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Elementary Treatises on all the Principi^ Subjects of the Law
The special features of these books are as follows:
1. A succinct statement of leading principles In black-letter type.
2. A more extended commentary, elucidating the principles.
3. Notes and authorities.
Published in regular octavo form, and bound in buckram.
Black on Bankruptcy.
Black on Construction and Interpretation of Laws (2d Ed.).
Black on Constitutional Law (4th Ed.).
Black on Judicial Precedents.
Bogert on Trusts.
Burdick on Real Property.
Chapin on Torts.
Childs on Suretyship and Guaranty*
Clark on Code Pleading.
Clark on Contracts (3d Ed.).
Clark on Criminal Law (3d Ed.).
Clark on Criminal Procedure (2d Ed.).
Clark on Private Corporations (3d Ed.).
Clephane on Equity Pleading.
Cooley on Municipal Corporations.
Costigan on American Mining Law.
Croswell on Executors and Administrators.
Dobie on Bailments and Carriers.
Dobie on Federal Jurisdiction and Procedure.
Eaton on Equity Jurisprudence (2d Ed.).
Gardner on Wills (2d Ed.).
Gilmore on Partnership.
Goodrich on Conflict of Laws.
Hale on Damages (2d Ed.).
Hughes on Admiralty (2d Ed.).
McKelvey on Evidence (3d Ed.).
Norton on Bills and Notes (4th Ed.).
Radin on Roman Law.
Shipman on Common-Law Pleading (3d Ed.).
Smith's Elementary Law.
Tiffany on Agency (2d Ed.).
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Tiffany on Persons and Domestic Relations (3d Ed.).
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Vance on Insurance.
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Hornbooks on the law of other subjects will be published from
time to time.
PnblisHed and for sale hj
WEST PUBLISHUrG CO., ST. PAXTI., MCfN.
CliniT- Id
eo(>«|i
HANDBOOK
ORTHB
LAW OF PARTNERSHIP
WCLUDINQ
LIMITED PARTNERSHIPS
BY EUGENE ALLEN GILMORE
PROFESSOR OF LAW "^
m THE UNIVERSITY OF WISCONSIN
t . '•
• * »•
'-*-•"--- ', » f .. ' It, » • •« • C » 1 » .
ST. PAUL, MINN.
WEST PUBLISHING CO.
1911
OOPTBIGHT, 1911
WBST PUBLISHING €X)MPANY
(Qil.Pabt.)
L PO
JUL
•• • » to «
c c
J « "^ •> c
vl r ^ »- . fc
i> •
• « •
• k b k
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• k •• 4 ^
PREFACE
The original arrangement with the publishers contem-
plated, not an entirely new treatise on the law of Partner-
ship, but merely a new edition of Mr. William George's
text on this subject. After the work was begun, however,
it seemed advisable to abandon Mr. George's text for the
most part, and to prepare a substantially new treatise, us-
ing such portions of his work as should be found suitable.
With the exception, therefore, of Chapters VIII and IX,
the present book, both in arrangement and text, is new. A
few passages and a number of citations and notes have been
taken from Mr. George. Chapters VIII and IX are repro-
duced substantially as found in Mr* George's book, with the
addition of later cases. The law on the subject being rea-
sonably well worked out in the authorities, the aim of the
present author has been to make a clear and definite state-
ment of the leading principles, in a form serviceable alike
to students and practitioners. Whatever merit the book
has lies in this direction, rather liran in the discussion of
controverted points, or the advancement of new theories.
The citations, while including all the leading cases, are not
exhaustive, but are sufficiently full for practical purposes.
The author acknowledges his great indebtedness for valua-
ble assistance in the task to Mr. Henry A, Hirshberg and *
to Mr. Oliver S. Rundell; also to Mr. Olcott O. Partridge
for his preparation of the chapter on Limited Partnerships.
£• A* G*
Madison, Wisconsin, May, 1911.
TABLE OF CONTENTS
CHAPTER I
WHAT CJONSTITUTES A PARTNERSHIP
BsctloB
1. Partnership Inter Se — ^True Partnership.. 1-6
2. Partnership the Result of Intention 6-7
3. Legal Intention Controls 7-10
4-6w Partnership by Operation of Law — Partnership as
to Third Parties 10-18
7. Doctrine of Partnership as to Third Parties
Overthrown 19-24
& Tests of Intention — In General 25-26
9. Mutual Agency 26-29
10. Sharing Gross Returns 29^1
11. Sharing Profits 81-38
12. Sharing Profits and Losses. 34-86
18. Oommon Ownership of Property 86-^
14. Joint Enterprise or Business. . : 89-40
15. Relations Distinguishable from Partnership. •..•• 40-46
16^ Contract for a Partnership 47-49
17. Promoters of Cori)oratlon8. • 60-51
18. Liability of Stockholders In Defective Corpora-
tions 51-58
19. B3zistence of Partnership — Nature of Question... • 58-59
20. Burden of Proof 59-60
21. Partnership by Estoppel • • 61-68
CHAPTER II
FORMATION AND CLASSIFICATION OF PARTNERSHIPS
22. Partnership Arises trom a Contract 69-77
23. Requirements of the Contract 77
24. Competency of the Parties 77-89
25. Consideration 89-92
26. Formalities • 92-93
27-28. Statute of Frauds 93-98
20. Subject-Matter 98-99
3a Legality of Object 100-lOi
Oil.Pa»t. (vii)
yiii TABLB OF CONTENTS
Section
31. dasslflcatlon of Partnerships 103
3Z Ordinary Partnershii» — Unlverfial, General*
Special, or Partic^ilar 104
83. limited Partnerships 105
34. Joint-Stock Companies... 105
85. Subpartnershlps 106
36. Mining Partnerships 107
37-38. Trading and Nontrading Partnerships 107-110
39. Classification of Partners 110-112
CHAPTER III
THE NATURE AND CHARACTERISTICS OF A PARTNERSHIP
40. Various Conceptions of a Partnership 113-118
41-42. The Partnership Name 118-127
43. Partnership Property 127-131
44. What is Included in Partnership Property... 132
45-46. Partnership Capital 132-133
47-48. Amount of Contribution 134-136
49-51. Good Will.... 136-146
62. Title to Partnership Property — How Taken and
Held .* 146-153
53. Conversion of Partnership Realty Into Personalty 154-155
54. Extent of Conversion 155-169
55. Nature and Extent of Partner's Interest in Part-
nership Property 170-176
56-57. Transfer of Partnership Property — By Act of
Partnership ,.:... 176-179
5a iFirm Creditors' Rights in Firm Assets— Part-
ner's Lien 179-181
59. Change of Firm Property into Separate Prop-
erty 181-189
60-61. Use of Firm Property to Pay Separate Debts
of Partners •••••• 189-194
• 62. By Act of a Single Partner. . . ^ 195-196
63. Form of Conveyance 196-197
64. Successive or Simultaneous Transfers of each
Partner's Interest 197-204
65-66. Effect of Death of Partner on Partnership Prop-
erty 204^208
67. Surviving Partner as Quasi Trustee 208-214
68. Agreement of Partners Controlling Property after
Death of Partner 215-216
TABLB OF CONTBNXa iX
CHAPTER IV
nature; extent, and duration of partnership
liability
Section Page
69. Nature of Liability in Contract 217-220
70. Characteristics of Joint Obligations '• • • . 220-224
71. Partnership Liability and Joint Liability 224-226
72. Quasi Severable Character of Joint Obligations in
Equity 227-231
73. Liability of Estate of Deceased Partner 231-234
74. Extent of Uabillty in Contract 234-235
75. Nature and Extent of Liability in Toji:. 236-239
76. Commencement of Partnership Liability in Con-
tract 240-241
77. LiabUlty of an Incoming Partner • 242-249
7& Liability of Retiring Partner 249-258
79. Termination of Partnership Liability in Contract 258
80. Past Transactions 258-263
81. Future Transactions 263
82. Dissolution by Operation of Law 263-264
83» Dissolution by Act of the Parties 265-272
CHAPTER V
POWERS OF PARTNERS
84. Origin and Nature of the Partner's Power to Bind
the Firm 274
85. Powers of Partners Inter Se 275
86. Powers of Partners as to Third Persons 276
87. Express Power 276
8a Implied Power 276-278
89. Ratification 278-279
90. Estoppel 279
91. Test of Authority— Nature of Question 280-282
92. Limitations Arising from Scope of Business.. 282-286
93. Limitations Arising from Nature of Business 286-287
94-95. Particular Powers Considered — Power to Sell
Firm Property 288-294
96. Power to Pledge or Mortgage Firm Property 294-296
97* Assignment for Benefit of Creditors 297-298
: TABLE OF CONTENTS
Section
9& Power to Buy.. 298-300
99. To Borrow Money 300-302
lOa Issue BUls and Notes 802-308
101. Execute Sealed Instruments 308-313
102. Pay and Ck)llect Debts 313-316
103. Institute and Conduct Legal Proceed-
ings 31^-317
lOi. Receive NoUce 318-819
105. Make Admlssious and Representations 320-322
103. Miscellaneous Powers 322-323
107. Power to Subject Firm to Tort Liability 324-327
108. Illegal Acts— Penalties and Crimes 827-330
109. False Arrest and Malicious Prosecution 330-332
110. Defamation 332-333
IIL FraYid and Misrepresentation 833-334
112. Conversion and Misapplication of Property. •• 834-337
113. Wrongful Use of Trust Funds 337-339
114. Powers of Partners after Dissolution 839-341
115. Particular Powers Considered— Power to Dis-
pose of Firm Assets 842-^43
lia Power to Collect Debts 844
117. Pay and Settle Firm Debts 845 .
11& Perform Existing Contracts 346-^47
119. Incur New Obligations 847-349
120. Make Admissions 849-351
121. Take Firm Debts out of the Statute of
limitattons 351-353
122. Powers of Surviving Partner ••••••• 353-^60
CHAPTER VI
RIGHTS AND DUTIES OF PARTNERS INTER SB
123. Duty to Conform to the Partnership Agreement. . 861-832
124. Right to Participate in Management 832-363
125. Control of Majority 364-369
126. Right to Information Concerning Business 870
127. Duty to Keep and Right to Inspect Accounts 371-378
128. Duty to Devote Themselves to the Business and to
Exercise Care and Skill 873-874
129. Duty to Observe Good Faith 874-378
130. Right to Benefits from Transactions Concerning
Firm Interests 378-881
131. Right to Benefits from Information Obtained as
Partner 881-382
TABLB OF CONTENTS XI
Btetlon
182. Right to Garry on Separate Business • 88^-384
188. Right to Compensation for Services 884-886
184. Right to Indemnity and Contribution 887-892
186. Right to an Accounting 892-894
186. Distribution of Assets among Partners 894-899
137. Partner's So-CaUed Lien 40(M06
CHAPTER VII
REMEn>IES OF CREDITORS
188. Remedies at Law 404
189. Creditors of the Partnership 404-410
140. Creditors of the Separate Partner 410-420
141. Garnishment of Partnership Debtors 420-422
142. Remedies In E>]ulty — Insolvency or Bankruptcy of
rirm 428
143. Firm Creditors Against the Firm Estate 428-425
144. Separate Creditors Against the Firm Estate. • 426
145. Partners Against the Firm Estate 427-481
146. Separate Creditors Against the Separate Es-
tates 431-437
147. Firm Creditors Against the Separate Estates 437-448
148. Partner Against the Separate Estate of a Co-
partner 444-446
149. Rights of Secured Creditors 446-450
150. Rights of Joint and Several Creditors — ^Double
Proof 450-453
151. Insolvency or Bankruptcy of a Partner 453-457
15Z Rights Against Estate of Deceased Partner... 457-458
CHAPTER VIII
ACTIONS BETWEEN PARTNERS
158. Action on Partnership Claim or Liability — At Law 469-406
154. In Equity 466-471
155. Under the Code 471-472
156. Actions between Firms with Common Member. . • . 473-478
157. Action at Law on Individual Obligation 478
158. Claims Not Connected with Partnership 479
159. Claims for Agreed Final Balances 479-181
160. Express Contracts between Partners 481-487
161. TiOsses Caused by Partner's Wrong 488-490
ZU TABLB OF C0NTBNT8
Section TBg9
162. Bqultable Actions in General— Jurisdiction 491-492
163. Necessity of Praying for a Dissolution 492-498
164. Noninterference in Matters of Internal Regu-
lation 498-494
165. Effect of Laches 494-496
166. Accounting and Dissolution 497-498
167. Eight to Accounting 49^-^10
168. Accounting upon Dissolution 499-503
169. Accounting without Dissolution 604-510
170. Specific Performance 510-514
171. Injunction « 514-^19
172. Receivers 619-{K29
CHAPTER IX
ACTIONS BETWEBN PARTNERS AND THIRD PERSONS
178. In General 530
174. Parties to Actions by the Firm 580
175. Claims Arising Ex Contractu 581-<^
176. Contracts in Firm Name 531-533
177. Contracts in Name of Partner 538-540
17& Claims Arising Ex Delicto 540-542
179. Parties to Actions against the Firm 542
180. Liabilities Arising Ex Contractu 542-548
181. Liabilities Arising Ex Delicto 549
182. Effect of Changes in Firm 550
183-185. Admission of New Member 550-4553
186-188. Retirement of Old Member 653-556
189. Death of Member 556-657
190-193. Bankruptcy and Insolvency 558-559
194. Disqualification of One Partner to Sue • • • 560-565
195. Action in Firm Name 566-667
CHAPTER X
TERMINATION OF THE PARTNERSHIP
196. By Act of the Partners — ^Mutual Assent 666-670
197. By Act of one Partner— Partnership at Will* • 670-671
19a Partnership for Fixed Period 671-678
TABLB OF CONTENTS
■•etion Pm«
199. Dissolution by Operation of Law 67&-581
(a) Death of a Partner 573-575
(b) Bankruptcy of a Partner or of the Firm. . 675-576
(c) Marriage of a Female Partner 576-577
(d) Where the Business has Become lUesal.. 578
(e) Alienation of Entire Firm Property or
Partner's Interest Therein. 578-581
200. Dissolution by Judicial Decree — Impossibility of
Success 581-583
201. Incapacity or Insanity of a Partner ••• 683-580
202. Misconduct of Partner 685-689
203. Annulment of Partnership^ 689-501
CHAPTER XI
LIMITED PARTNERSHIPS
204. General Nature— Definition 092-695
205. Establishment of the Relation — Statutory Author-
ity 695-601
200-207. Purposes 601-602
206. Location of Business ; 603-604
209. Members— General and Special 604-605
210. Gontribution to Capital— How made 606-607
211. Certificate s-*« 608-611
212. Recording 612-613
213. Publication eia-617
214. Affidavit of Payment of Capital 617-^18
215. Failure to File Certificate 618-619
2ia Duration — Continuance or Renewal 620-622
217. Effect of Alteration 622-623
218-219. Firm Name— Firm Sign 623-626
220. Withdrawals of Capital 626-628
221. Bights and Liabilities 62&-631
222. Liability for Fraud 631-682
223-^S24. Fraudulent Preferences 632-634
225. Assignments for Benefit of Creditors 635-636
226. Dissolution 636-638
227. Death of Partner 63&-639
228. Admission of New Partners 639
229. Sale of Partner's Interest 640
230. Miscellaneous Statutory Provisions 640-642
281-232. Actions-^Between Members — Between Firm and
Third Persons • 643-^644
This volume contains
Key- Number Annotations
Tliftt 18 to say, for every j^int of Uw which 10 stateJ or
Jiscusse J in the text, and in 8u{>{>ort of which cases are
cited, there is adJed to the author's note a citation to the
Key-Numher section or sections in the Decennial Digest
or in the Key-Mumher Series, under which all cases di-
rectly involving that j^int have heen digested. A similar
citation to the Century Digest is given, excet>t where the
«)nnci^le involved is one on which no case law CTisted
^rior to 1897.
Gil.Pabt.
(xiv)t
HANDBOQX
ON THE :
LAW OF PARTNERSHIP
- -* «
CHAPTER I
•j^
WHAT C?ONSTITUTBS A PARTNERSHIP
•
1. Partnership Inter Se — True Partnership.
2. Partnership the Result of Intention.
8. Legal Intention Controls.
4-6w Partnership by Operation of Law — ^Partnership o to Third
Parties.
7. Doctrine of Partnership as to Third Parties Overthrown.
& Tests of Intention — In General.
9. Mutual Agency.
10. Sharing Gross Returns.
11. Sharing Profits.
12. Sharing Profits and Losses.
13. Ck)mmon Ownership of Property.
14. Joint Enterprise or Business.
15. Relations Distinguishable from Partnershipi.
16. Contract for a Partnership,
17. Promoters of Corporations.
18. Liability of Stockholders in DefectiVe Corporations
19. Existence of Partnership — ^Nature of QuABtlon.
20. Burden of Proot
21. PartnersUp by EstoppeL
PARTNERSHIP INTER SE— TRUE PARTNERSHIP
1. Partnership is a relation existing, by virtue of a contract,
express or implied, between persons carrying on a
business owned in common, with a view of profit to
be shared by them.
Gil.Pabt. — ^1
• •
. ....
2 WHAT CONSTITUTES A PARTN¥:RSHIP (Ch. 1
A complete and e^^ustive definition of the term "partner-
ship/' in the presenf ^codified state of the law, is imprac-
ticable. Numerous ^attempts have been made to formulate a
satisfactory statjm^nt of the essential elements constituting a
partnership, .J}ttf.*^&c various definitions have been approxi-
mate rather. tteih exhaustive."* This is due in part to the
difficultyjnlicrent in any attempt at exhaustive definition. It
is also».(iftft» in part to the fact that "the law of partnership
rest^ on, sr foundation composed of three materials : The com-
mqn%vf ; the law merchant ; and the Roman law" * — and
jffo/n'these sources come fundamentally different conceptions
liqi* ^partnership. . It is further due to the fact that the term is
»*1ised to describe a situation of fact composed of several ele-
;• *ments. In other words, the existence of a partnership is de-
termined by the concurrence of several independent facts re-
sulting from an agreement between the parties, such as, for
example, the ownership of property in common, the joint own-
ership of capital, sharing of profits and losses arising from
the use of common property or the prosecution of joint ven-
tures, and the joint conduct of a business owned in common.
The existence or nonexistence of certain of these elements
constitutes tests by which the existence or nonexistence of a
partnership is determined. Some of the difficulty in defining
a partnership lies in the confusion that has existed in the
courts as to which elements were necessary to constitute a
partnership, varying tests having been applied from time to
time.*
1 MEEHAN T. VALENTINE, 145 U. S. 611, 12 Sup. Ct 972, 86 L.
Ed. 835, Gilmore, Cas. Partnership, 45. See ** Partnership*^ Deo.
Dig. (Key No.) f| I-IS; Cent. Dig. U IS-SSyi.
sCoUyer on Partnership, 1.
• Below is given a collection of definitions. A number are statuto-
ry, and others are collected from standard texts.
"Partnership is the relation Bubsisting between persons carrying
on a business in common with a view to profit" Eng. Partn. Act,
1890 (53 & 54 Vict c. 89).
**The association of two or more persons, for the purpose of carry-
ing on business together, and dividing its profits between them."
Civ. Code Cal. 1906, i 2395 ; Civ. Code Mont 1907, | 5466 ; Civ. Code
N. D. 1905, f 5818 ; Civ. Code S. D. 1908, f 1723.
'*A Joint interest in the partnership property, or a joint interest in
§ 1) INTER SB 8
Partnership is a Relation Existing for Profit
The older definitions commonly speak o{ partnership as
a contract. This is not quite accurate. Partnership is a
relation existing between persons. It is true that that re-
lation arises out of a contract; that a partnership does
not arise except by agreement; but the term is used to
the profits and losses of the business, constitutes a partnership as to
third persons. A common interest Jn profits alone does not" CIy.
Code Ga. | 2629.
^'Partnership is a synallagmatic and cummutative contract made be-
tween two or more persons for the mutual participation in the profits
which may accrue from property, credit, skill or Industry, furnished
in determined proportions by the parties." Civ. Code La. art 2801.
"As between the members thereof, the association, not incor-
porated, or two or more persons who have agreed to combine their
labor, property and skill, or some of them, for the purpose of en-
gaging in any lawful trade or business, and sharing the profits and
losses as such between them." Partnership Law (Laws N. T. 1897)
c. 41>0. f Z
"Partnership is the relation which subsists between persons who
have agreed to combine their property, labor and skill in some busi-
ness and to share the profits thereof between them." Indian Contract
Act f 289.
''A partnership is the contract relation subsisting between per-
sons who have combined their property, labor or skill in an enter-
prise or business as principals for the purpose of Joint profit"* Bates,
Partnership, I 1.
'*A partnership is a voluntary unincorporated association of in-
dividuals, standing to one another in the relation of principals, for
carrying out a Joint operation or undertaking for the purpose of a
Joint profit" Dixon's Law of Partnership, 1.
"Partnership is a contract of two or more competent persons to
place their money, effects, labor and skill, or some or all of them,
in lawful commerce or business, and to divide the profit and bear
the loss in certain proportions." T. Parsons, Partnership, c. 2, f 1.
"Partnership is the relation which subsists between persons who
have agreed to share the profits of a business carried on by all
or any of them on behalf of all of them." Pollock's Digest of the
Law of Partnership (3d Ed.) f 4.
"Partnership is a contract of two or more competent persons to
place their money, effects, labor and skUl, or some or all of them, in
lawful commerce or business, and to divide the profit and bear the
loss in certain proportions." 3 Kent's Commentaries, 23.
"Partnership is a voluntary contract between two or more persons.
Joining together their money, goods, labor and skill, or either or all
of them, upon an agreement that the gain or loss shall be divided
4' WHAT CONSTITUTES ▲ PARTNERSHIP (Ch. 1
describe the relation that results, and not the contract
from which it arises. The contract may -be express or im-
plied. If not expressed, its terms are determined from
all the acts of the parties/
The basis of a partnership is a business enterprise;
without it there can be no partnership. As a legal insti-
tution the partnership was introduced into the common
law from the law merchant, and had its source in the
Roman law. As an aid in facilitating business enterprises
it was well known among the merchants of the Middle
Ages. Few cases involving partnership are to be found
in the common-law reports until the seventeenth century,
because they were tried in the mercantile courts. Yet
though originated by the mercantile class, and usually
composed of merchants, it is not necessary that the busi-
ness be a mercantile one.' It is only necessary that there
be a legal business of some kind conducted in common
with a view to profit. It is not necessary that the per-
sons composing a partnership firm be natural persons.
The conventional person represented by a partnership may
become a member of another partnership.* An artificial
proportionably between them, and having for its object the advance-
ment and protection of fair and open trade." Watson, Partnership,
p. 1.
''See Llndley, Partnership, p. 8, for a more extended collection of
deflnltions."
4 See chapter II, post, p. (38^ on the Formation and Classification
of Partnerships; Brlggs t. Kohl, 182 HI. App. 484; Goons ▼. Coons,
106 Va. 572, 56 S. E. 576; Williamson & Co. v. Nigh, 58 W. Va.
629, 53 S. E. 124. Bee **PartncrsUpr Dec. Dig, {Key No,) U i, ««;
Cent. Dig, ff i, 7, 8.
i Bates y. Babcock, 95 Cal. 479, 30 Pac. 605, 16 L. R. A. 745, 29
Am. St. Rep. 183; Southworth y. People, 85 111. App. 289 (appealed
183 111. 621, 56 N. E. 407) ; CHESTER y. DICKBRSON, 54 N. Y. 1,
18 Am. Rep. 550, Oilmore, Gas. Partnership, 186; Flower y. Bame-
koff, 20 Or. 137, 25 Pac. 370, 11 L. R. A. 149. Bee ''Partnershipr
Dec. Dig, {Key No,) f IS; Cent. Dig, f S.
« In re Hamilton (D. C.) 1 Fed. 800 ; Bollock t. Hubbard, 28 Gal.
495, 83 Am. Dec. 130 ; Meyer y. Erohn, 114 111. 574, 2 N. B. 495 ;
Meador y. Hughes, 14 Bush (Ky.) 652 ; Simonton y. McLaiu, 37 La.
Ann. 663; RAYMOND y. PUTNAM, 44 N. H. 160. Gllmore, Gas.
Partnership, 490. See **Partner8hip,*' Dec. Dig. {Key No.) H 16, t$;
Cent. Dig, f 9.
§ 1) INTER 8E 6
person, such as a corporation, may also become a mem-
ber of a partnership. Though it is usually held that the
power to enter a partnership is not within the implied
powers of a corporation, there is nothing in the nature of
a corporation to prevent it. Consequently, it may do so
where the power is expressly given or necessarily im-
plied.'
Profits to be SJiar^ed
The profits of every business belong to the proprie-
tors of the business. The profits of a partnership business
belong to the partners, who are proprietors of that busi-
ness. The securing of an interest in the profits of the
business is the inducement which causes each partner to
enter the partnership. Ordinarily the profits are by agree-
ment to be shared between the partners in certain propor-
tions, and all attempted common-law definitions state, as
an essential element of a partnership, that the profits are to
be shared. The English Partnership Act, however, does
not in its definition of partnership mention a sharing of
profits, but defines partnership as a common business car-
ried on "with a view of profit." • This has led to some
questioning as to whether or not a sharing of profits is
a necessary object of a partnership. It has been suggest-
ed that "this object appears to be rather an accident than
of the essence of the partnership relation." • It is doubt-
7 Butler V. American Toy Ck>., 46 Conn. 136 ; Geurinck ▼. Alcott, 66
Ohio St 94, 63 N. E. 714, Bee '^Corporations,'' Deo, Dig, {Key 2fo.)
i 979; Cent. Dig, f 16S8,
• English Partnership Act (1890) | 1 (1).
• ''The terms 'partnershiiy' and 'partner' are evidently derived
from 'to part,' In the sense of to divide amongst or share, and doubt-
less the division of profits amongst the partners is an almost uni-
versal object of partnerships. But this object appears to be rather
an accident than of the essence of the partnership relation. It
is apprehended that even before the act of 1890 there could have been
no doubt that persons who carried on a business in all other respects
as partners, but with the object of applying the profits towards some
charitable purpose, instead of dividing them amongst themselves,
would have been partners. If this be so, the omission of any words
suggesting a division of profits from the definition of partnership is
in accordance with the previous law." Lindley's Law of Partnership
(7th Ed.) pp. 10, 11.
6 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
ful if sharing of profits can be considered as merely an
accident of the partnership relation. It seems impossible
to conceive of a proprietorship in a business which does
not include a proprietorship in the profits of the busi-
ness. Hence it is conceived that one with no interest in
the profits of a business cannot be a partner in the busi-
ness itself. It may be true that the profits are never in
fact divided. The profits become the joint property of the
partners, and there is, of course, no reason why they may
not dispose of them jointly, without making any actual
division. But it is believed that, if one conducts a busi-
ness the profits of which do not belong to him, he can-
not be considered as a proprietor of the business, nor held
to a principal's liability with respect thereto.. So in part-
nership a joint proprietorship of the profits is indissol-
ubly connected with a joint proprietorship in the partner-
ship business.**
PARTNERSHIP THE RESULT OF INTENTION
2. Partnership arises only by consent of the parties to
the relationship, and never by operation of law.
The existence of a partnership depends upon the
intention of the parties to establish the relation-
ship which the law terms '^partnership.'
ff
Partnership arises by virtue of a contract. Each mem-
ber of a partnership, by entering into the relationship, au-
thorizes his copartners to act for him in the conduct of
the business. He intrusts his interests to them, thereby
indicating his confidence in them. It is therefore neces-
sary that every one entering into a partnership should
10 Pollock's Digest of the Law of Partnership (8th Ed.) pp. 7, 8.
9. "The evidence must show that the persons taking the profits
shared them as principals in a Joint business, in which each has an
express or implied authority to bind the others.** Harvey v. Childs,
28 Ohio St 319, 22 Am. Rep. 387 ; Briere v. Taylor, 12G Wis. 347,
105 N. W. 817. See ^'Partnership" Dec Dig. (Key No.) §§ i^lS, SO,
70; Cent. Dig. §{ 15-28, 39-48, lU.
\ •
§ 3) BESULT OP INTENTION 7
have the right to select his copartners. It being a rela-
tionship of trust and confidence no one can be forced into
it against his will. Hence the existence of a partnership
depends upon the intention of the parties. *'A partner-
ship inter se must result from the intention of the par-
ties as expressed in the contract, and they cannot be made
to assume toward each other a relation which they have
expressly agreed not to assume." ^^
SAME— LEGAL INTENTION CONTROLS
3. It is the legal or manifestedt not the secret, intention
of the parties that is to detennine whether a
partnership exists.
Here, as elsewhere in the law, intention means the
manifested, not the secret, intention. This is to be ascer-
tained from the words and conduct of the parties; If they
have entered into a written agreement, their intention is
ascertained by a construction of such writing. If the
agreement is not in writing, the intention is to be found
in an interpretation of their words and conduct. Even
if the agreement was originally put in writing, the lan-
guage and conduct of the parties may be put in evidence
to show that it was subsequently varied.** It is the in-
tention to establish the relationship which the law in-
quires into. If two or more agree to enter into a certain
relationship, it becomes a question of law as to whether
or not that relationship constitutes a partnership; if the
agreement is clear, the mere fact that the parties did or
did not think they were becoming partners is immaterial.
They must intend their acts; the consequences of those
acts are determined by law. In one sense, therefore, per-
il London Assurance Ck>. t. Drennan, 116 U. S. 461, 6 Sup. Ct 442,
29 li. Ed. C88. See ^'Partnership;* Dec. Dig. (Key No.) f 17; Cent.
Dig, S 9.
IS England ▼. Curling, 8 Beav. 129. See, also, Lord Eldon in Jack-
son V. Sedgwick, 1 Swanst 460, 469. See '^Partnership;' Deo. Dig.
{Key No.) f{ 17, 18, 20-22, 29; Cent. Dig. if 1, S, 4, ^-8, SO-^S, S8.
8 WHAT CONSTITUTES A PARTNERSHIP • (Ch. 1
sons may be held liable as partners who never intended
to form a partnership. "It is nevertheless possible for
parties to intend no partnership and yet to form one. If
they agree upon an arrangement which is a partnership
in fact, it is of no importance that they call it some-
thing else, or that they even expressly declare that they
are not to be partners. The law must declare what is
the legal import df their agreements." *•
The objection that persons charged as partners had
never intended to be partners was thus answered in a
leading case: "What tihey did not intend to do was to
incur the liabilities of partners. If intending to take the
profits and have the business carried on for their benefit
was intending to be partners, they did intend to be part-
ners. If intending to see that the money was applied for
that purpose, and for no other, and to exercise an effi-
cient control over it, so that they might have brought an
action to restrain it from being otherwise applied, and so
forth, was intending to be partners, then they did intend
to be partners." " So, on the other hand, the mere fact
that the parties themselves call their relation a partner-
ship will not make it so. "Where the question of part-
!• Cooley, J., in BEECHER v. BUSH, 45 Mich. 188, 7 N. W. 785,
40 Am. Rep. 465, Gilmore, Gas. Partnership, 49 ; Brelnig v. Sparrow,
39 Ind. App. 455, 80 N. E. 37. See ** Partnership," Dec. Dig, (Key
No.) H i7, 18, 20-22, 29; Cent Dig. §f i, S, 4, «-«, SO-SS, 58.
14 POOLE Y V. DRIVER, 5 Ch. Dlv. 458.
'The real inquiry always is: Have the parties by their contract
combined their property, labor, or skill in an enterprise or business,
as principals, for the purpose of joint profit? If they have done so,
they are partners in that enterprise or business, no matter how earn-
estly they may protest they are not, or how distant the formation of
a partnership was from their minds. The terms of their contract
given, the law steps in and declares what their relations are to the
enterprise or business and to each other." Spaulding v. Stubbings,
86 Wis. 255, 56 N. W. 469, 39 Am. St Rep. 888.
"Whether the parties knew that they were partners or not, they
certainly intended and contracted to do all that in law is necessary
to create a partnership. The relation of partnership may be es-
tablished, although the parties may not expressly intend to create
such relation." Chapman v. Hughes, 104 Cal. 304, 37 Pac. 1048.
"The intent of the parties must be ascertained from the legal ef-
§ 3) LEGAL INTENTION CONTROLS 9
nership is to be determined from a contract between the
parties to it, the relation must be found from the terms
and provisions of the contract, and even though parties
intend to become partners, yet if they so frame the terms
and provisions of their contract as to leave them without
any community of interest in the business or profits, they
are not partners either in fact or in law. ♦ ♦ ♦ The
terms of the agreement, where there is one, fix the real
status of the parties toward each other." ^' If, however,
the agreement between the parties leaves the relationship
between them doubtful, or, in case there is no express
agreement, if the conduct of the parties is ambiguous, it
is material to show whether or not the parties intended to
form a partnership, for "every case must be solved in fa-
vor of their intent; otherwise we should 'carry the doc-
trine of constructive partnership so far as to render it a
feet of the Instrument, and not the names employed by the parties."
Van Knren y. Trenton Locomotive & Machine Mfg. Co., 13 N. J. Eq.
306.
"Their belief , or understanding, that during that time they were
not partners, in the legal sense of the word, was a mistaken and im-
material view of the law." Famom y. Patch, 60 N. H. 294, 48 Am.
Rep. 313.
Bestor y. Barker, 106 Ala. 250, 17 South. 389 ; Parker y. Canfield.
37 Conn. 250, 9 Am. Rep. 317; Pursley v. Ramsey, 31 Ga. 403;
Fongner v. Chicago First Nat. Bank, 141 111. 124, 30 N. E. 442 ; Grif-
fin y. Cooper, 50 lU. App. 257 ; Halliday y. Bridewell, 36 La. Ann.
238; Gunnison y. Langley, 3 Allen (Mass.) 337; Cudahy Packing
Co. y. Hlbou, 92 Miss. 234, 46 South. 73, 18 L. R. A. (N. S.) 975 ;
Sheridan y. Medara, 10 N. J. Eq. 4G9, 64 Am. Dec. 464; Magoyem y.
Robertson, 116 N. Y. 61, 22 N. E. 398, 6 Ia R. A. 589; Rlghter y.
Farrel, 134 Pa. 482, 19 Atl. C87 ; BenUey v. Brossard, 33 Utah, 396,
94 Pac. 736; Rosenfleld v. Halght, 53 Wis. 260, 10 N. W. 378, 40
AUL Rep. 770. See ^^Partnership:' Dec, Dig, {Key No.) f| 17, 18, 20-
22, 29: Cent. Dig. (( i. ^. 4> ^^i 90-^, $8.
is Sailors y. Nixon-Jones Printing Co., 20 111. App. 509; OLIVER
y. GRAY, 4 Ark. 425; DWINEL y. STONE, 30 Me. 384; Rose y.
Buscher, 80 Md. 225, 30 AU. 637 ; RYDER y. WILCOX, 103 Mass.
24 ; McDonald y. Matney, 82 Mo. 358 ; Van Knren y. Trenton Loco-
motiye & Machine Mfg. Co., 13 N. J. Eq. 302; BURNETT y. SNY-
DER, 76 N. Y. 344, GUmore, Cas. Partnership, 117. See '^Partner-
Bhipr Dec Diff. (Key No.) {| 17, 18, 20-22, 29; Cent. Dig. U i, S, 4,
6^, SO^S, 88.
10 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
trap to the unwary/ Kent, C. J», in Post v. Kimbcrly, 9
Johns. (N. Y.) 470, 604." "
PARTNERSHIP BY OPERATION OF LAW— PART-
NERSHIP AS TO THIRD PARTIES
4. While true partnership results only from the inten^on
of the parties to form the relation, there once ex-
isted in England, and still exists to some extent
in the United States, an anomalous relation call-
ed ''partnership as to third persons," which arose
by operation of law, and which was neither true
partnership nor a liability based upon estoppel.
The origin of this relation was defined as follows :
Those who share the profits of a business are lia-
ble by operation of law as partners to third per-
sons for the debts incurred in such business, irre-
spective of whether or not they are in reality part-
ners as between themselves.
5. REASON: Every one who has a share in the profits
of trade ought also to bear his share of the losses,
for when he takes of the profits he takes a part
of that fund upon which the creditor relies for his
pa3rment.
e. EXCEPTIONS:
(1) Those who share gross returns are not necessarily
liable as partners by operation of law.
(2) A reference to profits as a measure of compensation
for services rendered or for the use of property
furnished does not create a partnership as to third
persons.
t« BEECHER ▼. BUSH, 45 Mich. 188, 194, 7 N. W. 785, 40 Am. Rep.
465, Ollmore, Cas. Partnership, 49.
"One may not make a contract of partnership, and, calling it an
agency^ have It treated as such by the courts ; for, when the facts are
known, the law fixes the legal consequences which flow from them.
Neither may one secure the benefits of the relation of a partner, and,
by contract, secure immunity from its obligations as against credi-
tors. But when the contract is susceptible of the construction put
§§ 4-6) AS TO THIRD PARTIES 11
The Origin of the Rule
It has been seen that partnership is the result of a con-
tract, and that the relationship exists only between those
who have voluntarily consented to assumfe it. Partner-
ship liability, therefore, will exist only where there is a
true partnership. It is possible, however, that a partner-
ship liability may come about by the application of the
well-established doctrines of estoppel. It may be that
two or more persons have represented themselves to a
third person as partners, and have induced such person to
rely on those representations. They will not be permitted
as against him to deny that they are partners. They are
really not partners; but they, are estopped, by reason of
their representations, to show the contrary, andlare there-
fore held as if they were partners.
Notwithstanding the general principle that partnership
results only from a contract whereby the parties indicate
an intention to form the relation, there early became es-
tablished in the law an anomalous relation known as
"partnership as to third parties," which was neither true
partnership nor founded upon estoppeh This anomaly
resulted from making certain acts arbitrary tests of part-
nership, rather than tests of intention. It continued to
exist for many years in England, when it was finally
abandoned, as will be shown presently, and still exists to
some extent in the United States. The basis of the anom-
aly thus created by operation of law was found in the
fact of participating in the profits of a business. It was
laid down that he who shared the profits should be liable
to third persons as a partner. It might be that he had
never agreed to 5e a partner. Moreover, it might be,
when the third person dealt with the alleged partnership,
he did not even think that a partnership existed. Yet if
he later discovered that some one, even though a stranger
to him, had an agreement to share the profits of the
upon it by the parties at the time it was made, such oonstraction
will \^ accepted by the courts as the true one." Fairly ▼. Nash, 70
Miss. 108, 12 Sonth. 149. See •'Partnership,*' Deo. Dig. {Key No.) H
17, 18, 20-^, 29; Cent. Dig. K U S, 4, ^-S. SOSS, 28.
12 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
business conducted by the one or ones actually dealt with/
the third person could hold him as a partner. Thus there
existed the possibility of one being held as a partner who
was not one in fact, and who had never represented him-
self as such.
The reason given for the rule was that every one who
has a share in the profits of a trade ought also to bear his
share of the losses; for when he takes of the profits he
takes a part of that fund upon which the creditor relies
for his payment. The origin and meaning of the rule can
best be considered in connection with the cases which
first announced and applied it.
In Bloxham v. Pell *' one partner purchased the interest
of the other and continued the business, giving the out-
going partner a bond for the amount of his share. The
bond bore 5 per cent, interest, and the purchasing partner
agjeed to pay in addition £1,200 per year for six years in
lieu of the profits of the trade. This arrangement, if re-
garded as a loan to the purchasing partner, would give the
outgoing partner an illegal rate of interest, and would
therefore amount to a usurious transaction, and subject
the participants to a criminal liability. In an action on
a debt contracted after dissolution. Lord Mansfield said
that such an arrangement was a mere device to get more
than the legal rate of interest, and arbitrarily held the de-
fendant liable as a partner; for "if it was not a partner-
ship it was a crime, and it shall not lie in the defendant
Pell's [the retiring partner] mouth to say: 'It is usury
and not a partnership.* " The proposition thus announced,
that persons may be held as partners by operation of law,
appears to have been the basis of the decision in the later
case of Grace v. Smith,** where on facts similar to those
in Bloxham v. Pell, De Grey, C. J., laid down the doc-
trine stated in black-faced type above. This, however,
as originally stated in Grace v. Smith, was accompanied
XT BLOXHAM ▼. PELL, 2 W. Bl. 998. 999. See •'Partnership,^
Dec, Dig, {Key No,) { SO; Cent, Dig. §i 89-48'
18 0RACE V. SMITH, 2 W. Bl. 998, GUmore, Cas. Partnership,
IT. See '*PartnersMp;' Deo, Dig. (Key No.) H S0-S2; Cent. Dig. H
54, S5, S9-48.
§§ 4-6) AS TO THIRD PABTIK8 18
by an important qualification, viz.: That if the profits
are looked to only as a fund of payment, then the taking
from such profits will not create a partnership by opera-
tion of law. It is only where one participates in the prof-
its as proprietor or co-owner that the court in Grace v.
Smith Qieant to hold that a partnership arose by implica-
tion of law. This qualification was not observed in the
subsequent cases.
In Waugh v. Carver,** the next case of importance, the
broad proposition was laid down, without limitation, that
persons participating in the profits of a business are as to
third persons partners, by operation of law. In this case
certain ship agents, carrying on business at different ports,
agreed to allow each other certain portions of the profits
or commissions made by the other: but it was expressly
agreed that neither of them should be prejudiced or af-
fected by the losses of the other, or be answerable for
the other's acts, but each should carry on his own busi-
ness on his own credit, and be accountable for his own
losses and acts. In an action brought by a third person
against all the parties to this agreement for goods sui^plied
to one of them, the court said : "It is plain upon the con-
struction of the agreement, if it be construed only between
the Carvers and Geisler, that they were not, nor ever
meant to be, partners. They meant each house to carry
on trade without risk of each other, and to be at their
own loss. * * * But the question is whether they
have not, by parts of their agreement, constituted them-
selves partners in respect to other persons. The case,
therefore, is reduced to the single point, whether the Car-
vers did not entitle themselves, and did not mean, to take
a moiety of the profits of Geisler'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, up-
on the authority of Grace v. Smith, he who takes a moiety
!• WAUGH ▼. CARVER, 2 H. Bl. 235, Gllmore, Gas. Partnership,
W Bee "^Partnership;' Deo. Dig, {Key No,) i SO; Cent Dig, H
S9-48.
11 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
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."
Abundant criticism of the broad rule thus laid down
may be found in the works of text- writers and commen-
tators and in judicial •opinions. The fallaciousness of the
rule lies in the violence it does to the real facts; for as a
matter of fact creditors do not look to the profits of a
business as security for their debts. The existence of
debts is entirely inconsistent with the existence of profits.
There are no profits so long as unpaid debts exist ; hence
it is entirely inaccurate to say that creditors rely on
profits as a source of payment. It may be that they desire
the business to be a profitable one in order that their se-
curity may be more ample; but when their debts are
paid it is a matter of indifference to them as to how the
profits are distributed.
Exception — Sharing Gross Returns
It was very soon apparent that, in the application of the
doctrine of Grace v. Smith and Waugh v. Carver, a dis-
tinction was to be made between sharing in the profits
and in the gross returns of a business or property. By
"profits" is meant the amount by which the total income
of a business exceeds the expenditures. There is, in strict-
ness, no other kind of "profits." The term "gross profits"
has, however, been used to designate the gross returns
of a business. This has brought about the use of the term
"net profits," to indicate what is really profits. Hence
the two terms, "gross profits," to indicate gross returns,
and "net profits," to indicate profits. The use of the terms
"gross returns" and "profits" is preferable.
The reason given for holding one who shared profits
to be a partner as to third persons was inapplicable, be-
cause creditors do not rely on profits for payment. There
is no doubt, however, that creditors do rely on the gross
returns of a business for payment. A clerk who works for
a fixed salary is paid out of the gross returns of the busi-
§§ 4-6) AS TO THIKD PABTIES 15
ness. Consequently he takes part of that upon which the
creditors rely for payment. Yet it has never been sug-
gested that he incurs a partnership liability. Every one
recognizes that he is but a general creditor, as others are ;
that the failure or success of the firm is no more material
to him than to other creditors. He has the interest of a
third person, not that of a proprietor. Suppose, however,
his payment is a share of the gross returns. Even then
the amount he receives does not indicate whether or not
the business is successful. His interest is distinct from
that of the proprietor, and may even be in conflict with
it. "Though the sum may come out of profits, if they
are sufficient, it will, nevertheless, come out of somebody,
though there^ be no profits. The fixed amount, which is
independent of the success or failure of the business, be-
trays a stranger's interest, and not a principal's. A pro-
prietor's share springs out of the business, and varies
according to its vicissitudes. A principal who made no
contribution himself could never take his copartner's, and
make gain out of his copartner's loss and the failure of
the business." *• Hence, despite the applicability of the
reason which was given for holding those who shared
profits to a partnership liability, it was soon decided that
an agreement to share "gross profits" or "gross returns'*
did not make the parties partners even as to third per-
sons. Thus a sailor shipping on a whaling voyage under
an agreement to receive a share of the oil for his services
is not a partner with the captain.*^ A captain of a ship,
who receives one-fifth of the returns of the voyage, is
not a partner with the owners.'* No partnership exists
between the owner of a barge and a man who works it
and receives for his services one-half the gross earn-
ings.*" The proprietor of a theater, who lets it to a man-
«o J. Parsons, Principles of Partnership, | 62.
«i WILKINSON V. FRASIER, 4 Esp. 182. Bee ''Partnership,'*
Dec. Dig. {Key No.) i SO; Cent. Dig. H 99-48.
s> Mair y. Glennle, 4 M. & S. 240. See '*Partner8h4p,** Deo. Dig.
{Key No.) | SO; Cent. Dig. H S9-48.
28 DRY ▼. BOSWELL^ 1 Camp. SSa 8ee ^'Partnership,** Deo. Dig.
{Key No.) | SO; Cent. Dig. | 4S.
16 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
ager, who finds the acting company, the proprietor provid-
ing the general service and expenses of the theater, and
the gross receipts being equally divided, is not a partner
with such manager.** Brokers who have agreed to divide
commissions are not partners.** Co-owners of a chattel,
who agree to divide its gross earnings, are not partners.**
A landowner and one who cultivates the land for a share
of the crops are not partners.*^ Connecting carriers are
not partners, though a through rate is charged, where
each bears the expense of its own line, and the gross re-
ceipts are shared in an agreed proportion.** And the own-
er of a hotel, who leases it, receiving as rent a share of
the gross receipts, is not a partner of the lessee.**
Same — Not Sharing Profits as Profits
In the application of the rule of Waugh v. Carver an-
other distinction is well recognized, viz. : Between a shar-
ing of profits as profits, by virtue of a proprietary interest
therein, and a reference to profits as a measure of compen-
2« Lyon ▼. Knowles« 8 Best & S. 556; Thomas ▼. Springer, 134 App.
Dlv. 640, 119 N. Y. Supp. 460. See ''Partnership,'' Deo, Dig, (Key
No.) { SO; Cent. Dig, S 45.
as Wass V. Atwater, 33 Minn. 83, 22 N. W. 8; Pomeroy ▼. Slgerson,
22 Mo. 177. See '* Partnership;* Dec. Dig. (Key No.) S SO; Cent. Dig.
H 5. S9-48.
"FRENCH ▼. STYRTNG, 2 C. B. (N. S.) 357; QUACKENBUSH
V. SAWYER, 54 Cal. 439, Qllmore. Cas. Partnership, 66. See ''Part*
nership;* Dec. Dig. (Key No.) §§ 10. SO; Cent. Dig. §{ 15, 25, 45.
2T DONNBLL V. HARSHE, 67 Mo. 170, Gilmore, Cas. Partnership,
63 ; BLUE ▼. LEATHERS, 15 lU. 31 ; Randall ▼• Ditch, 123 Iowa,
582, 99 N. W. 190. See 'Partnership^' Dec. Dig. (Key No.) $| 8, 50;
Cent. Dig. Ǥ 21, 42.
28 Peterson v. Chicago, R. I. & P. R'y. Co., 80 Iowa, 92, 45 N. W.
673. Where, however, connecting carriers have associated themselves
under a contract for a division of the profits of the carriage in cer-
tain proportions, or the receipts from it after deducting any expenses
of the business, they may be held liable as partners. Bostwlck v.
Champion, 11 Wend. (N. Y.) 571 ; Hutchinson on Carriers (3d Ed.) §
250. See "Partnership," Dec. Dig. (Key No.) S SI; Cent. Dig. { S5.
29 BEECHER V. BUSH, 45 Mich. 188, 7 N. W. 785, 40 Am. Rep.
466, Gilmore, Cas. Partnership, 49; Drilling ▼. Armstrong (Ark.)
127 S. W. 725; Nantasket Beach Steamboat Co. v. Shea, 182 Mass.
147, 65 N. E. 57 ; Austin v. Neil, 62 N. J. Law, 462, 41 Atl. 834. See
''Partnership,'* Dec. Dig. (Key No.) §§ 8, SO; Cent. Dig. §S 21, 22, 42.
§§ 4-6) AS TO THIRD PABTIB8 17
sation for services rendered or for the use of property
furnished. This distinction appears to have arisen through
an attempt to reconcile the cases of Bloxham v. Pell and
Grace v. Smith, for, while Lord Mansfield decided in favor
of the plaintiff in the former case, a verdict for the de-
fendant in the latter case was not disturbed ; it being in-
ferred that in the exercise of their right to find the facts,
the juiy had found that the payments did not come out of
the profits. Confronted by these two cases, Lord Eldon,
in Ex parte Hamper,** said : "It is clearly settled, though
I regret it, that, if a man stipulates that, as a reward of
his labor, he shall have, not a specific interest in the busi-
ness, but a given sum of money, even in proportion to a
given quantum of the profits, that will not make him a
partner; but, if he agrees for a. part of the profits, as such,
giving him a right to an account,** though having no
property in the capital, he is, as to third persons, a part-
ner." This distinction may be illustrated by the case of
Leggett V. Hyde.** The defendant loaned a certain sum
of money to the firm of A. D. Putnam & Co. in considera-
tion that the firm would employ defendant's son as a clerk,
and pay to the defendant one-third of the profits of the
business, which was to be settled half yearly. In hold-,
ing the defendant liable as a partner the court said: "It
was one-third of the profits that he was to have, and not
a sum in general equal to that one-third; so that he was
to take it as profits, and not as an amount due — not as a
measure of compensation, but as a result of the capital and
industry. * * * He had that interest in the profits, as
profits, because he could claim a share of them specifically.
»• 17 Ven 403, 412. Bee ^'Partnership," Dec. Dig. (Key No,) {§ +-
15; Cent. Dig. K 15'-28.
•1 A right to an accounting does not prove a partnership. Any
one whose compensation depends upon the profit realized from a
business has a right to an accounting. Schultz ▼. Brackett Bridge
Ck>., 35 Misc. Rep. 605, 72 N. Y. Supp. 160. See *' Partner ship," Deo.
Dig (fey No.) U 4'iS; Cent. Dig. §{ 15-28.
82 LEQOB3TT ▼. HYDE, 58 N. Y. 272, 17 Am. Rep. 244, GUmore,
Cas. Partnership, 22. See '^Partnership," Dec Dig. {Key No.) | SO;
Cent. Dig. H S9-48.
OIL.PART.— 2
18 WHAT CON8TITX7TBS A PARTNERSHIP (Ch. 1
as they should appear on each six months. * ♦ * It mat-
ters not that the defendants meant not to be partners at
all, and were not partners inter se. They may be partners
as to third persons. * * * The test of partnership is
a community of profit — a specific interest in the profits
as profits — in contradistinction to a stipulated portion of
the profits as a compensation for services." As a result
of this distinction certain exceptions have been well rec-
ognized in those jurisdictions which follow the earlier
English rule.
An agent, servant, factor, broker, or employe, who, with
no interest in the capital or business, is to be remunerated
for his services by a compensation from the profits, or by
a compensation measured by the profits, is not by this fact
alone made liable as a partner. In Loomis v. Marshall,*'
the court deemed it contrary to public policy to declare to
"enterprising citizens of our country, who possess industry
and skill, but are without capital, that they can neither im-
prove farms, nor manufacture goods, nor be employed as
mechanics, for a compensation proportioned to the avails
of the sales — the product of their labor and skill — ^without
involving themselves and their employers in such respon-
sibility as partners as would to a considerable extent de-
prive them of employment." The establishment of such a
narrow exception indicated that the courts felt that the
test was economically sound; it has already been shown
that the reasoning upon which it was founded was inac-
curate. Those who shared profits generally were, however,
held to a partnership liability in England until after the
middle of the last century.**
•« 12 Conn. 69, 85, 30 Am. Rep. 506. Bee ''Partnership,^ Deo. Big.
(Key Vo.) | SO; Cent, Dig, | ^.
s« Sharing profits as compensation for services rendered does not
constitute one a partner In the huslness In which the service was.
rendered. Smythe's Estate ▼. Evans, 209111. 376, 70 N. E. 906; Mc-
WlUlams ▼. Elder, 52 La. Ann. 995, 27 South. 352; Smith v. Dunn, 44
Misc. Rep. 288, 89 N. Y. Supp. 881 ; Lance v. Butler, 135 N. G. 419,
47 S. E. 488 ; State v. Hunt, 25 R. I. 75, 54 Aa 937 ; Altgelt v. Alamo
Nat Bank» 98 Tex. 252, 83 S. W. 6; Langley ▼. Sanborn, 135 Wis.
178, 114 N. W. 787. The same rule applies where profits are received
aa compensation for property or capital furnished. JOHNSON BROS.
S 7) AS TO THIRD PARTIES 19
SAME— DOCTRINE OF PARTNERSHIP AS TO
THIRD PARTIES OVERTHROWN
7« The rule which made the sharing of profits a test of
partnership rather than a test of intention to form
a partnership was overthrown in England, and
was never generally accepted in the United States.
Partnership liability grows out of true partner-
ship only. Sharing of profits is evidence merely
of intention.
The rule that there could be a partnership as to third
persons without there being at the same time a partner-
ship inter sese, and the subsidiary rule that such a part-
nership could be proved by showing that profits were
shared, were both overthrown by the case of Cox v.
Hickman. Though it did not profess to overrule the case
of Waugh V. Carver, it has been understood as having
done so.** The case was as follows: B. and J. T. Smith
V. GARTER ft CO., 120 Iowa, 855, 94 N. W. 850, Gilmore, Cas. Part-
nership, 54 ; Roberts ▼. G. W. Adams ft Son Go., 110 S. W. 314. HH
Ky. Law Rep. 207 ; Gille Hardware ft Iron Go. t. McGleverty, 89 Mo.
App. 154 ; Hazell ▼. Glark, 89 Mo. App. 78. But see Dilley ▼. Abright
19 Tex. Glv. App. 487, 48 S. W. 64a See "Partnership,'' Dec. Dxy.
{Key 2fo.) || 4-iS, SO; Cent Dig. §| IS-^tS, SQ-J^S, '
«B GOX V. HIGKMAN, 8 H. L. G. 268, Gllinore, Gas. Partnership, 31.
**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 GOX ▼. HIGKMAN, 8 H. L. G. 268 [Gilmore, Gas. Partnership,
31]. Prior to that decision, the dictum of De Grey, G. J., in GRAGE
▼. SMITH, 2 W. Bl. 998 [Gilmore, Gas. Partnership, 17], *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 ▼. GARVER, 2 H. Bl. 235 [Gilmore, Gas. Partnership, 19],
where it was laid down that he who takes a moiety of all the profits
indefinitely shaU by operation of law be made liable to losses, if
losses arise, upon the principle that by taking a ];)art of the profits
he takes from the creditors a part of that fund which is the proper
secnnty 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 re-
20 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
for some time previously to the year 1849 carried on a
business at the Stanton Iron Works, in Derbyshire, as
ironmasters and corn merchants. In that year, becoming
embarrassed in circumstances, a meeting of their cred-
itors took place, and later a deed was entered into by the
Smiths, of the first part, certain creditors, as trustees, of
the second part, and the general creditors, including those
named as trustees, of the third part. By the terms of this
deed the Smiths transferred their interest to the trustees,
with power to them to carry on the business under the
name of the Stanton Iron Company, and divide the net
income, which was always to be considered the property
of the Smiths, among the creditors, and when all the
debts were paid they were to hold for the Smiths. Provi-
sion was made for meetings of the creditors, and at such
meetings a majority in value of the creditors present was
to have power to make rules governing the conduct of the
business, or order its discontinuance. Cox and Wheat-
croft were among the members named as trustees, but
Cox never acted, and Wheatcroft resigned before the hap-
pening of the events immediately giving rise to the cause
of action. This arose through the acceptance by the trus-
tees per proc. of the Stanton Iron Company, pursuant
to the power given them in the deed, of bills of exchange
cently, it was disputed, It was a common opinion (in which I for one
participated) that the doctrine had become so Inveterateiy part of
the law of England that it would require legislation to reverse It
In COX ▼. HICKMAN • • • I think that the ratio decidendi is
that the proposition laid down In WAUGH ▼. CARVER, 2 H. Bl. 235
[Oilmore, Cas. Partnership, 19], ylz., that a participation in the prof-
Its of a business does of itself, by operation of law, constitute a part-
nership, is not a correct statement 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 part-
ner, the participation in the profits being a most important element
in determining that question, but not being in itself dedalve; the
test being, in the language of Lord Wensleydale, whether it is such a
participation of profits as to constitute the relation of principal and
agent between the person taking the profits and those actually carry-
ing on tbe business." Blackburn, J., in BULLEN y. SHARP, L. R.
1 C. P., at lOS, Gllmore, Cas. Partnership, 3a See **Fartfier9hip,"
Deo. Dig. {Key No.) i SO; Cent. Dig, H 59-43.
g 7) A8 TO T^IBD PARTIES 21
drawn by Hickpan who had supplied goods to the Stan-
ton Iron G^mpany. Action was brought against the de-
fendants as partners, upon one of the bills. The fact
that they had been named or had acted as trustees was
not dwelt upon, at least in the House of Lords ; Black-
burn, J., stating the question thus: "The question is,
whether the stipulations are such as to render those credi-
tors who are parties to the deed partners in the Stanton
Iron Company, so far, at least, as regards liability to third
persons." Judgment was given for the plaintiff in the
Common Pleas,'* and an appeal was taken to the Ex-
chequer Chamber, where the judges were equally divided.
The judgment therefore stood, and the defendants appeal-
ed to the House of Lords. The judges were summoned,
the opinions of those who attended being equally divided ;
but the Lords were unanimous in holding that the defend-
ants were not liable as partners. Lords Cranworth and
Wensleydale delivered the principal opinions.*^ Lord
Cranworth in the course of his opinion said that : "The lia-
bility of one partner for the acts of his copartner is in
truth the liability of a principal for the acts of his agent.
* * * It was argfued 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
••18 G. B. 617. JervlB, C. J., In dellyering the opinion of the
court, said: "The case, in fact, is expressly bound by the authority
of Ow^ y. Body, 5 Ad. & E. 28. 6 N. & M. 448, which is recognized,
and its principle clearly and neatly stated by Maule, J., in Janes v.
Whitbreaid, ante. Vol. XI, p. 406, shortly before we had the mis-
fortune to lose him." See "Partnership,*' Deo, Dig, {Key No.) § SO;
Cent Dig. §§ S9-48.
ST **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 in-
ternal 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 es-
peclaUy in the elaborate judgment of Lord Cranworth, that we
must look for the ratio decidendi." Blackburn, J., in BULLEN v.
SHARP, L. R. 1 C. P., at 100, Gilmore, Cas. Partnership^ 36. Bee
'*Partner8Mpr Dec. Dig. {Key No.) I SOj Cent. Dig. §{ S9-^8.
22 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
tests, whether a person, not ostensibly a partner, is never-
theless, 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 par-
ticipate in profits affords cogent, often conclusive, evi-
dence that the trade in which the profits have been made
was carried on in part for or on behalf of the person set-
ting up the claim. But the real ground of 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, namely, 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 act-
ing ostensibly as the traders, by whom the liabilities have
been incurred, and under whose management the profits
have been made." Lord Wensleydale said: "A man who
allows another to carry on trade, whether in his own
nam.e or not, to buy and sell, and to pay. over all the
profits to him, is undoubtedly the principal, and the per-
son 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 ag^ee that they should 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
contract in carrying on the trade, as much as a single prin-
cipal would be by the act of an agent, who was to give
the whole of the profits to his employer. Hence it be-
comes a test of the liability of one for the contract of an-
other 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 this subject,
is only the consequence, not the cause, why a man is
§ 7) AS TO THIRD PARTIES 23
•
made liable as a partner/' •' This case clearly states that
a sharing of profits is not sufficient to charge one with a
partnership liability, in the absence of all other elements
of partnership. Though some doubt was expressed in
Kilshaw v. Jukes as to whether it should be extended be-
yond its particular facts, later cases demonstrated that it
was to be taken as establishing a general rule.**
Since, except where the parties by their conduct had
estopped themselves to deny the partnership relation,
those cases where profits were shared constituted the only
class of cases where there existed a partnership as to third
persons, in the absence of a partnership inter se, it follow-
ed that, when sharing profits ceased to be a conclusive test
of partnership liability, partnerships as to third persons
ceased to exist.*®
.
Effect of Cox V, Hickman in America
The case of Cox v. Hickman has been generally follow-
ed in the United States. In Beecher v. Bush,** Cooley,
J., said that "it would be easy to show that the American
»« COX ▼. HICKMAN, 8 H. L. C. 268, Gllmore, Ceb. Partnership,
31. See "Partnership,^' Dec, Dig. {Key No.) i 30; Cent. Dig. §§ 89-48.
••KILSHAW ▼. JUKES, 3 Best & Smith, 847; BULLEN v.
SHARP, L. R. 1 C. P. 86, Gllmore, Cas. Partnership, 36; Holme v.
Hammond, L. R. 7 Ex. Cas. 218. Bee "Partnershdp/' Dec. Dig, (Key
yo.) § SO; Cent. Dig. §§ 89-48.
40 "They say that the defendant Is a partner with his son, and
that. If not partners Inter se, they are so as regards third parties.
A most remarkable expression! Partnership means a certain re-
lation 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? But that must mean
Inter se, for partnership Is a relation Inter se, and the word cannot
be used except to slgnl^ that relation.** Bramwell, B., In BULLEN
r. SHARP, L. R. 1 0. P. 86, Gllmore, Cas. Partnership, 36. See
''Partnership^ Dec. Dig. (Key No.) I 80; Cent. Dig. §§ 89-48.
41 BEECHER ▼. BUSH, 45 Mich. 188, 7 N. W. 785, 40 Am. Rep.
465, Gllmore, Cas. Partnership, 40. See Eastman ▼. Clark, 63 N. H.
276, 16 Am. Rep. 102, for an exhaustive examination of the cases on
the subject of partnership as to third persons, by Doe, J. In speak-
ing of the test of WAUGH v. CARVER, 2 H. Bl.. 235, Gllmore, Cas.
Partnership, 10, he says: "Neither Is such a test established by a
preponderance of the weight of American cases decided without rof-
24 WHAT CONSTITUTES A PABTNBBSHIP (Gh. 1
authorities are, in the main, in harmony with it." In a
few states, however, the courts have held themselves con-
cluded by previous decisions following the rule of Waugh
V. Carver. Hence they have refused to recognize the later
case, declaring that to do so would involve a change in the
law such as the Legislature alone was competent to ef-
fect."
irence to COX ▼. HICKMAN," 8 H. L. Cas. 288, Gilmore, Gas. Part-
nership, 81. See ''Partnership,** Dec, Dig, (Key No.) i SO; Cent.
Dig. §S S9-48.
42 "We are aware that the trend of modem outside authorities Jb
against the old rule, • • • and that now many courts hold that
persons are not liable to third persons as partqers, although they
share tn the profits of a business, unless they are really partners in-
ter sese, or have held themselves out as partners under such circum-
stances as to estop them from denying that they were. For my own.
part, I wish the law in this state upon the subject of partnership
had undergone the change which Is pointed out, * * * so that
even as to third persons, a partnership could not be held to exist,
unless there was really a partnership inter sese, or else the person
claimed to be a partner had, by holding himself out as such, es-
topped himself to deny that he was. This would greatly simplify
matters in cases in which the question of partnership or no partner-
ship may arise, and would, it seems to me, place the law in such
cases upon a more rational and reasonable basis. But we are bound
by' the previous decisions of this court which we have cited, which
are directly in point, and must follow them so long as they stand
unreviewed and unreversed." Brandon & Dreyer v. Conner, 117
Ga. 759, 45 S. E. 371, 63 L. R. A. 260.
*'It is claimed by the learned counsel for the appellant that the
rule in GRACE v. SMITH [2 W. Bl. 998, Gilmore, Cas. Partnership,
17] and WAUGH v. CARVER* [2 H. Bl. 235, Gilmore, Cas. Partner-
ship, 19} has been exploded, and another rule propounded, which
shields the appellant He Is correct so far as the courts in England
are concerned." After commenting on COX v. HICKMAN, 8 H. L.
Cas. 268, Gilmore, Cas. Partnership, 81, and BULLEN v. SHARP, U
R. 1 C. P.. 86^ Gilmore, Cas. Partnership, 36, the court proceeds :
** Without discussing those decisions and determining Just how far
they reach, it is sufficient to say that they are not controlling here ;
that the rule remains in this state as it has long been, and that
we should be governed by it until here, as in England, the Leg-
islature shall see fit to abrogate it" Folger, J., in LEGGBTT v.
HYDE, 58 N. T. 272, 17 Am. Rep. 244, Gilmore, Cas. Partnership,
22. See HACKETT v. STANLEY, 115 N. Y. 625, 22 N. B. 746, Gil-
more, Cas. Partnership, 27.
"The agreement between the defendants made ,them partners at
§ 8) TB8T8 OF INTENTIOH 26
TESTS OF INTENTION— IN GENERAL
8. As partnership arises from the actual manifested in-
tention to do those things which in law constitute
the relation, it is necessary to ekamine the vari-
ous constituent acts which tend to prove the es-
sential intention, and to determine the eviden-
tial value of such acts.
The question to be ascertained in determining whether
or not two or more persons are partners is : Did they in-
tend to become co-proprietors of a common business, con-
ducted for mutual profit? If they can be proved to have
intended this, there is no further question; they are part-
ners. The difficulty, however, lies in ascertaining the ex-
istence of an intention to do this. Parties frequently agree
upon the elements of a partnership, leaving to be inferred
whether by such agreement they intend to be partners.
If they agree upon all of the elements, there can be no dif-
eommon law and In this state. The case of WAU6H y. CARVER,
2 H. Bl. 235 [Gllmore, Gas. Partnership, 10], decided in 1793. which
followed GRACE ▼. SMITH, 2 W. Bl. 998 [Gllmore, Gas. Partner-
ship, 17], decided in 1775, was followed and adopted to its full ex-
tent in Puryiance ▼. McClintee, 6 Serg. & R. (Pa.) 259, In 1820. The
well-settled rule of WAUGH y. CARVER was oyerruled in England
in 1860 by the case of COX y. HICKMAN, 8 H. L. Gas. 268 [Gllmore,
Gas. Partnership, 31], but there has been no departure from It in
this state, except by legislation In 1870. In the opinion in Edwards
y. Tracy, 62 Pa. 374, decided in 1869, Sharswood, J., pointed out the
new English rule of COX y. HICKMAN, but followed the old one of
WAUGH y. CARVER, saying: *It is entirely too late now to ques-
tion either the rule or the exception. We are bound to stand super
antiquas yias by our own decided cases.' In the opinion in Lord y.
Proctor, 7 Phila. (Pa.) 630, decided at nisi prius the same year, he
said that the rule in WAUGH y. CARVER was too ancient a land-
mark in our law to be now disturbed, and that it had accordingly
been followed in Edwards y. Tracy. Since the act of 1870 there has
been no change in Judicial decision." Wessels y. Weiss, 166 Pa.
490, 81 Atl. 247. See, also, the Texas cases : Gothran y. Marmaduke,
60 Tex. 370 ; DiUey y. Abright, 19 Tex. Civ. App. 487, 48 S. W. 548 ;
Fouke y. Brengle (Tex. Ciy. App.) 51 S. W. 519. See '* Partner ship;*
Deo. Dig. {Key No.) | SO; Cent. Dig. Sf S9-48.
26 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
ficulty in making such an inference. If they agree upon
only one or more, however, it often becomes a ques-
tion of extreme difficulty to determine their intention. No
conclusive test can be given, each case depending in large
measure upon its peculiar facts. Yet the agreement to
do anything which ordinarily goes to make up a partner-
ship is of value as being evidence of the intention of
tlie parties. In this sense, therefore, they may be con-
sidered as t^sts of intention. While all the facts of each
particular case are to be taken into consideration, it is
obvious that some facts will have more evidential value
than others.** In the main, the doctrine that participat-
ing in profits will of itself make the participants partners
has been abandoned. It is now proposed to examine the
various facts tending to establish the required intention,
and to consider their value as evidence.
SAME— MUTUAL AGENCY
9. Mutual agency is not a test of partnership. Agency Is
a result of partnership, but mutual agency does
not create a partnershipw
Mutual Agency as a Test
In Cox V. Hickman Lord Cranworth stated, as a test of
liability as a partner, "the fact that the trade has been car-
ried 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." **
It has been recognized, however, that the relation of prin-
ts "So far as the notion ever took hold of the Judicial mind that
the question of partnership or no partnership was to be settled by ar-
bitrary tests it was erroneous and mischievous, and the proper cor-
rectlye has been applied." Gooley, J., in BEEGHER v. BUSH, 45
Mich. 188, 200, 7 N. W. 785, 789, 40 Am. Rep. 463, Gilmore, Gas.
Partnership, 49. Bee ^^Partnership," Dec. Dig, (Key No.) |§ ^-15, 17,
SO; Cent. Dig, SS 5, 15-28, S9-48.
** GOX v. HICKMAN, 8 H. L. G. 288, Gilmore, Gas. Partnership,
BL Bee "Partnership," Dec. Dig. (Key No.) § U; Cent. Dig. ( IS.
§ 9) TESTS OF INTENTION 27
cipal and agent does not furnish a conclusive test of part-
nership. "As has been pointed out in later English cases,
the reference to agency as a test of partnership was unfor-
tunate and inconclusive, inasmuch as agency results from
partnership, rather than partnership from agency. * ♦ ♦
Such a test seems to give a synonym, rather than a defini-
tion; another name for the conclusion, rather than a state-
ment of the premises from which the conclusion is to be
drawn. To say that a person is liable as a partner, who
stands in the relation of principal to those by whom the
business is actually carried on, adds nothing by way of
precision, for the very idea of partnership includes the rela-
tion of principal and agent." *• While the relationship of a
principal undoubtedly serves as a test of "liability," it does
not furnish a test of liability as a partner. The relation-
ship of agent and principal results from the foundation of
a partnership. "The acting partners are identified with the
company, and have power to conduct its general business in
the usual way. This power is conferred by entering into
the partnership, and is perhaps never to be found in the
articles/' *• Every partner is the general agent of the part-
nership in the conduct of the partnership business ; hence •
one who seeks to charge the partnership with the acts of
a partner need but prove the partnership. It is true that
as between the partners the authority of one to act in the
conduct of the business may be limited;*^ but this does
not relieve the firm from liability for the acts of such part-
ner as against one who knew of the existence of the part-
*B Gray, J., In MEEHAN ▼. VALENTINE, 145 U. S. 611, 12 Sup.
Ct 972, 36 L. Ed. 835, Gilmore, Gas. Partnership, 45; Boreing y.
WUson & Moss, 108 S. W. 914, 33 Ky. Law Rep. 14. See "Partner-
ship," Deo. Dig. (Key No.) §§ i, U; Cent. Dig. §§ IS, 11.
*« Marshall, O. J., in WINSHIP v. BANK of UNITED STATES, 5
Pet 529, 8 L. Ed. 216, Gllmore, Gas. Partnership, 356. See **Partner'
ship," Dec. Dig. (Key No.) § 125; Cent. Dig. § 190.
*T BEEGHEB v. BUSH, 45 Mich. 188. 7 N. W. 785, 40 Am. Rep.
465, Gllmore, Gas. Partnership, 49; McAlplne y. Millen, 104 Minn.
289, 116 N. W. 583; First Nat Bank y. Stodden, 103 Minn. 403,
115 N. W. 198; Taylor v. Sartorious, 130 Mo. App. 23, 108 S. W.
1089. See ^^Partnership,'' Dec. Dig. (Key No.) S U; Cent. Dig. § 13.
28 WHAT CON8TITUTB8 A PARTNERSHIP (Gh. 1
nership, but did not know of the limitation on the partner's
authority.**
It may thus be seen that mutual agency results from
partnership. The mere fact that it is but a result of part-
nership would not render it inapplicable as a test of the
existence of a partnership, provided that it always did re-
sult from the existence of a partnership, and provided, fur-
ther, that it did not exist independent of the existence of
a partnership. As a matter of fact mutual agency does not
always result from the existence of a partnership. In
Holme V. Hammond, Cleasby, B., said : "I must add, how-
ever, that I cannot quite concur in the passage cited by
my Brother Martin from the judgment of O'Brien, J., in
Shaw V. Gait, 8 H. L. C. 268, to the effect that the exist-
ence of partnership is to be ascertained by seeing whether
each is principal and agent to and for the others. My
view is that agency is in such cases deduced from partner-
ship, rather than partnership from agency. But neither
does partnership always imply this mutual agency. In the
common case of partnership, where, by the terms of the
partnership, all the capital is supplied by A., and the busi-
ness is to be carried on by B. and C. in their own names»
it being a stipulation in the contract that A. shall not ap-
pear in the business or interfere in its management, that
he shall neither buy nor sell, nor draw or accept bills, no
one would say that, as among themselves, there was any
agency of each one for the others." *• Therefore mutual
48 *'Every partner Is an agent of the firm and his other partners
for the purpose of the business of the partnership; and the acts
of every partner who does any act for carrying on in the usual
way business of the kind carried on by the firm for which he is a
member bind the firm and his partners, unless the partner so acting
has in fact no authority to act for the firm in the particular matter.
and the person with whom he Is dealing either knows that he has
no authority, or does not know or believe him to be a partner.**
Bng. Partnership Act of 1890, { S.
"This section introduces no change in the law.^ Lindle^B Law
of Partnership (7th Ed.) p. 146.
See the opinions of James, L. J., In Benld*s Case, 5 Ch. 788, and
of Parke, B., in Hawken v. Bourne, 8 M. & W. 710. Bee '^Partner-
shipr Dec, Dig, {Key 2fo,) §{ 1S2, 160; Cent. Dig. S 196.
4» Holme V. Hammond, L. R. 7 Ex. Cas. 218, 233. See "'Partner-
ship,** Dec, Dig. (Key No.) § 14; Cent. Dig. § IS,
§ 10) TESTS OF INTENTION 29
agency as a test of partnership, even if it were accurate,
is not sufficiently extensive to include all cases of partner-
ship. It is not, however, even accurate, because it is pos-
sible to have cases of mutual agency without the existence
of a partnership. For instance, joint owners of chattels
may ag^ee upon the use of the chattels, giving each cer-
tain powers over it, as co-owners of a horse may agree
that each shall find a buyer for the horse, without thereby
creating a partnership between them.** Or two persons
may jointly own and jointly use a threshing machine in
threshing for others, without thereby becoming liable as
partners.**
SAME— SHARING GROSS RETURNS
10. An agreement to divide the gross returns of a business
is not prima facie evidence of an intention to form
a partnership.
The reason for the rule holding sharers of the profits of
an enterprise to a partnership liability was stated to be
that he who shares in the profits of a business should share
in the losses, because he takes part of the fund upon which
the creditor relies for payment.** It has been shown that
this reason was inaccurately applied to sharing profits, for
the creditor does not rely on profits as a fund of payment.
But, if the reasoning were sound, it should have been ap-
plied to those who agreed to share the gross returns of
a business ; for he who shares the gross receipts of a busi-
ness does take from the fund upon which the creditor
ordinarily relies for reimbursement.**
soGOBLL ▼. MORSB, 126 Mass. 480. See ^'Partnership,'* Dec.
Dig, {Key No.) { U; Cent Dig. § 13.
51 STATE BANK OF LUSHTON v. O. S. KELLEY CO., 47 Neb.
678, 66 N. W. 619 ; FRENCH v. STYRING, 2 0. B. (N. S.) 357. See
'* Partnership;* Cent. Dig. { 75.
^•^ OBACE T. SMITH, 2 Wm. Bl. 998, GUmore, Oas. Partuership,
17. See '*Partnership;' Dec. Dig. (Key No.) §f 4-13, 30; Cent. Dig. §§
15-28, 88-48.
61 **i may here observe, that If the ground upon which a participa-
tion in profits was considered as constituting a partnership be (as
30 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
It was early decided, however, that sharing gross re-
turns did not make the parties liable as partners ; ^* and,
since an agreement to share gross returns did not create
a partnership liability, it follows that it alone would not
b^ sufficient to create a partnership. This principle has
been enacted into the English Partnership Act, 1890.**
stated by Chief Justice De Grey in GRACE ▼. SMITH), that 'if any
person takes part of the profits, he takes part of tJiat fund on
which the creditor of the trader relies for his payment,' it appears
difficult to explain why a person should not be rendered liable as
a partner by a participation in the gross profits or proceeds as
well as by one in the net profits. The latter are only to be ascer-
tained after deducting and providing for all liabilities; but the
amount of a share in the gross proceeds would be ascertained, and
might be taken away as soon as they were received, without pro-
viding for the liabilities." 0*Brien, J., in Shaw v. Gait, 16 Ir. Com.
Law, 357, 373.
"The question has been raised whether consistency to the sup-
posed 'net profit rule' requires that a sharer of gross returns should
be held to a similar liability. On the one hand, 'the letter of the
net profit rule' has been looked at without regard to its reason.
It is said, in substance, that gross returns, though they include net
profits, are not literally the same thing ; that a participant in gross
returns does not participate tn profits as profits; and tha*t a divi-
sion of gross returns is only incidentally a division of profits, not a
division of profits as such. This reasoning is extremely unsatis-
factory. On the other hand. It is said that the reason of the 'net
profit rule' applies with much greater force to the sharer of gross
returns. Gross returns necessarily include net profits. If the
sharer in net profits takes from the creditors the fund upon which
they rely for payment, much more does the sharer in gross returns.
And, if taking from the fund is sufficient reason for holding the
former liable, a fortiori it is a reason for holding the latter. Net
profits 'are only to be ascertained after deducting and providing for
all liabilities; but the amount of a share in the gross proceeds
would be ascertained, and might be taken away as soon as they were
received, without providing for the liabilities.' This train of rea-
soning appears to be unanswerable." Smith, J., in Eastman v. Clark,
53 N. H. 276, 16 Am. ^ep. 192. See ^'Partnership,'* Dec Dig, {Key
No.) S{ 4-lS, SO; Cent. Dig. §§ 15-'28, 88-48.
s4 Benjamin ▼. Porteus, 2 H. Bl. 590; DRY ▼. BOSWELL, 1 Camp.
330 ; Mair v. Glennie, 4 M. & S. 240.
"A person who shares gross profits (gross returns) is not a part-
ner, but a person who shares net profits is prima facie to be con-
sidered as a partner." Parke, B., in Heyhoe v. Burge, 9 C. B. 431.
Bee ^'Partnership,** Dec. Dig. {Key No.) §S 10, SO; Cent. Dig. H 25, 45.
66 <'The sharing of gross returns does not of itself create a part-
§ 11) TESTS OF INTENTION 81
Moreover, taken alone, it is not even prima facie evidence
that parties are partners to prove that they have agreed to
share the gross returns of a business. This is true even
though, in addition to the agreement, they are co-owners
of a chattel from or through which they expect to gain the
returns to be divided/*
SAME— SHARING PROFITS
11. An agreement to share the profits of a business is prima
facie evidence of an intention to form a partner^
ship.
The case of Cox v. Hickman, as finally understood, ef-
fectually dispelled the notion. that participation in profits
made a partnership by operation of law as to third per-
sons. Yet it is one of the results of a partnership that the
profits shall be divided. That is in general the purpose of
the establishment of a partnership. Therefore proof of
sharing of profits, or of an agreement to share profits, is
cogent evidence that the parties intended to form a part-
nership. It is evidence so strong that, if nothing to the
contrary is shown, it is conclusive."^ In other words, shar-
nership, whether the persons sharing such returns have or have not
a joint or common right or interest in any property from which or
from the use of which the returns are derived." Partnership Act,
1890, § 2 (2).
se Partnership Act, 1890, f 2, par. (2). This section merely codi-
fies the law as it already existed. Gibson ▼. Lupton, 9 Bing. 297;
FRENCH V. STYRING, 2 O. B. N. S. 357 ; Moore v. Curry, 106 Mass.
409; Tyson v. Bryan, 84 Neb. 202, 120 N. W. 940. See '^Partner-
shipr Dec. Dig. (Key No.) §| 10, SO; Cent. Dig. S§ 25, Jt5.
B7 <*A right to participate in profits affords cogent, often conclu-
sive, 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." Lord Cranworth in COX v. HICKMAN, 8 H. L. C.
268, Gilmore, Cas. Partnership, 31.
'*But it is said that there are dicta of various judges in various
cases that the participation in the profits may decide the questipn,
or that It is prima facie evidence of a partnership. Undoubtedly,
if one found that two persons were participating in the profits made
t^ a business, and knew nothing more, one would say, How is this?
32 WHAT CONSTITUTBS A PARTNERSHIP (Ch. 1
ing profits is prima facie evidence of the existence of a
partnership. It is not, however, conclusive evidence. Part-
nership involves more than merely sharing the profits of
a business, and if the parties prove that they intended to
form none of the ot^er elements of partnership they will
not be considered as partners. They may show that the
profits were to be shared in some other right."* Their in-*
tention is gathered from the whole contract, and the sur-
rounding circumstances control. Thus, where a father paid
a sum of money as his infant son's share of the capital of
the partnership, and it was agreed that during the son's
minority the profits should be accounted for to the father,
it was held that the father was not himself a partner.**
The presumption that a partnership exists may be rebutted
by showing that the profits were received by one of the
alleged partners as interest on or payment of a loan ; •• or
If they participate In the profits as being jointly entitled to. the
profits, that, unless explained, would lead to the conclusion that the
business is the Joint business of the two, and this would be part-
nership." Cotton, L. J., in Badeley v. Ck>n8olidated Bank, L. B. 38
Ch. Diy. 238, at page 250.
The receipt of a share of profits in a business is, under section
2, subsec. 3, E^ngllsh Partnership Act, 1890, prima facie evidence
of a partnership. Buford v. Lewis, 87 Ark. 412, 112 S. W. 963;
JOHNSON BROS. v. CARTER & CO., 120 Iowa, 355, 94 N. W. 850,
Gilmore, Cas. Partnership, 54; Boreing v. Wilson & Moss, 108 S. W.
914, 33 Ky. Law Rep. 14 ; Weiss v. Hamilton. 40 Mont 99, 105 Paa
74. See "Partnership;* Dec, Dig, {Key No,) ff 4-i5, SO; Cent. Dig.
S$ 15-2S, 88-48.
Bs "The way in which the profits are to be shared Is the essence
of the matter ; and when the right to profits arises by virtue of an
express contract and does not flow from the relation of the parties,
the right exists qua debt, and not by virtue of a partnership." Llnd-
ley, Partn. (Wentw. Ed.) p. 13, note 2. FBCHTELBR v. PALM
BROS. & CO., 133 Fed. 462, 66 C. C. A. 336, GHmore, Cas. Partner-
ship, 76; Pierpont v. Lanphere, 104 IlL App. 232; Beard v. Row-
land, 71 Kan. 873, 81 Pac. 188; Leonard v. Sparks, 109 La. 543, 33
South. 594; Sawyer v. Burris, 141 Mo. App. 108, 121 S. W. 321.
Bee "Partnership,** Dec, Dig, (Key No,) f§ i-iS, 30; Cent. Dig. ff
15-28, 38-48.
p9 Barklie v. Scott, 1 Huds. & B. 83. See *' Partnership,** Dec Dig,
(Key No,) SS 4-13, 17, 30; Cent, Dig. SS 3, 15-^8, 38-48,
«o Ex parte BRIOOS, In re NOTLET, 8 Deac. & Ch. 867, Ollmore,
Cas. Partnership, 4; MOLLWO, MARCH & CO. v. COURT of
§ 11) TESTS OF INTBNTION 33
that they were received as compensation for services ren-
dered;** or that they w^ere shared as income or rent from
property owned in common, as, for example, where two
persons bought a circus, and agreed that one should run
it and that the income should be divided.*'
WARDS, L. p. 4 p. C. 419; POOLET ▼. DRIVER, 5 Oh. Dlv. 458;
MagoTern v. Robertson, 116 N. T. 61, 22 N. E. 398, 0 L. R.
A. 589; HACKETT v. STANLEY, 115 N. Y. 625, 22 N. E.'745, Gil-
more, Gas. Partnership, 27; Richardson v. Hughitt, 76 N. Y. 55, 32
Am. Rep. 267 ; LEGGETT t. HYDE. 58 N. Y. 272, 17 Am. Rep. 244,
Gllmore, Gas. Partnership, 22 ; Waverly Nat Bank v. Hall, 100 Pa.
466, 24 Aa 665, 30 Am. St Rep. 823 ; Boston & G. Smelting Go. ▼.
Smith, 13 R. I. 27, 43 Am. Rep. 3 ; POLK v. BUGHANAN, 5 Sneed
(Tenn.) 721 ; Ford v. Smith, 27 Wis. 261 ; MEBHAN v. VALENTINE,
145 U. S. 611, 12 Sup. Gt 972, 36 L. Ed. 835, Gllmore, Gas. Partner-
ship, 45. In case of an alleged lending, very slight power of con-
trol may turn the scale in fayor of a partnership. See "Partner-
ahipr Dec, Dig. (Key No.) H 6, SO; Cent. Dig. %% 17-19, 40.
• I SODIKER V. APPLEGATB. 24 W. Va. 411. 49 Am. Rep. 252.
Gllmore, Gas. Partnership, 5; Regina v. McDonald, 7 Jur. N. S.
1127 ; Pott V. Ey ton, 8 G. B. 32 ; Ross ▼. Parkyns, L. R. 20 Eq. 33 ;
Berthold ▼. Goldsmith, 24 How. 536, 16 L. Ed. 762 ; Brown y. Hicks
(G. G.) 24 Fed. 811; Hodges ▼. Dawes, 6 Ala. 215; Le Fevre y. Gas-
tagnio, 5 Golo. 564; Pond t. Gummlns, 50 Gonn. 372; Burton v.
Goodspeed, 69 111. 237; Holbrook v. Oberne, 56 Iowa, 324, 9 N. W.
291 ; Shepard v. Pratt, 16 Kan. 209 ; Hallet v. Desban, 14 La. Ann.
529; Reddlngton y. Lanahan, 59 Md. 429; Partridge ▼. Kingman,
130 Mass. 476 ; Fairly v. Nash, 70 Miss. 193, 12 South. 149 ; Webb
▼. Liggett, 6 Mo. App. 345 ; Waggoner v. First Nat Bank of Greigh-
ton, 43 Neb. 84, 61 N. W. 112 ; Mason v. Hackett, 4 Nev. 420 ; Brom-
ley Y. Elliot, 38 N. H. 287, 75 Am. Dec. 182 ; Voorhees y. Jones, 29
N. J. Law, 270 ; Lewis y. Greider, 51 N. Y. 231 ; Bartlett v. Leyy,
2 Stro. 471 ; Gherry y. Owsley (Tex.) 10 S. W. 519 ; Jackson y. Hay-
nie's Adm'r, 106 Va. 365, 56 S. E. 148; Nicholaus y. Thielges, 50
Wis, 491, 7 N. W. 341. See ''Partnership," Dec. Dig. {Key No.) U
P, 30; Cent. Dig. |§ 23, 24, 4^, U-
•s QUAGKENBUSH y. SAWYER, 54 Gal. 439, Gllmore, Gas. Part-
nership, 66; Parker y. Fergus, 43 111. 437; Ghapman y. Eames, 67
Me. 452; Thompson y. Snow, 4 Me. 264, 16 Am. Dec. 263; HOLMES
y. OLD GOLONY R. GORP., 5 Gray (Mass.) 58 ; BEEGHER y. BUSH,
45 Mich. 188, 7 N. W. 785, 40 Am. Rep. 4*65, Gllmore, Gas. Partner-
ship, 49; Kellogg Newspaper Go. y. Farrell, 88 Mo. 594; Austin y.
NeU, 62 N. J. Law, 462, 41 Atl. 834; Helmstreet y. Howland, 5
Denio (N. Y.) 68 ; Dunham y. Rogers, 1 Pa. 255 ; Friedlander y. Hill-
coat (Tex.) 14 S. W. 786. See ''Partnership," Deo. Dig. {Key No.) H
8, 30; Cent. Dig. H 21, 2S, ^2.
Gil. Past.-
34 WHAT CONSTITUTES A PARTNERSHIP (Oh. 1
SAME— SHARING PROFITS AND LOSSES
12. An agreement to share the profits and losses of a busi-
ness is prima fade evidence of an intention to form
a partnership.
Ordinarily, when two or more persons become co-pro-
prietors of a business, they intend and expect to share both
the profits and losses of such business — the profits, be-
cause that is the inducement which causes them to enter
into the relationship; the losses, because as a rule no one
will enter a business with another except upon the condi-
tion that that other shall bear his share of the risk. The
intention to engage in a common business is the true test
of partnership; therefore those who engage in such a busi-
ness under an agreement to share the profits and losses
are as a matter of law partners. Since a case will rarely
be found in which one will agree to share the losses of a
business in which he is not a principal, in the conduct of
which he has not a right to participate, a partnership is
found in practically all cases where an agreement is made
to share the profits and losses of a common enterprise.
Therefore the existence of such an agreement is very strong
evidence that a partnership exists. It is evidence so strong
that it has sometimes been thought to be conclusive.*'
Yet it is certainly not necessarily inconsistent with the ex-
istence of an agreement to share profits and losses that
the parties never intended to engage in a common busi-
ness.** Consequently, where the plaintiflF agreed to cul-
•« Scott V. CampbeU, 80 Ala. 728; Miners' Co-operative Ass'n v.
The Monarch, 2 Alaska, 383; Brooke v. Tncker, 149 Ala. 96, 43
Sooth. 141. See ''Partnership,*' Dec. Dig. (Key No.) f{ ii, 12, SO;
Cent. Dig. S§ 26, 27, 46, ^7.
•« In the earlier editions of liindley's Law of Partnership this
statement appeared: ''Whatever difference of opinion there may be
as to other matters, persons engaged in any trade, business or ad-
venture, upon the terms of sharing the profits and losses arising
therefrom, are necessarily to some extent partners in that trade,
business or adventure; nor is the writer aware of any case in
§ 12) TESTS OF INTENTION 35
tivate defendant's farm, each to pay half the expense and
receive half of the profits, a charge to the jury that they
were partners was held erroneous ; •• and an agreement be-
tween A. and B., rival buyers of cattle, to buy each for
himself as before, but each to share equally in the profits
and losses of every shipment, was held not to constitute
a partnership.** An agreement to share profits and losses
is, however, prima facie evidence of an intention to form
a partnership.*^
which persons who have agreed to share profits have heen held not
to be partners!'*
Prof. Ames criticises this statement In a note to his Gases on
Partnership, p. 124, saying: "But this statement, It Is conceived. Is
much too sweeping. An agreement to share profits and losses cre-
ates a strong, but not conclusive, presumption of a partnership be-
tween the parties, as appears from the following authorities:
MOORE V. DAVtS, 11 Gh. Dlv. 261 (semble) ; Stevens ▼. Feucet, 24
111. 483 ; Chaffralx v. Price, 29 La. Ann. 176 ; DWINEL ▼. STONE,
30 Me. 384 (semble) ; Howe v. Howe, 99 Mass. 71 (semble) ; DON-
NELL V. H ARSHE, 67 Mo. 170, Qllmore, Gas, Partnership, 63 ; Mus-
ser V. Brink, 68 Mo. 242 (semble); Osbrey ▼. Relmer, 49 Barb. (N.
Y.) 265."
The later editions of Lord Llndley's work (7th Ed. p. 46) have al-
tered the last clause of the quotation 'given, so that It reads : "Nor
Is the writer aware of any case In which persons who have agreed
to share profits and losses In this sense have been held not to be
partners.*' That Is, "In this sense" means "as persons engaged In
any trade, business, or adventure." National Surety Co. v. T. B.
Townsend Brick & Contracting Co., 74 111. App. 312, affirmed 176
lU. 156, 52 N. E. 938. See ^'Partnership,'* Dec. Dig. {Key No.) H
^IS, SO; Cent. Dig. §S 15-^28. 38-48.
•8 DONNELL V. HARSHE, 67 Mo. 170. Gllmore, Gas. Partnership,
63. See "Partnership,*' Dec. Dig. {Key No.) J 5; Cent. Dig. $ IS.
•6 CLIFTON V. HOWARD, 89 Mo. 192, 1 S. W. 26, 58 Am. Rep.
97. See ** Partnership,** Dec. Dig. {Key No.) §§ S, 11, SO; Cent. Dig.
U S, IS, H, 47.
«7 "If the question In this case had depended on the simple ques-
tion whether sharing In profits and losses constituted a partnership, so
as to authorize one party to pledge the other's credit, I should have
thought the direction right; as, since the decision In COX v. HICK-
MAN, 8 H. L. C. 268 [Gllmore, Gas. Partnership, 31], It has been
the law that sharing In profits and losses does not In Itself con-
stitute a partnership, but only affords a strong presumption that
the one party Is made the agent for the other." Blackburn, J., In
Noakes ▼. Barlow, 26 L. T. N. S. 136. See "Partnership,** Dec. Dig.
{Key No.) U 4-^S, 17, SO; Cent. Dig. §{ S, 15-4t8, S8-48.
36 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
The inference that the parties did 'not intend to become
partners is stronger, however, than in thfe case of an agpree-
ment to share profits, only, simply because an agreement
to share profits and losses without intending to become
partners is more rare than an agreement to share prcffits
only without a like intention. Hence stronger evidence
would be required to rebut such prima facie evidence.
COMMON OWNERSHIP OP PROPERTY
18. Common ownership of property does not create a part-
nership between the parties.
As has been indicated, the true test of partnership is an
agreement to engage in a joint business. It is a common
incident of such an agreement that the parties should
jointly contribute a capital to be owned in common, to be
used in the partnership business, and in the payment of
partnership debts. Yet common ownership of property
constituted a well-known and clearly defined relation in
the common law before partnership was introduced from
the law merchant. Hence, while a usual result of partner-
ship, and in that sense evidence that a partnership exists,
it does not of itself prove that there is a partnership. More-
over, it should not have that effect; for such ownership
is not necessarily founded on a contract between the par-
ties, and does not in any way depend upon their mutual
confidence.
Property owned in common is not necessarily held for
gain, as is partnership property. The mere fact, however,
that it produces a profit in the way of income or rent, ought
not to involve the owners in an unwilling partnership.
Hence the common ownership of property, combined with
a sharing of the profits arising from the use of such prop-
erty, does not create a partnership.** For example, A, and
e« **Jolnt tenancy, tenancy in common. Joint property, eommon
property, or part ownership does not of itself create a partnership
as to anything so held or owned, whether the tenants or owners dc
S 18) COMMON OWNERSHIP OF PROPBRTT 3T
B., being tenants in common of a horse, agreed that A.
should have the general management of the horse, training
and racing him, and that the expense and winnings should
be equally divided. It was held that they were not part-
ners so far as the keep of the horse was concerned.** The
owners of an undivided interest in the leases of certain oil
wells, who agreed to share in the expense of operating the
leases and of mining the oil, were held not to be partners.
"They were engaged in the development and operation of
the common property for their undividual benefit. They
were doing what tenants in common may. properly do, and
in the only way practical for them, viz., turning the com-
mon property to the profit of its owners, at their individual
cost, and dividing the product between themselves." ^*
Also, where a circus property was transferred to two per-
sons as security for a debt, and it was agreed that one
should take charge of the circus, make exhibitions, and
apply the receipts first to the payment of the other, then
of himself, it was held that the receipts came into his
hands as trustee, and not as partner.** Where, however,
co-owners of property use such property in joint business,
they become partners in such business. The difficulty will
always be to determine whether or not they have gone into
business.** For instance, in reference to the remarks of
or do not share any profits made by the use thereof." English Part-
nership Act, 1890, I 2 (1).
e» FRENCH v. STYRING, 2 C. B. N. S. 357. "It Is no more a
partnership than If two tenants in common of a house agreed that
one of them should have the general management, and provide funds
for necessary repairs, so as to render the house fit for habitation of
a tenant, and that the net rent should be divided between them
equally." Per wiUes, J., at page 366 of above case. Bee **Pari'
nersMp;* Dec. Dig. {Key No.) f§ 5, 30; Cent. Dig, H 13, U, 38.
70 BUTLER SAVINGS BANK v. OSBORNE et al., 159 Pa. 10, 18,
28 AU. 163, 39 Am. St. Rep. 605, Gilmore, Gas. Partnership, 58. See
^^Partnership:* Deo. Dig. {Key No.) Sl 5, 30; Cent. Dig. ff 13, 14, 38.
71 QUACKBNBUSH v. SAWYER, 54 Gal. 439, 5 Pacific Goast Law
J. 277, Gilmore, Gas. Partnership, 66. See **Partner9Mp:* Dec Dig.
(Key No.) $ 5; Cent. Dig. § 15.
" NO YES V. GDSHMAN et al., 25 Vt 390, Gilmore, Gas. Part-
nership, 65. See ^^Partnership:* Dec. Dig. {Key No.) §§ |-i5; Cent.
Oig. H i^^fi.
88 WHAT CONSTITUTES A PABTNBRSHIP (Gh. 1
Willes, J., in French v. Styring/* Pollock says : ^* "But if
they furnished the house at their joint expense, and then let
portions of the house as lodging, they might well be part-
ners. Letting a house is not a business, but letting fur-
nished rooms is." It is in the business that the partnership
exists, however, and not in the property. Common owners
of property may at the same time be partners in business,
and the mere fact that they use the common property in
the partnership business does not make such property part-
nership property, any more than does the use of the prop-
erty of one partner in the partnership business make such
property partnership property. Whether or not joint property
becomes partnership property depends upon the agreement
of the parties.^*
tt
78 FRENCH V. STYRING, 2 O. B. N. S. 367. See '^Partnership,
Dec. Dig, {Key No,) §{ ^-i5; Cent Dig. §« 15-28.
7« In note 1, p. 3, of Digest of the Law of Partnersblp (8th Ed.).
7B '*i think the fair result of the evidence is that there was no
partnership between the plaintiff and the defendant in the horse
in question. They were owners in common, each being entitled to
an undivided moiety — part owners, but not partners in the ordinary
sense of the term. I incline to agree with the defendant's counsel
that, though not partners in the horse, the plaintiff and defendant
might be partners in the mode of working and managing it for their
common good." Cockburn, C. J., in FRENCH v. STYRING, 2 C.
B. N. S. 357, 363. See Bryant v. Fitzslmmons, 106 Md. 421, 67 AtL
356.
*'It Is not necessary to constitute a partnership that there should
be any property constituting the capital stock which shall be joint-
ly owned by the partners. But the capital may consist in the mere
use of property owned by the individual partners separately." Wal-
worth, C, in CHAMPION v. BOSTWICK, 18 Wend. (N. Y.) 182, 31
Am. Dec. 376.
"If, then, it is true that the parties were owners in common of
the property before the agreement was made, and the agreement
specially preserves their title as such through the time that the
business as to which they were partners lasted, and the use of such
property owned In common by them for the business does not make
it partnership property, under the circumstances of this case, the
plaintiffs have no right to a judgment that the property be sold
in the winding up of the partnership business." Sedgwick, J., in
Auten V. EUlngwood, 51 How. Prac. (N. Y.) 359, 365; Holton ▼.
Quinn (C. C.) 76 Fed. 96; Hendy v. March, 75 Cal. 566, 17 Pac.
702; Merritt v. Walsh, 32 N. Y. 685. See "Partnership,'* Dec. Dig.
{Key No.) §§ 4-18, SO; Cent. Dig. S§ 15-28, 38-48.
§ 14) JOINT ENTSRFBISB OB BUSINESS 89
JOINT ENTERPRISE OR BUSINESS
14. Engaging as co-owners in a joint enterprise or business
for profit to be shared creates a partnership.
In order to create a partnership, there must be some-
thing more than the engaging in a common enterj^rise, even
though that enterprise be entered upon with a view to
profit. A joint agreement to do a piece of work for a third
person and divide the payments does not necessarily make
the parties partners. The fact that payments were to be
immediately divided, instead of being placed in a common
fund, indicated in the case in question that they did not
intend to form a partnership/* Neither does a joint agree-
ment to arrest a criminal and divide the reward offered ; '^
nor a joint enterprise to make a single haul of fish and
divide them equally.'* There must be a joint business,
not in any technical sense, but actually. In the above
illustrations the parties would not have been ordinarily un-
derstood as being engaged in business, nor were they. In
Coope V. Eyre,'* the parties agreed that one should pur-
chase oil, which was to be divided among all, each paying
the one who made the purchases his share of the purchase
price. It was held that they were not partners. So, also,
in Gibson v. Lupton,** where two persons joined in the
purchase of some wheat to be divided and paid for equally.
In neither case was there a joint business. Had the pur-
chases* been made with the intention of reselling, they
TeFINKLB v. STAGEY, Menaghten'B Sel. Gas. In Ghan. 9; Willis
▼. Crawford, $8 Or. 522, 63 Pac. 985, 64 Paa 866, 53 L. R. A. 904.
See **Partnership,'' Deo. Dig. {Key No,) $ 11; Cent. Dig. f 26.
T7 DawBon t. Gurley, 22 Ark. 381. See "Partnership;* Cent. Dig.
7« Hurley r, Walton, 63 111. 280. See ** Partnership;* Dec. Dig.
{Key yo.) \ 5; Cent. Dig. f 16.
T» 1 H. Bl. 37. See "Partnership;* Deo. Dig. {Key No.) H |-15,
SO; Cent. Dig. U 15-28, 5M8.
80 9 BlDg. 297. See "Partnership,** Dec. Dig. {Key No.) K -M^,
SO; Cent. Dig. §§ 15-28, S8'-48.
40 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
would have been partners.** It should not be understood
from the above cases that a single transaction may not
constitute a partnership. A partnership may be created
for one adventure only, as well as a series of adventures,
provided that it is a business adventure.*'
RELATIONS DISTINGUISHABLE FROM
PARTNERSHIP
16* There are various relations bearing some resemblance
to partnership, and having certain characteristics
of partnerships, which should be distinguished as
follows :
(1) Corporations.
(2) Joint ownership of property*
(a) Coi>arcenary.
(b) Joint tenancy.
(c) Tenancy in common.
(3) Associations not for profit.
Partnership Distinguished from a Corporation
It is frequently convenient for men engaged in business
to unite their capital and efforts in a common business.
It may be that each one alone has not the capital or the
81 HOARE v. DAWES, 1 Doug. 371, Gllmore, Gas. Partnership, 1:
REID V. HOLLINGSHEAD, 4 B. & C. 867; Worsham ▼. Vlgnal,
14 Tex. Civ. App. 324, 37 S. W. 17; McNealy v. Bartlett, 1^ Mo.
App. 68, 99 S. W. 767.
In GOELL v. MORSE, 126 Mass. 480, two persons bought a horse.
Intending to resell, but it was agreed that neither should have pow-
er to sell without the concurrence of the other. This was held not
to be a partnership. It would seem, however, that It might more
properly have been held to be a partnership with limited authority.
See ^'Partnership," Dec. Dig. {Key No.) tS 4-^5, SO; Cent. Dig. §§
15-28, S8'48.
ss Heyhoe v. Burge, 9 O. B. 431; Smith r, Watson, 2 B. ft O. 401 ;
Kayser y. Maugham, 8 Colo. 232, 6 Pac. 803; Jones v. DaTles, 60
Kan. 309, 56 Pac. 484, 72 Am. St. Rep. 354; Spencer v. Jones, 92
Tex. 516, 50 S. W. 118, 71 Am. St. Rep. 870. See Partnership Act,
1890, § 32, subsec. "b," as to the termination of such partnership.
See ** Partnership," Dec. Dig. (Key No.) S 5; Cent. Dig. % 16.
§ 16) BELATION8 DISTINOUISHABLB 41
credit to prosecute the business successfully. There may
be many other reasons why they find it convenient to unite
their forces. One way of combining their interests for
purposes of business is to form a partnership. One im-
portant characteristic of a partnership is the unlimited lia-
bility of each of the members for the debts incurred in
conducting the joint business. Another way of uniting
their interests and gaining the benefits of combined capital
and credit is to form a corporation. One important char-
acteristic of a corporation is the limited liability of its
stockholders. It becomes important to distinguish a part-
nership from a corporation.
A corporation is a legal entity or person created by
special authority from the state or the sovereign. Though
it consists of a number of individuals, it has a legal ex-
istence apart from any of them. Hence it may sue or be
sued in its corporate name. It may sue its own members
and be sued by them. It may own property and incur lia-
bilities with respect to it. It owns the profits made in any
business in which it may engage. The death or retirement
of a stockholder, by sale or otherwise, does not in any way
affect the identity of the corporation. The liability of the
shareholders does not, ordinarily, extend beyond the
amount of their subscriptions to the capital stock.
On the other hand, a partnership is created by the agree-
ment of the parties. Though it transacts business as an
individual might, it has no legal existence apart from the
members composing it. It is not a legal person, and can
acquire no rights aAd incur no liabilities. Hence it cannot
sue or be sued as an entity. Its property is their property.
Its rights are their rights, and can be enforced by them.
Its liabilities are their liabilities, and can be enforced
against them. The death or retirement of a member de-
stroys the partnership. Each member is individually liable
for the whole of the obligations of the partnership, even
though he has paid in full his contribution to the partner-
ship capital.*'
•« In re GIBBS* ESTATB, 157 Pa. 50, 27 AU. 383, 22 L. R. A. 2761,
Gilmore, Gas. PartDershlp, 91 ; La Cotts t. Pike. 91 Ark. 26, 120 S.
42 WHAT CONSTITUTES A PABTNBB8HIP (Ch. 1
Common Ownership — In general
The property owned by a partnership is held in one form
of co-ownership. It is one of the incidents of partnership
that the capital contributed and the profits realized are
owned in common. Co-ownership of property may exist,
however, without arising from a partnership, or without
creating one. The usual fofms of co-ownership recognized
by the common law are coparcenary, joint tenancy, and
tenancy in common. A brief examination of these forms
of co-ownership is necessary to a proper understanding of
partnership ownership.
Same — Coparcenary
Coparcenary was the term applied at common law to the
tenancy which existed where, as under the common law,
the female descendants, or, as under special custom, the
male descendants of equal degree, took jointly, yet as a
single heir, by descent from a common ancestor. Since it
only applied to property held by descent, it applied to real
property only. The relationship was imposed upon the par-
ties by operation of law, and their consent was immaterial.
Neither had any power of disposal over the shares of the
rest as a partner would have; but each could dispose of
his own share and introduce a new party, which a partner
could not do. In case one coparcener did dispose of his
interest, the coparcenary would cease to exist and become
a tenancy in common. The grantee would become a co-
owner, but not a coparcener.** Coparcenary has in this
country never existed, except in Maryland; estates which
under the common law would be estates in coparcenary
being declared either by statute or by judicial legislation to
be tenancies in common.*'
Same — Joint Tenancy
Joint tenancy is created when a conveyance is made to
two or more jointly. Being a conveyance by act of the par-
W. 144, 184 Am. St Rep. 4a Bee ^'Partnership,'* Deo. Dig. {Key
Vo,) HS,6; Cent. Dig. || lS-28.
•* 2 Bl. Com. c. 12, p. 187.
••1 Washburn on Real Property, 651; Tiedeman on Real Prop-
erty (2d Bd.) 202.
§ 15) RSI^TIONS DISTINGUISHABLB 43
•
ties, it might consist of atv interest in personalty as well as
of an interest in land. The joint owners were called joint
tenants. Though none of them could dispose of the whole,
each could dispose of his interest. Since all joint tenants
hold by the same title, the grantee of a single joint tenant,
though a co-owner, would not become a joint tenant. A
sale by one destroyed the joint tenancy, and created a ten-
ancy in common.** Though a tenancy in common in real
estate might be created in the same way as a joint tenancy
— ^i. e., by a conveyance to two or more by apt words in
the conveyance — the common law was inclined in case of
doubt to construe the conveyance as creating a joint ten-
ancy rather than a tenancy in common; the former being
more beneficial to the feudal lord. In a devise, however,
the contrary rule prevailed. In a joint tenancy, upon the
death of one joint tenant, his share accrued to the surviv-
ors ; in a tenancy in common, this rule of survivorship did
not obtain. Hence a devise was, if possible, construed as
creating a tenancy in common ; it being presumed that the
devisor had intended that which was most beneficial for
the devisees.*' The presumption that existed in favor of
the creation of a tenancy in common in a devise came to
exist also in a conveyance by deed, when once the courts
were freed of feudal influences.**
In the United States joint tenancies have never been
favored, though, except in Ohio, they have generally ex-
isted in this country till abolished by statute. There is,
however, in general, a presumption, either judicial or stat-
utory, against their creation, and in some states they have
been expressly abolished by statute.** Therefore the com-
mon form of co-ownership, apart from partnership owner-
ship, is tenancy in common.
Same — Tenancy in Common
A tenancy in common, though it may be created in the
same manner as a joint tenancy — i. c., by a conveyance to
•• 2 Bl. Com. c. 12, p. 180. •f 2 Bl. Ck>m. c. 12, p. 193.
•» Fisher v, Wigg, 1 P. Wins. 14, note; York y. Stone, 1 Balk. 158;
Fisher y. Wlgg, 1 Salk. 392, note 2 ; Rlgden y. Yalller, 28 Ves. Sr.
252, 258. See ""Willsr Deo. Dig. {Key No,) f 627; Cent. Dig. |! USZ-
1459.
8* See Joint Tenancy, Deo. Dig. (Key No.) f t; Cent. Dig. | t.
I
44 WHAT CONSTITUTBS A PARTNERSHIP (Ch. 1
•
two or more jointly — may also be created by the convey-
ance of an undivided interest to different individuals at
different times by separate conveyances. Therefore there
need be no concurrence of action, even in the inception of
the relationship. Each tenant in common may, moreover,
introduce new tenants in common without the consent of
the others, by selling all or part of his interest. He has,
however, no power over the interest of his fellow tenants.
Due to the disfavor with which the survivorship of joint
tenancy is viewed, tenancy in common has come to be the
usual form of co-ownership in this country. Therefore
property owned in common is now ordinarily owned in
partnership or in tenancy in common.**
Organizations Not for Profit
Partnerships were originally composed of merchants,
who had combined in order to gain mutual profit from
dealing in commodities. Partnership is not confined to
mercantile enterprises, however, as it has long been held
that lawyers, physicians, and other nontrading persons,
may become partners by combining their forces for mutual
profit Yet the object of every partnership must be the ac-
quisition of gain. Partnership is a business relation, and
•oTbe priDdpal differences between partnership ownership and
other forms of C0H>?mer8hip is summed up In Lindley on Partner-
ship as follows :
"1. Go-ownership is not necessarily the result of an agreement
Partnership Is. 2. Go-ownership does not necessarily involve com-
munity of profit or of loss. Partnership does. 3. One co-owuer
can, without the consent of the others, transfer his interest to a
stranger, so as to put him in the same position as regards the other
owner as the transferror himself was before the transfer. A part-
ner cannot do this. 4. One co-owner is not as such the agent, real or
implied, of the others. A partner is. 5. One co-owner has no lien
on the thing o?med in common for outlays or expenses, nor for what
may be due from the others as their share of a common debt A
partner has. 6. One co-owner of land is entitled to have it divided
between himself and co-owners, but not (except by virtue of the
Partition Acts) to have it sold against their consent A partner
has no right to partition in specie, but is entitled, on a dissolution,
to have the partnership property, whether land or chattels, sold,
and the proceeds divided." Lindley, Law of Partnership (7th Ed.)
p. 26.
§ 15) RKLATI0N8 DI8TINGUI8HABLB 45
the purpose of every business is gain. Therefore no asso-
ciation or combination which is not formed for gain con-
stitutes a partnership. Members of social, religious, char-
itable, political, and commercial societies or clubs are not
partners.** As the members of such organizations are not
partners, their liability to third persons must depend upon
the principles of the law of agency. No liability attaches
by virtue of membership in the association ; hence liability
for the acts of the representatives cannot be fastened on a
member by merely proving his membership. Actual au-
thority, as in other cases of principal and agent, must be
proved.** As between the members, their liability is de-
termined by their contract, and is usually limited to a def-
inite subscription or assessment ; ** and an action at law
may be maintained for unpaid subscriptions.**
The fact that persons unite for mutual benefit does not
alone make them partners. They must derive that benefit
from the conduct of a joint business. It has been repeat-
edly decided that joint purchasers of property with intent
to divide are not partners. They are not engaged in a joint
business. Beneficial associations are not partnerships, un-
less they engage in business.** Thus it has been held that
•1 REG. Y. ROBSON, L. R. 16 Q. B. Div. 137, Gilmore, Gas. Part-
nership, 85; Caldicott ▼. Griffiths, 8 Ex. 898; Pipe v. Batement, 1
Iowa, 369 ; Teed v. Parsons, 202 111. 455. 66 N. E. 1044 ; BURT t.
liATHROP, 52 Mich. 106, 17 N. W. 716, Gllmore, Gas. Partnership.
57 ; White v. Brownell, 8 Abb. Prac. N. S. (N. Y.) 818 ; Local Union
No. 1, Textile Workers, y. Barrett, 19 R. I. 668, 36 Atl. 5. See ^^Part-
nersMp," Dec. Dig. {Key No.) H 1* H; Cent. Dig. | 56; ^^Associa-
tionsr Cent. Dig. % 1; "Cluhar Cent. Dig. | 1.
•2 Wise V. Perpetual Trustee Co., [1903] A. G. 139; Flemyng ▼.
Hector, 2 M. & W. 172; Luckombe ▼. Ashton, 2 Fas. & Fin. 705;
Dunham v. Loverock, 158 Pa. 197, 27 Atl. 990, 88 Am. St Rep. 838.
8ee "Partnership^ Cent. Dig. | 7.
•» Wise V. Perpetual Trustee Go., [1903] A. G. 139 ; Harington ▼
Sendall, L1903] I Ch. 921. See ** Partnership,'* Deo. Dig. {Key No.)
n 70, 71; Cent. Dig. §§ 1X4-^6. ,
»4 Hall V. Thayer, 12 Mete. (Mass.) 130. See "Subscriptions,'- Cent.
Dig. |§ 10, 25.
OS State ex rel. Hadley ▼. Kansas City Live Stock Exchange, 211
Mo. 188, 109 S. W. 675, 124 Am. St. Rep. 776; Webster v. Taplln,
Rice & Co., 29 Ohio Cir. Gt R. 543, affirmed 76 Ohio St 590. 81 N.
46 WHAT CONSTITUTES A PARTNERSHIP (Ch, 1
mutual insurance companies, where each member is an in-
surer of the others, are not partnerships.** Though each
member expects to obtain a financial benefit through his
membership, they are not in business, which implies dealing
with a third person for gain ; hence are not partners. The
same is true of secret lodges which insure the members.*'
Also an organization of farmers to conduct a telephone ex-
change for their mutual convenience was held not to con-
stitute a partnership.** Also where property is bought to be
divided, it is held that members of a co-operative association
formed for the purpose of buying goods to be resold to the
members are not partners. Where, however, they engage in
selling to persons who are not members, they engage in a
business enterprise, and become partners.**
B. 1196. See ^'Partnership,'' Dec, Dig. {Key Vo.) |{ 4-15; Cent,. Dig.
$1 15-28.
08 Strong Y. Harvey, 8 Bing. 304; Red way v. Sweeting, L. R. 2
Ex. 400; Gray v. Pearson, L. R. 5 O. P. 568 ; Andrews & Alexander's
Case, 8 Eq. 176. Bee '^Insurance,** Dec. Dig. (Key No.) i 55; Cent.
Dig. I 68.
•T Burke v. Roper, 79 Ala. 138 ; Kuhl ▼. Meyer, 85 Mo. App. 206 ;
Laf ond v. Deems, 81 N. Y. 607. Contra : Gorman v. Russell, 14 Cal.
531. See, however, CIy. Code Cal. S 603, and St Cal. 1873-74, p.
745. In Pennsylvania such organizations are held to create part-
nerships, and except as exempted by statute, the members are held
liable as such. Babb v. Reed, 6 Rawle, 151; 28 Am. Dec 650;
Pritehett v. Schafer, 2 Wkly. Notes Cas. 817; Pain v. Sample, 158
Pa. 428, 27 Atl. 1107; Sparks v Husted (Com. PL) 5 Pa. Dist R.
189. See ^'InBuranoe,*' Dec. Dig. {Key No.) § 694; Cent. Dig. | I8S4.
•• Melnhart v. Draper, 133 Mo. App. 50, 112 S. W. 709 ; Branagan
V. Bnckman, 67 Misc. Rep. 242, 122 N. Y. Supp. 610. See **Partner-
ship,*' Dec. Dig. {Key No.) || 1, 5, 15.
•0 Teed v. Parsons, 202 lU. 455, 66 N. E. 1044; Hodgson v. Bald-
win, 65 111. 532 ; Manning v. Gasharle, 27 Ind. 399 ; Beaman v. Whit-
ney, 20 Me. 418; Atkins v. Hunt, 14 N. H. 205; Farnum v. Patch,
60 N. H. 294, 49 Am. Rep. 813 ; Edgerly v. Gardner, 9 Neb. 130. 1 N.
W. 1004; Smith v. HoUlster, 32 Vt 695; Stlmson v. Lewis, 36 Vt
91 ; Tenney v. New England Protective Union, Division No. 172, 37 Vt
64; Henry v. Jackson, 87 Vt 431. See ^'PartneruMpt" Dec Dig.
{Key No.^ H S, 4I; Cent. Dig. i| IS, U, 66.
8 16) CONTRACT FOB A PABTNBRSHIP 47
CONTRACT FOR A PARTNERSHIP
16. A contract for a partnership to arise in the future or
upon the happening of a contingency does not
make the parties thereto partners until the time
prescribed has elapsed, or imtil the contingency
has happened.
Though partnership arises by contract, the making of an
executory contract of partnership does not create a part-
nership. If the partnership is not to take effect till a cer-
tain time has elapsed, or a certain contingency has hap-
pened, no . partnership will exist until the elapsing of the
time or the happening of the contingency.^ "A marked
distinction exists in law between an agreement to enter
into the copartnership relation at a future day and a co-
partnership actually consummated. It is an elementary
principle that a partnership in fact cannot be predicated
uplon an agreement to enter into a copartnership at a fu-
ture day, unless it be shown that such agreement was ac-
tually consummated. In the language of the text-books,
the partnership must be 'launched.' To constitute the rela-
tion, therefore, the agreement between the parties must be
an executed agreement. So long as it remains executory,
the partnership is inchoate, not having been called into be-
ing by the concerted action necessary under the partnership
agreement. It is undoubtedly true that a partnership in
1 DOW Y. STATE BANK OF SLEEPY BYE, 88 Minn. 355, 93 N.
W. 121, Gllmore, Cas. Partnership, 87; Dickinson v. Valpy, 10 B. &
C. 128 ; Rebonl y. Ghalker, 27 Conn. 114 ; Johnston y. Eichelberger,
13 Fla. 230; WHson v. Wilson. 6 Idaho, 597, 57 Pac. 708; Metcalf
Y. Redmon, 43 111. 2S4; Haskins y. Burr, 106 Mass. 48; Bird y.
Hamilton, Walk. Gh. (Mich.) 361 ; Westwood y. Cole, 66 Misc. Rep.
53, 120 N. Y. Supp. 884; Atkins y. Hunt, 14 N. H. 205; Matter
of Hoagland, Zl App. DiY. 347, 64 N. Y. Supp. 920; Mosier y. Par-
ry, 60 Ohio St 388, 54 N. E. 364; Irwin y. Bidwell, 72 Pa. 244;
Buasard Y. McAnulty, 77 Tex. 438, 14 S. W. 138; State y. Menden-
han. 24 Wash. 12, 63 Pac. 1109; Hoile y. York, 27 Wis. 209; Hol-
gate V. Downer, 8 Wyo. 344, 57 Pac. 9ia See "PartnersJiip,*' Deo,
Dig. {Key No.) |{ 20, 21, 40, 57; Cent. Dig. {{ 6, S6, 82,
48 WHAT CONSTITUTES ▲ PAltTNBRSHIP (Gh» 1
praesenti may be constituted by an agreement, if it appears
that such was the intention of the parties. But where it
expressly appears that the arrangement is contingent, or
is to take effect at a future day, it is well settled that the
relation of partners does not exist, and that, if one or more
of them refuse to perform the agreement, there is no rem-
edy between the parties, except a suit in equity for specific
performance, or an action at law for the recovery of dam-
ages, should any be sustained." • It is the present estab-
fishment by agreement of the relationship that creates a
;oartncrship, not a contract to establish one in the future.
Thus an agreement to enter into a partnership according to
articles to be later drawn up does not create a partnership.*
s Meagher t. Reed, 14 Colo. 335, 24 Pac. 681, 685, 9 L. R. A. 455.
Where there is an agreement to be partners after a fixed time, the
mere arrival of such time does not necessarily make the parties
partners. Non constat one of them may repudiate the agreement,
and elect to respond in damages for breach of contract The part-
nership must be launched. See Doyle v. Bailey, 75 IIL 418; Wil-
son y. Campbell, 10 111. 383 ; Powell y. Maguire, 43 Cal. 11 ; Truitt
y. Clark, 81 111. App. 652, affirmed 183 lU. 239, 55 N. B. 683 ; Vance
y. Blair, 18 Ohio, 532, 51 Am. Dec. 467; Gray y. Gibson, 6 Mich.
300; Brink y. New Amsterdam Fire Ins. Co., 5 Rob. (N. Y.) 104.
See, also, Que^ City Furniture & Carpet Co. y. Crawford, 127 Mo.
356, 30 S. W. 163; LATTA y. KILBOURN, 150 U. S. 524, 14 Sup.
Ct 201, 37 L. Ed. 1169, Gilmore, Cas. Partnership, 425. See "Part-
nership,'* Dec. Dig, {Key No.) §! 20, 21, 29, iO; Cent, Dig, %\ 6, 7,
SO-SS, S6,
9 Syers y. Syers, 1 App. Cas. 174. The commencement, as to third
persons, of a partnership at a time prior to the date of the partner-
ship articles, may be shown by the acts, declarations, and dealings
of such persons, as partners, prior to that date, which have in-
duced such third persons to deal with them as partners. Gain Lum-
ber Co. y. Standard Dry-Kiln Co., 108 Ala. 346, 18 South. 882; Cook
y. Carpenter, 34 Vt 121, 80 Am. Dec. 670; Davis y. Evans, 89 Vt
182; Atkins v. Hunt, 14 N. H. 205; Hartman y. Woehr, 18 N. J.
Eq. 383; Morrill v. Spurr, 143 Mass. 257, 9 N. B. 580; National
Bank of Chemung y. Ingraham, 58 Barb. (N. Y.) 290; First Nat.
Bank of Gainesville v. Cody, 93 Ga. 127, 19 S. E. 831. Defendant
and plaintiff agreied orally to form a partnership to carry on a hotel
purchased by defendant In contemplatioi;i of the fulfillment of tftis
agreement, they began business, made contracts, opened the books,
and performed various other acts in the partnership name. When
the articles of parthership were drawn up. they could not agree
upon the terms, and defendant finally declined to enter into the
g 16) OONTBAOT FOR A PARTNERSHIP 49
An option g^ven to one to become a partner in a present
business does not make him a partner. He becomes a part-
ner only upon exercising the option and electing to become
a partner.* The death of one of the parties before the time
fixed upon for the beginning of the partnership, or the fail-
ure to perform a condition precedent, will prevent a part-
nership ever arising." The existence of a partnership is
determined, however, by what the parties have done, not
by what they think they have done. Therefore a declara-
tion in a preliminary agreement that they do not intend to
form a present partnership will not prevent a partnership
arising, if what is actually agreed upon and done does
create one. Whether one is actually created or not depends
upon all of the terms ,of the agreement and all of the cir-
cumstances of the case.* Moreover, since no formal instru-
ment of agreement is necessary, the terms of the prelim-
inary agreement may be subsequently varied and perform-
ance of its conditions waived ;' but the waiver of a condi-
tion definitely agreed upon is not to be presumed.*
IMirtnersblp. Held, that there was nothing to Indicate that the
partnership was actually formed, entitling plaintiff to an account-
ing. MARTIN Y. BAIRD, 175 Pa. 540, 34 Atl. 800. See ^'Partner-
«Mp," Dec. Dig. (Key No,) |i 21, 40; Cent. Dig. §§ 6, S6.
4gABBL V. SAVANNAH RAIL & EQUIPMENT CO., 135 Ala.
380, 33 South. 663, Gllmore, Cas. Partnership, 116; Ex parte Davis,
4 De G. J. & S. 523; Gabrlell v. Evill, 9 M. & W. 297; Price v.
Groom, 2 Ex. 542; Howell y. Brodie, 6 Bing. N. C. 44; Bumell v.
Hunt, 5 Jur. 650 (Q. B.); Re Young, Ex parte Jones, [1896] 2 Q.
B. 484. See "Partnership,*' Dec. Dig. (Key No.) U 20, 21, 40, 57;
Cent. Dig. §fi 6, 7, S6, 82.
» DOW V. STATE BANK, 88 Minn. 355, 93 N. W. 121. Gllmore,
Cas. Partnership, 87; Metcalf v. Redmon, 43 111. 264. See "Part-
nership,'* Dec. Dig. {Key No.) | 21; Cent. Dig. | 6.
8 England y. Curling, 8 Beay. 129, 133 ; Arnold y. Conkliu, 96 111.
App. 373 ; Ehrhardt y. Steyenson, 128 Mo. App. 476, 106 S. W. 1118.
See "Partnership,** Dec. Dig. {Key No.) §i 17-22, 29; Cent. Dig. §S
1-7, SOSS, S8.
T First Nat Bank of GainesyiUe y. Cody, 93 .Ga. 127, 19 S. E.
831. See "Partnership,** Dec. Dig. {Key No.) |§ 22, 29, 67; Cent.
Dig. |§ 8, S2, 82.
• Johnston y. Eichelberger, 13 Fla. 230; Bird y. Hamilton, Walk
Ch. .(Mich.) 361. See "Partnership,** Deo. Dig. {Key No.) §i 21, 71;
Cent. Dig. §| 6, 115.
Gii^Part.-
50 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
PROMOTERS OF CORPORATIONS
17. Those who engaged in the promotion of a corporation
do not thereby become partners.
''A promoter is a person who brings about the incorpo-
ration and organization of a corporation." • If two or more
persons ag^ee to combine in promoting a corporation, they
do not thereby become partners. Their combination has no
more of the elements of a partnership than an a^eement
to form a partnership at a future date would have.**
Though it has been stated in England that persons combin-
ing for the purpose of procuring the act of Parliament nec-
essary in order to form a company were partners,** such
statement is clearly inaccurate, and is inconsistent with
later decisions.** Promoters may, of course, become liable
to third persons, but it is not a partnership liability. It is
the liability of one who contracts, either himself or by an
agent, with another.** It may also be true that promoters
become in fact partners by actually carrying on, as inci-
dental to the work of forming a corporation, a business en-
terprise.** It is the carrying on of such business, not the
combination to effect an incorporation, that makes them
partners. It is conceived, also, that promoters might be-
come partners in the business of promoting; i. e., if they
• Cook on GorporationB, vol. Ill, p. 2188.
10 Arnold y. Ck>nklin, 96 lU. App. 373. See ^'Partnership,** Deo.
Dig. {Key No,) I 42; Cent. Dig. % 67; ^'Corporations,*' Cent. Dig.
\ 26, '
11 HOLMES ▼. HIOGINS, 1 B. & O. 74; Lucas ▼. Beach, 1 Man.
& Gr. 417. See ''Partnership," Deo. Dig. (Key No.) | 42; Cent. Dig.
I 57.
i« Reynell v, Lewis, 15 M. & W. 517; Wyld v. Hopkins, Id. ; Cap-
per's Case, 1 Sim. N. S. 17& See "Partnership;* Deo. Dig. (Key No,)
S 42; Cent, Dig, | 57.
itHersey v. Tully, 8 Colo. App. 110, 44 Pac 854; Whetstone v.
Crane Bros. Mfg. Co., 1 Kan. App. 820, 41 Pac. 211. Bee "Partner*
ship,** Dec. Dig {Key No.) | 42; Cent. Dig. | 57; ^^Corporations,**
Cent, Dig f 26
i« Bamett v. Lambert, 19 M. & W. 489. See "Partnership,** Deo.
Dig, (Key No,) i 42; Cent. Dig, i 57.
§ 18) 8TO0KHOLDEBS IN DSFBCTIVK OOBPORATIONS 51
engaged in creating successive corporations as an occupa-
tion, putting their profits in a common fund, it might well
be held that they had made promotion a business, and were
partners in that business*^*
LIABILITY OF STOCKHOLDERS IN DEFECTIVE
CORPORATIONS
18. Whether stockholders in a defective- corporation' are
liable as partners is a question on which the cases
are conflicting. By the weight of authority, such
persons are not liable as partners, if they have pro-
ceeded far enough in an attempted incorporation
to create a de facto corporation.
Persons who, without attempting to incorporate, pre-
tend to be a corporation, or who, though attempt-
ing to incorporate, fail for some reason to create a
de facto corporation, are liable as partners.
Corporations De Jure and Corporations De Facto
Corporations are either de jure or de facto. A de jure
corporation is one which has legal existence. Not even the
state can question its right to operate under its charter, nor
deprive it of any power which its charter grants. A cor-
poration de jure is a corporation in law as well as in fact.
Td create a corporation de jure there must be a law under
which the incorporation can be effected and a substantial
compliance with the terms of that law. It is not necessary
that there be a literal compliance with it. Thus it does not
affect the validity of an incorporation if there is a failure to
comply with specifications in the statute which are direct-
ory merely. Those conditions which by the law are made
conditions precedent to incorporation must be complied
with ; but it does not affect the legal existence of a corpora-
tion if there is a failure to comply with conditions preced-
ent, not to incorporation, but to doing business under the
corporate charter.**
i6Llndley'B Law of Partnership (7th Ed.) p. 20.
i«"A sabstantlal complia^ice wiU make a corporation de Jure.
But there miifit be an apparent attempt to perfect an organization
52 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
• A corporation de facto, as distinguished from a corpora-
tion de jure, is a corporation in fact, but which has not been
legally organized. Though it exists as a corporation, and
must for all practical purposes be treated as a corporation,
its existence is, if not illegal, at least illegitimate. Though
individuals must ordinarily be treated, as a corporation in
all cases, and though even the state cannot deny its corpo-
rate existence in collateral proceedings, a corporation de
facto may be dissolved and its corporate existence terminat-
ed by a direct proceeding brought against it by the state.
To create a de facto corporation there must be a law un-
der which a de jure corporation could have been created,*^
a bona fide attempt to incorporate under the law, some com-
pliance with it, and a subsequent user of corporate rights.
If these things are done, a corporation de facto exists, even
though all of the conditions required by law in order to
form a de jure corporation have not been complied with.^^
under the law. There being such an apparent attempt to perfect
an organization, the failure as to some substantial requirement will
prevent the body being a corporation de Jure." Finnegan ▼. Noeren-
berg, 52 Minn. 239, 53 N. W. 1150, 18 L. R. A. 778, 38 Am. St Rep.
552.
"Where there has been a substantial compliance with the law,
the corporation is, of course, de Jure." Re GIBE'S ESTATE, 157
Pa. 59, 27 Atl. 388, 22 L. R. A. 276, Ollmore, Gas. Partnership, 91.
See "Corporations,** Dec, Dig, {Key No.) {| «5, 28; Cent, Dig,* {§
70, 71, 79-76; ^'Partnership:* Dec, Dig, 141; Cent, Dig. ff 56, 58, 59.
17 A few courts hold that an incorporation under an tmconstltu-
tional act creates a de facto corporation. Richards ▼. Minnesota
Savings Bank, 75 Minn. 196, 77 N. W. 822; City of St Louis v.
Shields, 62 Mo. 247; Lincoln Building & Savings Ass'n v. Graham,
7 Neb. 173; Coxe ▼. State, 144 N. Y. 396, 89 N. E. 400. Bnt the
weight of authority and the better view seems to be that a de
facto corporation cannot be created under an unconstitutional stat-
ute. Doboy & Union Island Tel. Ck). v. De Magathlas (0. 0.) 25 Fed.
697; Brandenstein v. Hoke, 101 Cal. 131, 35 Pac. 562; Georgia, S.
& F. R. Co. V. Mercantile Trust & Deposit Co., 94 Ga. 806, 21 S. E.
701, 32 L. R. A. 208, 47 Am. St Rep. 153; Eaton ▼. Walker, 76
Mich. 579, 43 N. W. 638, 6 L. R. A. 102. See "CorporaiiOfM," Dec.
Dig. (Key No.) H 25, 28; Cent. Dig. §S 70, 71, 75-76: ''Partner-
ship:' Dec. Dig. | 41; Cent. Dig. U 56, 58, 59,
IS '*Wbere the law authorizes a corporation, and there Is an eflCort,
in good faith, to organize a corporation under the law. and there-
§ 18) STOCKHOLDERS IN DBFEOTIYB OOBFOBATION8 63
Pretended Incorporation
If, however, a number of individuals pretend to be a cor-
poration and to exercise corporate powers, without having
even attempted to organize properly as a corporation, it is
held that such pretended corporation has no legal existence
at all.^* Such organization can be attacked by an individ-
ual or the state, directly or collaterally, and the persons
thus conducting business are liable as partners.*^
Liability of Stockholders in Defective Corporations, or Mem-
bers of Associations Assuming to Act as Corporations
One of the advantages to be derived from the privilege
of doing business as a corporation is the limited liability of
the stockholders. While in partnership each partner is lia-
ble to the full extent of all his separate property for the
debts of the firm, a stockholder is usually not liable beyond
the amount paid in for his stock. In order, however, to gain
this advantage and others incident to incorporation, all the
conditions prescribed by the law for the organization must
be complied with. When there has been a substantial com-
pliance with the law, and a corporation de jure has been
found, no question as to the extent and manner of the stock-
holder's liability can arise. That has been determined by
the Legislature. If persons have, however, failed to com-
ply substantially with the law, and yet have assumed to act
as a corporation, their liability may constitute a question
upon, as a result of such effort, corporate functions are assumed and
exercised, the organlasatlon becomes a corporation de facto, and as
a general rule the legal existence of such a corporation cannot be
Inquired Into collaterally, although some of the required legal for-
malities have not been complied with. Ordinarily, such an Inquiry
can only be made In a direct proceeding, brought in the name of
the state." Nlblack, J., in Hasselman y. United States Mortgage
Co., 07 Ind. 365, 368. See **CorporationM," Dec. Dig, (Key No.) I 29;
Cent, Dig. || 77. 78.
!• MartlB y. Deetz, 102 Oal. 55, 36 Pac. 868, 41 Am. St Rep. 151 ;
Journal Go. y. Nelson, 133 Mo. App. 482, 113 S. W. 690; Childs y.
Hurd, 32 W. Va. 66, 0 S. E. 362. See ^Corporations,** Dec. Dig.
(Key No.) H 25, 28; Cent. Dig. §§ 70, 71, 75-76.
to FuUer y. Rowe, 57 N. Y. 23 ; McLBNNAN y. HOPKINS, 2 Kan.
App. 260, 41 Pac. 1061. See '^Corporations,** Dec. Dig. (Keg No.) §§
26. 29; Cent. Dig. §{ 77, 78; ^'Partnership,** Dec. Dig. | 4I; Cent.
Dig. U 58, 59.
54 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
of much perplexity. On the one hand, it is said that they
ought to be held to a partnership liability, that they have
contracted for all of the benefits of partnership, that that
is all that is necessary in order to create a partnership, and
that in order to escape the liabilities of partnership they
should be compelled to obey the requirements of the Leg-
islature.*^ On the other hand, it is said that the parties
never intended to form a partnership, that they never con-
tracted as partners, and ought not to be held to a partner-
ship liability.**
It seems to be true that in forming a corporation the
members or stockholders do, in effect, contract for what in
law constitutes a partnership, viz., the conduct of a com-
mon business with a view to mutual profit. We have seen
that the relationship which the parties think they are as-
suming is immaterial. Therefore it seems that, so far as
the intention of the parties is concerned, the stockholders
of a defective corporation might well be held to a partner-
ship liability. Still it should be recognized that creditors
are really not injured by granting to stockholders in a de-
fective corporation the limited liability attendant upon per-
fect incorporation, since such creditors usually deal with
the stockholders on that basis. It is possible, therefore,
that all stockholders in a defective corporation may be held
liable as partners, unless it appears that public policy would
be better served by holding them liable as stockholders.
This seems to be the view of the courts, and, though there
is much conflict in the cases, the* conflict is due, mainly, to
difference in policy rather than in principle.
The question may arise in different situations, varying
from those where the law would not permit of the forma-
«i BIGELOW Y. GRB60BT, 73 lU. 197, Onmore, Caa. PartnereWp,
104 ; Melnhard, Schaul & Go. y. Bedingfield MercantUe Go^ 4 Ga. App.
176, 61 S. E. 34. See ** Partner ship,"* Dec. Dig. {Key No.) i 41; Cent.
Dig. |§ 56, 58, 59; ^^Corporations,'' Cent. Dig. | H.
«« RUTHERFORD ▼. HILL, 22 Gr. 218, 29 Pac. 546, 17 L. R. A.
549, 29 Am. St Rep. 596, Gilmore, Gas. Partnership, 106; Gwens-
boro Wagon Go. y. Bliss, 182 Ala. 253, 31 South. 81, 90 Am. St Repu
907. See '' Partnership, ** Dec. Dig. {Key No.) §S 17, 41; Cent. Dig.
SI 5, 56, 56, 59; ^'Corporations;' Cent. Dig. | 7-t,
§ 18) STOCKHOLDERS IN DEFEOTIVB CORPORATIONS 55
tion of a corporation to carry on the business actually car-
ried on to the situation where a corporation might have
been created, and was honestly attempted to be created, but
there was an innocent failure to comply substantially with
the law.
No Law Permitting Incorporation
General incorporation acts usually specify the particular
businesses for which corporations may^be formed under the
act. A corporation formed for any other purpose exists
without legislative sanction, and the members are usually
held to a partnership liability.** Thus the members of a
rifle club formed under a statute permitting incorporation
for "literary, scientific, and charitable purposes" were held
individually liable to the widow of a man killed by a bear
kept by the club.**
If the act under which a corporation was organized is
unconstitutional, the mere fact that an attempt was made
in good faith to organize under it will not prevent the stock-
holders from being liable as partners.** And, though for-
eign corporations generally are permitted to transact busi-
ness in each state, if their organization constitutes a fraud
upon the laws of a state, the members will be held to a
partnership liability.**
«» MandevUle y. Courtrlght, 142 Fed. 97, 73 C. 0. A. 821, 6 L. R.
A. (N. S.) 1003. See ^^Partnership,*' Dec, Dig, {Key No,) § 41; Cent
Dig, n 56, 58, 59; "Corporatiom*' Cent. Dig. | H.
s« Vredenburg y. Behan, 83 La. Ann. 627.
**The business conducted by the members of the organization
was BO entirely aside from the power conferred upon the grange by
the statute under which the Incorporation was effected that the
business must be regarded as a partnership, and not corporate."
Henry v. Slmanton, 64 N. J. Eq. 572, 54 Atl. 153; Wonderly v.
Booth, 86 N. J. Law, 250; Re Mendenhall, 9 Nat Bankr. R. 497,
Fed. Cas. No. 9,425; Ridenour y. Mayo, 40 Ohio St 9; Empire
Mills y. Alston Grocery Co. (Tex. App.) 15 S. W. 200. Bee **Oorporar
turns,"* Dec, Dig. {Key No,) § U; Cent, Dig, | 16.
2s Brandensteln y. Hoke, 101 Cal. 135, 35 Pac. 562; Snyder y.
Stndebaker, 19 Ind. 462, 81 Am. Dec. 415 ; Eaton y. Walker, 76 Mich.
579, 43 N. W. 638, 6 L. R. A. 102. But see Richards y. Minnesota
Sayings Bank, 75 Minn. 196, 77 N. W. 822. See ^^Partnership;* Deo.
Dig, {Key No,) | 41; Cent, Dig, U 56, 58, 59,
s« Montgomery y. Forbes, 148 Mass. 249, 19 N. B. 342; Hill y.
66 WHAT CONSTITUTES A PARTNERSHIP (Oh. 1
A Statute Authorising Incorporation, but no Bona Fide At-
tempt to Organise under It
Even if a statute exists which permits the organization
of a corporation to conduct a particular business, those who
wish to escape individual liability must at least make a
bona fide attempt to organize under it. Unless they do so
they will be held to have entered on the business as part-
ners.*'
A Colorable Attempt to Organize under a Valid Existing Law
and Subsequent User
Although there is nothing inconsistent with the law of
partnership in holding stockholders in a defective corpo-
ration liable as partners, and though it has been seen that
in many cases they are so held, the present tendency atid
the weight of authority is in favor of holding stockholders
in a de facto corporation to a corporate liability merely.**
Corporati9ns are recognized as beneficial to the state in the
promotion of trade, and when the state has authorized the
doing of a certain kind of business through a corporation
it is recognized as unwise to discourage their organization
by holding those who have in good faith attempted to or-
Beach, 12 N. J. Eq. 31 ; Humphreys v. Mooney, 6 Colo. 282 ; Staf-
ford Nat. Bank v. Palmer, 47 Coun. 443. See '* Partnership,*' Dec,
Dig, {Key No,) | 41; Cent. Dig, §§ 56, 58, 59; "^Corporations;' Cent.
Dig, %\ n, 2547.
«T Harrlll v. Davis, 168 Fed. 187, 94 C. C. A. 47, 22 L. R. A. (N.
S.) 1153 ; Owen v. Shepard, 59 Fed. 746, 8 C. C. A, 244 ; Forbes v.
Whlttemore, 62 Ark. 229, 35 S. W. 223 ; Pettis y. Atkins, 60 111. 454 ;
Sanders & Walker v. Hemdon, 128 Ky. 437, 108 S. W. 908, 32 Ky.
Law Rep. 1362, rehearing denied 110 S. W. 862, 33 Ky. Law Rep.
669 ; Fuller v. Rowe, 67 N. Y. 23 ; Worthlngton v. Griesser, 77 App.
Dlv. 203, 79 N. T. Supp. 52; Hyatt v. Van Riper, 105 Mo. App. 664,.
78 S. W. 1043 ; McLBNNAN v. HOPKINS, 2 Kan. App. 260, 41 Pac.
1061; Queen City Furniture & Carpet Co. v. Crawford, 127 Mo.
356, 80 S. W. 163 ; In re Browne & Jenkins Co., 106 La. 486, 81 South.
67. See "Partnership;' Deo. Dig, (Key No,) U 41, 42; Cent. Dig.
II 56-59; "Corporations," Cent. Dig. H 26, 74.
28 **The test of a de facto corporation is this: Was .there a law
under which there might have been a de jure corporation of the
kind, character, and class to which the organization in question ap-
parently belongs?'* Toledo, St L. & K. C. R. Co. y. Continental
Trust Co., 95 Fed. 497, 508, 36 C. C. A. 155, 167. See ^^Corporations;'
Deo. Dig. (Key No.) | 28; Cent. Dig. | 70,
5 18) STOCKHOLDERS IN DEFEOXIYB CORPORATIONS 57
ganize one to a partnership liability.** There is much au-
thority, however, for the view that all stockholders in de-
fective corporations are liable as partners. It is said that
they are claiming an exemption in derogation of common
right, and must comply strictly with the statutory require-
ments in order to claim the exemption.** As stated before,
the question resolves itself into one of public policy. The
effect of holding members of de facto corporations as part-
ners is to discourage attempts to organize corporations.
The question is : Is it wise to do so, and thereby hold the
members to a greater liability than they had intended in fa-
vor of those who would get all they expected to get when
they contracted if they are held to a stockholder's liability?
The tendency seems in favor of the position that it is for the
«» Whitney v. Wyman, 101 U. S. 392, 25 L. Ed. 1050; St Louis
lb S. F. R. Co. V. Soathwestem Telephone & Telegraph Co., 121 Fed.
276^ 58 Cw C. A. 198 ; Owensboro Wagon Co. v. Bliss, 132 Ala. 253,
31 South. 81, 90 Am. St Rep. 907 ; Bates v. Wilson, 14 Colo. 140, 24
Pac. 99; Butler Paper Co. v. Cleveland. 220 111. 128, 77 N. E. 99,
110 Am. St Rep. 2^0 ; Love t. Ramsey, 139 Mich. 47, 102 N. W. 279 ;
Brown v. Corbin, 40 Minn. 608, 42 N. W. 481; Central R. Co. of
New Jersey v. Pennsylvania R. Co., 31 N. J. Eq. 475; Vanneman v.
Young, 52 N. J. Law, 403, 20 Atl. 53 ; People ex rel. New York, N.
H. & ^. R. Co. V. Board of R. Com'rs, 81 App. Div. 242. 81 N. Y.
Supp. 20, affirmed 175 N. Y. 516, 67 N. E. 1088 ; Albright v. Lafay-
ette BuUding & Savings Ass'n, 102 Pa. 411, 423 ; American Salt Co.
V. Heidenhelmer, 80 Tex. 344, 15 S. W. 1038, 26 Am. St Rep. 743 ;
Mitchell V. Jensen, 29 Utah, 346, 81 Pac. 165. See "PartneraMp,"
Dec. Dig, {Key No.) §| U, 4i&; Cent. Dig. %% 56^9; "Corporations,"
Cent. Dig. H 2^. H,
30 '*Our law furnishes so simple a method by which societies such
as these may be incorporated and acquire the right to contract
• • * and it is 80 easy for any one to know what is the truth
of the case, that if men will make business transactions of the
character disclosed by this record, they must take the consequences."
Wilkins V. Wardens and Vestry of St Mark's Protestant Episcopal
Church of Dalton, 52 Ga. 351, 353 ; Forbes v. Whittemore, 62 Ark.
229, 35 S. W. 223 ; Loverin v. McLaughlin, 161 111. 417, 44 N. E. 99 ;
Kaiser v. Lawrence Savings Bank, 56 Iowa, 104, 8 N. W. 772» 41
Am. Rep. 85; Sebastian v. BooneviUe Academy Co. (Ky.) 56 S.
W. 810 ; Louisiana Nat Bank v. Henderson, 116 La. 413, 40 South.
779; Smith v. Warden, 86 Mo. 382. 8ee ^^Partnership;' Deo. Dig.
[Key No.) §§ 41, Jfi; Cent, Dig. || 56-59; "Corporations,'* Cent. Dig.
58 ' WHAT CONSTITUTBS A PARTNERSHIP (Ch. 1
state only to question the corporate privileges and liabili-
ties of a de facto corporation.**
EXISTENCE OF PARTNERSHIP— NATURE OP
QUESTION
19. Whether or not a partnership exists is ultimately a
question of law, to be determined by the court
after the facts have been established.
Whether or not a partnership exists is ultimately a ques-
tion of law. After the facts are established, their legal ef-
fect is determined as a matter of law. It is customary,
however, to say that the question of the existence of a part-
nership is a mixed question of law and fact.** Where all
Si "Not Infrequently the holding that the legal existence of a de
facto corporation cannot be questioned by a private individual is
referred to as being based on estoppel. This is not so, however, for
the elements of estoppel are lacking. Moreover, if it were based on
estoppel, those who had not dealt with the supposed corporation as
a corporation could attack the validity of its existence; for
they, at least, could not be said to be estopped. Besides, If those
who have dealt with a de facto corporation were estopped to deny
its corporate existence, those who have dealt with any association
which, though not a de facto corporation, is assuming corporation's
functions as a corporation, should be estopped. It has already been
seen that they are not, however. The theory that a de facto cor-
poration has no real existence, that it is a mere phantom, to be in-
voked only by that rule of estoppel which forbids a party who has
dealt with a pretended corporation to deny its corporate existence,
has no foundation, either in reason or authority. A de facto cor-
poration is a reality. It has an actual and substantial legal exist-
ence. It is, as the term implies, a corporation." Society Perun v.
City of aeveland, 43 Ohio St 481, 490, 3 N. E. 3o7, 360.
"This rule [concerning de facto corporations] is not founded upon
any principle of estoppel, as Is sometimes assumed, but upon the
broader principles of common Justice and public policy. It would
be unjust and Intolerable if, under such circumstance, every Inter-
loper and Intruder were allowed thus to take advantage of every in-
formality or irregularity of organization." Mitchell, J., in East
Norway Lake Church v. FrolsUe, 37 Minn. 447. 451, 35 N. W. 260,
262. See '^Corporations," Dec, Dig, {Key No.) §| 28, 29; Cent, Dig,
SI 70, 77. 78.
•2 Fox V. Clifton, 9 Bing. 115, 117; Gabriel v. EvUl, Car. & M.
358; EVERITT v. CHAPMAN, 6 Conn. 347, Gilmore, Cas. Partner-
§ 20) QUESTION or EXISTENOB 69
the facts are admitted, it is for the court to say whether or
not they constitute a partnership.** Thus the court must
say whether a written agreement renders the parties to it
partners.** But, where the facts are in dispute, the court
will instruct the jury as to what {acts will constitute a part-
nership, and it is for the jury to say whether or not the nec-
essary facts exist;** or, if a special verdict is desired, the
jury will determine what the facts really are, and the court
will then determine whether or not such facts constitute a
partnership.
SAME— BURDEN OF PROOF
20. The burden of proving the existence of a partnership
is upon him who relies upon its existence.
The burden of proving a partnership is on him who relies
upon its existence.** Thus where a suit was begun for the
ship, 68; Beecham y. Dodd, 3 Har. (Del.) 485; Doggett y. Jordan, 2
Fla. 541; Drake v. Elwyn, 1 Gaines (N. Y.) 184; TerriU y. Richards, 1
Nott & McC. (S. C.) 20. See ** Partnership,'' Dec. Dig. {Key No,) §|
122, 218; Cent. Dig, %% ISS"^, J^.
*s 'Morgan y. Farrel, 58 Conn. 413, 20 Atl. 614, IS Am. St Rep.
282 ; EVERITT y. CHAPMAN, 6 Conn. 347, GUmore, Cas. Partner-
ship, 68 ; Kingsbury v. Tharp, 61 Mich. 216, 28 N. W. 74. Bee "ParU
nership,'* Dec, Dig. (Key No.) §§ 122, 218; Cent. Dig. SS 185%, 427.
•* Boston & O. Smelting Co. y. Smith, 13 R. I. 27, 43 Am. Rep. 3.
See '^Partnership;* Deo. Dig. {Key No,) || 122, 218; Cent. Dig. U
iO, my^, 427.
••McGrew y. Walker, 17 Ala. 824; Morgan y. Farrel, 58 Conn.
413, 20 Aa 614, 18 Am. St Rep. 282; EVERITT v. CHAPMAN, 6
Conn. 347, Gllmore, Cas. Partnership, 68; Kingsbury y. Tharp, 61
Mich. 216, 28 N. W. 74 ; Waggoner y. First Nat Bank of Creighton,
43 Neb. 84, 61 N. W. 112 ; Dulany y. Elf ord, 22 S. C. 308. See "Part-
nershipr Deo. Dig. {Key No.) |S 122, 218; Cent. Dig. H 185M, 186,
426, 427.
«• Woodward y. Sutton, 1 Cranch, O. C. 351, Fed. Cas. No. 18,009;
Smith y. Moynihan, 44 Cal. 53 ; Hobson y. Porter, 2 Colo. 28 ; De
St Aubin y. Laskin, 74 lU. App. 455; Henshaw y. Root 60 Ind.
220; Byington y. Woodward, 9 Iowa, 360; MaunseU y. WUlett, 36
La. Ann. 322; Howe y. Thayer, 17 Pick. (Mass.) 91; Campbell y.
Sherman, 49 Mich. 534, 14 N. W. 484; Stickney y. Smith, 5 Minn.
486 (GiL 390) ; Cook y. Martin, 5 Smedes & M. (Miss.) 379 ; Walga-
60 WHAT C0NSTITUTB8 A PARTNERSHIP (Gb. 1
pasturage of certain cows, and the defense was interposed
that the plaintiff and defendant were partners and the cows
were pastured under the partnership agreement, it was held
that the burden of proving the partnership was on the de-
fendant, the court saying: '"It is not clear that the parties
to this suit intended to form a partnership relation, and the
burden of proving that relation was on the party asserting
its existence." *^ And where, in an action for goods sold to
a partnership, the defendant admitted that he was a mem-
ber of a partnership of the same name as that to which the
goods were alleged to have been sold, but contended that
there were two partnerships of the same name, and that he
was not a member of the one which bought the goods, it
was held that the burden of proving that defendant was a
member of the partnership which bought the goods was on
the plaintiff.** If a partnership is proved to have once ex-
isted, however, its continued existence is presumed. To es-
cape liability in such a case the one alleging the termination
must prove that fact, and also that proper notice, where
necessary, was given to the one seeking to establish a part-
nership liability.**
mood V. Randolph, 22 Neb. 493, 35 N. W. 217; Kelly r. Deylln, 47
N. T. Super. Ct 555; Clark v. Kensell. Wright (Ohio) 480; Strlck-
ler r. Gitchel, 14 Okl. 523, 78 Pac 94; Ashley v. Williams, 17 Or.
441, 21 Pac. 556; Hallstead y. Coleman, 143 Pa. 353, 22 Atl. 977,
13 L. R. A. 370; State v. Penman, 2 Desaus. (S. C.) 1; Clifton &
Wadklns v. Royse Cotton OH Co., 39 Tex. Civ. App. 188, 87 S. W.
182. See "Partnership,** Dec, Dig, {Key No.) { U; Cent. Dig. H
61-63,
ST BrlggB y. Kohl, 132 111. App. 484. See ^Partnership,^ Dec. Dig
{Key No.) § U; Cent. Dig. H 61-68.
«« Bristol & Sweet Co. v. Skapple, 17 N. D. 271, 115 N. W. 841.
See ""Partnership;* Dec. Dig. (Key No.) I 44; Cent. Dig. §S 61-^8.
»» Lleb V. Craddock, 87 Ky. 525, 9 S. W. 838; Dunham v. Loverock,
158 Pa. 197, 27 Aa 990, 38 Am. St Rep. 838. See "'Partnership,'*
Deo, Dig. (Key No.) | 259; Cent Dig. { 599.
§ 21) PABTNERSHIF BT ESTOPPEL 61
PARTNERSHIP BY ESTOPPEL
21. One who represents himself to be a partner, or who
knows and assents to such a representation by an-
other, is liable, by the doctrine of estoppel, as a
partner to all persons who, knowing of the repre-
sentation, rely upon the same.
Estoppel — In General
One is said to be estopped when he is not permitted to
tell the truth. He is not permitted to tell the truth, be-
cause he has at some other time told the contrary, either
by words or conduct, under such circumstances that it
would, in the view of the courts, be unjust to permit him
now to tell the truth and to rely upon it.
The principal circumstances usually considered as essen-
tial in creating an estoppel are: A misrepresentation of
some material question of fact or law, made mediately or
immediately to the one in whose favor the estoppel is as-
serted, under such circumstances that it might reasonably
be expected that he who asserts the estoppel would act
upon it, and upon the faith of which he did act, so that it
would injure him to permit the truth to be established.**
Holding Out by Defendant
Partnership by estoppel exists only where the parties
have not agreed to be and are not partners in fact. They
are held as partners only because they have represented
themselves to be such,' and in consequence it would be un-
just to a third person, who has relied on such representa-
tions, to permit them to show that they are not in fact part-
ners.** It may be, however, that the partnership created
by estoppel does not in any way resemble true partnership
even as to third persons, for one who represents another
as his partner may be held liable as a partner for the acts
4» Bwart on Bstoppel, p. 72.
« > Gershner y. SCDtt-Mayer Ck>mmls8lon Co, (Ark.) 124 S. W. 772 ;
Meh'hard, Schaul ft Go. ▼. Bedingfleld Mercantile Co., 4 Ga. App.
nil. 01 8. B. 34. See -PartnenMp;' Dec. Dig. {fLey No.) U SSSS;
Cent. Dig. ^^ 4$^^.
62 WHAT CONSTITUTES A PARTNERSHIP (Ch. 1
«
of such other without the other incurring any partnership
liability at all.** One may estop himself to deny that he
is a partner by a direct assertion that he is one, or by con-
duct which would reasonably entitle one to believe him to
be one. The responsibility for the belief existing in the
plaintiff's mind must be brought home to the defendant.
For instance, a decedent's estate is not liable on the repre-
sentations of the survivors that the partnership still con-
tinued.** The estoppel is founded upon equitable princi-
ples and cannot be asserted against innocent parties.
Liability by Being Held Out by Others
It is plainly just that one who has held himself out as
a partner should be held liable to those who have acted on
such representation. The cases where such holding out
has been shown are clear. The rule is the same where such
holding out has been authorized by the defendant ; for what
is done by his authority is, in law, done by himself. Such
authority may be shown by conduct as well as by words.
Where, however, tio authority can be shown, the ques-
tion is more perplexing. One cannot be held for that for
which he is in no way responsible. Hence, if one is held
out as a partner without his knowledge, he cannot be es-
topped to deny the partnership, even as against those who
relied on the representation,** But the rule has been laid
down that "if one is held out as a partner, and he knows it,
he is chargeable as one, unless he does all that a reasonable
and honest man should do under similar circumstances to
assert and manifest his refusal, and thereby prevent inno-
cent parties from being misled." *" This rule makes it nec-
« 3 Hess V. Ferris, 57 111. App. 37; Mechem on Partnership, § 73.
See **Parther8Mp,'* Dec. Dig, (Key No,) §| SS-S8; Cent. Dig. §§ 49-55.
*» Webster v. Webster, 3 Swanst 400; VuUiamy v. Noble, 3 Mer.
593, 614. See ''Partnership;* Dec. Dig. (Key No.) H 33S8; Cent,
Dig. §§ 49-53.
4* Campbell v. Hastings, 29 Ark, 512; Butler v. Hinckley, 17
Colo. 523, 30 Pac. 250 ; Bishop v. Georgeson, 60 111. 484 ; Sheldon v.
Bigelow, 118 Iowa, 586^ 92 N. W. 701; Bery v. Callahan, 15 Ky.
Law Rep. 539; Crook v. Davis, 28 Mo. 94; Cole v. Butler, 24 Mo.
App, 76; Seabury & Johnson v. Bolles, 51 N. J. Law, 103, 16 AtL
54, 11 L. R. A. 136. See "Partnership;* Deo. Dig. {JBley No.) ^ 36;
Cent. Dig. § 51.
«B T. Parsons on Partnership, 134.
S 21) PARTNERSHIP BT ESTOPPEL 63
essary for one who has knowledge only that he is being
held out as a partner to deny the truth of the representa-
tion. It in effect makes him chargeable, not only for his
own conduct, but for the conduct of others. It apparently
invests him with the guardianship of his own name and
credit, and charges him with liability for their misuse in
the hands of others. It is submitted that the rule as stated
is too broad, and that one is not liable as a partner to third
persons unless a jury would be justified in finding, not only
that he knew that he was being held out as a partner, but
that he assented to being so held out. Even in a case where
the rule above stated was adopted, it was stated that evi-
dence existed from which the jury would be justified in
' finding that the defendant knew of and assented to his be-
ing held out as a partner.** In another case it was said:
"The court instructed the jury as follows : 'If you find that
Mrs. Rutherford knew that her name had been mentioned
in a commercial newspaper as associated with Mr. Beck-
with, and composing the partnership of Charles M. Beck-
with & Co., it was her duty, if she was not such partner, to
see that a denial of such copartnership was promptly made,
in unmistakable terms, and as full as the publication of the
partnership had been made. Failing to do this, she will be
held to have acquiesced in such publication, and would be
estopped from denying the existence of such copartnership
as against the plaintiff, provided he gave the firm of Charles
M. Beckwith & Co. the credit of the liability in question in
reliance upon the alleged facts of such holding out, and
failure on the part of defendant Rutherford to publicly deny
the same.' The instruction was erroneous. Mrs. Ruther-
ford was under no legal or moral obligation to publish a
denial of this newspaper story. Any one who saw fit to
deal with Mr. Beckwith, relying on this item, did so at his
peril. If she had been shown the article, had assented to
it, and credit had been given her on the strength of such
assent, the rule of estoppel would have applied. There be-
<« FLETCHER v. PULLEN, 70 Md. 205, 16 Ati. 887, 14 Am. St
Rep. 355, Gilmore, Cas. Partnership, 100. See ** Partnership,*' Dec.
Dig. {Key No,) SI S6, 56; Cent. Dig. §{ 51, 80.
64 WHAT CONSTITUTES A PABTNBB8HIP (Ch. 1
ing no evidence that she authorized or assented to it, there
is no room for the application of the rule." **
Knowledge of the Plaintiff
Not only must responsibility for the representation be
fastened upon the defendant, but it must be shown that the
plaintiff knew of the representation. "A person who is not
in fact a partner, who has no interest in the business of the
partnership, and does not share in its profits, and is sought
to be charged for its debts because of having held himself .
out, or permitted himself to be held out, as a partner, can-
not be made liable upon contracts of the partnership, ex-
cept with those who have contracted with the partneriship
upon the faith of such holding out. In such a case, the only,
ground of charging him as a partner is that by his conduct
in holding himself out as a partner he has induced persons
dealing with the partnership to believe him to be a partner,
and, by reason of such belief, to give credit to the partner-
ship. As his liability rests solely upon the ground that he
cannot be permitted to deny a participation which, though
not existing in fact, he has asserted, or permitted to appear
to exist, there is no reason why a creditor of the partner-
ship, who has neither known of nor acted upon the asser-
tion or permission, should hold as a partner one who never
was in fact, and v/hom he never understood or supposed to
be, a partner, at the time of dealing with and giving credit
to the partnership." *•
4r Grant C. J., in Manton ▼. Rutherford, 121 Mich. 418, 80 N.
W. 112; Rittenhouse ▼. Leigh, 67 Miss. 697. *'The holding one*8
self out to the world as a partner, as contradistinguished from the
actual relation of partnership. Imports at least the yolontary act of
the party so holding himself out It implies the lending of his
name to the partnership, and is altogether incompatible with the
want of knowledge that his name has been so used. Thus, in the
ordinary Instances of its occurrence, where a person aUows his
name to remain in a firm, either exposed to the public over a shop
door, or to be used in printed invoices or bills of parcels, or to be
published in advertisements, the knowledge of the party that his
name is used and his assent thereto is the very ground upon wliich
he is estopped from disputing his liability as a partner." Tlndal,
C. J., in Fox V. Clifton, 8 L. J. 0. P. 257. See '* Partnership*' Dea
Dig, {Key Vo.) S 96; Cent. Dig. § 51.
*«Gray, J., in THOMPSON et aL ▼. FIRST NAT. BANK OF
B 21) PABTMBRBHIP BY B8TOFPBL 65
It has been said, however, that, although the plaintiff
did not know of defendant's representation of partnership,
he may nevertheless recover. "The whole foundation of
the theory that a person who, not being in fact a partner^
has held himself out as a partner, may be liable as such to
a creditor of the partnership who had no knowledge of the
holding out, and who never gave credit to him or to the
partnership by reason of supposing him to be a member of
it, is a statement attributed to Lord Mansfield in a note of
a trial before him at nisi prius in 1784,** as cited by counsel
in a case in which it was sought to charge as a partner one
who had shared in the profits of a partnership. By so much
of that note as was thus cited, which is the only report of
the case that has come down to us, it would appear that
in an action by Young, a coal merchant, against Mrs. Axtell
and another person, to recover for coals sold and delivered,
the plaintiff introduced evidence that Mrs. Axtell had lately
carried on the coal trade, and that the other defendant did
the same under an agreement between them by which she
was to bring what customers she could into the business,
and the other defendant was to pay her an annuity, and
also two shillings for every chaldron that should be sold to
those persons who had been her customers or were of her
recommending, and that bills were made out in their joint
names for goods sold to her customers, and that the jury
found a verdict against Mrs. Axtell, after being instructed
by Lord Mansfield that *he should have rather thought, on
the agreement only, that Mrs. Axtell would be liable, not
on account of the annuity, but the other payment, as that
would be increased in proportion as she increased the busi-
ness. However, as she suffered her name to be used in the
business, and held herself out as a partner, she was cer-
TOLEDO, 111 U. S. 529, 536, 4 Sup. Ct 689, 28 L. Ed. 507. Gllmore,
Gas. Partnership, 96; Spaulding v. Nathan, 21 Ind. App. 122, 51 N.
E. 742; Daniel v. Schultz, 12 Ky. Law Rep. 987; Adrian Knitting
Co. ▼. Wabash IL Co.. 145 Mich. 328. 108 N. W. 706. See ^^Pmrtner-
8Mpr Dec. Dig. (Key No.) ^ S7; Cent. Dig. H S7, 52.
4» Young V. AxteU, cited in WAUGH v. CARVER, 2 H. BL 236.
!242, Gilmore. Cas. Partnership, 19. See ** Partnership,'* Dec Dig.
{Key No.) { 57; Cent. Dig. S| 57, 52.
Gil.Pabt. — 5
66 WHAT CONSTITUTES A PARTNERSHIP (Gh. 1
tainly liable, though the plaintiff did not, at the time of deal-
ing, know that she was a partner, or that her name was
used.* * * ♦ But as the case was not there cited upon
the question of liability by being held out as a partner, it
is by no means certain that we have a full and accurate re-
port of what was said by Lord Mansfield upon that ques-
tion ; still less that he intended to lay down a general rule,
including cases in which one, who in fact had never taken
any part in or received any profits from the business, held
himself out as a partner." ••
The great weight of authority accords with the view
that, in order to succeed on the grounds of estoppel, the
plaintiff must show that he personally was aware of defend-
ant's representation.*^
»• Gray, J., in THOMPSON v. FIRST NATIONAIi BANE OP TO-
LEDO, 111 U. 8. 529, 4 Sup. Gt 689, 28 L. Ed. 507, Gilmore^ Gas.
Partnership, 96. See '^Partnership,*' Dec. Dig. {Key No,) { 57; Cent,
Dig, §§ 57, 52.
«iMcIver v. Humble, 16 East, 169; Ford ▼. Whltmarsh, Hurl-
stone & Walmsley, 53 ; Pott v. Eyton, 3 G. B. 32; Martyn v. Gray,
14 G. B. N. S. 824; Edmundson y. Thompson, 31 L. J. N. S. 207;
Benedict ▼. Davis, 2 McLean, 347, Fed. Gas. No. 1,293; Hefner y.
Palmer, 67 111. 161; Uhl y. Haryey, 78 Ind. 26; SHERROD y.
LANGDON, 21 Iowa» 518; Sheldon y. Blgelow, 118 Iowa, 586, 92
N. W. 701; Wood y. Pennell, 51 Me. 52; Fitch y. Harrington, 13
Gray (Mass.) 469, 74 Am. Dec. 641 ; Gook y. Penrhyn Slate Go., 36
Ohio St 135, 38 Am. Rep. 568 ; Kirk y. Hartman, 63 Pa. 97 ; Hicks
y. Gram, 17 Vt 449.
Gontra: POILLON y. SEGOR, 61 N. Y. 456. This case adopted
the following rule laid down in Parsons on Partnership: "Where
one Is held forth to the world as a partner, the first question is:
Was he so held out by his own authority, assent or connlyance, or by
his negligence? If by his authority, consent or connlyance, the pre-
sumption Is absolute that he was so held out to eyery creditor or
customer. If so held out by his own negligence only, he should be
held only to a creditor who had been actually misled thereby."
Parsons on Partnership (3d Ed.) 130. This rule was omitted In the
later editions, and the statement was made that the decision adopt-
ing It was erroneous. Parsons on Partnership (4th Ed.) 104, note
2. The case Itself must be considered as oyerruled by the subse-
quent cases of Gentral Glty Sayings Bank y. Walker, 66 N. Y. 424 ;
Gassldy y. Hall, 97 N. Y. 159 ; Rogers y. Murray, 110 N. Y. 658, 18
N. E. 261. See ''Partnership,'' Deo. Dig. (Key No.) fj 57, U; Cent,
Dig, |§ 57, 52, 61-SS.
§ 21) PARTNERSHIP BY ESTOPPBIi 67
Reliance by the Plaintiff
It is not only necessary for the creditor to show that he
knew of the representations made or permitted by, the de-
fendant, but that he believed them and relied upon them/*
Thus, while one might hold an actual partner of whose ex-
istence he was unaware at the time he made the contract
sued upon, if he subsequently discovered it, he can hold by
estoppel only those upon who^e credit he at the time re-
lied ; also, even though he has been told that a certain per-
son was a partner in a certain firm, he cannot hold him if
the statement has been subsequently denied by the reputed
partner; •• nor can he hold him if by the exercise of due
diligence he might have learned the truth.'*
Though the plaintiff must have believed and had reason
to believe that the defendant was a partner,'" it is not nec-
»s Herman Kahn Go. y. A. T. Bowden & Co., 80 Ark. 23, 96 S. W.
126; James Rellly Repair & Supply Go. t. GaUagher (Sup.) 108 N.
Y. Supp. 655; Mims v. Brook & Go., 3 Ga. App. 247, 69 S. E. 711;
Breinig y. Sparrow, 39 Ind. App. 455, 80 N. B. 87. Bee ^'Partner-
shipr Deo, Dig. (Key No.) § 57; Cent. Dig. » S7, 62.
B« McGlean y. Clark, 20 Ont App. 660; Erans y. Luthy, 56 111.
App. 506; Rittenhouse y. Leigh, 57 Miss. 697.
'The ground of liability of a person as partner who is not so in
fact is that he has held himself out to the world as such, or has
permitted others to do so, and by reason thereof is estopped from
denying that he is one, as against those who haye in good faith
dealt with the fliTn,. or with him as a member of it But It must
appear that the person dealing with the firm belieyed, and had a
reasonable right to belieye, that the party he seeks to hold as a
partner was a member of the firm, and that the credit was to some
extent induced by this belief. It must also appear that the holding
out was by the party sought to be charged, or by his authority, or
with his knowledge or assent This, where It is not the direct act
of the party, may be inferred from circumstances, such as from ad-
yertisements, shop bills, signs, or cards, and from yarious other acts
from which it is reasonable to infer that the holding out was with
his authority* knowledge or assent" FIiETCHER y. PULLEN, 70
Md. 205, 16 AtL 887, 14 Am. St Rep. 355, Gilmore, Gas. Partnership,
100; Riyes y. Michaels, 16 Misc. Rep. 57, 37 N. Y. Supp. 644. 8ee
^^Partnership/' Deo. Dig. {Key No.) S 37; Cent. Dig. §| 57, 52.
»4 Morgan y. Ferrel, 58 Conn. 413, 20 Atl. 614, 18 Am. St Rep. 282.
See **Partner8hip," Deo. Dig. (Key No,) § S7; Cent. Dig. U S7, 50, 52.
BB Fisher y. A< Y. McDonald Co., 85 111. App. 653. Bee "^Partner-
ship;' Dec. Dig. {Key No.) { S7; Cent. Dig. S{ ^7, 52.
fl8 WHAT CONSTITUTBS A PARTNBRSHIP (Ch. 1
essary for him to show that he relied solely on the credit
of the defendant It is sufficient to charge the defendant
if he gave credit to a firm of which he believed him to be
a partner. Thus it is not necessary for the plaintiff to show
that the defendant was a man of financial ability.'* Nor
need he be able to swear that had defendant not been a
partner he would not have sold the goods to the firm."^
Nature of Question
Whether or not defendant has held himself out to the de-
fendant as a partner is a question of fact." Hence it is
possible for the same holding out to be regarded as suffi-
cient in one case to establish liability and insufficient in
another. This result was actually reached in two English
cases.** The same representations were relied upon as con-
stituting a holding out in each case. Similar instructions
were given to the jury in each case ; they being instructed
that they must hold the defendant liable if they find a hold-
ing out. In one case a verdict was returned for the plain-
tifiF, in the other for the defendant, and in each case the
court refused to disturb the verdict.
B« Strecker y. Ck}im, 90 Ind. 460. See **PartneriMp/* Dec Dig.
{Key No.) | Si; Cent. Dig. S 49-
»T Lleb V. Oraddock, 87 Ky. 625, 0 8. W. 83a See "Partnerahip,'*
Deo. Dig. (Key No,) || 57, 241; CerU. Dig. K S7, 52, ^79^, 4S0.
B* Wood y. The Duke of Argyll, 6 Man. ft Gr. 028; Lake y. The
Duke of Argyll, 6 Q. B. 477 ; FLETCHER y. PULLBN, 70 Md. 206,
16 Atl. 887, 14 Am. St Bep. 396, GUmore, Cas. Partnership, 100;
Seabury & Johnson y. Bolles, 61 N. J. Law, 103, 16 Atl. 64^ 11 L. B.
A. 136. See "Partnership,'* Dec. Dig. {Key No.) H l^t ^IS; Cent.
Dig. IS 185^, 427.
B« Wood y. The Duke of Ars^U, 6 Man. ft Gr. 028; Lake y. The
Duke of Argyll, 6 Q. B. 477. See ^'Partnership,^ Deo. Dig. iKey No:^
U SS-S8, 122, 218; Cent, Dig. U 49-^8, 186\i, 4^.
i 22) VOBMATION AND CLASSIFICATION 69
CHAPTER II
FORMATION AND OLA88IFIOATION OF PABTNBRSHIPS
22. Partnership Arises from a Contract
23. Requirements of the Contract
24. Competency of the Parties.
20. Consideration.
20. Formalities.
27-2& Statute of Frauds.
29. Bubject-Matter.
30. Legality of Object
81. Classification of Partnerships.
3Z Ordinary Partnerships — ^Universal, General^ Special* or
Particular.
83. Limited Partnerships.
34. Joint-Stock Companies,
35. . Subpartnershlps.
36. Mining Partnerships.
87-^88. Trading and Nontrading Partnerships.
89. Classification of Partners.
PARTNERSHIP ARISES FROM A CONTRACT
SS2. Partnership is a relation which results only from a con-
tract between the parties; it is never created by
operation of law. Being a relation based upon
mutual trust and confidence, it can only exist
where the parties have voluntarily created it. This
gives rise to the principle of delectus personarum,
or right of selection, which requires that every
member to the relation consent to its formation
and continuance.
Partnership Created Only by Contract
Since partnership is the relation existing between per-
sons who have so agreed that the profits of a business car-
ried on by one or more for all inure to them all as co-own-
ers, it necessarily follows that a partnership can be created
only by contract, either express or implied. In the absence
of such an agreement, a true partnership is never created by
70 FOBMATION AND CLASSIFICATION (Gh. 2
operation of law.* Thus where sons assisted their father for
many years in carrying on business, although the former
received no compensation and regarded themselves as hav-
ing an interest in the business, it was held that no partner-
ship existed, for there was no agreement to form the rela-
tion, and the law will not "surprise them into a partnership
of which they never dreamed." The most that the sons
had was an expectation of ultimate succession to the busi-
ness.* So a mere agreement between two cornmcrcial
houses to share commissions in sales of goods forwarded
by one to the other does not constitute a partnership.* So,
also, where a broker purchased a quantity of tea for sev-
eral persons, who were to have separate shares therein,
such persons were held not to be partners with the broker
and one another, because they "had never met or contracted
1 North Pac. Lumber Co. y. Spore, 44 Or. iffZ, 75 Pac. 800; Reyn-
olds ▼. Radke, 112 111. App. 575; Wilson's Ex'rs y. Cobb's Ex'rs, 28
N. J. Eq. 177, 179, where, In holding that Joint prosecution of a
lawsuit does not create a partnership, the court said : **There is no
such thing as a partnership by implication or operation of law.
The relation inter sese is founded in voluntary contract, and cannot
exist independent of it"
A partnership is not established by the mere fact that parties
purchase property Jointly. Ingals v. Ferguson, 59 Mo. App. 299. See
''Partnership,*' Dec. Dig. (Key No,) §| 18, 20-22, 28S2; Cent. Dig.
§1 1, JhS, 30-48.
« PHILLIPS y. PHILLIPS, 49 HI. 437, GUmore, Cas. Partnership,
113. **The Intention or even belief of one party alone cannot cre-
ate a pa^nership without the assent of the others." Id. But see
Ratzer y. Ratzer, 28 N. J. Eq. 136, where a partnership was declared
to exist on similar facts. See ^'Partnership,** Dec. Dig. (Key No.)
I 18; Cent. Dig. ^ 4.
» Pomeroy y. Sigerson, 22 Mo. 177; FBCHTELER et al. y. PALM
BROS. & CO., 133 Fed. 462, 66 C. C. A. 336, GUmore, Cas. Partner-
ship, 76 ; SABEL et al. y. SAVANNAH RAIL & EQUIPMENT CO..
135 Ala. 380, 33 South. 663 (1903) GUmore, Cas. Partnership, 116;
In re Winter's Estate, Myr. Prob. (Cal.) 131, where persons Hying
together as husband and wife accumulate property, on the death of
the man the woman was held not entitled to the property as sur-
yiylng partner, as against a former wife. But where the ^ife in-
vests community property in a partnership business, the husband
becomes a partner. Houghton y. Puryear, 10 Tex. Civ. App. 383,
30 S. W. 583. See ''Partnership,*" Deo. Dig. {Key No.) {| JhlS, 28-
82; Cent. Dig. §| 15-28, S0S5, 88-48.
§ 22) PARTNERSHIP ARISES FROM A CONTRACT 71
•
together as partners/'* Again, where the plaintiff furn-
ished the master of a vessel with money with which to pur-
chase goods to be taken on a voyage and sold and the prof-
its to be divided, they were not partners, for "it was only
■an agreement for so much as a compensation for the plain-
tiff's trouble, and for lending the master his credit." ■ This
rule, that all the parties to the relation must have voluntar-
ily assented thereto, originated in the Roman law, was in-
corporated in the law merchant, and became an integral
part of the common law. As explained elsewhere,* an
anomalous exception to the rule was established, called
partnership as to third persons, by reason of participation
in the profits of a business, whereby persons not really
partners as between themselves were held liable as partners
to third persons dealing with them. This exception was ^
abandoned in England, where it originated, and was either
never adopted by American courts, or, if adopted, was dis-
carded save in a few jurisdictions.^ Where the relation ex-
ists, it usually does so as the result of an express or implied
agreement to form a partnership. It is not necessary that
any particular words be used in the contract, nor that the
parties specifically designate their agreement as one of part-
nership. It is sufficient if the agreement is to dp such acts
as the law regards as amounting to partnership.*
Delectus P^sonarum
The requirement of a contract for the creation of a part-
nership is founded upon the principle of delectus person-
« HOARE ▼. DAWES, 1 Dong. S71, Gllmore, Gas. Partnership, 1.
See ^^Partnership," Dec. Dig, (Key No.) §§ 18, 20-22; Cent, Dig. §§
i, 4. e-8.
bHESKETH ▼. BLANOHARD, 4 East, 144, Gllmore, Cas. Part-
nership, 2. See "Partnership,** Dec, Dig, (Key No.) |§ 9, SO; Cent.
Dig. a 2S, 24, 43, U>
• Chapter I, ante, "Partnership as to Third Persons," |S 4-7,
pp. 10-24.
f COX V. HICKMAN, 8 H. L. Cas. 268, Gllmore, Cas. Partnership,
31; BEECHER v. BUSH, 45 Mich. 188, 7 N. W. 785, 40 Am. Rep.
465, Gilmore, Cas. Partnership, 49. See **Partnership,** Dec Dig.
(Key No.) fi SO; Cent. Dig. §S S8'48.
sBeecher ▼. Bnsh, supra; Spaulding ▼. Stubbings, 86 Wis. 255,
56 N. W. 409, 89 Am. St Rep. 888; Coons ▼. Coons, 106 Va. 572, 56
72 FORMATION AND CLASSIFICATION (Ch. 2
arum, or right of selection, and this in turn grows out of
the nature and consequences of the relation. "When a man
enters into a partnership, he certainly commits his dearest
rights to the discretion of every one who forms a part of
that partnership." "It is an imprudent thing for a man to
enter into partnership with any person, unles3 he has the
most implicit confidence in his integrity." • Within the
scope of the partnership one partner may bind his copart-
ners by his contracts and acts, may pledge their credit and
may convey a perfect title to the firm chattels. The prop-
erty or money which one puts into a partnership venture
ceases to be his exclusively and comes under the control
and disposition of his copartners. Because of the powers
of partners to subject one another to liability and to deal
with common property, and because of the mutual confi-
dence and trust required in the relation, this right of selec-
tion of one's associates is a fundamental principle, not only
in the establishing, but also in the continuance, of the rela-
tion. It therefore follows that no person can be introduced
as a partner without the consent of himself and of all those
who for the time being are members of the firm.^" If a
partner does assign his interest in the firm, his assignee
does not become a member of the partnership, but acquires
merely a right to insist upon an accounting from the firm,
and to have whatever his assignor would be entitled to
upon a settlement of the partnership affairs. Thus the pur-
chaser of the interest of a deceased partner, or of the inter-
est of a partner sold on execution, does not become a mem-
ber of the firm.^^ Likewise, if a partner by will leaves his
S. B. 576. See ** Partnership,'' Deo, Dig. (Key No.) Si »0-62, 28^2;
Cent. Dig. §| i, 6-8, S0S5, S8-48.
» Wells V. Masterman, 2 Bsp. 731 ; Baker v. Charlton, 1 Peake, 80.
8ee ''Partnership,'' Deo. Dig. {Key No.) |§ 1, 18; Cent. Dig. % k.
10 Morrison v. Austin State Bank, 213 111. 472, 72 N. E. 1109, 104
Am. St Rep. 226 ; Gray ▼. Gibson, 6 Mich. 800 ; McNamara v. Gay-
lord, 1 Bond, 302, Fed. Gas. No. 8,910; Frellgh v. Miller, 16 La.
Ann. 418; Freeman v. Bloomfleld, 43 Mo. 391; Filley v. Walker,
28 Neb. 50e, 44 N. W. 737; Marquand v. New York Mfg. Co., 17
Johns. (N. Y.) 529, 535. See **ParinersMp,'* Deo. Dig. (Key No.) §
227; Cent. Dig. S ^75.
11 Noonan v. Nunan, 76 CaL 44, 18 Pac. 98; Carter v. Roland, 63
I 22) FABTNERSHIP ABISES FBOH A OOMTBAOT 73
interest in the firm to his executors or to a legatee, this
does not make the executor or the legatee a partner, al-
though the devise was for the express purpose of accom-
plishing such a result.^*
Apparent Exceptions
Partners may, however, agree at the outset in the part-
nership contract to accept the assignee of a partner's inter-
est as a member of the firm, and if such assignee elects to
become a partner by virtue of the assignment he will then
take on all the rights and liabilities of a member of the re-
lation. Under such an arrangement the old partnership is
said to continue. In reality, the old firm is at an end, and
a new partnership of the continuing member and the as-
signee is created.^* The partnership articles may also pro-
I
Tex. 540; Nlcoll v. Mumford, 4 Johns. Gh. (N. Y.) 522; Kingman
y. Sparr, 7 Pick. (Mass.) 235; ModdeweU v. Keever, 8 Watts. & S.
(Pa.) 63. See ^'Partnership,'' Dec. Dig. {Key No,) | 227; Cent. Dig.
U US, 47S--m.
12PEARGE y. CHAMBERLAIN, 2 Ves. 33, GUmore, Cas. Part-
nership, 692; Wilson v. Greenwood, 1 Swanst. 471; FOX y. HAN-
BURY. Ck)wp. 445; WILD y. DAVEfNPORT, 48 N. J. Law, 129. 7
Atl. 295, 57 Am. Rep. 552. See '* Partnership;' Dec, Dig. (Key No.) |
255; Cent. Dig. |§ 552-561, ,
IS "As a partner cannot possibly continue to be a member of a
firm after his death, any agreement with his executor, or other
person haying a beneficial Interest In the share of the assets which
belonged to him, for the continuation of the business thereafter
with the snrylylng partner, Is, necessarily, the formation of another
partnership, the terms of which, when not otherwise expressly agreed
upon, may be Implied, from the manner of conducting the business,
to be the same as those of the former partnership. 'What Is In-
accurately called proyislon against the dissolution of the partner-
ship Is an agreement that, If either party dies, his property shall
remain in the firm and In the business, or that his executors shall
carry on the business, for the benefit of his children, or that his
children, or some one of them, or some other person, shall. Imme-
diately on his death, take his place In the firm, and become a part-
ner In his stead. All these agreements and arrangements, and all
that can be made for a similar purpose, are, in fact, only bargains
for the creation of a new partnership when the old one ceases to
exist And so, too, all arrangements or contracts which may be
made between the surylylng partners and the representatives or
appointee of the deceased have for their effect only the formation
of a new i>artnership, which, upon some terms or other, takes the
74 FORMATION AND CLASSIFICATION (Ch. 2
vide that on the death of one partner the surviving partners
will continue the business and accept into the firm the rep-
resentative of the deceased member. If the representative
elects to come in, but not otherwise, the partnership will
continue.** Although there be no agreement in advance for
substitution of members, an implied assent may be found
in the actual acceptance of a partner's assignee. The new
partner becomes such, however, by reason of the acceptance
of the other partners and his agreement with them, and not
by reason of the assignment or transfer of the one who has
ceased to be a partner.*'
Nor does^ the principle of delectus personarum prohibit
stock, and carries on the business of the old one.* Parsoos on Part-
nership, I 343. The effect cannot be otherwise of any arrangement
for a continuation of the business, between the surviving member
of the firm and the executor or other appointee under the wlU of
the deceased member, made In pursuance of the will; for, upon the
death of the partner, his personal estate, Including his Interest In
the partnership, devolves upon his executor, and vests In the bene-
ficiaries of the will, and becomes their property." Per Williams,
J., In McGrath v. Cowen, 57 Ohio St 885, 401, 49 N. B. 338, 340
(1893). See ^Partnership," Dec. Dig, {Key No,) §fi «27, 255; Cent
Dig, §§ 145. 4yS-4'^5, 552-561.
14 Ex parte Garland, 10 Ves. 110, 119; Warner v. Cunnlnghame,
8 Dow. 76.
In WILD V. DAVENPORT, 48 N. J. Law, 129, 136, 7 Atl. 295,
299, 57 Am. Rep. 552 (1886), It Is said: "A provision In articles
of partnership that on the death of a partner his executor, or per-
sonal representative, or some other person, shall be entitled to the
place of a deceased partner In the firm, with the capital of the de-
ceased In the firm business, or some part of It, Is binding upon the
surviving partner to admit the executor, personal representative,
or nominee of the deceased partner, but does not bind the latter to
come in. They have an option to come In or not, and a reasonable
time within which to elect." fifee **Partner8hip,** Deo. Dig. {Key No.)
{ 255; Cent, Dig. §| 552^61.
isMeaher v. Cox, 87 Ala. 201; Rosenstlel v. Gray, 112 IlL 282.
In the absence of any new stipulations, the acceptance of a part-
ner's assignee Is only for the conduct of the business according to
the terms and conditions of the original articles. Love v. Payne,
73 Ind. 80, 38 Am. Rep. 111. Silence or failure to dissent from an
assignment by one partner purporting to substitute his assignee for
him Is evidence from which acceptance of the assignee may be In-
ferred. Jones V. O'Farrel, 1 Nev. 351 fifee ^^Partnership," Deo. Dig.
{Key No.) |§ 227, 255; Cent, Dig. H 14S, 479^475, 652-561.
§ 22) PABTNEBSHIF ARISES FROM A CX)NTRAGT 75
ft
what IS called a "subpartnership," which is sometimes des-
ignated a partnership within a partnership, and which
arises when a partner agrees with an outsider to share with
him his profits derived from the business. Such person is
not a partner, accurately speaking, nor is he under a part-
nership liability. The term "subpartnership" is misleading.
The so-called "subpartner" has no relations whatsoever
with the firm, but only with the person with whom he has
contracted.** Likewise, in that species of so-called part-
nerships designated "mining partnerships," the principle of
delectus personarum does not enter, and the fact that it
does not is sufficient to deny to them the character of per-
fect partnerships in the strict sense. They are anomalous
relations, having many of the characteristics of a partner-
ship.*^ So, also, in joint-stock companies there is no de-
lectus personarum. This is anomalous, and may be ex-
plained by saying that the parties to such relation have
agreed in advance that the respective shares may be trans-
ferred without affecting the partnership.**
Effect upon the Partnership of Assignment by Partner of His
Interest Therein
If, notwithstanding the requirement of the principle of
delectus personarum, a partner assigns his interest in the
partnership to a stranger, what consequences follow? Un-
less the case falls within one of the apparent exceptions
just discussed, the logical result of such an act is a dissolu-
tion of the partnership. Whether such a result will follow
depends upon the time stipulated for the continuance of the
relation.** If the partnership is one determinable at the
i« See post, I 85, p. 106; BURNETT v. SNYDER, 76 N. T. 844,
Gilmore, Gas. Partnership, 117 ; Nlrdllnger y. Bemhelmer, 133 N. Y.
45, SO N. E. 561. Bee ** Partnership," Dec Dig, (£ei/ No.) i 2S;
Cent, Dig. | 9.
IT Kahn y. Central Smelting Co., 102 U. S. 641, 26 L. Ed. 266, Gil-
more. Gas. Partnership, 120, note; Dnryea y. Burt, 28 Gal. 569:
Spotswood y. Morris, 12 Idaho, 360, 85 Pac. 1094, 6 Ia R. A. (N. S.)
665. See post, chapter II, | 36, p. 107. See **Min€S and Minerals,^
Dec. Dig. (Key No.) S| 96-100; Cent. Dig. i| 222-225.
i« See post, p. 105.
1* For further discussion of the subject, see post, p. 578.
76 rORMATION AND CLASSIFICATION (Ch. 2
will of the partners, the introduction of a stranger into the
firm, by the conveyance to him of the share of one partner
Without the consent of the others, brings the relation to an
end ipso facto.** If, however, the partnership is by the con-
tract creating it to continue for a certain time, the Ameri-
can authorities are in considerable conflict as to the power
of one partner, by his own acts, to put an end prematurely
to the relation.** Some hold that it is inequitable and in-
jurious to permit any partner to violate his engagement
that the firm shall exist for a certain time.** Where this
rule prevails, the partners who are aggrieved by the intro-
duction of a new member have merely the right to apply
to a court of equity for a receivership. There is no dissolu-
tion ipso facto, as in the case of a partnership at will.**
But probably the weight of authority is with the cases
holding that the right of a partner to dissolve the firm is
10 Wilson V. Waugh, 101 Pa. 233 ; Carter ▼. Roland, 63 Tex. 540 ;
Fourth Nat Bank v. New Orleans & O. R. Co., 11 WalL 824, 20 L.
Bd. 62; Moras y. Gleason, 64 N. Y. 204; Blake ▼. Sweeting, 121 lU.
67, llJ N. B. 67. See "Partnership;' Dec, Dig. {Key No.) i 264; Cent.
Dig. §1 S24, 472, 608, 6H, 611.
SI The BngUsh oonrts hold that such a partnership cannot be dis-
solved by one partner. BROWN v. HUTCHISON, [1805] 2 Q. B. 126.
See **Partner8Mp;* Deo. Dig. (Key No.) || 67-^2, 259^; Cent. Dig.
§i 82-86, 601.
a« Cole V. Moxley, 12 W. Va. 730; Hannaman ▼. Karrick, 9 Utah,
236, 33 Pac. 1039. Cf . with same case in 168 U. S. 335, 18 Sup. Ct
135, 42 L. Bd. 484, where the court in taking the opposite view says :
"An absolute assignment by one partner of all his interest in the
partnership to a stranger dissolves the partnership. • • • No
partnership can efficiently or beneficially carry on its business with-
out the mutual confidence and co-operation of all the partners.
Bven when, by the partnership artides, they have covenanted with
each other that the partnership shall continue for a certain period,
the partnership may be dissolved at any time, at the will of any
partner, • • • rendering the partner who breaks his covenant
liable to an action at law for damages, as In other cases of breaches
of contract" See "Partnership,'* Dec. Dig. (Key No.) i £55%;^ Cent.
Dig. S 601.
ss "It can hardly be that a partner, who has himself no right to
dissolve or to introduce a new partner, can, by assigning his share,
confer on the assignee a right to have the accounts of the firm
taken, and the affairs thereof wound up, in order that he may ob-
tain the benefit of his assignment** LindL Partn. 364.
i
§ 24) BXQUIBEMENT8 OF THE OONTRAOT 77
a right inseparably incident to every partnership, whether
at will or for a term oi years.** In these jurisdictions, the
introduction of a n^Cw member into a partnership for defi-
nite time would dissolve it ipso facto, just as it would a
partnership at will.* The only distinguishing feature would
be the right of action of the aggrieved partners for damages
for the premature dissolution of the firm.
REQUIREMENTS OF THE CONTRACT
23. A contract for a partnership must comply in all respects
with the requirements of a valid contract. These
requirements wiU be considered under the follow-
ing heads :
(a) The competency of the parties.
(b) Consideration.
(c) Formalities to be observed.
(d) Subject-matter*
SAME— CbMPETENCY OF THE PARTIES
24. Parties competent to enter into ordinary contracts are
competent to form a partnership. The capacity of
the following persons will be specially considered:
(a) Aliens (p. 78).
(b) Felons (p. 79),
(c) Infants (p. 79).
(d) Lunatics (p. 83).
(e) Married women (p. 85). .
(f) Corporations (p. 88).
(g) Partnership between firms (p. 88).
(h) Number of persons who may become pcutners (p.
89).
S4 Skinner y. Dayton, 19 Johns. (N. T.) 518, 538, 10 Am. Dec. 280.
"Even where partners covenant with each other, that the partner-
ship shaU continue seven years, either partner may dissolve it the
next day, by proclaiming his determination for that purpose; the
only consequence being that he thereby subjects himself to a claim
for damages for a breach of his covenant" HoweU v. Harvey. 5
78 FORMATION AND CLASSIFICATION (Oh. 2
■
Like the parties to all other contracts, prospective part-
ners must have the capacity to contract if they are to be
the partners of each other. The question in each case is:
What power has this individual at law to consent, so as to
bind himself? As certain classes of persons are not com-
petent in law to enter into contracts at all, or only under
limitations and restrictions, it is necessary to consider such
classes. The contractual capacity of aliens, felons, infants,
lunatics, married women, and corporations must therefore
be particularly examined. On the capacity of no other per-
sons is there any doubt*
Aliens
The rule is well established that the mere fact that a
man is an alien will not render him ineligible as a partner,
so long as the nation of which he is a citizen is not at war
with the nation of his partner.*' When, however, actual
war breaks out between the United States and the nation
of the alien, it not only prevents a voluntary resident of the
latter from joining a partnership here, but the partnership,
once formed, necessarily is suspended, and, in effect, dis-
solved, since the partners are barred from commercial in-
tercourse with each other.**
Ark. 270, S9 Am. Dec. 876; Lapenta r. Lettlerl, 72 Conn. S77, 44 Atl.
730, 77 Am. St Rep. 815; McKee ▼. Ck>wle8, 161 lU. 201, 43 N. E.
785 ; Richardson v. Gregory, 126 IIL 166, 18 N. B. 777 ; SOLOMON
V. KIRKWOOD, 65 Mich. 256, 21 N. W. 336, GUmore, Gas. Partner-
ship, 589; SIeimner'8 Appeal, 58 Pa. 168, 98 Am. Dec. 255; Becker
v. Hill, 20 Lane. Law Rev. 845. Statutory provlslODs: Civ. Gode
Ga. S 2633 ; Giv. Gode Mont S 3262 ; GIt. Gode N. D. f 5848 ; Glv.
Gode S. D. i 1753. Bee **PartnersMp;* Deo. Dig. (Key Nq.) i 259^;
Cent. Dig. %% 600, 601.
«B QRISWOLD V. WADDINGTON, 15 Johns. (N. Y.) 57, GUmore,
Gas. Partnership, 600; McGonnel v. Hector, 3 Bos. & P. 113; Bran-
don V. Nesbit, 6 Term R. 23. See ^^Partnership," Deo. Dig. iKey No.)
{ 268; Cent. Dig. fi 612; ''Wwrr Cent. Dig. \ SO.
" QRISWOLD V. WADDINGTON, 15 Johns. (N. Y.) 67, GUmore,
Gas. Partnership, 600 ; HiUyard ▼. Mutual Ben. Life Ins. Go., 35 N.
J. Law, 415; Woods ▼. Wilder, 43 N. Y. 164, 3 Am. Rep. 684; Bank
of New Orleans v. Matthews, 49 N. Y. 12 ; Hanger v. Abbott, 6 WaU.
532, 18 L. Ed. 939; Kershaw y. Kelsey, 100 Mass. 561, 97 Am. Dec.
124, 1 Am. Rep. 142; Glemontson ▼. Blessig, 11 Exch. 135. See fur-
ther discussion chapter X, §§ 197, 198, pp. 570-573, Termination of
g 24) BEQUIBEHENTS OV THE CONTBAGT 79
If the partnership and its business is of such a nature that
an entire suspension of all intercourse during the war
would not be inconsistent with a continuance of the rela-
tion, it might very well be regarded as revived on the sus-
pension of hostilities.
Felons
Since felons do not, in the absence of statutory restric-
tions, labor under any disability to contract in this coun-
try, they may, unless so restricted, be members of a part-
nership.**
Infants
As an infant's contracts, with few. exceptions,** are not
void, but voidable merely, he may enter into a contract of
partnership, which will be binding or not, according as he
chooses to stand by it or repudiate it,** He incurs no per-
sonal responsibility during his minority, cither to his co-
partners on the partnership contract •• or to third parties
on contracts negotiated pursuant to the partnership enter-
prise.** ' He may, before becoming of age, or within a rea-
the Partnership. See '^Partnership,'* Dec. Dig. {Key No.) S 268;
Cent. Dig. % 612; "War,** Cent. Dig. § SO.
2T Pen, Code N. Y. §§ 707, 708; Code Cr. Proc. N. Y. S 819; Avery
V. Everett, 110 N. Y. 817, 18 N. E. 148, 1 Ll R. A. 264^ 6 Am. St Rep.
368. Bee "Convicts,** Dec. Dig. {Key No.) |§ S, 4; Cent. Dig. || 2,
S, 8.
>• It is nsnally stated that contracts of infants are voidable, ex-
cept those for necessaries, which are binding, and those creating a
power of attorney, which are said to be void. Fetrow v. Wiseman,
40 Ind. 148. 165. See "InfanU;* Dec Dig. {Key No.) U 46-58; Cent.
Dig. §§ 98-160.
sAGoode V. Harrison, 5 Bam. & Aid. 147; Dnnton v. Brown, 81
Mich. 182; Osbum v. Farr, 42 Mich. 134, 8 N. W. 299; Whitney v.
Dutch, 14 Mass. 457, 7 Am. Dec. 229; BUSH v. LINTHICUM, 59
Md. 344. See "Infants:* Dec Dig. {Key No.) || ^7, $4, 57, 58; Cent.
Dig. H 1S2-1S4, 149. 150.
•• Neal V. Berry, 86 Me. 193, 29 Ati. 987. Bee **InfanU,*' Dec Dig.
{Key No.) S! 47, 54; Cent. Dig. § 1S4.
SI SHIRK V. SCHULTZ, 118 Ind. 671, 15 N. B. 12, Gilmore, Gas.
Partnership, 125; Gordon v. Miller, 111 Mo. App. 842, 85 S. W. 943
(1905) ; Bush v. linthicum, 69 Md. 344, Gilmore, Cas. Partnership,
126, note; BIXLER v. KRESGB, 169 Pa. 405, 32 AtL 414, 47 Am. St
Rep. 920. In Mehlhop v. Rae, 90 Iowa, 30, 67 N. W. 650, it was held
80 FORMATION AND CLASSIFICATION (Gh. 2
sonable time thereafter, avoid the partnership agreement
and all transactions pursuant thereto, even to the prejudice
of a stranger dealing with him in ignorance of his minori-
ty.** What constitutes a reasonable time after majority
within which the infant must disaffirm, if he would avoid
personal liability, depends upon the facts of the particular
case. Unless he disaffirms within a reasonable time, he may
be held to have elected to stand by the contract, and the
transactions consummated during his infancy. Mere con-
tinuance in the partnership, however, will not of itself consti-
tute an affirmation of debts incurred prior to majority.** As
to all contracts made by the firm after becoming of age, he
is bound by continuing in the business.** Whether or not
he has elected to be bound is a question of his intention, to
be determined by his conduct and declarations.** The
right to repudiate the partnership is the privilege of the
that the Infant may repudiate a partnership contract with a third
person, without also repudiating a partnership agreement In MU-
ler V. Sims, 2 Hill (S. C.) 479, It was held that an Infant i>artner,
confirming the contract of partnership after coming of age, sub-
jects himself to all the liabilities of the firm Incurred during his
minority. See "Infants,** Dec. Dig, {Key No,) §f 47, 54; Cent. Dig.
§ m.
S2 Murphy ▼. Johnson, 46 Iowa, 57; Ghllds V. Dobbins, 55 Iowa,
205, 7 N. W. 496 ; Adams v. Beall, 67 Md. 53, 8 Atl. 664, 1 Am. St
Rep. 379 ; Folds v. Allardt 35 Minn. 488, 29 N. W. 201. In Dunton
V. Brown, 31 Mich. 182, it was said that the Infant could not dis-
aflSlrm during minority and recover his capital and the value of his
services. See ''Infants** Dee. Dig. iKey No.) §§ 47, 54, 58; Cent.
Dig. §§ 155, 1S4. 149. 150.
tt CONTINENTAL NAT. BANE OF BOSTON v. STRAUSS, 137 N.
Y. 148, 32 N. E. 1066; Osbum v. Farr, 42 Mich. 134, 3 N. W. 299;
Crabtree v. May, 1 B. Mon. (Ey.) 289; Dana ▼. Stearns, 3 Oush.
(Mass.) 372. See ''Infants,** Dec. Dig. {Key No.) §§ 47, 54, 57; Cent.
Dig. §§ m, 151.
t4 Goode V. Harrison, 5 B. A Aid. 147. Cf. King v. Barbour, 70
Ind. 35. In Salinas v. Bennett, 33 S. C. 285, 11 S. E. 968^ it was
held that an infant partner who continues his connection with the
business after reaching majority ratifies all partnership transactions
during his Infancy. See "Partnership,** Dec. Dig. iKey No.) | 155;
Cent. Dig. fi 278.
SB Jenkins v. Jenkins, 12 Iowa, 195; Mlnock ▼. Shortrldge, 21
Mich. 304; Whitney v. Dutch, 14 Mass. 457, 7 Am. Dec. 229:
Keegan ▼. Cox, 116 Mass. 289 ; Todd ▼. Glapp, 118 Mass. 495 ; Kemp
{ 24) BEQUIREMENT8 OF THE CONTRACT 81
infant. The adult partner is bound, both to the infant on
the partnership agreement and to third parties on firm con-
tracts. Nor can third parties set up the infancy of one of
the partners as a ground for avoiding liability to the firm.**
The right of repudiation being the infant's, and his con-
tract being only voidable in all actions by and against the
firm, he should be made a party.*^ While the adult part-
ner is bound to the infant on the partnership agreement, he
may, in case Ae has been induced to enter the cpntract by
fraudulent representations of the infant that he is of age,
or in- case the infant is misconducting himself in relation to
the firm business, have the partnership dissolved on that
account.* •
Infanfs Rights Before Repudiation
Until the right of repudiation is exercised, the partner-
ship relation continues, and the infant has all the rights and
powers of an adult partner. He is entitled to equal posses-
V. Cook, 18 Md. 130, 79 Am. Dec. 681. See **Infafi4s,'' Dec, Dig, {Kep
yo.) H 57, 58; Cent, Dig. §§ 186-^160,
•• Stein V. Robertson, 30 Ala. 286 ; Halt v. Ward, 2 Str. 037 ; War-
wick V. Bruce, 2 M. & S. 205 ; WiUard v. Stone, 7 CJow. (N. Y.) 22,
17 Am. Dec. 406; Gannon v. Alsbury, 1 A. K. Marsh. (Ky.) 76, 10
Am. Dec. 709. The privilege of repudiation has been held to extend
to the Infants' legal representatives. Hnssey v. Jewett, 9 Mass. 100 ;
Martin v. Mayo, 10 Mass. 137, 6 Am. t)ec. 103 ; Jackson v. Mayo, 11
Mass. 147, 6 Aul Dec. 167. See **Infant8," Dec. Dig, {Key No.) f
68; Cent. Dig. fi 160; ''Partnership;' Deo. Dig. {Key No.) § 2k; Cent.
Dig. \ 10.
87 Teed v. El worthy, 14 East, 210; Osbum v. Farr, 42 Mich. 134,
8 N. W. 299; Wamsley v. Llndenberger, 2 Rand. (Va.) 478; Slocum
V. Hooker, 18 Barb. (N. Y.) 536; Mason v. Denlson, 15 Wend. 64.
English and some American courts have held that an Infant partner
Is not a proper party defendant ; but these cases may often be ex-
plained on the ground that the Infant's contract was treated as void
and not voidable; Bnsgers v. MerrlU, 4 Taunt. 468 ; Jaffray v. Fre-
baln, 5 Esp. 47. See 1 Ghitty on Pleading, pp. 14, 50, and notes;
1 Lludley on Part (2d Ajn. Ed., Ewell), 74 and notes. See "Part-
nership;' Dec. Dig. (Key No.) §§ 198-202; Cent. Dig. §f S61-SH;
"Infants,*' Dec. Dig. (Key No.) § 74; Cent. Dig. §§ 188-190.
S8 Bush V. Llnthicum, 59 Md. 344, Gllmore, Gas. Partnership, 126,
note ; Lemprlere v. Lange, 12 Ch. Dlv. 675. While this last case Is
not one of partnership, it stands for the proposition announced. See
**Infants;' Dec. Dig. {Key No.) | 56; Cent. Dig. | 100.
Gil.Pabt. — 6
82 FORMATION AND CLASSIFICATION (Ch. 2
sion with his adult copartner of the firm assets. He may
incur and collect firm debts, buy and sell the firm property,
and subject the partnership to liability in contract and tort
by acts falling within the partnership business. He may
also make contracts in the firm name, which, though void-
able as to' him, will bind his copartner and the firm assets."
Infant's Rights After Repudiation
Where the rights of firm creditors arc not involved, an
infant partner, who has been induced by fraud to enter ~ a
partnership, may have the contract set aside and recover
his contribution from the adult partner.** In the absence
of fraud, however, he could probably not recover his con-
tribution, especially where his contribution was in the form
of time and services.** If the infant paid a premium or
bonus to gain admission to the firm, it has been held that
he cannot, upon repudiation of the contract, recover it,**
Effect of Repudiation on Rights of Creditors
While the infant may repudiate all personal liability on
firm obligations, he cannot by so doing prevent the appli-
cation of the firm assets to the payment of the firm debts,
nor claim his original contribution to the adventure. This
result may be stated as due to the right of the adult part-
ner to have the assets acquired with the firm capital and in
the course of the business applied to the firm debts. "The
adult partner * * * is entitled to insist that the part-
nership assets shall be applied in payment of the liabilities
of the partnership, and that until these are provided for
no part of them shall be received by the infant partner, and
if the proper steps are taken this right of the adult partner
can be made available for the benefit of the creditors.'* **
••Parker y. Oakley (Tenn. Gh. App.) 67 S. W. 426; Bush ▼. Lln-
thicum, 59 Md. 344, 349, Gllmore, Gas. Partnership, 126, note. See
^*Infant8/' Deo, Dig. (Key No.) i 5k; Cent, Dig. | ISi.
«o Sparman v. Kelm, 83 N. Y. 245. See "Infants,^ Deo. Dig. (Key
yo.) § 58; Cent. Dig. § 149.
«i Page ▼. Morse, 128 Mass. 99; Moley ▼. Brine, 120 Biass. 821
See ^'Infants;* Cent. Dig. \ ISS.
48 Adams y. Beall, 67 Md. 53, 8 AtL 664, 1 Am. St Rep. 879; Ex
parte Taylor, 8 DeG. M. & G. 254. See **Infanta,'* Cent. Dig. § ISS.
4SL0VELL y. BEAUGHAMP [1894] A. G. 607, 611. See ''In-
fanta,'' Cent. Dig. § ISi.
§ 24) REQUIREMENTS OF THE CONTRACT 83
"If an infant goes into a mercantile adventure which proves
unsuccessful, he ought at least to be held so far as that the
assets acquired by the firm should be applied to the pay-
ment of the debts of the concern." ** Another explanation
of this result may be found in treating the firm as an entity
distinct from its members and holding that this entity has
acquired the title to the firm assets. The infant, being no
longer the owner of the property, cannot reclaim it. The
explanation, however, does not appear in the decided
cases.*' The chief advantage the infant partner gains in
repudiating the firm obligations is that when the partner-
ship property is exhausted, and his contribution is used, his
liability ceases. He does not have to pay his pro rata share
of the firm debts out of his individual resources, as do the
adult partners.**
Lunatics
Whether a lunatic can enter into a partnership contract
depends upon his capacity' to enter into contracts generally.
While the law is in some confusion on this subject, the fol-
lowing propositions appear to be established: Where the
sane person is unaware of the other party's insanity, and
there has been no formal abjudication of insanity, the con-
tract is binding on the lunatic. If, however, the contract
has not been executed, and the parties can be restored to
their former position, it may be avoided.*^ If the sane party
** Yates V. Lyon, 61 N. Y. 844 ; Page v. Morse, 128 Mass. 99 ; Mo-
ley ▼. Brine, 120 Mass. 824; Pelletler ▼. Couture, 148 Mass. 269, 19
N. B. 400, 1 L. R. A. 863 ; SHIRK v. SCHULTZ, 118 Ind. 671, 15
N. B. 12, Gilmore, Gas. Partnership, 125. See **Infant8," Dec. Dig.
{Key No.) i 54; Cent. Dig. H ISS, ISi.
«s Burdick on Partnership (2d Ed.) p. 97. It has been held that
under the present federal bankruptcy act (Act July 1, 1898, a 541,
80 Stat 544 [U. S. Oomp. St 1901, p. 8418]) a firm containing an in-
fant partner may be adjudicated bankrupt and the partnership as-
sets applied to firm debts. The petition as to the infant partner was
dismissed. In re Dunnigan (D. C.) 95 Fed. 428; In re Duguid (D.
C.) 100 Fed. 274. See ''Bankruptcy,'' Deo. Dig. (Key No.) | 69.
*• Gay V. Johnson, 32 N. H. 167 ; Yates v. Lyon, 61 N. Y. 344 ;
WhITTEMORB v. ELLIOTT, 7 Hun (N. Y.) 5ia See ''Infants^
Dec. Dig. iKey No.) § 54; Cent. Dig. S 1S4»
«T Gribben v. Maxwell, 34 K^n. 8, 7 Pac 584, 55 Am. Rep. 233 ;
Young ▼. Steyens, 48 N. H. 183, 2 Am. Rep. 202, 97 Am. Dec 592;
84 FORMATION AND CLASSIFICATION (Ch. 2
is aware of the other's insanity, or if there has been a for-
mal adjudication of insanity, of which the sane party is
bound to take notice, the contract is voidable.** In some
jurisdictions contracts by lunatics are made void.** Sub-
ject to the foregoing general principles, a lunatic may en-
ter into a partnership.*® The innocent partner is protected,
as are other innocent partners ; for a lunatic cannot avoid
a contract made with him in good faith by one who had no
knowledge of his insanity, save as his lunacy is cause for
dissolution of the partnership.'* If the partnership is to
be set aside where the sane partner was ignorant of the
other's condition, the parties must be restored to their
former position.'* The fact that a partner becomes insane
during the existence of the partnership does not dissolve
the latter ipso facto, but may be a ground of dissolution
by a court of equity. Until such dissolution, the lunatic is
Mutual Life Ins. Go. ▼. Hunt, 79 N. Y*. 541. Even if the contract has
been executed, if the sane party can be put in statu quo, the con-
tract is voidable. Burnham y. Eldwell, 113 111. 425. See **In8ane
Persowt," Dec. Dig, (Key No.) | 72; Cent. Dig. § 125.
4s Carter v. Beck with, 128 N. Y. 312, 28 N. E. 582; Wadsworth ▼.
Sharpsteen, 8 N. Y. 388, 59 Am. Dec. 499. In England the rule ap-
pears to be that a defendant who seeks to avoid a contract on the
ground of his insanity must plead and prove, not merely his in-
capacity, but also the plalntllTs knowledge of that fact, and unless
he proves these two things he cannot succeed. Imperial Loan Ck>.
V. Stone, 1892, 1 Q. B. 599; Drew v. Nunn, L. R. 4 Q. B. D. 661.
See ^'Insane Persona,'* Dec. Dig. (Key No.) { 7S; Cent. Dig. H 12$,
132^188.
«• Bums' Ann. St Ind. 1908, § 3110; Civ. Code Oa. 1895, | 365Z
Contracts of lunatics under guardianship are declared void by Civ.
Code Cal. §§ 38-40, and Civ. Code S. D. §§ 20-22. See "Insane Per-
sons,'* Dec. Dig. (Key No.) { 75; Cent. Dig. §§ 125, 182-188.
soBehrens v. McKenzie, 23 Iowa, 333, 92 Am. Dec. 428; Fay ▼.
Burditt, 81 Ind. 433, 42 Am. Rep. 142. See **Insane Persons,** Deo.
Dig. {Key No.) § 72; Cent. Dig. § 125.
SI Molton V. Camroux, 2 Ex. 487, 4 Ex. 17. Nor is lunacy a de-
fense to an action by an innocent person on an executed contract
Drew V. Nunn, 2 Q. B. D. 661; Baxter v. Earl of Portsmouth, 5
Bam. & C. 170. See "Insane Persons,** Dec. Dig. (Key No.) | 75;
Cent Dig. §i 125, 182-188.
fi2 Behrens v. McKenzie, 23 Iowa, 333, 92 Am. Dec 428; Fay ▼.
Burditt 81 Ind. 433, 42 Am. Rep. 142. WhUe these are not part-
nership cases, it is submitted that the principle would govern the
§ 24) BEQUIREMBNTS OV THS COMTRAOT 86
entitled to a share of the profits made by the other part-
ners, and IS liable for their misconduct,"
Married Women
At common law a married woman had no capacity to en-
ter into contracts, except where she had a separate estate,
or where her husband was a convicted felon, or an alien
residing abroad, or where she had been abandoned by her
husband, or judicially separated from him. Her capacity
to be a partner was no greater than her capacity to con-
tract**
partDership contract, jnst as It does other contracts with Innatica.
See "Insane Persons," Dec. Dig. (Key No.) { 7S; Cent. Dig. | 1S3.
»s RAYMOND v. VAUGHAN, 17 IlL App. 144, affirmed 128 lU. 2S6,
21 N. E. 566, 4 L. R. A. 440, 15 Am. St. Rep. 112, Gllmore, Gas.
Partnership, 395 ; Reynolds v. Austin, 4 Del. Gh. 24. See ^^Partner-
ship," Dec. Dig. (Key No.) I 274; Cent. Dig. § 621.
»4 De Graum ▼. Jones, 23 Fla. 83, 6 South. 925 ; Bradstreet ▼.
Baer, 41 Md. 19; Carey v. Burruss, 20 W. Va. 571, 43 Am. Rep. 790;
Brown v. Jewett, 18 N. H. 230; Gwynn v. Gwynn. 27 S. C. 525, 4
8. E. 229 ; Weislger y. Wood, 36 8. a 424, 15 S. B. 597 ; Frank v.
Anderson, 13 Lea (Tenn.) 695; Brown ▼. Chancellor, 61 Tex. 437;
Miller ▼. Marx, 65 Tex. 131.
The right of a married woman to engage in business as a sole
trader has been recognized in cases where she has been abandoned
by her husband — ^whether voluntarily or involuntarily — or has been
separated from him. Bogget v. Frier, 11 East, 301; Krebs v.
O'Grady, 28 Ala. 726, 58 Am. Dec. 312; Young v. PoUak, 85 Ala.
439, 5 South. 279; Schwartz v. Reesch, 2 App. Gas. (D. G.) 440;
Love V. Moynehan, 16 111. 277, 63 Aul Dec. 306; Gregory v. Pierce,
4 Mete. (Mass.) 478; Buffer v. Ril^, 47 Mo. App. 479; McArthur
V. Bloom, 2 Duer (N. Y.) 151; King v. Paddock, 18 Johns. (N. Y.)
141 ; Cleaver, v. Scheetz, 70 Pa. 496 ; Rhea v. Rhenner, 1 Pet. 105,
7 L. Ed. 72. Also, where her husband has been convicted of a fel-
ony: Lean v. Schutz, 2 W. Bl. 1195; Gorbett v. Poelnitz, 1 T. R.
5; Marshall v. Rutton, 8 T. R. 545; Garrol v. Blencow, 4 Esp. 27.
Also, where the husband is an alien who has never resided in the
country: Deerly v. Mazarine, 1 Salk. 119; De Gallow v. L'Aizle, 1
B. & B. 357 ; Marsh v. Hutchison, 2 B. & P. 226 ; Farber v. Gran-
arie, 4 B. & P. 80 ; Walford v. De Pieniie, 2 Esp. 554 ; Abbot v. Bay-
ley, 6 Pick. (Mass.) 89.
The foregoing cases, recognizing the right to engage in business
as a sole trader, would seem to authorize the engaging in business
as a partner. See **HuMband and Wife," Deo, Dig. (Key No.) |§ di-
100; Cent. Dig. §§ S65-976.
86 FOBMATION AND CLASSIFICATION (Gh. 2
The common-law disability has been removed or modi-
fied by statute in most states. The extent to which she
may now make contracts and enter into partnership will
depend upon the extent of her statutory emancipation.
While these statutes are similar in their main features the
wording of each and its judicial interpretations must be sep-
arately examined, in order to ascertain her contractual ca-
pacity in any particular jurisdiction. In most states she
may enter into partnership contract with any person ex-
cept her own husband."' Statutes, however, which secure
to a married woman merely the use or control and profits
of her separate estate, have been held not to authorize her
to engage in partnership.'*
Same — Partnership between Hushand and Wife
At common law a married woman could not enter into
contracts with her own husband, and consequently she
could not join him in partnership. It is generally held that
the statutory changes do not remove the disability.*' In
» Abbott ▼. Jackson, 43 Ark. 212; Camden ▼. Mullen, 29 Cal.
565; Francis ▼. Dickel, 68 Ga. 255; Conant v. National State Bank
of Terre Haute, 121 Ind. 323, 22 N. E. 250 ; VaU v. Winterstein, 04
Mich. 230, 53 N. W. 932, 18 L. R. A. 515, 34 Am. St Rep. 834 ; New-
man V. Morris, 62 Miss. 402; Scott v. Conway, 58 N. T. 619; Fremont
First Nat Bank y. Rice, 12 O. a D. 121, 22 Ohio Cir. Ct R.
183 ; Loeb ▼. Mellinger, 12 Pa. Super. Ct 592 ; Emott v. Hawley, 34
Wash. 585, 76 Pac. 93, 101 Am. Rep. 1016; Krouskop v. Shontz, 51
Wis. 204. 8 N. W. 241, 37 Am. Rep. 817. See ^'Husband and Wife,''
Dec. Dig. {Key No.) §§ i2, 97; Cent. Dig. §§ 225, S7S.
s« Bradstreet ▼. Baer, 41 Md. 19; Landers v. Dithridge, 2 Pa. Co.
Ct. 560; Lycoming Fire Ins. Co. ▼. Fetterman, 2 Danph. Co. Rep.
(Pa.) 337; Hagan v. Hoover, 33 S. G. 219, 11 S. E. 725; Gwynn v.
Gwynn, 27 S. C. 525, 4 S. E. 229; Bradford ▼. Johnson, 44 Tex. 381.
See *'Hu8band and Wife,** Dec. Dig. (Key No.) H 4^$ 97; Cent. Dig.
S§ 225, S7$.
S7 Gilkerson-Sloss Commission Co. v. Salinger, 56 Ark. 294, 19 S. W.
747, 16 K R. A. 526, 85 Am. St Rep. 105 ; Barlow Bros. Co. v. Par-
sons, 73 Conn. 696, 49 AtL 205; Scarlett v. Snodgrass, 92 Ind. 262;
Clay V. Vanwinkle, 75 Ind. 239; Montgomery v. Sprankle, 31 Ind.
113; Squire v. Belden, 2 La. 268; Mayer v. Soyster, 30 Md. 402;
Lord y. Parker, 3 Allen (Mass.) 127 ; Bowker v. Bradford, 140 Mass.
621, 5 N. E. 480 ; Artman v. Ferguson, 73 Mich. 146, 40 N. W. 907,
2 L. R. A. 345, 16 Am. St Rep. 572; JacQuin v. Jacquin, 15 Abb.
N. 0. (N. Y.) 408; Payne ▼. Thompson, 44 Ohio St 192, 5 N. E. 654;
5 24) BEQUIREMENTS OF THE OONTRAOT 87
some jurisdictions, either by reason of express statutory
provision or by judicial construction, the partnership re-
lation between husband and wife is recognized, and the
present tendency of the decisions is to allow a married wo-
man to become a partner, even with her husband, where
the right to contract is given to h^r generally, as distin-
guished from the right to contract merely as to her sepa-
rate property.**
Purdom v. Boyd, 82 Tex. 130, 17 S. W. 606; Brown v. Chancellor,
61 Tex. 437 ; Stelnback v.- Weill, 1 White & W. Civ. Ca8. Ct App.
(Tex.) S »34; Cockrum v. McCracken, 1 White & W. Civ. Cas. Ct
App. (Tex.) § 65; Board of Trade of City of Seattle v. Hayden, 4
Wash. 263, 30 Pac. 87, 32 Pac. 224, 16 L. R. A. 530, 31 Am. St Rep.
019; Fuller & FuUer Co. y. McHenry, 83 Wis. 573, 53 N. W. 896,
18 L. R. A. 512.
In Board of Trade of City of Seattle v. Hayden, 4 Wash. 283.
267, 30 Pac. 87, 88, 32 Pac. 224, 16 L. R. A. 530, 31 Am. St Rep.
919, in denying the capacity of the wife to enter into partnership
with her husband, Stiles, J., said : "In the foreground of the dis-
• cussion is placed the proposition that the purpose of the statute
is to free the wife from the control and influence of her husband,
and to relieve her property from his debts and management; but
the next following suggestion, that unless she can become his part-
ner she will not be whoUy free, if yielded to, will place her and
her property within touch of the very dangers which it is sought
in the flrst place to vdthdraw her from. Her improvident husband,
by the most ordinary persuasion, or by his mere declaration made
in her presence, as in the case at bar, could, in spite of her, unless
she assumed a hostility which would endanger the continuance of
the marriage relation, waste and dissipate her entire estate, and
thus the very purpose which, it seems to us, stands out the most
clearly in the act in question — 1. e., to Secure her protection in the
management and enjoyment of her estate — would be defeated.** See
*'Hu8l)and and Wife," Dec. Dig. {Key No.) § i2; Cent. Dig. § 225.
B«HOAGLIN V. C. M'. HENDERSON & CO., 119 Iowa, 720, 94
N. W. 247, 61 L. R. A. 756, 97 Am. St Rep. 335, Gllmore, Cas. Part-
nership, 121; Belser y. Tuscumbia Banking Co., 105 Ala. 514, 17
South. 40 (subpartner) ; Vizard v. Moody, 119 Ga. 918, 47 S. B.
348 ; Ellis v. Mills, 99 Ga. 490, :?7 S. B. 740 ;• BURNBY v. SAVAN-
NAH GROCERY CO., 98 Ga. 711, 23 S. B. 915, 58 Am. St Rep.
342; Heyman v. Heyman, 210 111. 524, 71 N. E. 691 (affirming 110
IlL App. 87) ; Louisville & N. R. Co. v. Alexander, 27 S. W. 981, 16
Ky. Law Rep. "806 ; Suau v. Caffe, 122 N. Y. 308, 25 N. E. 488, 9
L. R. A. 593; Hook y. Kenyon, 56 Hun, 69^ 9 N. Y. Supp. 40; Lane
88 FOBMATION AND CLASSIFICATION (Gh. 2
Corporations
A corporation may be expressly authorized by its charter
to enter into a partnership."* In the absence of such au-
thorization,' however, a corporation is not competent to
form a partnership, whether with an individual, a firm, or
another corporation/* This does not mean, however, that
while acting within the scope of its corporate powers, and
without actually becoming a partner, a corporation may
not so contract as to incur, as to third persons, a joint lia-
bility."
Partnership between Firms
While the law does not recognize a partnership as an en«
tity, nevertheless there is no inaccuracy in saying that one
firm may enter into a contract of partnership with another
firm or with an individual. As between the parties to such
a contract, in keeping accounts, making contributions, and
distributing profits, the firm is treated as an entity. As re-
gards third parties, however, the firm joining in such an
T. Bishop, 65 Vt 575, 27 Atl. 499 ; In re Klnkead, 3 Bias. 405, Fed.
Cas. No. 7,824.
In England a married woman with a separate estate may be ft
partner with her husband. Butler v. Butler, 16 Q. B. Div. 374. See
'*Hu8l)and ^nd Wife," Dec, Dig. {Key No.) { i2; Cent. Dig. { 225.
s» For example of such a charter, see Butler v. Toy Co., 46 Conn.
136. See "Corporations," Deo. Dig. (Key No.) S 379; Cent. Dig. |
1538.
«o White Star Line v. Star Line of Steamers, 141 Mich. 604, 105
N. W. 135, 113 Am. St Rep. 551 (1905) ; People v. North River Sugar
Refining Co., 121 N. Y. 582, 24 N. E. 834, 9 L. R. A. 33. 18 Am. St.
Rep. 843; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. 173, 8
Am. Rep. 159; Aurora State Bank v. Oliver, 62 Mo. App. 390. A
national bank cannot become a partner. MERCHANTS' NAT.
BANK V. WEHRMANN et al. a003) 69 Ohio St 160, 68 N. E. 1004,
Gilmore, Cas. Partnership, ^81. A department' store corporation can-
not form a partnership with a restaurateur. Franz et al. t. Wm.
Barr Dry Goods Co., 132 Mo. App. 8, 111 S. W. 636 (1908) ; Breinig
V. Sparrow, 39 Ind. App. 455, 80 N. B. 37. See "Corporations," Deo.
Dig. {Key No.) | 379; Cent. Dig. § 1538.
61 Marine Bank of Chicago v. Ogden, 29 111. 248; Cleveland Paper
Co. T. Courier Co.. 67 Mich. 152» 34 N. W. 556. See "Corporations^*^
Dec Dig. (Key No.) tt 378, 379; Cent. Dig. U 1538, 1539.
S 25) BEQUIBEMBNTS OF THE OONTKAGT 89
arrangement loses its identity, and each member becomes
liable as a partner in the joint concern.*'
Number of Persons Who may Become Members of the Part-
nership
In the absence of statutory enactments, there is no limit
on the number of persons who may join in partnership.
For statutory limitations the laws of the particular juris-
diction should be consulted/*
SAME— CONSIDERATION
lUI. A partnership agreement, like other contracts, must
have a consideration to support it.
Agreements to become partners, like all other agree-
ments, must be founded upon some consideration in order
to be binding. The mutual covenants and promises of the
partners with respect to the common enterprise are regard-
■ed as constituting sufficient consideration. The promises
by each to contribute capital, services, or credit, and to
perform the duties and liabilities of a partner, in considera-
tion of similar promises by the others, will constitute a
binding agreement.'* Any contribution in the shape of
•«In re Hamilton (D. O.) 1 Fed. 800; RAYMOND v. PUTNAM,
44 N. H. 160, Gllmore, Cas. Partnership, 490; Bullock v. Hubbard,
23 Cal. 496, 83 Am. D6c. 130; Meador v. Hughes, 14 Bush (Ky.) 652.
A partnership between individuals and a second partnership con-
stitutes all members of the second partnership members of the first
Meyer v. Krohn, 114 111. 574, 2 N. B. 496 ; North Pac. Lumber CJo.
V. Spore, 44 Or. 462, 75 Pac. 890 ; WiUson y. Morse, 117 Iowa, 581,
«1 N. W. 823. See "Partnership^ Deo. Dig. {Key No.) §{ 16, 29;
Cent. Dig. S 9l
es By English Companies Act, 1862 (25 & 26 Vict e. 89, S 4), no
more than ten persons may engage as partners in banking, and not
more than twenty in any other kind of partnership for profit
There must of necessity be more than one person in the partner-
ship. Stirling V. Heintzman, 42 Mich. 449, 4 N. W. 165. See **Part-
nerahip," Dec, Dig. (Key No.) | 4S; Cent. Dig. S 60.
•4 Byrd v. Pox, 8 Mo. 574 ; COLEMAN v. EYRE, 45 N. Y. 38, GU-
more. Cas. Partnership, 137. See, also, Brady v. Powers, 112 App.
Div. 845, 98 N. Y. Supp. 237 (modifying 105 App. Div. 476, 94 N. Y.
90 FORMATION AND CLASSIFICATION (Gh. 2
capital or labor, or any act which may result in liability to
third parties, is a sufficient consideration to support such
an agreement. Allowing the use of one's name is sufficient
consideration.*" A promise to account for one-half of the
profits is supported by a promise to share one-half of the
losses.** Nor need the contribution to the firm assets be
equal in value, for the partners are the best judges of the
adequacy of the consideration of the agreement into which
they enter.*' Where, however, one person, without fur-
nishing any means or doing anything whatever toward the
common enterprise, is to share equally in the profits and
the firm property, there is ho mutuality in the arrangement,
and such agreement is unenforceable.** But if such per-
son participates in the business, and thus subjects himself
to partnership liability for firm obligations, the agreement
will be binding.**
Supp. 259); Breslln v. Brown, 24 Ohio St. 565, 15 Am. Rep. 627;
Rush Center Creamery Co. v. HiUis, 3 Pa. Super. Ct 527; Belcher
y. Conner, 1 S. C. 88; Kimmins v. Wilson, 8 W. Va. 584; In re
Wedgwood Coal, etc., Co., 7 Ch. D. 75, 47 L. J. Ch. 278, 37 L. T. Rep.
442; Dale v. Hamilton, 6 Hare, 869; 67 Eng. Reprint 955; The
Herkimer, Stew. (Nova Scotia) 17. See **Partner87Up,** Dec Dig,
{Key yo.) S 19; Cent. Dig. i 5.
•» McCord V. Field, 27 U. C. O. P. 391 ; Breslin v. Brown, 24 Ohio
St 565, 15 Am. Rep. 627. Bee '^Partnership,'' Dec. Dig. {Key No.)
fi 19; Cent. Dig. § 5; ^'Contracts," Cent. Dig. I S45.
«• COLEMAN y. EYRE, 45 N. Y. 38, Gllmore, Cas. Partnership,
137. See ''Partnership;' Dec. Dig. (Key No.) § 19; Cent. Dig. § 5;
''Contracts,'* Cent. Dig. § S52.
«7 "If one man has skill and wants capital to make that skill avail-
able, and another has capital and wants skill, and the two agree
that the one shall provide capital and the other skill, it is perfect-
ly clear that there is a good consideration for the agreement on
both sides ; and it is impossible for the court to measure the quan-
tum of value. The parties must decide that for themselves." Vice
Chancellor Wigram, in Dale v. Hamilton, 5 Hare, 369, 393. See
"Partnership," Dec. Dig. {Key No.) { 19; Cent. Dig. fi 5; "Contracts,"
Cent. Dig. %\ SU, S45, 352.
•sTrayes v. Johns, 11 Colo. App. 219, 52 Pac. 1113; Mitchell v.
O'Neale, 4 Nev. 504; Frothingham v. Seymour, 118 Mass. 489;
Alabama Fertilizer Co. v. Reynolds, 79 Ala. 497; Kimmins v. Wil-
son. 8 W. Va. 584. See "Partnership," Dec. Dig. (Key No.) § 19;
Cent. Dig. § 5; "Contracts," Cent. Dig. §§ 3U, 345, 352.
e» Emery v, Wilson, 79 N, Y, 78; Guccione v, Scott, 21 Misc. Rep.
§ 26) BEQUIBBHEKT8 OF THS CX>KTRA€JT 91
Premiums
When one is admitted into a partnership with a person
who is already established in business, he frequently agrees
to pay the latter a premium or bonus ; i, e., a sum of money
for his own private benefit This premium belongs indi-
vidually to the former owner of the business, and forms no
part of the firm assets. .
Such an agreement is valid, and gives a plaintiff who is
ready and willing to take the defendant into partnership
a good cause of action for the premium.'* The only difii-
cult question is as to whether any of the premium is re-
turnable in the event the partnership is terminated sooner
than is expected, either by reason of fraud or total or par-
tial failure of consideration. This, however, involves no
principles peculiar to partnership law alone, and is gov-
erned by the law applicable to all contracts.''^ Where a
premium has been obtained by false and fraudulent repre-
sentations, the defrauded partner may make his loss good ei-
ther by having the partnership accounts taken or by dis-
affirming the contract and thereby recovering the money
paid directly.''" In the absence of fraud, where the partner-
ship is terminated sooner than contemplated, whether by
410, 47 N. T. Supp. 475; Id., 33 App. Dlv. 214, 53 N. T. Supp. 462;
Geddes y. Wallace, 2 Bligh, 270 ; Heyhoe v. Barge, 9 G. B. 431.
The sarrender by one partner of his right to withdraw from the
firm and continuance therein is a good consideration for the prom-
ise of his copartners that he should have one-half the net assets of
the firm upon dissolution In addition to one-half of the profits dur-
ing the continuance of the firm. Melville v. Kruse, 69 App. Dlv.
211, 74 N. T. Supp. 826 ; Id., 174 N. Y. 306, 66 N. B. 965. See 'Tart-
nerahip,'* Deo. Dig. (Key No.) fi 19; Cent. Dig. § 6; '^Contracts,**
Cent. Dig. %% SU, Si5, S52.
TO Walker ▼. Harris, 1 Anstr. 245. See, also, post, p. 484, "Ac-
tions between Partners," chapter VIII, § 160. See "Partnership;*
Dec. Dig. {Key No.) § 19; Cent. Dig. i 5.
71 SMIT£[ V. EVERETT, 126 Mass. 304, Gilmore^ Oas. Partnership,
608; Toumade v. Hagedom, 5 Thomp. & O. (N. Y.) 288; Capen v.
Barrows, 1 Gray (Mass.) 376. Bee **Partner8hip,*' Deo. Dig. (Key
No.) fil 25, S04; Cent. Dig. SS 11, 701.
TiBx parte Turquand, 2 M. D. & D. 339; Burg t. Allen, 1 Coll,
589. See "Partnership;* Deo. Dig. (Key No.) K 25, S04; Cent. Dig.
il 11, 701.
d^ rOBMATION AND CLASSIFICATION (Cb. 2
death or otherwise, the tendency of the cases is to hold
that, if persons wish to secure a return of the premium,
they should cover such contingencies in the partnership
articles.**
SAME^FORMALITIES
26. No particular formalities are essential to the validity
of a contract of partnership. The existence of the
contract may be implied from the conduct of the
parties.
In the absence of statute, the partnership agreement may
be either express or implied, in writing or oral. While
the terms of the agreement are ordinarily set forth in writ-
ing, a valid partnership may exist although no express
agreement may be discovered. It may be established
solely from the conduct of the parties.'* On the other
hand, merely calling the relationship a partnership will not
»• Taylor t. Hare, 1 Bos. & P. (N. S.) 260; Whlncup v. Hnghes,
L. R 6 C. P. 78; Ferns v. Carr, 28 Ch. Div. 409; Farr t. Pearee, S^
Madd. 74.
Bng. Partnership Act, 1890, § 40, provides: ^Wbere one partner
has paid a premium to another on entering into a partnership
for a fixed term, and the partnership is dissolved before the ex-
piration of that term otherwise than by the death of a partner, the
court may order the repayment of the premium, or of such part
thereof as it thinks just, having regard to the terms of the part-
nership contract and to the length of time during which the part-
nership has continued; unless (a) the dissolution is, in the judg-
ment of the court, wholly or chiefly due to the misconduct of the
partner who paid the premium, or (b) the partnership has been dis-
solved by an agreement containing no provision for a return of any
part of the premium." See ^'Partnership,^ Deo. Dig. {Key No.) f-
S04; Cent. Dig. S 701.
T4 Breinig v. Sparrow, 39 Ind. App. 455, 80 N. B. 87 (1907) ; DA-
VIS v. DAVIS, 1 Ch. a894) 393; Ratzer v. Ratzer, 28 N. J. Eq.
137; Haug v. Haug, 193 IlL 645, 61 N. B. 1053; Buffum v. Buffum.
49 Me. 108, 77 Am. Dec. 249; Hirbour ▼. Reeding, 3 Mont 15:
Sanger v. French, 157 N. Y. 213, 91 N. B. 979 ; Bverhart v. Everhart,.
4 Luz. Leg. Reg. (Pa.) 259; Fernandez v. De la Rosa, 1 Philippine,
671, See ** Partnership," Dec. Dig. {Key No.) U ZO, 22, 29; Cent..
Dig. {§ i, 5, 7, 8, SO-SS; 38.
5§ ^-28) BSQUIBBMENT8 OF THE OONTRAGT 93
make it one. The term may have been used in a popular
sense, and the real relationship may be something quite differ-
ent/* In some states there are statutes requiring agreements
for all partnerships to be in writing, duly executed and re-
corded; in all the states not only writing, but publication,
and sometimes still other formalities, are required in the
case of limited partnership/* Unless these requirements
are strictly observed, the parties will be held liable as gen-
eral partners.
SAME— STATUTE OF FRAUDS
27. Partnership agreements that are not to be performed
within the. space of one year are required by the
Statute of Frauds to be in writing.. If, however,
parties act upon an oral agreement, they will be
treated as partners at wiU.
28. While the decisions are conflicting, by the weight of
authority the Statute of Frauds does not require
the partnership contract to be in writing in order
to enable the partners to show that real estate con-
stitutes partnership assets.
Statute of Frauds
In considering the application of the Statute of Frauds
to partnership agreements, we have first to examine that
provision of the fourth section which prescribes that all
agreements which are not to be performed within the space
of one year from the making thereof shall be in writing.
This provision covers, not only partnerships to commence
more than a year from the date of the agreement, but also
agreements for present partnerships that are to last more
than a year/* But if in either case the parties have acted
T8 Sailors y. Nlzon- Jones Printing Co., 20 IlL App. 509. See "Part-
nersMp,'' Dec. Dig. {Key No.) H i7, 20, 22; Cent. Dig. S! 1, S, 6^, 14.
T« See the statutes of the Taiious states. As to limited partner-
ship, see post, chapter XI, It 211-214, pp. 604-617.
77 Stitt T. Bat Portage Lumber Co., 98 Minn. 62, 107 N. W. 824
(1900) ; Smith v. Tarlton, 2 Barb. Gh. (N. Y.) 836 ; Wliipple y. Park-
9i rOBMATION AND CLASSIFICATION (Gh. 2
on the agreement, and have become partners, they must be
treated as such, and the statute will not apply.*' In such
case they will be treated as partners at will.**
Same — Partnerships in Real Estate
The other important provisions of the Statute of Frauds
provide that no estate or interest in lands shall be created,
assigned, or declared except by deed in writing, and that
all contracts for the sale of land or any interest therein shall
be in writing. To what extent these provisions require a
contract of partnership to be in writing is a question on
which there is much confusion and conflict of authority.
Whether the contract is for the formation of an ordinary
commercial partnership, in the conduct of which real es-
tate may be incidentally involved as an asset, or for the
formation of a partnership for the special purpose of deal-
ing in land, the weight of authority is apparently to the ef-
fect that the statute does not require it to be in writing.'*
er, 29 Mich. 369. But see Shropshire t. Adams (1905) 40 Tex. Civ.
App. 339, 89 S. W. 448, Gllmore, Cas. Partnership, 138, note, hold-
ing a verbal contract of partnership to be valid, since the death of
one of the partners might work a dissolution at any time. See
**Fraud$, Statute of,*' Dec. Dig. {Key No.) H 44, 49, 56; Cent, Dig.
H 74, 1S5-1S9, 159.
T»McNealy v. Bartlett, 123 Mo. App. 58, 99 8. W. 767; Allison
V. Perry, 130 111. 9, 22 N. B. 492; Coward v. Clanton, T9 Cal. 23,
21 Pac. 359 ; Gates v. Fraser, 6 lU. App. 229. Bee **Fraud8, Statute
of,** Dec. Dig. {Key No.) | 76; Cent. Dig. §| 1S5-1S9.
7» Wahl V. Bamum, 116 N. Y. 87, 22 N. B. 280, 6 L. R. A. 623.
See '^Partnership,** Dec. Dig. {Key No.) { 261; Cent. Dig. {§ 600, 601;
''Frauds, Statute of,'* Cent. Dig. § 66.
•ocausler v. Wharton, 62 Ala. 358; McClintock y. Thweatt, 71
Ark. 323, 73 S. W. 1098; Bates v. Babcock, 95 Cat 479, 30 Pac.
605, 16 L. R. A. 745, 29 Am. St Rep. 133; Coward v. Clanton. 79
Cal. 23, 21 Pac. 359; Meylette v. Brennan, 20 Colo. 242, 38 Pac.
75; Meagher v. Reed, 14 Colo. 367, 24 Pac. 681, 9 L. R. A. 455;
Murley v. Ennis, 2 Colo. 300; BunneU v. Talntor's Adm*r, 4 Conn.
568; Van Housen v. Copeland, 180 IlL 74, 54 N. B. 169; Speyer v.
Desjardins, 144 lU. 641, 32 N. B. 283, 36 Am. St Rep. 473 ; AlUson
V. Perry, 130 IlL 9, 22 N. B. 492; Home v. Ingraham, 125 111. 198,
16 N. B. 868; Bopp v. Fox, 63 111. 540; Eaton v. Graham, 104 111.
App. 296; Frankenstein v. North, 79 lU. App. 669; Van Housen v.
Copeland, 79 111. App. 139; Hunt v. Elliott, 80 Ind. 245, 41 Am.
Rep. 794; Holmes v. McCray, 61 Ind. 358, 19 Am. Rep. 735; PEN-
6§ 27-28) BEQUIREHENTS OF THE CONTRACT 95
The result is explained in several ways: Partnership is a
relation resulting from a contract, and whether there is a
contract giving rise to such a relation is a question of fact,
which may be shown by oral evidence. The contract being
thus proved, the relation of partnership is established.
Oral evidence may then be used to show what constitutes
the assets of such partnership, and the interest of the part-
NYBAOKBR v. LEARY, 65 Iowa, 220, 21 N. W. 575, GUmore, Cas.
Partnership, 214 ; Richards v. GrinneU, 63 Iowa, 44, 18 N. W. 668,
50 Am. Rep. 727 ; Jones v. Davies, 60 Kan. 300, 56 Pac. 484, 72 Am.
St Rep. 354 ; Tenney v. Simpson, 37 Kan. 363, 15 Pac. 187 ; MARSH
▼. DAVIS, 33 Kan. 328, 6 Pac. 612, GUmore, Cas. Partnership, 133:
Simon V. Gulick, 50 S. W. 992, 104 Ky. Law Rep. 104; Garth v.
Dayls & Johnson, 120 Ky. 106, 85 S. W. 692, 117 Am. St Rep. 571 ;
CoUins V. Decker, 70 Me. 28 ; Petrle v. Torrent, 88 Mich. 43, 49 N.
W. 1076 ; Davis v. Gerber, 69 Mich. 246, 37 N. W. 281 ; Morgart v.
Smouse, 103 Md. 463, 63 Atl. 1070, 115 Am. St Rep. 367 ; Fall River
Whaling Co. v. Borden, 10 Cash. (Mass.) 458; Howard v. Priest 5
Mete. (Mass.) 582; Stitt v. Rat Portage Lumber Co., 98 Minn. 52,
107 N. W. 824 ; Fountain v. Menard, 53 Minn. 443, 55 N. W. 601. 39
Am. St Rep. 617; NeweU v. Cochran, 41 Minn. 374, 43 N. W. 84;
Sherwood v. St Paul & C. Ry. Co., 21 Minn. 127 ; Connell v. Mulli-
gan, 13 Smedes & M. (Miss.) 388; Hunter v. Whitehead, 42 Mo.
624; Springer v. Cabell, 10 Mo. 640; Hlrbour v. Reeding, 3 Mont
15; Personette ▼. Pryme, 34 N. J. Eq. 26; CHESTER v. DICKERSON,
54 N. Y. 1, 13 Am. Rep. 550, Gilmore, Cas. Partnership, 136 ; Fairchild
V. FalrchUd, 64 N. Y. 471 ; Smith v. Tarlton, 2 Barb. Ch. (N. Y.) 336 ;
WILLIAMS V. GILLIES, 75 N. Y. 197 ; Traphagen v. Burt 67 N. Y.
30 ; Falkner v. Hunt 73 N. C. 571 ; Flower v. Bamekoff, 20 Or. 132,
23 Pac. 370, 11 L. R. A. 149 ; Knott v. Knott, 6 Or. 142 ; Howell v.
Kelly, 149 Pa. 473, 24 Atl. 224; Davenport v. Buchanan, 6 S. D.
876, 61 N. W. 47 ; MurreU v. Mandelbaum, 85 Tex. 22, 19 S. W. 880.
34 Am. St Rep. 777; Miller v. Ferguson, 107 Va. 249, 57 S. E. 649,
122 Am. St Rep. 840; Henderson v. Hudson, 1 Munf. (Va.) 510;
BROOKE v. WASHINGTON, 8 Grat (Va.) 248, 56 Am. Dec. 142,
Gilmore, Cas. Partnership, 318; McCuUy v. McCully, 78 Va. 159;
Case V. Seger, 4 Wash. St 492, 30 Pac. 646; McElroy v. Swope, 47
Fed. 380; Wright v. Smith, 105 Fed. 841, 45 C. C. A. 87; Forster
▼. Hale, 6 Ves. Jr. 309; Dale v. Hamilton, 5 Hare, 369.
Ontra: Causler v. Wharton, 62 Ala. 358; Rowland v. Boozer,
10 Ala. 690 ; Roughton v. Rawlings, 88 Ga. 819, 16 S. E. 89 ; GOLD-
STEIN V. NATHAN, 158 111. 641, 42 N. E. 72; Gantt v. Gantt 6
La. Ann. 677; Pecot v. Armelin, 21 La. Ann. 6G7; Slocomb v. De
Lizardi, 21 La. Ann. 355, 99 Am. Dec. 740; Dunbar v. BuUard,
2 La. Ann. 810; Parsons v. Phelan, 134 Mass. 109; Raub v. Smith,
61 Mich. 543, 28 N. W. 076, 1 Am. St Rep. 619; Norton v. Brink,
96 FORMATION AND CLASSIFICATION (Ch. 2
ners therein/^ Whether this is anything more than an ap-
plication of the doctrine of implied or resulting trusts to
cases where partnership funds have been invested in land,
the legal title to which is held by one partner subject to a
75 Neb. 566. 110 N. W. 669, 7 L. R, A. (N. S.) 945, 121 Am, St Reii.
822 ; SchultJz v. Waldons, 60 N. J. Eq. 71, 47 Atl. 187 ; Clancy ▼. Graine^
17 N. C. 363; Everhart's Appeal, 106 Pa. 349; Lefevre's Appeal,
69 Pa. 122; McGormick's Appeal, 57 Pa. 54, 98 Am. Dec 191; Lang-
.ley V. Sanbom, 135 Wis. 178, 114 N. W. 787; Scheuer v. Cochem,
126 Wis. 209, 105 N. W. 573, 4 L. B. A. <N. S.) 427; McMUlen v.
Pratt, 89 Wis. 612, 62 N. W. 588; Bird v. Morrison, 12 Wis. 138;
Smith V. Burnham, 3 Sumn. 435, Fed. Gas. No. 13,019; Young ▼.
Wheeler (C. C.) 34 Fed. 98 ; McKinley ▼. Lloyd (O. C.) 128 Fed. 519.
Where the agreement is merely to share the profits and losses
arising from the use of land, owned either by one of the parties or
by both, the statute is not applicable. MoClintock v. Thweatt, 71
Ark. 323, 73 S. W. 1093 ; Von Trotha v. Bamberger, 15 Colo. 1, 24
Pac. 883; Kilbourn v. Latta, 5 Mackey (D. C.) 304, 60 Am. Rep.
373 ; PENNYBACKER v. LEARY, 65 Iowa, 220, 21 N. W. 575, Gil-
more, Gas. Partnership, 214; Davis v. Gerber, 69 Mich. 246, 37 N.
W. 281; Newell v. Gochran, 41 Minn. 374, 48 N. W. 84; Pitman t.
Hodge, 67 N. H. 101, 36 Atl. 605; Babcock v. Read, 99 N. Y. 609, 1
N. B. 141 ; Falkner v. Hunt, 73 N. G. 571 ; Flower v. Bamekoff, 20
Or. 132, 25 Pac. 370, 11 L. R. A. 149; Everhart's Appeal, 106 Pa.
349 ; Davenport v. Buchanan, 6 S. D. 376, 61 N. W. 47 ; BRUGE v.
HASTINGS, 41 Vt 380, 98 Am. Dec. 592, Gilmore, Gas. Partner-
ship, 71; Case v. Seger, 4 Wash. St 492, 30 Pac. 646; Treat y.
HUes, 68 Wis. 344, 32 N. W. 517, 60 Am. Rep. 858. See "Frauds,
Statute ofr Dec, Dig. {Key No,) S 7^; Cent. Dig, H 1S5-1S9,
81 "The question of partnership must be tried as a fact, and as if
there was an issue upon it If by facts and circumstances it is
established as a fact that these persons were partners in the col-
liery, in which land was necessary to carry on the trade, the lease
goes as an incident The partnership being established by evidence
upon which a partnership may be found, the premises necessary for
the purposes of that partnership are by operation of law held for
the purposes of that partnership." Forster v. Hale, 5 Ves. 309.
"An agreement to form a partnership for the purpose of buying
and selling land may be proved by parol ; It may thei\ be shown by
parol that certain land has been bought for the purpose of the part-
nership, and consequently that the plaintiff is entitled to the profits
obtained by its resale." Dale v. Hamilton, 6 Hare, 369.
The leading case opposed to Dale v. Hamilton, supra, and Forster
y. Hale, supra, and antedating the former, is Smith v. Burnham, 3
Sumn. 435, Fed. Gas. No. 13,019. See "Partnership,*' Dec, Dig. {Key
No,) §§ ^5-50; Cent, Dig. {§ 64-74; "Frauds. Statute of;* Deo. Dig.
(Key No,) §§ U, 49, 56; Cent. Dig. §§ 66, 74, 136-1S8.
g§ 27-28) BBQUIRBMENTS OF TRB CONTRACT 97
trust in favor of his copartners, is not at all satisfactorily
discussed by the authorities. Apparently the rule has a wider
significance and is applied to cases not falling within the
doctrine of trusts.'*
""The result of the cases we have been considering upon this
subject of the effect of a parol partnership upon the title to lands
acquired and used for partnership purposes is that, the fact of
partnership being proved, whether by articles or by parol, real es-
tate acquired and used for the partnership purposes becomes, as
between the partners, and for aU purposes of adjustment of claims
against the firm or its members, partnership assets; that in cases
where the title to the land is in the partners as joint t^iants the
right of survivorship incident to that tenancy does not exist; and
that where the title is in one, or some number less than the whole,
of the partners, it is for the purposes above named devested, and
becomes vested in all the partners by partnership title; and this
whether the land was purchased with the money of the firm (creating
a resulting trust to the firm) or with the money of the partner tak-
ing the title; and that it is not material whether the partnership
was already established and engaged in its business when the land
was acquired and brought into the stock, or whether it was es-
tablished and the land acquired and put in contemporaneously, or
whether the partnership was established for the purposes of some
other trade or business, or for the special purpose of dealing in
and making profit out of the very land itself which is in question.
The whole doctrine (unless it can stand as an application of the law
of implied trusts to cases of land purchased and held by one partner
in derogation of his fiduciary obligation to the other) must be re-
garded as a bald exception to the rule that no oral agreement can be
made available directly or indirectly to effect or compel the transfer
of any interest in land. It has been iseverely criticised, and strenu-
ous efforts have been made to stop it half way by limiting it to
cases of a partnership already formed for and engaged in business,
as distinguished from a partnership formed and the land acquired in
pursuance of one and the same verbal agreement, or to cases of a
partnership for general purposes to which the holding and use of the
land was incidental, as distinguished from a partnership formed for
the special purpose of dealing in the land. On principle, the doctrine
of Forster v. Hale, that, on parol proof of a partnership existing and
doing business, land used by the firm for the purpose of that business
is assets of the firm, however the paper title may stand, seems to
admit of no such limitations. And the cases which assert them do
not deal at all, or do not appear to deal satisfactorily, with that
question." Browne, Stat Frauds (5th Ed.) f 261a. See **Truats*' Dec.
Dig. (Key No,) i 84; Cent. Dig. fi 127; "Partnerihip;' Cent. Dig.
%10S.
GiL.PAKr.^7
98 rOBMATION AND CLASSIFICATION (Gb. 2
Where resulting trusts are not prohibited by statute, oral
evidence may be used to show that lands acquired with
partnership funds after the formation of the firm are held
subject to firm purposes. Many of the cases cited in the
footnotes involve the application of the doctrine of result-
ing trusts to after-acquired real estate with partnership
funds. Again, it is said that real estate is treated and ad-
ministered in equity as personal property for all the pur-
poses of the partnership. A court of equity, having full ju-
risdiction of all cases between partners touching the part-
nership property, will inquire into, take an account of, and
administer all the partnership property, whether it be real
or personal, and in such cases will not allow a partner to
commit a fraud or breach of trust upon the copartner by
taking advantage of the statute.*'
SAME— SUBJECT-MATTER
29. The subject-matter of a contract of partnership invari-
ably involves the prosecution of a business for
profit.
Gain the Object of Partnership
It cannot be said that the creation of a partnership is the
subject-matter of a contract of partnership, for the partner-
ship relation is only the result of the agreement to prose-
cute a business jointly, and to share profits and losses. The
real subject-matter is the purpose which the parties have
in mind when they contract together, and that invariably
•« CHESTER et al. v. DICKERSON, 64 N. T. 1, 13 Am. Rep. 650,
Gilmore, Gas. PartDership, 136; Flower v. Bamekoff, 20 Or. 132»
25 Pac. 370, 11 L. R. A. 149; Essex v. Essex, 20 Bear. 442, 449;
Selkrig y. Davies, 2 Dow. P. G. 230 ; Grawshay y. Maule, 1 Swanst
495. MARSH v. DAVIS, 33 Kan. 326, 6 Pac 612, Gilmore, Gas. Part-
nership, 133; Richards y. Grinnell, 63 Iowa, 44, 18 N. W. 668, 60
Am. Rep. 727 ; Bates y. Baboock, 95 Gal. 479, 30 Pac. 605, 16 L. R.
A. 745, 29 Am. St Rep. 133 ; Speyer y. Desjardlns, 144 111. 641, 32
N. E. 283, 36 Am. St. Rep. 473. See **Trust8;' Dec. Dig. {Key No.)
i 84; Cent. Dig. S 127; "Partnership,** Dec Dig. (Key No.) S 68;
Cent. Dig. §S 108, 52S; ^'Frauds, Statute of," Dec. Dig. (Key No.) f
16; Cent. Dig. f§ 1S5'1$9.
8 29) BEQUIREMENTS OF THE CONTRAOT 99
involved the idea of a business for profit. The contempla-
tion of profits inheres in the very definition of a partner-
ship.**
Societies Not Having Gain for Their Object
Societies and clubs, the object of which is not to share
profits, are not partnerships ; nor are their members, as
such, liable for each others' acts.** If liabilities are to be
fastened on any of their members, it must be by reason of
the acts of those members themselves,** or by reason of
the acts of their agents ; and the agency must be made out
by the person who relies upon it, for none is implied by the
mere fact of association.**
What Business Enterprises may be the Subject of a Partner--
ship Agreement
While partnerships originally related only to trade and
commerce, they may extend to all callings and professions.
Any enterprise proper for an individual to engage in for
the purpose of enjoying the profits of it may as properly be
pursued by a partnership for a like purpose, whether the oc-
cupation be mining, farming, or the practice of law or medi-
cine. At one time the impression prevailed that a partner-
ship could not validly be formed for the purpose of dealing
in real estate ; but, under the modem decisions, real estate
forms no exception to the rule stated above.**
•* Laf ond v. Deems, 81 N. T. 507 ; McGabe v. Goodfellow, 133 N.
Y. 89, 30 N. B. 728, 17 L. R. A. 204 ; Danbury Comet Band t. Bean,
64 N. H. 524; State ex rel. Hadley v. Kansas City Live Stock
Bxch., 211 Mo. 181, 109 S. W. 675, 124 Am. SL Rep. 776.
Farmers' telephone company, organized merely for convenience of
Its members, is not a partnership. Melnhart v. Draper, 133 Mo. App.
60. 112 S. W. 709. See ^'Partnership," Dec. Dig. {Key No.) H i» 4-
IS; Cent. Dig. SS i5-28.
8 s Teed ▼. Parsons, 202 IlL 455, 66 N. E. 1044 (religions society);
Reg. V. Robson, 16 Q. B. Dlv. 137 (Young Men*s Christian Associa-
tion). See chapter I, § 15, p. 44, "Organizations Not for Profit*' See
•^Partnership;* Dec. Dig. (Key No.) SS i. 9-lS; Cent. Dig. SS lS-28.
••As In Cross v. Williams, 7 Hurl. & N. 675, where the command-
ant of a rifle corps was held liable for uniforms he had ordered.
See •'Associations,'* Dec. Dig. (Key No.) S IS; Cent. Dig. SS 26-28;
•'Clubs;* Dec. Dig. S ii; Cent. Dig. S 7.
«T See ante, chapter I, S ^» P- 44. .
•8 CHESTER Y. DICKERSON, 64 N. Y. 1, 13 Am. Rep. 650, GU-
100 rOBMATION AND CLASSIFICATION (Qh. 2
SAME— LEGALITY OP OBJECT
80. A partnership cannot be formed to carry on a business
which is unlawful or opposed to public policy.
What Partnerships are Illegal
In order that a partnership may result from a contract,
the contract must be legal. Illegality, however, will not be
presumed, but must plainly appear to enter into the es-
sence of the contract. An agreement is illegal where its
performance involves either (1) the violation of a 'positive
law, or (2) where it is opposed to public policy.
The following are illustrations of partnerships illegal be-
cause involving the violation of positive law : Partnerships
formed for the purpose of deriving profit from a criminal
offense, such as smuggling, gambling, robbery, theft, and
the like.'* So, where a statute prohibits unqualified per-
sons from carrying on certain trades or business, a part-
nership between unqualified persons for the purpose of
carrying on such a business would be illegal. But the mere
fact that one or more members of such a partnership are
disqualified will not render the partnership illegal, if the
business is in fact carried on by persons duly qualified.
There is no presumption that the disqualified one was to
perform any part of the duties for which he was disquali-
fied.*»
more, Gas. Partnership, 136, and cases there cited ; Flower t. Bame-
koflf, 20 Or. 187. 25 P. 370, 11 L. R. A. 149. See **Partner$hip,'* Deo.
Dig. {Key No.) S 15; Cent. Dig. § «; **Frauds, Statute of,*' Dec. Dig.
(Key No.) S 76; Cent. Dig. K ISS-ISB.
«» CENTRAL TRUST & SAFE DEPOSIT 00. T. RBSPASS, 112
Ky. 606, 66 S. W. 421, 66 L. R. A. 479, 99 Am. St Rep. 317, Gilmore,
Cas. Partnership, 139; Smith v. Richmond, 114 Ky. 308, 70 S. W. 846,
102 Am. St Rep. 283 ; Graft v. McGonoughy, 79 111. 346, 22 Am. R^.
171 ; Davis v. Gelhaus, 44 Ohio St. 69, 4 N. E. 593. A partnership
in breeding, training, and racing horses for purses is legal. CEN-
TRAL TRUST & SAFE DEPOSIT GO. ▼. RESPASS, snpra. See
"•PartnersMp;* Deo. Dig. (Key No.) § 26; Cent. Dig. S 12; "Gaming,''
Dec. Dig. {Key No.) S 17; Cent. Dig. { SS.
•0 Williams y: Jones, 6 Bam. k C. 108; Harland y. LUienthai,
63 N. T. 438. Where a statute prohibits a lawyer or a physician not
§ 80) REQUIBEMENT8 OF THE COI^IUGT 101
A partnership may also be illegal ujpoa" the general
ground that it is formed for a purpose forbidrleir by the cur-
rent notions of morality or public policy. A 'pWf tnership,
for examplfe, formed for the purpose of deriving profit from
the sale of obscene prints, or for the procurement of 'ftiar-
riages, or of public offices of trust, would be undoltfot'^dly
illegal.*^ We have already seen that partnerships bet^eca
citizens of one country and alien enemies are illegal.*^ ^o,
also, are partnerships between persons resident in this
country for the purpose of trading with an enemy's jcoun-
try.** But a partnership in this country for running the
blockade established by one belligerent nation in the ports
of another is not illegal ; for, subject to the risk of capture,
a neutral may lawfully trade with a belligerent.** Public
policy does not permit of a partnership in a public office.**
licensed from practicing, a partnership between him and a licensed
practitioner is not Illegal, if his share of the profits is not in consid-
eration of ills practicing. Scott t. Miller, Johns. Bng. Oh. 220. But
a sheriff who is forbidden to buy county scrip cannot do It indirectly
by forming a partnership for that purpose. Read y. Smith, 60 Tex.
379. See "Partnership," Dec, Dig. (Key No.) I 16; ''Attorney and
Client;* Deo. Dig. (Key No.) f SO; Cent Dig. \ 4S-
•1 Sterry t. Clifton, 9 C. B. 110 (sale of offices) ; Pare t. Cflegg, 29
Beav. 589, and Thornton v. Haw, 8 Jur. (N. S.) 663 (associations for
promulgating irreligious opinions). Bee "Partnership^' Deo. Dig.
{Key Vo.) § 26; Cent. Dig. f 12.
93 See chapter II, i 24, "Aliens." '
0s Generally, as to effect of war, see Prize Cases, 2 Black, 635,
17 Jj. Ed. 459; The Cheshire, 8 Wall. 231, 18 L. Ed. 175; also Evans
V. Richardson, 3 Mer. 469 ; Snell v. Dwlght, 120 Mass. 9 ; Dunham ▼;
Presby. Id. 285. See "Partnership,** Dec. Dig. {Key No.) H 26, 268;
Cent. Dig. H i«, 612.
o« Ex parte Chayasse, 4 De Gex, J. & 8. 655; The Helen, Ij. R. 1
Adm. & Ecc. 1. See "Partnership,** Dec Dig. (Key No.) \ 26; Cent.
Dig. S 12; "Contracts,** Dec. Dig. (Key No.) \ 166; Cent. Dig. H
662r-6S0.
»B Jons T. Perchard, 2 Esp. 507 (sheriff) ; Gaston y. Drake, 14 Nev.
175, 33 Am. Rep. 548 (prosecuting attorney); Forsyth* v. Woods, 11
Wall. 484, 20 L. Ed. 207 ; Seely's Adm'r y. Beck, 42 Mo. 143 ; Bowen
T. Richardson, 133 Mass. 293 (executor or administrator) ; Wollcott
y. Gibson, 61 111. 69 ; Hobbs y. McLean, 117 U. S. 567, 6 Sup. Ct 870,
29 L. Ed. 940; Warner y. Griswold, 8 Wend. (N. Y.) 665; Gould y.
Kendall, 15 Neb. 549, 19 N. W. 483. On partnerships for the purpose
of bidding on public lands, and stifling competition, see Piatt >.
102 roaitf ATioN and classification (Gh. 2
, • • •
• • *
A combinati^a* a£ manufacturers and dealers, formed sole-
ly to enhaq<;er.thc price of articles manufactured and dealt
in, cannotj^ud in the name adopted by it as a partnership,
for such^i 'partnership is illegal.**
•^ •
•••
Santf&rBfFect of Illegality
vThp law will not interfere between the members of an
'illegal partnership to compel an accounting or settlement of
.•/••.thfe partnership affairs.*' It leaves the parties where it
.•/••.•!• fends them, and will not enforce either a division of the
profits or contribution for losses. Even if an agreement
for an illegal partnership has been partly performed, the
law will not enforce it.** In order, however, that illegality
may be a defense, it must affect the contract on which the
plaintiff is compelled to rely in order to make out his right.
He may recover, if the obligation in which he sues is sup-
Oliver, 2 McLean, 267, Fed. Cas. No. 11,115; King y. Wlnants, 71
N. C. 469, 17 Am. Rep. 11 ; Hunter v. Pfeiffer, 108 Ind. 197, 9 N. E.
124. See ''Partnership;* Dec, Dig. {Key No,) f 26; Cent, Dig. I 12;
''Contracts,*' Dec. Dig. (Key No.) §| 119, 124; Cent. Dig. H 581, 65Jh
657.
99 Jackson y. Akron Brick Ass'n, 53 Ohio St. 303, 41 N. E. 257, 35
L. R. A. 287, 63 Am. St Rep. 638. See "Partnership," Dec. Dig.
{Key No.) S 26; Cent. Dig. S 12.
97 CENTRAL TRUST & SAFE DEPOSIT CO. V. RESPASS, 112
Ky. 606, 66 S. W. 421, 56 L. R. A. 479. 99 Am. St Rep. 317, Gllmore.
Cas. Partnership, 139. See note, 99 Am. St Rep. 326^ "AccounttDg by
Illegal Partnership." See, also, Craft v. McConoughy, 79 111. 346,
22 Am. Rep. 171; Snell v. D wight, 120 Mass. 9; Fairbank v. Leary,
40 Wis. 637; Planters' Bank v. Union Bank, 16 Wall. 483, 21 h.
Ed. 473. If part of the business only is Ulegal, and is separable,
the partnership is not wholly void, and the court may settle the legal
part Wishek v. Hammond, 10 N. D. 72, 84 N. W. 587 ; Anderson v.
PoweU, 44 Iowa, 20. See "Equity,** Dec. Dig. {Key No.) |* 25; Cent.
Dig. i 79; "Gaming,** Dec. Dig. {Key No.) i 17; Cent. Dig. f SS;
"Contracts,** Cent. Dig. I 695.
98 Ewing V. Osbaldiston, 2 Mylne & C. 53.
No action lies to recover a premium agreed to be paid by defend-
ant in consideration of being admitted to an illegal partnership.
WilUams v. Jones, 5 Bam. & C. 108. Accounting not allowed of lot-
tery business. Smith v. Richmond, 114 Ey. 303, 70 S. W. 846, 102
Am. St Rep. 283. See "Partnership,** Dec: Dig. {Key No.) I 50i;
Cent. Dig. §{ 701, 702; "Contracts,** Dec. Dig, {Key No.) i 1S8;
"Equity,** Dec. Dig. {Key No.) I 25; Cent, Dig, f 80.
I
§ 31) CLA8SIFIOATION OF PABTNERSHIPS 103
ported by an independent consideration, although indirectly-
connected with the illegal partnership.** In short, the
cases may be summarized as holding that no accounting
will be granted in the case of an illegal partnership, but
that, if the origin of the fund is foreign to the controversy,
the property being at present invested in a legal business,
accounting may be had, and that if the parties to an illegal
partnership waive the illegality, and themselves state their
Accounts, no one else may object to the accounting.*
CLASSIFICATION OF PARTNERSHIPS
31. Partnerships may be divided, in respect to the nature
of the association, into
(a) Ordinary partnerships (p. 104) •
(b) Limited partnerships (p. 105) •
(c) Joint-stock companies (p. 106).
(d) Subpartnerships (p. 106).
(e) Mining partnerships (p. 107).
09 *'Two men enter into a conspiracy to rob on the highway, and
they do rob, and while one Is holding the traveler the other rifles
his pocket of $1,000, and then refuses to divide, and the other files a
bill to settle up the partnership, when they go into all the wicked
details of the conspiracy and the rencounter and the treachery. Will
a court of justice hear them? No case can be found where a court
has allowed itself to be so abased. Now If the robbers had taken
the $1,000 and invested it in some legitimate business as partners,
and had afterwards sought the aid of the court to settle up that
legitimate business, the court would not have gone back to inquire
how they first got the money; that would have been a past trans-
action, not necessary to be mentioned in the settlement of the
new business." King v. Winants, 71 N. C. 473, 17 Am. St Rep. 11,
See, also, Armstrong v. American Exch. Nat Bank, 150 U. S. 433, 10
Sup. Ct 450, 33 L. Ed. 747 ; Woodworth v. Bennett, 43 N. T. 273, 3
Am. Rep. 706. See ''Contracts,*' Dec. Dig, (Key No,) K 199, HO;
Cent. Dig. §| 699, 1 19-121.
1 Woodworth v. Bennett 43 N. Y. 273, 3 Am. Rep. 706; CENTRAL
TRUST & SAFE DEPOSIT CO v. RESPASS, 112 Ky. 606, 66 S. W.
421, 96 li. R. A. 479, 90 Am. St Rep. 317, Gllmore, Cas. Partnership,
139. See '^Contracts;' Dec. Dig. {Key No.) K 1S9, HO; Cent. Dig. §§
e9S, 71S-t21; ^'Gaming;* Dec. Dig. iKey No.) t 17; Cent. Dig. i S3.
104 rOBUATION AND CLABSiriCATIOM (Ch. 2
SAME— ORDINARY PARTNERSHIPS
32. Ordinary partnerships may be divided, in respect to
their extent, into universal, general, and special
or particular, partnerships^
Ordinary Partnerships — Universal, General, and Special or
Particular
A universal partnership is one where the parties agree to
bring into the firm all of their property, of whatever de-
scription, and to employ all their skill, labor, and services
in the business of that partnership for their mutual bene-
fit* While theoretically possible, such partnerships are
practically never found/ A general partnership is one
where the partners agree to join in all transactions of a par^
ticular class of more or less permanency, such as a part-
nership in banking, merchandising, or contracting. A spe-
cial partnership, on the other hand, contemplates associa-
:ion in only a single venture.*
* See Story, Partnership, p. 71.
• But, as approaching them, see Gray t. Palmer, 9 Oal. 616;
vlasely t. Separatist's Society of Zoar, 13 Ohio St 144; Qoesele t.
Bimeler, 14 How. 589, 14 L. Ed. 554; Lyman y. Lyman, 2 Paine,
11. Fed. Gas. No. 8,628; Houston t. Stanton, 11 Ala. 412; Baker t.
Na ^htrieb, 19 How. 126, 15 L. Ed. 528 ; Rice t. Barnard, 20 Vt 479,
50 Am. Dec 54; Hamilton v. Halpin, 68 Miss. 99, 8 South. 739;
United States Bank y. Binney, 5 Mason, 176, 183, Fed. Gas. No. 16,-
791. See, also. Fuller ▼. Ferguson, 26 Cal. 546, for the relation anal-
ogous to universal partnerslilps which the Mexican law in force in
Calif oinia before its cession created between husband and wife. See
"Partnerthip;' Dec. Diff, (Key No,) U 1-iS, 65; Cent, Dig. H 1-60,
« Ther« is much confusion in the tlse of the terms, and there la no
particular advantage in such classification. The scope of a partner-
ship business and the rights and liabilities of the participants must
be determined by the facts of each particular case Cf. Mechem,
Partn. Bq. 15; Bates, Partn. Eq. 12; T. Pars. Partn. Eq. 40; Story,
Partn. Eq. 70; Bates, Tim. Partn. Eq. 1; Shumaker, Partn. Eq.
4^43.
I 84) OL48SIFIGATION OF PARTNER8HLP8 105
SAME— LIMITED PARTNERSHIPS
S3. Limited partnerships are those in which the liabilities
of some of the partners are limited to specified
amounts*
Limited partnerships exist solely by virtue of statutes,
which allow the liabilities of some of the partners to bear
losses to be restricted to a defined amount- The distin-
guishing feature is the absence of the common-law liability
of each partner for the full amount of the partnership
debts.*
SAME— JOINT-STOCK COMPANIES
84. A joint-stock company is a partnership with a capital
divided into transferable shares.
Where, in America, persons form corporations in exten-
sive business enterprises in order to avoid their individual
liability for all the debts of the association, in England it
is more common to resort to the formation of a joint-stock
company. The business management of these companies
is committed to a board of directors, the capital is divided
into shares, and the shares are freely assignable, as in cor-
porations. The provisions of the joint-stock companies'
acts, and the memorandum and articles of association, con-
trol. When these are silent, the members are individually
liable for all the debts of the company, as are the members
of an ordinary partnership.*
The absence of the delectus personariim, the limited lia-
bility, and the assignability of the shares are the distin-
guishing features of these associations.
* See poet, chapter XI, p. 692.
• 25 & 26 Vict c. 89; 80 & 31 Vict c. 181. See, also. Laws N. T.
1881, a 699 ; Shumaker, Partn. 11, 280.
106 FORMATION AND CLASSIFICATION (Cb. 2
SAME— SUBPARTNERSHIPS
35. A contract between a partner and a third person to
share the former's proportion of the profits does
not make such third person a member of the part-
nership, but creates a subpartnership, provided the
other requisites of a partnership agreement are
present.
We have already seen that the principle of delectus per-
sonarum does not apply to a subpartnership, for this is
merely a partnership within the main partnership, of which
it is independent/ "I take it," says Lord Eldon, "to have
long since been established that a man may become partner
with A., where A. and B. are partners, and yet not be a
member of that partnership which exists between A. and
B." • A. may ag^ee to divide the profits of his partnership
with B. with the stranger, but the latter thereby acquires
no standing whatever in the original firm, and is not enti-
tled to any share of its profits as such. With A. alone is
he privity.*
T See ante, chapter II, § 22, p. 74; BURNETT v. SNYDER, 70
N, Y. 344, Gilmore, Cas. Partnership, 117; Setzer v. Beale, 19 W.
Va. 274. Bee *' Partnership,'* Deo, Dig. (Key No,) S§ 18, 2S, 29; Cent.
Dig. IS h 9, SS, 475.
8 Ex parte Barrow, 2 Rose, 252, 254; Nlrdlinger y. Bemhelmer,
133 N. Y. 45, 30 N. E. 561 ; Morrison y. Dickey, 122 Oa. 353, 60 S. E.
175, 60 L. R. A. 87 (1905). See "^Partnership," Deo. Dig. (Key No.) |{
18, 2S, 29; Cent. Dig. {{ i, 9, SS.
• Note that since the decision of COX y. HICKMAN, 8 H. L. Oas.
268, Gilmore, Cas. Partnership, 31, the participation of the sub-
partner In the profits of the principal firm does not render him liable
to its creditors, as he would haye been under WAUGH y. CARVER,
2 H. BL 235, Gilmore, Cas. Partnership, 19. See chapter I, §{ 5, 6, 7.
Bee "Partnership;' Deo. Dig. iKey No.) H IS, 23, SO; Cent. Dig. f{
4, ft^S-W.
§§ 37-^8) CLA8SIFIGATION OF PARTNERSHIPS 107
SAME— MINING PARTNERSHIPS
36. Where tenants in common of a mine work it together,
but divide the profits in proportion to their inter-
ests, they are mining partners.
Mining partnerships are a cross between tenancies in
common and partnerships proper.** Their chief peculiarity
is the absence of the delectus personarum, the essential ele-
ment of a strict partnership. ' Moreover, the shares of a
mining partnership may be assigned ad libitum. The
death of a partner, or his retiring from the firm, does not
dissolve the partnership.** However, there is nothing to
prevent the partners in a mining operation from forming a
strict partnership, if they wish it, and when it appears that
the confidential relation — the delectus personae — is estab-
lished, and the firm is not subject to the intrusion of other
partners at will, the ordinary incidents of partnership at-
tach.**
SAME— TRADING AND NONTRADING PARTNER-
SHIPS
87. Partnerships are also divided, in respect to their busi-
ness, into trading and nontrading.
38. Trading partnerships are those in the conduct of whose
business there is contemplated the periodical or
continuous buying and sdling of mercantile com«
modities.
10 Nolan ▼. Lovelock, 1 Mont 224. See '*Mine$ and Minerala,**
Dee. Dig. (Key No.) H OS-lOO; Cent. Dig. St £2^-225.
11 Katm V. Central Smelting Oo. (1880) 102 U. S. 641, 26 L. Ed.
266, Gilmore, Cas. Partnership, 120, note; Blackmarr v. Williamson,
57 W. Va. 249, 50 S. B. 254. See "PartnersMp,** Dec. Dig. (Keu
No.) It 96-100; Cent. Dig. fit 222-225.
IS Decker y. Howell, 42 Cal. 636. See "Mines and Minerals,** Deo.
Dig. (Key No.) fi 97; Cent. Dig. i 222.
108 FORMATION AND CLASSIFICATION (Ch. 2
Trading and Nontrading Partnerships
Partnerships are usually classified, on the basis of the
nature of the business, into trading or commercial partner-
ships and nontrading partnerships. The significance of the
classification lies in the fact that the scope of each partner's
power to act as agent for his copartners is usually much
broader in the former class than in the latter. For exam-
ple, in a trading firm each partner has implied power to
borrow money and issue therefor negotiable paper^ while
in a nontrading firm no such implied power exists.*' The
classification is quite generally recognized by the courts
and is of importance in ascertaining the scope of a partner's
power.**
Same — Trading and Nontrading Firms Defined
A trading firm is one in the conduct of whose business
there is contemplated the periodical or continuous buying
and selling of mercantile commodities. "The test of the
character of a partnership is buying and selling. If it buys
and sells, it is a commercial or trading; if it does not buy
or sell, it is one of employment or occupation." *• It is a
trading firm if the conduct of its business "so involves buy-
ing or selling, whether incidentally or otherwise, that it
naturally comprehends the employment of capital, credit,
and the usual instrumentalities of trade, and frequent con-
tact with the commercial world in dealings which in their
itPE2ASE T. COLE, 53 Conn. 53, 22 Atl. 681, 55 Am. Rep. 53,
Gllmore, Gas. Partnership, 372; Smith y. Sloan, 37 Wis. 285, 19
Am. Rep. 757 ; HEDLEY y. BAINBRIDGE, 3 Q. D. 3ie. 2 O. & D.
483, 11 Ix J. Q. B. 293, Oilmore, Gas. Partnership, 371. For further
discussion, see chapter V, t 98, p. 288, "Powers of Partners.** See
'^Partnership," Deo. Dig, {Key yo.) i US; Cent, Dig, i m..
i« Marsh, Merwln & Lemon y. Wheeler, 77 Gonn. 449, 57 Atl. 410,
107 Am. St Rep. 40; Lee v. First Nat Bank of Ft Scott, 45 Kan.
8. 26 Pac. 196. 11 L. R. A. 238; WINSHIP y. BANK OF UNITED
STATES, 9 Pet 629, 561, 8 L. Ed. 216, Gilmore, Gas. Partnership,
356. But see, contra, Hoskinson y. Eliot 62 Pa. 393. See ^'Pariner-
9Mpr Dec Dig. (Key No,) i 146; Cent, Dig, H 242-255,
IB Lee y. First Nat Bank of Ft Scott 45 Kan. 8, 25 Pac. 196,
11 L. B. A. 238 ; Kimbro y. Bullitt 22 How. 256, 268, 16 L. Ed. 318.
See '^Partnership;' Deo, Dig. {Key No,) f§ 125-164; Cent, Dig, U 190-
900,
§§87-88) OLA88I11GATION or PARTMEB8HZF8 109
character and incidents are like those of traders gener-
ally," "
While the distinction between trading and nontrading
firms is recognized, it is not always easy to draw the line.
The courts have judicially declared certain partnerships to
be in trade/^ and others not to be in trade.^* Doubtful
cases are to be dealt with according to their facts, and the
question of the extent of the partner's power should be sub-
mitted to the jury. "While, on the authorities, it may not
be very difficult, in many cases, to hold, as a matter of law,
that the scope of the business carried on by a certain firm
renders it a trading partnership, with a power or authority
i« Marsh, Merwin & Lemon ▼. Wheeler, 77 Oonn. 449, 454, 59 AtL
410, 412, 107 Am. St Rep. 40. In PHILLIPS v. STANZELL (Tex.
Civ. App.) 28 S. W. 900, the court quotes with approval the following
definition from Bates, Partn. | 827 : '*If the partnership contemplates
the periodical or continuous or frequent purchasing, not as an in-
cident to an occupation, but for the purpose of selling again the
thing purctiased, either in its original or manufactured state, it Is
a trading partnership; otherwise, it is not" See '* Partnership^**
Dec. Dig, (Key No.) §| 125-164; Cent. Dig. K 190-900.
iTQenerally, all partnerships engaged in carrying on mercantile
business in the ordinary way have been held to be in trade. Smith
T. Collins, 116 Mass. 388; Wagner v. Simmons, 61 Ala. 143; Gano
V. Samuel, 14 Ohio, 592; Dow v. Moore, 47 N. H. 419; Walsh v.
Lennon, 98 III. 27, 38 Am. Rep. 75.
Likewise firms manufacturing commodities for sale are in trade.
WINSHIP V. BANK OF UNITED STATES. 5 Pet 529, 8 L. Ed.
216; Gilmore, Gas. Partnership, 8^6; Holt v. Simmons, 16 Mo. App.
97; Oowand v. Pulley, 11 La. Ann. 1; Hoskinson v. Eliot, 62 Pa.
393. See ^^Partnership" Deo. Dig. {Key No.) K 125-164; Cent. Dig.
II 190-SOO.
!• Smith V. Sloan, 87 Wis. 285, 19 Am. Rep. 757 (attorneys) ; Third
Nat Bank v. Snyder, 10 Mo. App. 211 (brokers) ; Kimbro ▼. Bullitt,
22 How. 296, 16 L. Ed. 313 (farmers and planters) ; Levi y. Latham,
15 Neb. 509, 19 N. W. 460, 48 Am. Rep. 361 (livery men) ; Scheie v.
Wagner, 163 Ind. 20, 71 N. E. 127 (money lenders and Insurance
agents); Horn v. Newton Gity Bank, 32 Kern. 518, 4 Pac. 1022
(operators of threshing machines); PEASE v. GOLE, 53 Gonn. 53,
22 Atl. 681, 55 Am. Rep. 53, GUmore, Gas. Partnership, 372 (theater
managers) ; Deardorf *s Adm'r v. Thacher, 78 Mo. 128, 47 Am
Rep. 95 (real estate agents); Third Nat Bank of Sedalia v. D. A.
Faults & Go., 115 Mo. App. 42, 90 S. W. 755 (contractors carrying
government mail). See *' Partnership,'* Dec. Dig. {Key No.) |{ 125-
164; Cent. Dig. U 190-900.
110 FOBMATION AND CLASSIFICATION (Ch. 2
■
resting in each partner to borrow money for the use of the
firm, and to execute and deliver negotiable paper therefor,
or to hold, as a matter of law, that the firm business con-
stitutes it nothing but a nontrading partnership, in which
the partners have, prima facie, no authority to borrow
money, or to bind the concern by a promissory note, there
are many partnerships concerning which no rule of law as
to the implied powers of the partners with respect to firm
notes can be applied with safety. In these cases the au-
thority of either partner in this respect must be determined
is a question of fact, depending upon circumstances pecu-
liar to each. Certain it is, from the nature of the business
conducted by defendant firm, that the court below could
not hold, as a matter of law, that it was a trading partner-
ship, and hence that each partner had implied authority to
borrow money for its use, and to execute and deliver a firm
note for the same." *•
CLASSIFICATION OF PARTNERS
39. Partners have been divided into various dasseSt tuch
as:
(a) General.
(b) SpeciaL
(c) Ostensible.
(d) Secret.
(e) Silent.
(f) Dormant.
(g) NoxninaL
General and Special Partners
A general partner being one whose liability for partner-
ship debts is unlimited, the term has no significance as ap-
plied to members of ordinary partnerships, who are neces-
sarily all general partners. It is used merely to distinguish
the one or more members of a limited partnership who are
i» VETSOH ▼. NBISS et al., 06 Minn. 459, 69 N. W. 815, Gllmore,
Gas. Partnership, 879. Bee ^'Partnership,** Dec Dig. {Key No.) i 218.
§ 89) CLASSIFICATION OF PARTNEBS 111
not special partners; that is, whose liability is not limited
to a defined amount, as is that of the special partners. In
a limited partnership there must always be one or more
general partners, as well as one or more special partners.'*
Ostensible Partners
An ostensible . partner is one whose connection with the
firm is openly avowed, either by means of the firm- sign or
otherwise.
Secret Partners
A secret partner, on the other hand, is one whose con-
nection with the firm is concealed, or at least is not an«
nounced or made known to the public.**
Silent Partners
A silent partner, while having his right to a share of the
firm profits, has no voice in the management of the part-
nership business. This restriction placed upon his power
by the mutual agreement of the partners will not, how-
ever, be allowed to work to the detriment of a third person,
deeming himself, upon good grounds of belief, in dealing
with a partner, to be dealing with the firm.'*
Dormant Partners
A dormant partner combines in himself the characteris-
tics of both the secret and the silent partner. Although
his identity may be a secret, and he may not transact any
of the business of the firm, he still maintains the relation of
principal to his agent, the fellow partner. This distin-
guishes him from the mere sharer of profits, who, since Cox
V. Hickman, has had no partnership liability.*' Once the
secret of his existence is disclosed, the dormant partner,
like the undisclosed principal in the law of agency, is held
so See post, chapter XI, pi 592, '^Limited Partnerships.**
ai WlUard v. BuUen, 41 Or. 26, 67 Pac 924, 68 Pac. 422. See ^'Part-
nership," Dec. Dig. (Key No.) | S9; Cent. Dig. H Si, 55.
" As to what notice Is sufficient to relieve the firm from liability
for acts of a partner of restricted authority, see post, "Powers of
Partners," chapter Y, S 86 et seq., p. 276.
ss COX T. HICKMAN, 8 H. L. Gas. 268, Gllmore, Gas. Partnership,
81. See ''PartnertMp!' Deo. Dig. (ICey HOn) % S9; Oent. Dig. ii
54, 55.
• _
-fta^klTOn MJtD CLASSIFICATIOM (Gh. 2
X. "n ^iiv liabflity, even where he has attempted
^ >5t 'acit OS a mere lender.'* He has this advan-
- ^ - r- rhat so long as he is unknown he is pro-
• - c -nie that "a dormant partner may retire from
• . »•, ut ^ving notice to the world," *•
X v..;-.ta.i partner is the expression used to designate a
X >^>« ^ix^ iMs acquired the name, with outside persons,
, V ii^ a '^drtner^ without necessarily participating in the
. . :>. Liability attaches to him by reason of his own act
'• v^-.^iiMb:^ alone* Having courted liability for the firm's
X ov>^ I^ can generally be forced to pay them.**
•^ IWI^KT ▼* DRIVER, S Ch. DiT. 458; Allen & Go. T. Davids,
V 5^ O *iW» 40 & E. 846. See '* Partnership,'* Deo. Dig. (Key No.) il
vwv :^*.' CvnL Dig* H 296-900.
••'v^VKCKK T. WHALLEY, 1 Bam. & Adol. U. Farther dls-
V u««4vu v^ ttt^ UabUity of dormant and secret partners will be found
:sm. <^<ki^t«r lY, I 88, p. 265. Bee ^^Partnership,'* Deo. Dig. {Key
>u.> I tCW; Cent. Dig. if i8Jhi88'
«« s^i^ aal% chapter I, | 26, ''Partnership by BstoppeL"
§ 40) MATURE AND CHABACTlBBISTICa 113
CHAPTER III
THB NATURE AND GHABAOTERISTICS OF A PARTNERSHIP
40. VarionB Conceptions of a Partnership.
41-42. The Partnership Name.
43. Partnership Property.
44. What Is Included in Partnership Property.
45-46. Partnership Capital.
47-48. Amount of Gontrlbntlon.
40-61. Good Will.
62. Title to Partnership Property — ^How Taken and Held.
63. Conversion of Partnership Realty into Personalty.
64. Extent of Conversion.
66. Nature and Extent of Partner's Interest in Partnership
Property.
66-67. Transfer of Partnership Property — ^By Act of Partnership.
68. Firm Creditors' Rights in Firm Assets — ^Partner's Lden.
69. Change of Firm Property into Separate Property.
60-6L Use of Firm Property to Pay Separate Debts of Partners.
62. By Act of a Single Partner.
63. Form of Conveyance.
64. Successive or Simultaneous Transfers of each Partner's
Interest
66-66. Effect of Death of Partner on Partnership Property.
67. Surviving Partner' as Quasi Trustee.
6& Agreement of Partners Controlling Property after Death of
Partner.
VARIOUS CONCEPTIONS OP A PARTNERSHIP
40. Whether a firm is a legal entity distinct from its mem-
bers is a question on which there is diversity of
opinion. By merchants and by the civil law a part-
nership is regarded as an entity; by the common
law it is considered merely as an association of
individuals.
In General
No one question in the law of partnership has produced
more controversy, at least among text-writers, than the
question as to the true nature of a partnership. It is de-
GlL.PAaT.
114 NATUBB AND CHABACTBBISTIC8 (Ch. 3
clared by one learned writer that: "It is certain that a
partnership is neither a tenancy in common, nor a corpora-
tion; and it is equally certain that it has some of the at-
tributes and qualities of each of these forms of joint own-
ership. The question, which lies at the bottom of the dif-
ficulties presented by our present topic, seems to us to be
this: Which of these two things does partnership most
nearly approach? ♦ ♦ ♦ A partnership is a legal body
by itself. We do not say it is a corporation, because it
wants some of the most essential elements of incorporation.
But we say it is a body by itself, and is so recognized by
the law for some purposes, and should be — always in a
proper way, and to a proper degree — for all purposes." *
But the above view is criticised by another writer in the
following language: "What is the polarity of mind of a
lawyer who advocates making a partnership by turns a
corporation and a number of individuals? If he compre-
hended the elemental distinction of kind, he would not ex-
pose his confusion by making the suggestion; but he
would disguise the proposition in the jargon of lawyers,
who speak of a man quo inodo a horse." * The author fur-
ther insists that, if the fiction that the firm is a person had
a legal basis for its existence, a partnership would become
a corporation, and would be subject to the incidents of in-
corporation.
The Mercantile Conception
However we may regard a partnership, whether as a le-
gal entity or as a collection of individuals combined for
purposes of mutual profit, there is no doubt that according
to the conception of merchants the firm is regarded as a
distinct body from the individuals of which it is composed.
Partnership bookkeeping is conducted as though the firm
were a natural person, possessing rights and obligations of
1 Parsons (TheophUus) on Partnership (4th Ed.) pp. 826, 328.
s Parsons (James) Principles of Partnership (Ist Ed.) 287. Mr.
Parsons' conception of a partnership Is as follows: '*The sum of
the rights and datles of the partners in the relation is caUed the
status of partnership. The status may be created by contract, like
marriage or sale. The contract is the occasion or doir, and the
consummation or conveyance establishes rights in rem."
§ 40) YARIOUS GONCEFnONS OF PABTNER8HIF 115
its own. Each partner is represented as a debtor to the
firm for money or other property received by him from the
common fund. He becomes a creditor of the firm for the
amount of his contributions to that fund. In general, ^it
may be said that, though they probably recognize gen-
erally the personal liability of partners,* business men are
apt to conceive of a firm as distinct from its members. This
distinction, thus made, is often recognized by the courts in
the interpretation of mercantile contracts. Even though a
court may not recognize the partnership as an entity, it will
recognize the usage of business men in interpreting their
contracts. Thus in Bank of Buffalo v. Thompson,* a mort-
gage was given by Thompson to the bank, conditioned for
the payment of all notes, checks, or bills of exchange there-
after "made, drawn, indorsed, or accepted" by Thompson
and discounted by the bank for his benefit, and also for
the payment of "all sums of money which shall at any time
be due or owing by him to said bank upon any account
whatever." Subsequent to giving the mortgage Thompson
formed a copartnership with three other persons. The
bank, having discounted for the firm several notes made
and indorsed by Thompson in the firm name, claimed that
these were secured by the mortgage. In refusing to sus-
tain the contention of the bank, the court said: "In ordi-
nary commercial language the obligation of a firm would
not be spoken of as the obligation of any one of its mem-
bers, and a firm is regarded as an entity distinguished
from all the individual members of which it is composed.
* ♦ ♦ This mortgage must be regarded as a commer-
cial instrument, executed in commercial transactions, and
must be construed as ordinary commercial men would un-
derstand the language used; and we think that among
business men a distinction is made between the firm, as an
t Holmes, J., In HALLOWELL y. BLACKSTONB NAT. BANK,
154 Mass. 859, 28 N. B. 281, 13 L. R. A. 815, Gllmore, Gas. Partner-
ship, 809. See **Partner9hip/' Dec Dig. {Key No.) I 6S; Cent Dig.
I 9S; '*Pledffe8,'* Cent, Dig. | 61.
4 BANE OF BUFFALO V. THOMPSON, 121 N. Y. 280, 24 N. B.
473, Gllmore, Gas. Partnership, 152. See "Partnership^" Deo. Dig.
i^ey No.) %6S: Cent. Dig. | 99; '^Mortgages:' Cent. Dig. I 228.
116 NATUBB AND CHARACTBRISTICS (Ch. 3
entity, and the members who compose it, and that this
language would not be understood as broad enough to
cover the indebtedness of a firm of which Thompson was
a member, and for whose debts, jointly with the odier mem-
bers of the firm, he could be made responsible." The court
did not mean to say that it recognized a partnership as an
entity. It merely took cognizance of the way in which
those who had made a contract treated it, in order to give
effect to their intention.*
The same rule has been applied in the interpretation of
statutes relating to commercial transactions. In an Ohio
case an attempt was made to recover statutory damages on
a protested bill "drawn on persons without the state/' The
bill was drawn in Cincinnati on "Taylor & Cassily, New
Orleans." Taylor and Cassily were partners in trade, hav-
ing branches both in New Orleans and Cincinnati ; Taylor
living in New Orleans and Cassily in Cincinnati. The busi-
ness of each branch was kept distinct, and each kept ac-
counts with the other as with customers generally. In con-
struing the statute to apply to this bill, the court said : "It
can hardly be doubted that the terms, 'any person or per-
sons, or body corporate,' as used in the statute, were .in-
tended to include all persons, natural or artificial, upon
whom bills of exchange could properly be drawn. Can any
good reason be assigned why mercantile firms, by whose
agency so much of the commerce of the world is transacted,^
should be excluded from the operation of a* statute designed
to regulate commercial paper?"* In another case it was
held, under a statute requiring a chattel mortgage to be filed
where the owner of the property resided, or, in case of his
nonresidence, where the property was located, that a filing
of a chattel mortgage given by a firm, one of whose miembers
was a nonresident, at die place where the resident partner re-
sided and where the principal business of the firm was carried
s But see HALLOWBLL y. BLAGKSTONE NAT. BANK, 154 Mass.
359, 28 N. E. 281, 13 L. B. A. 315, GilmoFe, Gas. Partnership, 309^
where a contrary result was reached. See **Pledgea^** Cent. Dig, | €1.
0 WBST ▼. VAIJ.BY BANK, 6 Ohio St 169, 172. Bee **BUl9 and
Notes;' dent. Dig. § A|.
§ 40) TABIOnS OONOBFnONB OF PARTNERSHIP UT
on, "should be considered a sufficient filing within tfie spirit
of the statute." ^
The Legal Conception
The legal conception of a partnership is, however, very
different from the commercial one. While the civil law re-
gards a partnership as an entity,* the common law, in the
language of the courts, at all events, rarely recognizes the
partnership as distinct from the members of which it is
composed.* They possess the rights and liabilities of the
partnership. The obligations of the partnership may be
satisfied out of their assets, and the death or retirement of
any one of them terminates the partnership. Though stat-
utes have made it possible in many instances to sue the part-
T HUBBARDSTON LUMBER CO. 7. COVERT, 35 Mich. 255, Gil-
more, Cas. Partnership, 14& See "Chattel Mortgages,** Cent. Dig.
» SnccesBlon of PILGHER, 39 La. Ann. 862, 1 Sonth. 029, Gilmore,
Gas. Partnership, 148. "The partnership, once formed and put Into
action, becomes, in contemplation of law, a moral being, distinct
from the persons who compose it It is a clyil person, which has its
peculiar rights and attributes." Smith v. MeMicken, 3 La. Ann. 322.
See ^'Partnership** Dec, Dig. (Key No.) I 6S; Cent. Dig. § 95.
• "It was not the lease of the firm, because there was no such
thing as a firm known to the law." James, Jj. J., in Ex parte GOR-
BETT, L. R. 14 Gh. D. 122, 126, Gilmore, Gas. Partnership, 146.
"In contemplation of law there is no merger or fusion of the several
persons composing a partnership into a common or comprehensive
person including them all. A firm adds nothing to population, and
in this respect is unlike a corporation, which augments population
in the legal, though not in the natural, world." Bleckley, G. J., in
DRUOKER y. WELLHOUSE, 82 Ga. 129, 132, 8 S. E. 40, 42, 2 L
R. A. 328.
"A partnership is not a person, either natural or artificial." Bean,
J., in Adams v. Church, 42 Or. 270, 272, 70 Paa 1037, 1038, 59 L.
R. A. 782, 95 Am. St Rep. 740.
"A partnership cannot be considered as a person, in contradlstlne^
tion to the persons composing It, simply because such is not its
nature." Stayton, 0. J., in WIGGINS v. BLAGKSHEAR, 86 Tex.
665, 668, 26 a W. 939, 9i0.
"Persons who have entered into partnership with one another are,
for the purposes of this act, called collectively a firm, and the name
onder which their business is carried on is called the firm name."
Partnership Act, 1890, | 4(1). Bee "Partnership,** Dec. Dig. {Key
Jfo.) I 63; Cent. Dig. | 9S.
118 NATURB AND CHARACTBRISTICS (Ch. 3
ners in the name of the partnership, such statutes are pro-
cedural merely and do not change the essential nature of a
partnership.** The same is true of statutes which permit
the levying of taxes in the firm name, and the bringing of
suit where the firm transacts business. The taxes, if not
satisfied out of the firm assets, may be satisfied out of those
of the individual partners, and the execution may be levied
on the judgment against the property of the partners. The
attitude of the courts towards the firm as a collection of
individuals, and not as an entity, is illustrated in Jones v.
Blun.** A statute forbade a corporation which had re-
fused payment of its debts to transfer any of its property
to any of its stockholders, directly or indirectly, in payment
of a debt. A corporation of which Blun was a stockholder,
having refused payment of its debts, transferred certain
property to a firm of which Blun was a member. Though
the same court had in Bank of Buffalo v. Thompson, supra,
recognized, in construing a mercantile contract, tiie commer-
cial conception of partnership, it declared, in setting aside the
transfer as contrary to statute : "There' is no such potency in
the entity known as a copartnership as to shield a stockholder
of a corporation from the penalty denounced by this statute
because he happens to be a member of a firm, and thus allow
him to secure to himself a preference of his claim against a
corporation/'
THE PARTNERSHIP NAME
41. Partners may, in the absence of statutory restrictions^
carry on their common business in any name they
wish. They will be bound on simple contracts
made in any name, if in fact such contracts were
made on their behalf by one having authority.
They cannot, however, be held on negotiable or
!• Bz parte Blaln, 12 Gh. D. 522; Western National Bank of N. T.
T. Perez, Trlanca & Ck>., [1891] 1 Q. B. 304; Bx parte Beauchamp,
[1894] 1 Q. B. 1. See '*Partner8Mpr Deo. Dig. (Key No.) « 69, 197;
Cent. Dig, §1 93, S60.
11 JONBS y. BLUN, 145 N. Y. 833, 39 N. B. 954» OUmore^ Cas.
Partnership, 160. See **Corporation8,*' Cent, Dig. I 2155.
S§ 41-42) THE PARTNERSHIP NAMB 119
sealed instruments, unless signed with an adopted
firm name» or with the names of all the partners.
42. If the firm name is also the name of a partner, there is
a presumption, if sxich partner has no separate
business of his own, that contracts signed in that
name are firm contracts. If he carries on a sepa-
rate business, no presumption arises. It is a ques-
tion of fact whether the name represents himself
or the partnership.
Partnership Name
At common law, in the absence of statutory limitations,
one may carry on business in any name he chooses, if he
does not have a wrongful intent in so doing. Likewise per-
sons in the partnership relation may carry on their com-
mon business under afay name they wish. A firm being at
law a collection of individuals, the partnership name is rep-
resentative of them rather than of the partnership. This
being so, an obligation in the names of all of the partners
is as much a partnership obligation as though it were
signed in a partnership name.** It is not necessary that
the partners should fix upon a firm name at all.** But, if
chosen, it is merely a convenient way of expressing the col-
lective names of the partners.** It is in law the name or
symbol by which each partner has chosen to represent him-
self, and it may, in the absence of statutory restrictions,
consist of the names of any or all of the partners, or the
names of individuals who are not partners, or it may be
purely fanciful. In some jurisdictions restrictions are
"DREYFUS y. UNION NAT. BANK. 164 lU. 83, 46 N. E. 408;
Kahn y. Thomson, 113 Ga. 957, 89 S. E. 322; McGREGOR y.
CLEVELAND, 5 Wend. (N. Y.) 475, Ollmore, Cas. Partnership, 154;
BERKSHIRE WOOLEN CO. y. JUILLARD, 75 N. Y. 535, 81 Am.
Rep. 488, Ollmore, Cas. Partnership, 156. See **Partner8Mp,*' Dec
Dig. {Key No.) H 64, 1S6; Cent. Dig. §§ 87^1, tOS, 20k, 240.
i» Parsons y. Hay ward, 4 De O., F. & J., 474; JUROENS y. ITT-
MAN, 47 La. Ann. 367, 16 South. 952. See ''PartnereMp," Dec. Dig.
(Key No.) | 64; Cent. Dig. §§ 87-Pi.
14 HASKINS y. lyESTE, 138 Mass. 856, Ollmore, Cas. Partnership,
154. See **Partner$hip;' Deo. Dig. ^Key No.) ^ 64; Cent. Dig. U
87-^i, 4i6.
120 NATUBB AND CHARACTBBI8TIC8 (Ch. 3
placed upon the name which an individual or firm may use»
as forbidding the use by a firm of a name which represents
a corporation,*' or the use of "& Co.," unless it actually
represents a member of the firm,** and in England it is said
to be an offense against the prerogative of the crown for
private persons to "assume to act as a corporation." *'
Authority to Use Firm Name
If no firm name is chosen, each partner has the implied
power to choose and use any appropriate name to represent
the firm.** If a name is chosen, however, that name be-
comes the partnership name, and the only one by which
the partnership can be bound on those contracts in which
the use of a correct name is essential.**
Same — Simple Contracts
It is a principle of agency that in, a simple contract he
for whom and by those authority it was made can be bound,
whether his name appears in the contract or not, or whether
or not his existence was known to the other contracting
party.** This general rule of agency applies in the case of
contracts made by a partner; he being the agent for the
firm. His agency extends to the binding of the partnership
by contract If he makes a contract in his own name, but
li Cr. Code, HI. § 220.
i«See North y. Moore, 186 Cal. 621, 67 Pac. 1037; Brister y.
Joseph Bowling Co. (Miss.) 29 South. 830; Gaiterman y. Wishon,
21 Mont 458. 54 Pac 566; Castle Bros. y. Graham, 180 N. Y. 553,
73 N. B. 1120; Loeb y. Firemen's Ins. Co., 78 App. Diy. 113, 79
N. Y. Snpp. 510; Lauferty y. Wheeler, 11 Abb. N. C. (N. Y.) 220;
Walker y. Stlmmel, 15 N. D. 484, 107 N. W. 1081 ; Jenner y. Shope,
67 Misc. Rep. 159, 121 N. Y. Supp. 599 ; K. B. Co. y. Batie, 25 Ohio
Cir. Ot R. 482; Choctaw Lumber Co. y. GUmore, 11 Okl. 462, 68
Pac. 733 ; Boyee y. De Jong, 22 S. D. 163. 116 N. W. 83. See *'Part'
nereMp,'* Deo. Dig. {Key Vo.) i§ ^9, 64; Cent. Dig. H 60, 87-91.
If Pollock's Digest of the Law of Partnership (8th Ed.) p. 25.
i« Meriden Nat Bank y. Gallaudet, 120 N. Y. 298, 24 N. E. 994.
ffee 'Tartnershipr Deo. Dig (£ey No.) | 64; Cent. Dig. H 87-91.
i»KIRK y. BLURTON, 9 Mees. & W. 284, Gilmore, Cas. Part>
nership, 881. Bee **Partner9Mp,*' Deo. Dig. (JSey No.) ^ 156; OenU
Dig. f§ SOS, 204.
20 Thomson y. Dayenport 9 B. & O. 78; Wattean t. Fenwlck
(1893) 1 Q. B. 346 ; Leyitt y. Hamblet [1901] 1 K. B. 58 ; Schendel y.
eteyenson, 15B Mass. 351, 26 N. B. 689; Hubbard t. Ten Brook, 124
§§ 41-42) THE PABTMEB8HIP NAMB 121
It is shown that it was in fact made for the firm of which
he is a member, the firm can be held, even though its ex-
istence was unknown to the other party at the time the
contract was made,** or, if the known members of a firm
make a contract for the firm in their own names, a dormant
partner can be held thereon.*' Whether a contract entered
into in the name of one partner is his individual obligation,
or the obligation of the firm, is a difficult question of fact.
It is entirely possible for the partnership to be liable on a
contract negotiated in the name of one of its members.
Same — Negotiable and Sealed Instruments — Authorized
In the case of negotiable and sealed instruments, the rule
of agency is different from that which prevails in the case
of simple contracts. Only those whose names appear on
such instruments are liable thereon. In order to bind his
principal upon an authorized negotiable or sealed instru-
ment, the agent must execute it in his principal's name.
Likewise a partner, acting for his firm in an authorized
transaction, in order to bind his copartners, must execute
the instrument in the adopted firm name.**. If he uses some
other name, his copartners are not liable, unless it should
be made to appear that, while the firm has an adopted
name, they had also been accustomed to use the other
Pa. 291, 16 Atl. 817, 2 Ll R. A. 828, 10 Am. St. Rep. 585 ; Kayton y.
Barnett, 116 N. T. 625, 23 N. B. 24. See ''Contracts^ Dec. Dig. {Key
No.) §§ 185-188; Cent. Dig. U 790^10; '*Principal and Agent,"
Dec. Dig. (Key No.) | 1S2; Cent. Dig. §§ 459, ^67-^71.
21 Ruppen V- Roberts, 4 Nev. & Man. 31 ; ROBINSON ▼. WILKIN-
SON, 3 Price, 538; Bottomley y. Nuttall, 5 0. B. N. S. 122. See
•^Partnership," Dec. Dig. (Key No.) S 1S6; Cent. Dig. §g 20S, 204.
22 Beckham y. Drake, 9 M. & W. 79. See "Partnership,** Deo. Dig.
{Key No.) §§ 1S6, 164; Cent. Dig. §§ 209, 204, 296-^00.
2 a Negotiable Instruments: KIRK y. BLURTON, 9 M. & W. 2Si,
Ollmore, Gas. Partnership, 381; Faith y. Richmond, 11 A. & E. 339;
Williamson y. Johnson, 1 B. & Ow 146 ; Macklln's Ex'r y. Crutcher, 69
Ky. 401, 99 Am. Dec. 680 ; Tllf ord y. Ramsay, 37 Mo. 563 ; Palmer
y. Steyens, 1 Denlo (N. Y.) 471. Sealed Instruments: McNaughten
y. Partridge, 11 Ohio, 223, 38 Am. Dec. 731. An immaterial yarlation
in the name used from the real firm will not prevent a recovery upon
a bUl of exchange so signed. Norton y. Seymour, 3 G. B. 792. See
•'Partnership," Dec. Dig. (Key No.) | 146; Cent. Dig. §| 24»-255.
122 NATURB AND CHARACTERISTICS (Gh. 3
name.** If he uses his own name, he will be personally lia-
ble, as he appears as an obligor on the face of the instru-
ment.^' Can the firm, however, be held on an authorized
contract executed in the name of one partner? Admitting
that the contract itself was made on behalf of the firm, and
was properly authorized, it would seem that the holder of
a note or sealed instrument given on such a contract, signed
in the name of one of the partners, would be able to bring
an action against the partnership, not on the instrument it-
self, but on the original contract, the terms of which are
disclosed by the instrument. Such a holding would in no
way injure the partners themselves. They have authorized
the contract to be made, and if they have any equitable de-
fenses they may plead them. That such an action could be
maintained was clearly implied in . Emly v. Lye,** where
the plaintiff failed because unable to prove that the con-
tract was a firm contract, and was in effect decided in the
Kentucky cases of Hikes v. Crawford,*' and Paris v.
Cook.** If, however, it has been agreed to take the note
or bond of one member as payment of a partnership debt,
the debt is thereby extinguished, and the partnership dis-
charged from liability.**
«* Williamson v. Johnson, 1 B. & 0. 146. See ^^Partnership,** Dec
Dig. {Key No,) | 1S6; Cent, Dig, §§ 20S, 20k.
28 Sealed Instrument: Appleton v. Binks, 5 East, 147; Firemen's
Ins. Co. y. Floss, 67 Md. 403, 10 Atl. 139, 1 Am. St Rep. 398. Nego-
tiable instrument : Leadbitter v. Farrow, 5 Maule & S. 345 ; Pentz y.
Stanton, 10 Wend. (N. T.) 271, 25 Am. Dec. 558. See *" Partnership,**
Deo. Dig. {Key No.) | 1S6; Cent. Dig. | 20J^.
26 EMLY y. LYE, 15 East, 7. See, also, Wilson y. Kennedy, 2 Esp.
245 ; Puckf ord y. Maxwell, 6 T. R. 51. See ''Partnership,** Dec. Dig.
{Key No.) ${ 125-164; Cent. Dig. f§ 190-SOO.
s7 67 Ky. 19. In this case a surety on a note signed by one partner,
who was compelled to pay the note, was permitted to recoyer against
the partnership because, as explained in the later cases of Macklin^s
Ex'r y. Crutcher, 69 Ky. 401, 99 Am. Dec. 680, and Faris v. Cook,
110 Ky. 867, 62 S. W. 1043, 63 S. W. 600, the creditor might have an
action against the firm, not on the note, but on the contract itself.
Fair y. Citizens' State Bank, 9 Kan. App. 779, 59 Paa 43 ; Hoeflinger
y. Wells, 47 Wis. 628, 3 N. W. 589. See '* Partnership,** Dec Dig
{Key No.) f 1^6; Cent. Dig. § «^8.
as 110 Ky. 867, 62 S. W. 1043, 63 S. W. 600. See ""Partnership,**
Dec Dig. {Key No.) § US; Cent. Dig. % 2J^S.
«»Bonnell y. Chamberlin, 20 Conn. 487; MAFFET t. LEUCKEU
§§ 41-42) THE PARTNERSHIP NAMB 123
Same — Negotiable and Sealed Instruments — Ufvauthorized
liy without authority, a partner sig^s the firm name to a
negotiable or sealed instrument, his copartners are not lia-
ble. But, inasmuch as the partnership name is the name
of each member, it is usually held that the partner thus ex-
ecuting an instrument in the firm name, without authority,
binds himself personally.'*
It may be, however, that a partner has authority to bind
his firm on certain contracts, but not authority to put those
contracts in negotiable or sealed form ; that is, the contract
itself may be authorized, but not the form of it. As pointed
out in chapter V, it is only in trading firms that there is an
implied power to issue negotiable paper; also, as a general
rule, a partner has no implied power to bind his firm by a
sealed instrument.** When, therefore, he executes and de-
livers a negotiable or sealed instrument without authority,
it is clear that his copartners are not liable upon such in-
strument, but that he himself may be held thereon.** Can
the copartners be reached in any way? Applying the prin-
ciple just noticed in connection with authorized contracts
in a partner's name, it would seem that where a partner puts
the authorized contract between the firm and the third per-
S3 Pa. 468, Gllmore, Cas. Partnership, 317. See ^'Partnership,'* Deo.
Dig. {Key No.) ^ 146; Cent. Dig, | 248; '^Payment,** Dec Dig. (Key
No.) § 16; Cent. Dig. I 67.
•0 EUlott y. Davis, 2 B. & P. 338; Fulton y. Williams, 11 Cush.
(Mass.) 108; Sherman y. Christy, 17 Iowa, 322; Snow y. Howard,
35 Barb. (N. Y.)' 55; Morris v. Jones, 4 Har. (Del.) 428; Lay ton v.
Hastings, 2 Har. (Del.) 147; Brozee y. Poyntz, 3 B. Mon. (Ey.) 178;
Heath y. Gregory, 46 N. C. 417; Horton y. ChUd, 19 N. a 460;
Hosklnson y. Eliot, 62 Pa. 3d3; Palmer y. Taggart, 1 Chest. Co.
Rep. (Pa.) 107; MUwee y. Jay, 47 S. C. 430, 25 S. E. 298.
Contra: Fisher y. Pender, 52 N. O. 483; Hart y. Withers, 1 Pen.
& W. (Pa.) 285. See "Partnership,*" Deo. Dig. (Key 2fo.) §f 1S6, 146^
161; Cent. Dig. §§ 20S, 204, 242-255, 255%.
SI iSee chapter V, S 101, p. 30a
>s See case, supra, note 30. In Fisher y. Pender, 62 N. O,
483, and Hart y. Withers, 1 Pen. & W. (Pa.) 285, It was held that
the partner himself Is not liable on the Instrument because It \va8
not dellyered as his Indlyldual deed, but that of the firm. See
'' Partnership;* Deo. Dig. (Key No.) i§ 1S6, 146; Cent. Dig. {f 205,
204, 242-^5.
124 NATURB AND CHARACTERISTICS (Ch. 3
son, into a negotiable or sealed form, which is unauthor-
ized, the firm should be liable, not on the instrument itself,
but upon a simple contract. Thus in Daniel v. Toney ** it
was said: "The petition discloses the consideration of the
note, and alleges in distinct terms that the lumber and
money for which the note was given went to the use and
benefit of the firm of which appellant was a member, and
was so received and enjoyed by the firm. These allegations
are fully upheld by the evidence, and fix his liability as a
partner for the value of the property, although the note
may not, because of the scrawl, be operative as a partner-
ship obligation." So, also, in Walsh v. Lennon,** where
the plaintiff, who had loaned money to a firm and received
a sealed note therefor, which in such form was unauthor-
ized, was permitted to hold the partners on the common
counts.
Another way to reach the copartners, where an author-
ized contract is put in an unauthorized sealed form, is to
treat the seal as surplusage, provided it is not essential, and
to hold the firm on the instrument as though it were a sim-
ple contract.*' Some courts, however, have refused to per-
mit this, holding that the parties intended to enter into a
specialty contract only, and that to treat it as a simple con-
tract would be doing violence to their clear intention.**
Partnership Name and Partner^s Name the Same
It not infrequently happens, especially where some of the
partners are dormant, that the business of a firm is carried
on in the name of one of the partners, which name thereby
becomes the firm name. This use of the name of one of the
»» 50 Ky. 523. See **Partn€rsMp,^ Dec. Dig. {Key Vo.) § JJ^6; Cent
Dig. fi 2^7.
S4 08 lU. 27, 38 Am. Rep. 75. See, further, Brown v. Bostfan. 51
N. C. 1; HosklDSon v. Eliot, 62 Pa. 803. Bee **Partner8hip** Dec.
Dig. (Key No.) | X46; Cent. Dig. f «^7.
80 Cook y. Gray, 133 Bfass. 106; Moore v. SteTens, 60 Miss. 800.
See, also, Blanchard y. Inhabitants of Blackstone, 102 Mass. 343.
See ^^Partnership;* Dec. Dig. {Key No.) §| 1S6, i57, 146; Cent. Dig.
If 20S-B05, 2i0, til.
80 Russell y. Annable, 100 Mass. 72, 12 Am. Rep. 665 ; SchmprU
T. Shreeye, 62 Pa. 467, 1 Am. Rep. 430. See ''Partnership,*' Dec Dig.
{Key No.) f § 1S7, HI, U6; Cent. Dig. H BOS, 2X8, 240, 247.
S§ 41-42) THE FABTNERSHIP NAMB 125
partners as the firm name is not likely to produce confu-
sion, except where commercial paper is issued, which gets
into the hands of third persons, who are unacquainted with
the manner of its origin. Again, it is not likely to arise
where the firm is a nontrading, partnership, whose members
have no implied authority to issue negotiable paper.'' But
if a trading partnership uses the name of one partner as the
firm name it may become a question of much difficulty to
determine whether negotiable instruments bearing that
name have been signed in the partnership or in the indi-
vidual name. The implied authority exists to sign negotia-
ble paper in the firm name in the firm business; but the
partner whose name is used still has the right to sign ne-
gotiable paper in his own name in his behalf. In the case
of Yorkshire Banking Co. v. Beatson,'* William Beatson
and John Mycock carried on business as chemical manu-
facturers, under the name of William Beatson. Mycock
was a dormant partner. Beatson indorsed one bill and ac-
cepted another in the name of William Beatson. In a suit
against the firm upon the bills, it was held that upon proof
that Beatson, the partner whose name was used, carried on
no business on his own behalf apart from the partnership
business, a presumption arose that the signatures were
those of the firm.** The presumption is purely one of ex-
pediency, the court saying: "The vast majority of bills
given under the circumstances supposed would be really
partnership bills, and yet it would be often difficult, if not
impossible, for the holders of such bills to do more than
«» See chapter V, 1 100, p. 302, on Powers of Partners.
•3 YORKSHIRE BANKING CO. v. BEATSON, Ll R. 5 O. P. D.
109, Ollmore, Gas. Partnership, 157, 161. See "Partnership,** Dec,
Dig. (Key No.) | 1S6; Cent. Dig. %% 203, 204. '
8t SWAN V. STEELE, 7 East, 200 ; EMLT y. LYE, 15 East, 7 ;
Bz parte Bolltho, 1 Buck, 100; Bank of South Carolina v. Case, 8
B. & C. 427; Furze v. Sharwood, 2 Q. B. 388; Nicholson t. Rlck-
etts, 2 E. & B. 497 ; In re Adonsonia Fibre Co. v. Miles* Claim, Lb
R. 9 Ch. 635 ; United States Bank y. Binney, 5 Mason, 176, Fed. Cas.
No. 16,791; Bank of Rochester y. Monteath, 1 Denio (N. Y.) 402,
48 Am. Dec. 681; Ollphant y. Mathews, 16 Barb. (N. Y.) 606; Mif-
flin y. Smith, 17 Serg. & R. (Pa.) 165. Bee 'TartneraMp,** Deo. Dig.
{fLey }fo.) H 64, 1S6, 146; OefU. Dig. H 87, 209, 204, 248.
126 NATUBB AND CHARACTERISTICS (Ch. 8
prove that the only trade carried on under the individual
name was the trade of partnership, and if they were com-
pelled to go further, and prove that the particular bill was a
partnership bill, the effect might be that in many cases
dormant partners, and in some cases ostensible ones, too,
might escape from just liabilities. On the other hand, the
partners sought to be made responsible on the bills would
in most instances be able to prove whether any particular
bill sued on was or was not a partnership bill, and should,
as it appears to us, at least have the onus of doing so
thrown upon them, when it is through their own act, in al-
lowing the firm name to be the same as that of an individ-
ual in the firm, that difficulty and doubt arise/'
This presumption does not arise, even where the firm
is a trading partnership, where the partner whose name is
used carries on a separate business.*** It may also be re-
butted by proof that the signature was really intended to
be that of the persons signing. This was actually proved
in the Beatson Case mentioned above.
Use of Name Protected
It is a matter of some question as to whether or not there
is any property in a name as distinguished from its use as
a label or trade-mark on certain specific articles.** It is
clear, however, that one who has or uses a name of estab-
lished reputation in a business will be protected from the
efforts of competitors to secure part of that business
through adoption or imitation of the name.** And, though
it is said that one cannot be prevented from using his own
name in business,*' yet the use of one's own name may be,
«• United States Bank t, Binney, 0 Mason, 176, Fed. CaB. No.
16.791. Bee **Partner8hip;' Dec Dig. (Key No.) SI ^96, U6; Cent.
Dig. a 20S, 204, ^S, 261.
«i Singer Mfg. Go. ▼. Loog, L^ R. 8 App. Cas. 15; Borthwick t.
Evening Post, 37 Ch. Div. 449. See ** Partnership,"* Dec Dig. (Key
yo.) § 64; Cent. Dig. §| 87-9i; '^Trade-Marks and Trade-Names,"
Dec. Dig. (Key No.) §{ 2S, SI; Cent. Dig. || 26, S6.
42 Bininger y. Clark, 60 Barb. (N. Y.) 113. See ""Trade-Marks and
Trade-Names,'' Dec. Dig. {Key No.) S| 5S-101; Cent. Dig. H 61-115.
48 Cash y. Cash, 19 R. P. G. 181 ; Meneely T. Meneely, 62 N. Y.
427, 20 AnL Rep. 489. See "'Trade-Marks and Trade-Names;' Dec
Dig. (Key No.) U 10, 59, 64, 7S; Cent. Dig. ^i 14, 70, 75, 84.
§ 43) PARTNERSHIP PROPERTY 127
if not enjoined, at least regulated so as to prevent confu-
sion and consequent injury.** The protection of a name is
not a question peculiar to individuals, for the right of pro-
tection of its name against improper aggression belongs to
a partnership as well. The security of a firm in the pos-
session of the name it has adopted lies altogether in its right
to seek the intervention of equity to prevent fraud. This
security does not depend upon any exclusive right which
the firm may be supposed to have to a particular name, or
to a particular form of words. The right is to be protected
against fraud ; and fraud may be practiced by means of a
name, though the person practicing it may have a perfect
right to use that name, provided he does not use it under
circumstances such as to effect a fraud upon others/'
PARTNERSHIP PROPERTY
43. Partnership or firm property means the property which
the partners have agreed shall be devoted to the
purposes of the partnership relation.. What is
partnership property, as distinguished from prop*
erty owned by the partners individually or jointly,
depends upon their intention. In the absence of
express agreement, the intention is ascertained
from the manner and purpose of its acquisition
and the way in which it is used. The mere use of
property by the firm does not of itself prove that
it is partnership property.
The expression "partnership" or "firm" property means
that property, real or personal, which the partners have
agreed shall be devoted to partnership purposes. It is clear
44Wyckoff, Seaman & Benedict ▼* Howe Scale Co. of 1886, 122
Fed. 348, 58 C. G. A. 510 ; Baker v. Baker, 115 Fed. 297, 53 C. €w A.
157. See *'Trade-Mark8 and Trade-Names j** Dec Dig. {Key No,) SS
10, 59, 64, 7S; Cent. Dig. §{ U, 70, 75, 81
*8 Croft V. Day, 7 Beav. 84 ; Frazer v. Frazer Lubricator Co.,
121 lU. 147, 13 N. E. 639, 2 Am. St Rep. 73. See '^Trade-Marks and
Trade-Names," Dec. Dig. (Key No.) §§ 10, 59, 64, 75; Cent. Dig. {$
U, 10, 76, 84; '*JPartner8hip," Dec. Dig. {fiey No.) | 64; Cent. Dig.
» 87-91.
128 NATUBB AND CHARACTBRI8TIC8 (Gh. S
that persons engaged in business as partners may have
property, owned separately or jointly, which is not firm
property. It is for the partners to determine among them-
selves what shall be the property of them all in their part-
nership relation, and what shall be the separate property
of some one or more of them. It is competent for them, by
agreement among themselves, to convert what is the joint
property of all into the separate property of some one or
more of them, and vice versa. The only true method,
therefore, of determining, as between the partners them-
selves, what belongs to the firm and what does not, is to
ascertain what agreement has been come to on the subject.
If there is no express agreement, attention must be paid to
the source whence the property was obtained, the purpose
for which it was acquired, and the mode with which it has
been dealt.**
The Manner in Which Acquired
The property which comes into the hands of the firm by
virtue of a claim arising in favor of the firm becomes firm
property. Thus the proceeds of a suit for trespass brought
for trespass to firm property constitute firm assets.*^ The
proceeds are assets of the firm as constituted at the time
the cause of action accrued. It was the firm that was
injured. ■ Hence, if one partner dies before recovery on a
cause of action which accrued in his lifetime, the proceeds
recovered become assets of the firm of which he was a
member.** And any property which is produced by the
firm becomes firm property.** If the partners improve the
property of one of the partners which is used in the part-
nership, as by building upon his land, such improvements
become partnership property.**
«• Jenkins ▼. Jenkins, 81 Ark. 68, 98 S. W. 685. See ''Partner'
ship:* Dec. Dig. (Key No.) U 61-69; Gent. Dig, |§ 95-11$.
*T Collins V. Butler, 14 Gal. 223. See **Partner8Mp,** Deo. Dig.
(Key No.) §§ 67-69; Cent. Dig. H 95-llS.
48 Richards y. Maynard, 166 IlL 466, 46 N. E. 1138. See **ParU
nership,** Dec. Dig. {Key No.) 5 67; Cent. Dig. f 95.
«B Snyder v. Lunsford, 9 W. Va. 223. See ** Partnership,'' Deo. Dig.
(Key No.) I 67; Cent. Dig. | 97.
00 Clark's Appeal, 72 Pa. 142. See **Partner$hipi* Dec Dig. (fey
No.) § 68; Cent. Dig. § 102.
§ 48) PABTNBRBHIF FBOPBRTT 129
Property purchased with partnership funds becomes part-
nership property in the absence of any agreement to the
contrary. There is, however, in the absence of fraud, no
reason why partners may not purchase property with the
partnership assets, and when so purchased each partner
may hold his interest therein on his individual account.**
It may be that it is desired to invest undivided profits in
this way rather than by dividing them among the partners,
and there is no objection to such a proceeding. In Collumb
V. Read,** the court said: "Where the land was not pur-
chased for partnership uses, and there was no agreement
making it partnership property, and yet it was paid for out
of the funds of the partnership or taken in payment of debts
due it, the question between the two classes of creditors
would be one of construction as to the intent of the part-
ners in making the purchase. It might be that such a pur-
chase would be maoe as an investment of realized profits.
If, for instance, the purchase price should be charged to
the separate accounts of the partners, that would be an in-
dication that it was considered by them as an application of
divided profits. If, on the other hand, the income should
be carried into the books of the copartnership, or if the land
itself should be included in the periodical inventories of
stock in trade, there would be an inference, more or less
strong, that it had been agreed to hold the estate as part-
nership property." But, as stated before, in the absence of
evidence to the contrary, property bought with partnership
funds becomes partnership property, and when so bought
for use in the partnership business the evidence is very
strong that the parties so intended.
Where real estate is bought jointly, the tendency of the
courts is to construe the manner of its holding as tenancy
in common or joint tenancy rather than as held for partner-
ship purposes;** and in a case where co-owners of land
•1 Hoxle V, Carr, 1 Samn. 173, Fed. Gas. No. 6,802. 8ee **Partner'
•hip,** Dec. Dig. {Key No.) § fi7; Cent. Dig. S 98.
»s 24 N. Y. 505, Onmore, Cas. Partnership, 176, note. See -Part-
mer$Mp,** Deo. Dig. {Key No.) I 68; Cent. Dig. § 108.
•8 Thompson y. Bowman, 6 Wall. 816, 18 It. Ed. 736w Bee ^^Part-
nership," Dec. Dig. {Key No.) § 68; Cent. Dig. § 104.
Gil.Pabt.-
130 NATURB AND CHARACTBRISTICS (Ch. 3
used it as a quarry, and bought other land with the pro-
ceeds, it was held that such land did not become partner-
ship land. There was, however, some doubt as to whether
there was even a partnership in the business with the proceeds
of which the land was bought"* The general rule with re-
gard to real estate has been stated by the Supreme Court
of Alabama thus: "Steering clear of all cases of fraud, or
of the use by one partner, without the approbation of his
associates, of partnership funds in the acquisition of real
estate, the two facts must concur to constitute real estate
partnership property — acquisition with partnership funds,
or on partnership credit, and for the uses of the partner-
ship." "
Property Used tn the Partnership Business
The premises upon which a business is principally con-
ducted are often the sole property of |i partner. Likewise,
in some instances, are the tools of a trade, the furniture
of an office, and even what is known as "stock in trade." "•
The mere fact that one of the partners permits his prop-
erty to be used by the partnership does not necessarily dis-
close an intent to make it partnership property, nor does
it in fact make it such. One partner may supply the entire
property used by a partnership, and, if so stipulated, he
may remain the owner and possess the legal title ; the firm
possessing nothing more than a right to use the property
in the firm business." ' Even if property owned by all of
»* Steward y. Blakeway, L. R. 4 Gh. App. 003. See ^^Partnership,**
Deo. Dig. (Key No.) §§ 67-69; Cent. Dig. U 95-119.
5s BrlckeU, J., in Hatchett y. Blanton, 72 Ala. 423, 435.
"In the absence of proof of its purdiase with partnership fands
for partnership purposes, real property standing in the names of
several persons is deemed to be held by them as Joint tenants or
as tenants in common." Field, J., in Thompson y. Bowman, 6 Wall.
816, 317, 18 L. Ed. 730. Bee ''Partnership;* Deo. Dig. (Key No.) §
68; Cent. Dig. § 104.
^e Burden v. Barkus, 8 GifF. 412; Ex parte Owen, 4 De Gez &
S. 351 ; Ex parte Smith, 3 Madd. 63. See ^^Partnership,** Dec. Dig.
(Key No.) §§ 67-69; Cent. Dig. {§ 95"! IS.
BTSTUMPH et al. y. BAUER et al., 76 Ind. 157, Oilmore, Gas.
Partnership, 175. See "Partnership,** Deo, Dig. iKey No.) f 67; Cent.
Dig. I 95.
§ 48) PARTNERSHIP PROPERTY 131
the partners jointly is used in the firm business, such prop-
erty does not thereby become partnership property.** In
Robinson Bank v. Miller et al./* Newton, Emmons, and
Miller entered into an oral agreement of partnership to
carry on the business of milling and of buying and selling
grain. Each had acquired a one-third interest in a parcel
of land upon which the mill, in which the business of the
firm was done, was situated. Each paid for his share out
of his individual money.' Each acquired his interest before
the partnership was formed. It was held by the court that
the weight of authority supported "the position that where
persons who afterwards become partners buy land in their
individual names and with their individual funds, before
the making of a partnership agreement, the land will be re-
garded as the individual pr6perty of the partners, in the
absence of a clear and explicit agreement subsequently en-
tered into by them to make it firm property, or in the ab-
sence of controlling circumstances which indicate an inten-
tion to convert it into firm assets."
■•DAVIS ▼. DAVIS [ISM] 1 Gh. 383; HnmeB T. Hlgman, 145
Ala. 216, 40 South. 128 ; Ware v. Owens, 42 Ala. 212, 94 Am. Dee.
672; Frlnk v. Branch, 16 Conn. 260; ROBINSON BANK ▼. MIIj-
LER, 153 111. 244, 38 N. B. 1078, 27 L. R. A. 449, 46 Am. St Rep.
883, Gilmore, Cas. Partnership, 171; Theriot v. Michel, 28 La. Ann.
107 ; Gordon v. Gordon, 49 Mich. 501, 13 N. W. 834 ; Reynolds v. Ruck«
man, 35 Mich. 80; Dexter v. Dexter, 43 App. Dlv. 268, 60 N. Y.
Snpp. 371.
<*The mere use of the property by the partnership did not Impress
upon it the character of partnership property. It is not an un-
common occarrence that a partnership uses the property of Its sev*
eral members, or of a preceding partnership. In the absence of
an agreement that the property shall become joint property, its title
and character is unchanged." Brickell, O. J., in Hatchett v. Blan-
ton,. 72 Ala. 423. See "Partnership,** Deo. Dig. (Key No,) H ^f 68;
Cent. Dig. H 95-111.
s» ROBINSON BANK v. MILLER, 158 111. 244, 88 N. S. 1078, 27
Lb R. A. 449, 46 Am. St Rep. 883, Gilmore, Gas. Partnership, 17L
See "Partnership;* Deo. Dig. ij^ey l^oj i 68; Cent. Dig. I KH.
132 NATURB AND CHABACTBBISTICS (Gh. 3
SAME— WHAT IS INCLUDED IN PARTNERSHIP
PROPERTY
44. Partnership property, in its lai^est sense, embraces ev*
erything that the firm owns, consisting of both
(a) The capital contributed by its members, and
(b) The property subsequently acquired in partnership
transactions.
The term ''partnership propert}^'' is sometimes used, in
a narrower sense, to designate what the firm owns,
other than its capitaL
During the continuance of a firm, the capital contributed
by its members is not distinguishable from other property
acquired in partnership transactions. All' alike constitutes
partnership property or assets, and is treated alike in the
administration of the partnership affairs. Third persons
are not concerned with the origin of the firm's titie. In
treating of the general characteristics, therefore, of part-
nership property, it is impossible to distinguish between
the capital and the other property of the partnership. As
between themselves, however, under the partnership agree-
ment, the partners have certain rights, and are under cer-
tain liabilities, with respect to the partnership capital. It
will be convenient first to discuss these rights and liabili-
ties separately, and then to take up the subject of partner-
ship property in general.
SAME— PARTNERSHIP CAPITAL
46. The capital of a partnership is the aggregate of the
sums contributed by its members to establish or
continue the partnership business.
46. A partner's contribution to the firm's capital need not
be in money, but may consist of anything else of
value.
The •'capital" is, under the agreement of partnership, in-
variable; and in this respect the force of the expression
§§ 45-46) PARTNERSHIP PBOPBRTT 133
differs widely from that of the other expression, "the firm's
property or assets"; for the latter fluctuates according to
the fortunes of the business. The capital is in some cases
(notably, in the cases of professional and mechanical part-
nerships) a matter of nominal contribution merely, unless
we choose to say, rather, that in some cases the capital is
in profits, which is a confusing expression. In any case it
need not consist of money, but may consist of anjrthing
which the parties ag^ee to consider as capital.**
Form of Contribution
It is not necessary, in order to have the contribution to
a firm's capital perfectly valid, that such contribution shall
be in money in all cases ; for, by agreement, the contribu-
tion, although stated in terms of money, may be (except
in the case of a special partner's contribution) in the form
of securities, a patent, the good will of a business, or any-
thing else which is apparently readily convertible into
money. It must come into the fund, however, free from
liens and incumbrances generally, to the extent of the con-
tribution ; and any expenditure upon the property neces-
sary, in order to make the amount agreed to be contributed
good, is chargeable to the partner contributing the prop-
erty.**
•0 DEAN y. DEAN, 04 Wis. 23, 11 N. W. 289, GUmore, Oas. Part-
nership, 164; Cf. Thomas v. Lines, 83 N. C. 191. See, also. Sexton
y. Lamb, 27 Kan. 426 ; Nutting y. Ajshcrof t, 101 Mass. 300 ; Mathers*
Ex'r y. Patterson, 33 Pa. 485. ^ Where a former clerk is taken Into
co-partnership by a firm which was Indebted to him, and the amount
of such indebtedness is placed to his credit upon the new books, to
which, on dissolution of the firm, Is added his share of the net prof-
Its, such Indebtedness will not be regarded as capital put In by such
new member, but rather as a loan to the firm, to be repaid him. with
his share of the profits. Topping y. Paddock, 92 111. 92. See, also,
Stafford y; Fargo, 35 111. 481. A premium paid for admission to
another's business Is the latter's indlyldual property, and not a con-
tribution to capital. Eyans y. Hanson, 42 111. 234; Ball y. Far-
ley, 81 Ala. 288, 1 South. 253. Bee ^'Partnership,** Dec Dig. (JBCey
No.) t 72; Cent. Dig. t§ 117, 119.
•1 Dunnell y. Henderson, 28 N. J. Eq. 174. See, also, Nlchol y.
Stewart, 36 Ark. 612; Sexton y. Lamb, 27 Kan. 426. See **Partner^
ship:* Dec. Dig. iKey No.) H 72, H; Cent. Dig. U 117, 119.
134 MATURB AND CHARACTBBI8TICS (Gh. 3
SAME— AMOUNT OF CONTRIBUTION
47. The amount of capital to be contributed by each part-
ner is to be determined by the agreement between
the partners.
48. No partner can increase or diminish his share of the
capital without the agreement of the rest.
The amount of each partner's contribution to the firm
capital, is determined by the agreement of the parties. It
may be that the partnership is formed without the contri-
bution of any tangible property to a common fund. It
may be that one partner contributes money or its equiva-
lent, and another places his especial skill, experience, or
something else personal to himself, at the service of the
partnership. In the absence of agreement to the contrary,
the capital on dissolution is to be distributed in the propor-
tions paid in by each. In this distribution only the tangible
property contributed by each can be considered as capital.
Skill, experience, or peculiar ability does not admit of dis-
tribution, and on dissolution of the partnership cannot be
taken into account. Thus in Shea v. Donahue,** it was
agreed that Shea should contribute $1,000 to constitute a
fund to carry on the business of "making, buying, and
selling all kinds of tinware, stones, pumps, etc.," in part-
nership with Donahue. Donahue, being a practical work-
man of considerable experience in the business, it was
agreed that he should "give the business his entire per-
sonal attention and the benefit of his experience" to place
against the cash furnished by Shea. On dissolution it was
contended by Donahue that he was entitled to share equally
in the capital as in the profits, "and this, although it goes
without saying he would retain all his practical experience
which was to be placed against the cash furnished by his
partner." It was held, however, that there was "nothing
•> SHEA y. DONAHUB, 83 Tenn. 160, 54 Am. Rep. 407, Gilmore,
Gas. Partnership, 16& Bee "Partnership,** Dec Dig, {fiey No.) {
304; Cent. Dig. ^ 702.
§§ 47-48) PARTNERSHIP PROPERTT 135
in the agreement to take the case out of the ordinary one
of a partnership in profit and loss upon' unequal capitals";
that in consequence Shea was entitled to be paid $1,000 as
his contribution to the firm capital before the profits were
divided.
Having agreed to contribute a certain amount to the
firm capital, a partner can be compelled to pay that amount.
He cannot, however, be required to pay more than the
agreed amount, even though the necessity may be extreme,
and though the alternative may be a dissolution of the
partnership. The capital of a firm remains stationary, ex-
cept as the members as a whole agjee, and no partner can,
of himself, either increase or diminish his proportion.*'
If undivided profits are permitted to remain in the firm,
they do not thereby become capital ; •* nor do they become
a loan for which the partner who is entitled to them can
charge interest, in the absence of an agreement to that ef-
fect.«»
On the dissolution of a partnership, each member is en-
titled to draw out the proportion of capital which he con-
tributed. But even though the proportions were unequal,
it will be presumed, in the absence of agreement to the
contrary, that profits and losses are to be shared equally.
In determining losses, the capital of each member is con-
sidered as a debt due from the firm, and each member will
be required to contribute equally in order to make up the
deficiency which the assets of the firm are unable to meet.
••Farmer v. Samuel, 4 Lltt (Ky.) 187, 14 Am. Dec 106; Ful-
mer's Appeal, 00 Pa. 143 ; Ck)ck v. Evans' Heirs, 9 Yerg. (Tenn.) 287.
See ""PartneraMpr Dec. Dig, (Key No.) H 68, 76; Cent. Dig. S§ lOl-
111, 116, m.
•4 DEAN y. DBAN, 64 Wis. 23, 11 N. W. 239, QUmore, Cas. Part-
nership, 164. Bee ^^Partnership;' Deo. Dig. {Key No.) U 72, SOS;
Cent. Dig. U li7, 70S-705.
••Dexter v. Arnold, Fed. Gas. No. 8,855; Gage ▼. Parmelee, 87
111. 829; Bowling's Heirs y. Dobyns* Adm'rs, 5 Dana (Ky.) 434;
Sweeney y. Neely, 53 Mich. 421, 19 N. W. 127 ; Buckingham y. Lud-
lum, 29 N. J. EiQ. 345; Rensselaer Glass Factory y. Reid, 5 Cow.
(N. T.) 587; Brown's Appeal, 89 Pa. 139; Gilman y. Vaughan, 44
Wis. 646. See ^^Partnership;' Dec Dig. {fey No.) i 76; Cent. Dig.
H 120-129.
136 NATURE AND CHARACTERISTICS (Gh; 3
In Whitcomb v. Converse et al.,** Whitcomb, Converse,
Stanton, and Blagclen entered into a partnership; Whit-
comb and Converse contributing the entire capital. The
partnership was dissolved by mutual consent, and Whit-
comb wound up the business. The business resulted in a
loss, and Whitcomb brought a bill in equity to compel con-
tribution from the other partners to make up his loss of
capital. Blagden being insolvent, it was held that the capi*
tal contributed by each partner constituted a debt of tiie
partnership, and each solvent partner must share equally
in its loiss.*T
SAME— GOOD WILL
48. The '^good-wiir' of a business represents the momentum
of organization possessed by a "going concern/'
with the advantages of an established location,
name, and reputation. It is part of the assets of a
partnership business, and may be sold and trans-
ferred. Its value must be accounted for « by the
surviving partner to the representatives of the de«-
ceased partner.
BOl The vendee of the good will of a partnership business
' acquires the sole right to represent himself as con-
tinuing such business, and to carry it on in the old
firm name, provided, however, that he will not
thereby subject the vendor to liability.
51. Unless restricted by an express agreement, the vendor
of a business and its good will may enter into the
same line of business again in the same locality;
but he may not represent himself as continuing the
old business, and according to some decisions he
••WHITCOMB V. CONVERSE. 119 Mass. 38, 20 Am. Rep. 811.
Gllmore. Cas. Partnership, 488. See *' Partnership,*' Deo, Dig. {Kep
Jfo.) n S0S-S05; Cent. Dig. {{ 700-705.
•f Barfield v. Loughborough, L. R. 8 Ch. 1 ; In re Anglesea Col-
liery Co., L. R. 2 Eq. 379; Nowell v. Nowell, Ia R. 7 Bq. 538; In
re Hodges* Distillery Co., L. R. 6 Ch. 61 ; BRADBURY v. SMITH.
21 Me. 117 ; Julio v. Ingalls, 1 Allen (Mass'.) 41. See ** Partnership,**
Dec. Dig. (Key No.) §{ SOS-305; Cent, Dig. S{ 700-705.
§§ 49-61) PARTNERSHIP PROPERTT 137
may not personally solicit the customers of the
old business. He may use his own name, provided
such use will not amount to a representation that
.he is continuing the old business.
Good Will — Former Attitude of Courts
The term "good will" has not yet received a precise sig-
nificance in the law. This is due in part to the fact that
the good will of a business has not long been recognized
as an asset of the business. Though Lord Hardwicke,**
in 1743, in reference to the duties of an executor, said:
"Suppose the house were a house of great trade, he must
account for the value of what is called the good will of it,"
it was held in 1800 by Lord Loughborough, in Hammond
V. Douglas,*' that the good will of a business was not a
part of the partnership stock, which must be accounted for
by a surviving partner to the representatives of the de-
ceased. Though doubt was expressed later by Lord El-
don,^* the decision of Hammond v. Douglas was sustained
in 1835 by Vice Chancellor Shadwell in Lewis v. Lang-
don.^* Early text writers on Partnership paid little atten-
tion to good will. Watson,^* writing in the latter part of
the eighteenth century, does not refer to it, and Kent, writ-
ing a little more than a quarter of a century later, in a
passing reference, declared that "the good will of a trade
is not partnership stock." ^*
Same — Good Will Defined
The small importance formerly attached to good will
was due in part to the comparatively narrow definition
•8 Oibblett V. Read, 9 Mod. 459. See ^'Partnership;* Deo. Dig. {Key
Vo.) U ««5, 257, SOO, SIO; Cent Dig. H 4^7* S6S, 694; "(^ood WiUr
Deo. Dig. {Key No.) » 1-7; Cent. Dig. H 1-9.
•• 5 Ves. 539. See ** Partnership;* Dec. Dig. (Key No.) H ^9, «5T,
SOO, SIO; Cent. Dig. SS 4^^, 563, 694. 712.
70 Crawshay v. CoUlns, 16 Ves. 227. See "Partnership;' Dec Dig.
(Key No.) U ««^, 257, SOO, SIO; Cent. Dig. §{ ^77, 56S, 694, 712.
71 7 Sim. 421. See "Partnership;* Dec. Dig. {JS.ey No,) U 229, 2S7,
SOO, SIO; Cent. Dig. ({ 477, 563, 694, 712.
7 > Watson on Partnership (Ist Ed.) 1794.
Ts Kent's Com. ^94.
138 NATUKB AND CHARACTERISTICS (Ch. 3
which was given to the term. Lord Eldon/* in 1810, said :
"The good will which has been the subject of sale is noth-
ing more than the probability that the old customers will
resort to the old place." " In 1828 Sir John Leach, M. R.,
said : "The good will of the business is nothing more than
an advantage attached to the possession of the house."
While according to Lord Langdale, in England v. Downs,^*
decided in 1842: "Good will is the chance or probability
that custom will be at a certain place, in consequence of
the way in which that business has been previously car-
ried on." But whatever good will is to-day, there is no
doubt that it comprises far more than the mere benefit to
be derived from carrying on a business in a particular
place. Modern methods of advertising . and solicitation
have come to make it mean at least something besides that.
Vice Chancellor Wood, in Churton v. Douglas,^^ pointed
out that, while location is important, it would be absurd
to say that in case of a large wholesale business it made
any great difference to the public whether it was located
at one end of the Strand or the other, or in the Strand, or
any place adjoining. The location at which the business
is carried on is not the chief element of value in its good
will. "When you are parting with the good will of a busi-
ness you mean to part with all that disposition which cus-
tomers entertain towards the house of business identified
by the particular name or firm, and which may induce them
to continue giving their custom to it." The wider signifi-
cance thus given to the term "good will" is also shown in
the words of a New York case : ^* "Good will embraces at
least two elements : The advantage of continuing an estab-
T4 Crtittwell V. Icre, 17 Ves. 335, 34e. Bee **Oood WHW" Deo, Dig,
(Key No.) 11; Cent. Dig. { 1.
rs Chissum v. Dewes, 5 Rnss. 29, 80. See "Good WiU,'' Deo. Dig.
(Key No.) (1; Cent. Dig. { 1.
Tt 6 Beay. 2G9. See **Good Will," Deo. Dig. (Key No.) % 1; Cent.
Dig. t i.
TT H. B. V. Johns. 174. See "Good W«I," Deo. Dig. (Key No.) 1 1:
Cent. Dig. 1 1.
T« People ex rel. A. J. Johnson Co. v. Roberts, 150 N. Y. 70, 63
N. B. 685, 45 L. B. A. 126. Bee "Good WilW* Dec. Dig. (Key No.) %
1; Cent. Dig. % 1; "Taxation,'' Deo. Dig. (Key No.) % 391.
§§ 49-61) PARTNERSHIP PROPERTY 139
lished business in its old place, and of continuing it under
the old style or name. While it is not necessarily alto-
gether local, it is usually to a great extent, and must of
necessity be, an incident to a place, an established busi-
ness, or name known to the trade."
Notwithstanding the increasing importance of good will
in the business world, its limits are not yet clearly defined,
perhaps because they have not yet been reached. Though
the bill drawn by Sir F. Pollock, which served as a founda-
tion for the English Partnership Act,^* dealt with the sub-
ject of good will, the act itself does not. In the introduc-
tion to the seventh edition of Lindley's Law of Partnership
it is said : •• "Owing, it is believed, to differences of opin-
ion, and to the difficulty of arriving at a conclusion which,
would be acceptable to both Houses of Parliament, the
clauses relating to these subjects were struck out. The law
upon them must therefore be extracted from judicial de-
cisions, and the doubts and difficulties which beset ques-
tions arising on these subjects must remain for future ju-
dicial or legislative solution." In a few states good will
has received legislative definition. For instance, the Civil
Code of California defines it as follows : •* "The good will
of a business is the expectation of continued public pat-
ronage, but it does not include a right to use the name of
any person from whom it was acquired. The good will of
a business is property, transferable like any other." It is
noticeable that the name of the vendor of a business does
not go with the good will according to this definition,
though it may be that the |^ame of a proprietor of a busi-
ness may become so closely associated with a business that
the good will minus the name is of little practical value.
In Churton v. Douglas,** Vice Chancellor Wood said:
"The word 'firm,' I believe, like most mercantile terms, is
derived from an Italian word, which means simply signa-
T» Partnership Act, 1890.
io Lindley's Law of Partnership (7th Ed.) p. &
•1 Sections 092, 993.
•s H. R. V. John& 174, 1S9. Bee *'Oood WOI," Pea Diff. (Key VoJ
% 1; Cent. Dig. % 1; ^^Partnership,'' Deo. Dig. {Key No.) H 229, 267,
SOO, $10; Cent. Dig. SS 477, 66S, 694, tl2.
140 NATUBB AND CHARACTBRISTIC8 ' (Ch. 3
•
ture ; and it is as much the name of the house of business
as John Nokes or Thomas Stiles is the name of an indi-
vidual. The name of a firm is a very important part of the
good will of the business carried on by the firm." In the
same case the Vice Chancellor gave what is the most
widely quoted judicial definition of good will : " 'Good will,'
I apprehend, must mean every advantage — every positive
advantage, if I may so express it — ^as contrasted with the
negative advantage of the late partner not carrying on its
business himself that has been acquired by the old firm in
carrying on its business, whether connected with the prem-
ises in which the business was previously carried on, or
with the name of the late firm, or with any other matter
carrying with it the benefit of the business." Good will
represents the momentum of organization. It represents
the expenditure of time, capital, and energy involved in
overcoming the inertia of a business which has not yet been
"launched," and transforming it into a "going concern."
It represents, also, the favor which an established business
has acquired in the eyes of the purchasing public, in so
far as such favor can be transferred with the business which
produced it.
Same — Must be Accounted for by a Surviving Partner
The good will of a business is inseparable from the busi-
ness itself. In order to have a good will there must be a
business to which it is attached. Hence, if a partner dies,
and the firm business is wound up, the surviving partners
may immediately begin a new business in the same line
and in the same locality. TMfe surviving partner has the
authority to wind up the firm business, and he is liable to
the deceased partner's representatives for such partner's
share of the surplus remaining after debts are paid; but
he cannot continue the business and subject them to future
liabilities. These considerations led Vice Chancellor Shad-
well,** following Hammond v. Douglas,'* to say: "If a
••Lewis y. Langdon, 7 Sim. 4ZL Bee '^Partnership,^* Deo, Dig.
{Key tfo,) St «29, 857. SOO, SIO; Cent. Diff, St ^77, 56S, 694, 7i«.
•*16 Ves. 227. See ^Tartnership,*' Deo. Dig. (Key No.) tS ^29,
257, SOO, SIO; Cent. Dig, tS -*77, 565, 69i, 712,
§§ 49-51) PARTKBB8HIP PROFERTT ' 141
partnership is carried on between A. and B. under the
name of Smith & Co., and the surviving partner chose to
discontinue the business, and to write to the customers
and say that his partner was dead, and that the business
was at an end, the effect would be that that which is said
to be salable would cease to exist. Now what power is
there in a court of equity to compel a partner to carry on
a trade after the death of his copartner merely that, at a
future time, the good will, as it is called, may be sold?
It is plain that, unless there is such a power in this court,
it must be in the discretion of the surviving partner to de-
termine what shall be done with the good will; and, if
that is the case, it must be his property."
The former rule, that the good will of a business goes to
the surviving partners, and need not be accounted for to
the representatives of the deceased, no longer prevails in
England or in the United States.*' The good will of a firm
is built up by the combined industry and credit of the part-
ners, and if it can be disposed of — that is, if the firm busi-
ness can be sold as that of a going concern — the represen-
tatives of the deceased are entitled to have an accounting
of the value of the good will.®' It frequently happens that
the survivors continue the business, and that they buy the
share of the deceased partner. In such a case they succeed
to the benefits arising from the favor which the business
has obtained, and may be compelled to account for those
benefits.*^
•> Slater v. Slater, 175 N. Y. 148. 67 N. B. 224, 61 L. R. A. 796,
06 Am. St Rep. 606; Rammelsberg v. Mitchell, 29 Ohio St 22;
Holden'8 Adm'rs v. McMakin, 1 Pars. Bq. Cas. (Pa.) 270; Tennant
y. Dunlop, 97 Va. 234, 33 S. E. 620; Rowell v. Rowell, 122 Wis. 1,
99 N. W. 478; In re David (1899) 1 Ch. 378; HaU v. Barrows, 4
De O. J. & S. 150; Smith v. Everett, 27 Beav. 446; Wedderburn
V. Wedderburn, 22 Beav. 84. See ''Partnership,'* Deo, Dig, {Key No.)
H 229, 257, 900, SIO; Cent. Dig, §S 477, 56S, 694, 71«.
86 Matter of SUkman, 121 App. Dlv. 202. 105 N. T. Supp. 872, af-
firmed In 190 N. Y. 560, 83 N. E. 1131. See 'TartneraMp,** Dec. Dig.
{Key No.) H ^9. 257, SOO, SIO; Cent. Dig. §§ ^77, 56S, 69i, 712.
8T Slater v. Slater. 175 N. Y. 143. 67 N. B. 224, 61 L. R. A. 796,
96 Am, St Rep. 605 ; Rowell v. Rowell, 122 Wis. 1, 99 N. W. 473 ;
Wedderburn v. Wedderburn, 22 Beav. 84. See ''Partner ship,'' Dec.
Dig. {Key No.) H 229, 257, SOO, SIO; Cent. Dig. K 477, 56S, 694, 712.
142 • NATUBB AND CHABACTBBISTIC8 (Ch. 3
Same — Rights of the Vendee
The purchaser of a business gets with it, as incident
thereto, in the absence of stipulation to the contrary, the
good will of the business.** He thereby gets the right to
advertise to the public generally that he is the successor
to the business of his vendor, and that he is carrying on
that business.**
Same — Right to Use Old Firm Name
It seems doubtful, however, as to the extent the purchase
of the good will of a business entitles one to use the old
name. Though it has been repeatedly said that the firm
name constitutes an important part of the good will of the
firm,** yet there is danger of liability accruing to one who
permits himself to be held out as a member of a firm or
as proprietor of a business in which he is not in fact inter-
ested. Hence, where a business name is the name of an
individual, or it is partly composed of such a name, the
courts, if they permit the purchaser of the good will to
use the old firm name, will compel him to do so so as
to avoid possible injury to the vendor. In Levy v. Walk-
er,** Misses Charbonnel and Walker were conducting a
business under the name of Charbonnel & Walker. Miss
Charbonnel having married Levy, the partnership was dis-
solved. Miss Walker purchased the business and good
••Jennings r. Jennings, 1 Oh. 878; Menendez r. Holt, 128 U. S.
614, 9 Sup. Gt 143, 82 L. Ed. 526 ; Hozle v. Chaney, 143 Mass. 002,
10 N. E. 718, 58 Am. Bep. 149; Merry y. Hoopes, ill N. Y. 415,
18 N. E. 714; StdUifeld r. National Shirt Waist Co., 99 App. Dlv.
286, 90 N. Y. Supp. 964. Bee ''Good WUl,** Dec. Dig. (Key No.) {{
IS; Cent. Dig. §i IS.
••Ghurton v. Douglas, H. R. V. Johns. 174; Holbrook v. Nesbitt,
163 Mass. 120, 89 N. B. 794; Flte r. Dorman (Tenn.) 57 S. W. 120.
See "Partnership,*' Dec. Dig, (Key No.) U 229, 251, 300, 310; Cent.
Dig. if 477, 563, 694, 712.
•0 Ghurton v. Douglas, H. R. V. Johns. 174 ; People ex reL A. J.
Johnson Co. y. Roberts, 159 N. Y. 70, 68 N. E. 685, 45 L. R. A. 126.
See "Partnership," Deo. Dig. (Key No.) H 228, 229, 256, 257; Cent.
Dig. U 476, 477, 562, 563.
•1 10 Ch. Dly. 436. See "Partnership,** Dec Dig. (Key No.) il 228.
229, 256, 257; Cent. Dig. H 476, 477, 562, 563; "Good Will,** Deo.
Dig. (Key No.) H IS; Cent. Dig. U IS.
g§ 49-^1) PARTNERSHIP PROPERTT 143
will, and continued the business under the same name.
Mr. and Mrs. Levy, having commenced a business in
Paris under the name of Charbonnel et Cie., sought to
enjoin the use of the name Charbonnel by Miss Walker.
Jessel, M. R., said: "The plaintiffs are under no liability
by reason of Miss Walker so carrying on the business.
The plaintiffs are not actual partners in the firm of Char-
bonnel & Walker. The dissolution decreed by the court
has been duly advertised, and no person dealing with Miss
Walker for the first time can make Mr. or Mrs. Levy liable.
♦ * * What conceivable interest the plaintiffs may have
in the question as to the firm name under which Miss
Walker chooses to carry on the business I have been un-
able to ascertain^" From the foregoing it is evident that
the only way that a vendee of a business can raise an ob-
jection to the use of the old firm name by the purchaser
is by showing a possible injury to himself from the use of
such name. If he can, the use of the name by the pur-
chaser will be enjoined, unless the vendor expressly agreed
that he might use it. In Thynne v. Shove,'* Thynne sold
his business to Shove, including good will and certain
trade cards bearing the name "O. Thynne, Baker." Shove
used the cards till exhausted, and then printed others in
the same name. Thynne sought to enjoin the printing and
use of such cards, alleging that "the defendant has no right
to use my name, and I strongly object to his so doing, as
it will materially injure me if I start in business again at
Blackheath." Sterling, J., observed that such a demand
was far in excess of the plaintiff's rights; that the only
limitation on the defendant's right to use the name of the
plaintiff was in using it in such a way as to expose the
plaintiff to any liability by being held out as the real owner
of the business. The defendant was enjoined from using
the name of the plaintiff so as to expose him to liability.
New York has held that a firm name in the form of "J.
& J. Slater" was part of the good will, and the right to use
•s I* R. 46 Ch. D. 577. Bee '^PartnerBhip,'* Deo. Dig. (Key No.)
if Z28, 2B9, 256, 257; Cent. Dig. » 476, 477, 662. 66S; **Qood WttW*
Dec. Dig. {Key No.) U 1-^; Cent. Dig. U i-5.
144 NATURE AND CHARACTERISTICS (Gh. 8
the name could be sold to the survivor or a stranger.**
In this case a statute •* required the purchaser to make the
facts relating to the continued use of the firm name a mat-
ter of public record. Hence every one was given notice
as to who the proprietor was, and no legal liability could
attach to those whose names constituted a part of such
partnership name. In Louisiana it has been decided, how-
ever, that the trade-name of a business does not pass with
the good will, and that the use of such name might be
enjoined without reference to the injury caused by the use
of such name.**
Same — Rights of the Vendor
The vendor of the good will of a business *'may do ev-
erything that a stranger to the business in ordinary course
would be in a position to do. He may set up where he
will. He may push his wares as much as he pleases. He
may thus interfere with the custom of his neighbor as a
stranger and an outsider might do; but he must not, I
think, avail himself of his special knowledge of the old cus-
tomers to regain without consideration that which he has
parted with for value. He must not make his approaches
from the vantage ground of his former position, moving
under cover of a connection which* is no longer his. He
may not sell the custom and steal away the customers in
that fashion. That, at all events, is opposed to the com-
»• Slater v. Slater, 175 N. Y. 143. 67 N. B. 224, 61 L. R. A. 796,
96 Am. St Rep. 605. The following cases also recognize the right
of the purchaser of the good will to use the old firm name : Snyd^
Mfg. Co. V. Snyder, 54 Ohio St 86, 43 N. B. 326, 81 L. R. A. 657 ; Row-
eU ▼. Rowell, 122 Wis. 1. 99 N. W. 473. In WILLIAMS v. FAR-
RAND, 88 Mich. 473, 50 N. W. 446, 14 L^ R. A. 161, Gilmore, Cas.
Partnership, 177, the court stated that the purchaser will not, in
the absence of an express agreement, be allowed to continue the
business in the name of the old firm. See **Partn€r8hip" Dec. Dig.
{Key No.) K 228-280, 256, 257; Cent. Dig. U 47^77%, 562, 56$;
''Good wm,"" Dec, Dig. {Key No.) H !-€; Cent. Dig. U 1-5.
•4 Sections 20 and 21 of New Tork Partnership Law (chapter 420,
Laws 1897).
»B Vonderbank v. Schmidt, 44 La. Ann. 284, 10 South. 619, 15 Li
R. A. 462, 32 Am. St Rep. 336. See ''Partnership," Dec. Dig. {Key
No.) 11 228, 229, 256. 251; Cent. Dig. %% ^16, ^77, 562, 563; "Good
WiK." Deo. Dig. {Key No.) M 1-^; Cent. Dig. K i-5.
tS 4fr-51) PARTMEBSHIP PROPERIT 1^5
inon understanding of mankind and the rudiments of com-
mercial morality, and is not, I think, to be excused by any
maxim of public policy." •• The remarks quoted were
made in a case where the question involved was as to the
right of a member of an old firm, who has disposed of his
interest in the good will, to solicit custom from the former
customers of the firm. The question has been a cause of
division among the authorities. It is admitted that a ven-
dor of the good will of a business can set up in a similar
business in the same locality and solicit customers gener-
ally.*^ The courts have hesitated to draw a line between
solicitation in general and personal solicitation of the old
customers. In a well-considered case, the Michigan court
held,** in accordance with the then established rule in Eng-
land, that "the doctrine that a retiring partner who con-
veyed his interest in an established business, whether the
good will be included or not, cannot personally solicit the
customers of the old firm, has no support in principle."
The case of Pearson v. Pearson,** upon which the court
here relied, was, however, overruled in England by the
House of Lords in Trego v. Hunt, and the rule of the
»« Lord Macnaghten In TREGO ▼. HUNT, L. R. [1896] App. Cas.
1, 24 ; WILLIAMS v. FARRAND, 88 Mich. 478, 60 N. W. 446, 14 L.
R. A. 161, Gilxnore, Cas. Partnership, 177; Hutchinson v. Nay, 183
M«B8. 356, 67 N. B. 601. See **Partner8Mp,*' Deo. Dig, (Key No.) §|
«8*-«50, 256, 257; Cent. Dig, U 47M77%, 562, 56S; '*Good Will:'
Dec. Dig. {Key No.) ^ 6; Cent. Dig. f 5.
•T White V. Trowbridge. 216 Pa. 11, 64 Ati. 862. See ^'Partner-
sMpr Dec. Dig. {Key No.) SS 22S-2S0, 256, 251; Cent. Dig. St 475-
477%, 562, 56S; "Good TF«I," Dec. Dig. {Key No.) H J-^/ Cent.
Dig. Sfi Jf-5.
•• WILLIAMS V. FARRAND, 88 Mich. 473, 60 N. W. 446^ 14 L.
R. A. 161, Qilmore, C^. Partnership, 177. See, also, Webster v.
Webster, 180 Mass. 310, 62 N. E. 383, and Hutchinson y. Nay, 187
Mass. 262, 72 N. E. 974, 68 L. R. A. 186, 105 Am. St. Rep. 390,
where the question of the right to solicit old customers Is left open.
See ''Partnership:' Dec. Dig. {Key No.) §{ 228-'230, 256, 257 ;y Cent.
Dig. it 47M77%, 562, 56S; ''Good WiU:* Dec. Dig. (fey No.) H
1-6; Cent. Dig. tt l-^-
•• 27 Ch. Dlv. 145. See "Partnership:* Dec. Dig. {Key No.) tt 228-
2S0, 256, 257; Cent. Dig. tt 475-477%, 562, 665; "Good WiU:' Dec.
Dig. {Key No.) t§ 1-6; Cent. Dig. St i-5.
Gil.Part. — 10
146 NATUBB AND CHARACTBRISTICS (Gh. 3
earlier case of Labouchere v. Dawson * re-established there.
As the law stands, there is very strong authority for the
position that the vendor may not solicit the customers of
the old business.' With regard to the use of the old firm
name, the vendor of the good will is bound by the same
restrictions as strangers to the business. He may not use
it to enable him to lead the public to believe that he is
continuing the old business.*
TITLE TO PARTNERSHIP PROPERTY-
HOW TAKEN AND HELD
52. Title to personal pnoperty can be taken and held in the
partnership nan^. Because of the lack of cer-
tainty as to the grantee, caused by the use of sudi
a name, it is generally held that title to real estate
cannot be taken in a partnership name. The legal
title to land conveyed to a partnership in the part-
nership name vests only in tliose whose names
appear in the partnership namie. If the name of
no person appears in such name, the conveyance
is a nullity. There is some authority, however,
for the position that, if the persons meant by the
partnership name can be id'entified, the legal title
will vest in thenL
Title to Partnership Property — How Taken and Held — Per-
sonal Property
In refusing to recognize the legal existence of the firm
as an entity, the law has made it impossible for the firm,
1 L. R. 13 Eq. 822. See '^Partnership," Deo. Big. (Key No.) §§ ^8^
2S0, 256, 257; Cent. Dig. || 47M77%, 562, 663; ''Good W«Z," Deo.
Dig. (Key No.) §S 1-6; Cent. Dig. |§ 1-5.
a TREGO v. HUNT, L. R. [1896] App. Gas. 1. See ^'Partnership,'*
Deo. Dig. (Key No.) §§ 228-260, 256, 257; Cent. Dig. U 47M77%*,
562, 569; "Good Will,*' Dec. Dig. (Key No.) H 1-6; Cent. Dig. §|
1^.
• Cliarton ▼. Douglas, H. R. V. Johns. 174; WILLIAMS ▼. FAR-
RAND, 88 Mich. 473, 60 N. W. 446, 14 L. R. A. 161, Gilmore, Gas.
Partnership, 177; Myers ▼. Kalamazoo Buggy Co., 64 Mich. 216,
§ 62) TITLB TO PABTNEBSHIP PBOPEBTT 147
as such, to hold the | legal title to any kind of property
whatsoever. The ordinary business transactions of the firm
are, however, conducted in the partnership name, and the
law recognizes that name as sufficiently representative of
the partners to enable them to bind themselves by it. Bills
of sale of personal property in the partnership name pass
title to the property described. A chattel mortgage in a
firm name does the same. In Hendren et al. v. Wing et
al.,^ though the same court had held that "a partnership
as such cannot be the grantee in a deed or hold real es-
tate," and that "if the deed be to a name adopted as the
firm style, which includes the name of no party, it passes
nothing at law," • it was decided a chattel mortgage did
pass title. In this case a chattel mortgage was made to
the Arkansas Machinery & Supply Company, a partner-
ship, in the firm name. The court said : "The business of
the country is largely carried on by partners under partner-
ship names, which frequently do not contain the name, of
any person. Vast quantities of personal property of all
kinds are contracted for, Ibought, and sold by such firms
under their firm names each year, and their right to thus
buy and sell goes unchallenged. A consideration of this
fact shows that there is a wide distinction between the
rights of partnerships at law in regard to the buying and
selling of personal property and the restrictions which pre-
vail therein in regard to transfers of real estate. A mort-
gage is only a conveyance for the purpose of securing a
debt If a bill of sale conveying personal property to a
partnership by its firm name is valid, we see no reason
why a mortgage of personal property to a partnership
should not be upheld under like circumstances.? The fact
that the mortgage is under seal does not alter the rule.*
19 N. W. 981, 20 N. W. 545, 62 Am. Rep. 811. Bee **Partner8hipr
Deo. Dig. {Key No.) §| 928-280, 256, 251; Cent. Dig. U 47M77V^,
562, 568; **Qood WUW* Dec. Dig. {Key No.) §§ i-6; Cent. Dig. H 1-^-
4 HENDREN Y. WING, 60 Ark. 561, 81 S. W. 149, 46 Am. St Rep.
218, GUmore, Gas. Partnership, 189. Bee '^PartnersMp," Deo. Dig.
(Key No.) % 64; Cent. Dig. § 90.
ftPerdfuU t. P2att, 86 Ark. 456. Bee ^^Partnership,** Deo. Dig-
(Key No.) % 68; Cent. Dig. § 105.
• In MAUG^AN Y. 8HARPE, 17 G. B. N. S. 443, a chattel mort-
148 ' NATUBB AND CHABACTBBI8TIC8 (Ch. 3
Same— Real Property
In the case of real estate, it has repeatedly been declared
that the title thereto cannot be held by a partnership/
This is, of course, true when we consider the nature of a
partnership. Its nature does not permit of its holding
property. Since the partnership cannot hold property, it
has been decided in many courts that, if a conveyance of
real estate is made to a partnership in the partnership
name, the legal title vests in those partners whose names
appear in the partnership name — ^they being the only gran-
tees mentioned in the conveyance who are capable of re-
ceiving and hoHing title to the real estate conveyed; the
remaining partners, even if designated by the collective
term "and Co.," getting no legal title whatever.* The
grounds upon which the above cases were decided are
summed up in the case of PercifuU v. Piatt, as follows:*
m
gage under seal was glyen to the firm known as the Olty Invest-
ment & Advance Company. Williams, J., said: **The deed purports
and intends to convey the goods to those persons who use the style
and firm of the City Investment & Advance Company. They may
or may not be a corporation, but when it is ascertained that those
who carry on business under that name are the defendants, the deed
operates to convey the property to them." Bee **Partner8lUp,'* Dec.
Dig. (Key No.) § 68; Cent. Dig. f 90.
T GILLB V. HUNT, 35 Minn. S57, 29 N. W. 2. Gilmore, Cas. Part-
nership, 190; PercifuU v. Piatt, 86 Ark. 456; Moreau v. SafTarans,
3 Sneed (Tenn.) 599, 67 Am. Dec. 582; HOLMES T. JARRBTT, 7
Heisk. (Tenn.) 506; Tidd v. Rines, 26 Minn. 201, 2 N. W. 497;
WOODWARD V. McADAM, 101 Cal. 438, 36 Pac. 1016. iSfee ^'Pari-
nership," Dec. Dig. (Key No.) § 68; Cent. Dig. H 101-111,
< Riddle V. Whltehill, 135 U. S. 621, 10 Sup. Ct 924, 84 L. Bd.
282; PercifuU v. Piatt, 36 Ark. 456; GILLB T. HUNT, 85 Minn.
357, 29 N. W. 2, GUmore, Cas. Partnership, 190; Arthur V. Weston,
22 Mo. 378.
In Kringle v. Rhomberg, 120 Iowa, 472, 94 N. W. 1116, it was held
that, "where title to real estate purchased in a partnership transac-
tion is taken in the name of one of the partners, there is a result-
ing trust in favor of the partnership, which may be established by
parol evidence, so that the title in the one partner may be charged
with the interest of the partnership.'* See further, chapter II, $S
27, 28, p. 93. Bee '^Partnership," Dec. Dig. {Key No.) | 68; Cent.
Dig. §§ 101-111; ''Deedsr Cent. Dig. \ 288.
• PercifuU v. Piatt, 36 Ark. 456. Bee ** Partnership;' Deo. Dig
{Key No.) S 68; Cent. Dig. § 105.
:
g 52) TITLE TO PABTMBBfiHZP FBOPBBTT 149
"A partnership, as such, cannot, at law, be the grantee in
a deed, or hold real estate. The legal title must vest in
some person, and a partnership is not a corporation. If
the title be made to all the partners by name, they hold
the legal title as tenants in common, without survivorship.
If to one partner alone, the whole legal title vests in him,
which is the case, also, where the title is to a partnership
name, which, as in this case, expresses the name of one
party only, with the addition of '& Co.' If the deed be to
a name adopted as the firm style, which includes the name
of no party, it passes nothing in law. The same occurs
where the deed is to one already dead." *•
The reasons here given for holding that title passes
only to those partners included in the firm name are not
sound. They are founded on the theory that a partnership
name is the name of an entity not recognized in law. The
reason why a deed to a dead grantee fails is because the
person intended to take is not in existence. But a partner-
ship name is a compendious expression used instead of the
names of the partners. It is actually a name indicating ex-
isting natural persons. This being so, the courts have. been
driven to seek another reason for the rule. This has been
found in the uncertainty of the grantee intended by a part-
nership name and the consequent confusion of titles. Thus,
in Arthur v. Weston," the court, in holding that a convey-
ance of land to W. W. Phelps & Co.- passed title to Phelps
alone, declared that the question was "whether the part-
nership style is, as a matter of law, a good name of pur-
chase in a conveyance of real property sufficient to pass
the legal title to all the individuals of the firm.'* They an-
swered the question by saying that, "a conveyance of real
property being required by statute to be put in writing,
the party who is to take as grantee must be sufficiently
ascertained . by the written instrument, or it is a nullity, so
far as it purports to etfect a transfer of the legal title."
loRiffel y. Ozark Land & Lumber Co., SL Mo. App. 177. See
''Partnership,'' Dec. Dig. {Key No.) § 68; Cent, Dig. U 101-111.
11 22 Mo. 37a Bee ** Partnership;* Deo. Dig. (Key No.) % 68; Cent.
Dig. U lOl-Ul; ''Deeda," Cent. Dig. I «88.
150 NATURB AND CHARACTBRISTICS (Oh. 3
In Winter v. Stock,** the court held that a conveyance to
"Louis Blanchard & Co." passed title to Louis Blanchard
alone, saying: "A deed to a person by name 'and Com-
pany,' as to 'Louis Blanchard & Co.' contains no certain
designation or description of any other person than Louis
blanchard, for the reason that the word 'Company^ may de-
scribe one person as well as another." In Gille v. Hunt,**
it was decided that a conveyance to "D. B. Dorman & Co."
passed title to D. B. Dorman alone ; the court saying with
reference to a conveyance under general designations, such
as "associates" and "& Co.": "There are some authorities
which seem to hold that such a conveyance would be good
to the persons so designated, and that it may be proved
by parol who they are; but we think these cases go a
g^eat way towards holding that a conveyance of real estate
may vest partly in parol, and when we consider the infinite
confusion in titles to real estate, in which there ought to
be g^eat definiteness and certainty, such a rule might let
in, we do not hesitate to decide that the proposition that
such a designation is too indefinite and uncertain rests in
better reason and authority."
There is no doubt that the reasoning of the last-mentioned
cases is sound. The grantee in a conveyance of real estate
should be certain. Yet there is much authority for the
statement that a designation of the members of a partner-
ship, either by a wholly fictitious name, or by one in which
the names of some of the partners only appear, is suffi-
ciently certain to enable all of the partners to take title
under a conveyance in such name. That is certain which
may be made certain. If a grantee is sufficiently described,
so that the person meant may be identified, the grant is
certain. Applying the maxim, it is said in Sheppard's
Touchstone : ** "And yet, if the grant do not intend to de-
scribe the grantee by his known name, but by some other
is 29 Gal. 407, 89 Am. Dec. 67. See "Partnership,'' Dec Dig. {Kep
yo.) § 68; Cent. Dig. S§ lO!--!!!; ''Deeds,'' Cent. Dig. % 28S.
It GILLE Y. HUNT, 85 Minn. 857, 29 N. W. 2, GUmore, Gas. Part-
nership. 190. Bee ''Partnership," Deo. Dig. (Key Ho.) § 68; CenL
Dig. |§ 101-111; "Deeds," Cent. Dig. § 288.
i« Sheppard'8 Touchstone, p. 230.
g 52) TITLE TO PARTS fiRSHIP PBOPERTT 151
matter, there it may be made good by a certain description
of the person, without either surname or name of baptism."
Accordingly it has been held that a conveyance to the
"Lady Superior" of a convent passed the legal title to the
person who was at the time of the conveyance the Lady
Superior of the convent.** And it was held in Hoffman v.
Porter,** by Marshall, J., sitting as circuit judge, that, as
against demurrer to the complaint of John Hoffman, suing
as surviving partner on the covenants contained in a deed
to "Peter Hoffman & Son," John Hoffman was sufficiently
designated in the deed to enable him to sue on the cove-
nants contained therein. In Alabama it was held that a
deed to "Stoudenmeier & Co." vested the legal title in the
several members of the firm as tenants in common, and not
in the name of the partnersl^ip as such. Its legal effect
was the same as if the deed had been made to the three
partners in their individual names.*^
In Byam v. Bickford,** a deed was made to the "South
Chelmsford Hall Associates." It was agreed that South
Chelmsford Hall Association was meant. The court said:
"It is probable that, in making the deed, it was supposed
IB Lady Superior y. McNamara, 8 Barb. Ch. (N. T.) 375, 49. Am.
Dea 184.
i^Fed. Cas, No. 6^577. The court said: 'That the word 'Son,*
connected with other words which ascertain the son intended, is a
word of purchase, has been very well settled. In all the conveyances
In what is termed 'strict settlement,' a conveyance to A., remainder
to the first, second, third, and fourth sons of B., has been considered
as unquestionably valid. If these words are good to pass a remain-
der, I can perceive no reason why they might not pass a present
estate. If, then, this conveyance had been to the 'first son' of Peter
Hoffman, the estate might have passed to the first son. So, if he had
been an only 'son.' But It is admitted that a conveyance to the son
of A., he having several sons, would be void for uncertainty, and
that no averment could make it good. The question then is whether
there is anything in this deed to ascertain the son who is the pur-
chaser. Peter Hoffman was in partnership with his son John, and
the firm was known by the name of 'Peter Hoffman & Son.' I am
dis];>osed to think that this circumstance may designate the son
intended in the deed." See **Deed3," Cent. Dig. § 288.
17 Brunson y. Morgan, 76 Ala. 503. Bee ^^Partnership,*' Dec Dig,
(Key No.) § 68; Cent. Dig. §S lOUlll; ''Deedsr Cent. Dig. % 288.
IS 140 Mass. 81, 2 N. B. 687. See ** Associations,'' Cent. Dig. | 20.
152 NATUBB AND CHARACTBBI8TICB (Gh. S
that, although unincorporated, this association, as such, was
capable of taking and holding real estate. While there are
certain unincorporated societies which may, as such, take
and hold real estate by statute, this society does not belong
to that class. The general rule, therefore, applies to it, and
it is not qualified to take, as such, real estate as grantee.
But the South Chelmsford Hall Association was a body
well known, all the members of which could be ascer-
tained, and, as it could not take as a corporation, the deed
may properly be construed as a grant of the estate to those
who were properly described by this title, especially as the
grant is to the 'Associates,' a term deemed by the grantors
to mean the same as 'Association.' The persons associ-
ated in the society were thus tenants in common of the
land conveyed." In Kelley v. Bourne,** it was decided
that a deed to a partnership called the "Grant's Pass Real
Estate Association" passed at least an equitable title to the
members of the partnership.**
In Walker v. Miller,** a partnership business in the
name of James Webb, Jr., & Bro. was continued in the
same name after the death of both members of the firm by
the beneficial owners of their interests. A question arising
as to the validity of a conveyance of real estate made to
those owning the business in the partnership name, it was
held that parol evidence might be given in order to ascer-
tain the grantees.** From the above cases it may be seen
!• 15 Or. 476, 16 Pac. 40. Bee ^'Partnership,'' Dec. Dig. {Key No.)
i 68; Cent Dig. § 105.
>o Spaulding Mfg. Co. y. Qodbold, 92 Ark. 63, 121 8. W. 1063.
See ''Parinerahipr Dec. Dig. {Key No.) | 68; Cent. Dig. H 101-111.
SI 139 N. C. 448, 52 8. E. 125, 1 L. R. A. (N. S.) 157, 111 Am. St.
Rep. 805. Bee ^'Partnership** Deo. Dig. {Key No.) § 68; Cent. Dig.
II 101-111.
sfl The court saying: *'It Is sometimes said that only an equitable
title is conveyed in such cases. The better view, we think, is that
which we find sustained by the authorities cited — ^that the am-
biguity is latent and open to explanation, by which the real party
is disclosed and the deed treated as If the names were inserted. If
however, the other view be adopted, the same result would follow
in this case. It is well settled under our judicinl system that a par-
ty may recover in ejectment upon an equitable title."
It has been decided in a number of cases that where a mortgage
§ 52) TITLE TO PABTNER8HIP PROPERTT 153
that there is strong authority for the proposition that a
grant of land in the partnership name, whatever that name
may be, passes title to all of the members of the partner-
ship. But the objection of uncertainty is entitled to great
weight. It certainly adds much to the difficulty of deter-
mining in whom the record title lies to permit several gran-
tees to be named by a collective title,
of real estate creates a lien only, and is not a conveyance, a mort-
gage in the partnership name Is good, and the lien accrues to the
firm. Chicago Lumber Go. y. Ash worth, 26 Kan. 212; Foster y.
Johnson, 39 Minn. &80, 40'N. W. 259; Barber Y. Growell, 55 Neb.
571. 75 N. W. 1109.
In Barber v. Crowell, in determining the effect of a mortgage to
the ^'Western Trust & Security Company," the court said: "On
the assumption that the mortgagee was a partnership or unincorpo-
rated association, it is contended that it could not take title to
real estate, and that the mortgage Is therefore a nullity. It is un-
doubtedly true that a conyeyance of land will be ineffectual to pass
the legal title, unless made to a grantee haying capacity to receiye
it ; and it is also true that a partnership possesses no such capacity.
But a mortgage is not a conveyance. It is a mere security in the
form of a conditional conveyance, and the interest which it vests
in the mortgagee is not essentially different from that created by a
mechanic's lien or an ordinary judgment."
In Foster v. Johnson, supra, an action was begun to foreclose a
mortgage to a firm composed of L. S. Blake and James Y. Elliott,
the mortgage being given in the firm name, Blake & Elliott The
court held that the partners were sufficiently described to enable
them to take. They held further, however, that this question was
immaterial as a mortgage in the form of the one in question did
not operate" as a conveyance, distinguishing GILLE v. HUNT, 35
M4nn. 357, 29 N. W. 2, Gilmore, Gas. Partnership, 190, in the fol-
lowing language: ''But, in an action to foreclose, it is only neces-
sary that there should be a lien, and no question can be made that
a lien may accrue to a partnership in its firm name. In this re-
spect there is a difference l)etwe^n a foreclosure under the power of
sale and a foreclosure by action. In the former case the title must
pass by virtue of the mortgage, and the mortgage must be sufficient
to operate as a conveyance as soon as the equity of redemption is
barred by the sale ; but in the latter case the title passes by virtue
of the decree and sale under It There is no going behind the de-
cree to ascertain if the mortgage was sufficient to operate as a con-
veyance." See ^^Partnership," Deo. Dig. {JBLey No,) § 68; OetU. Dig.
%% lOl'lll.
154 MATUBB AND CHARACTERISTICS (Ob. 3
CONVERSION OF PARTNERSHIP REALTY
INTO PERSONALTY
53. By the doctrine of equitable conversion, the real estate
of a partnership is, unless a contrary intention ap-
pears, deemed to be personal property.
«
It is a well-established maxim of equity that equity re-
gards that as done which ought to be done. The most re-
markable application of the principle of equity indicated
by the maxim is found in what is called the "conversion'*
of property. Conversion has been defined as "that change
in the nature of property by which, for certain purposes,
real estate is considered as personal, and personal estate
as real, and transmissible as such." *" This change in the
nature of property is dependent upon the intention of the
owner, and if he has indicated an intention to alter his real
property into personal property, or his personal property
into real property, equity will treat the property as though
the intention had been carried out.** When persons enter
into partnership, there is an implied agreement that the
partnership property shall be liable for firm debts. This
means that it is agreed among them that as far as neces-
ss Francis, Maxims, Max. 13 ; Pomeroy's Equity Jurisprudence,
§ 1159; Green y. Smith, 1 Atk. 572; Lorillard ▼. Coster, 5 Paige (N.
Y.) 172. Bee '^Partnership^' Deo. Dig, {Key No,) §§ 68, 246; Cent.
Dig, S§ 108, 522, 523; *'Con/ver8ion;' Dec. Dig. (Key No.) SI 1-22;
Cent. Dig. S§ 1-72.
S4 The rule as stated by Sir Thomas Sewell, in Fletcher y. Ash-
bum, 1 Brown's Chan. 4d7, is as follows: "Money directed to be
employed in the purchase of land, ^nd land directed to be sold and
turned into money, are to be considered as that species of property
into which they are directed to be converted ; and this in whatever
manner the direction is given, whether by will,' by way of contract,
marriage, articles, settlement, or otherwise, and whether the money
is actually deposited or only covenanted to be paid, whether the
land is actually conveyed or only agreed to be conveyed. The own-
er of the fund or the contracting parties may make land money or
money land." See '* Partnership," Dec. Dig. (Key No.) §S 68, 246;
Cent. Dig. SS 108, 522, 523; ^'Conversion;' Dec. Dig. {Key No.) {|
i-2a; Cent. Dig. §S 1-72.
§ 54) COMTEBSION OV BEALTT INTO PER80NALTT 165
sary to pay the firm obligations the firm property may be
turned into money. If the firm acquires real estate, it is
acquired on this understanding. Carrying out the inten-
tion thus manifested by entering into the partnership, eq-
uity regards partnership real estate as personal property^
at least as far as necessary to pay debts.
SAME— EXTENT OF. CONVERSION
54, Equitable conversion being based upon the intention
of the partners, implied from the partnership agree-
ment, the extent to which firm realty will be con-
verted into personalty will depend upon the view
taken by the court of such intention. A difference
in view has led to the establishment of two rules,
known, respectively, as the English and the Amer-
ican rule.
(1) English rule of out and out conversion: Partnership
realty is, unless a contrary intention appears, con-
verted for all purposes into personalty, and is ad-
ministered and distributed according to the rules
governing personal property.
(2) American rule of pro tanto conversion : Partnership
realty is converted into personalty so far as is nec-
essary for carrying on the firm business and the
payment of the firm debts. The ordinary incidents
of dower and descent attach, even in equity, to
the siuplus left after the partnership business js
woimd up and the partnership accounts are settled.
Special rule in Massachusetts: Partnership realty
may be subjected to the payment of firm debts,
but not pursuant to the doctrine of equitable con-
version. Such realty is not converted at all, but
is impressed with a trust for the benefit of the
partnership and partnership creditors.
Conversion of Partnership Realty — Extent of Conversion De^
pefids upon Agreement of Partners
Since the conversion of partnership realty is a manifesta-
tion of the law of equitable conversion, and since equitable
156 NATURE AND CHARACTBRI8TIC8 (Ch. 3
conversion is based upon the intention of the parties, it fol-
lows that, if it can be shown that the partners so intended,
the partnership realty will be held to be converted for all
purposes.'* Such an intention is most clearly indicated by
means of an express agreement to that effect.'* In the ab-
sence of an express agreement, the intention of the parties
must be ascertained from their conduct, and, if there is
nothing more, it must be ascertained from the nature and
incidents of a partnership agreement. It is sometimes said
that such an agreement may be inferred from the purpose
for which particular real estate was purchased and used.'*
25 Holladay v. Land & River Imp. Co., 57 Fed. 774, 6 G. C. A. 560;
Riddle T. WhitehlU, 135 U. S. 621, 10 Sup. Gt 924, 34 L. Ed. 282;
Allen V. Withrow, 110 U. S. 119. 3 Sup. Gt. 517, 28 L. Ed. 90 ; Brown
▼. Slee, 108 U. S. 828, 26 U Ed. 618; ROVELSKY v. BROWN. 92
Ala. 522, 9 South. 182, 25 Am. St. Rep. 83, Gllmore, Gas. Partner-
ship, 239 ; DAVIS v. SMITH, 82 Ala. 198, 2 South. 897 ; Lenow v.
Fones, 48 Ark. 557, 4 S. W. 56 ; NlcoU v. Ogden, 29 111. 323, 81 Am.
Dec. 811; Maddock v. Astbury, 32 N. J. Eq. 181; Rosenbaum v.
City of N. Y., 59 Misc. Rep. 30, 109 N. Y. Supp. 775 ; DARROW v.
GALEINS, 154 N. Y. 503, 49 N. E. 61, 48 L. R. A. 299, 61 Am. St. Rep.
637, Gllmore, Gas. Partnership, 203 ; Barney y. Pike, 94 App. Dlr. 199,
87 N. Y. Supp. 1038 ; Ludlow's Heirs ▼. Gooper's Devisees, 4 Ohio St.
1; Leaf's Appeal, 105 Pa. 505; Frost ▼. Wolf, 77 Tex. 466, 14 S. W.
440, 19 Am. St. Rep. 761 ; Davis v. Ghrlstlan, 15 Grat (Va.) 11 ; Pierce's
Adm'r v. Trigg's Heirs, 10 Leigh (Va.) 406. "The question whether
the interest of a partner in such real estate shall for purposes of dis-
tribution be treated as realty or personalty is incidental to the relation
of copartnership. Its disposition is governed by express agreement,
or that implied from the acts of the copartners.*' Hiscock, J., in
Buckley v. Doig, 188 N. Y. 288, 80 N. E. 913. See "Partnership:*
Deo, Dig. (Key No,) S§ 68, 24$; Cent. Dig. » 108, 522-523.
2e Wilson v. HoUoway, 8 Gh. 340; THORNTON v. DIXON, 3 Bro.
Gh. 199; DAVIS v. SMITH, 82 Ala. 198, 2 South. 897; Smith v.
Jackson, 2 Edw. Gh. (N. Y.) 28. See "PartnersMp;' Dec Dig. (Key
yo.) §§.^8, 246; Cent. Dig. §§ 108, 522^23.
ST **The investment of partnership funds in lands and chattels
for the purpose of a partnership business, the fact that the two
species of property are in most cases of this kind so commingled
that they cannot be separated without impairing the value of each,
has been deemed to justify the inference that under such circum-
stances the lands as well as the chattels were intended by the part-
ners to constitute a part of the partnership^ stock, and that both to-
gether should take the character of personalty for all purposes;
and Judge Denio, in GoUumb v. Read [24 N. Y. 505], expressed the
§ 54) CX>NyER8ION OV BEALTT INTO PBRSONALTT 157
Equity seeks to give effect to the intention of the parties,
and will convert firm realty into personalty to the extent in-
dicated by such intention. In interpreting the agreement of
the partners with respect to their intention as to the treat-
ment of their real estate courts have differed, but the dif-
ference is as to the extent and not as to the principle of
conversion. The differences may be expressed in two rules,
which for convenience may be called the American and
English rules, representing the weight of authority in each
country.
Same — English Rule
The English rule may be stated as follows : Real prop-
erty owned by a partnership becomes, as a consequence of
such ownership, converted into personal property for all
purposes. This is embodied in the Partnership Act, 1890,
§§ 22 and 20 (2) : Section 22. "Where land or any herit-
able interest therein has become partnership property, it
shall, unless the contrary intention appears, be treated as
between the partners (including the representatives of a
deceased partner) and also as between the heirs of a de-
ceased partner and his executors or administrators, as per-
sonal or movable and not real or heritable estate." Section
20 (2) provides "that the legal estate or interest in any land,
or in Scotland the title to and interest in, any heritable es-
tate, which belongs to the partnership, shall devolve ac-
cording to the nature and tenure thereof, and the general
rules of law thereto applicable, but in trust, so far as neces-
sary, for the persons beneficially interested in the land un-
der this section." *•
opiDion that to this extent the EngUsh mle of conversion prevailed
here. That imramount consideration should be given to the inten-
tion of the partners when ascertained Is conceded by most of the
cases." Andrews, C. J., in DARROW v. CALKINS, 154 N. T. 508,
616, 49 N. B. 61, 64, 48 L. R. A. 299, 61 Am. St Rep. 687, Gilmore,
Gas. Partnership, 203. See ^^Partnership," Dec. Dig. (Key No.) §§
68, 246; Genu Dig. H 108, 522^23.
28 The Bnglish cases were not uniform in sustaining the above
rule, the following being opposed to it: THORNTON y. DIXON, 8
Bro. O. O. 199; Bell ▼. Phyn, 7 Yes. 453; Randall ▼. Randall, 7
Sim. 271; Oookson v. Cookson, 8 SinL 529. The later cases and
the majority of them were in favor of It, however. Ripl^ y. Wa-
168 NATUBB AND CHARACTERISTICS (Ch. 3
The rule is "said to have grown out -of the peculiar law
of inheritance there (England), and to remedy the hard-
ship of the rule which excludes all but the eldest child from
the inheritance, and of the other rule which exempts real
estate in the hands of the heir from all but the specialty
debts of the ancestor." •• These considerations may have
influenced the English courts, in that they took them into
consideration in determining what the parties intended;
but there is no doubt that the immediate basis of the deci-
sions establishing the rule which is above stated was the
intention of the parties themselves. This is nowhere bet-
ter indicated than in Darby v. Darby,*® the reasoning in
that case being as follows: In a court of equity the share
of a partner, on the dissolution of the partnership, in the
partnership property, is the amount of money that his share
of the surplus amounts to after the partnership property
has been sold and the partnership debts paid. Every part-
ner has a right to demand that all the assets of the partner-
ship shall be converted into money and no partner can be
compelled to accept his share in specie. This right is in-
herent in the contract of partnership, and is as much /a part
of the contract as though expressly stipulated. It applies
to all kinds of property, real as well as personal. It fol-
lows that all the real estate of partnership is acquired and
held under the implied agreement that it shall be sold on
dissolution of the partnership. If one agrees to sell land,
such land is, in equity, considered as converted into per-
sonalty. Applying this rule to partnership realty, such
terworth, 7 Ves. 425; Townsend ▼. Devaynes, 1 Mont Part Appen-
dix, p. 96 ; Phillips y. Phillips, 1 M. & K. 649 ; Broom ▼. Broom, 8
M*. & K. 443 ; Morris ▼. Kearsley, 2 Y. & G. Ex. 139 ; Houghton y.
Houghton, 11 Sim. 491; DARBY v. DARBY, 3 Drew. 495, GUmore,
Cas. Partnership, 193; Essex y. Essex, 20 Beay. 442; Waterer y.
Waterer, 15 Eq. 402; Murtagh y. Ck>stello, 7 L. R. Ir. 428; Hol-
royd V. Holroyd, 7 W. R. 428. 8ee "Partnership,*' Dec Dig, {Key
No.) §S 68, 246; Cent. Dig. Sf 108, 522^2S.
»» D ARROW y. CALKINS. 154 N. Y. 503, 49 N. B. 61, 48 Lw R.
A. 299, 61 AuL St Rep. 637, Gilmore, Cas. Partnership, 203. See
••Partnership," Deo. Dig. (Key No.) S§ 68, 246; Cent. Dig. S§ 108,
522^2S.
80 DARBY y. DARBY, 3 Drew. 495, Gilmore, Gas. Partnership,
193. See ** Partnership," Deo. Dig. (Key No.) I 68; Cent. Dig. § 108.
§ 64) CONVERSION OF REALTT INTO PERSON ALTT 159
realty is in equity converted into personalty for all pur-
poses.*^
Same — American Rule
Both the English and American courts which recognize
the doctrine of conversion proceed upon the theory of giv-
ing eflFect to the intention of the partners, implied from the
partnership agreement. The difference lies in the implica-
tion the courts of the two countries make, respectively, as
to the partners' agreement with respect to th'e treatment
of the firm real estate; the English courts holding, on the
one hand, that the partners contemplated and impliedly
agreed that upon dissolution all the firm assets, real and
personal, should be turned into cash for payment of debts
and distribution. The American courts hold, on the other
hand, that the partners did iiot thus contemplate and im-
pliedly agree, but rather intended that firm realty should
continue such, and upon dissolution be divided in kind, sub-
ject only to being converted into personalty if necessary for
the carrying on of the firm business and for the payment
of firm debts. The reason for thus interpreting the inten-
tion of the partners seems to be found in the nature of the
property. Personal property, while capable of being di-
vided in kind upon a dissolution of the firm, is not usually
so divided, but is turned into cash. Real estate, on the
other hand, is easily partitioned, and is usually divided in
kind. The partners therefore intended upon dissolution to
divide the two kinds of property in the usual way. This
reason is stated in Shearer v. Shearer:"* "In relation to
personal property, there is a practical difficulty in this re-
spect. The law recognizes it, and, upon the death of one
•1 "From the principle that a share of a partner is nothing more
than his proportion of the partnership assets after they have been
turned Into money and applied in liquidation of the partnership
debts, it necessarily follows that. In equity, a share In a partner-
ship, whether its property consist of land or not, must, as between
the real and personal representatives of a deceased partner, be deem-
ed to be personal, and not real estate, unless, Indeed, such conversion
is Inconsistent with the agreement between the parties." Lindley,
Partnership, •343.
»2 SHEARER V. SHEARER, 98 Mass. 107, 115. See '^Partner-
Mhip," Dec Dig. (Key No.) IS 68, 246; Cent. Dig. U 108, 522^.
160 NATURE AND CHABACTBBI8TIC8 (Gh. 3
partner, vests the whole title in the survivor. Even during
the continuance of the copartnership, one partner may
transfer the entire title of the firm by sale of any of its per-
sonal property in the course of its business. In regard to
such property, the rule that it is to be in all cases converted
into money is undoubtedly well established and entirely
uniform everywhere. In this equity follows the analogies
of the law. On the other hand, neither partner can con-
vey the interest of his copartner in real estate. The law
provides for its transmission in undivided shares; for its
partition; for its descent to the heirs of a deceased part-
ner. It seems to us best to accord with the general prin-
ciples of equitable interference that equity should recog-
nize the division of real estate held by copartners as al-
ready effected by operation of law, unless and except so
far as the terms of the copartnership and the state of the
accounts require its interposition in order to make the legal
title conform to the equitable or beneficial interest. When
this is accomplished, equity has no longer any office to
perform towards it."
Perhaps a more fundamental reason is found in the un-
conscious recognition of the firm as an entity, usually ex-
pressed by saying that the interest of a partner in partner-
ship property pertains not to any tangible property, but
only to the surplus which remains after the partnership
debts are paid and its affairs wound up. Since firm real
estate need not ordinarily be sold upon dissolution in or-
der to effect a division, there is no reason for implying an
agreement of the partners that it should be sold. But it
clearly was the intention that all the firm assets of every
kind be available for the purposes of firm business and for
the payment of the firm debts, and, in converting the realty
into personalty, equity is merely carrying out the implied
agreement of the partners. Therefore the general rule in
the United States is that partnership realty is to be con-
sidered as converted into personalty only so far as may be
necessary for the carrying on of the firm business and for
the payment of the firm debts.*' As the rule is sometimes
•» DARROW ▼. CALKINS, 154 N. Y. 503, 4^ N. B. 61, 48 L. R. A.
299, 61 Am. St Rep. 637, Qllmore, Gas. Partnership, 203 ; SHANKS
§ 64) OOKYSRSION OF BEALTT INTO PBRQOKALTY 16]
Stated, the conversion is limited to the payment of firm
debts. It would seem, however, that conversion for all the
purposes of the partnership, including the payment of
debts, is more correct. That some courts recognize a con-
version to this extent is manifest in the dower cases to be
noticed presently.**
Equity only regards the real estate of a partnership as
personal property for the purpose of carrying on the firm
business and paying the debts and settling the accounts of
the partners. In other respects it retains its legal inci-
dents,*** both at law and in equity.**
Special Rule in Massachusetts
Though the rights of the partners inter se and of firm
creditors in the firm realty are usually worked out through
an equitable conversion of the realty, such rights are not
infrequently spoken of as being based upon a trust aris-
ing out of the partnership relationship. This is notably
true in Massachusetts, where it is held that there is no con-
version at all, and that the rights of partners and creditors
are based upon a trust, the existence of which does not de-
pend upon the intention of the parties. This view is thus
stated in Shearer v. Shearer :*^ "Conceding the agreement
as supposed (in Darby v. Darby) either express (provided
it be not in writing) or implied, it is not such a contract as
V. KLEIN, 104 U. S. 18, 26 L. Ed. 695, Gllmore, Cas. Partnership,
260 ; DAVIS t. SMITH, 82 Ala. 108, 2 South. 807 ; MorriU v. Cole-
hour, 82 111. 618; Whitney v. Gotten, 53 Miss. 680; Campbell v.
Campbell, 30 N. J. Eq. 415; Mann v. Paddock, 108 Va. 827, 62 S.
E, 051. See "Partnership,'' Deo. Dig. (Key No.) §{ 68, 246; Cent.
Dig. H i08, 522^523.
»* See post, p. 167.
••Schllchter Jute Cordage Co. v. Mulqueen (O. C.) 142 Fed. 588;
Powers V. Robinson, 00 Ala. 225, 8 South. 10; Lenow t. Fones, 48
Ark. 557, 4 S. W. 56; Pepper v. Pepper, 24 IlL App. 316; CoUumb
y. Bead, 24 N. Y. 505 ; Dawson v. Parsons, 10 Misc. Rep. 428, 81 N.
Y. Supp. 78; Martin V. Morris, 62 Wis. 418. 22 N. W. 525. See
'* Partnership;' Dec. Dig. {Key No.) Si 68, 246; Cent. Dig. §} 108,
52Z-52S.
3« Flanagan v. Shuck, 82 Ky. 617. See ''Partnership;* Dec Dig.
{Key No.) § 68; Cent, Dig. { 108.
»T SHEARER V. SHEARER, 08 Mass. 107, lia See "Partner-
ship,'' Dec. Dig. {Key No.) }{ 68, 246; Cent. Dig. §§ 108, 522^25.
Gil.Pabt. — 11
162 NATUBB AND CHARACTERISTICS (Ch. 3
entitles the parties to a specific performance, and it does
not create the trust required for the conversion of real es-
tate. The statute demands a written agreement for that
purpose. Geni St. c. 100, § 19." The English statutes
seem equally to require it. The implied trust, which is en-
forced in equity for the adjustment of partnership obliga-
tions, results from the investment of the funds of the part-
nership in the real estate in question, for the use of the
partnership. Regarding it in that light, the court have but
to inquire to what use the funds, represented in the land,
are devoted; to whom and in what proportions the bene-
ficial interests belong; and the execution of the trust will
follow according to the nature of the rights to be secured.
It is not necessary to resort to inventions to work out the
equities of the case through some implied contract, or sup-
posed intentions of the parties in entering into the relation
of partnership, or in applying it to the ownership of land.
The ordinary, well-known, and generally recognized prin-
ciples of equity, as applied to trusts arising by implication
of law, are sufficient for all the requirements of that rela-
tion."
The reasoning here gfiven is radically different from that
of the cases upon which the doctrine of conversion is based.
Here there is no conversion, but the real estate continues
as real estate, subject to being changed with a trust to dis-
charge from debts. The result reached under this doctrine
is not apparently greatly different from that reached un-
der the pro tanto conversion rule. In each case the real
estate is liable for the firm debts, and in each case the sur-
plus, after debts are paid and accounts are settled, descends
ss "A question, however, is made and concerning which some
doubt arises from the conflict in decided cases. Will anything
short of an express covenant in the partnership articles have the
effect in equity of converting realty into personalty to all intents?
We see no good reason for holding that an agreement in writing is
necessary for such conversion. Undoubtedly the intention to con-
vert out and out should be made to appear clearly ; but such inten-
tion may be inferred from circumstances with sufficient deamess."
Mcllvalne, J., in Rammelsberg v. Mltcheil, 29 Ohio St 22, 53. See
•'Partnership," Deo, Dig. (Key No.) §§ 68, 246; Cent. Dig. U 108,
622-523.
S 64) OONYSBSION OF REALTY* INTO PBB50NALTT . 163
to the heirs of a deceased partner, free from trust or equit-
able obligation.**
Position of the Legal Title
It must be remembered that the doctrine of conversion is
an equitable one, as is also the doctrine that each partner
is endowed with an equity against the firm property for
the payment of firm debts. Neither in any way affects the
legal title. That passes either by virtue of a conveyance
good under the Statute of Frauds, by judicial decree, or, in
certain situations, by operation of law. The inception or
dissolution of a partnership does not constitute one of
those situations. The legal title to real property is not af-
fected in any way by the fact that it may be partnership
property, though the fact that those owning it are part-
ners may prevent them from using it as ordinary joint own-
ers could, and though it may in equity be subjected to in-
cidents that joint property is not ordinarily subject to.
This is due to the necessity of being able to establish a rec-
ord title. The facility and informality with which a part-
nership can be created and dissolved, with which it can
convert separate property into joint property and convert
joint property into several property, and with which it can
convert real property into personal property, in the view
of a court of equity, would destroy the stability of record
titles, if any of those things were permitted to affect them.
Hence, so far as the question of title to land is concerned,
partnership land is conceived of as being held either in joint
tenancy or tenancy in common. These relationships being
only incident to the holding of the legal title to land and
consequent upon it, they have no tendency to cause confu-
sion in titles. Though the fact of the existence of a part-
nership does not affect the legal title to land held by the
partnership, since the same fact, notably the death of a
partner, may cause a dissolution of the partnership and a
devolution of the title to land held by the partnership, it
«• Lenow y. Fones, 48 Ark. 557, 4 S. W. 56; SHBARER y. SHEAB-
ER, 98 Mass. 107 ; Scruggs y. Blair, 44 Miss. 406 ; Buchan y. Sum-
nep, 2 Barb. Ch. (N. Y.) 109, 47 Am. Dec 305. See ''Partnership,''
Deo. Dig. (Key No.) §§ 68, 2i6; Cent. Dig. §{ 108, 6iZ-623, 7(7^
164 NATUBB AND *CHAItACTBRI8TIC8 (Ch. 3
may make considerable difference in winding up a partner^"
ship, on the death of one partner, whether partnership land
is conceived of as being held in joint tenancy or in tenancy
in common.
In England the view seems to be that the legal title of
partners is held in joint tenancy. Hence, on the death of
one of the members of the firm, the legal title to his un-
divided intereist of the partnership survives to the other
members of the firm in whose name the legal title to the
rest of the land stands.^* In case the legal title is all in
one partner, it passes on his death to his personal repre*
sentative.*^ In this country joint tenancy is not favored,**
and it is generally held that partners hold the legal title to
firm realty as tenants in common, and on the death of one
of the partners the legal title to his share of the firm realty
passes to his heirs.** It passes to them subject to be ap-
plied to the firm debts.
*«JEFFBREYS ▼. SMALL, 1 Vera. 217, Oilmore, Cas. Partner-
ship, 266; Elliot y. Bfowd, 3 Swans. 489, note. See "Partnership,"
Deo. Dig. (Key No,) § 246; Cent Dig. S§ 519-^23,
«i Land Transfer Act, 1897 (60 ft 61 Vict c. 65) § 1.
«* See Joint Tenancy and Tenancy in Ck>mmon, chapter I, pp. 42-43.
«• SHANKS Y. KLEIN, 104 U. S. 18, 26 L. Ed. 635, Gllmore, Gas.
Partnership, 269; Perin y. Megibben, 53 Fed. 86, 3 G. G. A. 443, 6 U.
S. App. 348;' Megibben's Adm'rs y. Perin (G. G.) 49 Fed. 183; Glay
Y. Field (D. G.) 34 Fed. 375 ; Logan y. Greenlaw (G. G.) 25 Fed. 299 ;
Walton Y. Atkinson (Ala.) 51 South. 826; Blanchard y. Floyd, 96
Ala. 58, 9 South. 418; ANDREWS' HEIRS y. BROWN'S ADM'E,
21 Ala. 437, 56 Am. Dec. 252; Gllmore, Gas. Partnership, 267; Per-
cifuU Y. Piatt, 36 Ark. 456; Dupuy y. LeaYenworth, 17 Gal. 262;
Loubat Y. Nourse, 5 Fla. 350 ; Galbraith y. Gedge, 16 B. Mon. (Ky.)
631; Flanagan y. Shuck, 82 Ky. 619; Gasky y. Gasky, 6 Ky. Law
Rep. 775; Holmes y. Self, 79 Ky. 297; Lowe y. Lowe, 18 Bush
(Ky.) 688; Goodbum t. SteYens, 6 Gill (Md.) 1; Wilcox t. Wilcox,
13 Allen ^ass.) 252; Howard y. Priest, 6 Mete. (Mass.) 582; DYER
Y. GLARK, 5 Mete. (Mass.) 562, 39 Aul Dec. 697, Gilmore, Gas. Part-
nership, 196 ; Hanway y. Robertshaw, 49 Miss. 758 ; Scruggs v. Blair,
44 Miss. 406; Buchan y. Sumner, 2 Barb. Gh. (N. Y.) 166» 47 Am.
Dec. 305; DELMONIGO y. GUILLAUME, 2 Sandf. Ch. (N. Y.) 366;
Buckley y. Buckley, 11 Barb. (N. Y.) 43 ; Smith y. Jackson, 2 Edw.
Gh. (N. Y.) 28; Rammelsberg t. Mitchell, 29 Ohio St 22; Greene y.
Graham, 5 Ohio, 264; Summey y. Patton, ^ N. G. 601. 86 Am. Dec
451; Yeatman's Heirs y. Woods, 6 Yerg. (Tenn.) 20, 27 Am. Dec.
§ 64) OONYEBSION OF REALTY IKTO PER80NALTT 165
What influence the holding as to the legal title may have
had on the respective rights of the heirs and the personal
representatives of a deceased partner in his share of the sur-
plus of the firm realty it is difficult to say. That it may
have had some in this country, at least, seems probable;
for, the title once being in the heir, equity would not be in-
clined to disturb it in favor of the personal representative,
whose equity would be no greater than that of the heir.**
Effect on Dower
The right of a wife to dower in her husband's property
is a legal right, and attaches in law to the property of which
the husband is legally seised during her coverture. It is,
however, subject to the equities and incumbrances which
might be urged against the husband. Thus, if the husband
acquires property as trustee, though in a court of law the
wife might urge her right of dower, her recovery would be
enjoined by a court of equity.*** Where an equitable de-
fense can be pleaded in a court of law, the right of dower
in trust property in effect ceases to exist.
If a vendor contracts to sell land, he becomes, until the
conveyance is made, a trustee of the land for the vendee,
and the land in his hands is, in equity, regarded as hav-
ing the character of the property with which it is to be re-
placed ; i. e., of personalty. Hence, if a man contracts to
sell land before marriage, then marries before conveyance,
his wife is not entitled to dower in such land.** The same
452; WilUamson v. Fontaln, 7 Baxt (Tenn.) 212; MurreU v. Man-
delbaum, 85 Tex. 22, 19 S. W. 880, 34 Am. St Rep. 777; Pierce's
Adm'r V. Trigg's HelrB, 10 Leigh (Va.) 406.
But see French v. Vanatta, 83 Ark. 306, 104 S. W. 141. See "Part-
nership:' Dec Dig. (Key Vo.) |§ 68, 246; Cent. Dig. §1 101-111,
519^23,
«« SHEARER V. SHEARER, 98 Mass. 107. See ^^Partnership,"
Dec. Dig. {Key No.) § 246; Cent. Dig. {{ 619-^2S.
4ft Noel V. Jevon, 2 Freem. 43; Hlnton y. Hlnton, 2 Yes. Sr. 630;
634; Cashbom v. English, 2 Eq. Ga. Abr. 728; Cowman v. Hall, 8
GUI A J. (Md.) 898; Small y. Procter, 16 Mass. 495; Ck>ster ▼.
Clarke, 3 Edw. Ch. (N. Y.) 428; Derush v. Brown, 8 Ohio, 412;
Firestone t. Firestone, 2 Ohio St 415. See "Dotoer," Dec. Dig. {Key
yo.) §§ 11-19; Cent. Dig. i§ 18, S6S5.
«« Roper, Husb. & Wife (by Jacob) 358 ; Dean's Heirs y. Micbeirs
Heirs, 4 J. J. Marsh (Ky.) 451; Oldham y.-Sale, 1 B. Mon. (Ky.) 76;
166 NATURE AND CHARACTBBISTIC8 (Ch. 3
is true where land is bought under an agfreement to resell.
It never becomes, in the view of a court of equity, realty
to which dower attaches.**
It must also be noted that dower does not attach to land
held by the husband in joint tenancy.**
Same — English Rule
As to dower in partnership, it seems clear that in Eng-
land the wife of a partner gets no right of dower in partner-
ship land, either because of the way in which the legal title
is held, or because of the fact that it is held to be converted
into personalty.**
Gaines v. Gaines* Ez'r, 0 B. Mon. (Ey.) 295, 48 Am. Dec. 425; Raw-
lings v. Adams, 7 Md. 26 ; Bowie y. Berry, 3 Md. €h. 359 ; Cowman
Y. Hall, 3 Gill ft J. (Md.) 398; Firestone y. Firestone, 2 Ohio St
415; Adklns y. Holmes, 2 Cart (Ind.) 197. See ''Dower,'* Dee. Dig.
(Key No.) SI 11-19; Cent. Dig. f§ 18, 36-6^5.
*T In Coster y. Clarke, 3 Edw. Gh. (N. Y.) 428, flYe persons pur-
chased real estate, title being taken in the name of Clarke, one of
the number, under an agreement to resell the same at a profit. On
the question of the right of the wife of Clarke to dower, the court
said: "The lands were bought In the first instance with moneys,
to a large amount, adYanced by Mr. Coster, and some by Mr. But-
ler, under an agreement which was embodied In the written instru-
ment before mentioned of the 17th of August, 1826. This agree-
ment preceded or was simultaneous in effect with the purchases i^nd
the Yesting of the title in James B. Clarke. The purchases were
based upon it, or were made with reference to its proYisions; and
from the Yery inception of Mr. Clarke's title and legal seisin the
trust attached; and from that moment the property became con-
Yerted Into personalty, leaYlng nothing for the wife's right of dower
to attach to, except in subordination to the trusts." See "Dotoer,**
Dec. Dig. {Key No.) |§ 11-19; Cent Dig. }§ 18, 36-65.
48 "The wife shall not be endowed of lands or tenements which
the husband holdeth jointly with another at the time of his death;
and the reason of this dlYersity is, for that the joint tenant, which
surYiYeth, claimeth the land by the feoffment and by surYiYorship,
which is aboYe the title of dower, and may plead the feoffment made
to himself, without naming of his companion that died." Coke on
Littleton, lib. 1, c. 5, { 45; Mayburry y. Brien, 15 Pet 21, 10 L. Ed.
646. See **Dower," Dec. Dig. (Key No.) { 16; Cent. Dig. { 61.
*» Conger y. Piatt, 25 N. S. Q. B. 277; Houghton y. Houghton,
11 Sim. 491 ; Morris y. Kearsley, 2 Younge ft a 139. See "Dower,'*
Dec Dig. {Key No.) % 11; Cent. Dig. I 6B.
§ 54) OONYEBBION Ol* BBALTT INTO FfiBSONALTT 167
Same — American Rule
In this country the question is more difficult. The man-
ner of the holding of the legal title does not prevent dower
from attaching. It must be barred, then, in equity, if at
all. That it would be barred there, if the real estate of a
firm were conceived as being converted into personalty for
all purposes, there is no doubt. Since it is generally held
that it is only converted for the necessities of the partner-
ship, or that a trust is imposed upon it for those purposes,
it is held that as to the rest, which descends to the heirs of
a deceased partner, his widow is entitled to dower/*
Same — When Dower Attaches
The question as to when the dower attaches is one of
some perplexity. Does it attach to the entire interest of a
partner in the real estate, subject to being displaced on a show- •
ing that it is needed to pay the debts of the firm, or does
it only attach to the surplus remaining after the debts are
paid? The better rule and the majority holding would
seem to be that it does not attach in equity till all of the
firm debts are paid. Any other rule would seriously ham-
per the business of the partnership.'*
«o Perln v. Meglbben, 53 Fed. 86, 8 C. C. A. 443 ; Holton t. Gulnn
(C. C.) 65 Fed. 450 ; Espy v. Comer, 76 Ala. 501 ; Drewry v. Mont-
gomery, 28 Ark. 256; GALBRAITH v. TRACY, 153 111. 54, 38 N.
E. 837, 28 Ia R. A. 129, 46 Am. St Rep. 867 ; Pepper v. Pepper, 24
111. App. 316; Orlssom y. Moore, 106 Ind. 296, 6 N. E. 629, 55 Am.
Rep. 742; HUSTON v. NEIL, 41 Ind. 504, Gllmore, Cas. Partner-
ship, 200; SHEARER ▼. SHEARER, 98 Mass. 107; Campbell y.
Campbell, SO N. J. Eq. 415 ; Bucban v. Sumner, 2 Barb. Ch. (N. Y.)
165, 47 Am. Dec. 305 ; Dawson y. Parsons, 10 Misc. Rep. 428, 31 N.
Y. Supp. 78'; Greenwood y. Marvin, 111 N. Y. 423, 19 N. E. 228;
Mowry y. Bradley, 11 R. I. 370. Bee ''Dower,'' Deo. Dig. {Key No,)
§ 17; Cent, Dig, § 62,
■iTbis is clearly pointed out by Mitchell, J., in WOODWAREK-
HOLMES CO. V. NUDD, 58 Minn. 236, 239, 59 N. W. 1010, 1011, 27
L. R. A. 340, 49 Am. St Rep. 503. "It is now held with practical
unanimity by the American courts that, If partnership capital be in-
vested in land for the benefit of the company, all the incidents at-
tach to it which belong to any other stock, so far as consistent
with the statute of frauds and the technical rules of conveyancing,
and that it will be treated as personal estate until it has performed
all its functions to the partnership, and thereby ceases to be any
168 MATURB AND CHARACTBRI8TIC8 (Ch. 3
An early New York case held that dower attached im-
mediately to the partnership land of the husband as an in-
cident to the legal estate and seisin; that in consequence
it was necessary for the wife to join in a mortgage; that
after a mortgage had been given she had a right of dower
in the equity of redemption, which was not entirely lost
longer partnership property, and until then it is not subject to ei-
ther dower or inheritance, but that, after all the purposes of the
partnership hare been thus accomplished, whatever land remains
in specie will be regarded as real estate. The question is: At
what precise moment Is it reconverted into real estate, or, to speak
more accurately, does it resume all the attributes and incidents of
real property? We think the answer Is: The moment the part-
nership is terminated and wound up by judgment or agreement,
and it is determined that it no longer forms a part of the partner-
ship stock, and is not required for Its purposes. When a partner-
ship is dissolved and its afTalrs wound up and completely ended,
and any land remains in specie, unconverted, this must be deemed a
determination that it is no longer a part of the partnership stock,
and an election to hold it thereafter, individually, as real estate.
During the continuance of the partnership the partners can convey
or mortgage it, in the course of their business, whenever they see
fit, without their wives Joining in the conveyance or mortgage, and
the wives would have no dower or other interest in it. This is one
of the very objects of treating partnership real estate as personal
property; for otherwise the business of the firm might be stopped,
and the partners unable to realize on the assets of the firm, by rea-
son of the wife of one of them refusing to join In the conveyance
or mortgage. They have the same power of disposition over it for
the purposes of a dissolution of the partnership, the payment of Its
debts, and the distribution or division of the capital among them-
selves ; for until that Is done the property has not fulfilled Its func-
tions as personalty, or ceased to be partnership property. And
what the partners may thus do voluntarily the court may do for
them, in an action brought to dissolve the partnership and wind
up its affairs. • • • The error which lies at the foundation
of the whole argument of defendant's counsel is In the assumption
that, at the time of the purchase of this property, It became the
Individual real estate of the husband, and that the Inchoate right
of the wife under the statute Immediately attached, subject only to
a lien for the payment of partnership debts. This is not correct,
and none of the authorities that we have found so hold. The fact
is that only so much of It becomes the individual real estate of the
partner as remains in specie, unconverted, after aU the purposes
of the partnership have been entirely fulfilled, and it is only to
such of it that any inchoate Interest of the wife ever attaches.
5 54) OONYERSION OF REALTY INTO FEBSONALTl' 169
by foreclosure and sale.*' The case is not, however, con-
sistent with later New York decisions, and the question of
the necessity of a wife joining in a conveyance of partner-
ship land has been decided in the negative in the New York
Supreme Court ;•■ the court saying, with reference to the
earlier case: "In so far as the case of Smith v. Jackson
holds that dower attaches to such real estate, it is only cor-
rect in a modified sense. So long as the partnership exists,
the real estate owned by it is in equity considered personal
property, subject to firm debts, and to the interests of each
partner in the firm, and it Ss only after the partnership
ceases to exist, the copartnership debts have been paid, and
the individual interests of the copartners adjusted and set-
tled, as between themselves, that the real estate or the pro-
ceeds thereof are treated or considered as real estate to
which dower can attach."
In Massachusetts and in some other states it would seem
that the right of dower attaches at once, and that the wife
is a necessary party to conveyances of firm real estate.*^
If connfiel's contention la correct, the partners could never, even
during tbe active life of the copartnership, convey perfect title to
partnership land without their wives Joining, except to the extent
actually necessary to pay existing debts of the firm. This would
practicaUy involve, in every case where one of the wives refused to
Join in a conveyance, the necessity of a suit to which she is made a
party, in order to determine whether the sale was necessary to pay
debts. Any such rule would hamper the business of the firm to an
extent that might practically defeat the purposes of the partner-
ship."
See, to the same efTect, the dictum of the court in Walling ▼.
Burgess, 122 Ind. 2d9, 304, 22 N. E. 419, 23 N. B. 1076, 7 L. R. A.
481; HUSTON v. NEIL, 41 Ind. 604, Gilmore, Gas. Partnership,
200. Also Hauptmann v. Hauptmann, 01 App. Div. 107, 86 N. Y.
Supp. 427 ; Paige v. Paige, 71 Iowa, 318, 32 N. W. 360, 60 Am. Rep.
790; HamUton v. Halpin, 68 Miss. 99, 8 South. 739; Parrish v. Par-
rlsh, 88 Va. 529, 14 S. E. 325. See ''Dower," Deo, Dig. (Key No.) §
17; Cent. Dig. { 62.
B2 Smith V. Jackson, 2 Edw. Ch. (N. Y.) 2a See '^Dower,^ Dec.
Dig. (Key No.) §} 10, 15; Cent. Dig. §§ IS, S2, SS, SISO.
fts Dawson y. Parsons, 10 Misc. Rep. 428, 31 N. Y. Supp. 78, 80.
See ''Dower,"* Dec. Dig. {Key No.) §{ 10, 15; Cent. Dig. IS IB, S2, S3.
57-60.
64 DYER V. CLARK, 5 Mete. (Mass.) 5G2, 39 Am. Dec. 697, Gilmore,
Cas. Partnership, 196; Bowman v. Bailey, 20 S. C. 553; Lenow v.
170 KATX7BB AND CHARACTBRISTIC8 (Gh. 3
NATURE AND EXTENT OF PARTNER'S INTEREST
IN PARTNERSHIP PROPERTY
56. The characteristic features of an estate in partnership
are the following:
(a) The title to partnership property is in all of the part-
ners jointly, but the partners are neither
(1) Tenants in common,
(I) Because a sale of a partner's interest does
not pass ai^ undivided interest in the
property, but only such partner's share of
what remains after all partnership debts
are paid, and
(II) Because a sale of specific partnership prop-
erty by a partner passes the whole title,
and not simply the seller's individual in-
terest, nor
'(2) Joint tenants,
(I) Because there is no beneficial survivorship,
and
(II) Because one partner can sell partnership
. property in the lifetime of his copartners.
(b) A partner's share simply entitles him to a given pro-
portion of what remains after all the firm debts
have been paid.
(c) A partner is not entitled to a partition or division of
the property in kind.
There has been always a question as to the nature of
partnership property; that is, whether this property is an
estate in common or one in joint tenancy, inasmuch as it
is characterized by features found in both. It is held by
all the partners, and since it is the substantial effect of in-
dividual contribdtions of money or service, as the case may
be, it is difficult to understand at first that the individuals
Fones, 48 Ark. 557, 4 S. W. 66; Pugh's Heirs ▼. Carrie, 6 Ala. 446;
Brewer t. Browne, 68 Ala. 210; Collins y. Warren, 29 Mo. 236. See
*'Dower/' Dec Dig. (Key No.) SS 10, IS; Cent. Dig.. U ^S, SB, S3,
§ 55) fartneb's interest in partnership property 171
do not own it each in the ratio of his separate interest in
the business."
Partners are Not Tenants in Common of the Firm Property
It might appear tljat here is unity of possession, and
since, after the partnership shall have been dissolved, each
will be restored his proportion again, instead of all the prop-
erty going into the estate of the survivor, and since any
one of the partners may convey his share to a stranger
meantime, there seems to be an absence of that survivor-
ship without which there can be no estate in joint tenancy.
But, while the property thus is held by all the partners, it
is held by them as members of their firm ; and, just as has
been said of the partnership capital, so it is to be said of
partnership property, generally, that a partner does not
own any part of it."* Partners are not tenants in common.
For while a partner may, as was said above, convey his
.share to a stranger, the stranger will take nothing whatso-
ever by the conveyance until after a dissolution of the part-
nership, and a settlement with the partnership creditors, fo
whom he is postponed.*^ Even if a personal judgment is
i> T. Pars. PartD. (4tli Ed.) § 255, says : ''Wliat, then, is the right
or interest or property of a partner to or in the effects of the part-
nership? Certainly, not a separate and exclusive right to any part
or portion of it, or any right of any kind to any one part rather
than to any other part, or any other right or Interest than that
which all the other partners have. It follows, therefore, that he
can have no right or interest which is snch in kind or in degree as
prevents all or any of his copartners from haying precitely the
same; and the right which he has la the same as theirs In refer-
ence to the whole and every part of the property. We cannot, there-
fore, define this right of any one partner better than we have al-
ready done, by calling it an ownership of all the property of the
firm, subject to the ownership of the copartners, who hold it all
subject to his ownership. This Is at least the foundation of his
property and interest; and from this he derives certain rights as
incident to it."
ft«Lingen v. Simpson, 1 SIul ft S. 600; Cockle ▼. Whiting, Tam.
55; Fourth Nat Bank v. New Orleans ft C. R. Co., 11 Wall. 624, 20
L. Ed. 82; United States v. Hack, 8 Pet 271, 8 L. Ed. 941. See "Part-
nersMpr Dkc Dig. (Key Ifo.) {§ 67-^9, 76; Cent. Dig. §{ 95-118, 116,
1Z4.
" MBNAGH V. WHITWBI/L, 52 N. X. 146, 11 Am. Rep. 683, Gllmore
Ca& Partnership, 251; Carrie v. Cloverdale Banking ft Commercial
172 NATURE AND ' CHARACTBRI8TICS (Oh. 3
recovered against a partner for a private debt, and execu-
tion follows the judgment, a levy on the partner's share
will affect nothing but what it may afterwards appear that
the partner is entitled to; that is, after the dissolution of
the partnership, the payment of all the firm creditors, and
a determination of the share of the partner in the property
that remains/* For that is the significance of the word
"share," as used in such a connection ; it having been well
defined as "the value of his (partner's) original contribu-
tion, increased or diminished by his share of profit or
loss." •• But then the effect of a sale of property by an
individual is very different^ where such individual is a ten-
ant in common with the person interested with him in the
ownership of the property, from what it is where he is his
partner in such ownership. Thus, in the case of Person v.
Wilson,** there was a question whether a partnership or a
tenancy in common subsisted between certain individuals, be-
cause, all the property having been sold by one of them, the
sale would, on the latter hypothesis, have carried only the sell-
er's individual interest.** In another case the rights of a
purchaser from a member of a defunct partnership of a
Ck>., 90 CaL 84, 27 Pac. 58 ; SINDBLARE ▼. WALKER, 137 lU. 43, 27
N. B. 60, 31 Am. St Rep. 853 ; OoUlns' Appeal, 107 Pa. 590, 52 Am. Rep.
479 ; Dnrborrow's Appeal, 84 Pa. 404 ; Wliigham*8 Appeal, 63 Pa. 194.
But such a purchaser takes whatever would have been due his ven-
dor in preference to the latter's unsecured creditors. Thompson v.
Spittle, 102 Mass. 207. He does not become a tenant in common.
Donaldson v. President etc., of State Bank, 16 N. C. 103, 18 Am.
Dec. 577; Fourth Nat Bank v. New Orleans ft G. R. Co., 11 WaU.
624, 20 L. Ed. 82. See "Partnership^ Dec. Dig. (Key No.) }§ 61-69,
76, 77; Cent Dig. |§ SS-^U^, 116, m, 125, 145.
«8 TAYLOR V. FIELDS, 4 Yes. 396, GUmore, Gas. Partnership,
210; Fourth Nat Bank v. New Orleans ft C. R. Co., 11 WalL 624,
20 L. Ed. 82 ; SANBORN v. ROYGE, 132 Mass. 594, Oilmore, Gas.
Partnership, 510; Reinheimer t. Hemingway, 35 Pa. 432. Bee ''Part-
nership;* Deo. Dig. (Key No.) H 67-S9, 76, m-lSS; Cent. Dig. §}
95-llS, 116, m, SS7-S48.
>• Indian Oontract Act, | 253.
«o 25 B£inn. 189, 194. See "'Partnership,'* Deo. Dig. (Key No.) |S
77, 1S8, HI, 15S; Cent. Dig. }{ 125, US, 21Jh221, 275, S$6; ""Tenancy
in Common,*' Dec. Dig. (Key No.) § 27; Cent. Dig. f 72.
«i Thompson v. Bowman, 6 WaU. 316, 18 L. Ed. 736; Mersereau
V. Norton, 15 Johns. (N. Y.) 180. See "Partnership,** Deo. Dig. (Key
§ 55) fabtneb's interest in pabtnebship pbopebty 173
judgment in favor of the latter, which judgment had been
previously sold by the firm's assignee to a person secretly
representing the partners, were sustained on the ground that
the sale of the successful party had been made by a part-
ner, and not a tenant in common ; •* not, of course, a part-
ner as of the old firm, but in respect of the transaction of
buying and selling the judgment.
Partners are Not Joint Tenants of the Firm Property
Close examination into the question results in little that
is more substantial where the claim is made that firm prop-
erty is held in joint tenancy. To be sure, so far as concerns
the existence of some sort of survivorship, this claim has a
semblance of a basis; for, if the partner dies, the whole
property goes to the surviving copartner, instead of going
proportionably to the executor of the deceased. It has been
said that, just as a pledgee or mortgagee has a right to hold
the property in his hands until the debt due him is paid,
so a surviving partner may hold partnership property until
the debts of the firm arc paid, whether such debts run to
general firm creditors or to himself, and that the statute of
limitations will not run against him, so as to render his
hold upon the assets the less valid until such debts are
paid.** The surviving copartner has the closing up of the
partnership affairs, the reduction of its property into cash
for the payment of the firm debts, and the actual payment
of these debts,** without the executor having the right to
interfere, except, of course, that he has access to the courts
to compel this surviving partner to proceed to close up the
business,*^ and to have his proceedings scrutinized to the
No.) n 77. 1S8, m, 159; Cent. Dig. H 125, H5, 21Jh221, 275, 506;
**Tenanoy in Common;'* Dec. Dig. {Key No.) H ^» 55; Cent. Dig. §§
27, 72.
•a Thursby v. Lidgerwood, 69 N. Y. 1©8. See **PartnersMp,*' Dec.
Dig. (Key No.) § 245; Cent. Dig. § 515.
OS Clay Y. Freeman, 118 U. S. 97, 6 Sup. Ct 964, 30 L. Bd. 104.
8ee ^'Partnership:' Dec. Dig. (Key No.) §| 7fi, 77. 246; Cent. Dig.
K J 16, m, 125, U5, 522.
04 BUCKLEY v. BARBER, 6 Ezch. 164. See ^^Partnership:* Deo.
Dig. {Key No.) §§ 243-255; Cent. Dig. }{ 509-561.
•• Olay y. Freeman, 118 U. & 97, 6 Snp. Ct 964, 30 L. Ed. 104.
See ''Partnership," Deo. Dig. (Key No.) S 246; Cent. Dig. f 522.
174 NATUBB AND CHARACTBRI8TIC8 (Ch. 8
end that the estate be not made to suffer through any fraud
of his.** And it is necessary at times for the executor thus
to have the survivor compelled to proceed to close up the
firm's affairs; for the standing idly by of those interested
in the estate of the deceased partner, while the survivor
continues the business, using the property of the partner-
ship as before, must result in the subordination of the rights
of the estate in the assets to those of subsequent creditors
of the firm.*^ But this is the extent of the right to inter-
fere, and, while the whole property does not become part
of the permanent estate of this survivor, the latter can, by
his disposition of it in aid of such settlement, bind the ex-
ecutor and the heirs and devisees of the deceased partner,
so that they may be compelled subsequently, in a court of
equity, to give effect to such disposition so far as they may
be able to do so.** This is all that the survivorship really
amounts to in connection with partnership property; for,
after paying all the firm debts, the survivor's right to the
corpus of that property ends. He has his share, and the
executor or other representative of the deceased has the
share of the latter after the settlement of the firm's affairs
is done. Thus the tenancy can be no more properly called
"joint" than "in common." It has, it is true, been said that
this holding by the survivor is not that of a trustee; ** but
it has never been claimed that it is beneficial to him-
self, although in Holbrook v. Lackey^* a firm debtor, sued
by such survivor, was allowed to set off the tatter's private
indebtedness. However, in a situation like the last the sur-
«• KNOX T. GYB, H R. 6 H. L. 656. Bee ^^Partnership,** Dee, Dig,
(Key yo.) H 248-255; Cent. Dig. SI 509-561.
«T Hoyt ▼. Sprague^ 103 U. S. 613, 26 L. Ed. 585. See ^Partner-
ship** Dee. Dig. (Key No.) U 2Jfi-255; Cent. Dig. » 609-56L
«8 SHANKS V. KLEIN, 104 U. S. 18, 26 L. Ed. 635, OUmore, Ca&
Partnership, 269. See ^^Partnership** Deo. Dig. (Key No.) K 24S-255;
Cent Dig. §| 609-561.
•9 KNOX ▼. GTE, L. R. 5 H. L. 65a But see Jones t. Dexter, 130
Mass. 380, 39 Am. Rep. 459. See ''Partnership," Deo. Dig. {Key No.)
SS 24S-255; Cent. Dig. §{ 509-561.
TO HOLBROOK v. LACKEY, 13 Mete. (Mass.) 132, 46 Am. Dea 720.
See "Set-Off and Counterclaim^** Deo. Dig. {jsiey No.) % 45j Cent,
big. I 97.
§ 55) partner's interest in partnership profertt 175
vivor would be required to account for this in his settle-
ment, so that here is no attempt to give to the holding a
beneficial character. Pollock describes partners, with ref-
erence to their title generally to partnership property, as
"owners in common or joint owners without benefit of sur-
vivorship," ^* as if it is not necessary to be specific in the
matter at all ; and it has elsewhere been said that, although
it is essential to a partnership that there be a community
of interest in the substance of it, "this community of in-
terest must not be that of mere joint tenants or tenants in
common." ^* The title of partners to firm property can be
said merely to bear an analogy to these two species of ten-
ancy in respect of diflferent features of each of them. For
partnership property, as we have seen, is (theoretically, at
least) always of a personal nature, which the significance
of the old feudal tenancies does not properly touch. Be-
sides this, the fact being that one partner can sell all the
firm assets, and that, too, in the lifetime of his copartner,
it is plain that the law of neither tenancy controls either the
relation or its property.'*
Share a Right to Money
What is meant by the "share** of a partner is his propor-
tion of the partnership assets after they have been all real-
ized and converted into money, and all the debts and lia-
bilities have been paid and discharged.'* When a partncr-
»i Pol. Partn. c. 6, art 27.
Ts DONNELL y. HARSHE, 67 Mo. 170, Oilmore, Gas. Partnership,
63. See "Partnership,** Dec. Dig, {Key No.) § S; Cent. Dig. { IS.
ra **The legal title of real estate, if in the name of more than one
partner, is always held by them as tenants in common; but, in
equity, it may be partnership property." Bates, Partn. { 280.
T4 **The interest of a member of such a firm in the assets of it is
the share to which he is entitled by the terms of the copartnership
in the surplus of those assets remaining after all partnership debts
are fully paid. It appears in this case that the firm was insolvent;
that its debts much exceeded its assets; that there never could
arise a surplus. So the interest of Stockbrldge, as an individual, In
this property, was nothing ; and so the plaintifT got nothing by his
purchase." STAATS ▼. BRISTOW, 73 N. Y. 264, 267, Gilmore, Gas,
Partnership, 211. As to the nature of a partner's interest, see, also,
Fourth Nat Bank y. New Orleans ft G. R. Go., 11 Wall. 624, 20 L.
Ed. 82; FUley ▼• Phelps, 18 Gonn. 294; SINDBLARB Y. WALKER,
1 76 NATURB AND CHARACTERISTICS (Gh. 3
ship is dissolved or terminated, any one of the partners is
entitled to have the whole assets sold and the proceeds ap-
plied to the payment of partnership debts, and whatever
then remains is to be divided among the partners in propor-
tion to their several shares. No partner is entitled to a par-
tition of the property in kind, whether the property is real
or personaL'*
TRANSFER OF PARTNERSHIP PROPERTY— BY
ACT OF THE PARTNERSHIP
58. Partnership property may be transferred by the act of
all the partners or by the act of one authorized to
represent all. The method and validity of such
transfers are governed by the general laws appli-
cable to all transfers of property held jointly.
57* All transfers of individtial property and of partnership
property are subject to being set aside, if found to
be maofe with intent to hinder, delay, or defraud
the creditors of the grantor.
Property owned by partners may be transferred in all
the ways in which any other property held in common may
be transferred, and subject to the same general laws appli-
187 111. 43, 27 N. B. 59, 31 Am. St Bep. 853; Trowbridge ▼. Cross;
117 111. 109. 7 N. B. 347 ; Douglas ▼. Wlnslow, 20 Me. 89 ; MBNAGH
▼. WHITWELL. 52 N. Y. 146, 11 Am. Rep. 683, Gilmore, Cas. Part-
nership, 251 ; Hiscock ▼. Phelps, 49 N. Y. 97. A partner's share is a
right to money. Lindl. Partn. p. 839. A partner can compel a sale
and a division of the proceeds, but not a partition of the partner-
ship property. WILD ▼. MILNB, 26 Beav. 504. A partner's interest
is a chose in action. Ames, Gas. Partn. 163. A partner's daim for
an accounting after a dissolution must be brought within the period
prescribed by the statute of limitations, or It will be barred. KNOX
▼. GYE, L. R. 5 H. L. 656, followed in Taylor ▼. Taylor, 28 Law T.
189. See, also, Strange v. Graham, 56 Ala. 614 ; Pierce ▼. McClellan,
93 III. 245; Coudrey ▼. Gilliam, 60 Mo. 86; Massey ▼. Tingle, 29 Mo.
437 ; Manchester v. Mathewson, 3 R. I. 237. See "Partnerghip,** Dec.
Dig. {Key No.) §| 76, 220; Cent. Dig. §§ m. ^5S%.
TB WILD ▼. MILNE, 26 Beav. 604 ; KRUSCHKE ▼. STEFAN. 83
Wis. 373, 53 N. W. 679; PENNYB ACKER ▼. LEARY, 65 Iowa. 220,
§§ 56-57) TRANSFER Or PARTNERSHIP PROPERTY 177
cable to all such transfers. As the law does not recognize
the firm as an entity, it is necessary for purposes of aliena-
tion of firm property to follow the general rules of convey-
ancing. Firm property, as has been pointed out, is the
property of the members of the firm, held and used for pur-
poses of the common business. To alienate it, all the part-
ners must join, or one of them must act with authority for
all. The transfer may be made for any purpose, although
when one partner alone acts his authority will usually be
limited to transfers within the scope of the partnership
business and for firm purposes. Likewise the transfer may
be made to strangers, or to a member of the partnership.
By the latter conveyance what is joint property of all the
partners may become the joint property of less than all,**
or the separate property of a single partner.*'
Same — Conveyances in Fraud of Creditors
All transfers of property, however, whether belonging to
individuals severally, jointly, or as partners, are subject to
being set aside on the ground that they were made with
intent to hinder, delay, or defraud the creditors of the trans-
ferror. All transfers of partnership property are subject to
the same attack. The firm creditors have no lien upon the
firm property as such, and have no right to object to the
use of the property by the firm in any way it sees fit, so
long as the use does not make the partners insolvent, and
was not done to delay or defraud creditors.*' No person
can defraud his creditors by disposing of his property with
the intent of defeating them in their attempts to collect
21 N. W. 576, Oilmore, Gas. Partnership, 214 ; Mendenhall ▼. Benbow,
84 N. C. 646. In MOLINEAUX ▼. RAYNOLDS et al., 64 N. J. Bq.
559, 35 Atl. 536, GUmore, Gas. Partnership, 215, the court decreed
a partition; it appearing that there were abundant assets left to
meet all possible firm debts. See ^^Partnership,'* Deo, Dig. {Key No.)
H 297-^06; Cent. Dig. §f 679-709.
f BOLTON ▼. PULLER, 1 Bos. & P. 539. See "Partnership:* Dec.
Dig. iKey, Vo.) §§ 68, 93, 94; Cent. Dig. |§ 112, US, HO, 141.
TT Bx parte RUFFIN, 6 Ves. 119, Gilmore, Gas. Partnership, 217.
See '^Partnership:* Dec Dig. (Key No.) |§ 9S, 94; Cent. Dig. §§ 14O,
141.
78 Blake v. Sargent (D. 0.) 162 Fed. 263. See ** Partnership,**
Dec. Dig. (Key No.) § 183; Cent. Dig. S| S19-S36, 348.
GIL.PXBT.— 12
178 NATUBB AND CHARACTERISTICS (Gh. 3
their debts. The same rule applies to a partnership. The
creditors ot a partnership have a claim against the assets
of the partnership which prevents the partnership from dis-
posing of them with a fraudulent intent. "In this respect
it resembles the claim which the general creditors of an in-
dividual have upon his property. It is neither an estate
nor a lien. It is, ordinarily, but a right by lawful procedure
to acquire a lien during the ownership of the debtor ; yet,
under certain circumstances, that lien may be acquired
after the debtor's ownership has ended. This results from
the provisions of the ancient statute for the prevention of
fraud and perjuries, by force of which, when a person has
alienated his property with intent to hinder, delay, or de-
fraud his creditors, the rights of those creditors remain as
if no alienation had taken place, except against the claims
of bona fide purchasers, for good consideration, without no-
tice. Equity applies this statute to a partnership, its prop-
erty and creditors, just as it woufd in case of an individual,
and therefore, while generally it is true that a partnership
may defeat the equity of its creditors by the alienation of
its property and consequent extinguishment of the rights
of its partners inter sese, yet, if the alienation be effected
with intent to hinder, delay, or defraud the firm creditors
by defeating their equity, the claims of creditors will be
unimpaired, and the property will be treated as partner-
ship assets, unless it shall have passed into the hands of
those whom the statute protects." ^*
Purpose of Transfer of Firm Property
Assuming that the transfers are made in proper form by
all the partners, or by one acting under authority for all,
the validity thereof will be affected essentially by their pur-
pose. Before considering the purpose of the transfers, it
will be necessary to discuss the purpose for which firm as-
sets are held and the origin and nature of the firm creditors'
rights in firm assets. All questions relating to the power
of each partner to transfer firm property are discussed in
r» ARNOLD ▼. HAGERMAN, 45 N. J. Eq. 186, 17 Atl. 93, 14 Am.
St Rep. 712, Gllmore, Cas. Partnership, 223. Bee **PartnersMp,**
Deo, Dig. (Key No.) § 18S; Cent. Dig. §| S19SS6, S48.
§ 58) TRANSFER OF PARTNERSHIP PROFERTT 179
the chapter on Powers of Partners. It is assumed here
that, so far as authority of an agent partner making the
conveyance is concerned, the transfer is valid.
SAME— FIRM CREDITORS' RIGHTS IN FIRM AS-
SET&-PARTNER'S LIEN
58. When persons enter into a partnership relation, there
is implied tr a mutual agreement that all partner-
ship property shall be devoted first to the payment
of partnership debts. A coiut of equity, if it has
acquired jurisdiction of the settlement pf the af-
fairs of a partnership, will recognize and enforce
their agreement. The effect of such enforcement
will be the payment of the firm creditors out of
the firm assets before the separate creditors of each
partner. Firm creditors are said, therefore, to have
a priority in equity in a distribution of firm assets.
Such priority, however, is based, not upon any
right of their own, but upon the right of the part-
ners against one another, and is called a ''deriva-
tivc right."
The firm creditors' priority is also put upon other
grounds: (a) That they extended credit on the
faith of the firm assets and should have first claim
upon them; (b) that the firm is an entity having
its own creditors and property*
While it should be recognized that the priority of firm
creditors in firm assets is variously explained, it would
seem the explanation given in the foregoing black letter is
the one most frequently found in the language of the de-
cisions.
In the distribution of assets of the partnership in a court
of equity, the firm creditors are given a preference out of
the firm assets over the individual creditors. This prefer-
ence is said to be derived from the right which each part-
ner has, in equity, to have the firm assets applied to firm
debts, rather than to the individual debts of the respective
180 NATURE AND CHARACTERISTICS . (Ch. 3
partners. The origin of this ''equity'' of the partners, as it
is called, is said to rest in ''an implied contract that the as-
sets shall not be used for private purposes," •• or, in other
words, "upon the presumed intention of the partners them-
selves." *^ Out of the equity of the partners themselves
grows the equity of the firm creditors. "The right of each
partner extends only to a share of what may remain after
payment of the debts of the firm and the settlement of its
accounts. Growing out of this right, or rather included in
it, is the right to have the partnership property applied to
the payment of the partnership debts in preference to those
of any individual partner. This is an equity the partners
have as between themselves, and in certain circumstances
it inures to the benefit of the creditors of the firm. The
latter are said to have a privilege or preference, sometimes
loosely denominated a 'lien,' to have the debts due to them
paid out of the assets of a firm in course of liquidation, to
the exclusion of the creditors of its several members. Their
equity, however, is a derivative one. It is not held or en-
forceable in their own right. It is practically a subroga-
tion to the equity of the individual partner, to be made ef-
fective only through him. Hence, if he is not in a position
to enforce it, the creditors of the firm cannot be. But so
long as the equity of the partner remains in him, so long as
he retains an interest in the firm assets as a partner, a court
of equity will allow the creditors of the firm to avail them-
selves of his equity, and enforce, through it, the application
of those assets primarily to payment of the debts due them,
whenever the property comes under its administration. It
is indispensable, however, to such relief, when the cred-
it DARBY V. GILLIGAN, 83 W. Va. 216, 10 S. EL 400. 6 L. R.
A. 740, Gllmore, Cas. Partnership, 221. In this case It Is also sag-
gested that the priority is based upon the doctrine of suretyship,
since such partner is liable In solido for the firm debts, and Is there-
fore, inter se, ylrtually a surety for the copartners for their pro-
portions, and is entitled to have the firm assets applied so as to
relieve him from paying more than his share. See '*PartnenifUp,
Deo. Dig. (Key No.) §i 176-183; Cent. Dig. §§ S09-SS6.
«i ARNOLD ▼. HAGERMAN. 45 N. J. Eq. 186, 17 Atl. 08. 14 Am.
St. Rep. 712, Gllmore, Cas. Partnership, 223. See "Partnership,
Deo. Dig. {Key No.) H 176-183; Cent. Dig. SI 308-336.
H
•t
§ id) TRANSFER OF PARTNERSHIP PROPERTT 181
itors are, as in the present case, simple contract creditors,
that the partnership property should be within the control
of the court, and in the course of administration, brought
there by the bankruptcy of the firm, or by an assignment,
or by the creation of a trust in some mode. This is because
neither the partners nor the joint creditors have any spe-
cific lien, nor is there any trust that can be enforced until
the property has passed in custodia legis. Other property
can be followed only after a judgment at law has been ob-
tained and an execution has proved fruitless." •*
It should be noticed that the foregoing statements deal
with the situation where the assets of the partnership are
in the hands of the court for distribution. As will be more
fully discussed in a later chapter,** most courts, with more
or less slight variations, follow the general rule announced.
How far this equitable rule of distribution should control
the partners, while the partnership is a going concern and
they are in full control of the firm assets, is a question
of considerable perplexity. It remains, therefore, to con-
sider certain transfers made by the partners while the part-
nership is a going concern: First, transfers whereby the
firm property becomes the separate property of the part-
ners, or the property of fewer than all the original num-
ber of partners, or becomes the property of a single part-
ner; second, transfers whereby the firm property is applied
to the payment of the debts of a single partner or of the
individual debts of all the several partners.
SAME— CHANGE OF FIRM PROPERTY INTO SEP-
ARATE PROPERTY
59. Partnership property may by agreement of all the part-
ners become the separate property of such part-
ners, or the property of fewer than all the original
partners^ or the property of a single partner.
•1 Strong, J., in CASE ▼. BEAUREGARD, 99 U. S. 119, 25 L. Ed.
370, Ollmore, Cas. Partnership, 226. 8ee '* Partnership/* Dec. Dig.
(Key yo,) §S ne-lSS; Cent, Dig, §§ S08-S36.
•• Obapter VII, p. 404, Rights of Creditonk
182 NATURB AND CHARACTBBI8TICS (Ch. 3
PROVIDED, HOWEVER, that such change of own-
ership is not made with intent to hinder, delay, or
defraud firm creditors. It is held by a majority of
the courts that a fraudulent intent must be actually
shown; the transfer, being upon a consideration,
is not impeached by the fact of insolvency alone.
It is held by bther courts that, if the partnership
and its members are insolvent, the change is fraud-
ulent; the conveyance being volimtary, the fact of
insolvency is proof of bad faith.
In General
A brief statement of the law governing fraudulent con-
veyances seems desirable for a clear understanding of the
principles here involved. Having laid down the general
rule governing fraudulent conveyances, they will then be
discussed in connection with partnership cases.
Persons in the partnership relation enjoy the same rights
and are subject to the same restrictions as the owners of
property generally with respect to its alienation. The ab-
solute ownership of property includes the right to dispose
of it, by gift, sale, or otherwise, as one sees fit, subject, al-
ways, however, to one restriction, imposed by the common
law and by statutes declaratory thereof, viz., that such alien-
ation shall not be done with intent to hinder, delay, or de-
fraud the grantor's creditors. One may g^ve away or sell
his property. If a person is solvent, he may make a volun-
tary g^f t, if he acts in good faith ; i, e., without intent to
hinder, delay, or defraud his creditors. As the donor is sol-
vent, however, and has other property with which to pay
his creditors, it will rarely, if ever, occur that a voluntary
gift by such a person will be fraudulent If, however, a
person is insolvent, a gift of his property will inevitably
hinder and defraud his creditors, and will always, there-
fore, be fraudulent. The insolvency of the donor, in deal-
ing with voluntary conveyances (that is, conveyances with-
out consideration), is commonly said to prove bad faith.
One may sell his property, and if he does so for a con-
sideration and in good faith the transfer is valid. The law
requires both consideration and good faith. If the vendor
§ 59) TRANSFEB OF PABTNERSHIP PBOPEBTT 183
is solvent and received a good consideration, the transac-
tion can scarcely be impeached, because the sale, being for
a good consideration, will seldom hinder and delay the
creditors, and will therefore rarely be fraudulent. The na-
ture and adequacy of the consideration, however, is always
material on the issue of good faith. Likewise, if an insol-
vent person should sell his property for a good considera-
tion, the transfer would be valid if made in good faith.
Here, also, the presence or absence of good faith will de-
pend to considerable extent upon the nature and adequacy
of the consideration. If the consideration^ is adequate, it
will not be likely that the alienation will hinder and delay
creditors, and will not be fraudulent. There is necessarily
an intimate connection between consideration and good
faith, so intimate that it is commonly said that good faith
requires consideration. But good faith may be disproved,
even though there be consideration, and inadequacy of con-
sideration does not always prove bad faith. It should be
noticed here that a conveyance purporting to be upon a con-
sideration may be attacked on the ground that the consid-
eration is worthless, and hence that the conveyance is vol-
untary. If thus established to be voluntary, the insolvency
of the grantor will of itself be sufficient to prove bad faith.
Good faith, when dealing with voluntary conveyances,
means the state of mind of the donor ; for the donee, hav-
ing paid no value, could not retain the property against the
creditors of the fraudulent donor, and therefore the donee's
state of mind is immaterial. Good faith, on the other hand,
when dealing with conveyances on consideration, means the
state of mind of the seller and purchaser; that is, the law
protects the innocent purchaser for value, and in order to
impeach a transfer it must appear that the vendor and ven-
dee were both in bad faith.**
Transfer of Firm Property for Promise to Pay Firm Debts —
Valid
While a partnership is a solvent and going concern, there
can be no doubt that its members may by agreement make
such disposition of the firm property as they see fit, so
•4 Bump on Fraudulent Conveyances (4th Bid.) ce. VIII, IX, XI.
184 NATUBB AND CHABACTBRISTICS (Gh. 3
long as they act in good faith.** The usual situation that
arises in this connection is one in, which the firm property
is transferred by all the partners to one or more of their
number, who ag^ee in consideration of such transfer to as-
sume and pay the firm debts. As between the partners
such a transaction results in changing the firm property
into separate property. Its effect upon the rights of firm
' creditors, however, must be determined by the law of fraud-
sBThiB was decided in BOLTON v. PUIiLBR, 1 Bos. & P. 539,
where two banking firms carried on business, one in Liverpool and
one in London. All the members of the latter firm were partners in
the former, which, however, included others besides the members of
the London firm. In the course of business between the two firms,
certain bills of exchange were transferred from the Liverpool firm
to the London firm. On both firms becoming bankrupt, it was held
that the bills were the property of the London firm ; the court say-
ing : ^There can be no doubt that as between themselves a partner-
ship may have transactions with an individual partner, or with two
or more of th^ partners having their separate estate, engaged in
some Joint concern, in which the general partnership is not inter-
ested, and that they may by their acts convert the Joint property of
the general partnership' into the separate property of an individual
partner. • • • And their transactions in this respect will, gen-
erally speaking, bind third persons, and third persons may take ad-
vantage of them in the same manner as if the partnership were trans-
acting business with strangers."
CASE V. BEAUREGARD, 99 U. S. 119, 25 L. Ed. 370. Gilmore,
Gas. Partnership, 226; Levy v. Williams, 79 Ala. 171; Conroy y.
Woods, 13 Cal. 628, 73 Am. Dec. 605; Allen v. Center Valley Co.,
21 Conn. 136, 54 Am. Dec. 333; Schleicher v. Walker, 28 Fla. 680,
10 South. 33; Upson v. Arnold, 19 Ga. 190, 63 Am. Dec. 302; Singer,
Nimick & Co. v. Carpenter, 125 111. 117, 17 N. B. 761; Dunham v.
Hanna, 18 Ind. 270; City of Maquoketa v. Willey, 35 Iowa, 323;
Kelley v. Flory, 84 Iowa, 671, 51 N. W. 181; Woodmansie v. Hol-
comb, 34 Kan. 35, 7 Pac. 603 ; Wilson v. Soper, 13 B. Mon. (Ky.) 411,
56 Am. Dec. 573 ; Jones v. Lusk, 2 Mete. (Ky.) 861 ; Coakley v. Weil,
47 Md. 277; Robb v. Mudge, 14 Gray (Mass.) 534; Schmidlapp v.
Currie, 55 Miss. 597, 30 Am. Rep. 530; Sexton v. Anderson, 95 Mo.
873, 8 S. W. 564 ; Stanton v. Westover, 101 N. Y. 265, 4 N. B. 529 ;
MENAGH V. WHITWELI^ 52 N. Y. 146, 11 Am. Rep. 683. GUmore.
Cas. Partnership, 251; Mortley v. Flanagan, 38 Ohio St 401;
Baker's Appeal, 21 Pa. 76^ 69 Am. Dec. 752; Waterman v. Hunt,
2 R. I. 298 ; Ooone v. Bivens, 2 Head (Tenn.) 339 ; White v. Parish,
20 Tex. 688, 73 Am. Dec 204 ; Rice ▼. Barnard, 20 V t 479, 50 Am.
Dec. 54. See ^^Partnership,'' Dec. Dig, {Key No.) {§ 69, 76, 77, 176-
18S; Cent. Dig. || 112, IIS, 116, 124, l^f H5, S08-336,
.\
§ 69) TRANSFER OF PARTNERSHIP PROPERTT 185
ulent conveyances. The transfer now discussed purports
to be one upon a consideration, and therefore should not in
the first instance be dealt with as a voluntary conveyance.
The consideration for the transfer from partnership prop-
erty into separate property was the promise by the gran-
tees to assume and pay the firm debts. If such promise be
regarded as a consideration, and there would seem to be
no reason why it should not be so regarded, even though
the promisee is or soon becomes insolvent and never per-
forms his promise, then the conveyance should be valid,
unless it was made in bad faith; that is, with intent to hin-
der, delay, and defraud the firm creditors. Whether the
firm be solvent or insolvent is not the determining factor,
for an insolvent person may sell his property, if he acts in
good faith. Mere knowledge of insolvency will not, in con-
veyances upon consideration, prove bad faith.®* The valid-
ity of such conveyance being one upon a consideration, will
depend upon the good faith of the parties, and, in the ab-
sence of proof of actual bad faith, the weight of authority
seems to sustain such a transaction, whether the firm be
solvent or insolvent.*^ If the transaction be valid, then the
priority of the firm creditors to payment is lost; for such
priority, being derived through the rights of the partners,
disappears when the partners relinquish that right by agree-
ing to change firm into several property.*®
•• Ruhl V. PhUUps. 48 N. Y. 125, 8 Am. Rep. 522. See ^'Partner-
ahipr Dec, Dig. (Key No.) S§ 176-183; Cent. Dig. §§ 308SS6.
87 See cases cited in note 85, above. Myers v. Tyson, 2 Kan. App.
404, 48 Pac. 91; Hulskamp y. Moline Wagon Co., 121 U. S. 310, 7
Sup. Gt. 899, 30 L. Ed. 971 ; Reynolds y. Johnson, 54 Ark. 449, 16 S.
W. 124 ; Sickman v. Abernathy, 14 Colo. 174, 23 Pac. 447 ; AUen
▼. Center Valley Co., 21 Conn. 130, 54 Am. Dec. 333 ; Ellison v. Lucas,
87 Ga. 223, 13 S. E. 445, 27 Am. St. Rep. 242 ; Hapgood y. Comwell,
48 111. 64, 95 Am. Dec. 516 ; Hanf ord y. Prouty, 133 111. 339, 24 N. a
565; Purple y. Farrington, 119 Ind. 164, 21 N. B. 543, 4 L. R. A.
539; Richards y. Manson, 101 Mass. 482; Dimon y. Hazard, 82 N. Y.
65; Gallagher's Appeal, 114 Pa. 353, 7 Atl. 237, 60 Am. Rep. 350;
CarYer Gin & Machine Co. y. Bannon, 85 Tenn. 712, 4 S. W. 831, 4
AuL St Rep. 803: Sigler y. Knox County Bank, 8 Ohio St 511.
See "Pariner8hipr Dec. Dig. (Key No.) SS 176-183; Cent. Dig. H 308-
336.
•* *'If, before the interposition of the court is aBked, the property
186 NATURB AND CHARACTERISTICS (Ch. 3
Same — Contrary View
It should be recognized that there are many cases which
hold that a transaction of the kind above described is in-
valid.** The conveyance, according to these cases, is im-
peached on the ground that it is voluntary. This is estab-
lished by holding that what purports to be the considera-
tion for it is worthless. It is worthless because, the prom-
isee being insolvent, or becoming so within a short time
without having performed his promise to pay the firm
debts, the retiring partners received nothing for relinquish-
ing their interest in the firm property. Being a voluntary
conveyance, and the grantor being insolvent, this latter fact
conclusively shows that its effect is to hinder and defraud
has ceased to belong to the partnership, if by a bona fide transfer
it has become the several property either of one partner or of a
third person, the equities of the partners are extinguished, and con-
sequently the derivatlTe equities of the creditors are at an end. It
Is, therefore, always essential to any preferential right of the cred-
itors that there shall be property owned by the partnership when the
claim for preference is sought to be enforced." Strong, J., in CASE
▼. BEAUREGARD, 99 U. S. 119, 25 L. Bd. 370, Gilmore, Cas. Part-
nership, 226.
In HOWE ▼. LAWRENCE, 9 Cush. (Mass.) 553, 57 Am. Dec. 68,
Henry Shaw and William Gardner, partners under the name of Shaw
& Gardner, becoming dissatisfied, dissolved the partnership; Gard-
ner buying the firm property and agreeing to pay the firm debts.
The partnership and each partner was at the time insolvent, though
there was no proof that either knew it It was held, in the distri-
bution of the assets of Gardner in insolvency, that the former prop-
erty of the firm had become his separate property, and the firm cred-
itors were not entitled to priority in its distribution. Mansur-Teb-
betts Implement Co. v. Ritchie, 159 Mo. 213, 60 S. W. 87; Bedford
V. McDonald, 102 Tenn. 358, 52 S. W. 157. See ** Partnership;* Dec,
Dig. (Key No.) {§ 176-188; Cent. Dig. §§ S08SS6.
«» DARBY V. GILLIGAN, 33 W. Va. 246, 10 S. E. 400, 6 L. R. A.
740, Gilmore, Cas. Partnership, 221; ARNOLD v. HAGERMAN, 45
N. J. Eq. 186, 17 Atl. 93, 14 Am. St. Rep. 712, Gilmore, Cas. Partner-
ship, 223 ; JACKSON BANK V. DURFEY, 72 Miss. 971, 18 South.
456, 31 L. R. A. 470, 48 Am. St Rep. 596; BANNISTER v. MILLER,
54 N. J. Eq. 121, 32 Atl. 1066 ; MUler v. Bannister, 54 N. J. Eq. 701,
37 Ati. 1117 ; Ex parte MA YOU, 4 De G., J. & S. 604 ; Marsh v. Ben-
nett, Fed. Cas. No. 9,110; In re Cook, Fed. Cas. No. 3,150; Conroy
V. Woods, 13 Cal. 626, 73 Am. Dec. 605. See ** Partnership;' Dec Dig.
(Key No.) H 116-183; Cent. Dig. %% 308^36.
§ 59) TBAMSFER OF FABTNEBSHIF FBOFSBTT 187
the creditors, and hence it is fraudulent. Thus in Ex parte
Mayou,*" one of two partners made an assignment to the
other of the firm property in consideration that the other
assumed the firm debts. Both were in fact insolvent at the
time, as was the partnership. It was held that such an as-
signment was fraudulent as against the firm creditors.
Lord Chancellor Westbury said: "Taking, then, in the
first place, the principle of law which is embodied in the
statute of 13 Eliz. c. 5, and applying that to the transaction,
I think that it was not competent for the one to make or
for the other to accept an assignment of that description,
both of them being insolvent at the time, * * * be-
cause it had for its immediate and necessary object and
consequence the alteration of the property in such a man-
ner as would defect or delay the joint creditors. * * *
Having regard to the principle that a voluntary assignment
is, in this sense, a fraudulent assignment, if I regard the
transaction as entered into by one partner alone, I cannot
look at it^as a conveyance for good or valuable considera-
tion, seeing that the covenant by the assignee of the part-
ners was a covenant entered into by a man in a state of in-
solvency, and in this sense, being voluntary, it would be
fraudulent within the meaning which has been applied to
this term." •»
••Ex parte MAYOU, 4 De G., J. & S. 664. See ** Partnership,**
Dec. Dig. (Key No.) §§ 176-18S; Cent. Dig. S§ 308-3S6.
•1 In ARNOLD v. HAGERMAN, 45 N. J. Eq. 186, 17 Ati. 93, 14
Am. St Rep. 712, Gilmore, Cas. Partnership, 223, one Farr, being
in the lumber business, formed a copartnership In the business with
Hagerman and Fielder, under the name J. G. Farr & Go. Hagerman
and Fielder gave their notes to Farr to pay for certain property al-
ready in the business, which became firm property. The firm becom-
ing embarrassed, an assignment was made to Farr; he returning
the notes, and agreeing to pay the firm indebtedness. Farr made
an assignment for the benefit of creditors, and upon an attempt being
made to set aside the assignment to Farr the court held it to be
fraudulent, saying: "At the time of the transfer by Hagerman and
Fielder to Farr, the insolvency of each of these persons and of the
firm of J. G. Farr & Go. was patent to them all, and, indeed, was
the moving cause of the transfer. They all knew that, in the con-
dition of affairs then existing, none of them could meet maturing
obligations, and it was in the hope of facilitating an extension or
188 NATURB AND CHARACTERISTICS (Ch. 3
Same — Some Partners Remaining Solvent
In the foregoing discussion it has been assumed that aU
the partners are insolvent. If any of the partners who thus
join in changing the firm property into the several property
of one of the partners remain solvent, the transaction, even
though established to be voluntary in the manner above de-
scribed, is not necessarily fraudulent. It is to be treated,
then, as a gratuitous transfer by any solvent person, and
such transfers, as has been seen, can rarely be impeached.
Same — All the Partners Still Remain Liable
Notwithstanding that the firm assets may be thus con-
verted into the separate property of the partners, the con-
tract liability of all the original members of the firm still
continues, and firm creditors may pursue their remedies at
law and seize the property upon execution in the hands of
the partner to whom it has been conveyed. But they have
lost their priority with respect to such property, and, un-
less they have perfected their liens at law, they will, upon
a distribution in equity of the assets of the separate part-
ners, be postponed to the separate creditors.*"
compromise with creditors that the transfer was made. The transfer
embraced all the partnership property. If valid in all respects, it
appropriated the shares of Hagerman and Fielder to the payment
of the debts of Farr, for which those shares were previously not
liable, and left Hagerman and Fielder without any property what-
ever, as we gather from the testimony, to pay their debts. Inevit-
ably, therefore, by defeating the equity of the partnership creditors,
it would hinder them in the collection of their just claims. It is a rea-
sonable inference that these partners intended this manifest effect of
their act, and consequently the assignment by Hagerman and Field-
er to Farr must, according to the terms of the statute, be deemed
void as against the partnership creditors. Not only upon the ground
of a conmion intent to hinder partnership creditors, thus Inferred
from the knowledge which all parties must have had of the neces-
sary consequences of the transfer itself, but also upon the ground
that the transfer was made without valuable consideration — ^was
voluntary in the legal sense — ^it should be decreed invalid against the
partnership creditors, aU of whose debts were then in existence."
See ^^Partnership,'* Dec. Dig, (Key No.) SS 176-183; Cent. Dig. H
S08-^Se.
•1 See chapter VII, pw 404, on Bights of Creditors.
§§ 60-61) TRAN8F£B OF PARTNERSHIP PROPERTY 189
Satne — Executory Agreements — Reservation of Lien
If the agreement to change the firm property into sev-
eral property remains executory, or the legal title is not
to pass until certain acts are done, the rights of firm cred-
itors will not be destroyed.®' So, also, if the conveyance
is made with a reservation by the partners of the right to
have the firm debts paid, the priorities of firm creditors will
be preserved. As, for example, where the grantors have
the right to defeat the conveyance if the firm debts are not
paid.** If the legal title, however, has actually passed, and
has by subsequent conveyance come into the hands of a
purchaser in good faith for value, it would seem that a res-
ervation of lien would be unavailing to save the firm cred-
itors' priorities.
SAME— USE OP FIRM PROPERTY TO PAY SEPA-
RATE DEBTS OF PARTNERS
60. A transfer by an insolvent partnership of firm property
to pay the individual indebtedness of a partner, be-
ing voluntary, is fraudulent as to firm creditors.
61. A transfer by an insolvent partnership of firm property
to^ pay the individual indebtedness of all the mem-
bers of the partnership is held by some courts to
be valid, unless there was actual intent to defraud
firm creditors. By other courts it is held that such
a transfer, being voluntary, is necessarily fraud-
ulent
•« In re KEMPTNBR, L. R. 8 E3q. 28a Bee ^^Partnership,** Deo.
Dig, {Key No.) §{ 176-18S; Cent. Dig. §| 308-^S6.
•* THAYER V. HUMPHREY, 91 Wis. 276, 64 N. W. 1007, 80 L.
R. A. 549, 51 Am. St Rep. 887;Oilmore, Gas. Partnership, 546;
Bulger V. Rosa, 119 N. Y. 459, 24 N. E. 853.
It lias also been held that the continuing partner takes the assets
In trust for the firm creditors, and will be required to pay the firm
debts before using them for other purposes. Bowman y. Spalding
(Ky.) 2 S. W. 911; Shackelford's Adm'r ▼. Shackelford, 32 6rat
(Va.) 481. See ^^Partnership,'' Dec. Dig. (Key No.) M 176-183; Cent.
Dig. H S0&-^36.
190 NATURB AND CHARACTERISTICS (Ch. 3
Transferring Partnership Property to Pay a Separate Debt of
One Partner
Firm property is often, by conveyance of all the part-
ners, or by one acting under authority from all, used to pay
or secure the debt of a single partner. This may be done
by a conveyance or a mortgage. The effect of such a trans-
action is to put the firm property out of the reach of the
firm creditors, or to incumber it to their prejudice. If the
firm is solvent, or receives a good consideration, no objec-
tion can be made to it If, however, the firm is insolvent,
and no consideration is received, the law applicable to vol-
untary conveyances by insolvent persons applies, and the
transaction is invalid.** In the case of Menagh v. Whit-
well,** it was said with reference to a mortgage given by
members of a firm : "The mortgages executed by John C.
Smith and William B. Rubert appear to have been regarded
by the learned referee as transferring an undivided four-
fifths of the corpus of the partnership property therein de-
scribed. He has found, as to the mortgage from Smith,
that it was executed and delivered with the assent of the
other members of the firm. This mortgage, if such be its
true construction, having been given to secure the individ-
•B Keith y. Fiuk, 47 111. 272; Heineman ▼. Hart, 55 Mich. 64, 20
N. W. 792; Rothell v. Grimes, 22 Neb. 526, 35 N. W. 392; Ferson v.
Monroe, 21 N. H. 462; BANNISTER ▼. MILLER, 54 N. J. Eq. 121,
32 Ati. 1066 ; Ransom ▼. Vandeventer, 41 Barb. (N. Y.) 307 ; Lester
V. PoUock, 3 Rob. (N. Y.) 691.
An assumption by a solvent firm of the debts of one of Its members
is valid, notwithstanding that when the undertaking is performed the
firm is Insolvent Nordlinger v. Anderson, 123 N. Y. 544, 25 N. E.
992; Teagne v. Lindsey, 106 Ala. 266, 17 South. 538; Werner v. Her,
54 Neb. 576, 74 N. W. 833 ; Bemheimer ▼. Rindskopf , 116 N. Y. 428,
22 N. E. 1074, 15 Ain. St Rep. 414.
It has also been held that, if the debt of the single partner which
is paid was incurred for the firm and the firm got the benefit of it,
the firm property may be used to pay it Blackwell ▼. Rankin, 7 N.
J. Eq. 152 ; Gwin v. Selby, 5 Ohio St 96 ; Siegel v. Ghidsey, 28 Pa.
279, 70 Am. Dec 124 ; Coffin's Appeal, 106 Pa. 280. See "Partner-
sMpr Deo, Dig. (Key No,) §§ 176-183; Cent. Dig. §§ S08-3S6.
»fl MENAGH V. WHITWELL, 52 N. Y. 146, 11 Am. Rep. 683, Gil-
more, Gas. Partnership, 251. 8ee "Partnership,*' Dec Dig. {Key No.)
S§ 220, 227; Cent, Dig. U U9, 479%.
§§ 60-61) TRANSFEB OF PABTNEKSHIP PROPERTY 191
ual debt of the partner, even if effectual as to the firm, by
reason of the concurrence of all the partners giving it,
would be a fraudulent misapplication of the partnership
property, and void as to the creditors of the firm, under
the principle of the cases of Ransom v. Vandeventer,"^ and
Wilson v. Robertson,"* unless the firm were solvent at the
time the mortgage was given, and sufficient property would
remain, over and above that devoted by that instrument to
the payment of the individual debt, to pay the debts of the
firm." ••
Transferring Partnership Property to Pay Separate Debts of
All of the Partners
If the partners are solvent, there would seem to be no
doubt that they may by mutual agreement divide the firm
assets and each apply his respective share to the payment
of his individual debts. Whether such a transaction is
valid as against firm creditors, if the partners are insolvent,
is a question on which the authorities are in conflict. The
conflict involves the same principles already discussed in
connection with the transfer by all the members of a firm
to a single partner, who agrees to pay the firm debts. The
courts which uphold such transfers generally sustain the
validity of the transaction now under consideration, and
those which take the opposite view in that situation take
the same view here.
Same — Such Transfer is Valid
The right of firm creditors to prior payment out of firm
assets is a derivative right, and depends, as has been shown,
»T 41 Barb. (N. Y.) 307. See ^^Partnership," Dec. Dig. (Key No,) i
183; Cent. Dig. U S28, SSS.
»• WILSON V. ROBERTSON, 21 N. Y. 587. See '^PartnersMpr
Dec. Dig. {Key No.) | 18$; Cent. Dig. fi§ S19SS6; "Assignments for
Benefit of Creditors;' Cent. Dig. i§ 146, U7, 406.
»oGoodbar v. Gary (D. 0.) 16 Fed. 316; Caldwell v. Bloomlngton
Mfg. Co., 17 Neb. 489, 23 N. W. 336; Bernhelmer v. Rindskopf, 116
N. Y. 428, 22 N. E. 1074, 15 Am. St Rep. 414; Knauth v. Bassett,
34 Barb. (N. Y.) 31; Nordlinger v. Anderson, 123 N. Y. 544, 25 N.
E. 992; SAUNDERS v. REILLY, 105 N. Y. 12, 12 N. B. 170, 59 Am.
Rep. 472; Ransom v. Vandeventer, 41 Barb. (N. Y.) 307; WILSON
V. ROBERTSON, 21 N. Y. 587. See '* Partnership," Dec. Dig. {Key
No.) i 183; Cent. Dig. §§ 319-336, 348.
192 NATURB AND CHABACTBBI8TICS (Ch. 3
upon an implied agreement between the partners that the
common assets shall not be divided until the debts incurred
in the joint enterprise have been discharged. It is gener-
ally held that a relinquishment of this right by the partners
against one another, if they are solvent and act in good
faith, destroys the priority of firm creditors. Likewise it
is held ^ that, even though the partners are insolvent, if they
act in good faith and receive a consideration, the priority of
the firm creditors is lost. The priority thus depending upon a
right which is in the control of the partners themselves, they
may, upon a good consideration and in good faith, relinquish
such right. When, therefore, they decide to take the common
assets and use them to pay their separate debts, the agreement
amounts to a mutual relinquishment of reciprocal rights ; each
promise being the consideration for the other. There being,
then, a consideration and good faith, the transaction cannot
be impeached by the firm creditors. This is the holding by
many courts.*
1 See cases In note 85 above, and also In note 2 below.
sin WIGGINS v. BLACKSHEAR, 86 Tez. 665, 26 S. W. 9S9,
an assignment was made of partnership property for the benefit of
creditors ; preference being given to individual creditors. The court
said : "If they [the firm] had conveyed or mortgaged the entire prop-
erty to pay or secure the debt of one of the partners, for which
neither the firm nor the other partner was liable, then, on the plain-
est principles of right it ought to be held that such a conveyance or
mortgage was fraudulent as to firm creditors, and as to creditors of
the member of the firm not bound for the debt, for, to the extent of
his interest In the property, the conveyance would be voluntary.
Such, however, is not the case we have before us. The value of the
firm assets, exclusive of accounts and claims, which amounted to
$800, was shown to be $1,310, and one-half of this was more than
the individual indebtedness of either partner secured by the mort-
gage. As partnership creditors had no Uen on firm property, no rea-
son is perceived why each member might not lawfuUy permit the
other to pay his individual debt out of his own share of the partner-
ship property ; and the same reasons which would make lawful such
a payment would give validity to a mortgage given by both partners
to secure debts of members of the firm."
Also, In Re Edwards' Estate, 122 Mo. 426, 25 S. W. 904, 29 L. R.
A. 681, where the question was as to whether or not it was fraudu-
lent for an insolvent firm to assume the individual debts of the
partners by giving notes, the purpose of such notes being to put such
creditors on an equality with firm creditors, the court. In holding
§§ 60-61) TRANSFER OF PARTNERSHIP PROPBRTT 198
Same — Such Transfer is Inimlid
Other courts, however, hold that such a transaction by
insolvent partners is fraudulent as to firm creditors. The
ground for this position is that the relinquishment of their
reciprocal rights is voluntary and without consideration,
and, the parties being insolvent, is therefore fraudulent It
is said that there is no consideration, because each partner
has no specific interest in any tangible assets of the firm,
but only a right to his share of the residue after the firm
debts are paid; or it may be put on the ground that, the
partners being insolvent, their mutual promises are worth-
less.*
snch assumption not to be fraudulent, said : 'The principle we think
equally well settled by the more recent decisions of this court, as
well as by the weight of Judicial authority In other Jurisdictions,
that the assets of an Insolvent firm, before dissolution, may, with the
consent of all the partners, be applied to the satisfaction of aU the
Individual debts of the members of the firm, when done In good
faith. * * * In the case at bar the firm notes were given In
satisfaction of Individual debts long prior to the dissolution of the
partnership, and that transaction cannot be declared fraudulent at
law on the ground simply that the firm was at the time Insolvent or
was made so by the act of making these notes."
The court dted the following Missouri cases to sustain Its state-
ment: Reybum v. Mitchell, 106 Mo. 866, 16 S. W. 592, 27 Am. St
Rep. 350 ; Sexton v. Anderson, 95 Mo. 380, 8 S. W. 564 (referring also
to the cases dted In each) ; and Seger's Sons v. Thomas Bros., 107
Mo. 635, 18 S. W. 33, overruling Phelps v. McNeely, 66 Mo. 555, 27
Am. Rep. 378.
There was also cited the following from other Jurisdictions: Huls-
kamp V. MoUne Wagon Co., 121 U. S. 310, 7 Sup. Ct 899, 30 L. Ed.
971 ; CASE v. BE2AUREGARD, 99 U. S. 119, 25 L. Ed. 370, GUmore,
Cas. Partnership, 226 ; Coffin v. Day (D. C.) 34 Fed. 687 ; In re Kah-
ley, 2 Bias. 383, Fed. Cas. No. 7,598 ; Purple v. Farrlngton. 119 Ind.
164, 21 N. B. 543, 4 L. R. A. 535 ; Warren v. Farmer, 100 Ind. 593 ;
Trentman v. Swartzell, 85 Ind. 443; Schaeffer v. Flthlan, 17 Ind.
463 ; George v. Wamsley, 64 Iowa, 175, 20 N. W. 1 ; Jones v. Lusk,
2 Mete. (Ky.) 356; Klrby v. Schoonmaker, 3 Barb. Ch. (N. Y.) 46,
49 Am. Dec. 160 ; Kennedy y. National Union Bank of Watertown, 23
Hun (N. T.) 494; Pepper v. Peck, 17 R. I. 65, 20 Atl. 16; Anderson
?. Norton* 15 Lea (Tenn.) 14, 54 Am. Rep. 400. See ^^Partnership,"
Dec. Dig. (Key No.) {S 176-190; Cent. Dig. H $08-947-
• In JACKSON BANK v. DURFEY, 72 Miss. 971, 18 South. 456, 81
U R. A. 470, 48 Am. St Rep. 596, Durfey and Ascher were members
Gii*.Pabt.— IB
194 NATURE AND CHARACTERISTICS (Ch. 3
It should be noticed that some of the cases which hold
invalid transfers of firm assets by an insolvent partnership
do not in reality treat the priority of firm creditors as based
upon the right of the partners inter se. The priority is
based upon an inherent primary right of the firm creditors
themselves,* or it is regarded as a property right of the
firm creditors, which cannot be destroyed by the partners,*
or the firm is treated as an entity having its own creditors
who must be paid out of its own assets.*
of a partnership which was insolvent, as were each of the partners.
Durfey was indebted to an individual creditor in the sum of $5,000
and Ascher was likewise Indebted to an individual creditor in the
sum of $5,550. Being so indebted, each, on the same day, made a
trust deed of his undivided interest in certain firm property to secure
his individual indebtedness. On an attempt by a firm creditor to
have the trust deeds set aside, the court said: "The issue is thus
sharply presented whether it is lawful for the members of an in-
solvent firm to convert the Joint estate into severalty and appropriate
it to the payment of the individual debts of its members, leaving
the firm debts unpaid. * • • Durfey had a right to have the
partnership property applied to the partnership debts, and Ascher
had a like right While these reciprocal rights existed, they were of
value as property rights of the debtors to a certain class of cred-
itors; t e., firm creditors. Now, It is manifest that, for the very
purpose of preventing these creditors from resorting to these rights
for the satisfaction of their demands, the rights themselves were
waived, and attempted to be obliterated. We are unable to perceive
any Just principle upon which the right of a debtor can be recog-
nized to thus deal with his estate for tihe very purpose of obstructing
his creditors." Sanderson v. Stockdale, 11 Md. 563; Phelps v. Mc-
Neely, 66 Mo. 554, 27 Am. Rep. 378 (overruled in Goddard-Peck
Grocery Co. v. McGune, 122 Mo. 426, 25 S. W. 904, 29 L. R. A. 681) ;
BANNISTER v. MILLER, 54 N. J. Eq. 121, 32 AU. 1066; Miller v.
Bannister, 54 N. J. Eq. 701, 87 Atl. 1117. See ''Partnership," Dec
Dig. {Key No.) §§ 176-190; Cent. Dig. i{ S08S47.
* Caldwell v. Scott. 54 N. H. 414 ; Kidder v. Page, 48 N. H. 380 ;
Tenney v. Johnson, 43 N. H. 144. See ** Partnership,'' Dec. Dig. {Key
T.O.) {§ lie-190; Cent. Dig. §fi S08-S47.
B Franklin Sugar Refining Co. v. Henderson, 86 Md. 452, 38 Atl.
691, 63 Am. St Rep. 524 ; Bartlett v. Meyer-Schmidt Grocer Co., 65
Ark. 290, 45 S. W. 1063. Bee "Partnership,*' Dec. Dig. (Key No.)
i{ 176-190; Cent. Dig. §§ 808-^47-
• Teague v. Lindsey, 106 Ala. 286, 17 South. 538. See ^'Partner-
•hip;' Deo. Dig. {Key No.) U 176-190; Cent. Dig. S§ S08S47.
§ 62) TBAHSFBB OF PARTNBBSHIF PBOPBBTT 195
SAME— BY ACT OF A SINGLE PARTNER
62. Unless restricted by the partnership agreement, each
partner has power to sell those firm assets held for
sale. Any sale by a single partner, acting within
the scope of the firm business, is effective to pass
the title to the firm assets thus sold.
A discussion of the power of a partner to sell the firm
property is found in chapter V.^ It is only necessary here
to refer generally to the subject. Whether expressly pro-
vided for in the partnership agreement or not, there is im-
plied a mutual agency among the partners. The limits of
this agency, in the absence of express limits provided in
the articles of partners, are found in the scope of the firm
business. Each partner, within the scope of that business,
has power to bind his copartners. In an ordinary trading
firm there is an implied power to sell those firm assets held
for sale, and in many other kinds of partnership there may
be found an express or implied power of sale. In any part-
nership, trading or nontrading, power in one partner to
sell firm property may be found. This power may be es-
tablished in any of the ways in which the power of agents
generally is established. To be effective, the transfer of
firm assets by the act of a single partner must be author-
ized. Furthermore, as to real estate, the authority must
.be manifested in the proper manner. A transfer of firm
assets may fail, as has been seen, because it is fraudulent.
Likewise it may fail because made by a partner acting
without authority at all, or without authority in proper
form, or by a partner with authority, but who fails to com-
ply with the laws of conveyancing. An obvious example of
a sale invalid for want of authority is where one partner
disposes of the firm assets to pay his separate debts. This
is clearly beyond the scope of his implied authority, and
T See chapter Y, p. 2SS. The question of the validity of a convtsy-
ance of firm property by a single partner to pay his Indiyidual debts
is also considered there.
196 NATURE AND CHARACTERISTICS (Gh. 3
I
in the absence of actual authority, or an estoppel, a buyer
under such circumstances acquires no title. Even if he
acquired a title, it would be subject to impeachment for
fraud on the grounds previously noticed.*
SAME— FORM OP CONVEYANCE
63* Conveyances of firm property, whether real or personal,
must conform to the rules governing conveyances
of property generally.
Portn of Transfer — Personal Property
In the sale of personal property no particular formality
is required ; a sealed instrument not being necessary. This
being true, though in general a partner has no power to
bind his copartners by a sealed instrument,* the courts
incline to treat as surplusage a seal on an instrument as-
signing an interest in personal property. Therefore an as-
signment by one partner of such property by a sealed in-
strument is not necessarily bad merely because of the fact
that specific authority to make it was not given.^*
Same — Real Property
In the transfer of real estate a deed under seal is gener-
ally required. As to be noticed later,** sealed documents
were not usually regarded as mercantile instruments, and
therefore no power in one partner to execute them was
ordinarily implied. Express authority previously given, or
express subsequent ratification, was necessary. A partner
ft
• See, farther, chapter V, p. 282L
» HARRISON V. JACKSON, 7 T. R. 207, Gllmore, Caa. Partner-
ship, 382; Pollock v. Jones, 124 Fed. 163, 61 G. G. A. 555; Gerard
V. Basse, 1 Dall. 119, 1 L. Ed. 63; Gordon y. Funkhouser, 100 Va.
675, 42 S. B. 677. See '^Partnership;' Deo. Dig, (Key No.) i 1S7;
Cent, Dig. | 205.
10 DEX3KARD ▼. OASB, 5 Watts (Pa.) 22, 80 Am. Dec 287, GH-
more. Gas. Partnership, 283 ; TAPLBY y. BUTTERFIBIiD, 1 Mete.
(Mass.) 515, 35 Am. Dec. 874. Gontra: Pollock y Jones, 124 Fed.
163, 61 G. G. A. 655. See ^'Partnership,*' Deo. Dig. '{^ey No.) I 1S7;
Cent. Dig. { 205,
11 See chapter V, pi 806.
§ 64) TRANSFERS OF PARTNER'S INTEREST 197
may, however, make a binding contract to sell firm real es-
tate, if selling such real estate is within the scope of the
partnership business. The contract so made will support
an action for specific performance against the partnership.^*
If power to sell the firm real estate is established, the con-
veyance must conform to the rules governing conveyances
of real estate generally.
SUCCESSIVE OR SIMULTANEOUS TRANSFERS
OF EACH PARTNER'S INTEREST
64. There are two holdings as to the effect of a transfer
of a partner's interest in a partnership:
First: That such a transfer passes title to a share in the
corpus of the firm propertyt subject to the equita-
ble right of the remaining partners to have such
property applied in payment of firm debts. Ac-
cording to this holding, successive or simultane-
ous independent transfers by each partner of his
interest in the partnership operate to transfer the
legal title to all of the partnership property free
from the equitable right of any of the partners.
Second : That a transfer by one partner of his interest
passes title to his share of the surplus only. Ac^
cording to this holding, successive or simultane-
ous independent transfers by each partner of his
interest operate to pass title to the undivided sur-
plus only after firm debts are paid and accounts
settled.
As has been shown, the interest of a partner in the part-
nership property is an interest in the surplus which re-
mains after the payment of firm debts and the settlement
of accounts between the partners. "The property or ef-
fects of a partnership belong to the firm, and not to the
partners, each of whom is entitled only to a share of what
IS ROVELSKY T. BROWN et al., 92 Ala. 522, 9 South. 182, 25
Am. St Rep. 83, Gllmore, Gas. Partnership, 239. See ''PartnersMp,**
Dec Dig. {Key No.) { I4I; Cent. Dig. \ 218.
198 NATUBB AND CHARACTBRI8TIC8 (Ch. 3
m^y remain after payment of the partnership debts, and
after a settlement of the accounts between the partners." *•
This is the language of the law of partnership. As we
have seen, however, the courts do not recognize the firm as
an entity apart from its members. The property and the
obligations of the partnership belong to the persons com-
posing the firm. According to the law of property, the
legal title to all firm assets is in the partners individually,
and it can be alienated only in conformity with the require-
ments for conveyances of property generally. When, there-
fore, the courts say that a partner does not own any spe-
cific portion of the firm assets, they mean that^ while in
reality, according to the laws of property, he may own it,
he cannot use such ownership in violation of his obliga-
tions to his copartners. Courts of equity have read into
the partnership agreement a stipulation, binding alike on
each member of the firm, that the firm assets shall not be
used for individual purposes until the partnership purposes
are accomplished. As such stipulation arose from the mu-
tual consent of the partners when they entered into the re-
lation, it can be abrogated only by the same mutuality.
One partner, acting independently of the others, cannot
escape the restriction thus by common consent imposed
upon all. The effect of thus interpreting the partnership
contract is to make the interest of each partner in the firm
assets nothing more than an interest in the surplus after
the payment of the firm debts. A court of equity will com-
pel observance of the partnership agreement in this respect,
by preventing one partner from alienating the firm prop-
erty to pay his separate debts. Thus in Place v. Sweetzer ^*
a creditor of one partner was enjoined from selling on ex-
it Fourth Nat. Bank t. New Orleans & C. R. C6., 78 U. S. 624,
628, 20 L. Ed. 82. See '*Partner8hipr Deo. Dig, (Key No.) §§ lt&-
190, 227; Cent. Dig. §§ S08-S47, 47S, 474.
1* PLACE V. SWEETZER. 16 Ohio, 142, Gllmore, Gas. Partner-
ship, 511. See, also, T. Pars. Partn. (4th Ed.) p. 290, note (c), where
cases are collected and the conclusion Is reached that equity will
at the suit of the debtor's partners or the partnership creditors en-
join the creditor of a single partner from satisfying his execution
of the partnership effects until the firm debts are paid. See "Part-
nership,'* Deo. Dig. {Key No.) { 209; Cent. Dig, $S 401, 402.
§ 64) TBANSFER8 OF PARTNER'S INTEREST 199
ecution the debtor partner's interest in the firm assets until
an account was had. While perhaps no case can be found
where equity has, at the suit of one partner, enjoined a co-
partner from attempting to sell an interest in specific firm
assets, instances are numerous where equity has taken
charge of firm assets at the suit of one partner to prevent
the other partner from wasting or dissipating then^. Fur-
thermore, so thoroughly has the rule become established,
that a partner's interest in the firm assets relates only to
the surplus left after the payment of the firm debts, that
any alienation by him of his interest in the firm is invari-
ably construed to mean his interest in the surplus, and not
his interest in any specific articles of property.
The effect of the sale by a partner of his interest in the
firm assets can be viewed in two ways: First, that inas-
much as the legal title to his portion in such assets is really
in him, according to the law of property, the sale passes
a legal title to such portion, subject, however, to the pay-
ment of the firm debts. Second, that no legal title passes,
but only the partner's right to the surplus after the part-
nership debts have been paid. On the first view, the sale
by a partner of his interest in the firm assets does affect
the firm title pro tanto to the extent of such partner's pro-
portion of the total assets ; on the second view, it does not.
The necessity of determining which view is correct arises
when all the partners, acting independently, sell their re-
spective interests in the firm. For example. A., of the firm
of A. B. & C, sells his interest to X., B. his interest to Y.,
and C. his interest to Z. Is the firm title now gone, and
with it the priority of the firm creditors? It is said that
this priority is based upon the rights of the partners
against one another to have the firm assets applied to the
firm debts. It is conceded on all hands that, if all the part-
ners join, they may pass the legal title to the common as-
sets free from the claims of the firm creditors, and that
such conveyance is effective, unless impeachable for fraud.
If, however, one only sells his interest, the other partners
may still insist that the property be applied to the firm
debts. But if they all sell successively or simultaneously,
but each acting independently of the others, do they
200 NATURB AND CHABACTBBI8TIC8 (Gh. 3
thereby pass the legal title to the entire firm assets free
from the claims of firm creditors? There is no doubt that
the sale by one partner alone will not produce such effect.
Whether a sale by all acting independently will do so de-
pends upon the view one takes of the transaction. On the
view first mentioned, by A/s sale X. acquired a legal title
to a portion of the firm assets, charged with the burden of
the so-called equity of the other partners. Likewise Y.
acquired B.'s interest similarly charged. When C. sold to
Z., all the partners now having alienated their interests,
their mutual equities are gone, and the legal title is in the
three grantees, freed from such equities. Where X. first
got a legal title incumbered, he now has it unincumbered.
It might be urged, however, that, although by the independ-
ent sales by each partner of his interest the title to the en-
tire firm assets passes, the partners still retain their mutual
rights to have the property applied to the payment of firm
debts, and their grantees take the property subject to such
burden, and conceivably the price paid for each interest
was fixed with reference to this liability. While it is pos-
sible to regard the title thus conveyed as subject to firm
debts in cases arising between the partners and their gran-
tees, it is difficult to see how such incumbrance could affect
the property if it should be sold to third persons; for, if
it be assumed that the legal title to the entire corpus actu-
ally passed by the successive sales, then the grantees may
convey the title thus acquired to third persons, who would
hold it free from the partners' equities. For example, if
X., Y. and Z., in the illustration above, should convey their
respective interests to M., the entire title would rest in him,
and it could not be subjected to any liability growing out
of the mutual rights of the partners who formerly owned it.
The leading case holding that the successive independent
sales by all the partners of their respective interests passes
the legal title to the corpus of the firm property is Doner
V. Stauffer,*' where the respective interests of all the part-
is DONER V. STAUFFER, 1 Pen. & W. (Pa.) 198, 21 Am. Dec
870, Gilmore, Cas. Partnership, 247. In First Nat Bank of Indian-
Ola V. Brubaker, 128 Iowa, 587, 105 N. W. 116^ 2 L. R. A. (N. S.)
256, 111 Am. St Rep. 200, the partners, acting independently, sold
§ 64) TRANSFERS OF PARTNER'S INTEREST 201
ners were sold on execution in favor of their separate cred-
itors. No distinction apparently is made between volun-
tary and involuntary sales. The leading case holding that
the sales by all the partners of their respective interests in
the partnership do not affect the corpus of the firm prop-
erty, but convey only a right to the surplus after the firm
their respectlYe interest In the firm assets. The court denied the
claim of the firm creditors to priority, on the ground apparently
that the partners had released their mutual equities.
**The injustice, and, it may be said, the absurdities, which re-
sult from such a view, lead to an inquiry into its correctness. A
firm may be perfectly solvent, though the members are individually
insolvent, and yet in such a case the doctrine that the property of
the firm is divested, and the equities of the partners and partner-
ship creditors are extinguished, by separate transfers of the in-
dividilkl interests of all the partners, might result, not only in an
appropriation . of all the properties of the Arm to the payment of
the individual debts, to the entire exclusion of the firm creditors,
but to a most unjustifiable sacrifice and waste of such properties.
For instance, suppose a firm to consist of three members, each hav-
ing an equal interest, and to be possessed of assets to the amount
of 1300,000, and to owe debts to half of that amount; the interest
of each partner, supposing their accounts between themselves to be
even, is $50,000. The members of the firm are individually indebt-
ed. One of them sells his share, and receives for it $50,000, which
\b its actual value. The share of another of the partners is sold un-
der exeaition, and brings its full value, $50,000. Thus far one part-
ner remains, and he has an equity to have the firm debts paid, and
those who have sold out are protected against those debts. The
purchasers of the separate interests are entitled to the surplus only.
The joint creditors still have their recourse against the partner-
ship property, and the right to levy on such of it as is subject to
sale on execution; but before any levy the remaining partner sells
out his individual interest, or it is sold on execution. According
to the doctrine applied in the present case, and maintained in the
case of Coover's Appeal [29 Pa. 9, 70 Am. Dec. 149], supra, the firm
property is by this last sale relieved from the partnership debts,
the two shares first sold are at once changed from interests in the
surplus to shares in the corpus of the property free from the debts,
their value is doubled, and the fund which should have gone to
pay the joint debts is, without any consideration, appropriated by
the transferees of the individual interests of the partners." Rapallo,
J., in MENAGH v. WHITWELL, 52 N. T. 146, 11 Am. Rep. 683,
Gilmore, Gaa Partnership, 251, 255. See "Partnership," Dec Dig.
(Key No.) H 176-190, tH; Cent. Dig. %% S08-^47f *75, -^7^
202 NATURB AND CHARACTERISTICS (Ch. 3
debts are paid, is Menagh v. Whitwell.** This case was
decided on the assumption that there was no intention to
convey more than each partner's interest in the undivided
surplus. Had an intention to transfer an interest in the
corpus of the property been clearly shown, and had a final
conveyance been made to an innocent purchaser for value,
and had there been an attempt to reach the property in his
hands, the question would have arisen as to the nature of
the restriction on a partner's selling power. Is a partner
under a total inability to convey any part of the corpus of
the firm property, or can he convey a part of the corpus
in such property, subject, however, to the equities of the
other partners? If he can make such a conveyance, then
separate transfers by each member of a firm, with the in-
tention of passing title to firm property, would, if the inter-
ests conveyed became united in the hands of an innocent
purchaser for value, give him a legal and unincumbered
i« MENAGH T. WHITWELL, 52 N. Y. 146, 11 Am. Rep. 683, GU-
more, €as. Partnership, 251. In this case there was a firm of five
persons, each owning a one-fifth Interest Two of them sold their
interest to a third member, who thereby became an owner of three-
fifths interest in the firnL The owner of the three-fifths interest
mortgaged it to X., the plaintiff. Another partner mortgaged his
one-fifth to T. Plaintiff by foreclosure acquired title to the three-
fifths Interest of his mortgage, and Y. acquired the Interest of his
mortgagor. The remaining partner afterwards sold his one-fifth
Interest to a stranger. It was held that, if the Intent was to con-
vey an interest in the corpus, the mortgages were in fraud of cred-
itors and void; that, on the assumption that the mortgages were
intended to pass an interest In the surplus only, no share in the cor-
pus of the property passed, and each partner would have the right to
see that the property Itself was applied to the payment of firm
debts. Rapallo, J., said: "I do not Bee how this right can be af-
fected by the question whether the separate interest of aU or only
one of the partners is thus sold. Each of the purchasers would
acquire an interest merely in the surplus, and each partner whose
interest was sold would have the right to Indemnity against the firm
debts by the application to such debts of so much of the property
as might be necessary for the purpose. These debts must have been
taken into consideration in fixing the price of the interest sold, and
consequently allowed to the purchaser, and the partnership assets
are the primary fund for their payment" See "Partnership,*' Deo.
Dig. (Key No,) i t27; Cent. Dig. U J^IS-AH.
§ 64) TRANSFERS OF PARTNER'S INTEREST 203
title. The case of Menagh v. Whitwell, howevefj seems to
incline to the view that a partner is under a total disability
to convey more than his share of the surplus. Rapallo, J.,
in the latter part of his opinion, said: "Until some act is
done by the firm to transfer the joint interest, no separate
act of either or all of the partners, or proceedings against
them individually with reference to their individual inter-
ests, should be held to affect the title of the firm, so as to
preclude a creditor of the firm, having a judgment and ex-
ecution, from levying on the joint property." It is mani-
fest that, if a partner can sell nothing but his surplus, the
doctrine of protection of purchaser for value without notice
will have no application. The purchaser cannot get any-
thing that the firm creditors have a claim upon, because
the partner himself can sell nothing that they are entitled
to.^^ Further, if it be true that a partner cannot by his
independent sale pass any legal title to his share of the
corpus of the firm property, then partnership ownership of
property differs fundamentally from the ordinary owner-
ship of tenants in common, for there is no doubt that, by
the law of property governing tenancies in common, each
co-owner by his independent sale can pass a legal title to
his share of the common property. Again, if it be said that
a partner, like a cotenant, can by his independent sale pass
a legal title to his share of the common property, but that
such share is subject to the claim which his copartners
have, by virtue of the partnership agreement, against the
common property to have it applied to the payment of the
firm debts, then this is an exceptional form of co-ownership ;
for, by the law of property governing ordinary tenancy in
common, a purchaser from a cotenant of his individual in-
terest would take it free from any claim which the other
cotenants might have upon the share by virtue of any con-
tract between such cotenants, unless the claim were evi-
iT Tuner ▼. Leaverton, 143 Iowa, 162, 121 N. W. 615; PRATT v.
McGUINNESS, 173 Mass. 170. 53 N. B. 380, Gllmore, Cas. Partner-
ship, 212; Ewart v. Nave-McCord Mercantile Co., 130 Mo. 112, 31
S. W. 1041 ; Kenneweg v. Schilansky, 45 W. Va. 521, 31 S. E. 949.
See ^'Partnership;' Dec, Dig. {Key No,) i 227; Cent. Dig, §§ 473-474.
204 NATURE AND GHARACTBBISTICS (Gh. 3
denced by mortgage or in some other way, so that the
purchaser could be said to have bought with notice of the
incumbrance.
EFFECT OF DEATH OP PARTNER ON PARTNER-
SHIP PROPERTY
L Upon the dieath of a partner the legal title to the choees
in action and to the chattels of the partnership
vests in the surviving partner; in England the le-
gal title to real estate vests also in the surviving
partner; in the United States it vests in the heir
of the deceased partner, according to his interest
therein.
»
66. Whatever legal title vests in the surviving partner is
not for his sole benefit, but for the purpose of pay-
ing the firm debts and settling the affairs of the
partnership. The legal title to the real estate in
the hands of the heir is subject to being charged
by the stuviving partner for the same purpose.
It is well settled that survivorship, which is characte^ris-
tic of joint tenancies, does not apply to property held by
partners.^' When, however, it is said that there is no sur-
vivorship in partnership assets, it is meant merely that
there is no beneficial survivorship. The legal title may
survive, but not for the benefit of the survivor.
Same — Choses in Action
So far as the legal title to the choses in action of a part-
nership is concerned, there is no doubt now that it sur-
vives, though an early case *• held that an action on a firm
debt was properly brought by a surviving partner and the
representative of a deceased partner jointly. The case is,
i«Goke*s Iilttleton» 182A; JBFFEREYS t. SMALL, 1 Vem. 217,
GUmore, Oas. Partnership, 266. See ^^Partnership,** Deo. Dig, (Key
^0.) i 246; Cent Dig. § 520.
19 Han ▼. Huffman, 3 Kebb. 798. See "Partnership,** Dec. Dig.
{Key No.) S§ 243-^245, 258; Cent. Dig. {§ 509-518, 564^.
S§ 65-66) EFFECT OF DBATH OF PARTNfiB 205
however, clearly contra to the later cases and to the over-
whelming weight of authority.** The legal title is viewed
as devolving upon the survivor in his own right. He is
not an assignee of his deceased partner's interest.** He is
the only proper party to sue and to be sued with respect
to the partnership obligations and property.**
so BUCKLEY t. BARBBB, 6 Exch. 164 ; Kemp v. Andrews, Garth,
170; Dixon t. Hammond, 2 B. & A. 310; Gamble v. Rural In-
dependent School Dist of Allison (C. G.) 182 Fed. 514; ANDREWS'
HEIRS V. BROWN'S ADM'R, 21 Ala. 437, 56 Am. Dec. 252, GUmore,
Gas. Partnership, 267; Newman ▼. Gates, 165 Ind. 171, 72 N. E.
638; BA8SBTT t. MILLER, 39 Mich. 133, Gilmore, Gas. Partner-
ship, 271; STEARNS t. HOUGHTON. 38 Vt 584, GUmore, Gas.
Partnership, 273. See "Partnership,** Dec. Dig. (Key No.) §i 24$"
245; Cent. Dig. %\ 509-518.
SI NEHRBOSS v. BLISS, 88 N. T. 600. See ""Partnership,** Deo.
Dig. {Key No.) M 249-^47; Cent. Dig. K 509-528.
** Gases in note 20 above.
In ADAMS v. HAGKETT, 27 N. H. 289, 59 Am. Dec. 876, Gilmore,
Gas. Partnership, 274, an action was brought on promises made to
the plaintiff as the suryivlng partner of the firm of J. G. Bancroft
& Go., and as snrriTlng partner of the firm of G. A. & J. Q. Adams,
and also npon promises made to the plaintiff in ^ his indiyidual ca-
pacity. It was objected that the causes of action could not be Join-
ed, as they accrued in different rights. The court held that there
was no objection to Joining them, saying: "It is not disputed that
the plaintiff is the surriving partner of the two firms, and it is well
settled that where a firm consists of two persons, and one of them
dies, the rights of action which were vested in the firm survive to
the remaining member, not to him as to an administrator or execu-
tor, representing another person, but as the survivor of the part-
nership, representing himself, and being ali that is left of the firm.
The cause of action is in him; and hence it has been often held
that, in an action at the suit of a surviving partner, he may include
a count for a debt due to himself in ids own right, as both causes
of action are in him. Slipper v. Stidstone, 5 T. R. 493 ; French v.
Andrade, 6 T. R. 582; Golding v. Vaughan, 2 Ghit 436; Richards
V. Heather, 1 B. & A. 29 ; Smith v. Barrow. 2 T. R. 476. ♦ ♦ •
As it is clear upon authority that a surviving partner may, in an
action brought by him as such survivor, include in his declaration a
count for a debt* due to himself in his own right, no reason occurs
to us why he may not also, in the same suit, Join another count for
a debt accruing to him as survivor of another firm. The causes of
action are ail in him, and the principle in the one case must be the
same as in the other.*' See, also, Hewitt v. Hayes, 204 Mass. 586,
90 N. E. 985, 27 L R, A. (N. S.) 154 ; HOLBROOK v. LAGKET, IB
206 NATURE AND CHARACTERISTICS (Ch. 3
Same — Ordinary Chattels
There can be no doubt that in the United States the le-
gal title to ordinary chattels survives, despite the disfavor
with which joint tenancy in land is viewed.** In England
there has been some doubt upon this point, however, and
in 1851, in a case holding that the chattels of a partnership
might be seized under a fi. fa. issued on a judgment ob-
tained against the executors of a deceased partner on his
separate debt,** Baron Parke said there was "no satisfac-
tory authority for the position that the title to partnership
chattels survives at law, and the authorities the other way
greatly predominate." This view has since been character-
ized *• as "the peculiar views on the subject once taken by
the Court of Exchequer," and can hardly be said to repre-
sent the law in England at the present time.*'
Same — Real Estate
The doctrine of conversion of firm realty into personalty
has already been explained.*^ Under the English rule of
out and out conversion the legal title to firm realty appar-
ently vests, upon the death of one partner, in the survivor.
This is true where the title is held jointly, and the result
in such cases may be explained as due to the general rule
of survivorship applicable to joint estates.** Where the
title stands in the name of the deceased partner only, it
Mete. (Mass.) 132, 46 Am. Dec. 728. Bee ^PartnerBhip^*' Dec. Dig,
{Key No.) SS 24S-247, 258; Cent. Dig. §f 509-^28, 664V!t, 569^75.
2« ANDREWS' HEIRS V. BROWN'S ADM'R, 21 Ala. 437, 56 Am.
Dec 252, Gilmoret Cas. Partnership, 267 ; Dldlake y. Roden Grocery
Co., 160 Ala. 484, 49 South. 384, 22 L. R. A. (N. S.) 907 ; BASSETT y.
MILLER, 39 Mich. 133, Gllmore, Gas. Partnership, 271. See **Part'
nership,'* Deo. Dig. (Key No.) f 245; Cent. Dig. f 5U> *
s« By Partnership Act, 1890, f 23, it is no longer possible to leyy
on firm property, except on a judgment against the firm.
36 By Lord Justice James in Taylor y. Taylor, 28 L. T. R. 189.
See "Partnership;* Dec. Dig. {Key No.) |f 2|5-W; Cent. Dig. H
509-528.
s« KNOX y. GYE, L. R. 5 E. ft I. App. 656. See quotation from
this case in note 33, post See "Partnership,** Dec. Dig. (Key No.)
ff 2iS-2i7; Cent. Dig. ff 509-528.
>r See section 53, p. 154, ante.
s«Llndley'B Law of Partnership (7th Ed.) p. 879; JEFFERETS
T. SMALU 1 Vem. 217, Gllmore, Oas. Partnership, 266; Elliot T.
§§ 66-66) EFFECT OF DEATH OF PABTKEB 207
would seem to go to his heirs in the usual way, subject to
being divested pursuant to the partnership agreement.**
In the United States, while the doctrine of pro tanto con-
version is quite generally recognized, the legal title to firm
realty goes, upon the death of one partner, to his heirs, ac-
cording to the rules governing devolution of property upon
the death of the owner. If the legal title stands in the
name of the deceased partner, it passes to his heirs; if in
the names of both partners, the share of the deceased de-
volves upon his heirs after the manner of estate held in
common. The fact that the title thus passes does not,
however, release it from the partnership obligations. The
surviving partner has the power to charge such realty for
the payment of debts and the settlement of partnership
accounts. While he has not the legal title, still he can,
in the settlement of the firm business, convey an equitable
title; that is, he can confer upon a grantee his right to
have the real estate charged with the payment of firm
debts, and a court of equity will recognize such right by
compelling the heir to divest himself of the legal estate.
Thus, in Delmonico v. Guillaume,** a surviving partner,
in order to aid in paying firm debts, entered into a written
contract with the defendant to convey certain firm realty.
Defendant refused to accept the conveyance, on the ground
that one-third of the legal title was outstanding in the in-
fant heir of one of the deceased partners. In a suit by the
surviving partner for specific performance, in which the
infant heir was a defendant, the court held for plaintiff
and ordered the guardian ad litem of the infant to join in
the conveyance. The court said: "In this case * * *
the surviving partner, * * * as between himself and
the heir, * * * had an absolute right to dispose of it
Brown, 3 Swanst. 489, note. See, also, Partnership Act, 1890, 8
20(2). See *' Partnership,"* Deo. Dig. {Key No.) S 246; Cent. Dig.
§§ 519-52S.
s» Since Land Transfer Act, 1897 (60 ft 61 Vict c. 65) K 1. 25, the
legal title would devolve upon the legal personal representative of
the real property.
so DELMONICO V. GUILLAUME, 2 Sand. Ch. (N. T.) 866. See
'^Partnership,*' Deo. Dig. (Key No.) | 246; Cent. Dig. 88 519-628.
208 NATURE AND CHARACTBRI8TICS (Gh. 3
[the land] for the payment of the debts of the firm, in th<
same manner as if it had been personal estate. * * *
There is no doubt that the legal title is vested in the infant
defendant to the extent of one undivided half of the lots
contracted to Guillaume, But, the equitable right and in-
terest being vested in the surviving partner, the infant is
a mere trustee of the legal title, and the court of chancery
must compel a conveyance of the estate upon the applica-
tion of such surviving partner." *^ While it is well settled
that equity will compel the heir of a deceased partner to
convey the legal title to any firm real estate which may
have devolved upon him, where such real estate is needed
for the payment of firm debts, it would seem that equity
would also compel a divestment of the legal title whenever
necessary for the proper adjustment and settlement of the
partnership affairs.
SURVIVING PARTNER AS QUASI TRUSTEE
67. The surviving partner succeeds to the firm assets, sub-
ject to the same obligations of honesty, fidelity,
and integrity as when the partnership was in be-
ing. He is bound to pay the firm debts and dis-
tribute the balance of the assets among the part-
ners and their representatives according to their
respective interests. He must perform his duty
with diligence and in full recognition of his fidu-
ciary capacity, and he is accountable to the repre-
sentatives of the deceased partner for any miscon-
duct.
Upon the death of a member of a partnership, the surviv-
ing partner becomes the representative of the firm. Upon
him devolve all the assets of the partnership, and upon him
rests the duty of bringing the affairs of the firm to a close.
•1 Barton y. Lovejoy, 56 Minn. 880, 57 N. W. 835, 45 Am. St. Rep.
482; Tlllinghast v. Champlln, 4 R. I. 173, 67 Am. Dec. 510; Plerce'B
Adm*r v. Trigg's Heirs, 10 Leigh (Va.) 406. See **Partner9hip,** Dec.
Dig. (Key No.) f 24S; Cent. Dig. %% 519-^2S.
§ 67) 8URYIVINO PABTNBB AS QUASI TBUSTEB 209
This includes the collection of the obligations due the firm,
reducing to possession all the firm property, paying the
firm debts, making a complete accounting of the firm busi-
ness, and distributing the net assets, according to the inter-
ests of the several partners or their representatives,** The
mutual obligations of honesty, good faith, and integrity
resting upon the partners during the continuance of the
firm are in no way relaxed upon the death of a member.
The survivor owes the same fidelity to the representatives
of his deceased copartner. He is bound to administer the
affairs of the firm and to wind up its business in full rec-
ognition of his fiduciary relation. While he is not, accu-
rately speaking, a trustee, and does not hold the firm as-
sets in trust for the deceased partner's representatives,**
•s Kenton Furnace R. ft Mfg. Go. y. MoAlpin (G. G.) 5 Fed. 737;
In re F. Dobert & Son (D. G.) 165 Fed. 749; Word v. Word, 90 Ala.
81, 7 South. 412; McElroy y. Whitney, 12 Idaho, 512, 88 Pac. 349;
Beale y. Beale (IlL) 2 N. B. 65 (1885) ; Swafford*8 Adm'r y. White,
89 S. W. 129, 28 Ky. Law Rep. 119 ; Mathison y. Field, 8 Rob. (La.)
44; Gockerham y. Bosley, 52 La. Ann. 65, 26 South. 814; Hamlin y.
Mansfield, 88 Me. 131, 33 Atl. 788; Walker y. House, 4 Md. Gh.
39 ; Heath y. Waters, 40 Mich. 457 ; McGaughan y. Brown, 76 Miss.
496, 25 South. 155; Scudder y. Ames, 142 Mo. 187, 43 S. W. 659;
Haynes y. Brooks, 8 Giy. Proc. R. (N. Y.) 106 ; Lockwood y. Mitchell,
7 Ohio St 387, 70 Am. Dec. 78 ; Hanna y. Wray, 77 Pa. 27.
For further discussion of the rights and duties of the surylying
partner, see post, chapter V, fi 122. 8ee "Partnership," Dec, Dig.
{Key yo.) S§ 2J^-255; Cent, Dig. §§ 509-561.
««In KNOX y. GTE, L. R. 5 H. L. 656, Gilmore, Gas. Partner-
ship, 280, note, in holding that an action by the executor of the
deceased partner against the suryiylng partner was barred by the
statute of limitations. Lord Westbury said: "In deciding this case,
it must be recollected that the representatiye of a deceased partner
has no specific interest in or claim upon any particular i)art of
the partnership estate. The whole property therein accrues to the
Buryiying partner; and he is the owner thereof, both at law and
in equity. The right of the deceased partner's representatiye con-
sists in haying an account of the property, of its collection and ap-
plication, and in recelying that portion of the clear balance that ac-
crues to the deceased's share and interest in the partnership. An-
other source of error in this matter is the looseness with which the
word *trustee* is frequently used. The suryiving partner is often
called a 'trustee*; but the term is used inaccurately. He is not a
trustee, either expressly or by implication. On the death of a
Gii^Pabt. — 14
210 NATUBB AND CHABACTBRISTICS (Ch. 3
yet there are many analogies between his duties and those
of an ordinary trustee.** He will not be allowed to exer-
cise his power of disposal over the firm assets to his private
advantage.** In closing up the partnership business^ and
disposing of the firm property, he cannot buy it himself.
"This is so, not only because his duty as seller and his in-
terest as purchaser are in irreconcilable conflict, but for the
more cogent reason that it is indispensable to every legal
contract of sale and purchase that there be two contracting
parties competent to enter into a binding engagement with
each other!" •• Yet he may buy the interest of a deceased
partner from his personal representatives, if the sale is
made in good faith, and thus prevent the necessity of a sale
partner, the law confers on his representatives certain rights as
against the surviving partner, and imposes on the latter correspond-
ent obligations. The surviving partner may be called, so far as
these obligations extend, a trustee for the deceased partner; but,
when these obligations have been fulfilled, or are discharged, or
terminate by law, the supposed trust is at an end. * * * In like
manner here the surviving partner may be called a trustee for the
dead man; but the trust is limited to the discharge of the obliga-
tion, which is liable to be barred by lapse of time. As between the
express trustee and the cestui que trust, time will not run ; but the
siurvlving partner is not a trustee in that full and proper sense of
the word. ♦ ♦ ♦ There is nothing fiduciary between the sur-
viving partner and the dead partner's representative, except that
they may respectively sue each other in equity. There are certain
legal rights and duties which attach to them ; but it is a mistake to
apply the word 'trust* to the legal relation which is thereby created."
See, also, Krueger v. Speith, 8 Mont 482, 20 Pac. 664, 3 L. R. A. 291.
See ''Partnership;* Deo, Dig. {Key No.} f§ 2JiS-255; Cent. Dig. Sf
509-561.
•* Porter v. Long, 136 Mich. 150, 98 N. W. 990 (chargeable with
interest on Interest) ; Egan v. Wirth, 26 R. I. 363, 58 Atl. 987 (ac-
countable for profits) ; Rowell v. RoweU, 122 Wis. 1, 99 N. W. 473
(accountable for good will). See ''Partnership,** Dec Dig. (Key No.)
S§ 24S-255; Cent. Dig. f§ 509-561.
88 Gable v. Williams, 59 Md. 46; DEWEY v. CHAPIN, 156 Mass,
35, 30 N. B. 223. See "Partnership,** Deo. Dig. (Key No.) f{ 24S-255;
Cent. Dig. §§ 509-561.
•• VALENTINE et aL v. WYSOR, 123 Ind. 47, 23 N. B. 1076, 7
L. R. A. 788, Gilmore, €as. Partnership, 275, 279; Didlake ▼. Roden
Grocery Co., 160 Ala. 484, 49 South. 384, 22 L. R. A. (N. S.) 907.
See "Partnership,** Dec. Dig. (Key No.) t§ 251, 25i; Cent. Dig. {{
537, 651.
§ 67) SXTRVIVINO PABTNEB AS QUASI TBUSTES 211
of the partnership property and an accounting of the firm
assets.*^ He may even buy from them such legal title to
the partnership property as passed to them or to the heirs
of the deceased, provided they are vested with a power of
sale over such property.** The reason that would prevent
a surviving partner from selling to himself "has no applica-
tion to a case where a surviving partner purchases prop-
erty from the executor or administrator of the deceased,
and hence the rule which would govern the one case cannot
control the other." ••
In England/® and in some jurisdictions in the United
States, the trusteeship of the surviving partner is denied.*^
According to these cases "the right of the legal personal
representative of the deceased partner is to an account
merely of the partnership assets, and to the taking of that,
as to the taking of any other account, the statute of limita-
tions applies.*'
»T In re Silkman, 190 N. T. 560, 83 N. B. 1131. See "^Partnership,''
Dec. Dig. (Key Vo.) %% 2^255; Cent. Dig. %% 509-561.
*• Chambers t. Howell, 11 Beav. 6 ; Brown y. Slee, 103 U. S. 828,
26 L. Ed. 618; Balrd y. Baird's Heirs, 21 N. G. 524, 31 Am. Dec.
399; Roys y. VUas, 18 Wis. 169. See, also, Mulherin v. Rice, 106
Ga. 810, 32 S. B. 865. See "Partnership,*' Dec. Dig. (Key No.) f§
tJfi-t55; Cent. Dig. %% 609-^61.
••KimbaU y. Lincoln, 99 III. 578, 586. See "Partnership,** Dec.
Dig. (Key No.) U ^51, 254; Cent. Dig. f§ 5S7, 551.
«o See ante, note 33, p. 209.
«i BUSH y. CLARK, 127 Mass. Ill; Mutual Life Ins. Co. of New
York y. Sturges, 33 N. J. Eq. 328; Hogg*s Ex'rs y. Ashe, 2 N. C.
471. See "Partnership," Dec. Dig. iKey No.) |{ 24S-255; Cent. Dig.
K 509-561.
"Taylor y. Taylor, 28 L. T. R. N. S. 189, 190; KNOX y. GYB,
L. R. 5 H. L. 656, Gilmore, Cas. Partnership, 280, note.
See, howeyer, McPherson y. Swift, 22 S. D. 165, 116 N. W. 76, 133
Am. St Rep. 907, where it was held that an action In equity to as-
certain and recover a deceased partner*s interest in the ultimate
distribution of partnership assets was not an action on a contract,
and was not barred by the lapse of the statutory period of six years.
The English Partnership Act, 1890, f 43, provides: "Subject to
any agreement between the partners, the amount due from surviv-
ing or continuing partners to an outgoing partner or the representa-
tives of a deceased partner in respect to the outgoing or deceased
partner's share is a debt accruing at the date of the dissolution or
212 NATUBB AND CHARACTBBI8TIC8 (Gh. 3
Rights of Representatives of Deceased Partner
The duty of the surviving partner to wind up the firm
business, pay the firm debts, and distribute the residue is
owed to the representatives of the deceased partner,** who
may "invoke the interference of a court of equity, and com-
pel such a disposition of the partnership effects as will be
just and proper; this, because, as between the partners,
and therefore as between the surviving partner and the
personal representatives of the deceased partner, the joint
assets constitute a fund to be apportioned primarily to the
discharge of partnership liabilities." ** The representa-
tives of the deceased partner are entitled to his share of the
balance that may be left after the partnership affairs have
been settled. They have the same right that the surviving
partner has to require that the firm assets be applied to
the payment of the firm debts, and they may call upon the
survivor for an accounting to ascertain the condition of the
partnership business.**
death." Bee ** Partnership,'' Deo, Dig, (Key Vo.) {| tiS-tSS; OeiU.
Dig, §S 509-561,
4s The surviving partner is In no sense a trustee for the firm
creditors. Burchinell v. Koon, 25 Colo. 59, 52 Pac. 1100; Fairbanks,
Morse ft Qo, v. Welshans, 55 Neb. 362, 75 N. W. 865.
As to the remedies of firm creditors against the surviving part-
ner and the estate of the deceased partner, see cliapter IV, H 72.
73, pp. 227, 231, and chapter VII, f 152, p. 457. See ^'Partnership,*'
Dec, Dig. {Key No.) §S 243-255; Cent, Dig, IS 509-561.
«« EMERSON V. SENTER, 118 U. S. 8, 6 Sup. Ot 981, 80 L. Ed.
49; SIgoumey v. Munn, 7 Conn, 11; People v. White, 11 111. 341;
Fletcher v. Vandusen, 52 Iowa, 448, 8 N. W. 488; Cockerham v.
Bosley, 52 La. Ann. 65, 26 South. 814; Gable v. Williams, 59 Md.
46; Jones v. Dexter, 130 Mass. 380, 39 Aul Rep. 459.
A continuance of the business with the old assets, an intermingling
of the firm assets with the survivors' individual assets, and a failure
to keep separate accounts constitute an abuse of trust and will be
ground for an injunction, receiver, and accounting. Jennings' Adm'r
V. Chandler, 10 Wis. 21 ; Hooley v. Gieve, 9 Daly (N. Y.) 104. ifee
"Partnership," Dec. Dig. {Key No.) $} 243-255; Cent. Dig. §S 509-561,
«B Freeman v. Freeman, 136 Mass. 260 ; Hoard v. Clum, 31 Minn.
186, 17 N. W. 275; Egberts v. Wood, 3 Paige (N. Y.) 517, 24 Am.
Dec. 236 ; Watkins v. Fakes, 5 Helsk. (Tenn.) 185 ; Hoyt v. Sprague,
103 U. S. 613, 26 L. Ed. 585. See ** Partnership,** Dec. Dig. {Key No.)
S8 243-255; Cent. Dig. fS 509-561.
§ 67) fiUBViyiNO PABTNEB AS QUASI TBUSTES 218
Same — Survivor Liable for Deficiency on Sale of Assets-^
Following Assets Wrongfully Sold
The fiduciary obligations of the surviving partner re-
quire him to use due diligence to dispose of the assets to
the best advantage. . If he sacrifices them by a sale at less
than their true value, the representatives of the deceased
partner may compel him to make up the deficiency. They
may also compel the purchaser of the assets, who has col-
luded with the survivor in the improper sale, to account for
their true value, notwithstanding they may have already
taken judgment against the survivor for such breach of
trust. If the fraudulent purchaser still has the assets in his
possession, they may be recovered and applied to the pay<-
ment of the firm debts.^*
The right to dispose of partnership property comes to the
surviving partner, subject to the equity of the deceased
partner to have such property applied in payment of the
firm debts. If he uses it for his personal benefit, he does
so at his own risk,^^ and he is liable to the representatives
of the deceased for the deceased's ratable share of any profit
he may make out of such use of firm property.**
The Title of the Surviving Partner is Held for Firm Creditors
The fact that the legal title to the chattels of the firm
vests in the surviving partner does not enable his separate
creditors to reach such assets for the payment of their
debts to the prejudice of the firm creditors. Thus, if the
surviving partner's separate creditors obtain judgment
against him on his individual debt and seize the firm assets
in his hands, the representatives of the deceased partner
may by a bill in equity prevent the satisfaction of the sep-
♦« BUSSELL V. McCALIi, 141 N. T. 487, 36 N. B. 498, 38 Am. SL
Rep. 807; DEWET ▼. CHAPIN, 156 Mass. 35, 30 N. E. 223. See
^^Partnership,'' Dec, Dig. {Key No.) | 245; Cent. Dig. S$ 5U-51S.
«r Morgan t. Morgan, 68 Ala. 80 ; Fltz v. Reichard, 20 La. Ann.
649; Bauchle v. Smylle, 104 App. Dlv. 513, 93 N. Y. Supp. 709; Hib-
ber# V. Hubbard. 211 Pa. 331, 60 Atl. 911. Bee "Partnership,'* Deo.
Dig. {Key No.) §§ 21fi''255; Cent. Dig. %% 509-561.
*• Booth T. Parkes, Beatty. 444 ; Painter's Ex*r8 v. Painter. 133
Gal. xlx, 65 Pac. 135; Oliver v. Forrester, 96 111. 315; Young v.
ScbviUe, 99 Iowa, 177, 68 N. W. 670; Roberts v. Hendrlckson, 75
Mo. App. 484. See ** Partnership," Deo. Dig. (Key No.) §S 248-255;
Cent. Dig. U 509-561.
214 NATUBB AND CHARACTERISTICS (Ch. 3
arate creditors out of the assets thus seized until the firm
debts have been paid and the claims of the firm against the
survivor have been settled.** Also, if the surviving part-
ner becomes insolvent and assigns all his property for the
benefit of creditors, or is adjudicated a bankrupt, the firm
assets in his hands pass to his assignee^ subject to the pay-
ment of the firm creditors.**
Same — C hoses in Action
In the case of choses in action the foregoing principles
receive a modification to such an extent that a separate
creditor of a surviving partner does gain an advantage by
the survivorship of the legal remedies. The surviving part-
ner is the only proper party to bring actions on firm ob-
ligations,"* and this he may do in his own name.** When
thus suing on a debt due to his firm, the defendant may set
off a claim due from the surviving partner individually."*
Or when he is sued on a firm debt he may set off his in-
dividual debt against the plaintiff.** Or if he is sued on a
debt owed by him individually he may set off a firm debt
due to him as survivor.** Or if he sues on his own private
claim a partnership debt may be set off against it.**
*• MADDOCK'S ADM'X v. SKINKER, 93 Va. 479, 25 S. B. 535.
See "Partnership,** Dec, Dig. {Key No,) §{ 243-255; Cent. Dig. |§
509-561.
»o Preston v. Fitch, 137 N. Y. 41, 33 N. B. 77; Bx parte Leaf, In
re Simpeon ft WindroBS, 4 Deac. 287; Bz parte MANCHESTER
BANK, In re MELLOR, 12 Ch. D. 917. See "Partnership,** Deo. Dig.
(Key No,) U 24S-255; Cent. Dig. §f 509-561.
81 See note 20, p. 206, ante.
82 Smith V. Wood, 31 Md. 293; Header y. Leslie, 2 Vt 569; Brown
y. Allen, 35 Iowa, 306, eontra. See "Partnership,** Dec Dig. (Key
No,) S§ 243-258; Cent, Dig, |S 509-598.
6s White y. Union Ins. Co., 1 Nott ft McC. (S. C.) 556, 9 Aul Dee.
726. Bee "Partnership,** Deo, Dig. {Key No,) f§ 176-189; Cent. Dig.
§S 308-348; "Set-OfT and Counterclaim,** Deo. Dig. CKey No.) 9S 44.
45; Cent. Dig. K 82-99,
s« Lewis y. Culbertson, 11 Serg. ft R. (Pa.) 48, 14 Am. Dec. 607.
See "Bet'Oft and Counterclaim,** Deo. Dig. (Key No.) |§ 44, 45; C^.
Dig, S§ 82-99.
fts Slipper y. Stidstone, 5 T. R. 493; Johnson y. Kaiser, 40 N. X
Law, 286. See "Set-Oft and Counterclaim,** Dec. Dig. {Key No,) fi{
44, 45; Cent. Dig, H 82-99.
••French y. Andrade, 6 T. R. 682. See "Set-Oft and Counter-
claim,'* Deo. Dig. {Key No.) H 44* 45; Cent. Dig, f{ 82-99.
8 68) PROFEBXT AFTER DEATH OF FABTNEB 215
AGREEMENT OF PARTNERS CONTROLLING
PROPERTY AFTER DEATH
OF PARTNER
68. The members of a partnership may agree in advance
that on the death of one of them his interest shall
pass to a third person or to the surviving partners.
It is not infrequently provided in partnership articles
that on the death of one partner his share shall go to a per-
son of his nomination. This agreement is binding upon
the surviving partners, they thereby waiving their right
to object to the introduction of a new member into the firm.
Moreover, it has been held that the nominee may enforce
this right, even though there has been no direct assignment
to him, and even though the jurisdiction in which the part-
nership exists does not permit a third person to sue on a
contract made for his benefit. It is held that a trust is
created in his favor by the agreement which the courts will
enforce.'^ The agreement between the partners is, of
course, not obligatory upon the person named, and he has
a right to inform himself of the condition of the partner-
ship before deciding to become a member, though he can-
not demand a formal accounting.*^* If he decides to come
in, he must comply with the terms upon which he was en-
•T Thus In Page v. Cox, 10 Hare, 163, by agreement of the part-
ners, the widow of one of them was, at his decease, to be admitted
into partnership with the others. The same partner had previously
made a will by which he bequeathed his Interest in the stock and
trade to other persons. Upon his death the widow entered into the
partnership and made a conveyance of her interest A claim was
made under the will, but it was held that the partnership agree-
ment took the property out of the will and left the legal title in the
survivor, impressed with a trust in favor of the widow; that the
trust did not interfere with the disposal of the firm property during
the life of the deceased, because it was not to arise until his death ;
and that it was not the less enforceable because it was founded on
contract. See, further, chapter II, § 22, at page 73. See "Partner-
8hipr Dec, Dig, {Key No.) §§ 2JiS-255; Cent. Dig. §§ 509-561.
B«Plgott V. Bagley, McCl. & Y. 569. See "Partnership,'* Dec. Dig.
{Key No.) U 243-255, 298; Cent. Dig. §§ 509-561, 685, 686.
216 NATUBB AND CHARACTBRIBTIC8 (Oh. S
titled to do so.*^* Upon the admission of a new member
under a partnership agreement in place of the deceased,
there is no need for an accounting, and the assignable
rights of the old firm vest in the new one/* It may also
be that the partners agree among themselves that in the
event of the death of one of them the sole right to the as-
sets of the partnership and to continue the business of the
partnership shall vest in the survivors. In such a case the
representatives of the deceased have no right to compel an
accounting, but are only entitled to a settlement according
to the terms of the agreement ; and, in the absence of cir-
cumstances which would make such an arrangement fraud-
ulent as against them, the creditors of the old firm have
no preference in the assets of the old firm over the creditors
of the new firm, composed of the surviving partners.'*
»• Holland v. King, 6 O. B. 727. See ^'Partnership,** Deo. Dig. iKeu
No.) §§ 243-255; Cent, Dig. fi§ 509-561.
eo RAND v. WRIGHT, 141 Ind. 226, 39 N. B. 447. See •'Partner-
ship," Dec. Dig. {Key No.) i 255; Cent. Dig. { 55S.
«i In re SIMPSON, L. R. 0 Oh. App. Gas. 572L If the anrviTor
gets the right to the firm assets under such an agreement, the ex-
ecutor of the deceased partner cannot, of course, be held to account
for them. In re Weir, 59 Misc. Rep. 320, 112 N. Y. Supp. 27a See
'^Partnership,** Dec. Dig. (Key Vo.) H 24S-t55, B98; Cent. Dig. ||
609^61, 68(h^86.
I 69) FABTNBRSHIF LIABILITY 81T
CHAPTER IV
NATURB, BXTENT, AND DURATION OF PABTNBB8HIP
' LIABILITY
68. Nature of Liability In Contract
70/ CharacterlBtics of Joint Obligations.
71. Partnership Uablllty and Joint Liability.
72. Qnasl Severable Character of Joint Obligations In Bqnltjr.
73. liability of Estate of Deceased Partner.
74. Extent of liability In Contract
76, Nature and Extent of Liability In Tort
76. Commencement of Partnership liability In Contract
77. liability of an Incoming Partner.
7& liability of Retiring Partner.
79. Termination of Partnership Iilablllty In Contract
80. Past Transactions.
81. Future Transactions.
82. Dissolution of Operation of Law.
83. Dissolution by Act of the Parties,
NATURE OP LIABILITY IN CONTRACT
69. Aa the law does not recognize the partnership as a
legal entity apart from, its members, a partnership
as such cannot be a party to a contract. The lia-
bilities of a contract are the liabilities of the per-
sons composing such relationship, and the con-
tracts of a partnership are the contracts of the
individual partners jointly. Liability in contract
may be either several, joint, or joint and several.
Unless modified by statute, or affected by doc-
trines of equity, the liability of partners with re-
spect to partnership transactions is joint.
As stated in the black letter proposition above, since
there is no entity known as a partnership, there is in the
law no partnership contract apart from the contract of the
persons composing the partnership. While it is customary
to speak of the partnership contract, this is but a conven-
218 PARTNERSHIP LIABILITY (Ch. 4
ient way of describing the contractual obligations of the
partners with respect to the partnership transactions. For
example, a partnership contract between A. and B., part-
ners, on the one hand, and X., on the other, is in reality
the joint contract of A. and B. with X.^ By the law of
contracts, a number of individuals may become obligated
in different ways, viz.: Severally, jointly, or jointly and
severally. The obligations of partners with respect to the
partnership transactions are joint, and are in general sub-
ject to the rules governing all joint contracts. "It is true
that each copartner is bound for the entire amount due on
partnership contracts, and that this obligation is so far
several that if he is sued alone, and does not plead the non-
joinder of his copartners, a recovery may be had against
him for the whole amount due upon the contract, and a
joint judgment against the copartners may be enforced
against the property of each. But this is a different thing
from the liability which arises from a joint and several con-
tract. There the contract contains distinct engagements,
that of each contractor individually, and that of all jointly,
and different remedies may be pursued upon each. The
contractors may be sued separately on their several engage-
ments, or together on their joint undertaking. But in co-
partnerships there is no such several liability of the co-
partners. The copartnerships are formed for joint pur-
poses. The members undertake joint enterprises. They
assume joint risks, and they incur in all cases joint liabili-
ties. In all copartnership transactions this common risk
and liability exists. Therefore it is that in suits upon these
transactions all the copartners must be brought in, except
when there is some ground of personal release from lia-
bility, as infancy or discharge in bankruptcy; and, if not
brought in, the omission may be pleaded in abatement.
The plea in abatement avers that the alleged promises upon
which the action is brought were made jointly with an-
1 HASKINS y. D*ESTE et al., 133 Mass. 356, Gllmore, Cas. Part-
nership, 154; HALLO WELL v. BLACKSTONE NAT. BANK, 154
Mass. 359, 28 N. E. 281, 13 L. R. A. 315, Gilmore, Cas. Partnership,
309. See ^^Partnership,'* Deo. Dig. (Key No.) SS 165-179; Cent. Dig.
n soi-^05.
S 69) NATURB or UABIUTT IN OONTRAOT 219
Other, and not with the defendant alone, a plea which
would be without meaning, if the copartnership contract
was the several contract of each copartner." *
Contract liability is, however, in all cases joint, or joint
and several, or several, according to the intention of the
parties, and partners may make their contracts joint and
several, or several, by express agreement to that effect.*
Joint Obligations Distinguished from Joint and Several and
Several Obligations
Promises made by several persons may be several, joint
and several, or joint; several where each promises for
himself alone, joint and several where each promises for
himself and for all, and joint where each promises for all.
Whether a contract is several, joint and several, or joint
depends upon the intentions of the parties as determined
from the terms of their agreement.* As the liability of the
partners is joint, and is governed by the rules applicable
« Field, J., In MASON t. ELDRED, 6 WalL 231, 244, 18 I*. Ed.
783, Gilmore, Cas. Partnership, 281; Brandt ▼. Hall, 40 Ind. App.
451, 82 N. E. 929 ; Drew v. Bank of Monroe, 125 La. 673, 51 South.
683. See '* Partnership,** Dec, Dig, (Key No.) H 161-11$; Cent. Dig.
%% SOISOS.
s ** Joint contracts, or contracts which would be Joint by the com-
mon law, are in many states declared to be construed as Joint and
several." 1 Stlm. Am. St Law, H 4113, 5014, 5015. These statutes
haye been held to apply to contracts made by partners. Burgen t.
Dwlnal, 11 Ark. 314 ; Williams ▼. Muthersbaugh, 29 Kan. 730 ; NeU
V. Childs, 32 N. C. 195; WIGGINS v. BLACKSHEAR, 86 Tex. 665,
28 S. W. 939. But see Currey v. Warrington, 5 Har. (Del.) 147;
Sandusky v. Sldwell, 173 111. 493, 50 N. E. 1003 ; CJoates v. Preston,
105 111. 470; Hyde v. Gasey-Grinshaw Marble Co., 82 111. App. 83;
Pope Mfg. CJo. V. Charleston Cycle Co., 55 S. C. 528, 33 S. B. 787.
See *'Partner8hip;* Dec Dig. (Key No.) ff 165-17S; Cent. Dig. fS
SOl-305.
* '*That rule is that a covenant will be construed to be Joint or
several according to the interest of the parties appearing upon the
face of the deed, if the words are capable of that construction;
not that it win be construed to be several by reason of several in-
terests, if it be expressly joint" Parke, B., in Sorsbie v. Park, 12
M. & W. 146, 158. See "Contracts;* Dec Dig. {Key No.) H 181-184;
Cent. Dig. §§ 780-789; **Cov€nants;* Dec Dig. ifiey No.) t 28; Cent.
Dig. {§ 27, 28.
220 PARTNERSHIP LIABILITY (Ch. 4
to joint contracts in general, it will be necessary to exam-
ine the characteristics of joint obligations.
CHARACTERISTICS OF JOINT OBLIGATIONS
70. A joint obligation is one arisiiig upon a single promise
made by two or more persons jointly. Unaifected
by statutory change or by doctrines of equity, the
characteristics of a joint obligation are as follows :
(a) In an action to enforce such a promise all the prom-
isors are necessary parties.
(b) A release of one promisor releases all.
(c) A judgment upon a joint promise, whether satisfied
or not, extinguishes the promise and discharges
all the promisors, even though not parties to the
acticML
(d) In case of death of any promisor, the liability rests
upon the surviving promisors ; and; upon the death
of all the promisors, upon the representative of the
one dying last.
If the contract is several, there is a separate cause of
action against each promisor; there are as many causes
of action as there are promisors. If it is joint and several,
there is a cause of action against each promisor, and one
against them all jointly. Thus there is, therefore, one more
cause of action than there are promisors. In the case of
a joint contract there is but one promise, and hence but
one cause of action — a, right t& proceed against all of the
promisors collectively/
8 Streicheo t. Tehleisen, 112 Iowa, 612, 84 N. W. 715, SI L. B. A.
412 ; Ripley y. Orooker, 47 Me. 370, 74 Am. Dec. 491 ; Meyer y. Es-
tes, 164 Mass. 457, 41 N. E. 683, 32 L. R. A. 283; Dnmanolse y.
TowDsend, 80 Mich. 802, 45 N. W. 179; Alpaugh y. Wood, 53 N. J.
Law, 638, 23 Ati. 261 ; Field y. Bunk, 22 N. J. Law, 525 ; AlUn y.
Shadbume's Ex*r, 1 Dana (Ky.) 68, 25 Am. Dec. 121; Slocum y.
FalrchUd, 7 Hill (N. Y.) 292 ; Clark y. Rawson, 2 Denlo (N. T.) 135 ;
Eichbaum y. Irons, 6 Watts ft S. (Pa.) 67, 40 Am. Dec. 540; O'Brien
y. Bound, 2 Speers (S. G.) 498, 42 Am. Dec. 384. See **Oontraot8,**
Dec, Dig, {Key No.) H 181-184; Cent. Dig. U 780-789.
§ 70) CHABACTERT8TIC8 OF JOIKT OBLIOATION8 221
Actions on Joint Obligations
Since, in a promise by two or more jointly, there is but
a single promise, in which all joined, it is the right of the
promisors that they all be made defendants in any action
for the enforcement of such promise. If all are not made
defendants, those actually sued may, by plea in abatement
for nonjoinder of the others, prevent further proceedings
untii all are brought in. If for any reason the plaintiff is
not able to make all the promisors defendants, as, for ex-
ample, because one is out of the jurisdiction and cannot
be served, then, if the others object, he will be unable to
enforce the promise. By reason of the hardship thus inci-
dent to the enforcement of joint obligations, "in most of
the states legislative acts have been passed, called 'joint
debtor acts,' which, as a substitute for outlawry, provide
that if process be issued against several joint debtors or
partners, and served on one or more of them, and the others
cannot be found, the plaintiff may proceed against those
served, and, if successful, have judgment against all. Va-
rious effects and consequences are attributed to such judg-
ments in the states in which they are rendered. They gen-
erally are held to bind the common property of the joint
debtors, as well as the separate property of those served
with process, when such property is situated in the state,
but not the separate property of those not served; and,
whilst they are binding personally on the former, they are
regarded as either not personally binding at all, or only
prima facie binding on the latter." •
RelecLse of One Promisor
Since there is but one cause of action in case of a joint
contract, a cause of action against all of the promisors, it
ordinarily follows that a .discharge of one releases all.
Thus, if a technical release — ^i. e., a release under, seal — ^is
« Hall et al. ▼. Lannlng et al., 91 U. 8. 160, 168, 23 L. Ed. 271,
GUmore, Gas. Partnership, 286, note; MASON v. ELDRED et al.,
6 WalL 231, 18 L. Ed. 783, Gilmore, Cas. Partnership, 281 ; State y.
Glondt (Tex. OIv. App.) 84 S. W. 416. See ^'Contracts:* Dec. Dig.
{Key Nn.) M 181-184; Cent. Dig. H 780-789; **Partner8Mp,'* Dec.
Dig. (Key Ifo.) | 219; Cent. Dig. H i29-U5.
222 PARTNERSHIP LIABILITY (Gh. 4
given one joint debtor, the effect is to release all.' They
agreed to be jointly liable only. Moreover, even if the re-
lease were construed as being effective as to one only, the
other would, if compelled to pay, have a right to demand
contribution from the released promisor, thus in effect
nullifying the release.^ In order to avoid the loss of the
right to hold the other joint obligors by reason of a release
of one, it became the practice of the creditor, instead of
making a formal release, to covenant not to sue the party
sought to be released, and to reserve all rights against the
other joint promisors. If such was the intention of the par-
ties, the liability of the obligors not parties to the covenant
was unaffected.*
7 Brooks ▼. Stuart, 9 Ad. & El. 854 ; Beltzhoover ▼. Stockton, 4
Cranch, C. C. 095. Fed. Cas. No. 1,283; Armstrong v. Hay ward, 6
Cal. 186 ; Haney ft Campbell Mfg. Ck>. y. Adaza Go-operative Cream-
ery Co., 108 Iowa, 313, 79 N. W. 79; WUIiamson v. McGinnis, 11 B.
Mod. (Ky.) 75, 52 Am. Dec. 561; Drinkwater v. Jordan, 46 Me. 432;
Shaw V. Pratt, 22 Pick. (Mass.) 305; McAUister v. Dennln, 27 Mo.
40; Berry y. GlIIls, 17 N. H. 9, 43 Am. Dec. 584; Crane y. Ailing,
15 N. J. Law, 425; Harrison y. Close, 2 Johns. (N. Y.) 448, 3 Am.
Dec. 444; Finch y. Simon, 61 App. Diy. 141, 70 N. Y.' Supp. 361;
Greenwald y. Kaster, 86 Pa. 47. See **Release" Dec. Dig, (Key yo.)
IS 27-29; Cent, Dig. S$ 5S-1L
8 North y. Wakefield, 13 O. B. 536 ; State y. Matson, 44 Mo. 305.
The rule has been changed in a number of states by statute, making
a release of one Joint debtor effectiye as to all only with respect to
the proportionate share of those released. See 24 Aul & Eng. Ency.
(2d Ed.) p. 305. note 4 ; also NORTHERN INS. CO. y. POTTER, 63
Cal. 157, Gllmore, Cas. Partnership, 286. Bee ''Release,** Dec. Dig.
{Key No.) §1 27-29; Cent. Dig. If 55-7i; **ContHbutUm,** Dec. Dig.
(Key No.) §§ ^, 6; Cent. Dig. §S S. i, 10-12.
• Lacy y. Kinaston, 2 Salk. 575; Dean v. Newhall, 8 T.. R. 168;
Person y. Sanger, Fed. Cas. No. 4,752; TnthiU y. Babcock, Fed. Cas.
No. 14,^75; MuUendore y. Wertz, 75 Ind. 431, 39 Am. Rep. 155;
Williamson y. McGinnis, 50 Ky. 75, 52 Am. Dec. 561 ; Walker y. Mc-
CuUoch, 4 Me. 421 ; Ooodnow y. Smith, 35 Mass. 414, 29 Am. Dec.
600; City of Carondelet y. Desnoyer's Adm'r, 27 Mo. 36; CoUier y.
Field, 2 Mont 320; Line y. Nelson, 38 N. J. Law, 358; Sandlin y.
Ward, 94 N. C. 490; Oregg y. Hilsen, 34 Leg. lot (Pa.) 20; Pinney
y. Bugbee, 13 Vt 623.
"It is plain that the agreement released none of the debtors, much
less all of them. Indeed, if Eyans himself were sued contrary to
the covenant, Inasmuch as it Is one of Indemnity only, it is not ap-.
§ 70) CHARACTERISTICS OF JOINT OBLIGATIONS 223
Judgment on a Joint Obligation
A judgment, even though obtained against fewer than
all of the persons liable on a joint contract, constitutes a
bar to an action against the others. There is but one cause
of action, and that cause of action is merged in the judg-
ment obtained.^* The judgment is, however, binding upon
those against whom it was ;actually obtained. Though they
had a right to object for nonjoinder of all the promisors,
the right is personal to them, and if they do not raise the
objection the plaintiflf may proceed to judgment, which,
as has just been pointed out, bars all further action on the
joint promise, and discharges all the promisors, irrespective
of whether they were parties or not. Statutory changes,
however, in many of the states, preserve a right to proceed
against the other joint obligors whenever found.**
parent how he could plead It In bar .or set It up as a defence Ini any
manner, nor why he should not be left to his action upon it for re-
dress." Benton v. Mullen, 61 N. H. 125, 128.
"It is true, if the bank had formally released Reardon, she would
thereby have also released Bozeman. For it is well settled that a
release of one of several obligors is a discharge of all. And on this
point the authorities referred to by learned counsel are conclusive.
But we cannot consider the bank's agreement with Reardon a re-
lease; it is a covenant not to sue and to indemnify, which in its
nature is not a release. If Reardon himself had been sued by the
bank, he could not have pleaded that the bank had released him,
though he might have pleaded the covenant In bar; but even that
would only be permitted to avoid circuity of action." Bozeman v.
State Bank, 7 Ark. 328, 333, 46 Am. Dec. 291.
Various statutes have been enacted in different states with re-
spect to the effect of sealed instruments. The statutes and deci-
sions of each jurisdiction should be consulted. See ** Release,**
Dec. Dig. {Key No.) §§ 27-29; Cent. Dig. §§ 5S-71.
10 King V. Hoare, 13 M. & W. 494; MASON v. ELDRED. 73 U.
S. 231, 18 L. Ed. 783, Gilmore, Gas. Partnership, 281; Willings t.
Gonsequa, Fed. Gas. No. 17,767; Taylor v. Glaypool, 5 Blackf. (Ind.)
557 ; Ward v. Johnson, 13 Mass. 148. See **Judgment,** Dec. Dig.
{Key No.) f| 628, 629; Cent. Dig. §§ IIU, iU5.
11 MASON V. ELDRED. 73 U. S. 231, 18 L. Ed. 783, GUmore, Gas.
Partnership, 281 ; Bonesteel t. Todd, 9 Mich. 371, 80 Am. Dec. 90 ;
Thomas v. Mohler, 25 Md. 36; Westheimer v. Graig, 76 Md. 399, 25
Ati. 419; NATHANSON v. SPITZ et al., 19 R. I. 70. 31 Atl. 690.
See, also, post, chapter IX, pp. 543-545. See ** Judgment,** Dec. Dig.
{Key No.) §9 €28, 629; Cent. Dig. §§ llUf iU^.
224 PARTNERSHIP LIABILITY (Gh. 4
Survivorship in Joint Obligations
Since the liability on joint contracts survives at law, it
follows that, in the case of the death of one of the joint
obligors, all actions on such contracts must be brought
against the survivors.^* In case of the successive deaths
of all of the joint obligors, the legal liability on the con-
tract accrues to the personal representative of the last sur-
vivor.^*
PARTNERSHIP LIABILITY AND JOINT
LIABILITY
71. Partnership liability, as distinguished from joint liabil-
ity, is a liability incurred by the partners in con-
ducting the partnership lousiness. Whether part-
nership liability and joint liability are identical is
a question on which the courts di£Fer. According
to some decisions they are distinct; according to
others they are identical.
Distinction between Joint Liability and Partnership LAdbility
Though partnership contracts are joint, it is possible for
partners. to enter into joint contracts which have no rela-
tion to the partnership business, and which are not, there-
fore, partnership contracts. Ordinarily it makes but little
difference whether a joint contract is a partnership con-
tract or not, until an attempt is made to prove against the
partnership estate in insolvency proceedings or to reach
it on execution. It then becomes important to determine
whether a liability by persons in their partnership relation
is any different from a joint liability of the same persons
outside the partnership relation.
IS Towers t. Moore, 2 Vem. 98; Moore T. Rogers, 10 IlL S47;
Oere v. Clarke, 6 HUl (N. Y.) 350. Bee '*Contracts** D^e. Dig. {Key
No.) I 182; Cent, Dig, S§ 780-757.
IS In equity, however, a Joint obligation Is frequentlj treated aa
several. See section 72, post, on Quasi Severable Cbaracter of Joint
Obligations in Equity.
§ 71) JOINT LIABILITT 225
One View: Partnership Liability and Joint Liability Not Idetk-
tical
The members of a partnership have a right, as between
themselves, to demand that the assets of the firm shall be
applied to the payment of firm debts rather than to the
separate debts of any one partner. This right can be en-
forced by the creditors of the partnership, and is the basis
of the priority of firm creditors over separate creditors in
the distribution of firm assets.^*. It may be, however, that
all of the members of a partnership are liable on a joint
obligation which has no connection with the partnership
business. The question whether or not the creditors on
such a joint obligation shall be entitled to proceed against
the partnership property equally with the firm creditors
is one of some difficulty. On the one hand, it is contended
that a firm liability is distinct from a joint liability; that
the assets of the firm have been built upon the firm busi
ness, and are gained in part at least through the credit ex-
tended by firm creditors, who should in consequence be
given a preference over .those who are joint creditors
merely, and not firm creditors.^'
14 In re OHILDS, 9 Ch. App. 508; MurrUl v. NeH, 8 How. 414.
12 L. Ed. 1135 ; Irf re Lloyd (D. C.) 22 Fed. 90 ; Preston v. CJolby,
117 111. 477, 4 N. E. 375 ; Pahlman v. Graves. 26 111. 405 ; BUSH v.
CLARK, 127 Mass. Ill ; Mumford v. NicoU, 20 Johns. (N. Y.) 611 ;
Hartman's Appeal, 107 Pa. 327; Black's Appeal, 44 Pa. 503. See
'"Partnership," Deo. Dig. {Key No.) §§ 165-189; Cent. Dig. §| SOl-
SJ^8.
16 *<if a atm be composed of two persons, associated for the con»-
duct of a particular branch of business, It can hardly be maintained
that the joint contract of the two partners, made in their indlyidual
names, respecting a matter that has no connection with the Arm
business, creates a liability of the firm as such. The partnership
is a distinct thing from the partners themselves, and it would seem
that debts of the firm are different in character from other Joint
debts of the partners. If it is not so, the rule that sets apart the
property of a partnership exclusively, in the first instance, for the
payment of its debts, may be of little value. That rule presumes
that a partnership debt was incurred for the benefit of the partner-
stiip, and that its property consists, in whole or in part, of what
has been obtained from its creditors. The reason of the rule fails
when a debt or liability has not been Incurred for the firm as such,
OHi.PABT. — 15
226 PARTNERSHIP LIABILITY (Ch. 4
Another View: Partnership Liability and Joint Liability are
Identical
But it is held, on the other hand, that the right of the
partner to have the firm assets applied in payment of the
firm debts is an equitable doctrine, established for the ben-
efit and protection of the partners respectively; that the
partners are not injured if partnership property is taken to
pay a joint debt for which all are liable. Since they are
not injured, they cannot complain; and since they cannot
complain, the firm creditors, who must work out their
rights through the rights of the partners, likewise cannot
complain.*'
even though all the persons who compose the firm may be parties to
the contract Dictum of Strong, J., In Forsyth t. Woods, 78 U. S.
484, 486, 20 L. Ed. 207. ,
In WHBLAN v. SHAIN, 116 Cal. 826. 47 Pac. 57, Gllmore, Cas.
Partnership, 288, an action was brought against two partners on a
note, which the court found not to be a partnership obligation, and
not to have been issued as such, and certain partnership property
was attached. Later the same property was attached in suit against
the copartners as such on a firm obligation. Judgment being se-
cured in both actions, the sheriff sold the property on execution,
and the question arose as to whe£her the attachment on the joint
obligation merely was prior to that on the firm obligation. It was
held that partnership debts should be paid first out of the partner-
ship property, and that the attachment on the Joint obligation did
not give a preference over subsequent attachments on a firm ob-
ligation.
In Re Nims (C. a) 16 Blatchf. 439, Fed. Oas. No. 10,269, It was
held that creditors of O. Ii. Nims & Go. could not prove against the
estate of the firm of O. L. Nims, Agent, on the bankruptcy of the
latter firm, though both firms were composed of the same persons.
See Freedman v. Holberg, 89 Mo. App. 340, and cases cited. Bee
•'Partnership;' Deo. Dig. {Key No.) fi| 165-189; Cent. Dig. SI SOI-
S48.
i« In Re Vetterlein (D. G.) 44 Fed. 57, the court refused to aega-
rate the assets of two partnerships composed of the same persons
and consolidated the claims against both firms. GITIZENS' BANK
OF PERRY V. WILLIAMS, 128 N. Y. 77, 28 N. B. 83. 26 Am. St
Rep. 454, Gllmore, Gas. Partnership, 289; SAUNDERS y. REILLY,
105 N. Y. 12, 12 N. B. 170, 59 Am. Rep. 472.
In case of bankruptcy, the respective rights of Joint creditors, who
are not firm creditors, and of firm creditors, depend upon the pro-
visions of the bankruptcy act involved. Hoare v. Oriental Bank
§ 72) SfiTBBABLB CHARACTER OF JOINT OBLIGATIONS 227
QUASI SEVERABLE CHARACTER OF JOINT
OBLIGATIONS IN EQUITY
78. While at law, when one of the joint obligors dies, the
entire liability falls upon the survivor, in equity
such liability is kept alive, and becomes a charge
upon the estate of the deceased obligor. Because
of this, the statement is usually made that part-
nership obligations are in equity joint and several.
Survivorship at Low
In discussing joint tenancy and joint obligations, it was
seen that survivorship was a common characteristic. The
title to property held in joint tenancy went upon the death
of one joint tenant to the survivor; the liability of a joint
contract fell, in case of the death of one joint obligor, upon
the survivor. This doctrine of survivorship, however, was
Corporation, L. R. 2 App. Gas. 589. In re Nims (G. G.) 6 Blatchf.
439, Fed. Gas. No. 10,269; Ex parte Weston, 12 Mete. (Mass.) 1.
*'But appellants urge that their claim is otte against both the de-
fendants— a joint obligation — and, hence, as the equity of firm cred-
itors is derived from the privilege of a member to see that the as-
sets are first used to pay the firm debts for which he is liable, and
as both are liable for this debt, so that neither can have any in-
terest in preventing it from being paid out of the common property,
the reason of the rule fails. If we adhere strictly to the doctrine
that the firm creditors ^ve nio superior right except on that far-
fetched theory, there is much reason in this contention. But it
cannot be reconciled with the decisions, any more than the theory in
its rigor can be. The precise point has been decided adversely to
the appellant's position. Dunnica v. Glinkscales, 73 Mo. 500. In
that case, the partnership of Morehead Bros, had made an assign-
ment for the benefit of their creditors. Plaintiff presented, for al-
lowance, notes given by the two members of the firm in settlement
of a partnership business which they had previously conducted in
the state of Iowa. It was held these notes ought not to be allowed
against the assets of the new firm in Missouri. Similar rulings
were made in Forsyth v. Woods, 78 U. S. 484 [20 L. Ed. 2071 ; Page
V. Carpenter, 10 N. H. 77 ; Buffum v. Seaver, 16 N. H. 160 ; Bart-
lett V. Meyer-Schmidt Grocer Go. [65 Ark. 290], 45 S. W. 1063.*'
Ooode, J., in Freedman v. Holberg, 89 Mo. App. 840, 347. See **Part'
nerahip,*' Deo. Dig. (Key No.) U 165-190; Cent. Dig. SS 801-348.
228 PARTNERSHIP LIABILITT (Gh. 4
early, held not to be applicable to partnership property and
obligations. The maxim, "J^s accresccndi inter mercatores
locum non habet," was well established.^^ But it is not
literally true that there is no survivorship among partners.
"When it is said that by the law merchant the jus accres-
cendi, or right of survivorship, does not take place among
partners in trade, it is meant that it does not take place for
the exclusive benefit of the survivor; as it does in a joint
tenancy at the common law, but that the survivor holds
the partnership fund for the payment of the partnership
debts and the settlement of the partnership concerns, and
the balance, if any, to be distributed equitably between the
representatives of the deceased partner and the surviv-
or." *• The legal title to the personal property of the firm
and to the choses in action goes upon the death of one part-
ner to the survivor.* • All actions growing out of the con-
trol and disposition of the personal property are brought
only by or against him.*® The choses in action are in law
treated as joint contracts and subject to all the incidents
of such contracts. The surviving partner is the only proper
party in actions to enforce firm contracts, and this he may
do without joining with him the representative of the de-
ceased partner.** In an action by a surviving partner to
recover a debt due the firm, he may include a debt due
himself in his own right, or the defendant may set off a
IT Co. Lit. 182, a.
IB Walworth, C, In Egberts v. Wood, 3 Balge (N. T.) 517, 628, 24
Am. Dec. 236, Gllmore, Cas. Partnership, 267, note. 8ee **Partner'
sMp,** Dec. Dig, {Key No.) K 243-258; Cent. Dig. || 509-698.
ift See, however, chapter III, §§ 66, 66, p. 204, for a discussion of
the English rule as to the legal title to the chattels of a firm.
20 Martin v. Crompe, 1 Ld. Raym. 340; PFEFFER v. STEINBR,
27 Mich. 637, GUmore, Cas. Partnership, 272. See "Partnerahip,**
Deo. Dig, (Key No.) §9 24S-258; Cent. Dig. H 509-598.
SI BASSETT T. MILLER, 39 Mich. 133, Oilmore, Cas. Partner-
ship, 271; STEARNS v. HOUGHTON, 38 Vt 584, Gllmore, Cas.
Partnership, 273 ; Gamble v. Rural Ind. School Dlst. of Allison (G.
C.) 132 Fed. 614, 522 ; Newman v. Gates, 166 Ind. 171, 72 N. E. 63&
Even in equity the representatiyes of a deceased party need not
be parties plaintiff in suits to collect firm debts. BUCKLEY ▼.
BARBER, 6 Exch. 164. See "Partnership,'* Dec, Dig. {Key No.) U
24S-258; Cent. Dig. |§ 509-598.
§ 72) SSVSRABLX CHARACTER OF JOINT OBLIGATIONS 229
claim due him from the suing partner individually.** On
the Other hand, he alone can be sued on the firm liabilities.
The firm debts are, as other joint debts, the debt of the col-
lective individuals who have contracted, and no one can be
held who has not promised. Therefore, if one of the joint
promisors dies, the obligation remains upon the survivors
only. The representatives of the deceased partner cannot
be held at law on such joint obligation, because they never
promised.*"
Survivorship in Equity
Owing to the hardship which the rule of the common law
frequently imposed in the case of the death of one of the
co-obligors in joint obligations, equity has always shown a
willingness to - reform such contracts , and convert them
into joint and several obligations.** Even though there
was no mistake justifying reformation by a court of equity,
it was held very early that in equity the creditors of joint
obligors might hold the representative of the deceased ob-
ligor.** Furthermore, where the survivor in a joint obliga-
tion was compelled to pay the common debt, he was al-
lowed in equity to charge the estate of the deceased ob-
" ADAMS V. HACKETT. 27 N. H. 289. 59 Am. Dec. 376* GUmore,
Cas. Partnership, 274 ; Slipper v. Stidstone, 5 T. R. 493. See **Part-
nershipr Dec. Dig. {Key No,) U B4S-258; Cent. Dig. §f 509^98.
» Kemp V. Andrews, Garth. 170; Dixon v. Hammond, 2 B. ft Aid.
810; Martin v. Grompe, 1 Ld. Raym. 340; Slipper v. Stidstone^ 5
T. K. 493 ; French v. Indrade, 6 T. R. 582. See ''Partnership,** Dec.
Dig. (Key No.) §| 243-258; Cent. Dig. S§ 509-598.
24 Simpson y. Vaughan, 2 Atk. 31; GRAY ▼. GHISWELL, 9 Yes.
118; Plckersgill t. Lahens, 15 Wall. 140, 21 L. Ed. 119. See "Part-
nler«Wp," Dec. Dig. (Key No.) §§ 2iS^268; Cent. Dig. IS 509-598;
''Contracts:* Dec. Dig. (Key No.) | 182; Cent. Dig. |§ 780-787.
2ft *'There was a case which I determined in this conrt, where
there were two persons jointly bound in a bond, one of the ob-
ligors died, and to be sure, at law, it might have been put In suit
against the survivor, but as I thought it extremely tiard, I decreed
the representative of the co-obligor should be charged pari passu
with the surviving obligor in payment of the bond." Lord Hard-
wicke," in Primrose v. Bromley, 1 Atk. 90. See, also, THORPEI v.
JAGKSON, 2 Y. & G. 553, Gilmore, Gas. Partnership, 292. See
''Contracts:* Dec. Dig. (Key No.) § 182; Cent. Dig. §§ 780-787.
230 PARTNBB8HIP LIABILITY (Gh. 4
Hgor to the extent he had paid more than his share.**
These general principles governing joint obligations and the
relief in equity from their hardships are applicable to part-
nership obligations. There is, indeed, additional ground
for holding the representative of the deceased obligor ; for,
as has been seen, it is an essential part of the partnership
agreement that the property of the partnership shall first
be used to pay the partnership debts before any division
among the partners. Obviously, therefore, the representa-
tives of the deceased partner cannot withdraw any of the
partnership assets until the common debts are paid, and
equity will aid the survivor to accomplish this result. Be-
cause of the foregoing considerations it is frequently said
that joint contracts are joint and several in equity, but "it
has never been determined that every joint covenant is in
equity to be considered as the several covenant of each of
the covenantors." *'' "There is no doubt that in many cases
and text-books we find the expression that a partnership
debt is in equity joint and several. This, however, is only
a compendious expression, which must be interpreted with
reference to what were the functions of the court of equity
as to partnership debts. The only interposition of a court
of equity with regard to partnership debts took place in the
administration of the assets, either of the partnership or of
a deceased member of the partnership. Where a member
of the partnership died, the debts became in the eye of the
court at law the debts of the survivors ; but the survivors,
on the other hand, in a court of equity, had the right, as
against the estate of a deceased partner, to say that his rep-
resentatives should not withdraw any part of the partner-
ship property until all of the debts were paid or provided
for. If, therefore, a court of equity was administering the
assets of a deceased partner, it would, in order to clear his
estate, ascertain his liabilities to the partnership, and for
«• Musson V. May, S V. ft B. IM. See ''Partnership,*' Deo. Dig,
(Key No.) fS 165-119; Cent, Dig, §§ 801-905.
ST Sir William Grant, in Sumner v. Powell, 2 Mer. SO, 86'; Rich-
ardson V. Horton, 6 Beav. 185; United States y. Price, 9 How. 83,
13 L. Ed. 56. . See '^Partnership, Dec, Dig, (Key No.) §§ 165-179,
2i9'258; Cent, Dig. U 901-905, 509-598.
§ 73) 8EYEBABLE CHABAOTES OF JOINT OBLIGATIONS 231
this purpose would ascertain the debts due from the copart-
nership at his death. From this the other transition was
easy to giving the creditors of the partnership a direct right,
and not merely an indirect right, through the surviving
partners, to come for payment against the assets of the de-
ceased partner ; and from this again the transition was easy
to the expression which said that partnership debts, in the
eye of a court of equity, were joint and several, not thereby
meaning that a court of equity altered or changed a legal
contract, but merely that the court, in order, before dis-
tributing assets, to administer all the equities existing with
regard to them, would go behind the legal doctrine that a
partnership debt survived as a claim against the surviving
partners only, and would g^ve the creditors the benefit of
the equity which the surviving partners might have insisted
Qjj "28 Thus it will be seen that until dissolution of a part-
nership by death no several liability exists in equity upon a
joint contract, and if such contract should be reduced to judg-
ment against part of the firm no liability in equity ever
arises against the estate of the others.**
SAME— LIABILITY OF ESTATE OF DECEASED
PARTNER
73. While it is well settled that the estate of the deceased
partner can be made liable in equity for the part-
nership obligatipns, there is a conflict in the deci-
sions as to when such liability can be enforced.
In England and in some jurisdictions in the United
States, the liability can be enforced inmiediately;
in New York and other jurisdictions, the legal
remedies against the surviving partners must be
first exhausted, or a showing made that the sur-
vivors are insolvent.
>• Calms, Lb C, In KENDALL y. HAMILTON, L. R. 4 App. Gas.
604, 616, Ollmore, Gas. Partnership, 293. See ''Partnership,*' Deo.
Dig. (Key No,) §§ 243-^8; Cent. Dig. IS 509-598.
29 KENDALL ▼. HAMILTON, L. R. 4 App. Gas. 604, GUmore,
Gas. Partnership, 293. See "Partnership,** Dec. Dig. iKey No.) H
165-119, 1^49-258; Cent. Dig. n S01S05, 509-598.
'232 PARTNERSHIP LIABILITY (Ch. 4
While it is well settled that the estate of the deceased
partner may be made liable in equity, there is' a conflict of
authority as to whether the right to charge such estate
arises immediately upon the death of the partner, or wheth-
er the legal remedies of the creditor against the survivors
must first be exhausted or a showing be made that they are
insolvent. In England the rule has been established that
the estate of a deceased partner is liable in equity immedi-
ately.'® They cannot, however, compete with the separate
creditors of such partner.'^
80 The cases upon which doctrine of liability in equity of the es-
tate of a deceased partner rests are Primrose v. Bromley, 1 Atk.
89 ; Bishop v. Church, 2 Ves. 371 ; LANB v. WILLIAMS, 2 VeriL
292; Jacomb t. Harwood, 2 Ves. Sr. 265; Hoare v» Oontendn, Bro.
C. C. 27; GRAY v. CHISWELL, 9 Ves. 118; Ex parte Kendall, 9
Ves. 118; Devaynes v. Noble, 1 Mer. 397; WILKINSON t. HEN-
DERSON, 1 M. & K. 582. The last two cases cited established the
doctrine that the creditors of the partnership might proceed im-
mediately against the estate of the deceased.
The English rule seems formerly to have been as is now held in
New York. In VOORHIS t. CHILDS* EXECUTOR, 17 N. Y. 354,
Gilmore, Cas. Partnership, 298, Selden, J., said: **Prior to the case
of Devaynes v. Noble, 1 Mer. 397, the decisions of the Court of Chan-
cery in England appear to have been, for a considerable time at
least, in accordance with those in this state. The precise ground
of the change seems to have been this: In the earlier cases it had
been assumed that the liability in equity of the estate of the de-
cased partner was produced by a sort of equitable transfer to .the
creditor of the right of the surviving partners to Insist that the
estate of their deceased associate should contribute to the payment
of the debts of the firm; but, upon its being afterwards held that
the obligations of partners were to be regarded as joint and sev-
erable, the English conrts said that in all cases of that kind cred-
itors had a right to pursue their remedies against all or either of
their debtors. They therefore held that they might proceed im-
mediately in equity against the representatives of a deceased part-
ner, without resorting to their legal remedies against the survivors."
869 "Partnership,'* Dec, Dig. (Key No.) §§ S^7, 258; Cent, Dig. S9
525, 566.
•1 See chapter VII, p. 457, on Remedies of Creditors. The above
rule is codified in the English Partnership Act: "Every partner in a
firm \a liable Jointly with the other partners, and in Scotland sev-
erally also, for all debts and obligations of the firm incurred while
he is a partner ; and after his death his estate is also severally liable
in a due course of administration for such debts and obligations.
g 73) SEVERABLE CHARACTER OF JOINT OBLIGATIONS 233
In the United States the decisions are conflicting, many
jurisdictions holding with the English courts that the es-
tate of the deceased partner may be proceeded against im-
mediately.** On the other hand, there is much authority
for the view that the estate of a deceased partner cannot
be proceeded against, even in equity, unless it is shown that
the surviving partners are insolvent or that the legal reme-
dies against them have been exhausted. In New York this
view has been sustained in the following language: "The
surviving partners succeed primarily to all the rights and
interests of the partnership. They have the entire control
of the partnership property, and the sole right to collect the
partnership dues. The assets of the firm are, of course, to
be regarded as the primary fund for the payment of the
partnership debts, and it would seem equitable, at least,
that the parties having the exclusive possession of this
fund should be first called upon. The answer g^ven to this
by the English courts, that the representatives of the de-
ceased partner have their remedy over, seems hardly sat-
isfactory. The presumption is that the primary fund is
sufficient to meet the demands upon it. Why, then, per-
mit in equity a resort to another fund, and thus give rise
to a second action for its reimbursement? Besides, these
English decisions, permitting the creditors to proceed in
the first instance in equity against the estate of the de-
ceased partner, are in conflict with the established doctrine
so far as they remain unsatisfied, but subject In England or Ire-
land to the prior payment of his separate debts." Partnership Act
(1890) I 9.
«« DOGGETT V. DILL, 108 111. 560, 48 Am. Rep. 565, Gllmore,
Cas. Partnership, 300; United States v. Hughes (O. C.) 161 Fed.
1021; Nelson v. Hill, 6 How. 127. 12 L. Ed. 81; Travis v. Tartt,
8 Ala. 577 ; McLAIN v. CARSON'S EX'R, 4 Ark. 165, 37 Am. Dec.
777, Gllmore, Cas. Partnership, 304; Camp v. Grant, 21 Conn. 41,
54 Am. Dec. 321; Fillyau v. Laverty, 3 Fla. 72; Newman v. Gates,
165 Ind. 171, 72 N. E. a^>8: Freeman v. Stewart, 41 Miss. 141; Bow-
ker T. Smith, 48 N. H. Ill, 2 Am. Rep. 189 ; Wlsham v. Llppincott,
9 N. J. Eq. 353 ; Saunders v. Wilder, 2 Head (Tenn.) 579 ; Gaut v.
Reed, 24 Tex. 46, 76 Am. Dec. 94; Washburn v. Bank of Bellows
Falls, 19 Vt 278. See '* Partnership;' Dec. Dig. (Key No.) fif 2^5-
258; Cent. Dig. §§ 609-598.
234 PAKTNBRSHIP LIABILITY (Ch. 4
that parties must first exhaust their legal remedies before
resorting to courts of equity." ••
Notwithstanding the fact that a judgment against less
than all of the members of a partnership extinguished the
claim against the others even in equity,"* it has been held
that a judgment recovered against the surviving members
of a partnership does not preclude the judgment creditors
from obtaining payment of the original debt from the es-
tate of the deceased partner in equity.*' The judgment at
law is no bar, because at law the survivors only were lia-
ble. The estate of the deceased not being liable at law,
there was no merger.
EXTENT OF LIABILITY IN CONTRACT
74. In an ordinary partnership, each partner is liable in-
dividually to the full extent of his separate estate
for all the obligations of the partnership.
By complsringy however, with statutes in some juris-
dictions for the organization of limited partner-
ship, the liability may be fixed at a certain amotmt
The law does not recognize a partnership as distinct
from the individuals composing it Hence, though the con-
tracts of the partnership are joint, and the members, when
sued, are entitled to demand that all shall be sued jointly,
the contract is looked at as the contract of the members of
the partnership. Each partner is liable for all the debts of
tt Selden, J., in VOORHIS ▼. CHILDS* EX'B, 17 N. Y. 85^ 6U-
more, Gas. Partnership, 29S; PuUen in Whitfield, 55 Ga. 174; Pope
V. Cole» 55 N. Y. 124, 14 Am. Rep. 198; Sherman v. Kreul, 42 Wis.
33. Bee ''Partnership," Dec Dig. (Key No,) |§ 249-^8; Cent. Dig.
H 509^98.
s« KENDALL v. HAMILTON, 4 App. Cas. 504, Gilmore, Gas. Part^
nershlp, 293 ; King t. Hoare, 13 M. W. 494; Ex parte Hlgglns, 3 De
O. ft J. 33. See ''Partnership,*' Deo. Dig. (Key No.) | 219; Cent. Dig.
SI 429-JH5.
ss In re Hodgson, 31 Gh. Dlv. 177. See "Partnership** Deo. Dig.
{Key No.) || 219, 220, 24S'-258; Cent. Dig. §S 429-469, 609-^98.
§ 74) EXTENT OF LIABILITY IN CONTSAOT 235
the partnership.** "The contract, when made with part-
ners, is originally a joint contract, but may be separate as
to its effects. Though all are sued jointly, and a joint ex-
ecution taken out, yet it may be executed against one
only." *'' An execution may be levied against the assets
of the partnership, or against the assets of any member of
the partnership. If levied against the assets of a single
partner, the entire demand may be satisfied out of such as-
sets at the will of the creditor, leaving all questions of con-
tribution to be settled among the members of the partner-
ship themselves. Even though there be an agreement be-
tween the partners that one shall not be liable beyond a
certain amount for partnership debts, the rights of firm
creditors to go against such partner, for the full amount of
the firm debts will not be affected thereby.** Th^ only ef-
fectual way that a partner can escape the unlimited liability
of the common law, without legislative assistance, is by con-
tracting with the creditor, at the time that the contract is
made, that such creditor shall satisfy his claim out of the
partnership funds. Such an arrangement, while possible,
would be unusual.** Under legislative authority, however,
a partner may limit his liability by complying with the stat-
utes providing for the organization of limited partner-
ships.**
«• HALLOWELL ▼. BLAGKSTONB NAT. BANK, 164 Mass. 859,
28 N. B. 281, 18 L. R. A. 815, Gilmore, Cas. Partnership, 809; Chris-
tian y. lUinols Malleable Iron Ck>., 92 IlL App. 820; Benchlej ▼.
Ghapln, 10 Gush. (Mass.) 178 ; Nebraska Ry. Co. r. Lett, 8 Neb. 251 ;
Allen ▼. Owens, 2 Speers (S. G.) 170. See "Partnership,*' Deo. Dig.
{Key Vo.) §8 165^17S; Cent. Dig. §§ 301-^05.
ST De Grey, G. J., in Abbot ▼. Smith, 2 W. Blackstone, 947, 949.
Bee "Partnership^ Deo. Dig. (Key Vo,) §§ 165-17S, 219, 220; Cent.
Dig, S8 S01-S05, 429-469,
« MAGII/rON v. STEVENSON et aL, 178 Pa. 500, 84 Aa 235,
Gllmore, Gas. Partnership, 445; Dean y. Phillips, 17 Ind. 406. See
"Partnership," Dec Dig. {Key No.) §§ 165-173, 176-190, 219, 220;
Cent. Dig. || 601^05, 609^48, 429-4^9.
••Lindley's liiaw of Partnership (7th Bd.) p. 229L
«• See chapter XI, p. 592, Limited Partnerships.
236 PARTNERSHIP LIABILITY (Oh. 4
NATURE AND EXTENT OF LIABILITY IN TORT
75. For all torts committed in the course of the partnership
business each partner is liable, and this liability is
joint and several.
•
Tort Liability Joint and Several
' Though the contract liability of partners is joint only,
their liability for torts is joint and several. The reason for
this difference is that in the case of contract liability regard
is had to the intentipn of the parties; in the case of tort
liability the liability is imposed by law with especial regard
to the rights of the injured person. Hence an action for a
tort may be brought against any or all of the partners lia-
ble, and those against whom the action is brought cannot
plead in abatement that the rest are not joined.** Thus,
where an action was brought against several partners,
whose servant, in command of a ship owned by them, had
negligently caused his ship to run into another ship, upon
which were the plaintiff's goods, thereby causing damage
to such goods, it was held that those partners who were
sued could not complain that others were not joined.** But
if the cause of action is founded upon contract, and can-
not be maintained without reference to such contract, all
the partners must be joined, even though the action itself
sounds in tort** If, however, an action is prosecuted to
41 WHITE ▼. SMITH, 12 Rich. Law (S. G.) 595, Gilmore, Gas.
Partnership, 306 ; Roberts v. Johnson, 58 N. Y. 613 ; Hoxle ▼. Farm-
ers' ft Mechanics' Nat Bank, 20 Tex. Glv. App. 462, 49 S. W. 637;
Grlssom ▼. Hofius, 39 Wash. 51, 80 Pac. 1002. Bee ''Partnership,**
Dec. Dig. iKey No.) SS i55. 174; Cent. Dig. §§ 27^-277, S06.
*2 Mitchell V. Tarbutt, 5 T. R. 649. See '* Partnership.*' Dec. Dig.
(Key No.) |§ 15S, 174, 200; Cent. Dig. §S 274-277, S06. 869-^71.
49 "The principle running through all the cases seems to be that
where the action is maintainable for the tort simply, without ref-
erence to any contract between the parties, the action is one of tort
purely, although the existence of a contract may have been the
occasion or furnished the opportunity for committing the tort. But
where the action is not maintainable without pleading and proving
the contract — where the gist of the action is the breach of the con-
tract, eltheif by malfeasance or nonfeasance — It Is, In substance.
§ 75) UABILITT IN TORT 237
judgment against some of several joint tort-feasors, such a
judgment is held, in England, to be a bar to a subsequent
action against the others, even though it remains unsatis-
fied/* In this country it is generally held that an unsatis-
fied judgment against one or more of several joint tort-
feasors is no bar to a subsequent action against the others.**
The liability of a firm for the torts of one member, is co-
extensive with that of the partner who actually committed
the tort.**
Liability for Tort Committed in the Course of Business
It has been said that "the law as to partnership is un-
doubtedly a branch of the law of principal and agent." **
Whether this is so or not, it is undoubtedly true that the
law of partnership and the law of agency are intimately
connected; for "every partner is an agent of the partner-
ship, and his rights, powers, duties, and obligations are in
many respects governed by the same rules and principles
as those of an agent. A partner virtually embraces the
character of both a principal and an agent." *• This being
true, we find that the liability of the partnership for the
whatever may be the form of the pleading, an action on the con-
tract, and hence all persons Jointly liable most be sued.*' Mitchell,
J., in WhitUker ▼. Collins, 34 Minn. 289, 25 N. W. 632, 57 Am. Rep.
55; citing Powell v. Layton, 2 Bos. & Pnl. 365; Max v. Roberts,
2 Bos. ft PuL 454; Cabell v. Vaugban, 1 Wms.' Saund. 288h, 291e,
291f ; WeaU y. King, 12 East, 452; Bretherton ▼. Wood, 3 Brod. ft
B. 54; Waloott v. Canfleld, 3 Conn. 194. See ^'Partnership,'' Dec,
Dig, (Key No.) §§ 153, 174, ^00; Cent. Dig, || 27-f-«77, SOS, 869-871.
«4 Brinsmead y. Harrison, L. R. 7 C. P. 547. 8ee '^Judgment,"
Deo. Dig. (Key No.) §§ 629-631; Cent. Dig, SS 106k, 1088, lUJhlH6.
«• LoTejoy ▼. Murray, 3 Wall. 1, 18 L. Ed. 129.
As the rules governing the liability of Joint tort-feasors who are
partners are the same as govern Joint tort-feasors generally, a full
discussion of this subject belongs more properly to a work on torts.
For such a discussion, see Cooley, Torts (3d Ed.) pp. 231-238. See
** Judgment," Dec. Dig, (Key No.) |§ 629-631; Cent. Dig. SS 106^,
1088, im-llJi6.
4» Helm V. McCaughan, 32 Miss. 17, 60 Am. Dec. 588. See '*Part-
nership," Dec, Dig. (Key No.) §S 153, 174; Cent, Dig. SS 27Jh277, 306,
4T Lord Wensleydale, in COX v. HICKMAN, 8 H. L. C. 268, Gil-
more, Cas. Partnership, 31. See ''Partnership,*' Dec. Dig, (Key No.)
S 125; Cent. Dig, S 190.
4s Story on Partnership, section 1.
938 PABTNBRSHIP LIABILITY (Gh. 4
torts of each partner is determined by the law of agency.
It is the liability which a principal has for the torts of his
agent. It is well established in the law of agency that the
principal is liable for the authorized torts of his agent, and,
further, that he is liable for torts which he commits in the
course of the business of the principal, even though the
principal may not have expressly authorized the act com-
plained of, or even though he had expressly forbidden it.**
The test, then, of the liability of a partnership, or rather
of the members of a partnership, for the tort of one part-
ner, is: Was it committed in carrying on the firm busi-
ness? *® Thus, if one member of a publishing partnership
should put a libel in the partnership paper to be given out
as news, all of the partners would be liable. The business
of the firm being the publishing of news, the partner has
the implied authority to publish the libel as news. Such
news being libelous, all of the partners are liable.** But if
one partner in a mercantile or other business maliciously
tells untruths about a third party, which constitute a libel,
but which are not told in furtherance of the firm business,
the others are not liable. This is not because of the fact
that the libel was told maliciously, but because it was out-
side of the firm business. Thus, where a table was returned
to A., B., C. & D., trading as a furniture company, and a
placard was placed upon it saying: "Taken back from Dr.
N., who would not pay for it. To be sold at a bargain.
Moral : Beware of deadbeats" — it was held that the utter-
ance of the libel was not shown to be sufficiently connected
with the firm business to make any partner liable, in the
absence of a showing of knowledge or authority on his
part.**
4»Collman y. MUls, 1 Q. B. 896: Bee ''Partnership,** Deo. Dig.
(Key yo,) M 15S, 174; Cent. Dig. H 27Jh2Tr, $06.
•0 Haase y. Morton ft Morton, 138 Iowa, 205, 115 N. W. 821. See
"Partnership,*' Dec. Dig. {Key No.) tf ^55, m; Cent. Dig. U W-
«77, 306.
Bi Lothrop T. Adams, 133 Mass. 471, 43 Am. Rep. 528. Bee Part-
nership," Dec Dig. (Key No.) U 15$, 174; Cent. Dig. U «74-«77, $06.
•a Woodllng v. Knickerbocker, 31 Bllnn. 268, 17 N. W. 387. SUU,
U ttie Ubel is told in aid of the business through Injury to a com-
§ 75) UABIUTT IN TOBT 239
Other instances of acts which have been held to be with-
in the scope of the business and for which the partners
generally have been held liable are : Where in the prosecu-
tion of the business one member of a firm of butchers neg-
ligently left meat where it was eaten by a dog, who died
from the effects of it; •• where one member of a firm which
held a chattel mortgage on certain goods, the owner of
which was in default, entered the mortgagor's premises by
force, forcibly took possession of the mortgaged property,
and in doing so committed an assault upon the mortgagor : •*
where one of several partners drove a partnership coach
negligently, thereby injuring a third person ;•■ where one
of a firm of solicitors gave negligent advice to a client.*'
On the other hand, it has been held that a partner was
not liable where his partner converted property to his own
use ; *^ nor where he, without advice or consent, instituted
malicious prosecution for larceny of firm property/* The
acts in question could not be said to have been committed
in furtherance of the firm business, and were not within the
implied authority of a partner.**
petitor, all the members, even of a trading company, may be liable.
HANEY MFG. CO. v. PERKINS, 78 Mich 1, 43 N. W. 1073, Gil-
more, Gas. Partnership, 396. Bee "Partnership," Deo. Dig. iKey No.)
SS 15$, m; Cent. Dig. §S «7^, 906.
»• Dudley t. Love, 60 Mo. App. 420. Bee ^ParinerBhip,** Deo. Dig.
{Key No.) S$ 15S, 174; Cent. Dig. U «74-«77, S06.
»4Titcomb V. James, 57 111. App. 296. Bee ** Partnership,'* Dec.
Dig. (Key No.) I 153; Cent. Dig. S 274.
»»Moreton v. Hardern, 4 B. ft G. 223. Bee ** Partnership,** Deo.
Dig. (Key No.) | 15S; Cent. Dig. | 274.
««Blyth V. Fladgate, [1891] 1 Gh. 337; Morgan ▼. Blyth, [1891]
1 Gh. 354; Smith v. Blyth, [1891] 1 Gh. 337. Bee ^'Attorney and
Client:* Dec. Dig. (Key No.) S 115; Cent. Dig. | 2$1.
BTTownsend v. Hagar, 72 Fed. 949, 19 O. O. A. 256; Stokes T.
Bnmey. 3 Tex. Giv. App. 219, 22 S. W. 126. Bee **Partner8hip,** Deo.
Dig. (Key No.) S§ 15S, 174; Cent. Dig. H «7f-«77, $06.
S8 Marks y. Hastings, 101 Ala. 165, 13 South. 207; Farrell ▼.
Friedlander, 63 Hun, 254, 18 N. T. Supp. 215. Bee **Malioious Prose-
cution,** Dec. Dig. (Key No.) | 42; ^^Partnership,** Cent. Dig. § 274.
B9 For further discussion of the power of a partner to subject
his copartner to liability in tort, see diapter ¥» Powers of Partners.
240 PARTNERSHIP LIABILITY (Oh. 4
COMMENCEMENT OF PARTNERSHIP LIABILITY
IN CONTRACT
76. While two or more persons who are not partners may
become liable on a joint contract, the joint liability
of partners arises only when the relation of part-
nership has been duly established and the result-
ing mutual agency necessary to enable one partner
to bind his copartners has commenced.
It IS quite possible for two or more persons who are not
partners to make themselves liable on a joint contract, ei-
ther because they both immediately entered into such con-
tract, or because one was authorized to make such a con-
tract for the others. In the latter alternative it is a ques-
tion of fact whether there was authority in one to bind the
others. Such authority must be established in the manner
pertaining to ordinary agency. The joint liability of part-
ners, however, can arise only when the partnership relation
has been duly established. The power of one partner to
bind his copartner by acts done within thie scope of the busi-
ness results from the mutual agency implied from the very
formation of the relation. Until such relation is formed,
therefore, no agency exists, and consequently no power to
create partnership liability.'®
The agency of each partner commencing with the part-
nership, and not before, it follows that the firm is not liable
for what may be done by any partner before he becomes a
member thereof. So that, if several persons agree to be-
come partners, and to contribute each a certain amount of
money or goods for the joint benefit of all, each one is solely
responsible to those who may have supplied him with the
money or goods to be contributed by him ; '^ and the fact
•0 See chapter V, p. 273. Powers of Partners.
•1 Klrby v. McDonald, 70 Fed. 139, 17 C. C. A. 28; National Bank
of Virginia v. Crlngan, 91 Va. 347, 21 S. E. 820. See ''Partnership,'*
Dec. Dig. (Key No,) S§ 125-164; Cent Dig. §S 190-^00.
g 76} OOMMENOEMBNT OF LIABILITT IN CMDNTRAOT 241
that the money or goods so supplied have been brought in
by him as agreed will not render his copartners liable.'*
It may very well be that those who contemplate a part-
nership may authorize each other to perform certain acts
preparatory to the launching of the enterprise. In such a
case all will be liable for the acts of the others by the gen-
eral rules of agency. In order, however, to hold them, it
must be shown that such authority was actually given. Of
course, those who contemplate a future partnership may
contrary to their expectations make a present partnership.
If it can be proved that they have in fact formed a partner-
ship, a partnership liability can then be imposed upon them.
But, except in cases of estoppel, only those can be held as
partners who were actually partners at the time the liability
accrued.
If persons agree to become partners as from a future
day, upon terms to be embodied in articles of partnership
to be executed on that day, and the articles are not then
executed, but they nevertheless immediately commence
their business as partners, they will all be liable for the acts
of each, whether those acts occurred before or after sign-
ing of the articles ; for the question in such a case is not
when the articles were signed, but rather when did the part-
ners commence business. The mutual agency begins from
that time, whether they choose to execute any partnership
articles or not. Where there is an agreement for a partner-
ship, and there is nothing to lead to the conclusion that the
partnership was intended to commence at any other time,
it will be held to commence at the date of the articles, un-
less in fact it began at some other time.'*
9* Brooke ▼. Eyans, 5 Watts (Pa.) 196 ; Heap ▼. Dobson, 15 C.
B. (N. S.) 460. 8ee "Partnership," Deo, Dig, (Key No,) § 1S5; Cent,
Dig. S 202,
OS Williams ▼. Jones, 5 Barn. & G. 108. See "PartneraMp,*' De<k
Dig. {Key No.) SI 57, 58; Cent. Dig. Si S2, 8S.
GIL.PABT. — 16 •
242 PABTNBBSHIP LIABILITY (Ch. 4
SAME— LIABILITY OF AN INCOMING PARTNER
77. As one partner's liability for the acts done by his co-
partners exists by virtue of the mutual agency nec-
essarily incident to the partnership relation, it fol-
lows that until such relation is established there
can be no liability. Therefore an incoming part-
ner is not liable for the obligations which arose
before he became a member of the firm.
He may, however, make himself liable by assuming re-
sponsibility for a part or all of the existing obliga-
tions. This assumption may take the form of:
(1) Novation.
(2) Agreement to be joint obligor, surety, or guarantor.
(3) A promise to his prospective copartners for the ben-
efit of the holders of such existing obligations.
In General
While it is customary to speak of a person as being ad-
mitted into a firm, and to describe him as an incoming part-
ner, what really takes place is the formation of a new part-
nership, composed of the persons previously engaged in
business and the additional person. Whatever liabilities
there may be existing against the members of the original
firm remain their personal liabilities. The new member
does not join the old firm, and consequently does not be-
come liable for the debts of the former partners. He be-
comes a partner for the future ; he has no part in what is
past, and incurs no liability in respect to it.'* It cannot be
said that the entering into the firm constitutes a ratifica-
tion of what has already been done, because such was not
in any probability the intention of the incoming partner.
Besides, the liability of the old firm was not incurred on
•4 Mellor T. Lawyer, 65 111. App. 679 ; Humes ▼. Hlgman, 145 Ala.
215, 40 South. 128 ; Bank of Commerce t. Ada County Abstract Co.,
11 Idaho, 756, 85 Pac. 919; Strickler ▼. Gitchel, 14 OkL 523, 78
Pac. 94. See ^^Partnership," Deo. Dig. {Key Ifo.) % 2S8; Cent. Dig. H
§ 77) GOilMENGEMBNT OF UABIUTT IN CMDNTRAOT 243
behalf of the new partner, and one cannot ratify that which
was not done on his behalf. ••
Assumption of Liability by Incoming Partner
While an incoming partner is not liable for the existing
obligations of a firm of which he becomes a member, he
may nevertheless make himself liable. This may be done
by assuming responsibility for a part or all of the existing
obligations. The assumption of liability may take the form
of a novation, of an agreement to become a joint obligor
with the old partners, or a surety or guarantor of the exist-
ing debts, or of a promise to his prospective copartners to
pay such obligations, which promise may inure to the ben-
efit of the creditors of the old firm. In order to explain the
nature and scope of this assumed liability, it will be neces-
sary to recur briefly to certain elementary and fundamental
doctrines of the law of contracts.
A contract is the result of an agreement between certain
persons, who for a consideration undertake to act or refrain
from acting in a designated manner. The obligations of the
contract rest upon those only who have promised to be
bound. They are the parties to the contract. They only
can enforce its obligations or be held on its undertakings.
While the performance of the stipulations of a contract
may result in benefit to a third person, such person does
not by that fact become a party to the contract. Any doc-
trine, therefore, which recognizes a right in a person not a
party to a contract to enforce its performance, is, in the
eyes of a court of law, anomalous. At common law the rule
was well established that only the parties to the contract
could bring an action to enforce it.**
Where a partnership is in existence and has incurred
debts, these obligations rest upon contracts between the
creditor on the one hand and the members composing the
partnership on the other. The rights and liabilities of the
•• Wilson ▼. Tnmman, 6 Man. ft G. 236; HUGHES t. GROSS, 166
Mass. 61, 43 N. E. 1031, 32 L. IL A. 620, 55 Am. St Bep. 875. See
""Partnerahip;' Deo. Dig. (Key No,) S ^3; Cent. Dig. U 491-499.
•• Wald's Pollock on Contracts C3d Ed.) p. 233.
244 PARTNERSHIP LIABILITY (Ch. 4
parties are to be determined by the terms of the contracts.
If a stranger is admitted to a partnership after debts have
arisen, he is clearly not bound by these debts, because he is
not a party to the contracts. In order, therefore, to render
an incoming partner liable oii existing obligations, a new
contract must be made. The form of this agreement will
determine the nature of his liability. He may, in consid-
eration of being thus admitted or for some other considera-
tion, agree to pay a part or all of the existing debts of the
firm, or he may agree to be liable with the original part-
ners for the old debts, or agree to act as surety or guarantor
with respect to those.
Same — Novation — As Affecting Incoming Partner
While the obligations of a contract pertain only to those
who are parties to it, and a contract once made cannot be
changed or abandoned, except all who originally joined in
it consent, it is well established that, if the original parties
do come together, they may, upon a consideration, rescind
the old contract, or make a new contract differing in terms
or parties. Where the new agreement has for its object a
change of parties, it will, when consummated, constitute a
novation. For example, where A. is indebted to M., and X.
promises M., in consideration of A.'s release by M., to pay
A.'s debt to M., M. may now hold X., not on the old prom-
ise of A., but on the new promise of X. As novation is a
substitution of parties in a contract, it is obvious that it
may be used to create a liability against an incoming part-
ner or to relieve an outgoing partner from an existing obli-
gation by substituting some one in his place. Novation,
therefore, in this section, is discussed in connection with
the liability of an incoming partner, and also in a later sec-
tion in connection with the liability of a retiring partner.
An incoming partner may become a party to a novation
whereby the existing obligations resting upon the original
members of the firm are, by a valid contract with the firm
creditors, transferred to him, and the original members are
released. But such a substitution of debtors must be made
in compliance with the well-established rules governing no-
vations in general. The agreement giving rise to the nova-
§ 77) COMMBNCBIMBNT 07 LIABILITY IN CONTRAOT 246
tion may be ieither express or implied.** "The rule stands
on the principle of assent by the party to be charged, and
X)nsent of the creditor to accept the new liability." ••
"There must be a novation before the new firm is liable:
and the new contract must receive the consent. of all the
parties, and must have the effect to extinguish the old con-
tract, and create a new liability of debtor and creditor, or
of contractors, between the creditor or contractor and the
new firm, and such new contract must be based on some
consideration." ••
Same — Assumption as Joint Obligor, Surety, or Guarantor
The agreement between the incoming partner and the
original members of the firm may not, however, constitute
a novation. It may provide that the incoming partner will
become jointly liable with the old partners, or be a surety
for them, or a guarantor. It is always a question to be de-
termined by the facts of each particular case as to what
was the incoming partner's agreement. Having determined
this, his liability will be governed by the rules of law ap-
•7 Roife T. Flower, Ia R. 1 P. C. 27 ; Regester t. Dodge (G. C) 6
Fed. 9; Venable ▼. Steyens, 94 6a. 281. 21 S. E. 516; HeUman t.
Schwartz, 44 111. App. 84; Rusk ▼. Gray, 83 Ind. 589; Hoopes t.
McCan, 19 La. Aim. 201 ; Ck>n8alu8 t. McConihe, 119 N. Y. 652, 23 N.
E. 1150; Earon ▼. Mackey, 106 Pa. 452; Frye & BruUn v. PhUllps,
46 Wash. 190, 89 Pac. 559. 8ee ^^Partnership," Dec, Dig. (Key No') |
2$9; Cent. Dig. SI 487, 488, 495-499,
•s Shoemaker Piano Mfg. Ck>. ▼. Bernard, 2 Lea (Tenn.) 858, OU-
more, Cas. Partnership, 328, note. See ^Partnership,*' Dec. Dig. {Key
No.) H ^8, 2S9; Cent. Dig. |§ 487, 488, 491-499, 495-499.
•• Parmalee v. Wiggenhom, 6 Neb. 322, Gilmore, Cas. Partnership,
328, note.
'It is indisputable that an incoming partner is not, as of course,
liable for the debts and transactions of the firm, and that he can
be made liable in an action at law by the creditor only by some
agreement on his part to assume such liability. The mere fact that
he becomes a member of the firm creates no presumption of the exis-
tence of such agreement The fact, however, may be established
by indirect as well as by direct evidence, and may, in the absence
of an express agreement, be inferred from facts and circumstances
which Justly raise an* implication of its existence." Andrews, J.,
in Peyser v. Myers, 135 N. Y. 51)9, 602, 32 N. E. 699. 'See ^'Partner-
ship,*' Dec. Dig. {Key No.) U m, 2S9; Cent. Dig. fS 487, 488, 491^
493, 495-499.
246 PARTNERSHIP LIABILITY (Ch. 4
plicable to such situations generally. On (>r;nciple, the
firm creditor should be a party to any contract by which an
incoming partner agrees to become a joint obligor with re-
spect to existing firm debts, or to be liable as surety or
guarantor, thereon. Whether he is a necessary party to
such an arrangement is not entirely clear from the cases.
As, for example, where one was taken into an existing part-
nership having debts, the court said in a Wisconsin case : "It
is settled law in this state, as in many others, that when an
incoming partner, in consideration of being received into
the firm and becoming part owner of the firm property,
agrees to assume with the old partner or partners the exist-
ing debts of the business, such agreement is valid and bind-
ing, though it be by parol, and that such promise is enforce-
able by the creditors whose debts are thus assumed." As
to whether the firm creditor must be a party to the arrange-
ment the court says : "It is probably true that acceptance
by the creditor is necessary to make the assumption a com-
plete contract as between the firm and the creditor." *•
Same — Promise for the Benefit of Third Person
It may very well be, however, that the arrangement
whereby an incoming partner is admitted to an existing
firm will not take the form of a novation or make him a joint
obligor or guarantor. The agreement which is more likely
to be made is this : The incoming partner will promise the
original members of the firm that in consideration of his
being admitted he will pay the existing debts of the firm.
This promise will run, however, to the original members,
and not to the firm creditors ; and therein it differs essen-
tially from a novation, where the promise which effects a
substitution of debtors always runs to the creditor. The
promise will create a valid contract between the incoming
partner and his prospective associates. The question will
at once arise: How can the creditor of the original firm
rowinslow, 3^ in J. & H. GlasgeDs Co. t. Silber, 98 Wia. 079,
585, 67 N. W. 1122, 1124; HoUe v. Bailey, 58 Wia 434, 17 N. W.
322; Coleman t. Lansing, 65 Barb. (N. Y.) 54. See '^Partnerghip/'
Deo. Dig. (fey No.) H ^S, 2S9; Cent. Dig. || 487, 488, 491-493, 495^
499.
§ 77) COMMENCEMENT OF LIABILITT IN CONTRACT 247
take advantage of such promise? Clearly according to the
law of contracts he ought not to be able to bring an action
at law to enforce it. While the performance of the promise
will result beneficially to him, in that he will get his claim
against the old firm paid, still this does not make him a
party to the contract. The promise was not to him, and
he gave no consideration for it. At law, therefore, he
should have no remedy upon it.
The English courts hold, consistently with the theory of
contracts, that privity of contract is necessary in order to
enforce a contract ; one who is merely a beneficiary under
the contract of other persons has not such privity, and can-
not, therefore, enforce the promise.^* The same rule is ap-
plied in a number of the state courts in this country.^*
In equity, however, it is entirely proper to afford the firm
creditors a remedy. When the incoming partner enters
into a binding agreement with the original partners to pay
the firm debts, he is clearly liable to them for the nonper-
formance of his promise. This right of the original part-
ners against the incoming partner is an asset in their hands.
Assuming that the incoming partner is solvent, and that an
action against him will be effective to compel the perform-
ance of his contract or respond in damages, the creditors of
the original firm may properly claim to be subrogated to
this right of the original partners against the incoming
partner, and a court of equity will recognize the right and
enforce it.^*
»i Price ▼. Easton, 4 B. ft Ad. 433. See ''Partnership,'^ Deo. Dig.
{Key 7fo) %% 2S8, 2S9; Cent. Dig. S$ 487, 488, 491-408, 495-499;
**Contractsr Deo. Dig. (Key No.) U 186, 181; Cent. Dig. |§ 790^
807.
Ys Borden t. Boardman, 157, Mass. 410, 82 N. E. 4G9; Exchange
Bank of St Lonls v. Rice, 107 Mass. 37, 9 Am. Rep. 1; Linneman
V. Moross' Estate, 08 Mich. 178, 57 N. W. 103, 39 Am. St Rep. 528.
See '^Partnership,'' Deo. Dig. {Key No.) H 258, 2S9; Cent. Dig. §§.
487, 488, 491-498, 495-499; '^Contracts;' Deo. Dig. {Key No.) S| 186,
187; Cent. Dig. |§ 790-807.
Ts EeUer t. Ashford. 133 U. S. 610, 10 Sup. Ct 494, 33 L. Ed. 667;
Union Mutual Life Insurance Co. t. Hanford, 143 U. S. 187, 12 Sup.
Gt 437, 86 Ia Ed. 118. Youngs y. Trustees for Support of Public
Schools, 81 N. J. Eq. 290. See '^PartneraMp," Deo. Dig. {Key No.) %l
238, 289; Cent. Dig. \% 487, 488, 491-498, 495-499.
248 PARTNERSHIP LIABILITY (Ch. 4
Same — Anomalous Doctrine at Law
While it is inconsistent on principle with the law of con-
tracts to permit the firm creditors to enforce the promise
of the incoming partner, running to the original partners,
to pay the existing firm debts, it must be recognized that
in very many jurisdictions in the United States it is well
settled that the firm creditors may bring an action at law
directly to enforce such promise.^* The cases proceed upon
the doctrine of the law of contracts that a person for whose
benefit a promise is made should be permitted to enforce
such promise immediately. Thus, where A. is indebted to
M., and X. promises A. for a consideration to pay this debt,
M. may enforce X/s promise, although it was not made to
him and he gave no consideration for it. What really takes
place is that A. holds the promise of X. as a chose in ac-
tion in trust for M., the beneficiary. The law executes the
trust by permitting the beneficiary to proceed directly to
reduce the chose to possession. The doctrine of Lawrence
V. Fox and similar cases in contract is applicable to part-
nership contracts, so that the firm creditors may enforce
directly the promise of the incoming partner made for their
benefit.^* It is a very general qualification of the rule, how-
ever, that only in case the performance of the contract by
T4 Lawrence v. Fox, 20 N. Y. 208; Hendrick v. Lindsay, 83 U.
S. 143. 23 L. Ed. 855 ; Mason v. Hall, 30 Ala. 601 ; Morgan t. Oyer-
man Silver Min. Ck>., 37 Cal. 537; Lehow v. Simonton, 3 Colo. 340;
Treat v. Stanton, 14 Conn. 454 ; Bristow v. Lane, 21 III. 194 ; Stevens
V. Flannagan, 131 Ind. 122, 30 N. E. 898; West v. Western Union
Tel. Co., 39 Kan. 93, 17 Pac. 807, 7 Am. St. Rep. 530; Bohanan v. Pope,
42 Me. 96 ; Dearborn y. Parks, 5 Me. 81, 17 Am. Dec. 206 ; Vrooman
V. Turner, 69 N. Y. 280, 25 Am. Rep. 195; Bellas v. Fagely, 19 Pa.
276; Hind v. Holdship, 2 Watts (Pa.) 104. 26 Am. Dec. 107; Brown
y. O'Brien, 1 Rich. Law (S. C.) 288, 44 Am. Dec. 254 ; Grant y. Die-
bold Safe Co., 77 Wis. 72, 45 N. W. 951 ; Tweeddale v. Tweeddale,
116 Wis. 517, 98 N. W. 440. 61 L. R. A. 509. 96 Am. St. Rep. 1003.
See ^'Partnership,** Dec. Dig, {Key 2Vo.) §S 2S8, 239; Cera. Dig. %% 487,
488, 491-m, 495-499.
TB Lehow y. Simonton, 3 Colo. 346; Poole v. Hintrn^er, 60 Iowa,
180, 14 N. W. 223; Reynolds v. Lawton, 62 Hnn, 596. 17 N. Y.
Supp. 432. See '* Partnership," Dec. Dig. {Key No.) ii 2S8, 239;
Cent. Dig. H ^87, 4^8, 491-498, 495-499.
§ 78) GOMMflSNCRMENT OF LIABILITY IN CORTRAOr 249
the promisor relieves the promisee from a legal obligation
to the beneficiary can the beneficiary enforce the contract/*
In a leading New York case the distinction was made
that if the agreement was to assume only a certain propor-
tion of the debts of the firm the agreement could not be
taken advantage of by the firm creditors. The contract might
be fulfilled by paying certain creditors to the exclusion of
others; hence no one creditor could show that such a con-
tract was for his benefit/^ But the same court has held
that where the contract was to pay specific debts those to
whom such debts were owed could take advantage of the
contract ; ^* and where a third person agreed to pay all of
the debts of a firm it was held that the creditors of the firm
generally could hold him on his promise.'*
SAME— LIABILITY OF RETIRING PARTNER
78. A partner who retires from a firm continues liable on
all obligations created while he was a member of
the partnership, unless there has been a terminSi-
tion of partnership liability in one of the methods
designated in the preceding section 70 or section
80» or imless there has been a novation.
MODIFIED LIABILITY: In some jurisdictions,
however, it is held that where a partner retires,
and the continuing. partners take the firai assets
f Barnes v. Hekla Fire Ins. Co., 56 Minn. 38, 57 N. W. 314, 45
Am. St Rep. 438 ; Jefferson ▼. Ascb, 53 Minn. 446, 55 N. W. 604, 25
Ia R. A. 257, 39 Am. St. Rep. 618 ; Lawrence v. Fox, 20 N. Y. 268 ;
Ck)leman v. Whitney, 62 Vt 123, 20 Atl. 322. 9 L. R. A. 517. See
''PartnerBliipr Dec. Dig. {Key No.) |§ 238, 239; Cent. Dig. SI 487,
488, 491''49S, 495-499.
TT Wheat V. Rice, 97 N. Y. 296; Servlss v. McDonnell, 107 N. Y.
260, 14 N. E. 314. See ^^Partnership;' Dec. Dig. (Key No.) fS W«,
2S9; Cent. Dig. SS 487, 488, 491-493, 495-499.
T8 ARNOLD y. J^ICHOLS. 64 N. Y. 117, Gllmore, Cas. Partnership,
328. See "Partnership," Dec. Dig. {Key No.) §§ 238, 239; Cent. Dig.
|§ 487, 488, 491-493, 495-499.
»• Barlow V. Myers, 64 N. Y. 41, 21 Am. Rep. 582. See "Partner-
ship;' Dec. Dig. (Key No.) H ^S8, 239; Cent. Dig. » ^87, 488, 491-
49S, 495-499; **CowtractM," Cent. Dig. | 800.
250 PARTNERSHIP LIABILITT (Ch. 4
and assume to pay the existing firm debts, the re-
tiring partner ceases to be primarily liable and be-
comes a surety merely for such debts. All firm
creditors who have notice of such an arrangement
are boimd to treat him as a surety, and any con-
duct by the creditor that will discharge an ordi-
nary surety will discharge the retiring partner.
Novation — Release of Retiring Partner
It will not be necessary to examine specially the termi-
nation of a partner's liability by payment, release, and mer-
ger. This has already been sufficiently discussed under
sections 70 and 80. Novation as a means of creating a lia-
bility against an incoming partner has also been considered
under the foregoing section. It remains to notice, how-
ever, the application of the rules governing novation as af-
fecting the liability of a retiring partner. As an incoming
partner was not liable on the debts of the firm incurred pre-
vious to his admission, because he was not a party to the
contract giving rise to such debts, so a retiring partner can-
not escape liability on the debts incurred while he was a
member of the firm because he is a party to the contract
giving rise to them. When a party incurs a contract liabil-
ity, he cannot, without the consent of the other party to the
contract, escape such liability.
It is quite usual, when a person who has been a member
of a partnership retires from such relation, for his copart-
ner or copartners to continue the business and to agree
with the retiring partner to pay the outstanding debts. It
is obvious that such an arrangement between the retiring
and continuing partners, without the consent of the firm
creditors, can, by the law of contracts, have no effect upon
the rights of such creditors. Two debtors cannot, by thus
getting together, affect the rights of their common creditor.
In order to make a valid substitution of the continuing
partners for the retiring partner, the common creditor must
be a party to the arrangement, which must take the form of
a novation,** which may be either express or implied.
to A person who is admitted as a partner into an existing Ann
does not thereby become liable to the creditors of the firm for any-
§ 78) GOMMBNCEMENT OF UABILITT IN CONTRACT 251
Whatever the form, the agreement for substitution must
be based upon a consideration. A mere promise by the firm
creditor to look to the continuing partner is not effective.*^
And an assent to an arrangement by which the new firm
becomes liable for the debts of the old one does not of it-
self relieve the retiring partner from liability.**
Same — Consideration for Agreement to Release Retiring Part-
ner •
Some difficulty has been felt by the courts in finding
the consideration for the promise of the old creditor to re-
lease the retiring partner and look only to the continuing
partners. For example. A., B., and C. being partners, C.
withdraws. A. and B. promise X., a firm creditor, that in
consideration of his releasing C. they will pay X.'s claim
against A., B., and C. But as A. and B. are already bound
to pay X., their promise adds nothing to their liability, and
is not a good consideration for X.'s promise to release C.
This is the holding of a number of cases.** But in the case
thiDg done before he becomes a partner. A partner who retires from
a firm does not thereby cease to be liable for partnership debts
or obligations incurred before his retirement A retiring partner may
be discharged from existing liabilities by an agreement to that effect
between himself and the members of the firm as newly constituted
and the creditors, and this agreement may be either express or in-
ferred as a fact from the course of dealing between the creditors and
the firm as newly constituted. Flour City National Bank of Roches-
ter V. Widener, 163 N. Y. 276, 279, 57 N. E. 471 ; Frye & Bruhn v.
Phillips, 46 Wash. 190, 89 Pac 559. See ** Partnership,'' Dec Dig.
{Key No,) §1 2S6, 2S7; Cent, Dig, fi§ m-4H.
•1 Thomas v. Shillabeer, 1 N. & W. 124; Clark v. Billings, 59 Ind.
508; Eagle Mfg. Co. v. Jennings, 29 Kan. 657, 44 Am. Rep. 668;
Chase v. Vaughan, 30 Me. 412; Wildes v. Fessenden, 4 Mete. (Mass.)
12; Walstrom v. Hopkins, 103 Pa. 118; Collyer ▼. Moulton^ 9 R. I.
90, 98 Am. Dec. 370. See "Partnership,** Deo. Dig. (Key No.) §| BS6,
2S7; Cent. Dig. §§ 48Jh494.
•a Harris v. Farwell, 15 Beav. 81. See ** Partnership,** Deo. Dig.
{Key No.) IS 2S6, 2S7; Cent. Dig. |§ iSJhiH.
•* Lodge v. Dicus, 8 B. & Aid. 210; David t. Elllce, 5 B. & a 19a
These cases must be held to be overruled by LYTH v. AULT &
WOOD, 7 Exch. 669, Gilmore, Cas. Partnership, 336, and Thompson
V. Percival, 5 B. & Ad. 925. See, also, the remarkji of Wlgram, V. C^
252 PARTNERSHIP LIABILITY (Gh. 4
of Lyth V. Autl & Wood '* it was held that the considera-
tion, even though it was to pay a debt for which the pro-
misor was already liable, was sufficient to sustain the cred-
itor's promise to release the retiring partner. In that case
there was a partnership of A. and B. A. withdrew and B.
continued the business. X., a firm creditor, agreed, in con-
sideration of a payment by B. of a part of X.'s debt and a
promise to pay the balance, to release A. frqpi further lia-
bility. It was objected that there was no consideration for
X/s promise. In holding that the consideration was suf-
ficient. Baron Parke said: "It cannot be doubted that the
sole security of one of two joint debtors may be more ben-
eficial than the joint responsibility of both. In the latter
case, you are not entitled to sue one with safety, for the de-
fendant may plead in abatement the nonjoinder of his co-
contractor. In case of the bankruptcy of one of the part-
ners, there would also be a difference. * * * Where
there is more than one debtor, the creditor's remedy is dif-
ferent. There is, therefore, no doubt that the thing substi-
tuted is altogether different from the original debt."
This view of Baron Parke has generally prevailed.**
While what was said related to the dissolution of a partner-
ship of two, the reasoning would seem to be applicable to
a partnership composed of more than two.
The question of sufficiency of consideration will not arise
In MlUs T. Boyd, 6 Jar. 948 ; Early v. Bnrt, 68 Iowa, 716, 28 N. W.
35 ; Wild ▼. Dean, 8 Allen (Mass.) 579.
"The promise of a creditor to release the ontgoing and look to the
continuing partners for payment is not binding for want of con-
sideration. The creditor had the several liability of the continuing
partner already in the Joint obligation." Parsons (James) Partn. f
95. See "Partnership,'' Dec. Dig. (Key No.) H 2S6-2S9; Cent. Dig,
§§ m-m.
«* LYTH T. AULT & WOOD, 7 Bxch. 669, Gilmore, Cas. Partner-
ship, 386. See ^'Partnership,'* Deo. Dig. {Key No.) H 2S6-299; Cent.
Dig. §§ m-499.
8 B Thompson ▼. Percival, 5 B. ft Ad. 925; In re Clap, 2 Low.
226 ; Backus v. Fobes, 20 N. Y. 204 ; Ludington t. Bell, 77 N. Y. 138
33 Am. Rep. 601; Allison y. Abendroth. 108 N. Y. 470, 15 N. B. 606;
Collyer v. Moulton, 9 R. T. 90, 98 Am. Dec. 370; iBtna Ins. Co. V.
Wires, 28 Vt. 93. See "Partnership;* Deo. Dig. (Key No.) ff 236-^9;
Cent. Dig. fif m-499.
i 78) OOMMEKCEMBKT OF LIABILTTT IN OONTRAOT 253
where, upon the retirement of an old partner, a new part-
ner IS taken in. If the new firm, which now contains a
member not already liable on the debts of the original part-
nership, agrees to pay the old debts in consideration of the
release of the retiring partner, the promise of release is
clearly supported by adequate consideration. Very slight
circumstances will justify a finding that the creditors
agreed to accept the liability of the new firm in place of the
old one.**
Same — Novation by Implication
It is entirely possible to establish a novation by implica-
tion from the conduct of the parties. As the retiring part-
ner will usually be the one setting up his release from lia-
bility, he must plead and prove a valid agreement amount-
ing to a novation. Being liable under the contract, the pre-
sumption is that he continues so unless discharged.*' A
creditor who, after a partner has retired from the firm,
treats the continuing partners as his debtors, does not,
without more, discharge the retired partner.** The fact
that the creditor said nothing when informed that one of
the partners had withdrawn and the continuing partner had
assumed all the debts will not be sufficient to infer a nova-
tion.** Nor will the fact that the creditor, when so inform-
ed by the continuing partner, said, "All right ; pay as fast
OS you can," be sufficient.** Even if the new firm adopts
•• Regester v. Dodge (O. C.) 6 Fed. 6; ». c., 61 How. Prac. (N. Y.)
107. See "Partnership,'* Dec. Dig. {Key No,) §§ 296-299; Cent. Dig.
If Jfik-k99.
BT Benson v. Hadfleld, 4 Hare, 82, 87; First Nat Bank of Athens
V. Green, 40 Ohio St 431, 440 ; Botsf ord v. Eleinhans, 29 Mich. 332.
Bee ** Partnership,'* Dec. Dig. (fey No.) || 2S6-239; Cent. Dig. U
m-m. 506.
«« Botsford V. Eleinhans, supra. See "Partnership,** Dec. Dig.
(Key No.) §| 2S6-2S9; Cent. Dig. |§ m-499.
«• Wadhams v. Page, 1 Wash. St 420, 25 Pac. 462. See "Partner-
Bhip,** Deo. Dig. (Key No.) §§ 236-289; Cent. Dig. §§ W-W.
•0 MOTLEY V. WICKOFF, 118 Mich. 231, 71 N. W. 520, Gilmore,
Cas. Partnership, 837. In this case the creditor also promised the
retiring partner to release him; but the court held that there was
no consideration for the promise.
In KIRWAN Y. EIRWAN, 2 C. & M. 617, the creditor's state-
ment to the retiring partner that he knew he had no further claim
254 PABTNBBSHIP LIABILITY (Ch. 4
the old debt and pays the interest on it, this is prima facie
evidence only of some agreement between the partners
themselves, and a creditor who does no more than allow
the partner to carry out this agreement does not debar him*
self of his right to look for payment to those originally in-
debted to him.*^ Moreover, if the continuing partners give
a new security for the old debt, this will not operate to dis-
charge the retired partner, unless the creditors intended
that such should be the case, or unless the new security is
of such a nature as to merge the original debt.*' But the
fact that a creditor has ]taken from a continuing partner a
new security for a debt due from him and the retiring part-
ner jointly is strong evidence of ^n intention to look only
to the continuing partner for payment.**
A creditor may so conduct himself as to be estopped from
saying that a retired partner is still liable to him. A set-
tlement by partners of their accounts on the footing that
one of them only is liable to the creditor will not affect
him, unless he has been guilty of some fraud, or has done
some act or made some statement in order to induce the
pastners, or one of them, to settle their accounts on the faith
that one of them is no longer liable.**
on him was held not to release him. See "PartnershiPt* Deo. Dig.
(Key No.) H 2S6-2S9; Cent, Dig, §§ iSk-k99,
•iHALL T. JONES, 56 Ala. 4d3, Gilmore, Cas. Partnership, 339;
United States Nat Bank ▼. Underwood, 2 App. DIt. 342, 37 N.
Y. Supp. 838; Day t. Wetherby, 29 Wis. 363; Griffee t. Griffee, 173
Pa. 434, 34 Atl. 441 ; Hopkins v. Carr, 31 Ind. 260 ; Gulick v. GnUck,
16 N. J. Law, 18a See ''Partnership,'' Deo, Dig, {Key No,) {| 286-
239; Cent, Dig. {f 484-499, 506.
»« Walstrom v. Hopkins, 103 Pa. 118; Ludlngton t. Bell, 77 N. Y.
138, 33 Am. Rep. 601.
It has been held that a creditor may take the negotiable paper of
the new firm or continuing partner, without releasing the original
debtors, if it was taked merely as security for the old debt Smith
V. Rogers, 17 Johns. (N. Y.) 340 ; First Nat Bank of Athens y. Green,
40 Ohio St 431 ; In re Head (1893) 3 Gh. 426. See ''Partnership;'
Deo. Dig. (Key No.) §§ 2Se-2S9; Cent. Dig. If 4S4-499, 506.
•» Evans v. Drummond, 4 Esp. 89. See "Partnership," Dec Dig.
{Key No.) H 2S6^S9; Cent. Dig. §§ 4^4-499, 506.
•«Rege8ter t. Dodge (a G) 6 Fed. 6^ 19 Blatcht 79; Harris v.
§ 78) GOMMENOEMENT OF LIABILITT IN OONTRAGT 255
Modified Liability of Retiring Partner
While a novation is a well-recognized method whereby
a retiring partner may be released from liability, and the
continuing partner, either alone or with a stranger who
joins the firm, may be substituted for him, there is a com-
mon situation arising upon the retirement of a partner that
does not amount to a novation.*' Without consulting their
common creditor, the members of a firm may agree that
one of them shall retire, and that the other shall continue the
business and pay all the existing debts. Such an ar-
rangement is entirely proper and valid as between them-
selves. By it the continuing partner becomes the principal
debtor and the retiring partner becomes merely a surety,
with a right to indemnity from his copartner in case he is
called upon to pay any of the firm debts.** It is also well
settled that if two persons become jointly bound to a third
person, apparently as principals, but one is in fact a surety
for the other, the third person to whom the obligation runs
must treat him as a surety, on notice of the fact being given
him.*^ Since a partner who has obtained an agreement
from his copartner to assume the firm debts becomes as to
Farwell, 13 Beav. 403; Featherstone v. Hunt, 1 Bam. & O. 113;
Davison v. Donaldson, 9 Q. B. Div. 623.
In Porter v. Baxter, 71 Minn. 105, 73 N. W. 844, a dealer in fur-
niture contracted to supply certain goods to defendants as partners,
to be shipped by a specified date. Before the arrival of that time
one of the partners retired and a new firm continued the business.
With knowledge of this fact the dealer shipped the goods to the new
firm. It was held that the retiring partner was no longer liable.
See ^'Partnership** Deo. Dig. (Key Jfo.) fi tSe-iSQ; Cent. Dig. il
48Jh499.
•8 For a full collection of the authorities on the subject, see the
notes to Dean Co. v. GoUins, 9 L. R. A. (N. S.) 49. See ''Partner-
9hipr Dec. Dig. {Key No,) §i 2Se-2S9; Cent. Dig. i§ 484-499.
•• McAREAVY v. MAGRIL, 123 Iowa, 605, ^9 N. W. 193, Gllmore,
Cas. Partnership, 330; PRESTON t. GARRARD, 120 Ga. 689, 48
S. E. 118, 102 Am. St Rep. 124, Gilmore, Cas. Partnership, 334;
Fairfield v. Day, 71 N. H. 63, 51 AU. 2G3. See "Partnership;' Deo.
Dig. {Key No.) i 2S9; Cent. Dig. H ^87, 4S8.
91 Overend, Gumey ft Co. v. Oriental Financial Corporation, L.
R. 7 Ch. 142 ; Lauman v. Nichols, 15 Iowa, 161. See "Partnership,**
Deo. Dig. (Key No.) i 239; Cent. Dig. §§ 487, 488.
266 PABTNBR8HIP LIABILITT (Oh. 4
such partner a surety,** and since one apparently a princi-
pal debtor can compel the creditor to treat him as a surety, if
he is in fact such, many courts hold that a retiring partner be-
comes as to those creditors who have notice of the agree-
ment a surety merely, and is, therefore, entitled to the
rights of a surety.** This view has been thus stated in the
House of Lords : "If, notwithstanding that both the debt-
ors appeared to be principal debtors, the knowledge after-
wards that one of them is a surety only disentitles you to
deal with the other in the way of giving time without dis-
charging that debtor, then it seems to me it must equally
be the case (for otherwise there would be a distinction,
resting on no intelligible or solid basis) that where, al-
though both are principal debtors at the time, one of them
afterwards, as between himself and his codebtor, becomes
a surety, that one is discharged if time be given to the
other." 1
On the other hand, it is maintained that there is a dis-
tinction between the case where an obligor was originally
a surety, though not known to be such by the obligee, and
the case where one of two partners seeks by a contract be-
tween himself and his partner to change his relation to
the firm creditors from that of a principal debtor to that of
a surety. In the former case the original and true relation
of the makers to the debt is unchanged, while in the latter
"the debtors seek by an agreement between themselves
alone to change their relations to the debt without the con-
•• Rodgers v. Maw, 15 M. & W. 444. See "PartnertMp/' Deo. Dig.
(Key No,) § 2S9; Cent Dig, §§ 487, kSS,
»• SMITH y. SHELDON, 35 Mich. 42, 24 Am. Rep. 629, OUmore,
Cas. Partnership, 332; PRESTON v. GARRARD, 120 Ga. 689, 48 S.
B. 118. 102 Am. St Rep. 124, Gilmore, Cas. Partnership, 884 ; Wiley
▼. Temple, 85 111. Appl 69; Colgrore y. Tallman, 67 N. Y. 95, 28 Am.
Rep. 90; Millerd y. Thorn, 56 N. Y. 402; Lazelle t. Miller, 40 Or.
549, 67 Pac. 307. Bee **Partner8h4p,'' Deo. Dig, {Key No.) t 2S9;
Cent. Dig. f§ 487, 488.
1 Lord Herschell, L. O., In Rouse y. Bradford 'Banking Co., L. R.
(1894) App. Cas. 586, 592. See, also, Oakeley y. Pasheller, 10 Bit
(N. S.) 548. See ^^Partnership,'' Deo. Dig. (Key No.) i 2S9; Oeni,
Dig. iS 4^7, 4S8.
§ 78) O^MlfBNCBMENT OF UABIUTT IN CONTRACT 257
sent of the creditors." ' This distinction it is declared will
prevent an agreement between the partners changing the
liability of one of them from that of a principal debtor to
that of a surety becatise, "the liability of the partners as
principal debtors being fixed by the terms of the original
contract, it is not competent for them by any agreement
between themselves to change the nature of that liability,
or impose upon the creditor, without his consent, any new
or additional obligation or duty, a neglect of which may
work a discharge of one of such debtors from his obligation
to pay. The agreement between the partners by which
one of them assumes to pay the entire debt is regarded res
inter alios acta as respects the creditor who is neither bene-
fited nor prejudiced thereby." •
A third view, which is a modification of the two given,
seems to prevail in some jurisdictions. According to the
view in these jurisdictions the creditor will, if he has knowl-
edge of the agreement, be compelled to exercise reasonable
diligence and good faith in enforcing his right against the
partner who has assumed the debts of the firm. "Should
the creditors fail, after notice, to perform these duties, and
such failure result in damage to the retired partner, it
might well be regarded in a court of equity as cause to re-
lease him, at least to the extent of his damage. In such
case the terms of the contract have not been changed ; but
the fact that new relations had arisen between the partners,
by which one assumes, as between them, the burdens of all,
might well call upon the creditors to act in such a way as
not to injure the retiring partner." The court in the case
from which the above quotation was taken nevertheless de-
s McAREAVT v. liiAGRIL, 123 Iowa, 005, 90 N. W. 103, GUmore,
Cas. Partnership, 830. 8ee "Parinerahij^,** Dec Dig. {Key No,) |
tS9; Cent. Dig. |f iBTt, 488-
s McAREAVY y. MA6RIL, 123 Iowa, 005, 99 N. W. 193, GUmore,
Gas. Partnership, 330; HALL v. JONES, 5C Ala. 493, Gilmore, Gas.
Partnership, 339 ; Dean & Go. v. Gollins, 15 N. D. 535, 108 N. W. 242,
9 L. R. A. (N. S.) 49, 125 Am. St Rep. 010; Rawson t. Taylor, 30
Ohio St 889, 27 Am. Rep. 404 ; White v. Boone, 71 Tex. 712, 12 S.
W. 51; Buchanan v. Glark, 10 Grat (Va.) 104; Barnes v. Boyers, 84
W. Va. 303, 12 S. B. 708. See '^PartneriMp," Deo. Dig. (Key No.) fi{
tS&-2S9; Cent. Dig: if 484-499.
Oil.Pabt, — ^17
258 PARTNBB8HIP LIABILITY (Gh. 4
Clares: ''We cannot, however, go to the extent of holding
that a contract upon which two persons agree with a third
to be jointly and primarily liable for a debt can be changed
by the agreement of the debtors themselves, so as to re-
quire the creditor to accept one as a principal debtor and
the other as a surety for its payment." *
TERMINATION OF PARTNERSHIP LIABILITY IN
CONTRACT
79. Termination of partnership liability should be consid-
ered with respect to
(a) Past transactions.
(b) Future transactions.
SAME— PAST TRANSACTIONS
80. The liability on all partnership obligations which have
been properly created during the continuance of
the relationship can be terminated only in one of
the methods recognized by law for the termination
. of joint contracts in general, viz.:
(a) . Payment.
(b) Release.
(c) Merger.
(d) Novation.
Payment
In a partnership debt there is but one debt owed, the
joint debt of all. Therefore, if any one of the partners pays
it, the obligation is discharged. If, however, one partner
pays a firm creditor in such a manner as to show an intent
that the debt shall be kept alive for his benefit, the other
partners cannot plead such a payment in an action brought
by the creditor. Thus, where one partner paid a partner-
ship creditor and had the debt assigned to a trustee for him,
* Grotte V. WeU, 62 Neb. 478, 87 N. W. 173. See **Partner$hip,'*
Dec. Dig. (Key ^o.) { iS9; Cent. Dig. %% 487, 488.
g 80} TERMINATION OF LIABIIJTT IN CONTRACT 259
•
it was held that it was not extinguished.* If the pa)rment
is made out of partnership money, it must be applied to the
partnership debt and will extinguish it*
Same — Appropriation of Payments
As the question of the appropriation of payments be-
comes important in the settling of partnership accounts, it
will be necessary to state briefly the general rules govern-
ing the subject and their applicability to partnership cases :
(1) Where one person owes another two or more debts,
they may agree upon the application of payments to one or
more of the debts owed. (2) A debtor owing several dis-
tinct debts to the same person cannot insist upon paying a
part of any one, but he can pay in full whichever he wishes
in the order in which he wishes.^ He must, however, ex-
ercise his right of selection at the time of payment ; but he
need not expressly indicate the debt which he desires to
pay. His intention to pay a particular debt may be infer-
red from the circumstances of the payment.* (3) If the
debtor does not exercise his right to select the debt to
which his payment should be applied, the creditor may ap-
ply it. He has a reasonable time at least in which to exer-
iMcIntyre ▼. Miller, 13 M. & W. 725. See ^'Partnership,^ Dec,
Dig. {Key No.) If i^5, 165; Cent. Dig. fi§ 229-255%. SOI.
• THOMPSON V. BROWN, Moo. & W. 40. See '*Part'ner8hip;' Deo.
Dig. {Key No.) f US; Cent. Dig. |9 229-238%.
t Lynn v. Bean, 141 Ala. 236, 87 South. 515 ; Wendt ▼. Ross, 83
Gal. 650; Boyd v. Watertown Agricultural Ins. Co., 20 Colo. App. 28,
76 Pac. 986; Pickering v. Day, 2 Del. Ch. 333; Jackson t. Bailey,
12 111. 159; Thayer v. Denton, 4 Mich. 192; Seymour v. Marvin,
11 Barb. (N. Y.) 80 ; Patterson v. Van Loon, 186 Pa. 367, 40 Atl. 495 ;
Hassard v. Tomkins, 108 Wis. 186, 84 N. W. 174. See '^Partnership,'*
Dec. Dig. {Key No,) | 143; Cent. Dig. | 232; **Poyment*' Dec. Dig.
{Key No.) §i 36-41; Cent. Dig. ff 99-129.
• Shaw V. Plcton^ 4 B. & C. 715 ; Waters y. Tompkins, 2 C, M.
& R. 723;. Peters v. Anderson, 6 Taunt 596; Wittkowsky v. Reld,
82 N. C. 116 ; Lysaght v. Walker, 5 BIL N. S. 1 ; City Discount Co.
V. McClean, L. R. 9 C. P. 692. Pearce v. Walker, 103 Ala. 250, 15
South. 568; Hanson t. Cordano, 96 Cal. 441, 31 Pac. 457; Mitchell
V. Dall, 2 Har. & 6. (Md.) 159; Roakes v. Bailey, 55 Vt 542L Bee
''Partnership;' Dec. Dig {Key No.) f 143; Cent. Dig. § 232; •'Pay-
tnent,*' Deo. Dig. {Key No.) U 36-47; Cent. Dig. ii 99-129.
260 PARTNERSHIP LIABILITY (Ch. 4
cise his choice,* and can apply ft to any legal debt owed
him by the debtor at the time the payment was made ; *•
and even the debts barred by the statute of limitations in
preference to those which have not been barred.**
In certain situations a legal presumption arises that the
debtor intended that a payment should be appropriated in
a certain manner, and the creditor can appropriate them in
no other. Thus in payments on a running account it is pre-
sumed that payments are to be applied to the oldest items
of the account.** This rule is very important in determin-
ing the liability of retired and deceased partners ; for if the
new firm or the surviving members continue the old ac-
counts and make payments upon them, without specifying
the parts of the account to be paid, the payments will be
• Slmson T. Ingham, 2 B. & C. 66 ; Mills t. Fowkes, 6 Blng. N. O.
455; Mayor of Alexandria v. Patten, 4 Granch, 317, 320, 2 L. Ed.
633; Falrchild v. HoUy, 10 Conn. 176; Harker v. Conrad, 12 Serg.
& R. (Pa.) 301, 14 Am. Dec. 691. See ''Partnership,** Dec. Dig. (Key
Vo.) I US; Cent. Dig. § 2S2; ''Payment;* Dec. Dig. (Key No.) f§
S6-4y; Cent. Dig. §§ 99-J29.
10 Hammersley v. Knowlys, 2 Esp. 665; Goddard v. Hodges, 1 Gr.
& M. 33 ; McCurdy v. Middleton, 82 Ala. 131, 2 South. 721 ;. Lyon
V. Bass, 76 Ark. 534, 89 S. W. 849 ; Byrnes y. Claffey, 69 Cal. 120,
10 Pac. 821 ; Nichols v. Culver, 51 Conn. 177 ; Lowenstein v. Meyer,
114 Ga. 709, 40 S. E. 726 ; Wellman t. Miner, 179 111. 826, 53 N. B.
609; Eeaimes v. Durst, 110 Iowa, 114, 81 N. W. 238; Henry Bill
Pub. Co. V. Utiey, 155 Mass. 366, 29 N. E. 635. See "PartnertMp,**
Dec. Dig. (Key No.) f US; Cent. Dig. % 2S2; "Payment,** Deo. Dig.
(Key No.) || S6-47; Cent. Dig. H 99^129.
11 Friend v. Young, [1897] 2 Ch. 421; Mills ▼. Fowkea, 6 Blng.
N. C. 455; Williams v. Griffiths, 5 M. & W. 800; Nash v. Hodgson,
Kay, 650; Blake ▼. Sawyer, 83 Me. 129, 21 AU. 834, 12 L. R. A. 712,
28 Am. St Rep. 762.
It should be noted, however, that sudi payment and appropriation
does not serve as an admission which will take the debt itself out
of the statute. This must be shown by other means. See "Partner^
ship,** Dec. Dig. (Key No.) | US; Cent. Dig. f 2S2; "Payment,*
Dec. Dig. (Key No.) H 3M7; Cent. Dig. |§ 99-129.
12 Lazarus v. Freidheim, 51 Ark. 371, 11 S. W. 518; Molask^y t.
Peery, 76 Cal. 84, 18 Pac. 120; Falrchild v. Holly, 10 Conn. 175;
Johnson v. Foster (Iowa) 101 N. W. 741. fiCee "Partnership,** Dec.
Dig. (Key No.) fi US; Cent. Dig. f 2S2; "Payment,** Dee. Di^ UTey
No.) %% 5M7; Cent. Dig. §| 99^129.
§ 80) TERMINATION OF LIABILITY IN OONTRAOT 261
appropriated to the items owed by the old firm." The re-
tired or deceased partner will be excused to that extent,
even though he was, when a member of the firm, a dor-
mant partner and his existence was unknown.^* Moreover,
though an incoming partner is not liable for the debts of
the old firm, if the new firm with his assent" continues the
old accounts without break, payments by s\ich firm will be
applied in payment of the debts of the old firm.**
Release
It has been pointed out that at common law a release of
one of several joint debtors operated to release all of them.
To avoid this effect of a release it became the custom,
where a creditor wished to release one only of several joint
obligors, to covenant not to sue him. Moreover, the courts
mitigated the rigor of the rule by permitting a creditor to
give to one joint debtor a qualified release, which, if prop-
erly worded, was held not to discharge the remaining joint-
debtor." Thus it was said in North v. Wakefield : "The
deed contained an express clause that the release to God-
dard should not operate to discharge any one jointly or
otherwise liable to plaintiff for the same debts. It is plain,
therefore, that it did not release the defendant. The rea-
son why a release to one debtor releases all jointly liable
is because, unless it be held to do so, the codebtor, after
paying the debt, might sue him who was released for con-
tribution, and so in effect he would not be released; but
that reason does not apply where the debtor released agrees
laDeTaynes v. Noble, 1 Mer. 529; Sleech's Oase, 1 Mer. 640;
Clayton's Case, 1 Mer. 572. See '^Partnership,** Dec. Dig. (Key ^o.) I
US; Cent Dig. | 2S2; **PaymenV* Deo. Dig. (Key No.) H S6-47;
Cent. Dig. |§ 99-129.
1* Newmarch v. day, 14 East, 239; Brooke ▼. Enderby, 2 Brod. &
B. 70; Falrchlld v. HoUy, 10 Conn. 176. See *'Partner8Mp,** Deo.
Dig. {Key No.) || 14s. 2S6-2S9; Cent. Dig. Sf 292, 493^.
" St Louis Type Foundry Co. v. Wisdom, 72 Tena. 696. See
^^Partnership," Dec. Dig. (Key No.) §i US, 2S6-2S9; Cent. Dig. {§ 2S2,
!• Morgan v. Tarbell, 28 Vt 498. See ''Partnership," Dec Dig.
iKey No,) {( US, 236-2S9; Cent. Dig. f§ 232, 49S%.
17 Solly V. Forbes, 2 Bro. & B. 8& See "Release," Deo. Dig. {Key
No.) 1 28; Cent. Dig. U 67-^2.
262 PARTNERSHIP LIABILITY (Gh. 4
to such a qualification of the release as will leave him lia*
ble to any rights of the codebtor." *• Partnership debts be-
ing joint debts, these rules with respect to covenants not
to sue and releases apply to such debts. Thus in Northern
Insurance Co. v. Potter^* it was held that a release of two
of three partners did not release the third, it being specific-
ally agreed that the release should not have that eflEect**
Merger
Since at common law the promise in a joint obligation
was merged in a judgment obtained on that promise, the
same was true of partnership obligations. A different rule
was once laid down in the United States Supreme Court in
the case of Sheehy v. Mandeville & Jamesson ; "^ but it
was later decided, in accordance with the weight of author-
ity, that a judgment obtained on a partnership note in a
suit in which only one of the partners was served consti-
tuted a bar to a subsequent action against the partner not
served, because the obligation was merged in the judgment
obtained.** The court said : "A judgment against one upon
a joint contract of several persons bars an action against
the others, though the latter were dormant partners of the
defendant in the original action, and this fact was unknown
to the plaintiff when that action was commenced. When
the contract is joint, and not joint and several, the entire
cause of action is merged in tlie judgment. The joint lia-
bility of the parties not sued with those against whom the
judgment is recovered being extinguished, their entire lia-
bility is gone. They cannot be sued separately, for they
have incurred no several obligation. They cannot be sued
IS Patterson, J., in North v. Wakefield, 13 Q. B. 630, 64a Bee
''Release,'* Deo, Dig. (Key No.) { 28; Cent. Dig. ifi 57-62.
i» NORTHERN INSURANCE CO. V. POTTER, 63 CaL 157, GU-
more, Cas. Partnership, 286. See ''Release^** Dec. Djig, (Key No.) |
28; Cent. Dig. i§ 51~€2.
so By statute it is provided in many jurisdictions that a release
of one partner shaU not operate as a release of the others. See
Stim. Am. Statute liaw, f 5330.
SI 6 Cranch, 254, 3 L. Ed. 216. See "Judgment;* Dee. Dig. (Key
No.) f 628; Cent. Dig. | IIU.
St MASON V. ELDRED, 6 WaU, 231, 18 L. Ed. 783, Gilmore Caa
Partnership, 281. See "Judgment;* Deo. Dig, (Key No.) { 628; CenL
Dig. § 1144.
§ 82) TERMINATION OF LIABILITY IN CONTRACT 2G3
jointly with the others, because judgment has been already
recovered against the latter, who would otherwise be sub-
jected to two suits for the same cause." *■
Novation
As pointed out in considering the liability of an incoming
partner,** it is always possible under the law governing no-
vation for one debtor to be substituted for another. By
means of a novation, therefore, the existing debt of the
members of a firm may be transferred to strangers. Such
novation must be effected in conformity with the rules ap-
plicable to novations generally,
SAME— FUTURE TRANSACTIONS
81. So long as the partnership relation continues the mu-
tual agency of the partners to bind one another ex-
ists. In order to terminate liability for future
transactions the relation must be dissolved. The
dissolution may be
(a) By operation of law.
(b) By act of the parties.
SAME— DISSOLUTION BY OPERATION OF LAW
82. Where the dissolution is by operation of law, this of
itself terminates all liability of a partner for future
transactions, and all persons are bound to take no-
tice of the change.
Dissolution by Operation of Law
A partnership may be dissolved by operation of law.
Ordinarily the event which is designated by law as ter-
ss The Joint debtor acts which have been passed by many of the
states apply to partnership debts, and prevent a Judgment against less
than all of the partners from having the effect of extinguishing the
obligation existing against the others. Hall v. Lanning, 91 U. S.
IGO, 23 L. Ed. 271 ; MASON v. ELDRED, 6 WaU. 231, 18 L. Ed. 783,
Gllmore, Cas. Partnership, 281. See, also, chapter IX, post, pp. 543-
545. See ^'Judgment,** Dec. Dig, {Key No.) § 628; Cent. Dig. i 1J44:
^^Partnership;' Dec. Dig. {Key No.) §§ 165-J7S; Cent. Dig. §§ S0J-S05.
24 See ante, p. 244.
264 PARTNERSHIP TJABILITT (Gh. 4
minating a partnership is of sufficient notoriety to put one
on his g^ard ; but, whether so or not, it terminates the lia-
bility of each partner, and also of his estate, for the future
acts of his partners, without any notice being given. . Hav-
ing no voice in the termination of the partnership, he is not
held to the same standard of conduct as where he volunta-
rily terminates the relationship. Thus, if a partnership is
terminated by war between the countries of the respective
partners, no notice of the dissolution need be given.** The
same is true in the case of the death of one partner.'* The
rule of agency which prevails in the case of the death of
a principal prevails in this situation, and by such dissolu-
tion of a partnership the agency of each partner is thereby
terminated. This is subject to the qualification that the
agency of a partner does continue for the purposes of wind-
ing up the firm business and the surviving partners have all
power necessary for that purpose.*^ So, also, where one
partner becomes bankrupt,** or is adjudged insane.**
•i LYON V. JOHNSON, 28 Conn. 1, Gllmore, Caa. Partnership, 841.
Planters* Bank v. St John, Fed. Gas. No. 11,208; GRISWOLD v.
WADDINGTON, 16 Johns. (N. Y.) 57, Gllmore, Cas. Partnership,
600; Id., 16 Johns. (N. Y.) 438; Dickinson v. Dickinson, 25 Grat
(Va.) 321, 329; FOX v. HANBURY, Cowp. 445; Thomason v.
Frere, 10 East, 418 ; Morgan y. Marquis, 9 Exch. 145. See "^Partner-
ship,*' Dec, Dig. {Key No.) § 290; Cent Dig. | 651.
20 LYON V. JOHNSON, 28 Conn. 1, Gllmore, Gas. Partnership,
341; Williams v. Rogers, 14 Bush (Ky.) 776; Price v. Succession
of Mathews, 14 La. Ann. 11 ; Washburn v. Goodman, 17 Pick. (Mass.)
519; MARLETT v. JACEMAN, 8 Allen (Mass.) 287; GaldweU v.
StUeman, 1 Rawle (Pa.) 212; Devaynes ▼. Noble, 1 Mer. 616; Vul-
Uamy v. Noble, 3 Mer. 592, 614. See ^^PartnerBhip,^ Dec Dig. {fey
No.) fi 290; Cent Dig. § 651.
ST Weiss T. Hamilton, 40 Mont 99, 105 Pac. 74.
In Usher t. Dansey, 4 Camp. 97, It was held that the agency of an
agent of a partnership, such agent not being himself a partner, was
not terminated by the death of a partner; Lord Ellenborough de-
claring that that authority of the agent must be considered to
«9 EUSTIS V. BOLLES, 146 Mass, 413, 16 N. B. 286, 4 Am. St
Rep. 327, Gllmore, Cas. Partnership, 603 ; Watterson v. Patrick (Pa.)
1 Ati. 602. See '^Parinershipr Dec. Dig. {Keg No.) t 271; Cent.
Dig. i 616.
*9 laier v. Baker, 6 Humph. (Tenn.) 85. Bee **PartnerMMpt** Dee.
Dig. {Key No.) t 274; Cent Dig. { 621.
§ 83) TBKMINATION OF LIABILITT IN OONTRACT 266
SAME— DISSOLUTION BY ACT OF THE PARTIES
83. Where the dissolution is by the act of the parties, lia-
bility for future transactions will cease only upon
the giving of due notice of such change. The no-
tice must be given:
(a) To the public generally. This may be done by pub-
lishing in a newspaper or by any other equally ef-
fective method. i
(b) To those who have extended credit to the firm. This
notice must be actual.
EXCEPTION: A dormant partner is not required to
give notice of his retirement from a firm in order
to prevent his further liability for future transact
tions.
A partnership may be dissolved either by operation of
law or by the act of the parties. If it is dissolved by the
act of the parties, they must, in order to escape liability for
the future acts of their former partners, give notice of the
dissolution of the partnership. The reason for this rule is
the same as in other cases of revocation of agency, and is
variously stated as resting on estoppel, or on negligence
inducing credit, or on the presumption of a continuance of
an existing state of affairs, or on the theory of a holding
out as partners. "When one of two parties is to sustain
injury from the giving of credit, the one who originally in-
duced it should bear the loss, rather than the one who,
without notice of the change, relied upon the continued ex-
istence of the partnership." •• This reason does not apply,
emanate from the partnership, and not from the partners as in-
dividuals. This case has been sometimes regarded as authority for
the view that the agency of such an agent is unaffected by the death
of a partner. It seems probable, however, that it would only be held
to exist in the same modified sense as does that of the surviving
partners. See Bank of New Tork v. Vanderhorst 32 N. X. 558. See
'^Partnership^ Deo. Dig. {Key No.) H 2J,3-258, 275; Cent. Dig.
i§ -609^98, 621.
so AUSTIN V. HOLLAND, 68 N. Y. 571, 677, 26 Am. Rep. 246,
Oilmore, Cas. Partnership, 843. See **Partner8hip," Dec. Dig. (JTey
No.) §1 288-292; Cent. Dig. §f 651-661.
266 PARTNERSHIP LIABILITY (Ch. 4
however, where the dissolution is by death or bankruptcy,
or any other cause which terminates the partnership by op-
eration of law. But if a firm is dissolved by mutual con-
sent, and one member retires, while the rest conduct the
same business under the same name, the retiring member
will be held liable on the contracts of the new firm to those
who relied on the credit of the old firm, unless he gives
proper notice of the dissolution of the partnership.** No-
tice is necessary, also, where the partnership expires by the
limitation created in the original articles,'" unless the plain-
tiff knew the term the partnership was to continue.**
Even if a retiring partner does give notice of dissolution,
be may, of course, be held by estoppel for the subsequent
•1 Graham t. Hope, Peake, 154; Moline Wagon Ck). t. Rmnmell
<0. C.) 12 Fed. 658; Stewart ▼. Sonnebom, 51 Ala. 126, WUllams
▼. Bowers, 15 GaL 321, 76 Am. Dec. 489 ; Johnson ▼. Totten, 8 Cal.
843, 58 Am. Dec. 412; Holland ▼. Long, 57 6a. 36; Carmichael v.
Greer, 55 Ga. 116; Ennls ▼. Williams, 30 Ga. 691; Holtgreve v.
Wintker, 85 111. 470; Page ▼. Brant, 18 111. 37; Stall ▼. Gassady, 57 ,
Ind. 284; Denman v. Dosson, 19 La. Ann. 9; Lowe v. Penny, 7 La.
Ann. 356; Pope ▼. Risley, 23 Mo. 185; Scheiffelln v. Stevens, 60
N. C. 106, 84 Am. Dec 3£|5; Deerlng v. Flanders, 49 N. H. 225; Zol-
lar V. Janvrln, 47 N. H. 324 ; AUSTIN v. HOLLAND, 69 N. Y. 571,
25 Am. Rep. 246, Gilmore, Cas. Partnership, 343; Vernon ▼. Man-
hattan Go., 17 Wend. (N. Y.) 524; Shamburg t. Ruggles, 83 Pa. 148;
Kenney ▼. Altvater, 77 Pa. 34 ; Little y. Glarke, 36 Pa. 114 ; White
▼. Murphy, 3 Rich. Law (S. G.) 369; Hutchins ▼. Hudson, 8 Humph.
<Tenn.) 426; Kirkman v. Snodgrass, 3 Head (Tenn.) 370; Davis v.
WlUis, 47 Tex. 154; Tudor v. White, 27 Tex. 584; Prentiss v. Sin-
clair, 5 Vt 149, 26 Am. Dec. 288; Dickinson ▼. Dickinson, 25 Grat
(Va.) 321; Benjamin v. Govert, 47 Wis. 375, 2 N. W. 625. See
** Partnerships Deo. Dig. {Key No,) H 288-292; Cent. Dig. M 651-
661.
•s Holt ▼. Simmons, 16 Mo. App. 97 ; Ketcham t. Glark, 6 Johns. I
<N. Y.) 144, 5 Am. Dec. 197. See ''Partnership,** Deo. Dig. (Key
No,) SS 288-292; Cent. Dig. SS 651-661.
«« Schlater v. Winpenny, 75 Pa. 321.
Where members of an existing partnership dissolved it and formed
a corporation, without changing the original firm name in such a
way as to indicate the incorporation, it was held that notice of dis-
solution should have been given. Martin v. Fewell, 79 Mo. 401;
Goddard v. Pratt, 16 Pick. (Mass.) 412; WUley t. Thompson, 9 Meta
(Mass.) 829, 831. See ^^Partnership,'' Deo. Dig. (JTey No.) H 288-
S92; Cent. Dig. U 651-^61.
§ 88) TERMINATION OF LIABILITY IN GONTRACT 267
acts of the other partners, if he knowingly permits his name
to be used in the partnership business.** But merely al-
lowing the business to continue in the old firm name does
not of itself make him liable.**
Notwithstanding a dissolution, each partner has the im-
plied power to do all acts necessary to settle demands
against the firm and to complete transactions incompleted
at the time of dissolution.'*
Notice to the Public
In the giving of notice there are two classes of persons
to consider : The public generally, and those who have pre-
viously relied on the credit of the firm. It cannot be ex-
pected that actual notice shall be given to all members of
the public on the dissolution of a firm. It is sufficient if
reasonable means are used to make them aware of the
change in the firm. It has been held in England that a
publication in the London Gazette was sufficient notice as
against those who had no prior dealings with the firm,,
whether they actually saw such publication or not.*^ A
similar rule has been applied in this country.** In some
•« See section 21, chapter I, p. 61, on Estoppel.
••Webster ▼. Webster, 8 Swanst 490, note; Newsome ▼. C!ole8,
2 Camp. 617; Ex parte Central Bank of London, [1892] 2 Q. B.
G33. See ^^Partnership,'' Deo. Dig. {Key No.) H ^^, ^S; Cent. Dig,
SS 476, 665.
••Yale T. Eames, 1 Mete. (Mass.) 486; Tutt t. Cloney, 62 Mo.
116; Thursby t. Lddgerwood, 69 N. Y. 198; Murray t. Mamford,
6 Cow. (N. Y.) 441; Molst's Appeal, 74 Pa. 166. See, further, chap-
ter y. Powers of Partners, Powers of Partners after Dissolution, ffi
114-122, post, p. 839. See ^Partnership,*' Dec Dig. {Key No.) IS
277-287; Cent. Dig. U 622^50.
•T Godfrey t. Tumbull, 1 Esp. N. P. C 871; Newsome t. Coles,
2 Camp. 617.
"An advertisement in the London Gazette as to a firm whose prin-
cipal place of business is in England or Wales, in the Edinburgh
Gazette as to a firm whose principal place of business is in Scot-
land, and in the Dublin Gazette as to a firm whose principal place
of business is in Ireland, shaU be notice as to persons who had not
dealings with the firm before the date of the dissolution or change so
advertised.'* Partnership Act (1890) | 86(2). See ^^Partnership,"
Dec. Dig. {Key No.) U 289-292; Cent. Dig. U 651-661
•• Shurlds ▼. Tilson, 2 McLean, 458, Fed. Cas. No. 12,827; Mauldin
V. Branch Bank at Mobile, 2 Ala. G02; Lucas t. Bank of Darien»
268 PABTNBRSHIP LIABILITY (Gh. 4
cases, it has been held that a change in the name of a firm
was sufficient notice of dissolution, even to prior dealers ; ■•
in others, notoriety of the change in the firm has been held
equivalent to published notice.*'
Actual Notice — Who are Entitled to
Those who have previously dealt with the partnership,
relying on its credit, must be g^ven actual notice of a disso-
lution. Such persons are usually designated "former deal-
ers" or "former customers." The terms are vague and in-
definite. No exhaustive definition of their meaning can be
gfiven. It must be arrived at by a process of judicial in-
clusion and exclusion. The essential requisite, in order to
constitute one a former customer entitled to actual notice,
is dealing with the partnership on credit. The credit must
«
2 dtew. (Ala.) 280; Martin ▼. Searles, 28 Conn. 43; Polk ▼. Oliver,
56 MteB. 566 : Graves v. Merry, 6 Cow. (N. Y.) 701, 16 Am. Dec. 471 ;
Lansing v. Gaine, 2 Johns. (N. T.) 300, 3 Am. Dec. 422; Watkinson
V. Bank of Pennsylvania, 4 Whart (Pa.) 482, 34 Am. Dec. 621;
Planters' ft Mechanics' Bank v. Galliott, 1 McMoL (S. C.) 209, 36
Am. Dec. 256; Martin t. Walton, 1 McCord (S. C.) 16; Slmonds v.
Strong, 24 Vt 642.
"It is not an absolute, inflexible rule that there most be a pnb-
lication in a newspaper to protect a retiring partner. That is one
of the circumstances contributing \o or forming the general notice
required. It is an important one ; but it is not the only or an indis-
pensable one. Any means that, in the language of Mr. Bell, are
fair means to publish as widely as possible the fact of dissolution,
or which, in the words of Judge Edmonds, are public and notorious
to put the public on its guard, or, in the words of Judge Nelson,
notice in any other public or notorious manner, or, in the language
of Mr. Verplank, notice by advertisement or otherwise, or by with-
drawing the exterior indications of partnership and giving public
notice in the manner usual in the community where he resides, are
means and circumstances proper to be considered on the question
of notice." Lovejoy v. Spafford, 03 U. S. 430, 440, 23 L. Ed. 851,
by Hunt, J. Bee ^'Partnership;* Dec. Dig. {Key No.) K 289-^2;
Cent. Dig. IS 651^61.
«• Barfoot v. Goodall, 3 Camp. 147. See ^'Partnership,*' Deo, Dig.
(Key No.) | 291; Cent. Dig, H 657-^60.
«• Hart V. Alexander, 2 M. & W. 484 ; Lovejoy v. Spafford, 83 U.
S. 430, 23 L. Ed. 851 ; SOLOMON v. KIRKWOOD, 55 Mich. 256, 21
N. W. 336, Gilmore, Cas. Partnership, 589. But see Martin v.
Searles, 28 Conn. 43: Goddnrd v. Pratt, 16 Pick. (Mass.) 412. See
"Partnership;* Dec. Dig. {Key No.) S 291; Cent. Dig. If 667-^60.
§ 83) TERMINATION OF LIABIUTT IN CONTRAOT 269
have been given directly to the firm/* Those who have
given credit to the firm without its knowledge or consent,
as by discounting its commercial paper, are not entitled to
notice of the dissolution.** Former dealers are presumed
to know the composition of the partnership, and- to rely on
the individual credit of each ostensible. member. They are,
hence, entitled to act on this knowledge till informed to the
contrary- No practical difficulty can exist in their case,
since their names are on the partnership books and actual
notice can be imparted to them. Those who have previ-
ously dealt with the firm, but always for cash or without
becoming firm creditors, are not entitled to greater notice
then the public generally.*' But those who have loaned
money to the firm,** or have sold goods to it on credit, even
though the amount is small, and the credit was implied, are
entitled to actual notice of dissolution ; *• also those who
have discounted paper for the partnership,** or have de-
41 Oreen v. Waco State Bank, 78 Tex. 2, 14 S. W. 253. See **ParU
nership,"* Deo, Dig. {Key No.) | 289; Cent Dig, SS 652, 65S.
4s City Bank of Brooklyn v. McChesney, 20 N. Y. 241 ; Hutchins
V. Bank of State, 8 Humph. (Tenn.) 418. But see Vernon ▼. Man-
hattan CJo., 17 Wend. (N. T.) 524; Id.. 22 Wend. (N. Y.) 183; Me-
chanics' Bank ▼. LiTlngston, 83 Barb. (N. Y.) 458. See **Partner'
ship," Dec, Dig. {Key No.) | 289; Cent. Dig. U 652, 65S,
4« ASKEW T. SILMAN, 95 Ga. 078, 22 S. E. 573 ; Merrltt T. Wil-
liams, 17 Kan. 287.
Obviously those persons who have no knowledge whatever of the
existence of a partnership, and who have never had any dealings
under the belief that there was a firm, are not entitled to notice of
any kind. Austin v. Appling, 88 6a. 54, 13 S. E. 955; Chamber-
lain V. Dow, 10 Mich. 319; Swlgert v. Aspden, 52 Minn. 565, 54 N.
W. 738; Bloch v. Price, 24 Mo. App. 14; Blanks v. Halfln (Tex. Civ.
App.) 30 S. W. 941. See *' Partnership," Dec Dig, {Key No.) | 289;
Cent. Dig, H 652, 659.
44 Jansen v. Grlmshaw, 26 111. App. 287 ; Howell v. Adams, 68
N. Y. 314; Buffalo City Bank v. Howard, 85 N. Y. 500; Williams
V. Birch, 6 Bosw. (N. Y.) 299. See '"Partnership," Deo, Dig, {Key
No.) % 289; Cent. Dig, U 652, 65S,
4 6Clapp V. Rogers, 12 N. Y. 283. See ** Partnership," Dec. Dig,
(Key No.) § 289; Cent, Dig. H 652, 65S,
4tf ROSE V. GOFFIELD, 53 Md. 18, 36 Am. Rep. 389, Gilmore,
Gas. Partnership, 346; Bank of Gommonwealth v. Mudgett, 44 N.
Y. 514 ; National Shoe ft Leather Bank of Glty of New York v. Herz,
270 PARTNERSHIP LIABILITT (Ch. 4
posited money with it/^ or have indorsed accommodation
paper for it/* or have made advancements to it as factors
or consignees/* even though there were but one or two
transactions, are entitled to actual notice.**
Soffte — What is SuMcient Notice
No particular form of notice is necessary. It is sufficient
to show that actual notice was brought home to the one
seeking to enforce a partnership liability. Thus it has
been held that a change in the name of the firm was suf-
ficient.** Anything which should put an ordinarily prudent
man on his guard is sufficient, as an informal unsigned no-
tice of dissolution,'* or a notorious and violent dissolution
of a firm in Mobile, Ala., followed by a change in location
to Milwaukee, Wis., where the business was continued in
the name of the former firm.** As to whether or not actual
notice has been given, it has been held that the jury might
infer that it had been given from evidence that plaintiff's
credit man was accustomed to read the daily slips of a com-
mercial agency which contained notice of such dissolu-
tion.** Also the fact that plaintiff took a certain paper in
88 N. T. 629; National Bank t. Norton, 1 HIU (N. T.) 572. Bee
''Partnership;* Dec, Dig. {Key No.) | 289; Cent. Dig. SS 652, 65S.
«r Howell ▼. Adams, 68 N. Y. 314. See ^^Partnership;' Dec Dig.
{Key No.) | 289; Cent. Dig. {{ 652, 65S.
*• Hutchlns ▼. Sims, 8 Humph. (Tenn.) 423. See ^'Partnership,*^
Dec. Dig. (Key No.) | 289; Cent. Dig. H 652, 65S.
4»wmiams T. Birch. 6 Bosw. (N. T.) 299. See **Partnership;*
Dec Dig. (Key No.) | 289; Cent. Dig. H 652, 655.
«o LYON T. JOHNSON, 28 Conn. 1, Gllmore, Gas. Partnership, 341 ;
Wardwell t. Haight, 2 Barb. (N. Y.) 649. See ''Partnership,** Deo.
Dig. (Key No.) { 289; Cent. Dig. St 652, 65S.
■iHolt T. AUenbrand, 52 Hun, 217, 4 N. Y. Supp. 922; Kehoe t.
Garvllle, 84 Iowa, 415, 51 N. W. 166. But see Roof ▼. Morrlsaon, 37
111. App. 37; American Linen Thread Go. t. Wortendyke, 24 N. Y.
550. See "Partnership,** Deo. Dig. (Key No.) | 291; Cent. Dig. H
657-660.
"Young T. Tlbbltts, 32 Wis. 79. See ^'Partnership/' Dec Dig.
(Key No.) S 291; Cent. Dig. H 657-660.
BsGlapp T. Upson, 12 Wis. 492. See '^Partnership,^ Dec Dig.
(Key No.) i 291; Cent. Dig. {{ 657-^60.
54 Gage V. Rogers, 51 Mo. App. 42a See "Partnership,** Dec Dig.
{Key No.) { 291; Cent. Dig. n 657-660, 662.
§ 83) TERMINATION OF LIABILITY IN CONTRACT 271
which notice of dissolution was published has been held
evidence to prove that he knew of such dissolution.'*
It must be shown, however,, that notice was actually re-
xreived, and it has been held that though, on the mailing of a
notice properly addressed, a presumption that it was re-
ceived arises, such presumption may be rebutted by proof
that it was not in fact received.**
«B Jenkins t. Blizard, 1 Starkle, 418; Rabe y. Wells, 8 Gal. 148;
Whltesldea ▼. Lee, 2 111. 650. See ''Partnership,** Deo. Dig. {Key
No.) f 291; Cent. Dig. %% BSl-SSO, 662.
B« Hunt V. Ck>lorado MUling & Elevator Ck>., 1 Colo. App. 120, 27
Pac. 873; Meyer ▼. Krohn, 114 lU. 674, 2 N. B. 495; AUSTIN ▼.
HOLLAND, 69 N. Y. 671, 25 Am. Rep. 24Q» GUmore, Cas. Partner-
ship, 343.
"It is often difficult to determine what amounts to due and suffi-
cient notice of the retirement of a partner, but the evidence to
prove it should be such as would reasonably warrant the jury in
finding the fact of notice, that the party to be charged with it ac-
tually had it, or might, by reasonable diligence, have learned of the
dissolution of the partnership and the retirement of the partner
sought to be charged, from the means and opportunity supplied or
afforded for the putpose of giving notice of the same. Generally,
the reasonableness of the notice will be a mixed question of law
and fact, to be submitted to the jury under proper instructions of
the court as to whether, under all the attending circumstances of
the particular case, it was sufficient to warrant the inference of
actual or constructive knowledge of the dissolution. As said above,
ordinarily, notice fairly given in a newspaper, generally circulated
abroad, and particularly among the business people of the town or
city where the partnership carried on its business, would be suffi-
cient as to all persons who had not had previous dealings with the
partnership. It is better and safer to give notice in that way, al-
though it might be given in other ways. This would afford busi-
ness men reasonable opportunity to learn of the dissolution, and,
in the course of business, the matter would be generally known,
and more or less spoken of, to business men from every direction.
But such publication must be fair and reasonable, as to Its terms
and the number of times it shall be made. If the facts are found
or ascertained, the reasonableness and sufficiency of the notice may
be a question of law for the court The court must determine that
there is, or is not, evidence sufficient to go to the jury to prove no-
tice." Merrimon, O. J., in Ellison v. Sexton, 106 N. 0. 366, 861, 11
S. E. 180, 181, 18 Am. St Rep. 907. See ""Partnership;* Deo. Dig.
{Key No.) ( 291; Cent. Dig. H 657-660, 662.
272 PABTIISBSHIP LIABUJTT (Cll. 4
Dormant Partner
One who deals with a firm relies only on the credit of
those who are the apparent members of it. A dcMtnant
partner not being an apparent member of the firm, it can-
not be said that reliance is placed upon his credit. Hence,
though he can be held, if discovered, on liabilities incurred
by the firm while he was member of it," he is not bound
upon retiring to give notice of dissolution to escape liabil-
ity for future obligations/* When a dormant partner be-
comes known to certain persons, he ceases to be dormant
as to them, and must give them notice of his retirement
from the firm/* If many learn that he is a partner, he is
no longer a dormant partner, but an ostensible partner, and
is bound to give such notice as is required of such part-
ners.**
•7 See Dormant PartDers, chapter II, | 89, p. lU.
••CARTER T. WHALLET, 1 B. ft Ad. 11; Bigelow t. EUlot,
Fed. Cas. No. 1,399; Nussbaumer y. Becker, 87 111. 281, 29 Am.
Rep. 58 ; Ellis' Adm*rB ▼. Bronson, 40 111. 455 ; Scott v. ColmesiiU,
80 Ky. 416; Magill t. Merrle. 44 Ky. 168; Edwards ▼. McFall, 5
La. Ann. 167; GROSVENOR ▼. LLOTD, 1 Mete (Mass.) 19, GU-
more, Cas. Partnership, 348; Deford t. Reynolds, 86 Pa. 325; Vac-
caro ▼. Toof, 66 Tenn. 194. See '^Partnership,*' Deo. Dig. {Key Ho.)
S 289; Cent. Dig. % 651
•• Farrar ▼. Deflinne, 1 Car. ft K. 580 ; Park v. Wooten's Ex'rs,
. 85 Ala. 242; Warren y. Ball, 37 111. 76; Nussbaumer y. Becker, 87
111. 281, 29 Am. Rep. 53; Cregler y. Durham, 9 Ind. 375; Lleb y.
Craddock, 87 Ky. 525. 9 S. W. 838; Dayis y. Allen, 8 N. Y. 108;
Milmo Nat Bank y. Bergstrom, 1 Tex. Oiy. App. 151, 20 S. W. 836.
Bee "Partnership,'* Dec. Dig. {Key No,) % 289; Cent. Dig, S 654.
•9 ELMIRA IRON ft STEEL ROLLING-MILL CO. y. HARRIS*
124 N. Y, 280, 26 N. B. 541, Ollmore, Cas. Partnership, 849. See
Partnership,** Dee. Dig. (Key No.) 1289; Cent. Dig. S 654.
POWERS OF PA&TNEKfi 278
CHAPTER V
POWBRS OF PABTNBB8
84. Origin and Nature of the Partner's Power to Bind tba Firm.
85. Powers of Partners Inter Se.
Sd, Powers of Partners as to Third PersonSi
87. Express Power.
88. Implied Power.
88. Ratification.
90. Estoppel.
91. Test of Authority — Nature of Question.
92. Limitations Arising from Scope of Business.
93. Limitations Arising from Nature of Business.
M-95. Particular Powers Considered — ^Power to Bell Firm Propertjr.
96. Power to Pledge or Mortgage Firm Property.
97. Assignment for Benefit of Creditors.
9& Power to Buy.
99. To Borrow Money.
100. Issue Bills and Notes.
lOL Execute Sealed Instruments.
102. Pay and Collect Debts.
108. Institute and Conduct Legal Proceedings.
104. Receive Notice.
105. Make Admissions and Representations.
106. Miscellaneous Powers.
107. Power to Subject Firm to Tort Liability.
108. Illegal Acts — Penalties and Crimes.
109. False Arrest and Malicious Prosecution.
110. Defamation.
111. Fraud and Misrepresentation.
112. Conversion and Misapplication of Property.
113. Wrongful Use of Trust Funds.
114. Powers of Partners after Dissolution.
115. Particular Powers Considered — ^Power to Dispose of
Firm Assets.
11& Power to Collect Debts.
117. Pay and Settle Firm Debts.
118. Perform Existing Contracts.
119. Incur New Obligations.
120. Make Admissions.
121. Take Firm Debts out of the Statute of Limitations.
122. Powers of Surviving Partner.
QIL.PABT. — 18
274 POWERS OF PARTNtiSRS (Ch. 5
ORIGIN AND NATURE OF THE PARTNER'S POW-
ER TO BIND THE FIRM
S4. The power of a partner tp bind his firm in transactions
with third persons is to be determined by the gen*
eral principles of the law of agency. Each partner
is the general agent of the partnership, with power
to conduct its business in the usual way.
Origin and Nature of the Partner's Power — In General
Whatever power a partner has, as to third persons, arises
from the custom of merchants, which has attached to the
partnership relation a doctrine of mutual agency. "This
power is conferred by entering into the partnership, and is
perhaps never to be found in the articles." * As the com-
mon law does not in terms recognize the firm as an entity,
the partners are agents, not of the firm, but of one another.
Each partner is both a principal and an agent He is re-
garded as an agent of his copartners when he is acting, and
as the principal of his copartners when they are acting.
When he acts, he binds himself directly; he binds his as-
sociates by virtue of being their agent.* While the forego-
ing is the usual way of describing the agency involved in
partnership, it is also described in another manner, on the
assumption that the firm as an entity is the principal and
each partner is an agent for this entity.* In their results,
the decisions in reality recognize the firm as the principal.
1 MarshaU, C. J., In WINSHIP v. BANK OF UNITED STATES,
5 Pet. 529, S L. Ed. 216, GUmore, Cas. Partnership, 356; Alley y.
Bowen-MerrUl Co. (1905) 76 Ark. 4, 88 S. W. 838, 113 Am. St Rep.
73; Standard Wagon Co. of Georgia v. D. P. Few k Co., 119 Ga.
293, 46 S. B. 109. See ''Partnership^' Dec. Dig. {Key tfo.) S§ 125,
126; Cent. Dig. %% 190, 191.
2Welirman v. McFarlan, 9 Ohio Dec 400; BROOKE t. WASH-
INGTON, 8 Grat (Va.) 248, 56 Am. Dec. 142, Gllmore, Cas. Part-
nership, 318; BURGAN t. LYELL, 2 Mich. 102, 55 Am. Dec. 53,
Oilmore, Cas. Partnership, 358; Edwards ▼. Tracy, 62 Pa. 374;
Blodgett V. Weed, 119 Mass. 215; Fletcher ▼. Ingram, 46 Wis. 191,
50 N. W. 424. See "Partnership,'' Deo. Dig. (JKey No.) K 125, 126;
<Jent. Dig. \% 190, 191.
t "Everybody knows that partnership Is a sort of agency, but a
§ 86) FOWEBS INTER SB jS75
POWERS OF PARTNERS INTER SE
85. The powers of partners inter se are governed by the
agreement between them.
It is very common for the partners to stipulate among
themselves for the sole management of the business or spe-
cific departments by one or more of the partners, or to limit
the power of some of them to contract debts.* When,
therefore, the rights of third persons are not involved, the
scope of a partner's power is to be ascertained by the terms
of the partnership agreement. In the absence of express
mutual agreements defining the powers to be exercised by
the partners, all have equal rights to the management of
the firm business, and possess the ordinary powers inci-
dental to such cases."
▼ery peculiar one. You cannot grasp the notion of agency, prop-
erly speaking, unless yon grasp the notion of the existence of the
firm as a separate entity from the existence of the partners; a
notion which was well grasped by the old Roman lawyers, and
which was partly understood in the courts of equity before it was
part of the whole law of the land, as it is now. But when you get
that idea clearly, you will see at once what sort of agency it is. It
is the one person acting on behalf of the firm. He does not act as
agent, in the ordinary sense of the word, for the others, so as to
bind the others. He acts on behalf of the firm of which they are
members; and as he binds the firm, and acts on the part of the
firm, he is properly treated .as the agent of the firm. If you can-
not grasp the notion of a separate entity for the firm, then you are
reduced to this: That Inasmuch as he acts partly for himself and
partly for the others, to the extent that he acts for the others he
must be an agent, and in that way you get him to be an agent for
the other partners, but only in that way, because you insist upon
ignoring the existence of the firm as a separate entity." Per Jes-
sel, M. R., in POOLEY T. DRIVER, 5 Ch. D. 458, GUmore, Cas. Part-
nership, 360, note. Bee ^^Partnership;* Dec, Dig. (Key No.) SS ^^i
125, 126; Cent. Dig. SS 9S, 190, 191.
^Leavitt T. Peck, 8 Conn. 125, 8 Am. Dec. 157; Stone ▼. Wen-
dover, 2 Mo. App. 247. Bee ^^Partnership,*' Dec. Dig. (Key No.) SS
70-91; Cent. Dig. SS IH-^SS.
s lioyd V. Loaring, 6 Ves. 773, 777 ; Marshall ▼. Oolman, 2 Jac.
ft W. 266; Goodman v. Whitcomb, 1 Jac & W. 689. See post.
276 POWBR8 OF PARTNERS (Ch. 5
POWERS OP PARTNERS AS TO THIRD PERSONS
86. The powers of partners as to third persons consist (1)
of the express authority derived from the partner-
ship agreement; and (2) of the implied authority
derived from the nature of the business, though
not included in the partnership agreement.
SAME— EXPRESS POWER
87. By express agreement authority may be conferred upon
one partner to bind the firm by any act which
would be binding if done by all the pcurtners
By express agreement any power may be conferred upon
a partner that could be lawfully exercised by all the part-
ners, and the firm will be liable for any act of the partner
done within such express authority, although the act seems
to the third person to be beyond the apparent authority of
the partner. At the same time the powers of a partner may
be limited to any extent, but such limitations do not affect
third persons who have no reason to know but what the
restricted partner has all the usual powers of a partner
agent.*
SAME— IMPLIED POWER
88. Unless his power is limited by the partnership agree-
ment and this restriction is known to third per-
sons, a partner has implied power to bind the firm
by any act necessary and usual for canying on its
business in the ordinary manner.
chapter VI, p. 362, Rights and Duties of Partners Inter Se. Bee
''Partnership:' Dec. Dig. (Key No.) §§ 70-91; Cent. Dig. || 1H-1S8.
• Rice V. Jackson, 171 Pa. 89, 32 Atl. 1036; Stark y. Corey, 45
tU. 431; Stimson v. Whitney, 130 Mass. 591; Tradesmen's Bank v.
Astor, 11 Wend. (N. T.) 87. See post, § 90. p. 279, "Estoppel" ; Sladen,
Fakes & Co. v. Lance, 151 N. C. 492, 66 S. E. 449. S^ee ''Partnership/'
Dec. Dig. {Key No.) S§ 125-161^; Cent. Dig. %% 190-300.
§ 88) POWERS AS TO THIRD PERSONS 277
It is very seldom that the partnership articles attempt to
define all the rights and duties of a partner. "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 con-
duct and rights of the parties as between themselves. The
trading world, with whom the company is in perpetual in-
tercourse, cannot individually examine these articles, but
must trust to the general powers contained in all partner-
ships. * * * If it is to be restrained, fair dealing re-
quires that the restrictions 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-established commercial law." ^ As we
shall see in a later section, a partner has implied power to
bind the firm within the scope of the partnership business,
and most of his acts for his firm are done by virtue of this
implied authority. When, therefore, he acts within its
scope, he binds the firm, provided the person with whom he
deals has no notice of any limitation upon such implied au-
thority." But, though the firm is bound in such a case to
the third person, the partner so exceeding his authority is
in turn liable to his copartners for any damage resulting
from his breach of the agreement. Conversely, where the
T Marshall, C. J., In WINSHIP ▼. BANK OF UNITED STATES,
5 Pet. 529, 560, 8 L. Ed. 216, Gllmore, Oas. Partnership, 357. Au-
thority to do acts necessary to carry on the business in the ordi-
nary manner will be presumed. Garth v. Davis ft Johnson, 120
Ky. 106, 85 S. W. 692, 117 Am. St. Rep. 571 (1905) ; Boice ▼. Jones,
86 App. Div. 613, 83 N. Y. Sjapp. 230; Salt Lake City Brewing Go.
V. Hawke, 24 Utah, 199, 66 Pac. 1059. See ^'Partnership,** Dec. Dig.
{Key No,) {f 125-164; Cent. Dig. $S 190^00,
• See post, f 92, p. 282. See, also, IRWIN v. WILIiIAR> 110 U. S.
499, 4 Sup. C^t 160, 28 Ia E)d. 225, GUmore, Gas. Partnership, 363;
Hotckln V. Kent, 8 Mich. 526 ; Conely v. Wood, 73 Mich. 203, 41 N. W.
259 ; Krasky v. Wollpert, 134 Cat 338, 66 Pac. 309 ; Morrison v. Austin
State Bank, 213 111. 472, 72 N. B. 1109, 104 Am. St Rep. 225 ; Wool-
sey V. Henke, 125 Wis. 134, 103 N. W. 267 (1905) ; Clark v. BaU, 34
Colo. 223, 82 Pac. 529, 2 L. R. A. (N. S.) 100, 114 Am. St Rep. 154 ;
Slnden, Fakes & Co. ▼. Lance, 151 N. C. 492, 66 S. E. 449. See
''Partnership;* Deo. Dig. {Key No.) H 125-164; Cent. Dig. H 190-
SOO.
278 POWERS OF PARTNERS (Cb. 5
third person has notice of the limitation upon the partner's
authority, the firm is not bound.* This rule .is again re-
laxed somewhat where the firm has acquired a usage or
habit, affecting the apparent nature of its business, incon-
sistent with the strict limitations in the partnership agree-
ment known to the third party.**
SAME— RATIFICATION
88. A subsequent ratification of a partner's act, done with^
out authority, is equivalent to antecedent author-
ity.
Since the powers of partners are governed by the princi-
ples of agency, it follows that where authority is lacking
for a partner's act it may be supplied by a subsequent rati-
fication by the other partners.** The ratification may im-
pose liability in either contract or tort; it may be express
or implied. Thus in a recent case it was held that an un-
authorized contract of purchase by one partner was ratified
by the failure of the others to repudiate the contract be-
fore delivery of the goods.** Whether there has been a
• Bailey t. Clark, 6 Pick. (Mass.) 872 ; Boardman y. Gore, 15
Mass. 839; Ensign t. Wands, 1 Johns. Cas. (N. T.) 171; Wilson v.
Richards, 28 Minn. 837, 9 N. W. 872. Bee "Partnership;' Dec Dig,
{Key No.) f{ 1S», 1S5; Cent Dig. H 196-199.
10 Woodward v. Wlnship, 12 Pick. (Mass.) 430. See post, 1 93, p. 286,
"Limitation Arising from Nature of Business." Bee "Partnership,^
Dee. Dig. {Key No.) S 129; Cent. Dig. f 194.
11 MILLER ▼. ROYAL FLINT GLASS WORKS, 172 Pa. 70, 83
Atl. 350; Russell ▼. Annable, 109 Mass. 72, 12 Am. Rep. 665; Padflc
Mat. Life Ins. Ck>. t. Fisher, 109 Cal. 666, 42 Pac. 155; Cassidy ▼.
Saline County Bonk, 14 OkL 532, 78 Pac. 824; Guthiel t. Gilmer,
27 Utah, 496, 76 Pac. 628 ; Hatchett & Large ▼. Sunset Brick & Tile
Co. (Tex. Civ. App.) 99 S. W. 174 (1907) ; Moran Bros. Co. t. Wat-
son, 44 Wash. 392, 87 Pac. 508 (1906) ; Lee ▼. Klrby, 80 Ark. 366,
97 & W. 298. Bee '^Partnership/* Deo. Dig. {Key No.) S 167; Cent.
Dig. f§ 282-291.
IS Hatchett & Large t. Sunset Brick & Tile Co. (Tez. Civ. App.)
99 S. W. 174 a907). Bee ^'Partnership,*' Dec Dig. {jKey No.) | 157;
Cent. Dig. U 282^91.
§ 90) POWERS AS TO THIRD PERSONS 279
ratification in any particular case is always a question of
fact for the jury, and is to be determined according to the'
general rules of agency governing that subject.**
SAME—ESTOPPEL
90* A partner, though acting in excess or abuse of his ac-
tual authority, may bind the firm as to third per-
sons who bona fide rely on representations by
word or deed of the other partners that such part-
ner is acting within his authority, and who would
sustain loss if the act were not considered that of
the firm.
In addition to the liability of the partnership for acts
done by a partner within his express or implied authority,
or for unauthorized acts later ratified, a partner may bind
the firm where authority in the usual sense does not exist
at all, but where the other partners are estopped to deny
the authority he has assumed. As in the law of agency,
those who lead third persons to believe that certain author-
ity exists will not be heard to deny the existence of that
authority to the prejudice of those who relied upon it."
This principle was well applied in a recent case to hold a
partnership to liability whose members negligently per-
mitted one of them to put notes in circulation purporting
on their face to be genuine and firm obligations, when in
fact fraudulent and for the accommodation of others out-
side the partnership business.* •
i« Stewart ▼. Bmbaker, 112 111. App. 408; Cassldy T. Saline Coun-
ty Bank, 14 Okl. 532, 78 Pac. 324; Banner Tobacco Go. ▼. Jenlson,
48 Mich. 459,. 12 N. W. 655. Mere silence is not a ratification per
se. First Nat Bank v. State Nat Bank, 131 Fed. 422, 65 0. C. A.
406. See '^PartnersMp,'' Deo, Dig. (Key No.) U 157, 218; Cent Dig.
U 282-291, 427.
14 Walsh T. Hartford Fire Ins. Ck>., 73 N. Y. 10; Sheldon Hat
Blocking Go. t. Eickemeyer Hat Blocking Mach. Go., 00 N. Y. 613.
See, further, chapter I, S 21, p. 61. See "Partnership,** Dec Dig.
{Key yo.) U 155, 156; Cent. Dig. H 278-281.
15 Bank of Monongahela Valley ▼. Weston (1902) 172 N. Y. 259,
64 N. E. 946. The principle is taken over from the law of agency,
280 POWERS OF PARTNERS (Cb. 6
TEST OP AUTHORITY— NATURE OP QUESTION
81* Where an express authority, ratification, or estoppel
cannot be proved, the test of authority is what is
reasonably and usually necessary to carry* on the
business in the ordinaxy way. This is generally a
question of fact for the jury.
We have seen, in a preceding section, that a large part
of a partner's powers must necessarily be implied ; that he
has implied power, unless a restriction upon his actual au-
thority is known, to bind the firm by any act necessary and
usual for carrying on its business in the ordinary way.**
The very statement of the rule makes it clear that the im-
portant thing to be looked to is the necessity of the act in
the particular case and in the particular business in which
the firm is engaged.
The nature of the question is well stated' in Pooley et al.
V. Whitmore: "Every member of an ordinary partnership
is its general agent for the transaction of its business in the
ordinary way, and the firm is held responsible for what-
ever is done by any of its partners, when acting for the
firm, within the limits of the authority conferred by the
nature of the business it carries on. Every person is en-
titled to assume that each partner is empowered to do for
the firm whatever is necessary for the transaction of its
business, in the way in which that business is ordinarily
carried on by other people. But no person is entitled to as-
sume that any partner has more extensive authority than
that above described. It will be observed that what is nec-
as laid down in New York & N. H. R. Go. t. Schuyler, 84 N. Y. 6&
See, also, Jamison ▼. Charles F. Cnllom & Co., 110 La. 781, 84 South.
775, See ''Partnerahip/* Deo. Dig. (Key No.) f§ 155, 156; Cent. Dig.
H r78-28i.
!• See ante, I 88, p. 276.. The implied or apparent authority of a
partner is limited to acts which are reasonably necessary for carrying
on the business in the ordinary way. Kelley-Goodfellow Shoe Co.
▼. Long-Bell Lumber Co., 86 Mo. App. 4.?8 ; Stiindnrd Wagon Co. of
Georgia t. D. P. Few & Co., 119 Ga. 283, 46 S. E. 109. See ^^Part-
nerahip,** Deo. Dig. (Key No.) U 125-164; Cent. Dig. §| 190-SOO.
§ 91) TEST OP AUTHORITT 281
essary to carry on the partnership business in the ordinary
way is made the test of an authority when no actual au-
thority or ratification can be proved. * * * The ques-
tion whether a g^ven act can or cannot be necessary to the
transaction of the business in the way in which it is usually
carried on must evidently be determined by the nature of
the business and by the practice of persons engaged in it.
Evidence on both of these points is necessarily admissible,
and, as readily may be conceived, an act which is necessary
'for the prosecution of one kind of business may be wholly
unnecessary for the carrying on of another in the ordinary
way. Consequently no answer of any vafue can be given
to the abstract question, Can one partner bind his firm by
such an act? unless, having regard to what is usual in busi-
ness, it can be predicated of the act in question, either that
it is one without which no business can be carried on, or
that it is one which is not necessary for carrying on any
business whatever. There are obviously very few acts of
which such an affirmation can be truly made. The great
majority of acts which g^ve rise to doubt are those which
are necessary in one business and not in another." *' More-
over, the act must be reasonably necessary, if the power to
do it is to be implied. The mere fact that it is convenient,
or that it facilitates the transaction of the firm business, is
not enough." Nor, going to the other extreme, has a part-
ner implied power to do an act, however necessary, even to
save the business, if the act is in any sense unusual, or the
necessity an "extraordinary" one. Reasonable necessity is
the criterion of authority.** Whether the act in question
iTPOOLBT 7. WHITMORB, 10 Heisk. (Tenn.) 633, 27 Am. Rep.
733. Gllmore, Gas. Partnership, 360; IRWIN v. WILLIAR, 110 U.
S, 499. 4 Sup. Ct 160, 28 L. Ed. 225, Gllmore. Gas. Partnership, 863.
See post, S;i 02, f«, pp. 282, 286, "Limitations Arising from Scope and
Nature of Business." See *' Partners hi pr Dec. Dig. {Key No,) §§ 125-
164; Gent. Dig. §§ 190S00.
18 Diclsinson y. Valpy, 10 Bam. & O. 128; Ricketta y. Bennett, 4
C. B. 686; Mason v. Gibson, 73 N. H. 190. 60 Atl. 96. See ''Partner-
9hipr Deo. Dig. {Key No.) §S 125-164; Cent. Dig. H 190-600,
IB Eiawtayne ▼. Bume. 7 Mees. & W. 595; Russell y. Annable, 109
Mass. 72. 12 Am. Rep. G65 ; Barnard y. Lapeer & P. H. Plank Road
Co.. 6 Mich. 274; Gotzhausen y. Judd, 48 Wis. 213. 28 Am. Rep. 539;
282 POWERS OF PARTNERS (Ch. 5
is reasonably necessary to carry on the business in the or-
dinary way is, of course, generally a question of fact for
the jury.**
SAME— LIMITATIONS ARISING FROM SCOPfe OF
BUSINESS
92. Unless express authority, ratification, or an estoppel is
shown, a partner has no authority to bind his co-
partners in a matter which is beyond the scope of
the par&ership business.
By the acts of the firm all the partners are bound; and
all acts done by a partner on behalf of the firm within the
scope of its business are acts of the firm.** The phrase
"scope of the business" means whatever is usually done by
persons engaged in a similar business in the ordinary man-
ner at the same time and place.** The scope of the busi-
Morae V. Richmond, 97 111. 810; Mason v. Gibson, 73 N. H. 190, 60
Atl. 06. See ^'Partnership;* Dec. Dig. {Key No,) i§ 125-164; Cent.
Dig. i§ 190-900.
aoBeckwlth ▼. Mace (1905) 140 Mich. 157, 103 N. W. 559; Hef-
ferlln v. Karlman, 29 Mont 139, 74 Pac. 201 ; POOLBY v. WHIT-
MORB (1873) 10 Heisk. (Tenn.) 633, 27 Am. Rep. 733, Gilmore^ Gas.
Partnership, 860.
"Dealing in grain is not a technical phrase, from which a court
can properly infer as matter of law authority to bind the firm in ev-
ery case, irrespective of its circumstances; and if, by usage, it has
acquired a fixed and definite meaning, as a word of art in trade,
that is matter of fact to be established by proof found by a jury."
IRWIN ▼. WILLIAR, 110 U. S. 499, 4 Sup. Ct IGO. 28 L. Ed. 225,
Gilmore, Gas. Partnership, 863. Bee "Partnership,** Dec Dig. {Key
No.) § 218; Cent. Dig. i 4^.
SI Eastman ▼. Ck)oper, 15 PiclC (Mass.) 276, 26 Am. Dec 600;
Livingston ▼. Roosevelt, 4 Johns. (N. Y.) 251, 4 Am. Deo. 273 ; Mer-
cein ▼. Andrus, 10 Wend. (N. Y.) 461 ; Beardsley v. Tuttle, 11 Wis.
74 ; Bank of Ft Bladison ▼. Alden, 129 U. S. 372, 9 Sup. Gt 332, 32
L. Ed. 725. See *' Partnership," Deo. Dig. {Key No.) %% 125-164;
Cent. Dig. SS 190-900.
a« IRWIN V. WILLIAR, 110 U. S. 499, 4 Sup. Gt 160. 28 L. Ed.
225, Gilmore, Gas. Partnership, 363; Seaman y. Ascberman, 57 Wis.
547, 15 N. W. 788; Lynch v. Ulllstrom, 64 Minn. 521, 67 N. W. 636;
§ 92) TEST OF AUTHORITT 2S3
ness may be set forth in the articles of partnership. More
likely, however, it will be ascertained by considering the
usual course of similar businesses as usually carried on.'*
This is a question of fact,'^ especially in a new business.
In an old and well-known business the scope is determined
as a matter of law.*' If the scope of the business as defined
by the articles of partnership is actually observed by the
partners, then third persons who have notice thereof can-
not hold the partnership on contracts beyond the scope.'*
Banner Tobacco Ck). v. Jenlson, 48 Mich. 459, 12 N. W. 655. Bee
'* Partnership,'* Deo. Dig. {Key No.) Ii 125-16^; Cent. Dig. §S 190-
300.
ss The scope of the firm business is determined "according to the
usual and ordinary course in which it is carried on by those en-
gaged in it in the locality which is its seat, or as reasonably neces-
sary or fit for its successful prosecution. It it cannot be found In
that, it may still be inferred from the actual, though exceptional,
course and conduct of the business of the partnership itself, as per-
sonally carried on with the knowledge, actual or presumed, of the
partner sought to be charged." IRWIN v. WILLIAR, 110 U. S. 499,
4 Sup. Ct 160, 28 L. Ed. 225, Gilmore^ Cas. Partnership, 363. Bee
"Partnership;' Deo. Dig. {Key No.) ii 125-164; Cent. Dig. §i 190-
SOO.
S4 "What the nature of that business In each case Is, what is
necessary and proper to its successful prosecution, what is involved
In the usual and ordinary course of its management by those en-
gaged in it, at the place and time where It is carried on, are all
questions of fact to be decided by the jury, from a consideration of
all the circumstances which, singly or in combination, affect its char-
acter or determine Its peculiarities; and from them all, giving to
each its due weight, it is its (the jury's) province to ascertain and
say whether the transaction in question is one which those dealing
with the firm had reason to believe was authorized by all of its
members." Civ. Code Cal. § 2420; IRWIN v. WILLIAR, 110 U. S.
499, 4 Sup. Ct 160, 28 L. Ed. 225, Gilmore, Caa Partnership, 363.
See **Partner8^ip;' Deo. Dig. (Key No.) i 218; Cent. Dig. § 427.
t6 ALSOP V. CENTRAL TRUST CO., 100 Ky. 375, 38 S. W. 510,
Gilmore, Cas. Partnership, 365, note; Walcott v. Oanfleld, 3 Conn.
194; WeUs v. Turner, 16 Md. 133; DAVIS y. DODSON, 95 Ga.
718, 22 S. E. 645, 29 L. R. A. 496, 51 Am. St Rep. 108. Bee ''Part-
nerahip;' Deo. Dig. (Key No.) H 125-164, 218; Cent. Dig. ii 190-800,
427.
2«Aultman & Taylor Co. v. Shelton, 90 Iowa, 288, 57 N. W. 857;
Harper v. McKinnis, 53 Ohio St 434, 42 N. E. 251 ; Enterprise Oil
& Gas Co. y. National Transit Co., 172 Pa. 421, 33 Ati. 687, 51 Am.
284 POWERS OF PARTNERS (Ch. 5
If, however, the scope of the business is to be ascertained
by the usual course of similar business, third parties must
take notice of the limitations which usually exist, and can-
not hold the firm on contracts outside the usual course of
business.*' If a partner, like any other agent, does an act
for a purpose which is clearly not connected with the firm's
ordinary scope of business, he is not acting in pursuance of
any apparent authority. The only way to charge the firm,
therefore, is to prove that he had actual authority to do the
act.** For example, an agreement by one member of a law
firm to collect a note without charge is not binding on the
copartners, as gratuitous undertakings are clearly not within
the scope of the business of such a firm.** Further, if a part-
ner pledges the credit of a firm, without authority, to pay his
own private debts, to one who knows or has reason to know
they are private debts, the firm is not liable.** But, even
as against the other partners, an act of a partner for his
own exclusive benefit may be binding on the firm, where
there was nothing which ought to have put a reasonable
person on his guard as to the true nature of the transac-
St. Rep. 746; KUDg y. TnnstaU, 109 Ala. 608, 19 Sooth. 907. Bee
''Partnership^ Dec. Dig. {Key No.) SS 125--164; Cent. Dig. %% 190-900.
2 7 Taylor v. Thompson, 62 App. Div. 159, 70 N. Y. Supp. 997; Id.
74 App. Div. 820, 77 N. Y. Supp. 438, affirmed 176 N. Y. 168, 68 N
E. 240; Beatty v. Bulger, 28 Tex. Glv. App. 117, 66 S. W. 893; ISady
y. Newton Goal & Lumber Co., 123 Ga. 557, 51 8. B. 661, 1 L. R. A.
(N. S.) 650. 8ee "Partnership,*" Dec. Dig. (Key No.) H 12S-164;
Cent. Dig. H 190-SOO.
28 Standard Wagon Ck>. of Georgia y. D. P. Few & Go., 119 Ga.
293, 46 S. B. 109; Liylngston y. Roosevelt, 4 Johns. (N. Y.) 251, 4
Am. Dec. 273. See "Partnership,*" Deo. Dig. {Key No.) H 12S-164;
Cent. Dig. §§ 190-^00.
s» DAVIS V. DODSON, 95 Ga. 718, 22 S. B. 645, 29 L. B. A. 496,
51 Am. St Rep. 108. See ** Partnership;* Dec. Dig. {Key No.) | 1S9;
Cent. Dig. | 206.
soLeveson v. Lane, 18 G. B. (N.S.) 278; Snalth y. Burridge^ 4
Taunt 684. See, also, generally, Taylor y. Thompson, 62 App. Dly.
159, 70 N. Y. Supp. 997 ; Id., 74 App. Dly. 320, 77 N. Y. Supp. 438,
affirmed 176 N. Y. 168, 68 N. B. 240 ; Bady y. Newton Goal & Lum-
ber Go., 123 Ga. 557, «S1 S. B. 661, 1 L. R. A. (N. S.) 650, and note;
Alley y. Bowen-Merrill Go., 76 Ark. 4, 88 S. W. 838. 113 Am. St
Rep. 73 (1905). See "Partnership;* Dec Dig. {Key No.)^ IJH; Cent.
Dig. H 2Si-2S9.
8 92) TEST OF AUTHOKITT 285
tion.** If a partner makes a contract necessary for the con-
duct of the partnership business in the ordinary way, the
firm will be liable, unless the partner had in fact no author-
ity to bind the firm, and the person dealing with him was
aware of that want of authority; but if the contract was
not necessary for the conduct of the partnership business
in the ordinary way the firm will not be liable, unless an
authority to do the act in question, or some ratification of
it, can be shown to have been conferred or made by the
other partners.'*
Enlargement of Scope or Nature of Business by Subsequent
Conduct '
It may sometimes happen that the original scope of a
partnership business will be enlarged by the actual or im-
plied consent of all the partners, and what was originally a
nontrading partnership be converted into a trading firm,
with the consequent enlargement of the implied powers of
the individual partners. This was well illustrated in a case
where partners engaged in the printing business had grad-
ually added piano selling to their activities ; the court hold-
ing that the power of each partner to bind the firm had now
become coextensive with the whole business of the firm.
Where formerly he could do only acts necessary and proper
to the conduct of nontrading printing business, he could
ai Union Nat. Bank of Kansas City, Mo., v. NelH, 149 F. 711, 79
C. G. A. 417, 10 L. R. A. (N. 8.) 426; Fox ▼. Olemmons (Ky.) 99 8.
W. 641; Dnnnett & Slack v. Gibson, 78 Vt 439, 63 Atl. 141; Rice
T. Jackson, 171 Pa. 89, 82 AtL 1036 ; WINSHIP v. BANK OF UNIT-
ED STATES, 6 Pet 629, 8 L. Ed. 216, Gllmore, Gas. Partnership,
356 ; Nat Bank of Virginia ▼. Gringan, 91 Va. 847, 21 S. B. 820. A
member of a firm engaged in the cattle commission business has au-
thority to enter into an agreement whereby a bank is to fnmlsh a
customer money to purchase cattle with, in consideration that the
firm accept drafts drawn on it to the extent of the net proceeds of
the cattle shipped to it First Nat Bank of Pipestone ▼. Rowley,
92 Iowa, 680^ 61 N. W. 195. See ^'Partnership,'* Dec. Dig. (Key No.)
H 125-164; Cent, Dig. K 190-400.
•sGrellln y. Brook, 14 Mees. & W. 11; Dickinson v. Valpy, 10
Bam. ft G^ 128; Walden y. Sherburne, 15 Johns. (N. Y.) 422. See,
also, ante, H W, 92, pp. 280, 282. See ''Partnership,** Dec. Dig. (Key
Vo.) ft 125-164; Cent. Dig. H 190-SOO.
286 POWERS OF PARTNERS (Ch. 5
now exercise, in addition, the powers of a partner in a piano
selling, i. e., a trading, firm.**
SAME— LIMITATIONS ARISING FROM NATURE
OF BUSINESS
93. The scope of the firm business, and the extent to which
each partner is to be regarded as the implied agent
of the firm in his dealings with strangers, also de-
pend upon the general nature of the firm business.
We have already seen that a partner has power to do that
which is reasonably necessary to carry on the business of
the firm in the ordinary way, but no power to act beyond
the scope of its business.'* Obviously the scope of a firm's
business, and the ordinary way of carrying it on, will vary
according to the nature of that business. An act which is
. common and proper in the conduct of a grocery business
may not be required at all in the business of a firm of con-
tractors and builders, and third persons must take notice
of that fact."
Trading and Nontrading Partnerships
In any classification of partnerships with respect to the
nature of their business, the most obvious distinction is be-
tween trading and nontrading partnerships, of which some-
thing has already been said, and more will be said later.*'
»» Boardman v. Adams, 5 Iowa, 224. See "Partnership,** Deo, Dig,
{Key No.) §§ 125-164; Cent. Dig. §| 190-^00.
t4 Ante, §§ 88, 92, pp. 276, 282.
SB Where a partnership is limited to a particular trade or bnsi-
ness, one partner cannot bind his copartner by any contract not re-
lating to* such trade or business, and third persons wiU be presumed
to have knowledge of the limited nature of the partnership from
circumstances connected with the business of the firm. Livingston
▼. Roosevelt (1809) 4 Johns. (N. Y.) 251, 4 Am. Dec. 273, 1 Am. Lead.
Cas. 507, and note. See **Partner8Mp,'* Deo. Dig. iJS.ey No.) iS 125"
164; Cent. Dig. iS 190-300.
>• See ante, chapter II, i§ 37, 38, p. 107, and post, chapter V^ |
100, p. 302.
B 93) TEST OP AUTHORITT 287
The distinction between trading and nontrading partner-
ships is, in this connection, a difference in the powers of the
partners. In a trading firm, each partner has implied power
to borrow money and to give the firm paper therefor. In a
nontrading firm, no such implied power exists. That the
members of a nontrading partnership have not the same
extent of authority to bind the other members is so only
because the scope of business of such firms is not so wide
as that of trading partnerships; and where the act of a
partner is within the scope of the firm's business, a member
of a nontrading partnership may bind his copartners just
as truly as can members of a trading partnership.'^ Orig-
inally, in both trading and nontrading partnerships, the
question whether an act of a partner was necessary and
proper for the particular business was purely one of fact
for the jury.** This is probably still true of new business,
and of old businesses conducted in an exceptional manner.
But the gjeat mass of ordinary, every-day transactions in
trading partnerships have become usages recognized by the
courts, and are now treated either a$ questions of fact for
the court or as pure questions of law.**
<T Alley y. Bowen-MerriU Co. (1906) 76 Ark. 4. 88 S. W. 838, 113
Am. St Rep. 73; Lee v. First Nat Bank of Ft Scott, 45 Kan. 8,
25 Pac. 196, 11 L. R. A. 238; PEASE v. COLE, 53 Conn. 53, 22 AU.
681, 55 Am. Rep. 53, Gilmore, Cas. Partnership, 372. See "Partner-
shipr Dec, Dig. {Key No.) i§ 125-164; Cent. Diff. M 190S00.
«« IRWIN V. WILLI AR, 110 U. S. 499. 4 Sup. Ct 160. 28 L. Ed.
225, Gilmore, Cas. Partnership, 363. See ^^Partnership,'' Deo. Dig.
iKey No.) i 218; Cent. Dig. i 427»
s» '•The partnership (in farming) in this case is not a trading or
commercial one, which is generally governed as to Its scope of au-
thority by the rules of the law merchant of which the courts take
judicial cognizance. The principle goveming a nontrading partner-
ship Is well settled. There are three classes of case? where each
partner connected with such associations may lawfully bind the
firm ; the burden, in each case, being on the plaintiff to prove the
facts by which such authority is established, or from which it may
be Implied: (1) Where he has express authority to do so; (2) where
the contract made, or thing done, is necessary in order to carry on
the business of the partnership ; and (3) where it is usually or cus-
tomarily Incident to the partnerships of like nature," Woodruff v.
Scaife, 83 Ala. 152, 3 South. 311. See, also, Pollock's Digest of Part
288 POWERS OF PARTNERS (Gh. 8
PARTICULAR POWERS CONSIDERED—POWER
TO SELL FIRM PROPERTY
94. Each partner has implied power to sell any specific
part of the partnership personalty, tangible and in-
tangible, which is held for the purpose of sale, so
as to pass the entire title to the purchaser.
96. Where a firm is organized to deal in real estate, or
where a firm holds real estate for sale, each part-
ner has implied power to enter into a contract for
the sale of the same; but, where a deed under seal
is required to convey the legal title, power to ex-
ecute such an instrument is not implied, but must
be expressly conferred.
While the question whether a particular act is within the
power of a partner must depend largely upon the facts of
each case, there are certain powers which usually Accom-
pany ordinary partnerships. Some of these powers will
now be considered.
Power to Sell Personal Property of the Firm
In an earlier chapter there was an extended discussion
of the transfer of firm property in general, the purposes for
which it might be transferred, and the form of the trans-
fer, always assuming the existence of a partner's power so
to transfer.*^
As stated in the black letter proposition above, each part-
ner has the general power of sale of the property of the^ firm
held for sale, and "the sale of one partner is the sale of
(5th Ed.) 27; Fftrmer t. Bank of Wickllffe, 51 S. W. 680, 21 Kj.
Law Rep. 425.
"In a commercial partnership the extent of a partner's power to
bhid the firm 1b a question of law, while In the noncommercial firm
the power of one partner to bind his copartner Is a question of fact**
ALSOP V. CENTRAL TRUST CO. (1897) 100 Ky. 875, 38 S. W. 510,
Gilmore, Cas. Partnership, 365, note. Bee **Partner8hipt** Deo. Dig,
{Key No.) S 218; Cent, Dig, S 4^7.
*o Ante, chapter III, §S 56-04, pp. 176-203.
§§ 94-95) PAUTICULAR POWJSRS 289
both/'** It was formerly broadly stated that a partner
might sell all the partnership personalty at one time, and
thus terminate the partnership.** The tendency of the
modem cases, however, is to limit the implied power of
sale to the property which is held for the purpose of sale,
and not to include the property kept for the purpose of
carrying on the business. Thus one of a firm of farmers
ha§ no implied authority to sell the domestic animals
bought for and used in cultivating the farm.**
Like all other implied powers of partners, the power of
sale depends upon the general nature of the partnership
business. Obviously one of a firm of lawyers would not
have the same power to dispose of the partnership librarj-
that one of a firm of grocers would have to sell goods of its
stock. Also, one member of a partnership formed for the
increase and improvement of a flock of sheep has no implied
power to sell the entire flock, where the purpose of the part-
nership is brought homd to the purchaser.**
The power to transfer firm personalty includes also the
41 LAMBERT'S CASE, Godb. 244, Gflmore, Cas. Partnership, 230.
See "PartneraMp;' Dec. Dig. {Key No.) SS 1S8, I4I; Cent. Dig. i|
217-221.
4 2 Lamb v. Durant, 12 Mass. 54, 7 Am. Dec. 31; TAPLEY v. BUT-
TERFIELD, 1 Mete. (Mass.) 515, 85 Am. Dec. 374 ; Arnold v. Brown,
24 Pick. (Mass.) 89, 35 Am. Dec. 296; Graser ▼. Stellwagen, 25 N.
Y. 315; Mabbett v. White, 12 N. Y. 442. See "Partnership,'* Deo.
Dig. (Key No.) SS 141, 269; Cent. Dig. $S 220, 613.
48 Oayton v. Hardy, 27 Mo. 536. See, also, Blaker t. Sands, 29
Kan. 551; SLOAN v. MOORE, 37 Pa. 217, Gllmore, Cas. Partner-
slilp, 231 ; Hunter v. Waynick, 67 Iowa, 555, 25 N. W. 776 ; Lowman
V. Sheets, 124 Ind. 417, 24 N. E. 351, 7 L. R. A. 784 ; Wilcox v. Jack-
son, 7 Colo. 521, 4 Pac. 966. On sale of entire property of firm oper-
ating to discontinue the firm bnsiness, see, also, Doll y. Hennessy
Co. (1905) 33 Mont 80, 81 Pac. 625, holding It Inmiaterial that the
purchase price was applied to the liquidation of firm debts. If a
partner sell all the firm property, he acts beyond the scope of the
partnership buslnesa Bender y. Hemstreet, 12 Misc. Rep. 620, 34
N. Y. Supp. 423. A partner has no power, as such, to sell the good
will of the partnership business. Kelly y. Pierce (1907) 16 N. D.
234, 112 N. W. 995, 12 L. R. A. (N. S.) 180. See ** Partnership,** Deo.
Dig. {Key No.) H 1S8, Ul; Cent. Dig. %% 217-221.
44 Blaker y. Sands, 29 Kan. 551. See "Partnership** Deo, Dig.
{Key No.) %% 1S8, Ul; Cent. Dig. §S 217-221.
On.. Past. — ^19
290 POWBBS OF PARTNERS (Gh. 5
power to transfer negotiable instruments and all other
tangible property belonging to the firm.*' And as an agent
with power to sell has implied power to warrant quality or
soundness, so has the partner who sells firm property.**
Sale by Single Partner cf Firm Property to Pay Separate
Debts^-^s Against Ostensible Partners
A partner has no authority to use firm property to pay
individual debts. If he does so, the creditor can be com-
pelled to pay ilie partnership, even though he supposed that
the payment was made with individual property. Thus, in
Janney v. Springer,*^ the defendants were creditors of A.
A. Paine, of the firm of A. A. Paine & Co., on a promissory
note, and bought goods belonging to the firm from Paine
on condition that the price of the goods should be applied
on the note. They did not know that the goods were firm
goods, nor that the plaintiff, Janney, was in partnership
with Paine. It was held that the defendants were liable
for the goods so bought; the court isaying: "It is said there
was no firm sig^ erected at the place of business of the
partnership, and that defendants had no knowledge of the
existence of the firm. This want of knowledge and omis-
sion to use a sign was in no sense conflicting evidence upon
the question of a partnership in fact. It having been estab-
lished beyond question that the feed was partnership prop-
erty, it was incumbent on the defendants to show that Jan-
ney in some way assented to the alleged agreement to pay
«s George y. Tate, 102 U. S. 564, 26 L. Ed. 232; First National
Bank of Negannee v. Freeman, 47 Mich. 408, 11 N. W. 219; Gerli
v. Poidebard Silk Mfr. Co., 57 N. J. Law, 432, 81 Atl. 401, 30 L. R.
A. 61, 51 Am. St Rep. 611. See ^'Partnership,^ Dec Dig, (Key No.)
K 1S8, 146; Cent. Dig. §S 217-221, 251-252.
«• Sweet v. Bradley, 24 Barb. (N. Y.) 549; HUBBARD t. GA-
LUSHA, 23 Wis. 898 ; Sandllands y. Marsh, 2 B. & Aid. 673, at page
679. A partner in a contracting and building firm has implied au-
thority to warrant the durability of materials and workmanship
in constructing a building. Powell y. Flowers & McPhail, 151 N. GL
140. 65 S. E. 817. See *' Partnership," Dec. Dig. (Key No.) H 1S8,
HI; Cent Dig. | 221.
*T JANNEY y. SPRINGER, 78 Iowa, 617, 48 N. W. 461, 16 Am.
St Rep. 460, Gilmore, Cas. Partnership, 24a See ^'Partnership,'*
Deo. Dig. (Kev No.) i U4; Cent. Dig. i 236.
88 94r-96) PARTICULAR POWERS 291
the individual debt of Paine in partnership property, or that
he (Janney) in some way ratified the act after it was
done." *• It is sometimes said, however, that if the partner's
separate creditor takes in ignorance of the firm title he may
keep the property. Locke v. Lewis *• is cited for the propo-
sition, but an examination of the facts of that case would
seem to establish an estoppel.'*
Same — As Against Dormant Partners
If, however, one intentionally conceals the fact of his
membership in a firm from the world, he has no right to
complain if those who deal with the ostensible partner as
an individual offset firm demands with debts due from the
individual.'* Nor can he assert his right in firm goods as
against those who have extenfcd credit on the faith of the
individual ownership of the ostensible partner."
^sFarrlB y. Morrison, 06 Ark. 818, 60 S. W. 683; BRICKETT
T. DOWNS, 163 Mass. 70, 39 N. B. 776 ; HARTLEY ▼. WHITE, M
Pa. 31, Gilmore, €as. Partnership, 245; Todd y. Lorah, 75 Pa. 155;
Rogers y. Batchelor, 12 Pet. 221, 9 L. Ed. 1063.
One who knowingly receives partnership property with knowledge
that Its proceeds are passing to the Indiyidual nse of one partner is
charged with notice of such partner's want of authority tb dispose
of the property for his individual benefit COLUMBIA NAT. BANK
OF LINCOLN V. RICE, 48 Neb. 428, 67 N. W. 165. But see Grover
y. Smith, 165 Mass. 132, 42 N. B. 555, 52 Am. St Rep. 506, holding
that where a partner sells firm goods under an agreement that one-
fourth of the price should be applied In a private debt owed by the
partner to the purchaser, the firm cannot recover such one-fourth.
A fair sale made In good faith to an existing bona ^de creditor by
one partner, without the consent of the other, may, where the pur-
chaser has notice of such want of consent, be questioned by the
nonassenting partner, but is good as to all third persons. Klemm
y. Bishop, 56 111. App. 613. Bee ^'Partnership,"^ Deo. Dig. {Key No.)
i lU; Cent. Dig. H 2SJh2S9.
4» LOCKE y. LEWIS, 124 Mass. 1, 26 Am. Rep. 631. Bee "Part-
nership," Deo. Dig. (Key No.) i lU; Cent. Dig. iS 2SJh^9.
•0 See Burdlck on Partnership (2d Ed.) pp. 129, 130, for a criticism
6f the case.
•1 BRYANT y. CLIFFORD, 27 Vt 664, Gilmore, Cas. Partnership,
246; SWAN v: STEELE, 7 East, 210; WlUey v. Crocker- Wool-
worth Nat Bank, 141 Cal. 508, 75 Pac 10& Bee '^Partnership,** Deo.
Dig. (Key No.) S 164; Oent. Dig.. | SOO.
tts Swofford Bros. Dry Goods Co. y. Diment, 132 Mo, App. 616, HI
292 POWERS OF PARTNERS (Ch. 5
Same-^ale of Partnership 'Realty
' It is said that a partner has no implied authority to sell
firm realty. This absence of authority may be due to the
fact that real estate is not ordinarily the subject-matter of
a partnership and is not usually included in the property
held for sale. As the implied power of a partner to sell
usually extends only to those things held for sale, it would
not include firm real estate. But in so-called real estate
partnerships, where land is the commodity dealt in, it
would seem that there should be implied power in each
partner to sell it. Further, the lack of authority may be
explained by the nature of the instrument required to ef-
fect a transfer of real estate. Usually this can be done only
by deed under seal. As pointed out,** a partner has no im-
plied authority to execute a sealed instrument, and there-
fore, it is said, no power to sell the firm realty. But a dis-
tinction should be' drawn between the actual conveyance
of firm realty and a contract to convey. It might very well
be that a partner has power to bind the firm by an agree-
ment to convey partnership land, but has not the power to
execute the formal conveyance.'* Distinguishing, there-
fore, between a contract to sell and the actual conveyance
of the firm realty, the question whether a partner has im-
plied power to bind his copartner with respect to firm realty
will depend upon the position which such real estate occu-
pies in the firm assets and upon the nature of the firm busi-
ness. If land is a part of the partnership stock, and is a
commodity held for sale, then there should be implied pow-
er in each partner to make binding contracts to sell it.**
S. W. 1196. Bee *«Paitfi6rtMp,** I>ec Ma. (Ke^ Vo.) % m: Omni.
Dig. f $00.
ft* See post, S 101, p. 806, **Power to Execute Sealed Instnunents,"
and ante, chapter III, | 63, p. 196, "Form of Transfer.** The general
Implied powers of a partner do not extend to binding the firm by
seaL Arnold v. Steyenson, 2 Nev. 234 ; Foster's Appeal, 74 Pa. 391.
15 Am. Rep. 553. See *' Partnership," Dec. Dig. (Kew Vo.) H ISS,
141; Cent. Dig. SS 217-^21.
S4 Bates, Partnership, § 299.
■■ CHESTER ▼. DIOKBRSON, 64 N. Y. 1, 18 Am. Rep. 800, GO-
niore. Out Partnership. 136; Thompson t. Bowman, 6 Wall. 816;
18 L. Ed. 786; Sage ▼. Sherman, 2 N. Y. 417; Robinson y. Growder,
§g 94-95) PAUTIGULAB POWERS 293
Authorities recognizing such implied power often do so on
the ground that partnership realty is treated in equity as
personalty, and therefore each partner in a real estate firm
has implied power to sell it, and equity will decree specific
performance of contracts made pursuant to such author-
ity."' If, on the other hand, land is held as a. mere inci-
dent to the firm business, or as one o'f the things used in the
prosecution of the main enterprise, such as the site on
which the partnership activities are conducted, then there
should be no implied power to contract to sell it.*^
Sofne — Firm Title in Name of One Partner
It is possible, however, that a firm, by permitting the
title to firm realty to stand in the name of one partner, may
estop itself from claiming against a bona fide purchaser or
mortgagee from such partner; but, if the purchaser knows
4 McGord (S. a) 519, 536-587, 17 Am. Dec. 762; Batty t. Adams
Co., 16 Neb. 44, 20 N. W. 15 ; Baldwin ▼. Richardson, 33 Tex. 16.
In Thompson t. Bowman, supra. It Is said: "There is no doubt
that a copartnership may exist In the purchase and sale of real prop-
erty, equally as in any other lawful business. Nor is there any
doubt that each member of such copartnership possesses full author-
ity to contract for the sale or other disposition of its entire proper-
ty, though for technical reasons the legal title vested in all the co-
partners can only be transferred by their Joint act." See "Partner-
shipr Deo, Dig. {Key Vo.) H iS8, m; Cent. Dig. |§ 217-221.
B« In ROVELSKY ▼. BROWN, 92 Ala. 522, 5 South. 182, 26 Am.
St Rep. 83, Gilmore, Gas. Partnership, 239, specific performance
was granted of a contract to convey firm real estate, made by one
partner in a firm engaged in buying and selling realty.
See, also, Moderwell v. Mullison, 21 Pa. 257; Ludlow's Heirs y.
Cooper's Devisees, 4 Ohio St 1 ; Olcott v. Wing, 4 McLean, 15, Fed.
Gas. No. 10.481 ; Pugh's Heirs v. Currie, 6 Ala. 446.
See. further, post S 101, p. 808, on the "Power to Execute Sealed
Instruments.? Bee '"Partnership," Deo. Dig. (Key No.) S| i58> lJ^l;
Cent. Dig. iS Zn-ft21.
■TRuffner v. McConnel, 17 111. 212, 68 Am. Dec. 862; TAPLEY
V. BUTTERFIELD, 1 Mete. (Mass.) 515, 35 Am. Dec. 874; Judge y.
Braswell, 13 Bush (Ky.) 69, 26 Am. Rep. 185.
£^ven in Jurisdictions which deny the authority to sell the firm
real estate, it is held that if the conveyance is made in the presence
of all the partners and with their consent or Is ratified by them, it
will pass the title. Ferguson v. Hanauer, 56 Ark. 179, 19 S. W. 749;
Little V. Hazzard, 5 Har. (Del.) 291 ; Haynes v. Seachrest, 13 Iowa,
455; Weld v. Peters, 1 La. Ann. 432; Shirley v. Feame, 33 Miss.
294 POWBUS OF PARTNERS (Ch. 5
the property is firm property, he is presumed to know that
the partner having the legal title has implied power to sell
or mortgage it only for firm purposes."
SAME— POWER TO PLEDGE OR MORTGAGE FIRM
PROPERTY
4
96* A partner has implied power to pledge or mortgage the
personal property of the firm, either to raise
money or to pay the firm debts* But a partner has
no power to mortgage the firm realty without spe-
cial authority.
The power to give chattel mortgages and pledges is co-
extensive with the power to sell firm property, on the one
hand, and the power to borrow money, on the other/* In
the case of an ordinary trading partnership, the authorities
are all agreed that a partner has implied power to mortgage
any or all of the firm chattels held for the purpose of sale,
either to raise money for the firm, or to secure firm debts,
even antecedent debts.'* But a partner has no implied
653, 69 Am. Dec 875; Lawrence v. Taylor, 6 Hill (N. T.) 107; Frost
V. Wolf, 77 Tex. 455, 14 S. W. 440, 19 Am. St Rep. 761.
Although ineffective to pass the title of his copartners, it is held
to convey the interest of the partner actually executing it. El-
liott V. Dycke, 78 Ala. 150; Goddard v. Renner, 67 Ind. 532; Wal-
ton Y. Tusten, 49 Miss. 569. See **Partner8hip,'* Dec Dig, {Key No.)
H 1S8, Ul; Cent. Dig. I 1^18.
58 ROBINSON BANK ▼. MILLER, 163 lU, 244, 88 N. B. 1078. 27
L. R. A. 449, 46 Am. St Rep. 883, Gilmore, Gas. Partnership, 171;
Glark v. Allen, 84 Iowa, 190; Ghittenden v. German-American Bank,
27 Minn. 143, 6 N. W. 773; TarbeU v. West, 86 N. Y. 287. See,
also, National Union Bank of Maryland v. National Mechanics*
Bank, 80 Md. 371, 30 AU. 913, 27 L. R. A. 476, 45 Am. St Rep. 350 ;
GOLDTHWAITE v. JANNEY, 102 Ala. 431, 15 South. 560, 28 L. R.
A. 161, 48 Am. St Rep. 56. See "Fartnerahip,** Deo. Dig. iKey No.) U
1S8, Ul; Cent. Dig. §| 217-^21.
60 See ante, S 94, p. 288;; post, | 99, p. 300.
•0 Gates ▼. Bennett, 33 Ark. 475; Phillips y. Trowbridge Fur-
niture Company, 86 Ga. 699, 13 S. E. 19; Nelson v. Wheelock, 46
DL 26; McCarthy ▼. Seisler, 130 Ind. 63, 29 N. B. 407; Patch y.
Wheatland, 8 Allen (Mass.) 102; Richardson y. Lester, 83 IlL 55;
B 96) PARTICULAR POWERS 295
power to give security for the debts of others.'* And
a partner has no power to mortgage the firm property for
his individual debts.'* With regard to property not held
for the purpose of sale, however, the law seems to put mort-
gages and pledges upon the same basis as assignments for
the benefit of creditors, denying the presumption of the
power, except where the other partners have absconded,
are absent, or are otherwise incapacitated from assenting or
dissenting.** The power to pledge is implied from the
power to borrow money on the credit of the firm.'*
Same — Power to Mortgage Firm Realty
The general rule seems to be that one partner has no im-
plied authority to mortgage the firm real estate," and, in
Dickson V. Dryden, 97 Iowa, 122, 66 N. W. 148 ; Beckman v. Noble,
115 Mich. 523, 73 N. W. 803 ; Keck v. Fisher, 58 Mo. 532 ; Galway
v. Pullerton, 17 N. J.Bq. 389; Horton v. Bloedom, 37 Neb. 666, 56
N. W. 321 ; Morris v. Hubbard, 14 S. D. 525, 86 N. W. 25 ; West
Ck>ast Grocery Company v. Stinson, 18 Wash. 255, 48 Pac. 35 ; Rock
V. Collins, 99 Wis. 630, 75 N. W. 426, 67 Am. St Rep. 885 ; Union
Nat. Bank v. Kansas City Bank, 136 U. S. 223, 10 Sup. Ct 1013, 34
L. Ed. 341. See '^Partnership*' Dec. Dig. {Key No.) i H2; Cent,
Dig. I 22S.
•1 Bank of Conunerce v. Selden, 3 Minn. 160 (GU. 99) ; Lellman
V. Mills, 15 Wyo. 149, 87 Pac. 985. 8ee ''Partnership,** Deo. Dig.
{Key No.) 8 142; Cent, Dig. §§ 222-228.
•2 Lance v. Butler, 135 N. C. 419, 47 S. B. 48a See "Partnership;*
Dec, Dig. (Key No.) i 142; Cent. Dig. §§ 222-228,
«» See TAPLBY v. BUTTERFIELD, 1 Mete. (Mass.) 515, 85 Am.
Dec. 375 ; Hage v. Campbell, 78 Wis. 572, 47 N. W. 179, 23 Am. St
Rep. 422 ; McCarthy v. Selsler, 130 Ind. 63, 29 N. B. 407 ; Horton v.
Bloedorn, 37 Neb. 666, 56 N. W. 321. See "Partnership,** Deo. Dig.
{Key No.) | 142; Cent. Dig. f| 222-228.
•* Harris v. Baltimore, 73 Md. 22, 17 Ati. 1046, 20 Ati. Ill, 8 L.
R. A. 677, 25 Am. St Rep. 565; Hopkins ▼. Thomas, 61 Mich. 389,
28 N. W. 147; Clark v. Rives, 33 Mo. 579; Keller v. Smith, 20 Tex.
Civ. App. 314, 49 S. W. 263 ; George v. Tate, 102 U. S. 564, 26 L. Ed.
232; Marshall v. MaClure, 10 App. Cas. 325. See "Partnership,^
Dec. Dig, (Key No.) § 142; Cent. Dig. IS 222-228.
«« Greer v. Ferguson, 56 Ark. 324, 19 S. W. 966 ; Cottle v. Har-
rold; 72 Ga. 830; Kahn v. Becnel, 108 La. 296, 32 South. 444; Har-
din v. Dolge, 46 App. Dlv. 416, 61 N. Y. Supp. 753; McGahan T.
Rondout Bank, 156 tJ. S. 218, 15 Sup. Ct 347, 39 L. Ed. 403.
But such a mortgage has been held effective as to the Interest of
the partner executing It Cottle ▼.' Harrold, 72 Ga. 830; Baker v
296 POWERS OF PARTNERS (Ch. 5 *
the absence of prior express authority 01* subsequent rati-
fication, an attempt to do so is futile But the absence of
such power is doubtless due here, as in the case of convey-
ances of real estate already noticed, to the peculiar rule in
regard to sealed instruments.** In a trading firm, where
real estate is held for sale, and where the power exists to
borrow money and issue negotiable paper, it would seem
that there should be the power to mortgage the firm real
estate as security. While such a mortgage might be inef-
fective, because of the lack of implied authority to execute
a sealed instrument, it should be treated as an equitable
mortgage,*^ especially in a jurisdiction where the firm
realty is regarded as converted into personalty for the pay-
ment of firm debts.** However, a firm, by permitting the
title to firm realty to stand in the name of one. partner,
clothes him with apparent authority to mortgage it in his
own name for firm purposes.**
Lee, 49 La. Ann. 874 21 South. 688; Weeks ▼. Afascoma Rake Go.,
58 N. H. 101 ; -Watts ▼. DurscoH, 82 L. T. Rep. N. 8. 255 (affirmed
in 1001, 1 Ch. 294). See ^^Partnership,'' Deo, Dig. (Key No.) S IJtZ;
Cent. Dig. S 222.
•• It is not always put upon that ground, as appears from the
following: "Lands held by partners are considered as lands held
by tenants in common; and as one tenant in common cannot pass
any estate of his cotenant, and as land cannot pass without deed,
it follows that one partner cannot convey away the real estate of
the firm, without special authority/* Shaw, O. J., in TAPLEY v.
BUTTERFIELD, 1 Mete. (Mass.) 515, 35 Am. Dec. 375, Gilmore,
Cas. Partnership, 236^ note. See '^Partnership,** Dec. Dig. {Key No.)
IS 1S8, UK H2; Cent. Dig. §§ 217-228.
•7 Ex parte Broadbent, 4 Deac. & C. 8 ; Lindley, Partnership (7th
Eng. Ed.) 166. See ""Partnership;' Deo. Dig. {Key No.) S 142; Cent.
Dig. i 222.
e« Long ▼. Slade, 121 Ala. 267, 25 South. 81. It has been held,
however, that a mortgage on firm realty cannot be regarded as a
mortgage on personalty, merely because realty is sometimes consid-
ered personalty in equity. Miller v. Proctor, 20 Ohio St 442. See
"Partnership:* Dec. Dig. {Key No.) S 142; Cent. Dig. §§ 222-228.
•9 ROBINSON BANK v. MILLER, 153 111. 244, 38 N. B. 10781 27
L. R. A. 449, 46 Am. St Rep. 883, Gilmore, Gas. Partnership, 171;
Chittenden v. German-American Bank, 27 Minn. 143, 6 N. W. 778.
See "Partnership,** Deo. Dig. (Key No.) §{ 142, 155; Cent. Dig. H
222-228, 278, 279.
§ i>7) PARTICULAR POWERS 297
«
SAME— ASSIGNMENT FOR BENEFIT OF CREDI-
TORS
87. A partner has no authority to make an assignment for
the benefit of creditors, without the consent of all
the partners who are within the jurisdiction and
who are accessible.
By the weight of authority, it is not within the scope of
authority of onp partner to assign all the property of the
nrm for the benefit of creditors, when the other partners
can be consulted; for such an assignment, far from being
preservative, like the power to sell all the property of a
trading partnership in order to pay debts, is really destruc-
tive of the partnership business.** If, however, the other
partners are permanently beyond the jurisdiction, or for
some other reason incapable of giving their assent or dis-
sent to the proposed assignment, a partner has implied
power to make it of his own motion.** But mere tempo-
rary disability, due to illness or absence, will not warrant
such an assignment.** A managing partner, where the oth-
ers are absent from the country, or even, as held in one
TO Fox V. Curtis, 176 Pa. 52, 34 Atl. 952; WELLES v. MARCH,
30 N. Y. 844; Brooks v. Sullivan, 32 Wis. 444; Crittenden ▼. HUl,
61 Minn. 462, 63 N. W. 1030; Osborne v. Barge (C. C.) 29 Fed. 725.
Some cases, however, sustain such an assignment on the groimd
that, if a partner has implied power to sell all the firm assets, he
should also have the power to assign them for the benefit of cred-
itors. Scruggs V. Burmss, 25 W. Va. 670; Hennessy v. Western
Bank, 6 WatU & S. (Pa.) 300, 40 Am. Dec. 560. See ^'Partnership,*'
Dec. Dig. {Key No.) S 151; Cent. Dig, H 267-271.
71 DEOKARD V. CASE, 5 Watts (Pa.) 23, 30 Am. Dec 287, Gil-
more, Cas. Partnership, 233 ; Loeb v. Plerpoint, 58 Iowa, 469, 12 N.
W. 544, 43 Am. Rep. 122; Sullivan v. Smith, 35 Neb. 476, 19 N. W.
620, 48 Am. Rep. 854 ; Rumery v. McCuUoch, 54 Wis. 565, 12 N. W.
65; Mayer v. Bernstein. 69 Miss. 17, 12 South. 257: H. B. CLAF-
LIN CO. ▼. EVANS, 55 Ohio St 183, 45 N. E. 3, 60 Am. St. Rep.
686. Bee "PartnersMp,'* Dec. Dig, {Key No.) { 151; Cent. Dig. H
£67-271.
72 Stadelman ▼. Loehr, 47 Hun (N. T.) 327; Stockham v. Wells,
25 Wkly. Notes Cas. (Pa.) 84. See ''Partnership," Dec. Dig. {Key
No.) S 151; Cent. Dig. i| 267-271.
298 POWERS OF PARTNERS (Ch. 5
case, merely nonresident, may make an assignment.^* So,
also, as with other powers not implied, an assignment by
one partner will be valid if the other partners have previ-
ously consented to it, or subsequejitly ratify; but a ratifi-
cation will not aflfect liens of firm creditors acquired in the
interim.^* Prior authority or subsequent assent may be im-
plied from the circumstances or from the conduct of the
parties/*
SAME— POWER TO BUY
88. A partner has implied power to buy property, within
le scope of the firm's business, on the credit of
le firm.
t
It has long been decided that every member of an ordi-
nary partnership has implied power to purchase on the
credit of the firm such goods as are or may be necessary
for carrying 6n its business in the ordinary way.^* Thus,
Tt Williams v. Frost, 27 Minn. 255, 6 N. W. 793; H. B. CLAFLIN
GO. T. EVANS, 65 Ohio St 183, 45 N. E. 8, 60 Am. St Rep. 686.
But see Ck)x v. Swofford Bros. Dry Goods Go., 2 Ind. T. 61, 47 S.
W. 308. See, also, VosKmlk v. Urquhart, 91 Wis. 513, 65 N. W. 60 ;
Hennessy v. Western Bank, 6 Watts & 8. (Pa.) 800, 40 Am. Dec. 560.
But the mere fact tliat a partner, as general manager, has au-
thority to carry on the business for the others, does not necessa-
rily proTe authority to make. an assignment Callahan v. Heinz,
20 Ind. App. 359, 49 N. E. 1078; Hook v. Stone, 34 Mo. 829; Harper
y. Goodsell, L. R. 5 Q. B. 422. See ^'Partnership,** Deo. Dig, (Key
No.) S 151; Cent. Dig. §§ 267-271.
74 stein v. La Dow, 13 Minn. 412 (Gil. 881). But see Adee y. Cor-
nell, 93 N. Y. 572. A letter from an absent partner, containing the
words, *'Take charge of everything In our business; close It up
speedily," Is sufficient consent to an assignment WELLES y.
MARGH, 30 N. Y. 844. See "Partnership,** Deo. Dig. (Key No.) H
151, 157 ; Gent Dig. {{ 267-271, 290.
7» SHATTUGK v. CHANDLER, 40 Kan. 516, 20 Pac 225, 10 Am.
St Rep. 227, Gllmore, Gas. Partnership, 286; Elrby y. Ingersoll, 1
Doug. (Mich.) 477 ; Lowensteln y. Flauraud, 11 Hun (N. Y.) 899.
The burden of proving sufficient authority Is upon those claiming
under the assignment Callahan y. Heinz, 20 Ind. App. 859, 49 N.
B. 1078. See ^'Partnership,** Deo. Dig. {Key No.) U iSl, 165, 157,
217; Cent. Dig. S{ 267-271, 278^91, 419, i20.
Tt PORTER y. CURRY, 50 111. 819, 99 Am. Dec. 520, GUmorQ, Caft
§ 98) PARTICULAR POWERS 299
where one of a firm of harness makers bought on the credit
of the partnership a number of bits to be made up into
bridles, but instead pawned them for his own use, the seller
of the bits was allowed to recover their price in an action
against both partners. The fact that a partner misappro-.
priates the goods to his own use will not relieve the firm
of liability J ^ The firm is liable, although the goods may
have been supplied to only one of the partners, and no other
person may have been known to the supplier as belonging
to the firm/* If, however, goods are bought by a partner
actually and ostensibly as an individual, he alone is liable
to the seller; and a partner acting thus as an individual,
and not as an agent, would in such a transaction still be
solely liable, even should the firm become benefited by it.^*
Nor is the firm liable for goods ordered by and supplied to
one partner which it was his duty to contribute to the joint
stock of the firm.'*
Partnership, 868; McDonald ▼. Fairbanks, Morse & OKf 161 lU.
124, 43 N. B. 783 ; Braches t. Anderson, 14 Mo. 441 ; Mead y. Shep-
ard, 54 Barb. (N. Y.) 474 ; STEGEEB ▼. SMITH, 46 Mich. 14, 8 N.
W. 683, Gllmore, Gas. Partnership, 867 ; Smith ▼. Smyth, 42 Iowa,
483; LEFFLEB ▼. BIGB, 44 Ind. 103, Gllmore, Gas. Partnership,
868. A partner may buy land if necessary for the firm business.
Davis ▼. Gook, 14 Nev. 265 ; but see Glay ▼. Garter, 16 Wkly. Notes
Gas. (Pa.) 385; Judge ▼. Braswell, 13 Bush (Ey.) 67, 28 Am. Bep.
185. Bee ^^Partnership,'* Deo. Dig. {Key No.) | 14I; Cent. Dig. %%
214-216.
TT BOND ▼• GIBSON, 1 Gamp. 185, Gllmore, Gas. Partnership,
366. See ''Partnership;* Dec. Dig. (Key No.) | HI; Cent. Dig. H
214-2I6.
T8 BISEL T. HOBBS, 6 Blackf. (Ind.) 479, Gllmore, Gas. Partner-
ship, 321; Bracken v. March, 4 Mo. 74; Gardiner ▼. Ghllds, 8 Cat.
& P. 345. Where persons were erecting buildings as partners, and
one of them bought brick for use therein, without any express agree-
ment that the purchase was an individual purchase, and the brick
was used In the buildings, the firm was liable. STEGKER ▼.
SMITH, 46 Mich. 14, 8 N. W. 583, Gllmore, Gas. Partnership, 367.
See ''Partnership,** Dec. Dig. (Key No.) { HI; Cent. Dig. S{ 214-216.
TtEMLY y. LYE, 15 East, 7; Heckert ▼. Fegely, 6 Watts & S.
(Pa.) 139 ; Sinkler v. Lambert, 5 PhUa. (Pa.) 86 ; HOLBIES v. BUB-
TON, 9 Vt 252, 31 Am. Dec. 621, Gllmore, Gas. Partnership, 312.
See "Partnership,** Deo. Dig. (Key No.) S 14I; Cent. Dig, {§ 214-216.
60 BANNISTER Y. MIIJ.ER, 54 N. J. Eq. 121, 32 Ati. 1066. See
"Partnership,** Deo. Dig. (Key No.) | 14I; Cent. Dig. S{ 214-216.
300 POWERS OP PARTNERS (Oh. 5
This power of one partner to bind the firm by a purchase
of goods on its credit is not confined to trading partner-
ships. It is of no consequence what the partnership busi-
ness may be, if the goods supplied are necessary for its
transaction in the ordinary way. Thus a partner of a firm
engaged in the livery business is acting within the scope of
the partnership business when he procures horses for the
use of the firm.'* One of a firm of lawyers may buy law
books for the firm.** So, also, where some printers and
publishers agreed to share the profits of a work, and the
publishers ordered paper for that particular work, and be-
came bankrupt, the printers were held liable for its price
to the stationers who supplied it.** A partner binds the
firm in purchasing goods, even though his intention is to
defraud his fellow partners, so long as the seller is not privy
to the fraudulent intention.**
SAME— POWER TO BORROW MONEY
; A member of a trading ftna has implied power to bor-
row money, where necessary for the transaction of
the partnership business in the ordinary way. A
member of a nontrading partnership has no power
to borrow, in the absence of previous express au-
thority or subsequent ratification.
The requirements of commerce render it necessary that
the power to borrow money should exist in the members of
•1 Chappie ▼. Davis, 10 Ind. App. 404, 88 N. B. 856. See **Part-
nenhip,'* Dec. Dig. (Key 2Vo.) S 14I; Cent, Dig, %% tlJh^lS.
8s Alley V. Bowen-Merrill Oo., 76 Ark. 4, 88 S. W. 838, 118 Am.
St Rep. 78. See ** Partner ship** Dec, Dig, {Key No.) S 1J^; Cent.
Dig. n 2U''216.
?» Gardiner v. Chllds, 8 Car. & P. 345. See "PartnersMp,** Deo.
Dig. (Key No.) { Ul; Cent. Dig. §S 21J^16.
•4 BOND ▼. GIBSON, 1 Camp. 185, Gilmore, Cas. Partnership,
866; Carver v. Dows, 40 lU. 374; Clark v. Johnson, 90 Pa. 442;
Kenn^ v. Altvater, 77 Pa. 34. And see Johnson v. Barry, 95 lU.
483: See ^'Partnership;* Dec Dig. (Key No.) H HI, 164; Oent.
Dig. IS 2H, 276.
g 99) PABTIGULAB POWERS 301
a trading partnership.'* Thus a partner has power to bor-
row money for his traveling expenses while conducting
business for his firm.'* At the same time the power of bor-
rowing money, like every other implied power of a part-
ner, only exists where it is necessary for the transaction
of the partnership business in the ordinary way. Accord-
ingly a partner has no implied authority to borrow where
the business is one usually conducted on a cash basis, e. g.,
mining on the cost-book principle, and third persons, loan-
ing money to one partner, with knowledge of the custom of
the firm, do so at their peril.*^ So, also, third persons have
no right to assume the existence of the power in a business
where borrowing is unusual, as in the case of lawyers or
doctors, but must, in order to hold the firm, prove actual
authority or ratification.'* In fact, the power is seldom im-
plied in the case of members of nontrading partnerships.**
s« Union National Bank of Kansas City, Mo., ▼. Nelll, 149 Fed. 711,
79 O. O. A. 417, 10 K R. A. (N. S.) 4fi8 ; Smith ▼. Collins, 115 Mass.
388; Pahlman y. Taylor, 75 111. 629; BUnn v. Brans, 24 111. 317;
Church ▼. Sparrow, 6 Wend. (N. T.) 223; Sherwood v. Snow, 46
Iowa, 481, 26 Am. Rep. 155; National Bank of Commerce v. Mead-
er, 40 Minn. 325, 41 N. W. 1043 ; WINSHIP v. BANK OF UNITED
STATES, 5 Pet 529, 8 L. Ed. 216, Gllmore, Cas. Partnership, 356;
Lemke v. Faustmann. 124 111. App. 624 (1906); Hatchett ft Large
V. Sunset Brick ft Tile Co. (Tex. Civ. App.) 99 S. W. 174; Parker
▼. Parker (Ky.) 80 S. W. 209. Bee "Partnerahtp,*^ Deo. Dig, {Key
yo.) I US; Cent. Dig. § 241.
«• ROTHWELL v. HUMPHRIES, 1 Esp. 406, Gllmore, Cas. Part>
nershlp, 366. See "Partnership*' Deo, Dig. (Key yo.) { IJ^S; Cent.
Dig. S 241.
8T Burmester v. Norrls, 6 Exch. 796; Hawtayne v. Bourne, 7 Mees.
ft W. 595 ; RlckettB v. Bennett, 4 O. B. 686. See '^Partnership,'' Dec.
Dig. {Key yo.) S 145; Cent. Dig. { 241.
•» Smith V. Sloan, 87 Wis. 285, 19 Am. Rep. 767; Friend ▼. Dur-
yee, 17 Fla. Ill, 35 Am. Rep. 89; Crosthwalt v. Ross, 1 Hnmph.
(Tenn.) 23, 84 Am. Dec. 613. See ^'Partnership,*' Dec. Dig. (Key
yo.) SS 145, 151; Cent. Dig. §S 241, 282.
8» But see Hoskineon y. Eliot, 62 Pa. 393 ; LEFFLER ▼. RICE,
44 Ind. 108, Gllmore, Cas. Partnership, 368. ''Partners in other
bnslD^ss (than commercial), such as farming, mining, etc., have
prima fade no such authority. But this presumption against lack
of authority may be rebutted by showing that the organization and
particular purposes of the firm are such as to render it in the spe-
cial instance necessary, or, if not necessary, usual in similar cases."
802 POWERS OF PABTNBBS (Oil. 5
Nor, even in a trading partnership^ does the power to bor-
row money cover the borrowing of money to increase the
capital of the firm, which is the mere aggregate of the con-
tributions of all the partners. The transaction is in effect
like borrowing money for the partner's own individual con-
tribution, for which he alone remains bound.** Still less will
the firm be bound where, borrowing is prohibited, and the per-
son advancing the money is aware of the prohibition.*^
SAME— POWER TO ISSUE BILLS AND NOTES
100. A member of a trading partnership has implied power
to bind the firm on negotiable instrmnents. A
member of a nontrading partnership has prima
facie no such power.
In Trading Partnerships
Since a partner in trading partnerships has implied
power to borrow money on the credit of the firm, he should
Deardorf's Adm'r ▼. Thacher, 78 Mo. 131, 47 Am. Rep. 96w See
"PartneraMp,'* Dec. Dig. {Key No,) i US; Cent. .Dig. § t^l.
•0 Fisher ▼. Taylor, 2 Hare, 218 ; Greenslade ▼. Dower, 7 Bam.
& C. 635. The power to borrow money so as to bind the firm in-
cludes the case of his obtaining money from the firm's bank by an
overdraft Blackburn Bldg. Soe. y. Ounliffe, 22 Oh. Div. 61, 9 App.
Gas. 857; Waterlow ▼. Sharp, L. B. 8 Eq. 501. But it does not in-
clude opening a bank account in his own name. Alliance Bank v.
Kearsley, L. R. 6 P. O. 433. Bee '^Partnership,'* Deo. Dig. iKey No.)
I 145; Cent. Dig. S 2il.
91 In re Worcester Oom Bxchange Co., 3 De Gex., M'. & G. 180;
Blackburn Bldg. Soc. v. Cunliife, 22 Ch. Div. 61. When money is
borrowed by a partner as an individual, the fact that it is applied
for the benefit of the firm wlU not make the firm liable. Oibbs v.
Bates, 43 N. Y. 192; National Bank of Salem v. Thomas, 47 N. Y.
15 ; Green y. Tanner, 8 Mete (Mass.) 411 ; McLinden ▼. Wentworth,
51 Wis. 170, 8 N. W. 118. When money is borrowed for the firm,
and the partner borrowing it uses it for private purx>08e8, the firm
is nevertheless liable. Stark v. Ck)rey, 45 111. 431 ; Real Estate Inv.
Go. V. Smith, 162 Pa. 441, 29 AtL 855; Freeman ▼. Carpenter, 17
Wis. 126; Warren v. French, 6 Allen (Mass.) 817; Hay ward y.
French, 12 Gray (Mass.) 453; Klelnhaus y. Generous, 25 Ohio St
667. See "Partnership,** Dec. Dig. (Key No.) i 145; Cent. Dig. i 241.
§ 100) PARTICULAB POWEBfl 303
•
also have the power to bind the firm by giving evidence of
that indebtedness in any of the usual forms of commercial
paper. Accordingly third persons are justified in presum-
ing, as a matter of law, that all commercial paper, executed
by one of the members of a trading partnership, which
bears the signature of the firm, whether as maker, indorser,
or acceptor, is issued within the scope of the partnership
powers, and for partnership purposes.** Although the part-
nership agreement may expressly forbid any partner from
signing the firm name to negotiable paper, such restriction
is not binding upon third parties, who without notice be-
come holders of firm paper actually g^ven by a partner for
partnership purposes.** Even if one partner gives a' note
or bill in payment of a firm debt, in ignorance that his co-
partner has already done so, and both notes or bills come
into the hands of bona fide holders without notice of the
mistake, the firm is liable on both.**
•1 WINSHIP T. BANK OF UNITED STATES, 5 Pet 529, 8 L. Ed.
216, Gilmore, Gas. Partnership, 356; Silverman t. Chase, 90 IlL
37; PINKNBY v. HALL, 1 Salk. 126, Gilmore, Gas. Partnership,
371 ; Fuller v. Percival, 126 Mass. 381 ; First Nat Bank of Negau-
nee t. Freeman, 47 Mith. 408, 11 N. W. 219; Ketcham Nat Bank v.
Hagen, 164 N. Y. 446, 58 N. E. 523; Pettyjohn ▼. Nat Exchange
Bank, 101 Va. Ill, 43 S. E. 203. That a partner cannot bind the
firm by a guaranty for the payment of a bill of exchange, see DUN-
GAN V. LOWNDES, 3 Gamp. 478, Gilmore, Gas, Partnership, 369;
Lemke v. Faustmann (1906) 124 III. A^p. 624. As a joint maker of
a- note is not, as against the holder, a surety for the comaker to the
extent of the latter*8 portion of the note, in case the Joint maker
is a partnership, the holder will be chargeable with notice of the
suretyship, and therefore of the lack of authority to sign the note.
Union Nat Bank of Kansas Gity, Mo., v. NeiU (1906) 149 Fed. 711,
79 G. G. A. 417, 10 L. R. A. (N. S.) 42a See '^Partnership," Deo.
Dig. {Key No.) % U6; Cent, Dig. {{ 24^255.
9 s Bloom v. Helm, 53 Miss. 21; Benninger ▼. Hess, 41 Ohio St
64. See "Partnership,'* Deo. Dig. {Key No.) | 146; Cent. Dig. SS
242-255.
94 Davison v. Robertson, 3 Dow. 218. A Joint and several prom-
issory note, signed by one partner for himself and copartners, does
uqt bind them severally. Sherman v. Ghristy, 17 Xowa, 322; Per-
ring V. Hone, 2 Gar. & P. 401. But it does bind all the partners
Jointly, and the maker separately. Doty t. Bates, 11 Johns. (N.
Y.) 544; LORD GALWAY V. MATTHEW, 1 Gamp. 403; Maclae
T. Sutherland, 3 El. & BL 1; Snow ▼. Howard, 35 Barb. (N. Y.) 56;
304 POWERS OF PARTNBR8 (Gh. 5
Nontrading Partnerships
With respect to nontrading partnerships, however, the
great weight of authority denies the implied power of a
partner to bind the firm by the issuance of commercial
paper.** Thus the execution of a note for the purchase
price of a team of horses is not within the implied powers
of either partner of a firm engaged in the dairy business.**
While a nontrading firm cannot usually be held on ne-
gotiable paper given by one partner, the plaintiff may show
that the usage of the firm or the consent of the other part-
ners justified its issue.** Thus, if a member of a nontrad-
Fulton ▼. Williams, 11 Cush. (Mass.) 108; Gillow ▼. Ullle, 1 Bing.
N. C. 695. See *' Partner ship;* Dec. Dig. {Key No.) S 146; Cent. Dig,
%% 24^-255.
OB PEASE ▼. COLE, 53 Conn. 53, 22 Atl. 681, 55 Am. Rep. 53, Gil-
more, Gas. Partnership, 372; Alley ▼. Bowen-MerriU Go., 76 Ark. 4,
88 S. W. 838, 113 Am. St Rep. 73; Teed v. Parsons, 202 111. 455,
6C N. E. 1044; Powell Hardware Go. v. Mayer, 110 Mo. App. 14,
83 S. W. 1008. See ^'Partnership,'' Dec. Dig. (Key No.) { 146; Cent.
Dig. §S 24Z-255.
•• Schellenbeck ▼. Studebaker, 13 Ind. App. 437, 41 N. E. 845, 55
Am. St Rep. 240. The power is also denied to one of several min-
ing adventurers. Brown v. Byers, 16 Mees. & W. 252; Dickinson v.
Valpy, 10 Bam. ft G. 128. There Is no custom or usage that attor-
neys should be parties to negotiable instruments, nor is It necessary
for the purposes of their business. HEDLET v. BAINBRID6E et
al., 3 Adol. ft E. 316, Gilmore, Gas. Partnership, 371 ; Smith v. Sloan,
37 Wis. 285, 19 Am. Rep. 757 ; Alley v. Bowen-MerriU Go., 76 Ark.
4, 88 S. W. 838, 113 Am. St Rep.. 73. But see Miller v. Hines, 15
Ga. 197; Klmbro v. Bullitt, 22 How. 256, 16 D. Ed. 313; Ulery ▼.
Ginrich, 57 111. 531 ; Hunt v. Ghapin, 6 Lans. (N. T.) 139 ; Garland
V. Kacomb, L. R. 8 Bxch. 216 ; Levy v. Pyne, Gar. ft M. 453 ; HAH-
MAN V. JOHNSON, 2 El. ft Bl. 61, Gilmore, Gas. Partnership, 399;
Grosthwait v. Ross, 1 Humph. (Tenn.) 23, 34 Am. Dec. 613 ; POOL-
EY V. WHITMORE, 10 Heisk. (Tenn.) 629, 637, 27 Am. Rep. 733,
Gilmore, Gas. Partnership, 300. See ^'Partnership,** Dec. Dig. (Key
No.) S 146; Cent. Dig. K 242-255.
•T KIRK ▼. BLURTON, 9 Mees. ft W. 284, Gilmore, Gas. Partner-
ship, 381; PEASE V. GOLE, 53 Gonn. 53, 22 Atl. 681, 55 Am. Rep.
53, Gilmore, Gas. Partnership, 372; Harris v. Baltimore. 73 Md. 22,
17 Atl. 1046, 20 Atl. Ill, 985, 8 L. R. A. 677, 25 Am. St Rep. 565.
One authority broadly lays down the rule, without distinction 'be-
tween trading and nontrading partnerships, that the firm is liable
ns against bona fide holders on firm paper issued by one imrtner for
his individual use. New Tork Firemen's Ins. Go. ▼. Bennett, 5
§ 100) PARTICULAB POWERS 306
ing firm concurs in drawing, or authorizes his partner to
draw, a bill in the name of the firm, he impliedly authorizes
its indorsement in the same name for the purpose for which
it was drawn.** While the presumption is that in the case
of nontrading firms no implied power in a partner exists to
bind his copartner on negotiable paper, still it is quite pos-
sible to establish a situation where a presumption of such
power would arise. "And, of course, the fact that the firm
derives the benefit of the act may be taken into considera-
tion when applying this test."** In a nontrading firm the
question whether each partner has or has not the power to
bind the firm by the issuance of negotiable paper would
Ck)im. S74, 18 Am. Dec. lOO. But this was clearly a commercial
partnership.
In the following cases notes executed without express authority
were held binding on the firm: Voorhees v. Jones, 29 N. J. Law,
270 (railroad contractors); Van Brunt v. Mather, 48 Iowa, 508 (a
storage and forwarding firm); Miller t. Hlnes, 15 Ga. 197 (a law
firm). See " Partner sMp,'' Dec, Dig. (Key 2Vo.) § U6; Cent, Dig. {{
08 Horn ▼. Newton City Bank, 82 Kan. 518, 4 Pac. 1022. A part-
ner has no authority to sign a bank check postdated, even' where
he has express authority to issue checks for the firm. Forster ▼.
Mackreth, I^ ^. 2 Bxch. 163. A bill drawn and accepted by one
partner after the dissolution of the firm, although dated before,
does not bind the firm. WRIGHT v. PULHAM. 2 Chit. 121 ; MAR-
LETT y. JACKMAN, 3 Allen (Mass.) 287. One partner, after the
dissolution of the partnership, cannot indorse notes or bills given
before to the firm, so as to bind his copartner, though he Is au-
thorized to settle up the firm business. SANFORD v. MICKLES,
4 Johns. (N. Y.) 224. But, when one of two partners in trade had,
after an act of bankruptcy, accepted a biU of exchange in the name
of the firm, without the privity of his copartner, it was held to be
an available security in the hands of an innocent indorsee. LACT
V. WOOLCOTT, 2 Dowl. & R. 45a Bee ''Partnerahipr Dec, Dig
{Key No.) S 146; Cent. Dig. §§ 242-255.
»» VBTSCH V. NBISS, 66 Minn. 450, 69 N. W. 315, Gilmore, Cas.
Partnership, 379. But see dictum in New Tork Firemen's Ins. Co.
V. Bennett, 5 Conn. 574, 13 Am. Dec. 109, that any partnership is
bound as against a bona fide purchaser, though the paper was in
fact issued for the individual use of the acting partner. "If bills
are necessary, then they have a power to accept bills, and so to
bind each other." KIRK v. BLURTON. 9 Mees. & W. 284, Gil-
more, Cas. Partnership, 381. See ^^Partnership,** Dec. Dig. {Key
No.) I 146; Cent. Dig. H 242-256.
Gil.Pabt. — ^20
306 POWERS OP PARTNERS (Cll. 5
properly seem to depend upon whether the issuing of such
paper is essential to carry into effect the ordinary purpose
for which the partnership was formed.
As the presumption of the existence or nonexistence of
the power to sign negotiable paper depends upon whether
the firm is trading or nontrading, it becomes important to
distinguish between these two kinds of partnerships. This
subject is discussed in a previous chapter, M^liich should be
read in connection herewith,*
Bona Fide Holder
Like all other makers of commercial paper, a trading
partnership is bound to third persons who purchase its pa-
per for value without notice of the lack or abuse of author-
ity on the part of the partner issuing it* If, however, one
taking firm paper knows that the partner issuing it had no
authority to issue it, or issued it in fraud of the other part-
ners, the firm is not bound to pay the obligation.' Thus,
where paper in the firm name is g^ven to satisfy a separate
debt of the partner executing it, the firm is not bound.*
1 See ante, chapter IT, §§ 37, 38, pp. 107-110; chapter V,§93,p.286.
« Fuller V. Percival, 126 Mass. 381 ; Atlas Nat Bank v. Savery,
127 Mass. 75; Munroe v. Oooper, 5 Pick. (Mass.) 412; Atlantic State
Bank of City of Brooklyn v. Savery, 82 N. T. 291; Moorehead v.
Gilmore, 77 Pa. 118, 18 Am. Rep. 435. One who loans money to
a member of a mercantile firm, and receives from him a note exe-
cuted in the name of the firm, has a right to presume that the note
Is made in the course of the partnership business. Sherwood v. Snow,
46 Iowa, 481, 26 Am. Rep. 155; Piatt v. Koehler, 91 Iowa, 592,
60 N. W. 178. Bee "Partnership,'* Dec. Dig. (Key No.) S IJ^S; CetU.
Dig. i 252; **Btll8 and Notes,** Dec. Dig. {Key No.) S§ 827-^84; Cent.
Dig. i% 788-^95.
• New York Firemen's Ins. Co. t. Bennett, 6 Conn. 574, 13 Am.
Dec. 109; Cotton v. Evans, 21 N. C. 284; Smyth v. Strader, 4 How.
404, 11 L. Ed. 1031 ; Moynahan y. Hanaford, 42 Mich. 329, 8 N. W.
944 ; Powell v. Waters, 8 Cow. (N. Y.) 688 ; Boyd v. Plumb, 7 Wend.
<N. Y.) 309. But see, for facts held not to show knowledge of lack
of authority, WAIT v. THAYER. 118 Mass. 473 ; Atlas . Nat Bank
V. Savery, 127 Mass. 75. See ^'Partnership,** Deo. Dig. {Key No.) S
H6; Cent. Dig. {{ 2Jt2-255.
4 Funk V. Babbitt, 55 lU. App. 124. A partner cannot Issue firm
paper for his own accommodation. National Surety Bank y. Mc-
Donald, 127 Mass. 82 ; Wilson y. Williams, 14 Wend. (N. Y.) 146, 28
§ 100) PARTICULAR POWERS 307
But in the case of a trading partnership the fact that the
paper was issued for the individual benefit of a partner
must have been clearly brought home to the holder, if the
firm is to escape liability.' In fact, it may be said generally
that whether a trading firm is to escape from liability de-
pends upon the notice the holder has. Thus notes made
by a member of two firms in the name of one of them, in
favor* of his copartner in the other firm, for an individual
debt, would bind only the individual; for the payee had
knowledge of the transaction.*
Am. Dec. 518; Heffron t. Hanaford, 40 Mich. 805. Bee **Partner-
ship,*' Deo. Dig. (Key No.) {{ 146, W; Cent. Dig. {{ 2^9, 256, 257.
B Richardson ▼. Erckens, 53 App. Div. 127, 65 N. Y. Supp. 872,
affirmed 169 N. Y. 588, 62 N. B. 1100. See, also, King ▼. Mecklenburg,
17 Colo. App. 312, 68 Pac. 984. Where notice is clearly proved, the
firm is not liable. First Nat Bank y. State Nat Bank, 131 Fed.
422, 65 0. O. A. 406; Adams v. Long, 114 IlL App. 277; Kahn v.
OverstolZy 82 Mo. App. 235. '*In commercial partnerships a note ex-
ecuted by one member in the firm name is prima facie the obligation
of the firm; and,, if one of the parties seeks to avoid its payment,
the burden of proof lies upon him to show that the note was given
in a matter not relating to the partnership business, and that, also,
with the knowledge of the holder of the note." Lee v. First Nat
Bank of Ft Scott, 45 Kan. 9, 25 Pac. 196, 11 Ll B. A. 238; Third
Nat Bank v. Snyder, 10 Mo. App. 213; Stevens T. McLachlan, 120
Mich. 285, 79 N. W. 627. See *' Partnership r Deo. Dig. (Key No.) %
m; Cent. Dig. %\ 242-255.
• McCk>nnell v. Wilklns, 13 Out App. (Can.) 438. Where the firm
name is that of an individual, and the latter executes and delivers
a note, so that it does not appear as a certainty whether it is a
firm or private obligation, the burden of proof is on the holder to
show that the note was given on the partnership account; the pre-
sumption being, where he is engaged in no separate business, that
the maker intended to bind the firm. YORKSHIRE) BANKING GO.
V. BEATSON, 5 0. P. Div. 109, Gilmore, Gas. Partnership, 157;
United States Bank v. Binney, 5 Mason, 176, Fed. C^s. No. 16,791;
Funk ▼. Babbitt, 56 111. App. 124. Gontra, that the burden of proof
is on the firm to show that it was not the obligor, Mifflin v. Smith,
17 Serg. & R. (Pa.) 165. But see Burroughs' Appeal, 26 Pa. 264.
Where the firm name imports a partnership, see Garrier ▼. Gameron,
31 Mich. 373, 18 Am. Rep. 192; Vallett ▼. Parker, 6 Wend. (N. Y.)
615; Whitaker v. Brown, 16 Wend. (N. Y.) 505; Hogg v. Orgill,
34 Pa. 344. As to the liability of dormant partners, see Bank of
Alexandria T. Mandeville, 1 Granch, G. O. 575, Fed. Gas. No. 851;
308 rowisRS OF partners (Cli. 5
In case of a nontrading partnership the innocent pur-
chaser for value will seldom be protected, for the issuing of
the paper will usually be beyond the power of the partner.^
Moreover, the very nature of the business and of the par-
ticular transaction is sometimes sufficient to prevent the
holder from being considered an innocent purchaser for
value. Thus, where one member of a shipping firm signed
the partnership name as surety for another's individual ob-
ligation, it was held that the nature of the transaction pre-
cluded the innocence of the holder.'
SAME— POWER TO EXECUTE SEALED INSTRU-
MENTS
101. A partner has no implied power to bind his copartner
by the execution of sealed instruments.
EXCEPTIONS AND QUALIFICATIONS:
(a) One partner may execute a sealed rele^ise of a
firm debt.
(b) When the seal is unnecessary to the validity of
the instrument, it will be treated as surplus-
age, and the document will be regarded as un-
sealed.
(c) When the instrument is executed in the personal
presence of all the partners and with their
Ontario Bank v. Hennessey, 48 N. Y. 645. Where a note is given
partly for a private debt and partly for a firm debt, the cases are
not agreed as to the etfect King v. Faber, 22 Pa. 21 ; Rice ▼. Doane,
164 Mass. 136, 41 N. B. 126 ; Guild v. Belcher, 110 Mass. 257 ; WU-
son V. Forder, 20 Ohio St 89, 6 Am. Rep. 627. Bee *'Partner9hip^'*
Dec Dig. {Key No.) S§ 1S4, 146; Cent Dig. SS 200, 2i^255.
TPBASB ▼. OOLE, 53 Conn. 53, 22 Atl. 681, 55 Am. Repi 53,
Gllmore, Cas. Partnership, 372. Dickinson v. Vaply, 10 B. & O. 128;
Cocke ▼. Branch Bank at Mobile, 8 Ala. 175 ; DeardorTs Adm'r ▼.
Thacher, 78 Mo. 128, 135, 47 Am. Rep. 95. See "Partnership;* Dee,
Dig. {Key 3Vo.) § H6; Cent. Dig. §{ 242-255.
• ROLLINS v.. STEVENS, 31 Me. 454, Gilmore, Cas. Partnership,
370; DUNCAN ▼. LOWNDES. 3 Camp. 478, Gilmore. Cas. Partner-
ship, 369. A firm can be held upon paper signed in blank in its
name by a partner. Chemung Canal Bank v. Bradner, 44 N. Y. 680.
Contra: Hogarth v. Lathan, 3 Q. B. DIv. 643. See '^PartnereMp,'*
Deo. Dig. {Key No.) { U6; Cent. Dip. % 252.
i 101) PARTICULAR POWERS 909
knowledge, it wiU be regarded as the instru-
ment of alL
(d) When there is previous authority or subsequent
ratification, which may be shown by parol, or
may be implied from the declarations or acts
of the parties, or from the drctunstances^ the
instrument will be binding.
At common law one partner could not bind the firm by
deed, bond, mortgage, or other instrument under seal, un-
less he had express authority to do so under the seals of the
other partners.* The reason usually given for this rule is
that to recognize such a power would enable one partner
to give a favorite creditor a lien on the real estate of the
partners, and, consequently, a preference over the simple
contract creditors of the firm.** The correct reason, how-
ever, is to be found in the fact that a deed of real estate, the
kind of instrument under seal with which this rule origi-
nated, is not ordinarily a commercial document. As al-
ready pointed out,** real estate was not usually the sub-
ject-matter of a partnership, and its conveyance, not per-
taining to the customary activities of mercantile firms, was
naturally not regarded as within the implied powers of part-
ners. The rule being established, however, with respect to
deeds, was extended to all sealed instruments, and the state-
ment became common that contracts under seal were not
ordinary mercantile documents and were subject to rules
of law independent of trade and commerce.** While deeds
• "A general partnership agreement, thongh ander seal, does not
authorize the partners to give deeds for each other, unless a par-
ticular power be given for that purpose." Per Kenyon, G. J., in
HABRISON V. JACKSON et al., 7 Term R. 207, Gilmore, Gas. Part^
nership, 882. See **Partnership," Dec. Dig. (Key No.) { 157; Oenl.
Dig. I 205.
10 HARRISON ▼. JACKSON et al., supra. See **PartneraMp,*'
Dec Dig. {Key No.) i 1S7; Cent. Dig. S 205.
11 See ante, p. 292.
IS Gerard ▼. Basse, 1 Dall. 119, 1 L. Ed. 63; Macleod's Theory
and Practice of Banking (4th Ed.) pp. 236-244; STRAFFIN'S
ADM'R T. NEWELL, T. U. P. Charlt (Qa.) 168, 4 Am. Dec. 70S.
810 POWBBS OF PARTNERS (Ch. 5
of real estate were not usual mercantile documents, there
were, however, other documents under seal which did per-
tain^ to trade and commerce, and which might properly be
held to be within the implied power of a partner to execute.
Thus, in Straffin's Adm'r v. Newell,** which involved the
binding effect upon the firm of a sealed charter party exe-
cuted by one partner, the court, in upholding the instru-
ment, said : "I bottom my decision upon the broad ground
that a charter party is exclusively a mercantile transaction,
and always in the course of trade." ** It should be noticed
that the inability of a partner to bind his copartner by a sealed
instrument was due to the entire absence of power, and not
merely to the lack of power evidenced in the proper mianner,
viz., under seal.
Exceptions and Qualifications
While the rule is nominally adhered to, the inconvenience
of it has been avoided by the courts in various ways. It
was very early held that one partner could execute under
seal a release of a firm debt. This was an incident to the
implied power of each partner to collect debts.** But a
See ''Partnership;: Deo. Dig. (Key No.) SI 157, HI; Cent. Dig. H
205, 218.
i» STRAFFIN'S ADM'R v. NEWELL, T. U. P. Oharlt (Ga.) 163,
4 Am. Dec. 705. See ''Partnership,** Cent. Dig. K 206.
i« If aU forms of sealed instruments are foreign to ordinary com-
mercial transactions, and hence beyond the scope of a partner's
Implied power, it would seem that the statutory changes abolish-
ing the distinction between sealed and unsealed instruments has
considerably enlarged the implied powers of a partner. 1 Bates,
Partnership, S 413, note.
It has been held that, where a statute gives to notes the status
of sealed instruments, a partner may nevertheless have implied
power to execute such notes. Southard v^ Steele, 3 T. B. Mon.
(Ky.) 438; Montgomery v. Boone, 2 B. Mon. (Ky.) 244. See "Partner-
ship," Deo. Dig, {Key No.) S 1S9; Cent. Dig. ^ 206.
1* ''It is a general principle of law that, where two have a Joint
personal interest, the release of one bars the other; and I camiot
perceive that the case of copartners in trade proves an exception
to the general rule. Each partner is competent to seU the effects, or
to compound or discharge the partnership demands. He is to be
considered as an authorized agent of the firm for all such pur-
poses. Each has an entire control over the personal estate. So, in
like manner, one coexecutor or administrator cannot bind his com>
§ 101) PARTICULAR POWERS 311
mere covenant by one partner not to sue for a partnership
debt does not amount to a release of that debt by the firm.**
An actual release, moreover, must be bona fide made ; if it
can be shown that one partner has executed it in collusion
with the defendant, with the fraudulent intention of pre-
venting his copartners from enforcing a just demand, the
defendant will not be allowed to plead this release as a de-
fense to an action against him.*^
Same — Seal Treated as Surplusage
A further exception is recognized in cases where the seal
which the partner affixes is unnecessary to the validity of
the transaction in question. If one partner puts a seal on
a firm note, the seal may be disregarded, and all the part-
ners held to their ordinary liability.** A seal unnecessarily
affixed to a firm obligation will be treated as mere sur-
plusage, and the partners held as on a note, bill, or simple
contract, as the case may be.**
panlon to an obligation, but he may commit a separate devastayit
and release of a debt" Per Kent, G. J., in Plerson y. Hooker, 3
Johns. (N. Y.) 68, 3 Am. Dec. 467. See, also, Dyer y. Sutherland,
75 111. 583 ; Gillilan y. Sun Mut Ins. Co., 41 N. Y. 376 ; Noonan y.
Orton, 31 Wis. 265; McDONALD y. EGGLESTON, 26 Vt 154, 60
Am. Dec. 303, Gllmore, Cas. Partnership, 383. But see Brayley y.
Goff, 40 Iowa, 76; Gram y. Cadwell, 5 Cow. (N. Y.) 489. See **Part-
nership,*' Deo, Dig. {Key No,) { 148; Cent. Dig, t 2SS,
i« Emerson y. Baylies, 19 Pick. (Mass.) 65; Walmesley y. Cooper,
11 Adol. & E. 216. Cf. Richards y. Fisher, 2 Allen (Mass.) 527. See
** Partnership,*' Dec, Dig, {Key No,) { U8; Cent, Dig, I 2Sd,
IT Gram y. Cadwell, 5 Cow. (N. Y.) 489; Huntington y. Potter, 32
Barb. (N. Y.) 300 ; Brayley y. Goff, 40 Iowa, 76 ; Beatson y. Harris,
^ N. H. 83. See "Partnership," Dec, Dig. {Key No,) f US; Cent
Dig. § 23S,
i«Purylance y. Sutherland, 2 Ohio St 478; semble, chattel mort-
gage, TAPLEY y. BUTTERFIELD, 1 Mete. (Mass.) 515. 35 Am. Dec.
374. See "Partnership;* Dec. Dig, {Key No,) || 157, U6; Cent. Dig.
II 205, 247,
i» EDWARDS y. DILLON, 147 111. 14, 35 N. E. 135, 37 Am. St
Rep. 199, Gilmore, Cas. Partnership, 387 ; Sweetzer y. Mead, 5 Mich.
107 ; Price y. Alexander, 2 G. Greene (Iowa) 427, 52 Am. Dec. 526 ;
Oibson y. Warden, 14 Wall. 247, 20 L. Ed. 797. Cf. Purviance y.
Sutherland, 2 Ohio St 478. For certain further exceptions to the
general rule as to sealed instruments, permitted in bankruptcy pro-
•ceedings, see Halsey y. Fairbanks, 4 Mason, 206, Fed. Cao. No. 5,-
312 POWEKS OF PARTNERS (Ch. 5
Same — Instruments Executed in Presence of Partners
Where one partner executes an instrument under seal in
the presence of his copartners, they being cognizant of the
transaction and offering no objection, the instrument is re-
garded as the deed of all.**
Same — Parol Authority or Assent
Although by the law governing sealed instruments the
agent executing them was required to have sealed author-
ity, still in partnership transactions this requirement was re-
laxed, and a previous oral authority or a subsequent oral
ratification is sufficient to supply the want of express au-
thorization. Such previous authority or subsequent rati-
fication may be implied from the declarations or acts of the
partners, or from the circumstances.**
064; Dudgeon v. O'Connell, 12 Ir. Eq. 566; In re Sauls (D. G.) 6
Fed. 715 ; Ex parte Hodgkinson, 19 Ves. 291. The authority of one
member of a partnership to execute a sealed lease in the name of
the firm will be presumed, where his partner was instrumental In
procuring the lease. Bodey v. Cooper, 82 Md. 625, 34 Atl. 862. See,
also, STRAFFIN'S ADM'R ▼. NEWELL, T. U. P. Charlt (Ga.) 163.
4 Am. Dec. 705. In re Barrett, 2 Hughes, 444, Fed. Oas. No. 1,043,
holding that a partner may execute a power of attorney under seal
In the firm name for the purpose of collecting the firm debts, be-
cause of "the necessity of the case." See ^Partnership,** Dec. Dig.
{Key No.) § 1S7; Cent. Dig. { 205.
ao Fichthom ▼. Boyer, 5 Watts (Pa.) 159, 30 Am. Dec. 300 ; Ball
y. DunsterviUe, 4 Term R. 313 ; Bum v. Burn, 3 Ves. 573. Former-
ly the court held that, if any one of the partners was not so pres-
ent and thus assenting, it would require a formal instrument under
his hand and seal to clothe the partner officiating in the transac-
tion with the requisite authority to bind such absentee, but the
courts are now far less strict Bentzen v. Zierlein, 4 Mo. 417;
Cummins v. Cassily, 5 B. Mon. (Ky.) 74; HARRISON v. JACKSON,
7 Term R. 207. Gilmore, Cas. Partnership, 382; SMITH v. KERR, 3
N. Y. 144: Schmertz t. Shreeve, 62 Pa. 457, 1 Am. Rep. 439; Wil-
cox V. Dodge, 12 111. App. 517; Russell v. Annable, 109 Mass. 72, 12 .
Am. Rep. 665. See ** Partnership," Dec. Dig, {Key No.) | 1S7; Cent.
Dig. I 205.
SI EDWARDS T. DILLON, 147 111. 14, 35 N. B. 135, 37 Am. St
Rep. 199, Gilmore, Cas. Partnership, 387; McDONALD v. EGGLES-
TON, 26 Vt 154, 60 Am. Dec. 303, Gilmore, Cas. Partnership, 383;
Swan T. Stedman, 4 Mete. (Mass.) 548; 1 Am. Lead'. Cas. 446;
SMITH ▼. KERR, 8 N. Y. 144; Wilcox v. Dodjje. 12 IlL App. 517;
Pike v. Bacon, 21 Me. 280, 88 Am. Dec. 259; Pollock y. Jones, 124
§ 102) PARTICULAR POWERS 813
Partner Bound Although Firm is Not Bound
Although the partner, executing a sealed instrument in
the name of the firm without actual authority, may not suc-
ceed in binding his copartners, he may nevertheless bind
himself, either upon the instrument itself, or upon an im-
plied warranty of authority.*"
SAME— POWER TO PAY AND COLLECT DEBTS
102. A partner has implied power to collect debts owed to
the firm, and to pay those which it owes.
Each member of a partnership, in consequence of his
agency, has implied power to accept payment of firm debts,
and to give receipts and releases therefor.** The power
exists, although the firm has been dissolved, and some third
Fed. 163, 61 G. G. A. 556; MILLBR ▼. ROTAL FLINT GLASS
WORKS, 172 Pa. 70, 83 Atl. 850.
In a few jurisdictions it is held that there most be previous sealed
authority or subsequent sealed ratification. Gummlns v. Gasslly, 5
B. Mon. (Ky.) 74 ; Gordon v. Funkhouser, 100 Va. 675, 42 S. E. 677.
See ^^Partnership,** Deo, Dig. {Key No.) IS 197, 157; Cent. Dig, ff
205, 286.
» United States v. Astley, 8 Wash. G. G. 508, Fed. Gas. No.
14,472; Hoskinson y. Bliot, 62 Pa. 393; Van Deusen v. Blum, 18 Pick.
(Mass.) 229, 29 Am. Dec. 582; Skinner v. Dayton, 19 Johns. (N. Y.)
513, 10 Am. Dec. 286; Settle v. Davidson, 7 Mo. 604; Bowker
V. Bnrdekin, 12 L*. J. Exch. 329. But see Hart v. Withers, 1 Pen.
& W. (Pa.) 285, 21 Am. Dec. 382; Brown t. Bostlan, 51 N. G. 1;
Fisher v. Pender, 52 N. G. 488.
See. also, chapter III, § 63, p. 196. Bee ^^Partnership,** Dec. Dig.
(Key No.) §1 1S7, 161; Cent. Dig. §| 205, 255%.
«» Collins V. Collins (Ky.) 83 S. W. 99 ; People ▼. Devlin, 63 Misc.
Rep. 363, 118 N. Y. Supp. 478; Progressive Lumber Co. v. Rogers
(Tex. Civ. App.) 120 S. W. 280; Salmon v. Davis, 4 Bin. (Pa.) 375,
5 Am. Dec 410; Vanderburgh v. Bassett, 4 Minn. 242 (Gil. 171).
He has the power to receive tenders of payment Wyckoff y. An-
thony, 9 Daly (N. Y.) 417 ; Douglas v. Patrick, 3 Term R. 683. And
to give receipts and releases. Gordon v. Freeman, 11 111. 14; Steele
V. First Nat Bank of Joliet. 60 III. 23 ; Henderson v. Wild, 2 Gamp.
561 ; Dyer ▼. Sutherland, 75 111. 583. Such receipts and releases may
be impeached by the firm for fraud. Gordon v. Albert 168 Mass.
150, 46 N. SL 423. For the effect of a fraudulent release on the pow*
314 POWERS OF PARTNERS (Ch. 5
person has been appointed for the purpose of collecting the
outstanding assets.** Nor is the power limited to the re-
ceipt of cash. The partner may receive negotiable paper
in payment, and even goods, if the nature of the firm's busi-
ness and its usage will justify.** But a bill or note made
in the partner's own name will not affect the firm's right
of action against the debtor, unless the partner had actual
authority from the firm to accept a bill so made, or unless
the bill is actually paid ; *• and, similarly, goods which are
accepted in payment must be for the use of the firm, not
for the individual use of the partner.*^
On the same general principles, a partner has implied
power to compromise firm debts, where be acts in good
faith, without fraud or collusion, and with reasonable
care.**
Since a partner has implied power to accept payment of
obligations due the firm, the converse power to pay the
firm debts may also be implied** Another phase of this
er to sue at law on the released claim, see chapter IX, { 194, pp.
660-565. See ^^Partnership," Dec. Dig. (Key No.) §| US, US; Cent,
Dig. t§ 229-2SS}A-
s 4 MAJOR y. HA WEES, 12 111. 298, Gllmore, Cas. Partnership,
403 ; Tyng ▼. Thayer, 8 Allen (Mass.) 391 ; Robblns v. Fuller, 24 N.
Y. 570 ; Glllllan y. Sun Mut Ins. Ck>., 41 N. Y. 876. Not so, however,
if the debt had, to the knowledge of the debtor, been previously as-
signed to an individual partner. Hilton ▼. Vanderbilt, 82 N. Y. 591 ;
Bank of Montreal v. Page, 98 111. 100. See ^'Partnership,'* Dec. Dig,
(Key Nd.) |§ US, U8. 2SS; Cent. Dig. U 229'2S8\(t, 642-644-
asHeartt ▼. Walsh, 75 111. 200; Tomlins v. Lawrence, 8 Moore
& P. 555; Lee v. Hamilton, 12 Tex. 413, 41& ^ree '^Partnership,''
Dec. Dig. (Key No.) 1 14S; Cent. Dig. i 2S0.
a« Hogarth v. Wherley, L. R* 10 0. P. 630. See "Partnership,"
Dec. Dig. (Key No,) { US; Cent, Dig, U 229-235%.
aT FarweU v. St Paul Trust Co., 45 Minn. 405, 48 N. W. 828, 22
Am. St Rep. 742 ; Gregg ▼. James, Breese (111.) 143, 12 Am. Dec.
151. See ^'Partnership," Deo. Dig. (Key ifo.) f 14S; Cent. Dig. U
229-283%.
«• Walker ▼. Yellow Poplar Lumber Co. (Ky.) 35 S. W. 272; Pier-
son V. Hooker, 8 Johns. (N. Y.) 68, 3 Am. Dec. 467; Hawn v. Sev-
enty-Six Land & Water Co., 74 Cal. 418, 16 Pac. 196. Compare, how-
ever, Niemann v. Niemann, 43 Ch. D. 198. See "Partnership," Dec.
Dig, (Key No,) { U8; Cent, Dig. | 2SS.
i»Inne8 Y. Stephenson, 1 Moo. & Ry. 145; Cannon Y. Wildman,
§ 102) PABTIGULAB POWEB8 815
power, namely, the power to mortgage firm property to
pay firm debts, has already been discussed.** These lim-
itations upon the power to mortgage will be found to apply
equally well to the power to pay debts in general. The
firm will be bound by actual payments by one partner, by
his tenders of payment, and by his refusals to pay a cred-
itor uppn demand.** But a partner has no authority to
pay his private debts with partnership ftmds, or out of part-
nership property.** An agreement by one partner, where-
by his own separate creditor is induced to accept firm goods
in discharge of the debt, is not binding on the other part-
ners, who may sue for the value of the property thus turned
over ; nor is it material that the goods would not have oth-
erwise been purchased.**
A situation similar to the one Just described, but essen-
tially different, should be distingfuished : An agreement by
one partner and a third person, whereby the latter pur-
chases firm goods and agrees to pay for them in something
28 Conn. 472; Osborn ▼. Osborn, 86 Mich. 48. See ^'Partnership,'*
Dec. Dig. (Key No.) { US; Cent. Dig. H 229-238%.
»o See ante, chapter V, | 96, p. 294.
•1 Wyckoff V. Anthony, 9 Daly (N. Y.) 417; Douglas v. Patricdc, 8
Term R. 683; Pelrse v. Bowles, 1 Starkie, 323.
The effect of a release by one joint debtor upon the liability of
his co-obligors has been discussed in chapter IV, §§ 70, 80, pp. 220,
258. Bee "Partnership^ Dec. Dig. (Key No,) § 143; Cent. Dig. SI 229-
233%k,
»a JANNET ▼. SPRINGER, 78 Iowa, 617, 43 N. W. 461, 16 Am.
St Rep. 460, Gilmore, Gas. Partnership, 243; Cannon v. Lindsey,
85 Ala. 198, 3. South. 676, 7 Am. St Rep. 38; Blake ▼. Third Nat
Bank of St Louis, 219 Mo. 644, 118 S. W. 641.
If the same person is creditor of the firm and of a separate part-
ner, payments by the latter with partnership funds will be applied
on the firm debt Campbell v. Mathews, 6 Wend. (N. Y.) 551;
Downing v. Llnville, 3 Bush (Ky.) 472. Also, If the same person is
debtor to the firm and to a separate partner, payments by the debtor
will be applied first in discharge of the firm. Baton ▼. Whitcomb,
17 Vt 641 ; Scott ▼. Trent, 1 Wash. (Va.) 77.
See, also, chapter IV, I 80, p. 258> on appropriation of payments.
See ''Partnership;* Dec. Dig. (Key yo.) | 144; Cent. Dig. H 234-^9.
«» Harper v. Wrigley, 48 Ga. 495; Todd v. Lorah, 75 Pa. 156; Cad-
wallader ▼. Kroesen, 22 Md. 200. See "Partnership^* Deoi Dig. (ITey
A'o.) \ Hi; Cent. Dig. S§ 234-239.
316 POWERS OF PABTMBBS (Gh. 5
Other than money, as, for example, labor or goods, is bind-
ing on the firm, provided the labor or goods are of a sort
as would be used within the scope of the firm business and
are supplied for the firm, and without notice of any design
by the partner with whom the contract was made to appro-
priate them for his own private use.**
SAME— POWER TO INSTITUTE AND CONDUCT
LEGAL PROCEEDINGS
108. A partner has implied power to resort to the ordinary
legal proceedings proper for collecting the firm
debts, and for defending suits brought against the
firm; but he has no implied power to submit a
firm controversy to arbitration, nor to confess
judgment on behalf of the firm.
The power to collect debts implies with it a power to
resort to the ordinary legal process proper for that purpose.
Thus one partner may employ attorneys to sue in behalf of
the firm, and may execute a power of attorney under seal
for that purpose, notwithstanding the general rule denying
to one partner the power to execute sealed instruments in
the firm name.*' It is not necessary that the partner should
have the consent of the others in order to sue in the name
of all ; but, if he sues against their consent, he should in-
demnify them against the costs.** Conversely, a partner
i 4 Warder t. Newdigate, 11 B. Mon. (Ky.) 174, 52 Am. Dec. 567:
Lemon v. Fox, 21 Kan. 152; Liberty Say. Bank v. Campbell, 75
Va. 534; White v. Toles, 7 Ala. 569. See **Partner8Mp;' Dec. Dig.
(Key No,) U IV, m; Cent. Dig, || ^ftd-ZBd,
is In re Barrett, 2 Hughes, 444, Fed. Gas. No. 1,043; Wheatley v.
Tutt, 4 Kan. 240. Any partner has the right to use the firm name
in perfecting a mechanic's lien for the firm. Jones v. Hurst, 67
Mo. 568; German Bank v. Schloth, 59 Iowa, 316, 13 N. W. 814. 8ee
^^Partnership" Deo. Dig. (Key No.) % 149; Cent. Dig. §{ t29-2SS^i
**Meo7MniC8' Liene,*' Dec. Dig. {Key No.) 1 155; Cent, Dig. f 185.
••Kuhn ▼. Weil, 78 Mo. 213; Ward ▼. Barber, 1 B. D. Smith
(N. Y.) 423 ; Whitehead v. Hughes, 2 Gromp. & Mv 318. See "^Part-
nership*' Deo. Dig. (Key No.) 1 191; Cent. Dig. l,S50.
f 108) PABTICtTLAB POWERS 817
who Has the implied power to sue on behalf of the firm has
power to defend actions brought against it, and to employ
counsel for the purpose of entering an appearance.** Such
an appearance, however, binds the partners as partners, not
individually; so that a judgment rendered against the part-
nership would not, by virtue of the appearance merely, be
binding upon an individual partner in another jurisdiction,
•who never authorized it.**
Same — Arbitration and Confession of Judgment
The power of a partner to resort to legal process in order
to collect debts owed the firm, and to defend suits brought
against it, does not include proceedings which are unusual.
Thus, a partner cannot, without express authorization, bind
his copartners by the submission of a firm controversy to
arbitration.** The same considerations apply even more
strongly to confessions of judgment by one partner in be-
half of the firm ; the cases uniformly denying the implied
power of the partner to bind others than himself thereby.**
»T Bennett ▼. Stickney, 17 Vt 681 ; Wheatley v. Tutt, 4 Kan.
240. Bee **Partner8Mp;* Deo. Dig. (Key No.) |§ 128, 191, 204; Cent.
Dig. §1 19S, S81.
*8 PhelpB y. Brewer, 9 Onah. (Mass.) 390, 57 Am. Dec. 56. See,
also. Hall y. Lannlng, 91 U. S. 160, 23 L. Ed. 271; Haslet y.
Street, 2 McCord (S. G.) 310, 13 Am. Dec. 724, and note.
For liability of partnership, where one partner commits trespass,
malicious prosecntion, etc., in enforcing partnership demands, see
post, § 109, p. 330. See ** Partnership,** Dec. Dig, (Key No.) f 204;
Cent. Dig. f 581.
s» Buchanan y. Garry, 19 Johns. (N. X.) 137, 10 Am. Dec. 200;
Buchoz y. Grandjean, 1 Mich. 367 ; Fancher y. Bibb Furnace Go., 80
Ala. 481, 2 South. 268 ; Walker y. Bean, 34 Minn. 427, 26 N. W. 232 ;
St Martin y. Thrasher, 40 Vt 460. "The authority to bind a par^
ner to submit to arbitration does not flow from the relation of
partnership; and, when it is relied upon, It must, like eyery other
authority, be proyed either by express eyldence or by such circum-
stances as lead to the presumption of such authority haying been
conferred." See Baron Parke, in Adams y. Bankart, 1 Gr. M. & R.
681, 686. But see Gay y. Waltman, 89 Pa. 453, and Hallack y.
March, 25 III. 48, holding parol submission to arbitration to be yalid.
See, Also, Alexander y. Mulhall, 1 Posey, Unrep. Gas. (Tex.) 764 (1881).
See ^^Partnership," Dec Dig. (Key No.) { 1^8%; Cent. Dig. § 258.
40 MORGAN V. RIGHARDSON, 16 Mo. 409, 57 Am. Dec. 235, Gil-
luore. Gas. Partnership, 370; Hall y. Lanning, 91 U. S. 160, 23 L^
318 POWBBS OF PABTNBBfl (CIl 5
SAME— POWER TO RECEIVE NOTICE
104. One partner baa implied authority to receive notice
for all his copartners as to matters within the scope
of the partnership business, and his authority and
his knowledge is the knowledge of all within the
same limits.
Just as, in the law of agency, notice given to an agent
in the course of his employment will bind the principal, so
notice to one partner of any matter relating to the business
of the firm is notice to all the other members.*^ Thus,
where a firm is the maker of a note or acceptor of a bill,
presentation or demand of payment on one partner is suf-
ficient to charge indorsers.** Or, if a firm is an indorser of
a note or bill, notice of nonpayment or protest served upon
one partner is sufficient to bind the others.** Likewise
Ed. 271; Remington ▼. Cummlngs, 5 Wis. 138; Soper Y. Fry, 37
Mich. 236; Hler v. Kaufman, 134 lU. 216, 25 N. E. 617; Boyd y.
Thompson, 153 Pa. 78, 25 Atl. 709, 34 Am. St Rep. 685. But see, as
to creditors' right to object, McGormick Harvesting Mach. Co. y.
Coe, 53 111. At)p. 488. Nor can one partner giye a cognoyit to pay
the firm debt and costs. Rathbone v. Drakef ord, 4 Moo. & P. 57, and 6
Bing. 375. See "Partnership,*' Deo. Dig, (Key No.) f 150; Cent, Dig,
%\ 259-266.
41 Mechem, Agency, | 718; Tucker y. Cole, 54 Wis. 539, 11 N. W.
703 ; HUBBARD v. GALUSHA, 23 Wis. 398 ; Haywood y. Harmon,
17 111. 477 ; Holbrook v. Wight, 24 Wend. (N. T.) 169, 35 Am. Dec.
607; Miller y. Perrine, 1 Hun (N. Y.) 620; Hubbardston Lumber Co.
y. Bates, 31 Mich. 158; Howland y. Davis, 40 Mich. 545; McClurkan
y. Byers, 74 Pa. 405; Stockdale y. Keyes, 79 Pa. 251. See "Partner-
8hipr Deo. Dig. {Key No.) f 159; Cent. Dig, §{ 298-295.
42 Mt Pleasant Branch of State Bank y. McLeran, 26 Iowa, 306;
Erwin y. Downs, 15 N. Y. 575.
Also, notice to take depositions served upon one partner is suffi-
cient Spaulding y. Ludlow Woolen Mill, 36 Vt 150. Notice of ap-
peal given to one partner is notice to all. MUler v. Perrine, 1 Hun
(N. Y.) 620. Demand upon and refusal by one partner is sufficient
to establish conversion. Nisbet v. Patton, 4 Rawle (Pa.) 120, 26 Am.
Dec. 122. See "Partnership,'' Deo. Dig. {Key No.) U 146, 159; Cent
Dig. SI 254, 29S-295.
4tHume y. Watt, 6 Kan. 84; Nott y. Dauming, 6 La. 684. See
Partnership,'* Deo. Dig. {Key No.) f I46; Cent, Dig. f 254.
M
5 104) PARnCULAR POWERS 819
knowledge of one partner is knowledge of all. For example,
where partners took a mortgage on land, and one partner
knew of a prior mortgage upon it, this was notice to all.**
Or, where a firm bought logs, and then sought to rescind
the contract because they claimed it was represented that
the logs were afloat, they were held, as it appeared that one
partner knew the logs were not afloat, and his knowledge
was binding on all.**
It is only, however, where the partner is acting within
the scope of the firm business and within his authority that
notice to him is notice to his copartners.** Knowledge of
a partner obtained outside the scope of the firm business is
not imputed to his copartners.*^ Where a partner commits
a fraudulent act beyond the scope of the firm business,
which is a fraud upon his copartners as well as upon third
parties, knowledge of such fraud is not chargeable to the
innocent partners.** Or, if a partner misuses trust funds
in the firm business, his guilty knowledge is not imputed
to his copartners.**
«« Watson V. Wells, 5 Conn. 468 ; Herbert ▼. Odlln, 40 N. H. 287.
Bee ""Partnership,** Dec. Dig. (Key Ifo.) f 159; . Cent. Dig. H 299-
295.
«B Hubbardston Lumber Co. ▼. Bates, 81 Mich. 158. Further
cases: Blgelow ▼. Heanlger, 88 Kan. 362, 6 Pac. 693; Tucker ▼.
Bradley, 83 Vt 324. See "Partnership,** Deo. Dig. (Key No.) { 159;
Cent. Dig. U 29S-295. •
4« BIgnold ▼. Waterhouse, 1 M. & S. 255; Coon ▼. Pniden; 25 Minn.
105. See "Partnership,** Dec. Dig. (Key No.) | 159; Cent. Dig. ||
298-^295.
4T German Say. Bank v. Wnlfeknhler, 19 Kan. 60; Atlantic State
Bank of City of Brooklyn ▼. Sayery, 82 N. Y. 291. See "Partner-
ship,** Deo. Dig. (Key No.) i 159; Cent. Dig. §fi 29S''295.
«• GILRUTH v. DECELL, 72 Miss. 232, 16 South. 250, Gilmore,
Cas. Partnership, 401. See "Partnership,** Deo. Dig. (Key No.) 1 15k;
Cent. Dig. § 216.
4» Bienenstok ▼. Ammidown, 155 N. Y. 47, 49 N. E. 321. But see
Randall v. Eneyals, 27 App. Div. 146, 60 N. Y. Supp. 748; Cun-
ningham y. W'oodbridge, 76 Ga. 302. See, farther post, {{ 111, 113,
pp. 833, 337, for discussion of liability of partnership for the fraud
and misconduct of a partner. See "Partnership** Dec Dig. (ITey No.)
I 159; Cent. Dig. H 298-295.
320 P0WBB8 or PABTMBB8 (Oh. 5
SAME— POWER TO MAKE ADMISSIONS AND REP-
RESENTATIONS
105* Bach partner has implied power to bind the firm by
admissions or representations made during the
continuance of the partnership concerning the
partnership afFairs and in the ordinary course of
the partnership business. But the statements or
admissions of one partner, tmless authorized or
ratified, are not admissible as evidence to prove ei-
ther the existence of the partnership or that a
given transaction was a partnership transaction.
Where there has been prima facie proof of the existence
of the partnership, each partner has implied power to bind
his copartners by admissions or declarations made concern-
ing matters within the scope of the partnership business
and within his power as agent for the firm.** Thus, where
one partner, during the continuance of the partnership, ac-
knowledges a debt as due by the partnership, he binds the
firm as by a promise.** Or an admission by a partner that
he set fire to certain firm property is competent to defeat an
action by the partners to recover the insurance/* This
00 Franklin ▼. Hoadley, 116 App. Dlv. 638, 101 N. T. Supp. 874;
Carls ▼. Nlmmons, 92 Mo. App. 66; Oollett ▼. Smith, 143 Mass.
473, 10 N. E. 173 ; Western Assur. Ck>. y. Towle^ 66 Wis. 247, 28 N.
W. 104 ; Munson v. Wickwlre, 21 Conn. 613.
An admission by a dormant partner has been held to be binding.
Kaskaskia Bridge Ck). y. Shannon, 6 IlL 16; Weed ▼. Kellogg, 6
McLean, 44, Fed. Cas. No. 17,346.
As to admissions waiving the statute of limitations after the dis-
solution of the firm, see SAGE y. ENSIGN, 2 Allen (Mass.) 246;
Kallenbaeh y. Dickinson, 100 111. 427, 39 Am. Rep. 47; and post, f
118. Bee *' Partnership,*' Dec. Dig. {Key No.) || 152, 15S, fHS; Cent
Dig. n 272, rrs, 277, 6S0; ^'Evidence,'' Dec. Dig. (Key No.) t 249;
Cent. Dig. H 965-975.
Bi BURGAN y. LYELL, 2 Mich. 102, 66 Am. Dec. 68, Gilmore, Gas.
Partnership, 358. See ''Partnership,'' Dec Dig. {Key No.) | 152;
Cent. Dig. §§ 272, 275; ''Evidence," Dec. Dig. {Key No.) | 2^9;
Cent. Dig. §S 965-975.
. ss Western Assur. Co. y. Towle, 66 Wis. 247, 26 N. W. 104. See
§ 105) FABTICULAB VOWEBa 821
power does not differ materially from that of other agents
to bind their principals by admissions. Just as, in the law
of agency, the existence of the relation of principal and
agent must be shown by other independent evidence before
the admission of the agent will be received, so must it be
proved by satisfactory extraneous evidence that the parties
charged are partners, before the admission or representa-
tion of the alleged partner will have eflfect to bind others
than himself.** Thus a declaration of one man that another
is his partner is not competent to prove a partnership.**
Nor arc the admissions of a partner competent to prove
that a particular transaction is a partnership affair. Thus,
where a firm was sued on a note made by a partner in the
firm name, the plaintiff was not allowed to put in evidence
the statements of that partner that the note was a partner-
ship trajisaction.** Nor are the declarations of a partner
as to the scope of his own authority competent to prove
such authority.**
The effect of an admission or declaration by one partner
is not necessarily conclusive, but is governed by the rules
applicable to admission by agents in general.*^ Where,
"Partnership,*' Dec, Dig. {Key No.) | 152; Cent. Dig. St «7«, «75;
"Evidence^ Dec. Dig. (Key No.) fi 249; Cent. Dig. f| 965-975.
f a Oppenheimer y. GlemmonB (G. G.) 18 Fed. 886; Hahn y. St
aalr Sav. & Ins. Go., 50 111. 456; Union Nat Bank y. UnderhHl, 102
N. Y. 836, 7 N. E. 293 ; Boor y. Lowrey, 103 Ind. 468, 3 N. B. 151. 58
Am. Rep. 519; Reynolds v. Radke, 112 111. App. 575; Taft y.
Ghurch, 162 Mtiss. 527, 39 N. B. 283. But the partner's actual
testimony In the trial, as distinguished from his extrajudicial ad-
missions, to the fact of partnership, is competent First Nat
Bank of Wausau y. Gonway, 67 Wis. 210, 30 N. W. 215. Bee ^'Evi-
dence*' Dec. Dig. {Key No.) | 259; Cent. Dig. f 1009.
»* Hahn v. St Glair Sav. & Ins. Go. 50 111. 456 ; Taft y. Church,
162 Mass. 527, 39 N. B. 283. Bee "Partnership,** Dec. Dig. {Key No.)
S 46; Cent. Dig. ^ 69-11.
5 5TUTTLiE V. GOOPBR, 5 Pick. (Mass.) 414; Lock wood y. Beck-
with, 6 Mich. 168, 72 Am. Dec. 69. Bee "Partnership,"* Dec. Dig. {Key
tlo.) % 46; Cent. Dig. n 69-71; ""Evidence** Deo. Dig. {Key No.) t
249; Cent. Dig. U 965-975.
s« Thomas y. Harding, 8 Me. 417; Heifron y. Hanaford, 40 Mich.
306. Bee "Partnership," Dec. Dig. {Key No.) f 152; Cent. Dig. || 272,
27S; "Evidence," Deo. Dig. {Key No.) | 249; Cent. Dig. §§ 965-975.
•THoUis y. Burton, 8 Gh. 226; RAPP y. LATHAM, 2 B. ft Aid.
Gil.Pabt. — 21
322 POWERS OF PABTNBB8 (Ch. 6
however, third persons have been induced, by representa-
tions within the implied authority of the party making
them, to alter their condition to their disadvantage, a con-
clusive estoppel against the firm may be raised. Where
one partner representee! that certain flour was bought on
account of a third person, and that the firm's interest in it
was limited by the amount advanced by them in making
the purchase, the members of the firm were not allowed to
assert their ownership as against one who had purchased
of such third person.** So, also, where one partner receives
for his firm plaintiff's money, representing that he will in-
vest it in a particular mortgage and paying the plaintiff
sums from time to time as interest thereon, the firm is es-
topped to deny the representations."
SAME— MISCELLANEOUS POWERS '
106. In addition to the foregoing enumerated powers, there
are various miscellaneous powers which are usu-
ally incident to every partnership. The nature and
extent of these powers are to be determined by the
facts and circumstances of each particular part-
nership.
It remains only to mention a few more instances of the
powers of partners, which, while not important enough for
extended discussion, are governed by no different principles
than those already mentioned. A partner has power to bind
the firm by an account rendered,** by varying a contract
795. See ''Partnership,*' Dec. Dig. {Key No,) f 152; Cent. Dig. H ^2*
27S; ''Evidence;* Deo. Dig. {Key No.) | 2i9; Cent. Dig. || 965-975.
BsBemls v. Becker, 1 Kan. 226. See "Partnership;* Dec. Dig.
(Key No.) H 152, 155, 156; Cent. Dig. U 272, 275, 278-281.
B» Blair v. Bromley, 2 Phillips, 854; Grlswold v. Haven, 25 N.
Y. 5d5, 82 Am. Dec 880; Ooleman y. Pearce, 26 Mimi. 123, 1 N. W.
84& See "Partnership,** Deo. Dig. (Key No.) U 152, 155, 156; Cent.
Dig. II 2rt2, 27S, 278-281.
•0 BURGAN v. LYELL, 2 Mich. 102, 55 Am. Dec. 63, Gllmore, Cas.
Partnership, 358; Cady ▼. Kyle, 47 Mo. 846; Gullck v. Gullck,
14 N. J. Law, 578; Fergusson ▼. Fyffe, 8 Clark ft F. 121. Where one
§ 106) PARTIOULAB POWBBS 823
previously made by all,** by the appointment of an agent
or servant,**' by assenting to a deed of a debtor for the ben-
efit of his creditors,** by assenting to a transfer of a debt,**
by a penalty,** by accepting security for a debt,** by insur-
ing firm property, by settling the loss with the insurance
company, or by consenting to the cancellation of a policy.*^
All these are within the implied powers of a partner.
firm succeeds another, a statement of the indebtedness of each of
the firms, rendered to third persons during the existence of the
new firm, is as to each firm binding on one who, as a partner, is
individually liable for the debts of both firms, when such state-
ment is so made by one acting as his managing agent In both firms
during their existence. Waite ▼. High, 96 Iowa, 742, 65 N. W. 807.
Bee ""Account Stated^' Cent. Dig. t 20.
•1 HUlock V. Traders* Ins. Co., 54 Mich. 532, 20 N. W. 571; Leiden
y. Lawrence, 2 New Reports, 283. But see Detroit v. Bobinson,
42 Mich. 198, 8 N. W. 845; Horn ▼. Newton City Bank, 82 Kan.
518, 4 Pac 102Z Bee '"Partnership;* Deo. Dig. (ICey Vo.) % 159;
Cent. Dig. f 21S.
•2 Durgin T. Somen, 117 Mass. 55 ; Mead v. Shepard, 54 Barb.
(N. Y.) 474; BURGAN v. LYELL, 2 Mich. 102, 55 Am. Dec 53,
Gilmore, Gas. Partnership, 858; Sweeney v. Neely, 58 Mich. 421, 19
N. W. 127; Burleigh ▼. White, 70 Mei 180; Barcroft ▼. Ha worth,
29 Iowa, 462. Bee ""Partnership,'* Deo. Dig. (Key No.) f HO; Cent.
Dig. I 212.
••Dudgeon v. O'Gonnell, 12 Ir. Eq. 566; Morans v. Armstrong,
. Arms., M. & O. 25. Bee ""Partnerehip,** Deo. Dig. (Key No.) |i 125^
164; Cent. Dig. fi| 190^00.
•«Beale ▼. Caddick, 2 HurL ft N. 826; Backhouse v. Charlton,
8 Gh. Div. 444.
•B Beckham v. Drake, 9 Mees. & W. 79.
••Tomllns v. Lawrence, 8 Moore & P. 555. Bee ^^Partnership,**
Deo. Diq. (Key Jfo.) | US; Cent. Dig. i 2S0.
•f Graves v. Ins. Co., 2 Cranch, 439, 2 L. Ed. 824; Clement v.
Fire Ins. Asso., 141 Mass. 298, 6 N. £3. 847; Hillock v. Traders' Ins.
Co., 54 Mich. 581, 20 N. W. 571 ; BROWN v. HARTFORD FIRE IN&
CO., 117 Mass. 479, Gilmore, Gas. Partnership, 151; Hunt v. Royal
Assur. Co., 5 Maule & S. 47. Bee ""Partnership,** Deo. Dig. {Key No.)
H 12S-m; Cent. Dig. U 190^00; ^"Insuranoe;* Cent. Dig. i 1342.
32^4 POWBRS OP pabtnbA (Gh. 6
POWER TO SUBJECT FIRM TO TORT LIABILITY
107. A partner, acting in the ordinary course of the busi-
ness of the firm, or beyond it, if with the express
or implied authority of his copartners, may render
his copartners liable in tort for any loss or injury
caused by such action to any person not a member
of the firm, or for any penalty incurred by any
wrongful act or omission of such partner.
In General
The law of partnership with respect to the powers of
partners to bind one another is generally recognized as
governed by the doctrines of the law of agency. Conse-
quently the general scope of the business, which has been
adopted from the law of agency to mark the limitations on
the partner's implied power to bind his copartners in con-
tract, also applies to the liability of the firm for the torts
of a partner. When a tort is committed by a partner act-
ing within the scope of the firm business, the partners are
jointly and severally liable for the consequences of such
tort.** Thus, where one partner borrows a horse for the
use of the firm business, and negligently loses it, the owner
may recover therefor against his copartners.** Or where
one partner, while driving in the course of the firm busi-
ness, negligently ran over the plaintiff, each partner is li-
••Helm ▼. McOaaghan, 32 Miss. 17, 66 Am. Dec 588; Hess t.
Lowrey, 122 Ind. 225, 28 N. B. 156, 7 Ia R. A. 90, 17 Am.*St Rep.
855; Wood v. Lnscomb, 23 Wis. 287. See an exhaastlye note In
61 L^ R. A. 463-496.
The English Partnership Act of 1800, { 10, provides: "Where,
by any wrongful act or omission of any partner acting in the or-
dinary course of th^ business of the firm, or with the authority of
his copartners, loss or injury is caused to any person not being a
partner in the firm, or any penalty is incurred, the firm Is liable
therefor to the same extent as the partner so acting or omitting to
act" Bee *'Partner»Mp,'' Dee. Dig. (Key No.) ff 155, 174; Cent
Dig. H 274-S77, S06.
•» WItcher t. Brewer, 49 Ala. 119. See "Partnership,** Dec Dig.
(Key No.) §§ 15S, 174; Cent. Dig. |f 274, 906.
§ 107) POWER TO SUBJECT TO TOST LIABILITY 825
able.'* Sor alsp, a firm of butchers, one member of which,
in furtherance of the partnership, places poisoned meat
where dogs might reasonably be expected to get it, is lia-
ble to an owner of a dog which dies from eating such
meat.^* If the tort is committed by the partner in the ordi-
nary course of the firm business, the others are liable there-
for, even though they may have used every effort to pre-
vent the wrong, or may have expressly forbidden it/*
On the other hand, the firm will not be liable for the torts
of a partner committed while acting outside of the scope
of his authority.''* Thus a copartner is not responsible for
the conversion of a third person's property by one partner
to his own individual use.''* Nor is it within the ordinary
course of business of a drug firm to give away drugs, so
that any liability for the negligence of the partner mixing
the drugs is his aloneJ*
TO CHAMPION T. BOSTWICK, 18 Wend. (N. Y.) 175, 81 AnL Dec.
376. See '* Partnership,*' Deo. Dig. {Key No.) H 15S, 174; Cent. Dig.
H 21 J,, 906.
71 Dudley v. Love, 60 Mo. App. 420. See **Partner8hip,** Dee. Dig.
{Key No.) U 15S, 174; Cent. Dig. If «7i-«77, S06.
72 Collman v. MUls, [1897] 1 Q. B. 396: Limpus v. London General
Omnibus Co., 1 H, & C. 526; ATTORNEY GENERAL v. STRANY-
FOBTH, BTinb..97. See "^Partnership;* Dec. Dig. {Key No.) M 155,
174; Cent. Dig^%% 27-^-277, SOS.
78 Stock well V. United States, 3 Cliff. 284, Fed. Cas. No. 18,466;
Gooley, Torts, pp. 533, 536. See ''Partnership,** Dec. Dig. {Key Noi
U 153, 174; Cent. Dig. |S 27^-277, 306.
74 Stokes V. Burney, 3 Tex. Civ. App. 219, 22 S. W. 126; Town-
send V. Hagar, 19 C. C. A. 256, 72 Fed. 949. Even though had the
tort-feasor not been connected with the firm, he might not have been
in a position to commit the wrong. Sherwood v. Marwick, 5 Me.
295; PIERCE v. JACKSON, 6 Mass. 242. Cf., also. Manufacturers'
& Mechanics' Bank v. Gore, 15 Mass. 75, 81, 8 Am. Dec 83; Reyn-
olds V. Waller's Heir, 1 Wash. (Va.) 164. See "Partnership,** Dec
Dig. {Key No.) || 153, 174; Cent. Dig. %^ »7^«77, 306. •
75Gwynn v. Duffield, 66 Iowa, 708, 24 N. W. 523, 55 Am. Rep.
286. But all the members of a firm of lawyers or doctors are liable
for the negligent advice furnished for pay by one of them to a client
of the firm. Blyth v. Fladgate, [1891] 1 Ch. 337; Haley v. Case,
142 Mass. 316, 7 N. B. 877 ; Hess v. Lowrey, 122 Ind. 225, 23 N. E.
156, 7 L^ K A. 90, 17 Am. St Rep. 355. See, also, Rhodes v. Moules,
[1895] 1 Ch. 236; Dudley v. Love, 60 Mo. App. 420. See "Partner-
ship;' Dec. Dig. (Key No.) f§ 153, 174; Cent. Dig. {{ 27^277, 306.
326 POWERS OF PARTNERS (Ch. 5
While each partner is agent for his copartners, and binds
them by his acts, he also binds himself as principal. The
agency is peculiar, in that the partner is both an agent and
a principal. For this reason the doctrine of agency known
as the "fellow servant rule" does not apply where one part-
ner negligently injures an employ^ of the firm while work-
ing with him. Both partners are liable for the injuries thus
inflicted.^*
Where a partner expressly authorizes the commission of
a tort, he is, of course, liable, though the tort be beyond the
scope of the business of the firm. Subsequent adoption of
the wrongful act of one partner, or receipt of its benefits,
will render the other partners equally liable.^* Where part-
ners join in the commission of a tort, they arb liable as
joint tort-feasors, and not because of being partners.**
Same— Willful Tort
It is sometimes said that a firm is not liable for the will-
ful tort of a partner ; but an examination of the cases makes
it clear that, if the firm is relieved from liability in such
situations, it is not because the tort in question is willful,
but because, as in the case of a malicious arrest, for ex-
ample,^* by one partner, it is outside of the scope of the
partnership business. While willful acts tend to fall out-
side the scope of a partner's power, nevertheless, if, while
acting within the scope of his authority, a partner will-
f ASHWORTH ▼. STANWIX, 8 B. & B. 701, 7 Jur. N. S. 467.
See '*Partner8hipr Deo. Dig. (Key No.) |§ 163, J74; CeM. Dig. %%
i7Jh277, 306.
TT D>arant t. Rogers, 87 111. 508; United States t. Baxter (O. G.)
46 Fed. 850; Blenenstok y. Ammldown, 11 Misc. Rep. 76^ 2& N. Y.
Supp. 593. A subsequent approyal will not render a partner liable
for a trespass by his copartner, unless the taking of property which
constitutes the trespass was available to the firm. Grand ▼. Van
Vleck, 69 111. 47& See '^Partnership,'' Deo. Dig. (JTey No.) || 153,
174; Cent. Dig. SS «7|-«77, 306.
T8 Graham y. Meyer, 4 Blatchf. 129, Fed. Gas. No. 6,673, 24 Meyer,
Fed. Dec. 131. For parties to action ex delicto against a firni« see
ante, chapter IV, | 75, p. 236, and post, chapter IX, { 181, p. 549.
See •^Partnership,'* Deo. Dig. {Key No.) H 153, 174; Cent. Dig. |i
B74-1^7, 306.
T» See post, { 109, p. 880.
§ 108) POW£B TO SUBJECT TO TOBT UABIIilTT 827
fully causes injury to anotiier, his copartners are liable. If,
for instance, one partner in an omnibus transfer firm, while
driving a coach, should willfully run into his competitor's
coach, in order to prevent him from picking up a particular
passenger whom he himself desired, the willfulness of the
one partner's act would not per se relieve his copartners
from liability.'*
SAME— ILLEGAL ACTS— PENALTIES AND
CRIMES
108. Whether innocent partners are civilly liable for illegal
acts or omissions of a copartner in the course of
the firm business is a question on which the cases
are divided* Some hold that an illegal act is per
se beyond the scope of the firm business, and
hence innocent partners are not civilly liable for
it; others hold that an illegal act or omission
may occur in the performance of acts within the
scope of the firm business, and, if so> all the part-
ners are civilly answerable therefor.
Except in the case of certain statutory crimes, a part-
ner is not criminally liable for the acts of hia co-
partner, unless he expressly or impliedly author-
ized theuL
Illegal Acts
A leading case has held that acts which are illegal as
being contrary to a statute will not be regarded as within
the scope of the business, so as to charge the other part-
ners by construction merely.'* In this case the court re-
soLlmpus T. London General Omnibus Co., 1 H. & C. 626; Mor&-
ton ▼. Hardem, 4 B. & C. 223, 10 E. G. L. 316; CHAMPION v.
BOSTWICK, 18 Wend. (N. Y.) 175^ 31 Am. Dec. 876.
A full discussion of liability of a principal for the willful torts of
his agent will be found in works on Agency. See Tiffany on Agen-
cy, pp. 269-274. Bee '*Partner8Mp» Deo. Dig. {Key No.) §f 15S, 174;
Cent. Dig. §{ £71-877, S06.
•1 Graham t. Meyer, 4 Blatchf. 129, Fed. Cas. No. 5,673. See Bur*
328 POWERS or PARTNERS (Ch. 5
fused to hold to liability in coiyrersion the innocent mem-
bers of a partnership whose business was lending money,
and for whose purposes one partner had taken a chattel
mortgage on a steamboat to secure a usurious loan void by
statute.** If the innocent copartners are not liable, the true
ground of their immunity is, not because the act is illegal,
but because it is beyond the scope of the partnership busi-
ness, and hence beyond the partner's power. Illegal acts
are quite likely to be outside the scope of the firm business ;
but illegality per se does not make an act unauthorized.
Just as in the case of willful or malicious torts, it is entirely
possible for them to be committed by a partner while act-
ing within the scope of his power. It would seem, there-
fore, that for the act or omission of a partner in the course
of the firm business each member of the firm should be civ-
illy liable, whether that act be negligent merely, or willful,
or illegal."* Thus in Tenney v. Foote ■* a firm was held li-
able in tort where one partner, in the firm name, made an
illegal option or gaming contract for trading on the board
of trade. Similarly it is not necessary for a member of a
partnership which is conducting a quarrying business to
assent in his partnership capacity to the firing of a blast, to
render himself liable for the violation of a municipal ordi-
nance forbidding such firing.**
It must be recognized, however, that there are many
dick. Torts (2d Ed.) pp. 212-214, for a criticism of this holding.
See ''Partnership,'* Dec, Dig. (Key yo.) i 153; Cent, Dig, i 274,
8« See, also, Schreiber v. Sharpless (D. a) 6 Fed. 175. See ''Part-
nership," Dec. Dig, {Key No,) §$ 153, Ilk; Cent. Dig, {{ 27f-e76, 306.
"ATTORNEY GENERAL v. STRANYFORTH, Bunbury, 07;
StockweU v. United States, 18 Wall. 531, 547-^8, 20 L. Ed. 491;
Warner v. Griswold, 8 Wend. (N. Y.) 665 ; Lockwood v. Bartlett, 180
N. Y. 340, 29 N. E. 257 ; Grnmless y. Sturgess, 6 Heisk. (Tenn.) 190 ;
AUen y. Leighton, 87 Me. 206, 32 Atl. 877; Bayles y. Newton, 50
N. J. Law, 549, 18 Ati. 77; Hyme y. Erwln, 23 S. 0. 226, 55 Am.
Rep. 16; I)yer y. Monday (1895) 1 Q. B. 742.
"In almost eyery action for negligent driying, an illegal act is
imputed to the seryanf Per Byles, J., In Limpus y. London Gen-
eral Omnibus Co., 1 H. & G. 526; 541. See "Partnership,** Dec Dig,
{Key No,) || 153, IH; Cent. Dig, S§ £74-277, 306.
•*95 lU. 99. See "Partnership;* Cent, Dig,'i 2H.
»• City of Spokane y. Patterson (1907) 46 Wash. 93, 89 Pac. 402,
g 108) POWER 'to subject to tort LIABI1.ITT 329
cases apparently to the effect that illegal acts are per se
beyond the scope of a partner's power, and hence do not
subject innocent copartners to liability. "An agency or au-
thority to a partner to violate the provisions of a public
statute cannot be implied ; ' nor can it be implied that such
illegal act is within the scope of the partnership business,
which could only exist for lawful purposes." •• Thus one
partner was held not liable for the penalty imposed by stat-
ute for "willfully and knowingly" cutting trees of another
person, when this was done without his consent or knowl-
edge by his copartner.**
With respect to the liability of partners for violations of
liquor laws by one partner, there is considerable conflict of
authority, the majority relieving the nonacting partner from
liability, unless the act was done with his authority or as-
sent. But where the statute prohibits the act in question
absolutely, whether by one's own hand or another's, all the
partners will be liable.'*
Same—Crimes
The mutual agency of partners is not sufficient to render
one criminally liable for the acts of the other, though done
in the course of the partnership business.** One partner
may be civilly liable for the other's fraud, but he cannot be
♦>
8 li. R. A. (N. 8.) 1104, 123 Am. St Rep. 021. See *'Partner8Mp,
Dec. Dig. (Key No.) H 15S, 17^ 175; Cent. Dig. H 274-277, 306, 307.
86 Hutchlns y. Turner, 8 Humph. (Tenn.) 415; Marks y. Hast-
ings, 101 Ala. 165, 13 South. 297 ; Martin y. Simklns, 116 Ga. 254,
42 S. E. 483 ; Rosenkrans y. Barker, 115 lU. 331, 3 N. E. 93, 56 Am.
Rep. 169; Titcomb y. James, 57 HI. App. 298; Bemhelmer y. Beck-
er, 102 Md. 250. 62 AU. 526, 3 L. R. A. (N. S.) 221. Ill Am. St. Rep.
356; Noblett y. Bartsch, 31 Wash. 24, 71 Pac. 551, 96 Am. St Rep.
886. See, further, post, pp.330, 331. Bee ^^Partnership;* Dec. Dig,
(Key No.) §{ 153, 174. i75; Cent. Dig. Sfi 274-276, 306, 307.
8T WUliams y. Hendricks, 115 Ala. 227, 22 South. 439, 41 L. R. A.
650, 67 Am. St Rep. 32. See ** Partnership," Dec Dig. (Key No.) f§
153, 174; Cent. Dig. §f 274-277, 306.
88 Williams y. Hendricks, supru. Elaborate annotations to the
case will be found in 41 L. R. A., at pages 661 and 664. See "In-
toxicating Liquors;* Dec. Dig. (Key No.) $ 171; Cent. Dig. f 185.
s*Acree y. Com., 13 Bush (Ky.) 353; Robinson v. State, 38 Ark.
641 ; Whltton *y. State, 37 Miss. 379. See ^^Partnership;* Deo. Dig.
(fey No.) I 175; Cent, Dig. f 307.
3d0 POWERS OF PARTNERS (Ch. 5
arrested for it.'* In order to be criminally liable, the non-
acting partner must either assent to or participate in the
crime.**
SAME— FALSE ARREST AND MALICIOUS PROSE-
CUTION
109. One partner will not make the others liable for a false
arrest or a malicious prosecution, which he insti-
tutes for the suspected larceny of partnership prop-
erty, imless they advise or participate therein, and
then only in their individual capacity.
It is well settled, in carrying on ordinary legal proceed-
ings for the collection of firm debts and the protection of
firm property, a partner acts within the scope of his power.
For his misconduct in this connectibn all the partners are
liable, as where one partner, in attempting to collect a firm
debt, causes the goods of the third party to be levied upon,
instead of the debtor's goods,** or where he seizes the prop-
erty of a firm debtor on a void judgment against him.** He
would likewise seem to be acting within the scope of the
powers when he causes the arrest or the prosecution of a
person suspected of stealing the firm property. The fact
that he is prompted by malicious motives should not take
the act, otherwi3e authorized, outside his authority.**
While on principle the partners should be liable for ma-
licious arrests or malicious ' prosecutions caused by one
partner, it must be recognized that the authorities are prac-
•oMcNeely t. Haynes, 76 N. a 12S; Watson y. Hlnchman, 42
Mich. 27, 3 N. W. 236. See ** Partnership,** Dec Dig. {Key N4>.) i
207; Cent. Dig. f 359,
•1 See Clark & M., Crimes, 395.
•s Kuhn T. Well, 73 Mo. 213. Bee ^'Partnership;* Deo, Dig. ^Key
No.) II 153, 174; Cent. Dig. || S74-277, 306.
•» Rolfe ▼. Dudley, 58 Mich. 208, 24 N. W. 657. See '^Partnership,**
Deo. Dig. (Key No.) || 153, 174; Cent. Dig. || 274, 306.
•« Staples T. Schmld, 18 R. I. 224, 26 AtL 193, 19 L. B. A. 824.
See '^Partnership,** Deo. Dig. (Key No.) | 153; Cent Dig. | 274;
^'Malicious Prosecution,** Deo. Dig. (^ey No.) i 4^; Cent. Dig. i 83.
§ 109) FOWEB TO SUBJECT TO TOKT LIABILITT 331
tically unanimous in holding the contrary. Thus a partner
in an ordinary mercantile house has no implied authority
to bind his copartners by his acts in detaining and search-
ing a customer suspected of having stolen firm property.'*
Nor is one partner liable for a malicious prosecution insti-
tuted by his copartner on a charge of larceny.** Nor on an
attachment sued out by his copartner maliciously and with-
out probable cause.** With respect to cases of arrest and
malicious prosecution, the courts proceed upon the theory
that the partner, in bringing suspected criminals to justice,
acts not in the performance of any duty owed his copart-
ners, but the community as a whole, and therefore his co-
partners are not liable. The termination of the prosecution
in the defendant's favor imposes no liability on the firm,
although the charge was stealing the property of the firm.**
If, however, a partner advises, directs, or participates in an
arrest, although he may not have directly caused it, he will
be equally liable in his individual capacity with the partner
•s Bemheimer y. Becker, 1Q2 Md. 250, 62 Atl. 526^ 8 L. R. A. (N.
S.) 221, 111 Am. St Rep. 356; Rosenkrans ▼. Barker, 115 111. 831,
3 N. E. 08, 56 Am. Rep. 169. See ** Partnership,** Dec. Dig. {Key No,)
{§ 153, 174; Cent. Dig. Sf IB74, 306; ^FaUe Imprisonment,** Deo, Dig.
{Key No.) 1 15; Cent. Dig. |§ 61-63.
•• Marks ▼. Hastings, 101 Ala. 165, 18 South. 297. See "^Partner-
ship,** Deo. Dig. (Key No.) || 153, 174; Cent. Dig. H ^if 306; **M^
lupous Prosecution,** Deo. Dig. {Key No.) S 42; Cent. Dig. | 85.
•T Swenson y. Erlckson, 90 111. App. 358.
It has been held, howeyer, that a partnership may be sued as such
in an action for malicious arrest, when the process was sued out in
the interest of the partnership, and tmder the direction of all the
members of the partnership. Page y. GitizeniE^ Banking Co. (1900)
111 Ga. 73, 86 S. E. 418, 61 L. R. A. 468, 78 Am. St Rep. 144, and
note. See ^^Partnership,** Dec Dig. (Key No.) |S 153, 174; Cent.
Dig. §§ 274, 306; **Malicious Prosecution,** Deo. Dig. (Key No.) S
42; Cent. Dig. | 83.
99 Kirk y. Garrett, 84 Md. 383, 85 Att. 1089; Tarrell y. Frledland-
er, 63 Hun, 254, 18 N. Y. Supp. 215; Marks y. Hastings, 101 Ala.
165, 13 South. 297; Gilbert y. Emmons, 42 lU. 143, 89 Am. Dec. 412;
Rosenkrans y. Barker, 115 111. 331, 8 N. E. 93, 56 Am. Rep. 169.
See exhaustiye note in 51 Ia R, A. 463. See ^^Partnership,** Dec. Dig.
(Key No.) |ft 153, 174; Cent. Dig. fiS 274, 306; "False Imprison,
ment,** Deo. Dig. (Key No.) | 15; Cent. Dig. || 5-^7; "Malicious
Prosecution,** Dec Dig. (Key No.) | 42; Cent. Dig. U 83-86.
332 P0WBB8 OF PARTNERS (Ch. 5
who does; but mere passive knowledge of the prosecution
will not be enough to render him liable.®*
SAMB— DEFAMATION
110. Each partner is liable for defamatory statements made
by one partner during the continuance of the part-
nership and in the ordinary course of the partner-
ship business.
•I
In order that the member of a firm may be held respon-
sible for defamation by one partner, it is only necessary
that the defamatory statements be made to aid the firm
business. Accordingly partners are jointly liable for state-
ments made by one of them in derogation of a competitor.
"Each of the partners is an agent of the partnership as an
entirety, and if, in the course of that business, he injures
the business of another by slander, the partnership is liable
therefor, just as it might be for any other tort by any other
agent." * The partners in a firm publishing a newspaper
are all liable for the defamatory matter contained in arti-
cles prepared and printed by one.* The malicious intention
' of the partner guilty of the defamation is no defense to his
copartners, even in a jurisdiction where by statute the truth
of defamatory statements maliciously made cannot be
pleaded by the defendant.* If, however, the defamatory
statments are made by a partner while acting outside
the scope of the firm business, the innocent copartners are
••Gilbert t. Emmons, 42 111. 143, 89 Am. Dec. 412; Kirk ▼. Qar-
rett, 84 Md. 383, 35 Atl. 1089. Bee ^'Partnership," Dec. Dig. {Key
No.) §1 15S, IH; Cent. Dig. §{ S74, S06; '*FaUe Imprisonment,** Deo.
Dig. (Key No.) S 15; Cent. Dig. §§ 61-6S.
1 HANEY MFG. CO. v. PERKINS, 78 Mich. 1, 43 N. W. 1073, Gil-
more, Gas. Pai'tiiership, 396. See '^Partnership** Deo. Dig. {Key No.)
H 15S, IH: Cent. Dig. U 274, S06.
s McDonald v. Woodruff, 2 DiU. 244, Fed. Cas. No. 8,770. See
^'Partnership^ Dec. Dig. {Key No.) H i5$, 174; Cent. Dig. H 274.
soe.
t Lothrop T. Adams, 133 Mass. 471, 43 Am. Rep. 528. See "Part-
nership,** Dec Dig. (Key No.) SS 153, 174; Cent. Dig. H B74, 306.
§ 111) POWER TO SUBJBCT TO TORT LIABILITT 333
not liable. In such case only those actually participating
in the slander or authorizing it, can be held/
SAME— FRAUD AND MISREPRESENTATION
111. All the partners are civilly liable for fhe frauds coix^
mitted by a copartner in fhe course of the trans-
actions and business of the partnership, even
though they have no connection with, knowledge
of, or participation in, the fraud.
The liability of a partnership for the frauds and misrep-
resentations of its members, in the course of the partner-
ship business, is governed by the same doctrines applicable
in the law of agency. By the association of partnership
each member holds out his associate to be worthy of con-
fidence in their copartnership dealings. Accordingly, if a
partner makes a false representation as to the solvency of a
third person, by means of which an innocent third person
is induced to accept the note of such third person in pay-
ment of goods purchased for the firm, every member of. the
firm is liable in an action of fraud for the damages result-
ing.* So, also, where a member of a firm engaged in selling
pelts fraudulently substituted different and inferior pelts
from the ones actually sold, his copartner was held liable.*
ft
« Woodllng T. Knickerbocker, 31 Minn. 268, 17 N. W. 887 ; Blyth
V. Fladgate, [1891] 1 Ch. 337. See "Partnership," Dec. Dig. {Key No,)
H 15S, 174; Cent. Dig, §§ 274, ^06; "Libel and 8lander;' Cent. Dig.
§ 17$.
» HawklDs y. Appleby, 2 Sandf. (N. Y.) 421 ; Tenney t. Foote, 95
lU. 09; Peckham Iron Co. t. Harper, 41 Ohio St. 100. See generaUy,
Banner v. Schlessiiiger, 100 Mich. 262, 67 N. W. 116; CHESTER v.
DICEERSON, 54 N. Y. 1, 13 Am. Rep. 550; Gilmore, Cas. Partner-
ship, 136; GUI V. First Nat Bank (Tex. Civ. App.) 47 S. W. 751.
Bee ^^Partnership,*' Deo. Dig. {Key No.) H 15S, 174; Cent. Dig. f§
276, 277, 306.
• WOLF y. MILLS, 66 111. 360, Gilmore, Gas. Partnership, 397.
In CHESTER y. DIOKERSON, 54 N. Y. 1, 11, 13 Am. Rep. 560,
Gilmore, Cas. Partnership, 136, the court said: '*It is well settled
that the firm is, bound for the fraud committed by one partner in
the coarse of the transactions and business of the partnership, even
S34 powBBS or partners (Ch. 5
The firm will, however, not be liable for a fraud committed
by a partner on his own individual account.^ Similarly,
where a partner, in attempting to sell, not partnership
goods held for the purpose of sale, but the interest of a co-
partner in the firm, makes fraudulent representations to the
prospective purchaser, the copartner whose interest is sold
will not be liable therefor, unless he instigates or approves
of them, or unless the partner making the representations is
actually his agent*
SAME— CONVERSION AND MISAPPLICATION OP
PROPERTY
112. One partner renders his copartners liable: (a) Where,
while acting within the scope of the partnership
business^ he wrongfully converts the property of
another; (b) where, while acting within the scope
of his apparent authority, he receives the money
or property of a third person and misapplies it;
(c) where he misapplies money or property re«
ceived by the firm in the course of its business,
while such money or property is in the custody of
the finxu
Conversion of Property
If, while acting within the scope of his authority, a part-
ner deals with property in a way amounting to a conversion
of it, all the partners are liable. Thus all the members of a
partnership were held responsible for staves made out of
timber unlawfully cut by one partner on the plaintiff's land,
when the other partners haye not the slightest connection with, or
knowledge of, or participation in, the frand.** See "PartnerehiPf"
Dec. Dig. (Key No.) H 153, 174; Cent. Dig. §| rtS, 277, $06.
f Sherwood ▼. Marwick, 5 Me. 295; PIERCE t. JACKSON, 6
Mass. 242. Compare, also, Manufacturers' & Mechanics' Bank ▼.
Gore, 15 Mass. 75, 81, 8 Am. Dec. 83; Boardman y. Gore, 15 Mass.
331 ; Reynolds v. Waller's Heir, 1 Wash. (Va.) 164. Bee ^'Partner-
shipr Dec. Dig. {Key No.) |§ 153, 17 i; Cent. Dig. if 275, £77, 306.
8 Schwabacker y. Riddle, 84 lU. 517. Bee ''Partnership;* Dec Dig.
{Key No.) H 153, 174; Cent. Dig. f| 276, 277, 306.
i 112) POWBR TO SUBJECT TO TORT LIABILITT 335
sold by such partner to the firm, and afterwards resold by
it.* So, where one partner illegally seized the plaintiff's
cotton, though the other partner took no part in the sei-
zure, both were held liable for punitive damages.** So,
also, if one partner buys with partnership funds the prop-
erty of the plaintiff, wrongfully attached while in another's
custody as the property of third persons, all the partners
are liable for the conversion.**
Misapplication of Money or Property
With respect to the misapplication or misappropriation
of the property of third persons, the important question for
determination is whether the partner, when he received the
money or property, was acting within the scope of his au-
thority. If it is within the scope of the firm business, or
within the authority of a partner to receive the money or
property, then all the partners are liable for any misappli-
cation or misappropriation ; otherwise not. Thus one mem-
ber of a firm of attorneys received money from the plain-
tiff to be invested, and misappropriated it to his private use.
In deciding the question of the liability of the innocent co-
partner, the court held that, if the money was received to
be laid out on a particular mortgage, such a transaction
would come within the scope of the business of a firm of
lawyers, and all the partners would be liable for the misap-
propriation; but if received to be laid out generally, that
would not be within the scope of the business of lawyers,
but of scriveners or loan agents, and hence the innocent
partners would not be liable. ^^ If, however, it be shown
that investing money for others was a part of the business
» Tucker v. Cole, 54 Wis. 539, 11 N. W. 703. See "Partnership;'
Deo, Dig, {Key No,) {{ 15S, lU; Cent. Dig. H 275, S06.
10 Robinson y. Goings, 63 Miss. 500. Bee "PartnereMp,** Deo, Dig.
{Key No,) §§ 15S, 174; Cent. Dig, K «75, 306,
11 Fletcher ▼. Ingram, 46 Wis. 191, 50 N. W. 424. See, also, Ger-
hardt v. Swaty, 57 Wis. 24, 14 N. W. 851. See **Partner8Mp,** Dec,
Dig. (Key No.) §| 15$, lU; Cent. Dig. |{ 275, $06.
12 HARMAN y. JOHNSON, 2 El. & BL 61, Gilmore, Cas. Partner-
ship, 399; Gleather y. Twlsden, 28 Gh. Div. 340; Rhodes t. Monies,
<1895) 1 Ch. 23a See ^'Partnership;* Deo. Dig. {/ieu No.) U 153,
lUi Cent. Dig. §i ^5, 306'.
336 P0WBB8 OF PABTNBB8 (Oh. 6
of the firm, then if one partner receives money, and mis-
appropriates it, his copartners are liable." So, if one mem-
ber of a law firm collects money for a client, and absconds
with it, his copartner is liable.** Where, however, the act
is not within the scope of the firm business, the innocent
partners are not liable for any misappropriation. Thus X.,
of a shipping firm, undertook to collect a draft for A. The
draft was made payable to the order of X., who indorsed it
to his firm, with the request to collect and put the pro-
ceeds to his credit. The firm collected the money, and X.
withdrew the money for his own use. His innocent co-
partners were not held liable.*' Nor will the mere fact that
property obtained by a partner in his individual capacity,
and subsequently misappropriated, was for a time in the
innocent possession of the firm, render the latter liable for
the one partner's tort. The temporary possession of the
firm is not the same thing as a receipt of property by the
firm in the course of its business.*' Whether the receipt of
the money or property is within the scope of the business
itWlUet V. Chambers. Cowp. 814; Moore v. Knight (1891) 1 Ch.
.547. See ^'Partnership;' Dec. Dig. {Key No,) f| 153, 174; Cent. Dig.
IS 275. S06.
i« Dwlght ▼. Simon, 4 La. Ann. 490.
If a partner in a mercantile firm coUects money for a third per-
son and uses it in the firm business, instead of remitting it to his
principal, the partnership and every member will be liable for the
amount Welker v. Wallace, 81 Ga. 362; Whitaker v. Brown, 16
Wend. (N. Y.) 505. See ** Attorney and Client,'' Dec. Dig. (Key No.)
i 119; Cent. Dig. f 286; ^^Partnership," Dec. Dig. {Key Vo.) H ^53.
m; Cent. Dig. %% 275. 306.
i» Toof V. Duncan, 45 Miss. 48. See '^Partnership,** Dec. Dig. (Key
yo.) fiS 153, 174; Cent. Dig. Sf 275. 306.
i« Dounoe ▼. Parsons, 45 N. Y. 180; Toof y. Duncan, 45 Miss. 48;
Bienenstok y. Ammidown, 155 N. Y. 47, 49 N. E. 321, reversing g. c,
11 Misc. Rep. 70, 29 N. Y. Supp. 593, 32 N. Y. Supp. 1138. See, also,
Marsh y. Keating, 2 CI. & F. 250 ; GuiUou y. Peterson, 89 Pa. 163.
The principles of the foregoing cases have been embodied into the
British Partnership Act of 1890, { 11, providing : '*(a) Where a part-
ner, acting within the scope of his apparent authority, receiyes the
money or property of a third person and misapplies It, and (b)
where a t^rm In the course of its business receives money or property
of a third person, and the money or property so received Is mlsap-
plied by one or more of the partners while it is In the coatody of
8 113) POWER TO SUBJECT TO TORT UABILITT 337
must be determined in the same manner as in other situa-
tions involving liability for acts of an agent. It is essen-
tially a question of fact, which in all but clear cases must
be decided by the jury.^^
Same — Property Wrongfully Obtained by One Partner for
His Firm
It has been held that where one partner obtains money
or property by fraud or crime, and turns it over to his firm,
or uses it for the benefit of the firm, all the partners are
liable to the defrauded person. Thus, where money was
obtained by one partner by false pretenses and used for the
firm, the innocent partners were held liable for money re-
ceived to their use.^** So, also, where a partner wrongfully
put into the firm assets, and thereby increased them, the
property of a third person, his innocent copartner was held
liable."
SAME— WRONGFUL USE OF TRUST FUNDS
113, One partner cannot make the others responsible for
his breach of trust in emplo3ring funds of which he
alone is trustee in the partnership business, un-
less such other partners are implicated in the
breach of trust by their preknowledge of the source
of the fund, or of such facts as should have put
fhem on inquiry as to its source.'^
the firm, the firm is liable to make good the loss." See **Partner'
sMpr Dec, Dig, {Key No.) f§ 153, lU; Cent. Dig. S| 275, S06,
IT Palmer v. Scott, 68 Ala. 380; Birckhead v. De Forest, 120 Fed.
045, 57 0. O. A. 107; Hefferlln v. Earlman, 29 Mont 139, 74 Pac.
201. Bee **PartnerBhip," Dec, Dig, (Key No,) } 218; Cent, Dig, | 427,
i» RAPP V. LATHAM, 2 B. & Aid. 795. Bee "Partnership," Dec.
Dig. (Key No,) §S 15$, 174; Cent, Dig, §| 216, 277, S06,
J» Durant v. Rogers, 87 111. 508; Blight's Heirs v. Tobin, 7 T. B.
Mon. (Kj,) 612, 18 Am. Dec. 219 ; Wallace y. James, 5 Grant's Ch.
(Up. Can.) 163; Manufacturers' ds Mechanics' Bank ▼. Qore, 15
Mass. 75, 8 Am. Dec. 83. Bee '^Partnership,'* Deo. Dig. {Key No:) H
153, 174; Cent. Dig. §{ 274-217, 306,
aoThe English Partnership Act of 1890, f 13, provides: "If a
partner, being a trustee, improperly employs trust-property in the
business or on the account of the partnership, no other partner is
G11..PABT.— 22
^38 POWBR8 OF PARTNBB8 (Ch. 5
Presumptively it is not in the ordinary course of the busi-
ness of a partnership for one partner to apply trust funds
to its use. Thus, where one partner obtained his wife's
money by forging her name to a check, and used it as his
contribution to the capital of the firm, his act was held
wholly outside the scope of the partnership business, and
his knowledge of the fraud not to be imputable to his co-
partners.** Accordingly the firm must be implicated in the
breach of trust, if it is to be made liable. This it cannot be,
unless all the members either knew the source of the
money, or that it did not belong to the partner who applies
it to firm purposes, in which case they are bound to inquire
on what terms the money is held.** The knowledge of the
misconducting partner should not be imputed to the inno-
cent partners. It is only where a partner is acting within
the scope of his authority that notice to him is notice to all
the partners.** Where, however, partners know that a
fund belongs to an estate which their copartner represents,
they are bound to inquire on what trusts it is held, and
knowledge of the powers of the trustee partner is imputed
liable for the trust-property to the persons benefldaUy Interested
therein; provided as follows: (1) This section shall not affect any
liability Incurred by any partner by reason of his having notice of
a breach of trust ; and (2) nothing In this section shaU prevent tmst
money from being followed and recovered from the firm if stlU in
its i)ossession or under its controL"
SI 6ILRUTH V. DECELL^ 72 Miss. 232, 16 South. 250, Gllmore,
-Cas. Partnership, 401; Blenenstok v. Ammldown, 155 N. Y. 47,
49 N. B. 321. See *' Partnership r Deo. Dig. (Key No.) | 153; Cent,
Dig. §1 rn-m.
ss Dent V. Slough, 40 Ala. 518; Hutchinson v. Smith, 7 Paige (N.
T.) 28 ; In re Jordan (D. G.) 2 Fed. 319 ; Ran v. Small, 144 Pa. 304,
22 Atl. 740; Hawley v. Tesch, 88 Wis. 213, 59 N. W. 670; Penn v.
Fogler, 182 lU. 76, 55 N. E. 192; Garter v. Llpsey, 70 Oa. 417. The
other partners are not liable, where one partner lends trust money
to his firm, unless the fact of Its being trust money Is known to
such other partners. Wlllett v. Stringer, 17 Abb. Prac (N. Y.) 152;
Englar v. Offutt, 70 Md. 78^ 16 AU. 497, 14 Am. St Rep. 832; Shaf-
fer V. Martin, 25 App. Dlv. 501, 49 N. Y. Supp. 853. Bee **Partner^
shipr Dec. Dig. (Key No.) |§ 15S, 174; Cent. Dig. H rtJHSTt, S06.
St Blenenstok v. Ammldown, 155 N. Y. 47, 49 N. B. 321. See ante,
1 104, p. Sia Bee ** Partnership,*' Deo. Dig. (Key No.) f 159; Cent.
Dig. if 295-295.
6 114) FOWEBS AFTER DISSOLUTIOH 839
to them, whether they had actual knowledge or not.** The
mere fact that the firm has been benefited by the money in
question does not render it liable to the cestui que trust.'*
However this doctrine will not prevent the cestui from fol-
lowing his own money in the hands of the firm, if he can
show that the firm still has it intact, and that it did not
come by it by purchase for value without notice of its
trust character.** Such an action is quite different from
that wherein a cestui que trust sues all the partners who
are implicated in a breach of trust, either as his debtors or
as constructive trustees of the fvmd.**
POWERS OP PARTNERS AFTER DISSOLUTION
114. Upon dissolution of a partnership by act of the par-
ties, and notice thereof duly given, or by operation
of law, without notice, the mutual agency incident
to the relation ceases. Each partner, however,
even after dissolution, has implied authority to
bind his copartners and the firm property by such
. acts as are reasonably necessary to wind up the
partnership affairs, or to complete transactions be-
gun, but unfinished, at the time of dissolution.
Upon the dissolution of the relation of partnership, the
mutual agency incident thereto ceasies. As between them-
selves, the partners no longer have any power to bind one
another in the same general way as when the firm was a
going concern. But, as in the law of agency, an agent's
t4 Davis ▼. Gelhaus, 44 Ohio St 69, 4 N. B. {S98. Bee '^Partner-
ship,'' Dec. Dig. {Key Vo.) | 159; Cent. Dig. §f 29S-295.
SB Ex parte Apsey, S Brown, Ch. 265; Ex parte Heaton, Buck.
386. See "Partnerthip,'' Deo. Dig. (Key No.) || 15S, lU; Cent. Dig.
If tH-^J, S06.
>• Hollenbaek ▼. Moore, 44 N. Y. Super Ct 107. See, also, U. S.
T. Cohn (a a) 128 Fed. 616. Bee "Partnership,*' Deo. Dig. {JBiey
tfo.) SI 159, m, 175; Cent. Dig. H 274-277, S06, 307.
s7 Emerson y. Durand, 64 Wis. Ill, 116, 24 N. W. 129, 04 Am. Rep.
593; Stoddard ▼. Smith, 11 Ohio St 581. Bee "Partnership,** Deo.
Dig. (Key yo.) IS 153, 174; Cent. Dig. K 274-277, 306.
3M POWERS or PARTNERS (Oh. 6
power may continue for some time after his employment
has actually ceased, so, also, in partnership, the mutual
agency may continue, after the actual termination of the
partnership, unless such termination be by operation of law,
as by death. • As pointed out elsewhere, in the case of os-
tensible partners, the mutual agency continues, so far as
third parties afe concerned, until due notice of the dissolu-
tion has been given.'*
While upon dissolution by act of the parties, with proper
notice, or by operation of law, the general agency ceases,
^ it is obvious that some power must still remain in the part-
' ners to wind up the partnership affairs. There is a mutual
agency, therefore, after dissolution, as well as before; but
it is of a different sort and exists for a different purpose.
Its chief end is the closing up of the firm business, and its
scope extends no further than to such acts as reasonably
tend towards the accomplishment of this end.**
Liquidating Partners
Upon the dissolution of a partnership, whether by death
or otherwise, all the surviving former members have an
S8 See chapter X, { 196, p. 568, and chapter IV, { 88, p. 265. Bris-
tol ▼. Sprague, 8 Wend. (N. Y.) 423. '*The principle upon which this
responsibility proceeds is the negligence of the partners in leaving
the world in Ignorance of the fact of the dissolution, and leaving
strangers to conclude that the partnership continues, and to bestow
faith and confidence on the partnership nieane In consequence of
that belief.** CoUyer, Partn. (3d Ed.) 505; Lovejoy y. Spafford, 98
U. 8. 430, 23 Ia Ed. 851 ; Smart et al. t. Breckenbridge Bank (Ky.,
1906) 90 S. W. 5^ 4 Ia R. A. (N. S.) 800, and note. See ^'Porlner.
ship;* Dec. Dig. {Key No.) f§ 28^292; Cent. Dig. f| 651-661.
>• The dissolution of a partnership does not destroy the authority
of a partner to act for his former associates In matters in which
they still have a common interest and are under a common liability.
GATES y. BEEGHER, 60 N. Y. 518, 19 Am. Rep. 207. After dissolu-
tion the agency of a partner exists for winding up the firm busi-
ness, collecting credits, and paying off debts. Thursby v. Lidgeiv
wood, 69 N. T. 198; Lange y. Kennedy, 20 Wis. 279; Bryant v.
Lord, 19 Minn. 396 (GU. 342); Hayden y. Cretcher, 75 Ind. 108;
Hawn V. Water Co., 74 Gal. 418, 16 Pac 196; Conrad y. Buck, 21 W.
Va. 396, 413 ; Stebbins v. Willard, 53 Vt 665.
The majority of the partners exercise the same controlling Id
fluence after the dissolution of a partnership as before. Western
g 114) POWERS AFTKB DISSOLUTIOH 841
equal right to the possession of the firm assets for the pur-
pose of winding up the firm affairs.'^ It often happens,
however, that the partners will delegate to one of their
number the exclusive authority to liquidate the business.
Such a delegation gives no additional powers to those usu-
ally implied, unless additional powers are expressly grant-
ed.'* The only effect of the appointment of a liquidating
partner is to compel third persons, who have notice of it,
to deal with him alone, unless they would be subject to
the equities of the other partners." In the absence of such
notice, third persons have a right to assume that all the
former partners have authority to do such acts as are nec-
essary or proper to the winding up of the partnership busi-
ness."
What powers in particular are included in the agency ex-
isting after dissolution will be considered in the ensuing
sections.
Stage Co. V. Walker, 2 Iowa, 504, 65 Am. Dec. 789. 8ee "Partner-
fiMpr Dec, Dig, {Key No.) U 277-Z95; Cent. Dig, U 622-665.
so Lapenta v. Lettiere, 72 Conn. 877, 44 Atl. 730, 77 Am. St Rep.
815; Gray v. Qreen. 142 N. Y. 816, 87 N. B. 124, 40 Am. St Bep.
596; Geortner v. Trustees of Vniage of Canajoharle, 2 Barb. (N. Y.)
625. See '* Partnership;' Deo. Dig. (Key No,) |§ 277-295; Cent. Dig.
H 622-665.
SI But in Pennsylvania It Is held that a liquidating partner has
power to borrow money on the credit of the late firm, for the par-
pose of paying its debts. Baron v. Mackey, 106 Pa. 452 ; McGowin
▼. Cubbison, 72 Pa. 358. See, also, McCoon v. Galbraith, 29 Pa. 298 ;
Meyran v. Abel, 189 Pa. 215, 42 Ati. 122, 69 Am. St Rep. 80a See
''Partnershipr Dee. Dig. (Key No.) U 277-295; Cent. Dig. H 62^^65.
s2GiUUan v. Sun Mut Ins. Co., 41 N. Y. 376; Clark v. Reed,
31 Leg. Int (Pa.) 413. See ** Partnership,'* Dec. Dig. CKey No.) Sl
277-295; Cent, Dig. SS 622-665.
as Hilton v. Vanderbilt, 82 N. Y. 591; PALMER v. DODGB, 4
Ohio St 21, 62 Am. Dec 271, Gilmore, Cas. Partnership, 405; GU*
more v. Ham, 142 N. Y. 1, 36 N. B. 826, 40 Am. St Rep. 554. Bee
**Partner8hipr Deo. Dig. (fey No.) U 277-296; Cent. Dig. U $i$-^6S.
342 POWBBS OF PARTNBB8 (Ch. 5
SAME — PARTICULAR POWERS CONSIDERED —
POWER TO DISPOSE OF FIRM ASSETS
116* After dissolution, in the absence of agreement to the
contrary, each partner has implied authority to
oisposp of the partnership property, by sale or any
other mode reasonably necessary for the purpose
of winding up the firm business*
Power to Sell
The equal right of each partner, after dissolution, to the
possession of the firm assets, would be valueless without
the accompanying right of disposing of those assets in dis-
charge of the firm liabilities, or in settling up the firm busi-
ness generally.** In the absence of agreement to the con-
trary, it is accordingly recognized that each partner may
sell the partnership assets for the purposes above indicated.
Thus a sale by one partner, after dissolution, of a judgment
in favor of his firm, conveys a perfectly good title.*' Real
estate being considered personalty for the purpose of pay-
ing firm debts, it, too, may be sold in order to discharge the
firm liabilities and settle the partnership accounts.** But
the exercise of the power is subject to the same limitations
as have been determined in a previous part of this chap-
ter.*^ Since the good will of a partnership is part of its
property, it follows that it, too, can be sold.** Certain
•4 Lapenta v. Lettlere, 72 Conn. 377, 44 Atl. 730, 77 Am. St Rep.
315; Bach r. State Ins. Co., 64 Iowa, 595, 21 N. W. 99; Gray v.
Green, 142 N. Y. 816, 87 N. E. 124, 40 Am. Si Rep. 596. Bee "Part-
nership** Deo. Dig. (Key No.) | 1^82; Cent. Dig. §S SSS-^il.
SB Robbing v. Fuller, 24 N. Y. 570. See, also, Needham ▼. Wright,
140 Ind. 190« 89 N. B. 510. See '^Partnership,'' Dec. Dig. (fey No.)
I B82; Cent. Dig. SS 638-641.
scRoulston V. Washington, 79 Ala. 529; Walling r. Burgess, 122
Ind. 299, 22 N. B. 419, 23 N. E. 1076, 7 L^ R. A. 481 ; Barton v. Love-
Joy, 56 Minn. 880, 57 N. W. 935, 45 Am. St Rep. 482 ; SHANKS y.
KLEIN, 104 U. S. 18, 26 L^ Ed. 635, Gilmore, Gas. Partnership, 289.
See '^Partnership;' Deo. Dig. {Key No.) S 282; Cent. Dig. Si 69&-6il.
ST See ante, SS 94-96, 101, pp. 288-296, 308.
«« Dayton r. WUkes, 17 How. Prac (N. Y.) 510; Holden's Adm'rs
T. McMakin, 1 Pars. Bq. Gas. (Pa.) 270; Snyder Mfg. Go. v. Snyder,
§ 116) POWERS AFTEB DISSOLUTION 343
cases, however, relying on the now abandoned conception
of partnership as a tenancy in common,** have intimated
that the power to sell partnership assets should cease with
the necessity for it ; in other words, that as soon as the
firm debts are paid the power to sell the firm assets comes
to an end.** Obviously this overlooks the fact that a part-
ner's functions, after dissolution, are something more than
the mere paying of debts. If the property is more than suf-
ficient to pay firm debts, it femains to be divided among the
former members of the firm, and very often it cannot be di-
vided unless it is first sold.
Same — Power to Pledge
That a surviving partner has power to pledge firm prop-
erty in the course of winding up the firm business is well
settled.** There is some authority for the view that in case
of a dissolution inter vivos each partner has such power.**
But it has been denied.**
Same — Assignment for Benefit of Creditors
After dissolution inter vivos there is no implied power in
the partners to make an assignment for the benefit of cred-
itors, nor to confess judgment against the firm.**
54 Ohio St. 86, 43 N. B. 325, 31 L. R A. 657. See ^^Partnership!*
Dec. Dig, {Key Vo.) § SIO; Cent, Dig, § tl2,
»» See ante, chapter III, §§ 52, 55, 56, 62, pp. 146, 170, 176, 195, •Ti-
tle to Partnership Property."
40 Hogendobler y. Lyon, 12 Kan. 276. See, also, Stair v. Rich-
ardson, 108 Ind. 429, 9 N. E. 300; Halstead v. Shepard, 23 Ala. 558;
Bank of Port Gibson y. Bangh, 9 Smedes & M. 290; Roots y. Mason
City Salt & Mining CJo., 27 W. Va. 483, at page 492. Bee ^'Partner-
shipr Dec. Dig. {Key No,) i 282; Cent. Dig, IS 6S8-641.
41 Bohler y. Tappan (D. C.) 1 Fed. 469; First National Bank of
Peru y. Parsons, 128 Ind. 147, 27 N. B. 486 ; Durant y. Plerson, 124
N. Y. 444, 28 N. E. 1095, 12 L. B. A. 146, 21 Am. St. Rep. 686 ; Bur-
chinell y. Koon, 25 Colo. 59, 52 Pac. 1100. See '^Partnership;^ Dec
Dig. {Key No.) I 282; Cent. Dig. {§ 638-^41.
4* Miller y. Florer, 15 Ohio St 148. See ''Partnership!' Dec. Dig.
{Key No.) i 282; Cent. Dig, U 6S8-6U.
4s Roots y. Mason City Salt & Mining Co., 27 W. Va. 483. See
''Partnership!* Dec. Dig, {Key No.) S 282; Cent. Dig. S§ 6S8-6il.
** Paton V. Wright, 16 How. Prac. (N. T.) 481 ; Egberts v. Wood,
3 Paige (N. Y.) 517, 24 Am. Dec. 236 ; Deckert y. Filbert, 3 Watts &
S. (Pa.) 454 ; Kellogg y. Cayce, 84 Tex. 213, 19 S. W. 388 ; Mbir y.
344 POWERS OF PABTNBB8 (Cb. 6
SAME— POWER TO COLLECT DEBTS
116. After dissolution each partner has implied power to
collect and settie claims, receive payments, and
grant discharges from debts owed the firm.
If a partner is to wind up the firm business after its dis-
solution, he must obviously have the same power to collect
outstanding obligations as he had during the continuance
of the partnership.*' Firm debtors, paying a partner after
dissolution who is notoriously insolvent, will be protected,
even though notified by the other partners not to pay him.**
So, also, payment to a retiring partner, with notice that he
has retired, is good.*^ But the other partners are not
bound, if a debtor, knowing that a receiver has been ap-
pointed, nevertheless pays one, of the former members of
the firm.** The power to collect debts, of course, carries
with it power to receipt for them, and to grant discharges
on payment.**
Beck (Pa,) 2 Atl. 21S. Compare ante, §§ 07, lOa, 122, pp. 297, 316, 353.
See Partnership,** Dec. Dig, (Key No.) § 282; Cent. Dig. SS 6S8^il.
45Heartt v. Walsh, 75 in. 200; De Mott v. Kendrlck, 65 Hun,
623, 20 N. Y. Supp. 195; Robbing v. Fuller. 24 N. T. 570; Granger
V. McGUvra, 24 111. 152; GlllUan v. Sun Mut Ins. Co., 41 N. Y. 376.
That a partner has no authority to accept anything but money In
payment of a firm debt, see Kutz v. Naugle, 7 Pa. Super. Ct 179;
Kirk V. Hlatt, 2 Ind. 322. See "Partnership,** Dec. Dig. (Key No.) f
283; Cent. Dig. IS 642, 6iS.
«eGmilan v. Sun Mutual Ins. Co., 41 N. Y. 376; MAJOR y.
HAWKES, 12 111. 298, Gllmore, Cas. Partnership, 403 ; Heartt v.
Walsh, 75 lU. 200. See "Partnership,** Dec. Dig. (Key No.) S 28$;
Cent. Dig. §§ 642, 64S.
*T Fettrecht v. Armstrong, 6 Rob. (N. Y.) 339. See "Partnership,**
Dec. Dig. (Key No.) I 283; Cent. Dig. iS 642, 643, 655.
48 Manning v. Brlckell, 8 N. O. 133. Nor wlU the debtor be pro-
tected. If, having notice that his debt has been made the property
of one of the partners by assignment, he nevertheless pays another.
Hilton V. VanderbUt, 82 N. Y. 591; Bank of Montreal v. Page, 98
in. 109; GlUllan v. Sun Mut Ins. Co., 41 N. Y. 370. 380. Contra:
Hansen v. Miller, 44 lU. App. 550. See "Partnership,** Dec. Dig.
(Key No.) i 283; Cent. Dig. §§ 642, 643.
4» Gordon v. Albert, 168 Mass. 150, 46 N. £. 423; Riddle v. Et-
§ 117) POWERS AFTER DISSOLUTION 845
SAME— POWER TO PAY AND SETTLE FIRM
DEBTS
117. Each partner has power to pay and settle firm liabili-
ties.
The application of partnership property to firm debts,
and the right and duty of the partners so to apply it, Sire
the subject of other sections.'* It is also necessary here to
state that the power of each partner after dissolution to pay
firm debts follows from the equitable right of each partner
to insist upon the application of the partnership funds to
partnership debts, and that the existence of the power has
never been seriously doubted.'* Without it practically
every step in the winding up of a partnership would have
to be taken in the courts. A partner may compromise firm
debts and make bona fide settlements.'* He may pay not
only in cash, but by transferring firm property. The pay-
ment of rent due under a pre-existing lease is a mere pay-
ment of a firm debt, and not a new obligation."
ting, 32 Pa. 412; Van Keuren v Parmelee, 2 N. Y. 523, 51 Am. Dec'
322; (Jeortner v. Trustees of Village of Canajoharie, 2 Barb. (N.
Y.) 625. See ^^Partnership," Dec. Dig. {Key No.) § 283; Cent. Dig.
il 642, 64S,
BO Ante, chapter III, §S 58-^, pp. 179-195; post, chapter VI, | 187,
p. 400.
Bi MAJOR V. HAWKES, 12 111. 298, Gllmore, Cas. Partnership,
403; Card y. Clark. 29 Iowa. 189; Knowlton v. Reed, 38 Me. 246;
HaU V. Clagett, 48 Md. 223. See "Partnership:' Dec. Dig. (Key No.)
S 28S; Cent. Dig. § 6U-
BaChirry v. Kurtz, 33 Miss. 24; MUllken v. Lorlng, 37 Me. 408;
Bass V. Taylor, 34 Miss. 342 ; Union Bank y. HaU, Harp. (S. C.) 245.
See ^^Partnership:' Dec. Dig. (Key No.) § 287; Cent. Dig. I 633.
BsMiiliken y. Lorlng, 37 Me. 408; Barnes v. Northern Trust Co.,
109 lU. 112, 48 N. B. 31. See '' Partnership," Dec Dig. {Key No.) H
JSSi; 283, 28S; Cent. Dig. H 63&-ei&.
346 POWERS OF PARTNBB8 (Ch. 5
SAME— POWER TO PERFORM EXISTING CON-
TRACTS
118. After dissolution each partner has authority to com-
plete transactions begun, but not finished, at the
time of dissolution, and even to incur new obliga-
tions necessarily incidental to the performance of
such existing obligations. -
That the mere dissolution of a partnership should not re-
lieve its members of the duty of performing its unfulfilled
contracts is obvious. Whatever a partner, as survivor or
liquidator, does that is reasonably necessary to the comple-
tion of the firm's existing obligations is within the scope of
his authority."* Thu9 if, at the time of dissolution, a firm
was under obligation to execute a guaranty, and one part-
ner executes it, he binds all the former partners.'' Simi-
larly third persons may hold the partners by completing
contracts made with the firm before dissolution, as by de-
Hverini^ goods that were ordered during the continuance of
the partnership to one of the partners after dissolution."
A partner has no authority after dissolution, however, to
complete a contract that was a personal one, in reliance
S4 Denver v. Roane, 90 U. S. 555, 25 L. Ed. 476 ; Little v. Cald-
well, 101 Cal. 553, 36 Pac. 107, 40 Am. St. Rep. 89; King v. Leigh-
ton, 100 N. T. 886, 8 N. B. 594 ; GATES v. BEECHER, 60 N. X. 518,
19 Am. Rep. 207. Bee '^Partnership,'' Dec, Dig, (Key No.) i 284;
Cent, Dig. I 629,
B« Star Wagon Co. v. Swezy, 59 Iowa, 609, 13 N. W. 749. On
duty of surviving law partner to carry on pending litigation for es-
tate of deceased partner, see Sterne v. Goep, 20 Hnn (N. Y.) 396;
Moses T. Bagley, 55 Oa. 283. See ^'Partnership,** Dec, Dig. {JKey No.)
S 284; Cent, Dig, { 629.
«e WHITING et al. v. FARRAND et al., 1 Conn. 60, GUmore, Cas.
Partnership, 404; Kenney v. Altvater, 77 Pa. 84; Hubbard v. Mat-
thews, 54 N. Y. 43, 51, 13 Am. Rep. 562; Oady v. Shepherd, 11 Pick.
(Mass.) 400, 222 Am. Dec. 379. But a mere offer to sell, unaccepted
before the death of a partner, cannot afterwards by acceptance be-
come a contract GOODSPEED v. WIARD PLOW CO., 45 Mich.
322, 7 N. W. 902, Gilmore, Cas. Partnership, 404. See ^'Partnership,**
Dec. Dig, (Key No.) f 284; Cent. Dig, | 629.
§ 119) POWERS ATTEB DISSOLXJTIOH 847
Upon a particular partner, such as a contract between an
author and a publishing firm,'^ nor a general contract to
do all work of a certain kind. These are both terminated
by the dissolution of the partnership."* It is often impossi-
ble to complete the firm contracts without incurring some
new obligations; if these are necessary to that end, they
will be treated as merely incidental, and therefore witliin
the implied authority of the partner.'* Thus, although a
partner ordinarily has no authority after dissolution to
make or renew negotiable paper, where a firm had, before
dissolution, agreed to renew certain notes, it was held that
any partner might do so in pursuance of the firm agree-
ment.'*
SAME— POWER TO INCUR NEW OBLIGATIONS
119. After dissolution the partners have no power to bind
each other upon any new contracts.
As the authority of a partner, after dissolution, is re-
stricted to the settlement of the partnership affairs, it fol-
lows that dissolution revokes the power of the partners to
bind each other by new contracts.*^ This is clearly shown
BT Stevens v. Bennlng, 1 K. ft J. 168, 6 De O., M. ft O. 223. See
""Partnership;' Dec. Dig. (Key No.) SS ^9, 284; Cent. Dig. U (>29,
«57.
8 s Caldwell v. Stlleman, 1 Rawle (Pa.) 212; Robb t. Mudsre, 14
Gray (Mass.) 534; Schlater v. Wlnpenny, 76 Pa. 321^ But dissola-
tion does not terminate a contract for a spedfled length of time.
Oakford r. European ft Am. Shipping Ck)., 1 H. ft M. 182, 191. See,
also, Horst v. Roehm (O. C.) 84 Fed. 565. Bee ""Partnership,** Deo.
Dig. {Key No.) U 279, 28i; Cent. Dig. SS 629, 6S7.
9»BnTC;HART y. DRESSER, 10 Hare, 453, 4 De O., M. ft O.
542. See ""Partnership,** Dec Dig. {Key No.) |§ 285, 286; Cent. Dig.
n 6i5-650.
60 RICHARDSON ▼. MOIES, 31 Mo. 430. But the Uquidatlng
partner cannot bind the others by Indorsing a new draft and sub-
fltituting it for any old one, and a creditor taking such a draft with
knowledge of the facts cannot hold the other partners upon it. First
Nat Bank of Macon v. Ells, 68 Ga. 192. See ""Partnership,'* Dec.
Dig. (Key No.) { 286; Cent. Dig. §1 647, 648.
ei Ben T. Morrison, 1 Pet 351, 7 L^ Ed. 174; Clay T. Field (D.
;;48 POWERS OF PARTNBRfi (Cb. 5
in the denial of the power to borrow, so as to bind the firm,
even to pay firm debts.** Were it allowed, the settlement
of the firm affairs might be indefinitely postponed.
Power to Give or Indorse Negotiable Paper
As a partner cannot, after dissolution, create new obli-
gations, or vary the nature or obligation of those already
existing, it follows that he cannot, after dissolution, bind
his copartners by making, accepting, indorsing, oi renew-
ing negotiable paper.** The mere fact that the proceeds of
the paper are applied to the payment of firm debts makes
no difference.** Here, again, to imply such a power would
indefinitely postpone the settlement of the partnership af-
fairs. As with all other powers, not ordinarily implied,
however, previous special authorization** or subsequent
ratification will supply the lack of authority.**
C.) 84 Fed. 875 ; Weld t. Johnson Mfg. Co., 86 Wis. 662, 57 N. W.
874 ; Perrln v. Keene, 19 Me. 355, 86 Am. Dec. 759 ; Speake v. White,
14 Tex. 364; Hicks v. Russell, 72 111. 230; Bennett y. Buchan, 61 N.
Y. 222. But each partner is liable for all expenses reasonably, neces-
sary in winding up the firm business. CJonrad v. Buck, 21 W. Va.
396 ; Stebblns v. WiUard, 58 Vt 665. Bee '^Partnership;' Dec, Dig.
{Key No.) U 285, fm; Cent. Dig. SS 6i5-S50.
•s Hayden v. Cretcher, 75 Ind. 108 ; Dowzelot v. Rawlings, 58
Mo. 75 ; Payne v. Gardiner, 29 N. T. 146 ; Lee v. Stowe, 57 Tex. 444.
See "Partnership;* Dec. Dig. {Key No.) H 285, 286; Cent. Dig. U
646^50.
•s Lock wood V. Gomstock, 4 McLean, 383, 15 Fed. Gas. No. 8,449 ;
Funck V. Heintze (Tex. Civ. App.) 23 S. W. 417 ; Lange v. Kennedy,
20 Wis. 279 ; Bank of Montreal v. Page, 98 111. 109. See ^'Partner-
ship;* Deo. Dig. {Key No.) § 286; Cent. Dig. S§ 646-649.
•4 Falls V. Hawthorn, 80 Ind. 444; Hayden v. Cretcher, 75 Ind.
108; Parham Sewing Machine Company v. Brock, 113 Mass. 194.
Such a note will not extinguish a firm debt Gardner v. Conn, 34
Ohio St 187. But that notes given in liquidation of partnership
liability constitute no new obligation, see Chappell v. Allen, 38 Mo.
213; McPherson ▼. Rathbone, 11 Wend. (N. Y.) 96; Ward v. Tyler.
52 Pa. 893. See *^Partnershipy** Deo. Dig. iKey No.) f 286; Cent.
Dig. t§ 246-249.
es Wilson ▼. Forder, 20 Ohio St 95, 5 Am. Bep. 627; New Haven
County Bank v. Mitchell, 15 Conn. 222. But general authority to a
partner after dissolution to close up the partnership indeirtedness
by executing notes in the firm name does not authorize him to bind
•0 See note 66 on following page.
§ 120) POWERS AFTEK DISSOLUTION 849
Same — -Indorsement Without Recourse
An exception to the general rule is recognized by the
weight of authority in the case of indorsements without re-
course of paper payable to the firm. To be sure, an ordi-
nary indorsement is a new contract, and therefore impliedly
forbidden to a partner after dissolution. But as a partner
has implied power to sell firm property, of which the firm's
choses in action are a part, there would seem to be no val-
id reason for denying validity to such a sale. The implied
warranty of genuineness which an indorsement without re-
course involves should be no more beyond the scope of a
partner's power after dissolution than the implied warranty
of title in transfers of the firm's other assets.*'
SAME— POWER TO MAKE ADMISSIONS
180. After dissolution a partner has power to bind his for-
mer copartners by only those admissions fairly re-
lating to the settlement of the partnership affairs.
Whether he can by admissions bind his copartners
as to transactions occurring during the continu-
ance of the partnership is a question on which the
authorities are conflicting*
»
hlfl late copartner by stlpnlatins: In sucb notes to pay attorney's
fees and to waive exemptions. Brown v. Bamberger, 110 Ala. 842»
20 Sonth. 114. Though paper Is signed before dissolution, a partner
has no authority to Issue It after. Qale v. Miller, 54 N. Y. 53S,
affirming 1 Lans. (N. Y.) 451, and 44 Barb. (N. Y.) 420; Robb v.
Mudge, 14 Gray (Mass.) 534 ; Woodford v. Dorwln, 3 Vt 82, 21 Am.
Dec. 578. See, also, Glasscock v. Smith, 25 Ala. 474. See **Partner'
«Mp,*' Dec. Dig. {Key No,) |§ 285, 286; Cent. Dig, §{ 6k5-S50.
•• Sanborn* v. Stark (C. O.) 81 Fed. 18 ; Whltworth v. Ballard, 56
Ind. 279 ; Carter v. Pomeroy, 80 Ind. 48& The ratification may be
by parol and Informal, as by a partner's saying he had no objection
to the firm name being used. Smith v. Winter, 4 M. & W. 454. See
**Partner8hip," Dec. Dig. (Key yo.) S 286; Cent. Dig. S 649.
•TYale V. Eames, 1 Mete. (Mass.) 486; Walte v. Foster, 88 Me.
424; Parker v. Macomber, 18 Pick. (Mass.) 505. Ck>ntra, Fellows v.
Wyman, 88 N. H. 351 ; Glasscock v. Smith, 25 Ala. 474 ; Whltworth
▼. BaUard, 56 Ind. 279. See "Partnership;* Deo. Dig. (Key No.) i
Z86; Cent. Dig. ^ 648.
350 POWBBS OF PABTNBB8 (Cb. 5
At first glance it would seem that, after dissolution of a
partnership, one partner should have no more power to im-
pose an obligation upon his former associates by his ac-
knowledgment or admissions than could an agent, for the
relation of mutual agency no longer exists when the firm
is dissolved. Such is the view of a long line of cases fol-
lowing the first American decision on the subject** In
these jurisdictions, for instance, the admission of a partner
after dissolution that a certain partnership note was given,
not for his private debt, but for a firm debt, would not be
received in evidence.**
In the same year that the leading American case deny-
ing the authority to bind one's former partners by admis-
sions was decided, however, an English case, with an al-
most equally long line of followers, recognized such au-
thority/* The theory of these cases is that the firm still
exists as to things past, and that, as each partner has the
power to pay debts after dissolution, there is no reason
why he should not have power to say whether a certain
debt exists and what is its amount. So long as the admis-
sions concern things which took place during the existence
of the copartnership, in the regular course of the business
of the firm, and do not create a new liability, one partner
may bind the others thereby.^* Where the admissions in
esHackley t. Patrick (1808) 8 Jolm& (N. Y.) 636. See, also,
Blspham y. Patterson, 2 McLean, 87, Fed. Gas. No. 1,441; Cunning-
ham Y. Bragg, 37 Ala. 436 ; Dowzelot v. RawUngs, 68 Mo. 76 ; Nich-
ols ▼. White, 86 N. Y. 581; Tassey ▼. Church, 4 Watts & S. (Pa.)
141, 89 Am. Dec. 66. See, also, collection of cases in Gllmore t.
Ham, 40 Am. St Rep. 667. See ^^Partnership,** Deo. Dig, (Key No.)
S 294; Cent. Dig. i 6S0; ^'Svidence,"* Deo. Dig. {Key No.) S B49; Cent.
Dig. n 965-^5.
•» Curry v. White, 61 Cal. 630 ; Brewster t. Hardeman, Dud. (Ga.)
138; MILLER v. NEIMERIOK, 19 111. 172, Gllmore, Cas. Partner-
ship, 412. See ^^Partnership,'' Deo. Dig. {Key No.) i 294; Cent. Dig.
S 630; ^'Evidence," Deo. Dig. {Key No.) { 249; Cent. Dig. H 96S^75.
TO WOOD T. BRADDICns (1808) 1 Taunt 104, Gllmore, Cas. Par^
nership, 411. See ^'Partnership;* Deo. Dig. {K^ No.) f 294; Cent.
Dig. I 630; ^'Evidence," Deo. Dig. {Key No.) i 249; Cent. Dig. U
965-975.
Ti Cochran ▼. Cunningham's Bx*r, 16 Ala. 448, 60 Am. Dec. 186;
Gady ▼• Sh^herd, 11 Pick. (Mass.) 400, 22 Am. Dec. 879; Nalle ▼•
§ 121) POWERS AFTEB DISSOLUTION 351
question relate merely to the winding up of the partnership
affairs, and the power of the partners in so winding up, it
is possible to steer a middle course; for probably even the
decisions following Hackley v. Patrick ^* would find no ob-
jection to the liquidating partner's binding his former asso-
ciates by such admissions.^*
SAME— POWER TO TAKE FIRM DEBTS OUT OF
THE STATUTE OF LIMITATIONS
121. Although the decisions are conflicting, still by the
weight of authority, when due notice of dissolu-
tion has been given, a partner cannot, by an ac-
knowledgment of a partnership debt or a promise
to pay it, remove the bar of the statute of limita-
tions, so as to bind his copartners.
With respect to the power of partners after dissolution
to remove the bar of the statute of limitations on firm
debts, there is the same conflict of authority as in the case
of admissions. Some of the disagreement is doubtless due
to the difference in view as to the effect of the statute. If
the running of the statutory period extinguishes the debt,
so that a new promise is necessary to restore it, the surviv-
ing partner should have no power by an admission thus to
create a new obligation. If, however, the old debt still ex-
ists, but the remedy merely is barred, an admission does
not involve the creation of a new liability. The former
would seem to be the general view of the effect of the stat-
Gates, 20 Tex. 315; Loomls t. Loomis, 26 Yt 198; Rlcli v. Flanders,
89 N. H. 304. See ''Partnership,'' Dec, Dig. {Key No,) f 294; Cent.
Dig, % 690; ''Evidence,'* Deo. Dig. (Key No,) I W; Cent. Dig, IS
965-975.
7a 3 Johns. (N..Y.) 536 (1808), supra. See "Partnership,'* Dec. Dig,
(Key No.) I 294; Cent, Dig, t 6$0; "Evidence," Deo. Dig. (Key No.)
i 249; Cent, Dig. §§ 965-975.
T» Barnes ▼. Northern Trust Co., 169 111. 112, 48 N. E. 31; Par-
sons on Part (4th Ed.) § 128. See "Partnership," Dec. Dig. (Key
No.) S 294; Cent. Dig. | 6S0; "Evidence," Dec Dig. (Key No.) I
249; Cent. Dig. tf 965-975.
352 POWERS OF PARTNBB8 (Ch. 6
ute. Where such view prevails as to debts already barred
at the time of the admission, the weight of authority is to
the effect that a partner has no more power to revive an
extinct debt, so as to render his former associates liable,
than he has to involve them in a new one after dissolu-
tion.'* On the other hand, there are a few cases which pro-
ceed on the theory that the agency of partners, even after
dissolution, enables them to stop the running of the stat-
ute as against their associates/"
With respect to acknowledgments after dissolution, but
before the statute of limitations has taken effect, there is
even greater diversity of opinion. On the ground that it
is absurd to regard a part payment by one partner after dis-
solution as a promise by him and his former associates to
pay the rest, the weight of authority denies the right to
prolong the statutory time for enforcing claims.'* By the
minority it is urged that the agency of the partners for the
purpose of winding up includes power to make payments
which are for the benefit of all, and therefore to prolong
the time limit of the statute of limitations by such pay-
ments.'' Where no notice of dissolution has been given, it
T4 MAYBERRY V. WILLOUGHBY, 5 Neb. S68, 25 Am. Rep. 401,
Gil more, Cas. Partnership, 413; Lang's Heirs y. Waring, 17 Ala.
145; Newman v. McGomas, 43 Md. 70; Van Kenren v. Parmelee, 2
N. Y. 523, 51 Am. Dec. 322; Bell v. Morrison, 1 Pet 851, 375, 7 U
Ed. 174 ; Kerper y. Wood, 48 Ohio St 613, 29 N. E. 501, 16 L. R. A.
656; Reppert y. Golyin, 48 Pa. 248. Where there is express au-
thority by all the partners, of course, the power exists. Watson
y. Woodman, L. R. 20 Eq. 721, 730; Dayis y. Poland, 92 Va. 225,
28 S. E. 292. See **Liinitation of Actions;' Dee. Dig. (Key No.) |
14S; Cent. Dig. I 580; "Partnership;* Cent. Dig. § 634.
TttWhltcomb y. Whiting, 2 Doug. 652; Day y. Merritt 38 N. J.
Law, 32, 20 Am. Rep. 362 ; Wheelock y. Doollttie, 18 Vt 440, 46 Am.
Dec. 163, but altered by statute since. See "Limitation of Actions;'
Dec. Dig. (Key No.) I 143; Cent. Dig. I 580; ''Partnership,'* CenL
Dig. I 634-
Te Tappan y. KimbaU, 30 N. H. 136; Curry y. White, 51 OaL 580;
Tate y. Clements, 16 Fla. 339, 26 Am. Rep. 709; Wilson y. Wangh,
101 Pa. 233; Haddock y. Crocheron, 82 Tex. 276, 5 Am. Rep. 244.
fifee ^'Limitation of Actions;' Deo. Dig. (Key No.) §| 143. 155; Cent.
Dig. §S 580, 626; "Partnership;* Cent. Dig. S 634.
TT Whltcomb y. Whiting, 2 Doug. 652; Burr v. Williams, 20 Ark.
171 ; Bissell y. Adams, 85 Conn. 299 ; Van Staden y. Kline, 64 Iowa,
§ 122) POWERS OF SXmVIYINO PABTNSB S63
is generally held that creditors receiving a part payment or
a new promise from one of the partners should be allowed
to rely on it as a protection from the running of the stat-
ute/*
POWERS OP SURVIVING PARTNER
122. In case of the death of a partner, the aurviving part-
ner or partners have the exclusive right of posses-
sion and control of the firm property for the pur-
pose of doing any act necessary or proper for com-
pleting existing contracts and winding up the firm
business.
Powers of Surviving Partner
How the death of a partner affects partnership property,
the nature of the title of the surviving partner as quasi
trustee, and his duties towards the representatives of the
deceased partner, have been the subjects of an earlier
chapter.'* Also the nature of the partnership liability and
the quasi severable character of firm contracts has been dis-
cttQsed.** It now remains to notice the scope of the power
of the surviving partner with respect to winding up the
partnership business. Here, as in the case of dissolution
inter vivos, the power of the surviving partner exists for •
the purpose of bringing the affairs of the firm to a close.
180, 20 N. W. 3 (surviving partner); McClarg y. Howard, 45 Mo.
365, 100 Am. Dec. 378. See ''Limitation of Actions*' Deo. Dig,
{Key No,) { 155; Cent. Dig. I 626; '^Partnership,'' Cent Dig. fW-J.
T8 Fbrbee v. Garfield, 32 Hun (N. Y.) 889; Clement v. Clement, 69
Wis. 599. 85 N. W 17, 2 Am. St Rep. 760; SAGB v. ENSIGN, 2
AUen (Mass.) 245; Gates v. Flslc, 46 Mich. 522, 528, 8 N. W. 558
But see Tate .v. Clements, 16 Fla. 389, 26 Am. Rep. 709.
The law of the state where the remedy Is sought governs the que^
tlon as to the power of the partner to relieve from the statute
MAYBERRY v. WILLOUGHBY, 5 Neb. 368, 25 Am. Rep. 491, Gil
more, Cas. Partnership, 413. See **Limitation of Actions" Dec Dig.
{Key No.) H IV. tS5; Cent. Dig. %\ 5.80, 626; ""PartnensMp;' Cent.
Dig. S 6H.
T» Ante, chapter III, %% 65-67, pp. 204-214.
•0 See chapter IV, || 69-73, pp. 217-233.
Gil.Pabt. — ^23
354 POWBBS OF PABTNEKS (Ch. 6
Strictly speaking, the surviving partner is not an agent at
all. He acts in his own right, and while he is answerable
to the representatives of the deceased partner for his ad-
ministration of the firm business he does not represent
them. He takes the legal title to the personal property and
the choses in action and an equitable title to the real estate.
He stands in the place of the partnership with respect to
its assets and liabilities, and is vested with full power, pos-
session, and management of the firm business.** His func-
tion as such quasi trustee is to collect all the firm assets, to
apply them to the firm debts, and to distribute the surplus,
if any, among the surviving partners and the representa-
tives of those who are dead."* He has no right to continue
the partnership business longer than is necessary for wind-
ing up the affairs,®* except where the deceased partner by
will authorized the business to be carried on for a limited
period.** If he does continue the business without author-
ity, he only is liable for the debts thus incurred,** and is
answerable to the representatives of the deceased partner
for all losses caused by such continuance.** Whatever he
does in winding up the firm business, therefore, may be
considered within the fair scope of the purpose of the trust.
81 Murray t. Fox, 89 Hon (N. Y.) 110; NEHRBOSS ▼. BLISS, 88
N. Y. 600. Bee '^Partnership;* Deo. Dig. {Key No.) §| ^48-258; Cent.
Dig. S$ 509^98.
82 Patton Y. Leftwlcli, 86 Va. 421, 10 S. E. 686, 6 L. R. A. 569, 19
Am. St Rep. 902. See ^^Partnership,*' Dec. Dig, (Key Jfo.) | 2i5;
Cent. Dig. H 5H-518.
ssClay Y. Field (D. O.) 84 Fed. 875; Nelson v. Hayner, 66 IlL
487; Clay y. Freeman, 118 U. S. 97, 6 Sup. €t. 964, 80 L^ Ed. 104;
Orlm's Appeal, 105 Pa. 875. See ""Partnership,** Deo. Dig. (Key No,)
S 255; Cent, Dig. H 552-561.
84 Stewart y. Robinson, 116 N. Y. 828, 22 N. E. 160, 163, 5 U R.
A. 410.
See chapters II, | 22, p. 73; III, S 68, p. 215; X, i 199, p. 673,
for discussion of proYlsion for the continuation of the business after
death of a partner. See ""Partnership,** Deo. Dig. (Key xfo.) S 255;
Cent. Dig. S§ 552-561.
•« Julland Y. Watson, 43 N. Y. 571. Bee ""Partnership** Deo. Dig.
(Key No,) S 255; Cent, Dig, |§ 552-561.
80 Roberts y. Hendrickson, 75 Mo. App. 484. Bee ""Partnership,*'
Deo. Dig. (Key No.) | 255; Cent. Dig. IS 552^61.
S 122) POWERS OF SURYITINO PABTNBB 856
and of his authority.*^ So far as third persons are con-
cerned, who have dealt with or might deal with the part-
nership as such, the right of a surviving partner to take all
the property of the firm for the purpose of reducing it to
money and paying the firm debts is a right incidental to
all partnerships, and. one of which he cannot be deprived
by the personal representatives of the deceased partner, in
the absence of any allegation of mismanagement or want of
capacity.** If there be more than one surviving partner,
the right and duty to wind up the firm business devolves
equally upon them all. •• But the privilege of participating
in the winding up is personal, and may be waived or re-
signed to the other partners or their representatives.** The
right and duty survives, so that, if there be several sur-
viving partners and one dies, the remaining survivors suc-
ceed to the work. Upon the death of the last survivor, his
administrator is chargeable with the duty of completing the
settlement.**
•T Offutt v. Scott, 47 Ala. 104. See •'Partnership,'^ Deo. Dig. (JTcy
yo.) IS 2i9-251; Cent Dig. §S 509^68.
ss Shearer t. Paine, 12 Allen (Mass.) 289; Rice v. Merchants' ft
Planters* Nat Bank of Montgomery, 100 Ala. 617, IS South. 659.
The sorvlTlng partner has the sole power of settling the partnership
affairs, and only when a case of plain dellnqnency is shown on his
part can the representatives of the deceased Invoke the aid of a
court of equity to compel him to act for the good of all Interested
parties. Miller v. Jones, 39 111. 54 ; Merrltt v. Dickey, 88 Mich. 41 ;
Nelson y. Hayner, 66 ly. 487; Shields v. Faller, 4 Wis. 102, 105,
65 Am. Dec. 293. See, also, BUSH v. CLARK, 127 Mass. 111. See
'TartnersMp,'' Deo. Dig. (Key Vo.) H tJfi-tke; Cent. Dig. IS 50^
523.
8» Davis ▼. SoweU, 77 Ala. 262; Heartt ▼. Walsh, 75 111. 20a
See "Partnership;' Deo. Dig. {Key No.) | 2i5; Cent. Dig. §{ 51Jh518.
•oGrlfEln v. Spence, 69 Ala. 393; Welbom v. CkK>n, 67 Ind. 270.
See ''Partnership,'' Deo. Dig. iKeg No.) H 248-257; Cent. Dig. U
509-563.
91 Richards v. Heather, 1 B. & A. 29; C!ostley ▼. Wllkerson's
Adm'r, 49 Ala. 210 ; Copes v. Fullz, 1 Sim. & Mar. 623 ; NEHRBOSS
V. BLISS, 88 N. Y. 600; Calder v. Rutherford, 8 Brod. ft Blng. 302;
Dayton v. Bartlett, 88 Ohio St 357; Brooks v. Brooks, 12 Helsk.
(Tenn.) 12. See "Partnership;' Deo. Dig. (fiey ^o^ U 243-257; Cent
Dig. Si 509-^63.
356 POWERS OF PABTNBB0 (Oh. S
Satne — Righf to Compensation
Unless there is an express agreement to that cifect, or
unless the partnership business must be continued for some
time to effect a settlement, a surviving partner is not en-
titled to compensation for his services merely in closing up
the business,** "but the tendency is to deal with such
questions on their particular circumstances, rather than by
absolute rules." ••
Same-^ower to Dispose of Firm Assets
For the purpose of paying firm debts, or in the discharge
of firm contracts, the surviving partner has full power to
dispose of all firm assets, whether they consist of realty or
personalty.** But since the legal title to firm real estate
•s Condon ▼. Callahan, 115 Tenn. 285, 89 S. W. 400, 1 L. R. A.
(N. S.) 643, 112 Am. St Rep. 833 ; Young v. ScovlUe, 09 Iowa. 1T7,
68 N. W. 670; AMBS T. DOWNING, 1 Bradf. (N. Y.) 321, GiUnore.
Cas. Partnership, 610; Denver y. Roane, 99 U. S. 855, 25 L. Ed.
476; Schenkl y. Dana, 118 Mass. 236. A partner, rendering seryices
in excess of the mere winding up of the business of the partnership
on dissolution by the death of his copartner, is entitled to compen-
sation therefor. Richards y. Maynard, 166 lU. 466, 46 N. B. 1138.
See, also, Aldrldge y. Aldridge, 8 Reports, 189; Id., [1894] 2 Ch.
97 ; JacksonyiUe, M. P. Ry. & Nav. Co. y. Warriner, 85 Fla. 197, 16
South. 898. See '^Partnership," Deo. Dig. {Key No.) U 25S, tS5;
Cent. Dig. §S 559, 650, 560.
•a THAYER y. BADGER, 171 Mass. 279, 60 N. B. 641, (^ilmore,
Cas. Partnership, 435. See, also, Royster y. Johnson, 78 N. C. 474;
McElroy y. Whitney, 12 Idaho, 512, 88 Pac. 349.
But the administrator of a suryiying partner has been allowed
compensation. Dayton y. Bartlett, 38 Ohio St 357. See ''Partner^
•hip;* Deo. Dig. {Key No.) fS ft5S, 255; Cent. Dig. ff 5S9, 550, 560.
•* Bohler y. Tappan (D. C.) 1 Fed. 469 ; Milner y. Cooper, 65 Iowa,
190, 21 N. W. 558; Calvert y. Miller, 94 N. C. 600; Loeschigk y. Hat-
field, 51 N. Y. 660 ; Bartlett y. Smith, 5 Neb. (Unof .) 337, 98 N. W.
687 ; JUtNDNBR y. ADAMS COUNTY BANK, 49 Neb. 735, 68 N. W.
102a
In the case of negotiable paper payable to the firm, he may trans-
fer it by indorsement This Is yalid to pass the legBl title, bat will
not create a new liability on the contract of indorsement Johnson
y. Berlizheimer, 84 111. 54, 25 Am. Rep. 427; Bredow y. Mntnal Say-
ings Inst, 28 Mo. 181. So, also, a snryiying partner may assign
Judgment recovered by the firm. Thnrsby y. Lidgerwood, 69 N. Y.
198. See *'Partnor$Mp,'* Dec Dig. (Key No.) i 245; Cemk Dig. if
51JhS18.
S 122) POWERS or SURTIVINO PARTNER 867
passes upon the death of a partner to his heirs, the deed of
the surviving partner conveys merely an equity to the pur-
chaser, who, however, acquires a right to call upon and
compel the heirs to convey the legal title. Performance
of the contract will be decreed against the purchaser in fa-
vor of the survivor ; the heirs being required to join in de-
vesting themselves of any legal tide that may have come
to them.**
Except as to firm real estate, the power of disposition
exists for the purpose of turning the assets into cash for
purpose of distribution.** As to real estate, his power of
sale seems to be limited in this country to sales for the pay-
ment of debts.*^ If, however, the partnership realty has
been converted into personalty by the express terms of the
partnership agreement and the will of the deceased part-
ner,** or if the law of the particular jurisdiction recognizes
such power, then a conveyance by him is effective.**
Same — Power to Pledge or Mortgage
The power of disposition by a surviving partner is not
limited to selling merely. He may pledge or mortgage firm
assets as security for a firm debt/ or for a loan for firm pur-
poses.*
•s DELMONIGO ▼. GUILLAUME, 2 Sandf. Oh. (N. T.) 86S. See
^Partnership^ Dec. Dig {Key No.) H 245, 246; Cent, Dig. U ^^*-
52S.
•« Cases supra, note 94.
•7 See chapter III, §§ 63, 54, pp. 154-160.
•« DAVIS V. SMITH, 82 Ala. 198, 2 South. 897. See, also, chapter
III. f 68, p. 215. See '*Partner$Mp:* Deo. Dig. (Key No.) %% 24S, 246;
Cent. Dig. ff 514-^28.
B» Jones V. Sharp, 9 Helsk. (Tenn.) 660; Sanhom ▼. Sanborn, 11
Grant, Ch. (IT. C.) 359. See ^^Partnership,** Deo. Dig. {Key No.) H
245,246; Cent. Dig. U 514-523.
1 In re GLOUGH, L. R. 81 Gh. D. 324. See, also, cases nnder |
114, notes 41-43. p. 343. See ** Partnership,*' Dec. Dig. {Key No^
f 245; Cent. Dig. f 516.
* BUTOHART ▼. DRESSER, 4 D., M. ft O. 542 ; Conrtland Forg-
ing Go. y. Ft Wayne First Nat Bank, 141 Ind. 518, 40 N. B. 1070;
Burchinell v. Koon, 25 Golo. 59, 52 Pac. 1100. See **Partner9Mp,*'
Deo. Dig. {Key No.) H 245, 246; Cent. Dig. H 514^2S.
358 POWBRS OF PARTNBB8 (CSl 5
Same — Power to Assign for Creditors
Since the surviving partner succeeds to all the rights and
power of the partnership, and has entire control over the
firm property, he may make an assignment of it for the ben-
efit of the firm creditors, and in doing so may make such
preferences among the firm creditors as he sees fit.* Nor
is the consent of the representatives of the deceased part-
ner necessary.^ By statute in some states this power has
been taken away.*
Same — Power to Collect Claims Due the Firm
Being the sole representative of the firm, he has the ex-
clusive power to collect claims due the firm.* He is the
only proper person to receive payment, and he may compel
a firm debtor who has paid the administrator of the de-
ceased partner to pay again,^ or may compel the adminis-
trator to turn over the money thus collected by him.*
Same — Power to Complete Existing Contracts
As the existing obligations of a partnership, which do not
call for the personal service of the deceased, continue after
t EMERSON ▼. SBNTER, 118 U. S. 8, 6 Sup. Ct 981, 30 L. Ed.
49; Bartlett v. Smith, 5 Neb. (Unof.) 837, 98 N. W. 687; Patton y.
Leftwlch, 86 Va. 421, 10 S. E. 686, 6 L. R. A. 669, 19 Am. St Rep.
902. See ** Partnership,*' Deo. Dig, {Key No,) ^ 2J^5; Cent. Dig. |
Sieyj^; ^^Assignments for Benefit of Creditors,^ Deo. Dig, {Key No.)
I SO; Cent. Dig. M 99-104.
« WUliams y. Whedon, 109 N. T. 841, 16 N. E. 865, 4 Am. St Rep.
460. See **Partners?Up,** Deo. Dig. (Key No.) | 245; Cent. Dig. |
616^.
B SHATTUGK y. CHANDLER, 40 Kan. 616, 20 Pac. 225, 10 Am.
St Rep. 227, Gilmore, Oas. Partnenhip, 236 ; State y. Wlthrow, 141
Mo. 69, 41 S. W. 980. Bee '^Partnership,** Deo. Dig. (JTey No.) % 245;
Cent. Dig. f 516%.
• Davis y. Sowell, 77 Ala. 262; Gockerham y. Bosley, 62 La. Ann.
65, 26 Sonth. 814; Peters y. Davis, 7 Mass. 257; O'GonneU v.
Scfawanabeck, 76 Mich. 517, 48 N. W. 599; Potter y. Stransky, 48
Wis. 235, 4 N. W. 95. See '^Partnership,'* Deo. Dig. (Key No.) |
245; Cent. Dig. U SI4, 5i^Mi*
T Rice y. Richards, 45 N. a 277 ; Galvert v. Marlow, 18 Ala. 67.
Bee ''Partnership,** Deo. Dig. (Key No.) | 245; Cent. Dig. U 5i4,
• Shields y. FuUer, 4 Wis. 102, 65 Am. Dec. 293. Bee "Partner^
ship,** Deo. Dig. (Key No.) i 245; Cent. Dig. U 514, 5i4^.
§ 122) POWERS OF SUKYIYING PARTNEB 859
dissolution, it is the duty and right of a surviving partner
to do all necessary and proper acts for the completion of
unfinished contracts. Thus, where a firm ordered goods to
be manufactured, and one partner dies, the surviving part-
ners were held empowered to receive the goods and pay for
them.* So, also, the surviving partner may complete a
firm contract to cut and manufacture a quantity of lum-
ber.** It has also been held that he may borrow money, or
pledge firm property,*^ or give a note,^ if .necessary to com-
plete a firm contract.** The power to contract is limited to
existing and unfinished, business. There is no authority to
enter into new obligations, except so far as they are neces-
sary to the completion of unfinished transactions. Thus
the surviving partner cannot give a note binding his cosur-
vivors and the estate of the deceased partner.** Nor can
he make a binding contract of indorsement.**
An economical and eflfective winding up may, however,
involve the incurring of some new obligations. For exam-
• Mason v. Tiffany, 45 in. 892; Miller v. Hoffman, 26 Mo. App.
199; Weiss y. HamUton, 40 Mont. 99, 105 Pac. 74.
Any loss incurred by a ennrlving partner in completing a firm
contract is chargeable against the firm assets or pro rata against
the estate of the deceased partner. Tompkins y. Tompkins, 18
S. 0. 1.
There is, howeyer, no obligation to complete contracts calling for
personal seryice, where death terminates the liability. Tasker y
Shepherd, 6 H. & N. 575. See "Partnership,'* Dec. Dig. (Key No.) §f
«47, 248; Cent. Dig. §§ 524-528, 549.
!• Dayis y. SoweU, 77 Ala. 282. See ^^Partnership," Dec. Dig. (Key
yo.) f 247; Cent. Dig. H 524-528.
11 BUTCHART y. DRESSER, 10 Hare, 463, 4 D., M. & G. 542.
See '^Partnership,'* Dec, Dig. (Key No.) §S 245, 248; Cent. Dig. §9
516, 649.
i« Mason y. Tiffany, 45 111. 892. See ''Partnership," Dec Dig. (Key
No.) S§ 243, 247, 248; Cent. Dig. §f 513, 524-528, 549.
1* Macon Exch. Bank y. Tracy, 77 Mo. 594; Matteson y. Nathan-
son, 38 Mich. 877. See ''Partnership,*' Dec. Dig. (Key No.) {| 243,
247, 248; Cent. Dig. §§ 513, 524-528, 549.
1* First Nat Bank of Gainesville y. Cody, 93 Ga. 127, 19 S. B.
831 ; Nat Exch. Bank of Lexington y. Wilgos' Ex'rs, 95 Ky. 309, 25
S. W. 2; Johnson y. Berlizheimer, 84 lU. 54, 25 Am. Rep. 427;
Bredow y. Mutual Sayings Inst, 28 Mo. 181. See "Partnership,'*
Dec. Dig. (Key No.) » 243, 247, 248; Cent. Dig. §f 513, 524-528, 549.
860 POWERS or partnera (Ch. S
pie, where the assets consist of a large amount of unfin-
ished and raw material, which, to be sold without sacrifice,
should be manufactured, the surviving partner may work
it up, borrowing money or buying more material for that
purpose.** Likewise reasonable and necessary expenses in-
cident to a legitimate closing up of the business may be in-
curred.**
IS GalTert ▼. Miller, 04 N. a 600; OUver ▼. Forrester, 96 111. 819;
Roach ▼• Brannon, 57 Mlas. 490. Bee ^'Partnenhip/' Deo. Dig. (Key
yo.) i 248; Cent. Dig. f Si9.
i« CENTRAL TRUST, ETC, 00. ▼. RBSPASS, 112 Ky. 600, 06 a
W. 421, 56 Ia B. A. 479, 99 Am. St Rep. 817, GUmore, Gas. Partner-
ship, 189; Herron ▼. Wampler, 194 Pa. 277, 45 Atl. 81. See ^ParU
wenMpr Deo. Dig. {Keg No.) f £48; Cent. Dig. I 649.
§ 123) RIGHTS AND DUTIES OF PABTNBBS INTBB SB 861
CHAPTER VI
BIGHTS AND DUTIES OF PABTNER8 INTER SB
12B. Duty to Oonf orm to the Partnership Agreement
124. Right to Participate In Management
125. Control of Majority.
128. Right to Information Concerning Bnslnesa.
127. Duty to Keep and Right to Inspect Acconnti.
128. Doty to Devote Themselyes to the Business and to Bxerdae
Care and Skill.
129. Duty to Ohserve Good Faith.
130. Right to Benefits from Transactions Concerning Firm Interests.
131. Right to Benefits from Information Ohtained as Partner.
132. Right to Carry on Separate Business.
133. Right to Compensation for Services.
134. Right to Indemnity and Contribution.
135. Right to an Accounting.
136. Distribution of Assets among Partners.
137. Partner's So-Called Lien.
DUTY TO CONFORM TO THE PARTNERSHIP
AGREEMENT
123. It is the duty of the partners to conform their actions
to the agreement between them, whether this
agreement is contained in a formal written instrur
ment, known as the ''Articles of Partnership," or
whether informal or left to the implication of law.
It has already been noted that partners may make their
respective rights and liabilities whatever they see fit.^
While not indispensable, it is far safer to embody the agree-
ment of the partners in a formal instrument, known as the
"Articles of Partnership," to which the partners may refer
as a guide in all their transactions. These "Articles" should
state the general nature of the business, the capital and the
shares of the various partners, the powers of the respective
1 Ante, chapter V, I 85, p. 275, and chapter II, § 22, p. 09.
362 RIGHTS AND DUTIES OF PARTNERS INTER SB (Ch. 6
partners, the distribution of profits, and any other perti-
nent agreement the members care to insert. But whether
this contract be fully stated, or its details left to implication
of law, it is obvious that it is the duty of the partners to
conform thereto. Every known deviation from this duty
may afford the occasion for a dissolution, and make it ob-
ligatory upon the guilty partner to indemnify his copartners
for the loss they suffer from his breach of contract. Thus,
where a firm suffered a loss by reason of one partner sign-
ing the firm name to accommodation paper, in breach of
the partnership agreement, such partner was held individ-
ually liable to his copartners for the amount of the loss.*
RIGHT TO PARTICIPATE IN MANAGEMENT
124 In the absence of an express agreement to the con-
trary, all the members of a partnership have equal
rights in the management of the firm business.
But the partners may by agreement confer exclu-
sive management on one or more of their nimiber.
Although the duties and obligations arising from the re-
lation between the partners are regelated by the express
agreement between themselves, so far as such express con-
tract extends and continues in force,' it is possible that,
even on so important a subject as just what share each mem-
ber is to have in the management of the firm business, their
contract may be silent. Where this is the case, it will be
presumed that the powers of the various partners are equal,
even though their shares may be unequal.^ If a partner is
« MURPHY ▼. CRAFTS. 13 La. Ann. 519, 71 Am. Dec 519, Qll-
more, Gas. Partnership, 438. See post, S 134, p. 387, Indemnity and
Contribution; Robinson v. Bullock, 58 Ala. 618. See **Partnership,**
Dec. Diff. (Key No.) §§ 8S, 88; Cent. Dig. ff ISS, 1S6.
s Shamburg y. QtizenB' Bank, 85 Pittsb. Leg. J. (Pa.) 87. See
^'Partnership," Deo. Dig. {Key No.) f 79; Cent. Dig. i 127.
« KATZ y. BRBWINGTON, 71 Md. 79, 20 Aa 139, Oilmore^ Gas.
Partnership, 433; Peacock y. Peacock, 16 Yes. 51. A partner does
not lose his right to a yoice in the management of firm affairs by
pledging his share in the bosiness to secure an indiyldual debt Wil-
§ 124) BIQHT TO PARTIQIFATE IN MANAGEMENT 363
unjustly excluded from this right of participation in the
management of the firm affairs, whether the right be ex-
pressly or impliedly given, he may have his remedy by in-
junction.* Although a court of equity is loath to take
charge of a partnership and compel the partners to behave
themselves, still it will, when one partner is excluding a co-
partner or denying him his rights, take jurisdiction to de-
termine what his rights are under the partnership agree-
ment, and will enjoin his copartner from interfering with
the free exercise of those rights; nor is it necessary that
a dissolution be asked for in such cases.* A willful exclu-
sion, however, is ordinarily sufficient ground for a dissolu-
tion, and will of itself justify the court in appointing a re-
ceiver to take charge of the firm assets pending a winding
up.* It is always possible for the partners to agree among
themselves that one or more of them shall have exclusive
management of the partnership affairs, or they may stipu-
late that the management of certain phases of the business
shall be committed exclusively to one and other phases ex-
clusively to another.
cox y. Pratt, 125 N. T. 688, 25 N. B. 1091, afDrmed 52 Hon, 840, 6
N, Y. Supp. 861. See "Partnership,** Deo. Dig. {Key No.) f 79;
Cent. Dig. § 127.
8 Miller y. O'Boyle (O. O.) 89 Fed. 140; liyingston t. Lynch, 4
Johna Gh. (N. T.) 573; Jennings' Appeal (Pa.) 16 AtL 19, 2 L. R. A.
43 ; Abbot y. Johnson, 82 N. H. 9. For the effect on third persons
of secret limitations on a partner's authority, see ante, chapter Y,
I 86 et seq., p. 276 et seq. See "Partnership,** Dec. Dig. (Key No.)
if 79, 118; Cent. Dig. t§ 127, 181.
• PIRTLrE y. PENN, 8 Dana (Ky.) 247, 28 Am. Dec. 70, Qilmore,
Cas. Partnership, 480; Rutland Marble Co. y. Ripley, 10 Wall. 389,
19 L. Ed. 955; Wolbert'y. Harris, 7 N. J. Eq. 605. See "Partner-
ship,"' Dec. Dig. (Key No.) §f 79, 118, 273; Cent. Dig. f§ 127, 181, 620.
T Barnes y. Jones, 91 Ind. 161 ; Parkhurst y. Miiir, 7 N. J. Eq.
307; Hottenstein y. Conrad, 9 Kan. 487; Wilson y. Greenwood, 1
Swanst 471 ; Blakeney y. Dufanr, 15 Beay. 40. See ^^Partnership,**
Deo. Dig. iKey No:i % 79 i Cent. Dig. % 127.
3M BIOHT8 AND DUTIES OF PABTMBHS INTBB 8B (OIl 6
SAME— CONTROL OF MAJORITY
125. In the absence of express provision in the partnership
agreement to the contrary, the majority of the
partners in a firm of more than two have power
to decide all questions arising in the ordinary
course of the partnership business, providing they
act in good faith for the interest of the firm as a
m^le, as contrasted with the private interest of
all or any of the majority, and all of the partners
are consulted.
All transactions with third parties, conducted by the ma-
jority acting within the scope of the partnership business,
will bind the minority. In a firm of two, one member, by
dissent duly communicated to a third person, may prevent
the creation of new obligations. While the questions of
the power of a majority of the partners to control the mi-
nority has been much discussed, and there has been caution
manifested in stating any definite rule, the proposition em-
bodied in the first part of the black-letter type is supported
by authority, when dealing with the rights of the partners
inter se in a firm composed of more than two members.*
• JOHNSTON ▼. BUTTON'S ADM'R, 27 Ala. 245, Oilmore^ Gas.
Partnersbip, 391; G&.mpbell ▼. Bowen, .49 Ga. 417; Western Stage
Co. ▼. Walker, 2 Iowa, 504, 65 Am. Dec. 789; PBACOCK y. CUM-
MINOS, 46 Pa. 434 ; Iryine v. Forbes, 11 Barb. (N. Y.) 587 ; Kirk t.
Hodgsdon, 8 Johns. Gh. (N. Y.) 400.
The English Partnership Act of 1890, I 24(8), provides: "Any
difference arising as to ordinary matters connected with the part-
nership business may be decided by a majority of the partners, but
no change may be made in the nature of the partnership business
without the consent of all existing partners." For comments there-
on, see Pollock's Digest of Part. (6th Ed.) 79.
For a similar provision, see CTlv. Code Gal. § 2428.
In Gonst v. Harris, Turner & R. 616, 525, Lord Bldon said: '^
call that^ the act of all which is the act of the majority, acting bona
fide, meeting, not for the purpose of negativing what any one may
have to offer, but for the purpose of negativing what, when they are
met together, they may, after due consideration, think proper to
negative. For a majority of partners to say, 'We do not care what
S 125) RIGHT TO PARTIOIPATE IN MANAOEMBNT 866
Control Inter Se in a Firm of More than Two Members
In considering the question, a distinction should be
drawn between cases arising among the partners inter se
and those involving third persons. Ag^in, as between the
partners themselves, the control of the majority will de-
pend upon the nature of the act The basis of the major-
ity's power rests upon an implied consent derived from the
partnership contract. When several persons associate in
a business venture as partners, it is reasonable to imply
that they intend, in the absence of an expressed contrary
intention, that the judgment of the majority shall control
with respect to the conduct of all matters arising in the or-
dinary course of the firm business. "There is always an im-
plied understanding that the acts of the majority are to
prevail over those of the minority as to all matters within
the scope of the common business." • The majority may,
for instance, determine when and how much of the profits
are to be divided, unless otherwise provided for by agree-
ment.^* Or the majority may decide to devote the firm as-
sets to a pro rata distribution among the firm creditors. A
minority partner cannot then mortgage those assets to a
firm creditor who is aware of the majority decision.**
This implied consent to majority control, however, does
not exist as to unusual and extraordinary transactions.
Thus the majority cannot, against the wishes of a dissent-
one partner may say, we, being the majority, will do what we please,'
Is, I apprehend, what this court will not allow. * * * In all
partnerships, whether it is expressed in the deed or not, the part-
ners are bound to be tme 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 excluded. What weight is to be given to it
is another question." See "PartneraMp" Dec, Dig, {Key No.) ii
79, ISO; Cent. Dig. M 127, 195.
• JOHNSTON V. DUTTON'S ADM'R. 27 Ala. 245, Gilmore, g*i»-
Partnership, 301. See **PartnersMp,*' Deo. Dig. (Key No.) H 79, ISO;
Cent. Dig. §f 127, 195.
!• Robinson t. Thompson, 1 Vem. 465; Stevens ▼. Railway Co., 9
Hare, 318. See "Partnership,** Deo. Dig. ^Key No.) %% 79, ISO; Cent.
Dig. H 12rt, 195.
11 CARR y. HBRTZ, 54 N. J. Eq. 127. 33 Aa 194, affirmed in 54
N. J. Eq. 700, 37 Atl. 1117. See "Partnership,'* Dec. Dig. (^ey No.)
II ISO, ISS; Cent. Dig. || 195, 199.
366 BIGHTS AND DUTIES OF PARTNERS INTER SB (Ch. 6
ing partner, engage the firm in a different business than
that in which it was originally engaged ; ** nor enlarge the
scope of the business, so as to include dealing in commodi-
ties expressly eliminated by the partnership agreement ; *•
nor delegate to a manager the right to sign the firm
name; ** nor decide where the business of the partnership
is to be carried on after the expiration of the lease on the
regular place of business.^*
Same—^Majority Must Act in Good Faith
The power of the majority to control as to all matters
within the ordinary scope of the firm business must, how-
ever, be exercised in fairness and good faith, and not ar-
bitrarily or capriciously, or for private advantage.^* Fair-
ness requires that they should consult all the members of
the firm, and give all a chance to present their objections.*^
Same — Control Inter Se in a Firm of Two Members
As to extraordinary acts outside the scope of the firm
business, one partner cannot control the other, for the rea-
sons already noticed.*' As to transactions within the ordi-
nary scope of the business, and affecting only the partners
inter se, there is no occasion for the application of the right
of control. Prima facie the rights of the partners are equal,
and there is no reason to suppose that in the firm of two
It Zabriskle ▼. Hackensack & N. T. R. Co., 18 N. J. Eq. 178, 90
Am. Dec. 617 ; Lindl. Part p. 816, citing Natnsch ▼. Irving, Gow on
Part (8d Ed.) App. 398. See "Partnership;' Dec. Dig. {Key No.) §
ISO; Cent. Dig. 1 195.
i> Jennings' Appeal (Pa.) 16 Afl. 19, 2 L. R. A. 43. Bee ** Partner-
•Wp," Dec. Dig. {Key No.) § ISO; Cent. Dig. §§ 181, 195.
i4 Beveridge y. Beyerldge, L. R. 2 H. U So. 183. See ^^Partner-
sMpr Dec. Dig. {Key No.) H 7P, ISO; Cent. Dig. §§ 127, 195.
IS dements ▼. Norris, 8 Gh. Div. 129. See "* Partnership,"* Dec. Dig.
(Key No.) IS 79, ISO; Cent. Dig. » 127, 195.
i«'Blisset ▼. Daniel, 10 Hare, 493; JOHNSTON ▼. DUTTON'S
ADM'R, 27 Ala. 246, Gilmore, Gas. Partnership, 891; Western Stage
Go. y. Walker, 2 Iowa, ^18, 66 Am. Dec 789; Wall y. London & Nas-
sets Gorp., [1898] 2 Oh. 469. See ^^Partnership;' Dec Dig. (Key No.)
f ISO; Cent. Dig. i 195.
IT Id.; Gonst y. Harris, Turner & B. 616; fitory, Part | 123. Bee
^'Partnership;' Dec. Dig. {Key No.) S ISO; Cent. Dig. ^ 195.
!• See cases, notes 8-17» pp. 364-366, supra.
§ 125) BIGHT TO FARTIOIPATE IN MANAGEMENT 367
only the judgment of one should control the judgment of
the other. If they are unable to agree, and the partnership
articles make no provision for the settlement of such dif-
ferences, there would seem to be nothing to do but to dis*
solve the relation.
Same — Power of Control — Rights of Third Parties
The nature and scope of the powers of the members of a
partnership have already been discussed.^* Each partner
has authority, implied from the agreement out of which the
relation springs, to bind his copartners in all matters within
the scope of the partnership business. Transactions carried
on by one partner within this limit are binding on the firm ;
without that limit the firm is not bound, in the absence of
explicit authorization or subsequent ratification. The
power which thus belongs to one partner belongs to a ma-
jority of the partners in a firm composed of more than two
members. So far as third persons are concerned, a trans-
action carried on by a majority of the partners, acting with-
in the ordinary scope of the firm business, will bind all.
Thus one purchasing the partnership goods from two of
the three members of a firm in good faith and without col-
lusion acquires a perfect title, though notified by the third
partner of his repudiation of the sale.**
Since a single partner has no implied power to bind the
firm by acts beyond the scope of the firm business, so a
majority of the partners have no such power.*^ Obviously
the majority have no power to bind the minority to third
persons with respect to unusual transactions not within the
ordinary course of the firm business. Of this fact third
persons must take notice. If, for instance, a firm is com-
posed of more than two members, and one of them dissents
It Chapter V, | 86 et seq., p. 276.
- a 0 staples y. Sprague, 75 Me. 458; Bllsset ▼. Daniel, 10 Hare^
403 ; JOHNSTON v. DUTTON'S ADM'R, 27 Ala. 245, GUmore, Cas.
Partnership, 391 ; Western Stage Go. ▼. Walker, 2 Iowa, ^3, 65 Am.
Dec. 789; Cotton Plant Oil Mill Co. v. Bnckeye Cotton Oil Co., 92
Ark. 271, 122 S. W. 658 ; Markle v. WUbur, 200 Pa. 457, 50 Aa 204.
See **Partner8Mp," Deo. Dig, {Key No.) f 141; Cent. Dig. §§ tH-^l.
SI The authorities cited in the preceding note by implication 8o»>
tain the last proposition in the text
368 BIGHTS AND DUTIES OF PABTNBBS INTER SB (Oh. 6
to a contemplated contract, the party with whom the con*
tract is made acts at his peril, and cannot hold the dissent-
ing partner liable, unless his. liability results from the part-
nership articles or the nature of the partnership contract.**
Satne — Rights of Third Parties — Dissent by One of a Pirm
of Two Members
In a partnership of two persons there is ordinarily no
power of control by one of the other. As to transactions
within the scope of the business, each is agent for the other.
But, even as to acts falling within this scope, one partner
may, by dissenting and giving notice thereof to third par-
ties, prevent his copartner from binding him by any new
undertaking^. Thus, if one member of a, trading firm of
two persons refuses to consent to the issue of negotiable
paper, a payee, taking with notice of such dissent, cannot
enforce it against the firm.*' Where goods have been sold
to a firm against the known wishes of a dissenting partner,
the mere fact that the goods came to the use of the firm
does not impose any liability on the dissenting partner to
pay for them ; for the purchase may have been made at a
loss, which he foresaw, and, therefore, sought to avoid.**
One partner cannot engage a new, nor dismiss an old, serv-
ant against the will of his copartner.** Where both part-
ners have assented to a firm contract not limited to a defi-
nite period, either can keep it in force against the wishes of
his copartner; for the partner who is opposed to change
has always the advantage of position.**
St See cases cited in notes 8-17, pp. 364-360.
«» Leavitt v. Peck, 3 Conn. 124, 8 Am. Dec. 157; Wllklns ▼. Pearce,
5 Denlo (N. Y.) 541. See ^'Partnership^ Dec Dig. (Key No,) f| ISS,
US; Cent. Dig. H 199, «^«.
" MONROE V. CONNER, 15 Me. 178, 32 Am. Dec. 148, Gilmore.
Gas. Partnership, 395. See, however, Johnston ▼. Bemheim, 86 N.
0. 889. Notice of dissent may be effectively given by a dormant
partner, and to one who knew nothing of the existence of the part-
nership. Leavitt v. Peck, 8 Conn. 124, 8 Am. Dec. 157 ; Wlpperman
T. Stacy, 80 Wis. 345, 50 N. W. 33G. See ^^Partnership,*' Dec, Dig,
(Key No,) U ISS, Ul; Cent. Dig. §§ 199, 214.
S5 Donaldson v. Williams, 1 Cromp. & M. 345. See **Partnership,^
Dec. Dig. (Key No,) | 14O; Cent, Dig, $ 212.
se Clement v. Norrls, 8 Ch. Div. 129: BUTCH ART ▼. DRESSBR
S 126) BIGHT TO PARTIOIPATE IN'MANAOSMBNT 369
The dissent of one pairtner will not, however, deprive his
copartner of the powers that the partnership articles ex-
pressly or impliedly confer upon him, so as to impose ad-
ditional burdens upon third persons. One partner cannot,
for example, by notifying debtors not to pay his copartner,
prevent the latter from receiving payment of firm debts ; "
nor prevent his partner from paying a firm debt, even
though such payment may amount to a preference.'*
Same — Waiver of Dissent
It is always possible for a dissenting partner to waive the
effect of his dissent. Evidence of such waiver is frequently
found in the acceptance and use of the proceeds of the act
dissented from. Thus, where one partner refused to con-
sent to the act of his copartner in procuring the acceptance
of a draft, but afterwards received the draft and used it for
firm purposes, he was held to have waived his dissent. ••
Remedies of Dissenting Partner
If the dissenting partner is not satisfied, he may retire
from the firm ; or, if the act to which he objects is one the
other member or members have no authority to do, he may
obtain an injunction.**
4 DeG., M. & G. 042. See •^Partnership," Deo. Die. {Key No.) H
79, 139; Cent. Dig. §f in, 209^1S.
2T QUlUon y. Sun Mat Ins. Ck>., 41 N. T. 87& Bee "Partnership,'*
Deo. Dig. {Key Ho.) SS 1S3, 14S; Cent. Dig. §§ 197-199, 2S0.
«• MABBETT v. WHITE, 12 N. T. 442. See "Partnership," Deo.
Dig. {Key No.) f§ 13S, IJfi; Cent. Dig. §{ 197-199, 229, 231.
stpearoe y. WUkUis, 2 N. 7. 469. See, also, Johnston v. Bern*
helm, 86 N. 0. 889; Mason v. Partridge, 66 N. Y. 638. Bee "Part-
nership,*" Deo. Dig. {Key No.) |§ 138, 165; Cent. Dig. §f 197-199,
278-280.
to Ahhot ▼. Johnson, 82 N. H. 9 ; Natasch y. Trying, 2 Oooper's Ch.
858; Bates, Partn. § 435. Bee "Partmership,** Deo. Dig. {^ey No.)
if 118, 272; Cent. Dig. U iSl, 619.
Gil-Pabt.— S
370 BIQHTS AND DUTIES OF PABTNBB8 INTER SB (Ch. 6
RIGHT TO INFORMATION CONCERNING BUSI-
NESS
126. E^ch partner has the right to fuU information concern-
ing the partnership affairs and the manner in
which its business is conducted. .
Even though a partner may leave the active management
of the business altogether to the other members of the firm,
he does not thereby waive his right to be informed of all
the firm's operations, and to investigate all its acts to sat-
isfy himself that good faith and good business methods are
being observed. This involves a corresponding duty of
members of the firm so to manage that tiiiere shall be no
concealment one from another, whether willfully or negli-
gently, of what is being done of common concern.** If, ac-
cordingly, one partner fails to notify his copartners of the
service of process upon him in a suit against the firm, and
subsequently judgment is rendered against the firm, and
execution issued against firm property, he becomes' liable
to his copartners for breach of his duty to inform them.**
In every important exigency the partner about to act should
consult the other partner, and where, through his negli-
gence in failing to do so, loss occurs to him, he cannot com-
pel his partner to share therein.'* This applies as well to
persons who are negotiating to become partners as to those
who already are partners.**
ti YOBKB ▼. TOZER, 59 Minn. 7S, 60 N. W. 846» 28 L. B. A. S8,
50 Am. St Rep. 395, Gilmore, Gas. Partnership, 440; 1 Golly. Partn.
f 163, citing Qoodman y. Whitcomb, 1 Jac. & W. 593, per Lord Bl-
don. See ''Partnership,** Deo. Dig. (Key No,) K 70, 88; Cent. Dig.
t§ llh 1S6.
»«Devall y. Bnrbrldge, 6 Watts & S. (Pa.) 529; TORKS v. TO-
ZER, 59 Minn. 78, 60 N. W. 846, 28 L. R. A. 86^ 50 Am. St Rep. 395,
OUmore, Cas. Partnership, 440. See ^'Partnership,** Dec Dig. iKey
No.) f 88; Cent. Dig. § 136.
** YORKS y. TOZER, supra. In this case one partner, without
eonsniting the other, bought ont an invalid, but what he sapposed
was a yalid, claim against the firm real estate. See ''Partnership,*'
Deo. Dig. (Key No.) H 88, 101; Cent. Dig. M 136, 155.
•4 Fawcett y. Whitehouse, 1 Russ. & M. 132. See "Partnership,**
Deo. Dig. (Key No.) S| 88, 101; Cent. Dig. \% 136, 155.
§ 127) PUTT TO KEEP AGOOUNT8 871
DUTY TO KEEP AND RIGHT TO INSPECT AC-
COUNTS
127. It is a partner's duty to keep correct accounts of his
transactions for the firm and to allow them to be
examined by his copartners.
If a partner is to have information as to the status of the
partnership business, it is necessary that accurate accounts
of the firm transactions should be kept, and be open to his
inspection.'" The articles of partnership usually delegate
this general duty of keeping the firm accounts to one part-
ner, or to a clerk ; in either case it is the duty of each part-
ner to give the bookkeeper all necessary information.'* In
the absence of an agreement on the subject, the duty of
keeping the books rests equally upon each partner.'^ To
allow each partner convenient access thereto, the books
should be kept at the firm's place of business, and no part-
ner should remove them without the consent of the others.**
So strictly guarded is the right to inspect firm accounts
•s KATZ ▼. BREWINGTON, 71 Md. 79, 20 Ati. 139, Ollmore, Gas.
Partnership, 483; Saunders ▼. Dnval's Adm'r, 19 Tex. 467; God-
frey V. White, 43 Mich. 171, 188, 5 N. W. 243 ; Knapp ▼. Edwards,
67 Wis. 191, 15 N. W. 140; Chandler y. Sherman, 16 Fla. 99; Rowe
V, Wood, 2 Jac. & W. 658, per Lord Eldon ; Goodman y. Whitoomb,
1 Jac & W. 539. Of. VermUlion v. Bailey, 27 111. 320. See **Part'
neraMp," Dec. Dig. {Key No,) H SO, 81; Cent. Dig. U i^* 1^9.
86 Dimond ▼. Henderson, 47 Wis. 172» 2 N. W. 73; Knapp ▼. Ed-
wards, 67 Wis. 191, 15 N. W. 140; Webb ▼. Fordyce, 55 Iowa, 11,
7 N. W. 385; Pomeroy y. Benton, 77 Mo. 64; Hall y. Glagett, 48
Md. 223; Pierce y. Scott, 37 Ark. 308; Kelley y. Greenleaf, 3 Story,
105, Fed. Oas. No. 7,657. See ''Partnership,'' Deo. Dig. {Key Ifo.) M
80, 81; Cent. Dig. %% 128, 129.
tT Morris y. GrifOn, 83 Iowa, 827, 49 N. W. 846. See, also, cases
preyiously cited. But in Theall y. Lacey, 5 La. Ann. 548, it was held
that the keeping of regular books of account was not to be expected
in a partnership orally contracted between mother and son for con-
ducting a plantation. See "Partnership,** Deo. Dig. {Key No.) H 80,
81; Cent. Dig. %% 128, 129.
•B Goodman y. Whitcomb, 87 Eng. Reprint, 492; Greatrex y. Great-
rex, 1 De G. & 8. 692, 11 Jur. 1052, 63 Bng. Reprint, 1254 ; Taylor
872 BIGHTS AND DUTIBS OB* PABTNBBS INTBB SB (Gh. 6
that even the private books of a partner, from which he
transcribes accounts into the firm books, must on demand
be shown.** Unless he has bargained away the right, each
partner may, without the permission of the others, not only
inspect and examine the firm books, but also make extracts
from them.** But he may not inspect and make copies
from the books for an improper purpose, such as soliciting
customers of the firm to patronize him in his individual
competing business.**
Unless impeachable for fraud or mutual mistake, the pe-
riodical statements of account for the firm are to be treated
as conclusive on the partners.** If, however, the partner
whose duty it is to keep the books culpably neglects his
duty by not keeping them at all, by keeping them unintel-
▼. Dayls, 8 Beay. 888, note; Charlton r. Poalter, 19 Ves. 148, note.
See "^ Partnership/' Dec. Dig. (Key No.) H 80, 81; Cent. Dig. U 1281
129.
s^Toulmln y. Copland, 8 Y. & O. Ex. 625, 660, 661; Fre^nan ▼.
Fairlle, 3 Mer. 43. But see Ward ▼. Apprice, 6 Mod. 264. A solvent
partner Is entitled to retain the firm books as against the trustee in
bankmptcy of a copartner. Ex parte Freeman, 4 Deac. & C 404;
Ex parte Finch, 1 Deac. & 0. 274. See* ** Partnership/' Deo, Dig.
{Key No.) S§ 80, 81; Cent. Dig. H l^S, 129.
40 Taylor t. Rundell, 1 Younge & 0. Ch. 128, 1 Phil. Oh. 222;
Stnart ▼. Lord Bute, 12 Sim. 460. iSfee **Partnership;* Deo. Dig. (Key
No.) H 80, 81; Cent. Dig. {$ 128, 129.
«i A partner who has no share in the good will of the boslness
has no right, during the existence of the partnership to extract from
its books the names and addresses of customers for the purpose of
soliciting such customers on his own behalf after the termination of
the partnership.. TREGO t. HUNT, [1896] A. G. 7, 65 L. J.- Ch. 1,
73 L. T. Rep. (N. S.) 514, 44 Wkly. Rep. 225. See '*Partnershipr
Deo. Dig. (Key No.) H 80, 81; Cent. Dig. U i28, 129.
4s Stretch v. Talmadge, 65 CaL 510, 4 Pac. 513 ; Gage ▼. Parmelee,
87 lU. 329 ; Broderick y. Beaupre, 40 Minn. 379, 42 N. W. 83. The
bookkeeping of a partner cannot be questioned by one who la in
pari delicto, or chargeable with laches. Carpenter ▼. Camp, 39 La.
Ann. 1024, 30 South. 269; Lewis ▼. Loper (C. C.) 54 Fed. 237; Of.
Shoemaker t. Shoemaker, 92 S. W. 546, 29 Ky. Law Rep. 134; Al-
bee V. Wachter, 74 lU. 173; Stuart v. McKichan, 74 IlL 122; Keys
▼. Baldwin, 10 Ohio Dec. (Reprint) 268, 19 Wkly. Law Bui. 375.
See ^'Partnership;' Deo. Dig. (Key No.) U 80, 81; Cent. Dig. H 1£8.
129.
S 12S) DUTT AS TO THS BDSINOflS 878
ligibly, or by destroying or hiding them, eveiy presumption
will be indulged against him/'
DUTY TO DEVOTE THEMSELVES TO THE BUSI-
NESS AND TO EXERCISE CARE AND SKILL
128. It is the duty of each member of a partnership, in the
absence of an exemption therefrom, to devote his
entire time and energies to the partnership affairs.
So long as he acts in good faith, and in the exer-
cise of reasonable skill and diligence, and within
the ^cope of the firm business, he is not responsi-
ble to his copartners for losses occasioned by his
acts.
The partnership relation demands that each member
should bend his utmost energies and devote all his time to
the partnership affairs. So fundamental is this duty that
the most sweeping assertion of it in the articles of partner-
ship are held to be mere surplusage. ^^ If a partner wishes
to be free to indulge in outside enterprises and to secure
individual profits, he should see to it that permission there-
for is given him by the partnership agreement. The law
will not otherwise tolerate his becoming involved in inter-
ests that may either divert his attention from the partner-
«« Knapp ▼. BdwardB, 57 Wis. 191, 15 N. W. 140 ; Pierce ▼. Scott,
87 Ark. 308 ; Walmsley ▼. Walmsley, 8 Jones & L. 556 ; Gray ▼.
Halg, 20 3eay. 219. "Omnia prsesumuntur contra spoliatorem."
It is the duty of continuing or suryiylng partners so to keep the
accounts of the firm to show the position of the firm at any time
when a change among its members occurred. Boddam v. Ryley, 1
Brown, Ch. 239 ; Id., 2 Brown, Ch. 2, 4 Brown, Part Cas. 561 ; Ex
parte Toulmin, 1 Mer. 598, note; Toulmin v. Copland, 3 Younge ft
G. 655. But no presumptions will be indulged where, for over 20
years, the partners assented to a defective system of bookkeeping.
Shoemaker v. Shoemaker, 92 S. W. 546, 29 Ky. Law Rep. 134 (1906).
8ee ^^Partnership;' Dec. Dig. (Key No,) §§ 80, 81; Cent, Dig, H 128,
129; **Evidence:' Dec. Dig, (Key No,) § 78; Cent, Dig. S 98,
««Moynihan v. Drobaz, 124 Cal. 212, 56 Pac. 1026, 71 Am. St
Rep. 46; Pollock's Digest of Partnership (6th Ed.) 88. See "Part-
nership;* De>c. Dig. (Key No.) a 70, 83, 92; Cent, Dig. SS tH, ISl,
1S9.
374 BIGHTS AND DUTIBS OF PARTNERS INTBR SB (Gh. 6
ship welfare or, by imperiling his own credit, affect likewise
that of his firm.*' The injured partners have their remedy
by injunction, by petition for dissolution, or by action for
damages/*
Degree of Skill Required
Yet in his devotion to the firm business a partner does
not guarantee that he will exercise the very highest degree
of skill and diligence. His duty is performed if he trans-
acts the business of the firm with reasonable care, econ-
omy, skill, and diligence.*^ If one of a firm of bankers
causes loss to his firm by an honest error in judgment as to
an investment, he is under no liability to indemnify them.*'
So long as his act is not wanton or fraudulent, a partner
cannot be charged up for his lack of discretion or good judg-
ment/*
DUTY TO OBSERVE GOOD FAITH
128. Partnership is a relatioa of trust and confidence, and
partners must observe the utmost good faith to-
wards each other in all of their transactions, from
the time they begin negotiations with each other
to the complete settlement of the partnership af-
«v Dean ▼. McDowell, 8 Ch. D. S45, 348. Bee ^^Partnership,'* Dec,
Dig. {Key No,) H 70, 83, 9^101; Cent, Dig, %% 114, ISl, ISO-ISS.
46 But they are not entitled to any share of the profits gained In
the aeparate baslness, unl^ It Is a competitive business. See post,
IS 130-132, pp. 378-884; LATTA v. KILBOURN, 160 U. S. 524, 14
fiup. Ct 201, 37 Ix Ed. 1169, Qllmore, Gas. Partnership, 425. See
''Partnership,'' Dea Dig. (Key No.) §§ 86, 99; Cent. Dig. H 18k, 158.
4T7etzer y. Applegate, 83 Iowa, 726, 50 N. W. 66; MORRIS v.
WOOD (Tenn. Ch.) 36 S. W. 1013. See '^Partnership," Deo. Dig.
{Key No.) §§ 70, 88; Cent. Dig, H lUf 186.
48 Exchange Bank of Leon y. Gardner, 104 Iowa, 176, 73 N. W.
691. See, also, Tygart v. WUson, 39 App. Dly. 58» 66 N. Y. Supp.
827; Sayery y. Thurston, 4 111. App. 66. See "Partnership," Deo.
Dig, {Key No,) §S 70, 85, 88; Cent, Dig, U lU, 188, 186.
4» GHARLTON y. SLOAN, 76 Iowa, 288, 41 N. W. 303» Qilmore,
Gas. Partnership, 439; Knlpe y. Liylngston, 209 Pa. 49, 67 AtL 1130;
Fordyce y. Shrlyer, 116 lU. 580, 6 N. E. 87. See ''Partnership," Deo.
big. {Key No.) |t 70, 88; Cent. Dig. H 114, 186.
§ 129) DUTY TO OBSERYB GOOD FAITH 375
In General
The duty of each partner to exercise toward the others
the highest integrity and good faith is the very basis of
their mutual rights in all partnership matters.'* As the
partnership relation is one of mutual confidence and trust,
every member is obligated in all partnership affairs to con-
sider the mutual welfare of all the partners, rather than his
own private benefit. If, therefore, he attempts to secure
any private advantage from any transaction concerning the
partnership, or from any wrongful use of the partnership
name or property to his own ends, he violates his cardinal
duty, and must account to his associates for the benefits re-
ceived through its breach.'^ Therefore, if a partner obtains
a commission from a third person for inducing the firm to
enter into any particular transaction, he is likely to think
more of his private advantage than of the welfare of the
firm. The law, accordingly, insists on his sharing such
commission with his associates.'* In Fouse v. Shelley *•
»o BURTON V. WOOKEY, 6 Madd. 367, Gllmore, Cas. Partner-
ship, 418; MITCHELL y. REED, 61 N. Y. 123, 19 Am. Rep. 252,
Gllmore, Cas. Partnership, 419; JENNINGS et al. y. RICKARD,
10 Colo. 395, 15 Pac. 677, Gllmore, Cas. Partnership, 421 ; Wiggins
V. Markham, 131 Iowa, 102, 108 N. W. 113 ; Whitney v. Dewey, 158
Fed. 385, 86 O. C. A. 21 ; Fouse v. SheUy, 64 W. Va. 425, 63 S. B.
208 ; Finn y. Young, 50 Wash. 543, 97 Pac. 741. See ** Partnership,'*
Dec, Dig. {Key No,) |§ «5, 70, 88, 154; Cent, Dig. {{ 11, lU, 136, S76.
51 MITCHELL V. REED, 61 N. Y. 123, 19 Am. Rep. 252, Gllmore,
Cas. Partnership, 419; Pollock's Digest of Part (8th Ed.) pp. 92-
94 ; McAlplne y. Millen, 104 Minn. 289, 116 N. W. 583. If one part-
ner, in fraud of his copartner's rights, abstracts funds and Inyests
them in property in his own name, or in that of his wife or of a
third person, or uses them to pay off incumbrances upon his own
property or that of his wife, the defrauded partners can follow the
funds; but there must be some element of fraud in the appropria-
tion. Thus niere oyerdrafts give no right to proceed against the
separate estata Stone y. Baldwin, 226 111. 338, 80 N. B. 890, affirm-
ed 127 111. App. 663. See **Partner»Mp;' Deo. Dig. (Key Ho.) H 70, 81,
88, 92-101, 154; Cent. Dig. Sl 114, 129, 1S6, 139-155, 276.
8s Newell ▼. Cochran, 41 Minn. 374, 43 N. W. 84 ; Esmond y. See-
ley, 28 App. Dly. 292, 51 N. Y. Supp. 36. That a partner may act as
agent for a third person In dealing with the firm, where the firm is
»• Supra, note 60.
376 BIQHTS AND DUTIES OF PARTNERS INTBR SB (Ch. 6
defendant secured an option on 1,600 acres of tand and
formed a partnership wiUi plaintiffs in order to procure the
necessary funds. He represented to them that there were
only 850 acres, and upon buying the land had the vendor
make two deeds, one for 850 acres to the firm, and the other
to himself individually for the balance. In a suit by his co-
partners, the court declared that he held the land conveyed
him in trust for the firm.
PrelinUnary Negotiations
This obligation to perfect fairness and good faith is not
confined to persons who actually are partners, but applies
in all stages of their connection. There is some authority
for the proposition that with regfard to the preliminary ne-
gotiation of prospective partners the rule of caveat emptor
applies, and each may therefore secure for himself such
share in the contemplated firm as he can.'* The tend-
ency of the cases, however, is undoubtedly to require frank
disclosure and honest dealing from the very first.** Thus
one who contemplated forming a partnership may not ap-
propriate to himself alone the gain from buying at a low
figure, and selling to his firm at a higher, the property in
which the firm is designed to deal.** If one partner induces
the other to enter into, copartnership with him by fraudu-
lent representations, the latter may have the partnership
contract annulled, without showing actual damage, and
may further recover the value of. what he has contributed to
not harmed, see Randolph Bank t. Armstrong, 11 Iowa, 515; West-
cott V. Tyson, 88 Pa. 389. Cf. Fryer v. Harker, 142 Iowa, 708, 121
N. W. 52e, 23 L. R. A. (N. S.) 477. See "Partnership,'' Dec. Dig.
{Key No.) S§ 88. 9B-101; Cent. Dig. %% 1S6, 199-155.
s«nhler ▼. Semple, 20 N. J. Eq. 288. Bee ^'Partnership,^ Dee.
Dig. {Key No.) § 25; Cent. Dig. | 11.
»• BLOOM V. LOFGREN. 64 Minn. 1, 65 N. W. 900 ; HARLOW
▼. LA BRUM, 151 N. Y. 278, 45 N. E. 859 ; Densmore Oil Co. v.
Densmore, 64 Pa. 43. See ^^Partnership:* Dec. Dig. (Key No.) | 26;
Cent. Dig. § 11.
s« Densmore Oil Go. ▼. Densmore, sapra ; BLOOM t. LOFGREN,
64 MlnxL 1, 65 N. W. 960; Fawcett t. Whltehouse, 1 Rubs. & M.
132; Fouse ▼. Shelly, 64 W. Va. 425, 63 S. E. 208. See "'Partner-
ship," Dec. Dig. {fep No.) ^ 26; Cent. Dig. S 11.
§ 129) DUTY TO OBSERYB GOOD FAITH 877
the firm, with interest,*^ and also the value of his services
in attending to the firm business.**
Purchase of Copartner^s Interest
In buying out a copartner, partners are bound to exercise
the utmost frankness and honesty, and to make full dis-
closure of the fair value of the partnership assets.'* To
sustain a purchase by a managing partner from a copartner
ignorant of the state of the business, the price must be at
least approximately adequate, and all information possessed
by him necessary to enable the seller to form a sound judg-
ment must have been communicated.** Where certain
members of a cigarette manufacturing, concern purchased tiie
interest of a copartner, concealing from him the existence
of a contract by which the patentee of a cigarette making
machine had granted the firm the use of his machines at
a much lower rate than was given other manufacturers,
thereby greatly increasing the profits of the firm, and
knowledge of such contract could not have been acquired
by an inspection of the partnership books, it was held that
the retiring partner could maintain an action for deceit.**
The same principles will, of course, apply where one part-
ner se^ks to "unload" his interest on another and to with-
draw from the firm.
Satne — On Dissolution
The obligation to perfect fairness and good faith is
equally incumbent on persons who have dissolved partner-
8T HARLOW V. LA BRUM, 151 N. Y. 278, 45 N. B. 850. See
** Partnership,'' Dec, Dig, {Key No.) { 25; Cent. Dig. ^ 11,
B8 Caplen y. Cox, 42 Tex. Civ. App. 297, 92 S. W. 1048. See, also,
chapter X, § 203, p. 589. See "Partnership," Dec, Dig. (Key No.) i
«5; Cent. Dig, { 11.
B> Sexton V. Sexton, 0 Grat (Va.) 204, 215 ; Meyers ▼. Merlllion,
118 Cal. 352, 50 Pac. 662; Baker v. Cammlngs, 4 App. D. O. 230;
Pomeroy t. Benton, 57 Mo. 531; Goldsmith v. Koopman, 162 Fed.
173, 81 C. O. A. 465. See ** Partnership;* Deo. Dig. (Key No.) H 95,
226; Cent. Dig. {§ U2, 472.
•0 Brooks V. Martin, 2 Wall. 70, 17 L. Ed. 732 ; GUbert ft O'CaUl-
irhan V. Anderson, 78 N. J. Bq. 243, 66 Atl. 926. See **Partner8hip,*'
Deo, Dig. {Key No.) H 95, 226; Cent. Dig. §§ 142, 472.
•1 weight V. Duke, 91 Hun, 409, 86 N. Y. Supp. 853. See ** Part-
nership;' Dec. Dig. (Key No,) M 95, 226; Cent. Dig. U 142, 472,
878 RIGHTS AND DUTIES OF PARTNERS INTER SB (Ch. 6
shJp, but who have not completely wound up and settled
the partnership affairs.** Even after the dissolution of a
firm, where one partner obtained for himself a renewal of
an unexpired firm lease containing no provision for renewal,
without the consent of his copartner, he was obliged to ac-
count to the latter for the value of the expectancy of the
renewal; "for this," said the court, "pertained to the old
lease as a firm asset," ••
RIGHT TO BENEFITS FROM TRANSACTIONS
CONCERNING FIRM INTERESTS
130. A partner will not be permitted to obtain for himself
profits or benefits arising from a transaction con-
cerning firm interests or property. Such benefits
accrue to all the members of the firm.
In a great measure the rights, functions, and duties of
partners comprehend those of both trustees and agents.**
If, therefore, any benefit is to be gained from transactions
regarding firm affairs, it is the partner's duty to obtain it,
not for himself, but for the firm.*' There should be no
•a Betts y. June, 51 N. Y. 274 ; Jones y!* Dexter, 130 Mass. 880,
39 Am. Rep. 459; Beam y. Macomber, 33 Mich. 127; Warren y.
Schainwald, 62 Gal. 66; Lees y. Laforest, 14 Beay. 250; Clegg y.
Fishwick, 1 Macn. & G. 294; Wells y. McGeoch, 71 Wis. 196, 35 N.
W. 769; Pierce y. McClellan, 93 111. 245. See "Partnership,'* Dec.
Dig. (Key No,) §§ 277-295; Cent, Dig. {§ 624-665.
68 Johnson's Appeal, 115 Pa. 129, 8 Atl. 36^ 2 Am. St Rep. 539.
See, also, MITCHELL y. REED, 61 N. Y. 123, 19 Am. Rep. 252,
Gilmore, Gas. Partnership, 419. See ** Partnership,^ Dec Dig. {Key
No.) U 277-295; Cent. Dig. U 624-665.
64 MITGHELL y. REED, 61 N. Y. 123, 19 Am. Rep. 252, GUmore,
Gas. Partnership, 419. See "Partnership,** Dec. Dig. (Key No.) U
70''X01; Cent. Dig. §{ lU-155.
•» Klmberly y. Arms, 129 U. S. 512, 9 Sup. Gt 355, 32 L. Ed. 764;
HiU y. MUler, 78 Gal. 149, 20 Paa 304; Tebbetts y. Dearborn, 74
Me. 392; Filbnin y. Ivers, 92 Mo. 388, 4 S. W. 674; Goursln's Ap-
peal, 79 Pa. 220. See, also, David Belasco Go. y. Klaw, 48 Misc.
Rep. 597, 97 N. Y. Supp. 712. See "Partnership** Dec. Dig. (Key
yo.) K 70, 97; Cent. Dig. |§ lU, 146-151.
§ 130) BIGHT TO BENEFITS FBOH FIBM TBAK8AOTION8 879
clandestine profits in a partner's dealings with his firm. If
he furnished to the partnership, at the then prevailing
market price, goods which he had previously obtained at a
lower price, he must share his profits with his copartners.**
But a partner need not account to his firm for a benefit per-
sonal to himself, received outside the affairs of the part-
nership.*^ Similarly, the purchase by one partner of prop-
erty of any kind in which the partnership is concerned may
be regarded as a purchase for the firm, and each copartner
will be entitled to his share in it, upon reimbursing the
purchasing partner to that extent** Thus, where A. and
B. became partners to secure a contract for public work in
Mexico, and the authorities, without A.'s knowledge, told
B. they would not deal with A., and B. thereupon made a
contract with them himself without notifying A., it was de-
cided that B. held such contract for the firm, and that A.
was entitled to an injunction to prevent his exclusion from
participating in the management of the business.** If a
partner procures in his own name, and without the consent
••Bentley ▼. Craven, 18 Beav. 75. Wbere partners had agreed
that property hought by them to be sold again should be sold to a
person named and for a named sum, and one of the partners sold It
for a larger sum to a company in which he had an interest, it was
held that all the partners should participate in the whole profits.
Dunne ▼. English, L. R. 18 Eq. 524. As to secret commission on
firm sales or purchases, see, further, Hodge ▼. Twitchell, 33 Minn.
389, 23 N. W. 547 ; Newell ▼. Cochran, 41 Minn. 874, 43 N. W. 84 ;
Mattern y. Canavan, 8 Cal. App. 493, 86 Paa 618. See, also, Deaner
V. 0*Hara, 36 Colo. 476, 85 Pac. 1123 ; Rutan y. Huck, 30 Utah, 217,
83 Pac. 833. See '^Partnership,** Dec Dig. (Key No.) fS 70, 88, 97;
Cent Dig. §§ IH, 186, U6-151.
•TMoffatt y. Farquharson, 3 Brown, Ch. 338; Campbell y. Mul-
iett, 2 Swanst 551. See ^Partnership,** Dee. Dig. {Key No.) fS 9B-
101; Cent. Dig. H 189-155.
•• Anderson y. Lemon, 8 N. Y. 236. See ^^Partnership,** Dec. Dig.
(Key No.) § 96; Cent., Dig. S lU.
•• MiUer y. 0*Boyle (O. C.) 89 Fed. 140. One who agrees with an-
other to organize a railroad company and dlylde the profits, paying
his own expenses, cannot refuse to dlylde alsalary which he secures
from subscribers to the corporate stock for continued serylce after
the enterprise is under way. Leeds y. Townsend, 228 111. 451, 81 N.
E. 1069, 13 L. B. A. (N. S.) 191. See ''Partnership,** Deo. Dig. (Key
No.) §{ 92-101, 118; Cent. Dig. H 189-155, 181.
380 RIGHTS AND DUTIES OF PARTNERS INTER SB (Gh. C
of his associates, a renewal of the lease of the firm prem-
ises, he must hold that renewal as firm property/* Neither
may a partner for his own benefit buy up a claim against
his firm, and if he takes an assignment of such a claim he
will be considered as holding it for the firm, and may
charge against the firm only what he has actually paid out
for the claim/* Still less may he acquire an adverse title
or interest, so as to hold it against the firm/* If he buys
in the firm property at an execution sale, he does so in trust
for the partnership, and a purchaser from him with notice
occupies the same position/"
The rule requiring benefits acquired clandestinely to in-
ure to the firm rather than to the partner seeking them for
his own does not, however, necessarily apply to the case of
an acquisition of property or claims by a partner after dis-
solution of the firm/* Where a brother and sister were
partners, and the former had been abroad almost continu-
ously, while the latter had regularly carried on the business
TO Featherstonhangh ▼. Fenwlck, 17 Ves. 298, 811. Where the
partnership was to terminate on a certain day, and the lease on
the same day, the partner who clandestinely took a lease in his
own name was held to be in so far a trustee for the finn. MITCH-
ELL,▼. REED, 61 N. Y. 128, 19 Am. Rep. 252, GUmore, Oas. Part-
nership, 419. See, also, Lindley, Part 807; Clements v. Norris, 8
Ch. Div. 129; Gaddle v. Mann (0. O.) 147 Fed. 960. See ''Partner^
ship," Dec, Dig. (Key Vo,) | 96; Cent, Dig. § lU-
Ti Easton v. Strother, 57 Iowa, 506, 10 N. W. 877; Pllbnin ▼.
Ivers, 92 Mo. 888, 4 S. W. 674; Miller t. Ferguson, 110 Va. 217, 66
S. E. 562, 28 L. R. A. (N. S.) 618 (1909). See ** Partnership,'' Dec.
Dig, (Key No,) § 96; Cent, Dig. § lU-
T« Roby V. Colehonr, 185 111. 800, 26 N. E. 777; Mfller v. CBoyle
(C. C.) 89 Fed. 141 ; Kinsman v. Parkhnrst, 18 How. 289, 16 L. Ed.
385. See ^^Partnership,'' Deo, Dig, (Key No.) S 96; Cent. Dig, S H4.
T 8 Roby V. Colehonr, 185 111. 300, 25 N. E. 777; Lamar's Ex'r v.
Hale, 79 Va. 147; Farmer y. Samuel, 4 Litt (Ky.) 187, 14 Aul Dec.
106 ; Evans ▼. Gibson, 29 Mo. 223, 77 Am. Dec. 566. But see Brad-
bury ▼. Barnes, 19 Cal. 120 (mining partnership); McKensie ▼.
Dickinson, 48 Oal. 119. See ** Partnership,'' Dec. Dig. (Key No.) ^
96; Cent, Dig. ^ lU-
T4 Pierce ▼. McClellan, 98 111. 245; Chittenden ▼. Witbeck. 50
Mich. 401, 15 N. W. 626 ; Payne t. Hornby, 26 Beav. 280. Bnt see
Spiess y. Rosswog; 68 How. Prac (N. T.) 401. See "Partnership,'
Dec. Dig. (Key No.) S 96; Cent. Dig, § lU.
8 131) BIGHT TO BENEFITS FROM INFORMATION 381
alone, later marrying, and continued in the same business,
purchasing property for its purposes, such property was
held to belong to her solely.^*
RIGHT TO BENEFITS FROM INFORMATION OB-
TAINED AS PARTNER
181. ii a partner uses information obtained by him in the
course of the transaction of the partnership busi-
ness for purposes within the scope of the partner-
ship business, or for any purposes which would
compete with the partnership business, he must
account to the firm for any benefits which he may
have derived from such information.'*
Very often information may be acquired by a partner
through his association with the firm that he would like to
use for his personal profit. One member of a partnership
formed to speculate in real estate may in* the course of the
partnership business secure knowledge of a profitable deal
and attempt to appropriate its benefits all to himself.
Clearly this would be a case where his information should
be considered the property of the partnership, in the sense
that it should properly be applied to purposes within the
scope of the partnership business, and for the advance-
ment of all the members.'^' If, however, the business of the
firm is limited to real estate brokerage, or the sale and pur-
chase of real estate for the account of others, then the mere
fact that one member of the firm applied knowledge gained
therein to a successful speculation on his own account
would constitute no such violation of his duty to the firm
'•Merot ▼. Bumand, 4 Auss. 247. See **Partner8hip,** Dee. Dig.
{fiey No.) I 96; Cent. Dig. | lU-
70 Aas ▼. Benham, 2 Gh. 244, 255, 65 L^w T. (N. S.) 25, 19 Eng.
Oas. 580. Bee **PartnersMp," Deo. Dig. {Key No.) |§ 81, 9^101;
Cent. Dig. H 129, 1S9-155.
*T LATTA V. KILBOURN, 150 U. S. 524, 14 Sup. Ct. 201, 87 U
Bd. 1168, Ollmore, Gaa Partnership, 420. See *'Panner$hip,** Dee.
big. (Key No.) U 97-^9; Cent. Dig. U H6-15S.
382 RIGHTS AND DUTUDS 07 PABTNBBS INTBB SB (Oh. 6
as to entitle it to a share of his profits/' ''It is not the
source of the information, but the use to which it is ap-
plied," says the leading English authority on the subject,^*
"which is of importance in such matters. To hold that a
partner can never derive any personal benefit from informa-
tion which he obtains as a partner would be manifestly ab-
surd. Suppose a partner to become, in the course of carry-
ing on his business, well acquainted with a particular
branch of science or trade, and suppose him to write and
publish a book on the subject; could the iirm claim the
profits thereby obtained? Obviously not, unless by pub-
lishing the book he in fact competed with the firm in their
own line of business." •• So, also, information concerning
a mining district, acquired by a partner while prospecting
for his firm, if not fraudulently withheld from the firm, can
be used for his sole advantage after the dissolution of the
partnership.'* It is the misapplication of information that
may be regarded as firm property to purposes which are
competitive, such as the use of information gathered for
one newspaper partnership in another publication, that
makes the guilty partner liable to account to his firm.**
But there is no principle or authority which prevents a part-
ner from using information gained as a partner for purposes
which are wholly without the firxn business.**
T«Id.
r» Aas T. Benham (1891) 2 CIl 244, 255, 65 Law Times (N. S.) 25,
19 Eng. Gas. 589. See '^Partnership," Dec. Dig, (Key No,) SS 97-99;
Cent. Dig. %% U6^15S.
•0 Id. As to competing business, see post, fi 132.
81 JENNINGS ▼. RIQKARD, 10 Ck)lo. 395, 15 Pac. 677, Oilmore,
Gas. Partnership, 421. See, also. Burr y. De La Vergne, 102 N. T.
415, 7 N. E. 36a See **Portner8hip,** Deo. Dig. (Key No.) H 92-101;
Cent. Dig. §{ 1S9-155; **Mine8 and Minerals,'* Deo. Dig. {Key No.)
S 99; Cent. Dig. ^ 22S.
»s Glasslngton v. Thwaites, 1 Sim. & St 124. See ''Partnership,'*
Deo. Dig. (Key No.) S§ 9Z-101; Cent. Dig. §§ 1S9-155.
ssDean v. MacDoweU, 8 Ch. Dly. 345; Aas v. Benham (1891) 2
Ch. 244, 65 Law Times (N. S.) 25, 19 Eng. Gas. 589; LATTA v.
KILBOURN, 150 U. S. 524, 14 Sup. Gt 201, 37 L. Ed. 1169, Gil-
more, Gas. Partnership, 425. See "Partnership,** Deo. Dig. (iCey No:)
H 9Z-101; Cent. Dig. U 1S9-155.
S 132) SIGHT TO OABBT ON SEPARATE BUSINESS 883
RIGHT TO CARRY ON SEPARATE BUSINESS
132. In the absence of any agreement to the contrary, a
partner may carry on a separate business, so long
as he does not compete with his firm. Competing
with it, he must account to the firm for all the
profits made in such separate business, and for all
losses suffered by the firm therefrom.
Unless a partner has contracted expressly or impliedly
to devote all his energies and time to the partnership busi-
ness, his mere membership in a firm should not prevent him
from engaging in other enterprises not inconsistent with
his duty as a partner. Although the business he carries on
for his private benefit may be similar to that of the firm, if
it is in fact different, he is under no obligation to account
for its profits to his associates. A member of a firm of
warehousemen does not compete with his partnership in
owning and managing wharfboats.** It is evident, there-
fore, that the right to engage in a separate business is no
different in principle than the right to use information ac-
quired as a partner for one's own private gain. It is the
competition with the firm within the scope of the firm busi-
ness that is forbidden. A partner stands in a relation of
trust and confidence, and must not, in the pursuit of his
private advantage, place himself in a position that g^ves
him a bias against the due discharge of that trust or con-
fidence.*' It is often, however, a difiicult question to de-
cide whether the separate business carried on by a partner
s^Northnip v. Phillips, 99 111. 449. One of a firm of attorneys
Is entitled to retain for himself the compensation he receives for
acting as executor of an estate. Metcalfe v. Bradshaw, 145 111. 124,
83 N. B. 1116, 36 Am. St Rep. 478. A dormant or silent partner,
who only lends capital or credit to the firm, may consistently have
an antagonistic interest, if there is no deception. Pierce v. Daniels,
25 Vt. 624, 634. See "Partnerahipr Deo. Dig. (Key No.) § 99; Cent.
Dig. S 15S.
a 5 BURTON ▼. WOOKEY, 6 Madd. 867, 368, GUmore, Cas. Part-
nership, 418; Van Deusen ▼. Crlspell, 114 App. Div. 361, 99 N. Y.
Supp. 874. See '^Partnership,'* Deo. Dig. {Key No.) { 99; Cent, Dig,
S 15S.
384 aiQHTS AND DUTIES OF PARTNBB8 INTBB SB (Ch. 6
is in fact competitive. The Supreme Court of , the United
States, in the leading case of Latta v. Kilboum,** has held
that a partner in a firm of real estate brokers does not in-
terfere with its business by engaging in the purchase of
real estate as an individual speculation. This question of
fact once decided, the principle of law is easily applicable.*'
Beyond the line of trade or business in which the firm is
engaged, there is no restraint upon the right of a partner
to trafiic for his own benefit, in the absence of express
agreement on the subject.**
It should be noted, in addition, that the right of the part-
ners to claim a share in the clandestine profits of a copart-
ner's competitive business can be asserted by them alone,
and is not otherwise available to third persons for the pur-
pose of fixing a liability upon the partnership.** While the
partner engaging in another business not competitive with
the firm business is not liable to account for profits made
in such separate business, «he may be liable to his copart-
ners for any damages caused by the breach of his agreement
to devote his entire time and energy to the firm business.**
RIGHT TO COMPENSATION FOR SERVICES
133. A partner's services in the transaction of the firm busi-
ness do not entitle him to compensation, unless
there has been a special agreement to that effect,
or unless unreasonable burdens have been cast
upon hini by his copartner's willful neglect of his
duties.
•• LATTA V. KILBOURN, 150 U. S. 524, 14 Sup. Gt 201, 87 L.
Ed. 1169, Gilmore, Cas. Partnership, 425. See **Partner8Mp,^ Dec
Dig. {Key No,) S 99; Cent. Dig. | 15S.
ST Tlchenor ▼. Newman, 186 111. 264, 57 N. B. 828. See ''Partner^
ffMp," Dec. Dig. (Key No.) f 99; Cent. Dig. | 15S.
•8 Metcalfe y. Bradshaw, 145 111. 124, 83 N. B. 1116, 86 Am. St
Rep. 47& See "Partnership,** Deo. Dig. (Key No.) | 99; Cent. Dig.
S ISS.
99 Lockwood ▼. Beckwlth, 6 Mich. 168, 72 Am. Dec. 69. See *«Porl-
nership,** Dec. Dig. (Key No.) S 99; Cent. Dig. I 15S.
»o LATTA V. KILBOURN, 150 U. S. 524, 14 Sup. Ct 201, 87 U
Ed. 1109, Gilmore, Oas. Partnership, 425. See ^'Partnership;* Deo,
Dig. (Key No.) ^ 99; Cent. Dig. § 15S.
§ 133) BIGHT TO OOMPSNSATIOK FOB 8SBTI0B8 386
Since the law implies, from the very relation of partner-
ship, that each member should devote his entire time and
energies to partnership affairs, with no further selfish
thought than of his share of the common profits, it follows
♦that, if he is to exact payment from the firm for services
by him on its behalf, there must be a special agreement to
that effect.*^ The mere fact that one partner has bc^en
more active than the others in promoting their mutual wel-
fare is not enough to justify a claim for additional compen-
sation on his part. It is easy enough to provide for such a
contingency in the agreement itself, if it is intended. If no
such stipulation is made, the law will not imply one.**
While the rule may seem to impose considerable hardship
upon the partner who is forced to assume more work than
he had anticipated, it is clear that, should the courts under-
take, upon a mere estimate of a partner's services, to award
compensation in one case, they must do so in all cases
where skill and labor are unequally bestowed. This would
be to abolish the rule of law, and to place the right to com-
pensation not upon contract, where it belongs, but upon
the principles of quantum meruit.*' The force of the rule
is particularly shown in the denial of extra compensation
to a partner upon whose shoulders a disproportionate
amount of work is thrown by the illness of a copartner;
•1 Wimams T. Pedersen et al., 47 Wash. 472, 92 Pac. 287, 17 L.
B. A. (N. S.) 384; Denver ▼. Roane, 99 U. S. 355, 25 L. Ed. 476;
NeylllB V. Moore Min. Co., 135 Oal. 561, 67 Pac. 1054 ; Drew ▼. Per-
son, 22 wis. 651; Glover v. Hembree, 82 Ala. 324, 8 South. 251;
Emerson v. Durand, 64 Wis. Ill, 24 N. W. 129, 54 Am. Rep. 593 ;
Roth V. Boles, 139 Iowa, 953, 115 N. W. 930. For compilation of
cases, see note in 17 L. R. A. (N. S.) 884-4ia See *' Partnership,'*
Dec. Diff. iKev Vo.) | 8S; Cent. Dig. I ISl.
»2 LINDSEY V. STRANAHAN, 129 Pa. 635. .18 Ati. 524, Gllmore,
Gas. Partnership, 435; Danlap v. Watson, 124 Mass. 305; Peck ▼.
Alexander. 40 Colo. 392, 91 Pac. 38 a907) ; Caldwell ▼. Lang, 101 8.
W. 972, 31 Ky. Law Rep. 237. See ^'Partnership,*' Deo. Dig. {Key
No.) ^ 8S; Cent. Dig. ^ ISl.
»» Caldwell y. Lelber, 7 Paige (N. Y.) 488 ; Roth ▼. Boles, 139 Iowa,
253, 115 N. W. 930; WUllams y. Pedersen, 47 Wash. 472, 92 Pac.
287. See annotated note to this case in 17 L. R. A. (N. S.) 885i. See
'^Partnership,'* Dec. Dig. {fey No.) | 85; Cent. Dig. | ISl.
GII..PABT.— 25
386 BIGHTS AND DUTIES OF PABTNBBS IMTBB SB (Ch. 6
such illness being held to be a risk that should have been
foreseen.**
An exception to the general rule is recognized where the
difference in extent or importance of the services actually
rendered by the various partners was clearly not contem-
plated by them when they entered into the partnership re-
lation. Thus, where one partner willfully violates his duty
as partner by neglecting the business, leaving it altogether
to the care of his copartner, the latter was held entitled to
credit for his services in addition to his share of the prof-
its."
Ordinarily the general rule, denying extra compensation
in the absence of special agreement, applies also to liquidat-
ing and surviving partners.** The tendency of the cases is,
however, to allow extra compensation to surviving part-
ners under special circumstances, wherever it is possible to
construe the same as extraordinary.*^
•4 Heath t. Waters, 40 Mich. 457. But see Hart ▼. Myers (Snp.)
12 N. Y. Supp. 140, affirmed 59 Hun, 420, 18 N. Y. Sppp. 388, where
there was an express covenant on the sick partner's part to per-
form a certain part of the duties of the firm. For farther examples
of express provision for compensation, see Eeiley v. Tnmer, 81 Md.
269, 81 AU. 700; Smith v. Knight, 88 Iowa, 257, 55 N. W. 189;
Bckert v. Clark, 14 Misc. Rep. 18, 85 N. Y. Snpp. 118. A promise to
pay for extra services will not be implied from the mere rendition
of such services, no matter how great the excess of services may
be. Burgess v. Badger, 124 111. 288, 14 N. B. 850; McAllister ▼.
Payne, 108 Ga. ^7, 84 S. E. 185. See **Partner8Mp;' Dee. Dig. (Key
No.) % 83; Cent. Dig. | 131.
••Denver v. Roane, 99 U. S. 855, 25 L. Ed. 476; Marsh's Appeal,
89 Pa. 80, 8 Am. Rep. 206; Airy v. Borham, 29 Beav. 620; MAT-
TINGLY V. STONE'S ADM*R, 85 S. W. 921, 18 Ky. Law Rep. 187 ;
MiUer V. Hale, 96 Mo. App. 427, 70 S. W. 25& See ^'Partnership,''
Dec. Dig. (Key No.) || 83, 86; Cent. Dig. H 131 134.
••Beatty v. Wray; 19 Pa. 516, 57 Am. Dec. 677; Brown ▼. Me-
Farland's Ex*r, 41 Pa. 129, 80 Am. Dec 598; OYOEB'S APPEAI^
62 Pa. 73, 1 Am. Rep. 882; EimbaU v. Lincoln, 5 111. App. 816, af-
firmed 99 111. 578 ; Slater v. Slater, 78 App. Div. 449, 80 N. Y. Supp.
863 ; Id., 175 N. Y. 143, 67 N. E. 224, 61 L. R.' A. 796, 96 Am. St.
Rep. 609. Contra, Royster v. Johnson, 73 N. O. 474. See, also, ante,
chapter V, | 122, p. 853, Surviving Partner. Bee '^Partnership,'* Dec.
Dig. (Key No.) §| 253, 307; Cent. Dig. 8§ 550, 710, 711.
»T THAYER V. BADGER, 171 Mass. 279. 50 N. E. 541, Gilmore,
Cas. Partnership, 435; Zell's Appeal, 126 Pa. 329, 17 AtL 647; Rob-
§ 134) BIGHT TO INDEMNITY AND OONTBIBUTION 887
RIGHT TO INDEMNITY AND CONTRIBUTION
134. A partner is entitled to indemnity for losses caused by
his copartner's violation of the partnership con-
tract. In addition, if he pays or is compelled to
bear more than his just share of the firm's debts or
liabilities^ or incurs a personal liability or loss in
the ordinary and proper conduct of the firm busi-
nesSy or in doing something necessary for the
preservation of the business or property of the
firm, he is entitled to demand that his copartners
should, for his relief, contribute their due propor*
tion of his outlay or loss on the firm's behalf.
Indemnity
The right and duty of indemnity is a natural consequence
of the duty to conform to the partnership agreement. For
all losses due to failure to conform to the partnership agree-
ment, or to lack of skill and diligence, the partner in fault
must indemnify the copartners. For example, where a part-
ner, in violation of an express agreement not to extend
credit to relatives, advances money from the partnership
funds or sells partnership goods to an impecunious relative,
he is personally liable for the account.*^
Inson ▼. Simmons, 146 Mass. 167, 15 N. E. 558, 4 Am. St Rep. 299;
Bite's Heirs y. Hite's Ex'rs, 1 B. Mon. (Ky.) 177. As to Burvivor of
law partnership, see Osment ▼. McElrath, 68 Gal. 466, 9 Pac. 731,
58 Am. Rep. 17; dictum citing this as possible exception, Lamb t.
WUsin, 3 Neb. (Unof.) 496, 92 N. W. 167; Littie ▼• Caldwell, 101
Cal. 553, 36 Pac. 107, 40 Am. St Rep. 89; Sterne ▼. Goep, 20 Hun
(N. Y.) 396. See '^Partnership,'' Dec Dig. (iTey No.) || 253, 307;
Cent. Dig. %% 550, 710, 711.
» 8 McCoy y. Cossfield, 54 Or. 591, 104 Pac. 423. See, also, Holden
T. Thiirber (R. I., 1909) 72 Atl. 720 ; Brown v. Orr aOOD) 110 Va,
1, 65 S. E. 499; Loy v. Alston, 172 Fed. 90, 96 a O. A. 578; MUR-
PHY V. CRAFTS, 13 La. Ann. 519, 71 Am. Dec. 519, Gilmore, Cfts.
Partnership, 438; CHARLTON v. SLOAN, 76 Iowa, 288, 41 N. W.
303, Gilmore, Cas. Partnership, 439; YORES v. TOZER, 59 Minn.
78^ 60 N. W. 846, 28 L. R. A. 86, 50 Am. St Rep. 395, Gilmore, Cas.
Partnership, 440. See ante, chapter VI, | 123, Duty to Conform to
Agreement, and | 128, Duty to Exercise Care fuid SkilL See ''Part"
nership,'* Dec. Dig. (Key No.) i 85; Cent. Dig. | 1S3.
388 RIGHTS AND DUTIES OV PABTNBBS INTBB SB (Ch. 6
Contribution
The right and duty of contribution, while similar, is more
peculiar to the law of partnership. In all partnership trans-
actions there is common risk and common liability. The
members undertake joint enterprise^, assume Joint risks,
and they incur in all cases joint liabilities.** Each partner
is bound for the entire amount due on the copartnership
contracts. If, then, he is forced to pay alone an obligation
which properly should be borne by all the parties, it is but
right that he should be reimbursed for the amount he has
expended beyond his own pro rata liability.^ The right to
contribution, while often expressly recognized in the articles
of partnership, exists irrespective of them as an incident of
the partnership relation. Prima facie all losses or expendi-
tures of the character above indicated are to be borne by the
partners equally.*
Same — Basis of the Right
The right of contribution in the cases above cited resem-
bles indemnity in being nothing more than a partner's due
as agent for the firm.* Where, however, the expense in-
curred by the partner for which he seeks reimbursement
•• MASON T. ELDRED, 6 Wall. 231, 18 L. Ed. 783, OUmore, G^s.
Partnership, 281. See "Partnership,*' Dee, Dig. (Key No.) | 101;
Cfint.' Dig. § 155.
iMoran Bros. Go. v. Watson (1006) 44 Wash. 382, 87 Pac. 508.
The firm Is liable for the expense of repairs on a partnership ves-
sel, paid by one partner during the voyage. Mumford v. Nicoll, 20
Johns. (N. Y.) 611. A partner is allowed all his personal expenses
while away from home on firm business, although the partnership
contract binds each partner to pay his own individual expenses;
that contract provision being construed to apply only to expenses
when the parties were at home. Withers v. Withers, 8 Pet 355, 8 L.
Ed. 972. Of. French v. Vanatta (1907) 83 Ark. 306, 104 S. W. 141.
See "Partnership," Dec, Dig. {Key No.) | 101; Cent. Dig. | 155.
2Moley V. Brine, 120 Mass. 324; Jones v. Butler, 87 N. Y. 613;
TAFT V. SOH WAMB, 80 Dl. 289 ; Richards v. Grlnnell. 63 Iowa, 44,
18 N. W. 668, 50 Am. Rep. 727 ; Knapp v. Edwards, 67 Wis. 191, 15
N. W. 140. See "Partnership^* Deo. Dig. (Key No.) || 84, 87, 101;
Cent. Dig. H iS2, 185, 155.
• Thomas v. Atherton, 10 Gh. Div. 185; Spottlswoode's Oase, 6
De Gex, M. ft G. 845; Robinson's Ex'rs' Gase, Id. 572; Lefroy v.
Gore, 1 Jones ft L. 571 ; Bury v. Allen, 1 Golly. 604. See "Partner-
ship;* Deo. Dig. (Key No.) %% 85, 101; Cent. Dig. U 188, 15$.
§ 134) BIOHT TO INDEMKITT AND OONTRIBUTION 889
has been an "extraordinary outlay for necessary purposes,"
for example, to pay the cost of operations without which
the business cannot go on, there is some difference of opin-
ion as to the proper origin of the principle of contribution.
Pollock * maintains that the duty of contribution in this
class of cases has nothing to do with either agency or trust;
that it is a duty imposed, if at all, by quasi contract, a duty
to be recognized only under special circumstances, and more
analogous to salvage and average than aught else. The
English cases, however, hardly sustain this, clearly basing
the partner's right to be protected by contribution against
extraordinary losses upon the implied authority of the part-
ner to make the expenditures. "A partnership creates an
agreement that, in case any partner pays more than his
share, the others shall indemnify him." " But the right to
contribution is not necessarily limited by the scope of a
partner's powers in dealing with third parties. For exam-
ple, while a partner might not have any express or implied
authority to borrow money and thereby subject his co-
partners to liability to repay it, he may be entitled to re-
imbursement for money necessarily laid out by him for the
firm.* In the United States the right to indemnity or con-
tribution has never been seriously questioned ; the courts rec-
ognizing its existence, irrespective of whether based on the
rules of agency,^ trust,* or implied authority.*
Same — Modified by Agreement
It may always be shown that there has been a tacit or
express agreement that there should be no contribution.**
4 Digest Part (8th Ed.) 82.
• Wright V. Hunter, 5 Ves. 792. See ^'Partnership,^ Deo, Dig. (fay
^0.) «§ 84, 87, 101; Cent. Dig. §| ISZ, 135, 155.
• Ex parte Chippendale, In re German Mining Go., 4 De G., IL ft
G, 19. See '* Partnership r Dec. Dig. {Key No.) H 84, 87, 101; Cent.
Dig. §1 182, 185, 155.
TMeserve v. Andrews, 106 Mass. 419. See '^Partnership,'* Deo,
Dig. (Key No.) || 85, 101; Cent. Dig. If 18$, 155.
• Lee*B Bx*r v. Dolan's Adm'x, 89 N. J. Bq. 19B. See **Partner-
shipr Dec. Dig. {Key NO.) $| 85, 101; Cent. Dig. H 188, 155.
• (Chancellor Kent, In SeUs' Adm'rs v. Hnbbell, 2 Johns. Ch. (N.
J.) 394, 397. Sec '* Partnership r Dec. Dig. {Key Vo.) U 85. 101;
Cent. Dig. fS IBS. 155.
loLymaii v. Lyman. 15 Fed. Cas. No. 8.028. 2 Paine, 11; Mallett
390 RIGHTS AND DUTIES OF PABTNBBS INTBB SB (Gh. 6
Agreement also may fix a limit as to the amount of contri-
bution; but, in the absence of such an agreement, the
amount which a partner may be' called on to contribute is
not necessarily limited to a sum proportionate to his share
in the partnership. For, if some of the partners are unable
to contribute their share, those who are solvent must con-
tribute the whole.*^
Same — Conditions for Obtaining Contribution — Losses Due
to Partner^ s Own Negligence
In order that a partner be allowed credit for expendit-
ures made by him, however, it is not enough that he deemed
them necessary and proper. It must further appear that
they related to the common undertaking, and were in some
way beneficial to the partnership.^* If the loss or outlay
for which a partner seeks indemnity or contribution was
caused only through his own negligence, bad faith, or
breach of duty, or while he was acting outside of his au-
thority, no duty to reimburse him arises.^' Still less does
y. Eellar, 181 N. Y. 543, 73 N. E. 1126, affirmed 91 App. Diy. 502, 86
N. Y. Supp. 917; Boskowltz v. Nickel, 97 Cal. 19, 81 Pac. 732. See
'^Partnership,'' Dec Dig. {Key No.) {§ 84, 87, 101; Cent. Dig. f| 132,
1S5 155
11 MAGII/rON V. STEVENSON et al., 173 Pa. 560, 84 Ati. 235,
Gllmore, Gas. Partnership, 445; Scudder ▼. Ames, 89 Mo. 496, 14
S. W. 525 ; McEewan's Gase^ 6 Gh. Dlv. 447 ; In re Worcester Gom
Exchange Go., 3 De Gez, M<. ft G. 180. Gf. Meadows y. Mocqaot,
110 Ey. 220, 61 S. W. 28, 22 Ey. Law Hep. 1646, to the effect that
one who Is to contribute labor as his share of the partnership capital,
cannot be compelled to contribute to losses of capital by the other
partner. Gf. Hebblethwalte y. Flint, 115 App. Div. 597, 101 N. Y.
Supp. 43. See ''Partnership,'^ Dec. Dig. (Key No.) {§ 84, 87, 101;
Cent. Dig. Sfi 1S2, 185, 155.
12 Van Tine v. Hilands (G. G.) 142 Ted. 613 ; Godfrey y. White,
43 Mich. 171, 5 N. W. 243; Meserye y. Andrews, 106 Mass. 419.
See, also, Butler y. Butler, 164 111. 171, 45 N. E. 426 ; ^rbea y. Hes-
ton, 202 Pa. 406, 51 Atl. 1025. A payment by one partner of money
in excess of his share of the capital, not deriyed from partnership
profits, when it was necessary to be paid to preserye the partner-
ship business, constitutes a preferred claim on the partnership prop-
erty, which must be paid before there can be any surplus found to
be dlyided among partners. Matthews y. Adams, 84 Md. 143, 35
Atl. 60. See "Partnership,'' Dec Dig. (Key No.) fif 84, 87, 101; Cent.
Dig. §fi 1S2, 1^5, 155.
liMcFadden y. Leeka, 48 Ohio St 513, 28 N. B. 874; Ball y.
§ 134) BIGHT TO INDEMNITT AND CONTRIBUTION 891
the right to contribution exist in favor of a partner who
has, by his own fraud or misrepresentations, enticed an-
other into the firm ; for the latter is in a position to with-
draw from the partnership agreement without liability for
losses.^*
Same — Illegal Transactions
With regard to the right of a partner to reimbursement
whose loss has occurred through an illegal act, it should be
said at the outset that by a familiar rule there is no con-
tribution between wrongdoers. The courts, however, are
so liberal in this respect that unless the partnership itself is
illegal, or unless the act relied on as the basis of the claim
is not only illegal, but has been committed by the partner
seeking contribution, either expressly or impliedly knowing
its illegality, contribution will be allowed." A partner is
entitled to contribution where the act which causes him loss
was a mere breach of trust as distinguished from an illegal
act^ or not so clearly illegal but what it may have been done
in good faith or honest ignorance.^'
Same — Obtainable Only on Settlement of Partnership AC"
counts
Contribution proceeds upon the supposition that the part-
ner has paid more than his share of a burden which was
common to all the partners. To ascertain whether he has
really paid more than his share, an accounting of the firm
business is essential. This usually involves a suit in equity,
for the machinery of a court of law is not adequate to deal
with details of a partnership accounting. Until there has
Levin, 48 La. Ann. 859, 19 South. 118; Warren v. Raben, S3 Neb.
380, 50 N. W. 257; Maher v. Bull, 44 lU. 97. See "Partnerahipr
Dec. Dig, (Key No.) K 84, 85, 87, 101; Cent. Dig. H 1S2, ISS, 185, 155.
i« Rawlins ▼. Wlckham, 1 GlflP. 355; Newbigging v. Adam, 34 Ch.
Div. 582; PUlans v. Harknees, CoUee, 442. ' See "Partnership,'* Dec.
Dig. {Key No.) ^ 84, 85, 87, 88, 101; Cent. Dig. f| 1S2, ISS, 185, 1S6,
165.
iBLindL Part p. 878; Betts ▼. Oibbins, 2 Adol. ft E. 57; Smith
V. Ayrault, 71 Mich. 475, 89 N. W. 724, 1 L. R, A. 311 ; CLAYTON v.
DAVETT (N. J. Cai.) 38 Ati. 30a See "Partnerahip,** Dec. Dig. (Key
No.) §§ 88, 101; Cent. Dig. S§ ISO, 155.
le Ashurst T. Mason^ L. R. 20 Eq. 225; Pollock, Torts, 170, 171.
See ^^Partnership;* Deo. Dig. {Key No.) § 101; Cent. Dig. 1 155.
'^2 BIGHTS AND DUTIES OF PARTNERS INTBR SB (Ch. 6
been a settlement of the firm affairs, it is not possible to
know definitely the relief to which the complaining partner
is entitled*^ " * ♦ ♦ How can there by any fair or just
contribution, or any claim to contribution, as between part-
ners, until after a final settlement and ascertainment of the
exact state of the account of each partner, and a full set-
tlement of the partnership affairs ? * * * It might well
be that appellant was entitled to recover nothing from his
copartners by way of contribution on account of what he
had paid ; for, as there is no pretense that the partnership
accounts have ever been settled, it might appear on such
settlement that appellant was still indebted to the partner-
ship in a large sum, and that his partner had actually paid
for it much more than he had done." *• Moreover, the right
on contribution should arise only when loss has been ac-
tually sustained by the person seeking relief ; ^* but it has
been held that a prospect of immediate loss may justify an
immediate suit in equity.'^
RIGHT TO AN ACCOUNTING
135, ESach partner is entitled to a complete accounting from
his copartner, showing the condition of the part-
nership affairs, in order that the respective rights
and liabilities of the partners in relation to their
common business may be known. If such an ac-
counting is refused, any partner aggrieved may
bring suit in equity to compel it*
IT Kennedy ▼. McFadon, S Har. ft J. (Md.) Id^ 5 Am. Dec 434;
Maxwell v. Jameson, 2 Bam. ft Aid. 51; Spark v. Heslop, 1 BL ft
BL 563. Bee ^^Partnership,*' Deo. Dig. (Key No.) { 109; Cent. Dig.
I 171.
i« WARRING V. ARTHUR et al., 98 Ky. 34, 82 S. W. 221, OU-
more. Gas. Partnership, 441. See ^'Partnership,'* Deo. Dig. (Key No.)
I 109; Cent. Dig. § 171.
!• Maxwell ▼. Jameson, 2 Bam. ft Aid. 51; Spark y. Heslop, 1 El.
ft BL 868. See "* Partnership/* Deo. Dig. {Key No.) If iOl, 109; Cent
Dig. §1 155, 111.
aoLacey v. HHl, L. R. 18 Eq. 182; Hobbs v. Wayet, 36 Ch. Div.
256. See **Partner8hipr Dec. Dig. (Key No.) 1 109; Cent. Dig. 1 171.
§ 135) BIGHT TO AN AOGOUNTINO ' 893
Basis aiid Purpose of Accounting
We have seen that it is the duly of each partner to keep
and furnish correct accounts of all things affecting the part-
nership."* The importance of this duty becomes manifest
when upon the termination of the partnership, or upon the
happening of some other event requiring an adjustment of
the assets and liabilities of the firm, a formal accounting is
necessary.*' We have also seen that a formal settlement
of the mutual rights of the several partners in the firm
property is necessary before an action for contribution can
be maintained by one partner against the other."* " If all
the partners can ag^ee, and there are no conflicting claims,
and no frauds on creditors, there is nothing to prevent the
partners themselves making a complete settlement of all
the firm affairs in a private accounting without resort to
the courts,"* In the absence of fraud or mutual mistake,,
these private accountings and settlements will be conclu-
sive upon the partners."* Very frequently, however, dis-
putes, insolvency, or the existence of conflicting claims pre-
clude an amicable settlement of their affairs by the part-
ners themselves. It then becomes necessary to seek the aid
of the courts. The right of the partners to enforce an ac-
counting in the courts is considered at length in chapter
«i Supra, I 127, p. 371.
22Rels V. Heis, 99 Minn. 446, 109 N. W. 997: Miller ft Go. t.
Simpson, 107 Va. 476, 59 S. E. 378 (1907) ; Hines v. Dean, 1 White
ft W. Oiv. Gas. Ot App. (Tex.) § 690; Sprout v. Crowley, 30 Wis.
187. See '* Partnership,'' Dec, Dig. (Key No.) §| 81, 297-S12; Cent.
Dig. 18 129, 679-728.
«• Supra, i 134, p. 387.
2« Scheuer v. Berrlnger, 102 Ala. 216, 14 South. 640; Sage v. Wood-
hi, 66 N. Y. 578; Klmberly v. Arms, 129 U. S. 512, 9 Sup. Ct 355,
82 L. Ed. 764 ; Smith v. Proskey, 177 N. Y. 526, 69 N. B. 1131, re-
vising 82 App. Dlv. 19. 81 N. Y. Supp. 424; Phillips v. Reynolds,
236 111. 119, 86 N. E. 193 (1008). See ^^Partnership,'* Dec. Dig. (Kep
No.) II 81, Sll; Cent. Dig. §§ 129, 718-725.
25 Howard v. Pratt, 110 Iowa, 533, 81 N. W. 722; Eddy v. Fogg,
192 Mass. 543, 78 N. E. 549; Comer v. Mackey, 147 N. Y. 574, 42
N. B. 29; Heath v. Van Cott, 9 Wis. 516; Wlnslow v. Leland, 128
111. 304,- 21 N. B. 588 ; Fritz v. Fritz (1908) 141 Iowa, 721, 118 N.
W. 769. See ''Partnership:* Dec. Dig. {Key No.) f§ 81, Sll; Cent.
Dig. §{ 129, 718-725.
394 RIGHTS AND DUTIES OF PARTNERS INTER SB (Ch. 6
VIII, where the general subject of actions between part-
ners is discussed.*'
DISTRIBUTION OF ASSETS AMONG PARTNERS
136. Unless otherwise provided by the partnership agree-
ment, the assets of a partnership are distributed as
follows :
(a) To the pa3rment of all debts and liabilities of the
firm to third parties.
(b) The repa3rment to each partner of his advances to
the firm.
(c) The return to each partner of his contribution to the
capital of the firm.
(d) The surplus, if any, is divided among the partners in
the proportion provided in the partnership agree-
ment.
Having noted the right to an accounting and the property
subject to it, it becomes material to know how that ac-
counting is to apportion the rights of those both within and
without the firm, so as to give to each his due share of the
partnership property. In a previous chapter *^ the applica-
tion of partnership property to partnership debts, and the
paramount rights of the latter, were fully described. For
the purpose of this discussion, it is necessary, therefore,
only to repeat that in the accounting the debts of the part-
nership are first to be paid, and that neither the claims of
the individual partners against the firm nor their claims
against each other should be allowed to compete with
these.*'
«• See chapter VIII, p. 459. Actions Between Partners.
aT Chapter III, § 58, p. 179.
s8 GROTH et al. ▼. KERSTING et aU 23 Colo. 213, 47 Pac. 393,
GUmore, Gaa Partnership, 484; Jarvls y. Brooks, 27 N. H. 37, 59
Am. Dea 359; Edison Electric Illuminating Oo. y. De Mott, 51 N.
J. Bq. 16, 26 Ati. 952; Forsyth y. Woods, 11 WalL 484, 20 K Ed.
207; Second Nat Bank of Oswego y. Bart, 93 N. Y. 233; Powell
y. Bennett, 131 Ind. 465, 30 N. B. 518; Blake y. Third NationaJ
Bank of St Louis (1909) 219 Mo. 644, 118 S. W. 641 ; Lacey y. Cow-
S 136) DISTRIBUTION OF ASSETS AMONG PABTNBBS 895
Repaying Advances
After the obligations to third parties have been satisfied,
the question is one between the partners themselves. Very
often one partner has loaned money to the firm over and
above his contribution to its capital. This loan is called
an advance, and is treated as a debt due from the firm to
the partner making it. Next after the firm debts to out-
siders all advances are to be paid in full.** Suppose, for in-
stance, after paying its debts, a firm of three equal part-
ners should have left $16,000, and one of the partners had
previously advanced to the firm $7,500. Obviously, if each
partner should take out $5,000, leaving the partner who
made the advances a judgment merely against his copart-
ners for two-thirds of the $7,500, he would not only lose
one-third of his advances, but also have thrown upon him
the risk of collecting his judgment.**
It may turn out, however, that the firm assets left after
paying outside creditors are insufficient to pay advances.
In this event, unless the partnership agreement provides a
different method of apportioning losses, the deficiency is to
be borne in the proportion in which the profits are to be
shared.** The partner to whom the advance is owing must
bear his share of the loss like the rest.** It is entirely pos-
sible, however, to protect the partner making advances by
an (1909) 162 Ala. 546, 50 South. 281. See '^Partnership,*' Deo. Dig,
{Key No.) S| 176-189; Cent. Dig. §S SOSSJiS.
«• WWtney v. Whitney, 115 Ky. 552, 74 S. W. 194; Mason v. Gib-
son, 73 N. H. 190, 60 AU. 96 ; LESEHMAN ▼. BERNHEIMER, U3
N. Y. 39, 20 N. E. 869 ; Henderson ▼. Rles, 108 Fed. 709, 47 O. C.
A. 625; Harman y. Stnart (Ky., 1909) 119 S. W. 210; Capital Food
Co. v. Globe Coal Co. (Iowa, 1909), 116 N. W. 803, and 142 Iowa,
134, 120 N. W. 704. See ''Partnership^ Deo. Dig. (Key No.) | 904;
Cent. Dig. |§ 701, 702.
80LESERMAN ▼. BERNHEIMER, 113 N. Y. 89, 20 N. B. 869.
See "Partnership;* Dec Dig. {^ey No.) | 904; Cent. Dig. il 701,
702.
•1 Post, note 44, p. 899. See, also, Ramsay y. Meade, 37 Colo. 465,
86 Pac. 1018; Stark ▼. Howcott, 118 La. 489, 43 South. 61. See
"Partnership,** Dec Dig. (Key No.) | S04; Cent. Dig. K 701, 702.
■2 RAYMOND v. PUTNAM, 44 N. H. 160, Gllmore, Cas. Partner-
ship, 490. See "Partnership,** Deo. Dig. {JBiey No.) §| 30$, 504; Cent.
Dig. |{ 700-702.
396 BIOHT8 AND DUTIES OF PARTNERS INTER SB fCh. 6
an agreement limiting his loss in any event to a certain
amount. In this case, should his advances to the firm ex-
ceed this amount, and the business prove a failure, he
should have a joint and several judgment against his co-
partners for the difference.'^
Same — Interest on Advances
There is some conflict in the authorities as to whether a
partner should be allowed interest on these advances. That
the partnership may be liable for interest, where there is a
special contract to that effect, or where it may be implied
from the facts and circumstances that the firm is to pay
interest on advances, all are ag^eed.'^ In the absence of
such agreement or implication, what is perhaps the weight
of authority contends that advances, like overdrafts, are iso-
lated acts, not constituting items in the. account between
the lending partners and the firm, and that, it being impos-
sible to determine, until after an accounting, whether the
partner is really a debtor or a creditor, interest should not
be allowed.*" On the other. hand, some courts hold that
advances are loans, like any others, and, being usually made
with the knowledge of the other partners, should have in-
terest at the statutory or customary rate.**
•• MAGILTON y. STEVENSON, ITS Pa. 560, 84 Atl. 285, GUmore,
Gas. Partnership, 445. Bee ^'Partnership," Dec. Dig. (Key No,) |
87; Cent. Dig. | 135.
•4 Prentice t. Elliott, 72 Ga. 154 ; McCaU v. Moss, 112 IlL 4»3 :
Emerson v. Dnrand, 64 Wis. Ill, 24 N. W. 129, 54 Am. Rep. 593.
See ^'Partnership,*' Dec Dig. {Key No.) | 75; Cent. Dig. H 120-12S.
•• Mmer ▼. Lord, 11 Pick. (Mass.) 11 ; Godfrey ▼. White, .43 Mich.
171, 5 N. W. 243 ; Prentice v. Blliott 72 Ga. 154 ; In re James, 146
N. X. 78, 40 N. B. 876, 48 Am. St. Rep. 774. "There is no point dur-
ing this whole period [of accounting] that can be fixed equitably as
the time when interest should be charged. ^ • • We announce
as our conclusion on this subject that the general doctrine is well
settled that interest in an accounting between partners is not al-
lowed. The exception is that a court of equity may allow interest
where. In view of the particular facts of a case, it is Just and equi-
table to make the allowance.'* LAMB ▼. ROWAN (1903) 83 Miss.
45, 85 South. 427, 690, Gilmore, Gas. Partnership, 497. See, also.
Lemma ▼. Blanding (1909) 139 Wis. 156, 120 N. W. 842. See ''Part-
nership" Dec. Dig. {Key No.) f 75; Cent. Dig. |§ 120-12S.
i«FOLSOM y. MARLETTE, 23 Ney. 459, 49 Paa 89^ Gilmore,
§ 136) DISTRIBUTION OF ASSSTS AMONG PARTNBB8 897
Repaying Capital
After the firm creditors, including partners who have
loaned the firm money, are satisfied, the capital of the firm
is to be repaid. Ordinarily the capital furnished by the
partners is, in the absence of agreement to the contrary, a
debt owing by the firm to the contributing partner.*^ If
there is not sufficient to repay each partner his capital, then
the balances of capitals remaining unpaid must be treated
as so many losses, and are to be met like all other debts of
the partnership ; that is, borne pro rata by the partners in
the proportion in which profits are to be shared." That
one partner has contributed all the capital makes no differ-
ence. If A. contributes the whole partnership capital of
$1,000, and the firm assets on accounting prove to be $1,-
500, naturally this $500 should be divided. Should the
assets prove only $900, A. should be ratably repaid his pro-
portion of this $100 loss.**
Such is the usual situation with regard to capital in the
ordinary mercantile partnership; but it may obviously be
changed by agreement, as where the partnership articles
provide that contributions by the partners to the firm stock
shall not be considered as capital, but as firm assets, to be
distributed upon settlement, like profits.** It may be, es-
Cas. Partnership, 486, and cases dted at page 487. See, also, Rodi:-
ers ▼. Clement, 162 N. T. 422, 56 N. E; 901, 76 Am. St Rep. 342.
By the English Partnership Act, 1890, i 24(3), interest is allowed
on advances. 8ee "PartneraMp,*' Deo. Dig. {Key No.) f 75; Cent.
Dig. i§ 120-12S.
ST GHOTH ▼. KERSTINQ, 23 Colo. 213, 47 Pac. 393, Gilmore, Gas.
Partnership, 484; Scutt v. Robertson, 127 111. 135, 19 N. B. 851;
Jones v. Butler, 87 N. Y. 613. See ** Partnership,** Deo. Dig. (Key
yo.) i m ; Cent. Dig, | 102.
88 WHITCOMB V. CONVERSE, 119 Mass. 38, 20 Am. Rep. 811,
Gilmore, Cas. Partnership. 488; TAFT v. SCHWAMB, 80 111. 289;
Newell V. Newell, Ia R. 7 Eq. 538; Bee '^Partnership,** Deo. Dig.
(Key No.) | S04; Cent. Dig. i 702.
88 Newell V. Newell, supra; Hasbrlnck v. Chllds, 8 Bosw. (N. Y.)
105 ; Eng. Partn. Act, 1890, | 40 (b), 3. Bee "Partnership," Dec. Dig.
(Key No.) § S04; Cent. Dig. I 702.
♦0 GROTH et al. v. KERSTING et al., 23 Colo. 213, 47 Pac. 393,
Gilmore, Cas. Partnership, 484; MOLINEAUX ▼. RAYNOLDS, 54
N. J. Eq. 550, 85 Atl. 536, Gilmore, Gas. Partnership, 215; Blnney.y.
398 BIGHTS AND DUTIES OF PARTNERS INTER SB (Ch. 6
pecially in a partnership for a single venture, that the mere
use of the capital is contributed by a partner, and the part-
nership is in the profits only. In this case "the capital re-
mains the property of the individual partner to whom it
originally belonged, any loss or destruction of it falls upon
him as the owner, and, as it never becomes the property of
the partnership, the partnership owes him nothing in con-
sideration thereof." **
With regard to interest on capital, the same general rule
prevails as stated for the majority holdings with regard to
interest on advances, namely, that in the absence of agree-
ment a partner will not be allowed interest on his capital
in the firm.*'
Same — Division of Surplus
Assuming partnership debts, advances, and capital all
taken care of, the surplus is to be distributed among the
partners in proportion to their interest in the firm. This, in
turn, as previously indicated, depends upon the agreement
of the parties, which, if not a matter of construction of a
written document, is a pure question of fact.** In the ab-
Mutrie, 12 App. Gas. 100. Bee ^Partnership,^ Dee. Dig. (Key 2fo,)
H SOJhSOS; Cent. Dig. H 70^-709.
41WHITG0MB T. GONVERSB, 119 Mass. 88, 20 Am. Bep. 811,
OUmore, Gas. Partnership, 488, per Gray, G. J. See, also, SHEA y.
DONAHUE, 15 Lea (Tenn.> 160, M Am. Rep. 407, GUmore, Gas.
Partnership, 168; Gonroy y. Gampbell, 45 N. Y. Saper. Gt 826.
That in some JurlsdictionB it Is held that a partner who furnished
labor as his part of the capital cannot be required to bear any part
of his copartner's money contribution, see Meadows y. Mocquot, 110
Ky. 220, 61 S. W. 28, 22 Ey. Law Rep. 1646; Heran y. HaU, 1 B.
Mon. (Ey.) 150, 85 Ahl Dec 178; Everly y. Durborrow, 8 PhUa.
(Pa.) 08; Johnson y. Jackson (1908) 130 Ey. 751, 114 S. W. 260.
See •^Partnership,'* Deo. Dig. (Key No.) || 72, SOi; Cent. Dig. || 117,
702.
4s Hatzfeld y. Walsh (Tex. Gly. App.) 120 S. W. 525 (1909) ; TAFT
y. SGHWAM'B, 80 lU. 289; Jackson y. Johnson, 11 Hun (N. T.) 509;
EeUey y. Turner, 81 Md. 269, 81 AU. 700 ; Glark y. Worden, 10 Neb.
87, 4 N. W. 418. Gf. ligare y. Peacock, 109 IlL 94. See •"Partner-
ship;' Deo. Dig. (Key JSo.) | 75; Cent. Dig. If 120-129.
4* Peacock y. Peacock, 16 Ves. 49; McGregor y. Bainbridge, 7
Hare, 164; Binford y. Doounett, 4 Yes. 756. See ''Partnership,^
Deo. Dig. (Key Hfo.) | 906; Cent. Dig. If 706-709.
§ 136] DISTRIBUTION OV ASSBTS AMONG PABTNEB8 399
sence of evidence showing a contrary intention, the shares
of all the partners are presumed to be equal.^^
Claims Between Partners
It has already been noted that valid claims by any part-
ner against the firm upon firm transactions are credited to
him; *• but as a general rule claims growing out of individ-
ual transactions between the partners are not taken into
account in the adjustment and distribution of their respec-
tive shares.** Where the debtor partner is insolvent, how-
ever, a court of equity, in order to protect his copartners,
may compel a set-off of the claims of the other partners
against him, though these do not arise out of the firm trans-
actions. "If, on the accounting and settlement of the part-
nership matters, anything shall be found due the plaintiff
from the partnership, and it should be paid over to him, it
would, apparently, be impossible for the defendants to ob-
tain satisfaction of their claims against him. Actions at
law upon these claims would be futile. So it seems that
justice requires whatever sum may be found due to the
plaintiff shall be applied to the payment of these claims of
the defendants." *^
««WHITCOMB ▼. CONYEBSE, 119 Mass. 88, 20 Am. Rep. 811,
GUmore, Cas. Partnership, 488; Ligare t. Peacock, 109 111. ^;
TAFT V. SCHWAMB, 80 111. 289; Huger v. Cunningham, 128 Ga.
684, 56 S. B. 64 ; Taylor v. Coffing, 18 111. 422 ; Woelf el v. Thompson,
173 Mass. 301, 53 N. E. 819. Where two solicitors Joined In the
conduct of a single case, though paid separately, and doing unequal
amounts of work. It was held, in the absence of satisfactory evi-
dence, that they were entitled to share equally tn the fees. Robin-
son T. Anderson, 20 Beav. 98. Losses, in the absence of agreement
to the contrary, are to be borne like profits. See ^'Partnership,^ Deo.
Dig. (Key No.) f 76; Cent. Dig. §| 116, m.
40 Supra, p. 895.
«• Caldwell t. Leiber, 7 Paige (N. Y.) 483; Goldthwait t. Day,
149 Mass. 185, 21 N. E. 359 ; Reid ▼. McQuesten, 61 N. H. 421. See
**Partner8hip,*' Deo. Dig. {Key No.) | 300; Cent. Dig. | 695.
4T PENDLETON v. BEYER, 94 Wis. 31, 68 N. W. 415. See, also.
Nichol v. Stewart, 86 Ark. 612. That as between the partners them-
selves, when the rights of creditors are not involved, an Individual
Indebtedness from one partner to another may be deducted ' from a
partnership balance due from the latter to the former, see Jones v.
400 BIQHTS AND DnriBS OV PAKTNBBS INTKB SB (Ch. 6
SAME— PARTNER'S SO-CALLED LIEN
187. By virtue of the partnership agreement each partner
has a right to have all the finn assets applied first
to the pa3rment of firm debts and then to the settle-
ment of claims inter se. As such right will be en-
forced in equity, each partner has what is loosely
termed a lien on the partnership effects to secure
the accomplishment of these ends.
Definition and Scope
The lien of a partner has already been defined in the sec-
tions discussing the right to have firm property applied in
payment of firm debts.** While loosely called a lien, it is
not in reality such. Each party to the partnership relation
is considered as having agreed that the firm property shall
first be devoted to the payment of the firm debts and obli-
gations and to the adjustment of the claims of the partners
inter se growing out of the relation. A court of equity rec-
ognizes in each partner a right to have the firm assets thus
used, and will compel their application for such purposes.
The lien goes even further than to the mere protection of
firm obligations. It is attached by equity to the surplus
assets of the firm for the purpose of having them applied
in payment of what may be due to the partners, respec-
tively, after deducting what may be due from them as part-
ners to the firm.** It will be noted that the statement of
the rule excludes from the force of the lien debts incurred
between the firm and its members otherwise than in their
Jones, 23 Ark. 212; Parker v. Parker, 65 Barb. (N. Y.) 205. See
"Partnership:* Dec, Dig, (Key Vo,) H SOO, 3SS, 3S4; Cent. Dig. U
695, 7Si, 79t-t96.
41 Ante, chapter III, § 58, p. 179.
*• Kempton v. People, 189 111. App. 563 ; Bardwell v. Perry, 19 Vt
292, 47 Am. Dec. 687 ; Pearson v. Keedy, 6 B. Mon. (Ky.) 128, 43 Am.
Dec. 160; WARREN v. TAYLOR, 60 Ala. 218, Gilmore, Cas. Part-
nership, 446. Bee ** Partnership:* Dec. Dig. (Key No,) |§ 89, 179,
18t, 246, S09; Cent. Dig. K 197, SU, $18, 522, 715-717.
§ 137) DISTRIBUTION OF ASSETS AMONG PAHTNEBS 401
capacity as partners.** Nor does the lien cover individual
debts owed by one partner to another/^
This right or lien of the partners does not become of
practical importance, nor are its effects felt, until the affairs
of the partnership have to be wound up, or the share of a
partner ascertained. It does not give a partner a right to
insist, as against a judgment creditor of the firm, that he
has recourse to the assets of the firm before seeking to ob-
tain payment from the partners individually,**
To What Property the Lien Attaches
So long as the partnership lasts, the lien attaches to
everything that can be considered partnership property, and
is not, therefore, lost by the substitution of new stock in
trade for old."* No lien, however, is allowed if the part-
nership is illegal, unless it be possible to disassociate com-
pletely the illegality from the transactions or agreement re-
lied on as the basis of the lien.** Nor does the lien extend
the property acquired subsequently to dissolution by those
who are carrying on the business, therein differing from
»« Doddington v. Hallet, 1 Ves. Sr. 497 ; 1 lindl. Part. 354 ; Uhler
▼. Semple^ 20 N. J. Eq. 288; Skipp v. Harwood, 2 Swanst 586;
Scheuer v. Berrlnger, 102 Ala. 216. 14 South. 640. Bee "Partner-
ship;' Dec, Dig. {Key No,) { 89; Cent, Dig, { 157.
«i Mack V. Woodruff, 87 111. 570; Mumford ▼. Nicoll, 20 Johns.
(N. Y.) 611; Lewis v. Harrison, 81 Ind. 278. Notes given by de-
fendants, with sureties, for the price of a half interest in* prop-
erty of the plaintiff for the purpose of forming a partnership with
plaintiff in the property, are not partnership debts for which the
firm property is liable. Glapp v. Adams, 143 Iowa, 697, 121 N.
W. 44.
But see ante, note 47, p. 899. See ** Partnership," Dec. Dig, (Key
No,) I 89; Cent, Dig. { 1S7.
02 Clayton v. May. 68 6a. 27; Randolph v. Daly, 16 N. J. Bq. 313.
See "Partnership^' Dec. Dig, (Key No,) §| 89, S09; Cent. Dig, §§ i57,
715-717,
»« Stocken v. Dawson, 9 Beav. 239, 17 Law J. Ch. 282. See, also,
Hiscock V. Phelps, 49 N. T. 97: Evans v. Hawley, 35 Iowa, 83. as to
partnership property in the name of one partner. See ''Partner-
ship," Dec, Dig, (Key No.) § 89; Cent. Dig. § 137.
54 rryer v. Barker, 142 Iowa, 708, 121 N. W. 526, 23 L. R. A. (N.
S.) 477 ; Ewlng v. Qsbaldiston. 2 Mylne & C. 88. See ante, chapter
11, i 30, p. 100. See "Partnership," Dec. Dig, (Key No,) § 89; Cent
Dig. I 1S7.
Gii,.Part.— 26
402 BIGHTS AND DUTIES OF PABTNEBS INTBB SB (Ch. 6
the lien of a mortgagee on a varying stock in trade." If
the partnership is one in profits only, the lien can attach
only to the profits, for the means by which the profits were
produced were not firm property.'* Since a partner has no
right to apply the partnership property to his own individ-
ual uses or debts, the lien will attach to property as trans-
ferred, unless the transferee is a bona fide holder for
value.'^
Against Whom Available
The partner's lien exists against a partner or any one
claiming through him a share in the partnership assets."*
Accordingly it is available against executors of a deceased
partner, the trustee of a bankrupt partner, or the assignee
of a partner's share.** The extent and force of the lien is
well illustrated in the case of Warren v. Taylor,** where A.
filed a bill for accounting and settlement against his part-
ner, B., and against C, to whom B. had given a mortgage
on his (B.'s) interest in the firm. While B. had given A.
a mortgage, also, to indemnify the latter for the firm's pro-
tection against some paper of B.'s, this mortage was not re-
corded until after the one to C, so that, if A. were to pre-
vail over C, he must rely strictly on the priority of the
partner's lien. It was held that C. could claim under his
»BNerot V. Bumand, 4 Buss. 347, 2 BUgh (N. S.) 215; Payne ▼.
Hornby, 25 Beav. 280. See *' Partnership,*' Dec. Dig. (Key No.) |
SOB; Cent. Dig, %% 715-717.
08 Stevens v. Faucet, 24 111. 483; Voorhees y. Jones, 29 N. J.
Law, 270; Robblns v. Laswell, 27 111. 365. See ''Partnership,** Dec
Dig. (Key No.) {§ 89, S09; Cent. Dig. §| 157, 715-717.
»T Farwell v. St Paul Trust CJo., 45 Minn. 495, 48 N. W. 326, 22
Am. St Rep. 742; JANNEY v. SPRINGER, 78 Iowa, 617, 43 N. W.
461, 16 Am. St Rep. 460, Gilmore, Gas. Partnership, 243. See "Part-
nership r Deo. Dig. (Key No.) §§ 89, 97; Cent. Dig. i§ 1S7, H7.
B8 Hobbs V. McLean, 117 U. S. 567, 6 Sup. Gt 870, 29 L. Ed. 940;
Hoyt ▼. Sprague, 103 U. S. 613, 26 L. Ed. 585. See "Partnership,"*
Dec. Dig. (Key No.) §§ 89, 182; Cent. Dig. §§ Itn, S18.
00 Klrby v. Shoonmaker, 3 Barb. Gh. (N. Y.) 46, 49 Am. Dec. 160;
Gavander v. Bulteel, L. R. 9 Gh. 79. See "Partnership** Deo. Dig.
(Key No.) SI 89, 178-18S, S09; Cent. Dig. S§ 1S7, S10S56, 715-717.
80 WARREN v. TAYLOR, 60 Ala. 218, Gilmore, Gas. Partnership,
446. See ''Partnership,** Dec. Dig. (^ey No.) S§ 89, 179. 182; Cent.
Dig. M 1S7, SU, S18.
§ 137) DI8TBIBUTION OF ASSETS AMONG PARTNSBS 403
mortgage only what B. could claim if B. were suing A.;
that when C. bought or accepted as security B.'s interest in
the partnership effects, it was Cs duty to inquire of the
other partner, A., how the account stood between them.
Same — How Lost
The lien will be lost if the firm property is converted into
the separate property of a partner,'^ or is validly sold to a
stranger with the other partner's assent. Still less is it
available against a purchaser from a partner of specific
chattels of the firm.'* Similarly, if on the dissolution of
the firm its property is divided between the partners in
specie on the understanding that the debts shall be taken
care of in some specified manner, the lien is lost, and no
partner has the right to have the property brought back
into the common stock and applied in liquidation of the
firm debts.'*
«iGlddlng8 ▼. Palmer, 107 Mass. 269; Robertson v. Barker, 11
Fla. 192 ; Parker ▼. Merrltt, 105 lU. 293 ; ante, chapter III, §i 56-60,
p. 176 et seq. See ** Partner shdp,*" Dec. Dig. {Key No.) §fi 89, 179,
182, 809; Cent. Dig. i§ 157, 8H, 518, 715-717.
«s In re Langmead'B Trusts, 7 De Gex, M. & G. 8531 See **Part'
nershipr Deo. Dig. (Key 2fo.) §§ 89, 809; Cent. Dig. §§ 181, 7/5-7/7.
«8 Giddlngs V. Palmer, 107 Mass. 269; Miller v. Esttil, 5 Ohio St
608, 67 Am. Dec. 305; liingen v. Simpson, 1 Sim. & S. 600; In re
Langmead's Trust, 7 De Gex, M. & G. 353; Smith y. Edwards, 7
Hmnph* (Tenn.) 106, 46 Am. Dec. 71. But see chapter III, %% 56-60,
p. 176 ct seq. See ^^Partnership,** Deo. Dig. {Key No.) || 89, 277-282;
Cent. Dig. H 137, 622-€il.
404 BBMsoifis OF ciuBDrroBa (OIl 7
CHAPTER VII
REMEn>IES OF CREDITOEtS
188. Remedies at Law.
188. Creditors of ttie Partnership.
140. Creditors of tlie Separate Partner.
141. Garnishment of Partnership Debtors.
142. Remedies in Equity — Insolvency or Bankruptcy of FIra.
143. Firm Creditors Against the Firm Estate.
144. Separate Creditors Against the Firm Estate.
145. Partners Agyinst the Firm Estate.
146. Separate Cifxlitors Against the Separate EiStatea.
147. Firm Creditors Against the Separate Estates.
14& Partner Against the Separate Estate of a Oopartner.
149. Rights of Secured Creditors.
150. Rights of Joint and Several Creditors — Doable Proof.
151. Insolvency or Bankruptcy of a Partner.
162, Rights Against Estate of Deceased Partner.
REMEDIES AT LAW
188. The remedies which the creditors of the partnership or
of the separate partners have against the partner-
ship property will be considered under the follow- '
ing heads:
(a) Creditors of the Partnership.
(b) Creditors of the Separate Partners.
SAME— CREDITORS OP THE PARTNERSHIP
189. While a firm obligation is joint, the judgment tiiereon
is several in its effects, and may be satisfied out ol
the firm property or the separate property of any
or all of the partners^ at the option of the firm
creditor. I
I
Judgment on a Firm Obligation
As the law does not treat the firm as an entity, a firm
debt is the debt of the members composing the firm. While
I
§ 1S9) REMEDIES AT LAW 405
the obligation is joint, and is governed in the main by the
law relating to joint dbligations, yet when an action is
brought upon it, and a judgment is procured, the judgment
is several in its effect. A firm creditor in whose favor it has
been rendered may satisfy it out of the firm property, or
out of the separate property of any or all of the partners.
The judgment becomes a lien upon the firm and separate
real estate of each partner, and upon execution and levy
the chattels of the firm and of the partners may be seized.*
The firm creditor may at his option proceed against either
the firm or .the separate property, as neither partner has a
right to demand that he proceed against the firm assets,
even though ample to meet his judgment.' The judgment
of the firm creditors takes precedence against the firm prop-
erty over the judgments of the separate creditors, although
obtained subsequently. It is not affected by any prior
mortgage, assignment, lien, or other incumbrance upon the
separate interest of the partners, as such interest pertains
to the surplus* only after the firm debts have been paid.*
Action in the Firm Name
At common law all the members of a partnership must be
joined as defendants in an action on a firm obligation, as
such obligations were regarded as. joint. The nonjoinder
of all, however, did not defeat the action, but was merely a
ground for a plea in abatement.* If the partners actually
1 MEECH V. ALLEN, 17 N. Y. 300, 72 Am. Dec. 465, Gllmore. Cas.
Partnership, 409; Stelner v. Peters Store Co., 119 Ala. 371, 24 South.
076 ; Ferry & Go. v. Mattox k Turner, 2 Ga. App. 104, 58 S. E. 291 ;
McDaffle v. Bartlett, 3 Pa. 317 ; Stout v. Baker, 32 Kan. 113, 4 Pac.
141; WlBham v. Llppincott, 9 N. J. Eq. 353; Hunter v. Martin, 2
Rich. Lew (S. G.) 541 ; De Gamp v. Bates (Tex. Glv. App.) 37 S. W.
644. See "Partnership," Dec. Dig. (Key No.) U 1^5, 219, 220; Cent.
Dig. K SOI, 429-469.
2 Louden v. Ball, 93 Ind. 232; HAMSiMITH v. ESPY, 13 Iowa,
439; Barrett v. Furnish, 21 Or. 17. 26 Pac. 861; Webb v. Gregory,
49 Tex. GlT. App. 282, 108 S. W. 478. See ^^Partnership,*' Dec. Dig.
{Key No.) H 165, 187, 219, 220; Cent. Dig. |§ SOI, S40, S42, 429^469.
s Jones V. Parsons, 25 Gal. 100; Whitmore ▼. Shiverick, 3 Nev.
288. See chapter III, § 55, pp. 170-175. See '* Partnership,** Dec.
Dig. (Key No.) §§ 180, 181; Cent. Dig. §| 315^19.
♦ Bice V. Shute, 5 Burr. 2611. See '* Partnership,** Dec. Dig. {Keif
No.) i 200; Cent. Dig. §§ 369-^71.
406 REMEDIES OF CREDITORS (Ch. 7
sued did not raise the question of nonjoinder of their co-
partners, a judgment against those made defendants would
be binding upon them. In such a case the judgment could
not, of course, be enforced against those not joined, and
their obligation, being joint, was extinguished by the judg-
ment* If, however, the defendants insisted that all the co-
partners be brought in, the action could not proceed. To
relieve from the hardships of such a rule, statutory modi-
fications have been made quite generally in the United
States, which permit an action against fewer than all the
promissors.' In some jurisdictions, also, by statute it is
possible to bring an action against the partnership in the
partnership name. Under such statutes the judgment is
only against the common property of the partners and the
private property of the partner actually served with process.
A judgment entered in such a name is a lien on the partner-
ship property only,^
Garnishment .
The partner being liable for the debts of the firm, assets
of a partner in the hands of a third person may be reached
by garnishment or trustee process based on a firm obligation.
"As the debt due from the partners jointly is also due from
each, it may be enforced against the separate property of each.
It is immaterial whether the separate property is in the
form of goods and movable chattels, or goods, effects, and
credits intrusted and deposited in such a manner that they
can only be attached upon a trustee process. It is not nec-
» MASON ▼. ELDRED, 6 Wall. 231, 18 L. Ed. 783, Gllmore, Gas.
Partnership, 281. See note 6, chapter IV, 9 70, p. 220. See "Port-
nership,** Dec. Dig. (Key No.) i§ 200, tl9; Cent. Dig. i§ 869^71, 429-
• Stimson's Am. St Law, | 5015. See, also, ante, chapter IV, | 70l
p. 220.
T Baldridge ▼. Eason, 99 Ala. 516, 13 Sonth. 74; Ladiga Saw-MIU
Ck>. V. Smith, 78 Ala. 108; Fox's Appeal, 8 Sadler (Pa.) 393; Hens-
ley ▼. Bagdad Sash Factory Co., 1 White & W. Civ. Gas. Gt App.
(Tex.) I 718.
In Louisiana the same procedure is possible under the conception
of the ciTll law which regards the firm as an entity. Martin y.
Meyer (G. a) 45 Fed. 435. See ^'Partnership^* Dec. Dig. (fey Nc.)
|§ 197, 200, 219; Cent. Dig. i§ SSO, 569^871, 429-U5.
§ 139) REMEDIES AT LAW 407
essary that the principal debtors should have made a joint
deposit, or that the fund should belong to them jointly. It
is enough if funds attachable upon a trustee process are
due from the alleged trustee to either one of the principal
defendants." •
Attachment
A distinction should be drawn between seizure on final
execution and attachment on mesne process. The latter is a
statutory remedy of a harsh and extraordinary sort. The
courts construe the statutes strictly, and will not extend the
remedy beyond the clear intendment of the law. Such stat-
utes usually enumerate certain acts of a debtor which will
constitute a cause for attachment, such as nonresidence,
secreting or wasting his property, or intending to take it
out of the jurisdiction. In an action against a partnership,
the question arises, therefore, whether a firm creditor can
have the advantage of an attachment. It is held that he
may, if the grounds for the attachment exist against all the
partners. If, for example all of the partners are absent
from the jurisdiction, or all have been guilty of misconduct,
the firm property may be attached. If, however, only one
is absent, or if only one has been guilty of misconduct, it
is generally held that firm property cannot be attached on
such grounds.* If, however, the other members can be
shown to have authorized the misconduct of a single part-
ner, such misconduct becomes theirs, and, if within the
statutory grounds for attachment, firm property may be at-
tached because of it.^*
Same^^eparate Property of a Partner
While the remedy of attachment on mesne process does
not, in general, lie against the property of a firm, one of
whose members only has committed an act which is a stat-
« STEVENS V. PERRY, 113 Mass. 380. See ''Partnershipr Dec.
Dig. (Key No.) | 208; Cent. Dig. §§ 888-400-
9 JAFFRAY V. JENNINGS, 101 Mich. 515, 60 N. W. 52, 25 L. R.
A. 645, GUmore, Cas. Partnership, 503; YERKES v. McFADDEN,
141 N. Y. 136, 36 N. E. 7; Evans v. Virgin, 69 Wis. 153, 33 N. W.
569; HOLLINGSHEAD v. CURTIS, 14 N. J. Law, 402. See "Part-
nership," Dec. Dig. (Key No.) § 208; Cent. Dig. §§ 888-400.
10 Winner v. Kuehn, 97 Wis. 394, 72 N. W. 227 ; Keith v. Arm-
408 BBMEDIB8 OF CREDITORS (Ch. 7
iitory ground for attachment, it will lie against the prop-
erty of the partner, who has committed the :act, on a debt
due from the firm of which he is a member.** Where the
partnership property cannot be reached on attachment,
however, it is not permissible to attach the property of inno-
cent partners.**
Exemption
It is usually said that the exemption statutes, which per-
mit a debtor to hold certain property against his creditor,
ar6 not applicable to property heid in the partnership rela-
tion; that these statutes arc designed for single debtors.
Thus, in Pond v. Kimball,** in construing the Massachu-
setts statute of exemption, the court said : "We agree with
the plaintiff's counsel that the* statute is humane and bene-
ficial in its purpose and operation, and fairly entitled to as
liberal a construction as can be given it, consistently with
its true and just interpretation. There are many difficulties,
however, in the way of applying it to the case of copart-
ners and joint owners, and these difficulties we find to be
insuperable. * ♦ * it appears to us th?Lt the statute is
intended to apply only to the case of a single and individual
debtor. The exemption which it gives is strictly personal.
* * * Its apparent object is to secure to the debtor the
means of supporting himself and his family, by following
his trade or handicraft with tools belonging to himself."
The foregoing quotation represents the weight of author-
ity, so long as there has been no severance of interest by
the partners.**
strong. «5 Wis. 226, 26 N. W. 445. See "Partnership,** Dec, Dig, {Key
No.) § 208; Cent. Dig, §§ 883-400.
11 In re Ghipman, 14 Johns. (N. Y.) 217; In re Smith, 16 Johns.
(N. Y.) 102. See "Partnership,** Dec, Dig, {Key No.) ( tOS; Cent.
Dig. §§ S8S-m-
i2JAFFRi*Y V. JENNINGS, 101 Mich. 515, 60 N. W. 52, 25 L.
R. A. 645, Gilmore, Gas. Partnership, 503. See "Partnership,** Dec.
Dig. {Key No.) § 208; Cent. Dig. §§ S8S-Jt00.
i«POND ▼. KIMBALL, 101 Mass. 105. ;Sfee "Exemption^/* Dec.
Dig, {Key No.) % 61; Cent. Dip. §§ 85-^7.
14 HART V. HI ATT, 2 Ind. T. 24o. 48 S. W. 1038. Gilmore, Cas,
Partnership, 567; Thurlow v. Warren, 82 Me. 104, 19 Atl. 158, 17
Am. St. Rep. 472; Scblapback v. Long. DO .Aln. 525. 8 Sonth. 113;
§ 139) REMEblKS AT LAW 409
As already noticed/' partnership property is, by virtue
of the implied agreement of the partners, liable for the pay-
ment of the firm debts, and no partner may claim a share
in any specific property until such debts have been dis-
charged and the firm business wound up. According to this
doctrine, it should be held, therefore, that one partner can-
not claim an exemption out of the firm property ; for as a
result of the partnership agreement he does not own such
property for his individual uses. If, however, all the part-
ners mutually sever their interests in the common property,
it would seem that each partner might claim an exemption
out of his share, provided, of course, the property was of a
kind that was subject to exemption. It should be noticed
that in Pond v. Kimball *• "it does not appear that at the
time of the attachment the plaintiffs had dissolved partner-
ship, or had divided their joint property, or had had a gen-
eral settlement and winding up of their business." Until
such settlement and decision, clearly no one partner can
claim an exemption. But the inference is that, if they had
severed their interests, they might claim the statutory ex-
emption. It is held, therefore, in some jurisdictions, that,
if the partners mutually agree to dissolve the relation and
divide up the property, each may claim an exemption out
of the share coming to him.^^ Further, it is held that the
partners may sever their interests and claim their exemp-
tion, even after the property has been actually levied upon
by the firm creditors.** A distinction is made in some of
State ex rel. Peck v. Bowden, 18 Fla. 17. Bee "Eafemptiona,^ Dec.
Dig, (Key No.) § 61; Cent. Dig. §| 85-57.
IB See chapter III, | 58, p. 179.
i« POND V. KIMBALL, 101 Mass. 106. Bee ** Exemptions,** Dec.
Dig. (Key No.) i 61 ; Cent. Dig. §§ 85-87.
iTBlanchard v. Paschal, 68 6a. 32, 34, 45 Am. Rep. 474; Scott
T. Kenan, 94 N. C. 296. Cases of partnership should be distinguished
from case of mere Joint ownership of chattels. Stewart v. Brown,
37 N. Y. 350, 93 Am. Dec. 578 ; Radcliff v. Wood, 25 Barb. (N. Y.) 52.
Bee ^'Partnership;* Dec. Dig. {Key No.) % 61; Cent. Dig. §§ 85-87.
18 Russell V. Lennon, 39 Wis. 570, 20 Am. Rep. 60; Ladwig v. Wil-
liams, 87 Wis. 615, 58 N. W. 1103 ; McKlnney v. Baker, 9 Or. 74 ;
Skinner v. Shannon, 44 Mich. 86, 6 N. W. 108, 88 Am. Rep. 232.
410 REMEDIES OF CREDITORS (Ch. 7
the cases between a judgment against individual members
of the firm and against the firm ; in the former case exemp-
tion being allowed, but in the latter not.^* Any severance
of interest, however, which thus converts firm property into
separate property, would be subject to attack on the ground
of being fraudulent, according to the principles already dis-
cussed in a previous chapter.**
SAME— CREDITORS OF THE SEPARATE PART-
NER
140. The creditor of a separate partner, having reduced his
claim to judgment, may satisfy the same out of
the interest of his debtor in the partnership. This
is done in most jurisdictions by a levy and actual
seizure of all or a part of the partnership property,
and a sale of the debtor partner's interest therein.
This interest is the share coming to him after the
firm debts have all been paid and the claims of the
partners inter se have been adjusted. The pur-
chaser at the execution sale acquires a right to
have the value of such interest ascertained by an
accounting and settlement of the partnership busi-
ness, and to have the amount turned over to him
which may be f oimd due to the debtor partner.
But in Stout ▼. McNeUJ, 98 N. G. 1, 8 S. E. 915, the right was denied
. because one partner withdrew his consent to the severance. In
State V. Day, 3 Ind. App. 155, 29 N. E. 436, the right was denied aft-
er the levy was made.
It has also been held that one partner may claim exemption out
of a balance due him on a settlement of the partnership accounts
against his individual creditor, who had an execution levied on the
debtor's Interest in the firm assets prior to dissolution. Southern
Jellico CJoal CJo. v. Smith, 105 Ky. 769, 49 S. W. 807. See ^'Exemp-
tionsr Deo, Dig. {Key No,) | 61; Cent, Dig, §§ 88-87.
x» Wise V. Frey, 7 Neb. 134, 29 Am, Rep. 380; Servantl v. Lusk,
43 Gal. 238 ; Dennis v. Kass & Go., 13 Wash. 137, 42 Pac. 540. See
^EtDemptiona,** Deo, Dig, (Key No,) § 61; Cent. Dig. §§ 83-87.
so Chapter III, §§ 69, 60, pp. 181-194.
«*]
§ 140) REMEDIES AT LAW 411
Rights of Separate Creditors Against Firm Property Uncer-
tain
Though the rights of the firm creditors against the in-
dividual property of a partner are clear, the rights of the
separate creditor of a partner against the firm property are
uncertain, both in extent and value. This uncertainty re-
sults from the varying conceptions of the nature of a part-
ner's interest in the partnership property. If he holds a le-
gal title to an undivided part of it, which, in view of the le-
gal conception of the nature of a partnership, it seems that
he must, it might seem that a creditor who gets a legal claim
against the assets of a single partner gets a claim against
an undivided portion of the partnership property. It may
well be held, however, that the legal interest which a part-
ner has in the partnership property is not salable as an un-
divided interest, and therefore that those having claims
against the partner cannot reach the share which he owns
in the partnership. This, in effect, seems to be the view of
the majority of courts at present. Though many say that a
partner has no title or interest in any part of the partner-
ship property, except in the surplus remaining after ac-
counts are settled, this must be taken as meaning that this
is his only salable interest. No other explanation of the
facts, which will be shown later, that an execution purchaser
of a partner's interest in a partnership gets nothing more
than a right to an accounting, is adequate. It is not suf-
ficient to say that this is because a partner himself has
i>othing more, while at the same time denying that the part-
nership itself has a legal existence.
Enforcing Payment Against Partner^s Interest in the Partner-
ship— In General
A creditor of a separate partner, who has reduced his
claim to judgment, may satisfy the same out of any prop-
erty, tangible or intangible, belonging to his debtor. The
debtor's property may consist of his individual estate or of
an interest in a partnership. The right of his judgment
creditor to reach his separate property is. entirely clear.
When, however, an attempt is made by the creditor of the
separate partner to satisfy his judgment out of the interest
412 REMEDIES OF CREDITORS (Oh. 7
of the debtor in the partnership, much confusion and diver-
sity of practice prevails. It has also been recognized that
such interest should be available for the partner's creditors,
and courts of law have endeavored to bring it within the
reach of an execution.
A writ of execution is the common-law instrument for the
seizure of tangible property of a debtor. Intangible assets
could not be taken upon such a writ, but must be reached
by resort to equity. The property sought to be reached in
the situation now under consideration is the interest of the
judgment debtor partner in the partnership. This, then,
raises the question as to the nature of that interest. The
subject has been already discussed and frequently referred
to.** In the language of the law of partnership, it is an in-
terest in a surplus to be ascertained by an accounting be-
tween the partners. The surplus will be what is left of the
partnership property after the firm debts have been paid
and the accounts of the partners inter se have all been ad-
justed. Until the surplus or balance is ascertained, there
is nothing tangible to which the interest can pertain. Pend-
ing such ascertainment the partner interest is a chose in
action — a right to compel a settlement of the firm affairs
and an establishment of the surplus. It is therefore intangi-
ble property, and logically is not of the sort which a writ of
execution was designed to reach.
In the language of the law of property, however, the legal
title to firm property is in the partners as individuals. They
severally have a legal estate in tangible- property. There-
• fore, on this view, a writ of execution is the proper instru-
ment for reaching such interest. But, as pointed out,** this
interest is held subject to certain obligations imposed by
reason of the partnership agreement. A court of equity
compels the partners to hold their interest in the firm prop-
erty to discharge the partnership purposes, and forbids the
use of it for individual purposes. A purchaser of a part-
ner's interest takes the property subject to the same restric-
tions as the partner himself.
«i See chapter III, | 56, pp. 170-175.
«« Chapter III, §i 59, «0, pp. 181 191
§ 140) BBMEDIE8 AT LAW 413
By the law of property, the partner's interest pertains to
tangible property; by the law of partnership, it is but an
intangible chose in action. When a creditor of a separate
partner seeks to satisfy his judgment out of the interest of
his debtor in the firm, he uses a writ of execution issuing
from a court of law and proceeding upon the theory of
seizing tangible property to reach what in a court of equity
is intangible property. Such a performance can produce
nothing but confusion. It is not possible to examine in de-
tail the practice in each jurisdiction. It will be sufficient to
consider some of the more important questions.
5*affi^ — Levy — Upon What Property — How Made
As the execution is used to seize tangible property, the
sheriff is entitled to seize firm property on an execution
against one partner.** In fact, there was no other way in
which he could serve his writ. As the legal title to firm
property was deemed in law to be in the individuals com-
posing the firm, as tenants in common, a seizure of a part-
ner's interest involved a seizure of tangible property.**
Whether the sheriff must seize all of the property, or need
seize only a part, is a question on which the courts dif-
fer. In order to sell a partner's entire interest, some
courts, proceeding upon the theory of partnership owner-
ship as a tenancy in common, require that all the property
be seized. "In an action against one of the partners, the
officer must seize all the goods, because the moieties are
undivided; for if he seize but a moiety, and sell that, the
other partners will have a right to a moiety of that moiety.
He must seize the entire leviable property of the copartner-
ship. He must take and retain custody of the property, for
«« United States v. Williams, Fed. Cas. No. 16,719; Andrews v.
Keith, 34 Ala. 722; Harris v. Phillips, 40 Ark. 58, 4 S. W. 196;
Clark V. Cuahing. 52 Oal. 617; White ▼. Jones, 38 111. 159; Wlck-
ham ▼. Davis, 24 Minn. 167; Lester ex rel. Wright v. Glvens, 74
Mo. App. 395; Read v. McLanahan, 47 N. Y. Super. Ct 275; Cogs-
well V. Wilson, 17 Or. 31, 21 Pac. 388. See ''Partnership,'* Dec, Dig.
(Key No,) | 220; Cent. Dig. H U8, U9.
a« HBYDON v. HEYDON, 1 Salk. 392, Gilmore, Gas. Partnership,
507. See '^Partnership,** Dec Dig. (Key No.) | 220; Cent, Dig. Ii
W, 449.
414 REMEDIES OF CREDITOBS (Gh. 7
in no other way can he legally execute the writ and sell as
much of the interest of his judgment debtor as may be suf-
ficient to satisfy the execution." *• Other courts, however,
permit a levy on less than all the chattels as sufficient to
make a sale of the partner's entire interest.*' Again, other
courts permit a levy by a constructive seizure only. An
actual seizure of part or all of the firm chattels is treated as
a trespass.*^
Same — Right of Parties After L^vy-^heriff and Other Part-
ners
While in many jurisdictions an actual seizure of a part
or all of the firm property is necessary to make a levy ef-
fective to reach a separate partner's interest, the cases are
conflicting as to the rights of the sheriflf and the other part-
ners after levy. According to the earlier English cases the
sheriff proceeded on the theory of seizing and selling the
interest of a tenant in common, and therefore was entitled
to possession of the property seized.'® By the later cases
it was held that, while the sheriff was entitled to seize the
chattels in order to effect a levy, he could not take them
out of the possession of the other partners.'* In the United
States it is held by some courts that the sheriflf may take
exclusive possession of the property seized.*® Under this
«»HEYDON V. HEYEMDN, supra; Branch v. Wiseman, 51 Ind. 1;
Whlgham's Appeal, 63 Pa. 194. See "PartneraMp," Dec, Dig. {Key
No.) § 220; Cent, Dig. §§ 446-469.
2« Fogg V. La wry, 68 Me. 78, 28 Am. Rep. 19; Hershfleld v, Claflln,
25 Kan. 166, 37 Am. Rep. 237; Wiles ▼. Maddox, 26 Mo. 77. See
"Partnership,** Dec, Dig. {Key No.) § 220; Cent. Dig. |§ 446-469.
27 SANBORN V. ROYCE, 132 Mass. 594, Gllmore, Cas. Partner-
ship, 510 ; Hutchinson v. Dubois, 45 Mich. 143, 7 N. W. 714 ; Tucker
V. Adams, 63 N. H. 361; Vandlke v. Rosskam, 67 Pa. 330. See
''Partnership," Dec. Dig. (Key No.) i 220; Cent. Dig. i§ 446-469.
2« HEYDON V. HEYDON, 1 Salk. 392, Gllmore, Cas. Partnership,
507; BUTTON v. MORRISON, 17 Ves. 193. See ** Partnership,**
Deo. Dig. (Key No.) § 220; Cent. Dig. §§ 446-469.
2» Burnell v. Hunt, 5 Jur. 650. See ''Partnership,** Dec. Dig. (Key
No.) § 220; Cent. Dig. §§ 446-469.
80 Hasklns v. Everett, 4 Sneed (Tenn.) 531.
"For what purpose does a sheriff seize property on a fl. fa., If
not to remove and sell It? * * * Is the law so absurd as to com-
mand a sheriff, by Its writ, to seize and sell an article, yet forbid
§ 110) BEMEDIE8 AT LAW 415
view the other partners cannot bring replevin against the
sheriff who takes firm assets on an execution against one
partner,** and they are liable for damages if they take the
property from him.*^ The property, however, remains lia-
ble for the firm debts, and no action of the sheriff can de-
feat this liability,** Other courts hold, however, that, even
though firm property may be attached at the instance of a judg-
ment creditor of a single partner, the attaching officer has no
right to the exclusive possession of the property levied on.
This view is based on the ground that, the debtor partner not
being entitled to exclusive possession, no greater rights than
he had can be secured by virtue of an execution against his
property.**
him to remove it, or declare him a breaker of the peace for Belling
It, because he was resisted, and put to the exercise of force? This
is a sort of imbecility which the common law has been careful to
avoid In all cases.*' Oowen, J., In Phillips v. Cook, 24 Wend. (N.
Y.) 389, 893, 394. See ^'Partnership:* Deo. Dig. {Key No.) | 220;
Cent, Dig. § 456.
»i SMITH V. ORSER, 42 N. Y. 132. See '^Partnership," Deo. Dig.
{Key No.) i 220; Cent. Dig. §§ 446-469.
«« Hasklns v. Everett, 4 Sneed CTenn.) 531. See ''Partnership,^
Dec. Dig. {Key No.) § 220; Cent. Dig. §| 446-469.
«« JOHNSON V. WINGFIELD (Tenn. Ch. App.) 42 S. W. 203, Gil-
more, Gas. Partnership, 515; EIGHTH NAT. BANK OF CITY OF
NEW YORK V. FITCH, 49 N. Y. 639. See "Partnership^* Dec. Dig.
(Key No.) i 220; Cent. Dig. §1 446-469.
84 '*I*he sheriff In this case seized and took possession of specific
articles, and removed them altogether from plaintiff's control. It
seems probable, though the evidence does not distinctly show, that
he took possession of the whole livery stock and broke up the plain-
tiff's business. But whether he took the whole or only part is im-
material; in either case he seized specific articles when he had a
right to seize undivided and indefinite Interest only. He did this, also,
in total disregard of the plaintiff's rights ; for whereas the judgment
debtor, as partner, could only have had Joint possession with the
plaintiff, the officer, le^'ying on this right, assumed to take exclu-
sive possession and remove the property to another place. • • •
At most, for the purpose of his writ, the officer only takes the debt-
or's place, and seizes an Interest that can only be measured by final
account" Cooley, J., in Hutchinson v. Dubois, 45 Mich. 143, 146, 7
N. W. 714, 715.
It is sometimes required by statute that the property shall not be
removed from the possession of the partnership. See Richards v.
416 REMEDIES OP CREDITORS (Gh. 7
Same — Sale may be Enjoined
Some jurisdictions permit an injunction to stay any sale
whatever under an execution on a judgment against a sin-
gle partner until an account of the partnership can be taken
and the interest of the debtor partner determined.** Other
jurisdictions refuse an injunction in the absence of an al-
legation that the property is needed to pay the firm debts
and that the debtor partner would have no interest remain-
ing after the firm debts were paid.**
Same — What is Sold
Proceeding further on the theory of selling the interest
of a tenant in common, the sheriff sold an undivided inter-
est in the tangible property seized. This was regarded in
the earlier cases as carrying with it a right to an account-
ing to ascertain the interest of the debtor partner in the
specific property. Later, however, the right to the account-
ing seems to have ceased to be recognized. An interest in
tangible property was still sold, and the purchaser became
a tenant in common with the other partners.** In time the
sale seems to have been regarded as not passing any inter-
est in specific property, but an interest in the partner-
ship,** which was nothing more than "a mere right in
Haines, 30 Iowa, 574. See '^Partnership** Dec. Dig. {Key Vo.) %
220; Cent. Dig. §§ -UM^S.
«B PLACE V. SWEETZER, 16 Ohio, 142, Gllmore, Cas. Pfirtner-
shlp, 511; Osborn v. McBrlde, 3 Sawy. 590, Fed. Cas. No. 10,593:
Moore v. Sample, 3 Ala. 319 ; Ralney v. Nance, 54 111. 29 ; Hubbard
y. Curtis, 8 Iowa, 1, 74 Am. Dec. 283; Thompson v. Lewis, 34 Me.
167; Crooker v. Crooker, 46 Me. 250; Wiles v. Maddox, 26 Mo. 77;
Phillips V. Cook, 24 Wend. (N. Y.) 389 ; Meyberg v. Steagall, 51 Tex.
351; Warren v. Wallls, 42 Tex. 478. See '*Partner8h%p,'* Dec. Dig.
(Key No.) S 209; Cent. Dig. § m-
••Brewster v. Hammet 4 Conij. 540; Hubbard v. Curtis, 8 Iowa,
1, 74 Am. Dec. 283; Mowbray v. Lawrence, 13 Abb. Prac. (N. Y.)
317 ; MOODY v. PAYNE, 2 Johns. Ch. (N. Y.) 548. See ^'Partner-
ship,'' Dec. Dig. (Key No.) § 209; Cent. Dig. § 402.
8 T Holmes v. Mentze, 4 A. & E. 127; Carter v. Roland, 63 Tex.
640. See '^Partnership:* Dec. Dig. (Key No.) S 220; Cent. Dig. §1
459, 459%.
»« JOHNSON V. WINGFIELD (Tenn. Ch. App.) 42 S. W. 203, Gil-
more, Cas. Partnership, 515; Farley v. Moog, 79 Ala. 148, 58 Am.
Rep. 585; Lane v. Lanfest, 40 Minn. 375, 42 N. W. 84. Sec ''Part-
nerahinf.** Dec. Dig. (Key No.) f 220; Cent. Dig. §f i59, 459^.
S 140) REMEDIES AT LAW 417
equity to call for an account." *• If the sheriff attempted to
sell the entire property, he became a trespasser ab initio,
and could.be sued for trespass or for conversion.*®
Same — Rights of Parties After Sale — Purchaser and Other
Partners
The purchaser on the execution sale, whether of an inter-
est in tangible property or of a chose in action, acquires no
greater rights than the debtor partner had. He does not
become a partner, or acquire any right to participate in the
partnership business.** The firm property is still subject
to the payment of the firm debts and to the adjustment of
the partnership accounts. Whether the purchaser has ac-
quired anything of value by his purchase will depend upon
the condition of the partnership affairs. If the firm is in-
solvent, or if the debtor partner is indebted to his copart-
ners beyond the value of any share that might be coming to
him, or if the adjustment of the mutual accounts between
■•Farley v. Moog, 79 Ala. 148, 58 Am. Rep. 585. Bee ^'Partner-
ship," Dec, Dig, (Key No.) fi 220; Cent, Dig, |§ J^59, 459%,
40 RANDALL v. JOHNSON, 13 R. I. 338, Gllmore, Gas. Partner-
ship, 508 ; Daniel v. Owens, 70 Ala. 297 ; Spalding v. Black, 22 Kan.
55; Moore v. Pennell, 52 Me. 162, 83 Am. Dec. 500; Walker v.
Fitts, 24 Pick. (Mass.) 191 ; Waddell v. Cook, 2 Hill (N. Y.) 47, 87
Am. Dec. 372; Snell v. Crowe, 3 Utah, 26, 5 Pac. 522; White v.
Morton, 22 Vt 15, 52 Am. Dec. 75 ; Ford v. Smith, 27 Wis. 261. See
**Partner8hipr Dec, Dig, (Key Wo,) S 220; Cent, Dig {$ 457, 458.
41 Peck V. Fisher, 7 Cush. (Mass.) 386; Lane v. Lanfest, 40 Minn.
375, 42 N. W. 84; STAATS v. BRISTOW, 73 N. T. 264, GiJnore,
Cas. Partnership, 211; Foster v. Barnes, 81 Pa. 377.
As already pointed out on page 416, the early English cases and
many cases in the United States hold that the purchaser acquires
an interest ,in the tangible property of the firm levied upon, and a
common-law court attempted to ascertain the value of the debtor
partner's interest in the property thus seized. Heydon v. Heydon,
1 Salk. 393. This action of account was discontinued in England,
and until the English Partnership Act of 1890 (see p. 420) the pur-
chaser was treated as a quasi tenant in common with the other
partners, and had to ascertain the value of his interest as best he
could. Holmes v. Mentze, 4 A. & E. 127. See PARKER v. PISTOR,
3 Bos. & P. 288, Gilmore, Cas. Partnership, 507; TAYLOR v. FIELD,
4 Yes. 396, Gilmore, Cas. Partnership, 210; Chapman v. Koops, 8
Bos. & P. 289. See ''Partnership," Deo, Dig, {Key No,) t 220; Cent,
Dig, H 459, 4591^,
Gn..PABT.— 27
418 REMEDIES OF CREDITORS (Ch. 7
4
the partners exhausts his share, the purchaser acquires
nothing.** It has been held that purchaser rights are post-
poned to a mortgage executed by all the partners after the
execution sale.** The only effective way of ascertaining
the value of the debtor partner's interest is by resort to a
court of equity, where a complete accounting and adjust-
ment can be had. Accordingly a bill may be maintained by
the purchaser against the partners, asking that an account-
ing be had and that the interest of the debtor partner be
determined.**
43 Wilson y. Strobach, 59 Ala. 488 ; Wright ▼. Ward, 65 GaL 525,
4 Pac. 534 ; Chandler v. Lincoln, 52 111. 74 ; Peck v. Fisher, 7 Cnsh.
(Mass.) 386; WiUiams v. Gage, 49 Miss. 777; STAATS v. BRIS-
TOW, 73 N. Y. 264, Gllmore, Cas. Partnership, 211 ; Foster v. Barnes,
81 Pa. 377. See **Partner8Mp;* Dec. Dig. (Key No,) | 220; Cent,
Dig, K 459, 459% ; *' Execution,*' Cent, Dig. S 754.
4s Clements v. Jessup, 36 N. J. Eq. 572. Cf. First Nat Bank of
Cooperstown v. State Sav. Bank of Ionia, 130 Mich. 332, 89 N. W.
941 ; Cundey v. HaU, 208 Pa. 342, 57 Atl. 761, 101 Am. St Rep. 938.
See "PartneraTUp,*' Dec. Dig, (Key No.) | 220; Cent. Dig. H 459,
459%.
4* JOHNSON V. WINGFIELD (Tenn. Ch. App.) 42 S. W. 203,
Gilmore, Cas. Partnership, 515; Ticonic Bank v. Harvey, 16 Iowa,
141 ; ARNOLD v. HAGERMAN, 45 N. J. Eq. 186, 17 Ati. 93, 14 Am.
St Rep. 712, Gilmore, Cas. Partnership, 223; Hubble v. Perrin, 3
Ohio, 287; Cogswell v. WUson, 17 Or. 31, 21 Pac. 388; Sterling
V. Brightbill, 5 Watts (Pa.) 229, 30 Am. Dec 304. The other part-
ners may file a bill for an accounting of the partnership in case an
execution is levied upon partnership property on a Judgment against
one partner. AULTMAN v. FULLER, 53 Iowa, 63, 4 N. W. 809,
Gilmore, Cas. Partnership, 526. See, also, chapter IX, i 167, note 4,
p. 499.
In JOHNSON v. WINGFIELD, supra, where the subject is fully
considered, both with regard to the law in Tennessee and elsewhere,
the court lays down the following rules as representing the law of
Tennessee: "(1) That partnership property may be levied on by
the creditor for the individual debt of a member of the firm. (2)
That specific property may be levied on, and it is not necessary that
the execution be levied upon all the property of the firm. (3) That
the officer may, and that in fact it is his duty to, take actual posses-
sion of the property levied on, and retain it until the sale is made.
(4) That the purchaser only takes the interest of such Judgment
debtor after the settlement and adjustment of the partnership ac-
counts, as is the language used in the case of Haskins v. Everett 4
Sneed, 531, or a mere right to an accounting, as stated in another
§140) REMEDIES AT LAW 419
Statutory Modifications
The use of the writ of execution, designed originally for
tangible property, to reach partner's interest in the firm,
which is in reality an intangible right, is a perversion. It
is anomalous and unsatisfactory. It "tends to embarrass
and possibly to break up the copartnership business; but
we do not see how these consequences can be avoided at
law, even if they can in equity, without remedial legisla-
tion." *• Various remedial changes have b^en made in dif-
ferent jurisdictions ; some modifying the procedure under
the execution, and some abolishing the remedy by execu-
tion entirely and substituting in its stead a different rem-
edy. Thus in Texas it is provided that "a levy upon the
interest of a partner in partnership property is made by
leaving a notice with one or more of the partners, or with a
clerk of the partnership," *• thereby making an actual sei-
zure unnecessary. In some jurisdictions, for instance, in
Iowa *^ and Kentucky,*® it is provided that the officer levy-
ing the execution shall be permitted to take possession for
the purpose of having the property appraised and an in-
ventory taken. In New York the partners other than the
debtor may secure the release of the property by making
an application to the court and giving an undertaking to
the effect that they will account to the purchaser of the
debtor partner's interest on the execution sale for the value
of his interest as found due upon an accounting.** The
case. (5) That, as stated by Judge Freeman In Lincoln Sav. Bank
y. Gray, 12 Lea, 459, a levy Is necessary In order to fix a lien so a&
to authorize the filing of a bUl." See "Partnership" Dec. Dig. {Key
2fd.) § 220; Cent. Dig, | 452.
48 Traflford v. Hubbard, 15 R. I. 326, 328, 4 Ati. 762. See "Part-
nership," Dec. Dig. {Key No.) § 220; Cent. Dig. H U6-469.
*« Article 2352, Sayles* Ann. Oiv. St Tex. 1897; Adoue v. Wet-
termark, 36 Tex. Civ. App. 585, 82 S. W. 797. If a levy Is properly
made under such statute the sheriff may proceed to sell on execu-
tion; but it has been held that the notice mentioned by the statute
must be left with some partner other than the debtor partner.
Adoue V. Wettermark, supra. See "Partnership^** Dec. Dig. iKey
Ao.) § 220; Cent. Dig. §§ 455, 456.
*7 Section 3977, Code 1897.
48 Civ. Code Prac. f 660.
4 9 Executions, {§ 53, 54, Blrdseye's Rev. St. (3d Ed.).
4SI0 REMBDIBS OF CREDITORS (Ch. 7
remedy by execution is abolished entirely in Georg^, and
a garnishment process substituted in its stead, under which,
after service of process and answer by the firm, the question
of the interest of the debtor partner is submitted to a jury.**
In England, due to the suggestion and advice of Lord Lind-
ley,** a provision has been placed in the Partnership Act **
which provides that, "after the commencement of this act
a writ of execution shall not issue against any partnership
property except on a judgment against the firm." In the
place of the writ of execution, the separate creditor can ob-
tain an order charging the interest of the debtor partner
with the payment of the judgment. The charge may be
enforced by the appointment of a receiver or by a sale of
the partner's interest. The other partners may on such a
sale buy the interest of the debtor partner,** or they may
at their option treat the suffering by the debtor partner of
his share to be charged as dissolving the firm.**
SAME— GARNISHMENT OF PARTNERSHIP
DEBTORS
14L Debts due a partnership cannot be garnished in the
hands of a third person in a suit against one part-
ner for his individual indebtedness. Some juris-
dictions permit tangible assets of the partnership
in the hands of a third person to be garnished in
such case, however; it being held, as on execution,
' that the interest of the debtor partner only is
thereby reached.
••Armand v. Bumim, 69 Oa. 768; Anderson v. Ghenney, 51 Ga.
872; Branch v. Adam, 51 Ga. 113; WILLIS ▼. HENDERSON, 43
Ga. 325; Patterson v. Trumbull, 40 Ga. 104; Code 1895, U 2661,
4705-4729. See ** Partnership;' Dec, Dig, (Key No,) fi 220; Cent. Dig,
i452,
Bi Pollock's Digest of the Law of Partnership (8th Bd.) p. 77*
»« Partnership Act, fi 23, (1).
5s Partnership Act, | 28, (2) (3).
•4 Partnership Act, i 33, {2).
g 141) BEMEDIE6 AT LAW 421
Debts
It is usually held that a debt due a partnership cannot be
garnished in the hands of a third person in a suit against
one of the partners on an individual debt. The reasons for
this holding are plainly indicated in Johnson v. King/*
where it was said: "The question in this case is whether
an execution creditor of one member of a partnership is
entitled to a judgment, in a garnishment proceeding, against
a debtor to such partnership. This question we decide in
the negative. Such debt belongs to, and is assets of, the
partnership, primarily liable to the satisfaction of partner-
ship debts. If a judgment were given at law upon the gar-
nishment proceeding against the debtor to the partnership,
to satisfy the separate liability of one of the partners, it
would unjustly abstract a portion of the fund primarily be-
longing to the objects and purposes and creditors of the
concern ; and in such garnishment nothing can be done but
to give or refuse the judgment. The court has no power to
impound the debt, until by the adjustment of all the part-
nership affairs it shall appear whether the separate debtor
of the executive creditor has any, and what, interest in the
general surplus, or in the particular debts so impounded.
Such proceeding cannot take place at law." ■•
»« JOHNSON V. KING, 6 Humph. (Tenn.) 233 ; Stone v. Dowling,
119 Mich. 476, 78 N. W. 549 ; Raley v. Smith .(Tex. Civ. App.) 73 S.
W. 54. See ^'Partnership;* Cent, Dig, S§ SSS-J^OO; "Garnishment;*
Dee. Dig, {Key No.) | 62; Cent. Dig. H 120-125.
so PEOPLE'S BANK ▼. SHRYOOK, 48 Md. 427, 30 Am. Rep. 476,
Gilmore, Gas. Partnership, 513; Ljsmdon v. Gorham, Fed. Gas. No.
8,640; Ripley v. People's Sav. Bank, 18 111. App. 430; Trickett v.
Moore, 84 Kan. 755, 10 Pac. 147 ; Thomas v. Lusk, 13 La. Ann. 277 ;
StilliDgs ▼. Young, 161 Mass. 287, 37 N. B. 175 ; Upham v. Naylor,
9 Mass. 490; Hawes v. Inhabitants of Waltham, 18 Pick. (Mass.)
451; Dawson v. Iron Range & H. B. Ry. Co., 97 Mich. 33, 56 N.
W. 106; Markham v. Gehan, 42 Mich. 74, 8 N. W. 262; Sheedy v.
Second Nat Bank, 62 Mo. 17, 21 Am. Rep. 407 ; Pnllis v. Fox, 37 Mo.
App. 592; Barry v. Fisher, 39 How. Prac. (N. Y.) 521; Myers v.
Smith, 29 Ohio St. 120; JOHNSON v. KING, 6 Humph. (TennO
233; Bartlett v. Woodward, 46 Vt 100; Towne v. Leach, 32 Vt
747 ; Singer v. Townsend, 53 Wis. 126, 10 N. W. 365. See *'Oamish-
ment;' Dec. Dig. {Key Vo.) | 62; Cent. Dig. H 120-125; ^^Partner-
thipr Cent. Dig. {§ SSS-m^
422 BBHEDIBS OF CREDITORS (Ch. 7
Tangible Assets
If, however, it is sought to reach tangible assets of the
partnership in the hands of the garnishee, some courts,
even those that deny that a debt can be garnished, hold
that this can be done. In an Ohio case it was said : *'We do
not assent to the doctrine laid down by the court that part-
nership demands can be garnished for the separate debt of
one of the partners. ♦ * * Tangible property of the
firm stands on a different footing, and we intend in no de-
gree to qualify the recognized right of the separate credit-
ors to levy on the interest of one of the partners in such
property." •' The distinction between the case of the debt
and the case of tangible property is that the tangible prop-
erty may be treated in garnishee proceedings as on execu-
tion; the partnership interest being considered as still ex-
isting. A debt cannot be so treated. All the court can do
is to order the debt paid, and this will result in the use of
the firm assets to pay a partner's separate debt.*' If the
firm is dissolved and the accounts are settled, the interest
of each partner becomes certain, and in such case the debt
may be garnished.** And it is held, in some jurisdictions,
that if a firm is dissolved by the death of one partner, a
firm debtor may be garnished on a claim against the sur-
vivor,*® at least in the absence of a showing: that the dehf
was needed to pay the firm debts, and of a claim by the per-
sonal representative of the deceased partner.*^
B7 Myers v. Smith, 29 Ohio St 120, 124, 126, citing Nixon ▼. Nash,
12 Ohio St 648, 80 Am. Dec. 390. 8ee "Oamishment," Dec. Dig. (Key
yo.) § 62; Cent. Dig. §§ 120-125; ** Partnership,'* Cent. Dig. §§ 38S-
400.
B 8 Winston V. Ewlng, 1 Ala. 129, 34 Am. Dec. 768; Trlckett v.
Moore, 34 Kan. 755, 10 Pac. 147. See "Garnishment," Dec. Dig. {Key
No.) { 62; Cent. Dig. §§ 120-125; ^^Partnership," Cent. Dig. || SSS-
400.
»• Harlan v. Moriarty, 2 G. Greene (Iowa) 486 ; Blrtwhlstle v.
Woodward, 95 Mo. 113, 7 S. W. 465. See "Oamishment," Dec. Dig.
(Key No.) § 62; Cent. Dig. §§ 120-125; ^^Partnership," Cent. Dig.
§1 388-400.
eo Berry v. Harris, 22 Md. 30, 85 Am. Dec. 639 ; Knox v. Schepler,
2 Hill, Law (S. 0.) 595. See *' Garnishment," Deo. Dig. {Key No.) §
62; Cent. Dig. §§ 120-125; "Partnership^" Cent. Dig. K $83-400.
•1 Thompson v. Lewis, 34 Me. 167. See "Garnishment," Deo. Dig.
§ 143) BBMSDIE8 IN EQUITT 423
REMEDIES IN EQUITY— INSOLVENCY OR BANK-
RUPTCY OF FIRM
142. A court of equity may acquire jurisdiction of the af-
fairs of a partnership and of its members either by
an assignment in trust by the partners for the ben-
efit of creditors, or by a petition in insolvency, or
by a bill for the adjustment of the affairs of an in-
solvent partnership. Whenever equity thus ac-
quires jurisdiction, it distributes the assets of the
partnership and of its members according to rules
which produce essentially different results from
those obtainable at law. Such rules of distribu-
tion will be considered under the following heads :
(a) Firm Creditors Against the Firm Estate (ubi supra).
(b) Separate Creditors Against the Firm Estate (p. 426).
(c) Partners Against the Firm Estate (p. 427).
(d) Separate Creditors Against the Separate Estates (p.
431).
(e) Firm Creditors Against the Separate Estates (p. 437).
(f) Partner Against the Estate of a Copartner (p. 444).
(g) Rights of Secured Creditors (p. 446).
(h) Right of Joint and Several Creditors — Double Proof
(p. 460).
(i) Insolvency or Bankruptcy of a Partner (p. 453) .
(j) Rights Against Estate of Deceased Partner (p. 457).
SAME— FIRM CREDITORS AGAINST THE FIRM
ESTATE
143. Firm creditors are entitled to priority of pajnnent out
of the firm estate, except —
EXCEPTION: (a) Where there is a dormant part-
ner, but no ostensible firm.
Priority of Firm Creditors in Firm Property
Every partner is deemed to have agreed, on entering into
a partnership, that the firm property shall be used in pay-
ment of the firm debts in preference to those of any of the
424 RBMEDIBS OF CREDITORS (Ch. 7
partners. It is not necessary that this agreement should be
expressly stated, because it is implied from the very exis-
tence of the partnership. It is, moreover, an agreement that
equity will specifically enforce in favor of each partner, ei-
ther by distributing the firm property to firm creditors, if
it is in the hands of a court of equity for distribution, or by
preventing the separate creditors from taking it on execu-
tion, if it is not/* This is said to give each partner an
equitable lien on the assets of the firm. This lien arises
out of the agreement of the partners, and gives no direct
rights in the firm property to the firm creditors. Yet if the
firm property is in a court of equity for distribution, the
firm creditors can take advantage of the rights of the part-
ners, and can insist that their claims shall be satisfied out
of the assets of the partnership before those of the separate
creditors.** Since this right of the firm creditors is based
upon the right of the partners, and since that right is found-
ed upon an agreement of the partners, the preference of the
firm creditors may be lost by an agreement among the part-
ners whereby each releases the right he has against the
other.** In actual practice such a release is most frequently
accomplished by means of a transfer by one partner of his
interest in the partnership to the other.** If such a trans-
fer is made, the property of the partnership becomes that of
(Key No.) § 62; Cent. Dig. §§ 120-125; "Partner«Wp," Cent, Dig. ||
S8S-400.
ea PLACE v. SWEETZER, 16 Ohio, 142, Gilmore, Cas. Partner-
ship, 511. See '^Partnership,'' Dec, Dig. {Key No.) S§ 178-183, 220;
Cent. Dig. §§ S10-SS6, 462, 46S.
•» CASE V. BEAUREGARD, ©9 U. S. 119, 25 L. Ed. 370, Gllmorc.
Cas. Partnership, 226 ; Lacey t. Cowan, 162 Ala. 546, 50 South. 281.
It should be noted that there is a conflict of authority as to whether
or not firm creditors can Insist upon a distribution to them in pref-
erence to joint creditors who are not firm creditors. See chapter
IV, § 71, p. 224, Partnership Liability and Joint liability. See
^^Partnership,'' Dec. Dig. (Key No.) §§ 178-18S, 220; Cent. Dig. §|
S10^S6, 462, 469.
•4 CASE V. BEAUREGARD. 99 U. S. 119, 25 L. Ed. 370, GUmore,
Gas. Partnership, 226. See chapter III, § 59, p. 181. See ^Partner-
ship:' Dec. Dig. (Key No.) { 118; Cent. Dig. §{ S12, S19.
6 5 Ex parte RUFFIN, 6 Ves. 119, Gilmore, Cas. Partnership, 217.
See 'Partnership," Dec. Dig. (Key No.) §§ 178, 18S; Cent. Dig. §§ St2,
S19, S24-S27.
§ 148) BSMBDIE8 IK EQUITY 425
the separate partner, and becomes liable for his debts. Such
a transfer must, however, be valid imder the statute relat-
ing to fraudulent conveyances; for, while firm creditors
may not complain of th'e loss of their preference, the stat-
ute is as applicable to conveyances made by a partnership
as to those made by an individual.*^
Same— Exception — Dormant Partners
One exception must be noted to the right of a partner to
have the firm assets applied to firm debts. If a partner con-
ceals his existence from the public, permitting* his partner
to appear before the public and use the firm property as a
separate trader, he cannot complain if that property is taken
on execution by the separate creditors.*' By his conduct
he has induced them to rely on the credit of the ostensible
partner, part of which credit was due to the possession and
apparent ownership of the partnership property, and he has
estopped himself to deny that ownership. Since the dor-
mant partner cannot complain if the property of the firm in
the hands of the ostensible partner is taken by his separate
creditors, it follows that the firm creditors cannot.** Nor
can it be said that it is inequitable to deprive them of their
advantage in such a case because of the fault of the dor-
mant partner. They did not contract on the faith of such
a preference. They expected to compete with the separate
creditors at the time they made their contract, and equity
will not aid them merely because they have succeeded in
discovering the existence of a dormant partner.**
«• See chapter III, ({ 56-64, pp. 176-208, on the Transfer of Part-
nership Property.
•T Gammack v. Johnson, 2 N. J. Eq. 163 ; Callender v. Robinson,
96 Pa. 454. See "Partnership,'* Dec, Dig. {Key No,) { 178; Cent.
Dig. K SIS, m>
e« French v. Chase, 6 Me. 166; LORD v. BALDWIN, 6 Pick.
(Mass.) 348. See '^Partnership;' Dec. Dig. {Key No.) | t78; Cent.
Dig. H SIS, U4-
•• See, further, Oumbel v. Koon, 59 Miss. 264, for a partnership
case construing a statute making property in the hands of an osten-
Rible separate trader subject to the demands of his creditors ns
though it were his own property. Compare with the subject of re-
puted ownership and assets by estoppel, post, pp. 435-437. See "Part- *
nership;' Dec. Dig. (Key No.) S 178; Cent. Dig. §S SIS, U4-
426 REMEDIES OF CREDITORS (Gh. 7
SAME— SEPARATE CREDITORS AGAINST THE
FIRM ESTATE
144. The separate creditors are not entitled to payment out
of the firm estate tmtil the firm creditors have been
paid and until the liens of the other partners are
discharged.
In distributing the assets of a firm, the debts of the firm
which are due to those not members of it are first paid.
Then the debts which are due to each partner on accounts
other than the capital account are satisfied. Each partner
is then repaid the capital which he has put into the firm.
The residue, if any, is then distributed among the members
of the partnership according to the terms of the partnership
agreement.^* The partner's share in the assets is derived
from one or all of these three sources: From debts due him,
from his share of the capital, or from the share in the sur-
plus which he is entitled to by the partnership agreement.
It is out of this share thus coming to a partner that his in-
dividual creditors are paid. Hence they are postponed, in
the distribution of the assets of the partnership, to the equi-
ties of its members. Not until the accounts of the firm have
been settled, both as between the firm and its creditors, and
as between the partners themselves, are the creditors of the
partners entitled to any part of the partnership assets.^*
ToHyre v. Lambert, 37 W. Va. 26, 16 S. B. 446. See **Partner'
ship," Deo. Dig, {Key No,) i§ 178-189; Cent, Dig, fiS 310S36.
Ti McMiUan v. Hadley, 78 Ind. 690; WALTER v. HERMAN, 110
Ky. 800, 62 S. W. 857, 23 Ky. Law Rep. 741, GUmore, Cas. Partner-
ship, 575; Tappan v. BlaisdeU, 5 N. H. 190; Standish v. Babcock,
52 N. J. Eq. 628, 29 AU. 327 ; Buchan v. Sumner, 2 Barb. Ch. (N. Y.)
165, 47 Am. Dec. 305 ; Fleming v. Billings, 9 Rich. Eq. (S. C.) 149.
See **Partner8hip,*' Deo. Dig. (fey Vo.) H 178-183; Cent. Dig. H
910-336.
§ 145) BEMEDIES IN EQUITY 427
SAME— PARTNERS AGAINST THE FIRM ESTATE
145. As film creditors are the creditors of each member of
a firm, a partner camiot prove against the firm es-
tate in competition with firm creditors, for he
would thus be competing with his own creditors.
EXCEPTIONS :
(a) Where there has been a fraudulent conversion of his
separate estate to the use of the firm.
(b) Where as surety for the firm his individual property
has been applied by a firm creditor as collateral
security.
(c) Where he carries on a distinct trade in respect to
which the firm has become his debtor.
(d) Where he has been discharged in bankruptcy, or oth-
erwise, from his firm liability, he may prove any
valid claim which he may thereafter hold against
the firm estate.
(e) A purchaser in good faith for value of a partner's
claim against the firm may prove it against the
firm estate.
Partner Cannot Compete With Firm Creditors
Since a partner is liable for the debts of the partnership,
it is obviously unjust for him to compete with the firm
creditors in the distribution of the firm assets. Inasmuch
as they are the firm creditors, they are his creditors ; and
if he should prove against the partnership a debt due him
from the partnership, he would, if it were paid to him, sim-
ply be transferring a sum from one fund to another, against
both of which the firm creditors had a claimJ' Hence it
T« Wallersteln v. Ervln, 112 Fed. 124, 50 C. O. A. 129 ; Coster's
Ex*rs v. Bank of Georgia, 24 Ala. 37; Capital Food Co. v. Globe
Coal Co. (Iowa) 116 N. W. 803; Wllkerson v. Tichenor, 62 S. W.
870, 23 Ky. Law Bep. 244; Oonkling v. Washington University of
Maryland, 2 Md. Ch. 497 ; Ross v. Carson, 32 Mo. App. 148 ; Lawson
V. Dunn, 66 N. J. Eq. 90, 57 Atl. 415; Roop v. Herron, 15 Neb. 73.
17 N. W. 353; In re Rieser. 19 Hun (N. Y.) 202; Zell's Appeal, 111
Pa. 532, 6 Atl. 107 ; Colwell v. Weybosset Nat Bank, 16 R. I. 288,
428 RBMEDIBS OF CREDITORS (Oh. 7
has long heen the rule in English bankruptcy cases that the
partner who has a claim against the firm shall be postponed
to the firm creditors generally.^* The same rule seems to
be recognized under the United States Bankruptcy Act of
1898 ; for, though it permits the proof by the partner of his
claim against the estate, it also empowers the court to
marshal the assets of the partnership and the separate es-
tate of the partner so as to secure an equitable distribution
of such assets/*-
Exception — \Fraudulent Conversion
An exception to the general rule, which prevents a part-
ner from proving against the partnership estate, occurs
where the property of a partner has been fraudulently or
tortiously taken by the partnership and added to the firm
assets. In such a case, though, as stated before, the prop-
erty of the partnership is, if the partner is permitted to
prove against the partnership estate, merely transferred
from one fund which is liable to another which is also lia-
ble, the courts permit the defrauded partner . to compete
with the firm creditors. In the case where he has become
a contract creditor of the partnership, he has consented that
the iissets of the firm should thereby be increased ; where
his property has been added to that of the firm by means
of the wrongful conduct of his partners, he has not. In
such a case the courts will not postpone his claim to that
of the firm creditors.^*
16 Atl. 80, 17 Ati. 013 ; GIBBS v. HUMPHREY, 91 Wis. Ill, 64 Nl
W. 750. See ** Partnership,** Deo, Dig, {Key Ifo,) H 182, SOO; Cent.
Dig, §fi 918, 695.
Ts Ex parte SIIXITOB, 1 Olyn & J. 374, Gilmore, Cas. Partner-
ship, 669. See **Bankruptcy,** Deo. Dig. {Key No.) I S51; Cent. Dig.
iS S63, 564.
V4 Bankruptcy Act July 1, 1898, c. 541, fi 5, 30 Stat. 547 (U. S.
Gomp. St 1901, p. 3424) ; In re Denning (D, G.) 114 Fed. 219 ; Rush
V. Lake, 10 Am. Bankr. Rep. 455, 122 Fed. 561, 58 G. G. A. 447. See
**Ban1oruptcy," Deo. Dig. {Key No,) fi 351; Cent, Dig, || 56S, 564,
T6 Though the exception is undoubtedly well recognized, cases for
its application have been rare. Most of the cases where its exist-
ence has been admitted have been cases where the firm was allowed
or attempted to prove against the estate of the separate partner.
READ V. BAILEY, L. R. 3 App. Cas. 94. See, also. Ex parte Har-
§ 145) RKMBDIES IN EQUITT 429
Same — Partner as Surety
The United States bankruptcy courts have also estab-
lished the rule that, if a partnership creditor holds the se-
curities of an individual partner and after bankruptcy real-
izes upon them, the separate creditors of the partner whose
estate has thus been reduced will be allowed to receive from
the joint estate a sum equal to the dividend upon the secu-
rities/*
Same — Trade Debts
It was once the rule in England that in the distribution
of assets of a partnership two firms could prove against
each other the same as other creditors composed of the
same persons. The same rule was, of course, applied in the
case of a firm having a debtor or creditor partner. The
rule was, however, abolished over a century ago, and in its
stead was adopted the rule which has already been given,
by which a partner is not allowed to prove against the firm
estate in competition with firm creditors.^^ Several excep-
tions were, however, subsequently established, one of which
has been g^ven. Another was that if a firm had within it
a partner who was a separate trader, or if it contained with-
in its membership persons who made up another firm which
was a trading firm, trade accounts between the firm and
such a partner or between the first firm and the second
ris, 2 Yes. & B. 210 ; Lodge v. Feudal, 1 Yes. Jr. 166. In the United
States the exception has been repeatedly stated to exist "The rule
* * * is to be received with this important limitation: That It
does not apply in case, either where the effects obtained, creating
the debt, were taken from the separate estate to augment the Joint
estate, or from the Joint estate to augment the separate fraudulent-
ly, or under circumstances from which fraud may be inferred, or
under which it would be implied." RODGERS v. MERANDA, 7
Ohio St 180, Gilmore, Cas. Partnership, 528, 537 ; Matter of Rieser,
19 Hun (N. Y.) 202, 203. See **Partner8hip," Dec. Dig. (Key No,) I
182; Cent. Dig. § S18,
T« In re FOOT, 12 N. B. R. 337, Fed. Gas. No. 4,906. See '* Bank-
ruptcy," Dec. Dig. (Key No.) {fi 525, 351; Cent. Dig. §§ SOS, 505, 513,
563, 664; "PartnerslUp," Dec. Dig. (Key No.) fi 189; Cent. Dig. S
3U^
77 See the opinion of Lord Blackburn in READ ▼. BAILEY, L.
R. 3 App. Cas. 94, 102. See "Partnership;' Dec. Dig. (Key No.) §
182; Cent. Dig. fi 318,
430 REMEDIES OF CBEDITOBS (Ch. 7
might be proved in competition with other creditors.** The
reason for the exception does not clearly appear, but it
probably was due to the extreme reluctance which the Eng-
lish courts have always felt toward doing anything which
might tend to discourage and decrease trade and com-
merce.** The exception does not appear to be recognized
m the United States. Yet if a partner in one firm is en-
gaged in a separate business with another who is not a
member of the first firm, such second firm can prove against
the assets of the first with its creditors. In other words,' a
creditor of a firm is not deprived of his right in equity
merely because he is a copartner with a member of the in-
solvent firm.**
Same — Partner Discharged from Firm Liability
Since a partner is not allowed to compete with firm cred-
itors in the partnership assets because they are also his
creditors, it follows that if he is for any reason discharged
from liability on the firm obligations, as by reason of a dis-
charge in bankruptcy, or by virtue of the statute of limita-
tions, his disability is removed, and he can prove and share
with other creditors.**
Same — Purchaser in Good Faith
It would seem that, if the debt of a partner is assigned
by him for value and in good faith before the assets of the
firm are in the hands of the court for distribution, it might
well be held, and is generally held, that the assignee takes
rtEx parte SILLITOE, 1 Glyn & J. 874, Gilmore, Cas. Partner-
ship, 569 ; GIBBS v. HUMPHREY, 91 Wis. Ill, 64 N. W. 750. See
^^Partnership,'* Dec, Dig. (Key No,) § 182; Cent, Dig. \ S18,
7* See the opinions of Lords Eldon and Brougham In Ex parte
SILLITOE, 1 Glyn & J. 374, Gilmore, Gas. Partnership, 569, and Ex
parte COOK, Mon. 228, respectively. Bee ^'Partnership,^ Dec Dig,
(Key No.) § 182; Cent, Dig. | S18.
»o In re BUOKHAUSE, 10 N. B. R. 206, Fed. Cas. No. 2,086, GU-
more, Cas. Partnership, 572. See, also, COLE v. REYNOLDS, 18
N. Y. 74; Mangels v. Shaen, 21 App. Dlv. 507, 48 N. Y. Supp. 626.
See ^'Partnership,*' Dec. Dig. (Key No.) |§ 182, 190; Cent. Dig. SS
S18, 347.
•1 Ex parte Atkins, 1 Buck. 479; Ex parte Smith, L. R. 14 Q. B.
D. 894. See ^'Partnership,** Dec Dig. (Key No,) I 182; Cent. Dig.
%S18.
§ 146) BEMEDIES IN EQUITT 431
the debt free from the disability of the partner.** Still it
has been held in some jurisdictions that the assigi\ee of a
partner's claim against the partnership takes the claim sub-
ject to the imperfections which existed in it when in the
hands of the partner himself.**
SAME— SEPARATE CREDITORS AGAINST THE
SEPARATE ESTATES
146. The separate creditors of a partner are entitled to pri-
ority of payment out of the separate estate of that
partner.
Having regard to the legal nature of 'firm obligations, the
firm creditors should have a right to come against the es-
tate of the individual partner. As pointed out in chapter
IV ** each partner is at law liable to the full extent of his
separate property for the firm debts; and, as indicated in
the first part of this chapter,** when a firm creditor has re-
duced his claim to judgment, he may seize the individual
property on execution. When, however, a court of equity
acquires jurisdiction, he suffers a restriction upon his rights.
While the rule as stated in the black letter proposition
above is well established,** there are cases holding con-
«« Frank ▼. Anderson, 81 Tenn. 695. See ** Partnership;* Dec. Dig,
{Key No,) 8 182; Cent. Dig. S S18.
88 Simrall v. O'Bannons, 46 Ky. 608. See ** Partnership;' Deo. Dig.
{Key No.) 8 182; Cent. Dig. 8 S18.
84 See chapter IV, S 69 et seq., p. 217 et seq.
88 See ante, 8 139, p. 404.
86 In re Dnnkerson, 4 Biss. 277, Fed. Cas. No. 4,158; In re Estes
CD. G.) 3 Fed. 134; Union Nat. Bank of Chicago v. Bank of Com-
merce of St Louis, 94 111. 271 ; Mclntire ▼. Yates, 104 111. 491 ; Mil-
ler ▼. Clarke, 37 Iowa, 325; Trustees of Catskill Bank y. Hooper,
6 Gray (Mass.) 574 ; BUSH ▼. CLARK, 127 Mass, 111 ; Nutting v.
Ashcrof t, 101 Mass. 300 ; Ault v. Bradley, 191 Mo. 709, 90 S. W. 775 ;
MEECH ▼. ALLEN, 17 N. Y. 300, 72 Am. Dec 465; Gilmore, Cas,
Partnership, 499; Heckman y. Messinger, 49 Pa. 465; Lord y. De-
vendorf, 54 Wis. 491, 11 N. W. 903, 41 Am. Rep. 58; Ex parte
COOK, 2 P. Wms. 500. See ^^Partnership;' Deo. Dig. {Key No.) 88
186, 187; Cent. Dig. 88 SS9, S40.
432 BBMBDIBS OF CRBDITOB8 (Ch. 7
trary,*^ and there were periods in -the development of the
rule in England when the firm creditors were permitted to
prove pari passu with the separate creditors against the
separate estate of the partners. The history of the rule,
and reasons for and against it, are reviewed in Rodgers v.
Meranda.** In that case Hartley, C. J., says: "And this
rule, which gives the partnership creditors a preference in
the partnership effects, would seem to produce, in equity,
a corresponding and correlative rule, giving a preference to
the individual creditors of a partner in his separate prop-
erty ; so that partnership creditors can, in equity, only look
to the surplus of the separate property of a partner, after
the payment of his individual debts, and, on the other hand,
the individual creditors of a partner can, in like manner,
only claim distribution from the debtor's interest in the
surplus of the joint fund after the satisfaction of the part-
nership creditors. The correctness of this rule, however,
87 Camp V. Grant, 21 Conn. 41, 54 Am. Dec. 321; Pearce ▼. Cooke,
13 R. I. 184; White v. Dougherty, Mart & Y. (Tenn.) 309, 17 Am.
Dec. 802; BardweU v. Perry, 19 Vt 292, 47 Am. Dec. 687; Ex parte
Hodgson, 2 Brown, Ch. 5. See "Partnership** Dec. Dig. iKey No.)
II 186, 187. 247; Cent. Dig. §§ 3S9, ShO, 525-628.
a 8 RODGERS v. MERANDA, 7 Ohio St 179, 181, Gllmore, Gas.
Partnership, 528.
The rule Is one of long standing In England, being recognized in
the case of Ex parte Crowder, 2 Vern. 706, decided In 1715, and
iater followed In Ex parte COOK, 2 P. Williams, 500, and in Ex
parte Hunter, 1 Atk. 228. Lord Thurlow apparently altered the
role 60 far as it extended to bankruptcy In the case of Ex parte
HODGSON, 2 Brown, Ch. 5, decided in 1785. In this case he held
that there was no distinction to be made between joint and separate
creditors; each being entitled to share equally In a bankrupt part-
ner's estate. A bill In equity of the separate creditors would ap-
parently lie, however, to compel the Joint creditors to first satisfy
their claims out of the firm assets. The Inconvenience of the re-
sulting practice led Lord Loughborough, In Ex parte ELTON, 3 Ves.
Jr. 238, decided in the year 1796, to restore the old rule In bankrupt-
cy. Lord Eldon followed the same rule in Chlswell v. Gray, 9 Ves.
126, and it has ever since remained the law of England, applicable
not alone In bankruptcy, but in equity generally, that In the distribu-
tion of the estate of Insolvent partners the separate creditors are
entitled to priority In the separate estate. See RODGERS v. MER-
ANDA, supra. See ^^Partnership;* Dec. Dig. {Key No.) U 186, 187;
Cent. Dig. §| SS9, S40.
S 146) B£MEDIE8 IN EQUITT 483
has been much controverted; and there has not been al-
ways a perfect concurrence in the reasons assigned for it
by those courts which have adhered to it. By some it has
been said to be an arbitrary rule, esj;ablished from consid-
erations of convenience; by others, that it rests on the
basis that a primary liability attaches to the fund on which
the credit was given — that in contracts with a partnership
credit is given on the supposed responsibility of the firm,
while in contracts with a partner as an individual reliance
is supposed to be placed on his separate responsibility; ••
and, again, others have assigned as a reason for the rule
that the joint estate is supposed to be benefited to the ex-
tent of every credit which is given to the firm, and that the
separate estate is, in like manner, presumed to be enlarged
by the debts contracted by the individual partner, and that
there is, consequently, a clear equity in confining the cred-
itors, as to preference, to each estate, respectively, which
has been thus benefited by their transactions.** But these
reasons are not entirely satisfactory. * * * What,
then, is the true foundation of the rule which gives the in-
dividual creditor a preference over the partnership creditor
in the distribution of the separate estate of a partner? To
say that it is a rule of general equity, as has been some-
times said, is not a satisfactory solution of the difficulty;
for the question is whether it be a rule of equity or not. In
the distribution of the assets of insolvents, equality is
equity ; and to say that the rule which gives the individual
creditor a preference over the partnership creditor in the
separate estate of the partner is a rule of equality does not
still rid the subject of difficulty. For, leaving the rule to
stand which gives the preference to the joint creditors in
the partnership property, and perfect equality between the
joint and individual creditors is, perhaps, rarely attaina-
ble. That it is, however, more equal and just, as a general
rule, than any other which can be devised, consistently with
the preference to the partnership creditors in the joint es-
»• 3 Kent, Comm. 65.
••McGuUob y. DasbieU's Adm'r, 1 Har. & Q. (Md.) 96, 18 Am.
Dec 271. Bee ^'Partnership;' Dec Dig, {Key No,) U 186, 187; Cent.
Dig, II SS9, S40,
Gel.Pabt.— 28
434 REMEDIES OF CREDITORS (Ch. 7
tate, cannot be successfully controverted. It originated as
a consequence of the rule of priority of partnership credi-
tors in the joint estate, and, for the purpose of justice, be-
came necessary as a correlative rule. With what semblance
of equity could one class of creditors, in preference to the
rest, be exclusively entitled to the partnership fund, and,
concurrently with the rest, entitled to the separate estate of
each partner? The joint creditors are no more meritorious
than the separate creditors ; and it frequently happens that
the separate debts are contracted to raise means to carry
on the partnership business. Independent of this rule, the
joint creditors have, as a general thing, a great advantage
over the separate creditors. Besides being exclusively en-
titled to the partnership fund, they take their distributive
shares in the surplus of the separate estate of each of the
several partners after the payment of the separate creditors
of each. It is a rule of equity that, where one creditor is
in a situation to have two or more distinct securities or
funds to rely on, the court will not allow him, neglecting
his other funds, to attach himself to one of the funds to the
prejudice of those who have a claim upon that and no other
to depend on." •^
•1 "The theories which have heen soggested to account for the
course of dlstrlbutioD in equity do not go to the source of the cliange,
and explain the cause which brought about the departure from the
common-law system. The notion of credit, that, as the Joint cred-
itors relied upon firm assets, the separate creditors looked to the
separate estates for payment, is an assumption. It contradicts the
experience which imputes to every man a knowledge of the law.
The credit will depend upon the estate which the debtor had. The
partners have Joint and separate estates, which are both subject to
firm debts. The credit would, of course, be given in reliance upon
both estates. The partner has a resulting interest in the firm after
all its debts are paid, and his separate estate, which is also subject
to the firm debts. His creditor could exi)ect nothing from the part-
ner's share until the firm creditors had been satisfied, and he could .
only share the separate estate with them unless insolvency super-
vened, which would give him a paramount title to the separate
fund. The credit given to a debtor is not the cause of his estate,
but a consequence of his possessing the means to pay the debt." J.
Pars. Partn. 191.
§ 146) BEMEDIES IN EQUITT 435
Reputed Ownership
It may be, however, that the separate creditor will in cer-
tain situations be prevented from asserting the right which
he ordinarily has. For instance, it may be that the doctrine
of reputed ownership will give the creditor of an ostensible
firm a priority in the distribution in bankruptcy of the
goods used by such firm in its business, even though such
property was, in fact, the property of one only of the os-
tensible partners.
It has long been the policy of the English bankruptcy
laws, with a view, doubtless, to the benefit of trade, to make
goods used by the bankrupt in his trade, with the consent
of the true owner, in such manner as to become the reputed
owner of them, liable for his debts,** The purpose of the
statutory provisions making property liable for the debts
of the reputed owner is to prevent persons from obtaining
credit by being permitted to display as their own property
which belongs to another. Applying the doctrine of re-
puted ownership to the case of an ostensible partnership, it
is held that, if an ostensible partner permits his property to
be used by the ostensible firm in such a manner that it is
reputed to be firm property, such property becomes liable for
the firm debts.** It should be noted that the doctrine of
reputed ownership is based upon statute, and, while there are
expressions in some of the English partnership cases indicat-
ing that they are not decided upon the ground of reputed own-
ership,** It seems that they are more properly decided on that
•s Bankruptcy Act 1883, 8 44, (III), In enumerating the banknipt*B
property available for payment of debts, includes the following:
"All goods being, at the commencement of the bankruptcy, in the
possession, order, or disposition of the bankrupt, in his trade or
business, by the consent and permission of the true owner, under
such circumstances that he is the reputed owner thereof; provided
that things In action other than debts due or growing due to the
bankrupt in the course of Ills trade or business, Ishall not be deemed
goods within the meaning of this section."
•s Rowland v. Crankshaw, 1 Gh. 41 ; Ex parte Hayman, 8 Gh. Div.
77 ; Jn re Watson & Go. (1904) 2 Gh. 753 ; Shannon v. Mason, [1899]
2 Q. B. 679. See "Partnerahip," Dec. Dig. (Key ^o.) || 185-189;
Cent. Dig. f | SSl-SJt8.
•* Rowland v. Grankshaw, 1 Gh. 41. Bee "PartnersMp,** Dec. Dig.
(Key 2fo.) || 185-189; Cent. Dig, fi§ SS7'-S48.
436 BBMEDIES OF CBEDITORS (Ch. 7
ground than any other. Thus, it was said by Thesigcr, L. J.,
in Ex parte Hay man : ••* **If the consequence that the stock in
trade is to be held to be joint property, where there is an os-
tensible partnership, is merely an offshoot of the doctrine of
reputed ownership, then I can well understand that in such a
case the rights of the separate creditors should be barred, and
that they should not be entitled to prove in competition
with the joint creditors. But, if this result is supposed to
flow from the doctrine of ostensible partnership per se,
then I must say for myself that I cannot see why in such
a case the rights of the separate creditors should be any
less than the rights of the joint creditors. The law relating
to ostensible partnership is founded upon the doctrine of
estoppel, and although the doctrine of estoppel might be
perfectly good as between those who contract with the
joint creditors and the creditors themselves, I do not see
why in the event of bankruptcy that estoppel should apply
to the separate creditors, whose rights before bankruptcy
stand very much in the same position as those of the joint
creditors."
Partnership Assets by Estoppel
Nevertheless, in this country, in the absence of a statu-
tory doctrine of reputed ownership, it has been held in some
jurisdictions that the property of an ostensible partner used
in the partnership business was liable for the partnership
debts on the ground of equitable estoppel. A leading case
on this subject is Thayer v. Humphrey,** where Marshall,
J., in delivering the opinion, said : "The doctrine that estops-
B. from saying that he is not a partner of A. at the suit of
the creditors of the ostensible firm should estop A. from
holding that the property is his individual property, to the
prejudice of those who dealt with the firm as a firm in fact,
and should estop the creditors of the ostensible firm, in the
case of the bankruptcy of such firm, from resorting primar-
•» 8 Ch. Dlv, 11. Bee ** Partnership,'' Deo, Dig. {Key Vo.) H ISS-
189; Cent, Dig, |§ SS7-348.
•• THAYER V. HUMPHREY, 91 Wis. 276. 64 N. W. 1007, 30 L.
R. A. 549, 51 Am. St Rep. 887, Gilmore, Cas. Partnership, 646. See
''Partnership,'* Dec, Dig, {Key No.) {§ 177-189; Cent. Dig. St SIO-
S48.
g 147) REMEDIBS IN EQTTITT 437
ily to the individual property of the members of such firm;
in short, should work effectually to compel liquidation in
all respects the same as if the members of such firm were
just what they seem to be. This is what the doctrine of es-
toppel is for; that is what equity is supposed to accomp-
lish— ^to prevent fraud and promote justice between man
and man in the administration of human affairs." '^ The
difficulty with this view is that it loses sight of the fact
that the estoppel of an ostensible partner is a personal
one.** He is estopped to deny that he is personally liable
for the firm debts and a judgment against him may be ob-
tained upon them. It is a different thing, however, to
hold that this estoppel so binds his individual property as
to prevent his individual creditors from claiming it as his.
They, ordinarily, have done nothing which should prevent
them from establishing the truth and insisting upon it.**
same—firm creditors against the sepa-
rate; estates
147. The firm creditors are not entitled to payment out of
the separate estates imtil the separate creditors
have been paid. But they may participate equally
with the separate creditors in the distribution of
the separate estates in the following cases:
EXCEPTIONS :
(a) Where there is no joint estate nor living solvent
partner.
(b) Where there has been a fraudulent conversion of
firm property to the use of the separate estates.
(c) Where a partner has become indebted to the firm in
respect to a separate trade carried on by him.
•
•r See, also, Adams & Go. v. Albert, 155 N. Y. 356, 49 N. E. 029,
63 Am. St. Rep. 675. See ^'Partnership,'* Dec, Dig, {Key No.) If 177-
189; Cent. Dig. §| S10S48,
»8 BROADWAY NAT. BANK v. WOOD, 165 Mass. 812, 43 N. E,
100; SWANN v. SANBORN, 4 Woods, 625, Fed. Oas. No. 13,675,
Gllmore, Cas. Partnership, 557. See ** Partnership,'* Dec. Dig. (Key
No.) H 177-189; Cent. Dig. §| 310-SS6.
»» See the dissent of Newman, J. (Pinney, J., concurring), in
THAYER V. HUMPHREY, 91 Wis. 276, 64 N. W. 1007. 30 L. R. A.
438 REMEDIES OF CREDITORS (Ch. 7
Firm Creditors Against Separate Estate
As has just been pointed out, the separate creditors of
a partner are entitled, in equity, to be paid out of the sep-
arate assets of the partner before the firm creditors receive
anything. The same rule of distribution has been incor-
porated in the United States Bankruptcy Act of 1898.^
In Kentucky a different rule has been established, how-
ever. By this rule the firm creditors are entitled to exhaust
the firm estate, the separate creditors are then entitled to a
dividend out of the separate estate equal to that already
obtained by the firm creditors out of the firm estate, after
which the firm creditors are entitled to share equally with
the separate creditors in the remainder of the separate es-
tate.* Whether firip creditors become creditors of a partner
who purchases the firm property and agrees to pay the firm
debts is a question on which the case is conflicting. In
England and in some jurisdictions in the United States,
such an arrangement does not make them separate cred-
itors, unless they consent to it, or, knowing of it, deal with
the continuing partner to the prejudice of the other part-
ners.* In many jurisdictions in tfie United States, where
549, 51 Am. St Rep. 887, Gilmore, Cas. Partnership, 546. See "Part-
nership,** Deo. Dig, (Key No.) §| 117-189; Cent. Dig. |§ S10-3S6.,
1 Bankruptcy Act July 1, 1898, c. 541, | 6f, 30 Stat 548 (U. &
Comp. St 1901, p. 3424).
« Northern Bank of Kentucky v. Kelzer, 2 Duv. 169; Whitehead
y. Ghadweirs Adm'r, 2 J>aV, 432; Fayette Nat Bank of Lexington
▼. Kenney's Assignee, 79 Ky. 133. See, also, GIt. Code Ga. 1895, 8
2660 ; Johnson ▼. Gordon, 102 Ga. 350, 30 S. E. 507. The Kentucky
rule has been thus described by the Supreme Court of Minnesota :
"The original of this rule seems to be the rule adopted in Pennsyl-
vania, in Bell ▼. Newman, 6 Serg. & R. 78, for the distribution of firm
and individual assets, in a case where a surviving partner died,
leaving both partnership separate creditors and firm and separate
assets in the hands of his administrator. • • • Bell v. New-
man was practically overruled in Black's Appeal, 44 Pa. 503, and
the equity rule adopted. The objections to the now discarded rule
of Pennsylvania apply precisely to the Kentucky rule, which has not,
so far as we are advised, been followed by any other court ** Start,
C, J., in HAWKINS v. MAHONET, 71 Minn. 156, 73 N. W. 720, GU-
more, Cas. Partnership, 558. See "Partnership,** Deo, Dig. {Key No.)
I 187; Cent. Dig. §| 840^4^-
s Ex parte Freeman, Buck. 471; Ex parte Appleby, 2 Deac. 482;
§ 147) REMEDIES IN EQUITT 439
a right to sue on a promise for the benefit of a third person
is recognized, the creditors of a firm become the creditors
of an individual partner who assumes the firm debts, and
as such they may prove in bankruptcy with his other sep-
arate creditors.*
Exception — No Joint Estate nor Living Solvent Partner
There is a well-established exception to the rule above
stated, which is as follows : If there be no firm assets nor
living solvent partner, the firm creditors may participate
pari passu with the separate creditors in the distribution of
the separate estate. The reason for the exception is to be
found in the reason for the rule itself.' The reason usually
given is this : "Where one creditor is in a situation to have
two or more distinct securities or funds to rely on, the court
will not allow him, neglecting his. other funds, to attach
himself to one of the funds to the prejudice of those who
have a claim upon that and no other to depend on." •
Therefore, if there be no firm assets nor living solvent part-
ner, the firm creditors have no especial advantage over the
separate creditors and should be permitted to share pari
passu with them in the separate estate/
Rouse ▼. Bradford Banking Co. (1894) A. C. 586 ; Ex parte Jackson,
1 Ves. Jr. 130 ; Ex parte Peele, 6 Ves. Jr. 601 ; Ex parte Hitchcock,
3 Deac. 507; WUd y. Dean, 3 AUen (Mass.) 579; Bucklin v. Buck-
lin, 97 Mass. 256 ; Priesing v. Crampton, 181 Mass. 492, 63 N. E. 936.
See chapter IV, %% 77, 78, pp. 242-257. See '*Partner8h4p," Dec.
Dig. {Key No.) § 187; Cent. Dig. §§ SJiO-3.^2.
4 In re Long, 9 N. B. R. 227, Fed. Cas. No. 8,476; In re Rice, 9
N. B. R. 373, Fed. Cas. No. 11,750; In re Downing, 3 N. B. R. 748,
Fed. Cas. No. 4,044 ; ARNOLD v. NICHOLS, 64 N. T. 117, Gilmore.
Cas. Partnership, 328. See ** Bankruptcy,** Deo. Dig. (Key No.) §S
S09, S51; Cent. Dig. §§ 555-564.
B See pp. 432-434, ante, for general statement of, reasons.
« RODGERS V. MERANDA, 7 Ohio St 179, Gilmore, Cas. Partner-
ship, 528. See '^Partnership,'' Dec. Dig. {Key No.) {| 186, 187, 247;
Cent. Dig. §f SS9-S42, 525-528.
f E2x parte KENSINGTON, 14 Ves. 447. See Ex parte Pinkerton,
where proof was allowed, there being a solvent partner, who was,
however, abroad and unlikely to retuhi. Ex parte Pinkerton 0 Yes.
814; In re Knight, 8 N. B. R. 436, 438, Fed. Cas. No. 7,880; Ex
parte Hayden, 1 Bro. Ch. 398. See ^'Partnership,** Deo, Dig. iKey
No.) H 1S6, 187, 247; Cent. Dig. {§ SS9-S42, 525-^28.
440 RBMBDIES OF CBBD1T0B8 (Ch. 7
Same — Joint or Firm Assets
The rule that if there are firm assets the firm creditors
shall not be permitted to participate with the separate cred-
itors in the separate assets applies in England if there are
any firm assets at all which come into the hands of the
trustee in bankruptcy for distribution, even though the
trustee is obliged to expend all of them in costs,* In the
United States, however, it is generally held that the rule is
only applicable in case there are distributable assets. If all
of the assets possessed by an insolvent firm are absorbed
by the expense of disposing of the same, the firm creditors
may prove against the separate estate.* But if there are
any assets for distribution, no matter how small they may
be, the firm creditors are confined to them. This is true,
even though those assets may result from the purchase by
a separate creditor of ai worthless claim against the firm,**
or though they may have been produced by the estoppel of
a reputed partner to djeny that they are his.**
Same — Living Solvent Partner
Not only must there be no assets of the partnership, be-
fore a partnership creditor is permitted to share pari passu
with the separate creditors, but there must be no living
solvent partner. The reason is applicable to the entire rule.
A solvent partner in this connection means one who has
fi Ex parte Kennedy, 2 De Gex, M. & G. See, however, Ex parte
PEAKE, 2 Rose, 54 ; Ex parte HILL, 2 Boa. & P. N. R. 191, note.
See **Partner8hipr Dec, Dig. (Key No.) § 187; Cent. Dig. %% W, S^2.
• HARRIS ▼. PEABODT, 73 Me. 262, Gilmore, Gas. Partnership,
541. **The net proceeds of the partnership property shall be appro-
priated to the payment of the partnership debts, and the net pro-
ceeds of the individual estate of each partner to the payment of his
individual debts." Bankruptcy Law U. S. July 1, 1898, c. 541, | 5f.
80 Stat 548 (U. 8. Comp. St 1901, p. 3424). See ** Partnership;' Dec.
Dig. {Key No.) | 187; Cent. Dig. 88 SJ^O. 3^2; '' Bankruptcy," Dec.
Dig. (Key No.) 8§ S09, S51 ; Cent. Dig. §§ 555^64.
10 In re •MARWICK, Fed. Gas. No. 9,181, Gilmore, Gas. Partner-
ship, 545. See "Partnership;* Dec Dig. {Key No.) % 187; Cent. Dig.
18 S40, S42.
11 THAYER v. HUMPHREY, 91 Wis. 276, 64 N. W. 1007, 30 L.
R. A. 549, 51 Am. St. Rep. 887, Gilmore, Gas. Partnership, 54a See
^'Partnership,** Dec. Dig. {Key No.) 81 17S-189; Cent. Dig. |8 StO-
S48.
§ 147) BEMEDIES IN EQUTTT 441
. assets available for firm creditors; that is, a nonbankrupt
partner. Mere insolvency in the sense of financial embar-
rassment is not sufficient, for in legal contemplation the
firm creditors still have a remedy against him.** The sol-
vent partner must be living. If there are no assets and the
other partners are dead, even if they have left solvent estates,
the firm creditors will be permitted to participate with the
separate creditors of the living bankrupt partner.**
Fraudulent Conversion by Partners of Firm Property
An exception in favor of separate creditors was noted in
discussing the rights of the separate creditors against the firm
estate, where the property of the partner had been wrongfully
appropriated to the use of the firm. Conversely, where one
partner has fraudulently appropriated firm property to his own
use, the firm creditors can on a demand based upon such con-
version compete with the separate creditors.** An excellent
statement of the reason for the exception is to be found in the
opinion of Lord Cairns in Read v. Bailey.*"
' " McCulloh ▼. DashieU's Adm'r, 1 Har. & G. (Md.) 96, 18 Am. Dec.
271 ; Conrader v. Cohen, 131 Fed. 801, 58 C. C. A. 240 ; In re MAR-
WICK, 2 Ware. 233, Fed. Cas. No. 9,181, Gilmore, Cas. Partnership,
546; Ex parte Bauerman, 3 Dea. 476, 486. See ** Partnership,'* Deo.
Dig. {Key No.) §fi i87, 247; Cent. Dig. §S 5^0, 342, 525-^28.
i« Ex parte Bauerman, 3 Dea. 476. See '^Partnership,^' Deo. Dig.
{Key No.) |fi 187. 247; Cent. Dig. §§ S40. 342, 525-528.
14 Ex parte Smith, 1 Glyn & J. 741 ; Ex parte Watklns, Mont &
M. 57 ; Ex parte LODGE, 1 Ves. Jr. 166 ; McELROY v. ALLFREE,
131 Iowa, 518, 108 N. W. 119, Gilmore, Cas. Partnership, 573 ; RODG-.
ERS V. MERANDA, 7 Ohio St 180, Gilmore, Cas. Partnership, 528.
See ** Partnership," Dec. Dig. {Key No.) {f 186-188; Cent. Dig. SS
339-342.
16 READ V. BAILEY, 3 App. Cas. 94. "So long as you have dis-
tinct estates, so long as you keep distinct the Joint estate and the
separate estate^ If you allow the firm, the partnership concern, to
make contracts with Its separate members, and to stand upon those
contracts as affording a ground of proof as* against the separate
creditors, you run the risk, to say the least — perhaps I might say
you have the certainty — that contracts will be made between the
firm and the Individual members which in effect will, defeat the
rights of the creditors of the Individual members. But where you
have a conversion of the property of the firm to the purposes of the
individual members, not by way of contract or agreement with the
firm, not within the knowledge or the cognizance of the firm, but by
442 BBMBDIES OF CRBDITORS (Gh. 7
Trade Debts
Trade debts, also, which may be proved by a partner
against a firm, at least in England, may there be proved by
the firm against a partner in competition with the creditors
of the partner. In the bankruptcy of a partner, the firm to
which he belongs is treated as an ordinary creditor with
respect to those debts which have accrued in the regular
course of trade between the firm and such partner.^* In
the United States it is doubtful whether this exception is
allowed ; the courts not being inclined to favor exceptions
to the general rule, inasmuch as they tend to embarrassment
in the distribution of the assets within their control.^^
a fraud of an individual partner, to which the firm is no assenting
party, of which Its other members are not cognizant and cannot
be cognizant, there the reason for the rule ceases, and the firm
whose assets have thus been fraudulently abstracted ought not to
suifer, and ought not to be deprived of the right to proceed against
the separate estate in competition with any other claimants. Wheth-
er the separate estate has in the result been increased or not, wheth-
er at the time of the proof it is larger than it otherwise would
have been or not, is a matter which does not concern the applica-
tion of the rule, and it is sufficient that at one time the separate
estate was increased, when the property was thus fraudulently con-
verted and taken for the purpose of one partner." See ^^Partner-
ship,'* Dec. Dig, (Key No.) §§ 186-188; Cent. Dig. |§ SS9S42.
16 Ex parte Hesham, 1 Rose, 146; Ex parte Gastill, 2 Glyn & J.
124; Ex parte ST. BARBE, 11 Ves. 413. See *' Bankruptcy** Dec.
Dig. {Key No.) |§ S09, 951; Cent, Dig. §§ 555-561,.
17 In re Lane, 10 N. B. R. 135, Fed. Gas. No. 8,044. See, also,
GIBBS V. HUMPHREY, 01 Wis.. 111. 64 N. W. 750 ; Somerset Pot-
ters Works V. Minot, 10 Gush. (Mass.) 592, 598, 601. In this case
the court said: "We are aware that in the English courts there
have been cases where, under the peculiar equities of the case, the
courts of equity have allowed a demand, or debt for goods sold by
' a firm to one partner, to carry on his separate business, to be al-
lowed as against his separate estate. There has been, however,
great fluctuation in the opinions of the English chancellors on this
subject, and it is at tUis moment somewhat uncertain to what ex-
tent this exception to the general rule is allowed. Any exception
of this kind is full of embarrassment and difficulty, and is in con-
flict with that simple and direct mode of distribution of joint and
separate assets, which St 1838, c. 163, has provided. * * * In-
deed, this whole matter of exceptions to the general rule of dis-
tribution of joint and separate assets, as we have already intimated
in considering another point, is of very questionable expediency,
S 147) REMEDIES IN EQUITT 443
#
Legal Priority Against Separate Property
Though separate creditors are given priority in equity to
the creditors of the firm in the distribution of the estate of
a partner, "those courts have never assumed to exercise the
power of setting aside or in any way interfering with an
absolute right of priority obtained at law. * * * There
is no doubt that at law the judgment for a partnership debt
attaches and becomes a lien upon the real estate of each of
the partners, with the same effect as if such judgment were
for the separate debt of such partner. * * * The prin-
ciple that the separate property of an individual partner is
to be first applied to the payment of his separate debts has
* * * never been held to give priority as to such prop-
erty to a subsequent judgment for an individual over a
prior judgment for a partnership debt. It is true that
courts of equity will sometimes give to a mere equitable
lien, which is prior in point of time, a preference over a
subsequent judgment; but this will be done only where
such prior lien is specific in its character. * * * The
mere general equity of the separate creditors to have their
debts first paid out of the individual property of the part-
ners does not amount to a lien at all, much less a lien of the
kind necessary to give it a preference over a judgment for
a partnership debt." *•
and we are not disposed to favor Its introduction into our system."
The same doctrine has been approved in the United States District
Court See ** Bankruptcy,'' Dec. Dig. (Key No.) §§ SOB, Sol; Cent.
Dig. §§ 55&-560; ** Partner sMp,** Deo. Dig. {Key No.) §§ 186-188;
Cent. Dig. §| SSO-SJ^^.
18 Selden, J., in MEECH v. ALLEN, 17 N, T, 300, 72 Am, Dec.
465, Gllmore, Gas. Partnership, 499; In re SANDUSKY, Fed. Gas.
No. 12,30a
The firm creditor who has secured a lien against the assets of a
separate partner may be compelled to exhaust the firm assets be-
fore he realizes upon his security. In re Lewis, Fed. Gas. No.
8,313. But see In re SANDUSKY, 17 N. B. R. 452, Fed. Gas. No.
12,308, where the court refused to enjoin, at the suit of separate
creditors, the firm creditor from realizing on his lien at law against
the estate of one of the partners.
The Gourt of Ghancery in England permits a petitioning creditor,
though a Joint creditor, to charge the separate effects pari passu
with the separate creditors, because, as it is said, his petition, being
444 BBMBDIB8 OF CRBDIT0B8 (Ch. 7
SAME— PARTNER AGAINST THE SEPARATE ES-
TATE OF A COPARTNER
148. A partner is not entitled to payment out of the estate
of his copartner until the firm creditors have been
paid, except —
EXCEPTIONS:
(a) While the copartner's estate is insufficient to pay his
separate creditors.
(b) Where there are no firm debts, or he has paid them,
or they have ceased for any reason to exist.
prior in time, is in tJie nature of an execution in behalf of himself
and the separate creditors. Ex parte Ackerman, 14 Ves. 604; Bx
parte Hull, 9 Ves. 349; Ex parte Detastel, 17 Ves. 247; Ex parte
Burnett, 2 Mont D. & D. 857. But see MurriU ▼. Neil, 8 How. 414,
12 L. Ed. 1189; Ex parte Abell, 4 Ves. 837. This exception ap-
plies only to the petitioning creditor. The other firm creditors are
not let in to share in the separate estate. Ex parte ELTON, 3 Ves.
Jr. 238. See Crlspe v. Perritt, 1 Atk. 133. This exception does not
appear to have been recognized by the courts of this country. Mur-
riU ▼. Neil, 8 How. 414, 12 L. Ed. 1135.
By the United States statutes debts due the United States are en-
titled to priority out of the estate of an Insolvent debtor, or out
of the estate of a deceased debtor in the hands of an executor or
an administrator, provided the estate Is insufficient to pay all the
claims due from the deceased. Rev. St. § 3466 (U. S. Comp. St. 1901,
p. 2314). This priority is preserved in bankruptcy by the Bankruptcy
Act of 1898, with the exception that the claims of the United States
are postponed to the costs of administration and to certain claims
for wages due. Bankruptcy Act July 1, 1898, c. 541, ( 64b, 30 Stat.
563 (U. S. Comp. St 1901, p. 3447). The priority given to the Unit-
ed States by section 3466 gives it a preference in bankruptcy to the
assets of an Insolvent partner as against his separate creditors, even
though the claim of the United States may be one against the firm
of which the partner was a member. LEWIS v. UNITED STATES.
92 U. S. 622, 23 L. Ed. 513. But a claim against one partner does
not give it a priority against the assets of the partnership, because
"it is a rule too well settled to be now called in question that the
interest of each partner In the partnership property Is his share in
the surplus, after the partnership debts are paid ; and that surplus
only is liable for the separate debts of such partner." United
States V. Hack, 8 Pet 275, 8 L. Ed. 941. See "Partnership,'' Dec,
Dig, {Key No,) (§ 186-1S8; Cent, Dig. U SS9-Si2,
^ 148) BBMBDISB IN EQUHT 445
Partner as Creditor of Copartner
It has been shown that the reason why a partner, who
is a creditor of the firm, cannot compete with the firm cred-
itors in the distribution of the firm assets, is that the firm
creditors are his own creditors. The creditors of a partner-
ship are also the creditors of each partner. In consequence,
"it has been held that one partner cannot prove against his
copartner, because, in ordinary cases, that proof would di-
minish the surplus of the estate of the debtor partner, and
thereby the creditor partner, if admitted to prove, would
come into competition with his own creditors, namely, the
joint creditors, and detract to the extent of the proof from
the benefit which they would derive from the separate es-
tate/' *• Hence the general rule is that a partner cannot
prove against his copartner while firm debts remain unsat-
isfied,"
Exception — Copartner^s Estate Insufficient to Pay Separate
Creditors
The reason and the rule apply only to firm creditors, how-
ever, and if the circumstances are such that the partner can-
not compete with the firm creditors by proving against his
partner in bankruptcy he will be allowed to prove in com-
petition with the other separate creditors of such partner.
Thus it was held in a case, where it was shown that by no
possibility could there be any surplus left after the separate
debts were satisfied, that a. partner could prove with the
separate creditors; the Lord Chancellor*^ saying: "I
think it reasonable and just that the rule should not be ex-
tended beyond the reason which introduced it and was the
cause of its being laid down ; . and if it be true that the es-
tate of the partner against which the proof is tendered can-
not by any possibility yield a surplus, it would be unreason-
able and unjust to refuse the opportunity of proof being
made.'*
i» Bx parte TOPPING, 4 De Gez, J. & S. 551, 556, Gilmore, Gas.
Partnership, 576. 8ee *' Partnership," Deo. Dig. {Key Jfo,) § 188;
Cent, Dig, % 5^i.
so Ex parte BASS, 86 L. J. Bk. 39. Bee ^^Partnership,'* Deo, Dig.
(Key No.) 8 188; Cent. Dig. { S41.
«i Lord Westbury.
" ESx parte TOPPING, 4 De G., J. & 8. 651, 556, Gllmore, Gas.
446 REMEDIES OF CBEDIT0B8 (Ch. 7
Same — No Firm Debts in Existence
The same is true if there are no firm creditors. For in-
stance, if one partner pays all of the debts of the firm, he
will be allowed to prove his claim for contribution against
the other partners in bankruptcy in competition with their
separate creditors.**
It would seem, also, that a bona fide assignee for value
of a partner's claim against his copartner could prove the
same.
SAME— RIGHTS OF SECURED CREDITORS
149. A creditor ^^ho has received from his debtor security
for his debt may nevertheless, under the general
rule of distribution enforced in equity, without
surrendering the security, prove against his debt-
or's estate for the full amoimt of his claim and re-
ceive a dividend thereon. He may also enforce his
Partnership, 576. Bee "Partnership,'' Dec Dig, (Key No.) 8 188;
Cent. Dig. § S41.
a« Ex parte TATLOR> 2 Rose, 175. It Is not sufficient, however,
merely to indemnify the firm creditors against loss as a result of
such proof. Ex parte Moore et al., 2 Gly. & J. 106. See, contra, Ex
parte Ogilvy, 2 Rose, 177.
In compelling such contribution against one, if there are others
and they are all insolvent, proof can be made for half of the amount
paid. In re DELL^ Fed. Cas. No. S,774.
The following exceptions are also mentioned by Lindley, but they
do not appear to have been recognized in the United States: "The
principle which allows joint estate to prove against separate estate,
and separate estate to prove against Joint estate, in cases where
there has been a fraudulent conversion of property, or where there
liave been distinct trades, and a debt contracted in the course of
those trades, is also applicable to proofs by one partner against an-
other, in similar cases." Lindley*s Law of Partnership (7th Ed.)
p. 811.
A retiring partner, when the remaining partner has assumed the
firm debts, can, if compelled to pay the firm debts, prove, in the
name of the creditor paid, against the estate of the remaining part-
ner in bankruptcy. In re Dillon (D. O.) 100 Fed. 627. It is doubtful
whether he can compete with the other firm creditors in such proof.
In re Denning (D. G.) 114 Fed. 219. See "Bankruptcy" Dec Dig.
{Key No.) § 809; Cent. Dig. § 556.
§ 149) BEMEDIE8 IN EQUITT 447
security. If more than sufficient is produced from
both sources to satisfy his debt, the surplus will
go to the debtor's estate. In bankruptcy, however,
he must either stand by his security alone, or sur-
render it, and have it valued, and receive a divi-
dend only upon the unpaid balance.
Right of Secured Creditor — Equity Rule
The general rule of equity in insolvency proceedings is
that those creditors who have secured claims may prove
against the estate of the insolvent for the full amount of
their claim and also realize upon the security for the bal-
ance; it being the duty of the representative of the insol-
vent to redeem the securities in case they are more than
sufficient to pay the balance due.** This is undoubtedly in
accord with the contract of the parties. As said in a New
York case : "The agreement between the debtor and cred-
itor was that the debt should be paid. That debt is a defi-
nite quantity, and nothing less than its full amount can be
said to be the debt. It is not altered or affected in its
amount because the creditor may hold some collateral se-
curity. That is not a factor of the debt, but is merely an
incident to the debt. The very force and meaning of a col-
lateral security are in the idea of a guaranty of the perform-
ance of the principal agreement, which was to pay the debt.
The property which a creditor holds as collateral to the in-
debtedness of his debtor secures him to that extent, in case
his debt is not paid in full by the debtor or by his estate.
s« Mason y. Bo^, 2 Myl. ft Gr. 443 ; Kellock's Case, L. R. 3 Ch.
App. 769; LEWIS v. UNITED STATES, 92 U. S. 618. 23 L. Ed.
513 ; Findlay y. Hosmer, 2 Conn. 350 ; In the Matter of Bates, 118
111. 524, 9 N. EL 257, 59 Am. Rep. 383 ; Fumess v. Union Nat Bank,
147 111. 570. 35 N. E. 624; Levy v. Chicago Nat Bank, 158 111. 88.
42 N. E. 129, 30 L. R. A. 380 ; Third Nat Bank of Detroit v. Haug,
82 Mich. 607, 47 N. W. 33, 11 L. R. A. 327 ; Winston v. Biggs, 117
N. C. 206. 23 S. E. 316; Moses v. Ranlet 2 N. H. 488; PEOPLE
V. B. REMINGTON ft SONS, 121 N. T. 328, 24 N. E. 793, 8 L. R.
A. 458 ; Kellogg v. MUler, 22 Or. 406, 30 Pac. 229, 29 Am. St Rep.
618; ALLEN v. DANIELSON, 15 R. I. 480, 8 AtL 705, Gilmore,
Casw Partnership, 564 ; West v. Bank of Rutland, 19 Vt 403 ; Walk-
er V. Baxter, 28 Vt 710. 8ee "/iwolrenci^," Dec. Dig, {Key No.) §
108; Cent. Dig, S§ 161, 164-169.
448 REMEDIES OF CREDITORS (CIl. 7
As between the creditor and his debtor, the latter could not
compel the former to resort first to his collaterals before
asserting his claim by a personal suit. The debtor has no
control over the application of the collaterals. It is a gen-
eral rule of equity that the creditor is not bound to apply
his collateral securities before enforcing his direct remedies
against the debtor. Then on what principle can one hold
that, because the debtor becomes insolvent, the contract
with his creditor is changed, and that the creditor cannot,
under those circumstances, enforce his direct claim against
the debtor until he has realized on his securities? Is the
rule capable of such inversion ? I cannot see any reason in
the proposition. I do not see why, in the absence of inter-
vention by positive or statutory law, the engagements of
the parties should be varied." *■
In Massachusetts the rule and the reason upon which it
is based have both been rejected, and the rule adopted that
the creditor can only prove for the difference between the
amount of his claim and the value of his security. This
rule is said to be "consistent with the nature of the contract.
For the property pledged is in fact security for no more of
the debt than its value will amount to; and for all- the rest
the creditor relies upon the personal credit of his debtor, in
the same manner he would for the whole, if no security
were taken." •• This view of the contract has been denied
by the Supreme Court of the United States in the follow-
ing language: "We cannot concur in the view expressed
by Chief Justice Parker. * * * We think the collateral
is security for the whole debt and every part of it, and is
as applicable to any balance that remains after payment
" Per Gray, J., in PEOPLE v. B. REMINGTON & SONS, 121 N.
Y. 328, 333, 24 N. E. 793, 794, 8 L. R. A. 458, GHmore, Gas. Partner-
ship, 566, note. See ''Insolvency,** Dec, Dig. {Key No.) § 108; Cent,
Dig. §§ 161, m-169.
2 « Parker, O. J., in Armory v. Francis, 16 Mass. 308, 811. The
court further declared that "the same rule would undoubtedly be
applied in England to cases of insolvent estates, when the debtor
has deceased, if any mode of settlement and distribution of such
insolvent estates existed there." But see Mason v. Bogs, 2 Myl.
& O. 443. See "Insolvency,** Deo, Dig, (Key No,) § 108; Cent. Dig.
•§| 161, 164-169,
§ 149) REMEDIES IN EQUITT 449
from other sources as to the original amount due, and that
the assumption is unreasonable that the creditor does not
rely on the responsibility of the debtor according to his
promise." "
Same — Bankruptcy Rule
In bankruptcy, however, the rule is different. Here the
security must be surrendered or sold before the principal
debt can be realized upon. This rule was not originally
based upon any definite direction of the bankruptcy laws,
but resulted from the interpretation which the courts placed
upon the direction found in the early bankruptcy acts,
which required that the assets of a bankrupt should be dis-
tributed ratably among his creditors.** Upon similar di-
rection in the insolvency laws of various states the same
rule has been applied."* By the English Bankrupt Act of
1869, and by those of the United States of 186'r and of 1898,
it is expressly provided that a secured creditor must ac-
count for his securities before proving against the general
assets; the provision of the United States bankruptcy act
of 1898 being as follows : "The value of securities held by
secured creditors shall be determined by converting the
same into money according to the terms of the agreement
pursuant to which such securities were delivered to such
creditors or by such creditors and the trustee, by agree-
*i FuUer, G. J., In Merrill v. National Bank of Jacksonville, 173
U. S. 131, 141, 19 Sup. Ct 360, 364, 43 L. Ed. 640. See '' Insolvency ;'
Dec. Dig. (Key No.) | 108; Cent. Dig. |§ 161, 16Jh^69.
2 8 See the dissenting opinion of Justice White in MerrUl v. Na-
tional Bank of Jacksonville, supra, for an exliaustive discussion of
the origin of the bankruptcy rule. See ''Bankruptcy," Dec. Dig. (Key
No.) §§ S09, SIO; Cent. Dig. §§ 501-501, 555-564-
*» Wurtz V. Hart, 13 Iowa, 516 ; American National Bank of Kan-
sas City V. Branch, 57 Kan. 27, 46 Pac. 88 ; National Union Bank of
Maryland v. National Mechanics' Bank, 80 Md. 371, 30 Atl. 913, 27
L. R. A. 476, 45 Am. St Rep. 350 ; Vanderveer v. Conover, 16 N. J.
Law, 487; Armory v. Francis, 16 Mass. 308; Famum v. Boutelle.
13 Mete. (Mass.) 159; BeU v. Fleming's Ex'rs, 12 N. J. Eq. 13;
Whlttaker v. AmweU Nat. Bank, 52 N. J. Eq. 410, 29 Ati. 203;
Fields V. Creditors of Wheatley, 1 Sneed (Tenn.) 351; Winton v.
Eldridge, 3 Head (Tenn.) 361; In re Frasch, 5 Wash. 344, 31 Pac
755, 32 Pac: 771. See ''Insolvency," Dec. Dig. (Key No.) | 108; OenU
Dig. §§ 161, 164-169.
G11..PABT.— 29
450 BBMEDIBS OF CBEDITOBS (Ch. 7
ment, arbitration, compromise, or litigation as the court
may direct, and the amount of such value shall be credited
upon such claims, and a dividend shall be paid only on the
unpaid balance." •* The statute does not apply, however,
to a situation where the security is that of a third person.
It is only where it is the property of the bankrupt that it
must be accounted for. Even where a partnership becomes
bankrupt, if the partnership creditor holds a security on the
separate property of one partner, he may prove against the
assets of the firm his entire claim and still retain the se-
curity.**
SAME— RIGHTS OF JOINT AND SEVERAL CRED-
ITORS—DOUBLE PROOF
150. A creditor who has obtained the obligation of the firm,
as well as the several obligation of the members of
the firm, for the same debt, may prove against both
the firm and separate estates. This was true un-
der the United States bankruptcy act 9f 1867, but
is apparently not true under the act of 1898. In
England such a creditor was required to elect the
estate against which he would prove, unless the
joint and several liabilities arose out of distinct
contracts.
Double Proof^English Rule
It was formerly the rule in the bankruptcy practice in
England that, if a creditor of a firm had both the promise
of the firm and the separate promise of the partners to pay,
to Act July 1, 1808, a 541, | 571i, 30 Stat 660 (U. 8. Ck)mp. St
1901, p. 3443).
The bankruptcy rul6 has been made to apply in England to tbe
administration In chancery of the insolvent estate of one deceased
and to the winding up of an insolvent company under the Compa-
nies Act by section 25 of the Judicature Act of August 5, 1873, c.
66, and by an amendment thereto adopted August 11, 1875, c. 77.
•1 In re Holbrook, Fed. Gas. No. 6,588; In re May, Fed. Gas. No.
9,327 ; In re Thomas, Fed. Gas. No. 13.886. See ** Bankruptcy** Dec,
Dig. {Key No.) §§ S09, SIO; Cent. Dig, SS 501-507, 555-564.
§ 150) REMEDIES IN EQUITY 451
he must elect, in the case of the bankruptcy of the firm and
the partners liable, from which estate to receive dividends.
The reason given for the rule was that, while the holder of
a joint and several obligation might sue all jointly or might
sue each separately, he could not do both; that, since he
could not bring both a joint and a several action at law, he
ought not to be permitted to do what is equivalent to the
same thing in bankruptcy ; that is, to share in both the firm
and the separate estates.** Moreover, if he chose to go
against the firm estate, he was held to be for all purposes
a firm creditor, and when the separate creditors had satis-
fied their claims out of the separate estate he had no greater
rights in that estate than other firm creditors had.'* He
had, however, a reasonable time in which to make his elec-
tion."
It will be perceived that by this rule "the advantage of
a joint and separate creditor is no more than that he can
elect whether he will be in the first instance a joint or a
separate creditor." •" Considerable dissatisfaction was ex-
pressed by the English judges at this result. Lord Eldon
saying: "I never could see why a creditor, having both
joint and several security, should not go against both es-
tates." *• It was once thought that an exception to the rule
prohibiting one firm receiving dividends from two estates
existed where the estates liable were those of two firms
carrying on distinct trade, though one was included* in the
other. It was decided finally, however, that double proof
should not be allowed in any case.*^ The objections to the
•sEz parte Rowlandson, 3 P. W. 405; Ex parte Banks, 1 Atk.
106; Ex parte Bond, 1 Atk. 98. See "Bankruptcy," Deo, Dig. {Key
yo.) I S09; Cent. Dig. §§ 555-664,
••Ex parte BE VAN, 10 Ves. 106. See '* Bankruptcy," Deo. Dig.
{Key No,) | S09; Cent. Dig. §§ 655-564.
•4 Ex parte Bond and Hill, 1 Atk. 98. See **Banlcruptcy,'' Dec.
Dig. {Key No.) § S09; Cent. Dig. §§ 555-564.
•» Lord Eldon In Ex parte BE VAN, 10 Ves. 107, 110. See **Bank-
ruptcy,'' Dec. Dig. {Key No.) | 809; Cent. Dig. §| 555-564.
•«Ex parte BE VAN, 10 Ves. 107, 109. He added, however: «*It
is settled he must elect" See "Bankruptcy," Deo. Dig. {Key No.) §
S09; Cent. Dig. |§ 555-564.
•T Ex parte Mould, Mont 337, b. c. Mont & B. 28; Goldsmid ▼.
462 REMEDIES OF CBBDIT0R8 (Ch. T
rule led to the passing of a statute** providing, in effect,
that where members of a firm are jointly liable on a con-
tract, and they are also severally liable in the same con-
tract, proof may be made by the creditor against both es-
tates. The statute has been construed to apply to the ordi-
nary joint and several notes or bonds,'* and even to a case
where a partner, who was a trustee, placed some of the
trust funds in the hands of the firm of which he was a mem-
ber for investment, and the firm converted the funds.**
Hence, though the rule against double proof, except where
permitted by a statute, still prevails in England, the cases
which are not covered by the statute are comparatively few.
Same — American Rule
The former English rule has never been followed in this
country. In a Maine case it was said : *'A joint and several
note contains in one instrument two contracts, separate and
distinct from each other. The makers promise as a firm,
and also as individuals. In a legal sense, the parties to the
two contracts are not the same, but different; parties. The
parties meant something by this form of double contract.
The holder intended to have a security upon more than one
estate. The presumption is that the creditor would not
have paid the consideration he did, had it not been upon
the expectation of a double security. Why should not a
creditor have, as Lord Eldon thought he ought in justice
Gazenove, 7 H. L. C. 785. Bee '* Bankruptcy f^ Dec Dig. (Key No.) |
S09; Cent. Dig. §§ 555-661
••Bankruptcy Act 1883, Schedule 2: "If a debtor was at the
date of the receiving order liable in respect of distinct contracts
as a member of two or more distinct firms, or as a sole contractor,
and also as a member of a firm, the circumstance that the firms are
in whole or In part composed of the same individuals, or that the
sole contractor is also one of joint contractors, shaU not prevent
proof in respect of the contracts, against the properties respective-
ly liable on the contracts."
•• EIx parte Honey, li. R. 7 Ch. App. 178; Bx parte Stone^ L. R.
8 Ch. 914. See **Bankruptoy," Dec. Dig. (Key No.) | SOB; Cent. Dig.
81 655-^64.
40 In re Penkers, Bz parte Sheppard, 19 Q. B. D. 84. See "Bank-
ruptcy;* Dec Dig. {Key No.) | SOB; Cent. Dig. §{ 555-564.
g 151) REMEDIES IN EQUITT 453
to have, 'the benefit of the caution he has used'?** He
might have taken separate notes for the same debt. Why
not allow the same thing to be simply and directly done?"**
It has, however, been held that a creditor, though he can
demand and receive a dividend from both funds, can receive
a dividend from the second fund, not on the full amount
of his claim, but only on the amount by which the claim
exceeded the dividends received from the first fund.**
In the federal courts it has been held that the bankruptcy
act of 1867 in terms permitted double proof in such cases
as have just been considered,** but under the act of 1898 it
has been held that a partnership creditor holding a joint
and several note of the members of the firm was not entitled
to participate with the separate creditors in the distribu-
tion of the separate estate of one of the partners.**
SAME— INSOLVENCY OR BANKRUPTCY OF A
PARTNER
151. A partner may be adjudicated a bankrupt, although
his copartners remain solvent. In such case the
solvent partners and the trustee of the bankrupt
partner are, by some decisions, treated as tenants
in common of the firm assets, and each may ad-
minister whatever assets he may get into his pos-
session, but neither can dispossess the other. By
other decisions, the bankruptcy of a partner does
*i Ex parte BBVAN, 10 Vea. 107. Bee "Bankruptcy,'* Dec, Dig,
(Key No.) § S09; Cent. Dig, || 555^64,
4 2 Ez parte Nason, 70 Me. 363, 367. See, also, In re FARNHAM,
6 Bost. Law Rep. 21 ; ROGER WILLIAMS NAT. BANK v. HALL,
160 Mass. 171, 35 N. E. 666 ; HAWKINS v. MAHONET, 71 Minn. 155.
73 N. W. 720, Gilmore, Cas. Partnership. 558. See "Bankruptcy,"
Dec, Dig, (Key Vo.) | S09; Cent Dig, §| 555^64,
4« HAWKINS V. MAHONBY, 71 Minn. 155, 73 N. W. 720, Gilmore,
Cas. Partnership, KJa See "Bankruptcy,** Dec, Dig, (Key No,) |
S09; Cent, Dig, §§ 555-^64,
44 Emery v. Canal Nat. Bank, 7 N. B. R- 217, Fed. Cas. No. 4,446.
See "Bankruptcy,** Dec, Dig. (Key No.) § 809; Cent, Dig, S§ 555-564-
46 In re Mosler (D. C.) 112 Fed. 138. See "Bankruptcy,** Dec. Dig.
{Key No,) | 809; Cent, Dig, SS 555-564*
464 BBMBDIEa OF CREDITOBS (Gh. 7
not a£Fect the title to the firm assets; the solvent
partners being permitted to wind up the affairs of
the firm as surviving partners. The latter view is
adopted in United States bankruptcy act of 1898.
Insolvency or Bankruptcy of a Partner — Former View
It was formerly held that the purchaser on execution sale
of the interest of a partner in a partnership became a ten-
ant in common with the other partners.*' Following the
analogy thus established, it was likewise held that the as-
signee of a bankrupt partner became a tenant in common
with the remaining partners. Thus it was said by Lord
Mansfield : *^ "If a creditor takes out execution against one
partner, as in [Heydon v. Heydon] 1 Salk. 392, the vendee
would be tenant in common; and in the case of Skipp v.
Harwood, in Chancery, 6th July, 1747, Lord Hardwicke,
according to my note says: 'If a creditor of one partner
takes out execution against the partnership effects, he can
have only the undivided share of his debtor, and must take
it in the same manner the debtor himself had it, and sub-
ject to the rights of the other partners. The assignees, un-
der a commission of bankruptcy against one partner, must
be in the same state. They can only be tenants in common
of an undivided moiety, subject to all the rights of the other
partner.' "The same view was held by Chancellor Kent,
who said that ; ** "It is admitted, in all the cases, that the
assignees of a bankrupt partner, and the remaining solvent
partner, are tenants in common with respect to the part-
nership funds; and like all tenants in common one party
cannot call the joint property out of the hands of the other.
There is no such case. They are entitled equally to the
possession in law. * * * If the pretension of either
4« HEYDON V. HBYDON, 1 Salk. 892. GUmore, Cob. Partnership,
507. See ^Partnership," Deo. Dig. (Key No,) § 220; Cent, Dig. {§
459, 459^.
4T FOX ▼. H ANBURY, Cowp. 445, 449. See **Ban1oruptcy;' Dec.
Dig. {Key No.) § U9; Cent. Dig. § 229.
4« MURRAY V. MURRAY, 5 Johns. Ch. (N. Y.) 60, 61, GUmore,
Oas. Partnership, 578. See "Bankruptcy,** Dec Dig. (Key No.) f
149; Cent. Dig. | 229.
§ 161) BEMEDIES IN EQUZTT 455
party to an exclusive distribution of the partnership funds
were to be examined upon principles of policy and equity,
the assignees would have the better pretension, in the view
of this court, because the solvent partner has it in his power
to give preferences, and defeat the equality and equity of the
bankrupt system. Assignees, on the other hand, are bound
to make a ratable distribution of the assets, and, being trus-
tees under the control of this court, there is no good reason
why their equal rights at law as tenants in common should
suffer diminution here. They are tenants in common, but
with particular equities in them, as Lord Eldon observed,
'vastly beyond what tenants in common have where no
bankruptcy has occurred' ; and their claim to the distribu-
tion of the partnership fund has been encouraged and
strengthened by the decisions in chancery." As late as 1876
Judge Lowell declared** that the assignee in bankruptcy
"is a tenant in common with the solvent partner of the joint
stock. It usually happens that the latter will be in posses-
sion of the stock, and his possession will not be disturbed
excepting for good reasons ; and, on the other hand, if, as
in this case, the assignee is in possession, that will not be
disturbed without good cause."
Same — Modern View
Modern cases as a rule, however, incline to the view that
an assignment in insolvency by a partner of his share does
not "transfer the corpus of the partnership property, but
only his share of what would remain after the debts were
paid.""" According to this rule, it would seem that, the
title to firm property in the case of the bankruptcy of one
partner passes to the solvent partner in somewhat the same
way that it passes to the survivor in case of the death of a
partner. Wherever the title may be, however, there is no
doubt that the solvent partners have the right to possess and
the power to sell and convey the partnership property. This
**Wllkin8 V. Davis, 16 N. B. R. 60, Fed. Cas. No. 17,664. See
**Bankruptcy;' Deo, Dig. (Key No.) § U9; Cent, Dig, § 229,
50 OGDEN V. ARNOT, 29 Hun (N. Y.) 146 ; Amalnck v. Bean, 89
U. S. 395, 22 L. Ed. 801 ; JONES v. NEWSOM, Fed. Cas. No. 7,484.
See "Bankruptcy;* Dec, Dig. (Key No.) § U9; Cent. Dig. § 229; "/n-
aolvency;* Dec. Dig. (Key No,) § 56; Cent. Dig. | 71.
456 REMEDIES OF CREDITORS (Gh. 7
is expressly provided in the United States bankruptcy law
of 1898 as follows: "In the event of one or more, but not
all, of the members of a partnership being adjudged bank-
rupt, the partnership property shall not be administered in
bankruptcy, unless by consent of the partner or partners
not adjudged bankrupt, but such partner or partners not
adjudged bankrupt shall settle the partnership business as
expeditiously as its nature will permit, and account for the
interest of the partner or partners adjudged bankrupt."
The statute also provides for bankruptcy of the partner-
ship, and it has been held that the partnership assets were
not in the hands of the court for distribution, even though
each member of the firm had been adjudicated bankrupt;
that, though the statute quoted above in terms applied only
to cases where less than all of the partners were bankrupt, it
was exceptional and negative in construction; and that the
court were not warranted in constructing an affirmation out
of it."
■1 In re Mercnr. 122 Fed. 384, 58 a O. A. 472.
"If the assignee in bankruptcy of a partner becomes a tenant in
common with the other partners, whose title relates back to the
date of the commission of the act of bankruptcy, it would seem that
a legal lien on the firm property secured by attachment on behalf
of a firm creditor subsequent to the act of bankruptcy would be lost
by the assignment" See DUTTON v. MORRISON, 17 Ves. 193;
In re WAIT, 1 Jac. & W. 605. On the other hand, if the assignee
gets but a chose in action, the lien should not be affected by the as-
signment See RUSSELL v. COLE, 167 Mass. 6, 44 N. E. 1057, 57
Am. St Rep. 432; FERN v. GUSHING, 4 Gush. (Mass.) 857, Gil-
more,* Gas. Partnership, 581; Mason v. Warthens, 7 W. Ya. 532;
Bankruptcy Law July 1, 1898, c. 541, || 67c, 67f, 30 Stat 564, 565
(U. S. Gomp. St 1901, pp. 3449. 3450).
It was formerly held that the assignee of a bankrupt partner
and the remaining partners were so united in interest that they must
join in actions on firm obligations. See Eckhardt v. Wilson, 8 D.
& E. 140; RUSSELL v. COLE, 167 Mass. 6, 44 N. E. 1057, 57 Am.
St. Rep. 432; HALSEX v. NORTON, 45 Miss. 703, 7 Am. Rep. 745,
Gilmore, Gas. Partnership, 583; Browning v. Marvin, 22 Hun <N.
Y.) 547. This practice does not obtain under the United States Bank-
ruptcy Law of 1898 (30 Stat 545, c. 541 [U. S. Comp. St 1901, p.
3418]). See In re Meyer, 98 Fed. 976, 39 C. G. A. 368 ; In re Pali-
dori. 2 N. B. N. R. 945 ; In re Blair (D. G.) 99 Fed. 76. See "Bank-
ruptcy.** Dec, Dig. {Key No.) S 149; Cent. Dig. | 229; '^Insolvency,**
Dec. Dig. (Key No.) S 56; Cent. Dig. { 71.
§ 162) REMEDIES IN EQUITY 457
Effect of Discharge
In general, a discharge in bankruptcy of an individual
partner discharged him from liability on his partnership
obligations, as well as from his liability on his individual
debts." This was always true under the English bank-
ruptcy acts," and is undoubtedly true under the act of
1883.** The same is true under the present bankruptcy act
in the United States," though the authorities were in con-
flict on the subject under the act of 1867/*
SAME— RIGHTS AGAINST ESTATE OF DECEASED
PARTNER
152. In England, and in some jurisdictions in the United
States, firm creditors may prove their claims di-
rectly against the estate of the deceased partner
and are entitled to payment after such partner's
separate creditors. In other jurisdictions, they
are not entitled to prove against the separate es«
tate without a showing that the surviving partners
have been proceeded against to execution at law
or that they are insolvent. In all jurisdictions, if
there be no joint estate nor solvent living partner,
the firm creditors may participate equally with the
separate creditors in the separate estate.
•» MATTIX v. LEACH, 16 Ind. App. 112, 43 N. E. 969. See **Bank'
ruptcyr Dec, Dig. {Key No.) | 4^9; Cent. Dig. U 778, 782.
B8 Ex parte Hammond, L. R. 16 Eq. Cas. 614. See "Bankruptcy,**
Dec. Dig. (Key No.) § 429; Cent. Dig. {§ 778, 782.
•* Bankrupty Act 1883, \ 30.
»■ Jareckl Mfg. Co. v. McElwaine (C. C.) 107 Fed. 249; In re Kauf-
man (D. C.) 136 Fed. 262. See "Bankruptcy,** Dec. Dig. {Key No.) |
429; Cent. Dig. §S 778, 782.
B6 That a discharge granted to one partner, In his separate bank-
ruptcy, releases him from his Joint as well as individual debts: In
re Downing, Fed. Cas. No. 4,044; In re Stevens, Fed. Cas. No. 13,-
393; In re Abbe, Fed. Cas. No. 4; In re Leland, Fed. Cas. No. 8,-
228; Wilklns v. Davis, Fed. Cas. No. 17,664. That such a dis-
charge does not so release him: Hudgins v. Lane, Fed. Oas. No.
6;827 ; In re Winkens, Fed. Cas. No. 17,875. See "Bankruptcy** Dec.
Dig. {Key No.) § 429; Cent. Dig. f| 778, 782.
45S REMEDIES OF CREDITORS (Ch. 7
It has already been shown'^ that there is a conflict in the
cases as to whether or not action can be brought in equity
against the estate of a deceased partner while there are in
existence joint assets or there is a living solvent partner.
This conflict only applies, however, to the situation where
the estate of the deceased partner is solvent. If it is insol-
vent, the firm creditors will not be permitted to compete
with the separate creditors, even in jurisdictions like Eng-
land and Illinois, where under ordinary circumstances the
estate of the deceased partner may be proceeded against in
equity immediately."* If, however, it is shown that there is
no joint estate and no living solvent partner, the partnership
creditors will be allowed to participate with the separate
creditors of a deceased partner. "It is only where there are
two funds out of which a creditor may be paid that equity
intervenes in favor of another creditor, who is entitled to
payment out of one fund only, and requires the assets to be
marshaled." *•
»T Chapter IV, S§ 72, 73. pp. 227-233, on LlabUlty of Estate of De-
ceased Partner.
»«Gorry v. ChisweU, 9 Ves. 118; MoUne Water Power & Mfg.
Go. V. Webster, 26 lU. 234; Pahlman ▼. Graves, 26 lU. 405. See,
also, DOGGETT y. DILL, 108 111. 560, 48 Am. Rep. 565, Gilmore,
Gas. Partnership, 300; Greene v. Butterworth, 45 N. J. Eq. 738,
17 Atl. 949. See *'Partner8hipr Dec Dig. {Key No.) K «47, $58;
Cent. Dig. |S 524-^28, 566.
5ft Westbay v. Williams, 5 111. App. 521, 528. But see Wilder v.
Keeler, 3 Paige (N. Y.) 167 ; STEWART'S GASB, 4 Abb. Prac. (N.
Y.) 408. In Indiana partnership creditors are not allowed to share
with the separate creditors of a deceased solvent partner, even
though there are no firm assets or living solvent partner. Ameri-
can Bonding Go. v. State ex rel. Whisler, 40 Ind. App. 559, 82 N.
E. 548 ; Warren v. Farmer, 100 Ind. 593 : Weyer v. Thomburgh, 15
Ind. 124. See '^Partnership,** Dec. Dig. {Key No.) |S 247, 258; Cent.
Dig. §S 52Jh528, 566; ** Bankruptcy ;* Dec Dig. {Key No.) §§ U9, S09;
Cent. Dig. {§ 229, 555-564; "Insolvency;'. Dec Dig. (Key No.) U
56, 120; Cent. Dig. Ii 71, 189.
§ 153^ ACTIONS BETWEEN PARTNERS 459
CHAPTER Vin
ACTIONS BETWEEN PARTNERS
153. Action on Partnership Claim or liability — ^At Law.
lQ4t. In Equity.
155. Under the Code.
156. Actions between Firms with Common Member.
157. Action at Law on Individual Obligation.
158. Claims ;Not Connected with Partnership,
159. Claims for Agreed Final Balances.
160. Express Contracts between Partners.
161. Losses Caused by Partner's Wrong.
162. Bquitable Actions in General — Jurisdiction.
163. Necessity of Praying for a Dissolution.
164. Noninterference in Matters of Internal Regulation.
165. Effect of Laches.
166. Accounting and Dissolution.
167. Right to Accounting.
168. Accounting upon Dissolution.
169. Accounting without Dissolution.
170. Specific Performance.
171. Injunction.
172. Receivers.
ACTION ON PARTNERSHIP CLAIM OR LIABIL-
ITY—AT LAW
153. A partner cannot maintain an action at law against
his copartner upon either
(a) An obligation to the firm from the defendant, or
(b) An obligation from the firm to the plaintiff.
In the absence of statute, there is no method by which
an ordinary firm can sue or be sued as such ; for the firm,
as distinguished from the persons composing it, has no ju-
dicial existence. All proceedings, therefore, which have for
their object the enforcement of partnership rights or part-
nership obligations, must be taken by or against the part-
ners individually. It follows from this nonrecognition of
the firm as an entity distinct from its members that no ac-
460 ACTIONS BETWEEN PARTNERS (Ch. 8
tion at law can be maintained by a partner against his co-
partners upon a claim against the firm, and vice versa, that
no acticMi at law can be maintained against a partner by
his copartners upon a claim due the firm.^
The real reason why a partner cannot sue a copartner
upon a partnership claim or a partnership liability is that
until there has been an accounting, and all the partnership
affairs are settled, there is no cause of action in favor of
any partner against any of his copartners.' In Ives ▼•
1 Ames, Gas. Partn. p. 440 et seq. "When a partDerahlp Is sad-
sistlng, and there is no liquidation of the accounts, though there is
actually a balance of over £100 due to one partner, he [the cred-
itor] cannot, upon Buch a debt, support a commission ; but, had the
partnership been determined, and had the solvent partner paid all
debts, I should think he might sustain the commission/' Lord Bl-
don, in Bz parte NOKES, 2 Mont Bankf. p. 148, 1 Mont ft A. 47,
note a.
Persons participating in and financial subscribers to an effort to
push a bill through parliament looking to the establishment of a
railway enterprise are in so far partners that one of them who
actually did the surveying has not an action, against one or all of
them to receive his compensation. HOLMEis ▼. HIGGINS, 1 Bam.
& G. 74.
In an action on a contract between the parties whereby they had
agreed to carry on business in a certain specified way, in which
action the declaration set forth the agreement and alleged the de-
fendant excluded the plaintiff from the management and profits of
the business, and refused to make annual settlement and payments,
and, although continuing the business on the premises and with the
tools of the plaintiff, and making large profits, refused to recognize
that plaintiff had any rights under the agreement held, on demur-
rer, that the parties were partners, and the action therefore not
maintainable. RYDER v. WlLCax, 103 Mass. 24. See ^'Partner-
8hipr Dec. Dig. (Key No.) §| lOS-110; Cent. Dig. || 156-172.
i See Merrill v. Smith, 158 Ala. 186, 48 So. 495 ; Miner v. Lorman,
56 Mich. 212, 22 N. W. 265; Kalamazoo Trust Go. v. Merrill, 159
Mich. 649, 124 N. W. 597 ; CROSBY v. TIMOLAT, 50 Minn. 171, 52
N. W. 626, Gilmore, Gas. Partnership. 469; Christopherson ▼. Olson,
104 Minn. 830, 116 N. W. 840; Niven v. Spickerman, 12 Johns. (N.
Y.) 401 ; Halsted v. Schmelzel, 17 Johns. (N. Y.) 80 ; Casey ▼. Brush
2 Caines (N. Y.) 293 ; Simpson v. Miller, 61 Or. 232, 94 Pac 667. Of.
Johnson v. Kelley, 4 Thomp. & G. (N. Y.) 417 ; Pattison ▼. Blanch-
' ard, 6 Barb. (N. Y.) 537 ; Ferguson v. Wright 61 Pa. 258 ; Perley v.
Brown, 12 N. H. 493 ; Young v. Brick, 3 N. J. Law, 663 ; Harris ▼.
Harris, 39 N. H. 45 ; Scott v. Garuth, 50 Mo. 120 ; Chadsey v. Har-
§ 153) ACTION ON PARTNERSHIP OLAIM OR LIABILITT 461
Miller,? Hand, P. J., said : "Until the affairs of the concern
are wound up, what one partner may owe the firm is not
a debt due to a copartner; nor is the indebtedness of the
firm to one of the members a debt due from the other mem-
bers to him. The rights of the parties were very clearly
stated by Lord Cottenham, so late as in 1838, in Richard-
rison, 11 DL 151 ; BURNS v. NOTTINGHAM, 60 IlL 531, Gilmore,
Gas. Partnership, 459; White v. Ross, 85 Fla. 377» 17 South. 640;
liord y. Peaks, 41 Neb. 891, 60 N. W. 853 ; Remington v. Allen, 109
Mass. 47 ; NEWBY ▼. HABRELIi, 09 N. O. 149, 5 S. E. 284, 6 Am.
St Rep. 503 ; O'Brien, ▼. Smith, 42 Kan. 49, 21 Pac. 784.
As to the right of an Indorsee of a firm note to a partner to sue,
see CARPENTER v. GREENOP, 74 Mich. 664, 42 N. W. 276, 4 L. R.
A. 241, 16 Am. St Rep. 662, GUmore, Gas. Partnership, 467 ; Walker
V. Walt, 50 Vt 668. C?f. Davis v. MerriU, tSi Mich. 480, 16 N. W.
864 ; Wlntermute v. Torrent 88 Mich. 555, 47 N. W. 858.
While a partnership exists or remains unsettled, no action at law
can be maintained by one partner against another, except an action
of account or assumpsit on a promise to account Chase v. Garvin,
19 Me. 211; BURLEY v. HARRIS, 8 N. H. 233, 29 Am. Dec. 650,
GUmore, Cas. Partnership, 454. See Estes v. Whipple, 12 Vt 878;
Graham v. Holt 25 N. C. 800, 40 Am. Dec. 408 ; Stothert v. -Knox, 5
Mo. 112; Davenport v. Gear, 3 111. 495.
The relation of debtor and creditor between the surviving partner
and the representative of the deceased partner does not arise until
the affairs of the partnership are wound up and a balance Is struck.
Such balance Is to be struck after all partnership affairs are settled.
Gleason v. White, 84 Cal. 258; White's Adm'r v. Walde, Walk.
(Miss.) 263.
One partner cannot sue another, fbr his share, while their part-
nership accounts are unsettled. Dewlt v. Stanlford, 1 Root (Conn.)
270; Lamalere v. Gaze, 1 Wash. C. C. 435, Fed. Cas. No. 8,003;
Kennedy v. McFadon, 3 Har. & J. (Md.) 194, 5 Am. Dec. 434; Ozeas
V. Johnson, 1 Bin. (Pa.) 191; Young v. Brick, 3 N. J. Law, 663;
Murray v. Bogert 14 Johns. (N. Y.) 318, 7 Am. I>ec. 466; Springer
V. Cabell, 10 Mo. 640; McKnlght v. McCJutchen. 27 Mo. 436; Robin-
son V. Green's Adm'r, 5 Har. (Del.) 115; Smith v. Smith, 33 Mo.
557 ; Ives v. Miller, 19 Barb. (N. Y.) 196 ; Lower v. Denton, 9 Wis.
268. Where a debt against a firm has been collected of one of the
partners, he cannot sue the other partner at law for contribution,
though the debt was paid out of his separate property. Lawrence
V. Clark, 9 Dana (Ky.) 257, 35 Am. Dec. 133. Partners cannot sue
each other at law for any matter relating to the partnership con-
»19 Barb. (N. Y.) 196, 200. See ''Partner ship r Dec. Dig. (Key
No) H 109-110; Cent, Dig, §| 166-172,
462 ACTIONS BETWEEN PARTNERS (Oh. 8
son V. Bank of England.* That was a motion to compel a
partner to pay into court a large sum, which it was insisted
he had admitted he had drawn out, with the consent of the
partners, before dissolution. The Lord Chancellor re-
marked upon the ordinary use of the words 'creditor* and
'debtor,' as applied to partners who advance to or draw
money from the firm by consent, and added: 'But though
these terms "creditor" and "debtor" are so used, and suf-
ficiently explain what is meant by the use of them, nothing
can be more inconsistent with the 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 payment of his debt; and the supposed debtor
is liable to no proceedings, either at law or in equity; as-
suming always that no separate security has been taken or
cerns unless there has been a final settlement between them, the
balance ascertained, and an express promise to pay the balance.
Without a general adjustment of the partnership concerns, embrac-
ing all the partnership transactions, and concurred in by all the
partners, there is no consideration to uphold an express promise of
one partner to pay his copartner a balance alleged to be due. Chad-
sey V. Harrison, 11 111. 151. See, also, Phillips v. Blatchford, 137
Mass. 510; Fisher v. Sweet, 67 C?al. 228, 7 Pac. 657; Bowzer v.
Stoughton, 119 111. 47, 9 N. E. 208 ; Bullard v. Kinney, 10 Cal. 60 ;
Learned v. Ayres, 41 Mich. 677, 3 N. W. 178.
Where a trustee, under a deed of trust executed by one partner
on partnership property as security for an individual debt, has re-
covered the property in replevin against the partner executing the
deed, who was In possession of the property, the other partner must
resort to equity in order to recover it from the trustee, as one part
owner cannot maintain an action at law against his co-owner for
the Joint property. Hoff v. Rogers, 67 Miss. 208» 7 South. 358, 19
Am. St Rep. 301.
A partner cannot maintain an action for partition against his co-
partner as to real estate owned by the firm, where there has been
no adjustment of the copartnership accounta KRUSCHKE v. STE-
FAN, 83 Wis. 373, 53 N. W. 679 ; Meinhart v. Draper, 133 Mo. App.
50, 112 S. W. 709; MacFarlane v. MacFarlane, 82 Hun, 238, 31 N.
T. Supp. 272. CJontra: MOLINEAUX v. RAYNOLDS, 54 N. J. Eq.
559, 35 AtL 536, Gilmore, Gas. Partnership, 215. See, also, post, p.
491, "Actions In Equity." See "Partnership,*' Dec Dig. {Key No.) §|
lOS-110; Cent. Dig. |§ 15&-172.
« 4 Mylne & a 165. See ** Partnership,** Dec. Dig. (Key 2fo.) §§ 109-
110; Cent. Dig. §{ 156-112,
§ 153) ACTION OJSf PARTNERSHIP CLAIM OB LIABIUTT 463
given. The supposed creditor's debt is due from the firm
of which he is a partner, and the supposed debtor owqs the
money to himself, in common with his partners ; and, pend-
ing the partnership, equity will not interfere to set right
the balance between the partners/ And again: '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 settlement of accounts, and be-
fore the payment of the joint debt, or the realization of the
partnership estate? Nothing is more settled than that, un-
der such circumstances, what may have been advanced by
one partner, or received by another, can only constitute
items in the account. There may be losses, the particular
partner's share of which may be more than sufficient to ex-
haust what he has advanced, or profits more than equal to
what the other has received ; and until the amount of such
profit and loss be ascertained, by the winding up of the
partnership affairs, neither party has any remedy against or
liability to the other for payment, from one to the other,
of what may have been advanced or received.' "
There is another reason which is sufficient in many cases
to explain the rule that a partner cannot maintain an action
at law against his copartner on a partnership claim or lia-
bility. This reason is that, wherever the partnership claim
or liability on which the action is sought to be maintained
is a joint one,' all the partners must be joined as plaintiffs
or defendants, as the case may be.* Omission to join any
partner may be pleaded in abatement of the action. It fol-
lows, therefore, that a partner suing on such a partnership
claim or liability would have to be joined both as plaintiff
and as a defendant. Now, at common law a party cannot
at once be a plaintiff and a defendant in the same suit ; or,
in other words, he cannot sue himself either alqpe or in
conjunction with others.^
» See chapter IV, | 70, p. 220, and chapter IX, H 174-176* pp^
530, 531.
• See chapter IX, S| 179-180, p. 642.
f Story. Partn. 221 ; Bates, Partn. J 849 ; T. Pars. Partn. {{ 184,
185. "One member of a partnership cannot sue the firm at law for
ftdyances made by him to the Joint concern, nor can the firm sue an
individual partner for anything that he may have drawn out of the
464 ACTIONS BBTWBBN PARTNEBS (Ob. 8
Illttstrations — Action on Obligations to Firm
Under the first branch of the rule, a partner cannot main-
tain an action against his copartner where the liability of
the latter is in reality ,an obligation to the firm. Thus, one
partner cannot maintain an action to recover the price of
goods sold to another partner by the firm. This was held
in an action of assumpsit by one of three partners in a
steamboat against another, to recover one-third of the
amount which the latter owed the firm for liquors bought
by him at the bar of the boat. The partnership business
had ceased, but its affairs had not been settled.* So, also,
one partner is not Jiable to his copartner for money had
and received to the use of the firm,* nor for money lent by
the firm.^*
joint stock or proceeds, no matter how much more than his Bhare it
might have been; and the reason is that one man cannot occupy
the double position of plaintiff and defendant at the same time. The
aid of this court is Just as necessary to settle the account of these
advances as it is to settle the accounts arising out of the immediate
transactions of the special business of the partnership." BRACKEN
Y. KENNEDY, 3 Scam. (lU.) 558, 564, Gilmore, Cas. Partnership,
470; BURLEY v. HARRIS, 8 N. H. 233, 29 Am. Dec. 650, Gilmore,
Cas. Partnership, 454. See ** Partnership," Dec, Dig. (Key No.) . §S
lOS-110, 115; Cent. Dig. §§ 156-172, 178.
8 Page V. Thompson, 33 Ind. 137. See, also, Ivy ▼. Walker, 58
Miss. 253; Bank of British North America v. Delafleld, 126 N. Y.
410, 27 N. E. 797 ; BURLEY v. HARRIS, 8 N. H. 233, 29 Am. Dec.
650, Gilmore, Cas. Partnership, 454. But see Bennett v. Smith, 40
Mich. 211. See "Partnership,*' Dec. Dig. {Key No.) §{ lOS-110; Cent.
Dig. II UO, 156-172.
» Kutz y. Dreibelbis, 126 Pa. 335, 17 Atl. 609 ; Gardiner v. Fargo,
58 Mich. 72, 24 N. W. 655 ; Howard v. Patrick, 38 Mich. 795 ; Smith
V. Smith, 33 Mo. 557; Towle v. Meserve, 38 N. H. 9; Young v.
Brick, 3 N. J. Law, 663 ; Dana v. Gm, 5 J. J. Marsh. (Ky.) 242, 20
Am. Dec. 255; Bumey v. Boone, 32 Ala. 486; BOVILL ▼. HAM-
MOND, 6 earn. & C. 149; Fromont v. Coupland, 2 Bing. 170; Russell
V. Ford, 2 Gal. 86. See '* Partnership;* Dec. Dig. (Key No.) H lOS-
110; Cent. Dig. || 156-172.
^10 Gammon v. Huse, 9 111. App. 557 ; Pitcher v. Barrows^ 17 Pick.
(Mass.) 361, 28 Am. Dec. 306; Fulton v. Williams, 11 Cush. (Mass.)
108 ; Temple v. Seaver, 11 Cush. (Mass.) 314 ; Thayer ▼. Buffum, 11
Mete. (Mass.) 398; Smith v. Lusher, 5 Cow. (N. Y.) 688; Crow v.
Green, 111 Pa. 637, 5 Atl. 23 ; McFadden v. Hunt, 5 Watts & S. (Pa.)
468 ; Davis v. Merrill, 51 Mich. 480, 16 N. W. 864 ; Hill v. McPher-
§ 1S3) AOnON OK PARTNERSHIP OLAIM OR LIABIUTT 465
Same — Actions on Obligations to Partners
Under the second branch of the rule stated in the black-
letter text, a partner whose claim is really against the firm
cannot recover any part thereof in an action against one or
more of his copartners. This has been held many times in
actions for work and .labor performed by one partner for
the firm,** for money loaned the firm,** for goods sold to
the firm,** for money paid- for the firm,** for rent of prem-
ises occupied by the firm,** and other similar cases.
fion, 15 Mo. 204, 65 Am. I>eo. 142; Nevins v. Townsend, 6 Ck>mi. 5;
Simrall v. (yBannons, 7 B. Hon. (Ky.) 608; Smyth v. Strader» 4
How. 404, llli. Ed. 1081. See ''PartneraMpr Deo. Dig. (Key No.) U
lOS-llO; Cent. Dig. H 156-172.
11 HOLMES y. HIGGINS, 1 Bam. & C 74; Mllbam y. Godd, 7
Bam. & C. 419; Lucas y. Beach, 1 Man. & O. 417, 425; Robinson y.
Green's Adm'r, 5 Har. (Del.) 115; Duff y. Maguire, 90 Mass. 300;
Yonngloye y. Llebhardt, 13 Neb. 567, 14 N. W. 526; Stone v. Mat
tingly (Ky.) 19 S. W. 402; mils y. BaUey, 27 Vt 54a See "Part-
nership,'* Deo. Dig. (Keg No.) { 106; Cent. Dig. § 169.
i^CoUey y. Smith, 2 Moody & R. 96; Perring y. Hone, 4 Bing.
28; Richardson y. Bank of England, 4 Mylne & O. 165; Gridley y.
Dole, 4 N. Y. 486; Payne y. Freer, 91 N. Y. 43, 48 Am. Rep. 640;
BRACKEN y. KENNEIDY, 3 Scam. (111.) 558, Gilmore, Cslb. Partner-
ship, 470; Sieghortner y. Weissenbom, 20 N. J. Eq. 172; O'Neill y.
Brown, 61 Tex. 34; Wilson y. Soper, 13 B. Mon. (Ky.) 411, 56 Am.
Dec. 573; Mlckle y. Peet, 43 Conn. 65. See *' Partnership," Dec. Dig.
{Key No.) §§ lOS-110; Cent. Dig. %% 156-172.
i»Conrse y. Prince. 1 Mill, Const (S. C.) 416, 12 Am. Dec. 649;
Remington y. Allen, 109 Mass. 47; Bullard y. Kinney, 10 Cal. 60.
Bee ''Partnership," Dec. Dig. {Key No.) | 104; Cent. Dig. { 164.
1* Goddard y. Hodges, 1 Cromp. & M. 33 ; BROWN y. TAPSCOTT,
6 Mees. & W. 119; SADLER y. NIXON, 5 Bam. & Adol. 936, GU-
more, Cas. Partnership, 451; Leidy y. Messinger, 71 Pa. 177; Fess-
ler y. Hickernell, 82 Pa. 150; Harris y. Harris, 39 N. H. 45; Torey
y. Twombly, 57 How. Prac. (N. Y.) 149; lyes y. MUler. 19 Barb. (N.
Y.) 196; Phillips y. Blatchford, 137 Mass. 510; Lyons y. Alurray,
95 Mo. 23, 8 S. W. 170, 6 Am. St Rep. 17; Glynn y. Phetteplace, 26
Mich. 383; Murray y. Bogert, 14 Johns, (N. Y.) 318, 7 Am. Dec, 466;
Booth y. E^rmers' & Mechanics' Nat Bank of Rochester, 74 N. Y.
228; rhrew y. Ferson, 22 Wis. 651. See ''Partnership^' Dec. Dig.
{Key No.) |i 109-110; Cent, Dig. §§ 156-112.
18 Johnson y. Wilson, 54 111. 419; Plo Pico y. Guy as, 47 CJal. 174;
Estes y. Whipple, 12 Vt 373. Cf. Allen y. Anderson, 13 111. App.
451 ; Kinney y. Robison, 52 Mich. 389, 18 N. W. 120. See "Partner-
ship," Dec. Dig. {Key No.) %% lOS-110; Cent. Dig. %% 1^6-112.
GIL.PART. — 30
466 ACTIONS BETWEEN PARTNERS (Gh. 8
Same—Set-Off
Of course, a claim which cannot be directly enforced by
one partner against his copartners, because falling under
one or the other branches of the rule here under considera-
tion, cannot be indirectly enforced as a set-oflF.**
SAME— IN EQUITY
154. An obligation between a firm and one of its members
can be enforced only by proceeding in equity for
an accounting, except
EXCEPTION — ^Actions at law have been sustained
in some states in the following cases :
(a) Where the partnership has terminated, and the ac-
tion is for a final, though unascertained, balance
(p. 468).
(b) Where the partnership was for a single finished
transaction (p. 470).
(c) Where the partnership affairs have been adjusted,
except as to a single transaction (p. 471).
Since no cause of action exists between partners previous
to an accounting upon a partnership claim or liability, if
the partners do not voluntarily settle their accounts, the
only method of enforcing an obligation between a firm and
one of its members is an action for an accounting and set-
tlement of the partnership affairs.*^ "Now, the settlement
of all the partnership concerns is ordinarily, during the
i« Johnson v. WUson, 54 111. 419; Hess ▼. Final, 82 Mich. 515;
Gardiner -y. Fargo» 58 Mich. 72, 24 N. W. 655; Elder's Appeal, 39
Mich. 474; Hewitt v. Kuhl, 25 N. J. Eq. 24; Gummings v. Morris,
25 N. Y. 625; Ives v. MUler, 19 Barb. (N. Y.) 196; Dodd ▼. Tarr,
116 Mass. 287; Nell y. Greenleaf, 26 Ohio St 567; Underman v.
Dlsbrow, 31 Wis. 465; Tomllnson v. Nelson, 49 Wis. 679, 6 N. W.
366; Wharton v. Douglass, 76 Fa. 273; Love v. Rhyne, 86 N. G.
576; Wood v. Brush, 72 Gal. 224, 13 Pac. 627; Young v. Hoglan, 52
Gal. 466. Bee **Partner8liip,** Dec. Dig. (JKey yo.) | 112; Cent Dig.
I 175; **8et-0tr and Counterclaim," Deo. Dig. (Key yo.) S U! Cent.
Dig. §§ 91-99.
IT Unless a settlement has been made, and a balance struck, be-
tween partners, the remedy, where there are two, is an action of
§ 154) ACTION ON PARTNERSHIP CTLAIM OR LIABILITT 467
continuance of the partnership, unattainable at law; and
even in equity it is not ordinarily enforced, except upon a
dissolution of the partnership. If one partner could re-
cover against his copartners the whole amount paid by him
on account of the partnership, 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, the full ac-
count of all the partnership concerns must be taken, and
the partnership itself wound up." *• "It is a general rule,"
said Abbott, C. J., in Bovill v. Hammond,** "that between
partners, whether they are so in general or for a particular
transaction only^ no account can be taken at law." *• And
in another case it was said : "The remedy in such cases is
in equity, where the power to investigate accounts, to com-
pel specific performance, and to restrain breaches of duty
for the future, affords the only relief which can be had." **
The principles gov,erning a partnership accounting in equity
will be presently separately discussed.**
account; where more than two, a bill in equity. Beach y. Hotch-
kiss, 2 Conn. 426. See Duncan ▼. Lyon, 3 Johns. Gh. (N. Y.) 351, 8
Am. Dec. 613; Wilhelm v. Caylor, 82 Md. 161, Jacobs t. Fountain,
19 Wend. (N. T.) 121, and Appleby v. Brown, 24 N. Y. 143, for in-
stances and comments upon the common-law action of account See
"^Partnership,'' Deo. Dig. (Key No.) || lOS-liO, S18; Cent. Dig. i{
156-172, 7S5-7S8.
i» Story, Partn. S 221.
i» BOVILiL V. HAMMOND, 6 Bam. & O. 149, 151. See "^Partner-
aMp,*' Deo. Dig, {Key No.) U SISSIS; Cent Dig. K 729-7S8.
so No action at law will lie for the settlement of a partnership
account where the number of the partners exceeds two, the only
remedy in such case being by bill in chancery. Beach ▼. Hotchklss,
2 Conn. 425. When a firm- consists of only two members, assumpsit
lies by one against the other to settle and adjust the partnership
affairs. €k>nn. Revision 1875, tit 19, c. 7, { 6. The rights of part-
ners inter se can be settled and determined at law as well as in
equity. Wallace v. Hull, 28 Ga. 68. See ^^Partnership*' Dec, Dig,
{Key No,) |§ S13-S18; Cent. Dig. S| 729-7S8.
SI RYDER y. WILCOX, 103 Mass. 24, 31. Equity has plenary Ju-
risdiction over partnership accountings. BRACKEN v. KENNEDY,
3 Scam. (lU.) 658, Gilmore, Cas. Partnership, 470. See "Partner-
ship;' Deo. Dig. {Key No.) | S18; Cent. Dig. H 795-7S8.
ss See post P. 497.
468 ACTIONS BETWEEN PARTNERS (Gh. 8
Exception — Action for Balance
It has been held in some states that a balance due on a
partnership account may be recovered in an action at law,
provided the partnership has terminated, and the judgment
will finally settle all questions between the parties growing
out of the partnership affairs.** This doctrine was firmly
established in Massachusetts at a time when there were no
courts of equity in that state.** It is well stated by Bige-
low, J., as follows : "By the well-settled rule of law in this
commonwealth, an action may be well maintained by one
copartner against another to recover a final balance remain-
ing due upon the close of business of a firm after its dis-
solution. Nor is it necessary that this slK>uld be a fixed
ascertained balance as the result of a settlement of the ac-
counts of the firm between the partners. It is enough if it
appear that the firm is dissolved, and that there are no out-
standing debts due to or from the copartnership, so that the
action of assumpsit to recover the balance due one of the
firm will effect a final settlement between the copart-
ners." ** In a much later case, Ames, J., said : "In the case
of copartners, neither a settlement of the accounts, nor an
express promise to pay, need be proved, where the suit is
««Fry V. Potter, 12 R. I. 542; PettingUl v. Jones, 28 Kan. 749;
Wheeler y. Arnold, 30 Mich. 304 ; Pool v. Perdue, 44 Oa. 464 ; Downs
y. Short, 6 PennewUl (Del.) 2G4, 66 Atl. 365. A partner cannot ob-
tain judgment against his copartners for a debt due him by the
partnership, when it is shown that the partnership accounts are
unsettled, and that the judgment asked for will not haye the ^ect
of a final Uquldation of the partnership affairs. Austin y. Vaughan,
14 La. Ann. 43. See '* Partnership,'* Dec Dig. {Key No,) U lOS-llO,
SIS; Cent, Dig, §{ 156-172, 7S5-7S8,
s« See Bond y. Hays, 12 Mass. 34 ; Fanning y. Ohadwlck, 8 Pick.
420. 15 Am. Dec. 233; Brlnley y. Kupfer, 6 Pick. 179; Williams y.
Henshaw, 11 Pick. 79, 22 Am. I>ec. 366; Rockwell y. Wilder, 4 Mete.
556; Shepard y. Richards, 2 Gray, 424, 61 Am. Dec. 478; Sikes y.
Work, 6 Gray, 433; Shattuck y. Lawson, 10 Gray, 406; Wheeler y.
Wheeler. Ill Mass. 247, 250 ; Wllkins v. Davis. 15 N. B. B. 00, Fed.
Cas. No. 17,664. See ^^Partnership," Dec, Dig, (Key No.) U lOS-llO,
318; Cent, Dig, §§ 156-172, 755-758.
25 Sikes y. Work, 6 Gray (Mass.) 433, 434. See "Partnership,**
Dec Dig. {Key No.) H lOS-110, S18; Cent, Dig. §| 156-178, 755-75&
§ 164) ACTTION OV PABTNBBSHIP CLAIM OR LIABILTTr 469
assuinpsit for a final balance." '* It has been held that the
remedy in equity given by statute does not affect the appli-
cation of the rule to cases where the remedy by action at
law is plain and adequate.'^ Where there are debts due the
partnership outstanding, the action is not for a final bal-
ance, apd cannot be maintained.^" But the plaintiff may
show that the outstanding debts of the partnership are in-
capable of collection, and thus that the judgment rendered
will be a final settlement between the partners ; and in such
^case, especially if an assignment of all the outstanding debts
is seasonably given or tendered to the other party, the ac-
tion will lie.** A partner cannot, however, by himself as-
suming all the outstanding debts due the firm, without any
agreement or notice to his copartner, maintain assumpsit
against him for any balance which may be due.**
In Georgia it has been held that one partner may sue an-
other at law, and recover if he is able to show that the af-
fairs of the concern are so settled that the jury can ascer-
tain what is justly due him, and settle the rights in dis-
s« Wbeeler ▼. Wheeler, 111 Mass. 247, 250. "It has been held too
often now to be questioned that assumpsit will He to recover a final
balance of a partnership account, and that this extends to all cases
in which the rendltloh of the judgment will be an entire termination
of the partnership transactions, so that no further cause of action
can grow out of them. Brlgham v. Eyeleth, 9 Mass. 588; Jones
Y. Harraden, 9 Mass. 540, note; Bond y. Hays, 12 Mass. 34; Wilby
Y. Phinney, 15 Mass. 116 ; Fanning v. Ghadwlck, 3 Pick. (Mass.) 420,
15 Am. Dec 288; Brinley v. Kupfer, 6 Pick. (Mass.) 179. This rule
is not only founded on authority, but is reasonable in principle, and
convenient in practice.'* Williams v. Henshaw, 11 Pick. (Mass.) 79,
81, 22 Am. Dec. 366. See ** Partnership," Deo. Dig. {Keu ^o.) if lOS-
no, SIS; Cent, Dig, %% 156-112, 7S5-7S8.
17 Fanning v. Ghadwlck, 3 Pick. (Mass.) 420, 15 Am. Dec. 233;
Shepard v. Richards, 2 Gray (Mass.) 424, 61 Am. Dec. 473. See
**Partner8hipr Dec. Dig. (Key No.) |§ 109-118, SH, S18; Cent.
Dig, H 166-172, 750, 7S5-7S8.
IS Williams V. Henshaw, 11 Pick. (Mslbs.) 79, 82, 22 Am. Dec. 366.
See ^^Partnership,** Dec. Dig. (Key No.) {§ lOS-110, S18; Cent. Dig.
§§ 156-172, 7S5-7S8.
"Id.
so Williams v. Henshaw, 12 Pick. (Mass.) 378, 28 Am. Dec. 614.
See ^^Partnership,*' Dec. Dig. {Key No.) | 108; Cent. Dig. i 157.
470 ACTIONS BETWEEN PARTNERS (Ch. 8
pute.** So, in a Michigan case, where there were no fissets
remaining after payment of the debts, it was held that the
liability of one partner for money advanced by the other
beyond his share of the debts after dissolution was a sim-
ple money demand, which could be settled in an action at
law.'^ The court said: "There was no occasion for an ac-
counting in equity, unless there had been such dealing with
assets, as well as such private relations with the firm, as to
make a settlement otherwise difficult ; and there being only
two partners concerned, and discovery being now obtain-
able as well at law as in equity, there would seem to be no
very good reason why the remedy at law would not be en-
tirely adequate. But, whether this would be difficult or not,
it would be admissible to resort to it."
Same — Partnership in Single Transactions
In Pettingill v. Jones,^* Brewer, J., said: "Where there
is but a single partnership transaction, one joint venture,
which is fully closed, we think one partner may maintain
an action against the other for his share of the profits of
that single transaction, and that in such a case there is no
necessity of a formal accounting between parties/' •* In
Rhode Island an action to recover one-third of the losses
of a land 'speculation was decided the same way.*' The
court said : "There was no general copartnership, but only
«i Pool V. Perdue, 44 Ga. 454. See ** Partnership,*' Deo. Dig. (Kep
2fo,) il lOS-llO, S18; Cent. Dig. K 156-172, 755-758.
«2 Wheeler v. Arnold, 80 Mich. 304, 300. See '^Partnerahip,** Dee.
Dig. {Key No.) § 109; Cent. Dig. § 171.
SS28 Kan. 749. See, also, CLARKE t. MILLS, 86 Kan. 393, 13
Pac. 569, Gilmore, Gas. Partnership, 458. See *' Partnership,** Dec.
Dig. {Key No.) § 108; Cent. Dig. § 157.
s« Citing Sikes y. Work, 6 Gray (Mass.) 433 ; Wheeler y. Arnold,
30 Mich. 804. See "Partnership:* Dec. Dig. (Key No.) if lOS-110,
S18; Cent. Dig. |§ 156-172, 7S5-7S8.
SB Fry y. Potter, 12 R. I. 542, citing Robson y. Curtis, 1 Starkie,
N. P. 78 ; Buckner y. Ries, 34 Mo. 357 ; Wright y. Cumpsty, 41 Pa.
102. See, also. Kutz y. Dreibelbls, 126 Pa. 335, 17 AtL 609; Dorwart
y. BaU, 71 Neb. 173, 98 N. W. 652 ; LEDFORD v. EMERSON, 140
N. C. 288, 52 S. E. 641, 4 L. R. A. (N. S.) 130, GUmore, Cas. Partner-
ship, 456. But of. Dowllng y. Clarke, 13 R. I. 134. See '^Partner-
ship,*' Dec Dig. {Key No.) || lOS-llO, S18; Cent. Dig. §§ 15&-172,
7S5-7S8.
§ 155) ACTION ON PARTNERSHIP CLAIM OB LIABILITY 471
an agreement to share the gains and losses of a particular
adventure, the entire capital for which was furnished by the
plaintiff's testator. There were no joint debts or liabilities,
and no mutual claims subsisting to be adjusted.. The trans-
action was closed, and the losses ascertained. Nothing re-
mained for the defendant to do but pay his share of them.
The case is not intrinsically distinguishable from an ordi-
nary case in assumpsit, and, even without precedent, we
should have little difficulty in maintaining the action."
Bates says : ■• "This exception is not clearly established,
for some of the cases are not true partnership, but are mere
joint ventures. The courts at one time apparently were in
the habit of calling any contract relation a partnership in
which an accounting could be demanded."
Same — Single Unadjusted Item
Where a partnership has been dissolved, and the part-
ners have accounted with each other as to everything ex-
cept as to one item, one may maintain an action at law
against the other for his share of the item.*^
SAME— UNDER THE CODE
155. The' codes of procedure abolishing the distinctions be-
tween actions at law and suits in equity do not au-
thorize the maintenance of an action by one part-
ner against his copartner for money due on an un-
settled partnership account.
Under the reformed codes of procedure, there is but one
form of action, called a "civil action," and this action em-
braces all that was formerly comprehended both by actions
sePartn. § 865.
«T Whetstone v. Shaw, 70 Mo. 575; Purvines ▼. Champion, 67 IlL
459; Farwell v. Tyler, 5 Iowa, 535; Brown v. Agnew, 6 Watts &
S. (Pa.) 235. One partner may sue another for his interest in a note
when it does not appear from the pleadings that there were' any
partnership transactions to be settled, except the division of such
note. Moran y. Le Blanc, 6 La. Ann. 113. See **Partner8hip^*' Dec.
Dig. (Key ^o.) § 108; Cent. Dig. § 160.
^72 ACTIONS BBTWBSN PARTNERS (Gh. 8
at law and suits in equity. In equity, a partner could sue
his copartner, and obtain an adjustment of the partnership
affairs, and thus recover his whole interest therein. He can
do the same thing under the code, but the action does not
thereby become an action at law ; nor can the suit be main-
tained unless the irase made by. the pleadings and proof is
such as would formerly have called for the interposition of
a court of equity. It is, as formerly, an appeal to the power
of a court of chancery; and the case will fail if it be not
such as gives a right to invoke that power. It is a mistake
to suppose that, under the code, a suit may be maintained
which must formerly have failed both at law and in
equity.**
ss Page y. Thompson, 33 Ind. 137. Under the statutes of Minne-
sota, one partner cannot demand merely a judgment for money
against a copartner any more than he could have maintained an ac^
tlon at law. Russell v. Minnesota Outfit 1 Minn. 162 (611. 136). See.
also, CROSBY v. TIMOLAT, 50 Minn. 171, 52 N. W. 526, GUmore.
Cas. Partnership, 469. "By the Code, the distinction between ac-
tions at law and suits in equity Is abolished. The course of pro-
ceeding In both classes of cases is now the sam'e. Whether the ac-
tion depend upon legal principles or equitable, It Is still a cIyU ac-
tion, to be commenced and prosecuted without reference to this dis-
tinction. But, while this is so in reference to the form and course
of proceeding in the action, the principles by which the rights of
the parties are to be determined remain unchanged. The Code has
given uo new cause of action. In some cases parties are allowed
to maintain an action who could not have maintained It before;
but in no case can such an action be nialntained where no action
at all could have been maintained before upon the same state of
facts. If, under the former system, a given state of facts would
have entitled a party to a decree In equity In his favor, the same
state of facts now, in an action prosecuted In the manner prescribed
by the Code, will entitle him to a judgment to the same effect If
the facts are such as that, at the common law, the party would
have been entitled to judgment, he will, by proceeding as the Code
requires, obtain the same judgment The question, therefore, is
whether, in the case now under consideration, the facts, be they are
assumed to be, would, before the adoption of the Code, have sus-
tained an action at law or a suit in equity." COLE) v. RBXNOIJ)S,
18 N. Y. 74. 76. Cf. post, p. 473. See ^^Partnership,** Dec Dig, {Key
No.) ff lOS-llO, 318; Cent, Dig, H 166-172, 785-738.
§ 156) AOnONS BETWEEN FIBM8 WITH OOMMON MEMBER 473
ACTIONS BETWEEN FIRMS WITH COMMON
MEMBER
166. No action at law can be maintained on an obligation
between two firms having a common member, but
a remedy may be had in equity.
This rule follows as a corollary to the rule that a partner
cannot maintain an action against his copartner upon a
partnership claim or liability. The objections to the main-
tenance of such an action are equally fatal to an action be-
tween two firms having a common member. Owing to the
nonrecognition of the firm as an entity, such an action, of
course, would be one between a partner and his firm on a
partnership account, and the fact that there are other co-
partners does not alter the case in the least. There is the
same necessity for taking the partnership accounts, and the
same necessity for joining the common partner, both as a
plaintiff and as a defendant. The cases are unaminous in
holding that, under these circumstances, the action cannot
be maintained at law, and they are equally unanimous in
holding that a remedy exists in equity. But here the un-
animity ceases, and upon the question of how equity will
proceed to enforce the rights of the parties the few cas^s
that exist show much confusion and conflict.
The confusion seems to have been caused by the failure
to distinguish between the question of what rights equity
will enforce, and the entirely distinct question of how those
rights will be enforced.** The difficulty has been assumed
to be merely a technical one, growing out of the common-
law rule that all the members of a firm must unite in bring-
ing an action, and the consequent necessity of making the
**Thi8 distinction was recognized in a recent case, where the ac-
tion was under the Code. The court said : "At present the question
is not how the matter is to be adjusted, or what recovery shall be
allowed, but only as to whether the action can be maintained at all."
CROSBY V. TIMOLAT, 50 Minn. 171, 52 N. W. 526. GUmore, Cas.
Partnership, 468. See **Pannerahip,** Deo, Dig. (Key ^o.) §§ 19S.
201; Cent. Dig, §§ S56, S72.
474 ACTIONS BETWEEN PARTNERS (Ch. 8
common partner both a plaintiff and a defendant. But the
difficulty lies deeper. It is admirably stated by Mr. James
Parsons as follows : *• "The difficulty, however, does not
arise from procedure, and is not obviated by a resort to a
remedy in equity.*^ The obstacle is equally formidable in
equity. The common member of two firms must be put
by the decree in one firm or the other. If he is held a
plaintiff, he may be the debtor in the defendant firm, and a
decree might enable him to compel his copartners, who are
already his creditors in the defendant firm, to pay an addi-
tional debt for him. He might collect the debt out pf their
separate estate, or he might turn around and pay it him-
self, by setting off his debt, release his copartners defend-
ants, compound the debt, or delay its collection, at his dis-
cretion; and the only redress of his plaintiff copartners
would be an account. If he is made a defendant, he is ex-
cluded from the plaintiff firm by his copartners, although he
is entitled to a share of its property, and to a join\ control
in the business. He is compelled to pay his copartners in
the plaintiff firm, not their quota of the claim, but the whole
amount, which is more than they could receive if it was
his individual debt. They might collect all from him. They
might seize and sell his separate estate to pay the debt
He might be a creditor of his copartners, and yet they
would collect more out of him, instead of setting off what
they owed him in payment of the claim.**
Mr. Parsons comes to what seems the only logical con-
clusion, viz., that the equities of each individual partner
must be* worked out, although this involves a dissolution
40 Partn. § 162.
41 Nor do codes abolishing the distinctions between actions at law
and suits In equity obviate the difficulty. They do not profess to
create new causes of action. But see post, p. 566, and note 6.
Mr. Pollock, speaking of the English statute authorizing suits against
partnerships in the firm name, says that such statute does not in-
troduce anything that amounts to the recognition of the firm as an
artificial person, distinct from its members, and that actions be-
tween a firm and one of Its own members, or between two firms
having a common member, remain inadmissible In England. Partn.
art 67, pp. 121, 122.
§ 156) ACTIONS BETWEEN FIRMS WITH OOHMON MEMBER 475
of both firms>' In this conclusion he is supported by a
writer in the American Law Review,*' and by the case of
Rogers v. Rogers ; ** and this view is the only one con-
sistent with the rule as to actions between partners all of
the same firm, where, as has been seen, the only action,
cither at law, in equity, or under the code, that a partner
can maintain against his copartner upon a partnership ob-
ligation, is an action for an accounting and settlement of
the affairs of the firm. In the case of Rogers v. Rogers, tlie
court says: "If, however, John C. Rogers [the common
partner] should refuse to become paymaster to John C.
Rogers & Co. [the creditor firm], or be already so far a
debtor to that firm that the other members, Hugh Rogers
and Lowe, are unwilling to take him alone for the debt of
Rogers & Otey, then their course is to stop their business ;
and, upon the settlement of it, this debt of Rogers & Otey
will, as a part of the assets, be allotted to one of the part-
*« Partn. { 163. In CROSBY v. TIMOLAT, 60 Minn. 171, 174, 62
N. W. 526, Gilmore, Gas. Partnership, 460, the court said : "Ngr, at
law, would the contract or agreement between the two firms hav-
ing a common member be recognized as creating a legal obUgation
or cause of action. The transaction would be treated as an at-
tempt by a party to enter Into contract with himself. The reme-
dial system of the common law was too iQflexible and restricted to
enable it to adjust the complex rights and obligations of the parties
under such circumstances. But, in equity, the agreements of the
members of firms so related to each other were treated as obligato-
ry; and the fact that one of the parties to the joint contract stood
in the position of both an obligor and obligee did not stand in the
way of affording such relief or remedy as might be found to be ap-
propriate and necessary to the ends of Justice." See, in addition
to cases cited in this case. Hall ▼. Kimball, 77 111. 161 ; Beacannon
▼. liebe, 11 Or. 443, 5 Pac. 273; Aylett v. Walker, 92 Va. 540, 24
S. EX 226. Where one, who is a member of two firms, makes a note
in the name of one of the firms, payable to a member of the other
firm, the payee may sue and recover upon it in his own name.
Moore v. Gano, 12 Ohio, 300. After the death of a person who was
partner in two firms, the surriTors of one may maintain an action
against the survivors of the other partnership. Lacy v. Le Bruce,
6 Ala. 004. See "Partnership;* Deo. Dig. {Key No.) §f 19S, 201;
Cent. Dig. H S56, S12.
*» Volume 5, p. 47.
44 40 IJ. 0. 31. Bee ^'Partnership,'' Dec. Dig. (Key 2fo.) % 19S;
Cent. Dig. § S56.
476 ACTIONS BBTWBBN PARTNERS (Gb. 8
ners in his share^ and he can have relief on his own bill/'
In this case, the plaintiff, John C. Rogers, was a member of
the firm of John C. Rogers & Co., and also of the firm of
Rogers & Otey. The latter firm having become indebted
to the former, a suit in equity was brought by one firm against
the other, as though the two firms were composed of stran-
gers. Ruffin, C. J., before whom the cause came, emphatically
clenied that such suit could be maintained. "It is unnecessary,"
he says, "to consider the various matters stated in Otey's an-
swer that might affect the merits of the controversy as be-
tween him and the other parties, as it is impossible that
there can be any decree for the plaintiffs on this bill. It
seems to have been drawn on some vague sort of notion
that the firms are in the nature of corporations, and that
one of them might have a decree against the other as firms.
The bill involves the absurdity of a man's having a personal
decree against himself for a sum of money; and that, too,
coupled with a decree against another person in such a
manner as to enable the supposed creditors to raise the
whole debt out of this latter person, although, as between
that person and his partner (who is also a partner in the
other firm), it might appear, upon taking the accounts of
their firm, that the latter holds the fund out of which the
debt ought to be paid." "In the present state of things,
the court does not see, nor can the accounts be taken that
will enable the court to see, who is the proper person to pay,
and to receive this money. It may be that John C. Rogers
[the common partner] is the hand in the firm of Rogers &
Otey from which the money ought to go, and also that in
the other firm which ought to hold it. There can therefore
be no decree for the plaintiffs. Not one against Otey alone,
because no several liability on his part is alleged, nor any-
thing to except John C. Rogers from paying or contributing
to payment of the debt ; and not one against Rogers by him-
self, or jointly with Otey, because it would be to pay John
C. Rogers himself jointly with others, and for that reason
would be repugnant, absurd, and void.'' ^"
«• 8ee^ also, to aune sfteet, Bnglis v. FumlBs, 4 £. D. Smith (N.
Y.) 587. And see. further. Taylor v. Thompson, 176 N. T. 168, 176,
§ 156) ACTIONS BETWEEN FIRMS WITH OOMHON If EMBER 477
Mr. Bates states the opposite view as follows: "In
equity, however, and under the codes, where equitable rem-
edies will be granted in the courts in all actions, the firms
can be parties to such suits much as if they constituted dis-
tinct legal bodies, although there is a partner common to
each ; and hence, under the code, which administers equita-
ble legal remedies without distinction, the suit can be sus-
tained." *• This is, perhaps, the general statement of the
rule by text-writers and judges. It is obviously open to
the criticism that it confuses the question of what rights
will be recognized in equity, with the question of how
those rights will be enforced. The firm can no more sue as
such in equity than at law, nor does the code change this
rule.*^ However much the fact of partnership may be
taken into view in adjusting the rights of the partners, still
the suit is one between individuals only. Cole v. Reyn-
olds *• is the leading case in support of this view. Two
68 N. B. 240f 2243, where the court declared that, '*ln an action at
law to recover damages for deceit, It Is well settled that no action
can be maintained between the members of two firms having one
member in common." See "Partnership** Dec. Dig. {Key No.) ||
19S, 201 : Cent. Dig. |$ 956, Sit.
«• Partn. | 905. In Pennsylvania It Is provided by statute that
partners may be both plaintiffs and defendants In the same ac-
tion. Act April 14, 1838 (Pepper ft L. Dig. 1894, "Partnership,'' %
3). Speaking of this act Mr. J. Parsons says: "The act does not
enable a partner to sue his firm. Ace Hall v. Logan, 34 Pa. 331.
An Independent plaintiff Is required, who Is not also liable on the
contract which he seeks to enforce. The evil Is more extensive than
the remedy provided. The limited scope and technical character of
the statute make the form of procedure control the right" Partn.
I 161. Party joining in promise cannot sue his copromlsors. Price
V. Spencer (1870) 7 Phlla. 179; Wentworth v. Raiguel (1873) 9Phlla.
2T6. Cf. Duff V. Magulre, 107 Mass. 87, and Bryant v. Wardell, 2
Exch. 479. In an action under the statute, where the same person
is joined with plaintiff and with defendant, the execution is limited
to the joint assets. Tassey v. Church, 6 Watts & S. (Pa.) 465, 40
Am. Dec. 576. Cf. COLE v. REYNOLDS, 18 N. Y. 74, where prac-
tically the same result was reached without any statute. See "Part-
nership r^ Dec. Dig. (Key No.) M 19S, 201; Cent. Dig. H 956, 372.
*T Se^'ante, p. 471.
«iCK)LB V. REYNOLDS, 18 N. Y. 74. See "Partnership,** Deo.
Dig. {Key No.) | 201; Cent. Dig. | 372.
478 ACTIONS BETWEEN PARTNERS (Gh. 8
firms, in each of which A. was a partner, stated an account
of their mutual dealing. The partners in the creditor firm,
with the exception of A., who declined to be plaintiff, and
was made a defendant, brought their action against the
members of the debtor firm; and it was held that, upon
proof of these facts, the plaintiffs were entitled to judg-
ment for the balance thus ascertained, and that it was not
necessary in such a case that the complaint should propose
an accounting as between the firms or the various partners,
but that such accounting might be directed by the court if
facts were pleaded and shown that would render it inequi-
table to permit a recovery by one firm against the other,
without adjusting the accounts of the individuals composing
them. Even in such case the court thought that the better
doctrine would be to let the debtor firm pay its debt, and
the partners in the creditor firm, after receiving their debt,
adjust their individual equities among themselves. The ef-
fect of this decision was to hold that two of the partners
might have judgment against the debtor firm, including
their own copartner, for a debt due to their own firm, the
debt so recovered to be held as assets of the firm, and that
this might be done without an accounting, except as be-
tween the two firms. By such a decree, the common partner
is deprived of all possession and control of a portion of the
partnership property — a right inherent in the relation of
partnership. The court solves the difficulty arising from
his being a member of both firms by completely ignoring
his rights in the creditor firm, and treating him only as a
debtor.
ACTION AT LAW ON INDIVIDUAL OBLIGATION
157. A partner may maintain an action at law against his
copartner upon a claim due to the one from the
other as individuals. The following classes of
cases fall within the above rule :
(a) Claims not connected with the partnership (p. 479).
(b) Claims for an agreed final balance (p. 479).
(c) Claims upon express personal contracts between
partners (p. 481).
§ 159) ACTION AT LAW ON INDIYIDUAIj OBLIGATION 479
SAME— CLAIMS NOT CONNECTED WITH PART-
NERSHIP
158. A partner may maintain an action at law against his
copartner upon claims not connected with the part-
nership.
It is hardly necessary to say that the mere fact that per-
sons are partners as to certain transactions is no defense to
an action between them upon a claim in no manner con-
nected with the partnership affairs. As to matters, outside
of the partnership business, they are not partners, and may
sue and be sued precisely as strangers. Thus, where one
partner has sold his separate property to his copartner, he
may maintain an action at law for the price.**
SAME— CLAIMS FOR AGREED FINAL BALANCES
169. A final settlement of the partnership affairs converts
the liabilities between each partner and the firm
into liabilities between the partners individually,
and an action at law lies to recover the balance
found due any partner.
It has been seen that a partner cannot maintain an action
at law for a balance on the partnership account until the
accounts have been settled and adjusted. But where the
partners themselves state the account, and agree upon the
balances due any partner, all objection to the maintenance
of an action at law is removed. The settlement converts the
liabilities between each partner and the firm into liabilities
between the parties as individuals, and an action at law may
be maintained thereon.'® To have this effect, however, the
4» Elder v. Hood, 38 lU. 533 ; Hartzell ▼. Murray, 224 111. 377,
79 N. B. 674. See ** Partnership,** Dec. Dig. (Key No.) § 110; Cent
Dig. i 112.
60 Downs V. Short, 6 Pennewlll (Del.) 264, 66 Atl. 365; Purvlneu
V. C?liainpion, 67 111. 459; Hanks v. Baber, 53 111. 292; Wycoff v
i80 ACTIONS BETWEEN PARTNERS (Ch. 8
settlement must be a final winding up of the partnership af-
fairs.*^ ^ A partial settlement will not support an action at
law, unless there is an express promise to pay the balance
Pumell, 10 Iowa, 332; Fanjolng y. Ghadwlck, 3 Pick. (Mara.) 420,
15 Am. Dec. 233 ; Williams y. Henshaw, 11 Pick. (Mass.) 79, 22 Am.
Dec. 366; Seott y. Caruth, 50 Mo. 120; Holman y. Nance, 84 Mo.
674; McGlnty y. Orr, 110 Mo. App. 336, 85 8. W. 955; Knerr y.
Hoffman, 65 Pa. 126; Mackey y. Auer, 8 Hun (N. Y.) 180; Jaques
Y. Hulit, 16 N. J. Law, 38; Nlms y. Blgelow, 44 N. H. 376; Mc-
Gehee y. Dougherty, 10 Ala. 863; WRAY y. MILESTONE, 5 Meea.
& W. 21; Halderman y. Halderman, Hemp. 559, Fed. Gas. No. 5,909;
Summerson y. DonoYan, 110 Va. 657, 66 S. B. 822; Smith y. Put-
nam, 107 Wis. 155, 82 N. W. 1077, 83 N. W. 288. In the aboYe cases
Uiere was no express promise to pay the balance due. In a number
of cases It has been said that proof of an express promise to pay the
balance is necessary to maintain the suit; but this is not the better
Yiew. The following cases hold that there must be an express prom-
ise: DaYenport y. Gear, 3 111. 496; Klllam y. Preston, 4 Watts ft 8.
(Pa.) 14.
When parties buying and selling wool together as partners settle
their accounts, in which appears an Item charging one of them with
£15 "loss on wool," and the latter party expresisly assents to the
charge, an action is maintainable to recoYer the amount. In such
an action it is no answer that the plaintiff agreed to take the money
out in butcher's meat. WRAY y. MILESTONE, 5 Mees.ft W. 21.
Wliere a partnership has been dissolYed, and in the settlement one
partner has become the owner of the accounts payable to the firm,
such partner may maintain an action at law against the other for
moneys collected and withheld from him. GLADE y. WHITE, 42
Neb. 336, 60 N. W. 556.
"It is the law that one partner cannot sue another to recoYer
profits or to recoYer his share of partnership assets where the part-
nership is unsettled, although he may sue for an accounting and for
the recovery of whatever may be found due on a settlement of the
partnership affairs. But this rule does not apply to all cases grow-
ing out of partnership contracts. Where there Is an agreement
adjusting partnership affairs, and that agreement awards to one
partner a specific sum, or creates a specific duty in his favor, he
may maintain an action upon a breach of the duty or promise.
Snyder v. Baber, 74 Ind. 47; Warring v. 33111, 89 Ind. 497; Law-
rence V. Clark. 9 Dana (Ky.) 257 [35 Am. Dec. 133] ; Foster v. Al-
81 BURNS V. NOTTINGHAM, 60 111. 531, Gllmore, Cas. Partner-
ship, 459 ; Ross v. Cornell, 45 Cal. 133 ; Arnold v. Arnold, 90 N. Y.
580; De Jarnette's Ex'r v. McQueen, 31 Ala. 230, 68 Am. Dec. 164.
See ** Partnership;' Dec. Dig, {Key No.) §| 109-110: Cent. Dig. §(
156-172..
§ 160) ACTION AT LAW OK INDIVIDUAL OBLIGATION 481
found due/' But, where the settlement is a final winding
up of the partnership affairs, the law will imply a promise to
pay the balance."" If, after a final settlement, the business
is nevertheless continued, an action cannot be maintained
to recover the agreed balance unless there was an express
promise to pay it.'* But where there was an express prom-
ise to pay the balance, as where a note is given for the
amount found due, an action may be maintained, though the
business is carried on.'"
SAME— EXPRESS CONTRACTS BETWEEN PART-
NERS
160. A partner may sue his copartner at law upon an ex-
press contract between them by which the defend-
ant bound hinoself personally to the plaintifiF.
Where persons who are partners have contracted to-
gether on their own behalf, and not on behalf of their firm,
and the transaction is not such a one as the firm would have
a right to take advantage of, the rights and obligations
lanson, 2 Term R. 479 ; Wright v. Hunter, 1 Bast, 20 ; Neil y. Greeu-
leaf, 28 Ohio St. 567; Wells v. Carpenter, 65 lU. 447." Douthit y.
Douthlt, 133 Ind. 26, 32 N. B. 715. Where partners agree, under
seal, to diSBOlYe, and that one of them shall have all the debts due
the firm, he may maintain general assumpsit against the others for
a debt due from them to the firm. Beede v. Fraser, 66 Vt. 114, 28
AtL 880, 44 Am. St Rep. 824. See **P€^ner8hip,*' Dec. Dig. (Key
No,) a 109-110; Cent, Dig, $| 15&-172.
5 « Davenport v. Gear, 3 111. 495; BURNS ▼. NOTTINGHAM, 60
111. .531, Gllmore, Gks. Partnership, 459; Westerlo t. Byertson, 1
Wend. (N. Y.) 532 ; Murdock y. Martin, 12 Smedes ft M. (Miss.) 661.
See **Partner$hip,'' Dec. Dig. {Key No.) H 109-110; Cent. Dig. ff
156-172.
B< See cases cited supra, notes 60, 51.
B4 Allan Y. Garven, 4 U. G. Q. B. 242; Fromont y. Ck>upland, 2
Bing. 170. See *' Partnership," Dec. Dig. (Key No.) $§ 109-110; Cent.
Dig. §§ 156-172.
6» PRESTON Y. STRUTTON, 1 Aust 50; Sturgee v. Swift, 82
Miss. 239; McSherry y. Brooks, 46 Md. 103; Rockwell y. Wilder,
4 Mete. (Mass.) 556; Van Amringe y. EUmaker, 4 Pa. 281. See
^'Partnership,*' Deo. Dig. (Key No.) §S 109-110; Cent. Dig. H 156^172.
Gn- Part.— 31
482 ACTIONS BETWEEN PARTNERS (Ch. 8
created are individual rights and obligations, and an action
at law may be maintained upon the contract'* It is imma-
terial whether the contract relates to the partnership busi-
ness or not, or whether it was entered into before the part-
nership was formed, after it was terminated, or during its
continuance.*^ The right of the parties to such a contract
may be determined without a settlement of the partnership
accounts, and does not involve the necessity of making a
party both plaintiff and defendant. The fact that a balance
may be due the defendant from the plaintiff upon other
transactions involving a partnership accounting is imma-
terial, for, as has been seen, such transactions are not a
matter of set-off.*'
v« Bedford y. Brntton, 1 Bing. N. G. 890; RYDER y. WILCOX,
103 Mass. 24. Any partner, ultimately bound for the partnership
debts, may sue his copartner to apply the partnership property to
such debts. Gridley y. Conner, 2 La. Ann. 87. Action at law may be
maintained for breach of an express contract between the partners.
Sprout y. Crowley, 30 Wis. 187. Action at law may be maintained
for breach of contract independent of partnership. . Mullany y. Kee-
nan, 10 Iowa, 224. If a contract, though made concerning the
partnership affairs, and in furtherance of the joint undertaking, is
the indiyldual contract of the partners who are parties to it, and if
it is made by them in their own names, and not in the name of the
firm, an action may be maintained thereon by one against the oth-
ers, during the continuance of the partnership. Wright y. Michie,
6 Grat. (Va.) 354. A partner may sue his copartners upon an inde-'
pendent contract made by them as a firm with him before the part-
nership was formed between him and them. Mullany y. Keenan,
10 Iowa, 224. A partner may bring an action against the heirs of
his deceased copartner to establish his interest in land belonging
to the partnership. Reemsnyder y. Reemsnyder, 75 Kan. 565, 89
Pac. 1014. Bee '^Partnership,*' Dec. Dig. (Key No.) | 110; Cent.
Dig. S 172.
BT *'The real test is, not solely whether the action can be tried
without going into the partnership accounts, but whether the de-
fendant has bound himself personally to the plaintiff." Bates,
Partn. | 87a
B> A note giyen by one partner to the other for a balance in liq-
uidation of the affair^ of the firm may be the subject of an action
at law, although there are subsequent accounts ip which the payee
may be subsequently found in arrears. PRESTON y. STRUTTON,
1 Anstr. 50. There are many deeds of copartnership in which the
partners coyenant each to advance a certain sum at first In such
§ 160) ACTION AT LAW ON INDIVIDUAL OBLIGATION 483
Illustrations
Where the contract does not relate to the partnership
business, the right to maintain an action thereon is clear.
But the mere fact that the contract does relate to the part-
nership business does not alter the case, where the contract
was the individual contract of the partners, and not a con-
tract of the firm/* Illustrations of cases where actions at
law have been allowed on contracts entered into by part-
ners before the formation of the partnership, but relating to
it, are numerous. Thus, an action at law will lie for breach
of an agreement to form a partnership, or to continue a
partnership for a fixed time.*® Where one partner lends
case an action will He by one partner against the other to enforce
the coYenant, notwithstanding that there may be subsequent ac-
counts between them upon which a court of equity must adjudi-
cate. YENNING y. LEiGKIB, 18 East, 7. Where one gives a prom-
issory note to his retiring partner for firm funds advanced by the
latter* and used in the business, failure of consideration, based up-
on the alleged facts that no final settlement of the firm affairs has
ever been had, and that upon such settlement there would be noth-
ing due the payee, is no defense to an action at law upon said note.
WIIiSON V. WILSON, 26 Or. 251, 88 Pac. 185. One who is clerk,
and also in partnership in a particular business with his employer,
may, where his duties as clerk and partner are distinct, sue for his
salary due him in the former capacity without resorting to a suit
for the settlement of the partnership transactions. Alexander v.
Alexander, 12 La. Ann. 588. A stipulated compensation may be re-
covered at law, though payable out of profits. Robinson v. Greenes
Adm'r, 5 Har. (Del.) 115. See ^^Partnership** Dec, Dig, {Key No,)
U lOS-110; Cent, Dig. IS 156-172.
>• A promissory note given by one to another member of a com-
mercial company may be sued on by the payee, notwithstanding the
relation of parties, and the fact that the money, when recovered,
would belong to the company. VAN NESS v. FORREST, 8 Cranch,
30, 3 L. Ed. 478. A partner may sell his interest to his copartners,
and recover the purchase price In an action at law, and it is im-
material whether such interest is incumbered or not by the terms
of the partnership, or whether its amount Is fixed or the price agreed
on. Baker v. Robinson, 55 Mo. App. 171 ; Dull v. Reynolds Electric
Flasher Mfg. Co. (C. G.) 161 Fed. 129. See, also, supra, notes 5&-58.
Bee "Partner$JUp," Dee. Dig, {Key No.) § 107; Cent. Dig. I 170,
•oThe remedy for violation of an agreement for a future part-
nership is exclusively at law. Lane v. Roche, Riley, Eq. (S. G.)
215. See Gale v. Leckle, 2 Starkie, 107; Wilson v. GampbeU, 10
111. 383 ; OWEN v. MERONEY, 136 N. G. 475, 48 S. E. 821, 103 Am.
484 ACTIONS BETWBBN PARTNERS (Ch. 8
another money to be used by the latter as his contribution
to capital, the transaction is purely an individual one, and
the money may be recovered in an action at law.** Where
there is an agreement to buy a half interest in a stock of
goods, and to enter into partnership with the seller, the in-
terest bought to be put in as capital, the purchase price may
be recovered at law. The purchase is not a partnership
transaction. The interest must be purchased before it can
be* put in as capital.** So, one partner may sue his copart-
ner at law, and recover a premium promised by the latter to
procure admission to the firm.**
An action at law between partners will He for breach of
an agreement to pay firm debts out of defendant's private
funds, or to indemnify plaintiff frorii all liability thereon,**
St Bep. 082; Gilmore, Gas. Partnership, 4dl; Hill v. Palmer, 56
Wl0. 128, 14 N. W. 20, 48 Am. Bep. 703; Vance t. Blair, 18 Ohio,
582, 61 Am. Dec 467 ; Goldsmith t. Sachs (0. O.) 17 Fed. 728, West^
wood V. Cole, 66 Misc. Bep. 53, 120 N. Y. Snpp. 884; Bamsay ▼.
Meade, 87 Colo. 465, 86 Pac. 1018 ; Hobbs v. Bay, 96 S. W. 589, 29
Ky. Law Bep. 999. See, also, eases cited in note 67, infra. An ac-
tion lies to recover damages for a wrongful dissolution. Dart v. Laim-
beer, 107 N. Y. 664, 14 N. B. 291; Bagley t. Smith, 10 N. Y. 489,
61 Am. Dec. 756; Dunham y. GiUis, 8 Mass. 462; Beiter y. Morton,
96 Pa. 229; Addams v. Tutton, 39 Pa. 447; Wadsworth y. Man-
ning, 4 Md. 59 ; Jones v. Morehead, 3 B. Mon. (Ky.) 377. See **Part'
nerahip,** Deo, Dig. (Key No.) S 105; Cent Dig. | 168.
•1 HELME y. SMITH, 7 Bing. 709, 714, Gllmore, Cas. Partner-
ship, 84. An action at law can be maintained by one partner against
anotiier partner in the same firm, upon an express promise, made be-
fore the commencement of the partnership, in respect to advances to
be made to constitute the capital of the company for the carrying
on of the business of the partnership. Currier y. Webster, 45 N.
H. 226. See, also, to like effect. Smith y. Kemp, 92 Mich. 357, 52
N. W. 639 ; Bates v. Lane, 62 Mich. 132, 28 N. W. 753 ; BnU v. Ck)e,
77 Gal. 54, 18 Pac. 808, 11 Am. St Bep. 235. See '* Partnership,** Dec.
Dig. {Key No.) S| 105, 107; Cent. Dig. ^§ 168, 170.
•» Kinney v. Boblson, 52 Mich. 389, 18 N. W. 120. See *'Partner-
shipr Dec. Dig. {Key No.) |§ 105, 107, 110, 112; Cent. Dig. U 168,
170, 172, 175.
«« Walker v. Harris, 1 Anstr. 245. See ^'PartnersMp,^ Dec. Dig.
{Key No.) U 105, 107, 110; Cent. Dig. §§ 168, 170, 172.
« 4 Schmidt y. Glade, 128 IlL 485, 18 N. E. 762; Shennefleld y.
Dutton, 85 111. 603; Kellogg y. Moore, 97 111. 282; Adams y. Funk,
53 111. ^9; Halliday y. Carman, 6 Daly (N. Y.) 422; Cilley y. Van
§ 160} ACTION AT LAW ON INDIVIDUAL OBLIGATION 486
for breach of agreement to pay for personal services out of
private funds,*' and for breach of agreement to render ac-
jcounts.** "An agreement to pay money or to furnish stock
for the purpose of launching the partnership is an individual
engagement of each partner to the other, and the defaulting
partner may be sued in an action at law upon his agreement.
It is entirely separate and distinct from the partnership ac-
counts, and this forms the true test in determining whether
an action at law will lie by one partner against his copart-
ner." '^ A suit by a partner against his copartner, upon a
Patten, 58 Mich. 404, 25 N. W. 826 ; Jewell y. Ketchum, 63 Wis. 628,
23 N. W. 709; Frow's Estate, 73 Pa. 459; Edwards v. Remin^rton,
51 Wis. 336, 8 N. W. 193 ; Miller v. BaUey. 19 Or. 539, 26 Pac. 27.
A promise by a continuing partner to reimburse a retiring partner
for taking up, by his individual note, a partnership note on wliich
the latter is still liable, but which the former has at the dissolution
promised to pay, will sustain an action; a demand, whether neces-
sary or not, haying been first made. Warbritton v. Cameron, 10
Ind. 302. Generally, as to breach of contract assuming debt, Fer-
guson V. Balcer, 116 N. Y. 257, 22 N. E. 400; Thropp t. Richardson,
132 Pa. 399, 19 Atl. 2ia A bond given on the dissolution of a firm
by one partner for the payment of aU the firm debts can be en-
forced only by the obligee. When one partner indebted to the firm
gives his note to the other therefor, it is a valid counterclaim or
set-off in an action on a bond executed upon dissolution of the firm
by the payee to the maker for the payment of the partnership debts.
MERRILL V. GREEN, 55 N. T. 270. See ** Partnership,*' Deo. Dig.
(Key No.) §§ 105, 107, 110; Cent. Dig. S§ 168, 170, 172.
••Paine v. Thacher, 25 Wend. (N. T.) 450; Aldrich v. Lewis, 60
Miss. 229. See "Partnership," Dec. Dig. (Key No.) | 106; Cent.
Dig. S 169.
••Owston V. Ogle, 13 East, 538; Foster v. Allanson, 2 Term R.
479; Want v. Reece, 1 Bing. 18; Ferguson v. Baker, 116 N. Y. 257,
22 N. E. 400; Duncan v. Lyon, 3 Johns. Ch. (N. Y.) 351, 8 Am. Dec.
513 ; GUlen v. Peters, 39 Kan. 489, 18 Pac. 613 ; WUby v. Phlnney,
15 Mass. 116; Holyoke v. Mayo, 50 Me. 385; Bailey v. Starke, 6
Ark. 191 ; Rose v. Roberts, 9 Minn. 119 (Gil. 109). But see McPher-
son V. Robertson, 82 Ala. 459, 2 South. 333. See '* Partnership," Dec
Dig. {Key No.) H lOS-110; Cent. Dig. §§ 156-172.
•TCOOK V. CANNY, 96 Mich. 398, 55 N. W. 987, Gilmore, Cas.
Partnership, 462. One partner may sue another at law on a note
given by the latter to the former for the payment of a part of the
capital stock. Grigsby's ExY v. Nance, 3 Ala. 347; Scott v. Camp-
bell, 30 Ala. 728. See, also. Sprout v. Crowley, 30 Wis. 187 ; BROWN
v. TAPSCOTT, 6 Mees. & W. 119. If, by an agreement under seal
486 ACTIONS BBTWEBN PARTNERS (Cb. 8
claim not founded on the plaintiff's interest in the partner-
ship assets, but arising from a direct violation of the ar-
ticles of copartnership, need not be delayed for the taking
of an account of the partnership affairs.** A partner satis-
fying a judgment against himself upon an indorsement
made by his copartner in violation of the articles, is en-
titled to reimbursement for the costs paid in such satisfac-
tion, as well as for the amount of the judgment otherwise.**
Partners may, by special agreement touching any part of
between two persons, one agrees to furnish a specified sum of mon-
ey to carry on a certain business of the parties, and afterwards falls
to furnish the money, he Is liable to the other at law for such breach
of contract Ellison t. Chapman, 7 Blackf. (Ind.) 224. See, also,
cases cited In note 60, supra. See **Partner8Mp,^ Deo, Dig. (Key
No,) § 105; Cent. Dig. 1 168.
esRe^d V. Nevitt, 41 Wis. 848; Hill y. Palmer, 56 Wis. 123, 14
N. W. 20, 43 Am. Rep. 703; ^lorltz t. Peebles, 4 E. D. Smith (N.
Y.) 135 ; Kinloch t. HamUn. 2 HUl, Eq. (S. C.) 19, 27 Am. Dec. 441 ;
Dunham y. Glllls, 8 Mass. 462; Hunt y. Rellly, 50 Tex. 09; Dana y.
Gill, 5 J. J. Marsh. (Ky.) 242, 20 Am. Dec. 255; Radenhurst y. Bates,
3 Blng. 463. But see Stone y. Fouse, 3 Gal. 292; Rldgway y. Grant,
17 111. 117. An action at law may be sustained by one copartner
against another to recoyer damages for a breach of the articles or
terms of the contract Terry y. Carter, 25 Miss. 168; Kinloch y.
Hamlin, 2 HUl, Eq. (S. C.) 19, 27 Am. Dec. 441. One partner can-
not maintain an action at law on the coyenants In the articles of
copartnership to recoyer damages of his copartner for neglect of
the partnership business, while there Is a considerable amount doe
from him to his copartner, and the debts due by and to the firm,
the burden of which is to be borne, and the benefit enjoyed, by the
partners in certain proportions, are not all settled. Capen y. Bar-
rows, 1 Gray (Mass.) 376. See, also, Paterson y. Burton, 3 N. J.
Law, 717; BRACKEN y. KENNEDY, 3 Scam. (111.) 558, Gllmore,
Cas. Partnership, 470. A suit at law may be maintained for a
breach of partnership articles where the business of the partnership
has not been commenced, and there are no accounts in dispute be-
tween the partners. Vance y. Blair, 18 Ohio, 532, 51 Am. Dec. 467.
Where one partner has made profits, by engaging in any other busi-
ness in ylolation of his contract, his copartner has his option to sue
for damages for the breach of the contract, or to bring a bill in equi-
ty to compel an accounting. Morltz y. Peebles, 4 £1 D. Smith (N.
Y.) 135. See "Partnership,'' Dec. Dig. {Key No.) |S 105. 108; Cent.
Dig. §§ 157, 168.
«» Stone y. Wendoyer, 2 Mo. App. 24& See ^'Partnership,*' Dec.
Dig. {Key No.) i 105; Cent. Dig. | 168.
§ 160) AOnOK AT LAW ON INDIVIDUAL OBUGATION 487
the partnership's concerns, withdraw the same from the
partnership account, and make the agreement the founda-
tion of an action at law. Thus, where one of two partners,
by agreement between them, takes certain specific articles
of partnership property, and agrees to pay his copartner for
his share thereof a definite sum, at a specified time, the co-
partner may maintain an action to recover the amount so
agreed to be paid, independent of the settlement of the part-
nership accounts.^ •
TO Neil y. Greenleaf, 26 Ohio St 567; Simpson ▼. MUler, 51 Or.
232, 94 Pac. 567; JACKSON v. STOPHERD, 2 Cromp. & M. 361,
Oilmore, Gas. Partnership, 452. See, also, Roberts y. Ripley, 14
Conn. 543; Russell v. Grimes, 46 Mo. 410; Adams y. Funk, 53 111.
219; OoUamer v. Foster. 26 Vt T54.
Where one partner purchases the interest of the other partner
in the concern, for the sale dissolYes the partnership, and the part-
ner purchasing may be sued for the amount agreed to be paid by him
for such interest Edens y. Williams, 36 111. 252.
As to conversion of partnership property into separate property,
see ante, S§ 56-62, pp. 176-196.
Where partners agree to divide a partnership debt, and the debtor
assents to it and promises one of the partners to pay him his moie-
ty, such partner may maintain an action for his moiety against the
debtor. 1 Lindl. Partn. 265, citing Blair v. Snover, 10 N. J. Law,
153.
Assumi>sit lies where, after dissolution and settlement one part-
ner received more than was his due. Bond v. Hays, 12 Mass. 34.
And see Clark v. Dibble, 16 Wend. (N. Y.) 601; Beede v. Fraser,
66 Vt 114, 28 Atl. 880, 44 Am. St Rep. 824.
"Upon the general rule of law, there is no difficulty. One partner
cannot' maintain an action for a balance on the partnership ac-
counts until the accounts have been fettled and adjusted, and until
it is ascertained what is the balance due from the partner against
whom the claim is made; but there may be special bargains by
which particular transactions are isolated and separated from the
winding up of the concern, and are taken out of the general law of
partnership. When we consider the circumstances of this case,
plaintilTB right of action may be put upon the footing of a sepa-
rate transaction." Bayley, B., in JACKSDN v. STOPHERD, 2
Cromp. & M. 361, 365, Gilmore, Cas. Partnership, 452.
Partners may separate any portion of their partnership affairs
from the rest, and submit it to arbitrators for adjustment; and, if
a sum is found due from one to the other, a promise to pay that
sum is binding, and an action may be sustained upon It, notwith-
standing the other partnership concerns remain unsettled. Gib-
488 ACTIONS BBTWBBN PARTNERS (Gh. 8
SAME— LOSSES CAUSED BY PARTNER'S WRONG
161. A partner may maintain an action at law against his
copartner for a loss caused by the latter's wrong-
ful act, provided,
(a) The plaintiff's loss was suffered indiyidually, and not
in his capacity as a partner, and
(b) The defendant would not have been entitled. to con-
tribution had he alone paid the loss. '
Where one partner commits a distinct tort against his
copartner, in no way connected with the partnership busi-
ness, he is liable in an action at law as any one else would
be/* Thus, when one partner injures the separate property
of his copartner used in the firm business, he is liable in an
action at law/* But the wrongful act may be in some way
connected with the partnership, and still it may create an
individual liability to his copartner, enforceable at law.
Thus, fraud in inducing another to enter into a partnership
son V. Moore, 6 N. H. 547. When a firm has been dissolved, and one
partner has assumed the entire control of the goods, an action may
be brought by such partner against another partner to whom he
has sold a portion of the goods, at the other's request, and on a
promise to pay him, and not the firm. Caswell y. Cooper, 18 111.
532. An action at law Is maintainable by one partner against an-
other upon a promissory note executed by the one to the other, In-
Tolvlng particular Items or transactions of the partnership busi-
ness. WILSON V. WILSON, 26 Or. 251, 88 Pac. 185. See ''Part-
nershipr Dec, Dig, {Key No,) §§ 109-110; Cent, Dig. M 166-172,
Ti Pierce v. Thompson, 6 Pick. (Mass.) 193; GlUlam .▼. Loeb, 131
Mo. App. 70, 109 S. W. 835; Queen v. MalUnson, 16 Q. B. 867. Sec
CROCKETT V. BURLESON, 60 W. Va. 252, 54 S. E. 841. 6 L. R.
A. (N. S.) 263, Gllmore, Cas. Partnership, 464, where the court held
that a partnership settlement procured by fraud of a partner Is
ground for an action for deceit, without rescinding the settlement.
See '* Partnership;' Dec, Dig. (Key No,) H 104^ tlO; Cent. Dig, f|
16S, 167,
T2Haller v. WlHamowlcz, 23 Ark. 666; NEWBY ▼. HARRELL,
99 N. O. 149, 6 S. E. 284, 6 Am. St Rep. 503 ; Newberry v. Gibson.
125 Iowa, 675, 101 N. W. 428. See '^Partnership;' Deo. Dig. {Key
No,) § 104; Cent, Dig. i 169.
S 161) AC3TION AT LAW ON INDIVIDUAL OBLIGATION 489
is actionable at law.''* So, where a partner, in fraud of his
copartners, gives a note in the name of the firm for a pri-
vate debt of his own, he is liable to his copartners in an ac-
tion at law for the amount they have been compelled to
pay.''* But, if the note should be paid out of firm assets,
it is apprehended that an action at law would not lie; for,
until an accounting and settlement of the partnership af-
fairs, it is impossible to say what, if anything, the plaintiff
has suffered.* • Non constat the wrongdoing partner may
TsBoughner t. Black's Adm'r, 83 Ky. 521, 4 Am. St Rep. 174;
Rice T. Culver, 32 N. J. Eq. 601 ; Morse ▼. Hutchins, 102 Mass. 439 ;
Perry v. Hale, 143 Mass. 540, 10 N. B. 174 ; More v. Rand, 60 N. Y.
208 ; GLADE v. WHITE. 42 Neb. 336, 60 N. W. 556. 8ee ^^Partner-
ship,** Dec, Dig, {Key Vo,) %% 104, 107, 108; Cent Dig, Si 16S, 165-167.
T4 Calkins t. Smith, 48 N. Y. 614, 8 Am. Rep. 575, usually cited
in support of this proposition, is not an action against a partner
at all. All it really decided is that the fraud is not upon the firm,
but upon the innocent partners, and that the cause of action aris-
ing therefrom is no part of the partnership assets. It does not de-
cide that one partner may maintain an action at^ law without an
accounting, where the note was paid out of partnership assets.
See, also, T. Pars. Partn. § 203; Cross v. Cheshire, 7 Exch. 43;
OsBorne v. Harper, 5 East, 225. See **Partnership,** Dec. Dig. (Key
yo,) I 104; Cent. Dig, S§ 163, 167,
TB Sweet T. Morrison, 108 N. Y. 235, 240, 8 N. E. 896, was an ac-
tion by one partner against his copartner to recover damages for
fraud practiced upon him by them in the discharge of a debt due
the pattnership from a third person. The court held that, while
defendants were liable for damages so caused, a partnership set-
tlement was nteessary. The court said: "Sweet may recover, not
the debt due to the firm, for that is discharged, but damages for
the fraud practiced upon him in the process. This is his individual
right, and the resultant damages can only be measured by his in-
dividual loss; and that loss, if it exists at all, must necessarily be,
and can only be, a diminution of his partnership share, produced
by a collusive waste of partnership assets. But he has not proved
any such loss. It cannot be known, until a settlement of the part-
nership accounts, what loss has resulted from the fraud. Payson,
Cauda & Co. are not bound to pay Sweet's firm or Sweet's partners
anything. Primarily, the action is by Sweet against his copartners
for a partnership settlement, in which he charges them with the
willful and fraudulent waste of a valuable claim, and holds the
debtors responsible also by reason of their collusive participation.
That is the sole theory upon which the action can be maintained.
To Sweet's partners, and to his firm, nothing is due from Payson,
490 ACTIONS BETWEEN PARTNERS (Ch. 8
be found entitled to the whole of the partnership assets
upon an accounting. So, also, one partner cannot maintain
an action at law against his copartner for neglect of the
partnership business, because the loss is suffered, not in-
dividually, but through the diminution of the partnership
assets. Until a settlement of the partnership accounts, the
damage cannot be ascertained.*^* In some cases, as has been
seen, a partner is entitled to contribution to a loss, although
caused by his own wrong.^* In such a case, if any partner
pays more than his share, he, nevertheless, cannot recover
it in an action at law against any of his copartners.^* Ob-
viously, if one partner is entitled to contribution from his
copartners, he cannot be regarded as a wrongdoer as to
them. Equally obvious is it that a partnership accounting
would be necessary to ascertain whether any partner had,
in fact, paid more than his share, and, if so, how much.
Ganda & Co., and they can be compelled to pay only what Is needed
to perfect Sweet's rights, as disclosed by an honest settlement"
See, also. Fuller ▼. Perclval, 126 Mass. 381; Emery ▼. Parrott, 107
Mass. 96; Osborne v. Harper, 5 Blast, 225. As to rights against
third persons, growing out of a partner's wrongdoing, see post, p.
660. See "Partnership,*' Dec, Dig. {Key No.) U 109-110; Cent. Dig,
§1 156-llt.
^ecapen v. Barrows, 1 Gray (Mass.) 876. See, also, cases dted
in note 68, supra. That one partner fraudulently converts to his own
use property supplied by another for the partnership use dlssolyes
the partnership, or, at least, gives the Injured parly a legal tight of
action. Crosby v. McDermitt, 7 Gal. 146. Where one partner
mixed partnership funds with his own, made deposits of them in
bank in his own name, appropriated them to his own use, assuming
the absolute and entire control, and the bank, becoming insolvent,
received Its notes, and had them registered in his own name, with-
out the consent or knowledge of his copartner, by reason whereof
the partnership funds were lost, held, that such partner was re-
sponsible to the copartner for his share of the fund, and must bear
the loss alone. Lefever v. Underwood, i|l Pa. 505. See *'Partner'
9hip,** Dec. Dig, (Key No.) 1 104; Oent. Dig. 1 169.
TT Ante, I 182, p. 888.
7i story, Partn. S 220; Pearson v. Skelton, 1 Mees. ft W. 504. See
•"Partnerehip,*' Dec. Dig. {fey No.) % 109; Cent. Dig. % 171.
§ 162) ICQUITABLE ACTIONS IN GENBBAL 491
EQUITABLE ACTIONS IN GENERAL— JURISDIC-
TION
162. The jurisdiction of equity over partnership affairs is
governed by ordinary principlesy but, owing to the
complex nature of the relation, equity has come to
be the chief tribimal for the settlement of partner-
ship controversies.
We have seen in what cases an action at law can be main-
tained between partners. It may be stated as a general
rule that in all other cases equity has jurisdiction to grant
the appropriate relief. The exercise of jurisdiction is gov-
erned by ordinary principles. Equity will not interfere
where there is a plain adequate remedy at law, but the na-
ture of a partnership is such that the questions arising be-
tween partners almost always fall within the recognized
rules governing the jurisdiction of courts of equity.^*
General Rules as to Interference between Partners
There are three general rules by which courts of equity
are influenced when their interference is sought by one
partner against another, and to which it will be convenient
at once to refer; for the same rules are observed in all ac-
tions for specific performance, for an account, for a receiver,
for an injunction, and in those actions for fraud in which
equitable relief, as distinguished from the simple recovery
of damages, is sought. The rules in question, however,
have no application to cases in which one partner may sue
another at law. The rules alluded to are (1) not to inter-
fere except with a view to dissolve the partnership; (2)
TftQeneraUy, as to Jurisdiction of equity over partnerstdps, see
Story, Eq. Jur. | 666; Blsp. Eq. S 509; Christy's Appeal, 92 Pa. 157;
Epplng V. Aiken, 71 Ga. 682; BRACKEN v. KENNEDY, 8 Scam.
(lU.) 558, Gllmore, Gas. Partnership, 470; Daniel v. Gillespie, 65 W.
Va. 866, 64 S. E. 294 ; Brans v. Helse, 101 Md. 163, 60 Atl. 604. See
"Partnerahipr Dec, Dig. iKey No.) || lOS-llO, 193, 194; Cent. Dig.
i§ 166-172, 355S57.
492 ACTIONS BBTWBBN PARTNERS (Gh. 8
not to interfere in matters of internal regulation; (3) not
to interfere at the instance of persons who have been guilty
of laches.
SAME— NECESSITY OF PRAYING FOR A DIS-
SOLUTION
168. The old rule not to interfere except with a view to a
dissolution has been much relaxed, but not to the
extent of requiring equity to undertake the manr
agement of a going concern.'^
Formerly, courts of equity were averse to interfering at
all between one partner and another, unless it was for the
purpose of dissolving the partnership; or, if it was dis-
solved already, of finally winding up its affairs. Hence it
will be found, on reference to the older reported decisions,
that, if a dissolution was not sought, the court would not
decree a partnership account, nor restrain a partner from
infringing the partnership articles, nor protect the partner-
ship assets from destruction or waste. This rule, at no time
perhaps very inflexible, has gradually been relaxed ; it hav-
ing been discovered to be more conducive to justice to in-
terfere to prevent some definite wrong, or to redress some
particular grievance, than to decline to interfere at all un-
less complete justice can be done by winding up the part-
nership, and in that manner settling all disputes. At the
same time, so difficult is it to shake off old associations, and
to run counter to established rules, that traces of the aver-
sion alluded to may yet be found in the decisions of the
courts, and especially in those which relate to the specific
performance of agreements to form partnerships, and in
those which relate to the appointment of receivers and
managers. Indeed, notwithstanding the extent to which
the rule has been relaxed in actions for an account, or for
an injunction, one of the first points for consideration, even
&oThe text of sections 163 to 171 is substantially that of Mr.
Lindley^ with late American cases. See Lindl. Partn. pp. 465-479.
§ 164) EQUTTABLB ACTIONS IN GENERAL 493
now, when one partner sues another for equitable relief, is,
can relief be had without dissolving the partnership? Un-
doubtedly, it may, much more certainly than formerly, but
not always when perhaps it ought.
Modem Rule
Without stopping to inquire how the question is to be
answered in any particular case, it may be stated as a gen-
eral proposition that courts will not, if they can avoid it,
allow a partner to derive advantage from his own miscon-
duct by compelling his copartner to submit either to con-
tinued wrong or to a dissolution ; •* and that, rather than
permit an improper advantage to be taken of a rule de-
signed to operate for the benefit of all parties, courts will
interfere in modern times where formerly they would have
declined to do so.** At the same time, courts will not take
the management of a going concern into their own hands,
and, if they cannot usefully interfere in any other manner,
they will not interfere at all, unless for the purpose of wind-
ing up the partnership.
SAME— NONINTERFERENCE IN MATTER OF IN-
TERNAL REGULATION
164. A court of equity vnll not interfere in a matter of
merely internal regulation.
A court of justice will not interfere between partners
merely because they do not agree.'* It is no part of the
81 Fairthorne v. Weston, 8 Hare, 387, 392 ; Hogan ▼. Walsh, 122
Ga. 283, 50 S. E. 84 ; Bond v. May, 38 Ind. App. 396, 78 N. E. 260 ;
LORD ▼. HULL, 178 N. Y. 9. 70 N. B. 69. 102 Am. St. Rep. 484,
Gilxnore, Cas. Partnership. 472. See ** Partnership,** Dec. Dig. {Key
No.) 9 SIS; Cent Dig, 9 7S1.
8s Davis y. Davis, 60 Miss. 615 ; Traphagen v. Burt, 67 N. Y. 80.
See ''Partnership,*' Dec. Dig. (Key No.) § 315; Cent. Dig. S 791.
St But see Davis v. Davis, 60 Miss. 615 ; PIRTLE v. PENN, 3 Dana
(Ky.) 247, 28 Am. Dec. 70, Gllmore, Cas. Partnership, 480. See
''Partnership;* Dec. Dig. {Key No.) Si 272, S15; Cent. Dig. Sf 619,
7S1.
494 ACTIONS BETWEEN PARTNERS (Ch. 8
duty of the court to settle all partnership squabbles ; it ex-
pects from every partner a certain amount of forbearance
and good feeling towards his co-partner; and it does not
regard mere passing improprieties, arising from infirmities
of temper, as sufficient to warrant a decree for dissolution,
or an order for an injunction, or a receiver.** And, when
partners have themselves agreed that the management of
their affairs shall be intrusted to one or more of them ex-
clusively, the court will not remove the managers, or inter-
fere with them, unless they are clearly acting illegally, or
in breach of the trust reposed in them.*' The rule not to
interfere in matters of merely internal regulation or disci-
pline is strongly exemplified in cases of clubs.'*
SAME— EFFECT OF LACHES
166. Equity will not interfere at the instance of persons
who have been givlty of laches.
Laches a Bar to Relief in Equity
Independently of the statute of limitations, a plaintiff may
be precluded by his own laches from obtaining equitable
relief. Laches presupposes not only lapse of time, but also
the existence of circumstances which render negligence im-
putable; and, unless reasonable vigilance is shown in the
prosecution of a claim to equitable relief, the court, acting
s« Marshall v. Ck)lman, 2 Jac. & W. 266 ; Anderson v. Anderson,
2S^ Beav. 190; Smith v. Jeyes, 4 Beav. 503; Gofton v. Homer, 6
Price, 537. LORD v. HULL, 178 N. T. 9. 70 N. E. 69. 102 Am. St
Rep. 484, Gilmore, Gas. Partnership, 472; BUCK v. SMITH, 29
Mich. 166, 18 Am. Rep. 84, Gilmore, Gas. Partnership, 479. See, al-
so, post, chapter X, S 202, p. 685. See "Partnership,** Dec. Dig, {Key
No.) §§ 272, 324, S25; Cent, Dig. |§ 619, 755, 757-767.
85Law8on v. Morgan, 1 Price, 303; Waters v. Taylor, 15 Ves. la
See ^^Partnership," Dec, Dig, {Key No,) 9§ lOS-llO, 272, S15; Cent.
Dig. §§ 156-172, 619, 731.
«« Foss y. Harbottle^ 2 Hare, 461 ; Gorman v. Russell, 14 CaL 531 ;
Burke v. Roper, 79 Ala. 138; Mozley v. Alston, 1 Phil. Gh. 790;
Garlen v. Drury, 1 Ves. & B. 154. See '*Cnuhs,** Dec. Dig, {Key No,)
il 12-14; Cent. Dig. {§ 8, 9; ''Associations,** Deo. Dig. iKey No.) fi
20, 21; Cent. Dig. §§ 36-44-
§ 165) EQUITABLE ACTIONS IN GENERAL 495
on the maxim, "Vigilantibus non dormientibus subveniunt
leges," will decline to interfere.*^
To a Suit for an Account
In the early case of Sherman v. Sherman,** two persons
had dealings as merchants. One of them died. His widow
filed a bill for an account, but, although the statute of lim-
itations did not apply, the bill was dismissed, on the ground
that many years had elapsed since the dealings in question
had taken place, and the deceased had allowed any claims
he might have had to slumber.**
Acquiescence in Account
Again, where an account has been rendered, and has been
long acquiesced in, unless fraud be proved, a court will not
reopen it, although the account may be shown to be errone-
ous, and although no final settlement was ever come to.*®
The same principle is acted on in taking accounts; for
charges long improperly made and acquiesced in, or long
87 Evans v. Smallcombe, L. B. 3 H. L. 240, 256 ; Groenendyke ▼.
Goffeen, 109 111. 325; Drew v. Beard, 107 Mass. 64; Stout v. Sea-
brook's Ex'rs, 30 N. J. Eq. 187; Richards v. Todd, 127 Mass. 167;
Hoyt V. Sprague, 103 U. S. 613, 26 L. Ed. 585; Pond v. Glark, 24
Conn. 370. See "Equity;* Dec. Dig. {Key No.) 99 67-58; Cent. Dig.
§i 191-245; "Partnership;' Deo. Dig. {Key No.) §9 lUf S21; Cent.
Dig. 99 i77, 745.
««2 Vem. 276. See "Partnership;' Dec. Dig. {Key No.) 9 S21;
Cent. Dig. 9 745.
B» See, also, Sturt v. Melllsh, 2 Atk. 610. In McPberson v. Swift,
22 S. D. 165, 116 N. W. 76, 133 Am. St Rep. 907, it was held that
a delay of ten years after dissolution to bring an action for an ac-
counting was not such laches as to bar plaintiff, in the absence of
a showing of prejudice to the defendant To the same effect Stehn
▼. Hayssen, 124 Wis. 583, 102 N. W. 1074; Sterling v. Chapin, 102
App. Div. 589, 92 N. Y. Supp. 904; Stuart v. Harmon, 72 S. W. 365,
24 Ky. Law Rep. 1829 ; Gompton v. Thorn, 90 Va. 653, 19 S. E. 451.
See "Partnership;* Dec. Dig. {Key No.) 99 Sll, S21; Cent. Dig. 99
722, 7^5.
•0 Scott y. Milne, 5 Beav. 215, on appeal 7 Jur. 709 ; Bell v. Hud-
sou, 7a Gal. 285, 14 Pac 791, 2 Am. St Rep. 791; Hite's Heirs y.
Hue's Ex'rs, 1 B. Mon. (Ky.) 177; Goleman v. Marble, 9 La. Ann.
476 ; Oliver v. House, 125 Ga. 637, 54 S. E. 732. See "Partnership;*
Deo. Dig. {Key No.) 99 Sll, S21; Cent. Dig. 99 722, 745.
496 ACTIONS BBTWBBN PARTNERS (Gh. 8
omitted to be made, and known so to be, are regarded, in
the absence of fraud, as having been made or omitted by
agreement, and the question of mistake will not be gone
into.*^
Laches in Enforcing Agreements for Partnerships
The doctrine of laches is of great importance where per-
sons have agreed to become partners, and one of them has
unfairly left the other to do all the work, and then, there
being a profit, comes forward, and claims a share of it. In
such cases as these, the plaintiff's conduct lays him open to
the remark that nothing would have been heard of him had
the joint adventure ended in loss instead of gain; and a
court will not aid those who can be shown to have remained
quiet in the hope of being able to evade responsibility in
case of loss, but of being able to claim a share of gain in
case of ultimate success.**
Leches Where Partnership is a Mining Partnership
The doctrine now under discussion is especially applica-
ble to mining and other partnerships of a highly specula-
tive character. Mining operations are so extremely doubt-
ful as to their ultimate success that it is of the highest im-
portance that those engaged in them should know on whom
they can confidently rely for aid. If, therefore, a person en-
gages in a mining adventure in partnership with others, and
disputes arise between them, and he is denied a partner's
rights, he should be careful to assert his claims whilst the
dispute is fresh ; for if he lies by until the mine has been
rendered prosperous by his copartners, and he then comes
forward, insisting on his rights as a partner, and seeks
equitable, as distinguished from legal, relief, he will be re-
fused it, on the ground that he has applied for it too late.**
•1 Thornton v. Proctor, 1 Anst. 04. Bee **Partner8hip,** Deo. Dig.
{Key No.) §§ 311, 321; Cent. Dig. §§ 722, 745,
•a Cowell V. Watts, 2 Hall & T. 224. See ^^Partnership;' Dec Dig
(Key No,) § 114; Cent. Dig. f 177.
«» Alio way ▼. Bralne, 26 Beav. 575; Walker ▼. Jeffreys, 1 Hare,
841 ; Prendergast y. Turton, 1 Y. & C. Ch. 9S ; Glegg v. JSdmondson.
8 De Gex, M. & Q. 787; Rule v. Jewell, 18 Ch. Div. 660. See "Mine*
and MineraW Dec. Dig. (Key No.) f 99; Cent. Dig. | 223.
§ 166) ACCOUNTING AND DISSOLUTIOH 497
ACCOUNTING AND DISSOLUTION
166. Equity has jurisdiction of an action for the dissolu-
tion of a partnership and an accounting.
Dissolution
The remedy of a partner who insists upon a dissolution,
which is opposed by his copartners, is by a suit in equity
for a dissolution and an accounting.** An injunction and a
receiver to restrain the defendants from dealing with the
partnership assets, and from issuing bills or notes in the
name of the firm, may be sought and granted in the same
action. The action lies, although the partnership be a part-
nership at will> and can therefore be dissolved by the plain-
tiff himself ; •' and, if the partnership has been dissolved
before the action is brought, the plaintiff is entitled to a
declaration to that effect.** If the partnership is admitted,
and the right to dissolve is not contested, the court will de-
cree a dissolution on motion, before the hearing or trial.*^
An action may be brought for the rescission of a contract
of partnership, or in the alternative, for dissolution of the
•4 Llndl. Partn. 492. Equity has jurisdiction to settle up the af-
fairs of the partnership, and make whatever orders are necessary
to do complete Justice. Story, Partn. § 222; Denver v. Roane, 99
U. S. 355, 25 L. Ed. 476; Ambler v. Whipple, 20 Wall. 546, 22 L.
Ed. 403 ; CQaggett v. Kilboume, 1 Black, 346, 17 L. Ed. 213 ; Sharp
V. Hibbins, 42 N. J. Eq. 543, 9 Atl. 118 ; Harvey v. Vamey, 98 Mass.
118 ; Miller v. Lord, 11 Pick. (Mass.) 11 ; BRACKEN v. KENNEDY,
4 111. 558, Gilmore, Oos. Partnership, 470; Clark v. Gridley, 41 Oal.
119 ; Daniel v. Gillespie, 65 W. Va. 366, 64 S. E. 254 ; Whitmore v.
William Waters Estate, 142 III. App. 288. See "Partnership,'* Dec.
Dig, (Key ATo.) §| 5X5. 315. 919; Cent. Dig. §§ 129. 725%, 75/, 759.
»» Lindl. Partn. p. 491 ; Master v. Kirton, 3 Ves. 74. Where, how-
ever, the partnership is at will and has no assets, one partner has
no right to demand an accounting of profits earned by his copart-
ners, who continue the business after notifying him of their elec-
tion to dissolve. Brady v. Powers, 112 App. Div. 845, 98 N. T.
Supp. 237. Bee '^PartneraMp," Dec. Dig. {Key No.) {§ 52^, 525/
Cent Dig. H 755-767.
•• Lindl. Partn. p. 492.
•T Thorp V. Holdsworth, 3 Ch. Div. 637. See '* Partnership," Deo.
Dig. (Key No.) § 330; Cent. Dig. § 787.
Gil.Part. — 82
498 ACTIONS BETWEEN PARTNERS (Gh. 8
partnership.** The grounds on which the court will dis-
solve a partnership will be considered hereafter in the
chapter on "Termination of a Partnership." •• In the pres-
ent chapter it is proposed to consider the subjects of ac-
count, injunctions, and receivers.
Accounting
One of the most ancient common-law actions was the ac-
tion of account. It could, however, be brought only in a
limited class of cases. The proceeding under it was cum-
bersome in the extreme, and courts of common law could
not compel a discovery from the parties, who were incom-
petent to testify. It is not surprising, therefore, that the
common-law action of account should have fallen into dis-
use. It was to some extent supplanted at law by the ac-
tion of assumpsit. The equitable procedure, however, was
greatly superior to that of the common-law tribunals, what-
ever form of action might be adopted. A master in chan-
cery had abundant power to examine the parties on oath,
to make inquiries from all proper persons by testimony on
oath, and to require the production of all necessary docu-
ments.* Equity has plenary jurisdiction in the matter of a
partnership accounting. It extends to all matters necessary
to wind up the partnership affairs, including the sale of real
estate.*
»8 Bagot V. Easton, 7 ClL Div. 1. See **Partnership,^ Deo, Dig.
(Key No.) § 5«7/ Cent, Dig. f 771.
»» Post, chapter X, ft 200-203, pp. 585-^591.
1 Fetter, Eq. p. 248.
1 Bates, Partn. 907; Bruns v. Helse, 101 Md. 163, 60 Atl. 604;
Denver v. Roane, 99 U. S. 355. 25 L. Ed. 476; Clark v. Gridley, 41
Gal. 119; BRACKEN v. KENNEDY, 8 Scam, (lil.) 558, GUmore,
Caa. Partnership, 470; Gillett v. Hall, 13 Conn. 426; NUes v. Wil-
liams, 24 Conn. 279; Bennett v. Woolfolk, 15 Ga. 213. As to the
common-law action account, see Lee v. Abrams, 12 111. Ill ; BRACK-
EN V. KENNEDY, 3 Scam. (111.) 558, Gllmore, Gas. Partnership,
470; Hunt v. Gorden, 52 Miss. 195; Stoart v. Kerr, Morris (Iowa)
240 ; Neal v. Keel's Ex'rs, 4 T. B. Mon. (Ky.) 162 ; WUhelm v. Cay-
lor, 32 Md. 151 ; Appleby v. Brown, 24 N. Y. 143 ; Rickey y. Bowne,
18 Johns. (N. Y.) 131 ; Griffith v. Willing, 3 Bin. (Pa.) 317 ; Spear
y. Newell, 2 Paine, 267, Fed. Cas. No. 13,224. (Generally as to
partnership accounting, see Lllliendahl y. Stegmair, 45 N. J. Eq.
648, 18 Ati. 216; Niles y. Williams, 24 Conn. 279; Gillett y. Hall,
§§ 167-168) ACCOUNTINO AND DISSOLUTION 499
SAME— RIGHT TO ACCOUNTING
167. Every partner is entitled to an account from his co«
partners.*
168. ACCOUNTING UPON DISSOLUTION— A part-
ner may maintain a bill for an accounting where
there has either been a dissolution, or he has
grounds to seek one.
It has been seen that the rule of equity not to interfere
in partnership affairs except with a view to a dissolution
has been relaxed. The application of this rule to actions
for an accounting will be presently examined, but in cases
where there has been a dissolution, or where grounds for a
dissolution exist, and one is sought by the bill, the right of
a partner to maintain the bill is undoubted.*
13 Ck>im. 426; Ooz ▼. Volkert, 86 Mo. 505. The fact tliat the
prayer of the complaint, In a suit to dissolve a partnership, ask-
ed damages, as well as an accounting and a receiver, does not make
the action one at law. Adams v. Shewalter, 139 Ind. 178, 38 N.
E. 607. In an action for an accounting between partners on a dis-
solution, the court will be governed, so far as it Is reasonable, by
the articles of agreement between the parties. Lelghton v. Clarke,
42 Neb. 427, 60 N. W. 875. In a suit for the dissolution and settle-
ment of a partnership, a personal Judgment should not be rendered
against one partner for the amount supposed to be due to the other
as his share of the profits until the assets are reduced to cash and
the debts paid, there being no agreement to the contrary. Green v.
Stacy, 90 Wis. 46, 62 N. W. 627. Bee ^^Partnership,*' Dec. Dig. {Key
No,) SI SIS, Sid; Cent. Dig. §f 129, 729%, 1S9.
* See, further, on the right to accounting, chapter VI, { 135, p. 392.
« Eddy V. Fogg, 192 Mass. 543, 78 N. E. 549 ;' Rels v. Rels, 99
Minn. 446, 109 N. W. 997. See, also, cases In notes to section 133,
p. 884, chapter VI.
Persons claiming under a partner may sometimes maintain an ac-
tion for an accounting:
Thus personal representatives of a deceased partner may do so.
Hackwell v. Eustman, Cro. Jac 4101 ; H^ne v. Mlddlemore, 1 Rep.
Ch. 138 ; Rines v. Ferrell, 107 Minn, 251, 119 N. W. 1055 ; Miller v.
Jones, 39 111. 54; Jennings' Adm'rs v. Chandler, 10 Wis. 21; Free-
man V. Freeman, 136 Mass. 260 ; 6rlm*s Appeal, 105 Pa. 375 ; Cost-
ley V. Towles, 46 Ala. 660; Denver v. Roane, 99 U. S. 355, 25 L. Ed.
500 ACTIONS BBTWBBN PARTNBB8 (Ch. 8
The right of every partner to have an account from his
copartners of their dealings and transactions is too obvious
476. Cf. Griffith v. Vanheytbuysen, 9 Hare, 85; Hutton ▼. Laws,
55 Iowa, 710, 8 N. W. 642 ; State v. Brower, 98 N. C. 344 ; Newell
▼• Humphrey, 87 Vt 265.
Widows and heirs cannot, their remedy being to compel the rep-
resentative to act or account Hutton ▼. Laws, 55 Iowa, 710, 8 N.
W. 642; Harrison v. Rigbter, 11 N. J. Eq. 389; Tate ▼. Tate, 85
Ark. 289; Rosenzwelg v. Thompson, 66 Md. 593, 8 Atl. 669; Lad-
low's Heirs y. Cooper's Devisees, 4 Ohio St 1. For exceptions to
this doctrine, see Bates, Partn. i 925.
The assignee of a partner's Interest may maintain the bill. Day
V. Stafford, 128 Mo. App. 438, 107 S. W. 433; McPherson v. Swift,
22 S. D. 165, 116 N. W. 76, 133 Am. St Rep. 907 ; Doll ▼. Hennes^
Mercantile Mfg. Co., 33 Mont 80, 81 Pac. 625; Jones ▼. Way, 78
Kan. 535, 97 Paa 437, 18 U R. A. (N. S.) 1180; Strong ▼. Clawson,
10 IlL 346; Miller v. Brigham, 50 Cal. 615; Donaldson v. President
etc, of State Bank, 16 N. C. 103, 18 Am. Dec. 577 ; Farley ▼. Moog,
79 Ala. 148, 58 Am. Rep. 585; Fourth •Nat Bank of New York ▼.
New Orleans & 0. R. Co., 11 Wali: 624, ^ L. Ed. 82; Mathewson v.
Clarke, 6 How. 122, 12 L. Ed. 370. See, generally, Bates, Part I
927.
A purchaser of a partner's share on execution Is entitled to an
account from the solvent partners, as Is also the execution debtor
himself. Lindl. Partn. p. 493; HABERSHON v. BLURTON, 1
De Gex & S. 121; Perens v. Johnson, 3 Smale & O. 419; DUTTON
V. MORRISON, 17 Ves. 193, 196; NewhaU v. Buckingham, 14 lU.
405 ; Farley v. Moog, 79 Ala. 148, 58 Am. Rep. 585 ; Hubbard ▼. Cur-
tis, 8 Iowa, 1, 74 Am. Dec. 283; Barrett v. McKenzle, 24 Minn. 20;
Clement v. Foster, 38 N. C. 213; Knerr v. Hoffman, 65 Pa. 126;
Milleman v. Kavanaugh, 213 Pa. 240, 62 Atl. 907. See, also, chapter
VII, S 140, note 44, p. 41&
A creditor at large of the firm has no right to an accounting.
Clement v. Foster, 38 N. C. 213; Greenwood v. Brodhead, 8 Barb.
(N. T.) 598 ; Young V. Frier, 9 N. J. Eq. 465 ; MIttnlght v. Smith, 17
N. J. Eq. 259, 88 Am. Dec 233; Freeman v. Stewart 41 Miss. 138:
Reese v. Bradford, 13 Ala. 837.
Some courts have held surviving partners as trustees, and al-
lowed the creditor to maintain a bill to wind up the partnership,
and. the same reasoning has been applied in cases of Insolvency.
Bates, Partn. | 929. cases cited. See, also, Davis v. Qrove, 2 Rob.
(N. T.) 134, 635; Sanderson v. Stockdale, 11 Md. 563; Baidwell v.
Perry, 19 Vt 292, 302, 303, 47 Am. Dec. 687 ; Fiske v. Gould (C O.)
12 Fed. 372; Johnston v. Straus (C. C.) 26 Fed. 57; FItspatriok v.
Flannagan, 106 U. S. 648, 656, 1 Sup. Ct 309, 27 L. Ed. 211.
Creditors of deceased partner, like the widow and heirs, must
§§ 167-168) AOCOUNTINO AND DISSOLUTION 601
to require comment. An action for an account may be
maintained by partners, although the partnership accounts
enforce their rights through a personal representative. Lindl. Part
p. 494.
A subpartner has no right to an accounting from the principal
firm, or any of the members of it, except the one with whom he is
a subpartner, for there is no contract or privity except between
those two. lindL Partn. p. 493 ; BURNETT ▼. SNYDER, 76 N. Y.
344, Gilmore, Cas. Partnership, 117, Id., 81 N. Y. 550, 37 Am. Rep.
527; Shearer v. Paine, 12 AUen (Mass.) 289; RelUy y. Reilly, 14
Mo. App. 62; Bates, Partn. |{ 163, 928.
An employ^, compensated by a share of the profits, may maintain
a bill for an accounting. Bentley v. Harris, 10 R. I. 434, 14 Am.
Rep. 695; Hallett v. Gumston, 110 Mass. 32; Ohannon v. Stewart,
108 111. 541; Harrington ▼. Churchward, 6 Jur. (N. S.) 576; Rich-
ton y. Qrissell, 5 Eq. Cas. 326; Lindl. Partn. p. 493. See, generally,
Freeman y. Freeman, 136 Mass. 260; Gerard y. Bates, 124 111. 160,
16 N. E. 258, 7 Am. St Rep. 350.
The fact that defendant in an action for an accounting denied his
partnership with complainants did not depriye him of the right to a
just statement of the account, on his being found to be a partner.
Thompson y. Noble, 108 Mich. 10, 65 N. W. 563. Where, after dis-
solution of a partnership, all the assets are left in the hands of
one partner to settle the partnership affairs, the copartner is en-
titled to an accounting, although the eyidence shows, the defendant
has paid out more in satisfaction of firm debts than he has recelyed
from the assets. Sharp y. Hibbins, 42 N. J. Eq. 543, 9 Atl. 113.
Where an employ^ of a firm receives a portion of the net profits
of a branch of the business as part compensation for his seryices,
equity will haye Jurisdiction of a bill by his employ^ for an account
of the partnership affairs for the purpose of ascertaining the profits
of such business, although the complainant is not a partner. Chan-
non y. Stewart, 103 111. 541. See, also, Hargraye y. Conroy, 19 N.
J. Eq. 281; Hallett y. Cumston, 110 Mass. 32; Clark y. Gridley,
41 Oal. 119.
The statute of limitations applies to actions of account between
partners. The statute does not begin to run against each item of
an account between partners from the time it becomes a part of the
account; but, if part be within six years, it draws that which is
before after it Todd y. Rafferty*s Adm'rs, 30 N. J. Eq. 254. A
cause of action for an Accounting of the affairs of a partnership
does not necessarily accrue, for the purpose of setting the statute
of limitations In motion, at the exact date of the dissolution of the
partnership, by death or otherwise ; but a court of equity may post-
pone the period, if the suryiyor, of necessity or by consent, con-
tinues in control of the property until the purpose of such control
502 ACTIONS BETWEEN PARTNERS (Ch. 8
are not complicated/ and although an action for damages
may be sustainable,* and although the defendant may have
stolen or embezzled the money of the firm.^ Moreover, al-
though formerly the court of chancery would not entertain
a suit for damages merely, although the suit was in form a
suit for an account,® yet, in a partnership suit involving a
general account, claims were adjusted which in ordinary
cases would have formed the subject of an action at law; •
and it is apprehended that now the court will, in taking such
an account, deal with every claim which it may be neces-
sary to investigate in order to adjust and finally settle the
is accomplished, or the suryivor has openly asserted an adverse
claim. Thomas v. Hurst (G. G.) 73 Fed. 372; McPherson v. Swift,
22 S. D. 165, 116 N. W. 76, 133 Am. St Rep. 907. Where a copart-
nership has ceased to do business more than six years, the right to
have an account and settlement is barred by limitations. Stovall
V. Glay, 108 Ala. 105, 20 South. 387.
An accounting may be had of the affairs of an illegal partner-
ship, where it is completed. Brooks v. Martin, 2 WaU. 70, 17 U
Ed. 732; Harvey v. Vamey, 98 Mass. 118; Pfeuifer v. Maltby, 54
Tex. 454, 38 Am. Rep. 631.
The complaint In an action for an accounting need not specify
the particular transactions as to which the accounting wUl be re-
quired. Teschmacher v. Lenz, 82 Hnn, 594, 31 N. Y. Snpp. 543. On
a bill for an accounting between partners, the burden of proof la on
plaintiff to establish the partnership, and to show by the accounts
that a true balance can be stated. Hlnkson v. Ervin, 40 W. Va.
Ill, 20 S. E. 849. Bee ^'Partnership;* Dec. Dig. {JBiey No.) || 297-
S48; Cent. Dig. || e79-8t2.
sGruikshank v. Mc Vicar, 8 Beav. 106. See ^'Partnership,** Deo.
Dig. (Key No.) §§ 298, $15; Cent. Dig. §8 680-686, 191.
• Wright V. Hunter, 5 Ves. 792; Blain v. Agar, 1 Sim. 37; Id., 2
Sim. 289; Townsend v. Ash, 3 Atk. 336. See ''Partnership,** Dec
Dig. (Key No.) §| 615, $17; Cent. Dig. §S 761, 763.
7 Roope V. D'Avlgdor, 10 Q. B. Dlv. 412. See "Partnership,** Deo.
Dig. (Key No.) §8 615, 617.
s Duncan v. Luntley, 2 Macn. & G. 30. See, also, Glifford v.
Brooke, 13 Ves. 132 ; Tannenbaum v. Armeny, 81 Hun, 581, 31 N. Y.
Supp. 55. Bee "Partnership,** Deo. Dig. (Key No.) | 815; Cent. Dig.
f 751.
• Bury V. AUen, 1 Golly. Gh. 589 ; MacKenna v. Parkes, 86 Law
J. Gh. 366, 15 Wkly. Rep. 217. Gf. Great Western Ins. Go. ▼. Gun-
llffe, 9 Gh. App. 525. See "Partnership** Deo. Dig. (Key No.) {{ 6li-
817, 6U; Cent. Dig. {§ 729-786, 816-816.
§§ 167-168) ACCOUNTING AND DISSOLUTION 503
account. Disputes not affecting the accounts will naturally
be excluded from it.*®
Costs on Accounting
While each particular case will bt^ considered according
to its own facts, as a general rule the costs involved in a
partnership accounting are paid out of the partnership
funds.** The court, however, has full power to apportion
the costs among the partners, or tax them against one partner
only. Where there are no partnership funds for distribution,
the costs will usually be divided between the parties.** Where
one partner has been guilty of misconduct, and has com-
pelled a resort to litigation, he may be personally charged
with the payment of costs.** In case the cpsts are charged
against the firm assets, they will, if those assets are suf-
ficient, be paid before profits are divided.** Claims for
costs, however, are usually postponed to claims for ad-
vances and for capital.*"
10 Lindl. Partn. p. 498. In an action for fin accounting, it is error
to give plaintiff Judgment against defendants jointly for the full
amount of his claim, without adjudging the respective liabiUties of
defendants. Gimpel v. Wilson, 10 Misc. Rep. 153, 30 N. Y. Supp.
042. Bee ^^Partnership;* Dec. Dig. {Key No.) A SU; Cent. Dig. H
813-^16.
iiGilman v. Vaughan, 44 Wis. 646; GTGER'S APPEAL, 62 Pa.
73, 1 Am. Rep. 382. See '^Partnership;* Dec, Dig. {Key No.) 9 S46;
Cent. Dig. § 820.
laGROTH v. KERSTING, 23 Colo. 213, 47 Pac. 303, Gilmore,
Gaa Partnership, 484 ; FOLSOM v. M ARLETTE, 23 Ney. '459, 49
Pac. 39, Gilmore, Gas. Partnership, 486. See ** Partnership;* Dec.
Dig. {Key No.) § 346; Cent. Dig. § 820.
18TAFT V. SCHWAMB, 80 111. 289; Knapp v. Edwards, 57 Wis.
191, 15 N. W. 140; Hamer v. Giles, 11 Oh. D. 942; O'Lone v. O'Lone,
2 Grant's Ch. 125. Bee ^'Partnership,** Deo. Dig. {Key No.) § 346;
Cent. Dig. { 820.
1* MATTINGLT v. STONE'S ADM'R, 35 S. W. 921, 18 Ky. Law
Rep. 187. Bee ''Partnership;* Dec. Dig. {Key No.) § 346; Cent. Dig.
i 820.
15 POTTER V. JACKSON, 13 Ch. D. 845; ROSS v. WHITE a894)
3 Ch. 326. In the last case a partner indebted to the firm was re-
quired to pay such indebtedness before being entitled to have the
costs paid out of the firm assets. See "Partnership,** Dec. Dig. {Key
No.) I 346; Cent. Dig. | 820.
604 ACTIONS BBTWBBN PARTNERS (Gh. 8
169. ACCOUNTING WITHOUT DISSOLUTION— A
partner may sometimes maintain a bill for an ac<
counting without a dissolution. The following are
the principal classes of cases in which an account-
ing without a dissolution will be granted :
(a) Where one partner has sought to withhold from his
copartner the profit arising from some secret
transaction (p. 606).
(b) Where the partnership is for a term of years still un-
expiredy and one partner has sought to exclude or
expel his copartner, or drive him to a dissolution
(pp. 607, 608).
(c) Where the partnership has proved a failure, and the
partners are too numerous to be made parties to
the action, and a limited account will result in jus-
tice to them all (p. 608) .
(d) Where there is an agreement for periodical account-
ings or accountings as to distinct transactions
(p. 609).
(e) Where an execution or attachment has been levied
against one partner's interest (p. 509).
General or Limited Account
The account which a partner may seek to have taken
may be either a general account of the dealings and trans-
actions of the firm, with a view to a winding up of the part-
nership, or a more limited account, directed to some partic-
ular transaction as to which a dispute has risen. It was
formerly considered that no account between partners could
be taken in equity, save with a view to a dissolution ; *•
i^Lindl. Partn. p. 495; Forman v. Homfray, 2 Ves. & B. 829:
Loscombe v. Russell, 4 Sim. 8; Knebell v. White, 2 Yoange & G.
Exch. 15. See, also. Glynn v. Phetteplace, 26 Mich. 383; Phillips
y. Blatchford, 137 Mass. 510; Davis v. Davis, 60 Miss. 615; Covlile
V. Oilman, 13 W. Va. 319 ; Clark v. Gridley, 41 CaL 119.
"The general rule is that a court of equity, in a suit by one part-
aer against another, will not interfere in matters of Internal regu-
lation, or except with a view to dissolve the partnership, and by a
final decree to adjust all its affairs. Story on Partnership, § 229;
Lindley, 567; Gow. 114; Parsons, § 206; Bates. 8 910; Collier, 8
23G. It is not its office *to enter into a consideration of mere pprt-
§ 169) AOCOUNTINO AND DISSOLUTION 605
and a bill praying an account, but not a dissolution, has
been held bad on demurrer.*^ But this rule has been con-
siderably relaxed, for it has been felt that more injustice
frequently arose from the refusal of the court to do less than
nershlp Bquabbles' (Wray ▼. Hutchison, 2 Mylne & Keen, 235, 288),
or *0D every occasion to take the management of every playhouse
and brewhouse' (Carlin v. Drury, Vesey & B. 153, 158). If the mem-
bers of the firm cannot agree as to the method of conducting their
business, the courts will not attempt to conduct It for them. Aside
from the inconvenience of constant interference, as litigation is
apt to breed hard feelings, easy appeals to the courts to settle the
difreren<res of a going concern would tend to do away with mutual
forbearance, foment discord, and lead to dissolution. It is to the
interest of the law of partnership that frequent resort to the courts
by copartners should not be encouraged, and they should realize
that, as a rule, they must settle their own differences, or go out
of business. As a learned writer has said : 'A partner, who is driv-
en to a court of equity as the only means by which he can get an
accounting from his copartners, may be supposed to be in a posi-
tion which will be benefited by a dissolution ; in other words, such
a partnership as that ought to be dissolved.' Parsons on Partner-
ship (4th Ed.) § 206. 'If a continuance of the partnership is con-
templated,' as another commentator has said, 'or if an accounting
of only part of the partnership concerns is allowed, no complete Jus-
tice can be done between the partners, and the fluctuations of a con-
tinuing business will render the accounting which is correct to-day
incorrect to-morrow ; and to entertain such bills on behalf of a part-
ner would Involve the court in incessant litigation, foment disputes,
and needlessly drag partners not in fault before the public tribu-
nals.' 2 Bates on Partnership, S 910. Judge Story declared that
'a mere fugitive temi)orary breach, involving no serious evils or mis-
chief, and not endangering the future success and operations of the
partnership, will therefore not constitute any case for equitable
relief. ♦ ♦ ♦ It is very certain that, pending the partnership,
courts of equity will not interfere to settle accounts and set right
the balance between the partners, but await the regular winding
up of the concern.* Story on Partnership, §§ 225, 229. While a
forced accounting without a dissolution is not impossible, it is by
no means a matter of course, for facts must be alleged and proved
showing that it is essential to the continuance of the business, or
that some special and unusual reason exists to make it necessary.
Thus Mr. Lindley, upon whom reliance was placed by the courts
below, mentions three classes of cases as exceptions to the general
rule: (1) Where one partner has sought to withhold from his co-
17 Loscombe v. Russell, 4 Sim. 8. See ** Partnership ," Dec. Dig.
(Key No.) § 527; Cent. Dig. 9 771.
506 ACTIONS BBTWBBN PARTNERS (Gh. 8
complete justice than could have arisen from interfering to
no greater extent than was desired by the suitor ag-
grieved.^* Where, however, no good reason appears for
departing from the old rule, it will be adhered to.** Cer-
tain exceptions to the rule have become established, and
these will be more briefly considered.
Account Where One Partner Withholds What the Firm is
Entitled to
Where one partner has obtained a secret benefit, which,
upon principles already discussed, all the partners are en-
titled to, but from which he seeks to exclude his copartners,
they can obtain their share of such benefit by an action for
an account, and such action is sustainable, although no dis-
solution is sought.'* The equity of the firm, however, is
against the delinquent partner only, and where the benefit
which the plaintiffs assert their right to share has not yet
been obtained, but only agreed for by their copartner, the
plaintiffs have no locus standi against a person with whom
the agreement has been entered into by such partner, and
partner the profits arising from some secret transaction ; (2) where
the partnership Is for a term of years still unexpired, and one part-
ner has sought to exclude or expel his copartner, or drive him to a
dissolution; (3) where the partnership has proved a failure, and
the partners are too numerous to be made parties to the action, and
a limited account will result In justice to them all/" Per Vann,
J., in LORD V. HULL, 178 N. Y. 9. 70 N. E. 69. 102 Am. St Rep.
4S4, Gllmbre, Cas. Partnership, 474. See ^'Partnership,*' Dec. Dig,
{Key No,) 8§ SlS-^48; Cent. Dig. §§ 729-822,
18 See ante, p. 499; Prole v. Masterman, 21 Beav. 61. Of. Mun-
nlngs V. Bury, Tam. 147; Bromley v. Williams, 32 Beav. 177;
Hutchinson v. Wright, 25 Beav. 444; Taylor v. Dean, 22 Beav. 429.
See "Partnership;* Dec. Dig. {Key No.) §8 S1SS48; Cent. Dig. |8
729-822.
!• Ambler v. Whipple, 20 Wall. 546, 22 L. Ed. 403; Patterson v.
Ware, 10 Ala. 444; Falrchild v. Valentine, 7 Rob. (N. Y.) 564. See
^'Partnership;* Dec. Dig. {Key No.) S§ SlS-Si8; Cent. Dig. 88 729-
822.
20 Lindl. Partn. 495. See, also, Hichens v. Congreve, 1 Russ. &
M. 150; Fawcett v. Whltehouse, Id. 132; Beck v. Kantorowlcz, 3
Kay & J. 230; Society for Illustration of Practical Knowledge v.
Abbott, 2 Beav. 559; Davis v. Davis, 60 Miss. 615; Traphagen v.
Burt, 67 N. Y. 30. See ''Partnership," Dec. Dig. (Key No.) 88 SIS,
S15; Cent. Dig. 88 729, 7S1.
g 169) AOCOUNTINO AND DISSOLUTIOH 607
cannot therefore restrain such persons from performing
that agreement. The proper course for the aggrieved part-
ners to take is to proceed against their copartner, and claim
from him the benefit of the agreement into which he has
entered.**
Account in Cases of Exclusion
Where the partnership is for a term of years still unex-
pired, and one partner has sought to exclude or expel his
copartner, or to drive him to dissolution, an account has
been directed, although no dissolution has been asked.**
The general proposition that courts of equity would inter-
fere under the circumstances now supposed was laid down
in Harrison v. Armitage,** where, however, no account was
directed, inasmuch as the evidence did not establish a part-
nership. But in Chappie v. Cadell ** an account was di-
rected at the suit of a minority, where the majority had sold
a partnership newspaper to a stranger, and some of the
more active of the majority had then entered into a fresh
agreement with the purchaser to carry on the paper in part-
nership with him. Richards v. Davies ** went a step fur-
ther. There a partnership had been entered into for a term
of years, which was still unexpired. The defendant would
come to no account with the plaintiff respecting the part-
nership dealings and transactions, but, on the application
SI Lindl. Partn. 496; Alder v. Fouracre, 8 Swanst Ch. 480.
Where defjBndant transferred certain partnership property to a
third person, his copartner 1b not obliged to rely on an action for
damages, but may sue for an accounting, and compel a surrender of
his share of the proceeds of such sale. Tannenbaum v. Armeny,
81 Hun, 581, 31 N. Y. Supp. 55. See "Partnership,** Dec. Dig. {Key
No.) §§ S1S^18; Cent. Dig. 8§ 729-758.
22 Hogan ▼. Walsh, 122 Ga. 283, 50 S. E. 84 ; Davis ▼. Davis, 60
Miss. 615; Traphagen v. Burt, 67 N. Y. 30; Knowles v. Haughton,
11 Yes. 168 ; Harrison v. Armltage, 4 Madd. 143 ; Blisset v. Daniel,
10 Hare, 493. See ^^Partnership,** Deo. Dig. {Key No.) fS S13-S18;
Cent. Dig. §§ 729-7S8.
23 4 Madd. 143. See ^'Partnership,** Dec. Dig. {Key No.) K SIS-
SIS; Cent. Dig. §§ 729-758.
24 Jac. 537. See "Partnership,** Dec. Dig. {Key No.) {| S1S-S18;
Cent. Dig. §| nO-lSS.
25 2 Russ. & M. 347. See "Partnership,** Dec Dig. {Key No.)
S1S-S18; Cent. Dig. §§ 729-738.
608 ACTIONS BETWEEN PARTNERS (Ch. 8
of the plaintiff, a decree for an account of all past transac-
tions was made.**
Defendant Seeking to Drive Plaintiff to Dissolve
It has also been held that, where defendant conducted
himself in such a way as to prevent the possibility of the
partnership business being carried on, an accounting with-
out dissolution may be had.*^ If such relief were not
available, a person fraudulently inclined might, of his mere
will and pleasure, compel his copartner to submit to the al-
ternative of dissolving a partnership, or ruin him by a con-
tinued violation of the partnership contract.
Again, where a person seeks to establish a partnership
with another who denies the plaintiff's title to be considered
a partner, if the former is successful upon the main point
in dispute, an account of the past dealings and transactions
will be decreed, although the plaintiff does not seek for a
dissolution of the partnership which he has proved to ex-
ist.*" Upon the same principle, it is apprehended that if a
partner is wrongfully expelled, and he is restored to his
status as a partner by the judgment of the court, an ac-
count will be directed, but the partnership will not neces-
sarily be dissolved.**
Account Where Concern hcu Failed
Where the partnership has proved a fttilure, and the part-
ners are too numerous to be made parties to the action, and
^•The objection has been made that to allow such an account
the defendant might be vexed by a new btil whenever new profits
accrued. This was urged by Lord Eldon in Forman v. Homfray.
2 Yes. & B. 330, by Vice Chancellor Shadwell in Loscombe v. Russell.
4 Sim. 8, and by Baron Alderson in Knebell v. White, 2 Younge &
C. Exch. 19. The answer was made in Richards v. Davis that the
defendant would have no right to complain if he repeated the in-
justice of withholding what was due to the plaintiff. See **Part-
nerahipr Dec. Dig, {Key No.) U S1S'-S18; Cent. Dig. §i 7«S-75S.
»T Fairthome v. Weston, 3 Hare, 387. See "Partnership,'' Dec.
Dig. {Key No.) §{ rrs, SlS-^18; Cent. Dig. §i 619, 729-758.
2» Knowles v. Haughton, 11 Ves. 168, as reported in Oolly. Partn.
(6th Bd.) 431, note. See "Partnership," Dec. Dig. {Key No.) U MIS-
SIS; Cent. Dig. K 729-758.
»«6lisset V. Daniel, 10 Hare, 403; Lindl. Partn. p. 40& See
"Partnership,** Dec. Dig. (Key No.) §{ SJSS18; Cent. Dig. H t^^ '^^
§ 169) ACCOUNTING AND DISSOLUTION 609
•
a limited account will result in justice to them all, such an
account will be directed, although a dissolution is not asked
for.** This doctrine extends, not only to cases where an ac-
count is sought for the purpose of having joint assets ap-
plied in discharge of the joint liabilities, but also to cases
where an account is sought for the additional purpose of
obtaining a division of the surplus assets and profits among
the persons entitled thereto.*^
Agreements for Periodical Accountings
An agreement between partners for a periodical account-
ing, or for the settlement of distinct transactions as they
occur, may be enforced without a dissolution.** Thus, in
the case of a partnership to deal in lands, where it was
agreed that the proceeds of each sale should be divided at
the time made, it was held that a division of the proceeds
could be compelled without ordering the sale of other
lands.**
Execution ctgainst One Partner^s Interest
Where the interest of a partner has been seized on execu-
tion or attachment by his individual creditor, a bill for an
accounting to determine what, if any, interest such partner
had, may be maintained without a dissolution. "Where the
court is asked to order an account between partners, in or-
der to determine whether, at the time of the attachment.
•0 Lindl. Partn. 498 ; Wall worth v. Holt, 4 Mylne & G. 619 ; Rich-
ardson y. Hastings, 7 Beav. 323; Id., 11 Beav. 17: Deeks v. Stan-
hope, 14 Sim. 57 ; Apperly v. Page, 1 Phil. Ch. 779 ; Wilson v. Stan-
hope, 2 Colly. 629 ; Cooper ▼. Webb, IS Sim. 454 ; Clements v. Bowes,
17 Sim. 107; Sheppard ▼. Oxenford, 1 Kay & J. 491, 501. See '*Part-
nersMpr Deo, Dig, {Key No.) |§ 267, 5i5-«i8; Cent Dig, S8 Wl,
729-738,
•1 Lindl. Partn. p. 600. See Covllle v. Oilman, 18 W. Va. 814.
See **Partner8hipr Deo, Dig. (Key No,) H 515-518; Cent, Dig, H
72^-758.
*2 Miller ▼. Freeman, 111 Oa. 654, 36 S. E. 961, 51 L. R. A. 504;
Wadley v. Jones, 55 6a. 329; Attorney General v. State Bank, 1.
Dev. & B. Eq. (N. C.) 545. See, also, Denver v. Roane, 99 U. S. 355,
25 L. Bd. 476. See ^'Partnership," Dec, Dig. {Key No,) §| 31S-S18;
Cent, Dig, §S 729-738,
•3 Patterson v. Ware, 10 Ala. 444. See "PartneraMp," Dee, Dig,
(Key No.) || 310-313, 34is Cent. Dig, §fi 729-738, 8I4,
610 ACTIONS BBTWBBN PARTNERS (Ch. 8
the partner proceeded against at law by his creditor had
any beneficial interest in the property attached, the same
reason for refusal to proceed does not exist as in case of
a suit between partners, where the object is to ascertain
their relative rights, with a view to decreeing the payment
of a balance by one to the other. The creditor attaches the
interest of one partner as it exists at the time of the attach-
ment. Subsequent changes in the relations of the partners
inter sese, or in the rights of creditors, which are only sub-
stituted rights of the partners, are not necessary to be as-
certained." •*
SPECIFIC PERFORMANCE
170. Specific performance of an agreement for a partnership
will not be decreed, except
EXCEPTION— (a) When the execution of an instru-
ment or of articles of partnership are necessary to
confer rights upon the other party, or to determine
his status, it will be decreed whether the partner-
ship was at will or for a fixed term, but the par-
ties will not be compelled to act under the articles
when signed,
(b) Persons may be decreed to be partners, for the pur-
poses of* an accounting, after the joint adventure
has come to an end.
General Rule Against Specific Performance of Agreements
for Partnership '
If two persons have agreed to enter into partnership, and
one of them refuses to abide by the agreement, the remedy
for the other is an action for damages, and not, excepting
in the cases to be presently noticed, for specific perform-
ance. To compel an unwilling person to become a partner
with another would not be conducive to the welfare of the
latter, any more than to compel a man to marry a woman
«* Cropper v. Ck)bum, 2 Curt 465, Fed. Cas. No. 3,416w See ^^Pari-
nerahipr Deo. Dig. {Key No.) tf 209, SIO^IS; Cent. Dig. H 402,
729-738.
§ 170) SPECIFIO PBRFOBMANCS 511
he did not like would be for the benefit of the woman.
Moreover, to decree specific performance of an agreement
for a partnership at will would be nugatory, inasmuch as it
might be dissolved the moment after the decree was made ;
and to decree specific performance of an agreement for a
partnership for a term of years would involve the court in
the superintendence of the partnership throughout the
whole continuance of the term. As a rule, therefore, courts
will not decree specific performance of an agreement for
a partnership.* • Nor will specific performance be decreed
of an agreement to become a partner and bring in a certain
amount of capital, or, in default, to lend a sum of money to
the plaintiff.'^
Cases in Which a Decree will he Made
HowTBver, if the parties- have agreed to execute some for-
mal instrument, which would have the effect of conferring
rights which do not exist so long as the agreement is not
carried out, in such a case, and for the purpose of putting
the parties into the position agreed upon, the execution of
that formal instrument may be decreed, although the part-
nership thereby formed might be immediately dissolved.'^
«B Scott V. Rayment, L. R. 7 Eq. 112; Hercy v. Birch. 9 Ves. 357;
Sheffield Gas Consumers' Co, y. Harrison, 17 Beav. 294; Buxton
T. Lister, 8 Atk. 383; England ▼. Curling, 8 Beav. 129; Syers v.
Syers, 1 App. Cas. 174; BUCK v. SMITH, 29 Mich. 166, 18 Am. Rep.
84, Gllmore, Cas. Partnership, 479; Morris ▼. Peckham, 51 Conn.
128. An agreement for a partnership for a fixed term will not be
enforced. See Somerby ▼. Buntln, 118 Mass. 279, 19 Am. Rep. 459;
Meason ▼. Kalne, 63 Pa. 335 ; Stocker ▼. Wedderbum, 3 Kay & J.
393. See **8p€Citlo Performance,*' Dec. Dig, (Key No,) § 79; Cent.
Dig. § 189.
•« Slchel y. Mosenthal, 30 Beay. 371. Where the contract Is mere-
ly to contribute capital, an action for damages Is an adequate rem-
edy. See "Specific Performance,** Dec. Dig. (Key No.) § 79; Cent.
Dig, § 189.
•T Buxton y. Lister, 3 Atk. 385 ; Stocker y. Wedderbum, 3 Kay
& J. 403. And see Crawshay y. Maule, 1 Swanst 513, note. Convey-
ances of property rights may be enforced. See Story, Partn. § 189;
1 Story, Eq. Jur. 666; Somerby y. Buntln, 118 Mass. 279, 19 Am.
Rep. 459; Blrchett y. Boiling, 5 Munf. (Va.) 442; Satterthwalt y.
Marshall, 4 Del. Ch. 337 ; Robinson y. Mcintosh, 3 B. D. Smith (N.
Y.) 221; Tllman y. Cannon, 3 Humph. (Tenn.) 637; Beckwlth y.
512 ACTIONS BETWBBN PARTNERS (Oh. 8
Specific Performance Where an Account Only is Wanted
The only other class of cases in which anything like spe-
cific performance of an agreement for a partnership will be
decreed is where a person who has agreed with another to
share the profits of some joint adventure seeks to obtain
that share after the adventure has come to an end. Al-
though the decree giving him the relief he asks may be pref-
aced by a declaration that the agreement relied upon ought
to be specifically performed, this has not the effect of creat-
ing a partnership to be carried on by the litigants, but
merely serves as a foundation for the decree for an account.
Manton, 12 R. I. 442; Whitworth v. Harris, 40 Miss. 488. But see
Sims V. McEwen*8 Adm*r, 27 Ala. 184.
In England v. Curling, 8 Beay. 129, the plaintiff and twg of the
defendants agreed to become partners as ship agents, for 7, 10, or
14 years, and they signed with their initials an agreement to that
effect A deed was prepared to carry oat the agreement The
deed, however, was never executed, and it differed somewhat from
the agreement The parties carried on business as partners under
the agreement for 11 years, and then they began to quarrd. The
defendant Curling, who appears to have been in the wrong from
the beginning, gave notice to dissolve in 3 months. He retired from
the partnership, and entered into partnership with other persons,
and carried on business with them on the premises and in the name
of the old firm. The new firm opened the letters addressed to the
old one, and gave notice of its dissolution to its correspondents.
The plaintiff then filed a bill for specific performance and an in-
junction, and he obtained a decree. The following was the minute
of the decree : "The court doth declare that the agreement for a
copartnership, dated, etc., Is a binding agreement between the par-
ties thereto, and ought to be specifically performed and carried into
execution, and doth order and decree the same accordingly. Refer it
to the master to inquire whether any and what variations have
been made in the said agreement by and with the assent of the sev-
eral parties thereto since the date thereof. Let the master settle
and approve of a proper deed of copartnership between the said
parties In pursuance of the said agreement, having regard to. any
variations which he may find to have been made in the said agree-
ment as hereinbefore directed; and let the parties execute it
Continue the Injunction against the defendant Curling." It Is to
be noticed that the relief granted was by restraint and not en<
forcement except merely as to signing the deed. See the observa-
tions of Lord Romllly on this case in Slchel v. Mosenthal, 30 Beav.
376. Bee "Bpeciflc Performance/* Dec, Dig, (Key No.) { 79; Cent
Dig. S 189.
§ 170) SPECIFIC PERFORMANCE 613
which is the substantial part of what is sought and given.
An instance of this class of cases is afforded by Dale v.
Hamilton.** There, in substance, three persons had agreed
to purchase land, to build on it and improve it, and then to
sell it for their common benefit. Land was accordingly ob-
tained, built upon, and improved, and subsequently the
right of one of the three persons to any share in the ad-
venture was denied by the other two. He thereupon filed
a bill for a sale of the land, for an account of the joint specu-
lation, and for a proper distribution of the moneys arising
from the sale; and the court held him entitled to this re-
lief.**
Specific Performance for Other Purposes
Relief in the shape of specific performance may be re-
quired for other purposes besides carrying into execution
agreements to form partnerships. The assistance of a
court is often requisite to compel those engaged in a going
concern to act conformably to the articles of partnership,
and also to compel those who have dissolved partnership
to observe the stipulations into which they have entered.
The relief will be granted or refused upon the principles by
which the court is ordinarily guided in questions of specific
performance, and that nothing turns on the circumstance
of the litigants having been partners. For purposes of ref-
erence, it may be useful to mention that the court has en-
forced the following agreements, entered into upon or with
a view to a dissolution, namely, agreements not to carry on
business within a certain distance or for a certain space of
time; *** agreements as to the custody of partnership books,
and the furnishing of copies thereof; *^ agreements that a
•• 5 Hare, 369, and 2 Phil. Ch. 266. See ''Specific Performance,**
Dec. Dig. {Key No.) i 79; Cent. Dig. § 189.
•• For another instance, see Webster v. Bray, 7 Hare, 159. See
"Specific Performance,'' Dec. Dig. {Key No.) S 79; Cent. Dig. S 189.
40 v^Thlttaker v. Howe, 3 Beav. 383 ; Turner v. Major, 3 Glff. 442.
And Bee Coates v. Ck>ates, 6 Madd. 287; Wmiams ▼. WilUamB, 1
WUs. Ch. 473, note. See ''Specific Performance" Dec. Dig. {Key
No.) § 79; Cent. Dig. S 189.
«i Ungen v. Simpson, 1 Sim. & S. 600. And see Whittaker ▼.
Howe, 3 Beav. 383. See "Specific Performance" Dec. Dig. {Key
No.) § 79; Cent. Dig. S 189.
Qil.Pabt.— 33
514 ACTIONS BETWEEN PARTNERS (Ch. 8
third party, and he only, shall get in debts ; *■ agreements
that the value of the share of an outgoing or a deceased
partner shall be ascertained in a specified way, and taken
accordingly.;** agreements that an outgoing partner shall
offer his share to his copartners before selling it to other
persons ; ** agreements to grant an annuity to a retiring
partner and his widow ; *" agreements not to divulge or
make use of a trade secret.**
INJUNCTION
171. The granting of an injunction to protect a partner's
rights is governed by ordinary principles. It may
be granted, although no dissolution of the part^
nership is sought.
Injunctions and Receivers
In order to prevent a partner from acting contrary to the
agreement into which he may have entered with his copart-
ners, or contrary to the good faith which, independently of
any agreement, is to be observed by one partner towards
his copartner, it is sometimes necessary for a court to in-
terfere, either by granting an injunction against the partner
*« Davis V. Amer, 8 Drew. 64 ; Turner v. Major, 3 Giflf. 442. See
**8peciflc Performance,*' Dec. Dig, (Key No,) § 79; Cent, Dig. f 189.
« 3 Morris v. Kearsley, 2 Younge & 0. Exch. 139; Essex ▼. Essex,
20 Beav. 442; King v. Chuck, 17 Beav. 325. And see Featheraton-
haugh ▼. Turner, 25 Beav. 382, and Gibson v. Goldsmid, 5 De'Gex,
M. & G. 757, reversing 18 Beav. 584. Cf. Downs v. Collins, 6 Hare,
418, where to have enforced the agreement would have been to de-
cree specific performance of a contract for a partnership; and
Cooper V. Hood, 7 Wkly. Rep. 83, where a decree was refused on the
ground that the agreement sought to be enforced was too vague in
its terms. See "Specific Performance,** Dec. Dig. {Key No.) | 79;
Cent, Dig, | 189,
** Homfray v. FothergiU, L. R. 1 Eq. 567. See ** Specific Perform^
ance,** Dec, Dig, (Key No.) § 79; Cent, Dig, | 189.
48 Aubin V. Holt, 2 Kay & J. 66; Page v. Cox, 10 Hare, 163. See
"Specific Performance," Dec, Dig. (Key No.) § 79; Cent. Dig, § 189.
4« Morison v. Moat, 9 Hare, 241. See "Specific Performance,** Dec.
Dig. (Key No.) § 79; Cent. Dig. § 189.
S ITl) INJUNCTION 615
complained of, or by taking the affairs of the partnership
out of the hands of all the partners, and intrusting them to
a receiver of its own appointment. These two modes of in-
terference require to be considered separately, for they are
not had recourse to indiscriminately. The appointment of
a receiver, it is true, always operates as an injunction, for
the court will not suffer its officer to be interfered with by
any one ; *^ but it by no means follows that, because the
court will not take the affairs of a partnership into its own
hands, it will not restrain some one or more of the partners
from doing what may be complained of.**
Illustrations
Partners may be enjoined from excluding their copartner
from the partnership business ; *• from using partnership
property contrary to the partnership agreement ; "• from
changing the fundamental nature of the partnership busi-
er Helmore V. Smith, 35 Ch. DIv. 449; LindL Partn. p. 63a See
**Partner8hipr Deo. Dig. {Key No.) S§ 118, 119, 209, 210, 92i, S25;
Cent. Dig. {§ 181, 181^, 401'40S, 755-757.
«» See Hall ▼. Hall, 8 Macn. & G. 79, 85; RnUand Marble Go. t.
Ripley, 10 WaU. 339, 19 L. Ed. 955 ; PIRTLE v. PENN, 3 Dana (Ky.)
247, 28 Am. Dec. 70, Gllmore, Gas. Partnership, 480; Van Kuren y.
Trenton Locomotive & Machine Mfg. Go., 13 N. J. Eq. 303 ; New T.
Wright, 44 Miss. 202 ; WUson v. Fltchter, 11 N. J. Eq. 71 ; Ballon y.
Wood, 8 Gush. (Mass.) 48. An injunction will be granted to restrain
one partner from using partnership property in a manner not au-
thorized in the contract of partnership. New v. Wright, 44 Miss.
202. Generally, as to injunctions to protect rights after dissoln-
tion, see Wilkinson v. Tllden (G. G.) 9 Fed. 683; Fletcher v. Van-
dusen, 52 Iowa, 448, 3 N. W. 488; SHANNON v. WRIGHT, 60 Md.
520, Gilmore, Gas. Partnership, 481 ; McGowan Bros. Pump & Mach.
Go. V. McGowan, 22 Ohio St 370. See "Partnership," Deo. Dig. (Key
No.) S§ 118, 209, S24; Cent. Dig. §| 181, 401, 402, 155, 756.
*• Rutland Marble Go. v. Ripley, 10 Wall. 339. 19 L. Ed. 955;
PIRTLE V. PENN, 3 Dana (Ky.) 247, 28 Am. Dec. 70, Gilmore, Gas.
Partnership, 480 ; Wolbert v. Harris, 7 N. J. Eq. 605 ; Hall v. Hall,
12 Beav. 414 ; Petit v. Ghevelier, 13 N. J. Eq. 181 ; McGabe v. Sin-
clair, 66 N. J. Eq. 24, 58 Ati. 412; Fitzgerald v. Flynn (R. I.) 69
AU. 921 ; Miller v. O'Boyle (G. G.) 89 Fed. 140. See "Partnership,'*
Dec. Dig. {Key No.) § 118; Cent. Dig. 8 181.
BO New V. Wright, 44 Miss. 202; Hall v. Hall, 12 Beav. 414. See
"Partnership;* Deo. Dig. {Key No.) { 118; Cent. Dig. | 181.
516 ACTIONS BBTWBBN PARTNlORS (Cb. 8
ness ; ■* from carrying on a competing business ; •■ and
injunctions have been granted in many other classes of
cases."* Even where the partnership is at will, an injunc-
tion may be granted, but not, of course, where it would
be valueless/* While the granting of an injunction usually
accompanies an action for a dissolution, it may occur al-
though no dissolution is sought."
Injunction in Action for Dissolution
In an action instituted for the purpose of having a part-
nership dissolved, or of having an account taken after a
partnership has been dissolved, it has never been doubted
that an injunction will be granted to restrain one of the
partners from doing any act which will impede the winding
up of the concern. For example, one partner will be re-
strained from carrying on the concern for any other pur-
pose than winding up ; ■• from damaging the value of the
good will, if it ought to be sold for the benefit of all ; "^
01 Natnsch v. Irving, 2 Coop, t Cott 858. See **Partner9hip,^ Dec
Dig. (Key No.) 1 118; Cent Dig. 8 181.
ss Marshall v. Johnson, 33 Oa. 500 ; Kemble v. Kean, 8 Sim. 833,
335. See **Partners?Up,*' Dec. Dig. {Key No.) f| 99, ^118; Cent. Dig.
U 16S, 181.
B8 See Glassington y. Thwaites, 1 Sim. & S. 124; Stockdale t. Ul-
lery, 37 Pa. 486, 78 Am. Dec. 440; Morris v. Ck>lman, 18 Yes. 437;
Levlne ▼. Michel, 35 La. Ann. 1121 ; England t. Curling, 8 Beav.
129. See '^Partnership," Dec. Dig. {Key No.) § 118; Cent. Dig. | 181.
B4 Lindl. Partn. p. 540. See Peacock y. Peacock, 16 Yes. 49 ; Miles
T. Thomas, 9 Sim. 606. See ** Partnership,*' Dec Dig. (Key No.) f
118; Cent. Dig. § 181; "Injunction,** Dec. Dig. {Key No.) { 22;
Cent. Dig. Sf 20, 21.
SB LindL Partn. (Wentw. Ed.) p. 539, note 1, citing Ballon y. Wood,
8 OoBh. (Mass.) 48; Stockdale v. Ullery, 37 Pa. 486, 78 Am. Dec.
440 ; Marshall v. Johnson, 33 Ga. 500 ; Kean y. Johnson, 9 N. J. Eq.
401 ; Roberts y. McKee, 29 6a. 161 ; Rutland Marble Oo. y. Ripley,
10 Wall. 339, 19 L. Ed. 955. See ''Partnership,** Dec. Dig. (Key No.)
U 118, 209, 32i; Cent. Dig. §§ 181, hOl. 402, 755, 756.
»« De Tastet y. Bordenave, Jac. 516 ; Wilson y. Fitchter, 11 N. J.
Eq. 71 ; Marshall y. Watson, 25 Beay. 501 ; Charlton y. Poulter, 19
Yes. 148, note. See '^Partnership,** Dec. Dig. (Key No.) § 524; Cent.
Dig. S§ 755, 756.
BT Turner y. Major, 8 Qiff. 442; . Bradbnry y. Dickens, 27 Beav.
53. In the last case the defendant was advertising the discontinu-
ance of a partnership periodical of which he was the editor. Angier
§ 171) INJUNCTION 617
from getting in the assets if he is likely to misapply them.**
A surviving partner will be restrained from improperly
ejecting the representatives of his deceased copartner ; **
and they, on the other hand, will be restrained from mak-
ing any improper use of partnership property, the legal
estate of which may happen to be in them.** So a surviv-
ing partner will be restrained from disposing of or getting
in the partnership assets, if he has already been guilty of
breaches of trust with reference to them.*^ Again, in an
action for a dissolution, a partner will be restrained from
improperly interfering with or obstructing the partnership
business ; ** from drawing accepting, or indorsing bills of
exchange in the partnership name for other than part-
nership purposes ; •* from getting in debts owing to the
firm ; •* from withholding the partnership books ; ** and,
generally, on a dissolution, one partner will be restrained
from injuring the property of the firm.**
T. Webber, 14 Allen (Mass.) 211, 92 Am. Dec 748; Trego v. Hunt,
65 L. J. Oh. (N. S.) 1, 73 Law T. Rep. C14. Bee '* Partnership,'' Deo.
Dig. (Key No.) { S24; Cent. Dig. §§ 755. 756.
•8 O'Brien v. Ck)oke, Ir. R. 6 Eq. 51. There the plaintiff was al-
lowed to get them In, Indemnifying the defendant against costs, &c.
See '^Partnership,'* Dec. Dig. (Key Nq.) { S24; Cent. Dig. S 755,
s» Elliot T. Brown, 8 Swanst 489, note ; Hawkins ▼. Hawkins, 4
Jur. (N. S.) 1045. Bee '^Partnership," Dec. Dig. {Key No.) §8 118, £58.
«o Alder V. Fouracre, 3 Swanst Ch. 489. See ''Partnership,'' Deo,
Dig. {Key No.) K US. 258.
«i Hartz V. Schrader, 8 Vee. 317. See "PartnersMp," Deo. Dig.
{Key No.) §§ 118, 258.
«s Smith Y. Jeyes, 4 Beav. 503 ; Charlton ▼. Ponlter, 19 Vee. 148,
note. See "Partnership," Dec. Dig. {Key No.) § 324; Cent. Dig. f 755.
« 3 Williams v. Bingley, 2 Vern. 278, note; Colly. Partn. 233; Jer-
vls V. White, 7 Ves. 413; Hood v. Aston, 1 Rnss. 412. In the two
last cases, the Injunction restrained mala fide Indorsees for value
from parting with or negotiating the securities. See "Partnership,"
Dec Dig. {Key No.) §S 118, 824; Cent. Dig. §§ 181, 755.
«* Read v. Bowers, 4 Brown, Ch. 441. See "Partnership,** Deo.
Dig. {Key No.) §§ 118, S24; Cent. Dig. §§ 181, 755.
«» Taylor v. Davis, 3 Beav. 388, note; Greatrex v. Greatrex, 1 De
Gex & S. 692; Charlton v. Poulter, 19 Ves. 148, note. See "Partner-
ship," Dec. Dig. {Key No.) %% 118, 324; Cent. Dig. S| 181, 755.
•« See Marshall v. Watson, 25 Beav. 501, where an injunction to
restrain a partner from publishing the accounts of the firm, was
under special circumstances refused. See, also, as to making slander-
518 ACTIONS BETWEEN PARTNERS (Ch. 8
Injunction to Enforce Special Agreements
So, after a dissolution, the court constantly interferes by
injunction to restrain breaches of special agreements en-
tered into between the partners— such, for example, as
agreements not to carry on business ; '^ not to get in debts
of the firm ; •• not to divulge a trade secret.'* So, if a
partner retires, and assigns his interest in the partnership
and in the good will thereof to the continuing partners, he
will be restrained from recommencing or carrying on busi-
ness in such a way as to lead people to suppose that he is
the successor of or still connected with the old firm/*
Injunction in Case of Misconduct
Equity will also enjoin the misconduct of partners.
Mere squabbles and improprieties, arising from infirmities
of temper, are not considered sufficient ground for an in-
junction ; ^^ but if one partner excludes his copartner from
his rightful interference in the management of the partner-
ship affairs, or if he persists in acting in violation of the
partnership articles on any point of importance, or so
grossly misconducts himself as to render it impossible for
the business to be carried on in a proper manner, the court
0U8 statements and diverting fetters, Hermann Loog v. Bean, 26 Ch.
DlT. 806, a case of agency, but applicable to partnerships.
So the court will Interfere by injunction to protect partners from
the interference of persons claiming the share of a late copartner by
reason of his death or bankruptcy, or under an execution. Philips
V. Atkinson, 2 Brown, Oh. 272 ; Bevan v. Lewis, ;i Sim. 376 ; Allen
V. Kilbre, 4 Madd. 464. See, also, ante, § 140, notes 36, 36, p. 416.
See "Partnership,'' Deo, Dig. {Key No.) f$ 118, S24; Cent Dig. %%
ISU 755.
«T Whittaker v. Howe, 8 Beav. 383. See '^Partnership,*^ Dec. Dig.
(Key No.) | S24; Cent. Dig. 8 755.
« 8 Davis V. Amer, 8 Drew, 64; Hartz v. Schrader, 8 Ves. 817;
Ellis V. Commander, 1 Strob. Eq. (S. 0.) ISa See '^Partnership,"
Dec. Dig. (Key No.) S 924; Cent Dig. § 755.
6» Morison v. Moat, 9 Hare. 241 ; Roberts v. McKee, 29 Ga. 161.
See ** Partnership," Dec Dig. (Key No.) § S24; Cent Dig. i 755;
** Injunction," Dec. Dig. (Key No.) § 56; Cent Dig. | 110.
TO Churtbn v. Douglas. Johns. Eng. Ch. 174. See ''Partnership,**
Dec. Dig. {Key No.) K 230, 258; Cent Dig. f 477%.
71 See Marshall v. Colman, 2 Jac. & W. 266; Smith v. tfeyes, 4
Beav. 503; Lawson v. Morgan, 1 Price, 303; Oof ton v. Horner, 5
Price, 537 ; Warder v. Stilwell, 3 Jur. (N. S.) 9. See "Partnership,"
Deo. Dig. (Key No.) S§ 88. 118; Cent Dig. §| 1S6, 181.
§ 172) ' BECBIVEBS 619
will interfere for the protection of the other partners.'*
Where, however, the partner complained of has by agree-
ment been constituted the active managing partner, the
court will not interfere with him unless a strong case be
made out against him ; '■ nor will the court restrain a part-
ner from acting as such merely because, if he is known so
to do, the confidence placed in the firm by the public will
be shaken.'*
RECEIVERS
172. The appointment of a receiver of partnership prop-
erty rests in the sound discretion of the court
This discretion is exercised subject to the follow-
ing general rules:
(a) A receiver will not be appointed unless a dissolution
be sought, except
EXCEPTIONS — (1) Where a receiver is necessary to pre-
' serve tlie property until final hearing, and
(2). Where a decree can be made for carrying on
the concern according to certain terms, which
the parties themselves have agreed upon.
Ys In Anderson v. Wallace, 2 Moll. 640, one of several partners
who horsed a mail coach was restrained from horsing it on the
ground that he did it so badly as to imperil the business of the
concern. See ^^Partnership,** Dec. Dig. {Key No.) |§ 7P, 118; Cent.
Dig. §1 127, 181.
TtLawson v. Morgan, 1 Price, 803; Waters v. Taylor, 15 Ves.
10. See, also. Walker v. Hirsch. 27 Ch. Dlv. 460. See ''Partner-
ship;* Dec. Dig. (Key No.) §| 79, 118; Cent. Dig. K 127, 181.
74 Anon, 2 Kay & J. 441.
Partner applying for injunction must come with clean handa
Smith V. Fremont, 2 Swanst. Ch. 330; Llttlewood v. Caldwell, 11
Price, 97, where an injunction was refused, because the plaintiff
had taken away the partnership books; Rutland Marble Co. v.
lUpley, 10 Wall. 339, 19 L. Ed. 955. See, also, Const v. Harris,
Turn. & H. 496, 524.
An injunction will also be granted to sustain a person from hold-
ing out another as partner with him without the authority of that
other. See Routh v. Webster, 10 Beav. 561; Bullock v. Chapmen,
2 De Gex & S. 211 ; De Groot v. Peters, 124 Cal. 406, 57 Pac. 209.
71 Am. St Rep. 91. Lindl Partn. 544. Bee ''Partnership,** Dec. Dig.
(Key No.) § 118; Cent. Dig. § 181.
520 ACTIONS BBTWBBN PARTNERS (Ch. 8
(b) Before dissolution, a receiver will not be appointed,
unless it appears that plaintiff will be entitled to a
decree of dissolution, and that defendant has been
guilty of improper conduct.
(c) Where a decree of dissolution has been entered on
account of the improper conduct of the parties, a
receiver will be appointed as a matter of course.
(d) After dissolution, a receiver will be appointed only
where it appears either that a partner is miscon-
ducting himself, or that the assets are in periL^*
•
Principles on Which a Receiver is Appointed
Where an application is made for a receiver in partner-
ship cases, the court is always placed in a position of very
great difficulty. On the one hand, if it grants the motion,
the effect of it is to put an end to the partnership, which
one of the parties claims a right to have continued; and,
on the other hand, if it refuses the motion, it; leaves the
defendant at liberty to go on with the partnership business
at the risk, and probably to the great loss and prejudice,
of the dissenting party. Between these difficulties it is not
very easy to select the course which is best to be taken,
but the court is under the necessity of adopting some mode
of proceeding to protect, according to the best view it can
take of the matter, the interests of both parties.^*
In granting or refusing an order for a receiver in part-
nership cases, the court does not act on the same principles
on which it grants or refuses an order for an injunction.
In granting a receiver of a partnership, the court takes the
affairs of the partnership out of the hands of all the part-
ners, and intrusts them to a receiver or manag^er of its own
appointment. In granting an injunction, the court does
not take the affairs of the partnership into its own hands,
T8 The text of this section Is substantially reproduced from Kerr
on Receivers.
7e Madgwlck v. Wimble, 6 Beav. 4&5. 500; Blakeney v. Dufaur.
15 Bear. 40. 42. Equity has inherent Jurisdiction to appoint a re-
ceiver independent of statute. Cox v. Volkert. 86 Afo. 505. fiee
'^Partnership;' Dec. Dig, (Key No.) || 119, 210, 258, S25; Cent. Dig.
n 181\^, iOS, 575%, 7J7-7^.
§ 172) RECEIVSBS 521
but only restrains one or more of the partners from doing
what may be complained of. The order for a receiver ex-
cludes all the partners from taking any part in the manage-
ment of the concern. The order for an injunction merely
restrains one of the partners, who may have acted in breach
of the partnership articles, or may have otherwise miscon-
ducted himself, from continuing to act in the way com-
plained of.'^ It, therefore, dpes 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.^* In every
case where complaints are made of breaches of articles, it
must be seen whether they are urged with a view of mak-
ing them the foundation of a dissolution, or of a decree
enforcing and carrying on the partnership according to the
original terms, and preventing, by proper means, those
breaches recurring which have before happened by reason
of the conduct of the parties.'*
Receiver Not Appointed Unless a Dissolution be Sought
It is not according to the practice of the court, where it
is not the object of the suit to obtain a dissolution of a.
partnership, but, on the contrary, to continue the partner-
ship, to grant, in the course of that suit, the appointment
of a receiver.*® The court does not interfere with the man-
agement of a partnership, except as incidental to the ob-
TTHaU ▼. HaU, 8 Macn. & G. 79, 86. See "Partnership," Dec
Dig, {Key No.) U 119, 210, 258, S25; Cent. Dig. H 181^, m, 57ff%,
757-7^7.
TtHall y. Hall, 12 Beav. 414, 3 Macn. ft G. 79; Read v. Bowers,
4 Brown, Gli. 441 ; Hartz v. Schrader, 8 Ves. 317. See, also, Gar*
retson v. Weaver, 8 Edw. Ch. (N. Y.) 385 ; Low v. Holmes, 17 N. J.
Eq. 148. See "Partnership,'* Dec. Dig. (Key No.) §§ 119, 210, 258,
S25; Cent. Dig. §§ I8IV2, 40S. 576^, 757-767.
T»Hall V. Hall, 12 Beav. 414, 3 Macn. & G. 79; Goodman ▼.
Whltcomb, 1 Jac. & W. 589, 593. See "Partnership,'' Dec. Dig. (Key
No.) §§ 119, S25; Cent. Dig. f§ 181^^, 757-767.
80 Goodman v. Whltcomb, 1 Jac. & W. 589, 598 ; Hall v. Hall, 12
Beav. 414, 3 Macn. & G. 79 ; Roberts v. Eberhardt, Kay, 148 ; Camp-
bell ▼. Rich Oil Co., 96 S. W. 442, 29 Ky. Law Rep. 716. Disagree-
ments between partners. Insufficient as a ground for dissolution,
are not sufficient to sustain the appointment of a receiver. SLOAN
V. MOORE, 37 Pa. 217, Gilmore, Cas. Partnership, 231; McElvey v.
522 ACTIONS BETWEEN PARTNERS (Gh. 8
ject of the suit — to wind up the concern and divide the
assets.*^ If the court were not to adopt such a rule, it
might be called upon to make itself the manager of every
trade in the country.**
Same — Exceptions
Cases, however, may arise in which a partner was so
conducting himself that, unless a receiver was appointed
before the hearing, the partnership concern might in the
meantime be destroyed. In such case the court would ap-
point an interim receiver.** A receiver would also, there
is no reason to doubt, be appointed, although the dissolu-
tion of the partnership were not sought, in a case where
the question was one of the receipt of money only, and
where, if the money were allowed to be received by the
parties, it would not be applied to its proper purposes, and
thus, at the hearing, there would be a failure of justice,
unless the court interposed in the meantime.**
Necessity of Prayer for Dissolution
It is not necessary, in order to induce the court to appoint
a receiver, that the bill should expressly pray for a dissolu-
tion. It is enough that it be plain that it is necessary to
put an end to the concern.** If such be the case, the case
stands upon precisely the same basis as if the bill had been
filed exclusively for the purpose of the dissolution, and the
winding up of the concern.** The court will in all cases
Lewis, 76 N. Y. 873. See ''Partnership,^ Deo. Dig, (Key No.) §|
119, 325; Cent. Dig. |§ 181^, 757-167.
•1 Waters v. Taylor, 15 Ves. 10, 13. See ** Partnership,** Dec Dig.
(Key No.) {§ 119, 325; Cent. Dig. §§ 181\ii, 757-767.
«a Goodman v. Wbitcomb, 1 Jac. ft W. 589, 592; Roberts v. Eber-
hardt, Kay, 148. See ''Partnership," Dec. Dig. (Key No.) SS 119, 325;
Cent. Dig. §f ISl-^, 757-767.
8s Hall y. Han, 12 Beav. 414, 3 Macn. & G. 79; GlUett v. Hlgglns,
142 Ala. 444, 38 South. 664. See "Partnership;* Dec. Dig. (Key No.)
§{ 119, 325; Cent. Dig. §f 181^, 757-767.
8«HaU V. HaU, 12 Beav. 414, 3 Macn. ft G. 79^ See "Partner-
ship;* Dec. Dig. (Key No.) {| 119, 325; Cent. Dig. {§ i81%, 757-767.
«» Wall worth v. Holt, 4 Mylne ft C. 619. See "Partnership," Dec
Dig. (Key No.) § 325; Cent. Dig. §§ 757-767.
8« Hall V. Hall, 3 Macn. ft G. 89. See "Partnership/* Dec Dig,
(Key No.) | 325; Cent. Dig. §§ 757-767.
§ 172) BECEIY^RS 523
entertain an application for a receiver if the object of the
suit is to wind up the partnership affairs, and the appoint-
ment of a receiver is sought with that view.'^
The mere fact that the bill may pray a dissolution is not
a sufficient ground for the appointment of a receiver, un-
less a state of facts is shown upon the bill as will, if proved
at the hearing, entitle the plaintiff to a decree for dissolu-
tion.** The court will not, upon motion, appoint a re-
ceiver, unless it sees that there is an actual present dissolu-
tion, arising from the acts of the parties, or that, at the
hearing, it will dissolve the partnership. If there has been
no misconduct, or no such violation of the articles as to
entitle the plaintiff to a dissolution, a receiver will not be
appointed.** If, however, the court sees its way to a dis-
solution at the hearing, there is a case for a receiver.*®
Receiver Not Ordered in Every Case Where a Case for Dis-
solution is Made
The court will not, as a matter of course, appoint a re-
ceiver of the partnership assets even where a case for dis-
solution is made.** The very basis of a partnership con-
87 Sheppard v. Oxenford, 1 Kay & J. 491 ; Hubbard v. Curtis, 8
Clarke (Iowa) 1, 74 Am. Dec. 283; Say lor v. Mockble, 9 Iowa, 209;
Evans v. Coventry, 5 De Gex, M. & G. 911. See **Partner8hip,*' Deo.
Dig. {Key No.) { 925; Cent. Dig. §f 757-757.
88 Goodman v. Whitcomb, 1 Jac. & W. 589 ; Roberts v. Eberhardt,
Kay, 148 ; Smith v. Jeyes, 4 Beav. 503. See ** Partnership,** Dec. Dig.
(Key No.) § S25; Cent. Dig. §f 757-767.
89 Baxter v. West, 28 Law J. Ch. 169; Rische v. Rische, 46 Tex.
Civ. App. 23, 101 S. W. 849 ; Campbell v. Rich Oil Co.. 96 S. W. 442,
29 Ky. Law Rep. 716. See "Partnership,*' Dec. Dig. {Key No.) { 325;
Cent. Dig. {§ 757-767.
80 Marsden v. Kaye, 30 Law T. 197 ; Go wan v. Jeffries, 2 Ashm.
296; Glllett v. Higgins, 142 Ala. 444, 38 South. 664. If the case
made stands in such a state that the court cannot see whether or
not there shall be a decree for dissolution at the hearing, it will not
take into Its own hands the conduct of a partnership, although It
may be dissolved. Goodman v. Whitcomb, 1 Jac. & W. 592. See,
also, as to appointment on Interlocutory application, Baxter v. West,
28 Law J. Ch. 169; at the hearing, Id., 1 Drew & G. 173, 175;
Waters v. Taylor, 15 Ves. 25 ; Bailey v. Ford, 13 Sim. 495 ; Bowker
V. Henry, 6 Law T. (N. S.) 43. See "Partnership,** Dec. Dig. {Key
No.) f S25; Cent. Dig. §{ 757-767.
•r Harding v. Glover, 18 Ves. 281 ; Fairbum v. Pearson, 2 Macn.
524 ACTIONS BBTWBBN PARTNBB8 (Ch. 8
tract being the mutual confidence reposed in each other by
the parties,** the court will not appoint a receiver in a suit
between members of the partnership firm unless some spe-
cial ground for its interference be established.** It must
appear that the member of the firm against whom the ap-
pointment of a receiver is sought has done acts which are
inconsistent with the duty of a partner, and are of a nature
to destroy the mutual confidence which ought to subsist
between the parties.**
A O. 145; Slemmer's Appeal, 68 Pa. 168, 06 Am. Dea 255; Waters
▼. Taylor, 15 Ves. 10; Cox ▼. Peters, 13 N. J. Eq. 39; Renton ▼.
Chaplain, 9 N. J. Eq. 62; QuinUvan ▼. English, 44 Mo. 46; Law-
rence Lumber Co. ▼. A. J. Lyon & Co., 93 Miss. 859, 47 South. 849;
Marshall v. Matson, 171 Ind. 238, 86 N. E. 839.
It is held that, where the firm is admittedly dissolTed, the ap-
pointment of receiver follows as a matter of course. Nathan ▼.
Bacon, 75 N. J. Eq. 401, 72 Atl. 359; Bond ▼. May, 38 Ind. App.
396, 78 N. E. 260. See ^'Partnershipr Dec. Dig, (Key No.) | S25;
Cent. Dig. §i 757-767.
•s Philips ▼. Atkinson, 2 Brown, Ch. 272. See Peacock ▼. Pea-
cock, 16 Ves. 51 ; Sieghortner v. Weissenbom, 20 N. J. Eq. 172 ; Qar-
retson ▼. Weaver, 3 Edw. Ch. (N. Y.) 385. See "Portn^r^Wp," Dec.
Dig. (Key No.) H 1, 70; Cent. Dig. { lU.
•s Harding v. Glover, 18 Ves. 281. See, also, Slemmer's Appeal,
58 Pa. 168, 98 Am. Dec. 256 ; Tomlinson v. Ward, 2 Conn. 396 ; Ter-
rell V. Goddard, 18 Ga. 664; Parkhurst v. Muir, 7 N. J. Eq. 307;
Smith V. Brown, 50 Wash. 240, 96 Pac. 1077; Whilden v. Chapman,
80 S. C. 84, 61 S. B. 249 ; Jones v. Weir, 217 Pa. 321, 66 AtL 550 ;
CampbeU v. Rich Oil Co., 96 S. W. 442, 29 Ky! Law JRep. 7ia See
**Partner8hip," Deo. Dig. {Key No.) {§ 119, S25; Cent. Dig. H 181\^,
767-767.
9* Smith V. Jeyes, 4 Beav. 505 ; Peacock v. Peacock, 16 Ves. 51 ;
Chapman v. Beach. 1 Jac & W. 594, note. Williamson v. Wilson, 1
Bland (Md.) 418, 428; Whipple v. Lee, 46 Wash. 266, 89 Pac. 712;
New V. Wright, 44 Miss. 202; Rutland Marble Co. ▼. Ripley, 10
Wall. 339, 19 L. Ed. 955; Drew v. Beard, 107 Mass. 64; Wilson v.
Fitchter, 11 N. J. Eq. 71 ; SHANNON v. WRIGHT. 60 Md. 520, Gil-
more, Cas. Partnership, 481; Cox v. Volkert, 86 Mo. 505; Stock-
dale V. Ullery, 87 Pa. 486, 78 Am. Dec. 440 ; Fairthome v. Weston,
8 Hare, 387.
Upon a bill between partners for closing the affairs of a partner-
ship after the dissolution of the firm, the insolvency of the de-
fendant will entitle the complainant to the appointment of a re-
ceiver and an injunction. Randall v. Morrell, 17 N. jT. Eq. 343.
See "Partnership," Dec Dig. (Key No.) |§ 119, S25; Cent. Dig. H
181Mt^ 757-757.
§ 172) BEGEIVEBS 626
Death or Bankruptcy of One Member of a Firm Not a Ground
for a ReceiveY
The death or bankruptcy of one of the members of a firm
is not of itself a ground for the appointment of a receiver
as against the surviving or solvent partner or partners.
The mutual confidence which the members of the firm re-
posed in each other at the date of the contract, and which
formed the very basis of the partnership contract, is not,
as regards the surviving or solvent partner or partners,
affected by the death or insolvency of one of the members
of the firm.*" If a partner dies or becomes bankrupt, a
right to wind up the partnership concern, and collect the
assets, is by law vested in the surviving •• or solvent •^
partner or partners, as the case may be. Before the court
will interfere and appoint a receiver, some breach or neg-
lect of duty on their part must be established.*'
»» Philips V. Atkinson, 2 Brown. Ch. 272. See ** Partnership,'* Dec,
Dig, (Key No.) § S25; Cent. Dig. %% 759, 760.
••Gomiis Y. Young, 1 Macq. 385. See PhUips ▼. Atkinson, 2
Brown, Ch. 272. See, also, ante, § 122, p. 353. See ^'Partnership,**
Dec. Dig. (Key No.) |{ 248-257, 277-287; Cent. Dig. §{ 509-56S, 622-
660.
•7 Freeland v. Stansfeld, 2 Smale ft Glff. 479, 487; Fraser ▼. Ker
Shaw, 2 Kay & J. 496, 499. See, also, ante, | 151, p. 453. See ^'Part
nership,** Dec. Dig. (Key No.) §f 277-287; Cent. Dig. H 622-^50.
••Collins V. Young, 1 Macq. 385; Horrell v. Witts, L. R. 1 Prob
& Dlv. 103; Renton v. Chaplain, 9 N. J. Eq. 62; Walker v. HOuse, 4
Md. Ch. 39, 45; Hamill ▼. HamiU, 27 Md. 679; Jones ▼. Weir, 217
Pa. 321, 66 Atl. 550. '*It is consequently a matter of course to ap-
point a receiver when all the partners are dead and a suit is pend-
ing between their representatives." Kerr, Rec. p. 94; Philips v.
Atkinson, 2 Brown, Ch. 272. So, also, when such appointment is
sought by a partner against the representatives or assignees in bank-
ruptcy of his late copartner. Freeland v. Stansfeld, 16 Jur. 792.
2 Smale & Giff. 479. See, also, Fraser v. Kershaw, 2 Kay & J. 496.
Where there is an unreasonable delay on the part of the surviving
partners in closing the affairs of the partnership, or if they are
wasting the partnership assets, a receiver will be appointed, on the
application of the administrator of the deceased partner. Miller
V. Jopes, 39 111. 54. See, also, Holden's Adm*rs v. McMakin, 1 Pars.
Eq. Cas. (Pa.) 270; SHANNON v. WRIGHT, 60 Md. 520, Gilmore,
Cas. Partnership, 481. When one partner, who is insolvent, or iu
failing circumstances, without the consent and against the will of
the other partner, is disposing of the effects of the partnership, and
626 ACTIONS BKTWBBN PARTKKB8 (Ch. 8
Misconduct of Partner a Ground for a Receiver
The ground on which the court is most oommooly asked
to appoint a receiver is where, by the misconduct of a
partner, his right of personal intervention in the partner-
ship aflairs has been forfeited, and the partnership funds
are in danger of being lost. Mere quarrels and disagree-
ments between the partners, arising from infirmities of
temper, arc not a sufficient ground for the interference of
the court.** The due winding up of the affairs of the con-
cern must be endangered to induce the court to appoint a
receiver.* The non-cooperation of one partner, whereby
the whole responsibility of management is thrown on his
copartner, is not sufficient.* Where, however, a partner
has so misconducted himself as to show that he is no lon-
ger to be trusted — as, for example, if one partner colludes
with the debtors of the firm, and allows them to delay pay-
appropriating them to his own use, the other has a right to an In-
junction, and to have a receiver appointed. Phillips ▼. Tresevant,
67 N. C. 870. After dissolution of the firm, whether by mutual
agreement or by the death of one of its members, a receiver wlU be
appointed, where it appears that the partners in possession are
misconducting themselves, or that the assets are In peril. Word v.
Word, 90 Ala. 81, 7 South. 412; Bufkin v. Boyce, 101 Ind. 53, 8
N. E. 615; Davis v. Grove, 2 Rob. (N. Y.) 134, 635. See **Partner-
8hip;' Dec. Dig. {Key Vo.) If 119, S25; Cent. Dig. |§ 181%, 757-767.
••Goodman v. Whltcomb, 1 Jac. & W. 589, 593; Marshall v. Gol-
man, 2 Jac. .ft W. 266 ; Smith v. Jeyes, 4 Beav. 503, 504 ; McElvey
V. Lewis. 76 N. T. 873 ; HENN v. WALSH, 2 Edw. Ch. (N. Y.) 129.
Gilmore, Gas. Partnership, 588; SLOAN v. MOORE, 87 Pa. 217,
Gilmore, Cas. Partnership, 231; Loomis v. McKenzie, 31 Iowa, 425.
And see Kennedy v. Kennedy, 8 Dana (Ky.) 239. See "Partnership,**
Deo. Dig. {Key No.) {{ 119, S25; Cent Dig. §{ i8i%, 757-767.
1 Goodman v. Whltcomb, 1 Jac. ft W. 589, 593 ; Smith v. Jeyes,
4 Beav. 503, 505. Where each partner attempts separately to make
an assignment of the partnership assets for the benefit of creditors
to separate assignees, each of whom notifies the firm debtors not to
pay the amount owing the firm to the other, the appointment of a
receiver for the partnership is proper. Fox v. Curtis, 176 Pa. 52.
84 Atl. 952. See "Partnership,'* Dec. Dig. {Key No.) | S25; Cent.
Dig. |§ 757-757. .
t Roberts t. Eberhardt, Kay, 148; Rowe v. Wood, 2 Jac. ft W.
556 ; Smith v. Lowe, 1 Edw. Ch. (N. Y.) 33. See "Partnership,** Dec
Dig. {Key No.) | S25; Cent. Dig. §{ 757-767.
§ 172) BECEIVEBS 527
t
ing their debts ; • or is carrying on a separate trade on his
own account with the partnership property ; * or if a sur-
viving partner insists on carrying on the business, and em-
ploying therein the assets of his deceased partner ; ■ or
where, the partnership property being abroad, one of the
partners goes off in order to do what he likes with it ; • or
if the persons having the control of the partnership assets
have already made away with some of them ; ' or if there
has been such mismanagement as to endanger the whole
concern ; • or if one of the partners has acted in a manner
inconsistent with the duties and obligations which are im-
plied in every partnership contract • — in all such cases a
receiver will be appointed.
There is a case for a receiver, even although there be no
misconduct endangering the partnership assets, if one part-
ner excludes another partner from the management of the
s Estwick ▼. Oonningsby, 1 Vem. 118. In Whilden v. Chapman, 80
S. O. 84, 61 S. E. 249, a receiver was appointed where one partner
had permitted a creditor to obtain a judgment against the firm by
default on service of summons on him alone. See **Partnership,**
Dec, Dig. {Key No.) {| 119, S25; Cent. Dig. %% ISl^, 757-767.
« Harding v. Qlover, 18 Ves. 281. See '* Partnership,** Dec. Dig.
{Key No.) §f 119, S2S; Cent. Dig. S§ 181^, 757-767.
B Madgwlck v. Wimble, 6 Beav. 495. See Grawshay v. Maule, 1
Swanst 507; Miller v. Jones, 39 111. 54; Holden's Adm*rs v. Mc-
Makin, 1 Pars. Bq. Cas. (Pa.) 270. See ^Partnership," Dec. Dig.
{Key No.) §{ 119, 258, 925; Cent. Dig. §§ 181%, 757-767.
• Sheppard v. Ozenford, 1 Kay & J. 491. See "Partnership,** Deo.
Dig. {Key No.) §| 119, S25; Cent. Dig. §§ 181^^, 757-767.
T Evans v. Coventry, 5 De Gex, M. & G. 911. See ''Partnership**
Dec. Dig: {Key No.) |§ 119, S25; Cent. Dig. §{ 181%, 757-767.
s De Tastet v. Bordicu, cited 2 Brown, Ch. 272; Jefferys v. Smith,
1 Jac. & W. 298; Hall v. Hall, 3 Macn. ft G. 79; Cohn v. Wahn,
132 App. Div. 849, 117 N. Y. Supp. 633; Reinhardt v. Reinhardt,
134 App. Div. 440, 119 N. Y. Supp. 285. See "Partnership,** Dec. Dig.
{Key No.) |§ 119, S25; Cent. Dig. {§ 181%, 757-767.
• Smith V. Jeyes, 4 Beav. 505 ; Saylor v. Mockbie, 9 Iowa, 209.
See, generally, Boyce v. Burchard, 21 Ga. 74; SUTRO v. WAGNER,
23 N. J. Eq. 388, Gilmore, Cas. Partnership, 483 ; Evans v. Evans, 9
Paige (N. Y.) 178; Jacquin v. Buisson, 11 How. Prac. (N. Y.) 385;
Haight V. Burr, 19 Md. 130; Maher v. Bull, 44 111. 97. See "Part-
nership,** Dec. Dig. (Key No.) i| 119, S25; Cent. Dig. U 181%,
757-767.
528 ACTIONS BBTWEBN PARTNBB8 (Ch. 8
«
partnership affairs.^' This doctrine is acted on where the
defendant contends that the plaintiff is not a partner/* or
that he has no interest in the partnership assets.**
Inasmuch as the court will not appoint a receiver against
a partner unless some special ground for doing so can be
shown, it follows that in a firm of several members there
is more difficulty in obtaining a receiver than in a firm of
two. For the appointment of a receiver operating in fact
as an injunction against the members, there must be some
ground for excluding all who oppose the application. If
the object is to exclude some or one only from intermed-
dling, the appropriate remedy is rather by injunction than
by a receiver.**
lowUson ▼. Greenwood, 1 Swanst 481; Goodman v. Whitcomb,
1 Jac. & W. 592; Rowe v. Wood, 2 Jac. & W. 558; Const ▼. Har-
rl8» Turn. & R. 525; KATZ v. BREWINGTON, 71 Md. 79, 20 Atl.
13d, Gilmore, Cas. Partnership, 433 (cf. Kershaw y. Matthews, 2
Rubs. 62) ; Hottensteln v. Conrad, 9 Kan. 4S5 ; Shulte ▼. Hoffman,
18 Tex. 678 ; Rische v. Rlsche, 46 Tex. Civ. App. 23, 101 8. W. 849 ;
Holder v. Shelby (Tex. Civ. App.) 118 S. W. 590; Barnes v. Jones,
91 Ind. 161 ; Heathcot ▼. Ravenscrof t, 6 N. J. Eq. 113. In Maynard
V. Railey, 2 Nev. 313, it was held that a receiver would be ap-
pointed where one partner excludes his copartner from the partici-
pation in the affairs of the partnership, or when both partners have
assigned their respective interests, and the assignees cannot agree.
In Marten v. Van Schaick, 4 Paige (N. Y.) 479, Chancellor Walworth
says: ''Each partner has an equal right in this case to the posses-
sion and control of the partnership effects in business, and, if they
cannot agree among themselves, it is a matter of course to appoint
a receiver, upon a blU filed to close the partnership concerns, on the
application of either party.'* See, also. Van Rensselaer v. Emery, 9
How. Prac. (N. Y.) 135; McElvey v. Lewis, 76 N. Y. 373; Richards
V. Baurman, 65 N. C. 162 ; SLOAN v. MOORE, 37 Pa. 217, Gilmore,
Cas. Partnership, 231. See '^Partnership,'* Dec. Dig. (Key No.) H
119, S25; Cent. Dig. U 181\^, 757-767.
11 Peacock v. Peacock, 16 Ves. 49; Blakeney v. Dufaur, 16 Beav.
40. See ''Partnership," Dec. Dig. (Key No.) §i 119, S25; Cent. Dig.
H i8i%, 757-767.
It Hale V. Hale, 4 Beav. 369.
See, also, Sheppard v. Oxeuford, 1 Kay & J. 491, 492, where a re-
ceiver was appointed, although the legality of the partnership was
denied. See ^'Partnership** Dec. Dig. (Key No,) §{ 119, S25; Cent.
Dig. §1 181^, 757-767.
i» Kerr, Reo. p. 98; Hall v. Hall, 3 Macn. & G. 79. See "Partner-
ship:* Dec. Dig. (Key No.) §{ 119, 925; Cent. Dig. §{ i8i%. 151-161.
§ 172) BE0EIVEB8 629
Course of Court Where the Partnership is Denied
Where a partnership is alleged on the one side, and de-
nied on the other, and a motion is made for a receiver, the
court, if it directs an issue as to partnership or no partner-
ship^ usually declines to appoint a receiver until that ques-t
tion is determined.**
i*Kerr, Rec. p. 98; Peacock v. Peacock, 16 Ves. 49; Chapman v.
Beach, 1 Jac. & W. 594, note; Fairbum ▼. Pearson, 2 Macn. & Q.
144; Norway v. Rowe, 19 Vee. 144; Baxter v. Buchanan, 3 Brewst
(Pa.) 435 ; Hobart v. Ballard, 31 Iowa, 521 ; Guyton v. Flack, 7 Md.
398; Speights v. Peters, 9 Gill (Md.) 472. A receiver will not be
appointed in a proceeding to dissolve a partnership where the part-
nership is denied, unless the court is satisfied that there is in fact
a partnership between the parties, or that the fund is in danger.
McCJarty v. Stanwlz, 16 Misc. Rep. 132, 38 N. Y. Supp. 820.
The existence of the partnership must be established as a pre-
requisite to a receiver. Rische v. Rische, 46 Tex. CSlv. App. 23,' 101
8. W. 849.
Another case in which th^ court may be called upon to appoint
a receiver is where the partners have, by agreement, divested them-
selves more or less of their right to wind up the alfairs of the con-
cern. Davis V. Amer, 3 Drew. 64. See, also. Turner v. Major, 8
Giff. 442. When both partners have assigned their respective in-
terests, and the assignees cannot agree, a receiver will be appointed.
Maynard v. Railey, 2 Nev. 813. Bee ** Partnership,'' Deo, Dig. (Key
Ho.) If 119, S25; Cent. Dig. if 181^, 757-767.
Qh^Pabt. — 84
530
ACTIONS BY OB AGAINST PABTNBB8
(Ch.9
CHAPTER IX
ACTIONS BETWEEN PABTNERS AND THIRD PERSONS
173. In GeneraL
174. Parties to Actions by the Firm.
175. Claims Arising Ex Contractu.
176. Contracts in Firm Name.
177. Contracts in Name of Partner.
178. Claims Arising Ex Delicto.
179. Parties to Actions against the Firm*
180. Liabilities Arising Ex Contracto.
181. Liabilities Arising Ex Delicto.
182. Effect of Changes in Firm.
183-185. Admission of New Member.
186-188. Retirement of Old Member. '
189. Death of Member.
190-193. Bankruptcy and Insolvency.
194. Disqualification of One Partner to Sne^
195. Action in Firm Name.
IN GENERAL
173. Actions between partners and third persons are in the
main governed by ordinary principles. The chief
peculiarities relate
(a) To parties, and
(b) To actions where one partner is disqualified to sue.
PARTIES TO ACTIONS BY THE FIRM
174. It is a general rule that all partners must join as par-
ties plaintiff in an action to enforce a partnership
claim. This will be considered under the following
heads :
(a) Claims arising ex contractu (p. 831),
(b) Claims arising ex delicto (p^ 840).
§§ 175-176) PARTIES TO ACTIONS BT THE FIRM 631
SAME^— CLAIMS ARISING EX CONTRACTU
175. The question as to parties plaintiff in actions on part-
nership claims ex contractu arises in two classes
of cases:
(a) Where the contract was made in the name of the
firm (p. 533), and
(b) Where the contract was made in the name of one
partner on behalf of the firm (p. 536).
176. CONTRACTS IN FIRM NAME— Actions upon con-
tracts made in the firm name must be brought in
name of all the' persons who were actual partners
at the time the contract was made, except
EXCEPTIONS:
(a) Dormant partners are proper but not necessary par-
ties (p. 632).
(b) Nominal partners need not be made parties unless
expressly named in the contract (p. 632).
It has been seen that the firm, as an entity, does not
exist in contemplation of law, and that ^the firm name is
merely a convenient symbol to indicate all the partners
jointly.^ A contract made in the partnership name is, there-
fore, a contract made with all the partners jointly, and it
is familiar law that in such a case, all the persons with
whom the contract was made must join in an action to
enforce it* The effect of changes in the firm, as by the
1 See ante, chapter III, § 41, p. lia
2 MASON ▼. EIiDRED, 6 WaU. 231, 18 L^ Ed. 783, GUmore, Cas.
Partnership, 281 ; Seely v. Schenck, 2 N. J. Law, 75 ; Reed v. Han-
over Branch RaUroad Co., 105 Mass. 303; Choteau ▼. Raitt, 20
Ohio, 132; Vlnal v. West Virginia Oil & OU Land Co., 110 U. S.
215, 4 Sup. Ct 4, 28 L. Ed. 124; Gushing v. Marston, 12 Cush.
(Mass.) 431 ; Moore v. Bums, 60 Ala. 269 ; Phillips ▼. Holmes (Ala.)
51 South. 625 ; Johnson, Nesbitt & Co. v. First Nat Bank of Gads-
den, 145 Ala. 378, 40 South. 78; Fish y. Gates, 133 Mass. 441; Ives
y. Muhlenburg, 135 IlL App. 525 ; Bruett & Co. y. F. C. Austin Drain-
age Exeayator Co. (O. C.) 174 Fed. 668; Crosby y. Hammerllng (C.
C) 170 Fed. 857. As partners cannot be sued otherwise than In
532 ACTIONS BT OR AGAINST PARTNERS (Gh. 9
admission of a new member, or the retirement of an old
one, has already been considered.^
Dormant Partners
In partnership transactions, dormant partners occupy the
position of undisclosed principals. They may, therefore,
join as plaintiffs in an action on a contract entered into on
behalf of the firm of which they are members. But dor-
mant partners never need be joined as plaintiffs in such an
action. The action may be brought by the ostensible part-
ners alone, for they are the persons with whom the con-
tract was expressly made. In other words, dormant part-
ners are proper, but not necessary, parties.*
Nominal Partners
A nominal partner is a person who appears to be a part-
ner, but is not so. He sometimes must, and sometimes
need not, join in an action on a contract made with the
firm.'
First. If a contract is made expressly with a real and
with a nominal partner, they must join in suing on it.*
Thus, if a nominal partner's name is on a bill of exchange
or promissory note, he must be a party to the action
•
their Individual names, tbe allegation of a partnership name need
not be proven, - but may be regarded as surplusage. Gooraon ▼.
Parker, 89 W. Va. 621, 20 S. B. 583.
A judgment in the firm name is irregular, but not void. Meyer
V. Wilson, 166 Ind. 651, 76 N. B. 74a See ** Partnership," Deo. Dig.
(Key No.) i§ 197^202, 21S; Cent. Dig. §§ 9G0SH, 408. 409.
s See ante, chapter IV, | 7.7, p. 242, and § 78, p. 249.
* Wood V. O'Kelley, 8 Gush. (Mass.) 4(>8 ; HiUiker v. Loop, 5 Vt
116, 26 Am. Dec. 286; Piatt v. Halen, 23 Wend. (N. Y.) 456; Wilson
V. Wallace, 8 Serg. k R. (Pa.) 53 ; Desha v. Holland, 12 Ala. 513,
46 Am. Dec. 261; Monroe v. Bzzell, 11 Ala. 603. See Seymour v.
Western Railroad Co., 106 U. S. 320, 1 Sup. Ct 123, 27 L. Ed. 103 :
Secor V. Keller, 4 Duer (N. Y.) 416; Howe v. Savory, 51 N, Y. 631;
Id., 49 Barb. (N. Y.) 403 ; Allen v. Fleck (Tex. Civ. App.) 118 S. W.
176; Masterson v. F. W. Heitmann ft Co., 38 Tex. dv. App. 476,
87 S. W. 227. See "Partnership," Dec. Dig. {Key No.) H 199, 200;
Cent. Dig. §§ 966, S70.
ft Dlcey» Parties, p. 172.
« GUIDON V. ROBSON, 2 Gamp. 302. Cf. Teed v. Elworthy, 14
East, 210. See "Partnersip,*' Dec. Dig. {Key Xo.) U 198. 199; Cent.
Dig. §§ 861-^68.
§ 177) PABTIES TO AOnONS BT THE FIRM 533
brought upon it; and the same rule applies to actions on
contracts under seal.''
Secondly. Prima facie, a nominal partner ought to join
in suing on any contract, whether express or implied, made
with the firm; for an agreement with the firm is, prima
facie, an agreement with the persons who apparently make
up the firm. But, if it be distinctly shown that a person
who is apparently the member of a firm is in reality not
so— i. e. that he is merely a nominal partner — a contract
made with the firm is not in reality made with him, and he
need not join in suing upon it.'
Thirdly. It is an open question whether a nominal part-
ner can join in cases in which it has been established that
there is no necessity for his joinuig. As a misjoinder is a
much less serious error than a nonjoinder of plaintiffs, a
nominal partner should, as a matter of prudence, join in
all actions on contracts made with the firm.*
177. CONTRACTS IN NAME OF PARTNER— Actions
on contracts, made in the name of one partner, but
on behalf of the firm, must be brought by all the
members jointly who composed the firm at the
time the contract was made, except
. EXCEPTIONS:
(a) In the following cases the action must be brought
in the name of the contracting partner alone:
(1) Where the contract is under seal (p. 636).
(2) Where the contract is a negotiable instrument
(p. 636).
T GUIDON ▼. ROBSON, 2 Camp. 302. See "Partnershipr Dec
Diff. (Key No.) §| 198-200; Cent Dig. §| S61-S7L
« C?f. Teed v. Elworthy, 14 East, 210, with KELL v. NAINBY, 10
Bam. & C. 20. See Bates, Partn. { 1023. 8ee ** Partnership,'' Dec,
Dig, (Key No.) f 199; Cent Dig. |§ 862-^68.
• Dicey, Parties, p. 172. See, in afflrmative, Colly. Partn. 407.
See, in negative, Lindl. Partn. (2d Ed.) 479. Cf. Bond v. Pittard,
3 Mees. & W. 357. And see KELL v. NAINBY, 10 Bam. & C. 20;
Harrison v. Pitzhenry, 3 Esp. 238; Enlx v. Hays, 48 Iowa, 86;
Bishop V. Hall, 9 Gray (Mass.) 430. See "* Partnership;* Deo. Dig.
(Key No.) § 199 : Cent Dig. §| 862^68.
534 ACTIONS BY OB AGAINST PARTNERS (Ch. 9
(3) Where th6 right to sue on the contract is by the
terms or circumstances of it expressly re-
stricted to the partner with whom it is made
(p. 636).
(b) In the following cases the action may be brought
either in the name of all the partners, or in
the name of the partner in whose name it was
made:
(1) Where the contract is made with the partner
personally, as well as with him on behalf of
the firm (p. 638).
(2) Where the partner is the only known or osten-
sible principal; that is, where the firm occu-
pies the position of an undisclosed principal
(p. 638).
(3) Where the partner has paid away money of the
firm under circumstances which give a right
to recover it back (p. 638).
(c) Dormant partners are proper, but not necessary, par-
ties (p. 640).
Each partner is an agent of his copartners within the
scope of the partnership business. Hence, he must sue
alone on contracts made with the firm (his principals) in
cases in which an action must be brought in the name of
an agent. The question whether a partner may or must
sue without joining his copartners is in reality nothing but
the inquiry whether an agent must or may sue on a con-
tract made with him on behalf of his principal.** Accord-
ingly, where it expressly appears from the contract that it
was entered into on behalf of a firm, an action thereon
must be brought by all the members composing the firm
at the time the contract is entered into,** excepting only
10 Dicey, Parties, p. 153.
11 Badger ▼. Daenieke, 56 Wis. 678, 14 N. W. 821; Wilson ▼.
Wallace, 8 Serg. & R. (Pa.) 53 ; Braett & Co. v. F. a Austin Drain-
age Excavator Go. (G. C.) 174 Fed. 668; PhUlips v. Holmes (Ala.)
51 South. 625; Ingham Lumber Ck>. v. IngersoU & Go. (Ark.) 125
S. W. 139. Bee **Panner»hip," Deo, Dig. (Key No.) { 199; Cent. Dig.
i S6S. '
§ 177) PARTIES TO ACTIONS BT THB FIRM 536
dormant partners." So, where the action is on an implied
contract with the firm, all the partners must join as plain-
tiffs, whether the defendant knew he was dealing with the
firm or not. Thus, if the funds of a firm are lent by one
partner, he cannot alone maintain an action for its repay-
ment by virtue of any implied contract with himself, for
the promise to repay which is implied by law is a promise
with the real lenders of the money, and must be sued upon
by them.^"
When Partner must Sue Alone — Sealed Instruments
Where a contract under seal is entered into with one
partner only, he alone can sue upon it. If it is entered into
with more than one, all those with whom it was expressly
entered into must sue jointly, and no others can.**
Same— ^Negotiable Instruments
No person can claim upon a bill of exchange or promis-
sory note except the parties named in the instrument.
Hence, though the party named in such instrument is a
partner, the action must be brought in his name alone, and
not jointly in the name of himself and his copartners, who
are not parties.*" This exception appears to be of small
IS See ante, p. 532, note 4; Lebeck v. Shaftoe, 2 Esp. 468. See
**Partner8hip,'J Dec. Dig, {Key No,) § 199; Cent. Dig. § S66.
i> Colly. Partn. p. 1012, note, citing Garrett v. Handley, 3 Bam.
A G. 462 ; Graham v. Robertson, 2 Term R. 2S2 ; Teed v. Elworthy,
14 East, 210. In an action by partners on a contract made by de-
fendant with one of plaintiffs only, plaintiffs need not prove that de-
fendant understood that they were partners. Philpott v. Bechtel,
104 Mich. 79, 62 N. W. 174. See "PartneraMp^ Dec. Dig. {Key No.)
§ 199; Cent. Dig. §§ 962^68.
i*See Dicey, Parties, pp. 153, 134, 101; Metcalfe v. Rycroft, 6
Maule ft S. 75; Colly. Partn. p. 1010, note, citing note to Cabell
V. Vaughan, 1 Saund. 291i; Scott v. Godwin, 1 Bos. & P. 67. A
partner, being a tenant in common with his copartner, may recover
possession of the whole of the firm real estate, as against one hold-
ing the same without title. Brady v. Kreuger, 8 S. D. 464, 66 N.
W. 1083, 59 Am. St Rep. 771. See ** Partnership," Dec. Dig. {Key
No.) i 199; Cent. Dig. {| 962, 363.
i» Dicey, Parties, pp. 153, 134; Bowden v. Howell, 3 Man. & G.
638 ; Driver v. Burton, 17 Q. B. 989 ; Mynderse v. Snook, 53 Barb.
(N, Y,) 234; Id., 1 Lans. (N. Y.) 488. See ** Partnership," Dec. Dig.
(Key No.) § 199; Cent. Dig. |{ 362^68.
536 ACTIONS BY OR AGAINST PARTNERS (Oh. 9
importance, since the right to sue on such instruments is
assignable. If they be indorsed in blank, any persons hold-
ing them may sue upon them. Where a partner is named
as a p^Tty to a negotiable instrument, he may indorse it to
his firm, and thereupon an action may be maintained by all
the partners jointly.^*
Same — Contract with Partner Alone
It may be that, though a partner is acting for his firm,
the person with whom he deals expressly refuses to con-
tract with any other than the partner himself, or it may be
manifest, from the circumstances of the case, that the con-
tract was with the partner personally, and with him alone.
In such a case, though the partner may have been, as a
matter of fact, acting for his firm, and the firm as his prin-
cipal may have rights against such partner, yet the firm
has no rights #against a person with whom the partner dealt,
but who never contracted with the firm, and the partner,
who is the only person with whom he did contract, is the
only one who can sue him upon the contract.^^ Thus,
!• See Bates, Partn. § 1017.
IT Where the third person has clearly expressed his Intention to
deal with the agent as principal, or where he has dealt with the
agent on terms of trust and confidence, or the nature of the contract
Is fiduciary, the undisclosed principal cannot claim the benefits of
the contract "Every man has a right to elect what parties he will
deal with. * * * And, as a man's right to refuse to enter into
a contract is absolute, he is not obliged to submit the validity of
his reasons to a court or Jury." Winchester v. Howard, 07 Mass.
303, 93 Am. Dec. 03. The intention to deal only with the agent
may be found in the recitals of the written contract. Humble v.
Hunter, 12 Q. B. 310; or the negotioations attending an oral one,
* Winchester v. Howard, supra. In the first case, the question would
be one of construction for the court; in the latter, of fact for the
jury. The intention may be further inferred from the nature of
the contract, as where it is fiduciary, or for personal skill or service.
Pol. Gont (6th Ed.) p. 67; Eggleston v. Boardman, 37 Mich. 14.
But In the latter case it would seem that, if the agent has personally
discharged the trust or performed the service, his undisclosed princi-
pal may recover the compensation. Warder v. White, 14 111. App.
50, citing Grojan v. Wade, 2 Starkie, 443; Huff. Ag. 8.132. Where
a landlord, knowing that his store is wanted by a firm of four per-
sons in which to carry on their business, makes a lease to one of
them, and two of the others sign as sureties, and the other is in no
§ 177) PARTIES TO AOTIONS BT THE FIRM 537
where a contract was made with one of several partners in
his individual capacity, and he at the tin^e declared that he
alone was interested in it, it was held that the other part-
ners, although they might be interested in it, could not sue
upon it;** for, though the partner might, as regards his
fellow partners, act as their agent, yet "if one partner makes
a contract in his individual capacity, and the other partners
are willing to take the benefit of it, they must be content to
do so according to the mode in which the contract was
made/' *• So, if one contracts with an agent, in considera-
tion of the known personal capabilities of the agent, he can-
not be made liable to the principal for whom the agent was
acting.*® •
This exception contains the principle which governs all
the exceptional cases in which a partner mu^st sue alone for
a breach of contract. The reason of this peculiarity always
is that the other contracting party has contracted with the
partner alone. That the contract was made with him alone
may appear by the form of the contract itself (e. g. where
it is by deed), or it may be proved from the circumstances
of the case. But the reason why the partner alone can sue
will be found to be in every instance the same, viz. that, as
way a party to the lease, only the one named as lessee can sue
for breach of the lease. Barwitz v. Jeffers, 103 Mich. 512, 61 N.
W. 784. See, also, Covington v. Sloan (Tex. Civ. App.) 124 S. W.
690; Davldge v. Guardian Trust Co. of New York. 136 App. Dlv.
78, 120 N. Y. Supp. 628. See ^'Partnership," Dec. Dig. {Key No.) f
199; Cent. Dig. f§ S62-S68.
18 Lucas V. Delacour, 1 Maule & S. 249. *'Where, in a written in-
strument, the agent has represented himself In express terms or
recitals as the real and only principal, the undisclosed principal
cannot maintain an action in his own name, since parol evidence
would be inadmissible to vary the express terms and recitals of the
written instrument. Humble v. Hunter, 12 Q. B. 310; Schmaltz
V. Avery, 16 Q. B. 655 ; Darrow v. H. R. Home Produce Co. (C. C.)
57 Fed. 463." Huff. Ag. f 133. See ** Partnership," Dec, Dig. (Key
No.) $ 199; Cent. Dig. S§ 362-^68.
i»Id.
2<» Robson V. Drummond, 2 Bam. & Adol. 303. See "Principal and
Agentr Dec. Dig. {Key No.) %% HO, Ul, IJfi, 18S; Cent. Dig. H 496-
m. 502^12, 692.
538 ACTIONS BY OB AGAINST PARTNERS (Ch. 9
between him and the other party to the contract, he has
contracted, not as an agent, but as sole principal.*^
When Partner may Sue Either Alone or Jointly with Copart-
ners
"Where an agent makes a contract, stating who his prin-
cipal is, the principal, and not the agent, is the person gen-
erally the party to the contract, if the agent have the au-
thority he alleges. But, on the other hand, an agent may,
and often does, make himself personally a party to the con-
tract, if the form of the contract be such as to amount to
saying, 'Although I am an agent only, nevertheless I con-
tract for myself ;' and, although the principal may in some
cases take advantage of such a contract, the agent, being
the contracting party is clearly liable, and can therefore sue
upon it." "
Same — Firm as an Undisclosed Principal
"It is a well-established rule of law that, where a con-
tract not under seal is made by an agent in his own name
for an undisclosed principal, either •the agent or the princi-
pal may sue on it; the defendant in the latter case being
entitled to be placed in the same situation at the time of
the disclosure of the real principal as if the agent had been
the contracting party. The rule is most frequently acted
upon in sales by factors, agents, or partners, in which case
either the nominal or the real plaintiff may sue ; but it may
be equally applied to other cases." *■
Same — Recovery of Money Paid under Fraud or Mistake
"If an agent pays money for his principal, by mistake or
otherwise, which he ought not to have paid, the agent, as
well as the principal, may maintain an action to recover it
back." ** There is no reason why this rule should not ap-
21 See Dicey, Parties, p. 136. See, fnrther, chapter III, §1 41-42,
pp. 118-126.
22 Fisher v. Marsh, 34 Law J. Q. B. 178, per Blackburn, J.
Cf. HUliker v. Loop, 5 Vt. 116, 26 Am. Dec. 286. See ^'Partnership,'*
Dec, Dig. (Key No,) § 199; Cent. Dig, §§ S61-368.
2s Sims y. Bond, 5 Bam. & Adol. 393, per curiam. See "Partner'
8hipr Dec. Dig, {Key No,) § 199; Cent. Dig. §§ 361-S68.
2* Story, Ag. § 398.
§ 177) PARTIES TO ACTIONS BT THE FIRM 689
ply to payments made by one partner for his firm, and.it
has been held that where a partner enters into a contract
under seal for the payment of money, and the money is paid
out of funds of the firm, and it then appears that the con-
tract was invalid on the grotmd of fraud, the partner who
entered into the covenant may sue alone for the recovery
back of the money.*'
Same — Reason and Limitation of Rule
The right to bring the suit either in the name of the part-
ner with whom the contract was made, or in the name of
all the partners jointly, rests on the ground that, while the
partners collectively — i. e. the firm — have the ordinary right
of every principal to sue for the breach of a contract made
on their behalf, the agent has been dealt with as a party,
though not the only party, to the contract, or to the trans-
action which gives a right of action as if there had been a
breach of contract ; e. g. where the partner sues for money
of the firm which he was wrongfully induced to pay.'^ The
choice or election of suing either in the name of the agent
partner, or all the partners jointly, is subject to certain lim-
itations, the object of which is to prevent this right of elec-
tion from being so exercised as to work injustice to any of
the persons concerned in the contract.
First The partner's right to sue is subject to the firm's
right to interpose. Wherever the principal, as well as the
agent, has a right to maintain a suit upon any contract
made by the latter, he may generally supersede the right of
the agent to sue by suing in his own name.*'^ So, the prin-
cipal may, by his own intervention, intercept or suspend
or extinguish the rights of the agent under the contract, as
if he makes other arrangements with the other contracting
party, or waives his claims under it, or receives payment
thereof, or in any other manner discharges it. This, indeed,
results from the general principle of law that every man
«8 Lefevre v. Boyle, 3 Bam. & Adol. 877. See **Partn€rship,**
Dec. Dig. (Key No.) § 199; Cent. Dig. S§ S62^68.
2« Dicey, Parties, p. 140.
2T Sadler v. Leigh, 4 Camp. 195. See '^Partnership,'* Deo. Dig.
{Key No.) | 199; Cent. Dig. |§ 362-368.
540 ACTIONS BT OB AGAINST PABTNBB8 (Gh. 9
may waive or extinguish rights the benefit whereof exclu-
sively belongs to himself, and that whatever rights arc
acquired by an agent are acquired for his principal.*'
Secondly. Where an undisclosed principal sues on a con-
tract made by his agent, "the defendant is entitled to be
placed in the same situation at the time of the disclosure of
the real principal as if the agent had been the contracting
party" ; *• that is, the defendant may avail himself of all
defenses which would have been available to him against
the agent at the time of the disclosure, had that agent been
really a principal.'*
Dormant and Nominal Partners
When the contract is made in the name of one partner,
but under circumstances entitling the firm — i. e. all the
partners jointly — to sue, the same considerations as to dor-
mant and nominal partners apply as in the case of contracts
made in the firm name.**
SAME— CLAIMS ARISING EX DELICTO
178. In an action ex delicto to recover damages. suffered by
partners jointly, i. e., damages to the firm, all the
partners must join as plaintiffs.
Where the same act that causes a damage to all the part-
ners jointly as a firm also causes a separate and personal
damage to one or more of the partners, two or more causes
of action exist. The joint damage must be recovered in a
joint action by all the partners, and the individual damage
must be recovered in separate actions by each.
With respect to actions by partners not founded on any-
S8 Story, Ag. i 403.
2 0 Sims T. Bond, 5 Bam. & Adol. 393, per curiam. See "Principal
and Agent,** Dec, Dig. (Key Vo,) $$ 1S8-U6, 185; Cent, Dig. 8S
495-527, 704-y06,
so Thomson y. Davenport, 9 Bam. & O. 78, 2 Smith, Lead. Cas.
(7th Ed.) 359. See **Principal and Agents*' Deo, Dig. (Key No.) S
185; Cent. Dig, S§ 704-706.
SI See ante, p. 532.
§ 178) FARTIBS TO ACTIONS BT THB FIRM 641
breach of contract, or of quasi contract, but on some tort,
the general principle is that, where a joint damage accrues
to several persons from a tort, they ought all to join in an
action founded upon it,** while, on the other hand, several
persons ought not to join in an action ex delicto, unless
they can show a joint damage.**
These doctrines are well illustrated by actions for libel.
A libel on a firm can be made the subject of an action by
the firm.** If the libel reflects directly on one partner, and
through him on the firm, two actions will lie, viz. one by
the party libeled, and the other by him and his copartners ;
but the damage in the first action must not appear to be
joint, nor must that in the second appear to be confined to
the libeled partner only.** If one partner Is libeled, and
the firm cannot be shown to have been damnified, an ac-
tion for the libel should be brought in the name of the in-
dividual partner aggrieved, and not by the firm ; *• and he
•s Bee 1 Win. Saiind. 291m; Addison t. Overend, 6 Term R. 766;
Sedgworth ▼. Overend, 7 Term R. 279. One partner cannot maintain
action for conversion of firm property. Doll t. Hennessy Mercantile
Co., 33 Mont 80, 81 Pac. 625. See ''Partnership*' Dec, Dig, (Key
Vo.) i 199; Cent. Dig, %% S6f^68.
aa 2 Wm. Saond. 116a ; Noonan ▼. Orton, 82 Wis. 106 ; Donnell ▼.
Jones, 18 Ala. 490, 48 Am. Dec. 59; Medbury v. Watson, 6 Mete
(Mass.) 246, 39 Am. Dec. 726; Robinson v. Mansfield, 13 Pick. (Mass.)
139 ; Trott y. Irish, 1 Allen (Mass.) 481. Gf . Duffy v. Gray, 52 Mo.
52a See ''Partnership,** Deo. Dig. {Key No.) f 199; Cent. Dig. H
S6Z-^68.
s« See Ck)oke v. Batchelor, 8 Bos. & P. 150; FORSTER y. LAW-
SON, 3 Blng. 452 i Williams t. Beaumont, 10 Blng. 260; Metropoli-
tan Saloon Omnibus Co. v. Hawkins, 4 Hurl. & N. 87; Taylor y.
Church, 1 E. D. Smith (N. Y.) 279; Duffy y. Gray, 52 Mo. 528;
Donnell ▼. Jones, 13 Ala. 490, 48 Am. Dec. 59. See "Libel and
Slander,** Dec. Dig. {Key No.) § 73; Cent. Dig. 8 174.
SB See Harrison v. Bevington, 8 CJar. & P. 708; FORSTER ▼.
LAWSON, 8 Blng. 452; 2 Wm. Saund. 117b; Hay thorn v. Lawson,
3 Car. & P. 196; Duffy v. Gray, 52 Mo. 528; Donnell y. Jones, 18
Ala. 490, 48 Am. Dec. 59; Noonan v. Orton, 32 Wis. 106; Dayis y.
Ruff, Cheves (S. a) 17, 34 Am. Dec. 584 ; Weitershausen t. Croatian
Print & Pub. Co. (0. O.) 151 Fed. 947. See "Libel and Slander,**
Dec. Dig. {Key No.) § 7S; Cent. Dig. I m.
ao Solomons v. Medex, 1 Starkle, 191. Where the firm Is libeled,
each partner may sue to recover damages thus Inflicted upon his in-
terest Tobln ▼. Alfred M. Best Ck)., 120 App. Div. 387, 105 N. Y.
542 ACTIONS BY OB AGAINST PARTNBB8 (Ch. 9
may sue alone, although the libel more particularly affects
him in the way of his business.*'^ Moreover, a general
statement not clearly pointing to any particular person, but
libelous as to an entire class, may be treated by any in-
dividual of that class, who can show that he was in fact in-
tended, as a libel on himself; and this principle is as applic-
able to libels affecting a firm as to those affecting single in-
dividuals.**
PARTIES TO ACTIONS AGAINST THE FIRM
179. This subject will be treated under the following heads :
(a) Liabilities arising ex contractu (infra).
(b) Liabilities arising, ex delicto (p. 649).
SAME— LIABILITIES ARISING EX CONTRACTU
180. AU persons who are partners at the time when a con-
tract is made by or on behalf of the firm must be
joined as defendants in an action for its breach,
except
EXCEPTIONS:
(a) Dormant partners are proper, but not necessary,
parties (p. 544).
(b) Nominal partners are not necessary parties, but
are proper parties in cases where they have
been held out under such circumstances as to
render them liable as actual partners (p. 645).
(c) Where the contract has been made in the name
of one partner, he alone can be sued in
the following cases:
(1) Where the contract is under seal (p. 546).
Snpp. 294. See **Lihel and Slander,*' Dec Dig. (Key No.) | 7S;
Cent. Dig. % 174-
•T Harrison v. Bevlngton, 8 Gar. & P. 708; RoblDson ▼. Marchant,
7 Q. B. 9ia See ""Libel and Slander,** Dec. Dig. (Key No.) t 7S;
Cent. Dig. 8 174.
s8Le Fanu v. Malcolmson, 1 H. L. Gas. 637. See **Libel and
Slander,** Dec. Dig. (Key No.) S 21; Cent. Dig. I 103.
i
fi 180) PARTIES TO ACTIONS AGAINSt THE FIBM 643
(2) Where the contract is a negotiable instru-
ment (p. 546).
(3) Where credit was given exclusively to the
partner in whose name the contract was
made (p. 647).
(d) Where the contract has been made in the name
of one partner, an action thereon may be
maintained either against such partner
alone or against all the partners jointly in
the following cases:
(1) Where the partner contracted individually,
as well as on behalf of the firm (p. 647).
(2) Where the contract does not show that it
was entered into on behalf of the firm;
that is, where the firm occupies the posi-
tion of undisclosed principal (p. 648).
As has been seen, contracts with a firm are simply con-
tracts with all the partners jointly. All persons who are
jointly liable on a contract must, as a general rule, be joined
in an action thereon. Where a contract, therefore, is made
by or on behalf of a firm, as where it is made in the firm
name, all the persons who were partners at the time it was
made must, as a general rule be joined a^ defendants.
The partnership name is merely a symbol to designate all
the partners, without naming them, and to show that the
contract was a partnership transaction. But, even where
the contract was entered into by an agent, or by one part-
ner, if it appears from the contract that it was a contract
with the firm, then all the partners must be joined, because
they are joint principals.** It is important to bear in mind,
•» Hosklns ▼. Velasco Nat. Bank, 48 Tex. Olv. App. 246, 107 S. W.
598; Moses v. Krauss, 90 Miss. 618, 44 South. 162; Leola Lumber
Co ▼. .Bozarth, 91 Ark. 10, 120 S. W. 152; Page v. Brant, 18 lU.
37; Pettis ▼. Atkins. 60 111. 454; Holllngshead v. Curtis, 14 N. J.
Law, 402; Slmonds v. Speed, 6 Rich. Law (S. C.) 390; Llpplncott
V. Shaw Carriage Co. (C. C.) 25 Fed. 577. Nonjoinder, of all the
partners can be taken advantage of by plea in abatement Slns-
helmer v. William Skinner Mfg. Co., 54 III. App. 151; Puschel v.
Hoover, 16 111. 340 ; Ives v. Muhlenburg, 135 111. App. 517 ; Mershon
▼. Hobensack, 22 N. J. Law, 372; Smith v. Cooke, 31 Md. 174, 100
I
644 ACTIONS BY OB AGAINST PABTNBB8 (ph. 9
however, that legislation in many states has greatly modified
joint obligations, both as to their nature and the procedure for
their enforcement. Attention has already been called to this
legislation.** An extended examination of such statutes can-
not be made within the limits of the present work. Some of
the more important characteristics are mentioned in the note,
but the enumeration is not exhaustive. The reader should
consult the statutes and the decisions of the particular juris-
diction in question.***
Dormant Partners
It has been seen that dormant and secret partners are lia-
ble on all contracts entered into on behalf of the firm to
which they belong ; and, whether such a contract is written
or parol, express or implied, it is clear that they may be
sued upon it. But it is perfectly proper not to join them.
Am. Dec. 68. In an action against the members of the firm of R. &
Co. on a contract made in the firm name by defendant R., it appear-
ed tliat when the contract was made the other defendants were not
R.'b partners, and who were his partners then did not appear.
Held, that the complaint must be dismissed as to all the defendants,
including R. Hand v. Rogers, 14 Misc. Rep. 248, 35 N. Y. Supp. 712,
affirmed 29 Civ. Proc. R. 254, 16 Misc. Rep. 17, 37 N. Y. Supp.
657. Where all the partners are sued on a partnership debt, and the
action Is barred as to one, he not having been made a party at the
commencement of the action, no recovery can be hdd against the
others. Fish v. Farwell, 54 111. App. 457. In an action against the
members of a voluntary association, upon a contract, the recovery
must be against all or none. Pettis v. Atkins, 60 111. 454. In Kent
V. HoUiday, 17 Md. 387, it was held that in an action on a part-
nership contract all those who were partners at the time of the con-
tract ought to be Joined as defendants, for such a contract is a Joint
contract, and that a declaration which discloses that there was a
joint contractor at the time the contract sued on is made, and does
not aver he was dead, or a nonresident of the county, or account In
any other way for his not being joined in the action, is bad on de-
murrer. See *Tanner9hip,** Deo, Dig, (Key No,) § 200; Oe§U. Dig,
§ S69.
*o See ante, chapter IV, $ 70, p. 220.
«i In some states It is provided that where two or more persons
are bound by contract, judgment, decree, or statute, whether jolntlv
only, or Jointly or severally, or severally only, the action thereon
may, at plaintifTs option, be brought against any or aU of them.
California: Code Civ. Proc. 1900, |§ 414, 094. Iowa: Code 1897, |
§ 180) PARTIES TO ACrnONS AGAINST THE FIBll 545
A person who holds himself out to another as the only per-
son with whom that other is dealing cannot afterwards say
that such other was also dealing with somebody else. In
short, dormant partners are proper, but not necessary, par-
ties."
Nominal Partners
Nominal partners are not actual partners. As has been
seen, their liability on firm contracts rests on estoppel, and
not on the fact that they are actual parties to it.** A plain-
tiff, in an action on a firm contract, may therefore waive
the benefit of the estoppel, and sue only the actual partners,
or he may join the nominal partner, as he sees fit. In other
words, nominal partners are not necessary parties, but are
proper parties, in cases where they have been held out un-
der such circumstances as to render them liable as actual
partners.**
3465. Indiana: Barns' Ann. St 1908, S$ 824-327. Minnesota: Oen.
St 1905, i§ 4282, 4283. Missouri v Ann. St 1906, S 892. New Mexico :
Gomp. Laws 1897, K 2894, 2895. Tennessee: Shannon's Code 1896,
§i 448474487. South Carolina : Ck)de Civ. Proc. 1902, S 157.
An action or judgment against, one or more persons severally
bound Is not in several states a bar to proceedings against the others.
Iowa: Code 1897, f 3465. Indiana: Bums' Ann. St 1908, §| 693-
596. Kansas: Gen. St 1905, | 5336. Kentucky: Civ. Code Prac.
1906, §S 27, 373. Montana : Rev. Codes 1907, $ 7129. New Mexico :
Comp. Laws 1897, §S 2894, 2895. Tennessee: Shannon's Code 1896,
i 4487. Vermont : St 1894, 8 1182.
4«New York Dry Dock Co. v. Tread well, 19 Wend. (N. Y.) 525;
Leslie V. WHey, 47 N. Y. 648; Scott v. Conway, 58 N. Y. 619;
North V. Bloss, 30 N. Y. 374; Wright v. Herrick, 125 Mass. 154;
Page V. Brant, 18 111. 37; COX v. HICKMAN, 8 H. L. Cas. 268,
Gilmore, Cas. Partnership, 31 ; Cleveland v. Woodward, 15 Vt 302,
40 Am. Dec. 682; De Mautort v. Saunders, 1 Bam. & Adol. 398;
Chase v. Demlng, 42 N. H. 274 ; Allen v. Fleck (Tex. Civ. App.) 118
S. W. 176. Dicey, Parties, p. 368. See '^Partnership^'* Deo, Dig,
(Key No,) S 200; Cent, Dig. § 970,
43 See ante, chapter I, § 21, p. 61.
** Hatch V. Wood, 43 N. H. 633; SCARF v. JARDINB, 7 App.
Cas. 345. "But where the nominal partner has never been known
as such to a particular person, it would rather appear (see, contra.
Young V. Axtell. cited in WAUGH v. CARVER, 2 H. Bl. 235, 1
Smith, Lead. Cas. [6th Ed.l 846, Gilmore, Cas. Partnership, 19, where
it is stated by Lord Mansfield *that as the defendant had suffered
Gzl.Pabt. — 35
546 ACTIONS BY OB AGAINST PARTNBBS (Gh. 9
When Agent Partner must be Sued Alone — Deeds
Where a partner contracts by deed in his own name, he
alone can be sued thereon. This is a mere application of
the rule that the person to be sued on a contract by deed is
the person with whom the contract is expressed by the deed
to be made.*"
Same — Negotiable Instruments
Where a partner draws, indorses, or accepts a bill of ex-
change in his own name, he alone can be sued thereon.
Though "the rule of law, as to simple contracts in writing
other than bills and notes, is that parol evidence is admis-
sible to charge unnamed principals, * * * but is inad-
missible for the purpose of discharging the agent who signs,
as if he were principal, in his own name, * * * yet it
is conceived that the law as to negotiable instruments is
ber name to used In the business, and held herself out as a partner,
she was certainly liable, though the plaintiff did not at her time
of dealing know that she was a partner, or that her name was
used.' Id. 847) that such person cannot Join him in an action against
the firm, for the rule which imposes on a nominal partner the re-
sponsibilities of a real one Is framed In order to prevent those per-
sons from being defrauded or deceived who may deal with the
firm. But, where the person dealing with the firm has never heard
of him as a component part of It, that reason no longer applies.
WAUGH V. CARVER, 1 Smith, Lead. Cas. (6th Ed.) 860, Gllmore,
Cas. Partnership, 19. A plaintiff's right to sue a nominal partner
depends upon its being proved 'that the defendant held himself
out, not to the world, for that Is a loose expression, but to the plain-
tiff himself, or under such circumstances of publicity as to satisfy
a Jury that the plaintiff knew of it, and believed him to be a part-
ner.* Dickinson v. Valpy, 10 Barn. & O. 140, per Parke, J. And
compare Shott v. Strealfield, 1 Moody & R. 9; ALDERSON v.
POPES, 1 Camp. 404, note. The rule as to a nominal partner's lia-
bility to be sued may. If this view of his position be correct, be thus
summed up: He is simply an apparent partner, and may be sued
by any person to whom he appears to be a partner, but cannot be
sued by any person to whom he has not appeared to be a partner.**
Dicey, Parties, p. 270. See chapter I, § 21, p. 61. See ^'Partner-
ship;' Dec, Dig. (Key No,) § 200; Cent Dig, S 869.
*B Dicey, Parties, pp. 271, 229, rule 48; Eastwood v. Bain, 3 Hurl.
& N. 738 ; Bottomley v. Nuttqll, 5 C. B. (N. S.) 122, 28 Law J. C
P. 110; Appleton v. Binks, 6 East, 147, 148; Firemen's Ins. Co. v.
Floss, 67^ Md. 403, 10 AU. 139, 1 Am. St Rep. 398. See ''Partner-
ship;' Dec, Dig, (Key ^0,)% 200; Cent, Dig, | 369,
§ 180) PARTIES TO ACTIONS AGAINST THK FIRM 547
different in one respect, to wit, that where the principal's
name does not appear he is not liable on a bill or note as a
party to the instrument." *•
Same — Credit Given Exclusively to Agent Partner
It is possible that a third party, with whom a partner
contracts as an agent, on behalf of his firm as a known prin-
cipal, may be willing to give credit to the agent partner,
and not be willing to give credit to the firm or principal. A
person so dealing with an agent cannot afterwards sue the
principal.*^ "If the principal be known to the seller at the
time when he makes the contract, and he, with the full
knowledge of the principal, chooses to debit the agent, he
thereby makes his election, and cannot afterwards charge
the principal." **
When Partner may be Sued Alone or Jointly with Copartners
Where a partner contracts individually, as well as on be-
half of his firm, the action may be brought either against
him alone or against all the partners jointly. "A person
who is acting for another, and known by him with whom
he deals to be so acting, may and will be personally liable
if he contracts as a principal, and that whether he contracts
by word of mouth or in writing. The difference is that, if
the contract is by word of mouth, it is not possible to say,
from the agent using the words *V and 'me'; whereas, if
the contract is in writing, signed in his own name, and
speaking of himself as contracting, the natural meaning of
the words is that he binds himself personally, and, accord-
ingly, he is taken to do so. * * * It is well settled that
an agent is responsible, though known by the other party
to be an agent, if, by the terms of the contract, he makes
*• Bylefl, Bills (8th Ed.) 34, 35. Pentz v. Stanton, 10 Wend. (N. Y.)
271, 25 Am. Dec. 558 ; Leadbitter v. Farrow, 5 Manle & S. 345. Of.
Lindufl V. Bradwell, 5 O. B. 583, 17 Law J. C. P. 121. 8ee ^^Partner-
$Mp," Dec. Dig. (Key No.) S 200; Cent Dig. § S69.
4T Addison v. Gandasequi, 4 Taunt 573, 2 Smith, Lead. Gas. (8th
Ed.) 892. See "Partnership,** Dec. Dig. {Key No.) § 200; Cent. Dig.
f S69.
48 Thomson ▼. Davenport, 0 Bam. & O. 78, 2 Smith, Lead. Gas.
(8th Ed.) 39a See '^Partnership," Dec Dig. iKey No.) t 200; Cent.
Dig. I 869.
548 ACTIONS BY OR AGAINST PARTNBB8 (Ch. 9
himself the contracting party." *• If the contract is by
parol, it is merely a question of evidence whether the part-
ner intended to bind himself personally. If the contract is
in writing, it is a question of interpretation. Thus, where
an agent contracts in his own name, without mentioning
his principal, though the fact of his being an agent is known
to the other party, he is personally liable.** The fact, how-
ever, that an agent is clearly liable on a written contract,
does not free his principal from liability ; for, though a per-
son who appears to be liable on the face of a written con-
tract cannot give evidence to show that he is not liable,
since to do this would be to contradict the written con-
tract, there is nothing to prevent the production of evidence
that a person who is not liable on the face of a contract is
in reality chargeable under it.'*
SatPie — Firm as Undisclosed Principal
Where a partner contracts in his own name, but in reality
for his firm, which occupies the position of an undisclosed
principal, either the partner so contracting or the firm —
L e., all the partners jointly — may be sued.'* This excep-
tion might be included under the last
«• WiUlamson y. Barton, 81 Law J. Exoh. 174, per Bramwell, B.
See, also, Dicey, Parties, 2S5; Story, Ag. § 269; Higgins ▼. Senior,
8 Mees. & W. 834; Parker v. Winlow, 7 El. & Bl. 942. Gf. Fisher
▼. Marsli, 84 Law J. Q. B. 177, 6 Best & S. 411. See "^Partnership,"
Dec, Dig, {Key No.) f 200; Cent, Dig, § 969,
80 Higgins y. Senior, 8 Mees. & W. 884. See ""Principal and
Agent," Dec. Dig, {Key No,) i 136; Cent. Dig. |§ 476^491.
Bl Dicey, Parties, p. 256; Paterson v. Gandasequl, 15 Bast, 62, 2
Smith, Lead. Gas. (6th Ed.) 613. Bee ""Principal and Agent," Dec
Dig. (Key No.) i§ 1S0-1S6; Cent, Dig. K 45&-m, 500.
ss See Dicey, Parties, 256 ; Paterson v. Gandasequi, 15 East, 62,
2 Smith, Lead. Cas. (6th Ed.) 613. Where one assumes to act as
agent for a single member of a firm in the sale of partnership prop>
erty, the receipt by the assumed principal of the money received
on the sale is a ratification of the agency, and an adoption of the
means by which it was obtained. And, when the purchaser was
ignorant of the existence of the partnership, the other partners
need not be Joined in an action to recover back the money paid, for
fraud on the part of the agent, or for mistake. The declared pdnci-
pal becomes liable inunediately upon the receipt of the money, and
his subsequent division of it among persons who were strangers in the
§ 181) PARTIES TO ACnOMS AGAINST THB FIBU 549
SAME— LIABILITIES ARISING EX DELICTO
«
181. One or any or all of the partners in a firm may be sued
separately or jointly for a wrong committed by
the firm.
Actions of Tort against Partners
It is not every tort which, though committed by several
persons acting together, is legally imputable to them all
jointly; ••. but, supposing a tort to be imputable to a firm,
an action in respect of it may be brought against all or any
of the partners. If some of them only are sued, they can-
not insist upon the other partners being joined as defend-
ants;"* and this rule applies even where the tort in ques-
tion is committed by an agent or servant of the firm, and
not otherwise by the firm itself."" But there is a distinc-
tion between ordinary actions of tort and those which are
brought against persons in respect of their common inter-
est in land; for all joint tenants or tenants in common
ought to be joined in an action for an injury arising from
the state of their land, and this rule applies to partners as
well as to persons who are not partners."*
transaction to the plaintiff cannot affect his liability. Leslie v.
Wiley, 47 N. T. 64a See '* Partnership," Dec. Dig. {Key Vo.) % 200;
Cent. Dig. § S69.
ss See Hale, Torts, p. 167.
ft4 Sutton V. Clarke, 6 Taunt 29 ; MaxweU ▼. Martin, 130 App.
Div. 80, 114 N. T. Supp. 349; Hale, Torts, p. 123; Undl. Partn.
p. 283. See chapter IV, § 75, ante, p. 236. Bee ^'Partnership,*^ Dec
Dig. {Key No.) § 200; Cent. Dig. § S69.
BB Mitchell V. Tarbutt, 5 Term R. 649; Aneell v. Waterhouse, 6
Maule & S. 385 ; Wood v. Luscomb, 23 Wis. 287 ; Howe v. Shaw, 56
Me. 291. See '* Partnership,** Dec. Dig. {Key No.) | 200; Cent. Dig.
§ S69.
68Lindl. Partn. 283; Mitchell v. Tarbutt, 5 Term K. 649. See
^^Partnership;* Deo. Dig. (£ey No.) | 200; Cent. Dig. i S69.
550 ACTIONS BY OB AGAINST PABTNEB8 (Ch. 9
EFFECT OF CHANGES IN FIRM
182. Changes in the membership of a firm may arise by
(a) The admission of a new member (infra).
(b) The retirement of an old member (p. 663).
(c) The death of a member (p. 556).
(d) The bankruptcy or insolvency of a member (p. 658).
SAME— ADMISSION OF NEW MEMBER
183. Where a new member has been taken into a firm, he
cannot join as plaintiff in actions on claims due the
old firm, except
EXCEPTIONS :
(a) Where the claim has been assigned to the new firm
(p. 661).
(b) Where, by consent of all the parties, the new firm is
substituted for the old as the obligee (p. 551).
184. Where a new member has been taken into a firm, he
cannot be joined as a defendant in an action on a
liability of the old firm, except
EXCEPTIONS :
(a) Where, by consent of all parties, the new firm is sub-
stituted as the ^obligor (p. 552).
(b) Where the incoming partner has become liable to
creditors by assuming debts of the old firm, he may
be joined or sued separately, according as his lia-
bility is joint or several *' (p. 652).
185. Where the circumstances are not such that the new
partner can sue or be sued, as the case may be, the
action must be brought by or against the partners
of the old firm, precisely as though no change had
occurred.
•T See chapter IV, §§ 76-78, ante, p. 240, where the commence-
ment and duration of firm liability is considered.
§§ 183-185) EFFECT OF CHANGES IN FIRM 551
The admission of a new member into a firm, as has been
repeatedly said, operates as the formation of a new firm,
and the dissolution of the old one. In other words, prima
facie, the new partner is admitted for the future, and not
for the past. The claims due the old firm belong to the
members of the old firm, and are to be enforced by them.
Similarly, a new member cannot be sued on a liability of
the old firm. The liabilities, like the claims of the old firm,
belong to the old members. There are, however, certain
exceptions or apparent exceptions to these rules ; and, un-
der certain circumstances, the incoming partner may sue
or be sued as the case may be. But, where the circum-
stances are not such that the new partner can sue or be
sued, the action must be brouight by or against the partners
of the old firm, precisely as though no change had occur-
red. "
Exceptions — When New Member may Join as Plaintiff
The first exception to the rule that a new member can-
not sue on a claim due the old firm is where there lias been
an assignment of such claims by the old firm to the new.
Assignees of choses in action are now almost universally
allowed to sue thereon in their own names.'*
The second exception is where, by consent of all the par-
ties interested, the new firm is substituted for the old as
the obligee. This exception differs from the first as a nova-
tion differs from an assignment, viz. by the consent of the
creditor, the discharge of the old obligation, and the crea-
tion of a new one. In such a case the new member may of
ssLlndl. Partn. p. 286; Wllsford v. Wood, 1 Esp. 1^; Vere v.
Ashby, 10 Bam. & 0. 288; Young v. Hunter, 4 Taunt. 582; Hatchett
V. Blanton, 72 Ala. 423 ; Rlngo v. Wing, 49 Ark. 457, 5 S. W. 787 ;
Bracken v. Dillon, 64 Ga. 243, 37 Am. Rep. 70. An incoming partner
is not liable on a written agreement of employment for more than a
year, made before his entry into the firm, and signed in the firm
name only. HUGHES v. GROSS, 166 Mass. 61, 43 N. E. 1031, 32
L. R. A. 620, 55 Am. St Rep. 375. See "Partnership/* Dec. Dig.
{Key No,) U 2S4, 2S8, 2^2; Cent. Dig, §§ -^8^, ^85. k91, 492, 503,
»• Vlles V. Bangs, 36 Wis. 131 ; Walker v. Steel, 9 Colo, 388, 12
Pac. 423. For cases illustrating the common-law rule see Howell v.
Reynolds, 12 Ala. 128; Molen v. Orr, 44 Ark. 486. See "Partner-
ship;* Dec. Dig. (Key No.) {§ 234, ^42; Cent. Dig. {{ -^82%, 48S, 508,
552 ACTIONS BT OR AGAINST PARTNSB8 (Cb. 9
course join, but the exception is only an apparent one, for
the action is on the obligation to the new firm, and not on
the obligation to the old one.**
S<wie — When New Member may be Made a Defendant —
Assumption of Debts
The first exception to the rule that a new member can-
not be sued on an obligation of the old firm is where, by
consent of all the parties interested, the new firm is substi-
tuted as the obligor. This exception to the rule as to de-
fendants corresponds to the similar exception as to plain-
tiffs, just considered. It is only an apparent exception, for
the action is really on an obligation of the new firm, the
obligation of the old firm being discharged in consideration
of the assumption of liability by the new firm.
There is a second exception in some jurisdictions to the
rule under consideration. As has been, seen, a number of
courts hold that an incoming partner; by assuming debts
of the ol#|irm, may become liable to creditors, although he
•0 See ante, chapter IV, S{ 77-78, pp. 242-257. **In all these cases,
founded on a new and original consideration of benefit to the de-
fendant or harm to the plaintiff moving to the party making the
promise elthier from the plaintiff or original debtor, the subsisting
liability of the original debtor is no objection to recovery." Farley
V. Cleveland, 4 Cow. (N. Y.) 439, 16 Am. Dec 387, approved in Hoile
V. Bailey, 58 Wis. 434, 17 N. W. 322. The new member having cove-
nanted, as between himself and the retiring partner, to pay the lat-
ter*8 share of the partnership liabilities, and the new firm having
made payments on the plaintiff's claim, and the retiring partner hav-
ing assigned to plaintiff all claim he might have against such new
member on , the . agreement between them, and the plaintiff having
thereupon brought this suit against the new firm, these facts, appear-
ing in evidence, would be sufficient to fairly warrant a jury in find-
ing that plaintiff had accepted the new firm as her debtor in place of
the old, and had consented to the substitution which the several
partners among themselves had agreed upon. Creditors of a dissolved
firm, who take the paper of the succeeding firm, release the retiring
members. SMITH v. SHELDON, 35 Mich. 42, 24 Am. Rep. 529, Gil-
more, Cas. Partnership, 332; Regester v. Dodge, 10 Blatchf. 79, 6
Fed. 6 ; Dodd v. Dreyfus, 57 How. Prac. (N. Y.) 319. But such sub-
rogation of the new firm must be accepted by the creditor, to re-
lease the retiring member. Hayes v. Knox, 41 Mich. 529, 2 N. W.
670; Osborn v. Chsbom, 36 Mich. 48. 8ce "Parinership,** Dec Dig.
(Key Vo.) §§ 2S^, 2Ji2; Cent, Dig. U ^82%, 483, SOS.
§§ 186-188) EFFECT OF CHANOE8 IN FIRM 553
has not contracted with them, and although the old firm
has not been released. In these jurisdictions, where the
incoming partner has become liable to creditors by assum-
ing debts of the old firm, he may be joined or sued sepa-
rately, according as his liability is joint or several.*^
SAME— RETIREMENT OF OLD MEMBER
186. A retired partner must join as a plaintiff in actions on
claims due the old firm whenever such joinder
would have been necessary had he not retired, ex-
cept
EXCEPTIONS:
(a) Where the claim has been assigned to the new firm.
(b) Where, by consent of all the parties, the new firm is
substituted for the old as obligee.
187. A retired partner must be joined as a defendant in an
action on a liability of the old firm whenever such
joinder would have been necessary had he not re-
tired, except
EXCEPTIONS:
(a) Where, by consent of all the parties, the new firm is
substituted for the old as the obligor.
(b) Where the new firm has become liable to creditors
by assimung debts of the old firm.
188. Where the circumstances are not such that the retired
partner may be omitted, the action must be
brought by or against the partners of the old finn,
precisely as though no change had occurred.*'
9
•1 See ante, chapter IV, §§ 77-78, pp. 242-257. If a new firm,
formed from an old firm by the retirement of a member, succeeds to
and continues the business of the old firm in the same place, slight
evidence is sufficient to warrant the inference that it has assumed
the liabilities .of the old firm ; and, if it has assumed such liabili-
ties, a partner has the same right to give partnership notes in pay-
ment of them as he has to give such notes in payment of the debts
•s See chapter IV, § 77, p. 242, ante, where the commencement
and duration of firm liability is discussed.
554 ACTIONS BT OR AGAINST PARTNERS (Ch. 9
Much the same considerations apply to the case of the
retirement of an old member as do to the case of the admis-
sion of a new one. The change operates equally as the dis-
solution of the old firm and the formation of a new one.
The general rule is that a retired partner must join as plain-
tiff or defendant whenever such joinder would have been
necessary had he not retired. The exceptions to this rule
are practically the converse of the exceptions to the rule as
to incoming partners. Thus, where the claim has been as-
signed to the new firm, or whef e, by consent of all the par-
ties concerned, the new firm is substituted for the old as
obligee, the retired partner should not join as plaintiff.
Under similar circumstances, it has been seen that an in-
coming partner should join. So, where, by consent of all
concerned, the new firm is substituted for the old as obligor,
and where the new firm has become liable to creditors by
assuming debts of the old firm, the action may be against
the new firm, omitting the retired partner. Where the cir-
cumstances are not such that the retired partner may be
omitted, the action must be brought by or against the part-
ners of the old firm, precisely as though no change had oc-
curred.*'
When Change in Firm Discharges Contract
Although a change in a firm, whether by the introduc-
tion of a new partner or the retirement of an old one, can-
not, except as already mentioned, confer upon the partners
any new right of action against strangers, or vice versa, as
of the new firm. Shaw v. McGregory, 106 Mass. 96. See ''Partner^
ship:' Dec. Dig. (Key No.) fS 2S8, tS9, 2^2; Cent. Dig. M 491, 492.
497, SOS.
«is Llndl. Partn. p. 286; Dobbin ▼. Foster, 1 Gar. & K. 323. See,
also, ante, { 180, p. 642. Where one member of an Insolvent firm
sells his Interest with the agreement that the new firm shall assume
the debts of the old, the assets of the new firm are charged in equity
with a trust for the payment of the debts of the old, which may be
enforced by a creditor of the old firm who has not consented to ac-
cept the new firm as his creditor instead of the old. THAYER v.
HUMPHRBY, 91 Wis. 276, 64 N. W. 1007, 30 U R. A. 549, 51 Am. St
Rep. 887, Gilmore, Gas. Partnership, 546. See ''Partnership,** Dec,
Dig. (Key No.) {{ 2S2, 2S6, 2S9, 242; Cent. Dig. M 481, 4S2, 484^4^8,
495, SOS,
§§ 186-188) EFFECT OF CHANGES IN FIRM 555
regards what may have occurred before the change look
place, it may, nevertheless, operate so as to discharge a per-
son from a contract previously entered into by him. Thus,
a person who is surety to a firm is discharged from his sure-
tyship, for the future, by a change among its members, and
cannot therefore be sued either by the old or by the new
partners for any default of the principal debtor occurring
subsequently to the change.'* Again, if a person enters
into a contract with a firm, and that contract is of a purely
personal character, to be performed by the individuals who
have entered into it, and not by any one else, a change in
the firm may operate as a dissolution of the contract, so
that neither the new nor the old partners can sue in respect
of any alleged breach which may have occurred since the
change took place. An illustration of this is afforded by
Robson v. Drummond.'** In that case A. and B. were part-
ners as coachmakers. C, who knew nothing of B., entered
into a contract with A. for the hire of a carriage for five
years, at so much a year, and A. undertook to keep the car-
riage in proper order for the whole five years. Before the
five years were out, A. and B. dissolved partnership, and
A. assigned the carriage and the benefit of the contract re-
lating to it to B. B. gave C. notice of the dissolution and
arrangement respecting the carriage; but C. declined to
continue the contract with B., and returned the carriage.
An action was then brought by A. and B. against C, for
not performing the contract; but it was held that the ac-
tion would not lie, the contract having been with A. alone,
to be performed by him personally, and he having disabled
himself from continuing to perform it on his part. In Stev-
ens V. Benning,*' the same principle was applied to a con-
tract between an author and a firm of publishers; and it
was held that the contract was one of a personal character,
•* See ante, chapter lY, i 7^ pp. 253, 255.
•s 2 Bam. & AdoL 308. Of. BrltlBh Waggon Co. ▼. Lea, 6 Q. B.
Dlv. 149. See ^'Partnership," Dec. Dig, (Key No,) §§ 235-238; Cent,
Dig. u m-m^
«• 1 Kay & J. 168, 6 De Gex, M. & Q. 223. See Hole v. Brad-
bury, 12 Cb. Dlv. 886. Bee ** Partnership,'* Dec. Dig. {Key No.) §S
236-238; Cent. Dig, §{ 48Jhi94.
556 ACTIONS BT OB AGAINST PABTNBB8 (Gh. 9
and that, consequently, the author was discharged from it
by a change in the firm, and an assignment of the benefit of
the contract to persons of whom the author knew nothing.
SAME— DEATH OP MEMBER
189. After the death of a member, actions on partnership
claims or obligations must be brought by or
against the surviving partners, and ultimately the
last survivor <^ his representatives.
Where a partner dies, all actions in respect of any con-
tract entered into by or on behalf of the firm before his
death must be brought by or against the surviving members
of the firm, and by or against them alone. The representa-
tives of the deceased partner can neither sue nor be sued
at law in respect of any such contract.*^ So, an action for
the conversion of partnership goods must be brought by
the surviving partners.*^ It follows that the last surviving
partner, or, if he be dead, his legal personal representative,
is the proper person to sue and be sued at law in respect of
the debts and engagements of the firm.** "These rules,
•TLlndl. Partn. p. 289; BASSBTT v. MIIiLBR, 39 Mich. 18S.
Oilmore, Cas. Partnership, 271; Dixon ▼. Hamond, 2 Bam. & Aid.
SIO; MARTIN ▼. CROMPE, 1 Ld. Raym. 340, 2 Salk. 444; BUCK-
LET ▼. BARBER, 6 Exch. 164. 178; Murphy ▼. Cochran (Iowa)
128 N. W. 849 ; Shivel T. Oreer (Tex. Civ. App.) 123 S. W. 207. The
administrator of a deceased partner cannot be joined with the snr-
viying partners, as a defendant, in an action on the obligations of
the firm. Childs ▼. Hyde, 10 Iowa, 294, 77 Am. Dec. 118w See
chapter lY, 8 78, p. 271, note 20, p. 205, ante, and chapter Y, i 122.
p. 853, ante, on the effect of death on firm liabilities and the rights
. of surviying partners. See ** Partnership," Dec, Dig. {Key No.) if
B4S-241, 258; Cent. Dig. H 509^28, 569-575.
•s Kemp V. Andrews, Garth. 170. But see BUCKLET ?. BAR-
BER, 6 Exch. 104. See 'Partnership,'* Dec. Dig. {Key No,) | 258;
Cent. Dig. { 571.
•» Dicey, Parties, p. 274, rule 58; Lindl. Partn. p. 289; Richards
▼. Heather, 1 Bam. & Aid. 29; Calder v. Rutherford, 3 Bred. &
B. 302. "A joint contract is made by X., Y., and Z. The lia-
bility to be sued upon the, contract passes, on the death of Z., to X.
and Y. ; on the subsequent death of Y^ to X. ; and, on the death
§ 189) EFFECT OF 0HANGB8 IK FIRM 5^7
however, can be no longer relied upon, except where the
obligation sought to be enforced is joint in equity, as well
as at law. Wherever it is several as well as joint, an action
may, it is apprehended, be brought by or against the sur-
viving partners and the executors or administrators of the
deceased partner." ^*
On the death pendente lite of a partner plaintiff, the ac-
tion proceeds without amendment upon the mere sugges-
tion of the death ; and so, in case of the death of a partner
defendant pendente lite, the liability survives against the
survivors, and no revivor is necessary.**
of X. (provided the liability to be sued surriTes), to X.'8 executor or
administrator. The represeDtatives, e. g. of Z., can neither be
sued upon the contract themselves, nor be stied Jointly with X. and
Y. A person's separate liabUity on any contract passes, of course,
to his representatives. If, therefore, X., Y., and Z. enter into a joint
and several contract, and Z. die, X. and Y. may be sued on their
joint contract, and Z/s executor may be sued on Z.'s separate con-
tract In other words, a joint and several contract by X. and Y.
is, in effect, three contracts, — a joint contract by X. and Y., a sepa-
rate contract by X., and a separate contract by Y.'* Dicey, Par-
ties, p. 238. See '^Partnership,** Deo. Dig. (Key No.) i 258; Cent,
big. U 569-575.
ToLindl. Partn. p. 288. See, also, DOGGBTT v. DILL, 108 111.
560, 48 Am. Rep. 566, Gilmore, Cas. Partnership, 300; Nelson v.
Hill, 5 How. 127, 12 L. Ed. 81 ; Blair v. Wood, 108 Pa. 278 ; Gamp
V. Grant. 21 Conn. 41, 54 Am. Dec. 321; Manning v. Williams, 2
Mich. 105; Pope v. Cole, 55 N. Y. 124, 14 Am. Rep. 198; Sherman v.
Kreul. 42 Wis. 33 ; Pearson v. Keedy, 6 B. Mon. (Ky.) 128, 43 Am.
Dec. 160; Pullen v. Whitfield, 55 Ga. 174. See ante, chapter IV. 8
72, p. 227. See *' Partnership ^ Dec. Dig. (Key No.) i 258; Cent. Dig.
H 560-515.
71 Phoenix Ins. Co. v. Moog, 81 Ala. 335, 1 South. 108; Gaines v.
Belme, 3 Ala. 114 ; Troy Iron & Nail Factory v. Wlnslow, 11
Blatchf. 513, Fed. Cas. No. 14,199; Townes v. Birchett, 12 Leigh
(Va.) 173; Bowen v. Troy Portable Mill Co., 31 Iowa, 460; Childs
V. Hyde, 10 Iowa, 294, 77 Am. Dec. 113; Dunman v. Coleman, 59
Tex. 199. See, also, Sherman v. Kreul, 42 Wis. 33; Cragin v.
Gardner, 64 Mich. 399, 31 N. W. 206. See ''Abatement and Revival;*
Dm. Dig. {fiey JHo.) U 61, 64; Cent. Dig. || 517, S25.
658 ACTIONS BY Or against partners (Gh. 9
SAME— BANKRUPTCY AND INSOLVENCY
190. Actions on firm claims must be brought
(a) On the insolvency of the Brm, by the trustee of the
bankrupts.
(b) On the bankruptcy of one or more partners, by the
solvent partners, together with the trustee or trus-
tees of die bankrupt partner or partners.
191* Mere bankruptcy or insolvency of a firm or its mem-
bers does not, previous to their discharge, affect
their liability on firm obligations.
192. After discharge of the firm in bankruptcy, no action
can be maintained against the partners on previ-
ous obligations of the fimx.
193. After the discharge of one or more partners in bank-
ruptcy, the action must be brought against the sol-
vent partner or partners.
Where a partnership makes an assignment for the bene-
fit of creditors, or is forced into bankruptcy, the partner-
ship is dissolved, and its affairs must be wound up. In
such case the assignee or trustee is the person to bring ac-
tions on firm claims.^* Where one or more partners be-
come bankrupt or make an assignment for the benefit of
creditors of all their property, including their interest in the
partnership, the firm is likewise dissolved; and actions on
firm claims should thereafter be brought by the solvent
partners, together with the trustee or trustees of the bank-
rupt partner or partners.^' In such case it is held by some
authorities that the assignee or trustee becomes a tenant
Ts Llndl. Partn. p. 289. See Ray v. Davies, 8 Taunt 134; Stone-
house ▼. De Silva, 3 G^mp. 399; Hancock v. Haywood, 3 Term R.
433. See "Partnershipr Dec, Dig. (Key No.) i 271; Cent. Dig. i 616;
"Bankruptcy;* Dec. Dig. {Key No.) i§ 145, 149, 281; Cent. Dig.
|§ 229, 428; '* Insolvency,'* Dec. Dig. {Key No.) 8 90; Cent. Dig. U
132^137.
rs Eckhardt v. WUson, 8 Term R. 140; Thomason v. Frere, 10
Bast, 418; Graham v. Robertson, 2 Term R. 282; Heilbut v. Nevill,
Lk R. 4 O. P. 354. If the assignees decline to join, the solvent part-
ners were entitied to make use of their names upon indemnify-
§§ 190-193) EFFECT OF CHANGES IN FIBM 559
in common with the solvent partner of all the partnership
property/* By other authorities, however, it is held that
the title to firm property in case of the bankruptcy of one
partner passes to the solvent partner in the same way that
it passes t6 the survivor in case of the death of a partner,
and that he is the proper party to sue on firm claims.^' The
mere assignment or bankruptcy of a firm or its members
does not, however, affect their liability on firm obligations.
They continue liable and may be sued Until such obliga-
tions are discharged.^* After discharge of the firm in bank-
ruptcy, no action can be maintained against the partners
on previous obligations of the firm, unless they are such as
cannot be discharged in bankruptcy/^ ' After the discharge
of one or more partners in bankruptcy, the action must be
brought against the solvent partner or partners/* "There
is no remedy by action against a trustee in respect of the
bankrupt whom he represents. The remedy is by proof
against the bankrupt's estate." ^*
Ing them agalnsf the costs of the action. Llndl. Partn. p. 289 ;
Whitehead v. Hughes, 2 Gromp. & M. 318; Bz parte Owen, 13 Q.
B. Div. 113. An assignment of one partner's estate under the in-
solvent laws does not prevent all the partners from maintaining an
action previously commenced on a debt due to the partnership.
Cunningham v. Munroe, 15 Gray (Mass.) 471. See "Partnership,*'
Dec, Dig. {Key mo,) { 211; Cent, Dig. { SIS; ^'Bankruptcy;* Dec, Dig,
{Key No,) §§ U5, 149. 281; Cent, Dig. §S 229, 428; "Insolvency,*'
Dec. Dig. {Key No,) § 90; Cent. Dig. §§ 1S2-1S7,
T4jDicey, Parties, p. 160; MURRAY v. MURRAY, 5 John. Ch.
(N. Y.) 60, Gllmore, Cas. Partnership, 578; Wllklns v. Davis, 15 N.
B. R. 60, Fed. Cas. No. 17,664. See "Partnership,** Dec. Dig, {Key
No.) § 271; Cent. Dig. { 616; ^'Bankruptcy,*' Dec. Dig. {Key No.) §{
149, 281; Cent. Dig. §§ 229, 4^8.
T6 OGDEN V. ARNOT, 29 Hun (N. Y.) 146; Amsinck v. Bean, 89
U. S. 395, 22 L. Ed. 801. See, for further discussion and cases, ante,
chapter VII, § 151, p. 453. See "Partnership," Dec. Dig. {Key No.)
§ 271; Cent, Dig. § 616; "Bankruptcy,** Deo. Dig. {Key No.) |
149, 281; Cent, Dig. { 229, 428.
T6 Llndl. Partn. p. 289.
TT Dicey, Parties, p. 273.
T8 Lindl. Partn. p. 290; Dicey, Parties, p. 273; Hawkins t. Rams-
bottom, 6 Taunt 179 ; MATTIX v. LEACH, 16 Ind. App. 112, 43 N.
E. 969. See "Bankruptcy,*' Dec Dig. {Key No.) I 429; Cent. Dig.
If 778, 782.
T» Dicey, Parties, p. 273.
560 ACTIONfl BT OR AGAINST PARTNBBS (Oh. 9
DISQUALIFICATION OP ONE PARTNER TO SUE
194. In cases where all the partners most join as plainti£Fs
to enforce a firm claim, if one of the partners is
disqualified to sue, no action at law can be main-
tained.
It has been seen that all the partners must join in an ac-
tion on an obligation to. a firm because it is in law an ob-
ligation to all the partners jointly.^^ Whenever, therefore,
one partner is disqualified to sue upon a cause of action, no
action can be maintained at law either by all the partners
jointly, because by hypothesis one is disqualified, or by the
other partners, because all must join.** The rule already
discussed ,that no action at law lies upon a claim by a firm
against one of its members, or vice versa, is an illustration
of this principle. In such an action one partner would have
to be joined both as a plaintiff and as a defendant, and a
person is disqualified to sue himself.'*
So, if a partnership become possessed of a negotiable se-
curity which has been procured by one partner upon, the
understanding that he will punctually provide for the pay-
ment thereof 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 such a case
that he could not maintain any suit in his own name there-
on, the same objections will avail against him as a coplain-
•0 See ante, p. 630.
•1 Bates, Partn. f 1035 et seq. See, also, Cochran ▼. Caimlnghain*8
Bx'r, 16 Ala. 448, 50 Am. Dec. 188 ; Morse v. Bellows, 7 N. H. 549,
28 Am. Dec. 872; Salmon v. Davis, 4 Bin. (Pa.) 375, 5 Am. Dec.
410. See ''Partnerihip,"* Dec, Dig. (Key No.) S 191; Cent. Dig. 8 S51.
•« See ante, pp. 540. 542. Where three members of firm were lia-
ble as Joint obligors with defendant, it wns held that neither the firm
nor the trustee in bankruptcy of the firm could sue defendant, as this
would make one party both plaintiff and defendant Kalamazoo
Trust Co. V. Merrill, 159 Mich. 649, 124 N. W. 697. See "Partner-
shipr Dec. Dig. {Key No.) § 115; Cent. Dig. i 178; '^Bahtruptcy,*'
Dec. Dig. (Key No.) 8 281; Cent. Dig. i 4^8.
S 194) DISQUALIFICATION OF ONE PABTNBR TO SUB 561
tiff.*' So, also, a partner holding a security of the firm by
indorsement from the payee or other indorser cannot sue
the indorser thereon.'*
. A partnership cannot maintain an action if one partner
is an alien enemy. A state of war suspends all commercial
intercourse between the belligerents, and shuts their courts
against all suits and proceedings and all claims and per-
sons who have acquired and retained a hostile character.' •
Perhaps the most numerous class of cases where this
doctrine is invoked is where one partner has wrongfully
disposed of. partnership property, as where he has released
a firm debtor or used firm property in the payment of his
individual debts, and the firm seeks to recover the debt or
the property. This is obviously a firm claim, and the guilty
partner is a necessary coplaintiff. He cannot recover un-
less he is allowed to repudiate his former act, and unless he
can recover his copartners cannot. The courts have hope-
lessly disagreed in their application of the doctrine to this
class of cases.
In considering this class of cases, a distinction should be
observed between (1) acts of the partner which, though
wrongful, are yet done within the course of the partnership
business, and which may therefore be considered as the
acts of the firm, and (2) acts which are not done in the
course of the partnership business, but which are wrongs
to the other partners.
(1) A wrongful act done by one partner in the course of
the partnership business is the wrongful act of the firm,
and, of course, no cause of action in favor of the firm can
arise from it." Thus, fraud on the part of one partner in
••Story, Partn. f 237; Sparrow v. Chlsman, 9 Barn. & C. 241.
See Richmond v. Heapy, 1 Starkle, 202. See ^^Partnership," Dec,
Dig. {Key No.) 8 199; Cent. Dig. $§ 862-^68.
•* Bailey v. Bancker, 3 Hill (N. Y.) 188, 38 Am. Dec. 625. See
^^Partnership," Dec. Dig. (Key No.) {§ 104-110; Cent. Dig. {{ 156-172.
«B story, Partn. § 240; McConnell v. Hector, 3 Bos. & P. 113;
Griswold V. Waddlngton, 16 Johns. (N. Y.) 438. See ''War;' Dec. Dig.
{Key No.) f 10; Cent. Dig. §§ 26-S6.
•• But as between themselves, In the settlement of their part-
nership accounts, the wrongdoing partner may sometimes be solely
chargeable with whatever damages arise from his act
Gil.Pabt. — 36
562 ACTIONS BY OR AGAINST PARTNERS (Ch. 9
procuring a note is available as a defense to an action
thereon by all the partners jointly ; i. e. by the firm.^^ So,
where one partner procures goods for the firm by false rep-
resentations, and fraudulently disposes of them, all the
partners are jointly liable.®* Likewise, a release of a firm
debt by one partner is ordinarily the act of the firm.**
(2) It is in the cases where a partner has wrongfully dis-
posed of partnership property, not in the course of the part-
nership business, but in fraud of his copartners, that the de-
cisions are most conflicting. Two classes of cases may be
considered: (a) Where chattels, exclusive of money, are
used, and (b) where money is used. Each will be consid-
ered separately. Where it is the credit of the firm that is
used, as where one partner uses firm paper for his private
purposes, the firm can defend by showing that the paper
was issued without authority, except, of course, as to a
bona fide holder. The rights and liabilities of the parties
under these circumstances have already been discussed.**
(a) Where firm chattels other than money are virrong-
fully disposed of by one partner, various opinions are held
as to the possibility of an action being maintained by the ,
partners jointly for their recovery.
In some jurisdictions it is held squarely that the guilty
partner cannot, by thus joining with him his copartners,
repudiate his own act, but that his disability affects all the
partners, and, therefore, that the action cannot be main-
tained.** Jones V. Yates ** is a leading English case in
8T Kilgore V. Bruce, 166 Mass. 136, 44 N. B. lOa See Tanner-
ship,'' Deo, Dig, {Key No.) i 15S; Cent Dig. { 276.
88 Banner v. Schlesslnger, 109 Mich. 262, 67 N. W. 116. Bee
^'Partnership,'* Dec. Dig. {Key No.) S 15S; Cent. Dig. i US.
88 Dyer v. Sutherland, 75 111. 683; My rick v. Dame, 0 Gush.
(Mass.) 248 ; Gordon v. Albert, 168 Mass. 150, 46 N. B. 423 ; Coch-
ran V. Cunningham's Ex'rs, 16 Ala. 448, 50 Am. Dec. 186; Salmon
▼. Davis, 4 Bin. (Pa.) 379, 5 Am. Dec 410; Morse v. Bellows, 7 N.
H. 549, 28 Am. Deo. 372. Bee "Partnership," Deo. Dig. {Key No.) i
148; Cent Dig. § 2SS.
80 See ante, p. 306; Bates, Partn. 8 1086.
81 Church y. First Nat Bank of Chicago, 87 111. 68 (cf. Brewster
y. Mott, 4 Scam. [111.] 378); SINDELARE y. WALKER, 137 111.
»2 9 Bam. & C. 5SZ Bee "Partnership," Dec Dig. {Key No.) 8
199; Cent. Dig. {§ S62-S68.
g 194) DISQUALIFICATION OF ONE PARTNER TO SUB 563
support of this view. In that case, Sykes and Bury being
partners, Sykes fraudulently gave the bills of the partner-
ship in discharge of his private debt, and also applied part
of the partnership funds to the same purpose. The ques-
tion was whether the partners Sykes and Bury could re-
cover in a joint action the amount, of the bills and of the
money in a court of law, by an action of trover for the bills
of assumpsit for the money, and it was held that they, could
not. So, it has been held in this country that if one mem-
ber of a partnership settles a demand due from him indi-
vidually by setting off and discharging a demand due from
his creditors to the partner, although this is a fraud upon
the partnership, no action at law can be maintained on be-
half of the partnership to recover the demand due it from
such creditor.*'
In some jurisdictions it is held just as squarely that the
partners can maintain an action to recover the property.
Rogers v. Batchelor •* is the leading case in support of this
view. Story, J., said : "In the case of a partner paying his
own separate debt out of the partnership funds, it is mani-
fest that it is a violation of his duty and of the rights of his
partners unless they have assented. The act is an illegal
conversion of the funds, and the separate creditor can have
no better title to the funds than the partner himself had."
The court further held that it made no difference whether
the separate creditor had knowledge that there was a mis-
43, 27 N. E. 09, 81 Am. St Rep. 853; Homer v. Wood, 11 Gush.
(Mass.) 62; Farley v. Lovell, 103 Mass. 887; Craig v. Hulschizer,
34 N. J. Law, 363; .Wtearer v. Rogers, 44 N. H. 112; Blodgett v.
Sleeper, 67 Me. 409; Bumpus ▼. Turgeon, 98 M«. 550, 57 Atl. 883.
One who cannot sue by himself cannot do so merely by Joining oth-
ers with him. Wallace v. Kelsall, 7 Mees. & W. 264, per Parke, B.
See "Partnership," Dec. Dig, (Key No.) i 199; Cent Dig, {§ S62-S68.
•» In Homer v. Wood, 11 Cash. (Mass.) 62 (approved in Grover v.
Smith, 165 Mass. 132, 42 N. E. 555, 52 Am. St. Rep. 506), the court
limited its decision to the precise case before it, in which it was
admitted that the defendant had acted in good faith in settling
with the fraudulent parties. In Grover v. Smith, supra, Holmes,
J., said that the good faith of defendant was inunaterial. See ''Part-
nerahipr Dec, Dig. (Key No,) { lU; Cent, Dig, H 2$6, 239.
•4 12 Pet 221, 9 L. Ed. 1063. See ^'Partnership,** Dec. Dig. {Key
No.) t ^U! Cent. Dig. { 2S6.
564 ACTIONS BY OR AGAINST PARTNERS (Oh. 9
appropriation of the partnership fund or not. The position
taken was that, if he had such knowledge, he would be
guilty of gross fraud, not only in morals, but in law; but
that knowledge was not an essential ingredient in the case.
The true question was said to be whether the title to the
property had passed from the partnership to the separate
creditor. If it had not, then the partnership might reassert
its title to it in the hands of such creditor. This view is
followed in many cases.** Viles v. Bangs •• was an ac-
tion for the value of goods sold to defendant. The defense
was that the goods had been taken under an agreement
with one partner in payment of his private debt. The court
held that plaintiff could recover. The court said: "A re-
covery can only be defeated by the court sustaining this ap-
propriation of the partnership property; and, by giving
force and effect to the settlement, the plaintiff does not
trace his cause of action through the wrongful act of his
partner, but the defendants claim that he is bound by it."
In some jurisdictions the transaction may be treated as,
in effect, a sale, and the separate creditor is liable to the
firm in assumpsit for the value of the goods.*^ The doc-
trine has been held not applicable to counterclaims.**
Where the guilty partner is not a party, as where the suit
•sCotzhausen v. Judd, 43 Wis. 213, 28 Am. Rep. 539; Purdy ▼.
Powers, 6 Pa. 492; Forney y. Adams, 74 Mo. 138; Ackley v. Staeh*
lln, 56 Mo. 558; Thomas ▼. Pennrich, 28 Ohio St 55; Burwell v.
Springfield, 15 Ala. 273; Liberty Sav. Bank v. Campbell, 75 Va.
534 ; Johnson v. Crlchton, 56 Md. 108 ; Busby y. Rooks, 72 Ark. 657,
81 S. W. 1056 ; McNair v. Wilcox, 121 Pa. 437, 15 Atl. 575. 6 Am.
St Rep. 799. See **Partner8h4p,'* Dec Dig, (Key No.) | IJU; OefU.
Dig. Si 234-2S9.
»«36 Wis. 131; Estabrook y. Messersmith, 18 Wis. 54S, distin-
guished, but doubted. Bee "JPortnertfAip,*' Dec, Dig. (Keif No.) 8 H4;
Cent. Dig, {{ 236-239.
•T Daniel v. Daniel, 9 B. Mon. (Ky.) 195. Cf. Grover y. Smith, 165
Mass. 132. 42 N. E. 555, 52 Am. St Rep. 506. And see A<^ley y.
Staehlin, 56 Mo. 558; Forney y. Adams, 74 Mo. 138; Dob y. Hal-
sey, 16 Johns. (N. T.) 34, 8 Am. Dec. 293. See **Partner8MPt^ Dec.
Dig. (Key No.) S iU; Cent, Dig. $§ 234-239.
99 Bates, Partn. § 1043, citing Cornells y. Stanhope, 14 R. I. 97.
See, also, Craig y. Hulschizer, 34 N. J. Law, 363. See *'8et'Off and
Counterclaim,'* Dec. Dig. (Key No.) U 44, 45; Cent. Dig. H 82-89.
§ 194) DISQUALIFICATION OF ONE FABTNER TO SUB 5G5
is by an assignee for the benefit of creditors^ the action has
been sustained.** So, also, the disqualification does not af-
fect the right of a creditor to pursue the property.*
Of course, the defrauded partners cannot maintain an ac-
tion at law alone against either the guilty partner or the
one with whom he dealt The damage, being a joint dam-
age, cannot be recovered in separate actions. The remedy
is in equity.*
(b) Where the property wrongfully disposed of by one
partner is money, as distinguished from other chattels of
the firm, the title to the money, nevertheless, passes, and
cannot be recovered by the firm, provided the grantee of
the guilty partner acted bona fide. This is certainly true in
those jurisdictions where it is held even as to ordinary
chattels that they cannot be recovered by the firm, and it
is probably true in all jurisdictions. Money is a peculiar
species of property, and even a thief can pass title to it to
an innocent person.' If the defendant knew the partner
was using firm money, the ordinary rule applies; and it
can be recovered or not, according to the view taken of the
general question.*
••Thomas v. Stetson, 62 Iowa, 537, 17 N. W. 701, 49 Am. R^.
148 ; Gotzhansen v. Judd, 43 Wis. 213, 28 Am. Rep. 539 ; Thomas y.
Pennrich, 28 Ohio St. 55. See ''Set-Off and Counterclaim," Dec, Dig.
(Key No,) iS U^ 45; Cent, Dig. §§ 82^9; ''PartnerBhip,*" Deo. Dig.
(Key No,) { 144; Cent, Dig. H 2S6, 2S9.
1 Bates, Partn. 8 1045.
s Miller V. Price/ 20 Wis. 117 ; Craig ▼. Hulschlzer, 34 N. J. Law,
363 ; Fenton v. Block, 10 Mo. App. 536. See ante, p. 488. See, also.
Halstead v. Shepard, 23 Ala. 558; Church v. First Nat Bank of
Chicago, 87 111. 68. One partner cannot maintain an action at law
for damages against a vendee for partnership goods sold him by a
copartner in fraud of plaintiff's rights. Reed v. Gould, 105 Mich.
368, 63 N. W. 415, 55 Am. St. Rep. 453. See "Partnership," Dec,
Dig. (Key No,) || 193, 199; Cent. Dig, §fi S56, S62,
s See Bates, Partn. § 1048.
« Foster ▼. FIfield, 29 Me. 136; Davis v. Smith, 27 Minn. 890, 7
N. W. 731. See "Partnership,** Deo. Dig. ifiey No.) f 144; OetU,
Dig. f 2Sa.
666 ACTIONS BT OB AGAINST PABTNEB8 (GIl 9
ACTION IN FIRM NAME
19S. In some jurisdictions actions in the firm name are au-
thorized by statute, either generally or where the
names of the members are unknown at the time
the action is commenced.
It has been seen that, in the absence of statute, actions
must be brought by and against the partners as individuals.
In England and in some of the states of this country, suits
in the firm name are now authorized by statute, either gen-
erally or in cases where the names of the members are un-
known.* These statutes are not mandatory, but are op-
tional, and the partners may be sued in their individual
names. The statutes being remedial, should be liberally
construed. The following observations by Sir Frederick
Pollock as to the effect of the English statutes, are in the
main applicable to the American statutes : "These rules, it
will be observed, do not introduce anything that amounts
to the recognition of the firm as an artificial person, dis-
tinct from its members. They allow the name of the firm
to be used for the purpose of making procedure quicker and
easier; and creditors of a firm have now the great prac-
B Alabama : Code 1907, | 2506 ; Levy stein y. Gerson, Seligman
Co., 147 Ala. 251, 41 Soutl). 774. California: Code Civ. Proc 1909,
I 388. lotoa: Code 1897, | 3468. yehraska: Cobbey*s Ann. St
1903, S 1023. Montana: Rev. Codes 1907, § 6497. Ohio: Bates'
Ann. St (6th Ed.) | 5011.
There can be no such thing as a partnership with one partner,
and therefore a statute authorizing actions by a firm to be brought
in the firm name does not authorize an action by an individual in
a name Indicating a partnership, which really does not exist, but
under which he does business. Stirling v. Helntzman, 42 Mich. 449,
4 N. W. 165. Under the Nebraska statute, to authorize a partner-
ship to sue in the firm name, the pleadings must set forth that the
partnership was formed to carry on trade or business or to hold
property in that state. McJunkln v. Placek & Fitl, 80 Neb. 373,
114 N. W. 411. See, also, Heenan v. Parmele, 80 Neb. 509, 114 N.
W. 639; Id.. 80 Neb. 514, 118 N. W. 324. See ^Tartnerahip;' Dec
Dig. {Key No,) | 197; Cent. Dig. | S60.
§ 195) ACTION IN FIRM NAME 567
tical convenience of being able to pursue their claims, even
to judgment, without first ascertaining who all the partners
are. The substantive results, however, are the same as un-
der the former practice. Actions between a firm and one
of its own members, or between two firms having a com-
mon member, which are allowed by the law of Scotland,
remain,' it is conceived, inadmissible in England ; and a
judgment against a firm has precisely the same effect that
a judgment against all the partners had formerly." •
« Pol. Partn. p. 121,
668 TERMINATION OF THB PARTNERSHIP (Ch. 10
CHAPTER X
TERMINATION OF THB PABTNBRSHIP
196. By Act of the Partners — ^Mutual Assent
197. By Act of one Partner — ^Partnership at WilL
19a Partnership for Fixed Period.
199. Dissolution by Operation of Law.
(a) Death of a Partner.
(b) Bankruptcy of a Partner or of the Firm.
(c) Marriage of a Female Partner.
(d) Where the Business haa Become Illegal.
(e) Alienation of Entire Firm Property or Partner's In-
terest Therein.
200. Dissolution by Judicial Decree — Impossibility of Success.
201. Incapacity or Insanity of a Partner.
202. Misconduct of Partner.
203. Annulment of Partnership.
BY ACT OF THE PARTNERS— MUTUAL ASSENT
196. Any partnership may at any time be dissolved by mu-
tual agreement of all the partners.
All partnerships, whether for a limited period or at will,
may at any time be dissolved by mutual assent of the part-
ners, clearly expressied. The parties who have made the
contract can, as between themselves, dissqlve it at any
time.^ Thus a written agreement of dissolution of a firm,
containing full terms of settlement, deliberately executed,
is binding on the partners, in the absence of fraud or mis-
take.* If the parties intend to put an end to the contract,
this intention prevails, and the partnership contract is dis-
solved, the same as any other contract would be, whether
1 Bank of Montreal v. Page, 98 111. 109 ; Bragg v. Geddes, 93 111.
89; Wood v. Gault, 2 Md. Gh. 433; Hazell v. Clark, 89 Mo. App.
78; Kennedy v. Porter. 109 K. Y. 526, 548, 17 N. E. 426; Simpson
V. Miller, 51 Or. 232, 94 Pac. 567. See ^'Partnership," Dec Dig, {Key
No.) § 262; Cent. Dig, §i 602, 605, 606.
2 Howard v. Pratt, 110 Iowa, 533, 81 N. W. 722. See "^Partner-
ship;* Dec. Dig. (Key No.) § 262; Cent. Dig. $$ 602. 605. 606.
§ 196) BY ACT OF THE PARTNERS 569
this expression be by words, by writing, or by conduct.'
Thus a dissolution may be brought about by the withdrawal
of a partner from the business, or by the addition of a new
partner, or by any of the many ways in which commercial
men indicate an intent to dissolve business relations.*
Where all the partners abandon the business and close up
the concern, this amounts to a dissolution, without proof
ol any formal agreement to that effect.* So may a disso-
lution be brought about by the award of arbitration.
Where partners have properly submitted their troubles to
arbitrators, and these have correctly exercised the power
conferred upon them, the result achieved by them stands
for the agreement of the parties, and will, if necessary, be
enforced by a court of equity.' Hence, where articles of
partnership make .provision for arbitration of all matters of
difference between the partners, the arbitrator may, in case
of dispute, award a dissolution.^ The partnership may thus
also be dissolved pursuant to the original agreement.* Or
• Armstrong v. Fahneetock, 19 Md. 58 ; Wood v. Gault, 2 Md. Gh.
433; Pate* v. Wright, 15 How. Prac. (N. Y.) 481; Green v. Waco
State Bank, 78 Tex. 2, 14 S. W. 253. See '* Partnership," Dec. Dig.
{Key No,) § 262; Cent, Dig, SI 602, 605, 606.
« Hatchett ▼. Blanton, 72 Ala. 423 ; Beaver ▼. Lewis, 14 Ark. 138 ;
McCall 7. Moss, 112 III. 4d3; Abat v. Penny, 19 La. Ann. 289; Vlo-
lett V. Falrchlld, 6 La. Ann. 193 ; Avery v. Craig, 173 Mass. 110, 53
N. E. 153 ; SpauDhorst v. Link, 46 Mo. 197 ; Mudd v. Bast, 34 Mo.
465 ; Warren v. Maloney, 29 Mo. App. 101 ; Abbot v. Johnson, 32 N.
H. 9; Slemmer's Appeal, 58 Pa. 168, 96 Am. Dec. 255; Euless v.
Tomllnson (Tex. Civ. App.) 38 S. W. 534; Bank of Mobile v. An-
drews, 2 Sneed (Tenn.) 535; Peters v. McWlUlams, 78 Va. 567;
McMahon v. McCIeman, 10 W. Va. 419. But the mere taking of
an account of stock does not per se work a dissolution. Russell v.
Leland, 12 Allen (Mass.) 349. See "Partnership*' Deo. Dig. {Key
No.) §§ 259-276; Cent. Dig. §§ 599-623,
8 Llgare v. Peacock, 109 111. 94 ; Spurck v. Leonard, 9 IlL App.
174. See ** Partnership:* Dec, Dig. {Key No.) | 267; Cent. Dig. i 611.
• Greeh v. Waring, 1 W. Bl. 475. See ^'Partnership^* Dee. Dig.
{Key No.) || 82. 262; Cent. Dig. § ISO,
T Vawdrey v. Simpson, [1896] 1 Ch. 166. See ** Partnership,** Dec,
Dig. {Key No.) §§ 82, 261; Cent. Dig. i ISO,
^sOnstott V. Ogle, 284 111. 454, 84 N. E. 1059, reversing Ogle v.
Onstott, 136 111. App. 588. See "Partnership,** Deo. Dig. {Key No.)
§1 261, 262; Cent. Dig. §§ 600-606.
570 TERMINATION OF THE PARTNERSHIP (Ch. 10
the agreement, may contemplate the accomplishment of a
certain purpose, and, this being realized, the partnership is
at an end. Thus a partnership has been held to be dis-
solved where a bank closed its doors and ceased to do busi-
ness,* or where the building contemplated in the agreement
has been completed,** or where the business consisted in
dealing in war scrip, and the supply of such scrip has, on
account of the termination of the war, completely stop-
ped."
SAME— BY ACT OF ONE PARTNER— PARTNER-
SHIP AT WII^L
197. A partnership at will may be dissolved at any time by
any partner for any reason.
A partnership not formed for some specified time or for
the accomplishment of a particular object is a partnership
at will, and fience may be dissolved at the mere caprice of
any partner,^* who, however, must give due notice of his
intention to his copartners, though this notice need not be
in writing or by express declaration, but may be mere con-
duct or implication from circumstances.^* Where the part-
ners merely continue their former dealings after the time
• POTTER V. TOLBBRT, 113 Mlcli. 486, 71 N. W. 849. Bee ^'Pari-
nership*' Dec. Dig. {Key No.) § B66; Cent. Dig. § 610.
10 Sims V. Smith, 11 Rich. Law (S. C.) 565. See ^'Partnership,''
Dec. Dig. {Key No.) i 266; Cent. Dig. i 610.
11 Jones V. Jon^, 18 Ohio Cir. Ct R. 260, 10 O. O. D. TL See
'Partnership,'* Dec. Dig. {Key No.) §§ 266, 267; Cent. Dig. S§ 610, 611.
12 Blaker v. Sands, 29 Kan. 554; Major y. Todd, 84 Mich. 85, 47
N. W. 841; WALKER v. WHIPPLE, 58 Mich. 476, 25 N. W. 472,
Gilmore, Cas. Partnership, 691; Stitt v. Rat Portage Lumber Co.,
98 Minn. 52, 107 N. W. 824; Loorya v. Kupperman, 25 Misc. Rep.
518, 54 N. Y. Supp. 1005; Wright v. Ross, 30 Tex. Civ. App. 207, 70
S. W. 234; Meysenburg y. Littlefleld (C. C.) 135 Fed. 184; Master
V. Kirton, 3 Ves. 74; Miles v. Thomas, 9 Sim. 606, 609; Nerot v.
Bumand, 4 Russ. 247, 260. <6fe6 ''Partnership," Dec. Dig. {Key No.)
§§ 61, «5P%, 26S; Cent. Dig. §§ 600-602, 607. ,
IS Abbot V. Johnson, 32 N. H. 9. See "Partnership,'* Dec. Dig.
{Key No.) §§ 259%, 26S; Cent. Dig. §§ 600-602, 607.
§ 198) BT ACT OF THE PARTNERS 571
»
of the partnership has expired, a partnership at will comes
into existence, which, however, will be governed by the
terms of the former agreement so far as they are applica-
ble.
SAME— PARTNERSHIP FOR FIXED PERIOD
198. Whether a partnership for a fixed period can be dis-
solved prematurely by the act of less than all the
partners is a question upon which the courts are
divided; some holding that it can be thus dis*
solved, the misconducting partners being liable in
damages for breach of contract, and others holding
that the relation is indissoluble.
Where the partnership is for a fixed term, or for the ac-
complishment of a particular object, the question whether
any party to it may dissolve it at his mere pleasure pre-
sents many difficulties, and has led to a division of the au-
thorities. The courts on the one side enforce the contract
with all its consequences, creating thereby in effect an irrev-
ocable agency. They lay stress on the wrong that would
be done to the remaining partners if a member were allowed
to withdraw, for which wrong damages might be an insuf-
ficient remedy. They also urge that equity will dissolve
the relation at the suit of the innocent party, where it has
become intolerable.**
1* Bllsset V. Daniel, 10 Hare, 493; Wood v. Woad, li. R. 9 Exch.
190; Barnes v. Youngs, [1898] 1 Ch. 414; Pollock's Digest of Part-
nership (6th Ed.) 80; Lindl. on Partnership (7th Ed.) 574; Howell
V. Harvey, 6 Ark. 270, 39 Am. Dec. 376; CASH v. EARNSHAW,
66 111. 402, Oilmore, Cas. Partnership, 605; Qerard v. Gateau, 84
111. 121, 125, 25 Am. Rep. 438 ; Berry v. Folkes, 60 Miss. 576 ; Van
Euren ▼. Trenton Locomotive & Machine Mfg. Co., 13 N. J. Eq. 306;
Sieghortner v. Welssenbom, 20 N. J. Eq. 127 ; Ferrero v. Buhlmeyer,
34 How. Prac. (N. Y.) 33 ; Bishop v. Breckles, Hoff. Ch. (N. Y.) 534 ;
Hannaman v. Karrick, 9 Utah, 236, 33 Pac. 1089, reversed in 168
U. S. 328, 18 Sup. Ct 135, 42 L. Ed. 484; Pearpolnt v. Graham, 4
Wash. C. C. 232, Fed. Cas. No. 10,877; Cole v. Moxley, 12 W. Va.
730. See ^^Partnership,** Dec. Dig. {Key No.) §§ 25d%, 272; Cent.
Dig. §§ 600-602, 619.
572 TERMINATION OF THE PARTNERSHIP (Ch. 10
On the other hand, courts holding the contrary doctrine
lay stress upon the unwisdom and impossibility of compel-
ling an unwilling and dissatisfied partner to remain in the
connection at the almost certain risk of litigation and loss,
and therefore hold that no irrevocable agency has been
created, but leave the other partners to their remedy for
damages for the breach of the partnership agreement/*
"There can be no such thing as an indissoluble partner-
ship. Every partner has an indefeasible right to dissolve
the partnership, as to all future contracts, by publishing
IB "A contract of partnership Is one by which two or more per-
sons agree to carry on a business for their common benefit, each
contributing property or services, and having a community of in-
terest in the profits. It is, in effect, a contract of mutual agency,
each partner acting as principal in his own behalf and as agent for
his copartner. Every partnership creates a personal relation be-
tween the i>artners, rests upon their mutual consent, and exists be-
tween them only. Without their agreement or approval, no third
person can become a member of the partnership, either by act of a
single partner or by operation of law ; and the death or bankruptcy
of a partner dissolves the partnership. So an absolute assignment
by one partner of all his interest in the partnership to a stranger
dissolves the partnership, although it does not make the assignee a
tenant in common with the other partners in the partnership prop-
erty. No partnership can eflaciently or beneficially carry on business
without the mutual confidence and co-operation of all the partners.
Even when, by the partnership articles, they have covenanted with
each other that the partnership shall continue for a certain period,
the partnership may be dissolved at any time, at the will of any
parser, so far as to put an end to the partnership relation, and to
the authority of each partner to act for all, but rendering the part-
ner who breaks his covenant liable to an action at law for dam-
ages, as In other cases of breaches of contract" Karrick v. Han-
naman, 168 U. S. 828, 384, 336, 18 Sup. Ct 135, 138, 42 L. Ed. 484, by
Gray, J. ; Swift v. Ward, 80 Iowa. 700, 45 N. W. 1044, 11 L. R. A.
302; Blake v. Dorgan, 1 G. Greene (Iowa) 537; MONROB v. CON-
NER, 15 Me. 178, 32 Am. Dec. 148, Gilmore, Cas. Partnership, 3d3;
Cape Sable Co.'s Case, 3 Bland (Md.) 606; Mason v. Connell, 1
Whart (Pa.) 381; Slemmer's Appeal, 58 Pa. 168, 98 Am. Dec 255;
Green v. Waco State Bank, 78 Tex. 2, 14 S. W. 253 ; Lapenta v. Let-
Ueri, 72 Conn. 377, 44 Atl. 730, 77 Am. St Rep. 316. The following
statutory provisions recognize the right: Civ. Code Oal. § 2451;
Civ. Code Ga. 1895, | 2633 ; Civ. Code N. D. | 5848 ; CAv. Code S. D.
{ 1753. See "Partnership,*' Dec. Dig, {Key No.) §| 259^, 272; Cent.
Dig, SS 600-^02, 619,
§ 199) DI880Lt7nON BT OPERATION OF LAW 673
his own volition to that effect; and after such publication
the other members of the firm have no capacity to bind him
by any contract. Even where partners covenant with each
other that the partnership shall continue seven years, either
partner may dissolve it the next day, by proclaiming his
determination for that purpose; the only consequence be-
ing that he thereby subjects himself to a claim for damages
for a breach of his covienant. The power given by one
partner to another to make joint contracts for them both
is not only a revocable power, but a man can do no act
to divest himself of the capacity to revoke it." *•
While, however, the courts are divided on the question
whether a resort to them is necessary at all where less thaiv
all the partners want to dissolve a partnership for a term,
they are agreed that they will lend their aid to such end
where serious cause exists, such as total incapacity or gross
misconduct of a partner or hopeless state of the partner-
ship business.
DISSOLUTION BY OPERATION OF LAW
199. The partnership is dissolved by operation of law, with
no necessity of notice, in the following cases:
(a) Death of a partner.
(b) Bankruptcy of a partner or of the fimu
(c) Marriage of a female partner.
(d) Where the business has become illegal.
(e) Alienation of the entire firm property or partner's
interest therein*
Death of a Partner
As partnerships are based on the delectus personarum,
every addition or subtraction from a partnership dissolves
the firm, whether it is for a term or at will. Where, there-
fore, one partner dies, the firm immediately is dissolved by
le Skinner y. Dayton, 19 Johns. (N. Y.) $18, 538, 10 Am. Dec. 286;
SOLOMON V. KIRKWOOD, 55 Mich. 256, 259, 21 N. W. 336, Gil-
more, Gas. Partnership, 589. See ^^Partnership,** Deo, Dig, (Key No,)
I 259Mi ; Cent, Dig, |i 600-602.
574 TERMINATION OF THE PARTNBHSHIP (Ch. 10
operation of law, without notice or judicial decree.^^ And
a special partnership is dissolved by the death of the spe-
cial partner.^* The cases which hold that a partnership
may by previous agreements be continued after the death
of a partner,^* or that it may be continued under the will
of the deceased partner with the consent of the survivors,^^
or by a court of equity, the surviving partners consent-
ing,*^ do not establish any contrary doctrine. "What is
inaccurately called provision against the dissolution of the
partnership is an agreement that if either party dies his
property shall remain in the firm and in the business for
the benefit of his children, or that his children, or some
one of them, or some other person, shall immediately on his
death take his place in the firm and become partner in his
stead. All these agreements and arrangements, and all
IT Parker v. Parker, 99 Ala. 239, 13 South. 520, 42 Am. St Rep.
48 ; McGall v. Moss, 112 lU. 493 ; Schmidt v. Archer, 113 Ind. 365, 14
N. E. 543 ; Powell v. North, 3 Ind. 392, 56 Am. Dec. 513 ; WiUiam-
son y. Wilson, 1 Bland (Md.) 418 ; Egberts v. Wood, 3 Paige (N. Y.)
517, 24 Am. Dec. 236; Washburn y. Goodman, 17 Pick. (Mass.) 519;
Roberts y. Kelsey, 38 Mich. 602 ; Durant y. Pierson, 124 N. Y. 444,
26 N. E. 1095, 12 L. R. A. 146, 21 Am. St Rep. 686; McNaughton
V. Moore, 2 N. C. 189 ; McGrath y. Cowen, 57 Ohio St 385, 49 N. B.
338; Jones y. McMichael, 12 Rich. Law (S. G.) 176; Bank of Mo-
bile y. Andrews, 2 Sneed (Tenn.) 535 ; Landa y. Shook, 87 Tex. 608,
30 S. W. 536 ; Altgelt y. D. Sullivan & Co. (Tex. Ciy. App.) 79 S. W.
333; Davis v. Christian, 15 Grat (Va.) 11; Burwell v. (}awood, 2
How. 560, 11 L. Ed. 378 ; PEARCE v. CHAMBERIiAIN, 2 Ves. Sr.
34, Gilmore, Cas. Partnership, 592. See ^^Partnership," Dec. Dig.
(Key yo.) I 275; Cent. Dig. { 621.
18 AMES y. DOWNING, 1 Bradf. Sur. (N. Y.) 321, Gilmore, Cas.
Partnership, 610. See "Partnership,'* Deo. Dig. (Key No.) | 275;
Cent. Dig. § 621.
i»Duffleld y. Brainerd, 45 Conn. 424; Powell v. Hopson, 13 La.
Ann. 626; Gratz v. Bayard, 11 Serg. & R. (Pa.) 41; Alexander's
Ex'rs v. Lewis, 47 Tex. 481 ; Davis v. Christian, 15 Grat (Va.) 11 ;
Walker v. Wait, 50 Vt 668. See, for further discussion, chapter II.
I 22, p. 69 et seq. See ^^Partnership," Dec. Dig. {Key No.) §i 255,
274; Cent. Dig. §§ 552-561, 621.
2 0 Pitkin y. Pitkin, 7 Conn. 307, 18 Am. Dec. Ill; Burwell v.
Cawood, 2 How. 560, 11 L. Ed. 378. See '* Partnership," Dec. Dig.
(Key No.) §i 255, 2H; Cent. Dig. §§ 552-561, 621.
21 Powell v. North, 3 Ind. 392, 56 Am. Dec. 513. Bee '^Partner-
ship," Dec. Dig. (Key No.) §§ 255, 274; Cent. Dig. §§ 552^61, 621.
§ 199) DISSOLUTION BT OPERATION OF LAW 575
that can be made for a similar purpose, are, in fact, only
bargains for the creation of a new partnership when the
old one ceases to exist." ** Hence it has been held that no
provision in the partnership contract can prevent its dis-
solution on the death of a partner. "If such an agreement
is valid for three years after death, it must be equally so
for one hundred years, and thus by partnership agreements,
appearing valid on their face, the whole law relating to
wills and trusts could be circumvented and rendered prac-
tically of no effect." '• What effect outlawry or civil death
of a partner would have on the partnership does not seem
to have been adjudicated. It would seem, however, that
this would work a dissolution, the same as natural death
would.^* Since the rule that a partnership is dissolved by
death depends entirely on the delectus personarum, and
since usually a mining partnership is abnormal, in that it
does not conform to the principle of delectus personarum,
such partnership may not be dissolved by the death of a
partner.**
Bankruptcy of a Partner or of the Firm
Bankruptcy of a partner works a dissolution by opera-
tion of law, since the bankrupt ceases to control his prop-
erty, and the same passes to his assignee in very much the
same way as the property of a deceased person passes to
his executor or administrator; the acts of the bankrupt
after bankruptcy being void.** The actual adjudication,
«« Kennedy v. Porter, 109 N. Y. 528, 549, 17 N. B. 426. See, also,
McGrath v. Cowen, 57 Ohio St 385, 401, 49 N. E. 338. See '^Part-
nership;' Dec. Dig. (Key No,) K ^55, 274; Cent. Dig. i§ 552-561. 621.
«» Laney v. Laney, 6 Dem. Sur. (N. Y.) 241. Kennedy v. Porter,
supra. The conrt in the latter case, on page 549 of 109 N. Y., page
435 of 17 N. B., said (quoting Parsons on Partnership, p. 407) : "We
do not believe that any provision made beforehand, In reference to
the death of a partner, or any agreements or arrangements made
subsequently to his death, can prevent this dissolution." See, for
further discussion, chapter II, § 22, p. 69 et seq. See "Partnership,"
Dec. Dig. {Key No.) §§ 255, 274; Cent. Dig. §§ 552-561, 621.
«* Parsons on Partnership. § 301 ; Story on Partnership, § 303.
»5 Taylor v. Castle, 42 Cal. 367; Jones v. Clark, 42 Cal. 180. See
''Mines and Minerals;* Dec. Dig. {Key No.) § 100; Cent. Dig. § 225.
«« McNutt V. King, 59 Ala. 597 ; Meinhard, Schaul & Co. v. Folsom
976 TBBHINATIOH OF THB PABTNBR8HIP (Ch. 10
however, is not necessary, and an admission of insolvency
is enough, if put in legal form before a court. But the
mere fact of insolvency does not operate as a dissolution,
but there must be some act of bankruptcy, such as stop-
ping payment or assignment.*^ All persons must take no-
tice of dissolution by bankruptcy, since the dissolution is
by operation of law.** A partner's bankruptcy, however,
will not dissolve the firm, even if the partner has been ad-
judicated a bankrupt, where this adjudication was obtained
by his copartner merely for that purpose.**
In the same way a firm is dissolved if it becomes bank-
rupt Thus a valid assignment by a partnership of all the
firm assets, except property exempt from execution, oper-
ates as a dissolution of the partnership.**
Marriage of a Female Partner
At common law a woman by marriage lost all control
over her property, and her personalty passed absolutely to
Bros., 8 Ga. App. 251, 50 S. B. 830; Hardy v. Weyer, 42 Ind. App. 343,
85 N. B. 781; WllUamson v. Wilson, 1 Bland (Md.) 418; Dearborn v.
Keith, 6 CuBh. (Mass.) 224; BUSTIS v. BOLLES, 146 Masa 418, 16
N. B. 280, 4 Am. St Rep. 327, Gilmore, Cas. Partnership, 603;
HALSEY V. NORTON, 45 Miss. 703, 7 Am. Rep. 745, Gilmore, Cas.
Partnership, 583; Marquand v. N. Y. Mfg. CO., 17 Johns. (N. Y.)
525, 536 ; Blackwell v. Clay well, 75 N. 0. 213 ; Amslnck y. Bean, 22
Wall. 8U5, 404, 22 L. Ed. 801 ; FOX v. HANBURY, Cowp. 445, 448 ;
Morgan ▼. Marquis, 9 Ex. 145, 147. See '^Partnership,** Deo, Dig.
(Key ATo.) f 27i; Cent. Dig. § 616,
•T Arnold ▼. Brown, 24 ?ick. (Mass.) 89, 35 Am. Dee. 296; Siegel
V. Chldsey, 28 Pa. 279, 70 Am. Dec. 124.
In some Jurisdictions a voluntary assignment by a partner for
the benefit of creditors work an immediate dissolution. Wells v.
Ellis, 68 Cal. 248, 9 Pac. 80; WELLES v. MARCH, 30 N. Y. 344.
In other jurisdictions it gives to the copartners an option to have a
dissolution. Williston v. Camp, 9 Mont 88, 22 Pac. 501; English
Part Act 1800, | 38 (2). See ^'Partnership:* Deo. Dig. (Key No.) S
«7i; Cent. Dig. | 616.
f BUSTIS V. BOLLES, 146 Mass. 413, 16 N. E. 286, 4 Am. St
Rep. 827, Gilmore, Cas. Partnership, 603. See ** Partnership,'* Dec.
Dig. (Key I\'o.) §( 271, 289; Cent. Dig. § 616.
a» Amsinck v. Bean, 22 WaU. 895, 404, 22 L. Ed. 801. Bee ** Peart-
nershipr Deo. Dig, (Key No.) § 271; Cent. Dig. § 616.
so Wells V. Ellis. 68 Cal. 248, 9 Pac. 80; Clark v. Wilson, 19 Pa.
414; McKelvy's Appeal, 72 Pa. 400. See ''Partnership,** Deo. Dig.
{Key No.) §§ 264. 211; Cent, Dig. §§ 6i6. 611,
6 199) DISSOLUTION BT OPBRATION OF LAW 577
her husband. It followed that marriage dissolved the part-
nership, since her husband was substituted for her as ef-
fectively as an executor is substituted for a deceased per-
son.** Since the statutory enlargement of the rights of
married women with respect to their separate property and
to engaging in business, it is generally held that they may
be partners with any one except their husbands. The mar-
riage of a single woman partner with a third person will
not, therefore, dissolve the firm.** As to whether the in-
termarriage of a female partner and her male copartner
will work a dissolution depends upon whether husband
and wife can be members of the same firm. Under modern
statutes the states are divided on this question, such states
as Iowa, Georgia, Pennsylvania, and Vermont holding that
she can, while Massachusetts, Arkansas, Indiana, Michi-
gan, South Carolina, Texas, and Wisconsin hold that she
cannot.** In accordance with the second view, it has been
held that where partners intermarried the partnership was
at an end ; the court saying : "The fact is certain that the
subsequent intermarriage of the parties worked an instan-
taneous dissolution of the relation." ** If the question
whether the intermarriage of partners dissolves the part-
nership should come up in these states, the solution of the
question would undoubtedly depend upon the question
whether a married woman can be a partner of her husband.
Courts holding that she cannot would doubtless hold that
marriage dissolved the partnership, while a contrary con-
clusion would be reached by the courts holding that a wife
can be a partner of her husband.
m
SI Brown ▼. Chancellor, 61 Tex. 439; Nerot v. Bumand, 4 Russ.
246, 260. See "Husband and Wife," Dec. Dig. {Key No.) f 97; Cent.
Dig, § SIS.
ss'See chapter II, i 24, p. 85.
ss "See a note in 4 Eng. & Am. Ann. Gas. 868. See ante, chapter
II, I 24, pp. 86, 87, for the cases. See "Partnership;* Cent. Dig. |
618; "Eusland and Wife,** Dec. Dig. {Key No.y if J^, 97; Cent. Dig.
H 225, S7S.
«* BASSBTT V. SHEPARDSON, 52 Mich. 3, 17 N. W. 217. See
"Partnership,** Cent. Dig. S B^S; "Husband and Wife,** Deo. Dig.
(Key No.) St *?, 97; Cent. Dig. f{ 255, S7S.
Gil.Pabt. — 37
678 TBRMINATION OF THB PARTNERSHIP (Ch. 10
Where the Business has Become Illegal
The law does not recognize a partnership for an ille-
gal purpose. It would be against public policy to do so.
Equally the law refuses further to recognize a business
which, while at one time legal, has now become illegal.
Thus it was held that a firm of attorneys was dissolved by
operation of law when one of the members became a cir-
cuit judge; a state law absolutely prohibiting circuit judges
from practicing law, directly or indirectly.*' The most
striking example, however, is the case of a partnership
among residents of different nations between whom war
has been declared. Where war is declared, commercial in-
tercourse between the citizens of the belligerent countries
becomes illegal, and hence the partnership is dissolved by
operation of law.'' It would also be impossible to continue
the relation as the parties to it are in law enemies of each
other, and the trust relation and the relation of principal
and agent between the parties has become difficult, if not
impossible.
Alienation of Entire Firm Property or Partner^s Interest
Therein
By conveying away all the partnership property, or his
interest therein, a partner does by his own act what the
law does in the case of the death of a partner or the mar-
riage of a female partner; and hence the partnership is
dissolved. "The principle on which this doctrine rests is,
on the one hand, that new partners cannot be introduced
into the firm without the consent of all the other partners ;
and, on the other hand, that the creditors of the partner
«• Justice V. Lairy, 19 Ind. App. 272, 49 N. B. 459, 65 Am. St Rep.
406. See chapter II, § 30, p. 100. Bee **Atiom€y and Client;* Dec
Big. {Key No.) { SO; Cent. Dig, S iS.
•^McAdams* Ex'rs v. Hawes, 9 Bush (Ky.) 15; Mutual Ben. life
Ins. Co. V. HUlyard, 37 N. J. Law, 444, 18 Am. Rep. 741 ; Hubbard v.
Matthews, 54 N. Y. 43, 13 Am. Rep. 562; Woods v. Wilder, 43 N.
Y. 164, 3 Am. Rep. 684; GRISWOLD v. WADI>INGTON, 15 Johns.
(N. Y.) 67, Gilmore, Cas. Partnership, 600; Taylor v. Hutchison,
25 Grat (Va.) 536, 18 Am. Rep. 699; Douglas v. United States, 14
Ct. CI. 1; Exposlto V. Bowden, 7 El. & B. 763, 794. See ^'Partner-
ship;' Dec, Dig. {Key No.) | 268; Cent. Dig. § 612.
§ 199) DISSOLUTION BT OPEBATION OF LAW 579
taking his property by assignment cannot be involved
against their consent in the responsibility of the continu-
ance of the partnership business. This doctrine is firmly
established, where the partnership is for an indefinite term ;
but it has not been received without dissent where the
partnership is for a definite term. * * ♦ Under such
an arrangement it has been held that an assignment by one
partner of his interest in the partnership property is a
cause for dissolution (it may be on equitable terms), and
an accounting, on the application of the assignee, and is
ipso facto a dissolution of the partnership, at the option of
the other partners." "^
It makes no difference whether the conveyance is to
third parties,'* or even to a copartner.** But in the latter
«T Davis V. Megroz, 6B N. J. Law, 427, 26 AtL 1009, 1010. Com-
{Mire Riddle y. WhltehlU, 136 U. S. 621, 633, 10 Sup. Gt 924. 34 L.
Ed. 282.
See, also, Miller y. Brlgham, 50 Gal. 615 ; Blake y. Sweeting, 121
lU. 67, 12 N. B. 67 ; Leonard y. Sparks, 109 La. 543, 33 South. 594 ;
Avery v. Gralg, 173 Mass. 110, 53 N. B. 153; De Manderfleld v.
Field, 7 N. M. 17, 32 Pac. 146; Mumford v. McKay, 8 Wend. (N.
Y.) 442, 24 Am. Dec. 34; Haeberly's Appeal, 191 Pa. 239, 43 Atl.
207 ; Moore v. Steele, 67 Tex. 435, 3 S. W. 448 ; Moore v. May, 117
Wis. 192, 94 N. W. 45.
The effect of such a conveyance should be considered in connec-
tion with the question of the power of one partner to dissolve a
partnership for a fixed term. See ante, p. 571. See ^^Partnership,"
Deo, Dig. {Key No.) f§ 264, 269; Cent. Dig. §| 608, 61S, 6I4, 617.
88 MONROE V. HAMII/TON, 60 Ala. 226 ; Miller v. Brlgham, 50
Gal. 615; McCall v. Moss, 112 111. 493; Barkley v. Tapp, 87 Ind.
25 ; Whitton y. Smith, Freem. Ch. (Miss.) 231 ; Freeman v. Hemen-
way, 75 Mo. App. 611 ; De Manderfleld v. Field, 7 N. M. 17, 32 Pac.
146; Marquand v. N. Y. Mfg. Go., 17 Johns. (N. Y.) 525; Buford v.
Neely, 17 N. O. 481; Marx v. Goodnough, 16 Or. 26, 16 Pac. 918;
Ayer v. Ayer, 41 Vt. 346 ; Ballard v. Gallison, 4 W. Va. 326 ; West-
brook V. Wheeler, 25 Out 559. See "Partnership," Deo. Dig. {Key
yo.) §§ 264, 269; Cent. Dig. Sf 608, 618, 6H, 611.
8» Schleicher y. Walker, 28 Fla. 680, 10 South. 33; Clark v. Garr,
45 111. App. 469; Lesure v. Norris, 11 Gush. (Mass.) 328; Wiggin
V. Goodwin, 63 Me. 389, 391 ; Sistare v. Gushing, 4 Hun (N. Y.) 503 ;
Spaunhorst v. Link, 46 Mo. 197; Gochran v. Perry, 8 Watts & S.
(Pa.) 262; Rogers v. Nichols, 20 Tex. 719, 724; Heath v. Sansom,
4 Bam & Adol. 172, 175. See '* Partnership," Deo, Dig. i^ey No.)
H 264, 269; Cent. Dig. (§ 608, 618, 6I4, 617.
580 TBBMINATION OF THB PARTNERSHIP (Gh. 10
case the courts may treat the sale merely as evidence tend-
ing to prove a dissolution.*® A sale by one partner, how-
ever, does not bring about a dissolution, if all the partners
retain some share in the business, and none of them in con-
sequence of the sale goes out** A mortgage by way of
security of a partner's interest in the firm has been held
to work a dissolution ; ** but the better opinion holds this
not to be a dissolution, where a continuance of the part-
nership is contemplated.** Thus a chattel mortgage by
one partner of his copartnership interest has been held not
necessarily to dissolve the firm.**
While the mere filing of an attachment against partner-
ship property,*' or the seizure of property under a writ of
attachment,** has no effect in dissolving the firm, the levy
of execution and sale under such levy effects a dissolu-
tion,*^ except where the levy and sale were collusive, to
*• Waller v. Dayis, 59 Iowa, 103, 12 N. W. 708 ; Taft ▼. Baffum,
14 Pick. (Mass.) 322; Lobdell y. Baldwin, d3 Mich. 569, 53 N. W.
730. See ** Partnership," Dec, Dig. {Key No.) SI 264, ^69; Cent.
Dig. H 608, 6XS, 6H, 617.
41 MONROE y. HAMILTON, 60 Ala. 226 ; Taft y. Buffum, 14 Pick.
(Mass.) 322; RusseU y. Leland, 12 Allen (Mass.) 349; Russell y.
White, 63 Mich. 409, 29 N. W. 865. See **Partner8Mp,'* Dec. Dig.
{Key No.) S 264; Cent. Dig. {| 608, BU, 617.
«2Bank of State of North Carolina y. Fowle, 67 N. O. 8, 10;
Horton'8 Appeal, 13 Pa. 67, 71 ; Carroll y. Eyans, 27 Tex. 262. See
^Tartnership,'* Dec. Dig. {Key No.) f 264; Cent. Dig. | 608.
4s MONROE y. HAMILTON, 60 Ala. 226; Dupont y. McLaran,
61 Mo. 502; Receivers of Mechanics' Bank of Paterson y. Godwin,
6 N. J. Bq. 334, 338; Ferrero y. Buhlmeyer, 34 How. Prac (N. Y.)
83; Brown y. Beecher, 120 Pa. 590, 607, 15 Aa 60a See "Partner-
ship,** Deo. Dig. {Key No.) S 264; Cent. Dig. §S 608, 614, 617.
«« State y. Quick, 10 Iowa, 451 ; Inglis y. Floyd, 88 Mo. App. 565.
See ''Partnership,** Dec. Dig. {Key No.) § 264; Cent. Dig. | 608.
*5 Foster y. Hall, 4 Humph. (Tenn.) 346. See ''Partnership,** Dec.
Dig. {Key No.) S 264; Cent. Dig. { 6I4.
46 Barber y. Barnes, 52 Cal. 650; Choppin y. Wilson, 27 La. Ann.
444. See "Partnership,** Dec. Dig. {Key No.) { 264; Cent. Dig. | 6I4.
«T Therlot y. Michel, 28 La. Ann. 107 ; Sanders y. Young, 81 Miss.
Ill; Morrison y. Blodgett, 8 N. H. 238, 29 Am. Dec. 653; Renton
y. Chaplain, 9 N. J. Eq. 62; Aspinall y. London & NorUiwestem
Ry. Co., 11 Hare, 325; HABERSHON y. BLURTON, 1 De Gex &
8. 121. See "Partnership,** Dec. Dig. iKey No.) i 264; OmU. Dig. |
ei4>
§ 200) DISSOLUTION BT JUDICIAL DEORES 681
force a dissolution to the disadvantage of some one of the
partners.** But a conveyance by a member of a mining
partnership, because there is no delectus personarum in
such organizations, even if made to a stranger^ does not
dissolve the partnership.**
DISSOLUTION BY JUDICIAL DECREE— IMPOSSI-
BILITY OF SUCCESS
200. A court of equity may dissolve a partnership on the
occurrence of events or changes of circumstances
wliich render the continuance of the relation im-
possible or unprofitable.
Where the partnership is at will, it may be dissolved at
any time by any of the partners; and hence there is no
occasion to go into court. Where, however, the relation-
ship is for a term, it cannot, according to one line of au-
thorities,** be dissolved at the option of any one of the
members; and hence a resort to the courts may become
necessary. It is clear that this resort must be to a court
of equity, as a court of law is not capable of coping with
the situation.**
The object of all partnerships is profit. Where it is clear
that a profit is out of the question, and financial loss must
be the inevitable outcome of a continuance of the relation,
♦•Renton y. Chaplain, 9 N. J. Eq. 62. See "Partnership," Dec
Dig. {Key No.) $ 264; Cent. Dig. $ 6U.
49 Taylor v. Castle, 42 Oftl. 367; Duryea v. Burt, 28 Cal. 569;
Skniman v. Lachman, 23 Cal. 198, 83 Am. Dec. 96; PATRICK v.
WESTON, 22 Colo^ 45, 43 Pac. 446 ; Freeman v. Hemenway, 75 Mo.
App. 611-617 ; Bissell v. Foss, 114 U. S. 252. 5 Sup. Ot 851, 29 L.
Ed. 126; Kahn v. Central Smelting Co., 102 U. S. 641, 26 L. Ed.
266. See chapter II, $ 36, p. 107. See **Mine8 and Minerals,** Deo.
Dig. (Key Vo.) i 100; Cent. Dig. § 225.
so See ante, p. 571.
Bi Story on Partnership, S 284; Nugent y. Locke, 4 Cal. 320;
Stone T. Fouse, 3 Cal. 294; Wilson y. Lassen, 5 Cal. 116; Barn-
stead y. Empire Mining Co., 5 Cal. 299; Mudd v. Bates,' 73 IlL
App. 576. See ''Partnership,*' Dec. Dig. {Key No.) S 318} Cent. Dig.
SI 7S5-738.
582 TERMINATION OF THB PARTNERSHIP (Ch. 10
a proper case for the interference of the courts exists.'*
Thus, where the whole scheme On which the partnership is
built proves to be visionary, impracticable, or worthless,'*
or a mere "bubble," •* or where the patent on which the
hopes of the firm had been pinned proves a failure,'' a dis-
solution will be decreed. Other examples could be accu-
mulated without difficulty. It has been held that, where
a business cannot be carried on according to the true intent
of the partnership agreement, the courts will decree a dis-
solution." A partnership for a whaling voyage was dis-
solved ; it appearing that there was no reasonable prospect
of success after the cruise had under many difficulties
continued for six months."^ ' So the court put an end to
the partnership where its combustible property had been
burned, its teams had been taken off by an invading army,
and the partners were financially in such condition that
they could not make the remaining assets profitable."
B>Meaher v. Cox, 87 Ala. 201; HoweU v. Harvey, 5 Ark. 270,
89 Am. Dec. 876; Jackson v. Deese, 85 Ga. 84, 00; Dunn y. Mc-
Naught, 88 Oa. 179; Sieghortner y. Weissenbom, 20 N. J. Eq. 172^
177 ; Moles y. O'N^l, 28 N. J. Eq. 207 ; Holladay y. Elliott, 8 Or.
85; Page y. Vanklrk, 1 Brewst (Pa.) 282; Brown y. Hicks (D. C.)
8- Fed. 155 ; ROSENSTEIN y. BURNS (C. C.) 41 Fed. 841 ; Burns
y. Rosensteln, 135 U. S. 449, 10 Sup. Gt 817, 84 L. Ed. 193 ; Bailey
y. Ford, 18' Sim. 496; Jennings y. Baddeley, 3 Kay & J. 78; BAR-
ING y. DIX, 1 Goz, 218» Gllmore, Gas. Partnership, 604; Harrison
y. Tennant, 21 Beay. 482. See "Partnership," Dec, Dig, {Key No.)
S 267; Cent. Dig. § 611.
Bs Lafond y. Deems, 52 How. Prac. (N. Y.) 41 ; Id., 1 Abb. N. C.
(N. Y.) 318, reyersed on other grounds 81 N. Y. 507. See '^Partner-
ship,'' Dec. Dig. {Key No.) § 267; Cent. Dig. § 611,
B4 Beaumont y. Meredith, 3 Yes. & B. 181. See "Partnership/*
Deo. Dig. {Key No.) i267; Cent. Dig. S 611.
»« BARING y. DIX, 1 Cox, 213, Gllmore, Cak Partnership, 604.
See "Partnership:' Dec. Dig. {Key No.) $ 267; Cent, Dig. § 611.
5« Holladay y. Elliott, 8 Or. 85 ; Brlen y. Harrlman, 1 Tenn. Ch.
467 ; ROSENSTEIN y. BURNS (C. C.) 41 Fed. 841 ; Bums y. Ros-
ensteln, 135 U. S. 449, 10 Sup. Gt 817, 34 L. Ed. 193. See "Partner-
ship," Deo, Dig. {Key No.) § 267; Cent. Dig. § 611.
1 57 Brown y. Hicks (D. C.) 8 Fed. 155. See "Partnership,** Dec.
i Dig. {Key No.) i 267; Cent. Dig. fi 611.
B8 Jackson y. Deese, 35 Ga. 84. See "Partnership:* Deo. Dig. {Key
No.) S 267; Cent. Dig. S 611.
§ 201) DISSOLUTION BT JUDICIAL DECREE 683
Where a partnership needed more money to make the busi-
ness a success, which one of the partners is unwilling and
the other unable to advance, or where both were unwilling
or unable to advance the necessary funds^ a proper case for
a dissolution was held to exist/*
SAME— INCAPACITV OR INSANITY OF
A PARTNER
201. A court of equity will dissolve a partnership where a
partner is totally incapacitated from performing
the pcutnership duties.
Where a partner by reason of either bodily or mental
infirmities or other reason becomes totally incapacitated
from performing his duties as a partner, equity will decree
a dissolution, both to protect the partner who is incapaci-
tated as well as to relieve the other partners from the diffi-
cult position in which they are thus placed.** "It may
be laid down as a general rule that when partners are to
contribute skill and industry, as well as capital, if one part-
ner becomes unable to contribute that skill, a court of
equity ought to interfere for both their sakes." '^ But
where the incapacity is but temporary, the court will not
pronounce a dissolution, but will wait to see whether any
improvement will take place.*' Nor is the rule confined
to sickness. Any other incapacity may have the same ef-
fect. Thus the court decreed a dissolution where a mem-
SB Sleghortner v. Welssenbom, 20 N. J. Eq. 172; Welssenbom v.
Sleghortner, 21 N. J. Eq. 483; Jennings y. Baddeley, 3 Kay & J.
79. See ^^Partnership,*' Dec. Dig. {Key Ko.) S 267; Cent. Dig. § 611.
«o Barclay ▼. Barrie, 64 Misc. Rep. 403, 119 N. Y. Supp. 463;
Casky v. Gasky, 5 Ky. Law Rep. 775; Page v. Vanklrk, 1 Brewst
(Pa.) 282; Leaf y. Coles, 1 De Gez, M. & G. 174, 12 Eng. L. & Eq.
117; Sayer y. Bennet, 1 Cox, 107; Anonymons, 2 Kay & J. 441.
See ^'Partnership^ Dec. Dig. {Key No.) $ 274; Cent. Dig. S 621.
•1 Sayer y. Bennet, 1 Cox, 109. See "Partnership,** Dec. Dig.
{Key No.) S 274; Cent. Dig. { 621.
«2 Whltwell y. Arthur, 35 Beay. 140. See ^'Partnership^** Deo. Dig.
(Key No.) { 274; Cent. Dig. i 621.
584 TBRMINATION OF THE PARTNERSHIP (Ch. 10
bcr of a law firm was elected as justice of the peace, since
it was shown that the duties of this office required prac-
tically all his time.**
Same — Insanity
This rule as to disability applies with peculiar force to
insanity. The insanity of a partner does not operate ipso
facto as a dissolution,** but the action of the courts must
be invoked. "The insanity of a partner is a ground for the
dissolution of the partnership, because it is immediate in-
capacity; 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 with
insanity, the continuing partner may, if he think fit, make
it a ground of dissolution ; but in that case I consider, with
Lord Kenyon, that in order to make it a ground of dissolu-
tion he must obtain a decree of the court. If he does not
apply to the court for a decree of dissolution, it is to be
considered that he is willing to wait to see whether the
incapacity of his partner may not prove merely temporary.
If he carry on the partnership business in the expectation
that his partner may recover from his insanity, so long
as he continues the business with that expectation or hope
there can be no dissolution." •* The court will, therefore,
not dissolve a partnership if the lunacy is temporary only,
with a fair prospect of recovery within a reasonable time,
«» Stiles V. Bradley, 133 App. Div. 508, 117 N. Y. Supp. 637. Bee
*'Partner8hipr Dec. Dig, {Key No.) § 274; Cent. Dig. % 621.
«* RAYMOND V. VAUGHN, 128 lU. 256, 21 N. B. 566, 4 Ia R. A.
444, 15 Am. St. Rep. 112, Gllmore, Gas. Partnership, 595 ; JURGENS
V. ITTMAN, 47 La. Ann. 367, 16 South. 952; Anonymous, 2 Kay &
J. 441. There has been vigorous contention to the contrary. T. Par-
sons, In his book on Partnership, § 362, Imagines the case of a part-
ner becoming insane, and the other partners, deprived of his sagaci-
ty, rush into mad ventures, entailing tremendous liabilities, before
any dissolution by the court can be had. In such case, if the part-
nership is not dissolved ipso facto by insanity, a great hardship
would befall the Insane partner. Isler v. Baker, 6 Humph. <Tenn.)
65 ; Robertson v. Lackle, 15 Sim. 285 ; MHlerah v. Keen, 27 Beav. 236.
See chapter II, i 24, pp. 83-84. See '* Partnership,** Dec Dig. (Key
yo.) § 274; Cent. Dig. S 621.
•6 Jones V. Noy, 2 Mylne & K. 125. 130. See ** Partnership,** Dec
Dig. (Key No.) § 274; Cent. Dig. S 621.
§ 202) DISSOLUTION BT JUDICIAL DEOBBB 685
and so docs not materially affect the partner's capacity to
discharge his partnership duties.** Nor is mere diminu-
tion of mental capacity not amounting to insanity suflS-
cient.*^ Where, however, the malady is so serious as to
incapacitate the partner for his duties according to the
partnership arrangement, the relation will be dissolved,**
even at the suit of the lunatic or his committee; *• but the
' dissolution will be of the date of the decree and will not
be retroactive.'*
SAME— MISCONDUCT OF PARTNER
S02. A court of equity will dissolve a partnership for gross
neglect, misconduct, or breach of duty, but not at
the suit of the party who is alone at fault.
It has been held in a few cases that the desertion of the
firm business, or the absconding of a partner, of itself, with-
out any action of a court, dissolves the partnership ; '* but
the weight of authority treats this merely as a ground on
which the court will dissolve the relation at the suit of the
«« RAYMOND ▼. VAUGHN, 128 111. 256, 21 N. E. 566, 4 L. R A.
444, 15 Am. St Rep. 112, Gilmore, Gas. Partnership, 595. See "Part-
nership:* Dec. Dig, (Key No,) i 274; Cent. Dig. S 621.
«7 Sadler ▼. Lee, 6 Beav. 324, 331. Bee ** Partnership,** Dec. Dig.
{Keu No.) S 274; Cent. Dig. § 621.
« 8 Reynolds ▼. Austin, 4 Del. Ch. 24; RAYMOND v. VAUGHN,
128 lU. 256, 21 N. E. 566^ 4 L. R. A. 444, 15 Am. St Rep. 112, Gil-
more, Gas. Partnership, 595; GRISWOLD v. WADDINGTON, 15
Johns. (N. Y.) 67, Gilmore, Gas. Partnership, 600; Paige v. Vankirk,
1 Brewst (Pa.) 282 ; Anonymous, 2 Kay & J. 441 ; Sadler v. Lee, 6
Beav. 324, 331; Sayer v. Bennet 1 Cox, 107; Leaf v. Coles, 1 De
Gex, M. & G. 171; Sander v. Sander, 2 Coll. 276. See "Partner-
ship,** Dec. Dig. (Key No.) $ 274; Cent. Dig. § 621.
*9 Jones V. Lloyd, L. R. 18 Eq. 265. See "Partnership,** Deo, Dig.
{Key No.) § 274; Cent. Dig. | 621. .
ToBesch V. Frolich, 1 Phil. Ch. 172; Sander v. Sander, 2 Coll.
276. See "Partnership^' Dec. Dig. {Key No.) S 274; Cent Dig. $ 621.
Ti Beaver v. Lewis, 14 Ark. 138; Whitman v. Leonard, 3 Pick.
(Mass.) 177; Potter v. Moses, 1 R. I. 430; Ayer v. Ayer, 41 Vt 346.
See "Partnership,** Dec. Dig. {Key No.) H 267, 27S; Cent. Dig. §§
611, 620.
586 TERMINATION OF THB PARTNERSHIP (Ch. 10
remaining partners.^* The court will require a strong case
to be made, and has no jurisdiction to decree a separation
for trifling causes or temporary grievances, such as defects
of temper, discourtesy, inattentiveness, casual disputes, dif-
ferences of opinion, errors of judgment, small infractions
pf the partnership agreement, which do not essentially ab-
stract or destroy the ordinary rights, operations, and inter-
ests of the firm/* If such defects require any remedy, the
court will supply it by acting on the faulty party by injunc-
7s Llgare ▼. Peacock, 109 IlL 94; Burgess y. Badger, 124 lU. 288,
14 N. E. 850; Arnold y. Brown, 24 Pick. (Mass.) 89, 35 AnL Dec.
296; Denyer y. Roane, 99 U. S. 355, 25 L. Ed. 476; Ambler y. Whip-
ple, 20 WaU. 546, 22 L. Ed. 403 ; Master y. Klrton, 3 Yes. 74. See
^'Partnership," Dec. Dig. {Key No.) SS 2G7, 275; Cent. Dig. §§ 611,
620.
T» Howell y. Haryey, 5 Ark. 270, 39 Am. Dec 876 ; CASH v. EARN-
SHAW, 66 lU. 402, GUmore, Cas. Partnership, 605; Gerard y.
Gateau, 84 111. 121, 25 Am. Rep. 438; Loomis y. McKen2ie, 31 Iowa,
425 ; Lafond y. Deems, 52 How. Prac. (N. Y.) 41 ; Id.. 81 N. Y. 507 ;
Fischer y. Raab, 57 How. Prac. (N. T.) 87; Richards v. Baurman,
65 N. C. 162; Slemmer's Appeal, 58 Pa. 168, 98 Am. Dec. 255;
Page y. Vanklrk, 1 Brewst (Pa.) 282, 284; SLOAN v. MOORE. 37
Pa. 217, Gilmore, Cas. Partnership, 231; Wray y. Hutchinson, 2
Mylne & K. 235; Goodman y. Whitcomb, 1 Jac. & W. 589, 593;
Anderson y. Anderson, 25 Beay. 190.
In Howell y. Haryey, supra, the court said : "The Jurisdiction of
a court of equity in cases of copartnership, flowing from the pe-
culiar trusts and duties growing out of that connection, is of the
most extensive and beneficial character. It often declares par|3ier-
ships utterly yoid in case of fraud, imposition, and oppression in
the original agreement, or decrees a dissolution of a partnership
which was unobjectionable in its origin, but which subsequent caus-
es haye rendered onerous and oppressive. Gross misconduct, want
of good faith, or criminal want of diligence, or such cause as is pro-
ductive of serious and permanent injury in the partnership con-
cerns, or renders it impracticable to carry on the business, is good
ground for a dissolution at the suit of the injured partner. Habit-
ual drunkenness, great extravagance, or unwarrantable n^ligence
in conducting the business of the partnership Justifies a dissolu-
tion; but then it must be a strong and clear case of positive or
meditated abuse to authorize such a decree. For minor misconduct
and grievances, if they require redress, the court will interfere by
way of injunction, to prevent the mischief." See ''Partnership,^
Deo. Dig. (Key No.) §§ 118, 267, 272, 273, S24; Cent. Dig. U 181, 611.
619, 620, 755.
§ 202) DISSOLUTION BT JUDICIAL DECBEE 687
tion/* Where, however, the infractions are of a more seri-
ous nature, amounting to g^oss misconduct, want of good
faith, or criminal want of diligence, so as to render it im-
practicable to carry on the firm business, a proper case for
the action of the courts exists.^* Thus habitual intoxica-
tion, extravagance, and dishonesty,^* willful and persistent
neglect of the defendants to comply with the terms of the
partnership agreement,^' wrongful exclusion of a partner
from the business,^' fraudulent failure to keep proper ac-
T4 Sleghortner v. Welssenbom, 20 N. J. Bq. 172, and cases cited
In previous note. ''The general rules of law concerning Injunction
in partnership cases are the same that obtain In any other case.
Courts of equity are authorized In any cause to Interfere by in-
junction to prevent Irreparable Injury or loss." See chapter VIII,
§ 171, p. 614 et seq. Note In 98 Am. St Rep. 267. See "Partnership,''
Dec. Dig. (Key No,) 6§ 118, 267, £72, 213, S2i; Cent. Dig. fS 181,
611, 619, 620, 755.
75Meaher v. Cox, 37 Ala. 201; Howell v. Harvey, 5 Ark. 270,
39 Am. Dec. 376; Gerard v. Gateau, 84 111. 121, 25 Am. Rep. 438;
Kennedy v. Kennedy, 8 Dana (Ky.) 239; Sleghortner v. Weissen-
bom, 20 N. J. Eq. 172 ; SUTRO v. WAGNER, 23 N. J. Eq. 388, GU-
more, Cas. Partnership, 483; Wagner v. Sutro, 24 N. J. Eq. 589;
Singer r. Heller, 40 Wis. 544, 547; Wood v. Beath, 23 Wis. 254;
Gaddie v. Mann (C. O.) 147 Fed. 960; Harrison v. Tennant, 21 Beav.
503; Smith v. Jeyes, 4 Beav. 503; Cheeseman y. Price, 35 Beav.
142; Waters v. Taylor, 2 Ves. & B. 299. See "Partnership," Dec.
Dig. (Key No.) §§ 272, 273; Cent. Dig. §S 619, 620.
»« Ambler v. Whipple, 20 Wall. 546, 22 L. Ed. 403; Of. Krlgbaum
V. Vindquest, 10 Neb. 435, 6 N. W. 631. See "Partnership,*' Dec. Dig.
(Key No.) §§ 272^274; Cent. Dig. H 619-621.
T7 ROSENSTEIN v. BURNS (C. C.) 41 Fed. 841. See "Partner-
ship," Dec. Dig. (Key No.) § 273; Cent. Dig. f 620.
78 Moore v. Price, 116 Ala. 247, 22 South. 531; Heyman v. Hey-
man, 210 IlL 524, 71 N. E. 591 ; Havener v. Stephens, 58 S. W. 372,
22 Ky. Law Rep. 498; Kennedy v. Kennedy, 3 Dana (Ky.) 239;
Groth V. Payment, 79 Mich. 290, 44 N. W. 611. Major v. Todd, 84
Mich. 85, 47 N. W. 841 ; Beller v. Murphy, 139 Mo. App. 663, 123 S.
W. 1029; Hartman v. Woehr, 18 N. J. Eq. 383; Wilcox v. Pratt,
52 Hun, 340, 5 N. Y. Supp. 861 ; Holder v. Shelby (T6x. Civ. App.)
118 S. W. 590 ; Cole v. Price, 22 Wash. 18. 60 Pac. 153 ; Redding v.
Anderson, 37 Wash. 209, 79 N. W. 628 ; Werner v. Leisen, 31 Wis.
170; Wood V. Beath, 23 Wis. 254, 260; Goodman v. Whltcomb, 1
Jac. & W. 589, 593 ; Newton v. Doran, 1 Grant, V. C. 590 ; Wlmbly
V. Clark, 22 Quebec Super. Ct 453. See "Partnership," Dec. Dig.
{Key No.) § 273; Cent. Dig. S 620.
688 TBRMINATION OF THE PARTNERSHIP (Gh. 10
counts/* or misappropriation of the funds in the hands of
the firm/* have been held to be proper causes for dissolu-
tion. As will readily be seen, the line between trifling
grievances and gross misconduct is not very clearly de-
fined, but is rather a matter of degree, and in fact depends
on all the circumstances of the particular case, such as the
character of the partners and the business in which they
are engaged. The. determining question in every case must
be: Do the acts complained of prevent the profitable con-
tinuance of the business on the terms of the partnership
agreement?*^ It is obvious that under proper conditions
a dissolution will be decreed on the suit of the innocent
party. But even if both parties are in fault, if conditions
have become intolerable and a continuance of the business
must be unprofitable, the courts will decree a dissolution,
though defendant claims to be the party least in fault and
resists the action.*' The courts will pursue this course,
rather than undertake "the high prerogative of decreeing
a personal reconciliation and restoration of mutual confi-
dence." Thus, where dissensions in the natural course of
events have produced chronic hostility between the parties,
so that they work against instead of for each other, the
court will dissolve the firm at the suit of any one of them.**
Tt Werner t. Leisen, 81 Wis. 169; Wood v. Beath, 23 Wis. 254;
C^heeseman v. Price, 35 Beay. 142; Gowan y. Jeffries, 2 Ashu. 296w
He>« "Partner* Aip," Dec. Dig, (Key No.) S 27S; Cent. Dig, | $20.
•oDumont y. Ruepprecht, 38 Ala. 175, 179; Cottle y. Leitch, 36
C^nl. 434; Maher y. Bull, 44 111. 97, 99; Adams y. Shewalter, 139
I lid. 178, 38 N. B. 607; Hanna y. McLaughlin, 158 Ind. 292, 63 N.
n. 475 ; Flaramer y. Green, 47 N. Y. Super. Ct. 538 ; Belter y. Mor-
ton, 90 Pa. 229 ; Hubbard y. Moore, 67 Vt 532, 32 Ati. 465 ; Smith
▼. Jeye«, 4 Beay. 503 ; Gheeseman y. Price, 35 Beay. 142. See **Part'
nertihip,'* Dec Dig. (Key No.) § 275; Cent. Dig. § 620.
• 1 Page y. Vankirk, 1 Brewst. (Pa.) 282; Id., 6 Phila. 264. See
** Partnership,** Dec. Dig. (Key No.) S 273; Cent. Dig. § 620.
••Boyd y. Mynatt, 4 Ala. 79; Blake v. Dorgan, 1 O. Greene
(lowu) 587; Steyens y. Yeatman, 19 Md. 480; Ferrero y. Buhlmey-
•r, 34 How. Prac. (N. Y.) 33 ; Atwood y. Maude, 3 Ch. Dly. 369, 873 ;
UnxiiiV y. West. 1 Drew. & S. 173, 175. See ** Partnership,** Deo. Dig.
{hvv No.) H 272, 27S, S17; Cent. Dig. » 619, 620, 7SS.
• Kierard y. Gateau, 84 111. 121, 25 Am. Rep. 438; Blake y. I>or-
Kttfi, 1 G. Greene (Iowa) 537; Whitman y. Robinson, 21 Md. 30;
§ 203) ANNULMENT OF PARTNERSHIP 589
Where, however, one partner is entirely at fault, he will
not be allowed to build up a cause of action on his own
wrong and thus procure a dissolution."^
ANNULMENT OF PARTNERSHIP
203. In cases of fraud, imposition, and oppression in the
original agreement, the partnership may be de-
clared void ab initio.
Declaring a partnership void ab initio is quite different
from merely dissolving it. The distinction is very much
the same as between a divorce and an annulment of a mar-
riage. Where a divorce is procured, the marriage is recog-
nized as valid. An annulment, however, declares that it
never existed. Equally a dissolution of a partnership rec-
ognizes that a partnership has existed. A decree declaring
the partnership void ab initio, on the other hand, wipes the
relation out of existence retroactively so far as the partners
are concerned. It is obvious that a partnership may be
dissolved by the court at the instance of the innocent party,
where it has been induced by fraud.** Thus, where the
purpose of the partnership was to buy a patent right, and
Bishop Y, Breckles, 1 Hoff. Gh. (N. Y.) 534; Lafond y. Deems, 62
How. Prac. (N..Y.) 41; Id., 1 Abb. N. C. (N. Y.) 818, reversed on
other grounds 81 N. Y. 507; Philipp y. Von Rayen, 28 Misc. Rep.
552, 57 N. Y. Supp. 701; Singer v. Heller, 40 Wis. 544; Watney v.
Wells, 30 Beay. 56 ; Leary y. Shout, 33 Beav. 583 ; Baxter v. West,
1 Drew. & S. 173; Harrison y. Tennant, 21 Beay. 482. See "Part-
nershipr Dec. Dig. {Key No.) SS 272, 273; Cent. Dig. IS 619, 620.
•4 Gerard y. Gateau, 84 lU. 121, 25 Am. Rep. 438; Harrison y.
Tennant, 21 Beav. 482; Falrthome v. Weston, 2 Hare, 387, 392.
See *' Partnership:' Dec. Dig. {Key No.) SS 272, 273; Cent. Dig. S§
619, 620.
S5 Fogg y. Johnstou, 27 Ala. 432^ 62 Am. Dec. 771 ; Howell y.
Haryey, 5 Ark. 270, 39 Am. I>ec. 376; White y. Smith, 63 Ark. 518,
39 S. W. 555 ; ROSENSTEIN y. BURNS (O. C.) 41 Fed. 841 ; Bums
y. Rosensteln, 135 U. S. 449, 10 Sup. Ct. 817, 34 L. Ed. 193 ; Mycock
y. Beatson, 13 Ch. Dly. 384; Jauncy v. Knowles. 29 U J. Gh. 91, 1
L. T. 116, 8 W. *R. 69. See ^'Partnership^ Dec. Dig. {Key No.) §S
25, 273, 276, 315; Cent. Dig. H ii. 620. 623, 731.
I
690 TERMINATION OF THE PARTNERSHIP (Ch. 10
one of the partners obtained a secret advantage from the
vendor of the same for the influence which he had exerted
on his partners in forming the partnership for this purpose,
the relation was dissolved.** And a dissolution was de-
creed, where one of the partners had misrepresented his
skill as a machinist and engineer, thus inducing the plain-
tiff to enter into the agreement. It was held that the ag-
grieved party may, if the equities of the case require it,
obtain the dissolution as of the date on which he aban-
doned the enterprise, after giving due notice to his copart-
ners.*^
The courts, however, go farther, and in a proper case
will rescind the contract ab initio and put the innocent
party or parties in statu quo as near as can be done. The
party aggrieved has a right to have the agreement wholly
set aside, and may take the stand that the misrepresenta-
tions vitiate the contract.** Thus, where the plaintiff was
induced to enter the partnership by the fraudulent altera-
tion of the defendants' books and by other devices, the
court annulled the contract of partnership and said: "The
effect of Todd's election to avoid the contract of partner-
ship for the fraud practiced on him is that, as between the
parties, there has never existed any copartnership. All the
business, though in the name of the firm, was for the bene-
fit and at the risk of Richards. It is just that Todd should
receive a reasonable compensation for his time thus spent
in the service of and for the benefit of Richards. ♦ * *
It is also clear that as Todd, by holding himself out as a
member of a firm, rendered himself liable to the creditors
of such apparent firm, Richards 'should, in order to place
him in statu quo, indemnify him against the claims of such
creditors." •• It is quite clear from the statement that an
f»
•• White ▼. Smith, 63 Ark. 613, 39 S. W. 655. See "Partnership;
Deo. Dig. (Key No.) t§ 25, 27S; Cent. Dig. H 11, 620.
•T Fogg T. Johnston, 27 Ala. 432, 62 Am. Dec. 771. See "Partner-
ehip,"* Deo. Dig. (Key No.) S 273; Cent. Dig. § 620.
•• HARLOW V. LA BRUM^ 161 N. T. 278, 45 N. E. 869, affirming
82 Hun, 292, 31 N. Y. Supp. 487. See *'Partner8hip,*' Dec Dig. {Key
No.) { 85; Cent. Dig. { 11.
••Richards t. Todd, 127 Mass. 169. See, also, Oharlesworth t.
§ 203) ANNULMENT OF PARTNERSHIP 691
annulment of the contract ab initio is a far better remedy
to the defrauded party than a mere dissolution could
be. Hence this remedy has been quite frequently in-
voked.*® It should be noted, however, that the courts will
not annul the partnership agreement for any light reason,
such as mere puffing of the prospect of the venture or ex-
aggeration of the value of the property put into the busi-
ness.*^ Where, however, the misrepresentation has been
material,** though not necessarily sufficient to give an ac-
tion for deceit,*' the courts may dissolve the relation ab
initio. But where a partner, after knowledge of the fraud,
has recognized the fraudulent partnership contract as valid,
the courts will not decree a rescission.**
Jennings, 34 Beav. 96. See ^^Partnership,^ Dec, Dig, (Key Vo,)
25, 315; Cent, Dig. §§ 11, 7S1,
•0 Hynes v. Stewart, 10 B. Mon. (Ky.) 429; SMITH v. EVERETT,
126 Mass. 804, Gilmore, Oas. Partnership, 608; Perry y. Hale, 143
Mass. 540, 10 N. E. 174; Gibson y. Cunningham, 92 Mo. 131, 5 S.
W. 12 ; Hunter v. Whitehead, 42 Mo. 524 ; HARLOW y. LA BRUM,
82 Hun, 292, 31 N. Y. Supp. 487, affirmed 151 N. Y. 278, 45 N. B.
859; More y. Rand, 60 N. Y. 208; Hollister y. Simonson, 36 App.
Diy. 63, 55 N. Y. Supp. 372; Klmmins y. Wilson, 8 W. Va. 584;
Oterl y. Scalzo, 145 U. S. 578, 588, 12 Sup. Ot 895, 36 L. Ed. 824;
Newbigging y. Adam, 34 Ch. Diy. 582. Jennings y. Broughton, 17
Beay. 23, affirmed 5 De Gez, M. & G. 125 ; Hamil y. Stokes, 4 Price,
161; Andrewes y. Garstin, 10 Com. Bench. N. S. 444; Stainbank
y. Femley, 9 Sim. 556; Rawlins y. Wickham, 1 Giff. 355, 3 De Gez
& J. 304; Colt y. Wollasten, 2 P. Wms. 154; Green y. Barrett, 1
Sim. 45; Pillans y. Harkness, Colles, 442; Redgraye y. Hurd, 20
Ch. Diy. 1. See ^'Partnership,*' Dec, Dig, {Key No,) §i 25, 315; Cent,
Dig, §§ 11, 131.
01 Gerard y. Gateau, 84 IlL 121, 25 Am. Rep. 438; Jennings y.
Broughton, 17 Beay. 234, affirmed 5 De Gex, M. & G. 126. See *'Pa/rt'
nerahip," Dec, Dig, (Key No,) $§ 25, 273, 315; Cent, Dig, S§ 11, 620,
731,
•t Rawlins y. Wickham, 1 Giff, 355, 3 De Gex & J. 304. See
•* Partnership,'* Deo. Dig, (Key No,) §S 25, 273, 316; Cent, Dig, U lU
620, 731,
99 Newbigging y. Adam, 34 Ch. Diy. 582. See '^Partnership,** Deo.
Dig, (Key No.) §S 25, 273, 315; Cent, Dig. {§ 11, 620, 731,
*9«St John y. Hendrickson, 81 Ind. 350; Eyans y. Montgomery,
50 Iowa, 325; Andriessen's Appeal, 123 Pa. 303, 16 Atl. 840; Rid-
del y. Smith, 10 L. T. 561, 12 W. R. 899. See ''Partnership,** Dec
Dig. (Key No.) Si 25, 273, 315; Cent, Dig. SS 11, 620, 731.
592
LIMITBD PARTNERSHIPS
(OlU
CHAPTER XI
LIMITED PARTNERSHIPS
204. General Nature — Definition.
206. Bstablishment of the Relation — Statatory Authority*
206-207. Purposes.
208. Location of Business.
209. Members — General and SpeciaL
210. Ck>ntribution to. Capital — ^How made.
211. Certificate.
212. Recording.
213. Publication.
214. Aflldavit of Payment of Capital.
210. Failure to F^le Certificate.
216. Duration — Continuance or RenewaL
217. Effect of Alteration.
218-219. Firm Name— Firm Sign.
220. Withdrawals of CapitaL
221. Rights and Liabilities.
222. Liability for Fraud.
223-224. Fraudulent Preferences.
225. Assignments for Benefit of Crediton.
226. Dissolution.
227. Death of Partner.
22a Admission of New Partners.
229. Sale of Partner's Interest
230. Miscellaneous Statutory Provisions.
281-232. Actions — Between Members — Between Firm and Third
Persons.
GENERAL NATURE— DEFINITION
tOL A limited partnership is a partnership, authorized by
statute, in which the liability of one or more, but
not all, of the partners is limited to the amount
contributed by him or them to the firm capital at
the time of the formation of the partnership.
i
§ 20i) GENERAL NATURE 598
History
Limited partnerships are wholly unknown to the com-
mon law both of England * and of the United States,* and
are a form of association borrowed from the civil law of
France.
They are created only by statute, and exist and are con-
trolled entirely by legislative enactments:' In France and
Italy these limited partnerships, called "partnerships in
commendam," were known as far back as the Middle Ages,*
and seem to have arisen out of the necessity of finding
some method by which the nobles and rich clergy could
make use of their accumulated wealth in trade' for the mu-
tual advantage of both themselves and the trader, but with-
out either taking an active part in the business or subject-
ing themselves to any liability beyond their original in-
vestment. They are in reality a sort of quasi corporation,*
and form a step half way between the partnership univer-
sally recognized at common law, in which each and every
partner is liable in solido for the debts of the firm, and
the modem corporation, in which all shareholders are lia-
ble only to the extent of their original investment.
In England, curiously enough, the continental law of lim-
ited partnerships never gained a foothold in the common
law, and, although recognized by many statutes to the ex-
1 Coope V. Eyre, 1 H. Bl. 37. See ** Partnership,'* Dec. Dig, {Key
^0.) §§ 3^9-^76; Cent, Dig, $S 823-865; "Joint-Stock Companies/*
Dec. Dig. {Key No.) SS 1-B4; Cent. Dig. H 1-33.
2 AMES ▼. DOWNING, 1 Bradf . Sup. (N. Y.) 321, Gllmore, Gas.
Partnership, 610; OLAPP v. LACEY, 35 Conn. 463; PIERCE v.
BRYANT, 5 Allen (Mass.) 01; SINGER y. KELLY, 44 Pa. 145;
Henkel v. Heyman, 91 111. 101 ; MANHATTAN CO. v. LAIMBBER,
108 N. Y. 578, 15 N. E. 712» Gllmore, Cas. Partnership, 615. See
''Partnership;* Dec. Dig. {Key No.) SS 349-376; Cent. Dig. §§ 823-
865; "Joint-Stock Companies," Dec. Dig. {Key No.) S§ 1-24; Cent.
Dig. SS 1-^3.
* CLAPP y. LACEY, 35 Conn. 463 ; Lancaster v. Choate, 5 AUen
(Mass.) 530. See "Partnership,** Dec. Dig. {Key No.) S 366; Cent.
Dig. S 839.
* Sip Frederick Pollock's Essays on Jurisprudence.
* Hayes v. Bement, 3 Sandf. (N. Y.) 397 ; Whittemore v. MacDon-
neU, 6 U. C. C. P. 551. See "Partnership,** Dec. Dig. (Key No.) S
349; Cent. Dig. S 823.
Gh^Pabt.— 38
5M LnCTTED PABTNEB8HIPS (Ch. 11
tent of permitting joint-stock companies with limited lia-
bilirj/ it was not until 1907 that true limited partnerships
were authorized by statute, and even these differ from
those of the United States in some particulars, especially
in requiring the large number of 10 partners for banking
firms and 20 for other sorts/
In the United States limited partnerships existed from
earliest times in Louisiana, which was originally a colony
of France,* and undoubtedly also existed in Florida so long
as that state remained a colony of Spain ; but Florida in
1822 adopted the English common law as it existed down
to the fourth year of James I as the basis of its jurispru-
dence,* and in 1838 passed a statute modeled after th^t of
New York. In the last codification of the Florida laws this
statute has, however, been omitted, so that to-d^y Flor-
ida does not recognize limited partnerships.
Of the English colonies, which, as we have seen, did not
inherit limited partnerships from the mother country, New
York and Connecticut were the first to sanction them by
statute. Both of these states passed statutes in the same
year, 1822, New York on April 17th and Connecticut on
May 29th. These statutes are very similar, although the
courts of the latter state strenuously deny that its statute
is in any way copied from New York,^* but insist that both
were derived from the French law.
The New York statutes were revised in 1829. The revi-
sion is based on a report of commissioners made November
2, 1S27. The commissioners were John Duer, B. F. But-
ler, and John C. Spencer, three eminent lawyers of that
day. They entirely recast the statute relating to limited
partnerships, added the provisions for filing affidavits of
publication and the provisions as to fraudulent preferences,
changed the provision as to dissolution so as to require
publication of notice, forbade the use of the words "and
« 31 and 22 Vict c. 91.
t An Act to Establish Limited Partnerships, 7 Edw. VII, c. 24.
• T^oulslana: Oiy. Code 1825, arts. 27d9, 2810-2822; Ciy. Code
XWXK arts* 2828, 2839-2851.
t Ihirt V. Bostwick. 14 Fla. 162, 173.
!• CI-APP ▼. LACEY, 85 Conn. 463.
§ 205) ESTABLISHMENT OF THE RELATION 695
company" in the firm name, and made other minor changes.
Their report on this subject was adopted by the Legisla-
ture without any important change, except for striking out
a declaratory section that dissolution should not affect the
liability of the partnership and its members to persons with
whom they had had dealings, who had no actual notice of
the dissolution.
This statute, as appearing in the New York Revised
Statutes of 1829, was soon re-enacted in almost all of the
existing states.**
ESTABLISHMENT OF THE RELATION— STAT-
UTORY AUTHORITY
205. A limited partnership can exist only by authority of
statute. In addition to the essentials of an ordi-
nary partnership, all the requirements of the stat-
ute najust be observed.
A limited partnership must consist of one or more part-
ners, whose liability is limited, and who are called "special
partners," and one qr more general partners, who are in-
trusted with the management of the business and are liable
in solido for the debts of the firm, exactly as if there were
no special partners. Within the limits prescribed by the
statutes the partners may make such terms and conditions
of partnership as they choose, and their agreement with
each other is governed by the general rules applicable to
partnership contracts;** for a limited partnership is not
regarded as an anomaly, but rather as a different variety
of ordinary partnership.** The elements of ordinary part-
11 Among the earliest were Massachusetts, March 10, 1835; Penn-
sylyania, March ZL, 1836 ; New Jersey, February 9, 1837 ; Michigan,
March 18, 1837; Virginia, March 29, 1837; Mississippi, Feb. 15,
1838; Vermont, Rev. St 1839; Ohio, January 24, 1846; Illinois,
February 23, 1847; Kentucky, February 26, 1850; New Hampshire,
July 13, 1855 ; and Indiana, March 5, 1859.
1 a Nutting ▼. Ashcroft, 101 Mass. 300. See '^Partnership," Deo.
Dig. {Key No.) §S S49-S76; Cent. Dig, SS 829-865.
i« AMES T. DOWNING, 1 Bradf. Sur. (N. Y.) 321, 828, Qilmore,
596 LIMITED PARTNERSHIPS (Ch. 11
nership must exist/^ and in addition the requirements of
the statute must be complied with, and any failure to com-
ply with the statutory requirements, either as to original
formation ^* or subsequent conduct of the business,** re-
sults in a general partnership, and imposes the full com-
mon-law liability on all parties, except in a few cases of
estoppel ^^ and of acts done subsequent to the formation
by one special partner without the knowledge and consent
of other special partners.
Competency of Parties
Any person having the capacity to contract may be either
a general or a special partner, and as the contracts of an
infant are only voidable, and not void, the fact that one of
the partners is an infant will not make the partnership in-
valid, so long as it does not appear that he has avoided his
contract.^*
Married women, when their disability has been removed
by statute, may, as we have seen, be partners in a general
partnership, though ordinarily not with their husbands,
and there seems to be no reason why they may not sim-
ilarly be special partners.**
• •
Gas. Partnership, 610; Marshall ▼. Lambetti, 7 Rob. (La.) 471; Safe
Deposit & Trust Ck). v. Cahn, 102 Md. 530, 545, 62 Atl. 819; Lan-
caster V. Ohoate, 5 Allen (Mass.) 530. See "ParinersMpt*' Deo. Dig,
{Key No.) | 349; Cent. Dig. | 823.
14 Richardson v. Carlton, 109 Iowa, 515, 80 N. W. 532. See **ParU
nership;* Dec. Dig. {Key No,) | 3^9; Cent. Dig. $ 823.
X » Hotopp V. Huber. 160 N. Y. 524, 55 N. B. 206. See ^Tanner-
ahipr Dec. Dig. (Key No.) || 362, 371; Cent. Dig. HM2, 848.
f Pamsworth v. Boardman, 131 Mass. 115. See **Partnerih4p,*'
Dec. Dig. (Key No.) § 362; Cent. Dig. SI 842, 850.
IT TRACY V. TUFFLY. 134 U. S. 212. 227. 10 Snp. Ct 527. 83 L.
Ed. 879; Allegheny Nat. Bank y. Bailey, 147 Pa. 111. 23 AU. 439.
See "Partnership,'* Dec. Dig. (Key No.) i 365; Cent. Dig. | 845.
»• CONTINENTAL NAT. BANK OF B(>STON v. STRAUSS, 137
N. Y. 148, 32 N. E. 1066 ; Jonau y. Blanchard, 2 Rob. (La.) 513. See
** Partnership;* Dec. Dig. (Key No.) i 353; Cent. Dig. I 887; **Inr
fanisr Dec. Dig. {Key No.) § 54; Cent. Dig. §§ 132-134^
i» BERNARD & LEAS MFG. CO. y. PACKARD. 64 Fed. 809. 12
O. O. A. 123. See chapter II, § 24, p. 85. ante. See ''Hustand and
Wife,** Dec. Dig. {Key No.) U 42, 97; Cent. Dig. U ^^f S7S.
§ 206) ESTABUSHMBNT OF THE BBLATION 697
Present Statutes — In General
At the present time statutes* on the subject of limited
partnership are in force in all the American states, terri-
tories, and dependencies, except Arizona, Florida, Okla-
homa, Porto Rico, and the Philippines. These statutes, as
well as those of the Canadian provinces, are referred to in
the note below.'*
The earlier statutes followed the language of the New
York Revised Statutes of 1829 almost as closely as if they
had been recommended by a commission on uniformity of
legislation; but by occasional amendments and more fre-
so Alabama: Ciy, Ck)de 1907, H 5265-5288.
AloBka: Garter's Ann. Codes 1900, pp. 423-425, pt 5^ c. 32.
Arkan9a9: Klrby'B Dig. 1904, c. 121, U 5803^830.
California: Kerr's Codes. voL 2 (Civ. Code [Pocket Ed.] 1909) Vk
2477-2510.
Colorado: Rev. St 1908, c. 105, H 4768-4788.
Connecticut: Oen. St 1902, |§ 4016-4024.
Delaware: Rey. CodQ 1898 (Rev. Code 1852, amended to 1898) c.
64, II 1-^.
District of Columbia: Code Marcli 3, 1901 (Bd. 1906) || 1498-152a
Georgia: Code 1895, vol. 2, || 2662-2685.
Hawaii: Rey. Laws 1905, c. 161, || 2630-2652.
IdaJio: Rey. Codes 1908» || 3336-3360.
IlUnois: Hurd's Rey. St 1908, c. 84.
Indiana: Burns' Ann. St (Revision of 1906) c. 118, || 9693-9711.
Iowa: Code 1897, || 3106-3121; Ck)de Supp. 1907, p. 784, | 8109.
Kansas: Gen. St 1905, c. 74, {| 4766, 4786.
Kentucky: Russell's St 1909, || 2490-2501, | 2098.
Louisiana: Merrick's Rev. Civ. Code 1900, arts. 2839-2852.
Maine: Rev. St. 1903, c. 35.
Maryland: Code Pub. Gen. Laws (Poe, 1904) art 78 ; also article
27, I 176.
Massachusetts: Rev. Laws 1902, vol. 1, c. 71.
Michigan: C}omp. Laws (MUler, 1907) c. 1!^9, || 6056-6078.
Minnesota: Rev. Laws 1905, c. 57, |S 2819-2837.
Mississippi: Code 1906, c. 88, §| 3129^146.
Missouri: Act June 1, 1909, pp. 705-708.
Montana: Civ. Code 1907, || 5510-5534.
Nebraska: Cobbey's Ann. St 1907, || 9700-9727.
Nevada: Cutting's Comp. Laws 1900. || 2773-2785.
New Hampshire: Pub. St 1901, c. 122.
New Jersey: Pub. Laws 1837, p. 121, Feb. 9, and supplementals
approved March 15, 1859 (P. L. 1859, p. 335), April 2, 1869 (P. L.
1869 p. 1224), March 26, 1888 (P. U 1888, p. 265), and March 13.
598 LIMITED PARTNERSHIPS (Ch. 11
quent revisions slight differences have arisen. The chap-
ter in the California code was framed on a slightly different
plan, and its provisions have been followed closely in Ha-
waii, Idaho, Montana, North and South Dakota, and Wyo-
ming. In Montana the statute is especially clearly and
succinctly phrased. Other important variations from the
type are found in the statute of the District of Columbia,
which is largely based on that of Maryland, and in Georgia
and Massachusetts ; and various special provisions of some
originality appear in Indiana, Mississippi, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, and Virginia.
1901 (P. L. 1901, p. 74, c. 43) ; Gen. St 1895, vol. 2, pp. 2437-2440.
Gf. P. L. 1880, p. 804 (March 12), and P. L. 1883, p. 188 (March 23).
yew Mewico: Ck>mp. Laws 1897, §$ 2658-2676.
Veto York: Partnership Law (Laws 1909, c. 44 [Oonsol. Laws, c.
89]). II 80-42.
Vorth Carolina: Pell's Revlsal 1908, vol. 1, |f 2521-2539.
Vorth Dakota: Rev. Codes 1905, {§ 5865-5889, 9011.
Ohio: Bates' Ann. St (6th Ed., 1908) voL 2, %% 3141-3161; vol.
8. I 7077.
Oregon: Ball. & Ck>t C!omp. St 1902, yol. 2, {| 4393-4402.
Panama and Canal Zone: Civ. Ck>de (transl. by Joannlni) 1905^
arU. 2087-2089, 2096.
Pewnsylvania: Purdon's Dig. (13th Ed., 1903) vol. 2, pp. 2023-
2030, 2299, 2305 ; Yolume 3, pp. 3464-3467 (Act March 21, 1836 [P.
L. 143] ; Act AprU 21, 1858 [P. L. 383] ; Resolution April 16, 1838 [P.
L. 691] ; Act March 30, 1865 [P. L. 46] ; Act Feb. 21, 1868 [P. L. 42] ;
Act June 2, 1874 [P. L. 271] ; Act May 9, 1899 [P. L. 261] ; Act
June 27, 1889, | 21; Act July 9, 1901, § 2; Act AprU 3, 1903;
Act AprU 14, 1905; Act AprU 17, 1905 [P. L^ 186]; Act June 7,
1907 [P. L. 432] ; Act May 8, 1909 [P. L. 386]).
Rhode Island: Gen. Laws 1909, c. 186.
South Carolina: Civ. Code (Code of Laws 1902^ toL 1) c. 89, ||
1680-1707.
South Dakota: CiY. <>>de (Comp. Laws 1910, voL 2) H 1768-1792;
Penal Code, |{ 420, 435.
Tennessee: Shannon's Code 1896, If 3119^141a.
Texas: Sayles' Ann. Civ. St 1897, vol. 2, arts. 3583-^605.
Utah: Comp. Laws 1907, || 1687-1707. •
Vermont: P. S. 1906, c, 207, || 4891-4901.
Virginia: Code 1904, vol. 2, {{ 2863-2876.
Washington: Rem. & Bal. Code 1910, vol. 2, {| 835&-8368i
West Virginia: Code 1906, || 3456-3467.
Wisconsin: St 1898, |{ 1703-1724.
Wyoming: Comp. St 1910, || 3397-3421.
§ 205) ESTABLISHMENT OF THE RELATION 599
The statutes of the civil law jurisdictions, Louisiana and
Panama and the Canal Zone, are materially different from
the others and much less full. They show that, although
the idea of limited partnership was borrowed from the civil
law, it was elaborately worked out by statutory methods
characteristic of common-law jurisdictions. In Louisiana
and the Canal Zone a limited partnership, or partnership
in commendam, is not regarded as a different variety of
partnership; but partners in commendam are treated as
possible incidents of an ordinary partnership.
Same — Construction of Statutes
As the statutes are primarily for the benefit of the spe-
cial partner,** in that by limiting his liability they give
him a special advantage, it is important that creditors and
others dealing with the firm should not be misled or suffer
any hardship by reason of this limited liability of one of
Canada.
British Columbia: Rev. St 1897, vol. 2, c. 150, §§ 47-64.
Manitoba: Rev. St 1902, vol. 2, c. 129, §§ 61-79.
New Brunswick: Consol. St 1877, c. 97, §S 1-13.
Newfoundland: Consol. St 1892 (2d Series) c. 98.
Northwest Territories: Ordinances of N. W. Territories, 1905, c.
94, §1 47-66 (Alberta Eid.) ; or Gen. Ord, N. W. Territories, 1905, pp.
917-920, |§ 47-66, and Ordinance of 1899, c 7 (Saskatchewan Ed.).
Nova Scotia: Rev. St 1884 (5th Series) c. 83, || 32-45.
OntaHo: Rev. St 1887, c. 151, §§ 1-19.
PHnce Edward Island: Act AprU 17, 1862 (25 Vict c. 13).
Quebec: Beauchamp's Civ. Code Ann. 1905, vol. 2, arts. 1871-1887.
The Canadian statutes are not summarized in this chapter. The
statute of Ontario, however, is substantially similar to the shorter
American statutes on limited partnership, while that of Quebec
is apparently an almost literal translation of the chapter on that
subject in the New York Revised Statutes of 1829.
In almost all the states the statutes on the subject of limited
partnership may be found in a single chapter or article of the latest
revision. For this reason it seems to be unnecessary in referring to
these statutes to cite in each instance the chapter and section, and
reference will therefore be made in the notes to subsequent sections
of the chapter to the references in this note.
21 Patterson v. Holland, 7 Grant Ch. (U. 0.) 5; Durant v. Aben-
droth, 41 N. Y. Super. Ct 53. See ** Partnership;' Dec. Dig. (Key
No.) IS S5U S62; Cent. Dig. §S S25, 8Ji2.
600 LIMITED PARTNERSHIPS (Ch. 11
the partners.'' Consequently all of the statutes contain
provisions intended primarily for the protection of cred-
itors and for securing to all persons interested the fullest
knowledge of the firm's standing.
There is, however, considerable conflict upon the ques-
tion of the construction of the statutes. Some courts take
the view that the statute, being derogatory of the common
law, should be construed with the utmost strictness, and
that in order to secure its protection all of its provisions
must be exactly complied with.** Other courts, taking the
view that the statute is remedial in its nature and should
be liberally construed, hold that substantial compliance
with its terms is sufficient.'* But the better view, and the
one toward which the courts are now tending,'* would
seem to be that those provisions of the statute which are
clearly for the protection of creditors should be strictly
complied with,'* but that a mere formal defect or technical
violation of the statute should not make the special part-
si Spalding Y. Black, 22 Kan. 62; Ulman v. Briggs, 32 La. Ann.
660; WHITE v. EISEMAN, 134 N. Y. 103, 31 N. E. 276; CONTI-
NENTAL NAT. BANK OF BOSTON v. STRAUSS. 137 N. T. 158, 32
N. B. 1066 ; Haddock v. Grlnnell Mfg. Corp., 109 Pa. 372, 1 AU. 174 ;
FOURTH ST. NAT. BANK v. WHITAKER, 170 Pa. 303, 33 Atl. 100.
See ''Partnership;' Dec Dig. {Key No,) H S62, S71; Cent. Dig. §§
84'J, 847, 848.
2»Holllday v. Union Bag & Paper Co., 3 Colo. 342; PIERCE t.
BRYANT, S Allen (Mass.) 91; Haggerty v. Foster, 103 Mass. 17;
In re Allen, 41 Minn. 430, 43 N. W. 382; Richardson v. Hogg, 38
Pa. 153. Bee '*8tatutesr Deo. Dig. iKey No.) | 2S9; Cent. Dig. |
320.
"CROUCH V. FIRST NAT. BANK, 156 111. 358, 40 N. E. 974;
Van Riper v. Poppenhausen, 48 N. Y. 73; MANHATTAN CO. v.
LAI M BEER, 108 N. Y. 589, 15 N. E. 712, Gllmore, Cas. Partnership,
615 ; Fifth Ave. Bank ▼. Colgate, 120 N. Y. 888, 24 N. E. 799, 8 L
R. A. 712; WHITE v. EISEMAN. 134 N. Y. 101, 31 N. E. 276;
Blumenthal y. Whitaker, 170 Pa. 309, 313, 33 Atl. 108; Spencer
Optical Mfg. Co. y. Johnson, 53 S. C. 533, 536, 31 S. E. 892. See
''Partnership;* Dec. Dig. (Key No.) | S62; Cent. Dig. I 842; "flftci-
utes;' Dec. Dig. (Key No.) S 236; Cent. Dig. §§ 317, 324, 325.
SB Ulman y. Brlggs, 32 La. Ann. 660. See ''Partnership;' Dec. Dig,
\Key No.) | 362; Cent. Dig. § 842.
2« Lachalse y. Marks, 4 E. D. Smith (N. Y.) 610, 626. See "Part-
nership;* Dec. Dig. (Key No.) | 362; Cent. Dig. § 842.
§§ 206-207) ESTABLISHMENT OF THE RELATION 601
ner liable as a general partner,'^ unless it can be shown
that creditors have been misled.'*
SAME— PURPOSES
206. Limited partnerships can be formed to engage in only
the business authorized by statute. The statutory
authority is usually confined to a mercantile, me-
chanical, or manufacturing business. Most of the
statutes prohibit limitfd partnerships from engag-
ing in insurance or banking.
207. Where a limited partnership is attempted to be formed
for an unauthorized or prohibited purpose, an or-
dinary or general partnership results, and the part-
ners are all liable as general partners.
In the New York Revised Statutes of 1829, which served
as a model for most of the American statutes on limited
partnership, and in eighteen states to-day,** it is provided
that a limited partnership may be organized "for the trans-
action of any mercantile, mechanical or manufacturing
business." In twelve of these states,*" it is expressly pro-
vided Nthat these businesses shall not include banking or in-
sr Johnson ▼. McDonald, 2 Abb. Prac. (N. Y.) 290; Smith ▼. Ar-
gall, 6 Hill (N. Y.) 479, affirmed 3 D«nio (N. Y.) 435 ; Cock v. Bailey.
146 Pa. 828, 23 Atl. 370; Blumenthal v. Whitaker, 170 Pa. 309, 33
Atl. 103. See "Partnership,** Dec, Dig. (Key No.) § S62; Cent. Dig. §
842,
28 WHITE ▼. BISEMAN, 134 N. Y. 103. 31 N. E. 276. See "Part-
nership," Cent. Dig. {§ 8S4, 842.
2 8 Arkansas, Delaware, District of Columbia, Kansas, Maine.
Michigan, Minnesota, Nebraska, New Jersey. North Carolina, Oregon,
Rhode Island, Utah, Vermont. Virginia, Washington, West. Virginia,
and Wisconsin. For references to the statutes of these states, see
note 20, above.
so Delaware, Maine, Michigan, Minnesota, New Jersey, North Car-
olina, Rhode Island, Utah, Vermont, Virginia, West Virginia, and
Wisconsin. Virginia and West Virginia also exclude brokerage.
North Carolina permits limited partnerships for writing and solicit
ing, though not for issuing, insurance.
602 LIMITED PARTNERSHIPS (Ch. 11
surance. Other states allow a somewhat wider scope.**
Two states ** permit the formation of limited partnerships
for any lawful business except insurance, and twelve ** for
any business except banking and insurance. This was the
provision in the earliest American statutes on the subject.**
Other states '• expressly allow the formation of such part-
nerships for any business whatever, and several •• impliedly
do so, by imposing no restriction.
The attempted formation of a limited partnership for the
purpose of carrying on any business not authorized by stat-
ute, or the engaging in such unauthorized business at any
subsequent time, will render the special partners liable as
general partners.*^
•1 Mississippi: "Any mercantile, commercial, or manufacturing
business, or any work of improvement." Maryland: "Any mer-
cantile, mechanical, manufacturing or banking business." South
Oarolina: "Any mercantile, mechanical or manufacturing business,
or for transportation of passengers, products of the soil or mer-
chandise." Kentucky and PennsylTanla: "Any mercantile, agri-
cultural, mechanical or manufacturing business, or for the mining
and transportation of coal." Alaska : "Any mercantile, manufactur-
ing or mining business." Nevada: "Any mercantile, mechanical,
manufacturing or mining business." Ohio: Similar to Nevada, but
expressly excepts banking and Insurance. Tennessee: Similar to
Ohio, but adds the word "agricultural" to the list. Georgia : "Any
mercantile, commercial, mechanical, manufacturing, mining or agri-
cultural business." See references in note 20, above.
•2 Indiana and Massachusetts.
s* California, Connecticut, Idaho, Bilssouri, Montana, New Hamp-
shire, New Mexico, New York, North Dakota, South Dakota, Texas,
and Wyoming. New Mexico and Texas specify: "Any mercantile,
mechanical, manufacturing or other lawful business except bank-
ing and Insurance." See references in note 20, above.
s«New York: Laws 1822^ c. 244, § 2; Connecticut: Laws 1822,
c 21, § 1.
SB Alabama and Hawaii. The former mentions "mercantile, me-
chanical, manufacturing or any other lawful business."
*• Colorado, Illinois, Iowa, Louisiana, and Panama and Oanal
Zone. See references in note 20, above.
«7 McGehee v. Powell, 8 Ala. 827, where the parties attempted to
form a limited partnership to transact a banking business, and were
all held as general partners. •
Every one dealing with a limited partnership Is chargeable with
notice as to the scope and range of the business, as set forth in the
§ 208) XSTABUSHMENT OF THB BELATIOH 603
SAME— LOCATION OF BUSINESS
208. As the limitation on the liability of special partners
exists solely by statute, and as a limited ;>artner-
ship is not a legal entity, it is generally held that
such partnerships must carry on business in the
state where organized.
In most states •• a limited partnership may be organized
only for the transaction of business within the state. In
sixteen states ■• the statute says nothing on this point, and
there is apparently no such restriction. Under the law of
New Jersey, Pennyslvania, and some other states, "part-
nership associations," or "partnerships with limited liabil-
ity," may be organized to do business in any state or coun-
try; but these are really joint-stock associations, and not
within the scope of this chapter.
It is, however, the general rule, whether expressly so
stated in the statute or not, that as the limitation on the
liability of special partners exists solely by reason of the
statute, and as the limited partnership so formed is not a
legal person, as in the case of a corporation, it cannot be
formed in one state for the purpose of carrying on business
in another, but must carry on its business in the state in
articles, when the same have been filed and made public as required
by law. TAYLOR v. RASCH, 1 Flip. 385. Fed. Cas. No. 13.800. See
''Partnership,'* Dec. Dig. {Key Vo,) f§ 55i%, 362; Cent, Dig. $ 8^2.
s 8 Alabama, Arkansas, Colorado, Delaware, District of Columbia,
Georgia, Indiana, Iowa, Kansas, Maryland, Michigan, Minnesota,
Missouri, Nebraska, Nevada, New Jersey, New York, North Carolina.
Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah,
Vermont, Virginia, West Virginia, Wisconsin. In Illinois, Oregon,
Washington, and Alaska the provision is that limited partnerships
may be organized or formed within the state. See references in note
20, above. So in Laws N. Y. 1822, a 244, { 1, and in Rev. St
N. Y. 1820.
•0 California, Connecticut, Hawaii, Idaho, Kentucky, Louisiana,
Maine, Massachusetts^ Mississippi, Montana, New Hampshire, New
Mexico, North Dakota, South Dakota, Texas, and Wyoming. So,
also, in Panama and the Canal Zone, and under Laws Conn. 1822, a
21, S 1. See references in note 20, above.
604 LIHITBD PARTNERSHIPB (Ch. 11
which it is formed. There is, however, no objection to the
partnership doing business in other jurisdictions, and in
such cases it does not appear to be, necessary to file any ad-
ditional papers within those jurisdictions. Where the
business is so extended to other jurisdictions, the liability
of the special partner depends on the law of the jurisdic-
tion in which the partnership was organized ; *• but pro-
ceedings by or against it are governed by the law of the ju-
risdiction within which they are brought.**
SAME— MEMBERS— GENERAL AND SPECIAL
209. Limited partnerships must consist of both general and
special partners. Some statutes regulate the nimi-
ber of each.
By the statutes of almost all the states ** it is expressly
provided that the persons other than the general partners
shall contribute a part of the capital, that if the statute is
complied with they shall not be liable for the debts of the
partnership beyond the amount invested, and that they
shall have the title of special partners. In Louisiana, un-
der the rule of the civil law, a limited partnership is known
as a partnership in commendam, and the special partners
«o King y. Sarria, 69 N. Y. 24, 25 Am. Rep. 128; Jacquin v. Bnis-
son, 11 How. Prac (N. Y.) 385; Lawrence v. Batcheller, 131 Mass.
504; Richardson v. Carlton, 109 Iowa, 515, 80 N. W. 532; Barrows
V. Downs, 9 R. I. 446, 11 Am. Rep. 283. See **Partner$hip^*' Dec.
Dig. {Key No.) | 350; Cent. Dig. | 824.
41 EDWARDS V. WARREN UNOLINB & GASOLINE WORKS,
168 Mass. 564, 47 N. E. 502, 38 L. R. A. 791. See ''Partnership,**
Dec. Dig. {Key No.) §| 349, 350; Cent. Dig. | 824.
42 Alabama, Alaska, Arkansas, California, Colorado, Connecticut.
Delaware,- District of Columbia, Georgia, Hawaii, Idaho, Illiuois,
Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Mary hi ud.
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio, Pennsylvania, Rhode
Island, South Carolina, South Dakota, Tennessee, Texas, Utah.
Vermont. Virginia. West Virginia, Wisconsin, and Wyoming. See
reference In note 20, above.
§ 209) ESTABLISHMENT OF THE RELATION 605
are called "partners in commendam." *• In one territory **
it is expressly provided that limited partnerships may be
formed between corporations. In most states *' it is ex-
pressly declared that the general partners alone shall have
the power to make contracts and transact business. In
seven states *• no such restriction is expressly made. The
special partners in many states *^ are formally authorized
to examine into the affairs of the partnership, and to ad-
vise and consult with the other partners. Their other pow-
ers and limitations are noted in the subsequent sections.
Number of Special Partners
In two jurisdictions ** the number of special partners is
limited to six, but in the others *• there is no restriction.
4* So, also, in Panama and the Canal Zone. See referenceB in
note 20, above.
44 Hawaii. See references in note 20, above. In Colorado and
New Mexico, it is provided that a woman may be a special partner
with her hnsbaM or others.
4» Alabama, Arkansas, California, Colorado, District of Columbia,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentuclcy,
Louisiana, Maine, Maryland (unless the word "limited" used), Michi-
gan, Minnesota, Montana, Missouri, Nebraska, Nevada, New Hamp-
shire, New Jersey, New Mexico, New York, North Carolina, North
Dakota, Panama and the Canal Zone, Pennsylvania, Rhode Island,
South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia,
West Virginia, Wisconsin, and Wyoming. See references in note 20,
above. So, also, by Rev. St N. Y. 1829, vol. 1, pt 2, c. 4, tit 1, { 3,
the typical statute.
«• Alaska, Connecticut, Delaware, Georgia (unless general partners
are ill or absent, and he posts a notice showing who are general and
who are special partners), Massachusetts, Missouri, Nevada, and
Vermont See references in note 20, above.
«T Alabama, Arkansas, California, District of Columbia, Hawaii,
Idaho, Illinois, Indiana, Maryland, Michigan, Minnesota, Montana,
Nebraska, New Jersey, New Mexico, New York, North Carolina,
North Dakota, Pennsylvania,* South Carolina, South Dakota, Texas,
Utah, West Virginia, Wisconsin, and Wyoming. See references in
note 20, above.
4s Maryland and the District of Columbia. In Iowa a limited
partnership is to consist of *'one or more persons, to be known as
general partners, and a like number as special partners"; but this
probably does not mean that the number of general and special
partners must be the same. In Washington there must be at least
two general and at least two special partners.
4» UoUiday v. Union Bag & Paper Co., 3 Colo. 342. See **ParU
nership:' Dec. Dig, {Key No.) S 555.
606 LIMITED PABTNBBSHIP8 (Ch. 11
a
SAME— CONTRIBUTION TO CAPITAL— HOW
MADE
810. The contribution of the special partner must be actu-
ally paid in before the certificate is filed, and in
most states must consist of actual cash, though in
a few states it may consist of property, or of both.
A general partner need make no contribution to
the firm capital.
In most states "• a special partner's contribution to the
capital must be made "in cash," or "in actual cash pay-
ments," or "in actual money," or "actually and in good
faith paid in lawful money of the United States." In twelve
states '^ it may be made in cash or property. In a few ju-
risdictions •* the statute is not specific on this point.
BO Laws N. Y. 1822, c. 244, | 8 ; Laws Conn. 1822, c. 21, | 4 ; Rev. St
N. T. 1829, vol. 1, pt 2, c. 4, tit 1, f 2. Alabama, Alaska, Arkansas,
California, Connecticut, Delaware, District of Columbia, Georgia,
Hawaii, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minne-
sota, Missouri, Montana, Nevada, New Hampshire, New Mexico, New
York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania,
South Carolina, South Dakota, Tennessee, Texas, Vermont, Wash-
ington, West Virginia, Wisconsin, and Wyoming. See references in
note 20, above.
SI Colorado, Illinois, Indiana, Kansas, Louisiana, Michigan, Mis-
sissippi, Nebraska, New Jersey, Rhode Island, Utah, and Virginia.
See references in note 20, above. In Colorado, Illinois, Kansas,
Michigan, Mississippi, Rhode Island, and Virginia it may be in prop-
erty "at cash value." In Indiana it may be in **cash, goods, mer-
chandise, accounts, or bills receivable'*; in Nebraska, "in actual
cash payments, or in goods, wares, merchandise, machinery and fix-
tures'* ; in New Jersey, '*in any goods, wares or merchandise of the
kind in which the said partnership intend to deal, * * * at a
fair bona fide valuation"; in Utah, "in actual cash payments, or In
real or personal property, or both." In Colorado, Indiana, New
Jersey, Rhode Island, and Virginia, the property must be described
in the certificate.
Bs Connecticut, Idaho, and Panama and the Canal Zone. In Con-
necticut the special partners are described as "furnishing capital to
the partnership stock." No affidavit of payment is required. In
Idaho the certificate must show that the sums contributed by the
special partners "have been actually and in good faith paid."
§ 210) BSTABLISHMKIYT OF THB BELATIOK 607
Where the statute states that the contribution must be
made in cash, the courts are very strict in construing this
requirement literally, and payment in bonds,"* notes,'* or
uncertified checks •'is not sufficient.
' The New York courts have however, shown a tendency
to modify the rule in regard to checks, and in a later case '•
it has there been held that where the money is actually in
the Bank at the time the check is given, and is cashed or
certified the next day, this is sufficient compliance with the
statute.
It should be noted that in dealing with the question of
the sufficiency of the cash contribution it is immaterial
whether creditors have been misled or not. If the form of
contribution is insufficient to satisfy the statute, all are lia-
ble as general partners.*'
Increase of Capital
Provisions' for increase of capital are found in a few
states. In Indiana this may be done by taking in new spe-
cial or general partners, or by the partners making new
subscriptions. All must consent A certificate should be
filed and recorded, but failure to do so will not dissolve the
firm or increase the special partner's liability.
In New York a special partner may increase his contri-
bution of capital. A certificate must be filed, signed by all
the general partners, verified by one. In Pennsylvania the
provision is substantially similar to the Indiana statute.'®
»» Haggerty v. Foster, 108 Mass. 17. See '* Partnership,'* Dec Dig.
(Key No.) | S55; Cent, Dig. If 829^SS.
•* PIERCE V. BRYANT, 5 AUen (Mass.) 91. See '^Partnership;'
Dec. Dig. {Key No.) § S55; Cent. Dig. | 8S1.
»» EHirant v. Abendroth, 60 N. Y. 148, 25 Am. Rep. 15& See "Part-
nership," Dec. Dig. (Key No.) S 955; Cent. Dig. | 8S0.
»• WHITE v. EISEMAN, 134 N. Y. 101, 31 N. B. 276. See "Part-
nership;* Cent. Dig. § 834-
sTDurant v. Abendroth, 69 N. Y. 148, 25 Am. Rep. 158; Maloney
V. Bruce. 94 Pa. 249; Eliot v. Hlmrod, 108 Pa. 569; Sheble v.
Strong, 128 Pa. 315, 18 AU. 397 ; Gearing v. Carroll, 151 Pa. 79, 24
Atl. 1045. See ^^Partnership;* Dec. Dig, {Key No.) % S55; Cent. Dig.
n 829-8SS.
8s See references in note 20, aboyeu
908 UMITBD PABTNBB8HIP8 (Ch. 11
SAME— CERTIFICATE
211. Persons forming a limited partnership must make and
severally sign a certificate containing a statement
of all the facts required by the statute.
In all the states in which limited partnerships are pro-
vided for by statute, the members are required to sign and
file a certificate. In a few states this is called by a different
name.** This certificate in nearly all the states must con-
tain (1)- the firm name (sometimes called the "firm") un-
der which the partnership is to do business ; •• (2) the gen-
eral nature of the business to be transacted ; •* (3) the
names and residences of all the partners, stating which are
general and which are special partners ; •' (4) the amount
•• Miissouri : "A written statement'' Virginia and West Virginia:
"A paper." In Ix)iiislana and Mississippi the articles of partnership
are to be filed. See references in note 20, above.
«o Laws N. Y. 1822. e. 244, | 6; Laws Conn, 1822, c 21, | 3; Rev.
St N. Y. 1829. Alabama, Alaska, Arkansas, California, Colorado,
Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massa-
chusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania,
Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and
Wyoming. See references in note 20, above.
•1 Rev. St N. Y. 1829. Alabama, Alaska, Arkansas, California,
Colorado, Delaware, District of Columbia, Georgia, HawaU, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massa-
chusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania,
Elhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and
Wyoming. See references In note 20, above.
62 Rev. St N. Y. 1829; Laws N. Y. 1822, c. 244, H e, 7; Laws
Conn. 1822, c 21, $ 3. Alabama, Alaska, Arkansas, California, Colo-
rado, Connecticut, Delaware, District of Columbia, Georgia, Hawaii,
Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana.
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New
§ 211) ESTABLISHMENT OF THE RELATION 609
of capital contributed by each of the special partners ; ••
and (6) the dates (frequently miscalled the "period") at
which the partnership shall begin and end.** In five
states •* the place of business of the partnership must be
stated in the certificate; and other special provisions are
found in a few jurisdictions.**
York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania,
Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and
Wyoming. See references in note 20, above. In Alaska, Delawalre,
Maine, Oregon, and Washington there is no provision expressly re-
quiring the certificate to distinguish between the general and special
partners ; and so under Laws Conn. 1822, c. 1, 1 3.
•8 Rev. St N. Y. 1829; Laws N. Y. 1822; Laws Conn, 1822. Ala-
bama, Alaska, Arkansas, California, Colorado, Connecticut, Dela-
ware, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Louisiana (the amount furnished, or agreed to be
furnished, by each partner in commendam), Maine, Maryland,
Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana,
Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania,
Rhode Island, South Carolina, South Dakota, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and
Wyoming. See references in note 20, above. In Tennessee the pro-
vision is not limited to the capital contributed by the special part-
ners. In Kentucky this provision is omitted. In Pennsylvania the
amount contributed by each special partner must be stated in the
certificate, but only the aggregate amount of the special partners'
contributions must be published.
•« Rev. St N. Y. 1829; Laws N. Y. 1822; Laws Conn. 1822. Ala-
bama, Alaska, Arkansas, California, Colorado, Connecticut, Dela-
ware, District of Columbia, Georgia, Hawaii, Idaho, Illinois, Indi-
ana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New York, North Carolina,
North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South
Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Wash-
ington, West Virginia, Wisconsin, and Wyoming. In Kentucky, Mis-
souri, and Virginia the "duration" of the partnership is to be stated.
See references in note 20, above.
«8 Colorado, Hawaii, Kentucky, Virginia, and West Virginia. See
references in note 20, above.
•« New York : Whether the various partners are of full age.
Connecticut: The amount of capital already paid In. Virginia:
That the death of a special partner shall effect a dissolution, if the
partners desire so to provide. Illinois: Any special agreement as
Gil. Part. — 89
610 LIMITED PARTNERSHIPS (Ch. 11
There does not, however, seem to be any requirement
that the certificate shall contain all the details of the part-
nership agreement, and there is nothing to prevent a spe-
cial partner from agreeing with the other partners for an
extension of his liability.*^ In five of the states which per-
mit the capital contributed by the special partners to con-
sist of property other than money •■ the property must be
described in the certificate.
Signing and Acknowledging
In all the states that have statutes on the subject of lim-
ited partnership, the certificate must be signed by all the
partners, and in two •• it must be witnessed. In one of the
earliest statutes ^* the certificate must be sworn to before
a judge; but this provision has been generally replaced by
a requirement that the certificate shall be acknowledged by
all the signers/^ In most states the acknowledgment is to
to the terms of dissolution, or that dissolution shall not be caused
by the death of a partner. Louisiana : The proportion of profits or
losses to be borne by the partners In commendam. In the earliest
American statutes (Laws N. Y. 1822 and Laws Ck>nn. 1822) it was
required that the certificate should state which of the general part-
ners were authorized to transact the firm's business. So still, in
Connecticut ; the partnership is liable only for the acts of these part-
ners. In the District of Columbia, if the certificate is signed by an
attorney in fact, the power of attorney must be recorded.
•T METROPOLITAN NAT. BANK of NEW YORK v. SIRRBT, 97
N. Y. 320, 831. See **P(irtner8hip," Dec. Dig. {Key No.) I S52; Cent.
Dig. I 8Z6.
«s Colorado, Indiana, New Jersey, Rhode Island, and Virginia.
See references in note 20, above.
«0 Louisiana (one witness) and South Carolina (two). See ref-
erences in note 20, above.
TO Laws Conn. 1822, c. 21, { 4.
Ti Alaska, Arkansas, Colorado, Connecticut, Hawaii, Idaho, Illi-
nois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Mich-
igan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hamp-
shire, New Mexico, New York, North Dakota, Pennsylvania, Rhode
Island, South Carolina ("proved"). South Dakota, Texas, Utah, Ver-
mont, Washington, Wisconsin, and Wyoming. In Minnesota and
North Carolina the statute is indefinite as to the number of signers
who must acknowledge it, and in Mississippi and Tennessee it is to
be acknowledged like a conveyance of land. See references in note
20, above.
§ 211) ESTABUSHMENT OF THE BELATIOK 611
be before a justice of the peace/* or a person authorized
to. take acknowledgments of deeds ; ^* but in a number of
states there are various provisions, for acknowledgment
before particular officers.^*
The certificate as a general rule speaks from the time it
is filed, and it is sufficient if the statements made are true
at that time;'* but it has occasionally been decided that
the certificate speaks from the time it is made.''* Any false-
hood in the certificate will impose general liability on all
the partners, and as the purpose of the certificate is the
protection of those dealing with the firm it is immaterial
whether the falsehood was intentional or unintentional.^^
72 Delaware, Indiana, Maine, Massachusetts, New Hampshire, and
Vermont See references in note 20, above.
78 Alaska, Arkansas, California, Ck>lorado, Gonneoticut, Hawaii,
Idaho, IlUnois, Iowa, Kansas, Maryland, Michigan, Minnesota (ap-
parently), Montana, Nebraska, Nevada, North Dakota, Ohio, Oregon,
Pennsylvania, South Dakota, Tennessee (in substance), Utah, Wash-
ington, and Wyoming. In New Mexico it is to be acknowledged be-
fore any person authorized to take acknowledgments for record;
in Texas, like a deed; and in South Carolina, to be ''proved the
same as deeds are proved." In West Virginia it is to be acknowl-
edged lijce a power of attorney. See references in note 20, above.
74 In Alabama, before a judge of the Supreme Court or circuit
court or a judge of probate; in Georgia, before a judge of the
superior court, ordinary, justice of the peace, or notary public; in
Kentucky, before a clerk of any county court where the partnership
has a place of business; in Arkansas, before a judge or justice of
the peace; in the District of Columbia, before a judge of any
court or a notary ; in Nebraska and Utah, before a notary public or
other person authorized to take acknowledgments of deeds; in
Rhode Island, before a justice or notary ; in Louisiana, before a re-
corder, notary, or person authorized to make the record, or on
proof by a subscribing witness instead of acknowledgments. In
Missouri, New York, and Wisconsin the statutes on limited part-
nership do not specify the officer by whom the acknowledgment is to
be taken. Under Laws N. Y. 1822, c. 244, f 12, and Rev. St N. Y.
1829, the acknowledgment was to be before the chancellor, a justice
of the Supreme Court or circuit judge, or a judge of any county
court. See references in note 20, above.
T 5 WHITE V. EISBMAN, 134 N. Y. 101, 31 N. E. 276. 8ee ''ParU
nersUp;' D€C. Dig, {Key No,) S S56; Cent, Dig, f$ 826, 8S4.
T6 Vernon v. Brunson, 54 N. J. Law, 586, 25 Atl. 511. See **Part-
nership," Dec. Dig. (Key No,) f S52; Cent. Dig. { 826.
T7 Haggerty v^ Foster, 103 Mass. 17, 20; Van Ingen v. Whitman,
612 LIMITED PARTNERSHIPS (Ql. U
SAME— RECORDING
212. The certificate must be recorded in the county where
the partnership has its principal place of business,
and a copy in every county where it has a regular
place of business, and must remain on file.^*
In most states ^* the certificate must be recorded with
the county clerk of the county where the partnership has
its principal place of business, or with the county record-
er,*® or register of deeds,** while in other states there are
other varying provisions.** In some states the certificate
62 N. T. 513. See ^^Partnership,*' Dec Dig. {Key No.) i| S55, S62;
Cent. Dig. §S 829, 842.
T«Hfflikel V. Hey man, 91 111. 9a See **Partner8hiPt" Dec Dig.
{Key yo.) i S57; Cent. Dig. S 8S5.
T» California (also with county recorder), Colorado, UUnois, Kan-
sas, Michigan, Missouri, Montana, Nebraska, New Jersey, New York,
North Dakota (also with clerk of district court), Oregon, Texas,
and Wyoming (also with register of deeds). So, also, by Laws N.
Y. 1822, c 244. { 6 ; Rev. St. N. Y. 1829. See references in note 20,
above.
<o California (also with county clerk), Delaware, Idaho, Indiana,
Missouri, Nevada, New Mexico, Ohio, Pennsylvania, and Utah. See
references in note 20. above.
81 Maine, Minnesota, North Carolina, North Dakota (also with
clerk of district court). South Dakota (also with clerk of circuit
court), and Wyoming (also with county clerk). See references in
note 20, above.
8s In Kentucky and South Carolina, with the clerk of the county
court, and so in West Virginia, in each county where the firm does
business; in Arkansas, Maryland (with special provisions for Bal-
timore), South Dakota (also with register of deeds), and Wisconsin,
with the clerk of the circuit court; in Georgia, with the clerk of
the superior court; in the District of Columbia, with the derk of
the Supreme Court of the District; in Iowa and North Dakota
(also with register of deeds), with the clerk of the district court
for the county; in Mississippi, to be filed with the clerk of the
chancery court, and recorded in the record of deeds of land; in
Alabama, in the office of the Judge of probate ; in Washington, with
the county auditor; in Alaska, with the recorder of the precinct;
in Louisiana, with the officer authorized to record mortgages; in
Massachusetts, with the secretary of the commonwealth; in Ha-
waii, with "the treasurer"; and in Connecticut, New Hampshire,
§ 213) ESTABLISHMENT OF THE RELATION 613
IS to be recorded "at length," •» or "at large."** In one
state •* a certified copy of the certificate is to be prima facie
evidence of the matters recited therein; and this would
seem to be the rule even where the statute is silent.*' In
seven states " the original certificate, and in most states *•
a transcript or certified copy of it, is to be recorded in each
county where the partnership maintains a place of business.
SAME— PUBLICATION
213. A copy of the certificate must be published as required
by statute.
Publication of the certificate is always essential,** and in
nearly all of the states it must be published in one •• or
Rhode Island, and Vermont, with the town clerk. See refer^ices In
note 20, above.
at Kansas and Michigan. See references in note 20, above.
84 Rev. St N. T. 1829. Arkansas, Colorado, District of Columbia,
Georgia, Illinois, Maryland, New Jersey, New Mexico, Pennsylvania,
South Carolina, Tennessee, and Texas. See references in note 20,
above.
•B Connecticut See references in note 20, above.
8« Hogg V. Orgill, 34 Pa. 350. But see, also, Madison County
Bank v. Gould, 5 HMl (N. Y.) 309. See '^Partnership*' Deo. Dig,
{Key No,) f 557; Cent. Dig, § 8S5.
8T Delaware, Maine, Mississippi (the articles of partnership),
Ohio, Texas, Virginia, and West Virginia. See references in note
20, above.
88 Rev. St. N. T. 1829. Alabama, Arkansas, California, Colorado,
Connecticut (in towns), Georgia, Idaho, Illinois, Indiana, Iowa, Kan-
sas, Louisiana (if a commercial partnership), Maryland, Michigan,
Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, New
Mexico, New Tork, North Carolina, North Dakota (filed in the clerk's
office and recorded in the registry of deeds), Pennsylvania, Rhode
Island (in towns), South Carolina, South Dakota, Tennessee, Utah,
Vermont (in towns), Wisconsin, and Wyoming. Under Laws N. Y.
1822, c. 244, I 6, simply the name of the firm was to be registered
in each county.
«• Haddock v. Grinnell Mfg. Corp., 109 Pa. 880, 1 Atl. 174; Davis
V. Sanderlin, 119 N. C. 84, 25 S. E. 815; Ussery v. Crusman (Tenn.
Ch. App.) 47 S. W. 567. See *' Partnership," Dec. Dig. (Key No.)
f S57; Cent. Dig. § 8S5,
•0 Alask'a. Arkansas, California, Colorado, Connecticut Delaware,
•1 See note 91 on following page.
C14 LIMITED PABTNBRSHIP8 (Ch. 11
two '^ newspapers. The publication is to be. beg^n immedi-
ately after the certificate is recorded,^* or within- a week,*' or
twenty days,** or one month,"" or two months,** and is to
continue once a week for three *' or four *• or six ** weeks.
The papers in which the certificate or its terms are to be
thus published are in several states required to be papers
published in the county where the partnership has its prin-
cipal place of business, or, if none is published in that
county, in the county nearest thereto.* Other provisions for
Idaho, Indiana, Kansas, Maine, Massachusetts, Minnesota (appa-
rently), North Carolina, North Dakota, Ohio, Oregon, South Caro-
lina, Utah, Vermont, Virginia, Washington, West Virginia, and Wy-
oming. See references in note 20, above.
•1 Laws N. T. 1S22, c. 244, § 14 ; Laws Conn. 1822, c. 21, J 7 ; Rev.
St N. Y. 1829. Alabama, District of Columbia, Georgia (if two in
county, otherwise in one; if one, in the one in which the sheriff
advertises), Hawaii, Iowa, Maryland, Michigan, Nebraska, New
York, Pennsylvania, Rhode Island, and Wisconsin. See references
in note 20, above. In Mississippi, publication is not required.
»2 Alabama, Alaska, Colorado, District of Columbia, Georgia (un-
less made within two months, the partnership is to be treated as
general), Illinois, Indiana, Maryland, Massachusetts, Michigan,
Minnesota, Nebraska, Nevada, New York, North Carolina, Ohio,
Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, and
Virginia. See references in note 20, above.
•s California, Hawaii, Montana, North Dakota, South Dakota, and
Wyoming. See references in note 20, above.
»* Maine.
•0 Idaho.
•• See note 92, above, as to Georgia. In Connecticut and Dela-
ware there is no provision on this subject
97 Nevada and New Hampshire. See references in note 20, above.
9B Alaska, California, Colorado, District of Columbia (three times
a week), Hawaii, Idaho, Kansas, Kentucky, Minnesota, Missouri,
Montana, North Dakota, Oregon, South Dakota, Utah, Virginia,
Washington, and Wyoming. See references in note 20, above.
••Laws N. Y. 1822, c 244, f 14; Laws Conn, 1822, c. 21, J 7;
Rev. St. N. Y. 1829. Alabama, Arkansas, Connecticut (twice a
week), Georgia, Illinois, Indiana, Iowa, Maine, Maryland, Massa-
chusetts, Michigan, Nebraska, New Jersey, New York, North Caro-
lina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee,
Texas, Vermont, West Virginia, and Wisconsin. See references in
note 20, above.
1 Colorado, Georgia, Idaho, Illinois, Indiana, Montana, Nevada,
and New Jersey. In California, North and South Dakota, and
\
§ 213) ESTABLISHMENT OF THE RELATION 615
designating the paper or papers are referred to in the note
below.* In twenty-eight states "proof of publication," •
Wyoming, If no newspaper Is published in the county, the publica-
tion is to be made in the nearest paper published within the state;
in Maine, Ohio, South Carolina, and Vermont, in a paper published
in an adjacent county; in Ohio, the newspaper, if published in an
adjacent county, must be of general circulation in the county where
the partnership has its principal place of business, and publication
must also be made in every county where it has a place of business ;
in South Carolina, notice must also be posted on the courthouse
door. See references in note 20, p. 597, above.
2 Iowa: Newspaper designated by clerk of court where filed, pub-
lication in the senatorial district Alabama: Two papers desig-
nated by the judge of probate. Pennsylvania: Designated by the
recorder of deeds — shall be the legal journal of the county, if any.
Tennessee: Designated by the register of deeds. Utah: By the
county recorder. District of Columbia: Two designated by the
clerk of the Supreme Court of the District Arkansas: One desig-
nated by the clerk of the circuit court Texas: By the county clerk.
Nebraska: Two published in county where registered, designated by
county clerk ; i$ none in county, then published in judicial district
where business is conducted. New York : Two designated by coun-
ty clerk, one in city or town where principal place of business is, or,
if none there, then in the nearest county paper. Wisconsin: Two
designated by clerk of circuit court for county where registered, and
published within the judicial circuit Delaware and Rhode Island:
In any paper published in the state. Kansas: In the county where
the certificate is recorded, or in any paper of general circulation
therein. Kentucky and Missouri: In a paper published in each place
where the firm has a place of business, or, if none published there,
then in the nearest paper. Hawaii: In two papers- published in
Honolulu in English. Alaska: One published in precinct where
the firm does business, or if none, then in a paper of general
circulation there. Ohio and Washington: One paper in county
where the firm does business, or, if none, then in any paper of gen-
eral circulation there (in Washington must be a weekly). Virginia
and West Virginia: In each county where the firm does business.
Virginia : If none, must post four weeks on courthouse door. Mas-
sachusetts: In county where the firm has principal place of busi-
ness, or, if none, then in Boston. California and Connecticut: In
county where the certificate is recorded. North Carolina: "In the
same county, or near the place of said partnership business." Utah :
In each county where the certificate is recorded, or, if none pub-
lished there, then within judicial district. See references in note
20, p. 597, above. Under Laws N. Y. 1822, c. 244, { 14, and Laws
t Minnesota.
616 LIMITBD PARTNERSHIPS (Ch. 11
or an affidavit of publication filed by the printer,* proprie-
tor/ publisher,' or editor,^ or by one of the editors or pub-
lishers,* or by the printer or publisher,* or by the printers,
publishers, or editors,*® or by the printer, publisher, or chief
clerk,** or by the printer, publisher, or foreman,** or by the
printers or some one in their employ knowing of the publi-
cation,** may be filed,** and shall be evidence,** or prima
facie or presumptive evidence,** of the facts stated. The
notice published must agree with the certificate in every
substantial point,*^ but a variance which is not material,
such as a slight inaccuracy in the spelling of a name, will
not be fatal,** and if the variance is in the date for the
Gonn. 1822, c. 21, § 7, publication was to be made in any two pa-
pers published in the senate district Rey. St N. T. 1829, provided
that they should be designated by the county derk or clerk of court
4 Alabama, Arkansas, New Hampshire, Pennsylvania, and South
Carolina. Rev. St N. Y. 1829. See references in note 20, p. 597,
above.
» North Carolina. >
• Iowa and Texaa
7 Maryland.
8 District of Columbia.
• Hawaii, Illinois, and New York. See references in note 20, p.
597, . above.
10 Georgia and Tennessee.
11 California, Idaho, Montana, North and South Dakota, and
Wyoming.
12 Nebraska, Utah, and Wisconsin.
IS Kansas and Michigan.
i«In Massachusetts and New York, it must be filed; in Massa-
chusetts, it must be made by one of the partners, and filed and re-
corded within sixty days after recording the certificate. See refer-
ences in note 20, p. 597, above.
IS Alaska, Arkansas, Georgia, Illinois, ' Kansas, Maryland, Mich-
igan, Nebraska, New Hampshire, Pennsylvania, South Carolina, Ten-
nessee, Texas, Utah, Wisconsin, and Wyoming. See references in
note 20, p. 597, above. So in Rev. St N. Y. 1829.
IS California, District of Columbia, Hawaii, Idaho, Iowa, Mon-
tana, North Dakota, and South Dakota. See references in note 20,
p. 597, above.
IT Manhattan Co. v. Phillips, 109 N. Y. 883, 17 N. B. 129; Smith
V. Argall, 6 Hill (N. Y.) 479. See ''Partnership^ Deo, Dig. (Key No,)
i S57; Cent Dig. S 8S5.
IB Smith V. Argall, 6 Hill (N. Y.) 479. See ''ParPnerthip;' Dec.
Dig. (Key No,) S S57; Cent. Dig. % 835.
8 214) ESTABLISHMENT OF THE REI4ATIOK 617
commencement of the partnership, it will not affect the lia-
bility of the special partner on contracts made later than
either date mentioned;** but any variance will be sufEc-
ient to impose general liability on all the partners, if any
person dealing with the firm has been misled by it, and this
is a question of fact for the jury.**
SAME— AFFIDAVIT OF PAYMENT OF CAPITAL
214. In the same office where the original certificate is filed
there must also, in most states, be filed an affida-
vit of one or more of the general partners, stating
that the sums specified in the certificate to have
been paid in by the special partners have been ac*
tually and in good faith paid in cash.
In most states an affidavit must be filed, made by one or
more of the general partners,** and in some states by one
or more of the special partners,** or by all the partners,**
in the same office where the original certificate was filed,**
!• Levy V. Lock, 47 How. Prac. (N. Y.) 394; Madison County Bank
y. Gould, 5 Hill (N. Y.) 309. See ''Partnership;' Dec. Dig, {Key No.)
S S57; Cent. Dig. § 835.
«o Bowen v. Argall, 24 Wend. (N. Y.) 496. See "Partnership,*' Dec,
Dig, (Key No,) $ 575; Cent. Dig. S 859.
SI Alabama, District of Golambia, IIlinolB, Iowa, Kansas, Ken-
tucky, Maryland, Michigan, Minnesota, Mississippi, Missouri, Ne-
braska, New Hampshire, New Jersey, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia,
West Virginia, and Wisconsin. So under Laws Conn. 1822, c. 21,
f 4 ; Laws N. Y. 1822^ c. 244, f 8 ; Rev. St. N. Y. 1829. In Arkan-
sas, the affidavit is to be made by one of the general partners. See
references in note 20, p. 597, above.
2s Colorado and New Mexico.
ss California, Georgia, Hawaii, Idaho, Montana, North and South
Dakota, and Wyoming. See references in note 20, p. 597, above.
24 Alaska, Arkansas, California, District of Columbia, Hawaii,
Idaho, Illinois, Kansas, Maryland, Michigan, Minnesota, Mississippi,
Montana, Nebraska, New Hampshire, New Jersey, New Mexico,
North Carolina, North Dakota, Pennsylvania, South Carolina, South
Dakota, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia,
618 LIMITED PARTNERSHIPS (Ch. 11
stating that the sums stated in the certificate to have been
contributed by each special partner have been actually and
in good faith paid in cash (or, in states where the contribu-
tion may be made in property, in cash or property at a fair
cash valuation), or as specified in the certificate.'* In one
state ^® a certified copy of the affidavit is made prima facie
evidence ; but this provision seems of no advantage.
SAMEi— FAILURE TO FILE CERTIFICATE
215. Until the certificate is filed and recorded,*^ and in
most states until the affidavit is also filed,'* the
limited partnership is not to be considered as or-
ganized.'*
Wisconsin, and Wyoming. See reference in note 20, p. 597, above.
In Mississippi, it is to be recorded as part of the articles of the part-
nership; in Virginia and West Virginia, it constitates part of the
certificate ; in New Mexico and New York, it must be filed in each
county ; in Iowa, it must be attached to the certificate ; in Missouri,
it must be filed with the county recorder.
2 0 Rev. St N. T. 1829; Alabama, Arkansas, California, Colorado,
District of Columbia, Georgia, Hawaii, Idaho, Illinois, Iowa, Kan-
sas, Maryland, Michigan, Minnesota, Mississippi, Missouri, Mon-
tana, Nebraska, New Hampshire, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Pennsylvania, South Carolina,
South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and
Wyoming. In Kentucky, the affidavit must verify Vie statemoit in
the certificate; in Mississippi, it must describe the property. See
references in note 20, p. 597, above.
2« Georgia.
2 r Alaska, Connecticut, Maine, Ohio, Oregon, Virginia C*and ad-
mitted to record as of each person signing*')* Washington, and West
Virginia (and published). See references in note 20, p. 597,. above.
28 Rev. St N. Y. 1829. Alabama, Arkansas, California, Colorado,
District of Columbia, Georgia, Hawaii, Idaho, Illinois, Kansas, Ken-
tucky, Maryland, Michigan, Minnesota, Mississippi, Missouri, Mon-
tana, Nebraska, Nevada, New Jersey, North Carolina, New Mexico,
North Dakota, Pennsylvania, South Carolina, South Dakota, Ten-
nessee, Texas, Utah, Wisconsin, and Wyoming. See references in
note 20, p. 597, above.
s»And in Connecticut and Maine it is expressly provided that
the special partners shall be liable meanwhile as general partners.
§ 216) E8TABLISHMBNT OF THE RELATION 619
If any false statement is made in the certificate *• (or, in
most states, in either the certificate or the affidavit),"^ all
of the partners are liable as general partners, and the subse-
quent performance of an act stated to have been already
performed will not cure the defect.**
In two states •• all persons interested are liable on all
firm contracts or engagements. In four states •* an excep-
tion is made in case of an unintentional false statement,
which makes the special partner liable as a general partner
only to such firm creditors as are actually misled. In six
states •• a method of protection against honest mistakes is
provided. Where there was an effort in good faith to form
a limited partnership and the person dealing with the firm
has received a memorandum showing that the partnership
is special, and who are the special partners, the latter dn
not become liable to him as general partners.**
•0 Idaho, Indiana, Massachusetts, Nevada, New Hampshire, North
Dakota, Rhode Island, and Vermont See references in note 20, p.
697, above.
SI Alabama, Alaska, Arkansas, California, Ck>lorado, Connecticut,
District of Columbia (if not the result of accident or mistake), Geor-
gia, Hawaii, Illinois, Kansas (all partners making or consenting to
it liable as general partners), Kentucky (if any part false), Maine (to
persons misled), Maryland, Massachusetts, Michigan, Maine, Mis-
sissippi (except to each other), Missouri (and also for perjury if
affidavit false), Montana (if wilful), Nebraska, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oregon, Pennsylvania,
South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia,
Washington, West Virginia, and Wyoming. So, also, under Laws
N. T. 1822, c. 244, § 8; Laws Conn. 1822, c. 21, { 4; Rev. St N. T.
1829. See references in note 20, p. 597,. above.
82 MYERS V. EDISON GENERAL ELECTRIC CO., 59 N. J. Law,
153, 35 Atl. 1069; Durant v. Abendroth, 69 N. Y. 148, 25 Am. Rep.
158. See ^^Partnership,'* Deo, Dig. (Key No.) S S56; Cent. Dig. { 8S4.
ss Iowa and Wisconsin.
S4 (California, Hawaii, Idaho, and Maine.
SB California, Idaho, Montana, North and South Dakota, and Wy-
oming. See references in note 20, p. 597, above.
•• By Laws N. Y. 1822, c. 244, S 8, and Laws Conn. 1822, c. 21,
f 4, it was expressly provided that persons guilty of false swearing
should be guilty of perjury. This has been left to be inferred from
the general criminal code in most later statutes. See note 31, above.
620 UlUTBD PABTNBBSHIPS (Ch. 11
DURATION— CONTINUANCE OR RENEWAL
216. A limited partnership commences and ends at the
dates named in the certificate. It may be renewed
for an additional term in substantially the same
manner as it was originally constituted.
A limited partnership begins and ends at the dates named
in the certificate, and in all transactions made either be-
fore the date specified for the commencement or after the
date specified for the ending the liability of all of the part-
ners is general ; *' but such general liability for acts done
prior to the formal commencement of the limited partner-
ship will not increase the liability of the special partners on
transactions after that date.** Every renewal or continu-
ance of a limited partnership must be certified,** acknowl-
edged,** or ''verified," or "sworn to," ** and recorded,** and
•T SARMIBNTO v. THE CATHERINE C, 110 Mich. 120, 67 N.
W. 1085. See ** Partnership," Dec Dig, (Key No,) K S60, S61; Cent,
Dig, %% 8S7, 8S8,
ts l^chomette t. Thomas, 6 Rob. (La.) 172. See **Partner9hip,"
Dec, Dig. (Key No,) {S S59, 361, S62; Cent, Dig, If 857, 8S8, 8^2,
s» Alabama, Alaska, Arkansas, California, Connecticat, Delaware,
District of Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kan-
sas, Kentucky, Maine, Maryland, Massachusetts (need certify only
that at the time of the renewal the amount contributed by each spe-
cial partner and the whole capital equals or exceeds the amount
originally contributed), Michigan, Minnesota, Mississippi (partner-
ship articles instead of a certificate), Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New Mexico, New Tork.
North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode
Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Ver-
mont, Virginia, Washington, West Virginia, Wisconsin, and Wy-
oming. So, also, under Rev. St N. Y. 1829. See references in note
20, p. 597, above.
«o Alabama, Alaska, Arkansas, California, Delaware^ District of
Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Maine,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebras
ka, Nevada, New Hampshire, New Jersey, New Mexico, New Tork,
41 Connecticut (must state certain facts), Montana, North and
South Dakota, Virginia, and Wyoming.
«s See note 42 on following page.
§ 216) DURATION — CONTINUANOE OB RENEWAL 621
in most states an affidavit of a general partner made and
filed,** and publication made or notice given as required
upon the filing of the original certificate.** The efficacy of
notice by newspaper publication is less an article of faith
among lawyers to-day than ninety years ago; and it may
be doubted whether the requirement of a new publication
should be necessary if a new certificate is filed and indexed
or recorded, with an affidavit that the capital has not been
reduced since the original certificate was made.
If the statutory requirements are not complied with, the
partnership becomes general.*" There are a few special
provisions on this subject in various states.**
North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South
Carolina ("proved"), Tennessee ("proved"), Texas, Utah, Vermont,
Washington, and Wisconsin. So, also, under Rev. St N. Y. 1829.
See references in note 20, p. 597, above.
«s Alabama, Alaska, Arkansas, California, Delaware, District of
Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,
Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi,
Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jer-
sey, New Mexico, New York, North Carolina, North Dakota, Ohio,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota,
Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Vir-
ginia, Wisconsin, and Wyoming. So, also, under Rev. St. N. Y. 1829.
See references in note 20, p. 597, above.
48 Alabama, Alaska, District of Columbia, (Georgia, Illinois, Iowa,
Kansas, Maryland, Massachusetts (only that a hew certificate has
been published ; this affidavit may be made by any partner), Michi-
gan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New
Mexico, New York, North Carolina, Pennsylvania, South Carolina.
Tennessee, Texas, Utah, and Wisconsin. See references in note 20.
p. 697, above. So, also, under Rev. St N. Y. 1829.
«« Alabama, Alaska, Arkansas, California, Delaware, District of
Columbia, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Ken-
tucky, Maine, Maryland, Michigan, Minnesota, Missouri, Montana,
Nebraska, Nevada. New Hampshire, New Jersey, New York, North
Carolina, North Dakota, Oregon, Pennsylvania, South Carolina,
South Dakota, Texas, Utah, Vermont, Virginia, Washington, West
Virginia, Wisconsin, and Wyoming. So, also, under Rev. St. N. Y.
1829. In Connecticut the publication is to be made once a week
for two weeks. See references in note 20, p. 597, above.
4 ft In Connecticut there is no express provision to this effect
«• In New Hampshire the renewal must be within thirty days
after the expiration of the old partnership. In Virginia and West
Virginia, if the capital is not altered, the certificate may state sim-
622 LIMITED PARTNERSHIPS (Ch. 11
There is a conflict of opinion as to whether or not a legal
renewal may be made if the capital of the special partner
has become impaired. Some courts hold that the renewal
certificate must state that the contribution of the special
partner remains unimpaired,*^ and others that the state-
ment refers only to the amount of the original contribu-
tion ; *' and this latter view seems more sound, for, as there
is no change in the partnership, except in duration, the spe-
cial partner should not assume any additional liability, and
in a going business it might well prove practically im-
possible to swear positively whether the original contribu-
tion was impaired or not.
EFFECT OF ALTERATION
217. The statutes of most states provide that any alteration
in any of the matters stated in the certificate shall
be deemed a dissolution of the partnership, and
that if such partnership is carried on after such al-
teration it shall be deemed a general partnership.
If there is a change in the names of partners or of the
firm, in the nature of the business, the capital or the shares
thereof, or in any other matter required to be set forth in
the original certificate *•— or in some states if the nature
ply when it was originally contribated. Ck>mpare the Massaehasetts
proviBion above noted. A similar provision exists in North Caro-
lina. See references in note 20, p. 597, above.
*7 FOURTH ST. NAT. BANK v. WHITAKER, 170 Pa. 297, 83
Atl. 100. See "Partnerthip/* Dec Dig, (Key No,) | S61; Cent. Dig,
S 858.
*«HOGAN V. HADZSITS, 113 Mich. 568, 71 N. W. 1092; Fifth
Ave. Bank v. Colgate, 120 N. T. 381, 24 N. R 799, 8 L. R. A. 712;
Arnold V. Danziger (C. C.) 30 Fed. 898, 900. Bee ''Partnership,'' Dec.
Dig, {Key No.) { S61; Cent, Dig, f 8S8,
«• Alaska, Arkansas, District of Columbia, Georgia, Iowa, Kan-
sas, Maryland, Michigan, Minnesota, Mississippi (does not specify
changes in the capital), Missouri (first three only), Nebraska, New
Hampshire, New Jersey, New Mexico, New Tork, North Carolina,
Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vir-
ginia, West Virginia, and Wisconsin. So under Rev. St N. Y. 1829.
§ 218) FIBM NAME — ^FIBM SIGN 623
of the business or the firm name is changed, or if a part-
ner withdraws or a new partner is admitted, and a new
certificate is not filed and acknowledged, and published
within ten days"^ — ^the effect in most states, unless there
is a formal renewal, is to cause a dissolution of the partner-
ship; "^ and if the business is continued after the alteration
without recording a new certificate the partnership is a gen-
eral one."* In seven states *• the alteration does not effect
a dissolution, but makes the special partners immediately lia-
ble as general, whether the business is continued or not.
FIRM NAME— FIRM SIGN
218. In most states the partnership business must be trans-
acted in a firm name in which the names of the
special partners do not appear, and without the
addition of the word '^company" or any other gen-
eral term.
In Kentucky, it is an alteration if there is a cliange in the partners,
or in the nature of the business, or a withdrawal of capital. See ref-
erences in note 20» p. 697, above.
so CaUfomia, Hawaii, Idaho, Montana, North Dakota, South Da-
kota (''verified," instead of acknowledged), and Wyoming (verified
and signed by one or more of the partners). See references in note
20, p. 597, above.
Bi Alaska, Arkansas, District of Columbia, Georgia, Iowa, Kansas,
Maryland, Michigan, Minnesota, Nebraska, New Jersey, New Mexi
CO, North Carolina, Ohio, Pennsylvania, South Carolina, , Tennessee
Texas, Utah, West Virginia, and Wisconsin. See references in note
20, p. 597, above. So under Rev. St N. T. 1829.
S3 Alabama, Arkansas, District of Columbia, G^eorgia, Hawaii,
Idaho, Iowa, Kansas, Kentucky and Missouri (as to any special
partner knowing the facts), Maryland, Michigan, Minnesota, Mis-
sissippi, Nebraska, New Jersey, New Mexico, New York, North Caro-
lina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah,
Virginia, West Virginia, and Wisconsin. So by Rev. St N. T. 1829.
Under the original statutes (Laws N. Y. 1822, c. 244, | 7, and Laws
Conn. 1822, c. 21, | 3) there was merely a directory provision for
recording. See reference in note 20, p. 597, above.
ss California, Hawaii, Idaho, Montana, New Hampshire, North
Dakota, and Wyoming. See references in note 20, p. 697, above.
624 LIMITED PARTNERSHIPS (Ch. 11
219. In several states the partnership must post a sign in
soixie conspicuous place, bearing the full name of
all the partners.
All limited partnerships are required by statute to adopt
and set forth in the certificate their firm name and as a
general rule this name must i>ot contain the names of the
special partners, but only of one or more of the general
partners ; •* but in some cases the name of the special part-
ner may by statute be used if it was a part of the name of
a former general partnership to which the limited partner-
ship succeeds.'* In three states *• the special partners'
ft« Alabama, Alaska, Arkansas, Colorado, Gonnecticut, Delaware,
District of Columbia, Georgia, lUinols, Indiana, Iowa, Kansas, K&i-
tucky, Louisiana, Maine, Maryland, Massachusetts (must use all
except not more than three), Michigan, Minnesota, Mississippi, Mis-
souri, Montana, Nebraska, Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Carolina, North Dakota, New Hamp-
shire (by implication), Ohio (must use all, unless use **& Co."), 'Ore-
gon, Panama and Canal Zone, Pennsylvania (all, except, if three or
more, may use any two and "& Co." and post a sign, or in any case
may use name of one and "& Co.," and post sign), Rhode Island,
South Carolina (Compare Civ. Code 1902, { 1706), South Dakota,
Tennessee, Texas, Utah, Vermont (all, unless more than three),
Washington, West Virginia, and Wisconsin. In Montana, Nebraska,
Nevada, New Jersey, North Carolina, Tennessee, Texas, Utah, Wash-
ington, West Virginia, and Wisconsin the words **one or more of"
are omitted. In Virginia, any name may be used, if the names of
the special partners do not appear (a sensible provision), and the
firm may advertise themselves as "successors," without Increasing
the special partner's liability, though his name appears in the old
firm. In Massachusetts and Missouri, a limited partnership may
do business under the name of its predecessor, with the consent of
the latter's members or their personal representatives (so In Ohio,
if the former firm has been in business for five years or more), and
a special partner is not liable as a general partner because a gen-
eral partner's surname is used which is the same as his own, or
because his surname appears in the name of the predecessor firm.
There is a similar provision in Rhode Island, provided the word
''Limited" is used, and also in South Carolina. See references in
note 20, p. 697,. above.
55 GROVES V. WILSON, 168 Mass. 370, 47 N. B. 100. See ''Part-
nerthip,*' Deo. Dig. (Key No.) § 858; Cent. Dig. | 85^. See next
preceding note.
56 California, Hawaii, and Idaho.
§§ 218-219) FIRM NAME — FIRM SIGN 626
names may be used if the word "Limited" is added. The
words "& Co." are not to be used,**^ or any other general
term ; '• but in New York, where the statute forbids the
use of the words "and Company" or "& Co." to represent a
special partner, the court held that, as no penalty for such
use was provided, and as a creditor was not likely to be
misled or injured, it could not impose the liability of a gen-
eral partner for this violation of the statute.** In seven
states *^ such an addition may or may not be used. In a
•few states •^ the word "Limited" must be used in the firm
name. If the name of a special partner is used with his
privity or consent, he is liable as a general partner.** In
BY Alaska, Arkansas, Georgia, Iowa, Kansas, Kentucky, Maine,
Mftssaehusetts, Missouri, New Jersey, North Carolina, Oregon, Penn-
sylvania (except when a sign is posted). South Carolina (if these
words used without representing an actual partner, constitutes a
misdemeanor, except where the use of a partnership name is con-
tinued aB authorized), Tennessee, Texas, Vermont, Washington, and
West Virginia. So by Rev. St N.' T. 1829. In Louisiana, New
Mexico, and Wisconsin these words must not be used, unless there
is more than one general partner. See references in note 20, p.
697, above.
B8 Alaska, Arkansas, Iowa, Kansas, Kentucky, Massachusetts,
Michigan, Missouri, New Jersey. North Carolina (except the word
"Limited"), Oregon, Pennsylvania. South Carolina, Tennessee, Texas,
Vermont, Washington, and West Virginia. See references in note
20, p. 597, above.
»• BUCK V. ALLEY, 145 N. T. 488, 40 N. B. 23a 8ee "Partner-
ship,'* Dec. Dig, {Key No,) f S58; Cent Dig. % 8S6,
•0 District of Columbia, Maryland, Michigan, Minnesota, New
Tork, and North and South Dakota. See references in note 20, p.
507, above.
•1 Alabama, Kentucky (in the sign), Maryland (in the sign, if a
special partner participates in the business), and North Carolina
(permissive). In California, Hawaii, Idaho, and Wyoming the word
must be used, if the firm uses a special partner's name.
•s Alabama, Alaska, Arkansas, Colorado, Connecticut (or even
without his knowledge), Delaware, District of Columbia, Georgia,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massa-
chusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Ne-
vada, New Hampshire, New Jersey, New Mexico, New York, North
Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, South Caro-
lina, Tennessee, Texas, Utah (even without his knowledge), Ver-
mont, Virginia, Washington ("with his consent or privity"). West
Virginia, and Wisconsin. So under Laws N. Y. 1822, c. 244, I 4;
Gil.Pabt. — 40
626 LIMITED PARTNERSHIPS (Ch. 11
some states it is provided that every limited partnership
shall post on the outside of the front of the building where
its principal place of business is a sign in legible English
characters containing the full names of all its members.**
WITHDRAWALS OF CAPITAL
220. No part of the sum contributed by any special partner
to the capital stock shall be withdrawn by him, or
paid or transferred to him in the shs^e of divi-
dends, profits, or otherwise, at any time during the
continuance of the partnership. But any partner
may annually receive lawful interest on the sum so
contributed by him, if the pa3rment thereof does
not reduce the original capital
•
In every statute the withdrawal or impairment of capital
by a special partner is forbidden ; •* but he may annually
receive lawful interest or profits on his share, if this does
Laws Conn. 1822, c. 21, S 2; Bev. St N. Y. 1829. In California and
Maryland, he is liable, unless tiie word "limited" is used; and see
above. In Alaska and Washington, he Is not liable to any person,
to whom he makes it appear that he acted and was recognized as a
general partner only. See references in note 20, p. 697, above.
6> Minnesota, Missouri, New York, North Dakota, Ohio (names of
all the general partners), Pennsylvania (if uses *'& Co."), South
Dakota, Virginia, and Wisconsin. In Missouri, New York, North
and South Dakota, Virginia, and Wisconsin, the sign must distin-
guish between general and special partners. In Missouri and Vir-
ginia, the sign must be legible, but not necessarily In English, and
must be posted at each place of business. In Kentucky, a sign must
be posted at each place of business, with the name of the firm and
words "Limited Partners.*' In New York and Ohio, if a proper sign
is not posted, a person suing the firm may amend his pleadings with-
out costs by correcting the number and names of the partners. In
Missouri, the partnership becomes generaL Compare Civ. Code S.
C. 1902, I 1705. See references in note 20, p. 597, above.
•iHOGAN V. HADZSITS, 118 Mich. 568, 71 N. W. 1092; Bally v.
Hornthal, 154 N. Y. 648, 49 N. E. 56, 61 Am. St Rep. 640. And so,
also, under the early statutes. See "Partnership,'' Dee* Dig. iKey
No,) S 564; Cent. Dig. I SU-
§ 220) WITHDRAWALS OF OAFITAL 627
not reduce the amount of the capital,*" and, indeed, this
right would be implied in any case. In most states •• he is
expressly allowed to have both interest and profits, if this
does not reduce the capital and a surplus remains to be di-
vided; but an excessive division amounts to a with-
drawal,*^ and the penalty for such withdrawal varies. ' In
some states it is merely a liability to return the amount so
withdrawn,*® or a sum sufficient to make good his share of
.the capital.** In others he becomes liable as a general part-
ner.^® The sum for which he is thus liable he is bound to
OB Connecticut (not exceeding 10 per cent, from the year's prof-
its only), Massachusetts (not over 6 per cent), Nebraska, Utah and
Wisconsin (not over 12 per cent). New Hampshire (annuaUy or semi-
annually), South Dakota, Indiana, Louisiana, and Mississippi. So
under Rev. St N. T. 1829. See references in note 20, p. 5d7, above.
«« Alabama, Arkansas, California, District of Columbia, Georgia,
Hawaii, Idaho, Illinois, Iowa, Maryland, Missouri, Montana, Ne-
braska, New Jersey, New Mexico, New York, North Carolina, North
Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Texas,
Utah, Vermont, Wisconsin, and Wyoming. In Massachusetts, Mis-
sissippi, and Nevada this is directly to be implied from the statute.
See references in note 20, p. 597, above.
•T Lachaise v. Marks, 4 E. D. Smith (N. Y.) 610; Bell v. Merrifleld,
28 Hun (N. Y.) 219. See ''Partnership," Dec. Dig. {Key No.) I S64;
Cent Dig. % SU.
«s Alaska, Colorado, Delaware, Indiana, Kansas, Kentucky (in sub-
stance), Maine, Massachusetts, Michigan, Minnesota, Nevada, Oregon,
Rhode Island, Virginia and West Virginia (for a sum sufficient with
the partnership effects to pay the debts of the firm, but not liable
unless capital impaired), and Washington. See references in note
20, p. 597, above. Snyder v. Leland, 127 Mass. 291. So under Rev.
St N. Y. 1829. Bee ''Partnership,'' Deo, Dig. (Key Ho.) % S64; Cent.
Dig. II 841, 8U'
68 Alabama, District of Columbia,. Georgia, Illinois, Iowa, Mary-
land, Mississippi (or be treated as a general partner), Nebraska, New
Jersey, New Mexico, New York (or be liable as general partner for
all debts contracted before restitution, up to the amount withdrawn),
North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Utah, Ver-
mont and Wisconsin. See references in note 20, p. 597, above.
70 California, Hawaii, Idaho, Montana, New Hampshire, North
Dakota, South Dakota, and Wyoming. See references in note 20, p.
597, above. Madison County Bank v. Gould, 5 Hill (N. Y.) 814;
Bell V. Merrifleld, 28 Hun (N. Y.) 223 ; Haviland v. Chace, 39 Barb.
(N. Y.) 283; Hogg v. OrgiU, 34 Pa. 344. See "Partnership," Dec
Dig. (Key No.) | 564; Cent. Dig. | 844-
628 LIMITBD PARTNERSHIPS (Ch. 11
ft
restore, with interest/^ or, in a few states, without inter-
est^*
RIGHTS AND LIABILITIES
22L The liability of general partners is the same as in oiv
dinary partnerships.
Where all the statutory requirements have been con»-
plied with, special partners are not personally lia-
ble for partnership obligations.
As among themselves the rights and liabil-nes of the
partners depend upon the terms of the partne ship agree-
ment, as we have already seen, and the liability of the gen-
eral partners is the same as in a common partnership. This
is sometimes definitely stated in the statutes,^* It is to the
general partners that the duty of management is intrusted,
and to them that the firm capital belongs/* The special
partner is not entitled to take any part in the management
of the firm, though he may examine into its afiFairs and act
in an advisory capacity to the general partners ; *• but he
Ti Colorado, District of Columbia, Maryland, Massachasetts, fifich-
Igan, Minnesota, Nebraska, Nevada, New Jersey, New Tork, Ohio,
Oregon, Pennsylvania, Rhode Island, Texas, Utah, Virginia, Wash-
ington, and Wisconsin. See references in note 20, i>. 597, above.
T2 Alabama, Georgia, Illinois, Iowa, North Carolina, and Tennes-
see. See references in note 20, p. 597, above.
T* Liability of general partners same as in a general partnership.
California, Hawaii, Idaho, Louisiana, Missouri, Montana, New York,
North Dakota, Panama and Canal Zone, South Dakota, and Wyom-
ing. See references in note 20, p. 597,- above.
Liability is to account to each other and to special partners. Al-
abama, Arkansas (as other partners now are by law). District of Co-
lumbia, Georgia, Illinois, Indiana, Iowa, Kansas, Maryland, Maine,
Mississippi, Missouri, Nebraska, New Jersey, New Mexico, New York,
North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee,
Texas, Utah, and Wisconsin. So, also, under Laws N. Y. 1822, c
244, 8 10 ; Laws Conn. 1822, c. 21, 8 5 ; Rev. St. N. Y. 1829.
T4 BRADBURY v. SMITH, 231 Me. 117. See "PartnersMp,** Dec.
Dig. {Key No.) || S67-^69; Cent. Dig. |f 840, 846, 847.
T6 Alabama. Arkansas, California, District of Columbia, Georgia,
HawaU, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Mary-
land, Michigan, Minnesota, Mississippi, Montana, Nebraska, New
S 221) BIGHTS AVD LIABIUTIES 629
must not make contracts for the firm,''* or transact any part-
nership business otherwise than as expressly authorized by
the statute/^ nor be employed for that purpose as agent or
attorney.^* In two states he is allowed to act as attorney
in fact, under a power of attorney,^* and in five Southern
states it is provided that a lawyer who is a special partner
may act as adviser and attorney at law.** If a special part-
ner interferes in the business, otherwise than as permitted
by the statute, he becomes liable as a general partner.*^
Jersey, New Mexico, New York, North Oarollna, North Dakota, Ohio,
Pennsylvania, South Carolina, South Dakota, Tennessee, Texas,
Utah, Virginia, West Virginia, Wisconsin, and Wyoming. See refer-
ences in note 20, p. 697, above. So under Laws N. Y. 1822, c. 244, |
a; Laws Ck>nn. 1822, c. 21, | 3.
T« Delaware, Indiana, Kentucky, Maine, Michigan, Montana, New
Jersey, Rhode Island, and West Virginia. In Oregon and Wash-
ington, he may make contracts for the firm If he acted and was
recognized as a special partner only. In Minnesota, New Jersey,
and New York, he may negotiate sales or make purchases for the
partnership, with the approval of one or more of the general part-
ners. In the last two states his contracts are not binding on the
firm till approved by a general partner. See references in note 2D,
p. 607, above; also see note 81, below.
V7 Alabama, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky,
Louisiana, Minnesota, Mississippi, New Jersey, North Carolina, Ohio,
Panama and Canal Zone, Pennsylvania, South Carolina, Utah, West
Virginia, Wisconsin, and Wyoming. See references in note 20, p.
587, above. So under Laws N. Y. 1822, c. 244, S 6, and Rev. St N.
Y. 1829.
f Alabama, Georgia, Indiana, Iowa, Kansas, Louisiana, Massa-
chusetts, Nebraska, New Jersey, New York, North Carolina, Ohio,
Pennsylvania, Tennessee, Virginia, West Virginia, and Wisconsin.
So under Laws N. Y. 1822, c. 244, S 6. In Minnesota, he may not
act as agent or attorney for the partnership unless specially au-
thorized; in Ohio, he may, if he discloses his agency. In Illinois,
Ohio, and Tennessee, he must have, the consent of all the general
partners. See references in note 20, p. 697, above.
7ft Illinois and Tennessee. See references in note 20, p. 697, above.
••Alabama, Georgia, Mississippi, and North and South Carolina.
•1 Alabama, Arkansas, Georgia, Indiana, Iowa, Kansas, Mary-
land, Minnesota, Mississippi, New Jersey (unless specially employed
in writing by the general partners to do so). New York, North Caro-
lina, Ohio, Pennsylvania, Panama and Canal Zone, Tennessee, Utah,
and Wisconsin. So under Laws N. Y. 1822, c. 244, S 6, and Rev.
St N. Y. 1829. In Montana, Nevada, New Hampshire, Oregon, and
630 LIMITED PARTNERSHIPS (Ch. 11
Some states allow a special partner to deal with the firm
like any stranger,"* and in some, loans by a special part-
ner to the firm are authorized, and it is provided that
as to these the special partner shall stand on the same foot-
ing as any other creditor in case of insolvency."* Other
states do not allow this, and hold that a special partner can*
not become a creditor of his firm and share with the other
creditors in case of insolvency.** In seven Western juris-
dictions** the provisions as to a special partner's . liabili-
ties are somewhat differently phrased. He is liable as a
general partner to all the firm creditors if he has willfully
made or permitted a false or materially defective statement
in the certificate, affidavit, or published statement, or has
willfully interfered with the business of the firm, except
by investigating or advising as to its affairs, or loaning it
n^oney, or has willfully joined in or assented to a violation
of the statute. If he has unintentionally done any of these
things, he is liable as a general partner to any creditor of
the firm who has been actually misled thereby ta his prej-
Rhode Island, and a few other states, it Is provided that if he per-
sonally makes contracts with any one except the general partners
he shall be liable as a general partner. So in Vermont, unless he
notifies the person at the time he is acting as a special partner only,
and in Washington unless he can show when sued that in mak-
ing the contract he acted and was recognized as a special partner.
See note 76, p. 029, and references in note 20, p. 507, above.
saRayne v. Terrell, 83 La. Ann. 812; METROPOLITAN NAT.
BANK OF NEW YORK v. SIRRET, 97 N.T. 820. Bee ^'Partner-
ship,** Deo. Dig. (Key No,) S S66; Ceni. Dig, | 8S9.
8> California, Hawaii, Idaho, Illinois, Michigan, Maine (as to
loans by him to firm or use of his credit for its benefit), Montana,
New Jersey (by P. Ix 1859, p. 335), New York, North and South
Dakota, Virginia (like Minnesota, statute apparently contradictory;
compare sections 2871-2878), and Wyoming. See references in note
20, p. 597, above.
84 Alabama, Connecticut, District of Columbia, Georgia, Kentucky,
Maryland, Mississippi, Missouri, Nebraska, New Hampshire^ New
Mexico, North Carolina, Ohio, Pennsylvania, Rhode • Island, South
Carolina, Tennessee, Texas, Utah, West Virginia, and Wisconsin.
See references in note 20, p. 597,. above. So by Laws N. Y. 1822, c
244, I 11 ; Laws Conn. 1822, c. 11, S 5 ; Rev. St N. Y. 1829.
>B California, Hawaii, Idaho, Montana, North and South Dakota,
and Wyoming. See references In note 20, p. 697, above^
3 222) RIGHTS AND LIABILITIES 631
udice. In six of these jurisdictions •• there is a provision
by which he may protect himself from liability. One who,
upon making a contract with a partnership, accepts from
or gives to it a written memorandum of the contract, stat-
ing that the partnership is special and giving the names of the
special partners, cannot afterwards charge the persons thus
named as general partners upon that contract by reason of
an error or defect in the proceedings for the creation of the
partnership prior to the acceptance of the memorandum, if
an effort has been made by the partners in good faith to
form a special partnership in the manner required by the
statute. If, on account of the failure to fulfill the statutory
requirements, liability as a general partner attaches to a
special partner, this liability continues even after death,*^
and even although the partnership is continued after the
period named in the certificate.** But this imposing of a
general liability upon a special partner does not have the
effect of changing the firm into a general partnership. The
relations of the partners among themselves are not changed,
and the special partners are treated as general ones only so
far as claimants are concerned.**
SAME— LIABILITY FOR FRAUD
222. Any partner, general or special, guilty of fraud in the
affairs of the partnership, is by some statutes made
civilly liable to the person injured.
«• California, Idaho, Montana, North and South Dakota, and
Wyoming.
8T Hotopp V. Huber, 160 N. Y. 524, 56 N. B. 206. See '^Partner-
ship," Dec. Dig. {Key No.) | S71; Cent. Dig. | 848.
88 TILGB V. BROOKS, 124 Pa. 178, 182, 16 Atl. 746, 2 L. R. A.
796, Gilmore, Gas. Partnership, 627. See '^Partnership," Cent, Dig.
I S42.
88 Waters v. Harris (Super. N. Y.) 17 N. Y. Supp. 370. See, also,
Guillou V. Peterson, 80 Pa. 163 ; Deckert v. Chesapeake Western Co.,
101 Va. 804, 45 S. E. 799 ; Abendroth v. Van Dolsen, 131 U. S. 66,
9 Sup. Ct 619, 33 L. Ed. 57. See '"Partnership," Dec. Dig. (Key No.)
I S62; Cent. Dig. i 842.
632 LIMITED PARTNERSHIPS (Ch. 11
In a number of states it is explicitly provided that any
partner, general or special, who is guilty of fraud in the af-
fairs of the partnership, shall be liable civilly to the person
injured to the extent of his damage.*® In some states he is
also guilty of a misdemeanor.** A special partner is not,
however, liable for torts of the firm, even although because
of some violation of the statutes he may be subject to a gen-
eral liability for its debts.**
FRAUDULENT PREFERENCES
223. The statutes of most states prohibit the transfer of
property of the firm, or of the general or special
partners, in contemplation of insolvency of such
firm or partner, with intent to create a preference
over other creditors of the Stttl
224. If a special partner concurs in a violation of the above
prohibition, he is liable as a general partner.
It is very generally provided that any sale or conveyance
made in contemplation of or after insolvency, and with the
intention of giving a preference, is void, whether made to a
creditor or to a general or special partner,*' and regardless
•0 Alabama, Arkansas, Georgia, Illinois, Iowa, Kansas, Maryl'and,
Nebraska, New Jersey, New Mexico, Ohio, Pennsylvania, South Caro-
lina, Tennessee, Texas, and Wisconsin. See references in note 20,
p. 597, above. So under Laws N. Y. 1822, c. 244, | 10; Rev. St N.
T. 1829.
91 Georgia, Iowa, Minnesota, North and South Dakota, and Ten-
nesi^ee. In Arkansas, lUlnois, Kansas, Maryland, Nebraska, New
Jersey, South Carolina, and Wisconsin, there is a similar provi-
sion, accompanied by a general statement that he shall be punish*
able by fine or imprisonment, in the discretion of the court So un-
der Rev. St N. Y. 1829. Under Laws N. Y. 1822, c. 244, | 10, the
offender was to forfeit one thousand dollars, half to the Informer
and half to the state. In Ohio, he is liable to a fine of five hundred
dollars or Imprisonment for six months or both. See references in
note 20, p. 597, above.
»2 McKnight V. Ratcliff, 44 Pa. 156. See *'PartnerHhip,** Dec Dig,
{Key No.) | S71; Cent. Dig. | 8^8.
»8 TRACY V. TUFFLY, 134 U. S. 206. 10 Sup. Ct .'>27. S3 L. Ed.
§§ 223-224) FRAUDULENT PREFERENCB8 633
of whether the person who received the preference had no-
tice that a preference was intended ; •* and if the preference
consists of the withdrawal by a special partner of his con-
tribution during the insolvency of the firm, he may be sued
individually, and the action will be regarded as an equita-
ble proceeding to restore the amount withdrawn.*" But
bona fide purchasers for value without notice of the prop-
erty of an insolvent limited partnership are protected,'* and
an attaching creditor may, of course, obtain a preference,
at any time before the appointment of a receiver, by the
usual method of obtaining an execution and making a levy,
and, where the debtor has not made a confession of judg-
ment, a preference so obtained is not voidable.*^
The New York Revised Statutes of 1829 contained the
following provision, altered from a somewhat similar pro-
vision in Laws 1822, c. 244, § 9: "Every sale, assignment
or transfer of any of the property or effects of such partner-
ship, made by such partnership when insolvent, or in con-
templation of insolvency, or after, or in contemplation of
the insolvency of any partner, with the intent of giving a
preference to any creditor of such partnership or insolvent
partner, over other creditors of such partnership; and
every judgment confessed, lien created, or security given,
by such partnership, under like circumstances, and with like
intent, shall be void, as against the creditors of such part-
nership."
The revision commissioners who drafted this section ob-
served in their report of November 2, 1827,** in regard to
879; Corbln v. Boles (C. C.) 34 Fed. 692. See "Partnership,** Dec.
Dig. {Key No.) | S7S; Cent. Dig. | 850.
•* George t. Grant, 20 Hun (N. T.) 372. See "Partnership;* Dec.
Dig. (Key No.) H 575, S74; Cent. Dig. $| 850, 851.
»8 Bell V. Merrifleld, 109 N. Y. 202, 16 N. E. 55, 4 Am. St Rep.
436 ; CROUCH v. FIRST NAT. BANK, 156 111. 342, 40 N. B. 974.
See "Partnership;* Dec. Dig. {Key No.) |§ 849-851; Cent. Dig. H
•• State Bank of Virginia v. Blanchard, 90 Va. 22, 17 8. B. 742.
See "Partnership;* Dec. Dig. {Key No.) | StS; Cent. Dig. ^ 850.
•T Van Alstyne v. Cook, 25 N. T. 489. See "Partnership,** Dec. Dig.
(Key No.) §| ^72-^74; Cent. Dig. || 849-851.
•« Volume 4.
634 LIMITED PARTNERSHIPS (Ch. ll
this and the two following sections : "These three last sec-
tions are intended as a substitute for the ninth section of
the original act. These sections, as drawn, are somewhat
complex, from the nature of the subject; but it is believed
that they express the true intent of the Legislature, a^id
present no difficulties which an attentive perusal will not
solve."
A following section contained a provision in similar lan-
guage that every transfer of the property of a general or
special partner when insolvent or in contemplation of in-
solvency, or after or in contemplation of the insolvency of
the partnership, with the intent of giving any creditor of
his own or of the partnership a preference over partnership
creditors, should also be void. These two sections have
been followed almost literally in many states."*
If a special partner violates these provisions or concurs
in a violation of them, he is liable as a general partner.^
••As to preferences by the partnership: Alabama, California,
District of Columbia ("or in contemplation of the insolvency of any
general partner") Georgia, Idaho, Jowa, Maryland, Minnesota, Mis-
Bouri, Montana, Nebraska, New Jersey, New Mexico, New Tork,
North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota,
Tennessee (in substance), Texas, Virginia, West Virginia (in sub-
stance), Wisconsin, and Wyoming. See references in note 20, p.
507, above. A similar provision is in the Illinois statute.
As to preferences by a partner: Alabama, California, District
of Columbia, Georgia, Idaho, Illinois (similar in general), Iowa,
Maryland, Maine, Missouri, Montana, Nebraska, New Jersey, New
York, North Dakota, Pennsylvania, South C^arolina, South Dakota,
Tennessee (in substance), Texas, Virginia, W^est Virginia (in sub-
stance), Wisconsin, and Wyoming. This provision is omitted in
New Mexico and Ohio. In some of these states the two sections
are consolidated. In Kentucky there is a general provision making
preferences void, applicable to all partnerships.
1 Alabama, District of Columbia, Georgia, Iowa, Maryland, Maine,
Nebraska, New Jersey, New Mexico, New York, Ohio, Pennsylvania,
South Carolina, Tennessee, Texas, and Wisconsin. So by Laws N.
Y. 1822, c 244, | 0; Rev. St N. Y. 1829. A substantially similar
provision is in the (ITodes of California, Hawaii, Idaho, Montana,
North and South Dakota, and Wyoming. See references in note 20,
p. 697, above. Bowen v. Argall, 24 Wend. (N. Y.) 608; Pusey v
Dusenbury, 75 Pa. 437 ; McArthur v. Chase, 13 Grat (Va.) 683. See
^^Partnership," Dec. Dig. {Key No.) f 575; Cent Dig. | 850.
§ 225) ASSIGNMENTS FOB BENEFIT OF 0BEDITOB8 635
ASSIGNMENTS t^OR BENEFIT OF CREDITORS
225. Although the cases are not unanimous, it is held by
some that assignments for the benefit of creditors
cannot be made without the assent of all the part-
ners, general and special.
Assignments for the benefit of creditors may be made by
limited partnerships, as by general partnerships, except
that, as the special partner is liable only to the extent of
his contribution, his individual property, need not be in-
cluded in the assignment.^
In some states there is an additional provision that a gen-
eral assignment by the partnership for the benefit of its
creditors shall be void, unless it provides for a proportion-
ate distribution of the assets among all the creditors, or
unless the assets are sufficient to pay the debts.*
The assignment, like other acts for the firm, should be
made by all of the general partners, and it seems that the
assent of the special partner is necessary, though the cases
on this point are not unanimous.*
The theory upon which the courts proceed, as will be
seen by the cases previously cited, is that in case of insol-
vency the property of the firm is regarded as a trust fund
for the benefit of the creditors, to be distributed among
them pro rata by means of proceedings in equity, and these
« TRACY V. TUFFLY, 134 U. S. 206, 10 Sup. Ct 527, 33 L. Ed.
879. See "Partnership,** Dec. Dig, {Key No.) ^ S7S; Cent. Dig. |
S50; ** Assignment 9 for Benefit ot Creditors,** Dec, Dig, (Key No.) l
27/ Cent. Dig, §| 92, 99, '
• Delaware, Indiana, Michigan, Neyada, and Rhode Island. In
Indiana, Michigan, and Nevada the statute provides for implied as-
sent after sixty days by creditors with notice, and for notice by pub-
lication. In most of these statutes provision Is made for giving a
first claim to the United States on bonds for duties.
* Bowen v. ArgaU, 24 Wend. (N. Y.) 496 ; MUls v. Argall, 6 Paige
(N. Y.) 577 ; Hayes v. Heyer, 3 Sandf . (N. Y.) 284 ; barrow v. Brufif,
36 How. Prac. (N. Y.) 479. See *'PartnersMp,** Dec, Dig. (Key Ifo.)
S S7S; Cent, Dig, | 850; '^Assignments for Benefit of Creditors,
Deo, Dig, (Key No,) | 27; Cent. Dig. S§ 92, 9S.
99
636 UHITBD' PARTNERSHIPS (Ch. 11
proceedings may be begun at the instance of a creditor, or
of one of either class of partners.*
DISSOLUTION
226. No dissolution by the voluntary act of the partners can
take place before the time specified in the certiB-
cate, until a notice of such dissolution is filed and
recorded, and also, in most states, duly published.
Dissolution
A limited partnership may not voluntarily dissolve be-
fore the time stated in the certificate has expired, without
filing and publishing a notice of dissolution. In most states
it is provided in substance that no dissolution by the volun-
tary act of the partners shall take place before the time of
termination specified in the certificate of formation or re-
newal,* until a notice of dissolution has been recorded
where the original certificate was recorded,^ and published
» Innes v. Lansing, 7 Paige (N. Y.) 583. See **Partner$hip,** Dec,
Dig, (Key No,) $ ^7^; Cent. Dig, || 849, 850; '^Assignments for Ben^
eflt of Creditors^ Dec, Dig, (Key No.) | 27; Cent. Dig. H 92, 93.
• Alabama, Alaska, California, Colorado, Delaware, Distxict of
Columbia, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine,
Maryland (except by an alteration), Massachusetts, Michigan, Mis-
sissippi (except in a suit by a partner), Missouri (may be dissolved,
but not to take effect), Nebraska, New Hampshire, Nevada, New
Jersey, New Mexico, North Carolina, Ohio (except by suit), Oregon,
Pennsylvania, Ehode Island, South Carolina, Tennessee, Texas,
Utah, Vermont, Washington, West Virginia, and Wisconsin. So,
also, by Rev. St N. Y. 1829. In Hawaii, Idaho, Montana, New
York, North Dakota, South Dakota, Virginia, and Wyoming it is
declared that a limited partnership is subject to dissolution like a
general partnership, except that no dissolution by act of the part-
ners Is complete till notice of dissolution is recorded and published.
See references in note 20, p. 597, above.
7 Alabama, Alaska, C^llfomia, Delaware (in each eounty). Dis-
trict of 0>lumbla, Georgia, Hawaii Illinois, Indiana, Iowa, Kansas
(in each county), Maryland, Massachusetts, Michigan, Maine, Ne-
braska, Nevada, New Hampshire, New Jersey, New Mexico, New
York (filed only). North Carolina, North Dakota, Ohio, Oregon (filed
only), Pennsylvania, Rhode Island, South Carolina, Tennessee, Tex-
§ 226) DisspLUTioii 637
for three ■ or four • or six *• weeks, or for some other period
of time/* or for the period required for the publication of
the original certificate/' in a newspaper published in each
county where the partnership has a place of business/* A
limited partnership may, however, be dissolved by opera-
tion of law in the same way and for the same reasons as a
general partnership,^* or by proceedings brought tO' dis-
as, Utah, Vermont, Virginia, Washington (filed only), West Virginia,
Wisconsin, and Wyoming. So under Rev. St N. T. 1829. See ref-
erences in note 20, p. 697, above.
8Alal>ama, Nevada (in county where certificate filed), and New
Hampshire (in a newspaper In general circulation in the county
where the principal place of business is located). See references
in note 20, p. 697, above.
• Rev. St. N. Y. 1829. California, Ck)lorado (published in prin-
cipal county, and filed in each), District of 0>lumbia (In two papers
designated by clerk), Georgia, Hawaii (in two Honolulu papers),
Idaho, Iowa, Kentucky, Maryland, Missouri, Montana, Nebraska,
New Jersey, New Mexico, New York, North Carolina, North Dakota,
Ohio, Pennsylvania, Texas, Utah, Virginia (or, if none published in
the county, posted), Wisconsin, and Wyoming. See references in
note 20, p. 697, above.
10 Delaware (within the state), Illinois, Indiana, Kansas, Maine,
Michigan, Rhode Island (in two papers within the state), and West
Virginia. See references in note 20, p. 697, above.
11 Mississippi: For thirty days in the county where the principal
place of business Is located "or a convenient county" (need not be
recorded). South Carolina: For three months in the two news-
papers most contiguous to the place or places where the partnership
does business, and posted on the courthouse door. See references
in note 20, p. 697, above.
13 Alaska, Massachusetts, Minnesota, Oregon, Vermont, and Wash-
ington. See references In note 20, p. 697, above.
IS In Massachusetts an affidavit of publication must be made and
filed. In Michigan and North Carolina, the provisions for pub-
lishing the notice of dissolution differ from the provisions for pub-
lishing the terms of the certificate — in Michigan, in providing that.
If no newspaper is published in the home county, the notice of dis-
Holution may be published at the seat of government; in North
Carolina, by requiring publication in the nearest newspaper to each
place of business. See references in note 20, p. 597, above. Under
Rev. St N. Y. 1829, publication in the *'state paper'* was also re-
quired. In Laws N. Y. 1822, c. 244, § e, and Laws Ck)nn. 1822, c.
21, I 8, there were merely discretionary provisions *for recording.
i4jacquln v. Buisson, 11 How. Prac. (N. Y.) 385; AMES v.
DOWNING, 1 Bradf. Sur. (N. Y.) 821, Gilmore, Cas. Partnership,
638 . LIMITBD PARTNBBSHIPS (Ch. 11
solve it for reasons sufficient to justify the dissolution of a
general partnership.^*
SAME— DEATH OF PARTNER
227. The statutes generally do not prevent dissolution by
operation of law, and if either a general or a spe-
cial partner dies the partnership is dissolved, as in
the case of an ordinary partnership. Some stat-
utes, however, contain provisions affecting this
rule.
In Illinois the partnership articles may provide what shall
be the relative rights of heirs and legal representatives on
the death of a general partner, and may provide for a con-
tinuation of the business. In the absence of a provision on
the latter subject, the business may be continued in the
manner provided by the statute. If there is no contrary
provision on the former subject, the heirs or legal repre-
sentatives of a general partner are to be treated as being in
the situation of a special partner.
In Minnesota the certificate may provide that the death
of a partner shall not dissolve the partnership, in which case
it may be continued by the surviving partners as a limited
partnership till the expiration of the period fixed. In New
York the business may be continued if the partnership ar-
ticles so provide and the deceased partner's representatives
consent.
In Missouri, after the death of a general partner, the
surviving partners may purchase his interest from his legal
representatives at a valuation determined by three apprais-
ers appointed by the probate court.
In Pennsylvania the legal representatives of a general
610. See '^Partnership,'* Dec Dig. {Key No.) | S76; Cent. Dig. ||
8^3, 862.
itt CONTINENTAL NAT. BANK OF BOSTON v. STBAUSS, 137
N. Y. 148^ 32 N: E. 1066; Toumade v. Methfessel, 3 Hun (N. Y.)
144. See '"Partnership," Deo. Dig. {Key No.) | S76; Cent. Dig. (S*
862, 86S.
§ 228) DISSOLUTION 639
partner may dispose of his interest for the benefit of his es-
tate. The firm name must be changed, and the case treated
as an alteration, and a certificate must be recorded and pub-
lished accordingly.
In Virginia a partnership is not dissolved by the death
of one or more of the special partners, unless it is expressly
so stated in the certificate or "paper." *•
SAME— ADMISSION OF NEW PARTNERS
228. In a few states there are statutory provisions for the
admission of new special partners upon a new cer-
tificate, signed by each of them and by the general
partners, being verified or proved, acknowledged,
and recorded, and published.^'
In New York new special partners may be added, if a
new certificate is filed, signed by all the general partners and
sworn to by one of them, and an affidavit of payment of
capital made by one of them is also filed. No publication
is required.** There is a similar provision in Hawaii. In
Indiana a neglect to record the certificate of any increase
of capital or of a sale of a special partner's interest does not
dissolve the firm, or make the special partners liable as
general partners. Any change in the number of partners,
however, unless specially authorized by statute and carried
out in the manner provided, amounts to an alteration and
makes all the partners generally liable if the partnership is
carried on after that date.**
•
i« Ft)r Pennsylvania, see 2 Pardon's Dig. (13th Ed., 1903) pp. 2299-
2305, paragraph 27. For the other states, see references in note
20, p. 597, above.
17 California, Idaho, Indiana (or general partners), Montana, and
Wyoming. See references in note 20, p. 597, above.
18 So, also. In North and South Dakota, where, however, the cer-
tificate must be signed by each new special partner and all the gen
eral partners. Apparently an affidavit is not required. See refer-
ence in note 20, p. 597, above.
i» PERTH AMBOY MFG. CO. v. CONDIT, 21 N. J. Law, (559;
640 LIMITED PARTNBRSHIPS (Ch. 11
SAME— SALE OF PARTNER'S INTEREST
2t9. In the absence of contract or statutory provision to the
contrary, the conveyance of any partner's interest
in a limited partnership works a dissolution^ as in
the case of an ordinary partnership.
In some states it is provided that a special *• or general **
partner, or either,** may sell his interest without the part-
nership being dissolved or the special partners rendered lia-
ble as general. In most states the consent of the other
partners is required.
MISCELLANEOUS STATUTORY PROVISIONS
230. In addition to the foregoing, there are miscellaneous
provisions peculiar to the statutes of a few states.
Some of the more important are noted below.
BUCK y. ALLEY, 145 N. Y. 494, 40 N. E. 236 ; Haddock ▼. Orlnnell
Mfg. Corp,, 109 Pa. 880, 1 Atl. 174. See "Partnership,** Deo. Dig,
(Key No,) §§ S62, S6S; Cent Dig. U 8S6, 8S8, 842, 84S.
20 Indiana, Kansas, New Jersey, New York, and Pennsylvania.
In New York and New Jersey, a notice of the sale must be filed
within ten days. In Kansas and New Mexico, all the partners must
indorse their consent on the certificate, and it must be noted on
the margin of the record. In Pennsylvania, the written consent of
all the partners to the sale must be obtained. This may be given
in advance in the articles of partnership, or in a separate paper.
In New York, the sale may be by the legal representatives of a de-
ceased special partner. See references in note 20, p. 597, above.
SI New Jersey (must file new certificate, and affidavit that^ there
has been no withdrawal by any special partner) and Pennsylvania
(by deed or will, with other partners' written consent, which may
be given in advance). In Pennsylvania, the legal representatives of
a deceased partner may sell his interest A sale is treated as an
alteration. See references in note 20, p. 597, above.
S3 Michigan : A general or special partner may sell his interest
to any like partner or other person, and the firm name thus be al-
tered, prbvided a full certificate is filed and published and an aflS-
davit made. See reference in note 20, p. 697, above.
6 230) MI8GEL£4ANEOn8 STATUTOBT PROVISIONS 641
In California and New Mexico *• married women may be
special partners with their husbands or other persons. In
Illinois " it is expressly provided, as is true by implication
in every state, that a partner may bring suit to dissolve the
firm on account of his partner's fraud. In Indiana " there
are special provisions, not confined to limited partnerships,
for a surviving partner's winding up the business. In Louisi-
ana *• the certificate must be recorded within six days after
execution, and there are special provisions for the time for
recording it in other counties. A partner in commendam
may withdraw his capital if the firm attempts to use his
name, and is no longer liable if he publishes notice of with-
drawal in two newspapers. In Massachusetts and Ohio *•
there are special provisions for acknowledgment of the cer-
tificate where one or more partners reside outside the state.
In Massachusetts and Missouri '* the new certificate on re-
newal should state simply that the capital of the firm equals
or exceeds the original amount. In Massachusetts it should
state that this is true as to each special partner's contribu-
tion, while in Missouri it must state how much then stands
to the credit of the special partners. In Mississippi *• spe-
cial partners may be joined in a suit against the firm, but a
special partner may plead the contract of partnership in de-
fense, and be held only to the extent of his liability, deduct-
ing any debts he has previously paid. In New Jersey**
there is a special provision for additional renewals. In New
York ** it is provided that a special partner may lease to the
general partners. In North Carolina and Virginia ** the af-
fidavit filed at renewal may state that the capital was origfi-
nally paid in cash in good faith, and is now represented by
goods or merchandise. In Ohio ** any limited partnership
engaged in manufacturing or mining may rent, cultivate, or
improve its lands, as if this was within the scope of its reg-
ular business. In Pennsylvania ** a notice relating to lim-
ited partnerships must be published in the county legal jour-
nal, if any. There are elaborate provisons for the taxation
of limited partnerships. In Virginia** the certificate or "pa-
per" is to be indexed under the name of each partner and
*• See references in note 20, p. 597, abore.
Gil. Part. — 41
642 LIMITED PARTNERSHIPS (Ch. 11
the firm name in the record. In Virginia and West Vir-
ginia there are elaborate provisions for disclosure of the
principal by signs and published notices, when a business is
conducted by an agent.^* In many states there are recent
statutes requiring the recording of the true names of per-
sons doing business under other names than their own
names, including arbitrary and fictitious names, and names
suggesting a firm or corporation. In other states there are
provisions for "partnership associations" with transferable
shares. These are really joint-stock companies, and not
within the scope of this chapter. In Pennsylvania, besides
limited partnerships and joint-stock companies, there is a
special kind of "partnerships with limited liability," using
in the name the word "Registered," and organized to do
business within or without the state.** These registered
partnerships are simply another form of quasi-corporation,
practically similar to joint-stock associations.
Insolvency of Special Partner
In Indiana and Pennyslvania the statutes contain a pro-
vision that the insolvency of a special partner shall not dis-
solve the firm, but his interest may be sold by his assignee
or trustee.*' This seems a wise and useful provision, for
otherwise it would seem that the insolvency of a special
partner must work a dissolution of the firm, except in states
which permit the sale of a special partner's interest. The
insolvency of a general partner always works a dissolution
by operation of law.**
>• See references in note 20, p. 597, above.
a« 2 Purdon's Dig. (ISth Ed., 1903) pp. 8464^3467.
SB See reference in note 24, above.
«• Wilkins V. Davis, 2 Low. 511, Fed. Gas. No. 17,664. Bee "Part-
nership," Dec. Dig. {Key No.) §§ 271. 572; Cent. Dig. St 616, 84B.
§§ 231-232) AGTIONS 643
ACTIONS— BETWEEN MEMBERS— BETWEEN
FIRM AND THIRD PERSONS
231, Actions between members of a limited partnership are
subject to substantially the same rules as apply to
actions between members of a general partnership.
232. Actions between the firm and third persons may be
brought by and against the general partners only.
All suits brought by or against a properly formed lim-
ited partnership, either while it is a going concern or in
proceedings instituted to wind up its affairs, should be
bought in the names of the general partners only, in
the same manner as if there were no special partners.*^
In some states the statutes on this point are mandatory,**
and in others permissive.** Where, however, a special part-
ner has made himself liable as a general partner, he should
join or be joined as plaintiff or defendant as the case may
be.** And in some states he should be so joined when he
•
ST Lawrence v. Batcheller, 131 Mass. 504 ; Richter ▼. Poppenhaus-
en, 42 N. Y. 373. See ^^Partnership,'* Dec. Dig. {Key No.) { S75;
Cent. Dig. ^ 854.
>s Alabama, Alaska, Arkansas, California, Colorado, Connecticut,
Delaware, District of Columbia, Georgia, Hawaii, Idaho, lUinois,
Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mich-
igan, Minnesota, Mississippi (applicable only to suits against the
firm ; option to join any special partners), Nevada, New Hampshire,
Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Ver-
mont (against the firm), Virginia, Washington, and West Virginia.
See references in note 20, p. 697, above. So under Laws N. Y. 1822,
c. 244, I 18 ; Laws Conn. 1822, c 21, { 6 ; Rev. St N. Y. 1829.
29 Iowa, Missouri, Montana, Nebraska, New Jersey, New Mexico,
New York, North Carolina, North Dakota, South Dakota, Tennessee,
Texas, Utah, Wisconsin, and Wyoming. See references in note 20,
^ p. 597, above.
to Alaska, (Jolorado, Connecticut, Delaware, District of Columbia,
Georgia, lUinois, Indiana, Kentucky, Maryland, Maine, Massachu-
setts, Michigan, Minnesota, Missouri, Nevada, New Hampshire,
Ohio (special partner, liable as general, may sue or be sued), Oregon,
Rhode Island, South Carolina, Vermont, Virginia, Washington (all
partners may join), and West Virginia. In Georgia, the provision
is express that in such cases one or more of the special partners may
644 LIMITBD PARTNERSHIPS (Ch. U
is liable for sums received or withdrawn from the capital,**
In others, however, the suit should be against the special
partner individually; •* and this would seem to be the bet-
ter rule where there is no statutory provision, for the spe-
cial partner does not have the rights in the firm that a gen-
eral partner has, but is regarded as having a status more
like that of the stockholder of a corporation. His individ-
ual rights and liabilities should consequently be settled by
individual suits, except in cases where he has become by
operation of law subject to the liabilities of a general part-
ner ; and even then, as the imposing of general liability does
not confer full partnership rights, he should sue individ-
ually. Other provisions on this subject are referred to in
the note below.**
be Joined as defendants. See references In note 20, p. 5d7, aboTa.
So, also, nnder Laws N. Y. 1822, c. 244, | 13; Laws Conn. 1822, c.
21, i 6. Safe Deposit & Trust Go. ▼. Oahn, 102 Md. 580, 82 Atl. 819 ;
Hotopp ▼. Huber, 160 N. T. 624, 55 N. B. 208. See •'Purinenhipr
Dec, Dig. {Key Noj § S75; Cent. Dig. % 85t.
•1 Alaska, Colorado (in a suit by the other partners), Delaware,
Illinois, Indiana, Maine (in substance), Biassachusetts, Michigan,
Minnesota, Nevada, Oregon, Rhode Island, Vermont, and Washing-
ton. See references in note 20, p. 587, above.
ts Robinson v. Mcintosh, 8 E. D. Smith (N. T.) 221. See "Poit-
nership,** Dec. Dig. (Key No.) ^ S75; Cent. Dig. U 852, 854.
••In the District of Columbia and Maryland the general partners
whose names appear in the firm name are the only necessary de-
fendants^ The effect is the same as if aU the general partners were
sued, and if any special partner is found not liable. Judgment may
be entered against the other partners only. If a special partner is
afterwards found to be liable, a new suit may be brought against
him, in which Judgment is prima facie evidence of the amount due
from the firm. There is a somewhat similar provision in Koitucky.
In South Carolina, if a plaintiff Joining a special partner as de-
fendant flails to prove his liability, this is not ground for a nonsuit
In Virginia and West Virginia, the firm may sue a special partner
on any debt as if he were not a partner* See references in note 20
Pi 007, above.
TABLE OF CASES CITED
[THS FIOUBXB BBFBB to PAOS8]
Aas ▼. Benbam, 381, 882.
Abat T. Penny, 569.
Abbe, In re, ^7.
Abbot y. Bayley, 85.
Abbot T. Johnson, 363, 809, 569,
670.
.Abbot y. Smith, 235.
Abbott y. Jackson, 86.
Abell, Bz parte, 444.
Abendroth y. van Dolsen, 631.
Ackerman, Ex parte, 444.
Ackley y. Staehlin, 564.
Acree y. Com., 329.
Adams y. Bankart, 317.
Adams y. Beall, 80, 82.
Adams y. Church. 117.
Adams y. Funk, 484, 487.
Adams y. Hackett, 205, 229.
Adams y. Long, 307.
Adams y. Shewalter, 499, 588.
Adams & Co. y. Albert, 437.
Addams y. Tutton, 484.
Addison y. Gandasequi. 547.
Addison y. Overend, 541.
Adee y. Cornell, 298.
Ad kins y. Holmes, 166.
Adonsonia Fibre Co. y. Miles*
Claim, 125.
Adoue y. Wettermark, 419.
Adrian Knitting Co. v. Wabash B.
Co., 65.
iEtna Ins. Co. y. Wires, 252.
Airy y. Borhara, 386.
Alabama Fertilizer Co. y. Reynolds,
90.
Albee y. Wachter, 372.
Albright y. Lafayette Building &
Savings Ass*n, 57.
Alder v. Fouracre, 507, 517.
Alderson v. Popes, 546.
Aldrich y. Lewis, 485.
Aldridge y. Aldridge, 356.
Alexander y. Alexander, 488.
Alexander v. Mulhall, 317.
Alexander's Bx'rs y. Lewli, fPr4
Allan y. Garven, 481.
Allegheny Kat. Bank y. Bailey, 596.
Allen, In re, 600.
Allen y. Anderson. 465.
Allen y. Center Valley Co, 184,
185.
Allen y. Danielson, 447.
Allen y. Fleck, 532. 545.
Allen y. Kilbre, 518.
Allen y. Leighton, 328.
Allen y. Owens, 2i35.
Allen y. Withrow, 156.
Allen & Co. v. Davids, 112.
Alley y. Bowen-Merrill Co., 274,
284, 287, 300, 304.
Alliance Bank v. Kearsley, 302.
Allin y. Shadbume's Ex'r, 220.
Allison y. Abendroth, 252.
Allison y. Perr^, 94.
Alloway y. Brame, 496.
Alpausji y. Wood, 220.
Alsop y. Central Trust Co., 288,
288.
Altgelt y. Alamo Nat Bank, la
Altgelt y. D. Sullivan & Co., 574.
Ambler y. Whipple, 497, 506, 586,
587.
American Bonding Co. y. State,
458.
American Linen Thread Co. y. Wor-
tendyke, 270.
American Nat. Bank v. Branch, 449.
American Salt Co. y. Heidenheimer,
57.
Ames y. Downing, 356, 574, 598,
595, 637.
Amsinck v. Bean, 455, 559, 576.
Anderson y. Anderson, 494, 586.
Anderson y. Chenney, 420.
Anderson y. Lemon, 379.
Anderson v. Norton, 193.
Anderson y. Powell, 102.
Anderson y. Wallace, 519.
Andrewes v. Garstin, 591*
Andrews y. Keith, 413.
Gil. Past.
(645)
646
CASES CITB0
[The flguree refer to pagee]
Andrews' Heirs ▼. Brown's Adm'r,
164, 205, 206.
Andrews « Alexander's Case, 46.
Andriessen's Appeal, 591.
Angier y. Webber, 516.
Anglesea Collienr Co., In re, 136.
Anonymous, 519, 583, 584, 585.
Ansell v. Waterhoose, 549.
Apperly v. Page, 509.
Appleby, Ex parte, 438.
Appleby v. Brown, 467, 498.
Appleton v. Binks, 122, 546.
Apsey, E2x parte, 339.
4.rmand ▼. Burrum, 420.
Armory v. Francis, 448, 449.
Armstrong v. American Exch. Nat
Bank, 103.
Armstrong v. Fahnestockj569.
Armstrong t. Hayward, 222.
Arnold v. Arnold^ 480.
Arnold v. Brown, 289, 576, 586.
Arnold v. Conklin, 49. 50.
Arnold v. Danziger, 622.
Arnold v. Hagerman, 178, 180, 186,
187, 418.
Arnold v. Nichols, 249. 439.
Arnold t. Stevenson, 292.
Arthur v. Weston, 148, 149.
Artman v. Ferguson, 86.
Ashley v. Williams, 60.
Ashurst y. Mason, 391.
Ashworth y. Stanwix, 326.
Askew y. Silman, 209.
Aspinall y. London & N. W. R. Co.,
580.
Atkins, E^cparte, 430.
Atkins y. Hunt 46, 47, 48.
Atlantic State Bank y. Savery, 306,
319.
Atlas Nat Bank y. Sayery, 306.
Attorney General y. State Bank,
509.
Attorney General y. Stranyforth,
325,32a
At wood y. Maude, 588.
Aubin y. Holt, 514.
Ault y. Bradley, 431.
Aultman y. Fuller, 418.
Aultman & Taylor Co. ▼. Shelton,
283.
Aurora State Bank y. Oliver, 88.
Austin y. Appling, 269.
Austin y. Holland, 265, 266, 271.
Austin y. Neil, 16, 33.
Austin y. Yaughan, 468.
Auten y. EUingwood, 38.
Avery v. Craig, 569, 579.
Avery v. Everett, 79.
Ayer y. Ayer, 579, 585.
Aylett y. Walker, 475.
B
Babb y. Reed, 46.
Babcock y. Read, 96.
Bach y. State Ins. Co., 342.
Backhouse v. Charlton, 323.
Backus y. Fobes, 252.
Badeley v. Consolidated Bank, 32.
Badger y. Daenieke, 534.
Bagley v. Smith, 484.
Bagot ▼. Easton, 498.
Bailey v. Bancker, 561.
Bailey y. Clark, 278.
Bailey v. Ford, 523, 582.
Bailey y. Starke, 485.
Baily y. Homthal, 626.
Baird v. Baird's Heirs, 211.
Baker y. Baker, 127.
Baker y. Charlton, 72.
Baker y. Cummings, 377*
Baker v. Lee, 295.
Baker v. Nacbtrieb, 104.
Baker v. Robinson, 4^
Baker's Appeal, 184.
Baldridge v. Ea.son, 406.
Baldwin y. Richardson, 293.
Ball y. Dunsterville, 312.
Ball y. Farley, 133.
Ball v. Levin, 390.
Ballard v. Callison, 579.
Ballon v. Wood, 515, 516.
Bank of Alexandria v. Mandeville,
307.
Bank of British North America y.
Delafield, 464.
Bank of Buffalo y. Thompson, 115,
iia
Bank of Commerce y. Ada County
Abstract Co., 242.
Bank of Commerce y. Selden, 295i
Bank of Commonwealth v. Mudgett,
269.
Bank of Ft, Madison v. Alden, 282.
Bank of Mobile y. Andrews, 569,
574.
Bank of Monongahela Valley ▼.
Weston, 279.
Bank of ^f ontreal v. Page, 314, 344,
348, 568.
Bank of New Orleans y. Matthews,
78.
Bank of New York v. Vanderhorst
265.
Bank of Port Gibson y. Bangh, 343.
Bank of Rochester y. Monteath,
125.
Bank of South Carolina y. Case,
125.
Bank of State of North Carolina ▼.
Fowle, 580.
CASES CITED
[Th».flgure8 refer to pages]
647
Banks, Ez oarte, 451.
Banner v. Scblessinger, 833, 562.
Banner Tobacco Co. v. Jenison, 279,
283.
Bannister ▼. Miller, 186, 190, 194,
299.
Barber y. Barnes, 580.
Barber v. Crowell, 153.
Barclay v. Barrie, 583.
Barcroft v. Hawortb. 323.
Bardwell v. Perry, 400, 432, 500.
Barfield t. Loughborough, 136.
Barfoot ▼. Goodall, 268.
Baring v. Dix, 582,
Barkley v. Tapp, 579
Barklie v. Scott, 32.
Barlow y. Myers, 249.
Barlow Bros. Co. v. Parsons, 86.
Barnard t. Lapeer & P. H. Plank
Road Co., 281.
Barnes v. Boyers, 257.
Barnes t. Hekla Fire Ins. Ca,
249.
Barnes y. Jones, 363, 528.
Barnes y. Northern Trust Co., 345,
351.
Barnes y. Youngs, 571.
Bamett y. Lambert, 50.
Barney y. Pike, 156.
Bamstead y. Empire Min. Co., 581.
Barrett, In re, 312, 316.
Barrett y. Furnish, 405.
Barrett y. McKenzie, 500.
Barrow, Ex parte, 106.
Barrows y. Downs, 604.
Barry y. Fisher, 421.
Bartlett y. Levy, 33.
Bartlett y. Meyer-Schmidt Grocer
Co., 194, 227.
Bartlett y. Smith, 356, 358.
Bartlett y. Woodward, 421.
Barton y. Lovejoy, 20S, 342.
Bass, Ex parte, 445.
Bass y. Taylor, 345.
Bassett y. MUler, 205, 206, 228,
556.
Bassett y. Shepardson, 577.
Bates, Matter of. 447.
Bates y. Babcock, 4, 94, 98.
Bates y. Lane, 484.
Bates y. Wilson, 57.
Batty y. Adams Co., 293.
Bauchle y. Smylie, 213.
Bauerman, Ex parte, 441.
Baxter y. Buchanan, 529.
Baxter y. Portsmouth, 84.
Baxter y. West, 523, 588, 689.
Bayles y. Newton, 328.
Beacannon y. Liebe, 475.
Beach y. Hotchkiss, 467.
Beale y. Beale, 209.
Beale y. Caddick, 323.
Beam y. Macomber, 378.
Beaman y. Whitney. 46.
Beard y. Rowland. 32.
Beardsley y. Tuttle, 282.
Beataon y. Harris, 311.
Beatty y. Bulger, 284.
Beatty v. Wray, 386.
Beauchamp, £}x parte, 118.
Beaumont y. Meredith, 582.
Beaver v. Lewis, 569, 585.
Beck y. Kantorowicz, 506.
Becker v. Hill, 78.
Beckham y. Drake, 121, 323*
Bcckman v. Noble, 295.
Beckwith y. Mace, 282.
Beckwith y. Manton, 511*
Bedford v. Brutton, 482.
Bedford y. McDonald, 186.
Beecham y. Dodd, 59.
Beecher v. Bush, 8, 10, 16, 23, 26,
27. 33, 71.
Beede v. Fraser, 481, 487.
Bebrens y. McKenzie. 84.
Belcher v. Conner, 90.
Bell y. Fleming's Bx'rs, 449.
Bell y. Hudson, 495.
Bell y. Merrifield, 627, 633.
Bell y. Morrison, 347, 352.
Bell y. Newman, 438.
Bell y. Phyn, 157.
Bellas y. Fagely, 248.
Beller v. Murphy, 587.
Belser y. Tuscumbia Banking Co,
87.
Beltzhoover v. Stockton, 222.
Bemis y. Becker, 322.
Benchley v. Chapin, 235.
Bender v. Hemstreet. 289.
Benedict v. Davis, 6o.
Benid's Case, 28.
Benjamin y. Covert, 266.
Benjamin y. Porteus, 30.
Bennett v. Bnchan, 348.
Bennett v. Smith, 464.
Bennett y. Stickney, 317.
Bennett y. Woolfolk, 498.
Benninger v. Hess, 303.
Benson v. Hadfield, 253.
Bentley y. Brossard, 9.
Bentley y. Craven, 379.
Bentley y. Harris, 501.
Benton y. Mullen, 223.
Bentzen v. Zierlein, 312.
Berkshire Woolen Co. y. Juillard,
119.
Bernard & Leas Mfg. Co. y. Pack-
ard, 596.
Bernheimer y. Becker, 329, 331.
Bernheimer v. Rindskopf, 190, 191.
Berry y. Folkes, 571.
648
CASES CITBD
ITIit flcorw refer to pate4]
Beny ▼. GilliflL 222.
Berrr ▼. Harris, 422.
Bertfaold v. Goldsmith, 83.
Bery y. Callahan, 62.
Besch y. Frolich, 585.
Bestor y. Barker, 9.
Betts y. Gibbins, 391.
Betts y. ^une, 378.
Beyan, E2z parte, 451, 468.
Beyan y. Lewis, 518.
Beyerid^ y. Beyeridge, 366.
Bienenstok y. Ammidown, 319, 326,
336,33a
Bigelow y. Elliot, 272.
Bigelow y. Gregory, 54.
Bigelow y. Henniger, 319.
Blgnold y. Waterbouse, 319.
Binford y. Dommett, 398.
Bininger y. Clark, 126.
Binney y. Mutrie, 397.
Birchett y. BoUine, 511.
Birckhead y. De Forest, 837.
Bird y. Hamilton, 47, 49.
Bird y. Morrison, 96.
Birtwhistle y. Woodward, 422.
Bisel y. Hobba, 299.
Bishop y. Breckles, 571, 589.
Bishop y. Church, 232.
Bishop y. Georgeson, 62.
Bishop y. Hall, 533.
Bispham y. Patterson, 350.
Bissell y. Adams, 352.
Bissell y. Foss, 681.
Bixler y. Kresge, 79.
Black's Appeal. 225, 438.
Blackburn Bldg. Soc. y. Onnliffe,
302.
Blackmarr y. Williamson, 107*
Blackwell y. Claywell, 576.
Blackwell y. Rankin, 190. ^ .
Blain, Er parte, 118.
Blain y. Agar, 502.
Blair, In re, 456.
Blair y. Bromley, 322.
Blair y. Snoyer, 487.
Blair y. Wood, 567.
Blake y. Dorgan, 572, 588.
Blake y. Sargent, 177.
Blake y. Sawyer, 260.
Blake y. Sweeting, 76, 579.
Blake y. Third Nat Bank, 815,
394.
Blakeney y. Dufaur, 363, 520, 628.
Blaker y. Sands, 289, 570.
Blanch ard y. Blackstone, 124
Blanchard v. Floyd, 164.
Blanchard y. Paschal, 409.
Blanks y. Halfin, 269.
Blight's Heirs v. Tobin, 337.
BUna y. Byans, 301.
Blisset y. Danielt 866; 867» 507,
508, 571.
Bloch y. Price, 269.
Blodgett y. Sleeper, 668.
Blodgett y. Weed, 274.
Bloom y. Helm, 303.
Bloom y. Lofgren, 376.
Bloxham y. Pell, 12, 17.
Blue y. Leathers, 16.
Blumenthal y. Whitaker. 600, COl.
Blyth y. Fladgate, 239. 325, 333.
Boardman y. Adams, 286.
Boardman y. Gore. 278, 334.
Board of Trade of City of Seattle
y. Hayden, 87.
Boddam y. Ryley, 373.
Bodey y. Cooper, 312.
Bogget y. Frier, 86.
Bohanan y. Pope, 248.
Bohler y. Tappan, 343, 366L
Bo ce y. Jones, 277.
Bolitho, Ex parte, 126.
Bolton y. Puller, 177, 184.
Bond, Ex parte, 451.
Bond y. Gibson, 299, 300.
Bond y. Hays, 468, 469, 487.
Bond y. May, 493, 524.
Bond y. Pittard, 633.
Bonesteel y. Todd, 223.
Bonnell y. Chamberlin, 122.
Boor y. Lowrey, 321.
Booth y. Farmers' & Mechanics'
Nat. Bank, 466.
Booth y. Parkes, 218.
Bopp y. Fox, 94.
Borden y. Boardman, 247.
Boreing y. Wilson & Moss, 27, 32.
Borthwick y. Evening Post, 126.
Boskowitz y. Nickel, 390.
Boston & 0. Smeltidig Co. y. Smith,
33, 59.
Bostwick y. Champion, 16.
Botsford y. Kleinhaus, 253.
Bottomley y. Nuttall, 121, 546.
Boughner y. Black's Adm'r, 489.
Bovee y. De Jong, 120.
Bovill y. Hammond, 464, 467.
Bowden y. Howell, 535.
Bowen y. Argall, 617, 634, 635.
Bowen y. Richardson, 101.
Bowen y. Troy Portable Mill. Co.,
557.
Bowie ▼. Berry, 166.
Bowker y. Bradford, 86.
Bowker y. Burdekim 313.
Bowker y. Henry, 523.
Bowker y. Smith, 233.
Bowling's Heirs y. Dobyns' Adm'rs,
135.
Bowman y. Bailey, 169.
CASBS CITED
rrbe llsurw refer to pagwO
649
Bowman ▼• Spftldlng, 189.
Bowzer v. Stoughton, 462.
Boyce y. Burchard, 527.
Boyd V. Mynatt, 'SSS.
Boyd y. Plnmb, 306.
Boyd y. Thompson, 318.
Boyd y. Watertown Agrlcultnral
Ins. Co., 259.
Bozeman y. State Bank, 223.
Braches y. Anderson. 299.
Bracken y. Dillon, 551.
Bracken y. Kennedy, 464, 465, 467,
486, 491, 497, 498.
Bracken y. March, 299.
Bradbury y. Barnes, 380.
Bradbury y. Dickens. 516.
Bradbury y. Smith, 136, 62&
Bradford y. Johnson, 86.
Bradstreet y. Baer, 85, 86.
Brady y. Kreuger, 535.
Brady y. Powers, 89, 497.
Bragg y. Geddes, 568.
Branagan y. Buckman, 46.
Branch y. Adam, 420.
Branch y. Wiseman, 414.
Brandenstein y. Hoke, 52, 56.
Brandon y. Nesbit, 78.
Brandon & Dreyer y. Conner, 24.
Brandt y. Hall, 219.
Brayley y. GoflP, 311.
Bredow y. Mutual Sayings Inst,
356, 359.
Breinig y. Sparrow, 8, 67, 88, 92.
Breslin y. Brown, 90.
Bretherton y. Wood. 237.
Brewer y. Browne, 170.
Brewster y. Hammet, 416.
Brewster y. Hardeman, 350l
Brewster y. Mott, 562.
Brickett y. Downs, 291.
Brien y. Harriman. 582.
Briere y. Taylor, 6.
Briggs, E2z parte. 32.
Brigffs y. Kohl, 4, 60.
Brigham y. Bveleth, 469.
Brink y. New Amsterdam Fire Ins.
Co., 48.
Brinley y. Kupfer, 468, 469.
Brinsmead y. Harrison, 237.
Brister y. Joseph Bowling Co., 120.
Bristol y. Spragde, 340.
Bristol & Sweet Co. y. Skapple, 60.
Bristow y. Lane, 248.
British Waggon Co. y. Lea, 555.
Broadbent, Ex parte, 296.
Broadway Nat. Bank v. Wood, 437.
Broderick y. Beaupre, 372.
Bromley ▼• Elliot, 33.
Bromley y. Williams, 506.
Brooke y. Enderby, 261.
Brooke t. Eyans, 241.
Brooke y. Tucker, 84.
Brooke y. Washington, 96, 274.
Brooks y. Brooks, 355.
Brooks y. Martin, 377, 602.
Brooks y. Stuart, 222.
Brooks y. SuUiyan, 297.
Broom y. Broom, 158.
Brown y. Agnew, 471.
Brown y. Allen, 214.
Brown y. Bamberger. 349.
Brown y. Beecher, 5o0.
Brown y. Bostian. 124, 313.
Brown y. Byers, 304.
Brown y. Chancellor, 85, 87, 677.
Brown y. Corbin, 57.
Brown y. Hartford Fire Ina. Co.,
323.
Brown y. Hicks, 33, 582.
Brown y. Hutchison, 76.
Brown y. Jewett. 85.
Brown y. McFarland's Ex'r, 886.
Brown y. O'Brien, 248.
Brown y. Orr, 387.
Brown y. Slee, 156, 211.
Brown y. Tapscott, 465, 486.
Brown's Appeal, 135.
Browne & Jenkins Co., In re, 66.
Browning y. Maryin, 456.
Brozee y. Poyntz, 123.
Bruce y. Hasting^, 96.
Bruett & Co. y. F. C. Austin Drain-
age Excayator Co., 531, 534.
Bruns y. Heise, 491, 49a
Branson y. Morgan, 151.
Bryant y. Clifford, 291.
Bryant y. Fitzsimmons, 38.
Bryant y. Lord, 340.
Bryant y. Wardell, 477.
Buchan ▼. Sumner, 163, 164, 167,
426.
Buchanan y. Clark, 257.
Buchanan y. Curry, 317. '
Buchoz y. Grand jean, 317.
Buck V. Alley, 625, 640.
Buck y. Smith, 494, 511.
Buckhause, In re, 430.
Buckingham y. Ludlum, 136b
Buckley y. Barber, 173, 206, 228,
556.
Buckley y. Buckley, 164.
Buckley y. Doig, 156.
Bucklin y. Bucklin, 439.
Buckner y. Ries, 470.
Buffalo City Bank v. Howard, 269.
Buffum y. Buffum, 92.
Buffum V. Seaver, 227.
Bufkin y. Boyce, 526.
Buford y. Lewi?, 32.
Buford y. Neely, 57flt
Bulger y. Rosa, 189.
Bull y. Coe, 484.
650
CASES CITED
[The figures refer to pagee]
BuIIard y. Kinney, 462, 465.
Bullen V. Sharp, 20, 21. 23, 24.
Bullock V. Chapmen, 519.
Bullock Y. Hubbard, 4. 89.
Bumpus v. Turgeon, 563.
Bunnell v. Taintor'g Adm'r, 94.
Burchinell v. Koon, 212, 343, 357.
Burdon v. Barkus, 130.
Burg y. Allen, 91.
Burgan v. Lyell, 274, 320, 322, 323.
Burgen v. Dwinal, 219.
Burgess v. Badger. 386, 586i
Burke v. Roper, 46, 494.
Burleigh v. White, 323.
Burley v. Harris, 461, 464.
Burmester y. Norris, 301.
Bum y. Bum, 312.
Burnell y. Hunt, 49, 414.
Burnett, Ex parte, 444.
Burnett y. Snyder, 9, 75, 106, 601.
Bumey y. Boone, 464.
Buraey y. Savannah Grocery Co.,
87.
Bnmham y. Kidwell, 84.
Burns y. Nottingham, 461, 480, 481.
Bums y. Rosenstein,. 582, 589.
Burr y. De La Vergne, 382.
Burr y. Williams, SS2.
Burroughs* Appeal, 307.
Burt y. Lathrop, 45.
Burton y. Goodspeed. 33.
Burton y. Wookey, 375, 383.
Burwell y. Cawood, 574.
Burwell y. Springfield, 564.
Burwits y. Jeffers, 537.
BuTv y. Allen, 388, 502.
Busby y. Rooks, 564.
Busgers y. Merrill, 81.
Bush y. aark, 211, 225, 355, 431.
Bush y. Linthicum, 79, 81. 82.
Butchart y. Dresser, .347, 357, 359,
368.
Butler y. American Toy Co., 6b
Butler y. Butler, 88, 390.
Butler y. Hinckley, 62.
Butler y. Toy Co., 88.
Butler Paper Co. v. Cleyeland, 57.
Butler Savings Bank y. Osborne,
37.
Buxton y. Lister, 511.
Buzard y. McAnulty, 47.
Byam y. Bickford, 151.
Byington v. Woodward, 68«
Byrnes y. Claffey, 260.
Byrd y. Fos, 89.
Cabell y. Vaughan, 237, 535.
Cadwallader v. Kroesen, 315.
Cady y. Kyle, 322.
Cady y. Shepherd, 346, 350.
Cain Lumber Co. y. Standard Dry-
Kiln Co., 48.
Calder y. Rutherford, 355, 556.
Caldicott v. Griffiths, 45.
Caldwell y. Bloomington Mfg. Co.,
191.
Caldwell y. Lang, 385.
Caldwell y. Leiber, 385, 399.
Caldwell y. Scott, 194.
Caldwell y. Stileman. 264, 347.
Calkins y. Smith, 489.
Callahan v. Heinz, 298.
Callender y. Robinson. 425.
Calvert y. Marlow, 358.
Calvert y. Miller, 356, 360.
Camden y. Mullen, 86.
Cammack v. Johnson, 425.
Camp y. Grant, 233, 432, 557.
Campbell y. Bowen, 364.
Campbell y. Campbell, 161, 167.
Campbell y. Hastings, 62.
Campbell y. Mathews. 315.
Campbell y. Mullett, 379.
Campbell y. Rich Oil Co., 521, 623,
524.
Campbell y. Sherman, 59.
Cannon y. Alsbury, 81.
Cannon y. Lindsey, 315.
Cannon y. Wildman, 314.
Capen v. Barrows, 91, 486, 490.
Cape Sable Co.'s Case, 572.
Capital Food Co. y. Globe Coal Co.,
395, 427.
Caplen v. Cox, 377.
Capper's Case, 50.
Carey y. Burmss, 85.
Caris y. Nimmons, 320.
Carlen y. Drury, 494.
Carlin y. Druiji 505.
Carmichael y. Greer, 266.
Carpenter y. Camp, 372.
Carpenter y. Greenop, 46L
Carr v. Herts, 365.
Carrie y. Cloverdale Banking &
Commercial Co., 171.
Carrier v. Cameron, 307.
Carrol y. Blencow, 85.
Carroll v. Evans, 580.
Carter y. Beckwith, 84.
Carter y. Lipsey, 338.
Carter y. Pomeroy, 349.
Carter y. Roland, 72, 76, 416.
Carter y. Whalley. 112, 272.
Carver y. Dows, 300.
Carver Gin & Mach. Co. y. Bannon,
185.
Case *y. Beauregard, 181, 184, 186,
193,424.
Case V. Seger, 95, 96.
Casey y. Bru«h, 460.
CASES CITED
[The figures refer to pages]
651
Cash ▼. Gash, 120.
Cash T. Eamshaw, 571, 580.
Cashbom v. English, 165.
Casky v. Casky, 164, 583.
Cassidy t. Hall, 66.
Cassidy ▼. Saline County Bank,
278, 279.
Castill, Ez parte, 442.
Castle Bros. ▼. Graham, 120.
Caswell y. Cooper, 488.
Catherine C, The, 620.
Causler y. Wharton, 94. 95.
Cavander y. Bulteel, 402.
Cayton v. Hardy, 289.
Central Bank of London, Ex parte,
267.
Central City Sayings Bank y. Walk-
er, 66.
Central R. Co. of New Jersey t.
Pennsylyania R. Co., 57.
Central Trust & Safe Deposit Ca t.
Respass, 100, 102, 103, 360.
Chadsey y. Harrison, 460, 462.
Chaffraix v. Price, 35.
Chamberlain y. Dow, 269.
Chambers y. Howell, 211.
Champion y. Bostwick, 38, 825, 827.
Chandler y. Lrlncoln, 418.
Chandler y. Sherman, 371.
Channon y. Stewart, 501.
Chapman y. Beach, 524, 529.
Chapman y. Biames, 33.
Chapman y. Hughes, 8.
Chapman y. Koops, 417.
Chappell y. Allen, 34&
Chappie V. Cadell, 507.
Chappie y. Dayis, 300.
Charlesworth y. Jennings, 590.
Charlton y. Ponlter. 372. 516, 517.
Charlton y. Sloan, 374, 387.
Chase y. Deming, 545.
Chase y. Garyin, 461.
Chase y. Vaughan, 251.
Chayasse, E2z parte, 101.
Cheeseman y. Price, 587, 588.
Chemung Canal Bank y. Bradner,
306.
Cherry y. Owsley, 83.
Cheshire, The, 101.
Chester y. Dlckerson, 4» 95, 98, 99,
292,333.
Chicago Lumber Co. y. Ashworth,
153.
Childs, In re, 225.
Childs y. Dobbins. 80.
Childs y. Hurd, 53.
Childs y. Hyde, 556, 557.
Chipman, In re, 408.
Chippendale, Ez parte, 389.
Chissum y. Dewes, 138.
Chiswell y. Gray, 432.
Chittenden y. German-American
Bank, 294, 296.
Chittenden y. Witbeck, 380.
Choctaw Lumber Co. y. Gilmore.
120.
Choppln V. Wilson, 580.
Choteau y. Raitt, 531.
Christian y. Illinois Malleable Iron
Co., 235.
Christopherson y. Olson, 460.
Christy s Appeal, 491.
Church y. First Nat Bank, 562,
565.
Church y. Sparrow, 301.
Churton y. Douglas, 138, 139, 142,
146, 518.
Cilley y. Van Patten, 484.
Citizens' Bank of Ferry y. Williams,
226.
City Bank of Brooklyn y. McChes-
ney, 269.
City Discount Co. y. McClean, 259.
City of Carondelet y. Desnoyer*s
Adm*r, 222.
City of Maquoketa y. Willey, 184.
City of St. Louis y. Shields, 52.
City of Spokane y. Patterson, 828.
Claggett y. Kilboume, 497.
Clancy y. Craine, 96.
Clap, In re, 252.
Clapp y. Adams, 401.
Clapp y. Lacey, 593, 594
Clapp y. Rogers, 2^.
Clapp y. Upson, 270.
Clark y. Allen, 294.
Clark y. Ball, 277.
Clark y. Billings, 251.
Clark y. Carr, 579.
Clark y. Cushing, 413.
Clark y. Dibble, 487.
Clark y. Gridley, 497, 498, 501,
504.
Clark y. Johnson, 300.
Clark y. Kensell, 60.
Clark y. Rawson, 220,
Clark y. Reed, 341.
Clark V. Rives, 295.
Clark y. Wilson, 576.
Clark y. Worden, 398.
Clark's Appeal, 128.
Clarke y. Mills, 470.
Clay V. Carter, 299.
Clay V. Field, 164, 347, 354
Clay y. Freeman, 173, 354.
Clay y. Vanwinkle, 86.
Clayton y. Davett, 391.
Clayton y. May, 401.
Clayton's Case, 261.
Cleather y. Twisden. 335.
Cleayer y. Scheetz, 85.
Clegg y. Edmondson, 496^
662
CASES CITBD
ITte flgnrw Tttw to p«g<M]
Clegf T. Fiflhwick* 87&
Clement ▼. Clement, 863.
Clement t. Fire Ins. An*n» 828.
Clement ▼. Foster, 500.
Clement t. Norria, 868.
dementi ▼• Bowes, 600.
dementi ▼. Jessup, 418.
Clements ▼. Norris, 366, S80,
Clemontson ▼. Blessig, 78.
Cleveland ▼. Woodward, 646.
Cleveland Paper Co. y. Courier Cto.,
88
difford ▼• Brooke, 602.
Clifton T. Howard, 86.
dif ton & Wadkina ▼. B07M Ctotton
Oil Co^ 60.
douffh. In re, 867.
CoaUey ▼. Weil, 184.
Coatea v. Coatee, 618,
Coatea t. Preston, 219.
Cochran v. Cunningham's Bz*r. 860,
660, 662.
Cochran t. Perry, 679.
Cock T. Bailey. 601.
Cock V. Evans' Heiis, 136.
Cocke ▼. Branch Bank, 808.
Cockerfaam v. Boslev, 209, 212, 868.
Cockle T. Whiting, 171.
Cockmm t. McCracken, 87*
Coffin y. Day, 193.
Coffin's Appeal, 190.
Cof ton y. Homer, 494, 618.
Conwell y. Wilson. 413, 418.
Cohn y. Wahn, 627.
Cole y. Butler, 62.
Oole y. Moxley. 76, 671.
Cole y. Price, 687.
Cole y. Reynolds, 480, 472, 477.
Coleman y. Eyre, 89, 90.
Coleman y. Lansing, 246.
Coleman y. Marble, 495.
Coleman y, Pearce, 322.
Coleman y, Whitney, 249.
Colgrove y. Tallman, 256.
Coliamer v. Foster, 487.
Collett y. Smith, 320.
CoUey y. Smith, 466.
Collier ▼. Field, 222.
Collins y. Butler, 128.
Collins y. Collins, 313.
Collins ▼. Decker, 95.
Collins y. Warren, 170L
Collins y. Young, 625.
Collins' Appeal, 172.
Collman y. Mills. 238. 326.
Collumb y. Read, m, 156, 161.
Collyer y. Moulton, 261, 252.
Colt y. Wollasten, 591.
Columbia Nat. Bank v. Rice, 291.
Colwell ▼• Weybosset Nat. Bank,
427.
Compton y. Thorn. 49S.
Conant y. National State Bank, 86L
Condon y. Callahan, 866.
Conely y. Wood, 277.
Conner y. Piatt, 166.
Conkling y. Washington University
of Maryland. 427.
Connell v. Mulligan, 96.
Conrad y. Buck, 340, 348.
Conrader y. Cohen. 441.
Conroy y. Campbell, 898.
ConroT y. Woods, liB4, 180L
Consalns v. McConihe, 246.
Const y. Harris, 364, 366» 619, 628.
Continental Nat. Bank y. Strauas,
80, 596, 600, 638.
Cook, Ex parte. 480, 431, 432.
Cook, In re, 186w
Cook y. Canny, 486.
Cook y. Carpenter, 48.
Cook y. Gray, 124.
Cook y. Martin, 69.
Cook y. Penrhyn Slate Co.. 6QL
Cooke y. Batchelor, 641.
Cookson y. Cookson, 167*
Coon V. Pruden, 319.
Co^ns y. Coons, 4, 71.
Coope y. Eyre, 39. 593.
Cooper y. Hood, 514.
Cooper y. Webb, 609l
Coover's Appeal. 201*
Copes y. Fulls, 366.
Corbett, Ex parte, 117.
Corbett v. Poelnitz, 86.
Corbin y. Boies, 633.
Cornells V. Stanhope, 564
Comer v. Mackey, 393.
Coster y. Clarke, 165, 166.
Coster's ESx'rs y. Bank of Georgia,
427.
Costley y. Towles, 499.
Costley y. Wllkerson's Adm'r, 355.
Cothran v. Marmaduke, 26.
Cottle y. Harrold, 295.
Cottle y. Leitch, 58&
Cotton v. Evans, 306.
Cotton Plant Oil Mill Co. y. Buck-
eye Cotton Oil Co., 367.
Cotzhausen v. Judd, 281, 564, 665.
Coudrey y. Gilliam, 176.
Course v. Prince, 465.
Coursin's Appeal, 378.
Courson v. Parker, 532.
Courtland Forging Co. v. Ft Wayne
First Nat. Bank, 357.
Coville y. Gilman, 504, 6OO1
Covington v. Sloan, 537.
Cowand v. Pulley, 109.
Coward v. Clantou, 94.
Cowell y. Watts, 496.
Cowman y. HaU. 166^ 16QL .
CASBS CITED
triM llsurw refer to pases]
653
Goz ▼. Hickman, 19.20. 28. 24, 26,
26, 81, 85, 71, 106, lllT287, 645.
Cox y. Peters, 624.
Cox y. Swofford Bros. Dry Goods
Co. 296.
Cox y. Volkert, 400, 520, 524.
Coxe y. State, 52.
Crabtree y. May, 80.
Craft y. McOoooughy, 100, 102.
Cra|^ y. Gardner, 557.
Craik y. Hulschizer. 568, 664, 666.
Crane y. Ailing, 222.
Crawshay y. Collins, 187.
Crawshay y. Manle, 98» 611, 627.
Cresler y. Dnrliam, 272.
Crellin y. Brook. 286.
Crispe y. Perritt 444.
Crittenden y. Hill, 297.
Crockett y. Burleson, 488.
Croft V. Day, 127.
Crook y. Davis. 62.
Crooker y. Crooker, 416.
Groone y. Bivens, 184.
Cropper y. Cobum, 510.
Crosby y. Hammerling, 581.
Crosby y. McDermitt, 400.
Crosby y. Timolat, 460, 472, 478,
475.
Cross y. Cheshire, 489.
Cross y. Williams, 99.
Crosthwait y. Ross, 801, 804.
Crouch y. First Nat Bank, 000,
63a
Grow y. Green, 464.
Crowder, Ex parte, 482.
Cruikshank y. McVicar, 502.
Crumless y. Sturgess, 828.
Cmttwell y. Lye, 188.
Cndahy Packinfr Co. y. Hibou, 9.
CummiDgs y. Morris, 466.
Cummins y. Oassily. 812, 8ia
Cundey y. Hall, 418.
Cunningham y. Bragg, 350.
Cunningham y. Monroe, 559.
Cunningham y. Woodbridge, 819.
Currey v. Warrington. 219.
Currier y. Webster. 484.
Gurry y. Kurts, 345.
Curry y. White, 360. 352.
Gushing y. Marston, 531.
Dale y. Hamilton, 90. 95. 96, 613.
Dana y. Gill, 464. 486.
Dana y. Steams, 80.
Danbury Cornet Band y. Bean, 99.
Daniel y. Daniel, 564.
Daniel y. Gillespie, 491, 497.
Dantel y. Gwens, 417.
Daniel y. Schultx, 65.
Daniel y. Toney, 124.
Darby y. Darby, 158. 161.
Darby y. Gilligan, 180, 180.
Darrow y. BrufC, 685.
Darrow y. Calkins. 156, 167, 168,
160.
Darrow y. H. R. Horns Prodnce
Co., 537.
Dart y. Laimbeer. 484.
Davenport y. Buchanan, 95, 96.
Davenport v. Gear, 461, 480, 481.
David, In re, 141.
David y. Davis, 504, 606.
David y. BUioe, 251.
David Belasco Co. y. Klaw, 878.
Davidge v. Guardian Trust Co. of
New York, 537. .
Davis, Ex parte, 49.
Davis V. Allen. 272.
Davis y. Amer. 514, 518, 529.
Davis y. Christian, 156, 674.
Davis V. Cook, 299.
Davis v. Davis. 92, 181, 493. 504,
506, 607.
Davis v. Dodson. 283, 284.
Davis y. Eivans, 48.
Davis y. Gelhaus, lOjO, 339.
Davis v. Gerber, 96, 96.
Davis y. Grove, 500, 520.
Davis v. Megroz, 579.
Davis y. Merrill, 461, 464.
Davis v. Poland, 352.
Davis y. Ruff, 541.
Davis v. Sanderlin. 613.
Davis y. Smith. 156. 161. 857. 666.
Davis y. Sowell, 355, 358, 359.
Davis y. Willis. 266.
Davison v. Donaldson, 266. ^
Davison y. Roberteon, 803.
Dawson v. Gurley. 89.
Dawson v. Iron Range ft H. B. R.
Co., 421.
Dawson v. Parsons, 161, 167, 169.
Day y. Merritt. 352.
Day V. Stafford. 500.
Day y. Wetherby. 254.
Dayton v. Bartlett 356, 856.
Dayton v. Wilkes, 342.
Dean v. Dean, 133. 135.
Dean v. MacDowell, 374, 882.
Dean v. Newhall, 222.
Dean y. Phillips. 235.
Dean Co. v. Collins. 255.
Dean's Heirs v. Michell's Helis,
165.
Dean & Co. v. Collins. 267.
Deaner v. CHara, 379.
Dearborn v. Keith, 576.
Dearborn v. Parks, 248.
Deardorfs Adm'r y. Thadisr, 100,
302. 3oa
654
CASES CITBD
tTbe figures refer to pages]
De Camp ▼. Bates. ^5.
Deckard ▼. Case, 196, 297.
Decker y. Howell, 107.
Deckert ▼• Chesapeake Western Co.,
631.
Deckert t. Filbert, 343.
Deeks y. Stanhope, 509.
Deering t. Flanders, 260.
Deerly y. Mazarine, 85.
Deford y. Reynolds, 272.
De Gallow y. L'Aizle, 83.
De Graum y. Jones, 85.
De Groot y. Peters, 519.
De Jarnette's Ek'r y. McQueen,
480.
Dell, In re, 446.
Delmonico y. Guillanme, 164, 207,
357.
De Manderfield y. Field, 579.
De Mautort y. Saunders. 545.
De Mott y. Kendrick, 344.
Denman y. Dosson, 266.
Denning, In re, 428, 446.
Dennis y. Kass & Co., 410.
Densmore Oil Co. y. Densmore,
876.
Dent y. Slough, 838.
Denyer y. Roane, 346, 356, 385,
386, 497, 49S, 499, 509, 586.
Derush y. Brown, 165.
De St Aubin y. Laskin, 59i.
Desha y. Holland, 532.
Detastel, Ex parte, 444.
De Tastet y. Bordenare, 516.
De Tastet y. Bordicu, 527.
Detroit y. Robinson, 323.
Deyall y. Burbridge, 370.
Deyaynes y. Noble, 232, 261, 264.
Dewey y. Chapin, 210. 213.
Dewit y. SUniford, 461.
Dexter y. Arnold, 135.
Dexter y. Dexter, 131.
Dickinson y. Dickinson, 264,266.
Dickinson y. Valpy, 47, 281, 285,
304, 308, 646.
Dickson y. Dryden, 295.
Didlake y. Roden Grocery Co., 206,
210.
Dilley y. Abright, 19, 25.
Dillon, In re, 446.
Dimon y. Hazard, 185.
Dimond y. Henderson, 371.
Dixon y. Hammond, 205, 229.
Dixon y. Hamond, 556.
Dob y. Halsey, 564.
Dobbin y. Foster, 554.
Doboy ft Union Island Tel. Co. t.
De Magathias, 52.
' Dodd y. Dreyfus, 552.
Dodd y. Tarr, 466.
Doddington y. Hallet, 401.
Doggett y. DiU, 233, 458, 557.
Doggett y. Jordan, 59.
Doll y. Hennessy Mercantile Mlg.
Co., 289. 500, 541.
Donaldson y. President, etc, of
State Bank, 172, 500.
Donaldson y. Williams, 368.
Doner y. Stauffer, 200.
Donnell y. Harshe, 16, 35, 175.
Donnell y. Jones, 541.
Dorwart y. Ball. 470.
Doty y. Bates, 303.
Douglas y. Patridc, 313> 315.
Douglas y. U. S., 57&
Douglas y. Winslow, 176.
Dounce y. Parsons, 336.
Doutbit y. Douthit, 481.
Dow y. Moore, 109.
Dow y. State Bank of Sleepy Bye,
47, 49.
IX>wling y. Clarke, 470.
Downing, In re, 439, 457.
Downing y. LinyiUe, 315.
Downs y. Collins, 514.
Downs y. Short, 468, 479.
Dowzelot V. Rawlings, 348, 850l
Doyle y. Bailey, 48.
Drake y. Elwyn, 59.
Drew y. Bank of Monroe, 2191.
Drew y. Beard, 495, 524.
Drew y. Ferson, 385, 465.
Drew y. Nunn, 84.
Drewry y. Montgomery, 167.
Dreyfus y. Union Nat. Bank, Ud.
Drilling y. Armstrong, 16.
Drinkwater y. Jordan, 222.
Driver y. Burton, 535.
Drucker y. Wellhouse, 117.
Diy y. Boswell, 15, 30.
Dudgeon y. (yConnell, 312, 82a
Dudley y. Love, 239, 325.
Duff y. Maguire, 465^ 477.
Duffleld y. Brainerd, 574.
Duffy y. Gray, 541.
Duguid, In re (D. C.) 83.
Duke of Argyll, The, 68.
Dulany y. Elford, 59.
Dull y. Reynolds Electric Flashtf
Mfg. Co., 483.
Dumanoise y. Townsend, 220.
Duniont y. Ruepprecht, 588.
Dunbar y. Bullard, 95.
Duncan y. Liowndes, 303, 308.
Duncan y. Luntley, 502.
Duncan y. Lyon, 467, 485.
Dunham y. Gillis, 484. 486.
Dunham y. Hanna, 184.
Dunham y. Loyerock, 45, 60l
Dunham y. Presby, 101.
Dunham y. Rogers, 33.
Dunkerson, In re, 431.
CASES CITED
[Tlie figurw refer to pases]
655
Dunlap y. Watson, 885.
Dunman y. Coleman, 557*
Dunn y. McNaught. 682.
Dunne y. English, 379.*
Dunnell y. Henderson, 133.
Dunnett & Slack y. Gibson, 285.
Dunnica y. Clinkscales, 227.
Dunnigan, In re (D. G.) 83.
Dunton y. Brown, 79, 80.
Dupont y. McLaran, 580.
Dupuy y. Leayenworth, 164.
Durant y. Abendroth, 599, 607, 619.
Durant y. Pierson, 343, 574.
Durant y. Rogers, 826, 337.
Durborrow's Appeal, 172.
Durgln y. Somers, 323.
Duryea y. Burt, 75, 581.
Dutton y. Morrison, 414, 456, 500.
Dwigbt y. Simon, 336.
Dwinel y. Stone, 9, 35.
Dyer y. Clark, 164, 169.
Dyer y. Monday, 328.
Dyer y. Sutherland, 311, 318, 562.
Eady y. Newton Goal & Lumber
Co., 284.
Eagle Mfg. Co. y. Jennings, 251«
Early y. Burt, 252.
Earon y. Mackey, 245, 341.
Eastman y. Clark, 23, 30.
Eastman y. Cooper, 282.
East Norway Lake Church y. Frois-
lie, 58.
Easton y. Strother, 380.
Eastwood y. Bain, 546,
Eaton y. Graham, 94.
Eaton y. Walker, 52, 55.
Eaton y. Whitcomb, 315.
Eckert y. Clark, 386.
Eckhardt y. Wilson, 456, 55a
Eddy y. Fogg, 383, 499.
Edens y. Williams, 4S7.
Edgerly y. Gardner, 46.
Edison Electric Illuminating Go.y.
De Mott, 394.
Edmundson y. Thompson, 66.
Edwards y. Dillon, 811, 312.
Edwards y. McFall, 272.
Edwards y. Remington, 485.
Edwards y. Tracy, 25, 274.
Edwards y. Warren Linoline ft
Gasoline Works, 604.
Edwards* Estate, In re, 192.
Efean V. Wirth, 210.
Egberts y. Wood, 212, 228, 843,
574.
Effgleston y. Boardman, 586.
Ehrhardt y. Stevenson, 49.
Eichbaum y. Irons, 220.
Eighth Nat. Bank y. Fitch, 415.
Elder y. Hood, 479.
Elder's Appeal, 466.
Eliot y. Himrod, 607.
Elliot y. Brown, 164, 206.
Elliott y. Brown, 517.
Elliott y. Davis, 123.
Elliott y. Dycke, 294.
Elliott y. Hawley, 86.
Ellis y. Commander, 518.
Ellis y. MiUs, 87.
Ellis' Adm'rs y. Bronson, 272L
Ellison y. Chapman. 486.
Ellison y. Lucas, 185.
Ellison y. Sexton, 271.
Elmira Iron & Steel Rolling-MiU
Co. y. Harris, 272.
Elton, Ex parte, 432, 444.
Emerson y. Baylies, 311.
Emerson y. Durand, 339, 385, 396.
Emerson y. Senter, 212, 358.
Emery y. Canal Nat. Bank, 458.
Emery y. Parrott, 490.
Emery y. Wilson, 90.
Emly y. Lye, 122. 125, 299.
Empire Mills y. Alston Grocery Co.,
55.
England y. Curling, 7, 49, 611, 512,
516,
England y. Downs, 138.
Englar y. Offutt, 338.
Englis y. Furniss. 476b
Enix y. Hays, 533.
Ennis y. Williams, 2^6.
Ensign y. Wands, 278.
Enterprise Oil & Gas COb x. Na-
tional Transit Co., 283^
Epping y. Aiken, 491.
Erben y. Heston, 390.
El-win y. Downs, 318.
Esmond y. Seeley, 37S.
Espy y. Comer, 167.
Essex y. Essex, 98, 158, 514.
Estabrook y. Messersmith, 564i
Estes, In re, 431.
Estes y. Whipple, 461, 465.
Estwick y. Conningsby, 527.
Euless y. Tomlinson, 569.
Eustis y. Bollfs, 264, 576.
Evans y. Coventry, 523, 527.
Evans y. Drummond, 254.
Evans y. Evans, 527.
Evans y. Gibson, 380.
Evans y. Hanson, 138.
Evans y. Hawley, 401.
Evans y. Montgomery, 591.
Evans y. Richardson, lOL
E2vans y. Smallcombe, 49&.
Evans y. Virgin, 407.
£>rerhart t. Everhart, 92.
666
CA8B8 CITSD
[The figurM refer to pecet]
ETerhart** Appeal, 96.
Ereritt t. Chapman, 68, 69.
Bverly t. Durborrow, ^8.
Ewart V. Naye-McCoid Mercantile
Co., 203.
Ewin^r V. Osbaldiston, 102, 401.
Exchange Bank of Leon t. Gard-
ner. 874.
Exchange Bank of St Louis ▼• Bice,
247.
Exposito T. Bowden, 678.
Fair t. Oitizens' State Bank, 122.
Fairbank t. Leary, 102.
I^irbanks, Morse & Go. t. Wel-
shans, 212.
Fairbum t. Pearson, 628, 629.
Fairchild t. Fairchild, 96.
Fairchild t. Holly. 2ti0, 261.
Fairchild t. Valentine, 60a
Fairfield t. Day, 265.
£\iirly v. Nash, 11, Sa
Fairthome t. Weston, 49% 608»
524, 689.
Faith T. Richmond, 121.
Falkner ▼. Hunt, 96. 96.
Fall River Whaling Co. t. Borden,
95.
Fall's Y. Hawthorn, 848.
Fancher t. Bibb Furnace Co., 817.
Fanning ▼. Chadwick, 468, 469,
480.
Farber ▼. Granarie, 86.
Faris t. Cook, 122.
Farley t. CleTeland, 662.
Farley ▼. Lovell, 668.
Farley v. Moog, 416^17, 600.
Farmer t. Bank of Wickliffe. 288.
Farmer t. Samuel, 135, 380.
Famham. In re, 463.
Famsworth v. Boardman. 696.
Famum v. Bou telle. 449.
Famum ▼. Patch, 9, 46w
Farr t. Pearce, 92.
Farrar t. Definne, 272.
Farrell t. Friedlander, 239, 831.
Farris t. Morrison, 291.
Farwell ▼. St Paul Trust Co., 814,
402.
Farwell t. Tyler, 471.
Fawcett T. Whitehouse, 870, 376,
606.
Fay ▼. Burditt 84.
Fayette Nat. Bank t. Kenney's As-
signee, 438.
F. Dobert & Son. In re, 209.
Featherstone v. Hunt. 255.
Featherstonhaugh ▼. Fenwick, 880.
Featherstonhaugb t. Turner, 614.
Fechteler t. Palm Bros. & Co., 8^
70.
Fellows T. Wyman. 849L
Fenton ▼. Block, 666.
Ferguson v. Baker, 485.
Fergusson t. Fyffe, 322.
Ferguson y. Hanauer, 293.
Ferguson y. Wright 460.
Fern y. Gushing, 4S>6.
Fernandez y. De la Rosa, 92,
Perns v. Carr. 92.
Ferrero y. Buhlmeyer, 671. 680, 68&
Ferry ft Co. Y. Mattoz « Tomer,
•406.
Person y. Monroe, 190l
Person y. Sanger, 222.
Fessler y. Hickemell. 466w
Fetrow y. Wiseman, 79.
f^ttrecht Y. Armstrong, 344
Fichthom y. Boyer, 812.
Field Y. Bunk, 220.
Fields T. Creditors of Wheatley,
449.
Fifth AYe. Bank y. Colgate, 600,
622.
Filbum Y. lYers, 378, 88jOl
Filley y. Phelps, 176.
Filley y. Walker, 72.
Fillyau y. Laverty, 238.,
Fipcb, Ex parte, 372.
Finch Y. Simon. 222.
Findlay y. Hosmer. 447*
Finkle Y. Stacey, 39.
Finn y. Young. 376.
Finnegan y. Noerenberg, 62.
Firemen's Ins. Co. y. Floss, 122,
646.
Firestone y. Firestone, 166, 166.
First Nat Bank T. Brubaker. 200.
First Nat Bank y. Cody, 48, 48,
359.
First Nat Bank y. Conway, 821.
First Nat Bank y. Ells. 347.
First Nat Bank y. Freeman, 290,
303c
First Nat Bank y. Green. 253. 264.
First Nat Bank y. Parsons, 3431
First Nat Bank y. Rowley. 285.
First Nat Bank y. Stadden, 27.
First Nat. Bank y. State SaY.
Bank, 279. 807, 41&
Fischer y. Raab, 686.
Fish Y. Farwell. 644.
Pish Y. Gates. 631.
Fisher y. A. Y. McDonald Co., 67.
Fisher y. Marsh, 588, 648.
Fisher y. Pender, 123, 813.
Fisher y. Sweet 462.
Fisher y. Tnylor, 302.
Fisher y. Wigg, 43.
Fiske T. Gould, 60a
CA8B8 CITBID
[TIm figarw refer to pages]
657
Fitch ▼. Harrington, 60.
Pite V. Dorman, 142.
Fitz y. Reichard* 213.
Fitzgerald t. Flynn, 510w
Fitzpatrick t. Flannagan, 500.
Flammer t. Green, 588.
Flanagan v. Shuck, 161, 164.
Fleming y. BillingB, 426.
Flemyng y. Hector, 45.
Fletcner y. Ashbum, 154.
Fletcher y. Ingram, 274, 335.
Fletcher y. Pullen, 63, 67, 6&
Fletcher y. Vandusen, 212t515.
Flour City Nat Bank y. Widenar,
251.
Flower y. Bamekofl, 4, 95, 96, 98,
100.
Fogg y. Johnston. 589, 590.
Fogg y. Lawry, 414.
Folds y. Allardt, 80.
Folsom y. Marlette, 396, 5081
Foot, In re, 429.
Forbes y. Garfield. 358.
Forbes y. Wbittemore. 56, 67.
Ford y. Smith, 33, 417.
Ford y. Whitmarsh, Hurlstone ft
Walmsley, 66.
Fordyce y. Shriyer, 874.
Forman y. Homfray, 504, 508.
Forney y. Adams, 564.
Forster y. Hale, 95, 96, 97.
Forster y. Lawson, 541.
Forster y. Mackreth, 305.
Forsyth T. Woods, lOl, 228^ 227,
394.
Foss y. Harbottle, 494.
Foster y. Allanson, 480, 485.
Foster y. Barnes, 417, 418.
Poster y. Fifield, 565.
Foster y. Hall, 580.
Foster y. Johnson, 158.
Foster's Appeal. 292.
Fougner y. Gnicago First Nat.
Bank, 9.
Fouke y. Brengle, 25.
Fountain y. Menard, 95.
Fourth Nat Bank y. New Orleans
& C. R. Co., 76, 171, 172, 175*
198. 500.
Fourth St Nat Bank y. Whitaker,
600, 622.
Fouse V. Shelly, 375, 376.
Fox y. Clemmons, 285.
Fox y, Clifton, 58, 64.
Fox y. Curtis, 297, 526.
Fox y. Hanbury. 73, 264, 454, 676.
Fox's Appeal, 406.
Francis y. Dickel, 86.
Francis y. Maxims, 154.
Frank y. Anderson, ^, 431.
IVankenstein y. North, 94.
Gil.Pabt.-42
Franklin y. Hoadley, 820.
Franklin Sugar Renning Co. y. Hen*
derson, 194.
Franz y. Wm. Barr Diy Gooda Co.,
88.
Frasch, In re, 449.
Fraser y. Kershaw, 525.
Frazer y. Frazer Lubricator Co^
127.
Freedman y. Holberg, 226, 227.
Freeland y. Stansfeld. 525.
Freeman, Ex parte, 372, 43a
Freeman y. Bloomneld, 72.
Freeman y. Carpenter, 302.
Freeman y. Fairlie, 372.
Freeman y. Freeman, 212, 490, 501*
Freeman y. Hemenway, 579,681.
Freeman y. Stewart. 233, 500.
Freligh y. Miller, 72.
Fremont First Nat Bank y. Rioa,
86.
French y. Andrade. 205, 214.
French y. Chase, 425.
French y. Indrade, 229.
French y. Styring, 16, 29, 31, 87,
38
French y. Vanatta, 165, 88a
Friedlander y. Hillcoat 83.
Friend v. Duryee, 301.
Friend v. Young, 260.
Frink y.' Branch. 131.
Fritz y. Fritz, 393.
Fromont y. Coupland, 464, 481.
Frost y. Wolf. 156. 294.
Frothingham y. Seymour, 90.
Frow's Estate, In re. 486.
Fry y. Potter, 468, 470.
Frye & Bruhn y. Phillips, 245, 251.
Fi^er y. Harker, 376, 401.
Fuller y. Ferguson, 104.
Fuller y. Percivai, 303, 306, 490.
Fuller V. Rowe, 53, 56.
Fuller & Fuller Co. t. McHenry,
87.
Fulmer's Appeal, 135.
Fulton y. Williams, 123, 304, 464.
EMnck y. Heintze, 348.
Funk V. Babbitt 306, 307.
Fumess y. Union Nat. Bank, 447. .
Furze y. Sharwood, 125.
Gable y. Williams. 210, 212.
Gabriel y. Eyill, 6a
Gabriell y. EMU, 49.
Gaddie y. Mann. 380. 587.
Gage y. Parmelee, 135, 872,
Gage y. Rogers, 270.
Gaines y. Beirne, 567.
65S
CASBS CITBD
[The flffurM refer to pages]
Gaines y. Gaines' Ex'r, 160.
Galbraith y. Gedge, 104.
Galbraith y. Tracy, 167.
Gale Y. Leckle, 483.
Gale V. Miller. 349.
Gallagher's Appeal, 185.
Galway y. Fullerton, 295.
Gamble y. Rural Independent
School Dist of Allison, 205, 22a
Gammon y. Huse, 464.
Gano Y. Samuel, 109.
Gantt Y. Gantt 95.
Gard y. Clark. 345.
Gardiner y. Ghilds, 299, 300.
Gardiner y. Fargo, 464, 46a
Gardner y. Conn. 348.
Garland, Ex parte, 74.
Garland y. Kacomb, 304.
Garrett y. Handley, 535.
Garretson y. WeaYer, 521, 524.
Garth y. DaYis & Johnson, 95, 277,
Gasely y. Separatist's Soc. of Zoar,
104.
Gaston y. Drake, 101.
Gates Y. Beecher, 340, 346.
Gates Y. Bennett, 294.
Gates Y. Fisk, 353.
Gates Y. Fraser, 94.
Gaut Y. Reed, 233.
Gay Y. Johnson, 83.
Gay Y. Waltman, 317.
Gearing y. Carroll, 607.
Geddes y. Wallace. 91.
George y. Grant, 633.
George y. Tate, 290, 295.
George y. Wamsley, 193.
Georgia, S. & F. R. Co. y. Mercan-
tile Trust & Deposit Co., 52.
Geortner y. Trustees of Canajohar-
ie, 341, 345.
Gerard y. Basse, 196, 309.
Gerard y. Bates, 501.
Gerard v. Gateau, 571, 586, 587,
588, 589. 591.
Gere y. Clarke. 224.
Gerhardt y. Swaty, 335.
Geril Y. Poidebard Silk Mfg. Co.,
290.
German Bank t. Schloth, 316.
German Mining Co., In re, 389.
German SaY. Bank y. Wulfekuhler,
319.
Gershner y. Scott-Mayer Commis-
sion Co., 61.
Geurinck y. Alcott 5.
Gibblett y. Read. 137.
Gibbs Y. Bates. 302.
Gibbs Y. Humphrey, 428, 430, 442
Gibbs' Estate, In re, 41, 52.
Gibson y. Cunningham, 591.
Gibson y. Goldsmid, 514.
Gibson y. Lupton, 31, 39.
Gibson y. Moore, 487.
Gibson y. Warden, 311.
Giddings y. Palmer, 403.
Gilbert y. Emmons, 331, 832.
Gilbert & O'Callighan y. Anderson,
377.
Gilkerson-SloBS Commission Cow y.
Salinger, 86.
Gill Y. First Nat. Bank, 333.
Gille Y. Hunt, 148, 150, 153.
Gille Hardware & Iron Co. y. Mc-
CleYerty, 19.
Gillen y. Peters, 485.
Gillett Y. Hall, 498.
Gillett Y. Higgins, 522, 623.
Gilliam y. Loeb. 488.
Gillilan y. Sun Mut. Ins. Co., 311,
314, 341, 344, 3169.
Gillow Y. Lillie, 304.
Gilmore y. Ham, 341, 350.
Gilman y. Vaughan, 135, 508^
Gilruth Y. Decell, 319, 338.
Gimpel y. Wilson, 503.
Glade y. White, 480, 489.
Glasscock y. Smith, 349.
Glassington y. Thwaites, 382, 516.
Gleason y. Whote, 461.
GloYer Y. Hembree, 385.
Glynn y. Phetteplace, 465, 504.
Goddard y. Hodges, 260, 465.
Goddard y. Pratt, 266, 268.
Goddard y. Renner, 294.
Goddard-Peck Grocery Co. T. Mc-
Cune, 194.
Godfrey y. TurnbulL 267.
Godfrey y. White, 371, 390, 396.
Goell Y. Morse, 29, 40.
Goesele y. Bimeler, 104.
Golding Y. Vaughan, 205.
Goldsmid y. CasenoYe, 451.
Goldsmith y. Koopmaxi. 377*
Goldsmith Y. Sachs, 484.
Goldstein y. Nathan, 95.
Goldthwait y. Day, 399.
Goldthwaite y. Janney, 294.
Goodbar y. Gary, 191.
Good bum y. SteYens, 164.
Goode Y. Harrison, 79, 80.
Goodman y. Whitcomb, 275. 370,
371, 521, 522, 523, 526, 528, 586,
587.
Goodnow Y. Smith, 222.
Goodspeed y. Wiard Plow Co^ 346.
Gordon y. Albert, 3a3, 344, 562.
Gordon y. Freeman, 313.
Gordon y. Funkhouser, 196» 813.
Gordon y. Gordon, 131.
Gordon y. Miller. 79.
Gorman y. Russell, 46, 49i»
Gorry y. Chiswell, 458.
CASBS CITBD
[The figurM refer to pagec]
659
Gould T. Kendall. 101.
Gowan v. Jeffries. 523?. 588.
Grace v. Smith. 12, 13, 14, 17, 19,
^24. 25, 29. 30.
Graham ▼. Holt. 461.
Graham t. Hope, 260.
Graham t. Meyer, 326, 327.
Graham t. Robertson, 535, 558.
Gram v. Gadwell, 311.
Granger ▼. McGilvra, 344.
Grant ▼. Dlebold Safe Co., 24&
Graser t. Stellwagen, 289.
Gratz V. Bayard, 574.
Graves ▼. Insurance Co., 823.
Graves v. Merry, 268.
Gray v. Chiswell, 229, 232.
Gray v. Gibson. 48, 72.
Gray v. Green, 341, S42,
Gray v. Haig, 373.
Gray v. Palmer, 104.
Gray v. Pearson, 46.
Greatrez v. Greatrex, 371, 517.
Great Western Ins. Co. v. Cunliffe,
502.
Green t. Barrett. 691.
Green v. Smith. 154.
Green v. Stacy, 499.
Green v. Tanner. 302.
Green v. Waco State Bank, 269.
569. 572.
Green v. Waring, 569.
Greene v. Butterworth. 45&
Greene v. Graham, 164.
Greenslade v. Dower. 302.
Greenwald v. Kaster. 222.
Greenwood v. Brodhead, 500.
Greenwood v. Marvin, 167.
Greer v. Ferguson, 295.
Gregg V. Hilsen, 222.
Gregg V. James, 314.
Gregory v. Pierce, 85.
Gribben v. Maxwell. 83.
Gridley t. Conner. 482.
Gridley t. Dole, 465.
Grlffee t. Griffee, 254.
Griffin ▼. Cooper, 9.
Griffin t. Spence, 355.
Griffith V. Vanheythuysen, 600.
Griffith ▼. Willing. 498.
Grigsby's Ex'r ▼. Nance, 485.
Grim's Appeal, 354, 499.
Grissom t. Hofius, 236.
Grissom v. Moore, 167.
Griswold v. Haven. 322.
Griswold v. Waddlngton, 78, 264,
561, 578, 585.
Groenendyke v. Coffeen, 495.
Grojan v. Wade. 536.
Grosvenor v. Uoyd. 272.
Groth V. Kersting, 394, 397, 503.
Groth T. Payment, 587.
Grotte V. Weil. 25&
Grover v. Smith, 291. 563, 564.
Groves v. Wilson. 624.
Grund ▼. Van Vleck. 326.
Guccione v. Scott, 90.
Guidon t. Robson. 532, 533.
Guild V. Beldier. 308.
Guillon V. Peterson. 336, 63QL
Guiterman v. Wishon, 120.
Gulick V. Gulick, 254, 322.
Gumbel v. Koon, 425.
Gunnison v. Langley, 9.
Guthiel V. Gilmer. 27&
Guy ton v. Flack, 529.
Gwin V. Selby, 190.
Gwynn v. Duffield, 325.
Gwynn v. Gwynn, 85, 86L
Gyger's Appeal, 386, 503.
H
Haase v. Morton & Morton, 23&
Habershon v. Blurton, 500, 580.
Hackett v. Stanley, 24, 33.
Hackley v. Patrick. 330, 35L
Hackwell t. Eustman, 499.
Haddock v. Crocheron. 352.
Haddock v. Grinnell Mfg. Corp.,
600. 613, 640.
Haeberly's Appeal, 579.
Hagan v. Hoover. 86.
Hage V. Campbell. 295.
Haegerty v. Foster. 600, 607, 611.
Uahn ▼. 'St Clair Sav. & Ins. Co.,
321
Haigbt V. Burr, 527.
Halderman v. ualderman, 480*
Hale V. Hale. 528.
Haley v. Case, 325.
Hall V. Barrows, 141.
Hall V. Clagett, 345. 371.
Hall V. Hall, 515. 521, 522, 527,
528,
Hall V. Huffman. 204.
Hall V. Jones, 254, 257.
Hall V. Kimball. 475.
Hall V. Lanning, 221. 263, 317.
Hall Y. Logan, 477.
Hall V. Thayer. 45.
Hallack v. March, 31*2.
Haller v. Willamowicz. 488.
Hallet V. Desban. 33.
Hallett V. Cumston, 501.
Halliday v. Bridewell, 9.
Halliday v. Carman, 484.
Hallowell v. Blackstone Nat. Bank,
115, 116, 218, 235.
Hallstead v. Coleman, 60.
Halsey v. Fairbanks, 311.
Halsey v. Norton. 456, 576.
Halstead t. Shepard, 343, 565.
860
CASBS CITBD
[The flgoTM refer to peget]
Halsted t. Schmebsel, 46a
Halt Y. Ward, 81.
Hamer ▼. Giles, 503.
Hamil t. Stokes, 591.
Hamill t. Hamill, 526.
Hamilton, In re (D. C.) 4, 89.
Hamilton t. Halpin. 104, 169.
Hamlin t. Mansfield, 200.
Hammersley v. Knowljs, 260.
Hammond, Ex parte, 457.
Hammond y. Donslak 187, 140.
Hamper, Bx parte, 17.
Hamsmith t. Bspy, 406.
Hancock ▼. Haywood, 66&
Hand t. Rogers, 544.
Haney Ufg. Go. t. Perkins, 289,
OwS(Sk
Haney & Campbell Mfg. Co. t.
Adasa Co-operatiye Creamery Co.,
Hanford t. Prouty, 186.
Hanger t. Abbott, 7&
Hanks T. Baber, 479.
Hanna t. McLaughlin, 588.
Hanna t. Wray, 209.
Hannaman t. Karrick, 76, 671«
Hansen t. Miller, 344.
Hanson t. Cordano, 259.
Hanway t. Robertshaw, 164.
Hapgood Y. Cornwell, 185.
Hardin y. Dolge, 295.
Harding y. Olover, 523, 524, 627.
Hardy y. Weyer, 576.
HargraYs y. Conroy, 501.
Harington y. Sendall, 46.
Harker y. Conrad, 260.
Harlan y. Moriarty, 422.
Harland y. Lilienthal, 100.
Harlow y. La Brum, 876, 377, 690,
591.
Harman y. Johnson, 804, 336.
Harman y. Stuart, 895.
Harper y. Goodsell, 298.
Harper y. McKinnis. 288.
Harper y. Wrigley, 816.
Harrill y. DaYis. 56.
Harrington y. Churchward, 601.
Harris, Bx parte, 428.
Harris y. Baltimore, 295, 304.
Harris y. Parwell, 251, 254.
Harris y. Harris, 460, 466.
Harris y. Peabody, 440.
Harris y. Phillips, 413.
Harrison yw Armitage, 607.
Harrison y. BeYington, 541, 542.
Harrison y. Close, 222.
Harrison y. Fitzhenry, 533.
Harrison y. Jackson, 196. 309, 81Z
Harrison y. Righter, 500.
Harrison y. Tennant, 582, 687, 689.
Hart Y. Alexander, 268.
Hart Y. Bostwick, 694.
Hart Y. Hiatt. 408.
Hart Y. Myers, 386.
Hart Y. Withers, 123, 8ia.
HarUey y. White, 291.
Hartman y. Woehr. 48, 687.
Hartman's Appeal, 226.
Harts Y. Schrader, 517, 518, 62L
Hartsell y. Murray, 479.
Harvey y. Childs, 6.
Harvey y. Vamey, 497, 502.
Hasbrinck y. Childs, 397.
Haskins y. Burr, 47.
Uaskins y. D*Bste, 119, 2ia
Haskins y. Bhrerett, 414, 416, 4ia
Haslet Y. Street, 817.
Hassard y. Tomkins, 269.
Hasselman y. United States Mortg.
Co., 63.
Hatch Y. Wood, 645.
Hatchett Y. Blanton, 18Q, 131, 561,
569.
Hatchett & Large v. Sonset Brick
& Tile Co., 278, 301.
Hatzfeld y. Walsh, 89&
Hang Y. Haug, 92.
Hauptmann v. Hauptmana, 169.
Havener v. Stephens, 587.
Haviland y. Chace, 627.
Hawes y. Waltham, 421.
Hawken v. Bourne, 28.
Hawkins Y. Appleby, 333.
Hawkins y. Hawkins, 517.
Hawkins y. Mahoney, 438, 458L
Hawkins y. Ramsbottom, 559.
Hawley y. Tesch, 338.
Hawn v. Seventy-Six Land ft Wa-
ter Co., 314.
Hawn Y. Water Co., 84a
Hawtayne v. Bourne, 30L.
Hawtayne v. Bume, 281*
Hayden, Bx parte, 439.
Hayden v. Cretcher, 340, 848b
Hayes y. Bement, 593.
Hayes y. Heyer, 635.
Hayes Y. Knox, 552.
Hayman, Bx parte, 435, 430L
Haynes y. Brooks, 209.
Haynes y. Seachrest, 293.
Haythom y. Lawson, 541.
Hayward y. French, 302.
Haywood y. Harmon, 318.
Hazell Y. Clark, 19, 668.
H. B. Claflin Co. y. Bvans, 297.
298.
Head, In re, 254.
Heap Y. Dobson, 241.
Heartt y. Walsh. 314. 844, 86S.
Heath y. Gregory, 123.
Heath y. Sansom. 579.
Heath y. Van Cott. 393.
CA8SS CITBD
(The flgurw refer to paged]
661
Heath ▼• Waters, 209, 386.
Heathcot v. Ravenscroft, 528L
Heaton, Dz parte, 389.
Hebblethwaite v. Flint, 390.
Heckert y. Fegely» 299.
Heckman t. Messinger, 431.
Hedley t. Bainbridge, 108, 301
Heenan t. Parmele, 566.
Hefferlin y. Karlman, 282, 337.
Heffron y. Hanaford, 307, 321*
Hefner y. Palmer, 66.
Heilbnt y. NeyiU, 658.
Heimatreet y. Howland, 33.
Heineman y. Hart, 190.
Heirn y. McOaughan, 237, 324.
Helen, The, 101.
Hellman y. Schwarts, 245.
Helme y. Smith, 484.
Helmore y. Smith, 515.
Henderson y. Hudson, 96.
Henderson y. Ries, 395.
Henderson y. Wild, 313.
Hendren y. Wing, 147.
Hendrick y. Lindsay, 248.
Hendy y. March, 38.
Henkel y. Heyman, 593, 612.
Henn y. Walsh, 526.
Hennessy y. Western Bank, 297,
298.
Henry y. Jackson, 46.
Henry y. Simanton, 55.
Henry Bill Pub. Co. v. Utley, 260.
Henshaw y. Root, 59.
Hensley y. Bagdad Sash Factory
Co.. 406.
Heran y. Hall, 398.
Herbert y. Odlin, 319.
Hercy y. Birch, 511.
Herkimer, The, 90.
Herman Kahn Co. y. A. T. Bow-
den & Co., 67.
Hermann Loog y. Bean, 518.
Herron y. Wampler, 360.
Hersey y. Tully, 50.
Hershfield y. Claflin, 414b
Hesham, Ek parte, 442.
Hesketh y. Blanchard, 71.
Hess Y. Ferris, 62.
Hess Y. Final, 466.
Hess Y. Lowrey, 324, 325.
Hewitt Y. Hayes, 205.
Hewitt Y. Kuhl, 466.
Heydon y. Heydon, 413, 414, 417,
454.
Heyhoe y. Burge, 30, 40, 91.
Heyman y. Heyman, 87, 587.
Heyne y. Middlemore, 409.
Hibberd y. Hubbard, 213.
Hichens y. Congreve, 506.
Hicks Y. Cram, 66.
Hicks Y. Russell, 348.
Hier y. Kaufman, 318.
Higgins, Bx parte, 234.
Higgins Y. Senior. 548.
Hikes Y. Crawford, 122.
Hill, Bx parte, 440, 45L
HiU Y. Beach, 65.
Hill Y. HcPherson, 464.
Hill Y. Miller, 378.
Hill Y. Palmer, 484, 486.
Hilliker y. Loop, 632, 538.
Hillock Y. Traders* Ins. Co., 823.
Hills Y. Bailey, 465.
Hillyard y. Mutual Ben. Life Ins.
Co., 78.
Hilton Y. Vanderbilt, 314. 341, 344.
Hind Y. Holdship, 248.
Hlnes Y. Dean, ^d3.
Hinkson y. Eryin, 602.
Hinton y. Hinton, 165.
Hirbour y. Reeding, 92, 95.
Hiscock Y. Phelps, 176, 401.
Hitchcock, Ex parte, 439.
Hite's Heirs y. Hite*s Ex'n, 387,
495.
Hoagland, Matter of, 47.
Hoaglin y. C. M. Henderson &
Co., 87.
Hoard y. Clum, 212.
Hoare y. Contencin Bro., 232.
Hoare y. Dawes, 40, 71.
Hoare y. Oriental Bank Corp., 226.
Hobart y. Ballard, 529.
Hobbs y. McLean, 101, 402.
Hobbs y. Ray, 484.
Hobbs y. Wayet, 392.
Hobson y. Porter, 59.
Hodge y. Twitchell. 379.
Hodges y. Dawes, d3.
Hodges' Distillery Co., In re, 136.
Hodgkinson, Ex parte. 312.
Hodgson, Ex parte, 432.
Hodgson, In re, 234.
Hodgson y. Baldwin, 46.
Hoeflinger y. Wells, 122.
Hoff y. Rogers, 462.
Hoffman y. Porter, 151.
Hogan y. Hadzsits, 622, 626.
Hogan y. Walsh, 493, 507.
Hogarth y. Lathan, 308.
Hogarth y. Wherley, 314. -
Hogendobler y. Lyon, 343.
Hogg V. Orgill, 307, 613, 627.
Hogg's Ex'r y. Ashe, 211.
Hoile Y. Bailey, 246, 562.
Hoile y. York, 47.
Holbrook, In re, 450.
Holbrook y. Lackey, 174, 20Bt
Holbrook y. Nesbitt, 142.
Holbrook y. Oberne, 33.
Holbrook y. Wight, 318.
Holden y. Thurber, 387.
662
CASES CITED
[The figures refer to pages]
Holden*8 Adm'rs ▼. McMakin, 141,
a42, 525, 527.
Holder v. Shelby, 528, 587.
Hole y. Bradbury, 555.
Holgate V. Downer, 47.
Holiaday v. Elliott, 582.
Holladay y. Laud & Itlyer Imp.
Co., 156.
Holland y. King, 216.
Holland y. Long, 266.
Hollenbaek y. Moore, 339.
Holliday y. Union Bag & Paper
Co., 600, 605.
Hollingshead y. Curtis, 407, 543.
Hollis y. Burton, 321.
Hollister y. Simonson, 591.
Holman y. Nance, 480.
Holme y. Hammond^^23, 28.
Holmes y. Burton, 299.
Holmes y. Higgins, 50, 460, 465.
Holmes y. Jarrett, 148.
Holpaes y. McCray, 94.
Holmes y. Mentze, 416, 417.
Holmes y. Old Colony R. Corp., 33.
Holmes y. Self, 164.
Holroyd y. Holroyd, 158.
Holt V. Allenbrand, 270.
Holt y. Simmons, 109, 266.
Holtgreye y. Wintker. 266.
Holton y. Guinn, 38, 167.
Holyoke y. Mayo, 485.
Homer v. Wood, 563.
Homfray y. Fothergill, 614.
Honey, Ex parte, 452.
Hood y. Aston, 517.
Hook y. Kenyon, 87.
Hook y. Stone, 298.
Hooley y. Gieye, 212.
Hoopes y. McCan, 245.
Hopkins y. Carr, 254.
Hopkins y. Thomas, 295.
Horn y. Newton City Bank, 109,
305, 823.
Home y. Ingraharo, 94.
Horrell y. Witts, 525.
Horst y. Roehm, 347.
Horton yl Bloedorn, 295.
Horton y. Child, 123.
Horton's Appeal, 580.
Hoskins y. Velasco Nat. Bank, 543.
Hoskinson y. EUot, 108, 109, 123,
124, 301, 313.
Hotckin y. Kent, 277.
Hotopp y. Huber, 596, 631, 644.
Hottenstein y. Conrad, 363, 528.
Houghton y. Houghton, 1'58, 166.
Houghton y. Puryear, 70.
Houston y. Stanton, 104.
Howard y. Patrick, 464.
Howard y. Pratt, 393, 568.
Howard y. Priest, 95, 164.
Howe y. Howe, 35.
Howe y. Lawrence, 186.
Howe y. Sayory, 532.
Howe y. Shaw, 549.
Howe y. Thayer, 59.
Howell y. Adams, 269, 270.
Howell y. Brodie, 49.
Howell y. Harvey, 77, 571, 582,
586, 587, 589.
Howell y. Kelly, 95.
Howell y. Reynolds, 551.
Howland y. Davis, 318.
Hoxie V. Carr, 129.
Hoxie y. Chaney, 142.
Hoxie y. Farmers* & Mechanics*
Nat Bank, 236.
Hoyt y. Sprague, 174, 212, 402,
495.
Hubbard y. Curtis, 416, 500, 523.
Hubbard y. Galusha, 290, 318.
Hubbard y. Matthews, 346, 578.
Hubbard y. Moore, 588.
Hubbard y. Ten Brook. 120.
Hubbardston Lumber Co. y. Bates,
318, 319.
Hubbardston Lumber Co. y. Cov-
ert, 117.
Hubble y. Perrin, 418.
Hudgins v. Lane, 457. .
Huffer y. Riley. 85.
Huger y. Cunningham, 399.
Hughes y. Gross, 243, 551.
Huiskamp y. Moline Wagon Co.,
185, 193.
Hull, Ex parte, 444.
Humble v. Hunter, 536, 537.
Hume y. Watt, 318.
Humes y. Higman, 131, 242.
Humphreys v. Mooney, 56.
Hunt y. ChapizL 304.
Hunt y. Colorado Milling & Eleva-
tor Co., 271.
Hunt y. Elliott, 94.
Hunt y. Gorden, 498.
Hunt v. Reilly, 486.
Hunt y. Royal Assur. Co., 323.
Hunter, Ex parte, 432.
Hunter v. Martin, 405.
Hunter v. Pfeiffer, 102.
Hunter v. Waynick, 289.
Hunter y. Whitehead, 95, 591.
Hurley v. Walton, 39.
Hussey y, Jewett, 81.
Huntington v. Potter, 311.
Huston y. Neil, 167, 169.
Hutchins v. Bank of State, 269.
Hutchins v. Hudson, 266.
Hutchins v. Sims, 270.
Hutchins y. Turner, 329.
Hutchinson v. Dubois, 414, 415.
Hutchinson y. Nay, 145.
CASES CITBD
[Th« figurM refer to pages]
663
Hutchinson y. Smith, 338.
Hutchinson v. Wright, 506.
Hutton T. Laws, 500.
Hyatt T. Van Riper, 56.
Hyde ▼. Casey-Grinshaw Marble
Co., 21d.
Hynes v, Stewart, 501*
Hyre v. Lambert, 426.
Hyrne t. Erwin, 328.
I
Imperial Loan Co. y. Stone, 84.
Ingala y. Ferguson, 70.
Ingham Lumber Co. y. IngersoU &
Co., 534.
Inglis y. Floyd. 580.
Innes y. Lansing, 636.
Innes y. Stephens«on, 314.
Irvine y. Forbes, 364.
Irwin y. Bidwell, 47.
Irwin y. Williar, 277, 281, 282,
283, 287.
Isler V. Baker, 264, 584.
Ives y. Miller, 401, 405, 466.
Ives y. Muhlenburg, 531, 543.
Ivy y. Waliter, 46i
J
Jackson, Ex parte, 439.
Jackson v. Akron Brick Ass'n, 102.
Jackson y. Bailey, 259.
Jackson y. Deese. 582.
Jackson y. Haynie*8 Adm*r; 33.
Jackson y. Johnson, 398.
Jackson y. Mayo, 81.
Jackson y. Sedgwick, 7.
Jackson y. Stopherd, 487.
Jackson Bank v. Durfey, 186, 103.
Jacksonville, M. P. & Nav. Co. y.
Warriner. 356.
Jacobs y. Fountain, 467.
Jacomb y. Harwood, 232.
Jacquiny. Buisson, 527, 604, 637.
Jacquin y. Jacquin, 86.
J affray y. Frebain, 81.
J affray v. Jennings, 407, 408.
James, In re, 396.
James Reilly Repair & Supply Co.
y. Gallagher, 67.
Jamison y. Charles F, CuUom &
Co., 280.
Janes y. Whlthbread, 21.
Janney y. Springer, 290. 315, 402.
Jansen y. Grimshaw, 269.
Jaques y. Hulit, 480.
Jarcckl Mfg. Co. y. McBlwaine,
457.
Jarvis y. Brooks, 394.
Jauncy y. Knowles, 589.
Jeffereys y. Small, 164, 204, 206.
Jefferson y. Asch, 249.
Jefferys y. Smith, 527.
Jenkins y. Blizara, 271.
Jenkins y. Jenkins, 80, 128.
Jenner y. Shope, 120.
Jennings y. Baddeley, 582, 583.
Jennings y. Broughton, 591.
Jennings y. Jennings, 142.
Jennings y. Rickard, 375, 382.
Jennings' Adm'r y. Chandler, 212,
499.
Jeuning*s Appeal, 363, 366.
Jervis y. Wnite, 517.
Jewell y. Ketchum, 485.
Johnson y. Barij, 300.
Johnson y. Berlizheimer, 356, 359.
Johnson y. Crichton, 564.
Johnson y. Foster, 260.
Johnson y. Gordon, 438.
Johnson y. Jackson, 398.
Johnson y. Kaiser, 214.
Johnson y. Kelley, 460.
Johnson y. King, 421.
Johnson y. McDonald, 601.
Johnson y. Totten, 266.
Johnson y. Wilson, 465, 466.
Johnson y. Wingfield, 415, 416,
418.
Johnson Bros. y. Carter & Co.,
18, 32.
Johnson, Nesbitt & Co. y. £lrst
Nat. Bank, 531.
Johnson's Appeal, 378.
Johnston y. Bernheim, 368, 369.
Johnston y. Dutton's Adm'r, 364,
365, 366, 367.
Johnston y. Eichelberger, 47, 49.
Johnston y. Straus. 500.
Jonau y. Blanchard, 596.
Jones, Ex parte, 49.
Jones y. Blun, 118.
Jones y. Butler, 388, 397.
Jones y. Clark, 575.
Jones y. Da vies, 40. 95.
Jones y. Dexter, 174, 212, 37&
Jones y. Harraden, 469.
Jones y. Hurst, 316.
Jones y. Jones, 399, 570.
Jones y. Lloyd, 585.
Jones y. Lusk, 184, 193.
Jones y. McMichael, 574.
Jones y. Morehead, 484.
Jones y. Newsom. 455.
Jones y. Noy, 584.
Jones y. O'Farrel, 74.
Jones y. Parsons, 405.
Jones y. Sharp, 357.
Jones y. Way, 500.
Jones y. W^ir, 524, 525.
664
CA8198 CITED
(Th^ flsurw reter to pagw]
Jones ▼. Yates, 662.
Jons Y. Perchard, lOL
Jordan. In re, 838.
Journal Co. v. Nelson, 63.
Judge ▼. Braswell, 2d3, 299.
Juliand t. Watson, 354.
Julio Y. Ingalls, 136.
Jnrgens y. Ittman, 119, 684.
Justice Y. Lairy, 678.
J. & H. Clasgens Co. y. Silber, 246.
Kahley, In le, 193.
Kahn y. Becnel. 295.
Kahn y. Central Smelting Co., 75,
107, 681.
Kahn y. OYerstolz, 307.
Kshn T. Thomson, 119.
Kaiser y. Lawrence Savings Bank,
67.
Kalamasoo Trust Co. y. Merrill,
460 660.
Kallenbach y. Dickinson, 32a
Karrick y. Hannaman, 572.
Kaskaskia Bridge Co. y. Shannon,
320.
Katz Y. Brewingtoxi. 362, 371, 628.
Kaufman, In re, 457.
Kayser y. Maugham, 40.
Kayton y. Barnett, 121.
EL B. Co. Y. Batie, 120.
Keaimes y. Durst, 260.
Kean y. Johnson, 516.
Keck Y. Fisher, 295.
Keegan y. Cox, 80.
Kehoe y. Canrille, 270.
Keiley y. Turner, 386, 398.
Keith Y. Armstrong, 407.
Keith Y. Fink, 190.
Kell Y. Nainby, 633.
Keller y. Ashford, 247.
Keller y. Smith, 295.
Keiley y. Bourne, 152.
Keiley Y. Flory, 184.
Keiley y. Greenleaf, 371.
Kelley-Goodfellow Shoe Co. y.
Long-Bell Lumber Co., 280.
Kellock's Case, 447.
Kellogg Y. Cayce, 343.
Kellogg Y. Miller, 447.
Kellogg Y. Moore, 484.
Kellogg Newspaper Ca y. Farrell,
33
Kelly Y. DeYlin, 60.
Kelly Y. Pierce, 289.
Kemble y. Kean, 516.
Kemp Y. Andrews, 206, 229, 666.
Kemp Y. Cook, 80.
Kemptner, In re, 189.
Kempton y. People, 40Ol
Kendall, Ex parte, 232.
KendaU y. Hamilton, 231, 284.
Kennedy, Ex parte, 440.
Kennedy y. Kennedy. 526, 587.
Kennedy y. McFadon, 392, 461.
Kennedy Y. National Union Bank,
198.
Kennedy y. Porter, 668, 675.
Kenneweg y. Schilansky, 208.
Kenney y. AltYSter, 266, 800, 846w
Kenney y. Bobison, 484.
Kensington, Ex parte, 439.
Kent Y. Holliday, 544.
Kenton Furnace R. & M£g. Oa y.
McAlpin, 209.
Kerper y. Wood, 862. •
Kershaw y. KelseY, 78.
Kershaw y. Matthews. 528.
Ketcham y. Clark, 266.
Ketcham Nat Bank y. Hagen, 303.
Keys Y. Baldwin, 372.
Kidder y. Page, 194.
Kilboum y. Latta, 96.
Kilgore y. Bruce, 562.
Killam y. Preston, 480.
Kilshaw y. Jukes, 23.
Kimball y. Lincoln, 211, 38a
Kimberly y. Arms, 878, 393.
Ivlmbro y. Bullitt, 108, 109, 30i.
Kimmins y. Wilson, 90.
Kimmius y. Wilson. 591.
King Y. Barbour, 80.
King Y. Chuck, 514.
King Y. Faber, 308.
King Y. Hoare, 223, 234.
King Y. Leighton, 346.
King Y. Mecklenburg, 307.
King Y. Paddock, 85.
King Y. Sarria, 604.
King Y. Winants, 102, 103.
Kingman y. Spurr, 73.
Kingsbury y. Tharp, 69.
Kinkead, In re, 88.
Kinloch y. Hamlin, 486.
Kinney y. Robison, 465, 484.
Kinsman y. Parkhurst. ;ibO.
Kirby y. Ingersoll, 298.
Kirby y. McDonald, 240.
Kirby y. Schoonmaker, 193, 402.
Kirk Y. Blurton, 120, 121, 304,
305.
Kirk Y. Garrett, 831, 332.
Kirk Y. Hartman, 66.
Kirk Y. Hiatt, 344.
Kirk Y. Hodgsdon, 364.
Kirkman y. Snodgrass, 266.
Kirwan y. Kirwan, 253.
Kleinhaus y. Generous, 302.
Klemm v. Bishop, 201.
Kling Y. Tunstall, 284.
CASES CITED
(The flffurM rof«r to pagw]
665
E^app ▼. Edwards, 371, 378, 888,
Knauth ▼. Bassett, 191.
Knebell t. White, 504, 508.
Knerr y. Hoffman. 480, 500.
■Knight, In re, 430.
Knipe y. Livingston, 874.
Knott Y. Knott, 96.
Ejiowles y. Uaugiiton, 507, 506.
Knowlton v. Reed, 345.
Knox Y. Gye, 174, 176, 206, 209,
211.
Knox Y. Schepler, 422.
Krana y. Lnthy. 67.
Krasicy y. Woolpert, 27T:
Kreba y. 0*Grady, 85.
Krigbaom y. Vindqaest, 587*
Kringle y. Rhomberg, 148.
Krouskop Y. Shontz, 86.
Krneger y. Speith, 210.
KruBchke y. Stefan, 176, 462.
Kahl Y. Meyer, 46.
Kuhn V. Weil, 316, 330.
Kata Y. Dreibelbis, 464, 47a
KaU Y. Naugle, 344.
Labonchere y. Dawson, 146.
Lacey v. Cowan, 394, 424.
Lacey y. Hill, 392.
Lachaise y. Marks, 600, 627.
Lachomette v. Thomas, 620.
La Gotts y. Pike, 41.
Lacy Y. Kinaston, 222.
Lacy Y. Le Bruce, 475.
Lacy Y. Woolcott, 305.
Ladiga Saw-Mill Go. v. Smith, 406.
Ladwig Y. Williams, 409.
Lady Superior v. McNamara, 151.
Lafond y. Deems, 46, 99, 582, 586,
589.
Lake y. Duke of Argyll, The» 68.
Lamalere y. Gaze, 461.
Lamar's Ex*r v. Hale, 380.
Lamb y. Durant, 289.
Lamb y. Rowan, 396.
Lamb v. Wilsin, 387.
Lambert's Case. 289.
Lancaster y. Choate, 593, 596.
Lance y. Butler, 18, 295.
Landa y. Shook, 574.
Landers y. Dithridge, 86.
Lane, In re, 442.
Lane y. Bishop, 87.
Lane y. Lanfest, 416, 417*
Lane y. Roche, 483.
Lane y. Williams, 232.
Laney y. Laney, 575.
Lang's Heira y. Waring, 352.
Lange y. Kennedy, 340, 348.
Langley y. Sanborn, 18, 96.
Langmead's Trust, In re, 408.
Lansing y. Gaine, 268.
Lapenta y. Lettieri, 78, 841, 842,
572.
Latta Y. Kllboum, 48, 874, 381«
382, 884.
Lauferty y. Wheeler, 120.
Lauman y. Nichols, ^$5.
Lawrence y. Batcheller, 604, 648.
Lawrence y. Clark, 461. 480.
Lawrence y. Fox, 248, 249.
Lawrence y. Taylor, 294.
Lawrence Lumber Go. y. A. J.
Lyon & Co., 524.
Lawson y. Dunn, 427.
Lawson y. Morgan, 494, 518, 519.
Layton y. Hastings, 123.
Lazarus y. Friedneim, 260.
Lazelle y. Miller, 256.
Leadbitter y. Farrow, 122, 547.
Leaf, Ex parte, 214.
Leaf Y. Coles. 583. 585.
Leafs Appeal, 156.
Lean y. Schutz, 85.
Learned y. Ayres, 462.
Leary y. Shout, 589.
LeaYitt y. Peck, 275, 368.
Lebeck y. Shaftoe, 535.
Ledford y. Emerson, 470.
Lee Y. Abrams, 498.
Lee Y. B'irst Nat. Bank, 108, 287,
307.
Lee Y. Hamilton, 314.
Lee Y. Kirby, 278.
Lee Y. Stowe, 348.
Lee's Ex'r y. Dolan's Adm'z, 889.
Leeds y. Townsend. 379.
Lees Y. Laforest, 378.
Le Fanu y. Malcolmson, 542.
LefCYcr y. Underwood, 490.
LefeYre y. BoyIo, 639.
Le FeYre y. Gastagnio, 83.
Lefevre's Appeal, 96.
Leffler y. Rice, 299, 301.
Lefroy y. Gore, 388.
Leggett Y. Hyde, 17, 24. 83.
Lehow Y. Simonton, 248.
Leiden y. Lawrence, 323.
LeidY Y. Messinger, 465.
Lelghton y. Clarke, 499.
Leland, In re^ 457.
Lellman y. Mills, 295.
Lemke y. Faustmann, 301, 308.
Lemma y. Bland ing, 396.
Lemon y. Fox, 316.
Lempriere y. Lange, 81.
Lenow y. Fones, 156, 161, 163, 169).
Leola Lumber Co. y. Bozarth, 543,
Leonard y. Sparks, 82, 579.
666
CASES CITED
CThe figures refer to pages]
Leserman ▼. Bemheimer. 3d5.
Leslie v. Wiley, 545, 549.
Lester ▼. Pollock, 190.
Lester ex rel. Wright ▼• Givens,
413.
Lesure t. Norris, 579.
Leveson y. Lane, 284.
Levi y. Latham. 109.
Levine y. Michel, 516.
Levitt V. Hamblet, 120.
Levy y. Chicago Nat Bank, 447.
L«vy y. Lock, 617.
Levy v. Pyne, 304.
L«vyy. Walker, 142.
Levy v. Williams, 184.
Levystein y. Gerson, Sellgman Co.,
566.
Lewis, In re, 443.
Lewis v. Oulbertson, 214.
Lewis y. Greider, 33.
Lewis y. Harrison, 401.
Lewis y. Langdon, 137, 140.
Lewis y. Loper, 372.
Lewis y. U. S., 444, 447.
Liberty Say. Bank y. Campbell,
316, 564.
Lieb y. Craddock, 60, 68, 272.
Lij?are y. Peacock, 398, 399, 569,
586.
Lilliendahl y. Stegmair, 498.'
Limpus y. London General Omni-
bus Co., 325, 327, 328.
Lincoln Building & Savings As8*n
y. Graham, 52.
Lincoln Say. Bank y. Gray, 419.
Linderman y. Disbrow, 460.
Lindner y. Adams County Bank,
356.
Lindsey y. Stranahan, 385.
Lindus y. Bradwell, 647.
Line v. Nelson, 222.
Lingen y. Simpson, 171, 403, 513.
Linneman y. Moross* Estate, 247.
Lippincott y. Shaw Carriage Co.,
LitUe y. Caldwell, 346, 387.
Little y. Clarke, 266.
Little y. Hazzard, 293.
Littlewood v. Caldwell, 519.
Livingston y. Lynch, 363.
Livingston y. Uoosevelt, 282, 284,
286
Lloyd, In re, 225.
lioyd y. Loaring, 275.
Lobdell y. Baldwin. 580.
Local Union No. 1, Textile Work-
ers y. Barrett, 45.
Locke y. Lewis, 291.
Lockwood y. Bartlett, 328.
Lockwood y. Beckwith, 321, 384.
Lockwood y. Comstock, 348.
Lockwood y. Mitchell, 209.
Lodge, Ex parte, 441.
I^dge y. Dicus, 251.
Lodge y. B'eudal, 429.
Loeb y. Firemen*s Ins. Co., 120.
Loeb V. Mel linger, 86.
Loeb y. Pierpoint, 297.
Loeschigk v. Hatfield, 356.
Logan v. Greenlaw, 164.
London Assur. Co. y. Drennan, 7.
Long, In re, 439.
Long y. Slade, 296.
Loomis y. Loomis, 351.
Loomis y. McKenzie, 526, 686.
Loomis y. Marshall, 18.
Loorya y. Kupperman, 570.
I^rd y. Baldwin, 425.
Lord y. Devendorf, 431.
Lord y. Hull, 493. 494, 506.
Lord y. Parker, 8o.
Lord y. Peaks, 461.
Lord v. Proctor, 25.
Lord Galway v. Matthew, 303.
Lorillard v. Coster, 154.
Loscombe v. Russell, 504, 505, 60S.
I^throp y. Adams, 238, 332.
Loubat y. Nourse. 164.
Ix>uden y. Ball, 405.
Louisiana Nat. Bank y. Hender-
son, 57.
Louisville & N. R. Co. t. Alexan-
der, 87.
Love y. Moynehan, 86.
Love y. Payne, 74.
Love y. Ramsey, 57.
Love y. Rhyne, 466.
Love joy y. Murray, 237.
Lovejoy v. Spaflford, 268, 340.
Lovell y. Beauchamp, 82.
Loverin v. Mclaughlin, 57*
Low y. Holmes, 521.
Lowe y. Lowe, 164.
Lowe y. Penny. 266.
Lowenstein y. Flanrand, 29S.
Lowenstein v. Meyer, 260.
Lower v. Denton, 461.
Lowman y. Sheets, 289.
Loy y. Alston, 387.
Lucas y. Bank of Darien, 267*
Lucas y. Beach, 50, 465.
Lucas y. Delacour, 537.
Luckombe v. Ash ton, 45.
Ludington y. Bell, 252, 264.
Ludlow*s Heirs y. Cooper's Devi-
sees, 156, 293, 500.
Lycoming Fire Ins.' Co. y. Fetter-
man, 86.
Lyman y. Lyman, 104, 389.
Lynch y. Ilillstrom, 282.
Lyndon y. Gorham, 421.
Lynn y. Bean, 259.
CA8BS CITBD
[The flsurai refer to pages]
667
Lyon T. Bflss, 200.
Lyon ▼. Johnson, 204, 270.
Lyon V. Knowles, 10.
Lyons v. Murray, 405.
Lysaght v. Wnlker, 259.
I^th ▼. Ault & Wood, 251, 252.
M
Mabbett t. White, 289, 309.
McAdams' £]x*r8 v. Hawes, 578*
McAllister ▼. Dennin, 222.
McAllister ▼. Payne, 380.
McAlpine ▼. Millen. 27, 375.
McAreavy y. Magril, 255, 257.
McArthur ▼. Bloom, 85.
McArthur y. Chase, 034.
McCabe y. Goodfellow, 99.
McCabe y. Sinclair, 515.
McCaU y. Moss, 390, 509, 574, 579.
McCarthy y. Seisler, 294, 295.
McCarty y. Stanwix, 529.
McCaughan y. Brown, 209.
McClean y. Clark, 07.
McClintock y. Thweatt, 94, 90.
McCIurg y. Howard, 353.
McClurkan y. Byers, 318.
McConnell y. Hector, 78, 501.
McConnell y. Wilkins, 307.
McCoon y. Galbraitb, 341.
McCord y. Field, 90.
McCormick*s Appeal, 90.
McCormick Haryesting Mach. Co. y.
Coe, 318.
McCowin y. Cubbison, 341.
McCoy y. Cossfield, 387.
McCuIlob y. Dasbiell's Adm'r. 433,
441.
McCully y. McCully, 95.
McCurdy y. Middleton, 200.
McDonald y. Eggleston, 311, 312.
McDonald y. Fairbanks, Morse &
Co.. 299.
McDonald y. Matney, 9.
McDonald y. Woodruff, 332.
McDuffie y. Bartlett, 405.
McElroy y. AUfree, 441.
McElroy y. Swope, 95.
McElroy y. Whitney, 209. 350.
McElyey y. Lewis, 521, 520, 528.
McFadden y. Hunt, 404.
McFadden y. Leeka, 390.
MacFarlane y. MacFarlane, 402.
McGahan y. Rondout Bank, 295.
McGehee y. Dougherty, 480.
McGehee y. Powell. 002.
McGinty y. Orr, 480.
McGowan Bros. Pump & Mach. Co.
y. McGowan, 515.
McGrath y. Cowen, 74, 574, 575.
McGregor y. Bainbridge, 898.
McGregor y. Cleyeland, 119.
McGrew y. Walker, 59.
Mclntire y. Yates, 431.
Mclntyre y. Miller, 259.
Mclyer y. Humble, 00.
McJunkin y. Placek & Fitl, 500.
Mack y. Woodruff, 401.
McKee y. Cowles, 78.
McKelTney's Appeal, 570.
MacKenna y. Parkes, 502.
McKenzie y. Dickinson, 380.
McKewan's Case, 390.
Mackey y, Aner, 480.
McKlnley y. Lloyd, 90.
McKinney y. Baker, 409.
Maclae y. Sutherland, 303.
McLain y. Carson's Ex'r, 233.
Macklin'8 Ez*r y. Crutcher, 121,
122, 401.
McKnight y. McCutchen, 401.
McKnight y. Ratcliff, 032.
McLennan y. Hopkins, 53, 50.
McLinden y. Wentworth, 302.
McMahon y. McCleman, 509.
McMillan y. Hadley. 420.
McMillen y. Pratt, 90.
McNair y. Wilcox, 504.
McNamara v. Gaylord, 72.
McNaughten y. Partridge. 121*
McNaughton y. Moore, 574.
McNealy y. Bartlett, 40, 94.
McNeely y. Haynes, 330.
McNutt y. King, 575.
Macon Exch. Bank y. Tracy, 359.
McPherson y. Kathbone, 348.
McPherson y. Robertson, 485.
McPherson y. Swift, 211, 495, 500,
502.
McSherry y. Brooks, 481.
McWilliams y. Elder, 18.
Maddock y. Astbury, 150.
Maddock*8 Adm'x y. Skinker, 214.
Mad^wick y. Wimble, 520, 527.
Madison County Bank y. Gould,
013, 017, 027.
Maffet y. Leuckel, 122.
Magill y. Merrie, 272.
Magilton y. Stevenson, 235, 890,
390.
Magovem y. Robertson, 9, 33.
Maher y. Bull, 391, 527, 588.
Mair y. Beck, 343.
Mair y. Glennie, 15, 30.
Major y. Hawkes, 314, 344, 345.
Major y. Todd, 570, 587.
Mallett y.- Kellar, 389.
Maloney y. Bruce, 007.
Manchester y. Mathewson, 170.
Manchester Bank, Ex parte, 214.
Mandeyille y. Courtright, 55.
'
668
GASES CITBD
ITlM flgarM refer to p«tM|
ManifeUi t. Shaeiiy 480.
ManEattED Go. t. Laimbeer, 083,
600.
Manhattan Co. v. Phillips, CKL
Mann t. Paddock, 161.
Manning v. Brickell, 844.
Manning t. Gasharie, 46.
Manningy. WllIiamB, 667.
ManBur-Tebbetts Implement Ca T.
Ritchie, 186.
Manufacturers' ft Mechanics' Bank
▼. Gore. 326, 334, 337.
Marine Bank of Cldcago t. Ogden,
88.
Markham ▼. Gehan, 421.
Markle t. Wilbur, 867.
Marks t. Hastings, 239, 829, 831.
Marlett y. Jackman, 264, 306.
Marquand ▼. New York Mfg. Co.,
72, 676, 679.
Marsden ▼. Kaye, 623.
Marsh ▼. Bennett. 186.
Marsh t. Davis, 96, 98.
Marsh t. Hutchison. 86.
Marsh t. Keating, 336.
Marsh's Appeal, 386.
Marsh, Merwin ft Lemon t. Wheel-
er, 108, 109.
Marshall v. Colman, 276, 494, 618,
626.
Marshall t. Johnson, 616.
Marshall t. Lambeth, 696.
Marshall t. McClure, 296.
Marshall t. Matson, 624.
Marshall ▼. Button, 86.
Marshall ▼. Watson, 616. 617.
Marten v. Van Schai(±, 628.
Martin t. Baird, 49.
Martin ▼. Crompe, 228» 229, 660.
Martin ▼. Deetz. 63.
Martin ▼. Fewell, 266.
Martin t. Mayo, 81.
Martin t. Meyer, 406.
Martin t. Morris, 161.
Martin t. Searles, 268.
Martin ▼. Simkins, 329.
Martin t. Walton. 268.
Martyn t. Gray, 66.
Marwick, In re, 440, 441i
Man ▼. Goodnough, 679.
Mason t. Bogg, 447, 448.
Mason ▼• Connell, 672.
Mason t. Denlson, 81.
Mason v. Eldred, 219, 221, 228, 262,
263, 888, 406, 631.
Mason t. Gibson, 281, 282, 896.
Mason t. Hackett, 33.
Mason t. Hall, 248.
Mason t. Partridge, 369.
Mason t. Tiffany, 350.
Mason T. Warthens, 466.
Massey ▼• Tingle, 176.
Master ▼. Kirton, 497, 670, 686.
Masterson ▼. F. W. Heitmann ft
Co., 632.
Mathers' Ex'r ▼. Patterson, 133.
Mathewson ▼. Clarke, 600.
Mathison t. Field, 209.
Mattem y. Canayan, 379.
Matteson y. Nathanson, 369.
Matthews y. Adams, 390.
Mattingly y. Stone's Adm'r, 886,
603.
Mattix Y. Leach, 467, 669.
Maughan y. Sharpe, 147.
Mauldin y. Branch Bank, 267.
Maunsell y. Willett, 69.
Max Y. Roberts, 237.
Maxwell y. Jameson, 392.
Maxwell y. Martin, 649.
May. In re, 460.
Mayberry y. WilloughbY, 852» 863.
Mayburry y. Brien, 16o.
Mayer y. Bernstein, 297.
Mayer Y. Soyster, 86.
Maynard y. Railey, 628, 629.
Mayor of Alexandria y. Patten, 260.
Mayou, Ex parte, 186, 187.
Mead Y. Shepard, 299, 323.
Meader y. Leslie, 214.
Meador y. Hughes, 4, 89.
Meadows y. Mocquot, 390, 898.
Meagher y. Reed, 48. 94.
Meaher y. Cox, 74. 682, 687.
Meason y. Kaine, 611.
Mechanics' Bank y. Livingston, 269
Medbury y. Watson, 641.
Meech y. Allen, ^, 431, 443.
Meehan y. Valentine, 2, 27, 33.
Menbben's Adm'rs y. Perin, 164.
Mehlhop Y. Rae, 79.
Meinhard, Schaul ft Co. y. Beding-
field Mercantile Co., 64, 61.
Meinhard, Schaul ft Co. y. Folsom
Bros., 675.
Meinhart y. Draper, 46, 99, 462.
Mellor, In re, 214.
Mellor Y. Lawyer, 242.
Melville y. Kruse, 91.
Menagh y. Whitwell, 171, 176, 184.
190, 201, 202, 203.
Mendenball, In re, 66.
Mendenhall y. Benbow. 177.
MeneelY y. Meneely, 126.
Menendei Y. Holt, 142.
Mercein y. Andrus, 282.
Merchants' Nat Bank Y. Wehr>
mann, 88.
Mercur, In re, 456.
Meriden Nat Bank y. Gallaudet,
120.
Merot Y. Bunand, 381.
CA8B8 CITBD
ITlM tgarm nfer to pagw]
669
Merrill ▼• Green, 486.
Merrill ▼. National Bank, 448.
Merrill t. Smith, 400.
Merritt ▼. Dickey, 355.
Merritt t. Walsh, 38.
Merritt y. Williams, 289).
Meny ▼. Hoopes, 142.
Merserean ▼. Morton, 172.
Mershon ▼. Habensack, 548.
Meserve ▼. Andrews, 389, 390.
Metcalf y. Redmon, 47, 49.
Metcalfe t. Bradshaw, 383, 884.
Metcalfe t. Rycroft, 535.
Metropolitan Kat Bank ▼. Sirret,
810,630.
Metropolitan Saloon Omnibus Co.
V. Hawkins. 541.
Meybere y. Steagall, 418.
Meyer, In re, 458.
Meyer y. Estes, 220.
Meyer y. Krohn, 4, 88, 271.
Meyer y. Wilson, 582.
Meyers y. Merillion, 377.
Meylette y. Brennan, 94.
Meyran y. Abel, 841.
Meysenbnn y. Littlefield, 570.
Mickle Y. Feet, 465.
Mifflin Y. Smith. 125, 307.
Milbum Y. Codd, 465.
Miles Y. Thomas, 516, 570.
Milleman y. Kayanaugh, 500.
Miller y. Bailey, 485.
Miller y. Bannister, 186, 194.
Miller y. Brixham, 500, 579.
Miller y. Clarke, 431.
Miller y. Estill, 403.
Miller y. Ferguson, 95, 380.
Miller y. Florer, 343.
Miller y. Freeman, 509.
Miller y. Hale, 386.
Miller y. Hines, 304, 305.
Miller y. Hoffman, 359.
Miller y. Jones, 355. 499, 525, 527.
Miller y. Lord, 396, 497.
Miller Y. Marx, 85.
Miller y. Neimerick, 350.
Miller Y. CBoyle, 363, 879, 880,
515.
Miller y. Perrine, 31&
Miller y. Price, 565.
Miller y. Proctor, 296.
Miller y. Royal Flint Glass Works,
278, 313.
Miller y. Sims, 80.
Miller ft Co. y. Simpson, 393.
Millerah y. Keen, 584.
Millerd y. Thorn, 256.
Milliken y. Loring, 34S.
Mills Y. Argall, 635.
Mills Y. Boyd, 252.
Mills Y. Fowkes, 26a
Milmo ]f7at Bank T. Betfstrom,
272.
Milner y. Cooper, 356.
Milwee y. Jay, 123.
Mims Y. Brook & Co., 67.
Miner y. Lorman, 460.
Miners* Co-operatiYe Ass'n Y. Mon-
arch, The, 34.
Minock y. Shortridffe, 80.
Mitchell Y. Dall, 259.
Mitchell Y. Jensen, 57.
Mitchell Y. CNeale, 90.
Mitchell Y. Reed, 375. 378, 880.
Mitchell Y. Tarbutt, 236, 549.
Mittnight y. Smith, 500.
Moddewell y. Keeyer, 73.
Moderwell y. Mullison, 293.
Moffatt Y. Farwuharson, 879.
Moies Y. O'Neill. 582.
Moist*s Appeal, 267.
Molaskey y. Peery, 260.
Molen y. Orr, 551.
Moley y. Brine, 82, 83, 388.
Moline Wagon Co. y. Ruromell, 266.
Moline Water Power & Mfg. Co. y.
Webster, 458.
Molineaux y. Raynolds, 177, 397,
462.
Mollow, March & Go. y. Conrt of
Wards,. 32.
Molton y. Camroux, 84.
Monarch, The, 34.
Monroe y. Conner, 368, 572.
Monroe y. Ezzell, 532.
Monroe y. Hamilton, 579, 580.
Montgomery y. Boone, 310.
Montgomery y. Forbes, 55.
Montgomery y. Sprankle, 86.
Moody y. Payne, 416.
Moore, Elz parte, 446.
Moore y. Burns, 531. .
Moore y. Curry, 31.
Moore y. Davis, 35.
Moore y. Gano, 475.
Moore y. Knight, 336.
Moore y. May, 579.
Moore y. PennelL 417.
Moore y. Price, 587.
Moore y. Rogers, 224.
Moore y. Sample, 416.
Moore y. Steele, 579.
Moore y. Stevens, 124.
Moorehead y. Gilmore, 306L
Moran y. Le Blanc, 471.
Moran Bros. Co. y. Watson, 278^
388.
Morans y. Armstrong, 328.
More Y. Rand, 489, 591.
Moreau y. Saffarans, 148.
Moreton y. Hardem, 239, 327.
Morgan y. Blyth, 239.
670
CASES CITSD
CThe figares refer to pAStt]
Morgan t. Farrel, 69, 67.
Morgan y. Marquis, 264, 676.
Morgan ▼. Morgan, 213.
Morgan v. Overman Silver Min.
Co., 248.
Morgan t. Richardson, 317.
Morgan ▼. Tarbell, 261.
Morgart ▼. Smouse, 95.
Morison t. Moat, 614, 518.
Moritz V. Peebles, 486.
Morrill ▼. Golehour, 161«
Morrill y. Spurr, 48.
Morris y. Col man, 616.
Morris v. Griffin, 371.
Morris y. Hubbard. 296.
Morris y. Jones, 123.
Morris y. Kearsley, 158, 166, 614.
Morris y. Peckham, 511.
Morris y. Wood, 374.
Morris Run Coal Co. T. Barclay
Coal Co., 8&
Morrison y. Austin State Bank,
72, 277.
Morrison y. Blodgett, 680.
Morrison y. Dickey, 106.
Morse y. Bellows, 560, 662.
Morse y. Gleason, 76.
Morse y. Hutchins, 489.
Morse y. Richmond, 282.
Mortley y. Flanagan. 184..
Moses Y. Bagley, 346.
Moses Y. Krauss, 543.
Moses Y. Ranlet, 447.
Mosier, In re, 453.
Mosier y. Parry, 47.
Motley Y. Wickoff, 253.
Mould, Ex parte, 451.
Mt. Pleasant Branch of State Bank
Y. McLeran, 318.
Mowbray v. Lawrence, 416.
Mo wry v. Bradley, 167.
^'[oynahan y. Hanaford, 306.
Moynihan y. Drobaz. 373.
Mozley y. Alston, 494.
Mudd Y. Bast, 569.
Mudd Y. Bates, 581.
Mulherin y. Rice, 211.
MuUany v. Keenan, 482.
Mullendore y. Wertz, 222.
Mumford y. McKay, 579.
Mumford v. NicoU, 225, 388, 401.
Munnings y. Bury, 506.
Munroe y. Cooper, 306.
Munson Y. Wick wire. 320.
Munton y. Rutherford, 64.
Murdock y. Martin, 481.
Murley y. Ennis, 94.
Murphy y. Cochran, 556.
Murphy v. Crafts, 362, 387.
Murphy y. Johnson, 80.
Murray y. Bogert, 461, 465.
Murray y. Fox, 354.
Murray y. Mumford, 267.
MurraY y. Murray, 454, 669.
Murrell y. Mandelbaum, 95, 165.
Murrill Y. Neil, 225, 444.
Murtagh y. Costello, 158.
Musser y. Brink, 35.
Musson Y. May J 230.
Mutual Ben. Life Ins. Co. y. Hill-
yard, 678.
Mutual Life Ina. Co. y. Hnnt, 84.
Mutual Life Ins. Co. of New York
Y. Sturges, 211.
Mycock Y. Beatson, 589.
Myers y. Edison General Electric
Co., 619.
Myers y. Kalamazoo Buggy Co.,
146.
Myers y. Smith, 421, 422.
Myers y. TjyBon, 186.
Mynderse y. Snook, 535.
My;rick y. Dame, 662.
N
Nalle Y. Gates, 350.
Nantasket Beach Steamboat Ca t.
Shea, 16.
Nash Y. Hodgson, 260.
Nason, Ex parte, 453.
Nathan y. Bacon, 524.
Nathanson y. Spitz. 223.
National Bank y. Norton, 270.
National Bank y. Thomas, 302.
National Bank of Chemung y. In-
graham, 48.
National Bank of Commerce T.
Meader, 301.
National Bank of Virginia y. Crin-
gan, 240, 286.
National Exchange Bank y. Wil*
gus* Ex*r8, 359.
National Shoe & Leather Bank y.
Herz, 269.
National Surety Bank y. McDon-
ald, 306.
National Surety Co. y. T. B. Town-
send Brick & Contracting Co., 36.
National Union Bank y. National
Mechanics' Bank, 294, 449.
Natusch Y. Irving, 366, 369, 5m
Neal V. Berry, 79.
Neal Y. Keel's Ex'rs, 498.
Nebraska R. Co. y. Lett, 235.
Needham y. Wright. 342.
Nehrboss y. Bliss, 205, 354, 356.
Nell Y. Childs. 219.
Neil Y. Greenleaf, 466, 48L 487.
Nelson y. Hayner, 354, 365b
Nelson y. Hill, 233, 667.
CA8BS CITED
(Th« flsures refer to paces]
671
Nelson t. Wheelock. 294.
Nerot V. Burnand, 402, 570, 677.
Nevills ▼. Moore Min. Co., 385.
NeYins y. Townsend, 465.
New V. Wright, 515, 524.
Newberry y. Gibson, 4S8.
Newbigging y. Adam, 891, 591.
Newby y. Harrell, 461, 488.
Newell y. Cochran, 95, 96» 375b
379.
Newell y. Humphrey, 500.
Newell y. Newell, 397.
Newhall y. Buckingham, 500.
New Hayen County Bank y. Mitch-
ell, 348.
Newman y. Gates, 205, 228, 233.
Newman y. McComas, 352.
Newman y. Morris, 86.
Newmarch y. Clay, 261.
Kewsome y. Coles, 267.
Newton y. Doran. 587.
New York Dry I>ock Co. y. Tread-
well, 545.
New xork Firemen's Ins.. Co. y.
Bennett, 304, 305, 300.
New York & N. H. B. Co. r.
Schuyler, 280.
NicoU y. Mumford, 73.
NicoU y. Ogden, 156.
Nichol y. Stewart, 133, 399.
Nicholaus y. Thielges. 33.
Nichols y. Culver, 260.
Nichols y. White. 350.
Nicholson y. Ricketts, 125.
Niemann y. Niemann. 314.
Niles y. Williams, 498.
Nims, In*re, 226, 227.
Nims y. Bigelow, 480.
Nirdlinger y. Bernheimer, 75, 106.
Nisbet y. Patton. 318.
Niyen y. Spickerman, 460.
Nixon y. Nash, 422.
Noakes y. Barlow. 35.
Noblett y. Bartsch, 329.
Noel y. Jeyon, 165.
Nokes, Ex parte, 460.
Nolan y. Loyelock, 107.
Noonan y. Nunan, 72.
Noonan y. Orton, 311, 541.
Nordlinger y. Anderson, 190, 19L
North y. Bloss, 545.
North y. Moore, 120.
North y. Wakefield, 222, 261, 262.
Northern Bank of Kentucky y.
Keizer, 438.
Northern Ins. Co. y. Potter, 222,
262.
North Pac. Lumber Co. r. Spore.
70 89.
Northrup y. Phillips, 383.
Norton y. Brink, 9o.
Norton y. Seymour, 121.
Xotley, In re, 32.
Nott y. Dauming, 318.
Nowell y. Nowell, 136.
Noyes y. Cushman, 37.
Norway y. Rowe, 529.
Nugent y. Locke, 581.
Nttssbaumer y. Becker, 272.
Nutting T. Ashcroft, 133, 431, 595.
Oakeley t. Pasheller, 256.
Oakford t. European & Am. Shijh
ping Co., 347.
O'Brien y. Bound, 220.
O'Brien y. Cooke, 517.
O'Brien y. Smith, 461.
O'Connell y. Schwanabeck, 858.
Offutt y. Scott, 355.
Ogden y. Arnot, 455, 559.
Ogilvy, Ex parte, 446.
Ogle y. Onstott, 569.
Olcott V. Wing, 293.
Oldham y. Sale, 165.
Oliphant y. Muthews, 125.
Oliver' y. Forrester, 213, 360.
Oliver y. Gray, 9.
Oliver y. House, 495.
O'Lone y. O'Loue, 503.
O'Neill y. Brown, 465.
Onstott y. Ogle, 569.
Ontario Bank v. Hennessey, 308.
Oppenheimer v. Clemmons, 321.
Osbom y. Osborn, 315, 552.
Osborn y. McBride, 416.
Osborne y. Barge, 297.
Osborne y. Harper, 489, 490*
Osbrey y. Reimer, 35.
Osbum y. Farr, 79, 80. 81.
Osment y. McElrath, 387.
Oteri y. Scalzo, 591.
Overend, Gurney & Co. y. Oriental
Financial Corp., 255.
Owen, Ex parte, 130, 559.
Owen y. Body, 21.
Owen y. Meroney, 483.
Owen y. Shepard, 56.
Owensboro Wagon Co. y. Bliss, 54,
57.
Owston y. Ogle, 485.
Ozeas y. Johnson, 461.
Pacific Mat. Life Ins. Co. t, Fish-
er, 278.
Page y. Brant, 266, 543, 545.
Page y. Carpenter, 227.
Page T. Citizens' Banking Co., 331.
672
CASBS CITBD
VFtM flgares reter to paces]
Page y. Cox, 215. 514.
Page y. Morse, 82, 83.
Page y. Thompson, 464. 472.
Page V. Vankirk, 582, 583, 586. 588.
Pahlman y. Grayes, 225, 301, 458.
Pain y. Sample, 46.
Paine y. Thacher, 485.
Paige y. Paige, 169.
Paige y. Vankirk, 585.
Painter's Bx'rs y. Painter, 213.
Palidori, In re, 456.
Palmer y. Dodge, 341.
Palmer y. Scott, 337.
Palmer y. Steyens, 121.
Palmer y. Taggart, 128.
Pare y. Clegg, 101.
Parham Sewing Mach. Co. y.
Brock, 84a
Park y. Wooten's Bx'ri, 272.
Parker y. Canfield, 9.
Parker y. Fergus, 33.
Parker y. Macomber, 340.
Parker y. Merritt, 403.
Parker y. Oakley, 82.
Parker y. Parker, 301, 400, 574.
Parker y. Pistor, 417.
Parker y. Winlow, 548.
Parkhnrst y. Muir, 363, 524.
Parmalee y. Wiggenkom, 24S. n
Parrish y. Parrish, 169.
Parsons y. Hayward, 119,
Parsons y. Phelan, 96.
Partridge y. Kingman, 33.
Patch V. Wheatland, 294.
Paterson y. Burton, 486.
Paterson y. Gandasequi, 548.
Paton y. Wright, 343, 569.
Patrick y. Weston, 581.
Patterson y. Holland. 599.
Patterson y. Trumbull, 420.
Patterson y. Van Loon, 259.
Patterson y. Ware, 506, 509.
Pattison y. Blanchard, 460.
Patton y. Leftwich, 354, 358.
Payne y. Freer, 465.
Payne y. Gardiner, 348.
Payne y. Hornby, 380, 402.
Payne y. Thompson, 86.
Peacock y. Cummings, 364.
Peacock y. Peacock, 362, 398, 516.
524, 528, 529.
Peake, Bz narte, 440.
Pearce y. Chamberlain, 73, 574.
Pearce y. Cooke, 432.
Pearce y. Walker, 259.
Pearce y. Wilkins, 369.
Pearpoint y. Graham, 571.
Pearson y. Keedy, 400, 557.
Pearson y. Pearson, 145.
Pearson y. Skelton, 490.
Pease y. Cole, 108, 109, 287, 804,
308.
Peck y. Alexander, 385.
Peck y. Fisher, 417, 418.
Peckham Iron Co. y. Haiptr, 888.
Pecot y. Armelin, 95.
Peele, Six parte, 439.
Peirse y. Bowles, 315.
Pelletier y. Couture, 83.
Pendleton y. Beyer, 399*
Penkers, Bk parte, 452.
Penn y. Fogler, 338.
Pennybacker y. Leary, 94. 96, 176.
Pentz y. Stanton, 122, 547.
People y. Board of R. Com'rs, 67.
People y. Deylin, 313.
People y. B. Bemington ft Sons,
447, 448.
People y. North Riyer Sogar Refin«
ing Co., 88.
People y. Roberts, 138, 142.
People y. White, 212.
People's Bank y. Shryods, 421.
Pepper y. Peck, 193.
Pepper y. Pepper, 161, 167.
PercifuU y. Piatt, 147. 148, 164.
Perens y. Johnson, 500.
Perin y. Megibben, 164, 167.
Perley y. Brown, 460.
Perrin y. Keene, 348.
Perring y. Hone, 303, 466.
Perry y. Hale, 489, 591.
Person y. Wilson, 172.
Personette y. Pryme, 96.
Perth Amboy Mig. Co. ▼• CondiC,
639.
Peters y. Anderson, 259.
Peters y. Davis, 358.
Peters y. McWilliams, 569.
Peterson y. Chicago, R. I. & P. R.
Co., 16.
Petit y. Chevelier, 515.
Petrie y. Torrent, 95.
Pettingill y. Jones, 468, 470.
Pettis y. Atkins, 56, 543, 544.
Pettyjohn y. National Bxch. Bank,
Peyser y. Myers, 245.
Pfeffer y. Steiner, 228.
Pfeuffer y. Maltby, 502.
Phelps y. Brewer, 317.
Phelps y. McNeely, 193, 194.
Philipp y. Von Raven, 589.
Phillips y. Atkinson, 518, 524, 525.
Phillips y. Blatchford, 462, 465,
504.
Phillips y. Cook, 415, 4ia
Phillips y. Holmes, 531, 534.
Phillips y. I^Ulips, 70. 158.
Phillips y. Reynolds, 393.
Phillips y. Stonzell, 109.
Phillips ▼• Treseyant, 526.
CASES CITBD
[Th« figures refer to paces]
673
Phillips T. bowbrldge Fumituie
Co, 2^
Philp!ott ▼. Bechtel, 635.
Phoenix Ins. Co. v. Moog, 557.
Piatt V. OliTer, 101.
Pickering v. Day, 259.
PickersgOl v. Liahens. 229.
Pierce ▼. Bryant, 593, 600, 607*
Pierce ▼. Daniels, 383.
Pierce ▼. Jackson, 325, 334.
Pierce ▼. McClellan, 176« 378, 380.
Pierce y. Scott, 3r71, 373.
Pierce y. Thompson, 488.
Pierce's Adm'r y. Trigg's Heirs,
156* 165, 208.
Pierpont y. Lamphere, 32.
Pierson y. Hooker, 311, 814.
Pigott y. Bagley. 215.
Pike y. Bacon, 312.
Pilcher. Succession of. 117.
Pillans y. Harkness, 391, 591.
Pinkerton, Ex parte, 439.
Pinkney y. Hall, 303.
Pinney y. Bugbee, 222.
Pio Pico y. Cuyas, 465.
Pipe y. Batement, 45.
Pirtle y. Penn, 363. 493, 515.
Pitcher y. Barrows, 464.
Pitkin y. Pitkin, 574.
Pitman y. Hodge, 96.
Place y. Sweetzer, 198, 416, 424.
Planters' Bank y. St. John, 264.
Planters' Bank y. Union Bank, 102.
Planters' & Mechanics' liank y.
Galliott, 268.
Piatt y. Halen, 532.
Piatt y. Koehler, 306.
Poillon y. Secor, 66.
Polk y. Buchanan, 33.
Polk y. Oaver. 268.
Pollock y. Jones, 196, 312.
Pomeroy y. Benton, 371. 377.
Pomeroy y. Sigerson, 16, 70.
Pond y. Clark. 495.
Pond y. Cummins, 33.
Pond y. Kimball, 408. 409.
Pool y. Perdue, 468, 470.
Poole y. Hintrager, 248.
Pooley y. Driver, 8, 33. 112, 275.
Pooley y. Whitmore, 280, 281, 282,
304.
Popey. Cole, 234, 557.
Pope y. Risley, 266.
Pope Mfg. Co. y. Charleston Qycle
Co., 219.
Porter y. Baxter, 255.
Porter y. Curry, 298.
Porter y. Long. 210.
Post y. Samberiy, 10.
Pott y. Eyton, 33, 66.
Potter y. Jackson, 503*
Qil.Pabt.— 43
Potter y. Moses, 585.
Potter y. Stransky, 358b
Potter y. Tolbert, 570.
Powell y. Bennett, 394.
Powell y. Flowers & McPbail, 290.
Powell y. Hopson, 574.
Powell y. Layton, 237.
Powell y. Maguire. 48.
Powell y. North, 574.
Powell y. Waters, 306w
Powell Hardware Co. y. Mayer,
304.
Powers y. Robinson, 161.
Pratt y. McGuinness, 203.
Prendergast y. Turton, 496b
Prentice y. Elliott. 396.
Prentiss y. Sinclair, 266b
Preston y. Colby, 226.
Preston y. Fitch, 214.
Preston y. Garrard, 255, 25(1.
Preston y. Strutton, 481, 482.
Price y. Alexander, 311.
Price y. Easton, 247.
Price y. Groom, 49.
Price y. Mathews, Succession of,
264.
Price y. Spencer, 477.
Priesing y. Crampton, 439.
Primrose y. Bromley, 229, 232.
Pritchett y. Schafer, 46.
Prize Cases, 101.
Progressive Lumber Co. y. Rogers,
313.
Prole y. Masterman, 506.
Puckford y. Maxwell, 122.
Pugh's Heirs v. Currie, 170, 298.
Pullen y. Whitfield, 234, 557.
Pnllis y. Fox, 421.
Purdom y. Boyd, 87.
Purdy y. Powers, 564.
Purple y. Farrington, 185, 193.
Pursley y. Ramsey, 9.
Purviance y. McClintee, 25.
Purviance y. Sutherland, 311.
Purvines y. Champion. 471, 479.
Puschel y. Hoover, 543.
Pusey y. Dusenbnry, 634.
luackenbusb v. Sawyer, 16, 83, 37.
(ueen y. Mallinson, 488.
(ueen City Furniture & Oarpet
Co. y. Crawford, 48, 56.
Quinlivan y. English, 524.
Rabe y. Wells, 271.
Radcliit y. Wood, 409.
674
CASBS CITED
(The figures refer to pages]
Radenbunt t. Bates. 486.
Rainey y. Nance. 416.
Raley v. Smith, 421.
Rammelsberg y. Mitchell, 141, 162,
164.
Ramsay y. Meade, 895, 484.
Rand y. Wright 216.
Randall y. Ditch, 16.
Randall y. Johnson, 417.
Randall y. Keneyals, 319.
Randall y. Morrell, 524.
Randall y. Randall, 157.
Randolph y. Daly, 401.
Randolph Bank y. Armstrong, 876.
Ransom y. Vandeyenter. 190, 191.
Rapp y. Latham, 821, 337.
Rathbone y. Drakeford, 818.
Ratzer y. Ratzer. 70, 92.
Ran y. Small. 888.
Raub y. Smith, 95.
Rawlings y.* Adams, 166.
Rawlins y. Wickham, 891, 591.
Rawson y. Taylor, 267.
Ray y. Dayies. 558.
Raymond y. Putnam, 4, 89, 895.
Raymond y. Vaughan, 85.
Raymond y. Vaughn, 584, 585.
Rayne y. Terrell, 630.
Read y. Bailey, 428, 429, 441.
Read y. Bowers, 517, 521.
Read y. McLanahan, 413.
Read y. Nevitt, 486.
Read y. Smith, 101.
Real Estate Iny. Ck>. y. Smith, 302.
Reboul y. Chalker. 47.
Receiyers of Mecnanics' Bank of
Paterson y. Godwin, 580.
Redding y. Anderson, 587.
Reddington y. Lanahan, 83.
Redgraye y. Hurd, 591.
Redway y. Sweeting, 46.
Reed y. Gould, 565.
Reed y. Hanoyer Branch R. Co.,
531.
Reemsnyder y. Reemsnyder, 482.
Reese y. Bradford, 500.
Reg y. Robson, 45, 99.
Regester y. Dodge, 245, 253, 254,
Regina y. McDonald, 83.
Reid y. Holllngshead, 40.
Reid y. McQuesten. 399.
Reilly y. Reilly, 501.
Reilly Repair & Supply Co. y. Gal*
lagher, 67.
Reinhardt y. Reinhardt, 527.
Reinheimer y. Hemingway, 172.
Reis y. Reis, 393, 499.
Reiter y. Morton, 484, 588.
Remington y. Allen, 461, 465.
Remington y. Cummings, 81&
Rensselaer Glass TtLCtorj v. Beid,
135.
Renton y. Chaplain, 524, 525, 680^
581. -- » -»
Reppert y. Colyin, 852.
Reybum y. Mitchell, 198.
Reynell y. Lewis, 50.
Reynolds y. Austin, 85. 586.
Reynolds y. Johnson, 185.
Reynolds y. Lawton, 248.
.Reynolds y. Radke, 70, 821.
Reynolds y. Ruckman, 131.
Reynolds y. Waller's Heir, 825,
Rhea y. Rhenner, 85.
Rhodes y. Monies, 325, 885.
Rice, In re, 439.
Rice y. Barnard, 104, 184.
Rice y. Culyer, 489.
Rice y. Doane, 308.
Rice y. Jackson, 276, 286.
Rice y. MerchanU' & Planters' Nat
Bank, 355.
Rice y. Richards, 858.
Rice y. Shute, 405.
Rich y. Flanders, 351.
Richards y. Baurman, 528, 586.
Richards y. Dayies, 507.
Richards y. Dayis. 508.
Richards y. Fisher, 811.
Richards y. Grinnell, 95, 98, 888.
Richards y. Haines, 415.
Richards y. Heather, 205, 855, 55a
Richards y. Manson, 185.
Richards y. Maynard, 128, 356.
Richards y. Minnesota Sayings
Bank. 52, 55.
Richards y. Todd, 495, 490.
Richardson y. Bank of England,
461, 465.
Richardson y. Carlton, 596, 604.
Richardson y. Brckens, 307.
Richardson y. Gregory, 78.
Richardson y. Hastings. 500.
Richardson y. Hogg, 600.
Richardson y. Horton, 230.
Richardson y. HughittiSd.
Richardson y. Lester, 294.
Richardson y. Moles, 347.
Richmond y. Heapy, 561.
Richter y. Poppennausen, 643.
Richton y. Grissell, 501.
Ricketts y. Bennett, 281, 30L
Rickey y. Bowne, 498.
Riddel y. Smith, 591.
Riddle y. Btting, 844.
Riddle y. WhitehlU, 148, 156, 57&
Ridenour y. Mayo, 55.
Ridgway y. Grant, 486.
Rieser, In re, 427.
Rieser, Matter of, 429.
CASES CITBD
[TlM flsuret refer to paces]
676
Riffel V. Ozark Land & Lumber
Co., 149.
Rigden y. Vallier, 43.
Righter t. Farrel, 0.
Rines y. Ferrell, 4d9.
Kingo y. Wing, 551.
Ripley y. Crooker, 220.
Ripley y. People's Say. Bank, 421.
Ripley y. Waterworth, 157.
Rische y. Riache, 523, 528. 52a
Rittenhoose y. Leigh. 64, o7«
Riyes y. Michaels, 6t.
Roach y. Brannon, 300.
Roakea y. Bailey, 250.
Robb y. Mudge. 184, 347, 849.
Robbina y. Fuller, 314, 342, 344.
Robbina y. Laswell, 402.
Roberto y. G. W. Adams & Son
Oo., 19.
Roberto y. Bberhardt, 521, 622,
523, 626.
Roberto y. Hendrickson. 213, 854.
Roberts y. Johnson, 23o.
Roberto y. Kelsey, 574.
Roberto y. McKee, 516, 618.
Roberto y. Ripley, 487.
Robertoon y. Barker, 403.
Robertson y. Lackie, 5S4.
Robinson y. Anderson, 309.
Robinson y. Bullock, 362.
Robinson y. Growder, 292.
Robinson y. Goings, 335.
Robinson y. Green's Adm'r, 461,
465, 483.
Robinson y. Mcintosh, 511, 644.
Robinson y. Mansfield, 541.
Robinson y. Marchant, 542.
Robinson y. Simmons, 387.
Robinson y. State, 329.
Robinson y. Thompson, 365.
Robinson y. Wilkinson, 12L
Robinson's Ebi'rs Case. 388.
Robinson Bank y. MUier, 131, 294,
296.
Robson y. Curtis, 470.
Robson y. Drummond, 537, 556.
Roby y. Colehour, 380.
Rock y. Collins, 295.
RockweU y. Wilder, 468, 48L
Rodgers y. Clement, 397.
Rodgers y. Maw, 256.
Rodgers y. Meranda, 429, 432, 439,
Rogers y. Batchelor, 291, 563.
Rogers y. Murray, 66.
Rogers y. Nichols, 579.
Rogers y. Rogers, 475.
Ro^er Williams Nat Bank y. Hall,
453.
Rolfe y. Dudley, 330.
Rolfe y. Flower, 245.
Rollins y. Sterens, 308.
Roof y. Morrison, 270.
Roop y. Herron, 427.
Roope y. D'Ayigdor, 502.
Rooto y. Mason City Salt & Mining
Co., 343.
Rose y. Buscher, 9.
Rose y. Coffleld, 269.
Rose y. Roberto, 485.
Rosenbaum y. New York, 150.
Rosenfield y. Haight, 9.
Rosenkrans y. Barker, 329, 331.
Rosenstein y. Bums, 582, 587, 589.
Rosenstiel y. Gray, 74.
•Rosenzweig y. Thompson. 600.
Ross y. Carson, 427.
Ross y. Cornell, 480.
Ross y. Parkyns, 33.
Ross y. White, 503.
Roth y. Boies, 385.
Rothell y. Grimes, 190.
Rothwell y. Humphries, 301.
Roughton y. Rawlings, 95.
Roulston y. Washington, 342.
Rouse y. Bradford Banking COb,
256, 439.
Routh V. Webster, 519.
Royelsky y. Brown, 156, 197, 293.
Rows y. Wood, 371, 526, 528.
Rowell y. Rowell, 141, 144, 210.
Rowland y. Boozer, 95.
Rowland y. Crankshaw, 436.
Rowlandson, Ex parte, 451.
Roys y. Vilas, 211.
Royster y. Johnson, 356. 386.
Ruffln, Ex parte, 177, 424.
Ruffner y. McConnel, 293.
Ruhl y. Phillips, 185.
Rule y. Jewell, 496.
RumeiT y. McCulloch, 297.
RuppeU y. Roberts, 121.
Rush y. Lake, 42a
Rush Center Creamery Co. v. Hll-
lis, 90.
Rusk y. Gray, 245.
Russell y. Annable, 124, 278, 281,
312.
Russell y. Col^ 456.
Russell y. Ford, 464.
Russell y. Grimes, 487.
Russell y. Leland, 569. 580.
Russell y. Lennon, 409.
Russell y. McCall, 213.
Russell y. Minnesota Outfit, 472.
Russell y. White. 580.
Ruton y. Huck, 379.
Rutherford y. Hill, 54.
Rutland Marble Co. y. Ripley, 363,
515, 516, 519, 524.
Ryder y. WUcoz, 9, 460, 467, 482.
676
CASES CITED
[Th« flgnreB ref ar to paces]
Sabel T. Sayannah Rail & Equip-
ment Co» 49, 70.
Sadler y. Lee, 585.
Sadler y. Leigh, 539.
Sadler y. Nixon, 465.
Safe Deposit & Trust CSo. y. Cihn,
596, 644.
Sage y. Bnsign, 820. 3^3.
Sage y. Sherman, 292.
Sage y. Woodin, 393.
Sailors y. Nizon-Jones Printing Co.,
9 93
St'Barbe, Bz parte. 442.
St. John y. Hendrickson, 591.
St. Louis Type Foundry Co. y.
Wisdom, 261.
St Louis ft S. F. R; Co. y. South-
. western Telephone & Telegraph
Co., 57.
St. Martin y. Thrasher, 317.
Salinas y. Bennett. 80.
Salmon y. Dayis, 313, 560, 562.
Salt Lake City Brewing Cd. y.
Hawke, 277.
Sanborn y. Royce, 172, 414.
Sanborn y. Sanborn, 357.
Sanborn y. Stark, 349.
Sander y. Sander, 585.
Sanders y. Young, 580.
Sanders & Walker y. Herndon, 56.
Sanderson y. Stockdale, 194, 500.
Sandilands y. Marsh, 290.
Sandlin y. Ward, 222.
Sandusky, In re. 443.
Sandusky v. Sidwell, 219.
Sanford y. Mickles, 305.
Sanger y. French, 92.
Sarmiento y. The Catherine C, 620.
Satterthwait y. Marshall, 511.
Sauls, In re, 312.
Saunders y. Duval's Adm'r, 371.
Saunders y. Reilly, 191, 226.
Saunders y. Wilder, 233.
Sayery y. Thurston, 374.
Sawyer y. Burris, 32.
Sayer y. Bennet, 683, 585.
Saylor y. Mockbie, 523, 527.
Scarf y. Jardine, 545.
Scarlett y. Snoderass, 86.
Schaeffer y. Fithian, 193.
Scheiffelin y. Stevens, 266.
Scheie v. Wagner, 109.
Schellenbeck y. Studebaker. 304.
Schendel y. Stevenson, 120.
Schenkl y. Dana, 356.
Scheuer y. Berringer, 393, 401.
Scheuer y. Cochem, 96.
Schlapback v. Long, 408.
Schlater y. Winpenny, 266, 347.
Schleicher y. Walker, 184, 579.
Schlichter Jute Cordage Co. y. Mul-
queen, 161.
Schmaltz y. Avery, 537.
Schmerts y. Shreeve, 124, 312.
Schmidlapp v. Cu^rie, 184.
Schmidt y. Archer, 574.
Schmidt y. Glade, 484.
Schreiber y. Sharpless, 328.
Schults y. Brackett Bridge Co^ 17.
Sehultz y. Waldons. 96.
Schwabacker v. Riddle, 334.
Schwartz v: Reesch, 86.
Scott y. Campbell, 34, 485b
Scott y. Caruth, 460. 48a
Scott y. Colmesnil, 272.
Scott y. Conway, 86, 540.
Scott y. Godwin, 535.
Scott V. Kenan, 409.
Scott y. Miller, 101.
Scott V. Milne, 495.
Scott y. Rayment, 511.
Scott y. Trent, 315.
Scruggs y. Blair, 163, 164.
Scruggs y. Burruss, 297.
Scudder v. Ames, 209, 390.
Scutt y. Robertson, 397.
Seabury & Johnson v. Bolles, 62.
68.
Seaman y. Ascherman, 282.
Sebastian y. Booneville Academy
Co., 57.
Second Nat Bank of Oswego v.
Burt, 394.
Secor y. Keller, 632.
Sedgworth v. Overend, 541.
Seely y. Schenck, 531.
Seely's Adm*r v. Beck, lOL
Seger*s Sons y. Thomas Bros., 193.
Selkrig V. Davies, 98.
Sells* Adm'rs v. Hubbell, 389.
Servant! v. Lusk, 410.
Servlss y. McDonnell, 249.
Settle v. Davidson. 313.
Setzer y. Beale, 106.
Sexton y. Anderson, 184, 193.
Sexton y. Lamb, 133.
Sexton y. Sexton, 377.
Seymour v. Marvin, 259.
Sejrmour v. Western R. Co., 532,
Shackelford's Adm*r y. Shackelford,
189.
Shaffer y. Martin, 338.
Shamburg y. Citizens' Bank, 362.
Shamburg v. Ruggles, 266.
Shanks y. Klein, 160. 164, 174, 842.
Shannon y. Mason, 435.
Shannon y. Wright, 515, 524, 526.
Sharp y. Hibbins, 497, 501.
Shattuck V. Chandler. 298, 858L
Shattuck y. Lawson, 468»
CASES CITED
[The flgurw refer to pages]
677
Shaw T. Gait, 28, 80.
Shaw ▼. McQregoiy, 55i.
Shaw y. Picton, 250.
Shaw ▼. Pratt, 222.
Shea ▼. Donahue, 134, 398.
Shearer y. Paine, 355, 501.
Shearer y. Shearer, 158, 161, 163,
165. 167.
Sheble y. Strong, 607.
Sheedy y. Second Nat. Bank, 421.
Sheehy y. Mandeville & Jamesson,
262.
Sheffield Gas Coniumers' Co. y.
Harrison, 511.
Sheldon y. Bieelow, 62, 66.
Sheldon Hat Blocking Co. y. Eicke*
meyer Hat Blocking Co., 279.
Shennefield y. Dutton, 484.
Shepard y. Pratt, 33.
Shepard y. Richards, 468, 468.
Sheppard, ICz parte, 452.
Sheppard y. Oxenford, 508, 628,
52ir52&
Sheridan y. Medara, 9.
Sherman y. Christy, 123, 303.
Sherman y. Kreul, 234, 557.
Sherman y. Sherman, 495.
Sherrod y. Langdon, 66.
Sherwood y. Marwick, 325, 334.
Sherwood y. St Paul & C. R. Co.,
85.
Sherwood y. Snow. 301, 306.
Shields y. Fuller, 355, 35&
Shirk y. Schultz, 78, 83.
Shirley y. Feame, 283.
Shiyely. Greer, 556.
Shoemaker y. Shoemaker, 372, 373.
Shoemaker Piano Mfg. Co. y. Ber-
nard, 245.
Shott y. Strealfield, 546.
Shropshire y. Adams, 84.
Shulte y. Hoffman, 528.
Shurids y. Tilson, 267.
Sichel y. Mosenthal, 511, 512.
Sickman y. Abematby, 185.
Siegel y. Chidsey. 190, 576.
Sieghortner y. Weissenbom, 468l
524, 571, 682, 583, 587.
Sigler y. Knox County Bank, 186.
Sigoumey y. Munn, 212.
Sikes y. Work, 468, 470.
Silkman, In re, 211.
Silkman, Matter of, 141.
Sillitoe, Ex parte, 428, 43a
Silverman y. Chase, 303.
Simon y. Gulick, 85.
Simonds y. Speed, 543.
Simonds y. Strong. 268. .
Simonton y. McLaln, 4.
Simpson, In re. 216.
Simpson y. Miller, 460, 487, 568.
Simpson y. Vaughan, 228
Simpson & Windross, In re, 214.
Simrall y. CFBannons, 431, 465.
Sims y. Bond, 538, 540.
Sims y. McEwen's Adm'r, 512.
Sims y. Smith. 570.
Simson y. Ingham, 260.
Sindelare y. Walker. 172. 175, 062.
Singer y. Heller, 587, 688.
Singer y. Kelly, 583.
Singer v. Townsend, 421.
Sinter Mfg. Co. y. Loog, 126.
Singer, Nimick & Co. v. Carpenter,
Sinkler y. Lambert, 288.
Sinsheimer y. William Skinner Mfg.
Co., 543.
Sistare y. Cushing, 578.
Skillman y. Lachman, 581.
Skinner y. Dayton, 77. 313, 678.
Skinner y. Shannon, 408.-
Sklpp V. Harwood, 401, 464.
Sladen, Fakes & Co. v. Liance, 276,
277.
Slater y. Slater, 141, 144, 386.
Sleecfa's Case, 261.
Slemmer's Appeal, 78, 524, 568, 672,
586.
Slipper y. Stidstone, 205, 214, 228.
Sloan y. Moore, 288, 521, 526, 628,
586.
Slocomb y. De Lizardi, 85.
Slocum y. Fairchild, 220.
Slocum y. Hooker, 81.
Small y. Procter, 165.
Smart y. Breckenridge, 840.
Smith, IBl parte, 130, 430, 441.
Smith, In re, 408.
Smith y. Argall, 601, 61&
Smith y. Ayrault, 381.
Smith y. Barrow, 2(KS.
Smith y. Blyth, 238.
Smith y. Brown, 524.
Smith y. Bumham. 86.
Smith y. Collins, 108, 301.
Smith y. Cooke, 543.
Smith y. Dunn, 18.
Smith y. Edwards, 403.
Smith y. Everett, 81, 141, 501.
Smith y. Fromont, 518.
Smith y. Hollister, 46.
Smith y. Jackson, 156, 164, 168.
Smith y. Jeyes, 484, 517, 518, 628,
524, 526, 527, 587, 588.
Smith y. Kemp, 484.
Smith y. Kerr, 312.
Smith y. Knight, 386.
Smith y. Lowe, 526.
Smith y. Lusher. 464.
Smith y. McMicken, 117.
Smith y. Moynihan, 58.
678
CASES CITBD
[TlM flgnrw refer to pacM]
Smith ▼• Otser, 415.
Smith ▼. Proskey, 393.
Smith y. Putnam, 480.
Smith ▼. Richmond, 100, 102.
Smith ▼. Rogers, 254.
Smith ▼. Sheldon. 256, 552.
Smith y. Sloan, 108, 109, 301, 804.
Smith y. Smith, 461, 464.
Smith y. Smyth, 299.
Smith y. Tarlton, 93, 95.
Smith y. Warden, 67.
Smith y. Wataon, 40. «
Smith y. Winter, 349.
Smith y. Wood, 214.
Smyth y. Strader, 306, 465.
Smythe's Estate y. Evana, 18.
Snaith y. Burridge, 284.
Snell y. Crowe, 417.
Snell y. Dwight, 101, 102.
Snow y. Howard, 123, 303.
Snyder y. Baber, 480.
Snyder y. Leiand, 627.
Snyder y. Lunaford, 128.
Snyder y. Studebaker, 55.
Snyder Mfg. Ck>. y. Soyder, 144,
342.
Society for Illnstratlon of Practical
Knowledge y. Abbott, 506.
Society Peran y. Gleyeland, 58.
Sodiker y. Applegate, 33.
Solly y. Forbes, 261.
Solomon y. Kirkwood, 78, 268, 573.
Solomona y. Medez, 541.
Somerby y. Buntin, 511.
Somerset Potters Works y. Minot,
442.
Soper y. Fry, 318.
Sorsbie y. Park, 219.
Southard y. Steele, 310.
Southern Jellico Coal Co. y. Smith,
410.
Soathworth y. People, 4.
Spalding y. Black, 417, 600.
Spark y. Heslop, 392.
Sparks y. Hasted, 46.
Sparman y. Keim, 82.
Sparrow y. Chlsman, 561.
Spanlding y. Ludlow Woolen ^11,
318.
Spanlding y. Nathan, 65.
Spaulding y. Stubbings, 8, 71.
Spaulding Mfg. Co. y. Godbold, 152.
Spaunhorst y. Link, 569, 579.
Speake y. White, 348.
Spear y. Newell, 498.
Speights y. Peters, 529.
Spencer y. Jones, 40.
Spencer Optical Mfg. Co. y. John-
son, 600.
Speyer y. Desjardins, 94, 98.
Spiess y. Rosswog, 380.
Spotswood y. Morris, 75.
Spottiswoode's Case, 388:
Springer y. Cabell, 95, 461.
Sprout y. Crowley, 393, 482, 485.
Spurck y. Leonard, 569.
Squire y. Belden, 86.
Stoats y. Bristow, 11^ 417, 418.
Stadelman y. Loehr, 297.
Stafford y. Fargo, 133.
Stafford Nat. Sank y. Palmer, 66.
Stainbank y. Femley. 59L
Stair y. Richardson, 343.
Stall y. Cassady, 266.
Standard Wagon Co. of Georgia y.
D. P. Few i Co., 274, 280, 284.
Standish y. Babcock, ^6.
Stanton y. Westoyer, 184.
Staples y. Schmid, 330.
Staples y. Sprague, 367.
Star Wagon Co. y. Swezy, 340.
Stark y. Corey, 276, 302.
Stark y. Howcott, 395.
State y. Bowden, 409.
State y. Brower, 600.
State y. Cloudt 221.
State y. Day, 410.
State y. Hunt, 18.
State y. Kansas City Liye Stock
E2zcb., 45, 99.
State y. Matson, 222.
State y. Mendenhall, 47*
State y. Penman, 60.
State y. Quick, 580.
State y. Withrow, 35a
State Bank of Lushton v. O. 8.
Kelley Co., 29.
State Bank of ViiKinia y. Blanch-
ard, 633.
Steams y. Houghton. 205, 228.
Stebbins y. Wilfard, 340, 348.
Stecker y. Smith, 299.
Steele y. First Nat. Bank, 3I3.
Stehn y. Hayssen, 495.
Stein y. La Dow, 298.
Stein y. Robertson, 81.
Steinback y. Weill, 87.
Steiner y. Peters Store Co., 405.
Steinfeld y. National Shirt Waist
Co., 142.
Sterling y. Brightbill. 41&
Sterling y. Chapin. 495.
Sterne y. Goep, 346. 387.
Sterry y. Clifton, lOl.
Stevens, In re, 457.
Steyens y. Benning, 347, 555b
Stevens y. Faucet, 402.
Stevens y. Feucet, 35.
Stevens v. Flannagan, 248.
Stevens y. McLachlan, 30^.
Stevens v. Perry, 407.
Stevens y. Railroad Co., 366i
CASES CITED
rriM flfurts refer to paces]
679
Bteveni ▼. Teatman, 588.
Steward ▼. Blakeway, 130.
Stewart ▼. Brown, 409,
Stewart y. Brubaker, 279.
Stewart ▼. Robinson, 854.
Stewart ▼. Sonnebom, 266.
Stewart's Case, 458.
Stickney ▼. Smith, 59.
Stiles Y. Bradley, 584.
Stillings y. Young, 421.
Stimson y. Lewis, 46.
Stimson y. Whitney, 276.
Stirling y. Heintzman, 89, 666.
Stitt y. Rat Portage Lamber Co.,
93, 95. 570.
StockdaJe y. Keyes, 818.
Stockdale y. Ullery, 516, 524.
Stocken y. Dawson, 40L
Stocker y. Wedderbum. 511.
Stockham y. Wells, 297.
Stockwell y. U. S., 325, 82a
Stoddard y. Smith, 339.
Stokes y. Bumey, 239, 825w
Stone, Six parte, 452.
Stone y. Baldwin, 375.
Stone y. Dowling, 421.
Stone y. Fouse, 486, 581«
Stone y. Mattingly, 465.
Stone y. Wendover, 275, 486,
Stonehouse y. De Silya, 558.
Stothert y. Knox, 461.
Stout y. Baker, 405.
Stout y. McNeill, 410.
Stout y. Seabrook's Ez^ra, 495.
Stovall y. Clay, 502.
Straffin*s AdmV y. NeweU, 809, 810,
312.
Strange y. Graham, 176.
Strecker y. Conn, 68.
Streichen y. Fehleisen, 220.
Stretch y.. .Talmadge, 372.
Strickler y. Gitchel, 60. 242.
Strong y. Clawson, 506.
Strong y. Haryey, 46.
Stuart y. Harmon, 495.
6tuart y. Kerr, 498. •
Stuart y. Lord Bute, 372.
Stuart y. McKichan, 372.
Stumph y. Rauer, 130.
Sturges y. Swift, 481.
Sturt y. Melllsh. 495.
Suau y. Caffe, 87.
Sulliyan y. Smith, 297.
Summerson y. Donoyan. 480.
Summey y. Patton, 164
Sumner y. Powell, 230.
Sutro y. Wagner, 527, 587.
Sutton y. Clarke, 549.
Swafford's Adm*r y. White, 209.
Swan y. Stedman, 312.
Swan y. Steele, 125, 291.
Swann y. Sanborn, 437.
Sweeney y. Neely, 135, 323.
Sweet y. Bradley, 290.
Sweet y. Morrison, 489.
Sweetzer y. Mead, 311.
Swenson y. E)rickson, 331.
Swift y. Ward, 572.
Swigert y. Aspden, 269.
Swoflford Bros. Dry Qooda Co. v.
Diment, 291.
Syert y. Syera, 48, 611.
Taft y. Church, 321.
Taft y. Ruflfum, 580.
Taft y. Schwamb, 388, 397, 898,
399,503.
Tannenbaum'y. Armeny, 502, 507.
TapJey y. Butterfield, 196, 289, 293,
296, 296, 311.
Tappan y. Blaisdell, 426.
Tappen y. Kimball, 352.
Tarbell y. West, 294.
Tasker y. Shepherd, 359.
Tassey y. Church, 350, 477.
Tate y. Clements, 352, 353.
Tate y. Tate, 500.
Taylor, £k parte, 82, 446.
Taylor y. Castle, 575, 581.
Taylor y. Church, 541.
Taylor y. Claypool, 223.
Taylor y. Cofling, 399.
Taylor y. Davis, 371, 517.
Taylor y. Dean, 506.
Taylor y. Field. 417.
Taylor y. Fields, 172.
Taylor y. Hare, 92.
Taylor y. Hutchison. 578.
Taylor y. Rasch, 603.
Taylor y. Rundell, 372.
Taylor y. Sartorious, 27.
Taylor y. Taylor, 176, 206, 211.
Taylor y. Thompson, 284, 476.
Teague y. Lindsey, 190, 194.
Tebbetts y. Dearborn, 378.
Teed y. Elworthy, 81, 532, 533. 535.
Teed y. Parsons, 45, 46, 99, 304.
Temple y. Seaver, 464.
Tennant y. Dunlop, 141.
Tenney y. Foote, 328. 333.
Tenney y. Johnson, 194.
Tenney y. New England Protectivt
Union, Division No. 172, 46.
Tenney y. Simpson, 96,
Terrell y. Goddard, 524.
Terrill y. Richards, 59.
Terry y. Carter, 486.
Teschmacher y. Lenz, 502.
Thayer y. Badger, 356, 386.
Thayer y. Buffum, 464.
680
CASES CITED
[TlM flfures refer to pagMl
Thayer ▼. Denton, 250.
Thayer y. Humphrey, 188, 486, 437,
440, 554.
Theall y. Lacey, 371.
Theriot y. Michel, 131, 580.
Third Nat. Bank y. D. A. Faalta &
Co.. 109.
Third Nat. Bank y. Hang, 447.
Third Nat Bank ▼. Snyder, 109,
307.
Thomaa, In re, 450.
Thomas ▼. Atherton, 388.
Thomas ▼. Harding, 321.
Thomas y. Hurst, 502.
Thomas y. Lines, 133.
Thomas y. Lusk, 421.
Thomas y. Mohler, 223.
Thomas y. Pennrich, 564, 66S.
Thomas y. Shillabeer, 251.
Thomas y. Springer, 16.
Thomas y. Stetson, 565.
Thomason y. Prere, 264, 558.
Thompson y. Bowman, 129, 180,
172, 292, 293.
Thompson y. Brown, 259.
Thompson y. First Nat. Bank, 64,
66.
Thompson y. Lewis, 416, 422.
Thompson y. Noble, 501.
Thompson y. Perciyal, 251, 252.
Thompson y. Snow, 33.
Thompson y. Spittle, 172.
Thomson y. Dayenport, 120, 540,
547. .
Thornton y. Dixon, 156, 157.
Thornton y. Haw, 101.
Thornton y. Proctor, 496.
Thorp y. Hold8worth2497.
Thorpe y. Jackson, 229.
Thropp y. Richardson, 485.
Thurlow y. Warren, 408.
Thursby y. Lidgerwood, 173, 267.
340, 356.
Thynne y. Shove, 143.
Tichenor y. Newman, 384.
Ticonic Bank v. Harvey, 418.
Tidd y. Bines, 148.
Tilford y. Ramsay, 121.
Tilge y. Brooks, 631.
Tillinghast y. Champlin, 208.
Tilman y. Cannon, 511.
Titcomb y. James, 239, 329.
TObin y. Alfred M. Best Co., 541.
Todd T. Clapp, 80.
Todd y. Lorah, 291, 315.
Todd y. Rafferty's Adm'rs, 501.
Toledo, St. L. & K. C. R. Co. y.
Continental Trust Co., 56.
Tomlins v. Lawrence, 314, 323.
Tomlinson v. Nelson, 466^
Tomlinson y. Ward, 524.
Tompkins y. Tomi^lns, 359.
Toof y. Duncan, 336.
Topping, E2z parte, 445.
Topping y. Paddock, 133.
Torey y. Twombly, 465.
Toulmin, Ez parte, 373.
Toulmin y. Copland, 372. 873.
Toumade y. Hagedom, 9l.
Toumade y. Methfessel, 638b
Towers y. Moore, 224.
Towle y. Meserve, 464.
Towne y. Leach, 421.
Townes y. Birchett, 557.
Townsend y. Ash, G02.
Townsend y. Devaynes. 158.
Townsend y. Hager, 239, 325.
Tracy y. Tufflv, 596, 632, 636.
Tradesmen's Bank y. Astor, 276.
Trafford y. Hubbard, 419.
Traphagen y. Burt, 05| 498» 506^
507.
Travis y. Tartt, 233.
Trayes y. Johns, 90.
Treat y. Hiles, 96.
Treat y. Stanton, 248.
Trego y. Hunt, 145, 146, 372, 517.
Trentman y. Swartzell, 193.
Trickett y. Moore, 421, 422.
Trott y. Irish, 54L
Trowbridge y. Cross, 176.
Troy Iron & Nail Factory y. Wins-
low, 557.
Truitt v. Clark, 48.
Trustees of Catskill Bank y. Hoop-
er. 43L
Tucker y. Adams, 414.
Tucker y. Bradley, 319.
Tucker y. Cole, 318. 335.
Tudor y. White, 266.
Tuller y. Leaverton, 208.
Turner v. Major, 513, 514, 516^ 529.
Turquand, Ez parte, 91.
Tuthill y. Babcock, 222.
Tutt y. Cloney, 267.
Tuttle V. Cooper, 321.
Tweeddale v. Tweeddale, 248.
Tygart v. Wilson, 374.
Tyng y. Thayer, 314.
Tyson y. Bryan, 31.
u
Uhl T. Harvey, 66.
Uhler y. Semple, 376, 401.
Ulery y. Ginrich, 304.
Ulman v. Briggs, 600.
Union Bank v. Hall, 345.
Union Mut. Life Ins. Co. y. Han-
ford, 247.
Union Nat. Bank y. Bank of Com-
merce, 431.
CASES CITBD
[Tbe figures refer to paces!
681
Union Nat Bank ▼. Kansas City
Bank, 295.
Union Nat Bank v. Neil), 285, 301,
303.
Union Nat. Bank y. Underbill, 821.
U. S. V. Astley, 313.
U. S. V. Baxter, 32a ,
U. S, V. Cohn, 339.
U. S. y. Hack, 171. 444.
U. S. y. Hughes, 233.
U. S. y. Price, 230.
U. S. y. Williams, 413.
United States Bank y. Binney, lu4,
125, 126, 307.
United States Nat Bank t. Undex^
wood, 254.
Upham y. Naylor, 421.
Upson y. Arnold, 184.
Usher y. Dansey, 264.
Ussery y. Crusman, 613.
Vaccaro y. Toof, 272.
Vail y. Winterstein, 8a
Valentine y. Wysor, 210.
Vallett V. Parker. 307.
Van Alstyne y. Cook, 633.
Van Amringe y. Ellmaker, 481.
Van Brant y. Mather, .305.
Vance y. Blair, 48, 484, 48a
VanderbnrKh y. Bassett, 313.
Vanderyeer y. Oonover, 449.
Van Deusen y. Blnm, 313.
Van Deusen y. Crispell. 383.
Vandike y. Rosskaro, 414.
Van Housen y. Copeland, 94.
Van Ingen y. Whitman, 611.
Van Keuren y. Parmelee, 345, 852.
Van Kuren y. Trenton Locomotiye
& Mach. Mfg. Co., 9, 515, 571.
Vanneman y. xoung, 67.
Van Ness y. Forrest, 483.
Van Rensselaer y. Emery, 528.
Van Riper y. Poppenhausen, 600.
Van Staden y. Kline, 352.
Van Tine y. Hilands, 390.
Vawdrey y. Simpson, 509.
Venable y.^Stevens, 245.
Venning y. Leckie, 483.
Vere v. Ashby, 551.
Vermillion y. Bailey, 371.
Vernon y. Brunson, 611.
Vernon y. Manhattan Co., 266, 269.
Vetsch y. Neiss, 130. 305.
Vetterlein, In re, 226.
Viles y. Bangs, 551, 564.
Vinal y. West Virginia Oil ft Oil
Land Co., 531.
Violett y. Fairchild, 569.
Vizard y. Moody, 87.
Vonderbank y. Schmidt, 144.
Von Trotha y. Bamberzer, 96.
Voorhees y. Jones, 33, 805, 402.
Voorhis y. Child's Ez'r. &% 284
Voshmik y. Urouhart, 298.
Vredenbnrg y. Behan. 55.
Vrooman y. Turner, 248.
Vnlliamy y. Noble, 62, 264.
w
Waddell y. Cook, 417.
Wadhams y. Page, 253.
Wadley y. Jones, 509.
Wadsworth y. Manning, 484.
Wadsworth y. Sharpsteen, 84.
Waggoner y. First Nat. Bank, 88,
59.
Wagner y. Simmons. 109.
Wagner y. Sutro, 5e7.
Wahl y. Bamum, 94.
Wait, In re, 456.
Walt y. Thayer, 306.
Waite y. Foster. 349.
Waite y. High, 323.
Walcott y. Canfield, 287. 283.
Walden y. Sherburne, 285.
Walford y. De Pienne, 85.
Walgamood y. Randolph, 69.
Walker y. Baxter. 447.
Walker y. Bean, 317.
Walker y. Fitts. 417.
Walker y. Harris, 91, 484.
Walker y. Ilirsch, 519.
Walker y. House, 209, 526.
Walker y. Jeffreys, 496.
Walker y. McCuUoch, 222.
Walker y. Miller, 152.
Walker y. Steel, 551.
Walker y. Stimmel, 120.
Walker y. Wait, 461, 574.
Walker y. Whipple, 670.
Walker y. Yellow Poplar Lumber
Co., 314.
Wall y. London & Nassets Corp.,
366.
Wallace y. Hull, 467.
Wallace y. James, 337.
Wallace y. Kelsall, 563.
Waller y. Davis, 580.
Wallerstein v. E)rvin, 427.
Walling y. Burgess, 169, 342.
Wallworth y. Holt, 509, 522.
Walmesley y. (>ooper, 311.
Walmsley v. Walmsley, 373.
Walsh y. Hartford Fire Ins. Co.,
279.
Walsh y. Lennon. 109, 124.
Walstrom v. Hopkins, 251^ 254.
Walter y. Herman, 42a
Walton y. Atkinson, 164.
682
CASES CITED
[The flgureB refer to pagMl
Walton ▼. Tusten, 294.
Wamsley v. Lindenberger, 81*
Want V. Reece, 485.
Warbritton y. Cameron, 485w
Ward V. Apprice, 372.
Ward V. Barber, 316.
Ward Y. Johnson, 223.
Ward ▼. OlVler, 348.
Warder v. Kewdigate, 316.
Warder ▼. Stilwell, 5ia
Warder v. White, 536.
Wardweli v. Haicht, 270.
Ware v. Owens, 131.
Warner ▼. Ounninghame, 74.
Warner v. Griswold, 101, 328.
Warren v. Ball, 272.
Warren ▼. Farmer, 193, 468.
Warren t. French, 302.
Warren y. Maloney. 669.
Warren y. Raben, 391..
Warren y. Schainwald, 378.
Warren y. Taylor, 400, 402.
Warren y. Wallis, 416.
Warring y. Arthur. 392.
Warrlnff y. Hill, 480.
Warwick y. Bruce, 81.
Washburn y. Bank of Bellows
Falls, 233.
Washburn y. Goodman, 264, 574.
Wass y. Atwater, 16.
Waterer y. Waterer, 158.
Waterlow y. Sharp, 302.
Waterman y. Hunt, 184.
Waters y. Harris, 631.
Waters y. Taylor, 494, 619, 622,
523, 524, 587.
Waters y. Tompkins, 259.
Watkins, ESx parte, 441.
Watkins y. Fakes, 212.
Watkinson y. Bank of PennayWa-
nia, 268.
Watney y. Wells, 589.
Watson y. Hinchman, 330.
Watson y. Wells, 319.
Watson y. Woodman, 352.
Watson & Co., In re, 435.
Watteau y. Fenwick, 120.
Watterson y. Patrick, 264.
Watts y. Durscoll, 296.
Waugh y. Carver. 13, 14, 16, 19.
20, 23, 24, 25, 65, 106, 645, 546.
Wayerly Nat Bank y. Hall, 83.
Weall y. King, 237. ^
Weaver y. Rogers, 563.
Webb y. Fordyce, .371.
Webb y. Gregory, 405.
Webb y. Liggett, 33.
Webster y. Bray, 513.
Webster y. Taphn, Rice & Co., 45.
Webster y. Webster. 62. 145, 267.
Weddexbnm y. Wedderbum, 141.
Wedgwood Coal, etc, Co.* In re,
90.
Weed y. Kellogg, 320.
Weeks y. Mascoma Rake Co., 296.
Wehrman y. McFarUn, 274.
Weir, In re, 216.
Weisiger y. Wood, 86.
Weiss y. Hamilton, 32, 264, 359.
Weissenbom y. Sieghortner, 583.
Weitershausen y. Croatian Print. &
Pub. Co., 641.
Welbom y. €oon, 355.
Weld y. Johnson Mfg. Co., 348L
Weld y. Peters, 293.
Welker y. Wallace, 336.
Welles y. March, 297, 298, 676.
Wellman v. Miner, 260.
Wells y. Carpenter, 481.
Wells y. Bills, 576.
Wells y. McGeoch, 378.
Wells y. Masterman, 72.
Wells y. Turner, 283.
Wendt y. Ross, 259.
Wentworth y. Raiguel, 477.
Werner y. Her, 190.
Werner y. Leisen, 587, 588.
Wessels y. Weiss, 25.
West y. Bank of Rutland, 447.
West T. Valley Bank, 110.
West y. Western Union TeL Co.,
248.
Westbay y. Williams, 458.
Westbrook y. Wheeler, 579.
West Coast Grocery Ca y. Stinson,
295.
Westcott y. Tyson, 876.
Westerlo y. Evertson, 481.
Western Assur. Co. v. Towle, 820.
Western Nat Bank of N. Y. y.
Peress, Trianca & Co., 118.
Western Staee Co. y. Walker, 340,
364, 366, 367.
Westheimer y. Craig, 223.
Weston, fik parte, 227.
Westwood y. Cole, 47, 484.
Weyer y. Thomburgh, 45&,
Wharton y. Douglass, 466.
Wheat y. Rice, 249.
Wheatley y. Tutt, 316. 31T.
Wheeler y. Arnold, 468, 47a
Wheeler y. Wheeler, 468, 469.
Wheelock y. Doolittle, 352.
Whelan y. Shain, 226.
Whetstone y. Crane Bios. M^. Co.,
50.
Whetstone y. Shaw, 471.
Whigham's Appeal, 172, 414.
Wbilden y. Chapman, 524, 627.
Whincup y. Hughes, 92.
Whipple y. Lee, 524.
Whipple y. Parker, 98^
CASES CITED
[The flsuret r«f er to pagw]
683
Whitaker y. Brown, 807, 336.
Whitcomb y. Convene, 130» 897,
080, oUv*
Whitcomb y. Whiting, 352.
White V. Boone, 267.
White y. Brownell, 45.
White y. Dougherty, 432. .
White y. Eiseman, 600, 601, 607,
611.
White y. Jones, 413.
White y. Morton, 417.
White y. Murphy, 2(36.
White y. Parish, 184.
White y. Ross, 461.
White y. Smith. 236, 589, 600.
White y. Toles, 316.
White y. Trowbridge, 146.
White y. Union Ins. Co., 214.
White's Adm'r y. Waide, 4^61.
White Star Line y. Star Line of
Steamers, 88.
Whitehead y. Ohadweirs Adm'r,
438.
Whitehead y. Hughes, 816, 659.
Whitesides y. Lee, 271.
Whiting y. Farrand, 34a
Whitman y. Leonard, 585.
Whitman y. Robinson, 58&
Whitmore y. Shiverick, 405.
Whitmore y. William Water's Es-
tate. 497.
Whitney y. Gotten, 161.
Whitney y. Dewey, 375.
Whitney y. Dutch, 79, 80.
Whitney y. Whitney, 395.
Whitney y. Wyman, 57.
Whittaker y. Amwell Nat Bank,
449.
Whittaker y. Collins, 237.
Whittaker y. Howe, 513, 5ia
Whittemore y. Elliott, 83.
Whittemore y. MacDonell, 593.
Whitton y. Smith, 579.
Whitton y. Sute. 329.
Whitwell y. Arthur, 583.
Whitworth y. Ballard, 349.
Whitworth y. Harris, 512.
Wickham y. Davis, 413.
Wiggin y. Goodwin, 579.
Wiggins y. Blackshear, 117, 192,
219.
Wiggins y. Markham, 375.
Wilby y. Phinney, 469, 486.
Wilcox y. Dodge, 812.
Wilcox y. Jackson, 289.
Wilcox y. Pratt, 362. 687.
Wilcox y. Wilcox, 164.
Wild y. Dayenport 73, 74.
Wild y. Dean, 252. 4^.
Wild y. Mflne. 176.
Wilder y. Keeler, 45a
Wildes y. Fessenden, 261.
Wiles y. Maddox, 414, 416.
Wiley y. Temple, 256.
Wilhelm y. Caylor, 467, 498.
Wilkerson y. Tichenor, 427.
Wilkins y. Davis, 455, 457, 468^
559. 642.
Wilkins v. Pearce, 368.
Wilkins v. Wardens & Vestry of
St Mark's Protestant Episcopal
Church of Dalton, 67.
Wilkinson y. Ftasier, 16.
Wilkinson y. Henderson, 282,
Wilkinson y. Tilden, 616.
Willard y. BuUen, HI.
Willard y. Stone. 81.
Willet y. Chambers, 336.
Willett y. Stringer, 338.
Willey y. Crocker-Woolworth Nat
Bank, 291.
Willey y. Thompson, 266.
Williams y. Beaumont 541.
Williams y. Bingley, 517.
Williams y. Birch, 269, 270.
Williams y. Bowers, 266.
Williams y. Farrand, 144, 146,
146.
Williams y. Frost 298.
Williams y. Gage, 4ia
Williams y. Gillies, 96.
Williams y. Griffiths. 260.
Williams y. Hendricks, 329.
Williams y. Henshaw, 468, 469,
480.
Williams y. Jones, 100, 102, 241.
Williams y. Muthersbaufh, 219.
Williams y. Pederson, 385.
Williams y. Rogers, 264.
Williams y. Whedon, 368.
Williams y. Williams, 613.
Williamson y. Barton. 648.
Williamson y. Fontain, 166.
Williamson y. Johnson, 121, 122.
Williamson y. McGinnis, 222.
Williamson y. Wilson, 524, 574,
576.
Williamson & Co. y. Nish, 4.
Willings y. Oonsequa, 223.
Willis V. Crawford. 39.
WiUis y. Henderson, 42a
Williston y. Camp, 576.
Willson y. Morse, 89.
Wilsford y. Wood, 551.
Wilson y. Campbell, 48, 483.
Wilson y. Fitchter, 515, 516, 624.
Wilson v. Forder 308, 348.
Wilson y. Greenwood, 73, 363, 628*
Wilson y. Holloway, 15a
Wilson y. Kennedy, 122.
Wilson y. Lassen, 581.
Wilson y. Richards, 27a ,
684
CASBB CITBD
[Th« flfures r«fer to pacM]
Wilson T. Robertaon, 191.
Wilson T. Soper, 184, 466.
Wilson T. Stanhope, 60a
Wilson T. Strobach, 418.
Wilson ▼. Tumman, 243.
Wilson T. WaUace, 632, 681
Wilson ▼. WaufiTh, 76, 362.
Wilson ▼. Williams, 306.
Wilson T. WUson, 47, 483, 48a
Wilson's SK'rs v. Cobb's Ez'rs» 70.
Wimblj ▼. Olark, 687.
Winchester t. Howard, 636b
Winkens, In re, 457.
Winner ▼. Knehn, 407.
Winship t. Bank of United States,
27, 106, 100, 274, 277, 285^ aOl,
303.
Winslow T. Leland 393.
Winston t. Bifgs. 447.
Winston v. Ewing, 422.
Winter ▼. Stock, 160.
Winter's IfisUte, In re, 70.
Wintermute v. Torrent. 46L
Winton ▼. E^dridge, 449.
Wipperman ▼. Stacy, 368.
Wise ▼. Prey, 410.
Wise y. Perpetual Trustee Co., 46.
Wisham y. Lippincott, 233, ^)6.
Wishek y. Hammond, 102.
Witcher y. Brewer, 324.
Withers y. Withers. 388.
Wittkowsky y. Beid, 260.
Woelfel y. Thompson, 300.
Wolbert y. Harris, 363, 616.
Wolf y. Mills, £^3.
Wollcott y. Gibson, 101.
Wonderly y. Booth, 66.
Wood y. Beath. 687. 688.
Wood y. Braddick. 360.
Wood y. Brush, 466.
Wood y. (Duke of Anyll, The, 68.
Wood y. Gault, 668, 569.
Wood y. Luscomb, 324, 649.
Wood y. O'Kelley, 532.
Wood y. Pennell, 66.
Wood y. Woad, 671.
Woodford y. Dorwin, 349.
Woodlinf y. Knickerbocker, 238,
333.
Woodraansie y. Holcomb, 181
Woodruff y. Scaife, 287.
Woods V. Wilder, 78, 678.
Woodward y. McAdam, 148.
Woodward y. Sutton. .'iO.
Woodward v. Winship, 278.
Woodward-Holmes Co. y. Nudd,
167.
Woodworth y. Bennett 108.
Woolsey y. Henke, 277.
Worcester Com Exch. Co.. In re.
302, 890.
Word y. Word, 209, 526.
Worsham y. Vignal, 40.
Worthington y. Qriesser, 66,
Wray y. Hutchinson, 68a
Wray y. Hutchison, 606.
Wray y. Milestone, 480.
Wright y. Cumpsty. 47a
Wright y. Duke, 3T7.
Wright y. Herrick, 646.
Wright y. Hunter, 389, 481, 602L
Wright y. Michie, 482.
Wright y. Pulham, 306.
Wright y. Ross. 670.
Wright y. Smith, 96.
Wright y. Ward, 4ia
Wurts y. Hart, 449.
WyckofP y. Anthony, 318, 816.
W/ckoff, Seaman & Benedict v.
Howe Scale Co.. 127.
Wycoff V. Purnell, 479.
Wyld y. Hopkins, 6a
Tale y. Eames, 267, 919.
Yates y. Lyon^ 88.
Yeatman's Heirs y. Woods, 164.
Yerkes y. McFadden, 407.
Yetzer y. Applegate, 374.
York y. Stone, 43.
Yprks y. Tozer, 370, 387.
Yorkshire Banking Co. y. Beatson,
126, 307.
Young, In re, 49.
Young y. Axtell, 66, 646.
Young y. Brick, 460, 461« 464.
Young y. Frier, 600.
Young y. Hoglan, 466.
Young y. Hunter, 551.
Young y. Pollak, 86.
Young y. Scoville, 213, 36&
Young y. Stevens, 83.
Young y. Tibbitts, 270.
Young y. Wheeler, 96.
Youngloye y. Liebhardt, 46*^.
Yonngs y. Trustees for Support of
PuUic Schools, 247.
Zabriskie y. Hackensack St N. Y.
R. Co., 366.
Zeirs Appeal. 386, 427.
ZoUar y. Janyrin, 266.
INDEX
[the nOUBES BKTBB TO PAQU]
A
AOCBPTANOB.
of bills of exchange, implied power of partner, 303.
ACX^ESS,
to books of partnership, STL
ACCOUNT,
common-law action for. 488.
ACCOUNTING,
partner's right to, 382, 393, ^8-502.
upon dissolution of partnership, 488-603.
without dissolution, S04--510.
general or limited account, 604, 606.
where one partner withholds money or property, 608.
in cases of exclusion of one partner, 607.
where djsfendant seeks to force dissolution, 607.
where concern has failed, 608, 608.
agreements for periodical accounting, 608.
execution against one partner's interest 608, 610.
costs on, 603.
Illegal partnership, 102, 103.
clandestine profits or advantages, 378^380.
profits in competing or noncompetlng business, 381-384.
laches, effect of, in suit for, 484.
who entitled to besides partners, 488, n.
purchaser on execution sale of partner's Interest, 417-418,
608, 610.
specific performance, where accounting only desired, 612, 613.
ACCOUNTS,
duty of partners to keep, 371-^78.
when conclusive on partners, 372.
ACCOUNT RENDERED,
power of partner to bind copartners by, 322,
ACKNOWLEDGMENT,
of certificate of limited partnership, 610.
effect of, regarding statute of limitations, 361, 362.
Gil.Pabt. (686)
686 INDBZ
[The figures refer to paces]
ACTIONS,
In firm name, 405, 566.
power of partner to institute, 316.
between members of limited partnership, 643.
between firm and third persons, 644.
on joint obligations, 221.
between partners, 459-529.
at law, 459-466.
by partner on obligation to firm from copartner, 459 et
BeQ.
against partner on obligation from firm to plaintiff, 459
et seq.
on partnership claim or liability at law, 459-490.
reason why partner cannot sue copartner at law on part-
nership claim or liability, 460-463.
by partner against copartner on obligations to firm, 459,
464-466.
by partner against copartner on obligations of firm, 464.
set-off of claims growing out of partnership, 466.
exceptions to rule that no action at law lies between
partners, 466-471.
Massachusetts rule, 468.
for final, though unascertained, balances, 468, 469.
partnership in single transactions, 470.
single unadjusted item, 471.
action on indiyldual obligation, 478-490.
claims not connected with partnership, 479.
claims for agreed final balances, 479-481.
express contracts between partners, 481-487.
lUustratlons 483-487.
losses caused by partner's wrong, 488-490.
under the Code, 471, 472.
between firms with a common member, 473-478.
equitable actions in general, 491 et seq.
enforcement of partnership claims or liabilities In
equity, 466^71.
equitable jurisdiction, 491.
general rules as to equitable interference between part-
ners, 491, 492.
necessity of praying for dissolution, 492, 493.
modem rule, 493.
noninterference in matter of internal regulation, 403,
494.
•ifect of laches, 494-496.
laches a bar to relief In equity, 494.
acquiescence in account, 495.
laches a bar to a suit for an account, 496.
INDEX 687
[TlM flgurei refer to pafee]
ACTIONS— ContU
laches In enfordng agreements for partnerships,
49a
where partnership Is a mining partnership, 406^
accomiting and dissolution, 497-498.
accounting upon dissolution, 499 et seq.
accounting without dissolution, 504 et seq.
specific performance, 610-514.
InjunctloDs and receiyers, 614 et seq.
Injunctions, 614-619.
injunction granted though no dissolution is sought, 614.
illustrations, 615.
injunction in action fo^ dissolution, 616, 617.
death of member, 618, n.
injunction to protect partners from the representatives
of a copartner, 618, n.
injunction to restrain breaches of special agreements,
6ia
Injunction in case of misconduct, 618.
partner applying for injunction must come with dean
hands, 519, n.
to restrain holding out, 519, n.
receiyers, appointment of, 619 et seq.
principle on which receiyers are appointed, 620, 621.
necessity of prayer for dissolution, 522, 523.
receiver not appointed unless a dissolution is sought» 621.
exceptions, 522.
misconduct of partner a ground for a receiver, 526.
receiver appointed where partners have by ageement di-
vested themselves of the right of winding up, 629, n.
course of court where partnership Is denied, 629.
death or bankruptcy of partner, 526.
one partner excluding copartner from management, 527.
between partners and third persons, 530 et seq.
parties to action on firm claim, 630-541.
claims arising ex contractu, 531-540.
contracts in firm name, 631-533.
dormant partners proper, but not necessary,
parties, 532.
nominal partners, when necessary or proper
parties, 532.
contracts in name of partner, 633-540.
exceptions to rule, 533.
when partner must sue alone, sealed Instm-
ments, 536.
negotiable instruments, 686.
contract with partoer alone, 636, 637.
688 INDBZ
rtlM llgarM refer to pMpa4
ACTIONS— CSonfd.
when partner may sue either alone or Jointly
with copartner, 538.
firm aa an undisclosed principal, 638.
recovery of money paid under fraud or mis-
take, 538.
reason and limitation of rule, 539.
dormant and nominal partners, 540l
daims arising ez delicto, 540, 541.
parties to actions against the firm, 542 et seq.
liabilities arising ez contractu, general rule, 542.
exceptions to rule, 542, 543.
dormant partners, 544.
nominal partners, 545.
when agent partner must be sued alone, deeds,
548.
negotiable instruments, 546.
credit given exclusively to agent partner,
547.
when partner may be sued alone or Jointly with
copartners, 547.
firm as an undisclosed principal, 548L
liabilities arising ex delicto, 549.
effect of changes in firm, 550 et seq.
assignment of claims to new firm, 551,
novation, 552.
retirement of old member, 553-555.
assumption of debts by new firm, 564-IKSB.
bankruptcy and insolvency, 558, 559.
death of copartner, 556-557.
disqualification of one partner to sue, 560-565.
claim arising from wrongful act of one partner, 560-564.
wrongful act done In course of partnership business, 561
wrongful act not in course of partnership business, 562.
where firm chattels other than money are wrongfully
disposed of by one partner, 562.
where firm money is wrongfully disposed of by one
partner, 565.
action in firm name, 566.
ADMISSION.
of new member into firm, effect of, 71-76, 242-248.
when new member may Join as plaintiff, 550-^1.
when new member may be made defendant, 552, 558.
ADMISSIONS,
power of partner to make, 320-322.
after dissolution, 349-352.
to prove partnership, incompetent, 82L
to prove partner's power, 321.
INDBX 689
[The ftgnrM refer to pftce4
ADVANODS,
by partner, a loan, and not capital, 18S.
repaying, 896.
Interest on, 886.
AFFIDAVIT,
accompanying certificate to limited partnership, 617, 61S.
AGENCY,
aa teet of partnership, 26-29.
of partners, see Powers of Partners.
ALIENATION,
of partner's interest, as effecting dissolution, 678-080.
of partnership property, see Property.
ALIENS,
capacity to be partners, 78.
parties to actions, 661.
AiNNULMBNT,
of partnership, 689-691.
APPBARANGB,
power of partner to enter, 816, 317.
ARBITRATION,
partner lias no implied power to bind firm to, 817.
ASSETS,
distribution among partners, see Partners.
among creditors, see Creditors,
as distinguished from capital, 132, 188.
ASSIGNEE,
in bankruptcy, of one partner, relation between, and solvent co-
partners, 464-456.
of partner's interest, 71-76.
ASSIGNMENT,
of partner's interest, effect, 72, 73, 76-77, 678-580.
of firm' claims to new firm, 651-663.
ASSIGNMENT FOR BENEFIT OF CREDITORS,
by partner in existing firm, 297.
after dissolution, 348.
by survlTing partner, 358.
by limited partnership, 636.
ASSOCIATIONS NOT FOR PROFIT, 44r-46. 08-89.
ASSUMPTION,
of firm debts, by incoming partner, 242-240, 560-668L
ATTACHMENT,
of firm property, 407. •
of separate property of partner, 407. 406, 580.
Gii,.Pabt. — 44
690 INDBZ
[The flgores refer to paces]
AUTHORITY,
see Powers of Partners.
B
BALANCES,
actions between partners for final balances, 468, 469, 479-481.
BANKRUPTCY,
see Insolyency.
distribution of assets upon, of firm or partners, see Creditors,
parties to actions, after, 558, 559.
of partner or firm, as cause of dissolution, 525, 575.
of partner, effect of, on firm property, 453-457.
BILLS AND NOTES,
see Negotiable Instruments.
BONA FIDE HOLDERS,
of firm paper, 806-308.
BOOKS OP ACCOUNT,
see Accounts.
BORROWING MONEY,
partner's power to borrow, 300-302.
BURDEN OF PROOF,
of partnership, 59-60.
see Presumptions.
BUYING,
partner's power as to, 298-300.
c
CAPACITY,
of persons to be partners, 77-89.
CAPITAL,
defined, 132.
form of contribution, 133.
amount of, 134, 135.
losses impairing, how borne, 135, 136.
distinction between, and property, 132, 183.
repaying, on distribution of assets, 397.
of limited partnership, 606, 607, 626, 627.
affidavit of payment, 617, 618.
CERTIFICATE,
of limited partnership, see Limited Partnerships.
CHANGE,
in membership of firm, effect of, 71-77, 242-257, 660-^56.
INDBX ^^1
[Tlw tgnrm refer to pacet]
CHATTEL MOBTGAGE;
power of partner to execute, 204.
power of sorvlyliig partner to execute, 357.
CHATTEI/S.
title to, effect of deatb of partner, 206.
see Property; Partnership.
CfiOSES IN ACTION.
title to, upon deatli of partner, 204, 214.
actions on, suryive to surviving partner, 214, 556, 667.
CODE,
actions between partners under tbe, 471, 472.
COMMON OWNERSHIP,
of property, does not create a partnership, 36-88,
COMMON PARTNER,
actions between firms with, 473-478.
COMPENSATION,
partners' right to, 384-386.
surviving partner's right to, 356, 386.
when partnership is annulled, 376, 377, 600.
COMPETENCY,
of persons to be partners, 4, 77-80.
COMPETING BUSINESS,
liability of partners for profits in, 381-884.
CONFESSION OP JUDGMENT,
power of partner as to, 317.
CO-OWNERSHIP,
distinguished from partnership, 40-46L
CONSIDERATION,
of contract of partnership, 80-00.
Buflidency of, 80.
premiums, 01.
return, in case of fraud, 01*
apportionment* 02.
CONTRACT,
see Partnership Liability,
partnership arises only from, 3, 6, 60-77.
requirements of the contract, 77-07.
competency of parties, 77-^.
consideration, 80-00.
formalities, 02.
statute of frauds, 03-06.
may be express or implied, 4, 02, 08L
formalities required, 02, 03.
692 INDBX
[Th« figures refer to pafit]
CONTRACT— Cont'd.
subject-matter, 98, d9.
gain the object of, 44, 99.
legality of partnership contract, 100-102.
effect of illegality, 102.
for future partnership, 47-49.
contracts in firm name, 120-126.
in partner's name, 119. .
partners' liability on, 121-124.
presumptions as to, 125.
power of partner after dissolution to perform exlittng oonAracta.
846.
CONTRIBUTION.
see Indemnity and Oontributioo.
of capital, 132-136.
in limited partnership, 606, 607.
to losses,
of capital, 135» 136.
of the business, 387-^392.
conditions for procuring, 390, 891, 892.
CONTROL,
of partnership by majority, 864-369.
CONVERSION,
of partnership real estate into personalty, 164 et seci.
see Real Bstate.
of partner's separate property to use of firm, separate creditors*
rights in equity, 428.
of firm property to use of partner, firm creditors' rights In
equity, 441.
liability of firm for partner's, 884.
CONVEYANCE,
see Transfer of Property ; Property ; Partnership.
COPARCENARY.
distinguished from partnership, 42.
CORPORATIONS,
corporation as a partner, 6, 88.
distinguished from partnership, 40, 41.
liability of stockholders in defectlye, 61-67.
promoters of, not partners, 50.
COSTS,
of accounting, 503.
CREDITORS,
assignments for, see As8igi>ment for Benefit of Orediton.
conveyances in fraud of, see Fraudulent Conveyances; Conver-
sion; Real Estate; Limited Partnerships: Lien.
INDBZ 693
[Tht flcurea refer to paces]
CRBDITOR&-<7oiitU
firm crediton' 80K:ailed deriyatiye Uen, 179-181, 197-208, 40(M03.
rights against incoming partner, see Incoming Partner.
rights against retiring partner, see Retiring Partner.
of partnership containing {nf ant member, 82.
rights against estate of deceased partner, 281-234.
right to subject firm realty to pajrment of debts, 161, 162.
conversion of firm realty into personalty, see Real Estate.
remedies of creditors of partnership,
at law, Judgment on a firm obligation, effect ofj 404, 40S.
action in firm name, 405, 406.
garnishment, 406.
attachment, 407.
exemption out of firm property, 406, 409.
remedies of separate creditors,
at law, against firm property, 411 et seq.
enforcing payment against partner's share, 411-420.
execution on Judgment against partner, 413.
how levied as to firm property, 413, 414.
rights of parties after levy, sheriff and other part-
ners, 414, 415.
sale may be enjoined, 416.
what may be sold, 416.
rights of parties after sale, purchaser and other
partners, 417, 418.
garnishment, 420-422.
statutory modifications, 419, 420.
remedies of firm and separate creditors in equity,
insolvency or bankruptcy of firm, 423 et seq.
firm creditors against firm estate, 423-430.
basis of priority, 424, 425.
exception, dormant partner, no ostensible firm, 425.
' separate creditors against firm estate, 426.
partners against firm estate, 427-430.
exceptions, fraudulent conversion, 428.
partner as surety, 429.
trade debts, 429, 430.
partner discharged from liability, 430.
assignee for value of partner's claim, 430.
separate creditors against the separate estates, 431-437.
reputed ownership, 435, 436.
assets by estoppel, 436, 437.
firm creditors against the separate estates, 437-443
exceptions, no Joint estate nor living solvent partner,
430-441.
fraudulent conversion, 441.
trade debts. 442.
legal priority against separate property. 443.
694 INDEX
[Thie figures refer to paces]
CREDITORS— ContU
partner against separate estate of copartner, 444.
secared creditors, rights ot^ 446-460.
double proof, 40O-4S8.
rights against estate of deceased partner, 227-233, 457, 468.
joint, bat not firm, creditors, 224-226.
GRIMES,
committed by one partner, liability of Innocent partner, for, 327,
828.
D
DEATH,
of partner, dlssolyes partnership, 263-264, 673-675.
not a ground for receiver, 626.
continuation of partnership after partner's death, 73, 74.
agreements controlling firm property after partner's death, 215,
2ia
effect of partner's death on firm actions, 666, 657.
of partner in limited partnership, effect of, 638, 680.
title to firm property, after partner's death, 204.
ordinary chattels, 206.
real estate, 163-165, 206-208.
choses In action, 204, 214.
DEBTS,
see Actions ; Creditors ; Trade Debts,
partner's power to pay and collect, 813-816.
after dissolution, 344, 345.
revival of debts barred by statute of limitations, 861, 862.
garnishment of» in actions against firm and partners, 406, 420,
421.
DECEASED PARTNER,
see Death; Partners,
liability of estate of, 231-284.
liability of estate of, as affected by appropriation of payments*
250-26L
DECEIT,
liability of firm for deceit of partner, 888, 834.
DEED,
see "Sealed Instruments.
DEFAMATION,
power of partner to subject firm to liability for, 832.
DELECTUS PERSONARUM,
doctrine explained, 71-73.
apparent exceptions, 73-75, 106, 106.
INDBX 603
[The llgarM refer to pages]
DELECTUS PBRSONARUM— ContU
none in Joint-stock company, 75, 105.
nor in mining partnership, 75, 107.
does not prohibit subpartnership, 76, 100.
DISCHARGE,
of partner, in bankruptcy, effect of, on firm debts, 457.
DISSENT,
by one partner, effect on riglits of third parties, 367-300.
remedies of dissenting partner, 309.
waiver of, by partner, 308.
DISSOLUTION,
of partnership, by act of partners, mutual assent, 205-272, 508-
573.
by act of one partner, partnership at will, 570.
partnership for fixed period, 571.
by operation of law, 203, 204, 573 et seq.
death of partner, 573-575.
bankruptcy of partner or firm, 575, 570.
marriage of female partner, 570, 577.
where business has become illegal, .578.
alienation of entire firm property or partner's interest
therein, 578-581.
by Judicial decree, 581 et seq.
impossibility of success, 581, 582.
incapacity or insanity of partner, 84, 583-58&
misconduct of partner, 585-588.
annulment of partnership, 589-591.
notice of, to public generally, 207.
actual notice, who are entitled to, 208-209.
Bufiiciency of notice, 270, 271.
in case of dormant partner, 272.
powers of partners, after, see Powers of Partners,
necessity of, in seeking remedies in equity, 492, 493.
accounting upon, 499-503.
accounting without, 504-510.
injunction and receiver in action for, 510, 517.
assignment of partner's interest, as effecting dissolution,
75-77. 578-581.
mortgage upon partner's Interest, as effecting dissolution,
580.
attachment of partner's interest in firm, effect of, 580.
execution against partner's interest in firm, effect of, 580i
58L
of limited partnership, 030, 037.
sale of partner's interest in, effect of, 010.
696 INDBZ
[The flffurM refer to paces]
DISTRIBUTION,
of assets among creditors, see Oredltors.
among partners, see Partners.
DORMANT PARTNER,
defined. 111.
notice of withdrawal unnecessary, 112, 272.
no rigbt to enforce application of firm property to firm debts.
426.
proper, but unnecessary, party to actions, 632, 640, 644.
DOUBLB PROOF, 46(M68.
DOWER,
in firm real estate, 166-169.
when dower attaches, 167-168.
DUTIES,
see Partners.
E
DLBOTION.
see Double Proof.
ENTITY,
partnership as an, 114-117.
EQUALITY,
presumption of, rights In firm property, 18S.
as to partners' shares, 898, 399.
EQUITY,
remedies In, between partners, see Actions.
of creditors, see Creditors,
several character of firm obligations in, 227-231.
suryivorship in, 229.
liability of estate of deceased partner in, 231-234.
ESTOPPEIi,
partnership by, 61-^6.
assets by, rights of creditors, 436-437.
liability of partners by, 279.
EVIDENCE,
of partnership, 68-69, 92.
participating in profits, effect of, 20-35.
sharing profits only, 31-33.
presumption as to contracts in partner's name, 124-126L
oral, to show firm realty, 96.
burden of proof, 69, 60.
EXECUTION,
against partner*8 interest in firm, how enforced, 411-420.
levy, upon what property, how made, 413.
rights of parties after levy, 414, 416.
INDBX 687
rrtae figures refer to pagee]
EXECUTION— OontU
sale may be enjoined, 416.
what may be sold, 416.
rights of parties after sale, 417, 418.
statutory changes, 419, 420.
against partner's Interest as effecting dissolution, 580, 68L
EXEMPTION,
partner's right to, out of firm property, 408, 400.
EXCLUSION,
of one partner, account In case of, 607.
remedies for partner's exclusion, 862-368, 571-673.
as a ground for dissolution, 363.
EXPRESS POWERS,
see Powers of Partners.
F
fact;
partnership a question of, 68, 60.
as to what constitutes firm property a question of, 127-131.
sufficiency of notice of dissolution a mixed question of law and
fact, 271.
FALSE IMPRISONMENT,
power of partner to subject firm to liability for, 330, 331.
FARMING,
on shares, when a partnership, 36.
FELONS,
capacity to be partners. 79.
FEME SOLE,
marriage of, as effecting dissolution of firm, 676, 577.
FINAL BALANCES,
actions for, between partners, 468, 469, 479-481.
FIRM NAME,
see Name,
firm as an entity, 114-117.
of limited partnership, 623-626.
FORM,
of conveyance of firm property, 196, 197.
FORMER DEALERS,
defined, 268.
entitled to actual notice of dissolution, 268, 260L
FRAUD.
see Good Faith,
liability of firm for partner's, 333.
in limited partnership, 631, 632.
698 INDEX
[The figures refer to pases]
PBAU1>— Cont'd.
premiums returnable for, 91.
annulment of partnership for, 689-691*
TRAUDS, STATUTE OP, *
see Statute of Frauds.
FRAUDULENT CONVEYANCES,
In general, 182, 183.
by limited partnership, 632-634.
of firm property, 177. 182-194, 197-203.
partner's so-called lien, 179-181, 197-203.
reservation of, 189.
change of firm property into separate property, 181-189.
use of firm property to pay separate debts of partner, 189-191.
to pay separate debts of all partners, 191-104.
successive or simultaneous transfers of each partner's interest,
effect of, 197-203.
transfer of firm property to one partner for promise to pay firm
debts, 183-189.
FUTURE PARTNERSHIP, 47-49.
G
GAIN,
the object of partnership, 3-6, 44r46, 08, 99.
societies not for gain, 44-46, 98, 99.
GARNISHMENT,
of partnership debtors by creditors of partner, 420-422.
debts, 421.
tangible assets, 422.
firm creditors may garnish debts due partner, 406.
as means of ascertaining value of partner's interest in firm,
419, 420.
GENERAL PARTNER,
defined, 110.
GOOD FAITH.
duty of partners, as to, in general, 374, 375.
preliminary negotiations, 876.
purchase of copartner's interest, 877.
on dissolution, 377.
benefits from transactions concerning firm interests, 378-381.
accountability of partner for information obtained as partner,
381. 382.
as to separate business, 383, 384.
GOOD WILL,
defined, 136-140.
INDBZ •••
(The flsuret refer to paieid
iSOOD WILI/-€oiitU
formfur attitude of court towards, 137.
is property of firm, 140, 141. '
must be accounted for by surviving partner, 140.
rights of vendee of, use of old firm name, 142-144.
rights of vendor of, 144-146.
partner cannot Inspect boolu to get firm customers, 872.
GROSS RETURNS,
sharing of, 14-10.
as evidence of partnership, 2^-31.
H
HOLDING OUT,
see EstoppeL
HUSBAND AND WIFE,
partnership between, 70, n., 86, 87.
I
ILLEGAL ACTS,
by one partner, liability of Innocent partners for, 827-829.
ILLEGALITY.
of business, as effecting dissolution of firm. 578.
ILLEGAL PARTNERSHIPS,
defined, 100, 101.
between unqualified persons, 100.
effect of illegality, 102.
IMPLIED POWERS.
see Powers of Partners.
INCAPACITY,
of partner, as effecting dissolution, 583-58S.
INCHOATE PARTNERSHIPS, 47-49.
INCOMING PARTNER,
llabiUty of, in general, 242.
assumption of firm debts, 248.
novation, 244.
Joint obligor, surety, or guarantor, 245, 246.
promise for benefit of third person, 246-249.
as party to actions, see Actions.
INDEMNITY AND CONTRIBUTION,
partners' right to, 387-892.
basis of right, 388, 389.
modified by agreement, 389, 890.
700 INDEX
[The figures refer to pages]
INDEMNITY AND CONTRIBUTION— ContU
conditions for obtaining, loss^ due to partner's negligence, .'KK).
Illegal transactions, 391.
partnership accounting as a condition precedent to, 391, 882.
INDORSEMENT,
of negotiable paper, Implied power of partner, 849.
INFANTS,
capacity to be partners, 79-82.
rights of, before repudiation of partnersliip agreement, 81.
after repudiation, 82.
effect of repudiation of partnership agreement on firm credi-
tors, 82.
INFORMATION.
concerning firm business, partner's right to, 870.
INJUNCTION,
injunction and receivers, 514-616.
in an action for dissolution, 516, 517.
to restrain breaches of special agreements, 618.
in case of misconduct of partner, 618, 619.
INSANITY,
of partner as effecting dissolution of partnership, 84, 583-^586.
INSOLVENCY.
see Bankruptcy,
of special partner lb limited partnership, 642.
INl^ENTION,
partnership results only from, 6, 69-77.
manifested or legal intention determines existence of partner-
ship, 7-9, 25, 26. 69-77.
tests of, 26-S6, 39, 40.
sharing gross returns, 29-31.
sharing profits, 31-83.
sharing prpflts and losses, 34, 35.
to form partnership, how shown, 7, 8, 25-^36.
as to what constitutes firm property, 130, 131.
INTEREST,
nature and extent of partner's, in firm property. 170-176, 411»
416.
alienation of partner's, as effecting dissolution of firm, 678-680.
on advances, 396.
share of profits as interest, 16-1&
J
JOINDER OF PARTIES^
see Actions.
INDBX 701
tTht flfurM rtf er to pages]
JOINT ADVENTUBD^
see Partnership.
JOINT CREDITOHS,
see Creditors.
JOINT BNTBRPRISB OR BUSINESS,
engaging in, for profit, constitutes a partnership, 39, 40.
JOINT ESTATE— NO LIVING fiOLYBNT PARTNER, 439-i41«
JOINT OBLIGATIONS,
defined, 219.
characteristics of, 220l
actions on, 221.
see Actions,
'rtiease of, 221, 261.
Judgment on, 22S,
partnership obligations and, compared, 224-22(L
survivorship in, 224, 227-281.
liability of estate of deceased partner, 231-234.
quasi seversble character in equity, 227-231.
statutory changes as to, 228.
JOINT OWNBRSQIP,
of property, distinguished from partnership, 36-^, 4(M3.
JOINT-STOCK COMPANIES, 75, 105.
JOINT TENANCY,
distinguished from partnership, 42, 48.
JOINT TENANTS,
are not partners, 173-175.
JUDGMENT,
on firm obligation, eflfect of, 404, 406.
merger of Joint obligation in, 262.
partner has no implied power to confess, 817.
JURY,
existence of partnership, when a question for, 58, 69.
extent of partner's powers, a question for, 280, 281.
L
LACHES,
effect of, in actions between partners, 494-496.
a bar to relief in equity, 494.
as a defense to a suit for an account, 494.
acquiescence in account, 495.
In enforcing agreements for partnerships, 496.
LANDLORD AND TENANT,
when partners, 16.'
702 INDBX
rTlie flgurei refer to pages]
LANDS,
see Real Estate; Property.
LAW,
partnership by operation of law, 1, 6-9, 69-76.
see Partnership as to Third Persons ; Bstoppd.
dissolution by operation of law, 263-264, 573 et seq.
creditors' remedies at, see Creditors.
LEVY,
on partner's interest in firm, how made, 413 et seq.
LIABILITY,
see Partnership Liability; EstoppeL
LIEN,
see Creditors,
partners' so-called Hen on firm property, 179-181, 197-203, 40O-
403.
definition and scope of, 400, 401*
to what attaches, 401.
against whom available, 402.
how lost, 403.
reservation of, 189.
LIMITATIONS,
see Statute of Limitations.
LIMITED PARTNERSHIPS,
general nature, definition, 592.
history of, 693-^95.
establishment of, statutory authority, 595 et seq.
competency of parties, 596.
present statutes, in general, 597-599.
construction of statutes, 599, 600.
purpose for which formed, 601, 602.
location of business, 603, 604.
members, general and special, 604, 605.
number of special partners, 605.
contribution to capital, how made, 606, 607.
Increase of capital, 607.
withdrawals of, 626, 627.
certificate, 608 et seq.
signing and acknowledging, 610, 611.
recording, 612, 613.
publication, 613-617.
afiSdavit of payment of capital, 617, 61Si
failure to file certificate, 618, 619.
duration, continuance, or renewal, 620-622.
effect of alteration, 622, 623.
firm name, firm sign, 623-625.
INDEX 703
[TbA flcnreft ref tr to pagMl]
LIMITED PARTNERSHIPS— ContU
rights and liabilities of partners, 628 et se^
liability for fraud, 631, 632.
fraudulent preferences, 632-634.
assignment for benefit of creditors* 63B.
dissolution, 636.
death of partner, 638.
admission of new partner, 639.
sale of partner's Interest, 640.
mlscellaneotis statutory provisions, 640.
InsolTency of special partner, 642.
actions, between members, 643.
between firm and third persons, 643, 644.
LIQUIDATING PARTNER,
see Powers of Partners,
defined, 341.
compensation, right to, 386.
LOSSES,
of capital, partners' liability for, 135, 136.
sharing of, as evidence of partnership, 84^ 85.
LUNATICS,
capacity to be partners, 83, 84.
M
MAJORITY,
control of, 864r-869.
MALICIOUS PROSECUTION,
power of partner to subject firm to liability for, 830, 831.
MANAGEMENT,
partner's right to participate in, 862, 363.
control of majority, 364-^69.
MARRIAGE,
of female partner, as eif^lng dissolution of partnership, 576,
577.
MARRIED WOMEN,
capacity to be partners, 85, 86.
partnership between husband and wife, 86, 87.
competency to enter limited partnership, 596.
MARSHALING ASSETS,
see Creditors.
MERGER,
of joint obligation in Judgment, 262.
704 INDBX
[The flgurm refer to pages]
MINING Partnership,
no delectus perKmamm, 75, 107.
defined, 107.
transfer of shares In, 107, 081.
laches, effect of, in actions concerning, 490.
MISAPPLICATION,
of property, liability of firm for partner's, 835-88T.
wrongful use of trust funds, 837-^338.
MISCX)NDUOT,
of partner, as effecting dissolution, 685-688.
injunction against, 518, 519.
receiver In case of, 526-^28.
MOBTGAGB,
of partnership property, partner's power as to, 206, 290.
survlying partner's power, 357.
title in name of one partner, 290.
upon partner's Interest, effect of, 580.
MUTUAL AGBNOT,
as test of partnership^ 20-29L
N
NAMB,
actions in firm name, 405, 606.
contracts in firm name, 120-120.
simple contracts, 120, 121.
negotiable or sealed, authorized, 121, 122.
unauthorized, 128, 124.
firm name and i>artner*s name the same, 124-126.
contracts in individual names of partners, effect of, 110.
corporate name, use of, 120.
good will, right of vendee of, to use firm name, 142-144.
individual liability of partner on unauthorized contract In flrm
name, 123, 124.
in what name flrm may be bound, 120-126.
limited partnership, name of, 023-025.
necessity of flrm name, 119.
partnership name, defined and discussed* 118-127.
a collective representation of the partners, 119.
property in firm name, 126, 127.
exclusive right to use, 126.
title to firm property in firm name^ 140-158.
to personalty, 146, 147.
to real estate, 148-153.
use of unauthorized name, 120.
INDBX 706
CTte flsarM refer to p«CM]
NlDGLIOBNCBf
of partners, in keeping accounts, effect of, 8T2, 878.
in management of firm business, 873, 874.
liability of firm for negligence of partner, 824-326.
NBGOTIABLE INSTRUMENTS,
actions on, parties to, 535, 546.
in firm name, authorized, 121, 122.
unauthorized, 128, 124.
where firm name and partner's name are the same, 184-136.
partner's power to issue, 302-306.
in trading firm, 302, 303.
in non-trading firm, 304-806.
rights of bona fide holder, 806.
powers after dissolution, 348.
indorsement of. after dissolution, 848, 849.
power of sunriying partner, 859.
liability of firm for, on common counts, 124.
NET PROFITS,
see Gross Returns; Profits.
NEW OBLIGATIONS,
power of partner to incur, after dissolution, 847.
power of sunriying partner, 858-360.
NOMINAL PARTNERS,
defined, 112.
when necessary or proper parties, 532, 588, 545.
as parties in action on contract in name of one partner, 540.
joinder of, in actions on firm liability arising ex oontracto, 545.
NON-TRADING PARTNERSHIP,
see Trading Partnership. •
NOTICE,
of dissolution, 267-272.
actual, who entitled to, 268, 269.
sufficiency of, 270, 271.
must be received, 271.
presumption of receipt when mailed, 271.
by dormant partner, 112, 272.
by retiring partner to secure modified liability on t^t^
firm debts, 255-258.
power of partner to receive notice, 818.
notice to partner, when notice to firm, 8I89 819.
NOVATION,
as affecting parties to actions, 550-555.
termination of firm liability, effect of, 268.
as affecting liability of incoming partner, 244.
Oil.Pabt. — 45
706 INDBX
CThe figures refer to pagea]
0
OPERATION OF LAW,
partnership by, see Partnership as to Third Persons.
OSTENSIBLE PARTNER,
defined, 111.
see EstoppeL
P
PARTIES,
to actions, see Actions.
joinder of, see Actions.
competency of, to form partnership, 77-89, 696.
PARTITION,
between partners, when allowed, 175, 170.
PART OWNERS,
not partners, 40-44.
PARTNERS,
see Limited Partnerships; Partnership; Surviving Partner ;
Powers of Partners; Partnership Liability; Creditors,
accounting between, see Accounting,
accounts between, see Accounts,
actions between, see Actions,
actions by and against, see Actions.
actions, where one partner is disqualified to sue, 660-565.
. action by copartner for losses caused by partner's negligence,
488-490.
admissions by, see Admissions,
agency of, see Powers of Partners.
alienation of partner's interest, eitect of, 197-203, 678-580.
aliens as, 78.
assignment of interest of, effect, 75-77, 197-203, 578-580.
assignee of partner's claim against firm, right of proof, 430, 431.
attadiment of separate property of, 407, 408.
bankruptcy of, as effecting dissolution, 575.
not ground for receiver, 525.
books, firm books, conclusive between when, 872.
capital, liability for losses of, 135-130.
clandestine profits, rights to, 378-384.
classification of, 110-112.
consent to formation of partnership, 69-73.
corporation as, 5, 88.
death of partner causes dissolution, 263-264, 573-576.
not a ground for a receiver, 525.
deceased partner's representatives, rights of against surviving
• partner, 212.
IMDBX 707
[Th« flgurei refer to pages]
PARTNERS— Cont'd.
defective corporation, liability of partners In, 61-67.
defined, 89-40.
as to third persons, 10-24.
tests of intention, 26-36.
sharing gross returns, 14, 29-31.
sharing profits and losses, 34-36.
sharing profits only, 31-33.
dissolution of partnership by mutual consent of, 668-670.
by act of one partner, 670-673.
distinguished from Joint tenants, 36-38, 42-43.
tenants in common, 43-44.
coparceners, 42.
promoters of corporations, 60.
dormant, see Dormant Partner,
duties of, see rights and duties, post
efliect of discharge in bankruptcy of a partner, 467.
estoppel, partners by, see Estoppel,
exemption, rights of, out of firm property, 408, 409.
felons as, 79.
fiduciary relation between, 72, 73, 375-378.
firms as, 88.
firm contracts in name of one partner, 119-126.
garnishment by firm creditors of debts due to, 406.
Incapacity of, as effecting dissolution, 683-685.
incoming partner, liability of, see Incoming Partner,
indiyidual liability of, on unauthorized contracts, 123-124.
Infant, rights and liabilities of, 79-83.
insanity of, as ground for dissolution, 683-685.
Insolvency or bankruptcy of one partner, as ground for dissolu-
tion, 526, 676.
effect of, on firm business and property, 463-4^7.
rights of assignee of bankrupt partner, 454-456.
effect of discharge of, 457.
intention to be, how ascertained, 7-9, 25-36.
interest of, in firm property, nature of, 170-176, 411, 416.
assignment of partner's interest, 75-77, 678-680.
remedies of partner's creditors against, 411-420.
joint owners of property, not partners, 36-38.
Joint liability of, see Partnership Liability,
liability of estate of deceased partner, 231-234, 457, 468.
liability of retiring partner, see Retiring Partner,
liability of incoming partner, see Incoming Partner,
liability of, for firm obligations, 234-236.
see Partnership Liability,
liability of, for torts of copartner, 236-239.
liability of, in defective corporation, 51-57.
liability of, for unauthorized sealed instrument, 813.
708 INDBX
(The flfures refer to page4
PABTNERS-^ContU
Uen of, 179-ld4, 197-203, 400-103, 424.
see Lden.
Hying solyent partner, defined, 440.
lonatlcs as, 83-84.
married women as, 85-87.
marriage of female partner, effect of, 576-^77.
misconduct of,
as ground for dissolution, 685-588.
injunction In case of, 518, 519.
receiver, 526-528.
nature of Interest of, In partnership, 170-170, 411, 416b
nominal partners, defined, 112.
partnerships as, 6, 88, 89.
powers of surrivlng partner, see Powers of Partners,
proof by, in Insolyency and bankruptcy, 427-430,' 444-446L
see Oreditors.
rights and duties of, inter se, 361 et seq.
to conform to the partnership agreement, 361, 362.
to participate in management, 362, 363.
control of majority, 864-369.
in firm of more than two members, 866.
in a firm of two members, 366.
rights of third parties, effect of dissent, 367, 868.
waiver of dissent, remedies of dissenting part-
ner, 369.
entitled to information concerning business, 870.
as to keeping and Inspecting accounts, 371.
duty to devote themselves to the business and use care and
skill, 373, 374.
obligation of good faith, in general, 874-376.
preliminary negotiations, 376.
purchase of copartner's interest, 377.
on dissolution, 377.
right to benefits from transactions concerning firm inter-
ests, 378-380.
right to information obtained as partner, 381, 382.
carrying on separate business, 383, 384.
compensation for services, 384-386.
Indemnity and contribution, 387-392.
losses due to partner's own negligence, 390.
Illegal transactions, 391.
requires partnership accounting, 391, 392.
accounting, 392, 393.
partner's so-called Uen, 179-194, 197-203, 400-403, 424.
see Lien,
distribution of assets among, 394 et seq.
repaying advances, 395.
interest on, 396.
IMDBX 709
CTht flgurei ref ar to pagMQ
PABTNBRS-^^ntU
repaying capital, 3d7, 398.
division of surplus, 398.
claims between partners, 399.
rights of, upon insolvency, against * estate of deceased partner,
467-158.
rights of, In equity, against firm estate, 427-430.
rights of, upon seizure and sale of copartner's interest, 411-420.
rights and liabilities of members of limited partnership, 028 et
seq.
retiring partner, liability of, see Retiring Partner,
separate property of, firm creditors' rights against, 404 et seq.
at law, 404 et seq.
in equity, 403 et seq.
solvent partners, entitled to possession of firm assets, 463-456.
subpartners, 76, 106.
I surety, partner as surety for firm, rights of, 429.
r torts, liability of, for copartner's torts, 236-239.
transfer of firm property by one partner, 195, 190.
transfer of each partner's interest in firm, effect of, 197-203»
678-680.
i •
PARTNER^S LIEN.
see Lien; PartnerSb
PARTNERSHIP,
actions by and against, see Actions,
action bet^'eeu firms with common member, 473-478.
agency as test of, 2(V-29.
agreement for. lacbes In enforcing, 496.
alienf^tlon of entire assets of, as effecting dissolution, 678-681.
annulment of, 589-691.
arises only out of contract, 3, 6, 69-77.
assignment of partner's interest in, effect of, 76-77, 678-68a
associations not for profit, 44-46, 98-99.
attachment or seizure of partner's interest, as effecting dis-
solution, 580, 407, 408.
bankruptcy of partner or of firm causes dissolution, 526, 575.
by operation of law, partnership as to third persons, 10-24.
see Estoppel; Partnership ns to Third Persons,
capacity of parties to form, 77-^.
capital of, 132-136.
changes in, effect of, as to parties to actions, 650-665.
clandestine profits and advantages belong to, 378-384.
classification of partnerships, 103-110.
common ownership of property does not constitute, 36-68.
consideration for contract of, &9-92.
conteniplated partnerships. 47-49.
710 INDEX
[The figures refer to pages]
PABTNERSH IP— Cont'd.
contract for, may be egress or implied, 4, 02, 03.
formalities required, 92, 93.
statute of frauds, 03-9S.
creditors of, rights of, see Creditors,
death of partner causes dissolution of, 263-264, 573-67&
contract for continuance after, 73, 74.
defective incorporation, 61-157.
defined, 1-5, 39, 40.
various conceptions of,. 113-118.
mercantile conception, 114-117.
legal conception, 117, 118.
partnership a status, 114.
relations distinguishable from, 4(HS'n»
dissolution of, see Dissolution,
estoppel, partnership by, see Estoppel,
evidence of, nature of question, 58, 59.
execution against partner's interest in, 411-420, 580, 5S1.
fixed period, partnership for, dissolution of, 571-573.
good will of, see Good Will; Property.
Illegality of object of, effect of, 102, 57&
intention to form, necessary, '6, 69-77.
how ascertained, 7-9, 25-36.
Implied from conduct of parties, 92.
joint enterprise or business constitutes, 39, 40.
Joint-stock companies, 75, 105.
joint or firm assets, what constitutes, 440.
reputed ownership, 435, 436, 437.
joint liability and partnership liability, 224-22a
legality of object of, 100-102.
liability of, on sealed or negotiable contracts, 124.
limited partnerships, see Limited Partnerships,
manifested or legal intention of parties as test of, 7-9, 25, 20,
69-77,
marriage of female partner as causing dissolution of, 576, 577.
mining partnership, 107.
mortgaging partner's interest, effect of, 580.
name of, 118-127.
see Name.
necessity of, 110.
collective representation of partners, 110.
what name may be used, 110.
authority to use, 120.
contracts in, 120-126.
partnership name and partner's name the same, 124-120.
nature, extent, and duration of partnership liability, see Part-
nership Liability,
nature of partner's Interest in, 170-176, 411, 416.
INDBX 711
[Th« flcarei refer4o pagea]
PARTNERSHIP— ContU
number of persons who may fonn» 89.
origin of law of, 4.
parties, competency of, to form, 4, 77-89.
partnership between firms, 4, 88-89.
partnership inter se, true partnership, 1.
partnership as to third persons, see Partnership as to Third
Persons,
premiums, 91, 92.
property of, see Property; Real Estate; Conversion; Partners.
power of partners to sell, see Powers of Partners.
creditors' rights against, see Creditors.
exemption out of, 408, 409.
form of partner*s contribution to, 133.
what constitutes, question of fact, 129.
title to, how taken and held, 146-153.
title to, on death of partner, 204r-208, 213, 214.
agreements controlling property after partner's death, 215,
216.
effect of bankruptcy of partner, 453-457.
actions In relation to, 562-565.
nature of partner's Interest in, 170-176, 411, 416.
transfer of, 176-204.
purpose of, 4, 98, 99.
real estate shown to be property of, by oral evidence, 95.
relations distinguishable from, 40-57.
corporation, 40-41.
defective corporations, 51-57.
coparcenary, 42.
Joint tenancy, 42, 43.
tenancy In common, 43.
organizations not for profit, 44-46, 98-99.
contract for partnership, 47-49.
promoters of corporations^ 50.
reputed ownership, 435-437.
results solely from contract, 3, 69-77.
requirements of the contract, 77-97.
parties, competency, 77-^.
consideration, 89-90.
formalities, 92.
statute of frauds, 93-98.
Bubpartnershlp, 75, 106.
termination of, see Dissolution,
tests of Intention to form, 25^6, 39, 40.
sharing gross returns, 29-31.
sharing profits, 31-^33.
sharing profits and losses, 34, 85.
712 IMDBX
CTh* flsuAs ref ar to pacM]
PABTNKBSHIP— Cont'd.
title to firm property, how taken and held, 146-153.
to personalty, 146, 147.
to real estate, 148-153.
trading and non-trading firms, defined, 107, 286.
transfer of firm property, see Transfer; Frandnlent GoBTCiy-
ances.
tmst and confidence among partners, 71-73, 874, 875.
will, partnership at, dissolution of, 570.
PARTNERSHIP UABILITY,
nature, extent, and duration of, 217 et seq.
nature of liability in contract, 217, 218.
characteristics of joint obligations, 220.
actions on, 221, 222.
Judgment on, 223.
partnership liability and Joint liability, 224-226.
quasi severable character in equity of firm contracts, 227-281.
extent of liability in contract, 234, 235.
commencement of, 240. 241.
incoming partner, liability of, 242-249.
novation, 244, 245.
surety or guarantor, 245, 246.
promise for benefit of third person, 246-248.
retiring partner, liability of, 249-257.
novation, 250-254.
' suretyship liability, 255-257.
termination of, 258 et seq.
past transactions, 258-262.
payment, 258.
appropriation of payments, 259-261.
release, 261.
merger, 262.
novation, 263.
future transactions, 263 et seq.
dissolution by operation of law, 263, 26^
by ^ct of parties, 265-272.
notice of, 267-272.
nature and extent of, in tort, 236-239.
PARTNERSHIP AS TO THIRD PERSONS,
see Estoppel,
defined, 10.
origin of the doctrine, 11-18.
doctrine overthrown, 19-23.
to what extent accepted in United States, 28, 24
PARTNERSHIP CREDITORS,
see Creditors.
INDEX 718
rrh« flsures refer to page4
PABTNERSHIP PROPERTY,
see Property.
PAYMENTS,
in discbarge of partnership liability, 258.
appropriation of payments, 259-261.
of firm debts, by one partner, power of, 313-315, 846, 858.
of partner's separate debts with firm property, 189-194.
to one partner of debts due firm, 313-315, 344, 358.
PIDRSONAL PROPERTY,
see Property,
conversion of firm realty into, 154 et seq.
extent of the conversion, 155-163.
position of the legal title on conversion to, 163-166.
effect on dower, 165-169.
title to, how taken and held, 146, 147.
partner's power to sell, 288-293.
to pledge or mortgage, 294-296.
to assign for creditors, 297.
effect of death of partner, on title to, 204-208, 213, 214.
choses in action, title to, on death of partner, 204, 214.
PERSONS,
capacity to be partners, 77-89.
number of, in a partnership, 89.
pledge;
of partnership property, power of partner as to, 294-296.
power after dissolution, 343.
power of surviving partner, as to, 867.
POWERS OP PARTNERS,
origin and nature of,' 274. ^
express power, 276.
implied power, 276, 277.
ratification, 278.
estoppel, 279.
test of authority, nature of question, 280.
limitations arising from scope of business, 282-288.
from nature of business, 286, 287.
particular powers, 288 et seq.
sell firm personalty, 288-291.
firm realty, 292, 293.
pledge or mortgage firm property, 294-296.
assignment for benefit of creditors, 297.
buy, 298, 299.
borrow money. 300, 301.
Issue bills and notes, 302.
in tradlDg firms, 302, 303.
in non-trading firms. 304-806
714 INDEX
[Tht figures refer to pages]
POWERS OF PARTNERS— Cont'd.
execute sealed Instruments, 308-313.
pay and collect debts, 313-315.
institute and conduct legal proceedings, 316^
submit to arbitration. 317. -
confess judgment, 317.
receive notice, 318, 319.
admissions and representations, 320-322.
render account, 322.
employ agent or servant, 323.
miscellaneous powers, 322-323.
subject firm to tort liability, 324^26.
willful tort, 326.
illegal acts, penalties and crimes, 827-329.
false arrest and malicious prosecution, 330, 331.
defamation, 332.
fraud and misrepresentation, 333.
conversion and misapplication of property, 834-337.
wrongful use of trust funds, 337-339.
powers after dissolution, 339 et seq.
sell, 342.
pledge, 343.
assignment for benefit of creditors, 343.
collect debts, 344.
pay and settle firm debts, 345.
perform existing contracts, 346.
incur new obligations, 347.
give and indorse negotiable paper, 348, 349.
make admissions, 349, 350.
take firm debts out of statute of limitations, 851, 802.
powers of surviving partner, 353 et seq.
dispose of firm assets, 356.
pledge or mortgage, 357.
assign for benefit of creditors, 358.
collect firm debts, 358.
complete existing contracts, 358-360.
PREMIUMS,
see Consideration.
PRESUMPTION,
against partner withholding oT Improperly keeping accoimts, 372,
373.
as to what constitutes partnership property, 129, 130.
as to receiving mailed notice of dissolution, 271.
negotiable paper, presumption as to power of partner to Issue,
302-306.
none, as to liability of Incoming partner, 245.
INDEX 715
CTh« flsares refer to pages]
PRESUMPTION— Contd.
of partnership, from sharing profits and losses, 84, S5.
from sharing profits only, 31-33.
from sharing gross returns, 29-31.
of equality In profits, 135, 808, 399.
where partnership name and partner's name the same, 124-126.
PROFITS,
<^ see Partnership as to Third Persons,
associations not for profit, 44-46, 98, 99.
clandestine, accountability of partners for, 878-880.
defined, 14.
object of partnership, 3, 44-46, 98, 99.
sharing, as test of partnership, 10-24, 31-^.
« essential to a partnership, 5, 6.
PROMISSORY NOTES,
see Negotiable Instruments.
PROMOTERS,
of corporations, not partners, 50.
PROOF,
see Creditors,
of partnership, see Evidence; Partnership; Burden of Proof.
PROPERTY,
co-ownership of, does not create partnership, 36-^.
of partnership, in general, 127, 128, 132.
manner In which acquired, 128-130.
what constitutes partnership, 127-145.
when land deemed, 94-98, 127-131.
good will, 136-145.
see Good WllL
capital, 132 et seq.
see Capital,
property used In firm business, 130, 131.
reputed ownership, assets by estoppel, 435-437.
question of fact as to what constitutes, 129.
property purchased with partnership funds, 128, 129.
nature and extent of partner's Interest in, 170-176, 411, 416.
exemption out of, partner's right to, 408, 409.
power of partner to sell, 288-293, 342, 356.
see Powers of Partners,
title to, how taken and held, 146-153.
to personalty, 146, 147.
to realty, 148-153.
effect of death of partner, on title to, 204-208, 213, 214.
agreements controlling, after partner's death, 215, 216.
transfer of, see Transfer,
effect on, of bankruptcy of partner, 453-457.
716 INDEX
V^h^ flgurw ref«r to pases]
PR0PB3RTY— Cont'd.
conveyance of, in fraud of firm creditors, see Fraudalent
Conveyances,
alienation of entire, as effecting dissolution, S7S-6S0*
firm name, property In, 126, 127.
when partnership realty deemed personalty, 154-168L
see Real Estate,
priority of firm creditors In, In equity, 423-430.
see Creditors,
rights of separate creditors In, see Creditors.
at law, 411 et seq.
In equity, 423-430.
successive or simultaneous transfers of each partner's in-
terest In, effect of, 197-203.
of separate creditors. •
firm creditors* rights agalust, see Creditors.
at law, 404-409.
In equity, 437-443.
priority of separate creditors in, in equity, 4.S1-437.
partner against copartner's property, rights of, 444.
PUBLICATION,
of notice of dissolution, 207.
of certificate of limited partnership, 613, 614.
RATIFICATION, ■*
as creating firm liability, 278.
parol, sufficient to bind firm on unauthorized deed, 812*
REAL ESTATE,
conversion into personalty, in general, 164, 155.
extent of, 155-162.
out-and-out conversion, English rule, 157, 158.
pro tanto conversion, American rule, 159-161.
charging real estate for firm debts, 161, 162.
position of the legal title, 163, 164.
effect upon dower, 165-169.
when dower attaches, 167-169.
death of partner, effect on title of firm to, 206-208.
form of conveyance of, 196, 197.
partnership to deal In, requirement of statute of frauds, 94-88.
power of partner to s^l, 292, 293.
title in name of one partner, 293.
power to mortgage, 295, 296.
power of surviving partner, 356, 357.
title to, how taken and held, 148-153.
when a part of firm property, 91-08, 127-131.
see Property.
INDBX TIT
(TlM flgnres nt%T to pafMl
RBGEIVERfl,
principle upon which appointed, 620, 621.
not appointed unless dissolution of firm is sought, 621, 522.
exceptions, 522.
not necessarily appointed, even though dissolution decreed. 628»
624.
death or bankruptcy of partner, not a ground for, 625.
misconduct of partner as ground for, 526-628.
where partnership is denied, 529.
where partners by agreement have waived right to wind up,
529, n.
RECORDING,
certificate of limited partnership, 612, 618.
RELEASE,
power of partner to execute sealed release, 811.
of one Joint obligor, effect of, 221, 261.
REMEDIES,
see Creditors; Actions.
RENEWALS,
of limited partnership, see Limited Partnership!.
REPUTED OWNERSHIP,
property held by ostensible firm, 435-487«
RETIRING PARTNER,
liability of, 249-257.
release of, 250. «
novation, 250-254.
modified liability, suretyship, 256-267«
RIGHTS AND LIABILITIES,
see Partnership Liability.
s
BALE,
of partner's interest in firm on execution, how made, 411-^1201
of partner's interest, effect of, 75-77, 197-203, 578-680.
power of, see Powers of Partners,
of firm property, see Transfer.
SCOPE OF BUSINESS,
as limiting partner's power, 282-285.
enlargement of, by subsequent conduct, 288.
SEALED INSTRUMENTS,
actions on, parties to, 535, 546.
firm liable on common counts, when, 124.
in firm name, 121-126.
see Name.
718 INDEX
[The flgurcB refer to paeet]
SCALED INSTRUMENTS— Cont'd.
• power of partners as to» 121, 308-^312.
sealed release, 311.
seal treated as surplusage, 124, 31L
executed in presence of all, 312.
parol authority or ratification, 312.
liability pf partner on, acting without authority, 81&
SECRET PARTNER,
defined. 111.
see Dormant Partner.
SECURED CREDITORS,
see Creditors.
SELU
power of partner to sell firm property, 288-293.
to pay individual debts, as against ostensible partner, 290.
as against dormant partner, 291.
power to sell firm realty, 292.
see Transfer,
firm title in name of one partner, 293.
power to sell, after dissolution, 342.
power of surviying partner to sell, 856-858.
SEPARATE CREDITORS,
see Creditors.
SEPARATE PROPERTY,
of partners, see Creditors ; Property,
SET-OFF, •
of claims growing out of partnership, 488.
In action by surriving partner to enforce firm claims, 214.
SHARE,
nature of partner's share In firm property, 170-176, 411, 416.
presumed equality of shares of partners in profits, 135, 398, 399.
sale of partner's share in firm, effect of, 75-77, 197-203, 578-680.
sale of partner's share on execution, 411-420.
SHARING,
profits as evidence of partnership, 10-24, 2, 31-33.
gross returns does not create partnership, 14-16, 29-31.
profits and losses as evidence of partnership, 34, 35.
profits, essential to partnership, 5, 6.
as test of partnership, see Partnership as to Third Persona
SILENT PARTNER,
defined, 111.
SOCIETIES,
not for profit, are not partnerships, 44-46, 98, 99.
SOLVENT LIVING PARTNER,
defined and discussed, 439-441.
INDEX 719
CTh* figures refer to pafei]
SPECIAL PARTNEB,
defined, 110, 604, 605.
SPEOIFIO PBRFOfRHANGE,
of partnership agreements, 610, 511.
where an account only is wanted, 512, 51S.
for other purposes, 513, 514.
STATUTE OF FRAUDS,
requirements of, where partnership runs for more than a year, 93.
where partnership holds land or deals in real estate^ 94r-88.
STATUTE OF LIMITATIONS,
power of partner to take debts out of, after dissolution of part-
nership, 351, 352.
see Admissions,
appropriation of payments with respect to, 259.
STATUTORY CHANGES,
in law governing enforcement of creditors' rights against part-
ner's Interest in firm, 419, 420.
in nature of joint obligations, 223.
SUBPARTNBRSHIP,
defined, 75, 106.
not prohibited by principle of delectus personarum, 73-75.
SURETY,
incoming partner as, for firm debts, 245.
retiring partner, when he becomes surety, 255-257.
partner as surety for firm, right in equity against firm estate,
429.
SURPLUSAGE,
seal treated as, 124, 811,
SURVIVING PARTNER,
as quasi trustee of partnership estate, 208-211, 213, 214.
powers of , see Powers of Partners.
no power to continue the business, 354.
no beneficial suryivorshlp in favor of, 204-208.
rights and duties with respect to winding up, 208-211, 213, 214,
355-360.
when there are several, 355.
. administrator of, when chargeable, 355.
compensation, right to, 356, 386.
good win, liability to account for, 140, 141.
liability for deficiency on sale of firm assets, 213, 214.
representatives of deceased partner, rights of, against, 21Z
waiver of right to wind up, 355.
SURVIVORSHIP.
in joint obligations, 224.
no beneficial, among partners. 204-20S.
720 ' INDBX
[The figures refer to pafMl
T
TENANTS IN COMMON,
are not partners, 36-38, 4(M3, 171-178.
assignee of bankrupt partner and solvent oopartnen, 4B^^4BflL
TENANCY IN COMMON,
does not create partnership, 36-38.
distipgaished from partnership, 43, 44.
TERMINATION,
of partnership, see Dissolvtlon.
of partnership liability, see Partnership liability.
as to past acts, 258-263.
as to fntore acts, 263-27L
TESTS OF INTENTION,
to form a partnership, 25-36, 39, 40.
THIRD PARTIES,
partnership as to, see Partnership as to Third Parties.
TITLE,
to firm property, see Property.
to firm property, how taken and held, 146-153.
to personalty, 146, 147.
to real estate, 148-153.
tf ect of death of partner on title to firm property, 206-208.
as to real estate, 163-165.
as to choses in action, 214.
tfect of bankruptcy of one partner on title to firm property,
453-457.
legal title to firm realty, as affected by conyersion, 163-165.
TORTS,
partnership liability for, see Partnership Liability.
power of partners to subject firm to liability for, see Powers of
Partners,
parties to actions for, 540, 541, 548.
TRADE NAME,
see Name.
TRADE DEBTS,
proof of, by firm creditors against partner's estate, 442.*
by separate creditors against firm estate^ 429, 430.
TRADING PARTNERSHIP,
defined, 107, 286.
powers of partners in, 286, 287, 301-303.
as to n^otiable instruments, 802, 808.
TRANSFER,
of partnership property, by act of firm, 176-194.
by act of partner, 195, 196.
see Powers of Partners.
INDBX 721
rrhe figure* refer to pages]
TRANSFER— Cont'd,
form of, 196, 197.
successive or simultaneoTis transfers of each ]>artiier*8 Interest In
firm, effect of, 197-204.
of firm property In fraud of firm creditors, see Frauduhent Con-
yeyances; Lien,
of partner's Interest In firm, effect of, 72, 73, 75-77.
TRUST,
implied or resulting, in firm real estate, 94-98.
firm liability for partner's breach of, 337-339.
firm property held in trust (or firm creditors, see Creditors;
Lien; Real Estate.
TRUSTEE,
fiduciary character of partnership relation, see Good Faith,
surylving partner as trustee, see Suryivlng Partner.
TRUSTEE PROCESS,
see Garnishment
u
UNDISCLOSED PARTNER,
see Dormant Partner.
UNDISCLOSED PRINCIPAL,
contract in name of partner, action by firm, 038.
liability of firm as undisclosed principal, 548.
UNIVERSAL PARTNERSHIP,
defined, 104.
USUAL COURSE OF BUSINESS,
as determining scope of partners' powers, see Powers of Partners.
w
WAIVER,
of dissent from acts of majority of partners, '369.
waiver of right of surviving partner to wind up, 30(k
WAR,
as effecting dissolution of partnership, 264, 578.
WARRANT,
power of partner to, 290.
WILL,
partnership at, dissolution of, 570.
WINDING UP,
see Dissolution ; Surviving Partner.
WITHDRAWAL,
of partner, see Retiring Partner.
WXBT PUBLISHING CO., PRXNTBIM, BT. PAUL,
Gil. Part. — 46
THE UNIFORM PARTNERSHIP ACT
PART I. PRELIMINARY PROVISIONS
Section I.— Name of Act. This act may be cited as Uniform Partnership Act.
Sea. 2^— Definition of Terms. In this act, *'Court" includes every court and
Judge having jurisdiction in the case.
"Business** includes every trade, occupation, or profession.
"Person" includes individuals, partnerships, corporations, and other associ-
ations.
"Bankrupt** includes bankrupt under the Federal Bankruptcy Act or insolvent
under any state insolvent act.
"Conveyance" includes every assignment, lease, mortgage, or encumbrance.
"Real property" includes land and any interest or estate in land.
Sea 3^— Interpretation of Knowledge and Notice. (1) A person has "knowl-
edge" of a fact within the meaning of this act not only when he has ax*tua)
knowledge thereof, but also when he has knowledge of such other facts as in
the circumstances shows bad faith.
(2) A person has "notice" of a fact within the meaning of this act when the
person who claims the benefit of the notice
(a) States the fact to such person, or
(b) Delivers through the mail, or by other means of communication, a writ-
ten statement of the fact to such person or to a proper person at his place of
business or residence.
Sec 4.^Rnles of Construction. (1) The rule that statutes in derogation of
the common law are to be strictly construed shall have no application to this act.
(2) The law of estoppel shall apply under this act.
(3) The law of agency shall apply under this act
(4) This act shall be so interpreted and construed as to effect its general pur-
pose to make uniform the law of those states which enact it.
(5) This act shall not be construed so as to impair the obligations of any con-
tract existing when the act goes into effect, nor to affect any action or proceed-
. ings begun or right accrued before this act takes effect.
Sec. 5.P— Rules for Cases not Provided for in this Act. In any case not pro-
vided for in this act the rules of lilw and equity, including the law merchant,
shall govern.
PART II. NATURE OF A PARTNERSHIP
Sec. 6d— Partnership Defined. (1) A partnership is an association of two or
more persons to carry on as co-owners a business for profit.
(2) But any association formed under any other statute of this state, or any
statute adopted by authority, other than the authority of this state, is not a
partnership under this act, unless such association would have been a partner-
ship in this state prior to the adoption of this act; but this act shall apply to
limited partnerships except in so far as the statutes relating to such partner-
ships are inconsistent herewith.
Sec. 7.— Rulee for Determining the Existence of a Partnership. In deter-
mining whether a partnership exists, these rules shall apply:
(1) Except as provided by section 16 persons who are not partners as to each
other are not partners as to third persons.
(2) Joint tenancy, tenancy in common, tenancy by the entireties, joint prop-
erty, common property, or part ownership does not of itself establish a partner-
ship, whether such co-owners do or do not ^are any profits made by the use
of the property.
(3) The sharing of gross returns does not of itself establish a partnership,
whether or not the persons sharing them have a Joint or common right or in-
terest in any property from which the returns are derived.
(4) The receipt by a person of a share of the profits of a business is prima
facie evidence that he is a partner in the business, but no such inference shall
be drawn if such profits were received in payment:
(a) As a debt by installments or otherwise.
(b) As wages of an employee or rent to a landlord,
(c) As an annuity to a widow or representative of a deceased partner,
(d) As interest on a loan, though the amount of payment vary with the
profits of the business,
(e) As the consideration for the sale of the good-will of a business or other
property by installments or otherwise.
Sec. 8.— -Partnership Property. (1) All property originally brought into the
partnership stock or subsequently acquired, by purchase or otherwise, on ac-
count of the partnership is partnership property.
(2) Unless the contrary intention appears, property acquired with partner-
ship funds is partnership property.
(1)
2 THE XTNIFaRM PARTNEBSHIP ACT
(3) Any estate in real property may be acquired in the partnership name.
Title so acquired can be conyeyed only in the partnership name.
(4) A conveyance to a partnership In the partnership name, though without
words of inheritance, passes the entire estate of the grantor unless a contrary
intent appears.
PABT in. BELATIONS OF PARTNERS TO PERSONS DEALING WITH
THE PARTNEBSHIP
See. 9^->Partiier Agent of Partnership as to Partnership Basiness. (1) Every
partner is an agent of the partnership for the purpose of its businese, and the
act of every partner, including the execution in the partnership name of any in*
strument, for apparently carrying on in the usual way the business of the part-
nership of which he is a member binds the partner^ip, unless the partner so
acting has in fact no authority to act for the partnership in the particular mat-
ter, and the person with whom he is dealing has knowledge of the fact that ho
has no such authority.
(2) An act of a partner which is not apparently for the carrying on of the
business of the partnership in the usual way does not bind the partnership un-
less authorized by the other partners.
(3) Unless authorized by the other partners or unless they have abandoned
the business, one or more but less than all the partners have no authority to:
(a) Assign the partnership property in trust for creditors or on the aa-
signee's promise to pay the debts of the partnership,
(b) Dispose of the good- will of the business,
(c) Do any other act which would make it impossible to carry on the or-
dinary business of the partnership,
(d) Confess a judgment,
(e) Submit a partnership claim or liability to arbitration or reference.
(4) No act of a partner in contravention of a restriction on his authority
shall bind the partnership to persons having knowledge of the restriction.
See. 10^— Conveyanoo of Real Property of the Partnership. (1) Where title
to real property is in the partnership name, any partner may convey title to
such property, by a conveyance executed in the partnership name; but the
partnership may recover such property unless the partner's act binds the part-
nership under the provisions of paragraph (1) of section 9, or unless such
property has been conveyed by the grantee or a person claiming through such
grantee to a holder for value without knowledge that the partner, in making
the conveyance, has exceeded his authority.
(2) Where title to real property is in the name of the partnership, a convey-
ance executed by a partner. In his own name, passes the equitable interest of
the partnership, provided the act is one within the authority of the partner
under the provisions of paragraph (1) of section 9.
(3) Where title to real property is in the name of one or more but not all
the partners, and the record does not disclose the right of the partnership, the
partners in whose name the title stands may convey title to such property, but
the partnership may recover such property if the partners' act does not bind the
partnership under the provisions of paragraph (1) of section 9, unless the pur-
chaser or his assignee, is a holder for value, without knowledge.
(4) Where the title to real property is in the name of one or more or all the
partners, or in a third person in trust for the partnership, a conveyance executed
by a partner in the partnership name, or in his own name, passes the equitable
interest of the partnership, provided the act is one within the authority of the
partner under the provisions of paragraph (1) of section 9.
(5) Where the title to real property is in the names of all the partners a
conveyance executed by all the partners passes all their rights in such property.
Seo. 11 w— Partnership Bound by Admission of Partner. An admission or rep-
resentation made by any partner concerning partnership affairs within the scope
of his authority as conferred by this act is evidence against the partnership.
Sec. 12.— Partnership Charged with Knowledge of or Notice to Partner. No-
tice to any partner of any matter relating to partnership affairs, and the knowl«
edge of the partner acting in the particular matter, acquired while a partner
or then present to his mind, and the knowledge of any other partner who rea-
sonably could and should have communicated it to the acting partner, operate
as notice to or knowledge of the partnership, except in the case of a fraud on
the partnership coin milted by or with the consent of that partner.
See. 13.— Partnership Bound by Partner's Wrongful Act Where, by any
wrongful act or omission of any partner acting in the ordinary course of the
business of the partnership, or with the authority of his co-partners, loss or
injury is caused to any person, not being a partner in the partnership, or any
penalty is incurred, the partnership is liable therefor to the same extent as the
partner oo acting or omitting to act.
Sec. 14.— Partnership Bound by Partner's Breaoh of Trntt. The partnership
is bound to make good the loss*
THB X7NIF0RU PARTNBBSHIP AOT 8
(a) Where one partner actfnc within the scope of hie apparent authority
receires money or property of a third person and misapplies it; and
(b) Where the partnership in the course of its business receives money or
Eroperty of a third person and the money or property so received is misapplied
y any partner while it is in the custody of the partnership.
See. tS^^Natare of Partner's Liability. AH partners are liable.
(a) Jointly and severally for everything chargeable to the partnership un-
der sections 13 and 14.
(b) Jointly for all other debts and obligations of the partnership; but any
partner may enter into a separate obligation to perform a partnership con-
tract.
Sao. IS^-Partaer by Estoppel. (1) When a person, by words spoken or writ-
ten or by conduct, represents himself, or consents to another representing him
to any one, as a partner in an existing partnership or with one or more persons'
not actual partners, he is liable to any such person to whom such representa-
tion has been made, who has, on the faith of such representation, given credit
to the actual or apparent partnership, and if he has made such representation
or consented to its beinj§[ made in a public manner he is liable to such person,
whether the representation has or has not been made or communicated to sudi
person so giving credit by or with the knowledge of the apparent partner mak-
mg the representation or consenting to its being made.
(a) When a partnership liability results, he is liable as though he were an
actual member of the partnership.
(b) When no partnership liability results, he is liable jointly with the oth-
er persons, if any, so consenting to the contract or representation as to incur
liability, otherwise separately.
(2) When a person has been thus represented to be a partner in an existing
partnership, or with one or more persons not actual partners, he is an agent of
the persons consenting to such representation to bind them to the same extent
and in the same manner as though he were a partner in fact, with respect to
persons who rely upon the representation. Where all the members of the ex-
isting partnership consent to the representation, a partnership act or obligation
results; but in all other cases it is the joint act or obligation of the person
acting and the persons consenting to the representation.
Sec 17w— Liability of Incoming Partner. A person admitted as a partner into
an existing partnership is liable for aU the obligations of the partnership arising
before his admission as th6ugh he had been a partner when such obligations
were incurred, except that this liability shall be satisfied only out of partnership
property.
PART IV. RELATIONS OF PARTNERS TO ONE ANOTHER
Sec l8.^Raies Determinina Rights and Dutiea of Partners. The rights and
duties of the partners in relation to the partnership shall be determined, sub-
ject to any agreement between them, by the following rules:
(a) Each partner shall be repaid his contributions, whether by way of cap-
ital or advances to the partnership property and share equally in the profits
and surplus remaining after all liabilities, including those to partners, are
satisfied; and must contribute towards the losses. Aether of capital or oth-
erwise, sustained by the partnership according to his share in the profits.
(b) The partnership must indemnify every partner in respect of payments
made and personal liabilities reasonably incurred by him in the ordinary and
proper conduct of its business, or for the preservation of its business or
property. ...
ic) A partner, who in aid of the partnership makes any payment or advance
beyond the amount of capital which he agreed to contribute, shall be paid in-
terest from the date of the payment or advance. „ . . .
(d) A partner shall receive interest on the capital contributed by him only
from the date when repayment should be made.
(e) All partners have equal rights in the management and conduct of the
partnership business.
(f) No partner is entitled to remuneration for acting in the partnership
business, except that a surviving partner is entitled to reasonable compensa-
tioii for his services in winding up the partnership affairs.
(g) No person can become a member of a partnership without the consent
of aU the partners.
(h) Any difference arising as to ordinary matters connected with the part-
nership business may be decided by a majority of the partners; but no act in
contravention of any agreement between the partners may be done rightfully
without the consent of all the partners.
Sec 19.— Partnership Books. The partnership books shall be kept, subject to
any agreement between the partners, at the principal place of business of the
partnership, and every partner shall at all times have access to and may inspect
and copy any of them.
ft THE UNIFOBM PABTNEB8HIP AOT
' Seo. 20w— Duty of Partners to Roodor lnforni&tio«. Partners shall render oo
demand true and fall information of all things affecting the partnership to any
partner or the legal representative of any deceased partner or partner under
legtLi disability.
Soo. 2 Id— Partner Aocountablo as a Fidaoiary. (1) Every partner must ac-
count to the partnership for any benefit, and hold as trustee for it any profits
derived by him without the consei^t^ of the other partners from any transaction
connected with the formation, conduct, or liquidation of the partnership or from
any use by him of its property.
(2) This section applies also to the representatires of a deceased partner
engaged in the liquidatiou of the affairs of the partnership as the persomd rep-
resentatives of the last surviving partner.
Seo. 22.— Right to an Account Any partner shall have the right to a formal
account as to partnership affairs:
(a) If he 18 wrongfully czdndcd from the partnership business or posses-
sion of its property by his co -partners,
(b) If the right exists under the terms of any agreement;
(c) As provided by section 21,.
(d) Whenever other circumstances render it just and reasonable.
Seo. 23.— Continuation of Partnership Beyond Fixed Term. (1) When a part-
nership for a fixed term or j^articular undertaking is continnea after the ter-
mination, of such term or particular undertaking without any express agreement,
the rights and duties of the partners remain the same as they were at such ter-
Donation, so far as is consistent with a partnership at wilL
(2) A continuation of the business by the partners or snch of them as habit-
nally acted therein during the term, without any settlement or liquidation of the
partnership affairs, is prima facie evidence of a continuation of the partnership.
PART V. PROPERTY RIGHTS OF A PARTNER
Sec. 24^-Extent of Property Rights of a Partner. The property rights of a
partner are (1) his rights in specific partnership property, (2) his interest in
the partnership, and (3) his right to participate in the management.
Seo. 25w— Nature of a Partner's Right In Speolflo Partnership Property. (1)
A partner is co-owner with his partners of specific partnership property holding
as a tenant in partnership.
(2) The incidents of this tenancy are such that:
(a) A partner, subject to the provisions of this act and to any agreement
between the partners, has an equal right with his partners to possess specific
partnership property for partnership purposes; but he has no right to possess
such property for any other purpose without the consent of his partnersL
(b) A partner's right in specific partnership property > is not assignable ex-
cept in connection with the as^gnment of the rights of all the partners in the
same property.
(c) A partner's right in specific partnership property is not subject to at-
tachment or execution, except on a claim against the partnership. When
partnership property is attached for a partnership debt the partners, or any of
them, or the representatives of a deceased partner, cannot daim any right
under the homestead or exemption laws.
(d) On the death of a partner his right in specific partnership property
vests in the surviving partner or partners, except where the deceased was
the last surviving partner, when his right in such property vests in his legal
representative. Such surviving partner or partners, or the legal representa-
tive of the last surviving partner, has no right to possess the partnership prop-
erty for any but a partnership purpose.
(e) A partner's right in specific partnership property is not subject to
dower, curtesy, or allowances to widows, heirs, or next of kin.
Sec. 26^— Nature of Partner's Interest in the Partnership. A partner's inter-
est in the partnership is his share of the profits and surplus, and the same
is personal property.
Seo. 27^p-Asslgnnient of Partner's Interest. (1) A conveyance by a part-
ner of his interest in the partnership does not of itself dissolve the partnership,
nor, as against the other partners m the absence of agreement, entitle the as-
signee, during the continuance of the partnership, to interfere in the management
or administration of the partnership business or affairs, or to require any infor-
mation or account of partnership transactions, or to inspect the partnership
books; but it merely entitles the assignee to receive in accordance with his con-
tract the profits to which the assigning partner would otherwise be entitled.
(2) In case of a dissolution of the partnership, the assignee is entitled to re-
ceive his assignor's interest and may require an account &om the date only of
the last account agreed to by all the partners.
Seo. 28.— Partner's Interest Subject to Charging Order. (1) On due applica-
tion to a competent court by any judgment creditor of a partner, the court
which entered the judgment, order, or decree, or any other court, may charge the
interest of the debtor partner with payment of the unsatisfied amount of such
THE UNIFORM PABTNEBSHIP ACT O
•Jadgment debt with interest thereon; and may then or later appoint a receiver
of his share of the profits, and of any other money due or to fall due to him in
respect of the partnership, and make all other orders, directions, accounts and
inquiries which the debtor partner might have made, or which the circumstances
of the case may require.
(2) The interest charged may be redeemed at any time before foreclosure, or
in case of a sale being directed by the court may be purchased without thereby
causing a dissolution:
(bl) With separate property, by any one or more of the partners, or
(b) With partnership property, by any one or more of the partners with the
consent of all the partners whose interests are not so charged or sold.
(3) Nothing in this act shall be held to deprive a partner of his right, if
any, under the exemption laws, as regards his interest in the partnership.
PART VI. DISSOLUTION AND WINDING UP
Seo. 29.— DIsaolutioii Defined. The dissolution of a partnership is the change in
the relation of the partners caused by any partner ceasing to be associated in
the carryinK on as distinguished from the winding up of the business.
Seo. 30.— Partnership Not Terminated by DUsdution. On dissolution the part-
nership is not terminated, but continues until the winding up of partnership af-
fairs is completed.
Seo. 3 1 w— Causes ef Dissolution. Dissolution is caused:
(1) Without violation of the agreement between the partners,
(a) By the termination of the definite term or particular undertaking speci-
fied in the agreement,
(b) By the express will of any partner when no definite term or particular
undertaking is specified,
fc) By the express will of all the partners who have not assigned their in-
terests or suffered them to be charged for their separate debts, either before
or after the termination of any specified term or particular undertaking.
(d) By the expulsion of any partner from Uie business bona fide in ac-
cordance with such a power conferred by the agreement between the partners;
(2) In contravention -of the agreement between the partners, where the cir-
cumstances do not permit a dissolution under any other provision of this sec-
tion, by the express will of any partner at any time;
(3) By any event which makes it unlawful for the business of the partnership
to be carried on or for the members to carry it on in partnership;
(4) By the death of any partner;
By the bankruptcy of any partner or the partnership;
(6) By decree of court under section 32.
Sec. 32^-DissolutioD by Decree of Court. (1) On application by or for a
partner the court shall decree a dissolution whenever:
(a) A partner has been declared a lunatic in any Judicial proceeding or is
shown to be of unsound mind,
(b) A partner becomes in any other way incapable of performing his part
of the partnership contract,
(c) A partner has been guilty of such conduct as tends to affect prejudi-
cially the carrying on of the business,
(d) A partner willfully or persistently commits a breach of the partnership
agreement, or otherwise so conducts himself in matters relating to the part-
nership business that it is not reasonably practicable to carry on the busi-
ness in partnership with him,
(e) The business of the partnership can only be carried on at a loss,
(f) Other circumstances render a dissolution equitable.
(2) On the application of the purchaser of a partner's interest under sections
28 or 29:
(a) After the termination of the specified term or particular undertaking,
<b) At any time if the partnership was a partnership at will when the in-
terest was assigned or when the charging order was issued.
Seo. 33.^-General Effeot of Dissolution on Authority of Partner. Except so
far as may be necessary to wind up partnership affairs or to complete transac-
tions begun but not then finished, dissolution terminates all authority of any
partner to act for the partnership,
(1) With respect to the partners,
(a) When the dissolution is not by the act, bankruptcy or death of a part-
ner; or,
(b) When the dissolution is by such act, bankruptcy or death of a partner,
in cases where section 34 so requires.
(2) With respect to persons not partners, as declared in section 35.
See. 34.— Right of Partner to Contribution From Co-partners After Disso-
lution. Where the dissolution is caused by the act, death or bankruptcy of a
partner, each partner is liable to his co-partners for his share of any liability
created by any partner acting for the partnership as if the partnership had not
been dissolved unless
• THE UNIFORM PARTNERSHIP ACT
(a) The dfssolutloo being by act of any partner, the partner acting for the
partnership had knowledge of the dissolution, or
(b) The dissolution being by the death or bankruptcy of a partner, the
partner acting for the partnership had knowledge or notice of the death or
bankruptcy.
Seo. 35.— Power of Partner to Bind Partnershln to Third Persons After DIs-
aolutloRw (1) After dissolution a partner can bind the partnership except as
provided in paragraph (3)
(a) By any act appropriate for winding up partnership affairs or completing
transactions unfinished at dissolution.
(b) By any transaction which would bind the partnership if dissolution had
not taken place, provided the other party to the transaction
(I) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice of the dissolution; or
(II) lliough he had not so extended credit, had nevertheless known of
the partnership prior to dissolution, and, having no knowledge or notice of
dissolution, the fact of dissolution had not been advertised in a newspaper of
general circulation in the place (or in each i>laqe if more than one) at which
the partnership bu^ess was regularly carried on.
(2) The liability of a partner under paragraph (lb) shall be satisfied out of
partnership assets alone when such partner had been prior to dissolution
(a) Unknown as a partner to the person with whom the contract is made;
and
(b) So far unknown and inactive in partnership affairs that the business
reputation of the partnership could not be said to have been in any degree
due to his connection with it.
(3) The partnership is in no case bound by any act of a partner after dis-
solution
(a) Where the partnership is dissolved because it is unlawful to carry on
the business, unless the act is sppropriate for winding up partnership affairs; or
(h) Where the partner has become bankrupt; or
Where the partner has no authority to wind up partnership affairs, ex-
cept by a transaction with one who
(I) Had extended credit to the partnership prior to dissolution and had
no knowledge or notice of his want of authority; or
(II) Had not extended credit to the partnership prior to dissolution, and,
having no knowledge or notice of his want of authority, the fact of his want
of authority has not been advertised in the manner provided for advertising
the fact of dissolution in paragraph (lb II).
(4) Nothing in this section shall affect the liability under section 16 of any
person who after dissolution represents himself or consents to another repre-
senting him as a partner in a partnership engaged in carrying on business.
Seo. 36.— Effeot of Dissolution on Partner's Existing Liability. (1) The disso-
lution of the partnership does not of itself discharge the existing liability of any
partner.
(2) A partner is discharged from any existing liability upon dissolution of the
partnership by an agreement to that effect between himself, the partnership
creditor and the person or partnership continuing the business; and such agree-
ment may be inferred from the course of dealing between the creditor having
knowledge of the dissolution and the person or partnership continuing the
business.
(3) Where a person agrees to assume the existing obligations of a dissolved
partnership, the partners whose obligations have been assumed shall be dis-
charged from any liability to any creditor of the partnership who, knowing of
the agreement, consents to a material alteration in the nature or time of pay-
ment of such obligations.
(4) The individual property of a deceased partner shall be liable for all ob-
ligations of the partnership incurred while he was a partner but subject to the
prior payment of his separate debts.
Sea 37^Rlght to Wind Up. Unless otherwise agreed the partners who have
not wrongfully dissolved the partnership or the legal representative of the last
surviving partner, not bankrupt, has the right to wind up the partnership af-
fairs; provided, however, that any partner, his legal representative, or his as-
signee, upon cause shown, may obtain winding up by the court.
Seo. 38.— Rights of Partners to Applloatlon of Partnership Property. (1)
When dissolution is caused in any way, except in contravention of the partner-
ship agreement, each partner, as against his co-partners and all persons claim-
ing through them in respect of their interests in the partnership, unless other-
wise agreed, may have the partnership property applied to discharge its liabil-
ities, and the surplus applied to pay in cash the net amount owing to the re-
spective partners. But if dissolution is caused by expulsion of a partner, bona
fide under the partnership ni^reement, and if the expelled partner is discharged
from all partnership liabilities, either by payment or agreement under section
86 (2), he shall receive in cash only the net amount due him from the partner-
ship.
THE UNIPOKM PARTNERSHIP ACT 7
(2) When dissoltttion is caused in contravention of the partnership agreement
the rights of the partners shall be as follows:
dissolution
wrongfully, to damages for breach of the agreement.
(b) The partners who have not caused the dissolution wrongfully, if they
all desire to continue the business in the same name, either by themselves or
jointly with others, may do so, during the arreed term for the partnership and
for that purpose may possess the partnership property, provided they secure
the payment by bond approved by the court, or par to any partner who has
caused the dissolution wrongfully, the value of his interest in the partnership
at the dissolution, less any damages recoverable under dause (2a II) of this
section, and in like manner indemnify him against all present or future part-
nership liabilities.
(c) A partner who has caused the dissolution wrongfully shall have:
(I) If the business is not continued under the provisions of paragraph
(2b) all the rights of a partner under paragraph (1), subject to clause (2a
II), of this section,
(II) If the business is continued under paragraph (2b) of this section
the right as against his copartners and all claiming through them in respect
of their interests in the partnership, to have the value of his interest in
the partnership, less any damages caused to his co-partners by the disso-
lution, ascertained and paid to him in cash, or the payment secured by
bond approved by the court, and to be released from all existing liabilities
of the partnership; but in ascertaining the value of the {partner's interest
the value of the good-will of the business shall not be considered.
Seo. 39.— Rights Where Partnership la Dissolved for Fraud or Misrepraeen-
tation. Where a partnership contract is rescinded on the ground of the fraud
or misrepresentation of one of the parties thereto, the party entitled to rescind
is, without prejudice to any other right, entitled,
(a) To a Uen on, or right of retention of^ the surplus of the partnership
property after satisfying the partnership liabilities to third persons for any sum
of money paid by him for the purchase of an interest in the partnership and
for any capital or advances contributed by him; and
(b) To stand, after 4dl liabilities to third persons have been satisfied, in
the place of the creditors of the partnership for any payments made by aim
in respect of the partnership liabilities; and
(c) To be indemnified by the person pultj of the fraud or making the rep-
resentation against all debts and liabilities of the partnership.
Seo. 40/— Rules for Distribution. In settling accounts between the partners
after dissolution, the following rules shall be observed, subject to any agree-
ment to the contrary:
(a) The assets of the partnership are:
(I) The partnership property,
(II) The contributions of the partners necessary for the payment of all
the liabilities -specified in clause (b) of this paragraph.
(b) llie liabilities of the . partnership shaU rank in order of payment, aa
foUows:
(I) Those owing to creditors other than partners,
(II) Those owing to partners other than for capital and profits,
(III) Those owing to partners in respect of capital,
(IV) Those owing to partners in respect of profits.
(c) The assets shall be applied in the order of their declaration in clause
(a) of this paragraph to the satisfaction of the liabilities.
(d) The partners shall contribute, as provided by section 18 (a) the amount
necessary to satisfy the liabilities; but if any, but not all, of the partners
are insolvent, or, not being subject to process, refuse to contribute, the other
partners shall contribute their share of the liabilities, and, in the relative
proportions in which they share the profits, the additional amount necessary
to pay the liabilities.
(e) An assignee for the benefit of creditors or any person appointed by
the court shall have the right to enforce the contributions specified in clause
(d) of this paragraph.
(f) Any partner or his legal representative shall have the right to enforce
the contributions specified in clause (d) of this paragraph, to the extent of
the amount which he has paid in excess of his share of the liability.
(g) The individual property of a deceased partner shall be liable for the
contributions specified in clause (d) of this paragraph.
(h) When partnership property and the individual properties of the partners
are in the possession of a court for distribution, partnership creditors shall
have priority on partnership property and separate creditors on individual
property, saving the rights of lien or secured creditors as heretofore.
(1) Where a partner has 'become bankrupt or his estate is insolvent the
^daims against his separate property shall rank in the following order:
(I) Those owing to separate creditors,
8 THE UNIFORM PARTNERSHIP ACT
(IT) Those owing to partnership creditors,
(III) Those owing to partners by way of contribution.
Sec. 4 1 ."-Liability of Persoiw Continuing ttio Business in Certain Cases. (1)
When any new partner is admitted into an existing partnership, or when any
partner retires and assigns (or the representative of the deceased partner as-
signs) his rights in partnership property to two or more of the partners, or
to one or more of the partners and one or more third persons, if the business is
continued without liquidation of the partnership affairs, creditors of the first or
dissolved partnership are also creditors of the partnership so continuing the
business
(2) When all but one partner retire and assign (or the representative of a
deceased partner assigns) their rights in ijartnership property to the remain-
ing partner, who continues the business without liquidation of partnersliip af-
fairs, either alone or with others, creditors of the dissolved partnership are
also creditors of the person or partnership so continuing the business.
(3) When any partner retires or dies and the business of the dissolved part-
nership is continued as set forth in paragraphs (1) and (2) of this section, with
the consent of the retired partners or the representative of the deceased part-
ner, but without any assignment of his right in partnership property, rights of
creditors of the dissolved partnership and of the creditors of the person or
partnership continuing the business shall be as if such assignment had been made.
(4) When all the partners or their representatives assign their rights in part-
nership property to one or more third persons who promise to pay the debts
and wno continue the business of the dissolved partnership, creditors of the
dissolved partnership are also creditors of the person or partnership continuing
the business.
(5) When any partner wrongfully causes a dissolution and the remaining
partners continue the business under the provisions of section 38 (2b), either
alone or with others, and without liquidation of the partnership affairs, cred-
itors of the dissolved partnership are also creditors of the person or partner-
ship continuing the business.
(6) When a partner is expelled and the remaining partners continue the busi-
ness either alone or with others, without liquidation of the partnership affairs,
creditors of the dissolved partnership are also creditors of the person or part-
nership continuing the business.
(7) The liability of a third person becoming a partner in the partnership
continuing the business, under this section to the creditors of the ' dissolved
partnership shall be satisfied out of partnership property only.
(8) When the business of a partnership after dissolution is continued under
any conditions set forth in this section the creditors of the dissolved partner-
ship as against the separate creditors of the retiring or deceased partner or
the representative of the deceased partner, have a prior right to any claim of
the retired partner or the representative of the deceased partner against the
person or partnership continuing the business, on account of the retired or de-
ceased partner's interest in the dissolved partnership or on account of any con-
sideration promised for such interest or for his right in partnership property.
(9) Nothing in this section shall be held to modify any right of creditors to
set aside any assignment on the ground of fraud.
(10) The use by the person or partnership continuing the business of the part-
nership name, or the name of a deceased partner as part thereof, shall not of
itself make the individual property of the deceased partner liable for any debts
contracted by such person or partnership.
Sec. 42.— Rights of Retiring or Eatate of Deoeased Partner, When the Buei-
ness Is Continueil. When any partner retires or dies, and the business is con-
tinued under any of the conditions set forth in section 41 (1, 2, 3, 5, 6), or
section 38 (2b), without any settlement of accounts as between him or his es-
tate and the person or partnership continuing the business, unless otherwise
agreed, he or his legal representative as against such persons or partnership^
may have the value of his interest at the date of dissolution ascertained, ana
shall receive as an ordinary creditor an amount equal to the value of his inter-
est in the dissolved partnership with interest, or, at his option or at the option
of his legal representative, in lieu of interest, the profits attributable to the
nse of his right in the property of the dissolved partnership; provided that the
creditors of the dissolved partnership as against the separate creditors, or the
representative of the retired or deceased partner, shall have priority on any
claim arising under this section, as provided by section 41 (8) of this act.
Seo. 43.— Acorual of Actions. The right to an account of his interest shall
accrue to any partner, or his legal representative, as against the winding up
Eartners or the surviving partners or the person or partnership continuing the
usiness, at the date of dissolution, in the absence of any agreement to the
contrary.
PART VII. MISCELLANEOUS PROVISIONS
8ee. 44v— When Aot Takes Effect. This act shall take effect on the
day of one thousand nine hundred and
Sec. 45.— Legislation Repealed. All acts or parts of acts inconsistent with
this act are hereby repealed.
CTAQIARh
Hsnobook on llw taw of portnor
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