5 Cush. 359, 364. Lambden v. Sharp.
uhi sup. Contra, Rex v. Inhab. of Austrey, 6 M. & S. 319.}
1 Fisher v. Tayler, 2 Hare, 218, 229. {See § 146.}
CHAP. VII.] POWERS AND AUTHORITIES. 217
thereto, against the will of the majority. Where there
is no stipulation in the partnership articles to control or
vary the result (for if there be any stipulation, that
ought to govern),^ the general rule would seem to be,
that each partner has an equal voice, however unequal
the shares of the respective partners may be, because in
such a case, each partner has a right to an equal share
of the profits ; ^ and the majority, acting fairly and hona
fide, have the right and authority to conduct the part-
nership business, within the true scope thereof, and dis-
pose of the partnership property, notwithstanding the
dissent of the minority.^ Where there are but two
1 Const V. Harris, Turn. & R. 496, 517, 518, 521 ; 3 Kent, 45 ; {§ 213.}
" See ante, § 24.
* Coll. on P. B. 2,c. 2, § 1, p. 129, 130; Id. B. 3, c. 1, § 262, 2d ed. ; 3
Chitty on Comm. and Manuf. c. 4, p. 236 ; Const v. Harris, Turn & R. 496,
517, 518, 524, 525 ; Kirk v. Hodgson, 3 Johns. Ch. 400, 405, 406 ; [Johnston
V. Dutton, 27 Ala. 245] ; {Western Stage Co. v. Walker, 2 Iowa, 504. See
Noyes v. New Haven, Kew London, & Stonington R. R. Co. 30 Conn. 1 ; Lind.
on P. 508-518.} It is not easy to say, that this doctrine is so entirely settled,
as to admit of no controversy. The elementary writers are not all agreed
about it ; and the dicta of judges do not always admit its correctness. Still
it appears to me, that the text states the true doctrine, fairly deducible from
a just survey of all the leading authorities. On one occasion. Lord Eldon
said : " If I consider them (a lodge of freemasons) as individuals, the ma-
jority had no right to bind the minority." Lloyd v. Loaring, 6 Ves. 773, 777.
But that was not a case strictly of partnership; but rather of a club. Mr. Wat-
son, in his Treatise on Partnership (c. 4, p. 194, 2d ed.), says : "We have seen in
V. Layfield, 1 Salk. 292, Lord Holt held, that the act of one partner
should be presumed the act of the others, and should bind them, unless they
could show a disclaimer. And it would seem, that, even during the subsistence
of the partnership, and in the established course of trade, one partner may, to
a certain degree, limit his responsibility. If there be any particular specula-
tion or bargain proposed, which he disapproves of, by giving distinct notice
to those with whom his copartners are about to contract, that he will not in
any manner be concerned in it, they could not have recourse upon him ; as
proof of this notice would rebut Yns prima facie liability. The partnership in
that case might either be considered as dissolved, or quoad hoc as suspended.
Where three persons entered into partnership in the trade of sugar-boiling,
and agreed, that no sugars should be bought without the consent of the
majority ; one of them afterwards makes a protest, that he would no longer
be concerned in partnership with them. The other two persons after make
218 PARTNERSHIP. [CHAP. VII.
persons in the firm, and they dissent from each other,
it would seem a just result, that it amounts to a tempo-
rary suspension of the right and authority of each to
carry on or manage the partnership business, or dispose
of the partnership property, in respect to all persons
having notice of such disagreement.^ But in every
case, where the decision of the majority is to govern, it
would seem reasonable, that the minority, if practicable,
should have notice thereof and be consulted ; and if the
majority should choose wantonly to act without infor-
mation to, or consultation with the minority, it would
hardly be deemed a ho7ia fide transaction, obligatory
upon the latter.^
a contract for sugars, the seller having notice, that the third had disclaimed
the partnership, he shall not be charged." The case in 1 Salkeld, 292, will not
be found to justify the broad conclusion of the author. It was there held,
that partners would be presumed to have assented to a transaction designed
for their benefit, unless they had refused to be concerned in it. The case in
16 Vin. Abr. 244, A. pi. 12, is, indeed, directly in point. But the same case
is reported under the name of Minnit v. Whinery, 3 Bro. P. C. 523 (5 Bro.
P. C. by Tomlins, 489), where it appears, that the case turned upon very
different considerations, and facts estabhshing an exclusive credit to the other
partners, contracting the debt, and that there had been a dissolution of the
partnership at the time. See Coll. on P. B. -3, c. 1, p. 261, 2d ed. In the
case of Vice v. Fleming, 1 Y. & J. 227, 230, Mr. Chief Baron Alexander
said : " It is clear that the defendant might, by an absolute notice, have dis-
charged himself from all future liability, whether he ceased or continued to
be a partner." Mr. Baron Garrow added : " All the partners of a firm are
liable for the debts of the firm ; but this responsibility may be limited by
express notice by one, that he will not be liable for the acts of his copartners."
It does not seem to me, that the facts of that case required so strong a state-
ment, or that the point was positively in judgment. The case of Willis v.
Dyson, 1 Stark. 164, is not in point; for there were but two partners, and
they dissented in opinion, and notice was given by one. In Lord Gal way v.
Matthew, 1 Camp. 403, s. c. 10 East, 264, a majority of the partners did not
c o ncurin giving the note. See Booth v. Quin, 7 Price, 193; 3 Kent, 45 ;
Coll. on P. B. 2, c. 2, § 2, p. 129, 130, 2d ed.; Gow on P. c. 2, § 2, p. 52, 3d
ed. and note, ibid, of American editor (Mr. Ingraham) ; Id. c. 4, § 1, p. 149.
' Willis V. Dyson, 1 Stark. 164; {Donaldson v. Williams, 1 Cr. & M.
345.}
* Const V. Harris, Turn. & R. 496, 525, 527. — In this case Lord Eldon
said : " I call that the act of all, which is the act of the majority, provide d
CHAP. VII.] POWERS AND AUTHORITIES. 219
§ 124. The Roman law seems to have ado])ted the
general rule, that no act was binding upon all the part-
ners, unless so far as it was expressly or impliedly
agreed to by all ; and consequently the refusal or pro-
hibition of one rendered the act a nullity, as to him-
self. In this respect, the partner prohibiting was held
to have a superior right against the others. In re
com7nuni 7ieminem dominorum, jure facere quicqicam,
invito altera^ posse. Unde manifestum est prohihendi
jus esse ; in re enim j^ciri p)otiore'>n causmn esse prohi-
hentis constat. Sed etsi in communi prohiberi socius
a socio, ne quid faciat, potest, ut tamen factum opus tol-
lat, cogi non jwtest, si, cum p)roMhere poterat, hoc prcB-
termisit} The French law has adopted the same doc-
trine, in the absence of all counter stipulations of the
parties.- But if the administration of the partnership be
confided to one or more of the partners, the others can-
not recall that authority, or annul or prohibit its ex-
ercise during the existence of the partnership, or the
presumed duration of the authority.^ Such also is the
rule of the Scottish law ; "* and of the Louisiana Code.^
all are consulted, and the majority are acting hona fide, meeting not for the
purpose of negativing what, when they are met together, they may, after
due consideration, think proper to negative. For a majority to say, We do
not care what one partner may say, we being the majority, will do what we
please, is, I apprehend, what this court will not allow." Again : " In all
partnerships, whether it is expressed in the deed or not, the partners are
bound to be true and faithful to each other. They are to act upon the joint
opinion of all, and the discretion and judgment of any one cannot be ex-
cluded. What weight is to be given to it is another question. The most
prominent point on which the court acts, in appointing a receiver of a part-
nership concern, is, the circumstances of one partner having taken upon
himself the power to exclude another partner from as full a share in the
management of the partnership, as he, who assumes that power, himself
enjoys."
' D. 10, 3, 28; Poth. Pand. 17, 2, n. 27; Domat, 1, 3, 4, art. 22.
" Poth. de Soc. n. 87-91. « Poth. de Soc. n. 71, 90.
* 1 Stair, Inst. tit. 16, § 4, p. 157. * q^^^^^ ^rt. 2838, 2839, 2841.
220 PARTNERSHIP. [cHAP. VII.
§ 125. The doctrine of the common law above stated,
as to the right of the majority to govern in all cases,
where the stipulations of the articles of the partner-
ship do not import the contrary, must be strictly
confined to acts done within the scope of the business
of the partnership, and does not extend to the right to
change any of the articles thereof In such a change,
it is essential that all should unite ; otherwise it is not
obligatory upon them.^ This is emphatically true in
case of joint associations, and joint-stock companies of
an extensive nature, in the constitution of which certain
articles are treated as fundamental, and cannot be al-
tered or varied without the consent of all the members ;
for the rule, which applies to public bodies, strictly so
called, that the majority is to govern in all cases, is
inapplicable to private associations, where the terms
originally prescribed for the association must and
ought to remain in full force, until abrogated by the
consent of all the associates.^
' [Thus, if written articles of partnership stipulate that there shall be no
trade in spirituous liquors, and they be so changed by the majority as to
allow such trade, this is a material alteration, at least when such trade is con-
trary to law, and will justify the minority in withdrawing from the firm.
Abbot V. Johnson, 32 N. H. 9.]
* Livingston v. Lynch, 4 Johns. Ch. 573, 596. — In this case Mr. Chan-
cellor Kent said: "Lord Coke, Co. Litt. 181, b. took the distinction between
public and private associations, and admitted, that, in matters of public con-
cern, the voice of the majority should govern, because it was for the public
good, and the power was to be more favorably expounded than when it was
created for private purposes. In Viner, tit. Authority, B., we have several
cases marking the same distinction ; and it is now well settled, that in matters
of mere private confidence, or personal trust or benefit, the majority cannot
conclude the minority. But where the power is of a public or general nature,
the voice of the majority will control, on grounds of public convenience; and
this is also part of the law of coii^orations. Attorney-General v. Davy, 2
Atk. 212; The King v. Beeston, 3 T. R. 592; Withnell v. Gartham, 6 T. R.
388 ; Grindley v. Barker, 1 B. & P. 229 ; Green v. Miller, 6 Johns. 39 ; 5
Co. 63, a. In Lloyd v. Loaring, 6 Ves. 773, there was a suit by three per-
sons, on behalf of themselves and all the other members of a lodge of free-
CHAP. VII.] POWERS AND AUTHORITIES. 221
masons ; and Lord Eldon observed, ' that if he considered them as individuals,
the majority had no right to bind the minority. One individual has as good
a riglit to possess the pro2;)erty as any other, unless he can be affected by
some agreement.' Mr. Abbott, I^aw of Shipping, Part 1, c. 3, § 2, admits
the extreme inconvenience, under the law of England, of enjoying personal
chattels vested in several distinct proprietors, without a common consent and
agreement among them. But the case most applicable to the one before us,
is that of Davies v. Hawkins, 3 M. & S. 488. A company was formed for
brewing ale, and by deed they confided the conduct of the business to two
persons, who were to be trustees of the company. General quarterly meet-
ings of the company were to be held. It was resolved by the K. B., that one
person only could not be appointed at a general quarterly meeting, in place
of the two originally appointed under the deed, unless such alteration was
made by the consent of all the subscribers. Lord Ellenborough said, that ' a
change had been made in the constitution of this company, which could not
be made without the consent of the whole body of the subscribers. It was
such a substituted alteration in its constitution, as required the assent of
all.'" {Natusch v. Irving, Gow on P. app. 398, 3d ed. ; Lind. on P. 511-
514.}
222 PARTNERSHIP. [CHAP. VIII.
CHAPTER VIII.
LIABILITIES AND EXEMPTIONS OF PARTNERS AS TO THIRD
PERSONS.
j § 126. Proof of authority to bind the firm sometimes necessary.
127. In case of a guaranty.
128. Firm not bound to a party who knows the want of authority.
129. Foreign law on the subject.
130. Illustrative cases.
131. So a fortiori, in cases of fraud.
132. Firm not bound by the use of its property or credit in favor of a
partner's private creditor,
133. This a presumptive rule only.
133 a, Equity will prevent such use,
134. Firm not liable when credit Is given to one partner.
135. Roman law.
136. Emly v. Lye, 15 East, 7,
137. French law.
138. Rule not ajjplicable to a dormant partner.
139. Firm business carried on In the name of one partner.
140. Taking a separate security.
141. Stage-coach proprietors.
142, 143. Negotiable paper in the name of a partner.
■ 144. Clubs.
145. Joint purchases,
146. Commencement of liability,
147-151. Illustrative cases.
152, 153. Liability of incoming partner.
154. A firm sometimes not bound though the creditor meant to bind it.
155. Extinguishment of llablHty.
156. By credit given to a partner,
157. Appropriation of payments.
158. Discharge of retiring partner.
159. Liability of retiring partners for future debts. Dormant partners.
160. Ostensible partners,
161. What is sufficient notice of retirement,
162. Notice of a dissolution other than by retirement,
163. Fraudulent retirement,
164. Joint-stock companies,
165. Scottish law.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 223
166. Liability of the partnership for torts.
16 7. Torts several as well as joint.
168. Release of one partner releases all.
168 o. Notice of copartners' acts.}
§ 126. There are certain powers and authorities,
which from long usage and recognition are so generally
attached to all sorts of partnerships, that they will be
deemed to exist by presumption of law Q^resumptione
juris et dejure), unless there is clear evidence to repel
the presumption, or some positive contrary stipulation
be agreed upon between the parties. Thus, for exam-
ple, each partner may, as we have seen, buy and sell
goods, belonging to or for the use of the partnership
or the ordinary business thereof; ^ each partner may
pledge the partnership property, or borrow money for
partnership purposes, on the credit of the firm.^ These
cases are sufficiently clear from what has been already
suggested in a former section.^ But the same doctrine
cannot be as universally affirmed, as to the right to
draw, or indorse, or accept, or negotiate bills of ex-
change, or to make, or indorse promissory notes, not
being the securities of third persons, held by the firm,
as a part of the funds thereof, and therefore disposable
accordingly. For although, in the ordinary course of
commercial partnerships, these are known and univer-
^ Coll. on P. B. 3, c. 1, § 1, p. 263-265, 267, 2d ed. ; Hyat v. Hare, Comb.
383; Thicknesse v. Bromilow, 2 Cr. & J. 425; ante, § 102; Livingston v.
Roosevelt, 4 Johns. 251 ; U. S. Bank v. Binney, 5 Mason, 176 ; s. c. 5 Pet.
529.
2 Coll. on P. B. 3, c. 1, § l,p. 263, 267; Id. 290, 291, 2d ed. ; Rothwell
V. Humphreys, 1 Esp. 406 ; Thicknesse v. Bromilow, 2 Cr. & J. 425 ; Bank of
U. S. V. Binney, 5 Mason, 176; s. C. 5 Pet. 529; Fox v. Hanbury, Cowp.
445; Raba v. Ryland, Gow, 132; Tupper v. Haythorn, Gow, 135; Reid v.
Hollinshead, 4 B. & C. 867; Church i\ Sparrow, 5 Wend. 223; Livingston
V. Roosevelt, 4 Johns. 251, 265 ; 2 Bell, Couim. B. 7, p. 615, 616, 5th ed. ;
3 Kent, 43-46 ; Gow on P. c. 2, § 2, p. 36-56, 3d ed. ; Wats, on P. c. 4, p.
195 ; U. S. Bank v. Binney, 5 Mason, 176 ; s. c. 5 Pet. 529.
* Ante, § 102.
224 PARTNERSHIP. [CHAP. VIII.
sally acknowledged operations, which any partner is
competent to transact, because they arise from the
usages of trade, and the previous consent of all the
partners, and from this universality in practice, they
are now adopted as a general rule of law ; ^ yet it by
no means follows, that the like rule prevails in all other
sorts of partnership, or in such as are of a special and
peculiar nature.^ The foundation of any general and
known usage may here altogether fail, and the very
nature, or organization, or objects of the partnership
may show, that it is neither a proper nor a necessary
power to be exercised by a partner.^ Thus, if a part-
nership is organized for mining, or for farming purposes,
the directors or active agents thereof will not, as inci-
dent thereto, possess a power to draw or accept bills, or
to draw or indorse notes for the company. But there
should be some proof, that an express authority is given
for this purpose, or that it is implied by the usages of
the business, or the ordinary exigencies and objects
thereof.'*
' Coll. on P. B. 3, c. 1, § 2, p. 268-279, 2d ed. ; Thicknesse v. Bromilow,
2 Cr. & J. 425 ; U. S. Bank v. Binney, 5 Mason, 1 76, 184 ; s. c. 5 Pet. 529 ;
Livingston v. Roosevelt, 4 Johns. 251 ; Swan v. Steele, 7 East, 210; Gow on
P. c. 2, § 2, p. 38-50, 3d ed.; Le Roy v. Johnson, 2 Pet. 186; Harrison v.
Jackson, 7 T. R. 207.
2 Dickinson v. Valpy, 10 B. & C. 128; Thicknesse v. Bromilow, 2 Cr. & J.
425, 430. [But this rule was extended to banking partnerships, in Bank of
Australasia v. Breillat, 6 Moore, P. C. 152, where the language of the text is
cited with approbation.] {See § 102 a.}
' Coll. on P. B. 3, c. 2, § 2, p. 329, 330, 2d ed.; Gow on P. c. 4, § 1, p.
149, 150, 3d ed.
* Coll. on P. B. 3, c. 1, § 2, p. 269, 2d ed. ; Dickinson v. Valpy, 10 B. & C.
128; MuUett v. Huchinson, 7 B. & C. 639; Thicknesse v. Bromilow, 2 Cr. &
J. 425 ; Greenslade v. Dower, 7 B. & C. 635. [In Ricketts v. Bennett, 4 C.
B. 686, it was held that one of several co-adventurers in a mine has not,
as such, any authority to pledge the credit of the general body for money
borrowed for the concern. And the fact that he had the ffencral manage-
ment of the mine makes no difference, in the absence of circumstances from
which an implied authority for that jiurpose can be inferred. See also
CHAP. Vlir.] LIABILITIES AND EXEMPTIONS. 225
§ 127. The like observations apply with increased
force to cases of guaranty.^ If one partner gives a
letter of credit or guaranty in the name of the part-
nership, it is not to be treated, as of course binding on
the partnership ; for it is not a natural or necessary in-
cident in all sorts of partnerships, for one partner to
possess the power to bind his copartners by a guaranty.^
It must be shown to be justified, either by the usages
of the particular trade or business, or by the known
habits of the particular partnership, or by the express
or implied approbation of all the partners in the given
case.^ The same rule will apply to cases, where one
Tredwen v. Bourne, 6 M. & W. 461 ; Hawtayne v. Bourne, 7 M. & W. 595 ;
Hawken v. Bourne, 8 M. & W. 703.] Pothier has put several cases illustrative
of au analogous doctrine, in cases of partnerships not commercial. Poth. de
Soc. 102-104. Mr. Chancellor Kent has well summed up the doctrine in
his Commentaries, 3 Kent, 46. He says : " It was formerly understood, that
one partner might bind his copartners by a guaranty, or letter of credit,
in the name of the firm ; and Lord Eldon, in the case of Ex parte Gardom,
considered the point too clear for argument. But a different principle seems
to have been adopted ; and it is now held, both in England and in this coun-
try, that one partner is not authorized to bind the partnership by a guaranty
of the debt of a third person, without a special authority for that j^urpose,
or one to be implied from the previous course of dealing between the parties,
unless the guaranty be afterwards adopted and acted upon by the firm. The
guaranty must have reference to the regular course of business transacted
by the partnership, and then it will be obligatory ujjon the company, and
this is the principle on which the distinction rests. The same general rule
applies, when one partner gives the copartnership as a mere and avowed
surety for another, without the authority or consent of the firm ; for this
would be pledging the partnership responsibility, in a matter entirely un-
connected with the partnership business."
' 2 Bell, Comm. B. 7, p. 618, 5th ed. ; 3 Kent, 46. { See previous note.}
^ [Sweetser v. French, 2 Cush. 309 ; Andrews v. Planters' Bank, 15 Miss.
192; Langan v. Hewett, 21 Id. 122; Tutt v. Addams, 24 Mo. 186] ; {1 Am.
Lead. Cas. 457, 4th ed.}
* Duncan v. Lowndes, 3 Camp. 478; Sandilands v. Marsh, 2 B. & Aid.
673 ; Payne v. Ives, 3 Dow. & Ry. 664 ; Ex parte Nolte, 2 Glyn & J. 295, 306 ;
Coll. on P. B. 3, c. 1, § 3, p. 279-281, 2(1 ed. ; Crawford v. Stirling, 4 Esp.
207 ; Theobald on Prin, and Surety, 29-31 ; 2 Bell, Comm. B. 7, c. 1, p. 618,
5th ed. ; 3 Kent, 46, 47; Sutton v. Irwine, 12 S. & R. 13; Hamill r. Purvis,
15
226 ' PARTNERSHIP. [cHAP. VIII.
partner signs or indorses the name of a firm to a note,
as surety for a third person, in which note the partner-
ship has no interest, and where it is not in the course
of their business.^
2 Penn. 177; Gow on P. c. 2, § 2, p. 37, 38, 56-58; Id. c. 4, § 1, p. 148,
149, 3d ed. ; Dob v. Halsey, 16 Johns. 34; [Rollins v. Stevens, 31 Me. 254] ;
Foot V. Sabin, 19 Johns. 154; N. Y. F. Ins. Co. v. Bennett, 5 Conn. 574 ;
{Alliance Bank v. Tucker, 15 Weekly Rep. 992.} There is some apparent
discrepancy in the authorities. But the text contains what seems to me the
just results belonging to the doctrine ; and it is accordingly adopted by Mr.
Chancellor Kent in his Commentaries. 3 Kent, 46, 47, In Hope v. Cust,
cited by Mr. Justice Lawrence in Shirreff v. Wilks, 1 East, 48, 53, Lord
Mansfield is reported to have said : " There is no doubt but that the act of
every single partner in a transaction relating to the partnership, binds all
others. If one gives a letter of credit or guaranty in the name of all the
partners, it binds all." Lord Mansfield was here addressing himself to the
case of bankers, when it might perhaps be within the ordinary scope of their
business. On the other hand, Lord EUenborough, in Duncan v. Lowndes,
3 Camp. 478, in the case of a commercial partnership, said: "As it is not
usual for merchants in the common course of business to give collateral
engagements of this sort, I think you must jirove that Lowndes had authority
from Bateson to sign the partnership firm to the guaranty in question. It
is not incidental to the general power of a partner to bind his copartners by
such an instrument. The case was not, however, a guaranty in the partner-
ship business, but a guaranty of the acceptances of a third person, not
belonging to the partnershijj funds. In Sandilands r. Marsh, 2 B. & Aid. 673,
a guaranty of an annuity by one partner, the partnership not dealing in
annuities, but the dealing in this annuity being known to the other partner,
and not disapproved of by him, and he having no knowledge of the guaranty,
was held to bind the partnership, upon the ground that the transaction as to
the annuity, being adopted as a part of the business binding on the partner-
ship, the whole transaction bound the partnership, although the guaranty was
not known. This must have been sustained upon the notion, that dealers in
annuities, in the ordinary course of things, were accustomed to guaranty
them ; for the mere adoption of an act of one partner, where there was a
concealment of material circumstances, might not bind him, if the business
were not within the scope of their ordinary business." {The decision in Ex
parte Gardom, 15 Ves. 286, and Lord Mansfield's dictum, must be considered
as overruled, and the law in England settled in accordance with the text by
Hasleham v. Young, 5 Q. B. 833, and Brettel v. Williams, 4 Exch. 623.}
' Laverty v. Burr, 1 Wend. 529, 531 ; Bank of Rochester v. Bowen, 7
Wend. 158 ; Wilson r. Williams, 14 Wend. 146 ; Catskill Bank v. Stall, 15
Wend. 3G4 ; [Rollins v. Stevens, 31 Me. 454] ; {McQuewans v. Hamlin,
35 Penn. St. 517 ; Selden v. Bank of Commerce, 3 Minn. 166, 1 Am. Lead Cas.
CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 227
§ 128. In the next place, every contract in the
name of the firm, in order to bind the partnership,
must not only be within the scope of the business of
455, 4th ed. See Butterfield v. Hemsley, 12 Gray, 226. } The American cases
are very generally agreed on this point. In Laverty v. Burr, 1 Wend. 529,
531, Mr. Justice Sutherland, in delivering the opinion of the court, said:
" Hosmer, the agent of the plaintiffs, took t^ie note in question for a debt
due from Allen, the maker, to them. He refused to take Allen's note with-
out seciu'ity. The security given was the indorsement of Burr and Baldwin,
the defendants, and of Smith and Jenkins, the second indorsers. The
plaintiffs, therefore, knew, when they took the note, that the indorsement
of the defendant was made by one of the partners, in the name of the firm,
as security for Allen, and not for a debt due from the firm. The partner,
who did not sign the note, is not bound by it under such circumstances,
unless he was previously consulted, and assented to the transaction ; and
the burden of proving, that the partner, who did not sign the note, con-
sented to be bound, is thrown on the creditor. Dob v. Halsey, 16 Johns.
34, and Foot v. Sabin, 19 Johns. 154. In England, the assent of all the
partners is presumed, and the burden of avoiding the security is thrown on
the firm, and they are required to prove, that the note was signed by one
of the partners on his individual account, without the knowledge and
against the consent of the others, and that the creditor knew that fact, when
he took the paper of the firm. Here the 07iits j^robaiuli is thrown on the
creditor. The law upon this subject is very fully considered and clearly
established in the cases referred to, and also in Livingston v. Hastie, 2
Caines, 246, Lansing v. Gaine, 2 Johns. 300, and Livingston v. Roosevelt, 4
Johns. 251. The only distinction between this case and that of Foot v.
Sabin, 19 Johns. 154, is this. In that case the note was signed by one
of the partners in the name of the firm as sureties ; here it was indorsed ;
and it was urged upon the argument of this cause, that in eveiy general
partnership, each member necessarily possesses the power of signing or
indorsing negotiable commercial paper in the customary way of business,
though the power of pledging the firm as sureties for third persons may not
exist. The form of the transaction cannot be material, except by way
of evidence. AVhen paper is signed by one partner in the name of the
firm, as sureties for a third, it carries on the face of it evidence that it was
not given for a partnership debt, and proof of that fact becomes unneces-
sary. But when it is signed or indorsed in the ordinary manner, such proof
must be given. But when the fact is established, that it was not given for a
partnership debt, and that the person to whom it was passed knew it,
no matter what the form of the instrument is, it does not bind the partners,
who did not sign or assent to it. In this case, the assent of Baldwin is not
shown, and he is therefore entitled to judgment." [The authority, however,
may be proved by circumstances. Butler v. Stocking, 4 Seld. 4U8.]
228 PARTNERSHIP. [cHAP. VIII.
the partnership, but it must be made with a i^arty who
has no knowledge, or notice, that the partner is acting
in violation of his obligations and duties to the firm, or
for purposes disapproved of by the firm, or in fraud of
the firm.^ For every such contract, made with such
knowledge or notice, will be void as to the firm, how-
ever binding it may be upon the individual partner
making it.- This is a natural result of the principles
of justice and equity applied to every other contract,
as well as to that of partnership contract. It also
follows from the known limitations of the law of
agency : for no agent can bind his principal in any
transaction, in which he knowingly exceeds his author-
ity, or knowingly colludes with another person, having
notice, in any violation of the rights of his principal.^
§ 129. The same principles are incorporated into the
foreign law, of the modern nations of Europe, in
respect to partnership. Thus, Pothier says, that in
cases of partnership, the signature of the firm by one
partner will not oblige the partnership, if it appears
from the very nature of the contract, that it does not
concern the business of the partnership.'* So, Mr. Bell
asserts the like principles to belong to the Scottish law.
When (says he) the party has notice of a stipulated
restraint on the power of the partners ; or when, by the
circumstances, or in its own nature, the transaction is
such as to carry evidence with it of a misapplication of
> fLind. on P. 260-269; 1 Am. Lead. Cas. 442, 4th ed.}
- See Stainer v. Tysen, 3 Hill, (N. Y.) 279.
3 Story on Ag. § 125, 165; 3 Kent, 44-46; Gow on P. c. 2, § 2, p. 42;
Id. p. 4D-56, 3d ed.; Coll. on P. B. 3, c. 1, p. 261, 2d ed. [Thus, if a per-
son seeking to enforce a contract for goods sold a firm upon the negotiation of
one partner, knew that such partner was not authorized by the articles of co-
partnership to purchase goods for the firm, the other partners are not liable
therefor. Hastings r. Hopkinson, 28 Vt. 108.]
■» Poth. on Oblig. n. 83 ; Poth. de Soc. n. 101.
CHAP. Till.] LIABILITIES AND EXEMPTIONS. 229
the firm to what is an mdividual concern only, and
not a matter in which the company is interested,
the company and the other partners will not be
bound. ^
§ 130. This doctrine may be illustrated in various
ways ; but the same principle pervades the whole of the
cases. Thus, if a person should trust a firm, with a full
knowledge that one partner had withdrawn from it, or
that the firm was dissolved, or that the other partners
disavowed or repudiated any such transaction ; in each
of these cases he would have no remedy against any of
the partners, except the one with whom he had entered
into the contract.^ So, also, if the creditor should have
1 2 Bell, Comm. B. 7, p. 616, 5th ed.
2 Minnit v. AVhinery, or Whitney, 5 Bro. P. C. by Tomlins, 489 ; s. c. 16
Vin. Ab. 244 ; s. c. 2 Bro. P. C. 323 ; Le Roy v. Johnson, 2 Pet. 186 ; Gow
on P. c. 2, § 2, p. 48, 49, 3d ed. ; Coll. on P. B. 3, c. 1, p. 262, 2d ed.; Willis
V. Dyson, 1 Stark. 164; Alderson v. Pope, 1 Camp. 404, note. {See Lind. on
P. 46}; Gow on P. c. 2, § 2, p. 55-57, 2ded.; Id. c. 4, § 1, p. 148-150.—
Mr. Gow (on P. c. 2, p. 48, 49, 3d ed.) has stated the whole doctrine very
clearly and distinctly. " On the subject " (says he) " of negotiable instru-
ments, it remains to be observed, that even in transactions, in which all the
partners are interested, the authority of one partner to make, draw, accept,
or indorse promissory notes or bills of exchange in the joint name is only im-
plied, and may, therefore be rebutted by express previous notice, to the party
taking a joint security from one partner, of his want of authority, or that the
others will not be liable upon it. Such a power is not indispensably essential
to the existence of a partnership ; the partners may stipulate between them-
selves that it shall not be exercised ; and if a third person, apprised of such
stipulation, will take a joint security, he cannot sue the firm upon it, although
it were truly represented to him, by the partner giving the security, that the
money to be advanced on It was required for the purpose of, and was in fact
applied in liquidating the partnership debts ; much less can he hold the firm
responsible on a security so obtained, if he take it in defiance of a positive
notice, previously given by one of the members, that he will not be answera-
ble for any bill or note signed and negotiated by the others. And the power
of one partner to bind the firm by a negotiable security, where it Is capable
of being exercised. Is only co-existent with the duration of the partnership it-
self; for, immediately on its dissolution, the power ceases." But although a
partner has withdrawn from a partnership, and it is known to the other party,
yet if his name is still to continue in the firm for a limited period, that will
230 PARTNERSHIP. [CHAP. VIII.
notice of any private arrangement between the partners
by which the power of one partner to bind the fu-m, or
his liabiUty on the partnership contracts is quahfied,
restricted, or defeated ; the creditor would be bound by
such arrangement, and could not enforce any right in
contravention thereof.^ The cases have gone yet
create a liability on his part as a partner for that period, since he thereby holds
himself out to the world, as responsible for their engagements for that period, not-
withstanding the dissolution of the partnership. Brown v. Leonard, 2 Chitty,
120.
1 Coll. on P. B. 3, c. 1, p. 261 ; Id. p. 329, 2d ed. ; Minnit v. VVhinery,
583 ; Bignold v. Waterhouse, 1 M. & S. 255 ; Gow on P. c. 2, § 2, p. 54-56,
2 Bro. P. C. 323 ; s. c. 5 Bro. P. C. by Tomlins, 489 ; Ex parte Harris, 1 Madd.
3d ed. ; Id. c. 4, § 1, p. 149-151. — In Lord Galway v. Mathew, 10 East, 264>
Lord EUenborough said : " The general authority of one partner to draw
bills or promissory notes to charge another is only an implied authority ; and
that implication was rebutted in this instance by the notice given by Smithson,
who is now sought to be charged, which reached the plaintiff, warning him
that Mathew had no such authority. It is not essential to a partnership, that
one partner should have power to draw bills and notes in the partnership firm
to charge the others ; they may stipulate between themselves, that it shall not
be done ; and if a third person, having notice of this, will take such a securi-
ty from one of the partners, he shall not sue the others upon it, in breach of
such stipulation, nor in defiance of a notice previously given to him by one of
them, that he will not be liable for any bill or note signed by the others." Mr.
Gow, speaking on this subject, says : " So if the person, with whom the single
partner deals, is at the time conscious of the misconduct of that partner in
pledging the joint name to a separate transaction, he cannot enforce against
the firm any claim that may arise to him out of such dealings. Neither can
he call upon the firm to fulfil a contract which has been made by one partner,
if he be privy to a private agreement between the partners themselves, the effect
of which is to throw the responsibility upon the single partner alone. There-
fore, where four persons are partners in a coach concern, but one by agree-
ment provides the coaches at a certain rate per mile, he alone is responsible
for repairs done to the coach by a person cognizant of this arrangement, al-
though the names of all four appear on the vehicle. So, if it be notorious,
that the proprietors have separate departments and interests, they must be
sued separately by the tradesmen, who may supply each with goods."
I Mr. Lindley (Lind. on P. 266) says : " Granting that a person, knowing
the limits of a partner's authority as set by his copartners, cannot hold them
responsible for an act done by him in excess of his authority, it still remains to
determine the elFect of notice, by non-partners, of stipulations entered into
between the partnei-s themselves.
"In Galway v. Mathew, 10 East, 264, Lord EUenborough is reported to
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 231
further ; and it has been held, that where a note has
been made or indorsed by a partner, in violation of his
have said, ' It is not essential to a partnership that one partner sliould have
power to draw bills and notes in the partnership firm to charge the others ;
they may stipulate hettveen themselves that it shall not he done ; and if a third
person, having notice of this, tcill take such a security from one of the partners, he
shall not sue the others upon it in breach of such stipulation.'
" Again, in Alderson v. Pope, 1 Camp. 404, note, the same judge held ' that
where there was a stipulation between A., B., and C, who appeared to the
world as copartners, that C. should not participate in profit and loss, and should
not be liable as a partner, C. was not liable as such, to those who had notice of
this stipulation.' These dicta appear to authorize the statement that if part-
ners stipulate amongst themselves that certain things shall not be done, no
person who is aware of this stipulation is entitled to hold the firm liable for
what may be done by one of the members, contrary to such stipulation. But
it is submitted that this proposition is too wide. A stranger dealing with a
partner is entitled to hold the firm liable for whatever that partner may do on
its behalf within certain limits. To deprive the stranger of this right, he ought
to have distinct notice that the firm will not be answerable for the acts of one
member, even within these limits. Now notice of an agreement between the
members that one of them shall not do certain things, is by no means neces-
sarily equivalent to notice that the firm will not be answerable for them if he
does. For there is nothing inconsistent in an agreement between the mem-
bers of a firm that certain things shall not be done by one of them, and a
readiness on the part of all the members to be responsible to strangers for the
acts of each other, as if no such agreement had been entered into. It is im-
material to a stranger what stipulations partners may make amongst them-
selves, so long as they do not seek to restrict their responsibility as to him :
and it is only when knowledge of an agreement between partners necessarily in-
volves knowledge that they decline to be responsible for the acts of each other,
within the ordinary limits, that a stranger's rights against the firm can be pre-
judiced by what he may know of the private stipulations between its members.
"In Galway i'. Matthew, 1 Camp. 403, and 10 East, 264, the 2:)laintiff's
knowledge of want of authority was derived, not from notice of any agreement
between the partners, but from an advertisement published by one of them,
warning all persons that he would no longer be liable for drafts drawn by the
others on the partnership account. (Distinct notice to the same effect existed
in Minnit v. Whitney, 16 Vin. Ab. 244, s. C 5 Bro. P. C. 489; Willis v.
Dyson, 1 Stark. 164.) The passage, therefore. In the judgment, and extracted
above, was by no means necessary for the decision of the case. With re-
spect to Alderson v. Pope, 1 Camp. 404, note, if all that was meant was that a
person knowing that C. did not authorize A. or B. to act on his behalf, could not
hold C. liable for their acts, the case presents no dllHculty ; but if anything
more than tlils was meant, the authorltj' of the decision becomes at least
doubtful, it having been held in another case that a person who holds himself
out as a partner with others with whom he has no concern, is liable for their
232 PARTNERSHIP. [cHAP. YIII.
duty and authority, if the holder, who receives it, has
been guilty of gross negligence in receiving it, it will
not be binding in his hands upon the partnership.^
§ 131. The same doctrine applies, a fortiori to cases
of fraud ; for, although in cases of partnership, a fraud
committed by one partner in the course of the part-
nership business and transactions, without the knowl-
edge of the other partners, will bind the firm, and
create a liability co-extensive therewith ; ^ yet it would
be absurd to apply this principle to any cases, w^here
the fraud is known to, or participated in, or connived at
by, the third person, whose interest it affected ; for that
would be to allow him to take advantage of his own
wrong, and would affect the innocent with the grossest
injustice. Thus, for example, if one partner should
acts, eveu to persons having notice of the true state of aflfiiirs ; and the de-
cision was based upon the very ground that a person, who holds himself out as
a partner with others, expresses his readiness to incur the responsibilities of a
partner as regards strangers, whatever he may intend shall be the case be-
tween him and those with whom he associates his name. Brown v. Leonard,
2 Chitty, 120. Against the general proposition in question it may be further
urged that if partners agree not to be liable beyond a certain amount, and a
stranger has notice of that agreement, the notice avails nothing against him.
Such an agreement, coupled wjth notice of it on the part of a person dealing
with the firm, is by no means equivalent to a contract between him and it,
that he shall not hold the members responsible beyond the amount which they
may have agreed between themselves to contribute respectively. See Green-
wood's Case, 2 De G. M. & G. 459, 476. The writer is not acquainted with any
case in which it has been decided that persons who are aware of the terms
upon which partners have agreed together to carry on business are deemed to
contract with them upon the basis of the agreement come to amongst them-
selves. In all cases of this description, the real question to be determined
seems to be whether there was distinct notice that the firm would not be an-
swerable to strangers for acts which, without such notice, would clearly impose
liability upon it ; and in case of any doubt upon this point, the firm ought
clearly to be liable, the onus being on it to show sufficient reason why liability
should not attach to it."}
' Lloyd V. Freshfield, 2 C. & P. 325 ; s. c. 9 Dow. & Ky. 19 ; N. Y. F.
Ins. Co. U.Bennett, 5 Conn. 5 74; {Chapman v. Devereux, 32 Vt. 616.}
2 Ante, § 108 ; Coll. on P. B. 3, c. 1, § 5, p. 293-304, 2d ed. ; Gow on P. c. 2,
§ 2, p. 55, 3d ed. ; Id. c. 4, § 1, p. 146-148.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 233
make a negotiable security in the name of the partner-
ship, and dispose of it to a third person, who knew that
* the proceeds were to be applied in fraud of the firm, or
for purposes not within the scope of their business, or
for illegal purposes, it would not be binding on the firm.^
A fortiori, if the whole transaction should be a medi-
tated fraud to accomplish a mere gaming purpose, or
some other illegal purpose, between the very parties, the
same rule would apply.-
§ 132. Similar principles will apply, although not
always to the same extent, or with the same certainty,
where one partner misapplies the funds, or securities, or
other effects of the partnership in discharge or payment
of his own private debts, claims, or contracts. In such
cases the creditor, dealing with the partner, and know-
ing the circumstances, will be deemed to act mala fide,
and in fraud of the partnership, and the transaction,
by which the funds, securities, and other effects of the
partnership have been so obtained, will be treated as
a nullity.^ The same rule will ordinarily apply to the
case of a note, or indorsement, or acceptance, given by
one partner in the name of the firm for his own separate
debt or contract ; for it is a clear misapplication of the
partnership credit.'* So, a release of a paitnership debt
^ {See Connecticut River Banlc v. French, 6 All. 313 ; Warren v. French,
6 All. 31 7.}
- Coll. on P. B. 5, c. 1, § 5, p. 293-303, •2d ed. ; Gow on P. c. 2, § 2, p. 55, 56,
3d ed. ; Id. c. 4, § 1, p. 147-151 ; Sandilands v. Marsh, 2 B. & Aid. 673.
^ Gow on P. c. 2, § 2, p. 42-48, od ed. ; 3 Kent, 42, 43 ; Ex parte Agace,
2 Cox, 312 ; Coll. on P. B. 3, c. 2, § 3, p. 331-347, 2d ed. ; Hope v. Cast,
cited 1 East, 53 ; Arden v. Sharpe, 2 Esp. 524 ; Shirreff v. Wilks, 1 East,
48; [Kemeys v. Richards, 11 Barb. 312] ; Green v. Deakin, 2 Stark. 347;
Ex parte Goulding, 2 Glyn & J. 118; Snaith r. Burridge, 4 Taunt. G84 ;
Rogers V. Batchelor, 12 Pet. 221 ; [7ix jmiie Bushell, 3 Mont. D. & De G.
615; Burwell v. Springfield, 15 Ala. 273.]
* Gow on P. c. 2, § 2, p. 44-48, 3d ed. ; Coll. on P. B. 3, c. 2, § 3, p.
331-347, 2d ed. ; Wats, on P. c. 4, p. 196, 197, 2d ed. ; Wliitaker c.
Brown, 11 Wend. 75; Gansevoort i?. Williams, 14 Wend. 133; Wilson v.
234 PARTNERSHIP. [CHAP. VIII.
by one partner (which ordinarily will extinguish the
partnership debt), will be held inoperative and void, as
Williams, 14: Wend. 146 ; Dob v. Halsey, 16 Johns. 34 ; [Lang v. Waring,
17 Ala. 145] ; {Ex parte Thorpe, 3 Mont. & Ayr. 716, 1 Am. Lead. Cas.
454, 4th ed. ; Fall River Union Bank v. Sturtevant, 12 Cush. 372 ; Clay
V. Cottrell, 18 Penn. St. 408 ; Venable v. Levick, 2 Head, 351.} In Arden
V. Sharpe, 2 Esp. 524, 525, Lord Kenyon said: "The bill is indorsed by
one partner in the name of the firm. One partner certainly may indorse a
bill in the partnership name ; and if it goes into the world, and gets into the
hand of a bona fide holder, who takes it on the credit of the partnership
name, and is ignorant of the circumstances, though in fact the bill was first
discounted for that one partner's own use, in such case the partnership
is liable. But the case is different, where the party, who brings the action,
was himself the person who took the bill with the indorsement by one part-
ner only, and was informed that the transaction was to be concealed from
the other. He cannot sue the partnership. The transaction indicates that
the money was for that partner's own use, and not raised on the partnership
account, therefore he shall not be allowed to resort to the security of the
partnership, to whom in the original transaction he neither looked nor
trusted." In Livingston v. Roosevelt, 4 Johns. 251, 265, Mr. Justice Van
Ness said: "The distinction between general and special partnerships
is probably coeval with their existence. A general rule applicable to both
is, that in transactions relating to the joint concern, one of several partners
may bind the rest. He may sign notes, indorse or accept bills for the com-
mon benefit, &c., without applying to the rest in every particular case. But
this authority of a single partner has its limitations. Formerly, as appears
by the case of Pinkney v. Hall, 1 Salk. 126, and s. c. 1 Ld. Raym. 175, it
was probaljly less extensive than at this day. One partner of the concern
has no authority to pledge the pai'tnership goods for his own debt ; nor can
he bind the firm to any engagements, known at the time to be unconnected
with, and Ibreign to, the partnership. This has not only been so settled by
this court, but now is, and always has been, the established law in England.
Not an adjudged case, nor, I believe, a single dictum can be found the
other way. This will appear from most of the cases, which I shall presently
have occasion to mention for another purpose. In special partnerships,
however, this power of the individuals composing them is restricted to still
narrower limits, and can only be legally exercised within the compass of that
particular business to which the partnership relates. It is as circumscribed
as the partnership itself. It is, therefore, analogous to that which is con-
ferred on an agent, appointed for a special purpose, Avho, if he exceed his
authority, cannot bind his principal. Fenn v. Harrison, 3 T. R. 757.
This analogy is complete, in all cases, where third persons have dealings
with a special partner, with notice that he is such. And, accordingly, it has
been i-epeatedly ruled, that, whenever such a partner pledges the partnership
funds, or credit, in a transaction, which is known to be unconnected with,
CHAP, yill.] LIABILITIES AND EXEMPTIONS. ' 235
to the firm, if it was taken in discharge of the separate
debt of the partner releasing it by his creditor knowing
all the circumstances.^
^ 133. But althous:!! this is the general doctrine in
the absence of all controlling circumstances ; yet the
presumption of any fraud or misapplication may be
rebutted by the circumstances of the particular case.
Thus it may be shown, that the other partners have
directly or by fair implication authorized or confirmed
the application of the partnership funds, securities,
effects, or credits to the very purpose,^ or that the part-
ner had acquired, with the consent of his partners, an
exclusive interest therein, or that, from other circum-
stances, the transaction was actually bona fide, and un-
exceptionable, although it went to the discharge of the
private debt by one partner only.^ For, it has been
and not flxirly and reasonably within, the compass of the partnership, it is,
as to the other partners, fraudulent and void. They, however, to entitle
themselves to the protection of this rule of law, must not do, or consent to,
or suifer any thing to be done, which may hold them out to the world as
general partners ; and it would always be prudent and proper (though I will
not say it is indispensably necessary) to give public notice to the community,
that the partnership is special, and of the particular species of traffic or
business to which it is confined; Willet v. Chambers, Cowp. 814; De Ber-
kom V. Smith, 1 Esp. 29 ; Arden v. Sharpe, 5 Esp. 524 ; Shirrefi" v. Wilks,
1 East, 48. In the ease, Ex ijarte Bonbonus, 8 Ves. o40,. Lord Eldon ex-
presses himself thus : ' I agree it is settled, that if a man gives a partnership
engagement in the partnership name, with regard to a transaction, not in
its nature a partnership transaction, he, who seeks the benefit of that
engagement, must be able to say, that though in its nature not a particular
transaction, yet there was some authority beyond the mere circumstance of
partnership, to enter into that contract, so as to bind the partnership ; and
then it depends upon the degree of evidence.' " [See also Ex parte
Bushell, 3 Mont. D. & De G. 615.]
^ Gram v. Cadwell, 5 Cowen, 489 ; Evernghim v. Ensworth, 7 Wend.
326; Farrar v. Hutchinson, 9 Ad. & E. 641;. {1 Am. Lead. Cas. 453, 4th
ed. ; Williams r. Bramhall, 13 Gray, 462. But see Halls v. Coe, 4 McCord,
136.}
2 [Wheeler v. Rice, 8 Gush. 205] ; {Darling t'. March, 22 Me. 184.}
^ Gow on P. c. 2, § 2, p. 44-48, 3d ed. ; Id. c. 4, § 1, p. 149-151 ; 3
Kent, 42-44 ; Coll. on l\ B. 3, c. 1, § 4, p. 287-289 ; Id. p. 313-331 ; Id.
236 • PARTNERSHIP. [cHAP. VIII.
very justly remarked, that the application by a single
partner of a joint security, in discharge of his individ-
ual debt, by no means necessarily establishes, that it is
a fraud upon the firm ; for it may not only have been
expressly authorized by the firm, but it may frequently
result from prudential considerations and arrangements,
referable to their own business and interests.^ The
c. 2, § 3, p. 331-338, 2d ed. ; Ex jyarf eAga.ce, 2 Cox, 312 ; Ripley v. Taylor,
13 East, 175, 178, 182 ; AVintle v. Crowtlier, 1 Cr. & J. 316 ; Bairdu. Coch-
ran, 4 S. & R. 897 ; {1 Am. Lead. Cas. 454, 4th ed. }
1 See Gow on P. c. 4, § 1, p. 149, 3d ed. ; Coll. on P. B. 3, c. 2, § 3, p.
331-347, 2d ed. ; Ex imrte Bonbonus, 8 Ves. 540 ; Frankland v. McGusty,
1 Knapp, 274; Ridlej' u. Taylor, 13 East, 175, 178, 182; Wats, on P. c. 4,
p. 202, 2d ed. ; ShirretF v. Wilks, 1 East, 42 ; 2 Bell, Coram. B. 7, p. 616,'
617, 5th ed. ; {Carter v. Beaman, 6 Jones, Law, 44.} — In Ex paiie Bon-
bonus, 8 Ves. 540, 543, 544, Lord Eldon said : " This petition is presented
upon a principle, which it is very difficult to maintain ; that if a partner for
his own accommodation pledges the partnership, as the money comes to the
account of the single partner only, the partnership is not bound. I cannot
accede to that. I agree, if it is manifest to the persons advancing money,
that it is upon the separate account, and so, that it is against good faith,
that he should pledge the partnership, then they should show that he had
authority to bind the partnership. But if it is in the ordinary course of
commercial transactions, as upon discount, it would be monstrous to hold,
that a man borrowing money upon a bill of exchange pledging the partner-
ship, without any knowledge in the bankers that it is a separate transaction,
merely because that money is all carried into the books of tlie individual,
therefore the partnership should not be bound. No case has gone that
length. It was iloubted, whether Hope v. Cast Avas not carried too far, yet
that does not reach this transaction ; nor Shirreff v. Wilks ; as to which I
agree with Lord Kenyon, that, as partners, whether they expressly provide
against it in their articles (as they generally do, though unnecessarily), or
not, do not act with good faith, when pledging the partnership property for
the debt of the individual, so it is a fraud in the person taking that pledge
for his separate debt. The question of fact, whether this was flxir matter
of discount, or, being an antecedent, separate debt of Rogers, the discount
was obtained merely for the purpose of paying that debt by the application
of the partnersliip funds, which question is brought forward by the affidavits,
though not by the petition, must lead to further examination. If the partners
are privy, and silent, peruiitting him to go on dealing in this way, without
giving notice, the cpiestion will be, whether subsequent approbation is not
for this purpose equivalent to previous consent. Purnell, therefore, must
explain himself upon this ; for if he admits all these circumstances to have
been in his knowledge, it will be very difficult to say he is entitled to the
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 237
mere fact, that a note, or security, or fund of the firm
has been taken in discharge or payment of the separate
debt of one partner, is not alone decisive of collusion, or
fraud, or misapplication thereof. Neither is the fact,
benefit of that principle, Avhich is established for the safety of partners.
That explanation, if material in 1793, is much more so now; when one of
the partners is dead ; another gone abroad ; the managing clerk dead.
Under these circumstances, if the examination as to the propriety of tlie
proof made in 1793, which I consider a sort of judgment for the debt, can-
not be gone into but under most unfavorable circumstances to those who
made it, I cannot throw that difficulty upon those who come forward then ;
and permit the inattention of the others, who might have come at any time
since, to be prejudicial to third persons." Again he added : "In Fordyce's
Case, Lord Thurlow and the Judges had a great deal of conversation ujion
the law ; and they doubted, ujjon the danger of placing every man, with
whom the paper of a partnership is pledged, at the mercy of one of the
partners with reference to the account he may afterwards give of the trans-
action. There is no doubt, now, the law has taken this course ; that if,
under the circumstances, the party taking the paper can be considered as
being advertised in the nature of the transaction, that it was not intended
to be a partnership proceeding, as if it was for an antecedent debt, 2)rima
facie, it will not bind them ; but it will, if you can show previous positive
authority. In many cases of partnership and different private concerns, it
is frequently necessary, for the salvation of the partnership, that the private
demand of one partner should be satisfied at the moment ; for the ruin of
one partner would sjiread to the others, Avho would rather let him liberate
himself by dealing with the firm. The nature of the subsequent transactions,
therefore, must be looked to, as well as that at the time. It is impossible
now to forget, whatever I might have thought of it in 1793, that the person,
upon whose evidence this joint demand could be cut down, is Purnell, the
bankrupt ; who could not be a witness at law ; whose duty, also, it Avas to
protect the partnership against this proof; and who has permitted it to
stand all this time ; and who, upon all the circumstances appearing in these
affidavits, if he should deny notice, could not be believed by a jury." See
also Hood V. Aston, 1 Russ. 412, 415. [So, the use of a partnership name
by one partner for his own private benefit, may be ratified by the other part-
ner ; and no independent consideration is necessary to support a subsequent
promise by the other partner to pay such partnership obligation. Com-
mercial Bank v. Warren, 15 N. Y. 577.] {But in Taylor v. Hillyer, 3 Blackf.
433, it was held that such subsequent promise by the other, if oral, was
within the Statute of Frauds, and did not bind him, qiicere tamen. And a
note given in the firm name with the consent of all the partners, for the
debt of one partner, may be renewed in the firm name by that partner, and
it will not be necessary for the holder of the note to show that the other
members authorized the renewal. Tilford r. Ramsey, 37 Mo. 563.}
238 PARTNERSHIP. [cHAP. VIII.
that the amount thereof has been passed to the separate
private credit on account of one partner ; nor that a
note or security of the firm has been in part discounted,
or applied to pay a separate debt of one partner ; for
all these circumstances may be consistent Avith entire
good faith, and without gross negligence on the part of
the creditor. There must, therefore, be some other
ingredients in the case, importing some knowledge or
suspicion of mala Jides, or some reasonable grounds,
which should put the creditor upon further inquiry.^
It may, however, be taken as the general rule, that
where a note, or security, or fund of the firm has been
taken in discharge of a separate debt of one partner,
the burden of proof is on the holder or creditor to show
circumstances, sufiicient to repel every presumption of
fraud, or collusion, or misconduct, or negligence, on his
own part, unless indeed the ckcumstances, already in
proof on the other side, repel such presumption.^ And
1 See Coll. on P. B. 3, e. 2, § 3, p. 331-347, 2d ed. ; Ridley v. Taylor,
13 East, 175 ; Ex parte Bonbonus, 8 Ves. 540-54:5 ; Hood v. Aston, IRuss.
412, 415.
* Frankland v. McGusty, 1 Knapp, 274, 301, 305, 306 ; Ex parte Bon-
bonus, 8 Ves. 540 ; CoU. on P. B. 3, c. 2, § 3, p. 342, 343 ; Lloyd v. Fresh-
field, 9 Dow. & Ry. 19 ; s. c. 2 C. & P. 325 ; Foot v. Sabin, 19 Johns. 154, 157,
158; Dob v. Halsey, 16 Johns. 34, 38; Gansevoort v. Williams, 14 "Wend.
133 ; {1 Am. Lead. Cas. 454, 4th ed. ; Robinson v. Aldridge, 34 !Miss. 352 ;
King V. Faber, 22 Penn. St. 21. } — Li Frankland v. MeGusty, 1 Knapp, 274,
301. Sir John Leach (Master of the Rolls), in delivering the opinion of the
coui-t, said : " I take it to be clear, from all the cases upon the subject, that it
lies upon a separate creditor, who takes a partnership security for the payment
of his separate debt, if it be taken simpliciter, and there is nothing more in
the case, to prove that it was given with the consent of the other pai'tners.
But there may be other circumstances attending the transaction, which may
afford the separate creditor a reasonable ground of belief that the security,
so given in the partnership name, is given with the consent of the other part-
ners ; and those circumstances occurred in the case which was cited, and
which seemed to be inconsistent with the other authorities. I refer now to
the case of Ridley v. Taylor. In that case the bill was dated eighteen days
before its delivery by tlie partner to his separate creditor, and it was not
known by the creditor that it was drawn and indorsed by the debtor alone ;
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 239
if the securities or funds of the partnership are received
in payment of the separate debt of one partner by
and the bill was to a greater amount than tlie separate debt. The court
therefore were of opinion, that there was reasonable ground for the separate
creditor believing it not to have been given to him in fraud of the partner-
ship, and that the general presumption, that a partnership security, when
applied in payment of a separate debt, is in fraud of the partnership, was
repelled by the special circumstances which belonged to that particular
occasion. Upon a consideration, therefore, of all the authorities, I am of
opinion, that the law is, that taken simpliciter the separate creditor must
show the knowledge of the partnership ; but if there are circumstances to
show a reasonable belief, that it was given with the consent of the part-
nership, it lies upon the partners to prove the frfeud. I think that will
reconcile all the cases." And again (Id. p. 305, 306): "The counsel
seemed to be perfectly satisfied with a reference to one of the members
of the court to examine what the law was in that case, it having been ad-
mitted here, that there was no direct evidence, whether these bills had
been given with the assent of the pai-tners, or whether they had not been
given with their assent; and the question therefore was, when bills had
been given by an individual partner in the name of the partnership firm,
for his individual debt, upon whom the burden of proof lay to show that the
other partners did not assent to the formation of those bills. Upon the con-
sideration of that question, and examining all the authorities, it appeared
to the member of the court, who had the duty of that examination, that,
simpliciter, bills drawn by one partner for a separate debt in the partnership
name, could not be recovered upon, as against the partnership firm ; but
that the person claiming payment of the bills must prove either a direct as-
sent of the other partners to the formation of the bills, or if not such direct
assent, that there were some circumstances in the transaction, from which
the party taking them might reasonably infer, that they were given with the
consent of the other partners." In Dob v. Halsey, 16 Johns. 34, 38, Mr.
Chief Justice Spencer, in delivering the opinion of the court, said: "This
court has decided, in several cases, that where a note is given in the name
of the firm, by one of the partners, for the private debt of such partner,
and known to be so by the person taking the note, the other partuers are
not bound by such note, unless they have been previously consulted, and
consent to the transaction. Livingston v. Hastie, 2 Caipes, 24G ; Lansing v.
Gaine, 2 Johns. 300; Livingston v. Roosevelt, 4 Johns. 251. In Ridley v.
Taylor, 13 East, 175, the Court of King''s Bench held, that if one partner
draw or indorse a bill in the name of the partnership, it will, prima facie,
bind the fii-m, although passed by one partner to a separate creditor, in dis-
charge of his ])rivate debt, unless there be covin between such separate
debtor and creditor, or, at least, the want of authority, either express or im-
plied, in the debtor partner, to give the security of the firm for his separate
debt. The only difference between the decision of this court and that
2-10 PARTNERSHIP. [chap. YHI.
his creditor, it will not be necessary for the partners to
establish the fact, that the creditor knew at the time,
of the King's Bench, consists in this : We require the separate creditor,
who has obtained the partnership paper for the private debt of one of the
partners, to show the assent of the whole firm to be bound ; the rule of
the Iving's Bench throws the burden of avoiding such security on the firm,
by requiring them to prove that the act was covinous on the part of the
partner, for whose private debt the paper of the firm was given, by show-
ing, that it was done without the knowledge and against the consent of
the other partners, and that the fact was known to the separate creditor,
when he took the paper of the firm. I can perceive no substantial differ-
ence, whether the note of a firm be taken for a private debt of one of the
partners, by a separate creditor of the partner pledging the security of
the firm, and taking the property of the firm ujjon a purchase of one of
the partners, to satisfy his private debt. In both cases, the act is equally
injurious to the other partners ; it is taking their common property to
pay a private debt of one of the partners." The same point was decided
in Foot V. Sabin, 19 Johns. 1.54, 157, 158, where the same learned judge
said: "The plaintiff proved Holmes"s signature to the note, and, also,
that Wilson and Foot were partners, and that Wilson signed the name of
the firm ; and it appeared on the face of the note, that they signed as
' sureties ' to Holmes. Whether we apply this proof to the general issue
or to the special plea, the plaintiff has not maintained either issue. It was
incumbent on him to show, that all the defendants were liable on the note,
and that Wilson executed the note with the express assent and authority of
Foot. In this case, it appearing, that the signature of the name of the
firm, by Wilson, was not for a partnership debt, Wilson could not bind his
partner, Foot. All the cases were reviewed in Dob v. Halsey, 16 Johns, oi,
and the principle established is this, that where a note is given in the name
of a firm, by one of the partners, for the private debt of such partner, and
known to be so by the person taking the note, the other partner is not
bound, unless he has been previously consulted, and has consented to the
transaction ; and the burden of the proof, that the partner, who did not
sign the note, consented to be bound, is thrown on the creditor. The same
principle applies with greater foix-e, when one of the partners becomes
security for another person, and attempts to bind his copartners. The
creditor is aware, that he is pledging the partnership responsibility in a
matter in nowise connected with the partnersliip business ; and that is a
I'raud on such of the partners as do not assent expressly that the firm shall
be bound. When, therefore, it appeared, from the plaintiff's own showing,
that the note was signed by Holmes, as principal, and by Wilson, with the
name of the firm of Wilson and Foot, as sureties for Holmes, nothing was
shown to bind Foot, and the plaintilF failed to maintain the issue. On the
motion for a nonsuit, the court iield, that the plaintiff was bound to prove
the authoritv or consent of Foot, to the making the note, which the court
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 241
that it was a misapplication of the securities or funds ;
considered he had done. There was no proof of any authority or consent
of Foot, except the proof of the signature of Wilson of the name of the
firm. The court, then, certainly drew a very incorrect legal inference from
the fact proved." Perhaps the whole doctrine cannot be summed up better
than it is done by Mr. Chancellor Kent in his learned commentaries. " In
all contracts," says he, " concerning negotiable paper, the act of one part-
ner binds all ; and even though he signs his individual name, provided it
appears on the face of the paper, to be on partnership account, and to be
intended to have a joint operation. But if a note or bill be drawn by one
partner, in his own name only, and without appearing to be on pai-tnership
account, or, if one partner borrow money on his OAvn security, the partner-
ship is not bound by the signature, even though it was made for a partner-
ship purpose, or the money applied to a partnership use. The borrowing
partner is the creditor of the firm, and not the original lender. If, how-
ever, the bill be drawn by one partner in his own name, upon the firm or
partnership account, the act of drawing has been held to amount, in judg-
ment of law, to an acceptance of the bill by the drawer in behalf of the
firm, and to bind the firm as an accepted bill. And though the partnership
be not bound at law in such a case, it is held, that equity will enforce pay-
ment from it, if the bill was actually drawn on partnership account. Even
if the paper was made in a case, which was not in its nature a partnership
transaction, yet it will bind the firm, if it was done in the name of the firm,
and there be evidence that it was done under its express or implied sanc-
tion. But if partnership security be taken from one partner, without the
previous knowledge and consent of the others, for a debt, which the creditor
knew at the time was the private debt of the particular partner, it would be
a fraudulent transaction, and clearly void in respect to the partnership. So,
if from the subject-matter of the contract, or the course of dealing of the
partnership, the creditor was chargeable with constructive knowledge of
that fact, the partnership is not liable. There is no distinction in principle
upon this point between general and special partnerships ; and the question,
in all cases, is a question of notice, express or constructive. All partnei'ships
are more or less limited. There is none that embraces, at the same time,
every branch of business ; and when a person deals with one of the partners
in a matter not within the scope of the partnership, the intendment of law
will be, unless there be circumstances or proof in the case to destroy the
presumption, that he deals with him on his private account, notwithstanding
the partnership name he assumed. The conclusion is otherwise, if the sub-
ject-matter of the contract was consistent with the partnership business ; and
the defendants in that case would be bound to show, that the contract was
out of the regular course of the partnership dealings. When the business of
a partnership is defined, known, or declared, and the company do not ap-
pear to the world in any other light than the one exhibited, one of the
partners cannot make a valid partnership engagement, except on partner-
ship account. There must be at least some evidence of previous authority
16
242 PARTNERSHIP. [CHAP. VTII.
for the very nature of such a transaction ought to put
beyond the mere circumstance of partnership, to make such a contract bind-
ing. If the public have the usual means of knowledge given them, and no
acts have been done or suffered by the partnership to mislead them, every
man is presumed to know the extent of the partnership, with whose mem-
bers he deals. And when a person takes a partnership engagement, with-
out the consent or authority of the firm, for a matter that has no reference
to the business of the firm, and is not within the scope of its authority, or its
regular course of dealing, he is, in judgment of law, guilty of a fraud. It is
a well-established doctrine, that one partner cannot rightfully apply the
partnership funds to discharge liis own pre-existing debts, without the express
or implied assent of the other partners. This is the case even if the creditor
had no knowledge at the time of the fact of the fund being partnership
property. The authority of each partner to dispose of the partnership funds
strictly and rightfully extends only to the partnership business, though in the
case of bona Jicle purchasers, without notice, for a valuable consideration, the
partnership may, in certain cases, be bound by the act of one partner." 3
Kent, 41-43. The question upon whom the burden of proof lies to show,
that the partnership funds or securities have or have not been misapplied,
by the application thereof to the payment of a separate debt of one part-
ner, has been elaborately discussed in some other cases in the American
Reports ; and the conclusion is uniformly maintained, that the burden of
proof is on the holder, and not on the other partners. In Gansevoort v.
Williams, 14 Wend. 133, 135, Mr. Justice Xelson, in delivering the opinion
of the court, examined all the cases at large. The following extract may
not be unacceptable to the learned reader: "The English cases upon this
subject are not always consistent with themselves ; and even the same
court, while they profess to adhere to their general position, namely, that
the partner denying the authority of his associate must prove affirma-
tively, that the holder knew the paper was given in a transaction uncon-
nected with the partnership ; and also, that he did not assent, sometimes
substantially disregard the latter qualification of the rule in the application
of it to the facts. The case of Hope v. Cust, before Lord Mansfield, in 1774,
cited by Lawrence, J., in 1 East, 53, is an instance. There one Fordyce,
who traded largely in his private capacity, as well as in the business of a
banker with others, had considerable dealings in his private capacity with
Hope «& Co., in Holland, and gave to them a general guaranty in the part-
nership name, for money due in his separate capacity. The plaintiffs failed
in recovering on the guaranty. Lord Mansfield, in reporting the case to the
Court of Chancery, it being an issue from that court, said he left it to the
jury to say, whether, under the circumstances, the taking of the guaranty
was, in respect to the partners, a fair transaction, or covinous, with suffi-
cient notice to the plaintiffs of the injustice and breach of trust Fordyce was
guilty of in giving it. Chitty on Bills, 33. The case seems to have been
put to the jury, from the history given of it, upon the gross negligence of
the plaintifl's in not discovering that Fordyce was committing a fraud upon
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 243
him upon further inquiry ; and however bona fide his
his associates. But it does not appear, that there was any affirmative
evidence showing that the other partners had not assented, and that this was
known to the pLiintiffs. In Ex parie Bonbonus, 8 Ves. 540, Lord Chan-
cellor Eldon says, in Fordyce's case, Lord Thurlow and the judges had
a great deal of conversation upon the law, and they doubted upon the
danger of placing every man, with whom the paper of the pai'tnership is
pledged, at the mercy of one of the partners, with reference to the account
he may afterwards give of the transaction. But he says, 'there is no doubt
now the laAv has taken that course ; that if, under the circumstances, the
party taking the paper can be considei'ed as being advertised in the nature
of the transaction, that it was not intended to be a partnership proceeding,
as if it was for an antecedent debt, prima facie it will not bind them.'
The case of ShirrefF v. Wilks, 1 East, 48, is another instance. There the
plaintiff, Oct. 1795, sold a quantity of porter to B. & W., partners, which
was shipped by them to the West Indies. In April, 1796, R. came into the
firm and continued till November following, when it was dissolved. The
balance due for the porter, as settled by W., was £78, for which the plain-
tiffs drew upon the defendants the bill in question, which was accepted by B.
in the name of the then firm. The court decided R. was not bound, and
Lord Kenyon says, R. had no concern with the matter, and was no debtor
of the plaintiffs ; that no assent of his was found, and nothing to show that
he had any knowledge of the transaction ; that the transaction was fraudu-
lent upon its face. In Ridley v. Taylor, 13 East, 175, the rule was applied
by Lord Ellenborough with more strictness. There he required something
more than the naked fact, that the Bill in the name of the firm was given for
the private debt of the member who drew it, and that fact known to the
plaintiffs. The court would not infer want of authority or fraud upon these
facts ; and they considered the circumstances of the case of ShirrefF v.
Wilks, as having fairly authorized such a presumption, and that it was
decided upon that ground. But in Green v. Deakin, 2 Stark. 347, a
partnership security (a bill) was given by one member for his private debt
to the plaintiff; and although it appeai'ed expressly, that the plaintiff was
not informed, that the associate had not concurred, yet Lord Ellenborough
held, that the nature of the transaction was intrinsically notice, and he non-
suited him. So, in Wood v. Holbeck, Chitty on Bills, 83, note z, the
action was on a bill against three acceptors, where it appeared they were
partners in a tea speculation, and the drawer, a wine merchant, drew it in
payment of wine delivered to one of them ; the jury Avere directed, if they
found it was drawn without the knowledge or concurrence of the other two,
they were not liable, omitting the necessity of bringing home affirmatively
notice to the holder. It is not material to look any further into these cases ;
they will be found stated and referred to in Chitty on Bills, p. 29, 33.
They all clearly prove, that while the English courts hold to the position,
that the firm is liable on a bill or note made by one out of the partnersiiip
business, unless the holder knows that it was so made, and that the other
244 PARTNERSHIP. [CHAP. VIII.
conduct may be, it is a case of negligence on his part,
partners did not concur, the frequent practical operation and effect of
it under their direction does not essentially differ from the rule as settled in
this court. They undoubtedly put the defence of the copartner upon the
ground of fraud, committed upon him by his associate and the holder. But
this is sometimes inferred from the fact, that the bill or note is given for a
private debt, and that known to the holder ; and at other times further
proof is required negativing a presumed concurrence of the copartner. In
this court, the cases are believed to be uniform from that of Livingston
V. Hastie, 2 Caines, 246, down to the present time, that where a note or other
security is given in the name of the firm, by one partner for his private debt,
or in a transaction unconnected with the partnership business, which is the
same thing, and known to be so by the person taking it, the other partners
are not bound, unless they have consented. 11 Jolins. 544; 16 Johns. 34;
19 Johns. 154; 3 Wend. 418; 5 Wend. 223; 6 Wend. 615; 7 Wend. 158,
309. Prima facie, the execution of the bill or note in the name of the firm
by one partner binds the whole. The burden, therefore, of proving a
presumptive want of authority, and of course fraud, for that necessarily
follows, lies upon the copartners. 11 Johns. 544. We hold, that the
fact of the paper of the firm being given out of the partnership business
by one member is presumptive evidence of want of authority to bind the
other members of the firm, and if the person taking it knows the flict at
the time, he is chargeable with notice of want of authority, and guilty of
concurring in an attempted fraud upon the other partners. It may be
asked, why should the partners be bound at all, when the paper is in fact
signed without their authority ? This is no doubt against general princi-
ples, and involves the injustice of subjecting a person to answer for an act
of another, to which he never expressly or impliedly assented. The an-
swer is founded upon the law merchant. By entering into the partner-
ship, each reposes confidence in the other, and constitutes him a general
agent as to all the partnership concerns ; and the inconvenience to com-
merce, if it were necessaiy, that the actual consent of each partner should
be obtained, or that it should be ascertained, that the transaction was for the
benefit of the firm in the ordinary transaction of their business, suggested
the rule, that the act of one, when it has the appeai-ance of being on behalf
of the firm, is considered the act of the rest; and whenever a bill is drawn,
accepted, or indorsed by one of several partners, on behalf of the firm
during its continuance, which comes into the hands of a bona jide holder,
the partners are liable to him, though in truth one partner only nego-
tiated the bill for his own benefit, without the consent of the copartners.
Swan V. Steele, 7 East, 210; Chitty on Bills, 30. There appears never to
have been a doubt in England or in this State, in any of the cases, but that
all the partners are bound, unless the bona Jides can be impeached. What
shall amount to an impeachment is oftentimes a debatable question, and in
England seems to rest very much upon the circumstances of the case.
There is more uniformity and precision in the application of the rule here.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 245
which will not entitle him to recover against the part-
nership.^
It is undoubtedly the practice of mercantile firms to indorse the bank paper
of each other by the hand of any one of the members. Upon a strict appli-
cation of the rule in this court, and upon some of the cases in England,
such paper would not bind the firm, if the bank had knowledge of the
facts. It is not within the purpose and business of a mercantile firm to
indorse paper for their neighbors. Such business is not within the contem-
plation of the partnership, and therefore no authority is to be implied or
attached to any one of the members. It might well alarm the mercantile
community to lay down the position, that the partnership indorsement of
accommodation paper, by one of the firm, for any person that might ask
him, M'ould be binding upon all, whether the holder knew the facts or not.
Even the authority of one partner to sign bills and notes for the firm when
interested, is only implied, and may be rebutted by notice. Chitty on Bills,
33. It would be a strange implication of authority, where the firm had no
interest. But if it should appear, that a house was in the habit of indorsing
at the bank or elsewhere for another, such general course of dealing would
be sufficient evidence of authority from all the members of the firm, and
such use of it by one would bind all. Duncan v. Lowndes, 3 Camp. 478.
The authority would not How from the partnership, but from facts and
considerations independently of it." See, also, on the same point, Wilson v.
Williams, 14 Wend. 146 ; Rogers v. Batchelor, 12 Pet. 221, 229-232.
1 Rogers v. Batchelor, 12 Pet. 229-232 ; [Powell v. Messer, 18 Tex. 401] ;
|Purdy V. Powers, 6 Penn. St. 492 ; 1 Am. Lead. Cas. 453, 456, 4th ed.} —
This point came directly before the Supreme Court of the United States in the
case of Rogers v. Batchelor, 12 Pet. 221, 229, and was much discussed. Upon
that occasion the Court said : " The first instruction raises these questions ;
whether the funds of a partnership can be rightfully applied by one partner
to the discharge of his own separate pre-existing debt, without the assent,
express or implied, of the other partner ; and, whether it makes any differ-
ence, in such a case, that the separate creditor had.no knowledge at the
time of the fact of the fund being partnership property. We are of opinion
in the negative on both questions. The implied authority of each partner to
dispose of the partnership funds strictly and rightfully extends only to the
business and transactions of the partnership itself; and any disposition of
those funds, by any partner, beyond such purposes, is an excess of his
authority as partner, and a misappropriation of those funds, for which the
partner is responsible to the partnership ; though in the case of bona fide
purchasers, without notice, for a valuable consideration, the partnership may
be bound by such acts. Whatever acts, therefore, are done by any partner,
in regard to partnership property or contracts, beyond the scope and objects
of the partnership, must, in general, in order to bind the partnership, be
derived from some further authority, express or implied, conferred upon
such partner, beyond that resulting from his character as partner. Such is
246 PARTNERSHIP. [CHAP. VIII.
§ 133 a. Upon like principles, if the acting partners
of a firm, or the governing body of a joint-stock company
the general principle ; and, in our judgment, it is founded in good sense and
reason. One man ought not to be permitted to dispose of the property, or
to bind the rights of another, unless the latter has authorized the act. In
the case of a partner, paying his own separate debt out of the partnership
funds, it is manifest, that it is a violation of his duty and of the rights of
his partners, unless they have assented to it. The act is an illegal con-
version of the funds ; and the separate creditor can have no better title to
the funds than the partner himself had. Does it make any difference, that
the separate creditor had no knowledge, at the time, that there was a mis-
appropriation of the partnership funds ? We think not. If he had such
knowledge, undoubtedly he would be guilty of gross fraud ; not only in
morals, but in law. That was expressly decided in ShirrefFw. Wilks, 1 East,
48 ; and, indeed, seems too plain upon principle, to admit of any serious
doubt. But we do not think, that such knowledge is an essential ingredient
in such a case. The true question is, whether the title to the property has
passed from the partnership to the separate creditor. If it has not, then
the partnership may re-assert their claim to it in the hands of such cred-
itor. The case of Ridley v. Taylor, 13 East, 175, has been supposed to
inculcate a different and more modified doctrine. But upon a close exam-
ination, it will be found to have turned upon its own peculiar circum-
stances. Lord EUenborough in that case admitted, that one partner could
not pledge the partnership property for his o^vn separate debt ; and if he
could not do such an act of a limited nature, it is somewhat difficult to
see, how he could do an act of a higher nature, and sell the property.
And his judgment seems to have been greatly influenced by the consider-
ation, that the creditor in tliat case might fairly presume, that the partner
was the real owner of the partnership security ; and that there was an
absence of all the evidence (which existed and might have been produced)
to show, that the other partner did not know, and had not authorized the
act. If it had appeared from any evidence, that the act was unknown to,
or unauthorized by the other partners, it is very far from being clear, that
the case could have been decided in favor of the separate creditor ; for
his Lordship seems to have put the case upon the ground, that either
actual covin in the creditor should be shown, or, that there should be
pregnant evidence, that the act was unauthorized by the other partners.
The case of Green v. Deakin, 2 Stark. 347, before Lord EUenborough,
seems to have proceeded upon the ground, that fraud, or knowledge by the
separate creditor, was not a necessary ingredient. In the recent case. Ex
parte Goulding, cited in Coll. on P. 283, 284, 1st ed., the Vice-Chan-
cellor (Sir John Leach) seems to have adopted the broad ground, upon
which we are disposed to place the doctrine. Upon the appeal, his decision
was confirmed by Lord Lyndhurst. Upon that occasion his Lordship said :
* No principle can be more clear, than that, where a partner and a creditor
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 247
should unite with a stranger to produce a fraud against
the firm or company for whom they act, a court of
enter into a contract on a separate account, the partner cannot pledge the
partnership funds, or give the partnership acceptances in discharge of this
contract, so as to bind the firm.' There was no pretence in that case of any
fraud on the part of the separate creditor. And Lord Lyndhurst seems to
have put his judgment upon the ground, that unless the other partner as-
sented to the transaction he was not bound ; and that it was the duty of the
creditor to ascertain, whether there was such assent or not. The same ques-
tion has been discussed in the American courts on various occasions. In
Dob V. Halsey, 16 Johns. 34, it was held by the court, that one partner
could not apply partnership property to the payment of his own separate
debt, without the assent of the other partners. On that occasion, Mr. Chief
Justice Spencer stated the difference between the decisions in Xew York,
and those in England, to be merely this : that in New York the court re-
quired the separate creditor, who had obtained the partnership paper for the
private debt of one of the partners, to show the assent of the whole firm to
be bound ; and that in England, the burden of proof was on the other part-
ners to show their want of knowledge or dissent. The learned judge add-
ed : ' I can perceive no substantial difference, whether the note of a fii-mbe
taken for a private debt of one of the partners by a separate creditor of a
partner, pledging the security of the firm ; and taking the property of the
firm, upon a purchase of one of the partners to pay his private debt. In
both cases, the act is equally injurious to the other partners. It is taking
their common property to pay a private debt of one of the partners.' The
same doctrine has been, on various occasions, fully recognized in the Supreme
Court of the same State. And we need do no more than refer to one of
the latest; the case of Evernghim y. Ensworth, 7 Wend. 326. Indeed, it
had been fully considered long before, in Livingston v. Roosevelt, 4 Johns.
251. It is true, that the precise point now before us, does not appear to
have received any direct adjudication ; for in all the cases above mentioned,
there was a known application of the funds or securities of the partnership
to the payment of the separate debt. But we think, that the true principle
to be extracted from the authorities is, that one partner cannot apply the
partnership funds or securities to the discharge of his own private debt with-
out their consent ; and that without their consent their title to the property
is not devested in favor of such separate creditor, whether he knew it to be
partnership property or not. In short, his right depends, not upon his knowl-
edge, that it was partnership property ; but upon the fact, whether the
other partners had assented to such disposition of it or not.'''
[But if one partner indorse and negotiate a note in the firm name, but out
of the legitimate business of the company, a subsequent holder will be entitled
to recover against the partnership, on proving that he became a holder before
maturity, for a valuable consideration, and without notice of the fraud. Gil-
dersleeve v. Mahony, 5 Duer, 383;] {1 Am. Lead. Cas. 455, 4th ed. ; Roth
248 PARTNERSHIP. [CHAP. VIII.
equity might interfere and repudiate such acts, and
ask {1} to be reheved against them.^
§ 134. There are other cases, which constitute excep-
tions to the general liability of partners for acts or con-
tracts concerning the partnership business, which deserve
special notice in this connection. One of them is, where
in the very transaction, although it may be for the benefit
or use of the partnership, and in the business thereof,
yet the credit is exclusively given to the partner, trans-
acting it, upon his sole and separate liability. The
law is exceedingly clear and well settled upon this
point. If money is borrowed, or goods bought, or any
V. Colvin, 32 Vt. 125. A partner drew a check in the name of the firm, pay-
able to bearer, for the purpose of paying a debt due from the firm to H.,
but instead of so using it, he retained it, and paid the debt due H. by setting
off against it a debt due from H. to him individually, and paying the balance
in cash. Subsequently he transferred the check to B. to pay a private debt.
Held, that B. could maintain an action on the check against the firm. Gale
V. Miller, 44 Barb. 420.
Any doubt thrown on the rule as to the burden of proof, by Lord Ellen-
borough's dictum in Kidley v. Taylor, lo East, 175, must be considered as
removed by the recent case of Leverson v. Lane, 13 C. B. n. s. 278, in which
it was held that one who takes from a partner in a firm, for his separate debt,
a bill accepted in the firm name, must show that the acceptance was with the
concurrence of the other partners. In this case Mr. Justice Williams said:
" I do not mean to deny that there is in the judgment of Lord Ellenborough,
in Ridley v. Taylor, 13 East, 175, a dictum which is to some extent inconsis-
tent with the law as laid down in this case. But that dictum is clearly at
variance with all the authorities both before and since that judgment ; " and
Mr. Justice Byles said: "I adopt the law as laid down in a text-book of
very great value, — Smith's Mercantile Law, where I think it is correctly laid
down (p. 44), and evidently well considered, and after reading Lord Ellen-
borough's judgment in Ridley v. Taylor, 13 East, 175, ' It would seem,' says
the learned author, ' that the unexplained fact that a partnership security has
been received from one of the partners in discharge of a separate claim
against himself, is a badge of fraud, or of such palpable negligence as
amounts to fraud, which it is incumbent on the party who so took the security to
remove, by showing either that the partner from whom he received it acted un-
der the authority of the rest, or at least that he himself had reason to believe
so.'" See also Hogg r. Skeen, 18 C. B. n. s. 426.}
1 Vigors V. Pike, 8 CI. & Fin. 562, 648.
CHAP. Vlir.] LIABILITIES AND EXEMPTIOISS. 249
other contract is made by one partner upon his own ex-
clusive credit, he alone is liable therefor ; and the part-
nership, although the money, property, or other con-
tract is for their proper use and benefit, or is applied
thereto, will in no manner be liable therefor.^ For it is
entirely competent for one partner to borrow money, or
to buy goods, or to enter into contracts on his own sole
and exclusive credit with third persons ; and, on the
other hand, it is equally competent for them to rely on
that exclusive credit, and either to refuse to contract
with the firm, or to exonerate the firm from all liability
upon any contract, which would otherwise bind the firm,
as being for then- account and benefit. For the maxim
of the common law here applies with its full force :
Modus et conventio vincunt legem; and either party
may at his pleasure waive or relinquish rights, to which
he would otherwise be entitled. It is but following out
the rule of natural justice and the exposition of the in-
tention of the parties recognized in the Pandects. Ante
omnia enim animadvertendiim est, ne conventio in alia
re facta, aut cum alia persona, in alia re, aliave persona
noceati^
§ 135. This very case was directly put in the Roman
law, in relation to joint employers of ships, where one
' Coll. on P. B. 3, c. 2, § 2, p. 819, 2d ed. ; Id. p. 342, 343 ; Ex parte
Emly, 1 Rose, 61 ; Ex parte Bonbonus, 8 Ves. 540; Sylvester v. Smith, 9
Mass. 119, 121; Gow on P. c. 4, p. 154, 155, 3d ed. ; Lloyd v. Freshfield,
2 C. & P. 325 ; 9 Dow. & Ry. 19 ; Ketchura v. Durkee, 1 HofT. 538 ; Le
Roy V. Johnson, 2 Pet. 186, 198-200. See Trueman v. Loder, 11 Ad. & E.
589, 595 ; De Mautort v. Saunders, 1 B. & Ad. ^98 ; Bonfield v. Smith, 12 M.
& W. 405; [Green v. Tanner, 8 Met. 411. And if the contract is made
with one alone, and credit is given to him, he is liable on such contract,
without joinifig his copartnei's. Hagar v. Stone, 20 Vt. 106 ; Stansfeld v.
Levy, 3 Stark. 8; Murray v. Soraerville, 2 Camp. 99, n. ; Cleveland v.
Woodward, 15 Vt. 302] ; {Lind. on P. 290-292; 1 Am. Lead. Cas. 448,
4th ed.}
^ D. 2, 14, 27, 4 ; Poth. Oblig. n. 85.
250 PARTNERSHIP. [cHAP. VIII.
acted as the administrator of the concern, and con-
tracted in his own name exclusively. Si 2^hires navem
exercemit, cum quolibet eorum in solidum agi j^otest.
Ne in plicres adversarios destringatur^ qui cum uno
contraxerit} The same rule is adopted in the French
law ; and accordingly Pothier says : When a partner
has not contracted in the name of the firm, but in his
own name alone, he alone will be bound, although the
contract has been applied to the benefit of the partner-
ship. Thus, if a partner has borrowed money in his
sole name, for his own account, and then he applies the
money to partnership purposes, the creditor cannot
have any action against the firm ; for, according to the
principles of law, a creditor has his remedy only against
the party with whom he has contracted, and not against
those who have been benefited or received profit from
it.^ And this ao:ain is but the dictate of the Roman law.
Non adversus te creditores^ qui mutuam sum^psisti
pecunicun, sed ejus, cui hanc credideras heredes experiri,
contra ju7^is formam evidenter postulas.^
§ 136. One illustration may be taken from a case,
which has already passed into judgment. In that case,
one of two partners drew bills of exchange in his own
name, which he procured to be discounted by a banker,
through the medium of the same agent who procured
the discount of other bills drawn in the partnership
name, with the same banker ; it Avas held by the court,
that the banker had fio remedy against the firm, either
upon the bills so drawn in his own name, or for money,
had and received through the medium of such bills,
although the proceeds were carried to the partnership
account. The reason was, that the money was advanced
1 D. 14, 1, 1, § 25 ; Id. 14, 1, 2 ; ante, § 102.
* Poth. de Soc. n. 101, 105, 106. => Cod. 4, 2, 15.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 251
solely on the security of the parties, whose names were
on the bills, by way of loan to them, and not by way of
loan to the partnership. And it made no difference in
the case, that the banker conceived at the time, that all
the bills were drawn on the partnership account ; since
he did not credit the firm, but only the names on the
bills.i
§ 137. The French law has followed out the like
doctrine to its legitimate conclusion. Whenever one
partner in a commercial partnership contracts a debt
in his own sole name, he alone will be responsible
therefor ; and the creditor will have no recourse against
the partnership, even although the debt may have been
contracted in behalf of, or for the benefit of the part-
nership.^ And a fortiori in cases of non-commercial
partnerships, the doctrine is held to apply ; ^ with the
reservation, however, that the other partners have not
made him their agent to contract a joint obligation in
solido, or otherwise.^
§ 138. Still, although the general principle is clear,
it may not always be easy to apply it to the circum-
stances of particular cases ; for it is often a matter of no
inconsiderable difficulty and intricacy at the common
law to ascertain in point of fact, whether there has
been an exclusive credit given to one partner or not.
In the case of a dormant and secret partner, the credit
is manifestly given only to the ostensible partner ; for
no other party is known. Still, however, it is not
treated as an exclusive credit ; for the law in all cases
of this sort founds its decision upon the ground, that
the creditor has had a choice or election of his debtor,
' Emly V. Lye, 15 East, 7 ; Siffkin v. Walker, 2 Camp. 308 ; ante, § 102 ;
post, § 142, 243. See Faith v. Richmond, 11 Ad. & E. 339.
2 Poth. de Sec. n. 100, 101. => Poth. de Soc. n. 105.
* Puth. de Soc. n. 104, 105.
252 PARTNERSHIP. [CHAP. VIII.
which cannot be, where the partner is dormant and
unknown.^ The credit therefore is not deemed ex-
clusive, but binding upon all, for whom the partner
acts, if done in their business and for their benefit,
as is the case in cases of agency for an unknown
principal.^
§ 139. Another case may easily be put. Suppose a
partnership to be carried on in the sole name of one of
the partners, and he at the same time should transact
business upon his own separate account ; and he should
borrow money in his own name. In such a case the
question may arise, whether the partnership is bound
for such borrowed money, or the individual partner
only. And it must be resolved by taking into con-
sideration the whole circumstances of the case. Thus,
if the money is in fact borrowed for the partnership
business, or it is in fact applied to the partnership busi-
ness, in the absence of all controlling circumstances, the
partnership will be bound therefor ; since the fair pre-
sumption is, that it was intended by the partner to
pledge the partnership credit, and not merely his indi-
vidual credit, whether the partnership was known or
unknown to the lender. On the other hand, if the
money was borrowed for the separate use of the indi-
» Ante, § 63.
2 Story on Ag. § 291, '292 ; 2 Kent, 630, 631 ; Paley on Ag. by Lloyd,
245, 250, 3d ed. ; Thomson v. Davenport, 9 B. & C. 78, 80, 87 ; Poth. on
Oblig. n. 82, 83, 447 ; Coll. on P. B. 1, c. 1, § 1, p. 11, 12, 14, 2d ed. ; Id.
B. 3, c. 1, p. 259 ; Hoare v. Dawes, Doug. 371 ; Gow on P. c. 4, § 1, p.
162, 163, 3d ed. ; Saville v. Robertson, 4 T. R. 720 ; Robinson v. Wilkin-
son, 3 Price, 538 ; U. S. Bank v. Binney, 5 Mason, 176 ; s. c. 5 Pet, 529 ;
Kelley v. Hurlburt, 5 Cowen, 534; Mifflin v. Smith, 17 S. & R. 25 ; {Far-
mers' Bank of Missouri v. Bayless, 35 Mo. 428 ; Richardson v. Farmer,
36 Mo. 35; 1 Am. Lead, Cas. 448, 4th ed.} The law with regard to
dormant partners extends only to commercial partnerships. It has, there-
fore, no application to dormant partners in land speculations. Pitts v.
Waugh, 4 Mass. 424 ; Smith v. Burnham, 3 Sumn. 435. { See § 83. }
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 253
vidual partner, or actually applied to that use, the con-
trary presumption would prevail. But, if the business
of the partnership were different from the separate
business of the individual partner, and he should bor-
row expressly of the lender for the one business or for
the other, the lender would be deemed to give credit to
that particular business, and not to the other business ;
and then the partnership would or would not be bound
according to the fact, whether it was borrowed for their
business or not.^ And, in such a case, it would make
no difference, whether the lender did, or did not know,
that there was any partnership in either business, or
whether the money was actually applied to the business,
for which it was expressly borrowed, or not. But in
the absence of all proofs, as to the purpose,, for which
the money was borrowed, or to which it was applied, it
would be deemed to be borrowed upon the separate
account of the individual partner.^
' [And the declaration by the borrower at the time, that it was on part-
nership account lias been held sufficient proof to bind the firm. Oliphant
v. jMathews, IG Barb. 608.] {See § 106. If one partner contracts a debt,
representing to the creditor, that it is for the benefit of the firm, and if the
contract is within the scope of the firm business, the firm is liable, whether
the representations are true or false ; Stockwell v. Dillingham, 50 Me.
442.}
^ See Coll. on P. B. 3, c. 1, § 2, p. 275-277, 2d ed. ; Etheridge ».
Binney, 9 Pick. 272 ; Mifflin v. Smith, 17 S. & R. 165 ; U. S. Bank v. Bin-
ney, 5 Mason, 176 ; s. c. 5 Pet. 529 ; [Oliphant r. Mathews, 16 Barb. 608 ;
South Carolina Bank v. Case, 8 B. «fe C. 427 ; Buckner v. Lee, 8 Ga. 285.]
{In Furze v. Sharwood, 2 Q. B. 388, it was held, that under the peculiar
circumstances of the case the burden of proof was on the partners to show
that the contract sued on was on account of the separate business. Ex
parte Law, 3 Deac. 541 ; Hubbell v. AVoolf, 15 Ind. 204.} —In U. S. Bank
V. Binney, 5 Mason, 176, 183, 184, the court said: "In respect to both
general and limited partnershijjs, the same general principle apjilies, that
each partner has authority to bind the firm, as to all things within the
scope of the partnership, but not beyond it. Where the contract is made
in the name of the firm, it will, prima facie, bind the firm, unless it is ultra
the business of the firm. Where the firm im[)orts, on its face, a company.
254 PARTNERSHIP. [CHAP. VIII.
§ 140. Various other cases may be put to illustrate
the same rule. Thus, if a person should advance money
as A. B. & Co., or A., B., & C, there the contracts made by the partners
in that name bind the firm, unless they are known to be beyond the scope
and business of the firm.^ But where the business is carried on in the
name of one of the partners, and his name alone is the name of the firm,
there, in order to bind the firm, it is necessaiy not only to prove the signa-
ture, but that it was used as the signature of the firm by a party author-
ized to use it on that occasion, and for that purpose. In other words,
it must be shown to be used for partnership objects, and as a partnership
act. The proof of the signature is not enough. The plaintiffs must go
further, and show, that it is a partnership signature. In the present case,
the signature of ' John Winship ' may be on his own individual account, as
his personal contract, or it may be on account of the partnership. Upon
the face of the paper it stands indifferent. The burden of proof, then, is
upon the plaintiffs to establish, that it is a contract of the firm, and ought to
bind them." And again: "The notes are all indorsed in the name of
' John Winship.' For aught, therefore, that appears on the face of them,
they were notes only binding him personally. The plaintiffs must, then,
go further, and show either expressly or by implication, that these notes
were ofi'ercd by Winship, as notes binding the firm, and not mei'ely on
himself personally ; or that the discounts were made for the benefit, and
in the course of the business of the firm. It is not sufficient for the plain-
tiffs to prove, that the bank, in discounting these notes, acted upon the
belief, that they bound the firm, and were for the benefit and busmess of the
firm. They must go further and prove, that the belief was known to and
sanctioned by Winship himself in offering the notes ; and that he inten-
tionally held out to them, that the discounts were for the credit, and on
the account of the firm ; and that his indorsement was the indorsement of
the firm, and to bind them ; and that the bank discounted the notes upon
the faith of such acts and representations of Winship. The jury will
judge from the whole evidence, how the case stands in these respects.
The mere fact, that the discounts so procured Avere applied to the use of
the firm is not, of itself, sufficient to prove, that the discounts were pro-
cured on account of the firm. It is a strong circumstance, entitled to
weight, but not decisive." In Etheridge v. Binney, 9 Pick. 272, 274, the
court said: " I^ow as the partner, whose name is assumed by the firm,
may also engage in other branches of business, in which he may want
credit on his own private account, if he applies for a loan of money to
one, who is ignorant of the copartnership, and no information is given of
its existence, it is a private loan, and does not bind the firm, unless the
creditor sliall know, tliat the money borrowed, or the goods procured, by
the individual, went to the use of the firm. The burden of proof in such
1 [Barrett v. Swanii, 17 Me. 180; Holmes v. Porter, 39 Me. 157.]
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 255
for a firm, and yet take the security of one partner
therefor, the security would bind that partner only.^
And indeed, under such circumstances, if the separate
security is knowingly taken upon advances for the firm,
it will ordinarily be treated, as an election by the cred-
case is upon the creditor, in order to make good his claim upon the firm ;
for he credited the individual, and not the firm, and it will be presumed to
be fiar the private benefit of the individual, unless the contrary is proved.
But if the existence of the firm is known to the person, who makes the
loan, and representations are made to him by the borrower, that he bor-
rows for the use of the company, and that they are answerable for the
debt, so that credit is given to the company, and not to the individual
partner, the burden of proof is upon the company, when sued, to show
that the power confided to the individual has been abused, and that the
money borrowed was applied to his private use, and also, that this was
known to the lender to be his intention. This principle necessarily follows
from cases settled. If a purchase is made in the name of a firm, or money
borrowed, and a note given or indorsed in that name, this is prima facie
evidence of a debt from the firm, and it can onl}- be rebutted by proof in
the defence, that tin's was fraudulently done by the individual partner for
his own private use, and that this was known to the creditor. So that in
the limited partnership, if the name of the firm had been John Winship &
Co., or Winship & Binney, all notes given to any creditor, in either of those
names, would be company notes, unless disproved, as before stated. Xow,
the making and oflTering of such a note is nothing more than a representa-
tion that the money is wanted for the use of the company, and as they con-
fide in the individual, they will be bound by his acts. The name of the
firm here being only the name of the individual, a note offered in that
name, unaccompanied by any representation, would of course import only a
promise by John Winship alone ; and the credit being given to him alone,
the creditor would not recover against the firm, without proving, that the
money actually went into the funds of the firm. But if the borrowing part-
ner states that he is one of a company, and that he borrows money for the
company, or purchases goods for their use, then, as there is such company,
and as they have given him authority to use the company credit to a certain
extent, and as the creditor will have no means of knowing whether he is
acting honestly towards his associates, or otherwise, if he lends the money
or sells the goods on the faith of such representation, the company will be
bound, unless they prove that the contract was for his private benefit, and
known to be so by the creditor."
1 Coll. on P. B. 3, c. 2, § 2, p. 315-324, 2d ed. ; Siffkin v. Walker, 2
Camp. 308; Emly v. Lye, 15 East, 7. {If goods are sold to a firm, taking
the note of one member does not discharge the firm, unless an agi'eement
to discharge is afiirmatively shown. Folk v. Wilson, 21 Md. 53S.}
256 PARTNERSHIP. [cHAP. VIII.
itor, to absolve the partnership from responsibility, and
to confine the credit to that partner only.^ Nor will it
make any difference in such a case, that the money has
not only been borrowed, but has been applied to part-
nership purposes, if the contract has been exclusively
upon the separate credit or security of one partner.^
On the other hand, if money is actually borrowed on
the credit of the firm in the course of the business of
the firm, it will make no difference in the liability of
the other partners, that it has been misapplied by the
borrowing partner.^ But care must be j;aken to distin-
guish between cases of this sort, and cases, where the
separate security of one partner has been taken, not as
the primary debt, but merely as collateral security for
the primary debt, as one of the firm ; for, in the latter
case, the firm will undoubtedly be- holden, notwith-
standing the separate security.^
§ 141. The custom of a particular trade or business
may in some cases also furnish an exemption of the
partnership upon contracts made for their benefit, and
establish, that the credit is exclusively given to the
contracting partners. Instances, however, of this sort
are of rare occurrence ; and it has been remarked by a
learned writer, that perhaps there is no ordinary trade
» Coll. on p. B. 3, c. 2, § 2, p. 318, 319, 321, 2d ed. ; Ex parte Hunter,
1 Atk. 223; Ex parte Emly, 1 Rose, 61; Gow on P. c. 4, § 2, p. 154-156,
3ded.
2 Coll. on P. B. 3, c. 2, § 2, p. 319, 320, 2d ed. ; Bevan v. Lewis, 1
Sim. 376 ; Lloyd v. Freshfield, 2 C. & P. 325 ; Parkin v. Carruthers, 3 Esp.
248 ; Jaques v. Marquand, 6 Cowen, 497 ; [Green v. Tanner, 8 Met. 411] ;
{Farmers' Bank of Missouri v. Bayless, 35 Mo. 428.}
3 Coll. on P. B. 3, c. 1, § 1, p. 263; Id. B. 3, c. 2, p. 322, and note,
2d ed. ; Church v. Sparrow, 5 Wend. 223 ; U. S. Bank v. Binney, 5 Mason,
176 ; s. c. 5 Pet. 529 ; Gow on P. c. 4, § 2, p. 146, 147, 3d ed. ; Id. § 3,
p. 282-284; ante, § 105.
^ Coll. on P. B. 3, c. 2, § 2, p. 323, 2d ed. ; Id. p. 275; Ex parte
Brown, cited 1 Atk. 225 ; Denton v. Rodie, 3 Camp. 493 ; South Carolina
Bank V. Case, 8 B. & C. 427 ; Ex parte Bolitho, Buck, 100.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 257
or business, except that of stage-coach proprietors, in
which the firm have been held not liable for repairs
made, or goods supplied, by the order of one partner
for the use of the concern.' In general, such proprie-
tors are held bound, like all other partners." But
under some special circumstances, the credit has been
held to be exclusively given to the partner ordering
the repairs or supplies. Thus, where several persons
furnished with horses, which were their several prop-
erty, the several stages of a coach, and in the general
business and profits all the proprietors were partners,
and shared the profits, it was held, that the proprie-
tors were not all jointly liable for goods furnished to
one partner for the use of his horses, drawing the
coach along his part of the road ; and that the goods
must be deemed furnished upon the exclusive credit of
that partner.^
§ 142. The general rule is, as we have seen, that if a
bill or note is drawn or indorsed in the name of one
partner only, not being the firm name, it will not be a
contract binding on the firm, but on himself only, even
although it may be a transaction for the use or benefit
of the firm.'* But, nevertheless, cases might arise, where
the partnership might be held liable, as the drawers or
indorsers of the note or bill, notwithstanding it was
' Coll. on P. B. 3, c. 3, § 3, p. 329, 330, 2d ed.
« Ibid. ; Arthur v. Dale, cited Coll. on P. B. 3, c. 2, § 3, p. 330, 2d ed.
^ Barton v. Hanson, 2 Taunt. 49 ; s. c. 2 Camp. 97 ; Iliard v. Bigg, Man-
ning's Nisi Prius, Index, 220; Gow on P. c. 4, § 1, p. 149, 150, 3d ed.
^ Coll. on P. B. 3, c. 1, § 2, p. 277, 2d ed. ; Id. B. 3, c. 2, § 3, p. 331-
347 ; Jaques v. Marquand, 6 CoAven, 497 ; Smith v. Craven, 1 Cr. & J. 500,
507 ; ante, § 136 ; Trueman v. Loder, 11 Ad. & E. 589 ; Faith v. Richmond,
11 Ad. & E. 3.39; ante, § 102; {Nicholson v. Ricketts, 2 E. & E. 497;
Farmers' Bank v. Bayless, 35 Mo. 428 ; and see the eases on the negotiable
paper of partnerships well collected in Bvlcs on Bills, 43-53. Lind. on P.
274-282.}
17
258 PARTNERSHIP. [CHAP. Till.
made or indorsed only in the name of one partner.^
But, then, in such cases, in order to bind the firm it
must appear, that the other partners had constantly
treated such note or bill, so made and indorsed, as the
note, or bill, or indorsement of the firm in the adopted
name of the partner, as a firm name,^;ro hac vice; or at
least, as the note, or bill, or indorsement made by the
firm by procuration of the partner, so that the holder
would be at liberty to write over the partner's name
the name of the firm by procuration of the partner (A.
and B. by procuration of B.).^ But, whether this would
be so, or not, it has been held, that if one partner makes
use of an assumed firm name, not the real name of the
firm, and signs it by procuration of the assumed firm,
and the other partners knew his habit of so doing, and
adopted the note, or bill, or indorsement, as that of the
firm, the partners will be held to have adopted the new
firm name, ^:)ro hac vice, and will be bound by the con-
tract.^
^ [Palmer v. Stephens, 1 Denio, 471.]
^ South Carolina Bank v. Case, 8 B. & C. 427; Ex jyarte Bolitho,
Buck, 100; {1 Am. Lead. Gas. 448, 4th ed. See Ostrom v. Jacobs, 9
Met. 454. }
* Williamson v. Johnson, 1 B. & C. 146 ; Coll. on P. B. 3, c. 1, § 2, p. 276,
277, 2d ed. ; Id. B. 3, c. 2, § 2, p. 319-324 ; [/« re Warren, Daveis, 320, 325 ;
Newton V. Boodle, 3 C. B. 795 ; post, § 202 ; {Faith v. Richmond, 11 Ad. &E.
339 ; Kirk v. Blurton, 9 M. & W. 284 ; Wilde v. Keep, 6 C. & P. 235 ; Smith's
Merc. Law, 81, 3d Am. ed. See Tilford r. Ramsey, 37 Mo. 563, 567. } This
liability of a partnership, notwithstanding the names of individuals only were
used, is illustrated in the following case. Where the proprietors of a line of
canal boats, by articles between themselves agreed that the business of the
concern at Rochester should be conducted by J. A., one of the proprietors, in
his own name, and that at Albany it should be conducted by W. M., an
agent, in his name, but in behalf of and upon the responsibility of the
defendants, who were two of the proprietors ; that no copartnership name
should be used, and no paper made, accepted, or indorsed in the name, or
on account of the copartnership ; and that each party should raise his share
of the money needed by the concern upon his own responsibility, and the
other parties were not to be liable therefor, but all the parties were to
CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 259
§ 1-43. The doctrine has even been pressed further ;
and it has been held, that a note or other security may
be so signed, as at once to make the partner signing it
separately liable, and also the firm liable thereon. Thus,
where A. (one of the partners in the firm of A., B., and
C.) made a promissory note in these words : " Sixty
days after .date, I promise to pay D., E., or order," &c.,
and signed the note "For A., B., & C. — A.;" it was
held, that the firm was liable thereon, and also that he
was separately liable ; so that, in effect, it was treated
as a joint and several security, a joint security of the
firm, and a several one of the partners signing it.^ This
share equally in the profits ; it was held, that a bill by J. A. in his own
name, to raise money for the business of the concern, drawn upon and
accepted by W. M., in his name, bound all the proprietors, at once as
drawers and acceptors. Bank of Rochester v. Monteath, 1 Denio, 402 ;
Palmer v. Stephens, 1 Denio, 471.]
1 Lord Galway v. Matthew, 1 Camp. 403 ; Hall v. Smith, 1 B. & C. 407 ;
[Staats V. Howlett, 4 Denio, 559.] See Story on Ag. § 154, 275, 276 ; Coll.
on P. B. 3, c. 1, § 2, p. 277, 2d ed. — In the case of Lord Galway, 1 Camp.
403, the firm were held liable. In the case of Hall r. Smith, 1 B. & C. 407,
which was a note of this sort payable to bearer, and was signed A., B., and
C. by A., the suit was against A. only; and he was held separately liable.
Mr. Justice Bayley on this occasion said: "In pronouncing judgment for
the plaintiff, we shaU not give to the note any different effect from that
which it appears upon the face of it to have. The words used are ' I prom-
ise to pay,' and it is signed by the defendant. What then is the import of
those words ? Surely, that W. Smith promises. It is true, that he promises
for himself and others, but he alone promises. Now, there are many cases,
where a party, entering into a contract in his own name on behalf of others,
may be sued, or those, for whom he contracts, may be sued, and e cotiverso,
an agent may sue, or the parties beneficially interested may sue. If any
hardship arise from this construction, it might have been avoided by intro-
ducing the pronoun ' we ' instead of ' I ; ' and on the other hand, a great
difficulty may be imposed upon the plaintiff, if he be compelled to sue all ;
for then he would be bound to prove the partnership of all the parties,
whereas in this action it is sufficient to prove the handwriting of the defend-
ant. The cases of March v. Ward, and Clark v. Blackstock, import, that
the word 'I' creates a several promise by each party that signs, and here
a fortiori that must be the effect of it, for the party sued is the only person,
who actually made the promise. The plaintiff is therefore entitled to re-
cover." { Hall v. Smith, has been overruled by Ex parte Buckley, 14 M. & W.
260 PARTNERSHIP. [CHAP. VIII.
construction of the instrument certainly goes to th^
very verge of the law ; and perhaps may be thought
to deserve further consideration.
§ 144. Cases of a different character may occur,
where the question, whether exclusive credit has been
given to one partner, or joint contractor, may admit of
much discussion and difficulty, founded upon, the pecu-
liar circumstances thereof. Thus, in case one member
of a club should order goods for the use and benefit of
the club, all the members of the club, who concurred
in the order, or subsequently ratified it, might be liable
for the amount thereof, although the member, who
ordered the goods, should be made debtor in the trades-
man's books, unless it clearly appeared, that the trades-
man meant to give exclusive credit to that member
only ; for such entry in the books would not of itself be
decisive of an intent to give such exclusive credit.^
469 ; s. c. 1 Ph. 562. See also In re Clarke, De G. 153, reversing Ex parte
Christie, 3 Mont. D. & De G. 736 ; Owen v. Van Uster, 10 C. B. 318 ; Maclae
V. Sutherland, 3 E. & B. 1 ; Snow v. Howard, 35 Barb. 56, 35 Law Mag. 298. |
' Delauney v. Strickland, 2 Stark. 416 ; Flemyng v. Hector, 2 M. & W.
172; Coll. on P. B. 1, c. 1, § 1, p. 31, 2d ed. ;' {Caldicott v. Griffiths, 8
Exch. 898 ; Todd v. Emly, 8 M. & W. 505. Though the members of a
club are not liable to third parties from the mere fact of association, they
may be liable for the acts of agents whom they have authorized. Cockerell
V. Aucompte, 2 C. B. n. s. 440; Burls v. Smith, 7 Bing. 705; Lind.
on P. 55.} In the case of Flemyng v. Hector, Lord Abinger said: "I
had thought, but without much consideration, at the Assizes, that these
sort of institutions were of such a nature, as to come under the same view
as a partnersliip, and that the same incidents might be extended to them ;
that, where there were a body of gentlemen, forming a club, and meeting
together for one common object, what one did in respect of the society
bound the others, if he had been requested and had consented to act for
them. Several cases have been cited in the course of the argument, which
do not apply, with the exception of one of them, to societies of this nature.
Trading associations stand on a very different footing. Where persons
engage in a connnunity of profit and loss as partners, one partner has the
right of property for tlie Avhole. So, any of the partners has a right, in
any ordinary transactions, unless the contrary be clearly shown, to bind the
partnership by a credit ; he might accept a bill of exchange in the name of
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 261
§ 145. Neither does it necessarily follow, because
two persons, who are not partners, have joined together
the firm, and as between the firm and strangers the partnership would be
bound, although there might be an understanding in the firm that he was
not to accept. It appears to me, that this case must stand upon the ground,
on which the defendant put it, as a case between principal and agent ; and
I am the more inclined to look at it in that light, by an observation, made
by Mr. Piatt, in the course of the argument yesterday, on the subject of
bills of exchange. I apprehend, that one of the members of this club
could not bind another by accepting a bill of exchange, acting as a commit-
tee man, even where there might be an apparent necessity to accept, as in
the case of a purchase of a pipe of wine : the party might draw a bill, but
I do not think he could accept the bill to bind the members of the club. It
is, therefore, a question here, how far the conniiittee, who are to conduct
the affairs of this club as agents, are authorized to enter into such con-
tracts, as that, upon which the plaintiffs now seek to bind the members
of the club at large ; and that depends on the constitution of the club,
which is to be found in its own rules ; and upon two of the cases, those that
were tried before me at Guilford, looking at these general rules, it certainly
does strike me, that it is impossible to interpret them, so as to give the com-
mittee the power of dealing on credit, even for the purpose of the club. It
appears by the rules, that every member is to pay his subscription of ten
guineas as entrance money, before he can become a member, and a yearly
subscription of five guineas ; so, that by the provisions of the club, there is
to be a fund in hand in order to bear the expenses. But then, again, every
member, who makes use of the club, who either eats or drinks there, or takes
any sort of refreshment, is to pay ready money. That shows again, that the
club was not disposed, and not intended, to have any transactions on credit,
even with its own members ; and it also shows, that care was taken to pro-
vide ready money to meet every expense ; so that, if a party, or a gentle-
man of the club, were to order any particular thing, that the club did not
contain, he is to pay for it instanter ; so that no occasion was expected to be
necessary for the committee's pledging the credit of the club, or even their
own. Under these circumstances, as the rules of the club, which are in
writing, must be taken to form the constitution of the club, and are to be
construed as matters of law, I do not see what there was to go to the jury ;
I do not see any thing in these rules, of which the jury are to be the judges.
The words are, ' to manage the aflfairs of the club ; ' the question then is,
what the affairs of the club are. They are to have in their hands a subscrip-
tion, and they are to take care, that every member pays it before he comes
into the club, and pays for every thing he has in the club. It therefore ap-
pears that the members in general intended to provide a fund for the com-
mittee to call upon. I cannot infer, that they intended the conunittee to
deal upon credit, and unless you infer that that was the intention, how are
the defendants bound ? "
262 PARTNERSHIP. [CHAP. VIII.
to make a purchase for a joint shipment, that they will
be jointly liable to the vendor for the purchase-money ;
for if the purchase has been made imder circumstances
which demonstrate that the vendor gave an exclusive
credit to each of them for a moiety (as by drawing a
separate bill on each for a moiety), then each will be
solely and separately liable only for his own share. ^
And the same rule may be justly applicable to cases
of partnership, where such a division of the credit is
authorized and acted upon by the vendor, with a clear un-
derstanding that it is to be an exclusive credit, pro tanto.
§ 146. The case of a debt, contracted prior to the
existence of a partnership, has also sometimes been
treated as a case where exclusive credit is given to the
contracting party, and not to the firm, although they
ultimately receive the benefit thereof.^ But it may be
resolved into the more general principle, that a contract
can be obligatory only upon those who are parties to
it, or derive a benefit from it at the time of its incep-
tion.^ In short, the joint interest or joint liability
must be contemporaneous with the formation of the
contract itself, in order to superinduce the correspond-
ing liability to perform it ; and if there be no partner-
ship then in existence, to be bound, or none which is a
party or privy to the contract, it cannot be deemed
their contract ; but solely that of those who contracted,
and were capable of contracting it at the time. 0th er-
' Gibson v. Lupton, 9 Bing. 297. { See Sims v. Willing, 8 S. «fe Ft. 103. }
" See Ketchum v. Durke, 1 Hoffin. 538.
3 Gow on P. c. 4, § 1, p. 150-153, 3d ed. ; Coll. on P. B. 3, c. 3, § 1, p.
348-368, 2d ed. ; Saville v. Robertson, 4 T. R. 720; Ketchum v. Durkee,
1 Hofim. 538; {Lind. on P. 23-30, 311-314.} Where no other time is
fixed for the commencement of a partnership in an agreement between the
parties, it is taken to have commenced on the date of the agreement, as the
presumed intention of the parties. Williams v. Jones, 5 B. & C. 108.
{See Battley v. Lewis, 1 Man. & G. 155, and § 194, post.}
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 263
wise, the law would introduce the extraordinary anom-
aly of making a contract, consummate and perfect
between all the original parties, expand so as to be in
fact the contract of other parties, who had not, and
perhaps could not, at the time, have any interest in, or
privity, or connection therewith.^
' Go-w on P. c. 4, § 1, p. 150-152, 3d ed. — Mr. Gow has well stated the
principle, and illustrated it by the cause of Saville v. Robertson, 4 T. R.
720. Mr. Gow says, p. 151, 152, " A joint contract, however, entered in-
to by one or more individuals, is binding only upon those who have a joint
interest in it at the time of its inception ; for no subsequent act by any per-
son, who may aftei-wards become a partner, not even an acknowledgment
that he is liable, will entail upon that person the obligation of fulfilling such
a contract, if it clearly appear, that a partnership did not exist at the time
the contract was made. The joint interest must be contemporaneous with
the formation of the contract itself, to superinduce the corresponding liabili-
ty to perform it. If it were otherwise, the law would, in fact, create a sup-
posed contract, when the real contract between the parties was consummated,
before the joint interest and consequent joint risk was in existence. Thus,
where several persons agreed upon a maritime adventure, and to provide a
cargo of goods, which should, in the judgment of the majority, be proper
for the voyage ; and permission was given to the supercargo (who was to
have a proportionate profit, and bear an equal loss with the respective ad-
venturers) to ship, on the joint account, as many goods as he might think
fit ; such goods being first approved by a majority of the persons concerned
in the adventure, as proper for the voyage; and it was afterwards agi-eed,
that each party was to hold no other share or proportion in the adventui*e,
than the amount of what each separately ordered and shipped ; and that the
orders given for the cargo and outfit of the ship were to be separately paid,
and that one was not to be bound for any goods or stores ordered or shipped
by the other ; and that the supercargo should have free liberty to ship what
goods were suitable to the voyage, over and above the ship and outfit, leav-
ing room for those ordered by the adventurers ; and that the ship should be
made over in trust for the general concern ; it was held, that if the supercar-
go afterwards purchased goods, as part of the cargo, and the ship sailed
with the goods so purchased, he alone was liable for them, and not his co-
adventurers jointly with him. The reason on which this determination pro-
ceeded, seems to have been, that, after the purchase of the goods made by
the several adventurers, there was still, before they became joint property,
a further act to be done, which was the putting them on board the sliip, in
which they had a common concern for the joint adventure, and until that
fui'ther act was done, the goods purchased by each remained tlie sc})arate
property of the purchaser. The partnership in the goods did not arise
until their admixture in ihe common adventure." Again he adds (p. 153) :
264 PART>'ERSHIP. [chap. YIII.
§ 14:7. This doctrine may easily be illustrated by
a few cases. Thus, if two persons should separately
purchase goods on their own separate accounts, and
afterwards should agree to unite their interests therein,
in one joint commercial adventure for their joint and
mutual profit, this would create a partnership in the
goods for that adventure. But it would not make
them liable as partners to the vendors of the goods ;
for they then had no joint interest in the purchase.^
The same rule would apply to a case where one mer-
chant should purchase goods on his own sole account,
and afterwards should ship them upon a joint adven-
ture for joint profits with other persons, whom he had
subsequently admitted as sub-purchasers, or to whom
he had subsequently sold an undivided interest in the
goods ; for in such a case the original credit was exclu-
sively given to himself; and the other parties could in
no just legal sense be deemed parties or privies to the
contract of purchase.^ It would ordinarily be other-
"Itis not, however, sufficient to constitute a joint liability for the capital
brought into the trade, that there is to be a subsequent participation in
the profit derived from it. In such a case, the right to participation can
only take its origin from the time of the introduction of the capital; and, al-
though communion of profit is a strong circumstance to explain a contract
in itself doubtful, and to show, as the legal presumption is, that a pai-tuer-
ship existed at the time amongst the participants ; yet, where the nature of
the contract clearly appears, it cannot have such a retrospect as to alter it,
and to substitute the responsibility of several for that of an individual con-
tractor. Therefore, if several persons agree to form a partnership, and that
each shall contribute a certain share of the capital, and any of the persons
borrow or purchase the share, which is by him afterwards brought into the
common stock, the liability for payment to the lender or vendor is not joint,
but personal."
i Gow on P. c. 4, § 1, p. 151-153, 3d ed. : Saville r. Robertson, 4 T. R.
720 ; Coll. on P. B. 3, c. 3, § 1, p. 348-358, 2d ed.; Id. p. 365, 366 ; Young
V. Hunter, 4 Taunt. 582 ; Gouthwaite v. Duckworth, 12 East, 421 ; {Duncan
V. Lewis, 1 Duvall, 183.}
- Gow on P. c. 4. § 1, p. 151-153. 3d ed. ; Young v. Hunter, 4 Taunt.
582; Greenslade v. Dower, 7 B. & C. 635; Coll. on P. B. 3, c. 3, § 1, p.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 265
,1
wise, however, if the joint adventure were agreed
upon before the purchase, and the purchase were to be
made for all the persons concerned therein in the name
of one.^
356-358, 2ded. ; Id. p. 365 ; Coope v. Eyre, 1 H. Bl. 37 ; Gardiner v. Childs, 8
C. & P. 345; Gouthwaite v. Duckworth, 12 East, 421 ; {Davis v. Evans, 39
Vt. 182.}
' Gow on P. c. 4, § 1, p. 151-153, 2d ed. ; Gouthwaite r. Duckworth,
12 East, 421, 4-'4 ; Waugh v. Carver, 2 IL Bl. 235, 246 ; Gardiner v. Childs,
8 C. & P. 345 ; Smiths. Craven, 1 Cr. & J. 500 ; Post v. Kimberly, 9 Johns.
470; Felichy w. Hamilton, 1 Wash. C. C.491; Coll. on P. B. 3,c. 3, § l,p. 349-
357. — In the text the qualifying word ''ordinarily" is inserted with refer-
ence to a suggestion of Mr. Justice Gibbs in Young v. Hunter, 4 Taunt. 582,
583, where he is reported to have said: " I am by no means of opinion, that
there may not be a case, where two houses shall be interested in goods from
the beginning of the purchase, yet not be both liable to the vendor ; as if the
parties agree amongst themselves, that one house shall purchase the goods, and
let the other into an interest in them, that other being unknown to the ven-
dor ; in such a case the vendor could not recover against him, although such
other person would have the benefit of the goods. In Gouthwaite r. Duck-
worth, 12 East, 421, 425, Lord Ellenborough said: " It comes to the question,
whether, contemporary with the purchase of the goods, there did not exist a
joint interest between these defendants. The goods were to be purchased, as
Duckworth states in his examination, for the adventure ; that was the agree-
ment. Then what was the adventure ? Did it not commence with the pur-
chase of these goods for the purpose agreed upon, in the loss and profits of
which the defendants were to share ? The case of Saville v. Robertson does
indeed approach very near to this. But the distinction between the cases is,
that there each party brought his separate parcel of goods, Avhich were after-
wards to be mixed in the common adventure on board the ship, and till that
admixture the partnership in the goods did not arise. But here the goods in
question were purchased, in pursuance of the agreement for the adventure,
of which it has been before settled, that Duckworth was to have a moiety.
There seems also to have been some contrivance in this case to keep out of
general view the interest Avhich Duckworth had in the goods ; the other two
defendants were sent into the market to purchase the goods, in which he was
to have a moiety ; and though they were not authorized, he says, to pur-
chase on the joint account of the three ; yet, if all agree to share in goods
to be purchased, and in consequence of that agreement one of them go in-
to the market and make the purchase, it is the same, for this purpose, as if
all the names had been announced to the seller, and therefore ail are lia-
ble for the value of them." Mr. Justice Bayley added : " In Saville v.
Robertson, after the purchase of the goods made by the several adventurers,
there was still a further act to be done, which was the putting them on board
266 PARTNERSHIP. [cHAP. VIII.
§ 148. The same rule will apply to cases, where
there is a separate loan of money to one of several
the ship, in which they had a common concern, for the joint adventure ; and
until that further act was done, the goods purchased by each remained the
separate property of each. But here, as soon as the goods were purchased,
the interest of the three attached in them at the same instant by virtue of
the previous agreement." See Coll. on P. B. 3, c. 3, § 1, p. 356-358, 2d
ed. ; Gardiner v. Childs, 8 C. & P. 345, and Smith v. Craven, 1 Cr. & J.
500, where the subject was much considered. In this last case, A., B., and
C, not being general partners, entered into a joint speculation for the
purchase and imjjortation of corn, and each was to contribute a third. A.
paid his share ; and the bankers of B. advanced money to B. on his individ-
ual credit, which was applied to the payment of bills drawn by B. in the
course of the said speculation. It was held, that A. was not liable to pay
the bankers for the advance ; since it was manifest, that it was raised on
his individual credit. On this occasion Bayley, J., said: "If I supply my
agent with money, which he misapplies, and raises money elsewhere, can
the person, from whom he obtains the money, sue me for the amount? If
this had been a claim by the seller of the corn, no doubt he would have been
entitled to proceed against all the parties, and might have called upon them
all for payment. It is not a claim by the seller, but by the person, who, as
between the parties themselves, is the mere hand, by which the money is
advanced. Wharton having given collateral security, the plaintiffs, as his
agents and on his credit, not knowing any thing of the other parties, pay
the money, and pay it in discharge of that, which is the individual debt
of their principal, and of him alone. As agents they had no notice that they
made the payment, except on the individual behalf of Wharton ; he only
was trusted, and the advances Avere made on his credit alone ; the plaintiffs
were not deluded by the prospect of a partnership security, and the claim
must be restricted to Wharton alone. See what a situation the defendant
Craven would be placed in, were it otherwise. He was justified in sup-
posing, that Wharton's share was raised out of his own funds. He finds,
that all the bills are honored, when they become due, with funds, which he
would naturally conclude were really the funds of Wharton ; and to my
mind, it would be most unjust, if, after a lapse of time. Craven, having
settled the full amount of what, as between himself and Wharton, he was
bound to pay, a third person were allowed to come forward and say, ' I
advanced the money on the credit of Wharton only, but I find, that it was
applied in payment of your liabilities, and therefore I look to you.' A party
is not liable as a partner, except he give to his partner express or implied
authority to pledge his credit in the transaction, out of which the claim
arises. Now, what authority does Craven appear to have given to Wharton
to borrow this money from the plaintiffs ? It is not sufficient to say, that
Craven was relieved from a liability ; for your payment of my debt does
not make mo your debtor, unless the payment be made at my request. The
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 267
joint adventurers, for the purpose of founding a part-
nership or joint adventure ; the firm, when formed,
will not be liable for the advance ; for the case is not
distinguishable from one, where several persons are to
contribute their separate proportions of money towards
a common fund for joint purposes, and each is to
borrow, and does borrow, his own share upon his own
separate account and credit.^ In short, in all cases of
this sort, in order to bind the firm, the intended part-
ner must either have had an original authority to
purchase goods, or borrow money upon the joint
account, and have exercised that authority by a pur-
chase or loan on their account, and not on his own
exclusive credit, or the transaction must have been
subsequently ratified and adopted by the firm, as one
for which they were originally liable, or for which they
now elect to give their joint security.^
§ 149. These cases seem sufficiently clear upon prin-
ciple. But others may arise, where the application of
it may involve more complexity of circumstances, and
of course more embarrassment in enunciating it. Thus,
where A. and B., stationers, ordered certain paper-
makers to supply paper to C. and D., printers, for the
purpose of printing certain specified works ; and it
turned out afterwards in proof, that C. and D. were
interested as partners in the publication of those works,
the question arose, whether C. and D. w^ere liable to
the paper-makers for the paper supplied. The solution
partnership was not liable, unless Wharton had an authority from them to bor-
row ; and no such authority, express or implied, exists in the present case."
' Coll. on P. B. 3, c. 3, § 1, p. 357-360, 2d ed. ; Saville i'. Robertson, 4
T. R. 720; Greenslade v. Dower, 7 B. & C. 635; Wilson v. Whitehead, 10
M. & W. 503; {Donnally v. Ryan, 41 Penn. St. 306.}
2 Coll. on P. B. 3, c. 3, § 1, p. 357, 359, 360, 2d ed. ; Saville v. Robert-
son, 4 T. R. 720; Gouthwaite v. Duckworth, 12 East, 421 ; Browne v. Gib-
bins, 5 Bro. P. C. by Tomlins, 491 ; Gow on P. c. 4, p. 150-153, 3d ed.
268 PARTNERSHIP. [CHAP. VIII.
of that question depended upon another, and that was ;
when the partnership in the pubUcation of those works
commenced, whether before or after the paper was
ordered. If before, then all the partners were liable,
and C. and D. among them ; if after, then A. and B.
only were liable. And to arrive at a just conclusion
on the subject, it might be material to consider,
whether the ordering of the goods Avas the exclusive
act of A. and B., and intended to be upon their own
exclusive credit ; or was to be on that of the joint
concern, with the approbation of all who were to par-
ticipate in the publications.^ So, where A., B., and C.
verbally agreed that they should bring out and be
jointly interested in a periodical publication. A. was
to be the publisher, and to make and receive general
payments ; B. was to be the editor ; and C. to be the
printer ; and after payment of all expenses they were
to share the profits of the work equally ; C. was to
furnish the paper and charge it to the account at cost
prices ; and no profits were ever made, nor any
accounts settled ; the question arose, whether a third
person, who furnished the paper to A. for the purpose
of being used by him in printing the periodical, could
maintain an action therefor against A., B., and C, or
was limited to an action against C. only. The court
held that A., B., and C. were not jointly liable therefor,
but C. only.^
§ 150. So, in other cases of goods supplied, or work
and labor done, or services performed for persons who
are about engaging in a joint undertaking, and are
taking preliminary steps for establishing the same, it
is often a matter of no small nicety to ascertain who
» Gardiner v. Cliilds, 8 C. & P. 345; Coll. on P. B. 3, c. 3, § 1, p. 356,
357, 2d ed.
2 Wilson V. Whitehead, 10 M. & W. 503.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 269
of the parties are liable therefor.^ In contemplation
of law, the joint liabilities will of course commence
only from the time when the parties have agreed to
act together for the common purpose, and that precise
time is sometimes difficult to ascertain.^ There is a
1 Coll. on P. B. 3, c. 3, § 2, p. 365, 2d ed. ; 2 Bell, Comm. B. 7, c. 3,
p. 649-G52, 5th ed. ; Young v. Hunter, 4 Taunt. 582 ; Bourne v. Freeth, 9
B. & C. 632 ; Braithwaite v. Skofield, 9 B. & C. 401 ; Howell r. Brodie, 6
Bing. N. C. 44.
■ 2 [See Atkins v. Hunt, 14 X. H. 205, 206. — Gilchrist, J., here observed :
" There is of course an essential difference between a mere proposition to
form a partnership, audits actual constitution. Persons may take a deep
interest in the objects to be accomplished by the company ; may make
donations to aid its progress ; or may sign their names to subscription
papers for the same end, without being liable for debts which other persons
may contract in the prosecution of the same purpose. But a difficult ques-
tion often arises, as to where the proposition to make the contract ends,
and the contract itself begins. In Bourne v. Freeth, 9 B. & C. 632, a
prospectus was issued, stating the conditions upon which the company was
formed ; that the concern was to be divided into twenty share?, to be under
the management of a committee, and ten per cent of the subscriptions to be
paid in by a certain date. It was held that this prospectus imported only
that a company was to be formed, and not that it was actually formed, and
that the signature to the prospectus did not indicate to any person who
should read it that the signer had become a member of a company already
formed. So in a case where all the acts proved and relied on were equally
consistent with the supposition of an intention on the part of the defendant
to become a partner in a trade or business to be afterwards carried on, pro-
vided certain things were done, as with that of an existing partnership, it
was held that he was not a partner. Dickinson v. Valpy, 10 B. & C. 128,
per Parke, J. And where a prospectus for a company was issued, to be
conducted pursuant to the terms of a deed to be drawn up, it was held that
an application for shares, and payment of the first deposit, did not constitute
one a partner who had not otherwise interfered in the concern. Fox v.
Clifton, 6 Bing. 776. It was an important element in that decision, that
the deed was not executed by the defendant who Avas sought to be charged
as a partner. In Howell v. Brodie, 6 Bing. N. C. 44, the defendant, from
1829 until 1833 advanced various sums, with a view to a partnership in a
market about to be erected ; knew that the money was applied towards the
erection, and was consulted in every stage. In October, 1833, it was settled
by a written agreement that he should have a seventh share of it; but it
was held that he was not liable as a partner until October, 1833, although
profits had been made but not accounted for to him before that time. Lord
C. J. Tindal mentions the fact that no account of profits was rendered pre-
270 PARTNERSHIP. [CHAP. VIII.
gradual progress even in the formation of schemes of
this nature ; and preliminary acts are sometimes done,
and orders given by several persons, before they have
absolutely fixed upon being concerned in the joint
undertaking ; and yet it rests in negotiation, whether
they shall, or shall not, become partners.^ In such
vious to October, 1833, as being in favor of the defendant."] {Lind. on
P. 23-25 ; Gabriel v. EviU, 9 M. & W. 297 ; Be Hall, 15 Ir. Ch. 287.
Osborne v. Jullion, 3 Drew. 596 ; Davis v. Evans, 39 Vt. 182. See Jef-
ferj's V. Smith, 3 Russ. 158.}
1 Questions of this sort often arise in cases of unincorporated joint-stock
companies, in which every member is liable in solido for the debts con-
tracted on account of the partnership, as every member is in ordinary
commercial partnerships. In joint-stock companies many preliminary acts
are done towards the establishment of the company ; and it often becomes
a matter of nicety to ascertain, when a person is actually a member and
partner, or not. The general doctrine is well summed up by Mr. Collyer
(Coll. on P. B. 5, c. 1, § 2, p. 735-743). He says: "In joint-stock
companies, more than in any other kind of partnership, a variety of acts
are done before the partnership is actually commenced. Notices are
published, prospectuses are distributed, meetings are held, officers are
chosen, deposits are paid, and scrip receipts are given long before the
business Is commenced, or the deed of settlement is executed. Indeed,
many of these acts are necessarily done before even the full complement
of the intended shareholders is made up. Hence, although the prime
movers and agitators of the scheme will undoubtedly be liable in respect
of the contracts, into which they enter for the purpose of launching the
company ; yet they cannot by such proceedings bind those who merely
answer their invitation ; those for instance, who name themselves sub-
scribers, and even pay deposits, and do other acts showing an intention of
becoming partners, but who, by neglecting to observe the rules, or to
comply with the demands of the society, never become entitled to share
the profits. The contract of partnership, as regards these passive sub-
scribers, is executory only, and may be abandoned, if the terms of the
partnership are not reasonably fulfilled by the projectors. Under such
circumstances, they never have become actual partners in the concern,
and, consequently, have never rendered themselves liable for its debts.
In the language of a learned judge : ' If there is a contract to carry on
business by way of present partnership between a certain definite number
of persons, and the terms of that contract are unconditional, or complete,
then the partners give to each other an implied authority to bind the rest
to a certain extent. But if a person agree to become a partner at a future
time with others, provided other persons agree to do the same, and advance
stipulated portions of capital, or provided any other previous conditions
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 271
cases the question resolves itself ultimately rather into
a question of fact than of law ; and until the partnership
is definitely fixed and agreed on, those only are liable,
who have acted and ordered the materials, or work, or
labor, or services.^
§ 151. Upon the like ground, where, previous to the
formation of a company, a prospectus, signed by the
defendant, was issued, indicating that it was in contem-
plation to form the company ; and it appeared, that
the defendant solicited others to become share-holders,
and was present at a meeting of the subscribers, when
it was proposed to take certain premises to carry on
the business of the concern, which were afterwards
taken ; but he never paid his subscription ; it was held,
that the defendant was not chargeable, as a partner, for
goods supplied to the company ; for he did not hold
himself out to the world, as a partner in a company
already formed, but to one, which was to be, or might
are performed, he gives no authority at all to any other individual, until all
those contracts are performed. If any of the other intended partners in
the mean time enter into contracts. It seems to me to be clear, that he is
not bound by them, on the simple ground that he has never authorized
them.' " See also Fox v. Clifton, 6 Bing. 776 ; s. c. 9 Bing. 115 ; Harvey v.
Kay, 9 B. & C. 356; Bourne v. Freeth, 9 B. & C. 632, 638; Dickinson v.
Valpy, 10 B. & C. 128, 142; Doubleday v. Muskett, 7 Bing. 110, 118;
Pitchford V. Davis, 5 M. & W. 2 ; Howell v. Brodie, 6 Bing. N. C. 44.
' Coll. on P. B. 3, c. 3, § 1, p. 348-350, 2d ed. ; Id. 365, 366 ; Id. B. 5, c.
1, § 2, p. 735-743; Howell v. Brodie, 6 Bing. X. C. 44; Gouthwaite
V. Duckworth, 12 East, 421 ; Young v. Hunter, 4 Taunt. 582 ; 2 Bell,
Comm. B. 7, c. 3, p. 649-652, 5th ed. [Thus where certain per-
sons, proposing to form a company, applied to the defendant to become
president, to which he assented, and permitted himself to be publicly
named as such ; but the company was never formed, though meetings pre-
liminary to its formation were had, at one of Avhich the defendant presided ;
it was held that the jury might, if they thought fit, infer that the defendant
held himself out as contracting for work to be done in respect of such pre-
liminary meetings, though the order for such work was not directly given
by the defendant ; and that the defendant, if he so held himself out, was
liable for the work performed. Lake v. Duke of Argyll, 6 Q. B. 477 ;
Wood V. Duke of Argyll, 6 Mann. & G. 928.]
272 PARTNERSHIP. [cHAP. VIII.
thereafter be formed.^ It would have been otherwise,
if he had held himself out as a partner in a company
already formed ; ^ or had contributed to its funds, and
had been present at a meeting of the company, and a
party to a resolution to purchase the goods.^ On the
1 Bourne r. Frecth, 9 B. & C. G32 ; Dickinson i'. Valpy, 10 B. & C.
128. See Forrester v. Bell, 10 Ir. Law, ooo ; Fox v. Clifton, 6
Bing. 776; {Lind. on P. 25-30. See Reynell v. Lewis, 15 M. & W.
517 ; Hutton v. Thompson, 3 H. L. Cas. 161 ; Briglit v. Hutton, lb.
341, 368.} In Fox v. Clifton, Lord Chief Justice Tindal said: "Upon
this first question, therefore, whether a partnership was actually formed,
we think, if the right to participate in the profits of a joint concern is
to be taken, as undoubtedly it ought to be, as a test of a partnership,
these defendants were not entitled at any time to demand a share of profits,
if profits had been made ; inasmuch as they had never fulfilled the condi-
tions, upon which they subscribed. We think the matter proceeded no fur-
ther, than that the defendants had oflfered to become partners in a projected
concern, and that the concern proved abortive before the period, at which
the partnership was to commence : and, therefore, with re^^pect to the
agency of the directors, which is the legal consequence of a partnership com-
pletely formed, we think the directors proceeded to act before they had au-
thority from these defendants ; for they began to act in the name of the
whole, before little more than half the capital was subscribed for, or half the
shares were allotted. The persons, therefore, who contracted with the di-
rectors, must rest upon the security of the directors, who made such con-
tract, and of those subscribers, who by executing the deed have declared
themselves partners, and of any, who have by their subsequent conduct rec-
ognized and adopted the acts and contracts of the directors. But they
have not the security of the present defendants, who are not proved by the
evidence to stand in any one of such predicaments. It is unnecessary to
advert to any of the cases, which have been referred to, each of which must
I'est upon its own peculiar circumstances ; except that with re.>;pect to Per-
ring V. Hone, decided in this court, we think it right to observe, that the
great point, whether there was a partnership or not, does not appear to have
been made the prominent subject of argument, but to have been rather as-
sumed than disputed ; for the advertisement or prospectus was not brought
to the attention of the court, nor is there any argument upon the terms of
it. It is not incompatible with that determination, that the court might
have hold the proof of partnership inconqjlete, if the same materials had
been brought before them, which are presented to us."
2 Ibid. ; Braithwaite v. Skofield, 9 B. & C. 401 ; Fox v. Clifton, 6 Bing.
776 ; Howell v. Brodie, 6 Bing. N. C. 44.
» Ibid.; {Tredwen v. Bourne, 6 M. & W. 461; Peel v. Thomas, 15
C. B. 714.}
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 273
other hand, if a party supposes himself by mistake to
liave an interest in a company ah'eady formed, and he
has not ; if he does not hold himself out as a partner,
and no credit is given to him, the contracts of the com-
pany will not bind him, although he should afterwards,
acting under the mistake, declare himself to have an
interest therein.^
§ 152. From what has been already stated, it is ap-
parent, that an incoming partner (that is, a new
partner coming into an existing firm) will not be liable
in respect to debts, contracted by the firm previously
to his entering it.^ But although this is the clearly
established doctrine, yet it does not follow, that an
incoming partner may not become liable for such debts,
by expressly assuming them upon a proper considera-
tion, or otherwise dealing with the creditor in such a
manner as to create an implied obligation and duty to
pay the same in common with the old firm. The pre-
sumption of law, indeed, is against any such liability ;
but the presumption, like many others, may be re-
moved by due and satisfactory proofs of the contrary
intention and agreement.^ Thus, for example, if the
balance due from the old firm be with the consent of
the creditor, and all of the new firm carried to the
debit of the new firm, the latter deriving a benefit
therefrom, as a credit or deposit, it is very clear, that
^ Vice V. Anson, 7 B. «fe C. 409. [Explained in Owen v. Van
Uster, 10 C. B. 318, 1 Eng. L. & Eq. 396.] {Xewton v. Belcher,
12, Q. B. 921.}
* Coll. on P. B. 3, c. 3, § 2, p. 361, 2d ed. ; Sbirreff v. WUks
1 East, 48; Williams v. Jones, 5 B. & C. 108; Vere v. Ashby, 10 B
& C. 288; [A}Tault v. Chamberlin, 26 Barb. 83]; {Lind. on P
314-318.}
' Ibid. ; Catt v. Howard, 3 Stark. 3; Ex paiie Jackson, 1 Ves. Jr. 131
Kirwan v. Kirwan, 2 Cr. & M. 617 ; Helsby v. Mears, 5 B. & C. 504
[Beale v. Mouls, 10 Q. B. 976] ; {Rolfe v. Flower, Law Rep. 1 P. C. 27 ;
s. c. 3 Moore P. C. N. s. 365 ; Smead v. Lacey, Disney, 239. }
18
274 PARTNERSHIP. [cHAP. VIII.
the new firm will be bound thereby and therefor, as
their own debt.^ A fortiori, the same rule will apply,
where it is an express stipulation of the partnership
between the old firm and the incoming partner, that
the new firm shall assume all the outstanding debts
of the firm, and shall pay the same, and the creditor
shall assent thereto and take the new fixm, as his
debtors.^
§ 153. Indeed, it may be generally stated, that, in
all cases of this nature, the primary consideration is,
not so much to ascertain between what parties the orig-
inal contract was actually made, as it is to ascertain
whether there has subsequently been, with the consent
of all the parties, any change or extinguishment of
that contract. Where it is established by satisfactory
evidence, that, upon the accession of a new partner, a
new promise has been made by the entire new firm, in
respect of the old debt, with the consent of the old
partners, as well as of the creditor, it will amount to a
novation of the debt, as it is called in the Roman law
(novatio dehiti), and the new partner will be chargeable
with the debt. But such an adoption or ratification of
the new promise by the new partner must be clearly
shown, otherwise it will not be obligatory upon him ;
and it cannot be inferred from the mere act of joinmg
in the partnership, without other circumstances in aid
of the inference.^
§ 154:. Hitherto we have been principally consider-
ing cases, where either an exclusive credit has been
> Coll. on P. B. 3, c. 3, § 2, p. 361-365, 2d ed. ; Ex jmrte Peele, 6 Yes.
602.
* Ibid.; {Ex parte 'Wlnimove., 3 Deac. 365.}
3 Coll. ou P. B. 3, c. 3, § 2, p. 364, 365, 2d ed. ; Vere v. Ashby, 10 B.
6 C. 288. See also Lloyd v. Asbby, 2 B. «& Ad. 23 ; Hoby v. Roebuck,
7 Taunt. 157: Ketchum v. Durkee, HeflF, 538; {Lind. on P. 317;
Stemburg v. Callanan, 1-4 Iowa, 251.}
CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 275
given to one partner in the partnership business, or
where the transaction could not, from its nature and
character, or its period of commencement or origin, be
deemed to bind the partnership. But it is quite pos-
sible for third persons to enter into a contract with one
partner, under an impression that the particular con-
tract is made with and binding on the firm, when in
point of law it has no such obligation. (1.) Thus, in
the first place (as we have seen),^ if a person should
lend and advance money to a firm at the request of
one partner, and take his separate note or bill, or other
security, for the amount, not intending thereby to give
an exclusive credit to such partner, it is very clear,
that he cannot sue the partnership on such note or bill,
or other security, whatever might be his remedy against
the fu'm for the money lent and advanced.^ (2.) In
the next place, if a third person should contract with
one partner in a matter beyond, or unconnected with
the partnership business, the firm will not be liable to
him upon such contract, although he may have im-
plicitly trusted to the credit of the firm, and not to the
individual partner alone.^ (3.) In the next place, a
third person may, upon receiving a consideration, assent
to such private arrangements Qf a firm, as will deprive
him in point of law of any remedy against the firm,
or a part of them, although he did not so intend.'* (■!.)
And in the next place (as we have seen),^ the custom
of a particular trade may essentially affect the liability
1 Ante, § 136, 137, 140, 142.
2 Coll. ou P. B. 3, c. 2, § 2, p. 315-323, 2d ed.; Siffkin v. Walker, 2
Camp. 308 ; Emly v. Lye, 15 East, 7 ; Denton v. Rodie, 3 Camp. 493 ; [Watt
V. Kirby, 15 111. 200.]
* Coll. on P.B. 3, c. 2, § 2, p. 31G, 324-326 ; Ex parte Agace, 2 Cox, 312.
4 Coll. on P. B. 3, c. 2, § 2, p. 316, 326-329, 2d ed. ; Bolton i\ Puliei-, 1
B. & P. 539.
^ Ante, § 141.
276 PARTNERSHIP. [cHAP. VIII.
of the firm to a third person upon a contract, made
with one of the partners, if that person has full notice
of the custom, and is therefore bound by it, whatever
might have been his own private interpretation there-
of, as to its being an obligation binding on the firm.-^
§ 155. The liability of the firm to third persons may
thus, in the very origin or progress of the transactions
of one partner, or other person, assuming to act in be-
half of the firm, not only never arise, or it may be
varied, limited, or qualified ; but even when the liability
has clearly attached, and become absolute and binding,
subsequent transactions between such third persons and
one of the partners may work an extinguishment of
such liability, either Avholly or partially.^ Thus, if a
partnership were originally liable to a creditor for a
debt, and he should afterwards accept a security of one
partner, at all events, if it should be a security of a
higher or negotiable nature, for the whole debt, as a
satisfaction thereof, wholly or in part, it will operate
as an extinguishment of the debt of the partnership.^
' Coll. on P. B. 3, c. 2, § 2, p. 316, 329-331, 2d ed. ; Barton v. Hanson, 2
Taunt. 49 ; Hiard v. Bigg, Manning's Nisi Prius, Dig. Index, 220 ; Gow on
P. c. 4, § l,p. 149, 150, 3d ed.
^ Coll. on P. B. 3, c. 3, § 3, p. 376-383 ; Id. p. 385-389, 2d ed. ; Gow on P.
c. 3, §1, p. 129, 3d ed.; Newmarcli v. Clay, 14 East, 239; 2 Bell, Comm.
B. 7, c. 2, p. 638, 639,5th ed.; ante, § 146, 150. {On releases, see § 168.}
3 Gow on P. c. 4, § 1, p. 155-157, 3d ed. ; Coll. on P. B. 3, c. 3, § 3,
p. 385-389, 2d ed. ; Keed v. White, 5 Esp. 122 ; Evans v. Drumraond, 4 Esp.
89, 92; Newmarch v. Clay, 14 East, 239 ; [Stephens v. Thompson, 28 Vt. 77] ;
Thompson ?;. Percival, 5 B. & Ad. 925. — It is laid down in Gow on P. c.4,
§ 1, p. 155-157, 3d ed., that the security should be of a higher nature than the
original debt, in order to extinguish the partnership debt. But that doctrine
has since been overturned. The very question was before the court in Thomp-
son V. Percival, 5 B. & Ad. 925. On that occasion Lord Denman, in deliver-
ing the opinion of the court, said : " It appears to us, that the facts proved
raised a question for the jury, whether it was agreed between the plaintiffs
and James, that the former should accept the latter as their sole debtor, and
should take the bill of exchange accepted by him alone, by way of satisfac-
tion for the debt due from both. If it was so agreed, we think, that the
CHAP. Vril.] LIABILITIES AND EXEMPTIONS. 277
Upon the like ground, if the creditor should receive
the separate security of each partner, for his own share
agreement and receipt of the bill -would be a good answer on the part of
Charles Pereival to this demand, by way of accord and satisfaction. It is not
necessary to determine, whether the assent of Charles to this agreement was
necessary, in order to give it such an operation ; because if it was, there is
evidence of a delegation by Charles to James to make such an agreement ;
for James had the partnership effects left in his hands, and was to pay all the
partnership debts. It cannot be doubted, but that, if a chattel of any kind
had been, by the agreement of the plaintiffs, and both the defendants, given
and accepted in satisfaction of the debt, it would have been a good discharge.
It is not required, that the chattel should be of equal value ; for the party re-
ceiving it is always taken to be the best judge of that in matters of uncertain
value. Andrew v. Boughey, Dyer, 75, a. Nor can it be questioned, but
that the bill of exchange of third persons, given and accepted in satisfaction of
the debt, would be a good discharge. But it is contended, that the accept-
ance of a bill of exchange by one of two debtors cannot be a good satisfac-
tion, because the creditor gets nothing which he had not before. The written
security, however, which was negotiable, and transferable, is of itself some-
thing different from that which he had before ; and many cases may be con-
ceived, in which the sole liability of one of two debtors may be more benefi-
cial than the joint liability of two, either In respect of the solvency of the
parties, or the convenience of the remedy, as in cases of bankruptcy or sui*-
vlvorship, or In various other ways; and whether It was actually more
beneficial in each particular case, cannot be made the subject of Inquiry.
The cases of Lodge v. Dicas, 3 B. & Aid. 611, and David v. Ellice, 5 B. & C.
196, are said to be against this view of the law. [Lodge v. Dicas, may now
be considered as overruled. Lyth v. Ault, 7 Exch. 669, 11 Eng. Law & Eq.
580. See Wildes v. Fessenden, 4 Met. 12 ; Harris v. Lindsay, 4 Wash. C. C.
271.] In the former, however, no new negotiable security was given, nor
does the difference between the joint liability of two, and the sejmrate lia-
bility of one, appear to have been brought under the consideration of the
court. In the latter, no bill of exchange was given, and that decision,
on consideration. Is not altogether satisfactory to us. We cannot but
think, that there was abundant evidence in that case to go to a jury (and
upon which the court might have decided), of the payment of the old
debt by IngHs, Ellice & Co. to the plaintiff, and a new loan to the new firm ;
which might have been as well effected by a transfer of account by mutual
consent, as by actual payment of money. The cases of Evans v. Drummond,
4 Esp. 89, and Reed v. White, 5 Esp. 122, are authorities the other way. In
the former, Lord Kenyon points out forcibly the altered relation of the par-
ties by the substitution of the bill of the remaining partner for tliat of the
firm ; and it is difficult to see on what ground he decided the case, unless upon
this, viz., that such substitution under an agreement oi)erated as a satisfaction,
as far as regarded the retiring partners; and in Heed i\ AVhite, Lord Ellen-
2 78 PARTNERSHIP. [CHAP. Till.
of the debt, in satisfaction thereof, all joint liability of
the partnership for the debt wonld henceforth be gone/
The doctrine is eqnallv true in the converse case, where
a partnership is a creditor, and the separate and distinct
security of the debtor is taken to each partner severally
for his share of the debt.-
§ 156. This question most generally occurs in cases
of a retiring partner, where the creditor, knowing of his
retirement, subsequently gives credit to the remaining
borough acted lapon that authority, and so directed a special jury of merchants,
who entirely agi-eed with him. These cases were afterwards brought to the no-
tice of Lord Ellenborough, who expressed his approbation of them, in Bedford v.
Deakin, 2 Stark. 178. That case, however (which was also before the court,
in 2 B. & Aid. 210), was distinguished from them, because the creditor there
expressly reserved the liabiUty of the original debtors. If, therefore, the
plaintiffs in this case did expressly agree to take, and did take the separate
bill of exchange of James in satisfaction of the joint debt, we are of opinion
that his doing so amounted to a discharge of Charles," See s. p. Earwan v.
Kirwan, 2 Cr. & M. 617 ; Hai-t v. Alexander, 2 M. & W. 484 ; Harris v. [Far-
well, 15 Beav. 31,15 Eng. L. & Eq. 70 ; Benson v. Hadfield, 4 Hare, 32] ;
Coll. on P. B. 3, c. 3, § 3, p. 385-398, 2d ed. {A bond given by one partner
for a partnership debt extinguishes the original debt, unless it be shown to
have been intended only as a collateral security. See cases collected in
1 Sm. Lead. Cas. 571, [459], 6th Am. ed. So judgment against one part-
ner merges a*firm debt. 1 Sm. Lead. Cas. 6th Am. ed., ubi supra ; Lind.
on P. 368-370; Ex parte Higgins, 3 De 6. & J. 33. Equity will some-
times interfere to give relief against the partnership after a bond has been
given by one of the partners. See Smith v. Black, 9 S. & R. 142, McNaugh-
ten «. Partridge, 11 Ohio, 223; Xiday v. Harvey, 9 Gratt 454. Taking
the securit}- of one partner for a firm security of no higher nature does not of
itself extinguish the latter in the absence of some express or implied agree-
ment. Byles on Bills, 369 : Bottomley r. Nuttall, 5 C. B. x. s. 122 ; Waydell
V. Luer, 3 Denio, 410 ; Hill r. Voorhies, 22 Penn. St. 68 ; Potter r. McCoy,
26 Penn. St 458 ; 1 Sm. Lead. Cas. 566. [453], 6th Am. ed. ; Lyth v. Ault,
American note, 7 Exch. 675. Whether this would be the case in those States,
such as Massachusetts and Vermont, where the giving of a note is prima facie
pavment is a qucere suggested by Professor Parsons. Parsons on P. 111. See
Stephen v. Thompson, 28 Yt. 7 7, where a receipt from one partner " to bal-
ance account " was held prima facie a discharge of the partnership. }
1 Gow on P. c. 3, § 1. p. 129, 130, 3d ed. ; (Garret v. Taylor, 1 Esp. X. P.
117 ; Kirkham v. Newstead, 1 Esp. X. P. 117 ; Coll. on P. B. 3, c. 5, § 1, p.
467, 2d ed. ; AVats. on P. c. 8, p. 420, 2d ed.
= Ibid.
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 279
partners, or to the new firm, and enters into new and
separate contracts with the latter, touching his debt, or
allows his property to remain under their control and
management, as, for example, by way of new deposit,
or by carrying the balance to the debit of the new firm,
or by deferring payment of balances upon receiving
additional interest, or by receiving a separate security
therefor, or upon other considerations. In such cases
the general conclusion is, that exclusive credit is in-
tended to be given to the new firm ; and if so, then the
retiring partner is discharged.^ But the mere striking
of the balance, and carrying the same to a new account,
opened with the new firm, will not alone extinguish the
original debt against the old firm, unless accompanied
by other circumstances, which establish, that a new and
exclusive credit is given to the new firm."
8 157. In cases of this sort, where there are runnino^
accounts between the firm and third persons, and one
of the partners retires, the question, as to the appropri-
ation of payments, subsequently made by the partners
remaining in the firm, often arises, and especially in re-
' Evans v. Drummond, 4 Esp. 89 ; Reed v. White, 5 Esp. 122 ; Oakley
V. Pasheller, 10 BHgb, n. s. 548 ; s. c. 4 CI. & Fin. 207 ; Hart v. Alexander,
2 M. & W. 484 ; Thompson v. Percival, 5 B. & Ad. 925 ; Devaynes v.
Noble, 1 Mer. 530 ; [Farrar v. Deliinne, 1 C. & K. 580] ; 2 BeU, Comm. B.
7, c. 2, p. 638, 639, 5th ed. ; Gow on P. c. 5, § 2, p. 244, 245, 3d ed. ; Coll.
onP. B. 3, c. 3, § 3, p. 376-398, 2ded. {See Lind. on P. 353-367.} The
cases of David v. Ellice, 5 B. & C. 196, and Lodge v. Dicas, 3 B. & Aid.
611, are the other way. But their authority seems shaken, if not entirely
overturned, in the more recent decisions, and especially in the cases of
Thompson v. Percival, 5 B. «fc Ad. 925, and Hart v. Alexander, 2 M. & W.
484 ; [Harris r. Farwell, 15 Beav. 31, 15 Eng. L. & Eq. 70 ; Lyth v. Ault, 7
Exch. 669, 11 Eng. L. & Eq. 580.] See Coll. on P. B. 3, c. 3, § 3, p. 383-
398, 2d ed. ; Id. B. 3, c. 3, § 2, p. 326, 327, where all the authorities are
collected and commented on. See also Gow on P. c. 4, § 1, p. 155-159,
3ded.
^ Coll. on P. B. 3, c. 3, § 3, p. 391, 392, 2d ed. ; David c. Ellice, 5 B.
& C. 196; Lodge v. Dicas, 3 B. & Aid. 611; Hart c. Alexander, 2 M.
& W. 484.
280 PARTNERSHIP. [cHAP. VIII.
lation to banking transactions. As to this the doctrine
has been generally laid do\yn, that where divers debts
are due from a person, and he pays money to his cred-
itor, the debtor may, if he pleases, appropriate the pay-
ment to the discharge of any one or other of those
debts. If he does not appropriate it, the creditor may
make an appropriation. But if there is no appropri-
ation by either party, and there is an account current
between them (as is the case between banker and cus-
tomer), the law makes an appropriation according to
the order of the items of the account, the iirst item on
the debit side of the account being discharged or re-
duced by the first item on the credit side.^ To apply
these principles to cases of retiring partners : "Where
there is a cash account current between a firm and a
customer, and the account is in favor of the latter, a
retiring partner will be liable for the balance of this
account at the time of his retirement. But if the ac-
count be continued, the balance, for w^hich the retiring
partner is liable, will be diminished by every payment,
which is made by the new firm, supposing such pay-
ment not to be appropriated to the discharge of any
specific item ; because in such case, it is the first item
on the debit side of the account, which is discharged or
reduced by the first item on the credit side."
1 Coll. on P. B. 3, c. 3, § 3, p. 376-383, 2d ed. ; Davavnes v. ISToble,
Clayton's Case, 1 Mer. 572. See Copland v. Toulrain, 1 West, H. L. 164;
s. c. 7 CI. & Fin. 349; {Xewmarch v. Clay, 14 East, 239; Brooke v.
Enderby, 2 Brod. & B. 70; Smith v. Wigley, 3 Moore & Sc. 174; Stern-
dale V. Hankinson, 1 Sim. 393 ; Bank of Scotland v. Christie, 8 CI. & Fin.
214 ; Allcott V. Strong, 9 Cush. 323 ; Stanwood v. Owen, 14 Gray, 195 ;
Logan V. Mason, 6 W. & S. 9.}
2 Post, § 253-256 ; Ibid. — Mr. Collyer has added in another place
(p. 321), the following remarks : "To render an appropriation of payment by
the act of the party valid, it must be made at the time of payment, if made
by the payor, and within a reasonable time after pa}TQent, if made by the
payee. Sir William Grant was inclined to hold, according to the principles
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 281
§ 158. It frequently happens, that upon the retire-
ment of one partner, the remaining partners undertake
of the civil law, that the appropriation, even if made by the payee, must be
made at the time of payment. But cases might be stated, vehere such a rule,
if strictly adhered to, would be productive of injustice ; and it is manifestly
at variance with the decisions on this subject in the courts of common law.
On the other hand, those courts have been inclined to favor the creditor too
much, and have in many cases ' extended the proposition — that if the
debtor does not apply the payment, the creditor may make the application
to what debt he pleases — much beyond its original meaning, so as in
general to authorize the creditor to make his election when he thinks fit.'
In a recent case, however, the court of King's Bench came to a very just
decision on this important subject. Thus, in Simson v. Ingham, an action
on a bond was brought by Bruce & Co., bankers, against the heirs and
devisees of Benjamin Ingham. The bond was given by Ingham and another,
bankers, at Huddersfield, to the plaintiiJs, their London correspondents,
conditioned for remitting money to provide for bills, and for the repayment
of such sums as Bruce & Co. might advance on account of persons consti-
tuting the Huddersfield Bank. The damages were assessed by an arbitrator
at £13,845, subject to the opinion of the court, upon the following facts :
The house of Bruce & Co. were in the habit of sending to the Hudders-
field Bank monthly statements of their accounts. Benjamin Ingham died in
September, 1811. The last statement sent previously to his death was for
the month of August. The balance of that account was greatly in favor of
Bruce & Co. No alteration in the account was made in the books of Bruce
& Co. immediately on the death of Benjamin Ingham; but, during the
residue of that month and a part of October, the remittances made by the
Huddersfield Bank, and the payments made for them by Bruce & Co., were
entered in continuation of the former account. Before, however, any
account was transmitted to the Huddersfield Bank, subsequent to that for
August, Bruce & Co., in consequence of a communication with their
solicitor, opened a new account, and in that inserted all the remittances and
payments made subsequent to the death of Benjamin ; and in November,
they transmitted to the Huddersfield Bank statements of two accounts.
The first of these accounts was thus entitled : — ' Debtors, Messrs. B. & J.
Ingham & Co. (old account), in account with Bruce & Co., creditors ; ' and
the first item on the debit side was the balance of August. The second
account was in the same form, but entitled ' new account.' This account
began on the 16th September, without any balance brought forward, and
contained the remittances and payments made during that month, subsequent
to the death of Benjamin, and also those made in the month of October.
From this time the old and new accounts were kept separate in the books of
Bruce & Co. The Huddersfield Bank did not appear to have ever objected
to the accounts being kept separately by Bruce & Co., although in their own
books they only kept one account. The arbitrator was of opinion, that.
282 PARTNERSHIP. [CHAP. VIII.
to pay the debts and to secure the credits of the firm.
This is a mere matter of private arrangement and
agreement between the partners ; ^ and can in no re-
spect be admitte(i^ to vary the rights of the existing
creditors of the firm.^ But in all cases of this sort
it may be stated, as a general doctrine, that if the
arrangement is made known to a creditor, and he
assents to it, and by his subsequent act, or conduct, or
binding contract, he agrees to consider the remaining
partners as his exclusive debtors, he may lose all right
and claim against the retiring partner, especially if the
retiring partner will sustain a prejudice, and the cred-
itor will receive a benefit from such act, conduct, or
contract.^ Some illustrations of this doctrine have
been already stated in the cases of an exclusive credit
under these circumstances, the balance due on the death of Benjamin Ingham
was not discharged by subsequent payments by the new firm. Accordingly,
after making certain allowances for dishonored bills, he assessed the damages
at tlie sum above aAvarded ; and the Court of King''s Bench held the award to
be right. In the preceding case, the court proceeded on the principle, that the
entries, which had been continued in the creditor's books immediately on the
death of Ingham, not having been communicated to the debtors, were not
conclusive on the creditors, and consequently, that the general legal appro-
priation, of which such entries would otherwise have been evidence, was
incomplete. It is clear from this, as also from the express opinions of the
judges, that they did not consider it necessary, in order to support any
alleged appropriation on the part of the creditor, that he should prove it to
have been made at the time of payment. On the other hand, if payment be
made to the creditor of any sum in respect of an account current, the credi-
tor making no appropriation at the time of payment, and if, after such pay-
ment, the debtor and creditor continue their mutual dealings, or do any
other mutual act in respect of the same account, the creditor will be barred
by such subsequent transactions from establishing an appropriation of the
payment."
* [And if the new firm misapply the assets, they w^ill be liable to the out-
going partner for any payments by him of the old debts. Peyton v. Lewis,
12 B. Mon. 356.]
2 Coll. on P. B. 8, c. 2, § 2, p. 327-329, 2d ed. ; Id. B. 3, c. 3, § 3, p.
383-400.
3 Coll. on P. B. 3, c. 3, § 3, p. 383-398, 2d ed.
CHAr. VIII,] LIABILITIES AND EXEMPTIONS. 283
given to the new firm.^ So, if the creditor should give
up the securities of the old firm, and take those of the
new firm in lieu thereof; or should give a prolonged
credit to the new firm for the old debt, receiving from
the latter, in consideration thereof, an additional inter-
est, or a new security ; in all such cases the retiring
partner would be held discharged.^ But the mere fact
of the creditor's taking an additional security from the
new firm without surrendering the old, or of his re-
ceiving interest from the new^ firm, without varying
from that due on the old debt ; or of his acquiescing in
delay, without contracting upon any new consideration
to prolong the credit, will not absolve the retiring part-
ner from his original responsibility.^
§ 159. In this connection, it seems proper to inquire
into the circumstances, which will or will not exonerate
1 Ante, § 152.
* Coll. on P. B. 3, c. 3, § 3, p. 383-398, 2d ed. ; Evans v. Drummond,
4 Esp. 89 ; Reed v. White, 5 Esp. 122 ; Thompson v. Percival, 5 B. & Ad.
92.5 ; Oakley t\ Pasheller, lOBligh, n. s. 548 ; s. c. 4 CI. &Fin. 207 ; Goughv.
Davies, 4 Price, 200 ; Harris v. Lindsay, 4 Wash. C. C. 271 ; Hart v. Alex-
ander, 2 M. & W. 484. [But see Yarnell v. Anderson, 14 Mo. 619] ;
{Winter v. Innes, 4 Myl. & C. 101; Oakford v. Eur. & Am. Steamship
Co., 1 Hemm. & M. 182.}
3 Coll. on P. B. 3, c. 3, § 3, p. 383-398, 2d ed. ; Featherstone v. Hunt,
1 B. & C. 113; Bedford v. Deakin, 2 B. & Aid. 210; Daniel v. Cross, 3
Ves. 277 ; Harris v. Lindsay, 4 Wash. C. C. 271 ; Blew v. AVyatt, 5 C. &
P. 397; Smith v. Rogers, 17 Johns. 340; {Winter v. Innes, 4 Myl. & C.
101. But in Brown v. Gordon, 16 Beav. 302, creditors of a banking firm
were held to have accepted surviving partners as their debtors and to
have discharged the estate of a deceased partner by a delay of sixteen
years. See Robinson v. Wilkinson, 3 Price, 538} ; [Harris v. Farwell, 15
Beav. 31, 15 Eng. L. & Eq. 70. In this case a firm consisted of three
members. One of them died in 1837, and a new partner was admitted. A
creditor of the old firm received interest on his debt from the new firm
until 1841, when they became bankrujit. He then proved his claim against
the new firm, swearing they were indebted to ihim for money received to
his use. The separate estate of the deceased partner was held not dis-
charged thereby.] All these cases turn upon the same general considera-
tion ; whether there has been a new and exclusive credit given to the
new firm inextinguishment of the debt, or to the prejudice of the firm.
284 PARTNERSHIP. [cHAP. VIII.
a retiring partner from future liability for the new
debts and liabilities, contracted by the firm with third
persons, after his retirement.^ Of course the retiring
partner is not by his retirement exonerated from the
prior debts and liabilities of the firra.^ In the first
place, then, a dormant partner is not liable for any
debts or other contracts of the firm, except for those
which are contracted during the period that he remains
a dormant partner. Upon his retirement his liability
ceases, as it began, de jure, only with his accession to
the firm.^ The reason is, that no credit is, in fact, in
any such case given to the dormant partner. His lia-
bility is created by operation of law, independent of his
intention, from his mere participation in the profits of
the business ; and therefore it ceases by operation of
law, as soon as such participation in the profit ceases,
whether notice of his retirement be given or not.'* But
this doctrine must be taken with its appropriate qualifi-
cations ; and it is strictly applicable only, where the
persons dealing with the firm have no knowledge what-
soever, that he is a dormant partner. If the fact of his
being a dormant partner be unknown to all the credi-
tors, no notice whatever of his retirement is necessary ;
if it be known to a few, notice to those few is neces-
' {SeeLind. on P. 327.}
2 Gow on P. c. 5, § 2, p. 240-251, od ed. ; Coll. on P. B. 3, c. 3, § 3,
p. 369-372, 2d ed. [Thus, if goods be sent to a firm to sell on commission,
and one partner retires before they are all sold, he still continues liable to
the consignor for the receipts of sales by the continuing partner ; since the
liability attaches on receipt of the goods ; Briggs v. Briggs, 15 N. Y.
471 ; and notice to the consignor of the fact of dissolution would not ex-
onerate the retiring partner. Dean v. McFaul, 23 Mo. 76.]
^ Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed. ; Id. B. 3, c. 3, § 3, p. 370,
371 ; Gow on P. c. 5, § 2, p. 251, 3d ed. ; 3 Kent, 68.
* Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed.: Id. B. 3, c. 3, § 3, p. 370, 371 ;
Gow on P. 0. 5, § 2, p. 251, 3d ed.; 3 Kent, 68 ; [Ayrault v. Chamberlin, 26
Barb. 89]; {Warren v. Ball, 37 111. 76; Chamberlain v. Dow, 10 Mich.
319.{
CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 285
sary ; because they may fairly be presumed to have
given credit to the firm with reference to their knowl-
edge of the dormant partner.^
§ 160.. In the next place, where an ostensible or
known partner retires from the firm, he will still
remain liable for all the debts and contracts of the
firm, as to all persons, who have previously dealt with
the firm, and have no notice of his retirement.^ This
is a just result of the principle, that where one of two
innocent persons must suff"er from giving a credit, he
who has misled the confidence of the other, and has
been the cause of the credit, either by his representa-
tion, or his negligence, or his fraud, ought to suffer,
instead of the other. And where a person notoriously
holds himself out as a partner, all the world, who deal
with the firm, are presumed to deal with it upon his
credit, as well as upon that of the other members of
the firm- ; and his omission to give them notice of his
retirement is equivalent to a continual representation,
that he still remains a member of the firm, and liable
therefor.^ But, as to persons who have had no previ-
* Ibid. ; Evans v. Drummond, 4 Esp. 89 ; Newmarch v. Clay, 14 East,
239; Farrar v. Deflinne, 1 C. & K. 580; {Carter v. Whalley, 1 B. & Ad.
11; Heath v. Sansom, 4 B. &. Ad. 172; Grosvener v. Lloyd, 1 Met. 19;
Edwards v. McFall, 5 La. Ann. 167 ; Cregler v. Durham, 9 Ind. 3 75; Park
V. Wooten, 35 Ala. 242; Lind. on P. 326; 1 Sm. Lead. Cas. 1186, 6th
Am. ed. But see Goddard v. Pratt, 16 Pick. 412,428; Deford v. Reynolds,
36 Penn. St. 325. See also AVestern Bank of Scotland v. Needell, 1 Fost.
& Fin. 461.}
- Coll. on P. B. 3, c. 3, § 2, p. 368-371, 2d ed. ; Gow on P. c. 5, § 2,
p. 240-2.52, 3d ed. ; 2 Bell, Comm. B. 7, c. 2, p. 640, 641, 5th ed. ; [Clapp
V. Rogers, 2 Kern. 283; Pope v. Risley, 23 Mo. 185.] {On Avhat consti-
tutes a previous dealing, see Lyon i'. Johnson, 28 Conn. 1 ; Mechanics'
Bank v. Livingston, 33 Barb. 458 ; Bank of the Commonwealth v. Mud-
gett, 45 Barb. 663. }
« Coll. on P. B. 3, c. 3, § 3, p. 369-375, 2d ed. ; 3 Kent, 66-68 ; Gow on
P. c. 0, § 2, p. 248-251, 3d ed. ; Id. c. 4, § 1, p. 198; Graham v. Hope,
Peake, 154 ; Gorham v. Thompson, Peake, 42 ; [AVardwell r. Ilaight, 2
Barb. 549] ; Wats, on P. c. 7, p. 384, 385, 2d ed. ; [Davis i\ Allen, 3
Comst. 168] ; {Lind. on P. 329.}
286 PARTNERSHIP. [CHAP. VITI.
ous dealings with the firm, and no knowledge who are
or have been partners therein, a different rnle may
prevail. In such cases, unless the ostensible partner,
who has retired, suffers his name still to appear, as one
of the firm, so as to mislead the public (as by its being
stated, and still remaining in the firm name), he will
not be liable to mere strangers, who have no knowledge
of the persons who compose the firm, for the future
debts and liabilities of the firm, notwithstanding his
omission to give public notice of his retirement ; for it
cannot truly be said in such cases, that any credit is
given to the retiring partner by such strangers. Every
new creditor or new customer is- bound to inquire, who
are the parties really interested at the time in the firm
if he would be safe in his credit and dealings with
them. Unit squis que debet esse gnarus conditionis ejus,
cum quo contrahU} A fortiori, if public notice has
1 2 Bell, Coram. B. 7, p. 042, 5tli ed. ; Coll. on P. B.-3, c. 3, § 2,
p. 369-375, 2d ed. ; {Lind. on P. 329} ; Parkin v. Carmthers, 3 Esp. 248;
3 Kent, 67, 68; Williams v. Keats, 2 Stark. 290; Brown v. Leonard, 2
Chitty, 120 ; Nevvsome v. Coles, 2 Camp. 617 ; Dolman v. Orchard, 2 C. &
P. 104; Tombeckbee Bank v. Dumell, 5 Mason, 66; Lansing v. Gaine, 2
Johns. 300 ; Ketcham v. Clark, 6 Johns. 144, 148 ; Carter v. Whalley, 1 B. &
Ad. 11 ; Le Roy v. Johnson, 2 Pet. 186, 198, 200. — I am aware, that the doc-
trine is sometimes laid down more broadly, and the liability is made to at-
tach, unless the partner has given public notice of the dissolution. Thus,
in Parkin v. Carmthers, 3 Esp. 248, 249, Mr. Justice Le Blanc said :
"The principle on which I proceed is this: — That there was a partner-
ship subsisting, under the firm of Parkin, Campbell, & Co., which con-
tinued after the retirement of John Campbell. The rule of law is clear,
that where there is a partnership of any number of persons, if any change
is made in the partnership, and no notice is given, any person dealing with
the partnership, either before or after such change, has a right to call
upon all the parties, who at first composed the firm." In summing up to
the jury, his I^ordship laid it down as the law on the subject, " Tiiat if the
plaintiff advanced the money, even after the time that one of the partners
had retired, if he did not know of such retirement, he had a right to sue
all who before constituted the partnership. In jioint of fact in this case,
John Campbell had retired ; but still, if this was really a partnership, and
the money was lent to the persons carrying on trade under that firm, all
were liable." But iu this case, CampbelTs name was in tlie name of thg
CHAP. YIII.] LIABILITIES AND EXEMPTIONS. 287
been given of his retirement, the retiring partner will
not be liable to new creditors or customers, even if
firm. See also Gow on P. c. 5, § 2, p. 248, 249, 8d ed. ; Id. p. 251-
253; 2 Bell, Comm. B. 7, e. 2, p. 640-642, oth ed. It strikes me,
however, that the text contains the true principle. Where a partner-
ship is in fact dissolved by the retirement of a partner, who is known, but
whose name is not in the firm, it does not seem right to make him liable
to third persons, who afterwards trust the firm, without knowing who
compose it at the time, or of the jirevious connection of the retiring partner.
His case does not, under such circumstances, seem essentially to differ from
that of a dormant partner ; for such third persons give no credit to him,
and he receives no share of the profits derived therefrom. Mr. Watson
has stated the true princlpfe ; that "as credit is given to the whole firm,
justice requires, that all those, who belonged to it, should be bound, while
it is supposed to exist." But to whom bound ? Certainly, to those only,
who give credit to the firm, believing, that the original partners, whom they
knew, still continued in it. The case of Carter v. Whalley, 1 B. & Ad. 11,
eeems directly in 2)oint, in support of the doctrine of the text. There the
debt was contracted after the retirement of one partner, and no public
notice had been given thereof. But although it was known to some persons,
that he was a partner, yet it did not appear, that this creditor knew it, or
believed it, or gave credit to the partner. Mr. Justice Parke, on that occa-
sion, said : " The plaintiff was bound to show an acceptance by four parties ;
that is, that Veysey, who did accept the bill, was authorized to do so
by the three others named in the declaration. Saunders had given no direct
authority ; he was not a jiartner at the time. But he may by his conduct
have represented himself as one, and induced the plaintiff to give him credit
as such, and so be liable to the plaintiff. Such would have been the case,
if he had done business with the plaintiff before, as a member of a firm, or
had so publicly appeared as a partner, as to satisfy a jury, that the plaintiff
must have believed him to be such ; and if he had suffered the plaintlif to
continue in and act upon that belief, by omitting to give notice of his
having ceased to be a partner, after he really had ceased, he would be
responsible for the consequences of his original representation, uncontra-
dicted by a subsequent notice. But in order to render him liable on this
ground, it is necessary, that he should have been known as a member of
the firm to the plaintiffs, either by direct transactions, or public notoriety.
In the present instance, that was not so. The name of the company gave
no information as to the parties composing it, and the plaintiff did not show
that Saunders had dealt with him in the character of a partner, or had held
himself out so publicly to be one, as that the plaintiff must have known it.
Carter, the plaintiff, lived at Birmingham ; it should have appeared, that
there had been such a dealing at that place by Saunders, or that his con-
nection with the company had been so generally known there, tliat a knowl-
edge of it by Carter must have been pi'esumed. There having been no
evidence tor the jury on these points, I think the nonsuit was right." {In
City Bank of Brooklyn v. iNlcChesney, 20 N. Y. 240, a retired partner was
288 PARTNERSHIP. [cHAP. VIII.
they have never seen such notice, or had any knowledge
or hiformation thereof ; ^ smce the retirmg partner has
done all, which can be reasonably required to give
public notice of his withdrawal.^
§ 161. What will amount to due and sufficient notice
of the retirement of a partner is a question of fact, often
of no small nicety and difficulty ; for notice needs not
be express ; but it may be constructive, and be imphed
from circumstances.^ A notice in one of the public and
held liable to a subsequent creditor who had had notice of the prior partner-
ship, and had had no notice of the dissolution, though he had had no prior
dealings with the firm. There had been in this case no notice of the dissolu-
tion published in the newspapers. See Holdane v. Butterworth, 5 Bosw. 1 ;
Pratt V. Page, 32 Yt. 13.}
1 Coll. on P. B. 3, c. 3, § 3, p. 369-372, 2d ed. ; Parkin v. Carruthers, 3
Esp. 248 ; Gow on P. c. 5, § 2, p. 248, 249, 3d ed. ; Newsome v. Coles, 2
Camp. 617 ; Godfrey v. Turnbull, 1 Esp. 371 ; Wright v. Pulham, 2 Chitty,
121 ; s. c. sub noni. Wrightson v. Pullan, 1 Stark. 375.
^ Ibid. — We are of course to understand this doctrine with the qualifi-
cation, that nothing is otherwise done by the retiring partner to continue
his liability ; such, for example, as by authorizing the negotiable securities of
the old firm to be issued and negotiated in the name of the old firm ; for in
such case, he would be bound by such indorsement. Coll. on P. B. 3, c. 3,
§ 3, p. 372-375, 2d ed. See also Abel v. Sutton, 3 Esp. 108; Kilgour v.
Finlyson, 1 H. Bl. 155; Heath v. Sansom, 4 B. & Ad. 172. {Burton v.
Issitt, 5 B. & Aid. 267 ; Brown v. Leonard, 2 Chitty, 120; Smith i\ Winter,
4 M. & W. 454 ; Yale v. Eames, 1 Met. 486 ; Waite v. Foster, 33 Me. 424 ;
Richardson r. Moies, 31 Mo. 430. See § 322, post. } [The rules of notice,
proper to ordinary trading partnerships, are not applicable always to
companies established under statutes. For instance ; A., B., C., and D., who
carried on business under the firm of G. P. & Co., in 1840 opened an ac-
count with a banking company, established under the 7 Geo. 4, c. 46, and 1
& 2 Yict. c. 96. In 1842, A. retired from the firm; but this fact was not
advertised in the London Gazette ; nor was any change made in the pass-
book. It was held, that the mere fact of D., one of the firm of G. P. & Co.,
being also a director of the banking company (but having, as such, no share
in the management of or interference in the banking accounts) did not
amount to notice — actual or constructive — to the bank of the dissolution,
so as to discharge A. in respect of a debt subsequently accruing ; a banking
company, so established, differing in this respect from an ordinary trading
partnership. Powles v. Page, 3 C. B. 16.]
2 {Lind. on P. 335 ; Amidown r. Osgood, 24 Yt. 278 ; Wait v. Brewster,
31 Vt. 516 ; American Linen Thread Co. v. Wortendyke, 24 N. Y. 550; Wil-
liamson V. Fox, 38 Penn. St. 214 ; Clapp i: Upson, 12 Wis. 492.}
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 289
regular newspapers of the city or county, where the
partnership business was carried on, is the usual mode
of giving the information, and may, in ordinary cases,
be quite sufficient. But even the sufficiency of that
notice might be questioned in many cases, unless it is
shown, that the party entitled to notice is in the habit
of reading the paper.^ Public notice given in some
such reasonable way, will not be deemed actual and
express notice ; but it will be good presumptive evi-
dence, and sufficient for a jury to conclude all persons,
who have not had any previous dealings with the firm.
As to persons, who have been previously in the habit of
dealing with the firm, it is requisite, that actual notice
should be brought home to the creditor, or at least, that
the credit should be given under circumstances, from
which actual notice may be inferred.^ If the facts are
all found or ascertained, the reasonableness of notice
may be a question of law for the Court. But gener-
ally it will be a mixed question of law and fact, to be
submitted to a jury under the direction of the Court,
whether notice in the particular case, under all the cir-
cumstances, has been sufficient to justify the mference
of actual or constructive knowledge of the fact of the
dissolution. The weight of authority seems now to be,
that notice in one of the usual advertising gazettes of
the place, w^here the business was carried on, when
published in a fair and usual manner, is of itself notice ^
of the fact to all persons, who have not been previous
dealers with the partnership.^
1 [Pope V. Kisley, 23 Mo. 185.]
2 [SeePager. Brant 18111. 37.] {Little r. Clarke, 3G Penn. St. 114 ; Reilly
V. Smith, 16 La. An. 31 ; Scheiffelin v. Stevens, 1 Winst. Law, 106. Kirk-
man v. Snodgrass, 3 Head. 370. }
^ [But see Boyd v. McCann, 10 Md, 118.]
* 3 Kent, 67, 68. — I have followed almost the very words of Mr. Chancel-
lor Kent, in his excellent Commentaries. See also, on the same subject,
19
290 PARTNERSHIP. [cHAP. VIII.
§ 162. The same principles apply to notice in the
case of a dissolution of the partnership by the acts of
the parties, as ordinarily apply to the case of a retiring
partner.^ Until due notice is given of the dissolution,
each partner will remain liable for the acts and contracts
of the others in relation to the partnership, so far as
they respect persons who have previously dealt with the
firm, or have known the names of the partners, or have
given credit thereto ; although not to mere strangers,
who do not fall under the like predicament.^ But
very different considerations apply in the case of a
dissolution of the partnership by mere operation of
law, as by the death of a partner ; for in such a case
his estate is not bound or liable for any subsequent
debts or contracts, entered into by the survivors of the
firm.^ This subject, however, Avill more properly come
under review, when the effects of a dissolution by death
come under consideration, and may therefore be here
dismissed with this brief notice.
§ 163. There is another case, in which a retiring
partner may, notwithstanding notice of his withdrawal.
Coll. on P. B. 3, c. 3, § 3, p. 368-371, 2d ed. ; Gow on P. c. 5, § 2, p. 248-251,
3d ed. ; Wats, on P. c. 7, p. 384, 385, 2d ed. ; 2 Bell, Comm. B. 7, p. 640-
643, 5th ed. ; { City Bank of Brooklyn v. McChesney, 20 N. Y. 240 ; Hol-
dane v. Butterworth, 5 Bosw. 1.}
' I In Troughton v. Hunter, 18 Beav. 470, a partnership was dissolved by
decree. The Gazette would not insert an advertisement of the dissolution
unless signed by both partners. One partner refused to sign. He was or-
dered by the court to do so.}
2 Ante, § 128, 129,160; Gow on P.c. 5, § 2, p. 248-251, 3d ed. ; Coll. on P.
B. 3,c. 3, § 3, p. 368-375, 2d ed. ; Id. B. 1, c. 2, § 3, p. 75. {A partner-
ship note is taken out of the operation of the Statute of Limitations by a part
payment thereof made by one partner within six years, although the firm had
then been dissolved by the voluntary act of the partners, if the holder of the note
had previous dealings with the firm, and was not notified, and had no knowledge
of the dissolution. Sage v. Ensign, 2 All. 245 ; Tappan». Kimball, 10 Fost. 136.}
2 3 Kent, 63 ; Gow on P. c. 5, § 2, p. 248, note ; Id. c, 5, § 4, p. 362, 3d
ed. ; Vulliamy v. Noble, 3 Mer, 593, 614 ; 3 Chitty on Comm. and Manuf. c. 4,
p, 250; {§ 336, 343.}
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 291
be responsible, not only for the past debts of the old
firm, but for the new debts contracted by the new
firm ; and that is, in a case of positive or constructive
fraud. This may take place, when, upon the actual in-
solvency of the firm, known to all the partners, they
permit the retiring partner to withdraw a portion of
the partnership funds out of the reach of the joint cred-
itors of the new firm, for the purpose of cheating or
defrauding the latter ; for in such a case the fraud viti-
ates the whole transaction ; and the retiring partner
will be held liable to the full extent of all the funds
so fraudulently withdrawn.^ But the mere fact, that
1 Anderson V. Maltby, 2 Ves. Jr. 244 ; s. c. 4 Bro. Ch. 423 ; Coll. on P.
B. 3, c. 3, § 3, p. 400-404, 2d ed. — In this case Lord Loughborough said :
" The case resolves itself into a plain question whether in 1784, upon the first
of July, the defendant was bona fide a creditor of the other two then about
to enter into a new partnership. If not, if all this transaction is to be void,
under the color, in which it presents itself to me, it is an imposition, not upon
them only, because they were consenting, but upon the creditors, who must
deal with the partnership of the two contrived upon a certain foresight of
bankruptcy at no very remote period, though the exact time was not certain,
managed between persons of the same family, by which the creditors of the
two have been losers exactly to the amount of what he has received. The
only doubt I have is, whether I should better attain the justice of the case, by
directing an account of all transactions between Brough and George Maltby
from the commencement of their partnership, for it can go no further back,
and the defendant, with an inquiry into the state of accounts at that period
between them, to see, whether there was any consideration whatsoever, upon
which he could be a creditor ; for if it was all moonshine, and there was no
property, upon which any account could be made out, it is all an imposition
to create a false credit to themselves, and to give him the name of a creditor,
when in fact he was none, and a mere device to draw the money of other
people from the new copartnership into his pocket. Whether this should be done
in the Master's office, or by discussion of an issue at law, is a point, upon which
1 doubt. Consider wliich will best attain justice. As to the last, it depends
so much upon writing and accounts, that it will hardly come within the pe-
riod, in which a trial at law can be had with advantage. I do not think it a
case, in which, if a trial can be had, I should be unwilling to have the assist-
ance of a jury to decide it. But I would not let it go to an action, but cer-
tainly would direct an issue ; for I must take care to have the true question
tried exactly upon the merits in equity, which affect the real justice of the
case, and not upon the points not relating to that, which would be made in an
292 PARTNERSHIP. [cHAP. VIII.
a retiring partner knows at the time that the partner-
ship is insolvent, will not of itself involve him in any
liabilities for the new firm, or vitiate the dissolution,
if it was without any intention of fraud, and entirely
consistent in all its circumstances with good faith. ^
§ 164. In joint-stock and other large companies,
which are not incorporated, but are a simple, although
an extensive partnership, their liabilities to third per-
sons are generally governed by the same rules and
principles, which regulate common commercial partner-
ships.^ In such companies the fundamental articles
generally divide the stock into shares, and make them
transferable by assignment or delivery ; and the whole
business is conducted by a select board of trustees or
directors. Without undertaking to assert in what cases
such companies may or may not be deemed illegal, and
the members liable to be treated as universally respon-
sible, upon the ground of usurping and attempting to
exercise the proper functions of a cor])oration. which
the legislature or government is alone competent to
establish ; ^ it may well deserve inquiry, how far any
action. I agree with the defendant, that if any of these payments cannot be
recovered at law, there would be no equity for it. There can be no differ-
ence between a court of law and of equity as to this. The true question for
an issue would be, whether the partnership was indebted to the retiring part-
ner on account of his share in the partnership."
1 Coll. on P. B. 3, c. 3, § 3, p. 400-402, •2d ed. : Parker v. Ramsbottom, 3
B. & C. 257; Ex parte Peake, 1 Madd. 346 ; Gow on P. c. 5, § 2, p. 237,
238, 3d ed.
2 3 Chitty on Comm. and Manuf. c. 4, p. 22G ; Coll. on P. B. 5, c. 1, § 1,
p. 721-734, 2d ed. ; 2 Bell, Comm. B. 7, c. 2, § 2, p. 627-630. [But see
Powles V. Page, 3 C. B. 16. In Irvine v. Forbes, 11 Barb. 587, it was held,
that the members of a telegraph company, formed as a private association,
were not partners, but tenants in common, and that the majority had no pow-
er to bind the minority, except by agreement.] {See Parsons on P. c. 18 ;
Lind. on P. 3.}
« Coll. on P. B. 5, c. 2, § 1, p. 7:30-734, 2d ed. ; Joseph v. Pebrer, 3 B.
& C. 639 ; Blundell v. AYinsor, 8 Sim. 601 ; Walburn r. Ingilby, 1 Myl. &
K. 61, 76; {Lind. on P. 145.}
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 293
stipulation in those articles, and which limit the respon-
sibility of the members to the mere joint funds, or to a
qualified extent, will be binding upon their creditors,
who have notice of such a stipulation, and contract
their debts with reference thereto. This question,
many years ago, was presented to the Supreme Court
of the United States ; but the cause went off without
any decision upon the point. It seems to have been
thought, that such a stipulation can in no wise operate
as a limitation of the general liability of all the part-
ners for all their debts, even though the creditors have
full notice thereof.^ It may, however, be still deemed
an open question, whether creditors, with such notice,
can proceed against the members upon their general
responsibility, as partners, where they have expressly
contracted only to look to the social funds ; and,
whether, if they have notice of the qualifying stipula-
tion, and contract with reference to it, it may not be
easy to assign a reason, why it does not amount to an
> See Blundell v. Winsor, 8 Sim. 601 ; Walburn v. Ingllby, 1 ]\Iyl. & K.
61, 76. — In this last case Lord Broiigliam said: "The clause intimating
that each subscriber is only to be liable to the extent of his share, is not
enough to make the association illegal. Such a regulation is wholly
nugatory, indeed, as between the company and strangers, and can serve no
purpose whatever, unless to give notice. In that light it is not to be viewed
as criminal, or as a means of deception ; for the publicity of it may tend to
inform such as deal with the company, and a proof of that publicity in the
neighborhood of parties so dealing might go to fix them with notice. For
any other purpose, for the purpose of restricting the liability of the share-
holders, it would plainly be of no avail ; and whosoever became a subscriber
upon the faith of the restricting clause, or of the limited responsibility,
which that holds out, would have himself to blame, and be the victim of his
ignorance of the known law of the land." This language does not seem
necessarily addressed to a case, where the creditor contracts with a knowl-
edge of the restrictive clause ; but may be satisfied by referring it to cases,
where no such knowledge exists. The Vice-Chancellor's decision, in 8 Sim.
601, is susceptible of a like interpretation. [See Greenwood's Case, 3
De G. M. & G. 459, 23 Eng. L. & Eq. 422 ; Hallett v. Dowdall, 18 Q.
B. 2, 9 Eng. L. & Eq. 347 ; Peel v. Thomas, 15 C. B. 714; 29 Eng. L. &
Eq. 276.]
294 PARTNERSHIP. [CHAP. VIII.
implied agreement to be bound by it, as much as if it
were expressly agreed to. There is certainly nothing
illegal in a creditor's agreeing" to such a limited respon-
sibility, as a qualification or condition of his contract;
and in many other analogous cases contracts of this
sort are deemed perfectly proper, and unexceptionable ;
as for example, where a commission merchant agrees to
look exclusively to the goods for the reimbursement of
his advances ; or a mortgagee agrees to look exclu-
sively to the mortgaged property for his debt. But
a qualified agreement of this nature must be proved,
and is never presumed without some reasonable proof
thereof.
§ 165. The law of Scotland has recognized a distinc-
tion, grounded on these considerations, between the
nature, character, and effect of such joint associations,
and those of mere private partnerships ; confining the
responsibility of shareholders in such companies to the
extent of three shares. This great question was tried
about the middle of the last century, in the case of the
Arran Fishing Company. The doctrine established in
that case was this : That there is a clear distinction be-
tween the case of a joint-stock company, and that of a
company trading without relation to a stock. That in
the former case, the managers are liable for the debt,
which they contract, while each partner is bound to
make good his subscription. That there is no ground
of further responsibility against the shareholders ; nei-
ther on their contract, nor on any ground of mandate,
beyond their share ; the very meaning of confining the
trade to a joint-stock being, that each shall be liable
for what he subscribes, and no further. That in ordi-
nary partnerships, there is a universal mandate and a
joint 'pntpoi^itura^ by which each partner is hisfitor of
the whole trade to an unlimited extent, each being liable
CHAP. VIII.] LIABILITIES AND EXEMPTIONS. 295
in solido for the company debts. ^ In this respect the
Scottish law seems to have followed the general doc-
trine of the Roman law, that in all partnerships each
of the partners should be liable, not in solido^ but only
for his own share. ^ And this also is the general rule of
the French law in all cases, except of partnerships for
commercial purposes, where, upon grounds of public
policy, each of the partners is held liable in solido?
§ 166. We have thus far considered the liabilities and
exemptions of partners in cases arising under contracts ;
and the inquiry next presented is, when, and under
what cu'cumstances, partners are liable for torts, done
in the course of the partnership concerns, or by any
one of the partners under color thereof. As to torts
not committed in the course of the partnership busi-
ness, it is very clear, that the partnership is not liable
therefor in its social character, unless indeed they are
assented to or adopted as the act of the partnership."*
But torts may arise in the course of the business of the
partnership, for which all the partners will be liable,
although the act may not in fact have been assented to
by all the partners.^ Thus, for example, if one of the
partners should commit a fraud in the course of the
partnership business, all the partners will be liable there-
for, although they have not all concurred in the act.^
So, if one of a firm of commission merchants should sell
1 2 Bell, Coram. B. 7, p. 627, 628, 5th ed. * j) 45^ 9, n, § 1, o.
3 Both, de Soc. n. 96, 103, 104.
* {Taylor v. Jones, 42 N. H. 25 ; Cutter v. Fanning, 2 Iowa, 580. See
Stevens v. Faucet, 24 111. 483. }
* Coll. on F. B. 3, c. 1, § 6, p. 305-307, 2d ed. ; Gow on P. e. 4, § 1,
p. 160, 161, 3d ed. ; [Ex parte Eyre, 3 Mont. D. & De G. 12 ; Stockton v.
Frey, 4 Gill, 406.]
6 Coll. onP.B. 3, c. 1, § 5, p. 296, 297; Id. B. 3, c. 1, § 6, p. 305-307,
2d ed. ; Gow on P. c. 4, § 1, p. 160, 161, 3d ed. See Rapp v. Latham, 2 B.
& Aid. 795 ; Stone v. Marsh, 6 B. & C. 551 5 Kilby v. Wilson, Ry. & Moo.
178; {§108, 131, 168, 368.}
296 PARTNERSHIP. [CHAP. Till.
goods, consigned to the partnership, fraudulently, or in
violation of instructions, all the partners would be lia-
ble for the conversion in an action of trover.^ So, if one
of a firm, who are common carriers, should unlawfully
convert the goods intrusted to the firm for carriage, or
should negligently lose or injure them, all the partners
would or might be held liable in tort therefor.^ The
same doctrine would apply to a conversion or loss by
the negligence or fraud of an agent of the firm.^ So,
if partners own a ship, and by the negligence of the
master, goods, shipped on board on freight, are neg-
ligently injured or lost ; or another ship is by such
negligence injured by a collision with her, the partners
will be liable for the loss.^ For in all such cases the
maxim applies : Qui facit per al'ium, facit per se ; and
the master in such a case acts not only personally, but
as the agent or prcepositus of the entire firm.^ The
doctrine has been carried further ; and the partnership
has been held liable for a libel, which was published
and sold by one partner in the course of the business of
the firm, as, for example, by a printer or bookseller,
one of the firm in that business.^ The same rule might
^ Coll. on P. B. 3, c. 1, § 6, p. 305, 806, 2d ed. ; Nicoll v. Glennie, 1
M. & S. 588; {§ 108, 168, note; Castle v. BuUard, 23 How. 172. See
Stevens v. Faucet, 24 HI. 483.}
2 Gow on P. c. 4, § 1, p. 160, 161, 3d ed. ; Coll. on P. B. 3, c. 1, § 1,
p. 305, 306. 2ded. ; Moreton v. Hardern, 4 B. & C. 223.
3 Coll. on P. B. 3, c. 1, § 5, p. 296, 297, 2d ed. ; Id. B. 3, c. 1, § 6,
p. 305, 306 ; Id. B. 3, c. 6, § 5, p. 505 ; Id. § 7, p. 527 ; {Linton v. Hurley,
14 Gray, 191 ; McKnight v. Ratcliff, 44 Penn. St. 156.}
" Gow on P. c. 4, § 1, p. 160, 3d ed. ; Coll. on P. B. 3, c. 1, § 6, p. 305-
307, 2d ed. ; Mitchell v. Tarbutt, 5 T. R. 649 ; Morley v. Gaisford, 2 H.
Bl. 442 ; Moreton v. Hardern, 4 B. & C. 223.
» Gow on P. c. 4, § 1, p. 160, 3d ed. ; Coll. on P. B. 3, c. 1, § 6, p. 305, 3d
ed. ; [Uoyd i: Bellis, 37 Eng. L. & Eq. 545] ; Wats, on P. c. 4, p. 235, 2d ed.
« Wats, on P. c. 4, p. 241, 2d ed. ; Rex ?;. Almon, 5 Burr. 2686 ; Coll. on
P. B. 3, c. 1, § 6, p. 306, 2d ed. ; Gow on P. c. 4, § 1, p. 161, 3d ed. ; Rex
0. Pearce, Peake, 75 ; Rex v. Topham, 4 T. R. 1 26 ; Rex v. Marsh, 2 B. & C.
717, 723; Attorney General v. Stannyforth, Bunb. 97.
CHAP. VITI.] LIABILITIES AND EXEMPTIONS. 297
apply to cases of written slander, as by declaring a rival
merchant a bankrupt, or a cheat, if written in the name,
and as the act of the firm. So, if breaches of the rev-
enue laws by fraudulent importations, or smuggling, or
entries at the custom-house are committed by one of
the firm in the course of the business thereof, all the
firm would be liable penally, as well as civillv, there-
for.i
§ 167. But, in all cases of this sort, although the
partners are jointly liable as wrongdoers, it by no
means follows, that they must all be sued. On the
contrary, as the law treats all torts as several, as well
as joint, the party injured may, at his election, either
sue all the partners, or any one or more of them for
the tort ; and it will constitute no objection, that his
partners were also concerned in it.~ This is a rule by
no means peculiar to partnerships ; but it extends to
all cases of joint torts and trespasses at the common
law, whether positive or constructive.
§ 168. From what has been already suggested, it is
obvious, that a tort committed by one partner, or by
any other agent of the partnership, will not bind the
partnership, unless it be either authorized or adopted
by the firm, or be within the proper scope and business
of the partnership. And, as in either way, partners
may thus all be afiected by the tort of one partner, so
also a discharge or release of one, on account of the
tort, will amount to a discharge or release of all the
other partners. This, again, is the result of a general
rule of the common law, applicable to all cases of joint
' Coll. on P. B. 3, c. 1, § 6, p. 306-308, 2d ed. ; Gow on P. c. 4, § 1,
p. 161, 3d ed. ; Attorney General v. Burges, Bunb. 223.
2 Coll. on P. B. 3, c. 1, § 6, p. 306, 307, 2d ed. ; Id. B. 3, c. 6, § 3, p. 505 ;
Id. p. 527 ; Gow on P. c. 4, § 1, p. 160, 161, 3d ed. ; Edmonson v. Davis, 4
Esp. 14 ; Attorney General v. Burges, Bunb. 223 ; Wats, on P. c. 4, p. 235,
2d ed. ; {White v. Smith, 12 Rich. Law, 595.}
298 PARTNERSHIP. [CHAP. VIII.
torts and trespasses ; and has been recognized from
the earliest times.^
§ 168 a. In respect to what acts of one partner the
others will and ought to be held to have notice of, so as
to bind them all by implied consent or acquiescence, it
may be laid down as a general rule, for the protection
of those who deal with partners, that all of the part-
ners have such knowledge and notice of the acts of
any of their partners relative to their business, as in
discharge of their plain duty they might or ought to
have obtained."
1 Co. Litt. 232, a : Bac. Abr. Itdease (G) ; Com. Dig, Release, B. 4 ; Id.
Pleader, S M. 12 ; Kiffin v. Willis, 4 Mod. 379. {A release to one partner is
a release to all, whether the claim released arise ex contractu or ex delicto.
Cocks V. Nash, 9 Bing. 341 ; Clieetham v. Ward, 1 B. & P. 630. Secus with
a covenant not to sue. Lind. on P. 351 ; Couch i\ Mills, 21 Wend. 424.' If
it clearly apjjears from the terms of the release that it is intended to enure
only to the benefit of the releasee it will not discharge the other partners.
Solly V. Forbes, 2 Brod. & B. 38 ; Price v. Barker, 4 E. & B. 760. Hartley
V. Manton, 5 Q. B. 247 ; Roberts v. Strang, 38 Ala. 566. See also Wig-
gin V. Tudor, 23 Pick. 434, 444; McAllester v. Sprague. 34 Me. 296.}
[The distinction between the liability of the firm, and of an individual
partner for a tortious act, committed by one partner on pi-operty in the
custody of the firm, is illustrated by a recent English decision. Thus; a
customer deposited a box containing various securities with his bankers for
safe custody, and afterwards granted a loan of a portion of such securities to
one of the other partners in the banking-house, for his own jirivate purposes,
upon his depositing in the box certain railway shares, to secure the replacing
of the securities. This partner afterwards for his own purposes, and with-
out the knowledge of the customer, subtracted the railway shares, and sub-
stituted others of a less value. It was held, that, as the proceeds of the
railway shares were not applied to the use of the partnership, the banking
firm were not answerable for this tortious act of their partner for his own
benefit, nor for any loss occasioned by this subtraction of the shares, on the
ground of negligence. Ex parte Eyre, 3 Mont. D. & De G. 12. See
another instance in Coomer v. Bromley, 5 De G. & Sm. 532, 12 Eng. L. &
Eq. 307, where Blair v. Bromley, 2 Ph. 354, is commented upon, and distin-
guished.] {See Bishop v. Countess of Jersey, 2 Drew. 143 ; § 108, note.}
* Sadler v. Lee, 6 Beav. 324.
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 299
CHAPTER IX.
RIGHTS, DDTIES, AND OBLIGATIONS OF PARTNERS BETWEEN
THEMSELVES.
{ § 169. Partners bound to exercise good faith, diligence, and discretion.
1 70. Roman law.
171. French law.
172. Opinion of Cicero.
173. Duty of conforming to the terms of the partnership.
174. Partner cannot stipulate for his private advantage.
1 75. Nor sell or buy in the partnership) business for his own advantage.
176. French and Roman law.
177, 178. Carrying on a business adverse to the partnership.
179. Case of newspapers.
180. Conflict of duties where one is executor of his deceased partner.
181. Duty to account and right to manage.
182. Extra compensation not allowed; allowance of interest on capital.
183. Reasonable discretion required.
184. Pothier on the duties and rights of partners.
185. Partners allowed for necessary expenses, but not for extra services.
186. Opinion of Voet. }
§ 169. We come, in the next place, to the considera-
tion of the rights, duties, and obHgations of partners
between themselves. And here it may be stated, that
as the contract itself has its solid foundation in the
mutual respect, confidence, and belief in the entire
integrity of each partner, and his sincere devotion to
the business and true interests of the partnership ;
good faith, reasonable skill, and diligence, and the
exercise of sound judgment and discretion, are natu-
rally, if not necessarily, implied from the very nature
and character of the relation of partnership. In this
respect, the same doctrine applies, which ordinarily
applies to the cases of mandataries or agents for hire ; ^
> Story on Ag. § 182-189 ; Story on Bailm. § 421, 455.
300 PARTNERSHIP. [cHAP. IX.
and to other cases of bailment for the mutual benefit
of both parties. Hence, if the partnership suffers any
loss from the gross negligence, unskilfulness, fraud, or
wanton misconduct of any partner in the course of the
partnership business, he will ordinarily be responsible
over to the other partners for all the losses, and injuries,
and damages sustained thereby, whether directly, or
through their own liability to third persons.^ Of course
all losses, injuries, and damages sustained by the part-
nership from the positive breach of the stipulations
contained in the articles of partnership, on the part of
any partner, are to be borne exclusively by that part-
ner, and he must respond over to them therefor.
§ 170. This is the dictate of common sense and
justice ; and it has been expressly affirmed by the
Roman law. In relation to third persons, that law
declares, that partners are liable, not only for fraud,
but for negligence as well as fraud. Thus, in one
place, after enumerating other contracts, it is said:
Sed ubi utriusque utilitas vertitur, ut in emj^to, ut in
locato, ut in dote, ut in pignore, ut hi societate, et dolus,
et culiKi prcustatuT^ As between the partners them-
selves, the like redress was also given. 8i quid dolo
nostro socius damni ceperit, a nobis rejjetat.^ Venit
autem in hoc judicium j^ro socio honafides.'^ And again:
Utrum ergo tantmn doluni, an etiam cidpam prcestare
socium oporteat, quceritur f Celsus ita scripsit. Socios
inter se dolum et cidpam prcestare op)ortet. Si in coe-
' Ibid. {In Lefever v. Underwood, 41 Penn. St. 505, a partner deposited
partnership money in a bank in his own name. The bank failed. The partner
was held liable to his copartners. }
2 D. 13, 6, 5, 2; Poth. Pand. 13, 6, n. 12; Story on Ag. § 182, 183;
Poth. Pand. 17, 2, n. 27.
3 D. 17,2, 59, 1 ; Id. 17, 2, 52, 1 ; Poth. Pand. 17, 2, n. 36 ; Domat, 1, 8,
4, art. 3, 4, 7, 8.
* {D. 17,2, 52, 1.}
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 301
unda societate (inquit) artem operamve pollicitus est
alter, &c., nimirum ibi etiam culpa prcestanda est.
Quod si rei communi socius jiocuit, magis adinittit, cid-
pam quoque venWe} Again : Socius socio etiam cidpoi
nomine tenetur, id est, desidice cdque neglig entice.^
Again: Si qui societatem ad emendum coierint, deinde
res alterius dolo vel culpa non empta sit, pro socio esse
actionem coiistat.^ But it is added : Damna, quce im-
prudentibus accidimt, hoc est, damna fatalia, socH non
cogentur proistareJ^ And the general principle, which
runs through the whole matter, is summed up in the fol-
lowing expressive words. Culpa aidem non ad exactis-
simam diligentiam dirigenda est ; sufficit etenim talem
diligentiam communihus rebus adhibere, qualem suis
rebus adhibere solet ; quia, qui parum dUigentem sibi
socium adquirit, de se queri debet.^ It would, perhaps,
have been more exact to say, that in cases of partner-
ship the same diligence is ordinarily required of each
partner, as reasonable and prudent men generally em-
ploy about the like business ; unless the circumstances
of the particular case repel such a conclusion.*^
§ 171. The same doctrine runs through the whole
structure of the French law on the same subject.^
Pothier even presses it to a somewhat further extent,
in which he also follows the Roman law, holding, that a
partner cannot absolve himself from losses, occasioned
by his fault and negligence in one business, by placing,
in opposition to such claim, as a compensation, the
I
1 D. 17, 2,52, 2; Poth. Pand. 17, 2, n. 3G.
2 D. 17, 2, 72; Poth. Pand. 17, 2, n. 3G.
3 D. 17, 2, 52, 11 ; Poth. Pand. 17, 2, n. 36.
•• D. 17, 2, 52,3; Poth. Pand. 17, 2, n. 36 ; Doniat, 1, 8, 4, art. 3, 4.
* D. 17, 2, 72 ; Poth. Pand. 17, 2, n. 36 ; Domat, 1, 8, 4, art. 2, 3, 7, 8.
6 Story on Ag.§ 182-185 ; Story on BaUm. § 11,13-15,18; Id. § 455 ;
Jones on Bailna. 98 ; Poth. de Soc. n. 124.
7 Poth. de Soc. n. 124, 125.
302 PARTNERSHIP. [CHAP. IX.
profits, which he has brought to the partnership by his
industry and dihgence in other business of the firm.
The reason he afiirms to be. that the partner, who thus
exerts his industry and diligence, does no more than
his duty thereto ; and therefore the firm is not indebted
to him on that account.^ Non oh earn rem minus ad
periculum socii pertinet, quod negligentia ejus periisset,
quod in ^9/er«s^2«e aliis industria ejus societas aucta
fuisset. Et ideo, si socius qucedam neglig enter in socie-
tate egisset, in 2^^erisque aiifem societatem auxisset, non
com2?ensaiur comp)endium cum negligentia.^ The doc-
trine, thus stated, although somewhat strict and austere,
may perhaps be deemed salutary and convenient, as
creating a deep interest in partners to perform all their
duties with fidelity and diligence. It does not, however,
seem to have been held applicable to a series of con-
nected acts, all of which form a part of the same entire
business transaction, such, for example, as the sale of a
cargo of goods by one partner, who manages the whole
sale, where, although there may be some negligence, as
to the sale of a part, by which some loss has been in-
curred, yet there has been a great profit upon other
parts ; so that the loss is much more than compensated
for by the extra rate of profits.
§ 172. The necessity of entire good faith, and of the
absence of fraud on the part of partners towards each
other, is inculcated by Cicero in terms of deep import
and sound morality. In rebus minorihus socium fallere
turpissimuni est; neque injuria; propter ea quod aux-
ilium sihi se ptutat adjunxisse, qui cum altero rem com,-
municavit. Ad cujus igitur fidem confugiet^ cum per
ejusfidem loiditur, cui se commiserit? Atque ea sunt
> Poth. (le Soc. n. 125.
- D. 17, 2, 25 ; Id. 17, 2, 26; Poth. Pand. 17, 2, n. 29 ; Domat, 1, 8, 4,
art. 8.
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 303
animadvertenda peccafa maxime, cpice difficiUiine prcB-
caventur. Tecti esse ad alienos possumus ; intimi multa
apertioi^a videant necesse est. Socium vero cavere qui
possu7nus ? Quern, etiam si metuimus, jus officii Icedi-
mus. Rede igitur majores eum, qui socium fefeUisset,
in virorum honormn numero non putarunt haberi opor-
tere} The Roman law has also expressed the obligation
of good faith in exceedingly strong language. In
societatis contractibus fides exuberet.^ Good faith not
only requires, that every partner should not make any
false representation to his partners, but also that he
should abstain from all concealments, which may be in-
jimous to the partnership business. If, therefore, any
partner is guilty of any such concealment, and derives a
private benefit therefrom, he will be compelled in equity
to account therefor to the partnership. Upon the like
ground, where one partner, who exclusively superin-
tended the accounts of the concern, had agreed to pur-
chase the share of his copartners in the business for a
sum, which he knew, from the accounts in his posses-
sion, but which he concealed from them, to be for an
madequate consideration, the bargain was set aside in
equity, as a constructive fraud ; for he could not in
fairness deal with the other partners for their share of
the profits of the concern without putting them in
possession of all the information, which he himself had
with respect to the state of the accounts and the value
of the concern.^
§ 173. One of the most obvious duties and obliga-
* Cicero, Pro Roscio. Amer. c. 40, cited by Puf'endorf, B. 5, c. 8, § 4, and
by Coll. on P. B 2, c. 2, p. 117, 2d ed.
- Cod. Lib. 4, 37, 3; Domat, 1, 8, 4, art. 1, 2; {Blisset v. Daniel, 10
Hare, 493.}
' Maddeford v. Austwick, 1 Sim. 89 ; { Perens v. Johnson, 3 Sm. & G.
419; Sexton r. Sexton, 9 Gratt. 204; Hopkins v. Watt, 13 111. 298. See
Knight V. Marjoribanks, 11 Beav. 322; s. c. 2 Macn. & G. 10.}
304 PARTNERSHIP. [cHAP. IX.
tions of all the partners is, strictly to conform themselves
to all the stipulations contained in the partnership arti-
cles ; ^ and also to keep within the bounds and limitations
of the rights, powers, authorities, and acts, belonging
and. appropriate to the due discharge of the partnership
trade or business. Of course, every known deviation
from, and every excess in the exercise of such rights,
powers, authorities, and acts, which produce any loss or
injury to the partnership, are to that extent to be borne
by the partner who causes or occasions the loss or in-
jury, and he is bound to indemnify the other partners
therefor.^ The same doctrine is recognized by Pothier,
' Coll. on P. B. 2, c. 2, § 2,i). 131-161, 2d ed.
^ The doctrine here stated is sometimes of great practical importance in
the settlement of partnership accounts. An illustration of it occurred in
the case of Stoughton v. Lynch, 1 Johns. Ch. 467, as to funds, which
one partner had withdrawn from the partnership contrary to the articles.
On that occasion, Mr. Chancellor Kent said : " The articles of copartner-
ship intended to preserve, in a state of progressive accumulation, the
funds of the house ; and the clause, upon which the question before me
has arisen, is to be taken strictly. This is evidently the sense and spirit
of the agreement. It is expressly stipulated, that the capital and profits
of the company were to remain in the house, and to be employed for the ben-
efit of the concern, during the partnership, with this special exception, that
such part only was to be withdi'awn, as might be necessary for private ex-
penses. And to show the care, with which the parties guarded the funds
from being diverted by either of them, it was further stipulated, that neither
of them was to do business at New York on their private account, nor lend
any of the capital stock, or enter into acceptances ; but each party was to
do his best to promote the advantage of the company. Afler reading these
articles, it is impossible not to view most of the charges, which the defendant
wishes to include under the special exception, as palpably inadmissible. To
consider plate, musical instruments, carriages and horses, and the whole fur-
niture of a house, as coming within the permission granted to the parties to
withdraw the funds of the house only when necessary for private expenses,
is, in my judgment, an unreasonable and extravagant pretension. The object
of the decretal order, of last July, was, not to exempt from interest all those
moneys withdrawn, that were not supjiosed to be employed in land specula-
tions. I then observed, that, if the funds so withdrawn had been employed
in trade, the party would have had to account, not merely for interest, but
for the profits of that trade ; and we find authority for this in Brown v. Lit-
ton, 1 P. Wms. 140, and in Crawshay v. Collins, 15 Ves. 218, where the prin-
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 305
as existing in the French law ; ^ and it seems, indeed, so
clearly the result of natural justice as to require no
particular exposition.^
§ 174. But there are many implied duties and obliga-
tions of an equally important, although not perhaps
always of so obvious a nature. Thus, for example, it
is a violation of good faith, for any partner, in conduct-
ing the partnership business, to stipulate clandestinely
with third persons for any private and selfish advantage
ciple is stated, that if one partner trade alone on a joint stock, he shall divide
the profits. The least that I could do in this case was to make him pay inter-
est on all moneys withdrawn beyond the private necessity expressed in the
contract. The interest of the parties as joint traders, the obvious policy and
meaning of the contract, and that good faith, which is the animating principle
in all mercantile associations, unitedly concur in recommending us to view the
claims set up by either party, under the exception, with a jealous and scru-
pulous eye. Without such a rule of construction, a partnership, like the pres-
ent, with all its provisions to preserve the funds of the house untouched,
might soon languish under the carelessness, or dissipation, or discordant and
rival views of either of the contracting parties. The parties, then, had in
view, that funds were to be withdrawn only when necessary for private ex-
penses ; and when at any time withdrawn, the party must have done it with
a view to that necessity. I'hat must have been the purpose, for which they
were withdrawn. The more safe and regular way would have been, to have
stated, in each case, the object of the apjjropriation, so that each party, at the
end of every year, when a fair balance of the books, according to the articles,
was to be made, signed, and approved, might have known and judged of the
requisite appropriation. But it would, perhaps, be too rigorous to require the
production of such an original entry to justify every such appropriation ;
and I am willing even to presume, that a fair and reasonable sum, drawn
away in each year, was necessary for the private expenses of each individ-
ual partner during that year. Beyond this presumption I cannot go. All
the European expenses of the defendant are, therefore, to be laid out of the
case ; because, as I understand from the suggestions of the counsel upon the
argument, there was no concurrent, or any thing like contemporary, appro-
priations, or drafts, with any presumed reference to those expenses. I am to
presume, then, and I do presume and believe, that the defendant never
deemed it necessary, at the time, to recur to the permission granted under
these articles, to meet and defray those expenses. The idea of including them
under this article was an afterthought, arising many years after those ex-
penses had been borne and forgotten."
> Poth. de Soc. n. 133.
2 Poth. Pand. 17, 2, n. 36 ; Domat, 1, 8, 4, art. 3,4, 7.
20
306 PARTNERSHIP. [cHAP. IX.
and benefit to himself, exclnsive of the partnership ; for
all the partnership property and partnership contracts
should be managed for the equal benefit of all partners,
according to their respective interests and shares there-
in.^ If, therefore, any one partner should so stipulate
clandestinely for any private advantage or benefit to
himself, to the disadvantage, or in fraud of his partners,
he will in equity be compelled to divide such gains with
them.^ ' The same principle will apply to clandestine
bargains for his o^^ll private advantage and benefit,
made in contemplation of establishing a partnership
with other persons, and as a premium for his services
therein.^ So, if a purchase is made on the partnership
account by one partner, who clandestinely stipulates and
receives any reward or allowance from the seller for his
own private profit, he will be compelled to share the
same with his partners."* So, where one partner obtains
the renewal of a partnership lease secretly in his own
name, he will be held a trustee for the firm in the re-
newed lease.''
' Coll. on P. B. 2, c. 2, § 1, p. 117-120, 2d ed. ; 3 Kent, 51 ; {Gardner r.
McCutclieon, 4 Beav. 534; Lind. on P. 494.}
^ Ibid. ; Russell r. Austwick, 1 Sim. 52.
3 Fawcett v. Whitehouse, 1 Russ. & M. 132, 148, 149; Hiehens r. Con-
greve, 4 Russ. 562. { See Beck v. Kantorowicz, 3 Kay & J. 230,}
* Carter v. Home, 1 Eq. Cas. Abr. Account, A. pi. 13. {But see Wheeler
V. Sage, 1 Wallace, (u. s. s. c.) 518.}
* Featherstonhaugh v. Fen wick, 17 Yes. 298; Hiehens v. Congreve, 1
Russ. & M. 150, note B. ; s. C. 4 Russ. 562; Coll. on P. B. 2, c. 2, § 1, p.
120, 121, 2d ed.; Dougherty r. Van Nostrand, 1 Hoff. 68, 69, 70; {Clegg
V. Fishwick, 1 Macn. & G. 294. See Clements v. Hall, 2 De G. & J. 173,
reversing s. c. 24 Beav. 333.} [But see Anderson v. Lemon, 4 Sand. 552.]
— Lord Eldon in Featherstonhaugh v. Fenwick, 1 7 Yes. 311, said : " It is clear,
that one partner cannot treat privately, and behind the backs of his copart-
ners, for a lease of the jiremises, where the joint trade is carried on, for his
own individual benefit. If he does so treat, and obtains a lease in his own
name, it is a trust for the partnership ; and this renewal must be held to have
been so obtained. Consider, what an unreasonable advantage one partner
would, upon a different principle, obtain over the rest. In this respect, there
CHAP. IX. J RIGHTS AND DUTIES OF PARTNERS. 307
^ 115. The same doctrine is applied to other analo-
gous cases. In all purchases and sales, made on account
of the partnership, every partner is bound to act ex-
pressly for the benefit of the partnership ; and, there-
fore, he has no right, and cannot consistently with his
can be no distinction, whether the partnership is for a definite, or indefinite
period. If one partner might so act in the latter case, he might equally in
the former. Supposing the lease and the partnership to have different
terms of duration, he might, having clandestinely obtained a renewal of the
lease*, say to the other partners : ' The premises, on which we carried on our
trade, have become mine exclusively ; and I am entitled to demand from
you whatever terms I think fit, as the condition for permitting you to carry
on the trade here.' Is it possible to permit one partner to take such an
advantage ? When the application was made for a renewal, no notice of
dissolution had been given ; nor had the plaintiff notice of any intention of
renewing the lease. It is not true, as has been represented, that the im-
pediment to a renewal to the partnership arose solely from the indisposition
of Mr. Wilkinson to any connection with the plaintiff; as, before any ob-
jection had been made on that or any other ground, the defendant goes Avith
the intention, and for the dire(;t purpose, of obtaining a renewal for himself
and his sou exclusively. He makes the application to Murray ; who says,
the proposal was for a renewal for the benefit of the defendants ; expressly
excluding the plaintiff, with whom it was represented, that George Fenwick
was determined to have no further connection in trade ; and though it may
be true, that Wilkinson afterwards said, he would not have granted a lease
to the defendants jointly with the plaintiff, that declaration had become
quite unnecessary, by the resolution, preAnously expressed by the defendant,
not to take a lease jointly with him. This clandestine conduct was very
unfair towards the plaintiff. The defendants had not intimated to him, that
they would not have any further connection with him, and that they in-
tended to appl)' for a lease on their own account. They ought first to have
given him notice, and to have placed him on equal terms with them : and
then, If Mr. Wilkinson had thought proper to give them the preference, the
case might admit of a different consideration. Instead of that, they clandes-
tinely obtained an advantage, which would enable them to dissolve the
partnership on terms very unfavorable to the plaintiff; and they evidently
had that object in view. If they can hold this lease, and the partnership
stock is not brought to sale, they are by no means on ecpial terms. The
stock cannot be of equal value to the plaintiff, who was to carry it away,
and seek some place, in which to put it, as to the defendants, who were to
continue it in the place where the trade was already established ; and if the
stock was sold, the same circumstance would give them an advantage over
other bidders. In effect they would have secured the good-will of the trade
to themselves, in exclusion of their partner."
308 PARTNERSHIP. [cHAP. IX.
duty, voluntarily place himself in a situation, in which
his bias, as well as his interest, is in opposition to the
interest of the partnership. Thus, if a partner buys
goods for the partnership account, and makes the bar-
gain by a barter of his own private goods on his own
sole account, and charges the partnership with the full
cash value and price of the goods, as if they were bought
for cash ; it will be a constructive fraud upon the part-
nership ; and he will be compelled in equity to account
for any private profit so made in the barter.^ The same
rule will apply to the converse case of a sale of the part-
nership property under the like circumstances ; for the
general doctrine is, that there is an implied obligation
between partners, that they are to use the partner-
ship property for the benefit thereof, and not other-
wise.^
§ 176. This wholesome principle of justice has been
adopted in many other cases, where peculiar relations
' Burton v. Wookey, G Madd. 367 ; Coll. on P. B. 2, c. 2, § 1, p. 122, 2d
ed. — On this occasion Sir John Leach (the Vice-Chancellor) said : " It is a
maxim of the courts of equity, that a person, who stands in the relation of
trust or confidence to another, shall not be permitted, in pursuit of his pri-
vate advantage, to place himself in a situation, which gives him a bias against
the due discharge of that trust or confidence. The defendant here stood in
relation of trust or confidence towards the plaintiff, which made it his duty to
purchase the lapis calaminaris at the lowest possible price ; when in the place
of purchasing the lapis calaminaris, he obtained it by barter for his own shop
goods, he had a bias against a fair discharge of his duty to the plaintiff. The
more goods he gave in barter for the article jwrchased, the greater was the
profit, which he derived from the dealing in store goods ; and as this profit be-
longed to him individually, and as the saving by a low price of the article pur-
chased was to be equally divided between him and the plaintiff, he had plainly
a bias against the due discharge of his trust or confidence towards the plaintiff.
I must, therefore, decree an account of the profit made by the defendant in
his barter of goods, and must declare, that the plaintiff' is entitled to an equal
division of that profit with the defendant." 6 i\Iaild. 36 7 ; [ Bentlcy v. Craven,
18 Beav. 75.}
2 Crawshay r. Collins, 15 Ves. 218, 227. { See Westcott v. Tyson, 38 Penn.
St. 389.1
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 309
exist between the parties, by courts of equity.^ Pothier
has directly apphed it, not only to cases of bargains
during the partnership,^ but also to a case, where a
partner contemplates a dissolution solely to aid his own
sinister and selfish purposes. In order (says he) to
enable a partner to dissolve a partnership, two things
must concur; (1.) the renunciation of the partnership
must be made in good faith ; (2.) it must not be made at
an unreasonable time (contre fe???^;s). Debet esse facta
bona fide et temjjestive. The renunciation is not made in
good faith, when the partner renounces to appropriate
to himself alone the profits, which the other partners
proposed for the partnership, when it was formed.^ This
is the very doctrine inculcated by courts of equity under
the like circumstances.^ It is also the doctrine of the
Roman law. Si societatem ineamus ad aliquam reim
emendani ; deinde solus volueris earn emere, ideoque re-
nuntiaveris societati, ut solus emeres ; teneberis quanti
interest mea. Sed si ideo renuntiaveiHs, quia emj^tio
tibi displicebat, non teneberis quamvis ego enter o ; quia
hie nulla fraus est.^
§ 177. Upon similar grounds it is the implied obliga-
tion and duty of every partner, not to engage in any
other business or speculation, which must necessarily
deprive the partnership of a portion of the skill, indus-
try, diligence, or capital, which he is bound to employ
therein.'^ In other words, he is not at liberty to deal
on his own private account in any matter or business,
which is obviously at variance with, or adverse to, the
1 1 Story, Eq. Jur. § 315, 316, 321 ; Id. § 221 ; 2 Story, Eq. Jar. § 12G1,
1265 ; Stoughton v. Lynch, 1 Johns. Ch. 4G7, 470.
2 Poth. de Soc. n. 59. * Poth. de Soc. n. 150.
* Featherstonhaugh w. Fenwick, 17 Ves. 298.
* D. 17, 2, 65, 4; Poth. Pand. 17, 2, n. 64; Domat, 1,8, 4, art. 5, 17.
8 3 Kent, 51 ; Burton v. Wookey, 6 Madd. 367.
310 PARTNERSHIP. [cHAP. IX.
business or interest of the partnership. The object of
this prohibitory rule is, to withdraw from each partner
the temptation to bestow more attention, and to exercise
a sharper sagacity in respect to his own purchases and
sales and negotiations, than he does in respect to the
concerns of the partnership, in the same or in a con-
flicting line of business.^ It is, therefore, a rule founded
in the soundest policy. Pothier lays down the same
rule, and inculcates it in emphatic language, insisting
that no partner has a right to prefer his own particular
interest to that of the firm, or to take away the profits
of a bargain from the firm, and appropriate them to his
own private advantage.^ Boulay Paty is equally ex-
pressive on the same subject ; and he applies it, as well
to cases of masters of ships, as to partners.^
§ 178. If, therefore, one partner should clandestinely
carry on another trade, or the same trade for his own
private advantage, and in a manner injurious to the
true interests of the partnership, or should divert the
capital or funds of the partnership to such secret and
sinister purposes, he will be compelled in equity to ac-
count for all the profits made thereby.'^ So, if one
partner should purchase articles upon his own private
account in some special trade and business, in which
the partnership was engaged, and injuriously to the
partnership, as for example, by purchasing lapis ccdami-
naris of neighboring miners, on his own private account,
that being also the business of the partnership, he
would be held to account for the profits made thereby.^
' 3 Kent, 51. " Poth. de Soc. n. 59.
^ 2 Boulay Paty, Droit Comm. § 19, p. 94.
* Long V. Majestre, 1 Johns. Ch. 305 ; Glassington v. Thwaites, 1 Sim. &
St. 124, 133 ; 3 Kent, 51 ; Burton v. Wookey, 6 Madd. 867 ; Stoughton v.
Lynch, 1 Johns. Ch. 4G7, 4 70; {Lock v. Lynam, 4 Ir. Ch. 188; England v.
Curling, 8 Beav. 12!) ; Herrick v. Ames, 8 Bosw. 115.}
' Burton y. Wookey, 6 Madd. 367.
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 311
Indeed courts of equity will go further in cases of this
sort, and restrain the partner by injunction from carry-
ing on any trade or business, which is thus inconsistent
with the rights and interests of the partnership ; for
(as has been well remarked) the principles of courts
of equity will not permit, that parties, bound to each
other, by an express or implied contract, to promote an
undertaking for the common benefit, should any of
them engage m another concern, which necessarily
gives them a direct interest adverse to that under-
taking.^ But if there be no such necessary conflict
or incompatibility of interests, the mere circumstance,
that the partner may thereby be exposed to the tempta-
tion to be dishonest, or to abuse his trust, or to betray
his duty, has not been thought sufficient to justify courts
of equity in imposing such restraint by injunction.^
§ 179. The principle and the exception may readily
be illustrated bv the case of two rival mornino: news-
papers, and two evening newspapers. All newspapers
are, to some extent, rivals ; and there is also neces-
sarily some degree of rivalry between a morning and
an evening paper, especially in the country. The
question may, therefore, very properly arise in many
cases, whether a person, engaged as a partner in the
management of a morning paper, is at liberty to assist
with his skill, labor, and property, the publication of
an evening newspaper, which may affect the interests
of the former. If both papers are published in the
same city, for the Hke general circulation, it will be
difficult to escape the conclusion, that the interest in
the one is adverse to and in conflict with that of the
other. But, if one is published in another city, or one
is designed mainly for city cumulation, and the other
1 Glassington r. Thwaites, 1 Sim. & St 124, 133.
2 Ibid.
312 PARTNERSHIP, [cHAP. IX.
exclusively for country circulation, or the one is a daily,
and the other a weekly paper, the same conflict and
adversary interests may not arise ; and the nature and
objects of the particular papers, as well as the habits
and usages of the trade, may furnish material ingredi-
ents for a distinction between the cases. ^
' Glassington v. Thwaites, 1 Sim. & St. 124, 131, 133. — On this occa-
sion Sir John Leach (the Vice-Chancellor) said : " AH newspapers are to
some extent rivals. The competition is more immediate between two
morning papers and two evening pa|)ers ; but there is necessarily some
degree of rivalry between a morning and an evening pajier, especially in
the country. It might, therefore, have been made a question, whether it
would be a due act of management in the partnership concern of a morning
paper, to assist with its property and its labor the publication of any other
newspaper, so as to enable the majority of the partners in that respect to
bind the minority. But the question does not arise ; because the plaintiff
himself is to be considered as a party to the practice, before his copartners
became the proprietors of the evening paper; and because there is evi-
dence, that the proprietors of other morning papers have adopted the same
practice with respect to other evening papers, so as to form a sort of usage
in the trade to this effect. And it is to be considered, that the annual sum,
paid by the evening jjaper for the accommodation afforded to it, outweighs the
danger of inci'eased competition. The true question here is, whether it
makes any difference, that the other proprietors of the Herald have now be-
come the proprietors of the evening paper ; and 1 tliink it does not make a
material difference. It is true, that a considerable part of the expense of a
newspaper is occasioned by procuring information ; and if some of the pro-
prietors of a morning paper are also the proprietors of an evening paper,
they may have a stronger interest to promote the success of the evening
paper than of the morning paper, and a strong temptation to use the infor-
mation obtained at the expense of the morning paper for the benefit of the
evening paper. This temptation forms a powerful objection in all cases to
the partner in the concern of one newspaper being permitted to be a partner
in the concern of any other newspaper. But it is an objection founded on
the principle of policy and discretion, against which parties may protect
themselves by their contracts ; and accordingly, it is a common covenant in
such partnership articles, that no partner shall be the proprietor of any other
newspaper. In the present case, there is actually a covenant, that the pro-
prietors will not be concerned in any other morning paper, which, by impli-
cation, affords the conclusion, that it was the intention of the parties, that
they might engage in the concern of any evening paper. Where there is no
such covenant of restraint, it is clear, that, at law, a partner in one newspaper
may be a proprietor in any other ncAvspaper ; and in this case, equity must
follow law ; and it cannot be intended, that the parties meant to impose a
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 313
§ 180. Cases of a very delicate and embarrassing
nature sometimes arise in cases of partnership, where
one partner dies, and one or all of the survivors are
appointed his executors, and the partnership is con-
tinued as between the survivors. Under such circum-
stances, it may be difficult to say, that there may not
sometimes arise conflicting duties and obligations in
their diflerent acts and characters, as partners and as
executors. Still greater embarrassments may occur,
where the executors also sustain the character of guar-
dians of the children of the testator, who by the articles
have a right upon arriving at their majority to come
into the firm. It has been well remarked by a learned
writer, that it is clear, that surviving partners so situ-
ated, have inconsistent duties to perform. It is true,
that the difficulties of this situation are not so obvious,
where the parties claiming under the testator are all
sui juris, as where some of them are infants. But
even in the former case, the surviving partner cannot,
without the full knowledge and consent of these parties,
make his situation of executor a means of advantage to
his copartnership ; and in the latter case, the difficulties,
restraint, which they might have expressed, and have not expressed, and
where it is plain their attention was directed to the subject. The princi-
ples of courts of equity would not permit, that parties bound to each
other by express or implied contract to promote an undertaking for the
common benefit, should any of them engage in another concern, which
necessarily gave them a direct interest adverse to that undertaking. But
the argument here is, not that the defendants, by becoming the proprie-
tors of the evening paper, place themselves in a situation, in which they
are necessarily required to betray their duty to the morning paper ; but
that, if their interest be greater in the evening paper than the morning
paper, they are exposed to a temptation to be dishonest and to betray their
duty to the morning pa])er. If they act honestly, it is immaterial to the
morning paper, whether the defendants are or not the proprietors of the
evening paper. And for this reason it is, that it makes no difference in
the present case, that the defendants have become the proprietors of the
evening paper."
314 PARTNERSHIP. [cHAP. IX.
in the absence of specific contract, seem to be insuper-
able, unless the whole partnership concern be wound
up, or recourse be had to a court of equity.^
§ 181. In the next place, there is an implied obliga-
tion and duty upon all the partners, as a matter of
good faith, to which they are mutually pledged to each
other, that the business of the partnership shall be
conducted in such a manner, as that each of the part-
ners may be enabled to see, that it is carrying on for
' Coll. on P. B. 2, c. 2, § 1, p. 123, 2d ed. ; Id. B. 2, c. 3, § 4, p. 210, 211.
— The case of Wedderburn v. Wedderburn, 2 Keen, 722 ; s. c. 4 Myl. & C.
41, demonstrates the truth of these remarks. In that case the accounts of
successive partnerships and retirements of partners, after the death of the
first partner (the testator), were overhauled in equity, after a lapse of thirty
years from the testator's death. The decretal order in that case contains
the form of the proper order to be made in such cases, and may serve as a
valuable precedent. 2 Keen, 752, 753. This case was affirmed upon the
appeal by Lord Cottenham, who then used the following language : "I
have had many occasions to consider, and have frequently expressed my
sense of the difficulties, which the court has to encounter in administering
equity according to its acknowledged principles in cases of this description.
So many decisions have established the right of parties to participate in the
profits of trade, carried on under circumstances similar to the present, that
no question can be raised as to the duty of the court in decreeing such
relief, when a proper case arises for it ; but it is obvious, that very great
difficulties exist in enforcing this right. Great expense, great delay, and
great hardship upon the defendants frequently attend the prosecution of
decrees for this purpose, and the apparent benefit decreed to the plaintiff is
frequently much diminished, if not lost, in the attempt to enforce it. For
these reasons it appears to me, that these are cases, in which, above all
others, it is for the interest of all parties to settle the matters in contest
between them by private arrangement and compromise ; and I earnestly
recommend to the parties to take this into their serious consideration. I
have no doubt but that a settlement might be effected, which would secure
to the plaintiffs more than they can possibly obtain from the most successful
prosecution of the decree, and which would, at the same time, protect the
defendants against much of the expense, inconvenience, and hardship, to
which they must be exposed if it be adversely prosecuted. This, however,
is entirely for their private consideration. ]\Iy duty is only to dispose of
the matters litigated upon this appeal, which, for the reasons I have before
given, I now do by dismissing the appeal with costs." 4 Myl. & C. 55.
{Millar v. Craig, 6 Beav. 433; Stocken v. Dawson, 6 Beav. 371; Town-
end V. Townend, 1 GiflP. 201.}
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 315
their mutual advantage, and not injuriously to the
common interest.^ It seems, therefore, the proper duty
of each partner to keep precise accounts of all his own
transactions for the firm, and to have them always
ready for inspection and explanation." And if one
partner receives any moneys for the partnership, he
ought at once to enter the receipt thereof in the books
of the firm, so that the same may be open to the in-
spection of all the partners.^ This, indeed, is one of
the ordinary stipulations of partnership articles ; but it
is a mere affirmance of the general doctrine of the law.^
It follows from these considerations, that one partner
cannot exclude another from a personal interposition,
and an equal management in the concerns of the part-
nership. The powers of all are in this respect co-ordi-
nate and co-extensive, whether the partnership be in
full operation, or be subsisting only for the purpose of
winding up the affairs thereof.^ There may be excep-
tions and limitations growing out of the particular
articles or other incidents of the partnership, as where
one partner has sole authority to act in the manage-
ment of the concern ; or where one partner is the sole
owner of the property, and the other partners are only
to share the profits. '^ The Roman law inculcated a
similar doctrine ; and if one partner was prevented by
the others from an equal participation in any of the
' Coll. on P. B. 2, c. 2, § 1, p. 126, 2d ed. ; Peacock v. Peacock, 16
Ves. 49, 51 ; 3 Chitty on Comm. & Manuf. c. 4, p. 236.
2 Coll. on P. B. 2, c. 2, § 1, p. 121, 126, 2d ed. ; Id. B. 2, c. 2, § 2,
p. 142 ; Rowe v. Wood, 2 Jac. & W. 553, 558 ; Ex parte Yonge, 3 Ves. & B.
31, 36 ; {Lind. on P. 659-666.}
3 Goodman v. AVhitcomb, 1 Jac. & W. 589, 593.
* Coll. on P. B. 2, c. 2, § 2, p. 142, 2d ed.
* Coll. on P. B. 2, c. 2, § 1, p. 126, 2d ed. ; Rowe v. Woods, 2 Jac. &
W. 553, 558.
« Ibid.
316 PARTNERSHIP. [CHAP. IX.
partnership property, he might, even during the con-
tinuance thereof, maintain an action pro socio}
§ 182. In the next place, as there is an implied obli-
gation in every partner to exercise due dihgence and
skill, and to devote his services and labors for the pro-
motion of the common benefit of the concern, it hence
follows, that he must do it without any reward or com-
pensation, unless, indeed, it be expressly stipulated for
between the partners, as it well may be under peculiar
circumstances.^ The reason is, that each partner, in
taking care of the joint property, is in fact taking care
of his own interest, and is performing his own duties
and obligations, implied in, and constituting a part of,
the consideration for the others to engage in the part-
nership ; and the law never undertakes to measure and
settle between the partners the relative value of their
various and unequal services bestowed on the joint busi-
ness, for the obvious reason, that it is impossible to see,
how far in the original estimate of the parties, when
the connection was formed, the relative experience,
skill, ability, or even the known character and reputa-
tion of each, entered as ingredients into the adjustment
of the terms thereof.^
1 D. 17, 2, 52, 13; Poth. Pand. 17, 2, n. 33.
^ Thornton v. Proctor, 1 Anst. 94 ; Franklin v. Robinson, 1 Johns. Ch.
157, 165; Bradford v. Kimberly, 3 Johns. Ch. 431, 434; Cakhvell w.
Leiber, 7 Paige, 483; Burden v. Burden, 1 Ves. & B. 170; Lee v. Lash-
brooke, 8 Dana, 214; Whittle v. M'Farlane, 1 Knapp, 311, 315; [Lewis v.
MofTett, 11 111. 392 ; Lyman v. Lyman, 2 Paine, C. C. 11 ; King v. Hamilton,
16 111. 190; Coursen v. Hamlin, 2 Duer, 513; {Hutcheson v. Smith, 5 Ir.
Eq. 117 ; Lind. on P. 636. But see Levi v. Karrick, 13 Iowa, 344.} And
on the same principle a surviving partner has been held not entitled to
compensation for services in winding up the affairs of the firm. Beatty v.
Wray, 19 Penn. St. 516]; {Stocken v. Dawson, 6 Beav. 371; Brown v.
McFarland, 41 Penn. St. 129 ; Piper v. Smith, 1 Head, 93. But see Feather-
stonhaugh v. Turner, 25 Beav. 382, 392.}
^ [Interest on advances of capital by one of the partners to the firm,
will be allowed, where there is any agreement or understanding to that
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 317
§ 183. Nor is good faith alone required in all part-
nership acts ; but also the exercise of a sound and rea-
sonable discretion by each partner, for the mutual ben-
efit and interest of the concern. It is, therefore, the
duty of each partner to avoid transgressing or abusing
in any way the ordinary privileges of a partner in the
management of the concern ; as, for example, by pro-
fuse, or wanton, or unnecessary expenditures in the
partnership business, or by rash and imprudent specu-
lations, or by negligent or extravagant sacrifices of the
partnership property.^ Even where a right is reserved
to one partner to assign his share to another, who shall
thereby be entitled to admission as a partner, good
effect. Coll. on P. (Perkins's ed.) B. 2, c. 3, § 338, note, p. 309 ; Winsor v.
Savage, 9 Met. 346 ; Hodges v. Parker, 17 Vt. 242 ; Millaudon v. Sylves-
tre, 8 La. (Curry), 262; Reynolds v. Mardis, 17 Ala. 32; {Pond v.
Clark, 24 Conn. 370; Lind. on P. 649.} But it has been distinctly
declared by an American court that, in the absence of any such evidence,
neither of the partners will be entitled to intei-est on advances before a
general settlement or dissolution. Lee v. Lashbrooke, 8 Dana, 214; Jones
V. Jones, 1 Ired. Eq. 332 ; Honore v. Colmesnil, 7 Dana, 199 ; Waggoner
w.'Gray, 2 Hen. & Mun. 603; Dexter v. Arnold, 3 Mason, 284; Desha v.
Smith, 20 Ala. 747. An eminent English judge has intimated a contrary
opinion. According to him, the law is not clear, that, where partners are
equally laborious aiid equally attentive to the business, interest should not
be allowed on any excess of capital, and the parties thus be put on equal
terms in that respect. "Can one believe," he says, commenting on the
facts of a case in judgment, " that the party, to whom the whole capital
belonged, renounced his advantage in that respect, and continuing to take
an equally laborious part in the transaction of the business, should bring in
his whole income, both partnership and private, and yet intend to reserve
no advantage of that income upon the settlement of accounts l)etween him-
self and copartner.'' I must say, I have a great difFiculty in coming to such
a conclusion as that." Millar v. Craig, 6 Beav. 433 ; Hodges v. Parker,
17 Vt. 242 ; Stoughton v. Lynch, 1 Johnson, Ch. 467 ; Simpson v. Feltz, 1
McCord, Ch. 213; Ex parte Chippendale, 4 De G. M. & G. 19, s. c. sub
nam. In re German Mining Co. 19 Eng. L. & Eq. 591 ; Beacham i'. Eck-
ford, 2 Sand. Ch. 116. See post, § 349, note]; {Morris v. Allen, 1 Mc-
Carter, 44. See Wood v. Scoles, Law Rep. 1 Ch. 369 ; W\atncy v. Wells,
Law Rep. 2 Ch. 2r)0 ; Hill v. King, 9 Jur. n. s. 527.}
> Coll. on P. B. 2, c. 2, § 1, p. 127, 2d ed.
318 PARTNERSHIP. [CHAP. IX.
faith would seem to require, that the assignment should
be to a person of competent skill and honesty, and not
to a mere insolvent, or to a known profligate ; for this
would seem to be an abuse, and not a fair exercise of
the right of assignment.^
§ 18 J:. Pothier, in discussing the subject of the rights,
duties, and obligations of partners, in respect to each
other, has laid down a number of general rules, as
guides and principles. First. That each partner may
use the property, belonging to the partnership, accord-
ing to its proper use and destination, and not otherwise,
reciprocally allowing to his other partners the like use
and privilege." Second. That each partner has a right
to compel the other partners to bear then share of the
expenses, which are necessary for the preservation of
the common property.^ Third. No partner has a right
to make any material change or innovation upon the
common, permanent, or fixed property, or inheritable
estate of the fii-m, even though it may be beneficial to
the firm, without the consent of his partners ; for this
is deemed an authority not delegated by the firm, and
> Coll. on P. B. 2, c. 2, § 1, p. 129, 130, 2d ed. ; 2 Bell, Comm. B. 7,
p. 620, 5th ed. — In the case of JefFerys v. Smith, 3 Russ. 158, 168, Sir
John Copley (Master of the Rolls) seemed to think, that the insolvency of
the assignee constituted no just objection. On that occasion he said: "It
is said, that the assignment was colorable ; that is, that it was made for the
sake of securing the assignor from future liability. Suppose he made it
with that view, he had a right so to pi'Otect himself from future liability. It
is alleged, that the assignee was not a responsible person. Let it be so ;
Guppy, for the purpose of securing himself, had a right to assign to a
person not responsible. The only ground of objection would be, that,
though there was an assignment in form, there was an understanding
between the parties, that the assignee should be a trustee for the assignor.
Here there is no pretence for such a supposition. I must hold, therefore,
that, at all events, the assignment, coupled with the notice, freed Guppy
from future liability." But ought not a court of equity to interfere, where
an assignment is made to a notoriously incompetent person, or to one of
bad and dissolute habits? See 2 Bell, Comm. B. 7, p. 620, 5th ed.
* Both, de Soc. n. 8i, 85. ^ ^^^Yi. de Soc. n. 86.
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 319
which any one may prohibit from being done.^ Fourth.
No partner can alienate or bind the property of the
firm, except to the extent of his own interest therein.^
These rules may not be unreasonable in themselves ;
but it cannot be affirmed, that all of them have a just
foundation in our law. On the contrary, as we have
seen, some of them are repudiated.^ Pothier afterwards
adds some other obligations of partners inter sese ; as
for example, that each partner is bound to account to
the others for all that he owes to the firm, deducting
what is due to him by the firm.'* So, also, each partner
is bound to account to the extent of the share, which
he has in the partnership, for whatever is due to his
other partners by the firm, deducting whatever those
partners owe to the firm.^ These rules seem little
more than an expansion of the principles of the Roman
law on the same subject.^
§ 185. This is but a very summary view of the lead-
ing rights, duties, and obligations of partners inter sese,
implied by law ; and indeed a full enumeration of them,
with reference to the cu'cumstances of each particular
kind of partnership, would be found at once tediously
minute, and of little value, even if it were practicable.
The rights, duties, and obligations of partners inter sese
must necessarily be expanded or restrained, to meet the
exigencies of their peculiar trade and business ; and
general rules can do little more than to point out the
ordinary course in common transactions. We shall
have occasion hereafter to consider the rights, duties,
and obligations, expressed in, and arising under articles
1 Poth. de Soc. n. 87, 88.
2 Poth. de Soc. n. 89. ' Ante, § 95.
* Poth. de Soc. n. 108-123. * Poth. de Soc. n. 108, n. 12G-132.
« Poth. Pand. 17, 2, n. 26-29 ; Id. n. 33 ; Id. n. 36. See also Domat,
8, 8, 4, art. 7, 10-16.
320 PARTNERSHIP. [cHAP. IX.
of partnership, and the interpretation thereof. But, in
concluding this part of the subject, it may be remarked,
that partners are entitled inter sese to be allowed all
charges, losses, and expenditures, which they have prop-
erly, or necessarily, or unavoidably, incurred in trans-
acting the partnership business.^ On the other hand
(as we have seen),^ no partner is entitled, unless under
some special agreement, to any compensation, commis-
sion, or reward, for his skill, labor, or services, while em-
ployed in the partnership business.^ The nature of the
contract implying, that each partner shall gratuitously
give and exert all his skill, labor, and services, so far as
they may be properly required for the due accomplish-
ment and success of the partnership operation.^ If any
allowance is intended to be made for extra services or
labor, it is a fit matter to be adjusted in the articles,
under which the partnership is formed.
§ 186. John Voet lays down the like doctrine in
expressive terms, admitting at the same time, that, by
custom or special agreement, a compensation may be
allowed to one or more partners for extraordinary labor,
skill, or services. " Salarium sen honorarium quod at-
tinet^ licet rarior ejus in societate, quam quidem in
mandato, usus sit, dum partes lucri singidis ohvenientes
sufficlens operm pretkmi sunt ; nihil tamen impedit, quo
minus uni socio, negotia societatis forte p>otissimum aut
' See Domat, 1,8, 4, art. 11, 12; Thornton v. Proctor, 1 Anst. 94.
2 Ante, § 1.82.
' Coll. on P. B. 2, c. 2,§ l,p. 130; Id. §2, p. 142, 151, 2d ed. ; Franklin v.
Robinson, 1 Johns. Ch. 157, 165 ; Whittle v. M'Farlane, 1 Knapp, 311;
Dougherty v. Van Nostrand, 1 HofF. 68 ; Burden v. Burden, 1 Ves. & B.
170 ; ante, § 183.
* Ante, § 183 ; Franklin v. Boblnson, 1 Johns. Ch, 157, 165 ; Whittle v.
M'Farlane, 1 Knapp, 311 ; Bradford v. Kimberly, 3 Johns. Ch. 431 ;
Dougherty v. Van Nostrand, 1 Hoff. 68 ; Burden v. Burden, 1 Ves. & B.
170.
CHAP. IX.] RIGHTS AND DUTIES OF PARTNERS. 321
wiice tractanti ac promoventi, cum ad iUam operam
supra ceteros prcestandam ex conventione non teneretur^
vel ah initio salarium aliquod assigtietur, vel 2^osiea
viri honi arhitratu adjudiceUir, idque extraor dinar ia
potius tnagnistratus cogtiitione, quam ordinaria pro socio
actione intentata, argmnento eoriiin quce de salario in
mandata interveniente dicta sunt. Quod et moribus
hodiernis conveniens esse, patet ex responso Juriscon-
sultorum et mercatorum inter Responsa Jurisconsulto-
rmn HoIIandue" ^ The same doctrine may be traced
back to the Roman law.^
' 1 Voet, ad Pand. 17, 2, § 19, p. 757. • Domat, 1, 8, 4, art. 11, 12.
322 PARTNERSHIP. [cHAP. X.
CHAPTER X.
RIGHTS, DUTIES, AND OBLIGATIONS OF PARTNERS UNDER
THE ARTICLES THEREOF.
{ § 187. Partnership articles.
188, 189. Specific performance of an agreement for partnership.
190. Construction of general words.
191. Articles explained by conduct under them.
192. Articles modified and waived by acts of the partners.
193. Business not to be extended beyond the articles.
194. Commencement of partnership.
195. Partnership dissolved by death, notwithstanding articles.
196. Roman law.
197. 198. Partnership continued beyond the time hmited in the articles.
199. Continuance of partnership, notwithstanding death.
200. Same subject. Appointment of successor.
201. Same subject. Election of executor or appointee.
201 a. Same subject. Liability of the assets of the deceased.
202. Firm name.
203. Advances of capital.
204. Management of the firm business.
205. Ownei'ship of partnership property.
206. Annual accounts.
207. 208. Pui'chase of shares on dissolution.
209. Prohibition from carrying on business during the partnership.
210-212. After dissolution.
213. Power of a majority.
214. Expulsion of partners.
215. Reference to arbitration. }
§ 187. Hitherto, we have been mainly considering
the rights, duties, and obligations of partners inter sese,
implied by law. But, as written articles often exist
relative to the formation, management, rights, duties,
and obligations of the particular partnership, it may
not be without use to bring together some of the more
important stipulations and arrangements usually con-
tained in those articles, and to ascertain what, in point
CHAP. X.] CONSTRUCTION OF ARTICLES. 323
of law, is the true interpretation, application, and ob-
jects thereof ; and, incidentally, how far they are capable
of being enforced, either in Courts of Law, or in Courts
of Equity.^
§ 188. At the threshold of these inquiries we are met
with the question, whether Courts of Equity (for it is
clear, that Courts of Common Law have no jurisdiction,
except to give damages), are competent to decree the
specific performance of a preliminary agreement to
enter into a partnership ; and if so, under what circum-
stances a specific performance wdll be decreed. In re-
spect to this matter, it may be at once perceived how
full of delicacy, diflftculty, and embarrassment every at-
tempt to enforce a preliminary contract of this sort
must be. The success of every partnership is usually
so essentially dependent upon the hearty co-operation
and exertions of all the partners for the common good ;
and reluctance, and discontent, and resistance are so
incompatible with such success ; that at first it would
seem, that no Court of Equity ought to exert any such
authority to compel an observance of a mere treaty to
form a partnership. But, on the other hand, there
may be serious evils, resulting from a total refusal to in-
terfere in all cases of this sort under any circumstances ;
for one or more of the partners may have incurred re-
sponsibilities on account of the intended firm, or prelimi-
nary steps for the business of the intended partnership
may have been taken, and acts done, putting the same
into an inchoate and imperfect operation upon the full
faith and confidence of the punctilious discharge of
* I liave availed myself throughout this whole chapter mainly of the
materials contained in Mr. Collyer's able work on Partnership, B. 2, e. 2, § 2,
p. 131-1 G2, 2d ed. Mr. Bell has also devoted a considerable space to the
examination of the same subject, which will well reward the attentive ex-
amination of the learned x-eader. 2 Bell, Comm. B. 7, c. 2, § 4, p. 645-648,
6th ed.
324 PARTNERSHIP. [CHAP. X.
duties by the other side, so that it may work a most se-
rious, if not an irreparable mischief and injury, not to
enforce the specific performance of the contract, so as
to bind all parties to the acts so done, and to the respon-
sibilities so incurred.
§ 189. Courts of Equity have upon this subject adopted
an intermediate ground ; while, on the one hand, they
will not ordinarily entertain bills for a specific perform-
ance of such a preliminary contract ; they will, on the
other hand, under special and peculiar circumstances,
in order to suppress frauds, or manifestly mischievous
consequences, compel such a performance.^ One of the
cases, in which Courts of Equity will not ordinarily in-
terfere, is, where the partnership is to continue during
the mere pleasure of the parties ; for in such a case it
seems utterly nugatory to decree a partnership, which
may be immediately dissolved at the will of the dissatis-
fied party.^ On the other hand, where the partnership
' Buxton V. Lister, 3 Atk. 383, 385 ; Hibbert v. Hibbert, cited Coll. on
P. B. 2, c. 2, § 2, p. 132, 133, 2d ed,; Wats, on P. c. 1, p. 60, 2d ed. ; Anon.
2 Ves. Sr. 629, 630; Gow on P. c. 2, §4, p. 109, 110, 3d ed. ; 1 Story, Eq.
Jur. § 666, and note ; Coll. on P. B. 2, c. 2, § 2, p. 131-133, 2d ed. ; {Lind. on
P. 796 ; Sichel r. Rosenthal, 30 Beav. 371 ; Manning v. Wadsworth, 4 Md. 59.}
Lord Hardwicke, in Buxton v. Lister, 3 Atk. 385, arguendo, said : " Suppose two
partners should enter into an agreement by such a memorandum as is in the
present case, to carry on a trade together, and that it should be specified
in the memorandum, that articles should be drawn pursuant to it, and be-
fore they are drawn, one of the parties flies off; I should be of opinion,
upon a bill brought by the other in this court for a specific performance,
that, notwithstanding it is in relation to a chattel interest, yet a specific
performance ought to be decreed."
* Hercy v. Birch, 9 Ves. 357, 359 ; 1 Madd. Ch. Pract. 411, note (x) ;
Coll. on P. B. 2, c. 2, § 2, p. 133-135, 2d ed. ; Van Sandau v. Moore, 1 Russ.
441, 463. But see Gow on P. c. 2, §4, p. 110, 111, 3d ed. — Mr. Swanston,
in his learned note to Crawshay v. Maule, 1 Swans. 495, 513, has remai'ked :
"It seems clear, that, in general, the Court of Chancery will compel specific
performance of an agreement for a partnership, Buxton v. Lister, 3 Atk.
385; Anon. 2 Ves. 629; but Lord Eldon is represented to have held, that
this doctrine is not api)licable to partnerships, which may be immediately dis-
solved. Hercy v. Birch, 9 Ves. 360. See 1 Madd. Prine. & Pract. 411, 2d ed.
CHAP. X.] CONSTRUCTION OF ARTICLES. 325
has informally gone into operation, or it is for a specific
term of time, Courts of Equity have not unfrequently
decreed a specific performance, with the view of invest-
ing the parties fully with all their legal rights.^
§ 190. Passing from these preliminary considera-
tions, let us, in the next place, attend to some of the
more important stipulations usually contained in arti-
cles of partnership. And here it is to be observed,
that the same rules of construction apply, as in ordinary
cases ; that is to say, to ascertain what is the real
intention of the parties in particular stipulations ; and,
when ascertained, to carry it into effect, limiting any
general language, incautiously used, to the particular
purposes and objects and transactions specified.^ On
the other hand, general language, and especially such
as relates to the nature and extent of covenants, may
frequently be applied, and deemed to run through the
whole body of the articles. Thus, for example, the
words of covenant, which usually occur at the com-
mencement, or introductory part of the articles, usually
declare the covenant to be joint and several ; and
words of covenant in the succeeding stipulations of
the mstrument are on that account usually construed,
This distinction, however, must be received, it is presumed, not without
qualification. In many such cases, though the partnership could be imme-
diately dissolved, the performance of the agreement (like the execution of a
lease after the expiration of the term, see Nesbitt v. Meyer, 1 Swans. 223, 226),
might be important, as investing the party with the legal rights, for which he
contracted." {England v. Curling, 8 Beav. 129; Whitworth r. Harris, 40
Miss. 483.} We have already seen (ante, § 181), that, although in ordinary
partnerships the Roman law only gave the action pro socio after a dissolution
of the partnersliip ; yet in certain peculiar partnerships for collection of the pub-
lic revenue (Cou.s'a Vecligalium), the action jn'o socio for an account lay during
the continuance of the partnership. Poth. Pand. 17, 2, n. 33 ; D. 17, 2, 65, 15.
> Coll. on P. B. 2, c. 2, § 2, p. 135, 2d ed. ; Gow on P. c. 2, § 4, p. 109,
110, 3d ed. But see Downs v. Collins, 6 Hare, 418 ; [Lind. on P. 797.}
- Coll. on P. B. 2, c. 2, p. 137 ; 1 Fonbl. Eq. B. 1, c. 6, § 16, and note
(1) ; Gainsborough v. Stoi'k, Barnard. Ch. 312.
326 PARTNERSHIP. [CHAP. X.
although not so expressed, to be also intended to be
joint and several.^
§ 191. It is not, however, less important, in order to
arrive at correct results, to take into consideration
other matters. Thus, although the articles of part-
nership regulate the rights, duties, obligations, and
interests of the parties thereto, in certain specified
cases ; yet they leave in full force all the other rights,
duties, obligations, and interests, implied by law, so
far as they are not superseded, controlled, qualified
or limited by those articles.^ In the next place, in
all cases of doubtful interpretation, the actual construc-
tion, adopted by the partners in their partnership trans-
actions, will be, and indeed ought to be, adopted,- as the
true, legitimate, and appropriate interpretation intend-
ed by themselves.^
§ 192. In the next place, partnership articles in the
view of Courts of Equity, whatever may be the rule at
law, are liable to be controlled, superseded, qualified,
or waived by the acts and transactions of the partner-
ship, in the course of the business thereof, wherever
the assent of all the partners thereto may be fairly
inferred, and however positive, or stringent, those pro-
visions may be."^ In short, in many cases of this kind,
> Coll. on P. B. 2, c. 2, § 2, p. 139, 2d ed. ; Id. B. 2, c. 8, § 1, p. 169.
'^ Coll. on P. B. 2, c. 2, § 2, p. 138, 139; Cra\yshay v. Collins, 15 Ves.
218, 226 ; Jackson v. Sedgwick, 1 Swans. 460, 469 ; Pettyt v. Janeson,
6 Madd. 146 ; {Smith v. Jeyes, 4 Beav. 503.}
3 Coll. on P. B. 2, c. 2, § 2, p. 139, 2d ed. ; Geddes v. Wallace, 2 Bligh,
270, 271, 297, 298; [Beacham v. Eckford, 2 Sand. Ch. 116. Entries in
the books of a partnershijD have been said to be as conclusive of the rights
of the partners, as if prescribed in a regular contract. Stewart v. Forbes,
1 Hall & Tw. 461 ; s. c. 1 Macn. & G. 137.]
■* ["Partners," it has been said, "if they please, may, in the course of
the partnership, daily come to a new arrangement for the purpose of having
some addition or alteration in the terms on which they carry on business,
provided those additions or alterations be made with the unanimous concur-
CHAP. X.] CONSTRUCTION OF ARTICLES. 327
looking to the course of conduct of the partners, and
the special circumstances of their business, or to their
general acquiescence, or their positive acts, we may often
have the most satisfactory evidence that the partnership
articles have been laid aside, either pro tanto^ or in
whole, and that new articles and arrangements have
been entered into in their stead.^ Hence, it has been
rence of all the partners." England v. Curling, 8 Beav. 129 ; McDou-
galdw. Banks, 13 Ga. 451.]
* Geddes v. Wallace, 2 Bligh, 270, 297, 298 ; Jackson v. Sedgwick, 1
Swans. 460, 469; [England v. Curling, 8 Beav. 129; Stewart v. Forbes, 1
Hall & Tw. 461 ; s. c. 1 Macn. & G. 137] ; Const v. Harris, Turn. & R. 496,
523 ; Gow on P. c. 1, § 1, p. 9, 10, 3d ed. ; | Coventry v. Barclay, 33 Beav.
1, affirmed on appeal, 12 Weekly Rep. 500, 10 Jur. N. s. Digest, 158.}
— In Const I'. Harris, Turn. & R. 523, Lord Eldon said: "In ordinary
partnerships nothing is more clear than this, that although partners enter
into a written agreement, stating the terms, upon which the joint concern is
to be carried on, yet, if there be a long course of dealing, or a course of
dealing, not long, but still so long as to demonstrate, that they have all
agreed to change the terms of the original written agreement, they may be
held to have changed those terms by conduct. For instance, if in a com-
mon partnership, the parties agree, that no one of them shall draw or accept
a biU of exchange in his own name, without the concurrence of all the
othei's ; yet, if they afterwards slide into a habit of permitting one of them
to draw or accept bills, without the concurrence of the others, this court will
hold, that they have varied the terms of the original agreement in that re-
spect. So, in this case, if it can be shown, that in the administration of this
property, the proprietors in general, after 1812, pursued a different course
from that provided for by the deed of March, 1812, they must be taken to
have altered the agreement, and to have substituted the terms, to which, in
their conduct, they have adhered, instead of the terms contained in the
original agreement. And, with respect to the present plaintiff, there can be
no doubt, that if, after the deed of 1812 was executed, his testatrix gave in
to a course of administration of the property, different from the course pro-
vided for by the deed ; if her acts, or the acts of others with her consent,
afforded such evidence of departure from the terms of the written agree-
ment, as to amount to the substitution of a ncAv agreement, though evidenced
only by parol, instead of the written agreement ; lie, claiming under her,
must be bound by her acts, and cannot be at liberty to revert back from
those acts, establishing a new agreement, to call into operation again the old
agi'eement, and to insist, that the non-execution of the old agreement is, in
such circumstances, a breach of trust. So, again, it is a principle of this
court with respect to partnership concerns, that a partner, who complains
that the other partners do not do their duty towards him, must be ready at
all times, and offer himself to do his dutv toward them."
328 PARTNERSHIP. ' [cHAP. X.
judicially declared, that, in Courts of Equity, articles
of partnership, containing clauses, which have not been
acted upon by the parties, are read, as if those clauses
were expunged, or were not inserted therein.^
§ 193. In respect to the nature, and extent, and
kind of business of the partnership, as stated in the
articles, Courts of Equity construe the articles strictly,
and do not permit the business to be extended by any
of the partners, without the consent of all of them,
either express or implied, to any other business or
branch of business, of a different nature, extent, or
kind ; and if it is attempted, they will interpose by
way of injunction to restrain the offending parties.^
§ 194. In the next place, as to the commencement
of the partnership. If no other time is fixed by the
articles, the commencement will take place from the
date and execution of the instrument.^ And this rule
is so inflexible at law, that parol evidence has been
deemed inadmissible to control this intendment, al-
though the partnership would thus be rendered illegal
at least, if thereby the true construction of the words
of the instrument would be varied.'* This is certainly
pressing the law of implied construction to a great,
but perhaps not to an undue extent. It would not
probably be acted upon by Courts of Equity, unless
' Jackson v. Sedgwick, 1 Swans. 460, 469 ; Coll. on P. B. 2, c. 2, § 2,
p. 139, 2d ed.
2 Natusch V. Irving, Gow on P. Ap. 398, 407, 3d ed. : Id. p. Ill, 112.
3 Coll. on P. B. 2, c. 2, § 2, p. 140, 2d ed.
4 Williams v. Jones, 5 B. & C. 108; {Lind. on P. 685; Dix v. Otis, 5
Pick. 38. But see Davis v. Jones, 17 C. B. 625; Reboul v. Chalker, 27
Conn. 114.} — Perhaps Williams v. Jones requires a more full exposition.
The ground, upon which the learned judges put it, was, that the evidence
made the instrument conditional, instead of being, as it was in terms, abso-
lute. But, suppose the instrument had been signed on the first day of Janu-
ary, and it was agreed between the parties by parol, that it should commence
on the first day of the ensuing February, would the like objection have
applied ?
CHAP. X.] CONSTRUCTION OF ARTICLES. 329
the parol evidence was repugnant to the terms of the
written contract, as, for example, by making the agree-
ment conditional, when upon its face it was absolute ;
and not merely a supplement thereto.
§ 195. In the next place, as to the duration of the
partnership. Although the partnership be fixed to a
particular term or period of time, yet it is always
understood, as an implied condition or reservation
(unless the contrary is expressly stipulated), that it is
dissolved by the death of either of the partners, at
any time within that period.^ This doctrine seems an
exception to the ordinary rules of the common law in
the interpretation of contracts ; and it has sometimes
been complained of as unreasonable. But it seems
founded in very equitable principles, and is a natural
result of the peculiar objects of the contract.^ Every
partnership is founded upon a delectus jiersonce., which
implies confidence and knowledge of the personal
character and skill and ability of the other associates ;
and their personal co-operation, advice, and aid, in all
1 Coll. on P. B. 1, c. 2, § 2, jj. 73, 74, 2d etl. ; Id. B. 2, c. 2, § 2, p. 140 ;
Crawford v. Hamilton, 3 Madd. 251 ; Scholefield v. Eichelberger, 7 Pet. 586,
594 ; VuUiamy v. JJoble, 3 Mer. 593, 614 ; Gow on P. c. 5, § 1, p. 219, 220, 3d
ed. ; Gratz v. Bayard, 11 S. & R. 41 ; {Bell v. Nevin, 15 Weekly Rep. 85 ;
6 Am. Law Reg. n. s. 181.}
^ In Crawsbay v. Maule, 1 Swans. 495, 509, Lord Eldon said: "The
doctrine, that death or notice ends a partnership, has been called unrea-
sonable. It is not necessary to examine that opinion ; but much remains
to be considered before It can be approved. If men will enter into a
partnership, as into a marriage, for better and worse, they must abide by
it ; but if they enter into it without saying how long it shall iendure, they
are understood to take that course in the expectation, that circumstances
may arise, in which a dissolution will be the only means of saving them from
ruin ; and considering what persons death might introduce into the partner-
ship, unless it works a dissolution, there is strong reason for saying, that such
should be its effect. Is the surviving partner to receive into the partnership,
at all hazards, the executor or administrator of the deceased, his next of kin,
or possibly a creditor taking administration, or whoever claims by represen-
tation, or assignment from his representative ? " '
330 PARTNERSHIP. [CHAP. X.
the transactions thereof. The death of any one part-
ner necessarily puts an end to all such co-operation,
advice, and skill. If, therefore, the partnership were
not, whatever might be the stipulated terms for its
continuance, put an end to by the death of any one
partner, one of two things must follow ; either that the
whole business of the partnership must be carried on
by the surviving partners exclusively, at the hazard of
the estate and interests of the deceased partner ; or
else that the personal representative of the deceased,
toties quoties, who may be a mere stranger, or even a
woman, wholly unfit for and unacquainted with the
business, must be admitted into the management. We
see at once, that either alternative may be highly
inconvenient or injurious to the rights, interests, and
objects of the original concern.^ The law, therefore,
will not force it upon the parties ; but it presumes, in
the absence of all contrary stipulations, that by a tacit
consent, death is to dissolve the partnership, because it
dissolves the power of a personal choice, confidence,
and management of the concern.^
§ 196. The Roman law adopted this doctrine in its
fullest extent, and did not (as we have seen), even per-
mit the parties by their private stipulations to agree, that
upon the death of a partner, his heir should be admitted
into the partnership for the reasons before suggested.
Solmtur adhuc societas etiam morte socii ; quia qui so-
cietatem contrahit, certa7n jjersonam, sibi eliglt Sed et,
si consensu plurium societas contracta sit, morte unius
socii solviiur, etsi j^hires supersint ; nisi in coeunda so-
cietate aliter convenerit.^ This last qualification, as we
1 See Pearcev. Chamberlain, 2 Ves. Sr. 33, 34 ; Poth. de Soc. n. 144, 145 ;
Domat, 1, 8, 4, art. 14 ; Id. 1, 8, 2, art. 3, 4.
^ Gow on P. c. 5, § 1, p. 218-220, 3d ed. ; Mr. Swanston's note to Craw-
shay V. Maule, 1 Swans. 509, note (a).
3 Inst. 3, 2G, 5.
CHAP. X.] CONSTRUCTION OF ARTICLES. 331
shall presently see, applied only to the continuance of
the partnership by the survivors.^ Nemo 2^otest societa-
tem heredi suo sic parere^ ut ipse heres socius sit.^ Idem
respondit, societatem non posse idtra mortem porrlgi ;
et ideo nee lihei^tatem de suprem,is judiciis constrimjere
quis poterit, vel cognatum ulteriorem proximiorihus in-
ferre.^ Again : Adeo, moi^te socii solvitwr socletas, ut
nee ah initio 2^cicisci possimns^ ut heres etiam succedat
societati.^ Societas quemadmodum ad heredes socii
non transit, ita nee ad adrogatorem ; Ne alioquin in-
vitus quis socius efficiatur, cui non vult.^ The law of
England, as well as that of France (as we have seen), is
contrary in this respect to the Roman law ; and permits
the parties, by express stipulation, to provide for the
continuance of the partnership after the death of one
partner, and for the admission thereto of his heir, or
other representative.'^
§ 197. But suppose the original term of the partner-
ship should expire by the mere effluxion of time, and
still the partnership should (as indeed not unfrequently
happens) continue to be carried on by the same parties,
without the execution of any new articles of partnership,
or without any express recognition of the old articles ;
the question would arise, as to what ought, under such
circumstances, to be deemed the terms and stipulations
of the continued partnership. Is it to be presumed to
be renewed for the like period of time, and upon the
like stipulations and conditions, as those which were
contained in the old articles ? Or is it to be deemed a
' Domat, 1, 8, 5, art. 14, 15.
* D. 17, 2, 35. == D. 17, 2, 52, 9.
* D. 17, 2, 59. ^ D. 17, 2, 65, 11 ; D. 3, 2, 6, 6.
^ Ante, § 5; Pearce v. Cliamberlain, 2 Yes. Sr. 33; Baliiiain v. Shore, 9
Ves. 500; Crawshay v. Maule, 1 Swans. 495, 508; Poth. de Soc. n. 144, 145;
Gow on P.c. 5, § 1, p. 219, 220, 3d ed.; Coll. on P. B. 2, c. 2, § 2, p. 140, 147,
2d ed.; Gratz v. Bayard, 11 S. & R. 41.
332 PARTNERSHIP. [cHAP. X.
mere partnership during the pleasure of both parties,
and dissoluble instantaneously at the will of either]
And, if the latter be the true predicament thereof, then,
are the interests of the parties, and their shares in the
profits, while it is actually continued, to be governed
and guided by the stipulations of the old articles or
not?
§ 198. Perhaps these inquiries cannot be answered
universally in the same manner, as equally applicable
to the circumstances of all cases ; for the habits of the
trade, and the conduct of the parties, may often estab-
lish the fact satisfactorily, that some of the articles have
been practically waived, or abrogated, or qualified, while
others are necessarily implied, as being in full force and
operation. In such cases, the presumption of the actual
state of the partnership contract will necessarily vary
with the circumstances, and be governed by them, and
not govern them. In the absence, however, of all pre-
sumptions of this nature, the general rule seems to be,
that the partnership is to be deemed one for no definite
period, but dissoluble at the will of any of the part-
ners ; ^ but that, in other respects, the old articles of the
expired partnership are to be deemed adopted by impli-
cation, as the basis of the new partnership during its
actual continuance.^
' Featherstonhaugh v. Fenwick, 17 Ves. 298, 307. [See Gould v. Horner,
12 Barb. fiOl.]
^ Bootli V. Parks, 1 Molloy, 4G5 ; Crawshay v. Collins, 15 Ves. 218,
228; U. S. Bank v. Binney, 5 Mason, 176, 185. — In this last case
the Court said : " Whether the present be a limited or general partner-
ship, is to be determined by the whole evidence in the case. It is certain,
that by the articles it is a limited coi^artnership, and confined to the soap
and candle business. Those articles expired, by their own limitation, in two
years, and had force no longer, unless the parties elected to continue the
partnership on the same terms. That is matter of evidence upon the whole
facts. The natural presumption is, that as the partnershij) was continued in
fact, it was continued on the same terms as before, unless that presumption
CHAP. X.] CONSTRUCTION OF ARTICLES. 333
§ 199. In this connection, it may be well to say a few
words, as to clauses in articles of partnership, stipulat-
ing for the continuance thereof, notwithstanding the
death of one or more of the partners.^ Such a clause
is usually introduced into partnerships for a long term
of years, where the outlay of capital is great in perma-
nent fixtures and manufacturing establishments, and the
locality of the trade renders it important in point of
profit and good-will, that it should be steadily carried
on, as long as may be, under the same proprietors or
their representatives. In cases of this sort, the clause
commonly empowers the representative of the deceased
is rebutted by the other circumstances in the case. There is no written
agreement respecting the extension of the copartnership ; and therefore it
is open for inquiry upon all the evidence. The present notes were made
and indorsed long after the term of two years expired. The plaintiffs con-
tend, that the partnership was then general ; the defendants, that it was lim-
ited, as before. The jury must determine between them, upon weighing all
the facts and presumptions." [Thus, if by the written agreement one jiart-
ner is to receive no compensation for his time and services unless a profit is
realized from the business, and by the articles of partnership it was to con-
tinue for one year, but was in fact continued two years without any new
agreement, it was held that the same provision must apply to the second
year. Bradley v. Chamberlin, 16 Vt. 613]; {Essex v. Essex, 20 Beav.
442; Parsons v. Hayward, 31 Beav. 199, affirmed on appeal 8 Jur. n. s.
924; s. c. 6 L. T. N. s. 628; Mifflin v. Smith, 17 S. & R. 165. A memo-
randum of a partnership between A., B., and C. provided that, if one died, the
survivors should pay to his executors the value of his capital as appearing on
the last account. A. died, and B. and C. continued the business. B. after-
wards died. Held, from the conduct of the parties, that the same stipulation
was continued in existence, and that C. should pay to B.'s executors the value
of his capital as appearing on the last account. King v. Chuck, 17 Beav.
325. But where the articles of a partnership for a term provided that
either partner might, in the event of specified conduct on the part of the
other, dissolve the partnership by notice, and that the latter partner should,
in that case, be considered as quitting the business of the former, this pro-
vision was held not applicable to a continuation of the partnership, afler the
term, without an express renewal. Clark v. Leach, 32 Beav. 14, affirmed on
appeal. 1 De G. J. & S. 409.}
* {See Laughlin v. Lorenz's Adm'rs, 48 Penn. 275; Stan wood v. Owen,
14 Gray, 195.}
334 PARTNERSHIP. [CHAP. X.
partner to carry on the trade, in conjunction with the
survivors, for the benefit of the widow and children of
the deceased partner ; and frequently, also, for the ad-
mission of one or more of his children into the concern,
upon his or their arrival at majority.^ Sometimes the
provision partakes of the character of a settlement, giv-
ing an interest in the partnership to the widow, during
her life, and dividing her share, after her death, equally
among all the children.^ Under such circumstances,
the question may arise, whether all the children take a
vested interest in the partnership trade, from time to
time, as they are born, so that, although they should die
during the lifetime of their mother, yet their shares
thereof will be transmissible ; or, whether such children
only, as are living at the death of the mother, are en-
titled to take a vested share or interest. It has been
decided, that the latter is the true interpretation to be
put upon such provisions ; upon the ground, that the
primary object of all such clauses is the continuance of
the partnership ; and that all the other provisions, con-
tained therein, ought to be treated as subservient to this
leading purpose.^
' Coll. on P. B. 2, c. 2, § 2, p. 147, 148, 2d ed. [See Downs v. Collins,
6 Hare, 418.]
2 Ibid. {See Skirving v. Williams, 24 Beav. 275.}
3 Coll. on P. B. 2, c. 2, § 2, p. 147, 148, 2ded. ; Balmain v. Shore, 9 Ves.
500, 506, 507. — The case of Balmain w. Shore was of this nature ; and Sir
William Grant, in delivering his judgment, said : " The object of these very
ill-drawn articles is to constitute a partnership for the very unusual term of
99 years. As it was not to be expected any of the parties should live so long,
it was necessary to ascertain in what mode the partnership was to continue
after their death ; and it appears to have been intended for their own bene-
fit, and that of their families, called, in some parts of the articles, their se-
quels in right. From the manner in which the interests are given in the
clause, more particulai-ly ascertaining the mode of succession to the shares,
the question arises, whether the words are to be construed as they would
be, if applied to dispositions of property in general ; or a different con-
struction is to be made, from the consideration of the subject. It must be
CHAP. X.] CONSTRUCTION OF ARTICLES. 335
§ 200. Sometimes the clause provides for the con-
tinuance of the partnership, by stipuhiting, that the
interest of the deceased partner in the concern, after
his death, and during the term of the partnership,
shall go to such persons as he shall by his will name
and appoint ; and in default of such appointment, that
it shall devolve on his wife, and in case of her death,
upon his children, in equal shares ; and in case of the
death of all his children, to his executors and adminis-
trators, who are to succeed to all his rights and powers
admitted, that if this were a settlement of a sum of money, or other proper-
ty, the children would take vested interests ; and the words, ' after the de-
cease of such widow,' &c., would postpone, not the commencement of the
interest, but only the commencement of the possession. Accordingly, it
was contended, on the one hand, that under this instrument all the children
took vested interests in the partnership shares, as they were born ; and
though some died before their mothers, yet their shares were transmissible ;
on the other, that the words in the clause, to which I have alluded, are tb
have a different construction ; and that such children only Avill be entitled
to a share, as shall be living at the death of the widow. The words, I think,
must receive their construction from the consideration of the particular in-
strument. The primary object was to constitute a partnership, and to as-
certain the manner in which the shares were to be enjoyed in succession. It
was but a secondary object, and through that medium, to give a benefit to
the families ; and it appears to me, the object of this clause was to designate
and ascertain, who are to supply the vacancies, as they shall happen ; that
no interest was intended by anticijiation to any one ; but the object was to
provide for the filling up of that vacancy, which might happen by the death
of any partner interested in the partnership. For instance, where one of
the original partners died, and left a widow, she instantly was to succeed to
a share ; when she died, and left children, they were instantly to succeed
to that share ; and, until a vacancy happened, there was no room for ascer-
taining the objects, who were to come in the place of the party dying ; and
therefore such children only, as should be living at the time the vacancy
happened, could be intended to succeed upon that vacancy. That is more
evident from the provision as to the sale of a share ; which is perfectly in-
compatible with the supposition, that the children, as they were born,
should take vested interests in the partnership shares of their parents.
It was impossible the children, then born, could take such a vested inter-
est, as they must at all events succeed to. It was only upon the suppo-
sition, that the p'artner left a share, that there could be any successor;
and the vacancy must happen, before the succession could be ascertained."
336 PAKTNERSHIP. [CHAP. X.
in the business and management of the partnership.
Now, under such circumstances, the question may arise,
in what manner this power of appointment is to be
construed ; whether as a technical power of appoint-
ment, or not. If as a technical power, then it will be
necessary for the testator, in making the appointment
by will, to allude in some distinct manner to the power,
so as to demonstrate, that it is thereby intended to be
executed ; for a general gift of all his estate and effects
to one or more of his children, will not be deemed a
specific execution of the power. But, if not to be con-
strued technically, then such a gift will amount to a
sufficient designation of the donee or donees, as ap-
pointees of his share and interest in the concern, as
succeeding partners. Upon the same enlarged view of
the objects of this clause (as to the continuance of the
partnership business), it has been held, that such a
power of appointment is not to be treated as technical ;
and, therefore, that the appointment is well executed
by such a general gift.^
§ 201. Another question may arise under clauses
for the continuance of the partnership, and the admis-
sion of the executor and administrator of the deceased
partner into the firm, and that is, whether, when the
' Coll. on P. B. 2, c. 2, § 2, p. 148, 149, 2d ed. ; Ponton v. Dunn, 1
Russ. & M. 402. — On this occasion Sir John Leach (Master of the Rolls)
said : " It is true, the words ' name and appoint ' are used in the deed ; but
considering the relation of the parties, I cannot understand them to be used
with a view to create a power of appointment in its technical sense, and to
limit the testator's power of disposition by will over this part of his prop-
erty. Without this stipulation, those who claimed through him, would have
had no title to share in the partnership profits after his death ; and it is a
mere bargain with his partner, that he should have a power of disposition
by will, and if he died without a will, that the property should devolve to
his family in the manner stated. This property will therefore pass under
the description in his will, of ' all other his estate and effects, of whatsoever
nature or description.'"
CHAP. X.] CONSTRUCTION OF ARTICLES. 337
partnership is intended to be continued after the death
of the partner, it is a matter of election with the
widow, children, appointee, or executor, or administra-
tor, of the deceased, to continue the same, or not ; or
whether it is absolute and peremptory upon them. In
respect to clauses of this nature, the general rule is, in
the absence of all clear and well-defined declarations
to the contrary, that they are to be construed, as giving
the executor or administrator an option, so that he may
continue the partnership, or not, as he may think
proper ; and of course a reasonable time will be allow-
ed to him for that purpose.^ Probably the same rule
would prevail in the case of a widow, a child, a legatee,
or appointee, unless the language of the provision
clearly established a positive direction, that at all
events the partnership should be continued.^ If it
did, then it would seem clear, that every such party
must take, if he takes at all, according to the terms
of the will, and not otherwise ; and that he cannot
' Coll. on P. B. 2, c. 2, § 2, p. 149, 150, 2d ed. ; Pigott v. Bagley, 1 ]\Ic-
Cle. & Y. 569; [Downs v. Collins, 6 Hare, 418] ; {Madgwick v. Wimble,
6 Beav. 495.} Where the articles provide, that the executors or ad-
ministrators shall continue the partnership, if they think fit, they will be
considered as partners unless they give notice within a reasonable time to
the contrary. Coll. on P. B. 2, c. 2, § 2, p. 151, 2d ed. ; Morris v. Harri-
son, CoUes, 157.
2 Kershaw v. Matthews, 2 Russ. 62 ; Pigott v. Bagley, 1 McCle. & Y.
509. — In the former case Lord Eldon said : " If there is a partnership car-
ried on under articles, which stipulate that, upon the death of a partner, he
shall be succeeded in the business, either by some person, whom he shall
appoint, or by his executors, it may happen, that his appointees or his ex-
ecutors do not think proper to come into his place on the same terms on
which he was a partiier in the concern. In that case, the death of the party
puts an end to the partnership. The stipulation may be, that the appointee
or executor of the deceased partner is to be a partner only, if he does this
or that particular thing. If the executor or appointee refuses to comply
with the proviso, the whole concern must be wound up. But the dissolution
which takes place, is not a dissolution wrouglit l)y the exclusion of the ex-
ecutor or appointee ; for he never becomes a partner."
22
338 PARTNERSHIP. [CHAP. X.
elect to take the benefit without continuing the part-
nership.^
§ 201 a. Another question of a very important na-
ture may arise out of a provision for the continuation
of a partnership after the death of one of the partners,
as to the extent to which contracts made after the
death of that partner bind his assets.^ A testator,
directing the continuance of a partnership, may, if he
so choose, bind his general assets for all the debts of
the partnership contracted after his death.^ But he
may also limit his responsibility, either to the funds
already embarked in the trade, or to any specific
amount to be invested therein for that purpose ; and
then the creditors can resort to that fund or amount
only, and not to the general assets of the testator's
estate, although the partner, or executor, or other
person carrying on the trade, may be personally re-
sponsible for all the debts contracted.^ And this leads
> Coll. on P. B. 2, c. 2, § 2, p. 149, 150, 2d ed. ; Crawshay v. Maule, 1
Swans. 495, 512. {See Page v. Cox, 10 Hare, 163. } [Where the option was
secured to " the executor or administrator,*' on giving notice within three
months after the decease of the parties ; and the parties dying intestate, the
widow gave such notice within the three months, but without taking out let-
ters of administration till some time after the three months, it was held,
that she had not effectually complied with the condition, so as to be admit-
ted into the firm. Holland v. King, 6 C. B. 727.]
* Burwell u.'Mandeville's Ex'r, 2 How. 560, 576. ,See also Ex parte Gar-
land, 10 Ves. 110, 119 ; Ex parte Richardson in re Hodgson, 3 Madd. 138 ;
Thompson v. Andrews, 1 Myl. & K. 116; Pitkin v. Pitkin, 7 Conn. 307;
Scholefield v. Eichelberger, 7 Pet. 586, 594; Gratz v. Bayard, 11 S. & R.
41. [7n re Xorthern Coal Mining Co., 10 Eng. L. & Eq. 171 ; s, c. siib nom.
Ex parte Blakeley's Ex'rs, 3 Macn. & G. 726.] {See § 319 a. }
' {Laughlin v. Lorenz's Adm'r, 48 Penn. St. 275 ; Davis v. Christian, 15
Gratt. 11. But see Stanwood v. Owen, 14 Gray, 195. |
• * This is clearly established by the case Ex parte Garland, 10 Ves. 110,
where the subject was fully discussed by Lord Eldon, and Ex parte Rich-
ardson, 3 Madd. 138, 157, where the like doctrine was affirmed by Sir John
Leach (then Vice-Chancellor), and by the same learned judge, when
Master of the Rolls, in Thompson v. Andrews, 1 Myl. & K. 116. The case
of Hankey v. Hammock, before Lord Kenyon, when Master of the Rolls,
CHAP. X.] CONSTRUCTION OF ARTICLES. 339
US to remark, that nothing but the most clear and
unambiguous language, demonstrating in the most
positive manner that the testator intends to make his
general assets liable for all debts contracted in the
continued trade after his death, and not merely to
limit it to the funds embarked in that trade, would
justify the court in arriving at such a conclusion, from
the manifest inconvenience thereof, and the utter im-
possibility of paying off the legacies bequeathed by
the testator's will, or distributing the residue of his
estate, without in effect saying at the same time that
the payments may be recalled, if the trade should
become unsuccessful or ruinous. Such a result would
ordinarily be at war with the testator's intention in
bequeathing such legacies and residue, and would, or
might postpone the settlement of the estate for a half-
centm'y, or until long after the trade or continued
partnership should terminate. Lord Eldon^ put the
inconvenience in a strong light, by suggesting several
cases where the doctrine would create the most mani-
fest embarrassments, if not utter injustice ; and he said,
that the convenience of mankind required him to hold,
that the creditors of the trade, as such, have not a claim
against the distributed assets in the hands of third per-
sons, under the directions in the same will, which has
reported in Cook's Bankrupt Law, 67, 5th ed., and more fully in a note to
3 Madd. 148 ; so far as may be thought to decide that the testators assets
are generally liable under all circumstances, where the trade is directed to
be carried on after his death, has been completely overturned by other later
cases, and expressly overruled by Lord Eldon, in Ex parte Garland, 10
Ves. 110, 121, 122, where he stated that it stood alone, and he felt
compelled to decide against its authority. The case of Pitkin v. Pitkin,
7 Conn. 307, is fully in point to the same effect. See also Burwell v.
Mandeville's Ex'r, 2 How. 560, 576, where the doctrine stated in the text
was affirmed.
' Ex paHe Garland, 10 Ves, 110, 121, 122.
340 PARTNERSHIP. [cHAP. X.
authorized the trade to be carried on for the benefit of
other persons.^
§ 202. In partnership articles it is also often agreed
what shall be the proper style of the firm, as for
example, John Doe and Company ; and, under such
circumstances, it is a part of the duty of every partner,
in signing contracts and other instruments, punctili-
ously to observe and follow the very formulary.^ This
may be necessary, not only to bind the firm itself, but
also to absolve him from any personal liability, not
only to third persons, but also to his partner.^ It will
^ This, also, was mauifestly the opinion of Sir John Leach in the cases
Ex par^e Richardson, 3 Madd. 138; Thompson v. Andrews, 1 Myl. & K.
116, and was expressly held in the case in Pitkin v. Pitkin, 7 Conn. 307.
|In Kirkman v. Booth, 11 Beav. 273, 280, Lord Langdale, M. R., says:
"It is, and it has been admitted to be, a rule without exception, that, to
authorize executors to carry on a trade or permit it to be carried on with
the property of a testator held by them in trust, there ought to be the most
distinct and positive authority and direction given by the will itself for that
purpose." So Cutbush v. Cutbush, 1 Beav. 184 ; McISTeillie v. Acton, 4 De
G. M. & G. 744. In Stanwood v. Owen, 14 Gray, 195, it was held,
that a stipulation that, on the death of either partner, the survivor might
carry on the business for one year for the benefit of the parties, did not
• justify the allowance, against the insolvent estate of a deceased partner, xjf a
debt contracted by the survivor within the year. In Laughlin v. Lorenz's
Adm'r, 48 Penn. St. 275, articles of partnership provided that in the case
of the death of either partner, the partnership should continue to the next
1st of August, and should then be settled up "in such manner as may be
decided on by the survivor and the representatives of the deceased partner."
One partner died, and on the next 1st of August, his representative, the
surviving partner, and a third person, formed a partnership for five years
under the name of the old firm, continuing its business, collecting its assets
and paying its debts. Held, that the estate of the deceased partner was
liable for the debts of the new firm. This case seems to go far beyond any
other of the recent cases in extending the liability of the estate of the
deceased partner. The court seem to consider that the presumption is in
favor of binding the general assets, and not against it as would appear to be
considered in the cases cited above. In Davis v. Christian, 15 Gratt. 11, a
deceased partner's general assets were held liable.}
2 Coll. on P. B. 2, c. 2, §'2, p. 241, 2d ed.
•■' See ante, § 102 ; Shipton v. Thornton, 9 Ad. & E. 314, 329-332 ;
Faith V. Richmond, 11 Ad. & E. 339 ; ante, § 102, 136, 142.
CHAP. X.] CONSTRUCTION OF ARTICLES. 341
be a clear breach of such duty and engagement, to use
another firm name as that of the firm ; as, for example,
if the firm name be Doe & Roe, to use the name of
Doe & Company, or Doe & Roe & Company.^ It will
be equally a breach for one partner to sign his own
name, adding " for self and partners ; " because by
those words it can no more be known, who are his
partners, whom he means to bind, than by any other
general words.^ This doctrine applies, a fortiori^ where
the firm name is intended to express the names of all,
who are partners, as for example, John & Richard Doe;
for in such a case it may be for the benefit of each
partner, that he may be known to the world to be a
member in that concern, and also, that, as between the
partners themselves and the world, it should not be
left as a mere matter of speculation, who are really
partners, or who are not dormant partners ; but that
the firm may have the credit, and the public the confi-
dence, resulting from the knowledge of the fact.^ And
probably a Court of Equity might, in a case of this sort,
interfere by way of injunction, to prevent any mischief
to the firm, by thus exposing it to the consequence of
being made liable for proceedings of one partner, to
which it did not really assent.^
' Coll. on P. B. 2, c. 2, § 2, p. 141, 2(1 ed. ; Marshall v. Colman, 2 Jac.
& W. 266, 268, 269. [But where a partnership was to be carried on "in
the name of Seymour & Ayres," a signature of these names, with the addi-
tion of their respective Christian names, was held to bind the partnership.
Newton v. Boodle, 3 C. B. 795. But see In re Warren, Daveis, 320, 326.]
^ Ibid. » Marshall v. Colman, 2 Jac. & W. 26G, 269.
* In Marshall v. Colman, 2 Jac. & W. 266, a bill was filed for such an
injunction, not asking for a dissolution. But it was denied upon special
grounds. On that occasion Lord Eldon said : "There is only this point in
the case now before me, which I wish seriously to consider, namely, that
although this Court will interfere, where there is a breach of covenants in
articles of partnership, so important in its consequences, as to authorize the
party complaining to call lor a dissolution of the partnership, whether (and
it is a matter that will deserve a great deal of consideration before it goes
342 PARTNERSHIP. [CHAP. X.
■ § 203. In the next place, partnership articles often
contain provisions for the advance of particular amounts
so far) it will entertain the jurisdiction of producing a decree (for this is
what is to be done in the cause, in which this motion is now made) for a per-
petual injunction, as to a particular covenant, the partnership not being dis-
solved by the Court. There is one case, which is constantly occurring, that
of a partner raising money for his private use on the credit of the partner-
ship firm ; and the Court interferes then, because there is a gi-ound for dis-
solving the partnership. But then the danger must be such, there must be
that abuse of good faith between the members of the partnership, that the
Court will try the question, whether the partnership should not be dissolved
in consequence. But it is quite a different thing, and it would be quite a
new head of equity for the Court to interfere, where one party violates a
particular covenant, and the other party does not choose to put an end to
the partnership ; in that way there may be a separate suit and a perpetual
injunction in respect of each covenant; that is, a jurisdiction, that we have
never decidedly entertained. All this bill seeks is a jserpetual injunction
against using any other than this particular firm and name ; and the ques-
tion would be, if very serious mischief were to arise from not using it,
whether the party would not be obliged to frame his bill differently. I
have no difficulty in saying, that, where the members of a partnership
contract by covenant, that the firm shall be A., B., C, and D., it is a
breach of that covenant for' A. -to sign those instruments, to which the
covenant refers, in the name A. and Co. ; but it is no less a breach of that
covenant for D. to sign his own name, adding ' for self and partners,'
because by these words it can no more be known, who are his partners,
than by the word Co. When partners enter into such contracts, the
meaning and intent is, that, in the first place, it may be known to the
world, for the benefit of each partner, that he is a partner in that con-
cern, and also that, as between each partner and the world, it should not
be left to them to speculate, who are really partners, or who are dormant
partners, and so on. It is intended, that each individual may have the
credit, which belongs to his name, and may not be exposed to conse-
quences, which might arise from his name not being used. But it must
be made out to be a case, which goes further than this does, to entitle
the Court to grant an injunction against the breach of such a contract;
it must be a studied, intentional, prolonged, and continued inattention to
the application of one party calling upon the other to observe that con-
tract. Looking at the circumstances of this case altogether, recollecting
that the application was only made by the plaintiff in April last, and even
admitting, that some of the letters, as has been insisted, may amount to
contracts binding on the plaintiff, the question is, whether it was not
known who were really partners ? I do not mean to say, that there has
been such au exact performance of the contract as there ought to be ; and
these gentlemen will do well (if they mean to protect themselves from the
CHAP. X.] CONSTRUCTION OF ARTICLES. 343
towards the capital stock, at particular periods, or pro-
visions for the admission of other partners, upon the
payment of particular sums of money, by them, by in-
stalments. In all such cases the party so contracting is
treated as a debtor to the firm, to the full amount so to
be contributed or paid, as debitum in prcesenti, sohen-
dum in futuro ; and, indeed, he stands in equity as to
such debts, precisely in the same relation to them, as if
he were a third person, who was a debtor thereto.^
§ 20-1. In the next place, partnership articles some-
times provide, that one or more of the partners shall
exclusively manage and administer all the concerns
thereof, or one or more particular departments of the
business. In cases of this sort, courts of equity wiU
uphold with a steady hand every such stipulation, and
give it full effect during the continuance of the part-
nership, and inhibit the non-competent partners from
intermeddling therewith.^ And this is entirely in coin-
interference of this Court) to use all the names in the concern, — they
must do that, or the Court will be under the necessity of awarding an
injunction, or dissolving the partnership." The motion was refused Avith-
out costs. As to whether the right to use the partnership firm, after the
death of one partner, belongs to the survivor, or is a part of the good-
will of the partnership, see ante, § 100, and Lewis v. Langdon, 7 Sim. 421.
See also Webster v. TV^ebster, 3 Swans. 490, n. In Miles v. Thomas, 9
Sim. 606, Sir Launcelot Shadwell (the Vice-Chancellor) thought, that an
injunction might be granted, whenever the act complained of is one that
leads to the destruction of the partnership property, notwithstanding a
dissolution thereof may not be prayed.
' Coll. on P. B. 2, c. 2, § 2, p. 141, 2d ed. ; Akhurst i'. Jackson, 1 Swans. 85, 89.
[See also Bury v. Allen, 1 Coll. 589, 607] ; { Stevens v. Yeatman, 19 Md. 480.
In Featherstonhaugh v. Turner, 25 Beav. 382, it is said that a person selling
a share in his business and becoming a partner with the purchaser, for an in-
definite period, cannot, in equity, immediately dissolve the partncrsliip and
retain the premium, and to a similar effect are the decisions in Astle v. Wright,
23 Beav. 77, and Freeland v. Stansfeld, 2 Sm. & G. 479. On the allowance
of interest on advances, see § 182, n., and on the return of premiums on dis-
solution, see Airey v. Borham, 29 Beav. 620; Pease v. Hewitt, 31 Beav. 22;
Bullock v. Crockett, 3 Giff. 507 ; Lee v. Page, 30 Law J. x. s. Ch. 857.}
^ Ante,§ 173, 182, 193, 202; Coll. on P. B. 5, c. 1, § 3, p. 753-759, 2ded.
344 PARTNERSHIP. [cHAP. X.
cidence with the French law on the same subject ; for,
by that law, where by the articles one or more partners
are exclusively to administer the affairs of the partner-
ship, the power is deemed irrevocable during the con-
tinuance of the partnership, and cannot be lawfully in-
terfered with by the other partners.^ The Roman law
seems impliedly to have promulgated the same doc-
trine.^ The Code of Louisiana has also made it a part
of its own positive regulations.^
§ 205. In the next place, in partnership articles it is
sometimes agreed, that the real estate and fixtures, be-
longing to the firm, shall not be treated as partnership
property, as between the partners ; but that all the
partners shall have a several and individual interest
therein. In such cases, the interests of the partners
will be treated throughout, as their several and sepa-
rate estate ; and of course, in cases of bankruptcy of
the partners, it will be distributable to and among their
separate creditors respectively, in preference to their
joint creditors.^ The rule is, or at least may be, differ-
ent in cases of mere personal property, which still re-
mains in the reputed ownership of the partnership,
although it will be the same, if the property be clearly
and exclusively in the ownership of one partner, as his
separate personal property.^
• Poth.de Soc. n. 71, 72.
2 D. 14, 1, 1, § 13, 14 ; Poth. Pand. 14, 1, n. 4.
' Code of Louisiana (1825), arts. 2838-2840.
■» Coll. on P. B. 2, c. 2,§ 2, p. 141, 2d ed.; Id. B. 4, c. 2, § 1, p. 595, 596,
600; Id. B. 2, c. 1, § 2, p. 113; Smith v. Smith, 5 Ves. 189; Ex parte Smith,
3 Madd. 63. {Where the owner of a lease admits another to be his partner
in the use of a part only of the demised property, and afterwards dissolves
the partnership, the partner no longer has any interest in the lease. Burdon
V. Barkus, 3 Giff. 412.}
* Coll. on P. B. 2, c. 2, § 2, p. 141, 2d ed. ; Id. B. 4, c. 2, § 1, p. 595,
596, 600 ; Id. B. 2, c. 1, § 2, p. 113 ; Smith v. Smith, 5 Ves. 189 ; Ex parte
Smith, 3 Madd. 63 ; Coll. on P. B. 4, c. 2, § 1, p. 596-605, 2d ed. {See
Parsons on P. 252 ; Penny v. Black, 9 Bosw. 310.}
CHAP. X.] CONSTRUCTION OF ARTICLES. 345
§ 206. Connected with this stipulation is ordinarily
another for an annual account, valuation, and balance
of the moneys, stock in trade, and credits of the part-
nership, and also of the debts due by the partnership ; ^
and sometimes also for an annual division of the profits,
or of a portion thereof. The annual accounts, when so
settled and balanced, are ordinarily held to be conclu-
sive, unless some error is shown ; and to guard against
the opening of such accounts, upon suggested errors at
distant periods, it is not unfrequently further provided,
that such annual statements and settlements of the ac-
counts shall be binding and conclusive upon all the
parties, notwithstanding any errors, unless they are dis-
covered in the lifetime of the partners, or during the
term of the partnership.^ But all such clauses are
nugatory, in cases where the error has arisen from the
fraud of any of the partners ; for fraud will vitiate any,
even the most solemn transactions.^
§ 207. Another usual stipulation in the articles is for
a general account of all the partnership property and
concerns, upon the dissolution or expiration of the
partnership, which is followed up by another, pointing
out the mode of winding up the concerns, and of divid-
ing and distributing the partnership property and effects.
This is generally provided for in one of two modes. One
mode is, by a general conversion of all the partnership
assets into cash, by a sale, and dividing the produce
thereof, after providing for the payment of the debt's of
the firm, among all the parties, in proportion to their
respective shares and interests. Another mode is by
1 Coll. on P. B. 2, c. 2, § 2, p. 144, 145, 2d ed.
2 See Coll. on P. B. 2, c. 2, § 2, p. 145, 146, 2d ed. ; Oldaker v. Laven-
der, 6 Sim. 239; {Coventry?;. Barclay, 33 Beav. 1, affirmed on appeal, 12
Weekly Rep. 500 ; s. c. 10 Jur. N. s. Digest, 158.}
3 See Coll. on P. B. 2, c. 2, § 2, p. 145,. 146, 2d ed. ; Oldaker v. Laven-
der, 6 Sim. 239.
346 PARTNERSHIP. [CHAP. X.
providing, that one or more of the partners shall be
entitled to purchase the shares of the other at a valu-
ation.^ The former mode is that constantly adopted by
Courts of Equity, in the absence of any express stipu-
lations; the latter mode can be insisted upon, only
when there is an express stipulation to that very effect.^
A mere stipulation for the division of the partnership
stock and effects, at the end of the partnership, will not
be deemed by Courts of Equity sufficient to entitle one
or more of the partners to purchase them at a valua-
tion ; but merely to provide for a division in the usual
manner, by a sale.^ The same rule of a sale is applied
in all cases, where the mode prescribed by the partner-
ship articles becomes impracticable, or cannot otherwise
be fairly obtained.''
§ 208. Under the clause in the articles for the pur-
chase at a valuation, upon the dissolution of a part-
nership, the question has arisen, whether that clause is
applicable to a dissolution by bankruptcy. It has been
thought that it is not, although the point has not ex-
pressly come under decision ; but a strong inclination
of opinion, in that direction, was expressed by Lord
Eldon.^ The question turns upon this, whether a man
' Coll. on P. B. 2, c. 2, § 2, p. 145, 146, 2d ed., which cites 7 Jarman's
Convey. 31 ; Cookson v. Cookson, 8 Sim. 529. {See Burfield v. Rouch, 31
Beav. 241 ; Homfray v. Fothergill, Law Rep. 1 Eq. 567.}
^ Ibid.; Wilson v. Greenwood, 1 Swans. 471, 482 ; Featherstonhaugh w.
Fenwick, 17 Ves. 298; {Dickinson v. Dickinson, 29 Conn. 600.}
3 Coll. on P. B. 2, c. 2, § 2, p. 146; Rigden v. Pierce, 6 Madd. 353 ; Cook
V. Collingridge, Jac. 607.
^ Cook V. Collingridge, Jac. 607.
° Wilson V. Greenwood, 1 Swans. 471, 481, and the Reporter's note (a) ;
Gow on P. c. 5, § 3, p. 300, 3d ed.; Coll. on P. B. 2, c. 2, § 2, p. 145, 146, 2d
ed. ; post, § 396. — Mr. Swanston in his note says: " The following are some
of" the principal authorities applicable to this point. Lockyer i\ Savage, 2
Str. 947 ; Roe v. Galliers, 2 T. R. 133 ; Ex parte Hill, Cook's Bankr. Law,
228 ; 1 Cox, 300 ; Ex parte Bennet, Cook's Bankr. Law, 229. In the mat-
ter of Murphy, 1 Sch. & Lef. 44 ; Ex parte Henecy, cit. Id. ; In the matter
CHAP. X.] CONSTRUCTION OF ARTICLES. 347
can, by contract, or otherwise, provide for a particular
disposition of his property, in an event which deprives
him of all disposing power over it, and vests that right
in other persons.^
§ 209. We have already seen, that it is an implied
duty and obligation of every partner, not to carry on
any business inconsistent with, or contrary to the true
interest of the partnership.^ But this is often expressly
provided for by a special stipulation in the partnership
articles. Where the language is general, it will, of
course, be construed to apply to all other business, inju-
rious to, or interfering with the interest and business
of the partnership. But if the stipulation be limited to
engaging in the same business on the separate account
of the partner, or to engaging in any other particularly
specified business, during the continuance of the part-
nership, there, it would seem to leave the partner free
to engage in any other than the excepted business, upon
the known maxim of the law, that ExiJressio imius est
exdusio alterius.^
of Meaghan, 1 Sch. & Lef. 179; Dommett v. Bedford, 6 T. K. 684; 3 Ves.
149 ; Ex parte Cooke, 8 Ves. 353 ; Ex pai-te Hinton, 14 Ves. 598 ; Ex parte
Oxley, 1 Ball & Beat. 257; Higinbotham v. Holme, 19 Ves. 88; Ex parte
Vere, 19 Ves. 93; 1 Rose, 281; Ex parte Young, Buck, 179; 3 Madd.
124; Ex parte Hodgson, 19 Ves. 206. And see Brandon v. Robinson, 18
Ves. 429. The general distinction seems to be, that the owner of property
may, on alienation, qualify the interest of his alienee, by a condition to take
effect on bankruptcy ; but cannot, by contract or otherwise, qualify his own
interest by a like condition, determining or controlling it in the event of his
own bankruptcy, to the disappointment or delay of his creditoi'S ; the^ws dispo-
nendi, which for the first purpose is absolute, being, in the latter instance,
subject to the disposition previously prescribed by law."
' Ibid.
- Ante, § 178, 179.
3 Coll. on P. B. 2, c. 2, § 2, p. 143, 2d ed.; (iHassington v. Thwaites, 1 Sim.
& St. 124. — Mr. Collyer (Coll. on P. B. 2, c. 2, § 1, p. 142, 143, 2d ed.) has
remarked : " If several persons enter into partnership, under a stipulation,
that the copartners, or any of them, shall not, during the continuance of the
copartnership, engage in any business otherwise than upon the account and
348 PARTNERSHIP. [CHAP. X.
§ 210. The like language, in partnership articles, will
also, in some cases, be construed to import a prohibition
to engage in the same trade, upon a withdrawal from
the partnership, even when there are no express words
to the purpose, but the prohibition arises by mere im-
plication. Thus, where by the articles it was agreed,
that the trade of the partnership (that of a brewer)
should continue for eleven years, with a proviso, that if
either of the parties should be so minded, upon giving
six months' notice to the other, he should be at liberty
to quit the trade and mystery of a brewer, and the other
party should be at liberty to continue the trade upon
his own account; it was held by the Court, that the
party giving such notice, upon the true interpretation
of the words, "to be at liberty to quit the trade and
mystery of a brewer, &c." was not at liberty to engage
in the brewery business on his own account, but was
bound to quit it altogether.^
§ 211. So, where, upon the retirement of one of two
partners from a partnership in trade, it was left to arbi-
trators to determine (among other things) what was to
be paid to the retiring partner for the good-will of the
trade ; and the arbitrators, upon the understanding that
the retiring partner would not set up the trade in the
same street or vicinity, awarded to him a certain sum
for liis share of the good- will thereof, which was accord-
ingly paid by the other partner ; and he afterwards set
for the benefit of the same copartnership ; and, after the execution of the
articles, one of the partners with the consent of the others becomes a partner
in a separate firm, the articles of partnership, coupled with such consent, will
not operate to make the other partners of the original firm partners also in the
separate firm. But a person may, by the decree of a Court of Equity, be-
come a partner in the separate business of his copartner, entered into without
his consent, in violation of the articles."
' {Lind. on P. 705-712; ante, § 99, 100, and notes} ; Cooper v. Wat-
lington, 3 Doug. 413 ; s. c. 2 Chitty, 451.
CHAP. X,] CONSTRUCTION OF ARTICLES. 349
up the trade in the same neighborhood ; the Court, not-
withstanding the arbitrators had laid no express restraint
on the retiring partner, in their award, held, that he
should be restrained by injunction from carrying on the
trade there, as it was a violation of the implied parol
understanding of all parties at the time.^
§ 212. A fortiori^ an injunction will lie in a case,
where, upon the withdrawal of a partner, it is agreed
between the parties, that the business shall be carried on
by the remaining partners alone, if such retiring part-
ner should act in any manner inconsistent with such an
agreement. Thus, where the plaintiff and defendant
had been partners in stage-coaches ; and by an agreement
on the dissolution of their partnership, it was stipulated,
that the business, so far as it was carried on between
Newbury and London, should belong to the plaintiff,
and that the defendant should not carry on the business
of coach proprietor between Newbury and London ; the
defendant afterwards set up a stage-coach, which began
its journey at a place a few miles distant from Newbury,
but travelled through Newbury to London. On a bill
filed, and an affidavit in support thereof, Lord Eldon
granted an injunction to restrain the defendant from
carrying on the business between Newbury and London,
So, where a company, in which A. and B. were partners,
contracted with the Postmaster-General for the service
of the mail, each partner supplying horses for a distinct
part of the road ; but in consequence of the bad manner,
in which A. horsed the coach, the Postmaster-General
had been frequently obliged to suspend the contract ; it
was held, that B, might maintain an injunction against
A. to restrain him from interfering with B.'s portion of
the road, upon the ground of the irreparable injury to
' Harrison v. Gardner, 2 Madd. 198 ; Gow on P. c. 2, § 4, p. 107, 3d ed.
350 PARTNERSHIP. [cHAP. X.
the partnership, which would ensue from such an inter-
ference.^
§ 213. We have, also, already seen Avhat the general
rule of law is, as to the right and authority of a major-
ity, or of a definite number, to direct and regulate the
concerns of the partnership.^ This subject, in cases of
partnerships, composed of numerous persons, frequently
constitutes a matter of a special provision in the arti-
cles ; and so far as the provision extends, it will form
the rule of the partnership.^ But it will not be extended
by implication to any collateral cases, although they
may fall within the same, or even a greater, mischief.^
Thus, for example, if it is intended, that, in cases of dif-
ficulty, the majority shall have power to wind up or sell
the concern, the authority must be expressly given ; for
it will not be inferred frpm the general language of any
provision, that the majority, or any definite number,
shall have authority to direct and regulate the concerns
of the partnership.^ And in these, as in the like cases
the provision itself, so far at least as Courts of Equity
may be called upon to enforce it, may be controlled, or
waived by the acquiescence, or action, of the partners
habitually in a different course.^
§ 214. Provision is, also, often made in partnership
articles, for the expulsion of a partner for gross mis-
conduct, or in case of insolvency, or bankruptcy, or
other special enumerated cases. Of course, such a
provision will govern in all cases to which it properly
' Coll. on P. B. 2, c. 3, § o, p. 238, 2d ed. ; Williams v. Williams, 1
Wils. Ch. 473, note ; Anderson v. Wallace, 2 Molloy, 540.
* Ante, § 123-125.
' Coll. on P. B. 2, c. 2, § 2, p. 143, 144, 2d ed.
* Ibid.
^ Ibid. ; Chappie v. Cadell, Jac. 537.
^ Ante, § 192 ; Glassington v. Thwaites, 1 Sim. & St. 124 ; Jackson v.
Sedgwick, 1 Swans. 460.
CHAP. X.] CONSTRUCTION OF ARTICLES. 351
applies.^ And where a provision is made for insolvency,
the question may arise whether it means a technical in-
solvency under the insolvent debtor's act, or a mere ina-
bility to pay just debts, according to the common use of
the phrase in commercial transactions. The latter, it
should seem, is to be deemed the true sense.^
§ 215. It is also usual to insert in articles of partner-
ship, a stipulation that disputes and controversies between
the partners shall be referred to arbitrators, to be named
by the respective partners. It seems, that no action at
law is maintainable for a breach of any stipulation of
this sort, as it is against the policy of the common law,
and has a tendency to exclude the jurisdiction of the
Supreme Courts, which are provided by the Govern-
ment with ample means to entertain and decide all legal
controversies.^ Besides ; there is this additional diffi-
' [See the late important case of Blisset v. Daniel, 10 Hare, 493, 23 Eng.
L. & Eq. 105]; {Patterson v. Silliman, 28 Penn. St. 304. See Smith u.
Mules, 9 Hare, 556. On expulsion from a club, see Hopkinson v. Marquis
of Exeter, Law Rep. 5 Eq. 63. Evans v. Philadelphia Club, 50 Penn. St.
107.}
2 Coll. on P. B. 2, c. 2, § 2, p. 151, 152, 2d ed. ; Parker v. Gossage, 2
Cr. M. & R. 617 ; Biddlecome v. Bond, 4 Ad. & E. 332.
' Gow on P. c. 2, § 3, p. 72, 89, 3d ed. ; Figes v. Cutler, 3 Stark. 139 ;
Coll. on P. B. 2, c. 3, § 1, p. 165, 166, 2d ed. ; Kill v. Hollister, 1 Wils.
129 ; Wats, on P. c. 7, p. 383, 2d ed. [The more recent cases in England
establish the doctrine, that an agreement to submit a controversy to ai'bitra-
tion before a suit is brought, is binding upon the parties making it. See
Scott V. Avery, 8 Exch. 487 ; 5 H. L. Cas. 811 ; Livingston v. Ralli, 5 E. &
B. 132 ; Russell v. Pelligrini, 6 E. & B. 1020.] {In Livingston v. Ralli, 5 E.
& B. 132, it was held that an action lay for breach of a covenant to refer.
An agreement to reier, and arbitrators named, and a covenant not to sue,
and a power to examine witnesses under oatli, and to make the submission
a rule of court, prevents a party from filing a bill with the view of withdraw-
ing the case from the arbitration. Dimsdale v. Robertson, 2 Jones & Lat.
58. But an agreement to submit the affairs of a partnership to arbitra-
tion, and that the submission shall be made a rule of court, cannot be pleaded
in bar to a bill in equity seeking discovery, complaining that the plaintiff is
harassed by actions, and praying for a receiver; though before the bill was
filed, arbitrators were appointed, and, since bill filed, the submission has
352 PARTNERSHIP. [CHAP. X.
culty, that it would be impracticable for the party to
establish at the trial, that, upon such an arbitration, he
would have succeeded, so as to entitle him to damages.^
In either view, the stipulation would seem to be nuga-
tory and futile. But be this as it may, it is very clear, that
no stipulation of this sort will be decreed to be specifi-
cally performed by a Court of Equity ; not merely upon
the ground of public policy, but also upon the ground of
the utter inadequacy of arbitrators to administer entire
justice between the parties, from a defect of power
in them to examine under oath, and to compel the
production of papers, as well as upon the ground of
the utter impracticability of a Court of Equity's com-
pelling a suitable performance of such a stipulation
between the parties.^ But, under a clause of this
been made a rule of court. Cooke v. Cooke, Law Rep. 4 Eq. 77. See
Horton v. Sayer, 4 H. & N. 643 ; Wallis v. Hirscli, 1 C. B. n. s. 316 ;
Scott V. Corporation of Liverpool, 3 De G. & J. 334, Elliott v. Royal Ex-
change Assurance Co., Law Rep. 2 Ex. 237 ; Lee v. Page, Law J. n. s.
Ch. 857 ; Wood v. Robson, 15 Weekly Rep. 756.}
1 Ibid. ; Tattersall v. Groote, 2 B. & P. 131 ; Street v. Rigby, 6 Ves.
815, 818.
2 Coll. on P. B. 2, c. 3, § 1, p. 165-168, 2d ed. ; Street v. Rigby, 9 Ves.
815, 817, 818; Tattersall ??. Groote, 2 B. & P. 131, 135, 136; Wellington
V. Mcintosh, 2 Atk. 569 ; {Agar v. Macklew, 2 Sim. & St. 418 ; Darbey v.
Whitaker, 4 Drew. 134. See Jackson v. Jackson, 1 Sm. & G. 184.}
Gow on P. c. 2, § 4, p. 103, 104, 3d ed. ; 1 Story, Eq. Jur. § 670. —In
the case of Street v. Rigby, 6 Ves. 815, Lord Eldon discussed the subject
at large, upon a covenant of this nature, and said : "It has occurred to me,
that in almost every case of this sort, the parties have adopted a fancy, that
they can make any thing, in the contemplation of the court, fit to be consid-
ered matter of dispute, upon Avhich they think proper to dispute. That is
not so. It must be that which a Court will say is fairly and reasonably
made matter of dis^jute. Another circumstance is, that the parties do not
frequently appreciate the effect of such a covenant. First, at law, in the
case in the Court of Common Pleas, the Judges, Heath and Rooke,
seemed to think it futile, and tantamount to a covenant to forbear suit. I
take notice of the circumstance, as material with regard to Halfhide v.
Penning ; for if the meaning of a covenant to refer is to forbear suit
altogether, that covenant to refer, before you bring suit, and to suspend it
in the mean time, wouh] stand upon principles, pro temjiore, that it would
CHAP. X.] CONSTRUCTION OF ARTICLES. 353
nature, where the partners do actually refer matters to
arbitrators, questions may arise as to the nature and
be very difficult to say, do not apply to both those covenants. Sup-
pose an action brought. The question would be, what the damages would
have been, if the defendant had joined, and named an arbiti'ator, and evi-
dence had been produced (and what would be, could by no means be cor-
rectly proved), and an award had been made, giving some sujiposed sum,
which no proof could ascertain. The effect, thei-efore, of such a covenant
is, that, as the damages are not to be ascertained by evidence, nominal
damages only can be got. Whose fault is it ? There are prudential ways
of drawing these articles. There might have been an agreement for liqui-
dated damages, to enforce a specific performance, if an action could not
produce sufficient damages, or equity would not entertain a bill for a specific
performance. If they had enforced their legal remedy by such a stipulated
security, it would be very difficult to say, they would also have a remedy in
equity. In the case from Astley's Theatre, Astley v. Weldon, 2 B. & P.
346, there was no dispute in the Court of Common Pleas, that the actress
might have agreed upon a liquidated sum to be forfeited for non-attendance,
&c. The Court were of opinion, very properly, that where there was a
stipulated sum in the covenant, that was the stij^ulated damages ; and the
general sum of £200 for breach of any of the articles was a penalty ; but
it was not doubted that sum might have been made the liquidated damages,
if they thought proper. The party must put himself in a situation to have
substantial damages. In this case, upon an action, they could have only Is. ;
for they could not ascertain what more they were to have. Then, what can
they have in equity ? There is considerable weight as evidence of what the
law is, in the circumstance, that no instance is to be found of a decree for
sjjecific performance of an agreement to name arbitrators ; or that any dis-
cussion upon it has taken place in experience for the last twenty-five years.
I was counsel in Price v. Williams, 3 Bro. Ch. 168 ; 1 Yes. Jr. 365, a case
which justifies considerable doubts, whether the eulogia upon the domestic
forum of arbitrators are well founded. That was a case before Lord Thur-
low, upon a bill for specific performance of such an agreement, sending
parties to arbitrators, who might or might not be able to come to a decision ;
and Lord Thurlow was of opinion that the Court would not perform such an
agreement. The Court, if it is not part of the agreement, cannot give
them authority to examine upon oath ; and the agi-eement itself cannot
authorize any person to administer an oath. A difficulty arises from the
want of the conscience of the party. This court has given credit to itself,
notwithstanding what has passed in the Court of King's Bench, in their
rules upon attachments, as likely to decide as well as arbitrators ; and it re-
quires a strong case to deprive a person of the right to a decision here. In
Price V. Williams, the account came back very favorably to my client ; the
result being, that a very small sum was due from him. A vast number of
exceptions were taken ; and the Court felt that soi-t of difficulty of dealing
23
354 PARTNERSHIP. [CHAP. X.
extent of the matters upon which the arbitrators may
make their award. Thus, for example, if there should
with the exceptions, that led to an arbitration ; though at first the Court
would not hear of it ; and the party, who had not been able to establish any
thing before the Master, in that mode gained several thousand pounds.
Then the difficulty occurred about the power of this Court to review the
decision of arbitrators ; and in the end my client fared much worse than he
would have done before the Master. That case and others led me to adopt a
rule never to advise an arbitration afterwards. If such a bill never has been
usually filed in this Court, and if in that instance Lord Thurlow was of opinion
it could not be maintained, the jurisdiction would stand upon principles not
very intelligible, if a party, who by the imbecility belonging to the covenant
could recover only Is. damages in an action, coming to this Court for sub-
stantial justice, to have an account taken, that person, who could not file a
bill for a specific execution of the agreement to refer, can say, that though
he admits, neither of them could recover more than Is. at law, and he can-
not demand the relief by way of a specific performance, he can have it by
pleading the covenant, if he is brought in the character of a defendant ; and
can compel the other to go to that tribunal, to which the defendant, com-
ing in the character of plaintiff, could not oblige him to resort. It is very
difficult to say, that should be the law of the Court. Then, is it so ? I
look upon the case of Wellington v. Mcintosh as an authority, that at that
time it was not the law of the Court. At that period the distinction, taken
in later cases, had not obtained ; that the plea, though it might have been
good as to the relief, is bad, if bad as to the discovery. As to that, the
course of the later authorities seems to have altered the law of pleading.
But quoad such a point as this, the plea, if good to the relief, must be good
to the discovery; for this plea means this, if any thing; that the parties will
not harass themselves by going to courts of justice ; but will state to each
other what is in dispute, and refer that to arbitrators ; and entering into such
a covenant they must be taken to mean, that they will be content with a
decision upon such discovery as arbitrators can compel, without subjecting
each other to the necessity for either to be examined upon oath before arbi-
trators, who cannot examine them upon oath. They choose, therefore, that
forum, exclusive of the jurisdiction of the country to all intents and pur-
poses ; meaning that arbitrators shall, from beginning to end, do that which
they are enabled to do, viz., to decide between them as well as they can. It
would be a breach of covenant, that would entitle them to nominal damages,
to file a bill for discovery, as much as a bill for discovery and relief In
Half hide v. Fenning, the whole of my argument, according to the report,
amounts to taking the distinction between discovery and relief, and putting
the case upon that distinction ; and if it was so argued, I am not surprised,
that Lord Kenyon should take it, that the counsel thought, if not put upon
that, it could not be supported. But it is not to be put upon that distinction
but upon the ground I have stated. It is said, courts of law think these
CHAP. X.] CONSTRUCTION OF ARTICLES. 355
be a submission to arbitrators of all matters in difference
between the partners, the question may arise, whether it
agreements very wise. Kill v, Hollister, however, shows, that courts of law
are ready enough to say the agreement of the parties shall not oust their
jurisdiction ; though they permit it to oust the jurisdiction of courts of equity.
But they enforce the agreement, not as agreement, but by granting an at-
tachment for breach of the rule. It is dealing a little imperiously to say,
that an agreement which, made out of Court, would not bar an action, if
made in Court, shall bar a bill. It was justly observed upon the passage in
Atkyns, Wellington v. Mcintosh, 2 Atk. 569, that arbitrators cannot ad-
minister an oath ; and the agreement will not enable them. We see in daily
practice at law, the Court administers the oath ; and under that the parties
go before the arbitrators. It is said, the party must have discovery some
way. But if the distinction cannot be maintained between a bill for discov-
ery only, and for both discovery and relief, it must be said, they are bound
to go first before the arbitrators ; and the party must be brought there, and
must refer ; the parties to be examined upon honor, for they cannot upon
oath ; and then it is said, as in the'argument of these cases, if it so turns out,
then they are come to this Court ; saying, there is then a failure of the jus-
tice, for which they covenanted ; and therefore there is a jurisdiction in this
Court. Till Half hide v. Fenning no such decree was ever heard of. Next,
expressing it in terms of the highest respect and veneration for that noble
and learned person, now no more, I doubt whether it is a very wise exercise
of the jurisdiction of this Court, recollecting, that it is to give a relief be-
yond the law, not to order the parties to go to law to take the effect of the
stipulated remedy, but under a jiositive covenant, not a negative covenant,
that they will not sue (upon which there would be considerable difficulty),
to send them by way of experiment to that jurisdiction, so likely to miscarry,
under the circumstance that it has not, unless received under the authority
of the Court, a power to administer an oath, where the justice that tribunal
can render is so insufficient, though they have not expressly bound themselves
by covenant ; and, whether the court would not act more discreetly by say-
ing, they are in a Court, where justice can certainly be done ; and as they
have not stipulated to the contrary, their fate shall be decided here, instead
of sending them to so improvident a tribunal. I recollect passages, in which
courts of justice, however full of eulogia upon these domestic forums, have
recollected their own dignity sufficiently to say, they would not be ancillary
to those forums ; that the parties should not be permitted to take their relief
from them, coming here for discovery. It is enough for me to say, it is not
a necessary consequence of a covenant to refer, that the i^arty thereby
agreed to forbear to sue. I do not enter into the question of the effiict at
law of a covenant to forbear to sue. But, supposing it good, in strict law it
cannot be maintained, that, having covenanted to refer, the party has cov-
enanted to forbear to sue ; and if not, he has only left himself open to an
action for damages, if he does not refer ; which the suit does not prevent, if
356 PARTNERSHIP. [CHAP. X.
is within the competency of the arbitrators to award a dis-
solntion of the partnership ; and it has been held, that
thought advisable. It would be very strong to say, that where the legal
remedy they have provided for themselves is utterly incompetent to justice,
this Court is precluded from granting its ordinary remedy by a covenant,
■which does not in terms express an undertaking not to resort, to this Court,
and must hold that doctrine upon a plea ; in that shape permitting the de-
fendant to have in substance a specific performance, which would have been
refused to him as a plaintiff; at the hazard of doing substantial injustice, of
a delay of justice almost of necessity, and where the examination cannot be
addressed to the conscience of either the parties or the witnesses ; from which
the subject cannot be debarred, unless by express terms, or necessary impli-
cation. That this has not the effect of barring the legal remedy, is clear
from the cases at law, which agree that it is still competent to him to take the
legal remedy. Then why not the equitable ? The competency to take both
stands upon the same principle." See also Wilks v. Davis, 3 Mer. 507.
Mr. Collyer has remarked (Coll. on P. B..2, c. 3, § 1, p. 167, 168) : "This
leads us to a more general consideration of clauses of this nature. There
are many covenants, to which such clauses may be added with effect ; but
there are others, the breach of which does not admit of compensation by
liquidated damages, and to which, therefore, they cannot properly be ap-
plied. Thus, on the one hand, if the covenant be such, that the breach of
it must of necessity be uncertain in its nature and amount, then, if liqui-
dated damages be reserved, they will be deemed the real damages, and a
verdict in an action on the covenant will be found for the amount of the liq-
uidated damages. On the other hand, if the breach of covenant be attended
with certain damage, as, for instance, if it consist in the omission to pay a
certain sum of money, in such case, although liquidated damages be reserved
eo nomine, they will be considered by a jury only in the nature of a penalty,
and the real damages will be measured by the sum omitted to be paid. In
a late case, even where the real damage was uncertain, yet, as it was evi-
dently far less than the amount of the liquidated damages, the Court of
Common Pleas, although the language in which the liquidated damages were
agreed to be paid was the strongest that could be employed, referred it to
the prothonotary, to ascertain what damages, if any, the plaintiff had sus-
tained, and how much, if any thing, ought to be paid to the plaintiff. Mr.
Jarman, in commenting upon this case, observes, that, upon the reasoning
there adopted by the Court, it is obvious, that a covenant to pay a sum of
money as liquidated damages, on the breach of any one of a series of
stipulations, must in all cases be nugatory, as the covenant necessarily em-
braces acts of various degrees of importance, all which cannot with equal
justice be compensated for by the payment of the same sum ; if it were
sufficient in regard to some, it must be excessive as to others ; the conse-
quence is, that, in order to give an effectual remedy for the recovery of a
sum of money as stipulated damages in such a case, a distinct and separate
CHAP. X.] CONSTRUCTION OF ARTICLES. 357
they may.^ So, upon a like broad submission, and also
giving authority to arbitrators to dissolve the partnership,
upon such terms and conditions as they might prescribe,
it has been held, that the arbitrators may provide, that
upon the dissolution, one partner shall not carry on the
trade within a particular prescribed distance of the place
where the remaining partners are to carry it on.^ So,
upon a general submission by partners of all actions, notes,
accounts, dealings, controversies, and demands, in law
or equity, it has been held, that it is competent for the
arbitrators to award that one of the partners shall take
all the joint property, he paying to the other a sum in
gross, and also discharging all the partnership debts. ^
amount should be assessed, as the measure of compensation on the breach
of each several contract."
' Coll. on P. B. 2, c. 2, § 2, p. 152, 2d ed. ; Green v. Waring, 1 W.
Bl. 475.
*= Coll. on P. B. 2, c. 2, § 2, p. 152, 2d ed. ; Green v. Waring, 1 W. Bl.
475 ; Morley v. Newman, 5 Dowl. & R. 317.
« Byers v. Van Deusen, 5 Wend. 268; {§ 299-301, and see Burton v.
Wigley, 1 Bing. N. C. 665 ; Wood v. Wilson, 2 Cr. M. & K. 241 ; Wilkin-
son V. Page, 1 Hare, 276. But it is said that an ai'bitrator cannot appoint a
receiver. Cook v. Catchpole, 10 Jur. n. s. 1068 ; s. c. 34 L. J. n. s. Ch. 60.}
358 PARTNERSHIP. [cHAP, XI.
CHAPTER XI.
REMEDIES BETWEEN PARTNERS.
{ § 216. Preliminary.
217. Remedies between partners.
218. Action lies for breach of stipulation in articles.
219. No action lies foi' money paid on partnership account.
220. Nor for money paid on account of torts affecting the partnership.
221. Reasons whj- no action lies.
222. Remedies in equity.
223. Roman law.
224. Enforcement of positive and negative obligations.
225-227. When an injunction will be granted.
228. Appointment of a receiver during the continuance of the partner-
ship.
229. Whether an injunction will be decreed without a dissolution.
230. Roman law.
231. Appointment of a receiver.
232. Partnership declared void for fraud.
233. Relief against losses caused by misconduct. Rights lost by
delay. }
§ 216. These are the most material considerations,
which seem proper to be brought before the learned
reader, as to the true interpretation and construction of
partnership articles, so far as they have, as yet, come
under judicial cognizance and decision. They are ne-
cessarily imperfect ; but at the same time they may serve,
in some degree, as lights and guides, to direct our in-
quiries in analogous cases, and to point out the diffi-
culties to be surmounted, as well as the defects to be
avoided.
§ 217. The next inquiry naturally presented is, as to
the remedies, which belong to partners themselves,
either at law or in equit}' , during the continuance of
the partnership, either to enforce the particular stipu-
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 359
lations, contained in the articles of partnership, or other
duties and obligations which arise by operation and im-
pUcation of law. A full examination of this topic prop-
erly belongs to a treatise on remedies and pleadings at
law and in equity, and is beside the purpose of the pres-
ent Commentaries ; but it may be found discussed at
large in elementary works, devoted to the consideration
of remedies at law and in equity.^ It may not, how-
ever, be without use to bring together, in this place,
some general suggestions and doctrines applicable to
the subject, which may serve to explain other decisions,
or to clear away lurking doubts.
§ 218. Wherever there is an express stipulation in
the partnership articles, which is violated by any part-
ner, an action at law, either assumpsit, or covenant, as
the case may require, will ordinarily lie, to recover dam-
ages for the breach thereof."^ In many cases, indeed,
such damages may be merely nominal, and inadequate
for redress. But still we must take the law as we find
it ; and in such cases, as in some other relations in life,
we enter into the connection for better or for worse. ^
^ See Coll. on P. B. 2, c. 3, § 1-5, p. 162-257, 2d ed. ; Gow on P. c. 2,
§ 3, 4, p. 69-116, 3ded.
■ Gow on P. c. 2, § 3, p. 69-73, 3d ed. ; {Lind. on P. 730 ; Leighton v.
Wales, 3 M. & W. 545 ; White v. Ansdell, Tyrw. & G. 785 ; Bagley v. Smith,
10 N. Y. 489 ; Glover v. Tuck, 24 Wend. 153 ; See Holyoke t'.Mayo, 50
Me. 385 ; Capen v. Barrows, 1 Gray, 376 ; Addams v. Tutton, 39 Penn. St.
447; MuUany y. Keenan, 10 Iowa, 224; Lock v. Purdon, 2 All. (Xew
Bruns.) 33. }
3 Coll. on P. B. 2, c. 2, § 1, p. 131, 2d ed. ; Goodman v. Whitcomb, 1
Jac. & W. 589, 592; Wray ». Hutchinson, 2 Uy\. & K. 235; 1 Story, Eq.
Jur. §659-665; Gow on P. c. 2, § 3, p. 69-93, 3ded. — The action of
account seems properly applicable only to cases where the partnership is
ended. See 1 Story. Eq. Jur. § 659-665 ; Gow on P. c. 2, § 3, p. 68-70 ;
Id. p. 73, 74, 3d ed. ; Wray v. Milestone, 5 M. & W. 21 ; Foster v. Allan-
son, 2 T. R. 479 ; Duncan v. Lyon, 3 Johns. Ch. 351, 361, 362. Actions of
tort can scarcely be maintained at law by one partner against the other,
touching the partnership property ; even if one partner should wilfully
destroy the property. Gow on P. c. 2, § 3, p. 89-93, 3d ed. ; Coll. on P.
360 PARTNERSHIP. [cHAP. XI.
§ 219. It is sometimes laid down by elementary writ-
ers, that, during the continuance of tlie partnership, an
action at law will lie by one partner against the others,
for moneys advanced, or paid, or contributed, on account
of the partnership, or of the debts and obligations in-
curred thereby.^ But this doctrine, in the general terms
in which it is laid down, is utterly untenable, and incon-
sistent with the rights, and duties, and relations of the .
partners with each other.^ It is true, that one partner
B. 2, c. 3, § 8, p. 257, 268, 2d ed. The appropriate remedy seems to be in
equity. {But see Liud. on P. 740 ; Maybew v. Herrick, 7 C. B. 229 ; Barton
V. Williams, 5 B. & Aid. 395, affirmed, sub nom. Williams v. Barton, 3
Bing. 139.}
> See Gow on P. c. 2, § 3, p. 79-81, citing Abbot v. Smith, 2 Yf . BI.
947, and what was said by Lord Kenyon in Merryweather v. Xixon, 8 T. R.
186, and by Mr. Justice Bayley in Ansell v. Waterhouse, 6 M. & S. 385, 390,
and Holmes «. Williamson, 6 M. & S. 158* See also 1 Mont, on P. c. 4, p.
50 ; Gary on P. 65 ; [Hamilton v. Hamilton, 18 Penn. St. 20.]
^ Most of the cases which are supposed to inculcate this doctrine, turn
upon other very distinct grounds. They are nearly all summed up in Mr.
GoUyer's valuable Treatise. Goll. on P. B. 2, c. 3, § 2, p. 174-193;
{Lind. on P. 728, Met. on Gontr. 130.} They are cases, (1.) where either
the debt was a separate debt and not a partnership debt. Smith v. Bai-row,
2 T. R. 476 ; {See next note} ; Gow on P. c. 2, § 3, p. 75-77, 3d ed. (2.)
Or, a separate and distinct security, or negotiable instrument, was given by
one partner to another, on the partnership account. Preston v. Strutton, 1
Anst. 50; Venning v. Leckie, 13 East, 7; [Gridley v. Dole, 4 Gomst.
486] ; {Van Ness v. Forrest, 8 Granch, 30; Rockwell v. Wilder, 4 Met.
556 ; Ghamberlain v. Walker, 10 All. 429.} (3.) Or, where the contract was
preliminary to the partnership, and merely in contemplation of it ; such as a
promise to contribute so much to the partnership funds, in stock or money.
Gale V. Leckie, 2 Stark. 107; Venning v. Leckie, 13 East, 7; Helme v.
Smith, 7 Bing. 709; [Vance v. Blair, 18 Ohio, 532] ; {Elgie v. Webster,
5 M. & W. 518; Brown v. Tapscott, 6 M. & W. 119; French v. Styring,
2 G. B. N. s. 357 ; Gurrier v. Webster, 45 N. H. 226 ; Gurrier v. Rowe,
46 N. H. 72.} (4.) Or, where the case is one of part-owners or joint-con-
tractors, and not of partners. Helme v. Smith, 7 Bing. 709 ; Graham v.
Robertson, 2 T. R. 282; Sadler v. Nixon, 5 B. & Ad. 936; [French
V. Styring, 2 G. B. n. s. 357 ; s. c. 40 Eng. L. & Eq. 274.] (5.) Or,
where the money or funds have been voluntarily se^jarated from the
partnership stock or moneys, and appropriated to one partner, and he
alone is interested in a contract touching the same. Goffee v. Brian, 3
Bing. 54 ; Jackson v. Stopherd, 2 Gr. & M. 361 ; Wilson v. Gutting, 10
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 361
may maintain an action at law against the other part-
ners, or any one or more of them, for moneys advanced,
or paid, or contributed, at their request, for their sepa-
rate and distinct account and benefit. But this is upon
the plain ground, that it has no connection with the
partnership concerns and liabilities ; and that the trans-
actions or contracts are between the parties in their sev-
Bing. 436; Sharp v. Warren, 6 Price, 131; {Caswell v. Cooper, 18 111.
532.} (6.) Or, where a balance has been struck, and a separate promise
made to pay the same to one partner. {Whether an express promise
to pay a balance is necessary to support an action, is a point on which
the cases are in much conflict. To the effect that no express promise
is necessary, are Wray v. Milestone, 5 M. & W. 21 ; Fanning v. Chad-
wick, 3 Pick. 420 ; M'Coll v. Oliver, 1 Stew. 510. See Spear v. Newell,
13 Vt. 288 ; Van Amringe v. Ellmaker, 4 Penn. St. 281 ; Wright v.
Cumpsty, 41 Penn. St. 102 ; Wycoff v. Purnell, 10 Iowa, 332. To the
effect that an express promise is necessary are Westerlo v. Evertson, 1
Wend. 532; Pattison v. Blanchard, 6 Barb. 537; Chadsey t>. Harrison, 11
111. 151; Course v. Prince, 3 Mills, Const. R. 416. See Gulick v. Gulick,
2 Green, 578} ; Moravia v. Levy, 2 T. R. 483, note; Foster v. Allanson, 2
T. R. 479 ; Preston v. Strutton, 1 Anst. 50 ; Brierly v. Cripps, 7 C. «& P.
709.; Wray v. Milestone, 5 M. & W. 21; Henley v. Soper, 8 B. & C. 16;
Winter v. White, 1 Brod. & B. 350. See also Gow on P. c. 2, § 3, p. 69-
97, 3d ed. ; Fremont v. Coupland, 2 Bing. 170; Carr v. Smith, 5 Q. B.
128, 138. But the mere fact that an account has been taken and balance
struck between partners at a certain period during the partnership, would
not entitle any partner to maintain an action therefor, unless agreed to
generally by all the partners. See Morrow v. Riley, 15 Ala. 710. In
Carr v. Smith, 5 Q. B. 138, Lord Denman said: "The case of Fremont v.
Coupland, and other similar cases, seem to limit the action to a settlement
of accounts on a final close of all partnership transactions ; but this case
does not necessarily raise that question ; for at all events the settlement, in
order to ground an action, must be one which is binding and conclusive
upon the partners. Now it does not appear here that the adjustment and
settlement was ever agreed to by all the partners, nor indeed by the plain-
tiff and the testator ; if, therefore, it were binding and conclusive on them,
it must have been so by reason of the power confided to the persons who
drew it up, and in that case it would be an award, and required a stamp.
It would come within the authority of Jebb v. McKierman, rather than
within Boyd v. Emmerson, Sybray v. White, and similar cases." {Lind. on
P. 735, Holyoke v. Mayo, 50 Me. 385. See also Gibson v. Moore, 6 N. H.
547 ; Williams v. Henshaw, 11 Pick. 83 ; s. c. 12 Pick. 378 ; Dickinson v. Gran-
ger, 18 Pick. 315, 317 ; Sikes v. Work, 6 Gray, 433 ; Shattuck v. Lawson, 10
Gray, 405 ; Wiggin v. Cumings, 8 All. 353 ; Warren v.Wheelock, 21 Vt. 323.}
362 PARTNERSHIP. [cHAP. XI.
era], distinct, and independent capacities, separate from
the partnership. For there is no incompetency in part-
ners to enter mto contracts with each other, as individ-
uals, in matters dehors the partnership concerns and
business.^ But this is very different from the case of
a partner's entering into contracts with the partnership,
as such, or of his paying moneys, or incurring Kabilities
on account thereof, he being in all such cases one of the
parties in interest, and, as such, bound jointly with the
others to contribute towards the discharge of the com-
mon obligations of the partnership."^
§ 220. This doctrine is not confined to cases of
moneys paid, or debts incurred, or contributions made,
» Gow on P. c. 2, § 3, p. 75, 76, 3d ed. ; Coffee v. Brian, 3 Bing. 54 ;
Smith V. Barrow, 2 T. R. 476 ; Nockels v. Crosby, 3 B. & C. 814; Coll. on
P. B. 2, c. 3, § 2, p. 175-178, 2d ed. ; 1 Story Eq. Jur. § 664-666 ;
Wats, on P. c. 8, p. 394-409, 2d ed ; {Cross v. Cheshire, 7 Exch. 43 ; Cham-
berlain V. Walker, 10 All. 429 ; Paine v. Thaoher, 25 Wend. 450 ; Roberts
V. Fitler, 13 Penn. St. 265; Wright v. Michie, 6 Gratt. 354; Edens v.
Williams, 36 111. 252 ; Elder v. Hood, 38 111. 533. See Coleman v. Cole-
man, 12 Rich. 183.}
* Gow on P. c. 2, § 3, p. 77-79; Holmes v. Higgins, 1 B. & C. 74;
IMilburn v. Codd, 7B. «& C. 419 ; [Caldicott v. Griffiths, 8 Exch. 898 ; s. c.
22 Eng. L. & Eq. 527] ; Xeale v. Turton, 4 Bing. 149 ; league v. Hubbard,
8 B. & C. 345; Geddes v. Wallace, 2 Bligh, 270; Coll. on P. B. 2, c. 3,
§ 2, p. 174-178, 2d ed. ; Worrall v. Grayson, Tyrw. & G. 477, 480; s. c.
1 M. & W. 166 ; Brown v. Tapscott, 6 M. & W. 119, 123; BoviU v. Ham-
mond, 6 B. & C. 149; Pearson v. Skelton, 1 M. & W. 504; s. c. Tyrw. &
G. 848 ; Sadler v. Nixon, 5 B. & Ad. 936 ; Haskell v. Adams, 7 Pick. 59 ;
1 Story, Eq. Jur. § 679-681 ; {Harris v. Harris, 39 N. H. 45; Ordiorne v.
Woodman, 39 N. H. 541; White v. Harlow, 5 Gray, 463; Ives v. Miller,
19 Barb. 196 ; Crottes v. Frigerio, 18 La. Ann. 283 ; De Jarnette v, Mc-
Queen, 31 AJa. 230. } [In a late English case. A., B., & C. were shareholders
in a joint-stock mining company, and money being necessary to carry on
the mine, a loan was made upon the joint and several promissory note of
the three, and applied to the use of- the mine. A. being compelled to pay
the whole note, was allowed to sue the others for contribution. Sedgwick
V. Daniell, 2 H. & N. 319. So, also, if partners, by an express agreement,
separate a distinct matter from the partnership dealing, and one party
expressly agrees to pay the other a specific sum for that matter, assumpsit
will lie on that promise, although the matter arose from their partnership
dealing. Collamer v. Foster, 26 Vt. 754.]
CHAP. XI.] REMEDIES BETWEEN PARTMERS. 363
by one partner on account of liabilities of the partner-
ship, resulting from contracts binding the same ; but it
equally applies to moneys paid, and debts incurred, and
contributions made, by one partner on account of negli-
gences and torts, affecting the partnership.^ In the
ordinary course of things there is not, indeed, as is well
known, any right of contribution allowed by the com-
mon law between joint wrong-doers, where one has
paid the whole damages or expenses occasioned there-
by.^ And this rule is just as applicable to partners as
to other persons.^ But, then, the rule is to be under-
stood according to its true sense and meaning, which is,
where the tort is a known, meditated wrong, and not
where the party is acting under the supposition of the
entire innocence and propriety of the act, and the tort
is merely one by construction or inference of law.^ In
the latter case, although not in the former, there may
be, and properly is, a contribution allowed by law, for
such payments and expenses between the constructive
wrong-doers, whether partners, or not.° Still, however,
the same difficulty occurs at law in such cases of con-
structive torts, as in cases of contracts ; and no remedy
at law is maintainable therefor between the partners.
The remedy, as we shall presently see, must be admin-
istered in another tribunal.^
1 Pearson v. Skelton, 1 M. & W. 504; s. c. Tyrw. & G. 848.
^ Merryweather v. Nixan, 8 T. R. 186.
» Pearson v. Skelton, 1 M. & W. 504 ; s. c. Tyrw. & G. 848.
* Adamson v. Jarvls, 4 Bing. 66. ° Ibid.
« Pearson v. Skelton, 1 M. & W. 504; s. c. Tyrw. & G. 848. — In
this case Baron Parke is reported, in Tyrw. & G. 850, 851, to have said:
" How were the profits divided? Did the partners divide the net profits,
after the payment of all expenses, or the gross profits according to the
number of miles that each partner horsed the coach ? If the latter was the
case, there was no common fund, and you will be entitled to a rule ; but if
there was a partnership fund, out of which losses were to be paid, your
remedy is in equity. We will consult the Lord Chief Justice, and ascertain
364 PARTNERSHIP. [CHAP. XI.
§ 221. The ground, why at law, independent of any
special covenant, or any distinct several contract, one
partner cannot maintain a suit against the other part-
ners, for moneys paid, or advanced, or contributed, or
liabilities incurred, on account of the partnership/ may be
readily explained in a satisfactory manner. In the first
place, upon the mere technical principles of the common
law, one partner cannot sue the others for a contribution
or payment made for a just partnership liability ; for in
such a suit all the partners, including himself, must be
made defendants ; and it is clear, upon the acknowledged
principles of pleading at the common law, that a party
cannot at once be a plaintiff and a defendant in the same
suit ; or, in other words, he cannot sue himself, either
alone, or in conjunction with others.^ But a reason, far
what evidence he has upon his notes, as to the existence of a partnership
fund. With respect to the first objection taken at the trial, it does not
apply." On a subsequent day Parke, B., said, "that on consulting the
notes of the Lord Chief Justice, it appeared that there was a partnership
fund, out of which the expenses were first to be paid, and the residue
divided among the partners ; consequently the nonsuit was right." See
ante, § 61, and note.
' [Or for neglect of the partnership business. Capen v. Barrows, 1
Gray, 376.]
2 Coll. on P. B. 2, c. 3, § 2, p. 188-193, 2d ed. ; Bosanquet v. Wray, 6
Taunt. 597 ; MofFatt v. Van Millingen, cited 2 B. & P. 124, note ; Mainwaring
V. Newman, 2 B. & P. 120 ; De Tastet v. Shaw, 1 B. & Aid. 664 ; Neale v.
Turton, 4 Bing. 149 ; Teague v. Hubbard, 8 B. & C. 345 ; Brown v. Tap-
scott, 6 M. & W. 119, 123 ; Holmes v. Higgins, 1 B. & C. 74 ; Malyne's
Lex Merc. p. 310; Niven v. Spickerman, 12 Johns. 401; 1 Story, Eq. Jur.
§664,665,679; Jones v. Yates, 9 B. & C. 532; [Rawlinson v. Clarke, 15
M. & W. 292; Cruikshank v. M'Vicar, 8 Beav. 106] ; {Met. on Contr.
131, 132.} — In this respect the Roman law, the law of France, and the law
of Scotland, present a marked contrast to the common law. In the juris-
prudence of each of these latter countries, the firm is treated, in its aggre-
gate capacity, as having an independent existence, somewhat like a quasi
corporation ; and the firm may, therefore, sue and be sued, by a single
partner, without any repugnancy, exactly as a member of a corporation
may sue and be sued by the corporation itself. In this respect there
is an analogy to the proceedings in our Courts of Equity, where one
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 365
more satisfactory, because it is in no shape founded
upon technical principles, is, that until all the partner-
partner is entitled to sue all the other partners, for an adjustment of the
partnership concerns, or for any transactions growing out of the same con-
cerns. Mr. Bell (2 Bell, Comm. B. 7, p. 619, 620, 5th ed.) states the Scot-
tish law as follows : " Some lawyers have considered the obligation of the
company as only the joint and several obligations of the partners. But
this is not correct in the law of Scotland. The partnership is held as, in
law, a separate person ; capable of maintaining independently the relations
of debtor and creditor. As a separate person, the company is known and
recognized in obligations and contracts by its separate name or firm, as its
personal appellation. But it cannot hold feudal property in the so-
cial name. It is a consequence of this separate existence of the company
as a person, that an action cannot directly, and in the first instance, be
maintained against a partner for the debt of the company. The demand
must be made, first, against the company ; or the company must have failed
to pay, or have dishonored their bill, before the partner can be called on.
It also follows that the partners are guarantees or sureties for the company ;
not proper or principal debtors. And so, although diligence may proceed
against the partners directly, the company having failed to pay according to
their obligation ; and although personal diligence necessarily can proceed
only against the individuals, the estate of the partner can, in bankruptcy, be
charged only with the balance remaining due, after what may be drawn from
the company estate. Another consequence is, that the creditors of a part-
ner, if they would attach his share, must arrest in the hands of the company
as a separate person. Action or diligence seems to be legally competent by
a company firm, or against the partnership by its firm ; though personal ex-
ecution, of course, is possible only against the individuals. But so many
doubts have been raised of late on these points, that the safer course is to
use the names of the partners. Sequestration of the company''s estate pro-
ceeds in the name of the firm. In England, a doctrine prevails, which does
not accord with the law of Scotland, and which, perhaps, is to be ascribed
to a difference of principle, on the point now under discussion. At law, in
England, there can be no debt between two partnerships, of each of which
one person is a partner ; and this on the ground, that ' no man can con-
tract with himself, and, therefore, cannot bind himself in the society of one
set of persons to another, in which he is also a partner.' It is allowed that
the contract is available in equity, but not in law. In Scotland, debts be-
tween companies, in which the same individual is partner, are every day
sustained as quite unexceptionable." See Poth. de Soc. n. 135, 136. The
Roman law, while it ordinarily gave the action pro socio only in cases of a
dissolution of the partnership, excepted special cases. Nonnunquam necessa-
rium est, et manente societate, agi pro socio ; veluti, cum societas, vectiga-
lium causa, coita est, propter([ue varios contractus neutri expcdiat recedere
a societate, nee refertur in medium, quod ad alterum pervenerit. D. 17,
2, 65, 15 ; Id. 17, 2, 52 ; Poth. Pand. 17, 2, n. 33.
366 PARTNERSHIP. [cHAP. XI.
ship concerns are ascertained and adjusted, it is impossi-
ble to know whether a particular partner be a debtor or
a creditor of the firm ; for although he may have ad-
vanced large sums of money on account thereof, he may
be indebted to the firm in a much larger amount. Now,
a settlement of all the partnership concerns is ordina-
rily, during the continuance of the partnership, unat-
tainable at law ; and even in equity it is not ordinarily
enforced, except upon a dissolution of the partaership.
If one partner could recover against the other partners
the whole amount paid by him on account of the part-
nership, they would immediately have a cross action
against him for the whole amount, or his share thereof;
and if he could recover only their shares thereof, then,
in order to ascertain those shares, a full account of all
the partnership concerns must be taken, and the part-
nership itself wound up. This would manifestly be a
most serious inconvenience, as well as a change of the
original contract, from a joint contract of all the part-
ners, ill solido, to a several contract, each for his own
aliquot part of the final balance, due to a particular
partner upon a special transaction.^ And in cases of
this sort the maxim may justly apply : Friistra petis^
quod statim alteri reddere cogeris : ^ or, as it is some-
times expressed, Frustra peteret, quod mox restiturus
esset.^
§ 222. But, although, in cases of the sort above men-
tioned, no remedy lies at law, yet in equity an appro-
priate remedy may and will be granted, wherever it is
ex cequo et bono necessary and proper ; for, in equity,
there is no difficulty in one partner's suing the other
1 Coll. on P. B. 2, c. 3, § 2, p. 174-193, 2d ed. ; Harvey v. Crickett, 5
M. & S. 336 ; Gow on P. c. 2, § 3, p. 69-77, 3d ed. ; Id. c. 2, § 4, p. 93-102 ;
{Towle V. Meserve, 38 N. H. 9 ; Stoddard v. Wood, 9 Gray, 90.}
* Branch, Maxims, p. 51, Am. Ed. 1824 ; Jenkins, Cent. 25G.
=> Coll. on P. B. 2, c. 3, § 2, p. 175, 2d ed. ; 1 Story, Eq. Jur. § 664.
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 367
partners for money advanced, or contributions made, or
liabilities incurred, simply on the ground that it has
its foundation in a partnership transaction, if in other
respects the suit is unobjectionable, as no technical
difficulty occurs in equity, as to the joinder of all the
proper parties to the suit.^ Indeed, the ordinary remedy
now administered, in matters of account, or requiring
an account between partners, is exclusively in equity.^
But this subject, which is rarely if ever acted upon
in Courts of Equity, except upon a dissolution of the
partnership, will more appropriately occur in another
place.^
§ 223. The Roman law did not to the same extent
or precisely in the same manner as our law, recognize
the distinction between remedies at law and remedies in
equity, although it is very clear, that an analogous dis-
tinction, between suits in the ordinary forum, and suits
ex cequo et bono before the Praetor's forum, was well un-
derstood, and fully acted upon. But, in cases of part-
nership, owing to the complicated nature thereof, a
special remedy was provided, commonly called the Actio
2)ro socio, the nature, character, and operation whereof
are fully explained in the Digest.''
§ 224. And, here, a question, of a local and general
> Coll. on P. B. 2, c. 3, § 2, p. 174-193, 2d ed. ; Id. c. 3, § 7, p. 245-249 ;
Abbot V. Smith, 2 W. Bl. 947 ; Gow on P. c. 2, § 4, p. 93-102, 3d ed. ; 1
Story, Eq. Jur. § 666-674 ; Id. § 679, 680 ; Pearson v. Skelton, 1 M. & W.
504 ; s. c. T\Tw. & G. 848.
2 Coll. on P. B. 2, c. 3, § 4, p. 197-232, 2d ed. ; Duncan v. Lyon,
3 Johns. Ch. 351, 361-363; Gow on P. c. 2, § 3, p. 73, 74, 3d ed. ; Id. c.
2, § 4, p. 93-102.
3 Ibid. ; post, § 228, 229 ; Forman v. Hoinfray, 2 Ves. & B. 329 ; Har-
rison V. Armitage, 4 Madd. 143 ; Richards v. Davies, 2 Russ. & M. 347 ; Los-
combe V. Russell, 4 Sim. 8 ; Knebell v. White, 2 You. & C. Ex. 15 ; Glassing-
ton V. Thwaites, 1 Sim. & St. 124, and the Reporter's notes (a) and (b) ;
Natusch V. Irving, Gow on P. App. 398, 3d ed. ; Wallworth v. Holt, 4 Myl.
& C. 619, 635, 639.
* Dig. 17, 2, 31-34, &c. ; Poth. Pand. 17, 2, n. 30-54.
368 PARTNERSHIP. [cHAP. XI.
nature may arise, when, and under what circumstances,
and to what extent, Courts of Equity will interfere to
enforce either the express or implied duties and obliga-
tions of partners inter sese. In respect to such duties
and obligations as are of a positive and personal nature,
it seems difficult to perceive how Courts of Equity can
enforce a specific performance of them ; and, therefore,
in case of a breach thereof, the injured party must be
left to his remedy, if any, at law.^ But the same objec-
tion does not seem to iipply to cases where the relief
sought is to enforce the due observance of negative
duties and obligations ; for, here, all that is required is,
that the Court should restrain the partner from violat-
ing them ; or. in other words, from doing acts which
violate the express or implied obligation which he is
under to forbear. Thus, for example, although a Court
of Equity could not compel a partner to bestow his
skill, and diligence, and services faithfully in the part-
nership business, yet it may interpose by injunction to
restrain him from wasting the partnership property,
from misusing the partnership name, from interfering
to stop the partnership business, or from fraudulent
practices injurious or ruinous to the partnership, in vio-
lation of his express duties or express contracts."
' Kemble v. Kean, 6 Sim. 333 ; Clarke v. Price, 2 Wils. Ch. 157 ;
Kimberley v. Jennings, 6 Sim. 340 ; [Downs v. Collins, 6 Hare, 418] ; Coll.
on P. B. 2, c. 2, § 2, p. 142, 2d ed. ; Id. B. 2, c. 2, § 1, p. 131 ; 2 Story,
Eq. Jur. § 722 a.
2 Ibid. ; Coll. on P. B. 2, c. 3, § 5, p. 233-240, 2d ed. ; Id. B. 2, c. 2, §
2, p. 142 ; 3 Kent, 60; Miles v. Thomas, 9 Sim. 606. — The comments of the
Vice-Chancellor (Sir L. Shadwell) on this subject, in Kemble v. Kean, 6 Sim.
333, are so important, that they deserve to be cited at large. "In the case of
a mere contract between two persons, who are both carrying on the same trade,
that one shall not cany on his trade within a limited distance in which the
party contracted with intends to carry on his trade, the whole agreement is of
so genuine a kind, that the Court would enforce the performance of the agree-
ment by restraining the party by injunction from breaking the agreement so
made. In the case where the parties are partners, and one of the partners
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 369
§ 225. A few illustrations of the general doctrine
may be here properly introduced. Courts of Equity,
contracts that he shall exert himself for the benefit of the partnership, though
the Court, it is true, cannot compel a specific performance of that part of the
agreement, yet, there being a partnership subsisting, the Court will restrain
that party (if he has covenanted that he will not carry on the same trade
with other persons) from breaking that part of the agreement. That is in
case of a partnership. In the case of Morris v. Colman, 18 Ves. 437, the
bill was fil<;d by ]Morris against Colman for the purpose of having a question
upon the articles of partnership determined, and for restraining Colman from
doing many acts which he was disposed to do ; and I think, in that case (for
I was counsel for Colman from the beginning to the end), that Colman al-
ways stood on the defensive. The only question was, whether Colman should
be at liberty to do certain acts, which he insisted he was at liberty to do, and
Morris contended that he was not. Xow, I apprehend, that what Lord El-
don says, in giving his judgment upon that point, must be taken with refer-
ence to the subject that was before him ; and I perfectly well recollect the
time when the injunction was granted to restrain Mr. Colman, but I am not
quite sure it is exactly in the way in which the report represents. But Col-
man insisted, generally, tliat he had a right to write dramatic pieces for other
theatres ; and then there was an injunction granted to restrain the represen-
tation of one of the pieces which he had written, and which was intended to
be represented, I think, at Covent-garden Theatre. In the argument jt was
said, that the particular provision which is stated in the case, was a provision
restraining Colman from writing dramatic pieces for any other theatre ; and
in the argument it was said by the counsel for the plaintiff, that that provi-
sion was no more against public policy, than a stipulation that Mr. Garrick
should not perform at any other theatre than that at which he was engaged,
would have been. Xow, with reference to what was said by counsel, upon
arguing the case of a partnership, Lord Eldon says : ' If Mr. Garrick was
now living, would it be unreasonable that he should contract with Mr. Col-
man to perform only at the Haymarket Theatre, and Mr. Colman with him to
write for that theatre alone ? Why should they not thus engage for the tal-
ents of each other ? ' That mode of putting the question appears to me to
show, that Lord Eldon is speaking of a case Avhere the parties are in part-
nership together ; because it would be a strange thing that one should con-
tract to perform only at the Haymarket Theatre, and the other to write for
that theatre alone, except in the case of a partnership, where botii parties
would be exerting themselves for their mutual benefit; because if they were
not in partnership, the effect of such an agreement might be, that neither
might exert his talents at all. In this case, however, there is no partnership
whatever between the proprietors of Covent-garden Theatre and Mr. Kean ;
but the contract is nothing more than this, that ^Ir. Kean shall, for a given
remuneration, act a certain number of nights at Covent-garden Theatre,
with a proviso, that in the mean time he shall not act at any other theatre.
24
370 PARTNERSHIP. [cHAP. XI.
in interfering by way of injunction in cases of part-
nership, act upon a sound discretion, and will not
And it is quite clear, that this bill is filed for the purpose of having the per-
formance of an agreement with regard to his contract to act. [His Honor
here stated the substance of the bill, and then proceeded] ; — So that it was
an agreement to act at Covent-garden Theati-e, a certain number of nights in
the season, 1830-31, and that, in the mean time, the defendant should not
act in London ; and the bill is filed for the purpose of enforcing the per-
formance of that agreement, which mainly consists in the fact of his acting;
and it appears to me, that it is utterly impossible that this Court can execute
such an agreement. In the first place, independently of the difficulty of
compelling a man to act, there is no time stated, and it is not stated in what
characters he shall act ; and the thing is altogether so loose, that it is per-
fectly impossible for the Court to determine upon what scheme of things
Mr. Kean shall perform his agreement. There can be no prospective
declaration or direction of the Court, as to the performance of the agree-
ment ; and, supposing Mr. Kean should resist, how is such an agreement to
be performed by the Court ? Sequestration is out of the question ; and
can it be said, that a man can be compelled to perform an agreement to act
at a theatre by this Court sending him to the Fleet for refusing to act at all ?
There is no method of arriving at that which is the substance of the contract
between the parties, by means of any process, which this Court is enabled
to issue ; and, therefore (unless there is some positive authority to the con-
trary), my opinion is, that, where the agreement is mainly and substantially
of an active nature, and is so undetermined that it is impossible to have
performance of it in this Court, and it is only guarded by a negative pro-
vision, this Court will leave the parties altogether to a court of law, and
will not give partial relief by enforcing only a negative stipulation. I
think, for the reasons which I have stated, that what Lord Eldon has said in
the case of Morris v. Colman, bears upon this case. In Clarke v. Price, 2
Wils. Ch. 157 (in which, also, I was counsel), there was a positive stipula-
tion, by Price, that he would write reports for Clarke the bookseller. Lord
Eldon says, in his judgment, upon that case: 'The case of Morris v. Col-
man is essentially different from the present. In that case, Morris, Colman,
and other persons were engaged in a partnership in the Haymarket Theatre,
which was to have continuance for a very long period, as long indeed as the
theatre should exist. Colman had entered into an agreement, which I was
very unwilling to enforce, not that he would write for the Haymarket
Theatre, but that he would not write for any other theatre. It appeared to
me, that the Court could enforce that agreement by restraining him from
writing for any other theatre. The Court could not compel him to write for
the Haymai'ket Theatre ; but it did the only thing in its power ; it induced
hira, indirectly, to do one thing by prohibiting him from doing another.
There was an express covenant on his part, contained in the articles of
partnership. But the tei'ms of the prayer of this bill do not solve the diffi-
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 371
incerfere to remedy any breaches of duty, unless they
are of such a nature, as may produce permanent injury
to the partnership, or involve it in serious perils or
mischiefs in future. A mere fugitive, temporary breach,
involving no serious evils or mischiefs, and not endan-
gering the future success and operations of the part-
nership, will, therefore, not constitute any case for
equitable relief.^ It is upon this ground, that Courts
of Equity will not interfere in cases of frivolous vexa-
tion, or for mere differences of temper, casual disputes,
or other minor grievances between the parties ; but
will deem, as in some other more important relations
in life, that the parties enter into them with a fair un-
derstanding, that such infirmities are to be borne with,
and that a separation of interests, or an injunction
against acts, is not to be decreed, because one of the
parties is more sullen or less good-tempered than the
other.^
§ 226. It was upon the same ground of the fugitive
culty ; for, if this contract is one which the Court will not carry into execu-
tion, the Court cannot, indirectly, enforce it by restraining Mr. Price from
doing some other act.' His Lordship then proceeds to observe upon the
express terms of the contract, and says, that he will not, in that case, inter-
fere to enforce an implied negative stipulation ; for that is the utmost that
can be made of his Lordship's observations in that case. For the reasons,
which I have stated, I am of opinion, that, if this cause were now being
heard, and the agreement were admitted to be such, as it appears to be, this
Court could not make any decree, but must dismiss the bill." See 2 Story,
Eq. Jur. § 958, and note. See also the doctrine of the Roman law on
this subject (ante, § 181), where it is stated, that the action ^7?'o socio for an
account did not lie until after a dissolution of the partnership ; but it did in
certain special partnerships, such as a partnership for collection of the
public revenue (Causa Vectigalium).
' Coll. on P. B. 2, c. 3, § 5, p. 236, 2d ed. ; Charlton r. Poulter, 19 Ves.
148, n. ; Goodman v. Whitcomb, 1 Jac. & W. 589, 592 ; Miles v. Thomas, 9
Sim. 606, 6U9. {See Petit v. Chevelicr, 2 Beasl. 181. }
2 Goodman v. Whitcomb, 1 Jac. & W. 589, 592 ; Coll. on P. B. 2, c. 2, § 2,
p. 131, 2d ed. ; ante, § 218 ; {Cofton v. Horuer, 5 Price, 537. See Anderson v.
Anderson, 25 Beav. 190.}
372 PARTNERSHIP. [CHAP. XI,
or temporary nature of the breach of the stipulation,
that, where a covenant in the partnership articles pro-
vided, that the business should be carried on in the
joint names of all the partners, and that all contracts
and engagements on account of the trade, and all
checks and drafts drawn by them, and all receipts of
money paid, should be in the joint names of all the
partners, and some of them afterwards refused to fulfil
the covenant, and to add the name of the plaintiff to
certain contracts, entered into for and on account of
the firm, the Court refused to interfere by way of in-
junction.^
§ 227. On the other hand, where one partner has
improperly involved the partnership in debt, or has
himself become insolvent, or has otherwise grossly
misconducted himself. Courts of Equity will interpose,
and restrain him from drawing, accepting, or indorsing,
bills or notes in the name of tlie firm, or from contract-
ing, or receiving partnership debts.^ So, an injunction
will be granted against a partner, who grossly and
wantonly obstructs, injures, or prevents the carrying
on of the partnership business ; ^ or who designedly
misapplies the property of the partnership to purposes
not warranted by the articles or the objects of the
1 Marshall v. Colman, 2 Jac. & W. 266.
2 Coll. on P. B. 2, c. 3, § 5, p. 233, 234, and note (b), 2d ed. ; WilHams v.
Bingley, 2 Vern. 278, Mr. Raithby's note; Master r. Kirton, 3 Ves. Jr. 74 ;
Lawson v. Morgan, 1 Price, 303 ; Hood v. Aston, 1 Russ. 412; Gow on P.
c. 2, § 4, p. 108, 109, 3d ed. ; 1 Story, Eq. Jur. § 667; Miles v. Thomas, 9
Sim. 606 ; {England v. Curling, 8 Beav. 129.}
^ Charlton v. Poulter, 19 Ves. 148, note; {Smith v. Jeyes, 4 Beav.
503 ; Hall v. Hall, 12 Beav. 414 ; s. c. 20 Beav. 139 ; s. c. 3 Macn. & G. 79 ;
AVarder v. Stihvell, 3 Jur. n. s. 9 ; Anon. Z. v. X. 2 Kay. & J. 441 ; Lind on.
P. 840. An injunction will be granted to restrain the taking away of part-
nership books. Taylor v. Davis, 3 Beav. 388, note ; Greatrex v. Greatrex, 1
Dc G. & Sm. 692. See Morison v. Moat, 9 Hare, 241 ; Marshall v. Watson,
25 Beav. 501.}
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 373
trade.' If, therefore, a partnership negotiable security
is misapplied to the payment of the separate debt of
one partner, an injunction will be granted to restrain
its further negotiation, and to require it to be restored
to the partnership, or cancelled, as the case may require,
unless, indeed, it has passed into the hands of a bona
fide holder, without notice of the misapplication.^
§ 228. Independently of the administration of relief
by Courts of Equity in the cases to which we have
alluded, they will, it seems, in some instances, inter-
pose and appoint a receiver of the joint effects, during
the continuance of the partnership. But to authorize
a partner to call for the appointment of a receiver of
the stock of a subsisting partnership, he must be pre-
pared to show a case of the grossest abuse and the
strongest misconduct on the part of the managing
partner ; for, except under such ch'cumstances, the
Court will not interfere, inasmuch as the probable
* Glassington r. Thwaites, 1 Sim. & St. 124, aud the Reporter's note (a).
{Stockdale v. Ullery, 37 Penn. St. 486.}
^ Coll. on P. B. 2, c. 3, §5, p. 233-236, 245, 2d<ed.; Hood v. Aston, 1
Russ. 412,413; ante, § 132; Jervis r. White, 7 Ves. 414; Gow on P. c. 2,
§ 4, p. 108, 109, 3d ed. ; Littlewood v. Caldwell, 11 Price, 97; 1 Story, Eq.
Jur.§667, 669. —In Hood w. Aston, 1 Russ. 412, 415, Lord Eldon said: "The
mere circumstance, that a partner gives a partnership bill for his separate debt,
may, or may not, lay a ground for the issuing of an injunction against its ne-
gotiation ; for the person who takes it may or may not have some reason for
supposing that his debtor had a right or authority so to use the partnership
name. But where it appears, that an individual partner indebted to the part-
nership, being unable to pay his separate bill, holden by his bankers, substi-
tutes for it, by a negotiation with them, a partnership security, made and
given without the consent or knowledge of his copartners, and the bankers
are aware, that it is so given without their consent or knowledge ; — that is a
case, which comes within the principle, upon which the Court has always been
in the habit of interfering by injunction." Where a partnership negotiable
security has been misapplied by a partner, if it is in the hands of a third per-
son as holder, and relief is sought against him, he also, as well as the oilending
partner, should be made a party to the bill. See Coll. on P. B. 2, c. 3, § 7,
p. 245, 246, 2d ed.
374 PARTNERSHIP. [CHAP. XI.
result of its interposition will be the destruction of
the trade. Nor will a receiver be appointed upon a
summary application, where there is a covenant to refer,
and no attempt has been made to submit the matter in
dispute to arbitration. But if, in the ordinary course
of the trade, any of the partners seek to exclude
another from taking that part in the concern, which he
is entitled to take, the Court will grant a receiver ;
because such conduct will warrant a dissolution. The
principle, indeed, upon which the Court of Chancery
interferes between partners, by appointing a receiver,
is merely with a view to the proper relief, by winding
up and disposing of the concern, and dividing the
produce, and not for the purpose of carrying on the
partnership.^
§ 229. But in all cases of this sort, where an injunc-
tion is sought to restrain improper acts by a partner, a
very serious question may arise, whether the Court
will interfere, unless the bill not only asks for an in-
junction, but also for a dissolution of the partnership.
Indeed, it has been a matter of no small diversity of
judicial opinion, how far a Court of Equity ought to
interfere in such cases, unless for the purpose of dis-
solving the partnership and winding up the whole con-
cern ; since it may involve the Court in perpetual con-
troversies to enforce the observance of the articles, as
often as, during the long continuance of a partnership,
' Gow on P. c. 2, § 4, p. 114, 3d ed. — I have cited almost the \ery lan-
guage of Mr. Gow on this occasion. He cites Oliver v. Hamilton, 2 Anst.
453 ; Milbank v. Revett, 2 Mer. 405 ; Waters v. Taylor, 15 Ves. 10 ; Wilson
V. Greenwood, 1 Swans. 471, 481; Charlton v. Poulter, 19 Ves. 148, note;
and Wallworth v. Holt, 4 Myl. & C. 619, 635, 639. [See .also Bailey v. Ford,
13 Sim. 495; Whitewright v. Stimpson, 2 Barb. 379; Wolbert r. Harris, 3
Halst. Ch. 605 ; Blakeney v. Dufaur, 15 Beav. 40 ; s. c. 15 Eng. L. &Eq. 76 ;
ParkhurstiJ. Muir, SHalst. Ch. 307 ; Speights v. Peters, 9 Gill, 472] ; {§231,
330. {
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 375
any specific breach may occur ; which is a species of
jurisdiction, which Courts of Equity are not at all dis-
posed to entertain.^ It is very certain, however, that,
> Marshall v. Colman, 2 Jac. & AV. 266; Gow on P. c. 2, § 4, p. 111-
113, 3d ed. ; Coll. on P. B. 2, c. 3, § 5, p. 236-238, 2d ed. ; Goodman v.
Whitcomb, 1 Jac. & W. 589, 592 ; Loscombe v. Russell, 4 Sim. 8 ; Knebell
V. White, 2 You. &C. Ex. 15 ; Bentleyr. Bates, 4 Jur. 552 ; Gow on P. Suppl.
1841, p. 24, 25 ; 1 Story, Eq. Jur. § 671. — On this point Mr. Gow (Gow on
p. c. 2, § 4, p. Ill, 112, 3d ed.) says : " Courts of Equity will liliewise in-
terfere, where a breach of any of the covenants, contained in the articles of
partnership, has been committed, if the breach be so important in its conse-
quences as to authorize the party complaining to call for a dissolution of the
partnership. One case of constant occurrence, falling under this head of
equitable relief, is that of a partner raising money for his private use on the
credit of the partnership firm. In a case so circumstanced, the Court inter-
poses, because there is a ground for dissolving the partnership. But then
the impending danger must be such, there must be that abuse of good faith
between the members of the partnership, that the Court will try the ques-
tion, whether the partnership should not be dissolved inconsequence. Thus,
where it has been covenanted, that all contracts entered into by any of the
firm, and all checks, bills, and receipts for money, should be signed in the
joint names of all the partners, a Court of Equity will restrain one partner
from entering into any engagement in the name of ' himself and company,'
or ' himself and partners,' or will dissolve the partnership. Were the Court
not to lay down this rule for its guidance, separate suits might be successively
instituted, praying for perpetual injunctions in respect of the breach of each
particular covenant, which is a species of jurisdiction the Court has never
decidedly entertained. So, if one partner exclude another from the benefits
of the concern, the Court will interfere and dissolve the partnership ; and
it assumes a jurisdiction on this ground, that if the partners will not allow
the partnership to be carried on in the manner in which it ought to be, it is
a reason for putting an end to it altogether. I^Teither will a Court of Equity
assist in the management of the affairs of a company during its existence ;
but if a sufficient case is made out to justify its interposition, it will ap^Joint
a manager in the interim, for the purpose of winding up and putting an end
to the concern. But although the general principle of the Court is not to
interfere in a partnership concern, unless the bill prays a dissolution ; yet
there are cases of partnership for a term of years, in which it has been said
the Court will interpose during the term, notwithstanding a dissolution be
not prayed. Thus, where some of the members of a partnership or com-
pany seek to embark one of their body in a business, which was not origi-
nally part of the partnership concern, and they are unable to show that such
partner either expressly or tacitly acquiesced in the proposed extension of
the concern, a Court of Equity would, it is apprehended, restrain them from
proceeding in the execution of their intention, without dissolving the part-
376 PARTNERSHIP. [CHAP. XI.
pending the partnership, Courts of Equity will not inter-
fere to settle accounts and set right the balance between
nership or company. So, -where a member of a firm neglected to enter the
receipt of partnership money in the books, and did not leave the books open
for the inspection of the other partners, equity interfered without dis-
solving the partnership. So, where there has been a studied, intentional,
prolonged, and continued inattention to the application of one partner call-
ing upon the other to observe the contract of partnership, the Court will
grant an injunction against the breach of it. And, in general, circum-
stances of the latter description must be disclosed, to induce a judicial inter-
ference on a breach of the articles of partnership, unless a dissolution be
prayed."'
Mr. Collyer (Coll. on P. B. 2, c. 3, § 5, p. 236) says: "It seems
clear, that a Court of Equitj' will sometimes award an injunction against
one partner, without dissolving the partnership ; perhaps even where the
delinquency of that partner is not sufficient to warrant a dissolution. At
any rate, it certainly seems to have been held, that a Court of Equity will
restrain the gross personal misconduct of a partner, without compelling a
dissolution of the partnership before the expiration of the term. In Charlton
V. Poulter, 19 Yes. 148, n., a bill was filed by Richard Charlton, senior,
and junior, partners in a brewery, charging great misconduct by the de-
fendant, the third partner, in disobliging and turning away the customers,
prevailing on the servants to leave the brewhouse, assaulting and obstruct-
ing them, causing them to quit their service, locking up the books, retaining
as servants (without the plaintiff's consent) bruisers and boxers, who ob-
structed the trade, threatening to ruin the trade, and refusing to account.
The bill prayed, that, at the end of the partnership, the stock and
utensils might be valued, and that the defendant might be compelled to
receive one third part of the value, and for an injunction resti-aining the
defendant from any act to the obstruction or the damage of the trade. On
motion, after answer, for an injunction, it was ordered, that the defendant
be restrained from using force, either by himself or any other person or
persons, to the obstruction or interruption of the brewing trade in question,
and from removing or displacing any of the servants hired or employed by
the partners, or the major part of them, in carrying on the trade, without
leave of the Court ; and from carrying away or removing out of the count-
ing-house belonging to the partnership any partnership books or papers
relating to the said trade ; and upon the plaintiff's submission, it was further
ordered, that the plaintiffs be restrained in like manner. The opinion, that
a partner's misconduct may be restrained by injunction, without the neces-
sity of a dissolution, is sanctioned by Lord Eldon in the case of Goodman v.
Whitcomb, 1 Jac. & W. 589. The parties in that case being partners
in the business of carpet manufacturers, the bill was filed for a dissolution
of the partnership, and the usual accounts. One of the grievances stated in
the Ijill was, that the delondant had sold goods at an under price, and ex-
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 377
the partners, but await the reguhar wmding up of the
changed others for household furniture, •which he had appropriated to his
own use. Lord Eldon said, that trifling circumstances of conduct were not
sufficient to authorize the Court to award a dissolution. It was stated, that
the defendant had exchanged carpets for household furniture ; that, perhaps,
might be an improper act ; but still there might be a thousand reasons why
the Court should not do more than restrain him in future from so doing;
more particularly, as it was stated by the answer, that he did it, because he
thought it the best thing that could be done. A Court of Equity, however,
will be reluctant to award an injunction against a partner, unless there
be grounds for a dissolution ; and in many cases such a course would be
attended with obvious inconvenience to the parties. Marshall v. Colman,
2 Jac. & W. 266. And cases may arise where an injunction cannot with
propriety be granted, whether the parties do, or do not, contemplate a
dissolution of the partnership, and even though the party, against whom
the injunction is sought, may have acted contrary to the spirit of the part-
nership arrangements. Thus, two persons agreed to work a coach from
Bristol to London, one providing horses for a part of the road, and the
other for the remainder. In consequence of the horses of one having
been taken in execution, the other provided horses for that part which
had been undertaken by the first. He afterwards persisted in providing
horses for the whole journey, and claimed the whole profits. Upon a
motion for an injunction to restrain him from so working the coaches,
Lord Eldon refused the injunction. 'It is difficult,' said his Lordship, 'to
understand how such a case can be the proper subject of the jurisdiction
of this Court by injunction. If I enjoin the defendant from bringing
horses to convey the coaches between the limits in question, I must enjoin
the plaintiff from not bringing horses there. I cannot restrain the defend-
ant, unless I have the means of assuring him that he shall find the plain-
tiff's horses ready. I should otherwise enjoin him from doing that, which
if he omits to do, he will be liable to actions by every person whom he
has undertaken to convey from Bristol to London.' Smith v. Fromont, 2
Swans. 330. In this case Lord Eldon said, that a question might arise,
whether the plaintiff, showing that his horses were always ready, would not
be entitled to the same profit, as if they were used." See also Wilson v.
Greenwood, 1 Swans. 471, where Lord Eldon said, that in the ordinary
course of trade, if any one partner seek to exclude another from taking that
part in the concern, which he is entitled to take, the Court will grant a
receiver. Mr. CoUyer understands this declaration as applicable to cases
where a dissolution is not sought. Coll. on P. B. 2, c. 3, § 6, p. 240, 241,
' Richardson v. Bank of England, 4 Myl. & C. 165, 172, 173 ; post,
§ 348 a. u.
378 PARTNERSHIP. [cHAP. XI.
§ 230. The Roman law contained doctrine, which in
some measure proceeded upon similar considerations.
2d ed. [But this was shown not to be the true construction of that case, by
the Lord Chancellor in Hall v. Hall, 3 Macn. & G. 79.]
In the case of Loscombe v. Russell, 4 Sim. 8, the Vice-Chancellor
(Sir L. Shadwell) said: "I take this to be a bill, which purposelj^ avoids
the prayer for a dissolution ; and that it was not in the contemplation of the
plaintiff', that the partnership should be put an end to. It would, therefore,
be a surprise upon the parties to this record, if I were to deal with it, as if
a dissolution were sought. Here the partnership is still subsisting ; and the
bill is filed for an account merely of the dealings and transactions of the
partnership. With respect to the law of this Court upon this subject, there
is no instance of an account being decreed of the profits of a partnership, on
a bill which does not pray a dissolution, but contemplates the subsistence of
the partnership. The opinion of Lord Eldon upon this subject has been,
from time to time, expressed both before and since the decision of Harrison
V. Armitage. Suppose that the Court would entertain a bill like the pres-
ent, and direct an account to be taken of the dealings of a partnership, and
that it appeared, by the Master's report, that a balance was due from the
defendant to the plaintiff"; then, ujion further directions, the plaintiff" would
ask for an order, that the balance might be paid to him ; it would, however,
be competent to the defendant to file a supplemental bill, in order to show,
that, since the account was taken, a balance had become due to him from
the plaintiff", after giving the plaintiff" credit for the amount found due to him
by the Master ; and thus the matter might be pursued with endless changes,
and supplemental bills might be filed every year, that the partnership con-
tinued, and a balance would never be ascertained until the partnership ex-
pired, or the Court put an end to it. This Court will not always interfere
to enforce the contracts of parties ; but will, in some instances, leave them
to their remedy at law; as in the cases of agreements for the purchase of
stock, or for the building of houses. With respect to occasional breaches of
agreements between partners, when they are not of so grievous a nature, as
to make it impossible that the partnership should continue, the Court stands
neuter. But when it finds, that the acts complained of are of such a char-
acter as to show, that the parties cannot continue partners, and that relief
cannot be given but by a dissolution, the Court will decree it, although it is
not specifically asked. Here a dissolution is not prayed for ; and, if the
Court were to do what is asked, it would not be final. Having regard, then,
to the opinion expressed by Lord P^ldon, both before and aff;er the decision
in Harrison v. Armitage, my settled opinion is, that this bill cannot be main-
tained ; and, therefore, the demurrer must be allowed." In the recent case
of Miles V. Thomas, 9 Sim. 606, 609, the same learned judge said: "I
am of opinion, that the Court ought to interfere between copartners, when-
ever the act comjilained of is one that tends to the destruction of the part-
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 379
Ordinarily the action 2^'^^o socio did not lie to enforce a
right to a general account between partners until after
nersliip property, notwithstanding a dissolution of the partnership may not
be prayed."
Lord Cottenliam in the recent case of Wallworth v. Holt, 4 Myl. & C.
619, 635, 639, said: "When it is said that the Court cannot give relief of
this limited kind, it is, I presume, meant that the bill ought to have prayed
a dissolution, and a final winding up of the affairs of the company. How
far this Court will interfere between partners, except in cases of dissolution,
has been the subject of much difference of opinion, upon which it is not my
purpose to say any thing beyond what is necessary for the decision of this
case ; but there are strong authorities for holding that to a bill praying a
dissolution all the partners must be parties ; and this bill alleges that they
are so numerous as to make that impossible. The result, therefore, of these
two rules would be, — the one binding the Court to withhold its jurisdiction
except upon bills praying a dissolution, and the other requiring that all the
partners should be parties to a bill praying it, — that the door of this Court
would be shut in all cases in which the partners or shareholders are too nu-
merous to be made parties, which in the present state of the transactions of
mankind, would be an absolute denial of justice to a large portion of the
subjects of the realm, in some of the most important of their affairs. This
result is quite sufficient to show that such cannot be the law ; for, as I have
said upon other occasions, I think it the duty of this Court to adapt its prac-
tice and course of proceeding to the existing state of society, and not by too
strict an adherence to forms and rules, established under diffei-ent circum-
stances, to decline to administer justice, and to enforce rights for which there
is no other remedy. This has always been the principle of this Court, though
not at all times sufficiently attended to. It is the ground upon which the
Court has, in many cases, dispensed with the presence of the parties who
would, accoi'ding to the general practice, have been necessary parties. In
Cockburn v. Thompson, Lord Eldon says, ' A general rule, established for
the convenient administration of justice, must not be adhered to in cases in
which, consistently with practical convenience, it is incapable of application ; '
and again, ' The difficulty must be overcome upon this principle, that it is
better to go as far as jiossible towards justice than to deny it altogether.' If,
therefore, it were necessary to go much further than it is, in opposition to
some highly sanctioned opinions, in order to open the door of justice in this
Court to those who cannot obtain it elsewhere, I should not shrink from the
responsibility of doing so ; but in this particular case, notwithstanding the
opinions to which I have referred, it will be found that there is much more
of authority in support of the equity claimed by this bill than tliere is against
it. It is true that the bill does not pray for a dissolution, and that it states
the company to be still subsisting ; but it does not pray for an account of
partnership dealings and transactions, for the purpose of obtaining the share
of profits due to the plaintiffs, which seems to be the case contenqilated in
380 PARTNERSHIP. [cHAP.
XI.
a dissolution of the partnership. But in special cases,
as, for example, in cases where the partnership was for
the opinions to which I have referred ; but its object is to have the common
assets realized and applied to their legitimate purpose, in order that the plain-
tiffs may be relieved from the responsibility to which they are exposed, and
which is contrary to the provisions of their common contract, and to every
principle of justice. But whether the interest of the plaintiffs, in right of
which they sue, arises from such responsibility or from any other cause, can-
not be material ; the question being, whether some partners, having an inter-
est in the application of the partnership property, are entitled, on behalf of
themselves and the other partners, except the defendants, to sue such re-
maining partners in this Court for that purpose, pending the subsistence of
the partnership ; and if it shall appear that such a suit may be maintained
by some partners on behalf of themselves and others similarly circumstanced
against other persons, whether trustees and agents for the company, or stran-
gers being possessed of property of the company, it may be asked why the
same right of suit should not exist when the party in possession of such prop-
erty happens also to be a partner or shareholder ? In Chancey v. May, the
defendants were partners. In the Widows' Case, before Lord Thurlow, cited
by Lord Eldon, the bill was on behalf of the plaintiffs and all others in the
same interest, and sought to provide funds for a subsisting establishment. In
Knowles v. Houghton, 11th July, 1805, reported in Yesey, but more fully
in Collyer on the Law of Partnership, the bill prayed an account of part-
nership transactions, and that the partnership might be established ; and the
decree directed an account of the brokerage business, and to ascertain what,
if any thing, was due to the plaintiff in respect thereof; and the Master was
to inquire whether the partnership between the plaintiff and the defendant
had at any time, and when, been dissolved ; showing that the Court did not
consider the dissolution of the partnership as a preliminary necessary before
directing the account. In Cockburn v. Thompson, the bill prayed a disso-
lution ; but it was filed by certain proprietors on behalf of themselves and
others, and Lord Eldon overruled the objection that the others were not
parties. In Hichens v. Congreve, the bill was on behalf of the plaintiff and
the other shareholders, against other shareholders who were also directors,
not praying a dissolution, but seeking only the repayment to the company of
certain funds alleged to have been improperly abstracted from the partner-
ship property by the defendants ; and Sir Anthony Hart overruled a de-
murrer, and his decision was affirmed by Lord Lyndhurst. In Walbum v.
Ingilby, the bill did not pray a dissolution of partnership, and Lord Brough-
am, in allowing the demurrer upon other grounds, stated that it could not be
supported upon the ground of want of parties, because a dissolution was not
prayed. In Taylor v. Salmon the suit was by some shareholders, on behalf
of themselves and others, against Salmon, also a shareholder, to recover
property claimed by the company, which he had appropriated to himself;
and the Vice-Chancellor decreed for the plaintiff, which was affirmed on ap-
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 381
the collection of the public revenue (causa vectifjaViwn),
which partnership was held, on grounds of public pol-
peal. The bill did not pray a dissolution, and the company was a subsisting
and continuing partnership. That case and Hiehens v. Congreve differ from
the present in this only, that in those cases the partnerships were flourish-
ing and likely to continue, whereas in the present, though not dissolved,
it is. unable to carry on the purpose for which it was formed, an inability
to be attributed in part to the withholding that property which this bill
seeks to recover. So far this case approximates to those in which the
partnership has been dissolved ; as to which it is admitted that this Court
exercises its jurisdiction. This case also differs from the two last-men-
tioned cases in this, that the difficulty in which the plaintiffs are placed,
and the consequent necessity for the assistance of this Court, is greater in
tiis case; — no reason, certainly, for withholding that assistance. How
far the principle upon which these cases have proceeded is consistent with
the doctrine in Loscombe v. Russell, ' that in occasional breaches of con-
tract between partners, when they are not of so grievous a nature as to
make it impossible that the partnership should continue, the Court stands
neuter, will be to be considered if the case should ai'ise. It is not neces-
sary to express any opinion as to that in the present case ; but it may be
suggested that the supposed rule, that the Court will not direct an account
of partnership dealings and transactions, except as consequent upon a disso-
lution, though true in some cases, and to a certain extent, has been supposed
to be more generally applicable than it is upon authority, or ought to be
upon principle. It is, however, certain, that this supposed rule is directly
opposed to the decision of Sir J. Leach, in Harrison r. Armitage, and Rich-
ards V. Davies. Having referred to so many cases, in which suits similar to
the present have been maintained by some partners on behalf of themselves
and others, it is scarcely necessary to say any thing as to the objection for
want of parties; and as to the assignees of those shareholders who have be-
come bankrupts, those assigriees are now shareholders in their places, for
the purpose of any interest they have in the property of the company ; and,
as such, are included in the number of those on whose behalf the suit is
instituted. A similar objection was raised and overruled, in Taylor v. Sal-
mon, as to the shares of Salmon. Upon the authority of the cases to which
I have referred, and of the principle to which I have alluded, if it be neces-
sary to resort to it, I am of opinion that the demurrer cannot be supported ;
and that the usual order, overruling a demurrer, must be substituted for
that pronounced by the Yice-Chancellor." [See this case explained in Ilall
V. Hall, 3 Macn. & G. 79.]
In Fairthorne v. Weston, 3 Hare, 387, 391, Yice-Chancellor Wigram
said : " The argument for the defendant turned wholly upon the proposition,
that a bill praying a particular account is demurrable, unless the bill seeks
and prays a dissolution of the partnership ; in support of which, the case of
Loscombe v. Russell, and the cases there cited, were relied upon. That
382 PARTNERSHIP. [CHAP. XI.
icy, not to be dissolved, even by the death of one part-
ner, contrary to the common rule of that law, as to
general partnerships,^ an action jjro socio lay for an ac-
count during the existence of the partnership. Nonnun-
quam necessarium est, et nianente societate, agi pro
socio. Veluti cum societas, vectigalium causa coit
est (projpterque vcanos contractus neutri expediat rece-
dere a societate), nee refertur in medium, quod ad al-
terum j^erveneint.^
§ 231. Independently of the relief which Courts of
Equity are thus disposed to grant by way of injunction,
in order to prevent, suppress, or redress acts of miscon-
duct, and breaches of duty, and positive engagements
by any one partner, during the continuance of the
partnership, there is another auxiliary authority, which
is sometimes granted, and which, indeed, in many cases,
there may be cases to which the rule there laid down is applicable, I am not
prepared to deny, but the law as laid down in that case was never admitted
to be a rule of universal application. Harrison v. Armitage ; Richards v.
Davies. And the unequivocal expression of the opinion of Lord Cotten-
ham, in Taylor v. Davies and Walworth t\ Holt, of the Vice-Chancellor of
England, in Miles v. Thomas, and of Lord Langdale, in Richardson v.
Hastings, shows that there is no such universal rule at the present day;
and I cannot but add, that it is essential to justice that no such universal
rule should be sustained. If that were the rule of the Court, — if a bill in
no case would lie to compel a man to observe the covenants of a partner-
ship deed, — it is obvious that a person fraudulently inclined might of his
mere will and pleasure, compel his copartner to submit to the alternative of
dissolving a partnership, or ruin him by a continued violation of the part-
nership contract." See also 1 Story, Eq. Jur. § 667-672. {"Whatever
doubt there may formerly have been upon the subject, it is clear that an
injunction will not be refused simply because no dissolution of partnership
is sought." Lind. on P. 840. In Anon. Z. v. X. 2 Kay. & J. 441, an injunc-
tion Avas granted against partners, resti-aining them from preventing a co-
partner, who had recovered from a temporary attack of insanity, from tran-
sacting the business of the firm. In England v. Curling, 8 i>eav. 129, and
Hall V. Hall, 12 Beav. 414, s. c. 3 Macn. & G. 79, injunctions were
granted, though no dissolution was sought. See § 231, note.}
' D. 17, 2, 65, 9; Id. 17, 2, 59; Poth. Pand. 17, 2, n. 56, 57.
2 D. 17, 2, 65, 15; Poth. Pand. 17, 2, n. 33; ante, § 182, 221, note.
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 383
is indispensable to the complete protection and security
of the other partners, and that is, by the appointment
of a receiver to collect the debts and receive the assets
of the partnership.^ But this course is rarely advisable,
and indeed is never granted by Courts of Equity, un-
less where a case is made out of such gross abuse, and
misconduct on the part of one partner, that a dissolu-
tion ought to be decreed, and the affairs of the partner-
ship wound up.^
' Coll. on P. B. 2, c. 3, § 6, p. 240-244, 2d ed. ; ante, § 228, 229. [See
Bailey v. Ford, 13 Sim. 495.]
2 Coll. on P. B. 2, c. 3, § 6, p. 240-243, 2d ed. ; Gow on P. c. 2, § 4,
p. 114, 3d ed. {See § 228, 330.} — Mr. Gow has well summed up the
leading doctrines upon this subject, in a passage, a part of which has been
already cited (ante, § 228). He says: "Independently of the administra-
tion of relief by a Court of Equity, in the cases to which we have alluded,
it will, it seems, in some instances, interpose ; and, during the continuance
of a partnership, appoint a receiver of the joint effects. But to authorize
a party to call for the appointment of a receiver of the stock of a subsisting
partnership, he must be prepared to show a case of the grossest abuse, and
of the strongest misconduct, on the part of the managing partner ; for, ex-
cept under such circumstances, the Court will not interfere, inasmuch as the
probable result of its interposition is the destruction of the trade. Oliver v.
Hamilton, 2 Anst. 453 ; Milbank v. Revett, 2 Mer. 405. In a note to the
case of Glassington r. Thwaites, 1 Sim. & St. 124, 129, it is questioned by the
learned reporters, whether the Court will ever interfere on an interlocutory-
application for a receiver or injunction, in the case of a partnership, occa-
sioned by the acts of the parties, unless on circumstances clearly established,
of fraud, entire exclusion, or gross misconduct. Nor will a receiver be
appointed upon a summary application, where there is a covenant to refer,
and no attempt has been made to submit the matter in dispute to arbitration.
Waters v. Taylor, 15 Ves. 10. But if, in the ordinary course of trade, any
of the partners seek to exclude another from taking that part in the concern
wliich he is entitled to take, the Court will grant a receiver, because such
conduct warrants a dissolution. Wilson v. Greenwood, 1 Swans. 471 ; s. c.
1 Wils. Ch. 223. See also Read v. Bowers, 4 Bro. Ch. 441; Charl-
ton V. Poulter, 19 Ves. 148, n. The principle, indeed, upon which the
Court of Cliancery interferes between partners, by appointing a receiver,
is merely with a view to the relief, by winding up and disposing of the con-
cern, and dividing the jJroduct, but not for the purpose of carrying on the
partnership. Waters v. Taylor, 15 Ves. 10. Therefore, a receiver of a
partnership Avill not be appointed upon motion, unless it appear that the
plaintifi' will be entitled to a dissolution at the hearing ; for otherwise the
384 PARTNERSHIP. [cHAP. XI.
§ 232. To the foregoing enumeration of cases of reme-
dial justice, administered by Courts of Equity between
Court might make itself the manager of every trade In the kingdom. Good-
man V. Whitcomb, 1 Jac. & W. 589 ; Chapman v. Beach, Id. 594 ; Harrison
V. Armitage, 4 Madd. 143. And where it seems absokitely necessary that
a receiver should be appointed of partnership property, the Court will
always pause before it takes a step likely to be so ruinous to the p.arties.
Waters v. Taylor, 15 Ves. 10 ; Peacock v. Peacock, 16 Ves. 49, 57. A Court
of Equity, on an application properly substantiated, will appoint a receiver
of a mine or colliery, as well as of an ordinary partnership in trade ; be-
cause where persons have different interests in such a subject, and manufacture
and bring to market the produce of the land as one common fund, to be
sold for their common benefit, it is to be regarded rather as a species of
trade or partnership, than as a mere tenancy in common in the land. Jef-
ferys v. Smith, 1 Jac. & W. 298 ; Story v. Lord Windsor, 2 Atk. 630 ;
Crawshay?;. Maule, 1 Swans. 495, 518; s. c. 1 Wils. Ch. 181 ; Williams v.
Attenborough, Turn. & R. 70 ; Fereday v. Wightwick, Taml. 250. But if the
claimant to an equitable interest, in such a concern, knowingly suffers great
expense and risk to be incurred before he asserts his equitable right, and,
keeping aloof while the undertaking is hazardous, seeks the intei'position of
the Court only when it is attended with a profitable result, the Court will not
interfere by appointing a receiver, on motion, and it is doubtful whether it
would interpose in such a case, even by decree. Norway v. Rowe, 19 Ves.
144; Senhouse v. Christian, cited Id. 157. In particular cases, equity will
restrain the improper conduct of a partner without appointing a receiver.
Seeley v. Boehm, 2 Madd. 176 ; but see Smith v. Fromont, 2 Swans. 330,
and Glassington v. Thwaites, 1 Sim. & St. 124. Where, by the partnership
agreement, the concern was to be managed by a committee, the share of
each proprietor dying or retiring, to be first offered to the committee, to be
purchased for the general body, it was held, that the whole concern could
not be sold but with the consent of all ; and that, where all but two out of
thirty-one had agreed, and sold the concern, such sale did not pass the share
of such two ; but in such a case there need be no previous offer to the com-
mittee. Chappie V. Cadell, Jac. 537;" Gow on P. c. 2, §4, p. 114-116,
3d ed. See also Peacock v. Peacock, 16 Ves. 49 ; Oliver v. Hamilton, 2
Anst. 453; Richards v. Davies, 2 Russ. & M. 347; {§ 228, 330; Lind. on
P. 849. A receiver will not be appointed unless with the view of dissolving
a partnership. Hall v. Hall, 3 Macn. & G. 79 ; Roberts v. Eberhardt, Kay,
148; Smith v. Jeyes, 4 Beav. 503; Henn v. Walsh, 2 Edw. Ch. 129;
Walker v. House, 4 Md. Ch. 39. It Is not necessary, however, that the
plaintiff's bill should expressly pray for a dissolution, if the object of the
suit is to wind up tlie partnership afQiirs. Shepperd v. Oxenford, 1 Kay & J.
491. See Madgwick «. Wimble, 6 Beav. 495. Sloan f. Moore, 37 Penn.
St. 217. " In granting or refusing an order for a receiver, the court does
not act on the same principles as when it grants or r(;fuses an injunction ; it
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 385
partners, during the partnership, or in contemphition of
the dissohition thereof, may be added the cases, in which
rehef will be granted, where the partnership has been
entered into by one partner, under circumstances of
gross fraud or gross misrepresentation by the others ;
for in such cases Courts of Equity will not only decree
the same to be void, but will also interpose and restore
the injured party to his original rights and property, as
far as is practicable.^ In cases of this sort, Courts of
Equity proceed upon the same general ground, as in
other cases where a fraud has been perpetrated upon an
innocent partner ; as, for example, in the case already
suggested, where one partner sold out to the other for
an inadequate consideration, in consequence of the
fraudulent concealment by the latter of the real state
of the funds ; ^ for fraud will infect with a fatal taint
every transaction, however solemn ; and good faith and
confidence, and frank and honorable dealing are, or
being one thing to manage the affairs of a partnership oneself, and anotli^r
to prevent a person who has already misconducted himself from interfering
further with the partnership concerns. See Hall v. Hall, .3 Macn. & G. 79, 85.
Another reason for drawing a distinction between an injunction and a
receiver is, that whilst the former excludes only the person against whom it
is granted, the latter excludes all the partners from taking part in the man-
agement of the concern. It, therefore, does not follow that because the
court will grant an injunction, it will also appoint a receiver, or that because
it refuses to appoint a receiver, it will also decline to interfere by injunction.
Although an injunction was granted, a receiver was refused, in Read v.
Bowers, 4 Bro. Ch. 441 ; Hartz v. Schrader, 8 Ves. 317 ; Hall v. Hall,
12 Beav. 414, and 3 Macn. & G. 79." Lind. on P. 851. And see Garretson
tj. Weaver, 3 Edw. Ch. 385, and § 229, note.}
> Coll. on P. B. 2, c. 3, § 7, p. 244, 245, 2d ed. ; Gow on P. c. 2, § 4, p.
107, 3d ed.; Tattersall v. Groote, 2 B. & P. 131 ; Ex parte Broome, 1 Rose,
69; Hamil v. Stokes, 4 Price, 161; s. c. Daniell, 20; Oldaker v. Lavender,
6 Sim. 239 ; Green v. Barrett, 1 Sim. 45 ; Jones v. Yates, 9 B. & C. 532.
{Rawlins v. Wickham, 3 De G. & J. 304.} — If third persons are interested
and connected with such frauds, they also should be parties to the bill, as
well as the offending partners. Coll. on P. B. 3, c. 2, § 7, p. 2-15, 246, 2d
ed. ; Fawcett r. Wliitehouse, 1 Russ. & M. 132.
2 Ante, § 172; Blain v. Agar, 2 Sim. 289 ; 1 Story, Eq. Jur. § 220.
25
386 PARTNERSHIP. [CHAP. XI.
ought to be, emphatically the groundwork of all part-
nership engagements.
§ 233. Upon similar grounds, Courts of Equity^ will
hold each partner responsible to the other for all losses
and injuries, sustained by his past misconduct, or negli-
gences or misapplication of the partnership funds or
credit.^ Hence, if any partner has withdrawn, or used
the partnership funds or credit in his own private trade,
or private speculations, he will be held accountable, not
only for the interest of the funds so withdrawn, or credit
misapplied, but also for all the profits which he has
made thereby.^ On the other hand, if there are any
losses incurred by him thereby, they must be borne ex-
clusively by himself.^
^ [But not courts of law. Capen v. Barrows, 1 Gray, 3 76, 382.]
' Caldwell r. Leiber, 7 Paige, 483. [Compensation will be jjiven, substan-
tially in the nature of unliquidated damages. Bury v. Allen, 1 Coll. 589, 604.]
3 Stoughton V. Lynch, 1 Johns. Ch. 46 7; s. c. 2 Johns. Ch. 209; Brown
V. Litton, 1 P. Wms. 140; Crawshay v. Collins, 15 Ves. 218; Somerville v,
Mackay, 16 Ves. 382, 387, 389 ; 1 Story, Eq. Jur. § 667 ; Story on Ag. § 207.
'' [The Statute of Limitations strictly bars only legal remedies ; but Courts
of Equity, by their own rules, independently of any statute, give great effect
to length of time, and refer frequently to the Statute of Limitations as fur-
nishing a convenient measure for an equitable bar. Beckford v. Wade, 17
Ves. 87, 96 ; Coll, on P. B. 2, c. 3, § 374, p. 339, Perkins's ed. In analogy to the
statute, they have adopted in many cases the limit of si.x years. Sterndale
V. Hankinson, 1 Sim. 393 ; Acherley v. Roe, 5 Ves. 565, note b, and cases
cited, Sumner's ed. Though in cases of direct trust, no length of time bars
the claim between the trustee and ceMui que trust; yet where there is a trust
by implication, it must be pursued within a reasonable time. Ex parte Has-
ell, 3 You. & C. 617 ; Edwards v. University, 1 Dev. & Bat. Eq. 325. See
Townshendj;. Townshend, 1 Bro. Ch. 550, 554, and notes, Perkins's ed. ; Beck-
ford V. Wade, 17 Ves, 87, and note, Sumner's ed. And there is high
authority for a proposition that a Court of Equity will not, after six years'
acquiescence, une.xplained by circumstances, nor countervailed by acknowl-
edgment, decree an account between a surviving partner and the estate of a
deceased partner. Tatam v. Williams, 3 Hare, 347, 358 ; Barber v. Barber, 18
Ves. 286 ; Ault v. Goodrich, 4 Russ. 430; Bridges v. Mitchell, Gilb. Eq. 224 ;
Martin v. Heathcote, 2 Eden, 169. But see Robinson v. Alexander, 8 Bligh,
. N. s. 352; s. c. 2 CI. & Ein. 717, The cases, arising under the e.xception of
Merchants' Accounts, in the Statute of Limitations, have been supposed to
CHAP. XI.] REMEDIES BETWEEN PARTNERS. 387
afford an analogy on questions between partner and partner. Tatam v.
Williams, 3 Hare, 347. But It is doubtful whether this exception applies at
law, where all dealings have ceased more than six years. Inglis v. Haigh,
8 M. & W. 769 ; Cottam v. Partridge, 4 Man. & G. 271 ; Spring v. Gray, 5
Mason, 505; Coster v. Murray, 5 Johns. Ch. 522; Bass v. Bass, 6 Pick. 362;
S. c. 8 Pick. 187 ; Union Bank v. Knapp, 3 Pick. 96 ; Coll. on P. B. 2, c. 3,
§ 3 76, note, Perkins's ed.] {See, in addition to the cases cited in this note,
Foster v. Hodgson, 19 Ves. 180; Scott v. Milne, 5 Beav. 215; Whitley v.
Lowe, 25 Beav. 421; s. c. 2 De G. & J. 704; Bispham v. Price, 15 How.
162; King v. Wartelle, 14 La. Ann. 740; Massey i;. Tingle, 29 Mo. 437;
Lind. on P. 760.}
388 PARTNERSHIP. [cHAP. XII.
CHAPTER XII.
REMEDIES BY PARTNERS AGAINST THIRD PERSONS.
{ § 234. No action lies between firms which have a common partner.
235. This rule confined to the common law.
236. Jacaud v. French, 12 East, 317.
237. A partnershijj cannot sue on a bill on which one partner is liable.
238. A partnership cannot sue on a bill obtained by the fraud of a
partner.
239. Whether husband and wife, partners abroad, can sue in England.
240. A partnership cannot sue if one partner be an alien enemy.
241. Joining of dormant and of nominal j^artners.
242. In the case of written instruments.
243. Partnership contracts in the name of one partner.
244. Who must sue when the firm has been changed.
245-248. A surety or guarantor for advances by a firm discharged by
change in the firm.
249. Continuing contracts terminated by a change.
250. Bonds given to a firm for good conduct of its agents.
251. Guaranty for a firm discharged by change.
252. Extension or release of a debt by one partner binds the firm.
253. When dealing with a new firm discharges a debt to the old firm.
254. Debt not assignable to a new firm, without the debtors' consent.
255. Suit, how brought, when an infant partner has disclaimed.
256-258. Actions by partnership's for torts.
259. Suits in equity by partners.
260. Levy on separate property for partnership debts.
261-263. Levy on partnership property for separate debts.
264. Injunction of sale by the sherifi". Trustee process.}
§ 234. We come, in the next place, to the remedies
which belong to partners in their collective capacity,
against third persons ; and this will detain us but for
a very short time. And here, it may be laid down as
a general rule, that, at law, partners in their collective
capacity are entitled to the same remedies, to be ad-
ministered in the same way, as individuals have for
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 389
the assertion of tlieir rights, and the redress of their
wrongs.^ There are, however, some few exceptions,
one of which is a remarkable exception, and is j)urely
technical, and stands upon grounds peculiar to the
common law. It is, where the suit is between the
firm and one of its partners, or between one firm and
another firm, in each of which one and the same per-
son is a partner. In cases of this sort the common
law requires, that all the persons jointly interested in
the contract, or the wrong, should be made parties ;
and it is treated as an unjustifiable anomaly, if not as
an absurdity, that one and the same person should, in
the same suit, at once sustain the twofold character of
plaintifi" and of defendant, to enforce a right or re-
dress a wrong, arising either from the contract, or act,
or misconduct of those with Avhom he is jointly con-
cerned, or jointly interested.^ It will make no differ-
ence, in case;^ of this sort, whether the suit is brought
in the lifetime of all the partners, or after the death
of one of them ; because, in contemplation of law, no
valid legal contract ever existed between the partners ;
and therefore the death of any one of them cannot
make the contract available at law.^
§ 235. We have had already occasion to take notice,
that this exception is peculiar to Courts of Common
Law, and has no recognition whatsoever in Courts of
' Gow on P. c. 3, § 1, p. 117, 118, 3d ed. ; Coll. on P. B. 2, c. 3, § 2, p.
177, 188-193, 2d ed. ; Id. B. 3, c. 5, p. 457.
2* Gow on P. c. 3, § 1, p. 118, 119, 3d ed. ; ante, § 221 ; Coll. on P. B. 2,
c. 3,§ 2,p. 177, 188-193, 2d ed. ; Id. B. 3, c. 5, p. 457 ; Jones v. Yates, 9 B.
& C. 532; Bosanquet v. Wray, 6 Taunt. 597; Moffatt v. Van Millinp;en, 2
B. & P. 124 n. ; De Tastet v. Shaw, 1 B. & Aid. 664 ; Teague v. Hubbard, 8 B.
& C. 345; Harvey v. Kay, 9 B. & C. 356; Neale v. Turton, 4 Bing. 149 ;
[Denny v. Metcalf, 28 Me. 389 ; Green r. Chapman, 27 Vt. 236.]
5 Gow on P. c. 3, §l,p. 119, 120, 3d ed. ; Bosanquet v. Wray, 6 Taunt.
597. See Bailey v. Bancker, 3 Hill, (N. Y.) 188.
390 PARTNERSHIP. [cHAP. XII.
Equity.^ In the latter Courts, indeed, all the parties
in interest must join, and be joined in the suit ; but
it is sufficient that all of them are on one side or the
other side of the record ; and they need not be all
plamtifFs or all defendants in the same suit, even Avhere
the controversy is between two firms, in each of -which
some of them are partners.^ We have also had occa-
sion to see, that no such objection was recognized in
the Roman jurisprudence ; and that it is unknown to
the jurisprudence of Scotland and of France, and
probably also of most, if not of all, of the commercial
nations of continental Europe.^
§ 236. Analogous in principle to the case already
stated at the common law, is that of one firm, partly
composed of a common partner in another firm, which
seeks by a suit to enforce a security against a stranger,
after satisfaction of that security has been obtained
from the latter firm. In such a case, the money re-
ceived by the one firm being paid, and accepted in
satisfaction of the security, the common partner in
each firm Mill not be permitted to contravene the
receipt thereof for that purpose, nor will he be allowed
to sue upon such security, as one of the firm, although
he is personally ignorant of the circumstances which
constitute the satisfaction.^ This turns upon the gen-
1 Ante, § 221, note; § 222.
2 Ante, § 221 and note, § 222 ; 1 Story, Eq. Jur. § 666-674.
3 D. 17, 2, Go, 15; Id. 17, 2, 52; Poth. Pand. 17, 2, n. 33 ; 2 Bell. Comm. B.
7, p. 619, 620, 5th ed. ; Poth. de Soc. n. 135, 136. — Mr. Bell, in the passage
already cited (ante, § 221, note (1), 2 Bell. Comm. 620, oth ed.),says:. "In
Scotland, debts between companies, in -which the same individual is a partner,
are every day sustained, as quite unexceptionable." It is to be lamented that
the like rule has not been incorporated into the common law, treating the
firm, for the purposes of the suit, as an artificial body, or quasi corporation.
It would be highly convenient, and certainly conformable to the common
sense of the commercial world.
* Gow on P. c. 3, § 1, p. 120, 121, 3d ed. See Bailey v. Bancker, 3 Hill,
(N. Y.) 183.
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 391
eral principle, that the receipt of a partnership debt by
one partner is a full discharge thereof against the firm ;
for each partner is, sui juris, competent to receive it on
behalf of all, and duly to release and discharge the
debtor.^ And when once payment or satisfaction has
been made to one partner, it can be of no consequence
that he is connected with another firm ; for this does
not enable him to contravene his own act ; and if he
has no personal knowledge thereof, the receipt by his
partners is treated, in construction of law, as his own
receipt, and his assent is bound up in theirs.^ There-
fore, where A. was a partner with 13., in one mercantile
house, and with C. in another, and, after the former
house had indorsed a bill of exchange to the latter, B.,
acting for the firm of A. and B., received securities to
a large amount from the drawer of the bill, upon an
agreement by B., that the bill should be taken up and
liquidated by B.'s house ; and, if not paid by the ac-
ceptors when due, it should be returned to the drawer ;
the Court of King's Bench held, that the deposited
securities being paid, and the money, therefore, being
received by B. in satisfaction of the bill, A. was bound
by this act of his partner B., in all respects ; and, there-
fore, he could not, in conjunction with C, his partner
in the other house, maintain an action, as indorsees and
holders of the bill, against the acceptors, after such
satisfaction received through the medium of, and by
agreement with B., in discharge of the same.^
§ 237. Upon a similar ground, if a partnership be-
come possessed of a negotiable security, whicli has
been procured by one partner, upon the understanding,
that he will punctually provide for the payment thereof
1 Ante, § 114, 120, 131.
2 Jaoaud r. French, 12 East, 317.
» Ibid.
392 PARTNERSHIP. [cHAP. XII.
at its maturity, the partnership cannot sue upon such
security ; because the same partner must be made one
of the plaintiffs, and, as it is clear in sucl:^ a case, that he
could not maintain any suit in his own name thereon,
the same objections will avail against him, as a co-
plaintiff. Thus, where one partner in a banking house
drew a bill in his own name upon a third person, who
accepted the same, upon the condition that the partner
would provide funds for the payment thereof at its
maturity; and the bill was afterwards indorsed to the
partnership, and a suit was thereupon brought by all
the partners against the acceptor ; it was held, that the
action was not maintainable ; because all the partners
were bound by the acts of that partner, and as between
him and the acceptor, there was no pretence of any
right to recover.^ So, also, a partner holding a security
of the firm, by indorsement from the payee or other
indorser, cannot sue the indorser thereon.^
§ 238. The same principle will apply to a case where
all the partners sue upon an acceptance, or other
security, procured fraudulently by one partner, without
any participation or knowledge of the fraud by the
other partners ; for he must still be made a party plain-
tiff in the suit; and his fraud not only binds himself,
but his innocent partners in that suit; for, unless all
the plaintiffs are entitled to recover, the suit must fail.^
The case may even be put still more strongly; for if
the security be a fraudulent contrivance between the
guilty partner and the third person, in fraud of the
partnership, there can be no suit against such third per-
' SpaiTOw V. Chisman, 9 B. & C. 241.
« Bailey v. Bancker, 3 Hill, (N. Y.) 183.
3 CJowon P. c. 3, § 1, p. 120, 3d ed. ; Richmond v. Heapy, 1 Stark. 202,
204: Johnson V. Peek, 3 Stark. 66; {Weavers. Rogers, 44 N. H. 112; John-
son V. Byerly, 3 Head, 194.}
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 393
son at law, founded thereon, since the guilty partner is
at law a necessary plaintiff in every such suit.^
1 Jones V. Yates, 9 B. & C. 532 ; Kilby v. AVilson, Ry. & Mood. 1 78 ; [Fel-
lows V. Wyman, 33 N. H. 351, 358 ; Homer v. Wood, 11 Cush. 62, in which the
subject is very clearly presented by Bigelow, J.] { Wallace v. Kelsall, 7 M.
& W. 264 ; Greeley v. Wyeth, 10 N. H. 15; Miller v. Price, 20 Wis. 117.}
Lord Tenterden, in delivering the judgment of the Court, in the case of
Jones V. Yates, went fully into the reasoning, on which this doctrine of the
common law is founded ; and, therefore, although somewhat long, the pas-
sage is here inserted : '' These were two actions brought by the plaintiffs, as
assignees of Sykes & Bury. The first was an action of trover to recover the
value of three bills of exchange, which belonged to Sykes & Bury, and
which Sykes had indorsed to the defendants, with whom he had been in part-
nership, in part payment of a demand, due from him to the partnership of
Sykes, Yates, & Young, and by liim again immediately indorsed in the name
of that partnership to Alzedo, who was a creditor of the firm. The second ac-
tion was to recover money, drawn by Sykes from the funds of himself and
Bury, and paid into the hands of Yates, in further discharge of the balance
before mentioned, without the knowledge of Bury. Both the transactions were
frauds by Sykes, on his partner, Bury, and it must be taken, that Yates (at
least when the bills were indorsed and the money paid) knew the bills and
money came from the funds of Sykes & Bury, without the knowledge of
Bury. It may be doubtful, whether Young was actually privy to either tran-
saction ; but in our view of the case, that point is not material. On behalf
of the defendant, it was contended, that Sykes & Bury could not (if they had
continued solvent) have maintained any action against Yates & Young, in re-
spect of either of these transactions ; and that, if that were so, the plaintiffs,
their assignees, could not sue, they having no better remedy at law than Sykes
& Bury would have had. And we are of this opinion. It is unnecessary, there-
fore, to advert to any of the other points, raised in argument at the bar.
We are not aware of any instance, in which a person has been allowed, as
plaintiff in a court of law, to rescind his own act, on the ground, that such act
was a fraud on some other person ; whether the party seeking to do this has
sued in his own name only, or jointly with such other person. It was well
observed on behalf of the defendants, that where one of two persons, who
have a joint right of action, dies, the right then vests in the survivor. So
that, in this case (if it be held that Sykes and Bury may sue), if Bury had
died before Sykes, Sykes might have sued alone, and thus for his own benefit
have avoided his own act, by alleging his own misconduct. The defrauded
partner may perhaps have a remedy in equity, by a suit in his own name
against his partner, and the person with wiiom the fraud was committed.
Such a suit is free from the inconsistency of a party suing on the "^round of
his own misconduct. There is a great dilference between this case and that
of an action brought against two or more partners on a bill of exchange,
fraudulently made or accepted by one partner in the name of the others, and
394 PARTNERSHIP. [CHAP. XII.
§ 239. Another exception may arige from the incom-
petency of one of the partners to maintain the suit, from
his or her own pecuhar national or other character ; for
in all cases of suits brought by partners, all of the firm
must be competent to sue. Thus, for example, it has
been said by a learned writer, that, although the hus-
band and wife are partners in a foreign country, by
de ivered by such partner to a plaintiff in discharge of his OAvn private debt.
In the latter ease, the defence is not the defence of the fraudulent party, but
of the defrauded and injured party. The latter may, without any inconsist-
ency, be permitted to say in a court of law, that although the partner may for
many purposes bind him, yet, that he has no authority to do so by accepting
a bill in the name of the firm for his own private debt. The party to a fraud,
he who profits by it, shall not be allowed to create an obligation in another,
by his own misconduct, and make that misconduct the foundation of an ac-
tion at law. Then, if Sykes & Bury could not sue, how could the plaintiffs,
who represent them here ? It was said in support of the argument, that the
property did not pass from Sykes by his wrongful act, but remained in Sykes
& Bury. This was ingeniously and plausibly put ; but as against Sykes the
property did pass at law, and there was no remedy at law for Bury to recov-
er it back again. He could not do so without making Sykes a party. Fur-
ther, the right of the assignees to sue in this case was said to be analogous
to the right of assignees to sue for, and recover back, property voluntarily
given by a bankrupt to a particular creditor, in contemplation of his bank-
ruptcy, in favor of such creditor, and in preference to him, in which case the
bankrupt could not have sued, if no commission had issued, yet the assign-
ees are allowed to do so. That is a case, where the representatives could,
where the party represented could not, sue, and it is the only instance of the
kind mentioned at the bar, that has occurred to us. But, if we attend to the
principle on which the assignees are allowed to sue, we shall find there is no
analogy between that case and the case before the Court ; for the principle,
on which assignees have been held entitled to recover in such cases, is not on
the ground of fraud on any particular person, but on the ground that there
has been fraud on the bankrupt laws, which are made for the purpose of ef-
fecting an equal distribution of the insolvent's estate among all the creditors,
and which purpose would be defeated, if a party on the eve of a bankruptcy,
and with a view to it, could distribute his effects according to his own jjleasure
among some favorite creditors, to the total exclusion of the others. This is
mentioned by Lord Mansfield, as the principle of the decisions in the early
cases on this subject ; Alderson v. Temple, 4 Burr. 2235 ; Harman v. Fishar,
Id. •2237 ; s. C. Cowp. 117. For these reasons, we think the plaintiffs are not
entitled to recover." But see Longman v. Pole, 1 Mood. & Malk. 223. Is this
latter case distinguishable upon the ground that it was case for a tort V
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 395
whose laws they are competent to carry on partnership
business with each other ; yet that they are incompe-
tent to sue in an Enghsh Court of justice, as partners ;
since the law of England does not recognize their
capacity so to engage in trade, and enter into a com-
mercial partnership.^ The doctrine here laid down is
certainly not maintainable, as a doctrine of public law;
and the authority cited to support it by no means bears
it out in its full latitude."
§ 24.0. A case far more unexceptionable, to illustrate
the principle of this exception, is that of a partnership
in a belligerent, or in a neutral country, where the suit
is brought, which is composed in part of one or more
partners domiciled in an enemy's country ; for, under
such circumstances, during the war, no suit can be
brought there to enforce any contract whatever in favor
of the partnership. A state of war suspends all com-
mercial intercourse between the belligerents, and shuts
their Courts against all suits and proceedings, and all
claims of persons, who have acquired and retain a hos-
tile character.^
§ 2-il. Subject, however, to exceptions of this or a
similar nature, which all stand upon peculiar grounds,
the general rule is, as has been already mentioned, that
partners, in their collective or social capacity, may bring
any *suits, Avhicli it would be competent for any indi-
vidual to bring. It is also a general rule, that in all
> Coll. on P. B. 3, c. 5, p. 459, 2d ed., citing Cosio v. De Bernales, Ry. &
Mood. 102. It is also reported in C. & P. 266.
* All that Lord Tenterden decided in the case, was, that he would not
presume that a feme covert in a foreign country could engage in a partnership
with her husband, without some proof that such was the law of the foreign
country ; and no such proof being given, the plaintiffs were nonsuited. There
seems nothing objectionable or inconvenient in this doctrine.
* Gow on P. c. 3, § 1, p. 120; M'Connell v. Hector, 3 B. & P. 113 ; Gris-
wold r. Waddington, 16 Johns. 438 ; The Julia, 8 Cranch, 181 ; Albretcht v.
Sussmann, 2 Ves. & B. 323 ; {§ 315, 316.}
396 PARTNERSHIP. [cHAP. XII.
such suits at law all the partners should join.^ The
rule, however, undergoes, or may undergo, an exception
in cases of dormant partners ; for it is at the option of
the plaintiffs in such cases, either to join the dormant
partner in the suit, or to omit him (as in the correspond-
ing case of the partners' being sued as defendants, it is
at the option of the plaintiff to join the dormant part-
ner or not), and the joinder or non-joinder will not con-
stitute any objection to the maintenance of the suit in
any manner whatsoever.^ The same exception applies a
fortiori, where a man is merely a nominal partner ; for,
as he has no real interest, there seems no necessity of
his joining, as a party, in any partnership suit,^ although
there is no doubt that he may so join.^
» Gow on P. c. 3, § 1, p. 127, 128, 3d ed. ; [Gage v. Rollins, 10 Met. 348.]
2 Gow on P. c. 3, § 1, p. 128, 3d ed. ; Skinner v. Stocks, 4 B. & Aid. 437 ;
Lloyd V. Archbowle, 2 Taunt. 324 ; Brassington v. Ault, 2 Bing. 177; Wilson
V. Wallace, 8 S. & R. 53 ; Clarkson v. Carter, 3 Cowen, 84 ; Lord v. Baldwin, 6
Pick. 348, 352 ; Leveck v. Shaftoe, 2 Esp. 468 ; Ross v. Decy, 2 Esp. 470, note ;
Coll. on P. B. 3, c. 5, § 1, p. 465 ; Id. p. 468-470, 2d ed. ; Mawman v. Gillett,
2 Taunt. 325, note ; Alexander v. Barker, 2 Cr. & J. 133 ; [Wood v. O'Kelley,
8 Cush. 406 ; Jackson v. Alexander, 8 Tex. 109 ; Page v. Brant, 18 111. 37] ;
Cothay r. Fennell, 10 B. & C. 6 71. — The authorities here cited are not all
exactly agreed upon this point, where the dormant partner is a party jilain-
tifF; but they all agree as to the jjoint where such a partner is a party
defendant. [And in' Secor v. Keller, 4 Duer, 416, it was held that a dormant
partner must join with his active partner as plaintiffs in a suit by them for
work and labor done for the firm] It seems exceedingly difficult to state
any reasonable distinction between the cases; and the text contaiijs what
seems to me the true doctrine, founded upon the weight of authority. { That
a dormant partner need not join as plaintiff, see Waite v. Dodge, 34 Vt. 181 ;
Wood V. O'Kelley, 8 Cush. 406 ; Rogers v. Kichline, 36 Penn. St. 293. That he
need not be joined as defendant, see Chase v. Deming, 42 N. H. 274 ; Brown v.
Birdsall, 29 Barb. 549; North v. Bloss, 30 N. Y. 374; Hopkins v. Kent, 17
Md. 72. {
« Coll. on P. B. 3, c. 5, § 1, p. 470, 2d ed. ; Gow on P. c. 3, § 1, p. 128,
129, 3d ed. ; Parsons v. Crosby, 5 Esp. 199 ; Davenport v. Rackstrow, 1 C. &,
P. 89; Glossop V. Colman, 1 Stark. 25; Teed v. Elworthy, 14 East, 210;
KcU V. Nalnby, 10 B. & C. 20 ; {Hatch v. Wood, 43 N. H. 633. See Bishop
V. Hall, 9 Gray, 430.} But see Guidon v. Robson, 2 Camp. 302; Kieran
V. Sandars, 6 Ad. & E. 515.
■* Guidon v. Robson, 2 Camp. 302. { Guidon v. Robson was a suit on a
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 397
§ 242. In this respect, perhaps, there may be ground
for a distmction between the cases of common unwritten
contracts, and cases where a written instrument is made
payable to certain persons by name, although one of
them is but a nominal partner. For it may well be
said, that, in the latter case, as the promise is made to
all, the suit thereon may and should be brought in the
name of all, as proper parties to the contract.^ There
can be no doubt, that, in a case of this sort, all the per-
sons named may join in the suit ; ^ but it is quite a dif-
ferent question, whether all must so join, when all have
not an interest in the contract.^ We all know, that
there are many cases of written contracts, as for exam-
ple, of policies of insurance, procured to be under-
written by agents or brokers in their own names, in
which, nevertheless, the suit for a breach thereof may
be brought either in the name of the principal, or of
the agents or brokers.'* Why the same rule might not
well apply in other analogous cases of written contracts,
it is not easy to say.^ It is proper, however, to add,
that there is some apparent conflict in the authorities
on this point. "^
written contract. Mr. Lindley is of opinion that where a nominal partner
need not join, he ought not to join. Lind. on P. 391. See Waite i: Dodge,
34 Vt.»I81.|
' Coll. on P. B. 3, c. 5, § 1, p. 465, 470, 2d ed.
* Kell V. Nainby, 10 B. & C. 20.
« Gow on P. c. 3, § 1, p. 122, 123, 3d ed.
•« Story on Ag. § 160-162.
5 Coll. on P. B. 3, c. 5, §_ 1, p. 465-468, 2d ed. ; Grove v. Dubois, 1 T. R.
112 ; Cumming v. Forester, 1 M. & S. 494 ; Hagedorn v. Oliverson, 2 M. &
S. 485 ; Garrett v. Handley, 4 B. & C. 664 ; Lucena v. Craufurd, 3 B. & P.
75 ; Gow on P. c. 3, § 1, p. 122, 123, 3d ed. ; Bell v. Ansley, 16 East, 141 ;
Skinner t\ Stocks, 4 B. & Aid. 437 ; Alexander v. Barker, 2 Cr. & J. 133,
138 ; Atkinson v. Laing, 1 Dow. & 11. N. P. 16.
® Guidon v. Kobson, 2 Camp. 302. — On this occasion, the case being an
action by Guidon alone against llobson, upon a bill of exchange, drawn iu
the name of Guidon & Hughes (the latter being a mere clerk of Guidon) on
398 PARTNERSHIP. [cHAP. XII.
§ 243. And this naturally conducts us to the more
enlarged consideration, in what cases, and under what
circumstances contracts are to be treated as partnership
contracts, of which the firm may avail itself by way of
suit. We have already seen,^ that, in order to bind the
partnership in any contract with third persons, it is or-
dinarily necessary that it should be made in the firm
name ; and that, if made by one partner in his own
name only, it will ordinarily be binding only upon
himself, and not upon the partnership." There are,
however, exceptions to this rule, where the contract
is made by one partner in his own name, for and on
behalf of the partnership, or for the benefit thereof,
and yet the firm will be bound thereby.^ There is a
Robson, and accepted by him, Lord Ellenborough said : " There being such
a person as Hughes, I am clearly of opinion that he ought to have been
joined as a partner. He is to be considered in all respects a partner, as
between himself and the rest of the world. Persons in trade had better
be very cautious how they add a fictitious name to their firm for the pur-
pose of gaining credit. But, where the name of a real person is inserted
with his own consent, it matters not what agreement there may be between
him and those who share the profit and loss. They are equally responsible,
and the contract of one is the contract of all. In this case the declaration
states that the defendant promised to pay the money specified in the bill
to the plaintiff only, whereas she promised to pay it to the plaintiff jointly
with another person. The variance is fatal." But see Kell v. Nainby, 10
B. & C. 20 ; Hall v. Smith, 1 B. & C. 407 ; Marchington v. Vernon, 1 B. &
P. 101, n. ; Marsh v. Robinson, 4 Esp. 98 ; Walton v. Dodson, 3 C. & P.
162; Skinner v. Stocks, 4 B. & Aid. 437; Cothay v. Fennell, 10 B. & C.
671. In Alexander v. Barker, 2 Cr. & J. 133, 138, Baron Bayley said:
"I am the less surprised, that the learned judge should have considered
D. Alexander as the person with whom the defendant contracted, and who
alone could maintain the action, because I remember that it was at one
period the impression of Lord Ellenborough, that where money was lent
by a partner, the action must, in all cases, be brought by the individual with
whom the contract was made. But he was afterwards convinced of what is
doubtless the true rule, viz., that, where a contract is made by one on behalf
of others, the action may be brought in the name of the principals."
> Ante, § 102, 136, 142.
2 Ante, § 102, 136, 142; Faith v. Richmond, 11 Ad. & E. 339.
' Ante, § 102 and note, § 142 ; [Burnley v. Rice, 18 Tex. 481.]
CHAP. XII. j REMEDIES AGAINST THIRD PERSONS. 399
like enlargement of obligation in many other cases of
written and unwritten contracts, where the same doc-
trine will reciprocally apply in favor of the partnership,
as in the converse case is applied against it. Thus, for
example, if a contract of guaranty should be entered
into apparently with one partner, but in reality it should
be intended to be for the indemnity of the firm for ad-
vances to be made by the firm ; an action might be
maintained by all the partners, as upon a joint contract
therewith, although the written papers, containing the
guaranty, should be addressed to one partner, and he
alone should conduct the negotiation.^ The same rule
' Gow on P. c. 3, § 1, p. 121-123, 3d ed. ; Coll. on P. B. 3, c. 4, § 1,
p. 446, 447, 2d ed. ; Id. e. 5, § 1, p. 464, 465 ; Garrett v. Handler, 3 B. &
C. 462; s. c. 4 B. & C. 664; Walton v. Dodson, 3 C. & P. 162. — Mr.
Gow has summed up the authorities on this point as follows. "Partners
sometimes seek to enforce a guaranty, given to secure the repayment of an
advance to be made by the firm. In such a case the action must necessarily
be brought by all the partners to whom the guaranty is given, and by whom
the advance is made. And where a contract of that description is apparently
entered into in favor of one partner only, yet in fact if it be intended as an
indemnity to the firm, in respect of an advance to be made by them, a joint
action may be maintained. Thus, in the late case of Garrett v. Handley, 4
B. & C. 664, which was an action on a guaranty by two, as the survivors
of a firm of three partners, it appeared that the guaranty was addressed to
one of the partners only ; but evidence Avas produced, which established that
the advance to secure which the guaranty was entered into, was made by
the firm, and that the guaranty was given for their joint benefit, and not to
indemnify the single partner only. It was objected at nisi prius, and after-
wards insisted upon on a motion to enter a nonsuit, that there was a misjoin-
der ; for, as the guaranty was in terms given to one partner, to whom alone
the promise could be construed to have been made, the action should have
been brought by him only. But the Court of King's Bench held, that as the
guaranty was proved to have been intended for the benefit of the firm, the
action was properly brought by the surviving partners ; and, under such
circumstances, it is not competent to the partner, to whom the guaranty
may have been addressed, to treat the advance as one made by himself, on
his individual account, and in that character to support a separate action.
This was determined in a previous action on the same guaranty, and in
which the plaintiff declared, that in consideration that he would advance a
sum of money to A. B., tbe defendant promised that provision should be
made for paying the plaintill". At the trial it appeared, that the delendant
400 PARTNERSHIP. [CHAP. XII.
would apply to a loan made by one partner in a bank-
ing establishment, out of the banking fund, although
the whole negotiation should be conducted by and in
the name of that partner only.^
had given to the phiintifF the guaranty stated in the declaration, and that
the latter was a partner with two other persons in a banking-house, and
that the firm had advanced the money, and charged A. B. in account with
the same ; and it was held, that the averment in the declaration, that the
plaintiff had advanced the money, was not sustained by the proof, there
being no evidence to show that the money had been advanced to the plain-
tiff by the firm, and by him to A. B. It is not to be collected from either
of the two preceding cases, nor was it in fact necessary to determine,
whether the partner to whom the guaranty was actually given, could have
maintained a separate action upon it, provided his declaration so truly and
correctly stated the facts, as not to have been open to the objection of a
variance between the allegation and the proof. But judging from analogy
to the rule, applicable to a policy of insurance, which allows the action to
be brought, either by the party for whose benefit it was effected, or in the
name of him who effected it, it would seem, that that partner, as being the
party with whom the contract was made, might have supported such an
action." Gow on P. c. 3, § 1, p. 121-123.
^ Alexander v. Barker, 2 Cr. & J. 133, 138. See Robson v. Drum-
mond, 2 B. «& Ad. 303. — In Alexander v. Barker, Baron Bayley said : " I
have no doubt in this case, but that this action is maintainable by the plain-
tiffs ; and in that opinion I am fortified by the case of Garrett v. Handley,
Here D. Alexander stood in the double capacity of an individual and a
member of the firm. Barker wanted an advance of money, and to him it
was quite immaterial by whom the advance was made, whether by D. Alex-
ander alone, or by the house of which he was a member. He applies to D.
Alexander to make the advance. He does not qualify that application, and
say, you may be a member of a firm, and I will deal with you only, and will
not be answerable to other persons ; but he makes his application without
any qualification. By thus applying generally, he entitles D. Alexander, if
he makes the advance, to place him in the situation of being answerable to
him in either of his capacities, according to that in which he makes the ad-
vance. From the testimony it appears, that the advance was made by D.
Alexander, not individually, but with the money of the firm. He accepted,
therefore, the application for the advance, not as an individual, but in his
capacity as a member of the firm. In Garrett v. Handley, the contracting
partner first brought the action in his own name ; but it appeared that the
advance was made by the house, and the Court said, you did not make the
advance, and cannot maintain the action. Another action was then brought
in the name of the firm, and the Court being of opinion that the guaranty
was intended to apply to advances made by the firm, thought that the action
was maintainable. The language of that guaranty was much more pointed
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 401
§ 244. In the course of partnerships it not infre-
quently happens, that new partners are admitted, or old
partners retire, without any change of the firm name ;
and upon such a change the contracts and effects and
securities of the existing partnership are agreed to re-
main, and become a part of the funds of the new firm.
But in all such cases the contracts and securities must
be sued for in the names of the original firm, unless,
indeed, they are negotiable securities, and are indorsed
over by the old fii'm to the new firm ; in which latter
case the new firm may sue thereon in their own names,
like any other holders ; for in all other cases no persons
are permitted to sue thereupon at law, except the part-
ners, who originally made the contract, or had an inter-
est therein.^ A fortiori, the same rule will be applied
with more strictness, in cases where the contract is un-
der seal ; for, then, ordinarily, the parties to the deed,
and none others, can sue, or be sued thereon.^ In
equity, the case may be far otherwise ; for assignees of
than this letter. It was addressed to an mdividual, and was to this effect: —
' I understand from Mr. G., that you have had the goodness to advance
£550, &c., upon my assurance, which I hereby give, that provision shall be
made for repaying you this sum,' &c. But the advance was not made by
the individual alone ; and it was holden, that the firm by whom the advance
was made ought to sue. It appears to me, therefore, that the plaintiffs
were the persons wlio might and ought to sue in this case." See also Co-
thay V. Feunell, 10 B. & C. 671 ; Coll. on P. B. 3, c. 4, § 1, p. 446-448,
2d ed. ; Id. c. 5, § 1, p. 465. {A partner had an account at a bank in his
own name, but there was evidence that it was known to the bankers to be a
partnership account ; it was held that the firm might sue the bankers for not
paying a check drawn on them by one partner for partnership pur^joses.
Cooke V. Seeley, 2 Exch. 746.}
* Coll. on P. B. 3, c. 5, § 1, p. 461-463, 465, 466, 2d ed. ; Osborne v.
Harper, 5 East, 225 ; Wilsford v. Wood, 1 Esp. 182 ; Pease v. Hirst, 10 B.
&C. 122, 127; Innesu. Dunlop, 8 T. R. 595; Ord v. Portal, 3 Camp.
239 ; Robson v. Drummond, 2 B. & Ad. 303 ; Radenhurst v. Bates, 3 Bing.
463, 470.
" Coll. on P. B. 3, c. 5, § 1, p. 463, 464, 2d ed. ; Metcalfe v. Rycroft, 6
M. & S. 75. See also Pease v. Hirst, 10 B. & C. 122, 127.
26
402 PARTNERSHIP. [cHAP. XII.
equities and equitable interests are competent to sue in
equity in their own names, to enforce payment of the
assigned debts, or other choses in action, although they
may not be competent at law.^
§ 245. Questions, also, of a very delicate nature may
arise out of contracts and obligations by third persons,
with a partnership, where the contracts or obligations
are of a continuing nature, as to what is their true ex-
tent and operation, when there has been any change of
the partners by the retirement of an old partner, or the
admission of a new one. Thus, for example, a guaranty
for advances to be made, or credits to be given, from
time to time, by a firm to a third person ; and some
new advances or credits may have occurred, after a
change of the original partners, in the manner above
suggested. Under such circumstances, the question
w^ould arise, whether the guarantor would be liable,
either to the old firm, or to the new firm, for any such
advances or credits, after any such change. It has been
held, that the guarantor would not be liable therefor ;
and that no such guaranty ought to be extended be-
yond the actual import of its terms ; but that it ought
to be limited to advances and credits made by the orig-
inal firm only.^
' 2 Storv, Eq. Jur. § 1039, 1040 ; Tiernan v. Jacobs, 5 Pet. 580, 597.
— If, after an assignment, the debtor should promise the assignees to pay
them, a suit might then and upon that promise be maintained by the assign-
ees against the debtor in a Court of Law. Coll. on P. B. 3, c. 5, § 1, p.
462, 463, 2d ed. ; Wilslbrd v. Wood, 1 Esp. 182 ; Moor v. Hill, 2 Peake,
10 ; Innes v. Dunlop, 8 T. R. 595. There may be cases, also, where, after
the contract is made with partners, a severance may be made by the con-
sent of all the parties in interest, and then each may sue for his own share.
See Coll. on P. B. 3, c. 5, § 1, p. 467, 468, 2d ed.
2 Coll. on P. B. 3, c. 4, § 1, p. 443, 444, 2d ed. ; Myers v. Edge, 7 T. R.
254, 256 ; Cremer v. Higginson, 1 Mason, 323 ; Gow on P. c. 3, § 1, p. 123,
124, 3d ed. ; Spiers v. Houston, 4 Bligh, N. s. 515 ; Ex parte Kensington, 2
Ves. & B. 79 ; Dry v. Davy, 10 Ad. & E. 30 ; s. c. 2 Per. & Dav. 249. { But see
Pariente v. Lubbock, 8 De G. M. & G. 5.}
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 403
§ 246. The same doctrine will apply to more formal
instruments, such as a bond given by a principal and
surety to a firm, to secure advances made by the firm
to the principal ; for, upon such a bond the surety will
not be liable for any advances made after the with-
drawal or death of one of the partners.^ ]^or is there,
in this respect, any real difi"erence between the decisions
of Courts of Law, and those of Courts of Equity, as to
the construction or extent of the terms of the instru-
ment. In each Court, the interpretation, put upon the
terms of the contract, has precisely the same extent, and
the same limitations.^
§ 247. These decisions may, at first view, be deemed
somewhat rigid, if not inequitable. But, in reality, they
stand upon grounds capable of an entirely satisfactory
and solid vindication. In the first place, it can never
^ Stranger. Lee, 3 East, 484; Pemberton i: Oakes, 4 Russ. 154, 1G7;
{Chapman v. Beckinton, 3 Q. B. 703} ; Weston v. Barton, 4 Taunt. 673, 682.
— In this last case. Sir James Mansfield, in delivering the opinion of the
Court, said : " It is not necessary now to enter into the reasons of those de-
cisions ; but there may be very good reasons for such a construction. It is
very probable, that sureties may be induced to enter into such a security by
a confidence which they repose in the integrity, diligence, caution, and accu-
racy of one or two of the partners. In the nature of things there cannot be
a partnership consisting of several persons, in which there are not some per-
sons possessing these qualities in a greater degree than the rest ; and it may
be, that the partner dying, or going out, may be the very person on whom the
sureties relied. It would, therefore, be very unreasonable to hold the surety
to his contract, after such change. And though the sum here is limited, that
circumstance does not alter the case ; for although the amount of the indem-
nity is not indefinite, yet £3,000 is a large sum ; and even if it were only
£1,000, the same ground in a degi-ee holds; for there may be a great deal of
difference in the measure of caution or discretion, with which different per-
sons would advance even a thousand pounds. Some would permit one who
was almost a beggar, to extend his credit to that sum ; others would exercise
a due degree of caution for the safety of the surety. And, therefore, we
are of opinion, that as to such sums only, which were advanced before the
decease of Golding, can an indcnmity be recovered by the plaintiffs ; and as
to the sums claimed for debts incurred since his decease, the judgment must
be for the defendant."
^ Pemberton v. Oakes, 4 Russ. 154.
404 PARTNERSHIP. [CHAP. XII.
be said with truth or justice, that a guaranty or surety-
ship for advances, to be made by A., B., & C, does prop-
erly extend to any advances made by A. & B., or by A.,
B., & D. ; and therefore the guarantor, or surety, may,
with all good faith and correctness, say, Non in hcec
foedera veui. Besides, as has been well observed, the
guarantor or surety may have very good reasons, why
he might be willing to enter into an engagement with
a fixed reliance upon the vigilance, fidelity, discretion,
and skill of a particular partner, when he would not, if
that partner w^ere to withdraw, be willing to enter into,
or to prolong any such engagement.^
§ 248. It has been said, that guaranties for the pay-
ment of the debts of third persons are not in general in-
struments under seal, and that there is no technical rule,
which, as to them, prevents a Court of Law from look-
ing at the real justice and merits of the case.~ This is
^ Weston V. Barton, 4 Taunt. 673, 682; Simson v. Cooke, 1 Bing. 452.
See also Russell v. Perkins, 1 Mason, 368 ; Strange v. Lee, 3 East, 484, 490.
— Lord Ellenborough, in delivering the opinion of the Court in this last case,
said : " The Court will, no doubt, construe the words of the obligation accord-
ing to the intent of the parties to be collected from them; but the
question is, what that intent was. The defendant's obligation is to pay all
sums due to them, on account of their advances to Blyth. Now who are
' them,' but the persons before named, amongst whom is James Walwyn, who
then constituted the banking house, and with whom the defendant contracted ?
The words will admit of no other meaning. And, indeed, with respect to
any intent which parties entering into contracts of this nature may be sup-
posed to have, it may make a very material difference in the view of the
obligor, as to the persons constituting the house, at the time of entering into
the obligation, and by whom the advances ai-e to be made to the party for
whom he is surety. For a man may very well agree to make good such
advances, knowing that one of the partners, on whose prudence he relies,
will not agree to advance money imijrovidently. The characters, therefore,
of the several partners may form a material ingredient in the judgment of the
obligor upon entering into such an engagement." See Dry v. Davy, 2 Per. &
Dav. 249 ; s. c. 10 Ad. & E. 30.
^ Coll. on P. B. 3, c. 4, § 1, p. 445, 446, 2d ed. ; and the observations of Mr.
J. Park, in Ilargrave v. Smee, 3 Moo. & P. 573 ; s. c. 6 Bing. 244 ; and of
Lord Tenterden, in Davey v. Prendergrass, 5 B. & Aid. 187 ; Pease v. Hirst,
10 B. & C. 122 ; Dry v. Davy, 10 Ad. & E. 30 ; s. c. 2 Per. & Dav. 249.
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 405
true. But it is equally true, that the language in every
case is to be construed according to its fair and reason-
able meaning, and is not to be strained to reach cases
unforeseen or unprovided for ; for that would be to
make, and not merely to construe, contracts. And in-
deed, in all cases of this sort, the guarantor or surety
has a right to insist, that he shall not be presumed to
enter into engagements for events, which were never so
submitted to his consideration or contemplation, and
which, if considered or contemplated, might have in-
duced him altogether to abstain from any engagement
whatsoever.
§ 249. The same reasoning is equally applicable to
another class of cases, where there is a continuing con-
tract with a partnership, such as a contract to buy goods,
or to hu'e them of the partnership from year to year,
for a term of years ; for such a contract could hardly
be entered into without some reference to the character,
skill, and honesty of the existing partners ; and it is
scarcely presumable, that any man would be willing to
have his contract, or his patronage, assigned over from
time to time to mere strangers, of whom he knew noth-
ing, and of whose competence and ability and fidelity
he might have no adequate means of inquiry.^
§ 250. But the most striking, as well as the most
' Robson V. Drummond, 2 B. & Ad. 303. — Qucere, -whether it -svould make
any difference, that the retiring partner was a dormant partner ; and that the
ostensible partner still remained in the firm. See Dry v. Dav}-, 2 Per. & Dav.
249 ; s. c. 10 Ad. & E. 30 ; Robson i: Drummond, 2 B. & Ad. 303. {In Ste-
vens V. Benning, 1 Kay & J. 168 ; s. c. 6 De G. M. & G. 223, it was held
that an author was discharged from his contract with a firm of publishers, by a
change in the firm and an assignment of the contract to persons of whom the
author knew nothing. In Tasker v. Shepherd, 6 H. & N. 57§, a contract be-
tween A. and a firm of stone merchants that the firm would employ A. as
their London agent for four years, was held to have been terminated by the
death of one member of the firm within the four years, To the same effect is
Stewart i: Rogers, 19 Md. 98. See Pariente v. Lubbock, 8 De G. M. & G. 5.}
406 PARTNERSHIP. [chap. XII.
usual, illustration of this doctrine, which occurs in actual
practice, is, where bonds are given by sureties to part-
ners, for the fidelity and good conduct of clerks, and
other officers and agents, in the service and employment
of the partnership. In all cases of this sort, the uniform
rule of construction of the bond is, unless some clear
language to the contrary is inserted, that the bond does
not apply as a security, after any change of the mem-
bers of the partnership by death, or otherwise.^ But
language may be used in a bond, which shall clearly im-
port a continuing liability, notwithstanding any change
of the firm ; and if it does, there can be no question,
that it will, both at law and in equity, have the most
complete operation.^
§ 251. The like doctrine equally applies to cases,
where a guaranty is given by a firm on behalf of one
person, or by one person on behalf of a firm, and after-
wards another person is introduced into the business
of that person, or a material change takes place in the
firm ; for the guarantor or guarantors will not be liable
thereon for any subsequent advances, made to such a
person or firm, with a knowledge of the change.^
» Coll. on P. B. 3,c. 4, § 1, p. 435-442, 2d ed. ; Gow on P. c. 3, § 1, p. 123-
125, 3d ed. ; Wright v. Russell, 3 Wils. 530 ; s. c. 2 W. Bl, 934 ; Dance v.
(jirdler, 4 B. & P. 34 ; Strange v. Lee, 3 East, 484 ; Arlington i*. Merricke, 2
Saund. 411 ; University of Cambridge i: Baldwin, 5 M. &W. 580 ; Simson v.
Cooke, 1 Bing. 452,461.
' Metcalf V. Bruin, 12 East, 400 ; Simson v. Ingham, 2 B. & C. 65 ; Moller
V. Lambert, 2 Camp. 548. — Barclays. Lucas, 1 T. R. 291, was a case, which
was supposed to contain language, importing a provision of this character ; but
great doubts may well be entertained, whether the case can be maintained upon
any such interpretation. See Coll. on P. B. 3, c. 4, § 1, p. 436, 437, 441, 2d ed. ;
Barker v. Parker, 1 T. R. 287 ; Strange v. Lee, 3 East, 484 ; Gow on P. c. 3,
§ 1, p. 124, 3d ed. ; Simson v. Cooke, 1 Bing. 452.
3 Gow on P.c. 3,§l,p. 123-1 25, 3d ed. ; Coll. on P. B. 3, c.4, §1, p. 438,
442, 443, 2d ed. ; Wright v. Russell, 3 Wils. 530 ; s. c. 2 W. Bl. 934 ; Bellairs
V. Ebsworth, 3 Camp. 53 ; Ex parte Watson, 19 Ves. 459; Simson v. Cooke,
1 Bing. 452,461 ; ante, § 245-247. {Separate property pledged by one part-
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 407
§ 252. Hitherto we have been speaking of the orig-
inal rights of partners against third persons, arising
under general contracts, or special engagements with
them, and the proper limitations and qualifications
thereof. But many circumstances may subsequently
occur, which will suspend, or defeat, or extinguish or
vary these rights, of some of which it seems proper to
take notice, in this connection. In the first place, if
one of the partners should take an acceptance, or other
security for any debt, payable at a future day, this will
be construed to be an agreement to give time to the
debtor, so as to suspend the right of action of the firm
for the original debt, until such security shall be dis-
honored or shall become due.^ We have already had
occasion to take notice of the case of a security given
to one firm, of which satisfaction has been obtained by
another firm, each firm having one and the same com-
mon partner, which will operate as an extinguishment
of any further right of recovery upon such security.^
A fortiori, a release of a debt by one partner, at least
if it be not a fraud, will amount to an extinction of
the debt against the partnership.^
§ 253. In the next place, subsequent dealings with
a new firm will in many cases, diminish, or discharge,
ner for future advances to be made to tlie firm, is not liable for advances made
to the firm after the partner's death. Bank of Scotland r. Christie, 8 CI. &
Fin. 214. A surety for the conduct of A., as agent, is not liable for the joint
acts of A. andB., partners, as agents, A. and B. having always been employed
as partners in the capacity of agents, and never A. alone. London Assurance
Co. y. Bold, 6 Q. B. 514.'}
> Coll. on P. B. 3, c. 4, § 2, p. 453, 2d ed. ; Tomlin v. Lawrence, 3 Moo. &
P. 555.
" Ante, § 236 ; Jacaud v. French, 12 East, 317.
» Coll. on P. B. 3, c. 4,§ 2, p. 453, 2d ed. ; Id. B. 3, c. 2, § 1, p. 311,312;
Id. c. 5, § 5, p. 485 ; Wats, on P. p. 225, 2d ed. ; Perry v. Jackson, 4 T. R. 516,
519 ; Hawkshaw v. Parkins, 2 Swans. 539 ; Barker v. Richardson, 1 You. &
J. 362, 365, 366 ; Gow on P. c. 2, § 2, p. 60, 61 ; ante, § 115.
408 PARTNERSHIP. [CHAP. XII.
or satisfy a debt, due to the old firm by mere intend-
ment and operation of law. Thus, for example, if one
of several partners should die, or retire from the firm,
and a balance should then be due to the firm, such
balance will be gradually diminished, and may be ex-
tinguished, by sums subsequently paid to the remain-
ing partners, unless such sums shall be otherwise spe-
cifically appropriated at the time of the payment.^ It
1 {See § 157.} [Allcott v. Strong, 9 Cush. 323 ; Farnum v. Boutelle, 13
Met. 159 ; Morgan v. Tarbell, 28 Vt. 498] ; CoU. on P. B. 3, c. 4, § 1, p.
450-452, 2d ed. ; Id. c. 3, § 4, p. 422-424 ; Ex parte KendaU, 17 Ves. 514 ;
Clajiion's Case, in Devaynes v. Noble, 1 Mer. 529, 572 ; Bodenham v. Pui*-
chas, 2 B. & Aid. 39. — In this last ease, Mr. Justice Bayley said : " I can-
not distinguish this in principle from Clayton^s Case. The decisions in the
Courts of Law do not break in upon the distinction there taken. The prin-
ciple established by those decisions is this, that where there are distinct ac-
counts and a general payment, and no appropriation made at the time of
such payment by the debtor, the creditor may apply such payment to which
account he pleases. But whei-e the accounts are treated as one entire ac-
count by all parties, that rule does not apjsly. In this case the bond was
given in 1801, for advances made or to be made in Havard"s lifetime ; at
his death, the balance due was £4,404. The surviving partners might then
have called for payment of that sum, or they might have treated it as an
insulated transaction, and kept that as a distinct and separate account.
But instead of that, they blend it with the subsequent transactions ; for in
the first account delivered after Havard's death, are included, several
items, down to the 30th of June, and the payments after his death reduce
the balance, at that time, to £1,420. They might even then have treated
this balance as a distinct account, and as money due on the bond, if they
had so chosen. Do they do so ? Look to the next account ; the parties
balance their accounts every three months ; and in the next quarterly
account, they bring forward the balance of £1,420, and make it an item in
one entire account subsisting between these parties. The account goes on
from 1810 till 1813 ; and the then balance is treated as one entire balance
of one entire account, as the result of all the transactions between the
parties in the intermediate time. The plaintiffs were not bound to have so
treated it at Havard's death ; but having done so, there is not any authority
for saying, that they are now at liberty to apply the several payments in
reduction of the debt incurred by the subsequent advances, to the exclu-
sion of the bond debt. It certainly seems most consistent with reason,
that where payments are made upon one entire account, such pajTnents
should be considered as payments in discharge of the earlier items. Clay-
ton's Case, where all the authorities were fully considered by the Master
I
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 409
has been supposed, that the same doctrme will apply
m the case of an account current between a new firm,
composed of the remaining partners of the old firm,
and a new partner ; ^ but perhaps this may, in the
present state of the authorities, be thought to admit of
doubt, unless the balance is, with the consent of all the
parties in interest, carried to the debit of the new firm ;
for then the ordinary rule as to the appropriation of
payments will apply.- But the mere fact, that a cred-
of the Rolls, is directly against the plaintiff's right to make any such
approjjriatiou as he desires. That case does not break in upon any of the
cases at laAv, and ought to govern our decision in the present instance ;
and I am therefore of opinion, that there ought to be judgment for the
defendant."
* Pemberton v. Oakes, 4 Russ. 154, 168.
^ Gow on P. c. 0, § 2, p. 244-246, 3d ed. ; Clayton's Case, in Devaynes
V. Noble, 1 Mer. 572. See Copland v. Toulmin, 1 "West, H. L. 164 ; s. c.
7 CI. & Fin. 349. In Pemberton v. Oakes, 4 Russ. 154, 168, Lord Lynd-
hurst said: '* The third question is, Whether the balance, due from Stokes
to the bank at the time of Harding's death, has been discharged by his
subsequent payments ; and that point is decided by Clayton's Case, and Bo-
denham v. Purchas. It is true, that the facts here are not, in every respect,
precisely the same with the circumstances of these two cases. But the
decisions in them proceeded on a broad general principle, equally applica-
ble to the state of circumstances existing here. Where divers debts are due
from a person, and he pays money to his creditor, the debtor may, if he
pleases, appropriate the payment to the discharge of any one or other of
those debts ; if he does not appropriate it, the creditor may make an appro-
priation ; but if there is no appi'opriation by either party, and there is a cur-
rent account between them, as between banker and customer, the law makes
an appropriation, according to the order of the items of the account, the
first item on the debit side of the account being the item discharged or
reduced by the first item on the credit side. Here it is not pretended that any
distinct appropriation of the payments was made by the parties. It was the
practice oi' the bank to settle their accounts with Stokes quarterly ; transfer-
ring, at the end of each quarter, the balance then due from him to the account
of the next quarter. Harding died in the middle of a quarter ; but, on that
occasion, no change took place in the mode of settling the accounts. At the
end of the then current quarter, the balance was struck exactly as if Harding
had been alive, and no notice was taken of his death. There being no distinct
appropriation of the payments, either by the one party or the other, the law
makes the apiiropi-iation with reference to the order of the items of the ac-
count. If so, the debt which Stokes owed to the bank at the time of Hard-
410 PARTNERSHIP. [cHAP. XII.
itor of the firm, knowing of the death of one of the
firm, continues to deal as before with the survivors for
any length of time, without requiring payment of the
balance due to him from the firm at the time of the
death, will not deprive such creditor of the remedy
which he has in equity against the assets of the de-
ceased partner for the debt ; but there must be other
concurring circumstances establishing an abandonment
of his claim against the deceased, and adopting the
responsibility of the survivors for the debt instead
thereof.^
ing's death, has been discharged by the subsequent payments. In Bodenham
V. Purchas, a Court of Law confirmed the nile, which Sir William Grant
had laid down in a Court of Equity. The point was again brought into
discussion in Simson v. Ingham, 2 B. & C. 65 ; and the principle was again
confirmed, though the particular circumstances of the transaction produced
a different decision. In that case, two accounts were formed by a London
bank at the death of one of the partners in a country bank, which dealt
with them — the one was styled the old account — the other, the new ; and
in the latter, the London bank entered all the payments, made to them by
the country bank, after the death of that partner ; so that a distinct appropri-
ation was made. The same question arose in Brooke v. Enderby, before
the Common Pleas ; and there, too, the principle of Clayton's Case was
adopted. Feeling myself bound by the force and authority of these de-
cisions, and acquiescing completely in the reasoning of Sir William
Grant, I must decide that there was no debt due to Oakes and Willington
under the indenture of the 4th of January, 1802, a,t the time when the
memorandum was indorsed on the bond." A somewhat different view
seems to have been taken by Lord Abinger, in Jones v. Maund, 3 You. & ■
C. 347.
' {§ 157, 158}; Winter v. Innes, 4 Myl. & C. 101, 108, 109. In
this case Lord Cottenham said: "The question, therefore, is, Whether
a creditor of a firm, who, knowing of the death of one of the firm, con-
tinues to deal, as before, with the survivor for any length of time, with-
out requiring payment of the balance due to him from the firm at the
time of the death, thereby loses the remedy which he had in equity
against the estate of the deceased partner; — particularly in a case in
which there is not only no evidence of any intention to abandon such
claim, and to adopt the individual responsibility of the surviving pai'tner
in its stead, but the total absence of any object or consideration for so
doing, and conclusive evidence that the principal object of the forbear-
ance was not to press upon or prejudice the estate of the deceased, of
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 411
§ 254. Indeed, it may be laid down, as a general rule,
that, when a debt is once contracted by a third person
whose will the creditor was himself a trustee and executor, though he did
not prove. It would, I think, be extraordinary, if there were authorities to
be found in support of the affirmative of this proposition. I will shortly refer
to some of the principal cases at law and in equity which bear upon this
subject. The cases at law have necessarily arisen where the dissolution of
the partnership has taken place by arrangement between the partners, and
not by death. It will be found that in some, even where it was clear that
the creditor intended to take the separate security of the continuing partner
in lieu of the joint liability of the dissolved firm, the retired partner Avas held
not to be discharged, as in David v. Ellice, and Lodge v. DIcas, in which the
creditor, with a knowledge that the continuing partner had agreed to pay all
the debts, took his personal security for the debt ; but it was held that he
had not thereby released the retiring partner, upon the ground of want of
consideration for his so doing. These decisions have been considered as car-
rying the doctrine very far, and undoubtedly they do ; and the true ground
ajipears to me to have been acted upon in Bedford v. Deakin, and Thomp-
son V. Percival. In the former, it is laid down, that to discharge the retiring
partner, it must ajjpear, that the creditor accepted the separate security of
the continuing partner, in discharge of the joint debt ; and in the latter case,
although the creditor knew that the continuing partner had agreed to pay
all debts, and with that knowledge had taken a bill from him, for the pay-
ment of which, when due, he afterwards allowed two months, yet the Court,
upon a motion for a new trial, ordered it, that it might be put to the jury
whether the plaintiff" had agreed to take, and did take, the bill in satisfiiction
of the joint debt. If, therefore, the cases in equity of claims against the es-
tates of deceased partners are to be regulated by the same principle, there
can be no doubt of the right conclusion in the present case, for there was no
new security given ; and instead of an intention appearing, or any agree-
ment being proved, to release the estate of Mr. Winter, all the evidence
proves directly the reverse. It cannot be disputed now that the estate of a
deceased partner is liable in equity to the creditors of the firm, although the
legal remedy exists only against the sui-vivors. When and by what means
is that liability to terminate ? Sir William Grant, in VuUiamy v. Noble
(and he had much considered the question in Sleech's Case in Devaynes v.
Noble), has answered the question. He says, 'The deceased partner's es-
tate must remain liable in equity until the debts which affected him at the
time of his death have been fully discharged. There are various ways in
which the discharge may take place, but discharged they must be before his
liability ceases.' The discharge may be by direct payment, or by dealings
with the continuing partner operating as payment of the joint debt, or, in
the terms of Thompson v. Percival, the dealings may arise from the credi-
tor's having agreed to take, and taking the security of the survivor in satis-
faction of the joint debt ; or there may be an equitable bar to the remedy.
412 PARTNERSHIP. [cHAP. XII.
with a partnership (it not being by a negotiable secu-
rity), no mere private agreement between the partners
will vary their rights against such third person, un-
less it is assented to by the latter.^ Thus, for example,
if upon any change of the firm, the existing partnership
debts should be assigned over to the new firm, that
alone would not give any title to the new firm at law
to sue the debtors therefor. But if in such a case, after
such an assignment, and with full knowledge thereof,
the debtors should assent thereto, and promise payment
to the new firm, that would amount, by operation of
law, to an extinguishment of the liability to the old
firm, and to a transfer of the debts to the new firm ; so
that the old firm would no longer be entitled to sue
therefor ; but the right would be exclusively vested in
the new firm.-
for (as Lord Eldon expresses it in Ex pcoie Kendall) , ' As the right stands
only upon equitable grounds, if the dealing of the creditor with the surviv-
ing partners has been such as to make it inequitable that he should go against
the assets of the deceased partner, he will not upon general rules and prin-
ciples be entitled to the benefit of the demand.' In the present case there
is a total absence of any such equitable defence to the claim upon the estate
of Mr. Winter, as there is of any intention or conti-act to abandon it. The
more modern cases of Cowell v. Sikes, Wilkinson v. Henderson, and Braith-
waite V. Britain, in addition to the former authorities, leave no doubt that in
this case nothing has taken place which can bar Mr. Baillie's claim (admitted
to have at one time existed), to compel payment of so much of the debt due
to him from the firm as remains unpaid."
' Coll. on P. B. 3, c. 5, § 1, p. 466, 467, 3d ed. ; Radenhurst v. Bates,
3 Bing. 463; Wilsford v. Wood, 1 Esp. 182. {Armsby v. Farnam, 16
Pick. 318 ; Gushing v. Marston, 12 Cush. 431 ; Richards r. Fisher, 2 All.
527 ; Stewart v. Rogers, 19 Md. 98. }
2 See 2 Story, Eq. Jur. § 1041-1046 ; Williams v. Everett, 14 East, 582 ;
Yates V. Bell, 3 B. & Aid. 643; Grant r. Austen, 3 Price, oS; Tiernan i'.
Jackson, 5 Pet. 580, 597-601 ; Evans v. Silverlock, 1 Peake, 21 ; M'Lanahan v.
Ellery, 3 Mason, 269; Harris v. Lindsay, 4 Wash. C. C. 271; {Wood v.
Rutland Ins. Co., 31 Vt. 552.} See Gow on P. c. 3, § 1, p. 129, 130, 3d
ed. — The case of King v. Smith, 4 C. & P. 108, turned upon other dis-
tinct considerations. There it was agreed, upon a dissolution of the part-
nership, that A. (one of the partners) should receive all the debts due to
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 413
§ 255. In like manner, where a contract, originally
made with a firm, is, by the consent of all the parties
thereto, severed, and become a several contract with
one of the parties, or, by assignment and consent of all
the parties thereto, has been transferred by way of sub-
stitntion to a third person, there would seem to be no
doubt, that the liability to the partnership is extin-
guished by mere operation of law.^ Why, in the case
of an infant partner, who, before any action brought
against a debtor to the firm, has disaffirmed his original
connection with the firm, the contract should not, upon
principle, be thereafter treated as a several contract
with the remaining partners, it is not easy to say ; for
thereby the contract would seem, as to the infant, to be
void ah initio. But, upon the footing of authority, the
point does not seem entirely free from difficulty.^
§ 256. Hitherto, we have been considering the rights
of action and remedies at law, which partners may have
against third persons, founded upon contracts made with
the firm ; and the manner in which the same may be
qualified, suspended, severed, or extinguished, by the
subsequent acts of one or all of the partners. Let us
now proceed to the consideration of the rights of action
and remedies, which partners may have against third
the firm; and afterwards B., the other partner, drew a bill on C, a debtor
of the firm, for the debt due to the firm, who accepted it ; and it was held to
be no defence to a suit by B. against C. on the acceptance, that there was
the above stipulation on the dissolution ; for, notwithstanding such stipula-
tion, either partner might release or collect the debts due to tlie firm. But
it would have been otherwise, if all the debts of the firm had been assigned
to A., and in consideration thereof, C. had promised to pay the debt to A.,
and then B. had sued for the same in the partnership name.
' See Thompson v. Percival, 5 B. & Ad. 925. See M'Lanahan i\ Ellery,
3 Mason, 269; Ilosack v. Rogers, 8 Paige, 229.
^ The authorities on this subject are not easily reconcilable with each
other. See Teed v. Elworthy, 14 East, 210; Goode v. Harrison, 5 B. &
Aid. 147; Thornton v. lUingworth, 2 B. & C. 824; Whitney i\ Dutch, 14
Mass. 457 ; Tucker v. Moreland, 10 Pet. 58; Kell v. Xainby, 10 B. & C. 20.
414 PARTNERSHIP. [CHAP. XII.
persons, founded upon the torts of the latter. And,
here, it may be laid down as a general doctrine, that
whenever a joint injury or damage is done to the prop-
erty, or rights, or interests of the partnership by third
persons, whether it be misfeasance, or malfeasance, or
negligence, or omission of duty, or by positive conver-
sion of their property, an action will lie at law, by all
the partners (and, indeed in such an action they ought
all regularly to join), to obtain due recompense and re-
dress in damages.^ Where, indeed, the injury is done
to some, and not to all of the partners, they alone, who
are injured, may bring an action therefor without join-
ing the others ; for torts are, or at least may be, in their
nature, joint, as well as several ; and, therefore, in con-
templation of law, the rights of the parties vary accord-
ingly." Hence, if a third person should fraudulently
collude with one partner to injure the others, even
though the act might in other respects be an injury to
the partnership ; yet an action will lie by the other
partners alone against such third person, so colluding,
for the special damage occasioned thereby to them-
selves.^ So, where words, which impute insolvency in
trade, are spoken of one of the partners in a firm
(which cannot fail in many cases to have some tendency
to impair the credit of the firm itself), the injured
partner may maintain a several action for the slander ;
and it is not necessarily to be considered as an injury, for
which a joint action only can be maintained by the firm.'*
1 Coll on P. B. 3, c. 6, § 2, p. 473, 474, 2d ed. See also Addison v.
Overend, G T. R. 766 ; Bloxam v. Hubbard, 5 East, 407 ; Sedgworth v.
Overend, 7 T. R. 279 ; Gow on P. c. 3, § 1, p. 133, 3d ed. ; Id. p. 136.
2 Ibid.
3 Longman v. Pole, 1 Moo. & Malk. 223. {See Fox v. Rose, 10 U. C. Q.
B. Rep. 16.}
■• Harris v. Bevington, 8 C. & P. 708. {See Robinson v. Marcbant, 7
Q. B. 918.}
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 415
§ 257. On the other hand, there is not the slightest
doubt, that a joint action may be maintained by the
firm for any defamation of the firm, or for any libel
upon the firm ; for this is, justly and properly speak-
ing, a joint tort and injury, applicable to their collective
rights and interests.^ But in such a case the damages
' Coll. on P. B. 3, c. 5, § 2, p. 473, 2d ed. ; Cook v. Batcbellor, 3 B. & P.
150; Haythorn v. Lawson, 3 C. & P. 196. See Williams's note to Coryton
V. Lithebye, 2 Saiind. 112, 117, a. ; {Le Fanu?;. Malcomson, 1 H. L. Cas. 637 ;
Taylor v. Church, 1 E. D. Smith, 279 ; s. c. 4 Seld. 452 ; Lewis v. Chapman,
19 Barb. 252. In Metropolitan Saloon Omnibus Co. v. Hawkins, 4 H. & N^.
87, it was held, that an incorporated joint stock company might sue a share-
holder for a libel, and Martin & Watson, B B., intimate that a suit against one
jjartner who had libelled the firm might be maintained by the other partners. }
Forster v. Lawson, 3 Bing. 452. — In this latter case Lord Chief Justice
Best said : " An objection has been made to the declaration in this case ;
namely, that the action has been brought by three persons jointly, and that
they could not properly join in such an action. The general rule of law is,
as laid down in the case of Smith v. Cooker, Cro. Car. 512; namely, that
where several persons are charged with being jointly concerned in a murder,
each of them must bring a separate action for it ; and the reason is, that they
have no joint interest to be affected by the slander. Where, however, two
persons have a joint interest affected by the slander, they may sue jointly ;
and the case of Cook v. Batchellor is not the first case which has determined
this point. In the note in Saunders, to which the Court has been referred,
the learned editor states, that two joint tenants or coparceners might join in
an action for slander of the title to their estate ; and the form of the declara-
tion in such an action is to be found in Brownlow. This doctrine has also
been recently considered and confirmed in the case of Collins v. Barrett, in
which it was holden, that two persons might bring a joint action for a mali-
ciously holding them to bail, if the comjjlaint in the declaration was con-
fined to the expenses which they were jointly put to in procuring their
liberty. It has been said, that, notwithstanding the judgment against the de-
fendants in this action, if either of the plaintiffs has sustained any separate
damage, he may still maintain a separate action. I cannot see how there
can be any separate damage. The business injured is the joint business, and
the libel only affects the plaintiffs through their business. If, however, a
copartnership be libelled, and the libel contains something which particu-
larly affects the character of one of that firm, I think a joint action may
be maintained against the libeller, who would have less reason to com-
plain of such proceedings than he would have if each partner brought a
separate action for the injury done to the firm. Another objection raised
by the defendant's counsel is, that the plaintiffs have not stated the pro-
portion of interest, which each respectively had in their joint business. It
416 PARTNERSHIP. [CHAP. XII.
must be strictly limited to the injury sustained by the
firm in their jomt trade or business ; and cannot be ex-
tended to the injury done to the private feelings of the
individual partners/
§ 258. The same principle will apply to any other
wrong, done by third persons, affecting the partnership
trade or business ; such as obstructing their business
and employment, seducing persons from their service,
or wrongfully soliciting and inducing their customers
to Avithdraw their patronage from them by fraud, or
threats, or otherwise ; for in all such cases, a joint
damage is done to the firm.^
is not necessary for them to do so ; with their several proportions the de-
fendant has nothing to do. Any compensation they may recover "will
belong to them generally, and it is nothing to the defendant, how it may
be divided among them. It has also been urged, that the words contained
in the paragraph are not actionable. I have no hesitation in deciding,
that to say of any bankers, that they have suspended payment, is action-
able. For what can be the meaning of such a statement, except that they
are no longer solvent? Saying that a banker has suspended payment, is
saying that he cannot pay his debts. A temporary inability to pay debts
is insolvency. The charge of suspending payment is a charge of insolvency.
Such a statement will instantly bring all the creditors of a banking-house
upon it, and completely stop their business by preventing any one from
taking their bills. But here special damage is stated, and I think correctly
stated. It has been objected, that the sj^ecial damage is not set out with
sufficient certainty. Even if that were so, advantage could be taken of it
only by a sjjecial demurrer. In my opinion, however, the special damage
is cleai'ly and distinctly set out. The plaintiffs state that they had a number
of promissory notes outstanding and in circulation, and that in consequence
of these libels they were called upon and forced and obliged to pay those
notes ; how or when was not material, it being sufficient that they declare
that they have thereby lost all the benefit and advantage which would other-
wise have accrued to them in their trade and business, from the notes re-
maining outstanding and in circulation. The declaration goes even further ;
it states that the plaintiffs have suffered and sustained a great loss in raising
and procuring sufficient money to pay and satisfy their several notes. It
appears to me, that the declaration is unobjectionable, and that the plaintiffs
are entitled to judgment."
' Haythorn v. Lawson, 3 C. & P. 196. [See Robinson v. Marchant, 7
Q. B. 918.]
2 Weller r. Baker, 2 Wils. 414,423; Coryton v. Lithebye, 2 Saund. 112,
115, and WilHams's note (2), p. 116.
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 417
§ 259. In the next place, as to remedies in equity by
partners against third persons. It may be stated as the
general doctrine, that the same remedies in equity will
lie for the vindication of the rights, and the redress of
the wrongs of the partnership, as ordinarily belong to
private individuals.^ Thus, for example, if one partner
should collude with a third person to defraud the part-
nership by wrongfully using the partnership name, or
negotiating the securities, or applying the property
thereof for improper purposes, a Court of Equity would,
by an injunction, restrain him from so doing. ^ So, if a
third person should violate a copyright or patent right,
belonging to a partnership, an injunction would, in like
manner, lie to restrain him from such illegal conduct.
So, if a separate creditor of one partner should know-
ingly aid in the misapplication of the partnership funds
to the payment of his own debts, a Court of Equity
would restrain him from so aiding in such misconduct ;
and, if he had so improperly received the funds thereof,
it would compel him to restore the same to the partner-
ship.^ So, a Court of Equity will restrain a third per-
son by injunction, who is injuring the partnership by
vending an article of trade, similar to that manufactured
by the partnership, falsely, under the name of the part-
nership, and as if manufactured by the same, and thus
misleading the public, and diverting the patronage and
custom from the partnership."* The same rule will apply
to any other false and wrongful use of the partnership
name and reputation, by deceptive imitations of the
> Coll. on P. B. 3, c. 7, p. 566, 2d ed.
^ Gow on P. c. 2, § 4, p. 107-109, 3d ed. ; Coll. on P. B. 2, c. 3, § 5, p.
234, 235, 2d ed. ; Hood v. Aston, 1 Russ. 412 ; 1 Story, Eq. Jur. § 667, 669 ;
2 Id. § 930-935.
* Ante, § 132, 133 ; Gow on P. c. 2, § 4, p. 108 ; Coll. on P. B. 2, c. 3,
§ 5, p. 234, 235, 2d ed. ; Jervis v. White, 7 Ves. 413.
* 2 Story, Eq. Jur. § 951.
27
418 PARTNERSHIP. [CHAP. XII.
labels, devices, or ornaments used by the partnership
upon their own manufactured cutlery, or vehicles, or
medicinal preparations, or otherwise in the course of
their business.^ So, in like manner, an injunction will
lie for a partnership to prevent a third person from
publishing a magazine, or other periodical, in their
names, after they have ceased to have any connection
with it.^
§ 260. These cases all stand upon doctrines equally
applicable to all persons, whether they are partners, or
private individuals. But there is one case, which is pe-
culiar to partnerships, and which, therefore, requires a
distinct consideration in this place ; and that is, the case
of an execution levied upon the partnership property
by a creditor, under a judgment for a separate debt
against one partner. Where there is a joint suit and
judgment against all the partners for a partnership debt,
there is no doubt, at the common law, that the execu-
tion issuing thereon may be levied upon, and satisfaction
had, either out of the partnership effects, or out of the
separate effects of either of the partners (exactly, as in
the case of other joint debtors, not partners) ; ^ and if
one is compelled to pay or satisfy the whole debt, his
remedy for contribution therefor lies exclusively in
equity.'*
§ 261. But the question, as to the right of ^seizure of
partnership property for the satisfaction and discharge
' 2 Story, Eq. Jur. § 951 ; Motley v. Downman, 3 Myl. & C. 1, 14, 15 ;
Millington v. Fox, 3 Myl. & C. 338 ; Knott v. Morgan, 2 Keen, 213, 219 ;
{§100.}
2 2 Story, Eq. Jur. § 951 ; Hogg v. Kirby, 8 Ves. 215.
3 Ante, § 179, 189, 264; Coll. on P. B, 3, c. 6, § 10, p. 557; Ex patie
Ruffin, 6 Ves. 119, 126; Herries v. Jamleson, 5 T. R. 553, 554; Abbot v.
Smith, 2 W. Bl. 947; Jones v. Clayton, 4 M. & S. 349; Dutton v. Mor-
rison, 17 Ves. 193, 205, 206. {See Randolph v. Daly, 16 IsT. J. Ch. 313.}
•• Ibid. {See § 263, note.}
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 419
of the separate debt of one of the partners, is a matter
of a more complicated nature, and involves other con-
flicting rights and equities of the other partners. It
seems clear, at the common law, that the sheriff", upon
an execution upon a judgment against one partner for
his separate debt, may seize in execution the tangible
property of the partnership,^ In such case, it has been
said, that he should seize the whole or entirety of the
goods, and not merely an undivided moiety or propor-
tion thereof ; for if he should seize only the moiety, or
other proportion, the other partners would be entitled
to their moiety or other proportion thereof.^ It would,
perhaps, be more accurate (at least according to the
modern notions on this subject) to say, that the sheriff"
may seize, and should seize, the interest of the separate
partner in the property of the partnership ; and that,
and that alone, he is at liberty to sell upon the execu-
' [But qucere, whether the sheriff can take such goods into his possession,
to the exclusion of the other 2>ai'tner. See Hill v. WIggin, 11 Fost. 292.]
{It is undoubtedly the general law throughout the United States that the
sheriff can take possession of the goods on an execution, or on an attach-
ment on mesne process. 1 Am. Lead. Cas. 473-478, 4th ed. ; Reed v. Howard, 2
Met. 36 ; Read y. Shepardson, 2 Vt. 120 ; Whitney v. Ladd, 10 Vt. 165 ; Phillips
V. Cook, 24 Wend. 389 ; Davis v. White, Houst. 228 ; Newhall v. Bucking-
ham, 14 111. 405 ; White v. Jones, 38 111. 159 ; Atwood v. Meredith, 37 Miss.
635 ; Andrews v. Keith, 34 Ala. 722. See Burnell v. Hunt, 5 Jur. 650, 651.
In New Hampshire, however, it is held otherwise. Gibson v. Stevens, 7 N. H.
352 ; Morrison v. Blodgett, 8 N. H. 238, 251 ; Dow v. Sayward, 14 N. H. 9 ;
Treadwell v. Brown, 43 N. H. 290. In Pennsylvania the point seems not to
have been directly decided, but the dicta in Deal v. Bogue, 20 Penn. St.
228, and Smith v. Emerson, 43 Penn. St. 456, render it doubtful whether
the general rule would be there followed. See Reinheimer v. Horaingway, 35
Penn. St. 432. In the matter of Smith, 16 Johns. 102, it was held, that the part-
nership property could not be taken on a domestic attachment in a suit
against one partner. But see contra Burgess v. Atkins, 5 Blackf. 337 ; Reed
V. Howard, 2 Met. 36; Read v. Shepardson, 2 Vt. 120; Whitney v. Ladd,
10 Vt. 165. See § 263, note.}
= Heydon v. Heydon, 1 Salk. 392 ; Chapman v. Koops, 3 B. & P. 289, 290 ;
Jacky V. Butler, 2 Ld. Raym. 871 ; Skipp v. Harwood, 2 Swans. 586, 587;
Dutton V. Morrison, 17 Ves. 193, 205, 206.
420 PARTNERSHIP. [CHAP. XII.
tion.^ What that interest is, or may be, it is impossible
to ascertain in many cases, until a final adjustment of
all the partnership concerns." Yet, Courts of Law have
said, that the sheriff may go on to sell that interest un-
der the execution, however inconvenient it may be, and
the purchaser at the sale must be content to take such
an interest therein, as a tenant in common with the
other partners, as the partner himself had therein.^ For
in every such case, the other partners have a lien upon
the partnership property, as well for the debts due by
the firm, as for their own shares and proportions thereof;
and the judgment creditor, and the purchaser under him,
must take it, subject to all such claims and liens."*
» Coll. on P. B. 3, c. 6, § 10, p. 559-561, 2d ed. ; Chapman v. Koops, 3 B.
& P. 289, 290 ; Dutton v. Morrison, 1 7 Ves. 193, 206. In the matter of Wait,
1 Jac. & W. 605, 608; Rice v. Austin, 17 Mass. 197, 206, 207; Wilson i\
Conine, 2 Johns. 280; [Filley v. Phelps, 18 Conn. 294; Walsh v. Adams, 3
Denio, 125; Sutcliffe v. Dohrman, 18 Ohio, 181 ; Deal r. Bogue, 20 Penn
St. 228.]
^ 1 Story, Eq. Jur. § 667; Skipp r. Harwood, 2 Swans. 586; NicoU v.
Mumford, 4 Johns. Ch. 522 ; s. C. 20 Johns. 611.
^ Coll. on P. B. 3, c. 6, § 10, p. 559-562, 2d ed. ; Fox v. Hanbury, Cowp.
445 ; Skipp v. Harwood, cited in note to Burton o. Greene, 3 C. & P. 309 ;
[Haskins v. Everett, 4 Sneed, 531] ; Taylor v. Fields, 4 Ves. 396 ; Pope v.
Haman, Comb. 217 ; Ex parte Hamper, 17 Ves. 403, 407 ; The matter of
Smith, 16 Johns. 102, 106, and the Reporters note ; Skipp v. Harwood, 2
Swans. 586 ; s. c. under the name of West v. Skip, 1 Ves. Sr. 239 ; Id. 456 ;
Chapman v. Koops, 3 B. & P. 289 ; Holmes v. Mentze, 4 Ad. & E. 127 ; 1
Story, Eq. Jur. § 677, 678 ; Allen v. Wells, 22 Pick. 450.
* This subject was much considered in the case of Taylor v. Fields, 4 Ves.
396. Lord Chief Baron Macdonald on that occasion, in delivering the opin-
ion of the Court, said: "The right of the separate creditor under the exe-
cution depends upon the interest each partner has in the joint property.
With respect to that, we are of opinion that the corpus of the partnership
effects is joint property, and neither partner separately has any thing in that
corpus ; but the interest of each is only his share of what remains after the
partnership accounts are taken. In Skip v. Harwood, 1 Ves. Sr. 239, by the
name of West v. Skip, we see that whatever the right of the partnership may
be, it is not affected by what may happen between the individual partners.
There is a distinction between the rights of the partners and the rights of
the partnership. As between one partner and the separate creditors of the
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 421
§ 262. Strictly, indeed, and properly speaking, the
sale does not, at least in the view of a Court of Equity,
other, they cannot aiFect the joint stock any further than that partner whose
creditor they are could have affected it. In Fox v. Hanbury, Cowp. 445,
Lord Mansfield was led to the consideration of a point, that bears much upon
this case ; and adverting to the case of Skip v. Harwood, he states a passage
of Lord Hardwicke's judgment from his own note rather stronger than it
appears in the report : ' If a creditor of one partner takes out execution
against the partnership effects, he can only have the undivided share of his
debtor : and must take it in the same manner the debtor himself had it, and
subject to the rights of the other partner.' What is the manner in which
the debtor himself had it? He had that which was undivided, and could
only be divided by first delivering the effects from the partnership debts.
He who comes in as his companion, as joint tenant with him, according to
this doctrine of Lord Hardwicke, must take it in the same manner the debtor
himself had it, subject to the rights of the other partners. Lord Mansfield
having stated what, according to the course of the common law, as far as it
respects trade between partners, is the rule, that a creditor taking out exe-
cution against a partner, is directly in the place of the pai'tner debtor, pro-
ceeds to show that by the same rule, where a partner becomes bankrupt, the
assignees are put in the place of the partner in whose right they come in,
and by no means, as was argued by Mr. Plumer, by any rule arising out of
the bankrupt laws ; for nothing is said in any one of those acts as to the
creditors of a partnership, and the separate creditors of one partner ; but
they only provide for the case of mutual debts, and accelerating a debt upon
a security payable at a future day. But the same common law applied in
the case where one partner becomes a bankrupt, provides that the assignee
of the bankrupt shall be in the same situation as that in which a creditor
taking out execution stood before those acts. This introduces all the cases
of bankruptcy which Mr. Plumer wished to exclude, as not applicable to a
case in Avhich there was no bankruptcy ; and this case is to be considered as
if no bankruptcy had taken place, as the execution was before the bank-
ruptcy. In law there are three relations ; first, if a person chooses for val-
uable consideration to sell his interest in the partnership trade, for it comes
to that ; or if his next of kin or executors take it upon his death ; or if a cred-
itor takes it in execution, or the assignees under a commission of bankrujitcy.
The mode makes no diiference. But in all those cases the application takes
place of the rule, that the party coming in the right of the partner, comes
into nothing more than an interest in the partnei'ship, which cannot be
tangible, cannot be made available, or be delivered, but under an account
between the partnership and the partner ; and it is an item in the account
that enough must be left for the partnership debts. A great deal has
been said of the inconvenience. What is the inconvenience ? It is true,
the individual trusted to the partnership fund in his idea at the time he
was lending the money ; not that I believe that is very conmion. But it
422 PARTNERSHIP. [CHAP. XII.
transfer any part of the joint property to the purchaser,
so as to entitle him exckisively to take it or withhold
mav be dangerous in a thousand instances to have any thing to do with a
trader ; as for instance, to purchase an estate ; for an act of bankruj^tcy
may have been committed five years before, which will reach the estate.
But look to the danger on the other side ; one partner giving a bond, and
the creditors of the partnership looking to the stock itself. It is said, that
in this case the joint creditors had done nothing; and this meritorious
creditor has a right to be prefeiTcd on account of his early diligence.
But what is that to which he is entitled? The estate of a partner is
debtor to him. The question, therefore, recurs to the consideration, what
it was that partner had; for the creditor cannot be entitled to anymore.
It therefore argues nothing to say, he has the merit of diligence, till we
see upon what that merit can attach. If the partner himself, therefore,
had nothing more than an interest in the surplus beyond the debts of the
partnership upon a division, if it turns out that at common law that is the
whole that can be delivered to, or taken by, the assignee of a partner, the
executor, the sheriff, or the assignee under a commission of bankruptcy,
all that is delivered to the creditor, taking out the execution, is the inter-
est of the partner in the condition and state he had it ; and nothing was
due to this partner separately, the partnership being insolvent. The whole
property was due to the partuersliip creditors, and not to either partner."
See also Dutton v. Morrison, 17 Ves. 193, 205, 206. In the very recent
case of Allen v. Wells, 22 Pick. 450, Mr. Justice Dewey, in delivering
the opinion of the Court, said : " The conflicting claims of copartnership
and separate creditors have been a fruitful source of litigation in England.
The questions more usually have, arisen under the bankrupt law, and the
decisions are mostly to be found in the Chancery Reports, but not exclu-
sively so. The great number of cases in which this question has arisen,
shows very clearly, that there could have been at the time no very well
defined general principles, known and acknowledged as such, applicable to
the adjustment of these conflicting rights. Even as regards the joint prop-
erty of jjartners, the rule has varied. By the rules of law as formerly held
in England, the sheriff, under an execution against one of two copartners,
took the partnership effects and sold the moiety of the debtor, treating the
property as if owned by tenants in common. Heydon v. Heydon, 1 Salk.
392; Jacky r. Butler, 2 Ld. Raym. 871. But the principle is now well
settled in England, both at law and in equity, that a separate creditor
can only take and sell the interest of the debtor in the partnership prop-
erty, being his share upon a division of the surplus, after discharging
all demands upon the copartnership. Fox v. Hanbury, Cowp. 445 ; Taylor
V. Fields, 4 Ves. 396. The same fluctuation in the rule, as to partnership
property, has existed in the United States. The rule of selling the moie-
ty of the separate debtor in the partnership property on an execution for
his private debts, formerly prevailed in several of the States of the Union.
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 423
it from the other partners ; for that would be to place
him in a better situation than the execution partner
himself, in relation to the property.^ But it gives him
a right to a bill in equity, calling for an account and
settlement of the partnership concerns, and thus to en-
title himself to that interest in the property, which upon
the final adjustment and settlement of the partnership
concerns, shall be ascertained to belong to the execution
partner ; and nothing more.^ How utterly inadequate
a Court of Law is to furnish suitable means for taking
such an account, needs scarcely to be suggested ; and,
indeed, the very difficulty of ascertaining what interest
can be conveyed to the purchaser before such an ad-
justment and settlement are made, has induced very
learned minds to doubt whether a Court of Law is
competent to order any sale, before the exact amount
But the latei- decisions have changed the rule, and that now more gener-
ally adopted is in accordance with the one prevailing in England, and
which has been already mentioned. The State of Vermont still adheres
to the doctrine, that partnership creditors have no priority over a creditor
of one of the partners, as to the partnership effects. Reed v. Shepard-
son, 2 Vt. 120. The rule in Massachusetts, giving a priority to the part-
nership creditor in such cases, was settled in the case of Pierce v. Jack-
son, 6 Mass. 242, and has been uniformly followed since. The effect of the
rule that the only attachable interest of one of the copartners by a sepa-
rate creditor, was the surplus of the joint estate which might remain after
discharging all joint demands upon it, necessarily was to create a preference
in favor of the partnership creditoi-s in the application of the partner-
ship property ; and this effect would be produced, although the original
purpose of the rule might have been the securing the rights of the
several copartners, as well as those of their joint creditors. Whatever may
have been the object of the rule, the rule itself is now to be considered as
well settled, as to the appropriation of the partnership effects."
' 1 Story, Eq. Jur. § 667. But see Burrall v. Acker, 23 Wend. 606. [And
if he excludes the other partners from possession, they may have an action
against him. Newman v. Bean, 1 Fost. 93 ; Page v. Carpenter, ION. H.
77; Morrison v. Blodgett, 8 N. H. 238, 245.]
* 1 Story, Eq. Jur. § 677 ; Chapman r. Koops, 3 B. & P. 289, 290, 291;
Button I'. Morrison, 17 Ves. 193, 205, 206.
424 PARTNERSHIP. [CHAP. XII.
of the interest of the partner therein is thus ascer-
tained.^
§ 263. In cases of this sort, therefore, the real posi-
tion of the parties, relatively to each other, seems to
be this. The partnership property may be taken in
^ Waters v. Taylor, 2 Ves. & B. 299, 301 ; Dutton v. Morrison, 17 Ves. 193,
206, 207 ; In the matter of Wait, 1 Jac. & W. 605, 608. — In the case of
AVaters v. Taylor, Lord Eldon said : " If the Courts of Law have followed
Courts of Equity in giving execution against partnership effects, I desire to have
it understood that they do not appear to me to adhere to the principle, when
they suppose that the interest can be sold before it has been ascertained what
is the subject of sale and purchase. According to the old law, I mean
before Lord Mansfield's time, the sheriff, under an execution against partner-
ship effects, took the undivided share of the debtor without reference to the
partnership account ; but a Court of Equity would have set that right by
taking the account, and ascertaining what the sheriff ought to have sold.
The Courts of Law, however, have now repeatedly laid down that they will
sell the actual interest of the partner, professing to execute the equities between
the parties ; but forgetting that a Court of Equity ascertained, previously,
what was to be sold. LIow could a Court of Law ascertain what was the in-
terest to be sold, and what the equities, depending upon an account of all the
concerns of the partners for years ? " And again. In the matter of Wait, 1 Jac.
& W. 608, he said: " In my long course of practice, 1 have never been able
to reconcile all the decisions which have taken place on partnership property
with resjject to joint and separate estate ; nor have I ever been able very
clearly to see my way in the application of the doctrine which has been
held in some of the late cases on this subject. I conceive originally the law
was, that if there was a separate creditor of a partner, he might lay hold of
any chattels belonging to the partnershiji, and take a moiety of them, or
whatever other proportion that partner might be entitled to in the effects
of the partnership. But at law, somehow or other, they now contrive to
take an account which ascertains what is the interest of the debtor in the
effects taken in execution ; and when you put the question, what is that
interest, nothing can be more clear than that it is that which would result to
him when all the accounts of the partnership were taken. This equity, which
has been transferred into the proceedings of a Court of Law, I apprehend,
subsisted here long before ; a separate creditor applying for satisfaction of
his debt out of the jjartnership estate by means of an equitable execution,
must have taken it upon equitable terms. There has been a great deal of
reasoning as to the rights of partners, with reference to the execution of a
separate creditor ; but it always appeared to me that the interest of the in-
dividual partner was all which a creditor of that individual could take, and
that he must take it subject to all the partnership dealings."
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 425
execution upon a separate judgment and execution
against one partner ; but the sheriff can only seize and
sell the interest and right of the judgment partner
therein, subject to the prior rights and liens of the
other partners and the joint creditors therein.^ By
such seizure the sheriff acquires a special property in
the goods seized ; ^ and the judgment creditor himself
may, and the sheriff, also, with the consent of the judg-
ment creditor, may, file a bill against the other partners
for the ascertainment of the quantity of that interest,
before any sale is actually made under the execution.^
The judgment creditor, however, is not bound, if he
does not choose, to wait until such interest is so ascer-
tained; but he may require the sheriff immediately to
proceed to a sale, which order the sheriff is bound by
law to obey.'^ In the event of a sale, the purchaser
at the sale is substituted to the rights of the execution
partner, quoad the property sold, and becomes a tenant
m common thereof; and he may file a bill, or a bill
may be filed against him by the other partners, to as-
certain the quantity of interest, which he has acquired
by the sale.^
' Taylor v. Fields, 4 Ves. 396; ante, § 261, 262; Skipp v. Harwood, 2
Swans. 586, 587; Holmes v. Mentze, 4 Ad. & E. 127; Hai-vey i'. Crickett,
5 M. & S. 336 ; Button v. Morrison, 17 Ves. 193, 205, 206.
* Wilbraham v. Snow, 2 Saund. 47, and Williams's notes, Ibid.
' {Nixon V. Nasli, 12 Ohio St. 647.}
* Parker v. Pistor, 3 B. & P. 288; Chapman v. Koops, 3 B. & P. 289,
390 ; Holmes v. Mentze, 4 Ad. & E. 127 ; [and he is not liable to the other
2)artners for so selling. McPherson v. Pemberton, 1 Jones, (N. C.) 378.]
^ Chapman v. Koops, 3 B. & P. 289, 290; Ex parte Hamper, 17 Ves. 403,
407; Bevan r. Lewis, 1 Sim.376; Skipp ^^ Harwood, 2 Swans. 586,587; Taylor
V. Fields, 4 Ves. 396 ; Barker v. Goodair, 11 Ves. 78, 85 ; Gow on P. c. 3, § 2,
p. 144, 3d ed. ; 1 Madd. Ch. Pr. 131 ; Eden on Injunct. 31 ; Coll. on P. B. 3,
c. 6,§ 10, p. 557-565, 2d ed. [And if he sell the entire goods, he is liable to
a subse(|uent trustee of the firm for a moiety of the goods so sold. Latham
r. Simmons, 3 Jones, (N. C.) 27.] {See Moore v. Pennell, 52 (Me. 162;
Deal V. Bogue, 20 Penn. St. 228. The other partners may purchase at the
426 PARTNERSHIP. [CHAP. XII.
§ 264. In cases of the seizure of the jomt property
for the separate debt of one of the partners, a question
sherifi''s sale ; hut their conduct must be perfectly fair, or they will be held
as trustees for the partner whose share is sold. Perens v. Johnson, 3 Sm. &
G. 419. See Evans i'. Gibson, 29 Mo. 223. The purchaser has no right to
exclusive possession. Andrews v. Keith, 34 Ala. 722. Nor can he maintain
ejectment for his interest in the real estate. Clagett v. Kilbourne, 1 Black.
346. In Reinheimer v. Hemingway, 35 Penn. St. 432, it was held, that, as
against the purchaser of a partner's share, the other partners were entitled to
exclusive possession of the partnership property. See § 261, note.} In
Massachusetts, it has been held, that an attachment of j^artnershij^ goods, on
a suit against one partner, is not valid against a subsequent attachment
of the same goods by a creditor of the partnership. Pierce v. Jackson,
6 Mass. 242. On this occasion, Mr. Chief Justice Parsons said: " At com-
mon law, a partnership stock belongs to the partnership, and one partner has
no interest in it but his share of what is remaining after all the partnership
debts are paid, he also accounting for Avhat he may owe to the firm. Conse-
quently all the debts due from the joint fund must first be discharged, before
any partner can appropriate any part of it to his own use, or pay any of
his private debts ; and a creditor to one of the partners cannot claim any
interest, but what belongs to his debtor, whether his claim be founded on
any contract made with his debtor, or on a seizing of the goods on execution.
There are several cases by which these principles, so reasonable and equitable,
are recognized and confirmed." The same doctrine prevails in New Hampshire.
Tappan v. Blaisdell, 5 N. H. 190. [See Morton v. Blodgett, 8 N. H. 238 ;
Thompson v. Lewis, 34 Me. 167.] The doctrine, however, has not been
applied to cases of mei'e dormant partners, against the creditors of the
ostensible partners. Lord v. Baldwin, 6 Pick. 348 ; French v. Chase, 6
Greenl. 166 ; [Van Valen v. Russell, 13 Barb. 590.] See, also, Church v.
Knox, 2 Conn. 514 ; Brewster v. Hammet, 4 Conn. 540 ; Barber v. Hartford
Bank, 9 Conn. 407; Doner v. Stauff'er, 1 Penn. 198; Knox v. Summers, 4
Yeates, 477. Whether the like priority would be allowed at law, in favor of
an execution by a joint creditor, against the execution of a separate creditor
of one partner in England, does not appear to have been made a question for
argument. But it is pi-obably owing to the fact, that, at all events, in equity
the priority would be sustained, where the partnership is insolvent, in a
proper bill filed for the purpose. Could such a bill be filed by the joint
creditor ? Or, should his rights be worked out through the equities of the
other partners ? See 1 Story, Eq. Jur. § 675 ; ante, § 97 ; Ex parte Ruffin,
6 Ves. 1 1 9, 1 26, 1 27 ; Ex parte Williams, 1 1 Ves. 3, 5. j The law on the post-
ponement of executions against separate partners to those against the partner-
ship is treated in a very clear and original method in 2 Lead. Cas. in Eq. 336,
3d Am. ed. " It is thoroughly well settled, that while a sale under an ex-
ecution ibr the sejjarate debt of a partner, will only pass his interest in the
property, subject to the lien of his copartners and their equitable i-ight to re-
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 427
has arisen, whether a Court of Equity ought to inter-
fere, upon a bill for an account of the partnership, to
quire that all the property of the partnership shall be applied, in the first in-
stance, to the payment of its debts; Christian v. ElHs, 1 Gratt. 396 ; Renton v
Chaplain, 1 Stock. 62 ; In the matter of Smith, 16 Johns. 102 ; NicoU v. Mum-
ford, 4 Johns. Ch. 522 ; Holmes v. Mentze, 4 Ad. & E. 127 ; Garbett v. Veale,
5 Q. B. 408 ; Johnson v. Evans, 7 Man. & G. 240 ; 1 Am. Lead. Cas. 473, 4th ed. ;
an execution issued for a joint debt, will bind both the legal and equitable inter-
rest of all the partners, and, consequently confer all the right and title of the
firm on the purchaser, free from all claims, either of the partnership, or of
the individual partners. Hence, when a levy for a separate debt is followed,
before a sale, by an execution for the debt of the firm, an apparent conflict
arises between two legal mandates, one of which binds the whole right and
title of all the partners against whom it is issued, while the other has a prior
lien or hold on the separate share or interest of one. The proper course,
under these circumstances, undoubtedly is to sell under each writ separately,
and without regard to the existence of the other ; when the purchaser under
the first will become a tenant in common with the other partners at law, and
be subject to a lien for the partnership debts and to an account in equity ;
while those who buy under the second, will acquire the equities of the firm,
as well as, and in addition to, the separate shares or interests of the partners,
with the exception of the share of the partner against whom the first writ
issued. The extent and value of the interests thus acquired, may obviously
vary with the circumstances of each case in which the question arises ; but it
would seem plain, that the right of the purchaser under the writ of the sepa-
rate creditor, must extend as far as that of the partner for whose debt it issued,
and cannot be a nullity unless the firm is insolvent, or the relation between
its members is such that the whole of the assets would be appropriated by
equity to the other partners. Reed v. Shepardson, 2 Vt. 120. For although
the interest of the separate creditor is the interest of the partner in the state
and condition in which the partner has it, and is, consequently, worth nothing
unless the partnership assets are sufficient for the payment of its debts ; Tay-
lor V. Fields, 4 Ves. 396 ; Commercial Bank f. Wilkins, 9 Greenl. 28 ; yet, for
the same reason, it must necessarily have a real value, when the firm is solvent,
and the partner is not indebted to the firm. Snodgrass' Appeal, 13 Penn.
St. 471, 475. The sheriff should, therefore, as already stated, unless there is
something more to the contrary than the fjict that a levy for a separate debt
has been followed by a joint execution, proceed separately to a sale under
bothwrits, in the order of time in which he received them, and leave the
rights of the partners to be decided subsequently by equity. But although
this course is consistent with the legal rights of the purchaser under the separate
writ, and even with principle (Moody v. Payne, 2 Johns. Ch. 548), and would
seem to be that taken in England, it is attended with some inconveniences in
practice, and among others, with that of making the extent of the interest
exposed for sale depend on the solvency of the partnership ; and the state
428 PARTNERSHIP. [cHAP. XII.
restrain the sheriff from a sale, or the vendee of the
sheriff from an alienation of the property seized, until
of the accounts between the partners, in manifest derogation of the certainty
■which, as Lord Eldon observed in Waters t;. Taylor, 2 Ves. & B. 299, should
characterize every sale, especially when made by the law or by virtue of le-
gal 25rocess. The proper remedy or preventive under these circumstances,
lies in a levy by the joint creditors, either before or after the sale, followed
by an appeal for aid to equity, which will give the complainants the full ben-
efit of the equity of the partners, either by enjoining the sale, under the sep-
ai'ate execution, or by compelling the purchaser to submit to the result of an
account between the partners, and applying the property to the payment of
the partnership debts, if necessary for their liquidation. Witter u. Richards, 10
Conn. 37; Washburn «. Bank of Bellows Falls, 19 Vt. 278; Shedd v. Wil-
son, 27 Vt. 478. But as such a bill must be founded on an allegation of the
insolvency of the partnership, and cannot reach a final decision until that al-
legation has been substantiated by proof, it may necessarily lead to a long
and involved litigation, and prove of little benefit in fact, however perfect
in theory. A different view has accordingly been taken in many of the
States of the Union, and a levy for a debt due by the partnership, held to
relate back to the equity of the partners, and thus obtain a priority over an-
terior executions for the separate debts of the partners. ' A sale made under
these circumstances, by virtue of the joint writ, consequently confers an abso-
lute title on the purchaser, and the proceeds will be applied, in the first m-
stance, to the payment of the joint debts, to the exclusion of the separate
creditors, unless there is more than enough to satisfy the others. Pierce v.
Jackson, 6 Mass. 242 ; Morrison v. Blodgett, 8 N. H. 250; Coover's Appeal,
29 Penn. St. 9 ; Jarvis?;. Brooks, 3 Foster, 136, 146 ; Benson v. Ela, 35 N. H.
402; Tappan w. Blaisdell, 5 N. H. 190; Crane v. French, 1 Wend. 311;
Dunham v. Murdock, 2 Id. 558 ; Commercial Bank v. Wilkins, 9 Greenl. 28 ;
Douglas V. Winslow, 20 Me. 89 ; Trowbridge v. Cushman, 24 Pick. 310.
The same view was taken, under somewhat different circumstances, in
Lancaster Bank v. Myley, 13 Penn. St. 544, and a mortgage of the real es-
tate of a partnership by the firm, held entitled to the whole of the proceeds
of the land, in opposition to a prior judgment for the sej^ai'ate debts of one
of the partners. In some of these cases, the partnership was proved or con-
ceded to be insolvent, and a sufficient equitable ground, consequently, laid for
treating the levy for the separate debt as a nullity, and awarding the whole of
the pi'oceeds to the joint creditor. Pierce v. Jackson ; Commercial Bank
V. Wilkins ; Douglas v. Winslow ; but there are others in which this ingre-
dient was wholly wanting ; Crane v. French ; Dunham v. Murdock ; Morri-
son V. Blodgett ; Trowbridge v. Cushman ; Coover's Appeal ; and which
seem to have been based on the principle, that a partner has no right or
title to any specific portion of the partnership assets, and only a right to what
may remain after the debts of the firm and the demands of his partners are
satisfied; Gibson v. Stevens, 7 N. H. 352; Lovejoy v. Bowers, 11 Id. 404;
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 429
the account is taken, and the share of the partner is
ascertained. Mr. Chancellor Kent has decided, that an
Deal V. Bogue, 20 Penn. St. 228 ; and that the claims of the separate credi-
tors cannot rise higher in this respect than those of the partners ; Morrison
V. Blodgett. But although this may be true as a princij^le of equity, it is not
less true that a partner is legally entitled to the custody and possession of the
partnershijT assets as a tenant in common as a means of securing and pro-
tecting his equitable or resulting interest in the partnership, and that neither
he, nor those who claim under him as creditors, can be deprived of this right,
without a sacrifice of justice as well as of technical principle. Hence, any
course of decision, which treats a separate execution as invalidated or super-
seded by a subsequent levy under a joint writ, without proof of the insolven-
cy of the firm, is unquestionably a departure not only from the course of the
common law, but from equity ; the right of the separate creditors to obtain
satisfaction out of the share of their debtor in the property of the firm, being
equally valid under both systems, with that of the joint creditors to the joint
or collective title of the partners; and the priority of the joint creditors a
mere right to a remedy, and liable to be defeated altogether, by the superior
diligence of the separate creditors, unless asserted in due season ; Russ v. Fay,
29 Vt. 381; Reed v. Shepardson, 2 Vt. 120; Haskins v. Everett, 4 Sneed,
531 ; Doner v. Stautfer, 1 Penn. 198 ; Snodgrass' Appeal, 13 Penn. St. 470. It
has accordingly been held, in a number of instances, that the legal right of
the separate creditors to proceed against the joint assets is indubitable, and
will not be restrained by equity unless some specific cause is shown why it
should not be exercised ; Cammack v. Johnson, 1 Green, Ch. 163; Moody w.
Payne, 2 Johns. Ch. 548 : even when the partnership is insolvent, and when a
sale of the share or interest of the partner must, consequently, be mere form,
and will pass no beneficial interest. Russ v. Fay, 29 Vt. 381. The better
opinion would, however, seem to be, that insolvency constitutes a sufKcient
ground for an injunction in favor of the partners, or of joint creditors whose
rights have been perfected by a judgment and levy, to prevent the sheriff
from proceeding to a sale on an execution issued by a separate creditor, which
will confer no real right on the buyer, and consequently ought not, as it would
seem, to be made by the law. Witter t). Richards, 10 Conn. 37 ; 1 Story, Eq.
Jur. 678 ; Skipp v. Harwood, 2 Swans. 586 ; 1 Ves. Sr. 239 ; Washburn v. Bank
of Bellows Falls, 19 Vt. 278 ; Sheddu. Wilson, 27 Vt.478. But the American
cases generally, as we have seen, cut the knot as too tedious to unloose, and
postpone the separate creditors to the joint, whenever executions issued by both
come in conflict, without other proof of the insolvency of the firm, or that there
will be no surplus left for the separate creditor on a settlement of tlie partner-
ship accounts, than the existence of the executions themselves, which may, per-
haps, be regarded as prima facie evidence of the inadequacy of the partnership
assets to satisfy all tlie demands against them. Tillinghast v. Champlin, 4 K. I.
173, 190." See, also, Willis v. Freeman, 35 Vt. 44 ; Crawfurd v. Baum, 12 Rich.
75; Scudder v. Delashmat, 7 Iowa, 39; Hubbard v. Curtis, 8 Iowa, 1.} [It
430 PARTNERSHIP. [CHAP. XII.
injunction for such a purpose ought not to issue to
restrain a sale by the sheriff, upon the ground, that no
harm is thereby done to the other partners ; and the
sacrifice, if any, is the loss of the judgment debtor
only.^ But that does not seem to be a sufficient
ground upon which such an injunction should be de-
is equally an interesting question whether the converse of the rule alluded
to in the preceding sections is recognized at law ; that is, whether the pref-
erence of a sej^arate ci-editor of a partner, to be paid out of the separate
estate of his debtor, before the creditors of the partnership, can be enforced
and secured at law. In some courts it is held, that the lien acquired by a
partnership creditor, by an attachment of the separate property of one part-
ner, cannot be defeated by a subsequent attachment of the same property, by
a separate creditor of the partner owning such property. Allen v. Wells,
22 Pick. 450 ; Newman b. Bagley, 16 Pick. 570; {Baker v. Wimpee, 19 Ga.
87; Kuhne v. Law, 14 Rich. 18, overruling Roberts v. Roberts, 8 Rich.
15. But see Purple v, Cooke, 4 Gray, 120.} But a contrary view has been
taken in more recent cases, and it has been thought to be a branch and
member of the same equitable doctrine that the right of private creditors to
look to private property, should be paramount to the right of joint creditors,
although the latter might have commenced the first jjrocess against the pri-
vate estate. Accordingly it was held, in a recent case, that where land of
one partner had been' set off on execution for a debt due from the part-
nership, and afterwards the same land was set off on execution for a separate
debt of the same partner, the separate creditor of such 2:)artner could recover
the land from the creditor of the ^partnership by a writ of entry. Jarvis v.
Brooks, 3 Fost. 136, And see Murrill v. Neill, 8 How. 414 ; Crockett v.
Grain, 33 N. H. 542. {See, also, Tenney v. Johnson, 43 N. H. 144, and
Gay V. Johnson, 45 N. H. 587. But the postponement at law of an execution
by a partnership creditor against separate property, to a subsequent execu-
tion by a separate creditor against the same property, seems to be confined to
New Hampshire.} Whether such a preference is to be observed in equity,
when there are no jjartnership funds, is more questionable. Bardwell v.
Perry, 19 Vt. 292; Washburn v. Bank of Bellows Falls, Id, 278. In these
cases it was held that in equity both sejiarate and partnership creditors have
the same rights to the separate estate of the partners, after the partnership
funds are exhausted, and that separate creditors cannot prevent joint creditors
from sharing equally with them in the separate estate, when there are no part-
nership funds. See the able judgments of Redfield, Chancellor.]
' Moody V. Payne, 2 Johns. Ch. 548, 549. {So Brewster v. Hammet,
4 Conn. 640; Sitler v. Walker, Freera. Ch. 77. See Phillips v. Cook, 24
Wend. 389, 398; 3 Kent, 65.}
CHAP. XII.] REMEDIES AGAINST THIRD PERSONS. 431
nied. If the debtor partner has, or will have, upon a
final adjustment of the accounts, no interest in the part-
nership funds ; and if the other partners have a lien
upon the funds, not only for the debts of the partner-
ship, but for the balance ultimately due to them ; it may
most materially affect their rights, whether a sale takes
place, or not. For, it may be extremely difficult to
follow the property mto the hands of the various ven-
dees ; and the lien of the other partners may, perhaps,
be displaced, or other equities arise by intermediate
hona fide salps of the property m favor of the vendees,
or other purchasers without notice ; and the partners
may have to sustain all the chances of any supervening
insolvencies of the immediate vendees.^ To prevent
multiplicity of suits, and irreparable mischiefs, and to
insure an unquestionable lien to the partners, it would
seem perfectly proper, in cases of this sort, to restraui
any sale by the sheriff. And besides ; it is also doing
some injustice to the judgment debtor, by compelling a
sale of his mterest under circumstances in which there
must generally, from its uncertainty and litigious char-
acter, be a very great sacrifice to his injury. If he has
no right, in such a case, to maintain a bill to save his
own mterest, it furnishes no ground why the Court
should not interfere in his favor, through the equities
of the other partners. This seems (notwithstanding
the doubts suggested by Mr. Chancellor Kent) to be
the true result of the English decisions on this subject ;
which do not distinguish between the case of an as-
signee of a partner, and that of an executor or adminis-
trator of a partner, or of the sheriff, or of an assignee in
bankruptcy.^
' See Skipp v. Harwood, 2 Swans. 586, 587.
"" See Taylor v. Fields, 4 Ves. 396-398 ; s. c. 15 Ves. 559, note ; Barker «.
Goodair, 11 Ves. 78, 85-87 ; Slcipp v. Harwood, 2 Swans. 586, 587 ; Franklyn
432 PARTNERSHIP. [CHAP. XII.
V. Thomas, 3 Mer. 225, 234 ; Hawkshaw v. Parkins, 2 Swans. 539, 548 ; Parker
V. Pistor, 3 B. & P. 288, 289 ; Eden on Injunct. 31 ; Coll. on P. B. 3, c. 6, §
10, p. 557-565, 2d ed. ; 1 Madd. Cb. Pr. 112. See also Brewster v. Ham-
met, 4 Conn. 540. See also Matter of Smith, 16 Johns. 102, and the
Reporter's learned note ; Gow on P. c. 3, § 2, p. 142, 3d ed. ; Id. c. 4, §
1, p. 203-211; Id. c. 5, § 2, p. 229; Id. § 3, p. 307, 308. See 1 Story,
Eq. Jur. § 678. {And so are Place v. Sweetzer, 16 Ohio, 142; Newhall v.
Buckingham, 14 111. 405; Hubbard v. Curtis, 8 Iowa, 1. And see Cammack
V. Johnson, 1 Green, Ch. 163 ; Thompson v. Frist, 15 Md. 24 ; Moore v.
Sample, 3 Ala. 319; White v. Woodward, 8 B. Mon. 484; 2 Lead. Cas. in
Eq. 338, 3d Am. ed.} [Another question sometimes arising from the
law of partnership is, bow far a person indebted to a partnership, may
be summoned into Court by process of foreign attachment, and be charged
for goods, effects, or credits in bis hands, as the trustee of one partner, in a
suit by a separate creditor. {1 Am. Lead. Cas. 473-475, 4tb ed. } It
has been claimed that, since the separate creditor of each partner may levy
bis execution against one partner upon the joint estate of the partnership
(when such estate consists of tangible property), and may sell on execution
the interest of such partner, whatever it may be, in the partnership goods,
the same rule applies to proceedings by foreign attachment, and that the
interest of each partner in a debt due the partnership from the trustee may
be reached by this process ; and some decisions countenance this view.
Whitney v. Munroe, 19 Me. 42. And see Thompson v. Lewis, 34 Me. 167.
{And so are Wallace v. Hull, 28 Ga. 68 ; and Berry v. Ilawes, 22 Md. 38.}
On the other hand, a juster rule has been more frequently adopted in other
Courts, and it is now held by the current of authorities, that a trustee,
under such circumstances, cannot be charged. To hold otherwise would
be creating a severance of a joint debt, and would lead to great embarrass-
ment and confusion in determining the rights of all parties. Fisk v. Her-
rick, 6 Mass. 271 ; Lyndon v. Gorbam, 1 Gall. 367 ; Hawes v. Waltham,
18 Pick. 451 ; Upbam v. Naylor, 9 Mass. 490 ; Cbui-cb v. Knox, 2 Conn.
514; Mobley v. Lonbat, 7 How. (Miss.) 318; Barber v. Hartford Bank, 9
Conn. 407 ; Pettes v. Spalding, 21 Vt. 66 ; Cook v. Arthur, 11 Ired. 407] ;
{Johnson v. King, 6 Humph. 233; Towne v. Leach, 32 Vt. 747; Lucas v.
Laws, 27 Penn. St. 211 ; See Maynard v. Fellows, 43 N. H. 255. In Tread-
well V. Brown, 43 N. II. 290, it is said that a valid lien as against a partner
may be acquired by attaching all his interest in the effects of the firm, and
summoning the other partners as trustees ; but it was held, that such a lien is
not acquired, so as to support a bill for an account by merely summoning
the other partners as trustees.}
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 433
CHAPTER XIII.
DISSOLUTION OF PARTNERSHIP.
{ § 265. Modes of dissolution.
266. Roman law.
267. Foreign law.
267 a. (1) Dissolution by act of partners.
268. Any jiartnersbip may be dissolved by consent of all the partners.
269. Any partnership not limited as to time maybe dissolved at the will
of any partner.
270. Roman and French law.
271. Will to dissolve may be expressed.
272. Or implied.
273. In the Roman law the will to dissolve must be exercised in a rea-
sonable manner.
274. Foreign law on this subject.
275. Common law on this subject. Partnership for a time limited.
276. Roman and foreign law.
277. Whether a partnership is for a term, or at will.
278. Dissolution by expiration of term.
279. Nature of a partnership continued beyond the term.
280. Dissolution by completion of the objects of the partnership.
281. Roman law.
282. (2) Dissolution by a court of equity.
283. Roman law,
284. Foreign law.
285. Partnerships declared void ah initio.
286. Causes of dissolution.
287. Dissolution not decreed for trifling causes.
288. But decreed for gross misconduct.
289. Roman law.
290. ImpossibiHty of going on.
291. 292. Incapacity or inability of a pai'tner.
293. Roman law.
294. French law.
295. Insanity of a partner.
296. Roman law.
297. Dissolution not decreed unless the insanity Is confirmed.
298. Other causes of dissolution by decree.
299-301. Dissolution by award.
28
434 PARTNERSHIP. fCHAP. XIII.
302. (3) Dissolution by operation of law.
303. (a) By change in the status of a partner.
304. Outlawry or conviction of a partner.
305. Roman law.
30G. Marriage of a female partner.
307. (b) Dissolution by voluntary transfer of interest.
308. In case of a partnership for a time limited.
309. Roman law.
310. Assignment of the whole partnership property.
311. (c) Dissolution by involuntary transfer.
312. Sale of partner's share on execution.
313. Bankruptcy and insolvency.
314. From what time bankruptcy dissolves a partnership.
315. 316. (d) Dissolution by war.
317. (e) Dissolution by death.
318. Roman law.
319. Death is ipso facto a dissolution.
319 a. Effect of provisions in the articles concerning death.}
§ 265. Having considered the various topics belong-
ing to the original formation of the contract of partner-
ship, the rights of the partners in and over the partner-
ship property and effects, the powers and authorities of
each of the partners, relative to the partnership prop-
erty, effects, and concerns ; the liabilities of the partners
to third persons, and inter sese, and the various remedies
and modes of redress by and against partners, existing
at law and in equity, we come, in the next place, to the
consideration of the modes, in which a partnership may
be dissolved. And this part of our subject may be con-
veniently discussed under three distinct heads. (1.)
Dissolution by the act or agreement or consent of the
parties, or of some of them ; (2.) Dissolution by the
decree of a court of equity; (3.) Dissolution by the
mere operation of law.
§ 266. The Roman law in like manner declared, that
partnership might be dissolved in various ways ; as by
the extinction of the thing held in partnership ; or of
the persons forming it ; or of the rights of action grow-
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 435
ing out of it; or of the will of the parties to the con-
tinuance of it. Societas solvitur ex personis, ex rehus,
ex vohmtate, ex actione. Ideoqite, sive homines, sive
res, sive voluntas, sive actio interierit, distrahi videtur
societas} Of course, any partnership whatsoever,
whether it be for a definite period, or for an indefinite
period, may be at any time dissolved, at the mutual will
and pleasure of all the partners. Diximus (says the
Digest), dissensu solvi societatem ; hoc ita est, si omnes
dissentiunt.^ And the same rule must be recognized in
the jurisprudence of every country, acting upon the
mere dictates of reason and natural justice.
§ 267. According to Pothier, partnership is dissolu-
ble under the old French law, (1.) By the expiration
of the time, for which it is contracted ; (2.) By the ex-
tinction of the thing, or the completion of the business ;
(3.) By the natural or civil death of some one of the
partners ; (4.) By his failure or bankruptcy ; or, (5.)
By the voluntary expressed intention of being no longer
in partnership.^ Substantially the like distinction ex-
ists in the present Civil Code of France, and in that of
Louisiana.'^ The same causes of dissolution are also
recognized in the Scottish law, the Spanish law, the law
of Holland, and probably in that of the other conti-
nental nations, which derive the basis of their jurispru-
dence from the Roman law.^ This general coincidence
of opinion, in assigning the same causes for the dissolu-
tion of partnership, in so many countries, shows, that
the doctrine has its true foundation in the general prin-
1 D. 17, 2, 63, 10; Poth. Pand. 17, 2, n. 54, 55, 62, 64, 70; ante, §
84, 85.
^ D. 17, 2, 65, 3 ; Poth. Panel. 17, 2, n. 64.
3 Poth. de Soc. n. 138.
* Code Civil of France, art. 1865 ; Code of Louisiana, art. 2847.
^ Ersk. Inst. B. 3, tit. 3, § 25 ; Johnson's Inst, of Laws of Spain, tit. 15,
p. 232; Van Leeuwen, Comm. B. 4, c. 23, § 1.
436 PARTNERSHIP. [CHAP. XIII.
ciples of natural justice and reason, rather than in the
peculiar institutions of any particular age or nation.
§ 267 a} Let us, in the first place, consider the cases
of dissolution, at the common law, by the act, or agree-
ment, or consent of the parties themselves, or of some
of them ; and this will properly include all cases, where
the partnership is merely at will, or is for a prescribed
period, which expires by efflux of time, or otherwise,
according to its own limitation, or is voluntarily dis-
solved by mutual consent within the prescribed or lim-
ited period.
§ 268. In respect to all partnerships, whether they
are for a limited period, or at will, it is very clear, that
they may at any time be dissolved by the mutual pleas-
ure clearly expressed of all the parties. And this is so
consonant to reason and justice, that it would seem to
require no authority to support it. Nevertheless, the
Roman law has expressly recognized it ; and only put
the question, as worthy of inquiry, when and under
what circumstances the partnership might be dissolved
at the will of one partner. Diximiis (says the Digest)
dissensu solvi societatem ; hoc ita est, si omnes dissen-
tiunt. Quid ergo si unus renuntiet ? ^ But there is a
technical principle of the common law, which seems to
require, that, when the partnership is formed by deed
for a definite period, it can properly, according to the
common law, be dissolved only by deed ; for here the
maxim is. held to apply: Eodem modo, quo quid oritur,
eodem 7nodo dissolvitur? The same rule would seem
^ {In the first two editions this section was by accident numbered 2G8.}
2 D. 17, 2, 65, 3; Poth. Pand. 17, 2, n. 68.
» Ante, § 117 ; Bac. Abr. Release, A. 1 ; 2 Saund. 47 ff, Williams's
ed. ; Story on Ag. § 49 ; Coll. on P. B. 2, c. 2, § 2, p. 154, 155, 2d ed. ;
Doe V. Miles, 1 Stark. 181 ; Rackstraw v. Imber, 1 Holt, 368 ; Countess of
Rutland's Case, 5 Co. 25 b ; Blake's Case, 6 Co. 43 b ; 1 Mont, on P. Pt. 3, c.
1, p. 90, [113.] [Although the partnership agreement be under seal, it
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 437
to have been adopted in the Roman law. Thus, it is
said in the Digest : JVihil tain naturale est, quam eo ge-
nere quidque dissolvere, quo coUigatiim est. Ideo ver-
horum ohligatio verbis toUitur ; niidi consensus ohligatio
contrario consensu dissolmtur} Front quidque con-
tractum est, ita et solvi debet ; ut cum re contraxe7nmus,
re solvi debet.^ However this may be, it is very clear,
that a dissolution actually made by the parties will be
held in equity perfect and complete, to all intents and
purposes, between the parties, and also as to third per-
sons, having full notice thereof.^
§ 269. In respect to partnerships, where no certain
limit of their duration is fixed, they are deemed to be
mere partnerships at will, and, therefore, are ordinarily
at the common law dissolvable at the will of any one
or more of the partners ; for in such cases, as the con-
tract subsists only during the pleasure of all the part-
ners, it is therefore naturally and necessarily dissolved
by the pleasure of any one or more of them, like every
other contract existing at the mere will of both parties.'*
seems, it is not necessary that an agreement ibr dissolution should be also
under seal. Wood v. Gault, 2 Md. Ch. Dec. 433.]
' D. 50, 17, 35 ; ante, § 118.
2 D. 46, 3, 80; Poth. Pand. 50, 17, n. 1388; Story on Ag. § 49, note;
ante, § 118.
3 Coll. on P. B. 2, c. 2, § 2, p. 154, 155, 2d ed.
* Ante, § 84 ; 3 Kent, 53 ; 1 Mont, on P. Pt. 3, c. 1, p. 90, [113] ; Wats,
on P. c. 7, p. 381, 2d ed. ; Master v. Kirton, 3 Ves. 74; Gris\yold v. Wad-
dington, 15 Johns. 57; Heath v. Sansom, 4 B. & Ad. 172; Marquand v.
Kew York Manuf. Co. 17 Johns. 525 ; Miles v. Thomas, 9 Sim. 606, 609 ;
Xerot V. Burnand, 4 Russ. 247, 260. — Mr. Chancellor Kent (3 Kent, 53)
says : "It is an established principle in the law of partnership, that, if it be
without any definite period, any partner may withdraw at a moment's notice,
when he pleases, and dissolve the partnership. The civil law contains the
same rule on the subject. The existence of engagements with third persons
does not prevent the dissolution by the act of the parties, or either of them,
though those engagements will not be affected, and the partnership will still
continue as to all antecedent concerns, until they are duly adjusted and
settled. A reasonable notice of the dissolution might be very advantage-
438 PARTNERSHIP. [CHAP. XIII.
The general rule, in all such cases, is, Dissociamur re-
nuntiatione}
ous to the company, but It is not requisite ; and a partner may, if he pleases,
in a case free from fraud, choose a vei'v unseasonable moment for the exer-
cise of his right. A sense of common interest is deemed a sufficient security
against the abuse of the discretion." In Peacock v. Peacock, 16 Ves. 49, 56,
Lord Eldon said: "With regard to what passed, since the question was
much agitated at the Bar, whether this partnership is now dissolved by the
notice in writing from the defendant, that from and after the date of that
notice the partnership should be considered dissolved. The plaintiff insists,
that it is not dissolved ; and that it can be dissolved only upon reasonable
notice. I have always taken the rule to be, that in the case of a partnership,
not existing as to its duration by contract between the parties, either party
has the power of determining it, when he may think proper ; subject to a
qualification, that I shall mention. There is, it is true, inconvenience in
this; but what would be more convenient? In the case of a partnership
expiring by effluxion of time, the parties may by pre\'ious arrangement
provide against the consequences ; but where the partnership is to endure so
long as both parties shall live, all the inconvenience from a sudden determi-
nation occurs in that instance, as much as in the other case. I cannot agree,
that reasonable notice is a subject too thin for a jury to act upon, as in
many cases juries and courts do determine what is reasonable notice. With
regard to the determination of contracts upon the holding of lands, when
tenancy at will was more known than it is now, the relation might be deter-
mined at any time ; not as to those matters, which during the tenancy re-
mained a common interest between the jjarties ; but as to any new contract
the will might be instantly determined. When that interest was converted
into the tenancy from year to year, the law fixed one positive rule for six
months' notice ; a rule, that may in many cases be very convenient ; in
others, that of nursery grounds, for instance, most inconvenient. As to
trades, in general, there is no rule for the determination of partnership;
and I never heard of any rule with regard to different branches of trade ;
and, supposing a rule for three months' notice, that time might in one case
be very large ; and in another, in the very same trade, unreasonably short.
I have, therefore, always understood the rule to be, that, in the absence of
express contract, the partnership may be determined, when either party
thinks proper ; but not in this sense, that there is an end of the whole con-
cern. All the subsisting engagements must be wound up; for that purpose
they remain with a joint interest ; but they cannot enter into new engage-
ments. This being the impression u2)on my mind, I had some apprehension
from the turn of the discussion here, that some different doctrine might have
fallen from the Court at Guildhall ; but upon inquiry from the Lord Chief
Justice, as to his conception of the rule, I have no reason to believe, that.
> 2 Bell, Comm. B. 7, c. 2, p. 631, 5th ed. ; Poth. Pand. 17, 2, n. 54.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 439
§ 270. The same rule equally prevails in the Roman
law.^ Manet autem societas (say the Institutes) eo usque^
donee in eodein consensu perseveraverint At cum ali-
quis renuntiaverit societati, solvitur societas ; ^ or (as it
is expressed in the Code), Tamdiu societas durat, quam-
diu consensus j^artium integer p)erseverat.^ And Vinnius
has remarked upon the coincidence, in this respect,
of the contract of partnership with that of mandate.
Societas et mandatum in eo conveniunt, quod j^^ojyrio
quodam jure, et suis quihusdam modis solvantur, quos
Justinianus, cjuoniam ah iis modis, quihus jure communi
ohligatio toUitur, remoti sunt, exjylicare voluit^ And,
after alluding to the fact, that in common contracts the
obligation thereof can be extinguished only by the con-
sent of all the parties, he adds, that it is otherwise in
relation to the contract of partnership. Sed illud pro-
prium hujus contractus (societatis) est, quod etiam post-
quam res integra esse desiit, id est, postquain jam
coUatio et communicatio facta est, ah eo recedi et vel
unius voluntate p)otest ; cpiomodo in specie dicitur socie-
tas dissolvi renuntiatione.^ This also is the clear result
if this notice ha^ been given before the trial, the jury would not have been
directed to find that the partnership was, by the delivery of that pajDcr, dis-
solved." See also Featherstonhaugh v. Fenwick, 17 Ves. 298, 308, 809 ;
Crawshay v. Maule, 1 Swans. 495, 508 ; Heath v. Sansom, 4 B. «& Ad. 172.
{See §275.}
1 Poth. Pand. 17, 2, n. 64; ante, § 84, 85.
^ List. 3, 26, 4.
3 Cod. 4, 37, 5; Poth. Pand. 17, 2, n. 69; Id. n. 64; Domat, 1, 8, 5,
art. 1, 2 ; ante, § 84, 85.
* Vinn. ad Inst. 3, 26, 4.
'= Vinn. ad Inst. 3, 26, 4, Comra. Intr. n. 1 ; Poth. Pand. 17, 2, n. 64-
68. — Vinnius proceeds to give the reasons of this doctrine, and holds that
it is so fundamental, that it cannot be varied by express agreement : " Hoc
in contractu socictatis jure singulari receptum est contra regulas communes
de dissolvendis obligationibus. Idque duplici de causa ; primura, quia socii
officium invlcem pra;stant, et accipiunt ; deinde quia non bene convenit cum
natura et conditione socictatis, quas rationem (juandam et jus fraternitatis
habere creditur, aliqueni invituui retinere in connnunione ; quippe cujus
440 PARTNERSHIP. [cHAP. XIII.
of the French law, as Pothier has instructed us, under
ordmary circumstances.^ Indeed, to so great an extent
did the Roman law carry its doctrine, that (as we shall
presently see) a positive stipulation against its dissolu-
tion at the will of either of the partners was held to be
utterly void, as inconsistent with the true nature, and
interests, and confidence of that relation.^
§ 271. A partnership at will is presumed to endure
so long as the parties are in life and have a capacity to
continue it.^ The dissolution of it, either by death or
by a supervenient incapacity, will of course come under
consideration when we speak of dissolution by mere
operation of law. At present it is only necessary to
say, that a dissolution may be made not only by a posi-
tive or express renunciation thereof by one partner, but
also by implication from his acts and conduct ; or as
Vinnius expresses it: Porro autetn renuniiatione disso-
ciamur aut voluntate aperta, aut tacita. Aperta, cum
ceteris nimtiafur, ut res suas sihi liahecmt atqiie agcmt.^
Of express renunciation it scarcely seems necessary to
say any thing, when the partnership is merely at will ;
since it can make no difference whether it originated by
mere consent, or by verbal agreement, or by written
materia discordias inter non consentientes excitare solet. Adeo autem
visum est ex natura esse societatis, unius dissensu totam dissolvi, ut,
quamvis ab initio convenerit, ut societas perpetuo duraret, aut ne liceret ab
ea resilire invitis ceteris ; tamen tale pactum, tanquam factum contra natu-
ram societatis, cujus in ajternura nulla coitio est contemnere liceat. Nam,
quod Paulus seribit, societatem etiam in perpctuum coii'i posse, nihil aliud
significat, quam sine ulla temporis praefinitione, aut donee socii vivant ; quae
conventio non hoc operatur, ut non liceat abire, sed ut solo lapsu temporis
non finiatur societas."
1 Poth. dc Soc. n. 149.
2 Ibid.; Toth. de Soc. n. 145; ante, § 85; D. 17, 2, 14; Poth. Pand.
17, 2, n. 68.
3 Coll. on P. B. 1, c. 2, § 1, p. 68, 2d ed. ; 2 Bell, Comm. B. 7, c. 2, p.
631, 632, 5th ed. ; Poth. de Soc. n. 65 ; ante, § 84.
* Vinn. ad Inst. 3, 26, 4, Comm. n. 1 ; ante, § 84, 85.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 441
articles, oi' by any instrument under seal ; for in each
and every of these cases the same doctrine will prevail,
whether the renunciation be by parol, or in writing, or
by declaration under seal.^ For the rule of the common
law already referred to has here no just application,
that the dissolution must be by an instrument of as high
a nature as that by which it was created, according to
the maxim : Eodem modo, quo quid constituitur, eodem
modo dissohntu7' ; ^ or, as it is sometimes expressed :
Nihil tarn conveniens est naturaU cequitati, qucmi unum-
quodque dissolvi eo ligamine, quo ligatum est ;^ which
is certainly open to much question as a doctrine of
natural equity, if we are to understand thereby that it is
the only effectual mode of working a dissolution thereof.
§ 272. As to dissolution by tacit renunciation, or by
implication from circumstances,'* it may arise in various
ways, as by the withdrawal of a partner from the busi-
ness of the partnership, and engaging in other concerns,
or by his refusal to act with the other partners in the
business ; or by his assigning over his share in the part-
nership ; ° or by his doing any other act utterly incon-
' But see Doe d. Waitbman v. Miles, 1 Stark. 181.
2 Branch's Max. 47, 5th ed. 1824; Blake's Case, 6 Co. 43 b; ante, § 268.
' The Countess of Rutland's Case, 5 Co. 25 b ; Blake's Case, 6 Co. 43 b ;
2 Inst. 359; ante, § 268.
" [Fellows V. Wyman, 33 N. H. 351.]
* Marquand v. New York Manuf. Co. 17 Johns. 525 ; Ketcham v. Clark,
6 Johns. 144 ; Per Lord Chief Justice Denman, in Heath v. Sansom, 4 B. &
Ad. 172; Rodriguez v. Heffernan, 5 Johns. Ch. 417. {A proposal for a
dissolution, not accepted, is not a dissolution; Hall v. Hall, 12 Beav. 414;
but notice by two partners to the third that " we shall dissolve the partner-
ship " on a certain day, operates as a dissolution on that day ; and this,
although the partner to whom the notice is sent is a lunatic; Mellersh
V. Keen, 27 Beav. 23G. See .Hart v. Clarke, 6 De G. M. & G. 232;
Pearce v. Lindsay, 3 De G. J. & S. 139. Making up a stock account of a
firm, and ascertaining the amount of the interest of one partner, and trans-
ferring it to the credit of another firm of which he was a member, will not
dissolve the firm. Russell v. Leland, 12 All. 349.}
442 PARTNERSHIP. [CHAP. XIII.
sistent with the continuing relation of partnership.
Vinnius has enumerated several modes under the Ro-
man law, by which a tacit renunciation took effect,
upon the ground of their inconsistency with the rela-
tion of partnership; (1.) by a novation of the action,
pro socio, effected by one of the partners ; (2.) by an
action brought by one partner against the others for
the purpose of dissolving the partnership ; (3.) by each
partner separately engaging in business, and acting for
his own sole account.^ This last ground is pointedly
adverted to in the Koman law. Itaque, cum separatwi
socii agere coeperint, et imusquisque eorum. sibi nego-
tietur, sine duhio jus societatis dissolvitur.^
§ 273. And here the question was greatly discussed
in the Roman law, whether the right of renunciation
of a partnership could be exercised at any time by
any partner at his mere will and pleasure, however
unreasonable, or even injurious it might be to the other
partners. It was held, that it was competent for any
partner to renounce the partnership, whether it was a
partnership at will, or for a fixed period of time, even
although he had expressly stipulated to the contrary,
provided he acted with good faith, and without any
sinister motive, and provided, further, that the time
chosen for the purpose was not unseasonable, or injuri-
ous to the interests of the other partners ; in other words.
' Vinn. Inst. 3, 26, 4, Conim. n. 2. — The language of Vinnius is : "Tacita
voluntas renuntiandi tribus his factis evidenter arguitur; (1.) novatione
actionis pro socio ab uno ex sociis facta, quod etiam significat Ulpianus, cum
dicit, societatem etiam ab actione, seu ab interitu actionis distrahi ; (2.)
actione pro socio ab uno adversus alios instituta distrahendae societatis
causa; (3.) cum separatim agere coeperint, et sibi quisque negotiari ; veluti,
si typographi alifj^uot, qui antea communibus sumptibus libros imprimendos
curabant, postea singuli domi suaj sibi imprimere coeperint, et commune
impendium facere desierint, tacite renuntiasse societati intelliguntur."
2 D. 17, 2, 6i; roth. Tand. 17, 2, n. C9.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 443
it was sufficient if the partner renounced for a reason-
able cause, and at a reasonable time, and in a reasonable
manner. Si eonvenerit inter socios, ne intra certum
tempus communis res dimdatur, non videiur convenisse,
ne societate aheatur. Quid tamen, si hoe convenit, ne
abeatur ; an valeat ? Eleganter Pom^jonius scripsit,
frustra hoc convenire, nam etsi nbn convenit^ si tamen
intempestive renuntietur societati, essejiTO socio actionem.
Sed etsi convenit^ ne intra certum. tempus societate ahea-
tur, et ante tempus renuntietur, potest rationem habere
renuntiatio ; nee tenehitur pro socio, qui ideo renun-
tiamt, quia conditio qucedam, qua societas erat coita, ei
non proistatur ; aut quid, si ita [ijijuriosus ef] damnosus
socius sit, ut non exp)ediat eum pati ? ^
> D. 17, 2, 14 ; Poth. Panel. 17, 2, n. 64-68 ; 1 Story, Eq. Jur. § 668. —
Domat has summed up the principal doctrines of the Roman law on this
subject in the following articles. " 1. As partnership is formed by consent,
so is it in the same manner dissolved ; and it is free for the partners to break
off their partnership, and to give it over whenever the_y please, even before
the end of the term which it was to have lasted, if they all agree to it.
2. The tie which is among partners, being founded on the reciprocal choice
which they make of one another, and on the hopes of some profit, it is free
for every one of the partners to break off partnership whenever he pleases ;
whether it be because there is no good agreement among the partners, or
that some necessary absence, or other affiiirs, make the partnershij) burden-
some to him who is desirous to leave it ; or that he does not like a commerce
which the partners are about to undertake ; or that he does not find his
account in the partnership ; or for other reasons. And he may give over
partnership without the consent of the other partners, and that even before
the time at which it was to have ceased, and although it have been agreed
that none of tlie partners should break off the partnership till the time
agreed on were expired. Provided, that the partner does not break off
with some sinister view; as if he quits the partnership that he may buy for
himself alone, what the whole community had a mind to purchase, or that
he may make some other profit to the prejudice of the other partners, by
his leaving them ; or provided he does not quit after some business is begun,
or at an unseasonable time, which may occasion some loss or damage to the
community. 3. The partner who breaks off partnership with an inifair
design, disengages liis copartners from all engagements to him, but does
not disengage himself from his obligations to them. Thus, he who should
withdraw himself from an universal partnership of tiioir whole estate.
444 PARTNERSHIP. [cHAP. XIII.
§ 274. By the old French law, a partnership, which
was for an indefinite period, or without any limitation
of time, might be dissolved at the mere pleasure of
present and to come, that he alone might inherit a succession fallen to him,
would bear the whole loss, if the succession which he alone inherits should
prove burdensome ; but he would not deprive his copartners of the profit,
if the succession should prove advantageous, and they have a mind to share
in it. And in general, if a partner breaks off at an unseasonable time,
which occasions the loss of some profit to the community, which otherwise it
miglit have made, or which causes any other damage, he will be bound to
make it good ; as if he quits before the time to which the partnership was
to have lasted, abandoning a business with which he was charged. And he
who breaks off the partnership in this manner, shall have no share in the
profits which shall happen to be made afterwards ; but he shall bear his
part of what losses shall afterwards happen, in the same manner as he
would have been bound to do if he had not quitted the partnership. 4. The
partner who renounces the partnership at an unseasonable time, not only
does not free himself from his engagements to his copartners, but is answer-
able for all the losses and damages which his unseasonable renunciation
may have caused to the society. Thus, if a partner quits whilst he is on a
journey, or engaged in any other business for the community ; or if his
quitting obliges the partners to sell any merchandise before the time ; he
shall bo bound to make good the losses and damages which his leaving the
partnership under these circumstances shall have occasioned. 5. In order
to judge whether the partner withdraws himself at an unseasonable time, it
is necessary to consider what is most profitable for the whole community,
and not for any one of the partners in particular. 6. If, after a fair and law-
ful renunciation, the partner who has quitted the partnership, begins anew
to carry on any commei'ce from which he reaps some profit, he will not be
bound to share it with his former partners. 7. A fraudulent and unseason-
able renunciation is never permitted, whether the contract of partnership
has provided against it or not. For this would be repugnant to fidelity,
which, being essential to the contract of partnership, is always understood
to be comprehended in it. 8. The renunciation is of no use to the person
who has made it, till it be made known to the other partners ; and if in the
interval after the renunciation, and before it is known to the other partners,
he who lias renounced makes any profit, he will be obliged to share it with
his copartners ; but if he suffers any loss, it will all fall upon himself. And
if in tliis space of time the other partners reap any gain, he will have no
share in it; and if they suffer any loss, he must bear his part of it."
Domat, 1, 8, 5, art. 1-8, by Strahan. See, also, Mr. Swanston's learned
note to Crawshay v. Maule, 1 Swans. 609, note (a) ; Poth. Pand. 17, 2, n.
64-68 ; 2 Bell, Comra. B. 7, c. 2, p. 632, 633, 6th ed. ; 1 Story, Eq. Jur.
§ 668.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 445
any one of the partners, under two qualifications or
restrictions; (1.) that the renunciation should be in
good faith ; (2.) that it should not be made at an
improper time.^ But partnerships, which by the origi-
nal contract were to endure for a limited period, were
deemed not to be dissoluble, until the expiration of
that period, unless some just cause of dissolution should
occur.^ In this latter event, any partner might, upon
giving due notice, renounce the partnership. Some
of the just causes here referred to were, that such
partner was to be long absent in the service of the
State ; another was some habitual infirmity, which dis-
abled him from performing his duties.^ The modern
Code of France, and that of Louisiana, have adopted
the same rules."* Substantially the same principles pre-
vail in the Scottish law.^
§ 275. At the common law, there does not seem to
be any such recognized limitation or qualification of
the right of renunciation by any one partner, where
1 Poth. de Soc. n. 149, 150. - Poth. de Soc. n. 152, 153.
^ Poth. de Soc. n. 153, 154. See a like rule in the Roman law. Poth.
Pand. 17, 2, n. 68.
* Code Civil of France, art. 1869-1871 ; Code of Louisiana (1825), art.
2855-2859. — The French Civil Code expresses the whole doctrine in the
following brief terms : "Dissolution of partnership by the will of one of
the parties applies only to partnerships, the duration of which is unlimited,
and is etiected by a renunciation notified to all the partners, provided such
renunciation be bona fide, and not made at an improper time. Renunciation
is not made bona fide, where the partner renounces in order to appropriate
to himself alone the profit, which the partners proposed to have drawn out
in common. It is made at an improper time, where the things are no longer
entire, and that it is of consequence to the partnership that its dissolution
be deferred. Dissolution of partnerships for a term cannot be demanded
by one of the partners before the term agreed, unless for just motives ; as
where another partner fails in his engagements, or that an habitual infirmity
renders him unfit for the aflfairs of the partnership, or other similar cases,
the lawfulness and weight of which are left to the arbitration of judges."
* Ersk. Inst. B. 3, c. 3, § 26 ; 2 Bell, Comm. B. 7, c. 1, p. 532, 533,
6th ed.
446 PARTNERSHIP. [cHAP. XIII.
the partnership is merely at will ; for in such cases,
any partner, as we have seen, may dissolve it at his
pleasure.^ In cases, where the partnership is by the
' Ante, § 269; Marquand v. N. Y. Manuf. Co. 17 Johns. 525. — Mr.
Swanston, in bis learned note to Crawshay v. Maule, 1 Swans. 509-514,
says: " The Editor is not apprised of any direct authorities in the English
law on the distinction between seasonable and unseasonable dissolution.
But, in one instance, the Court of Chancery seems to have assumed jurisdic-
tion to qualify the right of renunciation, by reference to that distinction.
' An application was made some years ago to the Court of Chancery for an
injunction to inhibit the defendants from dissolving a commercial partner-
ship ; the other side proposed to defer it, as not having had time to answer
the affidavits ; but it was insisted that this was in the nature of an injunction
to stay waste, and that irreparable damage might ensue. At length the
Court deferred it, the defendants undertaking not to do any thing preju-
dicial in the mean time. But no doubt arose concerning the general pro-
priety of such an application. Chavany against Van Sommer, in Chancery,
M. T. 11, G. 3;' 3 Wooddeson, Lect. 416, note. The register contains
the following entry of the original application in this case. Peter Chavany,
plaintiff, James Van Sommer, and others, defendants ; 14th November,
1771. 'Whereas Mr. Solicitor-General, of counsel with the plaintiff, this
day moved and offered divers reasons into this Court, that an injunction
may issue to restrain the said defendants, James Van Sommer, &c., from
dissolving or breaking up the copartnership, now carrying on between the
plaintiff and the said defendants, &c. ; or from doing any act whatever
tending thereto, and also to restrain the said defendants, &c., from selling, or
disposing of, or joining in the sale, conveyance, or assignment of the lease-
hold estate, and interest belonging to the said copartnership, or contracting
for the sale thereof, or joining in such contract, in the presence of Mr. John
Cocks and Mr. Maddock, of counsel with the defendants, who prayed that
the said notice might be saved; whereupon, and upon hearing what was
alleged by the counsel on both sides, it is ordered, that the benefit of the
notice of the said motion be saved till the last day of this term, the defend-
ants consenting not to do any thing contrary to what the plaintiff now jirays,
in the mean time ; and it is further ordered, that the defendants do file their
affidavits two days before.' Reg. Lib. A. 1771, fol. 6. The benefit of the
notice was afterwards saved, till the first general seal ensuing the term (Id.
fol. 7), and on the 25th of November, the defendants obtained an order for
time to answer. Id. fol. 147. The register has been searched to the end of
Trinity term, 1775, without discovering any further trace of this cause. In
another case, the Court qualified the obligation to continue a partnership, by
reference to the design of the contract ; and directing an inquiry whether
the business could be carried on according to the true intent and meaning
of the articles, expressed a determination to dissolve the partnership, if the
Master reported in the negative. Baring v. Dix, 1 Cox, 213 ; 1 Mont, on
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 447
agreement to endure for a limited period of time, the
question, whether it may within the period be dis-
solved by the mere act or will of one of the partners,
without the consent of all the others, does not seem
to be absolutely and definitely settled in our jurispru-
dence, although it would not seem, upon principle, to
admit of any real doubt or difficulty. Whenever a
stipulation is positively made, that the partnership shall
endure for a fixed period, or for a particular adventure
or voyage, it would seem to be at once inequitable and
injurious to permit any partner, at his mere pleasure,
to violate his engagement, and thereby to jeopard, if
not sacrifice, the whole objects of the partnership ; for
the success of the whole undertaking may depend
upon the due accomplishment of the adventure or
voyage, or the entire time be required to put the part-
nership into beneficial operation.^ It is no answer
to say, that such a violation of the engagement may
entitle the injured partners to a compensation in dam-
ages ; for, independently of the delay and uncertainty
attendant upon any such mode of redress, it is obvious,
that the remedy may be, nay, must be, in many cases
utterly inadequate and unsatisfactory. If there be any
real and just ground for the abandonment of the part-
nership, a court of equity is competent to administer
suitable redress. But that is exceedingly different from
the right of the partner, sua sponte^ from mere caprice,
P. 90; and in Waters v. Taylor, 2 Ves. & B. 299, Lord Eldon declared a
partnership dissolved by the conduct of the parties, rendering it impossible
to conduct the undertaking on the terms stipulated. See Denisart, voce,
Societe, s. 12, p. 539." But the right of a Court to decree a dissolution of
the partnership is a very different thing from the right of the partner him-
self to dissolve it sua sponte. {See Blisset v. Daniel, 10 Hare, 493 ; Feath-
erstonhaugh v. Turner, 25 Beav. 382; Skinner v. Tinker, 3-1 Barb. 333.}
' Story, Eq. Jur. § 668.
448 PARTNERSHIP. [cHAP. XIII.
or at his own pleasure, to dissolve the partnership,^ In
short, the opposite doctrine, although perhaps in some
measure countenanced by the Roman law, is founded
upon reasons exceedingly artificial, if not indefensible.
It proceeds upon a ground which cannot be maintained
in common sense or justice, that any partner has a right
to found his own claim to immediate indemnity and
safety upon a known injury to the rights and interests
of his copartners, whatever may be the nature or extent
thereof.^
' See 1 Story, Eq. Jur. § 668. {A partnership between two solicitors
may be dissolved instanter, if one of them fraudulently sells out trust funds
and applies the produce to his own use. Essell v. Hayward, 30 Beav. 158 ;
See AUhusen v. Borries, 15 Weekly Rep. 739.}
^ The opinion here maintained has the apparent support of the most
respectable elementary writers, and has been either taken for granted, or
partially upheld by many eminent judges. See Gow on P. c. 5, § 1, p.
218, 219, 226, 3d ed. ; Coll. on P. B. 1, c. 2, § 2, p. 68, 2d ed. ; Wats, on
P. c. 7, p. 381, 2d ed. ; 1 Mont, on P. Pt. 3, c. 1, § 1, p. 90, [113]; 3
Kent, 61. Lord Eldon in Peacock v. Peacock, 16 Ves. 49, and Crawshay
V. Maule, 1 Swans. 495, took it for granted that one partner could not, of
his own mere will, dissolve a partnership for a limited period. Mr. Justice
Washington asserted the same doctrine in positive terms, in Pearpoint v.
Graham, 4 Wash. C. C. 223. On that occasion he said : " iSTow it is perfectly
clear, that one partner cannot, by withdrawing himself from the association
before the period stipulated between the partners for its continuance, either
dissolve the partnership, or extricate himself from the responsibilities of a
partner, either in respect to his associates, or to third persons ; and if this
be so, it would seem that he could not produce the same consequence by
any other voluntary act of his own. This is not like those cases where, by
the act of God, or by the operation of law, the partnership is dissolved, as
by the death or bankruptcy of a partner." The same doctrine seems to
have been held in the unreported case of Chavany v. Van Sommer, 3 Wood-
des. Lect. p. 416, note; 1 Swans. 512, note; ante, § 275, note; {and it
was so held in Smith v. Mulock, 1 Robertson, (N. Y.) 569.} The case of
Marquand v. N. Y. Manuf. Co. 17 Johns. 625, and the dictum of Mr. Justice
Piatt, in Skinner v. Dayton, 19 Johns. 513, 538, are indeed to the contrary.
Mr. Chancellor Kent (3 Kent, 54, 55, Id. 61) has summed up the reasoning
on this side of the question, without, however, expressing his own opinion.
He says : " But if the partners have formed a partnership by articles, for a
definite period, in that case it is said, that it cannot be dissolved without
mutual consent before the period arrives. This is the assumed principle of
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 449
§ 276. Nor does the Roman law, or the foreign law,
founded upon it, in cases of a partnership for a lim-
Law bj' Lord Eldon, in Peacock v. Peacock, and in Crawsliay v. Maule ;
and yet in Marquand v. N. Y. Manuf. Co. it was held, that the vohmtary
assignment, by one partner, of all his interest in the con(^ern, dissolved the
partnership, though it was stipulated in the articles, that the partnership
was to continue until two of the partners should demand a dissolution, and
the other partners wished the business to be continued, notwithstanding the
assignment. And in Skinner v. Dayton, it was held by one of the Judges,
that there was no such thing as an indissoluble pai'tnership. It was revoca-
ble in its own nature, and each party might, by giving due notice, dissolve
the partnership, as to all future capacity of the firm to bind him by contract ;
and he had the same legal power, even though the parties had covenanted
with each other that the partnership should continue for such a period of
time. The only consequence of such a revocation of the partnership power,
in the intermediate time, would be, that the partner would subject himself
to a claim of damages for a breach of the covenant. Such a power would
seem to be implied in the capacity of a partner, to interfere and dissent
from a purchase or contract about to be made by his associates ; and the
commentators on the Institutes lay down the principle, as drawn from the
civil law, that each partner has a power to dissolve the connection at any
time, notwithstanding any convention to the contrary, and that the power
results from the nature of the association. They hold every such conven-
tion null, and that it is for the ^^"blic interest, that no partner should be
obliged to continue in such a partnership against his will, inasmuch as the
community of goods in such a case engenders discord and litigation." He
afterwards adds : "In some instances, Chancery will restrain a partner from
an unseasonable dissolution of the connection, and on the same principle,
that it will interfere to stay waste and prevent an irreparable mischief. And
such a power was assumed by Lord Apsley, in 1771, without any question*'
being made as to the fitness of the exercise of it. In the civil law, it was
held by the civilians to be a clear point, that an action might be instituted
by, or on behalf of, the partnership, if a partner, in a case, in which no pro-
vision was made by the articles, should undertake to dissolve the partnership
at an unseasonable moment ; and they went on the ground, that the good of
the association ought to control the convenience of any individual member.
But such a power, acting upon the strict legal right of a party, is extremely
difficult to define, and I should think rather hazardous and embarrassing in
its exercise." Vinnius has stated the general reasoning of the Roman law
on this point in the passage already cited, ante, § 270, note. But his sole
ground is, that otherwise the partnership would be perpetual, which can-
only apply to a case where there is a covenant for its perjjetual duration ;
and even then it might be dissolved by a court of justice, for a reasonable
cause. In the recent case of Bishop v. Breckles, Hoff. Ch. 531:, the Vice-
Chancellor (llullinan) of New York examined all the authorities ; and con-
29
450 PARTNERSHIP. [CHAP. XIII.
itecl period of time, properly considered, justify, or
allow one partner to dissolve it at his mere pleasure,
within that period. On the contrary, as we have seen,^
it annexes to the exercise of the right a positive condi-
tion, that it shall be for a just cause and under reasona-
ble circumstances. Pothier accordingly says, that in
cases of partnership for a fixed period of time, there is
an implied understanding, that it shall not be dissolved
until the expiration of that period, at least unless some
just cause for the dissolution shall have supervened;
and, therefore, one partner cannot, without such just
cause, dissolve the partnership, to the prejudice of the
other partners. He cites the Roman law in support
thereof : Qui societatem in tenipus coit, earn ante tem/pus
renuntiando^ sociinn a se, non se a socio liherat;^ and
he then proceeds to enumerate the particular cases which
shall constitute just causes of dissolution. Moreover,
this important qualification is annexed by the Roman
law to the right of renunciation, that it is limited to cases
where it is for the benefit, not of the particular partner,
but of the partnership itself, that it should be dissolved ;
eluded by saying: "The law of the Court, then, requires something more
than the mere will of one party to justify a dissolution. But it seems to me,
that but little should be demanded. The principle of the civil law is the
most wise. Why should this Court compel the continuance of an union,
when dissension has marred all prospect of the advantages contemplated at
its formation ? By refusing to dissolve it, the power of binding each other,
and of dealing with the jjartnership property remains, when all confidence
and all combination of effort is at an end. The object of the contract is
defeated." In truth, however, the Roman law carries in its own bosom a
qualification, which shows that the dissolution must be for a reasonable
cause, and under reasonable circumstances ; and then it seems most fit for
the action of a court of justice, and not for one of the interested parties.
Ante, § 273, and note; Both. Band. 17, 2, n. 64, %b\ Both, de Soc. n. 138,
146, 149-152.
' Ante, § 273, 274 ; Both. Band. 17, 2, n. 64, Qb, 68 ; 2 Bell, Conmi. B.
7, c. 2, p. 632, 633, 5th ed.
= Both.de Soc. n. 152; D, 17, 2,65, 6; Both. Band. 17, 2, n. 64,65;
ante, § 273, note.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 451
otherwise it is deemed unseasonable. Hoc ita verum
esse, si socieiatis intersit non dirimi societatein, semper
enhn, non id quod privatim interest unius ex sociis^
servaiH solet, sed quod societati exp)edit} So that, in
effect, the whole difference in this view between the
Roman and foreign law, and the common law% resolves
itself into this, that in the former the partner may, by
his own act, primarily insist upon a dissolution, which,
however, is not valid, unless it be for a just cause, and
is affirmed to be so by a Court of Justice ; ^ whereas
the common law does not allow the dissolution to be
complete or effective, until a Court of Justice has itself
decreed the dissolution for a just cause. In substance,
therefore, the rule is the same in both laws ; although
it is varied in its actual application. The rule of the
common law is, to say the least of it, quite as conven-
ient as that of the Koman and foreign law, if, indeed,
it be not more appropriate, and just, and equitable, than
that of the latter.
§ 277. The question sometimes occurs, whether a
partnership, under all the circumstances of the case, is
properly to be treated as a partnership at will, or as a
partnership for a limited period. It is by no means
necessary, that there should be an express stipulation
either way ; for its intended duration may often be as-
certained by implications or presumptions, arising from
the acts and conduct of the parties, and other accompa-
nying circumstances. In the absence, however, of all
acts or circumstances, which clearly rebut and control
the inference, the conclusion of law is, that the partner-
ship is intended to be at the mere will and pleasure of
the parties. But acts and circumstances may greatly
1 D. 17, 2, 65, 5; Poth. Pand. 17, 2, n. Go ; Domat, 1, 8, 5, art. 4,5.
* Poth. de Soc. n. 154.
452 PARTNERSHIP. [cHAP. XIII.
qualify or even overturn this conclusion. Thus, the
question has arisen, whether the purchase or lease of
certain premises, for carrying on the trade or business
of the partnership for a limited term of years, did, of
itself, amount to presumptive proof, that there was an
implied agreement between the partners, that the dura-
tion of the partnership should be co-extensive with the
term of the purchase or lease. It has been held, that it
did not ; for it was not of itself decisive any way : but
was readily reconcilable with the notion, that it was
purchased for the mere accommodation of the trade or
business, while it should endure, and then to be sold as
part of the partnership effects ; and so it was not in-
tended in any manner to indicate the period of its
duration. Upon any other ground of reasoning, if the
purchase was of an estate in fee-simple, it might be con-
tended, that the partnership was to continue for ever
which would be a wholly inadmissible doctrine.^
' See Marshall v. Marshall, cited 2 Bell, Comm. B. 7, c. 1, p. 633, note 3 ;
Crawshay v. Maule, 1 Swans. 495, 508, 521. In this last case. Lord Eldon
said : " The general rules of partnership are well settled. Where no term
is expressly limited for its duration, and there is nothing in the contract to fix
it, the partnership may be terminated at a moment's notice by either party.
By that notice the partnership is dissolved, to this extent, that the Court will
compel the parties to act as partners, in a partnership existing only for the
purpose of winding up the aSairs. So death terminates a partnership, and
notice is no more than notice of the fact that death has terminated it. With-
out doubt, in the absence of express, there may be an implied contract, as to
the duration of a partnership. But I must contradict all authority, if I say,
that wherever there is a partnership, the purchase of a leasehold interest of
longer or shorter duration is a circumstance from which it is to be inferred
that the partnership shall continue as long as the lease. On that argument
the Court holding that a lease for seven years is proof of jDartnership for sev-
en years, and a lease of fourteen of a partnership for fourteen years, must
hold, that if the partners purchase a fee-simple, there shall be a partnership
for ever. It has been repeatedly decided, that interests in lands, purchased
for the purpose of carrying on trade, are no more than stock in trade. I re-
member a case in the House of Lords, about three years ago (the case of the
Carron Company), in which the question was much discussed, whether, when
partners purchase freehold estate for the purpose of trade, on dissolution,
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 453
§ 278. In the next place, a partnership may expire
by the mere efflux of the time, which limits and bounds
its duration under the terms of the original contract, by
which it is created. This is the natural, nay, the ne-
cessary, result of the very design and terms of the con-
tract; for the same consent, which originated, terminates
it ; and the consent cannot be presumed to exist beyond
the fixed period, since the presumption would be direct-
ly contradictory to the actual limitation. Hence, if in
fact continued, it must be continued by a new agree-
ment, and not under the old one.^ So Pothier lays
down the rule. Lorsque la societe a ete contradee pour
un certain te7n2:)s limite, elle jinit de plein droit par Vex-
that estate must not be considered as personalty, with regard to the repre-
sentatives of a deceased partner." Again he added : " It has also been in-
sisted, that the purchase of leases must be considered as evidence of a con-
tract for the continuance of the concern. Unquestionably partners may so
purchase leasehold interest, as to imply an agreement to continue the part-
nership as long as the leases endure ; but it is equally certain that there is no
general rule, that partners, purchasing a leasehold interest, must be under-
stood to have entered into a contract of partnership commensurate with the
duration of the leases. For ordinary purposes a lease is no more than stock
in trade, and as part of the stock may be sold ; nor would it be material, that
the estate purchased by a partnership was freehold, if intended only as an
article of stock ; though a question might, in that case, arise on the death of
a partner, whether it would pass as real estate, or as stock, personal estate in
enjoyment, though freehold in nature and quality. It is impossible, therefore,
in my opinion, to hold that there being many leases, some long, some of short
duration, and others intermediate, the partnership is to subsist during the
term of the leases, or of the longest lease." See also 2 Bell, Comm. B. 7, c.
2, p. 633, 5th ed. ; Coll. on P. B. 1, c. 2, § 1, p. 68, 69, 2d ed, ; Gow on P.
c. 5, § 1, p. 225, 3d ed. { On an agreement by a partner with a stranger for
a sub-partnership, there is no implication that the sub-partnership shall con-
tinue as long as the original partnership. Frost v. Moulton, 21 Beav. 596.
A partnership formed for mining and trading in California will be presumed
to be intended to continue at least one mining season ; at least if such a part-
nership engages men to work for a year, to be paid by a share of the profits,
this is an implication that the partnership) was intended to last a year, and it
cannot be dissolved at will. Potter v. Moses, 1 R. I. 430. See Reade v.
Bentley, 4 Kay & J. 656.}
' 2 Bell, Comm. B. 7, c. 2, p. 631, 5th ed. ; Id. c. 3, p. 649-655 ; U. S.
Bank v. Binney, 5 Mason, 176, 185; 3 Kent, 53.
454 PARTNERSHIP. [cHAP. XIII.
piration de ce temps} And he adds, that the prolonga-
tion of it beyond that period must be proved by some
act in writing, clothed with the proper formalities,
which were required by law in its original formation.^
§ 279. But the question may arise at the common
law, when a partnership is actually continued by the
parties after the expiration of the original term, pre-
scribed for its duration, what is to be deemed the true
effect and interpretation of the act '? Is it to be treated
as a continuation of the partnership, upon all the origi-
nal terms thereof, and for a like period ? Or, is it to
be deemed a mere continuation of the partnership, dur-
ing the will of the parties'? The question does not,
perhaps, admit of any uniform or universal answer. It
may be affected by various considerations ; by the acts
of the parties ; by the habits and changes of their busi-
ness ; by implications from their omission to act upon
certain terms of the original contract, and from appar-
ent qualification and exceptions and restrictions of oth-
ers, in their dealings and settlements with each other,
or even with third persons. But, in the absence of all
acts and circumstances whatsoever, to control or vary
the original terms of the agreement, the just legal con-
clusion seems to be, that the partnership is to be treated
as a mere partnership during the joint will and pleasure
of all the parties, and, therefore, dissoluble at the will
of any one of them ; but that in all other respects it is
to be carried on upon the original terms thereof, as to
rights, duties, interests, liabilities, and shares of the
profits and losses.^
» Poth. de Soc. n. 139; Code Civil of France, art. 1865, 1866; Code of
Louisiana, 1825, art. 2848, 2849.
* Ibid.
' {See § 19 7, 198}; Featherstonhaugh v. Fenwick, 17 Ves. 298; U. S.
Bank v. Binney, 5 Mason, 176, 185 ; 2 Bell, Comm. B. 7, c. 2, p. 632, 633,
5th ed. ; Gow on P. c. 5, § 1, p. 224, 225, 3d ed. ; Mifflin v. Smith, 17 S. & R.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 455
§ 280. In the next place, a partnership may expire
by its own express or implied limitation, whenever the
165. — Sir Wm. Grant (Master of the Rolls), in the case of Featherstonhaugh
V. Fenwick, 17 Ves. 298, 307, discussed the subject somewhat at large; and
how far presumptions might arise from circumstances, as to the terms on
which the partnership was to be deemed continued, he said : " The first ques-
tion in this cause is, whether the partnership was dissolved on the 22d of
November, 1804. The plaintiff contends that the defendants had no right
to put an end to the partnership at that period ; and that is contended on
several grounds ; first, that as by the articles which formerly existed, but had
expired, twelve months' notice was necessary to enable a partner to with-
draw, the same notice was necessary for withdrawing from the partnership ,
which continued without articles. I do not agree to that proposition. The
latter partnership was for an indefinite period, and therefore might be dis-
solved at the will of the parties ; subject to the question, afterwards made,
by what notice that will must be declared. Another ground on which the
plaintiff contends against the dissolution on the 22d of November, is, that the
lease of the premises in London, used in carrying on the concern, was then
unexpired. That does not oppose any obstacle to the dissolution ; as it is
not a necessary consequence, that partners, taking premises for the use of
their trade for a definite period, contract a partnership for the same period.
If any part of the term is unexpired at the end of the partnership, that is
partnership property, and is to be distributed as such ; but I do not appre-
hend that they are bound to continue the partnership on that account. A
third ground is, that there were several contracts subsisting with their work-
men, which had a considerable period of time to run. That argument goes
considerably too far. It would go to this extent, that a partnership could not
be dissolved, until all their contracts were completely ended and wound up ;
and that can hardly be the case at any period, as persons are entering into
contracts from day to day, which cannot all expire at the same period. It
would on that ground be hardly possible to dissolve any partnership, as there
must always be contracts depending. I do not conceive, therefore, that the
existence of engagements with third persons, either for goods to be worked
up, or engagements with their workmen, which had not come to a conclusion,
can form an objection to the dissolution. The partners cannot, it is true, by
a dissolution, relieve themselves from the performance of any engagements,
which they may have contracted with third persons ; but, as among them-
selves, the existence of such engagements cannot prevent a dissolution, either
by mutual consent or by notice. The question then is, what sort of notice
ought to be given tor this purpose ? Until a very recent period, it had been,
I believe, understood, that a reasonable notice should be given ; but upon the
question, what is reasonable notice, much difference of opinion may prevail.
On the one hand, it may be extremely disadvantageous to parties to say,
that a partnership shall be dissolved on a given day ; on the other, it must
be extremely difficult for a Court of Equity, by a general rule, to ascertain
456 PARTNERSHIP. [cHAP. XIII,
event has occurred, which the parties naturally or ne-
cessarily contemplated as its just termination.^ This may
arise in two ways; (1.) by the extinction of the thing,
which constituted the sole subject-matter of the partner-
ship; (2.) by the completion or accomplishment of the
entire business, for which the partnership was formed.^
■what is reasonable notice ; and the question, whether the particular notice
■was reasonable or convenient, would be the subject of discussion in almost
every instance of the dissolution of a partnership. Considerations of that
sort, I believe, have led to a different rule ; that in the case of a partnership,
such as this, subsisting without articles, and for an indefinite period, any
partner may say, ' It is my pleasure on this day to dissolve the partnership.'
But, considering the principles on Avhich the dissolution must take place, a
partner can very seldom, if ever, have an interest to give notice of dissolu-
tion at a period disadvantageous to the general interests of the concern ; as,
where the articles do not prescribe the terms, the law ascertains what shall
be the consequence of dissolution ; viz., that the whole of the joint property
must be sold off, and the whole concern wound up. Xo partner, therefore,
can derive a particular advantage by choosing an unseasonable moment for
dissolution ; as, upon the principles established in Crawshay v. Collins, and
the authorities there referred to, he must suffer in proportion to the extent of
his interest in the trade. I hold, therefore, that the dissolution of this part-
nership took place on the 2 2d November." In U. S. Bank v. Binney, 5 iNIason,
176, 185, the Court said: " Those articles (of partnership) expired by their
own limitation in two years, and had force no longer, unless the parties
elected to continue the partnership on the same terms. That is matter of
evidence upon the whole facts. The natural presumption is, that, as the
partnership was continued in fact, it was construed upon the same terms as
before, unless that presumption is rebutted by the other circumstances in the
case. There is no written agreement respecting the extension of the partner-
ship, and therefore it is open for inquiry upon all the evidence."
1 3 Kent, 52, 53.
2 3 Kent, 53; [Fellows v. Wyman, 33 X. H. 351] ; Griswold v. Wadding-
ton, 16 Johns. 438, 491. — On this occasion Mr. Chancellor Kent, in his most
masterly judgment, used upon this point the following language : '• Pothier,
in his treatise on Partnership, says, that every partnership is dissolved by the
extinction of the business for which it was formed. This he illusti-ates, in
his usual manner, by a number of easy and familiar examples. Thus, if a
partnership be formed between two or more persons, for bringing together,
and selling on joint account, the produce of their farms, or of their live-stock,
and the produce of the stock of one of them should happen to fail or be
destroyed, the partnership ceases, of course ; for there can be no longer any
partnership, when one has nothing to contribute. So, if two persons form a
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 457
Ail example of the first kind may easily be suggested
by a case, where two persons (not being otherwise part-
iiers) should jointly buy a ship, to be employed by them
for their joint and mutual profit as partners ; and the
ship should afterwards be totally lost or destroyed.
That would constitute a complete termination of the
partnership, not merely by operation of law (although
that ground might be fairly maintainable), but as an
exact exposition of the actual intendment and under-
standing of the parties.^ An example of the second
kind is readily found in the common case of a joint en-
terprise, voyage, adventure, or other commercial specula-
tion, for the joint account and mutual profit of the par-
ties concerned therein. Thus, for example, if two per-
sons (not bemg otherwise partners) should hire a ship
for a particular voyage, upon their joint account and
for their mutual profit, and the voyage should be under-
taken and completed, and the business thereof closed ;
the partnership so formed would be dissolved by the
mere lapse of time, and the occurrence of the event, by
which it was originally intended by the parties that it
partnership in a particular business, and the one engages to furnish capital,
or the raw materials, and the other his skill and labor, and the latter becomes
disabled by the palsy, the jjartnership is extinguished, because the object of
the partnership cannot be fulfilled. So, again, if two or more persons form
a partnership to buy and sell goods at a particular place, the partnership is
dissolved, Avbenever the business is terminated. Poth. de Soc. n. l-iO-143.
Extincto suhjecto, tollitur adjundum, is the observation of Huberus, when
speaking on this very point." 5 Duvergier, Droit Civil Franc.^ 418-428.
> See Poth. de Soc. n. 140, 141. — The Civil Code of France (art. 1867)
declares : " Where one of the partners has promised to put in common the
ownership of a thing, the loss of it, happened before the bringing in can be
effected, operates a dissolution of the partnership in relation to all the part-
ners. Partnership is in like manner dissolved in all cases by the loss of the
thing, where the enjoyment alone has been put in common, and the owner-
ship remains in the hands of the partner. But the partnership is not broken
up by the loss of a thing, the ownership of which has already been brought
into the partnership." {Claiborne v. Creditors, 18 La. 501.}
458 PARTNERSHIP. [CHAP. XIII.
should terminate.^ The same doctrine would apply to
the case of a joint shipment of goods, upon the joint
account and for the mutual profit of the shippers on a
foreign voyage ; or a joint purchase of goods, to be
sold for the joint benefit and profit of the purchasers
thereof; or a joint undertaking by mechanics, to per-
form work and labor, and find materials, to erect a
dwelling-house for a third person, upon their joint
account and for their mutual profit. For, in all such
cases, the completion of the voyage, or adventure, or
undertaking, or commercial speculation, naturally ter-
minates the partnership contemplated by the parties.^
§ 281. The same doctrine was formally promulgated
in the Roman law ; and has been incorporated into the
jurisprudence of all modern commercial nations, as in-
deed it might naturally be presumed to be, since it is
founded in common sense, and a just interpretation of
the intention of the parties. Thus, in the Roman law
it is said (as we have already seen),^ Societas solvitur ex
persoiiis, ex rebus, ex voluntate, ex actione. Ideoque
sive homines, sive res, sive actio interierit, disti'alii vi-
detur societas} Res vero intereunt, cum cmt nidlce relin-
quantur, aut conditionem midaverint, neque enhn ejus
rei, qucejam nulla sit, quisquam socius est ; neque ejus,
quce consecrata puhlicatave sit.^ And again : Item; si
alicitjus rei contracta societas sit, et finis 7iegotio impo-
' Ante, § 27, 30, 55, 267; Post v. Kimberly, 9 Johns. 470; Gow on P.
c. 5, § 1, p. 218, 3d ed. ; Wats, on P. c. 7, p. 379, 2d ed. ; 1 Voet ad Pand.
17, 2, § 26, p. 761 ; 5 Diivergier, Droit Civ. Franc, tit. 9, § 411-420.
^ Ante, § 27, 30, 55, 267 ; Cumpston v. McNair, 1 Wend. 457 ; Poth. de
Soc. n. 143 ; Coll. on P. B. 1, c. 1, § 1, p. 32, 2ded.; Wats, on P. c. 7, p. 379,
2d ed. ; 1 Voet ad Pand. 17, 2, § 26, p. 761 ; 5 Duvergier, Droit Civil Franc.
§431.
3 Ante, § 266.
* Poth. Pand. 17, 2, n. 54 ; D. 17, 2, 63, 10 ; Domat, 1, 8, 5, art. 11.
* D. 17, 2, 63, 10 ; Poth. Pand. 17, 2, n. 62.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 459
situs est, fiiitiir societas? Pothier, Vinniiis, and other
learned jurists, have done little more than to state the
same doctrine, with a few appropriate illustrations.^
§ 282. In the next place, as to the cases of dissolu-
tion by the decree of a court of equity.^ It is obvious,
from what has been already stated, that although a
partnership may, by the original agreement, be formed
for a stipulated period, and on that account may not
be dissoluble at the mere will of either of the partners,
without the concurrence of all the others ; "^ yet, that
various cases may occur, in which it may become the
duty of a judicial tribunal, either to declare the original
partnership null and void ah initio, or to annul it in
respect to all future operations ; otherwise the grossest
injustice and most mischievous consequences might
occur to some of the partners, without any fault or
impropriety on their own part. Indeed, the remedial
authority of a judicial tribunal, in order to be adequate
and complete, ought not to stop here ; for many cases
of unforeseen accident, or unsuspected mischief, may
occur, which may make the further prosecution of the
business of the partnership injurious, or improper,
without the fault of any partner, and, indeed, where
1 Inst. 3, 26, 6 ; D. 17, 2, 65, 10 ; Poth. Pand. 17, 2, n. 63 ; Domat, 1, 8,
5, art. 11.
* Poth. de Soc. n. 140-143 ; Vinn. ad Inst. 3, 26, 6, Comm. ; Johnston's
Civil Law of Spain, B. 2, tit. 15, p. 232; Van Leeuwen's Comm. B. 4, c. 23,
§ 11, p. 415 ; 2 Moreau & Carlt. Partidas 5, tit. 10, 1. 10, p. 773 ; Code Civil
of France, art. 1865 ; Code of Louisiana (1825), art. 2847 ; Griswold v. Wad-
dington, 16 Johns. 438, 491, 492, per Mr. Chancellor Kent. Vinnius puts the
doctrine in brief but very clear terms. " Si societas certas alicujus negotia-
tionis causa inita sit, puta vini aut frumenti ad certam quantitatem emendi
vendendique, sine negotio imposito, id est, empto distractoque vino aut fru-
mento, societas extinguitur. Bed in eo nihil proprium videtur societatis ; ut-
pote cui ea lex ab initio dicta sit. Idem est, si ad certum tenipus coutracta
sit societas ; nam, exacto tempore, ea expirat."
3 3 Kent, 60.
* Ante, § 273, 276.
460 PARTNERSHIP. [cHAP. XIII.
all of them are equally innocent. The Prsetor's Fo-
rum at Rome seems ordinarily to have exercised, or
at least to have superintended the exercise of this
authority, by controlling or confirming the acts of the
partners, as to the right of dissolution, as the partic-
ular case required its interposition ; and thus to have
administered the appropriate relief. The Koman law
(and the modern continental law has in a great meas-
ure followed it) authorized, as we have seen, any part-
ner to renounce such a partnership for any just and
reasonable cause. But then the sufficiency of that
cause was ultimately a matter for the decision of the
proper judicial tribunal; and until that decision was
had, his act could be deemed nothing more than a pre-
liminary step, or conditional assertion of the right of
dissolution.^
§ 283. The Roman law also treated it as a clear case
of dissolution, where action was brought by one partner
against the others, for an account of the partnership
business, and a judgment passed accordingly. [Societas)
actione dlstrahitur, cum aut stiinilaiione aut judicio
mutata sit causa societatis. Proculus enim ait, hoc
ipso, quod judicium ideo dictatum est, ut societas distra-
liaiur, renuntiaiam societatem, sive totorum honorum,
sive unius rei societas co'iia sit.^
§ 284. In England and America no jurisdiction
whatever exists, to decree a dissolution of a partner-
ship, for any cause whatsoever, in the Courts of Com-
mon Law. It is confided exclusively to Courts of
Equity ; and, indeed, as in many cases it must be a
matter resting in the sound discretion of the Court,
it seems most fit and proper to appropriate the juris-
' Ante, § 273, 274, 276 ; Poth. de Soc. n. 154 ; Civil Code of France, art.
1871 ; Poth. Pand, 17, 2, n. 70.
= D. 17, 2, 65 ; Poth. Pand. 17, 2, n. 70.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 461
diction to those tribunals which constantly exercise a
very large discretion in matters ex cequo et bono} This
was precisely the case in suits in the Prgetor's Forum ;
and for the most part it now also belongs to the higher
tribunals of the different nations of continental Europe,
where the strict distinction between law and equity, so
well recognized in our municipal jurisprudence, is
either unknown, or is repudiated. The principal dis-
tinctions as to the exercise of this jurisdiction between
our Courts of Equity and the tribunals of continental
Europe, seem to be these. In the first place, in the
latter tribunals, it is competent for one partner, in any
case and at any time, to renounce the partnership suh
moclo, although not absolutely, for any reasonable cause,
which afterwards shall be sanctioned and approved by
the proper tribunal ; whereas, in our law (as has been
already suggested),^ a previous decree of the Court is
necessary, however reasonable the cause may be.^ In
the next place, in the Roman law and in the modern
foreign law, certain causes are deemed ipso facto to
amount to an actual dissolution ; whereas, in our law,
they furnish proper grounds only for a decree of disso-
lution. This will become more apparent in the subse-
quent pages.
§ 285. The jurisdiction exercised by our Courts of
Equity, to decree a dissolution of the partnership,
during the term for which it was originally entered
into, is of a most extensive and beneficial nature, and
has the strongest tendency to prevent irremediable
injuries, and often utter ruin to some of the partners.
It may be exercised, as has been already suggested, in
the first place, to declare partnerships utterly void ah
' 1 Story, Eq. Jur. § 673 ; 3 Kent, 60.
" Ante, §273, 274, 276.
* Gow on P. c. 5, § 1, p. 221, 3d ed.
462 PARTNERSHIP. [CHAP. XIII.
initio ; and, in the next place, to decree a dissolution
from the time of the decree.^ The former remedial
justice is usually applied to cases where there was
fraud, imposition, misrepresentation, or oppression in
the original agreement for the partnership.^ The latter
may arise in very different classes of cases, and be
affected by very different considerations.
§ 286. Let us then proceed to the examination, in
their order, of the various causes for which a Court of
Equity will, or at least may, decree a dissolution of a
partnership which was unobjectionable in its origin.^
They may be distributed under two general heads ;
(1.) Causes arising subsequently to the formation of
the contract, founded upon the alleged misconduct, or
fraud, or violation of duty of one partner ; (2.) Causes
arising subsequently to the formation of the contract,
where no blame, laches, or impropriety of conduct,
necessarily attaches to any of the partners.
§ 287. Under the first head, that of the misconduct,
fraud, or violation of duty by a partner, it is proper to
observe, that it is not for every trivial departure from
duty or violation of the articles of partnership, or for
every trifling fault or misconduct, that Courts of Equity
will interfere and decree a dissolution. Thus, for ex-
ample, Courts of Equity will not interfere in cases- of
mere defects of temper, casual disputes, differences of
opinion, and other minor grievances, which may be
somewhat inconvenient and annoying, but do not essen-
1 Ante, § 232, 282. { On the date from which a dissolution shall be de-
creed, see Durbin v. Barber, 14 Ohio, 311 ; Dumont v. Ruepprecht, 38
Ala. 175.}
2 Ante, § 6 ; 1 Story, Eq. Jur. § 222, 240 ; Coll. on P. B. 2, c. 3, § 7, p.
244, 2d ed. ; Gow on P. c. 3, § 1, p. 107, 3d ed. ; [Hynes v. Stewart, 10 B.
Mon. 429.] See Lord Eldon's remarks in Tattersall r. Groote, 2 B. & P.
131, 135 ; Colt V. WooUaston, 2 P. Wms. 154 ; Green v. Barrett, 1 Sim. 45.
^ (On the return of a premium on dissolution, see § 203.}
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 463
tially obstruct or destroy the ordinary rights, interests,
and operations of the partnership.^
§ 288. On the other hand, if a case of gross mis-
conduct, or abuse of authority, or gross want of good
faith or dihgence, such as is and must continue to be
productive of serious and permanent injury to the suc-
cess and prosperity of the business of the partnership,
or such as renders it impracticable to be carried on, or
as is positively ruinous to its interests. Courts of Equi-
ty will promptly interfere, and decree a dissolution.^
' Coll. on P. B. 2, c. 2, §l,p. 131, 2d ed. ; Id. B. 2, c. 3, § 3, p. 193, 196;
Goodman r. Whitcomb, 1 Jac. & W. 589, 592 ; Wray v. Hutcliinson, 2 Myl.
& K. 235 ; 1 Story, Eq. Jur. § 673 ; Gow on P. c. 3, § 1, p. 114, 3d ed. — In
Goodman r. Whitcomb, 1 Jac. & W. 589, 592, 593, Lord Eldon said: "It
may be a question whether the Court ■will not restrain a partner, if he has
acted improperly, from doing certain acts in future. But if -what he has
done does not give the other party a right to have a dissolution of the part-
nership, what right has the Court to appoint a receiver, and make itself the
manager of every trade in the kingdom '? Where partners differ, as they
sometimes do, when they enter into another kind of partnership, they should
recollect that they enter into it for better and worse, and this Court has no
jurisdiction to make a separation between them, because one is more sullen,
or less good-tempered, than the other. Another Court, in the j^artnership
to which I have alluded, cannot, nor can this Court, in this kind of part-
nership, interfere, unless there is a cause of separation, which in the one case
must amount to downright cruelty, and in the other, must be conduct amount-
ing to an entire exclusion of the partner from his interest in the partnei-ship.
Whether a dissolution may ultimately be decreed, I will not say ; but triflinor
circumstances of conduct are not sufficient to authorize the Court to award a
dissolution. It is said, that the plaintiff has made larger advances of capital
than he was bound to do, and has received none of the profits. But that is
no ground for a dissolution. It is then stated that the defendant has ex-
changed carpets for household furniture. That may perhaps be an improper
act ; but still there may be a thousand reasons why the Court should not do
more than restrain him in future from so doing, and more particularly when
he states in his answer that he did it because he thought it the best thing that
could be done."
2 1 Story, Eq. Jur. § 673 ; Coll. on P. B. 2, c. 3, § 3, p. 195, 196, 2d ed. ;
Goodman v. Whitcomb, 1 Jac. & W. 589, 592, 593 ; Chapman v. Beach, 1
Jac. & W. 594, note ; Waters v. Taylor, 2 Ves. & B. 299 ; Loscombe v. Rus-
sell, 4 Sim. 8 ; 3 Kent, 60, 61 ; Gratz v. Bayard, 11 S. & R. 41, 48, per Ch.
Just. Tilghman ; 1 Mont, on P. Pt. 3, c. 1, p. 112 ; Adams i". Liardet, cited in
464 PARTNERSHIP. [cHAP. XIII.
Habitual intoxication, gross extravagance, and gross
negligence, and rash and reckless speculation, in the
conduct of the business of the partnership, would prob-
ably lead the Court to a like result.^ To justify such
an extraordinary interposition, however, the Court
always expects a strong and clear case to be made out
of positive or meditated abuse. ^ It is not sufficient to
show, that there is a temptation to such misconduct,
abuse, or ill faith ; but there must be an unequivocal
demonstration, by overt acts, or gross departures from
duty, that the danger is imminent, or the injury already
accomplished.^ For minor misconduct and grievances,
if they require any redress, the Court ordinarily will go
no further than to act upon the faulty party by way of
injunction.^
Waters v. Taylor, 2 Ves. & B. 299, 300, 304, and in 1 Mont, on P. Pt. 3, c. 1,
p. 99, and in Gow on P. c. 5, § 1, p. 227, 3d ed. ; Gow on P. c. 3, § 1, p. 1 11-
115, 3d ed. ; [Fogg v. Johnston, 27 Ala. 432.] See also Littlewood v. Cald-
well, 11 Price, 97, 99 ; Wats, on P. c. 7, p. 381, 382, 2d ed. ; Smith v. Jeyes,
4 Beav. 503; {Harrison w. Tennant, 21 Beav. 482; Watney o. Wells, 30
Beav. 56 ; Leary v. Shout, 33 Beav. 582 ; Baxter v. West, 1 Drew & Sm.
173. See Meaher v. Cox, 37 Ala. 201.}
' Ibid.; 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed.
'^ See Smith v. Mules, 9 Hare, 556 ; 10 Eng. L. & Eq. 103.
8 2 Bell, Coram. B. 7, c. 2, p. 634, 635, 5th ed. ; Glassington v. Thwaites,
1 Sim. & St. 124 ; Smith v. Jeyes, 4 Beav. 503.
■» Ante, § 224-228, 287 ; Marshall v. Colman, 2 Jac. & W. 266 ; Goodman
V. Whitcomb, 1 Jac. & W. 589, 592, 593 ; Charlton v. Poulter, 19 Ves. 148,
note (c) ; Gow on P. c. 3, § 1, p. 111-115, 3d ed. — Mr. CoUyer has summed
up the whole doctrine on this subject in the following terms : " Lord Thur-
low once said, that as to misbehavior in one of the partners, he did not
see what line could possibly be drawn, and what degree of misconduct
was to be held a sufficient ground for dissolving the partnership. Liardet
V. Adams, 1 Mont, on P. 112. And certainly, a Court of Equity will
not dissolve a partnership on slight grounds ; as, for instance, because one
partner may have conducted himself towards the other in an overbearing
and insulting manner. ' The Court,' to use Lord Eldon's expressions be-
fore adverted to, ' having no jurisdiction to make a separation between
them, because one is more sullen or less good-tempered than the other.'
Goodman v. Whitcomb, 1 Jac. & W. 592. See Wray v. Hutchinson, 2 Myl.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 465
§ 289. The like doctrine is promulgated in the Roman
law ; which permits any partner, at his election, to re-
nounce the partnership, whenever the objects of the
partnership are no longer attainable, or the misconduct
of the other partner is so seriously injurious or mis-
chievous to the partnership, that it ought not to be tol-
erated. Etsi ante tempus renuntietur, potest rationem
habere remmtiatlo. Nee tenehitur 2>i'o socio, qui ideo
& K. 235 ; [Blake v. Dorgan, 1 G. Greene, 537.] So again, want of prudence
or ability on the part of the person seeking relief, is no just ground for a
dissolution ; as, where he has made larger advances of capital than he is
bound to do, and has received none of the jirofits. Goodman v. Whit-
comb, supra. However, it may with safety be laid down, that not only
wilful acts of fraud and bad faith, but gross instances of carelessness and
waste in the administration of the partnership, as well as exclusion of
the other partners from their just share of the management, so as to
prevent the business from being conducted on the stipulated terms, are
sufficient grounds for the dissolution of the contract by a Court of Equity.
See Marshall v. Colman, 2 Jac. & W. 266 ; Goodman v. Whitcomb, 1 Jac.
& W. 589; Chapman v. Beach, Id. 594; Norway v. Rowe, 19 Ves. 144;
Waters v. Taylor, 2 Ves. & B. 299. So also it seems clear, that a habit
on the part of one partner of receiving moneys, and not entering the re-
ceipts in the books, or not leaving the books open to the inspection of the
other partners, whether such conduct arises from a fraudulent intent or
not, is good ground for a dissolution. Goodman v. Whitcomb, 1 Jac. &
W. 589. So if a partner in a banking-house allows a customer to over-
draw, and, by way of security, takes bonds from the customer, executed
to himself separately and not to the firm, this is such misconduct as will
warrant a Court of Equity in decreeing a dissolution. Master t'. Kirton,
3 Ves. 74 ; R. L. 1796, B. 428. And although this relief will not be admin-
istered for mere defects of temper in some of the parties, yet violent and last-
ing dissension seems to be a ground upon which a Court of Equity will de-
cree a dissolution ; as where the parties refuse to meet each other upon
matters of business, a state of things which precludes the possibility of the
partnership affairs being conducted with advantage. De Berenger v. Ham-
mel, 7 Jarm. Conv. p, 2G. And it has been laid down, that though the court
stands neuter with respect to occasional breaches of agreements between part-
ners, which are not so grievous as to make it impossible for the partnership
to continue ; yet when it finds that the acts complained of are of such a char-
acter, that relief cannot be given to the parties except by a dissolution, the
Court will decree a dissolution, though it is not specifically asked. Per Sir
L. Shad well, 4 Sim. 11." See also the language of Mr. Chancellor Kent
on the same subject, 3 Kent, 60, 61 ; Gow on P. c. 5, § 1, p. 227, 3d ed.
30
466 PARTNERSHIP. [cHAP. XIII.
reniintiavit, quia conditio qucedam^ qua societas erat
co'ita, ei non prcestatur, aut quid, si ita injuinosus et dam-
nosus socius sit, ut non expediat eum pati ? ^ Such also
is the French law.^
§ 290. Let us now proceed to the other head, em-
bracing the decree of a dissolution of the partnership
for causes independent of any blame, laches, or impro-
priety of conduct, necessarily attached to any of the
partners. And here, in the first place, it will be a suffi-
cient ground to decree a dissolution, that there exists an
impracticability in carrying on the undertaking for which
the partnership was formed.^ This may take place,
either from the inability of one or all of the partners
from carrying into effect the terms of the original con-
tract ; or from the undertaking itself being in its char-
acter visionary, or its operations absolutely impractica-
ble. The case of an Opera House, where the conduct
of the parties rendered it impossible to carry it on upon
the terms originally stipulated, may serve to illustrate
the former part of the position.'* The latter part of the
1 D. 17, 2, 14 ; Poth. Pand. 17, 2, n. 68.
* See 5 Duvergier, Droit Civil Franc. § 447-452.
» Coll. on P. B. 2, c. 3, § 3, p. 199, 200, 2d ed.; Gow on P. c. 5, § 1,
p. 226, 227, 3d ed. { See Meaher v. Cox, 37 Ala. 201. }
* Waters v. Taylor, 2 Ves. & B. 299 ; Griswold v. Waddington, 16 Johns.
438, 491 ; 5 Duvergier, Droit Civil Franc. § 420-428; Id. § 446-449. — In
Waters v. Taylor, Lord Eldon said : " The real question here is quite dif-
ferent from Adams v. Liardet ; which I take to be that in which Lord Thur-
low's opinion was expressed. This question is, whether from the acts of
Taylor himself, it is not manifest, that this partnership cannot be carried
on upon the terms for which the parties engaged ; whether a single act has
been done by him of late, that is not evidence, on his part, that he can no
longer himself be bound by his contract, so as to observe the terms of it 5
when he excludes himself from the concern and the partnership, as far as
it is to be conducted upon the terms on which it was formed, and says he
will carry it on upon other terms. Taking that to be his conduct, this
comes to the common case of one partner excluding the other from the
concern ; u,s if one will not, because he cannot, continue it upon the terms
on which it was formed, the consequence must be, that he says his part-
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 467
position may be readily illustrated in the not infrequent
case, where the partnership is to work a mine, which
turns out to be wholly unproductive, and ruinous in its
expenses ; or for the introduction of a supposed newly
invented machinery or manufacture, which proves to be
a mere delusion, or incapable of being put into success-
ful operation ; or for any other scheme of trade or oper-
ation, which is a mere bubble, or wild speculation, or is
founded in fundamental errors.^
ner shall not, because he cannot, carry it on upon those terms. That is
the true amount of this case. The one cannot engage a performer with-
out the other's consent ; having entered into stipulations only with refer-
ence to agreement, they have given me no means of extricating them
from the difficulties arising from non-agreement. Suppose an opera at this
time requires more than £300 per week, or a new exhibition more than £500,
if the plaintiff differs upon that, what is a judge to do but to look at the
contract, as the only thing the Court can act upon ? and if both parties
agree that the contract cannot be acted on, that furnishes the means of
saying, there is an end of it ; and their interests are to be regarded as
if no such contract had existed. The parties, by consent, determine that
there is an end of the concern, which cannot be carried on upon the terms
stipulated ; and the Court cannot substitute another contract." Mr. Chancellor
Kent, in Griswold v. Waddington, 16 Johns. 438,491, said : " In speaking of
the dissolution of partnerships, the French and civil law wi-iters say, that
partnershijJs are dissolved by a change of the condition of one of the par-
ties, which disables him to perform his part of the duty, as by a loss of
liberty, or banishment, or bankruptcy, or a judicial prohibition to execute
his business, or by confiscation of his goods. Inst. 3, 26, § 7, 8 ; Vinn. h.
t. 3, 26, 4; Huberus in Inst. 3, 26, 6 ; D. 17, 2, 65 ; Poth. de Soc. n. 147,
148 ; Code Civil, No. 1865 ; Diet, du Dig. par Thevenot Dessaules, Art.
Soc. No. 56. The English law of partnership is derived from the same
source ; and as the cases arise, the same principles are applied. The prin-
ciple here is, that when one of the parties becomes disabled to act, or
when the business of the association becomes impracticable, the laAV, as
well as common reason, adjudges the partnership to be dissolved."
' 3 Kent, 60 ; Baring v. Dix, 1 Cox, 213 ; Pearce v. Piper, 17 Ves. 1, and
Buckley v. Carter, referred to in 17 Ves. 11, 15, 16, and in Beaumont w.
Meredith, 3 Ves. & B. 180, 181 ; Reeve v. Parkins, 2 Jac. & W. 390 ;
Coll. on P. B. 2, c. 3, § 3, p. 193, 2d ed. ; Barr v. Speirs, cited in 2 Bell,
Comm. 633, note (2), 5th ed. ; Gow on P. c. 5, § 1, p. 227, 3d ed. {In
Jennings v. Baddeley, 3 Kay & J. 78, a dissolution was decreed of a part-
nership, the business of which could not be carried on without further
capital, each partner having contributed his share ; though it did not appear
468 PARTNERSHIP. [CHAP. XIII.
§ 291. In the next place, a partnership may be dis-
solved by the decree of a Court of Equity, on account
of the inability or incapacity of one partner to perform
his obligations and duties, and to contribute his skill,
labor, and diligence in the promotion and accomplish-
ment of the objects of the partnership. This inability
or incapacity may arise in various ways ; and whenever
its direct tendency is either necessarily to frustrate, or
essentially to obstruct, or diminish, the- objects of the
partnership, it would seem clear upon principle, that it
ought to furnish a complete ground for a dissolution by
a court of justice ; for the further continuance of the
partnership must be productive of serious inconvenience
and injury to the other partners, and may end in their
irremediable ruin, or the utter prostration of the enter-
prise.^
§ 292. Hence, if one of the terms of the partnership
be, that the whole or a large portion of the capital
stock shall be furnished by one partner, and skill and
diligence are mainly relied on in the other, as the
active partner ; and after the partnership is actually
commenced, the partner who is to furnish the capital,
should by misfortune become wholly unable to furnish
it, or if the other partner, who is to furnish the skill
and diligence, should be seized with a palsy, or any
other disease, which should permanently incapacitate
him from performing the required duties, such circum-
stances would seem to present a fit case for the inter-
position of a Court of Equity to dissolve the partner-
ship.^
that the ooncern was embarrassed. See Claiborne v. Creditors, 18 La. 501 ;
Clough V. RatelilFe, 1 De G. & Sni. 164.}
» 3 Kent, G2 ; Gow on P. c. 5, § 1, p. 221, 3d ed. ; 5 Duvergier, Droit
Civil Franc. § 44G-150.
^ 3 Kent, 02 ; Domat, 1, 8, 5, art. 12 ; 2 Bell, Comm. B. 7, c. 2, p.
C34, 635, 5th ed. ; Crawshay v. Maule, 1 Swans. 495, 514, the Reporter's
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 469
§ 293. The same doctrine is fully borne out by the
true spirit and intendment of the Roman law, which
note ; Jones v. Noy, 2 Myl. & K. 125, 129, 130 ; Wrexham v. Huddleston,
1 Swans. 514, note ; Waters v. Taylor, 2 Ves. & B. 299 ; Wray v. Hutch-
inson, 2 Myl. & K. 235, 238. — Vinnius (Coram, ad Inst. 3, 26, 8) puts
the doctrine in its true light, as to inability from poverty or misfortune. —
" Postremo etiam egestate unius socii societas solvitur, egestate scilicet
extrema, id est, bonorum omnium, aut tantum non omnium amissione.
Nam cum societas contrahatur bonorum in commune quaerendorum causa,
non magis bonis sublatis societati locus esse potest, quam sublata persona
socii. Amittuntur bona aut civitate salva, veluti cessione, id est, si socius,
aere alieno oppressus, bonis suis creditoribus cesserit, eaque a creditoribus
distracta fuerint ; ac turn etiam "societatem dirimi placet, aut civitate una
cum bonis amissa, ut in specie praecedente ; nam publicatione bona amitti,
ipsum verbum publicationis satis indicat ; eaque consideratione ilia quoque
ad hanc rationem dissolvendse societatis referri potest. Sed et decoctione
bona amittuntur et pereunt. Ceterum decoctione sola societatem solvl
negat Stracha, nisi ea ad manifestam egestatem socium redegerit. Non
puto autem, quod hie traditur de dissolutions societatis ob amissionem
bonorum, locum habere eo casu, quo nihil pecunise in societatem collatum
est, aut quo ille, qui operam tantum contulit, bona salva civitate amisit,
nisi forte ob bona amissa speratam operam prfestare nequeat." See also
Voet ad Pand. 17, 2, § 26, Tom. 1, p. 761. — Mr. Bell has made the fol-
lowing striking remarks upon this subject: " Incapacity by disease. 1. If
the partnership proceed in reliance on such aid from a partner, as any
bodily illness he may be aifected with may prevent, it would seem to be a
justifiable cause for having the partnership judicially dissolved, or for re-
nouncing the partnership, although there should be a fixed term of duration
not yet arrived. 2. Insanity has the effect, not only of depriving the
partner of the power of aiding the partnership by his exertions, but it pre-
vents him from controlling, for his own safety, the proceedings of his co-
partners. And, accordingly, where there are two partners, both of whom
are to contribute their skill and industry, the insanity of one of them, by
which he is rendered incapable of contributing that skill and industry, seems
to be a good ground to put an end to the partnership. At the same time
it may be observed, that these are cases of infinite delicacy. There is no
line of distinction by which it shall be ascertained how long a term of
inability shall justify measures of this description. A broken leg, or an
accidental blow, may incapacitate a partner for a time as much as insanity,
andthe one maybe as temporary as the other; and, perhaps the nearest
approximation to be made to a rule on the subject is, that a remedy and
relief will Ijc given only where the circumstances amount to a total and
important I'ailure in those essential points on which the success of the part-
nership depends. 3. Cases may be supposed of danger so imminent,
from bad health, lunacy, habits of intoxication, etc., as to make the con-
470 PARTNERSHIP. [cHAP. XIII.
adopts the like provision, enabling any party to re-
nounce the partnership, whenever its objects are no
longer attainable. The passage already cited estab-
hshes this right, whenever the conditions of the part-
nership are not capable of being fulfilled, or the fruits
thereof cannot be properly enjoyed.^ Quia conditio
qiicedam, qua societas erat co'ita, ei non prcestaticr.^ Vel
quod ea re friii non liceat, cujus gratia iiegotiatio sus-
cepta sit.^ The same doctrine is applied to the case of
a partner who is grievously oppressed with debt, at
least, when it amounts to insolvency. IteTn si quis ex
sociis mole dehiti j^roigravatus, bonis suis cesserit^ et
ideo prop)ter publica aut privata dehita substantia ejus
veneat, solvitur societas^ Another of the causes
tinuance of the partnership likely to prove ruinous to all concerned ; as in
the case of uncontrollable habits of intoxication in the partner of a gun-
powder manufactory. In cases of this description there can be no doubt
that such perils will afford ground for judicial interference to dissolve the
company. But it may be doubted, whether they would not justify the
other partners in entering the act of dissolution in the books, to be followed
up as soon as possible by judicial measures ; for such a state of things may
occur at the commencement of a long vacation, when no proper opportunity
can be had of dissolving by judicial interposition." 2 Bell, Comm. B. 7,
0. 2, p. 634, 635, 5th ed.
1 Ante, § 273, 289.
* D. 17, 2, 14; Poth. Pand. 17, 2, n. 68; ante, § 273.
3 D. 17, 2, 15 ; Poth. Pand. 17, 2, n. 68 ; Poth. de Soc. n. 152.
■* Inst. 3, 26, 8; Domat, 1, 8, 5, art. 12. — Domat has In this place
summed up the main principles of the Roman law on all these and the like
incapacities. " If one of the partners (says he) is reduced to such a con-
dition, that he cannot contribute to the community what he is obliged to
furnish, whether In money, or in labor, the other partners may exclude
him from the society; as, if his goods are seized on, if he has relinquished
them to his creditors ; if he labors under any Infirmity or any other incon-
venience that hinders him from acting ; if he is excluded from the manage-
ment of his concerns, as being a prodigal ; if he falls Into a frenzy. For In
all these cases, the partners may justly exclude from the partnership him,
who ceasing to contribute to It, ceases to have a right to it. But this Is to
be understood only for the time to come ; and the partner who may chance
to be excluded for any one of these causes, ought to lose nothing of the
profits which may come to his share in proportion to the contributions
which he had already made."
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 471
enumerated in that law for a dissolution of partnership,
is the absolute poverty or total loss of the property of
one partner. Dissociamur egestate}
§ 294. Pothier fully recognizes the same doctrine.^
He also puts the corresponding case of the partner
becoming paralytic, or otherwise infirm, whose skill and
diligence are relied on to conduct the business, or man-
ufacture the articles of the trade ; and holds, that such
an occurrence constitutes a sufficient ground for a dis-
solution.^ In each of these cases, however, the asserted
inability, or incapacity, does not, either in the Roman
law, or the French law, constitute ^:)er se a positive
dissolution ; but it only confers the right of election
upon the other partners, to do so at their pleasure by
an open renunciation.^ In this respect it is in perfect
coincidence with the doctrine of the common law.
> D. 17, 2, 4, 1 ; Poth. Pand. 17, 2, n. 54, 62; Domat, 1, 8, 5, art. 12.
2 Poth. de Soc. n. 141, 142, 148 ; Domat, 1,^8, 5, art. 12.
•'' Poth. de Soc. n. 142, 152; Civil Code of France, art. 1871; Domat,
1, 8, 5, art. 12.
* Domat, 1, 8, 5, art. 12, and note, Ibid. ; Poth. de Soc. n. 142, 152. —
Pothier says: "The same thing may be said of the case of an habitual
infirmity or disease, which occurs to one of the partners. It will be a just
cause for him to renounce the partnership, if the business of the partner-
ship be such that it requires his personal attention." Poth. de Soc. n. 152.
The Civil Code of France (art. 1871), declares: "Dissolution of partner-
ships for a term cannot be demanded by one of the partners, before the
term agreed, unless for just motives, as where another partner fails in his
engagements, or that an habitual infirmity renders him unfit for the affairs
of the partnership, or other similar cases, the lawfulness and weight of
which are left to the arbitration of Judges." Ante, § 274. See also Code
of Louisiana (1825), art. 2858, 2859, which declares: "Although the part-
nership may have been entered into for a limited time, one of the partners
may, provided he has a just cause for the same, dissolve the partnership
before the time, even although inconveniences might result for the partners,
and although it might have been stipulated, that the partners could not
desist from the partnership before the stipulated time. There is just cause
for a partner to dissolve the partnership before the appointed time, when
one or more of the partners fail in tht3ir obligations, or when an liabitual
infirmity prevents him from devoting himself to the affairs of the jjartner-
ship, which require liis presence or his personal attendance."
472 PARTNERSHIP. [cHAP. XIII.
§ 295. An incapacity of a dilFerent sort, but which
leads , directly to the same right of dissolution, is that
of insanity; for it is obvious, that, under such circum-
stances, the business either cannot be carried on at all,
or not as beneficially for all the parties, as was con-
templated in the formation of the original partnership.
Indeed, theoretically speaking, as insanity amounts to
a positive incapacity of the party to contract during
its continuance, and as the supposed agency and au-
thority given by each partner to the others to transact
the business of the partnership in the name of all, may
be deemed during the like period to be suspended or
revoked,^ the natural conclusion would seem to be, that
^ Story on Ag. § 481. — The following note, appended to that section,
may not be unimportant upon the point here under consideration. " This is
clear, where the party's lunacy is established under an inquisition, or where
he is put under guardianship. But some doubt seems to be entertained,
whether, before such inquisition or guardianship, there is any implied sus-
pension or revocation of the agent's authority. Mr. Bell (1 Bell, Comm.
§ 413, p. 395, 396, 4th ed. ; Id. p. 489, 5th ed.) considers insanity, not so
established, to be no suspension or revocation of the authority. He says :
' Insanity is to be judged of differently. There is here neither an implied
natural termination to the authority ; nor is there an existing will to recall
the former appointment ; nor is the act notorious, by which the public may
be aware of such fliilure of capacity. It was to this interesting question
chiefly, that the metaphysical discussion, to which I have already alluded,
was applied. But the strong practical ground of good sense, on which the
question was disposed of, as relative to the public, was, that insanity is con-
tradistinguished from death by the want of notoriety ; that all general dele-
gations of power, on which a credit is once raised with the trading world,
subsist in force to bind the grantor, till recalled by some public act or
individual notice ; and that, while they continue in uninterrupted operation
relied on by the public, they are, in law, to be held as available generally ;
leaving particular cases to be distinguished by special circumstances of mala
fides. The question does not appear to have occurred in England ; but the
opinion of very eminent English counsel was taken in a case, wliich was
tried in Scotland, and tliey held the acts of the procurator to be eifectual to
the public against the estate of the person by whom the procuratory was
granted.' He states, in his note (1) the Scottish case, in the following
words : ' Pollock against Paterson. The case in which this question
occurred to be tried, was compromised, and I had imagined was not reported.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 473
no valid act can be done, or contract can be made,*
during the insanity of any partner, which should be
binding upon the partnership. The common law, how-
ever, does not in this respect follow out the theoretical
principle ; but, upon grounds of public policy or con-
venience, holds, that insanity does not ordinarily |9er se
amount to a positive dissolution of the partnership ;
but only to a good and sufficient cause for a Court of
Equity to decree a dissolution.^ We say ordinarily ;
But after I had prepared a note from my own papers, to subjoin here, I
found the case well and ably reported in the Faculty Collection, to which I
refer the reader. The opinions of the Judges are peculiarly worthy of pe-
rusal ; not being confined to the narrow state of the question, as it occurred
technically, but extending to a large and comprehensive discussion of the
general question, as to the effect of Insanity on such powers. 10th Decem-
ber, 1811, 14 Fac. Coll. 369.' In note (2), he refers to the opinions of
counsel taken in England, in these words : ' After stating the terms of the
procuration, as on this and the preceding page, and that, after the insanity
of the grantor, the procurator had continued to carry on the busmess of a
banker for the principal, the question put was. Whether, in these circum-
stances, the transactions of Mr. John Patterson, under his father's procu-
ration, are good to those who transacted with him from the date of it to the
period of stopping.' The answer by Sir Vicary Gibbs (afterwards Lord
Chief Justice of the Common Pleas) , Sir Samuel Romilly, and Mr. Adam
(now Lord Chief Commissioner of the Scottish Jury Court), was, 'We
think they are good.' JNlr. Chancellor Kent, in his Commentaries, inclines
to the same opinion. 2 Kent, 645. Would a deed or sale, executed per-
sonally by a party manifestly insane at the time, be valid? If not, can his
agent be in a better condition ? "
' Saver v. Bennet, 1 Cox, 107 ; Pearce v. Chamberlain, 2 Ves. Sr.
33, 35;" [Leaf v. Coles, 1 De G. M. & G. 171 ; 12 Eng. L. & Eq. 117] ;
Wrexham v. Huddleston, 1 Swans. 514, note, and see Ibid, the Reporter's
note ; Waters v. Taylor, 2 Ves. & B. 299, 302, 303 ; Kirby v. Carr, 3 You.
& C. 184 ; Jones v. Noy, 2 Myl. & K. 125 ; 1 Story, Eq. Jur. § 673 ; 3 Kent,
68 ; Wats, on P. c. 7, p. 382, 2d ed. ; Griswold v. Waddington, 15 Johns. 57,
per Mr. Ch. Just. Spencer. {Anon. Z. v. X. 2 Kay & J. 441. See Rowlands
V. Evans, 30 Beav. 302. } In Sayer v. Bennet, 1 Cox, 107, 109, Lord Kenyon
(then Master of the Rolls) said : "I think, indeed, it may be laid down as
a general rule (without considering the particular circumstances of the
case), that when partners are to contribute skill and industry, as well as
capital, if one partner becomes unable to contribute that skill, a Court of
Equity ought to interfere for both their sakes ; for both have stakes in the
partnership, and are interested in having it carried on properly ; and the
474 PARTNERSHIP. [cHAP. XIII.
for, where the insanity has been positively ascertained,
under a commission of lunacy, or by the regular judi-
Court ought to see, that the property of the party, unable to take care of
himself, should be taken care of for him. It appears, that few people care
to leave the management of their property to other persons ; and as a
lunatic has no power of managing his own property, so a Court of Equity
will not deliver it to persons to whom the party himself has not committed
it. If, therefore, the defendant continued in the same situation as he has
been, I should have no difficulty in saying that the partnership ought to be
dissolved, though there may be no precedent for the purpose. As to what
is said with respect to a substitute for defendant, that is what Sayer never
intended by the partnership ; he never meant to take a partner from a Court
of Equity. The next thing is, how far his present situation ought to in-
fluence the Court. I think I may say, that, if it were clearly established,
that Bennet had recovered his senses, and there was no probability of
a relapse, it would be too much to dissolve the partnership ; (nor if it
were otherwise, could this Court dissolve it with a retrospect to the time
of the disorder's commencing ; for as his capital has been embarked, dur-
ing all that time, he must have the profits of it) . If I was clearly satisfied,
that Bennet was restored to a sound mind, and could afford the proper
assistance to Sayer, the partnership ought not to be dissolved. In Hud-
dleston's Case it does not appear, what was the extent of the dejection of
mind. Everybody knows that it is very frequent for persons once mad
to recover. And in this case I cannot find what the apothecary forms his
opinion upon, as to the likelihood of Bennet's recovery. I am astonished
that neither party examined Dr. Monro ; he ought to have had frequent
and recent opportunities of seeing him. Every lunatic is supposed to have
lucid intervals ; and it might be, that these were selected for his being
seen by these witnesses ; at least it is not made to appear sufficiently to
me. His family, with whom he has lived, ought to have stated it. Under
these circumstances I have great difficulty. On the principle I have no
doubt; but I cannot tell how the circumstances apply. I must, therefore,
direct a new kind of inquiry, which is, the Master must inquire whether
Bennet is now in such a state of mind as to be able to conduct this business
in partnership with Mr. Sayer, according to the articles of copai'tnership ;
for if he has merely a ray of intellect, I ought not to reingrafl him in
his partnership, and that in mercy to both, for the property of both is
concerned ; and he who cannot dispose of his property by law, must be
restrained here. I have, therefore, no manner of doubt of the principle."
In Waters v. Taylor, 2 Ves. & B. 299, 302, 303, Lord Eldon said:
"It was supposed that I had contradicted Lord Kenyon's doctrine in
Sayer v. Bennet. Certainly I did not contradict that doctrine ; nor did I
make any decree, which, duly considered, was an assent to it. The case
was no more than this ; one partner becoming a lunatic, the others thought
proper by their own act to put an end to the partnership ; which they had
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 475
cial appointment of a guardian to the lunatic, it may
deserve consideration, whether it does not i2)So facto
no right to do, if he had been sane ; and they continued to carry on the
business with his capital ; not being able to state, what was his, as a cred-
itor, and what was not his, as a partner. That, Lord Kenyon thought,
afforded sufficient ground for saying the partnership was not determined ;
and he also held, that one partner cannot, on account of the lunacy
of another, put an end to the partnership ; but that object must be attained
through the decree of a Court of Equity. My decision was not intended
either to support or impeach that, proceeding upon the particular circum-
stances of the case before me. The question, whether lunacy is to be con-
sidered a dissolution, is not before me. I shall therefore say no more upon
it, than this. If a case had arisen, in which it was clearly established, as
far as human testimony can establish, that the party was what is called an
incurable lunatic, and he had by the articles contracted to be always actively
engaged in the partnership, and it was therefore as clear as human testimony
can make it, that he could not perform his contract, there could be no
damages for the breach in consequence of the act of God. But it would
be very difficult for a Court of Equity to hold one man to his contract,
when it is perfectly clear that the other could not execute his part of it.
It will be quite time enough to determine that case, when it shall arise ;
for, as we know that no lunacy can be pronounced incurable, yet the dura-
tion of the disorder may be long or short ; and the degree may admit
of great variety. I would not, therefore, lay down any general rule by
anticipation, speculating upon such circumstances. I agree with Lord
Thurlow, that the jurisdiction is most difficult and delicate, and to be exer-
cised with great caution." In Jones v. jSToy, 2 Myl. & K. 125, 129, 130,
Sir John Leach (Master of the Rolls) said: "It is clear upon principle,
that the complete incapacity of a party to an agreement to perform that
which was a condition of the agreement, is a ground for determining the
contract. The insanity of a partner is a ground for the dissolution of
the partnership, because it is immediate incapacity ; but it may not, in the
result, prove to be a ground of dissolution, for the partner may recover
from his malady. When a partner, therefore, is affected Avith insanity, the
continuing partner may, if he think fit, make it a ground of dissolution.
But in that case, I consider with Lord Keftyon, that, in order to make it a
ground of dissolution, he must obtain a decree of the Court. If he does
not apply to the Court for a decree of dissolution, it is to be considered
that he is willing to wait to see whether the incapacity of his partner may
not prove merely temporary. If he carry on the partnership business, in
the expectation that his partner may recover from bis insanity, so long as he
continues the business with that expectation or hope, there can be no disso-
lution." See also Gow on P. c. 5, § 1, p. 221, 3d ed. ; Besch v. Frolich, 1
PhU. 172 ; [Sander v. Sander, 2 Coll. 276.]
476 PARTNERSHIP. [CHAP. XIII.
amount to a clear case of dissolution of the partnership
by operation of law ; since it immediately suspends
the whole functions and rights of the party to act per-
sonally.^ The Eoman law seems fully to have incul-
cated the same doctrine, upon the ground that a mad-
man has no capacity to contract.^
§ 296. Under the Roman law the other partners
not only had a right to renounce the partnership, where
any one of the partners was a prodigal or a madman, if
he was put under guardianship on account of his prodi-
gality or insanity ; but his guardian also was clothed
with the like authority, which, however, as he was at
liberty to exercise it as his election, does not seem to
have been understood as amounting ^^er se to a dissolu-
tion.^ Sancimus (says the Code) veteriim dubitatione
semota, licentiam habere furiosi cicratorem dissolvere,
si mcdiierit^ societatem furiosi^ et sociis licere ei renun-
tiare.'^
1 Story on Ag. § 481. — Mr. Collyer (Coll. on P. B. 2, c. 3, § 3, p. 195,
2d ed.) seems to think that a decree for a dissolution is still necessary,
notwithstanding a commission of lunacy has found the partner a lunatic.
The case of Milne v. Bartlet, cited by him from the Jurist (Eng.), Vol. 3,
p. 358, certainly seems to support the view which he takes of the subject.
But, at the same time, it cannot escape observation, that the point was not
made at the Bar, and that the decree would have been equally correct, if it
had proceeded to decree an account upon the ground that the dissolution
was already complete. I confess myself to have difficulty in comprehend-
ing how a partnership can still exist, after one partner is put under guard-
ianship by reason of insanity. See also 5 Duvergier, Droit Civil Franc, tit.
9, § 443-446. {In Isler v. Baker, 6 Humph. 85, it was held, that an inqui-
sition of lunacy found against a partner i^5o /Jr/c/o dissolved the partnership. }
* In negotiis contrahendis alia causa habita est furiosorum, alia eorum,
qui fari possunt, quamvis actum rei non intelligerent ; nam furiosus nullum
negotiura contrahere potest ; pupillus omnia, tutore auctore, agere potest.
(D. 50, 17, 5.) Furiosi, vel ejus cui bonis interdictum sit, nulla voluntas
est. (D. 50, 17, 40.)
3 Domat, 1, 8, 5, art. 12, 13.
* Cod. 4, 37, 7 ; Poth. Pand. 17, 2, n. 67 ; Domat, 1, 8, 5, art. 12, 13.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 477
§ 297. But although insanity may thus constitute
a sufficient ground to justify a Court of Equity in de-
creeing a dissolution ; yet we are to understand this
doctrine, and indeed, all other cases of personal infir-
mity or disability, in a qualified sense, and with its
appropi'iate limitations. It is not the mere fact of the
existence of such insanity, infirmity, or other disability,
supervening, that will justify the Court in the applica-
tion of such an extraordinary remedy. But it must
be of such a character, as amounts to a permanent or
confirmed disqualification to perform the duties of the
partnership. If the insanity, or infirmity, or other
disability, be of a temporary or fugitive nature ; if it
be merely an occasional malady, or accidental illness,
or an insanity, admitting of long lucid intervals, or
mild and gentle in its character, amounting to little
more than a dejection of mind ; if there be a fair
prospect of recovery within a reasonable time ; then,
and in such cases, there is no fit ground for a Court
of Equity to decree a dissolution ; for every partner-
ship must be presumed to be entered into, subject
to the common incidents of life, such as. temporary
illness, infirmity, or insanity.^ The case must be far
more stringent ; the hope of a recovery must be re-
mote ; the character of the disease must be permanent
and confirmed ; and the impracticability of resuming
the partnership duties, until after a period of indefinite
and doubtful duration, must be apparent and decisive. "-^
' 2 Bell, Coram. B. 7, c. 2, p. 62-i, oth ed.
^ Gow on P. c. 5, § 1, p. 221, 222, 3d ed. ; Id. Suppl. 18il, p. 64;
Wats, on P. c. 7, p. 382, 2d ed. ; Jones v. Nov, 2 ]\hl. & K. 125. — Mr.
Gow has well said : " But, as the duration of the disorder may be protracted
or circumscribed, and the degree may admit of variety, it is impossible
speculatively to lay down any general rule on the subject ; since such a rule,
in its application, must vary according as the malady is either confirmed
insanity, or mere temporary illness, or dejection of mind, and according as
478 PARTNERSHIP. [CHAP. XIII.
Even when a Court of Equity will, on account of the
insanity of a partner, dissolve the partnership, it will
not give a retrospective effect to its decree, by carry-
ing back the dissolution to the time when the insanity
commenced, or even to the time of filing the bill ; but
it will generally confine the dissolution to the time of
the decree.^
§ 298. There may be, and indeed are, various other
circumstances and changes of state or condition which
may, in like manner, justify a Court of Equity in dis-
solving a partnership ; such, for example, as in the
cases already hinted at,^ of the long absence of one
partner in the public service ; or his protracted ab-
sence abroad for mere personal or private objects ; or
his change of domicile to another state or country ; ^ or
his voluntary engagement in any other incompatible
pursuits. In all such cases, if the business and inter-
ests of the partnership will be thereby materially ob-
structed, or suspended, or interfered with, to the preju-
dice of the other partners, it will furnish a just and
the prospect of recovery is speedy or remote. Each case must be governed
and decided by its own peculiar circumstances. However, whatever may
be the nature of the disorder, one partner cannot, in consequence of such
an affliction, put an end to the partnership by his own act; that object can
only be attained through the medium of the decree of a Court of Equity."
Sadler v. Lee, 6 Beav. 324; {Kirby v. Carr, 3 You. & C. Ex. 184; Anon.
Z.v.X.2Kay & J. 441.
' Besch V. Frolich, 1 Phil. 172, 176 ; [Sander v. Sander, 2 Coll. 276.
But where by articles the partnership between two persons was to be dis-
solved on either party giving the other six months' notice ; and one of the
parties becoming deranged in his intellect, the other gave the required
notice ; the partnership was declared to have been dissolved in pursuance
of the notice, and not merely from the time of the decree, notwithstanding
the insanity of the party to whom it was addressed. Robertson v. Lockie,
15 Sim. 285. See also Bagshaw v. Parker, 10 Beav. 532.] { So Mellersh v.
Keen, 27 Beav. 236.}
=* Ante, § 274, 291, 292.
^ See Whitman v. Leonard, 3 Pick. 177, 179. [Explained and limited
in Arnold v. Brown, 24 Pick. 89, 94.]
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 479
reasonable cause for a Court of Equity to dissolve the
partnership. The Roman law on this point speaks at
once the language of common sense and public conven-
ience.^ There are other incapacities and disabilities,
which operate, ijjso facto, a dissolution of the partner-
ship, without any intervention of a Court of Justice ;
but these will come properly under consideration, when
we treat of the cases of dissolution by mere operation
of law.
§ 299. Analogous to the cases of a dissolution by the
decree of a Court of Equity, is that of a dissolution
which is adjudged by the award of arbitrators, upon a
proper submission of the case to them by the consent
of all the partners. Where there is a direct submission of
the very question to arbitrators by the express terms
of the submission, there does not seem to be any, the
slightest difficulty, in holding, that an award in the
premises, directly awarding a dissolution, will, 12:) so facto,
if unimpeached and unimpeachable, amount to a posi-
tive dissolution.^ And this is so for two reasons ; the
one of which is, that it is competent, in point of law,
for the arbitrators to make such an award obligatory
upon the parties, as the decree of a tribunal of their
own choice.^ The other is, that the dissolution of the
partnership may properly be treated, as made with the
consent of all the partners.'*
§ 300. The question, however, may arise, and, indeed,
has arisen, whether, when the arbitrators have not, in
express terms, awarded a dissolution, it may neverthe-
less be implied from the very nature and operation of
' D. 17, 2, 16 ; Poth. Pand. 17, 2, n. 68; Poth. de Soc. n. 152.
2 Wats, on P. c. 7, p. 383, 384, 2d ed. ; Coll. on P. B. 2, c. 2, § 2, p.
152, 153, 2d ed. ; Gow on P. c. 5, § 1, p. 230, 3d ed. ; Heath v. Sansom,
4 B. & Ad. 172 ; Street u. Rigby, 6 Ves. 815.
' Heath V. Sansom, 4 B. »fe Ad. 172.
« Ibid.
480 PARTNERSHIP. [CHAP. XIII.
the actual clauses of the award itself. And it has been
held, that it may, if the award admits of no other just
and reasonable interpretation. Thus, for example, if it
is awarded by the arbitrators, that the affairs of the
partnership shall be w'ound up, or that all the partner-
ship property shall be sold and delivered to the partner,
who shall become the purchaser ; or that one partner
shall take all the property and pay all the debts of the
partnership ; in thesd and the like cases, it seems to be
clear, that a dissolution of the partnership is positively
intended by the arbitrators.^
§ 301. The only other important question of a prac-
tical nature under this head is, What terms in the sub-
mission w411 amount to an implied authority to the arbi-
trators to dissolve the partnership ? Thus, for example,
where all matters in difference between the partners are
referred to arbitrators, if they should award a dissolu-
tion of the partnership, it may be made a question,
whether the arbitrators, by such an award, have not
exceeded their authority. In a case of this sort, the
Court held, that under such a submission it was clearly
within the scope of the authority of the arbitrators to
award a dissolution of the partnership.^
§ 302. We come, in the next place, to the considera-
tion of the dissolution of partnership by mere operation
of law. And this is divisible into vaiious heads. (1.)
Dissolution by the change of the state [status) or con-
dition of one or more of the partners. (2.) Dissolution
by the transfer of the property of one or more of the
partners, by their own act, or by the act of the law.
(3.) Dissolution by the bankruptcy and insolvency of
one or more of the partners, (-i.) Dissolution by a
* Heath V. Sansom, 4 B. & Ad. 172 ; Byers v. Van Deusen, 5 Wend.
208.
^ Green v. Waring, 1 W. Bl. 475; {§ 215.}
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 481
public war between the countries, of which the partners
are respectively subjects. (5.) Dissolution by the death
of one or more of the partners. These heads may seem
somewhat to run into each other ; but a distinct consid-
eration of them, in the order stated, may enable us to
see the principles applicable to each in a more exact
and comprehensive manner, than could otherwise be
conveniently done.
§ 303. And first, as to dissolution by the change of
the state or condition of one or more of the partners.
This, of course, must arise, whenever the incapacity
further to act sui juris ^ results by operation of law from
such change of state or condition. To this head we
might refer the case of persons, who, being partners, are
put under actual tutelage or guardianship, and are by
the local law disabled to act sui juris ; such as persons
becoming insane, idiotic, spendthrifts, or otherwise, from
excessive weakness or vice, being placed under tutelage
or guardianship ; ^ for the continuance of the partner-
ship contract would seem necessarily founded upon the
personal capacity of the partner to act and bind him-
self in the partnership transactions. We have already
seen how this subject is dealt with ui the Roman and
foreign law.^
§ 304. So, again, the same result will arise at the
common law, where a party has lost his capacity to act
sui juris, by reason of his outlawry, or conviction and
attainder of felony, or treason.^ These two last cases
are not only founded upon the personal incapacity of
the parties ; but also upon the further consideration,
' Ante, § 295, 296 : Domat, 1, 8, 5, art. 12, 13 ; Cod. 4, 37, 7 ; Poth.
Panel. 17, 2, n. 67 ; 2 Bell, Comm. B. 7, c. 2, p. 634, 635, 5th ed. ; Gris-
wold V. Waddington, 16 Johns. 438, 491.
* Ante, § 295, 296.
3 Coll. on P. B. 1, c. 2, § 2, p. 71, 2d ed.
31
482 PARTNERSHIP. [CHAP. XIII.
that by the attainder the crown becomes entitled to all
the partnership effects, by virtue of its prerogative ;
that is to say, to the moiety or share of the convict-
partner, by way of forfeiture; and to the moiety or
shares of all the other innocent partners, upon the ex-
traordinary (if it does not deserve the stronger epithets
of extravagant and oppressive) technical doctrine, that
it is beneath the dignity of the crown to become a joint
tenant, or a tenant in common with a subject, and,
therefore, the king shall take the whole by his preroga-
tive.^ No such doctrine has ever been promulgated in
1 Coll. on P. B. 1, c. 2, § 2, p. 71, 72, 2d ed. ; Wats, on P. c. 6, p.
377, 2d ed.; Gow on P. c. 5, § 1, p. 216, 217, 3d ed.— Mr. Watson (p.
377, 378) has stated the reasons of the doctrine, and its hardshijj, in the
following terms : " Before concluding this chapter upon the death of part-
ners, it may be proper to consider the consequences of one partner becoming
civilly dead, by outlawry or by attainder for treason or felony. The
outlaw or convict, being dead in law, incapable of entering into any con-
tract, bringing any suit, or holding any property, it is clear, that a part-
nership, in which he was, is ipso facto dissolved. He is as incapable of the
functions of a partner in trade, as if the breath had left his body. The
eflFects of his delinquency are extremely severe upon his copartner, who re-
mains a good and lawful man. And here is one of those instances, in which
by our law the innocent suffer with the guilty ; which rather shock us at first
sight, but which may be well contrived for the prevention of crimes, and the
general good of the commonwealth. Upon the outlawry or attainder of one
partner, all the partnership effects become vested in the crown. The share
of the partner outlawed or attainted is, in the first place, forfeited to the
crown ; whereby, if the king were capable of being so, he would become
joint tenant or tenant in common of the partnership effects with the other
partner ; but as this would be inconsistent with the dignity of the monarch,
he is strictly entitled to the whole. Sir Wni. Blackstone says : ' The king
cannot have a joint property with any person in one entire chattel, or such
a one as is not capable of division or separation. But where the titles of the
king and the subject concur, the king is entitled to the whole ; in like man-
ner, as the king cannot, either by grant or contract, become a joint tenant
of a chattel real with another person ; but by such grant or contract shall
become entitled to the whole in severalty. Thus, if a horse be given to the
king and a private person, the king sliall have the sole property ; if a bond
be made to the king and a subject, the king shall have the whole penalty ;
tlie debt or duty being one single chattel ; and so if two persons have the
proi)erty of a horse between them, or have a joint debt owing them on bond.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 483
America ; and even in England it has become obsolete
in practice, although it is still a subsisting prerogative,
which may spring upon and produce the ruin of the
innocent and unwary partners.
§ 305. The same result (that is, a dissolution of the
partnership), without any of the odious features attached
to prerogative, is, under the like circumstances, fully es-
tablished in the Roman and foreign law, whenever, by
a change of the state or condition, any one of the part-
ners is disabled from the performance of the appropriate
duties of the partnership, as by the loss of his personal
liberty and power of action by banishment, or by bank-
ruptcy, or by insolvency, or by a judicial prohibition to
act in his business, or by a confiscation of his property,
or by his civil death.^ In the Roman law a distinction
was taken between the cases of great, and intermediate,
and of small disabilities. The two former dissolved the
partnership ; the latter did not. Pariter (says Pothier,
quoting the Digest) solvitur societas cajntis dhninutione
and one of them assigns his part to the king, or is attainted, whereby his
moiety is forfeited to the crown, the king shall have the entire horse and en-
tire debt. For, as it is not consistent with the dignity of the crown to be
partner with a subject, so neither does the king ever lose his right in any
instance ; but, where they interfere, his is always preferred to that of another
person. From which two principles it is a necessary consequence, that the
innocent, though unfortunate, partner must lose his share in both the debt
and the horse, or in any other chattel in the same circumstances.' One good
effect of this doctrine, with regard to partnership, is, that it may render a
man cautious as to the pei'sons with whom he forms this relation, and that it
renders it his interest to strive to preserve them in the path of loyalty and
virtue. Besides ; although such are the strict rights of the crown, in the
mild spirit of modern times, they are not likely ever to be enforced, either
against creditors or deserving partners." This is perhaps the best apology
which can be made for the doctrine ; but it is impossible to disguise either
its gross injustice, or its mischievous tendency. Why should innocent per-
sons be at the mercy of the crown, whether they are to be involved in
positive ruin or not ? The case of the late Mr. Fauntleroy would afford a
striking instance of the terrific results of such a prerogative.
* See Griswold i'. Waddington, 16 Johns. -ioS, -491.
484 PARTNERSHIP. [CHAP. XIII.
socii maxima aid media. Hinc^ " Puhlicatione qiioque
distrain societatem diximus. Quod videhcr spectare ad
universorum honorum publicationem^ si socii bona pub-
licentur. Natn cum in ejus locum cdius succedat, i^o
mortuo habetur'' ^ Minima autem capitis diwdnutione
non solvitur. Quocirca., " 8i filiusfa^inilias societatem.
coierit, deinde emancipatus a patre fuerit^ apud JuUa-
num quceritur, an eadem societas duret, an vero cdia sit,
si forte p)ost emancip)ationem, in societate duratum est f
Jidianus scrijosit (Libro 14 Digestorum), eandem socie-
tcdem durare ; initiwn enim in his contractibus inspi-
ciendiim. Duabus autem actionibus agendimi esse, una
adversus pcdreon, altera adversus filiiim ; cum patre, de
eo, ciijus dies ante emancipcdionem cessit ; nam ejus
temporis, quo p)ost emanci2Kdionem societas duravit,
nihil p)rcestare pair em oportet; cum jilio autem, de
utroque tempore, id est, de tota societcde. Nam et si
quid [inquit), socius filii, post emancipationemjilii, dolo
feceint, ejus, non pcdri, sed Jilio actio danda est.'' ^ Si-
militer nee adrogatione socii solvetur societas; nontameyi
ad adrogatorem transibit. Hoc docet Paulus ; " Socie-
tas quemadmodum ad heredes socii non transit, ita nee
ad adrogatorem ; ne alioquin invitus quis socius efficia-
tur, cui non vidt. Ip)se autem adrogatus socius perma-
net ; nam et si Jiliusfamilias emancip)atus fuerit, perma-
nebit socius.'" ^ Aliud in servo ; nam cum personam
non habeat, nee nisi ex p>ersona domini socius esse pos-
sit, sequitur quod hujus manumissione aut alienatione
solvatur societas. Hoc docet Ulpianus ; '■'■Si servus
mens societatem cum Titio coierit, et alienatus in eadem
perm,anserit, p)otest did, cdienatione servi et prior em so-
cietatem finitain, et ex integro alteram inchoata7n ; cdcpie
' D. 17, 2, 65, 12; Poth. Pand. 17, 2, n. 60.
2 D. 17, 2, 58, 2; Poth. Pand. 17, 2, n. 01. ^ Ibid.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 485
icleo et onihi et emptori actionem pro socio com.p)etere.
Iteni^ tarn adversiis tne, quam adversus emi^toreyn, ex his
causis, quae ante alienationem inciderunt, dandam actio-
nem ; ex reliquis, adversus emptorem solum." ^ Pothier
asserts the same to be the doctrine of the French law,^
and it is now positively affirmed by the Civil Code of
France,^ and the Code of Louisiana.'*
' Poth. Pand. 17, 2, n. 60, 61; Domat, 1, 8, 5, art. 15; D. 17, 2, 65,
22; Id. 17, 2, 58, 3. — Vinnius and Heineccius Lave commented on this
subject in their Conmientaries to the Institutes, 3, 26, 7, p. 774, ed. 1777.
The comment is as follows : " Quod Paulus, dicta L. actione, 65, § Puhlica-
tione, 12 hoc tit. unde hie locus desumptus est, dicit, Publicatione bonorum
socii distrahi societatem, hoc Modestinus et Ulpianus dixerunt, societatem
solvi capitis derainutione, L. 4, § 1, d. L. verum. 63, § idt. eocl. Intelligunt
enim capitis deminutionein maximam et mediam, cum soclus severitate sen-
tentise aut in servitutera redigitur, aut in insulam deportatur, quo casu bona
daranati publicari solent, L. 1, de hon. damn. L. 8, § 1 & 2, qui iestam.fac.
Poterat htec species dissociationis etiam ad prtecedens genus referri, ad earn
videlicet, quaj morte socii contingit. Quibus enim libertas aut civitas ademp-
ta est, hi jure civili pro mortuis habentur ; eoque pertinet, quod dicitur in d.
L. verum. 63, § ult. homines interire aut morte, aut maxima et media capitis
deminutione. Sed et alia ratione ad sequens genus referri potest. ViNX.
Atqui si obseratus bonis cedit, bona non publicantur sed vendantur ; nee is
pro mortuo habetur, cujus substantia veniit, sed cujus bona ob delictum
consecrata pubhcatave sunt. Vide L. 63, § 10, L. 58, L. 65, § 1 tfc 2, ^.
pro soc. Heinecc.
2 Poth. de Soc. n. 147, 148. ' Code Civil of France, art. 1865.
* Code of Louisiana (of 1825), art. 2847. — It has been held by the Su-
preme Court of Massachusetts, that the absconding of one partner is a dis-
solution of the partnership, between the parties, and as to third persons,
who had notice thereof. Whitman v. Leonard, 3 Pick. 177, 179. [In Ar-
nold V. Brown, 24 Pick. 89, 94, it is said : " Nor will the voluntary absence
of one of the partners from the State, produce a dissolution. Some of the
dicta in Whitman v. Leonard, 3 Pick. 177, certainly favor the plaintiff's po-
sition. But they were not necessary to the decision of the case, and if
they were, must be taken in connection with the circumstances of that case.
There were facts enough to show the note to be grossly fraudulent, without
relying upon the absconding of one of the partners. The Chief Justice says,
' here was an absconding of one partner, which dissolved the partnership.'
The absence was longer in that case than this, and attended with many cir-
cumstances to distinguish it from this. It well might be that tliere was such
an absconding as would amount to a dissolution, and yet the temporary ab-
sence in this not produce the same effect. In England the absconding would
486 PARTNERSHIP. [CHAP. XIII.
§ 306. xlgain ; the marriage of a female partner will,
at the common law, for the like reason, create a disso-
lution of the partnership by mere operation of law ; for,
in the first place, by the marriage, all her personal prop-
erty and effects are transferred to and belong to her
husband in his own right, unless indeed there be some
reservation or valid contract to the contrary ; ^ and in
the next place, the marriage creates a positive personal
incapacity on her part any further to enter into, or to
bind herself by any contract.^
§ 307. In the next place, as to dissolution by a vol-
untary assignment by one or more of the partners of
all his right, title, and interest in the partnership prop-
erty. It seems now well established at the common
be an act of bankruptcy, and the bankruptcy, when determined by regular
adjudication, would create a dissolution. But the absconding is never relied
upon, there, as a dissolution. And we do not think that the absence of one
of the partners, under the circumstances disclosed in this report, amounted
to a dissolution of the partnership."]
1 1 Bl. Comm. 442-444; 2 Story, Eq. Jur. § 1367 ; {§ 10-14.}
- Ibid. ; Gow on P. c. 5, § 1, p. 226, 3d ed. ; Wats, on P. c. 7, p. 384;
2 Bell, Comm. B. 7, c. 2, p. 634, 5th ed. ; Griswold v. Waddington, 15
Johns. 57, 82. — Mr. Gow and Mr. Watson treat the point as doubtful, al-
though their opinions coincide with that expressed in the text. The point
seems to have been directly decided by Lord Eldon in Xerot v. Burnand, 4
Russ. 247, 260. He there said : " The next question is, when did the part-
nership terminate ? It was a partnership for no definite period ; and either
party therefore might, at any moment, have put an end to it by notice.
Miss Nerot married IVIr. Burnand, without consulting her brother, or, at
least, without his assent. If she chose so to change her situation, as to
make Mr. Nerot, in point of fact, if the partnership went on, a partner
with Burnand, Mr. Nerot had a right, the moment he received notice of
that step, to act upon it, and say, ' Your marriage has put an end to the
partnership.' No delay took place in that respect ; for the bill was filed as
early as Hilary term, 1820, the marriage having taken place towards the
close of the preceding year. I agree, therefore, with the Vice-Chancellor,
in saying, that the partnership was dissolved on the 16th of September,
1819." See also Gow's Supplement, 1841, p. 64. {In those states in which
a married woman has the same rights and control over her property as if
she remained single, there seems to be no reason why her marriage should
dissolve a partnership of which she is a member. See § 12, note.}
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 487
law, that if one partner does make such a volitntary as-
signment of all right, title, and interest in the partner-
ship property and effects, that will at once dissolve the
partnership, and convert the assignee or purchaser into
a tenant in common with the other partners.^ If the
assignment be bona fide, and unexceptionable in other
respects, this would seem to be the necessary operation
of law upon such an act ; for (as we have already seen),
every partnership being founded in the voluntary con-
sent of all the parties thereto, and that consent being
founded upon a delectus personarum^ no partner has any
right whatsoever to introduce a mere stranger into the
fii-m, without the consent of all the other partners ; ^ and
if such consent is given, then it becomes, to all intents
and purposes, the substitution of a new partnership for
the old one. And this is equally the doctrine of our
law, and of the Roman law, and of the modern foreign
law.^ The Roman law states the rule and the reason of
it in very succinct and expressive terms. Oimi enim
societas consensu contrahatur, socius mihi esse non potest,
quern ego socium esse nolui^
' Marquand v. N. Y. Manuf. Co. 17 Johns. 525 ; Keteham v. Clark, 6
Johns. Hi ; ante, § 272 ; 3 Kent, 59 ; Rodriguez v. HefFernan, 5 Johns. Ch.
417, 428 ; NicoU v. Mumford, 4 Johns. Ch. 622, 525. [But in such case the
other partners may hold possession of the property as against the assignee,
for the purpose of paying the debts and winding up the business of the con-
cern. Horton's Appeal, 13 Penn. St. 67.] {A conveyance, by a partner, of
his intei-est in all the real and personal estate of the firm is evidence tending
to show a dissolution, but is not in itself a dissolution. Taft v. BufFum, 14
Pick. 322. Nor does a mortgage, by a partner, of his interest in the person-
al property of the firm constitute a dissolution. State v. Quick, 10 Iowa,
451. So an assignment of a partner's interest as security, it being agi-eed
that the assignor should act in the partnership business as agent of the as^
signee does not operate as a dissolution. Buford v. Neely, 2 Dev. Eq. 481.
See also Bank v. Fowle, 4 Jones, Eq. 8. }
2 Ante, § 5 ; Inst. 3, 26, § 5, 8 ; 3 Kent, 59 ; Ex parte Barrow, 2 Rose,
252-254; Murray v. Bogert, 14 Johns. 318; Kingman v. Spurr, 7 Pick.
235. {See Merrick v. Brainard, 38 Barb. 574.}
3 Ante, § 5 ; Inst. 3, 26, 8.
* D. 17, 2, 19; Poth. Pand. 17, 2, n. 28; ante, § 5.
488 PARTNERSHIP. [CHAP. XIII.
§ 308. Indeed, there never could be any doubt, that
a general assignment by one or more partners will
produce this effect, when the partnership is for an
indefinite period, and determinable at will ; for, in such
a case, the assignment ^:>er se operates at once as a dis-
solution, upon due notice thereof by the party making
or receiving the assignment. The only point open for
discussion seems to be, whether the same conclusion
ought to be admitted, when the partnership is for a
fixed or definite period, and the assignment is made
within that period, in contravention of the partnership
articles. And it has been held, that if the assignment
is made bona fide, it operates, ipso facto, as a dissolution
of the partnership, since the purchaser is not compel-
lable to become a partner, nor, on the other hand, are
the other partners compellable to admit him as such.^
^ Per Lord Denman in Heath v. Sansom, 4 B. & Ad. 172 ; Marquand v.
N. Y. Manuf. Co. 17 Johns. 525, 529, 535. — On this occasion Mr. Chan-
cellor Kent said : "The suit was for a settlement of partnership accounts,
on the ground of its dissolution by the act of Fitch, one of the partners.
He became indebted to the Xew York Manufacturing Company, in a very
large amount, which he was unable to pay, and accordingly on the 14th of
April, 1814, he assigned over to them all his share, or undivided estate and
interest in the copai'tnership between him and the appellants. In May fol-
lowing, Fitch actually stopped payment, and became insolvent. It was con-
tended on the part of the INIanufacturing Company, that the copartnership
was dissolved by the assignment in April, or, at least, by the insolvency in
May. This was denied on the part of the appellants, on the gz-ound, that
by the original articles of copartnership, it was to continue until dissolved
by the death of one of the parties, or until two of them should demand a
dissolution. According to the construction given to the articles by the
appellants, they had a right to keep the capital of Fitch in their trade or
concern, notwithstanding any assignment of his property to his creditors,
and notwithstanding an actual insolvency on his part. I was of opinion that
the partnership was dissolved by the assignment, and that the appellants
were accountable for all the interest of Fitch in the capital and in the profits
of the concern. I do not mean to say, that a voluntary assignment by Fitch,
of his property to his creditors, may not be a breach of his contract or cov-
enant with his copartners. The question, as between them, under their arti-
cles of agreement, it was not necessary to discuss. But the creditors of one
copartner, who take his property by assignment, or on execution, cannot be
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 489
§ 309. The like rule seems to have prevailed in the
Roman law ; for there an assignment, by a debtor
involved against their consent in the responsibilities of a copartnership. The
capital stock, or interest of a partner, is certainly liable to his sepai'ate debts.
His creditors are entitled to it without the risk and burden of being partners.
An act of bankruptcy, says Lord Mansfield (Cowp. 448), is a dissolution of
the partnership, not only by virtue of the statutes of bankruptcy, but from the
necessity of the thing, since assignees cannot carry on a trade. According
to the doctrine on the part of the appellants, a party may lock up his capi-
tal in a mercantile house by such an agreement as the one in this case, and
it must remain untouclied without the consent of his copartners, during his
life. If the creditors take it by assignment, they must become partners in
the firm, and can only touch the yearly profits, and must be liable to the
yearly losses, and for all the engagements of the firm. This doctrine
appears to me to be too unreasonable, and too inconvenient, to be endured."
This decree was affirmed unanimously by the Court of Errors ; and on that
occasion Mr: Justice Woodworth, in delivering the opinion of the Court,
said: "An assignment made by the party himself, under circumstances like
the present, produces the same result ; in both cases, they give rise to a
state of things altogether incompatible with the prosecution of a partnership
concern, commenced, and previously conducted by the bankrupt and his
former copartner. It is perfectly clear, that a new partner cannot be ad-
mitted without consent. This, ex vi termini, implies, thatr even consent
would be nugatory, unless the assignee elected to become a partner ; where
he does not so elect, but (as in the present case) insists on a division of the
property, the demand, according to acknowledged principles, cannot right-
fully be denied. That a rule of this kind will, in some cases, and probably
in the present, bear hard on the partners opposed to a dissolution. Is not to
be doubted. But Its Inconveniences are more than counterbalanced, by the
superior benefits arising from its application. There is another insuperable
difliculty opposed to a continuance of the partnership, and that arises froili
the character in which the respondents are placed. How can they become
partners with ]\Iarquand & Barton ? They are a corporate body, and act as
trustees for the benefit of the stockholders. The bank had no power to
become partners with the appellants ; it was not within their corporate
privileges. It will not be pretended, that in the situation Fitch was placed,
he had not a right to assign his interest, and that it passed under the assign-
ment to the respondents. I conclude, therefore, that the assignment by
Fitch, per se, dissolved the partnership. In the case of Ketcham v. Clark,
6 Johns. 144, where one of the partners had executed an assignment of all
his right in the partnership property and debts, it Is said, that ' This act was,
of itself, a termination of the partnership.' But there being no evidence of
any public notice of the dissolution, nor any special notice to the party
afterwards dealing with the firm, on that ground the partners were held liable.
As between themselves, the point appeared to be conceded." See also 3
Kent, i)d.
490 PARTNERSHIP. [CHAP. XIII.
oppressed with debt, of all his title and interest in
the property of the partnership, for the benefit of his
creditors, was deemed a dissolution of the partnership.
Item (say the Institutes), si quis ex sociis, mole dehiti
prcegravatus, bonis suis cesserit, et ideo i^t'oi^ter pidjUca
aut jwivata debita substantia ejus veneat, solvitur socie-
tas. Sed, hoc casu, si adhuc consentiant in societatem,
nova videtur incipere societas}
§ 310. The authority of one partner voluntarily to
assign a part of the partnership property in payment
of, or as security for, the debts thereof, has been
already considered, as also has been the authority of
one partner to assign the entire partnership property
for the payment of the debts due to all creditors of the
partnership.^ No one can doubt, that the former is
perfectly valid and obligatory ; and that thereby the
property is severed from, and ceases to belong to, the
partnership. If the latter be (as has been strenuously
contended) also valid, but of which nevertheless serious
doubts may be entertained, especially where the part-
nership is for a term of years, as yet unexpired, then
it must be admitted, that it will amount, by operation
of law, to a dissolution of the partnership ; for the
case then falls within the scope of the doctrine already
stated, in cases where the entire thing, constituting
the foundation and object of the partnership, is ex-
tinct.^
§ 311. The next question is as to the operation of
an involuntary assignment, or an assignment in invitum,
• Inst. 3, 26, 8; Vinn. Comm, ad Id., and ante, § 292, 293; Domat, 1,
8, 5, art. 12.
* Ante, § 101, and note; Tapley v. Butterfield, 1 Met. 515.
3 Ante, § 101, and note, and § 280, 281; Havens v. Hussey, 5 Paige,
30, 31; Hitchcock v. St. John, 1 Hofim. 511; Anderson v. Tompkins, 1
Brock. 456 ; Pearpoint v. Graham, 4 Wash. C. C. 232 ; Tapley v. Butterfield, 1
Met. 515 ; [Dana v. Lull, 17 Vt. 390.]
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 491
under judicial process and proceedings. We have
already seen,^ that a separate creditor of any one
partner may seize and sell the right, title, and interest
of that partner in the partnership goods and effects,
under a separate judgment and execution against him.
The execution may be levied upon the whole of the
tangible goods and effects of the partnership, or upon
a part thereof ; and in each case it is good to the ex-
tent of the judgment debtor's right, title, and interest
therein, as it shall ultimately appear upon the final
adjustment and settlement of the partnership concerns.^
But, as soon as the levy and sale are completed under
the execution, the purchaser of the goods or effects be-
comes, by mere operation of law, a tenant in common
thereof with the other partners ; if the levy and sale
be of a part only, then of that part ; if of the whole,
then of the entirety.^ But in each case the legal result
is the same, that is to say, it amounts to a dissolution
of the partnership to the extent of the right, title, and
interest, levied upon and sold under the execution. If
the levy is of a part of the partnership property, there
is a severance 2^^^^ tanfo^ of the partnership interest
therein ; if of the whole, then there is a severance of
the entirety.^
^ Ante, § 261-263, « jbifj,
3 Ante, § 261-263; 1 Story, Eq. Jur. § 677, 678; Moody v. Payne, 2
Johns. Ch. 548; Dutton v. Morrison, 17 Ves. 193, 206; Allen v. Wells, 22
Pick. 450.
'' Gow on P. c. 3, § 1, p. 229, 3d ed. ; 3 Kent, 59; Fox v. Hanbury,
Cowp. 445 ; Skip v. Harwood, 2 Swans. 586, note ; Moody v. Payne, 2
Johns. Ch. 548 ; [Renton v. Chaplain, 1 Stock. 62 ; ] Nicoll v. Mumford, 4
Johns. Ch. 522; Rodriguez v. HelFernan, 5 Johns. Ch. 417, 428; jHaber-
shon V. Blurton, 1 De G. & Sm. 121 ; Aspinall v. London & N. W. Railway
Co., 11 Hare, 325; See Perens v. Johnson, 3 Sm. & G. 419}; Dutton iJ.
Morrison, 17 Ves. 193, 206. — In this last case Lord Eldon said: " Another
question remains, of far more difficulty, and of as much importance, as any
that has been decided. Where a creditor takes out execution against the
492 PARTNERSHIP. [CHAP. XIII.
§ 312. The doctrine, in this view of the matter, as
presented by the common law, stands upon clear and
satisfactory grounds. If the sale is valid under the ex-
ecution, it must, of course, subrogate the purchaser to
all the rights of the partner himself in the property.
Now, if such be the legal result, the purchaser is not
bound to become a partner ; nor are the other partners
bound to admit him into the partnership. He must,
therefore, hold a common and undivided interest with
them in the property ; and this can be only by treating
it as a tenancy in common, created by operation of law.
effects of an individual concerned in a partnership, it seems to be a very
difficult thing to determine with certainty, how he is to take his execution.
The old cases, if they are to govern, go in this simple course ; that the
creditor, finding a chattel, belonging to the two, laid hold of the entirety of
it, considering it as belonging to the two ; and paying himself by the applica-
tion of one half, he took no further trouble. It is obvious, that it was very
difficult to maintain this as an equitable proceeding, if a due proceeding at
law ; that a creditor of one partner should, without any attention to the
rights of the partners themselves, take one half of a chattel belonging to
them; as if it was perfectly clear that the interest of each was an equal
moiety. On the other hand, it may be represented, that the world cannot
know what is the distinct interest of each ; and therefore it is better, that the
apparent interest of each should be considered as his actual interest. But
Courts of Equity have long held otherwise ; and long before the case of Fox
V. Hanbury, I understand this Court to have said that was not equitable ;
and to have held, as is the constant course at present, that upon an execution
against one partner, or the quasi execution in bankruptcy, no more of the
property, which the individual has, should be carried into the partnership,
than that quantum of interest which he could extract out of the concerns of
the partnership, after all the accounts of the partnership were taken, and
the effects of that partnership were reduced into a dry mass of property,
upon which no person except the partners themselves had any claim. In the
case supposed by Lord Mansfield, a bill filed, where there was an execu-
tion at law, a Court of Equity has no difficulty in managing it ; having the
means of taking the complicated accounts of the partnership, and reducing
the concern into that state, in which the property would be devisable as clear
surplus. But the Court of King's Bench has repeatedly held, with consider-
able doubt of late how the object is to be accomplished, that a creditor taking
execution can take only the interest his debtor had in the property." {An
attachment on mesne process does not dissolve a partnership. Arnold v.
Brown, 24 Pick. 89.}
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 493
"Whether it might not have been better, as an original
question, to have held at the common law, that no sep-
arate creditor should be entitled to execute his judg-
ment against the partnership property, leaving the lat-
ter exclusively liable to the joint creditors, it is too late
to inquire. Certain it is, that the doctrine has very
many practical difficulties and mischiefs attending it,
independent of the apparent wrong and injury which
may be done to the other partners by a sudden dissolu-
tion of the partnership at the instance of a third per-
son, in violation of the obligations of the partners' own
contract, that it shall endure for a limited period. It is
a strange anomaly in jurisprudence, that third persons
should be entitled to dissolve the solemn hona fide con-
tracts of partners at their own caprice and pleasure,
however ruinous may be the effects to the innocent
partners ; for the partnership may be thus dissolved in
the midst of the progress of the most successful adven-
ture, and thus irreparable losses may ensue therefrom.
However, this is not a peculiar feature of the common
law ; for it is to be found equally recognized in the
E,oman law, at least where all the effects of the partner
are sold to his creditors ; for it is said : Item, bonis a
creditorlhus venditls unius socii, distrain societatem
Laheo ait}
• D. 17, 2, 65, 1; Poth. Pand. 17, 2, n. 62; Domat, 1, 8, 5, art. 12 ; 2
Kent, 59. — No case of this sort is mentioned by Pothier. He speaks only of
the dissolution of the partnership by the failure or bankruptcy of one part-
ner; and (as it should seem) only of a sale of his effects consequent thereon.
Poth. de Soc. n. 148. See also Domat, 1, 3, 5, art. 12, note. The Code
Civil of France, art. 1865, and the Code of Louisiana (of 1825), art. 2847,
speak only of a dissolution by failure or bankruptcy. See also 5 Duver-
gier, Droit Civil Franc. § 443-445. It seems doubtful (to say the least),
whether the Roman law contemplated any sale of the effects of one partner
to be a dissolution of the partnership, except where the entirety was ordered
to be sold by judicial process at the instance of his creditors, or by a ccssio
honorum of all his effects for the benefit of his creditors. See 2 La Croix,
49 J: PARTNERSHIP. [CHAP. XIII.
§ 313. Passing from this to the next case, which
stands upon a close analogy, that of a dissolution of the
partnership by the bankruptcy or insolvency of one or
more of the partners, it may be remarked, that this nat-
urally, and, indeed, upon just reasoning, necessarily
produces this effect ; for the bankrupt partner is there-
by disabled to perform his portion of the partnership
contract, since all his property is, by operation of law,
immediately upon the declaration of his bankruptcy or
insolvency, devested out of him ; and it passes by as-
signment to the persons who are duly designated as the
assignees thereof, to dispose of the same, and to distrib-
ute the proceeds among his creditors. The assignees
are not, on the one hand, compellable to become part-
ners, nor, on the other hand, are the other partners com-
pellable to admit them into the partnership, for the
reasons already suggested under the preceding head.
But a more important, and an absolutely conclusive,
ground is, that the further continuation of the partner-
ship is utterly incompatible with the whole policy and
objects of the bankrupt and insolvent systems. These
systems contemplate an immediate sale and distribution
of the assets among the creditors ; and the assignees
have no authority whatever to enter into any further
engagements in any trade or business on account of the
creditors, or at their risk.^ Hence, the common law,
the Roman law, and the modern foreign law all concur
in the same general result, that bankruptcy or insol-
La Clef des Lois Romaines, tit. Soc. p. 585. See also Mr. Chancellor Kent's
observations in Griswold v. Waddington, 16 Johns. 491.
1 Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Coll. on P. B. 1, c. 2, § 2, p.
69-71 ; Id. B. 4, c. 1, p. 578, 579, 2d ed. ; Fox v. Hanbury, Cowp. 445; Ex
parte Smith, 5 Ves. 295; Wilson v. Greenwood, 1 Swans. 471,482,483;
Crawshay v. Collins, 15 Ves. 218, 223; Marquand v. N. Y. Manuf. Co. 17
Johns. 525; Griswold v. Waddington, 15 Johns. 57, 82; s. C. 16 Johns. 438,
491 ; 3 Kent, 38, 39. .
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 495
veiicy is, of itself/ by mere operation of law, a complete
dissolution of the partnership.^ A fortiori, the like
doctrine applies, where all the partners become bank-
rupt ; for then the whole property is devested out of all
of them.
§ 314. Another question usually arises under this
head ; and that is, from what time is the partnership
dissolved by the bankruptcy or insolvency of one or
more of the partners "? Is it from the act of bank-
ruptcy or insolvency ? Or from the judicial or other
declaration of that fact, under the commission '? Or
from the time of the assignment of the property to the
assignees ? The rule now established, at least in the
policy of the British system of bankruptcy, is, that the
dissolution takes effect, immediately upon the declara-
tion of the bankruptcy under the commission, by rela-
tion back to the time, when the act of bankruptcy was
committed ; so that from that period the bankrupt is
deemed devested of all his property and effects ; and,
by operation of law, as soon as assignees are appointed,
it is vested in them by relation from the same period.^
^ [In Massachusetts, the mere insolvency of one or both partners, mean-
ing thereby their inability to pay their debts, will not, per se, and without
any assignment or legal proceedings, operate as a dissolution of the part-
nership, although it might furnish sufficient ground for declai'ing a dis-
solution. Arnold v. Brown, 24 Pick. 89, 93.] { So Siegel v. Chidsey, 28
Penn. St. 279.}
^ D. 17, 2, 6o, 1 ; Poth. Pand. 17, 2, n. 62 ; Poth. de Soc. n. 148 ; Civil
Code of France, art. 1865; 5 Duvergier, Droit Civil Franc. § 443; Code of
Louisiana (1825), art. 2847; 2 Mor. & Carlt. Partidas, p. 773, 1. 10; 2 Bell,
Coram. B. 7, c. 2, p. 643, 5th ed. ; Vinn. ad Inst. 3, 26, 8, Coram. ; ante,
§ 309.
3 3 Kent, 58, 59, 4th ed. ; Wats, on P. c. 5, p. 302-312, 2d ed. ; Gow on
P. c. 5, § 3, p. 298, 299, 3d ed. ; Coll. on P. B. 4, c. 1, p. 583-590, 2d ed. ;
Fox V. Hanbury, Cowp. 445; Hague v. Rolleston, 4 Burr. 2174; Ex paHe
Smith, 5 Ves. 295 ; Harvey v. Crickett, 5 M. & S. 336 ; Dutton v. Morrison,
17 Ves. 193, 203, 204; Barker v. Goodair, 11 Ves. 78,83; Thoraason v.
Frere, 10 East, 418. {^y the United States Bankrupt Law, Act of March
496 PARTNERSHIP. [cHAP.
XIII.
How far, and to what intents and purposes, it suspends
the rights and authorities of the other solvent partners
over the partnership, will come under examination,
when we come to consider what are the consequences
of a dissolution.
§ 315. In the next place, as to dissolution by a pub-
lic war between the countries, of which the partners
are respectively subjects. Although this point does
not seem to have been discussed in our courts of jus-
tice until a comparatively recent period, yet it would
seem to be a necessary result of principles of public
law, w^ell established, and clearly defined. By a decla-
ration of war the respective subjects of each country
become positive enemies of each other. They can
carry on no commercial or other intercourse with each
other ; they can make no valid contracts with each
other ; they can institute no suits in the courts of either
country ; they can, properly speaking, hold no commu-
nication of an amicable nature with each other ; and
their property is mutually liable to capture and confis-
cation by the subjects of either country.^ Now it is
obvious from these considerations, that the whole ob-
jects and ends of the partnership, the application of
the joint funds, skill, labor, and enterprise of all the
partners in the common business thereof, can no longer
be attained. The conclusion, therefore, would seem to
be absolutely irresistible, that this mutual supervening
2, 1867, § 14, the assignment relates back to the commencement of the pro-
ceedings in bankruptcy, not to the act of bankruptcy.}
' Potts V. Bell, 8 T. R. 548, 561 ; The Rapid, 8 Cranch, 155, 161 ; The
Julia, 8 Cranch, 181, 194; The Hoop, 1 Rob. 196; Griswold v. Wadding-
ton, 15 Johns. 57 ; s. c. 16 Johns. 438. — In this last case all the existing
authorities upon the whole subject, foreign as well as domestic, were brought
together, and critically examined with very great learning and ability. See
also 2 Wheat. App. p. 27-37 ; 3 Kent, 62 ; Scholefield v. Eichelberger, 7
Pet. 586. {See Clemontson v. Blessig, note, 11 Exch. 135, § 9, ante.}
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 497
incapacity must, upon the very principles applied to all
analogous cases, amount to a positive dissolution of the
partnership.
§ 316. The law of nations does not even stop at the
points already stated ; but it proceeds further. The
question of enemy, or not, depends not upon the natu-
ral allegiance of the partners, but upon their domicile.
If, therefore, the partnership is established, and, as it
were, domiciled in a neutral country, and all the part-
ners reside there, it is treated as a neutral establish-
ment, and is entitled to protection accordingly.^ On
the other hand, if any one or more of the partners, in
such a case, is domiciled in an enemy country, he is
treated personally as an enemy, and his share of the
partnership property is liable -to capture and condem-
nation accordingly, notwithstanding the partnership
establishment is in the neutral country.^ What, then,
is the case, where the partnership is established, and,
as it were, domiciled in an enemy country ? The rule,
then, fully recognized as applicable to the case, is, that
the partnership is to be treated throughout as a hostile
establishment, and the whole partnership property is
liable to capture and condemnation, as enemies' prop-
erty, notwithstanding one or more of the partners may
be domiciled in a neutral country. A fortiori, if some
of the partners are domiciled in one of the hostile
countries, and the rest in the other, it is clear that the
partnership is hostile, and the partners are also person-
ally enemies.^ The just inference from all these con-
siderations seems, therefore, to be, that, in all these
» The Venus, 8 Cranch, 253 ; The Indian Chief, 3 Rob. 22 ; M'Connell
V. Hector, 3 B. & P. 113 ; Griswold v. Waddington, 15 Johns. 57 ; s. c. 16
Johns. 438.
2 The Franklin, 6 Rob. 127.
' The Vigilantia, 1 Rob. 1 ; Simpson's Case, cited in the Franklin, 6 Rob.
127 ; The Friendschaft, 4 Wheat. 105 ; The San Jose Indiano, 2 Gall. 268.
32
498 PARTNERSHIP. [CHAP. XIII.
cases, there is an utter incompatibility, created by
operation of law, between the partners, as to their
respective rights, duties, and obligations, both public
and private, and, therefore, that a dissolution must
necessarily result therefrom, independent of the will or
acts of the parties.^
* This whole subject came successively before the Supreme Court of New
York, and the Court of Errors of that State, in the case of Griswold v.
Waddington, 15 Johns. 57 ; and s. c. 16 Johns. 438. The masterly judg-
ments of Mr. Chief Justice Spencer, and Mr. Chancellor Kent, delivered on
this occasion, exhaust the whole learning and reasoning upon it ; and are,
indeed, judicial discussions of rare and exquisite ability, research, force,
accuracy, and comprehensiveness. — The ultimate decision was, that the
partnership was dissolved, by the occurrence of war between the countries.
The following extract, from the opinion of Mr. Chief Justice Spencer,
presents a clear though brief review of the principle. He said : " Upon
the fullest reflection which I have been able to give to the subject, my
opinion is, that the declaration of war between the United States and
Great Britain produced a suspension during the war, or, ipso facto, a dis-
solution of the partnership previously existing between the defendants, so
that the one is not responsible upon the contract, express or implied, of the
other. It will be perceived, that this proposition assumes the fact, that the
partnership between the defendants had not become dissolved by the efflux
of time, or the acts of either of the partners, although this point is, in itself,
very questionable. The better conclusion from the evidence is, that the co-
partnership expired by its own limitation during the war ; and the existence
of the war would, at all events, dispense with the public notice, which is, in
general, necessary to the valid dissolution of a partnership. The case dis-
closes, that the firm of Henry Waddington & Co. consisted of Henry and
Joshua Waddington ; that Henry is a British subject, resident, before and
during the war, in London, conducting the partnership concerns there,
whilst the defendant was resident here. The negotiations, which gave rise
to the present suit, took place in England, and exclusively with Henry
Waddington, during the late war between this country and Great Britain.
It was admitted on the argument, and so the fact undoubtedly is, that the
proposition I have advanced, is neither supported nor denied by any judicial
decisions or elementary writer of the common law ; but, if I mistake not,
it is supported by the strongest reasons, and by necessary analogy with
adjudged cases. The first inquiry is, what are the objects and ends of part-
nerships? They are entered into with a view, that with the joint funds,
skill, and labor, of the several partners, the interests of the concern
may be advanced and promoted. There may be, and frequently are,
different inducements influencing each partner ; one may have more
capital and credit ; another may have more skill, activity, and experience.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 499
§ 317. In the next and last place, as to a dissolution
by the death of one of the partners. There is no
The one may choose to be a dormant and inert partner, furnishing an
equivalent for the services and skill of the other, and leaving the business
entirely to his control and management. But unexplained as this partner-
ship is, we must understand it to be an union with a view to the employ-
ment of the joint capital, labor, and skill of both the partners, for the
purposes of internal and external commerce between this country and
Great Britain. That the object of the partnership embraced both these
objects of internal and external trade, would seem to be unquestionable,
from the local position of the partners. That the death, insanity, or bank-
ruptcy of one of the pai-tners operates as a dissolution, was not questioned
in the argument ; and a respectable elementary wi'iter, Mr. Watson, is of
opinion, that the marriage of a ftme sole partner would produce the same
consequence. The cases of Pearce v. Chamberlain, 2 Ves. Sr. 33, and
Sayer v. Bennet, Wats, on P. 382, and several other cases cited by him, all
go to establish the general principle, that death, insanity, and bankruptcy,
work a dissolution of partnerships ; and they proceed on the principle,
that the other partners are not bound to admit the representatives of a
deceased or insane partner into the concern, the confidence having been
originally placed in the personal skill and assistance of those no longer
able to afford it. Let these principles be applied to the present case, and
it would seem that the same result is inevitable. In what situation did
the war put the defendants, as regarded each other? Most undeniably,
the two nations, and all their citizens, or subjects, became enemies of each
other, and the consequence of this hostility was, that all intercourse and
communication between them became unlawful. This is not only the
acknowledged principle of the law of nations, but is also a part of the
municipal jurisprudence of every country. I need not cite cases in
support of a position, which has so repeatedly been recognized in the
English Courts, and in our own, possessing, as well admiralty, as common
law jurisdiction. Another consequence of the war was, that the shipments
made by each of the partners would be liable to capture and condemna-
tion by the cruisers of the government of the other. And another very
serious evil attended them ; no debts, contracted in the partnership name,
could be recovered in the courts of either nation ; they not having, in the
language of the law, a jJersoiia standi injudicio, whilst they were amenable
to suits in the Courts of both nations. The Hoop, 1 Rob. 196, 201. It is
true, the same disability to sue for debts due the firm, antecedent to the war,
would exist. This, however, does not weaken the objection ; it remains
still an important item, in considering whether a partnership exists, when
the new debts created are to be liable to the same disability. It appears,
that Joshua Waddington is a citizen of the United States ; and it has
been already mentioned, that Henry Waddington is a British born subject.
They owed different allegiances ; and it became part of their duty to lend
500 PARTNERSHIP. [CHAP. XIII.
doubt, thati by the principles of the common law, the
death of any one partner will operate as a dissolution
of the partnership, however numerous the association
may be, not only as to the deceased partner, but as
between all the survivors.^ The reason is, that upon
all tlieir aid in a vigorous prosecution of the war, the one to the United
States, and the other to Great Britain. And it appears to me, that it
would not comport with policy or morality, that the law should imperiously
continue a connection, when, by its very continuance, it would afford
such strong inducements to a violation of that fidelity which each owes
to his government. Again ; all communication and intercourse being ren-
dered unlawful, and it being a well-established principle, that either part-
ner may, by his own act, dissolve a partnership, unless restrained to con-
tinue it for a definite period by compact, in what manner could such intentions
be manifested during the war ? It might, indeed, be made known to the
public of one of the countries, but it could not be notified to the public of
the hostile country ; and thus, unless the war produced a dissolution, he
would be responsible, notwithstanding he had the desire to dissolve the con-
nection, merely from inability to make known that determination ; an ina-
bility produced by events utterly uncontrollable. When the objects and
intentions of an union of two or more individuals to prosecute commercial
business are considered; when it is seen, that an event has taken place,
without their fault, and beyond their control, which renders their respect-
ive nations, and, along with them, the defendants themselves, enemies of
each other ; that all communication and intercourse have become unlawful ;
that they can no longer co-operate in the conduct of their common busi-
ness, by affording each other advice, and are kept hoodwinked as to the
conduct of each other ; that the trade itself in which they were engaged,
has ceased to exist ; that if they enter into any contracts, they are incapa-
ble of enforcing their performance by an appeal to the courts ; that their
allegiance leads them to support opposite and conflicting interests ; I am
compelled to say, that the law cannot be so unjust, as to pronounce that
a partnership so circumstanced, when all its objects and ends are pros-
trated, shall continue ; and, with the clearest conviction upon my mind, and
in analogy to the cases to which reference has been made, I have come
to the conclusion that the partnership between the defendants was, at least,
suspended, and I incline to the opinion that it was ipso facto dissolved by
the war, and consequently, that the defendant, J. W., is not liable to this ac-
tion." Mr. Chancellor Kent's opinion is far more elaborate, and sifts and
examines all the authorities, as well as the reasoning in support of them. It
is difficult to abridge it without diminishing its cogency. He holds the war
to be a positive dissolution.
' Coll. on P. B. 1, c. 2, § 2, p. 72, 73, 2d ed. ; Wats, on P. c. 6, p. 358-
3G0, 2d ed. ; Gow on P. c. 5, § 1, p. 219, 220, 3d ed. ; Crawshay v. Maule, 1
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 501
the theory of this branch of the law, the personal
qualities, skill, diligence, and superintendence of each
one of the partners, are justly presumed to enter into
and to constitute a material consideration with all the
other partners for engaging in the partnership. In
short, it is a mutual and reciprocal engagement of each
partner with all the others, that the partnership shall
be carried on with the joint aid and co-operation of all ;
and, therefore, the survivors ought not to be held bound
to continue the connection without a new consent,
when the abilities, skill, and character of the deceased
partner either were, or at least might have been, a
strong inducement to the original formation of the
partnership.^
§ 318. This is precisely the reason given in the
Roman law for the promulgation and support of the
like doctrine, not only as working a dissolution as to
the deceased partner, but as between the survivors.
Morte unius \socvi\ societas dissolvihcr, etsi consensu
omnium co'ita sit, plures vero siqjersint ; nisi in coeunda
societate aliter convenerit.^ And again in the Institutes
it is said : Solvitur adhuc societas etiam morte socii ;
quia qui societatem cojitrahii, certain j^ersonam sihi
eligit. Sed et si consensu plurium societas contracta
Swans. 495, 509 ; Gillespie v. Hamilton, 3 Madd. 251 ; Vulliaiuy v. Noble,
3 Mer. 593, 614 ; Scholefield v. Eichelberger, 7 Pet. 586. {But if by the arti-
cles of an unincorporated trading association, it appears that it was designed
to consist of many members, who might from time to time cease to be inter-
ested in the concern by voluntary withdrawal or death, and that the same
business should be continued by those who should remain, and by such as
might be added to their number, under the terms of the articles, the death
of one of them does not relieve others from liability to contribute for debts
subsequently contracted, without their consent or knowledge. Tyrrell v.
"Washburn, 6 All. 466. }
' 3 Kent, 55 ; Wats, on P. c. 6, p. 358, 359, 2d ed. ; Coll. on P. B. 1, c.
2, § 2, p. 72, 73, 2d ed. ; Pearce t'. Chamberlain, 2 Ves. Sr. 33 ; Gow on P.
c. 5, § 1, p. 219, 220, 3d ed. ; Scholefield v. Eichelberger, 7 Pet. 586, 594.
"■ D. 17, 2, ijo, 9 ; Poth. de Soc. n. m.
502 PARTNERSHIP. [CHAP. XIII.
sit, morte unius socii solvifur, etsi i^lures super sint ; nisi
in coeunda societate aliter convenerit} So strictly,
indeed, was this doctrine held, that (as we have seen)
even an express agreement, that the partnership should
be prolonged beyond the life of a partner, and his heir
or other representative should be admitted into the
same, was held in the Roman law to be invalid, as
defeating an essential ingredient in partnership, the
right of delectus personce.^ The Digest says : Adeo
morte socii solmtiir societas, ut nee ah initio 2^(^icisci
^yossimus, ut heres etiam succedat societati.^ Pothier
has still more fully expounded the reasons of the doc-
trine, although he admits at the same time, that, so far
as it respects the succession of the heir, or personal
representative, it is not entirely decisive, and has more
of subtilty than of solidity in it.^ There is, indeed, an
> Inst. 3, 26, 5.
^ Ante, § 5 ; Crawshay v. Maule, 1 Swans. 495, 509, tbe Reporter's note
(a) ; Gow on P. c. 5, § 1, p. 220, 3d ed. ; Domat, 1, 8, 5, art. 12.
3 D. 17. 2, 59 ; Poth. Pand. 17, 2, n. 56.
■* Poth. de Soc. n. 141-146. — Vinnius also fully explains the doctrine:
"Etiam morte unius socii societas solvitur. Et hoc genus distrahendae
obligationis societatis proprium est, recedens ab illo communi, quo placet,
heredem in eandem obligationem et idem jus, quod defuncti fuit, succedere.
Sed admissum in societate ex natura hujus contractus ; atque eadem ratione,
qua in mandato, quoque placet morte mandatarii solvi mandatum ; nimi-
rum quia in societate non tantum rei familiaris, ut fere in aliis contractibus,
verum insuper etiam fidei et industrite, qua; ad heredes non transeunt, con-
templatio versatur. Nam, ut in textu dicitur, qui societatem contraJiit,
certain personam sibi eligit, cujus scilicet fidem, industriam, res, et facultates
sequatur. Usque adeo autem, morte socii dirimi societatem placet, ut nee
ab initio pacisci possimus, ut heres in societatem succedat; quasi et tale
pactum naturas societatis repugnet, ut quis invitus socius efficiatur, cum
non vult. Exceptor tamen sunt societates vectigalium, in quibus hujusmodi
conventiones ob publicam utilitatem admissEe ; manetque hoc casu societas
etiam post mortem, nisi forte is mortuus sit, cujus contemplatione potis-
simum societas coita, aut sine quo ea administrari non possit." Vinn. ad
Inst. 3, 26, 5, p. 699, ed. 1726. Pothier says (n. 146) : "La raison est,
que les qualit^s personnelles de chacun des associes entrent en consideration
dans le contrat de societe. Je ne dois done pas etre oblige, lorsque Pun
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 503
exception to this doctrine in the Roman law, founded
upon public policy, and that is, that the death of one
partner does not generally dissolve the partnership, in
cases where the partnership is by the farmers of the
public revenue.^ In societate vedlgalluin nihilominus
manet societas, et post mortem alicujus ; seel ita de7num,
si pars defuncti ad personam heredis ejus adscripta sit,
lit heredi qnoque conferri oporteat ; quod ipsum ex
causa cest'wiandum est.^ But then, again, to this there
is, or may be, an exception. Quid enhn, si is morttms
sit, p)rop)ter cujus op)eram 7naxime societas co'ita sit?
Aut sine quo societas administrari non p)ossit f ^
§ 319. iVnd, here, the question may arise as to the
time from which the dissolution, by the death of any
partner, takes effect ; w^hether it be from the occur-
rence of that event, or from the period when the other
partners have notice thereof. At the common law,
the doctrine seems clearly established, that it takes
effect in respect, as well to the other partners, as to
third persons, from the time of the death, without any
consideration, whether they have notice thereof, or
not.^ The Roman law, on the other hand, pursued a
de mes associes est mort, a demeurer en societe avec les autres, parce
qu'il se pent iaire, que ce ne soit que par la consideration des qualites
personnelles de celui, qui est mort, que j'ai voulu contracter la societe. Ce
principe soufFre exception a Fegard des societes pour la ferme des revenus
publics, lesquelles subsistent entre les survivans, lorsque I'un des associes
vient k mourir ; hoc ita in pnvatis societatibus in societate vectigalium
manet societas et post mortem alicujus.''''
• D. 17, 2, 59 ; Poth. Pand. 17, 2, n. 57 ; Poth. de Soc. n. 146.
"" D. 17, 2, 59, and 17, 2, 63, 8; Poth. Pand. 17, 2, n. 57.
3 Ibid. ; Vinn. ad Inst. 3, 26, 5, p. 699, ed. 1726.
* Vulliamy v. Noble, 3 Mer. 693, 614; Gow on P. c. 5, § 1, p. 121, 3d
ed. ; Coll. on P. B. 1, c. 2, § 2, p. 71, 74; Id. B. 3, c. 3, § 4, p. 419,
2d ed. ; 3 Kent, 56 ; 2 Bell, Comm. B. 7, c. 2, p. 639, 5th ed. ; |§ 336, 343 ;
Marlett v. Jackman, 3 All. 287. — In this case Bigelow, C. J., says : " It is
certainly somewhat remarkable that no case can be found either in this
country or in England, in which the question has arisen and been adjudi-
504 PARTNERSHIP. [cHAP. XTII.
different course ; and as between the partners them-
selves adopted the same rule, which it applied to cases
cated, whether, in case a copartnership is dissolved by death, the surviving
partners are bound to give notice of such dissolution, in order to avoid a
liability occasioned by the subsecpent misuse of the copartnership name by
one of the firm. The adjudged cases have gone no further than to hold
that neither the estate of the deceased partner, nor his heirs or personal
representatives, can be held on a contract entered into in the name of the firm
subsequently to his death, although no notice of the dissolution of the firm
has been given. VuUiamy v. Noble, 3 Mer. 593, 614 ; Webster i\ Webster,
3 Swans. 490, and note ; Caldwell v. Stileman, 1 Rawle, 212 ; Washburn v.
Goodman, 17 Pick. 519, 526. Two text writers, however, of great learning
and authority, have laid down the rule, that, where a copartnership is dis-
solved by the death of one of the copartners, no notice of the dissolution
is necessary, and that the surviving members are not bound by any new con-
tract entered into by one of the firm in the copartnership name after such
dissolution, although it is made with a person who had previously dealt with
the firm, and had no notice or knowledge that it was terminated by the
death of one of the members. 3 Kent, 63, 67; Story on P. § 319, 336,
339. The same doctrine is stated by the American editor of Coll. on P.
§ 120, 538, 3d Am. ed.
On what principle, then, can it be maintained that the law fastens
on persons an obligation to answer for contracts entered into in the
name of a principal who has ceased to exist, by one whose authority
to act is absolutely tei-minated? The only answer that can be made to
this question by those who seek to sustain the obligation of such contracts
on the surviving members of the firm is, that a duty is devolved on them
to give notice of its dissolution by the death of one of their associates, and that
an omission to give such notice renders them liable in the same manner as
if the copartnership had not ceased to exist. This is doubtless the rule in
cases where the dissolution is effected by the voluntary act of the parties,
or results from any state of facts not public or notorious in their nature,
and which are more peculiarly within the knowledge of the members of the
firm. But it rests on the principle, that the copartners are guilty of negli-
gence in leaving the world in ignorance of such facts, whicli third persons
cannot be supposed to have the means of ascertaining, and allowing them to
infer that the copartnership continues, and to put faith and confidence in
the name of the firm in consequence of such belief. 3 Kent, 66 ; Story on
P. § 160. In determining on which of two parties a burden or a loss is
to rest, the law always seeks to ascertain whether either has been guilty of
any neglect or omission, whicli has misled the confidence or operated to
deceive the other, and requires that the responsibility shall be jilaced on the
one who has failed to do that which was necessary in the exercise of due
diligence or fair dealing. But this salutary principle is not applicable to
the case of a dissolution of a copartnership by the death of one of its mem-
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 505
of agency or mandate ; that is, the partnership is not
dissolved by the death of any partner, until the other
bers. The cause of such a termination of the copartnership is not the
voluntary act of the members. It does not result from any private trans-
action between them, nor from any occurrence or fact peculiarly within the
knowledge of the surviving members of the firm. On the contrary, the death
of a copartner may often occur under circumstances in which the knowledge
of the event may not come to his associates for a long period of time.
He may have been lost at sea, or have died in a distant land. In such a
case, if the copartnership is held to continue as to the surviving copartners
until notice of the death is given by them, it is obvious that they might be
held liable on conti'acts entered into by one of their number long after the
copartnership was dissolved among themselves by operation of law : after
the estate and effects and personal credit of the deceased copartner had
been withdrawn, and the power and authority of any of the firm to bind
his associates had been revoked. And this, too, without any neglect or
omission which could be imputed to them, and when they were in the
position of innocent parties, who had done no act to mislead or deceive
others, and had not ever made the contract on which they are to be held
liable.
" To parties thus situated, the more just and reasonable i-ule would seem
to be applicable, that where two parties stand toward each other in cequali
jure, and neither has been guilty of any negligence or want of good faith,
their respective rights must be settled by the application of the strict rule
of law, without reference to any supposed equities arising from the occur-
rence of an event, which neither party anticipated or could prevent. Cer-
tain it is, that the reason of the rule which requires, in cases of the dissolution
of a firm caused by the voluntary act of the parties, or by circumstances
which would necessarily come within the knowledge of the copartners, but
might be unknown to third persons, that notice of it should be given, in
order to relieve the members from future responsibility, does not apply where
the copartnership is terminated by death. Nor can it make any difference as to
this lialjility of the survivors, that they knew of the death of their copartner,
and omitted to give notice of it to the person with whom the new contract
was made. As the fact of death was not in its nature private or confined
within the knowledge of the members of the firm, the presumption is, that
third persons also had notice of it. Therefore the liability of survivors
upon a new contract, not entered into by themselves, but by one of their
associates without their knowledge or assent in the name of the firm, cannot
be made to dejjend on the question whether they had previous notice of the
death. They ought not to be held liable for omitting to give notice of that
which others are supposed to know. And although the member of the firm
who actually enters into a contract may be responsible, as upon a contract
made by himself individually, or on the ground that by making it in the
name of the firm after its dissolution, he by implication represented a fact
506 PARTNERSHIP. [cHAP. XIII.
partners have due notice thereof. Quod si, integris
omnibus manentihus, alter decesserit, deinde tunc sequatiir
res, de qua societatem co'ierunt, tunc eadem distinctione
utemur, qua in mandato ; id, si quidem ig?iota fuerit
mors alteiHus, valeat societas ; si nota, non valeat}
This also seems the doctrine of the French law, as laid
down by Pothier.^
to be true which he knew to be false, or which he did not know to be true,
and thereby caused loss or injury to an innocent third party, there is no
good reason for holding the other copartners liable, who have remained
passive, and done no act by which third parties have been deceived or
misled, or induced to change their position, or to part with their prop-
erty.
" The rule of the civil law which was referred to by the counsel for the
plaintiff, is essentially different from that of the common law. The effect of
the death of a principal under the civil law is not to revoke the authority of the
agent. He can bind tlie estate of his deceased principal until notice of
the death is given. Following out this analogy in cases of the death of a
copartner, the rule of the civil law is, that the heirs of the deceased co-
partner are liable on contracts made in the name of the firm by the sui-viving
copartners, if they had no knowledge of the death of their associate, or if
the persons with whom they dealt were ignorant of the dissolution. Poth.
de Soc. § 156, 157. It is not necessary in the present case to deter-
mine whether a surviving copartner, who enters into a contract in the name
of the firm after its dissolution by death, can be held liable in any form to
the person who in good faith, and in ignorance of the fact that the copart-
nership is at an end, has acted and dealt on the credit of the firm. That is
not the question which was raised at the trial. But we do decide, for the
reasons we have given, that a surviving copartner cannot be held responsible
on contracts made without his assent or knowledge by another copartner
after the firm has been dissolved by the death of one of its members, al-
though no notice of its dissolution has been given to the person with whom
the contract was made." But see Bank of N. Y. v. Vanderhorst, 32 N. Y.
653.}
' D. 17, 2, 65, 10; Poth. Pand. 17, 2, n. 58; Story on Bailm. § 203-
205; Story on Ag. § 488-500; Domat, 1, 8, 6, art. 5.
^ Poth. de Soc. n. 156, 157. — It is a curious coincidence, that the Con-
solato del Mare, in treating of persons who engage to build a ship together,
treats death, before the building is commenced, as a dissolution of the con-
tract ; and gives as one reason, not as the sole reason, that the day that any
one dies, from that moment every partnership in which he is engaged is
dissolved, because a dead man cannot be a partner. See Consolato del
Mare, c. 4 [49] ; 2 Pardessus, Col. de Lois Mar. 51, 52.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 507
§ 319 a. But, although, as we have seen, a dissokition
of the partnership takes place by law upon the death
of any one of the partners, this proposition must be
understood with the limitation, that, by the articles of
copartnership or other agreement between the part-
ners, it is not otherwise stipulated by the parties. For
it is entirely competent for the parties to vary this gen-
eral result of law by an express agreement ; and if
such an agreement exists, it will depend upon the par-
ticular terms thereof, to what extent the estate of a
deceased partner may be liable for debts contracted on
behalf of the partnership after his death, whether his
estate shall be generally liable for all the debts, or
only to the extent of the property embarked and left
in the partnership to be employed by the survivors.^
The like questions may sometimes arise in cases of
testators, who direct the partnership to be continued
after their death, if assented to by the surviving part-
ners. A testator may so direct the continuance of the
partnership that his whole estate shall be liable for the
postmortuary debts, or only to the amount of his act-
ual interest in the partnership debts at his decease ;
and this sometimes becomes a question of great nicety
in the construction of his words.^ Nothing, however,
but the clearest and most unambiguous language, show-
ing in the most positive manner an intention on the
part of the testator to render his general assets liable
for debts contracted after his death, will justify a
Court in extending the liability of his estate beyond
the actual fund employed therein at the time of his
death, xlnd this rule obtains on account of the ex-
^ Burwell v. Mandeville's Ex'r, 2 How. 560, and the cases there cited.
^ Burwell v. Mandeville's Ex'r, 2 How. 560 ; Ex jjarte Garland, 10 Ves.
110; Ex parte Richardson, 3 Madd. 188, 157; Thompson v. Andrews, 1
Myl. «fe K. 116 ; Pitldn v. Titkin, 7 Conn. 307. {See § 201 a. ]
508 PARTNERSHIP. [CHAP. XIII.
ceeding inconvenience and difficulty which would other-
wise arise in paying off legacies and distributing the
surplus of the property. Thus, where A. died, while
in partnership with B. ; and in his will, made during
his partnership, he made sundry bequests of his per-
sonal and real estate to different persons, and added,
"And if my personal property should not cover the en-
tire amount of legacies I have or may give, my executors
will dispose of so much of my real estate as will fully
pay the same ; " and in a codicil to his will, made also
during the partnership, he said : "It is my will, that my
interest in the copartnership subsisting between Daniel
Cawood and myself, under the firm, &c., shall be con-
tinued therein until the expiration of the term limited
by the articles between us. The business to be contin-
ued by the said Daniel Cawood, and the profit or loss
to be distributed in the manner the said articles provide."
But before the time limited for the partnership expired,
Cawood, who carried on the business, having failed, a
bill was brought against him and the executors of A. by
a creditor of the firm, upon debts contracted with him
by Cawood, on account of the firm after the death of A.
It was held, that the general assets of the testator were
not bound for the debts contracted after his death, by
Cawood, on behalf of the partnership, but that the
rights of any creditor in respect to such debts were
exclusively restricted to the funds actually embarked
by him in the trade, and to the personal responsibility
of Cawood himself.^ So, also, where the testator
directed by his will that "all his interest and concern
in the hat-manufacturing business, &c., as then conduct-
ed under said firm, should be continued to operate in
the same connection for the term of four years after his
' Biirwull V. Mandeville's Ex'r, 2 How. 560.
CHAP. XIII.] DISSOLUTION OF PARTNERSHIP. 509
decease ; " it was held, that the general assets of the
testator were not liable to the claims of any creditors of
the firm, who became such after the testator's death,
and that such creditors had no lien on the estate in the
hands of the devisees under the will, although they
might eventually participate in the profit of the trade. ^
' Pitkin V. Pitkin, 7 Conn. 307. See, also, Ex parte Garland, lOVes.
110, and Ex parte Richardson, 3 Madd. 138.
510 PARTNERSHIP. [CHAP. XIV.
CHAPTER XIV.
EFFECTS AND CONSEQUENCES OF A DISSOLUTION.
[§ 320. Rights of partners on a dissolution.
321. (1.) Voluntary dissolution.
322. Dissolution terminates the powers of partners.
323. In England declarations of one partner after dissolution may bind
the firm.
324. Difference of opinion in America.
324 a. Such declarations not binding in case of dissolution by death.
324 &. Pleading the Statute of Limitations after the death of a partner.
325. Powers remaining after dissolution.
326-328. Authority to pay and to collect debts.
329. Misconduct of a partner in winding up.
330. Appointment of a receiver.
331. Partner cannot act for his own benefit in winding up.
332,333. French law.
334. Effect of dissolution on third persons.
335. French law.
336. Notice of a dissolution by operation of law unnecessary.
337. (2.) Dissolution by bankruptcy.
338. Joinder of assignees in actions by or against the partnership.
339-341. Bankrupt partner loses all his powers. Powers of the solvent
partners.
342. (3.) Dissolution by death.
343. Surviving partners cannot continue the partnership.
344. But may wind it up.
345. Roman law.
346. Ownership of property in possession and of choses in action.
347. Equity will enforce a sale and settlement.
348. Accounts.
348 a. Advances only items in account.
349. Mode of taking accounts.
350. Sale of partnership property on dissolution.
351. Of taking property at a valuation.
352. Roman law.
353. 354. French law.
355. Superiority of the rule in equity.
356. (4.) Dissolution by decree.}
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 511
§ 320. Having ascertained the various causes, which
either positively, ipso facto, produce a dissolution of the
partnership, or may justify an application therefor to a
Court of Equity, let us now proceed to the considera-
tion of the effects and consequences of an actual dis-
solution, as between the partners themselves, and also
as between them and third persons. And first, as be-
tween the partners themselves. Although these effects
and consequences are in all cases of dissolution of
partnership, however occasioned, in many respects gov-
erned by precisely the same rules and principles, and
affected by the same general considerations ; yet, as
they are, at the same time, in particular cases, liable to
be variously modified and affected by peculiar circum-
stances attendant upon them, it will here be proper, if
not absolutely indispensable, to a full and accurate view
of all the relations growing out of the subject, to ex-
amine it under various heads. (1.) Dissolution by the
mere voluntary stipulations or acts of the parties inie?'
vivos. (2.) Dissolution by bankruptcy. (3.) Dissolu-
tion by death. (4.) Dissolution by the decree of a Court
of Equity. In each of these cases, it may be necessary
to examine the effects and consequences as between the
partners themselves, and also as between them and third
persons.
§ 321. In the first place, then, as to a dissolution by
the voluntary acts or stipulations of the parties iriter
vivos. This may arise in various w^ays ; as by the re-
tirement of one partner from the partnership, or the
admission of a new partner into the partnership ; or
by the voluntary separation of all the partners, and
their final relinquishment of the whole business thereof.
The former is a virtual destruction of the old partner-
ship, by the substitution of a new one among the part-
ners remaining in, or those coming into the firm ; the
512 PARTNERSHIP. [CHAP. XIV.
latter is a total destruction or extinguishment thereof.
The same result will arise (as we have seen), where
the partnership is dissolved by the mere efflux of time,
or by the voluntary change of the state or condition
of one or more of the parties, or by an assignment of
all the rights and interests of one or more of the part-
ners therein.^
§ 322. But in whatever manner the partnership is
actually ended, there are certam efiects and conse-
quences of its determination, which necessarily result
from it as between themselves, and will equally affect
their transactions with third persons, where the latter
have notice of the dissolution, or where, as in cases of
death and bankruptcy, notice is not by law required.
In the first place, as between the partners themselves,
the dissolution of the partnership puts an end to the
joint powers and authorities of all the partners, any
further to employ the property, or funds, or credit of
the partnership in the business or trade thereof, sub-
ject to the exceptions hereinafter stated. None of the
partners can create any new contracts or obligations
binding upon the partnership ; none of them can buy,
or sell, or pledge goods on account thereof; none of
them can indorse, or transfer the partnership securities
to third persons,^ or in any other way make their acts
the acts of the partnership. In short, none of them
can do any act, or make any disposition of the partner-
ship property or funds, in any manner inconsistent with
' Ante, § 278, 280, 303, 304, 306, 307.
2 [Fellows V. Wyman, 33 N. H. 351] ; {§ 328, 344 and notes ; LInd. on
P. 329. A bill of exchange drawn by a partnership and sent to an agent
for sale, but sold by the agent after dissolution to a purchaser having notice
of the dissolution, does not bind the firm. Robb v. Mudge, 14 Gray, 534.
In Parker v. Macomber, 18 Pick. 505, it was held that a partner authorized
to settle the partnership concerns might receive, in payment of a debt due to
the firm, a note payable to bearer and might transfer the same to a third
person.}
CHAP. XIY.] DISSOLUTION RIGHTS OF PARTNERS. 513
the primary duty, now incumbent upon all of them, of
winding up the whole concerns of the partnership.^
» National Bank v. Norton, 1 Hill, (N. Y.) 572; [Palmer y. Dodge,
4 Ohio St. 21] ; Gow on P. c. 5, § 2, p. 230, 240, 3d ed. ; Id. p. 251, 252 ; Ex
parte Williams, 11 Ves. 3, 5 ; Peacock v. Peacock, 16 Ves. 49,57 ; Wilson v.
Greenwood, 1 Swans. 471, 480 ; Crawshay v. Maule, 1 Swans. 495, 506 ; Whit-
man V. Leonard, 3 Pick. 177 ; Coll. on P. B. 1, c. 2, § 3, p. 75, 2d ed. ; Id. B.
2, c. 2, § 1, p. 130 ; 3 Kent, 03, 64 ; 2 Bell, Comm. B. 7, c. 2, p. 643, 644, 5th
ed. ; Kilgour v. Finlyson, 1 H. Bl. 155; Brisban v. Boyd, 4 Paige, 17;
[Geortner v. Tnistees of Canajoharie, 2 Barb. 625.] The remarks of Lord
Eldon on this subject, in Ci'awshay v. Collins, 15 Ves. 218, 226, present this
whole doctrine in a strong and just light. "Partnerships are regulated,"
said he, " either by the express contract, or by the contract, implied by law,
from the relation of the parties. The duties and obligations arising from
that relation, are regulated, as far as they are touched, by the expi-ess con-
tract ; if it does not reach all those duties and obligations, they are implied,
and enforced by the law. In the instance of a partnership without articles,
the respective proportions of capital contributed by the partners and the
trade being carried on either for a certain period, or the connection dissolv-
able at pleasure, the time being expired, or, in the other case, notice to de-
termine being given, it cannot be contended, that, if the remaining part-
ners choose to carry on the trade, they can consider the whole property as
their own, to be taken at such valuation as they think proper to put upon it.
That is not the law. The obligation implied among partners is, that they
are to use the joint property for the benefit of all, whose property it is.
Many complicated cases may arise. There may be a partnership, where,
whether the parties have agreed for the determination of it at a particular
period, or not, engagements must, from the nature of it, be contracted,
which cannot be fulfilled during the existence of the partnership ; and the
consequence is, that for the purpose of making good those engagements
•with third persons, it must continue ; and then, instead of being, as it was,
a general partnership, it is a general partnership determined, except as it
still subsists for the purpose only of winding up the concerns. Another
mode of determination is, not by effluxion of time, but by the death of one
partner; in which case the law says, that the property survives to the others.
It survives as to the legal title in many cases ; but not as to the beneficial
interest. The question then is, .whether the surviving partners, instead of
settling the accounts, and agreeing with the executor as to the terms, upon
which his beneficial interest in the stock is still to be continued, subject still
to the possible loss, can take the whole property, do what they please, and
compel the executor to take the calculated value. That cannot be without
a conti'act for it with the testator. The executor has a right to liave the
value ascertained, in the way in which it can be best ascertained, by sale. If
the implied obligation is, that partners are to use the property for the bene-
fit of those whose property it is, where is the hardship? ? I concur, therelbre,
33
514 PARTNERSHIP. [cHAP. XIV.
§ 323. And here the consideration natiu'ally arises
(which has been akeady touched in another place^),
whether (since it is incompetent to any of the partners,
after a dissohition, by any new acts, duties, or obhga-
tion, to bind the partnership) any acknowledgments,
or declarations, or statements, subsequently made by
any one of the partners, respecting the real or supposed
with the judgment of Lord Rosslyn upon that point, in the case of Ham-
mond V. Douglas ; though I agree with the doubt, expressed by Sir Samuel
Romilly, upon the other point there determined, that the good-will survives.
If the surviving partners think proper to make that, which is in equity the
joint propeiiy of the deceased and them, the foundation and plant of in-
creased profit, if they do not think proper to settle with the executor, and
put an end to the concern, they must be imderstood to proceed upon the
principle which regulated the property before the death of their partner."
{One partner, after dissolution, cannot give a note in the firm name for a
debt due from the firm. Lockwood v. Comstock, 4 McLean, 383 ; Perren v.
Keene, 19 Me. 355; Parker v. Macomber, 18 Pick. 505; Haven v. Goodel,
Disney, 26 ; Chase v. Kendall, 6 Ind. 304 ; Conklin v. Ogborn, 7 Ind. 553 ;
Fowler v. Richardson, 3 Sneed, 508 ; Bower i\ Douglass, 25 Ga. 714 ; Cun-
ningham V. Bragg, 37 Ala. 436 ; White v. Tudor, 24 Tex. 639. Nor re-
new a partnership} note. Lumberman's Bank v. Pratt, 51 Me. 563 ; Lusk v.
Smith, 8 Barb. 570 ; Hurst v. Hill, 8 Md. 399 ; Parker v. Cousins, 2 Gratt.
372 ; Palmer V. Dodge, 4 Ohio St. 21 ; Lange v. Kennedy, 20 Wis. 279 ; Van
Valkenburgh v. Bradley, 14 Iowa, 108, overruling Kemp v. Coffin, 3 Greene,
190. Nor accept a bill. Tombeckbee Bank v. Dumell, 5 Mason, 56. See
post, § 344 ; Robb v. Mudge, 14 Gray, 534. But one partner, after dissolu-
tion, may waive demand and notice. Darling v. March, 22 Me. 184. And
one partner, after dissolution, may indorse the firm note, payable to himself,
given before dissolution. Temple v. Seaver, 11 Cush. 314. If the part-
ners on dissolution authorize the issuing and negotiation of notes in the
name of the old firm, they will be bound. See § 160, note and cases there
cited. In Pennsylvania it has been held that one partner, after dissolution,
has authority to give notes in the firm name for partnership debts. Robinson
V.Taylor, 4 Penn. St. 242. But this doctrine seems peculiar to that State.
See Houser v. Irvine, 3 W. & S. 345 ; Estate of Davis & Desauque, 5 Whart.
530 ; Heberton v. Jepherson, 10 Penn. St. 124. In Lewis v. Reilly, 1 Q. B.
349, it was held that a bill drawn by two partners, payable to their own or-
der, might be indorsed after dissolution in the name of both by one partner
to a person who had notice of the dissolution. But the correctness of this de-
cision has been much questioned. See Lind. on P. 330, 334; Smith's Merc.
Law, 88, 3d Am. ed.}
' Ante, § 107 ; Tassey v. Church, 4 Watts & S. 141.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 515
transactions, or duties, or obligations of the partnership,
during the continuance thereof, are binding as evidence
or otherwise upon the other partners, who have not as-
sented thereto.^ It seems difficult upon principle to
perceive how they can be, any more than the declara-
tions, or acts, or acknowledgments of any other agent
of the partnership would be, after his agency has ceased.^
In the latter case, they are constantly held inadmissible
by the Courts of common law, upon grounds which
seem absolutely irresistible.^ And yet the contrary
doctrine has been constantly maintained, as to partners,
for a great length of time, in the Courts of common
law m England, founded apparently upon a mere un-
reasoned decision in the time of Lord Mansfield ; ■* and
it is but recently that it has been overturned by an Act
of Parliament,^ which has remedied some of the mis-
chiefs inherent m it, but has still left behind some which
are as yet without redress.*^ The doctrine has been es-
pecially applied to, and, indeed, is most forcibly illus-
trated by cases of the revival of partnership debts,
which are barred by the Statute of Limitations, by the
simple acknowledgment of one partner, even, when
1 3 Kent, 49-51 ; Parker r. MoitgU, 2 Phill. 453, 464, and note ; {Speake
V. White, 14 Tex. 364.}
^ See the able case of Ellicott v. Nicliols, 7 Gill, 85.
^ Ante, § 134-138. See the reasoning of Sir Wm. Grant, in Fairlie v.
Hastings, 10 Ves. 123, 126, and of Mr. Justice Kennedy, in Hannay v. Stew-
art, 6 Watts, 487. See, also, Garth v. Howard, 8 Bing. 451 ; Story on Ag.
§ 135, 136, and note.
■» Whitcomb v. Whiting, Doug. 652.
= See the remarks of Lord Tenterden against the decision in Whitcomb
V. Whiting, Doug. 652, in his opinion in Atkins v. Tredgold, 2 B. & C. 23,
28, and of Mr. Justice Bayley, Id. p. 29, and of Mr. Justice Holroyd, Id.
p. 30.
« Coll. on P. B. 3, c. 1, § 4, p. 282-285, 2d ed. ; Id. B. 3, c. 3, § 4, p.
417, 418 ; 3 Kent, 50, 51, and note (h) ; St. of 9 Geo. 4, c. 14 (9th of May,
1828). See Braithwaite v. Britain, 1 Keen, 206; Winter v. Innes, 4 Myl.
& C. 101, 111.
516 PARTNERSHIP. [cHAP. XIV.
made at a great distance of time after all the dissolution
of the partnership, and, indeed, long after the partner-
ship business has been closed by an actual settlement
thereof inter sese.^
§ 324. In America no small diversity of judicial
opinion has been expressed upon the same subject. In
some of the States the English doctrine has been ap-
proved ; in others it has been silently acquiesced in, or
left doubtful ; ^ and in a considerable number it has
been expressly overruled.^ The Supreme Court of the
United States have not hesitated, after a most elaborate
discussion, to overrule it, as unfounded in principle and
analogy. In truth, the whole controversy must ulti-
mately turn upon the single point, whether the ac-
knowledgment is a mere continuation of the original
promise, or whether it is a new contract, or promise,
springing out of, and supported by the original consid-
eration. It is upon the latter ground, that the Supreme
Court have deemed the doctrine wholly untenable.^
1 3 Kent, 49-51 ; s. p. Houser v. Irvine, 3 W. & S. 345.
^ Walton V. Robinson, 5 Ired. 341 ; {Ide v. Ingraham, 5 Gray, 106 ; Gay
V. Bowen, 8 Met. 100 ; Houser v. Irvine, 3 W. & S. 345. See Taunton Iron
Co. V. Richmond, 8 Met. 434. }
^ 3 Kent, 49-51, where the principal authorities are collected. See, also,
Levy V. Cadet, 17 S. «&R. 126 ; Walden v. Sherburne, 15 Johns. 409 ; Baker
V. Stackpoole, 9 Cowen, 420, 423 ; Brisban v. Boyd, 4 Paige, 17 ; Cady v.
Shepherd, 11 Pick. 400; Bell w. Morrison, 1 Pet. 351; Belote v. Wynne,
7 Yerg. 534; Tassey v. Church, 4 Watts & S. 141; [Van Keuren v.
Parmelee, 2 Comst. 523. In the last case, the decisions of the different
States are reviewed by the New York Court of Appeals, and the doctrine
of Lord Mansfield overruled.] {Exeter Bank v. Sullivan, 6 N. H. 124;
Shoemaker v. Benedict, 1 Kern. 176 ; Payne v. State, 39 Barb. 634 ; Rep-
l^ert V. Colvin, 48 Penn. St. 248. See Ostrom v. Jacobs, 9 Met. 454 ; Sage
V. Ensign, 2 All. 245 ; Tajjpan v. Kimball, 10 Post. 136 ; Myers v. Standart,
11 Ohio St. 29.}
■• The doctrine was apparently first applied in the case of Whitcomb
V. Whiting, Doug. 652, in the case of a joint and several note of several
persons, not partners, upon the supposed analogy to the case of payment by
one joint promisor. On that occasion Lord Mansfield dryly and briefly said :
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 517
§ 324 a. But, however the doctrme may be after a
dissohition, m cases where all the parties are living, it
" Payment by one is payment for all, the one acting virtually as an agent for
the rest. And in the same manner an admission by one is an admission by
all ; and the law raises the promise to pay, when the debt is admitted to be
due." A more inconclusive and unsatisfactory mode of reasoning can scarce-
ly be imagined. In the first place (as we see in the text), payment by an
agent, after his authority is withdrawn by his principal, is a payment which
binds the creditor, but certainly not the principal ; and the agent cannot re-
cover the money so paid from his principal ; although he may not be entitled
(unless, indeed, it is paid under a sheer and mutual mistake) to recover it
back from the creditor. Nor is it true, that payment by one partner, after
a dissolution, of any debt, as a supposed partnership debt, binds the other
partners. On the contrary, they have a right to say, that it never was, or
was not at the time of the payment thereof, an existing partnership debt.
Suppose it had been already either paid, or extinguished, how is the partner-
ship liable to pay it again ? It is assuming the very matter in controversy
to assert, that a debt, once barred by the Statute of Limitations, is not ex-
tinguished, if voluntarily revived by the acknowledgment of one partner.
What right or power has an agent, after his authority is dissolved, to make
any acknowledgment or promise ujion my account, to bind me ? He may
bind himself, if he pleases ; but it will require some other reasoning to show
that he can bind me. The reasoning against the English rule will perhaps
be found as fully stated in the case of Bell v. Morrison, 1 Pet. 351,
367-374, as in any other case. "It still remains (say the Court) to con-
sider, whether the acknowledgment of one partner, after the dissolution of
the copartnership, is sufficient to take the case out of the statute, as to all the
partners. How far it may bind the partner making the acknowledgment to
pay the debt, need not be inquired into. To maintain the present action,
it must be binding upon all. In the case of Bland v. Haselrig, 2 Vent. 151,
where the action was against four, upon a joint promise, and the plea of the
Statute of Limitations was put in, and the jury found that one of the defend-
ants did promise within six years, and that the others did not ; three Judges,
against Ventris, J., held that the plaintiff could not have judgment against
the defendant who had made the promise. This case has been explained
upon the ground, that the verdict did not conform to the pleadings, and es-
tablish a joint promise. It is very doubtful, upon a critical examination of
the report, whether the opinion of the Court, or of any of the Judges, pro-
ceeded solely upon such a ground. In Whitcomb v. Whiting, '2 Doug.
652, decided in 1781, in an action on a joint and several note, brought
against one of the makers, it was held, that proof of payment, by one of the
others, of interest on the note and of part of the principal, within six years,
took the case out of the statute, as against the defendant, who was sued.
Lord Mansfield said : ' Payment by one is payment for all, the one acting
virtually for all the rest ; and in the same manner, an admission by one is
518 PARTNERSHIP. [cHAP. XIV.
is very clear that no acknowledgment by the surviving
partners after the death of one of them will revive the
an atknission by all, and the law raises the promise to pay when the debt
is admitted to be due.' This is the whole reasoning reported in the case,
and is certainly not very satisfactory. It assumes that one party, who has
the authority to discharge, has, necessarily, also, authority to charge the
other; that a virtual agency exists in each joint debtor to pay for the
whole; and that a virtual agency exists, by analogy, to charge the whole.
Now, this very position constitutes the matter in controversy. It is true,
that a payment by one does inure for the benefit of the whole. But this
arises, not so much from any virtual agency for the whole, as by operation
of law ; for the payment extinguishes the debt. If such payment were made
after a positive refusal, or prohibition of the other joint debtors, it would still
operate as an extinguishment of the debt, and the creditor could no longer
sue them. In truth, he, who pays a joint debt, pays to discharge himself;
and so far from binding the others conclusively by his act, as virtually theirs
also, he cannot recover over against them in contribution, without such pay-
ment has been rightfully made, and ought to charge them. When the stat-
ute has run against a joint debt, the reasonable presumption is, that it is no
longer a subsisting debt ; and, therefore, there is no ground on which to
raise a virtual agency to pay that which is not admitted to exist. But, if
this were not so, still there is a great difference between creating a virtual
agency, which is for the benefit of all, and one which is onerous and preju-
dicial to all. The one is not a natural or a necessary consequence from the
other. A person may well authorize the payment of a debt, for which he is
now liable ; and yet refuse to authorize a charge, where there at present
exists no legal liability to pay. Yet, if the principle of Lord Mansfield be
correct, the acknowledgment of one joint debtor will bind all the rest, even
though they should have utterly denied the debt at the time when such ac-
knowledgment was made. The doctrine of Whitcomb v. Whiting has been
followed in England in subsequent cases, and was applied in a strong man-
ner, in Jackson r. Fairbank, 2 H. Bl. 340, where the admission of a credi-
tor to prove a debt, on a joint and several note, under a bankruptcy, and to
receive a dividend, was held sufficient to charge a solvent joint debtor, in a
several action against him, in which he pleaded the statute, as an acknowl-
edgment of a subsisting debt. It has not, however, been received without
hesitation. In Clarke ik Bradshaw, 3 Esp. 155, Lord Kenyon, at iiisi
prius, expressed some doubts upon it ; and the cause went off on another
ground. And in Brandram v. Wharton, 1 B. & Aid. 463, the case was
very much shaken, if not overturned. Lord Ellenborough upon that occa-
sion used language, from which his dissatisfaction with the whole doctrine
may be clearly inferred. ' This doctrine,' said he, ' of rebutting the statute
of limitations by an acknowledgment, other than that of the party himself,
begun with tlie case of Whitcomb v. Whiting. By that decision, where,
however, there was an express acknowledgment, by an actual payment of a
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 519
debt against the estate of the deceased partner, and
no acknowledgment by the representative of the de-
part of the debt by one of the parties, I am bound. But that case was full
of hardship ; for this inconvenience may follow from it. Suppose a person
liable jointly with thirty or forty others, to a debt ; he may have actually
paid it, he may have had in his possession the document by which that pay-
ment was proved, but may have lost his receipt. Then, though this was one
of the very cases which this statute was passed to protect, he may still be
bound, and his liability be renewed, by a random acknowledgment made by
some one of the thirty or forty others, who may be careless of what mischief
he is doing, and who may even not know of the payment which has been
made. Beyond that case, therefore, I am not prepared to go, so as to
deprive a party of the advantage, given him by the statute, by means of an
implied acknowledgment.' The English cases, decided since the American
Revolution, are, by an express statute of Kentucky, declared not to be of
authority in their Courts ; and consec|uently Whitcomb v. Whiting, in
Douglas, and the cases which have followed it, leave the question in Ken-
tucky quite open to be decided upon principle. In the American Courts, so
far as our researches have extended, few cases have been litigated upon this
question. In Smith v. Ludlow, 6 Johns. 267, the suit was brought against
both partners, and one of them pleaded the statute. Upon the dissolution
of the partnership, public notice was given, that the other partner was
authorized to adjust all accounts ; and an account signed by him, after such
advertisement, and within six years, was introduced. It was also proved,
that the plaintiff called on the partner, who pleaded the statute, before the
commencement of the suit, and requested a settlement, and that he then
admitted an account, dated in 1797, to have been made out by him ; that he
thought the account had been settled by the other defendant, in whose hands
the books of the partnership were ; and that he would see the other defend-
ant on the subject, and communicate the result to the plaintiif. The Court
held, that this was sufficient to take the case out of the statute ; and said,
that, without any express authority, the confession of one partner, after the
dissolution, will take a debt out of the statute. The acknowledgment will
not, of itself, be evidence of an original debt ; for that would enable one
party to bind the other in new contracts. But the original debt being
proved or admitted, the confession of one will bind the other, so as to pre-
vent him from availing himself of the statute. This is evident, from the
cases of Whitcomb v. Whiting, and Jackson v. Fairbank ; and it results
necessarily from the power given to adjust accounts." The Com-t also
thought the acknowledgment of the partner setting up the statute was
sufficient, of itself, to sustain the action. This case has the peculiarity of an
acknowledgment made by both partners, and a formal acknowledgment by
the partner who was authorized to adjust the accounts after the dissolution
of the partnership. There was not, therefore, a virtual but an express and
notorious agency devolved on him, to settle the account. The correctness
520 PARTNERSHIP. [cHAP. XIV.
ceased partner will revive the debt against the survi-
of the decision cannot, upon the general view taken by the Court, be
questioned. In Roosevelt v. Mark, 6 Johns. Ch. 266, 291, Mr. Chancellor
Kent admitted the authority of Whitcomb v. Whiting, but denied that of
Jackson v. Fairbank, for reasons which appear to us solid and satisfactory.
Upon some other cases in New York we shall have occasion hereafter to
comment. In Hunt v. Bridgham, 2 Pick. 581, the Supreme Court of Mas-
sachusetts, upon the authority of the cases in Douglas, H. Blackstone, and
Johnson, held that a partial payment by the jirincipal debtor on a note took
the case out of the statute of limitations, as against a surety. The Court
do not proceed to any reasoning to establish the princijile, considering it as
the result of the authorities. Shelton v. Cocke, 3 Munf. 191, is to the
same effect ; and contains a mere enunciation of the rule, without any dis-
cussion of its principle. Simpson v. Geddes, 2 Bay, 533, proceeded upon
a broader ground, and assumes the doctrine of the case in 1 Taunt. 104,
hereinafter noticed, to be correct. Whatever may be the just influence of
such recognitions of the principles of the English cases in other States, as
the doctrine is not so settled in Kentucky, we must resort to such recogni-
tion, only as furnishing illustrations to assist our reasoning, and decide the
case now, as if it had never been decided befoi-e. By the general law of
partnership, the act of each partner, during the continuance of the partner-
ship, and within the scope of its objects, binds all the others. It is consid-
ered the act of each and of all, resulting from a general and mutual delega-
tion of authority. Each partner may, therefore, bind the partnership by
his contracts in the partnership business ; but he cannot bind it by any
contracts beyond those limits. A dissolution, however, puts an end to the
authority. By the force of its terms it operates as a revocation of all
power to create new contracts ; and the right of partners, as such, can
extend no further than to settle the partnership concerns already existing,
and to distribute the remaining funds. Even this right may be qualified and
restrained, by the express delegation of the whole authority to one of the
partners. The question is not, however, as to the authority of a partner,
after the dissolution, to adjust an admitted and subsisting debt ; we mean,
admitted by the whole partnership, or unbarred by the statute ; but
whether he can, by his sole act, after the action is barred by lapse
of time, revive it against all the partners, without any new authority
> Atkins V. Tredgold. 2 B. «fe C. 23 ; Slater v. Lawson, 1 B. & Ad. 396 ;
Crallan v. Oulton, 3 Beav. 1, 7 ; Way v. Bassett, 5 Hare, 55, 67. {In Thomp-
son V. Waithman, 3 Drew. 628, payments by a surviving partner, who was
also executor of the deceased partner, were held to be made in his chai'acter
of surviving partner, and not of executor, and therefore a debt due by the
firm was not taken out of tlie statute as against the estate of the deceased
partner. See Jackson v. WooUey, 8 E. & B. 778 ; Whitley v. Lowe, 25
Beav. 421, s. c. 2 De G. & J. 704. }
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 521
§ 324 h. Another question has arisen ; and that is,
whether, after the decease of one partner, the surviving
communicated to him for this purpose. We thinii the proper res-
olution of this point depends upon another, and that is, whether the
acknowledgment or promise is to be deemed a mere continuation of the
original promise, or a new contract, springing out of and supported by the
original consideration. We think it is the latter, both upon principle and
authority ; and, if so, as after the dissolution no one partner can create a new
contract, binding upon the others, his acknowledgment is inoperative and
void as to them. There is some confusion in the language of the books, re-
sulting from a want of strict attention to the distinction here indicated. It
is often said, that an acknowledgment revives the promise, when it is meant
that it revives the debt or cause of action. The revival of a debt supposes
that it has been once extinct and gone; that there has been a period, in
which it had lost its legal use and validity. The act which revives it, is what
essentially constitutes its new being, and is inseparable from it. It stands
not by its original force, but by the new promiSe, which imparts vitality to
it. Proof of the latter is indispensable to raise the assumpsit, on which an
action can be maintained. It was this view of the matter, which first created
the doubt, whether it was necessary that a new consideration should be
proved to support the promise, since the old consideration was gone. That
doubt has been overcome ; and it is now held, that the original consideration
is sufficient, if recognized, to uphold the new promise, although the statute
cuts it ofi", as a support for the old. What, indeed, would seem to be deci-
sive on this subject is, that the new promise, if qualified or conditional, re-
strains the rights of the party to its own terms ; and if he cannot recover by
those terms, he cannot recover at all. If a person promise to pay, upon con-
dition that the other do an act, performance must be shown before any title
accrues. If the declaration lays a promise by or to an intestate, proof of the
acknowledgment of the debt by or to his personal representative will not
maintain the writ. Why not, since it establishes the continued existence of
the debt ? The plain reason is, that the promise is a new one by or to the
administrator himself, upon the original consideration, and not a revival of
the original promise. So, if a man promises to pay a pre-existing debt, barred
by the statute, when he is able, or at a future day, his ability must be shown,
or the time must be passed, before the action can be maintained. Why ?
Because it rests on the new promise, and its terms must be (iomplied with.
We do not here speak of the form of alleging the promise in the declaration,
upon which, perhaps, there has been a diversity of opinion and judgment ;
but of the fact itself, whether the promise ought to be laid in one way or
another, as an absolute or as a conditional promise ; which may depend
upon the rules of pleading. This very point came before the twelve
Judges, in the case of Hyleing v. Hastings, 1 Ld. Raym. 389, 421, in
the time of Lord Holt. There, one of the points Avas, ' whether the
acknowledgment of a debt within six years would amount to a new prom-
522 PARTNERSHIP. [CHAP. XIV.
partner can, in a suit brought to obtain payment of a
debt due to a creditor of the fii-m out of the assets of
ise, to bring it out of the statute ; and they were all of opinion, that it
would not ; but that it was evidence of a promise.' Here, then, the
Judges manifestly contemplated the acknowledgment, not as a continuation
of the old promise, but as evidence of a new promise ; and that it is the new
promise, which takes the case out of the statute. Now, what is a new prom-
ise, but a new contract ; a contract to pay, upon a pre-existing consideration,
which does not, of itself, bind the party to pay, independently of the con-
tract? So, in Boydell v. Drummond, 2 Camp. 157, Lord EUenborough,
with his characteristic precision, said, ' If a man acknowledges the existence
of a debt, barred by the statute, the law has been supposed to raise a new
promise to pay it ; and thus the remedy is revived.' And it may be affirmed,
that the general cuiTent of the English, as well as the American authorities,
conforms to this view of the operation of an acknowledgment. In Jones v.
Moore, 5 Binn. 573, Mr. Chief Justice Tilghman went into an elabo-
rate examination of this vfery point; and came to the conclusion, from a
review of all the cases, that an acknowledgment of the debt can only be con-
sidered as evidence of a new promise ; and he added, ' I cannot comprehend
the meaning of reviving the old debt, in any other manner than by a new
promise.' There is a class of cases, not yet adverted to, which materially
illustrates the right and powers of partners, after the dissolution of the part-
nership, and bears directly on the point under consideration. In Hackley
V. Patrick, 3 Johns. 536, it was said by the Court, that, ' After a dissolu-
tion of the partnership, the power of one party to bind the others wholly
ceases. There is no reason, why his acknowledgment of an account should
bind his copartners, any more than his giving a promissory note, in the name
of the firm, or any other act.' And it was, therefore, held, that the plaintiff
must produce further evidence of the existence of an antecedent debt, be-
fore he could recover ; even though the acknowledgment was by a partner
authorized to settle all the accounts of the firm. This doctrine was again
recognized by the same Court, in Walden v. Sherburne, 15 Johns. 409,
424, although it was admitted, that in Wood v. Braddick, 1 Taunt. 104, a
different decision had been had in England. If this doctrine be well found-
ed, as we think it is, it furnishes a strong ground to question the efficacy of
an acknowledgment to bind the partnership for any purpose. If it does not
establish the existence of a debt against the partnership, why should it be
evidence against it at all ? If evidence, aliunde, of facts within the reach of
the statute, as of the existence of a debt, be necessary before the acknowl-
edgment binds, is not this letting in all the mischiefs, against which the
statute intended to guard the parties ; viz. the introduction of stale and
dormant demands, of long standing, and of uncertain proof ? If the ac-
knowledgment, per se, does not bind the other partners, where is the pro-
priety of admitting proof of an antecedent debt, extinguished by the statute
as to them, to be revived without their consent? It seems difficult to find a
CHAP. XIV.] DISSOLUTION RIGHTS OF TARTNERS. 523
tliG deceased partner, in which suit the surviving part-
ner is made a party, set up the Statute of Limitations
satisfactory reason, -vvhy an acknowledgment should raise a new promise,
when the consideration, upon which alone it rests, as a legal obligation, is
not coupled with it in such a shape as to bind the parties ; that the parties
are not bound by the admission of tlie debt, as a debt ; but are bound by the
acknowledgment of the debt, as a promise upon extrinsic proof. The doctrine
in 1 Taunt. 104, stands upon a clear, if it be a legal ground ; that, as to the
things past, the partnership continues and always must continue, notwithstand-
ing the dissolution. That, however, is a matter which we are not prepared to
admit, and constitutes the very ground now in controversy. The light in which
we are disposed to consider this question, is, that after a dissolution of a part-
nership, no partner can create a cause of action against the other partners,
except by a new authority communicated to him for that purpose. It is
wholly immaterial what is the consideration, which is to raise such cause of
action ; whether it be a supposed pre-existing debt of the partnership, or
any auxiliary consideration which might prove beneficial to them. Unless
adopted by them, they are not bound by it. When the statute of limitations
has once run against a debt, the cause of action against the partnership is
gone. The acknowledgment, if it is to operate at all, is to create a new
cause of action ; to revive a debt which is extinct ; and thus to give an ac-
tion, which has its life from the new promise, implied by law from such an
acknowledgment, and operating and limited by its purport. It is then, in
its essence, the creation of a new right, and not the enforcement of an old
one. We think that the power to create such a right does not exist, after a
dissolution of the partnership, in any partner. There is a case in the Ken-
tucky Reports, not cited at the bar, which coincides, as far as it goes, with
our own views ; and if taken as a general exposition of the law, according
to its terms, is conclusive on this point. It is the case of Walker v. Du-
berry, 1 Marsh. 189. It is very briefly reported, and the opinion of the
Court was as follows. ' We are of opinion, that the Court below improp-
erly admitted, as evidence against Walker, the certificate of J. T. Evans,
made after the dissolution of the partnership, between Walker and Evans,
acknowledging that the partnership firm was indebted to the defendant
Duberry in the sum demanded, in the action brought by him in the Court
below.' It cites 3 Johns. 536 ; 3 Munf. 191. It does not appear what
was the state of facts in the Court below, nor whether this was an action
in which the statute of limitations was pleaded, or only non assunipsit
generally. But the position is generally asserted, that the acknowledg-
ment of a debt by one partner after a dissolution is not evidence against
the other. Whether the Court meant to say in no case whatever, or only
when the debt itself was proved aliunde, does not appear. The language
is general, and would seem to include all cases ; and if any qualification
were intended, it would have been natural for the Court to express that
qualification, and have confined it to the circumstances of the case. The
only room for doubt arises from the citations of 3 Johnson, and 3 JNIun-
524 PARTNERSHIP. . [cHAP. XIV.
as a bar to a demand against the assets of the deceased ;
and it has been held that he cannot.^ And it yet re-
mains a matter of doubt, whether the representatives
of the deceased partner can in such a suit set up the
Statute of Limitations as a bar, so long as the surviving
partner continues liable to the payment of the debt, as
the deceased's estate is liable to be called upon by the
surviving partner for contribution in case the latter
pays the debt.^
ford. The former has been already adverted to ; and the latter, Shelton
V. Cocke, 3 Munf. 191, recognized the distinction asserted in 3 Johns.
536, as sound. These citations may, however, have been referred to as
mere illustrations, going to establish the proposition of the Court to a
certain extent, and not as limitations of its extent. In any view, it leads
us to the most serious doubts, whether the State Courts of Kentucky
would ever adopt the doctrine of Whitcomb v. Whiting, in Douglas ; es-
pecially so, as the early case in 2 Vent. 151, carries an almost irresisti-
ble presumption, that the Courts, at that time, held a doctrine entirely
inconsistent with the case in Douglas." See also ante, § 107; {Bateman
V. Pinder, 3 Q. B. 574.}
^ Winter v. Innes, 4 Myl. & C. 101.
2 Winter v. Innes, 4 Myl. & C. 101, 111. — Lord Cottenham said : " When
the simple case shall occur of the representatives of a deceased partner setting
up the Statute of Limitations against a claim by a creditor of the firm, it will
be to be considered whether such a defence can prevail whilst the surviving
partner continues liable, and the estate of the deceased partner continues
liable to contribution at the suit of the surviving partner. If the equity of
the creditor to go against the estate of the deceased j^artner is founded upon
the equity of the surviving partner against that estate, it would seem that the
equity of the creditor ought not to be barred, so long as the equity of the sur-
viving party continues, as that would be to create that circuity, which it is
the object of the rule to prevent. In Braithwaite v. Britain, the Master of the
Rolls thought that the statute did not operate, although nine years had elapsed.
In this case it is not necessary to consider that general question ; Mr. Bailie
was himself a trustee and executor of the will of the deceased partner, and
did not renounce till 1830 ; and Mr. Innes, who had the property, acted
throughout on behalf of the estate of the deceased. And who now set up
the Statute of Limitations ? Not the executors of the deceased partner, who
are not bound to plead the statute, but may, if they please, pay a just debt,
though barrablc by the statute ; nor any one interested in his estate, but
those who stand in the place of Mr. Innes as surviving partner. I think, there-
fore, that their defence cannot prevail." [But see Way v. Bassett, 5 Hare, 55,
68 ; Braithwaite v. Britain, 1 Keen, 206. But after a dissolution of partnership.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 525
§ 325. On the other hand, notwithstanding the dis-
solution of the partnership, there still remain certain
rights, duties, powers, authorities, and relations between
them, which the law recognizes and supports, because
they are, or may be, indispensable to the complete
arrangement and final settlement of the affairs of the
partnership ; and, therefore, in a qualified and limited
sense, the partnership may be said for those purposes
to continue between the parties, until such arrange-
ment and settlement take place. ^ Indeed, as has been
well said by a learned author on this subject, from the
very nature of the partnership, engagements may be con-
tracted, which cannot be fulfilled during its existence,
exposed as it is to sudden and arbitrary terminations ;
and the consequence, therefore, must be, that, for the
purpose of making good outstanding engagements, of
taking and settling all the accounts, and converting all
the property, means, and assets of the partnership, ex-
isting at the time of the dissolution, as beneficially as
may be for the benefit of all who were partners, accord-
ing to their respective shares and proportions, the legal
interest must subsist, although, for all other purposes,
the partnership is actually determined.^
by death or otherwise, the surviving or continuing partners of the firm are, in a
suit against them by persons claiming to be creditors of the partnership, en-
titled to the protection of the Statute of Limitations, although as between
themselves and retired partners, or the estates of deceased partners, the part-
nership accounts are unsettled ; and the reti red partners, or the executors of
a deceased partner, are in such a suit against them entitled to the like protec-
tion. Way V. Bassett, 5 Hare, 55, 68 ; Brown v. Gordon, 16 Beav. 302; 15
Eng. L. & Eq. 340. See ante, § 233, note.]
' Govv on P. c. 5, § 2, p. 231, 3d ed. ; Wilson v. Greenwood, 1 Swans.
471, 480, 481 ; Crawshay v. Maule, 1 Swans. 495, 506, 507 ; Peacock v. Pea-
cock, 16 Ves. 49, 57; Ex parte Williams, 11 Ves. 3, 5 ; Ex parte RufHn, 6
Ves. 119, 126, 127 ; post, § 328, note; Murray v. Mumford, 6 Cowen, 441 ;
Cruikshank v. M'Vic'ar, 8 Beav. 106; [Geortner v. Trustees of Canajoharie,
2 Barb. 625.]
* Gow on P. c. 5, §2, p. 231. — Substantially the same language was
526 PARTNERSHIP. [CHAP. XIV.
§ 326. Besides ; as we have already seen,^ each part-
ner, upon the dissolution of the partnership, has a per-
fect right, in the first place, to require that the partner-
ship funds shall be directly and regularly applied to
the discharge of the partnership debts and liabilities ;
and, after these are discharged, to have his share of the
residue of the partnership funds. ^ This right is a privi-
lege or lien on those funds, fully recognized and en-
forced by Courts of Equity; and, through this right
of the partners themselves, is worked out the known
equity of the joint creditors, to have a priority of pay-
ment of their debts out of the same funds, in opposition
and preference to the separate creditors of each part-
ner.^ It is easy to perceive, that this right would be a
used by Lord Eldon, in Crawsbay v. Collins, 15 Ves. 226. See also Natusch
V. Irving, Gow on P. App. p. 398, 404, 3d ed.
1 Ante, § 97, and note 1 ; 1 Story, Eq. Jur. § 675, 676 ; Ex parte Ruffin,
6 Ves. 119, 126; Ex parte Williams, 11 Ves. 3, 5; Holderness v. Shackel,
8 B. & C. 612 ; [KIrby v. Schoon maker, 3 Barb. Ch. 46.]
2 Gow on P. c. 5, § 2, p. 235, 236, 3d ed.
^ Ex parte RufBn, 6 Ves. 119; S. c. ante, § 97, note; Ex parte Fell,
10 Ves. 347 ; [Allen v. Center Valley Co. 21 Conn. 130] ; Ex parte Wil-
liams, 11 Ves. 3, 5. — In the latter case Lord Eldon said : " I have frequently,
since I decided the case Ex parte Ruffin, considered it; and I approve that
decision. In a subsequent case the dissolution took place only a week
before the question arose ; and the true question, I thought, was upon
the bona fides of the transaction ; whether that which had been joint
estate, had become separate estate. The grounds upon which I went,
in Ex parte Ruffin, were these. Among partners clear equities subsist,
amounting to something like lien. The property is joint ; the debts
and credits are jointly due. They have equities to discharge each
of them fi'om liability, and then to divide the surplus according to
their proportions ; or, if there is a deficiency, to call upon each other to
make up that deficiency, according to their proportions. But, while they
remain solvent, and the partnership is going on, the creditor has no equity
against the effects of the partnership. He may bring an action against the
partners, and get judgment ; and may execute his judgment against the
effects of the i)artnership. But, when he has got them into his hands, he
has them by force of the execution, as the fruit of the judgment ; clearly,
not in respect of any interest he had in the partnership effects, while he was
a mere creditor, not seeking to substantiate, or create, an interest by suit.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 527
mere dead claim or inert title, if the mere dissolution
of the partnership would of itself prevent the partners
from applymg the joint funds in an appropriate manner
to those very purposes ; at least if a Court of Equity
did not interpose to enforce it. And why should a
Court be called upon to do the very acts, which, upon
principles of common sense and common justice, the
partners themselves might reasonably be left to do for
themselves, without such a dilatory and inconvenient
process ^
§ 327. Moreover, it is plain, that if a total extinction
of all rights, powers, and authorities of the partners to
deal with the partnership property, funds, and effects,
immediately followed upon the dissolution of the part-
nership, it would amount to a complete suspension of
all right and authority to apply any part thereof to
the payment and discharge of the existing partnership
debts, or to collect the debts due to the partnership, or
to adjust unsettled accounts, or even to close any out-
standing adventures, or inchoate operations. The mis-
chiefs, therefore, would be positive and irreparable,
without the intervention of a Court of Equity to corn-
There are various ways of dissolving a partnership ; effluxion of time ; the
death of one partner ; the banki-uptcy of one, which operates like death ;
or, as in this instance, a dry, naked agreement, that the partnership shall
be dissolved. In no one of these cases can it be said, that to all intents
and purposes the partnership is dissolved ; for the connection still remains
until the affairs are wound up. The representative of a deceased partner,
or the assignees of a bankrupt partner, are not strictly partners with the
survivor, or the solvent partner. But still, in either of those cases, that
community of interest remains that is necessary, until the affairs are wound
up ; and that requires, that what was partnership property before, shall
continue for the purpose of a distribution, not as the rights of the creditors,
but as the rights of the partners tliemselves require. And it is through the
operation of administering the equities, as between the partners themselves,
that the creditors have that opportunity ; as in the case of death, it is the
equity of the deceased partner that enables the creditors to bring forward
the distribution." See also Gow on P. c. 5, § 2, p. 235, 236, 3d ed.
528 PARTNERSHIP. [CHAP. XIV.
pel the parties to do that, which the law has wisely
allowed without compulsion, or to appoint a receiver,
who should perform the like functions in a slow, and
expensive, and, for the most part, a less active and skil-
ful manner.
§ 328. Hence it is now the admitted doctrine of the
common law, that although the dissolution of the part-
nership disables any one of the partners from contract-
ing new debts, or buying or selling or pledging goods
on account of the firm, in the course of the former
trade thereof; yet, nevertheless, it leaves every part-
ner in possession of the full power (unless, indeed,
upon the dissolution it has been exclusively confided
and delegated to some other partner or person) ^ to
pay and collect debts due to the partnership ; ^ to apply
the partnership funds and effects to the discharge of
their own debts ; to adjust and settle the unliquidated
debts of the partnership ; to receive any property
belonging to the partnership ; and to make due acquit-
tances, discharges, receipts, and acknowledgments of
their acts in the premises.^ For all these acts, if done
1 2 Bell, Comm. B. 7, c. 2, p. 643, 644, 5th ed. ; Gow on P. c. 5, § 1, p.
227, 228, 3d ed. ; Id. c. 5, § 3, p. 305, 306.
^ [And the insolvency of one partner, and his misapplication of the funds
collected, will not affect the validity of a bona fide payment to him by a
debtor of the firm. Major v. Hawkes, 12 111. 298.]
3 Coll. on P. B. 1, c. 2, § 3, p. 75 ; Id. B. 2, c. 2, § 8. p. 130 ; Id. B.
4, c. 1, p. 582-588, 2d ed. ; Fox v. Hanbury, Cowp. 445 ; [Ide v. Ingra-
ham, 5 Gray, 106 ; Milliken v. Loring, 37 Me. 408] ; Harvey v. Crickett, 5
M. & S. 336 : Woodbridge v. Swann, 4 B. & Ad. 633 ; Smith v. Oriell, 1
East, 368; 1 Mont, on P. App. Note 2 M. p. 135 ; 2 Bell, Comm. B. 7, c.
2, p. 643 ; Id. p. 637, 5th ed. ; Combs v. Boswell, 1 Dana, 473 ; Murray v.
Mumford, 6 Cowen, 441 ; [Gannett v. Cunningham, 34 Me. 56] ; Houser v.
Irvine, 3 Watts & S. 345 ; [Robinson v. Taylor, 4 Penn. St. 242] ; {§ 339,
341 , 344 ; Lind. on P. 332 ; Butchart v. Dresser, 10 Hare, 453 ; s. c. 4
De G. M. & G. 542 ; Ptobbins v. Fuller, 24 X. Y. 570 ; Huntington v.
Potter, 32 Barb. 300; Bass v. Taylor, 34 Miss. 342. See Ault v. Good-
rich, 4 Russ. 430. Xor can one partner by notice to the debtor deprive the
other partner of power to receive payment, after dissolution, of a debt due
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 529
hona fide, are for the advancement and consummation
of the great objects and duties of the partners upon
to the firm. Granger v. McGilvra, 24 111. 152. It has been held in Penn-
sylvania, that after dissolution one partner has power to borrow money to
pay the debts of the firm. Estate of Davis & Desauque, 5 Whait. 530.
On the power of a partner after dissolution to bind the firm bj'^ negotiable
paper, see § 322 ante.} In Harvey v. Crickett, 5 M. & S. 336-344:, the
question was much considered. On that occasion, Mr. Justice Bayley
expounded the doctrine in the following manner: "If this action is main-
tainable, the consequence would be, that after an act of bankruptcy com-
mitted by one partner, the partnership-house must immediately be closed.
But such a consequence is directly contrary to the cases of Fox v. Hanbury,
and Smith v. Oriell. If several persons enter into partnership, either for a
definite or an indefinite time, each partner is at liberty to apply the joint
funds in payment of the partnership debts ; and each has a lien on those
funds for his own indemnity, limited to their being applied to the payment
of partnership debts. When one of several partners becomes bankru23t, he
puts himself by that act Out of the partnership, and ceases to have any
further control over the partnership property. The whole of his rights
pass to his assignees. But this does not prevent the remaining partners
from exercising the control, which rests with them over the property, to
take care that it is duly applied in liquidation of the partnership debts.
If this wei'e not so, in what a situation would the solvent partners be
placed .f* For if, in this case, a creditor had applied to M. B. Harvey for
pajTnent of a partnership debt, and he were precluded by the bankruptcy
of J. W. Harvey from paying it, the consequence would be, that having
funds of the partnership in his hands, fully sufficient to satisfy the demand,
he must, nevertheless, become liable to arrest, and to be detained in prison.
And the creditor also would be in this dilemma, that, having funds to look
to for the discharge of his debt, he could not obtain payment, because he
could not properly receive what the other was unable to pay. The solvent
partner would say, that he was liable to account with the assignees of the
bankrupt partner, and thus leave the partnership creditor unpaid. This
seems to me to be a consequence, the inconvenience of which is sufliciently
obvious. It is argued, that a distinction is to be made in the ^iresent case,
because both M. B. Harvey and the defendants were aware of the act of
bankruptcy. But I ask, whether this was not a hona fide payment to a
person who is entitled to receive it ? If it were, the knowledge which they
possessed of the act of bankruptcy does not, as it seems to me, distinguish
the case from those of Fox v. Hanbury, and Smith v. Oriell. In Smith
0. Oriell, Lord Kenyon considered that the whole, and not a moiety only,
of the partnership pi-operty, delivered by the solvent partner in satisfaction
of a partnership debt, passed by the transfer." The other Judges con-
curred in his views. Mr. Bell (2 Bell, Connn. B. 7, c. 2, p. 643, 5th ed.)
has summed up the general doctrine, both as to authority and prin-
34
530 PARTNERSHIP. [cHAP. XIV.
the dissolution, to wind up the whole partnership con-
cerns, and to divide the surplus, if any, among them,
ciple, in the following terms. "When a partnership expires, whether
by death, or by lapse of time, or by bankruptcy, the partnership is
considered, in one sense, as determined, but in a sense also as con-
tinued, that is, continued, till all the affairs are settled. After this no
act can be eifectually done, or contract entered into, in the name of the
firm, as in partnership ; but every act of administration, which is necessary
for winding up the concern, may efiectually be done. 1. A receipt to a
debtor of the company, by the signature of the firm, seems to be valid, if
no other mode of settling the affairs has been appointed and made known.
2. If by the dissolution and notice the debts are to be paid to a
particular person, partner, or other receiver, no other can validly discharge
the debt ; especially if there be any evident marks of collusion ; as paying
by an offset against the partner, who grants the I'eceipt. 3. After disso-
lution, no valid draft, acceptance, or indorsation, can be made by the firm ;
and it is no authority to do so, if one partner is in the notice empowered
to receive and -pay the debts of the company. The indorsation, draft, or
acceptance, must be done by all the partners, or by one especially em-
2)owered so to act for them. 4. If after dissolution a partner accept a
bill in the name of the company, bearing date before the dissolution, it has
been held in England, that the other partners are not bound. But a dis-
tinction has been taken, where, before the dissolution, skeleton or blank bills
have been signed by the firm, and those are filled up subsequently to the
dissolution, but a date inserted prior to the dissolution ; in that case the bill
has been held effectual to bind the partners. Such a case occurred in Scot-
land, but it has not yet been decided, in which, after the dissolution, it ap-
peared that certain skeleton bills, which the company had been in use of
granting, were filled up and antedated, so as to fall within the period of part-
nership." [On the other hand, in Buckley v. Barber, 6 Exch. 164, 181, 1
Eng. L. & Eq. 506, Baron Parke said : " In our law this rule (of the civil
law) does not exist with respect to agents of deceased principals; and with
respect to surviving partners, though there are expressions of text-writers
(Story on P. § 344 ; 3 Kent, 63), and also of judges (Harvey v. Crickett, 5 M. &
S. 336 ; Woodbridge v. Swann, 4 B. & Ad. 633 ; Beak v. Beak, 3 Swans. 627 ;
Lord Nottingham's MSS., and 1 Swans. 507, note), which have that aspect,
there is no clear, satisfactory authority that the surviving jiartner has a power,
by virtue of the partnershiji relation onl}', to transfer the legal title to the
share belonging to the executors of the deceased, to a third person, leaving
the executors to pursue their remedy against the survivor, if that authority
is improperly exercised. It is clear that the legal title to the share of the
survivor passes, and the purchaser therefore is at all events tenant in common
with the executor ; and as the law allows no right of action to one tenant in
common against another, so long as the subject of the tenancy exists, and is
capable of recaption, that circumstance will explain all the decisions on the
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 531
after all debts and charges are extinguished.^ In cases
of the dissolution of a partnership by the death of one
of the partners, the same rights and duties (as we
shall presently see) attach to the surviving partners.
The survivors are entitled to close up the affairs of the
fii'm, to collect and adjust the debts due to it, and to
pay its debts and discharge its liabilities. They are
also bound to apply the partnership property to the
like purposes with reasonable diligence. If they are
negligent in the discharge of their duties in these
particulars, Courts of Equity will interfere, and, upon
the application of the representatives of the deceased
partner, appoint a receiver, and order a sale of the
partnership property, and wind up the affairs of the
firm.^
§ 329. And here is seen the beneficial operation of
the jurisdiction of Courts of Equity. AVhile they will
protect each partner in the due exercise of these rights
and authorities, notwithstanding a dissolution ; they
will, on the other hand, watch over and guard the
interests of the partnership itself, and take care that
subject, including Harvey v. Crickett, 5 M. & S. 336 ; see Woodbridge v.
Swann, 4 B. & Ad. 633. In Harvey v. Crickett, the dicta of the judges go
much further; probably Mr. Justice Bayley mistook the opinion of Lord
Kenyon in Smith v. Oriell, 1 East, 368, and we doubt whether surviving
partners have a power to sell, and give a good legal title to the share belong-
ing to the executors of the deceased partner, when they sell in order to pay
the debts of the deceased and of themselves ; but, be that as it may, we think
it clear, that the survivors could have no power to dispose of it otherwise
than to pay such debts, certainly not to mortgage that share together with
their own (for that is the real nature of this transaction), as a security for a
debt principally due from the surviving partners, and in part only from the
deceased, and in order to enable them to continue their trade. At all events,
therefore, this transaction was not within the scope of any implied authority
which the surviving partners may have, to wind up the affairs of the partner-
ship ; and therefore this conveyance did not pass the share of the deceased to
the plaintiiFs, by virtue of any implied authority in the survivors."]
' Note, Ibid. ; [Drury v. Roberts, 2 Md. Ch. Dec. 157.]
- Ibid. ; Evans v. Evans, 9 Paige, 178 ; post, § 344.
532 PARTNEKSHIP. [CHAP. XIV.
he shall not, by any misconduct, or abuse, or excess in
the exercise of his own rights and authorities, prejudice
those of the other partners. Hence, Courts of Equity
will interfere and prohibit and control, by an injunction,
any improper sale or other misapplication of the funds
of the partnership by any partner to the payment of
his own private and separate debts. So they will, in
like manner, prevent him from subsequently trading
with the partnership funds ; or from interfering injuri-
ously with the settlement of the partnership affairs ; or
from excluding the other partners from their just share
of the management thereof ; ^ or from doing any other
act, or making any use of the property of the partner-
ship, inconsistent with the purpose of winding up the
concerns thereof, in the manner most beneficial to all
> Gow on P. c. 5, § 2, p. 231, 232, 3d ed. ; Harding v. Glover, 18 Ves.
281 ; Crawshay v. Maule, 1 Swans. 495, 507 ; Heathcote v. Hulme, 1 Jac. &
W. 122, 128 ; Wilson v. Greenwood, 1 Swans. 471 ; Dacier. John, 1 McCle.
206 ; s. c. 13 Price, 446 ; Coll. on P. B. 2, c. 3, § 5, p. 235 ; Id. B. 4, c. 1,
p. 579, 587, 509, 2d ed. ; De Tastet v. Bordenave, Jac. 516; 1 Story, Eq.
Jur. § 671; Allen v. Kilbre, 4 Madd. 464; {Deveau v. Fowler, 2 Paige,
400. See § 99, 100, 344. In Davis v. Amer, 3 Drew, 64, and Marshall v.
Watson, 25 Beav. 501, an injunction was refused.} — Mr. Collyer (Coll. on
P. B. 2, c. 3, § 7, p. 245, note b) seems to think, that a Court of Equity
would refuse an injunction to restrain the use of the partnership name by
one partner after a dissolution ; and he founds himself upon the doctrine of
Lord Thurlow, in Ryan v. Mackmath, 3 Bro. C. C. 15, that a Court of Eq-
uity would not decree a written instrument to be delivered up and cancelled
upon which no action could be maintained at law. Lord Thurlow's opinion
upon the general doctrine seems now abandoned ; aud the contrary rule, as
to written instruments, generally established. See Mr. Belt's note (1) to 3
Bro. C. C. 15 ; 2 Story, Eq. Jur. § 699-702, and the cases there cited. But,
as between partners, the doctrine of Lord Thurlow would seem (even if it
were admissible in common cases) to be unsatisfactory, and inconsistent
with sound principles ; for every such use of the partnership name after the
dissolution may expose the other partners to the hazard of a suit at law, and
perhaps to a recovery against them, where actual knowledge of the disso-
lution could not be brought home to the holder, if it be a negotiable instru-
ment. But see Webster v. Webster, 3 Swans. 490, note, and Lewis v.
Langdon, 7 Sim, 421. See also ante, § 224-227. {Ante, § 99, 100 ; Chur-
ton I'. Douglas, H. R. V. Johns. 174.}
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 533
the parties.^ If any partner has, after the dissohition,
misapplied the partnership funds, and made profits
thereby, he will be made accountable for all such
profits ; but the losses, if any, must be borne by him-
self.^
§ 330. If it shall become expedient and proper
more efi"ectually to attain any or all of these purposes,
Courts of Equity will appoint a manager or receiver
to collect the partnership funds, and wind up the whole
concern in the manner most beneficial to all the par-
ties, either exclusive of all the partners, or by making
one or more of them the exclusive managers or receiv-
ers. To induce Courts of Equity, however, to interfere
m this last strong and summary manner, some fraud-
ulent breach of contract or duty must be shown, or
some urgent and pressing necessity.^
^ Crawshay ij. Maule, 1 Swans. 495, 507 ; Coll. on P. B. 2, c. 2, § 1, p.
130, 2d ed.
2 Ante, § 174, 233 ; {post, §349} ; Heatlicote r. Hulme, 1 Jac. & W. 122,
128 ; Stougliton v. Lynch, 1 Johns. Ch. 467, 469, 471 ; Crawshay v. Collins,
15 Ves. 218; Gow on P. c. 5, § 4, p. 354, 3d ed. ; Brown v. Litton, 1 P.
Wms. 140 ; Brown v. De Tastet, Jac. 284 ; 1 Valin, Comm. Lib. 2, tit. 8, art.
5, p. 578, ed. 1766 ; Willett v. Blanford, 1 Hare, 253, 263. {Post, § 331, 341,
343,. 349; Lind. on P. 830. See Watney v. Wells, Law Rep. 2 Ch. 250.}
[But if the partners of a solvent partnership agree to dissolve and divide
their joint property, and to own their respective parts in severalty, neither
has any remedy in equity against the other, and no lien on the other part-
ner, because of his liability for the debts of the fii'm, or his payment of
them. Holmes v. Hawes, 8 Ired. Eq. 21 ; Lingen v. SimiDSon, 1 Sim. & St.
600 ; Hickerson v. McFaddin, 1 Swan, 258.]
3 Gow on P. c. 2, § 4, p. 114; Id. c. 5, § 2, p. 231, 232, 3d ed. ; Hard-
ing i\ Glover, 18 Ves. 281 ; Crawshay v. Maule, 1 Swans. 495, 507 ; Heathcote
V. Hulme, 1 Jac. & W. 122, 128 ; Wilson v. Greenwood, 1 Swans. 471 ; Dacie v.
John, McCle. 206 ; De Tastet v. Bordenave, Jac. 516 ; Coll. on P. B.
2, c. 3, § 6, p. 240-244; Id. B. 4, c. 1, § 2, p. 579, 587, 588, 2d ed. ; 1
Story, Eq. Jur. § 672 ; 2 Bell, Comm. B. 7, c. 2, p. 645, 5th ed.; ante, § 228,
229, 231. {Lind. on P. 852 ; post, § 344 ; Roberts v. Eberhardt, Kay, 148 ;
Sheppard v. Oxenford, 1 Kay & J. 491 ; Blakeney r. Dufaur, 15 Beav. 40;
Davis V. Amer, 3 Drew, 64 ; Evans v. Coventry, 3 Drew, 75 ; s. c. 5 De G.
M. & G. 911 ; AValker v. Trott, 4 Edw. Ch. 38 ; Drury v. Roberts, 2 Md.
Ch. 157 ; Speights v. Peters, 9 Gill, 472 ; Chancellor Walworth held in Law
534 PARTNERSHIP. [CHAP. XIV.
§ 331. Courts of Equity proceed still further in the
enforcement of their principles. If any partner, after
the dissolution, should make any composition of the
debts due to or from the partnership, he will not be at
liberty to avail himself of any private benefit there-
from, but it will properly belong to the partnership ;
for whatever act he does, it is his duty to perform it
not for his own personal advantage, but for the utmost
advantage of the concern.^ Hence, also, if, under an
agreement for a lease for the partnership, one partner,
after the dissolution of the partnership, should obtain
the lease in his own name, he will be restrained from
disposing of it otherwise than for partnership pur-
poses.^ So fixed, indeed, is this duty still to continue
to act for the benefit of the partnership, that no partner
is allowed to claim any particular reward or compen-
sation for his trouble or services, in thus assisting in
the arrangement and winding up of the concerns
thereof, unless it be specially stipulated.^
V. Ford, 2 Paige, 310 ; and Marten v. Van Schaick, 4 Paige, 379, that on a
disagreement between partnei-s a receiver -would be appointed of course, and
these cases have been approved in Whitman v. Robinson, 21 Md. 30, but the
courts of New Jersey have declined to follow them. Rentonu. Chaplain, 1
Stock. 62 ; Birdsall v. Colie, 2 Stock. 63. Wilson v. Fitchter, 3 Stock. 71 ;
Cox V. Peters, 2 Beasl. 39. See Gowan v. Jeffries, 2 Ashm. 296. In Hale
V. Hale, 4 Beav. 369, on a bill for the dissolution of a partnership between
brewers, there was no charge of misconduct, but the defendant denied that
the plaintiff who was a clergyman could lawfully be a partner in such a busi-
ness, a receiver was appointed. }
> Coll. on P. B. 2, c. 2, § 1, p. 130, 2d ed. ; Beak v. Beak, 3 Swans. 627 ;
1 Story, Eq. Jur. § 316 ; Gow on P. c. 6, § 2, p. 255 ; Crawshay v. Collins,
15 Ves. 218, 229 ; Beak v. Beak, Rep. Temp. Finch, 190 ; ante, § 174-186 ;
{ ante, § 329 ; post, § 343, 349 ; Lees v. Laforest, 14 Beav. 250 ; Perens v. John-
son, 3 Sm. & G. 419.}
^ Coll. on P. B. 2, c. 3, § 5, p. 235, 2d ed. ; Aiders. Fouracre, 3 Swans.
489 ; Elliot v. [Brown, 3 Swans. 489, note ; Gow on P. c. 5, § 4, p. 349, 3d
ed. ; ante, § 174-186 ; {Clegg v. Fishwick, 1 Macn. & G. 294; Clements v.
Hall, 24 Beav. 333 ; s. c. 2 De G. & J. 173 ; Washburn v. Goodman, 17 Pick.
519; Leach ». Leach, 18 Pick. 68.}
' Ante, § 182 ; Coll. on P. B. 2, c. 2, § 1, p. 130, 2d ed. ; Id. B. 2, c. 2,
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 535
§ 332. The French law has, to a certain, but not to
the full extent, adopted these doctrines of the common
law. It treats the dissolution of the partnership, in
whatever way it may happen, when brought to the
knowledge of the partners, as a virtual determination
of their powers to act for the partnership in any future
operations ; unless, indeed, so far as may be necessary
to complete acts and concerns already entered into on
account of the partnership, but incomplete and in pro-
gress at the time of the dissolution. These are treated
as matters of positive and indispensable obligation;
and they, therefore, may be finished by the same part-
ner who was authorized to begin and complete them.^
And this is but following out the precept of the Ro-
man law, which required, in such cases, where the
dissolution was occasioned by the death of one partner,
that the business begun by him should be completed
by his heir. Heres socii, quamvis socius non est,
§ 2, p. 151 ; Heathcote v. Hulme, 1 Jac. & W. 122 ; Whittle v. M'Farlane,
1 Knapp, 311. — On tbis last occasion (which was an appeal from Jamaica)
the Master of the Rolls (Sir John Leach) said : " It is impossible to main-
tain the charge for commission, because it is in truth a charge by a partner
for the collection of a partnership debt. How can a partner charge com-
mission against a partner for the collection of a partnership debt, in which
both of them are interested ? It is a misapprehension entirely, and there
does not appear any pretence for saying that there is any local usage in the
island to sanction such a charge. If commission cannot be charged, of
course interest upon commission cannot be charged. The Court will, there-
fore, refer it back to the Court below, with a declaration, that no commis-
sion could be charged, either for the collection of the debts of first or
second partnership." See also Franklin v. Robinson, 1 Johns. Ch. 157;
Bradford v. Kimberly, 3 Johns. Ch. 431 ; Thornton v. Proctor, 1 Anst.
94 ; Burden v. Burden, 1 Ves. & B. 170 ; Caldwell v. Leiber, 7 Paige, 483 ;
{Stocken v. Dawson, 6 Beav. 371; Lyman v. Lyman, 2 Paine, C. C. 11;
Washburn v. Goodman, 17 Pick. 519; Bradley v. Chamberlin, 16 Vt. 613;
Dougherty v. Van Nostrand, Hoff. 68 ; Beatty v. AVray, 19 Penn. St.
516. See Newell v. Humphrey, 37 Vt. 265; Porter v. Wheeler, Id.
28L}
' Poth. de Soc. n. 155, 156.
536 PARTNERSHIP. [CHAP. XIV.
tamen ed, quce per defundum inchoata sunt, 2Der heredem
explicari debent}
§ 333. But in other respects the French law does
not seem to have followed out this just policy, and
these enlarged principles of the common law, as to
the rights of the partner upon the dissolution of the
partnership. On the contrary, it seems silently, if
not submissively, to have followed out the dictates of
the E-oman law on the subject of mandates or agency,
and the powers of partners ; ^ so that the dissolution
of the partnership, in any manner whatsoever, is held
to amount to a revocation of the implied powers and
authorities of each partner, any further to admin-
ister the concerns of the partnership, as the delegate
or agent of the others. Accordingly, Pothier lays it
down as clear, that, immediately after notice of the
dissolution of the partnership, the power of each part-
ner to act as the administrator thereof ceases ; and
even a payment to one partner of the debts due to the
partnership will be invalid, if the debtors have notice
of the fact of the dissolution at the time of such pay-
ment.^ Nay, the doctrine is pressed further ; and if
the partnership expires by its own limitation, or by
mere efflux of time, the like payment will be invalid,
even without such notice ; because (it is said) those,
who have any business with a partnership, ought to
inform themselves of the tenure or duration of that
partnership.'* So that, in fact, from the time of the
dissolution, the partners become tenants in common
of the property engaged in the partnership ; and if
' D. 17, 2, 40; Poth. Pand. 17, 2, n. 59.
2 Ante, § 95, 102, 109, and note ; Story on Ag. § 425-429 ; Potb. de
Soc. n. 156, 157.
3 Poth. de Soc. n. 157 ; Id. n. 155, 156.
* Poth. de Soc. n. 157.
CHAP. XIV. 1 DISSOLUTION RIGHTS OF PARTNERS. 537
%
the whole belonged to one, he is forthwith entitled to
the whole profits and proceeds thereof.^ They can no
longer proceed to administer the same separately ; and
all that they can do is to require either an amicable
and voluntary adjustment, and settlement, and division
of the partnership concerns ; or, in default thereof, to
apply to the proper tribunal for that remedial justice
which is required to accomplish the same purpose.
Each, therefore, has in effect an action or suit, like that
of the Roman action, P7'0 socio, or the Roman action,
Communi dividundo.^ Indeed, as we have seen, the
Roman law did not, during the continuance of the
partnership, clothe any partner, unless the power was
specially delegated to him, with the power to adminis-
ter the entire concerns and business of the partnership,
or with any power to dispose of any part of the prop-
erty thereof, except his own particular share.^
§ 334. The foregoing considerations apply to the
effects and consequences, as between the partners
themselves, of a voluntary dissolution by their own
mere act or will, or in conformity to their original
stipulations. Let us, then, in the next place, proceed
to consider the effects and consequences of such a dis-
solution in relation to third persons. And, here, the
preceding statements, respecting the liabilities of part-
ners to third persons,'^ will greatly abridge whatever
might otherwise have been appropriate in this place.
In the first place, the dissolution of a partnership,
whether it be by the voluntary act or will of the par-
ties, or by the retirement of a partner, or by mere
1 Poth. de Soc. n. 158, 160; Civil Code of France, art. 1865, 1872.
^ Poth. de Soc. n. 161-180 ; Civil Code of France, art. 1872 ; ante,
§ 223, 230.
3 Ante, § 95, 102, 109, and note ; Story on Ag. § 425-429.
* Ante, § 126-168.
538 PARTNERSHIP. [CHAP. XIV.
efflux of time, will not in any manner change the
rights of third persons, as to any past contracts and
transactions with, or on account of the firm ; but their
obligation and efficacy and validity will remain the
same, and be binding upon the partnership in the
same manner, as if no dissolution had taken place. ^
In the next place, such a dissolution will not absolve
the partners from liabilities to third persons, for the
future transactions of any partners, acting for or on
account of the firm, unless some one or more of the
following circumstances occur. (1.) That the third
persons dealing with, or on account of the firm, have
due notice of the dissolution ; ^ or, (2.) That they have
had no transactions whatsoever with the firm until
after the dissolution;^ or, (3.) That the partnership
was not general, but limited to a particular purchase,
adventure, or voyage, and terminated therewith before
the transaction took place ; ■* or, (4.) That the new
transaction is not within the scope and business of
the original partnership ; ^ or, (5.) That it is illegal,
or fraudulent, or otherwise void from its defective na-
ture or character ; ^ or, (6.) That the partner, sought
to be charged, is a dormant partner, to whom no credit
was actually given, and who retired before the transac-
tion took place.'''
' Coll. on p. B. 1, c. 2, § 3, p. 75, 2cl ed. ; Ault v. Goodrich, 4 Russ.
430 ; Gow on P. c. 5, § 2, p. 240, 241, 3d ed.
2 Ante, § 160-164 ; Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed. ; 2 Bell,
Coram. B. 7, c. 2, p. 638-640, 5th ed. ; Gow on P. c. 1, p. 20; Id. c. 5,
§ 2, p. 240, 248-251, 3d ed. ; Wats, on P. c. 7, p. 384, 385, 2d ed. ; Na-
tional Bank v. Norton, 1 Hill, (N. Y.) 572 ; [Conro v. Port Henry Iron Co.
12 Barb. 27.]
* Ante, § 160, 161. But see 2 Bell, Coram. B. 7, c. 2, p. 641, 642, 5th
ed. See, also. Parkin v. Carruthers, 3 Esp. 248.
* Ante, § 280, 321-323. ' Ante, § 126-128, 130.
« Ante, § 130-132 ; Id. § 6.
' Coll. on P. B. 1, c. 2, § 2, p. 74, 2d ed. ; Id. B. 3, c. 3, § 3, p. 370,
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 539
S 335. The same rule as to the necessity of notice
is adopted in the French law. And accordingly Pothier
says, that if traders and artisans, who have been accus-
tomed to furnish supplies to a partnership, continue, in
good faith, after the dissolution of the partnership, of
which they are ignorant, to furnish the like supplies to
one of the partners on account of the partnership, all
of the partners and their heirs will be bound therefor.^
It is observable, that Pothier puts, by implication, the
very qualification which is insisted on in the preceding
section ; for he confines the liability to the cases of per-
sons, who had, before the dissolution, been accustomed
to deal with the partnership. The same result, how-
ever, would probably arise in all cases, where, notwith-
standing the dissolution, the partners should still hold
themselves out as partners, either expressly, or by
allowing their names to stand openly as a part of the
firm.^
§ 336. In respect to the necessity of such a notice,
the cases of a voluntary dissolution of the partnership,
in any of the ways above mentioned, diff"er essentially
from the cases of a dissolution by the death, or the
bankruptcy (duly declared by public proceedings), of
one or more of the partners ; for, in these latter cases,
no notice whatsoever is necessary to be given of the
dissolution to third persons, in order to exempt their
estates from all responsibility for the acts and contracts
of the other partners ; since the partnership is thereby
dissolved by mere operation of law.^ The reason
371 ; Evans v. Drummond, 4 Esp. 89 ; Brooke v. Enderby, 2 Brod. & B.
70: Heath v. Sansom, 4 B. & Ad. 172; Gow on P. c. 4, § 2, p. 251, 3d
ed. ; ante, § 159.
> Poth. de Soc. n. 157.
- Ante, § ICO, 161; Williams v. Keats, 2 Stark. 290; Parkin v. Car-
ruthers, 3 Esp. 248.
» Coll. on P. B. 1, c. 2, § 2, p. 74; Id. B. 3, c. 3, § 4, p. 419, 2d ed.
540 PARTNERSHIP. [CHAP. XIV.
seems to be, that the parties are thereby either totally
incapable of acting at all, or at least of binding their
estates ; and it is against public policy to allow the
acts of the other partners to bind any persons, who are
incapable either of acting at all, or of continuing any
authority for such a purpose, or whose estates may
otherwise be subjected to irreparable injury, or even to
ruin. The same principle would probably be held to
apply to other cases, creating by mere operation of law
a positive incapacity ; such as the marriage of a female
partner, or the attainder of a partner of felony,^ or
the dissolution of the partnership by a public war.^
§ 337. With these brief remarks, w^e may dismiss the
consideration of the effects and consequences of a disso-
lution of the partnership by the voluntary acts or stip-
ulations of the partners, and may, in the next place,
proceed to the consideration thereof in cases of bank-
ruptcy.^ Bankruptcy (as we have seen) puts an end
Vullianiy v. Noble, 3 Mer. 593, 614; 2 Bell, Comm. B. 7, c. 2, p. 638, 639,
5th ed. ; Gow on P. c. 5, § 2, p. 248 ; Id. c. 5, § 4, p. 348, 3d ed, ; ante, § 162.
— Perhaps, in the case of bankruptcy, the reason why notice is not positively
required to be given after the declaration of the bankruptcy, is its supposed
notoriety, and that all the world are bound to take notice of it. Certainly
there is no pretence to say, that a mere secret act of bankruptcy, upon
which no public proceedings have been or can now be had, will produce
the like effect, unless notice be given. See Lacy v. Woolcott, 2 Dow. &
R. 458. See ante, § 313; 2 Bell, Comm. B. 7, c. 2, p. 641, 5th ed. ; Gow
on P. c. 5, § 3, p. 306, 8d ed. ; Thomason v. Frere, 10 East, 418 ; Franklin
V. Lord Brownlow, 14 Ves. 550, 557, 558 ; {ante, § 319 ; post, § 343 ; per Big-
elow, C. J., in Marlett v. Jackman, 3 All. 287, 296 : " The true distinction
is not that no notice is requisite when the dissolution takes place by opera-
tion of law, but only when it is effected by circumstances or an event of
a public or notorious nature, of which all men in the exercise of due dili-
gence are required to take notice."}
' .Ante, § 303, 306.
" Griswold V. Waddington, 15 Johns. 57 ; s. c 16 Johns. 438 ; ante,
§ .303, 304, 306, 315.
^ It is not within the scope or objects of these Commentaries to treat of
the various topi('s connected with the issuing of the commission in bank-
ruptcy, tlie proof of debts, and other proceedings thereon. They properly
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTJSERS. 541
to the partnership by operation of law, and immedi-
ately, upon the due declaration thereof, by relation
back from the time when the act of bankruptcy was
committed.^ From that period, therefore, the bankrupt
ceases *to have any power or dominion over his prop-
erty and effects in the partnership ; and it is trans-
ferred to the assignees, who are appointed under the
commission, and tliey succeed to all his rights and
interests therein.^ From the same period also the as-
signees are deemed tenants in common with the other
partners in all such property and effects, subject to the
rights and claims of the other partners.^
§ 338. Another consequence, flowing directly from
the preceding considerations, is, that all future actions
at law, to be brought on account of the partnership
property, or contracts, or rights, must be brought
jointly in the names of the solvent partners, and the
assignees of the bankrupt, who succeed equally to his
rights of action, as well as to his rights of property ;
for the assignment not only transfers the property of
the bankrupt, but also all his rights of action, to the
belong to a different Treatise, upon the practice in bankruptcy. The dis-
cussion of the subject of joint and several commissions in bankruptcy, and
the proceedings thereon, seems also properly to belong to sitch a Treatise.
Those who wish for more information thereon, can consult Coll. on P. B. 4,
c. 2, § 1-11, p. 595-678, 2d ed.,and Id. B. 4, c. 3, § 1-8, p. 686-718, and
Gow on P. c. 5, § 3, p. 256-348, 3d ed. ; {also Avery & Hobbs on the
U. S. Bankrupt Law, § 36.}
» Ante, § 313, 314; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Id. c. 5,
§3, p. 305-307; Coll. on P. B. 4, c. 1, p. 590, 591, 2d ed. ; Barker v.
Goodair, 11 Ves. 78; Dutton v. Morrison, 17 Ves. 193; la re Wait, 1 Jac.
&W. 605; Thomason v. Frere, 10 East, 418. {By the U. S. Bankrupt
Law of 1867, § 14, the assignment relates back only to the conmiencement
of the proceedings in bankruptcy. }
- Ante, §313, 314; 3 Kent, 58; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ;
Id. c. 5, § 3, p. 298, 299 ; Thomason v. Frere, 10 East, 418.
3 Ante, § 313, 314; 3 Kent, bS, 59; Gow on P. c. 5, § 3, p. 266, 267,
3d ed. ; Id. c. 5, § 3, p. 299, 305 ; Coll. on P. B. 4, c. 1, p. 579, 580, 2d
ed. ; Holderness v. Shackels, 8 B. & C. 612.
542 PARTNERSHIP. [cHAP. XIV.
assignees.^ On the . other hand, all actions at law by
third persons against the partnership, may be, and,
indeed, ordinarily should be, brought against all the
partners, including the bankrupt ; and the assignees
should not in general be made parties thereto, since they
are not liable thereto, but are to account only under the
proceedings in bankruptcy.^ The case may be, and
often is, very different in suits in equity, brought by
or against the assignees.^
§ 339. On the other hand, from the time of the act
of bankruptcy, and by relation thereto, the bankrupt
becomes incapable of acting for, or binding the part-
nership by his acts ; and in a general sense, and with
few exceptions, all his acts become from henceforth
void and inoperative. He cannot in any manner sell,
or otherwise dispose of the partnership effects ; he
cannot contract debts or other engagements, binding
on the partnership ; and he cannot compel any pay-
ments to the firm, or give any receipt or release there-
for.^ In respect to the other solvent partners, they
1 Gow on P. c. 5, § 3, p. 341, 342, 3d ed. ; CoU. on P. B. 3, c. 5, § 1,
p. 471 ; Id. B. 4, c. 1, p. 579 ; Id. B. 4, c. 5, p. 696, 697, 701, 702, 2d ed.
Thomason v. Frere, 10 East, 418 ; Graham v. Robertson, 2 T. 'R. 282
Franklin v. Lord Brownlow, 14 Ves. 557 ; 1 Chitty on PL p. 27, 28, 6th ed.
Com. Dig. Banh-upt, D. 29 ; {U. S. Bankrupt Act of 1867, § 16.}
2 1 Chitty on PI. p. 62, 63, 6th ed. ; Id. p. 104 ; Id. p. 176 ; Wats, on
P. c. 8, p. 434, 2d ed.
' See Story, Eq. PI. § 153-158, 439 ; Cook's Bankrupt Law, Vol. 1, c. 14,
§ 1-3, p. 553-561, 4th ed. ; Gow on P. c. 5, § 4, p. 352, 3d ed. ; Bailey v.
Vincent, 5 Madd. 48. — The full considei-ation of this subject properly be-
longs to a Treatise on Pleading, and is therefore omitted in this place.
* Ante, § 313, 314; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Id. c. 5,
§3, p. 299, 304-306; Coll. on P. B. 4, c. 1, p. 589, 590, 2d ed. — ]Mr.
Gow has very well stated the general doctrine, and cited some cases to
illustrate it. " We have seen," says he, " in a former part of this work, that
an act of bankruptcy committed by one partner, when followed by a com-
mission, dissolves the partnership by relation to the time when the act of
bankruptcy was committed. The partner, therefore, who has committed
the act ol" bankruptcy, cannot afterwards communicate to strangers any
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 543
also are, by the bankruptcy, disabled from engaging
in any new dealings in future on account of the part-
nership.^ But in respect to past transactions, which
rights, either against the firm, or the joint property ; because the commission
and assignment retrospectively deprive him of all capacity of acting. They
determine his power to bind the firm by relation to the date of his bank-
ruptcy, and all his rights, from that time, passing to his assignees, he ceases
to have any further control over the partnership, or the joint property.
And the statutes concerning bankrupts make an entire, not a partial avoid-
ance of the bankrupt's acts, as well in respect of his partner's moiety as
his own. Therefore, Avhere a partner, on the eve of his bankruptcy, volun-
tarily deposited goods with a third person for a creditor of the firm, and the
deposit falsely purported to be founded upon a supposed sale, the creditor,
after the bankruptcy of the partner, having received information of the
deposit, declared his acceptance of it ; and in an action of trover by the as-
signees under a joint commission to recover the goods, it was held, that the
creditor could not resist their claim, inasmuch as the deposit was not com-
pleted until after the bankruptcy of the party depositing, at which time the
partnership was at an end. So, where two of three partners affecting, but
without authority, to bind^the firm, by deed assigned a debt due to them
from a correspondent abroad, without his privity, to a creditor at home,
and afterwards, by the direction of such correspondent, drew a bill of
exchange in the name of the firm, upon his agent here, which was accepted,
payable to their own order, for the amount of the debt ; and then the two
partners, having in the mean time committed acts of bankruptcy, indorsed
such bill to the creditor of the firm in part satisfaction of his debt, and
afterwards separate commissions were sued out against the two partners,
who were declared bankrupts, and their effects assigned, the other partner
being all the time abroad, it was held, that by such an indorsement of the
bill by the two, after acts of bankruptcy committed by them, though before
the commission issued, nothing passed to the creditor ; for the bankrupt
partners had, by relation, ceased, at the time of such indorsement, to have
any conti'ol over the joint stock as partners, and therefore could not bind
either the property of their assignees, or of their solvent partner." Gow
on P. c. 5, § 3, p. 304-306, 3d ed. ; Hague v. Rolleston, i Burr. 2174 ;
Thomason v. Frere, 10 East, 418. But see Lacy v. Woolcott, 2 Dow. & R.
458 ; Coll. on P. B. 4, c. 1, p. 582-588, 2d ed. The exceptions to the gen-
eral doctrine stand principally upon the statutes of bankruptcy, saving from
the operation of the general rule bona Jide contracts, and payments made
by the bankrupt to and with persons who have no notice of the act of bank-
ruptcy. Coll. on P. B. 4, c. 1, p. 589, 590, 2d ed.
' Ante, § 313, 314 ; Gow on P. c. 5, § 3, p. 306, 307, 3d ed. ; Fox v. Han-
bury, Cowp. 445 ; Harvey v. Crickett, 5 M. & S. 336 ; Murray v. Murray,
5 Johns. Ch. 60, 78; Hoxie v. Carr, 1 Sumn. 173; Coll. on P. B. 4, c. 1,
p. 587, 588, 2d ed. ; Thomason v. Frere, 10 East, 418.
544 PARTNERSHIP. [cHAP, XIV.
were consummated at the time of the bankruptcy, they
are not prevented from exercismg a due control over
the partnership eflfects, and of applying them honafide
to the payment and discharge of the partnership debts
and obligations.^
§ 340. Indeed, so completely does the bankruptcy
of one partner sever the joint rights and interests of
the partnership, that even an execution, issued against
the partnership effects, subsequently to the act of bank-
ruptcy, will be invalid and inoperative upon those
effects ; for the act of bankruptcy overreaches the ex-
ecution ; and it is not competent for the execution
creditors to disappoint the arrangements, made in
bankruptcy, for the equal distribution of the effects of
the partnership among all the creditors ; since it would
defeat the just policy of the bankrupt laws.^ The sub-
ject of the due administration of the partnership assets,
and other incidental topics, will hereafter occur in
another connection, when we come to treat of the final
adjustment and settlement, and winding up of the part-
nership concerns.
§ 341. As to the solvent partners, in case of the
bankruptcy of one or more of the partners, it is clear,
that they retain all their original rights, powers, and
> Ante, § 325-328 ; Gow on P. c. 5, § 1, p. 227, 228, 3d ed. ; Coll. on P.
B, 4, c. 1, p. 579-588, 2d ed. — It seems that the assignees of the bankrupt
are clothed with the like reciprocal rights and authorities. Coll. on P. B. 4,
c. 1, p. 578-580, 2d ed. See, also, Gow on P. c. 5, § 3, p. 298-300, 3d ed. ;
Id. p. 308, 309 ; {Lind. on P. 950 ; Ex parte^ohmson, 3 Deac. & Ch. 376 ;
Fraser v. Kershaw, 2 Kay & J. 496 ; Morgan v. Marquis, 9 Exch. 145. But
see Lind. on P. 948; Alien v. Kilbre, 4 Madd. 464.}
=* Coll. on P. B. 4, c. 1, p. 590-592, 2d ed. ; Gow on P. c. 5, § 3, p. 308,
309, 3d ed. ; Barker v. Goodair, 11 Ves. 78; Button v. Morrison, 17 Ves.
193 ; In re Wait, 1 Jac. & W. 605. {An attachment of the property of a
partnership by the trustee process is not dissolved by the subsequent bank-
ruptcy of one of the partners after a dissolution of the partnership. Fern
V. Gushing, 4 Cush. 357.}
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 545
authorities over the management of the concerns of
the partnership, excepting only, that they are not at
liberty any further to carry on the business of the
partnership, or to make any new contracts or other en-
gagements, or to incur any liabilities on account there-
of, or to employ the capital stock in trade. If they do,
it will be a violation of duty, and at their own risk ;
and they may, at the option of the assignees, be com-
pelled to account for the profits, if any are thereby
made, or be charged with interest upon the share of the
bankrupt, and they must bear all the losses.^ But the
> Coll. on P. B. 2, c. 3, § 4, p. 221-227, 2d ed. ; Gow on P. c. 5, § 3, p.
306-308, 3d ed. ; Crawsbay v. Collins, 15 Ves. 218 ; s. c. 2 Russ. 325 ;
Brown v. De Tastet, Jac. 284; {Lind. on P. 954-957} ante, § 325-328.
— In Brown v. De Tastet, Jac. 295, Lord Eldon used the following lan-
guage: "The Master, in the execution of the decree, has, I am informed,
proceeded upon the case of Crawshay v. Collins. In that case, three per-
sons, Collins, Noble, and Boughton, carried on the business of pump and
engine manufacturers in partnership together. In 1804, a commission of
bankrupt issued against Noble, and in 1805 the bill was filed by his as-
signees, claiming three-eighths of the profits of the business, which remained
unaccounted for at the time of the bankruptcy, or which had accrued since,
and also of two patents, and the profits derived from them. The question,
therefore, was, whether the assignees of Noble were entitled to the same
relief, that he himself would have been entitled to, if he had not become a
bankrupt ; a bankruptcy dissolving a partnership in the same manner as
death, in this respect only, that assignees have rights somewhat similar to
those which the rejiresentatives have, where the partnership is dissolved by
death. It was argued, that in both cases the demand to be made by the rep-
resentatives of a deceased partner, or the assignees of a bankrupt, was lim-
ited to that sum of money, which, if the account had been taken at the dis-
solution, would have been found due from the surviving or solvent partner,
leaving all the property in their hands. On the other hand, it was argued
that, in many cases, that could not be the law ; for instance, if immediately
after the bankruptcy, all the stock, which in that case consisted of manufac-
tured goods, pumps, and such things had been sold for a sum of money,
three-eighths of which would have been more than what was due to the bank-
rupt, taking the account as matter of debt, then the assignees, being certainly
tenants in common till the stock was converted, and the identical stock being
sold, and three-eighths of it yielding more than what was due to the bank-
rupt at the time of his bankruptcy, as the calculated value, what pretence
could there be for saying that the assignees should not have a proportion of
35
546 PARTNERSHIP. [cHAP. XIV.
solvent partners have a lien upon the partnership prop-
erty and effects for the payment of all the debts and
charges due by the partners, as well as for their own
distributive share of the surplus.^ They may, therefore,
notwithstanding the act of the bankruptcy of the partner
is known to them, proceed, bona fide, to make payments
out of the partnership funds in discharge of the joint
debts and other obligations of the partnership ; ^ al-
though, if they are guilty of any excess, in this partic-
ular, injurious to the rights of the assignees, they may
be restrained by an injunction by a Court of Equity.^
§ 342. In the next place, then, as to the effects and
consequences of a dissolution by the death of one of
the partners. This subject may properly be considered
what it sold for ? But it is asked, Will you say, that in all cases, where
there is a jiartnership, such is to be the consequence of carrying on the busi-
ness, that the profits shall be divisible in the same way as if the partner had
not died, or had not become bankrupt ? I say, no ; I do not mean to say,
that it will be so in all cases ; but on the other hand, I will not deny that it
may be the law in some cases. The general principle, I should say, ought
to be this ; that, as it is quite competent to the parties to settle the accounts
and to mark out the relation between themselves, as creditors or debtors, so
where there is a non-settlement of the account (though a settlement may
sometimes introduce great hardships and difficulties), yet those who choose
to employ the property of another for the purposes of their trade, exposing
it to all the risks of insolvency or bankruptcy, have no right to say that the
account shall not be taken, if it can be taken without incurring difficulties
which might embarrass the house to such an extent as to make it unjust to
demand it." [Neither has the solvent partner an absolute legal right to the
sole administration of the assets ; although a Court of Equity would ordinarily
appoint him receiver, if his capacity and integrity were unquestioned. Hub-
bard r. Guild, 1 Duer, 662.] {See Freeland v. Stansfeld, 2 Sm. &
G. 479.|
» Ante, § 326 ; Jpost, § 405-408; Parker v. Muggridge, 2 Story, 334.}
2 Coll, on P. B. 4, c. 1, p. 582-589, 2d ed.; Harvey v. Crickett, 5 M. &
S. 336; ante, § 325-328, 339, and note, fin Murray r. Murray, 5 Johns.
Ch. 60, it was held, that solvent partners have no right to have partner-
ship funds in the possession of the assignee of a bankrujit partner given up
to them, and that the equity of the assignee is at least as high as that of the
solvent partners.}
' Ante, § 224, 225, 329, 341, and note.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 547
under two aspects ; (1.) As to the partners themselves;
(2.) As to third persons. In the first place, as to the
partners themselves. And, here, the remark already
made becomes important ; that a partnership is not,
strictly speaking, either a joint-tenancy or a tenancy
in common ; and that it is an universally established
principle of the whole commercial -WDrld, that the prop-
erty and effects thereof do not belong exclusively to
the survivors ; but they are to be distributed between
them and the representatives of the deceased, in the
same manner as they would have been upon a volun-
tary dissolution inter vivos. ^ In short, the universally
acknowledged maxim on this subject is : Jus accrescendi
inter mercatoresi^ro heneficio commercii locum nonhahet?
The niaxinl has been since expanded, and is now con-
stantly construed, so as to embrace all sorts of partner-
ships between two or more persons for their joint ac-
count and benefit, whether they are merchants or not,
and whatever may be the nature of the trade, or busi-
ness, or employment, in which they are engaged.^
1 Aute, § 89, 90. ^ Co. Litt. 182, a.
^ Ante, § 90 ; JefFereys v. Small, 1 Vern. 217. [In a late case in the Ex-
chequer, it was extended to manufacturers and to trade fixtures. Baron
Parke, in a learned judgment observed : " In the earlier books we do not
find any trace of the doctrine of survivorship inter viercatores, in chattels,
but some against the now admitted doctrine of survivorship as to remedies or
choses in action. The first cited is from the Year Book, 38 Edw. 3, 7, tit.
'Accompt' (which is the authority mentioned in Br. Ab., ' Joint-tenants,'
pi. 11). There Kirton, a sergeant, arguing that in an action of account
against a bailiff of two, not merchants, the executors of both ouglit to join,
says, that if two merchandise in common, the executors of each shall have a
moiety, so they ought in the case of an action. But Knyvet, J., says, ' It is
not alike of a chattel in possession and a chattel in action, for the action can-
not be severed, and his executors cannot join in the action with the other
who survived.' The language indeed is ' Taut ne poit my est' seve,' but ' I'aut'
seems a false jjrint — it may, however, mean the '. other,' or ' latter,' i. e., the
chose in action. It is afterwards said that the writ, which was by the execu-
tors of the survivor, was adjudged good; and a sentence is added, which must
be either a misprint, or refer to the right of action — it is said, ' and this is the
548 PARTNERSHIP. [CHAP. XIV.
§ 343. We have already seen, that a dissohition by
death puts an end to the partnership, from the time of
law of two merchants who have goods in common ; if one die, the other shall
have the whole by survivorship.' The next authority is Lord Coke, 1 Inst.
182, a, who puts the joint wares and merchandise, debts and duties, of merchants
on the same footing, and so does Noy, 55 ; and it is argued, that if they be
on the same footing, as the remedy clearly survives, the title to the chattels
does also. But Lord Coke clearly means, in the case of merchants, not to
allow a survivorship in both wares and duties, but to disallow it in each ; and
it was afterwards made a question, notwithstanding what is said in the Year
Book, 38 Edw. 3, whether the survivor and executor of the deceased ought
not to join in an action for a chose in action in the lifetime of the deceased.
It was held by the Court, in Hall v. Huff am, 2 Lev. 188, in consideration of
the authority of Lord Coke in this passage, that they ought to join in an ac-
tion for goods sold by two joint merchants ; also, there is a precedent in Lutw.
1493, of an action by the executors of a joint merchant joining with the sur-
vivor for taking the goods of the partnership in the life of the deceased.
Subsequently, in the case of Martin v. Crompe, 1 Ld. Raym. 340 ; 1 Salk.
444, it was held to be clear, in accordance with the doctrine in the Year
Book, 38 Edw. 3, that the right of action of two merchants survived, that
the survivor should take the whole, and account to the adminish-ator of the
deceased, and that the administrator could not join ; for Lord Holt said that
it would make strange confusion, that one should sue in his own right, and the
other in another's ; and it has been undoubted law, ever since that decision
that the remedy survives. Lord Eldon, in Ex parte Kuffin, 6 Ves. 119,126, says,
that ' in the law of merchants, the legal title in some respects, in all the equi-
table title, remains, notwithstanding the survivorship ; ' and the same doctrine
was acted upon in the Court of King's Bench, in the case of The King v.
The Collector of Customs at Liverpool, 2 M. & S. 223, which case proceeded
entirely on the ground that the legal title did not survive in the case of a part-
nership in ships. On the other hand, the authority is very slender, that the
title survives at law, and that the executor of the deceased person can only
claim in equity. The most direct is a note of Loi-d Tenterden's in his Trea-
tise on Shipping (p. 97), in which it is said, the tvXq '■ Jus accrescendi inter
mercatores locum nonhabet,' is only enforceable in a Court of Equity, — but
there is no prior authority quoted for that position. Mr. Justice Story (p. 68,
Am. ed. of Abbott) says that this note was not written by Lord Tenterden,
but that seems not to be the case, from a note of my brother Shee (p. 97, c.
3, 7th ed.). This note may have been founded on the authority of the doc-
trine in some equity reports where a Court of Equity has granted relief on
survivorship. For instance, in Lake v. Gibson, 1 Ab. Ca. Eq. 291, the Master
of the Rolls, Sir Joseph Jokyll, says, that ' in all cases of a joint undertaking,
either in trade or any other dealinj, the joint owners are to be considered as ten-
ants in common, and the survivors as trustees for those who are dead ; ' but this
observation follows a statement respecting a joint purchase of land, where the
CHAP. XIV. J DISSOLUTION RIGHTS OF PARTNERS. 549
the occurrence of that event, whether known or un-
known, or whether third persons have or have not
difference is pointed out between purchasing in equal shares, where there is a
survivorship, and where the portions are not equal, where there is none in
equity, however the legal estate may survive at law. The latter indicates
that the joint-tenants do not mean to have an equal chance of survivorship,
but that one shall hold ■ in trust for the other in proportion to his share.
There is no didnni that there is a survivorship at law, in all cases, between
merchants. A similar doctrine to that in Lake v. Gibson had been laid down
before in Jeffereys v. Small, 1 Yern. 21 7, a. d. 1 683, by Lord Keeper Guildford,
who is evidently treating of equities only, and who states the rule of equity to be,
that if two persons are joint-tenants by gift or devise, there is a survivorship ; the
parties are liable to all the consequences of the law ; — but as to any joint un-
dertaking, in the way of trade or the like, it was otherwise ; and he decreed
that the plaintiff should be relieved. The dida of judges in some subse-
quent cases were cited, which admit of the same explanation. Lord
Eldon, indeed, in Crawshay v. Collins, 15 Ves. 218, 227, speaking of partner-
ship, says it determines ' by the death of one partner, in which case the
law says that the property survives to the others. It survives as to the
legal title in many cases; but not as to the beneficial interest.' Now if Lord
Eldon is speaking of choses in action, it is perfectly correct, and it is by no
means clear that he meant any thing more. Upon the whole, there is no sat-
isfactory authority for the position that the title to partnership chattels sur-
vives at law, and the authorities the other way greatly predominate. It may
be added that Mr. Justice Story on Partnership, § 342, treats it as the uni-
versally acknowledged rule, that upon the dissolution of the partnership by
death, the property and effects thereof do not belong exclusively to the sur-
vivors, but they are to be distributed between them and the representatives
of the deceased, in the same manner as they would have been upon a volun-
tary dissolution inter vivos. We consider, therefore, that the first point made
on the part of the plaintiffs ought to be decided against them. The next
question is, whether the same law which excepts the goods of vierchants, for
the benefit of commerce, from the general law of joint-tenancy, extends to
those oi mannfadurers. At a very early period the term ' merchant ' was
very liberally construed — it was held to include shopkeepers. 2 Brownl. 99.
The same principle of the encouragement of trade applies to manufacturers,
in partnership and every other description of trade. Story, § 342. It is
then said that it does not extend to fixtures. But trade fixtures, which are
removable, are part of the stock in trade, and clearly fall within the rule as
to partnership stock, and all these fixtures were of that character. There-
fore we are of opinion that one third of the fixtures seized belongs to the
executors of William, and that they would be seizable under an execution
by^. fa. against his executor de bonis testatoris, if there were no other cir-
cumstances in the case. But it was urged on behalf of the plaintiffs, that
though the right to the chattels does not survive, the surviving partner or
550 PARTNERSHIP. [cHAP. XIV.
notice thereof.^ So that it completely puts an end to
the power and authority of the surviving partners to
partners have of necessity a jus dispoiiendi, for the purpose of winding up the
partnership concerns, and that the conveyance by Abraham was within the
scope of that authority, and transferred Ihe legal title in all. In the civil law
such a jus clisponendi prevails, in the case of both agents and partners of
deceased persons. ' Si, vivo Titio, negotia ejus administrare ccepi, inter-
mittere, mortuo eo, non debeo : nova tamen inchoare necesse mihi non est ;
Vetera explicare, ac conservare necessarium est ; ut accidit, cum alter ex
sociis mortuus est : nam qufecunque prioris negotii explicandi causa geruntur,
nihilum refert, quo tempore consummentur, sed quo tempore inchoarentur.'
D. 3, 0, 21, 2. In our law, this rule does not exist with respect to agents
of deceased principals ; and Avith respect to surviving partners, though there
are exjiressions of text-writers (Story on P. § 34:4 ; 3 Kent, 63) , and also of
Judges (Harvey v. Crickett, 5 M. & S. 336 ; see Woodbridge v. Swann, 4 B. &
Ad. 633 ; Beak v. Beak, 3 Swans. 627 ; Lord Nottingham's MSS., and 1 Swans.
507, note), which have that aspect, there is no clear, satisfactory authority
that the surviving partner has a power, by virtue of the partnership relation
only, to transfer the legal title to the share belonging to the executors of
the deceased, to a third person, leaving the executors to pursue their reme-
dy against the survivor, if that authority is improperly exercised. It is
clear that the legal title to the share of the survivor passes, and the pur-
chaser, therefore, is at all events tenant in common with the executor ; and
as the law allows no right of action to one tenant in common against anoth-
er, so long as the subject of the tenancy exists, and is capable of recaption,
that circumstance will explain all the decisions on the subject, including
Harvey v. Crickett, 5 M. & S. 336 ; see Woodbridge v. Swann, 4 B. & Ad.
633. In Harvey v. Crickett the dicta of the Judges go much further ; prob-
ably Mr. Justice Bayley mistook the opinion of Lord Kenyon in Smith v.
Oriell, 1 East, 3G8, and we doubt whether surviving partners have a power
to sell, and give a good legal title to the share belonging to the executors
of the deceased partner, when they sell in order to pay the debts of the
deceased and of themselves ; but, be that as it may, we think it clear, that
the survivors could have no power to dispose of it otherwise than to pay
such debts, certainly not to mortgage that share together with their own
(for that is the real nature of this transaction), as a security for a debt
principally due from the surviving partners, and in part only from the de-
ceased, and in order to enable them to continue their trade. At all events,
therefore, this transaction was not within the scope of any implied authori-
ty which the surviving partners may have, to wind up the affairs of the part-
nership ; and therefore this conveyance did not pass the share of the de-
ceased to the plaintiffs, by virtue of any implied authority in the survivors."
Buckley v. Barber, 6 Exch. 164 ; 1 Eng. L. & Eq. 506.]
' Ante, § 319, 336. — There seems to be an exception as to the necessi-
ty of such a notice, when the surviving partners or one of them are execu-
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 551
carry on for the future the partnership trade or busi-
ness, or to engage in new transactions, contracts, or
liabilities on account thereof.^ It is, therefore, the
duty of the surviving partners henceforth to cease
altogether from carrying on the trade or business
thereof ; ^ and if they act otherwise, and continue the
trade or business, it is at their own risk, and they will
be liable, at the option of the representatives of the
deceased partner, to account for the profits made
thereby,^ or to be charged with interest upon the de-
ceased partner's share of the surplus, besides bearing
all the losses."*
tors of the deceased partner ; for then, in order to exonerate his estate
from future liability, it is said, that due notice ought to be given of his
death to the creditors of the firm, because in the absence of such notice,
the executor partner, in his character of personal representative of the de-
ceased, has power to bind his estate. Vulliamy v. Noble, S Mer. 593, 614.
But is this doctrine maintainable, except in cases where the usual articles of
agreement authorized the executor to carry on the partnership ? What au-
thority otherwise can he have to bind the testator's estate ?
• Gow on P. c. 5, § 4, p. 351, 352, 3d ed. ; 2 Bell, Comm. B. 7, c. 2, p.
637, 638, 643, 644; 3 Kent, 63.
2 [See Travis v. Milne, 9 Hare, 141.]
^ [See Chambers v. Howell, 11 Beav. 6, when they will not be liable for
profits.]
* See Willett v. Blanford, 1 Hare, 253; Coll. on P. B. 2, c. 1, § 1, p.
79, 2d ed. ; Id. B. 2, c. 3, § 4, p. 221-226 ; Booth v. Parks, 1 Molloy, 465 ;
Crawshay v. Collins, 15 Ves. 218; s. c. 2 Russ. 325; Brown v. Litton, 1 P.
Wms. 140; [Ogden v. Astor, 4 Sand. 311 ; Goodburn v. Stevens, 1 Md. Ch.
Dec. 420 ;] Hammond v. Douglas, 5 Ves. 539 ; Brown v. De Tastet, Jacob,
284, 292; Heathcote v. Hulme, 1 Jac. & W. 122; 3 Kent, 64; ante, § 329;
{§ 341, 349. On advantages derived from the ^partnership name and good-will
see § 99, 100. See also Lind. on P. 830; Willett v. Blanford, 1 Hare. 253 ;
Stocken v. Dawson, 6 Beav. 371; s. c. 9 Beav. 239; 17 Law J. n. s. Ch.
282; Rice v. Gordon, 11 Beav. 265; Wedderburn v. Wedderburn, 2 Keen,
722; s. c. 4 Myl. & C. 41 ; 22 Beav. 84; Featherstonhaugh v. Turner, 25
Beav. 382; Simpson v. Chapman, 4 De G. M. & G. 154; Townend v.
Townend, 1 Giff. 201 ; Washburn v. Goodman, 17 Pick. 519 ; Shelly v. Hiatt,
7 Jones, Law, 509.} — Where an election is made to have a decree for a share
of the profits, there it would seem that the surviving partners are, or at least
may be, entitled to all just allowances and deductions, and even to some com-
552 PARTNERSHIP. [cHAP. XIV.
§ 344. But here, also, the same qualifications and
limitations of the doctrine already stated, with refer-
ence to the rights, duties, powers, and authorities of
the partners, in cases of a dissolution by voluntary
consent, or by efflux of time, or by bankruptcy, apply
to cases of the surviving partners.^ Although, as to
future dealings, the partnership is terminated by the
death of one partner ; yet for some purposes it may
be said to subsist, and the rights, duties, powers, and
authorities of the survivors remain, so far as is neces-
sary to enable them to wind up and settle the affairs
of the partnership.^ And the ordinary rule is, that
upon the dissolution of a partnership by death, the
surviving parties are entitled to close up the afi"airs of
pensation for their skill and personal services. {§331.} Lord Eldon, in Craw-
shay V. Collins, 2 Russ. 325, 345, said : " And I cannot bring myself to think,
that, if it be clearly made out, that a business is carried on with the property,
which belonged to a deceased partner, for instance, by the surviving partner,
and no particular circumstances occur to vary the rule, the mere accident of
one man surviving the other can authorize him to say, ' I shall carry on the
trade by the application of the funds of the partnership, at the hazard of the
funds of the partnership, and I shall have the whole of the profits, and you
shall have no share of them.' There may, undoubtedly, be occasion for
making claims in the nature of just allowances; but I cannot bring myself to
think, that the interest, which at law survives in a continuing partnership,
survives in such a sense as to cut down the rule of equity, and that the con-
tinuing partners shall have to account for nothing, but the value of what
the share was at the time of the death or bankruptcy of the other partner.
Even if you were to lay down the rule, in that way, still you would have to
ask yourself, how is that value to be ascertained ? It cannot be done by the
surviving partner choosing to say, ' I shall take it at such a value.' There
must be some way of valuing it, so as to give the party retiring the complete
value ; and there must be some way, in which this Court will direct that
valuation to be made." See also the remarks of the same learned Judge
in Crawshay v. Collins, 15 Ves. 218, 226-228, and 2 Russ. 325, cited ante,
§ 322, note, and ante, § 343, note; Gow on P. c. 5, § 2, p. 254, 3d ed. ; Id.
c. 5, § 4, p. 355 ; Coll. on P. B. 2, c. 3, § 4, p. 226, 228, 229, 2d ed.
* Ante, § 324-328. } On the dissolution of a firm of attorneys by the
death of one of the members, see McGill v. McGill, 2 Metcalfe, (Ky.) 258.}
- Evans v. Evans, 9 Paige, 178; ante, § 328 a. {See Bank of N. Y. v.
Vanderhorst, 32 N. Y. 553; Hebcrton v. Jeijherson, 10 Penn. St. 124.}
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 553
the firm.^ They have, therefore, a right to receive the
debts due to the partnership,^ and, on the other hand, to
apply the partnership assets and effects in discharge of
the debts and other obhgations due by it.^ However,
if there be any danger of abuse or positive misappli-
cation of those funds by the surviving partners, a
Court of Equity will interpose, and restrain it by
injunction, and even appoint a receiver, upon the
application of the representatives of the deceased.^
' Evans v. Evans, 9 Paige, 178.
2 {Philips V. Philips, 3 Hare, 281.}
* Ante, § 325-328, 341; 2 Bell, Comm. B. 7, c. 2, p. 637, 638, 643,
644, oth ed. and § 328, note, where the language of Mr. Bell is cited. Coll.
on P. B. 2, c. 2, § 2, p. 130, 2d ed. ; Wood v. Braddick, 1 Taunt. 104 ;
Hutchinson v. Smith, 7 Paige, 26 ; Evans v. Evans, 9 Paige, 178. [See
Buckley v. Barber, 6 Exch. 164; 1 Eng. L. & Eq. 506.] {In Missouri it
has been held that a surviving partner can transfer a promissory note given
to the partnership. Bredow v. Mutual Savings Inst. 28 Mo. 181. Secus, if
the dissolution be voluntary and not caused by death, though one of the
partners die after dissolution and before transfer. Mutual Savings Inst. v.
Enslin, 37 Mo. 453. A note payable to the order of a firm was indorsed
in the name of the firm by one of the partners who afterwards died : Held,
that the delivery of such note by the surviving partner did not pass the title.
Glasscock V. Smith, 25 Ala. 474. In Pennsylvania it has been held, that a
surviving partner may sell goods consigned to the firm for sale before the
death of his co-partner, so as to bind the estate of such partner for the
price received for such goods. Heberton v. Jepherson, 10 Penn. St. 124.
See § 322, and notes. |
* Gow on P. c. 5, § 2, p. 230, 231, 3d ed. ; Id. c. 5, § 4, p. 356, 357;
Philips V. Atkinson, 2 Br. C. C 272, and Mr. Belt's note ; Coll. on P. B. 2,
c. 3, § 4, p. 226, 2d ed. ; Id. B. 2, c. 3, § 5, p. 235 ; Id. B. 4, c. 1, p. 588 ;
Hartz 17. Schrader, 8 Ves. 317; Estwick v. Conningsby, 1 Vern. 118;
Burden v. Burden, 1 Ves. &B. 170; 3 Kent, 63 ; 2 Bell, Comm. B. 7, c. 2,
p. 645, 5th ed. ; 1 Story, Eq. Jur. § 672 ; ante, § 228, 231 ; Evans v. Evans,
9 Paige, 178 ; {§ 330 ; Morison v. Moat, 9 Hare, 241 ; Madgwick v. Wim-
ble, 6 Beav. 495 ; Hawkins v. Hawkins, 4 Jur. x. s. 1044 ; Walker v. House,
4 Md. Ch. 39 ; Bilton v. Blakely, 7 Grant, (U. C.) 214. If the estate of a
deceased person consists of his share in a business which he was carrying
on in partnership at the time of his death, and which the surviving partner
continues to carry on, an administrator pendente lite will not be appointed by
the probate court against the wishes of such partner, unless a strong case
is made, that he is dealing improperly with the business. Horrell v. Witts,
Law Rep. IP. & D. 103.}
554 PARTxXERSHIP. [cHAP. XIV.
§ 345. And, here, we have an analogous rule promul-
gated in the Roman law in the case of agency, as well
as in the case of partnership. Si, vivo Titio, negotia
ejus administrcu^e ccepi, intermittere, mortuo eo, non
debeo. jVova tanien inchoare necesse miki non est;
Vetera explicare ac conservare necessarium est ; ut acci-
dit, cum alter ex sociis mortuus est Nam qucecunque
prioris negotii explicandi causa geruntur. niliUum refert,
quo tempore consummentur, sed quo temp)ore inchoaren-
tur}
§ 346. One of the consequences, then, of a dissolution
of a partnership by death (under the qualification and
limitations above suggested) is, that the personal repre-
sentatives of the deceased become tenants in common
with the survivors of all the partnership property and
effects in possession.^ We say, the partnership property
and effects in possession ; for there is at the common
law a material distinction between such property and
effects in possession, and choses in action, debts, and
other rights of action, belonging to the partnership. The
latter, at law, belong to the survi^dng partners ; ^ and
they possess the sole and exclusive right and remedy to
reduce them into possession ; although, when so recov-
ered, the survivors are regarded as trustees thereof, for
' D. 3, 5, 21, 2 ; Poth. Pand. 3, 5, n. 50.
* Gow on P. c. 5, § 4, p. 351, 3d ed. — What, properly speaking,
constitutes partnership property, has been already in part considered, and
■will occur again incidentally in another connection hereafter. The subject
as to the good-will of an establishment,~^nd of the right to use the firm
name by the surviying partners, after the death of one partner, has been
already adverted to. Ante, § 98-100, and note, Ibid. ; Lewis v. Langdon,
7 Sim. 421.
' {And he may recover in trover against the administrator of the deceased
partner for notes due the partnership which were in the possession of the
deceased at the time of his death. Stearns v. Houghton, 38 Vt. 583. In a
suit by a surviving partner, to recover a debt due to the firm, the defendant
may set off a debt due to him from the surviving partner alone. Holbrook r.
Lackey, 13 Met. 132.}
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 555
the benefit of the partnership, and the representatives of
the deceased partner possess, in equity, the same right
of sharing and participating in them, which the deceased
partner would have possessed, if he had been Uving.^
1 Gow on P. c. 5, § 4, p. 348, 358, 3d ed. ; Martin v. Crompe, 1 Ld.
Raym. 340; Coll. on P. B. 3, c. 5, § 2, p. 471, 2d ed. ; Id. § 2, p. 474, 2d
ed.'; 1 Story, Eq. Jur. § 676, 677 ; 2 Bell, Coram. B. 7, c. 2, p. 637, 638,
643, 644, 4th ed. ; [Wilson v. Soper, 13 B. Mon. 411] ; {Felton v. Reid, 7
Jones, Law, 269.] — There is nothing in this doctrine peculiar to cases of
partnership ; for the same rule applies to cases of several obligees, cove-
nantees, and other joint contractees, having a joint interest in the contract ;
for in every such case, upon the death of one, the action must be brought in
the name of the survivors. Coll. on P. B. 3, c. 5, § 1, p. 471, 472, 2d ed.
And reciprocally at law (for it is different in equity) an action lies solely
against the survivors, at the suit of third persons, for any debt or other ob-
ligation due by the partnership. Coll. on P. B. 3, c. 3, § 4, p. 404—413, 2d ed. ;
1 Story, Eq. Jur. § 676, 677, 679, 680 ; Scholefield v. Heafield, 7 Sim. 667 ;
Gow on P. c. 0, § 4, p. 351, 352, 3d ed. ; Id. p. 356-358. Uv. Gow (p. 358,
359, 3d ed.) has assigned the technical reasons for this doctrine (which
seems not known in the Roman law, or in the modern law of continen-
tal Europe), as follows: "The right of action must necessarih^ survive ;
otherwise, according to the technicalities of law, there would be a failure of
justice ; for the rights of the executor and of the survivor being of sev-
eral natures, if they joined in the same suit, there consequently must be
several judgments, which in a single action is not allowed. Substan-
tially, however, the right of the representative of the deceased is not
varied by this legal anomaly ; for, there being no survivorship in point of
interest, the instant any joint chose in action is reduced into possession by
the legal process of the survivor, the right of the representatives to their
distributive portion attaches. So, with respect to joint contracts entered
into by a firm, and from which a joint legal responsibility results, it can at
law, after the death of one partner, be enforced against the survivor alone,
and finally against the representatives of the last survivor ; for the law con-
siders partnership contracts which are joint in form, as producing only a
joint obligation, which, on the death of one, attaches exclusively upon the
survivor. Indeed, the reason which has been advanced as operating to
prevent personal representatives from asserting, jointly with the survivor, a
right resulting to the partnership firm, applies with undiminished force, if
a right accruing to a stranger from the firm should be attempted to be en-
forced against them and the survivor. Executors or administrators, if legally
responsible, could only contract such a responsibility by the assumption of
their representative characters ; and it therefore follows, that they could
only be charged de bo)iis testatoris, whereas the surviving partner would be
liable de bonis propriis. So that the judgments must be different, as they
applied either to the survivor, or to the representatives of the deceased
556 PARTNERSHIP. [CHAP. XIV.
However, the representatives of the deceased partner
cannot, strictly speaking, be deemed partners with the
survivors. But still a community of interest subsists
between them, which is necessary for the windmg up of
the affairs of the partnership, and requires that what
was partnership property before, shall continue so, for
the purpose of being applied to the discharge of all the
proper debts and obligations thereof, and for a final dis-
tribution of the surplus, according to the rights and
shares of all the partners.^
§ 347. It may be further remarked, that, as it becomes
the duty of all the parties in interest, upon a dissolution
by death, with all practicable diligence to wind up and
settle the partnership concerns, to pay the partnership
debts and obligations, and to distribute the surplus
among those who are entitled to it, according to their
respective shares therein, each party in interest has a
right, in case of any improper delay, or danger of loss,
or neglect of duty, to require the aid of a Court of
Equity to enforce the duty, and to compel a full account
and settlement of the whole concern.^ Hence the per-
partner. And little inconvenience arises from the present rule ; for, not-
withstanding the surviving partner is liable for the whole debt in the first
instance, he can call upon the executor of his copartner for a contribution.
Nor is there any hardship upon the creditor, since, in the event of the insol-
vency of the surviving partner, we shall presently see that he has a remedy
in equity against the estate of the deceased."
* Gow on P. c. 5, § 4, p. 351, 3d ed. ; Ex parte Williams, 11 Ves. 3, 5 ;
Wilson V. Greenwood, 1 Swans. 471 ; Crawshay v. Maule, 1 Swans. 495,
506 ; Beak v. Beak, 3 Swans. 627 ; 2 Bell, Comm. B. 7, c. 2, p. 637, 638,
643, 644, 5th ed. ; 3 Kent, 63 ; ante, § 325-328 ; Evans v. Evans, 9 Paige,
178. {The executors of a deceased partner have no lien on the stock in trade
substituted by the surviving partner who has continued the business in place
of the partnership stock which he has sold. Payne v. Hornby, 25 Beav.
280.}
* Evans v. Evans, 9 Paige, 178. — A bill of this sort strongly resembles
the action, pro socio, of the Roman law, which was designed to effect the
same and other purposes. 2 Bell, Comm. B. 7, c. 2, p. 646, 5th ed. ; Poth.
Pand. 17, 2, n. 30-53; Poth. de Soc. n, 161.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 557
soiial representatives of the deceased partner have a
right to insist upon the application of the joint prop-
erty, in the hands of the survivors, to the payment of
the joint debts, and a division of the surpkis.^ And as
this can ordinarily be done only by a sale and conver-
sion of the property into money, they are entitled to
have the property sold for this purpose.^ And if within
a reasonable time the survivors do not account with
them, and come to a settlement, a Court of Equity will
entertain a bill for this purpose, and will, in aid thereof,
if necessary, restrain the partners by injunction from
disposing of the joint property, and from collecting the
outstanding debts.^ So, the surviving partners have
each against the others a like right to insist upon a
final adjustment and settlement of the partnership ac-
counts, and a distribution of the surplus ; but in such
a suit the personal representatives of the deceased part-
ners are necessary parties ; for they have an equal in-
terest therein with the survivors, and would not be
concluded by any decree made in the premises, unless
they were made parties.'*
1 ExiKirte Ruffin, 6 Ves. 119, 126 ; Gow on P. c. 5, § 4, p. 352, 3d ed.
^ Evans V. Evans, 9 Paige, 178; {post, § 350, 351.}
* Gow on P. c. 5, § 4, p. 352, 3d ed. ; Hartz v. Schrader, 8 Ves. 317 ;
ante, § 329-330, 344 ; Coll. on P. B. 2, c. 3, § 4, p. 226, 227, 2d ed.
* Gow on P. c. 5, § 4, p. 352, 3d ed. ; Coll. on P.B. 2, c. 3, § 4, p. 226,
227, 2d ed.— INIr. Bell (2 Bell, Comm. B. 7, c. 2, p. 645) has summed the
general results of the dissolution of the partnership, and the mode of settle-
ment of the partnership concerns, as follows:- "Until the tinal settlement
of the partnership ali'airs, and the payment of the joint debts, and distiu-
bution of the joint property, it cannot correctly be said, that the partnership
is determined. 1. On the dissolution of partnership, the property is com-
mon, to be divided according to the shares of the partners after the payment
of debts. This consists of the following particulars : 1st, The stock in
trade, as originally contributed, with all the additions made to it. 2d, Real
estates acquired by the company ; leases of premises for the use of the
company ; ships purchased or freighted on time. 3d, The good-will of a
mercantile or literary establishment seems to form a part of the common
stock. 2. The partners, or either of them, may insist on a sale as the best
558 PARTNERSHIP. [CHAP. XIV.
§ 348. In taking the account between the partners
upon any dissokition, each, of course, becomes charge-
able with all the debts and claims, which he owes, or is
accountable for, to the partnership ; with all interest
accruing upon the same debts and claims ; and with all
profits, which he has made out of the partnership
effects during the partnership, or since the dissolution,
either rightfully or by misapplication thereof^ Similar
provisions existed in the Roman law, which are labori-
ously collected by Pothier, in his edition of the Pan-
dects ; ~ and from that law they have been transferred
into the modern law of France.^
§ 348 a. If any partner has made advances to the
firm, and others have received advances from it, these
do not constitute debts, strictly speaking, until the con-
criterion of the value of the property ; and this the Court may order, with-
out waiting the final adjustment of interests, where it is manifest that there
must be a dissolution. 3. The common property thus converted, with the
pecuniary funds when collected, forms a fund, over which the creditors of
the concern have a primary and preferable claim ; and it must be so applied,
in the first place, before any partner, or his assignee or representatives,
can claim a share. 4. In taking an account between the partners them-
selves, the state of the stock is to be taken as at the dissolution (death for
instance) , and the proceeds thereof until it is got in ; and each is to be
allowed whatever he has advanced to the partnership, and to be chai'ged
with what he has failed to bring in, or has drawn out more than his just
proportion. The partners are to be allowed equal shares of the profit and
stock, if there be no other arrangement settled. But a different arrange-
ment may be established either by contract or by the books and usage of
the company. 5. The surviving partners are to wind up the affairs, unless
some fault or abuse is chargeable against them, or some danger from their
intromissions, which may require the appointment of a neutral person, or
the requisition of caution. 6. The same confidence, which was placed in
the partner, is not necessarily reposed in his representatives ; and, therefore,
whei-e both or all the partners die, the Court will appoint a receiver."
» Gow on P. c. 5, § 12, p. 255, 256, 3d ed. ; Id. § 3, p. 302, 303 ; Id.
§ 4, p. 355 ; Coll. on P. B. 2, c. 2, § 1, p. 122, 123, 2d ed. ; Id. B. 2, c. 3,
§ 4, p. 221, 222 ; ante, § 329, 341, 343 ; Burton v. Wookey, 6 Madd. 367 ;
Brown v. Litton, 1 P. Wms. 140 ; Crawshay v. Collins, 15 Ves. 218, 220.
2 Poth. Pand. 17, 2, n. 35-45.
3 Poth. de Soc. n. 167 ; Id. n. 109-132.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 559
cern is wound up, but only as items in the account be-
tween the partners.^
§ 349. In respect to the mode of taking the accounts
between the partners, that must depend upon circum-
stances.^ If the partners have by the articles of part-
1 Richardson v. Bank of England, 4 Myl. & C. 165, 172.— On this oc-
casion Lord Cottenham said, speaking of debtor and creditor partners :
" But though these terms ' creditor' and ' debtor' are so used, and sufficiently
explain what is meant by the use of them, nothing can be more inconsistent
with the known law of partnership than to consider the situation of either
party as in any degree resembling the situation of those whose appellation
has been so borrowed. The supposed creditor has no means of compelling
pavment of his debt ; and the supposed debtor is liable to no proceedings
either at law or in equity, assuming always that no separate security has
been taken or given. The supposed creditor's debt is due from the firm of
which he is a partner ; and the supposed debtor owes the money to himself
in common with his partners ; and, pending the partnership, equity will not
interfere to set right the balance between the partners. Indeed it could
not do so with effect, inasmuch as immediately after a decree has enforced
payment of the money supposed to be due, the party paying might, in exer-
cise of his power of a partner, repossess himself of the same sum. But if,
pending the partnership, neither law nor equity will treat such advances as
debts, will it be so after the partnership has determined, before any settle-
ment of account, and before the payment of the joint debts or the realization
of the partnership estate ? Nothing is more, settled than that, under such
circumstances, what may have been advanced by one partner, or received
by another, can only constitute items in the account. There may be losses,
the j^artlcular partner's share of which may be more than sufficient to ex-
haust what he has advanced, or profits more than equal to what the other
has received ; and until the amount of such profit and loss be ascertained
by tlie winding up of the partnership affairs, neither party has any remedy
against, or liability to, the other, for payment from one to the other, of what
may have been advanced or received. In Crawshay v. Collins. Lord Eldon
says, ' Where a sum is advanced as a loan to an individual partner, his profits
are first answerable for that sum ; and if his profits shall not be sufficient
to answer it, the deficiency shall be made good out of his capital ; and if
both his profits and his capital are not sufficient to make it good, he is con-
sidered as a debtor for the excess.' The money drawn out by any partner
ceases to be part of the joint stock, so that, upon bankruptcy, the joint creditor
cannot recall it, unless there had been a fraudulent abstraction ; Ex parte
Younge. Again, in Foster v. Donald, Lord Eldon says, ' If a partner, as
partner, receives money belonging to the firm, and, admitting that he has re-
ceived it, insists thai there is a balance in his favor, there is no pretence for
making him pay it in.' " Ante, § 229.
2 {See Lind. on P. 659-664 ; Levi v. Karrick, 13 Iowa, 344.}
560 PARTNERSHIP. [CHAP. XIV.
nership provided a particular mode, that will be held to
furnish the true rule for the adjustment of the concern,
and the winding up of all the affairs thereof; unless
the partners, by their own acts and conduct, have
waived, or abandoned it ; for, in that event, the stipu-
lation in the articles, as to the mode, will be held
a nullity.^ In the absence, however, of any positive
stipulations, or the abandonment of them by the acts
and conduct of the parties, Courts of Equity, as
between the partners, will commence with the last
stated account between them ; and deem that conclu-
sive upon all antecedent transactions, unless, indeed,
some gross and palpable error or fraud can be shown.^
If there has not been any stated account or any
positive or implied settlement at any period, then, of
course, the accounts must be taken from the period of
the commencement of the partnership.^ If profits have
accrued since the death of the partner, by the employ-
ment of the capital or otherwise, that will be treated as
an accession to the capital, and as joint property sub-
ject to all just allowances and deductions.'*
1 Ante, § 192 ; Gow on P. c. 5, § 4, p. 353, 354, 3d ed.; Jackson v. Sedg-
wick, 1 Swans. 460, 469 ; Pettj-t v. Janeson, 6 Madd. 146 ; 2 Bell, Comm. B.
7, c. 2, p. 645, 647, 648, 5tli ed.
=* Ante, § 206.
3 Ante, § 206, 207, 347 ; Gow on P. c. 5, § 4, p. 354, 355, 3d ed. ; Beak
V. Beak, Eep. Temp. Finch, 190 ; s. c. 3 Swans. 627 ; Coll. on P. B. 2, c. 2,
§ 2, p. 144, 145, 2d ed. ; Id. B. 2, c. 3, § 4, p. 212-214. {Gill v. Geyer, 15
Ohio St. 399.}
* Willett V. Blanford, 1 Hare, 253, 265; ante, § 329, 341, 343, and note;
Gow on P. c. 5, § 4, p. 354, 356, 3d ed. ; Brown v. Litton, 1 P. Wms.
140 ; Hammond v. Douglas, 5 Ves. 539 ; Crawshay v. Collins, 15 Ves. 218,
and Hill v. Burnham, and Coxwell v. Bromet, cited there, p. 220, 223 ;
Brown v. De Tastet, Jac. 284 ; Burden v. Burden, 1 Ves. & B. 170 ; Coll.
on P. B. 2, c. 3, § 1, p. 165, 2d ed. ; Id. B. 2, c. 3, § 4, p. 221, 222 ; 2 Bell,
Comm. B. 7, c. 2, p. 647, 648, 5th ed. ; {Bate v. Robins, 32 Beav. 73; Wat-
neyi\ Wells, Law Pep. 2 Ch. 250; Tyng v. Thayer, 8 All. 391.} Many
other matters, connected with the taking of the accounts between the partners,
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 561
§ 350. Another question which ordinarily arises
between the partners in cases of a dissolution by
arise incidentally in the course of the adjustment, under the direction of Courts
of Equity ; such, for example, as the allowance of interest for or against part>
ners for advances made to or by them ; [see ante, § 182 a] ; so for separate
debts due from the other partners to one partner. These and many similar
questions will be found discussed in other elementarj' treatises ; but they are
not within the scope of the present Commentaries, which do not purport to
deal with the minute details fit for the consideration of an accountant. See,
on this subject, Gow on P. c. 2, § 4, p. 105, 106, 3d ed. ; Id. c. 5, § 3, p.
236; Id. c. 5, § 4, p. 356-358; Coll. on P. B. 2, c. 3, § 4, p. 200,
212-221, 229-231, 2d ed. ; [Beacham v. Eckford, 2 Sand. Ch. 116.]
Mr. Collyer has well remarked (p. 214): "In taking the partner-
ship accounts, it is mainly to be considered, what was the value of the
joint property, and what the amount of the joint debts at the time of
the dissolution ; what was the share of the retired, deceased, or bankrupt
partner, in the joint property ; whether, and to what extent, the joint
capital has been employed, or joint debts incurred, since the dissolution;
whether any of the joint property in specie has been sold since the disso-
lution ; if so, what the gross amount, and what the interest of the profits ;
on the other hand, whether any of the joint property in specie having been
sold, the profits have been applied to the purchase of other property in
specie ; and generally, whether, and to what extent, the joint property has
been traded with since the dissolution. These, with many other considera-
tions bearing on each particular case, must be duly weighed in the arrange-
ment of complicated partnership accounts. And it may here be remarked,
that the account is founded on the same principles, in whatever manner the
dissolution may have taken place ; whether, therefore, the aifairs are to be
adjusted between the remaining and retiring partner, the surviving partner
and the executors of the deceased partner, or the solvent partner and the
assignees of the bankrupt partner." The following remarks of Vice-Chan-
cellor Wigram, in Willett v. Blanford, 1 Hare, 253, 269-272, deserve to be
here cited as to the mode in which profits are to be shared which are made
after the death of one partner, as showing that no universal rule can be
laid down. " The circumstances of some cases would almost exclude the
possibility of making a decree in any other form than that which the plaintiiFs
claim in this case. Take, for example, the case suggested by Lord Eldon,
in Crawshay i\ Collins, of the mere conversion into money, at a large profit,
long after the testator's death, of the very property which belonged to the
partnership at his death, and no other circumstance to embarrass the ques-
tion. Again, the dissolution of a partnership prima facie prevents new
contracts being made on the joint account of the partners ; but it necessarily
leaves the old contracts of the partnership to be wound up. In the absence
of circumstances to alter the case, it would be impossible to deny the right
of the estate of a deceased partner to participate in the profits arising from
36
562 PARTNERSHIP. [CHAP. XIV.
death (which is equally applicable, indeed, to other
cases of dissolution), is, in what manner the partner-
winding up of the old concerns ; and if, in such a case, the surviving partners
should have so mixed up new dealings with the old, that the two could not
be separated, the right of the estate of the deceased partner to share in the
profits of the new dealings might unavoidably attach. In another case, a
partnership may be formed, the substratum of which may consist of specific
things of peculiar value in their use, as, for example, patents, the inven-
tion or property of one of the partners ; and the profits made after the
death of the patentee, or owner of the patent, may be derived wholly or
principally from contracts subsisting at his death, but not wound up until
long afterwards ; or contracts entered into after his death, of which con-
tracts his specific property (the patents) may have been the media. In such
a case, in the absence of special circumstances, it would be difficult to sug-
gest a principle upon which the estate of the deceased partner should be
refused the same proportion of the profits which he enjoyed in his lifetime.
This appears to me to be the ground of the ultimate decision in Crawshay
V. Collins. Again, the whole, or the substantial part, of a trade, may
consist in good-will, leading to renewals of contracts with old connections.
In such a case, it is the identical source of profit which operates both before
and after dissolution ; and this appears to me to be the groundwork of Lord
Eldon's reasoning, in Cook y. CoUingridge. Circumstances may be suggested
of a very diiferent kind. Take the case of a business, in which profit is made
by the personal activity and attention with which the use of the money
capital is directed, and the case may require a different determination.
Brown v. De Tastet ; Featherstonhaugh v. Fenwick. Or, there may be the
case of two persons being partners together, in equal shares ; one finding
capital alone, and the other finding skill alone ; and suppose the latter,
before his skill had established a connection or good-will for the concern,
should die, and the survivor, by the assistance of other agents, should
carry on the concern upon the partnership premises, — it could scarcely be
contended, afler a lapse of years, that the estate of the deceased partner was
entitled as of course to a moiety of the profits made during that lapse of time
after his death ; and if his estate would not be so entitled where the deceased
partner had left no capital, itVould be difficult to establish a right to a moiety,
only because he had some small share of the capital and stock in trade en-
gaged in the business at his death, without reference to its amount, and the
other circumstances of the case. If, on the other hand, the skill of an indi-
vidual, without capital, had been exercised as a partner in a concern, until
it has created a connection and good-will, and, upon his death, his surviving
partner, instead of giving to the estate of the deceased the benefit of that good-
will by«a sale of the concern, should think proper to carry on the concern
for his own benefit until the connection and good-will were lost ; it would
not be difficult to justify a decree which, in such a case, should declare the
estate of the deceased entitled to share any profits made afler his death.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 563
ship effects and assets are to be divided, after all the
charges and the debts and obligations due to third
persons have been duly paid and discharged. In
other words, how are the effects and assets, whether
real, personal, or mixed, to be valued, so as to make
an equal distribution of them among the partners,
according to their respective shares thereof. In rela-
tion to the real estate of the partnership, it seems to
have been generally considered, that it ought to be
decreed to be sold, as the only fair and just way (in
the absence of any other ageeement between the par-
ties) to ascertain its true value. ^ The same rule would
If capital were to be taken as the basis upon which, in every case, the pro-
portion of profits was to be calculated, much injustice would often ensue.
In partnership cases, the agreed capital of a concern is considered in
general as remaining the same, notwithstanding one partner may make ad-
vances to, and the other abstract money from the concern. If, at the death
of an acting partner, he had abstracted or borrowed money from the part-
nership exceeding the amount of his property in the concern, it would be
any thing but justice to hold, as a rule of course, that his right to partici-
pate in the profits after his death should continue to the same extent as if
his accounts with the partnership Avere adjusted, and he had given his time
and attention to the business. The distinction also between capital and
stock in trade, which forms so material a subject of consideration in Craw-
shay V. Collins, would often make it unjust to take the agreed amount of
capital in partnership as a basis upon which to found a general rule applica-
ble to the estate of a deceased partner. I consider myself, therefore,
bound by authority and reason, to hold, that the nature of the trade, the
manner of carrying it on, the capital employed, the state of the account
between the partnership and the deceased partner at the time of his death,
and the conduct of parties after his death, may materially affect the rights
of the parties ; and that I must have more infoi'mation than I now possess
before I can safely decide this case."
1 Coll. on P. B. 2, c. 3, § 4, p. 204-214, 2d ed. ; Id. p. 214-216 ; Cook
V. Collingridge, Jac. 607 ; 2 Bell, Coram. B. 7, c. 2, p. 632, 645, 5th ed. ;
3 Kent, 64 ; Crawshay v. Collins, 15 Ves. 218, 227 ; Crawshay v. Maule, 1
Swans. 495, 506, 523 ; Gow on P. c. 5, § 2, p. 234, 235, 3d ed. ; {Lind. on
P. 857. A. and six others, who were jointly entitled to several leases of a
colliery, worked it as partners. Held, on a dissolution, that A. could not in-
sist on a partition, though there might be no debts ; but that the whole must
be sold. Wild v. Milne, 26 Beav. 504.}
564 PARTNERSHIP. [CHAP. XIV.
seem equally to apply to all cases of chattels and
other personal property and effects, which are not capa-
ble in themselves of being exactly divided, without
reference to their positive and absolute value. ^ As to
chattels and other personal property, capable of such
a division, the same rule, as to a sale, may not neces-
sarily and under all circumstances apply. But the
true doctrine of Courts of Equity on this subject
would seem to be, in all cases, to decree a sale of the
partnership property, rather than a division thereof in
kind, whenever a sale would be most beneficial for
the interests of all the partners.^
§ 351. The doctrine has sometimes been strenuously
contended for, that upon the dissolution of the partner-
ship by the retu-ement, or death, or bankruptcy of one
partner, the others had a right to take the whole part-
> Ibid.
2 Ibid. ; Rigden v. Pierce, 6 Madd. 353; Coll. on P. B. 2, c. 2, § 2, p.
146, 147, 2d ed. ; Id. B. 2, c. 3, § 4, p. 206-211, 214-216. —Mr. Gow (Gow
on P. c. 5, § 2, p. 235, 237, 3d ed. ; Id. p. 252, 253) insists upon the right
of any partner to insist on a sale in aU cases. He says (p. 234) : "When
the common property is ascertained, either partner may insist upon a sale
of the whole concern. The rights of the partners respectively are then pre-
cisely equal ; each may require the -whole concern to be wound up by a sale,
and a division of the produce. One partner has no claim upon his individ-
ual proportion of a specific article, nor can he insist upon an exclusive right
in it ; but he is entitled only to a general arrangement of the partnership
concerns, and for that purpose to an account of the produce of the aggre-
gate joint effects. He cannot separate his share from the bulk of the joint
property, nor compel his copartner to accept what, according to a valuation,
his interest may be worth. That is not the mode in which a Court of Equity
winds up the concerns of a partnership. But in every case, in which that
Court interferes in closing the transactions of a firm, it directs the value of
the whole of the joint property, whether real or personal, to be ascertained,
in the way in which it can be best ascertained, viz. by a sale and its conversion
into money." In Fereday v. Wightwick, Taml. 250, 261, Sir John Leach,
•Master of the Rolls, said: "It is a principle, that all property, whether
real or personal, is subject to a sale on a dissolution of the partnership."
Mr. Chancellor Kent lays down the same doctrine in his Commentaries. 3
Kent, 64.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 565
nership property and effects at a valuation. But this
doctrine has been completely repudiated by Courts of
Equity, as equally unfounded in principle and public
policy.' In short, it would amount to a right of pre-
> Gow on P. c. 5, § 2, p. 234, 235, 3d ed. ; ante, § 350; Coll. on P. B.
2, c. 3, § 4, p. 206-211, 2d ed. ; Crawshay v. Collins, 15 Ves. 218, 227 ;
Crawshay i'. Maule, 1 Swans. 495 ; Fox v. Hanbury, Cowp. 445 ; Feather-
stonhaugh v. Fenwick, 17 Ves. 298 ; Wilson v. Greenwood, 1 Swans. 471 ;
Cook V. CoUingridge, Jac. 607; Sigourney v. Munn, 7 Conn. 11. — In
Featherstonhaugh v. Fenwick, 17 Ves. 298, 309, 310, Sir William Grant
said : " The next consideration is, whether the terms upon which the defend-
ants proposed to adjust the partnership concern, were those to which the
plaintiff was bound to accede. The proposition was, that a value should be
set on the partnership stock ; and that they should take his pi-oportion of it
at that valuation ; or, that he should take away his share of the property
from the premises. My opinion is clearly, that these are not terms to which
he was bound to accede. They had no more right to turn him out, than he
had to turn them out, upon those terms. Their rights were precisely equal ;
to have the whole concern wound up by a sale, and a division of the pro-
duce. As, therefore, they never proposed to him any terms which he was
bound to accept, the consequence is, that, continuing to trade with his stock,
and at his risk, they come under a liability for whatever profits might be
produced by that stock." In Crawshay v. Collins, 15 Ves. 218, 227, Lord
Eldon (after making the remarks already stated, ante, § 322, note), added:
"As to the case now before the Court, of the bankruptcy of one partner,
supposing it the simple case of profit made by the mere sale of the proper-
ty, there must be an account. It is said, a duty was imposed upon the as-
signees to call for the account. That is true. It is further urged, that they
could not be traders in new adventures. That also is in a sense true. But
the proposition would be rash, that there can be no case in which they could
trade with consent of the creditors, or of the creditors and the bankrupt to-
gether. If they had the consent of all persons interested, I do not know that
other persons, with whom they might deal, could make the objection. The
duty is not as between them and the other persons, who are not properly to be
termed remaining or surviving partners, the destruction of one being, un-
less it is otherwise provided, a dissolution of the whole partnership, as if by
effluxion of time, or by death, except as it may be reasoned upon the ef-
fect in bankruptcy of the substitution of assignees. It is, however, no
more the duty of the assignees to settle with the others, than it is their duty
to settle with the assignees. Is it possible, then, to say, that upon any rule
of law the other partners can take, as sole owners, all the houses, buildings,,
and stock in trade ? The consequence of the destruction and dissolution of
the partnership is, that they became tenants in common in each and every
article embarked in it, under an obligation to deal with the whole of the
566 PARTNERSHIP. [CHAP. XIV.
eminence or superiority in some of the partners over
the rest, upon any dissokition, to compel them to sub-
mit to a particular mode of sellmg their rights in the
property, upon such terms as the others should choose
to prescribe ; a right utterly inconsistent with the ac-
knowledged principles of the equality of rights and of
powers and authorities of all the partners.^
§ 352. The Roman law, in like manner, contained
provisions for the due settlement and distribution of
the partnership effects, as, indeed, every system of juris-
prudence must, which aims at any moderate administra-
tion of public or private justice. The action. Pro socio,
seems properly to have applied to the due taking of the
accounts of the partnership, and the action, Commimi
dividundo, to the distribution of the effects.^ And cer-
tain rules were laid down, as to what charges and allow-
ances were to be made for or against each partner, and
the reciprocal rights, which each has against the others
stock, and every article, as the equitable title of the bankrupt and themselves
requires ; and, according to the case of Fox v. Hanbury, the right is not to
an individual proportion of a specific article, but to an account ; the proper-
ty to be made the most of and divided." Mr. Collyer has summed up the
general result of the cases in the following terms (p. 210) : " It appears,
therefore, that in all cases of partnership at will, whether the contract was
originally of that nature, or has become so by effluxion of time -or other
circumstances, a Court of Equity will, upon a dissolution, decree a sale of
the entirety of the partnership effects at the desire of any of the parties.
And even in the case of a partnership with articles, supposing it to be dis-
solved for the misconduct of one partner, a case might be stated, where a
Court of Equity would decree a general sale and account, as of a partner-
ship at will, notwithstanding express provisions in the articles, as to the pro-
ceedings to be had upon a dissolution."
^ Ibid. {But though a partner cannot insist on it as a matter of right, a
Court of Equity may order his share to be taken at a valuation when it is
most for the benefit of all concerned. Lind. on P. 858 ; Leaf v. Coles, 1
De G. M. &G. 171 ; Prentice v. Prentice, 10 Hare, app. xxii. ; Smith v. Mules,
9 Hare, 556, 572. }
* D. 10, 3, 1-31 ; Id. 17, 2, I. 52, 57, 65; Poth. Pand. 10, 3, n. 6; Id.
17, 2, n. 38-54; Poth. de Soc. n. 161.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 567
upon the final adjustment.^ But a special enumeration
thereof would rather be a matter of liberal curiosity,
than of practical utility or illustration of our jurispru-
dence.
§ 353. The French law also contains a minute enu-
meration of the mode of settling the accounts, and of
making a distribution of the effects upon the dissolu-
tion of partnerships.^ In some material respects, it
' Poth. Panel. 17, 2, n. -35-49 ; Domat, 1, 8, 5, art. 16.
2 Poth. de Soc. n. 167-174. —Pothier says (167, 168): "Avant que
de proceder au partage, on doit proceder au compte de ce que chacune des
parties doit a la communaute, qui est a partager, et de ce qui lui est du par
la dite communaute. On doit comprendre dans cet etat, non-seulement ce
qu'elle devoit a la societe lors de sa dissolution, mais ce qu'elle a pu devoir
a la communaute depuis la dissolution, soit pour raison de ce qu'elle auroit
retire du fends commun, soit pour raison du dommage qu'elle auroit cause
par sa faute dans les efFets de la communaute. Pareillement on doit
comprendre dans Tetat de ce qui est du par la communaute a chacune des
parties, non-seulement ce qui lui etoit du par la societe lors de sa dissolu-
tion, mais ce qui a pu lui etre du depuis par la communaute a cause des
debourses qu'elle auroit faits utilement pour les affaires communes, ou
pour les biens de la (jommunaute, depuis la dissolution de la societe. On
doit compeuser jusqu"a due concurrence le montant des sommes dont cha-
cune des parties est debitrice de la communaute, au montant de celles, dont
elle est creanciere, et arreter la somme dont elle se trouve, apres cette com-
pensation faite, debitrice de la communaute, ou celle, dont elle se trouve,
apres cette compensation faite, creanciere de la communaute. Observez
que, dans le comte de ce, qui a ete regu ou mis pour la societe, le livre de
societe tenu par Fun des associes fait foi entre eux ; Laidcrhacli. Apres ce
compte fait, on dresse la masse, c'est-a-dire, un etat detaille de toutes les
diffi6i'entes choses dont la communaute est composee ; et on comprend dans
cette masse, au nombre des dettes actives de la communaute, les sommes,
dont quelques-unes des parties se sent trouvees, apres la compensation faite,
debitrices de la communaute ; et au partage de la communaute, on la leur
precorapte sur leur part. On dresse aussi un etat des dettes passives de la
conununaute, et on y comprend les sommes, dont quelques-unes des parties
se seroient trouvees au compte de la communaute, apres compensation faite,
creancieres de la communaute. Ces sommes doivent etre par elles prelevees
au partage de la communaute. Chacune des choses dont la communaute est
composee, soit meubles, soit heritages, est portee dans cette masse pour une
certaine estimation. Les parties peu vent faire elles-memes cette estimation,
lorsqu'elles sont en ^tat de la faire, qu'elles en sont d'accord, et qu"elles sent
toutes majeures ; sinon Testimation se fait par un ou par plusieurs estimateurs
568 PARTNERSHIP. [CHAP. XIV.
agrees with our law ; in others, again, it widely differs.
It gives to every partner a right of action to enforce a
due account and settlement ; but it requires, in such a
case, that all the partners should be parties to the suit ;
and if they are not, they may intervene, and make
themselves parties.^ If the partners have fixed a par-
ticular time after the dissolution for the account, that
stipulation is to be followed. If there be no such stip-
ulation, then an account is immediately demandable.^
And so, indeed, is the rule of the Roman law. Si con-
veniat, ne omnino divislo Jiat, hujusonodi pactum, nullas
vires habere manifestissimujn est ; sin autem, intra cer-
tum tempus, qicod etiam ipsius rei qualitati prodest,
valet.^ In these and in many other respects there is an
agreement with our law.
§ 354. But the French law differs from our law in a
striking manner, as to the mode of distribution of the
partnership effects, whether they are movable, or im-
movable, or credits. It allows so mufh thereof to be
sold, as may be necessary to discharge the debts and
other obligations of the partnership.'^ But it does not
authorize a sale thereof for any other purposes, unless
it be by the express consent of all the partners, or it be
the only mode by which practically a division of a part
thereof can be made.^ It provides, with these excep-
tions, that a valuation thereof shall be taken, either by
agreement of the parties, or, if they disagree, by the
proper judicial tribunal.^ It further provides, that the
movable or personal property shall be valued, and di-
vided among them all in kind [en nature) ; that for this
dont elles conviennent ; et si elles n'en peuvent convenir, le juge du partage
en nomme d'office."
' Poth. de Soc. n. 162, 163. " Poth. de Soc. n. 165.
=> Poth. de Soc. n. 165 ; D. 10, 3, 14, 2. * Poth. de Soc. n. 169, 173.
' Poth. de Soc. n. 169, 171. « Poth. de Soc. n, 168.
CHAP. XIV.] DISSOLUTION RIGHTS OF PARTNERS. 569
purpose it shall be put into lots of equal value, the lots
to be drawn by the partners ; ^ that the real estate shall,
in like manner, be valued and divided ; and, as it rarely
will admit of being put into lots of equal value, the value
of each lot is to be ascertained, and the partner, who
draws any lot beyond or short of his share, is to pay or
receive the surplus to or from the other partners, who
respectively have the corresponding lots.^ As to debts
due to the partnership, they are to be valued and di-
vided in the like manner ; that is, each partner is to
have his own share of each of such debts. ^ But, inas-
much as great embarrassment must arise from each debt-
or's being thus obliged to pay each partner his share of
the debts, a custom has prevailed of putting up into lots
such of the debts as are good, and of dividing them by
lot, in the same way as other effects."* As to debts due
from the partnership to third persons, so far as they can-
not be discharged by the application of the partnership
effects, they also are divisible among all the partners,
who thereby become liable inter sese to pay the same to
the creditors ; but the rights of the creditors against all
in solido are not thereby varied.^
§ 355. It can scarcely escape observation, even from
this brief enumeration, how much the rule of our Courts
of Equity on this subject, by directing, in all cases of
real complexity or difficulty, a sale, instead of a distribu-
tion or division of the effects, excels that of the Roman
and French law, in point of convenience, simplicity, and
practical policy. The Scotch law has here also wisely
' Poth. de Soc. n. 169. « Poth. de Soc. n. 170.
* Poth. de Soc. n. 172.
* Poth. de Soc. n. 172. — In this respect the French law coincides with
that of the Roman law. Ea, quce in nominihus sunt, non recipiiint divisi-
onem. Cod. 3, 36, 6; D. 10. 2, 4; Poth. Pand. 10, 2, and 10, 3, n. 26;
Poth. de Soc. n. 172.
* Poth. de Soc. n. 173.
570 PARTNERSHIP. [cHAP. XIV.
abandoned the Roman law, and adopted the same rule
of a sale as is adopted in our law.^
§ 356. We come, in the next place, to the fourth and
last consideration under this head, viz. the effects and
consequences of a dissolution of the partnership by a
decree of a Court of Equity. And here, as between the
parties themselves, there is little room for any additional
observations, since precisely the same effects and conse-
quences follow, as ordinarily apply to a voluntary disso-
lution by the partners, or to a dissolution by death.
The only suggestion, which seems important in a prac-
tical view to be made, is, that where a bill is filed for
this purpose, and it is clear to the Court, that a dissolu-
tion ought finally to be decreed, the Court will gener-
ally at once put an end to the partnership trade or busi-
ness, by directing a sale by an interlocutory order or
motion, where that measure is manifestly required by
the interest of the parties, and otherwise a serious or
u-reparable mischief might ensue.^
1 2 Bell, Comm. B. 7, c. 2, p. 632, 633, 645, 5tli ed.
2 Gow on P. c. 5, § 2, p. 235, 236, 3d ed. ; Crawshay v. Maule, 1 Swans.
495, 506, 523 ; Nerot v. Burnand, 2 Russ. 56. See, also, Goodman v. Whit-
comb, 1 Jac. & W. 589, 592.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 571
CHAPTER XV.
DISSOLUTION EFFECTS AND CONSEQUENCES AS TO THE
RIGHTS OF CREDITORS.
J§ 357. Rights of creditors after dissolution.
358. ProjDerty may on dissolution be bona fide transferred to one partner
free from partnership equities.
359. Though such partner assumes the payment of partnership debts.
360. Quasi lien of creditors on partnership property.
361. This quasi lien arises only on dissolution by death or bankruptcy.
362. Joint creditors may proceed in equity against the estate of deceased
partner.
363. 364. Rights of joint and separate creditors against the estate of a
deceased partner.
365. Roman law.
366. French law.
367. 368. What are joint and what separate debts.
369, 370. Conversion and extinguishment of joint and separate debts.
371, 372. What is joint and what separate property.
373. Assignment of property by partner to the firm and vice versa.
374. Rights of creditors on dissolution by bankruptcy.
375. Rights of assignee in case of separate bankruptcy.
376. Joint debts payable out of joint, and separate debts out of separate
property.
377. This rule finally settled.
378. Those cases in which joint creditors may s\ia.r& pari passu with sep-
arate creditors.
379. (1.) When a joint creditor is petitioner for a separate commission.
380. (2.) When there is no joint estate and no living solvent partner.
381. (3.) When there are no separate debts.
382. Doubtful propriety of the general rule.
383. Joint creditors may prove their debts against the separate estate.
384. Joint and several creditors cannot prove against both estates.
385. Supposed analogy to joint and several executions at common law.
386. Analogy not real.
387. Proof allowed against two firms composed in part of the same
members.
388. When double proof is allowed in case of negotiable paper.
389. How a secured creditor must prove.
390. The separate estate cannot prove against the joint estate.
572 PARTNERSHIP. [CHAP. XV.
391. Nor the joint estate against the separate estate,
392. Separate creditors may prove against the joint estate in case of
fraud.
393. So in case of dormant partner.
394. So where some members of a firm carry on a separate trade.
395. No set-ofF of joint and separate debts.
396. Agreements as to disposition of property on dissolution avoided by
bankruptcy.
397-404. Statute of reputed ownership.
405. Solvent partners cannot come into competition with joint creditors
against the joint estate.
406. Nor against the separate estates.
407. Rights and powers of solvent partners.
408. Same rights in the case of a partnership for a single adventure.
490. Close of subject of pai'tnership.
410, 411. Part-ownership.}
§ 357. Hitherto we have been mainly considering
the effects and consequences of a dissolution as between
the partners themselves and then' representatives, and
when and under what circumstances third persons, hav-
ing no notice thereof, might, notwithstanding, have a
remedy against all the partners upon subsequent trans-
actions with some of the firm. We now come to the
consideration of the rights of the creditors, who are such
at or before the dissolution of the firm. These creditors
may be either joint creditors of all the firm, or separate
creditors of one or more of the firm. For the most part,
the same considerations will apply to each class of cred-
itors in all cases of distribution, whether by voluntary
consent, or by mere operation of law, or by death, or by
bankruptcy, or by the decree of a Court. There are,
however, some particulars belonging to the case of bank-
ruptcy, which will be reserved for a distinct and sepa-
rate examination. But, unless some qualification is an-
nexed, the doctrines hereinafter stated will generally
apply to all other cases of dissolution.
§ 358. It has been already suggested, that the rights
of antecedent creditors of the partnership are in no wise
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 573
varied by the dissolution of the partnership.^ It may
be added, that, upon the dissolution, it is competent for
the partners, in cases of a voluntary dissolution, to agree
that the joint property of the partnership shall belong
to one of them ; and if this agreement be hona jide^ and
for a valuable consideration, it will transfer the whole
property to such partner, wholly free from the claims
of the joint creditors.^ The like result will arise from
any stipulation to the same effect, in the original articles
of copartnership, in cases of a dissolution by death, or
by any other personal incapacity ; but not in cases of a
dissolution by forfeiture for felony, or by bankruptcy.
The reason of this is obvious. While the partnership
is solvent, and going on, the creditors have no equity,
strictly speaking, against the effects of the partnership.^
Neither have they any lien on the partnership effects
for their debts. All that they can, or may do, is to pro-
ceed by an action at law for their debts against the
partners ; and having obtained judgment therein, they
may cause the execution, issuing upon that judgment
to be levied upon the partnership effects, or upon the
separate effects of each partner, or upon both.'^ There
being, then, no lien, and no equity in favor of the cred-
' Ante, § 334, 335 ; Ault r. Goodrich, 4 Russ. 430 ; Gow on P. c. 5, § 2,
p. 240, 241, 3d ed. ; Coll. on P. B. 1, c. 2, § 3, p. 75, 2d ed. ; 2 Bell, Comm.
B. 7, c. 2, p. 638, 5tli ed,
' Gow on P. c. 5, § 2, p. 237-241, 3d ed. ; Coll. on P. B. 2, c. 1, § 2, p.
113, 114, 2d ed. ; Ex paiie Peake, 1 Madd. 346 ; Ex pmie Ruffin, 6 Ves. 119,
127; Ex parte Fell, 10 Ves. 347 ; Ex jmrte Williams, 11 Ves. 3 ; Ex parte
Rowlandson, 1 Rose, 416 ; Campbell v. MuUett, 2 Swans. 551, 575 ; ante, § 97,
and note ; ante, § 326, note ; [Ketchum v. Durkee, 1 Barb. Ch. 480 ; Sage v.
Cliollar, 21 Barb. 596 ; Bullitt v. Meth. Epis. Church, 26 Penn. St. 108.]
^ Ibid., and ante, § 97, note, and ante, § 326, note, and especially Ex parte
Williams, 11 Ves. 3, 5 ; [Waterman v. Hunt, 2 R. I. 298 ; Cook v. Beech, 10
Humph. 412.]
* Ex parte Ruffin, 6 Ves. 119, 126, 127 ; Ex parte Williams, 11 Ves. 3 ;
Ex parte Fell, 10 Ves. 347 ; Campbell i'. Mullott, 2 Swans. 551, 575.
574 PARTNERSHIP. [CHAP. XV.
itors against the partnership effects, until such execution
is issued and levied thereon, it follows, that those effects
are susceptible of being legally transferred, honafide, for
a valuable consideration, to any persons whatsoever, and
as well to the other partners as to mere strangers.^
§ 359. And this is equally true, although the whole
or a part of the consideration of the transfer is, that
the partners taking the property shall pay the whole
or a particular part of the debts of the partnership ; for
that will not aid the creditors. The reason is, that, in
such a case, the retiring partner who so transfers his
share, has no lien on the property for the discharge of
those debts ; for by his voluntary transfer thereof he
has parted with it, and trusted to the personal security
and personal contract of the other partners.^ Even if
he had, the lien would not pass to those creditors by
operation of law, so as to become available in theu*
favor.^ There may be, and indeed often is, a special
1 Ex 2Mrte Ruffin, 6 Ves. 119, 126, 127; Ex parte Williams, 11 Ves. 3,
5 ; ante, § 97, and note ; ante, § 326, note ; Campbell v. Mullett, 2 Swans.
551, 575 ; Ex parte Fell, 10 Ves, 347 ; [Ketchum v. Durkee, 1 Barb. Ch.
480; Allen v. Center Valley Co., 21 Conn. 130; Ferson v. Monroe, 1
Fost. 462; Howe v. Lawrence, 9 Cush. 553]; {post, § 371-373, 2 Lead.
Cas. inEq. 329, 3d Am. ed. ; 21 Law Mag. 320; Kimball v. Thompson,
13 Met. 283 ; Baker's Appeal, 21 Penn. St. 76 ; Siegel v. Cliidsey, 28 Penn.
St. 279 ; Richardson v. Tobey, 3 All. 81 ; Dimon v. Hazard, 32 N. Y. 65 ;
Potts V. Blackwell, 4 Jones, Eq. 58 ; Maries v. Hill, 15 Gratt. 400 ; Jones
V. Lusk, 2 Metcalfe, 356 ; Mandel v. Peay, 20 Ark. 325. See Mechanics'
Bank v. Hildreth, 9 Cush. 356. • On fraudulent transfers, see 2 Lead. Cas.
in Eq. 330, 3d Am. ed. ; Wilson v. Robertson, 21 N. Y. 587; Ransom v.
Van Deventer, 41 Barb. 307.}
2 Ex parte Ruffin, 6 Ves. 119, 126, 127; Ex 2:»ar^e Williams, 11 Ves. 3,
5-8; {Croone v. Bivens, 2 Head, 339.}
3 Gow on P. c. 5, § 2, p. 238-241, 3d ed. ; Id. p. 245 ; Id. p. 253, 254 ;
Coll. on P. B.4, c. 2, § 1, p. 603-605; Ex parte Peele, 6 Ves. 602; Ex
parte Williams, Buck, 13 ; Ex parte Freeman, Buck, 471 ; Ex parte Ruffin,
6 Ves. 119, 126, '127 ; Ex parte Williams, 11 Ves. 3 ; Campbell v. Mullett,
2 Swans. 551, 575 ; Ex parte Fell, 10 Ves. 347 ; {2 Lead. Cas. in Eq. 330,
3d Am. ed. ; Robb v. Mudge, 14 Gray, 534. Partnership property con-
veyed on a dissolution to one of the partners, who agrees to hold and con-
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 575
agreement, subsequently entered into between the cred-
itors and the partner, taking the transfer ; but then the
case stands dryly upon such an agreement, and has no
o^Dcration beyond it.^
§ 360. Subject, however, to these exceptions, it may
be generally stated, that, where the partners themselves
vey one-half of it to bis copartner after paying the firm debts, is to be ap-
plied, in case of the insolvency of both partners, to the jiayment of the firm
debts. Harmon v. Clark, 13 Gray, 114. See Wildes v. Chapman, 4 Edw.
Ch. 669. In Tenney v. Johnson, 43 N. H. 144, upon a disagreement
between partners, their differences were submitted to arbitration, and the
award was that all the goods and assets of the firm should pass to one of the
partners who should pay all the firm debts, and thereon such goods and
assets were all attached by the separate creditors of such partner, and
subsequently by the creditors of the firm, and it was held, that the latter
were entitled to be preferred, even had the award been executed by a trans-
fer in accordance with it. This is in accoi'dance with prior New Hampshire
cases. Ferson v. Monroe, 1 Fost. 462 ; Jarvis v. Brooks, 3 Fost. 136 ;
Benson v. Ela, 35 N. H. 402, but the doctrine seems peculiar to that State.
2 Lead. Cas. in Eq. 328, 3d Am. ed. ; ante, § 261, note. But see Conroy v.
Woods, 13 Cal. 626.} In Ex 2Jor^e Williams, 11 Ves. 3, 6, Lord Eldon
said: "The creditors are not injured by the agreement of partners to dis-
solve the pai'tnership ; and that, from that time, what was joint property
shall become the separate property of one, notice of the dissolution being
given ; as either a consideration is paid, or, which for this purpose is equal to
a consideration, a covenant is entered into to pay the debts and indemnifj-
the retiring partner, so conceived as not to leave any lien upon the prop-
erty. Upon any other principle the conclusion must be, that a partner
could not retire from Child's house ; as the effects may be distributed twen-
ty years hence among the creditors, if they remain so. If creditors do
not like the arrangement, they must go to each of the partners, and de-
sire payment. Another material ground is, that, where the possession of the
property is delivered ov«r to the surviving partner, and he goes into the world
as a sole trader ; he has all the credit belonging to him as such sole trader ;
having the possession, and dealing with mankind as such. I qualify it so ;
for I do not agree, that mere dissolution will work all this effect; as that
does no more than declare, that the partnership is not to be carried on any
further, except for winding up the affairs, and he who has actual possession,
has it clothed with a trust for the other, to apply the property to the debts ;
and that will qualify the nature of his possession, so that it cannot be said,
he has the sole possession of the specific effects, or the debts, to bring it
within the operation of the Statute of King James, which certainly affects
debts."
' See Gow on P. c. 5, § 2, p. 240, 245, 3d ed. ; Id. p. 254, where the prin-
cipal cases are collected.
576 PARTNERSHIP. [CHAP. XV.
have a lien upon the partnership effects for the dis-
charge of all the debts and obligations thereof (as they
have in all cases, where they have not parted with it)/
that lien may, in many cases, be made available for the
benefit of the creditors. But then the equities of the
creditors are to be worked out through the medium of
that of the partners.^ They have, indeed, no lien ; but
(as has been said) they have something approaching to
a lien, of which, with the assent of the partners entitled
to the lien, they may avail themselves in a Court of
Equity against the partnership effects.^ The commu-
1 Ante, § 97, and note, and ante, § 326; 1 Story, Eq. Jur. § 675, 676 ;
Holderness v. Shackels, 8 B. & C. 612.
^ [And if the contract of partnership is of such a nature, that the co-
partners can enforce no such right of lien as between themselves, the part-
nership creditors can claim no such preference. Rice v, Barnard, 20 Vt. 479 ;
Washburn v. Bank of Bellows Falls, 19 Vt. 278, and the able judgment of
Redfield, Chancellor. In the late case of Tillinghast v. Champlin, 4 R. I.
1 73, it was held that the doctrine of the text was applicable only while the
copartners are administering their own affairs, and did not apply, if one
partner died, leaving the other insolvent, or when both partners become
bankrupt, and their property is in the hands of assignees. But that in such
a case an equitable lien would attach in favor of copartnership creditors
upon joint property, and of separate creditors upon separate property, in the
hands of the surviving partner, or assignees, as trustee for each class of cred-
itors, which will be administered in equity against such trustees upon the
direct application of the creditors. See the able opinion of Ames, C. J.]
{2 Lead. Cas. in Eq. 329, 3d Am. ed. ; McNutt v. Strayhorn, 39 Penn. St.
269; Backus v. Murphy, 39 Penn. St. 397.}
3 Campbell v. Mullett, 2 Swans. 551, 575, 576 ; Ex 2miie Ruffin, 6 Ves.
119, 126, 127 ; Ex parte Fell, 10 Ves. 347 ; Ex jictrte Williams, 11 Ves. 3 ;
ante, § 97, note, and ante, § 326, and note ; 3 Kent, 65 ; Ex parte Kendall,
17 Ves. 514, 526. — In Ex parte Kendall, 17 Ves. 526, Lord Eldon said:
" I do not recollect an instance, that this right to go in upon the separate
fund, not given by the legal contract, was extended beyond those who were
creditors of the whole firm. Supposing that all those creditors could go in,
the next question is, whether the creditors of the four can compel them to
go in. With regard to that, though much artificial doctrine has been intro-
duced in this Court, yet creditors, as such, independent of the effect of any
special contract, have no lien or charge upon the effects of their debtor ;
and in all these cases of distribution of joint effects, it is by force of the
equities of the j^artners among themselves, that the creditors are paid ; not
by force of their own claim upon the assets, for they have none."
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 577
nity of interest still remains, notwithstanding a dissolu-
tion, so far as is necessary to wind up the affairs of the
partnership ; and this requires, that what was partner-
ship property before, shall (unless otherwise agreed)
continue to be so for the purpose of a distribution, not
as the rights of the creditors may suggest, but as the
rights of the partners themselves require. And it is
thus, through the operation of administering the equi-
ties between the parties themselves, that the creditors
have the opportunity of enforcing this quasi lien.^ In
short, in case of a dissolution, each partner holds the
joint property, clothed with a trust to apply it to the
payment of the joint debts, and, subject thereto, to be
distributed among the partners according to their re-
spective shares therein.^ -^
§ 361. From the foregoing considerations, then, it is
plain, that the joint creditors of the partnership, while
all the partners are living and solvent, can enforce no
claim against the joint effects or the separate effects
of the partners, except by a common action at law.^ It
is only in cases, where there is a dissolution by the
death or bankruptcy of one partner, that the right of
the joint creditors can attach, as a cjiiasi lien upon the
partnership effects, as a derivative subordinate right,
under and through the lien and equity of the partners.
1 Ex parte Williams, 11 Ves. 3, 6 ; Ex imrte Ruffin, 6 Ves. 119, 126,
127; ante, § 97, note; § 326, note; Ex parte Kendall, 17 Ves. 511, 626.
[See Stocken v. Dawson, 9 Beav. 239, 246.]
* Ibid. See Crallan v. Oulton, 3 Beav. 1, 7; {Harmon v. Clark, 13
Gray, 114.}
3 [In Allen v. The Center Valley Co., 21 Conn. 130, it was held, that
although partnership creditors were entitled to priority of payment as
against individual creditors, out of partnership funds, so long as they con-
tinued partnership funds, yet they have no specific lien thereon ; and while
tlic partnership remains, and its business is going on, whether insolvent or
not, there is no legal objection to a hona fide distribution of the partnership
funds among the members of the firm, or a l>ona fide change of them from
joint to separate estate.]
37
578 PAHTNERSHIP. [CHAP.
XV,
In the former case (of death), the personal representa-
tives of the deceased partner have a right (whether
his estate be solvent or insolvent), to insist upon a due
application of the joint effects, to pay the joint debts
and fulfil the other purposes of the trust.^ At law, in-
deed, the creditors have no remedy, except against the
surviving partners for their debts ; ^ but in equity, as
we shall presently see, it is far otherwise. In the lat-
ter case (of bankruptcy) the like equity attaches to the
solvent partners, and the assignees can stand only in
the place of the bankrupt, and take his rights, and
consequently they are entitled to nothing, except the
surplus, after the discharge of all the joint debts, and
of the claims of the other partners.^ So that, in each
case, it is plain, that the joint creditors must be paid,
in order to the due administration of justice between
the partners themselves. Thus, we see at once, how
the quasi lien or equity of creditors arises, and that it
is a dependent and subordinate right.
§ 362. Another important consideration in cases of
a dissolution by death is, as to the rights of the joint
creditors against the estate of the deceased partner.
We have seen, that at law,'* the sole right of action of
the joint creditors is against the survivors.^ And the
> Ex jyarte Ruffin, 6 Ves. 119, 126, 127; Ex parte Williams, 11 Ves. 3,
6 ; ante, § 97, note; ante, § 326, 346, 347, note; Gow on P. c. 5, § 2, p. 235,
236, 3d ed. ; 1 Story, Eq. Jur. § 675, 676 ; Coll. on P. B. 3, c. 3, § 4, p. 404,
405, 2d ed. ; Id. B, 3, c. 5, § 2, p. 503 ; 3 Kent, 65 ; Ex parte Kendall, 17
Ves. 514, 526 ; Wilcox v. Kellogg, 11 Ohio, 394.
2 Ibid. ; 1 Chitty on PL p. 39, 40, 3d ed. ; Bacon, Ab. Obligation, D. 4 ;
Com. Dig. Abatement, F. 8 ; Godson v. Good, 6 Taunt. 587 ; Bovill v. Wood,
2 M. & S. 23 ; Richards v. Heather, 1 B. & Aid. 29 ; Coll. on P. B. 3, c. 5,
§ 2, p. 503, 2d ed.
* See authorities cited in the preceding notes.
* [In Massachusetts a statute has changed this principle. Mass. Rev. Stat,
c. 66, § 27] ; {Gen. Sts. c. 97, § 28. See In re Rice, 7 All. 112.}
' Ante, § 361, note.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 579
inquiry here naturally presented is, whether they have
any remedy in equity. The doctrine formerly held upon-
this subject seems to have been, that the joint creditors
had no claim whatsoever in equity against the estate of
the deceased partner, except when the surviving part-
ners were at the time, or subsequently became, insolvent
or bankrupt.^ But that doctrine has been since over-
turned ; and it is now held, that in equity all partner-
ship debts are to be deemed joint and several ; ^ and
consequently the joint creditors have in all cases a right
to proceed at law against the survivors, and an election
also to proceed in equity against the estate of the de-
ceased partner, whether the survivors be insolvent, or
bankrupt, or not.^ The consequence is, that the joint
^ See Lane v. Williams, 2 Vern. 292 ; Jacomb v. Harwood, 2 Ves. Sr. 265 ;
Hankey v. Garratt, 1 Ves. Jr. 236 ; Ex parte Ruffin, 6 Yes. 119, 126, 127 ;
Ex paHe Williams, 11 Ves. 3 ; Ex parte Kendall, 17 Ves. 514 ; Campbell v.
Mullett, 2 Swans. 551; Grayu. Chiswell, 9 Ves. 118; Coll. on P. B. 3, c. 3,
§ 4, p. 404-408, 2d ed. ; Hamersley r. Lambert, 2 Johns. Ch. 508 ; Gowon P. c.
5, § 2, p. 359, 360, 3d ed. [This doctrine is still maintained in New York. See
Lawrence v. Trustees of Orphan House, 2 Denio, 577.]
- By the civil law of France, the rule as to the obligations of partners on
their partnership) conti'acts, does not seem to agree exactly with the rule of the
common law. They are always understood to contract jointly, but not alwavs
severally. The general rule is, that each partner is considered as contracting
only to the extent of his interest; and in any case, unless there be an express
agreement by all the partners to bind themselves severally, the creditor can
only recover from each his own proportion of the debt. One exception to
this rule is indeed admitted in favor of commercial partnerships (societes de
commerce), wherein the partners are liable jointly and severally (solidairement)
for the debts of the partnership ; and this exception is created for the pur-
pose of extending the credit of merchants. But in universal partnerships
(societes universelles), and in all special partnerships (societes particulieres),
which ai'e not commercial partnerships, each partner, although he is presumed
to contract in the name of the firm, only binds each one of his copartners for
his proportional part of the debt. When, indeed, a partner has conti-acted
for the firm in his own sole name, he is solely responsible to the creditor, but
he has a legal claim for indemnification and contribution therefor on each part-
ner for liis proportion, unless he have transgressed the limits of his authority, or
been guilty of fraud. See Poth. de Soc. c. vi. § 1, No. 96, § 111, No. 103-106.
' Coll. on P. B. 3, c. 3, §4, p. 407-413, 2d ed. ; Devaynesi). Noble, 1 Mer.
529 ; s.c. 2 Russ. & M. 495 ; Sumner v. Powell, 2 Mer. 30, s. c. Turn. & R.423 ;
580 PARTNERSHIP. [CHAP. XV.
creditors need not now wait, until the partnership affairs
are wound up, and a final adjustment thereof is made.
But they may at once proceed, as upon a joint and
several contract, in equity against the estate of the de-
ceased partner ; although in any such suit the surviving
partners must be made parties, as persons interested in
taking the account.^
Wilkinson v. Henderson, 1 Myl. & K. 582 ; Thorpe v. Jackson, 2 You. & C. Ex.
553 ; Gow on P. c. 5, § 2, p. 358-360, 3d ed. ; Id. § 3, p. 290-292; 1 Storj-,
Eq. Jur. § 676 ; 3 Kent, 64; Hamersley v. Lambert, 2 Johns. Ch. 508 ; Bel-
knap V. Cram, 11 Ohio, 411; {Lind. on P. 295, 872; Rice v. Gordon, 11
Beav. 265; Brown v. Douglas, 11 Sim. 283; Kimball v. Whitney, 15 Ind.
280. See darker. Bickers, 14 Sim. 639 ; Wilmer v. Currey, 2 De G. & Sm.
347.} In Devaynes v. Noble, 1 Mer. 529, 563, 564, Sir William Grant (Mas-
ter of the Rolls), said : " It may be proper, however, to observe, that the
common law, though it professes to adopt the Lex Mercatoria, has not adopted
it throughout in what relates to partnership in trade. It holds, indeed, that
although partners are in the nature of joint-tenants, there shall be no surviv-
orship between them in point of interest. Yet with regard to partnership
contracts, it applies its own peculiar rule ; and, because they are in form joint,
holds them to produce only a joint obligation, which consequently attaches ex-
clusively upon the survivors ; whereas, I apprehend, by the general mercan-
tile law, a partnership contract is several, as well as joint. That may probably
be the reason, why Courts of Equity have considered joint contracts of this
sort (that is, joint in form), as standing on a different footing from others.
The cases of relief on joint bonds may be accounted for on the ground of mis-
take in the manner of framing the Instrument ; and it may be said that equity
gives to them no other effect than it was the intention of the parties them-
selves to have given to them. But how is it possible to explain the cases upon
partnership notes, so as to distinguish them from ordinary partnership debts ? "
' Coll. on P. B. 3, c. 3, § 4, p. 404, 405, 2d ed.; |Lind. on P. 874} ; ante,
§ 347; Wilkinson r. Henderson, 1 Myl. & K. 582, 588. On this occasion Sir
John Leach (Master of the Rolls) said : " All the authorities establish, that,
in the consideration of a Court of Equity, a partnership debt is several, as
well as joint. The doubts upon the present question seem to have arisen
from the general principle, that the joint estate is the first fund for the pay-
ment of the joint debts, and that the joint estate vesting in the surviving part-
ner, the joint creditor, upon equitable considerations, ought to resort to the
surviving partner, before he seeks satisfaction from the assets of the deceased
partner. It Is admitted, that if the surviving partner prove to be unable to
pay the whole debt, the joint creditor may then obtain full satisfaction from
the assets of the deceased partner. The real question, then, is, whether the
joint creditor shall be compelled to pursue the surviving partner In the first
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 581
§ 363. Still another inquiry may remain, in cases
where the estate of the deceased partner is not suffi-
cient to pay all his separate debts, and all the joint
debts ; and that is, whether the debts are to be paid
pari jyassic out of the assets of the deceased, or either is
entitled to a preference. The general rule would seem
to be (as it is in bankruptcy), that the joint creditors
have a priority of right to payment out of the joint
estate, and the separate creditors a like right of pri-
ority to payment out of the separate estate ; and the
surplus, if any, is divisible among the other class of
creditors.^ In cases where there is both a joint estate
instance, and shall not be permitted to resort to the assets of the deceased
partner, until it is established that full satisfaction cannot be obtained fi-om
the surviving jjartner ; or whether the joint creditor may, in the first instance,
resort to the assets of the deceased partner, leaving it to the personal repre-
sentatives of the deceased partner to take proper measures for recovering
what, if any thing, shall appear upon the partnership accounts to be due from
the surviving partner to the estate of the deceased partner. Considering that
the estate of the surviving partner is at all events liable to the full satisfaction
of the creditors, and must first or last be answerable for the failure of the sur-
viving partner ; that no additional charge is thrown ujion the assets of the de-
ceased partner by the resort to them in the first instance, and that great
inconvenience and expense might otherwise be occasioned to the joint
creditors; and, further, that according to the two decisions in Sleech's Case
in the cause of Devaynes v. Noble, the creditor was permitted to charge the
separate estate of the deceased jiartner, which in equity was not primarily
liable, as between the partners, without first having resort to dividends, which
might be obtained by proof under the commission against the surviving part-
ner, I am of opinion, that the plaintiff is entitled in this case to a decree for
the benefit of himself, and all other joint creditors, for the payment of his
debt out of the assets of ShejAerd, the deceased partner." { So Vance v.
Cowing, 13 Ind. 460.} [But see Lawrence v. Trustees of Orphan House, 2
Denio, 577 ; Patterson v. Brewster, 4 Edw. Ch. 352, where the case of Wilk-^
inson v. Henderson is examined and disapproved.]
' Gray v. Chiswell, 9 Ves. 118, 124, 125 ; Twiss v. Massey, 1 Atk. 67;
Ex parte Cook, 2 P. Wms. 500 ; Ex parte Clay, 6 Ves. 813 ; Coll. on P. B.
4, c. 2, § 1, p. 595, 2d ed. ; Id. § 3, p. 623, 624 ; 3 Kent, 64, 65 ; Murray v.
Murray, 5 Johns. Ch. 60, 74-77 ; Tucker v. Oxley, 5 Cranch, 34, 44, 45 ; Gow
on P. c. 5, § 3, p. 286, 287, 3d ed. ; Id. p. 310-323 ; Payne v. INIatthews, 6
Paige, 19; Comm. Bank of Lake Erie v. AVestern Reserve Bank, 11 Ohio,
444, 451 ; [Bridge v. McCuUough, 27 Ala. 661 ; Rodgers v. Meranda, 7
582 PARTNERSHIP. [CHAP. XV.
and a separate estate, the rule may not be unreason-
able, as, at most, it only puts the joint creditors of the
Ohio St. 179, 187, where the subject is very ably examined. Walker w. Eyth,
25 Penn. St. 216] ; {Lind.on P. 876; 1 Am. Lead. Cas. 480, 4th Am. ed. ;
Ridgway v. Clare, 19 Beav. Ill; Lodge v. Prichard, 4 GifF. 294; s. c. on
appeal, 1 De G. J. & S. 610; Weyert?. Thornburgh, 15 Ind. 124; Moline
Water Power Co. v. Webster, 26 111. 233 ; Pahlman v. Graves, Id. 405 ;
Toombs r. Hill, 28 Ga. 371 ; post, § 376.} — This doctrine has not been univer-
sally adopted in America. Mr. Chancellor Kent has collected the principal
cases in his Note (b) to 3 Kent, 65. The subject was also very fully discussed
by the same learned Judge, and all the then existing authorities were cited
by him in Murray v. Murray, 6 Johns. Ch. 60, and by Mr. Chief Justice
Tilghman, and Mr. Justice Gibson, and Mr. Justice Duncan in Bell v. New-
man, 5 S. & R. 78, 85-107. Still more recently this doctrine has been re-
viewed at large by Mr. Chief Justice Shaw, in an elaborate opinion, in
Allen V. Wells, 22 Pick. 450 ; and the conclusion to which he has arrived
seems entirely well founded, that the doctrine is one that can be properly en-
forced in equity only, and not at law. The comments of all these learned
Judges upon the general doctrine are very instructive, and in a great
measure exhaust the subject. {In the American note to the case of Silk
V. Prime, 2 Lead. Cas. in Eq. 3d Am. ed. 313, this subject is treated
with great learning and clearness. What seems to be the true reason
for the prior rights of the separate creditors in the estate of a deceased
partner is there given thus : " Whenever one partner dies in the life-
time of another, the law casts all the obligations of the firm on the
surviving partner, and the only recourse of the partnership creditors against
the separate estate of the deceased partner being in equity, this estate will
stand, so far as they are in question, on the footing of equitable assets, and be
subject to the two principles which govern the distribution of such assets, first
that legal priorities must be resjjected, and next, that the division among equi-
table claimants must be equal. When, therefore, the estate of a deceased
partner comes into equity for distribution, the separate creditors, whose right
to the assets is legal, must be satisfied in the first instance, and then the resi-
due distributed as equitable assets among the joint creditors." It is not to be
denied, however, that the reason generally given in both the English and
American cases for this distribution of the assets of a deceased partner is the
, analogy of the proceedings in bankruptcy. See the cases cited in the note to
Silk V. Prime, ubi sup. ; Lodge v. Prichard, 4 Gifi". 294 ; s. c. on appeal, 1
De G. J. & S. 610. There is a theoretical advantage in supporting the distri-
bution of a deceased partner's estate on acknowledged principles of equity
jurisprudence rather than on a practice in bankruptcy, the soundness of which
has been seriously questioned, see § 377 ; but, on the other hand, the latter
method produces a uniformity in distributing the estates of both insolvent
and deceased partners, which recommends it in practice. This is best seen
in the administration of the assets of the last surviving partner. Both the
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 583
partnership to an election, whether they will proceed
against the joint estate, or against the separate estate,
where both estates are insolvent. But, where there is
no joint estate, the case may seem to be involved in
more nicety and difficulty ; since under such circum-
stances the creditors would seem, as their contract is
several, as well as joint, to be entitled, upon general
principles, to claim pari passu with the separate
creditors.^ However, it cannot be positively affirmed,
that such is the settled doctrine in equity, in cases of
deceased partners. On the contrary, there seems to
be some conffict of opinion upon the point.^ In bank-
joint and separate creditors have a legal claim on these assets, and therefore,
according to the principles of the pax-agraph quoted above, ought to take pari
passu, while in the estate of the partner who died first his separate credi-
tors, according to the same principle, would have the priority, a difference
which is at least inconvenient. Besides now in many of the States, the death of
a joint debtor does not discharge his estate from his liability at law for the
joint debts.}
' Coll. on P. B. 3, c. 3, § 4, p. 413, 2d ed. ; [Emanuel v. Bird, 19 Ala.
596.]
" Cowell V. Sikes, 2 Russ. 191, 194, 196. — In this case Lord Gifford
(Master of the Rolls) seemed to be of opinion, that the joint creditors under
such circumstances could not come in, jyari jjassu, with the separate creditors.
But Lord Eldon, under the circumstances of that particular case, thought
otherwise. Mr. Collyer on this subject says : " We ought not to conclude
this subject without adverting to the question, whether, when a partnership
creditor has obtained a decree in equity for payment of his debt out of the
estate of the deceased partner, he is entitled to receive payment j^ri passu
with the separate creditors of that partner. If this point were decided on
principle alone, and without reference to any supposed analogy between the
practice in the Courts of Equity and the practice in bankruptcy, it seems
clear, that the partnership creditor, as resting on his separate contract, would
have a right to come in competition with the separate creditors. On the
other hand, the cases of Gray v. Chiswell, and Cowell v. Sikes, tend to show,
that, by analogy to the rule in bankruptcy, the partnership creditor will in
such case be postponed to the separate creditors, unless there be no joint
estate." Mr. Chancellor Kent, in his Commentaries, seems to have laid down
the doctrine in general terms, as equally applicable to all cases. His lan-
guage is : " The joint creditors have the primary claim upon the joint fund,
in the distribution of the assets of bankrupt or insolvent partners, and the
584 PARTNERSHIP. [cHAP. XV.
ruptcy, where there is no joint estate, and there is no
solvent partner, joint creditors are permitted to prove
against the bankrnpt's estate ^^ari passu with the sepa-
rate creditors.^
§ 364. Be this doctrine as it may, it seems certain,
that the joint creditors cannot be compelled, in case
of the death of one partner, and the bankruptcy of
the survivors, to resort to the estate of the deceased
partner for payment for the benefit of the fund in
bankruptcy, in aid of creditors, who are creditors of
partnershiji debts are to be settled before any division of the funds takes
place. So far as the partnership property has been acquired by means of
partnership debts, those debts have in equity a priority of claim to be dis-
charged; and the separate creditors are only entitled in equity to seek
payment from the surplus of the joint fund, after satisfaction of the joint
debts. The equity of the rule, on the other hand, equally requires that the
joint creditors should only look to the surplus of the separate estates of
the jDartners, after payment of the separate debts. It was a principle of the
Roman law, and it has been acknowledged in the equity jurisprudence of
Spain, England, and the United States, that partnership debts must be paid
out of the partnership estate, and private and separate debts out of the pri-
vate and separate estate of the individual partner. If the partnership
creditors cannot obtain payment out of the partnership estate, they cannot
in equity resort to the private and separate estate, until private and separate
creditors are satisfied ; nor have the creditors of the individual partners any
claim upon the partnership property, until all the partnership creditors are
satisfied. The basis of the general rule is, that the funds are to be liable,
on which the credit was given. In contracts with a partnership the credit is
supposed to be given to the firm ; but those who deal with an individual
member rely on his sufficiency." 3 Kent, 64, €5. The modern Code of
Commerce of France provides (art. 534), that the creditor, holding a joint
and several obligation of the insolvent and other persons, who are also
insolvent, shall participate in the dividends of all their respective estates,
until he shall be fully paid. See, also, 1 7 Duranton, Cours de Droit Franc.
§ 457, and 5 Duvergier, Droit Civil Franc. § 406, cited post, § 365 ; 4 Par-
dessus, Droit Comm. § 1089. {See 2 Lead. Cas. in Eq. 323, 3d Am. ed. ;
post, § 380. In Weyer v. Thornburgh, 15 Ind. 124, though there were no
joint assets, yet the joint creditors were not allowed to share J9a?■^ passii in the
estate of a deceased partner.}
• Ex parte Kensington, 14 Ves. 447; Ex parte Janson, 3 Madd. 229;
Buck, 227 ; Ex parte Sadler, 15 Ves. 52 ; Coll. on P. B. 4, c. 2, § 3, p. 624,
626, 627, 2d ed. {See post, § 380.}
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 585
the survivors, and not of the old partnership.^ For
the rule in equity, that, where one person can resort
to two funds for payment, and another can resort to
one only, the latter may compel the former to resort
to the fund to which he may exclusively resort, in aid
of the latter, applies only where both debts are due by
precisely the same debtors.^
§ 365. This principle of Equity Jurisprudence, that the
joint creditors shall be entitled to a priority of payment
out of the joint effects, and the separate creditors to a like
priority out of the separate effects, before the other class
of creditors shall be entitled to any portion of the surplus,
is not, perhaps, under all its aspects, so purely artificial
as it has sometimes been suggested to be ; at least, it has
been often relied upon, as the dictate of natural justice.^
In the Roman law, if one man carried on two separate
trades, it seems, that the creditors, who separately sup-
plied goods or credit for the use of either of those trades,
had a privilege or right of payment out of the prop-
erty employed therein, in preference to the creditors
in the other business. Ut-puta (says Ulpian), duas
negotiatlones exercehat (^mta sagariam et linteariam) et
separatos hahuit creditores? Puto, separathn eos in
tributumvocari ; unusquisque enwi eorwrn merci magls,
quam ipsi, crediditJ^ Straccha lays down the like doc-
trine in the case of the failure or insolvency of a mer-
chant, engaged in two kinds of business. Si mercator
duas negotiatlones exerculsset, puta sagariam et lintea-
* Ex parte Kendall, 17 Yes. 514, 526, 527 ; Coll. on P. B. 4, c. 2, § 3, p.
629, 630, 2d ed.
* Ibid.; 1 Story, Eq. Jur. § 558-560; Id. § 642-645 ; {House v. Thomp-
son, 3 Head, 512.}
^ Ex parte Elton, 3 Ves. 238, 242 ; [Rodgers v. Meranda, 7 Ohio St. 179.]
* D. 14, 4, 5, 15 ; Poth. Pand. 14, 4, n. 8 ; 2 Emerigon, Contrat a la Grosse,
c. 12, § 6, p. 582, ed. 1 783 ; Inst. 4, 7, 3 ; 17 Duranton, Cours de Droit Franc.
§457, p. 512-514.
586 PARTNERSHIP. [CHAP. XV.
riam, ef separatos hcibiierit creditores in dictls mercibus^
separatos eos in trihutum vocari; et ilia 7^atio in prce-
dictis redditur ; quia unusquisque creditor magls merci,
quam mereatori, credidit ; et ne ex alferius re merceve
alii indemnes jiant, alii damnum sentiant}
§ 366. Emerigon holds the same doctrine ; and says,
that where a person carries on two trades in different
houses, the creditors who have given credit to one of
these trades or houses, have a privilege upon the effects
there found, to the exclusion of the creditors who have
given credit to the other trade or house ; and these last
creditors have also a like exclusive privilege upon the
effects of the trade or house to which they have given
credit.^ And he puts the very case of the joint credi-
tors of a partnership, as clearly settled in the French
law, saying, that the joint creditors of a partnership
have a privilege or preference of payment out of the
partnership effects, before the separate creditors of any
one partner ; and that the respective creditors of two
different partnerships have the like exclusive pri^dlege
and preference upon the partnership effects of each
partnership, although both firms are composed of the
very same persons.^ And he gives the very reason as-
signed therefor in the Roman law : Unusquisque enim
eorum merei magis, quam ijjsi, credidit^ This also
seems to be the recognized doctrine in the modern
jurisprudence of France ; and it has been so promul-
gated by some of its most approved jurists.^
' Straccha de Decoctorlbus, Pars Ultima, n. 21, p, 469, ed. 1669.
^ Emerigon, Contrat a la Grosse, c. 12, § 6, p. 582, ed. 1783.
3 Ibid.
* Ibid. See, also, 2 Story, Eq. Jur. § 1221-1223, 1239, 1240.
* 17 Duranton, Cours de Droit Franc. § 457, p. 512-515 ; 5 Duvergier,
Droit Civil Franc. § 405, 406 ; 4 Pardessus, Droit Comm. § 1089, 1207.—
In relation to the correlative principle, that the separate creditors ought
first to be paid out of the separate effects of the debtor partner, there
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 587
§ 367. In relation to what properly constitute joint
debts of the partnership, and what constitute separate
debts of the particular partners, the considerations al-
ready suggested in another place will, in a great meas-
does not seem to be the same uniformity of opinion at present prevailing
in France, although Duranton strongly inclines to hold it. His language
is: "Mais il n"y a pas lieu de dire, en sens inverse, que les creanciers
particuliers d'un associe doivent etre payes sur les biens personnels de est
associe, par preference aux creanciers cju"il a a raison de la societe, meme
en ce qui concerne la part de ses coassocies dans ces memes dettes, dans
le cas ou ils en seraient tenus solidairement, soit parce que la societe serait
en nom coUectif, soit parce que les associes se seraient obliges avec clause
de solidarite ; car cet associe est oblige, a I'egard des uns comme a Tegard
des autres, sur tous ses biens presens et a venir, par consequent sur ses
biens particuliers comme sur ceux qu"il avait pour sa part dans la societe.
Et de meme que les creanciers particuliers d"un heritier ne peuvent demander
la separation de son patrimoine d'avec celui du defunt (art. 881) , pour etre
payes sur ses biens par preference aux creanciers de la succession, de meme
les creanciers particuliers d'un associe ne doivent pas pouvoir demander la
separation de ses biens personnels de ceux qu'il a dans la societe, pour etre
paves sur ces memes biens par preference aux creanciers, qu'il a relative-
ment aux affaires de cette societe. II y a parite parfaite ; cet associe, en
contractant la societe, et des dettes relativement a cette meme societe, a
fait ce qu'il avait le droit de faire, comme un heritier, qui, en acceptant
purement et simplement une succession oberee, a pris sur lui les dettes du
defunt. Tout ce qu'on pourrait dire de plus juste, et telle est Topinion de
plusieurs personnes, c'est que si les creanciers de la societe demandent a
etre payes par preference sur ses biens ils doivent souiFrir que les creanciers
particuliers de I'associe soient payes par preference a eux sur les biens per-
sonnels de cet associe. La loi citee au n° precedent fournirait un argument
pour le decider ainsi. . On en trouverait un semblable dans la loi 3, § 2, S.
de separationibus, oil Papinien, centre le sentiment de Paul et d'Ulpien
(dans la 5% au meme titre), qui ne voulaient pas que les effets de la sepa-
ration pussent etre scindes, admettait bien les creanciers du defunt, qui
avaient demande la separation des patrimoines, a se faire payer aussi sur les
biens particuliers de I'heritier, mais toutefois apres discussion pr^alablement
faite de ceux du defunt, et, en outre, apr^s le paiement integral des creanciers
particuliers de Th^ritier ; decision qu'avait adoptee Domat, Lebrun, et Po-
thier. -Comme le point en question n'est pas positivement prevu et regie
par le Code Ci\-il, les juges, en virtu de Farticle 4, pourraient le decider de
la sorte, en suivant les regies de Tequitd, qui paraissent en effet vouloir une
semblable decision." 17 Duranton, Cours de Droit Frangais, § 458, p.
515-517. M. Duvergier holds a different opinion. 5 Duvergier, Droit
Civil Franc. § 406.
588 PARTNERSHIP. [CHAP. XV.
ure, supersede any discussions here.^ It may, however,
be generally stated, that wherever the original credit is
given to the partnership, that will constitute a debt
against the partnership, notwithstanding the partner
contracting the debt may also have given his own
separate security therefor, or have also made himself
personally liable therefor.^ And, on the other hand,
wherever the original credit has been exclusively given
to the partner contracting the debt, the partnership will
not be liable therefor, but the individual partner only,
although it has been applied to the use and benefit of
the partnership.^
§ 368. So, also, if the original debt is exclusively
contracted by one partner on his own account, but it
has been immediately assumed by the partnership, with
the consent and approbation of the creditor, as a part-
nership debt, it will henceforth be treated in his favor
as a joint debt.'* So, if one partner is separately in-
trusted with trust-money, and he, wdth the knowledge and
consent of his partners, applies it to partnership purpo-
ses, it will constitute a joint debt against the partnership
at the election of the ceshci que trust, or beneficiary.^
' Ante, § 126-155 ; Coll. on P. B. 4, c. 2, § 1, p. 613-622, 2d ed. {See,
also, Tremlett v. Hooper, 10 Gray, 254 ; Fisher v. Minot, Id. 260.}
* Ante, § 140 ; Gow on P. c. 5, § 3, p. 282-285 ; Wats, on P. c. 5, p. 274-
278, 2d ed. ; Ex parte Brown, cited 1 Atk. 225 ; Ex parte Emly, 1 Rose, 61 ;
Ex jmrte Hunter, 1 Atk. 223.
=> Ibid.
* Ante, § 142, 154; Gow on P. c. 5, § 3, p. 284-286, 3d ed. ; Ex parte
Jackson, 1 Ves. Jr. 131 ; Ex jmrte Peele, 6 Ves. 602 ; Ex parte Williams,
Buck^ 13 ; Ex parte Apsey, 3 Bro. Ch. 265 ; Coll. on P. B. 4, c. 2, § 1, p.
613-622, 2d ed. ; Ex parte Freeman, Buck, 471 ; Wats, on P. c. 6, p. 274,
275, 2d ed.
^ Gow on P. c. 5, § 3, p. 285, 3d ed. ; Ex paiie Watson, 2 Ves. & B.
414 ; Smith v. Jameson, 5 T. R. 601 ; Keble v. Thompson, 3 Bro. Ch. 112 ;
Coll. on P. B. 4, c. 2, § 1, p. 616-622, 2d ed. ; Id. c. 2, § 5, 638, 639 ; Ex
parte Clowes, 2 Bro. Ch. 595 ; Wats, on P. c. 5, p. 274-278, 2d ed.; {Lind.
on P. 248 ; Trull v. Trull, 13 All. 407. See ante, § 166.}
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 589
§ 369. Cases also may arise in a more general form,
involving the like considerations, whether debts, origi-
nally separate, have been converted into joint debts ;
or debts, originally joint debts, have been converted
into separate debts, at any other period subsequent to
their first creation ; and also, whether, if there has been
such a conversion, the original debts have been thereby
intentionally extinguished, or not.^ It is obvious, that
the remedy of the creditors against the estates of the
partners, either joint or several, may be materially af-
fected by each of these facts, and especially by the lat-
ter. By the conversion of debts, in the technical sense
of the phrase, is meant the changing of their original
character and obligation with the consent of the credi-
tors ; so that, if they are originally joint debts of all
the partners, they become, by consent, the separate
debts of one partner ; or, if they are the separate debts
of one partner, they become, by the like consent, the
joint debts of all the partners. It is obvious, that this
conversion may be with an intention, either to extin-
guish the original debt, or merely to give the creditor
an additional security therefor; and the law will give
effect to it according to that intention. Where the
original debts have been converted with an intention
to extinguish them (which can only be where a suffi-
cient consideration exists or passes between the parties),
there, the creditors must rely solely on their debts in
their new quality or form, and are entitled to receive
compensation out of the joint estate or several estate,
according to the nature of the conversion, and in con-
formity to the principle already stated.^ But, where
1 Coll. on P. B. 4, c. 2, § 2, p. Glo, 6U, 2d ed. ; ante, § 155-157 ; Wats,
on P. c. 5, p. 274, 275, 2d ed.
2 Coll. on P. B. 2, c. 1, § 2, p. 113, 2d ed. ; Id. B. 4, c. 2, § 2, p. 614;
1 Mont, on P. B. 2, c. 7, § 2, p. 226-232, Am. ed. ; Wats, on P. c. 5, p.
256, 257, 2d ed. ; Bolton v. Puller, 1 B. & P. 539.
590 PARTNERSHIP. [cHAP. XV.
the original debts have been converted without any
such extinguishment (which, also, can only be upon a
sufficient consideration), the creditors can take advan-
tage of the debts, according either to their new or their
old form and quality.^ In other words, they may treat
them as joint, as well as separate debts, and have their
remedy against the joint or separate estate accordingly
in their election. The creditors are, therefore, ordi-
narily, in this latter case, in a far more beneficial con-
dition than in the former ; ^ and this may be, especially
in cases of bankruptcy, a right of no inconsiderable
value.^
§ 370. The question, therefore, may become highly
important to ascertain, what, upon any such conver-
sion, will amount to a conversion of the original debt
with any extinguishment ; and what will amount to
a conversion thereof without such extinguishment.
And here, again, what has been already stated may
serve, in a great measure, to explain and solve most
questions of this sort.'* In order to produce any con-
version at all, either with or without an extinguish-
ment, there must be a sufficient consideration, and also
1 Coll. on P. B. 4, c. 2, § 2, p. 614, 2d ed. ; Id. B. 2, c. 1, § 2, p. 113.
^ Ibid.
3 Coll. on P. B. 4, c. 2, § 5, p. 634-641, 2d ed. ; Gow on P. c. 5, § 3, p.
286-288, 3d ed. {The guaranty by a partnership of a debt of one of the
partners, if made in contemplation of insolvency, cannot be proved against
the joint estate by a creditor who knew the insolvency of the firm. Phillips
V. Ames, 5 All. 183.}
* Ante, § 157-159 ; Coll. on P. B, 3, c. 3, § 3, p. 384-389, 2d ed. —
See especially the cases already cited, ante, § 156-159, where, upon the re-
tirement of one partner, there have been subsequent dealings by the joint
creditors with the remaining partners, constituting a new firm, and new
securities have been taken, and new credits obtained, and new accounts
opened, and new stipulations entered into between them, with reference to
the old debts, when and under what circumstances they will amount to a
conversion of the old debts, and an extinguishment. Mr. Collyer and Mr.
Gow have cited the cases at large in the passages above referred to.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 591
a deliberate and mutual assent of the creditors and
debtors to such conversion. Both must concur ; and
the offer and the acceptance must be upon the same
conditions, stipulations, and limitations.^ In short, all
the terms must be accepted and complied with.^ And
it may be laid down, as a general rule, that where a
separate creditor has taken a partnership bill, or note,
or other security, in full discharge of his original claim,
there, the separate debt is converted into a joint debt,
and the original remedy is extinguished.^ The same
rule will apply in the converse case, where a joint
creditor has taken the separate bill, or note, or other
security, in discharge of the joint debt. But, if the
evidence goes only to show, that the bill, or note, or
other security was given, not in discharge of, but as a
collateral security for the original debt, in such a case
the original debt and remedy will still remain.^
§ 371. Another question may arise, and that is, as
1 Coll. on P. B. 4, c. 2, § 2, p. 617-620, 2d ed. ; Id. c. 2, § 1, p. 608,
609 ; {Dwight v. Mudge, 12 Gray, 23 ; Wild v. Dean, 3 All. 579 ; Backus
V. Fobes, 20 N. Y. 204. }
^ Ibid. ; Ex parte Fairlie, 1 Montagu, 17 ; Ex parte Peele, 6 Ves.
602; Ex parte Williams, Buck, 13; Ex parte Freeman, Buck, 471; Ex
parte Fry, 1 Glyn. & J. 96 ; Gow on P. c. 5, § 3, p. 284, 285, 3d ed.
3 Coll. on P. B. 4, c. 2, § 2, p. 614-618, 2d ed. ; Ex parte Seddon, 2
Cox, 49 ; Gow on P. c. 5, § 3, p. 282-286, 3d ed. ; Ex parte Lobb, 7 Ves.
592 ; Ex p)arte Roxby, 1 Mont, on P. 124 ; Ex parte Fairlie, 1 Montagu,
17; Ex parte Clowes, 2 Bro. Ch. 595; David v. Ellice, 5 B. & C. 196;
Gow on P. c. 5, § 4, p. 359-367, 3d ed. ; Id. c. 5, § 4, p. 360-366.
* Coll. on P. B. 4, c. 2, § 2, p. 615, 616, 2d ed. ; Id. B. 3, c. 3, § 3, p.
384-388 ; Ex parte Seddon, 2 Cox, 49 ; Ex parte Lobb, 7 Ves.,592 ; Ex
parte Koxby, 1 Mont, on P. 124 ; Ex parte Hodgkinson, Cooper, 99 ; Ex
parte Hay, 15 Ves. 4; Ex parte Slater, 6 Ves. 146 ; Evans v. Drummond,
4 Esp. 89; Reed v. White, 5 Esp. 122; Thompson v. Percival, 5 B. &
Ad. 925 ; Ex parte Whitmore, 3 Mont. & A. 627 ; Oakley v. Pashcller, 10
Bligh, N.S.548; s. c. 4 CI. & Fin. 207 ; Wats, on P. c. 5, p. 274-277, 2d ed.
{Ci'ooker v. Crocker, 52 Me. 267. So, if judgment has been recovered
against one partner for a debt due from the firm, the creditor cannot prove
against the joint estate ; Ex parte Higgins, 3 De G. & J. 33. }
592 PARTNERSHIP. [cHAP. XV.
to what is to be deemed joint property of the partner-
ship, and what separate property of the respective
partners. This, not iinfrequently, becomes a perplex-
ing and comphcated inquiry in cases of bankruptcy ;
and it is sometimes not wholly free from doubt in
other cases. But, as with few exceptions, and these
chiefly arising upon reputed ownership under the
statutes of bankruptcy,^ the same general principles
apply to all classes of cases, we shall consider them
(reserving the exceptions for a future discussion) in
this place.
372. The joint estate of the partnership is that
which belongs to the firm, and in which the partner-
ship have a joint interest, either at law or in equity, at
the time of the dissolution.^ The separate estate is
that in which any of the partners has a separate inter-
est, either at law or in equity, at the same period ; and
it is not the less his separate estate, although it may be
actually possessed and used by the partnership at the
time, for partnership purposes, if in truth it is merely
for the accommodation thereof, and the partnership have
no interest whatsoever therein.^ The partners may, by
their articles of partnership, agree as to what shall be
deemed partnership property, and what shall be deemed
' See Ex parte Enderby, 2 B. & C. 389 ; Ex parte Wood, De Gex,
134; Coll. on P. B. 4, c. 2, § 1, p. 597-600, 2d ed. ; Gow on P. c. 5, § 3,
p. 267, 268, 271-274, 3d ed. ; Id. § 2, p. 232-234; Wats, on P. c. 5, p.
256-260, 2d ed. ; Id. p. 264-272.
2 Ante, § 88-100 ; {In re Rowland, Law Rep. 1 Ch. 421.}
■■' Coll. on P. B. 4, c. 2, § 1, p. 595, 596, 2d ed. ; Ex jmrte Hamper, 17
Ves. 403, 412, 413 ; Gow on P. c. 5, § 3, p. 271-274 ; {Lind. on P. 551 ; Ex
parte Owen, 4 De G. & Sm. 351. As to real estate, see § 93, note. In El-
liot V. Stevens, 38 N. H. 311, it was held, that if partners by arrangement
among themselves, owned each a separate part of the stock in trade on
which the firm business was transacted, yet the stock would be regarded as
partnership property for the payment of partnership debts, at least as to
creditors who had no notice how the stock was owned. }
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 593
separate property, at the time of the dissolution. So
they may, during the partnership, convert joint prop-
erty into separate property, or separate property into
joint property ; and the property will, at the dissolution,
be held to possess tliat character, and that only, which
is imposed upon it at the time.^ Hence, if upon a dis-
solution, any partnership property be left in the posses-
sion of one partner, but not for the purpose of carrying
on the trade therewith, on his own account, it will be
deemed partnership property, and retain its true char-
acter, notwithstanding such partner shall subsequently,
while it is in his possession, become a bankrupt.^ The
reason is, that the property is in his hands, merely as
a trustee of the partnership ; and trust property is not
deemed to be the reputed property of the bankrupt.^
§ 373. In relation to the assignment of separate debts
by a partner to the firm, or the assignment of joint
debts by the firm to a separate partner (subject to the
exceptions arising under the bankrupt laws),"* the debts
will be treated as joint or several in equity, according
to the intention of the parties, whether they are actu-
ally reduced into possession, or whether actual notice
has been given to the debtors or not. For such an as-
signment will operate in equity as a complete transfer
of the debts, if made honafide^ and for a valid consider-
ation. In respect to the assignment of other property,
the transfer need be made only in the same way and
» Coll. on P. B. 4, c. 2, § 1, p. 596, 597, 2d ed. ; Id. p. 600, 601, 603-
606; Ex imrte Ruffin, 6 Ves. 119; {Fishery. Minot, 10 Gray, 260; Mc-
Cormick v. Gray, 13 How. 26.}
« Coll. on P. B. 4, c. 2, § 1, p. 596, 597, 2ded. ; Wats, on P. c. 5, p.
314-320, 2d ed. ; [See also Stooken v. Dawson, 9 Beav. 239.]
•■« Winch V. Keely, 1 T. R. 619; Copeman v. Gallant, IP. Wms. 314;
Ex parteYlyn, 1 Atk. 185; Ex parte^NAlmns, 11 Ves. 3, 5, 6 ; Coll. on P.
B.4, c. 2, § 1, p. 597-599, 2d ed. {And see Harmon v. Clark, 13 Gray, 114.}
^ Gow on P. c. 5, § 3, p. 275, 276, 3d ed.
38
594 PARTNERSHIP. [cHAP. XV.
manner, as it ought to be, to be valid if made in favor
of a third person. But, in all these cases, the transfer
by assignment roust be complete, and all the conditions
thereof fulfilled, otherwise it will not amount to a con-
version of the property.^
§ 37-1. We come, in the next place, to the considera-
tion of the effects and consequences of a dissolution by
bankruptcy upon the rights of creditors. It might at
first view be supposed, that the doctrines upon this sub-
ject, being the growth of the bankrupt system of Eng-
land, were not of much importance to be examined or
studied elsewhere. But, when it is considered, that the
jurisdiction exercised by the Courts in cases of bank-
ruptcy, is founded upon the general notion of adminis-
tering the principles of equity and general justice be-
tween the parties (although these principles may, per-
haps, in some instances be administered upon artificial
reasoning), it will be found, that they furnish many
lights by which the corresponding systems of other na-
tions in the analogous cases of insolvency, and the Ces-
sio honorum, may frequently be illustrated and expound-
ed. It is mainly upon considerations of this sort, that
they are here brought under review.^
' 2 Story, Eq. Jur. § 1039-1048 ; Coll. on P. B. 4, c. 2, § 1, p. 612, 613, 2d
ed. ; Ex imrte Ruffin, 6 Ves. 119 ; Gow on P. c. 5, § 3, p. 268-270, 3d ed.
See and consult the cases cited by Mr. Collyer on P. B. 4, c. 2, § 1, p. 605-
610, 2d ed. ; Gow on P. c. 5, § 3, p. 268-281, 3d ed. ; which, though arising in
bankruptcy, show what the general princi2)le is, where there is no bankruptcy.
[Ex parte Sprague, 4 De G. M. & G. 866 ; Hawkins v. Hawkins, 4 Jur. n. s.
1044 ; Armstrong v. Fahnestock, 19 Md. 58 ; Jones v. Neale, 2 P. & H. 339.}
^ {The provisions in the United States Bankrupt Act of 1867 concerning
partnerships are contained in the thirty-sixth section, which is as follows :
" Where two or more persons who are partners in trade shall be adjudged
bankrupt, either on the petition of such partners or any one of them, or on
the j)ctition of any creditor of the partnei-s, a warrant shall issue in the man-
ner provided by this act, upon which all the joint stock and property of the
copartnership, and also all the separate estate of each of the partners, shall
be taken, excepting such parts thereof as are hereinbefore excepted ; and
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 595
§ 375. It is obvious, that many of the considerations
already suggested, as applicable to other cases of disso-
lution, are also applicable to cases of bankruptcy.^
Thus, for example, the assignees, in the case of the
separate bankruptcy of one partner, can affect the joint
property no further than the bankrupt himself. They
have no right to change the possession or to make any
specific division of the joint effects. They take only
such an undivided share or interest therein, as the bank-
rupt himself had, and in the same manner as he held
it ; that is to say, subject to all the rights and liens of
the other partners ; and they are entitled only to the
balance, which is ascertained to be due to the bankrupt,
after all the partnership debts and the claims of the
solvent partners are paid, and a division is made of the
all the creditors of the company, and the separate creditors of each part-
ner, shall be allowed to prove their respective debts : and the assignee shall
be chosen by the creditors of the company, and shall also keep separate ac-
counts of the joint stock or property of the copartnership and of the sepa-
rate estate of each member thereof: and after deducting out of the whole
amount received by such assignee the whole of the expenses and disbui-se-
ments, the net proceeds of the joint stock shall be appropi'iated to pay the
creditors of the copartnership, and the net proceds of the separate estate of
each partner shall be appropriated to pay his separate creditors : and if
there shall be any balance of the separate estate of any partner, after the
payment of his separate debts, such balance shall be added to the joint
stock for the payment of the joint creditors: and if there shall be
any balance of the joint stock after payment of the joint debts, such
balance shall be divided and appropriated to and among the sepa-
rate estates of the several partners, according to their respective right
and interest therein, and as it would have been if the partnership had
been dissolved without any bankruptcy ; and the sum so appropriated to
the separate estate of each partner shall be applied to the payment of his
separate debts ; and the certificate of discharge shall be granted or refused
to each partner as the same would or ought to be if the proceedings had been
against him alone under this act ; and in all other respects the proceedings
against partners shall be conducted in the like manner as if they had been
commenced and prosecuted against one person alone. If such copartners
reside in different districts, that court in which the petition is first filed shall
retain exclusive jurisdiction over the case." }
' See Gow on P. c. 5, § 3, p. 299, 300, 3d ed.
596 PARTNERSHIP. [cHAP. XV.
surplus.^ But there are some doctrines, which are pe-
culiar to the latter cases, and therefore require a distinct
and separate examination. It is not the design of these
Commentaries to enter into a general discussion of all
the various topics belonging to the administration in
bankruptcy of the joint and separate effects ; or to the
administration in bankruptcy in cases under a joint
commission against all, or a separate commission against
one or more of the partners ; or of the practice and
proceedings in matters of bankruptcy. A full and ex-
act exposition of these subjects properly belongs to a
regular Treatise on the principles, the proceedings, and
the practice in bankruptcy, rather than to an element-
ary work on the subject of partnership, which can dis-
cuss but a single branch thereof.^ Our remarks will,
therefore, be limited to a few prominent considerations
of a general nature, which may principally serve to
illustrate the doctrines in bankruptcy, as contradistin-
guished from those which are commonly applicable to
other cases of dissolution, or which may qualify or vary
the latter.
§ 376. In the first place, then, it is a general rule in
bankruptcy, that the joint debts are primanly payable
out of the joint effects, and are entitled to a preference
' Gow on P. c. 5, §3, p. 300, 3d ed. ; Wats, on P. c. 5, p. 312, 313, 2d
ed.
^ The learned reader will find very ample information upon the prac-
tice and proceedings and administration of assets in bankruptcy, in Gow
on P. c. 5, §3, p. 256-348, 3d ed. ; in Coll. on P. B. 4, c. 2, § 1-21, p. 595-
678, 3d ed. ; Id. c. 3, p. 686-716 ; in Wats, on P. c. 5, p. 243-356, 2d ed. ;
in 1 Mont, on P. B. 2, c. 7, p. 226-233, Am. ed. ; and still more amply in
Cook on Bankruptcy, Christian on Bankruptcy, Deacon on Bankruptcy, and
Montagu & Ayrton on Bankruptcy. The doctrines stated in the text have
in some few cases been qualified or modified by the recent Bankrupt Act in
England. But it seemed unnecessary in the present work minutely to ex-
amine them, as they involve no general principles of Equity Jurisprudence
as administered in bankruptcy.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 597
over the separate debts of the bankrupt ; and so, in the
converse case, the separate debts are primarily payable
out of the separate effects of the bankrupt, and possess
a like preference ; and the surplus only, after satisfying
such priorities, can be reached by the other class of
debts.^ For this purpose, the joint estate and the sepa-
rate estate of the bankrupt constitute separate funds,
to be administered separately by the assignees under
1 Gow on P. c. 5, § 3, p. 235, 236, 3d ed. ; Id. p. 281, 282, 299, 300 ;
Coll. on P. B. 4, c. 2, § 3, p. 623, 2d ed. ; Id. B. 2, c. 1,»§ 2, p. 119 ; Twiss
V. Massey, 1 Atk. 67 ; Ex parte Cook, 2 P. Wms. 500 ; Ex parte Elton,
3 Ves. 238, 240; Ex parte Abell, 4 Ves. 837 ; Ex parte Clay, 6 Ves. 813;
In re Plummer, 1 Phil. 56, 60 ; Bolton v. Puller, 1 B. & P. 539, 545 ; [Mur-
rill V. Neill, 8 How, 414 ; Jackson v. Cornell, 1 Sand. Ch. 348 ; Woddrop v.
Ward, 3 Des. Eq. 203 ; Jarvis v. Brooks, 3 Post. 136 ; Bridge v. McCullough,
27 Ala. 661 ; Rodgers v. Meranda, 7 Ohio St, 179 ; Washburn v. Bank of
Bellows Falls, 19 Vt. 278] ; Wats, on P. c. 5, p. 262, 263, 2d ed. ; Id. p.
324-334. — In Ex parte Field, in Bankruptcy, 3 Mont. D. & De G. 95, the
Chief Judge (in Bankruptcy) said: "It appears to me that long known
decisions have settled the point, that a joint debt cannot be proved against
the separate estate of a bankrupt, so long as there are joint assets or a sol-
vent partner." The rule equally applies to cases of co-contractors as of
partners. Ibid.; Ex parte^iovi-'is, Montagu, 218. {See 1 Am. Lead. Cas.
480, 4th ed. ; 2 Lead. Cas. in Eq. 813, 3d Am. ed. ; especially the latter, to
which the learned reader is referi-ed for an excellent discussion on the foun-
dations, propriety, and limitations of this rule. Besides the cases there cited,
see Holton v. Holton, 40 N. H. 77 ; Treadwell v. Brown, 41 N. H. 12 ; Weyer
V. Thornburgh, 15 Ind. 124; Toombs v. Hill, 28 Ga. 371 ; N. Bank of Ken-
tucky V. Keizer, 2 Duv. 169 ; Whitehead v. Chadwell's Adm'r, Id. 432, and
more particularly Black's Appeal, 44 Penn. St. 503 and Kuhne v. Law, 14
Rich. 18 ; also the recent English case Lodge v. Prichard, 4 Giff. 294 ; s. c. on
appeal, 1 De G. J. & S. 610. See also U. S. Bankrupt Act, § 36 and ante,
§ 260-264, 363.
The joint creditors are entitled to interest on their debts before the sur-
plus is carried to the separate estates. Ex parte Ogle, Mont. 350 ; Ex
parte Reeve, 9 Ves. 588. But when the separate creditors have been paid
in full, the surplus is carried to the joint estate and the separate creditors
are not entitled to interest. Ex parte Clarke, 4 Ves. 677 ; Ex parte Min-
chin, 2 Gl. & J. 287 ; Ex parte Boardman, 1 Cox, 275; Ex parte Wood, 5
Jur. 1115 ; Ex parte Wood, 2 Mont. D. & De G. 283. Thomas r. Minot, 10
Gray, 263. But it would seem under the U. S. Bankrupt Act, 1867, § 36,
that the joint and separate creditors must stand in the same position as
to the allowance of interest. See Thomas v. Minot, uhi sttp.]
598 PARTNERSHIP. [CHAP. XV.
the commission, whether it be a separate commission
against one partner, or a joint commission against all
the partners.^
§ 377, This rnle, although now firmly established,
has occasioned much diversity of opinion among learned
Judges at different times." It was established at an
early period ; but was afterwards departed from, and
was again re-established ; and it now stands, as much,
» Gow on P. c. 5, § 8, p. 280-282, 3d ed. ; Id. p. 299, 300, 311, 312 ;
Wats, on P. c. 5, p. 243-245, 2d ed. ; Id. p. 252-260 ; Id. p. 262, 263 ;
[Purple V. Cooke, 4 Gray, 120] ; Bolton v. Puller, 1 B. & P. 539 ; Coll. on
P. B. 3, c. 2, § 3, p. 624, 2d ed. —Lord Chief Justice Eyre, in delivering the
opinion of the Court, in Bolton v. Puller, 1 B. & P. 539, 547, 548, said :
"Bankruptcy, when it intervenes, may very much change the situation
of these parties. Mr. Justice Heath suggested this consideration at the
close of the first argument. It is a very important consideration. If all
become bankrupts, all the joint and all the separate property will vest
in the assignees, whether the commissions are joint or several. If a sep-
arate commission issue against one partner, his assignees will take all his
separate property, and all his interest in the joint property. If a joint
commission issues against all, the assignees will take all the joint prop-
erty, and all the separate property of each individual partner. In the
distribution to creditors, a rule of convenience has been adopted. To un-
derstand it, we should see what the rights of creditors were as to execu-
tion for their debts before bankruptcy. A separate creditor might take
at his election the separate estate of his debtor, or his debtor's share of
the joint estate, or both, if necessary. A joint creditor might take the
whole joint estate, or the whole separate estate, of any one partner. But
the rule of convenience, which has been adopted, restrains the separate
creditor from resorting, in the first instance, to his debtor's share of the joint
property ; and also restrains the joint creditor from resorting, in the first in-
stance, to the separate property of his debtor. Bankruptcy has been called a
statute execution ; but if it has any analogy to an execution, it is certainly very
much modified, and, as I take it, by the authority of the Chancellor, who is
to take order for the distribution of the effects of a bankrupt. Under
the rule the separate creditors have a right to be satisfied for their debts
out of the separate property in preference to the joint creditors. . But what
shall be deemed separate property, or what effect the claims of third per-
sons upon that, which (as between one partner and the partnership) would
be separate property, are questions which neither bankruptcy nor the rule
of distribution seem to touch. The assignees stand but in the place
of the bankrupt, and take the effects suljject to every legal and equitable
claim upon those eff'ects."
^ [See Cleghorn v. Insurance Bank, 9 Ga. 319.]
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 599
if not more, upon the general ground of authority and
tlie maxim, stcu^e decisis, than upon the ground of an
equitable reasoning. In truth, it is precisely such a
case, as may well justify a great deal of argument on
each side ; and although it has been said, that the equity
of this mode of distribution is very plain, because each
estate ought to bear its own debts ; yet it is by no means
clear, that this is not an artificial suggestion, cutting
down the difficulty, and assuming the correctness of the
rule, rather than showing, that it has its origin and
foundation in the principles of natural justice, ex cequo
et bono}
* Ante, § 363, 364. — Mr. Gow (p. 312-314) has summed up the doctrine
of the authorities on this subject as follows : "In the time of Lord Hardwicke,
the rule adopted was to permit joint creditors to prove under a separate
commission against one partner, or under separate commissions against all
the partners, for the purpose of assenting to, or dissenting from, the certifi-
cate ; and the joint creditors were considered to have an equitable right to
any surplus of the separate estates, after payment of the separate creditors ;
but the joint property was distributed under a joint commission taken out
for that purpose, or a bill must have been filed for an account of the joint
estate. Ex parte Baudier, 1 Atk. 98 ; Ex j^arte Yoguel, 1 Atk. 132 ; Ex
parte Oldknow, Cook's B. L. 233; Ex parte Cobham, Id. 234. See also
Button V. Morrison, 17 Ves. 193, 207 ; Ex parte Farlow, 1 Rose, 421. This
rule was broken in upon by Lord Thurlow, who expressed his decided
opinion, that the contrary course was the best, as being the most legal ; and
he, in several instances (^Ez jJarte Haydon, Cook's B. L. 234 ; s. c. 1 Bro.
Ch. 4o4; Ex parte Copland, Cook's B. L. 236; s. c. 1 Cox, 420; Ex
parte Hodgson, 2 Bro. Ch. 5 ; Ex parte Page, Id. 119 ; Ex parte Flintum,
Id. 120), allowed the joint creditors to prove and take dividends under a
separate commission ; his Lordship holding, that a commission of bank-
ruptcy was an execution for all the creditors, and as the assignees under a
separate commission might possess themselves, not only of the se^jarate
estate, but of the bankrupt's proportion of the joint estate, and as a joint
creditor, having brought an action and recovered judgment against all his
debtors, might have several executions against each, thei'efore the bank-
ruptcy, preventing his action with effect, should be considered a judgment
for him as well as the others, and consequently that no distinction ought to
be made between joint or separate debts, but that they ought all to be paid
ratably out of the bankrupt's property, which was composed of his separate
estate, and his moiety or other proportion of the joint estate. See Button
V. Morrison, 17 Ves, 193, 207. Lord Rosslyn acted for some time upon the
600 PARTNERSHIP. [cHAP. XV.
§ 378. What renders the foundation of the rule it-
self as one of natural justice and equity, and not of
practice established by Lord Thurlow, but afterwards with some alteration ;
and upon great consideration he restored the principle of the rule, which
had been adopted by Lord Hardwicke. In the case of Ex parte Elton,
3 Ves. 238, 242, Lord Rosslyn says : ' The plain rule of distribution is, that
each estate should bear its own debts. The equity is so plain, that it is of
course upon a bill filed. The object of a commission is to distribute the
effects with the least expense. Every order I make, to prove a joint debt
upon the separate estate, must produce a bill in equity. It is not funda-
mentally a just distribution, nor a convenient distribution ; because it tends
to more litigation and more expense. Every creditor of the partnership
would come upon the separate estate. The consequence would be, the
assignees of the separate estate must file a bill to restrain the dividend
upon all these proofs, and make the partners parties. But there is another
circumstance ; it is a contrivance to throw this upon the separate estate ;
for what hinders them from recovering at law this debt against the partner-
ship, for it is money paid to one of the partners ? They have nothing to do
but to bring an action against the partner. The affairs of the partnerships
may be very much involved ; but if they are arrested, they would pay it.
It is not stated as a case where there are no joint effects. Here it is only
that there are two funds. Their proper fund is the joint estate, and they
must get as much as they can from that first. I have no difficulty in order-
ing them to be admitted to prove, but not to receive a dividend.' This rule
was afterwards acted upon by Lord Rosslyn (^Ex parte Abell, 4 Ves. 837) ,
and was adopted and followed by Lord Eldon in many subsequent cases,
not because he was convinced of its propriety, or of its being better calcu-
lated to the due administration of justice than the doctrine introduced by
Lord Thurlow ; but he adhered to it, because it was the practice, and to
avoid the mischief arising from shaking settled rules. Ex parte Clay, 6 Ves.
813, and the cases cited Ibid, in note; Ex pa?'^e Kensington, 14 Ves. 447;
Ex parte Taitt, 16 Ves. 193. According to the rule, therefore, which these
decisions have established, if there is a joint fund, or a solvent partner, a
joint creditor is'not entitled to prove his debt under a separate commission
for the purpose of receiving a dividend, without the Lord Chancellor's
order. Mont. B. L. 230. And notwithstanding the joint property is of
the most trivial amount, yet if there is such a fund of any, even the
smallest, description, and it is capable of being realized, the rule is inflexible,
and tliere will be no departure from it. Ex parte Peake, 2 Rose, 54. See
also J?ireLee, Ibid, in note. Lord Eldon, indeed, admitted this qualification
of the rule, that ' If the property alleged to exist be of such a nature, and
in such a situation, that any attempt to bring it within the reach of the
joint creditors must be deemed a desperate, or, in point of expense, an
unwarrantable attempt, that would authorize a departure from the rule ; as
in truth there would then be no joint property.' Ibid. And joint estate has
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 601
more -assumed convenience, somewhat more open to
criticism and question, is the character of the excep-
tions, to which it has given rise, some of which may
be truly said to present the reasoning against it in a
stronof hjjht, and to make it more difficult to be sus-
tained. These exceptions allow a joint creditor to
share, pari passu, with the separate creditors in every
case, to which they are applicable. They are of three
sorts; (1.) ^Yhere the joint creditor is the petitioner for
a separate commission against the bankrupt partner ;
(2.) Where there is no joint estate, and no living sol-
vent partner ; (3.) Where there are no separate debts.
In the tirst case, the petitioning creditor may prove
his debt, and share, j9a?'i passu, with the separate cred-
itors in the separate estate ; in the second case, all the
joint creditors enjoy the same privilege ; and in the
third case, all the joint creditors share, p«?^i passu, with
each other. ^
§ 379. The fii-st exception stands confessedly upon
a ground of reasoning, which, if not purely artificial,
applies at least with equal force in favor of the joint
creditors in all other cases. The ground is, that a
commission of bankruptcy is an action and an execu-
tion in the first instance.^ To which it has been replied
been said to mean such estate only as comes under the administration of the
assignees to distribute, and not to extend to joint estate pledged for more
than its value. Ex parte Hill, 5 B. & P. 191, n.'' See also Coll. on P. B.
4, c. 2, § 3, p. 623, 624, 2d ed. ; Ex parte Cobham, 1 Bro. Ch. 576, Mr.
Belt's note (1).
' Coll. on P. B. 4, c. 2, § 3, p. 623-628, 634, 635, 2d ed. ; ^.r parte
Tate, Cook's B. L. 244.
2 Twiss V. Massey, 1 Atk. 67 ; Ex parte Crisp, 1 Atk. 133 ; Coll. on P.
B. 4, c. 5, § 3, p. 625, 626, 2d ed. ; {Lind. on P. 1002} ; Ex parteEhon,Syes.
238. — In this latter case Lord Loughborough (afterwards Earl of Rosslyn)
said: "Antecedent to these authorities, I should have tliought it perfectly
clear it could not be done ; and, that the utmost length they could go was,
that a joint creditor, where there is a separate commission, is to be admitted
602 PARTNERSHIP. [cHAP. XV.
with as great force, that it is true that a commission is
an execution, but an execution for all the creditors ;
to prove, only for the purpose of assenting to or dissenting from the cer-
tificate, and receiving such surplus beyond the amount of the separate debts,
as joint creditors would be entitled to claim, where there are two commis-
sions. I doubt, Avhether it is possible to innovate upon that, which was
the law formerly ; for though a commission is an execution, and the joint
creditor has such an interest as enables him to take out a separate commission,
yet the consequence does not follow. There are cases antecedent to those
cited. In Lord King's time it was determined, that a joint creditor might
be a good petitioning creditor, though the commission is only against one
partner; that the joint creditor does no more in taking his execution, pass-
ing over his action, than bringing the separate effects to be administered in
bankruptcy. But it is not treated any longer as an execution at law ; for
the effects taken under it are not disposed of as at law, but fliU immediately
by the direction of the statute under the administration of this Court ;
which is to make an equitable distribution among the creditors, to admit all
equitable claims upon the effects, and to divide them ratably. It has been
long settled, and it is not possible to alter that, that each estate is to pay its
own creditors. With regard to the creditor suing out the commission, the
separate creditors cannot object to his having the effect of the execution
he has taken out. He is precluded from suing at law ; and it would be
against all equity, having done it for their benefit, to refuse him the fruit of
that for his own debt. But any other joint creditor is in exactly the case
of a person having two funds ; and this Court will not allow him to attach
himself upon one fund to the prejudice of those who have no other, and to
neglect the other fund. He has the law open to him ; but if he comes
to claim a distribution, the first consideration is, What is that fund from
which he seeks it ? It is the separate estate, which is particularly' attached
to the separate creditors. Upon the supposition, that there is a joint estate,
the answer is, ' Apply yourself to that ; you have a right to come upon
it ; the separate creditors have not ; therefore do not affect the fund attached
to them, till you have obtained what you can get from the joint fund.'
There would be no great inconvenience, if he could put them in his situation
as to the joint fund ; but I doubt very much whether that is possible. For
suppose in the case of A. and B., partners, the former remains solvent,
the latter becomes a bankrupt, and there is a joint debt of £1,000. The
creditor making his claim first against the separate estate, paying a dividend
of 10s. in the pound, receives £500. Can the assignees claim against the
solvent partner, what they have paid ? His answer would be, they could
only claim the same right the bankrupt could ; and as against the bankrupt
he is entitled to retain ; he has paid his moiety of the partnership debt.
If the case is turned the other way, and the creditor first sues the solvent
partner, he recovers all the debt against him ; and he has a right to come in
as a separate creditor of the bankrupt to the amount only of a moiety of
CHAP, XV.] DISSOLUTION RIGHTS OF CREDITORS. 603
that if a joint creditor had brought an action against all
the partners, he might have several executions against
each, or at least a joint execution, which could be levied
upon the joint property, and also upon the separate
property of each of the partners.^ What makes it still
that debt ; for a moiety only of the debt of the partnership he could have
recovered against him if he had been solvent. That makes a very great
difierence to the separate creditors. I was led to consider another thing, —
Is it possible to admit a separate ci'editor to take a dividend upon tlie joint
estate ratable with the joint creditors ? No case has gone to that, and it
is impossible ; for the separate creditor at law has no right to sue the other
partner. He has no right to attach the partnership property. He could only
attach the interest his debtor had in that property. If it stands as a rule of
law, we must consider, Avhat I have always understood to be settled by a vast
variety of cases, not only in bankruptcy, but upon general equity, that the joint
estate is applicable to partnership debts, the separate estate to the separate
debts. Another difficulty is, whether really it is just to put it to the assignees
in behalf of the separate creditors, to assert the right of the creditor, making
the claim, to go against the joint estate. The creditor coming in upon the
separate estate is first to answer the question, why he does not go against
the joint estate. It may be said, ' The law is open to you ; it is not open
to us. You put us to file a bill against the other partners to discover and
apply the partnership fund. You have a much quicker remedy; sue the
partnership. You need not wait the account. They will settle it rather
than put you to that ; at all events, j'ou have a legal execution against them.'
Another consideration is, that the great object of the law in establishing
this sort of authority, in which I now sit, is to make a speedy distribution,
and to avoid suits. The necessary consequence of admitting a joint cred-
itor to prove against the separate estate, is in every such case to make a
chancery suit ; and the right of the separate creditors to the administration
of their fund is frustrated." See, also. Ex parte Abell, 4 Ves. 837. {Where
the attachment of the property of one partner by a partnership creditor was
dissolved by the assignment in bankruptcy of that partner's estate, the
creditor, on proving his debt and the costs of his suit against such estate,
was held entitled to be paid such costs before the payment of the partner's
separate debts. Buck v. Burlingame, 13 Gray, 307. This was a decision
under the Massachusetts Insolvent Law, the provisions of which were similar
to those of the United States Bankrupt Act of 1867.}
' Ex parte Hodgson, 2 Bro. Ch. 5 ; Button i'. Morrison, 17 Ves. 193, 207.
— In this latter case, Lord Eldon went into the reasoning of the various
opinions, and said: "The case now before me must be regarded in this
point of view. The question being as to the effect of the quasi execution,
under a commission of bankruptcy against one partner, with reference to
the interest of himself and two others, in a fund in the hands of the plaintiff.
604 PARTNERSHIP. [CHAP. XV.
more artificial is, that if a joint creditor sues out a joint
commission against all the partners, he can resort only
to the joint funds of the partnership.^
The jurisdiction in bankruptcy being both legal and equitable, let us see,
whether we must not, of necessity, go a great way in this case ; or admit,
that we have already gone much too far in bankruptcy. The opinion of
Lord Hardwicke was, that joint creditors could prove under a separate
commission only for the purpose of assenting to, or dissenting from, the
certificate, but not to receive dividends ; and that they must file a bill for an
account of the joint estate. The operation of that bill was to draw into the
joint estate the share of that bankrupt partner, taken in execution, as far as
bankruptcy can be so represented ; and by the effect of the commission, the
bill, and the decree, nothing could be divided among the separate creditors
under the commission, but that which formed the separate share of the bank-
rupt after the account, and an application of the joint estate to all demands
against it. Lord Hardwicke, therefore, must either have thought, that upon
such a case it was clearly fit to say, that execution against one partner
should not affect the application of the joint fund to the joint demands ; or,
as I rather believe, he found himself in a situation requiring him to cut the
knot, and to make some rule that would, upon the whole, be most convenient.
This suliject took a different course at different periods, until the time of
Lord Thurlow, who considered it with great anxiety, and, having consulted
most of the Judges, expressed his decided opinion, that the contrary course
was the best, as being the most legal ; and therefore held, that the joint
creditors should be admitted to prove, and take dividends, under a separate
commission ; that a commission of bankruptcy was an execution for all
the creditors ; that, if a joint creditor had bi-ought an action against all the
debtors, he might have several executions against each ; and therefore
the bankruptcy, preventing his action with effect, should be considered as
a judgment for him as well as the other ; that he had a right to receive
the dividends ; and it was upon the assignees of the separate estate to bring
their bill to have the account settled. The question afterwards came to
be considered by Lord Loughborough, who got back to the old rule, and
abided by it firmly ; but great difficulties occurred of this sort. Lord
Loughborough, adopting the principle of Lord Hardwicke's rule, did not
adopt his practice ; not putting the joint creditors to file a bill, bringing
before the Court the assignees and the solvent partners, and taking the
account in their presence ; but taking this course, directing the assignees
to take an account of the joint estate, and applying that to the discharge
of the joint creditors, to ascertain the share of the residue, belonging
respectively to the bankrupt and the solvent partners. From the nature
of this proceeding, unless the solvent partners thought proper to come in
and have the account taken before the commissioners, the Lord Chancellor,
Ex parte Bolton, 2 Rose, 389, 390, cited in the preceding note.
CHAP. XY.] DISSOLUTION RIGHTS OF CREDITORS. 605
§ 380. The second exception excludes the joint
creditor, in all cases but one ; and in that case two
in bankruptcy, had no power to compel them ; neither could the joint
creditors, unless they thought proper to come in before the commissioners,
be compelled, in that proceeding, to come in ; and if the other partners
did not, or could not, as in the instance of residence abroad, make them-
selves parties, the account upon ordinary principles could not bind them.
I pressed the difficulty that would arise, if a joint creditor should bring
an action and proceed to judgment. Would this Court interfere upon the
ground, that there was an order in bankruptcy, to which he and the other
joint creditors were not parties-; and, to enforce that order, grant an
injunction against execution in that action ? That would be a question
of gi-eat imi^ortance, if the law was as simple as it was supposed to be in
the early cases upon this subject ; that the assignees were tenants in com-
mon of a chattel with the solvent partner ; and the creditor might satisfy
himself out of the appai-ent interest. But, taking the law to be, that no
more should be applied than the result of a general account, the only effect
of the execution would be, that the creditor would have subjected himself
to the general account, that was going on in another proceeding. The
question then came before me ; and ujion consideration of all the authori-
ties, I thought the best course for me to adopt (whether the best in prin-
ciple I have often doubted) was, that the rule should continue to be applied,
as it had been for some years in a course of application ; and, therefore,
I have not disturbed the practice, as it has of late prevailed. The result
is, that now it has been understood for fifteen years, that, under a separate
commission of bankruptcy, the other partners remaining solvent, an account
shall be directed of the joint estate in the absence even of the other part-
ners ; and upon the application of any one joint creditor, whether the
others choose it or not, the whole account being taken in the bankruptcy,
the joint creditors shall be paid, pari passu, out of the joint estate ; and
the residue shall then be distributed only according to the respective
interest of the partners ; and, if the rule of law, where a creditor takes
execution, is the same, perhaps we ai-e not far wrong. In the course of
this period there has been no instance of a creditor coming here, saying
that he had a judgment, not executed, against a partner, and desiring to
go on ; nor has the case occurred in bankruptcy of a joint creditor claiming
to set aside the execution under the commission by a prior act of bankruptcy ;
and desiring to have execution against all without any account. Such a
case, if it occurred, must be dealt with upon much the same principle as
this." I cannot find that Lord Thurlow's reasoning on the subject is any-
where given at large. All that remains consists of these notes and com-
ments. It is manifest that Lord Eldon equally doubted with him, as to the
solid foundation of the rule. Ex imrte Clay, 6 Ves. 813 ; £x parte Chandler,
9 Ves. 35 ; Ex parte Cobham, 1 Bro. Ch. 576, Mr. Belt's note (1) ; Ex parte
Taitt, 16 Ves. 193, 195, 196 ; Gowon P. c. 5, § 3, p. 312-315, 3d ed. Again,
606 PARTNERSHIP. [cHAP. XT.
circumstances must concur and co-exist ; (1.) That
there is no joint estate ; and (2.) That there is no living
solvent partner.^ If there is any joint estate, however
small it may be, if it is an available joint fund, and not
purely a desperate and nominal joint fund, then the
in Ex parte Bolton, 2 Rose, 389, 390, Lord Eldon said : " Since the case of
Ex parte Crisp, a decision now at least sanctioned by time, it has been
clearly settled, that a joint creditor may take out a separate commission ;
and, taking out that commission, he has a privilege of election, either to make
his proof against the separate or the joint estate. By a joint commission,
on the other hand, he binds himself to resort to the joint property. The
rule at law, as to executions, affords some analogy. If a creditor take out
a joint execution, he cannot afterwards take out a separate execution ; and a
commission is in the nature of an execution ; a joint commission being as
an execution against all, a separate commission as an execution against the
individual. If a creditor deliberately resorts to the process of a joint commis-
sion, he is, as a joint creditor, proceeding on a joint judgment and execution ;
and having once elected so to do, he cannot alter it. No determination
approaches a case like the present. Here are two separate commissions
at the instance of the same creditor. If it were the case of one separate
commission, thus awarded, the creditor might say, I will take my debt out of
either the joint or the separate estate ; but to get at the joint estate, there
must be a special order of the Chancellor. The joint property is, therefore,
reached by circuity ; and, being thus looked at, if the creditor says, I will
rank under this commission as against the joint estate, and, so ranking, receives
a dividend, say to the extent of fifteen shillings in the pound, he still re-
mains the creditor of the solvent partner as to the five, and for that he
may bring his action, or he may take out a commission ; and taking out a
commission, until he completely knows, and which until then he only indi-
rectly knows, the state of the joint accounts under that commission, he
cannot be said deliberately to have elected. I think, therefore, he is entitled
to reconsider his mode of proof; and refunding the joint dividend with the
interest, let the proof stand against the separate estate." See also Coll. on
P. B. 4, c. 2, § 5, 15. 634, 635, 3d ed.
1 {The U. S. Bankrupt Act, 1867, § 36, provides that "the net proceeds
of the joint stock shall be appropriated to pay the creditors of the copart-
nership, and the net proceeds of the separate estate of each partner shall be
appropriated to pay his separate creditors." An identical provision in the
Insolvent Act of ^Massachusetts has been held peremptory, distinctly forbid-
ding the application of this exception, and requiring the appropriation of
the separate estate to the separate creditors, whether there be any joint
estate or not. Howe v. Lawrence, 9 Cush. 553 ; Somerset Potters Works
r.*Minot, 10 Cush. 592. See Weyer i\ Thornburgli, 15 Ind. 124 ; Weaver
V. Weaver, 46 N. II. 188 ; ante, § 363. |
CHAP. XV.] DISSOLUTION RIGHTS OF CRKDITORS. 607
joint creditor is excluded. As for example, if the joint
fund is absolutely worthless from the expenses of any
attempt to get it in, or if it is pledged beyond its real
value, it will be deemed a mere nullity ; but not other-
wise.^ On the other hand, if there is no available joint
fund, still, if there is a solvent partner, as the creditor
has his right of action against him for a full satisfaction,
it is said, that, therefore, he ought not to be allowed to
come in competition with the separate creditors of the
bankrupt.- Why he may not, it is not easy to say upon
general reasoning, especially as all partnership debts
are now treated in equity as several, as well as joint.
But here, again, there is a "peculiar qualification upon
this part of the rule. The solvent partner must be
living ; for if he is dead, although his estate is solvent,
yet, the joint creditors may come in upon the separate
estate of the bankrupt ^;ari |9«.s,sz^, with the separate
creditors.^ The like rule will apply to the case of joint
debtors, who are not partners, under the like circum-
stances.'*
§ 381. The third exception stands, if possible, in its
actual application, upon more subtle and refined
grounds. It is not necessary here to make out a case,
where there are absolutely and literally no separate
1 Coll. on P. B. 4, c. 2, § 3, p. 626, 627, 2d ed. ; Ex parte Leaf, 1
Deac. 176 ; In re Lee & Armstrong, 2 Rose, 54 ; Ex parte Peake, 2 Rose,
54; Ex pane Hill, 5 B. «& P. 191, a ; Ex parte Janson, 3 Madd. 229 ; Ex
2)arte Kensington, 14 Ves. 447; [/« re Marwick, Daveis, 229]; {Lind. on
P. 1002. Where there was a joint fund of £13, though it did not appear
but that it would all be absorbed by costs, the joint creditors were excluded
from the separate estate. Ex parte Kennedy, 2 De G. M. & G. 228. So
where there was a joint fund of £9. 3s. 6cZ., all of whidi would be required for
expenses and costs. Ex jyarte Clay, 2 Christian's Bank. Law, 320 ; S. c. 2
DeG. M. &G. 230, note.}
- Coll. on P. B. 4, c. 2, § 3, p. 626, 627, 2d ed. ; Ex parte Sadler, 15
Ves. 52, 56; Ex parte Kensington, 14 Ves. 447.
' Coll. on P. B. 4, c. 2, § 3, p. 627, 2d ed. ♦ Ibid.
608 PARTNERSHIP. [CHAP. XV.
debts at all. It is sufficient, that they are few and
inconsiderable in amount, and that the joint creditors
undertake to pay them all, and do discharge them ; so
that they no longer stand in their way as subsisting
claims, impeding their rights.^
§ 382. Such is the acknowledged state of the author-
ities as to the general rule, and the exceptions to it as
to the respective rights of joint creditors and separate
estates of the bankrupt. After the repeated doubts
which have been expressed upon the subject, by the
most eminent judges, it is not, perhaps, too much to
say, that it rests on a foundation as questionable and
as unsatisfactory as any rule in the whole system of
our jurisprudence. Such as it is, however, it is for the
public repose, that it should be left undisturbed, as it
may not be easy to substitute any other rule which
would uniformly work with perfect equality and equity
in the mass of intricate transactions connected with
commercial operations.
§ 383. But although the joint creditors and the sep-
arate creditors are not entitled to come in, ^9«ri! passu,
upon the joint and separate estates of a bankrupt, for
a dividend thereof; yet they are in all cases entitled
to come in and prove their debts against his estate, for
the purpose of assenting to or dissenting from his cer-
tificate ; but not to vote in the choice of assignees.^
> Coll. on P. B. 4, c. 2, § 3, p. 627, 2d ed. ; Ex parte Chandler, 9 Ves.
35 ; Ex parte Taitt, 16 Ves. 193 ; Ex parte Hubbard, 13 Ves. 424. [See
also Rice v. Barnard, 20 Vt. 479.] {This seems, in truth, no exception at
all ; it has never been doubted, that, if there be any surplus left of the
separate estate after paying the separate creditors, that surplus goes to the
joint creditors ; and, if there are no separate creditors, the whole of the sep-
arate estate is such surplus. }
" Gow on P. B. 5, § 3, p. 280, 2d ed. ; Id. p. 329 ; Ex parte Taitt, 16
Ves. 193; Wats, on P. c. 5, p. 334, 335, 2d ed. {By the U. S. Bankrupt
Act of 1807, § 30, the assignee of both estates is chosen by the creditors of
the partnership. }
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 609
And this is upon a principle of natural justice, since the
certificate, when given, will operate as a discharge of
the bankrupt equally against his joint and his separate
creditors.^
§ 38-i. The question often occurs in bankrujitcy, as
to the rights of creditors, who are at law both joint
and several creditors of the partners, or, in other words,
to whom the partners are in law jointly and severally
indebted upon joint and several securities and con-
tracts, whether they are entitled to prove both against
the joint estates and against the separate estates of the
bankrupt or bankrupts. And here the general rule is
now firmly established, that they shall not in equity be
allowed to prove their debts and take dividends upon
the joint estate, and also upon the separate estate ; but
they shall be restrained, and put to their election to
prove and take dividends from the one or the other.^
When they have once made this election, they are ex-
cluded from any dividend of the other fund, unless
there remains a surplus after the discharge of all the
debts having a preference thereon.^ However, before
any such creditor can be put to his election, he is enti-
tled to a reasonable time to inquire into and ascertain
the true state of each fund ; and even after he has
made an election, he will sometimes be allowed to
recall it upon equitable circumstances, when it will not
interfere Avith the positive rights actually acquired and
fixed in others.^
1 Ibid.
- Gow on P. c. 5, § 3, p. 286, 287, 3d ed. ; Cook's B. L. 259, 4th ed. ;
Ex parte Banks, 1 Atk. 106 ; Ex parte Rowlandson, 3 P.Wms. 40o ; Ex parte
Bond, 1 Atk. 98 ; Coll. on P. B. 4, c. 2, § 8, p. 561, 2d ed. ; Id. B. 4, c. 2,
§ 4, p. 630-632 ; Id. p. 634-637 ; Wats, on P. c. 5, p. 289, 295, 2d ed.
{Lind. on P. 1013; Ex parte Barnewall, 6 De G. M. & G. 795. But see
Borden v. Cuyler, 10 Gush. 476.}
=> Ibid.
♦ Gow on P. c. 5, § 3, p. 286, 288, 289, 3d ed. ; Ex parte Bond, 1 Atk.
39
610 PARTNERSHIP. [CHAP. XV.
§ 385. The doctrine thus established does not, any
more than the preceding, seem to stand upon any sohd
ground of equity or general reasoning. It has been
supported upon some supposed analogy to the rule of
law in cases of this sort, where the creditor may sue all
the partners at law, and have a joint execution against
all, or he may sue each partner separately at law, and
have a separate execution against each. But he cannot
do both ; that is, he cannot at law at the same time sue
them all in a joint action, and each one separately in a
separate action ; but he will be put to an election of his
remedy by the very forms of pleading.^ And it is added,
98. — We are here to understand, that the election of the remedy by the
creditor against the joint or the several estate is strictly confined to cases of
one and the self-same debt ; and does not apply, where the creditor has two
distinct debts, arising under separate and independent contracts. Coll. on
P. B. 4, c. 2, § 4, p. 632, 2d ed. ; Id. § 5, p. 634-638, 2d ed. ; Ex paHe Ed-
wards, Mont. & McA. 116.
' Gow on P. C.5, § 3, p. 286, 287, 3d ed. ; Coll on P. B. 4, c. 2, § 4, p.
630, 631, 2d ed. ; Id. p. 634, 635 ; Ex parte Rowlandson, 3 P. Wms. 405, 406.
— On this occasion Lord Talbot stated his opinion to be : " That as at law,
when A. and B. are bound jointly and severally to J. S., if J. S. sues A.
and B. severally, he cannot sue them jointly, and, on the contrary, if he sues
them jointly, he cannot sue them severally, but the one action may be
pleaded in abatement of the other; so, by the same reason, the petitioner
in the present case ought to be put to his election under which of the two
commissions he would come ; and that he should not be permitted to come
under both ; for then he would have received more than his share. But his
Lordship said he would hear counsel, if they had anything to object against
this order." And again he added : "In the principal case, the bond upon
which the petitioner would seek relief under the separate commission, was
not only for the same debt, but given by both the parties ; and the plea in
abatement would have been proper, had the bond been sued at the same
time both as a joint and several bond, which cannot be where there is only
a separate bond. Then taking this to be the rule at law, that a joint and
several bond cannot be sued at one and the same time both jointly and sev-
erally, but that the obligee must make his election ; so it ought to be (he
said) in the principal case. And this would best answer the general end of
the statutes concerning bankrujjts, which provide that all debts shall be paid
equally, as in conscience they are all equal ; that it is upon this foundation
that debts of a partnership have been ordered to be first paid out of the part-
nership effects ; and that afterwards the joint creditors, when the separate
CHAP, XV.] DISSOLUTION RIGHTS OF CREDITORS. 611
that the general end of the bankrupt laws is to provide
for the payment of all debts equally, as in conscience
all are equal ; and equality is equity.^
§ 386. Now (to say the least of it), this is assuming
the very ground of controversy, and not establishing it
by any satisfactory reasoning. With what justice can
it be said, that a contract, which, is merely joint or
merely several, shall stand upon an equal footing, as to
right and remedy, with one that is both joint and sev-
creditors are satisfied, may come in upon the separate effects, but not before ;
and so vice versa, the separate creditors are to come first on the separate
effects of the partners, and if these are not sufficient then on the joint effects,
after the partnership creditors are paid." And therefore, the Reporter adds,
" That there might be an equality in the principal case, his Lordship ordered
that the petitioner should make his election, whether he would come in for
a satisfaction out of the partnership, or the separate effects, but not out of
both at the same time ; however, his having received his dividend out of the
joint effects, on the joint commission, whilst this matter was in suspense, was
not to bind him ; and provided he brought that back again, he might come
in for a satisfaction out of the separate effects, and he to have a month's time
to make his election." Lord Hardwicke, in Ex paHe Bond, 1 Atk. 98,
said : "It was objected upon the last day of petitions, that this would be con-
trary to proceedings at law upon a joint and several bond, where the credi-
tor may proceed against both obligors at the same time, till his debt is fully
satisfied. And to be sure it is so at law ; but in bankrupt cases, this Court
directs an equality of satisfaction. Consider it on the footing of a joint estate
first; joint creditors are entitled to a satisfaction out of the joint estate, be-
fore separate creditors ; but then they have no right to come upon the sep-
arate estate for the remainder of their debts, till after separate creditors are
satisfied. What would be the consequence, if the petitioners should be ad-
mitted to come on both estates at the same time? Why, then, these credi-
tors would draw so much out of the separate estate, as would be a prejudice
to other joint creditors, who have an equal right to come upon the separate
estate with themselves ; and by that means I should give the petitioners a
preference to other creditors, when the act of parliament and the equity of
this court incline, that all persons should have an equal satisfaction, and not
one more than another." See also Ex />ar/e Wildman, 1 Atk. 109.
' Ibid. — The doctrine, compelling the creditor to elect, equally applies
to the case of a joint creditor, who takes the separate personal contract or
security of one of the debtors, as collateral security for the joint debt. Ex parte
Roxby, 1 Mont, on P. 124 ; Gow on P. c. 5, § 3, p. 287, 3d ed. ; Coll. on P.
B. 4, c. 2, § 5, p. 635, 636, 2d ed. ; But see In re Plummer, 1 Phil. 56, 59 ;
post, § 389.
612 PARTNERSHIP. [CHAP. XV.
eral 1 The very object of the latter is to provide a su-
perior remedy to enforce it ; and why should any Court
deprive the creditor of the very benefit which ' the debt-
ors had stipulated to give him, or restrain him from
using all his rights "? Courts of Equity generally act
upon an opposite principle, and give a broader effect to
joint partnership contracts in favor of the creditor, even
when his remedy is, by the death of one of the partners,
gone at law.^ However, the doctrine is now too firmly
established in practice to be shaken.^
§ 387. But, although, generally, where a creditor
holds the joint contract or personal security of the firm,
^ Ante, § 384, 385, and note. — Lord Eldon held a pointed opinion
against tlie whole doctrine ; but at the same time he considered it so well
established in practice by authority, that he ought not to depart from it.
In iix jja/'^eBevan, 9Ves. 223, 224, he said: "It is not necessary to de-
cide the other question, as to the joint and several proof. If it was, I
am not perfectly satisfied with the authority that has been stated. The
reasoning goes upon this, that a joint and separate action could not be
brought at law. But surely the distinction is thin, that where a joint and
separate bond is given, and another secui'ity, several from each, there,
as two actions might be brought, the rule in bankruptcy should be dif-
ferent. I think I have heard, that in the case cited in Peere Williams,
the only separate creditor was he who took out the commission ; and it
appears by the book, that the joint creditors prayed that he might deliver
over to them the effects, which was refused ; and it was said, that he should have
the effects applied to his separate bond ; and if that is the case, the rule is quite
right ; for he would have a right to take the separate effects, if not to the det-'
riment of other separate creditors." And again, in £"0; parte Bevan, 10 Ves.
107, 109, he said : " The principle seems obvious ; yet in bankruptcy, for some
reason not very intelligible, it has been said the creditor shall not have the
benefit of the caution he has used. I never could see why a creditor, having
both a joint and a several security, should not go against both estates. But
it is settled that he must elect. By his election to go against the joint estate,
the effect to the joint creditors is very different from what it would have been
if he had elected to go against the separate estate ; and the question is, wheth-
er, if he elects to go against the joint estate, and thereby participates with
the joint creditors, that j^articipation, arising from his election, has not in
practice been treated as a consideration for the rest of the joint creditors ;
entitling them to go along with him upon the separate estate, when he after-
wards goes against that estate."
2 {But see Borden v. Cuyler, 10 Cush. 476.}
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 613
and likewise the separate contract or personal security
of individuals composing the firm, he is compelled, upon
the bankruptcy of some of them, to elect, whether he
will consider them as his joint or as his separate debtors,
and proceed accordingly ; yet this rule is not without
exceptions.^ For, where a creditor holds the joint con-
tract or personal security of a firm, and also the several
contract or personal security of some of its members,
and the latter likewise form a distinct partnership inter
sese, there are cases where the creditor may have a
double remedy. Thus, if A., 13., C, and D. trade under
the firm of A., B., & Co., and C. and D. are in a distinct
partnership, and the firm of A., B., & Co. draw bills upon
C. and 1)., who accept them, the holder of such bills may
prove them under the bankruptcy of C. and D., and
afterwards may bring his action on the bills against A.,
B., & Co.^ So, if a creditor of A. and B. should take out
a separate commission against A., and receive a dividend
under that commission out of the joint estate, he may
bring an action against the other partner for the resi-
due.^
§ 388. Cases sometimes occur upon written nego-
tiable instruments, such as bills of exchange and prom-
issory notes, where, in reality, all the parties are part-
' {"If any bankrupt shall, at the time of adjudication, be liable upon any
bill of exchange, promissory note, or other obligation in respect of distinct con-
tracts as a member of two or more firms carrying on separate and distinct
trades, and having distinct estates to be wound up in bankruptcy, or as a sole
trader and also as a member of a firm, the circumstance that such firms are
in whole or in part composed of the same individuals, or that the sole con-
tractor is also one of the joint contractors, shall not prevent jjroof and re-
ceipt of dividend in respect of such distinct contracts against the estates re-
spectively liable upon such contracts." U. S. Bankrupt Law of 1867, § 21.}
* Ex 2^arte Farr, 1 Rose, 76. See also In re Plummer, 1 Phil. 56, 59 ;
post, §389.
3 Heath V. Hall, 4 Taunt. 326 ; Young v. Hunter, 10 East, 252 ; Coll.
on P. B. 4, c. 2, § 7, p. 645, 2d cd. ; Gow on P. c. 5, § 3, p. 289, 3d ed.
614 PARTNERSHIP. [CHAP» XV.
ners, and the bills or notes are drawn, or indorsed, or
accepted, upon their joint partnership account, and yet
the parties appear only to be separately bound upon
the face of the instrument, as drawers, or as indorsers,
or as acceptors. In such cases, a question has been
made, whether the creditor has a right in bankruptcy
to prove his debt against the estates of all the respec-
tive parties (which is called double proof), or must elect
to prove against one only of the estates.^ It has been
held, that if the creditor is, at the time of taking the
negotiable instrument, ignorant of the actual connection
between the parties in that instrument, he is entitled to
the double proof.^ But, if he is not so ignorant, it
seems doubtful, in the present state of the authorities,
whether he is entitled to the double proof, or not.^ Be
» {See U. S. Bankrupt Law of 1867, § 21.}
2 Coll. on P. B. 4, c. 2, § 8, p. 648, 649, 656, 2d ed. ; Gow on P. c. 5,
§ 3, p. 289, 3d ed. ; Ex parte Benson, Cook's B. L. 253 ; Ex parte La
Forest, Id. 251 ; Ex parte Bonbonus, 8 Ves. 540.
3 Coll. on P. B. 4, c. 2, § 8, p. 649-651, 2d ed. ; Gow on P. c. 5, § 3, p.
288, 3d ed. — Mr. Collyer (Coll. on P. B. 4, c. 2, § 8, p. 648-651, 2d ed.)
has stated the cases as follows. " The leading case on this subject is Ex
parte La Forest, Cook's B. L. 251. There, Corson and Gordon, partners
and turpentine manufacturers, entered into partnership with Whincup and
GrifSn, soap manufacturers. The latter business was carried on under the
firm of Whincup & Griffin. A joint commission was issued against the
four, under which they were found bankrupts ; and the assignees possessed
themselves of the joint fund of the four, and also the joint fund of Corson
& Gordon, and their respective separate estates. Corson & Gordon, in
their partnership firm, drew bills of exchange upon the firm of Whincup &
Griffin, who accepted such bills. The petitioners discounted many of these
bills. The petitioners alleged, that, at the time of such discount, they were
ignorant of any partnership existing between the four ; but that they con-
sidered Corson & Gordon, the drawers, and Whincup & Griffin, the accep-
tors, as two distinct firms, and thought that they had the security of the
funds of both those firms. The petitioners applied to the commissioners
to be admitted to prove against the respective joint estates of Corson &
Gordon, and of Whincup & Griffin ; but the commissionei's relused,
conceiving that the bills ouglit to be proved only against the joint estates
of Wliincup, Griffin, Corson, and Gordon. Lord Loughborough held, that,
admitting the allegation of ignorance on the part of the petitionei's to be true,
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 615
this as it may, it is very certain, that the creditor cannot
prove his debt against the joint and against the separate
they were entitled to the proof which they required. Again, A., B., and C.
were partners in a cotton manufactory, and B. ;'nd C. carried on a distinct
trade in partnership, as grocers. The petitioner sold goods to B. and C. as
grocers, for which they remitted to him a bill drawn by A. in their favor,
upon one Z., and indorsed by B. and C. Z. accepted the bill; but it was
protested for non-payment. The drawer, indorsers, and acceptor, all
became bankrupts. The petitioner did not know that A. had any connec-
tion in trade with B. and C. Lord Loughborough ordered that the peti-
tioner should be at liberty to prove the amount of the bill against the joint
estate of B. and C, and also against the separate estate of A., and be paid
dividends upon both estates. Ex parte Benson, Cook's B. L. 253. Again,
five persons, trading under the firm of C. & Co., drew a bill of exchange on
two of the members of the copartnership, who carried on a distinct trade, as
H. and G. The bill was accepted, negotiated, and, in the course of circu-
lation, came into the hands of the petitioner, without any knowledge, on his
part, of the connection between the parties. LTpon the bankruptcy of C. &
Co. the petitioner claimed to prove both against the drawers and acceptors.
Lord Eldon held, that the petitioner, as ignorant of the connection of the
parties, was entitled to such proof. Ex parte Adam, 2 Rose, 36. In all
these cases, the partners, who appeared as distinct parties to the bills, were
also in distinct partnerships ; and yet the holders of the bills, in order to
obtain double proof, were required to prove their ignorance, that these
distinct partnersliips also formed an aggregate partnership. Nevertheless,
according to a learned wi'iter. Lord Eldon has determined, that, where the
firms are in fact distinct, it is not material that the ignorance of the holder,
that the same parties were also united in one firm, should be requisite to
entitle him to proof. Eden on Bankr. Law, 182. Now, although this
remark does not seem to be supported by any express authority ; yet it is
justified by several dicta of Lord Eldon, and by the case of Ex j^arte
Walker, 1 Rose, 441, which is in point. There A., a sole trader, B. and C,
partners, and D., also a sole trader, engaged in a joint adventure; and for
a joint purchase of goods by them, the vendor, with a knowledge of their
joint interest, received in payment a bill drawn by A. on, and accepted by
B. and C. ; Lord Eldon held, that on the bankruptcy of A., and of B. and
C., the vendor was entitled to prove the bill against both their estates.
On other occasions, likewise, Lord Eldon appears to have adverted to
double proof, without ever referring to the ignorance of the holder of the
double security, that the distinct firms constituted one general firm. Ex
parte Bonbonus, 8 Ves. 540. On the other hand, there is a recent case, in
which Sir George Rose is reported to have said, that the holder of a bill is
not entitled to double proof, if he knew the different persons whose names
appear upon it to be all members of one joint firm. Ex parte Hill, 2 Deac.
249, 261. LTpon the whole, it seems still open to contend, that where a bill
is di'awn by some of the partners upon the others, or upon the whole firm,
616 PARTNEESHIP. [CHAP. XV.
estates of the same parties ; but he must elect to go
against the one, or the other.^
§ 389. Another question may arise in bankruptcy,
where a creditor has a pledge or mortgage or other se-
curity upon the estate of the bankrupt for his debt,
whether he can retain it, and proceed in bankruptcy
for the amount, or not. And, here, a doctrine prevails,
which seems equally consonant to justice and common
sense ; and that is, that the creditor in such case may,
if he chooses, surrender up the pledge or mortgage or
other security, and come in under the commission, for
his whole debt ; or, he may have the pledge or mort-
gage or other security sold, and if it is insufficient to
pay the whole debt, he may prove against the estate
for the deficiency.^ But as the established rule in bank-
ruptcy is, that the deduction of a pledge or mortgage
or other security is never made, except when it is the
property of the bankrupt, it has been held, as a conse-
quence of that rule, that in the case of a separate pledge
or mortgage or security of property made for a joint
debt, either by a partner or by a third person, the secu-
rity may be retained, although the whole joint debt be
proved under the commission.^
or vice versa, and the bill purports, and the fact is, that the drawers and
acceptors likewise constitute distinct firms respectively, in such case, the
holder, whether ignorant or not of the aggregate connection of the parties,
is entitled to pursue the contract appearing on the fiice of the bill, and to
prove against both the estate of the drawer and that of the acceptors."
See Wats, on P. c. 5, p. 274-276, 2d ed.
' Coll. on P. B. 4, c. 2, § 8, p. 651-654, 2d ed. {This whole subject of
double proof is learnedly discussed in Lind. on P. 1018-1025. See Wick-
ham V. Wickhani, 2 Kay & .1. 478. Ex parte Goldsmid, 1 De G. & J. 257 ;
s. c. affirmed in House of Lords, sub nom. Goldsmid v. Cazenove, 5 Jur. x.
s. 1230, and an article in 3 Jur. n. s. pt. 2, p. 27.}
= Coll. on P. B. 4, c. 2, § 4, p. 633, 2d ed. ; Id. c. 2, § 7, p. 645, 646 ;
Ex parte Geller, 2 Madd. 262 ; Ex parte Bennet, 2 Atk. 527 ; Ex parte Parr,
1 Rose, 76; Ex parte Goodman, 3 Madd. 373; In re Plummer, 1 Phil. 56,
59; {U. S. Bankrupt Law of 1867, § 20.}
^ Coll. on P. B. 4, c. 2, § 7, p. 645-647, 2d ed. ; Ex parte Parr, 1 Rose
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. G17
§ 1390. It was also for a long time a matter of doubt,
whether, if a fii'm be indebted to one of the partners,
the creditors on the separate estate of that partner
should be admitted as creditors on the partnership es-
tate, in competition with the joint creditors ; Lord Hard-
wicke conceived and held,^ that, where money had been
lent to the partnership by a partner, who afterwards
became bankrupt, the separate creditors of the latter
might prove the amount of the loan, as a debt against
the joint estate. Lord Thurlow, however, thought dif-
ferently ; and in a subsequent case,^ he decided, that
proof could not, under such circumstances, be made.
He proceeded upon the principle, that the equities of
the creditors, whether joint or separate, must be worked
out through the medium of the partners ; and that it
was a clear and well-established rule, that the individ-
ual partner could not himself prove against the joint
estate in competition with the creditors of the firm,
who were in fact his own creditors, and thereby take
part of the fund to the prejudice of those, who were
not only creditors of the partnership, but of himself.
Therefore, where there was a joint commission against
two partners, and a separate commission against one of
them, and the assignees under the separate commission
petitioned to be admitted creditors under the joint com-
mission for a sum of money brought by the bankrupt,
whom they represented, into the partnership, beyond
his share, and as being, therefore, a creditor upon the
partnership, for that sum ; Lord Thurlow refused it,
upon the ground, that proof of a debt due to an indi-
76; Ex parte Peacock, 2 Glyn & J. 27; In re Plummer, 1 Phil. 56, 59;
Ex parte Bowden, 1 Deac. & Ch. 135; {Lind. on P. 990; Ex parte Leicester-
shire Banking Co., De Gex, 292. Rolfe i'. Flower, Law llep. 1 P. C. 27.
But see Harmon v. Clark, 13 Gray, 114, 122.}
1 Ex parte Hunter, 1 Atk. 223.
2 Ex parte Lodge, Cook's B. L. 534 ; s. c. 1 Ves. Jr. 166.
618 PARTNERSHIP. [CHAP. XV.
vidual partner could not be allowed to come in con-
flict with the proofs of the joint creditors.^ The rule
introduced by Lord Thurlow, has since his time been
in many cases acted upon and confirmed.^
§ 391. The like question may arise in the converse
case, where the joint creditors seek to prove a debt,
due from a single partner to the partnership, against
the separate estate of that partner. And here, also,
it is now the settled rule, that, where one partner has
become indebted to the firm, or has taken more than
his share out of the joint funds, the joint creditors are
not to be admitted to prove against the separate estate
of that partner, until his separate creditors are satis-
fied, unless it can be shown, that in drawing out the
money, the partner has acted fraudulently, with a view
to benefit his separate creditors, at the expense of the
joint creditors.^
* Ex parte Burrell, Cook's B. L. 532; Ex parte Parker, and Ex parte
Pine, Ibid.; Gow on P. c. 5, § 3, p. 290, 291, 3d ed.
^ Ex /larie Reeve, 9 Ves. 588; Ex parte Adams, 1 Rose, 305; Ex parte
Harris, Id. 437; Ex parte Sillitoe, 1 Glyn & J. 374, 382; Gow on P. c. 5,
§ 3, p. 290, 291, 3d ed. ; Rodgers v. Meranda, 7 Ohio St. 179, 193; Wats,
on P. c. 5, p. 278-280, 3d ed. — In this and the three succeeding sections,
1 have followed for the most part literally the language of Mr. Gow, as at
once full and accurate upon the points. {Lind. on P. 994 ; Ex parte Brown,
2 Mont. D. & De G. 71 8. A testator directed that it should be lawful for his wife
to retain and employ not exceeding £6,000 in the trade which he was carrying
on at his death, and he appointed his wife and son executrix and executor.
The widow carried on the trade, taking the son into partnership. Held,
that the employment of £6,000 of the assets in the trade was authorized
by the will, and gave no right of proof in competition with the joint creditors,
and that the son being taken into partnershijj made no difference. Ex
parte Butterfield, De Gex, 570.}
' Gow on P. c, 5, § 3, p. 316-318 ; Wats, on P. c. 5, p. 280-285, 2d ed.
Mr. Gow on this point says : " The law sanctioned by the authorities of I^ord
Talbot, and Lord Hardwicke, formerly was, that if the debt, raised by the
partners against an individual partner, arose out of contract, as upon a loan
by the partnership to him, the joint creditors might be admitted to prove
against the separate estate in competition with the separate credit07-s. But
the opinions entertained by those learned Judges have been receded from in
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 619
§ 392. But although in cases of contract, in which
the joint estate is increased at the expense of the
separate estate, the funds are administered as they are
constituted at the time of the bankruptcy ; yet there
are circumstances under which the separate creditors
will be permitted to prove, against the joint estate, a
debt due from the partnership to the individual part-
ner.^ To induce a relaxation of the rule, however, it
must be made out, that the separate effects, creating
the debt, were obtained from the separate to augment
the joint estate, either by actual fraud, or under cir-
more modern times ; and the settled doctrine now is, that if the claim arise
out of contract, the estates are to be administered jointly and separately, as
they are actually constituted at the time of the bankruptcy ; the joint cred-
itors not being permitted to recall into the joint fund, what one partner has
by contract, express or implied, subtracted from the joint, and applied in
augmentation of his separate estate. This rule was introduced by Lord
Thurlow, who, having much considered the question, finally determined, that
the assignees on behalf of the joint, could not prove against the separate
estate, unless the partner had taken the joint property, with a fraudulent
intent to augment his separate estate. Thus, where Feudal was a dormant
partner with Lodge, and Lodge took money from the partnership to a con-
siderable amount, without the knowledge of Feudal, who did not Intermeddle
in the partnershij) business, Lord Thurlow, after taking time to consider,
thought he could not permit the assignees, under a joint commission, to prove
against the separate estate of Lodge, without deciding upon a principle, that
must apply to all cases, and constantly occasion the taking an account be-
tween the partners and the partnership in every joint bankruptcy. He
said, that If the affidavits had gone the length of connecting the bankruptcy
with the institution of the jjartnershlji trade, and that Lodge, with a view of
swindling Feudal out of his property, had got him into the trade, and then
taken the effects of the partnership Into his own hands, with a view to his
separate creditors, it might have been different; and the petition, on the
part of the joint creditors, to prove against the separate estate, was dismissed.
The principle established by Lord Thurlow's decision .has been acknowledged,
and followed by Lord Eldon ; and it Is now an indisputable rule In bank-
ruptcy, that, where the debt from one partner to the partnership was Incurred
■with the privity of his co-partners, proof by the joint against the separate
estate will not be admitted." See also ante, § 384, 385, note, § 390; Lord
Eldon's opinion in Ex parte Harris, 2 Ves. & B. 210, 212, 213, cited; {post,
§ 406 ; Lind. on P. 1004 ; Walton v. Butler, 29 Beav. 428.}
' Ex parte Harris, 1 Eose, 43 7 ; s. c. 2 Ves. & B. 210 ; Ex parte Yonge,
3 Ves. & B. 31 ; s. c. 2 Rose, 40 ; Ex parte Cust, Cook's B. L. 535.
620 PARTNERSHIP. [CHAP. XV.
cumstances, from which the law will imply fraud ;
and, in a legal sense, every appropriation by the firm,
as contradistinguished from a taking either by con-
tract, or by loan, is considered fraudulent, if it be made
without the express or implied authority of the indi-
vidual partner.^
1 Ex parte Reid, 2 Rose, 84 ; Gow on P. c. 5, § 3, p. 292, 3d ed.; Wats,
on P. c. 5, p. 280-282, 2d ed. ; Coll. on P. B. 4, c. 2, § 10, p. 666-6 72, 2d ed. ;
Ex parte Harris, 2 Ves. & B. 210. — In Ex parte Harris, 2 Yes. & B. 210,
212, Lord Eldon said: " There has long been an end of the law which pre-
vailed in the time of Lord Hardwicke ; whose opinion appears to have been,
that, if the joint estate lent money to the separate estate of one partner, or
if one partner lent to the joint estate, proof might be made by tlie one or the
other in each case. That has been put an end to, among other principles,
upon this certainly ; that a partner cannot come in competition with separate
creditors of his own, nor as to the joint estate with the joint creditors. The
consequence is, that if one partner lends £1,000 to the partnership, and they
become insolvent in a week, he cannot be a creditor of the partnership,
though the money was supplied to the joint estate ; so if the jiartnership lends
to an individual partner, there can be no proof for the joint against the sepa-
rate estate; that is, in each case no proof to affect the creditor, though the
individual partners may certainly have the right against each other. The
opinion of Loi'd Talbot seems also to have been in favor of this proof. But
in and previously to the year 1790 great discussion took place at this bar;
the result of which, according to Lord Thurlow's opinion, was expressed
particularly in the case of Dr. Fendal and Lodge. The former, a physician,
embarked a very large property, his whole fortune, in a partnership with
Lodge, whom he permitted to have the whole management ; and, a bank-
ruptcy ensuing. Lord Thurlow held, that as it was with the knowledge and
permission of Fendal, that the whole management of the property was with
Lodge, he was authorized to do as he thought fit with the partnership prop-
erty ; and Fendal, therefore, must abide the consequences of what had been
done most improperly, but under his own authority most imprudently given ;
and there could, therefore, be no proof. The law has been clear from that
time, that, to make out the right to prove by the one estate, or the other, it
must be established, that the effects, joint or separate, have been acquired by
the one, or the other, improperly and fraudulently in this sense, that they
have been accjuired under circumstances from which the law implies fraud ;
or in this sense, to increase the separate estate of one partner, that he meant
fraudulently to increase his own means out of the partnership estate. Lord
Thurlow by ' fraud ' intended to express what he thought necessary to dis-
tinguish that from taking by contract, or loan, or without the express or
implied authority of the other partner ; and that such act would amount to
fraud. Upon this case, I formerly expressed my opinion ; and I now lay
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 621
§ 393. Cases also may arise, independently of any
fraud, in which the separate creditors will be entitled
to relief, and to make proof of their debts against the
joint estate. In cases of dormant partnership, it is a
general rule, that the creditors Avho have dealt with
the ostensible partner, not knowing that there is any
dormant partner, have a right to treat their debts as
joint debts, or as separate debts, and have an election
to prove the same against the joint estate, or against
the separate estate of the ostensible partner.^ Under
such circumstances, if such creditors should elect to
prove them against the separate estate of the ostensi-
ble partner, the separate creditors of the latter will be
entitled to prove their debts against the joint estate,
and to receive an equivalent out of any surplus of the
joint estate, which may remain after satisfying the
joint debts ; for the same rule prevails in bankruptcy,
as is adopted by Courts of Equity generally, that the
mere election of a creditor, who has a right to resort to
two funds, shall not deprive other creditors, who can
resort but to one of those funds, of their just rights ;
but the latter shall be allowed, by way of substitu-
tion, to obtain the like benefit against the other fund,
as the original creditor would have, if he had not
made such an injurious election.^ Therefore, where a
down, that, if in either the expressed or implied terms of an agreement for
a partnership there is a prohibition of the act, and it is done without the
knowledge, consent, privity, or subsequent approbation of the other partner,
before the bankruptcy, and to the intent to apply partnership funds to private
purposes, that is, prima facie, a fraud upon the partnership."
' Coll. on P. B. 4, c. 2, § 5, p. 639, 2d ed. ; Ex parte Reid, 2 Rose, 84 ;
Ex parte Norfolk, 19 Ves. 455 ; Ex parte Watson, 19 Ves. 459 ; Gow on P.
c. 4, § 1, p. 178, 179, 3d ed. ; Id. c. 5, § 3, p. 261, 262. [See Van Valen v.
Russell, 13 Barb. 590.] {Cammack v. Johnson, 1 Green, Ch. 163. See
§ 263, note, and Elliot v. Stevens, 38 N. H. 311.}
- Ex parte Reid, 2 Rose, 84; 1 Story, Eq. Jur. § 558-561 ; Id. § 663-
668 ; Gow on P. c. 5, § 3, p. 292, 3d ed. ,• Coll. on P. B. 4, c. 2, § 5, p. 689,
2ded.
622 PARTNERSHIP. [cHAP. XV.
joint commission issued against A. and B., A. being a
dormant partner, and the joint creditors resorted to
the separate estate of B., thereby diminishing that
separate estate, and exonerating the joint estate of A.
and B., so as to produce a surplus of it, it was held,
that the separate creditors of B. had a lien upon
that surplus to the extent to which their funds had
been diminished by this election and resort of the joint
creditors.^
§ 394. Another relaxation of the rule, that a part-
ner cannot prove against a fii-m, is admitted where
there is a minor partnership, or house of trade, consti-
tuted of persons who are members of a larger firm,
and there are distinct dealings between the distinct
houses of trade, and both firms become bankrupt, the
one being indebted to the other in respect of such
dealings ; in such a case proof may be made of the
debt, in the same manner as if the dealings had been
among strangers.^ But the question, what is a deal-
ing in a distinct trade, is always to be looked at with
great care, for the proof is admissible on behalf of the
separate trade against the aggregate firm, only in
respect of dealings between trade and trade. If an
individual partner, who is a separate trader, should
lend money to his partnership, the strict rule would
immediately apply to him, and shut him out from the
benefit of proof; for if it were sufficient to state, in
order to bring the case within the exception, that the
partner would not have lent the money, but as a sep-
arate trader, the general rule would be at an end. It
is obvious, therefore, that the right of proof must be
' Ex parte Reid, 2 Rose, 84.
* Ex parte Hargreaves, 1 Cox, 440; s. c. cited 6 Ves. 123, 747, and 11
Ves. 414 ; Ex parte Ring, Ex parte Freeman, Ex parte Johns, Cook's B. L.
538; Ex parte St. Barbe, 11 Yes. 413; Ex paiie H^^ham, 1 Rose, 146; Ex
paiie Catesby, 2 Christ. B. L. 626, 2d ed.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 623
confined to distinct dealings in the articles of distinct
trades ; since a more extended relaxation of the rule
would, in its consequences, lead to the destruction of
the rule itself^ Therefore, where two partners of a
large banking firm carried on a separate trade as iron-
mongers, and a debt arose from the aggregate firm to
the separate trade, in respect of moneys procured for
the benefit of the aggregate firm, on the credit of the
indorsement of the separate firm, it was held, that no
proof could be made on behalf of the firm of the two
against the aggregate firm in respect of that debt.^
If the firm consists of two persons only, and one carry
on a separate trade ; as they are both liable for the
same joint debts, the solvent partner is not entitled to
prove, under the commission against his copartner, a
debt for goods sold by his distinct house to the firm,
until the joint creditors have been satisfied. It would
be otherwise in the case of a firm of A., B., C, and D.,
pro\-ing against the firm of A., B., C, and E. ; for the
former would not be liable for the joint debts of the
latter firm.^
§ 395. The subject of set-oif in bankruptcy, as ap-
plicable both to separate debts and to joint debts,
^ lEx parte Williams, 3 Mont. D. & De G. 433.]
* Ex parte Sillitoe, 1 Gl. & J. 374. {B., a banker, formed a partnership
with M. and P., merchants, under the firm of M. & Co. There was an
agreement that B. should accept bills for the firm at a commission, and that
the firm should negotiate them and keep B. in funds to meet the acceptances.
B., M., and P. all became insolvent. M., on behalf of M. & Co., claimed
to prove against B.'s estate for £5,000 due to the firm on their account.
Held, that the dealing between B. and M. & Co. was not such a separate
trade as to allow the firm to prove against a partner's estate, and that the
fact that all the partners were insolvent, and therefore had no personal
interest, made no difference. Ex j)ai-te Maude, Law Rep. 2 Ch. 550.}
3 Ex -jjarte Adams, 1 Rose, 305 ; Gow on P. c. 5, § 3, p. 292, 293, 3d
ed. ; Wats, on P. c. 5, p. 286-288, 2d ed. ; Coll. on P.B. 4, c. 2, § 9, p. 664,
665, 2d ed.; Id. B. 4, e. 2, § 10, p. 666-672; Id. p. 673-678; {Houseal's
Appeal, 45 Penn. St. 484.}
624 PARTNERSHIP. [cHAP. XV.
might be here mtrodiiced and expounded. But as it
turns mainly on the positive provisions of the Statutes
of Bankruptcy, as to mutual debts and credits, or
on the doctrines, adopted by Courts of Equity, and
founded upon the equities arising in particular cases,
it seems more appropriate for Commentaries of a more
extended character. It may, however, be stated, that
at law, and in bankruptcy, and indeed in equity gen-
erally, there can be no set-off of joint debts against
separate debts, unless there be some special agreement
between the parties to that effect, or some equitable
cu'cumstances, creating it in the particular case.^
§ 396. We have already seen, that in common
cases of a dissolution, it is competent for the partners
to agree between themselves, either originally by their
articles of partnership, or by their arrangements at its
dissolution, that one partner may or shall take the
whole partnership property at a valuation ; and the
assignment thereof, Avhen made hona fide in either way,
will be valid and obligatory upon the creditors.^ But
hi cases of bankruptcy, the rule is otherwise ; for the
policy of the bankrupt laws intervenes, and prevents
any effect being given to any such stipulations or ar-
rangements. The assignees are entitled to the interest
of the bankrupt in his property, whatever it may spe-
cifically be, at the moment of the act of bankruptcy.
And no agreement made between him and his part-
ners, in contemplation of bankruptcy, is permitted to
interfere with their rights. For, although the owner
of property may generally, upon his own voluntary
» Coll. on P. B. 4, c. 2, § 11, p. 678-685, 2cl ed. ; 2 Story, Eq. Jur.
§ 1430-1444; Wats, on P. c. 5, p. 339-350, 2d ed. ; Gow on P. c. 3, § 1,
p. 137-139, 3d ed. ; Id. c. 5, § 3, p. 331-340 ; {Lind. on P. 933-942 ; Wil-
liams V. Brimhall, 13 Gray, 462.}
« Ante, § 208, 358, 359, 372, 373.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 625
alienation of that property, qualify the interest of his
alienee, by a condition to take effect upon the bank-
ruptcy of the latter ; yet it would defeat the very objects
of the bankrupt laws, to allow a party to qualify his own
interest therein, while it remains his absolute property,
by a like condition, determining or controlling it in the
event of his own bankruptcy, to the disappointment, delay,
or injury of his creditors ; for such an event, by mere
operation of law, takes away from him entirely the jus
disjyoneiidi, and transfers it to the assignees for the
equal benefit of all his creditors.^
> Gow on P. c. 5, § 3, p. 300, 301, 3d ed. ; Coll. on P. B. 2, c. 2, § 2,
p. 146, 2d ed. ; Wilson v. Gi-eenwood, 1 Swans. 471, 484. — I have stated ,
the doctrine positively in the text, deeming it the just result of the reason-
ing in the authorities, whether the stipulation be in the original articles of
partnership, or be made afterwards. Mr. Gow and Mr. Collyer speak of it as
a matter ojjen to doubt, where the stipulation is in the original articles.
In the case of Wilson v. Greenwood, 1 Swans. 471, 481, 482, Lord Eldon
said: "In this case, the first question is, whether, supposing the original
deed had provided for the dissolution of the partnership by bankruptcy,
as it has provided for the dissolution by other means, that provision would
be good. I will not say, that it would not; but I have heard nothing to
convince me that it ,would. From the original deed, it is clear, that the
intention of the pai-ties was not, as the defendants insist, to apply the special
provision to the event of dissolution by bankruptcy. After providing for
other cases, it expressly declares that, in case of bankruptcy, the concerns
are to be wound up in the same way as if no special provision was made.
On this agreement, the parties proceed till the execution of another deed,
which, in one sense, may be justly said to be made in contemplation of
bankruptcy, because it is apjilicable to the event of bankruptcy alone. But
I have no doubt, from the face of it, that it was, in a strict sense, in con-
templation of bankruptcy ; for it contains a recital, which cannot be believed
by any one, who looks at the original deed, that the parties to that deed
intended the same provision in cases of bankruptcy and insolvency, as in
the case of dissolution from other causes. I go further; the inefficacy of the
terms of the agreement, as applied to bankruptcy, aiFords another proof,
that the application was not designed. In the event of dissolution by mis-
conduct, the parties were to name a valuer, and the property was to be
divided. If the partnership was dissolved by the death of a partner, what
-was to be done? His executors or administrators were to name a valuer.
The deed, then, contemplating bankruptcy and insolvency, the provision
for insolvency is sufficient, because, while not yet become a bankrupt, the
40
626 PARTNERSHIP. [CHAP. XV.
§ 397. Passing from this subject, let lis, in the next
place, proceed to the consideration of another subject
of inquiry, which constantly arises in bankruptcy ; and
that is, what property, not strictly belonging to the bank-
ruj^t, but yet in his possession and reputed ownership
at the time of his bankruptcy, will pass to his assignees,
in opposition to the claims of the real owner ? This
inquiry is equally as applicable to cases of property
owned by partners, as it is to property belonging to
particular individuals. We have already seen,^ in what
cases partnership property, upon a dissolution of the
partnership, may pass by transmutation or conversion
thereof to one or more of the partners, or to the sur-
'vivors or remaining members of the firm. But the
point here proposed for consideration turns altogether
upon the construction of a clause which w^as early in-
troduced into the English Statutes of Bankruptcy, and
has continued substantially in force down to the pres-
ent day, throughout all the modifications which the
system has successively undergone. It was provided
by the statute of 21 James 1 (c. 19, § 11), that, if any
bankrupt, at the time of his bankruptcy, shall, by the
insolvent retains all capacities of acting. But if he becomes bankrupt, it
is impossible to contend, that, under this clause, he is to name the persons
who are to value the interests of his assignees ; and no such authority is
given to his assignees, for the word ' assigns ' is not to be found in the
deed. I have no doubt, therefore, whether on general principle, or on
the construction of the deeds, that the law of this case is, that the part-
nership was dissolved by bankruptcy ; and the projjerty must be divided,
as in the ordinary event of dissolution, without special provision. The
consequence is, that the assignees of the bankrupt jjartner are become,
quoad his interest, tenants in common Avith the solvent partner ; and the
Court must then apply the principle on which it proceeds in all cases,
where some members of a partnership seek to exclude other/ from that
share to which they are entitled, either in carrying on the concern, or
in winding it up, when it becomes necessary to sell the property, with all
the advantages relative to good-will." See also the Reporter's note, 481,
note (a) ; ante, § 207, 208.
' Ante, § 358, 359, 372, 373, SQG.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 627
consent and permission of the true owner or proprie-
tary, have in his possession, order, or disposition, any
goods or chattels, of Avhich he shall be the reputed
owner, and take upon him the sale, alteration, or dis-
position thereof, as owner, the commissioners shall have
power to sell and dispose of the same, to and for the
benefit of the creditors, as fully as any other part of the
estate of the bankrupt.^
§ 398. The provision thus made was doubtless de-
signed more fully to enforce the doctrines of the com-
mon law, and to aid in the suppression of frauds, by
preventing persons from giving an ostensible owner-
ship of property to third persons, who might thereby
acquire a false and collusive credit, to the ^ross injury
of their creditors. To a limited extent, this remedial
justice might have been ordinarily obtained, either at
the common law, or through the interposition of equity.^
But the statute has erected it into a positive rule, in
order to prevent cavil, and to operate by way of pre-
ventive and admonitory justice.
§ 399. The general question, then, arises, When, and
under what circumstances, the bankrupt can be prop-
erly said to have the possession, order, or disposition
of any goods or -chattels, or the reputed ownership
thereof, with the consent of the true owner ? It has
been well observed,^ that it is the principle of discoun-
tenancing fictitious credit, and its concomitant frauds,
which the statute enforces. Indeed there can be no
^ 1 Cook's B. L. 60, lih ed. ; Wats, on P. c. 5, p. 272-274, 2d ed. The
statute of 6 Geo. 4, c. 19, § 72, substantially re-enacts the same provision.
{So does the statute of 12 & 13 Vict. c. 106, § 125. There is no such pro-
vision in the U. S. Bankrupt Act of 1867.}
2 See 1 Story, Eq. Jur. § 388-394; 1 Fonbl. Eq. B. 1, c. 3, § 4 ; Com.
Dig. Chancery, 4, I. 3 ; Id. 4 W. 26; Storrs v. Barker, 6 Johns. Cli. 166,
169, 172 ; Pickard v. Sears, 6 Ad. & E. 469, 474.
2 Gow on P. c. 0, § 3, p. 272, 3d ed.
628 PARTNERSHIP. [CHAP. XV.
other just ground, upon which one man's debts are
to be paid out of the property of another. In further-
ance of this principle it has uniformly been held, that
such a possession as is calculated to give a delusive
credit is a reputed possession, within the meaning of
the statute. When, therefore, the fact of reputed own-
ership is settled, the application of the statute is easy ;
for, from the reputed ownership, false credit arises ;
from that false credit arises the mischief; and to that
mischief the remedy of the statute applies. Bat to
make the statute available to the creditors of the party
in whose visible possession the property has been, that pos-
session must continue up to the time of the bankruptcy ;
for, if withdrawn, hona Jide^ by the owner, at any time,
however short, before the bankruptcy, the property
cannot be reclaimed by the assignees.^ But a removal
made in contemplation of bankruptcy being fraudulent,
will not alter the possession in the consideration of iaw.^
And, to constitute a fraud on the part of the true owner,
it is necessary that the property should be left in the
order and disposition of the bankrupt, with his consent.
Where this is not the case, it would rather be to encour-
age than to check fraud, if what had been surreptitiously
detained were to be divested from the innocent owner,
and transferred to the assignees of the bankrupt.^
§ 400. In general, it may be stated, that the mere
fact, that the partnership property, after the dissolution
of the partnership, remains in the possession of one
partner, who afterwards becomes bankrupt, will not
be sufficient, of itself, to make him, in the sense of the
^ Jones V. Dwyer, 15 East, 21 ; Ex jyarte Smith, 3 Madd. 63 : s. c. Buck,
149 ; Storer v. Hunter, 3 B. & C. 368.
" Ex parte Smith, 3 Madd. 63.
3 Ex parte Richardson. Buck. 480,488; Gow on P. c. 5, § 3, p. 272,
3ded.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 629
statute, the reputed owner thereof ; for this is certainly
in consonance with the rights of all the partners, as all
and each of them are equally entitled to the possession
and custody thereof The case must go further, and
establish that the other partners have, by their own
acts, or contracts, or conduct, conferred upon him the
exclusive right, and order, and disposition thereof, be-
yond the purposes belonging to the partnership. This
results from the doctrine already stated, that all the
other partners, upon the bankruptcy of any one of
them, retain all their original rights and interests in the
partnership effects.^
§ 401. In cases of partnership, where the transfer of
the joint property from the retiring partners to the con-
tinuing partners is not made a matter of contract, it
may be difficult to establish an actual consent to any
change in the right to the property as taking place.
But, although no actual consent can be proved, yet
for this purpose the acts and conduct of the parties will
warrant the presumption of an assent ; and this will be
inferred, if, from the time of the dissolution down to the
time of the bankruptcy, the retiring partners renounce
their equity of having the partnership credits applied
in discharge of the part\iership debts, and allow the
continuing partners to deal as they think fit ^vlth the
property, and to act with the world respecting it so as
thereby to gain for themselves a false and delusive
credit.- A dissolution on the eve of the retirement of a
partner will not, of itself, convert into separate property
the joint estate left in the possession of the partners
continuing the business ; for such a possession is quali-
fied, and is clothed with a trust to apply the property
' Gow on P. c. 5, § 3, p. 2G7-2G9, 3d ed. ; Id. p. 271-278 ; Id. p. 299-
305; Holderness v. Shackels, 8 B. »& C. 612.
2 See West v. Skip, 1 Ves. Sr. 239, 2i2 ; Ex park'Rnmn, 6 Yes. 119.
630 PARTNERSHIP. [CHAP. XV.
in discharge of the joint debts/ unless, indeed, the
laches of the retiring partner has been such as to suiFer
the joint property to remain in the exclusive possession
of the continuing partners for such a length of time as
falsely to give them an appearance of substance.^ A.
fortiori, the statute will not apply to a case where the
joint property is wrongfully withheld by one partner,
against whom a bill in equity is filed for an account,
and an injunction to restrain him from disposing of it,
pending which he becomes a bankrupt.^ But if a new
firm be constituted of some of the members of an old
firm, either wdth or without the addition of others, and
the whole of the stock in trade of the old firm be de-
livered over to the new firm, and they be allowed to
appear to the world as apparent owners of it, and after-
wards become bankrupts ; in such a case all the eff"ects
of the old partnership, found in specie amongst the
property seized under the commission, wdll vest abso-
lutely in the assignees ; and though there be outstand-
ing debts of the former firm unsatisfied, these efi"ects, so
found in specie, will not be considered as the joint es-
tate of the former firm, either for the benefit of the joint
creditors, or of the partners who have withdrawn from
the firm."*
' Per Lord Eldon, Ex parte WilHams, 11 Ves. 3, 6.
* Gow on P. c. 5, § 3, p. 272, 273, 3d ed. ; West v. Skip, 1 Yes. Sr.
239, 242.
" Gow on P. c. 0, § 3, p. 273, 3d ed. ; West v. Skip, 1 Yes. Sr. 239,
242.
* Ex parte Ruffin, 6 Yes. 119, and Ex parte Williams, 11 Yes. 3, 6 ; Ex
parte Fell, 10 Yes. 347 ; Gow on P. c. 5, § 3, p. 272, 273, 3d ed. —I have
in this and the two following sections generally followed the language of ]\Ir.
Gow, and he has illustrated the doctrine here stated by the following cases :
" Therefore, where upon the dissolution of a partnership between a father
and his son, it was agreed that, until the son was provided for, the father
should allow him a third of the profits ; and the father afterwards formed a
partnership with a third person, and carried into it the stock belong-
ing to the former partnership ; on a commission of bankruptcy being
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 631
§ 402. In cases of conditional transfers of the joint
estate by some to the other partners, if the condition is
not performed before the bankruptcy, the nature of the
property is not changed by the simple force of the con-
tract. But in such cases, and in cases in which the con-
sideration for the transfer is not paid, the property will
still pass, as separate estate under the statute, if from
the time of the contract down to the date of the bank-
ruptcy, the partners to whom it is assigned are permit-
ted by the others to continue in the sole possession, and
to carry on trade and acquire credit as sole owners
thereof. There can. indeed, under such circumstances,
be no solid distinction between a permitted possession
under a contract, incomplete as regards the persons con-
tracting, and one which is tolerated by the parties inde-
pendently of contract. The one must be as productive
awarded against the father and son it was held, that then- joint property,
having been permitted by the son to become the visible property of the new
partnership, it must, in the first instance, be applied in satisfying the credi-
tors of that partnership ; and that if afterwards any surplus remained, the
share of the father in it would be his own sejDarate property, and, therefore,
subject to the claims of his separate creditors. And again, on the dissolu-
tion of a partnership between A., B., and C, three persons, as distillers,
one of them (to whom the property in fact belonged) leased to C. and to one
J. the distil-house and premises, and the several stills, vats, and utensils of
trade specified in a schedule, as used by the former partnership; and C. and
J. were to carry on the business on the premises, which they accordingly did
for some time, but aftei-wards became bankrupts ; whereupon a question
was raised, whether such stills, vats, and utensils, so continuing in the pos-
session of C. and J., and used by them in their trade, in the same manner
as by the former partners, passed under the statute to the assignees, as be-
ing in the possession, order, and disposition of the bankrupts at the time of
their bankruptcy, as reputed owners ; and it was held that the stills, which
were fixed to the freehold, did not pass to the assignees under the word
goods and chattels in the statute ; but that the vats, &c., which were not so
fixed, did pass to the assignees, as being left by the true owner in the pos-
session, order, and disposition (as it appeared to the eye of the world) of
the bankrupts, as reputed owners. So if a country partnership, consisting
of three partners, sell their goods in London, in the names of two of the
firm, the property in London will, it seems, be in the order and disposition
of the two." Ibid.
632 PARTNERSHIP. [cHAP. XV.
of the mischief contemplated by the statute, as the
other ; and both ought, therefore, to be held to be within
its provisions. It has consequently been considered,
that an exclusive possession, derived under a contract,
which, as between the parties themselves, has not been
performed, is sufficient to operate a conversion of the
property, if the meaning of the transaction was to trans-
mute it, and possession follows accordingly.^
§ 403. With respect to the description of property
affected by the statute, it is settled that no distinction
exists between debts due to the partnership and other
property ; for, notwithstanding debts are not assign-
able at law, yet they are still within the scope of the
statute.^ And where, upon the dissolution of a partner-
ship, debts have been assigned by some of the partners
to the others, although by the assignment the latter be-
come the true owners of them ; yet they will remain in
the^order and disposition of the partnership, and form
part of the joint estate, unless, prior to the bankruptcy,
notice of the assignment has been given to the debtors.^
1 Gow on P. c. 5, § 3, p. 274, 275, 3d ed. ; Ex parte Fell, 10 Ves. 347 ;
Ex parteV^\\Y\axas, 11 Ves. 8, 6. — In Ex parte Rowlandson, 1 Rose, 416, 419,
Lord Eldon said : "If one partner puts another into the sole possession of
the partnership estate and effects, and leaves them in his sole order and dis-
position, giving him title under an instrument upon the face of it giving
title, it would be difficult to insist that he would have a lien upon that prop-
erty for the consideration money, against the separate creditors of the
other ; considering that he had by title, and by his own act, left this proper-
tj^ in the sole order and disposition of the other. Previous to the dissolu-
tion, the joint creditors had established no lien on this property. They
could only sue and take out execution, either jointly or separately, against
the joint effects or separate effects of their debtors. Till they had actually
matured their process into an execution, they had no means of specifically
attaching the partnership effects, and could only work out their equity
through tl|ie partner himself."
* Ex jmrte Ruffni, 6 Ves. 119, 128; £'x parte Williams, 11 Ves. 3, 6;
Hornl)lower v. Proud, 2 B. & Aid. 327 ; Ex parte Enderby, 2 B. & C. 389.
» Ryall V. Rowles, 1 Ves. Sr. 348 ; s. c. 1 Atk. 165 ; Jones v. Gibbons,
9 Ves. 407 ; Ex parte Monro, Buck, 300.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 633
It is true, that a partner stands in a different situation
from a stranger, to whom the debts might have been
assigned ; because in his character of partner, and in-
dependently of any assignment, he is personally com-
petent to receive and discharge them. But it is also
true, that, until notice be given to the debtors, the other
partners are equally competisnt to receive and give
acquittances for whatever may be due.^ Besides, the
partners, who receive the assignment without informing
the debtors of the transaction, would thereby enable the
others, if they were so disposed, fraudulently to obtain
a fictitious credit with the debtors ; and, therefore, so
long as notice is withheld from them, the order and
disposition of these debts must remain in the partner-
ship. Upon this principle it has been held, that debts
due to a partnership, which, upon a dissolution, are as-
signed by a retiring partner to the continuing partners,^
or debts, which, by agreement, are, on a dissolution, to
belong to one of the partners,^ continue in the order
and disposition of the partnership, and consequently
form part of the joint estate, unless, previously to their
bankruptcy, the debtors are apprised of the assignment
or agreement. And it is insufficient in such cases to
notify the dissolution only ; for, unless express notice
of the assignment be also given, the order and dispo-
sition will not be altered."* But the operation of the
statute, and any question respecting the transmutation
* Duflf V. East India Co. 15 Ves. 198, 213.
' Ex parte Burton, 1 Glyn & J. 207.
' Ex parte Usborne, 1 Glyn & J. 358.
* Ex parte Harris, 1 Madd. 583, 587. — In Ex paj-Ze Usborne, 1 Glyn &
J. 358, a notice, stating the dissolution of the partnership by mutual agree-
ment, and that all debts due to or from the concern ■would be received and
paid by one of the partners, was inserted in the gazette. But Sir John
Leach held such a notice ineffectual, and that the order and disposition of
the debts owing by those debtors, who had not 'express notice of the agi'ce-
ment, remained in the partnership.
634 PARTNERSHIP. [CHAP. XV.
of the property, may, in all cases, be avoided, upon the
retirement of a partner, by his assigning to the remain-
ing partners all the effects in trust to pay the debts ;
because then, notwithstanding there may not be a
subsisting joint possession, the property would continue
subject to the joint demands, and would not, by the
simple fact of possession, be converted into separate
estate.^
§ 404. Another question, however, still remains to
be considered under this head ; and that is, how the
statute, as to reputed ownership, affects dormant part-
ners. After some fluctuation of judicial opinion, the
^ Ex parte Fell, 10 Ves. 347 ; and see Ex parte MV'iWmm?,, 11 Ves. 3, 6;
Ex parte Martin, 19 Ves. 491 ; s. c. 2 Rose, 331 ; Gow on P. c. 5, § 3, p.
275-277, 3d ed. — The Ship Register Acts have not affected this question of
reputed ownership at all, as those statutes relate to transfers by the acts of
the parties, and not to transfers by operation of law. Mr. Gow on this sub-
ject says : " The statute of James is not repealed, and of course those sec-
tions of the late general bankrupt act, in which the provisions in the statute of
James have been embodied, are not rendered inoperative as to shipping,
by the Ship Register Acts ; for these statutes relate to transfers made by
the act of the party only, viz. from a former owner to a new owner, and
where the transfer is capable of being effectuated in the ordinary way, by
the mere operation of an instrument of assignment from the one party to
the other, and do not relate to transfers deriving their effect by peculiar
provision or operation of law, as assignments by commissioners of bank-
ruptcy to assignees under the bankrupt laws do, or titles passing to exe-
cutors or administrators in case of death. In these cases a title may be
transmitted without any of the forms required by the statutes ; and as a
title may be transmitted without these forms in the case of bankruptcy
generally, it may be so done in a case falling within the scope and object
of the statute of James. Therefore, where A., the owner of a ship, duly
assigned his interest in it to B., and B. became the registered owner;
but by his permission, A. continued to have the same in his possession,
order, and disposition, until he became bankrupt, it was holden, that A.'s
assignees were entitled to the ship. And under a commission of bank-
ruptcy against two partners, ships registered in the name of one of them,
but in the ordering and disposition of both, form part of the joint estate.
On the same principle, a ship registered in the name of two partners,
but which is left in the order and disposition of one of them, will pass
to the assignees of the latter on his bankruptcy." See also Gow on P.
c. 5, § 3, p. 279 ; Kirkley v. Hodgson, 1 B. & C. 588.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 635
doctrine is now finally settled that, in cases of dormant
partners, if the ostensible partners become bankrupt,
the whole partnership property is to be deemed • to be
in their reputed ownership, and the dormant partner is
excluded from any right or title thereto, as against the
assignees in bankruptcy.^
§ 405. Hitherto we have been principally examining
questions arising upon a dissolution by bankruptcy, so
far as it affects the rights of creditors, either generally
or in case of reputed ownership of property. Let us
now look to some of the rights of the partners inter
sese, consequent upon such a dissolution. And here it
may be remarked that, generally, the partners are not
entitled, in any case, to come in competition with the
joint creditors upon the partnership funds, whatever
may be the rights and equities which w^ould otherwise
attach between them against the bankrupt partner or
partners.^ So, where all the partners become bank-
1 Gow on P. c. 5, § 3, p. 278-280, 3d ed. ; Id. p. 300, 301 ; Kirkley v.
Hodgson, 1 B. & C. 588 ; Ex parte Enderby, 2 B. & C. 389 ; {^Ex parie Wood,
De Gex, 134.] {This doctrine is now overthrown. In Reynolds v. Bowley,
Law Rep. 2 Q. B. 41, the Court of Queen's Bench acted on this doctrine,
feeling bound by the authority of the decided cases, though they doubted
whether those cases had been rightly decided, but, on appeal, the Court
of Exchequer Chamber reversed the judgment, and held that where one
partner bona fide allows the other to carry on the business ostensibly as
his own, the dormant partner's share in the partnership stock in trade
does not, on the bankruptcy of the ostensible partner, pass to the latter's
assignees, as in the possession, order, or disposition of the bankrupt, as
reputed owner. Reynolds v. Bowley, Law Rep. 2 Q. B. 474. -^
^ Gow on P. c. 5, § 3, p. 293, 3d ed. ; Id. p. 321 ; Coll. on P. B. 4, e. 2,
§ 9, p. 655-658, 2d ed. ; ante, § 390-394 ; Ex parte Kendall, 17 Ves. 514,
521 ; Ex parte Adams, 1 Rose, 305 ; Ex parte Reeve, 9 Ves. 588. In Ex
■parte St. Barbe, 11 Ves. 413, 414, Lord Eldon said: "There have been
cases of a trade carried on by three, and distinct trades by two, and by one
of them, where this sort of proof of a debt, distinctly due from one partner-
ship to the other, has been permitted as between the partners, so engaged
in different concerns. The course of the authorities has been, that a joint
trade niav prove against a separate trade ; but not a partner against a part-
ner. In the case of Shakeshaft, Stirrup, and Salisbury, Lord Thurlow went
636 PARTNERSHIP. [cHAP. XV.
rupt, the general rule is, that the separate estate of
one partner shall not claim against the joint estate of
the partnership, in competition with the joint credi-
tors ; nor the joint estate against the separate estate,
in competition with the separate creditors. And the
creditors are not, in either case, considered as satisfied,
until they have received the interest due upon their
debts respectively, as well as the principal.^
§ 406. In like manner a solvent partner cannot
prove his own separate debt against the separate
estate of the bankrupt partner, so as to come in com-
petition with the joint creditors of the partnership ;
for he is himself liable to all the joint creditors ; and
therefore he ought not, in equity, to be permitted to
take any of the funds of the bankrupt before all the
creditors, to whom he is liable, are duly paid.^ Neither
can a solvent partner prove against the separate estate
of the bankrupt partner, in competition with the sepa-
rate creditors of the bankrupt, unless and until all the
joint creditors of the partnership are paid, or at least
unless and until the joint estate is fully indemnified
therefor;^ for if a dividend were reserved to him on such
upon tills distinction ; that where there is only one partnership arranging
different concerns, belonging to them all, in different ways, for the benefit
of different parts of that joint concern, as in that instance, the three part-
ners carrying on the business of cotton manuflicturers in Lancashire, and
two of them in London, there could not be proof by the three against the
two. But if the trades are perfectly distinct, then the three, as cotton
manufacturers in Lancashire, might be creditors upon the separate concern
of the two, as ironmongers in London. I am inclined to abide by that case
and Ex parte Johns."
• Coll. on P. B. 4, c. 2, § 10, p. 66G-678, 2d ed. ; ante, § 390-393 ;
|§37G.}
^ Coll. on P. B. 4, c. 2, § 9, p. 655, 2d ed. ; Ex parte Reeve, 9 Ves.
588, 589.
' {A partner cannot prove against his copartner upon indemnifying the
joint estate ; he must show that the claims against it are discharged or barred.
Ex parte Moore, 2 GI. & J. 166.}
CHAP. XV.] .DISSOLUTION RIGHTS OF CREDITORS. 6'i7
proof, the joint creditors might he injured by such sol-
vent partner stopping, in transitu, the surplus of the
separate estate, which would otherwise be carried over
to the joint estate ; or the separate creditors might be
injured by their funds being stopped prospectively, upon
the faith of such partner being afterwards able to pay
the joint debts.'
1 Coll. on P. B. 4, c. 2, § 9, p. 655-658, 2d ed. ; Id. p. 660, 661, 662,
665; {Lind. on P. 1008. See Ex j^arte Maude, Law Eep. 2 Ch. 550;
Hill V. Beach, 1 Beasl. 31.} In Ex paHe Reeve, 9 Ves. 588, 589, Lord
Eldon said : " All these cases were very fully discussed by Lord Thurlow, in
the case of Lodge and Fendal. Dr. Feudal was a creditor of the partner-
ship of himself and Lodge, for large sums advanced. They became bank-
rupts immediately after the fomnation of the partnership ; and those advances
formed the joint estate to be divided. There was a struggle by Fendal to
be admitted a creditor for the amount of his advances, as against the part-
nership. Lord Thurlow, after full consideration, was of opinion that all
the authorities establish this : that those who, being in partnership, are
themselves, or some of them, debtors to the creditors of every class, cannot
come in comj^etition with the creditors. After their demands are liquidated
finally, the paitners may be creditors upon each other ; but not before.
The course in bankruptcy has been, to stop the proof at the date of the
commission, which is founded upon this ; that the debt to be proved is the
debt due before the commission, taking the commission to follow rapidly
upon the act of bankruptcy ; Avhich, however, is frequently not the case.
It is true, now, a great deal of debt accrued after the bankruptcy is paid
under it ; for instance, all interest accrued, though after the date of the
commission, if the state of the effects allows it, upon a sort of equitable
principle, the interest being considered as a kind of adjunct or shadow of
the principal debt, which was due before the bankruptcy. It is now, there-
foi-e, clearly settled, that where there is a partnership and separate debts
also, the partnership shall not be admitted a creditor upon any individual, or
any individual upon the pai'tnership, until the creditors of the individual
and the creditors of the partnership are satisfied to the extent of 20s. in the
pound, out of the respective estates; also, that where the separate creditors
ai'e paid 20s. in the pound, and there is a surplus, that surplus shall not go
immediately to pay interest to the separate creditors ; but shall go to make
the joint creditors equal with them as to the principal. No decision, how-
ever, has gone this length ; that, if both the joint and the separate creditors
are paid to the extent of 20*. in the pouud, upon the payment to that
amount to the creditors of each class, a partner shall not be admitted a
creditor upon the partnership, or upon the individual. But I cannot dis-
tinguish the cases ; for if the principle is, that neither the partnership nor
the individual debtor shall claim in competition with the creditors, and if
638 PARTJSERSHIP. , [CHAP. XV.
§ 407. Subject, however, to these exceptions in favor
of the joint creditors and separate creditors, and also to
that respecting reputed ownership, which has been pre-
viously mentioned, the solvent partners retain their full
right, power, and authority, over the partnership prop-
tlie creditors are entitled to any interest, the interest is as much a debt as
the capital ; and that principle will prevent either the partnership or the
individual debtor ranking with the other creditors, until all their demand is
satisfied ; which includes both the principal and interest of their debts."
See also Ex parte Moore, 2 Glyn & J. 166. Mr. CoUyer on P. (p. 658,
659, 3d ed.) has on this subject added : " But the general rule in question,
like all other general rules, is qualified in cases of necessity. Therefore,
when the solvent partner, without his own defiiult, is unable to procure a
discharge from every joint creditor, — as, for instance, where one of the
joint creditors is a lunatic, — in such case, it seems he will be permitted to
prove against the separate estate, upon giving security for the debt which
cannot be discharged, and paying the residue of the joint debts. Ex parte
Yonge, 3 Ves. & B. 31. There are some cases, also, where, notwithstand-
ing the retiring partner has not paid all the demands of the partnership, he
has been permitted to prove against the joint estate, on the ground of the
joint creditors' having assented to the arrangements made between the
retiring and remaining partners, or being barred by length of time from
objecting to the retiring partner's proof. Thus, where a partnership had
been dissolved upon the terms of the retiring partner taking a security from
the remaining partner for the balance due to him, and the remaining part-
ner was treated by the joint creditors as their sole debtor, until he after-
wards became bankrupt ; it was held that the retiring partner might prove
his debt against the separate estate of the bankrupt, although some of the
partnership debts were unpaid. Ex parte Grazebrook, 2 Deac. & Ch. 186.
In this case it may be remarked, that the retiring partner had been a dor-
mant partner. So, where upon the death of one of three partners, his
executors carried on the trade with the surviving partners for a twelve-
month, and then dissolved the partnership, upon which occasion the two
continuing partners gave the executors a bond, to secure the balance due
to them, and more than six years afterwards the two became bankrupt ; it
was held that the executors had a right to prove the amount of the bond
against the joint estate of the two continuing partners. Ex parte Hall, 3
Deac. 125. Again, where a person on the eve of bankruptcy induces
another, by fraudulent means, to become his partner, and the latter advances
capital to the concern, a case might be stated where the latter would be
allowed to prove the amount of the capital so advanced, pari passu with the
separate creditors of the bankrupt. However, such proof will not be al-
lowed where the person defrauded has held himself out to the world as a
partner, though only for a short time."
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 639
erty after bankruptcy, in the same manner and to the
same extent as if no bankruptcy of a particular partner
had occurred.^ Their lien, also, remains in full force,
not only to have the partnership funds applied to the
discharge of the partnership debts and liabilities ; but
also to the discharge of all the debts due by the part-
nership to them, or any of them, as well as for their own
distributive shares in the surplus. Hence they have a
right to priority of payment of the debts due by the
bankrupt to the partnership, in preference to his sepa-
rate creditors ; and if the joint funds should prove insuf-
ficient to discharge the debt, they have a right to insist
upon coming upon the separate estate of the bankrupt
therefor, imri passu, with the separate creditors.^ In
such a case the debt is deemed, in equity, a separate
debt of the bankrupt, secured also by a lien on the joint
fund.^
§ 408. In cases of this sort there is no difference,
whether the partnership is general or is only for a sin-
gle adventure ; or, indeed, whether the parties are strictly
to be treated as partners or as part-owners, if in the par-
ticular adventure there is, either by contract, or by
usage, or by custom, a lien of the co-adventurers upon
the property engaged therein, and the produce thereof,
for the proportion of the outfit and expenses incurred
by one or more of them, for the common benefit.^ In
' Ante, § 341 ; Gow on P. c. 5, § 3, p. 300-305, 3d ed. ; Id. p. 321-
323 ; Wats, on P. c. 5, p. 302, 2d ed. ; Id. p. 314-324; Coll. on P. B. 4,
c. 2, § 9, p. 655, 2d ed. ; Id. p. 661, 662.
2 Gow on P. c. 5, § 3, p. 321-323, 3d ed. ; Ex jmrte Terrell, Buck, 345 ;
Coll. on P. B. 4, c. 2, § 9, p. 655, 656, 2d ed. ; Id. p. 661, 662 ; Fereday v.
Wightwick, Taral. 250; Ex parte Reeve, 9 Ves. 588; Ex parte Drake
cited 1 Atk. 225; Taylor v. Fields, 4 Ves. 396; s. c. 15 Ves. 559, n. ;
Holderness v. Shackels, 8 B. »& C. 612. {See Hill v. Beach, 1 Beasl. 31.}
' ]\[any cases illustrative of this doctrine of the text Avill be found stated
in Gow on P. c. 5, § 3, p. 321-327, 3d ed.
* Gow on P. c. 5, § 3, p. 303, 304, 3d ed.
640 PARTNERSHIP. [cHAP. XV.
every such case, the lien of the other co-adventurers
thereon will be deemed to include all such outfits and
expenses, as well as their own shares in the adventure.^
Hence, where the part-owners of a ship were engaged in
the whale fishery, and the usual mode of managing the
cargo in such cases was, that, on the arrival of the vessel
at the homeward port, the whalebone was taken into
the possession of the ship's husband, and sold by him,
and the proceeds Avere applied towards the discharge of
the expenses of the ship ; and the blubber was deposited
in a warehouse belonging to one of the owners, but rented
by all the owners of the ship ; and the oil produced from
it was put into casks, each owner's share being weighed
out, and placed separately in the warehouse, in casks,
marked with his initials ; and, after the division, the
practice was for the warehouseman to deliver to the
order of each part-owner his share of the oil, unless
notice was given by the ship's husband that the own-
er's share of the disbursements had not been paid ;
and, in that case, the warehouseman was accustomed
to detain the oil until the demand had been satisfied ;
it was held that the other co-adventurers had a lien,
under such circumstances, upon all the imdelivered oil
in the possession of the warehouseman, for the unpaid
disbursements ; that the assignees of the owner, who
had become bankrupt, took the same oil subject to that
lien, and that the lien was not divested by the separa-
tion of the share of the bankrupt, and placing it in the
casks marked with his name.~
' Ibid.
^ Holderness v. Shackels, 8 B. & C. 612. Mr. Justice Bayley, in deliv-
ering his opinion in this case, fully expounded the general doctrine.
" Where there is," said he, " a joint adventure, which produces certain goods,
the proper course is, first to deduct all the expenses which have been incurred
in order to obtain those goods, and then to divide the residue among the
shareholders, in proportion to the shares to which each is entitled respect-
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 641
§ 409. These seem to be the most material consider-
ations, respecting the effects and consequences of the
ively. In this case the joint adventurers obtained a quantity of oil in bulk.
No partner, or representative of a partner, has a right to his ali(iuot part
of that oil, until he has paid his share of the expense of procuring it. That
will be the case, whether the shareholder has become a bankrupt or con-
tinues solvent. If he continues solvent, he may pay his share of the outfit
and of the expense. If he does not pay it in money, the other part-owners
have a right to see that an aliquot part of what has been gained in the ad-
venture be retained, so as to pay that share of the outfit, which he ought to
pay. In this case Foxton became bankrupt, and having become bankrupt,
if he could have paid in money his share of the outfit there would have been
twenty-nine tons of oil coming to him. He could not pay ; and, therefore,
as it seems to me the justice and the law of the case is, that his share of the
expense should be paid out of the twenty-nine tons, and that, until he has
paid his share of the expense, he cannot claim that quantity. It has been
said that there has, in this case, been a delivery, and that in consequence of
that delivery, the rights of Foxton and of his assignees are different from
what they otherwise would have been. But it seems to me that there has
not been a perfect delivery.. It would have been perfect if the other part-
owners had been dispossessed of the oil. That has not been done. The
property still remained in the warehouse, and was the joint property of all.
A part only has been removed. The removal of that part does not vary
the right as to the residue. It is clear that the assignees cannot recover the
twenty-nine tons before they pay Foxton's share of the expense. The other
part-owners might say, there are twenty-nine tons allotted to you ; you may
take possession of all to which you will be entitled, but you must first pay
your share of the expense ; nine tons will be sufficient for that purpose ;
you may, therefore, take away twenty tons. The right of the other part-
owners is not varied by their having allowed the bankrupt to take away
twenty tons. That being so, the plaintiffs are not entitled to recover. It
has been urged that there has, in this case, been a change of possession, by
reason of Locking's having debited the bankrupt in account, with a portion
of the rent. But that portion of the rent must have been paid by the bank-
rupt before he took away the oil, in specie ; or it might have been deducted
out of his share of the produce, if he compelled the other shareholdei-s to
sell, in order to pay his share of the expense. The usage being for the
pai't-owners to detain the oil, until each part-owner's share of the expense
has been paid, it seems to me that the ftict of debiting the party with ware-
house rent can have no effect. I think, therefore, that the plaintiffs have
not made out their right to the residue of the oil." The part-owners of the
ship would be deemed partners in this adventure (although not in the ship
itself), as sharing the net profits of the adventure, upon the grounds sug-
gested in the preceding sections as to joint adventurers, and sharing the net
profits. Ante, § 27, 3-1, oi), 40, 55. See also Mr. Bai'on Parke's Remarks
41
642 PARTNERSHIP. [CHAP. XV.
dissolution of a partnership by bankruptcy, which are
important to be brought before the reader, in order to
explain and ilhistrate the general distinction between
the case of a dissolution by bankruptcy, and other cases
of dissolution. A more minute inquiry into the various
details of the system, would occupy a large space, alto-
gether disproportionate to its relative usefulness in an
elementary work of this nature, and serve to perplex
and- obscure what might, otherwise, be justly applicable
to the systems of bankruptcy and insolvency in other
countries, which differ in some particulars from that of
England. And, here, these Commentaries, so far as they
respect the subject of Partnership, might be concluded ;
for it is not within the scope thereof to examine at large
the nature and extent of the remedies by or against
partners, either at the common law, or in equity,
whether they respect the government, or mere private
individuals. Those topics properly belong to a Treatise
of a very different character, where the principles of
pleading, in its most general sense, are to be brought
under review, and expounded with all their abstruse
and intricate learning.
§ 410. The subject, however, of Part-ownership in
goods and chattels, as contradistinguished from Part-
nership, has come incidentally under discussion in
several parts of the present Commentaries ; ^ and it
has been commonly thought, from its close analogy
to partnership, that a brief exposition of the general
principles applicable thereto is peculiarly appropriate
in such a connection. Pothier has, accordingly, thought
it worthy to be separately discussed in an Appendix
to his Treatise on Partnership. He considers every
in Pearson v. Skelton, Tyrw. & G. 848; s. c. 1 M. & W. 504; [Hawes v.
Tillingliast, 1 Gray, 289.]
' Ante, § 89, 90.
CHAP. XV.] DISSOLUTION RIGHTS OF CREDITORS. 643
community of property, or, as we should call it, every
tenancy in common of property, not a partnership, or
affected by any repugnant convention, to be a kind of
quasi-contvact, or ^«asi-partnership ; whether it be a uni-
versal community or a community of particular things.
And he illustrates the subject by examples, which, al-
though perfectly accurate in the foreign and Roman law,
where there may be a title by descent to every species of
property, real as well as personal, are not so striking in
our law ; to wit, by cases of a community of property
(hiens) under a succession or descent to many heirs, and of
legacies bequeathed jointly to many legatees.^ He states
the distinction between such a community of interest m
property and partnership, as principally consisting in
these circumstances, that partnership is founded neces-
sarily in the voluntary consent of the parties, and takes
place by and under one and the same title ; whereas, in
other cases of mere community of interest, these ingre-
dients are not essential. Certainly, they are not. But
they may (as Pothier admits), nevertheless co-exist in the
latter cases ; ^ and, therefore, they do not seem to con-
stitute, philosophically or logically, an appropriate dis-
tinction. Thus, for example, two persons may agree to
purchase a ship together in equal moieties, and to hold
the same as tenants in common ; and they may take the
ship at the same time by the same title deed.^ The
true distinction seems to be, that there is no community
of interest in the entirety of the property in the latter
cases ; whereas, in partnership, there always is such a
community of interest, founded upon the positive con-
sent of the parties."*
§ 411. Following, therefore, the example of Pothier,
1 Poth. de Soc. n. 2, 3 ; Id. App. n. 181-183; ante, § 3, 4. ,
* Poth. de Soc. n. 183. ^ ^^te, § 3, 4.
* Ante, § 89-91 • Gow on P. c. 2, § 2, p. 32, 3d ed.
644 PARTNERSHIP. [cHAP. XV.
as well as that of some of the most distinguished ele-
mentary writers on Partnership at the common law,
who have in the like manner discussed in supplementary
tracts the leading outlines of this branch of the law,^
the present work will be concluded with a chapter
devoted to the same purpose.
' Coll. on P. B. 5, c. 4, p. 793, 2d ed. ; Wats, on P. c. 4, p. 227, 2d ed. ;
2 Bell, Comm. B. 7, c. 4, p. 655, &c., 5th ed.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 645
CHAPTER XVI.
PART-OWNERS RIGHTS, POWERS, AND LIABILITIES OF.
§ 412. Part-ownership in real estate.
413. Personal property may be held in joint tenancy, or tenancy in
common.
414. Rights of tenants in common of chattels.
415. Ships.
41G. Acquirement and transfer of property in ships.
417. Ship-owners are tenants in common.
418. Employment of ships. Ship's husband.
419. Contribution to expenses incurred by common consent.
420. French law.
421. No right of contribution if no consent.
422. Alleged reasons of this rule.
423. Its doubtful propiiety.
424. Contrary doctrine of many maritime jurists and codes.
425. Doctrine of the Consolato del Mare.
426. Of Pothier.
427. No right of employment against the consent of any owner.
428. Unless on giving indemnity.
429. Roman and French law.
430. Law of other foreign nations.
431. Doubtful advantage of the English law.
432. Appointment of a master.
433. 434. Rights of majority and minority in the French law.
435. Equal division of ojnuion among the owners.
436. Foreign law.
437. Sale in case of disagreement as to employment.
438. The English Admiralty cannot decree a sale in such case.
439. Doctrine in America.
440. Liability for expenses incurred by common consent.
441. Part-owners have a lien on cargo shipped on joint account.
442-444. Lien on a ship for advances.
445. Right to displace master.
446. Part-owner cannot insure, borrow money, or pledge.
447. Dissolution of connection between part-owners.
448. Molloy's opinion on constructive ownership.
449. Remedies of part-owners against each other.
450. 451. Roman law.
646 PARTNERSHIP. [CHAP. XVI.
452. French law.
453. Part-owners not bound by each other's declarations.
454. Joinder by part-owners in suits against third persons.
455. Rights of third persons against part-owners In cases of contract.
456. French and Dutch law.
457. Roman law.
458. In cases of tort.
459-461. Roman law.
462. Foreign law.
463. Closing remarks. }
§ 412. We have already seen, that persons may be-
come part-owners (or, as Pothier denommates them,
q^lasi partners, quasi-associes),^ of movable or personal
property, as well as of real estate, without being part-
ners.^ As to part-ownership in real estate, not held as
partnership property or assets, it does not properly fall
within the scope of the present Commentaries ; but it
belongs rather to a Treatise, which is to unfold the
general rights incident and appertaining to real prop-
erty, in which the rights of persons holding real estate
in joint-tenancy, in coparcenary, and in tenancy in com-
mon, are discussed and distinguished. A very succinct,
but at the same time an accurate account of that sub-
ject, will be found in the elegant Commentaries of Sir
William Blackstone.^ W^hat is proposed to be consid-
ered in the present chapter, will simply relate to part-
ownership in movable or personal property.
§413. The general distinctions between joint-ten-
ancy, tenancy in common, and partnership, have already
been sufficiently pointed out in the preceding pages ; ^
and, therefore, need not again be here adverted to.
Movable or personal property may be held in joint-
tenancy, which, of course, gives the jus accrescencU, or
right of survivorship, of the whole property to the sur-
> Toth. de Soc. App. n. 184-186. " Ante, § 3 ; Id. § 89-94.
3 2 Bl. Comm. 178-194. ■» Ante, § 89-91, 410.
t
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 647
vivor, unless the joint-tenancy is severed in the Hfetime
of the parties ; or it may be held in tenancy in com-
mon, which gives to each tenant an undivided, but, at
the same time, a distinct and independent interest
therein, which does not pass to the survivor, but belongs
to the personal representatives of the party upon his
decease.^ But there can, strictly speaking, be no estate
in coparcenary of movable or personal property at the
common law ; because the latter title arises only by
descent ; and, at the common law, there can be no
descent of such property.^
§ 414. In general, the rights, duties, obligations,
authorities, and liabilities of part-owners are the same,
in relation to every kind of personal property ; and
therefore, whatever is affirmed in relation to one, will
apply to all others, unless in cases, where, from the
peculiar nature and uses of a particular species of such
property, or the peculiar customs and usages apper-
taining thereto, a different rule arises, by implication of
law, to govern or affect it. Thus, for example, if two
persons are tenants in common of a horse, or other per-
sonal chattel, each has an equal right to the possession
and use thereof; ^ and each can sell only his own un-
divided share thereof.^ If one tenant in common takes
exclusive possession of a personal chattel, refusing to
the other any possession or use thereof, the latter has
no remedy whatsoever by action ; but he may take
the chattel, if he can find it, from him who hath done
him the wrong. ^ In relation to expenses, it may be
stated that neither of such owners has a right to incur
any expense thereon, which shall bind the other to
' 2 Bl. Coram. 399 ; ante, § 89. * 2 Bl. Coram. 399.
3 Co. Litt. 200, a; 3 Kent, 153.
" Coll. on P. B. 5, c. 4, § 4, p. 811, 2d ed. ; Abbott on Shipp. B. 1, c. 1,
§ 2, p. 3, 5th ed. ; 3 Kent, 153, 154.
= Co. Litt. 199 b, 200 a.
648 PARTNERSHIP. [CHAP. XYI.
contribution therefor, ^Yithout some proof of an express
or implied authority therefor, even when the expenses
are absolutely indispensable for the due preservation
thereof. This is unquestionably true at the common
law, in the case of inanimate or dead chattels. But,
probably, in the case of a tenancy in common of a
horse, or other animal, in the absence of all controlling
circumstances, a presumption would be sustained, that
the necessary expenses of the keep thereof were to be
borne by the mutual contributions of both, from the
very nature of the chattel, and the mutual use and
benefit intended to be derived therefrom by the tenants
in common. However, if a positive or implied prohibi-
tion were shown, the same rule would prevail as in the
ordinary cases of dead chattels.
§ 415. But the most useful as well as the most
various illustrations of this subject, may be derived from
a class of chattels constantly found engaged in com-
merce and navigation, that is to say, ships ; the fitting
out and the employment of which have given rise to
many important questions ; and, therefore, the doc-
trines applicable to ships seem especially to require a
full exposition in this place. In our subsequent in-
quiries, the main topics discussed wall be the rights,
powers, duties, obligations, and liabilities belonging to
part-owners of ships, as well inter sese, as in respect to
third persons.
§ 416. Ships are strictly and technically denominated
chattels, or personal property, at the common law, al-
though they are distinguishable from most other kinds
of personal property by the peculiar solemnities which
belong to the mode in which the title thereto is ordina-
rily acquired, transferred, and made susceptible of
pledge, lien, or mortgage. Ordinarily, it is well known
that the title to personal goods and chattels will pass by
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 6-49
mere delivery and change of possession. But it is not
generally so in respect to the title to ships. In most, if
not in all, commercial countries,, the title thereto is now
usually acquired, and transferred, and evidenced by
written documents ; ^ and statute enactments in those
^ Whether a delivery of a ship by parol, without any bill of sale or other
AYritten instrument of transfer, be sufficient to pass a good title to the ship,
has been thought not quite settled in our laAv. It is true that a ship is a
mere personal chattel, and personal chattels ordinarily may pass by delivery
only, without any written evidence of contract or title. But the text shows
that, from very early times, a different course has been pursued in respect
to ships; and if the universal maritime usage has been to evidence a trans-
fer of ships by written documents, that usage would seem, prima facie, to
form a part of our municipal law, — the law merchant being a part of the
common law. There is a dictum in the case of Lamb v. Durant, 1 2 Mass.
54, in which it is declared that ships may pass by delivery only, as well
as any other chattel, so far as respects the property of the vessel. And a
like expression fell from the Court in Taggard v. Loring, 16 ^lass. 336.
But in neither of these cases was the point directly before the Court. On
the other hand, there is no case in the English Jurisjjrudence in which it has
been decided that a transfer by parol is sufficient to pass the title. The
point was made in Rolleston v. Hibbert, 3 T. R. 406, by counsel; and
Lord Kenyon then said : " It was first contended, that it was not necessary
that the property in a ship should pass by a written instrument. On that
point I give no opinion because it is not necessary." This language shows
that no such point was, at that time, deemed settled in the common law ;
otherwise it would at once have been recognized. Lord Stowell, on the
other hand, in the case of The Sisters, 5 Rob. 1.55, manifestly shows his
own opinion to be, that a bill of sale is necessary. His words are too re-
markable to be omitted. " It has been contended in argument (says he) ,
that the effect of a bill of sale alone would not be material, because this was
a foreign ship, in respect to which it might not be requisite that it should
pass by a bill of sale. It is said that the agreements to be found in these
letters (i. e. in that case), and the actual delivery under it, would be suf-
ficient to establish the equitable title ; and a reference has been made on
this subject to some opinions at common law, which are said to have been
given in favor of such a title. The opinions of gentlemen of that bar must
undoubtedly be entitled to entire respect, on a question of municijjal law.
But this is a question of a more general nature, arising out of a system of
more general law; out of the universal maritime law, which constitutes a
part of the professional learning of this Court and it^s practisers. Accord-
ing to. the ideas which I have always entertained on this question, a bill of
sale is the proper title to which the maritime Courts of all countries would
look. It is the universal instrument of transfers of ships in the usage of all
650 PARTNERSHIP. [CHAP. XVI.
countries create many regulations, respecting the mode
of acquiring, and transferring, and evidencing that title,
as well for municipal purposes and policy, as for the due
ascertainment and proof of the national character of
the ship, and its right to protection and privileges upon
the ocean. ^
§ 417. Property in a ship may be acquired by two or
maritime countries; and, in no degree, a peculiar title deed or conveyance
known only to the law of England. It is what the maritime law expects ;
what the Court of Admiralty would, in its ordinary practice, require ; and
what the legislature of this country has now made absolutely necessary, with
regard to British subjects, by the regulations of the statute law." In Ex
parte Halkett, 19 Ves. 474, Lord Chancellor Eldon said: " It is laid down
that the ship may be bound by bill of sale, but it cannot be by parol." Mr.
Jacobsen, in his Sea-Laws (B. 1, c. 2, p. 17, 21), manifestly considers a bill
of sale Indispensable, by maritime usage, to pass the title. In the case of
Ohl V. Eagle Ins. Co. 4 Mason, 172 ; s. c. Id. 390, the question underwent
considerable discussion. See also Atkinson v. Maling, 2 T. R. 462, 466 ;
Sutton V. Buck, 2 Taunt. 302, and particularly the argument of the defend-
ant's counsel, 305; Abbott on Shipp, Pt. 1, c. 1, § 5, p. 12; Zouch, Adm.
Jur. V. 103. {See 1 Pars. Mar. Law, 47; and also Metcalf v. Taylor, 36
Me. 28; Chadbourne v. Duncan, Id. 89; and McMahon v. Davidson, 12
Minn. 357; In all which a bill of sale was considered unnecessary.}
1 Abbott on Shipp. Pt. 1, c. 1, § 1, p. 1, 5th ed. ; Id. c. 2, § 1, p. 23; 1
Valin, Comm. LIv. 1, tit. 14, art. 1, p. 340, 341 ; Id. Liv. 2, tit. 10, art. 1, p.
601, 602. — The present British Ship Registry Act of 3 «& 4 Wm. 4,
c. 55, will be found at large In the Appendix to Mr. Sergeant Shee's very
valuable edition of Lord Tenterden's Treatise on Shipping; and the nature
and objects and construction of the various clauses of the old Act will be
found In Lord Tenterden's Text, Pt. 1, c. 2, p. 47-83, London ed. 1840.
The American Ship Registry Acts will be found In the Appendix to the
American edition of Abbott on Shipping (1829); and the nature, objects,
and construction of the various clauses thereof. In the notes to chapter sec-
ond of the text to that edition, from p. 23 to 68. See also 3 Kent, 139-150.
One of the most prominent differences between the British and the American
system is, or at least was, that, by the former, no title could be accjuired or
transferred except in the manner prescribed by the Registry Act; but. In the
latter, the transfer may be good and valid In law, although the requisites of
the Registry Act are not complied with. But then, by such non-compliance,
the ship will lose her American character and privileges as a registered ship.
It is not within the design of these Commentaries to go into any details on
this subject. They will properly find a place In a Avork on the Law of Ship-
ping and Navigation.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 651
more persons, either by building it at their own ex-
pense, or by the purchase of a part thereof of the sole
owner, or by a joint purchase of the whole of another
person.^ But, whether acquired by the joint building,
or by a part purchase, or by a joint purchase, the par-
ties, in the absence of all positive stipulations to the
contrary, become entitled thereto, as tenants in common,
and not as joint-tenants.^ In this respect, it will make
no difference, whether the title is acquired at one and
the same time, by and under one and the same instru-
ment, or whether it is acquired at different times, and
under different instruments,^ this is a natural, if not
a necessary result of the doctrine, that the jus accre-
scendl has no existence among merchants, or in the busi-
ness of commerce and navigation. A different doctrine,
which should introduce into the maritime law the nar-
row doctrine of the common law, as to joint-tenancy
and the right of survivorship, would be fatal to the in-
terests of commerce, and overthrow the plain dictates
of public policy. The whole course of commercial usage
and opinion has settled the doctrine the other way;
and accordingly, upon the death of one of the part-
owners, his executors and administrators become ten-
ants in common of the ship, with the survivors."* Of
* Abbott on Sliipp. Pt. 1, c. 1, § 1, p. 1, 5th ed. ; Jacobsen's Sea-Laws,
by Frick, c. 3, p. 36, 37, ed. 1818.
- Abbott on Shipp. Pt. 1, c. 3, § 1, p. 68, oth ed. ; Id. § 9, p. 79, 5th
Am. ed. note (1) ; Abbott on Shipp. by Shee, Pt. 1, c. 3, § 5, p. 96, 6th
ed. 1840; [Macy v. DeWolf, 3 Wood. & M. 193.]
* Coll. on P. B. 5, c. 4, p. 793, 2d ed. ; Doddington v. Hallet, 1 Ves. Sr.
497 ; 3 Kent, 151 ; Nicoll v. Mumford, 4 Johns. Ch. 522 ; Wats, on P. c. 1,
p. 54; Id. c. 2, p. 67; Id. 91; Ex parte Young, 2 Ves. & B. 242, 243;
Jacobsen's Sea-Laws, by Frick, c. 3, p. 36, 37, ed. 1818.
* Abbott on Shipp. Pt. 1, c. 1, § 1, p. 1 ; Id. c. 3, § 1 ; Nicoll v. Mumford,
4 Johns. Ch. 522 ; s. c. 20 Johns. 611 ; Dunham v. Jarvis, 8 Barb. 88, 94. —
In the 5th London edition of Abbott on Shipping, Pt. 1, c. 3, § 1, the fol-
lowing note (a) occurs : " This is the most usual practice. If the interests
are not severed and distinguished in this way, but the entire ship is granted
652 PARTNERSHIP. [CHAP. XVI.
course, the general rule of law, as to the rights of ten-
ants in common, prevails in regard to ships, that each
part-owner can sell only his own share thereof;^ where-
as, in cases of partnership (although not in cases of
joint-tenancy), any one partner can sell the entirety of
the ship.^
to a number of persons generally, it is apprehended they become joint-tenants
at law, and that the rule Jus accrescendi inter mercatores locum non habet,
which is applicable to a ship, is to be enforced only in a Court of Equity."
To which the American Editor (1829) has subjoined the following comment:
" This is not a note of the original author, but of his English editor. The
point stated in it seems new, and is apparently contrary to what is laid down
in Watson on Partnership, where he seems to consider the rule, as to the
Jus accrescendi, not applicable either to partnerships generally, or to owner-
ship of vessels in shares, but as an exception created by the law merchant,
and necessary for the advancement of commerce. In chapter 1, p. 54, he
says : ' If several either build or purchase a shiji, they are part-owners or
partners as to this concern.' And again, in chapter 2, p. 67 : ' There is no
difference in the interest of partners in goods to be disposed of in the course
of trade, and in a chattel, the keeping and employment of which constitute
the object of the partnership. The part-owners of a shij) are tenants in
common with each other of their respective interests.' He afterwards says,
in chapter 2, p. 91, that a part-owner of a ship can only dispose of his own
share, and not of that of his co-owners, even if it be partnership property.
The case of The King v. Collector of the Customs, 2 M. & S. 223, proceeds
on the principle, that the same rule, as to non-survivorship, exists as to
property in ships, as in common jjartnership property. Xo allusion was
there made as to the necessity of a suit in equity by the representative of
the deceased in any case ; and the particular shai'es of each party in the
ship ai'e not stated or referred to as material facts. In America it has not
been unusual to omit any specification of the shares of each part-owner,
both in the register and bill of sale ; and it has never been yet decided, that
such an omission made the parties joint-tenants with benefit of survivorship.
Mr. Collyer entertains the like opinion with the American editor. Coll. on
P. B. 5, c. 4, p. 793, 2d ed. It may be added, that this is now the general
understanding of the doctrine in America. 3 Kent, 40; Id. 151. In Ohl
V. Eagle Ins. Co., 4 Mason, 172, 390, the Court thought that if no other
distinct shares appeared in the register or bill of sale, the parties must, in
the absence of all other proof, be presumed to hold in equal moieties. See
also. In the matter of Blanshard, 2 B. & C. 244; Ex paiie Young, 2 Yes.
& B. 242; Nicoll v. Mumford, 4 Johns. Ch. 522; s. c. 20 Johns. 611, and
615, note."
' Hopkins v. Forsyth, 14 Penn. St. 34. Case of a steamboat.
'^ Abbott on Shipp. Pt. 1, c. 1, § 2, p. 3, 5th ed. ; ante, § 89-91 ; 2 Bell,
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 653
§ 418. It is. obvious, that a personal chattel, vested
in several distinct proprietors, cannot be advantageously
possessed or enjoyed, unless by common consent and
agreement among them all.^ For, as each has an equal
title to the possession and use thereof, no one can oust
the others of that possession or use ; and, when once a
struggle or controversy exists among them for the ac-
complishment of purposes adverse to each other, the
mischief must be immediate to the interest of some, and
perhaps ultimately ruinous to that of all. This remark
applies with peculiar force to ships, which (as has been
quaintly, but truly said) were " originally invented for
use and profit, not for pleasure or delight ; to plough
the sea, not to lie by the walls." ^ Hence, while the
Comm. B. 7, c. 4, p. 655, 5th ed. ; Coll. on P. B. 5, c. 4, § 4, p. 811 , 2d
ed. ; Jacobsen's Sea-Laws, by Frick, c. 3, p. 36, 37, ed. 1818. — Mr. Chan-
cellor Kent (3 Kent, 54), has well stated the distinction between part-
ownership in ships and partnership in ships. He says : " The cases recognize
the clear and settled distinction between part-owners and partners. Part-
ownership is but a tenancy in common, and a person who has only a part
interest in a ship, is generally a jiart-owner, and not a joint-tenant or
partner. As part-owner he has only a disposing power over his own
interest in the ship, and he can convey no greater title. But there may be
a partnership, as well as a co-tenancy, in a vessel; and, in that case, one
part-owner, in the character of partner, may sell the whole vessel ; and he
has such an implied authority over the whole partnership effects, as we have
already seen. The vendee, in a case free from fraud, will have an inde-
feasible title to the whole ship. When a person is to be considered as a
part-owner, or as a partner, in a ship, depends upon circumstances. The
former is the general relation between ship-owners, and the latter the
exception, and requires to be especially shown. But as the law presumes,
that the common possessors of a valuable chattel will and desire whatever
is necessary to the jireservation and profitable employment of the common
property, part-owners, on the spot, have an implied authority from the
absent part-owners, to order for the common concern whatever is necessary
for the preservation and proper employment of the ship. They are analo-
gous to partners, and liable as such for necessary repairs and stores ordered
by one of themselves ; and this is the princii^le and limit of the liability of
part-owners."
' Abbott on Shipp. Pt. 1, c. 3, § 2, p. 68, 5th ed.
2 Molloy, B. 2, c. 1, § 2; Godolph. Adm. Jur. Intr. p. 13 ; The Apollo,
1 Hagg. Adm. 306, 312; 3 Kent, 151, 152.
654 PARTNERSHIP. [CHAP. XYI.
possession, use, and employment of other personal chat-
tels have been generally left to the free and unrestricted
discretion of the proprietors thereof, and their own sense
of the necessity of mutual co-operation and forbearance
for their mutual benefit, it has been the policy of mari-
time nations, from a very early period, to provide reg-
ulations respecting the joint ownership of ships in order
to prevent the obstinacy of one or more proprietors from
interfering with the just rights and interests of the rest,
as well as to promote the general advancement of com-
merce and navigation, and to add to the resources of
national wealth and national power. Hence in cases of
ships, almost all maritime nations, in modern times, have
provided regulations, by which some of tlie part-owners
of the ship shall be at liberty, notwithstanding the dis-
sent of others, to employ it in trade and navigation, for
their own profit, and at their own expense and risk. Of
course, if all are agreed, and all consent, the employment
and the expenses and the profits are to be on the joint
account and for the joint benefit. . In such cases, it is
not unusual for all the owners, by common consent, or
a fixed agreement among themselves, to appoint an
agent (who may be either a part-owner, or a stranger)
to superintend the management and concerns of the
ship, who (as has been justly said), by a very intelligible
figure of speech, is called the ship's husband, and who
directs the repairs, appoints the ofi5.cers and mariners,
and generally conducts all the aff"airs and arrangements
for the due employment of the ship in commerce and
navigation.^
' Abbott on Shipp. Pt. 1, c. 8, § 2, p. 68, 5tli ed. ; Card v. Hope, 2 B.
& C. 061 ; Coll. on P. B. 5, c. 4, § 4, p. 810, 2d ed. ; 3 Kent, 151, 156 ; 1
Bell, Comm. B. 3, Pt. 1, c. 4, § 2, p. 503, 504, 5th ed. ; Jacobsen's Sea-
Laws, by Frick, c. 3, p. 38, 39, ed. 1818. — Mr. Collyer on this subject
says: " In order to administer the afiliirs of the ship with unanimity, it is
usual to appoint a ship's husband. He may be either a part-owner or a
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 655
§ 419. It follows, of course, that wherever the ship
is reasonably repaired, or necessary expenses are in-
curred, by the consent of all the owners, for the common
benefit, each part-owner is bound to contribute his share
thereof; and, if the whole has been paid by one part-
owner, he has a right at law to recover their several
contributory shares from each of the others.^ Now, in
this respect, the case differs from one of a mere partner-
ship in a ship ; for in the latter case (as we have seen),-
no partner has any right of contribution against the
others for any sums paid, or expenses incurred on the
joint account, until all the partnership concerns are ad-
justed ; and, then, only in equity.^ There is, on the
other hand, in some respects, a coincidence between the
cases ; for in each of them all the parties are at the
common law jointly liable, in soUdo, for the whole debt
stranger, and may be appointed by writing or parol. His duties are to see
to the proper outfit of the vessel ; to have a proper master, mate, and crew ;
to see to the furnishing of provisions and stores ; to see to the regularity of
all the clearances from the custom-house ; to settle the contracts ; to enter into
pi'oper charter-parties, or engage the vessel for general freight ; to settle for
freight and adjust averages with the merchant; to preserve proper certificates
and documents in case of future disputes with insurers or freighters, and to
keejj regular books of the shiji. But without special powers he cannot borrow
money generally for the use of the ship, though he may settle accounts and
grant bills for them, which will form debts against the concern. Nor can he,
without special authority, insure the ship." See also 1 Bell, Comm. B. 3,
Pt. 1, c, 4, § 2, p. 603, 504, 5th ed. ; Sims v. Brittain, 4 B. »& Ad. 375 ; 3
Kent, 157 ; {post, § 443, 446 ; 1 Pars. Mar. Law, 97 ; Preston v. Tamplin, 2 11.
& N. 363, s. c. affirmed on appeal, Id. 684. On the appointment and com-
pensation of ship's husband, see Benson v. Heathorn, 1 You. & C, C. C.
326 ; Smith v. Lay, 3 Kay & J. 105 ; Ritchie v. Couper, 28 Beav. 344 ; IMil-
ler V. Mackay, 31 Beav. 77 ; Same v. Same, 34 Beav. 295 ; Brenan v. Pres-
ton, 10 Hare, 331, s. c. 2 De G. M. & G. 818, Semble, that if one of the
part-owners acts as ship's husband, he is not entitled, in the absence of ex-
press or implied agreement, to any commission. Miller v. Mackay, 31
Beav. 77.}
» Abbott on Shipp. Pt. 1, c. 3, § 13, 15, p. 82, 84, 5th ed. ; {post,
§440-444; See Chappell v. Bray, 30 Law J. N. s. Exch. 24; Starbuck
V. Shaw, 10 Gray, 492.}
2 Ante, § 219, 220, 260. ' Ante, § 219-221, 260.
656 PARTNERSHIP. [cHAP. XVI.
to third persons, who have credited them for the repairs,
or other expenditures, for the common benefit.^
§ 420. The French law agrees with ours, so far as it
makes all the part-owners liable in the like manner as
partners, to contribute their proportion of all the ne-
cessary debts and reasonable expenses, incurred for the
common benefit. But, if one part-owner only has con-
tracted with the creditor, the latter can have no re-
course for the debt, except against the particular part-
ner with whom he has contracted. However, upon
payment of it, that party has his remedy over against
the others for their contributory shares.^ On the con-
trary, in cases of mere commercial partnerships, the
French law makes each partner liable, in solldo, to the
creditor for the whole debt.^ If, indeed, all the part-
owners have jointly contracted with the creditor, each
will be liable to him in severalty for his own share of
the joint debt ; ^ and for that only, unless they have all
agreed to be bound in solldo.^ The law of Holland is,
in this respect, coincident with the French law, making
the several part-owners in all cases chargeable for the
repairs and other expenses upon the ship, only accord-
ing to their respective interest in the ship.*^ In all
cases of this sort, however, we are to understand, that
the expenses are incurred with the consent of all, or
at least of a majority of the part-owners ; for neither a
single part-owner, nor a minority of the part-owners,
have any right to make any such repairs, or incur any
such expenses, against the will of the majority ; the
1 3 Kent, 156, {post, §455.}
" Poth. de Soc. n. 187 ; Id. n. 185 ; Id. n. 86 ; Abbott on Sbipp. Pt. 1,
c. 3, § 15, 5th ed.
^ Potli. de Soc. n. 96 ; ante, § 102, 105, 109.
* Poth. de Soc. n. 186, 187. » Poth. de Soc. n. 186, 187.
* Abbott on Shipp. Pt. 1, c. 3, § 15, p. 84, 5th ed., who cites Vmn. in Peck-
iuin, p. 155.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 657
latter having (as we shall presently see), a complete
authority to regulate the whole concerns of the ship.^
§ 421. Where, however, no common consent or
agreement exists among the owners, as to the posses-
sion, use, enjoyment, or preservation of the ship, it
becomes necessary to ascertain, what, at the common
law, are the ordinary rights, duties, obligations, and
liabilities of the part-owners, either inter sese, or in
respect to third persons. And in the first place, as
between the part-owners themselves. The inquiry,
which is here first naturally presented, is. What are
the rights, and duties, and liabilities of the part-owners
of a ship to each other in respect to repairs and other
expenditures, made by any of them for the proper or
necessary preservation thereof? The general under-
standing at the common law is, that, if there be no
express or implied agreement between the owners,
either by their conduct, or by their acts, sanctioning
any such repairs or expenditures, although any one or
more of the owners have a right to incur them ; yet
they have no remedy over against the others for con-
tribution thereto ; but they must themselves, whether
they constitute a majority or minority of the owners,
bear the whole charge.^
§ 422. The reason, usually given for this doctrine, is,
that no one part-owner has a right to compel another,
against his will, to incur any burden or expense, even
although necessary for the preservation of the common
property ; but it should be left to his own free choice.
For, otherwise, in case one part-owner were poor, it
' Post, § 426, 427.
- Abbott on Shipp. Pt. l,c. 3, § 2, p. 69-71, oth ed. ; 3 Kent, 153, 154
[Macy V. De Wolf, 3 W. & M. 193] ; {Brodie v. Howard, 17 C. B. 109
Curling V. Robertson, 7 Man. & G. 336 ; Hardy v. Sproule, 31 Me. 71
Stednian v. Feidler, 20 N. Y. 437. See Revens v. Lewis, 2 Paine, C. C. 202
Elder v. Larrabee, 45 Me. 590 ; post, § 455. {
42
658 PARTNERSHIP. [cHAP. XVI.
might operate as a grievous evil, and compel him to
sell his share by a sort of forced sale.^ Perhaps the
doctrine may have been founded upon the analogy to
cases of joint ownership of lands and woods, under the
old common law, where no one owner was bound to
contribute to the repairs of the fences and other melio-
rations made upon the common property, although for
the common benefit, unless done with the common con-
sent and agreement of all the owners, or justified by a
special custom.^ But there was an exception in cases
of houses and mills, which being of a higher legal
consideration, for the habitation of man, and for the
general good of the realm, the common law required
all the owners to contribute towards the necessary
repairs thereof.^ There seems to be great good sense
in this distinction ; and certainly it is not less applicable
to the case of ships, wiiich are for the use and habita-
tion of man, and the general good of the country, than
it is to houses and mills. The Roman law positively
affirms the like doctrine of contribution, in respect to
reparations of houses held in common.'* And, hence,
1 Ibid.
2 Lewis Bowie's Case, 11 Co. 79, b. 82, b. ; Co. LItt. 200, b.
3 Fitzh. Nat. Brev. 127; Id. 162; Co. Litt. 200, b. — Lord Holt Is re-
ported in Tenant v. Goldwin, 2 Ld. Raym. 1089, 1093, to have said: " That
the writ Is grounded upon the custom of the place, and not upon the
common law ; and there Is such a custom In many places, and there is no
other authority for It." It Is not a little remarkable, that neither Lord
Coke, nor FItzherbert, in affirming the doctrine, makes any allusion what-
ever to any such custom ; but they put It as a doctrine of the common
law; and put it upon the express ground, "that owners are In that case
(as Lord Coke says) bound, p7'o bono publico, to maintain houses and
mills, which are for the habitation and use of men." Mr. Chief Justice
Parsons, in delivering the opinion of the Court In Carver «. Miller, 4 Mass.
5')9, 561, states it to be a clear doctrine of the common law. The like
doctrine was affirmed by Mr. Justice Jackson, In delivering the opinion
of the Court in Doane v. Badger, 12 Mass. 65, 70. But see Converse v.
Ferre, 11 Mass. 325, 326.
* D. 17, 2, 52, 10; Poth. Band. 17, 2, n. 53 ; Domat, 3, 1, 5, art. 6-8.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 659
some maritime writers in modern times have, as we
shall presently see, applied it by analogy to the case
of part-ownership of ships. ^
§ 423. Whether, indeed, this supposed doctrine of
the common law, as to ships, is founded upon satisfac-
tory principles or not, may perhaps be thought to de-
serve more grave consideration than it seems hitherto
to have received. If we look to the general policy of
shipping and navigation, in all commercial nations, and
the objects for which joint ownership in ships is allowed
and encouraged, that is, to create a large and flourish-
ing marine trade by the union of small capitalists, and
thereby augmenting private wealth as well as national
interests, w^e shall see at once why the ordinary rules
with regard to joint ownership in other personal prop-
erty have been made to yield in the case of ships, and
have either been wholly set aside, or controlled by
principles of a more equitable and liberal character.
Now it is scarcely practicable to state a single reason,
why the ordinary rules should have been relaxed in
other cases, which is not strictly applicable to the case
of repairs, necessary and proper for the due preserva-
tion of the ship. In a just and reasonable sense, all
such repairs are for the common benefit of all the
owners, in order to prevent the utter ruin and destruc-
tion of the common property ; and they also generally
enhance the value, as well as preserve the sound state
of the property.
§ 424. It is clear (as has been already suggested),"
that many of the maritime Jurists, as well as some of
the positive codes of modern maritime nations, assert
the doctrine that all the owners of a ship are bound to
contribute according to their shares, for all expenses
^ Abbott on Shipp. Pt. 1, c. o, § 2, p. G8, 69, 5th ed. post § 424, note.
' Ante, § 422.
660 PARTNERSHIP. [CHAP. XVI.
inciuTecl in the necessary reparation thereof by any
one of the owners ; and this duty may be enforced by
suit in case of their neglect or refusal. Straccha af-
firms this in positive terms, and in this he is followed
by Roccus and other jurists.^ It has also the sanc-
tion of the highest tribunals of Genoa, one of the most
enlightened commercial states in the early progress of
commercial enterprise in the Mediterranean.^ Nay, in
some States and by some jurists the doctrine has been
pressed further ; so that if the negligent owner did
not, after due notice, within a limited time, pay his
proportion of the repairs with interest, he forfeited his
title to his share in the ship ; a severe and harsh regu-
lation, which is scarcely consonant to the liberal spirit
of maritime jurisprudence.^
1 Straccha, de Nav, Pars 2, n. 8, p. 420, ed. 1669 ; Roccus, de Nav. n. 22 ;
2 Emerig. Traite des Contrats k la Grosse, c. 4, § 4, p. 427-429, ed. 1783.
" Decis. Rotse Genuse, Decis. 170, n. 3 ; Straccha, de Merc. 285, ed.
1669.
^ Ibid. ; Straccha, de Nav. Pars 2, n. 8, p. 420, ed. 1669 ; Roccus, de Nav.
n. 22 ; 2 Emerig. Traite des Coutrats a la Grosse, c. 4, § 4, p. 427, ed. 1783.
— Straccha, in the passage referred to, says: "Naves plerunque refectione
egere, nemo est, qui nesciat ; et innuit Jurisc. (in 1. fin. ff. de exer.) Nee
etiam longo tempore durant, licet novis tabulis reficiantur ; ut scribit Ange.
(in 1. foramen, ti". de ser. urb. praj.) Unde proxime accedit ad propositas
quajstiones ilia dubitatio. Duos fingito exercitores, seu ejusdeni navis do-
minos ; alteram cessantem, et negligentem reficere ; alterum vero navim, quae
vitium fecerat, communi nomine refecisse. Puto, si intra quatuor menses so-
cius cessans numos pro portione erogatos cum centesimis usuris, non restituerit
consocio, qui refecerit, ex oratione Divi Marci reficienti jus dominil pro soli-
do vendicare, vel obtinere decretum esse. (L. si. fratres. § idem respondit.
Vers, idem respondit socius, qui cessantis. fF. pro socio. 1. si. ut proponis. C.
de sedifi. privat.) Qua? jura singulariter notanda inquit Areti. (Inst, de
act. § sequens. n. 13.) socium cessantem reficere rem communem. Si enim
alter reficit, et cessans intra quatuor menses non restituit partem impensarum
cum usuris, perdit dominium sua^ partis, et reficienti acquiritur. Probat et
conimendat ibidem Jason, (sub num. 48.) et idem Jason, (in repet. 1. quo-
minus, ff. de Hum. n, 112, et in 1. creditor, n. 7- ff. si cert, pcta.) Hoc idem
placuit Veron. (in tract, de servi. urb. pra^di. in tit. de refect, rub. 59. vers,
quarto qua?ritur), subdens, id valde notandum esse. Et vide Mars. (sing.
359. niille)." The passage in the Digest (17, 2, 52, 10), is as follows:
CHAP. XVI.] RIGHTS AND INTERESTS OF PAUT-OWNERS. 661
§ 425. Above all, the Consolato del Mare has ex-
plicitly sanctioned the doctrine, and declared, that
when the partowner-master (Patron, Senyor de la Nau)
finds that the ship needs repairs in the place of resi-
dence of the owners, if all of them, upon notice,
consent to have them made, he may repair the ship at
the expense of all, and hire money on the share of any
delinquent part-owner who fails to discharge his por-
tion. If the owners deem the repairs improper, be-
cause the ship is not worth repairing, then either the
partowner-master or the other owners may compel a
public sale of the ship. But if such master repairs
the ship without the consent of the other part-owners,
none of them will be liable to him for such repairs ;
but he must reimburse himself, as he may, out of the
earnings of the ship.^
§ 426. Pothier has affirmed the general doctrine of
the liability of every part-owner to contribution for all
repairs, reasonably [utllement) made upon the common
property, at least if he does not abandon his part of
the property ; and he applies it to ships.^ He takes
" Idemrespondit: Socius, qui cessantis cessantlumve portiones insuhe resti-
tuerit, quamvis aut sortein cuin certis usuris intra quatuor menses, postquam
opus refectuiu erit, recipere potest, exigendoque privilegio utetur, aut deinceps
propriam rem babebit, potest tamen pro socio agere ad hoc, ut consequatur,
quod sua intererat. Finge enim, nialle eum raagis suum consequi, quam do-
minium insulae : Oratio enimD. Marci idcirco quatuor mensibus finit certas
usuras, quia post quatuor dominium dedit."
1 Consolato del Mare, c. 200 [245] ; Id. c. 194 [239] ; Id. c. 197, [242].
I quote from Pardessus's edition, Tom. 2, p. 237-240 ; Id. p. 223-227 ; Id.
p. 231-233.
« Poth. de Soc. App. n. 187 ; Id. n. 192 ; Id. n. 86. His language is (n. 187) :
" A regard des dettes contractees pour les affaires de la communaute durant
la communaute, tel que seroit un march^ fait avec des ouvriers pour des re-
parations a faire a quelque heritage commun, il n'y a que celui des quasi-asso-
cies, qui les a contractees, qui en soit tenu envers les cr^anciers, sauf a lui a
s'en faire indemniser par ses quasi-associes, pour la part que chacun d'eux a
dans la connnunaute, lorsqu'elles ont ili utilement contractees. Lorsque ces
662 PARTNERSHIP. [cHAP. XYI.
the appropriate distinction in such cases, that the other
part-owners are not liable to the mechanics who have
made the repairs ; but only to the part-owner who has
procured them to be made.^ And he founds himself
upon the doctrine of the Pandects. Si cedes communes
sint, aid paries commimis, et ewn rejicere, vel demolire,
vel in eimi immitere quid ojms sit, communi dividundo
judicio eint agendum, aut inierdicto uti j^ossidetis expe-
rimur.^ The same doctrine is maintained in the Insti-
tutes, as arising, quasi ex contractu, in all cases where
one proprietor incurs expenses upon the common prop-
erty, which are for the benefit of all. Item, si inter
aliquos communis res sit sine societate, veluti quod j^ariter
eis legata donatave esset, et alter eorum altein ideo tene-
atur communi dividundo judicio, cpiod solus fructus ex ea
re perceperit, aut quod socius ejus solus in earn rein neces-
sarias imp)ensas fecerit ; non intelligitur ex contractu pro-
prie ohligatus esse ; quippe nihil inter se contraxerunt ;
quasi-associes les ont contractees ensemble, s'il n'yapas une' clause de soli-
darite exprimee, chacun d'eux n'en est teiiu envers le creancler que pour sa
portion virile ; de nieme que nous Pavons decide, supra, a Tegard des socie-
t^s particulieres, qui ne sontpas societes de commerce ; sauf a se faire raison
entre eux de ce, que chacun d'eux en doit porter de plus ou de moins que
cette portion virile, eu egard a la part qu'il a dans la communaute." Again
he adds (n. 192) : " C'est encore une des obligations, que forme la commu-
naute, que chacun des quasi-assocles est oblige de contribuer pour la part, qu'il
a dans la communaute, aux reparations qui sont a faire aux choses communes, a
moins qu'il ne voulut abandonner la j^art, qu'il a dans la chose." Emerigon
thinks that the jurists who maintain the doctrine, that the share of a de-
linquent owner is forfeited by omitting, after notice, within the limited
time, to pay his contributory portion, is founded upon a mistaken ap-
plication of the Law of the Emperor Adrian (Cod. 8, 10, 4), respecting re-
pairs on houses, which he deems to be a mere local regulation for the im-
provement of Rome. 2 Emerig. Traite des Contrats a la Grosse, c. 4, § 4, p.
427, ed. 1783. But Emerigon insists, equally with Pothier, that the delin-
quent owner is liable to contribution ; and that, upon his refusal, the other
owners may borrow the money on bottomry on his share. 2 Emei'ig. Traite
des Contrats a la Grosse, c. 4, § 4, p. 429, ed. 1783.
' Ibid. ; ante, § 420.
2 D. 10, 3, 12 ; Poth. Pand. 14, 3, n. 67 ; Poth. de Soc. n. 86, 192.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 663
sed^ quia ex maleficio non tenetw\ quasi ex contractu
teneri vicletur}
§ 427. In the next place, as to the employment and
equipment of the ship for any voyage or adventure.
1 Inst. 3, 28, 3. See also D. 17, 2, 52, 10. It should be recollected
that, in the Roman law, no such distinction generally prevailed between real
estate and personal estate, as is recognized in the common law. Both
might descend, and be devised in the same way, and both were generally
affected by the same incidents. Vinnius, in commenting on the text, says :
" Tertia species, qu£e quasi ex contractu obligationem producit, est com-
munio rerum inter aliquos citra societatem suscepta. Rerum communio sic
inter aliquos constituta, sive hereditatis inter coheredes, sive rerum singu-
larum inter eos, quibus eadem res legata aut donata est, quive simul eandem
rem emerunt sine alFectione societatis, duarum rerum obligationem parit ;
nam et consortem ad rerum divisionem obligat, et in communione manenti
prEestationibus quibusdam, ad eam communionem pertinentibus, implicat
(1. item, Labeo. 22, § 4, flim. ere. 1. 4, § 3, comm. divid.). Prima et prae-
cipua hie obligatio est, quod consors, si sponte communionem omittere nolit,
conijiellatur ad divisionem judicio divisorio ; in quo hoc maxime agi constat,
ut sua cuique parte adjudicata, a communione quam nee suscipere, nee
retinere quisquam cogitur (1. 26, § 4, de cond. ind. 1. ultim. C. comm. div.
discedatur. 1. 1, fam. ere. 1. 1, comm. divid. § quaedam. 20, 1 inf. de act.).
Divisio rerum qualis sit, quffi in ea adjudicatio, quseve mutua condenmatio,
explicatur (§ 4, et seqq. inf.de offic. jud.). Praestationes personales indu-
cuntur vel lucri, vel damni, vel impensarum nomine. (1. 3, comm. div.)
Lucri, ut, si quid ad unum e consortibus ex re communi pervenit, id ceteris
communicet. (1. 3, C. eod. d. § 4, inf. de oflF. jud. et hoc text.) Damni,
ut, si quid damni in re communi datum aut factum est culpa aut negligentia
unius, id ceteris proportione cujusque sarciat (1. 16, § pen. 1. heredes. 25,
§ non tantum. 16, et § item culpa. 18, 1. inter coheredes. 44, § quod ex fact.
5 fam. ercisc). Culpa autem non ad exactissimam diligentiam dirigitur;
quoniam, qui rem cum alio communem habet, propter suam partem causam
habet gerendi ; et ideo non major diligentia ab eo exigitur, quam qualem
suis rebus adhibere consuevit (d. 1. heredes. 25, § non tantum. 16). Im-
pensarum, ut, si qu£e ab uno in res communes factae sunt, quas propter
partem suam necesse habuit facere, ei a ceteris pro rata refundantur."
Vinn. Comm. ad Inst. 3, 28, 3, p. 716, 717, ed. 1726. The doctrine of
the text, as stated by Pothier and upheld by the Roman law, is, probably,
to be received with the qualification, that the repairs have been made with-
out any actual knowledge or dissent of the other owners ; for by the French
law, as we shall immediately see, the majority of the owners in interest
have the entire control and management of all the concerns of the ship ;
and, by the Roman law, even in cases of partnership, one partner alone
might, by his single prohibition, prevent the others from binding him by
any of their acts or contracts. Ante, § 124.
664 PARTNERSHIP. [CHAP. XVI.
We have already seen that, in cases of partnership at
the common law, the majority of the partners, in the
absence of all contrary stipulations, possess entire
authority to regulate and transact all the concerns of
the partnership ; and that this majority is to be de-
cided by the majority of persons, and not by that of
interest in the partnership.^ The French law has, on
this point, adopted the rule of the common law ; and
each, in this respect, differs entirely from the Roman
law, by which (as we have seen) a single partner
might prohibit, as far as he was concerned, any partic-
ular act or contract of the other partners, so that it
should not bind him.^ But, in relation to the part-
owners of ships, a different rule prevails at the com-
mon law ; for (as we have seen) no one or more of
the owners, whether a majority or a minority, can,
by incurring expenses or making repairs upon the
ship, oblige the other owners to contribute thereto,
unless they have expressly or impliedly consented to
the same.^
§ 428. What, then, it may be asked, is to be done
in case of any dissent by one or more of the part-
owners, not only as to the repairs, but as to the em-
ployment of the ship upon any projected voyage or
adventure ? Is the ship to remain idle, and rot at the
wharf] Or, may the ship be equipped and employed,
1 Ante, § 123, 124. See 3 Kent, 153-155.
2 Ante, § 124; 3 Kent, 153-155.
^ Abbott on Shipp. Part 1, c. 3, § 2, p. 70, 71, 5th ed. ; ante, § 123,
124. — The case of Steamboat Orleans v. Phoebus, 11 Pet. 175, is directly
in point. The English authorities above cited seem to leave the matter in
doubt. Upon principle, there does not seem any just reason why the
minority should not possess the same rights, as to the employment of the
ship, as the majority, if the latter refuse to employ her. And the policy
of the general rule would seem fairly to reach such a case, since otherwise
the ship must remain unemployed, and earn no freight for any one. See
3 Kent, 151, 152, 156.
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 665
SO as to earn freight and subserve the general commer-
cial policy of the country, as Avell as the private inter-
est of the other owners ? The common law has here
adopted and followed out the doctrines of Courts of
Admiralty, founded upon the enlarged and equitable
principles of maritime jurisprudence. It authorizes the
majority, in value or interest, to employ the ship upon
any probable design ; and yet, at the same time, it
takes care to secure the interests of the dissentient
minority from being lost, in any employment which
he or they disapprove.^ If the majority choose, there-
fore, to employ the ship upon any particular voyage or
adventure, they have a right so to do, upon giving
security by stipulation to the minority, if required, to
bring back and restore the ship to them, or in case of
her loss, to pay them the value of their shares.^ When
this is done, the dissentient part-owners bear no portion
of the expenses of the outfit ; and they are not entitled
to sliarc in the profits of the undertaking ; but the
ship sails wholly at the charge and risk, and for
the profit, of the others.^ And a complete jurisdiction
1 Abbott on Shipp, Pt. 1, c. 3, § 2, p. 70, 71, oth ed. ; Godolph. Adm.
Jur. Intr. p. 13 ; The Apollo, 1 Hagg. Adm. 306, 312 ; In the matter of
Blanshard, 2 B. & C. 2U, 248, 249 TMolloy, de Jure Mar. B. 2, c. 1, § 2,
p. 308, 10th ed. 1778; Id. § 3, p. 310; Sir Leoline Jenkins's Works, by
Wynne, vol. 1, p. 76, 84; Id. p. 792; Jacobsen's Sea-Laws, by Fi-ick,
0. 3, p. 43-45, ed. 1818.
? Abbott on Shipp. Pt. 1, c. 3, § 3, p. 70, 5th ed. ; 3 Kent, 151, 152;
Coll. on P. B. 5, c. 4, § 4, p. 806-808, 2d ed. ; Molloy, B. 2, c. 1, § 3;
2 Bro. Civil and Adm. Law, 131 ; The Apollo, 1 Hagg. Adm. 306 ; Ex
paiie Blanshard, 2 B. «& C. 244, 249 ; AVillings r. Blight, 2 Pet. Adm. 288 ;
Sea-Laws, 441, ed. 1705; Cai'd r. Hope, 2 B. »fe C. 661, 674, 675; Steam-
boat Orleans r. Phoebus, 11 Pet. 175; {Revens v. Lewis, 2 Paine, C. C.
202. The ^Marengo, 1 Sprague, 506. And see Southworth i'. Smith, 27
Conn. 355. }
2 Ibid. ; Sir Leoline Jenkins's Works, by Wynne, vol. 1, p. 76; Id. p.
792; Jacobsen's Sea-Laws, c. 3, p. 43-45, ed. 1818; {Davis v. Johnston,
4 Sim. 539 ; The Marengo, (U. S. Dist. Court for Mass.) 1 Am. Law Rev.
88. See Taylor v. Richards, 3 Gray, 326.}
66Q PARTNERSHIP. [cHAP. XVI.
exists in the Court of Admiralty, not only to compel
such a stipulation to be given by the majority at the
instance of the minority ; but, also, if the ship is in
possession of the minority, to compel the delivery
thereof upon giving such a stipulation to the majority.*
1 Ibid. ; The Jobn of London, 1 Hagg. Adm. S42, 346 ; The Pitt, 1 Hagg.
Adni. 240. {On the jurisdiction of equity in such cases, see Haly v. Good-
son, 2 Mer. 77 ; Christie v. Craig, 2 Mer. 137 ; Castelli v. Cook, 7 Hare,
89; Darby v. Baines, 9 Hare, 369 ; Brenan v. Pi-eston, 10 Hare, 331; s. c.
2 De G. M. & G. 813; Southworth v. Smith, 27 Conn. 355; 2 Pars. Mar.
Law, 565, n. } — Mr. Abbott has stated the whole doctrine with great clearness
and accuracy in the passage above referred to. He says : " The law of this
country appears to possess an important advantage over all the ordinances
that have been cited ; because, while it authorizes the majority in value to
employ the ship ' upon any probable design,' it takes care to secure the
interest of the dissentient minority from being lost in the employment, of
which they disapprove. And for this purpose it has been the practice
of the Court of Admiralty, from very remote times, to take a stipulation
from those who desire to send the ship on a voyage, in a sum equal to the
value of the shares of those who disapprove of the adventure, either to
bring back and restore to them the ship, or to pay them the value of their
shares. When this is done, the dissentient part-owners bear no portion of
the expenses of the outfit, and are not entitled to a share in the profits of the
undertaking ; but she sails wholly at the charge and risk, and for the profit
of the others. This security may be taken upon a warrant obtained by
the minority to arrest the ship. And it is incumbent on the minority to
have recourse to such proceedings, as the best means of protecting their
interest ; or, if they forbear to do so, at all events they should expressly
notify their dissent to the others, and, if possible, to the merchants also
who freight the ship. For it has been decided, that one part-owner cannot
recover damages against another, by an action at law, upon a charge of
fraudulently and deceitfully sending the ship to foreign parts, where she
was lost. And it has also been decided in the Court of Chancery, that
one part-owner cannot have redress in equity against another for the loss
of a ship sent to sea without his assent. These decisions are consonant to
the general rule of law, that where one tenant in common does not destroy
the common property, but only takes it out of the possession of another,
and carries it away, no action lies against him ; but if he destroys the com-
mon property, he is liable to be sued by his companion. And in a case
tried befoi-e Chief Justice lung, wherein it appeared, that one part-owner
had forcibly taken a ship out of the possession of another, secreted it, and
changed its name ; and that it afterwards came into the possession of a
third person, who sent it to Antigua, where it was sunk and lost ; the Chief
Justice left it to the jury to say, under all the circumstances of the case,
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 667
On the other hand, if the majority do not choose so to
employ the ship, the minority possess the same right
upon giving the hke security, and are in Uke manner
to be entitled to all the profits of the voyage or adven-
ture, and are to bear all the expenses and outfits and
risks thereof.^
§ 429. In this respect the common law differs essen-
tially from the French law.^ The French law, in the
absence of any positive stipulation of the part-owners
to the contrary, gives complete authority to a majority
in interest (not in number) to make repairs and incur
expenses on the ship for the common benefit, to which
all the other joint owners will be bound to contribute,
notwithstanding their dissent. The Ordinance of Louis
XIV. of 1681, expressly declares, that in all things
which concern the common interest of the proprietors
of the ship, the opinion of the majority shall be fol-
lowed ; and that shall be reputed to be the majority
which holds the largest shares of the ship.^ In this
whether it was not a destruction of the ship by the means of the defend-
ant; and they finding it to be so, the plaintiff recovered the vaUie of his
share. The Court of Common Pleas afterwards approved of the direction
of the Chief Justice. If a part-owner expressly notify his dissent, the
Court of Chancery will not compel him to contribute to a loss. If the
minority happen to have possession of the ship, and refuse to employ it,
the majority also may by a similar warrant obtain possession of it, and send it
to sea, upon giving such security." Post, § -434:.
' Steamboat Orleans v. Phoebus, 11 Pet. 175 ; The Apollo, 1 Hagg. Adm.
p. 306, 312 ; Ex parte Blanshard, 2 B. & C. 214, 219. See Godolph. Adm.
Jur. Intr. p. 13 ; Molloy, de Jure Mar. B. 2, c. 1, § 2 ; Abbott on Shipp. Pt.
1, c. 3, § 6, p. 71, 75, 5th ed. ; 2 Bro. Civ. and Adm. Law, 131 ; Sea-Laws,
442, 3d ed. ; Willings v. Blight, 2 Pet. Adm. 288 ; 3 Kent, 155-157 ; ante,
§ 427, note. But see The Elizabeth & Jane, 1 W. Rob. 278.
2 See 1 Valin, Comm. Liv. 2, tit. 8, art. 4, p. 575-;584, ed. 1766 ; Abbott
on Shipp. Pt. 1, c. 3, § 3, p. 69, 5th ed.
' 1 Valin, Comm. Liv. 2, tit. 8, art. 6, p. 575. The present commercial
code of France gives the like authority. Code de Comm. art. 220 ; 1 Bou-
lay Paty, Droit Comm. tit, 3, § 5, p. 340 ; 2 Emerig. Traite des Contrats A
la Grosse, c. 4, § 4, p. 427, ed. 1783; 3 Pardessus, Droit Comm. art. 621,
p. 43, 41 ; 3 Kent, 155-157.
668 PARTNERSHIP. [cHAP. XYI.
respect the French law seems to have followed out
the doctrine promulgated upon some other occasions
in the Roman law. Such, for example, as in the case
of creditors — Pari autem quantUate dehiii inventa, dis-
pari vero creditorum niimero ; tunc amplior 2^cirs cre-
ditorum obtineat^ ita, ut quod plurihus placeat^ hoc sfa-
tiicdur} And again, in the case of the arbitrators:
Judicknn enlm integrum est, quod j^hirimoriim sententiis
coinj^robaiur.^ And again : JIajorem esse ^:>«r/e?n, p7'o
modo dehiti, non p)ro nmnero p)ersonaruin, ijlacuit ;^ and
again ; Quod major pars Curiae effecit, pro eo hahetur,
ac si omnes egerint.^ And in answer to the question,
what, in a just sense, may be deemed repairs or expenses
for the common benefit, Valin does not scruple to declare,
that they are such as are reasonable and fit, in order to
put the ship in a state to earn freight, and to be suitably
navigated during the contemplated voyage or adventure. °
§ 430. The laws of other foreign maritime nations
seem generally to coincide with these provisions of the
French law, and abundantly show, that the doctrine is
not founded upon any peculiar policy of France.^ The
Ordinances of the Hanse Towns of 1591 and 1614, ex-
pressly affirm the doctrme, stating it, in one place, to be
conformable to ancient usage ; and, in another place,
to be conformable to the ancient usages of the sea.'''
^ Cod. 7, 71, 8, cited 1 Yalin, Comm. Liv. 2, tit. 8, art. 4, p. 575; D. 2,
14, 8; Kuricke, Jus Hanseat. tit. 5, art. 7, p. 758, 759.
"" Cited 1 Valin, Comm. 575. See also D. 50, 1, 19 ; Id. 4, 8, 17, 7 ;
Id. 4. 8, 27, 3.
3 D. 2, 14, 8 ; cited 1 Valin, Comm. 576.
* D. 50, 1, 19 ; cited 1 Valin, Comm. 577. See also the passage, D. 17,
2, 52, 10, referred to^ante, § 424, note.
' 1 Valin, Comm. Liv. 2, tit. 8, art. 5, p. 579.
* Styppman, Jus Mar. p. 416, n. 101-104; Scrip. Xaut. Fascic. Heinec.
p. 416, ed. 1740 ; Kuricke, Jus Hanseat. tit. 5, art. 7, p. 755, 758, 759 ; 1
BoulayPaty, Droit Comm. tit. 3, § 5, p. 344-346; Jacobsen's Sea-Laws, by
Frick, c. 3, p. 40, 41, ed. 1818.
^ 2 Pardessus, Collect, de Lois Mar. p. 526 ; Droit Mar. de la Ligue Anse-
CHAP. XTI.I RIGHTS AND INTERESTS OF PART-OWNERS. 669
The ordinance of Rotterdam of 1721;^ that of Ham-
burg of. 1276 ; - that of Lubec of 1299 ; ' and also
atique Reces. tie 1591, art. 57 ; Id. Reces. de 1614, art. 7, p. 546 ; Abbott
on Shipp. Pt. 1, c. 3, § 3, p. 70; Cleirac, Us et Cout. Ordin. Hanseat. art.
59, p. 211, ed. 1661 ; Id. p. 107, ed. 1788 ; Malyne, Lex Merc. p. 128, ed.
1636. — I copy from Pardessus's unrivalled edition, in this and the follow-
ing citations. Kuricke, in his Commentaries on the Hanseatic Ordinance
(Kuricke, Jus Hanseat. tit. 5, art. 7, p. 758, 759, ed. 1740), gives the
general provisions of the principal ordinances of different countries. His
language is: "Jus Wisbycen. art. 65, hoc in casu, quando nimirum inter
exercitorera et nauclerum conveniri non potest, statuit, nauclerum nihi-
lorainus posse navim illam ducere pro naulo, quod viri boni sequum esse
judicaverint. Et art. 66, in genere sancitur, quod omnes exercitores, quid-
quid in reparationem navis nauclerus impendent, vel etiam pro ejusdem
necessitate emerit, ad obolum usque solvere teneantur. Jus Pruthenicum
(1. 4, tit. 19, art. 4, § 3), generaliter vult, quod illi, qui niinores partes in
navi habent, sequi debeant eos, qui plus in eo possident. Jus vero Lube-
cense (1. 6, tit. 4, art. 6), alternative idem statuit, nimirum illos, qui minus
in navi possident, reliquos, qui plus tenent, aut sequi, aut totam navim certa
pecunia asstimare debere, optione aliis data, utrum tantumdem dare, aut
accipere veliut, emptoremque reliquis exercitoribus pecuniam istam intra
sex hebdomadas postmodum solvere teneri. Jus Danicum art. 61, idem
prajcipit, et addit, quod si nulla ratione inter se convenire possint, navim
tamen otiosam jacere non oporteat, sed exercitorum potior pars illam in
suum commodum, suo periculo, e;sercere possit ; illis vero, qui exercere
navera noluerunt, nulla vecturje portio danda sit. Eodem etiam tendunt
Statut. Hamburg. (Part. 2, tit. 13, artic. 2, et Grot. d. intr. part. 23). Utut
autem hfec expediti sint juris eo in casu, ubi plures exercitores existunt,
quteri tamen potest, quid hoc in casu, ubi duo tantum sunt exercitores, et
quidem inter se dissentiontes, juris sit ? Certe quum pra3valere debet, qui
navim navigare, quam otiosam domi manere mavult, inde concludi potest,
quod Ulpianus dissertis verbis (in 1. 12, § 1 ff. de usufruct.) scribat : Xavis
usufructu legato, navigatum mittendam navim, licet naufragii periculum
immineat ; navim enim ad hoc parari, ut naviget, dummodo tamen id apto
et non adverso navigationis tempore tiat, navisque idoneis hominibus com-
mittatur (1. 16, § 1, et 1. 36, in fin. ff. de R. Y.) et gubernatore sit instructa
(1. 13, § 2, ff. locat)." See also 2 Emerig. Traite des Contrats a la
Grosse, c. 4, § 4, p. 427, 428, ed. 1783 ; Id. 454, 455, Ed. of Boulay Paty,
1826.
» Ordin. of Rotterdam, 1721, art. 172 ; 2 Magens on Ins. 108 ; Abbott on
Shipp. Pt. 1, c. 1, § 3, p. 70, 5th ed.; 3 Kent, 153.
« Ordin. of Hamburg, 1276, art. 24; 3 Pardessus, Collect, de Lois .Mar.
p. 346.
3 Ordin. of Lubec, 1299, art. 25; 3 Pardessus, Collect, de Lois Mar,
p. 410.
670 PARTNERSHIP. [CHAP. XVI.
the laws of Wisbuy (although not printed m tlie com-
mon editions)/ contain provisions to the same effect.
§ 431. It has been supposed by a learned writer
upon this subject, that the common law has in this
respect an important advantage over all these ordi-
nances ; because, while it authorizes the majority in
value to employ the ship upon any probable design,
it takes care to secure the interest of the dissentient
minority." Perhaps it may not be so very manifest,
that such an advantage really exists ; for, although
the majority are thus entitled to employ the ship, yet
the minority cannot derive the slightest advantage
from that employment ; and they may, and indeed
must, be affected somewhat in their interest from the
natural diminution of value of the ship, by the mere
wear and tear of the voyage or adventure, even if no
accident occurs to prevent her safe return. It is no-
where affirmed, that the minority are entitled to any
compensation for such diminished value ; and the
general theory of the common law upon the rights of
part-owners, certainly authorizes every part-owner to
use the ship for his own purposes, without any liability
to repair the natural or necessary waste or decay occa-
sioned thereby. On the other hand, although the for-
' Laws of Wisbuy, 1841, art. 65, 66 ; 1 Pardessus, Collect, de Lois Mar. p.
522, 523. See also Pardessus's note to Tom. 1, p. 522, 523, notes 9, 10, and his
note to Tom. 2, p. 526, n. (2). In these notes he states, that these articles
are not found in the editions of 1505, or the MSS. of 1533 and 1537, but are
in that of 1541, of Gripswald. The Consolato del Mare gives to the master-
owner (Patron, Senyor de la Nau), who undertakes to build a ship, a right to
compel other persons, who have engaged to take particular shares in the ship,
to pay their proportions of the expenses of building the same ; or, upon their
default, to hire money on their shares for the same purpose. Consolato del
Mare, c. 3, [48], as given in 2 Pardessus, Collect, de Lois Mar. p. 50. I
have not discovered in that venerable collection any traces of the law as
to the employment and outfits of tlie ship, when some of the owners dissent.
See also Jacobsen's Sea-Laws, by Frick, c. 3, p. 40-43, ed. 1818.
^ Abbott on Sliipp. Pt. 1, c. 3, § 4, p. 70.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 671
eign laws and ordinances give the majority the right
to impose the burden of sharing the expenses upon
the minority ; yet the latter are to share fully in
the profits, if any, in the voyage or adventure, accord-
ing to the well-known maxim : Secundum naturam esl,
commoda cujusque rei eum sequi^ qiiem sequuntur in-
commoda}
§ 43*3. The common law not only thus gives to the
majority in interest of the part-owners the right and
authority to employ the ship upon any proper voyage
or adventure ; but also confers upon the majority the
right and authority in all cases to appoint the master
and officers and crew of the ships, and to displace them
at their pleasure, even although the master should be a
part-owner.- But, then, this authority must be exer-
cised by a free and impartial judgment in the choice of
the master and officers and crew, and especially in the
choice of the master, who is intrusted wdth the manage-
ment of the outfit, and with the navigation of the ship.
Any contract, therefore, made by some of the ^^ixt-
owners only, which is calculated to have the effect of
fettering their judgment, and of binding them to ap-
point, or to concur in the appointment of particular
persons as master and officers, is a violation of that
duty. The violation of duty becomes greater and more
odious, if the contract is founded upon motives of pecul-
iar sain and advantasfe to the contractors ; for all the
part-owners ought to share ratably in every profit that
may be made of the ship. And if such contracts could
' 1 Valin, Comm. Liv. 2, tit. 8, art. 5, p. 577-579; D. 50, 17, 10.—
The Danish Ordinance, art. 61, according to Kuricke, is simihxr to the law
of England. See above, § 430, note ; Jacobseu's Sea-Laws, by Frick, c. 3,
p. 37, 40-43.
^ This is also the rule of the French law. 1 Boulay Paty, Droit Comm.
tit. 3, § 5, p. 340. {Post, §445.}
672 PARTNERSHIP. [CHAP. XVI.
be allowed by law, they must operate as a discourage-
ment to persons to become part-owners of ships. ^ In-
deed, the duty is not owing singly to the other part-
owners, and to charterers (if any), but also to all whose
life or property may be embarked in her. Such a con-
tract is, therefore, utterly void, as against public policy,
and the true interests of commerce and navigation.
Upon this ground a contract, made by two part-owners,
who were the ship's husbands, with a third person to
sell him a part of their shares, and he to be appointed
master (they holding the majority of interests), and they
to be continued as th-e ship's husbands, and he or they
to have the appointment of his successor, as master, has
been held to be utterly void.~
§ -433. We have already seen that the French Ordi-
nance declares, that the opinion of the majority of the
owners of a ship, is to govern in every thing which con-
cerns the common interest of the owners. {En tout ce
qui concerne V inter et commiin des j)yo2yrietaires.) ^ But
the question, as to the extent of the power of the major-
ity to bind the minoi^ty by their acts, or, in other words,
what is to be deemed in the sense of the Ordinance for
the common interest, is a matter still left open to con-
struction and interpretation. Here, Valin is very ex-
plicit ; and he declares that it extends not only to the
repairs of the ship, but to the enterprise and voyage in
which the ship is to be engaged, to the choice of the
master, officers, and crew, and also to the outfits and
engagements for the voyage. But it does not extend
to any right to compel the dissenting owners to con-
tribute their shares to a cargo for the ship for the same
1 CarfLu. Hope, 2 B, & C. C61, 674, 675. I have followed nearly the
very words of Lord Tenterden, in his able judgment in this case.
2 Card V. Hope, 2 B. & C. 661, 674, 675.
3 Ante, § 429.
CHAP. XVI.] RIGHTS AND INTERESTS OF TART-OWNERS. 673
voyage.^ As to the repairs and other legitimate expen-
ditures and charges for the voyage, if the dissenting own-
ers refuse to contribute their shares, it is competent for
the majority, after such refusal and due proceedings
had, to take up the amount on bottomry for the account
and risk of the dissenting owners.^
§ 434. But suppose a majority of the owners are
against any employment of the ship* upon any adven-
ture or voyage whatsoever at a particular period, as not
being for the interest of the concern, and the minority
are, at the same time, ready and willing to employ the
ship upon a particular adventure or voyage, the ques-
tion then arises whether, in the sense of the Ordinance,
the majority have still the right to control the minority,
and prevent any such employment. The answer given
by Valin, in the affirmative, seems entirely satisfactory
in its reasoning, as a just exposition of the Ordinance.^
» 1 Valin, Comm. Liv. 2, tit. 9, art. 5, p. 576-580, ed. 17G6 ; 3 Pardessus
Droit Comm. art. 621, p. 44, 45 ; 3 Kent, 156, 157.
^ 1 Valin, Comm. Liv. 2, tit. 8, art. 5, p. 576, 577, 579; 3 Pardessus, Droit
Comm. art. 621, p. 44-46.
3 1 Valin, Comm. Liv. 2, tit. 3, art. 5, p. 582, 583 ; 1 Boulay Paty, Droit
Comm. tit. 3, § 5, p. 344, 345-348 ; Kuricke, Jus Hanseat. tit. 5, art. 7, p.
758, 759, ed. Heinecc. Scrip. Naut. Fascic. ed. 1740. Several of the mari-
time Jurists of other countries entertain a different opinion. Mr. Chancellor
Kent has summed up the opinions on each side with his usual ability and
accuracy. "By the French law, the majority in interest of the owners
control the rest, and in that way one part-owner may govern the manage-
ment of the ship, in opposition to the wishes of fifty other part-owners,
whose interests united are not equal to his. This control relates to the
etiuipment and employment of the ship, and the minority must contribute.
But they cannot be compelled to contribute against their will for the cargo
laden on board, though they will be entitled to their portion of the freight.
If the part-owners be equally divided on the subject, the opinion in favor of
emploving the ship prevails, as being most ftivorable to the interests of uav-
jiration. Many of the foreign Jurists contend, that even the opinion of the
minority ought to prevail, if it be in favor of employing the ship on some
foreign voyage. Emerigon, Ricard, Straccha, Kuricke, and Cleirac, are of
that opinion. But Valin has given a very elaborate consideration to the sub-
ject, and he opposes it on grounds that are solid, and he is sustained by the
43
674 PARTNERSHIP. [CHAP. XYI.
"Whether the common law has adopted the like rule
seems, in the present state of the authorities, doubtful,
although the old writers manifestly lean in favor of it.^
§ 435. A question far more nice and difficult, is to
decide what is to be done where the part-owners have
equal interests, and are equally divided as to the em-
ployment of the ship upon any particular voyage or
adventure. Within this predicament several cases may
arise: (1.) Where the part-owners are equally divided
as to the employment of the ship upon any voyage
or adventure whatsoever, one being in favor and the
other against any such employment, upon the ground,
that at the time it will be either unprofitable, or very
hazardous, under all the circumstances ; (2.) Where
each part-owner is equally willing to have the ship
employed in some voyage or adventure, but they differ
as to the voyage ; or, (3.) Where each part-owner is
ready to take the whole ship for a voyage, to be
planned by himself, but he will not engage with the
other in any voyage whatsoever. What is to be done
in such a case? An opinion has been expressed by
certain learned writers that, in the first case, the part-
owner who is willing to employ the ship for a voyage
or adventure is entitled to have it delivered to him for
that purpose, upon giving the usual security ; and this,
indeed, seems to be the actual practice in the Admi-
ralty of England.^
provisions of the old ordinance and of the new code. Boulay Paty follows
the opinion of Valin and of the codes, and says that the contrary doctrine
■would enable the minority to control the majority, contrary to the law of
every association, and the plainest principles of justice. The majority not
only thus control the destination and equipment of the ship, but even a sale
of her by them will bind the right of privileged creditors after the perfoi-m-
ance of one voyage by the purchaser, but not the other part-owners."
1 Willings V. Bhght, 2 Pet. Adm. 288 ; Abbott on Shipp. Pt. 1, c. 3, § 4-6,
p. 70-76 ; ante, § 427, 428. See The EUzabeth & Jane, 1 W. Rob. 278.
* Abbott on Shipp. Pt. 1, c. 3, § 6, p. 75, 5th ed. ; 1 Mont, on P. B. 2,
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 675
§ 436. Cleirac adopts the like opinion, in Avhicli he
has also the support of other Jurists.^ Straccha, in
particular, puts the case directly. Et ego Jingo tibi que-
stionem : Duos esse Dominos navis^ alterinn velJe congruo
tempore adnavlgandum ipsam navim navigatiim inittere^
aHerum vero malle in portu permanere ; et ptrceferendum
ilium existimo^ qui rem ad usumparatum uti velit, et uti-
liter agere, recusante socio.^ The reason seems to be,
that ships are designed for navigation ; and, thus em-
ployed, they support a great public commercial policy.^
The French Ordinance seems to justify the same course,
leaving, however, the question, as to the propriety of
the projected voyage, open for discussion.^
§ 437. But the two last cases (there being an equal-
ity of interests) have been thought by some distin-
guished Jurists to be wholly unprovided for by the
common law ; for, under such circumstances, there
seems to be no ground for giving any preference to
either part-owner.^ In cases of this sort, there is no
c. 1. Molloy holds this opinion. MoUoy, Ae Jure Mar. B. 2, c. 1, § 2, p.
308, 10th ed. 17 78. But see The Elizabeth & Jane, 1 W. Rob. 278; {and
2 Pars. Mar. Law, 555, note.}
' Cleirac, Us et Cout. Ordin. Hanseat. art. 59, p. 211, ed. 1661.
^ Straccha, de Navib. Pars 2, n. 6, p. 420, ed. 1669. ■
3 See Cleirac, Us et Cout. Ordin. Hanseat. art. 59, p. 211, ed. 1661 ; 1
Valin, Comm. Liv. 2, tit. 8, art. 5, p. 585, 586 ; Kuricke, Jus Hanseat. tit. 5,
art. 7; Scrip. Naut. Fascic. p. 758, 759, ed. 1740; ante, § 429, 430, note,
* 1 Valin, Comm. Liv. 2, tit. 8, art. 6, p. 585, 586.
' Abbott on Shipp. Pt. 1, c. 3, § 5, p. 72-76, 5th ed. ; Id. § 7, p. 75, 76;
Ouston V. Hebden, 1 Wils. 101. — In this case a part-owner, possessed of a
small share, instituted a suit in the Court of Admiralty, against the major
part-owner, who was also master, and who insisted upon making a voyage
■with the ship, praying that the shi > might be sold, or the party have such
other remedv as might be thought proper by the Admiralty; and the other
applied to the Court of King's Bencli to prohibit the Admiralty from pro-
ceedin"- in the suit. But Chief Justice Lee said : " I have no doubt but the
Admiralty has a power in this case to compel a security, and this jurisdiction
has been allowed to that Court for the public good. Indeed the Admiralty
has no jurisdiction to compel a sale; and if they should do that, you might
676 PARTNERSHIP. [cHAP. XVI
doubt that, under the Ordinance of France, of 1681,
a sale may be decreed to be made by the proper tri-
bunal, and the proceeds divided among the owners
according to their respective shares.^ Malyne evi-
dently supposes that the general maritime law author-
izes a sale to be made by the proper Court of Admi-
ralty, in all cases where, by reason of the disagreement
of the part-owners, the ship cannot be employed,
whether there be an equality in the dissenting interests
or not." Molloy adopts the same opinion ; and it has
apparently the support of others of the Old English
maritime writers, as a generally recognized practical
rule.^ The Consolato del Mare seems to uphold the
doctrine that, at least after the first voyage of a ship
which is owned by the master and other persons, the
part-owners may compel a sale of the ship, in case of
a disagreement between them.'* The law of Scotland
gives a right, as it should seem, in all cases, to the dis-
have a prohibition after sentence; or we may grant a prohibition against
selling, or compelling the party to sell, or to buy the shares of others." This
was agreed to by the whole Court, and the case ended by prohibiting the
Court of Admiralty to direct a sale, but leaving the Court at liberty to
compel security.
1 1 Valin, Liv. 2, tit, 8, art. 6, p. 584-586 ; 1 Boulay Taty, Droit Comm.
tit. 3, § 5, p. 359-366 ; 2 Emerigon, Traite des Contrats a la Grosse, c. 4, § 4,
p. 427, 428, ed. 1783; Id. p. 454, 455, ed. of Boulay Paty, 1827; 3 Par-
dessus, Droit Comm. art. 623, p. 46, 47 ; Abbott on Shipp. Pt. 1, c. 3, § 7, p.
75, 76, 5th ed. — The present Commei'cial Code of France also provides,
that the vessel shall not be adjudged to be sold in order to a distribution of
the proceeds among the joint owners, except U25on the application of a moiety
in value of the said owners, unless there be a written agreement to the con-
trary. Code de Commerce, art. 220 ; 2 Locre, Esprit de Code de Comm. p.
52-54; 1 Boulay Paty, Droit Comm. tit. 3, § 5, p. 359-366.
2 Malyne, Lex Merc. c. 30, p. 120, 121, ed. 1636.
3 Molloy, de Jure Mar. B. 2, c. 1, § 3, p. 310, ed. 1778 ; 2 Bro. Civ. & Adm.
Law, 131.
■* 2 Pardessus, Collect, de Lois Mar. p. 62, citing Consol. del Mare, art. 10
[55]; Id. p. 207, citing Consol. del Mare, art. 184 [229]; Id. p. 233, citing
Consol. del Mare, art. 199 [244] ; Id. p. 237, 238, citing Consol. del Mare, art.
200 [245].
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 677
senting partners, to offer their shares for sale to the
other owners at a particular price ; and, if this offer is
not accepted, then to require a judicial sale to be made
of the ship, and the proceeds to be divided among
them.^
' Bell's (Wm.) Diet, of Law of Scotland, voce, Sett., Action of, p. 910;
Id. Ship. p. 915, ed. 1838: 1 Bell, Comm. B. 3, Ft. 1, c. 4, § 11, p. 504,
5th ed. ; 3 Kent, 153, note (b). — In the work called " The Sea-Laws," the
like doctrine is affirmed. Sea-Laws, p. 441, ed. 1705. In several of the
foreign ordinances an alternative is given to the dissenting part-owners,
either to buy, or to sell their respective shares in the ship at a fixed price ;
and if they refuse, the majority or a minority may employ the ship in naviga-
tion. See Kuricke, Jus. Hanseat. tit. 5, art. 7 ; Scrip. Xaut. Fascic. p.
758, 759, ed. 1740, Heinecc. See also the opinion of Mr. Justice Wash-
ington, in Davis v. The Seneca, 18 Am. Jurist, p. 486, 490, 491. Mr.
Justice Washington in this case said: "Our attention is then invited to the
civil law, or rather to the Roman marine code, another legitimate source of
general maritime law; in which we find sundry wise provisions for adjusting
disputes between part-owners of vessels, from which the three following
rules may be deduced. 1. That the opinion and decision of the majority
in interest of the owners, concerning the employment of the vessel, is to
govern ; and, therefore, they may, on any probable design, freight out or
send the ship to sea, though against the will of the minority. 2. But if the
majority refuse to employ the vessel, though they cannot be compelled to it
by the minority, neither can their refusal keep the vessel idle, to the injury
of the minority, or to the public detriment; and since, in such a case, the
minority can neither employ her themselves, nor force the majority to do so,
the vessel may be valued and sold. 3. If the interests of the owners be
equal, and they differ about the employment of the vessel, one-half being
in favor of employing her, and the other opposed to it, in that case the will-
ing owner may send her out." Mr. Bell, speaking on this subject, after
stating the English rule, says: " In Scotland the remedy has been by sale.
Not only in the case of equality, but even where the minority opposed the
employment, the dissentient owners, minority, or equal, have, in admiralty,
been entitled to insist, either for a sale, or that, at a price put on the sliares,
the other owners shall purchase their shares, or be obliged to part with their
own. This doctrine was grounded on the consideration, that part-owners,
though not properly copartners, freqliently suffer by the contracts or delin-
quencies of shipmasters, perhaps not of their own choosing; for which they
are answerable, at least to the value of their own share. And the same
doctrine, though not supported by such considerations of hazard, was, in
modern times, applied to the case of a brewery held in common. Wliich of
these rules ought now to prevail in this united country, it migiit be presump-
tuous to say. But it may be necessary to reconcile thera in some future
678 PARTNERSHIP. [cHAP. XVI.
§ 4e38. It has also been generally supposed, that,
according to the common law of England, in no case
whatsoever of a disagreement of the part-owners, as to
the employment of the ship upon any particular voy-
age, does there exist any jurisdiction in the Court of
Admiralty (and, if that Court has it not, no other Court
has) to order a sale thereof, whether the ship be owned
in equal, or in unequal shares. It is true, that the terms
of the commissions, granted to the Judges of that Court,
include jurisdiction of all matters, which concern own-
ers and proprietors of ships, as such.^ But this jurisdic-
tion of the Courts of Admiralty has been exercised for
the last two centuries in England, if one may so say, in
vincidls, in consequence of the severe penalties imposed
upon the Judges by statute, if they should happen un-
intentionally to exceed their true jurisdiction ; and the
open hostility and prohibitory interference of the Courts
of common law.^ The commissions have thus become
practically much narrowed in the import of their terms,
by the construction of these latter Courts,^ It was pos-
itively, although incidentally, asserted by Lord Chief
case, in whicb tbe property comes to be mixed, and persons of botli countries
conc«rned in the same vessel. Perhaps the course followed in England
may be followed on the same principles of equity, which have recommended
it to adoption by the Court of Chancery in England, as a measure of less
harshness, and less attended with peril, than the remedy which we have long
used." 1 Bell, Comm. B. 3, P. 1, c. 4, § 1, p. 503, 5th ed. See also
Jacobsen's Sea-Laws, by Frick, c. 3, p. 40-43, ed. 1818. But see The
Elizabeth & Jane, 1 W. Rob. 278.
' Godolph. Adm. Jur. 43 ; Laws of the Sea, p. 259, ed. 1705 ; De Lovio
V. Boit, 2 Gall. 470, note; Houghton's Articles, Art. 1633; Gierke's
Praxis, p. 145, ed. 1798.
2 See De Lovio v. Boit, 2 Gall. 398.
' The Apollo, 1 Hagg. Adm. 306, 309. — The late Act of Parliament (3d
& 4th Vict. c. 65), has in a great measure restored to the Court of Admiralty
its ancient jurisdiction, as well as independence; and it exhibits the com-
plete triumph of principles of public policy and convenience over mere
technical doctrines, and the stern opposition of the Courts of common law.
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 679
Justice Lee, in a case in the King's Bench, in the reign
of George the Second, that the Court of Admiralty has
no authority to compel a sale in any case of disagree-
ment whatever between part-owners.^ If this doctrine
be in reality established in the common law of England,
it is a reproach both to its equity and its justice ; for it
leaves the part-owners of ships without any remedy
whatsoever, in cases where irreparable injuries may
arise from an equality of division in interests and opin-
ions, without any fault or wrong on either side. Upon
what ground it has been asserted, it is difficult to per-
ceive. It certainly has no support in the positive mari-
time law of other countries, or in the ancient principles
of maritime jurisprudence.^ All these point the other
way. The Admiralty Courts of England have never of
themselves adopted any such limited doctrine ; but have
always contended for the exercise of the full jurisdic-
tion as rightful, although they have been practically
compelled to surrender it under the imposing authority
of the Courts of common law.
§ 439. In America a strong disposition has been
manifested to assert the right and duty of Courts of
Admu-alty to decree a sale of the ship, in cases of an
equal division of voices and interests, as to undertak-
ing a particular voyage or adventure. It has been
recognized upon several occasions, as being within the
true scope of the Constitution of the United States, a
case of admiralty and maritime jurisdiction ; and it is
sustained by reasoning which it is difficult to overturn,-
unless by striking out of the commission the whole
authority of the Admiralty in cases of controversies
» Ouston V. Ilebden, 1 Wils. 101 ; Abbott on Shipp. Pt. 1, c. 3, p. 73, 74,
5th ed.; Jacobsen's Sea-Laws, by Frick, c. 3, p. 43, 44, ed. 1818; 1 Mont,
on P. B. 2, c. 1.
" Ante, §435-437.
680 PARTNERSHIP. [cHAP. XVI.
between part-owners ; and also by disregarding the
common usages, which have prevailed among mari-
time nations from an early period, and which constitute
the basis of the general maritime law, as well as of the
positive codes, which affirm and enforce it.^ The right
^ Ante, § 435-437, and note. — In the case of Skrine v. The Sloop Hope,
Bee 2, Judge Bee declared a sale of a ship upon a petition of one part-ownei*
af^ainst another part-owner. But the question was very elaborately discussed
on both sides, by very able counsel, in the ease of Davis v. The Brig Seneca,
Gilp. 10. The learned Judge of the District Court (Judge Hopkinson) pro-
nounced an opinion against the jurisdiction of the Court to decree a sale, the
case being that of the part-owners being equally divided in opinion, and
each wishing to employ the brig upon a distinct voyage. Upon appeal,
Mr. Justice Washington reversed the decree, and directed a sale ; and
the parties submitted to his decision. Upon that occasion Mr. Justice
Washington relied upon the French Ordinance, not as a mere matter
of positive regulation, but as an exposition of thfe general maritime law ; and
afterwards he added : " Having ascertained the true meaning of this article
of the French Marine Ordinance, its authority, or the influence which it
should have in deciding this cause, is next to be considered. It is insisted by
the counsel for the appellee, that this article is nothing more than a part of
the local law of France founded upon the Roman law of licitation adopted by
France, applicable to the partition of property, movable and immovable,
■which Is held in common by two or more persons, -which, without a sale,
could not be otherwise conveniently divided between them. And, in sup-
port of this argument, it Is remarked, that the expressions of the article
are all negative, and" must necessarily refer to some other code, whenever
the excepted case shall occur. The Ingenuity and the Imposing appear-
ance of thl^ argument are freely acknowledged ; but It will not, I think,
bear a close examination. For, admitting the general law of licitation
to have formed a part of the local law of France, It does not follow, that
an oi-dinance restraining and qualifying that law In cases, and In relation
to subjects purely maritime In their nature, should likewise form a part
of the local law of that country. It would rather seem, that, on account
of their maritime character, It was deemed proper to withdraw such sub-
.jects from the local, for the purpose of Incorporating them into the
general, marine code of the nation. That the 5th article Is of this de-
scription has not been questioned. It was no doubt copied from the Roman
maritime code, which, having also provided for cases of disputes between the
owners of unequal interests, as well as between those having equal interests
In one event only, it would seem as If the 6th article had been introduced
for the purpose of perfecting the system, by affording a remedy in another
event, for which the Roman law had made no provision. It Is most obvious,
In short, that Yalin, as well as other jurists, who have treated of these arti-
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 681
to order a sale of property, subjected to its jurisdiction,
is clearly a matter within the competency of a Court
cles, have considered them, not as parts of the common, but of the maritime
law of France ; and we find provisions similar to them in principle intro-
duced into the commercial code of that country. That the Ordinances of
Louis XIV. are not of binding authority upon the maritime Courts of other
countries, I freely admit ; but as affordino; evidence of the general maritime
law of nations, they have been respected by the maritime Courts of all nar
tions, and adopted by most, if not by all of them, on the continent of Europe.
We are informed, that this code was compiled from the prevailing maritime
regulations of France, and of other nations, as well as from the experience
of the most respectable commercial men of France. And why should not
such parts of it as are purely of a general maritime character, which are
adapted to the commercial state of this country, and are not inconsistent
with the municipal regulations by which our Courts are governed, be fol-
lowed by the Courts of the United States in questions of a maritime nature ?
I leave this question to be answered by those, who would restrain the admi-
ralty jurisdiction of the District Courts within the limits allowed by the
Common Law Courts of England to be exercised by the High Court of
Admiralty of that country. And why, let me again ask, shall the 6th article
of this code be rejected in the case now under consideration ? Neither
justice nor policy requires it; for it is manifest that the appellants must
either surrender their property in this vessel, or rather the fruits of it, to the
appellee, or their equal right to appoint the master, and to decide upon her
destination, or that she must remain idle in port, until the subject in dispute
is totally lost to both the owners. There is no other imaginable alternative,
unless it be the one which the appellants ask for ; for if the appellee may
now legally claim the right to take this vessel to sea,^and, by giving security
for her safe return, may take to himself, in exclusion of the other part-
owners, all the earnings of the voyage, his right to employ her, on the
same terms, as long as she shall be in a condition to be navigated, will
continue equally valid, and the exercise of it can no more be denied
then, than now. Suppose, for the purpose of further illustrating this part
of the subject, these parties had filed cross petitions, setting forth the
difference between them, respecting the appointment of a master, and each
praying to be permitted to take the vessel to sea under the usual stipulations ;
since neither could entitle himself to a preference, what could the Court
do, but dismiss both petitions, and thus leave the vessel unemployed,
unprofitable to both parties and to the interests of commerce, and subject
to all the injury to which such a state of things would expose her? Yet
this is substantially the present case ; and if the Court has no power to
decree a sale, it is clear that neither of the parties can take the vessel
to sea, without a decree of the District Court authorizing him to do so.
Upon the whole, considering the article of the French Coile, which has
so often been referred to, as constituting a part of the maritime law of
nations ; that it is in itself a wise and equitable provision ; that It Is not
682 PARTNERSHIP. [cHAP. XVI.
of Admiralty, and, indeed, is familiar in practice, in
order to prevent irreparable mischiefs or impending
inconsistent with the commercial state of this country, or with any law
which should govern this Court; I feel myself not only at liberty, but
bound to adopt and apply it to the present case; and I shall, therefore,
reverse the sentence of the District Court, and decree a sale of this
vessel. My opinion, I acknowledge, was very different, when this cause
was opened, from that which I now entertain. I had read that which was
pronounced in the District Court by the learned Judge of that Court,
with an entire conviction of its correctness. But the new evidence which
has been introduced in this Court, presents, in at least one most essential
particular, a different case from that which was submitted to the view
of that Court." Davis v. The Seneca, 18 Am. Jurist, p, 486, 492-494.
The decisions of the Courts of Common Law upon questions of Admiralty
Jurisdiction ought, for many reasons, historically well known, to be received
with great scruple and hesitation, especially when considering the times
when these questions were principally agitated, during the hostile contro-
versies between these Courts and the Court of Admiralty. Nor, indeed,
considering the very slight means of knowledge then possessed by the Courts
of Common Law upon the doctrines of commercial and maritime jurispru-
dence, a system very little in consonance with the strict doctrines of the
common law, is it at all a matter of wonder, that the decisions of these
Courts upon this subject should have little in them to commend them for
adoption in the present age, either in point of reasoning, or of principle, or
of learning. How, indeed, it could be, that the Admiralty had undoubted
jurisdiction in cases of disputes between part-owners themselves, and also
between part-owners and the master, to dispossess one party and give pos-
session to the other, thus acting in rem, in order to prevent irreparable
mischief or ruin to the joint property ; and yet, that it could not, to prevent
the like mischief and ruin, direct a sale thereof, if it were the only adequate
means to attain the end, is a matter of no small difficulty to understand.
Nothing is more clear or more common in the exercise of jurisdiction by
Courts of Admiralty, than to decree a sale of ships and of other property
in their custody, to prevent loss, or decay, or ruin. Even Courts of
Equity, although their jurisdiction rarely acts m rem, will direct a sale of
property subjected to claims within their cognizance, in order to adjust
rights, and to distribute proceeds, where otherwise irreparable mischief
might ensue, or no other sufficient remedy exists. This is very common in
cases of a dissolution of partnership, and in cases of charges upon land,
and even sometimes in cases of pledges of personal property. See 2 Story,
Eq. Jur. § 1024-1028, 1033. See also Stevens v. The Sandwich, 1 Pet.
Adm. 233, note ; De Lovio v. Boit, 2 Gall. 398, 463 ; 3 Kent, lo3, 154, and
notes. As to the jurisdiction of Courts of Admiralty in cases between
part-owners, see the commissions to the Vice-Admiralty Courts in America
(which in this respect are mere copies of the commission of the High Court
of Admiralty in England), cited in De Lovio v. Boit, 2 Gall. 470, note;
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 683
losses.^ Analogy, therefore, is clearly in its favor ; and
unless some limitation or exception can be asserted to
exist, either in the origin, or constitution, or practice
of the Court itself, it will not be a very satisfactory
mode of disposing of the question, for a Court of Com-
mon Law to assert, upon its own mere dictum^ without
any reasoning in support of it, that the Court of Ad-
miralty has a right, in cases of disputes between part-
owners of ships, to take a stipulation, but not to order
a sale. Such language would seem more like an edict
than a judgment, and to promulgate an arbitrary dis-
tinction, rather than a rational interpretation of the
jurisdiction of another Court.
§ 4-40. Having thus considered the rights, duties,
obligations, and liabilities of part-owners, as between
themselves, in respect to the repairs, possession, and
employment of the ship, and the authority of the ma-
jority to direct and control the same, let us now pro-
ceed to examine some other rights, duties, obligations,
and liabilities, arising from the same relation, when
all the part-owners act together, by common consent,
for their mutual interest. In the first place, it may
be convenient, here, to consider the rights and reme-
dies, where one or more or all of the part-owners, by
common consent, are employed in the general con-
cerns of the ship, or of a part thereof, and expend
moneys, or contract debts on account thereof There
can be no doubt, that, in such cases, all the part-own-
Curtis on Merchant Seamen, p. 348, note (3) ; Godolph. Adra. Jur. c. 4,
p. 43 ; Sir Leoline Jenkins's Works, Argument in the House of Lords on
the Admiralty Jurisdiction, vol. 1, p. 76, 80-84; Id. p. 792; 2 Bro. Civil
& Adm. Law, p. 77, note (5) ; Id. p. 130-133. {In Tunno v. The Betsina,
5 Am. Law Reg. 406, the United States District Court for the District of
South Carolina refused to order a sale on a libel by a minority of the part-
owners, alleging a disagreement as to the employment. }
» Ibid.
684 PARTNERSHIP. [CHAP. XVI.
ers are bound to contribute and pay their respective
shares of such expenditures, and that all of them are
liable in solido for the unpaid debts so properly in-
curred on the joint account.^ But the question may
arise, whether this is a mere personal charge, or
whether the respective part-owners have also a lien
on the ship itself for the expenditures, or charges,
made by them, which lien is capable of being enforced
against the ship itself, in cases of the insolvency,
death, or bankruptcy of a particular part-owner, or any
other failure on his part to discharge his own share
thereof.
§ 441. In cases of partnership, we have already
seen that the partners respectively have a specific
lien upon the partnership property, for all expenditures
made by them, and balances due to them for advances
and other liabilities incurred on account of the part-
nership, as well as for their shares of the partnership
effects, upon a dissolution of the partnership.^ There
is as little doubt, that part-owners of a ship, who pur-
chase a cargo, and engage in a common voyage and
adventure, upon the joint account and profit of all
concerned (and not merely in an employment of the
ship on freight), have also a like lien^ for all disburse-
ments and advances, as well as for their share of the
profits, upon the property employed in such voyage or
adventure, and its proceeds ; for as to such voyage or
» Ante, § 419, 420; Abbott on Shipp. Pt. 1, c. 3, § 8, p. 76, 5th
ed. ; Coll. on P. B. 5, c. 4, § 4, p. 811, 812, 2d ed. ; 1 Mont, on P. B. 2,
c. 1.
" Ante, § 326, 346, 347, 360, 361 ; Coll. on P. B. 5, c. 4, § 1, p. 793,
794, 2d ed.
' [In Green v. Briggs, 6 Hare, 395, 400, it was said that the use of the
■word "lien," in this connection, did not properly describe the right of a
part-owner to be reimbursed, out of the gross freight, the expenses incurred
in the prior repairs and outfits of the ship.]
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 685
adventure, they are treated as partners, and not merely
as part-owners.^
§ 442. But the question here propounded is in-
tended to apply to the case of expenditures, advances,
and debts, incurred on account of the ship, by the part-
owners, merely in their character as such, as, for ex-
ample, for repairs, or for outfits for a voyage, or by dis-
charging existing liens thereon. Upon this question,
different judicial opinions have been expressed by emi-
nent judges in England and in America.^ Lord Hard-
wicke, upon the most full and deliberate consideration,
held, that where any part-owner died without paying
his portion of the expenses of building and fitting out
the sliip, the other part-owners had a specific lien
on his share in the ship, for the moneys which they
> Ante, § 54-56 ; Abbott on Shipp. Pt. 1, c. 3, § 9, 10, p. 77-79, oth
ed. ; Coll. on P. B. 5, c. 4, § 1, p. 794, 2d ed. ; Holderness v. Shackels,
8 B. & C. 612 ; 1 Mont, on P. B. 2, c. 1. {See Macy v. De Wolf, 3 Wood.
& M. 193 ; Starbuck v. Shaw, 10 Gray, 492 ; 1 Pars. Mar. Law, 95, 101. } —
In the case of Holderness v. Shackels, 8 B. & C. 612, 618, the very distinc-
tion was stated by Lord Tenterden, in delivering his opinion. " This is not
the case of a claim of lien on the share of the ship, but a claim by persons,
being part-owners of a ship, engaged together in an adventure ; and the
subject-matter, in respect of which this action is brought, is part of the
proceeds of that adventure, viz., part of the oil, which had been obtained
on a fishing voyage. Now, it is clearly established, as a general principle
of law, that if one partner becomes a bankrupt, his assignees can obtain no
share of the partnership effects until they first satisfy all that is due from
him to the partnership. The case of Smith v. De Silva, Cowp. 469, is a
very entangled case, and the facts stated in the report are not very clear
or perspicuous. It appears that De Silva had originally made advances,
not as part-owner of the ship, nor even as partner in the adventure, but as
a person appointed by all the part-owners to manage the adventure for
them, rather as their agent than as their partner. He afterwards acquired
an interest by purchasing a part of the ship, and so became a partner in the
adventure; but he was not an original p.artner. Smith v. De Silva may,
therefore, have been properly decided, without breaking in on the general
princi[)le to which I have adverted."
2 Abbott on Shipp. Pt. 1, c. 3, § 9, 10, p. 76-80, 5th ed. ; Coll. on P. B.
5, c. 4, § 1, p. 793, 794, 2d ed. ; 3 Kent, 39 ; 1 Mont, on P. B. 2, c. 1, and
Id. A pp. note (z).
686 PARTNERSHIP. [cHAP. XVI.
had laid out, and the liabilities they had incurred on
this account.^ On the other hand, Lord Eldon, upon
' Doddingtonv. Hallet, 1 Ves. Sr. 497 ; Abbott onShipp. by Shee, Pt. 1,
c. 3, § 5, p. 94, ed. 1840. [In the late case of Green v. Briggs, 6 Hare, 395,
Vice-Chancellor Wigram observed : " The case of Doddington v. Hallet was
referred to in argument by the plaintiff's counsel, but only (as I understand)
for the purpose of excluding the suggestion that the plaintiff relied upon
it, or upon the doctrine it contains, for supporting his claim in this suit. I
collect from Story on Partnership, that, upon principles of public policy
and convenience, America has adopted Doddington v. Hallet. But, how-
ever that may be, it is certain that Lord Eldon, in Ex parte Harrison, and
in Ex paHe Young, deliberately overruled it. And the plaintiff was not
wrong in reminding me, at the outset, that what he seeks by this suit is, not
to affect the ship or the proceeds of the sale of the ship, but only to have
her gross earnings, or a sufficient part, applied in paying the expenses
incurred in making them, before profits are divided amongst the part-owners.
From this point I shall start by making three assumptions : first, by ex-
cluding the repairs of the hull of the ship ; secondly, by supposing the
ship's earnings to have consisted of a cargo of whale oil made upon a
whaling voyage, and not to have arisen in the shape of freight ; and, thirdly,
by assuming that the voyage was simple and entire, and not affected by
considerations which sometimes apply where an entire voyage out and
home has, for some purposes, been considered as consisting of several voy-
a""es. After these assumptions, I need not dwell long upon the point first
contended for by the plaintiff. Holderness v. Shackels is a case in point.
The Court distinguished between the ship itself, and her earnings ; and
held in that case, that, although part-owners were tenants in common of
the ship, they were jointly interested in the use and emplo^Tuent of the
ship, and that the law as to earnings must follow the law in partnership
cases. And in Ex paiie Hill, the Vice-Chancellor said : ' If there had been
no sale, the creditors would have had no lien on the ship, because that was
not joint property ; but the earnings of the ship would have been joint
property, and liable to the joint creditors, not from any doctrine peculiar
to the earnings of a ship, but on the general principle applicable to the
joint property of every partnership.' If in this case the ' Thames ' had
been employed on a whaling voyage, and the money now at the bank
represented the cargo, no dispute could have arisen. Then is freight, qua
earnings, distinguishable from other earnings of a ship, for the purpose
under consideration ? In the absence of authority establishing such a
distinction, or a clear principle requiring me to adopt it, I will not admit it.
The authorities, in fact, as far as they go, negative the distinction instead
of supporting it. In Ex parte Young, in which Lord Eldon's mind was
distinctly called to the difference between the ship and her earnings, he said,
' I have no doubt that freight is liable to the joint demand : as to the ship.
It stands upon the nice distinction of a tenancy In common.' In Ex parte
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 687
great consideration, overruled this decision of Lord
Hard\vi<"ke, and maintained that there was no lien
in such cases by the part-owners upon the shares of
each other. ^
Hill, the earnings of the ship, with which the Court had to deal, was freight.
In Ex parte Christie, Lord Eldon said, that what was coming from the master
was joint earnings. The language of Story on Partnership is not opposed to
this conclusion. The learned author meant only to state what he considered
clearly decided by authority, and not to say that freight might not be subject
to the same law as other earnings of a ship. Does principle then require me
to admit the distinction contended for, between freight and cargo, for a
purpose like the present ? Suppose a ship, by the consent of the owners, to
be fitted for a voyage, and to make profit partly by freight, and partly by
merchandise. Holderness v. Shackels furnishes the law in the one case. Upon
what principle is the mode of adjusting the account between the part-owners
to be split, with reference only to the nature of the earnings the ship has
made ? Am I bound to hold that each alteration in the employment of a
ship, which accident or convenience may, from day to day, suggest, is to
affect the rights of the part-owners inter se, as to the expenses necessary
to prepare the ship for her employment ? So here, in fact (though it forms
^ Ex parte Young, 2 Yes. & B. 242 ; Ex parte Harrison, 2 Rose, 76. —
Lord Tenterden (Abbott on Shipp. Ft. 1, c. 3, § 10, p. 79, note (1), Am.
ed. 1829), in his earlier editions, stated his own doubts upon the doctrine
of Lord ILardwIcke, in language which was afterwards adopted by Lord
Eldon, In Ex parteYoung, 2 Ves. & B. 242, and therefore it is here in-
serted, although omitted in the later editions. He said: " It seems tohave
been considered, that part-owners might have a lien on each other's shares
of a ship, as partners in trade have on each other's shares of their merchan-
dise. But I do not find this point to have been ever decided ; and there is a
material difference between the two cases. Partners are at law joint-tenants
of their merchandise ; one may dispose of the whole property. But part-
owners ai'e tenants in common of a ship. One cannot sell the share of
another. And If this general lien exists. It must prevail against a purchaser,
even witliout notice ; which does not seem consistent with the nature of the
interest of a tenant In common. It is true, indeed, that, as long as the ship
continues to be employed by the same persons, no one of them can be en-
titled to partake of the profits, until all that Is due In respect to the part he
holds in the ship has been discharged. But as one part-owner cannot compel
another to sell the ship, there does not appear to be any mode by which he
can enforce against the other's share of the ship, In specie, the payment of
his part of the expenses." See also 1 Mont, on P. B. 2, c. 1, and Id. App.
note (z). Why may not a lien be foirly presumed in such cases to be con-
templated by the parties ?
688 ' PARTNERSHIP. [cHAP. XVI.
§ 443. It does not appear that any distinction was
taken by Lord Eldon, in the application of the doc-
no part of the argument on which I mean to rely), it does appear that
the profits made were not exclusively from freight ; that there was a cargo
of beer, or some article of export to a small amount, that entered into the
transaction. If a distinction like that contended for, — a distinction which
leads to manifest injustice, and in support of which nothing but what Lord
Eldon in Young's case calls a ' nice distinction,' turning upon a tenancy in
common, be not already established, I see no ground for it. The case of
Helme v. Smith was referred to. In that case it was decided, that the mah-
a"-ing owner may sue each shareholder for his proportion of the expenses
before the adventure ends, which it was said in an ordinary partnership he
could not do. Other cases to the same effect were cited. But there is no
reason why that right should preclude the partner, who made an advance for
his copartner for joint purposes, from insisting, where joint property comes
to be divided, that in making the division, each partner, before he receives
his proportion of profits, shall be charged with his due proportion of the
expenses of making them. The observations of Mr. Justice Bosanquet, in
Helme v. Smith, apply to that view of the case. Moreover, the objection
would apply as strongly to Holderness v. Shackels as to any case. A form
of expression found in numerous cases was next relied upon ; namely, that
• freight follows the ownership in a ship, as an incident ; ' and Case v. David-
son, and other cases to the same effect, were referred to. This law I do not
doubt, but it is plain that those cases have no bearing upon the principal
case. The question in those cases has been, who was the rightful party to
receive such freight as was payable ; and not whether the freight to be paid
was gross or net freight, which is the only question here. Here there is no
dispute that Briggs & Co. are entitled to such freight as is coming in re-
spect of Acraman's share, and the only question is, whether the expenses of
earning the freight are not, as between the part-owners, to be first paid in
ascertaining what freight is coming. Excluding then the expense of the
repairs of the ship, I hold that the plaintiff has a right to have the gross
freight applied in paying the expenses of the refitting and outfit of the ship,
before any divi^iion amongst the part-owners shall be made. The argument
against the plaintifFs claim to have the expenses of repairs protected in the
same way, was in substance this : that the repairs to the hull of the ship
were inseparable from it ; that they were, in effect, improvements of the
chattel held in common, and must be governed by the same law which regu-
lates the rights of the shareholders i7iter se respecting the ship itself. Now
I will not deny, that a case may exist in which the question of repairs would
necessarily be so dealt with. Nor will I say that any rule of logic would
be violated by applying that reasoning to all cases of repairs. Nor, if I
found authority supporting that reasoning in its application to repairs, do I
say that my individual opinion is so strong against it, that I should feel
justified in opposing that opinion to any distinct authority. But that is not
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 689
trine, whether the party making the advances and ex-
penditures was the ship's husband or not, or whether
the ship's husband was a part-owner or not. The hen
the question here. I am satisfied there is nothing, in point of authority,
to prevent my holding that repairs necessarily and properly done, with a
view to a particular adventure, — repairs without which the particular ad-
venture could not be undertaken, — should be governed by the same consider-
ations which apply to such parts of the refitting and outfit as are inseparable
from, and not part of the ship. And, if that be so, I cannot hesitate in pre-
ferring a conclusion which (without possible injury to any one) excludes the
technical distinction upon which Lord Eldon overruled Doddington v. Hal-
let, and applies to this case the equitable rules by which the rights of part-
ners inter se are regulated. I say without possible injury to any one, be-
cause if, at the expiration of the adventure, the ship be of increased value,
each tenant in common will, in that character, have the benefit of the im-
provement. The question, however, is whether, upon legal principles, this
is the right conclusion. For the purpose of trying this I will first suppose,
that the repairs are strictly necessary for the purposes of the adventure, and
such as would be exhausted in the adventure. Why are the expenses of
such repairs not to be treated as part of the capital employed by the adven-
turers on joint account ? All expenditure for the purjjose of, and necessary to
the joint adventure, must, jvimn facie, be taken to be the capital embarked in
the adventure. The circumstance that the ship (held in common) is, during
the adventure, improved In value, cannot by any logical rule alter the char-
acter of the expenditure which was made with a view to the adventure ;
and if that be admitted, the case Is ended, for a partner who has not paid up
his share of the capital, cannot entitle himself to a share of the profits, with-
out giving credit for the share of capital which he ought to have supplied.
It would not be difficult to suggest a case In which tenants In common
of land, agreeing to be partners In farming It for experimental, as distin-
guished from ordinary agricultural purposes, and incurring extraordinary
expenses In so doing, by which the land itself Is Improved during the
partnership, would, as between each other, have a right similar to that which
I hold to exist In this case. "Would, then, the circumstance (If it existed),
that the expenditure in repairs was not exhausted with the adventure, al-
ter the case ? If expenditure were necessary or proper for a specific pur-
pose, why should this Incidental consequence alter the case ? I have al-
ready said, that no Injury could posslblv result to any party from it. The
utmost consequence, however, would be the apportionment of the expenses
of the repairs. In this case, the evidence Is, that the repairs were neces-
sary for the adventure. The ship, at the end of the voyage, was In fact
broken up, and the defendant has made no case for apportionment. Whore
the reasoning upon which Lord Eldon overruled Doddington v. Hallet, ap-
plies. It must be acted upon ; where it does not, the princij)le upon which
Doddington v. Hallet proceeded will, I conceive, be followed."]
44
690 PARTNEESHIP. [cHAP. XVI.
seems equally to have been denied by him in each case.
The ship's husband, indeed, will be entitled, if a part-
owner, to a lien for his disbursements and outfits upon
the proceeds and profits of the voyage or adventure,
undertaken upon joint account and for joint profit, as
a sort of partnership for the voyage or adventure. And
if the ship's husband be a mere stranger, and he has
regularly come to the possession of the proceeds of the
voyage, or of the ship itself, if sold, or of the ship's doc-
uments and freight, he will be entitled to a lien thereon
for his reimbursement and indemnity. But beyond
this, the ship's husband does not seem to be recognized
as having any peculiar lien, or at least not any upon the
ship or its proceeds.^ There seems no little hardship
in this strict doctrine ; and it forms a marked contrast
with that liberal policy, with which the Court of Admi-
ralty, following out the precepts of the general maritime
law, was accustomed to act, when allowed the free ex-
ercise of its own jurisdiction, by giving a lien on the
ship for all supplies and expenditures thereon.^
§ 414. In America, the same question has occurred,
and the doctrine of Lord Hardwicke has been affirmed,
as best founded in principle, and public policy, and
' 1 Bell, Comm. B. 3, Ft. 1, c. 4, § 1, p. 503-505, 5tli ed. ; Coll. on P.
B. 5, c. 4, § 4, p. 810, 2d ed. ; Abbott on Shipp. Pt. 1, c. 3, § 8-10, p. 76-
78, 5th ed. ; Ex parte Young, 2 Rose, 78, note ; s. c. 2 Ves. & B. 242.
^ See on this subject the resolutions of the Privy Council of England of
the 18th of February, 1632, assented to by all the Judges, expressly affirm-
ing the jurisdiction of the Admiralty, in the following terms : " If a suit be
in the Court of Admiralty, for building, mending, saving, or necessary
.victualling of a ship, against the ship itself, and not against any party by
name, but such as for his interest makes himself a party ; no prohibition is
to be granted, though this be done within the realm." Godolph. Adm. Jur.
159; Zouch, Adm. Jur. 122, 123; 2 Bro. Civil & Adm. Law, p. 78, 79;
Sir Leoline Jenkins's Works, Vol. 2, p. 76, 80-84, Argument on Admiralty
Jurisdiction. See also 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 5, p. 525-527,
5th ed.
CHAP. XVI.] RIGHTS AND IN'TERESTS OF PART-OWNERS. 691
convenience.^ In short, cases of this sort are treated
as constituting a quasi partnership, with reference to
* Mumford v. Nicoll, 20 Johns. 611, overruling the derision in the same
case in the Court of Chancery, 4 Johns. Ch. 522 ; Dunham v. Jarvis, 8 Barb.
88, 94; {Stewart v. Rogers, 19 Md. 98, 118. But see Merrill v. Bartlett,
6 Pick. 46 ; Macy v. De Wolf, 3 Wood. & M. 193, 1 Pars. Mar. Law, 95,
101.} The reasoning of Lord Hardwicke was to this effect: " No pur-
chaser or assignee of any share of this ship is now before me, but merely
the representative of Thomas Hall, who was part-owner with others in the
trade of this ship ; and his representative is just in the same case as he
would be himself; and these general creditors are in the same case, having
no assignment or specific lien on his share in the ship ; and the rule of
determination must be exactly the same as if Thomas Hall himself had been
before the Court, and an account prayed against him. It must be admitted,
the ship may be the subject of partnership, as well as any thing else ; the
use and earnings thereof being proper subject of trade, and the letting a
ship to freight as much a trade as any other. Then it appears plainly to be
a partnership among them, and the ship itself to be part of the subject
thereof, which was to be let to freight to the company, it being their method
of trading. The foundation of this partnership stock is the ship itself,
which mu?t be employed, and the earnings and profits to arise. Undoubt-
edly all these persons subject to this agreement, are liable in solido to the
tradesmen who fitted it out; and this agreement for proportional shares is as
between themselves; which is the case of aU partnerships. But as to all
persons furnishing goods or merchandise, or employed in work, each is
liable in solido." The opinion of Lord Eldon is ver}^ brief, and almost
without reasoning. He observed, in Ex parte Young, 2 Ves. & B. 242,
"The difficulty in this case arises upon the decision of Doddington v. Hal-
let, by Lord Hardwicke, Avhich is directly in point. That case is questioned
by Mr. Abbott, who doubts what would be done with it at this day ; and I
adopt that doubt. The case, which is given by Mr. Abbott, from the Reg-
ister's Book, is a clear decision by Lord Hardwicke, that part-owners of a
ship, being tenants in common, and not joint-tenants, have a right, notwith-
standing, to consider that as a chattel used in partnership, and liable, as
partnership effects, to pay all debts whatever, to Avhich any of them are
liable on account of the ship. His opinion went the length, that the tenant
in common had a right to a sale. There is great difficulty upon that case ;
and the inclination of my judgment is against it. But it would be a very
strong act for me, by an order in bankruptcy, from which there is no
appeal, to reverse a decree made by Lord Hardwicke in a cause. Froni a
manuscript note I know it was his most solemn and deliberate opinion, after
great consideration, that the contrary could not be maintained ; and there is
no decision in equity conti-adicting that." In the note of Lord Eldon's
judgment in 2 Rose, 78, note, the language attributed to him is : " Dodding-
ton V. Hallet, I know, from a MS. note, to have been Lord Hardwicke's
692 PARTNERSHIP. [CHAP. XVI.
the intended voyage or adventure, upon which the
ship is to be employed ; and, therefore, the repairs,
deliberate judgment. In a case of joint property, I admit there cannot be
much difficulty. It is different in a tenancy in common, and in an un-
divisible personal chattel. I certainly differ from Lord Hardwicke ; but I
hesitate to decide against his deliberate judgment in a cause upon a petition
in bankruptcy. The better way will be, at present, to intimate my opinion
to be against this lien, leaving the parties, if dissatisfied, to apply for
a rehearing. I have no doubt, that freight is liable to the joint demands.
As to the ship, it stands upon the nice distinction of a tenancy in common."
In Mumford v. Nicoll, 20 Johns. 611, Mr. Ch. Justice Spencer considered
the subject very much at large, and his opinion was adopted by the Court
of Errors. Upon that occasion he said: "The decree appealed from con-
siders the appellant and Stilwell to have been owners as tenants in common,
in equal moieties, of the brig Phcenix, and that they were special partners,
and had a joint interest in the cargo and voyage ; and that that partnership
was one entire and distinct concern, unconnected with any former partner-
ship, in any former voyage, in any other vessel ; and it was decreed, that a
master should state an account between the respondents, as assignees of
Stilwell and the appellant, in respect to the brig Phoenix, and her cargo and
voyage, and that the appellant be charged with a moiety of the net pro-
ceeds of the brig sold at Havana, and with a moiety of the net proceeds of
the freight and cargo of the brig on the voyage, or so much, if any, of the
net proceeds of the moiety of the freight and cargo, as shall appear due ,to
the respondents, as such assignees, after deducting the balance, if any found
due to the appellant from Stilwell, or an account to be taken and stated
between them, in respect to their joint concern in the said freight, and cargo,
and adventure, afler all just allowances between them, in respect to such
joint concern, are made. In other words, the decree considers the appel-
lant and Stilwell as joint owners and partners, in regard to the cargo and
freight, and directs the amount to be stated on that principle, confining that,
however, to the particular voyage and concern of the brig Phoenix ; and it
considers them tenants in common of the vessel itself, and renders the
appellant liable for the net proceeds of the sale of the brig, denying to the
appellant a right to reimburse himself out of those proceeds, however the
accounts between the appellant and Stilwell may stand, either as regards
that voyage, or other concerns and voyages in other vessels. I put out of
consideration, at once, the inquiry, whether the appellant knew of the
assignment to the respondents, of Stilwell's interest in the brig, when he
requested Captain Green to consign to him the proceeds of the brig and cargo,
because there is no complaint of the sale of the brig, which was made in
pursuance of instructions originally given, and which never were revoked ;
and because the appellant's riglit depends on legal principles, and not upon
the circumstance that he has those proceeds in his possession. The ques-
tion simply is. Has he a right to hold them subject to the inquiry into
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. G93
outfits, and other expenses incurred to accomplish the
enterprise, are deemed to be made on joint account, and
the general balance of his account, either in relation to that particular
adventure, or in relation to other and similar adventures ? In short,
under the flicts and circumstances of this case, are the proceeds of the
vessel to be regarded as partnership property, either as regards the voyage
of the Phoenix, or other and similar voyages in other vessels? I understand
the Chancellor as admitting, that the case of Doddington v. Hallet, 1 Ves.
Sr. 497, is directly opposed to the decision he has made, and that he con-
siders that case as not only not having been acted upon, but as overruled by
the cases to which he has referred. We will see what Lord Hardwicke de-
cided in that case. The bill was founded on an agreement between the
plaintiffs and one Hall, authorizing the latter to contract for the building of
a ship, and for fittinj; out, manasrinjr, and victualling her, with an ajrreement
to pay proportional shares, according to their interests. The part-owners
claimed, against Hall's representatives, a specific lien, upon what was due
to Hall for his share, on account of the money the plaintiffs had paid to the
tradesmen, in fitting, (fee, the ship, and that tlie administrators should not run
away with it, as part of the general assets for all the creditors. Lord Hard-
wicke, after premising, that the case stood as though Hall himself was before
the Court, no one having a specific lien on Hall's share in the ship, went on
to say that it must be admitted, that a ship might be a subject of partnership,
as well as any thing else, the use and earnings thereof being a proper sub-
ject of trade. He said, it was a partnership among them, and the t^hip itself
to be part of the subject thereof, which was to be let to freight to the com-
pany, it being their method of trading. The foundation of this partnership
stock was the ship itself, which must be employed, and the earnings and
profits to arise. That, undoubtedly, all the persons subject to the agreement
are liable in solido to the tradesmen who fitted it out, and the agreement for
the proportional shtires Is as between themselves, which is the case of all
partnerships. He said, if it had been agreed, that a brewhouse should be
part of the partnership stock (which often happened) , the case of the brew-
house being used in the partnership trade, If workmen do work in the brew-
house, every partner would be liable to that, and that brewhouse must be
brought into the partnership account ; and if more was due to one partner
than another, all the shares of the partnership stock, consisting of the lease
of the brewhouse, as well as the other effects, are liable to that account.
He went on to observe, that if the share of one partner had been assigned,
if it stood on the head of general equity, he should be of opinion, that if
the purchaser had notice of the partnership, he would be subject to It; and
he decreed for the plaintiffs. Lord Hardwicke perfectly understood the
distinction between a tenancy In common, such as owners of different
shares in a ship have among themselves, and a joint-tenancy, as between
partners of the goods and stock in trade. He meant to decide, and did
decide, that a subject, which ordinarily may be held as a tenancy in common.
694 PARTNERSHIP. [cHAP. XVT.
intended to be governed, as to rights and liens, by the
rules of strict partnerships. After all, there would seem
may, by the acts of the parties, become to be held in joint-tenancy. And
the facts of the ac^reement to build the ship at their joint exjDense, in pro-
portion to their shares, and the agreement to fit her out, manage, and
victual her, for the East India Company, formed, in his judgment, such a
community of interest, as to constitute that a partnership transaction, in
relation to those subjects ; and thus a specific lien was acquired, by those
who contributed more than their shares, against the share of the one who
contributed less than his proportion. This case derives strong confirmation
from the case of Smith v. De Silva, Cowp. 469, in which it was decided,
upon an issue out of Chancery, that the interest of part-owners in a ship,
and in the profits and loss of an adventure, undertaken by their mutual
consent, is not affected by the bankruptcy of one of them taking place after
the commencement of the voyage, although he has not paid his full share of
the outfit. Lord Mansfield, in giving the opinion of the Court, held, that
if the other partners had been obliged to discharge the amount of the notes,
which remained unpaid at the time of the bankruptcy, the assignees
must have allowed the other partners the full sum paid for the bankrupt,
and would have come against them only for the balance due to him, if any.
Mr. Abbott, in commenting upon this case, says, it seems to have been
considered the part-owners of a ship might have a lien on each other's
shares of a ship, as partners in trade have on each other's shares of their
merchandise. And in the third edition of his Treatise (p. 94), he says:
' It is true, indeed, that as long as the ship continues to be employed by the
same persons, no one of them can be entitled to partake of the profits,
until all that is due, in respect to the part he holds in the ship, has been
discharged.' And again, after citing the case of Doddington v. Hallet,
without a word of disapprobation, in p. 96, he says : ' This usage, or course
of trade, I apprehend to be, to charge the assignee or purchaser in account,
for the outfit and other expenses incurred, in respect of the voyage, of
which he is entitled, in consequence of his purchase, to share the profits,
which can only be the voyage in prosecution at the time of the purchase ;
but not to carry back the charge, as against him, to the expense of any
antecedent adventure, from which he can derive no profit.' The cases cited
by the Chancellor, and on which he has relied, to establish a contrary
doctrine, do, undoubtedly, strongly impugn the authority of Doddington v.
Hallet, though I must be allowed to say, that the case Ex parte Parry,
5 Ves. 575, is very distinguishable, and does not oppose Lord Hardwicke's
opinion. It is, however, to be observed, that all the cases on which the
decree is founded, are long since our revolution, and have no authoritative
influence here. And I am not disposed to overrule Lord Ilardwicke,
supported, as I think he is, by Lord Mansfield, and the other Judges who
sat with him, in a case in which justice and right require him to be sup-
ported. The statement of this case shows, that it is much stronger for the
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 695
to be intrinsic equity in the doctrine maintained by
Lord Hardwicke ; and, as liens may arise, either from
express or implied agreements, it is but a reasonable
presumption (in the absence of all controlling circum-
stances), that part-owners do not intend to rely solely
upon the personal responsibility of each other, to reim-
burse themselves for expenses and charges, incurred
upon the common property, for the common benefit ;
but that there is a mutual understanding, that they
shall possess a lien in rem.
§ 445. We have already had occasion to state, that
the majority in interest of the part-owners have a right
to appoint the master and officers of the ship.^ This
right necessarily carries with it the right to displace
and dispossess the master and other officers, when in
appellant, than the case before Lord Hardwicke. The vessel here was
owned in equal shares, and was fitted out, or to be fitted out, on a cir-
cuitous trading voyage, at the joint expense of the parties. It was, there-
fore, a limited and special partnership, not only as to the cargo, freight,
and the profits thereon, but as to the fitting out of the vessel. The appel-
lant, after paying his proportion of mechanics' bills and ship-chandlery,
under the assurance they had been paid by Stilwell, is called upon and
compelled to pay them over again. The respondents are assignees for
prior debts, and are chargeable with notice, or, at all events, have received
the subject, liable to all equities between the appellant and Stilwell.
Can it be just and equitable to deprive the appellant of his right to re-
imburse himself for the moneys he has been compelled to pay, as part-
owner, for the default of Stilwell, in whose shoes the respondents stand ?
I answer, unhesitatingly, that it would be inequitable and unjust to do so.
I must not be supposed to overrule the distinction between partners in
goods and merchandise, and part-owners of a ship. The former are joint-
tenants, and the latter are, generally speaking, tenants in common ; and
one cannot sell the share of the other. But I mean to say, that part-
owners of a ship may, under the facts and circumstances of this case,
become partners as regards the proceeds of the ship ; and if they are to be
so regarded, the right of one to retain the proceeds, until he is paid what
he has advanced beyond his proportion, is unquestionable."
* Ante, § 432. {See 1 Tars. ]\Iar. Law, 80. Nor will the master,
though a part-owner, be allowed, against the wishes of the owner of a greater
part of the vessel, to remain in possession, on giving security for the amount
of his co-owners' interest. The Kent, 1 Lush. 495.} »
696 PARTNERSHIP. [CHAP. XTI.
authority or possession of the ship ; and it will make
no difference, in this respect, whether the master or
other officer be a part-owner or not. However, when
a Court of Admiralty is called upon to enforce this
right, although it allows the authority to displace and
dispossess, to be exercised at the sole pleasure of the
majority, if the master or other officer is a mere stran-
ger ; yet if he is a part-owner, the Court commonly re-
quires some reasonable ground to be stated therefor.^
§ 446. It often becomes a matter of important in-
quiry, to what extent the implied authority of one
part-owner extends to bind the others in the concerns
of the ship, when there is no real disagreement among
them which affects their respective rights.^ As to this,
we have seen, that one part-owner may bind the others
by his contract for repairs and materials and expenses
of outfits by implication, when there is no known dis-
agreement among them, and there is an acquiescence
in what is done, or is doing.^ But there are certain
other authorities, which do not arise by implication of
law under ordinary circumstances ; and, therefore, such
authorities, whether exercised by a shii)'s husband, or
by a mere part-owner, will not bind the other owners,
unless there is either direct proof, or a strong presump-
tion, that they have been positively conferred upon
them.'* Thus, for example, neither the ship's husband,
nor any part-owner, as such, has a right to insure the
1 The New Draper, 4 Rob. 287, 290, 291. |The court will not generally
interfere in the ease of foreign vessels. The Johan & Siegmund, Edw.
Adm. 242. But see The See Renter, 1 Dods. 22. The court will not dis-
possess a master who is equitable owner of a moiety of a vessel, at the
instance of the legal owner of more than a moiety. The Victoria,
Swabey, 408.}
« Ante, § 419.
' Ante, § 419, 421 ; Davis v. Johnston, 4 Sim. 539. {See post, § 455. {
* { See Chappell v. Bray, 30 Law J. x. s. Exch. 24 ; Donald v. Hewitt,
33 Ala. 534; ante, §421.}
CHAP. XYI.] RIGHTS AND INTERESTS OF PART-OWNERS. 697
ship/ or to borrow money, on account of the owners,
or of other part-owners ; ~ or to pledge thek shares in
the ship for the expenses of a law suit.^
§ 447. AVe have seen, in cases of partnership, that
the dissolution thereof is not, under all circumstances,
dependent upon the sole will of any one partner ; but
can, in some cases, be accomplished only by the decree
of a Court of Equity."* The case is far otherwise
with respect to part-owners, who are not compellable
to maintain their connection with each other for any
period ; but each may terminate it at pleasure, by a
sale of his own share, without the privity or consent
of the others.^ The connection may also be dissolved
^ {Foster v. U. S. Ins. Co. 11 Pick. 85; Sawyer v. Freeman, 35 Me.
542 ; McCready v. Woodhull, 34 Barb. 80.}
^ French v. Backhouse, 5 Burr. 2727; Campbell v. Steen, 6 Dow, 116;
Coll. on P. B. 5, c. 4, § 4, p. 811, 812, 2d ed. ; Abbott on Shipp. Pt. 1,
c. 3, § 8, p. 76, 77, 5th ed. ; Hooper v. Lusby, 4 Camp. 66 ; Bell v. Hum-
phries, 2 Stark. 345; 3 Kent, 157; 1 Bell, Comm. B. 3, Pt. 1, c. 4, § 1,
p. 503, 504, 5th ed. {Nor purchase a cargo. Hewett v. Buck, 17 Me. 147.}
■'' Ibid. {But a managing owner has authority to procure bail for the
release of a vessel which has been arrested under order of a Court of Ad-
miralty. Barker v. Highley, 15 C. B. N. s. 27 ; s. c. 10 Jur. x. s. 391.}
* Ante, § 275, 282-303.'
' Coll. on P. B. 5, c. 4, § 1, p. 796, 2d ed. ; Id. § 4, p. 811 ; MoUoy,
de Jure Mar. B. 2, c. 1, § 3; Abbott on Shipp. Pt. 1, c. 1, § 3, p. 3 ; Id.
c. 3, § 7, p. 75, 5th ed. — Lord Tenterden, in his work on Shipping
(Abbott on Shipp. Pt. 1, c. 3, § 7, p. 75, 76, 5th ed.), has remarked upon
the difference between the law of England and that of foreign maritime
nations as to the right of sale. He says : " We have seen, that the Court
of Admiralty cannot, in any case, compel any of the part-owners to sell
his interest. The French Ordinance prohibits one part-owner of a ship
from forcing his companion to a sale (which by the French laws one tenant
in common might in general do), except in case of equality of opinions
upon the undertaking of a voyage. But a part-owner may by our law dis-
pose of his interest to another person at any time ; a rule better adapted to
the present state of commerce, than that which formerly prevailed among
some of the nations of the continent, and which did not permit the sale of
a ship until after a possession of three or more years ; or at least not till
after the performance of one voyage at the charge and risk of the part-
owners. The old rule appears to have been framed with a view to the
698 PARTNERSHIP. [CHAP. XVI.
by the death or bankruptcy of any one part-owner ; for
then his share passes by operation of law to the repre-
sentative or assignee of such part-owner. The absolute
destruction of the ship, also, amounts to a complete
dissolution thereof.
§ 448. MoUoy has put some curious cases of the
constructive ownership, as well as of the constructive
destruction of a ship, which it may be well to state in
his own words. " If a ship be broken up or taken in
pieces, with an intent to convert the same to other
uses ; if afterwards, upon advice or change of mind,
she be rebuilt with the same materials ; yet this is now
another, and not the same ship ; especially if the keel
be ript up or changed, and the whole ship be once all
taken asunder and rebuilt, there determines the part-
nership, quoad the ship. But if a ship be ript up in
parts, and taken asunder in parts, and repaired in parts,
yet she remains still the same vessel, and not another ;
nay, though she hath been so often repaired, that there
remains not one stick of the original fabric. If a man
shall repair his ship with plank or other materials be-
longing to another, yet the ship maintains and keeps
her first owners. But if a man take plank and materi-
als belonging to another, and prepared for the use of
shipping, and with them build a ship, the property of
the vessel follows the owners of the materials, and not
the builder. But if a man cut down the trees of an-
other, or takes timber or planks prepared for the erect-
ing or repairing of a dwelhng-house, nay, though some
interest of the master, who in former times was a principal owner, and was
the person, who, with the pecuniary assistance of the other owners, gen-
erally caused the ship to be built in the expectation of being employed in
the command ; an expectation that might be defeated, if the others could
sell their shares to strangers, who, acquiring a majority of interest, might
appoint a friend of their own."
CHAP. XVI.] RIGHTS AND INTERESTS OF TART-OWNERS. 699
of them are for shipping, and builds a ship, the prop-
erty follows not the owners, but the builders." ^
§ 449. Part-owners being tenants in common, one or
more of them cannot maintain any action at the com-
mon law against the others for detaining, or even for
forcibly carrying away the ship ; ^ but they may for
the destruction of the ship ; and, by parity of reason-
ing, probably for a sale of the entirety of the ship with-
out their consent.^ The right, also, to an account of all
the earnings and profits of the ship by all the part-own-
ers, is clear and indisputable. But at law, there is no
small embarrassment in their proceeding to compel an
account of the earnings and profits, which have been
received by some of the part-owners, who refuse to
render any account.^" The ordinary remedy in cases of
> Molloy, de Jure Mar. B. 2, c. 1, § 6, 7.
* Molloy, de Jure Mar. B. 2, c. 1, § 2; Abbott on Shipp, Pt. 1, c. 3,
§ 4, p. 70, 71, 5th ed. ; 3 Kent, 157 ; 1 Mont, on P. B. 2, c. 1 ; Barnardis-
ton V. Chapman, cited 4 East, 121-123; Heath v. Hubbard, 4 East, 110;
Litt. § 323 ; Co. Litt. 198 b, 200 a. {See The Ocean, 1 Sprague, 535.}
^ Bloxam v. Hubbard, 5 East, 407, 421 ; Wilson v. Reed, 3 Johns.
175. — There is a strong intimation, in Heath v. Hubbard, ^ East, 110,
that the sale of the entire ship by one part-owner, is not such a destruction
of the ship as will entitle the others to maintain an action of trover against
him. In the case of Wilson v. Reed, 3 Johns. 175, the Court expressly
held, that trover would lie by one tenant in common against another for a
sale by the latter of the entirety of a chattel, j If a vessel is forcibly taken
out of the possession of one part-owner by another part-owner, and sent on
a voyage on which it is lost, trover will lie. Barnardiston v. Chapman,
cited in Heath v. Hubbard, 4 East, 110, 121 ; Lowthorp v. Smith, 1 Hayw.
(N. C.) 255 ; Knight v. Coates, 1 Ir. Law, 53. The marginal note in this last
case is wrong. Jn Moody v. Buck, 1 Sand. 304, it was held that one part-
owner, having the exclusive use and possession of a ship, was not liable to
the other part-owners for carelessness in his use of it. See 1 Pars. Mar.
Law, 84. }
* Coll. on P. B. 5, c. 4, § 4, p. 812, 813, 2d ed. ; Abbott on Shipp. Pt.
1, c. 3, § 12, p. 80, 81, 5th ed. ; 1 Story, Eq. Jur. § 442-450. {See Star-
buck V. Shaw, 10 Gray, 492; but see Wood v. Merritt, 2 Bosw. 368.
An action of account will lie by one part-owner against the other who has
received the earnings of the ship from the master. Jarvis v. Noyes, 45
Me. 106. So an action may be brought by one party to a contract for
700 PARTNERSHIP. [CHAP. XVI.
this sort is by a bill in equity, to which, in general, all
the owners should be made parties, either as plaintiffs
or as defendants.^ We say, the ordinary remedy, and
to which, in general, all the parties should be made
parties ; because there may be cases, in which one of
the part-owners, or the ship's husband, or any other
agent may have entered into an agreement, by which
he may bind himself to account with each of the part-
owners severally, for his separate share of all proceeds
and profits in his hands ; and such an agreement, under
such circumstances, may entitle each part-owner to
maintain an action at law for such share ; and if that
should fail, or be found inadequate, it will entitle him
to maintain a separate bill in equity for an account
thereof, without making the other part-owners parties.^
§ 450. This duty to account for all the earnings
and profits, is so manifestly a dictate of general jus-
tice, that it must naturally find a place in the juris-
prudence of every civilized country. It is fully
recognized in the Roman law ; and in the modern
building a ship against the other, for a breach thereof, though the plaintiff
and defendant are to be tenants in common. Ripley v. Crooker, 47 Me.
370.}
1 Story, Eq. Jur. § 466 ; Coll. on P. B. 5, c. 4, § 4, p. 812, 813, 2d ed. ;
Abbott on Shipp. Pt. 1, c. 3, § 12, p. 81, 82, 5th ed. ; Moffatt v. Farqu-
harson, 2 Bro. Ch. 338. Story, Eq. PI. § 166. {See Milburn v. Guyther,
8 Gill, 92.}
2 Owston V. Ogle, 13 East, 538 ; Abbott on Shipp. Pt. 1, c. 3, § 12, p.
81, 82, 5th ed. ; Coll. on P. B. 5, c. 4, § 4, p. 912, 2d ed. The case of
Owston V. Ogle, 13 East, 538, was a case, where a suit at law for a share
of the net profits was brought, under an agreement of this sort, by one
part-owner against the ship's husband, who was also a part-owner, and was
successfully maintained. The case of Wilson v. Cutting, 10 Bing. 436, and
Servante v. James, 10 B. & C. 410, turned upon similar considerations.
{The admiralty has, in general, no jurisdiction in matters of account be-
tween part-owners. See the question fully treated in Kellum v. Emerson,
2 Curt. C. C. 79. See also The Marengo, (U. S. Dist. Court for Mass.) 1
Am. Law Rev. 88 ; Tunno v. The Betsiua, (U. S. Dist. Court for S. C.) 5 Am.
Law Reg. 406.}
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 701
jurisprudence of continental Europe.^ The Roman
law applies to all cases of this sort the common rule
of partnership. The Digest says: Si actor imi^ensas
aliquas in rem communem fecit, sive socius ejus solus
aUquid ex ea re lucratus est, velut operas servi merce-
desve ; Jioc [communi dimdundo'] judicio eorum omnium
ratio hahetur. Sive autem locando fundum communem,
sive colendo, de fundo communi quid socius consecutus
sit, communi dividundo judicio tenebitur." Again the
Code says : Idem eorum etiam, quce vobis permanent
communia, fieri divisionem providehit ; tam sumpiuum
[si qiiis de vohis in res communes fecit), qiiam fruc-
tuum.^ The reason given is : Ut in omnibus cjequabili-
tas servetur^
§ 451. The Roman law, indeed, seems to have gone
a step further than, perhaps, has as yet been distinctly
recognized at the common law, and that is, by giving
a complete remedy, in taking an account and making
an allowance for all losses occasioned by the fraud or
negligence of one part-owner, to the others, in the man-
agement of the common property. Item doll et cidpce
(cum in communi dividundo judicio hmc omnia venire
non ambigatur) rationem, ut in omnibus cequabilitas
servetur, habiturus.^ And again: Venit in communi
dividundo judicium, etiam si quis rem communem dete-
riorem fecerit ; forte servum vidnerando, aid animum
ejus corrumjmido, aut arbores ex fundo excidendo.'^
Probably our Courts of Equity would, in many cases,
act upon the same just and enlarged policy ; but it
would not be easy to point out many instances of its
actual exercise and application in practice.
1 1 Valin, Comm. Liv. 2, tit. 8, art. 5, p. 578, ed. 1766.
2 D. 10, 3, 11; Id. 10, 3, 6, 2.
" Cod. 3, 37, 4. * Ibid. ^ Ibid.
« D. 10, 3, 8, 2; Poth. de Soc. n. 190.
702 PARTNERSHIP. [CHAP. XVI.
§ 452. Pothier has enumerated, in a general way,
some of the duties and obligations which part-owners
owe to each other. Among others, he enumerates the
duty of each part-owner to pay his share of the debts
and charges contracted for the common concern ; ^ to
account with the other part-owners for their shares of
the common earnings and profits in his hands ; and to
pay the debts due by him to them, as well as the
damages sustained by them by his acts or negligences.^
Some of these duties and obligations are so obvious,
and so analogous to the like duties and obligations
between partners, that it does not seem to be of any
importance to dwell upon them, or even to enumerate
them in detail. But here, again, we must not assume,
as a matter of course, that any one or more of the part-
owners is entitled, at the common law, to a compensa-
tion for losses, sustained by the negligence or miscon-
duct of the others in the management of the common
property, where no special agency has been assumed,
simply because the Roman law or the French law
would seem, in the like cases, to justify it;^ for the
common law authorities have not as yet recognized
any such general doctrine ; and some of them may,
perhaps, be thought to point to a different conclusion.^
§ 453. We may conclude this head with the con-
sideration of the question, how far part-owners are
bound by the statements or admissions of each other,
where neither of them is the common agent of the
ship, or the separate agent of any one part-owner of
the ship. We have already seen, that the statements
and admissions of one partner, during the continuance
of the partnership, will bind the others as evidence,
' Poth. de Soc. n. 187-189, 191, 192. ^ Poth. de Soc. n. 189, 190.
' Poth. de Soc. n. 190. ♦ Ante, § 450, 451.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 703
according to the common law.^ But the same doctrme
has never been applied to the case of part-owners.^
The reason sometimes assigned for this distinction is,
that, in case of a partnership, every man knows who
his partner is. But when one part-owner sells his
share, the remaining part-owners, not being privy to
the instrument, by which the new part-owner is created,
may be entirely ignorant of the fact, who the person is,
who has thus become a part-owner with them.^ But
the truer and broader ground is, that there is no com-
munity of interests, or of rights, or of authorities
between part-owners ; and they are not, as in cases of
partnership, agents of each other in the concerns of
the ship, unless some special authority is expressly or
impliedly delegated to them for the purpose. Part-
owners are not, therefore, bound by the acts of each
other, unless those acts are specially authorized ; and,
hence, it follows, a fortiori^ that the mere admissions of
one, without any such authority, ought not to bind the
others. Even an act of one part-owner, which will
ordinarily make the ship liable to condemnation, if
done with the privity of the other owners, will not
produce any such effect, except as to his own share,
when it is done without such privity ; for that implies
co-operation and consent.^
§ 45-i. Let us in the next place proceed to the
consideration of the rights and remedies of part-owners
of ships against third persons. These may arise,
either from contracts made with such persons, or from
torts committed by them upon the common property.
• Ante, § 107.
= Coll. on P. B. 4, c. 4, § 5, p. 819, 820, 2d ed. ; Jaggers v. Binnings, 1
Stark. 64.
3 Mr. Justice Bailey in Wilson v. Dickson, 2 B. & Aid. 2, 12, 13.
* The Jonge Tobias, 1 Rob. 329 ; Coll. on P. B. 5, c. 4, § 5, p. 820, 2d
ed. ; 2 Wheat. App. 37-40. {See The William Bagaley, 5 Wallace, 377.}
704 PARTNERSHIP. [CHAP. XVI.
In respect to both, all the part-owners constitute in
point of law but one owner ;^ and, therefore, all con-
tracts made by them, either personally, or through the
instrumentality of an agent, or ship's husband, with
third persons, are treated as entire joint contracts ;
and the remedy for any breach thereof must be in the
name of all the part-owners against the other contract-
ing party. If the name of any one be omitted, it is
ordinarily, upon the technical rules of pleading at the
common law, fatal to the maintenance of the suit ; for
by those rules all the contracting parties, who are
plaintiffs, are positively required to join in the suit.^
1 Abbott on Shipp. Pt. 1, c. 3, § 13, p. 81, 5th ed.
2 Abbott on Shipp. Pt. 1, c. 3, § 14, p. 82, 5th ed. ; Coll. on P. B. 5, c. 4,
§ 6, p. 820-822, 2d ed. ; 1 Bell, Coram. B. 3, Pt. 1, c, 4, § 5, p. 519, 520, 5th
ed.; Skmner v. Stocks, 4 B. & Aid. 437; 1 Chitty on PI. p. 6-8, 3d ed.;
Baker v. Jewell, 6 Mass. 460; Coll. on P. B. 3, c. 5, § 1, p. 461, 462, 2d ed. ;
1 Mont, on P. B. 2, c. 1. — There may, perhaps, be an exception where
one part-owner has received his own share of the money due on the con-
tract, or has released his claim to it. At least, Lord Tenterden, in his
work on Shipping, puts the case as open for consideration at the common
law. There is, however, some reason to doubt, whether in such a case the
remedy of the other part-owners is not exclusively in equity. Lord Ten-
terden has stated the whole doctrine in the following terms : " In the case,
however, of an action for the freight of goods conveyed in a general ship,
all the part-owners ought to join, or if they do not, the defendant may
avail himself of the objection by evidence at the trial, and without plea in
abatement, according to the general rule of law and the distinction be-
tween contracts and wrongs; unless, perhajis, some one should have received
his own share, or have released his claim to it. The necessity of all the
part-owners joining as plaintiffs in the suit, in this case, is founded upon the
consideration, that all of them are partners with respect to the concerns of
the ship ; and upon this consideration, the present Lord Chancellor (Eldon),
in a case of bankruptcy, wherein it appeared that the owners of a ship, upon
a settlement of accounts with the master, who had become a bankrupt, were
indebted to him, and that on the other hand he also was indebted to some of
them severally upon separate and distinct concerns, refused to allow the
latter to set off their respective demands against the claim of his assignees for
their shares of the general debt." Abbott on Shipp. Pt. 1, c. 3, § 14, p. 82,
5th ed.; Ex parte Christie, 10 Ves. 105; Coll. on P. B. 5, c. 4, § 6, p. 821,
822. {The right of action survives and the executors of a deceased part-
owner need not be joined. Bucknam v. Brett, 35 Barb. 596; Bond v.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 705
In cases of tort, a more mitigated doctrine prevails ;
for while all the part-owners are at the common law
required in strictness to join in every snit for any tort,
committed against the common property, nevertheless,
the omission to join any one or more of them can be
taken advantage of only in a preliminary stage of the
suit by a plea in abatement ; and if no such plea is
filed in the cause, it is a waiver of the objection, and
will not affect the rights of the plaintiffs upon a trial of
the merits.^ It is not, perhaps very easy to establish
Hilton, 6 Jones, Law, 180. A part-owner may sustain a petitory suit in the
admiralty against a merely fraudulent possessor without joining the other
part-owners. The Friendship, 2 Curt. C. C. 426. |
' Abbott on Shipp. Pt. 1, c. 3, § 13, p. 81, 5th ed. ; 1 Bell, Coram. B. 3,
Pt. 1, c. 4, § 5, p. 519, 520, 5th ed. ; Child v. Sands, Salk. 31 ; Addison v.
Overend, 6 T. R. 766; Sedgworth v. Overend, 7 T. R. 279; Rice v. Shute,
5 Burr. 2611 ; Eccleston v. Clipsham, 1 Saund. 153, and Williams's note (1),
Id. p. 154; Baker v. Jewell, 6 Mass. 460; Hart v. Fitzgerald, 2 Mass. 509;
Converse v. Symmes, 10 Mass. 377; Thompson v. Hoskins, 11 Mass. 419;
Molloy, de Jure Mar. B. 2, c. 1, § 2; Coll. on P. B. 5, c. 4, § 6, p. 820-822,
2d ed. ; Heath v. Hubbard, 4 East, 110; Bloxam v. Hubbard, 5 East, 407 ;
Wheelwrights. Depeyster, 1 Johns. 471, 486; Brotherson v. Hodges, 6 Johns.
108. — Upon this point Lord Tenterden, in his work on Shipping, has given
the reasoning, on which the general rule is founded in eases of tort. The
several part-owners of a ship make in law but one owner ; and in case of any
injury done to their ship by the wrong or negligence of a stranger, they ought
regularly to join in one action at law for the recovery of damages, which are
afterwards to be divided among themselves according to their respective
interests ; for otherwise the party, who had committed the wrong, might
be unnecessarily harassed with the expense of several suits to obtain the same
end, which might be as well effected in one. But this rule of law is made
for the ease of the wrong-doer ; and, therefore, the law requires, that he
should avail himself of it at the very beginning of the cause, by pleading in
abatement of a suit brought by one part-owner, that there are others living,
who ought to be parties to it. For if the defendant does not do this, the
single part-owner will recover damages for the injury proportionate to his
share in the ship, whether the nature of his interest is made to appear upon
evidence at the trial, or is originally stated by himself in the allegation of his
cause of complaint. And If afterwards another part-owner sues for his own
interest, the defendant can no longer avail himself of the objection, because the
party to tlie first suit has no longer any matter of complaint. In the case of
the death of any part-owner after an injury received, the right of action sur-
45
706 PARTNERSHIP. [CHAP. XVI.
the soundness of this distinction upon any general
reasoning. It seems, however, to proceed upon this
ground, that, in cases of tort, the tort is treated as joint
and several ; whereas in cases of contract, the contract
is treated as an entirety, and as being incapable of sep-
aration as to the plaintiffs. And yet a different rule
prevails, even in cases of contract, as to the parties
who are defendants in the suit ; for in the latter cases,
the objection of the nonjoinder of all the proper con-
tracting parties to the contract as defendants can be
taken advantage of (as in the case of torts), by a
plea in abatement only, and not upon the trial of the
merits.^
§ 455. In the next place, as to the rights and rem-
edies by third persons against part-owners of ships.
These properly are divisible into those arising from
contract, or those arising from tort. In cases of con-
tract, by the common law, all the part-owners are liable
171 solido to the other contracting party for the entirety
of the debt or obligation, whether the contract be
directly made by one or more of the part-owners with
the consent of all, or be made through the instrumen-
tality of the master of the ship, or of the ship's hus-
band, or of any other agent.® There is an exception,
vives in general to the surviving part-owners, who must afterwards pay to the
personal representatives of the deceased the value of his share." Abbott on
Shipp. Pt. 1, c. 3, § 13, p. 81, 82, 5th ed.
1 Abbott on Shipp. Pt. 1, c. 3, § 15, p. 82, 83, 5th ed. ; 1 Mont, on P. B.
2, c. 1; Rice v. Shute, 5 Burr. 2611; Williams's note (1) to Eccleston v.
CHpsham, 1 Saund. 153, 154 ; Coll. on P. B. 5, c. 4, § 6, p. 822, 2d ed. ; Id.
B. 3, c. 5, § 2, p. 496, 497 ; Id. § 5, p. 513 ; Wright v. Hunter, 1 East, 20.
^ Abbott on Shipp. Pt. 1, c. 3, § 15, p. 83, 84, 5th ed. ; 3 Kent, 155, 156 ;
1 Bell, Comm. B. 3, Pt. 1, c. 4, § 5, p. 520, 529, 537, 5th ed. ; Coll. on P. B.
5, c. 4, § 6, p. 817, 818, 2d ed. ; Rich v. Coe, Cowp. 636; Baldney v.
Ritchie, 1 Stark. 338; Westerdell v. Dale, 7 T. R. 306; 1 Mont, on P. B. 2,
c. 1 ; {Preston v. Tamplin, 2 H. & N. 363 ; s. c. Id. 684. See ante, § 421 ; 1
Pars. Mar. Law, 89 ; Brodie v. Howard, 17 C. B. 109 ; Myers v. Willis, 17
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 707
indeed, which stands entirely in harmony with the
general rule ; and that is, where an exclusive credit is
knowingly and intentionally given to one or more of
the part-owners, or to the master, or the ship's hus-
band, or any other agent ; for in such cases, as it is
competent for the creditor to give such an exclusive
credit, he thereby exonerates all the other parties.^
What circumstances will, or will not, amount to giving
such an exclusive credit, must, of course, depend upon
the evidence in each particular case, and can admit of
no universal exposition.^ But it may be generally
stated, that merely receiving payment from one part-
owner for his share, or charging the master, or ship's
husband, or other agent, with the debt, will not, of
itself, amount to giving an exclusive credit to them,
which will discharge the owners.^ A fortiori, it will
not, where none of the owners are known, or it is not
known that there are other part-owners ; for, under
such circumstances, there is no pretence to say, that
any exclusive credit is intended to be given, since
C. B. 77; s. c. 18 C. B. 88-6; Mackenzie v. Pooley, 11 Exch. 638; Mitch-
eson V. Oliver, 5 E. & B. 419; Hardy v. Sproule, 29 Me. 258; Same v.
Same, 31 Me. 71 ; Stedman v. Feidler, 25 Barb. 605, s. c. 20 N. Y. 43 7. j
1 Abbott on Shipp. Pt. 1, c. 3, § 15, p. 82-84, 5th ed. ; Story on Ag.
§ 288-300; Chapman v. Durant, 10 Mass. 47; Schemerhorn v. Loines, 7
Johns. 311; Muldon v. AVhitlock, 1 Co wen, 290; Cox v. Reid, 1 C. & P.
602; Pteed v. White, 5 Esp. 122; Wyatt v. Marquis of Hertford, 3 East,
147 ; Ex parte Bland, 2 Rose, 91 ; Coll. on P. B. 5, c. 4, § 5, p. 817, 2d ed.
{1 Pars. Mar. Law, 91 ; Macy v. De Wolf, 3 Wood & M. 193; Elder v.
Larrabee, 45 Me. 590.}
« Story on Ag. § 288-291 ; Id. § 293, 294, 296-298.
3 Teed v. Baring, cited Abbott on Shipp. Pt. 1, c. 3, § 15, p. 83, 84,
5th ed. ; Ex parte Bland, 2 Rose, 91 ; Stewart v. Hall, 2 Dow. 29 ; James v.
Bixby, 11 Mass. 34; Leonard v. Huntington, 15 Johns. 298; Marquand r.
Webb, 16 Johns. 89 ; Story on Ag. § 288, 294-299 ; Coll. on P. B. 5, c. 4,
§ 5, p. 817, 818, 2d ed. ; Thompson v. Finden, 4 C. »& P. 158; {Whitwell v.
Perrin, 4 C. B. N. S. 412; King i\ Lowry, 20 Barb. 532; Macy v. Wheeler,
30 N.Y. 231.}
708 PARTISERSHIP. [CHAP. XVI.
there is no knowledge, or act, from which an election
to give an exclusive credit can be inferred.^ We have
already had occasion to state, that ordinarily all the
part-owners should be joined in a suit brought on a
joint contract by the creditor against them ; but that if
not joined, the objection is not fatal at the trial upon
the merits ; but was pleadable only in abatement.
§ 456. The French law does not agree with the
common law in making part-owners liable in solido
for all the debts contracted upon account of the ship,
or other common property, even when the contract is
made by all, or in the name of all, of them. But it
restricts the liability of each part-owner to the pay-
ment of his own share or proportion thereof, unless
all expressly agree to be bound in solido? In this
^ Story on Ag. § 290, 291, and note (2), Ibid.; Thomson v. Davenport,
9 B. & C. 78 ; Paley on Ag. by Lloyd, p. 245-250 ; Paterson v. Gandese-
qui, 15 East, 62.
^ Poth. de Soc. n. 187; 2 Emerigon, Tralte des Assur. c. 4, § 11, p. 456,
ed. 1783. — The law of Louisiana is the same as the law of France on this
subject. David v. Eloi, 4 La. (Miller) 106; 3 Kent, 156; Civil Code of
Louisiana (1825), art. 2796. IVIr. Justice Porter, in delivering the opinion of
the Court in David v. Eloi, 4 La. (Miller) 106, referring to the case of Kim-
ball V. Blanc, said : " In the opinion delivered in that case, the Court took
occasion to say, that as to the law jjrevious to the adoption of the Louisiana
Cod,e we were not left in doubt, since the decision in the suit of Carrol v.
Waters. It was there settled, that joint owners of steamboats were only
responsible for their virile share. That case was decided on the definition
given in the Code of Louisiana of a particular partnership, and it is so ex-
pressly stated in the opinion ; the majority of the Court being unable then,
as they are now, to distinguish between the joint owners of a steamboat, and
the joint owners of a house or of a plantation. It is an association, which
relates to a specified thing, and to the use to be derived therefrom. Civil
Code, 390, art. 12. The correctness of the construction was supposed to be
forfeited by a reference to the rules prevailing in the greater number of
commercial countries in relation to the responsibility of joint-owners. And
so it appears to be. For after all that has been said in the argument of this
cause, it is quite clear they are not responsible in solido, as they were in the
Roman law. By the statutes of the majority of the commercial nations of
Europe, owners of vessels are discharged from all responsibility by surren-
dering their interest in them. This Court does not profess to understand
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 709
respect it differs from its own rule in cases of commer-
cial partnerships ; for there all the partners are liable
m solido} And where the contract is entered into by
one part-owner alone on account of the ship, as for ex-
ample, for supplies or outfits or repairs, that part-owner
is solely responsible to the creditors for the whole amount
of the debt ; but he has his remedy over against the
other part-owners for contribution.^ In short, in such a
case, the creditor is deemed to give an exclusive credit
to the contracting part-owner. By the law of Holland,
how the part-owner of a ship, who can free himself from responsibility for a
debt, which may be ten times as great as his share in the vessel, by abandon-
ing that share to the creditor, can be considered as personally responsible in
solido for the whole debt. It thinks with Emerigon, that his obligation is
more real than personal ; and that it depends on the amount of interest he
has in the vessel, not on an obligation in solido as joint owner, whether he is
bound for the whole amount of a debt contracted by the master. 2 Emerigon,
Traite des Assur. p. 454. It remains to consider, whether a change has been
made in the law, as it stood previous to the adoption of the late amendments
to our Code. By the 2796th article of the Louisiana Code, it is provided,
that an association for the purpose of carrying personal property for hire in
ships and other vessels, is a commercial partnership. In the case of Kim-
ball V. Blanc, we decided that the bare circumstance of persons being joint
owners of a boat did not make them responsible in solido : and this is still
the opinion of the Court, because men may become joint owners of a boat for
other purposes than carrying personal property for hire. She may be bought
on speculation with an intention of selling her again. She may, as was said in
the opinion delivered in the case of Kimball v. Blanc, be chartered out, and
while she remains joint property, never be used to carry goods. In these and
other cases, which may be supposed, there Is no association for transporting per-
sonal property for hire. From the argument In this case, we suppose it has been
understood, that the Court, in the case alluded to, settled the principle, that
joint owners, who used the boat In carrying the goods for hire, were not re-
sponsible in solido. The general reasoning in that opinion, which went further
than was necessary for a decision of the case, may have furnished some
grounds for that belief; but nothing was further from our Intention; so far
from it, a contrary intimation was thrown out. It was there said : ' Owners
would perhaps be bound in solido, if they held themselves out to the connnu-
nity as partners In the carrying trade ; but the bare circumstance of their
being joint owners cannot have that effect.' "
» Poth. de Soc. n. 187 ; ante, § 102, 103, 109.
* Poth. de Soc. n. 187 ; ante, § 420.
710 PARTNERSHIP. [CHAP. XVI.
the several part-owners are in all cases chargeable only
according to their respective interests in the ship.^
* Abbott on Shipp. Pt. 1, c. 3, § 15, p. 84, 5th ed. ; Vinn. ad Peckium,
p. 155, note (a), tit. De Exercit. Act. ed. 1647; Van Leeuwen, Coram, on
Roman-Dutch Law, B. 4, c. 2, § 9. — Van Leeuwen, in his Commentaries,
says : "A creditor, who had transactions with any one, to whom a ship was
trusted by an owner, or who was placed by his master as factor or manager
of any merchandise concerning the ship, or such merchandises alone, such
creditor anciently had the option, whether he would call upon the owner of
the ship, or his substitute, the merchant, or his manager, for payment, and
prosecute them at law ; and if there were several owners or merchants, in
that case each of them was bound for the whole. But this usage has not
been adopted among us, it being prejudicial to trade ; and one is obliged
always to call upon the owners, or the merchants themselves, and sue them
at law. Neither is it in use in Holland (where trade is at present, and has
for a long time since been prosperous), viz. that where there are many
owners and partners, each shall be bound for the whole. But, on the con-
trary, it was introduced, that many joint owners of a ship together may not
be called upon for payment further than for the value of the ship, and the
amount of the property which she contains ; and each is bound separately,
and no further than for his respective share in the trade ; and it is sufficient
if they deliver and bring up, what they have in common, in satisfaction of
the decree for the whole ; and so it was decreed in the High Court of Hol-
land." Van Leeuwen's Coram. B. 4, c. 2, § 9, English Translation, London,
1820, p. 320. Vinnius, in his Commentaries on Peckius, De Exercit. Act.
(Lex. 4), p. 155, ed. 1647, says: "Si plures sint, qui navem exerceant,
placet singulos ex contractu magistri in solidum teneri ; idque hac ratione,
ne in plures adversaries distringatur, qui cum uno contraxit. (1. 1, par. ult.
et 1. 2, hoc tit. fac. 1. et ancillarum, 27, § ult. inf. de pecul.) Quippe actio
exercitoria, qua tenentur exercitores, ex solius magistri persona et facto nas-
citur ; utpote cum quo solo, non cum ipsis exercitoribus, contractum est.
Cum igitur in plures dividenda non sit obligatio, quas in unius persona
originem habet, ne in plures distringatur, qui cum uno contraxit, ex eo satis
intelligiraus beneficio divisionis hoc casu locura non esse. (Bald, in rubr.
C. eod. in fin.) Idem est, si contractum sit cum plurium institore. (1.
habebat. 13, par. ult. et I. seq. inf. de instit. act.) aut cum servo plurium
voluntate dominorura navem exercente. (1. 6, par. 1, inf. hoc tit.) Ceterum
hoc jus apud HoUandos receptum non est, apud quos singuli exercitores,
pro sua duntaxat parte exercitionis conveniri possunt. Neque enim ut
singuli in solidum teneantur, visum est aut naturali asquitati convenire,
quae satis habet, si pro suis singuli portionibus conveniantur ; neque publico
utile esse, propterea quod deterrentur homines ab exercendls navibus, si
metuant, ne ex facto magistri quasi in infinitum teneantur. Quin et hoc
constitutum, ne exercitoria etiam universi amjilius teneantur, cjuara ad
sestimationeni navis et eorura, qua? in navi sunt, teste Grotio, lib. 3, intro-
CHAP. XVI.] RIGHTS AND INTERESTS OF TART-OWNERS. 711
§ 457. The Roman law promulgates a similar doc-
trine, where the contract is made by all the part-owners
personally; that is to say, that they are not liable m
solido ; but each is liable only for his own share and
proportion of the debt, according to his interest in the
ship. On the other hand, where one part-owner only
makes the contract, he alone is held responsible to the
creditor for the whole debt. But where the contract is
made by the master, appointed by them, there all the
part-owners are liable in solido} Thus, it is said by
Ulpian in the Digest: Si tamen plures per se navem
exercemif, j^'^^o p)'>^o]yortionibus exercitionis conveniuntur.
Neque enim invicem sui magistri videntur. Sed, sijjlu-
res exerceant, unum autem de numero suo magistrum
fecerint, hujus nomine in solidum poterunt conveniri.
Sed si servus plurium navem exerceat vohintate eoricm,
idem placidU quod in p)luTibus exercitorihus. Plane si
unius ex omni vohintate exercuit, in solidum ille teneh-
itur. Et ideo puto^ et in superiore casu. in solidtim
omnes teneri.^
§ 458. In the next place, as to the rights and reme-
dies of third persons against part-owners of ships for
torts committed by them personally, or by the im-
proper conduct or negligence of their agents in the
management of the joint property. They are, without
question, all responsible at the common law, severally,
duct, ad jurisp. Bat. c. 1, et lib. 2, de jur. bell, et pac. c. 11, n. 13. Cete-
rum Hevia, p. 2, Cur. Phil. lib. 3, c. 4, n. 22, simpliciter sequitur disposi-
tionem juris communis." See also the Commentaries of Peckius upon the
same title and law of the Digest ; from which, perhaps, it may be inferred,
that principles similar to those of the Roman law pervade the jurisprudence
of many of the continental nations. The Scottish law is certainly so. See
1 Bell,"Comm. B. 3, Pt. 1, c 4, § 5, p. 519, 520, 537, 538, 5th ed. ; Ers-
kine, Inst. B. 3, tit. 3, § 45.
* Abbott on Shipp. Pt. 1, c. 3, § 15, p. 84, 5th ed. ; 1 Bell, Comm. B. 3,
Pt. 1, c. 4, § 5, p. 519-525, 5th ed.
* D. 14, 1, 4, § 1, 2, 24, 25; Poth. Pand. 14, 1, n. 4, 10, 13.
712 PARTNERSHIP. [cHAP. XYI.
as well as jointly, in solido, for all torts personally
committed or authorized by them, or occasioned to
third persons by the negligence of one or more, or all
of them, or by that of the master of the ship, or ship's
husband, or other agent thereof; but not for the wilful
or malicious acts of the latter.^ The reason for this
distinction between negligent and wilful or malicious
acts is, that neither the master nor ship's husband,
nor other agent, in doing such wilful or malicious acts,
can properly be deemed to be acting within the scope
of the authority confided to him by the owners, in the
management of the ship or its concerns ; but cases of
negligence may, and ordinarily do arise, in the very
course of such management.^ The doctrine is clearly
illustrated in the common case of a collision or run-
ning down of ships on the high seas, or in port, whereby
damage or loss is incurred. If the tort be by the wilful
or malicious act or design of the master, or any other
officer or agent of the ship, the owners are not liable
therefor ; but the party only, who commits the tort.
But if it be by the negligence of the master, or any
other officer or agent, then the owners are liable there-
for in solido, jointly and severally. On the other hand,
if a tort be committed by one part-owner of the ship,
who is not employed by the others about the concerns
of the ship, or authorized to act for them, but he
is acting solely, suo jure, as part-owner, the other
part-owners will not ordinarily be liable therefor,
whether the act be wilful or malicious, or merely
negligent, for the very reason that he is not intrusted
1 Story on Ag. § 308-313 ; 452-457 ; ante, § 167, 168 ; 1 Mont, on P.
B. 2, c. 1 ; Low v. Mumford, 14 Johns. 426 ; Patten v. Gurney, 17 Mass.
182. — Hence the suit may be commenced against all of them, or against
any one or more of them. Ibid.
* Story on Ag. § 308-313 ; 452-457.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 713
by them with the management or concerns of the
ship.^
§ 459. The Roman law, in like manner, in many
cases, made the principal liable for the torts and neg-
ligences of his agents and servants.^ It has been sup-
posed, that the Roman law never was in this respect
as extensive in its reach as our law ; in other words,
that it never did create a general liability of principals
for the wrongs and negligences of their agents, but
limited it to particular classes of cases ; and that the
liability of principals, so far as it is recognized in that
law, was mainly dependent upon the Praetor's edict ;
and was not worked out of the original materials of
the Roman jurisprudence. AVhether this supposition
be correct, or not, it is certain, that in certain classes of
cases, the Praetor, by his edict, either introduced a new
and more rigid liabilit}^, or he gave to that, which pre-
viously existed, an additional force, and, in some re-
spects, a more onerous obligation. Thus, masters and
employers of ships, innkeepers, and stable-keepers, were
made responsible for the safety and due delivery of the
goods committed to their charge ; and of course, if the
loss or damage were occasioned by the negligence or
wrong of their servants, and not by themselves, their
responsibility was not varied.^ Alt Prcetor ; JVautce,
1 Coll. on P. B. 5, c. 4, § 5, p. 820, 2d ed. ; Story on Ag. § 452-474.
{A. and B. were part-owners of a ship; A. defrayed all expenses and had
the uncontrolled management of the ship. A. had two-thirds of the gross
earnings and B. one-third : Held, that A. was a hirer of B.'s share, and not
B.'s agent, and that B. was not liable for damages caused by A.'s negligence.
Bei-nard v. Aaron, 9 Jur. n. s. 470, 11 C. B. >'. s. 889, Am. ed.}
■ Story on Ag. § 318.
' Story on Ag. § 318 ; Story on Bailm. § 464, 465 ; D. 4, 9, 1, 3 ; Heinec.
Pand. 4, 8, § 546-548; Poth. Pand.'4, 9, n. 1, 2, 8; Domat, 1, 16, 1, art.
3, 5; Id. 1, 16, 2, art. 2; Id. 1, 16, 3, art. 1. — Lord Stair, in his Insti-
tutes (B. 1, tit. 13, § 3), seems manifestly to have considered this edict as
introducing, for the first time, the liability of principals for the acts and
714 PARTNERSHIP. [CHAP. XVI.
caupo7ies, stahularii, quod cujusque salviim fore recepe-
defaults of their agents, and of making that liability more rigid, in many-
cases, upon the ground of public policy. His language is: "In the civil
law there is a depositation of a special nature, introduced by the edict,
' Naut£B, caupones, stabularii, quod cujusque salvum fore receperint, nisi
restituent, in eos judicium dabo.' By this edict, positive law for utility's
sake hath appointed that the custody of the goods of passengers in ships,
or strangers in inns, or in stables, shall be far extended beyond the nature
of depositation, which obliges only for fraud, or supine negligence, them,
who have expressly contracted for their own fact. But this edict, for
public utility's sake, extends it ; first to the restitution of the goods of pas-
sengers and voyagers, and reparation of any loss or injury done by the
mariners, or servants of the inn or stable. Whereas, by the common law,
before that edict, in this and such other cases, there was no such obligement ;
much less are persons now obliged for their hired servant's fact or fault,
except facts, wherein they are specially intrusted by them. But, because
the theft and loss of goods is very ordinary in ships, inns, and stables,
therefore this edict was introduced for the security of travellers. Secondly,
the edict extends this obligement, even to the damage sustained by (the act
of) other passengers or strangers In the ship, inn, or stable, for the which,
the master of the ship, innkeeper, or keeper of the stable, could be no
ways obliged, but by virtue of this edict. Thirdly, they were made liable
for the loss or theft of such things absolutely, from which they were free by
no diligence, but were not liable for accident or force ; that is, sea-hazard
must always be excepted." See also, 1 Bell, Comm. § 398-402, 4th ed.
See Story on Bailm. § 400-402, 458, 464-466. There are' certainly pas-
sages in the Digest, which make principals responsible for the fiiults and
negligence of their agents and servants, beyond those specially pointed
out in the Prstor's edict. This responsibility seems, however, to have
been limited to cases where the principal was guilty of some negligence in
employing negligent and Improper agents and servants. Thus, in the
Digest, the opinion of Pomponius is approved. Videamus, an et servorum
culpam, et quoscunque Induxerit, praestare conductor debeat ? Et quatenus
praestat, utrum, ut servos noxaj dedat, an vero suo nomine teneatur? Et
adversus eos quos induxerit, utrum prsestabit tantum actiones, an quasi ob
proprlam culpam tenebltur ? Mihi ita placet, ut culpam etiam eorum, quos
induxit, prsestet suo nomine, etsi nihil convenit ; si tamen culpam in indu-
cendis admittit, quod tales habuerit, vel suos, vel hospites. D. 19, 2, 11;
Poth. Pand. 19, 2, n. 30, 31. See also D. 9, 2, 29, § 9, 11; Poth. Pand.
19, 2, n. 31. See Story on Bailm. § 401; Domat, 1, 4, 2, art. 5, 6;
Id. 2, 8, 1, art. 1-9 ; Id. 2, 8, 4, art. 8. Again : Qui columnam
transportandam conduxit, si ea dum toUitur, aut portatur, aut reponitur,
fracta sit, ita id periculum prsestat, si qua ipslus eorumque, quorum opera
uteretur, culpa acclderit. Culjia autem abest, si omnia facta sunt, quae
diligentissimus quisque observaturus fulsset. D, 19, 2, 25, 7 ; Poth. Pand.
19, 2, n. 32.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 715
rint, nisi restituent^ in eos judicium daho} The reason
assigned is, that the rule is well founded in public policy
and convenience, and is the only means to prevent losses
by fraud or connivance.^ A fortiori^ if the act was
done with the consent of the principal, he was liable.
Si ipse alicui e nautis committi jussit, sine duhio deheat
ohligari.^ The liability of the principal for the acts and
negligences of his agents, as well as for his own, is fully
proclaimed in the comments of the Roman law. Thus,
for example, it is said, as to the owners or employers
of ships : Sunt quidam in navihiis, qui custodice grcdia
navihus j^rcejwnuntur^id est^naviimi cusiodes et dietaril.
Si quis igitiir ex his recepei^it, puto in exercitoreni dan-
dam actionem ; quia is, qui eos hujusmodi officio p)^^^^-
ponit, committi eis permittit.'^ The same doctrine is also
applied to innkeepers. Caupo prcEstat factum eorum,
qui in ea caup)ona ejus cauponce exercendce causa ihi
sunt. Item eoriim, qui hahitandi causa ihi sunt. Via-
torem autem factum non prcestat.^ The same doctrine
is also applied to stable-keepers. Caupones autem et
stabidarios ceque eos accijnemus, qui caup)onam vel sta-
hidum exercent, institoresve eorum.^ Eodem modo te-
nentur cauptones et stcdjularii, quo exercentes negotium
^suum recip)iunt.'' And the whole doctrine is summed
up in another passage, where it treats of the liability of
such principals for the frauds, deceits, and thefts of
their agents or servants, without their knowledge. Item
1 D. 4, 9, 1; Poth. Pand. 4, 9, n. 1, 2; Domat, 1, 16, 1, art. 2, -4, 6;
Id. 1, 16, 2, art. 2; Id. 1, 16, 3, art. 1-3; Heinec. ad Pand. 4, 8, § 546-
648, 551.
* Story on Ag. § 318, and note ; Domat, 1, 16, 1, art. 7.
' D. 4, 9, 1, 2 ; Potb. Pand. 4, 9, note (2) ; Story on Ag. § 318, note;
Domat, 1, 16, 1, art. 5.
« D. 4, 9, 1, 3 ; Poth. Pand. 4, 9, note (2) ; Domat, 1, 16, 2, art. 1-4.
» D. 47, 5, 1, 6 ; Poth. Pand. 47, 5, n. 3 ; Domat, 1, 16, 1, art. 3, 6.
« D. 4, 9, 1, 5 ; Poth. Pand. 4, 9, n. 2 ; Domat, 1, 16, 1, art. 3.
^ D. 4, 9, 3, 2 ; Poth. Pand. 4, 9, n. 3.
716 PARTNERSHIP. [CHAP. XYI.
exercitor navis, aid cauponce, aut stahuli, de dolo aut
furto, c£iiod in navi, aut caupona, aut stahido^ factum
erit, quasi ex maleficio teneri videtur, si modo ipsius
nidlum est 'nialeficium^ sed alicujus eorum^ quorum opera
navem, aid eaupoiumx^ aid stabidum exercet. Cum enim
neque ex maleficio, neque ex contractu, sit adversus eum
constitida hcec actio, et aliqitatetius culpm reus est, quod
opera malorum hominum ideretur ; ideo, quasi ex male-
ficio, teneri videtur} Here we have the rule of the
liability of owners and employers of ships and stable-
keepers, and the reason for it. They are responsible
for the tort and fraud of their agents and servants, al-
though they are not parties to it, quasi ex maleficio, as
if they themselves were wrongdoers ; because they have
made use of the services of such bad agents and servants
in their employment.
§ 460. And here, again, the like limitations to this
liability were recognized in the Roman law, as exist
in ours. The principal was not liable for the torts or
negligences of .his agents or servants, except in cases
within the scope of their employment. Thus, for ex-
ample, the innkeeper was liable only for the torts, or
thefts, or damages, of his servants, done or committed
in his inn, or about the business thereof; and not for
^ Inst. 4, 5, 3 ; Domat, 1, 16, 1, art. 7 ; Id. 1, 16, 2, art. 1-4. —The same
rule is laid down in the Digest. In eos, qui naves, caupones, stabula exerce-
bunt, si quid a quoquo eorum, quosve ibi habebunt, furtum factum esse di-
cetur, judicium datur ; sive furtum ope, consilio exercitoris, factum sit ; sive
eorum cujus, qui in ea navi naviganda causa esset. Navigandi autem causa
accipere debemus eos, qui adhibentur, ut navis naviget, hoc est, nautas. D.
47, 5, 1, Intr. and § 1; Poth. Pand. 47, 5, n. 1, 3. Qutecunque de furto
diximus, eadem et de damno debent intelligi. Non enim dubitari oportet,
quia is, qui salvum fore recipit, non solum a furto, sed etiam a damno reci-
pere videatur. D. 4, 9, 5, 1 ; Poth. Pand. 4, 9,n. 8; D. 14, 1, 1, 2 ; Poth.
Pand. 14, 1, n. 6 ; Heinec. Pand. Ps. 1, Lib. 4, tit. 8, § 551-554; Story
on Bailm. § 464-468; Ersk. Inst. B. 3, tit. 1, § 28, 29; Id. B. 3, tit. 3, § 43-
45 ; 1 Bell, Comm. B. 3, c. 4, § 5, p. 465-476, 5th ed. ; Domat, 1, 16, Intr.;
Story on Bailm. § 401.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 717
such torts or thefts committed in other places. Eodem
modo tenentur caiqjones et stahidarii, quo exercentes necjo-
tiwn suum i^eciiyiunt Ceterum, si extra neyotlmn rece-
perint^ non tenebuntur} So, the owner or employer of
a ship was not liable for the torts, or thefts, or damages,
of the mariners, unless done or committed in the ship,
or about the business thereof. Debet exercitor omnium
naidarum suorimi, swe Itheri, sive servi, factum prce-
stare. JSfec immerito factum, eorum prcestcU, cum ipse
COS suo periculo adhihuerit. Sed non alias iwcestat^
quam si in ipsa nave damnum datum sit. Ceterum, si
extra navem, licet a nautls, non I'^rcestahit.^
§ 461. Similar principles were applied in the Eo-
man law to the ordinary agents employed in the
common business of trade and commerce, called Insti-
tores ; ^ and also in the case of domestic servants and
persons belonging to the family. Prceter alt de his, qui
dejecerint, vel effuderlnt. Unde in eum locum, quo
volgo iterfiet, vel in quo consistetur, dejectum vel effusum
quid erit, quantum ex ea re damnum datum factumve
erit, in eum, qui ihi hahitaverit, in duphmi judicium
daho^ Si servus, insclente domino, fecisse dlcetur, in
judicio adjiciam, aut noxam dedere.^ These seem to
be the most important cases, specially and positively
provided for in the Roman law. That law does not
seem to have recognized, to the full extent, the general
maxim, Respondeat Superior, inculcated by our law.*^
1 D. 4, 9, 3, 2 ; Poth. Pand. 4, 9, n. 3.
= D. 4, 9, 7 ; Poth. Pand. 48, 5, n. 1 ; Domat, 1, 16, 1, art. 7 ; Id. 1, 16, 2,
art 1-4.
» Story on Ag. § 8 ; Domat, 1, 16, 3, art. 1 ; D. 14, 3, 5, § 1-9 ; Poth. on
Oblig. n. 121, 453, by Evans; Id. in French ed. n. 121, 489.
* D. 9, 3, 1 ; Id. 9, 3, 27, 11 ; 1 Bl. Comm. 431 ; Inst. 4, 5, 1 ; Ersk. Inst.
B. 3, tit. 3, § 46; D. 19, 2, 11 ; Domat, 2, 8, 1, art. 1-9,
^ D. 9, 3, 1 ; Poth. Pand. 9, 3, n. 1 ; Inst. 4, 5, § 1, 2.
8 See 1 Stair's Inst. B. 1, tit. 13, § 3 ; Story on Ag. § 454, n. 1. — Mr. Holt,
in a passage cited in Story on Ag. § 454, n. 1, says, that, " In the civil law the
718 PARTNERSHIP. [cHAP. XTI.
§ 462. The modern nations of continental Europe
have adopted the doctrine of the Eoman law to its
full extent, and some of them, at least, seem to have
carried it further. Pothier lays down the rule in the
following broad terms: " Xot only is the person, who
has committed the injury, or been guilty of the negli-
gence, obliged to repair the damage, which it has
occasioned ; those who have any person under their
authority, such as fathers, mothers, tutors, preceptors,
are subject to this obligation, in respect of the acts of
those who are under them, when committed in their
presence, and generally when they could prevent such
acts, and have not done so. But if they could not
prevent it, then they are not liable : Kullum crimen
patitiir IS, qici noii prohihet, quinn p)rohibere non j^otest.
(I. 109,^. de reg.jur.) Even when the act is committed
in their sight, and with their knowledge ; CuJjki carets
qui scit, seel p)rohibere non p)otest. (I. oO, Jf. d. t.) Mas-
ters are also answerable for the injury occasioned by
liability -was narrowed to the person standing in the relation of a pater-familias
to the wrong-doer." It is also observable, that Mr. Le Blanc and Mr. Mar-
shall, in arguing the case of Bush v. Steinman (1 B. & P. 404, 405), assert,
that, " the liability of the principal to answer for his agent is founded in the
superintendence and control which he is supposed to have over them (citing
1 Bl. Comm. 431). In the civil law, that liability was confined to the person
standing in the relation of pater-familias to the person doing the injury." For
•which they cite Inst. 4, 5, 1, and D. 9, 3. These citations clearly prove, that
the pater-familias is liable for the wrongful acts and negligences of his domes-
tics ; but they do not prove, negatively, that other persons were not liable, as
principals, in any other cases, for the wrongs and faults of their agent. The
text shows, that in many other cases, besides that of a pater-familias, the prin-
cipal was in the civil law liable for such wrongs and faults. The learned
counsel seem to have misunderstood the true meaning of the text of Black-
stone's Commentaries, which by no means insists upon any such limitations.
Mr. Justice Heath, in the same case, seems to have entertained the notion,
tliat the Roman law was or might be as limited as the learned counsel sup-
posed. But he added: " Whatever may be the doctrine of the civil law, it
is perfectly clear, that our law carries such liability much further." s. c. IB.
& P. 409. See also Story on Bailm. § 454-459.
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 719
the wrongs and negligences of tlieir servants. They
are even so, when they have no power to prevent
them, provided such wrongs or injuries are committed
in the exercise of the functions, in which the servants
are employed by their masters, although in the mas-
ter's absence. This has been established, to render
masters careful in the choice of those whom they
employ. With regard to their wrongs, or neglects
not committed in these functions, the masters are not
responsible." ^ The doctrine of the Roman law seems
to be followed with more scrupulous exactness in the
laws of Spain ^ and Scotland,^ where the specific enu-
merations of the Roman law are to be found followed
out in treating of the liability of principals for the
acts of their agents.^
§ 463. These are the most material considerations,
which seem necessary to be presented to the learned
reader in order to illustrate the leading distinctions be-
tween cases of partnership, and cases of part-ownership.
And, here, these Commentaries, according to their orig-
inal design, are brought to their appropriate conclusion.
In reviewing the whole subject of partnership, it cannot
escape the attention of any careful observer, how many
of the doctrines of the jurisprudence of the common law
are coincident with those of the Roman law, and those
of the modern commercial nations of continental Europe.
This circumstance aiffords no slight proof, that they are
1 roth, on Oblig. by Evans, n. 121, 453 ; in the French ed. n. 121, 489.
2 2 Moreau & Carleton, Partidas 5, tit. 8, 1. 26, p. 743 ; Story on Bailm.
§ 465-408.
^ Ersk. Inst. B. 3, tit. 3, § 43-46; 2 Bell, Comm. § 398-406, 4th ed.; 1
Stair, Inst. B. 1, tit. 13, § 3.
* These last four sections are copied literally from Story on Ag. § 458-461.
The object in re-inserting them here is the desire to make each work inde-
pendent of the other ; and it seems indispensable to a full exposition of this
branch of the subject, to present the Roman and foreign law with fulness and
exactness.
720 PARTNERSHIP. [cHAP. XVI.
essentially founded in the principles of general justice,
sound policy, and public convenience. If it should be
objected, that the common law on this subject contains
some very subtle, artificial, and even arbitrary doctrines,
having no just foundation in an enlarged and liberal
equity, and not susceptible of any satisfactory vindica-
tion, except as mere positive or technical rules, the same
objection lies, at least to an equal extent, against the
system of the Roman law upon the same subject, and
the jurisprudence of modern Europe, built upon it. In
truth, it is impracticable to establish any universal rules,
which shall equally suit the habits and institutions, the
policy, and the various employments of all commercial
nations. Every branch of municipal law must have a
close affinity to all others, belonging to the same com-
mon system, which attempts to regulate and enforce the
rights, the liabilities, and the remedies by and against
particular persons in their various social relations. The
positive and technical rules, applicable to one branch,
must in a great measure pervade the whole, in order to
make the administration of justice by the public tribu-
nals at once safe, easy, certain, and satisfactory. It
would, therefore, be a matter of wonder, if in the diver-
sities of pursuits, of occupations, of interests, and even
of political arrangements, in different countries, we
should not find ingrafted upon each system some pecu-
liarities, which, in a philosophical sense, might seem to
be either incongruities or defects. Human wisdom
never yet has achieved any thing perfect ; and the most,
that can be expected from the most enlightened juris-
prudence, is, that it shall contain within itself near ap-
proximations to the soundest equity and moral justice,
and in its adaptations be fitted to the wants, the spirit,
and the policy of the age. In this respect the common
law, especially in the department of commercial juris-
CHAP. XVI.] RIGHTS AND INTERESTS OF PART-OWNERS. 721
prudence, which has grown up and expanded with the
increasing intercourse between different nations, and the
enterprise, and skill, and necessities of navigation and
trade, may justly challenge competition with any other
system in ancient or in modern times. It has been
nourished by the genius, and learning, and independ-
ence of Judges, whose labors, like those of Ulpian, and
Gains, and Paul, and Papinian, are destined to the same
immortality as the Law itself. Its highest praise is,
that its principles receive an almost universal homage,
not as the positive dictates of authority, but as the per-
suasive and irresistible influence of reason. Valent j)ro
ratlone^ non pro introducto jure.
46
INDEX.
A.
Section
ABATEMEXT OF SUIT.
in cases of contract 239
nonjoinder of all contractors defendants . . 160, 454
nonjoinder of all plaintiffs fatal on trial as ■well as
in abatement 235, 236, 244, 245, 454
in cases of tort 167
nonjoinder of all plaintiffs 167, 454
nonjoinder of all defendants 167
(See Partxers — Fraud.)
ABSENCE FROM THE COUNTRY.
■when a good cause of dissolution of partnership or not . . 298
ACCEPTANCE.
of separate security of one partner, ■when debt of
firm extinguished by or not .... 155, 166, 157, 254, 255
ACCOUNT.
annual, under articles, effect of 206, 207, 208
all profits to be accounted for in 175, 181, 349
ho^w taken on dissolution 344-354
bet-ween part-owners, how and when taken .... 449, 451
by suit at law 449, 450
by bill in equity 449,451
when running account with new firm discharges the old
or not 154-158
will be compelled of fraudulent gains by partner . . 175-180
each partner bound to keep proper accounts 181
whether account decreed between partners ■without a
prayer for dissolution 334
ACCOUNTS.
win not be taken generally in equity pending the part-
nership or the balance set right 229, 349
ACKNOWLEDGMENT OF PARTNERS.
when it binds the firm or not 107
of debt 107, 323, 324, 824 a, 324 6
724 INDEX.
Section
ACKNOWLEDGiNIENT OF ONE PART-OWNER.
when it binds the other owners or not 453
ACT OF BANKRUPTCY.
eflEects and consequences of 313, 314, 374-408
(See Bankruptcy.)
ACTIONS BY PART-OWNERS 454
against part-owners 455-462
effect of nonjoinder as plaintiffs 235, 236, 244
effect of nonjoinder as defendants 235
ACTIONS BY PARTNERS.
all must join in 235, 236, 244
against partners, all should be joined 235
ACTIONS BY AND AGAINST PARTNERS.
(See Partners and Partnership.)
between partners 216-228 232
against third persons 234-264
ADMINISTRATION OF PARTNERSHIP.
who have a right to, generally 181
who under articles 204
equity will enforce and protect the right of 204
ADMIRALTY, COURT OF.
jurisdiction in cases of part-owners 428
in case of an equal division of interests and opinions , . 435-439
ADlVnSSION OF PARTNER.
when it binds the firm or not 107
of debt 107
whether it binds after dissolution or not 323, 324
of part-owner, when it binds others 453
ADVANCES.
by partner, how considered 219, 328
AGENT.
every partner agent of the firm 1
when agent, sharing profit as a compensation, a part-
ner or not 32, 33, 34, 35-52
distinction between sharing of gross and net profits . . 35-80
part-owner when agent or not, and how
far 89, 412-414, 419-422, 440, 446
AGREEMENT TO FORM PARTNERSHIP.
when forced in equity 188, 189
articles of partnership, when and how enforced . . . 188, 189
((See Articles.)
ALIENS.
when they may be partners or not 9
friends may be 9
alien enemies not 9, 240
dissolution of partnership by war 9
INDEX. 725
Section
ALLOWANCE TO PARTNER FOR SERVICES.
when allowed or not 182, 185, 18G
ANNUITY.
when receiving an annuity makes a person a partner or not 66-69
APPROPRIATION OF PAYMENTS.
effect of upon and after change of firm .... lo7, 253, 254
how made 157
ARBITRATION. (See Partners — Partnership.)
one partner cannot bind firm by 114
articles to refef to, cannot be enforced in equity .... 215
when arbitrators may award a dissolution on an arbitra-
tion 215, 299, 300, 301
ARTICLES OF PARTNERSHIP. (See P.utTNERSHiP.)
construction of, generally 187-215
construction of special articles 198-202
duties under 172-185
partners bound to conform to 173
when courts of equity will decree specific articles to form
a partnership 188, 189
what articles after partnership will be specifically decreed
to be performed 187, 189
how and when waived, controlled, or "varied 192, 199
ASSETS PARTNERSHLP, what are 92, 93
(See Partners and Partnership.)
distribution of, on dissolution 350, 355
ASSIGNEES IN BANKRUPTCY.
rights, powers, and interests of 375
ASSIGNMENT OF PARTNERSHIP PROPERTY.
when and what assignment good by one partner . 101, 309, 310
to pay partnership debts 101, 309, 310
whether general assignment by one partner good without
consent of all 101
when one partner may assign his interest in partnership or
not 183,307,308
dissolution of partnership, when by 307, 308, 309
when assignment to partner good or not . . . 358, 372, 373, 396
involuntary, effect of. (See Bankriiptcy.) '
involuntary, effect of by seizure in execution of. . . . 311, 312
assignment to one partner in cases of bankruptcy, when
valid or not 396
ASSUMPSIT. (See Action — Remedies.)
ATTAINDER OF FELONY, OR TREASON.
dissolution of partnership by 304, 305
AUTHORITY AND POWERS OF PARTNERS
to bind each other 101-125
AWARD. (See Arbitration.) 114,215,299,301
726 INDEX.
B.
Section
BANKRUPTCY. {See Partners and Partnership.)
effects and consequences of 313, 374-396
dissolution of partnership by 313
from what time 314
rights of joint creditors on 374-409
rights of several creditors on 374-409
reputed ownership in cases of, what is 397-404, 407, 408
rights of creditors in respect to dormant partners in cases
of 393
rights and powers of solvent partners in cases of . 338, 339, 407,
408
rights of creditors having a security 389
BILLS AND NOTES. {See Promissory Notes.)
when partners may make or indorse in name of firm . 102, 102 a,
126, 127
when partnership not bound by 126, 127
BOND TO PARTNERS.
for fidelity of clerks, &c., how and when extinguished . . 245-251
by one partner, wheti binding the firm or not . . . 117-122 a
BOOKS OF PARTNERSHIP.
effect of entries in 24, note, 191
c.
CAPITAL STOCK.
one partner may supply, and another labor and services 15, 16, 17
community of interest of partners in 15, 16, 17, 27
how and when partners contribute to 15, 16, 17
when community of interest creates a pai'tner or not in . 27-29
of what it may consist 15-58 a, 88-100
construction of articles as to advance of ... . 203, 204, 205
CHANGE OF FIRM,
effect of 153, 160
notice of, when necessary 159-163
CLANDESTINE BUSINESS AND PROFITS.
every partner responsible to partnership for 177, 178
CLUB,
when exclusive credit given to or not 144, 145
COLLUSION OF ONE PARTNER.
when it binds firm or not. (See Fraud.) 108, 109, 131, 132,
133, 133 a, 162, 163, 164, 237, 238
COMMANDITE.
partnership in, what is 78
how formed 87
INDEX. "^ 727
Section
CCMMENCEMEXT OF PARTNERSHIP.
when it takes effect 19-4
COMMISSIONS.
when participation in, makes a partnership or not 24, 37, 38, 41
COMMUNITY OF INTEREST.
in profits. {See Profits.) 18-23
when it makes parties partners 53-69
when not. {See Partnership.) 30-52
COMPENSATION OF AGENT.
when sharing profits makes agent a partner or not . . . 33, 34
partners cannot claim unless by special agreement 182, 185, 186
allowed to partner for expenditures and losses on ac-
count of firm 185, 186
COMPOUNDING AND COMPROMISING
debt of firm by one partner, when valid 115, 116
COMPROMISE AND COMPOUNDING
of debt by one partner valid 115, 116
CONCEALMENT BY PARTNER INJURIOUS TO
PARTNTERSHIP.
when he is liable for 172
when his contracts with firm voidable for 172
CONTINUANCE OF PARTNERSHIP.
construction of articles as to 195
after death of a partner by his agreement . . . 180, 199-201 a
by representatives or appointees 180, 199-201 a
how far debts contracted after his death bind his assets . . 201 a
CONTINUING CONTRACTS
how affected by change of firm 2-43, 245-251
In cases of guaranty .... 243, 244, 245, 248, 249, 250, 251
in cases of suretyship 246, 248, 249
in cases of bonds for fidelity of clerks, &c 249, 250
CONTRACT.
partnership founded in 2-6
{See Partnership.)
what are deemed partnership contracts or not 134, 137, 138, 154,
243-256
by what contract one partner can bind the firm 102-109, 142, 143
when firm not bound 110,113,117,118,142-146
not unless made In firm name 102, 102 a, 142
nor if by deed 117-122 a
exceptions to rule 120-122, 243, 244
not where exclusive credit given to one partner . . . 134-145
with partners, how extinguished . . . 154-157,253,254,255
{See EXTLNGCISIIMENT.)
what deemed of the partnership or not 243,244
how sued upon when one partner retires 244
i2S INDEX.
Section
CONTRACT — continued.
continuing, how construed 245-251
of guaranty to or by firm 245-248
of suretj'ship for clerks by or to firm 245-251
COXTRACTS
partnership, are deemed joint and several in equity . . . 362
COXTRIBUTIOXS BETWEEX PARTXERS.
when right exists to 169-173
when it may be had at law or not 218,219,220,221
when in equity ' . 222, 223, 224
when in cases of tort or not 220
COXVERSION OF DEBTS.
(^See ExTDfGuismrENT.)
what is 369, 370
effect and consequences of 369, 370, 397-404
CONVEYAXCE OF PARTXERSHIP PROPERTY.
by one partner, when good or not 106, 309, 310
{See AssiGXJiEXT.)
CORPORATION. *
whether a, may be a partner 20
COURTS OF EQUITY. {See Partners.)
remedial power between partners 176-183
in cases of fraud or clandestine business or bargains 174-183, 287
injunctions when granted by . . . 178, 179, 209-212, 225-233
when a receiver appointed by 228-231
when a dissolution decreed by ... 176, 232, 282, 286-298
when the specific performance of articles of partner-
ship will be decreed 188, 189
when specific performance'of articles of partnership
decreed or not 204-210
bill in equity between partners to account lies in . . . 347-351
so between part-owners to account 449
when equity will interfere to restrain one partner
violating the articles of partnership, the bill not
praying a dissolution 229
whether and how far they will interfere between
partners, unless a dissolution is prayed by the bill . . . 229
CREDIT.
when exclusive credit is given to one partner, the
partnership is not bound 134-145, 154, 243
what is exclusive credit or not 134-145, 158
when credit to new firm discharges old firm . 154-158, 253-255
CREDITORS.
when persons are partners as to, although not inter sese.
{See Partnership.) 53-70
when persons not partners as to 30-52
INDEX. 729
_ Section
CPEDITORS, RIGHTS AND PRR^ILEGES OF.
(See JoiXT Ckeditors.)
joint . . . . 361-365, 390, 391
several 363, 390, 391
joint and several 384-386
equities and quasi lien of 326, 357-361
rights of creditors against partners generally .... 126-168
in cases of death of one pai-tner 361, 362
against survivors 361, 362
against estate of deceased partner 361, 362
what debts are joint and several 367, 373
of bankruptcy 376, 377, 384, 386
D.
DAMAGES.
liability of partners to contribution for . . 109-173, 220, 221
when a partner liable to firm for 185
DEATH.
dissolution of partnership by 317, 318, 319 a
{See Partners and Partnership.)
from what time 319
effects and consequences of 342-356
rights of survivors 344-347
rights of representatives 342-346
rights of creditors 361,362
DEATH OF PARTNER.
when partnership continued by his agent for a period after
his death, how far his assets are liable for debts con-
tracted after his death 201 a
DEBT OF SEPARATE PARTNER.
pajTnent of, when misapplication of partnership funds or
not 132, 133
when debt binds partnership, which is contracted before
it is formed, or not 146, 147-152
when incoming partner bound or not 152, 153
DEBTS DUE BY PARTNERSHH*. (See Partnership.)
when joint and several 262
conversion of, what. is, and when it takes place .... 369, 370
effects of conversion 369, 370, 397—403
DEBTS OF PARTNERSHIP ARE JOINT AND SEVERAL.
DECLARATION OF PARTNER.
when it binds the firm or not . . . .107, 323, 324, 324 a, 324 b
whether after dissolution or not 323-324 6
of one part-owner, when it binds others 453
DECREE IN EQUITY OF A DISSOLUTION.
effects and consequences of 356
T30 INDEX.
Section
DECREE m EQUITY OF A DISSOLUTION — con^mwed.
when made 176, 232, 282, 286
receiver, when appointed 228-231, 330
DEED.
one partner cannot bind the firm by deed .... 101, 117-122 a
exceptions to the rule 120-122
DEFAMATION OF PARTNERSHIP.
action lies for 256-258
DELECTUS PERSONS,
when essential in partnei'ship 5
DILIGENCE, DUE,
when required of every partner in partnership business 182-186
DISCHARGE OF PARTNERSHIP DEBT.
(See EXTINGUISHMEXT.)
what is or is not 155-158, 253-255
DISSOLUTION OF PARTNERSHIP 265-319
(See Partners and Partnership.)
when decreed in equity 232, 286, 287, 288
when for fraud 232, 285-288
when decreed for gross miscon<luct .... 232, 233, 285-288
when not 286, 287, 288
how produced 265-319
by act or consent of parties 265, 268, 270, 274
by decree of court of equity 232, 265, 282-285, 295
by operation of law 265
when by efflux of time 278, 279
when at will 269-277
by extinction of the thing 280
by accomplishment of the entire business 280
on account of the impracticability of the undertaking . . . 290
on account of incapacity of partner . . . 294, 295, 298, 304
on account of insanity of partner 295-297
by award of arbitrators 299, 300, 301
by change of condition of a partner 302-306
by absence from the State 298
by outlawry 304
by attainder 304, 305
by marriage of a female partner 306
by assignment of all share and interest in partnership . . 307-310
by involuntary assignment. (See Bankruptcy.) . . . 313, 314
by seizure of partnership property in execution .... 311, 312
by public war 315^ 316
by death of partner 317, 318
from what time 314, 319, 319 «
effects and consequences as to partners 320-356
(See Partners and Partnership.)
INDEX. 731
Section
DISSOLUTION OF FART^ERSIIIP — continued.
effects and consequences as to creditors and third persons 357— ill
(See Partners and Partnership.)
effects and consequences of, by voluntary act .... 320-.')37
by bankruptcy 320, 337-341, 37Jr-306
by death . ' 320, 342-355
by decree in equity 320, 356
when notice of, necessary or not 334-336
in cases of voluntary dissolution 357-361
in cases of bankruptcy 337, 374-394
in cases of death oG2
rights against survivors 362
rights against estate of deceased 362, 364
rights of joint creditors 365-395
rights of several creditors 365-395
DISTPtlBUTION
of partnership effects 350-356
DORMANT PARTNER. (See Partnership.) 80
liability of, to third persons 63, 64
bound by acts and contracts of ostensible partners .... 103
not bound after his retirement from the firm 159
when necessary party to a suit or not 241
liabilities of, in cases of banki-uptcy 393
when dormant partner should join or be joined in a suit 241
DOUBLE PROOF,
what is, and when allowed 384-387
DURATION OF PARTNERSHIP. (See Partnership.) ... 84
at will 84,197,201,277,297
for a fixed time 84, 195, 278, 279
what is presumed as to 84
when deemed to be for life 271
construction of articles as to 195, 196, 198-200
in case of death of a partner 195
when deemed to be renewed 197, 198
effect of renewal indefinitely 197, 278, 279
construction of articles, as to continuation of, on
death of a partner 198-200, 279
DUTIES AND RIGHTS OF PARTNERS 169-186
(See Partners and Partnership.)
implied 169-186
express. (See Articles.) * 187-215
E.
EFFLUX OF TBIE,
dissolution of partnership by 278, 279
(See Dissolution.)
732 INDEX.
Section
ELECTION OF CREDITORS
to prove debts iu banki'uptcy 384-388
of joint creditors 384-388, 391, 392
of joint and several creditors 384-388, 393, 394
of creditors having a pledge or security 389
in cases of domnant partnershijJ 393
ENTRIES IN BOOKS OF PARTNERSHIP,
effect of . . * 24, n., 191
EQUITY, COURTS OF. (See Courts of Equity.) 178
whether courts of equity will interfere between partners
and appoint a receiver, except the bill prays a dissolu-
tion. (See Myl. & Craig, 635, 639.) / 229
when specific performance of articles to form a partnership
will be decreed by 188, 189
when specific performance of articles after partnership
will be decreed by 204-210
when injunction granted by or not 178, 179, 209-213, 221-233
receiver, when appointed by 228-231
when dissolution decreed by 176, 232, 282, 286
bill for account between part-owners, when it lies in . . 449-
EVIDENCE. (See Admission, Acivxowledgment, Declaration.)
when and what acts or acknowledgments of one partner
bind the others, or not 107
EXECUTION AGAINST PARTNERSHIP EFFECTS ON
A SEPARATE JUDGMENT AGAINST ONE
PARTNER,
when good for the separate debt of one partner . . . 261-264
how far the right of the creditor extends 261-264
what may be seized on . 261-264
whether sheriiF can sell on 262, 263
when injunction lies by the other partners against sale by
sheriff 264
effects of seizure on, in dissolving partnership . . . 811, 312
EXECUTORS AND ADMINISTRATORS OF PARTNERS.
(See Partners and Partnership.)
rights and duties of . 342-347
EXPENDITURES BY PARTNER
in business of firm to be allowed him 185
EXPIRATION OF PARTNERSHIP.
[See Dissolution of Partnership.) 265-319 a
EXTINGUISHMENT. OF PARTNERSHIP DEBT.
what is, or not 153-158, 251-255
upon change of firm 153-157
upon retirement of a partner 155,156,158,159
upon giving credit to new firm .... 157,158,253,264,265
by conversion of partnership debt . . . 369, 370, 397-404
INDEX. 733
F.
Section
FELONY, ATTAINDER OF,
is a dissolution of partnership 304, 305
FEME COVERT.
when she can be a partner or not 10,11
in case of abjuration or exile of husband 10, 11
in case of special custom 10-12
not without consent of her husband 10-12
when and how far bound as a partner 10, 11
powers of, in equity, under nuptial contracts, or other
agreements 11
when treated as a feme sole 11, 12
when a partner under a foreign law 239
marriage of a feme sole, when a dissolution of prior
partnership 306
FIRM, STYLE OF.
construction of articles as to 202
all the partners bound to conform to it 202
use of, necessary to bind firm to contracts 102, 134-136, 142, 143
exceptions to the rule 142, 143
FISHERIES,
when parties in, partners or not 42
FOREIGN LAW.
when it governs the rights of the partnership .... 239, 240
FRAUD OF A PARTNER.
when it binds the other innocent partners 108, 109, 13V 163, 164,
236, 237, 238
when not 128, 129, 131, 182
of retiring partner binds him to pay debts 162, 163
to injury of partnership, he is liable for 172, 173
what acts of a partner are frauds on the partnership . 172, 175
how remediable in equity 176
dissolution when decreed for 233, 287
FRAUDS, STATUTE OF.
how it affects partnership in lands 83, 93
G.
GENERAL PARTNERSHIP.
what is 74
{See Partxersiiip.)
GOOD-WILL OF A TRADE.
whether it is partnership property or not 90, 100
what passes by agreement to convey it to one partner . 211, 212
how equity will enforce right to 212
734 INDEX.
GUARANTY.
when partnership bound by, or not Ill, 112, 127
when guaranty to partnership extinguished or not .... 243
effect of change of firm on existing 245-250
H.
HUSBAND AKD WIFE. (See Fejie Covert.) 10-12
when wife may, or not, be a partner 10-12
when husband bound by acts of wife, as partner, or not . 10-12
when they may sue as partnei-s under foreign law .... 239
I.
ILLEGAL PARTNERSHIP.
void , 6
what is illegal 6
(See Partnership.)
IMPRACTICABILITY OF THE UNDERTAKING.
aground for dissolution of partnership 290 •
INCAPACITY OF A PARTNER.
{See Dissolution of Partnership.)
when a ground of dissolution of partnership .... 292, 293
INCOMING PARTNER.
rights and responsibility of ^ . 152, 153
INFANT.
partnership contract does not bind 7
partnership by, voidable, not void 7, 255
INJUNCTION.
when granted in equity between partners 178, 179, 192-202,
209-212, 222-233
not granted for fugitive and temporary breaches of
duty 225, 286, 287, 288
when granted against third persons 258-260
in cases of fraud ..." 258, 259, 285-288
in case of gross misconduct 258-260, 285-288
in other cases 258-260
in cases of separate execution against effects of firm . 260-264
whether equity will restrain sale by sheriff on sepa-
rate execution 264
INSANITY OF A PARTNER.
when a good ground of dissolution of partnership . . . 295-297
INSOLVENCY OF A PARTNER.
construction of article for dissolution of partnership on 214, 215
INTEREST.
when allowed between partners 182 a
INDEX. 735
Section
INTERESTS AND RIGHTS OF PARTNERS
in partnership property 88-100
(See Paetxership.)
J.
JOINDER OF PARTNERS. (See Nonjoinder op P.ujtners.)
all should join as plaintiffs 235, 236, 244, 245
objection of nonjoinder fatal at trial . . . 235, 236, 244, 245
all should be joined as defendants 235
but nonjoinder only pleadable in abatement . 235, 236, 241, 242
JOINDER OF PART-OWNERS
in cases of contract 454, 455
in cases of tort 454, 455
of all part-owners as plaintiffs should be in cases of con-
tract 454, 455
omission of, fatal 454, 455
in tort all should be joined 454
but the omission is only pleadable in abatement 167
JOINT ADVENTURERS,
when partners or not 33, 34
JOINT CREDITORS, RIGHTS AND PRIVILEGES OF.
(See Partners axd Partnership.)
against joint effects 361-365, 390
against separate effects 361-365
equities and quasi lien of . . 97, 326, 357-361
what i^roperty deemed joint, and what several 369, 370, 397-404
JOINT DEBTS,
what are 145-153, 376-387
what are joint and several 387, 389, 391-394
how payable in cases of bankruptcy 376-387
In cases of dormant partnerships 393
JOINT PROPERTY.
what deemed joint, and what several .... 369, 370, 397-404
JOINT STOCK COMPANIES,
liability of 164
liable like common partners 164
rights and powers of 213
rights of majority to govern 213
LAND,
L.
how statute of frauds affects partnership in 83
partnership property in 9-. 93
1S6 INDEX.
T 1 ■xTT-i Section
LiAOT) — contimiecl.
how treated in equity 92, 93
one partner can transfer only his own share therein, un-
less authorized by deed by other partners .... 117-122 a
LEASE
in name of one partner, when the benefit of belongs to
the firm 174
LETTER OF CREDIT,
when partnership bound by, or not 127
LM.BILITY AND EXEMPTIONS OF PARTNERS ON CON-
TRACTS. (See Partnership.)
as between themselves 169-186
as to third persons 126-169
on contracts 126-165, 168 a
on torts 166-168 a
LIBEL OF FIRM,
action lies for 256, 257
by firm, action lies for 257
LIEN OF PARTNERS
on partnership property 97, 98, 360, 361
upon dissolution 360, 361
LIEN OF CREDITORS,
when they have a quasi lien or equity, and what 97, 326, 357-361
LBIITATIONS, STATUTE OF.
admission of debt by a partner before dissolution, whether
it revives debt or not 107
whether it does, when made after dissolution of
partnership 323, 324
in case of misrepresentation 108
when a bar to an account between partners 233 a
when a bar, after dissolution of partnership to creditors . . 324 c
admission by one part-owner, when it binds the other part-
owners, or not 323, 325, 453
LOSSES,
when and how community in, essential to partnership, or
not 19-22, 60-62
when share of profits makes a person a party, although
he bears none of the losses 60-62
how losses borne in absence of any special agreement . . 20-27
validity and eifeet of special agreement, as to ... . 60-63
by neghgence, when a partner responsible for ... . 169-173
by one partner for the firm to be compensated for .... 185
LUNACY
of a partner, when cause for dissolution 7
LUNATIC,
whether a, may become a partner 7
INDEX. 737
M.
Section
MAJORITY IN CASES OF PARTNERSHIP.
rights and powers of 123
(>S'ee P^URTXERS.)
when entitled to govern 123, 124, 125, 213
when not 125, 213
construction of articles as to rights and powers of ... . 213
MAJORITY IN CASES OF PART-OWNERSHIP.
rights and powers of 413, 418-426
as to repairs of ship .'418-423
as to employment of ship 426-434
as to furnishing cargo 433, 434
as to appointing officers 432, 445
MARRIAGE OF FEME PARTNER.
a dissolution of partnership ■ 306
MINING BUSINESS.
when partnership bound by acts in, or not 126
MINORITY IN CASES OF PART-0WNT:RSHIP.
rights and powers of 428-431
MISAPPLICATION OF PARTNERSHIP FUNDS.
when it binds partners .... 108, 109, 130, 131, 133, 134
when not 128, 129, 132
to pay the separate debt of one pai'tner, when binding
or not 133, 134
MISCONDUCT OF PARTNER.
when a ground for an injunction 226, 227
when for a dissolution 233, 287, 288
MISREPRESENTATION BY PARTNER 107, 108
when it binds the partnership, or not 107, 108
when he is liable for, to his partners 172, 173
when it is ground for a dissolution 228-233
MORTGAGE.
when one partner may mortgage paiinershlp property, or not 94-96
when and how a creditor, holding a mortgage, may prove
in bankruptcy 389
N.
NAME OF FIRM.
construction of articles as to 100, 202
must be used to bind partnership 102, 134, 135, 136, 142, 143
effect of its being the sole name of one partner .... 139
NEGLIGENCE.
Avhen partner liable for lGU-172
47
738 INDEX.
Section
NEGLIGENCE — coniinncd.
when partners liable for inter sese . . . , . 169, 173, 348, 349
when to third persons 166, 167, 168
when part-owners liable for m^er sese 449, 452
when to third persons 445-460
NOMINAL PARTNERS.
who are 80
liability of 64, 65
(See Partnership.)
whether they must join and be joined in suits . . . 241, 242
NONJOINDER OF PARTNERS. {See Joinder of Partners.)
effect of, if plaintiffs 235, 236, 244, 245
effect of, if defendants 166, 235, 236, 240, 241
in cases of contract 240, 241, 242
in cases of torts 167
of dormant partner, effect of 240, 241
of nominal partner, effect of 242
NONJOINDER OF PART-OWNERS.
effect of, as plaintiffs, in cases of contract 454
as plaintiffs, fatal at trial 454
effect of, as defendants 167
pleadable only in abatement in cases of defendants . . . 197
in cases of tort 167
as plaintiffs 454
as defendants 167
NOTICE.
when acts of a partner in violation of duty known to third
persons will exonerate partnership 127-134
of retirement of partner, when necessary or not . 159-163, 334,
335, 336, 343
what is sufficient _ 161, 162, 163
when necessary on dissolution of partnership .... 159-163
when not 159, 160, 162, 336
not in cases of death 162, 336, 343
not in cases of bankruptcy 336
when notice to one partner binds the firm, or not . . 107, 108
0.
OSTENSIBLE PARTNERS, who are 80
liability of 64, 65
{See Partnership.)
when bound after retirement 160
when notice of retirement necessary 160
what notice sufficient 161, 162
INDEX. 739
Section
OUTLAWRY.
a dissolution of partnership 334
OWNERS OF SHIPS.
rights, powers, duties, and liabilities of. {See Part-
^ OAVNEiis.) 412-460
how ships held by part-owners 416, 417
no right of survivorship among 417
OWNERSHIP, REPUTED.
in cases of bankrujitey, what is or not .... 397-404, 407
P.
PARTNERS.
are both principals and agents 1
who may be 7-14
persons sui juris 7, 8
alien friends 9
J'eme covert in special cases 10, 11, 12
infant, when at his own election bound 7,8
■who may not be 7-14
infants generally 7, 8
alien enemies 9
married women 10, 11, 12
special exceptions by custom 12, 13, 14
different sorts of 80
ostensible partners 80
dormant partners 80
secret partners 80
rights of, in partnership property 88-100
difference between partners and jiart-owners .... 89
whether they are tenants in common or joint-
tenants 88-91
no difference of rights in equity, whether prop-
erty is personal or real 92, 93
powers and authorities of partners over partnership
property 94-96
power to sell or pledge partnership property .... 94-96
liens and rights of partners on partnership property . . 97-99
powers and authorities of partners generally . . . 101-125
to assign property generally or specially 101
to assign property ibr benefit of creditors 101
to buy or sell or pledge goods 102, 102 a, 126
to borrow money 102
to draw bills and notes 102, 102 a
to negotiate and indorse bills or notes .... 102, 102 a
to draw checks 102, 102 a
740 INDEX.
Section
PAETKERS — contimied.
to procure insurance 102
to do any acts authorized by usage of the
trade or business 102, 102 a, 103, 126
the like powers exist in cases of dormant
partners 103
and of trustees who are partners 105, 106
to do all acts appropriate to and within the
scope of the partnership business .... 107, 108, 113,
126, 127
how powers and authorities are to be exer-
cised and executed by 102
powers should be executed in the name of the
firm 102
right of majority of, to govern 123, 213
representations and admissions of, when they bind
the firm 107, 108, 109
when not 107, 108, 109
when notice to one pai-tner binds the firm 107
when fraud of one partner binds the firm 108
release of one partner binds the firm 115, 116
so compromise of debt 115, 116
so guaranty within scope of the trade or busi-
ness Ill, 127
what contracts are deemed partnership contracts,
or not 134, 137, 188, 154, 243
when the acts of a partner do not bind the firm 110-113, 117, 142,
145
not, when in business beyond scope of partnership . 110, 111, 112
not, when in acts not incident to the business or
• trade 112, 113
one partner cannot bind the firm in cases of sale of
real estate 101
one partner cannot bind the firm by submission to
arbitration 114
one partner cannot generally bind another by deed,
unless authorized by deed 117-122
exceptions to the rule 120-122
one partner cannot bind the firm by contract with a
third jierson, who linows that he is acting in fraud
of the firm or without authority .... 110-113, 128-131
nor by a guaranty not within business of the firm . . . Ill, 127
nor, ordinarily, by an appropriation of partnership
property to his private debts 132, 133
incases of disagi-eement between partners, the ma-
jority governs '. . . 123
INDEX. 741
Section
PARTNERS — continued.
exceptions to the rule 123, 124, 125
liabilities and exemptions of partners to third persons . 12G-108
when all are liable in soUdo ... 102-109, 456
partners bound only for acts done within scope of
business of firm 106, 107, 108, 100, 126, 127
not bound where act is fraudulent and knoAvn to the
other party 110-113, 128-133
not hound where credit is exclusively given to one
partner 134-139, 153, 154, 243
what is sufficient evidence of exclusive credit, or
not 138-144, 243
not bound, where debt is contracted before partner-
ship is formed 146-150
not bound by preliminary steps taken to form a part-
nership 150, 151
incoming partner not bound for debts of the old firm . . . 152
unless contract is changed by consent 152, 153
not bound, where the credit is not given to the firm, but
to one partner 154, 243
how discharged from contracts by subsequent acts 155, 156, 253-
255
by acceptance of the security of one partner in extinguish-
ment of the debt of the firm 155-158, 254, 255
when giving credit to the firm after retirement of one part-
ner discharges a prior debt, or not . . . 156-158, 253-255
how payments are to be appropriated 157, 253
when partner after his retirement is discharged from future
debts, or not 159, 160, 162, 163
when and to whom notice of retirement is necessary . . 160-163
notice of dissolution of partnership when necessary to
discharge partners, or not 160-163
what notice is sufficient or not 161
, when partners liable for new debts, notwithstanding a no-
tice of retirement or dissolution 163
when in cases of fraud 163
in joint-stock companies liable as in common partnerships . 164
whether partners in joint-stock companies can limit their
liability 164, 165
right of, to govern in cases of joint-stock companies . . . 213
when partners liable for torts of each other to third per-
sons 166-168
Rights, Duties, and Obligations of Partners between them-
selves 169-186
duties as to diligence and care and skill . . 169, 170, 171,
182, 183
742 INDEX.
Section
PARTNERS — continued.
partners liable for gross negligence .... 169-171, 233
partners liable for frauds 171, 172, 182
duty to conform to stipulations of articles of partner-
ship 173, 187
duty to abstain from clandestine and secret trade inju-
rious to partnership 174-179, 209-212
duty to act for benefit of partnership 175-177
duty to abstain from improper speculations .... 177
duty not to be interested in rival partnerships . . . 175, 180
duty to keep precise accounts and disclose all part-
nership transactions to all the partners 181
duty not to violate rights of other partners .... 182-184
duty to allow and pay all proper expenditures on
partnership account 185, 186
Construction of Partnership Articles 187-215
(See Partxersiiip.)
specific performance of articles, when decreed, or not . 188, 189,
193, 217-227, 232
remedies between partners at law and in equity . 193, 217-227,
232
when injunction granted, or not .... 193-202, 215, 224-227
when receiver appointed, or not 228, 229, 331
remedies by partners against third persons 234-264
when at law or not 234-241, 256-258
when in equity only 234, 235, 244, 259, 260
all partners must join as plaintiffs in a suit, otherwise it is
a fatal defect 235, 236, 244
exceptions to the rule 241, 242
all partners should be joined as defendants ; but the ob-
jection only matter of abatement 235
remedy in equity only, where one and the same person is
partner in two firms 234—236
partners cannot maintain suit at law upon a security, where
there is a good bar against one partner 237, 238
or where there is fraud or misrepresentation by one
partner 237,238
all partners must be competent, or at law no action lies
by them 239
what constitutes incompetency to sue 230, 240
being a. feme covert 239
being an alien enemy 240
what contracts are deemed partnership contracts, or not . . 243
how contracts are to be sued, when one partner retires 254, 255,
356, 357
construction of continuing contracts by or to .... 245-251
INDEX. 743
Section
PARTNERS — continued.
contracts to, for fidolity of clerk, when bindinjr, or. not,
on change of firm 245-250
continuing contracts of guaranty to, when binding after
change of the firm 245, 2-48-251
remedies by partners at law against third persons for torts . 256
and for frauds 256
and for defamation of firm 257
and for obstructions and injuries to their business . 258
remedies by partners in equity against third persons . 234, 235,
244, 259
by injunction :^59
in cases of execution against one partner and
seizure of partnership effects 260-264
whether equity will restrain sale of the effects
by sheriff in such a case 264
Dissolution of Partnership 265-270
by act of parties 265, 268, 269, 279
by efflux of time 267, 278
by tacit renunciation 272
by performance of business or voyage 280
by extinction of the partnership property 280
by a decree of court of equity 282-285
for what causes decreed 286-298
for causes at time of formation of partnership . . 286, 287
for causes subsequent to formation of partnership . . 286
for fraud 285,286
for gross misconduct 288, 289
for Impracticability In the undertaking 290
for incapacity or inability of a partner . . • . 291-294
for insanity 295-297
for absence from the State 298
when dissoluble by arbitrators, or not . . . 215, 299, 300
when dissoluble at pleasure, or not 268-270, 274-277, 307,
308
when deemed to endui'e for life 271
when deemed to be prolonged or renewed beyond
original term 84,85,271,272,279
by operation of law 302-316
by change of state or condition of party .... 302-305
by marriage 306
by voluntary assignment of all interest in partner-
ship 307-310
by involuntary assignment of Interest 311-313
by execution against all the partnership effects . . 311. 312
by bankruptcy and insolvency 313, 314
"744 INDEX.
PARTNERS — cow^mwed. ^^*'°"
at what time dissolved by bankruptcy or insolvency . . 314
by war between countries or partners 315, 316
by death of one partner 317, 318
from what time dissolution by death takes place . . . 319
notice of, when necessary or not 159-163, 334-336, 342, 343
effects and consequences of dissolution generally 320-411
between the partners 326-356
in cases of voluntary dissolution 320-322
lien of partners on effects 360, 361
what powers and authorities are extinguished
by dissolution .... 322-324, 329, 344, 445, 446
what power and authorities remain . . 320-328, 331,
344-346
when receiver will be appointed . . 228, 229, 231, 330
accounts between partners, how taken .... 346-353
representatives of, entitled to an account . . . 343, 361
when a sale of partnership effects will be ordered,
or not 350
all profits to be accounted for 349
valuation of partnership effects, when and how
made 350-355, 396
valuation when not allowed 358, 359, 373
when effects may be assigned to one partner on
dissolution, or not 358, 359, 396
assignment not allowed in cases of bankruptcy , . 396
effects and consequences of dissolution by bank-
ruptcy 337-341
rights and powers of partners on bankruptcy . . 337-343
rights of assignees in bankruptcy 378
by death, effects and consequences of . . . . 342, 357, 358
rights and powers of the survivors 344-347
rights and powers of representatives of ... . 342-346
lien of the survivors 361
by decree of a court of equity 356
effects and consequences of such a decree 356
sale of effects, when ordered by court of equity 350, 356
dissolution of partnership, effects and consequences
as to third persons 334, 337-411
rights of creditors on dissolution 358
equity of creditors upon partnership effects, when
and what 326, 358-360
creditors have no lien, but a quasi lien in certain
cases 326, 358-360
how this quasi lien is enforced 326, 358-361
rights of joint creditors of 361-365, 390
INDEX. 745
Section
PARTNERS — continued.
debts of joint and several creditors 3G2
equities of joint creditors as to separate eflfeots
3G3, 305, 390, 392
remedies of joint creditors 361,362,390-392
against survivors 362
against representatives of deceased partners .... 362
rights and remedies of separate creditors 363, 364, 390, 391
remedies of joint creditors in cases of death of one,
asid bankruptcy of the other partner . . 364-366, 367, 378
rights and remedies of a partner, who is a creditor of
the firm 390-392, 405-407
rights of creditors, who are both joint and several
creditors 384, 385
what debts treated as joint and several 367-373
what is a conversion of joint or of several debts . . 367-373
what property is deemed jomt and what several
369, 370, 397-403
rights of joint creditors in cases of bankruptcy . . 376-378
exceptions to the general rule 378-381, 392-394
where creditors are joint and several creditors, they
are bound to elect 384-386
exceptions to the rule 387-394
rights of a partner, who is creditor of the firm in
bankruptcy 390
set-off in banki-uptcy, what debt or claim is good, or
not, by way of 395
rights of pledgee and mortgagee 389
dissolution by bankruptcy, valuation not allowed on . . 396
reputed ownership in bankruptcy, what is, or not . . 397-403
PARTNERSHIP,
what constitutes 1, 2
founded in consent 3, 4, 5, 6
in contract 6
what is legal or illegal 6
community of interests in . . . . _ 15, 16, 27
community of property in 16, 17, 27
community of profits in 16, 18, 24
profits how shared 16, 24, 26
property how shared 18-24, 27-29
what constitutes between the parties 15-29
what constitutes as to third persons 30, 53-70
by sharing profits generally 18-24, 33, 34
b}' sharing profits as such 33, 34, 35, 53-62
by sharing net profits . . . .33, 34, 35, 38, 39, 40, 42, 43,
47, 53, 56-62
"746 INDEX.
PARTNERSHIP — conimwec?. ^'^°"
by sharing profits as a dormant partner 63
by holding out to the world, that one is a partner . . 64, 65
by receiving a part of the profits, as profits, as an
annuitant 66-69
by taking the profits as trustee for others 70
when it does not exist as to third persons 30-52
by mere joint purchase 30, 31
by mere joint sale 30, 31
by share of profits as agent . . 32-34, 38, 40, 41, 42, 47-52
by share of gross earnings 33-36, 41, 42-47
by share in fisheries 42
by shipment on half profits 43, 44
by portion of profits in lieu of rent 43
by share of gross earnings instead of wages . . . 41 17
by receiving an annuity out of the profits, not as
profits, but as a fund for pajTuent 67, 68
different sorts of.
universal partnership 71, 72, 73
general partnership 71. 74
special or limited partnership 71, 75, 408
private partnership 76
public company 76, 77, 79
in commandite 78
when deemed at vnll, or not 227
when deemed to be continued, or not, after expiration
of the original term 271, 279
business of partnership 81, 82, 83
in trade 81, 82
in purchase and sale of lands 82, 83
in collieries 82, 83
how formed 84, 85
for what period 84, 85, 277
for life 84, 85, 271
for years 84, 85, 277
indefinitely 84, 85, 271
when deemed to be renewed 279
in what mode formed.
by express or implied agreement . . . . . . . 86,87
by written articles 86, 87
by parol 86, 87
right of majority to govern in 123, 213
rights and interests to partners in partnership prop-
erty 88-100
(See Pautxers.)
partnership property, what is 92
INDEX. 747
Section
PARTNERSHIP — continued.
no difFerenoe between real and personal property, as
to rights of 92, 93
■whether real estate of partnershiji is deemed dis-
» tribiitable as personal property or not .... 92, 93
whether good-will of a trade is partnership property,
or not 99, 100
powers and authorities of partners in partnership
property 94
{See Partxers.)
liens of rights and partners on partnership property . 97-99
powers and authorities of partners generally . . . 101-125
(See Partxers.)
liabilities and exemptions of partnerships upon con-
tracts 123-1G8 a
(See Partners ^vxd Partxership.)
partnership not bound for acts of one partner not
within the scope of the partnership business 106, 107, 112,
113, 126, 127
not bound for fraudulent acts, known to be such by
the other party 110-113, 128-131, 133
not bound, where credit is exclusively given to one
partner 134, 137
what is proof of an exclusive credit, or not . . . 138-144
not bound for debts contracted before the partner-
ship is formed 146-151
unless specially agreed to 152
not bound upon preliminary contracts in contempla-
tion of a future partnership 149-151
new partnership not bound for debts of the old fii'm . . 152
unless specially agreed to 153
when discharged from a contract by subsequent acts
or contracts 155
when acceptance of negotiable security of one part-
ner discharges the partnership 155-158
when giving credit to a new firm discharges the old firm 156-159
how payments made after dissolution of old firm, and
new fimi is formed, are appropriated 157
■when a partner, after retirement, is discharged, or not,
from future debts of 159-163
■when notice of retirement or dissolution necessary,
or not 160-162
what notice of retirement or dissolution is suflicient,
or not 161
when are partners liable, after retirement or dissolu-
tion, for new debts, notwithstanding notice . . . 162, 163
7i8 INDEX.
Section
PARTNERSHIP — continued.
when liable in cases of fraud 162, 163
joint-stock companies, liability of partners in . . . . 164
whether shareholders can limit their liability to the
funds 164, 106
liable for torts generally 166-168
when liable for torts, or not, of one partner .... 166
rights, duties, and obligations of partners between
themselves 179-186, 331-333
(See Partners.)
duty to make no secret or private gains against part-
nership interests 174-186
rights and duties of partners under ai-ticles of . 173, 187-215
construction of articles of partnership 187-215
specific performance of articles, when decreed or
not 188, 189
rules of construction of articles of 190, 191
covenants in, when construed to be several, as well
as joint 190, 191
how and when articles are superseded, or waived, or
qualified 192-199
effect of entries in books of partnership ... 24, note, 191
construction of articles as to the commencement thereof . 194
debts of partners, when joint and several 362
construction of articles as to the duration thereof. . 195, 196
construction of articles as to partnership, continued
after the stipulated term 197
construction of articles as to continuance thereof after
death of a partner, by his appointee or representa-
tives 199-201 a, 275
construction of articles as to the name and signature
of firm 202
construction of articles as to carrying on other trade . 174,
179, 209, 210
construction of articles as to advance of capital stock . 203
construction of articles as to management of part-
nership by one or more partners 204
construction of articles as to what shaU be deemed
partnership property 205
construction of articles for annual accounts and set-
tlements 206
construction of articles as to winding up concerns
upon a dissolution thereof 207
construction of articles as to one partner's taking the
property at a valuation on a dissolution . . 206-208, 396
in cases of a bankruptcy 206-208, 396
INDEX. 749
Section
PARTXERSHIP — continued.
construction of articles as to business being car-
ried on by one of" the partners alone after dis-
solution 210, 211, 212 •
construction of articles as to right of majority
or select number to govern 213
construction of articles as to right to expel a
partner 214
construction of articles to settle disputes by arbi-
tration 215
remedies to compel specific perfoi'mance of an agree-
ment to form a partnership 187-189, 202
remedies for violation of articles at law, or in equity 193, 216-228,
232
when by injunction 193, 202, 224, 225, 227
when not by injunction 215, 217, 224, 225
when receiver will be appointed . . 228, 229, 231, 330, 331
when specific performance of, decreed . . 187, 188, 189, 202
dissolution of 265-319
by acts of parties 265, 267
by efflux of time 267, 278
by tacit renunciation 272
by jjerformance of voyage on business 280
by extinction of partnership property 280
by decree of a court of equity 282-285
for what causes 232,233,286-299
by decree for causes at time of formation of part-
nership 233, 286
for subsequent causes 286
for fraud 233, 285, 286, 287
for gross misconduct 233, 288
for impracticability of the undertaking 290
for incapacity or inability of partner 292-294
for insanity 295-297
for absence fi-om the state 298
when dissoluble by arbitration 299, 300
when dissoluble at pleasure or not . 268-271, 274-277, 307, 308
when deemed to endure for life 271
when deemed to be prolonged or renewed beyond
original term 85,86,271,272,304
when dissolved by operation of law 302-306
by change of state or condition of party . . 302, 303, 305
by marriage 306
by voluntary assignment of all interest in part-
nership 307-310
by involuntary assignment of partnership property 311-313
750 INDEX.
PARTNERSHIP — continued. ^'"""^
by execution and levy on all partnership prop-
erty 311,312
by bankruptcy and insolvency 313 814
at what time dissolved by bankruptcy and in-
solvency 314
by war between countries of imi-tnei's 315,316
by death of one partner . . . 317-319
at what time dissolved by death 319
when notice of dissolution necessary or not 159-163, 335, 336
what notice sufficient, or not 161 162
no notice in case of death 336 343
or of bankruptcy 335
or to new customers 150
in cases of dormant partners 159
dissolution of, effects and consequences of 320-411
between the partners themselves 320-356
in cases of voluntary dissolution 320-322
lien of partners on effects 360, 361
what powers and authorities remain 322, 323, 324, 324 a,
324 h, 328, 344
what not 322, 323, 344
no power to trade anew 322-324 329
what admissions and acknowledgments of part-
ners bind or not . . . .107, 323, 324, 324 a, 324 b, 333
what powers over partnership property remain
after 324-328, 333
to pay debts of partnership 324-328
to wind up the affairs 324-328
to make compositions 33 1
when receiver appointed 228, 229, 231 330
accounts how taken 346-349, 352, 353
representatives of partner entitled to account
and share of property 342^ 343^ 3gl
when sale directed or not .... 206, 207, 349, 350, 356
all property to be accounted for 349
when effects may be taken at a valuation or not . 350, 351,
352, 353, 354, 355, 396
Avhen and how effects may be assigned to one
partner on dissolution, or not .... 357, 358, 359, 396
not allowed in cases of bankruptcy 396
dissolution of, effects and consequences of as to third
persons ^. 334,335,357-411
when notice of dissolution necessary, or not, as
to third persons 159-163, 334, 335, 336, 343
no notice necessary to new customers 160
INDEX. 751
Section
PARTNERSHIP — continued.
nor in cases of bankruptcy 336
nor in cases of death 336, 343
dissolution in cases of bankruiitcy, ell'ects and conse-
quences of 337, 374, 375
all powers of bankrupt gone 338, 339, ,340
powers of solvent partners . . . 338, 339, 340, 407, 408
powers to settle and 2)ay debts, collect property,
&c., remain 339-341
to wind up affairs 340, 341
but not to contract new debts 338, 339, 343
whether assignment or valuation in favor of one
partner in bankruptcy good or not 358, 373
rights and powers of assignees 375
dissolution by death, effects and consequences of . . . 343-356
takes effect from time of death without notice
thereof 336, 343
no new contract can be made 343, 344
representatives of deceased partner entitled to ac-
account 343, 361
lien of, on partnership effects 361
right to share property as tenants in common 343, 346
powers and authorities of survivors 344
survivors may collect and pay debts . . . 344, 346, 347
and wind up afTairs 346, 347
lien of surviving partners 360,361
when sale of effects decreed 349
when effects taken at valuation, or not .... 350-354
how accounts taken 346-351, 352, 353
dissolution by decree of court of equity, effects and
consequences of 356
the same as in other cases 356
sale of effects ordered by 356
dissolution, effects and consequences as to third per-
sons 334, 335, 357-411
when notice of dissolution necessary or not, as to
third persons 159-163, 335, 336, 343
rights of creditors on dissolution 357, 358
when and what equity of creditors in partnership
effects 357, 358, 359
when creditors have a lien on partnership effects
or not 326, 358-361
when creditors may enforce a lien or claim against
partnership effects in equity 326, 358-361
joint creditors, remedy of, when all partners are
liviuix 361
75.2 INDEX.
Section
PARTNERSHIP — continued.
when one or more partners are dead . . . 361, 362
against surviving partners 346, 362
when they have a quasi lien .... 326, 361, 390
remedy in equity against deceased partner's
estate 361, 362
debts of partnership held to be joint and several . . 362
equities of, as to separate elFects of partners,
when one partner is a creditor of partnership . . 390
joint creditors, rights of, in respect to separate
creditors 363, 364
joint creditors entitled to priority out of joint effects,
but not of separate effects 363-366
separate creditors entitled to priority out of separate
eflFects 363, 364, 365
in cases of death of one partner and bankruptcy of
survivors, whether joint creditors compellable to
proceed against the estate of deceased partner in
aid of bankruptcy 364, 365
partner, who is a creditor of firm, cannot come in
competition with other joint creditors against
partnership effects , . 405-407
what property is deemed joint, and what several .... 372
what debts treated as joint, and what as several 367, 368' 369, 373
conversion of joint debts into several, and e contra,
what is, and when it exists 369, 370, 391-394
joint creditors, rights of, in cases of bankruptcy .... 376
joint creditors have a priority out of joint estate, and
separate creditors out of separate estate .... 376-378
foundation of the rule 378
exceptions to the rule 378-381
where joint creditor is petitioner in bankruptcy . . 379
where there is no joint estate and no solvent partner 378, 380
where there are no separate debts 378, 381
eflFect of persons being at once joint and separate
creditors of partners in bankruptcy 384-386
they can only elect to prove against the joint or several
estate, and not against both 384-387
exceptions to this rule 387-394
doctrine in bankruptcy as to creditors holding pledges or
mortgages 389
when and how a partner, who is a creditor of the firm is
entitled as against the joint or separate effects of other
partners 890,391,405-408
whether the separate creditors of a partner, who is cred-
itor of firm, may prove against the joint estate .... 390
INDEX. 753
Section
PARTNERSHIP — conthmcd.
whether the joint creditors may prove against the sepa-
rate estate of a partner, indebted to the firm 391
exceptions to the rule, that creditors cannot prove in
either case 392, 393, 394
in cases of fraud 392
in cases of dormant partners 393
in cases of minor partnership constituted of persons
of a larger firm 394
set-ofi in bankruptcy, when and how allowed 395
not generally allowed of joint debts against several
debts, or the contrary 395
agreement of parties to take at a valuation in cases of
bankruptcy not allowed 396
what in cases of bankruptcy is treated as propei-ty in the
reputed ownership of bankrupt, or not 397-404
PARTNERSHIP PROPERTY. {See Partners and Partnership.)
what is to be deemed or not 92, 93, 205
what property is deemed joint, and what several 371-373, 397-404
when the good-will of a trade deemed to be 99, 100 ,
rights and powers of partners in and over 94
when and how it may be assigned to one partner, or not 101,
309, 314, 396
how distributed on dissolution 350-355
reputed ownership in, what is, or not 397-404
PART-OWNERS.
rights, powers, and liabilities of, in general . . . 89, 412-453
when they may bind each other, or not . . . 419, 440, 441, 446
in cases of ships 415-418
no right of survivorship among 417
one part-owner of ship can sell only his own share, and
not the entirety 417
rights of, as to possession, use, and employment of ships 418,
427, 428, 434, 435
right of majority to govern 418-422, 427, 428
rights of minority 427-432
contribution may be claimed for repairs made by common
consent 419, 420, 440, 441
but not against part-owners, who dissent 411-425
rights of part-owners, when equally divided in opinion and
interest 435
right of minority to employ ship, if majority decline . . 428-439
whether a sale can be decreed of the ship, where part-
owners are etjually divided 435-439
whether part-owners have a lien on the shii) for ex-
penses and advances and materials furnished for a voy-
age 441-444
48
754 INDEX.
Section
PART-OWXERS — conUnned.
part-owners engaged in joint adventure are entitled to the
same equities and liens as partners 407, 408
part-owners engaged in joint adventure are treated as
partners, as to such adventure 75, 407, 408
appointment of master and officers belongs to majority of
ship-owners 432
remedies of part-owners against each other 449
remedies against third persons 454, 455
right and duty of, to account for ship's earnings . . . 449-452
declarations and admissions of one part-owner, when they
bind the others 453
remedies by part-owners upon contracts 454
remedies by part-owners for torts 454
remedies against part-owners upon contracts 455-457
remedies against part-o^vners upon torts 458-460
part-owners, when liable in solido upon contracts . . ' . 445—457
when liable in solido for torts 458-460
when liable for torts of their agents 458-462
when not liable for torts of their agents 458-462
PART-OWNERSHIP,
how it diifers from partnership 89, 90, 410-414
how it may be dissolved 447, 448
PAYMENT,
when good, out of partnership effects, by one partner, or
not 132, 133
after dissolution of partnership 328
when payment of his separate debt good, or not . . . 132, 133
how ajjpropriated 157
PERFORMANCE, SPECIFIC,
in equity, when decreed of partnership duties or ar-
ticles 187-193, 204-210, 216-227, 232, 233
when of articles to form partnership 187-189
PLEDGE.
when partners have power to pledge partnership property,
or not 94-96, 101
creditor, holding pledge, how and when he can prove in
bankruptcy 389
POWERS AND AUTHORITIES OF PARTNERS . 94-97, 101-125
(/See Partners a:st> Partnerships.)
limitations of 126-133
of part-owners 89, 90, 412-453
{See Part-owners.)
PRIVATE PARTNERSHIP,
what is 76
PROFITS.
meaning of 21
INDEX. 755
Section
TROTITS — continued.
community of interest of partners in 22, 23, 24, 28
(See Pautneus.)
when participation in profits makes a person a partner 18, 19,
23, 30-47, 52-69
when not 30-47
distinction between sharing gross and net profits 24, 25, 33, 34,
37, 38, 39, 41
how shared in absence of special agreement . . . 20-22, 24-27
partner cannot appropriate any to himself exclusive of the
partnership 174
all must be accounted for 175, 180, 349
PROHIBITION TO ENGAGE IX OTHER TRADE.
when implied 178,179,209,210,211
when expressed in articles 210
when courts of equity will enforce 210, 211, 212
PROMISSORY NOTES.
when one partner may bind the firm by signing, or in-
dorsing 102, 102 a, 136-139, 142, 143
when not 110-113, 127, 129, 130, 132, 133
PROPERTY OF PARTNERS IN PARTNERSHIP PROP-
ERTY. (See Partnership.) 88-100
PUBLIC PARTNERSHIP OR COMPANY,
what is 76
PURCHASE, BY ONE PARTNER,
when it binds the firm, or not 102, 111, 112, 113
E.
REAL ESTATE,
partnership property in 95, 93
(/See Paktnership.)
how treated in equity 93
RECEIVER,
when a court of equity ^vill appoint or not . . . 228-231, 330
REFERENCE TO ARBITRATORS. (See Arbitration.)
one partner cannot bind by a 114
agreement for, will not be enforced in equity 215
when award may include a dissolution of partnership . . . 215
RELEASE.
one partner may in his own name release a debt due to
the firm 114, 115, 252
when release not binding on the firm 132
release to one partner discharges all 168
RE]\IEDIES BETWEEN PARTNERS 193, 216-233
(See Partners and Partnership.)
756 INDEX.
REMEDIES BETWEEN FARTl^iERS — continued. ^'''""'
when at law or not 218, 219, 234:-24:l, 256-258
when in equity 222-233, 235, 236, 259-261
by partners against third persons 234-264
when at hiw, or not 234-242
when in equity 234, 235, 259-261
when in cases of tort 256, 257
when taken away by fraud or misrepresentation of
one partner 237, 238
RENEWAL OF PARTNERSHIP. (See Partnership.)
when and how renewed 279
effect of tacit renewal 279
REPAIRS,
when part-owners liable for, or not 419-426, 440
REPRESENTATION OF PARTNER,
when it binds the firm, or not 107,108,109
REPUTED OWNERSHIP,
in bankruptcy, what is, and what is not . . 397-404, 407, 408
RETIREMENT OF PARTNER. (See RetirixXG Partner.)
RETIRING PARTNER.
when discharged from old debts, or not 154-161
when discharged from new debts, or not 159-163
when notice of retirement of, discharges from future debts 159-161
what is due notice of retirement of 161-163
bound in cases of fraud 162, 163
RIGHTS AND DUTIES OF PARTNERS
between themselves 169-186
(See Partners.)
to third persons 126-128
RIGHTS AND INTERESTS OF PARTNERS IN PART-
' NERSHIP PROPERTY 88-100, 122, 126
(See Partnership.)
s.
SALE OF PARTNERSHIP PROPERTY.
when and how directed in equity , . . 206, 207, 349, 350, 356
SECURITY, SEPARATE,
of one partner, when it discharges the firm, or not . , . 142, 143
of new firm when it discharges the old . . . 134-144, 154-158
SEPARATE CREDITORS.
rights of, in general 376-388
rights of, in bankruptcy 370-394
SET-OFF,
in partnership, what is allowable or not 395
in bankruptcy 395
INDEX. 757
Section
SHIPS. (.See Part-owners.) 412-460
rights, ])owers, duties, and liabilities of owners of . . 412-460
SHIP'S HUSBAND,
meaning of the phrase 418
powers and authorities of 418, 446
duties of • 418, 419
lien of 441, 443
what powers and authorities he has not 446
SIGNATURE OF FIRM,
articles respecting « . . . . 202
necessary in general to bind the firm in case of contract
102, 134, 135, 142, 143
SLANDER, ACTION FOR.
by the firm 255, 256, 257
against the firm 256, 257
SOLVENT PARTNERS.
rights and powers of, on bankruptcy . . . 337-341, 407, 408
SPECIAL PARTNERSHIP,
what is 75
(See Partnership.)
SPECIFIC PERFORMANCE,
when compelled in equity, or not, of partnership duties
or articles .... 187, 188, 189, 204-215, 216-228, 232
to form a partnership, when decreed, or not . . 187, 188, 189
SPECULATIONS,
partner bound to abstain from 178
SUB-PARTNER,
liability of 121
SURETYSHIP,
how aflfected by change of firm 243-248
SURVIVING PARTNERS.
rights, powers, and authorities of 342-347
SURVIVORSHIP,
does not exist in cases of partners 88-91, 343
nor in cases of part-owners 417
T.
TENANTS IN COMMON,
rights of 90
TORTS,
liability of partners to third persons for 166-168 a
liability for, of one partner 166
liability of third persons to partners for . . 234, 235, 256-259
deemed several, as well as joint 167
when partners are not liable for 168
758 INDEX.
Section
TORTS — continued.
remedies for, by part-owners against third persons .... 454
remedies by third persons against part-owners . . . 455-460
part-owners liable for, when and how far 166-168 a
partners liable severally, as well as jointly, for . 167, 458-462
suit for, should, regularly, be brought by all the part-
ners 167, 454
suit for, should be regularly brought against all the
partners 167, 458-462
releaseof torts to one partner discharges all 168
liability of third persons to part-owners for 454
by part-owners to third persons for ... 458, 462, 463
of one part-owner to the others for 449, 450
TROVER,
between part-owners, when it lies, or not 449
TRUSTEE PROCESS,
when debt due a partnership, can be attached on .... 264
TRUSTEES,
when liable as partners. (/See Partxkrship.) ... 70, 106
u.
USAGE OF TRADE,
effect on partnership 127
when partnership bound by 127
VALUATION OF PARTXERSHIP EFFECTS.
agreement for, when and how decreed in equity 207, 208, 246, 247,
248, 358, 359, 360, 373
when not 208, 396
not in cases of bankruptcy 208, 396
w.
WAGES.
when a person receiving part of profits in lieu of wages
is a partner or not 32-51
WAR,
effect of, on partnership 9, 240
when it dissolves partnership 315, 316
r77jn\\/
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