!37f C3 ^^ £^ s "^w- Law Library Cornell Law School I]dCb^...j .X^....Cr.'. Date ..fy c. I Cornell University Library KF 1374.G48C3 Cases on the law of partnership, includin 3 1924 019 222 078 14^ Cornell University Library The original of tiiis book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019222078 CASES ON THE LAW OF PARTNERSHIP INCLUDING LIMITED PARTNERSHIPS SELECTED PROM DECISIONS OP ENGLISH AND AMERICAN COURTS BY EUGENE ALLEN GILMORE PROFESSOR OF LAW, UNIVERSITY OF WISCONSIN AMERICAN CASEBOOK SERIES JAMES BROWN SCOTT GENERAL EDITOR ST. PAUL WEST PUBLISHING COMPANY 1908 i5dZ(> Copyright, 1908, BY WEST PUBLISHING COMPANY (Gil. Pabt.) THE AMERICAN CASEBOOK SERIES. For years past the science of law has been taught by lectures, the use of text-books and more recently by the detailed study, in the class-room, of selected cases. Each method has its advocates, but it is generally agreed that the lecture system should be discarded because in it the lecturer does the work and the student is either a willing receptacle or offers a passive resistance. It is not too much to say that the lecture system is doomed. Instruction by the means of text-books as a supplement or sub- stitute for the formal lecture has made its formal entry into the educa- tional world and obtains widely ; but the system is faulty and must pass away as the exclusive means of studying and teaching law. It is an improvement on the formal lecture in that the student works, but if it cannot be said that he works to no purpose, it is a fact that he works from the wrong end. The rule is learned without the reason, or both rule and reason are stated in the abstract as the resultant rather than as the process. If we forget the rule we cannot solve the problem ; if we have learned to solve the problem it is a simple matter to formulate a rule of our own. The text-book method may strengthen the mem- ory; it may not train the mind, nor does it necessarily strengthen it. A text, if it be short, is at best a summary, and a summary presup- suposes previous knowledge. If, however, law be considered as a science rather than a collection of arbitrary rules and regulations, it follows that it should be studied as a science. Thus to state the problem is to solve it; the laboratory method has displaced the lecture, and the text yields to the actual experiment. The law reports are in more senses than one books of experiments, and, by studying the actual case, the student co-operates with the judge and works out the conclusion however complicated the facts or the principles involved. A study of cases arranged his- torically develops the knowledge of the law, and. each case is seen to be not an isolated fact but a necessary link in the chain of develop- ment. The study of the case is clearly the most practical method, for the student already does in his undergraduate days what he must do all his life; it is curiously the most theoretical and the most prac- tical. For a discussion of the case in all its parts develops analysis, the comparison of many cases establishes a general principle, and (iii) IV PREFACE. the arrangement and classification of principles dealing with a sub- ject make the law on that subject. In this way training and knowledge, the means and the end of legal study, go hand and hand. The obvious advantages of the -study of law by means of selected cases make its universal adoption a mere question of time. The only serious objections made to the case method are that it takes too much time to give a student the requisite knowledge of the sub- ject in this way and that the system loses sight of the difference be- tween the preparation of the student and the lifelong training of the lawyer. Many collections of cases seem open to these objections, for they are so bulky that it is impossible to cover a particular sub- ject with them in the time ordinarily allotted to it in the class. In this way the student discusses only a part of a subject. His knowl- edge is thorough as far as it goes, but it is incomplete and frag- mentary. The knowledge of the subject as a whole is deliberately sacrificed to training in a part of the subject. It would seem axiomatic that the size of the casebook should cor- respond in general to the amount of time at the disposal of instructor and student. As the time element is, in most cases, a nonexpansive quantity, it necessarily follows that, if only a half to two-thirds of the cases in the present collections can be discussed in class, the pres- ent casebooks are a third to a half too long. From a purely practical and economic standpoint it is a mistake to ask students to pay for 1,200 pages when they can only use 600, and it must be remembered that in many schools, and with many students in all schools, the mat- ter of the cost of casebooks is important. Therefore, for purely practical reasons, it is believed that there is a demand for casebooks physically adapted and intended for use as a whole in the class-room. But aside from this, as has been said, the existing plan sacrifices knowledge to training. It is not denied that training is important, nor that for a law student, considering the small amount of actual knowledge the school can hope to give him in comparison with the vast and daily growing body of the law, it is more important than mere knowledge. It is, however, confidently asserted that knowledge is, after all, not unimportant, and that, in the inevitable compromise between training and knowledge, the present casebooks not only de- vote too little attention relatively to the inculcation of knowledge, but that they sacrifice unnecessarily knowledge to training. It is be- lieved that a greater effort should be made to cover the general prin- ciples of a given subject in the time allotted, even at the expense of a considerable sacrifice of detail. But in this proposed readjustment of the means to the end, the fundamental fact cannot be overlooked that law is a developing science and that its present can only be un- derstood through the medium of its past. It is recognized as im- perative that a sufficient number of cases be given under each topic ireaieu to airora a oasis lor comparison ana aiscnminanon ; to snow the development of the law of the particular topic under discussion; and to afford the mental training for which the case system neces- sarily stands. To take a familiar illustration: If it is proposed to include in a casebook on Criminal Law one case on abortion, one on libel, two on perjury, one on larceny from an office, and if in order to do this it is necessary to limit the number of cases on specific intent to such a degree as to leave too few on this topic to develop it fully and to furnish the student with training, then the subjects of abor- tion, libel, perjury, and larceny from an office should be wholly omit- ted. The student must needs acquire an adequate knowledge of these subjects, but the training already had in the underlying principles of criminal law will render the acquisition of this knowledge compara- tively easy. The exercise of a wise discretion would treat fundamen- tals thoroughly : principle should not yield to detail. Impressed by the excellence of the case system as a means of legal education, but convinced that no satisfactory adjustment of the con- flict between training and knowledge under existing time restrictions has yet been found, the General Editor takes pleasure in announcing a series of scholarly casebooks, prepared with special reference to the needs and limitations of the class-room, on the fundamental sub- jects of legal education, which, through a judicious rearrangement of emphasis, shall provide adequate training combined" with a thor- ough knowledge of the general principles of the subject. The collec- tion will develop the law historically and scientifically; English cases will give the origin and development of the law in England; Ameri- can cases will trace its expansion and modification in America; notes and annotations will suggest phases omitted in the printed case. Cumulative references will be avoided, for the footnote may not hope to rival the digest. The law will thus be presented as an organic growth, and the neces- sary connection between the past and the present will be obvious. The importance and difficulty of the subject as well as the time that can properly be devoted to it will be carefully considered so that each book may be completed within the time allotted to the particular sub- ject. It is equally obvious that some subjects are treated at too great length, and that a less important subject demands briefer treatment. A small book for a small subject. In this way it will be alike possible for teacher and class to com- plete each book instead of skimming it or neglecting whole sections; and more subjects may be elected by the student if presented in short- er form based upon the relative importance of the subject and the time allotted to its mastery. Training and knowledge go hand in hand, and Training and Knowl- edge are the keynotes of the series. VI PREFACE. If it be granted that all, or nearly all, the studies required for ad- mission to the bar should be studied in course by every student — and the soundness of this contention can hardly be seriously doubted — it follows necessarily that the preparation and publication of collections of cases exactly adapted to the purpose would be a genuine and by no means unimportant service to the cause of legal education. And this result can best be obtained by the preparation of a systematic series of casebooks constructed upon a uniform plan under the super- vision of an editor in chief. For the basis of calculation the hour has been taken as the unit. The General Editor's personal experience, supplemented by the experience of others in the class-room, leads to the belief that approximately a book of 400 pages may be covered by the average student in half a year of two hours a week; that a book of 600 pages may be discussed in class in three hours for half a year; that a book of 800 pages may be completed by the student in two hours a week throughout the year ; and a class may reasonably hope to master a volume of 1,000 pages in a year of three hours a week. The general rule will be subject to some modifications in connection with particular topics on due con- sideration of their relative importance and difficulty, and the time ordinarily allotted to them in the law school curriculum. The following subjects are deemed essential in that a knowledge of them (with the exception of International Law and General Juris- prudence) is universally required for admission to the bar: Administrative Law. Insurance. Agency. International Law. Bills and Notes. Jurisprudence. Carriers. Mortgages. Contracts. Partnership. Corporations. Personal Property, including Constitutional Law. the Law of Bailment. Criminal Law. RIP t J ^^' ^^"'■" Criminal Procedure. P ^' 1 1d Common-Law Pleading. Public Corporations. Conflict of Laws. Quasi Contracts. Code Pleading. Sales. Damages. Suretyship. Domestic Relations. Torts. Equity. Trusts. Equity Pleading. Wills and Administration. Evidence. International Law is included in the list of essentials from its in- trinsic importance in our system of law. As its principles are simple in comparison with municipal law, as their application is less technical and as the cases are generally interesting, it is thought that the book may be larger than otherwise would be the case. As an introduction to the series a book of Selections on General Jurisprudence of about 500 pages is deemed essential to completeness. The preparation of the casebooks has been intrusted to experienced and well-known teachers of the various subjects included, so that the experience of the class-room and the needs of the students will fur- nish a sound basis of selection. While a further list is contemplated of usual but relatively less im- portant subjects as tested by the requirements for admission to the bar, no announcement of them is made at present. The following gentlemen of standing and repute in the profession are at present actively engaged in the preparation of the various case- books on the indicated subjects: George W. Kirchwey, Dean of the Columbia University, School of Law. Subject, Real Property. Nathan Abbott, Professor of Law, Columbia University. (Formerly Dean of the Stanford University Law School.) Subject, -Per- sonal Property. Frank Irvine, Dean of the Cornell University School of Law. Sub- ject, Evidence. Harry S. Richards, Dean of the University of Wisconsin School of Law. Subject, Corporations. James Parker Hall, Dean of the University of Chicago School of Law. Subject, Constitutional Law. William R. Vance, Dean of the George Washington University Law School. Subject, Insurance. Charles M. Hepburn, Professor of Law, University of Indiana. Sub- ject, Torts. William E. Mikell, Professor of Law, University of Pennsylvania. Subjects, Criminal Law and Criminal Procedure. George P. Costigan, Jr., Dean of the University of Nebraska School of Law. Subject, Wills and Administration. Floyd R. Mechem, Professor of Law, Chicago University. Subject, Damages. (Co-author with Barry Gilbert.) Barry Gilbert, Professor of Law, University of Illinois. Subject, Damages. (Co-author with Floyd R. Mechem.) Thaddeus D. Kenneson, Professor of Law, University of New York. Subject, Trusts. Charles Thaddeus Terry, Professor of Law, Columbia University. Subject, Contracts. Vlll PREFACE. Albert M. Kales, Professor of Law, Northwestern University. Sub- ject, Persons. Edwin C. Goddard, Professor of Law, University of Michigan. Sub- ject, Agency. Howard L. Smith, Professor of Law, University of Wisconsin. Sub- ject, Bills and Notes. Edward S. Thurston, Professor of Law, George Washington Univer- sity. Subject, Quasi Contracts.- Crawford D. Hening, Professor of Law, University of Pennsylvania. Subject, Suretyship. Clarke B. Whittier, Professor of Law, University of Chicago. Sub- ject, Pleading. Eugene A. Gilmore, Professor of Law, University of Wisconsin. Subject, Partnership. Joshua R. Clark, Jr., Assistant Professor of Law, George Washington University. Subject, Mortgages. Ernst Freund, Professor of Law, University of Chicago. Subject, Administrative Law. Frederick Green, Professor of Law, University of Illinois. Subject, Carriers. Ernest G. Lorenzen, Professor of Law, George Washington Univer- itl. Subject, Conflict of Lazvs. William C. Dennis, Professor of Law, George Washington University. Subject, Public Corporations. James Brown Scott, Professor of Law, George Washington Univer- sity; formerly Professor of Law, Columbia University, New York City. Subjects, International L,aw ; General Jurisprudence ; Equity. The following books of the Series are now published, or in press : Partnership, by Eugene A. Gilmore, Professor of Law, University of Wisconsin; Criminal Law, by Wm. E. Mikell, Professor of Law, University of Pennsylvania ; Damages, by Barry Gilbert, Professor of Law, University of Illinois ; Conflict of Laws, by Ernest' G. Lorenzen, Professor of Law, George Washington University; Trusts, by Thad- deus D. Kenneson, Professor of Law, University of New York. James Brown Scott, General Editor. Washington, D. C, November 16, 1908. TABLE OF CONTENTS. CHAPTER I. What Constitutes a Paktnership. Section Pagi 1. Partnership Inter Se — True Partnership 2. Intention to be Partners 3. Tests of Intention 1 I. Sharing Profits — ^Former Doctrine '. 1' II. Development of the Modern Doctrine 3 III. Common Enterprise or Business 5' 4. Relations Distinguishable from Partnership 8; 5. Partnership by Estoppel 9i 6. Defective Corporations 10^ 7. Joint Stock Companies Wi CHAPTER II. The Creation of a Paetneeship. 1. Arises out of Contract 11> 2. Competency of Parties 12: 3. Formalities 13-' 4. For What Purposes 13S CHAPTER III. The Natuee and Chaeacteeistics of a Paetnership. 1. Various Conceptions of the Nature of a Partnership 14( 2. The Partnership Name 15^ 3. Partnership Property 16-: I. Capital 16^ II. Property Other Than Capital 17: III. Good Win 171 4. Title to Partnership Property: How Taken and Held 18! 5. Conversion of Firm Realty Into Personalty 19; 6. Nature of Partner's Interest" in Partnership Property 21( 7. Transfer of Partnership Property 21' I. By Act of the Firm 21' II. By Act of Single Partner 23( III. Successive Transfers of Each Partner's Interest 24' S. Effect of Death of Partner on Firm Property 26( Gil.Paet. (ix) TABLE OF CONTENTS. CHAPTER IV. 2 The Nature, Extent, and Dubation of Pabtneeship Liability. Section Page 1. Nature of Liability in Contract 281 I. Characteristics of Joint Obligations 281 II. Partnership Liability and Joint Liability 288 III. Quasi Severable Character in Equity 292 Nature and Extent of Liability in Tort. , 306 3. Extent of Liability in Contract 309 4. Commencement and Duration of Liability 32.5 I. Assumption of Firm Obligations 325 II. Novation 336 III. Dissolution 341 CHAPTER V. The Powers op Partners. 1. Origin and Nature of the Partner's Powers 3.56 2. Test of Authority— Nature of Question 360 3. Particular Powers Considered 3G6 4. Powers of Majority 391 5. Power to Subject Partnership to Tort Liability 396 6. Powers of Partners After Dissolution 403 CHAPTER VI. Rights and Duties oj' Partners Inter Se. 1. Duty to Observe Good Faith 418 2. Rights and Duties as to the Conduct of the Business 433 3. Indemnity and Contribution 436 4. A Partner's Right to have Firm Property Applied to Firm Debts 446 CHAPTER VII. Remedies of Partners Inter Se. 1. Actions at Law 451 2. Remedies in Equity 470 3. Accounting and Distribution 484 CHAPTER VIII. Rights and Remedies of Creditors. 1. At Law 49j> I. Creditors of the Partnership 499 II. Creditors of the Partners 507 2. In Equity 528 3. Insolvency or Bankruptcy, Application of Assets 555^ CHAPTER IX. Termination of the Paetneeship. Section ' J 1. By Act of the Parties I 2. By Operation of Law I 3. By Judicial Decree ( CHAPTER X. Limited Paetneeships. 1. Their Origin and Characteristics ( 2. Their Formation and Conduct ( TABLE OF CASES. [cases cited in footnotes ABE INDICATED BY ITALICS. WHEBE SMALL CAP: TALS ABE USED, THE CASE IS BEFEEEED TO IN THE TEXT.] Page Aas V. Benham 432 Adams v. Hackett 274 Allen V. Danielson 564 Alsop V. Trust Co 365 Ames V. Downing 610 Andrew v. Boughet 336 Andrews' Heirs v. Brown 267 Arnold v. Hagerman 223 Arnold v. Nichols 328 Aultman & Co. v. Fuller, Williams & Co 526 Austin V. Holland 343 Ball v. Dunsterville 385 Bank of Buffalo v. Thompson... 152, 311 Harher v. Crowell 192 Baring v. Dix 604 Baebt v. Nesham 35 Bassett v. Miller 271 Beecher v. Bush 49 Bergman v. Jones 226 Berkshire Woolen Co. v. Juillard 156 Besoh v. Feolich 597 Bigelow V. Gregory 104 Bininqee v. Clabk 185 Bisel V. Hobbs 321 Bloxham & Fouedbiniee v. Pell & Bbookb 18 Bond V. Gibson 366 Bond v. Pittaed 35 bonesteel v. todd 285 Bracken v. Kennedy 470 Bradley v. Ely 10 Breen v. Richardson 410 Briggs, EJx parte 4 Brooke v. Washington 318 Brown v. Hartford Fire Ins. Co. 151 Bruce T. Hastings 71 Bryant & Straw v. Clifford 246 Bucher v. Covalt 213 Buck V. Smith 479 Buckhause, In re 572 BuUen v. Sharp 36 Burgan v. Lyell 358 Burley & Harris v. Harris 454 Burnett v. Snyder 117 Pa; Burns V. Nottingham 4f Burt V. Lathrop E Burton V. Wookey 4j Bdsh v. Linthicum li Butler Savings Bank v. Osborne . . t Cameron v. Watson Carpenter v. Greenop Carter v. McCIure Case V. Beauregard Cash V. Eamshaw Central Trust & Safe Deposit Co. V. Respass Charlton v. Sloan Chester v. Dickerson Chueton v. Douglas Citizens' Bank of Perry v. Wil- liams Clapp V. Lacey Clarke v. Mills Cocke v. Bank Coleman v. Eyre Collum'b V. Read Columbia Land & Cattle Co. v. Daly Columbia Land & Cattle Co. v. Murkins Cook V. Canny Corbett, Ex parte Coster V. Lorillard COTTBELL V. MANUFACTUBING CO. Cox & Wheatcrof t v. Hickman . . Cbankshaw, In re Crockett v. Burleson Crosby v. Timolat Cross V. Burlington Nat. Bank . . Darby v. Darby 1! Darby v. Gilligan 2! Darling v. March 4( Darrow v. Calkins 2( Davies v. Harvey 3i Davies v. Humphrey 5' Davis V. Howell 5; Dean v. Dean 1( Dean v. Macdowell H De Berkom v. Smith i l.Paet. (xiii) XIV TABLE OF CASES. Page Deckard v. Case 233 Doggett V. Dill 300 Doner v. Stauffer 247 Donnell v. Harshe '. . . . 03 Dow V. State Bank of Sleepy Eye 87 Downs V. Jackson 436 Druclcer v. Wellhouse 151 Dry v. Boswell 64 Duncan v. Lowndes 369 DUNTON V. Beown 126 Duryea v. Whitcomb 13 Dyer v. Clark 196 Eagle Mfg. Co. v. Jennings... 338 Edwards v. Dillon 387 EgMris v. Wood 267 Ellison V. Sexton 346 Blmira Iron & Steel Rolling Slill Co. v. Harris 349 Eustis V. Bolles 603 Evans V. Virgin 507 EvEEBT V. Williams 141 Bveritt v. Chapman 68 Paibthoene v. Weston 476 Faenswoeth v. Whitney 466 Pechteler v. Palm Bros. & Co 76 Fern v. Cushing 581 First 'Nat. Bank v. Greveling .... 624 Fletcher v. Pulleu 100 Folsom ' V. Marlette 486 Foster V. Sargent 176 PULLWOOD V. PULLWOOD 185 Gal WAY V. Matthew 395 Gibb's Estate, In re 91 Gille V. Hunt 190 Gilruth V. Decell 401 Goodchilds, In re 569 Goodspeed v. Wiard Plow Co 404 Gouthwaite v. Duokwoetb, Beo WN & Powell 70 Grace v. Smith 17 Griswold v. Waddington 600 Gbosvenob v. Austin 535 Grosvenor v. Lloyd 348 Groth V. Kersting 484 Hackett V. Stanley 27 Hall V. Cook 305 Hall V. Lanning 286 Hall & Long v. Jones 339 Hallowell v. Blackstone Nat. Bank 309 Halsey v. Norton 583 Halstead, Appeal of 91 Hamper, Ex parte 27 Harwhett v. Gardner 236 Haney Mfg. Co. v. Perkins 396 Harman v. Johnson 399 Harris v. Peabody. . ; 541 Harrison v. Jackson 382 iHart V. liiatt 567 Page Hartley v. White 245 Haskins v. D'Este 154 Haskins v. Evebett. 517 Hatohett V. Blanton 176 Hawkins v. Mahoney 558 Hayman, Ex paste 549 Hedley v. Bainbridge 371 Helme v. Smith 84 Hendren v. Wing 189 Henn v. Walsh 588 Hesketh v. Blanchard 2 Heydon v. Heydon 507 Hicks V. Wyatt 328 Hoaglin v. C. M. Henderson & Co. 121 Hoare v. Dawes 1 Holliday v. Paper Go 624 Holmes v. Burton 313 Hookham v. Pottage 184 Huiiard v. Winsor 199 Hubbardston Lumber Co. v. Cov- ert 148 Humphries v. Chastain 408 Hunter, Ex parte 569 Huston V. Neil 200 Irwin V. Williar 368 Jackson v. Stopherd 452 Jaffe V. Krum 626 Jaffray v. Jennings 503 Janney v. Springer 243 Jefifereys v. Small 206 Jennings v. Rickard 421 Johnson Bros. v. Carter & Co . . . 54 Johnson v. Wingfield 515 Johnston v. Dutton 391 Jones V. Blun 150 Jones v. Noy 597 Judd Linseed & Sperm Oil Co. v. Hubbell 311 Kahn v. Smelting Co 120 Katz V. Brewington 433, 482 Kelly V. Rummerfiehl 65 Kendall v. Hamilton 293 King v. Hoaee 284 Kirk V. Blurton 381 Kitchen v. Lee 127 Kno WLES, In ee .j65 Knox V. (Jye 280 Kringle v. Rhornberg 192 Lambert's Case 230 Lamb v. Rowan 497 Lasoomb v. Russell 477 Latheop v. Latheop 184 Latta V. Kilbourn 425 Ledford v. Emerson 456 Leffler v. Rice 368 Leggett V. Hyde 22 Le Rot v. Johnson 323 Lindsey v. Stranahan 435 TABLE OF CASES. XV Page Lineweaver v. Slagle 619 Livingston v. Koosevblt 375 Logan V. Oklahoma Mill Co 61 Loomis V. Barker 308 Loomis V. Wallblom 584 Lord V. Hnll 472 Lyon V. Johnson 341 Lyth V. Ault & Wood 336 McAreavy v. Magirl 330 McDonald Bros. v. Campbell & Bergeson 81 McDonald v. Eggleston 383 McElroy v. Allfree 573 McElvey v. Lewis 483 McGrath v. Gowen 594 aicGregor v. Cleveland 154 McKee v. Covalt 213 McLain & Badgett v. Carson's Ex'r 304 McJIULLEN V. Hoffman 141 BlcJlurtrie v. Guiler 74 Maffet V. Leuckel 317 MagUton v. Stevenson 445 Major V. Havvkes 403 Manhattan Go. v. Laimbeer 615 Jlarsh V. Davis 133 Blarwick, In re 545 Mason V. Eldred 281 Mayberry v. Willoughby 413 Rleech V. Allen 499 Meehan v. Valentine 45 Menagh v. Whitwell 251 Merchants' Nat. Bank v. Wehr- mann 131 Miller V. Neimerick 412 Miller's River Nat. Bank v. Jeffer- son 563 Mitchell V. Reed 419 MOLET V. Beine 127 Molineaux v. Raynolds 215 Monroe v. Conner 393 Morgan v. Richardson 370 Morris V. Peclcha)n 137 Motley V. Wickoff 337 Murphy v. Crafts 438 Murray v. Murray 578 Newman v. Ruby 465 Northern Ins. Co. v. Potter 286 Notley, In re 4 Noyes v. Cushman 65 Oakelet v. Pashellee 334 Olson v. Moeeison 552 Opperiheimer V. Gleinmons 71 Owen V. Meroney 461 Palmer v. Dodge 405 Parker v. Pistor 507 Parmalee v. Wiggenhorn 328 Pearce v. Chamberlain 592 Pease v. Cole 372 Page Pennybacker v. Leary 214 People V. Remington & Sons. . . . 560 People's Bank v. Shryock 513 Peterson v. Roach 314 PfefCer v. Steiner 272 Phillips V. Phillips 113 Pilcher, Succession of 148 Pinkney v. Hall 371 Pirtle V. Penn 480 Place V. Sweetzer 511 Pooley V. Driver 17, 360 Pooley V. Whitmore 360 Porter v. Curry 368 Pratt V. McGuinness 212 Preston v. Garrard 334 PuLSFOED, In ee 549 Quackenbush v. Sawyer 66 Queen v. Robson 85 Randall v. Johnson 508 Raymond v. Putnam 490 Raymond v. Vaughan 595 Reeves v. Denicke 184 Richaeds v. Davis 477 Richardson v. Parmer 322 Robinson Bank v. Miller 171 Rodgers v. Meranda 528 Rollins V. Stevens 370 Rose V. Coffield 346 Rothwell V. Humphreys 366 Rovelsky v. Brown 239 Rowland, In be 548 R. S. Cross V. Burlington Nat. Bank 326 Ruffin, Ex parte 217 Rutherford v. Hill 106 Sabel V. Savannah Rail & Equip- ment Co 116 Sadler v. Nixon 451 Sanborn v. Royce 510 Sanduslcy v. Sidwell 306 Saundees v. Baetlett 518 SSCAKESHAFT, StIBBUP & SaLIS- BUEY, Ex PASTE 570 Shand, In re 146 Shanks v. Klein 269 Shannon v. Wright 481 Shattuck v. Chandler 236 Shea V. Donahue 168 Shebhy V. Mandeville & James- son 283 Shirk V. Shultz 125 Shoemaker Piano Mfg. Co. v. Ber- nard 328 Sillitoe, Ex parte 569 Singer v. Heller 607 Sloan V. Moore 231 Smith V. Everett 608 Smith v. Shelden 332 SVl TABLE OF CASES. Page Smith V. Shelden 406 Sodlker v. Applegate 5 Solomon v. Kirkwood 589 Staats V. Bristow 211 Stoats V. Bristoto '507 Stearns v. Houghton 273 Stecker v. Smith 367 Stevens v. Perry 502 Stumph V. Bauer 175 Sutro V. Wagner 483 Pwann v. Sanborn 557 Swire v. Redman 334 Sylvester v. Smith 323 Tapleii V. Butterfleia 236 Tayloe v. Bush 9 Taylor v. Fields 210, 507 Thayer v. Badger 435 Thayer v. Humphrey 546 Thompson v. First Nat. Bank of Toledo, Ohio 96 Thorpe v. Jackson 292 Thuelow v. Wakren 568 Tilge V. Brooks 627 Topping, Ex parte 576 Valentine v. Wysor 275 Vernon v. Hallam 181 Vetsch V. Neiss 379 Voorhis v. Childs' Ex'r 298 Wahl V. Barniim 138 Walcott v. Canfield 374 Page- Walker V. Whipple 591 Walling v. Burgess 202 Walstrom v. Hopkins 338 Walter v. Herman 575 Warren v. Taylor 446 Warring v. Arthur 441 Watson v. Fletcher 141 Waugh V. Carver 19 Weaver v. Tapscott 319 Whelan v. Shaln 288 White V. Smith 306 Whitcomb v. Converse 488 Whiting v. Farrand 404 Wild V. Davenport 594 Williams v. Farrand 177 Willis V. Henderson 528 Winner v. Kuehn 507 Winship v. Bank of United States 356 Winston v. Ewing 513 Wippei-man v. Stacy 396 Wolff V. Madden 325 Wolf V. Mills ' 397 Wood V. Braddick 411 Wyooff V. Piirnell 460 Yale V. Eames 40f> Yorkshire Banking Co. v. Beat- son 157, 317, 382 Yorks V. Tozer 440 Young v. Axtell 98 Zuber V. Roberts. CASES ON PARTNERSHIP. CHAPTER I. WHAT CONSTITUTES A PARTNERSHIP. SECTION 1.— PARTNERSHIP INTER SE— TRUE PART- NERSHIP. HOARE V. DAWES. (Court of King's Bench, 1780. 1 Doug. 371.) Defendants and others employed Contencin, a broker, to purchase a lot of tea, each party, including the broker, taking a certain share of the whole amount purchased, the lots being too large for any one dealer. The practice was for those desiring to join in the purchase- to give orders or warrants to the broker for the delivery of the quanti- ty purchased on payment being made. These warrants were often pledged and money raised on them. The broker in this case, having" pledged the warrants given him for a loan from plaintiff, became bank- rupt. The price of tea having fallen in the meantime, plaintiff was un- able to realize from the warrants the amount of the loan. He brought the present action against all the defendants, on the ground that all the parties interested in the purchase were to be considered as partners and jointly and severally liable for the whole purchase. Each de- fendant had fully paid for his share of the whole purchase which he had agreed to take. There was no agreement between the parties as. to the redisposal of the tea. Verdict for defendant, and rule nisi for a new trial. Lord Mansfield. I considered this, at first, as a case of dormant partners. The law with respect to them is not disputed, viz., that they are liable when discovered, because they would otherwise receive usurious interest without any risk; but towards the end of the cause the nature of the transaction, and of these loans, was more clearly explained, and I was satisfied with the verdict, and am now confirmed in my opinion. The evidence of Cartony is irrelevant, because he said the broker borrowed the money for him; and, besides, he did not dispute the demand. Is this a partnership between the buyers? Gil.Paet. — 1 WHAT CONSTITUTES A PARTNEESHIP. (Ch. 1 I think it is not ; but merely an undertaking with the broker by each for a particular quantity. There is no undertaking by one to advance money for another, nor any agreement to share with one another in the profit or loss. The broker undertakes to buy and sell, but makes no advance without the security of the tea warrants, which are consid- ered as cash, and pass by delivery, like East India bonds. These warrants are pawned with the lender, but the broker has no power to pledge the personal security of the principals. He cannot sell the warrants, and borrow more money on such personal security. It makes no difference whether specific tea or the warrants are delivered at the sale. It would be most dangerous, if the credit of a person, who engages for a fortieth part, for instance, should be considered as bond for all the other 39 parts. Non hsec in foedera veni. The wit- nesses did not merely speak to opinion, but to matter of fact, and their own dealings. They said the money was lent to the broker alone. Sometimes, indeed, lenders have required to know the principals. They did not trust the broker alone; but all others who do not ask after the principals do. The note is given as a collateral security person- ally by the holder of the warrant, not in the character of a partner with other persons, nor as a broker for them. WiivLES and Ashhuest, JJ., of the same opinion. BuLivER, J. This is a very plain case. The plaintiffs had no rea- son to consider the broker as a partner with the other persons ; for, though he had a share, he did not act or appear as a partner, nor were they partners as among themselves. They had never met or con- tracted together as partners. If this transaction were sufficient to constitute a partnership, a broker would have it in his power to make 500 persons partners, who had never seen nor heard of one another, or might, at his pleasure, convert his principals into partners, or not, without any authority from them, by taking joint or separate war- rants. The rule discharged. HESKETH V. BLANCHARD et al. (Court of King's Bench, 1803. 4 East, 144.) This was an action for goods sold and delivered, and on the com- mon money counts. The defendant pleaded the general issue, and paid £50 into court upon the count for goods sold and delivered, which was laid out of the question in the ultimate consideration of the case. With respect to the count for money paid, laid out, and ex- pended by the plaintiff for the use of the testator, the case appeared to be this : The plaintiff was a draper and tailor, with whom the tes- tator, who had been a captain of a vessel in the African trade, had had dealings for several years. In the spring of 1800 the plaintiff applied to Robertson, who was then about to sail for the coast of Africa, for Sec. 1) PARTNERSHIP INTER SE — TRUE PARTNERSHIP. .3 orders, who declined giving him any, sa)'ing he knew of something else which would answer better; but as he had no sufficient credit for himself, nor ready money, he requested the plaintiff to go with him to one Corfe, a butcher, and order certain quantities of beef and tripe to take with him on the voyage, promising that if any profit should arise from them the plaintiff should have one-half for his trouble. Corfe accordingly furnished the articles, to the value of i75, and sent them on board Robertson's ship by the desire of the plaintiff and Robertson, both of whom he made debtors for the goods ; and, being examined as a witness at the trial, he also swore that he would not have trusted Robertson alone. After the goods were shipped, Robertson desired the plaintiff to make an insurance. The plaintiff afterwards paid Corfe the whole sum; and Robertson be- ing since dead, without having come to any settlement with the plaintiff, he brought this action to recover the money so paid. At the trial before Rooke, J., at the last Lancaster Assizes, it was ob- jected by the defendant's counsel that as the parties were to divide the profits, if any, they must necessarily be equally liable to any loss, and therefore, the agreement constituting a partnership, the action was not maintainable by one partner against the other. To this it was answered, on the part of the plaintiff, that it was not a connec- tion of profit and loss, but a simple payment of money for the use of another, upon an undertaking by that other to pay him half the profit of a certain adventure, supposing it to be successful," and that, though the plaintiff had made himself responsible to Corfe for the value of the articles furnished upon his credit jointly with that of Robertson, yet as between themselves, or in any other respect, there was no part- nership. It was thereupon agreed to take the opinion of this court upon the point; and the jury were accordingly directed to find a verdict for the plaintiff for i75 subject to the opinion of this court whether the plaintiff were entitled to recover the whole or a moiety, and if the court should be of opinion that he was not entitled to re- cover anything a nonsuit was to be entered. Park and Wood, who were to have shown cause against a rule for entering a nonsuit, after stating the facts of the case, and making the distinction above noticed, were stopped by the court. Topping and F. Clarke, contra, said that there might be a partner- ship in a particular transaction or adventure, as well as in a general trade, a!nd this was of the former kind. That in Grace v. Smith, 2 Bl. 998, the transaction between Smith and one Robinson, who had individually contracted the debt for which the action was brought, was holden not to be a partnership, because the share which Smith was to receive was not payable out of the profits of the trade, but was a personal demand on Robinson; whereas here the agreement was in terms for the plaintiff to have one-half of the profit of the adventure. And this principle was not controverted by Lord C. J. Eyre in Waugh V. Carver, 2 H. Bl.- 235, and vide Morse v. Wilson, 4 Term Rep. 4 WHAT CONSTITUTES A PARTNEKSHIP. (Ch. 1 353, though the distinction was taken with respect to agreements which would constitute a partnership with respect to creditors, though not as between the parties themselves. But there the parties had ex- pressly stipulated between themselves not to be answerable for each other's losses, which showed that their intention was not to become partners. Here there was no such stipulation, and therefore no such intention can be inferred, and then by the general operations of law upon their agreement they were constituted partners. Lord EivLBNBOROUGH, C. J. The distinction taken in Waugh v. Carver et al., applies to this case. Quoad third persons it was a part- nership, for the plaintiff was to share half the profits ; but as between themselves it was only an agreement for so much as a compensation for the plaintiff's trouble, and for lending Robertson his credit. Vide Wilkinson v. Frasier, 4 Esp. 182; Dry v. Boswell, 1 Campb. 339; Muzzy V. Whitney, 10 Johns. (N. Y.) 236. Per Curiam. Rule discharged generally. Ex parte BRIGGS. In re NOTLEY. (Court of Review and on Appeal before the Lord Chancellor, 1833. 3 Deac. & Ch. 367.) This was an appeal by Miss Briggs, a petitioning creditor in a bankruptcy proceeding against one Notley, from a decision refusing to admit the proof of her debt, on the ground that it arose out of a partnership between her and the bankrupt. There was also a petition by the bankrupt to annul the bankruptcy proceedings on the same ground. Erskine, C. J. * * * The undisputed facts are these: Miss Briggs advanced i330 to the bankrupt, on a bond and warrant of attorney for securing the repayment on the 2d November, 1837, with interest at £b per cent. This money was advanced to the bankrupt for the purpose of enabling him to establish a manufactory for choco- late. It is said that this is not a good petitioning creditor's debt, as there was, besides the written documents, an agreement that Miss Briggs was to share in the profits of the manufactory, and that the loan, therefore, must be considered as a debt arising out of the part- nership. Now, I have always understood the distinction to be this: If the transaction between two partners is intended to form an item in the partnership accounts, then you cannot say that there is a legal debt owing from one to the other until a balance is struck, after taking the partnership accounts. But after an accoimt has been taken, and a balance struck, then, although the partnership continues, the amount of the balance will be provable under a commission, or be a good petitioning creditor's debt. The cases in which the objection Sec. 1] PAETNERSHIP INTER SE — TRUE PARTNERSHIP. 5 of a partnership has been allowed to prevail are those in which money is actually brought into the partnership account, and where it would depend, upon taking the account, whether the sum was due or not from one partner to the other. But in this case I think there is not sufficient evidence of partnership. Conceding, however, that there was a partnership, the debt here is perfectly distinct from any part- nership accounts. Although Miss Briggs was promised an eighth share of the profits, this engagement appears to have been made after the loan of the money, and was not stipulated for by her previous to the advance of the money. The money was to be repaid at all events, and there is nothing to show that it was intended to form an item in any partnership accounts. It is clear, therefore, that there was no contemplation of a partnership between these parties, but that the real object of Miss Briggs was to obtain, if she was able, more interest than i5 per cent. Sir J. Cross. This is a petition of the bankrupt to supersede the fiat, on the ground that the p_etitioning creditor was his partner in trade. But, as his honor the Chief Judge has already stated, there was no contemplation of any partnership in fact. It is true that, if B. agrees to give A. a share in the profits of his business, the court may consider them quasi partners for all purposes of responsibility to third persons. But B., after borrowing money of A., cannot turn round upon him and say, "You are my partner, by operation of law, and therefore I will not pay you your debt." This would not be per- mitted by any court, either of law or equity. But, even if there was a partnership between these parties, I think that this debt was independ- ent of any partnership transaction, and is quite sufficient to enable a petitioning creditor to sustain a fiat. It appears to me, however, that there was no partnership in fact. Petition dismissed. SODIKER V. APPLEGATE. (Supreme Court of West Virginia, 1884. 24 W. Va. 41], 49 Am. R-ep. 252.) SnydeJr, J. Suit in equity, brought by William Sodiker against Lewis Applegate, in June, 1879, in the circuit court of Brooks county, to settle the accounts of an alleged partnership between the plaintiff and defendant for running a grist and flour mill, buying and selling- grain and products of said mill. The bill avers that by the terms of the partnership the defendant was to furnish the gristmill then owned by him and put it in repair at his own expense, the plaintiff was to run and operate the mill, the funds for carrying on the business and keepi:3g the mill in repair were to be furnished by the parties in equal portions, and the profits to be shared equally between them. The defendant in his answer positively denies that any partnership of any kind existed between him and the plaintiff. He avers that 6 WHAT CONSTITUTES A PAKTNERSHIP. (Ch. 1 while the plaintiff worked at his mill he did so as a hired hand. Be- ing without means and penniless, he was employed to run the mill so long as he might do so satisfactory to the defendant and the cus- tomers of the mill. The cause was referred to a commissioner for an account, depositions taken, and the commissioner reported that in his opinion no partnership existed; but, if the court should decide that the proofs established a partnership, he reported due to the plain- tiff $126.87. The plaintiff excepted to that part of the report which found that no partnership existed, and the court by its decree of June 14, 1883, sustained the said exception and decreed that the plaintiff recover from the defendant the said sum of $126.87 and costs. From this decree the defendant appealed. It is apparent from the evidence in this cause that no partnership existed. The only agreement between the plaintiff and defendant is stated by the plaintiff when he says : "My agreement was : Mr. Applegate was to furnish me a house to live in, and I was to have the half. It was to be half and half between us. Inside repairs of the mill were to be done by me, and half of the expenses to be paid by each. Outside repairs to be paid by Lewis Applegate. There was no agreement between us as to losses." The evident meaning of this language, as shown by the other tes- timony and facts, is that the plaintiff was- employed by the defendant to take charge of his mill as miller, and for his services in that behalf the plaintiff was to receive one-half the tolls or earnings of the mill. The half of the earnings or profits to which the plaintiff thus became entitled did not make him a partner This merely constituted the man- ner of payment and the measure of" his compensation for his services as miller. To constitute a partnership between the parties who share in the profits, the interest in the profits must be mutual; that is, each person must have a specific interest in the profits as a principal trad- er. He is not a partner if he merely receives out of the profits a com- pensation for his services as an agent, employe or servant. Coliyer on Partn. § 31. Thus, where A. purchased goods for an adventure on the credit of B., and it was agreed "that, if any profits should arise from them, B. should have one-half for his trouble, it was held that this was not a partnership between the parties." Hesketh v. Blanch- ard, 4 East, 144. In all cases there must be a participation as princi- pal. If the persons merely occupy the relation of principal and agent, employer and employe, or factor, no partnership can be predicated upon the fact that such agent, employe, or factor receives a part or share of the profits for his services or other benefits conferred. This proposition is illustrated by numerous cases, among which are the following: Berthold v. Goldsmith, 24 How (U S.) 542, 16 L,. Ed 762; Burckle v. Eckhart, 1 Denio (N. Y.) 341; Bowyer v. Anderson 2 Leigh (Va.) 550; Chapline v. Conant, 3 W. Va. 507, 100 Am. Dec! Sec. 2) INTENTION TO BE PAKTNERS. 7 766; Dils' Adm'r v. Bridge, 23 W. Va. 20; Hanna v. Flint, 14 Cal. 73; Morgan v. Stearns, 41 Vt. 398. In every partnership there is a community of interest, but every community of interest does not create a partnership. There roust be a joint ownership of the partnership funds, or a joint right of control over them, and also an agreement to share profits and losses arising therefrom. Thus an agreement between A. and B. that A. shall work B.'s farm upon shares and divide the produce does not con- stitute them partners inter sese, or as to third persons. Putnam v. Wise, 1 Hill (N. Y.) 234, 37 Am. Dec. 309. Nor are the owners of real estate who contract with mechanics to build a mill or other building upon their land partners inter sese; but either party, paying more than his share of the expense of the construction, may recover such excess of the other owner in assumpsit. Porter v. McClure, 15 Wend. (N. Y.) 187. It is unnecessary to illustrate further what particular facts and agreements do or do not constitute a partnership. The books are full of nice distinctions and definitions, showing that it is often difficult to decide to which class the particular facts and circumstances assign cases. In the case before us, however, there is no such difficulty. Under none of the authorities or definitions could this be classed as a partnership. I am therefore of opinion that the decree complained of must be reversed, with costs to the appellant, and the plaintiff's bill dismissed, with costs. Reversed. SECTION 3.— INTENTION TO BE PARTNERS. ZUBER V. ROBERTS. (Supreme Court of Alabama, 1906. 147 Ala. 512, 40 South. 319.) Bill by R. B. Zuber against Paul Roberts. From a decree in favor of defendant, plaintiff appeals. Affirmed. DowDELL, J. The bill in this case is filed for the purpose of a settlement of an alleged partnership between the complainant and respondent. The respondent, by his answer, denies the allegations of the bill as to the existence of any partnership between the parties. There was no contract in writing, and there was no express agree- ment between the parties for the creation of a partnership; and the determination of this question must be had from the terms of the agree- ment entered into between the parties, the character and conduct of the business, and the intention of the parties, to be gathered from the circumstances attending the entire transaction. 8 WHAT CONSTITUTES A PARTNEESHIP. (Ch. 1 In 1900 Paul Roberts obtained a lease for the Alabama Consolidat- ed Coal & Iron Company on a limestone quarry and entered into a contract to furnish said company with 200 tons of limestone a day for a term of three years. At this time the appellee was superintendent of the Alabama Consolidated Coal & Iron Company's furnace at Ironaton, Ala., and the appellant was an employe of said company under the appellee as superintendent. An agreement was subsequent- ly entered into between the parties, whereby the appellee was to furnish the capital for the equipment of the quarry and for stocking a com- missary, etc., and the appellant was to manage the quarry and com- missary, and for his services was to receive one-half of the profits derived from the quarrying of stone and one-half of the profits from the commissary, and, as the appellant states in his testimony, one-half of the rents collected on houses on the quarry premises. Operations were conducted under this arrangement for about two years, when the appellee made a contract with the Alabama Con- soHdated Coal & Iron Company whereby he surrendered his lease and canceled the contract for the supply of limestone during the unexpired time. He was paid a sum of money by the Alabama Consolidated Goal & Iron Company for the surrender of his lease and cancellation of the contract, and the appellant thereupon filed his bill for a settle- ment of the alleged partnership, claiming that he was entitled to par- ticipate equally with appellee in the sum received by appellee for the cancellation of the contract and the surrender of the lease, all of which the appellee denies, and appellee claims that the business was his alone, and that a division of the profits was only an adopted method of fixing the compensation of appellant for his services as manager of the business. The evidence shows that the business was conducted in the name of Paul Roberts, or in the name of the "Consolidated Quarry," which latter name was used by appellee for the convenience of the Alabama Consolidated Coal & Iron Company in the keeping of their accounts, and not as a partnership name. The appellant claims and testifies that the name of "Roberts & Zuber" was used in conducting the quarry busi- ness, and the evidence shows that the appellant had some bills of lad- ing for lime rock made out in the name of Roberts & Zuber. The appellee, on the other hand, testified that he did not authorize or con- sent to the use of such name, and, upon being informed that such name was being used, he notified the agent of the railroad company and the clerk in the commissary, who made out the bills of lading, that the bills should not be so made. The evidence further shows that the goods for the commissary were purchased in the name of Paul Roberts, and, as shown by sundry exhibits attached to the dep- osition of Paul Roberts, the complainant, Zuber, would order goods for the commissary, signing the name "Paul Roberts per R. B. Zuber," on the paper of the "Consolidated Company," which had the names "Paul Roberts, Proprietor," and "R. B. Zuber, Mgr.," printed thereon. Sec. 2) INTENTION TO BE PAKTNEKS. 9 The account for lime rock shipped to the Alabama Consolidated Coal & Iron Company was kept in the name of Paul Roberts, and all set- tlements were made with Paul Roberts by checks drawn to his ac- count. The capital for conducting the business was all furnished by the appellee. The lease on the quarry and the contract for the fur- nishing of stone, which made the business possible, were the property oi the appellee, and were never by him transferred or assigned in any way to the appellant, in whole or in part. On the other hand, the appellant contributed to the arrangement only his services as manager, and for such services received, instead of a stipulated salary, one-half of the net profits. The appellant himself testifies that the agreement was that the appellee should put up the money in lieu of appellant's services, and certain profits were to be divided between them. While the evidence shows a community of interest in the profits, it does not satisfactorily show that under the arrangement and con- duct of the business there was to be any community in the losses. The appellant contends that the fact, which is undisputed, that he bore his part of the loss in the payment of damages for an injury suffered by one of the employes working in the quarry mines goes to prove that he was not only to share in profits, but in the losses of the business as well, and therefore he was a partner. As to this matter, the evidence shows that at the time the appellant objected to paying any part of said loss, and the evidence further explains why he con- sented to pay one-half, and this was not upon the ground of any part- nership liability. The facts in the present case are very much like those in the case of Tayloe v. Bush, 75 Ala. 433, where there was a contract for the conduct of a farm; the agreement providing that one party should furnish the farm and certain stock, tools, etc., the other to conduct it, keep an account of all expenses, and to make equal division of the net proceeds. It was said in that case : "In determining whether a partnership was created, the intention of the parties is the single question for consideration. There is a well-recognized distinc- tion between cases where third persons have dealt with parties, as- sociated in business as partners, and controversies between the par- ties themselves, or controversies in which the rights of such persons are not involved. In the one class of cases, a partnership may arise by mere operation of law, without an inquiry into or in direct opposi- tion to the expressed intention of the parties. In the other class of cases, the question is as to the intention of the parties. * * * The test of a partnership generally is whether there is a community of "interests, a participation in losses and profits. Howze v. Patterson, 53 Ala. 205, 25 Am. Rep. G07; Autrey v. Frieze, 59 Ala. 587. The rule is not without its exceptions ; and when a party is without interest in the capital or business and is to be compensated for his services from the profits, or rewarded by the profits or what is to depend upon the result of an adventure or enterprise, the rule is without application. 'This contract is within the exception. The participation of Thomas 10 WHAT CONSTITUTES A PARTNERSHIP. (Ch- 1 in the profits was simply intended as compensation to him for his skill and services as the manager of the stock and plantation and in the cultivation and gathering of the crops." Again it is said in Stafford V. Sibley, 106 Ala. 192, 17 South. 324 : "An agreement by which one is to share in the profits alone does not create a partnership. The agreement should bind the parties to share the burden of losses. One who is to receive for his share a percentage of net profits, and if there are no profits is to be paid nothing, in one sense is affected by losses; but if by the agreement he is to contribute nothing to make good the losses, if he is under no legal Hability therefor, he does, not bear the burden of loss in its legal signification as an element of partnership." Applying this law to the facts in this case, as we gather them from the evidence, we are of the opinion that no partnership existed between the parties. To our minds, the weight of the evidence shows that it was never the intention of the parties to create a partnership, and that the agreement to divide the profits was only a mode, adopted by the parties, in fixing the appellant's compensation for the services which he was to render. It follows, therefore, that the decree appeal- ed from must be afiBrmed. Affirmed. BRADLEY et al. v. ELY. (Appellate Court of Indiana, 1900. 24 Ind. App. 2, 56 N. E. 44, 79 Am. St- Rep. 251.) CoMSToCK, C. J. The appellee, plaintiff below, sued James L,. Har- gis and James L,. Bradley as partners as J. L. Hargis & Co. The com- plaint was in two paragraphs. The first was on a promissory note executed by J. L,. Hargis & Co. to the appellee. The second was for money had and received to the use and benefit of the defendants, and to pay off an indebtedness incurred in the operation and management of a large farm operated, as alleged, by the defendants as partners. Appellant filed his sworn answer to the complaint in general denial. The finding and judgment of the court was for the appellant on the first paragraph of the complaint, and against Bradley and Hargis on the second paragraph. Bradley alone appeals. The error assigned is the action of the court in overruling appellant's motion for a new trial. Among the reasons specified in the motion for a new trial are "that the finding is not sustained by sufficient evidence and is con- trary to law." The record shows that the consideration of the note- which was executed by Hargis in person was for the same money loaned to Hargis in person and declared for in the second paragraph' of the complaint. On January 3, 1880, appellant, the owner of a. farm, entered into a written agreement with James H. Hargis for its cultivation; that under the contract he (James H. Hargis) resided, Sec. 2) INTENTION TO BE PARTNERS. 11 upon and cultivated the farm until 1890, when'his son J. L. Hargis, who for some time had acted as his father's foreman, moved on the farm, his father moving off, and during the son's occupancy and cul- tivation of the farm the alleged indebtedness accrued. The record shows that there was no contract for the occupancy or cultivation of the farm, written or oral, between appellant and James H. Hargis or J. L. Hargis, other than the written agreement with James H. Hargis. There is evidence that J. L. Hargis succeeded to the posi- tion and rights of his father, J. H. Hargis. The second paragraph al- leges a partnership between J. H. Hargis and the appellant. Counsel for appellee state in their brief that the court found that they were partners, and that the money was used in the discharge of indebted- ness created for the benefit of the partnership. Appellee contends that tie contract made the parties thereto a farm partnership. Ap- pellant contends that it is a contract "to rent and farnt let," as declared therein and does not create a partnership of any kind. Counsel for appellee, in support of their views, argue that Bradley furnished the farm and two-thirds of the personal property; that one-third of the personal property was appraised, and charged to Hargis, who, by the terms of the contract, became the owner of one-third the personal property, for the purchase of which he became indebted to Bradley, and agreed to pay interest thereon; that he furnished his own and hired labor; that he had the power of general manager; that there was to be a showing of the losses and profits, "two-thirds of the net profits to go to the party of the first part, and one-third thereof to go to the party of the second part, and the losses and expenses to be ap- plied, two-thirds to the party of the first part, and one-third to the party of the second part." It is claimed for counsel for appellee that these terms and stipulations of the agreement made the contract one of partnership; citing 17 Am. & Eng. Enc. Law, p. 854; Brown v. Higginbotham, 5 Eeigh (Va.) 583, 27 Am. Dec. 618; Champion v. Bostwick, 18 Wend. (N. Y.) 183, 31 Am. Dec. 376; Pettee v. Ap^ pleton, 114 Mass. 114 ; Fougner v. Bank, 141 111. 124, 30 N. E. 442 ; State Nat. Bank v. Butler, 149 111. 575, 36 N. E. 1000. As appears from brief of appellee, the cause was tried and decided upon the theory that appellee and appellant were partners. In the construction of a contract, we look to the intention of the parties. As said in George, Partn. p. 31 : "But it is the legal, rather than the declared, intention that controls. If the parties intend and do those things which the law declares constitute a partnership, then the parties are partners, and an express stipulation that they do not intend to form a partnership is of no avail. It simply shows that they have mistaken the legal effect of the agreement which they intend- ed to make." The fact of partnership, in the case before us, depends entirely upon the written agreement. * * * From an examina- tion of its terms, we think it quite clear that the parties did not in- tend to form a partnership. The words which are usually employed 12 WHAT CONSTITUTES A PARTNERSHIP. ' (Ch. 1 in articles embracing the formation of a partnership are wholly want- ing. The intention to form a partnership is nowhere in terms ex- pressed. Upon the contrary, the agreement recites that "the party of the first part has this day rented and farm let unto the party of the second part his [Bradley's] said farm, * * * for the term of one year, and after the 1st day of March, 1880, with the privilege of continuing the same from year to year on the terms hereinafter enum- erated, * * * and at the expiration of each year during the term of such tenancy," etc., "they shall meet on proper notice, * * * adjust their business and claims pertaining to said renting." Did the parties, without intending so to do, enter into a partnership ? Col- Iyer on Partnership (chapter 1) thus defines a "partnership": "If there is a joint undertaking and community of profit and loss, each party sharing in these mutually, and having a specified interest in the profits, not as compensation for services rendered, but as an as- sociate in the undertaking, the relation of partner is formed." George on Partnership, at page 50, says : "Cox v. Hickman, 8 H. L. Cas. 368, established the proposition that partners are the agents of each other; but, for reasonS' just explained, mutual agency is not the test of part- nership. The ultimate and conclusive test of a partnership is the ownership of the profits of the business. If there is a community of profits, a partnership follows. Community of profits means a pro- prietorship in them, as distinguished from a personal claim upon the other associate; in other words, a property right in them from the start in one associate as much as in the other." The contract provides for the purchase by the party of the second part of a one-third inter- est in the personal property on the farm. The remaining two-thirds interest was reserved in the party of the first part. This created a tenancy in common. It provides for the sale of the farm property on hand when the contract was entered into by "the mutual consent and agreement of the parties." The parties were not made the mutual agents of each other, each as principal. In Roper v. Schaefer, 35 Mo. App. 30, in which numerous authorities are cited, the rule stated in an instruction as follows was approved : "The court declares the law to be that a simple partnership in profits and losses of a busi- ness does not constitute a partnership, but there must be such com- munity of interests as enables each party to make contracts, manage the whole business, dispose of the whole property ; and the rule is the same as to third persons, unless the party sought to be charged has so acted as to lead the plaintiff to believe a partnership existed and to act upon such belief." The contract in question provides that the par- ty of the second part will cultivate all the farming land thereon, in such crops and in such proportion as the parties may agree upon from year to year; that he will plow and gather in good season or order, circumstances permitting, and put in a crib or garner ; and the parties are to sell the product of said farm at such prices as said parties may agree upon from time to time; "the said party of the second part Sec. 2) INTENTION TO BE PARTNERS. 13 to have charge of said farm, and to take full power to make all nec- essary purchases for said farm, and to buy and sell' such stock, and for such price, as may be mutally agreed upon." "The party of the second part to keep a complete and correct account of all purchases and sales of any kind and character pertaining to the management of said farm under this contract, which shall be open to the inspection of both parties." These provisions are consistent with the theory of tenancy, and with the foremanship of the party of the second part, and inconsistent with the theory of partnership, because the right of a partner to inspect the books is an incident of partnership, not de- pendent upon contract. The party of the first part is to have two- thirds of the price of all articles sold from said farm, and the party of the second part, one-third thereof. The agreement stipulates that the party of the second part shall not be required to replace buildings destroyed by fire. This provision would seem wholly out of place in a partnership agreement, but the parties may reasonably have had in mind the rule that ordinarily leased premises are to be surrendered to the landlord in as good repair as when taken, process of ordinary decay excepted. We are unable to agree with the learned trial court in the conclu- sion reached. We are of the opinion that the intention of the parties, gathered from the instrument, was to not enter into a partnership, and that without reference to their intention, as gathered from the ex- tracts we have made from the contract descriptive of the relation in- tended to be created, the instrument cannot be construed as creating a partnership. The specific interest in the profits given to the tenant were in compensation for services rendered. It contains no provision inconsistent with this interpretation, while the theory of partnership is against the apparent intention of the parties. * * * Judgment reversed, with instructions to sustain appellant's motion for a new trial. DURYEA et al. v. WHITCOMB. (Supreme Court of Vermont, 1858. 31 Vt. 395.) Book account. The auditor reported that on the 30th of August, 1854, the defendant, the plaintiffs, and Isaac B. Lewis made an agree- ment in the city of New York, where both the plaintiffs and Lewis resided and were engaged in the purchase and sale of potatoes, that the defendant, who resided in Wells River, in this state, should pur- chase potatoes during that season in Vermont and New Hampshire, taking the advice of the plaintiffs and Lewis, from time to time, in regard to the price, amount, and market of such purchases; that the defendant was to devote his whole time to this business, and was to have 6 cents per bushel to cover the expense of buying and carrying i-i WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 the potatoes, which sum of 6 cents per bushel was to be added to the cost of the potatoes ; that if it should become necessary, in the course of such purchases, for the defendant to visit other parts of the coun- try, the expense thereof should be borne, one-half by the defendant, one-quarter by Lewis, and one-quarter by the plaintiffs; that the de- fendant was to send the potatoes purchased by him to such market as he should think best, advising, however, on this subject, with Lewis and the plaintiffs; that all the potatoes which the defendant should purchase and send to New York were to be taken by Lewis or the plaintiffs, and sold at the highest market price by the one who should receive them, such party charging nothing for selling, and each to be accountable for their own sales; that if the defendant chose to send any of the potatoes purchased by him to any other market than New York he should be accountable for the amount of the sales thereof; that all the expenses of transportation of the potatoes to market were to be paid by the defendant; and added to the general cost of the po- tatoes, and at the close of the season the profit or loss on all the potatoes purchased by the defendant were to be apportioned among the parties as follows: to the defendant one-half, to the plaintiffs one-quarter, and to Lewis one-quarter; and that, if the defendant at any time needed more funds than he had for such purchases, he might draw on Lewis, or on the plaintiffs, in such a manner and to such an extent that the defendant should furnish one-half of the money for such pur- chases, the plaintiffs one-quarter, and Lewis one-quarter. The au- ditor further reported that in pursuance of this agreement potatoes were purchased by Whitcomb and sent to market and sold by the other parties, and that upon an adjustment of the claims of the plaintiffs against the defendant, arising out of such purchases and sales (which were the only matters embraced in the plaintiffs' account) , including the defendant's share of a loss in said business, computed according to the terms of the agreement, he found that the defendant was in- debted to the plaintiffs in the sum of $8i8.45. The auditor further reported that at the time the above-mentioned arrangement was made nothing was said between the parties about a partnership, and the au- ditor found from the foregoing facts that neither of the parties at that time supposed they were forming a partnership or intended to form one. The defendant insisted before the auditor, as well as before the county court, that this arrangement constituted a partnership between him, the plaintiffs, and Lewis, and claimed that the affairs of such part- nership could not be adjusted in this action. But the county court rendered judgment upon the report for the plaintiffs for the amount reported by the auditor, to which the defendant excepted. Aldis, J. As this is a case where the rights 'Of the partners inter se merely are concerned, where no question as to third persons is in- volved, the criterion to determine whether the contract is one of part- nership or not must be : What did the parties intend by the contract which they made as between themselves? Sec. 2) INTENTION TO BE PARTNERS. 15 If we regard the agreement itself, as set forth in the auditor's re- port, it is clearly a partnership. * * * The parties all furnish a share of the capital — Whitcomb one-half, Lewis one-quarter, the Duryeas one-quarter. They jointly own the property when purchased. It is purchased in order to be sold again for their joint and mutual benefit, thereby negating the idea of sep- arate control and disposition of their interests in the property pur- chased and of separate interests in the proceeds. Each is to share in the final profit or loss. At the close of the season the profits or losses are to be divided, to Whitcomb one-half, to Lewis a quarter, to the plaintiffs a quarter. Each is to aid in seUing, and to contribute his aid, skill, and knowledge to get the highest price. * * * The fact that each was to be accountable for his own sales amounts only to this: That each should sell for cash. If either did' not, he was to be accountable for his sale as cash. The proceeds of the sales by each would belong to them jointly, not severally. This provision is as consistent with an agreement for a partnership as with any oth- er. Noyes v. Cushman, 25 Vt. 390. So that Whitcomb was to have the control of the potatoes, and to run them to the best market, taking the advice of Lewis and the Duryeas on the subject, is, when we con- sider where the parties resided, where the potatoes were to be bought, and to what markets they might be sent, and that Whitcomb was to buy them, as consistent with a contract of partnership as with any other. I. This agreement does not belong to the class of cases where the parties are jointly interested in certain proportions in the property purchased, but not in the final profits or losses, where each of the part owners has the power of separate disposition of his interest. Such is the case of Coope v. Eyre, 1 H. Bl. 37, a leading illustration of the class. II. It is not of the class where a party receives a portion of the profits as a compensation for his labor as an agent or servant. Each furnished a portion of the capital. Each was a part owner of the prop- erty when purchased, and of the proceeds when sold. Neither could be said to be the servant or agent of the other. An agent who re- ceives a share of the profits as a compensation for his services is not expected to share in losses. If there are no profits, he loses his labor or wages ; but he loses no more, though there are further losses to be iDorne by the partners. Of this class is Kellogg v. Griswold, 12 Vt. 291, and Mason v. Pot- ter, 26 Vt. 722. III. Nor is it a case where a share of the gross or net earnings is to be paid as a compensation for the use of capital, or as rent, and where the party receiving such compensation has no interest in the husiness, the property, and the proceeds, but only a right of action against the other parties. Here the parties jointly contributed capital, labor, and skill — were joint owners of the property from the time of 16 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 its purchase till the final division of profits or loss. No severance of their interests could be had. No ascertainment of their respective shares or interests could be made till a final accounting. They must have relied on the property and its proceeds to secure to each his final share, no matter by whom the property might be sold, or its proceeds held. Hence the cases of Tobias v. Blin, 21 Vt. 544, Bowman et al. v. Bailey, 10 Vt. 170, and Ambler v. Bradley, 6 Vt. 119, do not apply. Of the same class are Denny v. Cabot, 6 Mete. (Mass.) 93, Holmes v. R. R. Corp., 5 Gray (Mass.) 58, Loomis v. Marshall, 12 Conn. 69, 30^ Am. Dec. 596, and various other cases cited by counsel. It is said, however, that the auditor finds that the parties did not in- tend to form a partnership, and that such intention must govern. It is with contracts of partnership, as with all other contracts, that as between the parties to them their intention must govern. Hence an express stipulation in a contract that the parties thereto shall not thereby become partners is binding and of great significance in giving construction to' the instrument, especially if the terms are doubtful, or susceptible of more than one meaning. 1. It is to be noted that in this case there was no such express stip- ulation. The auditor's report says : "At the time of the arrangement in New York, August 20, 1854, nothing was said about a partnership, and neither of the parties at that time supposed they were forming a partnership, or intended to form a partnership." As nothing was said about a partnership, the parties could not have stipulated that their contract should not create one. 2. The report states what was the arrangement of August 20, 1854. That was a contract for a partnership. If their contract was for a partnership by necessary legal construction (which we have found that it was), and they intended to make the contract (and this appears from the report) , the legal effect of their contract could not be varied by their not supposing it to be what it was. The further statement in the report that they did not intend to form a partnership seems incon- sistent with tlie other facts. One is at a loss to perceive how the au- ditor could discover such an intention, when nothing was said about a partnership, and when the contract which they made was a partner- ship. Probably the fair construction of the report is that the parties were not aware of the legal extent and obligation of the contract into which they entered. As the contract imports a partnership, we must hold, in the absence of any express stipulation and of any other circumstances to show the contrary, that they intended to create the relation which the con- tract expresses. * * * The result is that the judgment of the county court is reversed, and judgment rendered for the defendant to recover his costs.'- 1 "It was said, and said with considerable force, that they never intended to be partners. What they did not intend to do was to incur the liabilities Sec. 3) TESTS OF INTENTION. 1'^ SECTION 3.— TESTS OF INTENTION. I. Sharing Profits — Former Doctrine. GRACE V. SMITH. (Court of Common Pleas, 1775. 2 W. Bl. 998.) De Grey, C. J., reported : That this was an action brought against Smith alone as a secret partner with one Robinson (vide Abbot and Smith), to whom the gopds were deHvered, and who became bank- rupt in 1770. That on the 30th of March, 1767, Smith and Robinson entered into partnership for seven j'ears, but in the November after- wards, some disputes arising, they agreed to dissolve the partnership. The articles were not canceled, but the dissolution was open and no- torious, and was notified to the public on the 17th of November, 1767. The terms of the dissolution were that all the stock in trade and debts due to the partnership should be carried to the account of Robinson only ; that Smith was to have back £5,200, which he brought into the trade, and £1,000 for the profits then accrued since the com- mencement of the partnership; that Smith was to lend Robinson £4,- 000, part of this £5,300, or let it remain in his hands for seven years, at 5 per cent, interest and an annuity of £300 per annum for the same seven years — for all of which Robinson gave bond to Smith. In June, 1768, Robinson advanced to Smith £600 for two years' payment of the annuity and other sums by way of interest and gratuities, and other large sums at different times, to enable him to pay the partnership debts; Smith having agreed to receive all that was due to the part- nership, and to pay its debts, but at the hazard of Robinson. That on the 1st of August, 1768, the demands of Sinith were all liquidated and consolidated into one, viz., £5,200 due to him on the dissolution of the of partners. If Intending to be a partner Is intending to take the profits, then they did intend to be 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 partners. If intending to see that the money was ap- plied for that purpose, and for no other, and to exercise an eflicient control over it, so that they might have brought an action to restrain it from being otherwise applied, etc., was intending to be partners, then they did Intend to be partners." Per Jessel, M. R., In Pooley v. Driver, 5 Ch. Div. 458, 483 (1876). "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 something else, or that they even expressly declare that they are not to be partners. The law must declare what Is the legal Import of their agreements, and names go for nothing when the substance of the arrangement showfe them to be inapplicable. But every doubtful case must be solved In favor of their Intent; otherwise, we should 'carry the doctrine of constructive partnership so far as to render it a trap to the unwary.' " Per Cooley, J., in Beecher v. Bush, 45 Mich. 188, 7 N. W. 785, 40 Am. Rep. 4G5. Gil.Part. — 1 18 WHAT CONSTITUTES A PAETNBESHIP. (Ch. 1 partnership, il,500. for the remaining five years of the annuity, and £300 for Smith's share of a ship, in all, £7,000, for which Robinson gave a bond to Smith. That on the 22d of August, 1769, an assign- ment was made of all Robinson's effects to secure the, balance then due to Smith, which was stated to be £10,000. Soon after the commission was awarded. Davy, for the plaintiff, insisted that the agreement between Rob- inson and Smith was either a secret continuance of the old partner- ship or a secret commencement of a new one, being for the retirmg partner to leave his money in the visible partner's hands, in order to carry on his trade, and to receive for it 121/2 per cent, profit, which could not fairly be done, unless it be understood to arise from the prof- its of the trade, and that he ought therefore to be considered as a se- cret partner; and he relied much on a case of Bloxham and Fourdri- nier v. Pell and Brooke, tried at the same sittings (7th of March 1775), before Lord Mansfield in the King's Bench, as in point. "This was also a partnership for seven years between Brooke and Pell, but at the end of one year agreed to be dissolved, but no express dissolution was had. The agreement recited that, Brooke being desirous to have the profits of the trade to himself and Pell being desirous to relinquish his right to the trade and profits, it was agreed that Brooke should give Pell a bond for £2,485, which Pell had brought into the trade, with interest at 5 per cent., which was accordingly done. And it was further agreed that Brooke should pay to Pell £200 per annum for six years, if Brooke so long lived, as in lieu of the profits of the trade; and Brooke covenants that Pell should have free liberty to inspect his books. Brooke became a bankrupt before anything was paid to Pell. And, this action being brought for a debt incurred by Brooke in the course of trade, Lord Mansfield held that Pell was a secret partner. This was a device to make more than legal interest of mon- ey, and, if it was not a partnership, it was a crime. And it shall not lie in the defendant Pell's mouth to say: 'It is usury, and not a part"- nership.' " Grose and Adair, for the defendant, argued that the present case is very distinguishable from that of Bloxham v. Pell. Pell was to be paid out of the profits of the trade, as appears from the cove- nant to inspect the books, which else would be useless. His annuity was expressly given as and in lieu of those profits. It was contingent in another view, as it depended on the life of Brooke, by whom those profits were to be made. In our case the annuity is certain, not casual. It does not depend on carrying on the trade, nor to cease when that is left off, but is due out of the estate of Robinson. It is not a necessary dilemma, but it must be either usury or partnership. It may be, and probably was, a premium for the good will of the trade. Two thousand guineas is no uncommon price for turning over the profits of a trade so beneficial that it appears to have been rated at £1,000 to each partner in the space of less than eight months. And Sec. 3) TESTS OF INTENTION. 19 whether that sum is agreed to be paid at once, or by seven installments, it is the same thing. Besides, whether there be or be not a secret constructive partnership is a question proper for a jury, who have de- cided it on consideration of all the circumstances. De Grey, C. J. The only question is, what constitutes a secret part- ner? Every man who has a share of the profits of a trade ought al- so to bear his share of the loss. And if any one takes part of the prof- it, he takes a part of that fund on which the creditor of the trader relies for his payment. If any one advances or lends money to a trader, it is only lent on his general personal security. It is no spe- cific lien upon the profits of the trade, and yet the lender is generally interested in those profits. He relies on them- for repayment. And there is no difference whether that money be lent de novo or left be- hind in trade by one of the partners, who retires. And whether the terms of that loan be kind or harsh makes also no manner of differ- ence. I think the true criterion is to inquire whether Smith agreed to share the profits of the trade with Robinson, or whether he only re- lied on those profits as a fund of payment; a distinction not more nice than usually occurs in questions of trade or usury. The jury have said this is not payable out of the profits ; and I think there is no foundation for granting a new trial. Gould, Blackstone, and Nares, JJ., concurred. Rule discharged. WAUGH V. CARVER et al. (Court of Common Pleas, 1793. 2 H. Bl. 235.) Assumpsit by Waugh against Erasmus Carver, William Carver, and Archibald Giesler, as partners, for goods sold and delivered by the plaintiff to Giesler at his agency at Cowes. The Carvers denied a partnership with Giesler. Verdict for plaintiff, subject to the opinion of the court on a case stated. The Carvers were engaged in the business of shipping agents at Gos- port, and Giesler was engaged in a similar business at Plymouth. These parties entered into a written agreement in substance as fol- lows : The said Giesler will remove from Plymouth and establish him- self at Cowes for the purpose of carrying on a house there in the agency line on his own account; but, in consequence of the assistance and recommendations which the Carvers have agreed to render in support of the agency at Cowes, Giesler agrees to pay to the Carvers one-half of the commission or agency to be received on all the ships or vessels as may arrive or put into the port at Cowes, or remain in the road to the westward thereof, of which the said Giesler may pro- cure the address, and likewise one-half of the discount on the bills of several tradesmen employed in the repairs of such ships or vessels. Gies- ler will also consult and advise with the Carvers respecting ships or ves- 20 WHAT CONSTITUTES A PAKTNEESHIP. (Ch. 1 sels, and pursue such measures as may be for the best interest of all concerned, and will facilitate the procuring by the Carvers of ware- house facilities at Cowes. And the said Carvers, for the considera- tions hereinbefore mentioned, agree to pay to Giesler three-fifths of the commissions to be received by them on account of certain vessels proceeding from Cowes to Portsmouth and vessels stopping at Ports- mouth, and 11/2 per cent, on the amount of bills of tradesmen em- ployed in the repairs of such vessels, and certain percentage of charg- es received for warehouse facilities furnished by the Carvers to ves- sels unloading at Cowes; and also the said Carvers and Giesler will meet yearly for the purpose of examining and settling their accounts concerning the commission business, and that such party from whom the balance shall then appear to be due shall pay the same to the other party on such settlement, And it is hereby likewise covenanted, declared, and agreed, by and between the said Erasmus Carver and William Carver and the said Archibald Giesler, that each party shall separately run the risk of and sustain all such loss and losses as may happen on the advance of mon- eys in respect of any ships or vessels under the immediate care of ei- ther of the said parties, respectively; it being the true intent and meaning of these presents, and of the parties hereunto, that neither of them, the said Erasmus Carver and William Carver and Archibald Giesler shall, at any time or times during the continuance of this agree- ment, be in any wise injured, prejudiced, or affected by any loss or losses that may happen to the other of them, or that either of them shall in any degree be answerable or accountable for the acts, deeds, or receipts of the other of them, but that each of them, the said Eras- mus Carver and William Carver and Archibald Giesler, shall, in his own person and with his own goods and effects, respectively be an- swerable and accountable for his losses, acts, deeds, and receipts. And it is hereby further covenanted, declared, and agreed by and between the said Erasmus Carver and William Carver and Archibald Giesler that these presents do not, nor shall be construed to, mean to extend to such ships or vessels that may come to the address of ei- ther of the said parties, respectively, for the purpose of loading or delivering any goods, wares, or merchandise; it being the true intent and meaning of these presents, and the parties hereunto, that the fore- going articles shall not, nor shall be construed to, bear reference to their particular or separate mercantile concerns or connections. Lord Chief Justice Eyre. This case has been extremely well ar- gued, and the discussion of it has enabled me to make up my mind, and removed the only difficulty I felt, which was whether, by constru- ing this to be a partnership, we should not determine that if there was an annuity granted out of a banking house to the widow, for in- stance, of a deceased partner, it would make her liable to the debts of the house and involve her in a bankruptcy. But I think this case will not lead to that consequence. Sec. 3) TESTS OP INTENTION. 21 The definition of a partnership cited from Puffendorf is good as between the parties themselves, but not with respect to the World at large. If the question were between A. and B. whether they were partners or not, it would be very well to inquire whether they had contributed, and in what proportions, stock, or labor, and on what agreements they were to divide the profits of that contribution. But in all these cases a very diflferent question arises, in which the defini- tion is of little service. The question is, generally, not between the parties as to what shares they shall divide, but respecting creditors claiming a satisfaction out of the funds of a particular house, who shall be deemed liable in regard to these funds. Now, a case may be stated in which it is the clear sense of the parties to the contract that they shall not be partners ; that A. is to contribute neither labor nor money, and, to go still further, not to receive any profits. But, if he will lend his name as a partner, he becomes, as against all the rest of the world, a partner, not upon the, ground of the real transaction be- tween them, but upon principles of general policy, to prevent the frauds to which creditors would be liable if they were to suppose that they lent their money upon the apparent credit of three or four- persons, when in fact they lent it only to two of them., to whom, without the others, they would have lent nothing. The argument gone into, how- ever proper for the discussion of the question, is irrelevant to a great part of the case. Whether these persons were to interfere more or less with their advice and directions, and many small parts of the agreement, I lay entirely out of the case, because it is plain upon the construction of the agreement, if it be construed only between the Carvers and Giesler, that they were not, nor ever meant to be part- ners. They meant each house to carry on trade without risk of each other, and to be at their own loss. Though there was a certain degree of control at one house, it was without an idea that either was to be involved in the consequences of the failure of the other, and without understanding themselves responsible for any circumstances that might happen to the loss "of either. That was the argeement between themselves. But the question is whether they have not, by parts of their agreement, constituted themselves partners in respect to other persons. The case, therefore, is reduced to the single point whether the Carvers did not entitle themselves, and did not mean, to take a moiety of the profits of Giesler's house, generally and indefinitely as they should arise, at certain times agreed upon for the settlement of their accounts. That they have so done is clear upon the face of the agreement; and upon the authority of Grace v. Smith he who takes a moiety of all the profits 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. That was the foundation of the decision in Grace v. Smith, and I think it stands upon the fair ground of reason. I cannot 22 WHAT CONSTITUTES A PAETNBESHIP. (C". 1 agree that this was a mere agency in the sense contended for on the part of the defendants, for there was a risk of profit and loss. ^ A ship agent employs tradesmen to furnish necessaries for the ship. He contracts with them and is liable to them. He also makes out their bills in such a way as to determine the charge of commission to the shipowners. With respect to the commission, indeed, he may be con- sidered as a mere agent; but as to the agency itself he is as much a trader as any other man, and there is as much risk of profit and loss, to the person with whom he contracts, in the transactions with him, as with any other trader. It is true he will gain nothing but his dis- count ; but that is a profit in the trade, and there may be losses to him, as well as to the owners. If, therefore, the principle be true that he who takes the general profits of a partnership must of necessity be made liable to the losses, in order that he may stand in a just situation with regard to the creditors of the house, then this is a case clear of all difficulty. For though with respect to each other these persons were not to be considered as partners, yet they have made themselves such, with regard to their transactions with the rest of the world. I am therefore of opinion that there ought to be judgment for the plain- tiff. Gould and Heath, JJ., concurred. Rooke, J., gave no opin- ion. LEGGETT et al. v. HYDE et al. (C!ourt of Appeals of New York, 1874. 58 N. T. 272, 17 Am. Rep. 244.) Appeal by defendant George M. Hyde from judgment of the Gen- eral T.erm of the Supreme Court in the Second Judicial Department, affirming a judgment in favor of plaintiffs entered upon a verdict, and affirming order denying motion for a new trial. This action was brought against defendants, who were alleged to be members of the firm of A. D. Putnam &'Co., to recover for goods sold and delivered to that firm. Defendant Hyde denied that he was a partner. At the close of the evidence the counsel for defendant Hyde asked the court to direct a verdict in his favor, which was denied. The court, upon re- quest of plaintiffs' counsel, directed a verdict in favor of plaintiffs, to which defendant's counsel excepted. A verdict was rendered accord- ingly. Forger, J. At the trial each party asked the court to direct a ver- dict in his favor. Each thereby conceded that there could be no dis- pute upon any question of fact. Each thereby conceded that there was left for decision only a question of law, and that it arose upon a settled and uncontradicted state of facts. Taking the view of the testimony the most favorable for the appel- lant, the facts are these: In 1869 one Putnam and one Henneberger were partners in business, under the firm name of A. D. Putnam & Sec. 3) TESTS OF INTENTION. 23 Co. In that year the appellant invested or deposited with that firm $1,500. This sum was credited on its books to Fredk. Hyde, the son of the appellant. For this sum the appellant was to share in the profits of the business of the firm. His share was to be one-third, and de- mandable by him at the end of the year. At the end of the year his share of the profits was $500. This sum was also placed to the credit of Fredk. Hyde. Then, in 1870, the appellant loaned to the firm for one year the original sum of $1,500 and the $500 of profits, thus mak- ing $2,000. In the consideration of this loan the firm agreed to hire Fredk. Hyde as clerk, at $10 per week, for the year; to pay the ap- pellant one-third of the profits, which were to be settled half-yearly; and, at the end of the year, to take him in as a partner, if the firm and he should feel satisfied, on his making further investments and putting in more capital. Though it is nowhere in the testimony so stated in terms, yet it is fairly to be inferred that the $2,000 was loaned to be used in the business, and that if at the end of the year the appellant did not become an ostensible partner he was to be repaid, out of the concern, the $2,000, but without interest, strictly as such. The appel- lant never interfered in the affairs of the concern, nor exercised any control in the business. At the end of the first six months there were no profits of the business. The appellant never received anything for his $3,000, nor anything by way of interest money. The prominent and important facts are that he loaned the firm a sum of money to be employed as capital in its business, and that there- for he was entitled to have and demand from it one-third of the prof- its of its business every half year. In my judgment there results from this that Putnam and Henneberger, making use of that money as capital in that business, used it there for the benefit of the appellant, because any return to him, for the loan to them, must come from the use of it. If not used so that profits were made, he got no return. Further: That he had an interest in the profits, which, while they were anticipatory, was indefinite as to amount, but, when they were realized, was measured and specific as to share. Further: That his interest in them was in them as profits : that is, that he had a right on the lapse of every six months, though having no property in the whole capital, to have an account taken of the business, and a division made of the profits then appearing. Ex parte Hamper, 17 Vesey, 403. So it is said in Everett v. Coe, 5 Denio, 182 : "If he is to be paid out of profits made, then he has a direct interest in them. And see Ogden v. Astor, 4 Sandf. 321, 322. That he had this right to an account and a division at other time than at the end of each six months, if at any other time the exigencies of the concern, as the dissolution of the firm by death of one partner, or other reason, required an ac- count to be taken. He had that interest in the profits, as profits, be- cause he could claim a share of them specifically, as they should ap- pear on each six months, or other accounting of the business of the term then ended, and could then have and demand payment of his 24 WHAT CONSTITUTES A PARTNERSHIP. (^h. 1 share. By the terms of his contract with the firm, if it be upheld as made, he was interested in and affected by the results only of the year, as ascertained at the end of each six months. It would not affect him in the right to account, though the business of a previous year had been disastrous. If either six months' business should yield a profit, he could insist on payment to him of one-third thereof, and could demand that an account be had of the business of any six months to ascertain if there had been profit. 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 cap- ital and industry. The learned counsel for the appellant states the question of law to be this: Does a loan of money, with an agreement for compensa- tion from the profits of the business, per se constitute the lender a partner quoad the creditors of the firm? Is this statement of it cor- rect? Does the phrase "compensation from the profits" fully meet case? Does it fully present the fact that by the agreement the ap- pellant obtains an interest in the profits as such, and a right to in- sist upon an accounting, and a division thereof half-yearly? With this supplement, the question for decision is as stated by him. I am not to say what I think ought to be the answer to it, was this a case of first impression. I am to declare what I ascertain to be the answer already given by the law in this state, as it has been settled and declared by the authorities. The argument of the learned coun- sel is very ingenious, and very forcible when considered in refer- ence to what should be the proper rule, and what the true reasons upon which a rule should be founded. Yet, if it is found that by a long course of decisions, or by long acquiescence in and adherence to, a rule some time ago authoritatively promulgated, there has been established a principle of commercial law upon which the community has acted, it is the duty of the courts to adhere thereto, leaving it to the lawmaking power to find a remedy, if remedy be needed, in a positive alterative enactment. In England this had been done, and by an act of Parliament an important change has been made. St. 28 & 29 Vict. c. 86. In the first place, it matters not that the defendants meant not to be partners at all, and were not partners inter sese. They may be partners as to third persons notwithstanding. Manhattan Brass Co. V. Sears, 45 N. Y. 797, 6 Am. Rep. 177. And this effect may result, though they should have taken pains to stipulate among themselves that they will not, in any event, hold the relation of partners. Among the reasons given is this, whether it be strong or weak: That what- ever person shares in the profits of any concern shall be liable to creditors for losses also, since he takes a part of the fund, which in great measure is the creditors' security for the payment of the debts to them. Waugh v. Carver, 2 H. Bl. 235, citing Grace v. Smith, 2 Sec. 3) TESTS OF INTENTION. 25 W. Bl. 998. The doctrine took its rise in the decisions in these cases. And commenting upon them, the text-writers, who have presented most forcible criticisms upon it, say: "The principle laid down by De Grey, C. J., in Grace v. Smith, has served as the foundation of a long line of decisions which cannot now be overruled by any au- thority short of that of the Legislature. * * * And in all cases in which there is no incorporation, nor limited liability, it must still be regarded as binding on the courts." Lindley on Part. *36. "The doctrine is completely established upon the very ground asserted in Grace v. 'Smith." Story on Part. § 36, note 3. And so Mr. Par- sons, in his book on Partnership, quoting Lord Eldon, Ex parte Plamper: "But if he has a specific interest in the profits themselves, as profits, he is a partner" — adds : "Undoubtedly he is. Every prin- ciple of the law of partnership leads to this conclusion." He con- tends, however, that the specific interest in profits which is to make a person a partner must be a proprietary interest in them, existing before the division of them into shares. See, also, 3 Kent's Commen- taries, *25, note "b," where it is said: "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 com- pensation for services." The courts of this state have always ad- hered to this doctrine and applied or recognized it in the cases com- ing before them. * * * It is not too much to say, that the limited partnership act, 1 Rev. St. (1st Ed.) p. 764, pt. 2, c. 4, tit. 1, is a legislative and practical recognition of this rule of commercial law. Indeed, if it shall be held that such a contract as that of the appellant does not make him a partner as to third persons, there is little or no need of that act. The situation of the special partner is more onerous than that of the appellant under such a ruling. The first may lose his capital invested, as well as profits, by the same being absorbed in the pay- ment to creditors. The latter may lose his anticipated compensation for his money loaned ; but his position is quite as favorable to him as that occupied by creditors for the recovery of his money advanced. Neither may interfere, to transact business, or to sign for the firm, or to bind the same. Both may advise as to the management. Both may examine into the state and progress of the partnership concerns — the special partner, from time to time; the appellant, at the end of every six months. In one respect the special partner is better placed. He may stipulate for legal interest on his capital invested, as well as for a portion of the profits. The appellant, if he bargained for profits in addition to interest, might be in conflict with the usury act. It is evident that most of the conveniences and advantages of the limited partnership act, and some which it does not give, might be obtained by a loan of money, with a stipulation for compensation for its use by a share of the profits, if thereby a partnership is not created as to third persons. This is not decisive as to what the law is; but 26 WHAT CONSTITUTES A PAETNBESHIP. (Ch. 1 it is strongly indicative of the view of the law held by the revisers and by the Legislature. There have been from time to time certain exceptions established to this rule in a broad statement of it; but the decisions by which these exceptions have been set up still recognize the rule that, where one is interested in profits as such, he is a partner as to third persons. These exceptions deal with the case of 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; or with that of seamen, on whaling or other like voyages, whose reimbursement for their time and labor is to finally depend upon the result of the whole voyage. There are other exceptions, like tenants of land, or a ferry, or an inn, who are to share with the owners in results, as a. means of compensation for their labor and services. The decisions which establish these exceptions do not profess to abrogate the rule — only to limit it. It is claimed by the learned counsel for the appellant that the rule as announced in Grace v. Smith and Waugh v. Carver has been ex- ploded, and another rule propounded which shields the appellant. He is correct so far as the courts in England are concerned. Cox v. Hickman, 8 H. of L. C. 368, 9 C. B. N. S. (99 E. C. L.) 47, and Bvil- len V. Sharp, L. R. 1 Com. PL 86, affirm that while a participation in the profits is cogent evidence that the trade in which the profits were made was carried on in part for or in behalf of the person claim- ing the right to participate, yet that the true ground of liability is- that it has been carried on by persons acting in his behalf. Those cases were very peculiar in their circumstances. After the judg- ments rendered in them, the Parliament deemed it needful to enact, that the advance of money by way of loan to a person in trade for a share of the profits should not, of itself, make the lender responsible as a partner. St. 28 & 29 Vict. c. 86, as cited in Parsons on Partn. *93, note "t." If the decisions in the cases cited went as far as is- claimed, it would seem that the act was supererogatory. It is sug- gested, however, by Kelly, C. B., in Holme v. Hammond, L,. R. 7 Exch. 218, that the effect of the statute is that the sharing in the profits by a lender shall be no evidence at all of a partnership. At all events, those decisions have been accepted in England as settling the rule as above stated. See case last cited and cases therein refer- red to. 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 Legislature- shall see fit to abrogate it. The references upon the appellant's points do not show that the courts of this state have yet exploded the rule I have stated. I have Sec. 3) TESTS OF INTENTION. 27 consulted all the authorities cited (save a few of which I had not the books, or as to which there was a miscitation), and I do not find that the rule is questioned, further than to apply to the facts of the particular case some one or more of the exceptions to the rule which I have stated to exist. I am of the opinion that the judgment appealed from should be affirmed, with costs. ^ Church, C. J., dissents. HACKETT et al. v. STANLEY. (Court of Appeals of New York, 1889. 115 N. Y. 625, 22 N. B. 745.) Action by Martin Hackett and others against James Stanley, im- pleaded, and Moulton W. Gorham, as alleged copartners, for materials and labor furnished for the firm business. James Stanley appeals from a judgment for plaintiff. RuGEE, C. J. The determination of this case involves the construc- tion of an agreement between James Stanley and Moulton W. Gor- ham, and the question whether such agreement constituted the de- fendant Stanley a partner as to third persons with Gorham. If it did, then the judgment must be sustained. The liability of the alleged partners is predicated upon a debt for services rendered and Ynaterials furnished by the plaintiffs, upon the request of Gorham, in fitting up a place in New York to carry on the business of heating, ventilat- ing, etc. The part of the agreement which it is claimed creates the partnership reads as follows : "That for and in consideration of the loan of seven hundred and fifty ($750) dollars from the said party of the second part to the said party of the first part, for use in the business of heating, ventilating, etc., for which said party of the first part has given unto said party of the second part his note at two years, with interest, bearing date of January 14, 1885, payment of which is secured by an assignment of said value in a certain $3,000 policy in the Massachusetts Mutual Life Ins. Co., and also by a certain chattel mortgage, bearing date January 23, 1885, and in fur- ther consideration of services of said party of second part in secur- ing sales in said business, and for any further moneys he may, at his own option, advance for me in said business, the said party of the first part agrees to divide equally the yearly net profits of said business. It is understood and agreed that said loan of $750 is ex- pressly for use in said business, and for no other use whatever." It 1 "The cases have gone further to this nicety, upon a distinction so thin, tjiat I cannot state it as established upon due consideration: That if a trader agrees to pay another person, for his labor in the concern, a sum of money, even in proportion to the profits, equal to a certain share, that will not mal£e him a partner ; but, if he has a specified interest in the profits themselves, as profits, he Is a partner." Per Eldon, L. O., in Ex parte Hamper, 17 Ves. 403 (1810). 28 WHAT CONSTITUTES A PARTNEESHIP. (Ch. 1 was further provided that advances made by either party in the busi- ness were at all times subject to be withdrawn, at the option of the party making them, and were to bear interest while used in the busi- ness. Gorham was to be allowed $1,000 per annum for his services in managing the business, and quarterly statements of its condition were to be made by him to Stanley. It is fairly to be implied from the contract that Gorham was to be the active man in the business, and it was to be carried on in his name; but whether he was to furnish any capital, and if so how much, is not disclosed. For aught that appears the money furnished by Stanley was all that was supposed to be necessary to start and carry on the business until returns were realized from its prosecution. This agreement does not, in express terms, purport to form a part- nership; neither is the intention to do so disclaimed ; and the question is therefore whether, in a business carried on under the conditions provid- ed for in the contract, the parties thereto became partners, as to third persons. It clearly provides for something more than a loan Of money, as it is fairly to be implied from it that Stanley would render active serv- ices as a principal in the prosecution of the business, and furnish fur- ther financial aid therefor, if it became necessary, and he deemed it ad- visable to do so. The loan was not one made to Gorham generally, but was for the benefit of the particular business, in whose prosecution Stanley Had an equal interest, and any diversion of the funds from such use was strictly prohibited. Each party was authorized to charge the business with interest on the funds advanced by him for its prosecution, and they would each be entitled to pro rata reimbursement of such funds from the assets of the business, in case of a deficiency in as- sets to pay the advances in full. In that respect, it was evidently con- templated that each party should bear any loss incurred, in propor- tion to the advances made by them respectively. For all this, Stanley was to receive one-half the net profits of the business. His right to profits would not cease upon the repayment of the original loan, or depend upon the value of the services rendered or moneys advanced or either of them alone, but was to continue as lone as the business was carried on. The letter of the contract is that in consideration of the loan of $750, payable in two years, and the further considera- tion of services in securing sales in said business, and further moneys furnished, the net profits are to be divided. The services promised, and the moneys advanced and to be advanced, each and all constituted the consideration for the division of the profits. We think such an agreement, within all authorities, constitutes a partnership as to third parties. By it, Stanley had an interest in the general business of the concern; a right to require a quarterly account of its transactions; authority to make contracts in its behalf; and an irrevocable right to demand one-half of the profits of the business. That the original loan of $750 was secured to be repaid by Gorham to Stanley does not preclude the conclusion that they were partners ; for it is entirely Sec. 3) TESTS OF INTENTION. 29 competent for one partner to guaranty another against loss, in whole or in part, in a partnership business, if the parties so agree. The ap- plication of the rule that "participation in profits" renders their re- cipient a partner in the business from which profits are derived, as to third persons, has been somewhat restricted by modern decisions ; but we think that the division of profits must still be considered the most important element in all contracts by which the true relation of parties to a business is to be determined. We think this rule is founded in strict justice and sound policy. There can be no injustice in im- posing upon those who contract to receive the fruits of an adventure a liability for credits contracted in its aid, and which are essential to its successful conduct and prosecution. This liability does not, and ought not to, depend upon the intention of the parties, in making their contract, to shield themselves from liability, but upon the ground that it is against public policy to permit persons to prosecute an en- terprise which, however successful it may for a time appear to be, is sure in the end to result in the advantage of its secret promoters alone, and the ruin and disaster of its creditors and others connect- ed with it. Atherton v. Tilton, 44 N. H. 452; Chase v. Barrett, 4 Paige, 159. Expected profits being the motive which induces the prosecution of all commercial and business enterprises, their accumu- lation and retention in business are essential to their success ; and if persons are permitted, by secret agreement, to appropriate them to their own use, and throw the liabilities incurred in producing them upon those who receive only a portion of the benefits, not only is a door opened to the perpetration of frauds, but such fraud? are rendered inevitable. * * * The rule laid down in Kent's Commentaries (volume 3, p. 25, note "b"), that "the test of partnership is a community of profit; a spe- cific interest in the profits, as profits, in contradistinction to a stipulat- ed portion of the profits as a compensation for services," was ap- proved by this court in Leggett v. Hyde, 58 N. Y. 272, 17 Am. Rep. 244, in which case Judge Folger sayS: "The courts of this state have always adhered to this doctrine, and applied or recognized it in the cases coming before them." After citing numerous cases in support of the statement, he proceeds : "There have been from time to time cer- tain exceptions established to this rule, in a board statement of it; but the decisions by which these exceptions have been set up still recognize the rule that where one is interested in profits, as such, he is a part- ner as to third persons. These exceptions deal with the case of 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." The learned judge, after referring to the English cases claimed to have qualified, if not overruled, the cases of Grace V. Smith, 2 W. Bl. 998, and Waugh v. Carver, 2 H. Bl. 235, which were the foundation of the doctrine that a participation in profits 30 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 renders those receiving them partners, says that "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 Legislature shall see fit to abrogate it." * * * The doctrine that persons may be partners as to third per- sons, although not so as between themselves, and although the con- tract of partnership contains express provisions repudiating such a relation, has been too firmly established in this state by repeated deci- sions to be now disregarded by its courts. See cases cited in Leggett V. Hyde. It is claimed that this doctrine has been practically over- ruled in this state by the decisions in this court of Richardson v. Hughitt, 76 N. Y. 55, 32 Am. Rep. 267, Burnett v. Snyder, 76 N. Y. 344, Eager v. Crawford, Id. 97, Curry v. Fowler, 87 N. Y. 33, 41 Am. Rep. 343, and Cassidy v. Hall, 97 N. Y. 159. We do not think these cases had the effect claimed. They were all cases distinguished by peculiar circumstances, taking them out of the operation of the general rule. It cannot be disputed but that a loan may be made to a partnership firm on conditions by which the lenders may secure a limited or qualified interest in certain profits of the firm, without mak- ing them partners in its general business ; but that is not this case. [After reviewing the foregoing cases, the opinion continues :] It cannot reasonably be claimed that either of these cases is an au- thority for the reversal of this judgment. Whatever might have been their bearing if they related to the loan of money alone, we will not say; but, when connected with the circumstance that the defendant was expected to render future services as a principal, and furnish further financial aid, with a certain supervision over the conduct of the business, we think this case is clearly distinguishable from those cited. In the view taken of this case, it is quite immaterial whether the plaintiff extended the credit to Gorham alone or not, as the defend- ant was held liable upon the ground that, as to third persons, he was a partner; and it did not affect that liability, whether the plaintiff knew the fact or not. The exception to the ruling of the court sustaining the objection to the question put to plaintiff on cross-examination, as to whom the credit was furnished, was not well taken, as the fact sought to be proved was immaterial. The judgment should therefore be affirmed. Sec. 3) TESTS OF INTENTION. 31 II. Development oe the Modern Doctrine. COX AND WHEATCROFT v. HICKMAN. (House of Lords, 1860. 8 H. L. Cas. 268.) B. and J. T. Smith, as partners under the name of B. Smith & Son, were engaged in business as iron masters and corn merchants. Becoming financially embarrassed, a meeting of creditors was held and a deed of assignment executed by the Smiths, as parties of the first part, certain of the creditors, as trustees, of the second part, and the general scheduled creditors, among whom were the trustees, of the third part. The deed assigned the property of the partnership to trustees, and empowered them to carry on the business under the name of the Stanton Iron Company; to execute all contracts and in- struments necessary to carry it on; to divide the net income derived among the creditors ratably (such income to be deemed the property of the assignors), with the power to the majority of the creditors, assembled at a meeting; to make rules for conducting the business, or to put an end to it altogether; and, after the debts had been dis- charged, the property was to be reconveyed to the Smiths. Cox and Wheatcroft were named among the trustees. Cox never acted. Wheatcroft, after acting for six months, resigned. Afterwards the other trustees, who continued the business, became indebted to Hick- man for goods supplied to the company, and gave him bills of ex- change, accepted by themselves : "Per proc. The Stanton Iron Com- pany." This was an action on the bills of exchange thus given. The cause was tried in 1856, before the late Lord Chief Justice Jervis, when a verdict was found for the defendants ; but on motion on leave reserved the verdict was entered for the plaintiff. 18 C. B. 617. The case was taken to the Exchequer Chamber, when three judges (Justices Coleridge, Erie, and Crompton) were for affirming the judgment of the Common Pleas, and three other judges (Barons Martin, Bramwell, and Watson) were for reversing it. 3 C. B. (N. S.) 523. The judgment", therefore, stood, and was afterwards brought up to this House. The judges were summoned, and Lord Chief Baron Pollock, Mr. Justice Wightman, Mr. Justice Williams, Mr. Justice Crompton, Mr. Baron Channell, and Mr. Justice Blackburn, attended.^ Lord Cranworth. In this case the judges' in the Court of Exche- quer Chamber were equally divided, and unfortunately the same dif- ference of opinion has existed among the learned judges who attend- ed this House during the argument at your Lordships' bar. Except, therefore, from an examination of the grounds on which their opin- ions are founded, we can derive no benefit in this case from their as- 1 The opinions of tlie judges summoned are omitted. 32 WHAT COXSTITUTBS A PARTNERSHIP. (Ch. 1 sistance. We cannot say that in the opinions delivered in this House there is more authority in favor of one view of the case than of the other. We must not, however, infer that your Lordships have not derived material aid from the opinions expressed by the judges. These opinions have stated the arguments on the one side and the other with great clearness and force, and what we have to do now is to decide between them. In the first place let me say that I concur with those of the learned judges who are of opinion that no solid distinction exists between the liability of either defendant in an action on the bills and in an action for goods sold and delivered. If he would have been Hable in an action for goods sold and delivered, it must be because those who were in fact carrying on the business of the Stanton Iron Company were car- rying it on as his partners or agents ; and, as the bills were accepted, according to the usual course of business, for ore supplied by the plaintiff, I cannot doubt that, if the trade was carried on by those who managed it as partners or agents of the defendant, he must be just as liable on the bills as he would have been in an action for the price of the goods supplied. His partners or agents would have the same authority to accept bills in the ordinary course of trade as to purchase goods on credit. The liability of one partner for the acts of his copartner is in truth the liability of a principal for the acts of his agent. Where two or more persons are engaged as partners in an ordinary trade, each of them has an implied authority from the others to bind all by contracts entered into according to the usual course of business in that trade. Every partner in trade is, for the ordinary purposes of the trade, the agent of his copartners, and all are therefore liable for the or- dinary trade contracts of the others. Partners may stipulate among themselves that some one of them only shall enter into particular con- tracts, or into any contracts, or that as to certain of their contracts none shall be liable except those by whom they are actually made; but with such private arrangements third persons, dealing with the firm without notice, have no concern. The public have a right to assume that every partner has authority from his copartner to bind the whole firm in contracts made according to the ordinary usages of trade. This principle appHes, not only to persons acting openly and avow- edly as partners, but to others who, though not so acting, are by se- cret or private agreement partners with those who appear ostensibly to the world as the persons carrying on the business. In the case now before the House, the Court of Common Pleas de- cided in favor of the respondent that the appellant, by his execution of the deed of arrangement, became, together with the other creditors who executed it, a partner with those who conducted the business of the Stanton Iron Company. The judges in the Court of Exchequer Chamber were equally divided, so that the judgment of the Court of Sec. 3) TESTS OF INTENTION. 33 Common Pleas was affirmed. The sole question for adjudication by your Lordships is whether this judgment thus affirmed was right. I do not propose to consider in detail all the provisions of the deed. I think it sufficient to state them generally. In the first place there is an assignment by Messrs. Smith to certain trustees of the mines and all the engines and machinery used for working them, together with all the stock in trade, and in fact all their property, upon trust to carry on the business and, after paying its expenses, to divide the net income ratably amongst the creditors of Messrs. Smith, as often as there shall be funds in hand sufficient to pay one shilling in the pound, and, after all the creditors are satisfied, then in trust for Messrs. Smith. Up to this point the creditors, though they executed the deed, are merely passive; and the first question is, what would have been the consequence to them of their executing the deed if the trusts had ended there? Would they have become partners in the concern carried on by the trustees merely because they passively assented to its being carried on upon the terms that the net income — i. e., the net profits — should be applied in discharge of their demands? I think not. It was argued that, as they would be interested in the profits, therefore they would be partners. But this is a fallacy. It is often said that the test, or one of the tests, whether a person not ostensibly a partner is nevertheless in contemplation of law a partner is whether he is entitled to participate in the profits. This, no doubt, is in gen- eral a sufficiently accurate test; for a right to participate in profits affords cogent, often conclusive, evidence that the trade in which the profits have been made was carried on in part for or on behalf of the person setting up such a claim. But the real ground of the liability is that the trade has been carried on by persons acting on his behalf. When that is the case, he is liable to the trade obligations, and entitled to its profits, or to a share of them. It is not strictly correct to say that his right to share in the profits makes him liable to the debts of the trade. The correct mode of stating the proposition is to say that the same thing which entitles him to the one makes him liable to the other, 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 acting ostensibly as the traders by whom the liabilities have been incurred, and under whose management the profits have been made. Taking this to be the ground of liability as a partner, it seems to me to follow that the mere concurrence of creditors in an arrange- ment under which they permit their debtor, or trustees for their debtor, to continue his trade, applying the profits in discharge of their de- mands, does not make them partners with their debtors or the trustees. The debtor is still the person solely interested in the profits, save only that he has mortgaged them to his creditors. He receives the benefit of the profits as they accrue, though he has precluded himself from Gil. Part .—3 34 WHAT CONSTITUTES A PAETNEKSHIP. (Ch. 1 applying them to any other purpose than the discharge of his debts. The trade is not carried on by or on account of the creditors, thouglr their consent is necessary in such a case, for without it all the prop- erty might be seized by them in execution. But the trade still remains the trade of the debtor or his trustees. The debtor or the trustees are the persons by or on behalf of whom it is carried on. I have hitherto considered the case as it would have stood if the creditors had been merely passively assenting parties to the carrying on of the trade, on the terms that the profits should be apphed in liq- uidation of their demands. But I am aware that in this deed special powers are given to the creditors, which, it was said, showed that they had become partners, even if that had not been the consequence of their concurrence in the previous trust. The powers may be de- scribed briefly as, first, a power of determining by a majority in value of their body that the trade should be discontinued, or, if not discon- tinued, then, secondly, a power of making rules and orders as to its conduct and management. Those powers do not appear to me to alter the case. , The creditors might, by process of law, have obtained possession of the whole prop- erty. By the earlier provisions of the deed they consented to abandon that right, and to allow the trade to be carried on by the trustees. The effect of these powers is only to qualify their consent. They stipulate for a right to withdraw it altogether, or, if not, then to im- pose terms as to the mode in which the trusts to which they had agreed should be executed. I do not think that this alters the legal condition of the creditors. The trade did not become a trade carried on for them as principals, because they might have insisted on taking possession of the stock, and so compelling the abandonment of the trade, or be- cause they might have prescribed terms on which alone it should be continued. Any trustee might have refused to act if he considered the terms prescribed by the auditors to be objectionable. Suppose the deed had stipulated, not that the creditors might order the discontin- uance of the trade, or impose terms as to its management, but that some third person might do so, if, on inspecting the accounts, he should deem it advisable. It could not be contended that this would make the creditors partners, if they were not so already; and I can see no difference between stipulating for such a power to be reserved to a third person and reserving it to themselves. I have, on these grounds, come to the conclusion that the creditors did not, by executing this deed, make themselves partners in the Stan- ton Iron Company, and I must add that a contrary decision would be much to be deprecated. Deeds of arrangement, like that now be- fore us, are, I believe, of frequent occurrence; and it is impossible to imagine that creditors who execute them have any notion that by so doing they are making themselves Hable as partners. This would be no reason for holding them not to be liable, if, on strict principles of mercantile law, they are so; but the very fact that such deeds are Sec. 3) TESTS OP INTENTION. 35 SO common, and that no such liability is .supposed to attach to them affords some argument in favour of the appellant. The deed now before us was executed by above a hundred joint creditors; and a mere glance at their names is sufficient to show that there was no intention on their part of doing anything which should involve them in the obligations of a partnership. I do not rely on this; but, at least, it shows the general opinion of the mercantile world on the sub- ject. I may remark that one of the creditors, I see, is the Midland Railway Company, which is a creditor for a sum only of £39, and to suppose that the directors could imagine that they were making them- selves partners is absurd. The authorities cited in argument did not throw much light upon the subject. I can find no case in which a person has been made liable as a dormant or sleeping partner, where the trade might not fairly be said to have been carried on for him, together with those ostensibly conducting it, and when, therefore, he would stand in the position of principal towards the ostensible members of the firm as his agents. This was certainly the case in Waugh v. Carver, 2 H. Bl. 335. There Messrs. Carver, who were ship agents at Portsmouth, agreed with Giesler, a ship agent at Plymouth, that if he would establish himself as a ship agent at Cowes they would share between them the profits of their respective agencies in certain stipulated proportions. When, therefore, Giesler, in pursuance of the agreement, did establish him- self at Cowes, and there carry on the business of a ship agent, he in fact carried it on for the benefit of Messrs. Carver as well as of him- self; and the court held that, in these circumstances, the stipulation which they had entered into that neither party to the agreement should be answerable for the acts of the other was a stipulation which they could not make so as thereby to affect third persons. Each firm was carrying on business on account, not only of itself, but also of the other firm. This, therefore, made each firm the agent of the other. The case of Bond v. Pittard, 3 M. & W. 357, could admit of no doubt. The question was whether G. H. Watts and P. H. Watts could sue jointly for business transacted by them as attorneys. They had agreed to become partners on a stipulation that P. H. Watts should always receive £300 yearly out of the first profits as his share, and should not be liable for any losses. It was argued that this lat- ter stipulation prevented them from being partners ; but the court held the contrary. Each of them worked for the common benefit of both, and each of them, therefore, acted as agent of the other. The produce of the labor of each was to be brought into a common fund, to be afterwards shared according to certain arrangements between themselves. The case was really free from doubt. A similar principle explains and justifies the decision of the Court of Common Pleas in Barry v. Nesham, 3 C. B. 641. The question was whether the defendant was liable for goods furnished to one Low- thin in the way of his business as the printer and publisher of a news- 36 WHAT CONSTITUTES A PAETNBESHIP. (Ch. 1 paper. Nesham had sold the stock and good will of the paper to Low- thin, in consideration of il,500, and on a farther stipulation that for seven years the profits were to be applied as follows; that is to say: Lowthin was to have the first £150 of the annual profits, then Nesham was to have them to the extent of £500, if they made so much, and Lowthin was to have all beyond. It is clear that Lowthin was con- ducting the business for the common benefit of both, subject to their private arrangements as to the shares they should separately be en- titled to. Lowthin was, therefore, clearly the agent of Nesham. Owen V. Body is at most a case in which a dictum may be found. The Court of Queen's Bench was quite right in holding that the creditors were justified in refusing to execute the deed tendered to them ; and that is all which was decided. None of the other cases cited carried the doctrine farther than those I have referred to, and I therefore think that in this case the judgment appealed against ought to be reversed.^ BULLEN et al. v. SHARP. (Exchequer Chamber, 1865. Law Rep. 1 C. P. 86.) Blackburn, J. This was an action on a policy of insurance against the defendant as underwriter. The policy was actually underwritten in the name of the defendant's son. The question in the cause is whether the defendant was a partner in the underwriting business carried on in his son's name, so as to make him liable to third persons on contracts made in the course of that business. On the trial, a verdict was taken by consent for the plaintiff, subject to a special case, as part of which it was agreed that the court might draw any rea- sonable inferences of fact. The court below have determined the question in favor of the plaintiffs. * * * 1 have come to the conclusion that the judgment below ought to be reversed, as I thirik the defendant is not shown to have been a part- ner in the business carried on in his son's name. The case of Cox v. Hickman, 8 H. L. C. 268, being a decision of the House of Lords, the ultimate court of appeal, overrules all earher authorities inconsistent with that decision, and, so far as the judgment goes, fixed the law in this country. We are not bound by all that is said in the course of a judgment of the House of Lords; but that which appears to be the rule established by the decision of that tri- bunal is binding, not only on all inferior tribunals in this country, but even on that House itself when sitting judicially. 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 2 The concurring opinions of Campbell, L. C, and Wensleydale, L,., are omitted. Brougham and Chelmsford, LL.-, concurred. Sec! 3) TESTS OF INTENTION. 37 Cox V. Hickman, 8 H. L,. C. 368. Prior to that decision, the dictum of De Grey, C. J., in Grace v. Smith, 2 W. Bl. 998, "that every man who has a share of the profits of a trade ought also to bear a share of the loss," had been adopted as the ground of judgment in Waugh V. Carver, 2 H. Bl. 235, where it was laid down "that he who takes a moiety of all profits indefinitely shall, by operation of law, be made liable to losses, if losses arise, upon the principle that, by taking a part of the profits, he takes from the creditors a part of that fund which is the proper security to them for the payment of their debts." This decision had never been overruled. The reasoning on which it proceeds seems to have been generally acquiesced in at the time; and when, more recently, it was disputed, it was a common opinion (in which I for one participated) that the doctrine had become so in- veterately part of the law of England that it would require legislation to reverse it. * * * fhe rule laid down in Waugh v. Carver, if logically followed out, led to the conclusion that all the creditors who assented to this deed, and by so doing agreed to take the profits, were individually liable as partners; but, when it was sought to ap- ply the rule to such an extreme case, it was questioned whether the rule itself was really established. There was a very great difference amongst the judges who decided the case in its various stages below, and also amongst those consulted in the House of Lords. In the re- sult, the House of Lords — consisting of Lord Campbell, C, and Lords Brougham, Cranworth, Wensleydale, and Chelmsford — unanimously decided that the creditors were not partners. The judgments of Lord Cranworth and of Lord Wensleydale bear internal evidence of hav- ing been written. Lord Campbell, C, and Lords Brougham and Chelmsford, said a few words expressing their concurrence. It is therefore in the written judgments, and more especially in the elab- orate judgment of Lord Cranworth, that we must look for the ratio decidendi. [The judge here read from the opinions of Cranworth and Wensleydale, LL., in Cox v. Hickman.] I think that the ratio decidendi is that the proposition laid down in Waugh v. Carver, 2 H. Bl. 235, viz., that a participation in the profits of a business does of itself, by operation of law, constitute a partnership, 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 partner; the participation in the profits being a most important ele- ment in determining that question, but not being in itself decisive, and the test being, in the language of Lord Wensleydale, whether it is such a participation of profits as to constitute the relation of prin- cipal and agent between the person taking the profits and those actual- ly carrying on the business. I do not think it is proper for us to inquire whether this rule of law is more or less expedient than the rule laid down in Waugh v. Carver. That is a question for the Legislature, who may alter the 38 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 law as to them seems right. We have only to administer it, and to proceed to apply what we consider to be the judgment of the House of Lords to the facts in the present case. The case contains a power to draw inference of fact, and therefore it is open to the plaintiffs to contend that we should draw the infer- ence that the transactions stated in the case were not really what they appear to be. I shall afterwards deal with the question how far I think such inferences ought to be drawn. At present I shall consider the case on the supposition that the various transactions between the parties really were what they purport to be. It appears, then, that in March, 1857, the son of the defendant entered into a written agreement with one Fenn, an underwriter, which is set out in the fourth paragraph of the case. By this agree- ment the son was to be an underwriter; but the management of the business was to the confided to Fenn, who, in consideration of a salary of £300 a year, was to act for the son. On the same day on which this agreement was made, the defendant authorized Fenn to state to the committee of Lloyd's that he, the defendant, had placed at Fenn's disposal £5,000 and intended to give his son further aid, if needed. In November, 1858, it was resolved to extend the business carried on by Fenn in the name of the son, and by an agreement be- tween them Fenn's salary was raised to £350. On the 1st of January, 1859, the son signed a letter, addressed to the defendant, which is set out in paragraph 11 of the case. By it, in consideration of the defendant's guaranteeing the son to the extent of £5,000 in his busi- ness of an underwriter until by such business he should acquire the clear sum of £5,000, the son promised to pay the defendant during their joint lives an annuity of £500 a year, to be increased in case one- fourth of the son's average annual net profits during the first three years should exceed £500, to a sum equal to one-fourth of such net average annual profits. This arrangement, as worded, would not in- crease the annuity unless the son's average net profits during the first three years should exceed £3,000 a year; so that it would seem the parties contemplated carrying on a business much more extensive than was justified by a capital of £5,000, and it is not very surprising to find that, before the three years' end, the son was a bankrupt. It was expressly stipulated in the letter that the defendant should not be a partner with his son in his business. This last stipulation is bind- ing between them, but does not affect third parties ; and consequently the first question we have to determine is whether this agreement did constitute a partnership as to third parties, and I think that, assum- ing it to represent the real transaction, it did not constitute a partner- ship. It is not an arrangement by which the defendant agrees to carry on the trade in the name of his son, nor even one in which he stipulates for a portion of the profits of that trade; but it is a pur- chase of an annuity, secured only by the personal promise of the son, the consideration being that the defendant binds himself to make Sec. 3) TESTS OF INTENTION. 39 advances to the son to the extent of £5,000 when required in the business. In August, 1859, the son married; and prior to his marriage he executed a deed of settlement, which is made a part of this case. This deed was between the son, of the first part, the intended wife, of the second part, and two trustees (of whom the defendant was one), of the third part. It recites the agreements between the son and Fenn for carrying on the son's business under the management of Fenn, and also the agreements between the son and the defendant by which the son bound himself to pay the defendant an annuity, and an agree- ment, in contemplation of the marriage, by which the son engaged to convey some railway shares and other property, and also all the pro- ceeds of his underwriting business, to trustees, on certain trusts ; and then the son does by the deed assign over to the trustees (one of whom is the defendant) .all moneys, the proceeds of the underwriting business, then in the hands of Fenn or any other person who might be substituted as manager of the son's business, or thereafter to be, and gave them a power of attorney to recover such moneys from the manager; and then the indenture declares the trusts on which the moneys are to be held. These are, in the first place, to pay the an- nuity to the defendant; next, to pay the son an allowance of £500 a year, to be increased, if the business prospered, to £750 ; then, to ac- cumulate the surplus until it amounted to £8,500, and so remained for two years without reduction, when the engagement to pay over the future proceeds of the business to the trustees was to cease. There is a proviso that, at any time during the continuance of the engage- ment, the trustees were, upon the request of the son, or his manager for the time being, to raise out of the property assigned by the son and the accumulated fund any sum required to meet emergencies oc- curring in the underwriting business. The ultimate trusts of the ac- cumulated fund, when it should have remained two years without reduction at the sum of £8,500, were to repay any advances made by the defendant under his guarantee, and, subject thereto, for the benefit of the wife and children. Such a settlement as this would be very inconvenient in most trades; but, when the peculiar nature of an underwriting business as carried on at Lloyd's is borne in mind, it seems a prudent enough arrangement. The course of business was stated inXenos v. Wickham, 14 C. B. N. S. 108 E. C. L. R. 460, 33 L. J. C. P. 13 ; and we were informed during the course of the argument that it was stated accurately. The premiums are received by the broker, and out of these losses and returns of premiums are paid by him ; the balance being paid over to the underwriter at stated intervals. So long, therefore, as the losses do not exceed the ordinary and expected average, the underwriter only receives money; but if the losses exceed the average, so that the whole premiums in the hands of the broker are absorbed by these losses, the underwriter has to find the funds to meet the excess, and it is to be anticipated that at irreg- 40 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 ular intervals such extraordinary losses will occur. The underwriter, therefore, ought not to spend the annual proceeds of his trade as if they were clear gain, but should keep a considerable reserve fund. Now, if by a settlement an underwriter binds himself to his trustees to limit his personal expenditure, and to put the residue of the pro- ceeds of the trade in their hands as a reserve fund to meet emergen- cies of his trade, and, subject to meeting those emergencies, to form a fund for the benefit of his family, he does not bind himself to do that which a prudent man ought to do of his own accord. It is true that, by entering into this agreement, the trustees do take the profits of the trade; and, whilst Waugh v. Carver, 2 H. Bl. 235, was con- sidered as unqualified law, it wortld have been difficult to say that they did not thereby by operation of law make themselves partners in the trade, and personally responsible, though it may be observed that they do not by this arrangement withdraw the profits from the reach of the creditors, but rather secure that the trader shall not spend them, and that they shall remain as a fund to meet emergencies. But, when we find that the object of their taking the profits of the trade is to keep them as a reserve fund to meet the emergencies of the business, I think it becomes clear that, though they take the profits, they do not cause the business to be carried on for them, and that the participation is not such as to constitute the relation of principal and surety between the trustees of the settlement and the underwriter ; and that, according to Cox v. Hickman, 8 H. L,. C. 268, is the true • question. I think, therefore, that such a settlement does not of it- self make the trustees partners in the business. In the present case, the first trust was to pay the defendant his an- nuity ; and it was argued that, though his co-trustee, Donnison, might not be a partner of a principal in the underwriting business of the son, yet that the defendant, being not only a trustee, but also bene- ficially interested in the profits when received by him and his co- trustee, was a partner. But, if the previous arrangement between the defendant and his son was really what it purported to be, and the defendant really was an annuity creditor of his son, this arrangement goes no further than did that in Cox v. Hickman, 8 H. L,. C. 2G8. There is only one creditor, instead of many ; but in every other respect the words of Lord Cranworth, already cited, are strictly applicable: "The debtor [in this case, the son] is stiU the person solely interest- ed in the profits, save only that he has transferred them [or, in this case, a part of them] to his creditor, the defendant." The son re- ceives the benefit of the profits as they accrue, though he has pre- cluded himself from applying this portion of them to any other pur- pose than the payment of this annuity, for which he was already liable. The trade is not carried on by or on account of the annuitant creditor. I think, therefore, that, assuming that the transactions were really what they purport to be, the defendant was not liable as a partner in the business carried on in his son's name. ■Sec. 3) TESTS OF INTENTION. 41 I come now to consider whether, in the exercise of the power to draw reasonable inferences of fact, we ought to draw the inference that in reality the transactions were not such as they purport to be, but that they were a cloak for a scheme by which the defendant really ■carried on the business for himself. *■ * * Jn the present case I think we are not justified in drawing any such inference. For these reasons, I think that the judgment of the Common Pleas should be reversed. Bramwell, J. In this case the plaintiffs declare that they made a policy of insurance, and that "the defendant, in consideration of a •certain premium paid him by the plaintiffs, subscribed the said policy for ilOO and became an insurer thereon to the plaintiffs for that amount." The defendant pleads "that he did not subscribe the said policy or become insurer as alleged." And the question is whether the plaintiffs have proved the allegations so traversed. This is the real and ultimate question, because, though this, like other cases, has been argued as though the question were whether the defendant was a partner with somebody else, and though this way of arguing is rea- sonable enough, as prima facie a partner is liable for the acts of his copartner within the ordinary scope of partnership authority, yet, in- asmuch as a man may be a partner and not liable, or not a partner and yet liable, the determination of partnership or no partnership does not settle the question, which still remains, "did the de- fendant subscribe the policy and become an insurer?" Now, he did not subscribe it with his own hand; nor is he liable on the ground of holding himself out as a partner or principal in this matter, for he has not done so. The only other way in which he can be lia- ble is by reason of his having given authority to the person who signed it so to sign and bind him. The person who did sign it is described in the case as a "clerk," and he signed the name of the defendant's son. Then did the defendant give that person any authority so to sign and bind him? That he did not in words is certain; nor did he in intention; nor did the clerk intend to bind him; nor did his son, nor Fenn; nor did the plaintiffs suppose he was bound, or intend to deal with or trust him, but his son. If, then, he is liable, if he has given such authority, it is against the intentions of all parties. It is in spite of their meaning the contrary, and must therefore be from some force in the nature of the transaction itself. And this may be. If the defendant was really the principal, or one of the principals, in the transaction; if those who acted really were his agents; if, on the truth appearing, he had a right to say the contract was made with him, and to enforce it — he ought to be and would be liable. As, for instance, if there was a business which required the buying of goods on credit, and if a person tried to carry it on in the name of an agent, whether such agency was an agency of a partnership or any other, so that, upon the purchase of goods by the agent or partner, the property vested wholly or in part in the first-named person, then 42 WHAT CONSTITUTES A PARTNERSHIP. (Ch. t he would, as it seems to me, be liable, though he had stipulated with^ his agent or partner that he should not be, because he would have tried for an impossibility, for a thing repugnant in itself, viz., that the contract should be made with him, for his benefit, but not to bind him. It becomes necessary, then, to examine the facts. [After commenting on the facts, the opinion continues:] Why, then, the deed being bona fide, is the defendant a partner or principal in the business? He can make no contract, nor order one,, nor forbid one, nor enforce one, nor release one. If the profits were £10,000 in the year, he would get nothing but his annuity. The re- sidue would go to his son and the trust fund. His annuity would be larger, indeed; but that is unimportant. If there were no profits in any year, he would still be entitled to his £500 annuity. How can this state of facts prove that the defendant "subscribed the said policy^ and became an insurer"? It seems to me, therefore, that if the de- fendant is held to have "subscribed this policy and become an in- surer," it will be so held, though, as I have said, he has not done so. in form nor in substance, and that he has so done somehow, though there is no fraud, without his or any one else concerned intending it. Surely it seems enough to state this to show that it cannot be true, and that therefore the defendant is not liable. The burthen of proof to the contrary is on the plaintiffs. Now, what reason do they give? 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 relation be- tween 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 that 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 signify that relation. A. is not the agent of B. ; B.. has never held him out as such; yet C. is entitled as between him- self and B., to say that A. is the agent of B. ! Why is he so entitled, if the fact is not so, and B. has not so represented? But "partner- ship" and a "right to call persons partners as regards third parties," are words, and the thing must be looked at, viz., the taking or shar- ing of profits, which it is said gives C. a right as against B. to say B. is a partner of A. Why should it? I trust that, in the present state of authority, this question may be freely handled without presump- tion, and that the goodness of such a rule may be examined ; because,, though we are bound to administer the law as we find it, yet, when we are considering what is the law, we may not improperly inquire into the reasonableness of that suggested. Why, then, does a taking or sharing of A.'s profits by B. entitle C. to demand payment of B. of A.'s debts in the trade? How, if there is such taking or sharing in this case, does it prove that the defendant "subscribed the policv and became an insurer"? If A. agrees with B. to share profits and: Sec. 3) TESTS OF INTENTION. 43 losses, but not to interfere with the business, and not to buy or sell, and does not interfere, nor buy nor sell, and C, knowing this, deals with B., he would have no claim on A. Why should he, if he does not know of it? Why, upon finding out something between A. and B. which has in no way affected or influenced him, should he who has dealt with B. have a claim on A.? It is said, because profits are what the creditor trusts to, they are his fund for payment. This would be a bad reason, if true in fact. A man who trusts another generally has a claim on his profits and capital too. How does a man who trusts the former only more affect the creditor's fund? But, further, it really is not true in substance, only in words. It is not a receipt of profits, in substance, that makes a man liable. If I agree to receive a sum in proportion to profits, as, for instance, a sum equal to a tenth, I am not liable. If I receive a tenth, I am. What is the difference, except in words, at least as far as creditors are concerned? How can one set of words between A. and B. give C. a right, and the same thing in other words not? How many men in a thousand, not lawyers, could be got to understand that, of the two servants of a firm, the one who received a tenth of the profits was liable for its debts, and the other, who has received a sum equal to a tenth, was not? This Mr. Justice Story calls "satisfactory." Satisfactory in what sense? In a practical business sense? No; but in the sense of an acute and subtle lawyer, who is pleased with refined distinctions, interesting as intellectual exercises, though unintelligible to ordinary men, and mischievous when applied to the ordinary affairs of life. Lord Eldon did not think it satisfactory. Such law is a law of sur- prise and injustice, and against good policy. It fixes a liability on a man contrary to his intent and expectation, and without reason, and gives a benefit to another which he did not bargain for and ought not to have, and prevents that free use of capital and enterprise which is so important. It is said that this is true of a dormant partner. It is not. His existence may be unknown to the creditor; but the dormant partner knows he is liable, and means to be, and the creditor trusts all such persons. He means to deal with all real persons. It may be said that, if this reasoning is right, a man might bargain to receive all the profits of a business and not be liable. The answer is, the thing is impossible. There never was, and never will be, a bona fide agreement by one man to carry on a business, bear all its losses, and pay over all its profits. Should such an agreement appear, it would obviously be colorable. Where there is a chance of profit to the trader, there such an agreement may be honest, and, where honest, ought not to make him liable who is certainly to receive some of the profits, and perhaps all. I have hitherto dealt with the case on principle. I proceed to examine the authorities. The labor formerly needful is now rendered unneces- sary by Cox v. Hickman, 8 H. L. C. 368. That case has settled the law, I may be permitted, I hope, to say, in a perfectly satisfactory man- 4:4 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 ner. It is there laid down that the question in such cases as the present is one of authority, one of agency. Lord Campbell says (page 302) : "The defendant can only be liable upon the supposition that the person who wrote the acceptance on the bills of exchange was their mandatory for that purpose." Lord Wensleydale says (page 311) : "And the simple question will be this, whether Haywood was authorized by either of the defendants as a partner in that company to bind him by those acceptances." His Lordship proceeds: "Hay- wood must be taken to have been authorized to accept for them by those who actually carried on business under that firm. Were the ap- pellants partners in it? And further (page 312) : "The question, then, is whether this deed makes the creditors who sign it partners with the trustees, or, what is really the same thing, agents to bind them by acceptances on account of the business." And, generally, I refer to his whole judgment, particularly to the passage at page 313, beginning, "Hence it becomes a test of the liability," down to "liable as a partner." Lord Cranworth puts the same two arguments together at page 306. I refer to the passage beginning, "It was argued," and ending, "to have been made." This, then, is our guide for the future. The question here is, was the underwriter's business carried on by persons acting on the defendant's behalf? Now, it certainly was not. The clerk who signed the policy, Fenn, and the son, acted on the son's behalf; that is, unless the whole is a sham — which, as I have before said, I think is not open to us to consider, nor true, if it were open to us. This ought to dispose of the case. But, even if we assume that the law supposed to exist before Cox v. Hickman, 8 H. L. C. 268, re- mains untouched — that is to say, the supposed law of Waugh v. Car- ver, 2 H. Bl. 235 — I think the same conclusions ought to be come to. Lord Wensleydale does not notice that case. Lord Cranworth does, and, with submission, gives a better reason for the decision than is to be found in the case itself. The Chief Justice there says the ques- tion is whether they have not constituted themselves partners in re- spect to other persons, and puts his decision on the ground that "he who takes a moiety of all the profits indefinitely shall by operation of law be liable to losses." Let us hope that this notion is overruled — one which I beHeve has caused more injustice and mischief than any bad law in our books. But, even if not, how is this case within it ? By the letter of the 1st of January, 1859, after the business had proved profitable, the son agreed to pay his father, for their joint lives, i500 a year absolutely, not out of profits, nor dependent on them, with a provision for an increase in proportion to profits if they reached beyond a certain amount. This would not make the defendant a receiver of profits, nor give him a right to an account, nor, in fact, bring him within any of the old fancied rules of liability. Then comes the settlement, in which the defendant is a trustee. As far as Sec. 3) TESTS OF INTENTION. 45 the settlement alone is concerned, the defendant is no more liable than the other trustee. And why is he to be Hable ? It remains to notice the judgment of the court below. With great respect I think Cox v. Hickman was not followed. The Chief Justice says the deed made the defendant a partner, by giving him an inter- est in the business ; and he finishes by saying the question is wheth- er the creditors may come on the defendant in respect of the profits. But, according to the judgment in Cox v. Hickman, the question does not turn on that. Byles, J., seems to consider the deed as a contrivance for giving the defendant the profits — that in reality it was his business. If so, of course he is liable. Montague Smith, J., says he thinks the deed an arrangement by which the defendant was to have the profits as eo nomine, and that he is liable as a partner. But if Lords Cranworth and Wensleydale have laid down the true rule, it is not that indicated in the last expression. It seems to me, then, there is here no partnership, no taking of profits, which could have brought the case within what was supposed to be law before Cox v. Hickman, 8 H. L,. C. 268 ; that on rea- son and principle that supposed law was wrong; that it is now con- demned by the authority of Cox v. Hickman ; that anyhow Cox v. Hickman is the governing case; and that it lays down rules which decide this in favor of the defendant. The opinions of the majority of the court being thus in favor of the defendant, the judgment of the court below was reversed. Judgment reversed.^ GRAY, J., IN MEEHAN v. VALENTINE. (Supreme Court of the United States, 1892. 145 U. S. 619, 12 Sup. Ct. 972, 36 L. Ed. 835.) How far sharing in the profits of a partnership shall make one liable as a partner has been a subject of much judicial discussion, and the various definitions have been approximate rather than exhaustive. The rule formerly laid down, and long acted on as established, was that a man who received a certain share of the profits as profits, with a lien on the whole profits as security for his share, was liable as a partner for the debts of the partnership, even if it had been stipulated between him and his copartners that he should not be so liable; but that merely receiving compensation for labor or services, estimated by a certain proportion of the profits, did not render one liable as a partner. Story, Partn. c. 4; 3 Kent, Comm. 35, note, 32-34; Ex parte Hamper, 17 Ves. 403; Pott v. Eyton, 3 C. B. 33, 40; Bost- wick V. Champion, 11 Wend. (N. Y.) 571, 18 Wend. (N. Y.) 175, 184, 185, 31 Am. Dec. 376; Burckle v. Eckart, 1 Denio (N. Y.) 1 Channel, B., delivered a concurring opinion. Shee, J., and Pigott, B., dissented. 46 WHAT CONSTITUTES A PAETNEESHIP. (Ch. 1 337, and 3 N. Y. 132; Denny v. Cabot, 6 Mete. (Mass.) 82; Fitch V. Harrington, 13 Gray (Mass.) 468, 474, 74 Am. Dec. 641; Brun- dred v. Muzzy, 25 N. J. Law, 268, 279, 674. The test was often stated to be whether the person sought to be charged as a partner took part of the profits as a principal, or only as an agent. Benjamin V. Porteus, 2 H. Bl. 590, 592; Coll. Partn. (1st Ed.) 14; Smith, Merc. Law (1st Ed.) 4; Story, Partn. § 55; Loomis v. Marshall, 12 Conn. 69, 78, 30 Am. Dec. 596; Burckle v. Eckart, 1 Denio (N. Y.) 337, 341; Hallet v. Desban, 14 La. Ann. 529. Accordingly, this court, at December term, 1860, decided that a person employed to sell goods under an agreement that he should re- ceive half the profits, and that they should not be less than a certain sum, was not a partner with his employer. "Actual participation in the profits as principal," said Mr. Justice Clifford in delivering judg- ment, "creates a partnership as between the parties and third persons, whatever may be their intentions in that behalf, and notwithstanding the dormant partner was not expected to participate in the loss be- yond the amount of the profits," or "may have expressly stipulated with his associates against all the usual incidents to that relation. That rule, however, has no application whatever to a case of service or special agency, where the employe has no power as a partner in the firm and no interest in the profits, as property, but is simply em- ployed as a servant or special agent, and is to receive a given sum out of the profits, or a proportion of the same, as a compensation for his services." Berthold v. Goldsmith, 24 How. 536, 542, 543, 16 L. Ed. 762. See, also, Seymour v. Freer, 8 Wall. 202, 215, 222-226, 19 L. Ed. 306 ; Beckwith v. Talbot, 96 U. S. 289, 293, 24 E. Ed. 496 ; Edwards v. Tracy, 62 Pa. 374; Burnett v. Snyder, 81 N. Y. 550, 555, 37 Am. Rep. 527. Mr. Justice Story, at the beginning of his Commentaries on Part- nership, first pubHshed in 1841, said: "Every partner is an agent of the partnership; 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,' indeed, virtually embraces the character both of a principal and of an agent. So far as he acts for himself and his own interest in the common concerns of the partnership, he may properly be deemed a principal ; and so far as he acts for his partners, -he may as properly be deemed an agent. The principal -distinction between him and a mere agent is that he has a community of inter- est with the other partners in the whole property and business and responsibilities of the partnership ; whereas an agent, as such, has no interest in either. Pothier considers partnership as but a species of mandate, saying, 'Contractus societatis, non secus ac contractus man- dati.' " Afterwards, in discussing the reasons and limits of the rule by which one may be charged as a partner by reason of having re- ceived part of the profits of the partnership, Mr. Justice Story ob- served that the rule was justified, and the cases in which it had been "Sec. 3) TESTS OF INTENTION. 47 applied reconciled, by considering that "a participation in the profits will ordinarily establish the existence of a partnership between the parties in favor of third persons, in the absence of all other opposing circumstances," but that it is not "to be regarded as anything more than mere presumptive proof thereof, and therefore liable to be re- pelled and overcome by other circumstances, and not as of itself over- coming or controlling them," and therefore that, "if the participation in the profits can be clearly shown to be in the character of agent, then the presumption of partnership is repelled." And again: "The true rule, ex aequo et bono, would seem to be that the agreement and intention of the parties themselves should govern all the cases. If they intended a partnership in the capital stock, or in the profits, or in both, then that the same rule should apply in favor of third persons, ■even if the agreement were unknown to them. And on the other hand, if no such partnership were intended between the parties, then that there should be none as to third persons, unless where the parties bad held themselves out as partners to the public, or their conduct ■operated as a fraud or deceit upon third persons." Story, Partn. §§ 1, 38, 49. * * * The decision [in Cox v. Hickman] was put upon the ground that the liability of one partner for the acts of his copartner is in truth the liability of a principal for the acts of his agent; that a right to participate in the profits, though cogent, is not conclusive, evidence that the business is carried on in part for the person receiving them ; and that the test of his liability as a partner is whether he has au- thorized the managers of the business to carry it on in his behalf. Cox V. Hickman, 8 H. L. Cas. 268, 304, 306, 312, 313, nom. Wheat- croft V. Hickman, 9 C. B. (N. S.) 47, 90, 93, 98, 99. This new form of stating the general rule did not at first prove •easier of application than the old one ; for in the first case which arose afterwards one judge of three dissented (Kilshaw v. Jukes, 3 Best. ■& S. 847) ; and in the next case the unanimous judgment of four judges in the Common Bench was reversed by four judges against two in the Exchequer Chamber (Bullen v. Sharp, 18 C. B. [N. S.] ■614, and L. R. 1 C. P. 86). And, as has been pointed out in later English cases, the reference to agency as a test of partnership was unfortunate and inconclusive, inasmuch as agency results from partnership rather than partnership from agency. Kelly, C. B., and Cleasby, B., in Holme v. Hammond, L. R. 7 Exch. 218, 227, 233; Jessel, M. R., in Pooley v. Driver, 5 Ch. Div. 458, 476. Such a test seems to give a synonym, rather than a definition; another name for the conclusion, rather than a statement of the premises from which the conclusion is to be drawn. To say that a person is hable as a part- ner, who stands in the relation of principal to those by whom the busi- ness is actually carried on, adds nothing by way of precision, for the , very idea of partnership includes the relation of principal and agent. In the case last above cited. Sir George Jessel said: "You cannot 48 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 grasp the notion of agency, properly speaking, unless you grasp the no- tion 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 Ronian lawyers, and which was partly understood in the courts of equity." And in a very recent case the Court of Appeals of New York, than which no court has more steadfastly adhered to the old form of stat- ing the rule, has held that a partnership, though not strictly a legal entity as distinct from the persons composing it, yet being commonly so regarded by men of business, might be so treafed in interpreting a commercial contract. Bank v. Thompson, 131 N. Y. 280, 24 N. E. 473. In other respects, however, the rule laid down in Cox v. Hickman has been unhesitatingly accepted in England, as explaining and modi- fying the earlier rule. In re English & Irish Society, 1 Hem. & M. 85, 106, 107; Mollwo v. Court of Wards, L. R. 4 P. C. 419, 435; Ross V. Parkyns, L. R. 20 Eq. 331, 335; Ex parte Tennant, 6 Ch. Div. 303; Ex parte Delhasse, 7 Ch. Div. 511; Badeley v. Bank, 38 Ch. Div. 238. See, also, Davis v. Patrick, 122 U. S. 138, 151, 7 Sup. Ct. 1102, 30 E. Ed. 1090; Eastman v. Clark, 53 N. H. 276, 16 Am. Rep. 192; Wild v. Davenport, 48 N. J. Law, 129, 7 Atl. 295, 57 Am. Rep. 552; Seabury v. Bolles, 51 N. J. Eaw, 103, 16 Atl. 54, 11 E. R. A. 136; and 52 N. J. Law, 413, 21 Atl. 952, 11 L. R. A. 136; Mor- gan V. Farrel, 58 Conn. 413, 20 Atl. 614, 18 Am. St. Rep. 282. In the present state of the law upon this subject, it may perhaps be doubted whether any more precise general rule can be laid down than, as indicated at the beginning of this opinion, that those persons are partners who contribute either property or money to carry on a joint business for their common benefit, and who own and share the profits thereof in certain proportions. If they do this, the incidents or con- sequences follow that the acts of one in conducting the partnership business are the acts of all; that each is agent for the firm and for the other partners; that each receives part of the profits as profits, and takes part of the fund to which the creditors of the partnership have a right to look for the payment of their debts; that all are liable as partners upon contracts made by any of them with third persons within the scope of the partnership business; and that even an express stipulation between them that one shall not be so liable, though good between themselves, is ineffectual as against third per- sons. And participating in profits is presumptive, but not conclu- sive, evidence of partnership. In whatever form the rule is expressed, it is universally held that an agent or servant, whose compensation is measured by a certain proportion of the profits of the- partnership business, is not thereby made a partner, in any sense. So an agreement that the lessor of a hotel shall receive a certain portion of the profits thereof by way of rent does not make him a partner with the lessee. Perrine v. Hankin- son, 11 N. J. Eaw, 181; Holmes v. Railroad Co., 5 Gray (Mass.) 58; Sec. 3) TESTS OP INTENTION. 40 Beecher v. Bush, 45 Mich. 188, 7 N. W. 785, 40 Am. Rep. 465. And it is now equally well settled that the receiving of part of the profits of a commercial partnership, in lieu of or in addition to interest, by way of compensation for a loan of money, has of itself no greater effect. Wilson V. Edmonds, 130 U. S. 472, 482, 9 Sup. Ct. 563, 33 L. Ed. 1025 ; Richardson v. Hughitt, 76 N. Y. 55, 32 Am. Rep. 267 ; Curry V. Fowler, 87 N. Y. 33, 41 Am. Rep. 343 ; Cassidy v. Hall, 97 N. Y. 159 ; Smith v. Knight, 71 111. 148, 22 Am. Rep. 94 ; Williams v. Sout- ter, 7 Iowa, 435, 446; Boston & C. Smelting Co. v. Smith, 13 R. I. 27, 43 Am. Rep. 3 ; Mollwo v. Court of Wards, and Badeley v. Bank, above cited. In some of the cases most relied on by the plaintiff, the person held liable as a partner furnished the whole capital on which the business was carried on by another, or else contributed part of the capital and took an active part in the management of the business. Beauregard V. Case, 91 U. S. 134, 23 L. Ed. 263 ; Hackett v. Stanley, 115 N. Y. 625, 627, 628, 633, 22 N. E. 745; Pratt v. Eangdon, 12 Allen (Mass.) 544, 97 Mass. 97, 93 Am. Dec. 61 ; Rowland v. Long, 45 Md. 439. And in Mollwo v. Court of Wards, above cited, after speaking of a contract of loan and security, in which no partnership was intended, it was justly observed: "If cases should occur where any persons, under the guise of such an arrangement, are really trading as prin- cipals, and putting forward, as ostensible traders, others who are really their agents, they must not hope by such devices to escape lia- bility, for the law, in cases of this kind, will look at the body and substance of the arrangements, and fasten responsibility on the par- ties according to their true and real character." L. R. 4 P. C. 438. But in the case at bar no such element is found. * * * BEECHER et al. v. BUSH et al. (bupreme Court of Michigan, 1881. 45 Mich. 188, 7 jN'. W. 78.5, 40 Am. Rep. 465.) CooLEY, J. The purpose of the action in the court below was to charge Beecher as partner with Williams for a bill of supplies pur- chased for the Biddle House in Detroit. Beecher was owner of the Biddle House, and Williams proposed in writing to "hire the use" of it from day to day, and open and keep it as a hotel. Beecher ac- cepted his proposals and Williams went into the house and began business, and in the course of the business made this purchase. The proposals are set out in full in the special verdict. The question is whether by accepting the proposals Beecher made himself a partner with Williams in the hotel business; and this is to be determined on the face of the writing itself. It is conceded that Beecher was never held out to the public as a partner, and that the bill of Supplies Gil.Fart. — i 50 WHAT CONSTITUTES A PABTNERSHIP. (Ch. 1 was purchased on the sole credit of Williams and charged to him on the books of the plaintiffs below. The case, therefore, is in no way embarrassed by any questions of estoppel, for Beecher has done nothing and suffered nothing to be done which can preclude him from standing upon his exact legal rights as the contract fixed them. Nor do we understand it to be claimed that the parties intended to form a partnership in the hotel business, or that they supposed they had done so, or that either has ever claimed as against the other the rights of a partner. It is perfectly clear that many things which are commonly incident to a partnership these parties meant should be wholly excluded from their arrangement. Some of these were of primary importance. It is plain, for example, that Beecher did not understand that his credit was to be in any way involved in the busi- ness, or that he was to have any interest in the supplies that should be bought, or any privilege to decide upon them, or any legal control whatever until proceeds were to be divided, or any liability to losses if losses were suffered. These are among the common incidents to a partnership; and while some of them, and possibly all of them, may not be necessary incidents, yet the absence of all is very conclusive that the parties had no purpose whatever to form a partnership, or to give to each other the rights and powers, and subject each other to the obligations of partners. In general this should be conclusive. If parties intend no partnership the courts should give effect to their intent unless somebody has been deceived by their acting or assuming to act as partners; and any such case must stand upon its peculiar facts and upon special equities. * * * We have then a case in which the party it is sought to charge has riot held himself out, or suffered himself to be held out as a partner either to the pubHc at large or to the plaintiff, and has not intended to form that relation. He is not therefore a partner by estoppel nor by intent; and if he is one at all, it must be by construction of law. What, then, are the indicia of partnership in this case — the marks which force that construction upon the court irrespective of the in- tent of the parties, that in fact control their intent and give to the parties bringing suit rights which they were not aware of when they sold the supplies? In the elaborate and able brief which has been presented in behalf of the defendants in error it is conceded that the fact that Beecher was to receive each day a sum "equal to one- third of the gross receipts and gross earnings" for the day would not necessarily make him a partner. What is claimed is that the fact is "cogent evidence" that Beecher was to participate in the results of the business in a manner that indicated he was a principal in it and was not receiving compensation for the use of property merely. The view of the law here suggested is undoubtedly correct. There may be a participation in the gross returns that would make the receiver a partner, and there may be one that would not. The question is in what capacity is participation had. Gross returns are not profits and Sec. 3) TESTS OF IISTENTION. 51 may be large when there are no profits, but it cannot be predicated of either gross returns or profits that the right to participate is con- clusive evidence of partnership. This is settled law both in England and in this country at this time, as is fully shown by the authorities cited for the defendants in error. It was recognized in Hinman v. Littell, 23 jMich. 484; and in New York, where the doctrine, that partic- ipation in profits proves partnership has been adhered to most close- ly, it is admitted there are exceptions. Eager v. Crawford, 76 N. Y. 97. But we quite agree with counsel for defendants in error that no case ought to turn upon the unimportant and mere verbal distinction between the statement in the papers that Beecher was to have a sum ''ec[ual to" one-third of the gross receipts and gross earnings, and a statement that he was to have one-third of these receipts and earn- ings. It is perfectly manifest it was intended he should have one-third of them; that they should be apportional to him regularly and daily, and not that Williams w'as to appropriate the whole and pay a sum "equal to" Beecher's proportion when it should be convenient. We can conceive of cases where the difference in phraseology might be important, because it might give some insight into the real intent and purpose of the parties, and throw light ujxDn the question whether that which was to be received, was to be received as partner or only by way of compensation for something supplied to the other, but the intent in this case is too manifest to be put aside by any mere ingenuity in the use of words. Loomis v. Marshall, 12 Conn. 69, 79, 30 Am. Dec. 596. In Cox V. Hickman, 8 H. L. Cas. 268, 506, Lord Cranworth stated very clearly his views of what should be the test of partnership. "It is often said," he says, "that the test, or one of the tests, whether a person not ostensibly a partner is nevertheless in contemplation of law a partner, is whether he is entitled to participate in the profits. This is no doubt in general a sufficiently accurate test; for a right to participate in the profits affords cogent, often conclusive evidence that the trade in which the profits have been made was carried on in part for or on behalf of the person setting up such a claim. But the real ground of the liability is that the trade had been carried on by persons acting on his behalf. When that is the case he is liable in 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 in his behalf; i. e. that he stood in the relation of principal to the persons acting ostensibly as the traders by whom the liabilities have been incurred, and under whose management the profits have been made." There is something understandable by the common mind in this test ; there is nothing artificial or arbitrary about it ; it falls in with reason and enables every man to know when he makes 52 WHAT CONSTITUTES A PAETNEESHIP. (Ch. 1 his business arrangements whether he runs the risk of extraordinary Habilities contracted without his consent or approval. It is said, and we beHeve justly, in Bullen v. Sharp, L,. R. 1 C. B. 86, that the decision in Cox v. Hickman brought back the law of Eng- land to what it should be, and Mr. Baron Bramwell, referring to what was declared to be law in Waugh v. Carver, 1 H. Bl. 235, expressed the hope "that this notion is overruled," adding that it is "one which I believe has caused more injustice and mischief than any bad law in our books." Page 127. It is certainly overruled very conclusively in Great Britain. Kilshaw v. Jukes, 3 B. & S. 847; Shaw v. Gault, 16 Irish C. Iv. 357 ; Holme v. Hammond, L. R. 7 Exch. 218 ; Ex parte Delhasse, 7 Ch. Div. 411. And though in New York courts hampered somewhat by early cases have not felt themselves at liberty to adopt and follow the decision in Cox v. Hickman to the full extent, it would be easy to show that the American authorities in the main are in harmony with it. [The court, after examining numerous cases, con- tinues:] It is needless to cite other cases. They cannot all be reconciled, but enough are cited to show that in 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 arbitrary tests it was erroneous and mischievous and the proper correction has been applied. Except when one allows the public or individual dealers to be deceived by the appearances of partnership when none exists, he is never to be charged as a partner un- less by contract and with intent he has formed a relation in which the elements of partnership are to be found. And what are these? At the very least the following: Community of interest in some lawful commerce or business, for the conduct of which the parties eventually are principals of and agents for each other, with general powers with- in the scope of the business, which powers however by agreement be- tween the parties themselves may be restricted at option, to the ex- tent even of making one the sole agent of the others and of the busi- ness. In this case we have the lawful commerce or business, namely, the keeping of the hotel. We have also in some sense a community of interest in the proceeds of the business, though these are so divided that all the profits and all the losses are to be received and borne by one only. But where in the eventual arrangements does it appear, that either of the parties clothed the other with an agency to act on his behalf in this business? We speak now of intent merely, and not of any arbitrary implication of intent which the law, according to some authorities, may raise irrespective of and perhaps contrary to the intent. Could Beecher buy for the business a dollar's worth of provisions? Could he hire a porter or a waiter? Could he discharge one? Could he say the house shall be kept for fastidious guests ex- clusively and charges made in proportion to what they demand, or on the other hand that the tables shall be plain and cheap so as to Sec. 3) TESTS OF INTENTION. 53 attract a greater number? Could he persist in lighting with gas if Williams chose something different, or reject oil if Williams saw fit to use it? Was a servant in the house at his beck or disposal, or could he turn off a guest that Williams saw fit to receive or receive one that WilHams rejected as unfit? In short what one act might he do or au- thority exercise, which properly pertains to the business of keeping lip- tel, except merely the supervision of accounts, and this for the purpose of accounting only? And how could he be principal in a busi- ness over which he had absolutely no control? Nor must we for- get that this is not a case in which powers which might otherwise be supposed to exist are taken away or excluded by express stipu- lation; but they are powers which it is plain from their contract the parties did not suppose would exist, and therefore have not deemed it necessary to exclude. On the other hand, what single act are we warranted in inferring the parties understood Williams was to do for and as the agent of Beecher? Not to furnish supplies surely, for these it was expressly agreed should be furnished by Williams and paid for daily. Not to contract debts for water and gas bills and other running expenses, for by the agreement there were to be no such debts. Nor was this an agreement merely that expenses incurred for both were to be met without the use of credit, but it was expressly provided that they were to be the expenses of one party only, and to be used by him from his own means. There was to be no employment of credit, but it was the credit of Williams alone that was in the minds of the parties. It is difficult to understand how the element of agency could be more perfectly eliminated from their arrangements than it actually was. Beecher furnished the use of the hotel and a clerk to super- vise the accounts, and received for so doing one-third the gross re- turns. It was not understood that he was to intermeddle in any way with the conduct of the business so long as Williams adhered to the terms of the contract. If the business was managed badly Beecher might be loser, but how could he help himself? He had reserved no right to correct the mistakes of Williams, supply his deficiencies or overrule his judgments. He did indeed agree to take and account for whatever furniture should be brought into the house by Williams, but the bringing any in was voluntary, and so far was Beecher from undertaking to pay to the sellers the purchase price, that on the con- trary the value was to be offset against the deterioration of that which Beecher supplied ; and it was quite possible that, as between himself and Williams, there might be nothing to pay. And while Williams was not compellable to put any in, Beecher, on the other hand, had no authority to put any in at the cost of Williams. It is plain, therefore, that if there is any agency in this case for Beecher to act for Williams, or Williams to act for Beecher, it is an agency implied by law, not only without having expressed a pur- pose that an agency shall exist, but in spite of the plain intent that 54 WHAT CONSTITUTES A PARTNBRSEIIP. (Ch. 1 none shall exist. If therefore we shall say that agency of each to act for the other, or agency of one to act for both in the common business, is to be the test of partnership, or to be one of the tests, but that the law may imply the agency irrespective of the intent, and then imply the partnership from the agency, we see at once that the test disappears from all our calculations. To imply something in order that that something may be the foundation whereupon to erect an implication of something else is a mere absurdity. The test of partnership must be found in the intent of the parties themselves. They may say they intend none when their contract plainly shows the contrary ; and in that case the intent shall control the contradictory assertion; but here the intent is plain. We have not overlooked any one of the circumstances which on the argument were pointed out as peculiar to this case. None of them is inconsistent with the intent that Beecher was to be paid for the use of his building and furniture merely. He retained possession; but a reason for this appears in the power he reserved to terminate the arrangement whenever the contract was broken by Williams. Being in possession, he might suppose he could eject Williams without suit. He might also think it important to the reputation of the hotel that no landlord should be in debt for supplies or for servants' wages ; and for that reason require cash payments. It is easy to see that as lessor he might have had an interest in all the stipulations to which Williams' assent was required. [After deciding that defendant could not be treated as a dormant partner, the opinion concludes:] Our conclusion is that Beecher and Williams, having never in- tended to constitute a partnership, are not as between themselves part- ners. There was to be no common property, no agency of either to act for the other or for both, no participation in profits, no sharing of losses. If either had failed to perform his part of the agreement, the remedy of the other would have been a suit at law, and not a bill for an accounting in equity. If either had died the obligations he had assumed would have continued against his representatives. We also think there can be no such thing as a partnership as to third persons when as between the parties themselves there is no partner- ship and the third persons have not been misled by concealment of facts or by deceptive appearances. The judgment must be reversed with costs and a new trial ordered. JOHNSON BROS. v. CARTER & CO. et al. (Supreme Court of Iowa, 1903. 120 Iowa, 355, 94 N. W. 850.) Action on a promissory note of $1,233.12, signed "Carter & Co., by J. E. Carter," dated February 7, 1900, and payable in 60 days! The petition alleges that the defendant Brown was a member of that firm, and as such liable on the note. The defendant put these alle- Sec. 3) TESTS OF INTENTION. 55 gations in issue. After plaintiffs had introduced their evidence, the court directed a verdict for the defendant. Judgment was entered thereon, and the plaintiffs appeal. lyADD, J. [McGee, Kahman & Co., having entered into a contract with the Ft. Dodge & Omaha Railroad Company to grade its entire road, made a subcontract with J. E. Carter to grade two miles there- of. Carter, not having the necessary capital to carry on the work, agreed with Brown, a banker, to give him one-half of the profits if he would furnish the money and also a man, whose time was to off- set that of Carter, who was to keep the books and oversee the work. Brown furnished John Campbell, who kept the books in the name of Carter & Co. and transacted all the business, buying all supplies and handling all funds, while Carter had charge of the men doing the work. The men employed were boarded, and the price of board de- ducted from their wages. The note sued on was for supplies bought by Campbell and by his direction charged to Carter & Co. Brown honored sight drafts on his bank, signed "Carter & Co.," and receiv- ed notes so signed for moneys advanced. Upon the completion of the grading contract, including three additional miles. Carter exe- cuted his note to Brown for one-half of the cost of the horses, scrap- ers, etc., bought during the season and remaining on hand. On the one hand, plaintiff contends that there was sufficient evidence to carry the question of partnership to the jury, while, on the other, de- fendant insists that the evidence shows what the agreement was, and that it was properly construed as not creating the relationship of part- ners between Brown and Carter.] It may be conceded that, where an agreement is fully proven and is not ambiguous in terms, the court should declare its meaning, and define the rights and obligations of the parties created thereby. But we do not think this is such a case. While the firm name of Carter & Co. was apparently selected for convenience in bookkeeping, there is nothing to indicate that it was not to include both parties to the en- terprise. Brown's employment of Campbell, at his own expense, to act as bookkeeper and to handle the funds of Carter & Co., as an off- set to Carter's time, together with his assurance of Campbell's full authority to act for him, are circumstances tending to show that such was their intention. True, he advanced the money to execute the contract ; but he was a banker, and under the arrangement was to re- ceive for its use the highest legal rate of interest. In these circum- stances, the stipulation for one-half the net profits of the enterprise is more consistent with the theory of a partnership than a mere loan. The use of the words "net profits" may well have been understood as profits after the payment of interest. Both parties appreciated that large expenditures would be necessary, and the reference to such prof- its cannot be held, as a matter of law, to exclude the inference of the obligation of each to bear his just proportion of the losses, if any should occur. The thought, doubtless, was that all expenses 56 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 should be paid out prior to the division of gains. If the money ad- vanced was merely loaned to Carter, how happened it to be handled exclusively by Brown's representative, all purchases made by him, and everything done in the name of Carter & Co.? Possibly in- ferences explanatory of this may be drawn from the evidence, but not necessarily so. The conclusion that there was a partnership seems quite as reasonable. Of course, the mere sharing of profits will not be construed as establishing the partnership relation. Rud- dick V. Otis, 33 Iowa, 403. But it is an important circumstance to be taken into consideration. The obligation to share losses is an es- sential element to its existence. Winter v. Pipher, 96 Iowa, 17, 64 N. W. 663. But enterprises are not usually undertaken with a view of loss, and the mere fact that provision therefor is not expressly made does not preclude the inference that each partner is to bear his portion of the Ijurdens, as well as reap his share of the benefits, of the venture. "An agreement to share profits, nothing being said about losses, amounts prima facie to an agreement to share losses also; for it is but fair that the chance of gain and of loss should be taken by the same persons, and it is natural to suppose that it was their in- tention, if they have said nothing to the contrary; and accordingly it has been held that, unless an intention to the contrary can be shown, persons engaged in any business or venture, and sharing the profits to be derived from it, are partners as regards the business or adven- ture-" 1 Lindley on Partnership (Ewell) 30. [After examining vari- ous Iowa cases, the opinion continues:] From these authorities may be deduced, as established in this state, the following principles: (1) That the agreement only to share profits will not constitute partner- ship, though evidence of existence of that relation. (2) The shar- ing of 'losses is essential in a partnership, though the undertaking to do so may be inferred from an agreement to divide profits, unless precluded by the terms thereof. (3) That payment for services, or for the use of money or property to be used in the business, may con- sist of a share of profits, without making of the loaner or employe a partner. The absence of any participation in or control of the busi- ness is generally mentioned as indicating that a party is not a partner ; and, of course, the converse must follow. Indeed, it will be found, in most of the cases where the relationship is declared to exist inter se, the party held has enjoyed a direct, rather than merely a contin- gent, interest in the enterprise. The use of the term "partnership" is not essential, and the adoption of a firm name may be dispensed with. The facts of no two cases are exactly alike. The only crucial test seems to be the intention of the parties. If it appears to have been their purpose to enter into the relation of partners, all subter- fuges of either, resorted to in order to evade liability for possible losses, while securing certainty of the advantages to be derived from the relation, must be disregarded. Brown was careful to guard his portion of the prospective profits. From what he did in agreeing to a Sec. 3) TESTS OF INTENTION. 57 firm name, though ostensibly for convenience in bookkeeping, in ac- quiescing in its use in all matters connected with the enterprise, in the division of the profits after exacting the highest legal rate of in- terest for money supplied, in furnishing a man to act in his behalf in transacting the business as an offset to the labor of Carter in over- seeing the employes, in taking Carter's note for the cost of half, in- stead of all, the materials bought and remaining on hand, and in admitting that Campbell, in making use of the firm name "Carter & Co.," had full authority to represent him, it might have been inferred that he was not merely acting as a money loaner, but as a partner, and that both he and Carter so understood in the selection of a firm name, and so intended in carrying on their joint enterprise. Judgment reversed. III. Common Enterprise or Business. BURT V. LATHROP et al. (Supreme Court of Michigan, 1883. 52 Mich. 106, 17 N. W. 716.) CampbelIv, J. Plaintiff sued a large number of defendants as joint- ly liable to him for his services as attorney in defending some patent suits concerning the rights to use certain hard-rubber material in dentistry. He declared specially and with the common counts for these services, and also set up two judgments rendered in Jack- son county for the same causes of action. Upon trial court below ordered a verdict for defendants. The counts which describe the judgments do not set them out in such a way as to make out any legal liability under them against all these defendants, and the proofs are not any more definite. It appears affirmatively that no jurisdiction existed to bind more than a part of them, and there can be nothing •claimed for them under the issue as presented. They may, therefore, be laid aside. The ground for asserting a claim against the de- fendants jointly is that they are claimed to have become members of an association combined for the purpose of legal resistance to the claims of a patentee, and that plaintiff was employed by their officers. There is no testimony tending to show any immediate personal •employment of plaintiff by the defendants, jointly or individually, so as to justify this joint action. But it was claimed that they stood on the footing of partners, bound by the action of their designated managing members. The testimony indicates that several of the de- fendants,, at various times, became members of an association which, so far as pertinent to this inquiry, required them to pay five dollars each into the treasury, and to pay such assessments as should be levied pro rata, on pain of being left out of the association and its privileges. The officers were to employ counsel, and money was to be paid on the •order of the president and secretary. 58 WHAT CONSTITUTES A PAETNERSHIP. (Ch. 1 We can find in this arrangement nothing analogous to a partnership. There was no common business, and nothing involving profit and loss in a business sense. No one was empowered to make contracts binding on the subscribers personally, and no one was to be liable except for assessments, nor even for those except as he saw fit to pay them to keep his membership. It was nothing more than a com- bination which may have made the parties in some respects responsible to each other, but which did not, we think, authorize any contract with third persons which should bind any member personally be- yond his assessments. As plaintiff was not only aware of the articles, but showed that he acted under them and in furtherance of them in various ways, no question arises in the nature of an equitable estop- pel. We are not concerned on this record whether plaintiff has any other adequate means of securing compensation. The only question ■now is whether these defendants are his joint debtors. We think they are not. Judgment affirmed. BUTLER SAVINGS BANK v. OSBORNE et al. (Supreme Court of Pennsylvania, 1893. 159 Pa. 10, 28 Atl. 1G3, 39 Am. St. Rep. 665.) WiivtiAMS, J. The question raised on this record grows out of the following facts: The firm of D. Osborne & Bros, was engaged in drilling oil wells, and producing oil. It was an owner of some leases on which it was operating, and a part owner, as a tenant in common with other part owners, in others. In the same district, the firm of Carruthers & Peters was engaged in the same business, and in the same manner. Each of these firms bought an undivided one-half of two leases, known, respectively, as the "Cookman Eease" and the "Duncan lycase." Both leases were obtained from the same vendor, who was engaged in drilling a well upon one of them at the time of sale. The sale included the drilling tools and machinery in actual use, and it was agreed that Duncan, their vendor, should proceed to com- plete the work of drilling he had begun. When this was done, the two firms proceeded to prepare the well for pumping, each paying one-half of the expenses incurred. As soon as the first well was put in order, the owners entered into an agreement with each other to drill another well on the same lease, and to pay their one-half part of the cost of it. They divided the expenses incurred in pumping and in the care of the leases in the same manner, each paying one-half. The oil produced was run into pipe lines serving the district, and there- credited, one-half to Osborne & Bros., and one-half to Carruthers & Peters. Upon these facts the appellant contends that the tenants in common of the Cookman and Duncan leases became partners. It is not alleg- Sec. 3) TESTS OF INTENTION. 59 ed that any contract of partnership was ever entered into between the two firms, or that any new partnership name was adopted to repre- sent tliem in their operations upon these leases. Their relation to- wards each other, as the result of their purchase of their respective interests in the leases, was that of tenants in common. They were en- gaged in the development and operation of the common property for their individual benefit. They were doing what tentants in common may properly do, and in the only way practicable for them, viz. turn- ing the common property to the profit of its owners at their individual cost, and dividing the product between themselves, in the pipe lines, in shares corresponding with their interest in the title. The firm of D. Osborne & Bros, seems to have been badly in debt. The Butler Savings Bank was among its creditors, and was the holder of two judgments against the firm and the individuals composing it, on which writs of fieri facias were issued on 39th of June, 1893. The appel- lant was also a creditor, having one or more judgments entered against the firm. On the 3d of July, 1893, it caused a special writ of fi. fa. to be issued directing the sheriff to levy on the interest of D. Osborne & Bros, in an alleged partnership composed of the firms of D. Osborne & Bros, and Carruthers & Peters. The sheriff seized and sold, at the instance of the bank, the title of Osborne & Bros, in both leases. At the instance of the appellant, he seized and sold the interest of Osborne & Bros, in the alleged new firm. Whether the appellant is entitled to come in on the fund raised by the sheriff by means of a sale made upon all the writs in his hands depends on whether the alleged partnership between the tenants in common had any existence. If it did, the two leases were partnership property belonging to that partnership. The interest of Osborne & Bros, would, in that case, go to the purchaser at sheriff's sale, subject to a settlement of the partnership business, and would be simply a right to receive one-half of what might remain after that business was closed up, and the proceeds of such sale would go to the special writ of fi. fa. If, on the other hand, no such partnership existed, then the title of D. Osborne & Bros, was that of a tenant in common own- ing one-half of the leases. The purchaser at sheriff's sale would succeed to their title, and the money raised would go to the bank, as the proceeds of the sale of the property of its debtor. In the case of Dunham v. Loverock, 1.58 Pa. 197, 37 Atl. 990, 38 Am. St. Rep. 838, we have held, at the present term, that tenants in common engaged in the improvement or development of the common property will be presumed, in the absence of proof of a contract of partnership, to hold the same relation to each other during such improvement or development as before it began. As to third persons, they may sub- ject themselves to liability as partners by a course of dealing, or by their acts and declarations ; but as to each other their relation depends on their title, until, by their agreement with each other, they change it. The act of 35th April, 1850, gives the courts jurisdiction in equity 60 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 over the settlement of accounts between tenants in common of mines and minerals, and empowers them to "cause to be ascertained the quantity and value of the coal, iron ore or other minerals, so taken respectively by the respective parties, and the sum that may be justly and equitably due by, and from, and to, them respectively therefor, according to the respective portions and interests to which they may be respectively entitled in the lands." This power over the accounts between tenants in common was exercised by the courts of equity in England long before our statute was passed, and, as between the ten- ants in common and third parties, the same controversy frequently arose that exists in this case. The effort of third parties, extending credit to them, was to hold them liable as partners, just as the appel- lant seeks to do here. But the rule in England, as I understand it to be, is that when tenants in common agree to carry on mining opera- tions upon their land, each contributing towards the expenses in pro- portion to his or her respective interest or estate in the land, they will be considered, with respect both to themselves and third persons, as the ordinary owners of land working their respective shares of the mines, responsible only for their own acts, subject to no laws of part- nership whatever, and possessing distinct rights in the property. Bainb. Mines, c. 9, p. 296. The several owners may form a partner- ship for the purpose of operating the common property, if they so agree ; but in the absence of an agreement they will be presumed to deal with each other and the common property as part owners, hold- ing as tenants in common, and liable to each other in account render- ed or in equity, as the circumstances may seem to require. In the case now before us, there is no need to rely on the presumption, as the auditor has found, as a fact, that no partnership existed between the two firms owning the Cookman and Duncan leases. From this finding of fact the auditor correctly concluded, as a matter of law, that the special writ of fieri facias issued by the appellant against the interest of D. Osborne & Bros, in the alleged partnership had nothing on which it could be executed. The contention of the appellant fails, therefore, on both grounds. The law does not implv a partnership between tenants in common because of the fact that they agree to develop or operate the common property, since they may rightfully- do this by virtue of their respective titles as part owners ; and, next, the existence of an express agreement creating a partnership is nega- tived by the finding of the auditor, concurred in by the court below. As it is thus settled that the alleged partnership did not exist, the con- clusion is inevitable that the sale on the writ in favor of the bank pass- ed the title of D. Osborne & Bros, in the two leases to the sheriff's vendee, who thereupon became a tenant in common with the other part owner. The proceeds of the sale were therefore properly dis- tributed in the court below, and the decree of distribution is affirmed. Sec. 3) TESTS OF INTENTION. 61 LOGAN V. OKLAHOMA MILL CO. (Supreme Court of Oklahoma, 1904. 14 Okl. 402, 79 Pac. 103.) BuRWE^tL, J. G. H. Logan and R. C. Brennen. bought two farms, and had the titles conveyed to themselves jointly. During the three or four years that they owned the land, Brennen farmed it to wheat, Logan paying for half of his time and half of the expenses. Bren- nen each year sold the wheat to the defendant in error, collecting the money for the same, and paid Logan his half, except for the year 1901, which is in controversy in this action. The evidence, we think, also shows that the defendant was in possession of facts which would charge him with notice of the arrangement between Logan and Brennen. In June or July of 1901 Brennen sold to the defendant some 2,000 bushels of wheat which was grown on the Logan and Brennen farm, and the defendant contends that he agreed to apply the wheat on the payment of a debt from his son to the mill, while Brennen testified that he agreed to apply only his half of the wheat to the payment of his son's debt. Tickets to the amount of $500 were surrendered and applied in that way, and the other tickets for 948 bushels, amounting to $455.04, were by Brennen turned over to Mr. Logan, who presented them for payment, and the defendant re- fused to take them up, and assigned as a reason that the wheat was to be applied on the debt of Brennen's son. In fact, the defendant had declined to pay Brennen the amount of the Logan tickets before they were turned over to Logan, and gave that as a reason therefor. Logan then commenced this suit, alleging that he had sold and de- livered to defendant 948 bushels of wheat at 48 cents per bushel, and that there was still due and unpaid therefor the sum of $455.04. The answer was a general denial. On this state of facts the trial court found for the defendant, and taxed the costs to the plaintiff, who appeals to this court. * * * It is first contended by the defendant that the plaintiff had no legal capacity to sue, because Logan and Brennen were partners, and suit could only be maintained by them as such. * * * This brings us to a consideration of the legal status of Logan and Brennen, and, in presenting this matter, the appellee insists that Logan and Brennen were partners, while the appellant maintains that they, were tenants in common. It is sometimes quite difficult to determine whether persons are tenants in common or partners, but, when meas- ured by the rules laid down by the law writers, the case at bar can be classified, leaving no room for reasonable doubt. It has long since been the settled law that persons may be joint owners of real estate or other property, and not be partners. In other words, joint owner- ship does not necessarily mean partnership. In Lindley on Partner- ships, vol. 1, bottom of page 123, it is said: "No partnership neces- sarily subsists amongst persons to whom property descends, or is 62 WHAT CONSTITUTES A PAETNERSHIP. (Ch. 1 given jointly or in common; and, even if several persons agree to buy property to hold jointly or in common, although by the purchase they become co-owners, they do not become partners, unless that also was their intention." The Supreme Court of Illinois, in the case of Ryhiner et al. v. Feickert, 92 111. 305, 34 Am. Rep. 130, had oc- casion to consider the effect of naming two persons as payees in a note; and it was there held that the mere fact that a note ran to Charles and Wihiam Feickert, did not, as a matter of law, authorize the public to assume that they were partners, and that it required the indorsement of both to effect a legal transfer. The Supreme Court of California, in Quackenbush v. Sawyer, 54 Cal. 439, stated the rule as follows : "A mere joint ownership in personal property does not constitute a partnership; nor was a partnership created by an agree- ment to divide the income of a business carried on by a third party with the joint property of the plaintifif and defendant and paid to the latter for the joint use of himself and the plaintiff." One of the tests of a partnership is : Can either party sell his part of the prop- erty or thing in question, and his grantee compel recognition of his rights? If he can, then it is not a partnership, as one cannot pur- chase the interest of one partner in a business, and then compel the other partner, against his will, to continue the business with him. See Kent's Commentaries, vol. 3, star page 25, and volume 4, star page 368 et seq. It cannot reasonably be contended that the grantee of Logan or Brennen, either of the wheat or land, would not have the same rights as his grantor. There was no express agreement of part- nership between Logan and Brennen, and the facts do not justify an inference of partnership. They were joint owners of the land, and each was interested in reaping the fruits of his investment; and, in order to get some returns from the land, Brennen farmed the land to wheat, and Logan paid him for his services. Each owned half of the wheat, and neither could sell the half which belonged to the other with- out his consent. This consent, however, Brennen had, and, in selling Logan's half of the wheat, he acted as his agent ; and, were this a case where the defendant or Logan must suffer on account of some wrong- ful act of Brennen, of course, the loss would fall on Logan, but that is not the case. The defendant was in possession of such facts and circumstances as to charge it with knowledge of the arrangement be- tween Logan and Brennen, but, even if it were not, the wheat actually belonged to Logan, and the defendant did not part with any valuable thing to get it ; and it should be compelled to either pay for the wheat or return it, and, upon failure so to do, Logan could sue and recover its value. GoeH v. Morse and others, 126 Mass. 480. Under the facts in this case, the plaintiff ought to have recovered. The judgment of the lower court is hereby reversed, and judgment is hereby rendered for the plaintiff for $455.04, with interest at 7 per cent, thereon since October 15, 1901. Sec. 3) TESTS OF INTENTION. 63 DONNELIv V. HARSHE. (Supreme Court of Missouri, 1877. 67 Mo. 170.) Napton, J. The principal and decisive question in this case is the propriety of the following instruction given by the court : "The court instructs the jury that a copartnership is an agreement be- tween two or more persons of sufficient capacity to contract to carry on a given business and share the profits of such business; and if the jury believe from the evidence in this case that there was either a verbal or written agreement between the plaintiff and Emeline Harshe, by which the former was to occupy and cultivate the farm of said Emeline Harshe for any given length of time, and that each was to receive a moiety or share of the crops raised or grown thereon under such agreement, then such farming was a copartnership business, and belongs to another adjustment, and must be settled or adjusted in a dififerent form of action, and cannot be made available in this action; and if they find that the matters embraced in defendant's account were connected with or arose out of such business they will exclude all evidence of such account from their minds," etc. The evidence in the case is not stated in the bill of exceptions, but it is stated that evidence was offered tending to prove that plaintiff and defendant entered into an agreement by which plaintiff was to culti- vate a farm of defendant, lying in St. Francis county, on shares ; that plaintiff and defendant were each to defray one moiety of the ex- penses attending such cultivation of said farm, and were to share equal- ly in the profits thereof. The instruction asserts, as a matter of law, that the occupancy and cultivation by one of the farm of another, under an agreement that the owner and occupant will divide crops raised in an agreed proportion, constitutes the owner and occupant ■copartners. This is probably a very common mode of leasing farms in this state, but the proprietor and occupant might be equally surpris- ed to be informed that they were partners. A definition of partnership, broad enough to embrace all cases and narrow enough to exclude such as ought to be excluded, has been found a very difficult and embarrassing task to those writers who have published books on the subject. The courts have been erhbarrassed, also, in nice refinements about partnerships inter se and partnerships which are only as to creditors. Indeed, Judge Story, after a prolonged examination of these distinctions, seems to conclude that the intention of the parties ought to be the controlling circumstance to determine their relations, and therefore, where the profits and losses are to be shared by the parties in fixed proportions, and, to use his language, "each is intended to be clothed with the pow- ers and rights and duties and responsibilities of a principal, either as to the capital stock or the profits, or both, there may be a just ground 64 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 to assert, in the absence of all controlling stipulations and circum- stances, that they entered a partnership." This, it will be perceived, is quite indefinite. It is essential to a partnership that there be a community of interest in the subject of it, and this community of interest must not be that of mere joint tenants or tenants in common. When the effect of the agreement is, as propounded in the instruction, that one should oc- cupy and cultivate the farm, and the crops should be divided equally between the occupant and the owner, no partnership is necessarily intended or created. In the case of Dry v. Boswell, 1 Cham. 329,. where there was an agreement between the owner of a lighter and a lighterman that the lighterman should work the lighter, and the gross earnings should be equally divided between him and the owner, Lord Ellenborough held that this was only a mode of paying the lighter- man for his wages, and was not a participation in profits and loss, and no partnership existed. So in Ambler v. Bradley, 6 Vt. 119, A. owned a sawmill and agreed with B. that the latter should work it and divide the gross earnings equally. They were held not to be part- ners. In Putnam v. Wise, 1 Hill (N.Y.) 234, 37 Am. Dec. 309, an agreement between the owner of a farm and the oCcupant that the latter should work it on shares, and a division be made of the gross earnings of the farm, was held not to be a partnership. In Dwinel V. Stone, 30 Me. 384, it was held that a mere participation in profit and loss does not necessarily constitute a partnership. "There must be," said Shipley, C. J., "such a community of interest as empowers each party to make contracts, incur liabilities, manage the whole busi- ness, and dispose of the whole property, a right which, upon the dis- solution of the partnership by death of one, passes to the survivor, and not to the representatives of the deceased." In Caswell v. Dis- trich, 15 Wend. (N. Y.) 379, the court held an agreement between landlord and tenant that the tenant should sow certain kinds of grain and yield a certain portion of each crop to the landlord made them ten- ants in common with the crops. In Denny v. Cabot, 6 Mete. (Mass.) 82, an agreement was made between H. and B., by which H. was to supply B. with stock to be manufactured into cloth at his mill, on H.'s account, and B. was to manufacture the stock into cloth and to deliver the cloth to H. at a certain sum per yard, and H. could pay him one-third part of the net profits of the business, and this was held not to make A. and B. partners. In Harrower v. Heath & Cole. 19 Barb. (N. Y.) 331, an agreement similar to the one to establish which proof was offered in the present case was held to constitute the owner and occupiers tenants in common, both of the farm and the crops. And in Johnson v. Hoffman, 53 Mo. 504, a similar contract was held to make the landlord and tenants merely tenants in common of the crops and not the farm. It is useless, however, to multiply authorities on this subject, as hardly any two cases are exactly alike. Sec. 3) TESTS OF INTENTION. 65 and very slight shades of distinction lead to different conclusions. The instruction was erroneous, as we think, and the judgment must there- fore be Reversed.^ NOYES V. CUSHMAN et al. (Supreme C!ourt of Vermont, 1853. 25 Vt. 390.) ISHAM, J. The auditors have reported a balance due the plain- tiff, subject to objections which have been taken by the defendants. It is insisted by the defendants that they were not partners when the services were rendered by the plaintiff, and that this joint action against them as such cannot be sustained. We learn from the report that the gristmill and privilege were at first purchased by the de- fendants, Cushman and Noyes, under an agreement to rebuild the same and share equally in its expense, and that afterwards one-sixth of the same was purchased of them by the defendant Morse under an agreement to be at a like proportion of the expense of rebuilding 1 "It Is sometimes difficult to determine whether a person who worlcs the land of another on shares is a tenant in common of the crop with the owner of the land or a mere cropper. Much depends upon the wording of the con- tract between the parties. Lanyon v. Woodward, 55 Wis. 652, 13 N. W. 863 ; Carrier \. Atwood, 63 Wis. 301, 24 N. \V. 82; Wood v. Noack. 84 Wis. 398, 54 N. W. 785; Rowlands v. Voechting, 115 Wis. 352, 91 N. W. 990; Warner V, Abbey, 112 Mass. 355. In the case at bar there Is practically no dispute as to the facts. The plaintiff furnished the land and the seed. The defend- ant was to plow the ground, plant and care for and harvest the potatoes, and have one-half of what should be raised. After plowing the ground and planting the potatoes, the defendant moved away. Finally his son-in-law came and went over the potatoes with a cultivator one way and partly over them the other way. But the potatoes became badly damaged for want of care, and finally the plaintiff got another man to care for the potatoes, and agreed to give him a share of the crop for doing so. The defendant testi- fied to the effect that the plaintiff was to furnish the land and the seed, and that he was to cultivate the ground and have half the crop, provided he stayed there ; and if he did not stay, and no one else would buy, then the plaintiff would buy his share of the potatoes. The trial court manifestly held that the parties were tenants in common of the crop. If such was the relation of the parties, then the decision may be justified. Section 4257, St. 1898 ; Foley v. Land Co., 94 Wis. 329, 68 N. W. 994 ; Sullivan v. Sherry, Ul Wis. 476, 87 N. W. 471, 87 Am. St. Rep. 890; Orcutt v. Moore, 134 Mass. 48, 45 Am. Rep. 278. If, ou the other hand, the defendant was a mere crop- per, then the decision was wrong. The general rule is that: 'The legal pos- session to the land, as well as the title to the entire crop, is in the owner of the soil. The possession of the cropper being merely that of a servant, and incident to his right and duty of entering the close for the purpose of planting, cultivating, and gathering the crop, it is not the legal possession of the premises which usually gives the possessor the title to the produce. He has no property in his share of the crop until the division, which is made by the owner of the land.' 8 Am. & Bng. Ency. of Law (2d Ed.) 324, 325. It is said that 'the term "cropper" Is applied to a person hired by the landowner to cultivate the land, receiving for his compensation a portion of the crop raised.' Id." Per Cassoday, 0. J., in Kelly v. Rummerfleld, 117 Wis. 620, 94 N. W. 649, 98 Am. St. Rep. 951 (1903). Gil.Pakt. — 5 66 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 and putting the mill in proper condition for improvement and use. These several purchases vested the title and interest in these premises in the defendants as tenants in common. Their mutual obligation to rebuild and repair does not necessarily constitute them partners, for, as observed by Judge Bronson in Porter v. McCIure, 15 Wend. (N. Y.) 192, "they may or may not become partners in carrying on mill- ing business." A mere community of interest in real or personal es- tate does not constitute a partnership. But where a purchase of that character is made, and the premises are rebuilt or repaired for the purpose of prosecuting some joint enterprise or adventure, and under an agreement to share in the profits and loss of the undertaking, the contract then becomes one constituting a partnership, and each mem- ber thereof is liable as a partner, and they are liable jointly for ser- vices performed in perfecting their joint undertaking. The report of the auditors shows this to have been the character of the contract as made by these defendants. After having obtained a joint interest in the gristmill and privilege, they- became obligated to rebuild and repair the same, for the purpose of prosecuting a joint undertaking in the use of this property for milling purposes ; and the defendant Morse was to have' one-sixth of the toll or profits of the mill and one-half of the remainder for taking charge of the same, and the other defendants, Cushman and Noyes, were to have the remain- ing shares. In this contract are found all the elements of a partner- ship even as between themselves, much more as to third persons ; and whatever agreement may have been made as between themselves, as to the manner in which other persons were to be employed and paid, it can have no effect upon their liability to those who have ren- dered services in promoting their joint undertaking, particularly where, as in this case, the services were rendered under the under- standing that the defendants were jointly liable therefor, and when the plaintiff was ignorant of any different arrangement as between the defendants. We think, therefore, the auditors came to a right con- clusion that the defendants were liable as partners on this account to the plaintiff. The result is that the judgment of the county court is affirmed. QUACKENBUSH v. SAWYER. (Supi-eme Court of California, 1880. 54 Cal. 439.) McKee, J. We do not regard the action in this case, as does coun- sel for the appellant, as an action for the settlement of a partnership account. In substance it is alleged, in the complaint in the case, that the parties had severally advanced certain sums of money in' pur- chasing the "circus property" mentioned in the complaint; that they then entered into an agreement that the defendant should take and Sec. 3) TESTS OF INTENTION. 67 keep possession of the property, and cause it to be used and employed by circus companies or managers for the joint benefit of himself and the plaintiff in equal shares; that in using or employing it for this purpose he should make provision that the "rent or compensation" re- ceivable for the use of the property should be first paid to him ; and that, upon collecting or receiving such rent or compensation," he should account therefor and pay it over every month to the plaintiff, until the money which plaintiff had advanced for the purchase of the property, and interest thereon from the time of its advancement, should be paid, and, after such payment, defendant should account for and pay over to the plaintiff one-half of said rent or compensa- tion. And it is charged that the defendant received as "rent or com- pensation" for the use of the property large sums of money, of the amount of which plaintiff is ignorant, and he prays for an account- ing and division of the property. Each &,llegation of the complaint is specifically denied by the an- swer, and a special defense is also set up. The proofs on the trial es- tablish these facts : That in June, 1873, one Conkhn was owner of the "circus property" mentioned in the pleadings, and manager of a certain troupe or company of circus performers ; that by a bill of sale Conklin transferred the property to the parties in this action as security for the payment to them of certain sums of money which they had severally advanced to him ; that they agreed with each other that defendant should take possession of the property, and transport it from place to place in the state of California, upon a performing tour, and receive or collect the income of the performances and apply it, first of all, to the payment of money advanced by the plaintiff, and then to the payment of what he himself had advanced to Conklin. Pursuant to this agreement, defendant took possession of the prop- erty, and, being a teamster, made a contract with Conklin for the transportation of the property, during the summer season of 1873, from place to place in the state of California, on a performing tour, under the direction of Conklin. Performances were given in various interior towns and cities of the state, at which the defendant collect- ed or received $4,200 ; but he has failed and refused to account for or pay to the plaintiff any portion thereof. Upon these proofs the court below rendered judgment against the defendant for the amount of money advanced by the plaintiff to Conklin, and interest thereon from the date of its advancement. The bill of sale "to the parties made them joint owners of the property. Heyland v. Badger, 35 Cal. 404. But a mere joint ownership in personal property does not constitute the owners partners. Post v. Kimberly, 9 Johns. (N. Y.) 470; Hawes v. TilHnghast, 1 Gray (Mass.) 289. Nor did the agreement between them have that effect. A partnership is the association of two or more persons for the purpose of carrying on business together, and dividing its profits between them. Section 2395, Civ. Code. But plaintiff and defendant were not engaged in the circus business, nor 68 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 did they agree to carry it on. The business belonged to Conklin alone ; and in it the defendant used the joint property of himself and the plaintiff — as he was authorized to use it in the business of any other circus manager — upon the terms and conditions that he was to receive the income of the business from Conklin for the payment of their claims against Conklin. Only to the extent of the income, or, as the pleader calls it, "rent or compensation," receivable by the defend- ant, were they at all interested in the business; but an agreement to divide the income of a business does not create a partnership. There- fore, when the defendant received the income, he did not receive it as a partner, but as a trustee; and he held so much of it as was neces- sary to pay the plaintiff's demand against Conklin in trust for that purpose, and it was his duty to account for it to the plaintiff. Fail- ing in that, the plaintiff had a right to compel him to account for so much of it as came into his hands for the purpose of discharging his trust. Judgment affirmed. EVERITT et al. v. CHAPMAN et al. (Supreme Court of Connecticut, 1827. 6 Conn. 847.) Action by the plaintiffs against Isaac Chapman and Russel Mott, surviving members of a partnership composed of the defendants and Henry R. Mott, engaged in the business of manufacturing leather, under the firm name of Chapman & Motts. By the partnership ar- ticles the parties agreed to unite for the purpose of carrying on a tannery. Chapman agreed to furnish his tannery and equipment for a fixed annual rental, to be paid one-half by him and one-half by the Motts, and to furnish one-half of the hides necessary to keep the tannery in operation and to receive and make market for one-half of the leather produced. The Motts agreed to furnish a similar quanti- ty of hides and to market a similar quantity of leather, to take care of all the bark necessary to tan said stock, to do all the work of tanning for 4J4 cents per pound of leather, and to pay one-half the ex- penses for keeping the tannery in repair. "All the said parties also agree to use their own credit separately, and not jointly, in purchas- ing anything; and no notes are to be given, only by each individual in his own name." The business was conducted by H. R. Mott, who ordered the hides in question from the plaintiffs in his own name. The plaintiffs were ignorant of any partnership when they furnished the hides and charged them to H. R. Mott. The hides were made into leather for the joint benefit of the defendants. Chapman, having furnished his proportion of the hides according to the partnership articles, denied his liabiHty to the plaintiffs. The judge charged the jury that upon the facts admitted the de- Sec. 3) TESTS OP INTENTION. 69 fendant Chapman was liable as a partner for the value of -these hides to the plaintiffs. The jury returned a verdict for the plaintiffs accord- ingly, and the defendants moved for a new trial on the ground of a misdirection. Daggett, J. It was suggested, by the counsel for the defendants, though not pressed, that it should have been left to the jury to decide whether the defendant Chapman was a partner. Surely it was a question of law, and therefore within the province of the court to de- cide, whether by the articles recited and the facts admitted a part- nership, which subjected the partners to this debt, existed. There be- ing no fact in controversy, it was the undoubted duty of the judge to state to the jury whether the defendants were liable as partners. It was further suggested that the plaintiffs trusted Henry R. Mott and charged the hides to him. Such is the fact, in every case, where the suit is brought against a dormant partner; yet, when he is dis- covered, he is rendered liable. This is familiar law, and hardly re- quires support from authorities. In Hoare et al. v. Dawes, 1 Doug. 371, Lord Mansfield said "that the law with respect to dormant partners is not disputed, viz., that they are liable when discovered." Indeed, it would be most unjust that a person really in partnership, and par- ticipating in the profits, should not be rendered liable for the debts of the partnership, merely because he chose to conceal himself, or because his partner, when buying goods for the use of the partner- ship, did not disclose his connection. Such a principle is not to be tolerated. It was also suggested that the leather, when manufactured, was to be divided between the copartners; that is, the two Motts were to re- ceive and sell one half, and Chapman the other. Be it so. The leather was to be divided into moieties in quantity and quality. Such is the clear meaning of the article. Is it not the same, then, if the whole leather was, by agreement, to be sold by either of the partners, or by an agent, and the avails divided? Where, then, is there room for a question in this case ? The counsel for the defendants answer : Here is no copartnership in purchases for this establishment, because the Motts, by the articles, were to purchase one half the hides, and Chap- man the other half ; and neither of these parties were to use the cred- it of the other. This agreement might bind the parties. And it could not influence the present decision, if it were admitted, that it ought to affect third persons, dealers with either of the partners, if they were cognizant of the fact; but it is no part of the case that either the public at large, or these plaintiffs in particular, were acquainted with the stipulations in question. On the contrary, it is conceded in the motion for a new trial that the plaintiffs were ignorant of any co- partnership at all. It is therefore to these plaintiffs a case of a dormant partner, discovered after the debt was contracted. And is it to be endured that d. clause inserted in a private agreement between two or more partners, that one of the partners only should be liable 70 WHAT CONSTITUTES A PARTNERSHIP. (Cll. 1 for the property purchased for the use and benefit of the whole, should bind third persons, ignorant of any partnership? The injustice of such a doctrine is too great to need animadversion. The case, then, under consideration presents a partnership between three persons, with an agreement between themselves substantially to share in profit and loss, but that in the purchase of. one of the materials for the manu- facture, viz., hides, two of them should, with their own funds or credit, purchase one half, and the third the other half. For hides, thus purchased for the tannery by either, I am satisfied all the part- ners are liable. It would be to depart from the spirit of all the de- cisions on this subject to decide otherwise. The only case cited with confidence by the counsel for the defend- ants is that of Saville v. J. Robertson & J. Hutchinson, 4 Term Rep. 730. In that case it was decided that in an action against the defendants for goods sold and delivered, if it clearly appeared that no copartner- ship existed at the time of the contract to sell to one of them, any sub- sequent agreement between them to share in the profits of the goods, would not render them liable as partners. The court compared it to a case where several persons agree to enter into partnership, each to bring in a stipulated sum of money, and each borrowing his proportion of different persons, in which case the persons advancing the money could not maintain actions against all the partners for their several proportions lent to each. So in our courts it has been decided that where two agreed to build a vessel, one to furnish the materials and the other to do the work, and then to own it together, the building of the vessel was not a partnership concern. But Lord Kenyon, in giving his opinion in the case of Saville v. Robertson, above cited, says : "It is clear that if all these parties had been partners at the time when their goods were furnished, though that circumstance was not known to the plaintiff, they would all have been liable for the value of the goods." And Buller, in giving his opinion, says : "It is certainly true that if one partner order goods himself without disclosing the names of the other partners, and the goods be afterwards delivered to them all, they are all liable." And one of the judges (Ashhurst) thought it a case of partnership. This authority, then, is so far from justi- fying the defense that it vindicates the claim of the plaintiffs; for these defendants were in partnership when the hides were purchased, they were bought for the concern, they were delivered into their tan- nery, and they went to their joint benefit having been purchased by H. R. Mott, without disclosing the names of his copartners. In Gouthwaite v. Duckworth, Brown and Powell, 12 East, 421, the facts were more like those in this case. That was an action for goods sold and delivered. There was an agreement in that case that B*i-own and Powell were to purchase goods for an adventure to Lisbon, which were to be shipped on board the Betsey, and to pay for the same, and the returns of such adventure were to be made to Duckworth, and to go in liquidation of his demands on Brown and- Powell. Brown and Sec. 3) ■ TESTS OF INTENTION. 71 Powell purchased goods of the plaintiflf; but Duckworth was not known in the purchase, nor did he authorize the purchase on account of the three, who were to share in the profits and loss. Duckworth, in his own name, purchased and paid for goods sent out at the same time. Brown and Powell were to share in the profit and loss of these goods. They were all consigned to Barlow, who acted as the agent of all the defendants. The whole Court of King's Bench adjudged this to be a partnership transaction, and held the defendants jointly liable. I think the court are warranted, from a view of all the cases and the general principles of law on this subject, to- declare the purchase of these hides to be for the defendants and said H. R. Mott; that, had a loss been sustained in the hides, it must have been borne by the three, and any profit shared in like manner; that the stipulation re- specting the individual purchases of hides cannot affect creditors, who furnished this joint fund; and, therefore, that the charge was cor- rect, the verdict right, and, of course, that no new trial ought to be granted. The other judges were of the same opinion, except Brain- ARD, J., who was absent. New trial not to be granted.^ BRUCE V. HASTINGS. (Supreme Court of Vermout, 1867. 41 Vt. 380, 98 Am. Dec. 592.) Assumpsit. Plea, the general issue. Trial by jury, June term, 1867; Steele, J., presiding. On trial it appeared that the plaintiff's claim was for one-half the profits which accrued from the purchase and sale of a farm, stock, and produce. The plaintiff testified that the de- fendant had obtained the refusal of the farm, stock, and produce of one Nelson at a price named, and proposed to him, the plaintiff, to complete the trade, if the plaintiff would enter into the speculation with him; that their plan of operations was to buy the property, and then sell the real estate in parcels and the personal property at auction, or to sell the whole in some manner which they should find advisable, so as to clear the matter up in a short time ; that the plaintiff accepted 1 "When two or more persons employ a common stock, whether consisting of property, or mere labor and skill, in a common undertaking, with a view to a common profit, they are partners. It is not necessary that there should be a community of interest in the property that produces the profits, or a com- munity of losses, or an equality of profits ; but a community of profits is essential to a complete partnership, and where there is no express stipulation to the contrary the law presumes that the losses are to be shared in propor- tion to profits. In contemplation of law the profits of a partnership consist of the surplus realized from a business, after the debts and losses are adjusted. One partner may expressly stipulate that he is not to share in losses, and such an agreement will be valid between the parties ; but he cannot thus withdraw himself from his obligation as a partner to strangers." Per Dick, J., in Op- penheimer v. Clemmons (C. C.) 18 Fed. 88C (1883). 72 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 the proposition, and that he and the defendant bought the property of Nelson in accordance with the refusal the defendant had obtained, but took no deed; that, as they sold the real estate to different par- ties, Nelson deeded directly to these parties, and the most of the per- sonal property was sold at auction in Nelson's name; that the profits of the enterprise were over $1,000; and that by the agreement the plaintiff was to have one-half of the sum so cleared, and the defend- ant had that amount of money which belonged to him, the plaintiff. The defendant denied any such agreement. The original bargain with Nelson was made by the defendant before he had any talk with the plaintiff, and Nelson was not informed by the defendant that any one besides the defendant was to be interested in the trade. The original bargain was merely a refusal of the property at a price named. The refusal was evidenced by a written bond or contract, which was not produced. There was no written agreement of any kind between the plaintiff and the defendant. The plaintiff claimed that, after the de- fendant closed the trade in accordance with the refusal. Nelson asked him, the plaintiff, if he was interested in the trade, and he told him he was. The plaintiff testified that he was to share equally with the defendant; that nothing was said about losses, but if there had been a loss he did not know why he should not have had to share it; that if there had been a loss he should have paid one-half of it. Belden testified that Bruce, the plaintiff, told him before the auction that he "was jointly interested" with the defendant. The court rendered judgment that the plaintiff become nonsuit, to which the plaintiff ex- cepted. Wilson, J. This is an action of assumpsit to recover one-half the profits which accrued from the purchase and sale of a farm, stock, and produce. The defendant insists that the action involves the set- tlement of partnership transactions, and should be account, instead of assumpsit. * * * f]^^ question is whether the action of assump- sit will lie upon the agreement under which the plaintiff claims to re- cover. As a general rule, the action of assumpsit cannot be sustained by one partner against his copartner in respect to any matter connect- ed with the partnership transactions or which involved the considera- tion of their partnership dealings. Chitty on Contracts, 269. But we think a partnership does not arise on the agreement which the evidence tends to show was made between these parties. The defend- ant, in his own name and upon his own individual credit, bargained with Nelson for the property, but took no deed of it. The defend- ant sold the real estate to different parties, and Nelson, by direction of the defendant, deeded it directly to those parties. The most of the personal property was sold in Nelson's name by direction of the de- fendant. It does not appear that the title to the real estate ever vest- ed in either of these parties. It would seem that, if the plaintiff ac- quired any interest in or title to the personal property, he held as a tenant in common with the defendant, and not as a partner. It was Sec. 3) TESTS OF INTENTION. 73 not an agreement to put in capital and labor for the purpose of trade generally; but the agreement, as shown by the evidence, was limited to a single specific purchase by the defendant, with the understand- ing that the property should be sold as soon as a purchaser could be found, and that the defendant would give the plaintiff one-half that should be made in the enterprise, in consideration of his agreement to aid and assist the defendant in carrying out his contract with Nelson. The form of the contract has very much the appearance of being a mode of determining the plaintiff's compensation for the assistance which he contributed to the defendant in the purchase and sale of the property. But, treating the parties as tenants in common, there can be no serious objection to adjusting the plaintiff's claim in this form of action under the circumstances of the case. We have before re- marked that the contract contemplated a single specific purchase of property and sale of it. It has been sold and disposed of according to the understanding and to the satisfaction of both parties. It was the duty of the defendant to pay Nelson the contract price for the property. He did pay him, and the defendant had in his hands nearly $1,000, profits of the enterprise. Neither party had any right, under the agreement, to appropriate the profits of the enterprise for the pur- pose of further trade on their joint account. Their relation, as ten- ants in common of the specific property purchased, was at an end when the property was sold in pursuance of the agreement of the par- ties. If the defendant made such contract as the testimony tends to show he did make, he is indebted to the plaintiff for one-half the prof- its after deducting the expenses of selling the property; and the de- fendant is not holding the money as a credit, to be balanced in whole or in part by other money or property received by the plaintiff from the enterprise. The adjustment of the plaintiff's claim involves no accounting as to any matter or dealing except what relates to the spe- cific property purchased and sold under the contract, from which the profits in question accrued. It is conceded by the defendant that the whole proceeds of the sales, including the profits, passed into his hands or were paid out for his benefit, and that the plaintiff has never re- ceived any part of the property, or avails of it. Hence the reason of the rule, that "it would be useless for one tenant in common to re- cover what, upon taking a general account, he might be liable to re- fund," is not applicable to the facts of this case. We are agreed that the remedy may be assumpsit under the circumstances of this case. * * * The judgment of the county court' is reversed, and the cause is re- manded for trial. '''4 WHAT CONSTITUTES A PAETNEESHIP. (Ch. 1, McMURTRlE V. GUILER et al. (Supreme Judicial Court of Massachusetts, 1903. 183 Mass. 451, 67 N. E. 358.) Suit by Lawrence H. McMurtrie against James Guiler and another. There were ruHngs adverse to defendants, and they bring exceptions. BRAI.EY, J. This case is before us on a bill of exceptions instead of by appeal with a report of the evidence, and the principal question presented for decision is whether there was any evidence to support the finding that, as between themselves, the parties were partners. While there was some slight difference as to details in the testimony of the plaintiff, enough appeared to show that he was at work on a sal- ary for the defendants, who were contracting and mechanical engi- neers, when, in consequence of a more advantageous offer which he had received, to induce him to remain with them, they proposed to admit him as a member of the firm. No written articles of partnership were prepared, but it was understood and agreed between them that the plaintiff should receive from the profits of the business at least $2,- 400, and probably enough more to make the sum of $5,000, as his share for one year. He then ceased to work on a salary, but appar- ently drew $200 a month during the time, and at the close of the fiscal, year, a dispute having arisen as to his relation to the defendants, he left the firm, claiming at least one-quarter part as his share of the profits. After the proposition had been made to and accepted by him, he was introduced as a partner, and his name so appeared on the sta-' tionery and business cards of the firm. No fractional proportion of the profits which the plaintiff was to receive as his share seems to. have been fixed, and, while various suggestions were discussed, it was finally left unsettled. While in substance the evidence of the de- fendants tended to show that they understood the arrangement to be that the plaintiff was to share in the business of the firm only by way of compensation, and that there was no understanding that he was to- be admitted as a member, it appeared that one of them had as a wit- ness in another case stated to the contrary, and had testified that the plaintiff was his partner. On the whole evidence one of two results, may be reached — either that the plaintiff was interested in the business ■ as a member of the firm, or that he was at work for the defendants', under an agreement that his compensation was to be a share in the profits ; and the judge before whom the case was tried found in fa- vor of the plaintiff's contention. As between themselves and creditors, having represented that they were partners, and held themselves out as such, they would be estopped' to deny the fact ; but in this case no such question arises, and, in or- der to determine their relation to each other, their intention must con- trol. If no general definition of the contract of partnership to fit alK cases can be given, and each case as it arises must be decided on the- facts presented, there seems to be an agreement of the authorities-. Sec. 3) TESTS OF INTENTION. 75 that where persons associate themselves together to carry on a joint business for their common benefit, to which eacli contributes either property or services, and the profits arising therefrom are to be shared between them, the essential elements of a contract of partnership are made out. Ryder v. Wilcox, 103 Mass. 24; Somerby v. Buntin, 118 Mass. 379, 19 Am. Rep. 459; Meehan v. Valentine, 145 U. S. 611, 618, 13 Sup. Ct. 972, 36 L. Ed. 835; Pooley v. Driver, L. R. 5 Ch. Div. 458, 471. While the firm was not a commercial partnership, and it does not appear what property, if any, outside the partnership accounts and profits, was owned by them, a community of interest in the profits as such by the plaintiff was sufficient to establish the rela- tion and to entitle him to a decree. Howe v. Howe, 99 Mass. 71. There was enough to show that a going business enterprise was in existence, to which, by mutual consent, the plaintiff was admitted. He, in common with the defendants, contributed his services as a con- tracting and mechanical engineer, and with them was to share in the profits of their joint undertaking; and this is all that is necessary, as matter of law, to sustain the finding. But the defendant contends that, in case there was no agreement as to the proportion in which the parties were to share the profits, the contract is not complete, and there being, therefore, no way of as- certaining the plaintiff's share, he cannot prevail. We are not pre- pared to hold that, because it was left undetermined by their agree- ment what share the plaintiff was to take in the profits, a court of chan- cery must dismiss his bill, and allow the defendants to hold the result of his labor and skill for their exclusive benefit. Where the contract is silent, equity will adjust the rights of the partners to profits on the basis of what their intention was as shown from all the facts of the case. Whitcomb v. Converse, 119 Mass. 38, 43, 20 Am. Rep. 311; Harris v. Carter, 147 Mass. 313, 17 N. E. 649 ; Winchester v. Glazier, 152 Mass. 316, 325, 25 N. E. 728, 9 L. R. A. 434. The plaintiff might well have claimed one-third of the profits, and, if the defendants sought to cut down this claim, and 'to overcome any presumption aris- ing from the partnership relation by evidence of a different under- standing originally, or to be gathered from the course of dealing be- tween them, they could not be heard to deny to the plaintiff the equity of sharing in the profits while seeking oh their part to limit the extent of his interest at less than one-third, because to allow him to partici- pate to that amount would be unjust to themselves. Seeking equity for their protection, they must do equity to him. But the agreement final- ly made by the parties at the trial fixed the amount the plaintiff was to recover if found entitled to reHef, and the finding followed the agree- ment. * * * Exceptions overruled. 76 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 FECHTELER et al. v. PALM BROS. & CO. (Circuit Court of Appeals of the United States, 1904. 133 Fed. 462, 66 C. C. A. 386.) Bill to obtain an accounting under a contract between the com- plainants, comprising a firm engaged in business in the city of New York, under the name of Palm, Fechteler & Co., and the defendant, a corporation of Ohio, doing business at Cincinnati, under the corpo- rate name of Palm Bros. & Co. The contract provided in substance the following: The plaintiffs agreed to supply at actual cost all goods in the plaintiffs' line which defendant should select, and to pay to the defendant a sum' of money equal to 36 per cent, of the total and entire gross profits made each year in the plaintiff's business. Plaintiffs further agreed to employ at least $100,000 in their business during the life of the contract. The defendant agreed to supply at actual cost all goods in defendant's fine which plaintiffs should select, and to pay to plaintiffs a sum of money equal to 64 per cent, of the total and entire gross profits made each year in the defendant's business. The plain- tiffs and defendant were engaged in the same line of business. The agreement was to continue 12 years, and settlements were to be made annually. LuRTON, Circuit Judge. * * * But does the contract in suit actually create the relation of partners between the complainants and the defendant corporation, assuming the corporation to have the power to enter into such relation ? The question here presented is not wheth- er the nature of the agreement is such that liability as a partner might exist as to third persons, but whether this contract provides for an actual partnership. The defendant has repudiated the contract, and defends, when sued, upon the ground that it had no power to enter into a partnership agree- ment. To make good this defense, it must show that the contract is one for a partnership — an actual partnership — and it will not do to say that, although no actual partnership was intended or existed, it is enough to show that third persons might hold both complainants and defendants liable as partners, although in fact no such relation existed. Liability as a partner to third persons misled by appearances may some- times arise, though no actual partnership exists. But this rests upon the doctrine of estoppel. Partnership is a fact— a fact sometimes made out, like other facts, from circumstances, as well as by direct evidence. Evidence may raise a presumption of a partnership so strong as to be conclusive when third persons are involved. And this is the case when one has held himself out as a partner to one ignorant of the actual fact. But this case presents no such question, as the rights of third persons are not involved. Indeed, it would be difficult to imagine a case of liability to third persons upon the ground of holding out, when the supposititious partnership was with a corporation incapable, as Sec. 3) TESTS OF INTENTION. 77 matter of law, of entering into such a relation. If the contract sued upon is not one which deprives the stockholders of the corporation of their power and duty to manage the corporate affairs, or subjects the corporation to the domination incident to the affairs of a copartner- ship, it is not ultra vires. It devolves, therefore, upon the defendant to establish that the contract into which it has entered is, in substance and legal effect, one of partnership. It is not very prudent to define a partnership. Many definitions have been attempted, and Sir George Jessell, Master of the Rolls, in Pooley V. Driver, L. R. 5 Ch. Div. 458, 471, referred to the fact that no less than fifteen such definitions by different learned lawyers, no two of which he says agree, are given in the third edition of Lindley on Partnership, pp. 2, 3. Concerning these he says, "And I suppose anybody, by reading the fifteen, may get a general notion of what a partnership means." The Supreme Court, in Meehan v. Valentine, 145 U. S. 611, 618, 13 Sup. Ct. 972, 973, 36 L. Ed. 835, has, through Mr. Justice Gray, defined a partnership. The very learned justice in that case said: "The requisites of a partnership are that the parties must have join- ed together to carry on a trade or adventure for their common benefit, each contributing property or services, and having a community of interest in the profits." All would possibly not agree that the contribution by each of "prop- erty or service" is essential. Sir George Jessell, in Pooley v. Driver, cited above, states that un- der English law you can have a partner, a dormant partner, "who puts nothing in — neither capital nor skill, nor anything else." Undoubtedly, there must be an association of two or more persons for the purpose of carrying on a trade or business or adventure togeth- er and dividing the profits. The presence or absence of certain other incidents of a partnership by special arrangement between the parties would not seem to be of the essence of the matter. Fleming v. Lay, 109 Fed. 963, 955, 48 C. C. A. 748. There is found in some of the earlier cases a disposition to regard evidence of a participation in profits as affording so cogent a pre- sumption of a partnership as to make one liable to third persons, though ignorant of the fact, in defiance of the positive agreement of the parties that they should not be partners. Grace v. Smith, 3 W. Bl. 998; Waugh v. Carver, 2 H. Bl. 335; Berthold v. Goldsmith, 24 How. (U. S.) 536, 542, 16 L,. Ed. 762; Wood v. Vallette, 7 Ohio St. 173. This rule — that by operation of law one was liable as a partner to third persons, irrespective of the actual agreement between the parties, or of any misleading, seems to have been rested upon the theory that one who shares in the profits must also share in the losses and stand li- able for the debts. The reason given in Waugh v. Carver, 2 H. Bl. 235, for this, is that in taking part of the profits he takes a part of the fund 78 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 which the creditor relies upon for pa3anent. This reasoning has been repeated in many cases following Waugh v. Carver. But as Judge Story observes, this reasoning is utterly fallacious, inasmuch as prof- its do not exist until creditors are paid or provided for, as well as be- cause creditors rely upon the entire assets, and not the net profits. Story, Part. § 36, and note 3. If the presumption arising from evidence of a participation in profits had been as rigid as some of the judges have supposed, it was possible from that circumstance alone to fasten liability in the face of other evidence showing that in actual fact no partnership existed. But as this doctrine was based only upon a presumption of the fact of partnership from evidence of a participation in profits, it has never been regarded as an irrebuttable presumption, and its cogency as evi- dence of a partnership has been much relaxed by subsequent cases in which a wider view of the subject has been taken. The most that can be said of it, as the law is now understood, is that a participation in profits is strong evidence of a partnership, and enough, unless ex- plained by other circumstances showing a different relation. Cox v. Hickman, 8 H. L. Cases, 368, 304, 306, 312, 313; March & Co. v. Court of Wards, L. R. 4 P. C. 419, 435 ; In re Eng. & Irish Soc, 1 Hem. & Mil. 85; Ross v. Perkins, h. R. 20 Eq. 331, 335; Pooley v. Driver, L. R. 5 Ch. Div. 458, 476, 479. While the reference to agency as a test of partnership has not been accepted with much favor by the courts of either England or the United States, inasmuch as an agency is a consequence, and not a cause, of partnership, made so prominent in Cox v. Hickman, the case has otherwise met v/ith general approval as a more reasonable statement of the inferences deducible from evidence of a participa- tion in profits. Davis v. Patrick, 122 U. S. 138, 151, 7 Sup. Ct. 1102, 30 E. Ed. 1090; Story on Partnership, §§ 38, 49, notes; Meehan v. Valentine, 145 U. S. 611, 620, 623, 12 Sup. Ct. 972, 36 L. Ed. 835 ; Harvey v. Childs, 28 Ohio St. 319, 22 Am. Rep. 387. If participation in profits is only evidence of a partnership, and subject to be explained even as to third persons, it must follow that the intent and agreement of the parties themselves should govern in all cases, and that the same rule should apply in favor of third per- sons, unless there has been conduct calculated to deceive, which ap- plies between the parties themselves. * * * The intent to be partners is made out when we find a business car- ried on for the joint benefit of two or more persons, with an agree- ment for a mutual participation in profits, as profits. The fact that one of the incidents of a partnership — mutual liability for debts — has been eliminated by agreement does not change the essential nature of the relation, which is nevertheless that of a partnership. Fleming v Lay, 109 Fed. 952, 955, 956, 48 C. C. A. 748. Such a stipulation, though good between the parties, will not be valid as against third persons. This view reconciles the inconsistency of holding that a partnership Sec. 3) TESTS OF INTENTION. 79 exists in defiance of the agreement and intention of the parties, as ex- hibited in some of the cases which seem to sanction the notion that there may be a partnership as to third persons, though there had been no conduct to create an estoppel, and none between the parties them- -selves. But in every phase of the question as to the cogency of evidence of a participation in profits it has been understood that the person sought to be charged as a partner must have an interest in profits, as profits. Thus it is said by Judge Story in section 49 of his work upon Part- nership, adopting the view of ColHer upon Partnerships, "that in order to constitute a communion of profits between the parties, which shall make them partners, the interest in the profits must be mutual; that is, each person must have a specific interest in the profits as a princi- pal trader." Meehan v. Valentine, 145 U. S. 611, 619, 623, 12 Sup. Ct. 972, 36 L,. Ed. 835. Hence it always has been the rule that if you could show that the participation in profits was not a sharing in profits as a principal — in profits as pro'fits of a joint business — but under an agree- ment by which a sum was to be received which should be equal to a definite proportion of the profits as a compensation for services or Tent, or money advanced as a loan, there will be no liability as a part- ner. Such an arrangement would contradict the notion of a partner- ship, for there would be no participation in profits as a principal, no receipt of profits as profits. Upon the contrary, the relation of cred- itor would be made out ; the amount of the debt being a sum of money estimated by a certain proportion of the profits, as a mere measure or yardstick. "The way in which the profits are to be parti- cipated in is the essence of the whole matter." Cotton, L,. J., in Ex parte Tennant, 6 Ch. Div. 303, 316. This definition of sharing in prof- its as evidence of a partnership is supported by all the cases, and we need cite but a few of the more recent and controlling: Berthold v. Gold.smith, 24 How. (U. S.) 536, 542, 543, 16 h. Ed. 762; Meehan v. Valentine, 145 U. S. 611, 619, 12 Sup. Ct. 972, 36 L. Ed. 835 ; Story, Part. §§ 33, 34; Burnett v. Snyder, 81 N. Y. 550, 37 Am. Rep. 527. Applying these principles, the case at bar is of easy solution. The •contract in suit does not in terms provide for a partnership, nor con- template any of the incidents of a partnership, unless the provision in reference to the participation of each in the profits of the business of the other establishes the relation and liability of partners. But it is very clear that the provision for a participation in profits does not contemplate any sharing in profits as a principal or division of profits, as profits. "Profit" implies, without more, the gain resulting from the employment of capital — the excess of receipts over expenditure. Black's L,aw Dictionary, citing Connolly v. Davidson, 15 Minn. 519, 530 (Gil. 428), 2 Am. Rep. 154; Story on Part. § 36, note 3. The old cases drew a distinction between net profits and gross profits. In discussing the kind of participation in profits which oper- ated to create the relation of partners, it is said that: 80 WHAT CONSTITUTES A PARTNERSHIP. (Cll. 1 "The true meaning of the language, an 'interest in profits, as profits,' seems to be that the party is to participate, indirectly at least, in the losses, as well as in the profits, or, in other words, that he is to share in the net profits, and not in the gross profits. If he is to share in the net profits, which supposes him to have a participation of profit and loss, that will constitute him a partner ; if in the gross profits, then it will be otherwise." Story on Part. §§ 34, 42, and cases cited. Under the contract in suit, the sharing was to be not in the net gains or profits made by the one party in the business carried on by the other, but in the gross profits. That net profits were not meant, they make plain by a definition found in the fifth paragraph, where it is stated, in substance, that "gross profit" means the aggregate sales made, whether collected or not, after deducting the cost, import duties, and carriage, and that "no other charges, expenses or losses of whatever kind or nature shall be deducted from said gross profits." Thus the participation was in the gross amount of sales after the de- ductions above mentioned were made. The losses in bad debts and the cost of business might consume the margin between the cost and sale price, and yet the complainants would be entitled to receive a certain per cent, of the gross profit, though the business had made no actual gains, or had even made a loss. There was, then, no sharing in losses, and, under the old cases, no participation in profits, as prof- its, such as would, without more, raise a presumption of partnership. * * * Thus, though there is to be a sharing in gross profits, it is not to be a participation in profits, as profits, or as a principal in trade. Up- on the contrary, the plain purpose is that each, in consideration of the privilege of picking and choosing the goods or designs made or im- ported by the other, agrees to pay the actual cost of such goods so selected and furnished, and also "to pay" the other at the end of each year "a sum of money equal to" a definite per cent, of the entire gross sales of the party making the payment, less only the actual cost and carriage of such goods. It is an agreement to pay, not to divide as principals would do, but to pay a sum of money "equal to" (that is, measured or estimated by) a certain proportion of the gross prof- its. It is evident from these considerations that the character in which the one party would receive a proportion of the gross profit realized from the business of the other would be that of a creditor, rather than that of a principal trader. Unsupported as the claim of a partnership is by any provisions giving either party the slightest control of the business of the other, or any indication that the plan is a mere scheme or device to carry on trade as partners without subjecting themselves to the incidents and liabilities of such an arrangement, we can but reach the conclusion that the learned judge below erred in the view he took of the .contract. * * * Decree dismissing the bill reversed, with directions to remand for an answer. Sec. 3) TESTS OF INTENTION. 81 McDonald bros. v. Campbell & bergeson. (Supreme Court of Minnesota, 1905. 96 Minn. 87, 104 N. W. 760.) Elliott, J. The action was brought against the defendants as partners to recover the unpaid balance of an account for merchan- dise sold and delivered to the firm of Campbell & Bergeson. The only issue of fact at the trial was whether the defendant Emily P. Camp- bell was a member of the firm, and upon this issue the trial court found in favor of the plaintiffs. From an order denying a motion for a new trial, the defendant Emily P. Campbell appeals to this court. 3. The evidence tending to establish the existence of a- partnership between Bergeson and Mrs. Campbell was not very satisfactory; but it was sufficient to convince the trial court, and we find no reason for disturbing its conclusion. The witness Rudd, who appears to have been entirely fair and disinterested, testified that he called upon Emily P. Campbell at her residence as the representative of a com- mercial agency for the purpose of obtaining information about the financial condition of the firm of Campbell & Bergeson, and that in answer to his inquiry Mrs. Campbell stated that she was furnishing the capital to carry on the business and was personally responsible for all the debts of the ifirm. Mr. Campbell testified that he was the member of the firm, and that his wife at no time had any connection with the business. But it appeared that on March 3, 1904, he had made a statement of assets and liabilities on behalf of the firm, to which he signed the namp of his wife as a member of the firm. The witness Rudd testified that he had this statement in his possession, but he was not able to say whether he had ever exhibited it to Mrs. Campbell. It was, therefore, not competent evidence to charge Mrs. Campbell as a partner. McNamara v. Eustis, 46 Minn. 311, 48 N. W. 1123. But it may have very materially affected the value of Mr. Campbell's statement at the trial that his wife had never been a mem- ber of the firm. The court believed the testimony of Rudd, and was of the opinion that his evidence, when taken in connection with the conditions and circumstances, was sufficient to show that Mrs. Camp- bell was a member of the firm. It was necessary for the plaintiffs to establish the relation of part- ners as a fact, because there is no element of estoppel in the case. The witness Rudd did not represent the plaintiffs, and there is no evidence to show that the statement made to him by Mrs. Campbell was ever communicated to the plaintiffs. Accepting the facts as found by the trial court, we think the conclusion fairly follows that Mrs. Campbell was a member of the firm. Partnership is a contractual relation existing between persons who have combined their property, labor, and skill in an enterprise or business as principals for the pur- pose of joint profit. Baldwin v. Eddy, 64 Minn. 425, 67 N. W. 349 ; Meehan v. Valentine, 145 U. S. 611, 623, 12 Sup. Ct. 972, 36 L. Gil.Pakt.— 6 82 WHAT CONSTITUTES A PAETNERSHIP. (Ch. 1 Ed. 835 (Gray, J.). It exists when there is a community of interests in the whole property, business, and responsibihty of the concern. It is true that some of the ordinary indicia of partnership are not disclosed by the evidence in tliis case. An admission by a party that he is a member of a firm is sufiicient to bind him as such. Boosalis V. Stevenson, 62 Minn. 193, 64 N. W. 380. Such an admission is shown by this evidence. Mrs. Campbell was to furnish the capital and be responsible for the losses, and the fair inference is that she was to participate in the profits. The question of partnership or no partnership is not to be determined by any arbitrary formula. In some of the early cases in this court the rule then generally prevailing was adopted, and the agreement to share profits was said to be a conclusive test of the existence of a partnership. Fay v. Davidson, 13 Minn. 523 (Gil. 491) ; Wright v. Davidson, 13 Minn. 449 (Gil. 415); Connolly v. Davidson, 15 Minn. 519 (Gil. 428), 2 Am Rep. 154; Warner v. Myrick, 16 Minn. 91 (Gil. 81). But, according to the modern doctrine, even an agreement to participate in profits is not conclusive evidence of a partnership. As said by Mr. Justice Cool- ey, in Beecher v. Bush, 45 Mich. 188, 7 N. W. 785, 40 Am. Rep. 465 : "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 arbi- trary tests, it was erroneous and mischievous." The gradual aban- donment of the idea that such arbitrary tests exist may be traced from Grace v. Smith, 3 W. Bl. 999, through Waugh v. Carver, 2 H. Bl. 235, 2 Smith, L. C. (9th Ed.) 1178, to the celebrated case of Cox V. Hickman, 8 H. L. Cas. 268, which established the rule that even persons who share profits do not incur the liabilities of partners, un- less the business is carried on by themselves personally or by others as their real or ostensible agents. Cox v. Hickman has been gen- erally followed in this country. See authorities cited in note to George, Partn. 143. The question of partnership depends upon the consent and inten- tion of the parties, and this intention must be ascertained from the whole evidence and all the circumstances of the case. Bates, Partn. vol. 1, § 15 et seq. ; Shumaker, Partn. § 31, and the cases there cited. But, where a partnership is the legal result of the agreement actually made, parties are partners, even though they have stipulated that they are not to be partners. "The intention is ascertained from the whole contract, from the actual result it creates, and" not from the fact that the parties denominated it a partnership or may declare a part- nership is not intended." Bestor v. Barker, 106 Ala. 250, 17 South. 389 ; Anderson v. Newbigging, L. R. 13 App. Cas. 316. In Badeley v. ConsoHdated Bank, 38 Ch. Div. 238, Lord Justice Lindley said: "I take it that it is quite plain now, ever since Cox v. Hickman, that what we have to get at is the real agreement between the parties." In the same case Lord Justice Bowen said: "To my mind the true test of partnership has been settled by the House of Lords and by Sec. 4) RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. 83 court after court in a way which leaves it no longer open to discussion. The real test is that which is decided by a catena of cases, beginning with Cox V. Hickman and ending, I hope, with this case, though I am not sure of that. The question is whether there is a joint busi- ness, or whether the parties are carrying on business as principals and agents for each other. * * * 'j^j-ig right way is to weigh the facts separately and together, and to draw your conclusions." See Ames, Cases on Partnership, 121, note. It thus appears that no one fact or circumstance can be taken as the conclusive test by which to determine the question of partnership or no partnership. All that is necessary is that there be competent evidence to show that the parties have entered into a contractual re- lation by which they have combined their property, labor, and skill in an enterprise as principals for the purpose of joint profits. * * * The order appealed from is affirmed. SECTION 4.— RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. NELSON, J., IN COSTER v. LORILLARD. (Supreme Court of New York, 1835. 14 Wend. 336.) At common law, an estate in joint tenancy, says Sir W. Blackstone, is where lands or tenements are granted to two or more persons to hold in fee simple, fee tail, for life, for years, or at will. In conse- quence of such grants, an estate is called an estate in joint tenancy, which signifies a union or conjunction of interest. Each joint tenant has the entire possession of every parcel and of the whole; and this union and entirety of interest and possession has given rise to the principal incident to the estate, which is the right of survivorship. The interest being not only equal or similar, but also one and the same, on the death of his companion the sole interest in the whole remains to the survivor. 3 Black. Com. 82 to 187; 1 Co. Lift. 840, 845; 2 Cruise, 503, 4. Tenants in common are such as hold by several and distinct titles, but by unity of possession, because none knows his own severally, and therefore they ajl occupy promiscuously. Lord Coke draws the true distinction between these estates in his Commentaries on Littleton. The essential difference, he says, between joint tenants and tenants in common, is that joint tenants have the land by one joint title and in one right, and tenants in common by several titles, or by one title and several rights, which is the reason joint tenants have one joint freehold, and tenants in common have several free- holds. 1 Co. Lift. 875. In the more brief language of Mr. Preston, 84 WHAT COXSTITUTBS A PAETNERSHIP. (Ch. 1 joint tenants have one estate in the whole and no estate in any. partic- ular part. Tenants in common have several and distinct estates in their respective parts. Preston on Estates, 137. HELME V. SMITH. (Court of Common Pleas, 1831. 7 Biug. 709.) This was an action by the plaintiff, as part owner and managing owner of the ship Brailsford, against the defendant, another part owner of the same ship, for his portion of the balance due to the plaintiff for the outfit of the ship for several voyages. The cause having been referred to arbitration, the arbitrator found specially as follows: That the plaintiff was part owner of the ship Brailsford, and acted as ship's husband thereof during the several voyages in respect of which the claim in this action was made; that the defendant was also owner of one-fourth of the said ship, and interested to the extent of one- fourth in all the said voyages; and that the dealing between the plaintiff and defendant in respect of which this action was brought was upon the footing of the defendant being owner of one-fourth, and interested as aforesaid. He then awarded and adjudged: That the said plaintiff do recover against the defendant in the ac- tion the sum of £462 8s. 6d., being the balance due at the time of the commencement of the suit from the defendant as such owner of one- fourth part of the ship Brailsford to the plaintiff as such part owner thereof, for the share of the defendant of the expenses incurred and paid by the plaintiff as managing owner or ship's husband as afore- said, for the outfit of the said ship for four several voyages, being the voyages aforesaid, while the defendant was such part owner and in- terested as aforesaid. No account having been stated or settled be- tween the parties, no express contract to account having been proved before the arbitrator, but all the voyages having been concluded, and the ship sold as thereafter mentioned before this action was brought, if the court should be of opinion that an action was not maintainable by one part owner against another for the cause and under the cir- cumstances aforesaid, then he awarded that the verdict for the plain- tiff should be set aside, and a nonsuit entered in lieu thereof. A rule nisi was obtained to enter up judgment for plaintiff, pursuant to the award. TiNDAL, C. J. On looking at this award, two questions arise: One, whether an action will lie by one part owner of a ship against another for his share of the expenses of outfit; the other, whether the defendant, being in point of fact owner of a fourth, is liable to the expenses in that proportion, although legally entitled to no more Sec. 4) RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. 85 than an eighth. And there seems to be no reason for depriving the plaintiff of the full benefit of the award. If, indeed, the plaintiff and defendant were partners, there is an end of the question ; but part owners of a ship are not necessarily partners. If the parties had laid out money on a speculation in goods, the proceeds to be divided on the ship's return, they would have been partners in every sense; but there is nothing here to show that they were more than part owners, and the question is whether, if one lays out money to enable the ship to proceed, he may not sue each of the owners for his share of the expense. There is nothing to show that the plaintiff's claim was to depend on the profits of the voyage, or that he was to be deprived of remuneration if the voyage turned out to be without profit. The outfit was a portion of the capital which each was to advance, and, if the plaintiff had lent either of the part owners the capital he was to contribute, that would clearly have formed the ground of a separate claim. It might have been otherwise if by the course of trade it were the custom for a ship's husband to look to the returns of the ship for the payment of his bill ; but no such custom is stated on the award, nor anything to show that the plaintiff and defendant were partners. With respect to the second question, it is true that neither at law nor equity can an owner of a vessel claim any other interest than that which appears on the registry; but, if a party holds himself out and deals as owner of a fourth, he is liable to others on that proportion. Rule absolute. THE QUEEN v. ROBSON. (Crown Cases Reserved, 1885. L. R. 16 Q. B. Div. 137.; The prisoner was tried and convicted at the Autumn Assizes for the county of Northumberland on the 31st of October, 1885, on an indictment framed under St. 31 & 32 Vict. c. 116, § 1, charging that he, being a member of a copartnership called the Bedlington Colliery Young Men's Christian Association (hereafter called the "associa- tion"), feloniously did in January, March, and May, 1885, embezzle three several sums of money of and belonging to the said copartner- ship. The object of the association was, to use the language of one of its printed rules, "the extension of the kingdom of the Lord Jesus Christ among young men and the development of their spiritual life and mental powers." It was composed of members and associates. The number of members did not exceed 30. Any person was eli- gible for membership "who gave decided evidence of his conversion to God"; but before he could become a member he must be proposed and seconded by two members of the association and elected by the committee, on their being satisfied as to his suitability. Trustees for 86 whAt constitutes a partnership. (Ch. 1 the time being, in whom the real property belonging to the associa- tion was vested, became members by virtue of their appointment as trustees. Members were required to subscribe three shillings per annum. It was not material to consider the qualification or status of associates. The affairs of the association were in the hands of a general committee of management, consisting of a president, two vice presidents, a treasurer, two secretaries, and at least nine mem- bers. The committee had power to suspend or expel any member whose conduct was found inconsistent in their judgment with the Christian character. The agencies for the attainment of the objects of the association were, first, the personal efforts of the members; second, devotional meetings ; third, social meetings ; fourth, classes for Biblical instruction ; fifth, the delivering of addresses and lectures ;, and, sixth, the diffusion of Christian and other suitable literature. Before the first of the offenses charged against the prisoner was committed, the members of the association proposed to build, and afterwards built, a hall or place of meeting for the purposes of the association at a cost of nearly i200, of which about £40 was still owing. To this building every member had the right of entry and was entitled to a latchkey. The prisoner became a member of the association in 1878, and had continued to be a member up to the time of the trial. As and being such a member he solicited and ob- tained for the association from divers persons many sums of money as donations or subscriptions on account of and for the general pur- poses of the association, towards the building fund, and towards the liquidation of the aforesaid debt of i40. Three of these sums it was that the prisoner was charged with and found guilty of embez- zling. If the association was a copartnership within the meaning of St. 31 & 33 Vict. c. 116, § 1, the conviction was to stand affirmed. If on the contrary it was not, the conviction was to be reversed.^ Walton, for the prisoner. The only question is whether this as- sociation is a copartnership. The terms of the statute clearly show that the copartnerships contemplated thereby are copartnerships in the ordinary sense of the term, viz., for the purposes of gain or profit. Lindley, L,. ]■, in his work on Partnership, p. 1, gives an explanation of the term "partnership," which shows that the neces- sary idea of a partnership is that it should have for its object the acquisition and division of gain. He says: "Without attempting to define the terms 'partners' and 'partnership,' it will suffice to point out as accurately as possible the leading ideas involved in these words. 1 St. 31 & 32 Vict. c. 116, § 1, provides that "if any person, being a member of any copartnersbip, or being one of two or more beneficial owners of any money, goods, or effects," etc., "shall steal or embezzle any such money goods, or effects," etc., "of or belonging to any such copartnership or to such joint beneficial owners, every such person shall be liable to be dealt with tried convicted, and punished for the same as if such person had not been or was not a member of such copartnership or one of such beneficial owners " Sec. 4) RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. 87 The terms in question are evidently derived from to part, in the sense of to divide amongst or share; and this at once limits their apphca- tion, although not very precisely, for persons may share almost any- thing imaginable, and may do so either by agreement or otherwise. But, in order that persons may be partners in the legal acceptance of the word, it is requisite that they shall share something by virtue of an agreement to that effect, and that that which they have agreed to share shall be the profit arising from some predetermined business engaged in for their common benefit. • * * * To use the word 'partnership' to denote a society not formed for gain is to destroy the value of the word, and can only lead to confusion. Nor is it con- sistent with the modern usage. Lord Hale and older writers use copartnership in the sense of co-ownership, but this is no longer cus- tomary, and, as will be shown hereafter, there are many important differences between the two." This is not an association for the purposes of profit or gain. Lord CoLERiDGfi, C. J. It seems to me that this conviction cannot be supported. I cannot find any authority throwing any doubt on the accuracy of the passage in Lindley on Partnership, which makes the participation in profits essential to the English idea of partnership, and states that, although in former times the word "copartnership" was used in the sense of "co-ownership," the modern usage has been to confine the meaning of the term to societies formed for gain. A number of definitions given by writers from all parts of the world are appended to the passage, and in all of them the idea involved appears to be that of joint operation for the sake of gain. The association in the present case is not a copartnership in any sense of the word into which the notion of co-operation for the purpose of gain enters. We must construe the word "copartnership" as used in the act accord- ing to the meaning ordinarily attached to it by the decisions and text- books on the subject. This association does not come within that meaning. The only point reserved for us is whether this association is a copartnership within the act. Inasmuch as we are of opinion that it is not, the conviction must be reversed.^ Field, Hawkins, and Willis JJ., concurred. now V. STATE BANK OE SLEEPY EYE. (Supreme Court of Minnesota, 1903. 88 Minn. 355, 93 N. W. 121.) Action by Lorenzo E. Dow against the State Bank of Sleepy Eye. Judgment for plaintiff, and from an order denying a motion for new trial defendant appeals. Collins, J. March 18, 1901, five persons (Whiteside, Farrell, Spence, and Reichenthal, of the city of Chicago, and L. P. Jensen, 2 Tlie concurring opinion of Denman, J., is omitted. 88 WHAT CONSTITUTES A TARTNEESHIP. (Ch. 1 of Sleepy Eye, in the state of Minnesota) entered into a written agree- ment in wliich they stipulated that they "have agreed and do hereby mutually agree to form a limited partnership" to engage in a specified line of business in Chicago "for the term of five years, commencing with December 1, 1901, under the firm style of Whiteside, Farrell & Co." Each of the four men first mentioned was to contribute a cer- tain sum of money to the capital fund, to be paid in full on or before December 1st, and were to be general partners. Jensen was to be a special partner, in accordance with the laws of Illinois, contributing $10,000 towards the capital — two-fifths of the whole — which sum was also to be paid on or before December 1st. It was recited that each of the parties, except Jensen, had deposited in bank, and in the name of the firm, on account of his subscription to the capital, the sum of $1,000, and that Jensen had deposited with Farrell his duly certified check for the same amount on account of his subscription, and that the deposit made by each of these parties was "as a guar- anty of his faithful performance on his part of the agreement." This check was made payable to the order of Whiteside, Farrell & Co., the agreed firm name, and was to be held by Farrell personally, instead of being deposited in the bank. It was covenanted that on the fail- ure on the part of any of the persons named to pay over the balance of his agreed contribution on or before December 1st, "and to proceed with and to engage in the partnership business herein, in this agree- ment provided for, as therein provided, then the" amount of the de- posit of the party in default, with all interest, should be forfeited to such of the other parties as might be ready and willing to pay and to proceed with the partnership business; the amount forfeited to be divided equally between the nondefaulting parties. All interest earned on the amounts deposited by each of the persons not in default was to be paid over to them individually. It was also provided that: "Nothing contained in this paragraph shall be construed as depriving any of the parties to this agreement of any rights which they other- wise have at law or in equity for damages, beyond such sum so for- feited, for a failure on the part of any party or parties hereto to carry out and perform this contract." There were other provisions as to a division of the profits, for a division of the work, the management of the business, the authority of the partners, for the submission of all questions of dispute between them, prohibiting the general partners from engaging in any other business after December 1st, during the five years, and also that, "in case of the death of any of the general partners or the special part- ner, such death shall not work a dissolution of the firm, but the sur- viving general partners shall continue the business in such case for the full time and in the manner provided for herein; and in such case the heirs and legal representatives of such deceased general par- ner shall stand in the same relation to such partnership as a special Sec. 4) RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. 89 partner would, subject to no greater liabilities and entitled to the same relative rights." The check bore date of March 13th, a few days prior to the execution of thd contract in Chicago, and evidently was made in con- templation of it. On the day of its date it was certified as good by the duly authorized officer of the bank on which it was drawn, at Jensen's request. Before anything further was done under the agree- ment, and on October 9, 1901, Jensen died. From the testimony it appears that on December 1st Farrell delivered the check to White- side, Spence, Reichenthal, and himself, who, it seems, were then act- ing as a partnership under the firm name mentioned in the check and in the agreement. On the 17th of December one of these four men, by authority of his associates, placed this firm name on the back of the check, and at the- same time each one of the four indorsed the check individually to their attorneys in Chicago — Heckman, Elsdon & Shaw. It is claimed that on the same day the check was disposed of by Heckman to this plaintiff for value, and that the latter was a bona fide purchaser thereof. At this time it was indorsed by this firm of attorneys and by Wallace Heckman individually, one of the firm. At the trial a verdict for the plaintiff was ordered and return- ed for the full amount of the check, and this appeal is from a denial •of defendant's motion, in the alternative, for judgment notwithstand- ing the verdict, or for a new trial. The first question to which attention should be given is the agree- ment made between the five persons, and, as before stated, bearing date and actually executed in Chicago on March 18th. If that was nothing but an executory agreement to enter into a partnership upon the 1st day of December follwing (an inchoate partnership contract), the case must be disposed of upon the ground that the plaintiff was not and could not be a bona fide holder (a purchaser of the check free from all equities and defenses), because it was never properly indorsed ■or put in circulation by the payee. If the partnership had been form- ed as stipulated, then the right of the firm to indorse the check and convert the proceeds into capital funds would have been undoubted. If Jensen had lived, but had refused to proceed, the right of his pro- posed associates to indorse and put the check in circulation would have been implied. Under the agreement the check would have been forfeited to such of the other parties as stood ready to perform. But we are clearly of the opinion that Exhibit A was an executory con- tract entered into on the basis of the continuance of the life of each ■of the parties thereto. In itself it did not create a partnership, and the persons signing it never became partners, because performance became impossible when Jensen died. Such an event was not provided for in the agreement, and when it occurred the agreement was at once annulled as to all parties. The clause we have quoted, relating to the 'decease of one of the partners, was not applicable to a death occur- ing before a partnership had actually commenced. It is elementary 90 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 that partnership relations must always be assumed by mutual con- sent and unanimously, and not otherwise, for they are strictly volun- tary and personal. A third person cannot be introduced into a firm as a partner without or against the consent of a single member. Jen- sen's legal representatives or his heirs at law could not take his place, and force themselves upon the other parties to the agreement. Either one of the survivors could refuse to proceed or to furnish his share- of the capital, and could demand a return of the deposit, because Jen- sen had deceased and could not become a partner,; nor could any one else, except by unanimous consent. His estate could not be compelled to pay the amount agreed by him to be paid toward the capital funds. It is plain that the other parties to the contract could not and should not be obliged to go into the business with a capital of $15,000, when it had been agreed that it should be $25,000, of which two-fifths ($10,000) was to be contributed by Jensen. And it is obvious from some of the provisions of the agreement that there was no intention to form a present partnership. But if we should hold that a partner- ship was actually entered into in March, when the contract was signed,- every person named therein could be compelled to contribute the amount of capital subscribed by him. And Jensen's estate would not be relieved of pecuniary obligation when the check was paid, for there was no agreement that if the check was paid, or if damages- were recovered in case of nonfulfillment, Jensen was to be relieved from his written obligation to contribute to the capital. The agree- ment was executory, and there was no partnership in praesenti. Per- sons who have entered into a contract to become partners at some future time, or upon the happening of some future contingency, do not become partners until the agreed time has arrived, or the contin- gency has happened. An executory contract does not create a part- nership. The contract must be executed, and the partnership actu- ally "launched," before the relation will arise. Even after the arrival' of the stipulated time the parties are not necessarily partners, and' in fact they are not partners unless the partnership is launched. Any act, the performance of which is made a condition precedent to the- formation of the partnership, must be performed, before a partner- ship will be held to exist. The test is to ascertain from the terms of the agreement itself whether any time has to elapse or any act remains to be done before the right to share profits accrues, for, if there is, the parties will not be partners until such time has elapsed or the act has been performed. Shumaker, Partn. p. 78 et seq. These rules are laid down in every text-book and in all cases where- the subject has been discussed. We have found none in which it has been held that an agreement for a partnership to commence at a specified future day created, alone and of itself, a present partnership,, even as to third parties. More than this, not one of the provisions of this agreement indicates an intent to create a partnership in prae- senti, and all are opposed to that idea. For illustration, the clause which Sec. 4) RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. 91 provided that in case of default by one or more of the parties the amount deposited by him or them should be divided among those who stood ready to fulfill. The amount v^^as not to become an asset of the firm. Also the clause that gave to each of the parties whatever interest his deposit might earn before December 1st, and the clause that gave to each of the general partners full liberty to engage in other business until that day. It is obvious that goods could not have been purchased, nor could any other form of obligation have been in- curred, in the firm name, and a recovery had, as against the part- nership, by any person who knew the contents of, and. was obliged to rely upon, Agreement A. * * * • As the firm of Whiteside, Farrell & Co., provided for in the agree- ment, and' the payee of the check, never came into existence, the paper was never properly indorsed. The partnership was never launched, and the legal title to the check did not pass to his proposed associates when Jensen died. It follows that plaintiff did not derive title, and could not have been a bona fide purchaser, through the in- dorsements made. * * * Order reversed. The verdict will be set aside, and judgment entered for defendant. In re GIBBS' ESTATE. Appeal of HAESTEAD. (Supreme Court of Pennsylvania, 1893. 157 Pa. 59, 27 Atl. 383, 22 L. B. A. 276.) Proceedings for settlement of the accounts of E. B. Gibbs, admin- istrator of Henry Gibbs, deceased. From a decree dismissing excep- tions to the report of the auditor disallowing the claims of W. F. Hal- stead, guardian of Mary E. Clapp and Henry Clapp, he appeals. Wii/iviAMS, J. The appellant seeks to charge the estate of Henry Gibbs with money deposited by him, as guardian, in the Home Savings Bank, located at South Waverly, on the theory that the bank was a general partnership, and that the decedent was one of the partners. The appellees deny that the Home Savings Bank was a partnership, and assert that the decedent purchased shares of stock in the bank as and for the shares of stock in an incorporated bank, and not otherwise. At this point it seems desirable to define the words over which the con- test extends. First. What is a corporation? The several answers given by text writers may be reduced to the following formula: A corporation is an artificial person created by law as the representative of those per- sons, natural or artificial, who contribute to, or become holders of shares in, the property intrusted to it for a common purpose. As it is the creature of positive law, its rights, powers, and duties are pre- scribed by the law. Beyond the legitimate purposes which it was ere- 92 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 ated to serve, and the lines of limitation the law has drawn around it, it is without power to act or capacity to take. Thus a banking cor- poration, while fully competent to do what is usual and necessary in its own business, may not own and operate a railroad, or engage per- manently in any other business than that for which it was created. It has neither the legal capacity nor the right to do so ; and if it under- takes to go in any direction beyond its corporate powers its acts are ultra vires. The creation of a corporation is jiot within the power of the individuals who subscribe to its stock. It is exclusively the work of the law, and the best evidence of the existence of a corporation is the grant of corporate powers by the commonwealth. Second. What is a corporation de facto? It is an apparent corpo- rate organization, asserted to be a corporation by its members, and actually acting as such, but lacking the creative fiat of the law. In Tayl. Priv. Corp. 145, it is said that a de facto corporation may ex- ist "when a body of men are acting as a corporation under color of apparent organization, in pursuance of some charter or enabling act." Their organization may be imperfect, so that upon a quo warranto they could not show a sufficient compliance with the law to justify the exercise of corporate powers, but as to parties dealing with them, and as to each other, they are estopped to deny that they are what they hold themselves out to be. In a recent case in Minnesota — Finnegan V. Knights of Labor, 52 Minn. 239, 53 N. W. 1150, 18 L. R. A. 778, 38 Am. St. Rep. 552 — it was held that a de facto corporation exists when these three things concur, viz., a law under which the alleged corporation might be created, an attempt to organize under the law, an assumption and exercise of corporate powers under such attempted organization. In Methodist Church v. Pickett, 19 N. Y. 482, only two things were held necessary, viz., "the existence of a charter or law under which a corporation with the powers assumed might be lawfully cre- ated, and a user by the party to the suit of the rights claimed to be conferred by such a charter or law." Where there has been a sub- stantial compliance with the law, the corporation is, of course, de jure. Where there has been no substantial compliance, but there has been nevertheless an assumption and exercise of corporate powers in pur- suance of an attempted organization, the alleged corporation is such de facto only. The Minnesota courts hold the correct rule, and three things are necessary to create the liability: A law or charter under which an organization de jure might be affected; an attempt to or- ganize, which falls so far short of the requirements of the law or char- ter as to be ineffectual; an assumption and exercise of corporate powers notwithstanding the failure to comply with the law or charter. Third. What is a partnership? Perhaps the best definition is that given by Story: A relation created by a "contract between two or more persons to place their money, effects, labor, or skill, or some or all of them, in lawful commerce, and divide the profits between them." Its foundation is a contract, express or implied. It results from the Sec. 4) RELATIONS DISTINGUISHABLE FROM PARTNERSHIP. 93 act of the parties, not from the act of the law. Hedge's Appeal, 63 Pa. 273; 17 Amer. & Eng. Enc. Law, 829. See, also, Modde- well V. Keever, 8 Watts & S. 63 ; Channel v. Fassitt, 16 Ohio, 166 ; Murray v. Bogert, 14 Johns. (N. Y.) 318, 7 Am. Dec. 466; Phillips V. Phillips, 49 111. 437. But as to third parties one may be held liable as a partner by implication of law arising upon his own acts, contrary even to his own intention. Thus the officers and acting members of a corporation de facto may be liable as partners if their conduct has led others to trust the concern upon that basis. Stafford National Bank v. Palmer, 47 Conn. 443. But without a contract of partner- ship, or such acts and declarations as lead others to infer its exist- ence, and to extend credit on that basis, there is no foundation on which liability as a partner can rest. The best evidence of the exist- ence of a partnership is the contract creating it. If proof of the con- tract is not within reach, its existence may be inferred from proof of contribution to the partnership stock. If direct proof of contribution cannot be had, it may be inferred from participation in profits. In the absence of all this, the acts and declarations of the parties sought to be charged may be resorted to. Participation in profits is not conclusive proof of the existence of the partnership relation (Edwards v. Tracy, 62 Pa. 374) ; but both in England and in this country it is cogent ev- idence upon the question. It puts the defendant upon his proofs explanatory of the fact. If he is able to show that such participation was referable to some other reason such as compensation for services rendered by him as agent, broker, salesman, or otherwise, the prima facies is overcome. So, if the participation in the profits is referable to some other relation than that of partnership between the partici- pants, such as membership in a joint-stock association or a corpora- tion, the effect of proof of participation will be overcome. In the light of these well-settled rules, let us consider briefly the position of the parties, and the important findings of fact made by the learned auditor in this case. The claimant's right to share in the fund in court rested on the theory that the Home Savings Bank in which the money of his wards had been deposited, was a part- nership, and that the decedent was a partner. The burden of prov- ing the fact that the bank was a partnership was on him; and, as was said in Hallstead v. Coleman, 143 Pa. 354, 22 Atl. 977, 13 L. R. A. 370, "until that proof was given, the defendants were not called upon to enter upon their defense." The proof made upon this subject showed the organization of a bank under the name of the Home Sav- ings Bank, with a president, cashier, and a board of directors. This is the mode of organization usually adopted by corporations, and did not tend to prove a partnership. It was then shown that the decedent bought and held certificates of stock in the bank, after its organiza- tion, which recited not the formation of a partnership, but the organi- zation of a bank under the laws of the state, and the division of its capital into shares of $100 each. This is not the usual way in which 94 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 partnerships are created and partners admitted. It is the usual way in which stocks are issued and transferred in corporations. Proof was then made of the receipt by the decedent of several dividends upon his stock. These did not purport to be shares in the profits of firm business, but dividends, declared in the manner usual among corporations, upon the stock of the bank; and were paid by dividend checks drawn under the authority of a board of directors. The only other evidence was the returns made by the officers of the bank under the tax law of 1879, which threw very little light upon the character of the organization of the bank. Upon this proof the questions for the auditor were whether the bank was shown to be a partnership, and the decedent a partner. The bank did business for a number of years, and then failed. Its books and papers were in the hands, or subject to the control of, the receiver. The manner of its organiza- tion was not shown. The partnership agreement, if any such existed, was not produced. No proof was given that the officers or stock- holders claimed or held out to the public that the stockholders were partners, or the bank a partnership enterprise. It was not alleged that the decedent participated in any manner in the business, or exercised any control over it. The whole case against him rested on the fact that he had purchased shares in a bank, then organized and doing business, and received dividends declared by the directors, and paid to him in a cashier's check. We are not surprised that the learned auditor was led to ask, "What is there in all this evidence, from the beginning of the business to the failure, tending to prove a partner- ship?" nor that he answered his own question by holding that this proof was insufficient to establish prima facie the existence of the partnership relation. On the other hand, there was much tending to show that Henry Gibbs understood that he was the holder of stock in an incorporated bank, and that the bank assumed and exercised corporate powers, and was dealt with by the public as a corporation. The form of its certificates, the manner of their transfer, the election of directors by the stockholders, the management of the business of the bank by the directors and the officers elected by them, the mode of declaring and paying dividends, were all suggestive of a corpora- tion. They were not suggestive of a partnership. We are unable, therefore, to say that the auditor erred in finding that the bank was not shown to be a partnership. The learned judge who heard the exceptions to this report seems to have concurred with the auditor, and we require, under such circumstances, to be satisfied that a mis- take was made before interfering with the findings. We are not so satisfied; but are of opinion that the state of the evidence justified the auditor's conclusion. This disposes of the whole case. * * * Decree affirmed. Sec. 5) PARTNERSHIP BY ESTOPPEL. 95 SECTION 5.— PARTNERSHIP BY ESTOPPEIy. DE BERKOM v. SMITH et al. (At Nisi Prius, before Lord Kenyon, 1793. 1 Esp. 29.) Assumpsit to recover the value of a quantity of foreign lace against the defendants, charging them as partners. It was admitted that Smith, one of the defendants, was liable; but the other defendant, Lewis, denied that he was a partner. This was the only question in the case. The evidence on the part of the plaintiff was: That he was a foreigner, living at Lisle, in Flanders; that, having been applied to by the defendants for a quantity of lace on credit, before he would furnish it, he wrote over to his correspondent in London, to inquire concerning their circumstances and situation; that his correspondent had inquired from a Mr. Botham, a merchant in London, who informed him 'that they were in partnership in trade, which information the correspondent communicated to the plaintiff, who in consequence there- of gave them the goods on the terms they asked. Mr. Botham's clerk was called, and proved that the only connection in trade between Mr. Botham and the defendants was in discounting bills, which Mr. Botham had been in the habit of doing for Smith, one of the defendants; but that, on discounting a bill at one time for Smith, he had introduced Lewis to him as his partner. Lord Kenyon, upon this evidence, ruled that it was not sufficient to charge Lewis as his partner. His Lordship said that persons might be partners in a particular concern or business, but that notwithstand- ing, if they did not appear to the world as partners, that it should not be sufficient to constitute a general partnership and make them liable in other cases not connected with such particular business; that the circumstance in evidence of the introduction of Lewis to Mr. Botham should be taken secundum subjectam materiam — that is, as applying to the transaction in which Smith was concerned with Mr. Botham, the discounting of bills — to which transaction only it should be confin- ed; and that he was therefore of opinion that without further evi- dence a general partnership could not be established, in order to charge Lewis, the other defendant, in this action. It afterwards, however, appearing in evidence that in fact Lewis had represented himself to the plaintiff as partner in trade with Smith, his Lordship in his charge to the jury added that, though in point of fact parties are not partners in trade, yet if one so represents himself, and by that means gets credit for goods for the other, that both shall be liable. The plaintiff recovered. 96 WHAT .CONSTITUTES A PAETNEESHIP. (Ch. 1 THOMPSON et al. v. FIRST NAT. BANK OF TOLEDO, OHIO.. (Supreme Court of the United States, 1884. Ill U. S., 529, 4 Sup. Ot. 689, 28. L. Ed. 507.) Gray, J. This action was brought by the First National Bank of Toledo, Ohio, a national banking association established at Toledo, against William H. Standley, WiUiam H. Whiteside, Josephus At- kinson, Edward R. Thompson, and Joseph Uhl, as partners in the business of private bankers at Logansport, Ind., under the name of the People's Bank, upon a draft for $6,000, drawn and accepted by the partnership on August 35, 1877, payable in 90 days after date to the order of the plaintiff's cashier, and taken by the plaintifif in re- newal of a like draft discounted by it for the partnership on May 5^ 1877. Thompson filed a separate answer, denying that he was a mem- ber of the partnership, or hable to the plaintiff on the draft sued on. He died pending the suit, and it was revived against his administra- tors. * * * The jury returned a general verdict for the plaintiff, upon which judgment was rendered. The defendants sued out this writ of error. The plaintiff at the trial sought to charge Thompson with hability as a partner upon two grounds : First, that he was actually a partner ; second, that, if not actually a partner, he had held himself out to the world as such. And the case was submitted to the jury upon both grounds. The first and second assignments of error relate to the exclusion of evidence offered by the defendants bearing upon the first ground of action. The third and fourth assignments of error relate to the instructions given and refused as to the second ground of action. [The first and second assignments of error were sustained.] * * * The remaining and the principal question in the case is whether the liability of Thompson, by reason of having held himself out as a part- ner, was submitted to the jury under proper instructions. The court was requested to instruct the jury that if Thompson was not in fact a member of the partnership, the plaintiff could not recover against him, unless it appeared from the testimony that he had know- ingly permitted himself to be held out as a partner, and that the plain- tiff had knowledge thereof during its transaction with the partner- ship. The court declined to give this instruction, and instead thereof instructed the jury, in substance, that if Thompson permitted himself to be held out to the world as a partner, by advertisements and other- wise, as shown by the evidence, and to be introduced to other persons as a partner, the plaintiff was entitled to the benefit of the fact that he was so held out, and he was estopped to deny his liability as a partner, although the plaintiff did not know that he was so held out, and did not rely on him for the payment of the plaintiff's debt, or give credit to him, in whole or in part. This court is of opinion that Sec. 5) PARTNERSHIP BY ESTOPPEL. 97 the circuit court erred in tlie instructions to the jury, and in the refusal to give the instruction requested. 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, cannot be made liable upon contracts of the partnership except with those who have contracted with the partnership 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 per- sons dealing with the partnership to believe him to be a partner, and, by reason of such belief, to give credit to the partnership. As his lia- bility rests solely upon the ground that he cannot be permitted to deny a participation which, though not existing in fact, he has assert- ed, or permitted to appear to exist, there is no reason why a creditor of the partnership, who has neither known of nor acted upon the as- sertion or permission, should hold as a partner one who never was in fact, and whom he never understood or supposed to be, a partner, at the time of dealing with and giving credit to the partnership. There may be cases in which the holding out has been so public and so long continued that the jury may infer that one dealing with the partner- ship knew it and relied upon it, without direct testimony to that ef- fect. But the question whether the plaintiff was induced to change his position by acts done by the defendant or by his authority is, as in other cases of estoppel in pais, a question of fact for the jury, and not of law for the court. The nature and amount of evidence requisite to satisfy the jury may vary accorcling to circumstances. But the rule of law is always the same : that one who had no knowledge or belief that the defendant was held out as a partner, and did nothing on the faith of such a knowledge or belief, cannot charge him with liability as a partner if he was not a partner in fact. 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 held Hable 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 at- tributed 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 evi- dence 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 busi- ness, and the other defendant was to pay her an annuity, and also two Gil.Paet. — 7 98 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 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 in- structed by L,ord 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 business. However, as she suffered her name to be used in the business, and held herself out as a partner, she was certainly liable, though the plaintiff did not, at the time of dealing, know, that she was a partner, or that her name was used." Young V. Axtell, at Guildhall Sittings after Hilary Term, 24 Geo. HI., cited in Waugh v. Carver, 3 H. Bl. 235, 242. But as the case was not there cited upon the question of liability by being held out as a part- ner, it is by no means certain that we have a full and accurate report of what was said by Lord Mansfield upon that question ; 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. In delivering the judgment of the Common Bench in Waugh v. Carver, Chief Justice Eyre said : "Now a case may be stated in which it is- the clear sense of the parties to the contract that they shall not be partners ; that A. is to contribute neither labor nor money ; and, to go still further, not to receive any profits. But, if he will lend his name as a partner, he becomes, as againsfall the rest of the world, a partner, not upon the ground of the real transaction between them, but upon prin- ciples of general policy, to prevent the frauds to which creditors would be liable if they were to suppose that they lent their money upon the apparent credit of three or four persons, when in fact they lent it only to two of them, to whom, without the others, they would have lent nothing." 2 H. Bl. 246. This statement clearly shows that the reason and object of the rule by which one, who, having no interest in the part- nership, holds himself out as a partner, is held liable as such, are to pre- vent frauds upon those who lend their money upon the apparent credit of all who are held out as partners ; and the later English authorities uniformly restrict, accordingly, the effect of such holding out. In Mclver v. Humble, in the King's Bench in 1812, Lord Ellen- borough said: "A person may make himself liable as a partner with others in two ways : Either by a participation in the loss or profits, or ' in respect of his holding himself out to the world as such, so as to induce others to give a credit on that assurance." And Mr. Justice Bayley said: "To make Humble liable, he must either have been a partner in fact in the loss and profit of the ship, or he must have held himself out to be such. Now here he was not in fact a partner, and the goods were not furnished upon his credit, but upon the credit of Holland and Williams." 16 East, 169, 174, 176. In Dickinson v. Valpy, in the same court, in 1829, Mr. Justice Parke (afterwards Sec. 5) FAKTNEESHIP BY ESTOPPEL. 99 Baron Parke and Lord Wensleydale) said : "If it could have been proved that the defendant had held himself out to be a partner, not 'to the world,' for that is a loose expression, but to the plaintiff him- self, or under such circumstances of publicity as to satisfy a jury that the plaintiff knew of it and believed him to be a partner, he would be liable to the plaintiff in all transactions in which he engaged and gave credit to the defendant upon the faith of his being such partner. The defendant would be bound by an indirect representation to the plaintiff arising from his conduct, as much as if he had stated to him directly and in express terms that he was a partner, and the plaintiff had acted upon that statement." 10 Barn. & C. 128, 140. See, also. Carter v. Whalley, 1 Barn. & Adol. 11. In Ford V. Whitmarsh, in the Court of Exchequer in 1840, a direc- tion given by Baron Parke to the jury in substantially the same terms was held by Lord Abinger, Baron Parke, Baron Gurney, and Baron Rolfe (afterwards Lord Cranworth) to be a sound and proper direc- tion; and Baron Parke, in explaining his ruling at the trial, said: "I told the jury that the defendant would be liable if the debt was con- tracted while he was actually a pai;tner, or upon a representation of himself as a partner to the plaintiff, or upon such a public representation of himself in that character as to lead the jury to conclude that the plain- tiff, knowing of that representation, and believing the defendant to be a partner, gave him credit under that belief." Hurl. & W. 53, 55. In Pott V. Eyton, in the Common Bench in 1846, which was an ac- tion by bankers to recover a balance of account against Eyton and Jones, on the ground that either they were actual partners in the busi- ness carried on by Jones, or Eyton had by his own permission been held out as a partner. Chief Justice Tindal, delivering the judgment of the court, said: "There was no evidence to show that credit was in fact given to Eyton, or that the bankers knew that his name was over the door of the shop at Mostyn quay, or that they supposed him to be a partner. One person who had been manager, and another who had been a clerk, in the bank, were in court; and if they could have given such evidence, they would no doubt have been called as witness- es. We must assume, therefore, that credit was given to Jones alone ; and, if Eyton is to be made liable, that must be on the ground of an actual partnership between himself and Jones." 3 C. B. 33, 39. In Martyn v. Gray, in the same court, in 1863, Chief Justice Erie and Mr. Justice Willes expressed similar opinions. . 14 C. B. (N. S.) 824, 839, 843. The decision of the Court of Exchequer in Edmundson v. Thompson, 1861, is to the like effect. 31 Law J. (N. S.) Exch. 207, 8 Jur. (N. S.) 235. Mr. Justice Lindley, in his treatise on the Law of Partnership, sums up the law on this point as follows : "The doctrine that a person hold- ing himself out as a partner, and thereby inducing others to act on the faith of his representations, is liable to them as if he were in fact a partner, is nothing more than an illustration of the general principle 100 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 of estoppel by conduct." "The expression in Waugh v. Carver, 'if he will lend his name as a partner, he becomes as against all the rest of the world a partner,' requires qualification; for the real ground on which Hability is incurred by holding one's self out as a partner is that credit has been thereby obtained. This was put with great clearness by Mr. Justice Parke in Dickinson v. Valpy." "No person can be fixed with liability on the ground that he has been held out as a partner, unless two things concur, viz. : First, the alleged act of holding out must have been done either by him or by his consent ; and, secondly, it must have been known to the person seeking to avail him- self of it. In the absence of the first of these requisites, whatever may have been done cannot be imputed to the person sought to be made liable; and, in the absence of the second, the person seeking to make him liable has not in any way been mislead." Lindl. Partn. (1st Ed.) 45-47, (4th Ed.) 48-50. The current of authority in this country is in the same direc- tion. Benedict v. Davis, 2 McLean, 347, Fed. Cas. No. 1,293; Hicks V. Cram, 17 Vt. 449; Fitch v. Harrington, 13 Gray (Mass.) 469, 74 Am. Dec. 641; Wood v. Pennell, 51 Me. 52; Sherrod v. Langdon, 21 Iowa, 518; Kirk v. Hartman, 63 Pa. 97; Hefner v. Palmer, 67 111. 161; Cook V. Penrhyn Slate Co., 36 Ohio St. 135, 38 Am. Rep. 568; Uhl v. Harvey, 78 Ind. 26. The only American case, cited at the bar, which tends to support the ruling below, is the decision of the Commission of Appeals in Poillon v. Secor, 61 N. Y. 456. And the judgment of the Court of Appeals in the later case of Central City Savings Bank v. Walker, 66 N. Y. 424, clearly imphes that in the opin- ion of that court a person not in fact a partner cannot be made liable to third persons on the ground of having been held out as a partner, except upon the principle of equitable estoppel, that he authorized himself to be so held out, and that the plaintiffs gave credit to him. The result is that both, upon principle and upon authority, the third and fourth assignments of error, as well as the first, must be sustain- ed, the judgment of the circuit court reversed, and the case remanded to that court with directions to order a new trial. FLETCHER v. PUELEN et al. (Court of Appeals of Maryland, 1889. 70 Md. 205, 16 Atl. 887, 14 Am St Rep 355.) MutER, J. The plaintiffs, who are nurserymen in Milford, Del, sued Bramble & Fletcher, as partners in the same business at Cam- bridge, in this state, for fruit trees sold and delivered to them in the autumn of 1886. Bramble died before the trial, and Fletcher defended upon the ground that he was not a partner. The exceptions relate mainly to the admissibility of evidence upon the question, not whether Fletcher & Bramble were actually partners inter sese, but whether Fletcher had held himself out, or had permitted himself to be held out. ^u. Y''s Sec. 5) PAKTNEESHIP BY ESTOPPEL. OGT 25 1938 as a partner, so as to become responsible to third parties. The law on this subject, well established by authority, may be stated thus: "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 have in good faith dealt with the firm or with him as a member of it. But it must appear that the person dealing with the firm believed, and had a reasonable right to believe, 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 ap- pear 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 advertisements, shop bills, signs, or cards, and from various other acts from which it is reasonable to infer that the holding out was with his authority, knowledge, or assent; and whether a defend- ant has so held himself out, or permitted it to be done, is in every case a question of fact, and not of law." Thomas v. Green, 30 Md. 1; 1 Lindl. Partn. 45; Thompson v. Bank, 111 U. S. 536, 537, 4 Sup. Ct. 689, 38 L. Ed. 507 ; 5 Wait, Act. & Def. 113, 114. These general rules apply to the present case. The evidence shows that there was, in or near Cambridge, a fruit farm and nursery on about 15 acres of Fletcher's land, which Bramble had occupied and managed from the year 1881 to 1887. The plain- tiffs then proved that in October and November, 1886, they received several letters, postal cards, telegrams, and circulars from Cambridge, signed, "Fletcher & Bramble," representing them to be partners, and the envelopes in which the letters were inclosed were stamped with the same firm name. These letters contained orders for fruit trees, and the first of them gave a reference to a Mr. Van Horst, formerly of Milford, but then residing in Cambridge. The plaintiflfs not know- ing the firm, nor by whom the letters were written, wrote to Van Horst and others, inquiring as to its credit and standing, and in reply received information to the effect that Fletcher was entirely responsible, but that Bramble was worth nothing. Upon this information, and re- ceiving no intimation that Fletcher was not a partner, they filled the orders and delivered the trees, relying upon his credit. Each item of this testimony was excepted to as it was offered, upon the ground that these Ifetters, circulars, and envelopes were written and gotten up by Bramble without Fletcher's knowledge or consent. We think, how- ever, they were all admissible, not because the acts and declarations of Bramble would bind Fletcher, as of course they would not, unless he was an actual partner, but for the purpose of showing that the plaintiffs believed, and had good reason to believe, that he was a part- ner, and that they trusted the supposed firm upon the faith of his responsibility. To prove this was an important link in the plaintiffs' case, and evidence tending to prove it was, in our opinion, admissible. 102 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 The plaintiffs tlien proved that an advertisement signed, "Fletcher & Bramble," calling attention to their nursery, offering their trees for sale, and soliciting from the pubHc continuance of confidence and or- ders, was pubHshed in two weekly newspapers of Cambridge, where Fletcher lived, for three months during the year 1884. In one of these papers there was also a local notice of the advertisement. These were also prepared, inserted, and paid for by Bramble, without Fletch- er's knowledge ; but it was proved that during the time of their pub- lication he was a subscriber to both papers, and they were regularly sent him. There is also clear proof that he actually knew of them while they were being published, and never inserted in either of the papers any denial of the partnership. From all this it was competent for a jury to infer that he was held out to the public by Bramble as a partner, with his knowledge and assent; and we are of opinion the plaintiffs were entitled to prove this, though they never saw the ad- vertisements, and were not influenced by them in trusting the firm. They had already proved they had so trusted it in good faith, and upon good grounds, and we think they had the right to resort to these an- tecedent advertisements, and to this proof, for the purpose of showing that Fletcher had been so held out to the public with his knowledge and assent. It was evidence to go to the jury upon that subject, and, if uncontradicted, would have made him a partner, at least as to all third parties who had trusted the firm in good faith upon that supposi- tion. Having knowledge of these advertisements, it was his duty to deny the partnership, if he wished to escape liability. But what was he to do, and how much? We do not say he was under a legal ob- ligation to publish a repudiation of the partnership in the same news- papers, or in any other, though this would seem to be a very obvious and the most efficient mode of proclaiming such denial, and the fact that he failed so to do was a circumstance to go to the jury. But we take it that the rule upon this subject, stated by a very eminent jurist, is reasonable and just: "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 mani- fest his refusal, and thereby prevent innocent parties from being mis- led." Pars. Partn. *134. It follows that the court below was right in admitting all the evidence offered by the plaintiffs, and in reject- ing the defendant's first prayers. In regard to his second, third, and fourth prayers, all that need be said is that the propositions they con- tain are all embraced in his fifth prayer, which the court granted with a single modification, to which we see no valid objection. We come now to the rulings excluding certain evidence offered by the defendant to show and sustain his denial and repudiation of the partnership. His own testimony was to the effect that Bramble was simply his tenant of the land for the term of six years from 1881 ; that Bramble had a fruit-tree nursery on the land, but he himself had nothing to do with it, and never entered into a contract of partnership Sec. 5) PARTNERSHIP BY ESTOPPEL. 103 with Bramble, either written or verbal, in the nursery business, or any other; that he never held himself out as such partner, and never lent his name, or authorized the use of it by Bramble, with reference to this business, or any other, that he never knew of the letters, circulars, and envelopes written and used by Bramble until they were produced in court at the trial; that the advertisements and local notice were inserted without his knowledge or consent, and he never knew any- thing about them until they appeared in the papers; that he never put himself to the trouble and expense of publishing in these papers, or in any others, a contradiction of the advertisements, but had on all occasions, to town people and country people, when the subject was mentioned to him, and often when it was not, denied the existence of any partnership, and repudiated the advertisements as unauthorized by him. All this was allowed to go in without objection, but it is to be observed that he admits he knew of the advertisements which clearly and publicly proclaimed the partnership, and never published in any newspaper any denial of it. We have said he was under no legal obligation to make publication, but that it was his duty to do all that a reasonable and honest man should do, under similar circum- stances, to manifest his denial. This is the important question in the case, and it was one solely for the jury to determine. On this issue of fact he was entitled to adduce all the evidence he could, leaving it for the jury to decide whether, upon the whole of it, they thought he had done all that a reasonable and honest man ought to have done. Under this rule, he was entitled to the benefit of any evidence in corroboration of his own testimony which tended to prove the publicity of his de- nial. Now, in addition to his own general evidence on this subject he offered to prove : (1) By the editor of one of the papers in which the advertisement and notice appeared, that, when the witness called upon him to pay for the same, he refused to do so, repudiated all partner- ship with Bramble, declared he had nothing to do with Bramble's business, and would have nothing to do with his bills. (2) By the postmaster of Cambridge, that soon after the publication of the ad- vertisements witness delivered to Fletcher certain mail-matter ad- dressed to "Fletcher & Bramble," but he returned it unopened, and re- fused to accept the same, telHng witness he had nothing to do with Bramble's business, and was no partner of his. (3) That in July, 1885, he and Bramble were sued as partners by the stearriboat company be- fore a magistrate in Cambridge, on a bill for freight; that there was a crowd at the trial, and he resisted the suit, and refused to pay the account, on the ground that he -had nothing to do with Bramble's business; that the magistrate gave judgment in his favor, and the case was much discussed in the community, especially by the steamboat agent, who made great complaint because the magistrate had decided in his favor. In our opinion, these items of evidence should have been admit- ted. It is not for this court to pass upon their weight or effect, no mat- 104 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 ter how slight or inadequate, as a denial of the partnership publicly proclaimed in the newspapers, we may deem them to be. This is a matter solely for the jury. Our duty is simply to determine the ques- tion of their admissibility as evidence, and we think the court erred in rejecting them. We are also of opinion that the agreement, or "lease," as it is called, between Fletcher and Bramble, for the land upon which the nursery was carried on, should have been admitted. It was part of the defendant's case, to prove that he was not an actual partner with Bramble. This agreement was admissible for that pur- pose, if he could show that by its true construction it merely created the relation of landlord and tenant between them. The errors in re- jecting the items of evidence referred to requires us to reverse the judgment, and award a new trial. But, in view of the fact that the court below acting as a jury found for the plaintiffs, notwithstanding they had granted the defendant's fifth prayer, in which all his own testimony in denial of the partnership was expressly submitted to the consideration of the judges, we think each party should be requir- ed to pay his own costs, both in this court and in the court below. Judgment reversed, each party to pay his own costs in this court and in the court below, and new trial awarded. SECTION 6.— DEFECTIVE CORPORATIONS. BIGELOW V. GREGORY et al. (Supreme Court of Illinois, 1S74. 73 III. 197.) This was an action of assumpsit, brought by Bigelow, appellant, against Charles A. Gregory, Franklin H. Watriss, Oramel S. Houglj, and Reuben Hatch, as copartners, doing business under the name and style of the Warfield Cold Water Soap Company, to recover for goods sold and delivered. The defendants in the court below pleaded the general issue, and also interposed a further plea denying the partner-, ship, verifying the same by affidavit. The cause was tried by the court without a jury, and the issues found and judgment rendered for the defendants. The plaintiff brings the record here by appeal to re- verse the judgment. From the testimony it appears that in November, 1870, the de- fendants, with one Isaac N. Gregory, signed a certain paper, com- mencing: "Articles of Association of Warfield's Cold Water Soap Company, of Milwaukee. We, the undersigned, being desirous of forming a company for the purpose of carrying on a manufacturing business, as hereinafter stated, under authority of the act of the Legislature of the state of Wisconsin relating to joint-stock companies, Sec. 6) DEFECTIVE COKPOEATIONS. 105 approved April 2, 1858, and acts amendatory thereof, do hereby agree and certify that the name of the company is and shall be 'War- field's Cold Water Soap Company, of Milwaukee' " — proceeding to state at length the objects of the company, the amount of capital stock, its number of shares, the term of existence of the company, the number and names of the directors for the first year, they being the subscribers themselves, how the capital stock should be paid, the signers sub- scribing for all the stock and agreeing to pay it as required by the directors, and concluding: "We hereby adopt the foregoing as the articles of association of said Warfield's Cold Water Soap Company, of Milwaukee, for the purpose of becoming a body politic and cor- porate under said name. Witness our hands, at Chicago, Illinois, this twenty-third day of November, A. D. 1870. Charles A. Gregory. Franklin H. Watriss. Oramel S. Hough. Reuben Hatch. Isaac N. Gregory." This paper was filed in the office of the Secretary of State of Wis- consin on the 8th day of July, 1871, and in the office of the city clerk of Milwaukee August 33, 1871. It was also published in two news- papers in Milwaukee, the Guide and the Herald, September 13 and 13, 1871. The only question here arising is whether the defendants were ex- empt from individual liability by reason of having become a cor- poration. We are of opinion that in this case, as the question here comes up, the right of the defendants to be considered a corporation depends upon their having complied with the requirements of their articles of association and the filing of the certificate. These are important acts as affects the public interest, as affording means of notice respecting the corporation to such as deal with it, so that they may regulate their action and give or withhold credit accordingly, and we think they are to be regarded as statutory prerequisites, es- sential to corporate existence. The defendants are seeking escape from individual liability. Let them show that they have complied with the statute which enables them to do so, at least substantially, as respects the above-named acts. Such we regard to be the doctrine of the authorities. Unity Insur- ance Co. V. Cram, 43 N. H. 641; Mokelumne Mining Co. v. Wood- bury, 14 Cal. 425, 73 Am. Dec. 658; Harris v. McGregor, 29 Cal. 124 ; Field v. Cooks, 16 La. Ann. 153 ; Angell & Ames on Corp. § 83. This court has never held that individuals could make themselves a corporation by the mere signing of articles of agreement. And in the language of Parsons on Partnership, p. 544, "we do not be- lieve that a joint-stock company, or any other partnership, can limit its own liabilities and become a corporation or limited partnership by its own act and without any regard to the formalities or require- ments of the law." And see Stowe v. Flagg et al., 72 III. 397. Nothing had been done toward incorporation, except the signing of the articles of association, until July 8, 1871, when the articles 106 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 were filed with the Secretary of State of Wisconsin. They may be re- garded, perhaps, as substantially embracing the particulars required in the certificate. The greater portion of the indebtedness sued for had been contracted prior to that time. The filing of the articles in the office of the city clerk of Milwaukee, in which place the business of the corporation was to be transacted, and the publication in the newspapers, did not take place until after August 19, 1871, when the whole indebtedness had been contracted. We are of opinion the defendants were liable a-s partners, and had not absolved themselves from responsibility as such by having be- come a corporation. Judgment reversed. RUTHERFORD v. HILL et al. (Supreme Court of Oregon, 1S92. 22 Or. 218, 29 Pac. 546, 17 Tj. R, A. 519, 29 Am. St. Rep. 596.) Action by James A. Rutherford and Stephen G. Smith against J. W. Hill, R. P. Earhart, and Sherman Martin, as partners under the name and style of the Himes Printing Company. From a judgment on a verdict against them, defendants Hill and Earhart appeal. The defendants are sued as partners under the firm name and style of the Himes Printing Company. The complaint does not anywhere allege that the defendants entered into an agreement of copartnership, but in lieu thereof the following facts are alleged: "That the de- fendants, on or about the 3d day of September, 1890, executed,, acknowledged, and filed in the office of the clerk of the county court of Multnomah county and in the office of the secretary of state at Salem, Oregon, certain articles of incorporation as the Himes Print- ing Company; that the defendants, in violation of the laws for the formation of corporations subsisting in the state of Oregon, negli- gently failed to provide a stockbook and to secure stock subscrip- tions to said corporations ; that, in spite of their said violation of the law, the defendants undertook to carry on the business provided for in said articles of incorporation, appointed one George H. Himes superintendent of their said business, and authorized him and the de- fendant Sherman Martin to represent them in all the transactions of said business ; that said business was carried on under the firm name and title of the Himes Printing Company; that between May 1 and September 1, 1891, the plaintiff, at the instance and request of the defendants, through their agents, the aforesaid Himes and the de- fendant Martin, performed certain labor and services for the defend- ants, of the reasonable and agreed value of $313.14, which sum the defendants promised to pay; that the plaintiffs performed the afore- said work relying on the credit and representations of the defendants for their payment." Earhart and Hill answered separately, and each Sec. 6) DEFECTIVE CORPOEiTIONS. 107 of them denied every material allegation of the complaint, except they did not deny executing and filing the articles of incorporation of the Himes Printing Company. The jury returned a verdict against the defendants Earhart and Hill for the amount claimed, upon which judgment was entered, from which this appeal was taken. Strahan, C. J. * * * The sole question, therefore, seems to be whether or not, where three or more persons sign, acknowledge, and file articles of incorporation under the laws of this state, and do nothing further towards effecting an organization or carrying on the proposed business, and one of them assumes to do business under the proposed corporate name, and incurs liabilities, the other persons who signed said articles are liable. Appellants maintain that in such case there is no liability on the part of those who' do not participate in the business either directly or indirectly, while the respondents seek to maintain the reverse of this proposition; and this contention presents the only question we need consider on this appeal. The respondents contend that the executing and filing of the arti- cles of incorporation, and the assumption of the corporate name by one of the parties, under which he does business, create a partnership between all the persons signing said articles, and to sustain this view they rely upon these authorities : Whipple v. Parker, 29 Mich. 380 ; Jessup V. Carnegie, 44 N. Y. Super. Ct. 260; Coleman v. Coleman, 78 Ind. 346; Pettis v. Atkins, 60 111. 454; Smith v. Warden, 86 Mo. 382; Garnett v. Richardson, 35 Ark. 144; Lindl. Partn. 5; Abbott V. Smelting Co., 4 Neb. 416; Johnson v. Corser, 34 Minn. 355, 35 N. W. 799. Some other authorities, similar in principle to these, might be cited, but they add nothing to this side of the question. With- out stopping to distinguish these cases from the one now before us, we think the decided weight of authority, as well as the better rea- son, is the other way. Fay v. Noble, 7 Cush. (Mass.) 188, is an early case, in which it was held that the subscribers for and holders of stock in a manufacturing corporation which has been defectively organized, and transacted business under such defective organization, do not thereby become partners, general or special, in such business. In Trowbridge v. Scudder, 11 Cush. (Mass.) 83, it was held that the stockholders of a corporation do not become Hable as partners on notes given by the treasurer of the corporation merely because after organizing they transacted no business. In First Nat. Bank of Almy V. Almy, 117 Mass. 574, it was held that the members of a corpora- tion were not liable as partners by reason of having transacted busi- ness before the whole capital stock was paid in, as required by stat- ute. In Humphreys v. Mooney, 5 Colo. 282, in considering the ques- tion now before the court it was said : "The doctrine of a partnership Hability in such case is not found in law or reason, and is repugnant to the very purposes of the statute authorizing a corporation, one object of which is to limit individual liability." Substantially the same doctrine is announced in Gartside Coal Co. v. Maxwell (C. C.) 22 108 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 Fed. 197; Planters' & Miners' Bank v. Padgett, 69 Ga. 159; Stafford Nat. Bank v. Palmer, 47 Conn. 443; Ward v. Brigham, 127 Mass. 24; Central City Savings Bank v. Walker, 66 N. Y. 424; Jessup V. Carnegie, 80 N. Y. 441, 36 Am. Rep. 643; Blanchard v. Kaull, 44 Cal. 440; Mor. Corp. § 748. And 17 Amer. & Eng. Enc. Law. 866, after stating that the rule contended for by respondents had been adopted by quite a large number of cases, remarks : "But the weight of authority perhaps sustains the contrary rule that, if they were acting under the supposition that they were incorporated, and were assuming only the liability of stockholders, and not that of part- ners, they will not be held liable as such." And a long list of cases is cited to sustain this proposition. It is not doubted that cases might arise, and can readily be im- agined, where the incorporators sought to be charged might take such part in conducting the business, or hold themselves out to the world as partners or as principals in the business, that they would be held liable ; but this would grow out of their conduct in carrying on the business, and not out of the mere fact of signing and filing the articles. If the appellants could be held liable in this case, such liability would rest on the mere act of signing and filing the articles, and not upon any participation in the business, either directly or indirectly. It would have to rest upon the theory that, by the mere signing the articles with Martin, they constituted him their general agent, to proceed to con- duct the business contemplated by the proposed corporation, thus creating a liability for any act of his done within the scope of the powers of the proposed corporation. No authority to which our at- tention has been directed has gone so far, and we feel safe in saying that none can be found to support that doctrine. We therefore re- verse the judgment, and remand the cause for such further proceed- ings as are not inconsistent with this opinion. SECTION 7.— JOINT-STOCK COMPANIES. CARTER et al. v. McCLURE et al. (Supreme Court of Tennessee, 1897. 98 Tenn. 109, 38 S. W. 585, 36 ly. E. A. 282, 60 Am. St. Rep. 842.) BiJARD, J. The bill in this cause was filed by complainants, as credit- ors of McClure, Lucas & Co., seeking to hold the defendants liable for the debts of that concern, upon the theory that it was a commercial firm, of which defendants were members, at the time of the creation of these debts. The facts, so far as they are important in the de- cision of this case, and as they have been found by the Court of Chan- Sec. 7) JOINT-STOCK COMPANIES. 109 eery Appeals, are: That these defendants, with others who are not sued, all members of an alliance lodge in the town of Huntland, in this state, entered into an agreement among themselves to raise a sum of money which, it was assumed, would be sufficient to establish a co- operative store in that place. This agreement was reduced to writ- ing, and the names of the parties in interest were by them affixed to it, and over against his signature was placed the amount which each subscriber obligated himself to contribute to this joint enterprise. This agreement is in words and figures following, to wit: "Huntland, Tenn., Dec. 31, 1888. We, the undersigned, agree to pay to the di- rectors, to be elected, the sum annexed to our respective names, by the first of January, 1889, for the purpose of establishing a co-opera- tive store at Huntland, Tennessee. We further agree that the said money remain in the business for at least five years from beginning, unless two-thirds of the stockholders agree to discontinue the busi- ness in a shorter time. We further agree that three of the stock- holders be elected annually as directors, to have full control of the stock hereunto subscribed. It is further agreed that the directors act in conjunction with R. W. McClure, who is a stockholder to the amount of $3,050, and who is to be the principal salesman, and in the transaction of all business between the said McClure and directors, the directors are to be regarded collectively or as a unit, and the said McClure as a unit." After the execution of this paper, the three di- rectors provided for in it were duly chosen, and into their hands the subscribers paid the several sums they had agreed to contribute. These sums, aggregating $590, were turned over by the directors to Mr. McClure, who, adding the amount of $3,050, which he had agreed to place in the venture, purchased a stock of goods, and opened up a co-operative store in the name of R. W. McClure & Co., this being the business name agreed upon by McClure and the three directors. No incorporation ever took place, nor was such ever intended by these parties. The main purpose of the defendants, in entering into this business, was to avoid what they deemed to be the extortion there- tofore practiced upon them in the sale of goods by the merchants of the country. While not embodied in their writing, yet one of the terms of the contract, and the one which chiefly, if not altogether, in- duced all the subscribers (save, no doubt, McClure) to become in- terested in this enterprise, was that they were to purchase such goods as they might require from the stock in this store at a profit not ex- ceeding 10 per cent, above cost; and these directors were chosen as their representatives, especially, to look after McClure, who was the largest shareholder, as well as manager, and see that he kept faith with the subscribers in this matter. While the defendants, styling themselves in their written agreement as "stockholders," took no active personal control of the concern, yet they manifested a lively interest in its success. In addition to giving it the benefit of their own patronage, they were zealous in commending it to their neighbors. 110 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 At the end of the first year one Mosely desired to purchase an inter ■ est in the business. He, however, was not a member of the "alHance," and, organized as this enterprise was, in line with or under the in- spiration of that movement, it was necessary that he become such before he could be allowed to make such purchase. In order to qual- ify him to this end, the rules of the "lodge" to which these defendants belonged were suspended, and at one meeting he was admitted to the privilege of full fellowship with them. He contributed $2,000 to the capital of the concern, and its name was changed to McClure, Mosely & Co. At the end of another term of 13 months Mosely sold out his interest to one Lucas and thereafter the enterprise was con- ducted in the name of McClure, Lucas & Co., until insolvency over- whelmed it with disaster. The claims of complainants accrued during the existence of and against this latter concern. In addition to these changes in the organization of and style of the business, two deaths occurred among the original subscribers — one of them before, and the other after, the creation of these debts. This latter death, how- ever, can in no way affect this controversy, and will, therefore, not be further noticed. Upon this state of facts, it is insisted for the de- fendants — First, that this undertaking was in no sense a partnership, and that they did not sustain the relation of partners to either R. W. McClure & Co., Mosely, McClure & Co., or McClure, Lucas & Co.; secondly, if however, they are mistaken in this broad proposi- tion, then that they were only partners in the firm of R. W. McClure & Co., and that all partnership relation and liability, on their part, were terminated or dissolved by the various changes already adverted to, and long prior to the creation of complainants' debts. The chan- cellor and the Court of Chancery Appeals held both these contentions against the defendants, and the case is now before us on an appeal from the decree of this last-named court. 1. Were those parties engaged in a partnership enterprise? All of the defendants earnestly disclaim any purpose of entering upon such an undertaking. While, as has been stated, the prime motive of these parties was to organize a mercantile establishment where their various needs would be supplied at reasonable figures, yet they confess that, outside of this, they expected to share in any profits earned by it in proportion to the respective amounts contributed by them. These amounts were small, yet they were to serve as a basis for such distri- bution of profits. It is no doubt true that the defendants did not con- template a partnership, and each supposed that he was simply taking a share in a joint-stock enterprise, in which all he risked was the small sum paid for such share; yet it is for the law to determine, on the facts already given, whether a partnership was created, with all its attending liabilities. In Mallory v. Oil Works, 86 Tenn. 598, 8 S. W. 396, is quoted approvingly the definition of a partnership as giv- en by Judge Story. "A partnership," says the former writer, "is usu- ally defined to be a voluntary contract between two or more competent Sec. 7) JOINT-STOCK COMPANIES. Ill persons to place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business, with the understanding that there shall be a communion of the profits thei-eof between them." Story, Partn. § 3. The facts found by the Court of Chancery Appeals, a gen- eral outline of which is given above, disclose the constituent elements of a partnership as required by this definition. It is a case where these parties have embarked their money "in lawful commerce, * * * with the understanding that there" should be a division of profits earned. In addition to this, they have taken a firm name, and thus have advertised themselves to the world as a commercial partnership. Calling their contributions to the capital of this busi- ness a "subscription for stock," and taking certificates for their pay- ments from the company as a joint-stock company, it not being incorpo- rated, ' cannot alter their liability. "There is no intermediate associa- tion, or form of organization, between a corporation and a partner- ship, known to the common law, and, unless otherwise provided by statute, as is the case in England and New York, a joint-stock compa- ny is treated and has the attributes of a common partnership." 1 Bates, Partn. § 72. And Judge Story says that, "in joint-stock and other large companies, which are not incorporated, but are a simple, although an extensive, partnership, their liabilities to third persons are gener- ally governed by the same rules and principles which regulate com- mercial partnerships." And such has been the conclusion of the courts wherever the character of jo"int-stock companies similar to the one in question has been passed upon, so far as our examination has dis- closed. At least such was the holding in Hodgson v. Baldwin, 65 111. 532 ; Kenyon v. Williams, 19 Ind. 44 ; Manning v. Gasharie, 27 Ind. 399; Beaman v. Whitney, 20 Me. 413; Farnum v. Patch, 60 N. H. 294, 49 Am. Rep. 313. The Supreme Court of New Hampshire, in this last-cited case, have delivered an able, exhaustive opinion upon the law of partnership as it applies to an association like the one in question, and we content ourselves with what we have already said and by making special reference to that opinion. In the light of these authorities, we think there can be no doubt that these parties were partners in the firm of R. W. McClure & Co. 2. We think it equally clear, on the facts of this case, and in view of the legal principles applicable to them, that there was no termina- tion of the partnership enterprise, resulting from the changes oc- curring during its progress, by the introduction and subsequent with- drawal of Mosely, and the accession of Lucas or his capital to it, or the death of one of the original subscribers intermediate between the start of this business and the final insolvency of McClure, Lucas & Co. ; that, through all these changes, the defendants' relations re- mained as fixed by themselves in the beginning; and that they are liable as partners for the debts sought to be enforced in this cause. This conclusion we rest on two grounds: First. It is found by the Court of Chancery Appeals to be a fact that these defendants were 112 WHAT CONSTITUTES A PARTNERSHIP. (Ch. 1 members of the alliance lodge that, by a suspension of its rules, hur- riedly qualified Mosely, so that he might bring his capital and his name to the aid of this joint undertaking. They do not claim to have been ignorant of this proceeding, or to have offered any opposition to it, either in or out of their lodge, or that they made any protest against his accession to the business. On the contrary, their zeal for the suc- cess of the movement continued undiminished. And so witb regard to the withdrawal of Mosely and the introduction of Lucas in his room and stead. The record shows consultation with quite a num- ber of these defendants as to the advisability of this change, and an agreement with them in regard thereto, and acquiescence, at least by silence, on the part of the remainder. All these parties, through the various changes in the personnel of the organization, by death and purchase, and in the firm name under which the business was carried . on, not only stood by and watched the movements of the concern, as one in which they had a part, but they made no claim of dissolution by reason thereof until confronted by the claims of these complain- ants. It was then too late. For, conceding that either one of these acts might have been availed of by the defendants as working a dissolution of their partnership, yet, at their election, they might waive this effect. Second. The nature of this enterprise repels the idea that it was in the contemplation of the parties that either death or any transfer of shares should work a dissolution of the business. Not only was it to continue for five years, "unless two-thirds of the stockholders 'agreed' to discontinue the business in a shorter time," but the shares of the stockholders were transferable. Says Mr. Bates, in his work on Part- nership (volume 1, § 73) : "The fact of transferable shares makes such an association different, not merely in magnitude, but in kind, from ordinary partnerships, because not based upon mutual trust and confidence in the skill, knowledge, and integrity of every other partner. Hence a sale of his shares by a member, the shares being transferable, is not a dissolution. Death of a member is not a dis- solution, if such was the intent and the character of the association, in that the shares are transferable, and it is governed by officers, and is in the form of a corporation, is evidence of such intent." What the text-writers. and the opinions of many courts call the "delectus per- sonarum," an element in an ordinary commercial partnership, is lack- ing when a partnership assumes the character of a joint-stock company with transferable shares. 2 Bates, Partn. § 581 ; Machinists' Nat. Bank v. Dean, 124 Mass. 81 ; Walker v. Wait, 50 Vt. 668 ; McNeish V. Oat Co., 57 Vt. 316. It follows that the assignments of error upon the decree of the Court of Chancery Appeals, in the particulars above indicated, must be overruled. The assignments of error upon the court's decree as to the Lipscomb claim are disposed of only. The decree of that court is in all things affirmed. Sec. 1) THE CREATION OF A PAETNEK8HIP. 113 CHAPTER II. THE CREATION OF A PARTNERSHIP. SECTION 1.— ARISES OUT OF CONTRACT. Societie is a contract by consent about a thing to be had or used in common on both sides. * * * But that only is properly called Societie, which by mutual consent is applied to that end, that there may be partnership or fellowship among the persons contracting; wherein so soon as they are fully agreed, the one is properly called the other's fellow. West's Symboleography, § 26. PHILLIPS V. PHILLIPS. (Supreme Court of Illinois, 1863. 49 111. 437.) CaTon, C. J. The only question in this case is one of fact. Was there a copartnership between John Phillips and his four sons, or was he the sole proprietor of the business about which the contro- versy has arisen? It must be remembered in the outset that this is a controversy inter sese, and is not between third parties and the alleged members of the firm. Parties may so conduct themselves as to be liable to third persons as partners when in fact no partnership exists as between themselves. The public are authorized to judge from ap- pearances and professions, and are not absolutely bound to know the real facts, while the certain truth is positively known to the alleged parties of a firm. A partnership can only exist in pursuance of an express or implied agreement to which the minds of the parties have assented. The intention or even belief of one party alone cannot create a partnership without the assent of the others. If John S. Phillips designed and really believed that there was a partnership, but to which his father and brothers never assented, and in the existence of which they did not believe, then there was no partnership, unless, indeed, a copartnership could be formed and conducted without their knowledge or consent. This would be simply absurd. We cannot in this way surprise them into a partnership of which they never dreamed. Over 20 years ago John Phillips emigrated from Scotland and set- tled in Chicago with his family, consisting of a wife and four sons Gil.Part. — 8 114 THE CREATION OP A PAETNEESHIP. (Ch. 3 and two daughters. He was then very poor. He was a wood turner by trade, and commenced that business in a very small way with a foot lathe. He was frugal, industrious, and honest, and prospered as but few men, even in this country, prosper. He labored hard with his own hands, and as his sons grew up they joined their work to his, all except John S., who at a proper age was put as an apprentice to learn the chair maker's trade; but, his health proving delicate, his father made an arrangement with his master by which his time was released when he had but partially learned his trade, when John S. , returned home and took a more or less active part in the business of his father. His health was, however, for many years very delicate, and he was enabled to do but little physical labor. He, however, most- ly took charge of the office and books, for which the testimony shows he was very well qualified, and where he rendered efficient service. In the meantime the business had grown from the smallest beginning, with a single foot lathe, to a large manufactory, with extensive ma- chinery propelled by steam; and chair making, which was introduced at an early day, had become the principal or largest branch of the business. Thus this business was begun and continued and prospered till 1860, when the complainant left his father and the business, and filed this bill for an account as among partners. The business had always been conducted, as it was begun, in the name of John Phillips, the father, although in a few instances bills were made out to John Phillips & Sons by persons with but a super- ficial acquaintance with them, which were paid without eliciting re- mark or particular attention. The books were all kept in the name of John Phillips, with the exception of a few entries made by a book- keeper in the name of John Phillips & Sons. Indeed, there is, and can be, no question that, if there was a copartnership embracing the father and sons, the firm name adopted was John Phillips. The complainant, to show a copartnership, proves that the sons all devoted their time and attention to the business after they attained their majority, without regular salaries as laborers or servants; that funds which they drew from the concern for their support were charged to each one separately, while neither received a credit for labor or serv- ices; that the father, upon one or two occasions, stated to third per- sons that his sons were interested in the business; and he also relies upon the appearances to the outside public and the interest which all took in the success of the business. For the defense it is claimed that, following the habits and customs of their forefathers in Scotland, the sons continued to serve the father in the same relation and with the same fidelity after attaining their majority as before, under the distinct and often declared understand- ing that all should belong to the father during his life, and at his death the business and property should be left by him to his children, as he should think proper. If such was the understanding and purpose of the parties, then there was no partnership. Originally, undoubt- Sec. 1) ARISES OUT OF CONTRACT. 115 edly, the entire concern belonged to the father, and it so continued, unless by the agreement of the father the sons were admitted into the concern as partners; for, as before intimated, we know of no means by which the sons could become partners with the father, and thus ac- quire a title to his property, without his knowledge or consent. Did the father ever consent that his sons, or either of them, should be ad- mitted as partners with him? Did he ever agree that they should be part owners of this property? On repeated occasions the subject of a copartnership with his sons was presented to him, both in the pres- ence of the complainant and his brothers, and he ever repudiated the suggestion in the most emphatic terms. The very suggestion, even, seemed to excite his indignation. Upon one occasion he expressed himself in this characteristic phrase : "Na, na ! I will ha' nae sons for partners as long as I live. Damn them ! they would put me out of the door." On none of these occasions do we find the complainant, or any of" his brothers, claiming the existence of a copartnership ; but, on the contrary, they silently acquiesced in the assertions of the father. Had there been ever any agreement, expressed or implied, that there should be a partnership, they, as parties to it, must have been aware of it. If not expressed in words, there must have been at least the mental intention and tacit understanding on the part of the father that, they should be admitted as partners, and on their part to assume the benefits and liabilities of partners, and this could not be without their knowledge. Others might be deceived by appearances. Others, ignorant of the customs and traditions of their forefathers, which are so fondly cherished by emigrants from the old country, and particularly from Scotland, might draw erroneous conclusions as to the true relation existing between them as a family, by seeing men in middle life zealously bending their energies under the guidance of their father to the promotion of the success of the business. Whoever should apply customs prevalent among native Americans to this state of . facts would unhesitatingly conclude that all were in partnership. And so, no doubt, many were deceived; nor was it deemed neces- sary by any of the parties, on all occasions, to undeceive them by a full explanation of this family arrangement But the question here is, what was the actual fact? and not what observers supposed was the fact from appearances. It is the internal truth we are seeking, and these external appearances are only im- portant as they may enable us to arrive at this truth; and when we so find the truth by indubitable proof in a different direction than that indicated by these external appearances, then these must go for naught. Here we have the positive testimony of every living man who has the absolute knowledge of the facts, including the complainant himself, all testifying most unqualifiedly that there was no partner- ship. Decree is reversed, and the bill dismissed. 116 THE CREATION OF A PAETNERSHIP. (Cll. 2 SABEL et al. v. SAVANNAH RAIL & EQUIPMENT CO. (Supreme Court of Alabama, 1003. 135 Ala, 380, 33 South. 663.) TysoNj J. The important question presented is whether the agree- ment shown by the bill constituted complainants and respondents part- ners. It is made to appear that respondents called the complainants' attention to the possibility of purchasing on very favorable terms 17 secondhand narrow-gauge locomotives from the Plant System; and thereupon an agreement was made to purchase the engines, and which- ever party (complainants or respondents) should have the opportunity to buy would do so "upon the best terms possible," and when pur- chased the engines should be sold on joint account. It further appears that respondents did buy, but it does not appear that the purchase was made on joint account. After the purchase, complainants, with- out knowing the ternis of the contract of purchase, wrote the 'respond- ents, saying: "We had an agreement with you to purchase these loco- motives on joint account. Please let us know what you have done in the matter." To this the respondents replied: "We have bought the seventeen narrow-gauge locomotives from the Plant System for $18,- 000, as they are. As we stated to you that we would consider you in the deal, if you desire to be half partners of this material, send us your check for $9,000, and we will consider you in on joint account." It does not appear what, if any, reply was made to this letter. It must be inferred that complainants made no reply, or declined the offer. Complainants allege that they afterwards discovered that re- spondents bought the engines for $17,000, without paying any cash except as the engines were sold by them, and that they received $10,- 000 profit out of the transaction. The purpose of the bill is to make the respondents, as partners, account to complainants for these profits. It would seem that, from complainants' refusal to reply to the re- spondents' letter, although the latter may have stated the trade with the Plant System differently from that actually made, the complain- ants did not consider themselves bound by the dealing of their alleg- ed partners — conceding that there may be a valid partnership be- tween the two concerns — unless the terms of the trade were favorable. This is not the way partners deal. When a partnership transaction is made, partners are absolutely bound thereby. There is no discre- tion about participating. The respondents' letter also plainly indicat- ed that they did not consider the complainants concerned in the pur- chase until they consented to be bound. Here, then, we have the in- terpretation of the contract by both parties concerned, each indicating to the other and each acquiescing in the view that there was a mere agreement relating to the future, and not an actual partnership. And when we look at the nature of the agreement as detailed in the bill, we see it could mean nothing else. There was nothing contributed; nothing done at the making of the agreement, except to stipulate that Sec. 1) AKISES OUT OF CONTRACT. 117 the parties, acting separately, as occasion might offer, would buy (if possible) the engines on "the best terms possible," and that when pur- chased on those terms, as the complainants insist, and not otherwise, they would be partnership property, and be sold as such. Who was to say, and when, that "the best terms possible" had been made? The agreement was not that the purchase should be made at all events, or at the discretion of either party, or by their joint action. But, as we have said, each of the partners was to act separately, and thus on individual account, until the other party acceded to the transaction. Thus it is made evident from the conduct of the parties, and the agree- ment itself, that there was no actual partnership. To constitute a partnership, there must be a "valid agreement to enter into partner- ship, and this contract must be executed." Parsons on Part. p. 6. Unless something is done, or unless the agreement, from its nature, operates in prsesenti, the contract is executory, and either party may decline to carry it out, though liable, it may be, to a bill for specific performance or for damages at law in proper casei. 32 Am. & Eng. Enc. Law (2d Ed.) 52, and note 2; Meagher v. Reed, 14 Colo. 335, 24 Pac. 681, 9 L. R. A. 455, 460 ; Latta v. Kilbourn, 150 U. S. 546, 14 Sup. Ct. 201, 37 L. Ed. 1169. We feel constrained to hold that the facts alleged in the bill do not show a partnership, and that the motion to dismiss the bill for want of equity should have been granted. In conformity with this conclu- sion, a decree will be here entered reversing the decree below and dis- missing the bill. BURNETT V. SNYDER. (Court of Appeals of New York, 1879. 76 N. T. 344.) This action was brought to recover an indebtedness of the firm of Strang, Piatt & Co., of . which firm defendants were alleged to be members. Defendant Snyder, who alone appeared and answered, denied that he was a partner. Appeal from a judgment in favor of defendant Snyder. DanforTH, J. The question upon this appeal is whether the legal effect of the agreement entered into between the defendant Snydir, Peter O. Strang, and Ammon Piatt is such that Snyder thereby be- came a member of the firm of Strang, Piatt & Co. There is nothing else to be considered, for the referee has found, not only that Snyder was not a partner, but that he was not held out as being a partner, either by himself or by members of the firm, and, further, that the plaintiff had no belief prior to the year 1875 (several years after the debt in suit was contracted) that Snyder was a member of the firm. These propositions were all fairly open to debate, by exceptions tak- en to the findings; but it is not now claimed by the appellant that there is any reason for impeaching the last two concUisions, or any 118 THE CREATION OP A PARTNERSHIP. (Ch. 2 ground upon which the first can be assailed, unless it is found in the agreement above referred to. The provisions of this instrument are not all as clear and coherent as might have been expected, but it has certain unmistakable features which leave no doubt as to its proper construction. First. It purports to be an agreement by Peter O. Strang and Ammon Piatt, in their individual capacity, with C. Brown Snyder. It is dated December 31, 1869, and recites that a copartnership was on that day formed between Strang, Piatt, Phillip C. Lockwood, Amasa Clark, and Ammon B. Piatt, under the name of Strang, Piatt & Co., that it is deemed expedient and for the interest of said firm that Snyder should have an interest and become a copartner there- in, and therefore it is agreed between the parties to that paper "that C. B. Snyder is a copartner in the firm," and in consideration of the agreement and other considerations Snyder shall, and he is hereby entitled to, receive from Strang and Piatt one-third of the profits earned and received by each of them from their interest in said firm; and Snyder agrees that he will pay Strang and Piatt an amount equal to one-third of any losses which they, or either of them, may sustain or be chargeable with by reason of their connection, as copartners or otherwise, with the firm of Strang, Piatt & Co. The parties agree to do all they can to further the interest of the firm of Strang, Piatt & Co., and "at all proper times, during the continuance of this co- partnership, give each other true and exact statements of the affairs and accounts of the firm." The agreement was to commence with the copartnership of Strang, Piatt & Co., and to continue until the same was dissolved, as provided for in the articles of agreement. It is, then, as the appellant contends, an agreement that "Snyder shall have an interest and become a copartner"; indeed, "that he is a copartner in the firm." Such is its language; and doubtless, if the firm of Strang, Piatt & Co. had been composed of Strang and Piatt alone, it would be sufficient to introduce Snyder into that firm, and clothe him with the privilege and subject him to the liability of a copartner. But that partnership itself was formed by a contract entered into, not only by Strang and Ammon Piatt, but by Lockwood, Clark, and Ammon B. Piatt; so that the firm was composed of five persons, of whom only two signed the instrument in question. It re- quired the voluntary consent of all these persons to create the firm; and it seems very clear that the declarations of any number less than the whole, however emphatic, that another person was also a mem- ber, could have no effect, either upon the firm or upon that person, for the simple reason that it would be untrue. It is also clear that the declaration of Snyder could not affect the firm or himself, unless (as is not the case here) he or the firm had been trusted on account of or by reason of that declaration. This is but reiterating a princi- ple of law, well established, that as a partnership can commence only by voluntary contract of the parties, so, when it is once formed no Sec. 1) ARISES OUT OF CONTRACT. 119 third person can be introduced into the firm as a partner without the concurrence of all the persons who compose the original firm. The consent of one or more to his introduction is not sufficient (Kingman V. Spurr, 7 Pick. [Mass.] 235 ; Murray v. Kneeland, 14 Johns. 318, 7 Am. Dec. 466; Marquand v. Manufacturing Co., 17 Johns. 534) ; for otherwise, says Story, "it would, in effect, amount to a right of one or more of the partners to change the nature and terms and obligations of the original contract, and to take away the delectus personas, which is essential to the constitution of a partnership." Story on Partnership, § 5. Second. It is, however, strenuously contended by the appellant's counsel that there is in this instrument an agreement that Snyder shall share the profits of the firm, and that, therefore, he became liable as copartner to pay its debts. We cannot find that the instrument contains such an agreement. It is not there in words, nor can it be implied from the language used. He is "to receive," not from the firm, but "from Peter O. Strang and Ammon Piatt," not any part or share of the profits made by the firm, but "one-third of the profits earned and received by each" of them from their interest in said firm; and in this connection we may con- sider that by the terms of the same agreement Snyder becomes liable for, and agrees to pay to Strang and Piatt, "an amount equal to one- third of all losses," not of the firm, but "that they may sustain or be chargeable with by reason of their connection," not "as copartners" simply, but "as copartners or otherwise, with the firm of Strang, Piatt & Co." We have examined 'all the cases referred to by the learned counsel for the appellant, and can find none which sustains his posi- tion that by such an agreement Snyder became liable for the debts of the firm. It has been seen that, in the case before us, the agreement is in terms with Strang and Piatt. They are to pay the defendant one-third of the profits which they receive from their interest in the firm, and he is to pay to them an amount equal to one-third of the losses which they sustain. The cases referred to rest on contracts with a firm or an individual trader (Leggett v. Hyde, 58 N. Y. 272, 17 Am. Rep. 244), or are between persons engaged in a joint enterprise (Manhattan Brass & Mfg. Co. v. Sears, 45 N. Y. 797, 6 Am. Rep. 177 ; Walden v. Sherburne, 15 Johns. 409 ; Ontario Bank v. Hennessey, 48 N. Y. 545; Chase v. Barrett, 4 Paige, 148; Champion v. Bostwick, 18 Wend. 175, 31 Am. Dec. 376; Cushman v. Bailey, 1 Hill, 526; Catskill Bank v. Gray, 14 Barb. 471 ; Hodgman v. Smith, 13 Barb. 302) ; and all rest upon the rule, stated in Grace v. Smith, 2 Wm. Bl. 997, that he who takes a moiety of all the 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 takfes from the cred- itors a part of that fund which is the proper security to them for the pa3'ment of their debts. "This," says Eyre, C. J., in Waugh v. Car- ver, 2 H. Bl. 235, "was the foundation of the decision in Grace v. 120 THE CREATION OF A PAETNEESHIP. (Ch. 2 Smith, and I think stands upon the fair ground of reason." This covers the case of one taking profits, as such, from the partnership property or the firm, but has no relation to a case where the profits are first to be earned and received by one person before the other can have any claim upon any part thereof. No action would lie against the firm in favor of Snyder. If the firm earned profits, Snyder could not compel a division; for in the general profits of the firm he has no interest. There is no privity be- tween himself and the firm; and, if he sued Strang and Piatt, he could recover only on showing that they had received profits. That they were earned would not be sufficient. He has no claim against the firm, or cause of action as principal. He must make out his case through Strang and Piatt, and this consideration alone would seem to be a decisive answer to the plaintiff's demand; for the plaintiff claims by virtue of the agreement, and not because Snyder has done anything to induce the plaintiff to deposit his money with the firm, relying on his responsibility or his relation to the firm. We are of opinion that the plaintiff, on the facts found by the referee, has no cause of action against the defendant Snyder, and that the judgment should be affirmed. Judgment affirmed.^ , 1 "Mining partnerships as distinct associations, with different rigljts and liabilities attaching to their members from those attaching to members of ordinary trading partnerships, exist in all mining communities. In Skillman V. Lachman, 23 Cal. 398, 83 Am. Dec. 96, * * * the Supreme Court of California * * * said that, 'whatever may be the rights and liabilities of tenants in common of a mine, not being worked, it is clear that, where several owners unite and co-operate in working the mine, then a new relation exists between them, and to a certain extent they are governed by the rules relating to partnerships. They form what is termed a "mining partnership," which is governed by many of the rules relating to ordinary partnerships, but also by some rules peculiar to itself, one of which is that one person may con- vey his interest in the mine and business without dissolving the partnership.' Associations for working mines are generally composed of a greater number of persons than ordinary partnerships; and it was early seen that the con- tinuous working of a mine, which is essential to its successful development, would be Impossible, or at least attended with great difficulties, if an associa- tion was to be dissolved by the death or bankruptcy of one of its members, or the assignment of his interest. A different rule from that which governs the relations of members of a trading partnership to each other was therefore recognized as applicable to the relations to each other of members of a mining association. The delectus personse, which is essential to constitute an ordinary partnership, has no place In this mining association." Per Field, J , in Kahn V. Smelting Co., 102 U. S. 641, 645, 26 L. Ed. 266 (1880). Sec. 2) COMPETENCY OF PAKTIEa. 121 SECTION 2.— COMPETENCY OF PARTIES. HOAGLIN V. C. M. HENDERSON & CO. (Supreme Court of Iowa, 1903. 119 Iowa, 720, 94 N. W. 247, 61 L. R. A. 756, 97 Am. St. Rep. 335.) McClain, J. The nature of the controversy involved in this case, and the questions of law arising therein, will be better understood from a brief narrative of the facts as shown in the evidence : H. A. Hoaglin had been engaged in business at Mt. Pleasant, and in January, 1900, sold out his business; receiving therefor a sum in cash entirely insufficient to pay the indebtedness contracted by him in conducting his business. Being without other property or resources, he proceed- . ed to settle with his creditors, who were pressing for payment of their respective claims, by paying to each a portion of the indebtedness ; taking receipts in full for the respective claims. It does not appear that these settlements we?e made on any uniform basis, or in pur- suance of any agreement for compensation with creditors. In some instances about one-third of the claims were paid; in other instances, more. One of these creditors was the defendant firm, and through their attorney they accepted one-third of their claim, and receipted in full for the entire amount. Thereupon H. A. Hoaglin, with his wife, who had previously been conducting a millinery business in her own name in connection with the business carried on by H. A. Hoaglin, removed to Ottumwa, and, as it is contended, entered into a contract to carry on a partnership business under the name of H. A. Hoaglin. This alleged firm was without other assets than $250 of the wife's money, and $500 borrowed by husband and wife on their joint note from the wife's sister. With this sum of money in hand, H. A. Hoag- lin, without disclosing the fact that he was acting as member of the alleged firm, or that his acts were done otherwise than in his individual capacity, ordered through one Meades, the traveling agent for de- fendant firm, a bill of goods amounting to $1,000; paying $575 by draft delivered to said Meades, and proposing to pay the balance on time. The order contemplated the immediate shipment of the goods from defendants' place of business, in Chicago, to H. A. Hoaglin, at Ottumwa. Meades, having no authority to accept an order forwarded the order to defendants for acceptance and approval, accompanied by the draft, whereupon defendants refused to accept the order, and notified Hoaglin that they would retain so much of the money as was necessary to satisfy the balance of their previous indebtedness against Tiim, and would pay over to him, or furnish him goods for, the surplus. Thereupon Hoaglin and wife, suing as partners, brought this ac- tion to recover from defendants the amount of money represented by the draft delivered by Hoaglin to Meades for. defendants, and ap- 122 THE CREATION OF A PAETNBRSHIP. (Ch. 2. propriated by defendants to their own use. The suit, as originally brought, was by attachment, and notice was by publication, but de- fendants entered an appearance and secured the dismissal of the at- tachment by giving bond to pay the amount of any judgment rendered. The case was presented to the jury in the lower court on the theory that if the evidence showed Hoaglin and wife to have been partners, and the money paid by Hoaglin to Meades to have been partnership funds, then the attempted application by defendants of the money re- ceived through Meades to the satisfaction of the individual debt of Hoaglin was improper, and plaintiffs, as partners, were entitled ta- recover the entire amount so paid; and counsel for appellants pre- sent the question whether husband and wife can be partners, con- tending that there was no lawful partnership, and that the money paid by Hoaglin was his own money, out of which defendants had, a right to recoup themselves to the extent of Hoaglin's previous in- debtedness to them. We shall not stop to consider the question whether the acceptance by defendants from HoagHn of a part of his previous indebtedness, under the agreement that the entire indebtedness should thereby be discharged, constituted an accord and satisfaction, but shall proceed at once to determine whether a legal partnership between husband and wife can exist in this state. The common-law rule that married women cannot enter into a contract of partnership seems to be based on their incapacity at common law to contract for any purpose. Collyer on Partnership (5th Am. Ed.) § 15; Parsons on Part. § 19; Weisiger v. Wood, 36 S. C. 424, 15 S. E. 597 ; De Graum v. Jones, 33 Fla. 83, 6 South. 925. The power of a married woman to enter into a contract of partnership, if it ex- ists at all in any of the states in which the common-law system pre- vails, must depend upon statutory authority; and in several cases the question has been considered as to whether particular statutory en- largements of the powers of married women as to contracting and managing their separate property have rendered them competent to^ enter into partnership relations. Thus it has been held that authority to acquire, hold, and dispose of property as a separate estate will sus- tain a contract of partnership made by a married woman with a per- son other than her husband. Abbott v. Jackson, 43 Ark. 212. And undoubtedly the general power to contract which is conferred upon married women in some states would support a contract of partner- ship. But on the question whether the statutes extending the powers of married women with reference to the making of contracts and the ownership and disposition of separate property confer the power to- enter into the relation of a business partnership with the husband, the- courts seem to be somewhat at variance, not only on account of differ- ences in terms of the statutes in which the power is conferred, but al- so on account of differences of opinion as to the bearing of rules of public policy. In Massachusetts it is said that authority to buy and'! sell and enter into contract with reference to her personal property,. Sec. 3) COMPETENCT OF PARTIES. 123 to carry on trade, and to sue and be sued, does not involve power to enter into a partnership with the husband. Lord v. Parker, 3 Allen, 127. To same effect in states where the statutes give a married woman the right to control and contract with reference to her property, see Payne v. Thompson, 44 Ohio St. 192, 5 N. E. 654; Fuller v. Mc- Henry, 83 Wis. 573, 53 N. W. 896, 18 L. R. A. 512; Haas v. Shaw, 91 Ind. 384, 46 Am. Rep. 607; Artman v. Ferguson, 73 Mich. 146, 40 N. W. 907, 2 L. R. A. 343, 16 Am. St. Rep. 572; Gwynn v. Gwynn, 27 S. C. 525, 4 S. E. 229 ; Gilkerson-Sloss Commission Co. V. SaHnger, 56 Ark. 294, 19 S. W. 747, 16 L. R. A. 526, 35 Am. St. Rep. 105. In other states, statutes to substantially the same effect have been held to so far enlarge the legal capacity of a married woman as to authorize her not only to enter into a partnership contract in general, but specifically to enter into such contract with her husband. Toof V. Brewer (Miss.) 3 South. 571; Suau v. Caffe, 12-2 N. Y. 308, 25 N. E. 488, 9 L. R. A. 593. It has been held, however, that where the statutes not only confer the right to own and contract with reference to her separate property, but also the general power to con- tract, the wife may not only enter into business partnership relations in general, but also specifically with her own husband, and this is said not to be contrary to any dictate of public policy. Burney v. Grocery Co., 98 Ga. 711, 25 S. E. 915, 58 Am. St. Rep. 342; Lane v. Bishop, 65 Vt. 575, 27 Atl. 499. And see Bernard & Leas Mfg. Co. V. Calvin, 12 C. C. A. 123, 64 Fed. 309. The question of public policy involved in these statutory enlarge- ments of the powers and liabilities of married women must be deter- mined with reference to the general tenor of the statutory provisions on the subject as they have been found in the different states. In this state, under the provisions of Code, §§ 3153, 3164, which give to married women the right to acquire, own, and dispose of property in the same manner and to the same extent as their husbands may do, and to make contracts and incur liabilities which may be enforced by or against them to the same extent and in the same manner as if they were unmarried, it is not open to question that a wife may become surety for her husband, and be liable generally on such contract of suretyship, may become the general creditor of her husband, may be joint owner of property with him, and may be his agent, or may make him her agent, in the transaction of business. Citation of au- thorities to support these propositions would be wholly unnecessary. These unquestioned powers of a married woman in this state to deal with her husband would seem to cover all the powers and liabilities involved in entering into or continuing the relation of partner with her husband. The essential characteristics of a partnership seem to be joint ownership of property, and authority of each partner to bind the other partners by his acts with reference to the partnership property, and also to impose upon the other partnership liability. As these re- lations may be separately sustained between husband and wife, we 124 THE CREATION OF A PARTNERSHIP. (Ch. 3 see no reason why they may not be collectively created by entering into and carrying on the relation involved in the formation of the en- tity known as a partnership. The only objection which occurs to us is that involved in the denial of the capacity of husband or wife to maintain a suit in a court of law or equity against the other, except as such power is expressly conferred, as decided in Heacock v. Hea- cock, 108 Iowa, 540, 79 N. W. 353, 75 Am. St. Rep. 273, in which we have held that the relations of husband and wife to each other are such as to preclude a suit by the one against the other for breach of contract or for tort, unless it be for the preservation or protection of the separate property ; and it is argued that this inability of the wife to sue the husband would preclude the existence of a business part- nership arrangement between them. But we do not think that the conclusion follows. The same argument would lead to the result that a valid contract cannot be made between them, such as a contract for the repayment of money advanced by one to the other; and yet, as we have suggested, that is not the law of this state, and there is no intimation in the Heacock Case that it was intended by that decision to declare that such contracts are necessarily invalid. It, no doubt, might at one time have been reasonably argued that, inasmuch as a right of action by the wife against the husband was denied to her, she was not competent to voluntarily enter into contract or joint property relations with him, such as would involve for their protec- tion a general right to sue. But the time for that argument is past. The right to contract with the husband is now so well established that it would be inexcusable to say that its existence is negatived by a holding that public policy forbids a suit by the wife against the hus- band on accQUnt thereof. It may well be suggested, also, that there is express authority for a suit by the wife against the husband to recover her property, or any right growing out of the same (Code, § 3155), and therefore that, as the wife may at any time terminate any business partnership relation which may exist with her husband, and thereby become practically a joint owner only with him in the partnership property, there would seem to be no impossibility of sustaining an action by her against him for any right growing out of their joint ownership. In short, we think that, in view of the statutory provisions extending the legal powers and rights of married women, we cannot say that there is any public policy recognized in this state which precludes the existence of a business partnership relation be- tween husband and wife. None of the cases holding that such relation cannot exist are applicable to a condition of affairs as to the wife's capacity to make general contracts, and own and control her own prop- erty, such as exists in this state, except that of Seattle Board of Trade V. Hayden, 4 Wash. 263, 30 Pac. 87, 33 Pac. 324, 16 L,. R. A. 530, 31 Am. St. Rep. 919, and Haggett v. Hurley, 91 Me. 543, 40 Atl. 561, 41 L. R. A. 362, and we find ourselves unable to indorse the views ex- pressed in these cases. Our conclusions find support not only in the Sec. 3) COMPETENCY OF PARTIES. 125 cases already cited, but also in Belser v. Banking Co., 105 Ala. 514, 17 South. 40 ; Schlapback v. Long, 90 Ala. 525, 8 South. 113 ; Fuller V. Ferguson, 26 Cal. 546; In re Kinkead, 3 Hiss. (U. S.) 405, Fed. Cas. No. 7,824; Clark v. Hezekiah (D. C.) 34 Fed. 663; Snell v. Stone, 23 Or. 327, 31 Pac. 663. * * * After considering all the questions raised in behalf of appellants, we reach the conclusion that the judgment of the trial court should be affirmed. SHIRK V. SHULTZ. (Supreme Court of Indiana, 1888. 113 Ind. 571, 15 N. E. 12.) Suit by appellant, Milton H. Shirk, an infant, by his next friehd, Mary Shirk, for appointment of a receiver to take charge of the as- sets of the firm of which he was a partner, and after converting them into money to first pay him the amount invested by him therein, and apply the balance to the payment of the firm debts. Zoi,i,ARS, J. Appellant alleges in his complaint that in October, 1884, when he was a minor, he entered into partnership with appellee for an indefinite time, in the business of upholstering and dealing in furniture, under the firm name of Shirk & Shultz; that he still is a minor ; that he invested in the business, $500 ; that the firm has on hand furniture and goods of the value of $850, and is in debt over $600 ; that "he is advised by his guardian to renounce such partnership, and withdraw from said firm, and he hereby renounces such arrange- ment, and asks to avoid, annul, and undo all of his obligations in that behalf" ; that Shultz is insolvent, and that the firm creditors will ex- haust the assets of the firm, unless a receiver shall be appointed to take charge of them, etc. The prayer is for the appointment of a receiver to take charge of the assets of the firm, and convert them into money, and pay, first, to appellant the amount invested by him, and, second, the firm debts. The court made a special finding of facts, in substance, that in October, 1884, Shirk & Shultz entered into partner- ship, and continued in business until the commencement of this ac- tion, in August, 1885. Shirk is a minor and has a guardian. He en- tered into the partnership, and put into the business $271.40, with the consent of his guardian. Of that amount, $74.50 was paid to Shultz, to be used in the purchase of goods for the firm, and it was so used. The balance of the $271.40 was paid by Shirk on the debts of the firm, for goods, and labor of employes. During the existence of the firm, Shirk drew out $100. Shultz put into the business $260, and drew out nothing. The' assets of the firm, at the time this suit was com- menced, amounted in value to $800, and its debts aggregated $700. Shultz is insolvent. Upon the facts so found, the court below conclud- ed, as a matter of law, that the firm should be dissolved, and that a receiver should be appointed to take charge of the firm assets, con- 126 THE CBEATION OP A PARTNERSHIP. (Ch. 2 vert them into money and pay, first, the costs of this suit; second, the firm debts, and third, divide the surplus, if any, between the partners. A receiver was accordingly appointed. Appellant excepted to the conclusions of law, and contended, and still contends, that, upon the facts found by the court, he is entitled to have refunded to him, from the assets of the firm, the amount which he invested, in preference to the partnership creditors and all others. Whether or not he is so entitled is the one question for decision. The facts in the case of Dunton v. Brown, 31 Mich. 183, were these : Dunton, a minor, entered into partnership with Brown, and put about $100 into the business. After the business had been continued for about three months, Dunton informed Brown that he would no longer continue as a partner, and that if he remained any longer, he must be paid for his services. To that, Brown would not consent. Dun- ton went away for a while, but subsequently returned and continued for nine months. After leaving again, he brought an action to re- cover back the $100 with interest, and for his services. It was held that he could not maintain the action. In speaking of the partnership agreement, it was said: "It is at best only voidable; and we have found no authority which enables the infant or his guardian to de- termine whether a voidable contract shall be affirmed or annulled while the infancy continues. It appears to be a matter for his own decision when he arrives at mature age. * * * And it is worthy of consideration whether, inasmuch as the partnership business contin- ued and ended before suit, and before majority, it does not come with- in the rule which protects executed contracts in many cases. Squier v. Hydliff, 9 Mich. 274. Without deciding what may happen when the in- fant reaches majority, we think it impossible to sustain an implied assumpsit now, against the terms of the only agreement ever made, which was certainly not a nullity." In the case of Bush v. Linthicum, 59 Md. 344,^ one partner brought a suit for the dissolution of the firm, and the appointment of a receiv- er to take charge of the firm assets, and pay the firm debts, etc. In bar of the suit, the other partner interposed the plea of his infancy. In the decision of the case, after citing and approving the Michigan case above and the case of Armitage v. Widoe, 36 Mich. 130, which followed it, the court said: "Having formed this partnership, he can- not so far repudiate it during his minority as to escape such conse- quences of partnership as do not involve personal liability for claims 1 In disposing of this case in the circuit court, Miller, J., said: "All the books upon partnership lay down the proposition that an infant may become a partner with an adult. It is a contract not absolutely. void, but one which the infant may stand to or repudiate, at his election. While he remains a partner he has the rights and powers of a partner. He has equal right with his copartner to the possession of the assets of the firm, to collect the debts due it, and he has also the power to contract debts in the name of the firm, which, though he may himself subsequently repudiate, and get rid of personal responsibility, therefor, are still binding on his copartner." Sec. 2) COMPETENCY OF PARTIES. 127 against the firm, or costs incident to the legal settlement of its affairs. Such partnership must be dissolved as any other ; and the partnership assets must be assignable to partnership creditors. What his rights may be as against his adult copartner, when he reaches majority, we do not decide." The case of Kitchen v. Lee, 11 Paige (N. Y.) 107, 42 Am. Dec. 101, frequently cited by text-writers, was this: Kitchen and Lee were partners. During the existence of the partnership, they con- tracted debts as partners. Kitchen retired from the business, and re- linquished to Lee the goods of the firm, upon the condition that he would pay, or procure to be paid, the debts then due from the firm, and indemnify him. Kitchen, against the same. Previous to the re- tirement of Kitchen from the firm, Lee represented to him that he was 31 years of age. Subsequent to the dissolution of the firm, Lee refused to pay the firm debts, upon the ground that he was a minor, and not legally liable to pay such debts; and made a pretended sale of the goods to Price, who paid no consideration, and took them with knowledge of the facts that the firm debts were not paid, and that the sale to him was fraudulent as against Kitchen. Stating the above facts in his bill. Kitchen prayed for the appointment of a receiver to take charge of the goods and apply them to the payment of the part- nership debts. To the bill Lee pleaded that at the time of making the agreement to pay the firm debts he was a minor, and that Kitchen had notice of that fact. Walworth, Chancellor, held that the contract on the part of Lee to pay the debts was one which he might affirm or repudiate, at his election; but that he could not be permitted to re- tain all the partnership effects, and at the same time refuse to per- form the condition upon which Kitchen's interest in the effects of the firm was to become his property; that if Lee elected to rescind the agreement made, upon the retiring of Kitchen from the business, the latter had a right to insist that his interest in the copartnership effects should be applied to the payment of the debts in the same manner as if the dissolution had not taken place. It was further said : "The rule of law on the subject is that an infant cannot be permitted to retain the property purchased by him, and at the same time repudiate the ■contract upon which he received it. * * * If the goods in this case had belonged to the complainant (Kitchen) exclusively, at the time of the agreement, and the infant had repudiated his agreement when he became of age, trover or replevin would have been the proper remedy for the goods, if they remained unchanged. Badger v. Phinney, 15 Mass. 359, 8 Am. Dec. 105. But, this being copartnership property, previous to the agreement, the only remedy of the complainant was in this court; and this plea of infancy is not a full defense to the case made by the bill." In the case of Moley v. Brine, 120 Mass. 324, three persons, one of whom was a minor, were partners, and put into the business different amounts. It was held that, upon a dissolution of the partnership, 128 THE CREATION OF A PABTNEESHIP. (Ch. 2 the assets, upon a settlement of its business, being less than the amount contributed by all to the common stock, should be divided among the partners, according to the amount of their contributions, and that the deficiency and loss should be borne by the partners in the same proportion in which they were to bear profits and losses; in other words, that the minority of one of the partners gave him no advantage in the particulars named. Of him it was said: "He actu- ally entered into the partnership, had the benefits of it while it lasted, and drew out the greater part of his contribution. The assets remain- ing at the time of the dissolution being insufficient to pay the claims of all the partners, the loss of capital must fall upon the three part- ners in equal proportions, and the infant cannot throw upon his co- partners the obligation of making up the deficiency." In the case of Furlong v. Bartlett, 21 Pick. (Mass.) 401, one of the partners made a general assignment in the name of the firm, of all the partnership property, in trust for the payment of the debts of the company, and delivered the property to the assignee. The other partner, who was a minor, ratified the assignment, but, on coming of age, brought an action against the assignee for the alleged unlaw- ful taking and asportation of the property. It was held that tres- pass would not lie. In the decision of the case, it was said: "The court entertains strong doubts whether, under the pecuHar circum- stances of this case, any action will lie, or whether the plaintiff has any remedy, unless for his share of the balance, if the partnership should be ultimately solvent; but of this, as it is not now before the court, they express no opinion." The case in 120 Mass. 324, is based upon the proposition that where an infant has enjoyed the benefits of that for which he paid his money, he cannot recover back the money. In support of the conclu- sion reached, the court cited Breed v. Judd, 1 Gray (Mass.) 455; Holmes v. Blogg, 8 Taunt. 508 ; Aldrich v. Abrahams, Hill & D. 423 ; Medbury v. Watrous, 7 Hill (N. Y.) 110; Heath v. Stevens, 48 N. H. 251. The case of Breed v. Judd was based, really, upon two prop- ositions: First, that, in order to rescind a contract, an infant must place the other party in statu quo; and, second, that an infant cannot rescind an executed contract where he has enjoyed the benefits of it. The ground of the judgment in the case of Holmes v. Blogg was that the infant had received something of value for the money he had paid, and that he could not put the other party in the same position as be- fore. For those reasons it was held that the infant could not recover back the money he had paid on a lease. In Aldrich v. Abrahams it was said : "It has been holden that by avoiding an executory contract, the infant only cancels his obligation to perform it. He does not ac- quire the right to recover back what he had paid, or for services which he had rendered, under the agreement while it remained in force. In the case of Medbury v. Watrous, the court indorsed the doctrine that where an infant pays money on a contract, and enjoys the benefit of Sec. 2) COMPETENCY OF PARTIES, 129 it, and then avoids it, he cannot recover back the consideration paid; but suggested that if he has but partially enjoyed the benefits of the contract, he ought to be allowed to recover the difference. It was an- nounced as the law, in the case of Heath v. Stevens, that an infant, upon rescinding an executed contract, may recover for what he has done or paid under it, provided he restore or account for what he has received under the contract. It will be observed that the decision in the Michigan case above cited, is based upon the proposition that an infant cannot disaffirm a partnership agreement during his minority. The reasoning in that case was adopted in the Maryland case. The decision in the case in Paige was based largely upon the proposition that an infant cannot be permitted to retain the property purchased by him, and at the same time repudiate the contract upon which he purchased it. It may be said of most, if not of all, the propositions upon which the decisions in the cases cited are based, that they have not been regarded as the law in this state. We have stated them for the purpose of determining whether or not the conclusions in those cases may be regarded as cor- rect, notwithstanding the propositions upon which they rest may be regarded as incorrect. The holdings by this court have been that all voidable contracts by an infant in relation to personal property may be disaffirmed by him during minority. Carpenter v. Carpenter, 45 Ind. 142; Indianapolis Chair Mfg. Co. v. Wilcox, 59 Ind. 429, and ' cases there cited; Ayers v. Burns, 87 Ind. 245, 44 Am. Rep. 759, and cases there cited ; Rice v. Boyer, 108 Ind. 472, 9 N. E. 420, 58 Am. Rep. 53, and cases there cited, including cases by the Supreme Courts of Vermont, Massachusetts, and New York. In support of the right of infants to disaffirm such contracts during minority, see, also, Tyler, Inf. (2d Ed.) 70, 72, and cases there cited; Schouler, Dom. Rel. § 409 ; 1 Lindl. Partn. 83. The Supreme Court of Mary- land, since the case above cited from that court, has held that an in- fant may thus disaffirm during minority. Adams v. Beall, 67 Md. 53, 8 Atl. 664, 1 Am. St. Rep. 379. And so it has been the holding of this court that, in order to disaffirm and maintain an action during minority for his property or for money paid on a voidable contract, it is not necessary for the infant to return what he has received, or to place the other party in statu quo. Pitcher v; Laycock, 7 Ind. 398, and cases there cited; Miles v. Lingerman, 24 Ind. 385; Briggs v. McCabe, 27 Ind. 327, 89 Am. Dec, 503 ; Towell v. Pence, 47 Ind. 304; Carpenter v. Carpenter, supra; White v. Branch, 51 Ind. 210. The statute of 1881 has changed the rule as to real estate, but that change is not material here. Section 2945, Rev. St. 1881. And so, upon ample authority, this court has repudiated the doctrine that "if an infant advances money on a voidable contract, which he afterwards rescinds, he cannot recover this money back, because it is lost to him by his own act; and the privilege of infancy does not extend so far as to restore this money, unless it was obtained from him by fraud." Gil.Part. — 9 130 THE CREATION OF A PARTNERSHIP. (Ch. 2 House V. Alexander, 105 Ind. 109, 4 N. E. 891, 55 Am. Rep. 189, and cases there cited. The cases thus reviewed lend aid to the proposition that, in the case before us, appellant cannot, through the instrumentality of the court exercising equitable powers, and the receiver appointed by it, have the assets of the firm appropriated in the way of refunding to him what he invested in the business, and thus leave the firm crechtors wholly or partially uvipaid. And, so far as they sustain that proposi- tion, we approve of them, although disapproving, in the main, the reasoning upon which they rest. Had appellant purchased the goods on his own account, and paid for them, he might have disaffirmed the contract, and recovered the amount paid, without first returning, or offering to return, them to the person from whom he purchased them. It does not follow from that, however, that, after having thus disaf- firmed the contract, he could, nevertheless, hold the goods as against the person from whom the purchase was made. He would not be al- lowed to retain the goods after having thus recovered what he paid for them. When an infant thus repudiates a contract, he repudiates it for all purposes. He cannot repudiate it so as to escape payment for an article purchased, and still hold the article as against the per- son from whom the purchase was made. As was said in the case in Paige, supra, when a contract is thus repudiated, the vendor may have his action to recover the goods from the infant, if they remain in his hands unchanged. And so, if appellant had purchased the goods on his own account, he might have disaffirmed the contract, and refused to pay for them, without returning or offering to return them to the vendor. But, after having thus disaffirmed the contract, and refused to pay, he could not hold the goods as against the vendor. See Kitchen v. Lee, supra ; Rice v. Boyer, 108 Ind. 472, 9 N. E. 420, 58 Am. Rep. 53. What he could not do otherwise, he certainly cannot accomplish through a court of equity. Having gone into court, and asked that the assets of the firm should be taken charge of by it through a receiver, he must be held to have consented that the court shall deal with them and the rights of all concerned as the law and equity may require. Having thus invoked the interposition of the court, he must be held to have consented that it shall close out the business, so as to settle the ultimate rights of the parties. If it be said that his disaffirmance of the contract is such as would otherwise have relieved him from the obligation to pay for the goods, then the court having charge of the goods has the right to see to it that they, or the money that may be reahzed from the sale of them, shall be returned to vendor. In our judgment, however, appellant's course has been such as to ratify the purchase of the goods, and all that has been done by the firm. He states in his bill that he "renounces the partnership arrangement, and asks to avoid and annul all of his obligations in that behalf": but, at the same time, he treats the goods and assets on hand as part- Sec. 2) COMPETENCT OF PARTIES. 131 nership assets, and asks the court to take charge of and deal with them as such. His disaffirmance puts an end to the contract by which he became a member of the firm; but by asking the court to take charge of the goods as assets of the firm, as to them, he not only does not disaffirm, but ratifies all that was done in the purchase of them. As to them, he cannot disaffirm, and, at the same time, treat them as partnership assets. Having treated them as assets of the firm by asking the court to deal with them as such, the court will deal with them as partnership assets, as in any other case, and apply them first to the payment of the debts of the firm. 2 L,indl. Partn. *1040. This is not an action against the other party to recover a personal judgment against him for the amount paid into the business by appel- lant. What might be the rights of the parties in such an action, we do not decide. It is sufficient here that, in our judgment, the conclu- sions of law by the court below upon the facts found were correct, and the proper decree was entered. Judgment affirmed. MERCHANTS' NATIONAL BANK v. WEHRMANN et al. (Supreme Court of Ohio, 1903. 69 Ohio St. 160, 68 N. B. 1004.) This was an action by WilHam F. Wehrmann against the Mer- chants' National Bank and others to establish a partnership liability on the part of the. bank with a certain Elsmere Syndicate, for debts incurred in the operations of such syndicate. The court below found the bank liable. A petition in error was filed by the bank to reverse this judgment. BuRKET, C. J. The Merchants' National Bank of Cincinnati is a corporation organized under the national banking laws of the United States, and the Elsmere Syndicate was a partnership consisting of forty, shares, each partner holding one or more shares, and each share evidenced by a certificate, as shown in the foregoing statement of facts, and which certificates were transferable on the books of the syndicate; and such transfers were intended to make the transferee a partner in the syndicate, instead of the transferror, without a dis- solution of the partnership. The circuit court finds that the bank be- came owner by transfer of nine shares of this syndicate or partner- ship, which shares were taken by the bank to secure the payment of a large indebtedness owing to said bank for loans by it made to one of its customers in the usual course of business. The bank, in accept- ing said transfer, evidently regarded it as a collateral ; but it so treat- ed the shares, and so transacted the business as to said shares, that the circuit court found that the bank became the owner of the shares, and there was evidence warranting such finding. The case must there- fore be determined upon the theory that the bank held the shares as owner, and not merely as collateral — the purpose of such ownership, 132 THE CREATION OF A PARTNERSHIP. (Ch. 2 however, being to secure the ultimate payment of said indebtedness out of the proceeds of said shares; and, to tliat end, it was necessary that the property of said syndicate should be put into such condition as to yield the most money, and this is what the trustees of the syndi- cate attempted to do ; and, in so doing, debts were incurred, which the syndicate was unable to pay, and, after all its property had been con- sumed in paying said debts, a large debt still remained. * * * But conceding that a national bank may take shares in another bank as collateral security for a new loan, or to secure the payment of an old one, and that it may become the owner of such shares in at- tempting to realize on such collateral, and that it may thereafter be liable to creditors on its individual liability as such shareholder, yet that falls far short of holding a national bank liable as a partner in a partnership, and liable as such partner for not only its own share of the debts of the firm, but also the debts of its copartners. The in- dividual lilability of a holder of shares in a national bank is in its nature several, and not joint (United States v. Knox, 102 U. S. 422, 26 L. Ed. 216), while the Hability of a partner for partnership debts is, as to creditors, usually held to be joint; but some cases hold it to be joint and several. The individual liability is an inseparable incident to national bank shares, for which the lawful holder is Hable; but this liability is his own debt, and attaches to a specific several article of his property — the share of stock — and is therefore limited, and cannot exceed the face value of the stock. But in the case of shares in a partnership, the liability of a partner is not for a specific amount adhering to his share as an incident, and limited to a certain amount ; but the only limitation is the whole indebtedness of the firm, and which in many cases would far exceed the entire resources of the bank, and drive it into insolven- cy. The purpose of allowing a national bank to take collateral secur- ity is to enhance its solvency, and not to permit it to enter into wild speculations as a partner under the pretext of enforcing its rights as a pledgee or owner. "It is settled that the United States statutes rel- ative to national banks constitute the measure of the authority of such corporations, and that they cannot rightfully exercise any powers ex- cept those expressly granted, or which are incidental to carrying on the business for which they are established. Logan County Bank v. Townsend, 139 U. S. 67, 73, 11 Sup. Ct. 496, 498, 35 L. Ed. 107." California Bank v. Kennedy, 167 U. S. 363, 366, 17 Sup. Ct. 831, 833, 42 L. Ed. 198. To become a member of a partnership in any manner or for any purpose is not incidental to carrying on the business for which national banks are established, and is certainly not expressly granted. The power, therefore, does not exist. The liabihties for which a national bank must respond are such only as are created or incurred by its officers, acting in the capacity of officers of the bank alone, and not in connection with other trustees or officers of other companies. Were Sec. 3) FORMALITIES. 133 it otherwise, the other trustees or officers might outnumber the officers of the bank, and impose a burden on the bank which would ruin it; and thus the bank would be controlled, not by its officers, btft by out- siders. The officers of a bank cannot delegate their powers to others. It is therefore clear that a national bank cannot be a partner in a copartnership, and cannot incur a partnership liability. The same has been held as to coporations in this state. Geurinck v. Alcott, 66 Ohio St. 94, 63 N. E. 714. The first subdivision of the syllabus was omitted by mistake of printer, but is found in the headnote, and al- so in the index, and is as follows : "A corporation cannot be a member of a partnership." * * * Judgment reversed. SECTION 3.— FORMAEITIES. MARSH V. DAVIS et al. (Supreme Court of Kansas, 1885. 33 Kan. 826, 6 Pac. 612.) HoRTON, C. J. This was an action for the dissolution of a partner- ship, and for an accounting. The evidence conduced to show: That prior to March 12, 1875, there existed at lola, in this state, a firm, com- posed of W. E. Davis, George S. Davis, and Elias Bruner, engaged in the milling business under the name of W. E. Davis & Co. That the firm were then the owners of a grist and saw mill, and certain per- sonal property, and tracts of land, all used for partnership purposes, and in connection with the mill. That on March 13, 1875, it was verbally agreed between the members of the firm that the plaintiff should be taken into the partnership as a member thereof, on the fol- lowing terms : All the property of the partnership was valued at $12,000 ; each partner was to have an equal share therein ; the plaintiff was to pay $3,000, but it was 'understood "that he was to have his share in the partnership without interest on this sum until such a time as the proceeds of the mill or business made it." That it was further agreed among all the members that the partnership should be consummated by an entry in the journal and ledger books, setting forth that the parties had associated themselves together as partners, and the amounts invested by each member were to be shown by his credits on the ledger. That the entries upon the journal and ledger were made in accordance with this agreement. That on March 13, 1875, the plaintiff was permitted to go in possession jointly with the other parties. That all the parties acted on the agreement until about the middle of November, 1882. That the partnership after March 13, 1875, continued to do business under the firm name of W. E. Davis 134 THE CKEATION OF A PARTNERSHIP. (Cll. 2 & Co. That it was the particular duty of plaintiff to keep the books of the firm, and look after such other business as he could. That at the formation of the new partnership on March 12, 1875, the grist- mill was somewhat dilapidated, and was not making good flour. That the sawmill was very old, and pretty well worn out. That W. E. Davis and G. S. Davis were brothers. That- the wife of plaintiff was the sister of W. E. and G. S. Davis, and also the sister of the wife of Elias Bruner. That -the plaintiff kept the books, and also collected for the firm, borrowed money, brought suits against different parties, and did almost everything that was to be done to further the interests of the firm. That the defendants allowed him to hold himself out to the public as a partner, to sign the firm name to negotiable paper, subscriptions to public enterprises, and officials' bonds, to bring suits, and defend suits, as a partner. That land was condemned for a mill- dam. That plaintiff paid the money therefor from the proceeds of the business. That a dam was constructed across the Neosho river, where the mill is now located. That the old mill was taken down and moved to the new location in the spring of 1880. That a new mill was made out of it; that is, the old mill was rebuilt, and considerable new machinery put in it. That the expense of doing this was over $4,000. That about $1,500 was borrowed. That the balance of the money was paid from the proceeds of the mill. That the defendants accepted $110 they owed him prior to March 12, 1876, as part pay- ment of the $3,000, and used it in the partnership business. That the plaintiff also paid between $50 and $60 upon the purchase price of his interest in the firm after he became a member thereof. That during the partnership he drew out $1,900. That about the middle of November, 1882, plaintiff was excluded by the defend- ants, without any good reason or excuse, from further partic- ipation in the partnership, and was forbidden by the other partners from exercising any rights or control over the partnership business or property. That at the time of such exclusion the property of the firm was worth about $30,000, having increased from $12,000 in 1875 to $30,000 in 1882. After the introduction of all the evidence, on the part' of the plain- tiff, that the court would admit, the defendants interposed, and filed a demurrer thereto, upon the ground that no cause of action was proved. The court sustained the demurrer, and plaintiff excepted. This is the important ruling complained of. To sustain this ruling, the defendants contend that the contract of March 12, 1875, being for an interest in real estate, is, as to such real estate, void, under the statute of frauds ; and that, being void as to the real estate, it is also void as to the personal property, and the right to become a part- ner, which, as defendants allege, were parts of an entire and indivis- ible contract. The proposition is conceded by the defendants, that where real estate is purchased with partnership funds, for partnership purposes, after the partnership has been formed, such real estate is Sec 3) FOKMALITIES. 133 to be treated as part of the partnership property, and, as a conse- quence, personal estate. It is also well settled "that parol testimony is admissible to prove a resulting trust in relation to real estate, and that land purchased in the name of one partner, for the use and benefit of the firm, raises a resulting trust which will be enforced." Story, Eq. Jur. §§ 1206, 1207; Scruggs v. Russell, 1 McCahon, 39. These principles are applicable to this case and decisive against the defendants. When the plaintiff was taken into the partnership of W. E. Davis & Co., on March 12, 1875, as the firm was then in existence, and in the possession of real estate purchased for partnership pur- poses, and then appropriated to those purposes, such real estate was partnership property, and the plaintiff, by acquiring' an interest in the partnership by verbal contract, and thereafter having acted under the contract as one of the partners, with the consent of all the mem- bers, is not to be deprived of his interest in the partnership, either as to the personal property or real estate, on account of the statute of frauds. The cases establish that a partnership in any branch of trade or business may be shown by parol as an existing fact, and that what- ever real estate is held for the purpose of such business is regarded as an incident thereto, and the law will imply a trust in favor of the partnership, however the lands be held in law. For an illustration: If a mercantile firm carrying on the business of buying and selling goods, and as an incident to the business owning and having in posses- sion the building in which the business is transacted, takes into the partnership another person, who purchases an interest in the partner- ship, and, as a partner, is let in possession of the partnership proper- ty, and all the parties act on the agreement, such person is not to be deprived of his right in the real estate held by the firm at the time he became a member thereof because his agreement with the other part- ners was not in writing. If the partnership be proved, that will suf- fice to establish a partnership trust in the land intended and treated by all the partners as partnership property, however the land be held ; and this will not be incompatible with the conditions of the statute of frauds. Scruggs v Russell, supra; 1 Lindl. Partn. 87-90; Bird V. Morrison, 12 Wis. 138; Borden v. Whaling Co., 10 Cush. (Mass.) 458; Browne, Frauds, §§ 259-263. We think it is immaterial whether the real estate in this case was bought with partnership funds, for partnership purposes, after the formation of the partnership, or whether a part of the real estate was put into the firm as partnership property at the formation of the new firm on March 12, 1875, if the parties have acted on the agreement and become partners. In such case, the statute of frauds ceases to be applicable. Smith v. Tarlton, 2 Barb. Ch. (N. Y.) 336; Bissell v. Harrington, 18 Hun (N. Y.) 81. The judgment of the district court will be reversed, and the cause remanded for further proceedings in accordance with the views here- in expressed. 136 THE CREATION OF A PAETNEUSHIP. (Cll. 3 EARL, C, in CHESTER et al. v. DICKERSON et al. (Commission of Appeals of New York, 1873. 54 N. Y. 1, 13 Am. Rep. 550.) It cannot be questioned that two or more persons may become part- ners in buying and selling land. There is nothing in the nature or es- sence of a partnership which requires that it should be confined to ordinary trade and commerce, or to dealings in personal property. Story on Part. §§ 82, 83; Collyer on Part. §§ 3, 51, and note; Dud- ley V. Littlefield, 21 Me. 418 ; Sage v. Sherman, 2 N. Y. 417 ; Mead V. Shepard, 54 Barb. 474; Pendleton v. Wambersie, 4 Cranch (U. S.) 73, 2 L. Ed. 554; Thompson v. Bowman, 6 Wall. (U. S.) 316, 18 L. Ed. 736; Hoxiey. Carr, iSumn. (U. S.) 173, Fed. Cas. No. 6,802, Kent says : "A partnership is a contract of two or more persons to place their money, effects, labor, and skill, or some or all of them, in law- ful commerce or business, and to divide the profit and share the loss in certain proportions; and it is not essential to a legal partnership that it be confined to a commercial business. It may exist between attorneys, conveyancers, mechanics, owners of a line of stagecoaches, artisans, or farmers, as well as between merchants and bankers." 3 Kent, Com. 24, 38. And why may it not exist between dealers and speculators in real estate? But, as it is claimed that the partnership in this case existed by parol before the execution of the written agreement dated November 28, 1864, it is necessary to inquire whether a partnership, in refer- ence to lands, can be formed and proved by parol. Upon this ques- tion there is considerable conflict in the authorities. On the one hand, it is claimed that a parol agreement for such a partnership would be within the statute of frauds, which provides that no estate or inter- est in lands shall be created, assigned, or declared, unless by act or operation of law, or by a deed or conveyance in writing subscribed by the party creating, granting, assigning or declaring the same; and to this effect is the case of Smith v. Burnham, 3 Sumn. (U. S.) 435, Fed. Cas. No. 13,019. On the other hand, it is claimed that such an agreement is not affected by the statute of frauds, for the reason that the real estate is treated and administered in equity as personal prop- erty for all the purposes of the partnership. A court of equity having full jurisdiction of all cases between partners touching the partner- ship property, it is claimed that it will inquire into, take an account of, and administer all the partnership property, whether it be real or per- sonal, and in such cases will not allow the partner to commit a fraud or a breach of trust upon his copartner by taking advantage of the statute of frauds; and to this effect are the following authorities: Dale V. Hamilton, 5 Hare, 369 ; Essex v. Essex, 20 Beaven, 449 ; Bun- nell v. Taintor, 4 Conn. 568. A full discussion of the question is found in Dale v. Hamilton, and the reasoning and review of the cases there by Vice Chancellor Wagram are quite satisfactory. The general doc- Sec. 3) FOEMALITIE8. 137 trine is there laid down that "a partnership agreement between A. and B. that they shall be jointly interested in a speculation for buying, improving for sale, and selling lands may be proved without being evidenced by any writing, signed by or by the authority of the party to be charged therewith within the statute of frauds; and, such an agreement being proved, A. or B. may establish his interest in land, the subject of the partnership, without such interest being evidenced by any such writing." I am inclined to think this doctrine to be found- ed upon the best reason and the most authority. But whether it is or not it is not very important to decide in this case. Most of the conflict in the authorities has arisen in controversies about the title to the real estate after the dissolution of the partnership or the death of one of the partners. But suppose two persons, by parol agree- ment, enter into a partnership to speculate in lands, how do they come in conflict with the statute of frauds? No estate or interest in land has been granted, assigned, or declared. When the agreement is made no lands are owned by the firm, and neither party attempts to convey or assign any to the other. The contract is a valid one, and in pursuance of this agreement they go on and buy, improve, and sell lands. While they are doing this, do they not act as partners, and bear a partnership relation to each other? Within the meaning of the statute in such case neither conveys or assigns any land to the other, and hence there is no conflict witli the statute. The statute is not so broad as to prevent proof by parol of an interest in lands. It is simply aimed at the creation or conveyance of an estate in lands without a writing. If there was a parol agreement in this case before the writ- ten one, it was just like the one embodied in the writing, to wit, a partnership to purchase, lease, and take refusals of land, and then sell, lease, or work them for the joint benefit of the parties. This is not a controversy about the title to any of the lands taken or owned by the partners, but it simply relates to the conduct of the defendants while they were acting as partners ; and in such a case the statute of frauds certainly can present no obstacle to relief.^ COLEMAN V. EYRE. (Court of Appeals of New Tork, 1871. 45 N. T. 38.) Rapallo, J. The plaintiff was interested to the extent of one- fourth in the profits or losses of a shipment of coffee undertaken by him jointly with other parties. After the adventure had been begun, and before the coffee had reached its port of destination, it was mutually 1 "A contract forming a partnership to be continued beyond one year Is witliin the section of the statute of frauds which provides that every agree- ment which by its terms is not to be performed in one year from the making thereof is void unless it is in writing, and a partnership so formed is a partnership at will. Morris v. Peckham, 51 Conn. 128; Williams v. Jones, 138 THE CREATION OF A PAETNEESHIP. (Ch. 2 agreed between the plaintiff and the defendant that the latter should have one-half interest in the plaintiff's one-fourth interest in the ad- venture. The speculation resulted in a loss, and this action was brought to recover one-half of the plaintiff's proportion of such loss. It is now claimed on the part of the defendant that no vahd contract was made between him and the plaintiff; that inasmuch as the plaintiff had embarked in the speculation before and without reference to any arrangement with the defendant, and the defendant had not done or contributed anything to aid in the joint enterprise, there was no partnership, and no consideration for the undertaking of the plaintiff to give him one-half of the profits ; that therefore the defendant could not have enforced payment of half the profits if the adventure had been successful, and consequently no agreement on his part to con- tribute to the loss can be implied. This argument assumes that the agreement was simply that the de- fendant should have one-half of the profits which the plaintiff might make out of the adventure in case it should prove successful. But such was not the agreement proved. The agreement was that the de- fendant should share with the plaintiff in the adventure, and it seems to have been clearly understood that he should participate in the result, whether it should prove a profit or a loss. That it might result in a loss was contemplated by the parties. There is evidence in the case that the possibility of that event was the subject of conversation be- tween them at the time of making the contract; that the hope was then expressed that the plaintiff would not be compelled to call upon the defendant to contribute to a loss; and that afterward, when they did call upon him to contribute, he did not dispute his liability, but sought to reduce the amount by claiming a portion of the plaintiff's commissions. The evidence fully justified a finding that, in consideration of the agreement by the plaintiff to account to the defendant for half the profits in case of success, the defendant undertook to bear half the loss in the contrary event; and the intendment is that the referee did so find. Indeed, such is a proper construction of the actual find- ing. It is a clear case of mutual promises; and the obligation of each party was a good consideration for that of the other. Briggs v. Tillotson, 8 Johns. 304. The agreement was not within the statute of frauds. It was not an agreement for the sale of any personal property or chose in action, but an executory agreement, whereby one party undertook to bear one part of a possible loss in consideration of a share of an expected profit. 5 B. & C. 108; Jones v. McMlchael, 12 Rich. Law (S. 0.) 176; Essex v. Essex, 20 Beav. 442; Burden v. Barkus, 3 Giff. 412; 4 De G. P. & J. 42, 47 50; Reed's Stat. Fr. § 191 ; Lind. on Part. (25th Eng. Ed.) 80, 81." Per Eollett, C. J., in Wahl et al. v. Barnum et al., 116 N. Y. 87, 97, 22 N. B. 280, 5 L. R.' A. 623 (1889). But see Shropshire v. Adams (Tex. Civ. App.) 89 S. W. 448 (1905), contra. Sec. 4) roK what purposes. 139 The judgment of reversal and order granting a new trial should be reversed, and the judgment for the plaintiff entered on the report of the referee should be affirmed, with costs. Order of General Term reversed. SECTION 4.— FOR WHAT PURPOSES. CENTRAL TRUST & SAFE DEPOSIT CO. et al. v. RESPASS. (Court of Appeals of Kentucky, 1902. 112 Ky. 606, 66 S. W. 421, 56 I/. R. A. 479, 99 Am. St. Rep. 317.) Action by Jerome B. Respass against the executors of Solomon L,. Sharp for a settlement of partnership accounts. Judgment granting relief sought, and defendants appeal. Du RelIvE, J. Jerome B. Respass and Solomon L,. Sharp appear to have formed a copartnership, extending over several years, in the business of managing a racing stable, and, in connection with that business, were engaged in "bookmaking," or making wagers upon race horses. They seem, also, to have had an interest in a pool room at Newport. For the book business a separate account was kept by a cashier employed for the purpose. They had no regular time for mak- ing settlements with each other, but at various times, when requested, the cashier made out statements of the booking business of the firm. It appears from the testimony of Bernard, the cashier, that Sharp in November, 1897, handed him $4,724, and told him to deposit it to his (Sharp's) credit in the Merchants' National Bank of Cincinnati, Ohio, which was done. Sharp appears to have stated at the time that one-half of this fund belonged to Respass. It appears further that this was the "bank roll" of the bookmaking concern, in which each partner had an equal interest. At the same time he remarked that Respass had paid out $1,500 for the firm, and that he would see him in a few days and settle with him. Sharp died suddenly, before any such settlement was made. The money in the bank roll was on deposit to Sharp's credit. The racing business of the firm seems to have been almost entirely in the hands of Respass, who attended to the horses, trained them, entered them in races, and at times wagered on them for the benefit of the firm, which divided the profits or shared the losses, as the case might be. Respass brought suit against Sharp's executors for a settlement of the partnership accounts. The horses in the racing stable were sold under order of court, and various claims against the fund in court were made by Respass for expenses incurred in keeping, shoeing, clipping, training, and caring for the various 140 THE CREATION OF A PARTNERSHIP. (Ch. 3 horses, as well as for entering certain of the horses in stakes, and for wagers paid upon the horses "Fair Deceiver" and "Shannon." The business of breeding, training, and racing horses for purses is legal. The partnership for that purpose can undoubtedly be settled by the chancellor. The only question presented as to this matter is upon the correctness of the settlement made. [After allowing certain items for training and keeping the horses, and entering them for races:] Another item to which exception is taken consists of $700 ; being the amount of two bets made, lost, and paid by Respass on the horses "Fair Deceiver" and "Shannon." In view of the statutory law of Kentucky (see section 1955 et seq., Ky. St.), we are unable to see how any legal consideration can exist for a promise to reimburse to a partner any portion of any sum lost upon a bet on a horse race. In Lyons v. Hodgen, 90 Ky. 280, 13 S. W. 1076, it was held, in an opinion by Chief Justice Lewis, that this statute, pro- viding that "every contract, conveyance, transfer or assurance, for the consideration, in whole or in part, of money, property or other thing won, lost or bet in any game, sport, pastime, wager, or for the con- sideration of money, property or other thing lent or advanced for the purpose of gaming or lent or advanced at the time of any betting, gaming or wagering to a person then actually engaged in betting, gam- ing or wagering, shall be void" — applied to dealing in "futures"; that the process by which the money was won or lost was a wager, within meaning of the statute, which was designed to embrace every species of wagering, whether practiced at the time the statute was en- acted, or since devised. And in the opinion by the same judge in Sharp V. Com. (from Kenton county) 98 Ky. 574, 35 S. W. 553, it was held that betting upon horse races was gaming and illegal. We think it is well settled that a man who lends money to another, to be then bet on a horse race, cannot recover it back. And so it would seem that if A. agrees with B. that B. shall advance the money, and himself bet upon a horse race for their joint account, no action will lie by B. to compel A. to respond for his share of a bet which is lost. The statement of this proposition seems to decide it. It is a contract for an illegal venture. The whole contract is illegal. No right of action can arise out of that contract. This is exactly the position of Respass as to the two bets. He advanced the money to make them for himself and Sharp, relying upon Sharp's express or implied agreement to pay half the losses if loss should be incurred. Such a contract cannot be enforced in this state. A closer question is presented by the claim for a divison of the "bank roll." This $4,734 was, as found by the chancellor, earned by the firm composed of Respass and Sharp in carrying on an illegal business — that of "bookmaking" — in the state of Illinois. But though this amount had been won upon horse races in Chicago, it is claimed that, though secured illegally, "the transaction has been closed, and the appellee is only seeking his share from the realized profits from Sec. 4) FOB WHAT PURPOSES. 141 the illegal contracts, if they are illegal." On the other hand, it is claim- ed for appellants that, as to the bank roll, this proceeding is a bill for an accounting of profits from the business of gambling. It does not seem to be seriously contended that the business of "bookmaking," whether carried on in Chicago or in this common- wealth, was legal, for by the common law of this country all wagers are illegal. Irwin v. Williar, 110 U. S. 610, 4 Sup. Ct. 160, 28 L. Ed. 225. One of the most interesting cases upon this subject is that of Everet v. Williams — the celebrated Highwaymen's Case — an ac- count of which is given in 9 Law Quart. Rev. 197. That was a bill for an accounting of a partnership in the business of highwaymen, though the true nature of the partnership was veiled in ambiguous language. The bill set up the partnership between defendant and plain- tiff, who was "skilled in dealing in several sorts of commodities" ; that they "proceeded jointly in the said dealings with good success on Hounslow Heath, where they dealt with a gentleman for a gold watch"; that defendant had informed plaintiff that Finchley "was a good and convenient place to deal in," such commodities being "very plenty" there, and if they were to deal there "it would be almost all gain to them"; that they accordingly "dealt with several gentle- men for divers watches, rings, swords, canes, hats, cloaks, horses, bridles, saddles, and other things, to the value of i200 and upwards" ; that a gentleman at Blackheath had several articles which defendant thought "might be had for little or no money, in case they could pre- vail on the said gentleman to part with the said things"; and that, "after some small discourse with the said gentleman," the said things were dealt for "at a very cheap rate." The dealings were alleged to have amounted to £2,000 and upwards. This case, while interesting, from the views it gives of the audacity of the parties and their solicit- ors, sheds little light upon the legal questions involved, for the bill was condemned for scandal and impertinence, the solicitors were taken into custody and "fyned" £50 each for "reflecting upon the honor and dignity of this court," the counsel whose name was signed to the bill was required to pay the costs, and both the litigants were consequently hanged at Tyburn and Maidstone, respectively, while one of the solicit- ors was transported. This case is found referred to in the cases of Sykes V. Beadon, 11 Ch. Div. 170, 195, and McMullen v. Hoffman, 174 U. S. 639, 19 Sup. Ct. 839, 43 L. Ed. 1117. In the Sykes Case it was held, in the opinion by Sir George Jessel : "It is no part of the duty of a court of justice to aid either in carrying out an illegal contract, or in dividing the proceeds arising from an illegal contract between the parties to that illegal contract. In my opinion, no action can be maintained for the one purpose more than for the other." In Watson v. Fletcher, 7 Grat. (Va.) 1, the business of the firm had been the operation of a faro bank. One of the partners having died, the survivor sought an ac- counting of profits earned. The syllabus reads: "A court of equity will not lend its aid for the settlement and adjustment of the transac- 142 THE CREATION OF A PARTNERSHIP. (Ch. 3 tions of a partnership for gambling. Nor will it give relief to either partner against the other, founded on transactions arising out of such partnership, whether for profits, losses, expenses, contribution, or re- imbursement." To the same effect is Shaffner v. Pinchback, 133 111. 410, 2-1 N. E. 867, 23 Am. St. Rep. 624. In McMullen v. Hoffman, supra, it appeared that a partnership was formed for the purpose of obtaining a public contract by unlawful means, upon the terms of shar- ing the profits equally, and that the profits came into the hands of one partner. The other filed a bill for an accountmg, and was denied re- lief. Said the court : "We must therefore come back to the proposi- tion that to permit a recovery in this case is, in substance, to enforce an illegal contract, and one which is illegal because it is against pub- lic policy to permit it to stand. The court refuses to enforce such a contract, and it permits defendant to set up its illegality, not out of any regard for defendant who sets it up, but only on account of the public interest. * * * To refuse to grant either party to an il- legal contract judicial aid for the enforcement of his alleged rights under it tends strongly towards reducing the number of such trans- actions to a minimum. The more plainly parties understand that when they enter into contracts of this nature they place themselves outside the protection of the law, so far as that protection consists in aiding them to enforce such contracts, the less inclined they will be to enter into them. In that way the pubHc secures the benefit of a rigid ad- herence to the law." See, also, the cases of Snell v. Dwight, 120 Mass. 9; Morrison v. Bennett, 20 Mont. 560, 52 Pac. 553, 40 L,. R. A. 158 ; King v. Winants, 71 N. C. 469, 17 Am. Rep. 11 ; Watson v. Murray, 23 N. J. Eq. 257 ; Gould v. Kendall, 15 Neb. 549, 19 N. W. 483; Craft v. McConoughy, 79 111. 346, 22 Am. Rep. 171; Northrup V. Phillips, 99 111. 449; Wiggins v. Bisso, 92 Tex. 219, 47 S. W. 637, 71 Am. St. Rep. 837; Chicago, M. & St. P. R. Co. v. Railroad Co.,. 9 C. C. A. 659, 61 Fed. 993 ; Emery v. Candle Co., 47 Ohio St. 320, 24 N. E. 660, 21 Am. St. Rep. 819 ; Hunter v. Pfeiffer, 108 Ind. 197, 9 N. E. 124. Upon the other hand, a large number of cases are relied on on behalf of appellee. Many of these cases do not seem to us to bear directly upon the question here involved. We shall first consider the Kentucky cases : In Bibb v. Miller, 11 Bush, 306, the contest was between two persons, each of whom claimed title to the proceeds of a winning lottery ticket. The court was careful to say: "The ques- tion as to the legality of the sale of tickets and the distribution of prizes arises collaterally, and derives its importance solely from the fact that the plaintiffs in the action are compelled to rely on such sale and distribution in order to make out their title to the fund in controversy." In that case the corporation had recognized its obligation to pay, and voluntarily paid into court the amount claimed to be due on the coupon. The question there was whether the library company was acting pursu- ant to legal authority in selling the ticket and paying the prize distribut- Sec. 4) FOE WHAT PURPOSES. 143 ed to that ticket ; and the court held that, "in the absence of proof to the contrary, we must assume that it acted within the scope of the powers granted it by its act of incorporation." In Martin v. Richardson, 94 Ky. 183, 21 S. W. 1039, 19 L. R. A. 692, 42 Am. St. Rep. 353, a lottery ticket owned by one man had been fraudulently obtained from him by an- other and the proceeds collected. It was held that, the purchase of the ticket not being shown to have been made in a state where such purchase was illegal, the presumption was in favor of its legality. In Irwin V. Irwin, 107 Ky. 24, 52 S. W. 927, a lottery ticket, or its pro- ceeds, was given by a husband to his wife, and invested in real estate. It was held that, "whether the purchase was illegal or not, such trans- fer comes distinctly within the meaning and purview of the peremptory statute which requires the restoration of property obtained directly or indirectly from or through the other party by reason of the mar- riage." So, in Maize v. Bradley (Ky.) 64 S. W. 655, where, in an action to recover money had and received, it was claimed the fund had been placed in the hands of defendants to avoid taxation, it was held this defense was not available, as the fund had been reinvested, and a new contract entered into between the parties, untainted by the illegaHty of the original transaction. In the case at bar there was no division of the unlawful gains made by Sharp at Chicago. There was no new transaction with reference to them, such as the invest- ment of the fund, or any part of it, in horses, for their joint account. There was not even an accounting of the gains, accompanied by a promise to pay to Respass the amount ascertained to be due him under the terms of the illegal partnership agreement. There was simply a termination by death of an illegal partnership, with unlawful gains in the hands of one of the partners, an accounting for which is here sued for. We are cited to but two cases which seem to come up to the requirements of appellee's contention. Both of those cases have been subsequently questioned. There are many cases which come within the general terms of the doctrine laid down in Norton v. Blinn, 39 Ohio St. 145 : "Public policy does not require that one engaged in an unlawful enterprise should, by pleading it, shield himself from liability for the wages of his employes, agents, or servants. * * * It is contrary to public policy and good morals to permit employes, agents, or servants to seize or retain the property of their principal, although it may be employed in illegal business and under their con- trol. No consideration of public policy can justify such a lowering of the standard of moral honesty required of persons in these rela- tions. And again, if parties to an illegal contract waive the illegality and honestly account as between themselves, no other person can be heard to complain of such accounting. Hence we think that, if in making such settlement, one of the guilty parties should deliver prop- erty or money to an agent of another, to be delivered by the agent to his principal, such agent is bound to account therefor to his prin- cipal." It seems clear, also, that a wrongdoer who, by force or fraud. 144 THE CREATION OP A PARTNERSHIP. (Ch. 2 obtains money or property from another, or violates a trust imposed in him, cannot be heard to cliarge his victim with wrongdoing in the original obtention of the money or property. To this class belong the cases of Farmer v. Russell, 1 Bos. & P. 395; Tenant v. Elliott, Id. 2; Catts v. Phalen, 2 How. (U. S.) 376, 11 L. Ed. 306. And see Pol. Cont. 334, note. The doctrine as to such 'cases is aptly stated in Catts V. Phalen, supra: "Phalen & Morris had in their possession twelve thousand five hundred dollars, either in their own right, or as trustees for others interested in the lottery. No matter which, the legal right to this sum was in them. The defendant claimed and re- ceived it by false and fraudulent pretenses, as morally criminal as by larceny, forgery, or perjury; and the only question before us is whether he can retain it by any principle or rule of law." The cases which come nearest to supporting the contention of appellee are Sharp V. Taylor, 3 Phil. Ch. 801, and Brooks v. Martin, 2 Wall. (U. S.) 70, 17 E. Ed. 733. The former case was a partnership in a vessel registered in violation of the laws of both Great Britain and the Unit- ed States. Her voyages were profitable, but one partner, colluding with an outsider, obtained possession of the profits and refused to ac- count. The illegality of the traffic was relied on by him as a defense to an accounting. Said Eord Cottenham : "He is not seeking com- pensation and payment for an illegal voyage. That matter was dis- posed of when Taylor [the defendant] received the money, and plain- tiff is now only seeking payment for his share of the realized profits. * * * As between these two, can this supposed evasion of the law be set up as a defense by one as against the otherwise clear title of the other? Can one of two partners possess himself of the property of the firm, and be permitted to retain it, if he can show that in real- izing it some provision in some act of parliament has been violated or neglected? * * * The answer to this, as to the former case, will be that the transaction alleged to be illegal is completed and closed, and will not be in any manner affected by what the court is asked to do between the parties." This doctrine comes very close to appellee's contention, but, on examination, can be distinguished from the case at bar, and had been criticised and denied by Sir George Jessel, master of the rolls, in Sykes v. Beadon, supra, as well as in the case of McMullen v. Hoffman, 174 U. S. 639, 19 Sup. Ct. 839, 43 L. Ed. 1117. The case of Brooks v. Martin, 3 Wall. (U. S.) 70, 17 L. Ed. 733 — much relied upon by appellee — is explained and qualified by the Supreme Court in McMullen v. Hoffman, supra (page 668, 174 U. S., page 850, 19 Sup. Ct, and page 1128, 43 L,. Ed.), in the opinion by Mr. Justice Peckham : "The action was sustained upon the theory that the purpose- of the partnership agreement had been fully closed and completed, that substantially all the profits arising therefrom had been invested in other securities or in lands, and that therefore it did not lie in the mouth of the partner who had by fraud- ulent means obtained possession and control of these funds to sav to Sec. 4) FOR WHAT PURPOSES. 145 the other that the original contract was illegal." The case is also criticised in King v. Winants, 71 N. C. 473, 17 Am. Rep. 11, as fol- lows: "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 al- lowed 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 after- wards 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 transaction, not necessary to be mentioned in the settlement of the new business. And this illustrates the case of Brooks v. Martin, supra, so much relied on by plaintiff." See, also, Snell v. Dwight, 120 Mass. 9, 19 ; Morrison v. Bennett, 20 Mont. 560, 572, 52 Pac. 553, 40 L. R. A. 158 ; Gould v. Kendall, 15 Neb. 549, 556, 557, 19 N. W. 483 ; Wiggins v. Bisso, 92 Tex. 219, 225, 47 S. W. 637, 71 Am. St. Rep. 837. We conclude that in this country, in the case of a partnership in a business confessedly illegal, whatever may be the doctrine where there has been a new contract in relation to, or a new investment of, the profits of such illegal business, and whatever may be the doctrine as to the rights or liabilities of a third person who assumes obligations with respect to such profits, or by law becomes responsible therefor, the decided weight of authority is that a court of equity will not enter- tain a bill for an accounting. The judgment of the chancellor is therefore reversed, and the cause remanded, with directions to enter a judgment in accordance with this opinion. GIL.PAET.— 10 146 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 CHAPTER III. THE NATURE AND CHARACTERISTICS OF A PART- NERSHIP. SECTION 1.— VARIOUS CONCEPTIONS OE THE NATURE OF A PARTNERSHIP. Ex parte CORBETT. In re SHAND. (Chancery Division of High Court of Justice, 1880. L. R. ]4 Ch. Dlv. 122.) * * * On the 2-tth of September, 1864, C. J. Corbett grant- ed to Francis Shand, Charles Shand, Alexander Shand, and R. A. Robinson, who were then carrying on business in partnership as merchants, a lease of six rooms in the house No. 33 Rood Lane, in the city of London, for a, term of 13% years, less 13 days, from the 24th day of June, 1864, at an annual rent of £415. The lease con- tained a covenant by the lessees, jointly, and severally, to pay the rent and repair the premises. The rooms were occupied for the purpose of the partnership business, and the lease was as between the part- ners partnership property. Francis Shand died, and the business was thenceforth carried on in partnership by the other three lessees in the same rooms, until on the 12th of August, 1875, they were ad- judicated bankrupts. On the 30th of August, 1875, a trustee of their property was appointed, and he, on the 6th of October, 1875, obtain- ed leave from the court to disclaim the lease. He afterwards exe- cuted a disclaimer, and possession of the rooms was given up to and accepted by the lessor. The lessor afterwards relet the rooms, but at a lower rent. On the 14th of May, 1879, he tendered a proof against the joint estate of the bankrupts, and also against their sep- arate estates, for £396 2s. 6d. This sum was rriade up of £346 2s. 6d., the difference between the amount of the rent which would, if there had been no disclaimer, have been payable under the lease from the S9th of September, 1875, to the expiration of the term, and the amount of the rent which had been actually received under the re-, letting during the same period, and £50 for dilapidations to the rooms. The Registrar ordered the proof to be admitted against the joint es- tate only. The lessor appealed. Sec. 1) VARIOUS CONCEPTIONS OF PARTNERSHIP. 147 James, L. J. * * * ■yVe start with this fact that the trustee wants to get rid of the lease, that it is a damnosa hsereditas, and there- fore it never could have been for any practical purpose any part of either joint or separate estate. * * * Whose lease was it that he was disclaiming? It was not the lease of the firm, because there was no such thing as a firm known to the law. The firm, as cestuis que trustent, might have been the beneficial owners of the lease; but the legal estate in the lease was vested in three joint tenants. A., B., and C, who happened to be in business together, and unfortunately happened to become bankrupt. The trustee, who is the trustee of the joint estate, as well as of the separate estates, is the trustee of the property of A., B., and C, and he is authorized, although he may have done some act which under the old law would have bound him to elect to take the lease, to disclaim it. He is authorized to release the bankrupts from all the liability under which they would have been if the lease had not been surrendered. Then he, under that statutory power, surrenders the lease against the will of the lessor, and the les- sor is obliged to accept the surrender. For whom is he surrendering it? He is surrendering it for the three joint tenants whose lease it was. He is surrendering it for them, and for each of them. Each of them was possessed of the lease per my et per tout. That being so, the Legislature has said: "You may on behalf of those persons surrender the lease entirely, and put an end to it as between the lessor and the lessee." The lessor has certain remedies against his lessees. But the Legislature says to him: "Instead of those remedies, you may prove against the estate of the bankrupt." Of course, the word "bankrupt" may mean plural or singular, or plural and sin- gular, according to the context. But section 23 says : "You may have a right of proof against an estate for the damage you have sustained. It is not very much we give you ; but we do give you a right of proof for the amount of the damage you have sustained." Against whom is he to prove? He is to prove against the bankrupt whose trustee has disclaimed. * * * There were four persons who covenanted jointly, and there is no joint estate of those four. How the case would have stood if the three bankrupts had entered into the joint covenant it is not necessary for me to say. But here there is a dis- tinct liability of each of the three bankrupts on their covenant, and that liability has been put an end to by the act of the trustee. The act of the trustee has inured to the injury of the lessor. The lessor has a right of proof. Against whom? It seems to me it must be against the estates of the persons upon whose behalf and for whose benefit the lessor has been made to endure this injury; that is to say, he is entitled to prove against the separate estate of each of those three persons. That, as it appears to me, would have been the proper order for the Registrar to make, and no proof ought to have been admitted against the joint estate. 148 NATURE AND CHARACTEEISTICS OF A PARTNERSHIP. (Ch. 3 Succession of PITCHER. (Supreme Court of Louisiana, 1887. 39 La. Ann. 362, 1 South. 929.) Appeal from a judgment allowing the account of the administrator of the estate of one Pilcher. The appellant is a creditor of the firm of Embery & Pilcher, and objects to the allowance of $1,000 to the minor child of the deceased, Pilcher, out of the fund realized from the sale of the assets of Embery & Pilcher. Pilcher was insolvent, and had no property except his interest in the partnership. Watkins, J. In support of his theory that partnership funds can- not be applied to the claim of the necessitous minor and the commis- sions of the administrator, because they are by law consecrated to the payment of the debts of the partnership, which is insolvent, he cites Succession of Stauffer, SI La. Ann. 520. In that case the claim for $1, 000 set up in favor of the necessitous widow and minor, was denied un- der very like circumstances to those presented here. Its allowance was opposed by the creditors of the partnership of Stauffer & Co., of which the deceased had been a member ; and the opposition was sustained on the ground that the property of the partnership does not belong to either of the partners separately, but remains common stock, and a pledge for the payment of the debts of the firm in preference to any claims against the individual partners. In Smith v. McMicken, 3 La. Ann. 322, the court said : "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 civil person, which has its peculiar rights and attributes. * * * Hence, therefore, the part- ners are not the owners of the partnership property. The ideal be- ing, thus recognized by a fiction of law, is the owner. It has the right to control and administer the property to enable it to fulfill its legal duties and obligations; and the respective parties, who associated themselves for the purpose of participating in the profits which may accrue, are not owners of the property itself, but of the residuum which may be left from the entire partnership property, after the ob- ligations of the partnership are discharged." City of New Orleans V. Gauthreaux, 32 La. Ann. 1128. Judgment amended, disallowing the $1,000. HUBBARDSTON LUMBER COMPANY v. COVERT. (Supreme Court of Michigan, 1877. 35 Mich. 255.) Wilson Homer, of North Plains, Mich., and Henry P. Marcy, who resided in Massachusetts, were partners in the lumber business under the name of Homer & Marcy. The partnership executed a mortgage to Mrs. Homer on a quantity of logs. A portion of the logs were in North Plains, where Homer, the resident partner of the firm, lived, Sec. 1) VARIOUS CONCEPTIONS OF PARTNERSHIP. 149 and the remainder were at Crystal, Mich. The Hubbardston Lumber Company bought the logs from Mrs. Homer, the mortgagee, with the consent of the resident partner, Homer, and manufactured them in- to lumber. Covert, the defendant, as deputy sheriff, seized the lumber to satisfy an execution issued on a judgment in favor of one Thomp- son against Homer & Marcy on a partnership indebtedness. The Hubbardston Lumber Company brought replevin to recover the lum- ber, relying upon the title derived frorn Mrs. Homer. It was con- tended that the mortgage was invalid, as not complying with the statute, which required a chattel mortgage to be filed where the owner of the property resided, or, if he was a nonresident, then where the property was located; that as Marcy was not a resident of Michigan, and the mortgage was filed only in North Plains, where Homer, the resident partner of the firm, lived, and not in Crystal, where the prop- erty of the partnership was, it was absolutely void against attach- ing creditors. The trial court directed a verdict for the defendant. The plaintiff alleged error. Graves, J. For many purposes a firm, though managed from neces- sity by its members, is a distinct concern and possess a sort of in- dividuality. The assets are held in a sort of community, but the part- ners do not hold as common tenants or joint tenants. The property is distinctly separated from that belonging to the individual members, and it constitutes an identical and entire interest. The law makes distinctions between debtors and creditors of the firm on the one hand, and debtors and creditors of the persons composing the firm on the other, and assets are gathered, catalogued, and appropriated accord- ing to these distinctions. A member may become debtor or creditor of the firm, and each mernber is agent for it, and within limits stands for it. For some purposes, then, the law contemplates the firm as having a sort of ideal existence, and with the faculty of being in the relation of principal to agent in a certain representative sense. The agency consequent upon the relation extends no further than to firm transactions. As partner there is no power to bind individual interests. Either partner may contract for the firm in the firm name, and the act is the act of the firm, and not that of the individual who actually transacts. It is just the same as though the firm were a natural per- son and acted personally. Taxes may be imposed on a firm in the firm name. Section 978, Comp. Laws 1871. And suits are allowed to be brought in justices' courts for and against, copartnerships in the firm name, where the members' names are unknown. Section 5307, Comp. Laws 1871. These and other characteristics of individuality are sufficient to show that the firm has in many aspects a recognized legal identity. That it may have a local abiding place is as certain as that a cor- poration can. Carron Iron Co. v. Maclaren, 5 H. of Lords Cases, 416. And, where it has, I see no reason why it may not, as well as a corporation, be said to reside there, within the meaning of the statute 150 NATURE AND CHAEACTEKISTICS OP A PARTNERSHIP. (Ch. 3 which provides for filing chattel mortgages. Undoubtedly there may be cases in which it would be difficult to decide upon the question of abode; but this is nothing more than happens often where the ques- tion concerns the residence of natural persons. Indeed, there is rea- son for thinking that much fewer perplexing cases would occur in inquiries respecting the seats or abodes of firms than in inquiries con- cerning the residence of the individuals. In this case the mortgage purported to be the contract or mortgage of the firm, and not of the individuals composing it, as individuals, and the evidence tended to show that the firm resided or had its seat in North Plains. The only member residing in the state, the only party representing or author- ized to represent the firm, lived there, and in the state of things which appeared, and in the absence of countervailing proof, this was strong evidence of the residence of the firm there. This mortgage on firm property, made in the firm name by this very party, was there filed, and it seems to me this should be considered a sufficient filing within the spirit of the statute. The judgment should be reversed, ;ivith costs, and a new trial or- dered. JONES V. BLUN et al. (Court of Appeals of New York, 189.5. 145 N. Y. 333, 39 N. E. 954.) Bartlbtt, J. This action is brought to set aside certain transfers made by the Rheubottom & Teall Manufacturing Company to the firm of F. S. M. Blun & Co., on the ground that defendant Blun was a stockholder of said corporation and that the transactions attacked were after the corporation had refused the payment of its notes or other evidences of debt, and were, therefore, prohibited by statute. 1 Rev. St. (1st Ed.) p. 603, pt. 1, c. 18, tit. 4, § 4; 3 Rev. St. (Banks & Bros.' 8th Ed.) p. 1729. The plaintiff recovered at Special Term, and the General Term affirmed the judgment. [The statute prohibited a corporation, which has refused payment of its debts, from transferring any of the property to an officer or stockholder directly or indirectly for the payment of any debt. The transfers attacked in this case were made, by the corporation to, a partnership of which 'Blun, a stockholder in the corporation, was a member. It was contended that such transfers were not to a stock- holder of the corporation, and hence not invalid under the 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 cor- poration. If his copartner, who is not a stockholder, is injured by the enforcement of the statute, it may be a matter for adjustment between Sec. 1) VARIOUS CONCEPTIONS OF PARTNERSHIP. 151 themselves, but offers no reason for suspending the operation of the statute. If the contrary doctrine were to prevail, it would result in the officers and stockholders of corporations securing to themselves indefinite preferences by forming partnership relations in which the interest in the firm profits of the partner not a stockholder would be only nominal. Judgment affirmed.^ BROWN et al. v. HARTFORD FIRE INS. CO. (Supreme Judicial Court of Massachusetts, 1875. 117 Mass. 479.) Coi/T, J. The action is upon a policy of fire insurance in favor of the plaintiffs, Brown & Cottrell, who were partners in business. After the fire the policy was surrendered and canceled, on payment by the defendant of a sum of money to Brown in full satisfaction and com- promise of all claims under it. A receipt and discharge was given by him in the name of the firm, which is relied upon by the defendants as a bar to this claim. The plaintiffs reply that the settlement and discharge were procured by false and fraudulent representations, and that Brown was a minor when he gave it. The case finds that the money received by Brown was divided with his partner, as were also the damaged goods which were not sold after the fire. It is not nec- essary to consider all the questions raised on this report, because the settlement and discharge relied on, although obtained by false and fraudulent representations, constitutes a good defense until rescinded and avoided by a return or an offer to return the money paid by the defendant to obtain it. As a general rule a party cannot rescind a contract and retain the consideration, in whole or in part, which he has received under it. There is an exception to this rule in favor of infants and those who are under some form of disability. So that, where the consideration of the contract has been wasted or lost dur- ing minority, the infant does not lose his right to avoid it without restoration. Chandler v. Simmons, 97 Mass. 508, 514, 93 Am. Dec. 117; Bartlett v. Drake, 100 Mass. 174, 97 Am. Dec. 92, 1 Am. Rep. 101; Bassett v. Brown, 105 Mass. 551, 558; Gibson v. Soper, 6 Gray, 279, 66 Am. Dec. 414. The plaintiffs cannot avail themselves of this exception to exempt them from the duty of returning the consideration received. It is the firm that seeks to recover this insurance. The consideration for the release was received by the partnership in discharge of the poHcy. It was a ratification of the act of the infant partner, if such ratification 1 "In the contemplation of law there is no merger or fusion of the several persons composing a partnership into a common or comprehensive person in- cluding 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." Per Bleckley, C. J., In Drucker v. Wellhouse, 82 Ga. 129, 132, 8 S. B. 40, 2 L. R. A. 328 (1888). 152 NATURE AND CHAEACTEEISTICS OF A PARTNERSHIP. (Ch. 3 was necessary. The infancy of one partner cannot excuse the firm from its duties to the defendant; so that the firm may sue on the con- tract without first returning the consideration received. The evidence offered to show the infant partner's want of abihty to restore this money, and his Hability on account of the partnership for a much larger sum, was rightly rejected, and according to the terms of the report there must be Judgment for the defendant. - BANK OF BUFFAI.0 v. THOMPSON et al. ' (Court of Appeals of New York, 1890. 121 N. Y. 280, 24 N. B. 473.) Eael, J. On the 24th day of April, 1882, John Thompson was in- debted to the plaintiff upon his individual promissory notes, and was then carrying on business in his own name, and in that way had deal- ings with the plaintiff. On that day he executed to it a mortgage con- ditioned for the payment of all notes, checks, or bills of exchange thereafter "made, drawn, indorsed, or accepted" by Thompson and discounted by plaintiff 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.'' Subsequently to the exe- cution and delivery of that mortgage Thompson continued his in- dividual dealings with the plaintiff, and it discounted for his benefit notes made or indorsed by him. Several years after the mortgage was given, Thompson formed a copartnership with three other per- sons, under the firm name of Reynolds, Thompson & Co., and the firm carried on the business under that name, and the plaintiff dis- counted for the firm several notes made and indorsed by Thompson in the firm name. The plaintiff claims that these firm notes are se- cured by the mortgage, and the defendants contend that they are not so secured, and their contention has been sustained by the court below, and mainly, it is said, upon the authority of First National Bank of Batavia v. Tarbox, 38 Hun, 57. We think the court below properly construed the condition of the mortgage. It is clear that at the time of the execution of the mort- gage the parties did not contemplate any firm indebtedness, or any indebtedness of a firm of which Reynolds might be member. The plaintiff was dealing with him individually, and it was obtaining se- curity for his individual and personal obligations, and a fair con- struction of the language shows that it was intended to secure such obligations and such only. The language is broad and general, and carefully framed so as to make sure that all such obligations should be covered. In ordinary 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. In Parsons on Partner- Sec. 1) vAEiorrs conceptions of partnership. 153 ship, 346, it is said : "A partnership is a legal body by itself. We do not say it is a corporation, because it wants some of the most essen- tial 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 ; and among these purposes is the placing of its relation t'o its creditors on the basis of contracting its own debts, and having its own creditors, and pos- sessing its own property, which it applies to the payment of its debts." It was held in Fitzgerald v. Grimmell, 64 Iowa, 261, 20 N. W. 179, that a partnership under the statutes of that state was a legal entity, known to and recognized by law. It is probably the most accurate to say that a partnership is not strictly a legal entity, distinguished from the individuals composing it. Lindley on Partnership (Am. Ed.) 5 ; Faulkner v. Hyman, 142 Mass. 53, 6 N. E. 846. In Lindley on Partnership, p. 110, it is said : "Partners are collectively a firm. Mer- chants and lawyers have different notions respecting the nature of a firm. Commercial men and accountants are apt to look upon a firm in the light in which lawyers look upon a corporation; i. e., as a body distinct from the members composing it, and having rights and obligations distinct from those of its members. Hence, in keeping partnership accounts the firm is made debtor to each partner for what he brings into the common stock, and each partner is made debtor to the firm for all that he takes out of that stock. In the mercantile view, partners are never indebted to each other in respect of partner- ship transactions, but are always either debtors to or creditors of the firm." But this, the learned author says, is not the legal notion of a firm, and that the firm is not recognized by lawyers as distinct from the members composing it. This mortgage must be regarded as a commercial instrument, ex- ecuted in commercial transactions, and must be construed as ordinary commercial men would understand the language used; and we think that among business men a distinction is made between the firm as an 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 member, and for whose debts, jointly with the other members of the firm, he could be made responsible. We are therefore of opinion that the judgment below was right, and should be affirmed. Judgment affirmed. 154 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3. SECTION 2.— THE PARTNERSHIP NAME. McGregor et ai. v. cleveeand. (Supreme Court of New York, 1830. 5 Wend. 475.) The action was on a promissory note for $280, dated 23d October,. 1827, payable to "McGregor, Darling & Co.," and signed by "Oliver- Cleveland, Frederick Cleveland, and Rufus Cleveland." The signa- ture of Oliver Cleveland was proved, and that the names Frederick Cleveland and Rufus Cleveland were in the proper handwriting of Rufus Cleveland. In two other instances, Rufus Cleveland had given notes, signing the same "F. & R. Cleveland," which were ratified by Frederick Cleveland. Frederick Cleveland and Rufus Cleveland were in partnership as farmers and coopers. * * * The counsel for the defendants insisted that the evidence as to the execution of the note by Frederick Cleveland, and as to the plaintiffs being the payees, was not sufficient to entitle the plaintiffs to recover. The judge ruled, otherwise, and under his direction the jury found for the plaintiffs. The defendants' counsel excepted, and now moved for a new trial. ^ * * Savage, C. J. The questions raised by the bill of exceptions are:. (1) Whether there was sufficient proof of the execution of the note by Frederick Cleveland. * * * So far as respects F. & R. Cleveland, the note will be presumed, in the absence of all proof to the contrary, to have been given for a partnership transaction. There is no proof as to what was the style of their firm, except that in two instances the name of F. & R. Cleve- land was used. In this instance, one partner wrote the names of both at length, thus: "Frederick Cleveland and Rufus Cleveland," coupling the two names together. Being partners, each had power tO' charge the other; and, in my opinion, the signature was sufficient, and the evidence enough to justify a verdict on this point against all the defendants. * * * [A new trial was granted because of the insufficiency of the proof that the plaintiffs were the payees of the note.] HASKINS V. D'ESTE et al. (Supreme Judicial Court of Massacliusetts, 1882. 133 Mass. 356.) W. Ai^LEN, J. St 1877, p. 549, c. 163, provides that "any sig- nature to a written instrument declared on or set forth as a cause of action or ground of defense or set-off, in an action at law, shall be taken as admitted, unless the party sought to be charged thereby Sec. 2) THE PARTNERSHIP NAME. 155 shall file in court, within the time allowed for answer, a special de- nial of the genuineness of such signature and a demand that the party relying thereon shall prove the same at the trial." The two defendants were sued in a writ which describes them as "late copartners under the firm name and style of D'Este & Co.," and the declaration alleges that they made a promissory note signed D'Este & Co." One of the defendants, McKenzie, did not appear. The other, D'Este, appeared and filed a general denial. The question is whether the signature is to be taken as admitted to bind D'Este, or whether it is only admitted as the signature of a copartnership of D'Este & Co., and the plaintiff, to hold D'Este, must prove that he was a member of the firm whose signature he admits. The question is precisely what it would have been if both defendants had appeared and filed a general denial in answer. The admission is the same, as to those making it, whether made by both defendants together, or separately, or by one alone. A partnership is not a person distinct from its members, like a corporation. A partnership cannot be sued. A suit must be against the individuals composing it, and each individual stands, as to proof of his liability, as if he were sued alone. In either case his personal liability upon the joint undertaking would have to be made out, and in either case the allegation of partnership would but express the re- lation between the copartners ; and the relation of copartners to each other, as affects their liability to third persons, is simply one of agency. The allegation that a number of individuals as members of a co- partnership made a contract "is only the allegation that each of them, personally or by his agent, made it, and the agency is alleged and proved by the copartnership. In the case at bar the substantial allegation is that each of the de- fendants made a joint note in the name of D'Este & Co. ; that is, that each of them signed that name to the note. The allegation of copart- nership amounts only to a statement that each of the defendants was authorized to sign that name for both, and that an agent might be authorized to sign for both. This is the whole significance of the firm name. It is a name which the partners adopted, by which each could, in certain matters, bind the other with himself, or another agent might bind both. It was simply a convenient abbreviation of their two names, and, when used, had the same effect as if no firm name had been adopted and the name of each partner had been signed in full as a partner ; and it bound each only because he had adopted it as his name and authorized its use for the purposes for which it was used. When the defendant D'Este admits the genuineness of the signature, he does not admit it to be a mere name. He admits it to be a sign manual, the name of a person signed, and the only question is : Whose name does he admit it to be? The answer is plain. He admits it to be the genuine signature of the persons whose signature it is alleged in the declaration to be. The declaration does not allege that the firm 156 NATURE AND CHAEACTBEISTICS OF A PAETNEESHIP. (Ch. 3 made the note. It alleges that the defendants, D'Este and McKenzie, in the name of D'Este & Co., made — that is, signed — the note; that it is the genuine signature of both in the name they had adopted for binding themselves jointly. It is said that it is not alleged that the note was signed by the defendant D'Este personally and that he may not have been one of the persons doing business under the name of D'Este & Co. But it is alleged that the two defendants, one of whom is D'Este, made the note in that name. If the allegation had been that the defendant D'Este, doing business in the name of John Doe, had made the note in that name, it would hardly be contended that the genuineness of his signature would not be admitted, because there might have been another person doing business in that name whose signature it might be, nor because the signature might have been made by an agent, and not by the defendant personally. The declara- tion alleges that the defendants made the note. If the writ is taken in connection with the declaration, there is, so far as the question in issue is concerned, only the further allegation, in effect, that the two defendants held such a relation to each other that each had authorized the other to bind him in a joint note by the name of D'Este & Co. We think the signature is alleged to be that of the defendant D'Este, and that its genuineness, not having been denied, must be taken to have been admitted. See Wilkes v. Hopkins, 1 C. B. 737; Mahaiwe- Bank v. Douglass, 31 Conn. 170. In the opinion of a majority of the court, the ruling of the judge that the plaintiff was not entitled to recover was, for these reasons, erroneous. Exceptions sustained. BERKSHIRE WOOEEN CO. v. JUILEARD et al. (Court of Appeals of New York, 1879. 75 N. Y. 535, 31 Am. Rep. 488.) Appeal from order of the General Term of the Supreme Court in the First Judicial Department, reversing an order of Special Term, which overruled exceptions to and confirmed a referee's report herein. Reported below, 13 Hun, 606. This action was brought by plaintiff, as creditor of the firm of Hoyt, Spragues & Co., in its own behalf and in behalf of other creditors, against the receiver of said firm, appointed in a former action, and against the members of said firm, to reach the assets of said firm and have them applied in payment of its debts. By the judgment there- in said firm was declared insolvent, and it was adjudged that the assets in the hands of the receiver constituted a fund out of which the creditors, upon proof of their claims, were entitled to be paid pro rata according to their respective rights, and a referee was appointed to take proof of the claims of creditors. Five savings banks presented to the referee claims upon a bond executed by one Josiah Chapin, as Sec. 2) THE PARTNERSHIP NAME. 157 principal, and by all of the members of said firm of Hoyt, Spragues & Co., individually, as sureties. RapaIvLO, J. The bond upon which the banks found their claim against the copartnership assets of the firm of Hoyt, Spragues & Co., is executed by all the six members of that firm, and purports to be their joint obligation, as well as the several obligation of each of them. It also purports to create a joint obligation on the part of any two or more of them. The only aspect in which it is necessary to consider it on this appeal is as the joint obligation of all the members of the firm, and the question presented is whether it can be enforced as a copartnership obligation against the copartnership assets, notwithstand- ing that the firm name is not mentioned therein, but it appears on its face to be simply the joint obligation of the copartners, contracted in their individual names, and is under seal. We are of opinion that, notwithstanding the form of the instrument, if it was executed in the business of the firm and for its benefit, it should be regarded as a co- partnership obligation, payable out of the copartnership funds. When funds or property are obtained on the obhgation of only a portion of the members of a firm, the fact that the property thus obtained goes to the use of the firm is not of itself sufficient to render the firm liable. But where the property is not only obtained for and applied to the benefit of the firm, but is so obtained by the joint act and upon the joint written obligation of all its members, and the credit is given to all, the transaction is in substance a copartnership transaction, though the firm name is not actually used in the writing and though the part- ners may have superadded to their joint obligation the several liability of each of them. The orders should be affirmed, with costs out of the fund. YORKSHIRE BANKING CO. v. BEATSON et al. (Court of Appeals, 1880. L. R. 5 0. P. Div. 109.) In these actions the respective plaintiffs appealed against the judg- ment of Denman and Lopes, JJ., in favor of the defendants. ThesiGER, Iv. J. This is an action brought upon two bills of ex- change of which the plaintififs are the holders. The first is a bill -for £376. 15s., dated the 6th of March, 1878, drawn by R. R. Kelley & Co. upon, and accepted by, Messrs. J. & R. Wilson, payable to the order of the drawers four months after date, and bearing the succes- sive indorsements, "R. R. Kelley & Co.," "Wm. Beatson," and "Josiah Carr & Son." The second is a bill for £484. 13s., dated the 13th of March, 1878, drawn by Josiah Carr & Son, addressed, "Mr. WiUiam Beatson, Chemical Works, Rotherham," and accepted in the name "WilHam Beatson," payable to the order of the drawers four months after date, and indorsed by them. Both bills were discounted by the 158 NATURE AND CHAEACTEEISTICS OF A PARTNERSHIP. (Ch. 3 plaintiffs upon the 14th of March, 1878. The defendants to the action are Wm. B^atson and John Henry Mycock. The signature "Wm. Beatson" upon each of the bills was the signature of the defendant Wm. Beatson. He has allowed judgment to go by default, and the action is defended by Mycock alone, who disputes his Hability upon either of the bills. The circumstances of the case are as follows : Beatson, for many years prior to December, 1877, carried on business as a chemical man- ufacturer at certain works at Rotherham. At the end of the year 1873 and beginning of the year 1874 the plaintiffs made inquiries as to Beatson's commercial position of Josiah Carr, who was bringing them paper for discount with Beatson's name upon it, and, the result of the inquiries being satisfactory, they discounted such paper. Beatson and Carr had some trade transactions together, but apart from these trade transactions there was a series of accommodation transactions carried out by accommodation bills between Beatson and the other par- ties to the bills now sued upon, including Carr himself, and these ac- commodation bills were from time to time renewed. Down to the end of the year 1877 Beatson had no partner; but upon the 11th of December in that year a deed of partnership was entered into between him and the defendant Mycock. By its terms the partnership was to last for a period of five years, with power of continuance. The value of the good will of the business, the works and premises where the same was carried on, and the machinery, plant, and effects belonging to it, was estimated at £25,000, and Mycock was to purchase a one-fifth share of the business by the payment of the sum of i5,000. The business was to be carried on under the style of "William Beatson," the works and premises were to remain vested in Beatson, who was to stand possessed of them for the purposes of the partnership, and the business was to be managed by Beatson; his partner not being rec|uired to attend to the business any further than he should think fit. By the eleventh clause of the deed it was provided that neither of the partners, without the written consent of the other first obtained, should on the credit of the firm make any payment, ad- vance, or other application of the money or effects of the said part- nership, or in any manner engage or use the same, or the name or credit of the partnership firm, except on account and for the benefit of .the partnership and in the usual manner of carrying on the business ; and by the twelfth clause it was provided that neither of the partners should lend or deliver upon credit any of the moneys or effects be- longing to the partnership to any person whom the other partner should previously have forbidden to be trusted, nor without the pre- vious consent in writing of the other partner would become bail, sure- ty, or security with or for any person whomsoever, or make, give, draw, accept, or indorse any bond, bill, promissory note, or other in- strument, or enter into any obligation or engagement, or make any default, whereby the estate and effects of the partnership might be Sec. 2) THE PARTNERSHIP NAME. 159 made liable for the payment or satisfaction of any sum of money, for which the partnership should not have received a full and sufficient consideration. The object with which My cock entered into this partnership was that of ultimately putting his son, who was then under age, into it, and as a matter of fact Mycock never interfered in any way with the management of the business, or occupied any other position or con- nection with it than that of a dormant partner. Beatson concealed from him all information relating to his accommodation transactions, and for his frauds upon him in this and other matters connected with the inception of the partnership was ultimately prosecuted and convicted. The plaintiffs never knew of the partnership until July, 1878, at which date Beatson was a bankrupt. For some time prior to the formation of the partnership Beatson had kept an accoimt at the Shef- field and Rotherham Bank, headed "William Beatson," and after the formation of the partnership that account was continued without any change in its heading, and into that account Beatson paid all moneys, whether moneys belonging to the partnership or his own private mon- eys, and upon it he drew, whether for the purpose of the business or his own private purposes. Beatson himself was called as a witness for the plaintiffs, and in addition to proving the facts already men- tioned gave evidence to the effect that he kept two cash books, of which one was, as he stated, a private book kept as manager at the place of business, and the other a partnership cash book; that in the former he did not enter cash received on account of the partnership, but that in the latter all business payments were entered. With refer- €nce to his bill accommodation transactions generally he stated that none of them were brought into the ledger either before the partner- ship or after; that the cash transactions relating to these accommoda- tion bills were entered in the private book, to which Mycock had no access, and were never put into the partnership cash book, to which Mycock might have had access. With reference to his particular trans- actions with Josiah Carr he stated that all trade transactions between them were over before the partnership, and that as regards the par- ticular bills sued on they were bills drawn for his and Carr's accom- modation, not for Mycock's, although he added that they were in a degree for the business as one way of finding capital, and that with- out the bill transactions there was not capital enough to work the business. He admitted that Mycock found the £5,000 which he was to pay for his share in the business, that he never told Mycock that money was wanted, that he thought that he was not making Mycock liable for any of the accommodation bills, whether renewals or other- wise, and that he considered them private transactions, and did not •enter them in the partnership books. He further said that he con- sidered the bank book private, and that Mycock had left him to keep the banking account as he thought proper; that the proceeds of the accommodation bills were paid into the banking account ; and that out 160 NATURE AND CHAEACTEEISTICS OE A PARTNERSHIP. (Cll. 3 of such proceeds goods supplied to the business and wages were sometimes paid. As regards the proceeds of the bills sued on, it ap- peared that a portion of them found their way into the banking ac- count, but that upon the same day when this occurred Beatson drew out more than he put in. On the part of Mycock an accountant was called, who upon examination of Beatson's books proved that, apart from the accommodation bill transactiojis, the business had during the period between the beginning of January and the end of May, 1878, a cash balance to its credit, that the net result of the accommodation bills was to reduce the balance, and that Beatson had drawn out for his own purposes, independent of the business, about £4,000. Upon these facts taken from the notes of Lindley, J., before whom, with a jury, the case was tried, that learned judge stated to the jury that the questions for them were, first: "Was the name (Wm. Beatson) put to the bills to denote the firm or to denote William Beatson?" Secondly: "Did the bank take the bills as the bills of the Chemical Works, whoever the proprietors might be, or as the bills of William Beatson only?" The jury retired, and, returning into the court, the foreman stated that as regards the bill for £484. 13s., it having been drawn upon William Beatson at the Chemical Works, Rotherham, the jury agreed that William Beatson's acceptance of it must be held to denote the acceptance of the firm, but that as regards the other bill they found no evidence upon the point. Upon being asked by the learned judge to answer the question as regards that bill according to their judgment, the jury conferred again, and subsequently stated that from the fact of that bill being put in connection with the other they might take it as being the same thing, and to the second question they answered that the bank took the bills as the bills of the Chemical Works. Upon these findings a verdict and judgment was entered for the plaintiffs against the defendant Mycock. That judgment was subsequently set aside, and judgment entered for Mycock, by the Com- mon Pleas Division, upon the ground, stated shortly, that in a case where the name of an individual is the name also of a firm, and that name is put to a bill, the presumption is that the signature is the sig- nature of the individual, and not of the firm; that consequently it lay upon the plaintiffs in this case to displace the presumption by show- ing the signature to the bills sued upon were respectively the sig- natures of the firm, and that Beatson was- authorized to use the firm's name on the particular occasions and for the particular purposes — in other words, that the bills were given for partnership objects and as partnership acts, and that the plaintiffs had failed to discharge the burden cast upon them. Against the judgment of the Common Pleas Division the present appeal is brought. In support of the appeal it is contended for the plaintiffs either, first, that where, as this case, a signature is common to an individual and a firm of which the individual is a member, it is open to the bona fide holder for value without notice, whose paper it is, of a bill with Sec. 2) THE PARTNERSHIP NAME. 161 such signature upon it, to sue either the individual or the firm; or, secondly, that if this option is not open to the holder, there is a pre- sumption that the bill was given for the firm and is binding upon it, at least where the individual carries on no business separate from the business of the firm of which he is a member. As regards the first of these two contentions, we think that it is not a well-founded one. * * * Apart, too, from authority, it appears to us manifestly contrary to true principles of law that the holder of a bill bearing upon it a name which prima facie indicates an individual, and would naturally lead to credit being given to the individual alone, should, upon discovery and proof that tliere is a firm of which the individual is a member carrying on business under his name, have the right of going against the firm, although at the same time that the proof is given it is proved, also, that the bill was signed by the individ- ual for himself, and not for his firm, and for considerations entirely unconnected with any partnership purpose. The second contention made on behalf of the plaintiffs is one of more weight, and, apart from the intrinsic importance of the question involved in it, there is an additional importance derived from the fact that, if the contention be correct, it at least displaces the ground upon which the judgment of the court below rests, although it will still re- main to be considered whether judgments may or not be rested upon another ground. As a matter of principle, there is considerable force in the arguments both for and against the contention. Against it it is said that when a signature to a bill is of a name, which in itself and prima facie indicates an individual and would lead to credit being given to the individual, and the holder of the bill suing upon it is therefore compelled to give some proof that the name indicates a partnership, it is but just that he should be compelled to go the whole length of proving, not only that a partnership existed under the particular name, and that the individual carried on no business sepa- rate from that carried on by the firm, but, further, that the bill was signed by the individual as a partnership act and for partnership ob- jects. In support of the contention it is said that, inasmuch as a bill of exchange is ordinarily used as a trade instrument, there is a pre- sumption that a bill having upon it a name common to the firm and to the individual is a trade bill, and therefore the bill of the firm, in a case where it is proved or admitted that there is no trading in the name except by the firm. In the absence of authority upon this ques- tion, our opinion upon it would be in favor of the plaintiffs' con- tention. In point of convenience and expediency, and in the interests of trade, it has much to support it. 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 prove that the only trade carried on under the individual name was the trade of partnership, and if they were compelled to go further, and prove that the particular bill was a G11..PAET. — 11 162 NATURE AND CHARACTEKISTICS OF A PAETNEESHIP. (Ch. 3 partnership bill, the effect might be that in many cases dormant part- ners, and in some cases ostensible ones, too, might escape from just liabilities. On the other hand, the partners sought to be made re- sponsible 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 allowing the firm name to be the same as that of an individual in the firm, that difficulty and doubt arise. But in the court below it was considered that the American au- thorities clearly negative this view, and that the weight of English authorities is in favor of the American view of the law. We propose to consider first the English authorities. [The court here examines Swan v. Steele, 7 East, 209 ; Emly v. Lyle, 15 East, 6; Ex parte Bolitho, 1 Buck. 100; Bank of South Carolina v. Case, 8 B. & C. 427 ; Furze v. Sharwood, 2 Q. B. 388 ; Nicholson v. Rick- etts, 2 E. & E. 497; In re Adansonia Fibre Co., Miles' Claim, E. R. 9 Ch. 635.] Upon this review of English authorities they appear to support the view that where a name is common to a firm and to an individual member of such firm, and the individual member carries on no busi- ness separate from that of the firm, there is a presumption that a bill of exchange drawn, accepted, or indorsed in the common name is a bill drawn, accepted, or indorsed for the partnership, and for which the partnership is liable, and that it lies upon the defendants in an action against the partners upon such bill to get rid of the prima facie case made against them. But as the court below relies much upon the American authorities as uniformly negativing this view, and those authorities have been much discussed in the argument before this court, we think it desirable to refer to them. [The court here examines Parsons on Bills of Exchange, p. 131; Story on Partnership, pp. 106, 142; Oliphant v. Mathews, 16 Barb. (N. Y.) 608; U. S. Bank v. Binney, 5 Mason (U. S.) 176, 185, Fed. Cas. No. 16,791; Mifflin v. Smith, 17 Serg. & R. (Pa.) 165; Bank of Rochester v. Monteith, 1 Denio (N. Y.) 402, 43 Am. Dec. 681.] It appears to us, therefore, that the American authorities are in accord with the English upon the point under consideration, and that both fail to support the view taken by the court below, and are in favor of the second contention urged in this case on behalf of the plaintiffs. Applying, then, the presumption for which the plaintiffs contend to the circumstances of the present case, the matter stands thus: The only business carried on in the year 1878 in the name of and by Wil- liam Beatson was the business of the partnership, and both the bills sued upon have the appearance of trade bills. Prima facie, then, the bills were bills indorsed and accepted, respectively, in the name and on account of the partnership; and, if that prima facie case were not displaced, Mycock would be liable upon them to the plaintiffs as Sec. 2) THE PARTNERSHIP NAME. 163 bona fide holders for value without notice, even though they were so indorsed and accepted for private purposes of Beatson and in fraud of his partner. The nature of the partnership business was such as to give Beatson, in respect to persons deahng with him in busi- ness, an implied authority to bind his partner by bills of exchange, and his partner, although a secret one, must be held responsible upon any bills signed by Beatson in the name of the firm in favor of a holder whose title cannot be impeached, however much Beatson, in signing that name, may have exceeded the authority and broken the trust reposed in him by the agreement of partnership. As was said by the court in giving judgment in the case of.Wintle v. Crowther, 1 C. & J. 316, 318 : "Where a partnership name is pledged, the part- nership, of whomsoever it may consist, and whether the partners are named or not, and whether they are known or secret partners, will be bound, unless the title of the person who seeks to charge them can be impeached." And the authorities generally, both English and American, are uniform in support of this view. There is no diflfer- ence in this respect between the dormant and the ostensible partner, and, when once it is established that a name common to a firm and an individual member of it has been put to a bill as the name of the firm, there is no diflference between the liability of partners carrying on business in a name which bears in itself the stamp and evidence of a partnership. It may, perhaps, be argued that in the latter case the bona fide holder without notice is induced by the name itself to trust the firm, and is therefore entitled to have the responsibility of all the members of that firm, while an individual name would suggest no responsibility other than that of the individual whose name it is ; but when it is remembered that firm names are often used by individ- ual traders, while individual names are often used by firms, the argu- ment practically comes to nothing, and a common principle applicable to both cases remains alone consistent with mercantile expediency and general law. But, assuming that there is no difference as matter of law between the two cases, there is as a matter of evidence a very real and very practical difference. A name in itself indicating a firm does not, ex- cept in rare instances, of which the case of Stephens v. Reynolds is an example, leave open any doubt as to the meaning of a signature in such name ; but a name which in itself indicates an individual is, notwithstanding the effect of any legal presumption, ambiguous, and there are likely to be few, if any, cases where the decision of the jury or of a court will be rested upon the presumption alone. The present case is no exception to the rule, and the presumption in favor of the plaintiffs, arising from the fact that' Beatson carried on no business separate from that of the partnership, sinks into comjparative insig- nificance by the side of the additional facts which are proved in the case. Upon those facts we have to decide, as the courts in Nicholson V. Ricketts, and In re Adansonia Fibre Co., Miles' Case, were called 104 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 upon to decide, whether the signature to the bills upon which the dis- pute arises was intended to denote and did denote the partnership of which the defendant was a member. [After commenting on the evi- dence the opinion continues:] Can any inference be reasonably drawn from such evidence than that Beatson, in signing the bills, intended to sign and did sign them for himself? We think that no other inference ought to be drawn, and that the jury, in finding that the signature "William Beatson" up- on each of the bills was intended to denote the firm, gave a verdict against the evidence, and one which ought not to stand. We think that the judgment of the court below should stand, and that the appeal should consequently be dismissed. Judgment affirmed. SECTION 3.— PARTNERSHIP PROPERTY. I. CaPITAIv. DEAN et al. v. DEAN et al. (Supreme Court of Wisconsin, 1882. 54 Wis. 23, 11 N. W. 239.) Cole, C. J. This action is brought by the plaintiffs, as executors, to obtain a construction of the codicil to the will of N. W. Dean, who died February 28, 1880. The will was dated February 29, 1876, and makes a full disposition of the testator's estate, both real and per- sonal. * * * There is no controversy as to the proper construction of the will, and we need not further give its provisions. The codicil bears date February 33, 1880. On May 1, 1871, the decedent and his brother, Thaddeus Dean, entered into partnership in the business of dealing in lumber in the city of Chicago, which partnership was con- tinued to the death of N. W.'Dean. The will makes no express refer- ence to this partnership business. But the codicil, after reciting that this partnership business had hitherto been profitable to the tes- tator, which was largely due to the business capacity and integrity of his brother Thaddeus, contains this language : " * * * I hereby direct my said executors to allow my present capital in said business to remain for the period of two years after my decease, collecting and receiving annually, from my said brother Thaddeus, the net profits arising from said business, under my agree- ment with him, belonging to me, for the benefit of my estate. At the expiration of two years it is my will and I direct that my said execu- tors have a full settlement and accounting with my said brother Thad- deus in relation to said business, and that thereupon they collect and Sec. 3) PARTNEESHIP PKOPEETT. 165 receive from him one-lialf of the net value of my interest therein, and upon the payment by him of the one-half value so ascertained I instruct and direct my said executors to execute and dehver to him all proper and necessary assignments and conveyances so as to vest in him absolutely all my right, title, and interest in the business afore- said; it being my intention, in addition to the bequest heretofore made to him in my said will, to bequeath and devise to him one-half of my entire interest in said business, subject to the limitations and restrictions aforesaid.'' The articles of copartnership, to which reference is made in the codicil, are quite full and specific. They provide, among other things, that each partner should contribute $15,000 to the capital of the firm, which was to be used in carrying on the copartnership business ; that Thaddeus Dean was to have the management of the business ; that he should be entitled to receive two-thirds of the profits, and N. W. Dean one-third thereof. The losses were to be borne in the same propor- tion. Books of account were to be kept, wherein all of the transac- tions of the firm should be entered, and which books should be open to the inspection of each partner at all times. By the ninth clause it was provided that N. W. Dean was to take out of the cash of the company's funds $135 per month for his own use, and Thaddeus Dean $250 per month, providing these sums could be so drawn out by the respective parties without impairing the capital of the firm, but neither partner was to take a greater sum for his own use. during any month without the written consent of the other. The tenth clause provided that Thaddeus Dean, at the end of each year, and oftener, if need be, on request, should make and render to N. W. Dean a just and true account of all the gains and profits, as well as losses, of the business, and of all things done on behalf of the partnership, and this account being so made he was to pay N. W. Dean his proportionate share of the profits, and take to himself his own share. In the eleventh clause it was provided that during the continuance of the copartnership none of the capital of the firm, nor any of the accrued but undivided gains and profits thereof, should be used or employed by the parties thereto for any other purpose than carrying on said business. In the twelfth, that at the end of the copartnership a final accounting should be had, and all the debts of the firm should be first paid, then each should draw out the amount of capital originally contributed by him, dimin- ished by his proportionate share of losses, if any ; the balance, if any, to be divided as provided for dividing profits. These are the material provisions of the copartnership agreement. From three letters which were introduced on the hearing — ^one writ- ten by Thaddeus Dean; the other two by N. W. Dean — it appears that each party agreed, in July, 1872, to increase its capital to $20,000. and did so. And it further appears, from the annual statement made of the partnership business, that at the end of each partnership year each partner was credited on the books of the concern with his share 166 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3 of the profits, and was charged with the amount wliich he had drawn out during the year. The accumulated but undivided profits of the business consisted almost wholly of real estate, lumber, notes, book accounts, and other personal property belonging to the firm. The amount standing to the credit of N. W. Dean at the time of his death, including his capital of $20,000, was $43,478.16. Or, to speak more accurately, that sum embraced the profits standing to the credit of N. W. Dean on the books of the firm at the time of his death, and also the unascertained profits which had accrued since the last annual state- ment of May 1, 1879, down to that time. The question arising upon the codicil, which the executors request the aid of the court in determining, is what amount they must leave in the partnership business for two years, and which, at the end of that period, they are directed to assign and convey to Thaddeus Dean upon his paying one-half of its ascertained net value; the annual profits having been collected by them in the meantime. On the part of the residuary legatee Thaddeus Dean it is claimed that it was the intention of the testator that his entire interest in the partnership busi- ness should remain in the business, including both his capital of $20,- 000 and all accumulated but undivided profits belonging to him under the partnership agreement; while, on the part of other residuary leg- atees, it is insisted that it was his capital only which was to be left in the business. Considerable proof was taken on the hearing relating to the acts of the parties and their course of dealing, for the purpose of aiding the court in arriving at the intention of the testator in mak- ing the codicil. But, aside from the articles of copartnership, this evidence furnishes but little assistance in construing the codicil. The intention of the testator must, therefore, be ascertained from the lan- guage of the codicil itself, read, of course, in the Hght of the written agreement to which it refers. On looking at the language of the codicil itself, the first thing which will be noticed is that the testator, in the introductory part, speaks of his "interest" in the business, which has been profitable to him. Be- ing desirous that the business so commenced should be maintained and carried on, he directs his "executors to allow my present capital in said business to remain for the period of two years after my decease, collecting and receiving annually from my said brother, Thaddeus Dean, the net profits arising from said business under my agree- ment with him, iDelonging to me, for the benefit of my estate." It will be seen that the mind of the testator was fixed at the outset upon his entire interest in that business as distinguishable from his capital there- in. If he intended that his entire interest should remain, it is singular that he changed his language, using words which convey a different meaning. The terms "interest" and "present capital" are not equiva- lent expressions, and do not convey the same idea in the connection in which they are used. If the testator intended that his entire inter- est in the business should remain, it is remarkable that he changed Sec. 3) PARTNERSHIP PROPERTY. 167 his phraseology. But this is not all. The executors are directed to collect annually from his brother Thaddeus the net profits arising from the business under the partnership agreement which belonged to him for the benefit of his estate. If the codicil is construed, as it must be, in connection with the partnership agreement, there is no difficulty in getting at the intention of the testator, for the agreement makes a plain and broad distinction between capital and profits. The former is devoted to the use of the partnership business, but provi- sion is made for withdrawing the latter from time to time. There- fore we think that the word "capital," as used in the codicil, must be understood as meaning the same thing as when used in the agreement ; it means the capital as opposed to profits, and the word "profits" means the gains upon the capital invested in the business. The testator further directs that when a final settlement is made or accounting had the executors shall convey to his brother, upon payment by him of one-half of its ascertained value, all his right, title, and interest in the business, declaring that it is his "intention, in ad- dition to the bequest heretofore made to him in my said will, to be- queath and devise to him one-half of my entire interest in said busi- ness, subject to the limitations and restrictions aforesaid." If the qualifying words, "subject to the limitations and restrictions afore- said," were omitted, this clause of the codicil would tend strongly to warrant the inference that it was the intention of the testator that his entire interest in the business should remain for two years, and then be disposed of as directed. But, as the clause stands, in view of the previous language, where the words "interest" and "capital" are used in a different sense, more especially in consideration of the fact that the whole codicil is to be construed in connection with the written agreement, no such inference or presumption can fairly be made; for the agreement, in its terms, so clearly and distinctly discriminates between capital and profits that it is impossible to hold the testator, by the words "my present capital," intended to designate not only the capital proper, which he had contributed to the business, but also all the accumulated and undivided profits which had accrued from the use of that capital. If he had intended to direct that his whole in- terest in the business should remain two years, or if he regarded his entire assets therein as capital, his intention or understanding would have been made manifest by the use of different language than that employed. But, as observed by counsel who argue in favor of the view we have taken of the meaning of the codicil, the testator, in the very sentence in which the words "my present capital" occur, directs what shall be done with the "net profits" of the business, and pointedly makes a distinction between capital and profits, thus showing that the two things were separate in his mind. The intention of the testator must prevail if it is possible to gather it from the language of the entire codicil. That intention was to allow his capital to remain in 168 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3 the business for two years, but nothing more. This construction of the codicil is vigorously combated by the learned counsel for Thad- deus Dean, because, as he says, if the accumulated profits of the par- ties were withdrawn it would so cripple the business that it could not be carried on with the success and profit which had theretofore at- tended it. But this argument, under the circumstances, is entitled to but little weight; for if there had been no provision for continuing the business it would have to be closed up on the death of N. W. Dean. Its continuance, therefore, was a favor, and could not have been claimed as a right by the surviving partner. * * * It results, from the views expressed, that the judgment of the circuit court, placing a construction upon the codicil, and giving directions to the executors in regard to the proper execution of their trust, is erroneous. The judgment must, therefore, be reversed, and the cause be remanded, with directions to enter a judgment in accordance with this opinion. SHEA V. DONAHUE et al. (Supreme Court of Tennessee, 1885. 15 Lea, 160, 54 Am. Rep. 407.) Cooper, J. Bill, among other things, for a partnership account be- tween Shea and Donahue. The capital of the partnership business was contributed exclusively by Shea, and the only question raised by the parties is whether Donahue, upon a settlement, is entitled to one- half of the capital thus advanced. The chancellor decided against Donahue, and he has appealed. The agreement of partnership, entered into March 21, 1877, provided as follows : "We do hereby agree to become partners as merchants, in making, buying and selling all kinds of tinware, stoves, pumps, etc., in the city of Knoxville, Tennessee, for the term of one year from this date, under the style and firm name of Shea & Donahue. And to con- stitute a fund for the purpose, Timothy Shea has paid in as stock one thousand dollars, which will constitute a common stook, to be used and employed between us in buying goods, wares and merchan- dise. John Donahue, being a practical workman, and having consider- able experience in the above named business, it is agreed that he will give the business his entire personal attention and the benefit of his experience to place against the cash furnished by said Shea. We are to bear the expenses and losses jointly and share the profits equally. The capital stock is not to be withdrawn by either party until the end of the term, but to be employed as capital unless mutually agreed be- tween us in writing." The partnership business was in fact carried on for about three years, the agreement only stipulating for one year. The contention of the defendant is that by the terms of the agreement he was entitled at the end of one year to an equal share of the profits of the business and • Sec. 3) PARTNERSHIP PROPERTY. 169 to one-half of the capital advanced by his partner; 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. But the agreement is that the partners are only to "share the profits equally," not the profits and the capital. And the profits of any busi- ness are only what remains after deducting debts and expenses and the capital paid in. Lindl. Part. 791, 806. The provision that the capital stock shall constitute a common stock, to be used in buying the mate- rials and wares of their trade, merely designates the mode in which it is agreed that the capital shall be invested. And the further pro- vision that the capital stock shall not be withdrawn by either party un- til the end of the term was only intended to restrain the partners from -drawing funds from the business, so as to trench upon the capital, while the partnership continued. There is nothing in the articles of agreement to take the case out of the ordinary one of a partnership in profit and loss upon unequal capitals. Of course, the articles of a partnership may expressly provide for an equal division of the assets upon a dissolution, notwithstanding an unequal advance of capitals by the respective partners. The same re- sult may follow a continuous course of dealing upon a basis which im- plies such equal division; for, if there is no evidence frorn which any different conclusion as to what was agreed can be drawn, the shares of all the partners will be adjusted equally, upon the favorite maxim • of chancery that equality is equity. But, as Mr. Lindley tells us, the rule is when the partners have advanced unequal capitals, and have agreed to share profits and losses equally, without more, each partner is entitled to his advance before division, and a deficiency in the capital must be treated like any other loss, and borne equally by the partners. Lindl. Part. 807. The only authorities adduced by the learned counsel of the defend- . ants in support of his contention in this case are to the effect that prop- erty brought into the partnership business by the members of the firm, • or bought with the capital advanced, becomes partnership property, and may be disposed of as such by one of the partners under his general powers as a member of the firm. And so it does beyond all question, for the very object of contributing capital, either in property or money, is to secure a partnership stock for the purpose of carrying on the • common business. But this fact has nothing to do with the settlement 'between the partners of their accounts at the end of the partnership. "By the capital of a partnership," says Mr. Lindley, "is meant the aggregate of the sums contributed by its members for the purpose of ■ commencing or carrying on the partnership business. The capital of a partnership is not, therefore, the same as its property. The capital is a sum fixed by the agreement of the partners, whilst the actual assets -of the firm vary from day to day, and include everything belonging to the firm and having any money value. Moreover, the capital of each jjartner is not necessarily the amount due to him from the firm; for 170 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3- not only may he owe the firm money, so that less than his capital is due to him, but the firm may owe him money in addition to his capital — e. g., for money loaned. The amount of each partner's capital ought, therefore, always to be accurately stated, in order to avoid disputes upon a final adjustment of accounts; and this is more important where the capitals of the partners are unequal, for, if there is no evidence as to the amounts contributed by them, the share of the whole assets will be treated as equal." Lindl. Part. 610. The same author adds in another place : "When it is said that the shares of partners are prima facie equal, although their capitals are unequal, what is meant is that losses of capital, like other losses, must be shared equally; but it i.s not meant that on a final settlement of accounts capitals contributed unequally are to be treated as an aggregate fund which ought to be divided between the partners in equal shares." Lindl. Part. 67. On the contrary, in his chapter devoted to Partnership Accounts, he ex- pressly tells us that the assets of a partnership should be applied as follows: "(1) In paying the debts and liabilities of the firm to non- partners; (2) in paying to each partner ratably what is due from capital; (3) in paying to each partner ratably what is due from the firm to him in respect of capital ; (4) and the ultimate residue, if any, will then be divisible as profits between the partners in equal shares, un- less the contrary can be shown." Lindl. Part. 806. In accordance with these principles, the following decision has been made by the Supreme Court of New York in a case cited in a note to page 610 of Lindley on Partnership: "Where by the terms of the agreement the defendant furnished the capital stock, and the plain- tiff contributed his skill and services, and the profits of the copartner- ship were to be equally divided, the plaintiff is not entitled to any part of the capital stock on a settlement of the affairs of the partner.ship. He has no interest in any part of the capital, excepting so far as in the progress of the business the same may have been converted into prof- its." Conroy v. Campbell, 13 Jones & S. (N. Y.) 326. The case, it will be noticed, is exactly in point. And to the same effect in prin- ciple are Whitcomb v. Converse, 119 Mass. 38, 20 Am. Rep. 311, Knight V. Ogden, 2 Tenn. Ch. 473, and Shepherd, Ex parte, 3 Tenn. Ch. 189. No case has been found to the contrary. Affirm the chancellor's decree. Decree affirmed. Sec. 3) PARTNERSHIP PKOPERTT. 171 II. Property Other than Capitai.. ROBINSON BANK v. MILLER et al. (Supreme Court of Illinois, 1894. 153 111. 244, 38 N. E. 1078, 27 L. R. A. 449, 46 Am. St. Rep. 883.) John Newton, John S. Emmons, and Frank O. Miller, having each acquired, with individual funds, a one-third interest in a certain parcel of land containing four acres, entered into an oral agreement of part- nership to engage in the business of milling and of buying and selling grain. The business of the firm was done in a mill on said land. John S. Emmons executed two mortgages on his one-third interest in the land — one to Willis Emmons to secure him as surety on a note of John S. Emmons, and the other to Wiley S. Emmons and William W. Walter to secure them as sureties on another note of John S. Emmons. Frank O. Miller also executed a mortgage on his one-third interest to one Lamport. The Robinson Bank, a creditor of the firm of Newton, Emmons & Miller, claims that the mill property and the land upon which the mill stands was partnership property belonging to Newton, Emmons & Miller as partners ; that the individual creditors of Miller and John S. Emmons, such as Willis Emmons, Wiley S. Emmons, and William W. Walter, were only entitled to such surplus as might arise out of the mill property after the payment of the firm debts therefrom. The bank filed a bill seeking to have the mortgages to Wiley S. Em- mons, William W. Walter, and Willis Emmons, and to Lamport, set aside. Said mortgagees filed cross-bills asking for the foreclosure of their respective mortgages. In the circuit court the mortgages by John S. Emmons were held to be valid, and a foreclosure was decreed. The mortgage to Lamport was set aside for fraud. This was an appeal by the bank and by Lamport. The validity of the mortgages depends on whether the land on which they were given was the property of the mortgagors individually or whether it belonged to the partnership. Magruder, J. * * * Whether real estate upon which a part- nership transacts its business is firm property or the property of the individual members of the firm is oftentimes a difficult question to determine, and one upon which the authorities are not altogether uni- form. The mere fact of the use of land by a firm does not make it partnership property. Geopper v. Kinsinger, 39 Ohio St. 429 ; Hat- chett V. Blanton, 72 Ala. 423. Nor is real estate necessarily the in- dividual property of the members of a firm because the title is held by one member, or by the several members in individual interests. 1 Bates, Partn. § 280. Whether real estate is partnership or individual property depends largely upon the intention of the partners. That in- tention may be expressed in the deed conveying the land, or in the arti- cles of partnership ; but when it is not so expressed the circumstances usually relied upon to determine the question are the ownership of the 172 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 funds paid for the land, the uses to which it is put, and the manner in which it is entered in the accounts upon the books of the firm. 1 Bates, Partn. § 280 ; 2 Ivindl. Partn. marg. p. 649 ; 17 Am. & Eng. Enc. Law, p. 945, and cases in note. Where real estate is bought with partnership funds for partnership purposes, and is applied to partnership uses, or entered and carried in the accounts of the firm as a partnership asset, it is deemed to be firm property; and in such case it makes no differ- ence, in a court of equity, whether the title is vested in all the part- ners, as tenants in common, or in one of them, or in a stranger. T. Pars. Partn. (4th Ed.) § 265; 1 Bates, Partn. § 281; Johnson v. Clark, 18 Kan. 157; 17 Am. & Eng. Enc. Law, p. 948, and cases cited. If the real estate is purchased with partnership funds, the party hold- ing the legal title will be regarded as holding it subject to a resulting trust in favor of the firm furnishing the money. In such case no agree- ment is necessary, and the statute of frauds has no application. Park- er V. Bowles, 57 N. H. 491 ; 1 Bates, Partn. § 281. In the case at bar the land was not purchased with partnership fiinds. The undivided one-third interest bought by John S. Emmons was paid for by him with his own individual money. Miller also paid for the one undivided one-third interest, purchased by him with his individual funds. None of the money of the firm of Newton, Emmons & Miller was contributed towards the purchase of the one-third interest held by Newton. Indeed, the proof shows that the firm of Newton, Emmons & Miller was formed by an oral agreement after Emmons and Miller had bought their interests. Each partner here held the title to an un- divided one-third part of the property. No entries were made upon the books of the firm showing that the real estate was treated as firm assets. The evidence, however, does show that the property was bought for the purpose of being used in the milling business, and that after its purchase it was used for firm purposes, and that the firm gave its notes to pay for repairs, and for placing new machinery in the mill upon the premises. Under these circumstances, was the land partnership property, or the individual property of the partners, hold- ing as tenants in common? It cannot be said that the land is firm property, upon the theory of a resulting trust, because the money of the firm was not used to buy the property. Such a trust might exist in favor of the firm, regarding it as a person, if the partners had taken the legal title, and the firm had advanced the purchase money. The trust must arise at the time of the execution of the conveyance, and when the title vests in the grantee. Such could not have been the case here, under the facts stated. Van Buskirk v. Van Buskirk, 148 111. 9, 35 N. E. 383. In view of the fact that the land was bought with individual, and not partnership, funds, and was conveyed in undivided interests to the several partners, and in the absence of any agreement that it should be regarded as firm property, does the conduct of the parties in afterwards forming a partnership, and using the property for partnership purposes, and repairing and improving the mill at the Sec. 3) PARTNERSHIP PROPERTY. 173 expense of the firm, make the land firm property, in a court of equity? A negative answer to this question is found in many of the authori- ties, as will be seen by reference to the following: Alexander v. Kim- bro, 49 Miss. 529 ; Theriot v. Michel, 28 La. Ann. 107 ; Reynolds v. Ruckman, 35 Mich. 80; Parker v. Bowles, 57 N. H. 491; Thompson V. Bowman, 6 Wall. (U. S.) 316, 18 L. Ed. 736; Frink v. Branch, 16 Conn. 260; Wheatley's Heirs v. Calhoun, 12 Leigh (Va.) 264, 37 Am. Dec. 654; Sikes v. Work, 6 Gray (Mass.) 433; Gordon v. Gordon, 49 Mich. 501, 13 N. W. 834 ; Moody v. Rathburn, 7 Minn. 89 (Gil. 58) ; Paige v. 'Paige, 71 Iowa, 318, 32 N. W. 360, 60 Am. Rep. 799; T. Pars. Partn. (4th Ed.) § 266; Hatchett v. Blanton, supra. The general doctrine of all these cases is that a purchase of the land with partnership funds is necessary to make it firm property. T. Parsons, in his work on Partnership (4th Ed.), says: "Although it [real estate] be held in the joint name of two or more persons, if there be no proof that it was purchased with partnership funds for partnership purposes, it will be considered as held by them as joint tenants or tenants in common. * * * So, if not paid for by part- nership funds, then it is probably his property who does pay for it, whatever use he permits to be made of it." Sections 265, 266. In Hatchett v. Blanton, supra, the Supreme Court of Alabama say : "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 partnership." In Thompson V. Bowman, supra, the Supreme Court of the United States say : "In the absence of proof of its purchase with partnership funds for part- nership purposes, real property standing in the names of several per- sons is deemed to be held by them as joint tenants or as tenants in common." Buchan v. Sumner, 2 Barb. (N. Y.) 165, 47 Am. Dec. 305. The theory of some of the cases is that real estate bought with separate, and not partnership, funds, cannot be converted into firm property by a verbal agreement between the partners, because no trust can be created in lands, unless by writing, in view of the statute of frauds, except such as results by implication of law. Parker v. Bowles, supra. There are cases which hold that, even though the land was originally bought by the several partners with their individual funds, and deeded to them as tenants in common, yet it will be regarded in equity as firm property where it is improved out of partnership funds for firm purposes, and actually used for such purposes, or where the firm puts valuable and permanent improvements upon it for firm pur- poses, and which are essential to the firm. In some instances the land is held to be the property of the partners, and the improvements to be the property of the firm. 1 Bates, Partn. §§ 281, 282. The use of the property is not conclusive of its character as real estate or per- 174 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 sonalty, but is only evidence of the intention of the parties. Id. § 285. When the intention of the partners to convert the land into firm prop- erty is inferred from circumstances, the circumstances must be such as do not admit of any other equally reasonable and satisfactory ex- planation. T. Pars. Partn. § 267. And, where it is sought to show a conversion of the land into personalty by agreement of the partners, such agreement must be clear and explicit. 17 Am. & Eng. Enc. Eaw, p. 954, and cases cited." In Alkire v. Kahle, 123 111. 496, 17 N. E. 693, 5 Am. St. Rep. 540, land was conveyed during the existence of the partnership to "Cato Abbott and Henry Robinson, composing the firm of Abbott & Robinson," and it was held not to be partnership property, because it was not shown to have been either purchased with partnership funds, or used for partnership purposes ; but we do not regard that case as holding that the mere use of the land for partner- ship purposes constitutes it firm property. In Mauck v. Mauck, 54 111. 281, land which had been bought and held for firm purposes was said to be firm property, and to partake of the character of personalty ; but in that case a part of the business of the firm was to buy and sell real estate, and, although the land was said to belong to the firm, it does not appear that it was not purchased with partnership funds. In Faulds V. Yates, 57 111. 416, 11 Am. Rep. 24, the land was bought for the use of the partnership, but after the partnership was formed, and with the money of two of the partners. In Bopp v. Fox, 63 111. 450, land, bought by four partners with their individual funds, and convey- ed to them in their individual names, was held to be partnership prop- erty, because, two weeks before the purchase, the four purchasers made, not a mere executory agreement to form a partnership at a fu- ture time, but a "present, verbal agreement of partnership," and then afterwards bought the land, and began the erection of a mill for the purpose of carrying on the milling business as a firm "already formed under the verbal agreement." It was there held that the essential ques- tion was whether the purchase money "was paid as partnership money for a partnership purpose," and we said, "We consider this was es- sentially a purchase with partnership funds for partnership purposes." The weight of authority seems to us to support the position that where persons who afterwards become partners buy land in their in- dividual names and with their individual funds, before the making of a partnership agreement, the land will be regarded as the individual property of the partners, in the absence of a clear and explicit agree- ment subsequently entered into by them to make it firm property, or in the absence of controlling circumstances which indicate an inten- tion to convert it into firm assets. We do not think that an application of this rule to the facts of the present case shows the real estate here in controversy to be firm property. * * * Decree affirmed. Sec. 3) PARTNERSHIP PROPERTT. 175 STUMPH et al. v. BAUER et al. (Supreme Court of Indiana, 1881. 76 Ind. 157.) Replevin for six barrels of whisky seized by the defendant Pressley, sheriff, on an execution in favor of defendant Bauer, on a judgment obtained by Bauer against Stumph. Prior to the rendition of said judgment, Stumph had entered into a partnership with one Ross. Stumph furnished all the capital and owned all of the stock of the partnership. Ross contributed his labor and experience, and had a "working interest" only, and received a share of the profits. The low- er court found for the defendants. Plaintiffs appeal. Best, C. * * * If the property in question was partnership property, its seizure was unlawful, and the appellants were entitled to recover. On the other hand, if the property belonged to Stumph, the levy was lawful, and the judgment was right. Did the property be- long to Stumph? This depends upon their contract. By its terms Stumph was to furnish all the capital, own all the stock, and give his attention to the business. Ross was to contribute his labor and ex- perience, and was to have a third of the net profits. This property was a part of the stock. By the contract Stumph did not put this property into the firm, if one was formed, as partnership property, nor part with its title, but, on the contrary, retained it himself. By express stipulation his title to the property was the same after as be- fore he made the contract, and Ross had no greater or different interest in the property than he would have had, had he engaged to render the same services for a like compensation. Ross was not to own the prop- erty, nor any interest in it, nor was it to belong to the firm. True, if it had been sold, he would have been entitled to one-third of the net profits, and so he would have been, had he been employed to render ■such services for such compensation. Had Stumph put this property into the firm, and Ross his labor and experience, the profits to be di- vided in the proportion named, the property would have been part- nership property. But this was not done. On the contrary, Stumph retained it, stipulating that he himself should own it, and this stipula- tion fixes the relation of these parties to this property. As between them, Stumph owns the property, and any right that he can assert to it against Ross can be asserted against him by the individual cred- itors of Stumph. Again, the conclusion that this property is the individual property •of Stumph is strengthened by the stipulation in the contract that Ross' interest is a "working interest," viz., one-third of the net profits. Stumph furnished everything, owns everything, and Ross has a "work- ing interest." What is that but a compensation for his services ? Why call .it a "working interest," if that was not a compensation for his work? This language is significant. It is in harmony with the clause providing that Stumph should own the stock, and both clauses are ut- 176 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3^ terly inconsistent with the position that Stumph put the property into- the firm and that it became partnership property. If, then, the "work- ing interest" of Ross was a mere compensation for his services, the fact that it consisted of one-third of the net profits did not make him a partner. Keiser v. State, 58 Ind. 379. Again, by the terms of this contract the relation between these part- ies may be discontinued at any time. When this relation ceases, what becomes of this property? Must it be converted, 'and an accounting" had? Under such circumstances, would any one suppose that it must be disposed of as partnership property, or doubt that Stumph is its absolute owner? We think not. The appellants also insist that, under the facts found, Ross is Hable as a partner, and therefore he is entitled to hold the partnership prop- erty until all partnership liabilities are extinguished, so as to protect himself. The answer to this position is that it assumes the very fact in dispute, viz., that this is partnership property. If it is not, neither Ross, nor any one claiming through him, has any lien upon it, whatever his liabilities may be to third parties. * * * We do not hold that Ross is not liable as a partner to third persons,, but hold that the property levied upon was liable to be seized and sold to satisfy Stumph's individual debt, and therefore think the judg- ment should be affirmed. PgR Curiam. It is therefore ordered, upon the foregoing opinion, that the judgment be, and it is hereby, affirmed, at appellants' costs.^ 1 "The mere use of the property hy the partnership did not impress upon it the character of partnership property. It is not an uncommon occurrence that a partnership uses the property of its several 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." Per Brickell, C. J., in Hatchett v. Blanton, 72 Ala. 423, 435 (1882). In Foster v. Sargent, 72, N. H. 170, 5.5 Atl. 423 (1903), the court saidr "The question * * * ig whether individual or firm creditors shall have priority in certain real estate * * * acquired with partnership funds. * * « It is * * * contended that, although * * * obtained with partnership property, still it cannot be so regarded, * * * because it has 'never been used in any way in tlie partnership business, but has been rented to others.' * * * i^ Collumb v. Read, 24 N. Y. 505, the court says: 'Where the land was not purchased for partnership uses, and there was no agreement making it partnership property, and yet it was paid for out of 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 partner in making the purchaiie. It might be that such a pur- chase would be made as an investment of realized profits. If, for instance, the purchase price should be charged to tlie separate accounts of the partners, that would be an indication 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 partnership property. * * * Where the price of land * * * is paid by copartnership money or effects, or it is taken in satisfaction of a debt due the concern, the real estate becomes partnership property, or is individual property, * * * as the intention of the purchasers shall appear to have been. It may be either one or the other.' " Sec. 3) PAKTNEESHIP PKOPEETT. 177 III. Good Wili,. WILLIAMS et al. v. FARRAND et al. (Supreme Court of Michigan, 1891. 88 Mich. 473, 50 N. "W. 446, 14 L. B. A. 161.) McGrath, J. Complainants and defendants had been for some years engaged as wholesale druggists on Lamed Street East, in the city of Detroit, as copartners, under the name and style of Farrand, Williams & Co. There were no articles of copartnership, and no term fixed for which the partnership was to continue. Prior to the taking of the annual inventory in January, 1890, defendant Jacob S. Farrand expressed to complainant Sheley a desire to dissolve the copartnership. Mr. Sheley declined to say anything until the annual inventory should be taken, and the business of the year settled up. On the 25th of January, 1890, after the completion of the inventory, defendants made a proposition in writing to "pay Messrs. Sheley & Brooks, for their interest in the firm of Farrand, Williams & Co., for the amount of their interest, being fifty thousand dollars, ($50,000,) the sum of six- ty thousand dollars, ($60,000,) or they will take for their interest, the amount being one hundred thousand dollars, ($100,000,) the sum of one hundred and twenty thousand dollars, ($120,000,) the sum to be paid in cash, or in notes acceptable to the parties who sell, one week from to-day, Saturday, the first day of February next. The store to be leased to the party purchasing for a term of five years, at a rent of eight thousand dollars ($8,000) a year, and the warehouse to be rented to the party purchasing, at a net rental of 6^ a year on the cost of their interest therein." On the following Monday Mr. Sheley accepted defendants' offer to sell, and on the 1st day of February fol- lowing a bill of sale was prepared, reciting, among other things, that defendants, in consideration of the sum of $130,000, paid to them by Alanson Sheley, party of the second part, "have bargained and sold unto the said party of the second part all our right, title, and interest to the within-mentioned resources of said firm, including the good will attendant upon the business." This bill of sale was not executed, ob- jection being made to the clause, "including the good will attendant upon the business," and a new instrument was prepared, reciting that defendants, parties of the first part, "for and in consideration of the sum of one hundred and twenty thousand dollars, to them paid by Alanson Sheley, of the second part, have bargained and sold, and by these presents do grant and convey, unto the said party of the second part, his executors, administrators, or assigns, all our right, title, and interest in the firm of Farrand, Williams & Company." This instru- ment was executed, the insurance policies were assigned by Farrand, Williams & Coj to Williams, Sheley & Brooks, and an agreement to as- sume and pay all the debts of the old firm was executed by Williams, Gil.Part.— 12 178 NATURE AND CHAKACTEKISTICS OF A PAETNEESHIP. (Ch. 3 Sheley & Brooks, and delivered to defendants. Defendants after- wards formed a copartnership under the firm name of Farrand, Wil- hams & Clark, and opened a wholesale drug establishment at No. 33 Woodward avenue. Complainants adopted the name and style of Wil- liams, Sheley & Brooks; posted their firm name, as successor to Far- rand, Williams & Co., over their place of business; had the words "Williams, Sheley & Brooks, Successors to" printed in red ink over the words "Farrand, Williams & Co." wherever the latter appeared upon letter heads, bill heads, labels, and on other stationery; adver- tised themselves in the newspapers and trade journals as Williams, Sheley & Brooks, successors to Farrand, Williams & Co.; and sent out circulars to the trade containing not only their firm name, but the names of the individual members of [he firm. Defendants also ex- tensively advertised the new enterprise through the same mediums, calling special attention to the names of the members of the new firm, their long connection with the drug business, and the dissolution of the old firm, and soliciting trade. The complainants contend that the assignment by defendants of all interest in the business carried with it the good will of the business, and, having purchased the good will of that business, they are en- titled to the exclusive use of the old firm name ; that, while defendants have the right to engage in the same line of business, they have not the right to such collocation of their own names as will produce con- fusion, attract customers, and secure orders, letters, and goods intend- ed for the old firm; that defendants have no right to simulate their labels, to solicit their customers, or entice away their employes. "Good will" has been defined by this court to be "the favor which the man- agement of a business wins from the public, and the probability that old customers will continue their patronage." Chittenden v. Witbeck, 50 Mich. 401, 15 N. W. 526. Lord Eldon, in Cruttwell v. Lye, 17 Ves. 335, defined it as simply the probability that old customers will resort to the old place. The following propositions must be regarded as established by the clear weight of authority : 1. Though a retiring partner may have assigned his interest in the partnership business, including the good will thereof, to his copartner, he may, in the absence of an express agreement to the contrary, en- gage in the same line of business in the same locality, and in his own name. 3. He may, by newspaper advertisements, cards, and general cir- culars, invite the general public to trade with him, and through the same mediums advertise his long connection with the old business, and his retirement therefrom. 3. He will not be allowed, however, to use his own name, or to ad- vertise his business, in such a way as to lead the public to suppose that he is continuing the old business; hence, will not be allowed to ad- vertise himself as its successor. Sec. 3) PARTNERSHIP PROPERTT. 179 4. The purchaser will not, in the absence of an express agreement, be allowed to continue the business in the name of the old firm. 5. That no man has a right to sell or advertise his own business or goods as those of another, and so mislead the public, and injure such other person. * * * 6. That when an express contract has been made to remain out of business, or for the use by a purchaser of a fictitious name, or a trade- name, or a trade-mark, the courts will enjoin the continued violation of such agreement. * * * 7. That an assignment of all the stock, property, and effects of a business, or the exclusive right to manufacture a given article, carries with it the exclusive right to use a fictitious name in which such busi- ness has been carried on, and such trade-marks and trade-names as have been in use in such business. These incidents attach to the busi- ness or right of manufacture, and pass with it. Courts have uniform- ly held that a trade-mark has no separate existence; that there is no property in words, as detached from the thing to which they are ap- plied ; and that a conveyance of the thing to which it is attached car- ries with it the name. * * * 8. A corporate name is regarded as in the nature of a trade-mark, even though composed of individual names, and its simulation may be restrained. After adoption it follows the corporation. Statutes provid- ing for the organization of corporations usually prohibit the adoption of the same name by two companies. Holmes v. Manufacturing Co., 37 Conn. 378, 9 Am. Rep. 324. These propositions are sustained by a long line of authorities, but in none of the cases cited does the question hinge upon a grant of good will. Complainants insist, however, that a grant of good will may be impHed, and, when express or implied, it im- poses certain restraints upon the vendors, viz.: (1) That they cannot afterwards personally solicit customers of the old firm, and (2) that they are restricted in the use that may be made of their own names. 1. The doctrine that a retiring partner, who has conveyed his in- terest 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. A retiring partner conveys, in addition to his interest in the tangible effects, simply the advantages that an estab- lished business possesses over a new enterprise. The old business is an assured success, the new an experiment. The old business is a go- ing business, and produces its accustomed profits on the day after the transfer. It is capital already invested, and earning profits. The con- tinuing partner gets these advantages. The new business must be built up. The capital taken out of the old concern will earn nothing for months, and in all probability the first year's business will show loss instead of profit. For a time at least it is capital awaiting in- vestment, or invested, but earning nothing. The retiring partner takes these chances or disadvantages. He does not agree that the benefit derived from his connection with that business shall continue. He 180 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 does not agree that the old business shall continue to have the benefit of his name, reputation, or service ; nor does he guaranty the continu- ance of that patronage which may have been attracted by his name or reputation. He does not pledge a continuance of conditions. He takes out of the business an element that has contributed to the success of that business. He sells only those ad-vantages and incidents which attach to the property and location, rather than those which attach to the person of the vendor. T. Pars. Partn. *409. He sells only so much of the custom as will continue in spite of his retirement and ac- tivity. He sells probabilities, not assurances. It is urged that by the solicitation of the customers of the old firm he is endeavoring to im- pair the value of that which he has sold, but every act of his in the direction of the establishment of the new business tends to divert the customers of the old firm. The right to enter into the same line of business in the same locality (next door if you please), to advertise his former connection with the old business, and to solicit generally the patronage of the public, is conceded by the clear weight of author- ity. The exercise of these rights necessarily involves the diversion of custom to the new firm. Does not the right to again engage in the same line of business include all of the incidents of that right? Upon what principle is the line arbitrarily drawn at the personal solicitation of the customers of the old firm? The right to engage in business in his own name attaches to the retiring partner, and, unless expressly so agreed, there is no restraint upon that right. In the present case, Jacob S. Farrand had been at the head of the old house for half a century. His name could not be subsequently used in the same line of business without attracting the attention of the entire trade,' nor without affecting the probabilities of a continuance of the patronage of the old house. He gave no hint that he did not intend to again en- gage in business. All of the circumstances pointed in the direction of a new business. The retirement was not of Jacob S. Farrand alone, but of his son-in-law and Mr. Clark also. The proposition made to complainants was not only to sell, but to buy. In Ginesi v. Cooper, 14 Ch. Div. 596, the court went so far as to insist that a retiring part- ner had no right to deal with the customers of the old firm ; but that rule would operate as a restriction upon the public, and the case is without support in that respect. In Labouchere v. Dawson, L,. R. 13 Eq. 322, the court say that a retiring partner who sells the good will of a business is entitled to engage in a similar business, may pub- lish any advertisement he pleases in the papers, stating that he is car- rying on such a business; he may publish circulars to all the world, and say that he is carrying on such a business ; but he is not entitled, by private letter, or by visit by himself or agent, to solicit the custom- ers of the old firm. But in Pearson v. Pearson, 27 Ch. Div. 145, La- bouchere V. Dawson is expressly overruled. The court say : "The case of the plaintiff is founded on contract, and the question is, what are his rights under the contract? There is no express covenant not to Sec. 3) PAETNEKSHIP PROPERTY. 181 solicit the customers of the old business, but it is said that such a covenant is to be impHed. I have a great objection to straining words so as to make them imply a contract as to a point upon which the par- ties have said nothing, particularly when it is a point which was in their contemplation. It is said that there was a sale of the good will. I think that there was, taking good will as defined by Lord Eldon in Cruttwell V. Lye, 17 Ves. 335. The purchaser has a right to the place and a right to get in the old bills; so the purchaser gets the good will, as defined by Lord Eldon. But the term 'good will' is not used; and when a contract is sought to be implied we must not sub- stitute one word for another. But suppose the word did occur, what is the eflFect of the sale of 'good will' ? It does not, per se, prevent the vendor from carrying on the same class of business." Vernon v. Hal- lam, 34 Ch. Div. 752, held that a covenant by a vendor of a business, including the good will thereof, that he would not for a term of years carry on the business of a manufacturer, either by himself or jointly with any other person, under the name or style of J. H. or H. Bros, (the name of the business which he had sold), is not a covenant that the vendor would not carry on business as a manufacturer, but against using a particular name or style in trade, and the injunction was grant- ed to restrain a breach of that covenant. The court say: "When a vendor sells his business, and commences a similar business in the same locality, and solicits customers of the old house to deal with him, the court, following the decision in Pearson v. Pearson, and being of opinion that the case of Labouchere v. Dawson had been overruled by the decision in that case, refused to grant an injunction to restrain such solicitation." Leggott v. Barrett, 15 Ch. Div. 306, Ginesi v. Cooper, 14 Ch. Div. 596, and a number of other cases cited, follow Labouchere v. Dawson. The correct rule is; we think, laid down in Cottrell v. Manufacturing Co., 54 Conn. 138, 6 Atl. 791. The court say: "Cottrell did not require Babcock to agree, and the latter did not agree, to abstain from the man- ufacturing of printing presses. By purchasing the good will merely Cottrell secured the right to conduct the old business at the old stand with the probability in his favor that old customers would continue to go there. If he desired more, he should have secured it by positive agree- ment. The matter of good will was in his mind. Presumptively he ob- tained all that he desired. At any rate, the express contract is the meas- ure of his right ; and since that conveys a good will in terms, but says no more, the court will not upon inference deny to the vendor the possibiHty of successful competition by all lawful means with the vendee in the same business. No restraint upon trade may rest upon inference. Therefore, in the absence of any express stipulation to the contrary, Babcock might lawfully establish a similar business at the next door, and by advertisement, circular, card, and personal solicitation invite all the world, including the old customers of Cottrell & Babcock, to come there and purchase of him ; being very careful always when 182 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 addressing individuals or the public, either through the eye or the ear, not to lead any one to believe that the presses which he offered for sale were manufactured by the plaintiffs, or that he was the successor to the business of Cottrell & Babcock, or that Cottrell was not carrying on the business formerly conducted by that firm. That he may do this by advertisements and general circulars courts are substantially agreed, we think. But some have drawn the line here and barred personal solicitation. They permit the vendor of a good will to es- tablish a like business at the next door, and by the potential instru- mentalities of the newspapers and general circulars ask old customers to buy at the old place, and withhold from him only the instrumentality of highest power, viz., personal solicitation. To deny him the use of the newspapers and general circulars is to make successful business impossible, and therefore is to impose an absolute restraint upon the right to trade. This ^he courts could not do, except upon express agreement. But possibly the old customers might not see these; and in some cases, the courts have undertaken to preserve this possibility for the advantage of the vendor, and found a legal principle upon it. Other courts have been of the opinion that no legal principle can be made to rest upon this distinction ; that to deny the vendor personal access to old customers even would put him at such disadvantage in competition as to endanger his success ; that they ought not upon in- ference to bar him from trade, either totally or partially; and that all restraint of that nature must come from his positive agreement. And such, we think, is the present tendency of the law.'' Good will may be said to be those intangible advantages or incidents which are imperson- al, so far as the grantor is concerned, and attach to the thing conveyed. Where it consists of the advantages of location, it follows an assign- ment of- the lease of location. Again, it may not depend at all upon location, as in the case of a newspaper, and it would follow an assign- ment of all interest in the plant, property, effects, and business. A part- nership may become impersonal, after the death of the partners, and it is then treated like a fictitious or corporate name. A surname may become impersonal when it is attached to an article of manufacture, and becomes the name by which such article is known in the market, and the right to use the name may in consequence follow a grant of the right to manufacture that article, or a sale of the business of man- ufacturing such article; and where the right to manufacture is ex- clusive, the right to the use of the name as appHed to that article be- comes likewise exclusive. It appears, however, that in the first bill of sale which was prepared the words, "including the good will at- tendant upon said business," were inserted, but were objected to, stricken out, and a new bill of sale prepared, omitting any reference to good will. But it is said that this clause was objected to because, in the opinion of the objector, it might preclude him from engaging in the same business, whereas, under the law, he would have such a right had the clause remained. The only use, however, which com- Sec. 3) PARTNERSHIP PROPERTY. 183 plainants now propose to make of the clause, treated as a part of the instrument, is to restrict that right to engarge in business by taking away one of its incidents. Adopting the language used in Churton v. Douglas, Johns. Eng. Ch. 174, with reference to the right of plaintiff to continue the use of the old firm name, "I think the defendant is fully entitled to the benefit of the observation that it was proposed to him to insert such a provision, and that he refused it. I think, there- fore, that this case goes a step higher than the authorities, and the de- fendant is entitled to put his case in the highest possible form with regard to his right" to engage in the same line of business. II. The next question relates to the use by defendants of the firm name of Farrand, Williams & Clark. It is clear that complainants have no right to continue their business under the old firm name. The rule that upon a dissolution of a firm neither partner has the right to use the firm name, as well as the other rule that a retiring partner has no right to use the old firm name, are both subject to the excep- tion that a person has the right to use his own name unless he has expressly covenanted otherwise. In case A. B. should sell out his business to C. D., in the absence of a grant to C. D. of the right to use the name of A. B., or an agreement to the contrary, is there any doubt but that A. B. would have the right to engage in the same line of business in his own name? In that case, such a probability would naturally suggest itself to C. D., and if he desired to get the advantage of A. B.'s abstinence from business, he would insist upon an agreement to that effect. In the present case, Mr. Farrand's name had been at the head of the firm name for nearly half a century, and the name of another of the retiring members corresponded with the only other surname used in the old firm name. It must have been evident to com- plainants that in any event the name of the new firm would be similar to that of the old firm. If complainants desired any protection against such a use of the names of the retiring members, they should have in- serted a provision to that effect in the bill of sale. The right to con- tinue the use of a firm name, as well as a restriction upon the use by a retiring partner of his own name, are proper subjects of bargain, sale, and agreement. Here neither have been purchased. Complain- ants have purchased the business of the old firm. They have the right to advertise themselves as succeeding to and continuing that busi- ness. The exercise of such a right does not conflict with any right reserved by defendants. Complainants, by such a holding out, commit no fraud, misrepresentation, or deception. They publish the truth only. Defendants have the right to use their own names, or any col- location of their own names. They have not adopted the old firm name, although it would have been appropriate. They have adopted no fictitious name. There is no deception in the use of the name adopted by them. The business of the old firm is a separate and dis- tinct business. Defendants have no right to advertise their business as a continuation of the old firm business. They are subject to the 184 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 rule already laid down, that no man has the right to sell or advertise his own goods or business" as that of another, and so mislead the pub- He and injure such other person. In Lathrop v. Lathrop, 47 How. Prac. (N. Y.) 532, after dissolution J. Lathrop formed a copartnership with one Tisdale, and adopted the name of J. Lathrop & Co., which was the style of the old firm. Held that, in the absence of any cove- nant with his late partner, he might legally do so. In Reeves v. Den- icke, 12 Abb. Prac. (N. S.) [N. Y.] 92, the court say: "In this case, the firm name was not sold or transferred to defendants as constitut- ing a part of the partnership property; nor did the sale, in terms or by necessary implication, include the good will; and it is therefore unnecessary to determine whether the partnership name was a part of such good will. There was no restraint upon a retiring partner hold- ing him from engaging in a similar business, and he violated no obli- gation by forming a new firm under his own name, and transacting a business in all respects like that he had released to them. It is quite clear that defendants acquired no right to continue the use of the part- nership name of the old firm. If the good reputation of that firm was intended to pass and become a part of defendant's new firm, it should have been provided for in the conveyance. That it was not intended it should pass is evident from the omission to include it." Iowa Seed Co. V. Dorr, 70 Iowa, 481, 30 N. W. 866, 59 Am. Rep. 446; Bassett V. Percival, 5 Allen (Mass.) 345 ; McGowan Bros. Pump & Machine Co. V. McGowan, 22 Ohio St. 370. In Turton v. Turton, 42 Ch. Div. 128, although there were no contract relations between the parties, the court say : "No man can have the right to represent his goods as the goods of another ; therefore, if a man uses his own name, that is no prima facie case, but if he, besides using his own name, does other things which show that he is intending to represent, and is in point of fact making his goods represent, the goods of another, then he is so prohibited ; but not otherwise." In Hookham v. Pottage, L. R. 8 Ch. App. 91, plaintiff and defendant had been copartners as Hookham & Pottage. Plaintiff succeeded to the business, and defendant afterwards set up a shop only a few doors away, and printed over the door the words, "Pot- tage, from Hookham & Pottage." The court held that "defendant had a right to state that he was formerly manager, and afterwards a part- ner, in the firm of Hookham & Pottage, and that he had a right to avail himself by the statement of that fact of the reputation which he had so acquired, but that he had no right to make that statement, or to avail himself of that reputation, in such a way as was calculated to represent to the world that the business which he was carrying on was the business of Hookham & Pottage, or that Hookham had any in- terest in it." In Meneely v. Meneely, 62 N. Y. 431, 20 Am. Rep.' 489, the court say: "If defendants were using the name with the intention of holding themselves out as the successors of Andrew Meneely, and as the proprietors of the old established foundry which was being con- ducted by plaintiffs, and thus enticing away customers, and if with that Sec. 3) PAETNEESHIP PEOPEETr. 185 intention they used the name in such a way as to make it appear that ■of the plaintiffs' firm, or resorted to any artifice to induce the belief that defendants' establishment was the same as that of plaintiffs, and, perhaps without actual fraudulent intent, they had done acts calculated to mislead, the public as to the identity of the establishment, and pro- duce injury beyond that which resulted from similarity in name, then the court would enjoin them, not from the use of the name, but from using it in such a way as would deceive the public. * * * Kvery man has the absolute right to his own name in his own business, even though he may thereby interfere with or injure the business of another bearing the same name, provided he does not resort to any artifice or contrivance for the purpose of producing the impression that the es- tablishments are identical, or do anything calculated to mislead." In Fullwood V. Fullwood, 9 Ch. Div. 176, R. J. Fullwood carried on busi- ness as manufacturer of annatto at 24 Somerset place, Hexton, from 1785 to 1832. Plaintiff and three brothers, one of whom was the de- fendant, succeeded to the business, but ultimately the right to carry on the business vested in the plaintiff. Defendant, Mathew Fullwood, and another brother formed a copartnership in the name of E. Full- wood & Co., and issued and distributed in various ways cards contain- ing the following: "Established over 85 years. E. Fullwood & Co. (late of Somerset Place, Hexton), Original Manufacturers of Liquid and Cake Annatto." They also placed around the bottles containing the annatto a wrapper resembling that which plaintiff used. The court say: "Defendants are entitled to carry on their business under the firm name which they have adopted, if they are so minded, provided they do not represent themselves to be carrying on the business which has descended to plaintiff." In Bininger v. Clark, 60 Barb. (N. Y.) 113, the defendant wrongfully advertised himself as successor to the old firm, and made such a use of his own name as to indicate a fraud- ulent intent. Hegeman & Co. v. Hegeman, 8 Daly (N. Y.) 1; Levy v. Walker, 10 Ch. Div. 436. In Churton v. Douglas, Johns. Eng. ■Ch. 174, 5 Jur. (N. S.) 887, plaintiff and defendant had carried on the business as stuff manufacturers at Bradford, in a building owned by defendant, and known as "Hall Ings," under the name and style of John Douglas & Co. Defendant sold out to plaintiff all his share, right, and title in the business, including the good will, and executed to plaintiff a seven-year lease of the premises occupied by the firm. Within a short period defendant set up in the same line of business, next door to plaintiff, in a part of the same building known as "Hall Ings," adopting the old firm name of John Douglas & Co. The court held that defendant, by the use of the old firm name, and the surround- ings, would be obtaining the custom of the old firm, by inducing the behef that his was a continuation of the old establishment. The court ■says: "The authorities, I think, are conclusive upon this point that the mere expression of parting with or selling the good will does not imply a contract on the part of the person parting with that good 186 NATURE AND CHAEACTBEISTICS OF A. PAETNERSHIP. (Ch. 3 will not to set up again in the similar business ; but I use the expres- sion 'similar' to avoid including the case of the vendor seeking to car- ry on the identical business. He does not contract that he will not carry on an exactly similar business, with all the advantage which he might acquire from his industry and labor, and from the regard people may have of him, and that in a place next door, if you like, to the very place where the former business was carried on. It is settled that it is the fault of those who wish any protection against such a class that they do not take care to insert the provision to that effect in the deed." The same principle obtains with reference to trade-marks. One may have a right in his own name as a trade-mark, but he cannot have such a right as against another person of the same name, unless the de- fendant use a form of stamp or label so like that used by the plaintiff as to represent that the defendant's goods are of the plaintiff's man- ufacture. Sykes V. Sykes, 3 Barn. & C. 541 ; Holloway v. Holloway, 13 Beav. 209 ; Rogers v. Taintor, 97 Mass. 291 ; Oilman v. Hunne- well, 123 Mass. 139 ; Goodyear India Rubber Glove Mfg. Co. v. Good- year Rubber Co., 128 U. S. 598, 9 Sup. Ct. 166, 32 L. Ed. 535. The tests apphed by all the authorities in this class of cases are : Is a corporate or trade or fictitious name simulated? Is the name assumed or adopt- ed false in fact? Is it used in connection with locality or other repre- sentations, so as to convey the impression that the business is a contin- uation of the old business ? Defendants are not responsible for the blun- ders made by clerks, postal clerks, mail carriers, telephone employes or newspaper reporters. In Meneely v. Meneely, the court say : "When the only confusion created is that which results from the similarity of names, the court will not interfere." In Turton v. Turton it is said that "defendants are not responsible for the blunders made by the business community in not distinguishing between John Turton & Sons and Thomas 'Turton & Sons." See, also, Richardson & Boynton Co. V. Richardson & Morgan Co., 55 Hun, 606, 8 N. Y. Supp. 52; Goodyear India Rubber Glove Mfg. Co. v. Goodyear Rubber Co., 128' U. S. 598, 9 Sup. Ct. 166, 32 L. Ed. 535. Any collocation of the names of Farrand and WilHams would create some confusion. Defendant Clark had been connected with the old business for 30 years, and Williams, the son-in-law of Mr. Farrand, for 21 years. Defendants are using their own names only. They went into business on Woodward avenue, several blocks from the old stand. In every letter head, bill head, card, or advertisement in which their firm name appears they give the individual names of the members of the firm, the new place of business, and in no case have they rep- resented that they are successors to the old firm. The bill heads used by the old firm had a cut of the old stand on the left-hand upper cor- ner, about three inches square. Those of the new firm contain no cut, and less than half of the amount of matter. It would be exceed- ingly difficult to prepare two bill heads more unlike. The letter head.s Sec. 3) PARTNERSHIP PROPERTY. 187 of the old firm contained two cuts — one of the old stand, at the left hand, and one of the Peninsular White Lead & Color Works, on the right. The dissimilarity is marked. The envelopes used by the old firm contain eight printed lines on the upper left-hand corner, occupy- ing an inch and three-quarters of space. Those used by the new firm contain five lines, occupying about three-quarters of an inch in space. There has been no attempt at imitation, in words or type. On March 15th they announced, through circulars cMstributed generally, that they had engaged in business at 32 and 34 Wood- ward avenue; that they expected to have their new store ready for occupancy in a few days; and that the work of getting a new stock of goods would be pushed as fast as possible. On April 7th they issued another circular, announcing that they were now prepared to fill orders, and hoping that the friendly acquaintance of many years would be continued. An advertisement is produced, wherein defend- ants say: "Though it" may seem paradoxical, it is nevertheless true, that the wholesale drug-house of Farrand, Williams & Clark is both the oldest and the newest representative of this important commercial industry in Detroit." But in the same advertisement they announce the dissolution of the old firm, their retirement from said firm, and the formation and business location of the new firm. It is difficult to imagine how such an advertisement would mislead the public. It con- tains no false colors. Both parties advertised extensively in the city and state papers and in the trade journals; complainants giving the names of their individual members, and their new firm name, and advertising themselves as the successors to Farrand, Williams & Co. ; and defend- ants giving the names of their individual members, and the name and business location of the new firm. Complainants sent out circulars to the trade generally, informing it of the dissolution of the old firm, the fact that they were the successors, and giving their firm name ; and defendants sent out circulars announcing their withdrawal and the formation of a new firm. There is no doubt but that the dissolution of this firm, the fact that complainants had bought out the interests of defendants, the name adopted by complainants, the formation of the new firm, the names of- its members, and the defendants' firm name, have been most extensively advertised by both parties, not only in the city, but throughout the state and Union. Nearly 50 letters have been received by the old firm, since the dissolution, addressed to Farrand & Williams; Farrand & Williams Paint Co.; Farrand & Williams Drug Co.; Farrand, Sheley & Brooks; Farrand, Williams & Sheley; Farrand, Williams, Sheley & Co.; Farrand, Williams & Brooks ; Farrand & Co. ; Williams, Farrand & Co. ; Farrand, Sheley & Brooks; Williams & Farrand; Williams, Farrand & Co.; and Wil- liams & Co. It cannot be said that any act of defendants is respon- sible for these blunders. Confusion is inseparable from the dissolu- tion of an, old firm and the composition of two firms from its member- ship, especially when the name of but one of those who remain has 188 NATURE AND CHABACTBRISTICS OF A PAETNEESHIP. (Ch. 3 appeared in the firm name, and the new firm is composed of one whose name for nearly half a century has stood at the head of the firm name, and the surname of another retiring member is the same as the only other name used in the old firm name. It appears that at the outset defendant Clark by mistake opened two or three letters addressed "Farrand, Williams & Co.," bi:t in every other in- stance defendants refused to receive mail directed to Farrand, Wil- liams & Co., unless directed to defendants' street and number; that in a single instance Clark inadvertently signed a letter "Farrand, Wil- liams & Co." ; that two checks were sent to defendants in payment for goods bought from them, which were payable to the order of Farrand, Williams & Co., and Mr. Farrand indorsed them Farrand, Williams & Co., and guarantied the indorsements ; that in four instances mer- chandise or articles not marked, but intended for defendants, were deHvered to complainants, and afterwards taken away ; that in two instances complainants were notified by freight agents that freight awaited delivery; that in both the goods were manifested to Farrand, WilHams & Co., but marked, and were afterwards delivered, to Far- rand, Williams & Clark, for whom they were intended; that com- plainants were notified that a sample box of glassware had beeji shipped to them, but they had not received it; that defendants received a sample box of glassware from the same house, which was billed to Farrand, Williams & Clark, and the latter were notified of the ship- ment by the assignors; that similar boxes of samples had been sent to other drughouses at Detroit; that in one or two instances mer- chandise had been delivered to defendants which was intended for complainants; that in a single instance a customer at Port Huron, who knew of the dissolution, intending to call up the old house by telephone, asked for Farrand & Williams, was given Farrand, Wil- liams & Clark, and told that it was Farrand, Williams & Clark, asked the price of oil, and ordered one barrel; that 113 letters, telegrams, receipts, or bills were received by complainants directed to Farrand, Williams & Co., which were intended for defendants; that of these 35 were directed on the inside to Farrand, Williams & Clark; that all of the letters so received were from business houses from which de- fendants were buying goods, and none were from customers of either house. These proofs do not tend to show any appropriation by de- fendants of the old firm name, or any attempt to secure the corres- pondence addressed to the old firm, or that the customers have been deceived or misled, or that defendants have practiced any fraud, con- cealment, or deception. * * * The decree of the court below must be affirmed as of February 27, 1891, and the bill dismissed, with costs to defendants. Morse and Grant, JJ., concurred with McGrath, J. I,ong, J., did not sit.^ 1 The dissenting opinion of Chaniplin, C. J., Is omitted. Sec. 4) TITLE TO PAETNEKSHIP PROPEETT. 189 SECTION 4.— TITLE TO PARTNERSHIP PROPERTY: HOW TAKEN AND HELD. HENDREN et al. v. WING et al. (Supreme Court of Arkansas, 1895. 60 Ark. 561, 31 S. W. 149, 46 Am. St. Rep. 218.) Replevin by D. R. Wing and others, partners as the Arkansas Ma- chine & Supply Company, against G. H. Hendren and others. Judg- ment for plaintiffs. Defendants appeal. The appellees, D. R. Wing, C. E. Stephens, and Joseph Eggleston, are partners doing business under the firm name of Arkansas Machin- ery & Supply Company. In the course of their business as such firm they sold one E. H. Miller the following machinery: One 35 horse power return tubular boiler, with fixtures and fittings; and one 35 horse power C. & T. engine complete, with fixtures and connections. For this property Miller agreed to pay $906.50,'and he gave his notes for that amount, payable in installments. Afterwards, to further se- cure the payment of these notes. Miller executed a mortgage to said Afkansas Machinery & Supply Company, including in said mortgage the machinery purchased and also other property. Miller at this time was also indebted to appellants, and to secure the same had previously given them a mortgage on another boiler and engine. He disposed of this machinery without appellants' consent, and replaced it with the machinery in controversy. Appellants obtained possession of the boiler and engine purchased from appellees and claim the right to hold same in lieu of the boiler and engine wrongfully disposed of by Miller. Appellees brought replevin to recover the same. Their action was resisted on the ground that the mortgage to the Arkansas Machinery & Supply Company, under which appellees claimed, did not contain the name of either a natural or artificial person, and was therefore void. The circuit court held that the mortgage was valid, and gave judgment in favor of appellees. RiDDiCK, J. The Arkansas Machinery & Supply Company is not a corporation, but it is a business name of a firm of partners. The question for us to determine is whether a chattel mortgage executed to it as such partnership is valid at law. It was said by Mr. Justice Eakin, in Percifull v. Piatt, 36 Ark. 464, that "a partnership as such cannot at law be the grantee in a deed or hold real estate." "The legal title," said he, "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. * * * jf the deed be to a name adopted as the firm style, which includes the name of no party, it passes nothing at law." He proceeds, then, to say that in 190 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 equity the rule is different. A deed or mortgage of real estate to part- ners, describing them only by their firm name, will be enforced in equi- ty, whether such firm name includes the name of one or more of the partners or not. Chicago Lumber Co. v. Ashworth, 26 Kan. 312; Bates, Partn. § 296, and authorities there collated. But, as this is an action at law, it is contended that the strict rule of law with reference to the conveyance of real estate to partnerships must apply. The de- cisions in regard to transfers of real estate to partnerships are based on the old rule stated by Judge Eakin, that "a partnership, as such, cannot at law be the grantee in a deed or hold real estate." This rule does not apply to personal property. On the contrary, a partnership, as such, can at law be the vendee in a bill of sale or other conveyance of personal property. The custom of the country teaches us that this is so. The business of the country is largely carried on by partners under partnership names which frequently do not contain the name of any person. Vast quantities of personal property of all kinds are contracted for, bought, 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 be- tween the rights of partnerships at law in regard to the buying and selling of personal property and the restrictions which prevail there- in in regard to transfers of real estate. A mortgage is only a con- veyance 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. It is true that the statute re- quires certain formalities in regard to acknowledging and recording mortgages in order to give notice to third parties. But there is noth- ing in the statute which renders invalid mortgages of personal property executed to a partnership by its firm name. Such a conveyance to a firm is just as effectual as if the name of each partner had been set out in the mortgage. Henderson v. Gates, 52 Ark. 373, 12 S. W. 780'; Kellogg V. Olson, 31 Minn. 103, 24 N. W. 364; Byam v. Bickford, 140 Mass. 32, 2 N. E. 687; Brunson v. Morgan, 76 Ala. 593; Chi- cago Lumber Co. v. Ashworth, 26 Kan. 212. We therefore conclude that the judgment of the circuit court in regard to the validity of the mortgage was correct, and it is affirmed. GILLE V. HUNT et al. (Supreme Court of Minnesota, 1886. 35 Minn. 357, 29 N. W. 2.) GiivFiivLAN, C. J. Action under the statute to determine adverse claims to real estate, each party claiming the title. July 25, 1856, Jared S. Demman owned the premises, and on that day executed a mortgage thereon to "D. B. Dorman & Co.," containing the usual power of sale, and which was, on the same day, duly recorded. October 7, 1856, Sec. 4) TITLE TO PARTNERSHIP PROPERTY. 191 Demman conveyed the premises to Peter Ponciii, by deed duly record- ed the next day. On the same day, evidently either at the same time of or after the execution of this last deed, D. B. Dorman executed to Poncin a deed of quitclaim and release of the premises, which was recorded October 8, 1856. Plaintiff claims under Poncin. "D. B. Dor- man & Co." was a partnership under that name, composed of D. B. Dorman and Ovid Pinney, though that fact does not appear to have been stated in the mortgage. April 15, 1857, Dorman executed to Pinney an assignment of the mortgage recorded September 13, 1859. In May, 1864, Pinney proceeded to foreclose the mortgage under the power of sale, signing his name to the notice of sale, "Ovid Pinney, Mortgagee and Assignee." At the sale he became the purchaser, and received from the sheriff the usual certificate. The defendants claim under the mortgage and foreclosure. The case turns mainly on the question, in whom was the legal title to the mortgage; that is, who was in law the mortgagee? Was it D. B. Dorman, or was it the partnership or the parties doing business under the name D. B. Dorman & Co. ? A mortgage of real estate, though it is in effect but a lien or security, is in form a conveyance of an estate or interest in land (Morrison v. Mendenhall, 18 Minn. 232 [Gil. 212]), and must be governed by the same rules as to its execu- tion and validity, and the capacity of the parties, and their proper des- ignation, as are applied to a conveyance. It has been affirmed in sev- eral cases in this court that the legal title to real estate can be held only by a person, or a corporate entity, which is deemed such in law ; and that, therefore, a partnership cannot, as such, take and hold such legal title. Thus, in German Land Ass'n v. Scholler, 10 Minn. 331 (Gil. 260), it was decided that the plaintiff, being only a voluntary associa- tion of persons, unincorporated, had no legal capacity to take or hold real property. The rule was recognized in Morrison v. Mendenhall; and in Tidd v. Rines, 26 Minn. 201, 2 N. W. 497, it was decided that a conveyance to a partnership by its first name did not vest in it any legal title or estate, because a partnership, as such, is not recognized in law as a person; so that even had it been stated in the mortgage that the name inserted as the mortgagee was that of a partnership, it would not have made the partnership mortgagee. Nor, as we think, would the individual partners (other than the one named) be the mortgagee. It is true that the grantee in a conveyance need not be named, pro- vided he be described with sufficient definiteness and certainty, as where he is indicated by a title, or an office, and there is but one such ; as in Lady Superior v. McNamara, 3 Barb. Ch. (N. Y.) 375, 49 Am. Dec. 184, where a conveyance to the "Lady Superior" of a designated convent was held good to vest the title in a person then lady superior; but the court referred with approval to Duncan v. Beard, 2 Nott & McC. (S. C.) 400, in which it was held that a conveyance to one and his "associates" vested title in none but the person named, the term 192 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 "associates" being too indefinite to carry the title to the persons intend- ed by it. 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 great 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 great definiteness and cer- tainty — 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. Where the style of a partnership is inserted as a grantee, and it contains the name or names of one or more of the partners, there is no reason why the title should not vest in the partners so named; and the authorities are to the effect that it would. The legal title to the mortgage in question was, then, in D. B. Dor- man. He was the only person through whom legal title could be made, under the mortgage. * * * Judgment affirmed.^ 1 In Kringle v. Ehomberg et al., 120 Iowa, 472, 94 N. W. 1115 (1903), It Is held that, "where title to real property purchased in a partnership trans- action is talven in the name of one of the partners, there is a resulting 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." In Barber v. Crowell et al., 55 Neb. 571, 75 N. W. 1109 (1898), In decidhig, what effect should be given to a mortgage executed to the "Western Trust & Security Company," the court said: "On the assumption that the mortgagee was a partnership or unincorporated association, it is contended that it could not take title to real estate, and that the mortgage is therefore a nullity. It is undoubtedly true that a conveyance of land will be ineffectual to pass the legal title, unless made to a grantee having capacity to receive 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 con- veyance, 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. Davidson v. Cox, U Neb. 250, 9 N. W. 95 ; Buchanan v. «riggs, 18 Neb. 121, 24 N. W. 452. In the former case it was said: 'In this state, a mortgage of real estate is a mere pledge or collateral security creating a lien upon the mortgaged property, but conveying no title nor vesting any estate, either before or after condition broken.' That a lien on real estate to secure an indebtedness may accrue to a partnership in its firm name has been de- cided in Foster v. Johnson, 39 Minn. 380, 40 N. W. 255, and in Chicago Lumber Co. v. Ashworth, 26 Kan. 212." Sec. 5) CONVERSION OF FIRM REALTY INTO PERSONALTT. 193 SECTION 5.— CONVERSION OF FIRM REALTY INTO PER- SONALTY. DARBY V. DARBY et al. (High Court of Cliaucery, 1856. 3 Drew. 495.) Alfred Darby and Abraham Darby embarked in a joint specula- tion as partners in the purchase of real estate, to be laid out in build- ing sites and resold for their joint profit. There was' no actual deed or written instrument of partnership. While the arrangement con- tinued, and while a large portion of the land thus bought remained un- sold, Alfred Darby died. This was a bill filed by his administratrix for the administration of his estate. The principal question was whether Alfred Darby's share of the unrealized real estate descended to his heir at law, or whether it passed as personal estate to his personal representative. Sir R. T. KiNDERSLEY, V. C. [after reviewing the English cases.] The result, then, of the authorities may be thus stated : Lord Thurlow was of opinion that a special contract was necessary to convert the land into personalty; and Sir W. Grant followed that decision. Lord Eldon on more than one occasion strongly expressed his opinion that Lord Thurlow's decision was wrong. Sir J. Leach clearly decided in three cases that there was conversion out and out; and Sir L. Shad- well, in the last case before him, clearly decided in the same way. That is the state of the authorities. Now it appears to me that, irrespective of authority, and looking at the matter with reference to principles well established in this court, if partners purchase land merely for the purpose of their trade, and pay for it out of the partnership property, that transaction makes the prop- erty personalty, and effects a conversion out and out. What is the clear principle of this court as to the law of partnership ? It is that on the dissolution of the partnership all the property belong- ing to the partnership shall be sold, and the proceeds of the sale, after discharging all the partnership debts and liabilities, shall be divided among the partners according to their respective shares in the capital. That is the general rule. It requires no special stipulation. It is in- herent in the very contract of partnership. That the rule applies to all ordinary partnership property is beyond all question, and no one part- ner has a right to insist that any particular part or item of the part- nership property shall remain unsold, and that he shall retain his own share of it in specie. This principle is clearly laid down by Lord Eldon in Crawshay v. Collins, 15 Ves. 218, and by Sir W. Grant, in Feather- stonhaugh v. Fenwick, 17 Ves. 298, and the right of each partner to insist on a sale of all the partnership property, which arises from Gil.Part.— 13 194 NATURE AND CHAEACTERISTICS OF A PARTNERSHIP. (Ch. 3 what is implied in the contract of partnership, is just as stringent as a special contract would be. If, then, this rule applies to ordinary stock in trade, why should it not apply to all kinds of partnership property ? Suppose that partners, for the purpose of carrying on their business, purchase out of the funds of the partnership leasehold estate, or take a lease of land, paying the rent out of the partnership funds; can it be doubted that the same rule which applies to ordinary chattels would apply to such leasehold property? I do not think it was ever questioned that, on a dissolution, the right of each partner to have the partnership effects sold applies to leasehold property belonging to the partnership as much as to any other stock in trade. No one partner can insist on retaining his share unsold. Nor would it make any dif- ference in whom the legal estate was vested, whether in one of the partners or in all. This court would regulate the matter according to the equities. And Sir W. Grant so decided in Featherstonhaugh v. Fenwick. If, then, the rule applies, not only to ordinary stock in trade, but also to a lease for years, suppose, next, that the partnership, instead of purchasing a term of years, were (whether from necessity or choice) to purchase land in fee ; if the land is necessary for the partnership business, and bought with the partnership assets, what difference can it make whether the real estate bought is leasehold or in fee? L,et it be once established that the property purchased is partnership property and it then comes under the operation of those principles which arise out of the partnership contract ; and there seems to be no reason why the operation of those principles is to be restricted to any particular class or species of partnership property. The observations of L,ord Eldon in Crawshay v. Maule [1 Swanst. 495], show that in his opin- ion the right to a sale on a dissolution of partnership does not in any degree depend on the nature of the property. Nor could it be material in this case, any more than on the purchase of a leasehold interest, in whom the legal estate was vested. I should, therefore, feel no hesitation in coming to this conclusion: That the mere contract of partnership, without any express stipulation, involves in it an implied contract, quite as stringent as if it were ex- pressed, that at the dissolution of the partnership all the property then belonging to the partnership, whether it be ordinary stock in trade, or a leasehold interest, or a fee-simple estate in land, shall be sold, and the net proceeds, after satisfying all the partnership debts and lia- bilities, be divided among the partners, and that each partner, and the representatives of any deceased partner, have a right to insist on this being done. Next, what is the doctrine of this court as to conversion? If a testator seised of real estate devises it for sale, and directs that the proceeds of the sale shall be divided among certain persons, so that each of the cestuis que trustent is entitled to say he will have it sold and will take his share of the proceeds, that real estate is in equity Sec. 5) CONVEKSION OF FIRM KEALTY INTO PEKSONALTT. 195 converted into personalty ; and so, if three persons contract that certain real property belonging to them shall be sold, and the proceeds be di- vided among them, so that each one of them has a right to insist that it shall be sold, and that he shall have his share of the proceeds as money, that real property is in equity converted into personalty, and if any one of them dies while the property remains unsold his share is personalty, as between his heir and his personal representatives. Now, if it be established that by the contract of partnership all the partnership property is to be sold at the dissolution of the partner- ship, then any real property which has become the property of the part- nership becomes, by force of the partnership contract, converted into personalty; and that, not merely as between the partners, to the ex- tent of discharging the partnership debts, but as between the real and personal representatives of any deceased partner. That this is so I should, in the absence of all authority, have decided upon the principle; and when I find, notwithstanding the decision of Lord Thurlow, followed by Sir W. Grant, that Lord Eldon was clearly of opinion that real property purchased by a partnership for the part- nership purposes and with the partnership funds becomes personalty, that Sir J. Leach repeatedly so decided without any doubt, and that Sir L. Shadwell also decided the last case in the same way, I can have no difficulty in coming to the conclusion that, whenever a partnership purchase real estate for the partnership purposes and with the partner- ship funds, it is, as between the real and personal representatives of the partners, personal estate. Now, this case is not the ordinary case where persons carrying on the ordinary business of a commercial or manufacturing partnership have found it necessary to purchase real estate for partnership pur- poses. That is not the case. Here they bought land as the stock in trade, by the sale of which they were to make their profits. The land was not in the nature of plant, but was the very subject-matter of their trade. Does that make any diflference? If it does, I think it is in favor of treating it as converted, because the real estate is here clear- ly put in the same position as ordinary stock in trade ; and it appears to me that, if I entertained more doubt than I do on the general ques- tion, that doubt would in this case be very much diminished by the circumstance that here the real estate is itself bought for the very pur- ■pose of selling it again. The very intention of the partnership was to buy land to resell it. That is their very contract, and without sell- ing the land again there would be no partnership business. The part- nership was for the purpose of buying land to parcel it out in plots, and to sell them again, and each partner had a right to say he would have that contract carried out. We have here what Lord Thurlow wanted in Thornton v. Dixon, an actual contract that the land shall be sold. I must, therefore, decide that the share of A. Darby was personal estate, and' passed to his personal representatives. 196 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 DYER V. CIvARK et al. (Supreme Judicial Court of Massachusetts, 1843. 5 Mete. 562, 39 Am. Dec. 697.) Bill in equity. The plaintiff is surviving partner of the firm of Bur- leigh & Dyer, and the defendants are the administrator, the widow, and the minor children of the deceased partner, Stevens Burleigh. The case v^^as heard on the bill, the answer, and a master's report. Shaw, C. J. This is a suit in equity by the surviving partner of the firm of Burleigh & Dyer, established by articles of copartnership under seal, for the purpose of carrying on the business of distillers. The principal question is one which has arisen in several other cases, and is this : Whether real estate, purchased by copartners from part- nership funds, to be held, used, and occupied for partnership purposes, is to be deemed in all respects real estate in this commonwealth, to vest in the partners severally as tenants in common, so that, on the decease of either, his share will descend to his heirs, be chargeable with his wife's dower, and in all respects held and treated as real es- tate, held by the deceased partner as a tenant in common ; or whether it shall be regarded as quasi personal property, so as to be held and appropriated as personal property, first, to the liquidation and discharge of the partnership debts, and to the adjustment of the partnership ac- count, and payment of the amount due, if any, to the surviving partner, before it shall go to the widow and heirs of the deceased partner. This is a new question here, and comes now to be decided for the first time. There are some principles, bearing upon the result, which seem to be well settled, and may tend to establish the grounds of equity and law upon which the decision must be made. It is considered as estab- lished law that partnership property must first be apphed to the pay- ment of partnership debts, and therefore that an attachment of part- nership property for a partnership debt, though subsequent in time, will take precedence of a prior attachment of the same property for the debt of one of the partners. It is also considered that, however extensive the partnership may be, though the partners may hold a large amount and great variety of property, and owe many debts, the real and actual interest of each partner in the partnership stock is the net balance which will be coming to him after payment of all the part- nership debts and a just settlement of the account between himself and his partner or partners. 1 Ves. Sr. 242. The time of the dissolution of a partnership fixes the time at which the account is to be taken, in order to ascertain the relative rights of the partners and their respective shares in the joint fund. The debts may be numerous, and the funds widely dispersed and diffi- cult of collection ; and therefore much time may elapse before the af- fairs can be wound up, the debts paid, and the surplus put in a condi- Sec. 5) CONVERSION OF FIRM REALTY INTO PERSONALTY. 197 tion to be divided. But, whatever time may elapse before the final settlement can be practically made, that settlement, when made, must relate back to the time when the partnership was dissolved, to deter- mine the relative interests of the partners in the fund. When, therefore, one of the partners dies, which is de facto a dis- solution of the partnership, it seems to be the dictate of natural equity that the separate creditors of the deceased partner, the widow, heirs, legatees, and all others claiming a derivative title to the property of the deceased and standing on his rights, should take exactly the same measure of justice as such partner himself would have taken, had the partnership been dissolved in his lifetime; and such interest would be the net balance of the account, as above stated. Such, indeed, is the result of the application of the well-known rules of law, when the partnership stock and property consist of personal estate only ; and, as partnerships were formed mainly for the promo- tion of mercantile transactions, the §tock commonly consisted of cash, merchandise, securities, and other personal property, and therefore the rules of law governing that relation would naturally be framed with more especial reference to that species of property. It is therefore held that on the decease of one of the partners, as the surviving partner stands chargeable with the whole of the partnership debts, the inter- est of the partners in the chattels and choses in action shall be deemed so far a joint tenancy as to enable the surviving partner to take the property by survivorship, for all purposes of holding and administer- ing the estate, until the effects are reduced to money and the debts paid, though, for the purpose of encouraging trade, it is held that the harsh doctrine of the jus accrescendi, which is an incident of joint tenancy at the common law, as well in real as in personal estate, shall not apply to such partnership property ; but, on the contrary, when the debts are all paid, the effects of the partnership reduced to money, and the purposes of the partnership accomplished, the surviving partner shall be held to account with the representatives of the deceased for , his just share of the partnership funds. Then the question is whether there is anything so peculiar in the nature and characteristics of real estate as to prevent these broad prin- ciples of equity from applying to it. So long as real estate is governed by the strict rules of the common law, there would be, certainly, great difficulty in shaping the tenure of the legal estate in such form as to accomplish these objects. Should the partners take their conveyance in such mode as to create a joint tenancy, as they still may, though contrary to the poHcy of our law, still it would not accomplish the pur- poses of the parties, first, because either joint tenant might, at his op- tion, break the joint tenancy and defeat the right of survivorship by an aHenation of his estate, or (what would be still more objectionable) the right of survivorship at the common law would give the whole estate to the survivor, without liability to account, and thus wholly de- 198 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 feat the claims of the separate creditors, and of the widow and heirs of the deceased partner. But we are of opinion that the object may be accomphshed in equity, so as to secure all parties in their just rights, by considering the legal estate as held in trust for the purpose of the partnership ; and, since this court has been fully empowered to take cognizance of all implied as well as express trusts and carry them into effect, there is no diffi- culty, but, on the contrary, great fitness, in adopting the rules of equity on the subject which have -been adopted for the like purpose in England and in some of our sister states. And it appears to us that, considering the nature of a partnership and the mutual confidence in each other which that relation implies, it is not putting a forced con- struction upon their act and intent to hold that, when property is pur- chased in the name of the partners out of partnership funds and for partnership use, though by force of the common law they take the legal estate as tenants in common, yet that each is under a conscien- tious obligation to hold that legal estate until the purposes for which it was so purchased are accomplished, and to appropriate it to those pur- poses, by first applying it to the payment of the partnership debts, for which both his partner and he himself are liable, and until he has come to a just account with his partner. Each has an equitable interest in that portion of the legal estate held by the other until the debts ob- ligatory on both are paid and his own share of the outlay for partner- ship stock is restored to him. This mutual equity of the parties is greatly strengthened by the consideration that partners may have con- tributed to the capital stock in unequal proportions, or, indeed, that one may have advanced the whole. Take the case of a capitalist, who is willing to put in money, but wishes to take no active concern in the conduct of business, and a man who has skill, capacity, integrity, and industry to make him a most useful active partner, but without prop- erty, and they form a partnership. Suppose real estate, necessary to the carrying on of the business of the partnership, should be purchased out of the capital stock and on partnership account, and a deed taken to them as partners, without any special provisions. Credit is obtained for the firm, as well on the real estate , as the other property of the firm. What are the true equitable rights of the partners, as resulting from their presumed intentions, in such real estate? Is not the share of each to stand pledged to the other, and has not each an equitable lien on the estate, requiring that it shall be held and appropriated, first to pay the joint debt, then to repay the partner who advanced the cap- ital, before it shall be applied to the separate use of either of the partners? The creditors have an interest, indirectly, in the same ap- propriation, not because they have any lien, legal or equitable (2 Story on Eq. § 1253), upon the property itself, but on the equitable prin- ciple which determines that the real estate so held shall be deemed to constitute part of the fund from which their debts are to be paid be- fore it can legally or honestly be diverted to the private use of the Sec. 5) CONVERSION OF FIRM REALTY INTO PERSONALTY. 199 partners. Suppose this trust is not implied; what would be the con- dition of the parties, in the case supposed, in the various contingencies which might happen? Suppose the elder and wealthy partner were to die. The legal estate descends to his heirs, clothed with no trust in favor of the surviving partner. The latter, without property of his own, and relying on the joint fund, which, if made liable, is sufficient for the purpose, is left to pay the whole of the debt, whilst a portion, and perhaps a large portion, of the fund bound for its payment is withdrawn. Or suppose the younger partner were to die, and his share of the legal estate should go to his creditors, wife, or children, and be withdrawn from the partnership fund; it would work mani- fest injustice to him who had furnished the fund from which it was purchased. But treating it as a trust, the rights of all parties will be preserved. The legal estate will go to those entitled to it, subject only to a trust and equitable lien to the surviving partner, by which so much of it shall stand charged as may be necessary to accomplish the purposes for which they purchased it. To this extent, and no fur- ther, will it be bound; and subject to this all those will take who are entitled to the property, namely, the creditors, widow, heirs, and all others standing on the rights of the deceased partner. * * * On the facts of the present case, we are of opinion that the real estate in question was a part of the capital stock, purchased out of the partnership funds, for the partnership use, and for the account of the firm. The plaintiff has received a sum in rents and profits that have ac- crued since his partner's death. The defendant Clark, as administrator of Burleigh, the deceased partner, has sold an undivided half of the property as his, under a license, and with the assent of the plaintiff. The widow joined to release her dower, for a nominal sum. But we cannot perceive that the right of the widow is distinguishable from that of the creditors and heirs of the deceased partner. As far as this estate was held in trust by her deceased husband, she was not entitled to dower. For all beyond that she will be entitled, because he held it as legal estate, unless she is barred by her release, of which we give no opinion. The plaintiff is entitled to a decree charging the amount of rents and profits in his hands, and so much of the proceeds of the sale made by the administrator, as will be sufficient to discharge the balance of the partnership account; and the rest of the proceeds will remain in the hands of Clark, the administrator of Burleigh, to be distributed according to law.^ 1 Hubbard et al. v. "Winsor et al., 15 Mich. 147 (1866), Campbell, J.: "Bill to restrain the collection of certain taxes. * * * The grounds set up for relief are that real estate belonging to the complainants was assessed to the partnership. * * * Wg think the objections concerning the mode of as- sessing real estate are not tenable. It appears that the land was all handed in on one list with other property belonging to the firm, and, as it is alleged in the bill to be held in joint tenancy, there could be no assessment of shares 200 NATUEE AND CHAEACTBRISTICS OF A PARTNERSHIP. (Ch. 3 HUSTON et al. v. NEIL. (Supreme Court of Indiana, 1873. 41 Ind. 504.) BuSKiRK, J. This was an action by the appellee against the appel- lants to obtain a partition of certain real estate. The complaint alleges that the plaintiff was a tenant in common with the defendants in lot 51 of Conner's first plat in the original plat of the town of Connersville, Fayette county, Ind.; that oh the 27th day of April, 1855, one Joshua Bates and one Edward Neil purchased said real estate from the Junc- tion Railroad Company, which company, by proper deed, conveyed said property to Bates & Neil ; that at the time said conveyance was made to said Bates & Neil she was the lawful wife of the said Edward Neil, and continued to be such until the 4th day of January, 1870, when the said Neil departed this life intestate ; that on the 30th day of April, 1855, the said Bates and Neil, by a mortgage duly and lawfully exe- cuted, mortgaged said lot to the defendants ; that on the 17th day of March, 1859, the said mortgage was foreclosed, and said real estate was ordered to be sold; that in pursuance of said decree and order of sale the said property was on the 7th day of , 1859, sold, and was purchased by the said defendants, to whom a proper convey- ance was made, and they are now the owners of the undivided five- sixths thereof; that she did not join with her husband in the execu- tion of said mortgage; that she has not parted with her interest in said property; that as the widow of said Edward Neil, deceased, she is the owner of, and entitled to, the one undivided sixth of said real estate ; and that the defendants are the owners of, and entitled to, the one undivided five-sixths. There was a prayer for partition and other proper relief. There was issue, trial by the court, finding for the plaintiff, motion for a new trial made, overruled, and excepted to, and judgment on the finding. The appellants have assigned for error the sustaining of a demurrer to the second paragraph of the answer and the overruling of the mo- tion for a new trial. The substance of the answer i^ that the property in controversy was purchased by partners, with partnership means, for partnership pur- poses, and that it was mortgaged to secure a partnership debt, and was sold on a foreclosure of such mortgage, and purchased by the partnership creditors, leaving a balance of their judgment unpaid; the firm and the members composing it being insolvent. It is insisted by counsel for appellants that property thus acquired and held is regarded and treated as personal property and goes to pay the debts of the partnership, and only after they have been paid does it, or what is left of it, become the individual property of the partners, in it individually to the owners severally, because their estate, as set out, Is indivisible." Sec. 5) CONVERSION OF FIRM REALTY INTO PERSONALTY. 201 and that as it was applied to the payment of partnership debts, leaving a balance of such debts due and unpaid,' the firm and individual mem- bers thereof being insolvent, the same was never held and owned by the said Bates & Neil as real estate, and that consequently no portion thereof descended to, or is owned by, the plaintiff by virtue of her ■marital rights. There is an irreconcilable conflict between the English and American doctrine on this subject, and there is much conflict in the rule of de- cision adopted in the different states. We find the law stated with great clearness and accuracy by Par- sons in his work on Partnership. After speaking of the Enghsh doc- trine, he says : "In this country the rule is otherwise. There is not, and we know no reason why there should be, any reluctance to recog- nize as partnership property any real estate which should be so con- sidered; and when it has fulfilled all its functions as personal ■ prop- erty, in respect of the partnership, the partners, and the creditors, and is no longer wanted for these, it may now become, in their hands who have the legal title, real estate, and subject to all incidents as such, because the same persons with us take the personalty and inherit the realty, and it will be much simpler and easier for them to take at once -as realty that which is realty. The following, then, is the American rule : Real estate, purchased and held as partnership property, is so treated in equity, and subjected to all the incidents of partnership prop- erty. If there be death, the surviving partner, whether he hold the whole title, or hold it in part, or hold none of it, if he be a creditor •of the partnership, has the same right against the real estate, and only the same, which any other creditor has. But real estate goes to pay the debts of the partnership, and only after they are paid does it, •or what is left of it, become the property of the partners, or their rep- jesentatives, free from all claims ; and then it is divided between them just as so much money capital would be. But it then becomes at once real estate, or, rather, all the incidents and qualities of real estate re- vive. This rule goes upon the ground of a trust imposed upon all who hold the legal title, in behalf of all partnership objects; and, that trust ■once discharged, the residue resumes its former character." The same author, in speaking of the right of dower in such real estate, says: "The English rule would seem to cut this off. But in this country it is quite well settled that while dower yields to the claims of partnership creditors, whether they are of the firm or stran- gers, and therefore cannot be granted until all the partnership debts are paid or secured, yet, when this is accomplished, as the land is treat- ed in the same way as if it had never entered into partnership prop- erty, dower revives.'' The previous rulings of this court are in harmony with the prin- ciple above enunciated. Matlock v. Matlock, 5 Ind. 403; Hale v. Plummer, 6 Ind. 121 ; Roberts v. McCarty, 9 Ind. 16, 68 Am. Dec. t604 ; Patterson v. Blake, 12 Ind. 436 ; Holland v. Fuller, 13 Ind. 195 ; 202 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3- Dean v. Phillips, 17 Ind. 406 ; Schaeffer v. Fithian, 17 Ind. 463 ; Kist- ner v. Sindlinger, 33 Ind. 114. It is also insisted by counsel for appellee that she was a proper and necessary party to the proceeding to foreclose said mortgage, and that, as she was not made a party, her rights cannot be and are not affected by such foreclosure and the sale made in pursuance thereof. If the property in controversy was partnership property, then the in- terest of Neil was but the surplus remaining after the payment of the debts of the firm and the final accounting between the partners. If there was no surplus, Neil was never seised of the property, as real estate, at any time prior to his death, and consequently his wife had no interest in such property which would make her a necessary party to the suit to foreclose. Those only are necessary parties defendant who have or claim an interest in the controversy adverse to the plain- tiff, or who are necessary parties to a complete determination or set- tlement of the questions involved. Section 18 of the Code; 2 Gav. & H. Rev. St. 1870, p. 46. The case of Fletcher v. Holmes, 32 Ind. 497, is, upon the point under examination, much in point, and conclusively settles the ques- tion against the appellee. In the quotation hereinbefore made from Parsons on Partnership- the author speaks of dower. Our statute has abolished dower, and substituted in its place one-third in fee simple; but the same prin- ciples of law will apply to both alike. We are very clearly of the opinion that the facts stated in the sec- ond paragraph of the answer constituted a complete defense to the action, and that the court erred in sustaining the demurrer thereto, for which error the judgment must be reversed. The judgment is reversed, with costs; and the cause is remanded, with directions to the court below to overrule the demurrer to the second paragraph of the answer, and for further proceedings in ac- cordance with this opinion.^ 1 In Walling et al. v. Burgess et al., 122 Ind. 299, 22 N. B. 419, 23 N. E. 1076, 7 Li. R. A. 481 (1889), after holding that a surviving partner can convey an equitable title to partnership realty to pay firm debts, without making the wife or representatives of the deceased partner parties to the- deed, it Is said: "Suppose, for instance, that, Immediately before tlie death of Burgess, Burgess & Hildreth had sold and conveyed their real estate without the wife of Burgess joining, and the purchase money had been paid to the members of the firm and become a part of the partnership assets, it would seem clear that the widow and heirs could not have claimed and held any interest in the real estate so sold and conveyed. One of the pur- poses and objects of treating the partnership real estate as personal property in equity is that It may be sold and conveyed by the members of the firm in the usual course of business without the wives of the individual members joining In the conveyance. Were it otherwise, the business of the firm might be stopped, and the partners unable to realize on the assets of the firm, by reason of the wife of one of the members refusing to join in a con- veyance of the real estate." But see Fairehild v. Fairchild, 64 N. Y. 471, and. Pugh V. Ourrie, 5 Ala. 446. Sec. 5) CONVERSION OF FIRM REALTY INTO PER80NALTT. 203 DARROVV et al. v. CALKINS et al. (Cburt of Appeals of New York, 18&7. 154 N. Y. 503, 49 N. E. 61, 48 L. R. A. 299, 61 Am. St. Rep. 637.) Action by Alfred Lyman Darrow and Fanny Gay Darrow against Lyman Darrow Calkins and others. From an order of the Appellate Division (6 App. Div. 28, 39 N. Y. Supp. 527) vacating and setting aside an interlocutory judgment rendered in favor of plaintiffs, and granting a new trial, plaintiffs appeal. The action was for partition of certain lands in the city of Brook- lyn. The plaintiffs, as children and heirs at law of one Edwin J. Dar- row, who died intestate November 13, 1864, claimed title to one un- divided half of such land, subject to the dower right of two of the defendants, as set forth in the complaint. The defendants Calkins are the widow and three children of one Daniel O. Calkins, who died intestate July 20, 1887. It is alleged in the complaint that Edwin J. Darrow, at the time of his death, "was seised in fee simple" of the undivided one-half part of the premises sought to be partitioned, and Daniel O. Calkins of the other undivided one-half. It alleges that on the 25th day of September, 1861, the said Edwin J. Darrow, together with his wife, Lucy P. Darrow, made and executed "a certain deed in trust" bearing date on that day, which was recorded in the county of Kings January 19, 1865, whereby the said Edwin J. Darrow and his wife conveyed all their estate in the aforesaid real property to the said Daniel O. Calkins, "to have and to hold, to control and manage, sell and convey, the whole or any part of said premises as part of the partnership property of the aforesaid Calkins and Darrow, and to pay over to the said Darrow, his heirs and assigns, or other legal repre- sentatives, such portion thereof as shall, at the closing of the partner- ship business of said Calkins and Darrow, belong to or be due or coming to the said Darrow, his heirs, executors, assigns, or other legal representatives." It alleges, in substance, that a copartnership had existed up to the death of Darrow, in 1864, between him and Calkins, under the firm name of Calkins & Darrow ; that the trust upon which the deed of September 25, 1861, was made had not been performed; that no accounting had been had to "these plaintiffs, or to any court having jurisdiction in the matter" ; that the copartnership had long since ceased and terminated ; that there were no outstanding debts of the firm ; and that the purpose of the said trust had ceased to exist, and the trust, if ever operative, had terminated. The interests of the respective parties, as claimed by the plaintiffs, are set forth, in sub- stance, that the plaintiffs are each entitled to an undivided fourth part of the premises, and the children of Calkins to the other one-half part, subject to dower interests as stated. The complaint further states that a "certain pretended" judgment was entered on the 31st day of October, 1867, in the Supreme Court of the state of New York, in 204 NATURE AND CHAEACTEEISTICS OF A PARTNERSHIP. (Ch. 3 an action brought by Lucy P. Darrow (the widow of Edwin J. Dar- row), as administratrix of his estate, against Daniel O. Calkins and others, for the purpose of ascertaining "what interest such adminis- tratrix had, if any, in the copartnership effects of the firm of Calkins & Darrow," by which judgment it was decreed that the plaintiifs (in this action) had no title or interest in the lands or real estate described in the complaint in that action, which included the premises sought to be partitioned in this action ; that the present plaintiffs were infants, and nonresidents of the state, when the former action was brought ; and that they were not legally brought in as parties to that action, and were not bound by the appearance of the guardian ad litem for them therein ; and that the judgment as to them was without jurisdiction, and void. The complaint prayed judgment for partition according to the interests as set forth in the complaint. The defendants Calkins answered the complaint, and, among other things, alleged that Daniel O. Calkins, at the time of his death, was the sole owner of the lands described in the complaint, and that prior to his death he had fully performed all the terms and conditions con- tained in the deed of September 25, 1861, and that upon his death the lands descended to his children and heirs at law, subject to the dower right of his widow. The defendants Calkins further set up the judg- ment rendered in the action brought by the administratrix of Edwin J. Darrow against Daniel O. Calkins in bar of the present action, and also the statute of limitations. [Here follows a statement of the evi- dence, and a resume of the action begun in 1867.] Thereafter on the 31st of October, the final decree was entered. By this decree it was, among other things, adjudged that the interest of Edwin J. Darrow in the lands and real estate and the proceeds there- 'of was personal estate, and belonged to the plaintiff, as administratrix; that the infant defendants (the present plaintiffs) had no title or in- terest therein as heirs of Edwin J. Darrow ; that the assets of the co- partnership of Calkins & Darrow, including contracts for the sale of real estate, were worth about $28,000 ; and that, the "plaintiff and de- fendant- Daniel O. Calkins, on a full accounting between them as to said estate, having agreed upon the sum of $14,000 as the present ac- tual value of the interest of the estate of the said Edwin J. Darrow in the said copartnership property," therefore, etc. The decree fur- ther provided that the said Calkins pay the plaintiff, as administratrix, said sum of $14,000, and that "thenceforward all the estate, rights, interests, property, and assets of the said firm shall belong to and be the property of the said Daniel O. Calkins as his own proper goods and chattels and credits, lands and tenements." Calkins paid the $14,- noo as required by the judgment, and entered into possession of all the real estate embraced in the deed of September 35, 1861, not pre- viously sold. Andrews, C. J. We are relieved on this appeal from the inquiry which frequently arises between copartners and copartnership and in- Sec. 5) CONVERSION OF FIRM REALTY INTO PERSONALTY. 205 dividual creditors, whether real estate purchased and conveyed to the copartners during the existence of the firm by a conveyance which in form created a tenancy in common is to be regarded as belonging to them collectively as partnership property, or as the individual prop- erty of each according to the interests disclosed on the face of the deed. The finding of the trial court, which is not assailed by any exception, is express that the lands purchased by Daniel O. Calkins and Edwin J. Darrow were purchased by them as copartners out of the funds of the firm of Calkins & Darrow, and the deed executed by Darrow to Calk- ins on the 25th of September, 1861, upon which both the plaintiffs and the defendants rely as determining the character of the ownership, ex- pressly declares in the habendum that the lands were partnership prop- erty of Calkins & Darrow. We are to assume, therefore, that the lands were originally purchased out of partnership funds, with the intention on the part of each partner that they should be held as part- nership property, subject to administration under the rules governing the rights and interests of copartners in lands purchased by them to be held as the property of the partnership. The partners, as between themselves, made the lands partnership property, and the rights of creditors of the firm or of the individual partners are not involved. The only question here is between the plaintiffs, as heirs of Darrow, and the children of Calkins, and it turns mainly on the question wheth- er, upon the death of Darrow, in 1864, an undivided half part of the lands to which he acquired the legal title by the deeds running jointly to himself and Calkins, executed between 1850 and 1854, descended to and vested in the plaintiffs as his heirs at law. The plaintiffs, at the death of Darrow, were infants; and, although this action was not commenced until 30 years after his death, nor until 15 years after the younger of the plaintiffs became of age, it seems, under the case of Howell V. Leavitt, 95 N. Y. 617, the plaintiffs, although they have slumbered upon their rights during an adverse possession 27 years, were not barred by the statute of limitations. So, also, we think it must be held that they were not barred by the adjudication in the de- cree of October 31, 1867, in the action brought by the administratrix Darrow against Calkins for the settlement of the partnership affairs, which declared that "they had no title or interest in the said lands and real estate as heirs of the said Edwin J. Darrow, deceased, or other- wise." The service of the summons on the infants by publication was not completed when the judgment was entered, and, until the period of publication had expired, the court could acquire no jurisdiction to appoint a guardian ad litem, or to render a judgment binding upon them as parties to the action. Brooklyn Trust Co. v. Bulmer, 49 N. Y. 84; Crouter v. Crouter, 133 N. Y. 55, 30 N. E. 726. The legal nature and incidents of land purchased by a copartnership with copartnership funds is a subject upon which great diversity of opinion exists in different jurisdictions. ■ The English rule, after many fluctuations, has, as we understand the cases, come to be that lands so 206 NATURE AND CHAKACTERISTICS OF A PARTNERSHIP. (Ch. 3 purchased, whether purchased for or used for partnership purposes or not, provided only that they were intended by the partners to con- stitute a part of the partnership property, become ipso facto, in the view of a court of equity, converted into personalty for all purposes, as well for the purpose of the adjustment of the partnership debts and the claims of the partners inter se as for the purpose of determining the succession as between the personal representatives of a deceased j)artner and the heir at law. Darby v. Darby, 3 Drew. 495; Essex v. Essex, 20 Beav. 442; Lindl. Partn. (3d Ed.) 681 et seq. This doc- trine had its origin in England, and is said to have grown out of the pecuhar law of inheritance there, and to remedy the hardship 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.^ Fairchild v. Fairchild, 64 N. Y. 471; Shearer v. Shearer, 98 Mass. 114. Lindley, in his work on Partnership, bases the rule on the nature of the interest of each partner in the partnership property. He says (page 687) : "From the principle that a share of a partner is nothing more than his pro- portion of the partnership assets after they have been turned into mon- ey and applied in liquidation of the partnership debts, it necessarily follows that in equity a share in a partnership, whether its property consists of land or not, must, as between the real and personal repre- sentatives of a deceased partner, be deemed to be personal, and not real, estate, unless, indeed, such conversion is inconsistent with the agreement between the parties." The concluding words of the para- graph quoted concede that the intention of the parties will prevent a conversion where that intention is manifested. The general doctrine of "out and out" conversion adopted by the English courts has not been followed to its full extent in this and many other American states. There is no policy growing out of our laws of inheritance or the ex- emption of lands from liability for simple contract debts, which re- quires the application of such a doctrine here. The lands of the an- cestor are assets for the payment of all debts, and the persons who take by descent and under 'the statute of distribution are substantially the same. The necessity for an absolute conversion, supposed to be found in the nature of a partnership interest, seems hardly sufficient to justify a fiction which should deprive real estate of a partnership of its descendible quality, when it is admitted on all hands that part- nership real estate, if the necessity arises, is first subject to be ap- 1 A better statement of the reason for the doctrine is as follows: "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 partnership, whether its property consists of land or not, must, as between the real and personal representatives of a deceased partner, be deemed to be personal, and not real, estate, unless, indeed, such conversion is inconsistent with the agreement between the parties." Lindley, Partn. *343. Sec 5) PONVEKSION OF FIRM REALTY INTO PERSONALTY. 207 propriated in equity to the discharge of partnership obligations and the adjustment of tlie equities between the parties. The clear current of the American decisions supports the rule that, in the absence of any agreement, express or implied, between the part- ners to the contrary, partnership real estate retains its character as realty with all the incidents of that species of property between the partners themselves, and also between a surviving partner and the real and personal representatives of a deceased partner, except that each share is impressed with a trust implied by law in favor of the other partner that, so far as is necessary, it shall be first applied to the ad- justment of partnership obligations and the payment of any balance found to be due from the one partner to the other on winding up the partnership affairs. To the extent necessary for these purposes the character of the property is, in equity, deemed to be changed into per- sonalty. On the death of either partner, where the title is vested in both, the share of the land standing in the name of the deceased part- ner descends as real estate to his heirs, subject to the equity of the surviving partner to have it appropriated to accomplish the trust to which it was primarily subjected. The working out of the mutual rights which grew out of the partnership relation does not seem to re- quire that the character of the property should be changed until the occasion arises for a conversion and then only to the extent required. The American rule commends itself for its simplicity. It makes the legal title subservient in equity to the original trust. It disturbs it no further than is necessary for this purpose. The portion of the land not required for partnership equities retains its character as realty, and it leaves the laws of inheritance and descent to their ordinary operation. It would be useless to review in detail the authorities which seem to us to maintain what has been called the "American Rule." We refer to a very few of them. Buchan v. Sumner, 2 Barb. Ch. (N. Y.) 167, 47 Am. Dec. 305; Collumb v. Read, 24 N. Y. 505; Fair- •child V. Fairchild, supra ; Shearer v. Shearer, supra ; Shanks v. Klein, 104 U. S. 18, 26 L. Ed. 635. If, as sometimes happens, the title to partnership real estate is in the name of one of the partners only, on the death of the other partner his equitable title descends to his heirs •or goes to his devisees, but subject to the primary claims growing out of the partnership relation. Fairchild v. Fairchild, supra; T. Pars. Partn. § 272. But the general principles to which we have adverted are those applied by courts of equity in determining the character and incidents of partnership real estate, in the absence of any agreement, express or implied, between the partners on the subject. It is, however, generally conceded that the question whether partnership real estate shall be deemed absolutely converted into personalty for all purposes, or only converted pro tanto for the purpose of partnership equities, may be controlled by the express or implied agreement of the partners themselves, and that where, by such agreement, it appears that it was 208 NATURE AND CHAEACTBRISTICS OF A PAETNBRSIIIP. (Ch. 'S the intention of tlie partners that the lands should be treated and ad- ministered as personalty for all purposes, effect will be given thereto. In respect to real estate purchased for partnership purposes with part- nership funds, and used in the prosecution of the partnership business, the English rule of "out and out"- conversion may be regarded as properly applied on the ground of intention, even in jurisdictions which have not adopted that rule as applied to partnership real estate ac- quired under different circumstances, and where no specific intention appeared. 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 can- not be separated without impairing the value of each, has been deemed to justify the inference that under such circumstances the lands as well as the chattels were intended by the partners to constitute a part of the partnership stock, and that both together should take the charac- ter of personalty for all purposes ; and Judge Denio, in Collumb v. Read, supra, expressed the opinion that to this extent the English rule of conversion prevailed here. That paramount consideration should be given to the intention of the partners when ascertained, is conceedd by most of the cases. See Hoxie v. Carr, 1 Sumn. (U. S.) 183, Fed. Cas. No. 6,802; Fall River Whaling Co. v. Borden, 10 Cush. (Mass.) 463; Collumb v. Read, supra; T. Pars. Partn. § 367. The legal title to the real estate which the heirs of Edwin J. Darrow asked to have partitioned in this action was vested in Daniel O. Calkins at the time of the death of Darrow, in November, 1864. The plaintiffs, on the death of their father, took no legal estate in the lands. The legal estate which, prior to the 35th day of September, 1861, Darrow held in the undivided one-half of the premises, was by the deed executed by him on that day conveyed to Calkins. That this was the effect of the deed, we have no doubt. The deed is in terms full and ample to convey in fee the interest of Darrow to his grantee. It was coupled, however, with the declaration on the face of the deed that it was to be held by Calkins as partnership property, and the deed contained a pow- er of management and sale, and this was followed by the significant clause, "And to pay over to the said Darrow, his heirs and assigns, or other legal representatives, such portion thereof as shall, at the closing of the partnership business of said Calkins and Darrow, belong to or be due or coming to said Darrow, his heirs, executors, assigns, or other legal representatives." The suggestion that the deed attempted to create an express trust in lands, not within the enumerated trusts per- mitted by section 55 of our statute of "Uses and Trusts" (1 Rev. St. 728), and was, therefore, void as a conveyance, is not well founded. It recognized a pre-existing trust imposed upon the lands, implied by law, and arising out of the partnership relation, and that the trust was to continue notwithstanding the conveyance of the legal title. This was not, we think, in contravention of the statute which contemplated the creation of original trusts, and not the abrogation of existing trusts Sec. 5) CONVERSION OF FIRM REALTY INTO PERSONALTY. 209 resulting from or implied by operation of law; nor did it rer,.der in- operative the subsequent recognition of such an existing trust in con- nection with a conveyance of the legal title. We think the legal title to the one-half part of the land passed by Dar row's deed, subject to the performance by Calkins of the trust 'therein declared. The im- portant question is whether it operated to convert the partnership lands into personalty, and to change the interest of Darrow, or his repre- sentatives, from an interest in the land as realty into an interest in the proceeds of the lands, after a sale thereof by Calkins under the power contained in the deed. We are of opinion that it was the in- tention of the partners, disclosed on the face of the deed and by the surrounding circumstances, to substitute in place of Darrow's prior' interest in the lands, as such, an interest in him and his representatives in any surplus which should remain after a sale by Calkins, and the adjustment of the partnership affairs. It is not necessary to decide whether the surplus, when ascertained, would go to the real or per- sonal representatives of Darrow. As between Darrow and his repre- sentatives and Calkins and his representatives, the deed operated as a conversion of the lands into personalty. The personal representa- tives of Darrow were entitled to enforce, in an action for an account- ing and an adjustment of the partnership affairs, the claims of Dar- row's estate. This was the purpose of the action which resulted in the decree of October 31, 1867, and we think that decree was binding upon the plaintiffs, not on the ground that they were parties, but for the reason that, no controversy existing as to the original character of the property as partnership property, or as to the subsequent deal- ing between the partners in respect to it, the heirs of Darrow were not necessary parties to a final adjustment of the partnership affairs, including the interest of the Darrow estate growing out of his rela- tion to the lands under the deed of September 35, 1861. It was open to the plaintiffs, on an accounting by the administratrix of the Darrow estate, to claim that the $14,000 received by her under the decree in the action for an accounting should be regarded as real, and not per- sonal, assets, and that they were entitled to it in their character as heirs, and not as distributees. We think the order of the court below reversing the judgment at special term was correct, and it should therefore, be affirmed, and judgment absolute entered for the defend- ants on the stipulation, with costs. Order affirmed. Gil.Paet. — 14 210 NATURE AND CHAEACTEEISTICS OP A PARTNERSHIP. (Ch. 3 SECTION 6.— NATURE OF PARTNER'S INTEREST IN PARTNERSHIP PROPERTY. TAYLOR et al. v. FIELDS. (Court of Bxchequer, 1799. 4 Ves. 396.) The point in this cause depended upon the general question whetli- er a separate creditor of one partner can hold the partnership effects taken under an execution for his separate debt against the joint cred- itors of the partnership. At the time the execution took place the partnership was insolvent; but a commission of bankruptcy had not then issued. The court having taken some time to consider, the Lord Chief Baron delivered their opinion : The right of the separate creditor under the execution depends up- on the interest each partner has in the joint property. With respect to that we are of opinion that the corpus of the partnership effects is joint property, and neither partner separately has anything in that corpus, but the interest of each is only his share of what remains after the partnership accounts are taken. In Skipp V. Harwood, 1 Ves. 239 (sub nom. West v. Skip), we see that, whatever the right of the partnership may be, it is not af- fected by what may happen between the individual partners. There is a distinction between the rights of the partners and the rights of the partnership. As between one partner and the separate creditors of the other, they cannot affect the joint stock any farther than that partner whose creditors they are could have affected it. In Fox v. Hanbury, Cowp. 445, Lord Mansfield was led to the consideration of a point that bears much upon this case; and, adverting to the case of Skipp V. Harwood, he states a passage of Lord Hardwicke's judg- ment from his own note rather stronger than it appears in the report: "If a creditor of one partner takes out execution against the partner- ship effects, he can only have the undivided share of his debtor, and must take it iri the same manner the debtor himself had it, and sub- ject to the rights of the other partner." What is the manner in which the debtor himself had it? He had that which was undivided, and could only be divided by first deliver- ing the effects from the partnership debts. He who comes in as his companion, as joint-tenant with him, according to this doctrine of Lord Hardwicke, must take it in the same manner the debtor himself had it, subject to the rights of the other partners. Lord Mansfield having stated what, according to the course of the common law, as far as it respects trade between partners, is the rule, that a creditor taking out execution against a partner is directly in the Sec. 6) NATUKE OF PARTNEE's INTEREST. 211 place of the partner debtor, proceeds to show that by the same rule, where a partner becomes bankrupt, the assignees are put in the place of the partner, in whose right they come in, and by no means, as was argued by Mr. Plumer, by any rule arising out of the bankrupt laws ; for nothing is said in any one of those acts as to the creditors of a partnership and the separate creditors of one partner, but they only provide for the case of mutual debts and accelerating a debt upon a security payable at a future day. But the same common law, applied in the case where one partner becomes a bankrupt, provides that the assignee of the bankrupt shall be in the same situation as that in which a creditor taking out execution stood before those acts. This intro- duces all the cases of bankruptcy, which Mr. Plumer wished to ex- clude, as not applicable to a case in which there was no bankruptcy; and this case is to be considered as if no bankruptcy had taken place, as the execution was before the bankruptcy. In law there are three relations : First, if a person chooses for valuable consideration to sell his interest in the partnership trade, for it comes to that; or if his next of kin or executors take it upon his death; or if a creditor takes it in execution, or the assignees under a commission of bank- ruptcy. The mode makes no difference; but in all those cases the ap- plication takes place of the rule that the party coming in the right of the partner comes into nothing more than an interest in the partner- ship, which cannot be tangible, cannot be made available, or be de- livered, but under an account between the partnership and the part- ner, and it is an item in the account that enough must be left for the partnership debts. * * * The question, therefore, recurs to the consideration, what it was that partner had, for the creditor cannot be entitled to any more. It therefore argues nothing to say he has the merit of diligence, till we see upon what that merit can attach. If the partner himself, therefore, had nothing more than an interest in the surplus beyond the debts of the partnership upon a division, if it turns out that at common law that is the whole that can be delivered to, or taken by, the assignee of a partner, the executor, the sheriff, or the assignee under a commission of bankruptcy, all that is delivered to the creditor taking out the execution is the interest of the partner in the condition and state he had it; and nothing was due to this part- ner separately, the partnership being insolvent. The whole property was due to the partnership creditors, and not to either partner. STAATS v. BRISTOW. (Court of Appeals of New York, 1878. 73 N. Y. 264.) FoLGSR, J. The defendant had the possession of certain personal property, to which the plaintiff claims that he was entitled. It was, of course, incumbent upon the plaintiff to show and establish- his title. He showed that he was the purchaser at a sheriff's sale. The certi- 212 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 ficate given by the sheriff does not say that the plaintiff bought tlie property itself. It says that he bought only all the right, title, and in- terest which Joseph Stockbridge had in it on the 30th of November, 1874. The sheriff's return on the execution upon which he sold is the same. The execution on which the sale took place directed a sale of the property of the defendants therein named, who were the Stock- bridge above named and his copartner, Martin ; but the property point- ed at was what they owned, or either of them owned, on a day named, to wit, on the 9th of December, 1874, and before that day, to wit, on the 4th day of that month, the defendants in the execution had as- signed the property to the defendant in this action in trust for all of their creditors. So it is apparent that the plaintiff did not buy the property itself specifically, but only the interest, right, and title which Stockbridge had in it. Now the interest which he had in it was that of one of two part- ners, as the property was part of the assets of a copartnership firm of which he was a member. 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 part- nership debts are fully paid. It appears in this case that the firm was insolvent, that its debts much exceeded its assets, and that there never could arise a surplus. So the interest of Stockbridge, as an individual, in this property was nothing; and so the plaintiff got nothing by his purchase. Judgment for the defendant aiifirmed. PRATT V. McGUINNESS et al. (Supreme Judicial Court of Massachusetts, 1899. 373 Mass. 170, 53 N. E. 380.) Morton, J. This case was heard upon the pleadings and the mas- ter's report. There was a final decree and an appeal, and a request to the justice who heard the case to report the same, under St. 1883, c. 223, § 7. The case may be treated as here on appeal, and the report may be regarded as a -finding under that statute of all the facts on which the decree was founded, namely, those stated in the master's report and those admitted by the pleadings. It is not necessary, to determine the power of a single justice, independently of the statute of 1883, to report a case to the full court after the entering of a final decree. The bill, as brought, alleges that the plaintiff is a half owner as tenant in common of certain personal property, and asks that the property be sold, and the proceeds divided, ,that a mortgage put upon the property by one of the defendants be declared void, and that he be required to account for certain rents and profits received from the property. The master has found that the person from whom the plain- tiff derived his title had only an equitable interest in the property as a Sec. 6) NATURE OF PARTNER'S INTEREST. 213 member of a firm for which the legal title to it was held by one of the defendants as a part of the assets of the partnership. None of the plaintiff's exceptions to the master's report in regard to his findings of fact can be considered, because the evidence is not reported. It appears that at most the plaintiff has only an equitable interest in such assets of the partnership as may remain, if any, after settlement of the affairs of the partnership. He has nothing but that which he acquired from one of the partners, and, 'if the legal title to the chattels had been in the firm, he would not have acquired an ownership in the articles them- selves. The title tq personal property of a partnership is not in the individual members of the firm, so that they can convey an undivided share in any specific articles to another ; but it is in the firm as an en- tirety, subject to the equities of the different members, and their right to have it applied to the payments of the debts of the partnership. San- born V. Royce, 132 Mass. 594; Pelletier v. Couture, 148 Mass. 269, 19 N. E. 400, 1 Iv. R. A. 863;Lovejoy v. Bowers, 11 N. H. 404; Fourth Nat. Bank v. Railroad Co., 11 Wall. (U. S.) 624, 20 L,. Ed. 82 ; Menagh v. Whitwell, 52 N. Y. 146, 11 Am. Rep. 683 ; Tarbell V. West, 86 N. Y. 280 ; Beecher v. Stevens, 43 Conn. 587 ; Sirrine v. Briggs, 31 Mich. 443. It is questionable, upon the authorities, whether, upon a conveyance of an interest in only a part of the partnership prop- erty, a plaintiff could maintain a bill in equity for a settlement of the partnership affairs and an accounting. Assuming that he could, this bill was not brought for that purpose. * * * It is plain that this bill cannot be maintained. Decree affirmed. McKEE V. COVALT. BUCHER v. SAME. (Supreme Court of Kansas, 190.5. 71 Kan. 772, 81 Pac. 475.) C. A. Smith, J. The undisputed evidence in this case shows that the defendants Bucher and Mark were copartners prior to the purchase of the land in question, and that the land was purchased in a partner- ship transaction, and, so far as paid for, was paid for by an exchange of partnership property ; that the firm continued doing an active busi- ness until about 1893 or 1894, when it ceased, but there was no formal dissolution of the firm, and no accounting or settlement of the firm affairs. The firm property, including the land in question, was re- sponsible for the debts of the firm, and was turned over to Bucher to settle and adjust. He rented the land for a time, and applied the rent on the firm's indebtedness ; and when Covalt took the quitclaim deed from Mark he had knowledge of the fact, or at least sufficient infor- mation to put him upon his inquiry, that the land was partnership assets, and he was bound to take notice of the rights of the parties as well as of the rights of the creditors of the firm. The partners jointly held the land in trust for the firm, and neither owned an undivided one-half 214 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 interest therein individually, and neither had a right to sell the land or his interest therein except for the purpose of paying the obligations of the firm, until all of the firm debts had been paid and the affairs of the copartnership wound up. [The judgment of the district court, quieting the title of the grantee of the partner attempting to convey a one-half interest in the firm property, was reversed.] PENNYBACKER v. LEARY: (Supreme Court of Iowa, 1884. 65 Iowa, 220, 21 N. W 575.) Action in chancery. Upon a« trial on the merits, plaintiff's petition was dismissed. He now appeals to this court. Bbck, J. 1. The petition alleges that the parties entered into a parol contract of partnership for the purchase and sale of certain tracts of land, containing together 400 acres ; that in pursuance of this con- tract the lands were purchased and the title conveyed to defendant, and that thereby they each became the owner of an undivided one-half there- of. The special relief prayed for is that the interest of the parties be confirmed, and that the lands be partitioned accordingly. The petition also asks for general relief. The answer of the defendant denies the contract of partnership, and the interest claimed by plaintiff in the lands. Other allegations of the pleadings need not be recited here. * * * 3. But defendant insists and pleads as a defense, in his answer, that as the contract was for the purchase of an interest in lands, and was wholly oral, it cannot be enforced under the statute of frauds. The contract, to be truly stated, amounted to a parol agreement for the creation of a partnership, the object of which was to acquire and sell certain lands. The part of the agreement obligating the parties to pur- chase the land was but an incident of the contract of partnership. It provided for the subject and manner of investment of the capital of the firm. It was simply an agreement that the firm would buy the lands. By this agreement neither party bought or sold lands. It was not an agreement for the purchase and sale of lands. It was nothing more than an agreement that the firm should buy lands of another which should be held as firm property. It was not, therefore, an agree- ment or contract under which an interest in or title to lands was at- tempted to be transferred. It simply provides what interest the par- ties shall have therein when the lands shall be acquired as provided by the contract. Surely, if two persons agree to enter into a partnership for the purchase and sale of dry goods, and therein specify the manner of the contribution of the capital of the firm and the goods to be pur- chased therewith, and the persons of whom they shall be purchased, the contract could not be regarded as creating or transferring any prop- Sec. 6) NATURE OF PARTNER'S INTEREST. 215 erty or interest in the goods intended to be purchased. There is no distinction in principle between that case and this. We conclude that the contract in question is not within the contemplation of our statute of frauds, which provides that no evidence of a contract "for the crea- tion or transfer of any interest in lands, except leases for a term not exceeding one year," is competent, "unless it be in writing and signed by the party to be charged, or by his lawfully authorized agent." Code, § 3663. * * * 4. It will be observed that the lands, as we have before stated, were not purchased by the contract for the copartnership, but by a subse- quent purchase made in pursuance thereof. The case then assumes the aspect of the purchase of lands by a copartnership. While the title of the lands was, under this purchase, vested in defendant, they were really held by him in trust as partnership property. Plaintiff's interest in the lands is that of a partner, as prescribed by the contract of co- partnership. It is plain that plaintiff is not entitled to a partition of the lands, as he specially prays in his petition. Defendant furnished the money to purchase the lands, and under the contract of copartner- ship he is to be allowed a return thereof, with 10 per centum interest. After the sale of the lands and the repayment of the sum he advanced, with interest and taxes, the lands or the profits, if a sale shall be made, are to be divided between the parties. Plaintiff is entitled to no part of the lands or profits until defendant be paid and the partnership be settled. It is not made to appear that plaintiff is entitled now to en- force a sale of the lands and the final settlement of the partnership, if such relief could be granted under the general prayer of his petition. He is surely not entitled to a partition of the lands for which he special- ly prays. We therefore think that his petition ought to be dismissed, but he ought not to be precluded from seeking in a proper action the settlement of the partnership and the recovery of his interest as a partner in the lands, or the profits thereof, whenever he may be able to establish his right to enforce such a settlement of the partnership. The petition is therefore dismissed, without prejudice to such an action. Affirmed. MOLINEAUX V. RAYNOLDS et al. (Court of Chancery of New Jersey, 1896. 54 N. J. Eq., 559, 35 Atl. 536.) Reed, V. C. This bill is filed for a partition of a tract of land, upon which is a factory, at Bergen Point, N. J. It is admitted that the pres- ent owners of the property are Charles T. Raynolds, Thomas B. Hid- den, the two defendants, and Gen. Molineaux, the complainant. It is also admitted that they own it as partners. It is admitted by counsel that, if the property is subject to a partition suit, it should be sold, and 216 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 not divided. Two questions are presented for solution: The first is whether the suit for partition is well brought. If it is properly brought then the second question is, what are the proportionate interests of the owners in the property? * * * The first question mooted springs out of the existence of the De Floras suit. The counsel for the defendants insist that, so long as any claim against the old firm remains unsatisfied, so long each partner has a right to have the firm assets held as such to be applied in liqui- dation of the claim; that until all such claims are satisfied no partner has a right to demand a division of the firm property. The equitable rule thus invoked is entirely settled. The property of a firm, whether personal or real, is a fund to be primarily applied to the payment of its debts ; and each partner has a right to have it So appropriated, to the end that he himself may be relieved from any personal liability to an- swer for the firm debts. In England, land as well as personalty be- longing to a firm is regarded as personal assets. L,indl. Partn. par. 343. In this country the land is held to be personal assets so far only as it may be needed to pay firm creditors. National Bank of Metropolis V. Sprague, 20 N. J. Eq. 13 ; Freem. Co-Ten. par. 118. Out of this equity of each partner to have the firm property applied to the payment of firm debts, in order that he may be discharged from personal lia- bility, has emerged the rule that the partition of the real property of a firm will not be decreed, so long as debts of the partnership remain unliquidated. Pennybacker v. Eeary, 65 Iowa, 220, 21 N. W. 575; Kruschke v. Stefen, 83 Wis. 373, 53 N. W. 683 ; Mendenhall v. Ben- bow, 84 N. C. 646 ; Freem. Co-Ten. par. 443. By the rule laid down in these cases, the only method by which a partner, under such condi- tions, can compel a division of the firm property, is by a bill to ad- minister and settle the partnership affairs. It is apparent, however, that, inasmuch as the ground for refusing partition is that partners may be protected from future calls to pay firm debts, therefore, if it should be made to appear that the property involved in the application for partition will not be needed to meet such obligations, the objection to the distribution of the property disappears. Now, it appears in this case that there is other real estate in Brooklyn, belonging to this firm, of the value of $150,000. It also appears that the De Floras suit is pending in the courts of New York. The property and the pending suit are therefore both in the state of the firm's domicile. It is beyond the realms of probability that the final judgment in the De Floras suit, which suit has been dragging along for 20 years, can reach an amount which will begin to exhaust the Brooklyn property. Although it ap- pears that a proceeding for partition of that property also had been commenced in the courts of New York, that proceeding has not gone to a decree, and it is in that suit that the defense set up here can be more appropriately interposed. Under these conditions, I do not see any substantial ground for thinking that the interest of any member Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 217 ■of the firm will be menaced by the severance of the title to this prop- erty as is proposed by this suit. * * * I will advise a decree in conformity to these views. SECTION 7.— TRANSFER OF PARTNERSHIP PROPERTY. I. By Act of thb Firm, Ex parte RUFFIN. (In Chancery, before Lord Eldon, C, 1801. 6 Ves. 119.) In June, 1797, Thomas Cooper, of Epsom, brewer, took James Coop- er into partnership. That partnership was dissolved by articles dated the 3d of November, 1798, under which the buildings, premises, stock in trade, debts, and effects were assigned to James Cooper by Thomas Cooper, who retired from the trade. Upon the 2d of April, 1800, a commission of bankruptcy issued against James Cooper, under which the joint creditors attempted to prove their debts, but the commission- ers refused to permit them, upon which a petition was presented to Lord Rosslyn, who made an order that the joint creditors should be at Hberty to prove, with the usual directions for keeping distinct ac- counts, and an application of the joint estate to the joint debts and of the separate estate to the separate debts. At a meeting for the purpose of declaring a dividend, the commissioners postponed the dividend, in order to give an opportunity of applying to the Lord Chancellor, in consequence of which, this petition was presented, praying that the partnership effects remaining in specie and possessed by the assign- ees may be sold, and that the outstanding debts may be accounted joint estate. By the articles of dissolution the parties covenanted to abide by a valuation to be made of the partnership property, and James Cooper covenanted to pay the partnership debts then due and to indemnify Thomas Cooper against them, and Thomas Cooper convenanted not to carry on the trade of brewer for 30 years within 30 miles of Epsom. A bond for £3,000, the calculated value of the partnership property as- signed, was given to Thomas Cooper by James Cooper and his father, as surety. In pursuance of the covenant, the partnership property, con- sisting of leases, the premises where the trade had been carried on, stock, implements, outstanding debts, and other effects, were valued by arbitrators at £3,030, after charging all the partnership debts then due. James Cooper, by his affidavit, stated that all the joint creditors knew of the dissolution and the assignment of the property, that ad- 218 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. S' vertisements were published, and the deponent, after the dissolution,, received many debts due to the partnership, but paid more on account of the partnership. His father, by affidavit, stated that he paid the interest of the bond regularly, and intended to pay the principal when due. Ei-DON, L. C. This case is admitted, unless Ex parte Burnaby, 1 Cooke's Bank. Law (4th Ed.) 253, appHes to it, to be new in its cir- cumstances. Therefore, if I was of opinion that the petition could be supported, I should be very unwilling to express that in bankruptcy, where my opinion would not be subject to review. If the case I have mentioned has decided the point, there is the authority of Lord Hard- wicke upon it, which would weigh down the most considerable doubt that I could be disposed to entertain. I feel great difficulty in comply- ing with the prayer of the petition, and, when I read it, was struck with it as a new case, and as one upon which I do not clearly see my way to the relief prayed. It is the case of two partners who owed- several joint debts and had joint effects. Under these circumstances their creditors, who had a demand upon them in respect of those debts,_ had clearly no Hen whatsoever upon the partnership effects. They had the power of suing, and by process creating a demand that would directly attach upon the partnership effects. But they had no lien upon or interest in them in point of law or equity. If any creditor had brought an action, the action would be joint. His execution might be either joint or several. He might have taken in execution both joint and separate effects. It is true that the separate creditors of each, by bringing actions, might acquire a certain interest even in the partner- ship effects, taking them in execution in the way in which separate creditors can effect such property. But there was no lien in either. The partnership might dissolve in various ways: First, by death;, secondly, by the act of the parties, that act extending to nothing more than mere dissolution, without any special agreement as to the dis- position of the property, the satisfaction of the debts, much less any agreement for an assignment from either of the partners to the others.. The partnership might also be dissolved by the bankruptcy of one or both and by effluxion of time. If it dissolved by death, referring to the law of merchants and the well-known doctrine of this court, the' death being the act of God, the legal title in some respects, in all the equitable title, would remain notwithstanding the survivorship ; and the executor would have a right to insist that the property should be applied to the partnership debts. I do not know that the partnership creditors would have that right, supposing both remained solvent. So, upon the bankruptcy of one of them, there would be an equity to say the assignees stand in the place of the bankrupt, and can take no more than he could, and, consequendy, nothing until the partnership debts are paid. So, upon a mere dissolution without a special agree- ment, or a dissolution by effluxion of time, to wind up the accounts, the debts must be paid, and the surplus be distributed in proportion to- Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 219 the different interests. In all these ways the equity is not that of the joint creditors, but that of the partners with regard to each other, that operates to the payment of the partnership debts. The joint creditors must of necessity be paid, in order to the administration of justice to the partners themselves. When the bankruptcy of both takes place, it puts an end to the partnership certainly. But still it is very possible, and it often happens in fact, that the partners may have different in- terests in the surplus, and out of that a necessity arises that the part- nership debts must be paid ; otherwise, the surplus cannot be distribut- ed according to equity, and no distinction has been made with reference to their interests, whether in different proportions or equally. Many cases have occurred upon the distribution between the separate and joint estates, and the principle in all of them, from the great case of Mr. Fordyce, has been that, if the court should say that what has ever been joint or separate property shall always remain so, the consequence would be that no partnership could ever arrange their affairs. There- fore a bona fide transmutation of the property is understood to be the act of men acting fairly, winding up the concern, and binds the creditors ; and therefore the court always let the arrangements be as they stand, not at the time of the commission, but of the act of bank- ruptcy. Thomas Cooper is admitted to be solvent. He certainly has no such equity as if the partnership had been dissolved by bankruptcy, death, effluxion of time, or any other circumstance not his own act. But he dissolves the partnership a year and a half ago, and, instead of calling upon these effects according to his equity at the dissolution to pay the partnership debts, he assigns his interest to the other, to deal as he thinks fit with the property, to act with the world respecting it, desiring only a bond to pay a given value in three or four years. Therefore he or his executors could not sue. If it was necessary for the creditors to operate their relief through his equity, he has no equity. It is then said, and the circumstance had struck me, that all the property is not assignable at law — for instance, the debts ; but, as between the two Coopers they were the property of the bankrupt, for debts are within the statute of King James, and, if left in the order and disposal of the bankrupt, he is proprietor of the debt. Therefore Thomas Cooper could never set up the insufficiency of the legal operation of the assign- ment against his own deed. The assignment was not made subject to the payment of the debts, but in consideration of a covenant, leav- ing no duty upon the property, but attaching a personal obligation upon the assignee to pay the debts. The creditors, therefore, cannot rest upon the equity of the partner going out. I was struck with the argu- ment of inconvenience. The inconvenience on all sides is great. To say this seems to me a' monstrous proposition: That which, at any time during the partnership, has been part of the partnership effects, shall in all future time remain part of the partnership effects, notwith- standing a bona fide act. Suppose, an inprobable case, that the partners 220 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 in Child's house chose to shift their shop from Temple Bar to the west end of town; and that house, now the property of the partner- ship, was bona fide bought by one of the partners, and the money was invested in the purchase of the new house in which they were going to reside; suppose, a still more improbable case, that a year and a half or ten years afterwards they became bankrupt — would that house be part of the partnership effects ? It would be so, if it remained with- out legal interest being passed, or without any equitable claim, taking it out of the reach- of a legal execution ; but where the effect is a bona fide transaction of this sort, if it were held at any time after- wards to be partnership property, not for the purpose of satisfying demands of the partners, or of any creditor who cannot otherwise be satisfied, but to enable them to undo all the intermediate equities, com- mercial transactions could not go on at all. It would be much less in- convenience to examine the bona fides of each transaction than to say such transactions shall never take place. The case of West v. Skip, 1 Ves. 237, falls within some of the ob- servations I have made. Heath v. Percival, 1 P. Wms. 682, does not apply at all. The bond in that case was not given up; and therefore the creditor keeping the best security, and refusing to part with it, no inference can be made against the conclusion arising from that. Hankey v. Garratt, 1 Ves. 236, is also very different. There the part- nership was dissolved by bankruptcy or by death, and there was no actual transfer of the property to take it out of the reach of legal ex- ecution. I am unwilhng to make any observation upon Burnaby's Case. I do not know how to understand it. Whether there was anything special in the assignment, I cannot find out from the report. I shall endeavor to find the papers. It looks very like this case. If it is in specie this case, as an authority I should think myself bound to sub- mit to it. But, if it is not in specie this case, there is so much doubt whether this relief can be given that I am satisfied it ought to be given, if at all, in a jurisdiction where my opinion would be subject to review. My present inclination is that the creditors have not this equity. I have considerable doubt, also, whether, if they have it, Thomas Cooper would be benefited by it; and a further subject of grave and serious doubt is, whether, if the joint creditors disturb the arrangement, the separate creditors would not have a right to set the arrangement right at his expense. I now think there is a circumstance which distinguishes Burnaby's Case. The assignment was not by one to the other two, but by one to one of the other two, which may be very different. I think that circumstance distinguishes the case so much that I shall consuh the interest of the parties better by saying they may file a bill, if they think proper, than by further delay. The petition was dismissed. Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 221 DARBY et al. v. GILLIGAN et al. (Supreme Court of Appeals of West Virginia, 1889. 33 W. Va. 24G, 10 S. E. 400, 6 L. R. A. 740.) Snyder, P. Appeal from a decree of the circuit court of Taylor county, pronounced March 38, 1887, in the suit of Darby & Co. and others against John J. Gilligan and others. The suit was brought to set aside a trust deed made by said Gilligan to John T. McGraw, trus- tee; to enjoin said trustee from disposing of the property thus con- veyed to him; and to have the same applied to the payment of the plaintiffs' debts. On September 17, 1883, the said Gilligan and James Burns entered into an agreement in writing, whereby they agreed to form a partnership for conducting a general merchandising business in the town of Grafton, Taylor county, Gilligan having prior to that time been merchandising at the same place, and having then on hand a stock of goods, which he put into the firm at the value of $2,000, and Burns paid into the firm $1,000. Upon this capital stock, they agreed that Gilligan should have a two-thirds and Burns a one-third interest in the assets, business, and profits of the partnership. At the time this partnership was formed, Gilligan was indebted to the First National Bank of Grafton and others in the sum of $1,100, for money borrowed and put into the mercantile business while he was conduct- ing it alone. During the carrying on of the business by the firm, the firm contracted debts to the plaintiffs and others, and the partners so managed the business that they and the firm became indebted, to iri- solvency. Afterwards, on February 27, 1885, by a contract in writ- ing, the partnership was dissolved, upon the terms that in considera- tion of $1,000, for which Gilligan executed to Burns his note, payable one year from that date. Burns withdrew from the. firm, and Gilligan assumed, and agreed to pay, all the then existing indebtedness of the firm. About two months after, on April 24, 1885, Gilligan conveyed to John T. McGraw the whole of the assets of the late firm, in trust, to secure all his debts, including the debts due the plaintiffs and others by said firm; but in said conveyance he preferred the aforesaid $1,- 100 due to the Grafton Bank and others, the note for $1,000 given to Burns as aforesaid, which had been assigned by him to Anna Burns, and other individual debts, amounting in the aggregate to more than the value of the assets conveyed. Upon these facts the plaintiffs, the appellants here, contend that this attempt of Gilligan to prefer and pay his individual debts out of the said assets is a fraud upon the firm creditors, which, according to well-settled principles, a court of equity will not permit. Ordinarily the partnership estate is liable for the payment of the firm debts, in preference to the individual debts of the partners. This is the right of the partners inter se. The creditors of the partner,ship have no such right of priority over the creditors of the partners individually, otherwise than by substitution to the 222 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3 rights of the partners inter se. The partners may release this right, and, if they do so bona fide, the creditors of the partnership cannot complain; for it is not their right, except subject to the proper dis- position and control of the partners themselves, to whom it belongs. This right is generally called the "partner's lien." It differs from a common-law lien in that it is not dependent on possession, and any single partner can convey a good title to specific chattels by a bona fide sale in the course of trade; and a lien does not involve the right to deal with the property, whereas the partner's equity is a right to have it applied for certain purposes, and the one partner cannot assert the lien as a sole plaintiff. The existence of this equity may be ex- plained in a variety of ways, as on an implied contract that the as- sets shall not be used for private purposes ; on the doctrine of sure- tyship, since each partner is liable in solido for the debts, and there- fore, inter se, virtually a surety for the copartners for their propor- tions, and entitled to have the assets applied so as to relieve him. The partners have jointly the same right of absolute disposition of their joint property that any individual has. They may sell it, pledge it, convert it into other forms, divide it up among themselves, devote it to the payment of all or part of the debts, or exercise other owner- ship over it, subject only to each other's rights, and to the operation of statutes forbidding voluntary or fraudulent conveyances, to hinder, delay, and defraud creditors. It is clear from what has preceded that while the partnership is solvent and going on the partners may, by unanimous assent or joint act, do what they please with the assets, if the act is bona fide. Where, in such case, one partner sells or assigns his interest to the other, bona fide, for a valuable consideration, or an agreement to pay the debts of the firm, and indemnify against them, this will change the joint into a separate property. The only question is upon the bona fides of the transaction. If such an arrangement could not be made, a partner never could retire. Bates, Partn. §§ 559, 820, 824; Story, Partn. §§ 97, 360. On the other hand, according to the better reason and the weight of authority, if the firm is insol- vent, or on the eve of insolvency, and both of the partners are insol- vent, a purchase by one partner of the interest of the other, in con- sideration of the former's assumption of all the debts of the firm, will be regarded as a purchase upon a consideration which is of no value whatever; and, no equivalent having been given, the transfer is in effect voluntary, and its only effect, if sustained, would be to hinder partnership creditors, and hence is deemed ineffectual to convert the joint property into separate property, as against the firm creditors. Ex parte Mayou, 4 De Gex, J. & S. 664, 11 Jur. (N. S.) 433, 12 Law T. (N. S.) 254; Sanderson v. Stockdale, 11 Md. 563; Phelps v. Mc- Neely, 66 Mo. 554, 27 Am. Rep. 378; Tenney v. Johnson, 43 N. H. 141; Marsh v. Bennett, 5 McLean (U. S.) 117, Fed. Cas. No. 9,110; Roop V. Herron, 15 Neb. 73, 17 N. W. 353; In re Cook, 3 Biss. 122, Sec. 7,) TRANSFER OF PARTNERSHIP PROPERTY. 22-3 Fed. Cas. No. 3,150; Conroy v. Woods, 13 Cal. 636, 73 Am. Dec. 605; Ransom v. Van Deventer, 41 Barb. (N. Y.) 307; Menagh v. Whitwell, 53 N. Y. 146, 163, 11 Am. Rep. 683 ; Shackelford v. Shack- ■elford, 33 Grat. (Va.) 503; Farmers' Bank v. Smith, 36 W. Va. 541. In the case at bar the firm as well as the individual partners were indebted, to insolvency, at the time the contract of dissolution was made, by the terms of which GilHgan assumed to pay, not only the debts of the firm, but $1,000 to Burns. As the firm and Gilligan were then both insolvent, there was no . valuable consideration for either this assumption of the firm debts or said $1,000. Less than two months after this transaction, Gilligan, without paying a single firm debt, so far as the record shows, assigned all the assets in such a man- ner as to devote the whole of them to the payment of his individual debts. It seems to me plain that to uphold this scheme, against the rights of the social creditors, would violate, not only the general principles of equity, but the express provisions of our statute against voluntary and fraudulent conveyances. It is, however, claimed for the appellees that if this transaction is held void as to the firm cred- itors, then, for the like reasons, the act of Gilligan in putting his own stock of goods into the firm must be held void as to his individual creditors. But there is no analogy in the two transactions. It does not appear that either Burns or Gilligan was insolvent at that time, and it does appear that Burns paid into the concern $1,000, and also that the debts due the plaintiffs and others were contracted by the firm on the faith of the social assets. For these reasons the decree of the circuit court is reversed, and the cause remanded. ARNOLD V. HAGERMAN et al. (Court of Errors and Appeals of New .Tersey, 1889. 45 N. J. Bq. 186, IT Atl. 93, 14 Am. St. Rep. 712.) On July 17, 1883, John C. Farr, having a lumber business in Ho- boken and a wood manufacturing business in Asbury Park, formed a copartnership in the latter business with John H. Hagerman and John S. Fielder, under the name of J. C. Farr & Co. Hagerman and Fielder each gave to Farr his notes for $7,500, and thereupon property already in the business at Asbury Park became the capital of the new firm. On October 39, 1883, the new firm, being embarrassed, dissolv- ed, and Hagerman and Fielder assigned all their interest in the business and property of the partnership to Farr; Farr returning to them the notes aforesaid, and agreeing to pay the debts of the firm. On No- vember 30, 1883, Farr assigned all his property to Benjamin W. Ar- nold for the purpose of securing to his creditors an equal distribution of his property and effects, pursuant to the statute. In January, Feb- ruary, and March, 1884, the Second National Bank of Red Bank re- ■ covered several judgments against the members of the firm of J. C. 224 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3 Farr & Co. for partnership debts, and caused executions thereon tO' be levied upon what had been the property of said firm. On March 10, 1884, the bank filed its bill against Farr, Hagerman, Field, Arnold,, and others to have said assignments by Hagerman and Fielder to Farr, and by Farr to Arnold, set aside as fraudulent against the cred- itors of J. C. Farr & Co. The court below held the assignments by Hagerman and Fielder to Farr to be void.^ Dixon, j. * * * in equity a partnership is for some purposes deemed a single entity. Thus, when the property involved in the busi- ness of a partnership- is to be applied by a court of equity to the pay- ment of debts, that property is treated as belonging, not to the persons composing the firm, but to a distinct debtor, the partnership, and is used first to liquidate the debts contracted in the business of that debt- or, and only the surplus, if any, is surrendered to the individual part- ners. This equitable practice rests upon the presumed intention of the partners themselves, and hence is primarily considered as their equitable right against each other. Consequently, since Ihe decision of Lord Eldon in Ex parte Ruffin, 6 Ves. 119, it has been generally held that the partners could put an end to this right, and that if, by their agreement, the partnership is dissolved, and its property is as- signed to one of their number, or to a stranger, as his own, without reservation of the right, the right to have partnership debts paid out of that property is extinct. Growing out of this right of partners has arisen a corresponding equity in partnership creditors to have their debts first satisfied out of the firm property, which is now deemed a substantial element of their demands. Generally it may be said that this equity of creditors continues only so long as the right of the partners against each other subsists, and perishes when that termi- nates ; but this is not universally true, for this equity may survive the right to which, ordinarily, it is attached. In this respect it re- sembles the claim which the general creditors of an individual have upon his property. It is neither an estate nor a lien. It is, ordinariily, but a right by lawful procedure to acquire a lien during the owner- ship 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 frauds and perjuries, by force of which, when a person has alienated his property with intent to hinder, delay, or defraud 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 notice. Equity applies this statute to a partnership, its prop- erty and creditors, just as it would 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 1 A bill by Hagerman and Fielder against Farr to set aside their assignment to hiui because procurfd b.y fraud was considered in this case and dismissed. The portion of the opinion dealing with this bill is omitted. Sec. 7) TKANSFEK OF PAETNEESHIP PEOPEETY. 225 extinguishment of the right of its partners inter sese, yet, if the aUen- ation be effected with intent to hinder, delay, or defraud the firm cred- itors by defeating their equity, the claims of creditors will be unim- paired, and the property will be treated as partnership assets, unless it shall have passed into the hands of those whom the statute pro- tects. This doctrine has repeatedly been recognized in the courts of New Jersey. [After reviewing New Jersey cases, the opinion con- tinues:] The case before us comes clearly within the reach of this principle. At the time of the transfer by Hagerman and Fielder to Farr the in- solvency of each of these persons, and of the firm of J. C. Farr & Co., was patent to them all, and, indeed, was the moving cause of the trans- fer. They all knew that, in the condition of affairs then existing, none of them could meet maturing obligations, and it was in the hope of facilitating an extension or compromise with creditors that the trans- fer 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 whatever, as we gather from the testimony, to pay their debts. Inevitably, therefore, by defeating the equity of the partnership creditors, it would hinder them in the collection of their just claims. It is a reasonable inference that these partners intended this manifest effect of their act, and consequently the assignment by Hagerman and Fielder 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 common intent to hinder partnership creditors, thus inferred from the knowledge which all parties must have had of the necessary con- sequences of the transfer itself, but also upon the ground that the trans- fer was made without valuable consideration — was voluntary in the legal sense — it should be decreed invalid against the partnership cred- itors, all of whose debts were then in existence. Haston v. Castner, 31 N. J. Eq. 697. The consideration nominally given by Farr to Hag- erman and Fielder was the surrender of their notes and his covenant to indemnify them against firm creditors. But according to the testi- mony those notes were payable only out of the profits accruing to Hag- erman and Fielder from the firm of J. C. Farr & Co., and as that firm had failed, and was dissolved without realizing any profits, the notes had become absolutely valueless. Farr's covenant to indemnify does not constitute a valualale consideration, since he may be relieved there- from on the total failure of the transfer for which it was made. 2 Pom. Eq. Jur. §§ 751, 969; notes to Basset v. Nosworthy, 2 Lead. Cas. Eq. 82 ; Haughwout v. Murphy, 22 N. J. Eq. 531. It thus ap- pearing that, notwithstanding this transfer, all the rights and remedies of the creditors of J. C. Farr & Co. remained against the firm property in the hands of Farr, we are brought to consider the assignment to Arnold for the benefit of Farr's creditors. [The remainder of the opin- Gil.Pabt. — 15 226 NATURE AND CHABACTBEISTICS OF A PARTNERSHIP. (Ch. 3 ion holding the assignment by Farr to Arnold to be valid, the creditors of J. C. Farr & Co. being given priority in the distribution of the as- sets of J. C. Farr & Co. in the hands of Arnold, is omitted, as is also the dissenting opinion of Magie, J.] ^ CASE V. BEAUREGARD. (Supreme Court of the United States, 1878. 99 U. S. 119, 25 L. Ed. 370.) Strong^ J. The object of this bill is to follow and subject to the payment of a partnership debt property which formerly belonged to the partnership, but which, before the bill was filed, had been transfer- red to the defendants. There is little, if any, controversy respecting the facts, and little in regard to the principles of equity invoked by the complainant. The important question is whether those principles are applicable to the facts of the case. No doubt the effects of a partnership belong to it so loftg as it con- tinues in existence, and not to the individuals who compose it. 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 ac- counts. 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 cer- tain circumstances it inures to the benefit of the creditors of the firm. The latter are said to have a privilege or preference, sometimes loose- ly 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 cred- itors of its several members. Their equity, however, is a derivative one. It is not held or enforceable in their own right. It is practical- 2 On the question whether a cliattel mortgage by an insolvent partnership to secure the debts of its members was fraudulent as to firm creditors, the court in Bergman v. .Tones, 10 N. D. 520, 88 N. W. 284, 88 Ajn. St. Rep. 739 (1901) said: "The mortgage in question Is void as to creditors for another reason. When the mortgage was given the partnership was insolvent. The mortgage covered practically all, if not all, of the partnership property, and it undertook to secure the individual debts of the partners, which debts the partnership was under no legal or moral obligation to pay. In short, it was an attempted gift by an insolvent partnership of all of its property. This cannot be done. There is entire harmony in the authorities on this point. 'A partnership, paying the private debt of one of its jnembers, is paying what it is not liable for in law, equity, or morals, and is, iu effect, giving away its property ; and such conveyance, no bona flde rights Intervening, is fraudulent and void as to existing creditors if they are prejudiced thereby, as well as to the separate creditor of the other partner, whose individual interest in the firm is thus given away.' 1 Bates on Partnership, . § 566. See, also, Ransom v. Vandeventer, 41 Barb. (N. T.) 307; Keith v. Fink, 47 111. 272; Heineman v. Hart, 55 Mich. 64, 20 N. W. 792; Cron v. Cron, 56 Mich. 8, 22 N. W. 94; Wilson V. Robertson, 21 N. Y. 587 ; Ferson v. Monroe, 21 N. H. 462 ; Patter- son V. Seatoii, 70 Iowa, 689, 28 N. W. 598; Menagh v. Whitwell, 52 N. Y. 147, 11 Am. Rep. 683 ; Keith v. Armstrong, 65 Wis. 225, 26 N. W. 445." Sec. 7) TEANSFBE OF PAETNERSHIP PEOPEETY. 227 ly a subrogation to the equity of the individual partner, to be made effective only through him. Hence, if he is not in a condition to en- force it, the creditors of the firm cannot be. Rice v. Barnard et al., 20 Vt. 479, 50 Am. Dec. 54; Appeal of York County Bank, 32 Pa. 446. 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 v^rill allow the creditors of the firm to avail themselves of his equity, and en- force, through it, the application of those assets primarily to payment of the debts due them, whenever the property comes under its admin- istration. It is indispensable, however, to such relief, when the creditors 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 specific lien, nor is there any trust that can be enforced until the property has passed in custodiam legis. Other property can be followed only after a judgment at law has been obtained and an execution has proved fruitless. So, if before the interposition of the court is asked the property 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 consequently the derivative equities of the creditors are at an end. It is, therefore, always essential to any preferential right of the creditors that there shall be property owned by the partnership when the claim for pref- erence is sought to be enforced. Thus, in Ex parte Ruffin, 6 Ves. 119, where from a partnership of two persons one retired, assigning the partnership property to the other, and taking a bond for the value and a covenant of indemnity against debt, it was ruled by Lord Eldon that the joint creditors had no equity attaching upon the partnership ef- fects, even remaining in specie; and such has been the rule generally accepted ever since, with the single qualification that the assignment of the retiring partner is not mala fide. Kimball v. Thompson, 13 Mete. (Mass.) 283; Allen v. Valley Co. et al., 21 Conn. 130, 54 Am. Dec. 333 ; Ladd v. Griswold, 9 111. 25, 46 Am. Dec. 443 ; Smith v. Ed- wards, 7 Humph. (Tenn.) 106, 46 Am. Dec. 71; Robb v. Mudge, 14 Gray (Mass.) 534; Baker's Appeal, 21 Pa. 76, 59 Am. Dec. 752; Sigler & Richey v. Bank, 8 Ohio St. 511; Wilcox v. Kellogg, 11 Ohio, 394. The joint estate is converted into the separate estate of the assignee by force of the contract of assignment; and it makes no difference whether the retiring partner sells to the other partner or to a third person, or whether the sale is made by him or under a judgment against him. In .either case his equity is gone. These principles are settled by very abundant authorities. It remains, therefore, only to consider 228 NATURE AND CHAEACTBKISTICS OF A PAETNEESHIP. (Ch. 3 whether, in view of the rules thus settled and of the facts of this case, the complainant, through any one of the partners, has a right to fol- low the specific property which formerly belonged to the partnership, and compel its application to the payment of the debt due from the firm to the bank of which he is the receiver. The partnership, while it was in existence, was composed of three persons. May, Graham, and Beauregard; but it had ceased to exist before this suit was commenced. It was entirely insolvent, and all the partnership effects had been transferred to others for valuable con- siderations. None of the property was ever within the jurisdiction of the court for administration. On the 8th of May, 1867, Graham, one of the partners, assigned all his right and interest in any property and effects of the partnership, and whatever he might be entitled to under the articles thereof, to- gether with all debts due to him from the partnership or any member thereof, to the Fourth National Bank of the City of New York. By subsequent assignments, made on the 14tli and 16th of May, 1869, May, the second partner, transferred all his interest in the partnership property to the United States, and by the same instruments transfer- red to the United States, by virtue of a power of attorney which he held, the interest of Graham. On the 21st of August, 1867, the United States sold and transferred their interest obtained from May and Gra- ham in all the partnership property, including real estate, to Alexander Bonneval, Joseph Hernandez, and George Binder. On the 15th of October next following an act of fusion was executed between the New Orleans & Carrollton Railroad Company, Beauregard, Bonne- val, Hernandez, and Binder, by which the rights of all the parties became vested in the railroad company, subject to the debts and lia- bilities of the company, whether due or claimed from the lessee or the stockholders. The effect of these transfers and act of fusion was very clearly to convert the partnership property into property held in severalty, or, at least, to terminate the equity of any partner to require the applica- tion thereof to the payment of the joint debts. Hence if, as we have seen, the equity of the partnership creditors can be worked out only through the equity of the partners, there was no such equity of the partners, or any one of them, as is now claimed, in 1869, when this bill was filed. No one of the partners could then insist that the prop- erty should be applied first to the satisfaction of the joint debts, for his interest in the partnership and its assets had ceased. Baker's Ap- peal, 21 Pa. 76, 59 Am. Dec. 753. That was a case where a firm had consisted of five brothers. Two of them withdrew, disposing of their interest in the partnership estate and effects to the other three; the latter agreeing to pay the debts of the firm. Some time after one of the remaining sold his interest in the partnership property to one of the remaining two partners. The two remaining, after contracting debts, made an assignment of their partnership property to pay the Sec. 7) TEANSFEE OP PAETNEESHIP PEOPEETY. 229 debts of the last firm composed of the two ; and it was held that the creditors of the first two firms had no right to claim any portion of the fund last assigned, and that it was distributable exclusively among the creditors of the last firm. So in McNutt v. Strayhorn, 39 Pa. 269, it was ruled that, though the general rule is that the equities of the creditors are to be worked out through the equities of the partners, yet where the property is parted with by sale severally made, and nei- ther partner has dominion or possession, there is nothing through which the equities of the creditors can work, and therefore there is no case for the application of the rule. See, also, Coover's Appeal, 29 Pa. 9, 70 Am. Dec. 149. Unless, therefore, the conveyances of the partners in this case and the act of fusion were fraudulent, the bank of which the complainant is receiver has no claim upon the property now held by the New Orleans & CarroUton Railroad Company, arising out of the facts that it is a creditor of the partnership, and was such a creditor when the property belonged to the firm. The bill, it is true, charges that the several transfers of the part- ners were illegal and fraudulent, without specifying wherein the fraud consisted. The charge seems to be only a legal conclusion from the fact that some of the transfers were made for the payment of the pri- vate debts of the assignors. Conceding such to have been the case, it was a fraud upon the other partners, if a fraud at all, rather than upon the joint creditors — a fraud which those partners could waive, and which was subsequently waived by the act of fusion. Besides, that act made provision for some of the debts of the partnership ; and it has been ruled that where one of two partners, with the consent of the other, sells and conveys one half of the effects of the firm to a third person, and the other partner afterwards sells and conveys the other half to the same person, such sale and conveyances are not prima facie void as against creditors of the firm, but are prima facie valid against all the world, and can be set aside by the creditors of the firm only by proof that the transactions were fraudulent as against them. Kimball v. Thompson, 13 Mete. (Mass.) 283; Flack et al. v. Charron et al., 29 Md. 311. A similar doctrine is asserted in some of the other cases we have cited. And see Allen v. Valley Co., 21 Conn. 130, 64 Am. Dec. 333. In the present case we find no such proof. We discover nothing to impeach the bona fides of the transaction, by which the property became vested in the railroad company. Thus far we have considered the case without reference to the pro- visions of the Louisiana Code, upon which the appellant relies. Ar- ticle 2823 of the Revised Civil Code, is as follows : "The partnership property is liable to the creditors of the partnership in preference to those of the individual partner." We do not perceive that this pro- vision differs materially from the general rule of equity we have stated. It creates no specific lien upon partnership property, which continues after the property has ceased to belong to the partnership. It does not forbid bona fide conversion by the partners of the joint property into 230 NATURE AND CHAHACTBRISTICS OF A PARTNERSHIP. (Ch. 3 rights in severalty, held by third persons. It relates to partnership property alone, and gives a rule for marshaling such property between creditors. Concede that it gives to joint creditors a privilege while the property belongs to the partnership, there is no subject upon which it can act when the joint ownership of the partners has ceased. Article 3244 of the Revised Civil Code declares that privileges become ex- tinct "by the extinction of the thing subject to the privilege." What we have said is sufficient for a determination of the case. If it be urged, as was barely intimated during the argument, that the property sought to be followed belongs in equity to the bank, or is clothed with a trust for the bank, because it was purchased with the bank's money, the answer is plain. There is no satisfactory evidence that it was thus purchased. It cannot be identified as the subject to the acquisition of which money belonging to the bank was appHed. The bank has, therefore, no specific claim upon the property, nor is there any trust which a court of equity can enforce ; and it was well said by the Circuit Justice that, without some constituted trust or lien, "a creditor has only the right to prosecute his claim in the ordinary courts of law, and have it adjudicated before he can pursue the prop- erty of his debtor by a direct proceeding" in equity. Decree affirmed. II. By Act op Singi^e Partnuk. LAMBERT'S CASE. (CJourt of Common Pleas, 1614. Godb. 244.) Two men were partners in goods : the one of the partners sold unto J. S., at several times, goods to the value of £100, and for the goods at one time bought he paid the money according to the time; after- wards an action was brought by one of the partners for the rest of the money, and the plaintiff declared upon one contract for the whole goods, whereas in truth they were sold upon several contracts made, and the defendant in that case would have waged his law. But the court advised the plaintiff to be nonsuit, and to bring a new action, because that action was not well brought, for it ought to have been -a several action upon the several contract. And in this case it was agreed by the court, that the sale of one partner is the sale of them both; and therefore although that one of them selleth the goods or merchandiseth with them, yet the action must be brought in both their names; and in such case the defendant shall not be received to wage his law, that the other partner did not sell the goods unto him, as is supposed in the declaration. Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 231 SLOAN V. MOORE. (Supreme Court of Peuusylvania, 1860. 37 Pa. 217.) This was an appeal by Mortimer M. Moore from the decision of the common pleas of Erie county appointing a receiver of the assets of M. M. Moore and B. F. Sloan, late partners doing business as Sloan & Moore, and enjoining said Moore from interfering therewith. The bill, supplemental bill, and answer show that Sloan, the com- plainant, and Moore, the defendant, were equal copartners in the ownership and publication of the Erie Observer, a weekly newspaper. By the articles of copartnership it was agreed that it should continue until the 1st day of January, 1859. Shortly before its termination dif- ferences arose between the partners, and fruitless attempts were made to adjust the business of the firm and arrange the ownership of the property, in view of its approaching close. The property was of such a character that its value would have been greatly impaired by stopping the issue of the riewspaper, and yet neither of the parties could carry on the business singly, for each had equal rights, not only in the prop- erty, but in the business of the firm. No settlement having been effect- ed, and no arrangements having been made for continuing the publica- tion of the paper and prosecuting the business of the firm, the com- plainant filed his bill on the 15th of December, 1859, praying for the apppointment of a receiver and for an injunction against the defend- ant; and a subpoena was issued, returnable on the 23d of December, 1859. With the subpoena a certified copy of the bill was served. On the 29th day of December, 1859, before any further action was taken upon the bill, and two days before the expiration of the partnership by its own limitation, the defendant sold the Erie Observer printing es- tablishment, including the presses, type, tools, fixtures, and good will, and all the property of the firm in the' newspaper, to a certain J. J. Lints. A small part of the purchase money was paid in cash, and the defendant took the notes of the purchaser for the remainder, payable at different periods, some of them postponed for 18 months. A sup- plemental bill was then filed by the complainant, charging the sale so made, and renewing the prayer for a receiver and an injunction. It was on this state of facts that the court granted a special injunction, and subsequently made it perpetual, and appointed a receiver. Here the partnership was about to close when the original bill was filed, and had actually ceased when the supplemental bill was present- ed. The partners could not agree as to the disposition of the property. The custody of right belonged to one as much as to the other, and there was a gross breach of duty by the defendant. The attempt by Moore to sell the entire property of the firm, and thus exclude the complainant from any control over it, was utterly unjustifiable, and it imperiously demanded the appointment of a receiver. It was, indeed, ruled in Deck- ard V. Case, 5 Watts, 22, 30 Am. Dec. 287, that one partner might as- 232 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 sign the whole partnership property in trust for the payment of credi- tors, and the same has been held in some other cases, though it has been also doubted. In most, if not all, of the cases in which this doc- trine has been asserted, there were peculiar circumstances. Thus, in Deckard v. Case, the partner who did not join in the assignment had run away. He was, of course, not at hand to be consulted, and, as the assignment was for the liquidation of partnership debts, his assent was presumed. So, in Harrison v. Sterry, 5 Cranch (U. S.) 300, 3 I,. Ed. 104, the assignment was only a partial one, and it was made by the only managing partner residing in the United States ; the others being resident in England. So, in Anderson v. Tompkins, 1 Brock. (U. S.) 456, Fed. Cas. No. 365, the partner who did not join in the assignment had left for Europe, and the instrument was made by the partner who remained when the firm had failed in business. But none of the cases decided that a partner can make a general assignment in trust for the benefit of creditors against the consent, or without the concurrence of his copartner ; the latter being present, and capable of acting in the matter. The contrary was directly decided in Hays v. Heyer and Dem- ing V. Colt, 3 Sandf. (N. Y.) 284, 296. And, indeed, this must be so; for, while the contract of partnership constitutes each of its members an agent for the others, it is only for the purpose of carrying on the partnership, not for destroying it. Denuding the firm of all its prop- erty is a thing not contemplated, and consequently no agency for such a purpose was intended to be created. When, therefore, one partner is at hand, and might assent, but does not, it is quite unreasonable to presume that he has empowered his copartner to do an act destructive of the purposes for which the firm was established. Still less can an authority be admitted in one partner to sell the entire property of the firm, when the object of the firm was not trade, buying, and selling, but a business to which the continued ownership of the property sold is indispensable. An assignment is for the pur- pose of paying the debts, but a sale principally for division, as was this case, has not even that apology. Such a power in one of two copartners is asserted by no adjudicated case. It is directly in conflict with the purposes of the partnership. Instead of a presumption of agency to make such a sale, the presumptions are all the other way. It is not denied that it is within the scope of partnership authority for one partner to sell and dispose of all the partnership goods in the order- ly and regular course of the business ; but selling the newspaper, with its good will, presses, type, etc., cannot be said to have been in the regular course of the business of this firm. It is clear, therefore, that Moore had no power arising out of the contract of copartnership to make sale to Lints of the entire property of the firm. The case shows in him no other authority. That the com- plainant assented to the sale is not pretended, nor, indeed, can it be. It was made, as already seen, while the complainant was prosecuting his bill in court for a receiver and for an injunction against interfer- Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 233 cnce with the property. The supplemental bill charges that it was made without the knowledge or consent of Sloan, and the defendant's answer, while denying that it was made without that knowledge or consent, adds that he was informed and believed that the complainant ■ did not know he was selling the printing establishment. Nothing more than knowledge is asserted. The defendant carefully avoids averring that the complainant assented to the sale. He denies that it is true that complainant neither knew nor consented to the sale, and follows this denial by an averment that he did know of it. This is a negative pregnant. The sum of the case is this: One partner in a firm, not a trading firm, while the partnership is existing, finding himself unable to agree with his copartner respecting the disposition of the joint effects, makes a credit sale of the whole to a third person, without the assent of the other partner, though that other was at hand and might have been consulted. This, too, is done while judicial proceedings are pending to accomplish a settlement of the difficulties between the partners. Even if such a sale were legal, it evinces a total disregard of the rights of the nonconcurring partner, and is what has sometimes been called by a chancellor unrighteous conduct towards him. This was amply sufficient to warrant the appointment of a receiver. The reasons for the appointment of a receiver apply with equal force to justify the injunction. Indeed, the decree making the latter per- petual was a necessary consequence of putting the partnership prop- ■erty into the hands of the receiver. The decree of the court of common pleas is affirmed. DECKARD v. CASE. (Supreme Court of Pennsylvania, 1836. 5 Watts, 22, 30 Am. Dec. 287.) Error to the common pleas of Perry county, in an action of trespass on the case against the defendant Deckard, for levying an execution on certain carriages, wagons, etc. It appeared that the property had formerly belonged to Lowe & Mead, partners in the wagon-making business; that the plaintiffs and others, having judgments against the firm, caused a levy to be made on said property by the sheriff, who took it into his possession ; that. Mead having absconded, Lowe agreed with certain of the creditors to transfer all the stock in trade of the •firm to the plaintiffs, in consideration of their assuming to pay certain debts of the firm, including those for which the levy had been made; that he made such transfer accordingly, by an assignment under seal, and the sheriff thereupon delivered the property to the plaintiffs, who rented the shop formerly occupied by the partners, and took the goods back there, and began to carry on the same business, employing Lowe •as one of their workmen; that about 14 months afterwards another 234 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 creditor of L,owe & Mead, having obtained execution against them,, placed it in the defendant's hands, and he, having been indemnified by the creditor, levied upon the goods. The court below instructed the jury that the fact that the assignment included the whole stock in trade of the partnership, and was under seal, and executed by only one of the partners, did not render it invalid, but that, if the jury should find that the employment of Lowe was a part of the consideration of the transfer, it was fraudulent and void. Verdict and judgment for the plaintiffs, which the defendant brought error to reverse. Rogers, J. It is a general principle of the law of partnership that the' partners are bound by what is done by each other in. the course of the partnership business. They are considered as virtually present at and sanctioning the contracts they singly enter into in the course of trade ; and each is vested with authority to act at the same time as prin- cipal and as the authorized agent of his copartners. Each partner re- poses confidence in the other, and by the act of entering into the partnership constitutes him his general agent as to all the partnership business. These principles are established for the benefit of the part- ners themselves ; for it would be a great impediment to commercial dealings if, in the ordinary transactions of trade, it were necessary that the actual consent of each partner should be obtained, or that it should be required that the transaction should be really for the benefit of the firm. When, therefore, the act of one has the appearance of being on behalf of the firm, it is considered as the act of all. Among the pow- ers more ordinarily exercised by partners is the jus disponendi, or the power which each partner individually has of disposing of the joint stock or merchandise. But it is contended that these powers are subject to certain limitations; and on the authority of Justice Wash- ington, in Pearpoint & Lord v. Graham, 4 Wash. C. C. (U. S.) 234, Fed. Cas. No. 10,877, it is said to admit of serious doubt whether one partner can, without the consent of his associates, assign the whole of the partnership effects (otherwise than in the course of the trade in which the firm is engaged) in such a manner as to terminate the part- nership. Justice Washington inclines to take a distinction between a voluntary act of a partner, and those cases where, by act of God or by the operation of the law, the partnership is dissolved, as by death or bankruptcy of a partner. But why should the disposal of the whole stock in trade necessarily dissolve the partnership? The transaction may be for the benefit of the concern, and may increase, rather than diminish, the ability of the firm to continue their business. It is admitted he can sell part with- out the actual consent of his associates, and the policy of limiting that right is not very apparent, where the transaction is concluded in good faith; still less in a case hke the present, where the arrangement is most clearly for the benefit of the firm. For, had tlie property been sold by the sheriff in its unfinished state, it would have been attended with the sacrifice of the interests of all the parties. Mead, aware that Sec. T) TRANSFER OF PARTNERSHIP PROPERTY. 235 the property had been taken in execution, abandoned all care of it. From necessity, then, the other partner should have the power of dis- posal in payment of the debts of the firm. It cannot, with any pro- priety, be considered as a voluntary act of disposition ; but some ar- rangement was required to relieve the property from the custody of the sheriff. But is the power so limited as that one partner cannot dispose of the whole of the partnership effects? In Fox v. Hanbury, Cowp. 445, Lord Mansfield held that each partner has a power singly to dispose of the whole of the partnership effects. The authority is implied from the nature of the business. Justice Brainard, in Mills V. Barber, 4 Day (Conn.) 430, expresses the opinion that one partner has the absolute power of disposing of the whole. And in Harrison V. Sterry et al., 5 Cranch (U. S.) 289, 3 L,. Ed. 104, it is held that one partner may, in the partnership name, assign the partnership effects and credits in trust for creditors of the firm. The case of IDickinson v. Legare, 1 Desaus. Ch. 537, would seem to have been put on the ground of fraud, and certainly the transaction must be free from every taint of fraud; but, when the assignment is bona fide, I cannot doubt the power of one partner to transfer the whole, as well as a part, of the partnership effects. Nor do I think it can make any difference, in passing the interests of the firm, when the property has been delivered, whether the instrument of transfer be under seal or not. The assignment transfers the whole right of the firm, and not merely the right of Lowe. It purports to assign the whole interest, and contains warranty against all persons whatsoever. There is no ground to say that there was fraud in the contract. The fact of fraud was left by the court to the jury, and they have found that the contract was bona fide. * * * The levy was made upon all the property of the defendants. After the levy it was removed to an adjoining warehouse and held by the sheriff in custody for several days, and when so held the contract was made for a valuable consideration. The shop to which the property was retransferred was rented by the vendees. It was under their superintendence and care. They hired the workmen, purchased the materials, and continued the direction of the concern for 14 or 15 months. There is nothing in all this either fraudulent in fact or forbidden by the policy of the law. Nor will the fact that the plaintiff employed Lowe as a journeyman affect the transaction, unless his employment was a part of the consideration of the contract. Judgment affirmed.^ 1 "It is to be noted that the question arises in this case between the credi- tors of an insolvent firm, and not between the purchasing creditor and a member of the firm not consenting to the transfer of the property. If the question arose between the purchasing creditor and a nonconsenting partner, a very different question might be presented. The agency which one partner holds for his copartner is revocable, and his implied authority to dispose of the partnership assets is subject to revocation. It is undoubtedly the law that 236 NATURE AND CHAKACTEHISTICS OF A PARTNEESHIP. (Ch. 3 SHATTUCK V. CHANDLER. (Supreme Court of Kansas, 1889. 40 Kan. 516, 20 Pac. 225, 10 Am. St. Rep. 227.) Action upon promissory notes by J. E. Chandler, as assignee of the firm of Pierpont & Tuttle, against James A. Shattuck. Judgment for plaintiff, and defendant brings error. Clogston, C. This was an action upon a large number of promis- sory notes made payable to Pierpont & Tuttle, and guarantied by the firm of Shattuck & Bowers in these words: "For value received, I hereby guaranty the payment of this note according to the terms thereof, waiving demand, notice, and protest." The evidence shows that Pierpont & Tuttle were a manufacturing firm, located at Bush- nell. 111., and that Shattuck & Bowers resided in Phillips county, Kan., and were engaged in the sale of agricultural implements. Certain agricultural implements furnished by Pierpont & Tuttle were sold by Shattuck & Bowers, and the notes sued on were taken in payment If one partner dissents, or forbids the transfer of property of the firm be- fore it is complete, and notice thereof be given to the purchaser, the sale will not be binding upon the dissenting partner. The member of the firm would cease to act as the agent of the other member in respect of such transaction. It) Halstead v. Shepard, 23 Ala. 558, it was held that, where 'one partner undertakes to dispose of the partnership effects to the injury of the other partner, equity will interpose to grant relief,' and, 'if the purchasers of such effects take them with notice of such fraudulent intent of the partner making the sale, they will be considered as parties to the fraud, and liable in equity to the partner to refund.' " Per Shope, J., in Hanchett v. Gardner et al., 138 111. 571, 28 N. Ei 788 (1891). In Tapley v. Butterfleld, 1 Mete. (Mass.) 515, 35 Am. Dec. 374 (1840), up- holding the validity of a chattel mortgage under seal, executed in the name of the partnership by one partner, covering the whole property of the firm, it is said: "It is within the scope of partnership authority for one partner to sell and dispose of all of the partnership goods in the orderly and regular course of business. It is also within the scope of partnership authority to pay the debts of the firm, and to apply the assets of the firm for that pur- pose. He, being authorized to sell the goods to raise money to pay their debts, may apply the goods directly to the payment of the debts ; and accord- ing to the exigencies of the occasion he may pledge the partnership goods to raise money to pay the debts of the firm. To this extent we think each partner has a disposing power over the partnership stock, arising necessarily from the nature of that relation. * * * To what extent one partner can bind another in the disposition of the entire property of the concern is a question of power, arising out of the relation of partnership, and does not, we think, depend upon the form or manner in which it is exercised. 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 co-tenant, and as land cannot pass without deed, it follows that one partner cannot convey away the real estate of the firm without special authority. But, considering that the authority of selling and pledging the personal property is within the scope of partnership power, and may be done by either partner, and considering that it may be done without deed, the court are of opinion that such a mortgage, made by one partner in the absence of the other, although un- necessarily made by deed, was binding upon the property, and constituted a valid lien upon the property, which the plaintiff may avail himself of. And- erson v. Tompkins, 1 Brock. (U. S.) 456, Fed. Oas. No. 365 : Deckard v. Case, 5 Watts, 22, 30 Am. Dec. 287. ♦ * *" Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 237 therefor; said notes being made payable to Pierpont & Tuttle, and be- fore delivery to them were guarantied, as above stated. In answer to the petition the defendant alleged, among other defenses, that the plain- tiff was not the assignee of Pierpont & Tuttle, and that he had no right or authority to bring the action; and also alleged that Pierpont & Tuttle had failed to collect the notes when the same were due and pay- able; that the makers of the notes were solvent at that time, and aft- erwards became insolvent, and nonresidents of Kansas. The plain- tiffs offered in evidence the notes sued on, and the deed of assignment made in Illinois by Tuttle in the firm name of Pierpont & Tuttle; also a deed of assignment by Tuttle as the surviving partner of Pierpont & Tuttle. Said last deed of assignment, in addition to a general assign- ment of all the property of the firm of Pierpont & Tuttle, ratified the first deed of assignment, and all the doings and proceedings had there- under by the plaintiff as such assignee. Both of these assignments were objected to, and the objection overruled, and were admitted in evidence. The first deed was objected to upon the ground that one of several partners has no authority, without the consent of the other partners, to make a general assignment of the partnership property. The plain- tiff contends that the deed of assignment is prima facie good, and it devolved upon the defendant to show that Pierpont did not consent to the assignment, and that, unless it was at least shown that he objected to the assignment, the assignment must be held good. In this we do not agree with the plaintiff. Where an assignment is made by one part- ner, his right to make that assignment depends upon the consent of his copartner ; and to give him authority to make it, he must, in addition, show that his partner consented thereto, or show such a state of facts from which the court could presume assent; or show that the partner was absent from the country, and that therefore his assent could not be procured; or some other state of facts that would show to the court that the partner making the assignment had authority, either by reason of the articles of partnership, or by the fact of his being man- aging agent of the partnership, or some such fact from which the G9urt could say that the assignment was authorized by the partnership. No such proof was made in this case, and we think, in the absence of such proof, the assignment offered in evidence was absolutely void. See Burrill, Assignm. (5th Ed.) §§ 68-88 ; Loeb v. Pierpoint, 58 Iowa, 469, 13 N. W. 544, 43 Am. Rep. 133 ; Lowenstein v. Flauraud, 83 N. Y. 494; Haggertyv. Granger, 15 How. Prac. (N. Y.) 243; Dunklin v. Kimball, 50 Ala. 251; Sloan v. Moore, 37 Pa. 317; Graves v. Hall, 33 Tex. 665; Story, Partn. § 101; Pars. Partn. 166. This doctrine is now almost universally acknowledged to be the rule. The second assignment offered in evidence presents a more difficult question. In many of the states the doctrine is held that a surviving partner cannot make a general assignment, and in those states the the- ory upon which the decisions were rendered is that at the death of one 238 NATURE AND CHARACTERISTICS OP A PARTNERSHIP. (Ch. 3 partner the surviving partner becomes trustee of the partnership es- tate, and that he has no power to transfer the trust so created to an- other trustee. This seems to be the doctrine held in New York. See Nelson v. Sutherland, 36 Hun, 327; Loeschigk v. Hatfield, 51 N. Y. 660 ; Cushman v. Addison, 52 N. Y. 628 ; also Tiemann v. Molliter, 71 Mo. 512; Vosper v. Kramer, 31 N. J. Eq. 420. On the other hand, it has been held by some of the states that the surviving partner may make' a general assignment of a partnership ; and to this effect are numerous decisions, among which is Emerson v. Senter, 118 U. S. 3, 6 Sup. Ct. 981, 30 L. Ed. 49, in which case the court held that the surviving partner could make a general assignment. The court said: "The right to do so grows out of his duty, from his relations to the property, to administer the affairs of the firm so as to close up its business without unreasonable delay." This seems to be the settled doctrine of the Supreme Court of the United States, and should be followed, unless there is some statute making a different rule. This assignment was made under the laws of Illinois, and should be inter- preted thereunder; but in this case no statute of Illinois was offered disclosing what provisions had been made in that state by statute for the winding up of partnership business, and, in the absence of any showing of this kind, we must presume that the statute of Illinois is like that of Kansas. This brings up the question, is there any statute in Kansas that con- flicts with the rule laid down by the Supreme Court of the United States in the last case cited? Article 2, c. 37, Comp. Laws 1885, provides for the winding up and settlement of partnership estates. This provides for the appraisement of partnership property, and that the property shall remain in the possession of the surviving partner, and, if he sees fit to continue its management, and the disposing of the partnership assets, and the payment of the partnership debts, he may do so upon condition that he give a bond for the faithful performance of the duties imposed ; and the power is given the probate court to cite him, after the giving of such bond, to an accounting, and to adjudicate upon such accounts as in the case of an ordinary administrator, and for an action upon the bond in case of his failure to faithfully administer the part- nership estate ; and upon his refusal to give the bond and take charge of the partnership property, it becomes the duty of the administrator of the deceased partner's estate to assume the management of the same, and to settle it up. By this statute ample provisions are made for the closing up of a partnership estate, either by "the surviving part- ner or by the administrator of the deceased partner's estate. We think that the Legislature by this provision intended to provide a trustee to close up the partnership upon the death of a member of the firm, and that the statute creates a trust in the surviving partner which' he has no power to transfer to another, except as it is transferred by his re- fusal to administer upon the partnership estate, in which event it is Sec. T) TEANSFER OF PARTNERSHIP PEOPEETX. 239 transferred by operation of law to the administrator of the deceased partner's estate. * * * If the surviving partner under our statutes may transfer his trust to an assignee, then the assignee would close up the entire partner- ship business in the court having jurisdiction of the assignment and estate thereunder, and would be entirely free from the jurisdiction of the probate court, and the statute above cited would be without any force or effect. Did the Legislature intend that this statute might be regarded or not, at the pleasure of the surviving partner? We think ■not. This means of winding up a partnership business has been pre- scribed by the Legislature, and, in the absence of any proof of the statutes of Illinois to the contrary, we must presume that this is the manner of closing up partnership estates in that state. We therefore think the court erred in permitting the second assignment to. be given in evidence, as it gave the plaintiff no authority or right to commence the action. * * * It is therefore recommended that the judgment of the court below be reversed, and the cause remanded for a new trial. ROVELSKY V. BROWN et al. (Supreme Court of Alabama, April 14, 1891. 92 Ala. ,522, 9 South. 182, 2.5 Am. St. Rep. 83.) Action for specific performance by D. Rovelsky against B. S. Brown and A. J. Smith, partners as Brown & Smith. The chancellor granted the relief of complainant as to one-half interest owned by Brown, but refused to grant the relief as to the other half interest owned by Smith, and decreed that Smith was entitled to his half interest in the prop- erty sold and that all the property should be held subject to the debts of the partnership. Complainant appeals. Wai^ker, J. B. S. Brown and A. J. Smith were partners, doing business in the town of the Ozark, in this state, under the firm name of Brown & Smith. On the 37th day of September, 1889, said Brown, in the name of the firm, sold to Rovelsky a house and lot in the town of Ozark at the price of $700, received $500 thereof in cash, and signed the firm name to a bond for title purporting to bind A. J. Smith and B. S. Brown under the firm name of Brown & Smith. Rovelsky was put in possession of the property by Brown, and thereafter tendered the balance due on his purchase, and demanded of the partners a con- veyance of title to the property. Smith refused to join in the con- veyance. Thereupon Rovelsky filed his bill for the specific enforce- ment of the contract evidenced by the bond for title. Brown inter- posed no defense. Smith defended on the ground that the property in question was owned by himself and Brown as joint tenants or tenants in common, and that the sale by Brown was made without his knowl- edge or consent, and was repudiated by him, because, in respect to his 240 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3- right and title to his undivided half interest in said real estate, he was in no way bound by the acts of said Brown. Smith, by the terms of his answer and by the statements in his deposition, assumed the posi- tion that the land in question should not be treated as partnership prop- erty, but as any other land held by a tenancy in common. The bill avers that Brown & Smith were engaged in buying and selling real estate for speculation and profit, and that they engaged in that busi- ness as partners; that they bought and sold real estate as partners,- under the firm name of Brown & Smith. These averments are sus- tained by the testimony of Brown, of the complainant, and of Barnes,, all to the effect that Brown and Smith were partners in the real estate business, and were engaged in buying and selling lots in and around Ozark; that they treated and rented their property there as firm prop- erty, and, prior to the sale now sought to be enforced, each of the partners, in the name of the firm, was trying to make sale of the lot in question for the purpose of paying the debts of the firm. Brown stated that, prior to the purchase of the lot, he and Smith (the latter did not reside at Ozark) had formed a partnership for the purpose of buying and selling real estate in the town of Ozark, and that it was. agreed that Brown should make the purchases ; that he did make the purchases, and Smith afterwards paid his part of the purchase money to Brown, and the property was regarded as having been bought with partnership money; and that both members of the firm had the right to bargain for the sale of any of the lots belonging to the firm. * * * We are satisfied from the evidence that the lot was bought by Brown & Smith in the course of a general dealing engaged in by them in the business of buying and selling real estate, and that it, like other lots owned by them, was treated and regarded by them, and is to be treated and regarded by the court, as partnership property. So treating it, will the contract made in the name of the firm by Brown alone be specific- ally enforced against Smith? The doctrine is familiar, and is illustrated by many reported cases, that when partnership funds have been used in the acquisition of real estate, whether the title be taken in the name of one partner, or in the names of all, so as to make them in law tenants in common, such property will for certain purposes be treated in courts of equity as personalty. Powers v. Robinson, 90 Ala. 225, 8 South. 10, and au- thorities there cited. This doctrine has usually been invoked for the purpose of enforcing the payment of partnership debts, or to secure a proper division of the assets on a settlement of the partnership affairs ; and sometimes the courts, having in view only these familiar applica- tions of the rule, have spoken of it existing for the two purposes above mentioned. Such statements, on their face, may suggest a doubt as to whether the doctrine can be invoked for any other purpose. In an ordinary trading or commercial partnership, the usual deaHngs of the concern in the course of its business are with money or other per- sonal property. Real estate does not figure in the regular dealings of Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 241 such a partnership ; but it often happens that real estate is acquired in the collection of debts, or the funds of the firm may find their way into real estate in other modes. Still real estate does not become the subject-matter of the regular business dealings of the firm. It is dis- posed of, or, if it remains on hand, that part of the partnership funds which has been used in its acquisition is thereby practically withdrawn from the business. The real estate is not, in such cases, used for partnership purposes, except by selling it, and returning the proceeds to the business, there to be used in trade, in paying debts, or in a dis- tribution on a settlement of the partnership affairs. If not so volun- tarily applied by the partners themselves, courts of equity are not likely to be appealed to in reference to such real estate, as affected by the partnership relation, except to reach it as a depository or hiding place of partnership funds for the purpose of enforcing the payment of debts or to secure an equalization in division among partners. The fact that, in most of the reported cases, the equitable jurisdiction has been invoked only for one or the other or both of these two special purposes is an explanation of the habit of speaking of the rule as existing for those purposes, without mentioning other purposes which, on consideration, may be found to be equally within the reason of the rule. There are manifest reasons for the existence of this equitable rule of treating partnership real estate as personal property. A gen- eral partnership is a scheme of co-ordinate contribution, effort, and action by each for all. The property and resources contributed by the several members constitute a fund specially appropriated for use in carrying on the partnership business, for the satisfaction of partner- ship' obligations, and for a ratable division of what may be left among the partners. None of these special purposes could be effectually carried out as to real estate, if the incidents of the legal ownership of that kind of property are recognized in the partnership dealings. The powers of the several general partners in the acquisition, man- agement, control and disposition of the partnership property in the course of business, would be impossible of adequate exercise if ham- pered by the restrictions which at law embarrass the ownership and aHenation of real estate. The incidents of dower, heirship, etc., prac- tically preclude, so far as real estate is concerned, a recognition at law of that species of title which the partnership and the several mem- bers thereof have in the firm property; for each has the power of absolute disposition within the- scope of the business, and, in the case of the death of a member, the survivor or survivors are vested with an exclusive title and right of disposition for partnership purposes. It is plain, without further illustration, that, in dealing with partnership real estate for partnership purposes, it is impracticable to recognize the in- cidents of its legal ownership. And it is equally plain, without any illustration at all, that it would be grossly unjust, both in respect to the relations of the partners with each other, and as regards the part- nership dealings with others, to allow the investment of partnership Gil.Paet.— 16 242 NATURE AND CHAEACTEEISTICS OF A PARTNEESHIP.. (Ch. 3 funds in real estate to limit or to enlarge the rights and powers of the several partners as to the firm property, or to cut off or restrict the appropriation of the partnership property to the purpose above men- tioned, to which it has been specially set aside and devoted. Such in- equitable results are obviated by treating, so far as necessary to ac- complish the purposes of the partnership, such real estate as personal property. And why should not such real estate be treated as personal property when it is the subject-matter of the ordinary business of the partnership, as well as when it is sought to be reached to enforce the payment of debts, or to effect a settlement of the partnership affairs? It is a fact that the buying and selling of real estate is a regular busi- ness, engaged in throughout the country. Many partnerships are in existence devoted exclusively to the transaction of this kind of busi- ness. Real estate is the subject-matter of their trading operations. They deal in it as a commodity. It is their stock in trade. The ob- ligations they assume directly affect and involve the title to that char- acter of property. If a debt contracted in a transaction having no con- nection with real estate by a member of an ordinary commercial firm, acting within the scope of the business, may be enforced against land, merely because partnership funds have been used in its acquisition, a fortiori the obligation one member of a real estate partnership under- takes in the regular course of trade, in reference to the kind of prop- erty which is the special subject-matter of their business, should be effectually enforceable against all the partners, and should reach and bind the property dealt in. If the several partners in a firm, engaged in the business of buying and selling real estate, cannot bind the firm by purchases or sales of such property, made in the regular course of business, then they are incapable of exercising the essential rights and powers of general partners, and their association is not really a part- nership at all, but a several agency, the acts of each member being subject to ratification or repudiation by the other members, or by their wives, or, if they should die, by their widows, heirs, or devisees. In short, we are unable to discover any satisfactory reason for denying to a court of equity the power to treat real estate as personalty in ■order to make binding partnership obligations in reference to the par- ticular subject-matter of the regular dealings of the firm, when that rule sought to be invoked to this end is readily applied to enforce the payment of ordinary debts, or to secure a partnership division, which, as compared with the immediate and primary aim of carrying on the regular business of the concern, are the secondary and ultimate pur- poses to which the partnership property has been pledged or devoted. And authorities are not wanting to support the conclusion that the rule is not confined in its application by any such unreasonable distinction. In Lang's Heirs v. Waring, 17 Ala. 145, it was said: "So far as the partners and their creditors are concerned, real estate belonging to the partnership is in equity treated as mere personalty; and so it will be deemed as to all other intents, if the partners have .by agreement Sec. 7) TEANSFBE OF PARTNERSHIP PROPERTY. 243 or otherwise impressed upon it that character." In a suit to recover commissions for finding a purchaser of real estate, brought by a man who has been employed by one member of a firm to sell the partner- ship land, it was said: "There is no doubt that -a copartnership may exist in the purchase and sale of real property, equally as in any other lawful business. Nor is there any doubt that each member of such copartnership possesses full authority to contract for the sale or other disposition of its entire property, though, for technical reasons, the legal title vested in all the copartners can only be transferred by their joint act." Thompson v. Bowman, 6 Wall. 316. One member of a partnership engaged in the business of buying and selling real estate, fraudulently, and without the knowledge of his copartner, represented to a purchaser that the partnership land which was the subject of the sale was oil-producing. In an action for damages for the fraud and deceit, it was held that both partners were liable. In the course of the opinion the court says : "When the partnership business is to deal in real estate, one partner has ample power, as general agent of the firm, to enter into an executory contract for the sale of real estate." Chester V. Dickerson, 54 N. Y. 1, 13 Am. Rep. 550. "When real estate is brought into the partnership business, it is treated, in equity, as per- sonal estate, and a lease of it by one partner is as much a partnership transaction as a sale of partnership goods by him would be." Moder- well V. Mullison, 21 ,Pa. 257. When land is purchased to be dealt in as a commodity, this would seem to be, for the purposes of such deal- ing, an out and out conversion of it into personalty, and each partner can bind the firm by contracts for its disposition. Ludlow v. Cooper, 4 Ohio St. 1; Olcott v. Wing, 4 McLean (U. S.) 15, Fed. Cas. No. 10,481; Pugh V. Currie, 5 Ala. 446; Frost v. Wolf, 77 Tex. 455, 14 S. W. 440, 19 Am. St. Rep. 761 ; 1 Bates, Partn. §§ 298, 299. Our conclusion is that partnership real estate is, in equity and for partner- ship purposes, to be treated as personalty; and that one member of a partnership, engaged in the business of buying and selling real estate, can bind the firm by contract in the firm name for the sale of partnership land, and that such contract should be specifically enforced against all the partners. * * * The decree of the chancery court is reversed, and a decree will be here rendered for the specific enforcement of the contract of sale ; ap- pellee Smith to pay the costs in this court and in the chancery court. JANNEY V. SPRINGER et al. (Supreme Court of Iowa, 1889. 78 Iowa, 617, 43 N. W. 461, 16 Am. St. Rep. 460.) This is an action at law to recover upon an account for ground feed sold to the defendants. There was a trial by jury, and a verdict and judgment for the plaintiff. Defendants appeal. 244 NATURE AND CHAEACTEEISTICS OF A PAETNEKSHIP. (Ch. 3 RoTHROCK, J. It appears from the evidence that at the time the ac- count accrued A. A. Paine & Co., a partnership, were the keepers of a feed store, and that the individual members of the partnership were A. A. Paine and J. M. Janney, plaintiff in this action. W. W. Springer and C. F. Willard were at the same time engaged in the business of importing and selling high-bred horses from France under the part- nership style of Springer & Willard. A. A. Paine & Co. furnished the ground feed the value of which is in controversy in this action, which feed was consumed by the said horses. Some time after the account accrued the firm o~f A. A. Paine & Co. was dissolved, and at the dis- solution of the firm the ground feed account was assigned to Janney in the settlement of the partnership. He brought this action against the firm of Springer & Willard, and against Springer as an individual member of the firm. The defendants claimed that Willard bought the feed of A. A. Paine, and paid him therefor. The real facts relied upon as a defense were that A. A. Paine was indebted to Willard up- on a promissory note, and that Willard bought the feed of Paine un- der the agreement that the price of the same was to be appHed on the note and in payment thereof. After both parties had introduced their evidence the plaintiff filed a motion for an order directing the jury to return a verdict for the plaintiff. The motion was sustained upon the ground that an agreement between Willard and Paine that Willard should purchase the feed and pay for the same by the discharge of Paine's individual indebtedness was void as to Janney, the other mem- ber of Paine & Co., upless Janney in some way assented to or ratified the transaction. We do not understand that this proposition is con- troverted by counsel for appellants. But it is contended in behalf of appellants that the question as to whether there was such a partnership as A. A. Paine & Co. should have been submitted tO' the jury. We do not think this position can be sustained. The existence of the firm was shown by the testimony of these witnesses, and there was no evi- dence to the contrary. It is said there was no firm sign erected at the place of business of the partnership, and that defendants had no knowl- edge of the existence of the firm. This want of knowledge and oriiis- sion to use a sign was in no sense conflicting evidence upon the ques- tion of a partnership in fact. It having been established beyond ques- tion that the feed was partnership property, it was incumbent on the defendants to show that Janney in some way assented to the alleged agreement to pay the individual debt of Paine in partnership prop- erty, or that he (Janney) in some way ratified the act after it was done. Thomas v. Stetson, 62 Iowa, 537, 17 N. W. 751, 49 Am. Rep. 148. There was no evidence of such assent or ratification. The only other question necessary to be noticed in the case is the claim of counsel for appellants that, as they had no knowledge that Janney was in partnership with Paine, they had the right to deal with Paine as though he were the sole owner of the feed. It may be this position would be sound if there were any evidence that Janney was Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 245 a dormant or silent partner. But there is no such evidence. The partnership existed for some three years. Janney was personally and publicly engaged in the business, and his daughter was bookkeeper of the partnership. There was no evidence of any act of concealment of the partnership. It is true that for part of the time there was no partnership sign upon the building. But there was no sign of any kind, and therefore no effort to mislead any one as to the true relation of the parties. We think that under the facts of the case the question of knowledge as to the partnership is immaterial. In our opinion the court rightfully directed a verdict for the plaintiff. Affirmed. HARTLEY v. WHITE. (Supreme Court of Pennsylvania, 1880. 94 Pa. 31.) Action by Norman White against M. J. Decker and Andrew Hal- stead, copartners, and Silas Hartley as garnishee. The garnishee pleaded "nulla bona." At the trial a special verdict was found show- ing funds in the hands of the garnishee, and a judgment was entered on the verdict charging the garnishee. The garnishee brings the case up on writ of error. jMercur, J. The plaintiff in error was served as garnishee of Decker & Halstead, copartners. The jury found that, in fraud of the cred- itors of the firm and without the knowledge or consent of Decker, ex- cept as to one note (shown by the evidence to be about $40), Halstead assigned and transferred judgments and notes, the property of the firm, amounting to about $2,000, to the garnishee; that the transfer of this property was fraudulent, and intended by Halstead and the garnishee to be in payment of Halstead's private debts, and to pre- vent the same from being used and applied in the payment of the firm debts of Decker & Halstead; that the firm was at the time largely in debt, and soon after became insolvent. They further found that out of the claims thus assigned to the garnishee he had collected a specific sum in cash, and that he had surrendered to the makers notes, and taken new ones therefor, for a sum certain, and of sufficient value, added to the cash received, to exceed by several hundred dollars the sum due to the attaching creditor, or for which judgment was en- tered against the garnishee. It is well settled that one partner cannot make a valid transfer of firm property, in payment of his individual debt, without the con- sent of his copartner. Todd v. Lorah, 75 Pa. 155. Such act is a fraud on his copartner, and the right of property in the firm does not pass to the individual creditor. The present case goes still further. Not only was the attempted sale a fraud on the copartner, but it was in- tended and operated as a fraud on the creditors of the firm. It is, then, clear under these facts the purchaser cannot hold the property against 246 NATURE AND CHARACTERISTICS OF A PARTNERSHIP.. (Ch. 3 the creditors intended to be defrauded. He has no reason to complain of the amount for which judgment was entered against him. It is for a sum less than he has realized out of the property. It is further objected that the form of the judgment was wrong. This, however, is not a fatal error. The form of the judgment can be amended. It is now done by striking out those references, so that it shall stand, judgment in favor of plaintiff below and against said gar- nishee for $1,250.20 and costs, to be levied on the goods and effects of Decker & Halstead in his hands, or, in case he fails or refuses to pro- duce such goods and effects sufficient to satisfy the execution, then to be levied against him as his own proper debt. Thus amended, the judgment is affirmed. BRYANT & STRAW v. CLIFFORD. (Supreme Court of Vermont, 1854. 27 Vt. 664.) Action by Bryant & Straw, partners, against Clifford, to recover for work done by them as partners for Clifford. The defendant contracted for the work with Bryant, who acted on behalf of the firm. The ex- istence of the firm was not generally known, and was not known to the defendant at the time of making or during the performance of the contract, which he supposed to have been made with Bryant alone. At the time of entering into the contract Bryant was indebted to the defendant, which indebtedness defendant expected to use in payment of the work done under the contract. The defendant pleaded as a set-off his claim against Bryant. This was disallowed, and judgment given for plaintiffs in the trial court. Defendant alleged exceptions. Bennet, J. The more important question is: Can the defendant use his account against Bryant as a defense to this action brought by Bryant & Straw? Though, at he time the contract was entered into between Bryant and the defendant, Bryant & Straw were partners, yet this was not known at the time to the defendant, and he supposed he was contracting with Bryant alone, and during the performance of the work he supposed Bryant was alone interested, and had no knowledge of a partnership; and it is found that the defendant was induced to enter into the contract with Bryant because he owed him a balance on book. Bryant ostensibly acted for himself. Nothing was said about his having a partner, nor was it generally known that he had one. Though Straw was present when the contract was made, talked about the work, and made some estimates, and eventually as- sisted in doing the work, yet this was consistent with his being a jour- neyman to Bryant, in which capacity he had served him for about one year before. This was no notice of the existence of the partnership to the de- fendant, nor enough to put him on inquiry. Though an action may, on such state of facts, be brought by the partnership, yet the court will Sec. 7) TRANSFER OP PARTNERSHIP PROPERTY. 247 see that it is not done to the prejudice of the defendant, and he will be allowed the same defense, whether by set-off or otherwise, that he might have had if sued by Bryant alone. See Hilliker v. Loop, 5 Vt. 131, 26 Am. Dec. 286, and cases there cited. And the set-off need not have arisen, in this case, after the contract was made with Bryant. In the case of Lime Rock Bank v. Plimpton et al., 17 Pick. (Mass.) 159, 28 Am. Dec. 286, it was held that in a suit by the principal the defendant could not be defeated of a legal set-off against the agent who loaned the money. The defendant was allowed to detain to the amount of his claim against the agent. As in the case at bar the de- fendant was induced to make the contract with Bryant on account of his claim against him, it would be eminently unjust to deprive him of his defense by reason of this action being in the name of Bryant & Straw, when Straw must be regarded in the light of a secret part- ner when the contract was made with Bryant and the services rendered. The judgment of the county court is reversed, and judgment ren- dered on the report for the defendant to recover his costs. III. Successive Transfers of Each Partner's Interest. DONER et al. v. STAUEFER et al. (Supreme Court of Pennsylvania, 1829. 1 Pen. & W. 198, 21 Am. Dec. 370.) This was a feigned issue, directed by the court and joined between the defendants in error, who were the plaintiffs below (and for whom the verdict passed), and the plaintiffs in error, who were the defend- ants below. It appeared from the evidence in the cause that Daniel Howry and Benjamin B. Eshelman entered into partnership in a manufacturing es- tablishment, under the firm of Howry & Eshelman. They became con- siderably indebted. Judgments were entered and executions were is- sued against each of them. Abraham Doner, Samuel Herr, John How- ry, and Samuel Howry had severally judgments against Daniel Howry, on each of which an execution issued against him and was levied on the 9th of August, 1825, on the personal property of Daniel Howry and Benjamin B. Eshelman, as partners in trade. John Stauffer, Christian Breckbill, and Jacob Eshelman had sever- ally obtained judgments against B. B. Eshelman, on each of which judgments an execution was issued against him and levied on the 11th day of August, 1825, on Benjamin B. Eshelman's share of the person- al property of Benjamin B. Eshelman and Daniel Howry, as partners in trade. By virtue of these and other executions the personal prop- erty of the firm was sold for the sum of $5,070.39, which, after pay- 248 NATDEB AND CHARACTEEISTICS OF A PARTNERSHIP. (Ch. 3 merit of the costs, left a balance of $4,779. This balance was paid into court for distribution. On a rule obtained by the counsel of Staufifer, Breckbill, and Eshel- man to show cause why the one-half of the proceeds of the sale of the firm property should not be applied to the satisfaction of their ex- ecutions against B. B. Eshelman, the court decided that the execution creditors of Benjamin B. Eshelman had a legal right to his share of an intei-est in the partnership effects of the firm of Howry & Eshel- man as it stood on the 11th of August, 1825, when the executions were levied, and directed this issue to try what that share or interest was. The plaintiffs claimed a moiety or half part of the $4,779 as their share. The plaintiffs having closed their evidence, the defendants, in sup- port of the issue taken in the cause, offered to prove that the firm of Howry & Eshelman was entirely insolvent on the 11th of August, 1825 ; that the debts and claims against the said firm existing on the said 11th of August, 1825, which were then unpaid, greatly exceeded the whole property of the said firm; that Benjamin B. Eshelman on the said day had no interest whatever in the said firm, and that Daniel Howry, the other partner, is greatly interested in the application of the funds of the said firm to the payment of the debts of the said firm, as he is answerable individually and as a partner for the whole of the said debts — which offer being" objected to, the court overruled the same, and delivered the following opinion, to wit: "I am satisfied that the authorities cited settle the law as it applies to the cases decided; that is to say, to cases where there are separate executions against one partner levied on the partnership effects. But this is a case where the whole partnership effects are swept away by separate executions against each partner, where the creditors at large have no lien. I must say that the principal object in directing this issue was, as it was a case of great importance, to give an opportunity of completely considering and reviewing the law on the subject. But I am very clear that Ben- jamin B. Eshelman's interest, or want of interest, cannot be shown by evidence of debts due from the firm, and that the testimony offered relative to the insolvency of the firm, and the interest of Daniel How- ry in the application of the funds of the firm to the payment of its debts, cannot be admitted." To this opinion, overruling the evidence offered, the defendants excepted. Although the issue joined was between the separate execution credit- ors of the respective partners, the counsel for the defense appeared for the joint creditors of the firm to controvert the right of the separate creditors of Eshelman to be paid out of the fund in court before the joint creditors were satisfied, and they alleged that after the executions of the separate creditors were levied Howry & Eshelman had made an as- signment to trustees for the benefit of the creditors of the firm. The only question now raised in this court, upon the charge of the Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 249 court below and the bill of exceptions, was whether the separate ex- ecution creditors of Eshelman had a right to be paid out of the pro- ceeds of the sales of the goods of the firm before the joint creditors were satisfied out of that fund. GiBSONj C. J. It is settled by a train of decisions in the American as well as the British courts that the joint effects belong to the firm, and not to the partners, each of whom is entitled only to a share of what may remain after the payment of the partnership debts, and, con- sequently, that no greater interest can be derived from a voluntary as- signment of his share, or a sale of it on execution. That a contract which enables the parties to keep a class of their creditors at bay, and yet retain the indicia of ownership, should not have been deemed with- in the statutes of Elizabeth, is attributable exclusively to the disposi- tion universally manifested by courts of justice to encourage trade. But, such as it is, has the contract of partnership been established; and the principle which enables the partners to pledge to each other the joint effects as a fund for payment of the joint debts has intro- duced a preference in favor of the joint creditors, founded on no mer- its of their own, but on the equity which springs from the nature of the contract between the partners themselves. The author of the Commentaries on American L,aw (volume 3, p. 38)- attributes this preference to an inherent equity in the joint creditors themselves, arising from a supposed acquisition of the partnership effects from their means. The opinions of Chancellor Kent are so justly entitled to deference that no prudent judge will differ from him without hes- itation. Yet I cannot but adhere to the opinion I expressed in Bell v. Newman, 5 Serg. & R. 93, that in cases of insolvency or bankruptcy, in which alone the question of priority can be material, the joint ef- fects consist of the wreck of the capital originally embarked. Under a joint commission, ty which the effects pass to the assignees, while the partners are personally discharged, I admit that the preference of the joint creditors has no other foundation, if it has any at all, than this supposed inherent equity ; and the best elementary writer on the subject so disposes of the difficulty. Gow on Partnership, 341, 342. But in the case of a separate commission Lord Eldon expressly puts it on the particular equity of the partners themselves. Ex parte Ruf- fian, 6 Ves. 119. And in the case of an execution. Chief Baron M'Don- ald does the same. Taylor v. Fields, 4 Ves. 396. To secure the firm from the extravagance of its members, by preventing the capital from being withdrawn from the purposes of the partnership, the stock is pledged for the burden which, from the nature of the connection, is to be borne by all ; but, in molding the law of partnership to its pres- ent form, the credit gained by giving the joint creditors a preference was, if an object at all, a very remote one. Accordingly, with the single exception of a joint commission, we find that, wherever the partners are not individually involved, the joint creditors have no 250 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3- preference whatever, as in the instance of a bona fide assignment of the effects to one of the partners after the partnership has been dis- solved. In consequence of the rule as I have stated it, a separate execution creditor sells, not the chattels of the partnership, but the interest of the partner, incumbered with the joint debt; and the joint creditors,- therefore, have no claim to the proceeds. To allow them the proceeds,, and recourse to the property in the hands of the purchaser, would sub- ject it to a double satisfaction. Neither can they take the proceeds or the property at their election. They can interfere at all only on the ground of a preference, which has regard only to the partnership ef- fects; and these have not been sold, but only the subordinate interest of the partner, which was, strictly speaking, his separate estate. Their recourse, therefore, is necessarily to the property in the hands of the purchaser. Now, had the sheriff sold the interest of but one of the- partners, the execution ci'editor would have clearly been entitled to the proceeds. But although he sold the whole stock at one operation, on separate executions against both, there was, in contemplation of law, a separate sale of the interest of each. What, then, would have been the effect had these sales been made consecutively? The first in the order of time would have passed the interest of the partner, subject to the equity of his copartner, and the execution creditor would have been entitled to the price. But this equity, together with the remaining interest of the other partner, would have passed by the~- succeeding sale to the same purchaser; the execution creditor, in that instance, also taking the proceeds. Can it make a difference, then, that instead of being consecutive these two sales were simultaneous? A curious question might arise whether separate purchasers of the shares, respectively, would stand in the relation of partners, so as to enable the joint creditors to follow the goods. It seems to me they would not, because not personally involved in payment of the debts.. Here, however, where the shares of the partners are united in the- same purchaser, every semblance of partnership equities is at an end.. As regards the goods in the hands of the purchasers, this is conceded ;- but the joint creditors insist that the proceeds are to be substituted for the goods and subjected to the same equities. That might be done if the proceeds belonged to the partners; but it is not easy to imagine how they are to be treated as the owners of money raised by a sale on executions against them. For what purpose should the ownership of it be vested in them, even for an instant? Not to give the joint creditors a preference, for that would make the rights of the partners- depend on the claims of the joint creditors, who, on the contrary, can claim nothing but by virtue of the Hen, where there is one, of the part- ners. To say that the partners have such a lien because the joint creditors have an equity, and that the joint creditors have an equity because the partners have a lien, would be to argue in a circle. Here- the partners cannot be prejudiced in respect of their claims on each Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY, 251 Other; the advantage to be gained from an application of the joint effects to their separate debts being mutual and equal. The conse- quences are precisely the same as if the effects had been sold on an execution against both. We are therefore of opinion that the joint creditors cannot interpose, and, consequently, that the rejection of the evidence, as well as the direction to the jury, was substantially right. I have considered the question on principles applicable to it, in anal- ogy to well-settled parts of the law of partnership, rather than on au- thority bearing directly on the point. But since this opinion was drawn my Brother Huston has directed my attention to the case of Brinker- hoff V. Marvin, 5 Johns. Ch. (N. Y.) 320, which is direct to the point, so that, independent of analogies, we have an authority on which we might safely rule the cause. But both principle and authority are ad- verse to the preference claimed, and the issue, therefore, was correctly found for the plaintiff. Huston, J., dissented. Judgment affirmed. MENAGH V. WHITWELL et al. (Court of Appeals of New York, 1873. 52 N. X. 146, 11 Am. Rep. 683.) Appeal from a judgment in favor of the plaintiff entered upon the report of a referee. This was an action for converting machinery, utensils, lumber, and other chattels formerly belonging to the firm of J. C. Smith & Co. and appertaining to a yeast factory operated by that firm. From the 17th of August to the 22d day of December, 1866, the firm consisted of John C. Smith, HoUister E. Goodwin, John Wride, Marietta Huntington, and William B. Rubert, each being interested to the extent of one-fifth. The firm as thus constituted contracted debts to the Geneva National Bank upon which judgments were after- ward recovered against the above-named parties, viz., one judgment for $1,403.83, and one for $237.53, both recovered May 24, 1867. The larger judgment embraced claims to the amount of $330 which ac- crued after the withdrawal of John Wride from the firm. Executions were issued on these judgments on the 25th of May, 1867, and placed in the hands of the defendant Ringer, who was deputy sheriff of On- tario county, and by virtue of those executions he levied upon the property on the 19th of July, 1867, and sold it on the 29th of July, 1867. The defendant Whitwell was sheriff, and this action was brought against him and his deputy for that levy and sale. The plaintiff re- covered four-fifths of the value of the property. The plaintiff makes title to this four-fifths as follows: On the 22d of December, 1866, John Wride assigned all his interest in the prop- erty and business of the firm to John C. Smith, who agreed to pay the 252 NATURE AND CHARACTBEISTICS OF A PARTNERSHIP. (Ch. 3 firm debts, and on the 4th of February, 1867, Marietta Huntington as- signed all her interest in the property of the firm to said John C. Smith, who assumed her place in the firm. After these transfers the same business was carried on by the remaining partners under the same firm name. The referee finds that both of these transfers were made with the consent of all the other members of the firm, and in good faith, without intent to defraud the creditors of the firm. On the 28th of February, 1867, the firm then consisting of John C. Smith, William B. Rubert, and HoUister E. Goodwin, and Smith's interest being then three-fifths, he gave to the plaintiff a chattel mort- gage upon his undivided three-fifths interest in the yeast factory, prop- erty, accounts, and other choses in action of the firm to secure his in- dividual debt to the plaintiff of $2,400, payable in installments in two, five, and seven months, with power to take possession and sell in case of default, or whenever she should deem herself unsafe before de- fault. The referee finds that this amount was justly due the plaintiff for money loaned by her to Smith, which he had used for the firm and for which it was indebted to him, and that the mortgage was given in good faith, with the consent of all the persons composing the firm, and without intent to defraud creditors. There is no express finding in respect to the solvency of the firm at the time of the giving of this mortgage. On the Sd of February, 1867, William B. Rubert had given a like chattel mortgage on his one-fifth interest to Samuel E. Rubert to se- cure an individual debt of $500, payable in five days. The referee finds that this was a just debt for money loaned, and that the mortgage was executed in good faith to secure the debt, and without any fraudulent intent. It does not appear that any of the other partners consented to this mortgage. On the 10th day of May, 1867, the plaintiff and Samuel E. Rubert took possession of the property mentioned in their respective mort- gages, and after advertisement it was sold on the 18th of May, 1867 ; the three-fifths interest of John C. Smith being purchased by the plain- tiff for $1,000, and the one-fifth interest of William B. Rubert being bought in by Samuel E. Rubert for an amount less than his mortgage. On the same day John C. Smith sold and delivered to the plaintiff all his interest in a quantity of lumber, boxes and other material then on the premises, and belonging to the firm, for $200, which was applied in part payment of the plaintiff's mortgage. The referee finds that this sale was in good faith and without any fraudulent intent. This lumber, etc., was levied upon and sold by the defendants and is em- braced in the plaintiff's recovery. On the same day on which the plain- tiff and Samuel E. Rubert took possession under their mortgages, viz., the 10th of May, 1867, Hollister E. Goodwin, the only remaining mem- ber of the firm, transferred his undivided one-fifth interest in the prop- erty and business of the firm to Mary B. Goodwin, who still owns the same, but never became a member of the firm. The referee has not Sec. 7) TRANSFER OP PARTNERSHIP PROPERTY. 253 found that there was any consideration for this transfer, or what was its object, or that it was made in good faith. The only findings in respect to the solvency of the firm at the times of these several transactions are that, on the 22d of December, 1866, when John Wride withdrew from the firm, transferring his interest to John C. Smith, the firm was somewhat embarrassed, but was not known or believed to be insolvent by either Wride or Smith, and that on the 4th of February, 1867, when Marietta Huntington transferred her interest, the financial affairs of the firm were about the same as they were on the 22d of December, 1866 ; that the firm was largely in- debted and somewhat embarrassed; that the value of its property and assets depended in part upon the continuance of its business, and, in case such business was continued and properly managed, the property and assets of the firm were more than sufficient to pay its debts. The referee further finds that at the time of the seizure and levy by the de- fendants the property was in the possession of the plaintiff and Samuel E. Rubert, and was of the value of $3,150 ; that the plaintiff was the owner of an undivided three-fifths, and Samuel E. Rubert of one un- divided fifth part thereof; that Mary B. Goodwin was the owner of the other undivided fifth part thereof; and that, on the 15th of Au- gust, 1867, and before the commencement of this action, the said Sam- uel duly assigned to the plaintiff all his right to the property and cause of action against the defendants for taking possession thereof. As conclusion of law he finds that at the time of the levy neither of the defendants in the execution had any leviable interest in the prop- erty, but that it belonged, four-fifths to the plaintiff, and one-fifth to Mary B. Goodwin; that the bank had no hen thereon; and that the plaintiff was entitled to rec'over four-fifths of the value, amounting to $1,720, with interest from the time of the conversion. RafaIvLG, J. The mortgages executed by John C. Smith and William P. Rubert appear to have been regarded by the learned referee as transferring an undivided four-fifths of the corpus of the partnership property therein described. 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 individual debt of the partner, even if effectual as to the firm, by reason of the concurrence of all the part- ners giving it, would be a fraudulent misapplication of the partner- ship property, and void as to the creditors of the firm, under the prin- ciple of the cases of Ransom v. Vandeventer, 41 Barb. 307, and Wil- son V. Robertson, 31 N. Y. 587, 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. The Supreme Court have considered that the findings of the referee fail to disclose any insol- vency, but, on the contrary, establish solvency of the firm at the time the mort^aores were ofiven. We cannot concur in this view of the ef- 254 NATURE AND CHAEACTBEISTICS OP A PARTNERSHIP. (Ch. 3 feet of the findings, but think that the facts found show that the firm was insolvent when the mortgages were given, and, if there were any doubt upon that point, they clearly establish that the diversion of four- fifths of its properties to the individual debts of two of the partners would make it insolvent. According to these findings the firm was, in February, 1867, and had been from December, 1866, largely indebted and embarrassed, and the value of its property, and its consequent ability to pay its debts, depended in part upon the continuance and proper management of its business. The mortgages were given on the 2d' and 28th of Febru- ary, 1867. If they were intended to be liens upon the corpus of the property, as they have been treated by the referee, and not merely liens upon the surplus which should belong to the partners, respectively, after the payment of the firm debts, it is evident, from the facts stated as existing at the time, as well as from the result, that their enforce- ment would prevent the firm creditors from collecting their demands out of the firm property, and that, under the principle of the cases cited, they were fraudulent and void as to such creditors. If so, the mortgagees, by purchasing at the sale under the mortgages, acquired no valid title as against such creditors, and the plaintiff was, conse- quently, not entitled to recover. Assuming, however, that the mortgages were intended to pass mere- ly the individual interests of the mortgaging partners in the common stock, and for that reason were not fraudulent as to the firm creditors, then it becomes necessary to consider their legal effect upon the rights of creditors of the firm. It is clear that the remaining partner was en- titled to the control of the firm property so long as he retained his interest, and to apply it to the firm debts, and that the mortgagees ac- quired only a right to the surplus, if any, which would be found to be- long to the mortgagors on the settlement of the accounts. And so long as any of the partners had this dominion over the firm property it can hardly be questioned that it was subject to levy on ex- ecution at the suit of a firm creditor. Lovejoy v. Bowers, 11 N. H. 404; Coover's Appeal, 29 Pa. 9, 70 Ani. Dec. 149; Pierce v. Jackson, 6 Mass. 243. But the point upon which the judgment was sustained in the Su- preme Court, at General Term, was that after the execution of the mortgages H. E. Goodwin, the only remaining partner, made a sepa- rate transfer to a third party of his individual interest in the partner- ship properties, and on this ground it was held that when the execu- tion was levied none of the defendants in the execiition had any levi- able interest in the property levied upon, and it was further held that the plaintiff, who had purchased the interest of S. E. Rubert under his mortgage, was entitled, by virtue of the two mortgages and of the pur- chase at the sale under them, to recover the value of four-fifths of the corpus of the partnership property levied upon by the defendants, with- out regard to the partnership debts. Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 255 This position is not without authority in its support. It is founded upon the theory that the separate transfers of the individual interests of all the partners divested the title of the firm; that firm creditors have no lien upon the partnership effects, and no direct right to com- pel their application to firm debts in preference to individual debts; that the right to compel this application is an equity vested in the partners themselves, and exists only as between each other; that so long as this equity exists in any of the partners the creditors have an equity to compel its enforcement between the partners, and may by this means obtain the application of the partnership properties to their demands, in preference to the individual debts or separate disposi- tions of any of the partners — in other words, "that the equities of the creditors can only be worked out through the equities of the partners." From these premises the conclusions have been drawn that, if such equities are waived or released by the partners themselves, the cred- itors lose them, and that a transfer of the individual interest of a part- ner in the firm property to a third person extinguishes the equity of the partner, and consequently that of the creditors, which is dependent upon it. This doctrine has been carried to the extent of holding that, if the individual interests of each of the members of a firm are suc- "cessively sold under executions against such members, respectively, for their individual debts, the purchasers acquire the corpus of the property free from the copartnership debts, and the equities of the ■partners and partnership creditors are extinguished. Coover's Appeal, 29 Pa. 9, 70 Am. Dec. 149. The injustice and, it may be said, the absurdities which result from such a view lead to an inquiry into its correctness. A firm may be perfectly solvent, though the members are individually insolvent, and jet in such a case the doctrine that the property of the firm is divested, and the equities of the partners and partnership creditors are extin- guished, by separate transfers of the individual interests of all the part- ners, might result, not only in an appropriation of all the properties of the firm to the payment of the individual debts, to the entire exclu- .sion 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 having an equal interest, and to be possessed of assets to the amount of $300,000, 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 in- dividually indebted. One of them sells his share, and receives for it $50,000, which is its actual value. The share of another of the part- ners is sold under execution, and brings its full value, $5,000. Thus far one partner 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 partnership property, and the right to levy on such of it as is subject to sale on 256 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 execution ; but before any levy the remaining partner sells out his in- dividual interest, or it is sold on execution. According to the doctrine applied in the present case, and maintained in the case of Coover's Ap- peal, 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. Such is, in substance, the operation performed in the present case. Assuming that the mortgages are intended to convey only separate in- terests of the mortgagors (which, as has been shown, is the only theory upon which they can escape being regarded as fraudulent),, the mortgaged property was, at the time the mortgages were given, liable to be taken for the partnership debts. The mortgages were but a slender security, and their value dependent upon the firm debts being paid. This state of affairs continued so long as Hollister E. Goodwin retained his one-fifth interest in the firm. The firm property was legally under his dominion for the payment of firm debts ; and the firm creditors, if they then had their execution, could have rightfully levied upon it, or availed themselves of Goodwin's equity as to any property which must be reached in that form. But on the 10th of May, 1867, Hollister E. Goodwin made a transfer of his interest in the property of the firm to one Mary B. Goodwin; and on the same day the plaintiff and Samuel E. Rubert took possession under their mortgages. The referee has not found what was the consideration or purpose of this assignment from Hollister E. to Mary B. Goodwin, nor has he expressly found that it was made in good faith. But the effect claimed for it is that, HolHster E. Goodwin being the only re- maining partner, the transfer of his interest divested him of his do- minion over the partnership property and of his equity to require the application of the partnership property to the payment of its debts, and that, as the partnership creditors could only reach the property through him, he, by this transfer or surrender of his rights, had cut off their access to it, and thrown it into the hands of the transferees of the individual partners, unincumbered by firm debts. Waiving any question as to the bona fides of this transaction, the referee not having found it fraudulent, and treating the sale of Good- win's interest as if it had been made under an execution against him, we come back to the question whether the consequences claimed do legally follow from separate sales of the individual interests of the several partners. It would be a superfluous labor to trace the history of the changes which have, from time to time, taken place in the views of the courts respecting the nature of the interests of individual partners in the com- mon stock of a firm, and the respective rights of separate and joint Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 237 creditors; but it is sufficient to observe that they have resulted in a general recognition of the doctrine that as between a firm and its creditors the property is vested in the firm, and that no individual partner has an exclusive right to any part of the joint stock until the firm debts are paid and a balance of account is struck between him and his copartners, and the amount of his interest accurately ascertained. The corpus of the effects is joint property, and neither partner sepa- rately has anything in that corpus ; but the interest of each is only his share of what remains after the partnership debts are paid and accounts are taken. West v. Skip, 1 Ves. 239 ; Fox v. Hanbury, Cowp. 445; Taylor v. Fields, 4 Ves. 396; 15 Ves. 559, note; Pierce v. Jack- son, 6 Mass. 243; Doner v. Stauffer, 1 Pen. & W. (Pa.) 198, 21 Am. Dec. 370; 2 Kent, Com. (11th Ed.) 78, note; Collyer on Partn. (3d Am. Ed., by Perkins) pp. 704 to 710, notes to § 822; Story on Partn. notes to §§ 261, 262, 263; Crane v. French, 1 Wend. 311; Witter v. Richards, 10 Conn. 37. Partnership effects cannot be taken by attachment or sold on execu- tion to satisfy a creditor of one of the partners, except to the extent of the interest of such separate partner in the effects, subject to the pay- ment of the firm debts and settlement of all accounts. 3 Kent, Com. (11th Ed.) 76. Purchasers of the share of an individual partner can only take his interest. That interest, and not a share of the partnership effects, is sold, and it consists merely of the share of the surplus which shall remain after the payment of the debts and settlement of the accounts of the firm. 3 Kent, Com. (11th Ed.) 78, note "b." No more property can be carried out of the firm by the assignee of one partner than the partner himself could extract after all the ac- counts are taken. 1 Ves. 241 (Am. Ed.) note; 15 Ves. 557. No person deriving under a partner can be in a better condition than the partner himself. Fox v. Hanbury, Cowp. 445. A partner has no right, by an assignment of his interest, to take from the creditors or other partners the right to have their claims against the partnership satisfied out of its property. A mortgage made by one partner of his undivided interest cannot avail against the cred- itors of the partnership who attach the partnership property. Love- joy V. Bowers, 11 N. H. 404. These principles have been enunciated in a great number of cases, where some one at least of the partners retained his equity to have the firm debts paid, and the rights of the creditors to assets or pro- ceeds, which have come under the control of a court of equity, have been worked out through the equity of that partner. But I find no case in which the consequences of transfers of the separate interests of all the partners to outside parties has been considered, except the case of Doner v. Stauffer, 1 Pen. & W. (Pa.) 198, 21 Am. Dec. 370, and Coover's Appeal, 29 Pa. 9, 70 Am. Dec. 149, before referred to. In neither of these cases is the point adjudicated, for in both cases the Gil. Part. — 17 258 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 joint creditors intervened before the sale of the interest of the last remaining partner, and their right to priority was sustained, though the opinion of the court was expressed as to what the result would have been if all the individual interests had been first sold. There is another class of cases in which the partnership effects have been held to be liberated from liability to be applied to partnership debts in preference to the separate debts of one partner ; that is, where a bona fide sale has been made by a retiring partner, in a solvent firm of two members, to his' copartner, the latter assuming the debts. In such a case it is settled that the property formerly of the partnership becomes the separate property of the purchasing partner, and that the partnership creditors are not entitled to any preference as against his individual creditors in case of his subsequent insolvency. Ex parte Ruffin, 6 Ves. 119; Dimon v. Hazard, 32 N. Y. 65. But in those cases the joint property was converted into separate property by the joint act of all the members of the firm. They had power to dispose of the corpus of the joint property, and the exercise of that power, when free from fraud, divested the title of the firm as effectually as if they had united in a sale to a stranger. It remained subject to exe- tution for firm debts so long as it continued in the hands of the pur- chasing partner. It is conceded that the creditors have no lien which would aifect the title of a purchaser from the firm. But the question now is : What is the effect upon the title of the firm, as between it and its creditors, of transfers by the partners severally of their re- spective interests to third persons? Where the property remains in specie, and no act has been done by the firm to divest its title, but the partners have made separate transfers of their respective individual interests to different persons, is it still to be regarded, as to the firm creditors, as firm property, or has it become the absolute property of the several transferees of the interests of the individual partners? It has been shown that no share in the corpus of the property passed by either of these transfers separately, but merely an interest in the surplus, and which should be ascertained on an accounting after payment of the firm debts. But it is claimed that, when all the part- ners have assigned, their interest in the property is divested, and their equity is destroyed, and therefore the property is released from the debts, and what was at the time of the assignment a share of a con- tingent surplus has been converted into a share of the corpus of the property. Is this position sound? When a partner sells his interest in a firm to a person other than his copartner, or it is sold on execution against him, does he thereby lose all equity to have the firm debts paid out of the assets ? When he sells to his copartner he relies upon his assumption of the partnership debts, and unless he stipulates for an application of the assets to that purpose he parts with all lien upon them. But when he sells to a stranger not liable for the debts, or his interest is sold on execution, is not the right to have the debts paid out of the prop- Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 259 erty a right of indemnity personal to himself, and which does not pass by the sale? Could it be tolerated that the interest of a partner should be sold under execution against him, on which sale only the , value of his interest in the surplus could be realized, and that the purchaser should be allowed to take the corpus of the property and leave him liable for the debts? If the legal effect of the transfer were set forth in the instrument, it would be seen that all the purchaser ac- quired was a right to an account and to the partner's share in the surplus after payment of debts, when ascertained, and that he had no right to that part of the property which was rec|uired for the pay- ments of debts; that the sale was subject to the debts. 3 Kent, Com. 76-78. The partner whose share was sold would manifestly have an interest in the protection and appropriation of that part of the. proper- ty in discharge of his own liability to the firm creditors. I do not see how this right can be affected by the question whether the separate interests of all or only one of the partners is thus sold. Each of the purchasers would acquire an interest merely in the sur- plus, 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 h^ve 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. The case differs materially from a sale by a retiring copartner to his copartner, who is personally liable for the debts directly to the cred- itors ; but even such a sale is valid only when there is no insolvency at the time. To sell to an insolvent partner would be a clear fraud. How much more clearly apparent would be the injury to creditors by a sale to a person not liable for the debts, if such sale had the effect to relieve the property from them. It can hardly be necessary, where the firm property remains in specie, and is tangible and capable of being levied upon, to resort to the equities of the partners in case there has been no transfer by the firm and the only adverse claimants are assignees of the individual interests of the several partners for their separate debts. The right of the firm creditor to levy on property thus situated can be sustained on two grounds. If the effect of any of the transfers is to divest the title of the firm, then, if effected by the acts of the partner, they are clearly fraudulent and void as to firm creditors, as is shown in the cases of Ransom v. Vandeventer, 41 Barb. 307, and Wilson v. Robert- son, 21 N. Y. 587. An appropriation to the individual debt of one partner of any part of the firm property, even with the assent of his copartners, is illegal and void, provided the firm is not left with suffi- cient to pay its debts. How absurd it would be to hold that all of the partners, by making separate assignments of their respective shares in the firm property to their individual creditors, could effectually divest the firm of all its property and apply it to their individual debts, 260 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Cll. 3 leaving nothing for the partnership creditors. But the simple solution of the question is to hold that the title of the firm, as between it and its creditors, to the corpus of the property, or at least to so much of it as is necessary for the debts, is not divested by these separate trans- fers to strangers. As is stated by Prof. Parsons, in his work on Partnership (pages 356 to 362 [2d Ed.] c. 10, § 1), a partnership, though neither a ten- ancy in common nor a corporation, has some of the attributes of both. The well-established rule which excludes creditors of the several part- ners from the partnership property until that has paid the debts of the partnership is derived from the acknowledgment that a partnership is a body by itself. In its relation to its creditors it is placed upon the basis of having its own creditors and possessing its own property, which it applies to the payment of its debts, and after this work is done there is a resolution of the body into its elements. Until some act is done by the firm to transfer the joint interest, no separate act of either or ^11 of the partners, or proceedings against them individually with reference to their individual interests, should be held to affect the title of the firm, so as to preclude a creditor of the firm, having a judgment and execution, from levying upon the joint property. To hold that separate transfers of their individual shares by the several partners can convey a good title to the whole property free from joint debts would be to return to the doctrine, long since exploded, that partners hold by moieties as tenants in common. In the present advanced stage of the law upon this subject, no established rule is violated by holding that the title of the firm, as between it and its creditors, cannot be divested by the acts of the partners severally, not in the business of the firm, nor by the separate creditors of mem- bers of the firm (further than such temporary interruption of the pos- session as may be necessary to enable the officers of the law to make an effectual sale of the interest of the debtor partner). This view does not recognize any lien of partnership creditors upon the firm prop- erty. The firm have power to dispose of it without regard to the cred- itors, provided the disposition be not fraudulent. But the individual members or their creditors ought not to have any such power, and all transfers made by them for individual purposes should be held in- operative upon the corpus of the property, so long as there are firm debts unpaid for which the property is required. As against firm creditors, no greater effect should be given to such transfers when made by all the partners separately than when made by a portion of them, but the property should be deemed to continue in the firm until its title has been divested by some act of the firm. My conclusion is that, as between the firm of J. C. Smith & Co. and its creditors, the property levied upon by the defendants remained the property of the firm, and subject to levy on execution against it, notwithstanding the transfers by the several partners of their respective individual interests. Sec. 7) TRANSFER OF PARTNERSHIP PROPERTY. 261 I have not adverted to the changes which took place in the firm by the retirement of John Wride and M. Huntington, and the transfer by them of their interests to J. C. Smith, intermediate the contracting of the debt to the Bank of Geneva and the levy, the effect of these changes being fully considered in the opinion of my learned associate, Al,I. E, A. 788.) MiTCHBLi,, J. This suit was instituted by Emily E. Valentine, Mar- tha M. Little, Parmelia R. Gilbert, Mary E. Wood, and Florence T. Howe, the children and heirs at law of John Jack, late of Delaware county, deceased, against Jacob H. Wysor. The questions for deci- sion arise upon the complaint, from which we summarize the follow- ing facts: John Jack, father of the plaintiffs below, died testate in the month of October, 1859. At and before that date, he was in part- nership with the defendant, Jacob H. Wysor, the two composing the firm of Wysor & Jack. The testator was also a member of the firm of Wysor, Jack & Kline, ■ which was composed of the above-named Jacob H. Wysor, John Jack, and William B. Kline. This last-named firm was engaged in the milling business, and owned a flouring mill, together with 65 acres of land adjacent ; each member being the owner of an undivided one-third of the business and property. The business of the firm of Wysor, Jack & Kline was in no way connected with that of Wysor & Jack; the last-named firm being the owner of 380 acres of land, which constituted part of the firm assets, in which each partner had an equal interest. The character of the business of Wysor & Jack does not distinctly appear, but the land owned by them is treated by both parties as partnership property. By the first, second, and third clauses of his will, the testator appointed executors to carry the will into execution, made provision for his wife by giving her a life estate in his real estate, and expressed a desire that she should be ad- mitted into the firm, and continue the business as a partner with Wysor and Kline, his former associates in the milling business. The fourth and fifth clauses of his will read as follows : [The executors are au- thorized to adjust all debts due to and from the testator, to settle with testator's partners all firm affairs, and to sell so much of testator's real and personal estate, in such manner as the executors think best, 276 NATURE AND CHARACTERISTICS OF A PARTNERSHIP. (Ch. 3 to satisfy all debts against the estate.] As to the remainder of his property, after the termination of the life estate of the widow, the testator died intestate. After the testator died, Wysor, as surviving partner of the firm of Wysor & Jack, and Wysor and KHne, as sur- viving partners of Wysor, Jack & Kline, continued in possession of the property of their respective firms until June 25, 1866, when the executors of the last will of John Jack, assuming to act under the provisions of the fourth and fifth clauses of the will, above set out, made a settlement, and entered into an agreement with the defendant, Wysor, whereby, in consideration that the latter agreed to pay the indebtedness of the firm of Wysor & Jack, and certain debts due from the testator to Wysor, and also to pay his share of all the unpaid in- debtedness of Wysor, Jack & Klme, and all other indebtedness of the testator, including the cost of administration, and, in addition, con- vey certain property to the widow, and secure to her one-third in- terest in the property of Wysor, Jack & Kline, free from any debts, the executors and widow agreed to convey to the defendant, Wysor, all the interest of the testator, excepting certain designated parcels, in the real estate owned by the firm of Wysor & Jack. This agree- ment was consummated, and conveyances were made, accordingly, by the widow and executors, in June, 1866 ; and it is charged that the defendant claims, in virtue of these conveyances, to be the sole owner of the property, and denies the title of the plaintiffs. These convey- ances stood without question until in February, 1880, when this suit was instituted. It does not appear from the complaint that there was any disparity between the value of the property conveyed and the amount of debts assumed, or that the debts have not been paid according to the agree- ment, or that there was any fraud or collusion between the surviving partner and the executors, or that the latter were in any way over- reached. It is claimed, however, that the pov^rer of sale contained in the will did not extend to the partnership real estate, except that spe- cifically mentioned therein ; that, if it did, it only authorized the execu- tors to sell the testator's interest in so much thereof as remained after full payment of the partnership debts. Moreover, it is claimed that, even if the executors had authority to sell, the transaction, as disclosed by the complaint, was not a sale, within the meaning of the language employed in the will, and that, because the sale was made by the execu- tors without having given notice of the time, place, and terms of sale, and without having included the value of the real estate in the bond given by them when they qualified, the conveyance was invalid and void. It is claimed, too, that Wysor, being the surviving partner of the firm of Wysor & Jack, was a trustee of the partnership property, under a duty to the heirs and creditors, and that he was therefore incompetent to purchase and receive a conveyance from the executors. For all these reasons, it is urged that the conveyance is illegal, and ought to be set aside, and that an accounting of the affairs of the firm of Wysor & Sec. 8) EFFECT OF DEATH OF PARTNER ON FIRM PROPERTY. 277 Jack should be had; the appellants alleging their readiness to pay whatever may be found due the defendant, Wysor. While it is undoubtedly true, as a general rule, that an action to compel a surviving partner to account can only be maintained by the personal representative of the deceased partner, yet circumstances may appear which create an exception to the general rule, and make it proper that a court of equity should entertain an action, on behalf of the heirs. Where it is shown that there is a collusion between the surviving partner and the executor, the latter refusing to compel an accounting by the former, or where there has been such dealings be- tween the two as renders it probable that the executor will not make a bona fide effort to secure an accounting, or other like circumstances appear, it has been held that the heirs may maintain the action. In the absence of special circumstances, heirs have no locus standi against the surviving partner. 2 L,indl. Partn. 494; Harrison v. Righter, 11 N. J. Eq. 389; Hyer v. Burdett, 1 Edw. Ch. (N. Y.) 335. Assuming, without deciding, that the facts, as pleaded in the present case, make it apparent that the executors have placed themselves in such an attitude towards the surviving partner, and the transaction sought to be set aside, as to bring the case within the exception, it becomes pertinent to inquire whether or not the appellants, as heirs, show any interest in the property of the late firm of Wysor & Jack upon which to predicate an action. If the executors had no power under the will to sell and convey, or the surviving partner was in- competent to purchase, or receive a conveyance, or if, for any of the other reasons urged, the transaction between the executors and the surviving partner was illegal, and the conveyance void, then the prop- erty remained in the possession, and under the qualified ownership, of the surviving partner, unaffected by what transpired. It is familiar law that a surviving partner has the right to the control and posses- sion of the property of the firm, and that he may dispose of it in order to adjust the partnership accounts, and is only liable to the rep- resentatives of the deceased partner for what remains in his hands after the partnership affairs are settled; and there is nothing more thoroughly settled in the law of partnership than that the rights of the heirs of a deceased partner are subject to the adjustment of all claims between the partners, and attach only to the surplus which re- mains when the partnership debts are all paid, and the affairs of the firm wound up. Until all the debts are paid the rights of the heirs do not attach. Grissom v. Moore, 106 Ind. 296, 6 N. E. 639, 55 Am. Rep. 743, and cases cited; Walling v. Burgess, 122 Ind. 399, 32 N. E. 419, 23 N E. 1076, 7 L R. A. 481 ; Deeter v. Sellers, 103 Ind. 458, 1 N. E. 854. The heirs of a deceased partner have no interest, as such, in the property of the firm. Their only remedy is to compel the surviving partner to account for the surplus after the settlement of all the partnership liabilities; and, ordinarily, a court of equity will not entertain jurisdiction of the affairs of a partnership until by 278 KATUKE AND CHAEACTBHISTICS OF A PARTNERSHIP. (Ch. 3 its decree a final adjustment of the business can be effected. Tiiomp- son V. Lowe, 111 Ind. 272, 12 N. E. 476, and cases cited; Scott v. Searles, 5 Smedes & M. (Miss.) 25; Rossum v. Sinker, 12 Cent. Law J. 205, and note. Now, while it appears that the deceased part- ner was indebted to the firm, and that the firm was indebted on part- nership account, and that the surviving partner agreed, in considera- tion of the conveyance which is assailed, to pay these and other debts for which the testator's estate was liable, and while it may be inferred from the facts alleged in the complaint that the surviving partner has paid all the debts of the firm except what remains due to himself on the partnership account, it nowhere appears that the entire interest of the deceased partner would not be absorbed in the adjustment of the partnership account with the surviving partner. Having averred facts from which the inference arises that the surviving partner has paid all the partnership debts, and that the estate of the deceased partner is indebted to him, it is essential to the right of the heirs to call him to account that they make it appear that he has in his hands partnership property in excess of the amount required to reimburse himself. The averments in the complaint wholly fail to do this, and the, conclusion is therefore unavoidable that the complainants fail to show such an interest in the property as entitles them to invoke the aid of a court of equity. This conclusion necessarily follows from the application of the rule that a surviving partner is entitled to the custody and management of the assets, unless it be shown that he is committing waste, or otherwise mismanaging the affairs of the firm, and is only liable to the heirs or representatives of the deceased part- ner for what remains after everything is settled up. Roys v. Vilas, 18 Wis, 169; Shanks v. Klein, 13 Cent. Law J. 369; Anderson v. Ackerman, 88 Ind. 481; Cobble v. Tomlinson, 50 Ind. 550. * * * This brings us to inquire whether the surviving partner occupied such a relation to the property, and to those concerned, as to disqualify him from purchasing the interest from the executors of the deceased partner. It is not to be doubted that a surviving partner is regarded as a trustee, primarily for the creditors of the firm, and, secondarily, for the heirs or personal representatives of the deceased partner in all that remains, or fairly ought to remain, after adjusting the part- nership account. Accordingly, it has been correctly laid down that "the surviving partners are held strictly as trustees, and their conduct in discharging their trust is carefully looked after, by courts of equity. Thus, like other trustees, they cannot sell the property of the firm, and buy it themselves ; nor, as the converse of this, can they buy from themselves property for the firm. Their trust being to wind up the concern, their powers are commensurate with the trust. * * * Their trust is to wind up the concern in the best manner for all inter- ested, and therefore without unnecessary delay." Pars. Partn. 442; Case V. Abeel, 1 Paige (N. Y.) 393; Sigourney v. Munn, 7 Conn. 11 ; Jones v. Dexter, 130 Mass. 380, 39 Am. Rep. 459. Being in a Sec. 8) EFFECT OF DEATH OF PARTNER ON FIRM PROPERTY. 279 sense a trustee, the surviving partner cannot, of course, speculate upon the property which the law commits to his custody, solely for his own advantage, in disregard of the interest of his cestuis c[ue trustent ; and, if he makes profits out of the trust property, in the course of the adjust- ment of the affairs of the partnership, he is held to account to those in- terested for their share. He cannot purchase the trust property from himself, no matter whether the attempt be made by means of a public or private sale. This is so, not only because his duty as seller, and his interest 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. Hence, an attempt by a trustee who holds property in trust, whether he be surviving partner, administrator, or whatever his designation, to sell the trust estate to himself, is everywhere held to be void. Martin v. Wyncoop, 12 Ind. 266, 74 Am. Dec. 209; Hunsucker v. Smith, 49 Ind. 118; Murphy V. Teter, 56 Ind. 545 ; Rochester v. Levering, 104 Ind. 562, 4 N. E. 203 ; Nelson v. Hayner, 66 111. 487. In the case of a sale thus made or attempted, it can well be said, it is of no avail to show that the trustee acted in good faith. Such transactions are poisonous in their tendencies, and violative of the principles of public policy. They are declared void, not for the purpose of affording a remedy against actual mischief, but to prevent the possibility of wrong. Potter v. Smith, 36 Ind. 231 ; Morgan v. Wattles, 69 Ind. 261. These principles do not apply or control in the case of a sale made by the personal represen- tative of a deceased partner to a surviving partner. No good reason can be suggested why a surviving partner should be held legally in- competent and absolutely disqualified from becoming the purchaser of the interest of his deceased partner in the partnership business from his properly authorized legal representative, while very many reasons occur why such transactions, fairly entered into, should not only be up- held, but encouraged. In addition, the adjudged cases firmly support the right to make such sales. Brown v. Slee, 103 U. S. 828, 26 L,. Ed. 618 ; Baird v. Baird, 21 N. C. 524, 31 Am. Dec. 399 ; Chambers v. Howell, 11 B.eav. 6; Roys v. Vilas, supra. In Kimball v. Lincoln, 99 111. 578, after reiterating the rule that a surviving partner could not be- come a purchaser of the firm property at his own sale, nor from a co- trustee, the court said : "But the reason that would forbid a transaction of this character has no application to a case where a surviving partner purchases property from the executor or administrator of the deceased partner, and hence the rule which would govern the one case cannot control the other." See Ludlow's Heirs v. Cooper's Devisees, 4 Ohio St. 1. It has thus been seen that the executors had plenary power to make settlement of the partnership account, and to sell and convey the real and personal estate of the testator at their discretion, and that the surviving partner was competent to negotiate a settlement of the 280 NATURE AND CHAEACTBEISTICS OF A PARTNERSHIP. (Ch. 3 affairs of the firm, and to purchase the interest of his deceased part- ner. * * * Judgment for defendant affirmed.^ 1 In Knox v. Gye, L. R. 5 H. I;. 656 (1872), in holding that an action by the executor of the deceased partner against the surviving partner was barred by the statute of limitations, Lord Westbury said: "In deciding this case, it must be recollected that the representative of a deceased partner has no specific interest in or claim upon any particular part of the partnership estate. The whole property therein accrues to the surviving partner; and he is the owner thereof, both at law and in equity. The right of the deceased partner's representative consists in having an account of the property, of its collection and application, and in receiving that portion of the clear balance that accrues to the deceased's share and interest in the partnership. Another source of error in this matter is the looseness with which the word 'trustee' is frequently used. The surviving 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 partner, the law confers on his representatives certain rights as against the surviving partner, and imposes on the latter correspondent 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 obligation, 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 surviving partner is not a trustee in that full and proper sense of the word. * * * There is nothing fiduciary between the surviving 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 mistalie to apply the word 'trust' to the legal relation which is thereby created." The English partnership act of 1890 (section 43) provides: "Subject to any agreement between the partners, the amount due from surviving or continu- ing partners to an outgoing partner or the representatives of a deceased partner in respect of the outgoing or deceased partner's share is a debt ac- cruing at the date of the dissolution or death." Sec. 1) PARTNERSHIP LIABILITY. 281 CHAPTER IV. THE NATURE, EXTENT, AND DURATION OF PARTNERSHIP LIABILITY. 'SECTION 1.— NATURE OF LIABIUTY IN CONTRACT. I. Charactijristics of Joint Obligations. MASON V. ELDRED et al. Martin, 25 111. App. 300 ; Deering v. Flanders, 49 N. H. 225 ; Clark V. Fletcher, 96 Pa. 416. Notwithstanding the terms of the agreement of partnership, the adoption ot a firm name which did not exclude the defendant, the an- nouncement, by each of the Bloods to those making inquiries and hav- ing dealings with the firm, that Harris was one of the partners, and the further fact that he, to some extent, participated in the settlement of accounts and the financial management of the business — facts which, standing alone, determine that Harris' status in the firm was that of an ostensible partner — it is insisted that other evidence, pre- sented on the part of the defendant, authorized a submission to the jury of the question whether he was a dormant partner. The evidence relied on in support of such position was (1) that it was said at the time of the formation of the partnership that it should not be made public — "should not be talked about at all"; (2) the testimony of a number of witnesses residing in that locality, some of whom had had dealings with the firm of Blood & Co., to the effect that they did not know that Harris was a partner. This evidence, it is asserted, tended to show that his relation to the firm of Blood & Co. was not generally known. It may be observed, in passing, that one of the Bloods denied that there' was any understanding, at the time of the formation of the partnership, that the fact of Harris' membership should not be talked about, and evidence was adduced on the part of the plaintiff for the purpose of showing that it was quite generally known in the community that Harris was a member of the firm. For the purposes of this review, however, the plaintiff's answering evidence cannot be considered, as we are to determine whether the de- fendant's evidence was of such a character as to authorize a jury to find that he was a dormant partner, notwithstanding the facts which, . if standing alone, we have asserted require a holding that he was in law an ostensible partner. The agreement of partnership was reduced to writing. It does not in any manner suggest that the membership of Harris was to be kept from the public It purports to embrace the entire agreement, and the defendant has not attempted to show that, Sec. 4) COMMENCEMENT AND DURATION OF LIABILITY. 353 in reducing- the agreement of tlie parties to writing, anything was omitted by mistake or otherwise which had been agreed upon. It is not asserted that this so-called understanding was made a part of the original contract. It is not -pretended that the parties made a subse- quent agreement founded upon a new consideration. It does not clear- ly appear that the matter was spoken of in the presence of all the parties, much less assented to; for Samuel N. Blood says he does not remember any such thing-, and was not a party to any such agreement, and Harris' evidence does not necessarily include him. Harris' tes- timony on that subject, and the whole of it, is comprised in an answer to a single question: "Question. Now you may tell me, at the time you entered into this partnership, was there anything said between you as to whether this should be made public? Answer. There was, sir; it was not to be talked about at all." It is, we think, clear that this evidence cannot be permitted to effect a change in the legal re- lation which the parties assumed in writing and by subsequent conduct. Neither can a general partner, who, in order to relieve himself from a liability which attaches to an ostensible partner, assumes the burden of proving that he was a dormant partner, be deemed to have so well borne it as to destroy the legal effect of acts of the character disclosed by this record, by the testimony of his neighbors and others, given years after the dissolution, to the effect that they did not know until after the happening of that event that he was ever a member of the firm, supplemented by the expression of his own opinion that not one in ten in his vicinity knew of it. The question is not whether one knew it, or nearly all, but whether by agreement, the adoption of a firm name, and' subsequent conduct he so held out the Bloods as the only members of the partnership as to prevent his name from con- tributing to the standing and credit of the firm. If he did not, then he must be visited with the legal consequences of his failure to give notice to those who had, prior to his withdrawal, transacted business with the firm, and the lack of information on the part of some or many persons will not operate to shield him from it. The plaintiff, it seems, did not know that Harris was a member of the firm, but that fact can- not avail the defendant, because, at the time of the commencement of the dealings with the plaintiff, he was "an ostertsible, and not a secret, partner, and was such to all persons dealing with the firm, and his liability to the plaintiff is not changed by the fact that the plaintiff did not know that he was a partner. He trusted the copartnership, who- ever the partners might be who composed it." Howell v. Adams, 68 N. Y. 314. This position is riot only supported by authority, but is well founded in the methods largely adopted in business circles for the purpose of ascertaining whether credit shall be given. The competi- tion in business and rapidity with which orders must be filled make it necessary for business houses to promptly ascertain whether credit shall be given. This necessity has contributed to the establishment of agencies which undertake to ascertain the financial condition of cor- Gil.Part.— 23 354 PAETNEESHIP LIABILITY. (Ch. 4 porations, firms, and individuals engaged in business. The inquiry addressed, naturally, is, what is the financial condition of Jones & Co. ? For, having no acquaintance with the individuals comprising the firm, information as to membership does not aid the inquirer. So, in this case, the plaintiff's president testified that no inquiry was made as "to who constituted the firm of Blood & Co. * * * We thought the credit of Blood & Co., when we first commenced dealing with them, was good ; we inquired, and ascertained that the credit of the firm was good." The judgment should be reversed. HaighT, J. (dissenting). * * * The trial court held that, if Harris' connection with the firm was open and notorious as an osten- • sible partner, he would be liable ; but if his position was not open and notorious as an ostensible partner, but was that of a dormant partner, he would not be liable; and this question was submitted to the jury, who found in favor of Harris, and the judgment entered upon this verdict has been affirmed by the general term. It has been repeatedly held in this court that questions involving the weight of evidence cannot be here reviewed ; that they are finally disposed of by the gen- eral term ; that this court can only inquire as to whether there is evi- dence upon which the verdict could stand. The claim is made that there is no such evidence. A "dormant partner" has been variously defined as "sleeping," "silent," "not known," "not acting" ; one whose name and transactions as a partner are professedly concealed from the world; one who shares in the profits of a business, but is not known as a member of the firm. In its strictest sense, it may imply both the quality of secrecy and inactivity; but it has been held that to be such it is not essential that the dormant partner should wholly abstain from any actual participation in the business of the firm, or be universally unknown as bearing a connection with it. He may act in an advisory manner in the general business of. the firm, and it is sufficient if he is not generally known as a partner. North v. Bloss, 30 N. Y. 374. With this understanding as to the meaning of the term "dormant," we proceed to inquire as to whether there is any evidence tending to show whether Harris was such, which required a submission of that question to the jury. Our attention is first called to the articles of copartnership. * * * It consequently appears to me that, taking the evidence in connection with the articles of copartnership, a question was presented in which the jury might find that his position, in the firm was that of an inactive partner. It still remains to be determined as to whether his connection with the firm was kept secret to such an extent as not to be generally known. * * * If a dormant partner, it is conceded he would not be liable by reason of the failure to give notice of the dissolution of the partnership, and the reason of the rule is that the plaintiff suffers nothing in consequence of such failure. If the plaintiff had no notice of Harris' connection with the firm at the time it transacted its business it could have given no credit' on his account. This rule is salutary, Sec. 4) COMMENCEMENT AND DURATION OF LIABILITY. 355 and is founded upon reason. The plaintiff lias no right to exact a penalty from Harris by reason of his failure to give notice. The word "dormant," when used in this connection, should be held to cover cases that clearly come within the reason of the rule. The plaintiff, in order to recover, must show that it has suffered in consequence of his neglect. It is frankly admitted that the president or officers of the plaintiff did not know that Harris was a member of the firm at any time until after the final credit was given and the general assign- ment of Blood & Co., was made. It therefore gave no credit to the firm on account of Harris, and it suffered nothing by his failure to give a notice of his retirement, unless his relation with the firm was so notorious and ostensible as to give it a financial standing and rep- utation with the public. There is no pretense that his relation was of this character, or that any credit was given by the plaintiff because of any such reputation. * * * I am therefore of the opinion that the judgment should be affirmed, with costs. 356 THE POWERS OF PARTNERS. (Ch. 5 CHAPTER V. THE POWERS OF PARTNERS. SECTION 1.— ORIGIN AND NATURE OF THE PARTNER'S POWERS. WINSHIP et al. v. BANK OF THE UNITED STATES. (Supreme Court of the United States, 1831. 5 Pet. 552, 8 L. Ed. 210.) Action against John Winship, Amos Binney, and John Binney, co- partners trading under the name of John Winship, on several promis- sory notes, signed by John Winship as indorser. The partnership articles and a bond given by said Winship to the Binneys (construed as a part of the partnership agreement) provided for a partnership be- tween the Binneys and Winship for the manufacture of soap and candles, and, in addition to prescribing the rights' and duties of the re- spective parties, expressly provided that the "said John Winship shall * * * wholly abstain from becoming the surety or indorser of any person." At the trial numerous exceptions were taken to instructions given to the jury. Only that part of the opinion dealing with the ex- ception to the third instruction is given here. A verdict was found for the plaintiffs, and judgment entered there- on, which was brought up for review by writ of error. Marshm,!,, C. J. * * * The third instruction asked in the Circuit Court goes to the construction of the articles of copartnership. The plaintiff in error contends that those articles gave Winship no authority to raise money on the credit of the firm, or to bind it by his signature for the purpose of borrowing money. The instruction given was that, if the particular terms of the articles were unknown to the public, they had a right to deal with the firm, in respect to the business thereof, upon the general principles and pre- sumptions of limited partnerships of a like nature, and that any special restrictions did not affect them ; that in such partnerships it was within the general authority of the partners to make and indorse notes, and to obtain advances and credits for the business and benefit of the firm, and, if such was the general usage of trade, the authority must be presumed to exist, but that it did not extend to transactions beyond the scope and object of the copartnership; that, in the present arti- cles, Winship was, in effect, constituted the active partner, and has general authority to transact its ordinary business, with persons ignor- Sec. 1) OEIGIN AND NATURE OF THE PARTNER'S POWERS. 357 ant of any private restriction, to the same extent that partners in such limited partnerships usually possess. The amount of the charge is that if Winship and the two Binneys composed a joint company for carrying on the soap and candle busi- ness, of which Winship was the acting partner, he might borrow money for the business on the credit of the company, in the manner usually practiced in such partnerships, notwithstanding any secret restriction on his powers in any agreement between the parties, provided such restriction was unknown to the lender. The counsel for the plaintiff in error has objected to this instruc- tion with great force of reasoning. He contends, very truly, that in fact scarcely any unlimited partnerships exist. They are more or less extensive. They may extend to many or to few objects, but all are in some degree limited. That the liability of a partner arises from pledging his name if his name is introduced into the firm, or from receiving profits if he is a secret partner. No man can be pledged but by himself. If he is to be bound by another, that other must derive authority from him. The power of an agent is limited by the authority given him; and, if he transcends that authority, the act cannot affect his principal. He acts no longer as an agent. The same principle applies to partners. One binds the others so far only as he is the agent of the others. If the truth of these propositions be admitted, yet their influence on the case may be questioned. Partnerships for commercial purposes, for trading with the world, for buying and selling from and to a great number of individuals, are necessarily governed by many gen- eral principles, which are known to the public, which subserve the pur- pose of justice, and which society is concerned in sustaining. One of these is that a man who shares in the profits, although his name may not be in the firm, is responsible for all its debts. Another, more ap- plicable to the subject under consideration, is that a partner, certainly the acting partner, has power to transact the whole business of the firm, whatever that may be, and consequently to bind his partners in such transactions as entirely as himself. This is a general power, es- sential to the well conducting of business, which is implied in the existence of a partnership When, then, a partnership is formed for a particular purpose, it is understood to be in itself a grant of power to the acting members of the company to transact its business in the usual way. If that business be to buy and sell, then the individual buys and sells for the company, and every person with whom he trades in the way of its business has a right to consider him as the company, whoever may compose it. It is usual to buy and sell on credit; and, if it be so, the partner who purchases on credit in the name of the firm must bind the firm. This is a general authority held out to the world, to which the world has a right to trust. The articles of copartnership are, perhaps, never published. They are rarely, if ever, seen, except 358 THE POWERS OP PARTNERS. (Ch. 5 by the partners themselves. The stipulations they may contain are to regulate the conduct and rights of the parties as between themselves. The trading world, with whom the company is in perpetual intercourse, cannot individually examine these articles, but must trust to the gen- eral powers contained in all partnerships. The acting partners are identified with the company, and have power to conduct its usual busi- ness in the usual way. This power is conferred by entering into the partnership, and is perhaps never to be found in the articles. If it is to be restrained, fair dealing requires that the 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. 3 H. Bl. 235; 17 Ves. 412 ; Gow on Part. 17. * * * The judgment is affirmed.^ BURGAN V. LYELL et al. (Supreme Court of Michigan, 1850. 2 Mich. 102, 55 Am. Dec. 53.) Pratt, J. This is an action of assumpsit, brought by the plain- tiff in Wayne county court, for work and labor claimed to have been performed for the defendants in their mining business. The cause was submitted to the court below on a written statement, in which it is admitted that the defendants impleaded in this suit in- cluded all the members of the company; that they all signed the or- iginal article of copartnership, and prosecuted the business of mining under them. These concessions, thus made, constitute conclusive evidence, as against the defendants, of a partnership in fact, in which they are all, as partners, engaged in the business of mining. 2 Greenleaf, Ev. § 484. It further appears, from the case submitted, that Andrew Harvie, a member and one of the managers of the company, employed the plain- tiff to perform the work in question. But whether his powers, as one of the managers of the company, were general, or special and limited, does not appear; nor is it material to a judicial determination of this cause, as every member, in legal contemplation, without any special powers being conferred upon him by the articles of copartnership, is not only a principal of the firm, but a general agent, for all the co- partners, in the transaction of their legitimate company business (Story on Part. 1; Har. Ch. 172), each member being vested with power which enables him to act at once as principal, and all are regarded as being present and sanctioning the engagements and contracts which they may singly enter into within the scope of their partnership mat- ters (Story on Part. 158, 159). Harvie, then, being one of the part- 1 The dissenting opinion of Baldwin, J., is omitted. Sec. 1) ORIGIN AND NATURE OF THE PARTNER'S POWERS. 359 ners, was vested with the right of contracting with the plaintiff, and any work performed by him for the company under the contract would legally bind all of the partners for the payment of it. Although Har- vie, as a single member, was inhibited from making such a contract by some express provision of the articles of copartnership, still the rights of third persons, to whom such provision was unknown, would not be thereby affected, nor would it tend in the least to bar a third person, who had by the procurement of a single member, without no- tice, rendered services for the company, in recovering therefor in a suit against all. 2 Greenleaf, Ev. § 481; Story on Part. 193. The plaintiff, by the procurement of Harvie, as appears by the case, labor- ed for the company in their mining operations nine months and two days, at $18 per month. In this labor of the plaintiff all the partners are interested, and in judgment of law all are presumed to have been cognizant of its performance, and to have derived at least some bene- fit from it; hence all are, as they should be by every principle of jus- tice, held equally responsible to the plaintiff for the payment of the services thus rendered. And as regards their joint Hability it is a matter of no legal moment whether some of the partners were dor- mant in fact, or whether they subsequently assented to, or dissented from the proceedings of those with whom they had entrusted the man- agement of their company business. They would, nevertheless, be jointly liable to the plaintiff for his woirk. After the services were rendered, the plaintiff, as appears by the case, made out an account therefor against the company, the balance of which, after deducting some small sums which had been paid and credited, amounted to $147.43, on which John Greenfield, their super- intending agent of the hands employed on the mining location, certified to John Winder, a member and also one of the managers of the com- pany, that the account was correct, and that the balance thereof was due to the plaintiff. Winder afterwards, on presentation of the ac- count and certificate to him, paid to the plaintiff $40, which was in- dorsed thereon. It is a well-settled principle of law "that the acknowledgment by one partner, during the continuance of the partnership, of a debt as due by the partnership, will amount to a promise binding the firm." The certificate of the superintending agent, and the recognition of the account by a member and one of the managers of the company, con- stitute sufficient evidence of such acknowledgment. "And so a part payment of a debt of a firm by one partner, during the continuance of the partnership, will not only extinguish pro tanto the partnership debt, but will operate as an admission of the existence of the residue of the debt, binding on all the partners." Story on Partnership, p. 160. These are rules of law about which there has never been any dis- agreement, either by legal authors or courts of last resort ; and by them all the members of this company are equally liable to the plaintiff for the payment of the balance due him on the account. * * * 360 THE POWERS OF PARTNERS. (Ch. 5 The opinion, therefore, of this court, is that the plaintiff is entitled to judgment for the balance of his account and interest from the time of its liquidation.^ SECTION 2.— TEST OF AUTHORITY— NATURE OF QUES- TION. POOLEY et al. v. WHITMORE. (Supreme Court of Tennessee, 1873. 10 Heisk. 633, 27 Am. Rep. 733.) Burton^ J. Pooley, Barnum & Co. sued Edwin Whitmore & Co. on two promissory notes, of $185 each, made by W. A. Whitmore, payable at six and nine months, respectively, to the order of "Whit- more Bros.," and indorsed in that name. Whitmore Bros., a firm com- posed of Edwin Whitmore and the said W. A. Whitmore were part- ners in publishing the Public Ledger newspaper in the city of Mem- phis, and also conducted a general job printing office in that city. The notes in suit, however, were drawn and indorsed by W. A. Whitmore in' discharge of a private debt that he owed to one Cannon. Edwin Whitmore is the surviving partner of the firm, and puts in a special plea of non est factum, and insists that the firm is not bound to pay, on the ground that it is not a partnership debt. Defendants in error reply that they are bona fide purchasers for value of the note in due course of trade, and therefore are entitled to recover, notwithstanding the wrong or fraud of W. A. Whitmore in using the partnership name in a personal transaction. The court below instructed the jury that "as a general rule one part- ner is not liable for the act of another partner not within the scope of the partnership business; that if one partner sign a promissory note 1 "E^7erybocly knows that partnership is a sort of agency, but a very pe- culiar one. You cannot grasp the notion of agency, properly speaking, un- less you 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 the idea clearly, you will see at once what sort of agency it is. It is 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 biods the firm, and acts on the part of the firm, he is properly treated as the agent of the firm. If you cannot 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 Jessel, U. R., in Pooley v. Driver 5 Ch. D. 458, 476 (1876). ^ec. 3) TEST OF AUTHORITY — NATURE OF QUESTION. 361 or other negotiable paper in the firm name, without the knowledge or consent of the other partner, and for a matter not within the scope of the partnership business, the other partner will not be liable, unless he ratify the act, or unless the paper get into the hands of some purchas- er before maturity who had no knowledge or notice of the considera- tion between the original parties, and who paid a valuable considera- tion for the paper ; that such a person would be an innocent holder for value and without notice." The above instructions are not accurate, without important quali- fications, and were certainly calculated, as we think, to mislead the jury, in view of the facts of this case. 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 whatever is done by any of its partners, when act- ing for the firm, within the limits of the authority conferred by the nature of the business it carries on. Every person is entitled to as- sume 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 liusiness is ordinarily carried on by other people. But no person is en- titled to assume that any partner has more extensive authority than that above described. It will be observed that what is necessary to carry on the partnership business in the ordinary way is made the test of an authority when no actual authority or ratification can be proved. This is conforming to the most recent and carefully considered deci- sions j but, by adopting it, the liabihty of a firm for the acts of its co- partners is not so extensive as now lawyers sometimes imagine. The question whether a given 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 value can be given to the ab- stract question, can one partner bind his firm by such an act? unless, having regard to what is usual in business, 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 give rise to doubt are those which are necessary in one business and not in another. Take, for example, negotiable instruments. It may be necessary for one member of a firm of bankers to draw, accept, or indorse a bill of exchange on behalf of the firm, and to require that each member should put his name to it would be ridiculous; but it by no means follows, nor is it in fact true, that there is any necessity for one of several solicitors to possess a similar power, for it is no 362 THE POWERS OF PARTNERS. (Ch. 5 part of the ordinary business of a solicitor to draw, accept, or indorse bills of exchange. The question, therefore, can one partner bind the firm by accepting bills in its name? admits of no general answer. The nature of the business and the practice of those who carry it on (usage or custom of the trade) must be known before any answer can be given. Lindley on Partnership, 198-200. It is further said by the same author : "It is clearly settled that any member of an ordinary trading partnership can bind the firm by drawing and indorsing prom- issory notes in its name. But, in respect to partnerships which are not trading partnerships, the question whether one partner has any im- plied authority to bind his copartners by putting the name of the firm to a negotiable instrument depends upon whether the business of the partnership is such that dealings in negotiable instruments are nec- essary for its transaction, or are usual in partnerships of the same de- scription. In the absence of evidence showing necessity or usage, the power has been denied to one of several mining adventurers, quarry- workers, farmers, and solicitors." Id. 213, 214. The foregoing principles, as we think, have been fully recognized by this court in Crosthwait v. Ross, 1 Humph. 23, 34 Am. Dec. 613, where the distinction between partners in trade and partners in occu- pation or employment is taken, and the power of the former class to- bind the firm by drawing or indorsing notes and bills is sustained, while it is denied to the latter class. It is there held that one partner in the practice of physic could not bind the firm by drawing a bill or making a note on which to raise money, because it was not within the scope of their partnership, and it was distinctly holden that the power to raise money was not one of the implied powers resulting from such an association. By recurring to the instructions given by the court below in this case, it will be seen that this important distinction be- tween strictly commercial or trading partnerships and partnerships in occupation is entirely ignored, and we think it was the duty of the court to point out the distinction, for prima facie it cannot be said that one partner in a printing office would have the implied power tO" bind the firm by drawing or indorsing a note. In this case, to be sure, there was some evidence of the usage of this firm to deal in commer- cial paper ; but there was also evidence tending to the contrary conclu- sion. The consequence of this distinction between trading and non- trading partnerships is very important in reference to the main de- fense to be relied upon in this case. If a partner in a banking firm, for instance, should indorse a bill or note for his private debt, and it should get into the hands of a bona fide holder without notice, his firm would be bound by it. The indorsing or making of such paper being the usual mode of conducting that business, the public have a right to suppose that each partner is empowered to accept or indorse for the firm, and are not bound to inquire whether in a giVen instance the act was done with the assent of his copartners. But not so with a part- nership occupation merely, whose business does not ordinarily require Sec. 2) TEST OF AUTHOEITT NATURE OF QUESTION. 363 dealing in commercial paper. One who becomes a member of such a firm does not confer implied power on his copartners to bind him by dealing in bills or notes. He is not clothed with apparent power so to bind his firm, and no person deaHng with the firm has the right to suppose tiiat the powers of one member are more extensive than is imphed by the ordinary mode of conducting such business. If two persons are associated in the practice of law, and one of them, without or against the consent of the other, should indorse a note or bill for his private purpose, no one buying such bill could succeed on the plea that he was a bona fide holder without notice, for the reason that by forming such an association the several partners do not hold each oth- er out to the world as empowered to use their names as makers or in- dorsers of negotiable paper. The rules in regard to notice to a purchaser are very accurately laid down in our own cases, digested in Heiskell, and contain a much more accurate statement of the law upon the subject than is contain- ed in this charge, and one much more applicable to the facts of the case. Our conclusion is that the charge of the court in reference to the facts of this case, if it does not amount to a positive misstatement of the law, was calculated to mislead the jury, and that the appellant is entitled to a new trial, although he failed to ask further instructions to the jury. On hearing this cause at a former term, the court decided to grant a new trial, and it is now before us on application to reconsider the conclusion at which the court then arrived. On a reconsideration of the case, we adhere to our former opinion, and reverse the judgment of the municipal court, and remand the cause for a new trial in accordance with the principles herein announced. IRWIN v. WILIvIAR et al. ^Supreme Court of the United States, 1883. 110 U. S. 499, 4 Sup. Ct. IGO, 28 L. Ed. 225.) The defendants in error were plaintiffs below, and, brought this ac- tion against the plaintiff in error, as surviving partner of the firm of Irwin & Davis, to recover a balance alleged to be due, growing out of certain sales of wheat for future delivery, claimed to have been made by the defendants in error for the firm of Irwin & Davis upon their order. The liability of the plaintiff in error was denied on two grounds: (1) That the transactions were made by Davis, the deceased partner, without the knowledge, assent, or authority of the plaintiff in error, and were not within the scope of the partnership business; and (2) that the sales were wagering contracts and void. [The bill of exceptions, stating the evidence, and the charge given to the jury, is omitted.] 364 a?HE POWERS of partners. (Ch. 5 Matthews, J. The proposition contained in this charge is that the business of dealing in grain, no matter how much it may be re- stricted by agreement between the partners, and no matter how it may have been quahfied by the actual practice of the firm, necessarily au- thorizes each partner to bind the others by unknown contratts in dis- tant markets for unlimited sales and purchases of grain for future de- livery. And so the jury must have understood it; for they were told that, "if Irwin permitted Davis to hold himself and Irwin out to the world as partners in the business of dealing in grain, he became li- able with Davis on contracts for the sale and purchase of grain for future delivery, and in that case it is not material that Irwin should have actual knowledge of particular sales or purchases in the firm name," and "if Davis, as partner, did in fact buy and sell grain, and if, in his correspondence with customers and others, including the plaintiffs, he employed printed letter heads or cards representing the firm of Irwin & Davis as grain dealers, this was a holding out of that firm as a partnership engaged in that business," and "if, therefore, you believe from the evidence that Irwin & Davis held themselves out as dealers in grain, as well as in flour, and that the plaintiffs dealt with Davis, supposing they were dealing with the firm," etc., "you should find for the plaintiffs," etc. This was equivalent to directing the jury to find a verdict for the plaintiffs in the action, for the only facts to which their attention was directed as material were not disput- ed, viz., that the firm had been in the habit of bu5dng and selling grain, and had constantly used letter heads describing themselves as dealers in grain. In this, we think, there was error. The liability of one partner for acts and contracts done and made by his copartners, without his actual knowledge or assent, is a question of agency. If the authority is de- nied by the actual agreement between the partners, with notice to the party who claims under it, there is no partnership obligation. If the contract of partnership is silent, or the party with whom the dealing has taken place has no notice of its^ limitations, the authority for each transaction may be implied from tlie nature of the business 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 necessary or fit for its successful prosecution. If 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 personally carried on with the knowledge, actual or presumed, of the partner sought to be charged. In the present case the partnership agreement cannot affect the question, because it is not claimed, on the one hand, that it conferred actual authority to make the transactions in dispute, nor, on the other hand, that the defendants in error had any notice of its limitations. And so, too, any implication that might have arisen from a previous course of business of this character, carried on by Davis with the Sec. 3) TE8T OF AUTHORITT NATURE OF QUESTION. 36.5 knowledge of Irwin, must be rejected; for it is not claimed that any foundation in proof existed for it. The only remaining ground for the implied authority by which it can be claimed that Irwin was bound by the contracts of his partner is that arising from the intrinsic nature of the business in which the partnership was actually engaged, or from the usual and ordinary course of conducting it at the locality where it was carried on. 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 engaged 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 character or determine its peculiarities; and from them all, giving to each its due weight, it is its province to ascertain and say whether the transaction in question is one which those dealing with the firm had reason to believe was au- thorized by all its members. The difficulty and duty, of drawing the inference suitable to each case from all its circumstances cannot be avoided or supplied by affixing or ascribing to the business some gen- eral name, and deducing from that, as a matter of law, the rights of the public and the duties of the partners. 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 every case, irrespective of its circum- stances; and if, by usage, it has acquired a fixed and definite mean- ing, as a word of art in trade, that is matter of fact to be established by proof found by a jury. * * * As the judgment now under review would have to be reversed for the error just pointed out, it is not necessary, for the purpose of dis- posing of the present writ of error, to proceed further to examine other assignments ; but as the case must be remanded for a new trial, in which the remaining questions may again arise, it seems appropri- ate now to dispose also of them. * * * The judgment of the circuit court is therefore reversed, with direc- tions to grant a new trial ; and it is so ordered.^ 1 "In a commercial partnership tlie extent of a partner's power to bind the firm is a question of law, while in the noncommercial lirm the power of one partner to bind his copartner is a question of fact, and the burden of proof to establish the facts as to the validity of contracts. so executed by one mem- ber of such a partnership rests with the party claiming to hold the firm liable." Per Burnam, J., in Alsop v. Trust Co., 100 Ky. 375, 38 S. W. 510 (1897). 366 THE POWERS OP PAETNEKS. (Ch. 5 SECTION 3.— PARTICULAR POWERS CONSIDERED.^ ROTHWELL v. HUMPHREYS et al. (At Nisi Prius, before Lord Kenyon, C. J., 1795. 1 Esp. 406.) Assumpsit for money lent. Plea of the general issue. The defend- ants were partners, linen drapers, in London. The plaintiff was a fustian manufacturer at Manchester. Howell, one of the defendants, had gone down to Manchester to purchase goods in the way of his trade, and had, in fact, purchased from the plaintiff to the amount of £500. Being about to return, he borrowed ilO from the plaintiff to defray his expenses to London; and, having drawn a bill on the house in London for the amount of the goods, he included in it the £10 so borrowed, and the bill was drawn for £510. Before the arrival of the goods in London, Humphreys and Howell, the defendants, became in- solvent, and the plaintilf stopped the goods in transitu, so that the bill was never presented; and the action was brought to recover the £10 lent only. These facts were proved by a witness called by the plain- tiff. The defense relied upon was that the action was brought against both partners for a loan of money, admitted by the evidence to have been made to one of them, and which, therefore, could not be sup- ported. Lord Kenyon said that, though the loan of money was to one of the partners, it was lent to him while employed on the partnership business and on its account; that as such it was competent to him to bind the partnership to the payment of a debt so contracted, and which, in fact, he had done, by including the money lent in the same bill with that for goods sold clearly on the partnership account. Verdict for the plaintiff. BOND v. GIBSON et al. (At Nisi Prills, before Iiord Ellenborough, O. J., 1808. 1 Camp. 185.) Assumpsit for goods sold and delivered. It appeared that, while the defendants were carrying on the trade of harness makers together, Jephson bought of the plaintiff a great number of bits to be made up into bridles, which he carried away himself ; but that, instead of bring- ing them to the shop of himself and his copartner, he immediately pawned them to raise money for his own use. Gazelee, for the defendant Gibson, contended that this could not be considered a partnership debt, as the goods had not been bought on 1 The power of a partner to sell, mortgage, or assign the firm property has already been considered in chapter III, section 7 (II), to which cases the stu- dent is referred. Sec. 3) PARTICULAR POWERS CONSIDERED. 367 the partnership account, and the credit appeared to liave been given to Jephson only. He allowed the case would have been different, had the goods once been mixed with the partnership stock, or if proof had been given of former dealings upon credit between the plaintiff and the defendants. Lord ElIvENBorough. Unless the seller is guilty of collusion, a sale to one partner is a sale to the partnership, with whatever view the goods may be bought, and to whatever purposes they may be applied. I will take it that Jephson here meant to cheat his copartner; still the seller is not on that account to suffer. He is innocent; and he had a right to suppose that this individual acted for the partnership. Verdict for the plaintiff. STECKER, Adm'x, v. SMITH et al. (Supreme Court of Micliigan, 1881. 46 Mich. 14, 8 N. W. 583.) Graves, J. Plaintiff's intestate brought assumpsit against the de- fendant as copartners before a justice of the peace to recover for cer- tain brick furnished them. A recovery was allowed in that court, and defendants appealed; but prior to the trial in the circuit court Mr. Stecker died, and the plaintiff was duly authorized to assume the prose- cution of the action. On the hearing of the case the circuit judge di- rected a verdict for the defendants. The plaintiff claimed that the de- fendants were partners in putting up two certain buildings, and that the bricks were procured by the firm for those buildings and actually used as materials therein. A witness for the plaintiff testified that one of the defendants con- tracted individually for the brick, and another witness on the same side testified that one of the defendants admitted that brick were re- ceived, but that they were on his own account, and not for the part- nership. The plaintiff then offered to show that the defendants were in partnership in putting up the buildings for which the brick were ob- tained and in which they were used, but the court on objection ex- cluded the evidence. This was error. The statement made by the witness that the brick were purchased by one of the defendants on his individual account was not necessarily conclusive. In the first place, it was more matter of opinion than of fact, as represented by the record. But in any court the plaintiff was entitled to lay all the facts before the jury and have their judgment on the question whether the purchase was not a part- nership transaction, or at least one which entitled the plaintiff to charge the defendants as partners. If in point of fact they were erect- ing the buildings as partners, and one of them procured the brick for the purpose of the buildings, without any express arrangement with 368 THE POWERS OF PARTNERS. (Ch. S' the plaintiff's intestate that the purchase was an individual purchase,, and the brick were used in the buildings, the firm was liable. The judgment is reversed, with costs, and a new trial , granted. I^EFFLER et al. v. RICH. (Supreme CJourt of Indiana, 1873. 44 Ind. 103.) Downey, C. J. The appellee sued the appellants for work and la- bor, for money loaned, for money had and received, for board and lodging, and for wood, provisions, and merchandise, a bill of particu- lars of which was filed with the complaint. The defendants answered in three paragraphs : (1) A general denial. (2) Payment. (3) Set- off. Reply in denial of the second and third paragraphs of the an- swer. Trial by the court, finding for the plaintiff, motion for a new trial overruled, and final judgment for the plaintiff. It is urged as a question of law that Rice, one of the defendants, could not bind Leffler, his partner, for the items in question, for the reason that they were foreign to the business of the firm. Two of the items claimed by the appellee were for money loaned, one was for money paid for middlings, and one was for services in the purchase of grain, etc. The business of the defendants was that of milling. We do not see that the items of indebtedness are such as might not prop- erly and reasonably have accrued in connection with the business. We are aware of the rule of law, stated by the counsel for appellants, that where a person takes a security from one partner in the name of the partnership, in a transaction not in the usual course of dealing, he takes the security at his peril. Money may properly be borrowed by a partner to be use'd in the business of milling by the firm. The evi- dence of the plaintiff tends to show that the middlings in question were purchased to be ground over at the mill of the defendants, which would seem to be properly connected with the business of milling; and as to the compensation for purchasing grain for the mill there can- not well be any question. The judgment is affirmed. PORTER v. CURRY. (Supreme Court of Illinois, 1869. 50 111. 319, 99 Am. Dec. 520.) Eawrence, J. Curry and Majors were partners in the manufacture of wagons, and in August, 1867, sold a wagon to Porter, the appel- lant, for $110, for which he gave his note. Soon afterwards Porter, by an arrangement with Majors, sold the latter a mare for $200, and received therefor his own note and one executed by Majors for $90. Porter swears, however, that Majors claimed to be purchasing the Sec. 3) PARTICULAK POWEE8 CONSIDERED. 369 horse for the use of the firm, and on the credit of the firm, and that he himself supposed he was taking the firm note, instead of the indi- vidual note of Majors, and, not being able to read, did not discover his error until Majors absconded and he showed his note to a neigh- bor. Majors absconded to Missouri a few days after the purchase, taking with him the mare. Ctirry pursued Majors, obtained possession of the mare, and sold her. Porter brought this suit against the firm to recover the $90, and it is resisted on the ground that the mare was not required in the business, and therefore Majors had no power to buy her on the 'firm credit. It is clear, however, even if the purchase of a horse was not within the scope and usage of such a partnership as existed between Curry and Majors, yet if the mare was in fact purchased on the firm credit, and if Curry afterwards claimed her from Majors as firm property, and obtained possession of her on that ground, he thereby ratified the act of Majors in buying her on the partnership credit. He cannot be permitted, at the same moment, to claim the benefit of the purchase and deny its obligations. This view of the law was embodied in the sixth and seventh instructions asked by the plaintiff, and they should have been .given. For the same reason the first instruction given for the defendant should have been refused. It puts the case to the jury wholly on the question of an original power by Majors to buy on the firm credit, and makes the case turn entirely upon that, leaving the question of ratification altogether' out of view. The judgment is reversed and the cause remanded. Judgment reversed. 'EiUNCAN V. LOWNDES et al. (At Nisi Prius, before Ellenborough, C. J., 1813. 3 Camp. 478.) This was an action on a guaranty alleged to have been given by the defendants for the due payment of a bill of exchange to the plaintiff for i670 15s., accepted by "Dickinson & Co., for the price of goods which the plaintiff had sold them. It appeared that the two defehdaiits carried on business together as merchants at Liverpool, and that this guaranty was signed by Lowndes in the partnership firm. Lord Eli;enboeough. As it is not usual for merchants, in the com- mon course of business, to give collateral engagements of this sort, I think you must prove that Lowndes had authority from Bateson to sign the partnership firm to the guaranty in question. It is not inci- dental' to 'the general power of a partner to bind his copartners by such an instrument. The plaintiff, however, was not prepared with any evidence to af- fect Bateson, and submitted to be nonsuited. Gil.Paet.— 24 370 THE POWERS OF PARTNERS. (Ch. 5 ROLLINS V. STEVENS et al. (Supreme Court of Maine, 1850. 31 Me. 454.) Assumpsit upon a promissory note. The defendants were defaulted by consent, subject to the opinion of the court as to their liability. The note was signed: "John O. P. Stevens, Principal. W. & H. Stevens, Sureties." William Stevens and Hiram Stevens were copartners in navigation and business of commerce, under the style of W. & H. Stevens. Their company name was affixed to the note, in the form above stated, by Hiram Stevens. WEttS, J. It appeared by the evidence that Hiram Stevens signed the name of the firm, consisting of himself and William Stevens, to the note in suit as sureties for the other maker. One partner has no authority thus to use the name of the firm, out of the scope of the co- partnership business, unless the consent or subsequent ratification of the other is obtained. The note, on its face, indicates that it was given for the debt of the principal, and not for the debt of the firm. And the burden of proving such consent or ratification rests on the plain- tiff. The plaintiff's intestate could not claim to be an innocent holder, without the knowledge of such want of authority; for the form of the contract was information to him that the firm had no interest in it, they being partners in navigation and the business of commerce. Bayley on Bills, 58 ; Manufacturers' & Mechanics' Bank v. Winship, 5 Pick. (Mass.) 11, 16 Am. Dec. 369; 3 Kent's Com. 47; Gow on Partnership, 58; Foot v. Sabin, 19 Johns. (N. Y.) 154, 10 Am. Dec. 208. According to the agreement of the parties, the default as to William Stevens is to be taken off, and the action to stand for trial. MORGAN et al. v. RICHARDSON. (Supreme Court of Missouri, 1852. 16 Mo. 409, 57 Am. Dec. 235.) ScoTT, J. This was a proceeding to set aside a judgment and execu- tion thereon, confessed in vacation, in the name of A. & J. M. Rich- ardson, to the appellants, under the twenty-second article of the new Code of Practice. Achilles and J. M. Richardson were partners in trade, and indebted to the appellants for merchandise. The indebted- ness was evidenced by a promissory note, executed in the name of the firm. The confession was authorized by J. M. Richardson alone, and after the dissolution of the partnership between him and Achilles Rich- ardson. The execution was levied on goods belonging to A. Richard- son. The court below set aside the judgment against A. Richardson, and quashed the execution. Sec. 3) PAKTICULAE POWERS CONSIDERED. 371 1. The facts in this case stand admitted by the demurrer to the peti- tion, and we are at a loss to conceive the ground upon which the pro- ceeding can be sustained against A. Richardson. The case of Green V. Beals, 2 Caines (N. Y.) 254, is an authority to show that the judg- ment confessed by J. M. Richardson was void as to A. Richardson. The cases of Motteux v. St. Aubin, 2 W. Bl. 1133, and Denton v. Xoyes, 6 Johns. (N. Y.) 296, 5 Am. Dec. 237, are not applicable to the circumstances of this case. It cannot be maintained that a part- ner, either before or after the dissolution of the copartnership, has authority to confess a judgment for his copartner. The authorities are abundant to show that one partner cannot confess a judgment which will bind his copartner. Crane v. French, 1 Wend. (N. Y.) 311; McBride v. Hagan, 1 Wend. (N. Y.) 327. We can see no dif- ference in principle between setting aside the judgment and restrain- ing an execution upon it, as either mode of action is based upon the nullity of the proceeding, which is not permitted to be used as a foundation for any future action aganist the party for whom it has been unwarrantedly entered. It does not appear that the judgment against J. M. Richardson has been vacated, nor will we interfere with it. The other judges con- curring, the judgment below will be affirmed. PINKNEY v. HAI.Iv. (Court of Kings Bench, 1696. 1 Sails. 126.) By the custom of England, where there are two joint traders, and one accepts a bill drawn on both for him and partner, it binds both, if it concerns the trade; otherwise, if it concerns the acceptor only in a distinct interest and respect. HEDLEY V. BAINBRIDGE et al. (Court of Queen's Bench, 1842. 3 Adol. & E. 316.) Assumpsit on a promissory note made by defendant, payable to plaintiff on demand. Defendant denied making the note. Plaintiff nopsuited. A rule nisi granted to show cause why verdict should not be entered for plaintiff. lyord Denman, C. J. The defendant and a Mr. Spurrier were in partnership as attorneys. A sum of money was deposited with Mr. Spurrier by the plaintiff, a client of the firm, to be laid out on a mort- gage; and he gave the plaintiff the promissory note of the firm for the amount. The question is whether, under those circumstances, Spurrier had power to bind the firm by such note. No doubt a debt was due from the firm; but it does not follow that one partner had 372 THE POWERS OF PABTNEES. (Ch. 5 authority to give a promissory note for that debt. Partners in trade have authority, as regards third persons, to bind the firm by bills of exchange, for it is in the usual course of mercantile transactions so to do; and this authority is by the custom and law of merchants, which is part of the general law of the land. But the same reason does not apply to other partnerships. There is no custom or usage that attorneys should be parties to negotiable instruments; nor is it necessary for the purposes of their business. * * * Upon the whole we think that the implied authority is confined to partners in trade, and that the nonsuit in this case was right. Rule discharged. PEASE V. COLE. (Supreme Court of Errors of Connecticut, 1S85. 53 Conn. 53, 22 Atl. 681, 55 Am. Rep. 53.) LooMis, J. The question involved in this case is whether one mem- ber of a copartnership formed for the purpose of conducting a theater in Hartford could, under the circumstances mentioned in the finding, bind the other member by executing a negotiable promissory note in the name of the firm for money borrowed. The finding, in terms, ex- cludes all express authority of the other partner, and even all knowl- edge of the matter on his part. So that any conclusion that the note is the note of the firm, rather than of the, member executing it, must necessarily rest on an authority to be implied. But here, again, the facts found so circumscribe the range of inquiry as to exclude all the ordinary sources of such authority. The circumstances from which an authority may be implied are identical with those involved in a question of ordinary agency, for each partner is regarded as the ac- credited agent of the rest. In many cases the decisive fact is found in the customary course of dealing; but not so here, for it is found that the note in question was the only note ever given in the name of the firm. The copartnership first commenced business in August, 1883, and on the 24th of the same month the note in suit was given. There was therefore very little time for a course of conduct or usage of any sort to grow up, giving any apparent authority. The finding traces the money borrowed only into the hands of McCarthy the partner who signed the firm name, and no fact appears showing, directly or presumptively, that the act was necessary for any of the purposes of the partnership. The only remaining source from which an authority may be derived by implication must be sought in the nature and scope of the partnership and in the nature of the act ; and here, if we examine the legal principles that are applicable, it will be found, not only that all such implication is wanting, but that the presumption is directly against the authority assumed. The weight of authority in the United States, and the uniform tenor of the authorities in England, will be Sec. 3) PARTICULAR POWERS CONSIDERED. 373 found to establish a controlling distinction in respect to implied au- thority between commercial or trading and nontrading partnerships. Story, Partn. (6th Ed.) § 102a; 1 Lindl. Partn. (4th Ed., by Ewell), top p. 266, and note 1, and cases there cited; 1 Colly. Partn. 648, 658; Mete. Cont. 131, and cases cited in the notes. In a commercial partnership each acting partner is its general agent, with implied authority to act for the firm in all matters within the scope of its business; and the presumption of law is that all commer- cial paper which bears the signature of the firm, executed by one of the partners, is the paper of the partnership, for the reason that the giving of such notes would be within the usual course of mercantile transactions. But when we pass to nontrading partnerships the doc- trine of general agency does not apply, and there is no presumption of authority to support the act of one partner. Hence, in order to subject the firm upon a bill or note executed by one partner in its name, a course of conduct, or usage, or other facts sufficient to war- rant the conclusion that the acting partner had been invested by his copartners with the requisite authority, must appear, or that the firm has ratified the act by receiving the benefit of it. That the partnership in question belongs to the nontrading class seems so obvious as to need no discussion. The brief in behalf of the defendant Cole cites many cases, and gives a long list of pursuits and professions which those cases establish as of the nontrading class, and, although the conduct of a theater is not there mentioned, yet the analogies manifestly include it. To show the existence of the distinction contended for, and its application, we select from a multitude of authorities the following, in addition to those previously referred to : * * * Many more authorities equally pertinent might be cited, but these will suffice to show that the distinction relied upon is strongly sup- ported both in England and in the United States. While we feel con- strained to adopt the distinction between the two classes of partner- ship so far as the presumption of authority or the want of it is con- cerned, we do not deem it necessary for the purposes of this case, or even quite reasonable, to carry its application so far as to deny absolutely, as some of the cases do, the right to recover on a note given by a nontrading firm for money borrowed for the firm and appro- priated to its use, or on a note given in payment of its debts. Some authorities ignore the test of liability referred to, but adopt another, which is equivalent in result. Chancellor Kent, in his chapter on Part- nerships in the third volume of his Commentaries (7th Ed. p. 44), omits the use of the terms "trading" and "nontrading," and makes the distinction between partnerships, in respect to the power of one partner to bind the firm, depend on the single test of the usual scope of the business, in connection with the subject-matter of the contract. This rule was adopted in Crosthwait v. Ross, 1 Humph. (Tenn.) 23, 34 Am. Dec. 613, where it was held that one partner in the practice of medicine could not bind the firm by drawing a bill or note on which 374 THE POWERS OF PARTNERS. (Ch. 5 to raise money, because it was not within the scope of the partnership business. Though under a dififerent name, the real distinction here taken is between partners in trade and partners in an occupation. Afterwards the same court, in the case of Pooley v. Whitmore, 10 Heisk. (Tenn.) 629, 27 Am. Rep. 733, in a most able and elaborate opinion, held that the liability of a partnership firm of the nontrading class to a bona fide holder of negotiable paper without notice, upon a note indorsed in its name by a member for his own benefit, would depend upon the nature of the business, the usage of trade, and the course of dealing of the particular firm. It was also held that, where the nature of the partnership is such that it may or may not be proper to deal in negotiable instruments (as in that case, which was a pub- lishing company) , it was error in the circuit judge to charge, without qualification, that the firm was liable if the holder received the note before maturity, in the due course of trade, and without notice. We think the same principle, under the circumstances of the case at bar, made it error in the court below to hold the firm liable. This court hitherto has had no occasion to give prominence to the distinction under discussion. The nature of the partnership business has, how- ever, been made a ground for a presumption and a test of hability. In Walcott V. Canfield, 3 Conn. 194, the defendants were partners in running a line of stages from Hartford to Albany and back. One of the partners by an advertisement promised to transport passengers and leave them at Albany in a specified time, upon which agreement the suit was based. The advertisement, being the act of one partner, was held not even admissible in evidence against the firm, without previously establishing the authority of that one to bind the others. Hosmer, C. J., in delivering the opinion, on page 198, said: "A co- partnership formed to transport passengers and their baggage in a stage does not authorize one of the partners to bind the firm by an agreement that he will convey a person a certain distance within a specified time. Unless he had special authority, he could only obligate himself by a contract not within the scope of the connection, and not his partners, who had never expressly or impHedly assented." The subject-matter of the contract was different from the case at bar, but it seems even more closely connected with the scope of the business than the giving of the note in suit. Many authorities lay down the unqualified proposition, as if it was appHcable to all partnerships, that if one partner raises money on a negotiable bill or note signed or indorsed in the name of the firm, and which comes into the hands of a bona fide purchaser, the partnership is bound, although it was in fact for the individual use of the acting partner. The doctrine is so stated in substance by this court in New York Firemen's Ins. Co. v. Bennett, 5 Conn. 574, 13 Am. Dec. 109. The case shows that the partnership was a commercial one. We do not say, however, that public convenience does not demand the same rule in the case of noncommercial partnerships where the holder was not Sec. 3) PARTICULAR POWERS CONSIDERED. 375 advised of the nature of the partnership and its course of dealing, or of other circumstances to put him on inquiry, and where the circum- stances would justify the belief that he was dealing with the partner- ship. We may well leave this for future consideration, for, upon the facts found, we think the plaintiff's right was impaired by reason of what he knew in connection with the circumstances. We do not for- get that the court below, in terms, found that the plaintiff purchased the note in good faith without notice of any defect. This, of course, means simply that there was no actual bad faith and no actual notice, and, as matter of fact, it is final ; but at the same time the court found special facts as to the plaintiff's knowledge and action which we must also consider, and, if we find constructive notice or constructive fraud, the law must prevail. The plaintiff, as holder, must stand affected by the nature of the partnership, of which he was fully advised. He purchased the note in the face of the presumption that it was unauthorized. To show the general nature of the facts which courts have held to be constructive notice, we cite a few cases. In Livingston v. Roosevelt, 4 Johns. (N. Y.) 378, 4 Am. Dec. 373, A. and B. formed a copartnership under the style of A. & Co., in the business of sugar refining, and so ad- vertised in the newspapers. B. afterwards, without the knowledge of A., bought a quantity of brandy, for which he gave a note indorsed by him with the name of the firm. The plaintiff, who was an indorsee of the note, took the newspapers in which the firm's business was ad- vertised. Kent, C. J., after commenting on certain facts tending to show that the plaintiff knew that the purchase of the brandy was not a partnership concern, proceeded to lay down these principles : "But if the plaintiff did not in fact know that the purchase was made by C. J. Roosevelt on his own account, and acted under the mistaken im- pression that it was a partnership purchase, still the firm were not bound by the indorsement, because the facts disclosed amounted to constructive notice or notice in law. * * * When a person deals with one of the partners in a matter not within the scope of the part- nership, the intendment of the law will be that he deals with him on his private account, notwithstanding the partner may give the partner- ship name, unless there be circumstances to destroy that presumption. 'If,' says Lord Eldon (Ex parte Bonbonus, 8 Ves. 544), 'under the circumstances the person taking the paper can be considered as being advertised that it was not intended to be a partnership proceeding, the partnership is not bound.' Public notice of the object of a copartner- ship, the declared and habitual business carried on, the store, the count- ing house, the sign, etc., are the usual and regular indicia by which the nature and extent of a partnership are to be ascertained. When the business of a partnership is thus defined and publicly declared, and the company do not depart from that particular business,^ nor ap- pear to the world in any other light than the one thus exhibited, one of the partners cannot make a valid partnership engagement on any 376 THE POWEHS OF PARTNERS. (Ch. 5 other than a partnership account. * * * When the public have the usual means of knowledge given them, and no means have been suffer- ed by the partnership to mislead them, every man is presumed to know the extent of the partnership with whose members he deals." In 1 Collyer on Partnership, p. 650, it is said that "a note given by one partner in the partnership name, within the scope of the partnership, is binding upon the firm, but the payee is bound to know whether it is within the scope of his apparent authority, and, if it is in excess thereof, the firm is not responsible." In Cocke v. Bank, 3 Ala. 175, the note in suit was signed in the partnership name of J. F. & W. Cocke, who were partners in keeping a tavern. It was executed by J. F. Cocke, and payable to Lea & Langdon for their accommodation, without the knowledge of the other partner, Woodson Cocke. No actual knowledge of the circumstances was shown on the part of the bank, which sued an indorsee; but it was assumed to have been the duty of the bank to make inquiry. Goldthwaite, J., in delivering the opinion, said (page 180) : "The law presumes that the bank, if it inquired at all into the partnership of the defendants, must have re- ceived information that they were not partners in a mercantile trade, but only in the business of tavern keeping. This- ascertained, it took the note at its peril, and must have relied on the faith of the in- dorsers." It was held that Woodson Cocke, the partner who had no knowledge of the transaction, was not liable. In the case at bar the plaintiff had full and actual knowledge of the nature of the partnership, and the law attributed to him knowl- edge, also, that one partner could not bind the other by bill or note without authority, and knowing, as he did, that the note had been written and signed by McCarthy, who was irresponsible, and that, if he purchased it, it would be upon the credit of Cole alone, and having also actual knowledge of a course of deaHng which avoided Mc- Carthy and pointed to Cole alone as the financial representative of the firm, it seems to us the plaintiff took the note at his peril. It was very strange for the plaintiff to inquire of the one who had used the firm name if it was the note of the firm, and omit entirely, when he had ample and easy opportunity, to inquire of the other partner, on whose sole credit he depended ; but the court has found that the fail- ure to inquire of Cole was not owing to a belief that the inquiry would result in finding the note invalid, and this we must accept as true. Ordinarily such a finding would save the rights of a holder in good faith of negotiable paper, but the great difficulty in the present case is that the note was purchased with constructive notice that it was not within the apparent scope of the partnership business, and prima facie was not the note of the firm; and the actual course of business, so far as it was known to the plaintiff, tended to increase rather than allay the suspicion of a want of authority. But the plaintiff contends that the judgment in his favor cannot be disturbed because the burden of proof was on the defendant. On Sec. 3) PARTICULAR POWERS CONSIDERED. 377 this general subject of the burden of proof, most of the authorities cited in another connection to show the distinction between the two classes of partnerships, and many others that we might cite, assert most positively that in the case of noncommercial partnerships the burden is on the holder of the note. But we concede that many cases can be found which in terms would seem to place the burden on the defendant. In some of these cases the partnerships were in fact commercial, as in the case of Faler v. Jordan, 44 Miss. 283. In Doty V. Bates, 11 Johns. (N. Y.) 544, Piatt, J., giving the opinion, said: "The partnership being admitted, the presumption of law is that a note made by one partner in the name of the firm was given in the regular course of partnership dealings, until the contrary is shown on the part of the defendants." The case is so brief in the report that we cannot see clearly what was involved in the admission of the partnership which furnished the basis for the presumption. It incidentally ap- pears in the description of the firm that its business was tanning, currying, and shoemaking. This, doubtless, involved the buying of hides, bark, and materials for tanning, and the sale of leather and shoes. The basis of the presumption was doubtless the apparent scope of the business. In Holmes v. Porter, 39 Me. 157, the headnote omits an important qualification. The proposition laid down by the court is that, "when the contract is made in the name of the firm, it will prima facie bind the firm, unless it is ultra the business of the firm." The headnote omits the last clause. The case of Carrier v. Cameron, ' 31 Mich. 373, 18 Am. Rep. 193, was relied upon by the plaintiff to show that the burden was on the defendant. In terms it so holds, but a brief analysis will show that it is riot inconsistent with our position in this case, and will suggest a mode of reconciling many apparently conflicting cases. There was nothing at all in the case to show the nature of the partnership, and the plaintiff's knowledge of it. Graves, C. J., in giving the opinion, stated the question as follows : "Was the plaintiff below required, in order to make out a prima facie case^ to show in the outset that Carrier ha.d expre:ss authority to make notes generally, or else to show either that the copartnership was one of the class in respect to which such authority is presumed, or that its course of business had been such as to imply authority, or that the signing by Carrier had been approved or ratified ?" The question was answer- ed in the negative, upon the authority of Littell v. Fitch, 11 Mich. 535. It is to be noticed that the question was simply as to the burden of proof after the fact of partnership was admitted, and before the nature or class of the partnership appeared. That being the position of the case, the court well remarked that "it was not needful for the plaintiff, by any positive averment or positive proof, to negative a defense ^yhich, in virtue of a general presumption, would be intended not to exist. He could not be required to go into particular proof on such a point until some proof should appear in contravention of the presumption." In this statement of the law we fully concur, but it is not apphcable 378 THE POWERS OF PARTNERS. (Ch. 5- to the facts in the case at bar, because the controlling fact in the propo- sition is wanting. Proof in contravention of the presumption, which at the outset was in favor of the plaintiff, had appeared, and had re- sulted ill the finding of the opposing facts; and it is significant that all the facts which the above question impliedly concedes to be suffi- cient to overcome the presumption referred to are distinctly found, namely, that there was no express authority to make notes generally or to give this note; that the partnership was of the nontrading class,, in respect to which no authority can be implied; that there was no- course of business that could imply authority; and that the giving of this note had never been ratified or approved by Cole. Whatever pre- sumption, therefore, there might have been in favor of the plaintiff at the outset had been fully overcome, and, if there exists any further fact from which an authority might be implied, the plaintiff must show it, or lose his case. It is manifest that in the Michigan case, as, indeed, in all the cases treating of the burden of proof in suits on notes alleged to have been executed by partnerships, an illegitimate use has been made of the term "burden of proof." Properly, it is applied only to a party af- firming some fact essential to the support of his case. Thus used, it never shifts from side to side during the trial. Loosely used, as in the cases referred to, it is confounded with the weight of evidence, a very different thing, which often shifts from one side to the other as facts and presumptions appear and are overcome; and, in this in- discriiTiinate use of the term "burden of proof," much of the apparent conflict in the cases has its origin. For, after all, the test of the burden of proof is very simple, and so is the question of the weight of evi- dence, and there is no contrariety in the principle adopted by the au- thorities. In the light of principle, we think it may be demonstrated that the position of the plaintiff is untenable. A partnership has been sued on a note executed in its name. Upon the trial the note is pro- duced by the plaintiff, and the first question is, was it the note of the firm? The plaintifif takes the affirmative of this issue, because, if no evidence is offered on either side, he must fail. He has then the burden of proof, and it remains on him, and does not pass at all to the de- fendant. But suppose now it is shown or admitted that the partnership alleged exists, and that one of the firm executed and delivered the note in its name. By virtue of the general presumption that authority was given by the partnership, the plaintiff is entitled to recover, if nothing further appears, because the weight of evidence is on his side. But suppose the defendants take their turn, and prove the identical facts here found — that there was no authority, general or special, giv- en; no ratification of the act; no course of dealing to imply authority; and, furthermore, that the partnership was of a class from which no authority can be implied. Is the plaintiff now entitled to a verdict?- Has he proved that the note was the note of the firm? Surely not. What, then, is left on which to rest his case? The preponderance Sec. 3) PARTICULAR POWERS CONSIDERED. 379 of evidence is not with him. The burden upon him to show that it was a partnership note has not now been met. But it is said that there is a reahn of inquiry not touched by either party; that is, tliat it was not shown whether or not the partnership had the benefit of the con- sideration of the note. If such a fact appeared, we concede, for the purposes of this case, that it would tend to show that the note was the note of the firm. But if any authority could not be impHed as the case stood before, can it now be implied? The case stands precisely as before. There can be no change in the weight of the evidence, be- cause nothing has been added; and the claim of the plaintiff would seem to be reduced to the absurdity that he is to have the same benefit from an unproved fact as from one proved. There was error in the judgment complained of, and, as against the defendant Cole, it is re- versed, and a new trial ordered. The other Judges concurred, except Granger, J., who dissented. VETSCH V. NEISS et al. (Supreme Court of Minnesota, 1896. 66 Minn. 459, 69 N. W. 315.) CoivLiNS, J. Action upon a promissory note alleged to have been made by defendants, as copartners. The plaintiff was an indorsee after maturity. The answering defendant admitted the existence of a partnership for a specified purpose between the defendants, and then alleged that the note was executed and delivered by his copartner, without his knowledge or consent, and that the sole and only con- sideration therefor was a private debt due from such partner to the payee named in the note. These were the issues upon which the par- ties went to trial; and, at the conclusion of the evidence, the court, upon plaintiff's motion, instructed the jury to return a verdict in his favor. Such a verdict was returned, and the appeal is from an order denying a motion for a new trial. Several assignments of error are urged by counsel, mostly relating to the rulings of the court when receiving testimony; but we pass all of them, and come directly to that which challenges the action of the court when directing a verdict in plaintiff's favor. The evidence showed conclusively that the copartnership carried on the business of ' boring wells, buying materials for pumps and windmills, putting these materials together, and placing these articles into wells bored by the firm, or already bored or dug by other persons. Strictly speaking, it was not a trading partnership, although it will be seen upon an ex- amination of the decisions that the line of demarkation between what are trading and what are nontrading partnerships is very indefinite and indistinct. In 1 Bates, Partn. § 327, the author states that trad- ing partnerships are frequently called commercial or mercantile part- nerships, but that these terms seem to be somewhat too narrow, for 380 THE POWERS OF PARTNERS. (Ch. 5 oftentimes mechanical and manufacturing partnerships are included among trading partnerships, the test being founded, not on the nature of the articles they deal in, but the character of their dealings. Mr. Bates points out the difficulty in the application of any test for the purpose of determining with absolute certainty, as a question of law, what are and what are not trading partnerships, and finally concludes that if the partnership contemplates the periodical or continuous or frequent purchasing, not as incidental to' an occupation, but for the purpose of selling again the thing purchased, either in its original or manufactured state, it is a trading partnership; otherwise, it is not. This, as a general statement, is undoubtedly correct, but the difficulty lies in its application, as will be seen by an examination of the cases cited in the volume referred to (sections 328 and 329, the last treating particularly of nontrading firms), all of the cases cited being partner- ships in occupation ; and in some of these cases the difference between trading and nontrading partnerships seems to be ignored, the single test of scope of business being adopted. 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 resting in each part- ner to borrow money, for the use of the firm, and to execute and de- liver negotiable paper therefor, or to hold, as a matter of law, that the firm business constitutes 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 partner- ships 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 authority of either partner in this respect must be de- termined as a question of fact, depending upon circumstances peculiar 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 partnership, 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. The evidence conclusively showed that the note in suit was given for money borrowed to pay a firm debt, incurred for labor performed for the firm, and in its legitimate business, and that the money so ob- tained was used by the partner who made the note in payment of this indebtedness. But, when the partnership is strictly nontrading, it can make no difference that the money was actually used for its benefit. 1 Bates, Partn. § 343, and citations. The question is one of authority to execute the note, not as to what became of the proceeds, or for whose benefit they were used. But in cases where the court cannot say, as a matter of law, that the firm is either a trading or a non- trading partnership, and that each member has or has not the power to bind the firm by the issuance of negotiable paper, the test seems to be whether the issuing of such paper is essential to carry into effect Sec. 3) PARTICULAR POWERS CONSIDERED. 381 the or,dijiary purpose for which the partnership was formed. Id. And, of course, the fact that the firm derived the benefit of the act may be taken into consideration when applying this test. The liabiHty of one partner upon promissory notes and other contracts made by a copart- ner, without his .actual knowledge or assent, is a question of agency ; and the law applicable to the case now before us is concisely stated in Irwin V. Williar, 110 U. S. 499, 4 Sup. Ct. 160, 28 L. Ed. 235, thus: [See this case, ante, p. 363.] See, also, DowHng v. Bank, 145 U. S. 512, 12 Sup. Ct. 928, 36 L. Ed. 795 The court erred in holding, as a matter of law, that, upon any view of the facts, the jury could not find for the defendant who answered. We have not alluded to the testimony introduced by plaintiff which tended to show that the defendant just referred to knew that his part- ner was to borrow the money from the payee of the note, and to make the note in suit, for such knowledge was denied. It is hardly neces- sary to say that if the jury found that he was advised that the money was to be borrowed, and the note given, and assented to it, either actually or by implication, a verdict in plaintifif's favor could be sus- tained on this fact alone. Order reversed, and new trial granted. KIRK V. BLURTON et al. (Court of Exchequer, 1841. 9 Mees. & W. 284.) Alderson^ B. The court do not entertain any doubt as to the prin- ciple of law applicable to this case. One partner can bind his co- partners only to the extent of the authority which is given to the partners generally to enable them to carry on the partnership business together. The true principle is that which has been stated by Mr. Cresswell: That in the case of a partnersnip the authority which each partner has ig an i authority, given by law to do such things as are necessary for carrying on the partnership. If bills are necessary, then they have a power to accept bills, and so to bind each other. If there is an express contract amongst themselves, different from that which the law implies, that express contract must prevail. What au- thority is there in a cage like the present? An authority to bind the firm in the name of the partnership, and in that only. In those cases where the question has been left to the jury, it has been whether sub- stantially there was any difference between the signature and the name of the partnership. For instance, if the signature were Coal & Co., and the true designation, of the partnership were Cole & Co., it would no doubt be for the jury to say whether it was in substance the same. Upon the whole, I arn of opinion that Habershon had no authority to bind Blurton, except in the partnership name, which, upon the evi- dence, appears to have been "John Blurton," only ; and therefore the verdict on the first and second issues must be entered for the defendant. 382 THE POWERS OF PARTNERS. (Ch. 5 YORKSHIRE BANKING COMPANY v. BEATSON. See ante, p. 157, for a report of the case. HARRISON V. JACKSON et al. (Court of King's Bencli, 1797. 7 Term R. 207.) This was an action of covenant upon an agreement of three parts, stated in the declaration to have been made on the 10th of July, 1794, between the defendants, describing them as merchants and partners, of the first part, W. and J. Harrison, of the second part, and the plain- tiff, of the third part, of one part of which said agreement, as being sealed with the seal of the said W. Sykes for himself and the other two defendants, the plaintiff made a profert in the court. The declara- tion then stated the agreement and covenant of the defendants, the subject-matter of which agreement and covenant appeared on the agreement to be a partnership transaction on the part of the defend- ants, and to have been entered into on a full and valuable consideration received by them as partners. The declaration then stated the breach of covenant, whereby the plaintiff had sustained damage to the amount found by the jury. To this declaration the defendants pleaded that the agreement was not the deed of the defendants. Issue being joined, the cause was tried at the sittings after Hilary Term, 1797, before Eord Kenyon, at Guil.d- hall, when the jury found a verdict for the plaintiff damages i477 13s. 9d. and costs, 40s. subject to the opinion of this court on the following case: The defendants were partners. The agreement stated in the declara- tion was produced, and the subscribing witness proved that it was exe- cuted in his presence by the defendant Sykes in the following form: "Eor Jackson, Self, and Rushforth, W. Sykes." But neither Jack- son nor Rushforth was present at the execution. The question for the opinion of the court was whether such execution of the agreement by the defendant Sykes was binding on the other defendants, Jackson and Rushforth. Lord Kenyon, C. J. * * * The law of merchants is part of the law of the land ; and in mercantile transactions, in drawing and accept- ing bills of exchange, it never was doubted but that one partner might bind the rest. But the power of binding each other by deed is now for the first time insisted on, except in the nisi prius case cited, the facts of which are not sufficiently disclosed to enable me to judge of its pro- priety. Then it was said that, if this partnership were constituted by writing under seal, that gave authority to each to bind the others by deed; but I deny that consequence just as positively as the former, for a general partnership agreement, though under seal, does not authorize Sec. 3) PAETICULAE POWEE8 CONSIDERED, 383 the partners to execute deeds for each other, unless a particular power be given for that purpose. This would be a most alarming doctrine to hold out to the mercantile world. If one partner could bind the others by such a deed as the present, it would extend to the case of mortgages, and would enable a partner to give to a favorite creditor a real lien on ,the estates of the other partners. Per Curiam. Postea to the defendants. McDONAIvD et al. v. EGGLESTON et al. (Supreme Court of Vermont, 1853. 26 Vt. 154, 60 Am. Dec. 303.) ISHAM, J. This action is in covenant. The questions in the case arise under the plea of non est factum, which puts in issue the execu- tion of the instrument on which the action is brought. The agreement was signed and sealed, in the name of Eggleston, Barker & Co., by B. Barker, one of the firm. It is insisted that he had no authority as a partner to execute the instrument in that manner ; that it is not bind- ing on those partners, who were absent at the time, and who had not previously assented to its execution; and that no testimony was in- troduced, tending to show a subsequent ratification of its execution, hy the absent members of the firm, sufficient to render it their deed. We learn from the case that the defendants were the persons com- posing the firm of Eggleston, Barker & Co., and that in the fall of 1845 they contracted with Mr. Belknap to construct the Vermont ■Central Railroad from the mouth of Dog river to Lake Champlain. The first and second sections of the road were afterwards sublet by the defendants to the plaintiffs for construction. It is obvious, there- fore, that the subject-matter of this agreement, on the part of the de- fendants, was within the scope of their partnership business, and that this agreement was made to carry into effect the object for which their relation as partners was formed, and to insure, to that extent, the performance of that contract, which they were under obligations with Mr. Belknap to execute. It is unquestionably necessary for the plain- tiffs to show those facts, which will render this instrument the deed •of all the defendants; otherwise, this joint action of covenant cannot be sustained. At common law one partner could not charge the firm, by deed, with a debt or other obligation, even in commercial dealings, without a prior authority, under seal, for that purpose. Neither could such an instru- ment be subsequently ratified, so as to make it the deed of the com- pany, except by an instrument, under seal. Harrison v. Jackson, 7 Term R. 207 ; Holt, N. P. C. 141 ; Smith's Mer. Law 68 ; 1 Amer. Lead. Cas. 446, note. The reason for this rule is founded on prin- ciples of English law, which do not exist in this state; that such a power would enable one partner to give a favorite creditor a lien on 384 , THE POWERS OF PARTNEES. (Ch. 5 , the real estate of the partners, and, consequently, a preference over the simple contract creditors of the firm. Though this reason for that rule does not exist in this state, the general principle has been and is recognized and sustained. The strictness of this rule, however, has been greatly relaxed, to suit the exigencies of partnerships and commercial associations, and by later authorities in England and in this country instruments under seal may be executed for many pur- poses by one partner which will be binding on the firm. Thus one partner may release, under seal, an obligation or debt due the firm (McBride v. Hagan, 1 Wend. [N. Y.] 326; Morse v. Bellows, 7 N. H. 550, 28 Am. Dec. 372), or execute a power of attorney, under seal, to another, for that purpose (Wells v. Evans, 20 Wend. [N. Y.] 251; s. c, 22 Wend. [N. Y.] 325). It has been held "that when a seal is not essential to the nature of the contract, and will not chahge or vary the liability, the addition of a seal will not vitiate it; and when an act is done, which one partner may do Without deed, it is not less effectual that it is done by deed." On this subject Justice Story has remarked (Story on Part. § 122), "that in cases where the contract would have been binding, if made without a deed, there does not seem to be any solid reason why the act, when done, should be vitiated by being under the signature and seal of the firm." That this agreement would have been obligatory if it had been executed as a simple con- tract, and not under seal, there can be no doubt, for it was made to advance their partnership interests, and in the benefits derived from it they have' participated. We think, however, that principle does not apply to a case of this character. The doctrine seems to be established that an instrument executed in that manner, in the absence of other partners, will be bind- ing on the firm only in transactions that transfer an interest. Thus in Milton v. Mosher, 7 Mete. (Mass.) 244, it was held that a mort- gage of personal' property need not be under seal, and that a mortgage of that character is not vitiated by one' partner affixing a seal to the instrument. The same principle is sustained in Tapley v. Butterfield, 1 Mete. (Mass.) 515, 35 Am. Dec. 374; Lucas v. Bank, 2 Stew. (Ala.) 280 ; 1 Amer. Lead. Cas. 447, and cases cited. The rule, however, is of long standing, and fully sustained by the authorities, ' that a mere partnership relation will not authorize one partner to execute an in- strument under seal, whereby a new and original obligation is created which will be binding on the cbrhpany as a specialty debt, or which can be enforced by the action of covenant. If the case, therefore, is made to rest on the circumstances which took place at the time the instrument was signed by B. Barker, we do not see how it can be sus- tained as the deed of all the defendants. We have no doubt, however, that an instrument of this character, executed in this nianner, may be rendered obligatory by a previous parol authority, or by a subse- quent parol ratification, and in either event the instrument will become the deed of the company, aftd that much slighter acts will produce that Sec. 3) PARTICULAR POWERS CONSIDERED. 385 effect, where the subject-matter of the agreement is within their part- nership deaHngs, than it will where it has no connection with the busi- ness of the firm, and from which they are to derive no benefit. In the case of Ball v. Dunsterville, 4 Term R. 313, it was held that if the partners were all present, when one of their number signed the instrument in the partnership name and affixed thereto a seal, it be- came the deed of all. The authority for the execution of that deed was not under seal, but rested in parol ; that is, parol testimony was admitted to prove the presence of the partners at the time of its ex- ecution, and that circumstance was treated, not only as an adoption of the signature, but of the seal, so as to render it the deed of the firm, upon which covenant was sustained. If parol testimony is' ad- missible to prove an authority from that source, it is equally so to prove other circumstances showing their assent to such an execution of the instrument. The actual presence of all the partners may, per- haps, afford more satisfactory evidence of their assent than other circumstances which may exist; but that aiifects simply the credibility of the testimony, not its competency. If parol testimony is admissible in one case, it is in the other. If a power of attorney under seal can be dispensed with in one instance, it may in the other, also. This view of the subject is taken by Wilde, J., in Cady v. Shepherd, 11 Pick. (Mass.) 405, 23 Am. Dec. 379, in which he remarks "that in the case of Ball v. Dunsterville importance was attached to the cir- cumstance that both partners were present when the deed was ex- ecuted; and it may be important, as being the most satisfactory proof of the assfent of the nonsubscribing partner, but in no other respect does it appear to be material." If a previous authority, resting in parol, will render the instrument binding on the firm, as a deed, it follows that a subsequent ratification of the instrument may be proved by circumstances resting in parol ; for no greater authority is requisite to ratify an instrument than is required to execute it. The power that can create can legally ratify. This conclusion has been drawn and sustained wherever the case of Ball V. Dunsterville has been recognized and adopted, particularly by the courts in this country. Chancellor Kent (3 Kent's Com. 51) has reviewed the cases on this subject both in England and this country, and he observes "that an absent partner may be bound by a deed exe- cuted on behalf of the firm by his copartner, provided there be either a previous parol authority or a subsequent parol adoption of the act, and that such ratification amounts in judgment of law to an execution of the deed by all the partners, though executed by one only." The ratification does not make a verbal or simple contract merely, for it is an adoption by the party of the signature and seal affixed to the name of the firm. In Collyer's Treatise on Partnerships, § 467, it is said "that the American cases have gone farther than those in England in relaxing the former strictness of the law, and that it is well set- tled in the United States that an absent partner may be bound by a Gil.Part.— 25 386 THE POWEES OF PARTNERS. (Ch. 5 deed executed on behalf of a firm by his copartner, provided there be either a parol authority, or a subsequent parol adoption of the act." The rule is also sustained in 1 Amer. Lead. Cas. 446, in which it is remarked "that it is settled, after thorough investigation of the cases, that a partner may bind his copartner by an agreement under seal in the name of the firm, provided the copartner assents to the con- tract previously to its execution, or afterwards ratifies and adopts it; and this assent or adoption may be by parol, and need not be express and special, but may be implied from the conduct of the other partner or the course of dealing by the firm." Swan v. Stedman, 4 Mete. (]\Iass.) 548; Bond v. Aitkin, 6 Watts & S. (Pa.) 165, 40 Am. Dec. 550 ; Pike v. Bacon, 21 Me. 280, 38 Am. Dec. 259 ; Darst V. Roth, 4 Wash. C. C. (U. S.) 471, Fed. Cas. No. 3,582; Anderson v. Tompkins, 1 Brock. (U. S.) 462, Fed Cas. No. 365, by Marshall, C. J. We are satisfied that parol evidence is admissible to prove that this instrument is the deed of the defendants, and became such by the signature of the partner in the name of the firm, by showing a previous authority for that purpose resting in parol, or that they were present at the time, or subsequently ratified the same, either expressly or impliedly, and that this implication may be drawn from the conduct of the partners or the course of dealing by the firm. The court directed a verdict for the defendants, thereby treating the evidence introduced as having no tendency to show a subsequent rati- fication of the instrument, and as being incompetent to be taken into consideration by the jury. In relation to H. V. B. Barker and Mr. Haight, both of whom, it appears from the case, were about the house, at the time the instrument was executed, and who came there for that purpose, there can be no doubt that those circumstances should go to the jury as evidence of their assent to its execution. As to them, the case in its facts seems to fall within that of Ball v. Dunsterville. In relation to Mr. Eggleston, the remaining partner, more difficulty ex- ists. It does not appear that he had ever been in that vicinity previous to July, 1846, about two months after this instrument was executed. In consequence of some difficulties in the affairs of the company, he was sent for, and came to the office of the company at Montpelier on that account. On that occasion he was led to the examination of the affairs of the company and its liabihties and resources, to the examina- tion of the money which was received from Mr. Belknap under their contract, and to its expenditure by them in the construction of the road. As these plaintiffs were then employed in constructing their part of the road, and naturally would be entitled to the amount due them on the monthly estimates, it is not unreasonable to conclude that Mr. Eggleston, in seeing to the expenditures of the company, became in- formed of the contract made with the plaintiffs for the construction of those sections of the road. The duplicate of this instrument was among the papers in the office. After that examination they went to Burlington, on the line of the road, and on the sections where the Sec. 3) PARTICULAR POWERS CONSIDERED. 387 plaintiffs were at work. A statement of the affairs of the company was sent to him by mail, soon after his return to Albany, and the legal presumption is that it was received. It is true that all this may exist, and he .lot know that this contract was executed by deed; yet they are consistent with his examination of that agreement and his knowledge of its provisions. The question now is, not whether the testimony is Sufficient, but whether those circumstances have a ten- dency to show such knowledge, and that no objections were made to its execution in that form. Of this the jury are to judge, and draw their conclusions. If those circumstances have such a tendency, they should not have been taken from the consideration of the jury. We think plaintiffs were entitled to have that testimony submitted to the jury, as having a legal tendency in proof of the issue formed in the case. The. judgment of the county court must be reversed, and the case remanded. EDWARDS v. DILLON. (Supreme Court of Illinois, 1893. 147 111. 14, 35 N. E. 135, 37 Am. St. Rep. 199.) Magruder, J. This is an action of assumpsit brought by the ap- pellant against the appellee upon the following sealed instrument: "This is to certify that Levi Dillon & Sons have this day sold to B. Edwards, of Chicago, III., the imported Norman stallion Camhrone, for the sum of eighteen hundred dollars. We warrant the said stal- lion sound and healthy, but assume no responsibility on account of disease or accident after this date. We guaranty that the said stallion, with proper handling, shall prove to be an average foal getter. In case the said stallion shall fail to get colts, we agree to exchange him for a stallion of equal merits, and to pay half of the expense incurred in making said exchange. Said stallion shall have a fair trial of two years before being condemned as a breeder. Camhrone was foaled in Prance in 1880, and imported to the United States by Dillon Bros, in 1883. Camhrone is recorded in the National Register of Norman- Horses, No. 2,081. In witness whereof, we have hereunto set our hands and seal this thirtieth day of January, 1884. Levi Dillon & Sons. [Seal.]" All of the foregoing instrument was a part of the printed form hereinafter referred to, except the signature to said in- strument, and those words thereof which are italicized. The declara- tion avers breaches of warranty and guaranty set forth in the certifi- cate. The defendant, Levi Dillon, pleaded in abatement the non- joinder of his four partners, setting up that the alleged promises, if any, were made by the firm of "Levi Dillon & Sons," composed of Levi Dillon, John Harding, James Railsback, Ellis Dillon, and James C. Duncan, and that the horse in question, at the time of the sale, was 388 THE POWEKS OP PARTNERS. (Ch. 5 the property of the firm, and not of Levi Dillon alone. The plaintiff did not amend his declaration by making new parties, but filed his replication joining an issue of fact on the plea. In the circuit court there was a trial by jury, and verdict and judgment were in favor of the defendant, which judgment has been affirmed by the appellate court. It is admitted that the signature to the contract, "Levi Dillon & Sons," was made by Levi Dillon alone. The issue tried below was whether or not the contract was the contract of Levi Dillon & Sons, or of Levi Dillon alone. The jury found it to be the contract of the firm, and the judgment of the appellate court is conclusive of the question of fact. But it is urged by appellant that the court erred in allowing the defendant to introduce, over plaintiff's objection, oral proof of the part- nership, upon the alleged ground that the contract sued on was under seal, and that Levi Dillon had no power to sign a sealed instrument for the firm, and that, therefore, under the law, the signature was that of Levi Dillon alone, and that he alone was liable. The same question presented by the objections to evidence arises upon the instructions. It is assigned as error that the court refused to instruct the jury, at plain- tiff's request, that, "in order to bind the partners by signing and sealing the contract in question in the firm name of Levi Dillon & Sons, the de- fendant must have had express authority from each one of his part- ners to execute the contract under seal." At common law, one partner could not bind the others by an in- strument under seal, unless they gave him express authority under their seals. In harmony with this rule, it has been held that where one partner executes an instrument under seal, in the firm name, without authority under seal, he alone is bound by it. Story, Partn. (^th Ed.) §§ 117, 119 ; 1 Bates, Partn. § 421.- The general weight of authority is undoubtedly in favor of the position that one partner has no implied power to bind the firm by instrument under seal. 17 Amer. & Eng. Enc. Law, p. 1001, and cases in notes. But the American courts have been inclined to depart from the harshness of the common-law rule. They hold to the doctrine that, where one partner executes an instru- ment under seal in the name of the firm, it will be regarded as binding upon the firm, "where an express or an implied authority or confirma- tion could be justly established, not under seal, whether it be verbal or in writing or circumstantial." Story, Partn. (7th Ed.) §§ 121, 123. The prior assent or subsequent ratification may not only be by parol, but may be implied from declarations, or from acts and circumstances. 1 Bates, Partn. § 416 ; Pars. Partn. marg. p. 181, and notes ; Gram V. Seton, 1 Hall (N. Y.) 293; Cady v. Shepherd, 11 Pick. (Mass.) 400, 22 Am. Dec. 379, 17 Amer. & Eng. Enc. Law, p. 1002, and cases in note 4. In Eames v. Preston, 20 111. 389, the question was whether the action of assumpsit could be maintained upon a certain note therein set forth, which was executed by a firm. Inasmuch as the note was held to be under the seal either of the firm or of the partner signing Sec. 3) PARTICULAR POWERS CONSIDERED. 389 it, it followed that suit in assumpsit would not lie upon it, under the statute as it then existed. The matei-ial inquiry in that case was, not so much whether one partner had authority to execute an instrument under seal in the name of the firm, as whether the instrument there under consideration was or was not a sealed instrument. Under sec- tion 19 of the present practice act, assumpsit may be maintained upon sealed instruments. That section has abolished the distinction between sealed and unsealed instruments, as to the form of action. Harms v. McCormick, 132 111. 104, 23 N. E. 511. In Peine v. Weber, 47 111. 41, we said : "We think it may be safely said the modern rule is that one partner may, in furtherance of the partnership business, and for its benefit, execute a deed under seal, which will be binding on the other, if he has foreknowledge, or subsequently ratifies it, and this may be proved by acts and circumstances, or by his verbal declarations and admissions." Under the American doctrine the liabiHty of the part- ners will not be confined to the one who signs the sealed instrument in the name of the' firm, if it appears that the prior assent or subse- quent ratification of the other partners can be implied from their acts and declarations, or from other proper evidence tending to show such assent or ratification. Wilcox v. Dodge, 12 111. App. 517; Walsh v. Lennon, 98 111. 27, 38 Am. Rep. 75. There is evidence in the present record tending to show that the act of' Levi Dillon in signing the firm name of "Levi Dillon & Sons" to the instrument sued upon in this case was done with the previous assent of the other partners. The firm was engaged in the business of importing and selling Norman horses. They prepared a bound book, containing blank forms of certificates of sale, with warranties, of which the foregoing certificate, except the signature and the italicized words, is a sample. These certificates, with their warranties, were intended to be those of the firm, because the name of the firm is printed in the body of them, and were intended to be under seal, because each has, to the right of the signature line, a scroll with the word "Seal" printed in it. The firm adopted and used this blank form, giving therein written guaranties. All the mem- bers knew of the form. The firm gave 50 or 75 certificates drawn according to this form, with the seal attached. When a sale was made, one copy would be kept, and a duplicate would be given to the pur- chaser. All the members of the firm had access to the bound book of forms. The other members, as well as appellee, would fill up the cer- tificates, and write the guaranties in them when horses were sold, and sign the firm name thereto, opposite the seal, though the business was generally transacted by appellee. Byt, even if it were true that the evidence does not show acts and circumstances from which the assent of the other partners may be im- plied, we do not think that the instrument here sued upon was neces- sarily one which was required to be under seal. While one partner cannot bind his copartners by deed, yet, if the instrument executed by him, though under seal, would have been valid without a seal, and 390 THE POWERS OF PARTNERS. (Ch. 5 within the scope of the partnership business, and within the powers belonging to 'each partner, then the seal may be disregarded, and the instrument may be ratified as a simple contract. Walsh v. Lennon, supra; Mechem, Ag. § 141; Story, Partn. (7th Ed.) § 122; Sterling V. Bock, 40 Minn. 11, 41 N. W. 336; Human v. Cuniffe, 32 Mo. 316; Robinson v. Crowder, 4 McCord (S. C.) 519, 17 Am. Dec. 762; Deck- ard V. Case, 5 Watts (Pa.) 22, 30 Am. Dec. 287. In other words, "the mere addition of a seal to a contract within the ordinary scope of the business, which requires none, does not vitiate the contract." 17 Amer. & Eng. Enc. Law, p. 1004, and cases in note 1. This doctrine is conceded to be applicable to the instrument upon which the present suit is brought, so far as that instrument is a mere bill of Sale. Where there is a simple transfer of property, the addition of a seal neither adds to nor detracts from the effect of the transfer; and consequently, if it is signed and sealed in the firm name by one partner, it is not thereby rendered inadmissible in evidence against the other partners. But it is said that the addition of the seal to the firm name by the sign- ing partner makes the instrument inadmissible against the other part- ners, so far as the warranties or guaranties contained in it are con- cerned. There are some authorities which hold that an unnecessary seal may be disregarded in instruments of transfer, but not in those creating a new and original obligation, in the nature of a specialty debt. 1 Bates, Partn. § 418, note 2. But where the obligations con- tained in a bill of sale of personal property, as well as the transfer of the interest in the property itself, are within the ordinary scope of the partnership business, and within the powers of each individual part- ner, the non-executing partners are not relieved from Hability upon such obligations by the mere fact that the partner signing the firm name affixes a seal. The firm of Levi Dillon & Sons were dealing in Norman stallions. Each partner had the power to sell these stallions, and there was involved in such power of sale the further power to warrant the quality of the horse, as to its fitness for the purpose for which it was sold. Partners are considered as sanctioning the con- tracts which they singly enter into in the course of trade. By the act of entering into the partnership, each partner is made the general agent of his copartners as to the firm business. Deckard v. Case, 5 Watts (Pa.) 22, 30 Am. Dec. 287. Where a general agent is employed to carry on business, the authority to sell, which is conferred upon him, may carry along with it the power to warrant, if it is usual, as it was here, to give a warranty when making a sale in such business. Brady v. Todd, 9 C. B. (N. S.) 592; Bid. War. §§ 14, 15. A general agent employed to carry on the business of horse dealing for his employer has an implied authority to warrant soundness, when making sale of a horse. 2 Benj. Sales, marg. pp. 618-620, §§ 830, 831. Where a dealer contracts to supply an article in which he deals, to be applied to a particular purpose, so that the buyer necessarily trusts to the judgment of the dealer, there is an implied warranty that it is fit for Sec. 4) POWERS OP MAJORITY. 391 the purpose to which it is to be applied. Jones v. Just, L. R. 3 Q. B. 197; Bid. War. § 167. For the reasons here stated, we are of the opinion that the circuit court committed no error in refusing the instructions refused, or in admitting the evidence objected to. The judgment of the appellate court is accordingly affirmed.^ SECTION 4.— POWERS OF MAJORITY. JOHNSTON et al. v. BUTTON. (Supreme Court of Alabama, ]85o. 27 Ala. 245.) GoLDTHWAiTE, J. The evidence in this case tended to show that the appellants and one Vanderslice carried on in copartnership a steam sawmill, which by the articles of copartnership was to continue at least five years ; that the note sued on was given with the concurrence of two of the partners, Fogg and Vanderslice, for supplies necessary for the hands engaged in carrying on the mill, which had been ordered by one of them. Upon these facts alone there can be no doubt that the firm would be bound. The furnishing of supplies to those engaged in the immediate direction of the business was essential to the conducting of it, and within the scope of the purpose for which the individuals had associated; and the authority of either of the partners to purchase such supplies, and give the note of the firm, cannot be questioned. The principal ground of objection, however, is that the evidence proved that, before the goods were furnished and the note given, the appellant Johnston gave notice to the public that he would not be re- sponsible for any future debt contracted on account of the copartner- ship, and that this notice was brought home to the party with whom the debt was contracted ; and it is insisted that its effect was to revoke the authority of the other partners, so far as he was concerned, to bind the firm from that time. It is to be observed that in the present case the contract was con- curred in by two members of the firm; and the question, therefore, is as to the right of the majority to bind the other partners, against their dissent, as to matters appertaining to the common business, and in the absence of any stipulation conferring that power in the articles of co- partnership. This question is a new one in this court, and, indeed, we 1 As to the liability of the firm by reason of negotiable paper or sealed In- struments executed in the name of one partner, but tor the use and benefit of the firm, see the cases in chapter IV, section 3, ante. 392 THE POWERS OP PAETNEKS. (Ch. 5 have found no case in which it has been expressly decided. Both in England and the United States there are cases which assert the gen- eral proposition that a partner may protect himself against the con- sequences of a future contract, by giving notice of his dissent to the party with whom it is about to be made. Gallway v. Matthew, 10 East, 264; Willis v. Dyson, 1 Stark. 164; Vice v. Fleming, 1-Y. & Jerv. 227, 230 ; Leavitt v. Peck, 3 Conn. 125, 8 Am. Dec. 157 ; Feigley V. Sponeberger, 5 Watts & S. (Pa.) 564; Monroe v. Connor, 15 Me. 178, 32 Am. Dec. 148. And where the firm consists of but two persons, and there is nothing in the articles to prevent each from having an equal voice in the direction and control of the common business, the correctness of the proposition cannot be questioned. In such case the duty of each partner would require him not to enter into any contract from which the other in good faith dissented ; and, if he did, it would be a violation of the obligations which were imposed by the nature of the partnership. It would not, in fact, be the contract of the firm; and the party with whom it was made, having notice, could not en- force it as such. So, if the firm was composed of more than two per- sons, and one of them dissented, the party with whom the contract is made acts at his peril, and cannot hold the dissenting partner liable, unless his liability results from the articles or from the nature of the partnership contract. All the cases can be sustained on this principle; and it is in strict analogy with the civil law, which holds, where the stipulations of the partnership expressly intrust the direction and con- trol of the business to one of the partners, that the dissent of the other would not avail, if the contract was made in good faith. Pothier, Traite du Com. de Soc. Nos. 71, 90. And such, also, we think, is the rule of the common law. Const v. Harris, Turn & Russ. 496 ; Story on Part. § 121. Were it otherwise it would be denying to parties the right to make their own contracts. If our views as to the governing force of express stipulations are correct, the effect of such terms or conditions as result by clear implication from the articles, or arise out of the nature of the partnership, must be the same. It is as if they had been expressly provided. Now, whenever a partnership is formed by more than two persons, we think that in the absence of any express provision to the contrary there is always an implied understanding that the acts of the ma- jority are to prevail over those of the minority as to all matters within the scope of the common business ; and such we understand to be the doctrine asserted by Eord Eldon in Const v. Harris, supra, and such was the opinion of Judge Story. Story on Part. § 123 ; 3 Kent's Com. (5th Ed.) 45. The rule as thus laid down is certainly more reasonable and just than to allow the minority to stop the operations of the con- cern against the views of the majority. We do not say that it would be a bona fide transaction, so as to bind the firm, if the majority choose wantonly to act without information to or consultation with the mi- nority. Story on Part. § 123. But when, as in the present case, the Sec. 4) POWERS OF MAJORITY. 393 one partner has given notice, and expressed his dissent in advance, there could be no reason or propriety in requiring him to be consuhed by the other two. We do not consider the cases to which we have been referred, hold- ing that one partner has the right at pleasure to dissolve a partnership, although the articles provide that it is to continue for a specified term (Marquand v. Mfg. Co., 17 Johns. [N. Y.] 525; Skinner v. Dayton, 19 Johns. [N. Y.] 513, 10 Am. Dec. 286), as having any bearing on the case under consideration. Conceding they are law — which is doubtful (Story on Partn. § 275, note 3, and cases there cited) — the decision rests solely upon the ground that the limitation on the right of dissolu- tion is incompatible with the nature of the copartnership contract ; and this principle does not militate against the position we have asserted. The dissent, in the present case, cannot be regarded as a dissolution ; for, if effectual, it would not necessarily produce that result, although it might operate to change the mode of conducting the business. In other words, it might be carried on without contracting debts. Our conclusion is that the act, being concurred in by two of the partners, was, under the circumstances, the act of the firm, and that the charge, asserting the proposition that the dissent of one partner against the other two would necessarily exonerate him, was properly refused. Judgment affirmed. MONROE v. CONNER et al. (Supreme Judicial Court of Maine, 1838. 15 Me. 178, 32 Am. Dee. 148.) Assumpsit against James Conner and William Coleman. Conner lived at Gardiner, and owned a carding and fulling mill at Unity. The business of carding wool and dressing cloth was carried on at that mill by Coleman, and the articles charged were furnished by the plaintiff and delivered at the mill. The plaintiff claimed to recover against both, on the ground that Conner and Coleman were partners in the business carried on at that mill. No articles of copartnership were produced or proved to have been made, and the plaintiff relied on other evidence tending to prove the partnership. Conner denied the partnership, and offered evidence tending to prove- that he had given notice to the plaintiff that he would not be holden on any con- tracts made by Coleman. The counsel for Conner requested the judge to instruct the jury that if Conner notified the plaintiff's agent, who delivered all the articles, before the delivery, that he, Conner, would not be holden for anything unless delivered by his order, then Conner is not holden for anything delivered to Coleman after such no- tice. The judge did not give this instruction, but did instruct them that if, from the evidence in the case, they were satisfied that the defendants were copartners, such notice would not discharge Conner 394 THE POWERS OF PARTNERS. (Ch. 5 from further liabilities, unless he should show them that by the con- ditions of the copartnership such power was reserved to Conner. At the request of Conner's counsel the jury were directed to find whether such notice was or was not given. The jury found a verdict for the plaintiff, and also found that such notice had been given. Conner filed exceptions. Shepley, J. The question presented in this bill of exceptions is one of no inconsiderable importance in a mercantile community, and there is found to be some difference of opinion respecting it. The general rule is that the contract of one partner binds all in transac- tions relating to the partnership, and this rule prevails when the part- ner making the contract applies the fruits of it to his own private use, if the contract is made in the usual course of business, and the ap- propriation be unknown to the other party to the contract. So one partner can make purchases, and can sell, pledge, and assign the part- nership goods, and in these acts bind all the partners. When a partnership becomes known, and its course of dealing has. been established, all are at liberty to regard one as acting for the benefit of all the partners in this accustomed course of dealing. If it were not so, there could be no safety in commercial contracts of this character. But the right of one partner to bind all rests upon the principle that all have agreed that he should do so. This agreement is either expressed, or implied by law from the nature of the association or from the customary course of dealing. There is nothing inconsistent with this rule in allowing one of the partners to dissolve the contract of partnership, giving due notice that such power to bind him has ceased to exist. This he may, without doubt,, do where there is no special agreement that the partnership shall con- tinue for a definite period, which is yet unexpired. Whether one part- ner may dissolve the partnership before the agreed time expires may admit of doubt. Upon principle, however, it would seem that it was only for the other party to that contract to complain; it being of no importance to others whether they violate contracts between them- selves, if full notice is given, so that others may understand to whom they are to give credit. Kent evidently inclines to the opinion that the dissolution may take place. 3 Com. 54. And such is the law in New York (Marquand v. Mfg. Co., 17 Johns. 525; Skinner v. Dayton, 19 Johns. 538, 10 Am. Dec. 286) ; while the law would appear to be different in England (16 Ves. 56; 1 Swanst. 495). It does not, how- ever, become necessary to express any opinion upon this point, as there is no proof in the present case that the partnership was formed for any definite period. In such cases it is admitted that one partner may by notice dissolve, and thus prevent those having such notice from making further contracts to bind the partnership. If such a power exist as to all persons, it would be difficult to deny that one partner could protect himself against a particular contract by actual notice that he dissented from it before it was concluded. Such a notice re- Sec. 4) POWERS OF MAJOKITX. 395 moves the foundation upon which the right rests to charge all the partners upon the contract of one. It leaves no longer the presumption that one acts for all, by the consent of all. And if, after such actual notice, a person will give credit, he cannot reasonably complain that he cannot obtain payment from him who has notified him not to give the credit. The only difficulty arises in relieving the partner giving such notice from the payment when the fruits of the contract have been enjoyed by the partnership, of which he still continues to be a member. In Willis v. Dyson, 1 Stark. 164, Lord Ellenborough held that "it would be necessary for the party sending goods after such notice to prove some act of adoption by the partner who gave the notice, or that he had derived some benefit from the goods." Gow, Part. 69, states that, "to recover in an action for goods sold after such countermand, he must show that the sale was adopted by the dis- sentient partner, or that he had derived a benefit from the delivery." Kent (volume 3, p. 45) remarks "that the seller must show a subse- quent assent of the other partners, or that the goods came to the use of the firm." Both these jurists refer to the case of Willis v. Dyson as authority. It is quite obvious that here may be a difference between the goods coming to the use of the firm and a benefit derived to the dis- senting partner from their delivery to the firm. The bargain may have proved to be a very losing one, and this may have been fore- seen by the dissenting partner, and have been the very cause of the notice ; and why should he be held to pay, perhaps from his private property, for goods the purchase and sale of which may have absorbed the whole partnership stock, when he had provided against such cal- amity by expressing his dissent from the contract before it was con- summated ? In the case of Galway v. Matthew et al., 10 East, 264, one partner, after the other partner had given notice of his dissent, signed a note with the name of the partnership, and received the money and applied most of it to the payment df the partnership debts ; and the decision was against the right to charge the dissenting partner. In the case of Leavett v. Peck, 3 Conn. 124, 8 Am. Dec. 157, the fruits of the contract went to the partnership, and yet the dissenting partner was held not to be liable. Gow states that in negotiable instruments one partner cannot bind another who dissents and gives notice of it, and alludes to no qualifi- cation, where the fruits of the contract are applied to the use of the partnership. Gow, 65. Collyer, 214, says: "It seems, also, that the mere disclaimer by one partner of the future contracts of his copartner will be binding on third persons, whatever be the effect of such an act between themselves, or whether it be or be not in conformity to the partnership agreement." He afterwards also states the case of Willis V. Dyson in the language of the court. Kent, after making the remark before stated, examines the cases, and as the result of it says : "It seems, also, to be the better opinion that it is in the power of any 396 THE POWERS OF PAETNEKS. (Ch. 5 one partner to interfere and arrest the firm from the obligation of an inchoate purchase, which is deemed injurious." This he could not do if he were bound by the goods coming to the use of the firm. It ap- pears to be more in accordance with the general principles of law, and with good faith and fair dealing, to hold that a partner is not bound by a contract after he has given notice to the party proposing to make it that he would not be bound by it.^ Exceptions sustained, and new trial granted. SECTION' 5.— POWER TO SUBJECT PARTNERSHIP TO TORT LIABILITY. HANEY MANUFACTURING COMPANY v. PERKINS. (Supreme Court of Michigan, 1889. 78 Mich. 1, 43 N. W. 1073.) Long, J. This action was brought by the plaintiff, a manufacturing corporation, to recover damages alleged to have been caused by reason of the publication, oral, written, and printed, of the statement that the defendants had brought suit in the United States court against the plaintiff for an infringement of a patent, and had secured an in- junction against it, and closed it up, which statements were claimed to be false and malicious. * * * At the close of the trial in the circuit court the court directed the jury to return a verdict in favor of the defendants, on the ground that the testimony offered by the plaintiff did not entitle it to re- cover. * * * Some contention is made that the defendants could not be made jointly liable for these slanders upon the business of the plaintiffs, even if one or two of the partners may have been found guilty. The de- fendants were partners in business, and 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 Hable therefor, just as it might be for any other tort by any other agent. Patten v. Gurney, 17 Mass. 182, 9 Am. Dec. 141 ; Lothrop v. Adams, 133 Mass. 471, 43 Am. Rep. 528; Atlantic Glass Co. v. Paulk, 83 Ala. 404, 3 South. 800. In the present case it is claimed that the very purpose of these statements was to aid the business of the defendants as a partnership, by preventing plaintiff from making sales of an ar- ticle which the defendants were themselves as a partnership selling. 1 In Wipperman v. Stacy, 80 Wis. 345, 50 N. W. a36 (1891), the dissenting partner was held liable on the ground ol' ratification. Sec. 5) POWER TO SUBJECT PARTNEESHIP TO TORT LIABILITY. 397 If this fact is proven, then, in the course of the partnership business, if any one of the partners made false representations as to the business of another, and for the purpose of aiding the business of his own firm, the partnership must be held responsible for it. For the errors pointed out, the judgment of the court below must be reversed, with costs, and a new trial ordered. ' WOLF et al. v. MILLS. (Supreme Court of Illinois, 1S70. 56 111. 360.) Thornton, J. The appellee brought an action on the case, alleg- ing that appellants sold him a lot of sheep pelts, having on them a large quantity of wool, and, with intent to defraud him, delivered other and inferior pelts in quality, and deficient in the quantity of wool. Appellee recovered a verdict. Wolf & Haber jointly owned the pelts at the time of the sale. The proof is satisfactory that the pelts sold averaged about five pounds of wool per pelt, and the pelts delivered only three pounds. As to the alleged fraud, the evidence is conflicting. One witness testified posi- tively that he saw young Haber, a son of appellant, change the pelts, and that he placed light in place of the heavy pelts, soon after the sale. This was contradicted by the son; but the weight of evidence has been determined by a jury, and we shall not disturb the finding, un- less some principle of law has been violated. Appellants urge that, as there is no evidence to prove the change, if made, was by the direction of Wolf, or by any person in his em- ployment or under his control, therefore he is not liable. The evi- dence does show that Wolf and Haber were partners in the buying and selling of the sheep pelts, and that young Haber was handling them, and throwing them from one pile to the other. The jury was justified in the inference that this was in the scope of the partnership business, as it was connected with the joint property. It is improbable that the son would be thus engaged, unless directed. The father must have given him some instructions in regard to the exchange. There was, then, no error in the following instruction given for appellee: "If the jury believe from the evidence that the defendants sold the plaintiff a certain lot of sheep pelts at an agreed price, and that plaintiff has paid such price, and that the defendants afterward, either in person, by their agents, servants, or employes, delivered to plaintiff a lot of sheep pelts in any respect different from and inferior to those actually sold, intending thereby to have the plaintiff believe they were the same he had purchased, and intending to deceive and defraud the plaintiff, then the jury are instructed to find defendants guilty, and to assess as damages whatever loss the evidence may show the plaintiff sustained through such fraud and deceit." 398 THE POWERS OF PARTNERS. (Ch. 5 A tortious act of one partner will often create a liability against the firm. So a fraud committed by one partner in the course of the partnership business binds the firm, even though the other partners have no knowledge of, or participation in, the fraud. The jury might reasonably infer all that was necessary to fix the liability of the firm. Judgment affirmed. DAVIES V. HARVEY. (Court of Queen's Bench, 1874. Law Rep. 9 Q. B. 433.) The information charged that the appellant, being one of the guard- ians of the poor for the parish of Neath, in the Neath Union, and a person concerned in the administration of the laws for the relief of the poor, did furnish or cause to be furnished for his own profit or on his own account goods and materials, to wit, an iron bedstead, or- dered to be given in parochial relief to a certain poor person in the said union of Neath, contrary to St. 4 & 5 Wm. IV, c. 76, § 77. [The appellant was a guardian of the poor, and was also a cabinet maker, and carried on business with his son under the firm name of Davies & Son. The bedstead was purchased from the son, J. F. Davies, and delivered by him. On a case stated, one of the questions for the opinion of the court was whether the furnishing of the goods in question by J. F. Davies was a furnishing by the appellant (Davies) within the meaning of the statute.] Lush, J. With regard to the latter part of the case I think the facts bring it precisely within the words of the section. The reheving officer ordered at the shop of the appellant and his partner an iron bedstead to be sent to the pauper, and it was supphed by the partner and sent to the pauper's house; he knowing at the time that it was sent in pursuance of an order for parochial relief. The word "given" cannot be construed, in section 77, in its strict literal sense. It must be construed as being supplied gratuitously, whether as an absolute gift, or not in the way of parochial rehef. I think the case comes with- in the very words of the enactment. The material question, no doubt, is whether the appellant is liable; he not personally knowing, at the time of the supplying of this bedstead, -that it was to be given in parochial relief. From the words of the enactment I am of opinion that he is a person within the very scope and object of section 77. The section does not make the supplying of goods a crime, but pro- hibits it by a penalty. The intention is to prevent persons who hold offices concerned in the administration of the laws for the relief of the poor dealing for profit with the parish. The bedstead was sup- plied with the, knowledge of the appellant's partner, under a general authority given by the appellant, for the benefit of the appellant and the partner, and it was supplied by way of parochial relief. The goods are supplied in that sense by the appellant, though actually supplied Sec. 5) POWEK TO SUBJECT PARTNERSHIP TO TORT LIABILITY. 399 by his partner. He shares the profit, and it is suppHed on his account. I think it is strictly within the words, as well as the obvious intention, of the enactment. Were it otherwise, it would make a very wide way for evasions of this very salutary enactment. Judgment for the respondent. HARMAN V. JOHNSON. (Court of Queen's Bench, 1853. 2 El. & Bl. 61.) The first count of the declaration stated that defendant, on, etc., by his promissory note now overdue, promised to pay to plaintiff £1,670, and interest, at 5 per cent, per annum, two years after date, but did not pay the same. The second count stated that "plaintiff retained and employed defendant, and his partner William Henry Smith, then carrying on their business of attorneys and solicitors in copartnership, to invest certain money on mortgage in a proper manner, and they accepted such retainer and employment, and accordingly took that money from the plaintiff to invest a mortgage in a proper manner; but, though a reasonable time for so investing it had elapsed before this suit, it" has never been invested, whereby the plaintiff has lost the whole of it." There were also counts for money lent, moneys received, and on an account stated. Pleas: (1) To the first count: That defendant did not make the said note, etc. Issue thereon. (3) To the second count: "That the plaintiff did not retain or employ the defendant and the said W. H. Smith, nor did the defendant and the said W. H. Smith accept such retainer or employment, in manner, etc. Issue thereon. (3) To the second count: "That the defendant and the said W. H. Smith did not take said money in the said second count mentioned from the plain- tiff as in that count alleged." Issue thereon. (4) To the residue of the declaration : "Nunquam indebitatus." Issue thereon. On the trial it appeared that defendant and William Henry Smith agreed that they would "become, continue, and be copartners in the * * * profession of an attorney and solicitor, and all matters and things usually connected with, or forming part of, the carrying on of the same, or in any way or manner incidental thereto," for twelve years. * * * Subsequently to the execution of this agreement Smith had, without the knowledge of defendant, received from plain- tiff, professedly on behalf of the firm, a sum of £1,670. According to some of the evidence, plaintiff had given a general 'direction that this sum should be invested by the firm for her by way of mortgage; but according to other evidence she deposited it in order that it should be advanced on a particular mortgage, if that security turned out to be good. Smith, however, retained the money so deposited for his own private purposes, and prevailed on plaintiff to take, as security for it, 400 THE POWERS OF PARTNERS. (Ch. 5 the promissory note mentioned in the declaration, which, without the knowledge of defendant, he signed in the name of the firm, "Smith & Johnson." Smith afterwards absconded, and plaintiff brought the present action against defendant alone. The Chief Justice, after intimating his opinion that there was not evidence to fix the defendant with any liability on the promissory note, told the jury, with respect to the rest of the declaration, that, if the plaintiff employed Smith as the partner of Johnson, meaning to em- ploy the firm of Smith & Johnson to invest the money for her on mort- gage, or gave Smith the money for that purpose, and Smith repre- sented to her that the firm of Smith & Johnson could invest the money for her on mortgage, the defendant was liable, inasmuch as the receipt of the money by Smith for the purpose of its being laid out on mort- gage would be an act within the scope of authority which Smith had as partner with the defendant; for that attorneys now, as part of their business, acted as scriveners — that is, in laying out money on security — the separate profession of scrivener having fallen into dis- use. Verdict for plaintiff for £1,670. McCauley, in last Easter Term, obtained a rule nisi for a new trial on the ground of misdirection. Lord Campbeli,, C. J. I think there should be a new trial. The action is against Johnson, who is charged in the character of a part- ner with Smith in the calling of an attorney. There is no evidence going beyond the bare fact of their having jointly carried on the busi- ness of attorneys. I think that an attorney, qua attorney, is not a scrivener; that his business is to act in a court of law, to prepare con- veyances, fo examine titles, and so on, but not to act as a scrivener. A scrivener has to hold the money put into his hands until he has an opportunity of laying it out; but this employment of scrivener is not a consequence of his character of attorney. The question, then, here is whether Smith was acting within the scope of his partnership au- thority. If he received the money generally for the purpose of laying it out, he was not acting within his calling of attorney. Attorneys frequently do act as scriveners in the full sense of the term ; but there is no evidence that Smith and Johnson did so, or that the money re- ceived was received for purposes within the object of the partnership. There was strong evidence that Smith received the money to be laid out upon mortgage, and that he induced Mrs. ,Harman to intrust him with the money by representing that he had a security ready ; but I cannot say that this was conclusive. And, when I advert to the terms in which I directed the jury, I think that they were too general; for, if the meaning of Mrs. "Harman was that a security should be found, and ' that the money should be left in order to be invested in some mort- gage that might be found to be an eligible security, then the business was not to be performed in the character of an attorney. I think, therefore, that the question was left too widely to the jury. It should have been left more pointedly to them whether the money was placed Sec. 5) POWER TO SUBJECT PARTNEKSHIP TO TORT LIABILITY. 401 in Smith's hands for the purpose of being advanced on a particular mortgage, or whether it was deposited with him until he could find a proper mortgage. Had it been so left, the jury should have been told to find for the plaintiff on the first supposition and for the defendant on the second. Rule absolute. GILRUTH V. DECELIv. (Supreme Court of Mississippi, 1894. 72 Miss. 232, 16 South. 250.) Bill in chancery, reciting that complainant was in 1892 the wife of T. E. Decell, deceased, who was then a member of the firm of Gil- ruth & Decell ; that at that time she was the owner of a house and lot in Jackson, Miss. ; that she sold same, and that $1,600 of the purchase money was placed to her credit in the Capital State Bank of Jackson ; that the amount was withdrawn from said bank on a check drawn January 11, 1893, in favor of the Bank of Yazoo City; that to said check complainant's name and that of T. F. Decell were signed ; that complainant's signature was forged by T. F. Decell; that she was ignorant of the forgery for some months thereafter, and that she left her husband in March, 1893, and that he was killed soon afterwards, and that T. J. Moore was the administrator of his estate; that J. N. Gilruth, as surviving partner, after qualifying as required by law, took charge of the partnership property, and is now administering the same ; that the $1,600 obtained by the forgery was placed to the credit of T. F. Decell in the Bank of Yazoo City, and was checked out by him for his individual use ; that on the 16th of February, 1892, he checked on said deposit in favor of Gilruth & Decell for $500, which sum was placed to the credit of T. F. Decell on the books of Gilruth & Decell as capital paid in by him to complete the amount to be contributed by him in the firm of Gilruth & Decell; that said sum of $500 is still in the firm of Gilruth & Decell, and has gone into the hands of the sur- viving partner ; that the removal and conversion of said sum of money by said T. F. Decell was a fraud upon complainant, and that said De- cell held same as trustee ex maleficio; that complainant is entitled to have said sum of $500, mingled with the firm assets of Gilruth & De- cell, repaid to her out of the firm assets in preference' to all other claims against said assets, with interest from the date it was with- drawn. The bill makes Gilruth, as surviving partner, the only de- fendant, and prays that the court will decree that the said sum of $500 was her money, and was held in trust for her, and went into the firm of Gilruth & Decell impressed with said trust, and that it be refunded her out of the firm assets. Whitfield, J It is not alleged in the bill that Gilruth actually par- ticipated in the fraud by which Decell converted the trust fund to his own use, and afterwards paid it into the firm in payment of the bal- Gil.Pakt. — 26 402 THE POWERS OF PARTNEES. (Ch. 5 ance of his subscription to its capital stock; nor that he had any ac- tual knowledge of anything done by Decell in connection therewith. The acts and doings of Decell throughout were wholly outside the scope of the partnership business. Under the circumstances, while there may be some cases to the contrary as Palmer v. Scott, 68 Ala. 382, and Welker v. Wallace, 31 Ga. 363, it is well settled in Mississip- pi (Pickels V. McPherson, 59 Miss. 316), and generally, that a bill cannot be maintained against the firm to recover from it the trust fund thus put by the guilty partner, without participation or knowl- edge on the part of the others, into the assets of the firm. Knowledge of the guilty partner in such case is not the knowledge of the firm, lyiability of the other partners in such case, if it exist, must grow out of participation, as joint wrongdoers, in the fraud, and not out of the fact that they are partners, or their liability as partners. Bates, Partn. § 481 ; Evans v. Bidleman, 3 Cal. 435 ; 1 Lindl. Partn. pp. *142, =^=143. Jessel, M. R., thus emphatically puts it in Williamson v. Barbour, 9 Ch. Div. 535, 536 : "When we come to a question of fraud, different considerations arise. It is not true that the knowledge of a fraud by a partner is necessarily the knowledge of the firm. A very obvious in- stance * * * niay be shown, and is best shown, by an example. Suppose there is a firm with half a dozen partners who have a clerk, and the clerk has been in the habit of receiving presents from one of the sellers to the firm in order to pass goods of short weight, and fur- ther suppose that the clerk, not having been found out, is taken into partnership as a junior partner and continues the practice. Is it to be imagined, under these circumstances, that in a court of equity the other partners could not sue the vendor of the goods for the fraud, and not only sue him but their partners also? * * * j emphatic- ally deny that any such doctrine could by any possibility be laid down by any judge, and I need not say it has never been laid down. Of course fraud must be an exception. I put the case of a clerk knowing it before he became a partner, and not interfering with it afterwards. But it is immaterial that the knowledge was acquired during the part- nership. * * * It appears to me that that kind of notice will not do when it is applied to cases of fraud." And says Lindley : "If one partner is a trustee, and he improperly employs the trust funds in the partnership business, his knowledge that he is so doing is not imputable to the firm ; and therefore, to affect the other partners with a breach of trust, further evidence must be adduced." It is not within the scope of the bill to subject Decell's interest in the partnership as- sets. Besides, his administrator is not a party. Robertshaw v. Han- way, 53 Miss. 713, 717. The decree is reversed, demurrer sustained, and bill dismissed. Sec. 6) POWEKS OF PAKTNEKS AFTER DISSOLUTION. 403 SECTION 6.— POWERS OF PARTNERS AFTER DISSOLUTION.^ MAJOR V. HAWKES. (Supreme Court of Illinois, 1850. 12 III. 298.) The defendants in error sued Major, in the McEean circuit court, to recover an indebtedness due to them as copartners. Major proved the payment of his indebtedness to Hawkes, one of the copartners, after the publication of a notice of dissolution hj mutual consent. A verdict was found on the circuit against Major, and he brings the cause to this court by writ of error. Trumbull, J. Upon the voluntary dissolution of partnership, each of the partners, in the absence of any agreement to the contrary, re- tains the right to collect debts due the firm, and give discharges there- for. Story on Partnership, § 328. Hawkes had, therefore, just as much right to receive the money from Major, and give the receipt of the firm, as either of the other partners, and the receipt, if honestly obtained, was a defense to the further prosecution of the action. The fact that Major first made an attempt to settle the account by giving Hawkes credit upon a claim which he had against him individually, did not prevent him from afterwards paying the money to Hawkes, when he ascertained that the other partners would not assent to the first arrangement. Major was not responsible for the application which Hawkes made of the money, so that he paid it in good faith ; nor does the insolvency of Hawkes at the time alter the case. The record shows that he was known by the other partners to have beeen insolvent when the partnership was formed. They were willing to trust him notwithstanding, and by be- coming his partners gave to him the same right to receive the debts that should become due the firm which either of them should possess. It is true that without the assent of his copartners he had no right to apply partnership effects in discharge of his individual indebted- ness, and a creditor of his, knowingly receiving such effects in dis- charge, would be responsible for the same to the firm. To deprive Major of the benefit of the payment made to Hawkes it was incumbent upon the plaintiffs below to show that it was not made in good faith. It has been suggested by counsel that the money was returned to Major after being paid over; but there is no evi- dence in the case to justify such a presumption. The witness to the receipt testifies that the money was paid over to Hawkes in his pres- 1 As to the effect of death of one partner on the firm properly, and the rights and liabilities of the surviving partner, see, further, chapter III, section S, and chapter IV, section 1 (III). 404 THE POWERS OF PAETNEES. (Ch. 5 ence, and this is all the evidence in the record about the money. For aught that appears, Hawkes may have accounted with his copartners for the money received from Major; but whether he has or not is quite immaterial to Major, provided he honestly paid the money and has in no way aided or abetted in the misapplication of it. There would be no safety in paying a partnership debt to a single member of a firm, if the debtor was bound to see that the money was properly applied by the partner receiving it. Judgment reversed. WHITING et al. v." FARRAND et al. (Supreme Court of Connecticut, 1814. 1 Conn. 60.) Swift, J. This was an action to recover payment for books con- tracted to be delivered to the defendants. * * * It is further insisted on by the defendants that their copartnership was dissolved prior to the delivery of the books; that the plaintiffs could not afterwards deliver them, and bring this action to recover payment for them ; but that their remedy is by an action for a breach of contract arising from the dissolution of the copartnership. Copartners may dissolve their connection at pleasure, and this is no violation of any subsisting contracts with others; for they may, and they are bound to, perform them in the same manner as if no dis- solution had taken place. No action can ever be sustained against them, stating a mere dissolution of the partnership as a breach of con- tract; for they can perform it notwithstanding such dissolution. In the present case, the contract being executory, the plaintiffs could have no right of action till they had performed on their part. If, then, a dissolution of the copartnership by the defendants could prevent the plaintiffs from delivering the books, and excuse the defendants from receiving or becoming chargeable for them, it would be in the power of a partnership, by its own act of dissolution, to destroy a previous and subsisting contract. This would be directly subverse of the prin- ciples on which all copartnerships are founded. New trial not to be granted. GOODSPEED V. WIARD PLOW COMPANY. (Supreme Court of Michigan, 1881. 45 Mich. 322, 7 N. W. 902.) Campbbi,i., J. Goodspeed and Fales, prior to February 13, 1879, were partners in business, and on the 21st day of January, preceding the dissolution, Fales, in the name of the firm, but in the absence of Goodspeed, and without his knowledge or authority, gave to an agent of the Wiard Plow Company an order in writing for a large number Sec. 6) POWERS OF PARTNERS AFTER DISSOLUTION. 405 of articles connected with their business, to be shipped on the 1st day of April thereafter. On the 13th of February the firm was dis- solved, and on the same day the agent was informed of the dissolu- tion. The price of the articles ordered was shown to be above $500. On the 15th of February a portion of the articles were shipped, and the remainder, some earlier and some later than April. All came into the hands of Fales. There was no proof of any other acceptance of the order than the shipment, unless the agent at the time of receiving the order made some arrangement on the subject, which is not shown. On a suit against Goodspeed and Fales the court held that the ship- ment of goods and their reception by Fales bound Goodspeed, and that the fact that the time of shipment was different from that named in the order made no difference. We think this was erroneous, and that there was no ground of re- covery. A retiring partner is bound by all previous contracts made within the line of the business, but after dissolution he is not bound by any new contract made by his copartner. The order given by Fales made no contract until accepted, and un- til acceptance could at any time be withdrawn. Inasmuch as the amount of goods exceeded $50, there could be no binding contract as against the Wiard Plow Company without either a writing or some act done on the faith of the order. Here there was no proof of accept- ance of the order in writing, if at all. The shipment of the goods was not made in accordance with the terms of the order, and was not made until the order had been rescinded by notice of the dissolution. Fales could not waive any of the conditions, so as to bind Goodspeed, after the dissolution. The sale made was not the sale agreed upon, if there was any agreement. The case is therefore doubly defective, in not showing any valid agreement at all, and in showing a departure from the agreement proposed. Either objection is fatal to a recovery. Judgment was reversed, and a new. trial ordered. PALMER v. DODGE. (Supreme Court of Ohio, 1854. 4 Ohio St. 21, 62 Am. Dec. 271.) RannEY, J. Short and Palmer were partners in business from 1836 to June 38, 1841. During the existence of the partnership the firm borrowed money of one Sally Dana, for which a promissory note was given, and several times renewed, and which remained unpaid at the time the partnership was dissolved. After the dissolution, and on April 15, 1842, Short, in the name of E. Short & Co., with the defend- ant in error as surety,, executed a new note to Mrs. Dana for the prin- cipal and interest then due, payable in one year. It was proved that the agent of Mrs. Dana, who took this note, knew the partnership was dissolved, and it was further shown that Dodge took the newspaper 406 THE POWERS OP PARTNERS. (Ch. 5 in which the notice of dissolution was published. This note was once renewed by the same parties, and subsequently, and after the death of Short, was paid off by the surety, Dodge, who brought this action to recover the amount of Palmer as so much money paid for the use of the firm. On these facts the counsel for Palmer requested the court to charge the jury that E. Short, after the dissolution, had no authority to give said note to a person having knowledge of the dissolution, so as to bind the late firm of E. Short & Co.; and the said Dodge, having gone security on the note given after the dissolution, and with notice of it, had no right to recover from Palmer the money paid by him in discharge of the note. The court refused to give these instructions, but charged the jury that Short, after the dissolution, could not give a note in the name of the firm so as to bind^his copartner thereby; but if Short, in the per- formance of his agency in settling up the business of the firm, thought it necessary for the interests of the firm to renew the note, and in good faith obtained Dodge as security for that purpose, he (Dodge) might recover from Palmer the amount originally loaned to the firm, with 6 per cent, interest thereon. As no claim is made that Palmer came under any direct engagement to Dodge, or that he ever authorized Short to execute this particular note, or afterward recognized or ratified his act, it is evident the case must depend upon the authority retained by Short, as a member of the dissolved partnership, or upon that specially derived from the agree- ment of dissolution. We have carefully considered the case in both these aspects, and can see no sufficient reason why the instruction asked for should have been refused. Indeed, it seems quite impossible to justify the refusal, or support the charge as given, consistently with well-established and salutary principles applicable to the law of partnerships. > During the continuance of the partnership each member has the undoubted right to bind his associates to the performance of every contract he may make in the name of the firm, within the limits allow- ed by the articles of association ; and they are equally bound to third persons, having no notice of any special limitation of his power, upon all contracts within the scope and objects of the partnership, although he may have overstepped such limitations. In such cases the contract- ing partner acts for himself, and as the authorized agent of his co- partners. His authority, it is true, need not necessarily arise from the express terms of the partnership agreement; but the law implies it from the community of interest and joint object for which the asso- ciation is formed, and, as it is ordinarily necessary to the attainment of its ends, reasonably infers the power of each to act for all, as with- in the understanding and contemplation of the parties. They are sup- posed to have reposed this confidence in each other, and, however much it may be abused, in behalf of innocent third persons the conclusive Sec. 6) POWERS OF PARTNERS AFTER DISSOLUTION. 407 answer is that the loss must fall upon those who have given the ability to do the wrong. This capacity continues as long as the joint operations of the firm endure and contracts are necessary to accomplish its purposes. For the protection of third persons it may continue longer. As the period of its dissolution, by the agreement of the parties, may only be known to themselves, the law exacts, not only that they should hold them- selves out no longer as operating jointly, but that they use reasonable diligerjpe to advise others of the termination of their previous connec- tion. As to those who have previously dealt with the firm, the notice must be actual. As to others, public notice in some newspaper circu- lating in the neighborhood is sufficient, if even that is required. In such cases the other partners are charged for their negligence in omitting to perform a duty which the law requires at their hands, in^ tended to protect third persons against the unauthorized acts of their associates. But, where no question of notice intervenes, the dissolu- tion works an absolute and unqualified revocation of all power and au- thority in either of the partners to bind the others to any new engage- ment, contract, or promise. In the language of Judge Story (Story on Part. § 322) : "None of the partners can create any new contracts or obligations binding upon the partnership. None of them can buy or sell or pledge goods on account thereof. None of them can indorse or transfer the partnership securities to third persons, or in any other way make their acts the acts of the partnership. In short, none of them can do any act or make any disposition of the partnership property or funds in any manner inconsistent with the primary duty, now in- cumbent on all of them, of winding up the whole concerns of the part- nership." As the dissolution finds the engagements of the company, thev must remain until liquidated and paid, unless all the partners consent to come under new engagements, or otherwise change their character. But, while the law thus effectually revokes the implied authority of each partner to incur new obligations for his fellows, it leaves upon each of them the duty, and continues to each the right, of doing what- ever is necessary to collect the debts due to the partnership, and to adjust, settle, and pay its debts. "For [as stated by the same author] all these acts, if done bona fide, are for the advancement and consum- mation of the great objects and duties of the partners upon the dissolu- tion, to wind up the whole partnership concern and divide the surplus, if any, among them, after all debts and charges are extinguished." This right of each of the partners to participate in the settlement of its concerns cannot be interfered with by his copartners, without subjecting them to the controlling power of a court of equity; but it may, of course, be voluntarily relinquished by himself, or he may, if he sees fit, invest them with more extended authority than the law will imply in their behalf. 408 THE POWERS OF PARTNERS. (Ch. 5 Appended to the notice of dissolution signed by the partners and published in this case is this clause : "The remaining unsettled business of the firm will be adjusted by E. Short, who is hereby authorized to close all business transactions of the late firm.'' This notice is good evidence of the agreement of the parties, and conclusive in favor of third persons who have dealt with Short, relying upon it. But no one could or had a right to understand it as authorizing Short to do more than to adjust and settle the unfinished business and close up the transactions of the firm. This power he had, without the agreement. It added nothing to the authority which the law gave, and took noth- ing from it. Without the agreement, Palmer would have had equal authority, and the utmost effect that can be given to the stipulation would be to consider it as a surrender of the right by him, and as hav- ing invested Short alone with the power before possessed by both. There is not a word in it to indicate an intention to confer upon him the authority to create new obligations. He is, therefore, remitted to his power as a partner, and, considered in that light, it is very clear he possessed no such authority. The elementary books and adjudged cases speak an almost uniform language upon the subject. * * * We should find no difficulty in holding that the proof of the dissolu- tion was sufficient to charge Dodge, in the absence of any proof on his part to show that he had dealings with the firm before its dissolution. But this question is wholly immaterial, as the court in effect took it from the jury, and charged that Dodge would be entitled to recover, notwithstanding he had notice, if Short in good faith thought it nec- essary to renew the note and procured him to become security on it. In this we think they erred ; and the judgment, so far as the amount of this note entered into it, must be reversed.^ HUMPHRIES V. CHASTAIN. (Supreme Court of Geoi-gia, 1848. 5 Ga. 166, 43 Am. Dec. 247.) Assumpsit on a note indorsed in the firm name of Chastain & Har- vey, the indorsement having been made by Harvey (now insolvent), without the authority of Chastain, after the dissolution of the firm. Evidence offered to show that the indorsement was in payment of a previous debt of the firm having been rejected, the plaintiff, after judgment against him, brought error on that ground. 1 In Smith v. Shelden, 35 Mich. 42, 47, 24 Am. Rep. 529, supra, in passing upon the question of the power of a partner after dissolution to give notes in settlement of firm debts, Gooley, C. J., said: "We think it much safer to require express authority, when such obligations are contemplated, than to leave one party at liberty to execvite at discretion new contracts of this nature, which may postpone for an indefinite period the settlement of their concerns, when a settlement is the very purpose for which he is to act at all." Sec. 6) POWERS OF PARTNERS AFTER DISSOLUTION. 409 Warner^ J. The question made by the record in this case is wheth- er one partner, after the dissolution of the copartnership, can bind his copartner by a new contract for the payment of a pre-existing copart- nership debt. That after the dissolution of a copartnership, one co- partner cannot bind the other by indorsing a note in the copartnership name is, we think, well settled, both upon principle and authority; and that the note so indorsed is in payment of a debt due by the co- partnership makes no diflference. L,yon on Part. 274; Sanford v. Mickles, 4 Johns. (N. Y.) 224; Hackley v. Patrick, 3 Johns. (N. Y.) 536 ; Folz v. Pourie & Dawson, 2 Desaus. Eq. 40. In Bell v. Morrison, 1 Pet. (U. S.) 352, 7 L. Ed. 174, it was held that a dissolution of a copartnership puts an end to the authority of one partner, to bind the other. It operates as a revocation of all power to create new contracts ; and the court below did not err in rejecting the testimony offered, and ruling that Chastain was not bound by the indorsement made by Har- vey, in the name of the partnership, after its dissolution. Let the judgment of the court below be affirmed.^ DARLING V. MARCH. (Supreme Court of Maine, 1842. 22 Me. 184.) Assumpsit on a note dated November 13, 1837, for $3,000, signed by Lincoln, Foster & Co., payable to Willis Patten & Co. "at either bank in Bangor" six months after date, and indorsed by Willis Patten & Co. Over the indorsement was written, "Holden without notice or demand," and no demand was proved; the plaintiff relying on the waiver.. It was admitted, or satisfactorily proved, at the trial, that Amos Patten, the defendant's testator,' Willis Patten and Moses Patten, Jr., constituted the firm of Willis Patten & Co. prior to the 1st day of October, A. D. 1837 ; that on the 18th day of January, 1838, and for more than three weeks subsequently, notice that the firm had been dis- solved on the preceding 1st day of October, and that Amos Patten had retired, and that a new firm under the same name had been formed by Willis Patten and Moses Patten, Jr., was published in the Daily Whig and Courier, printed at Bangor ; that the note, about the time it fell due in May, 1838, was left in the Kenduskeag Bank for collection; that the officers of the bank had knowledge of the dissolution of the old firm at the time notice was published ; that about the time the note fell due the words "Holden without notice or demand" were written on the note by Mt)ses Patten, jr. * * * ' 1 In Yale v. Barnes, 1 Mete. (Mass.) 486 (1840), it was held that an authority given to one partner by the others, after dissolution, to sell a negotiable note made to the firm before dissolution, authorized the partner to indorse such note "without recourse" in the firm name. 410 THE POWERS OF PARTNERS. (Ch. 5 The foregoing facts (and others not material to the point in part- nership under consideration) were, by agreement, submitted to the court, who are to order a nonsuit or default as the facts and the law may warrant. * * * Shepi,e;y, j_ * * * The next question is whether one member of the firm could bind the other members, after its dissolution, by a waiver of demand and notice on paper existing before the dissolution. The dissolution operates as a revocation of all authority for making new contracts. It does not revoke the authority to arrange, liquidate, settle, and pay those before created. For these purposes each member has the same power as before the dissolution. If an account, exist- ing before the dissolution, be presented to one of the former partners, he may decide whether it should be paid or not, even though it be a disputed claim. . He may decide whether due notice had been given on negotiable paper, and may make or refuse payment accordingly. The waiver of demand and notice is but the modification of an exist- ing liability, by dispensing with certain testimony which would oth- erwise be required. If one of the former partners could not dispense with the proofs, which might be required at the time of the dissolu- tion, he could not liquidate the accounts and agree upon balances. To' waive demand and notice, and to settle accounts, is but to arrange the terms upon which an existing liability shall become perfect without further proof. In doing this he does not make a new contract, but acts within the scope of a continuing authority. Judgment for plaintiff. BREEN V. RICHARDSON et al. (Supreme Court of Colorado,^ 1883. C Colo. 605.) Morrison and Charist were copartners. Morrison died, and Char- ist, the surviving partner, to secure a debt of the firm, gave a trust deed upon certain real estate owned by them in the town of Silverton. Upon breach of the conditions of the trust deed the land was sold by the trustee, and the appellant, Breen, became the purchaser and was in possession. The appellees, as heirs at law of Morrison, brought suit to recover the undivided one-half interest in the land in controversy, and obtained judgment in the court below. To reverse that judgment Breen prosecutes this appeal. Beck, C. J. * * * This assignment involves the power of a. surviving partner to dispose of the partnership property in the settle- ment and payment of the partnership debts. It sufficiently appears that the real estate in controversy was part- nership property. It was property necessary for the ordinary busi- ness of the partnership, it was purchased for this purpose out of the funds of both partners at the time of the formation of the partner- Sec. 6) POWERS or paktnees after dissolution. 411 ship, and it was employed for the uses of the partnership until the firm was dissolved by the death of Morrison. The evidence also shows that at the time of the decease of Morrison the firm of Morrison & Charist was indebted beyond the extent of the personal assets. It is well settled, in such a case, that the partnership real estate is to be considered as personalty for the purpose of paying the firm debts. It is quite as well settled that, for the purpose of being appropriated to the payment of the partnership debts, the real estate, like other per- sonal property of the partnership, must pass under the control of the surviving partner, to be by him disposed of for the payment of the debts. An objection is made that the surviving partner had no authority to give the trust deed. The evidence shows the necessity for prompt action at the time the trust deed was given, in order to prevent the sacrifice of the property in question, and the law, we think, warrant- ed the execution of the trust deed. For the errors mentioned, the judgment will be reversed, and the cause remanded for a new trial. Reversed. WOOD et al. v. BRADDICK. (Court of Common Pleas, 1808. 1 Taunt 104.) This was an action brought to recover from the defendant the pro- ceeds of certain linens, which the bankrupts, in the year 1796, had con- signed for sale in America, as the plaintiffs alleged, to the defendant, jointly with one Cox, who was then his partner, but, as the defend- ant contended, to Cox only. The defendant pleaded the general issue and the statute of limitations. At the trial at Guildhall, before Mans- field, C. J., the plaintiffs produced in evidence a letter from Cox, dated the 34:th of June, 1804, stating a balance of £919 to be then due to the bankrupts upon this consignment. It was in proof that on the 30th of July, 1803, Braddick and Cox dissolved their partnership, as from the 17th of November, 1800. Cockell and Lens objected that this letter, being written after the dissolution of the partnership, was not admissible evidence to charge Braddick. The Chief Justice overruled the objection, but reserved the point; and the jury, being of opinion that the agency was undertaken by Cox on the partnership account, found a verdict for the plaintiff. Cockell now moved for a new trial. Mansfield, C. J. Clearly the admission of one partner, made aft- er the partnership has ceased, is not evidence to charge the other, in any transaction which has occurred since their separation; but the power of partners with respect to rights created pending the partner- 412 THE POWEES OP PARTNERS. (Ch. 5 ship remains after the dissolution. Since it is clear that one partner can bind the other during all the partnership, upon what principle is it that from the moment when it is dissolved his account of their joint contracts should cease to be evidence, and that those who are to-day as one person in interest, should to-morrow become entirely distinct in in- terest with regard to past transactions which occurred while they were united ? Heath, J. Is it not a very clear proposition that, when a partner- ship is dissolved, it is not dissolved with regard to things past, but only with regard to things future? With regard to things past, the partnership continues, and always must continue. Cockell took nothing by his motion. MILLER V. NEIMERICK et al. (Supreme Court of Illinois, 1857. 19 111. 172.) Skinner, J. Miller sued Neimerick and Eckert, as late partners, upon a book account. On the trial Miller offered in evidence a writ- ten statement, made by Neimerick after the dissolution of the part- nership, admitting a balance due from the firm of Neimerick & Eck- ert to Miller. The court rejected the evidence, and judgment was rendered for the defendants. The question is broadly presented whether admission of one part- ner, made after the dissolution of the partnership, relating to partner- ship transactions arising prior to the dissolution, are admissible to charge the several members of the dissolved firm. In the case of Wood V. Braddick, 1 Taunt. 104, such admissions were held compe- tent to charge all the members of the firm, and that ruling seems to have been followed in England until finally avoided by act of Parlia- ment. The same rule has been recognized in several states of this Union, but in many of them the opposite doctrine prevails. In view of the conflict of authority upon the question, we are at liberty to adopt such rule as is most consonant with the reason and analogies of the law and best adapted to the security of private rights. It is true that, during the existence of the partnership, each partner may act for the whole, upon the ground that all have delegated to each authority to act for them in matters of joint concern; but this plenary power of the several members of the partnership continues no longer than the partnership out of which it arises. Therefore, when the part- nership has terminated, the several partners lose their authority to act for the whole, and can no longer bind them by any undertaking in the partnership name; and their powers become limited to the adjust- ment of the partnership affairs and the winding up of the partnership. For such purposes each may receive and release debts due the part- nership, and apply the assets to the liquidation of the firm debts, the Sec. 6) POWERS OF PARTNERS AFTER DISSOLUTION. 413 pre-existing rights of their persons remaining unaffected by the dis- solution; but the power to bind the several members of the dissolved firm, by the creation of new liabilities and obligations, falls with the partnership. The admission of one partner of a debt of the partnership, made when the partnership has no existence, if sufficient to establish the Ha- bility of all the partners, involves the power to bind all by the creation of a partnership liability; for it is indifferent to the other partners whether their Hability be established by the admission, or the under- taking, written or verbal, of one of their number. The effect in either case is the same. A joint liability is pi-ima facie established and imposed, which may be satisfied, not only out of the partnership property, but out of the separate estates of the former partners. If the several members of a dissolved firm can, by admission or stipulation, charge their former partners, not only may the partnership assets be swallowed up, but the individual members of the late firm may be made bankrupt, by admissions made after the partnership has ceased to exist, by one no longer their agent, without the sanctions of an oath, or any of the ordinary guarantees of truth, and who may be without pecuniary ability to respond in damages, is influenced by ill will or private gain, and has in fact no real concern as to conse- quences of mere legal liability. We hold the written statement or admission incompetent to charge Eckert. Judgment affirmed. MAYBERRY et al. v. WIEEOUGHBY. (Supreme Court of Nebraska, 1877. 5 Neb. 368, 25 Am. Rep. 491.) GanTT^ J. In the court below, service of summons was had on C. N. Mayberry only. He pleaded the statute of limitations, and he now brings the case into this court as plaintiff in error. It appears, from the facts admitted, that the plaintiff in error and J. C. Mayberry were formerly partners, doing business in the state of Illinois, under the firm name of J. C. & C. N. Mayberry; that on the 14th day of January, 1864, the note on which this action was brought was executed by the firm and delivered to the defendant in error; that on the 29th day of March, 1864, the partnership was wholly dissolved, and that on or about the 15th day of July, 1868, the defendant in error had notice of the dissolution of the partnership; that in March, 1869, the plaintiff in error moved to the state of Nebras- ka, and has ever since resided there. J. C. Mayberry made partial payments on the note, on the 16th day of November, 1864, on the 1st day of June, 1868, on the 35th day of July, 1870, and on the 29th day oi November, 1871 ; and of these payments the plaintiff in error had 414 . THE POWERS OP PARTNERS. (Ch. 5 no knowledge whatever, until after the commencement of the suit, on the 18th day of April, 1876. The only question raised in the case is: Do these payments, made by J. C. Mayberry, take the debt out of the statute of limitations as to the plaintiff in error? It is said that the statute is a wise and beneficial law, and should not be viewed in an unfavorable light; and it is now generally conceded that it is not to be construed as merely raising a presumption of pay- ment, but that in its operation it is intended to be emphatically a statute of repose. Therefore, in order to take a debt out of it, there must be an un- qualified acknowledgment, not only of the debt as originally due, but that it continues_ so, or, if the promise to pay is conditional, the condi- tion must be performed before an action can be maintained on the promise, and the acknowledgment or promise must be made by the per- son to be charged, or by some person legally authorized by him to do so. Again, as the law strictly affects the remedy, and not the merits, it seems well settled that upon the plea of the statute the lex fori must prevail. McElmoyle v. Cohen, 13 Pet. (U. S.) 327, 10 L. Ed. 177; Townsend v. Jemison, 9 How. (U. S.) 413, 13 L. Ed. ,194; Bell v. Morrison, 1 Pet. (U. S.) 351, 7 L. Ed. 174. Hence the law must be regarded as designed to protect persons from ancient claims, whether well or ill founded, and its tendency is to produce speedy settlements, and if such settlements are not made within the time limited by the law its effects are such as to extinguish the legal liability upon the debt, unless it be revived by a new promise ; and therefore, if the creditor by his own fault and laches permits the statute to attach, whatever may, be the nature or character of his claim, he cannot complain of the operation of the law, since it is by his own negligence that it can be brought to bear against him. But, as J. C. and C. N. Mayberry were partners at the time the debt was contracted, it is contended that, notwithstanding the dissolu- tion of the partnership with notice thereof to the creditor, and not- withstanding the time limited by the statute within which actions can be commenced after the cause of action shall have accrued, had long expired, as to the plaintiff, yet the payments made by J. C. Ma!yberry, as above stated, and without the knowledge or assent of the plaintiff in error, constitute an admission by both, and in law raise a promise by both to pay the claim; and this proposition is urged upon the ground that, as J. C. Mayberry had authority to discharge the debt or make payments thereon, he necessarily had authority, upon the theory that a virtual agency existed in each co-contractor, by his in- dividual promise to charge the other with the payment of the debt. This is true as to partners, for it is a familiar and well-estabhshed doctrine that during the existence of the partnership the act of one partner within the legitimate scope of the partnership business, will "Sec. 6) POWERS OF PARTNERS AFTER DISSOLUTION. 415 bind the other partners ; and this doctrine, no doubt, had its origin in the fact that in a partnership, constituted by voluntary contract, with the understanding that there shall be a communion of profits between them, there must necessarily be in each partner a community of in- terest with the others in the whole property, business, and responsi- bilities of the concern, and therefore each partner is "praepositus ne- gotiis societatis," and in the diverse and multiplied transactions of the business, each must, virtute officii, become the agent of the others, when acting within the scope and objects of the partnership. But, upon the dissolution of the partnership, this agency, as well as the relation of partners, ceases to exist, and the authority to create new contracts is revoked, and the rights of the partners thereafter can •only extend to the settlement of the partnership concerns and the disbursement of the remaining funds. It is said that, "after dissolu- tion, no valid draft, acceptance, or indorsation can be made by the fii-m; and it is no authority to do so, if any partner is in the notice empowered to receive and pay the debts of the company. The indorsa- tion, draft, or acceptance must be done by all of the partners, or by one specially empowered to do the act for them." 3 Bell's Com. 644 ; Story on Part. § 332 ; 1 Smith, Lead. Cases, 730. No new contract can be created in the name of the firm, and no one of the partners can •create such contract so as to charge the others, unless they specially authorize him to do so for them. Now, the doctrine seems well settled by authority that an acknowl- edgment is to be considered, not as a continuation of the old promise, hut as the evidence of a new promise; and therefore it is alone this new promise which takes the debt out of the statute. This new prom- ise is a new contract, nothing more, nothing less; and it is a contract to pay a pre-existing debt, which of itself does not bind the party, hecause by force of the law it was extinguished. Hence, is not the acknowledgment, in essence and in law, the creation of a new con- tract, which gives the creditor a new cause of action, and not simply the enforcement of the old one? It therefore seems clear, both upon principle and authority, that, after the relation of partners has ceased to exist, one of the partners cannot, upon the ground of mutual agency, hind the others by such contract. The relation of the partners to their •creditors, then, becomes that of joint debtors. Bell v. Morrison, supra; Hackley v. Patrick, 3 Johns. (N. Y.) 537; Green v. Crane, H Lord Rayni. 1101; Thompson v. Peters, 12 Wheat. (U. S.) 565, •6 L. Ed. 730; Tompkins v. Brown, 1 Denio (N. Y.) 247; Dean v. Hewit, 5 Wend. (N. Y.) 357; Dunham v. Dodge, 10 Barb. (N. Y.) 569. It is, however, urged that the acknowledgment relied on in the ■case at bar consists of partial payments made on the original debt of J. C. Mayberry, and, as some of these payments were made before the time limited by the statute had expired, the statute of limitations did not attach as to the plaintiff in error; but it is said "that although 416 THE POWERS OP PARTNERS. (Ch. 5 a part payment of a debt admits its existence as a subsisting obliga- tion, and will, therefore, be sufficient to take it out of the statute, yet that it has no greater effect than any other unqualified acknowledg- ment, and must consequently be connected by sufficient evidence, both with the parties to the suit and the claim sought to be enforced." 1 Smith's L,ead. Cases, 726. Such payments necessarily prove only the existence of the debt to the amotmt paid; but from the fact of such payment a promise is inferred to pay the residue. Dunham v. Dodge, supra. And, again, it is said: "The true rule unquestionably is that whether the admission precedes or follows the bar makes no differ- ence, and that, while proof of the continued existence of the debt and of the willingness of the debtor to pay is requisite in all cases, noth- ing more will be requisite in any." 1 Smith's Lead. Cases, 714 ; Ayers V. Richards, 12 111. 146; Fryeburg v. Osgood, 21 Me. 176. And now the question is, can one joint debtor, by an assumed au- thority as the virtual agent of the other, legally charge him with the payment of the debt, when otherwise he would be discharged, and the debt be extinguished as to him, by operation of the statute ? The doctrine that a promise or acknowledgment by one joint debtor takes the debt out of the statute, and binds his co-contractor, upon the ground that he who makes the promise virtually acts as the agent of the other, seems to have originated in an unreasoned decision of Lord Mansfield in the case of Whitcomb v. Whiting, Doug. 651. But that case is contrary to the previous case of Bland v. Haselrig, 2 Vent. 151, and it must be regarded as the cause of all the confusion which exists in the decisions, both in England and America, on the subject of the statute, in respect to joint debtors. In England, however, the doctrine enunciated in Whitcomb v. Whit- ing has been somewhat restricted, which has remedied some of the mischief inherent in it. 1 B. & Aid. 467. And its force has been much weakened in the case of Atkins v. Tredgold, 2 Barn. & C. 23, in which Holroyd, J., seems to doubt Whitcomb v. Whiting as law. Story, in his work on Partnership (section 324), says that: "In America no small diversity of judicial decision has been expressed on this subject. In some of the states, the English doctrine has been approved; in others it has been silently acquiesced in, or left doubt- ful; and in a considerable number it has been expressly overruled." In the Supreme Court of the United States it has been overruled, as unfounded in principle. Bell v. Morrison, supra; Van Keuren v. Parmelee, 2 N. Y. 525, 51 Am. Dec. 322; Dunham v. Dodge, 10 Barb. (N. Y.) 570; Forney v. Benedict, 5 Barr (Pa.) 227. * * * It seems the doctrine that one joint debtor can take a, debt out of the statute as to all is based exclusively on the theory that there is a virtual agency in each co-contractor, in such case, by which the promise of one binds the rest. But upon what principle can this doc- trine of mutual agency be maintained? It cannot be founded on a communion of profits or a community of interests, as in the case of Sec. 6) POWERS OF PARTNERS AFTER DISSOLUTION. 417 partnership, for the reason that in fact no such interests exist be- tween the persons who are merely joint debtors; and it cannot be grounded merely upon a new promise by only one of the parties, for the reason that in fact and in law, as seems now to be well settled, such promise is a new contract, which is necessarily different from the original contract in respect to form, time, and substance, and is the creation of a new cause of action ; and the proposition will not be questioned that one joint debtor can, by such new contract, bind his co-contractors. It is, therefore, certainly difficult to discover any just grounds upon which the doctrine of mutual agency in joint debtors can be founded; hence must it not rest alone upon a mere assump- tion, which is untrue in fact, and unsupported by any reasonable and just interpretation of law? It is not only contrary to the earlier cases in England, but we think it is opposed to the object and spirit of our statute, which, it seems clear, was intended to protect the individual against claims after the time limited by the law for the commencement of the action has ex- pired. The statute is one of repose; and, when the time limited by it has expired, then in legal contemplation the debt is extinguished, and it can only be revived by a new promise by the person sought to be charged, or by some person lawfully authorized by him for that purpose. * * * We are, therefore, of opinion that the plea of the statute of limita- tions, interposed by the plaintiff in error, constituted a good defense in this action, under the evidence in the case, and that the judgment of the court below must be reversed, and the cause remanded. Judgment reversed. Gil.Part.— 27 418 RIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 CHAPTER VI. RIGHTS AND DUTIES OF PARTNERS INTER SE. SECTION 1.— DUTY TO OBSERVE GOOD FAITH. BURTON V. WOOKEY. (In Chancery, before Sir John Leach, V. C, 1822. 6 JIadd. 367.) The plaintiff and defendant entered into partnership together to deal in lapis calaminaris. The defendant, who was a shopkeeper, was to take the active part in the concern, and to purchase the lapis cal- aminaris from the miners, in whose neighborhood he lived. Many of the mmers were, before the partnership, in the habit of dealing at his shop, and continued so for some years after the partnership, re- ceiving from the defendant ready money for the lapis calaminaris, and paying for their shop goods afterwards as they would have done to any shopkeeper; but in the year 1817 or 1818, owing, as the de- fendant alleged, to the distress of the times, a new course of dealing took place between the defendant and the miners. In the place of paying them for the lapis calaminaris with money, he paid them with shop goods, and in his account with the plaintiff he charged him as for cash paid to the amount of the price of the goods. The question was whether he could justify this charge, or whether he must divide the profit made by him on the sale of the goods with the plaintiff. The Vice Chancellor. It is a maxim of courts of equity that a person who stands in a relation of trust or confidence to another shall not be permitted, in pursuit of his private advantage, to place him- self in a situation which gives him a bias against the due discharge of that trust or confidence. The defendant here stood in a relation of trust or confidence towards the plaintiff, which made it his duty to purchase the lapis calaminaris at the lowest possible price. When, in the place of purchasing the lapis calaminaris, he obtained it by barter for his own shop goods, he had a bias against a fair discharge of his duty to the plaintiff. The more goods he gave in barter for the ar- ticle purchased, the greater was the profit which he derived from the dealing in store goods, and as this profit belonged to him individually, and as the saving by a low price of the article purchased was to be equally divided between him and the plaintiff, he had plainly a bias against the due discharge of his trust or confidence towards the Sec. 1) DUTY TO OBSERVE GOOD FAITH. 419 plaintiff. I must therefore decree an account of the profit made by the defendant in his barter of goods, and must declare that the plain- tiff is entitled to an equal division of that profit with the plaintiff. MiTCHELIv V. REED. (Commission of Appeals of New York, 1876. 61 N. T. 123, 19 Am. Rep. 252.) Appeal from judgment of the General Term of the Supreme Court in the First Judicial Department, affirming a judgment in favor of defendant, entered upon decision of the court at Special Term. This action was brought to have certain leases, obtained by the de- fendant during the existence of a copartnership between him and plaintiff, for terms to commence at its termination, of premises leased and occupied by the firm, declared to have been taken for the partner- ship, and to have it adjudged that the defendant held them as trustee for the partnership. * * * The court found, as conclusions of law, that the defendant, Reed, was the sole owner of the leases executed to him as aforesaid, and that the plaintiff had no right, title, or interest in or to them, or either of them, and that the defendant have judgment accordingly, to which plaintiff duly excepted. Judgment was rendered accordingly. Eari,, C. The relation of partners with each other is one of trust and confidence. Each is the general agent of the firm, and is bound to act in entire good faith to the other. The functions, rights, and duties of partners in a great measure comprehend those both of trustees and agents, and the general rules of law applicable to such characters are applicable to them. Neither partner can, in the business and affairs of the firm, clandestinely stipulate for a private advantage to himself. He can neither sell to nor buy from the firm at a concealed profit to himself. Every advantage which he can obtain in the business of the firm must inure to the benefit of the firm. These principles are ele- mentary, and are not contested. Story, §§ 174, 175 ; Collyer, §§ 181, 182. It has been frequently held that when one partner obtains the re- newal of a partnership lease secretly, in his own name, he will be held a trustee for the firm as to the renewed lease. It is conceded that this is the rule where the partnership is for a Hmited term, and either partner takes a lease commencing within the term; but the contention is that the rule does not apply where the lease thus taken is for a term to commence after the expiration of the partnership by its own limita- tion, and whether this contention is well founded is one of the grave questions to be determined upon this appeal. It is not necessary, in maintaining the right of the plaintiff in this case, to hold that in all cases a lease thus taken shall inure to the benefit of the firm, but whether, upon the facts of this case, these leases ought to inure to the benefit of this firm. I will briefly allude 420 EIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. G to some of the prominent features of this case. These parties had been partners for some years. They were equal in dignity, although their interests differed. The plaintiff was not a mere subordinate in the firm, but, so far as appears, just as important and efficient in its affairs as the defendant. They procured the exclusive control of the leases of the property, to terminate May 1, 1871, and their partnership was to terminate on the same day. They expended many thousand dollars in fitting up the premises, a portion thereof after the new- leases were obtained, and they expended a very large sum in furnish- ing them. By their joint skill and influence they built up a very large and profitable business, which largely enhanced the rental value of the premises. More than two years before the expiration of their leases and of their partnership the defendant secretly procured, at an in- creased rent, in his own name, the new leases, which are of great value. Although the plaintiff was in daily intercourse with the de- fendant, he knew nothing of these leases for about a year after they had been obtained. There is no proof that the lessors would not have leased to the firm as readily as to the defendant alone. The permanent fixtures, by the terms of the leases, at their expiration belonged to the lessors. But the movable fixtures and the furniture were worth vastly more to be kept and used in the hotel than to be removed elsewhere. Upon these facts I can entertain no doubt, both upon principle and authority, that these leases should be held to inure to the benefit of the firm. If the defendant can hold these leases, he could have held them if he had secretly obtained them immediately after the partner- ship commenced, and had concealed the fact from the plaintiff dur- ing the whole term. There would thus have been, during the whole term, in making permanent improvements and in furnishing the hotel, a conflict between his duty to the firm and his self-interest. Large investments and extensive furnishings would add to the value of hi.s lease, and defendant would be under constant temptation to make them. While he might not yield to the temptation, and while proof might show that he had not yielded, the law will not allow a trustee thus situated to be thus tempted, and therefore disables him from making a contract for his own benefit. Terwilliger v. Brown, 44 N. Y. 237, and cases cited. It matters not that the court at Special Term found upon the evidence that the improvements were judicious and prudent- for the purposes of the old term. The plaintiff was entitled to the unbiased judgment of the defendant as to such improvements, uninfluenced by his private and separate interest. But, further, the parties owned together a large amount of hotel property in the form of furniture and supplies, considerably exceeding, as I infer, $100,000 in value. Assuming that the partnership was not to be continued after the 1st day of May, 1871, this property was to be sold, or in some way disposed of for the benefit of the firm, and each partner owed a duty to the firm to dispose of it to the best advantage. Neither could, without the violation of his duty to the firm, place the property in such Sec. 1) DUTY TO OBSERVE GOOD FAITH. 421 a situation that it would be sacrificed, or that he could purchase it for his separate benefit, at a great profit. Much of this property, such as mirrors, carpets, etc., was fitted for use in this hotel, and it is quite manifest that all of it would sell better with a lease of the hotel than it would to be removed therefrom. It is clear that one or both of these parties could obtain advantageous leases of the hotel for a term of years, and hence, if the parties had determined to dissolve their part- nership, it would have been a measure of ordinary prudence to have obtained the leases and transferred property with the leases as the only mode of realizing its value. This was defeated by the act of the defendant, if he is allowed to hold these leases, and thus place him- self in a position where the property must be largely sacrificed or purchased by himself at a great advantage. This the law will not tolerate. The language of Lord Eldon, in Featherstonhaugh v. Fen- wick, 17 Ves. 311, a case in many respects resembling this, is quite in point. He says: "If they [the defendants] can hold this lease, and the partnership stock is not brought to sale, they are by no means on equal terms. The stock cannot be of equal value to the plaintiff, who was to carry it away and seek some place in which to put it, as to the defendants, who were to continue it in the place where the trade was already established; and if the stock was sold the same construction would give them an advantage over the bidders. In effect they would have secured the good will of the trade to themselves in exclusion of their partner." ' For these reasons, independently of the consideration that the leases themselves had a value to which the firm was entitled, upon other grounds and upon authorities, to be hereafter cited, the plaintifif, who commenced his suit about one year before the term of the partnership expired, was, upon undisputed principles and au- thorities applicable to all trustees and persons holding a fiduciary re- lation to others, entitled to the relief he prayed for. * * * I am therefore of opinion that the judgment should be reversed, and new trial granted; costs to abide the event. JENNINGS et al. v. RICKARD. (Supreme Court of Colorado, 1887. 10 Colo. 395, 15 Pac. 677.) Elbert, J. Charles Rickard, the plaintifif below, on the 18th of December, 1882, filed his bill of complaint against the defendants, John and Daniel Jennings, claiming a decree against them for $20,200, on account of certain partnership transactions. He alleges that in the fall of 1874 he and the defendants entered into a mining copartner- ship for the purpose of collecting mineral specimens, and also for the purpose of discovering, locating, and developing lodes and mining properties ; that by the terms of such copartnership agreement Rickard was to furnish certain moneys, horses, wagons, etc. ; that the defend- 4:22 RIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 ants were to do the active work in the field in prospecting and locating mining claims, and that each were to have a one-third interest in all mining claims discovered and located by the defendants ; that this copartnership continued until April, 1878; that during this time the defendants discovered and located the Mammoth, the Empire, and the Trail lodes, and a certain claim to coal lands, and reported the same to plaintiff as properties belonging to the copartnership; that they reported the aforesaid lodes as being all that had been discovered, located, and claimed by them during the continuance of the copartner- ship agreement. He alleges that on the 19th of March, 1878, he con- veyed to said defendants, for the sum of $400, all his interest in and to the foregoing copartnership properties. Concerning this convey- ance of the 19th of March, 1878, he alleges a distinct and separate fraud upon the part of defendants Jennings, by reason of which he is entitled to a decree against them for $200. This fraud concerns prop- erties admittedly belonging to the copartnership, and will be consid- ered first. Under the terms of the copartnership, the lodes were located for convenience in the names of the defendants, and they were authorized to negotiate and sell them, accounting to plaintiff for one-third of the proceeds. The evidence clearly shows that on or about the 19th of March, 1878, the defendants approached the plaintiff concerning a purchase of his third interest in the foregoing copartnership properties, and that the negotiation resulted in the sale by plaintiff to defendants of his third interest in the same for the sum of $400, which he then and there conveyed by deed of that date to defendants. It also quite clearly appears that at the time of this sale the defendants were ne- gotiating a sale of the copartnership coal claim to one Smith, for the sum of $1,800. Although this sale to Smith was not consummated until some time thereafter, the deed to Smith, which was placed in escrow, bears date March 19, 1878, the date of the conveyance by the plaintiff to defendants of his one-third interest in the copartnership properties. The one-third interest of the plaintiff in the proceeds of the sale of this coal mine would have amounted to $600, $200 more than the defendants paid him for his entire interest in the four claims. The partnership relation is a trust relation, and the members of a copartnership are held to a strict rule of good faith and fair and open deaHng. He who assumes the relation invites the confidence of his copartners, and pledges fidelity to the interests of the copartnership. The requirements of the copartnership relation which the defendants sustained to the plaintiff demanded that, at the time of the negotiation for a sale of his third interest in the copartnership properties, they should have made known to him the negotiation which was then pending with Smith for the sale of the coal claim for the sura of $1,800. Their concealment of this negotiation from the plaintiff was the concealment of an important fact, affecting the value of plaintiff's copartnership interest for which they were negotiating. It enabled Sec. 1) DUTY TO OBSERVE GOOD FAITH. 42.3 them to deal with him on unfair and unequal terms. It was a fraud, and equity and good conscience required that defendants should ac- count to plaintiff for one-third of the proceeds of that sale. The sale by plaintiff to defendants of his one-third interest in the copartnership properties, to wit, the Mammoth, the Empire, and the Trail lodes, and the coal claim, was a sale in gross for $400. The consideration paid for each property respectively, does not appear. As the plaintiff introduced no evidence upon this point, and only prayed in his bill of complaint that the defendants be decreed to ac- count for the sum of $200, the difference between the entire considera- tion paid him for the whole property and his third interest in the pro- ceeds of the sale of the coal claim, the court was justified in limiting its decree in this behalf to that sum. Secondly. The plaintiff alleges another and distinct fraud respecting certain mining properties, which he claimed belonged to the copartner- ship, a claim which the defendants contest. Plaintiff alleges that, during the continuance of said copartnership agreement, the defend- ants discovered and located certain other mining claims, viz., the Cliff, the North Star, the Hiawassee, the Galena, the East Wing, the Buck- eye, and the Sylvanite; that under the terms of their copartnership agreement he was entitled to a one-third interest in the same, but that the defendants fraudulently concealed from him the discovery and lo- cation of said claims, and that he never knew of the existence of said claims, or of his rights therein, until on or about the 27th day of September, 1879, when the defendants sold and conveyed said claims to one Ballentine for the sum of $60,000. By reason of this fraud upon the part of defendants, the plaintiff claims a decree for $20,000, one-third of the proceeds of said sale to Ballentine. The defendants, in their answer, deny the copartnership, excfept as thereinafter stated, and "thereinafter" they say "that they, the defend- ants, further answering, admit that they entered into an agreement with plaintiff to gather specimens and prospect for lodes, substantially as set out in the complaint, and that such agreement continued until the early part of the year 1878." They set forth the sale and deed of the 19th of March, 1878, by, plaintiff to defendants, and say "that, upon the completion of such sale by plaintiff to defendants, it was then and there agreed by and between them that all former associations, agreement, copartnership, and business relations theretofore existing between plaintiff and these defendants should cease, and the same were then and there fully dissolved and terminated." In view of the testimony, as will be seen, this is an important admission. They deny any fraudulent concealment of lodes discovered and located as alleged in the complaint, but claim that the Mammoth, the Empire, the Trail lodes, and the claim to coal, lands, reported by them to plaintiff as copartnership properties, were all the lodes discovered and located by them during the continuance of the copartnership, from the fall of 1874 to the spring of 1878. 424 RIGHTS AND DUTIES OF PARTNERS INTER SB. (Cll. 6 Upon the admissions of the defendants in their answer and testi- mony, the CHff, the Hiawassee, the Galena, and the North Star must be treated, without hesitancy, as properties belonging to the copartner- ship. The defendants, in their answer, admit that the copartnership formed in 1874 continued until the spring of 1878. The copartner- ship must be treated as extending to all mining properties discovered, and located by the defendants during that period, in the absence of any limitation. John Jennings admits in his testimony that the four lodes named were discovered and located in 1876 and 1877. The defendant, Daniel Jennings, while he does not testify upon this point, does not in any way controvert or disclaim it. It is true that they both claim in their testimony that they understood that the copartner- ship was dissolved in the spring of 1876, when the copartnership "specimen store" was sold; but this testimony does not support the allegations of the answer, the admissions of which, upon this point, must be held to control. It appears from the testimony that these four mines belonged to the group of ten which were sold to Ballentine for the sum of $12,000. There is no evidence fixing the separate value of the mines which constitute this group. In the absence of any evidence upon this point, the respective mines constituting the group must be treated of equal value. In so far, therefore, as the decree of the court below was based upon the right of the plaintiff to recover one-third of the pro- ceeds arising from the sale of the Cliiif, the Hiawassee, the North Star, and the Galena is concerned, we think it is justified by the plead- ings and the evidence. It appears that three other mines which plaintiff claims belong to the copartnership, viz., the Sylvanite, the Buckeye, and the East Wing, were at the same time, namely, on the 37th of September, 1879, con- veyed to Ballentine by a separate deed, and that the true consideration therefor was $48,000. This sum, together with the $12,000 for which the other group sold, constitutes the $60,000 for the one-third of which plaintiff claims a decree. It remains, therefore, to determine whether, upon the evidence, these three mines belonged to the copartnership. The two Jennings and other witnesses testify positively to their discovery and location in 1879, after the copartnership had been admittedly dissolved. It ap- pears that the Sylvanite was by far the most valuable of the three; that the other two were not regarded as of much value. There was an effort upon the part of the plaintiff to show that, while the Sylvanite was not located until 1879, it was really discovered by the Jennings during the existence of the copartnership, and its discovery fraudu- lently concealed from the plaintiff. Daniel Jennings admits in his testimony that some years prior to 1879, while prospecting, he dis- covered some "float" upon the mountain side some four or five hun- dred feet from where the Sylvanite was afterwards discovered, and that he stuck a stake there to indicate the locality, with a view of re- Sec. 1) DDTT TO OBSERVE GOOD FAITH. 425 turning at some future day to prospect for the vein from which it came, but that he never did return to renew his search until 1879. Other witnesses testify to substantially the same admission on his part. At the worst, this was but a neglect upon his part to pursue a search that might have terminated beneficially to the copartnership. His failure to do so, however, does not appear to have been fraudu- lent. It is not shown that at the time he stuck the stake where he found the "float," that he discovered the vein from which it came, or that he had any knowledge respecting it that would render his failure to make further search for the mine fraudulent. Such and other indications of the existence of mineral veins are frequent in the path of the prospector. All that can be required of him is that he pursue his search with diligence and good faith. His failure to follow up a particular "float," or other indication of a lode, is not a fraud as of course. It will not do to say, under the circumstances of this case, that Jennings, after the dissolution of the copartnership, could not return to and prospect in Elk Mountain district for other lodes, ex- cept at the peril of having to yield to plaintiff a one-third interest in their discoveries, upon the proposition that by proper diligence they might have discovered such lodes during the existence of the copart- nership. The evidence does not show the fraudulent concealment of a discovery, as in the case of the other group of mines. In so far, therefore, as the decree of the court below was based upon the rights of the plaintiff to recover one-third of the proceeds arising from the sale of these three mines, we do not think it justified by the evidence. * * * The decree of the court below is reversed, and the cause remanded. LATTA V. KILBOURN. -{Supreme Court of the United States, 1893. 150 U. S. 524, 14 Sup. Ct. 201, 37 K Ed. 1169.) Bill by appellees, Kilbourn and Olmstead, as members of a dissolved ■partnership, agamst appellant, Latta, another member thereof, for an account of profits made by the latter in certain transactions alleged to have been within the scope of the partnership busmess, and which, as claimed, it was his duty to have conducted for the benefit of the firm, instead of for his individual advantage. Kilbourn and Latta had been partners in carrying on business as real estate brokers. Their business was one of agency, and consisted in negotiation and making sales and purchases of real property for others. Afterwards one Olmstead was admitted to the firm, the scope of the partnership business remaining unchanged. During the existence of both firms, each member thereof, with the knowledge of the others, had purchased real estate and other property on his individual account, and no question was ever made of 426 EIGHTS AND DUTIES OF PARTNEES IXTEE SE. (Ch. 6 the right to do so, nor did any partner ever claim that the profits- realized from such purchases should be treated as belonging to the partnership or subject to division among its members. By special agreement and as a special venture they had several times bought real estate and property on joint speculation and had divided the profits. During the existence of the firm Latta entered into an agreement with one Stearns by which they undertook to engage in the buying and. selling of real estate on joint speculation. These speculations re- sulted in large profits, and the present action is to compel Latta to- account for his share of those profits and share them with his copart- ners, Olmstead and Kilbourn. The court below entered a decree requiring Latta to account to his former partners for this share of these profits. From this decree Latta appealed. Jackson^ j_ * * * ^Yhe court below based its opinion upon two grounds: First, that the scope of the copartnership business and agreement, as alleged in the third paragraph of the bill was estab- lished, and that the appellant could not engage in purchases of real estate on his own account or in connection with others, except by the consent of his copartners, without violating the duty and obliga- tion which he owed to his firm; and, secondly, that even if the co- partnership did not include the business of buying and selling real estate on partnership account, still the appellant could not employ the knowledge and information acquired in the course of the partnership business in respect to the real estate market in making purchases or transactions for his own benefit. The general principles on which the court proceeded admit of no- question, it being well settled that one partner cannot, directly or in- directly, use partnership assets for his own benefit; that he cannot, in conducting the busmess of a partnership, take any profit clandes- tinely for himself; that he cannot carry on the business of the part- nership for his private advantage; that he cannot carry on another business in competition or rivalry with that of the firm, thereby de- priving it of the benefit of his time, skill, and fidelity, without being accountable to his copartners for any profit that may accrue to him therefrom; that he cannot be permitted to secure for himself that which it is his duty to obtain, if at all, for the firm of which he is a member; nor can he avail himself of knowledge or information which may be properly regarded as the property of the partnership, in the sense that it is available or useful to the firm for any purpose within the scope of the partnership business. It therefore becomes necessary, in testing the liability of the appel- lant to account for the profits realized from the transactions with- Stearns, to consider and ascertain what was the scope of the partner- ship agreement in reference to the purchase and sale of real estate. This is the underlying and essential fact on which rests the proper determination of the question whether the appellant, in engaging im Sec. 1) DUTY TO OBSERVE GOOD FAITH. 427 the joint enterprises with Stearns, violated any duty or obligation which he owed to the firm of Kilbourn & Latta. In other words, the question on this branch of the case depends entirely upon this : Were or were not those transactions within the scope of the firm business, in respect to which Latta owed a duty to his firm, or in respect to which he could properly be said to be the agent of the firm ? In his answer, which was called for under oath, Latta positively and in direct terms denied the allegation of the bill that it was ever agreed that the firm should carry on the business of buying and selling real estate, and that at no time was such transaction within the scope of the partnership business. Under the well-settled rules of equity pleading and practice his an- swer must be overcome by the testimony of at least two witnesses, or of one witness with corroborating circumstances. The proofs in the present case not only fail to break down his denial on this point, but, on the contrary, affirmatively establish that neither under the first nor the second firm of Kilbourn & lyatta did the partnership agree- ment extend to the business of buying and selling real estate either for investment or for speculation on firm account. Neither of the appellees testified to the contrary. The appellee Kilbourn, when pressed upon the question, evaded a reply thereto; and Olmstead, in his sworn testimony, failed to support the allegation of the bill as made on that particular subject. On the other hand, the testimony of the appellant fully supported the denial of his answer, and he is corroborated by all the facts and circumstances in the case, such as the character of the business as advertised and as actually conducted. The well-known characteristics of ''real estate and note brokers," in- dicating, as the words imply, those engaged in negotiating the sale and purchase of real property for the account of others, afford a pre- sumptive limitation upon the scope of the business, such as the appel- lant asserted and testified to in this case. His sworn answer and tes- timony on this point has not been overcome by the vague and equivocal testimony of the appellees. The court below was in error in finding as a matter of fact that the partnership extended to the buying and selling of real estate for the account of the firm. There is, therefore, no right on the part of the complainants to relief in this cause, based upon the consideration that the scope and character of the partnership business embraced the purchase and sale of real estate, either for the firm alone or jointly with others. The further allegation of the bill "that all profits resulting from operations in real estate by any member of the firm of Kilbourn & Ivatta during the existence of said partnership should belong to said firm, and be entered upon the books of the firm, and be paid into the partnership account, and that no member of said firm should engage in the business of buying and selling real estate in the said District on his own account, or with any other person or persons, except in cases where the proposed transaction had been explained to the said firm, 428 EIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 and the firm had declined to take any part therein," was also positively- denied by the answdr of the appellant under oath. There is no testi- mony in the cause to overcome that denial. On the contrary, the evi- dence establishes that there was no such restriction or limitation im- posed upon the individual members. So that the complainants were entitled to no relief on that ground. But, aside from the foregoing questions of fact, how stands the case on the assumption that there was a new stipulation or agreement when Olmstead was taken into the firm (as claimed by Kilbourn and Olm- stead, and as set out above) that knowledge and information obtained by any member of the firm as to bargains in real estate should be first communicated to the firm, with the view of giving the firm, or the members thereof, the first opportunity of purchasing, before any in- dividual member thereof could act upon such knowledge or informa- tion for his own benefit? Can the agreement to furnish information as to bargains in real estate, and give copartners the option of taking- benefit of such bargains, be considered as so enlarging the scope of the partnership business as to include therein the purchase and sale of real estate on joint account? It would be a perversion of language and a confusion of ideas to treat such a stipulation, if it were clearly established, as creating a partnership in future options to buy what did not already, by the terms of the copartnership, come within the scope and character of the partnership business. That alleged stipulation, instead of enlarging the partnership business, was manifestly a re- striction and limitation upon the power and authority of the copart- ners to bind the firm, or the members thereof, in any real estate trans- action, until each member had expressly consented or agreed to join in the particular purchase, specially submitted for consideration. By the well-settled law of partnership each member of the firm is both a principal and an agent to represent and bind the firm and his associate partners in dealings and transactions within the scope of the copartnership. No express authority is necessary to confer this agency or fiduciary relation in respect to the business of the firm. If the buying and selling of real estate was a part of the business of Kil- bourn & Latta, the alleged stipulation about giving an option to the firm and the members thereof to accept special bargains would have been an idle arrangement. But under the alleged stipulation each and every purchase of real estate was a special and individual transaction or enterprise, requiring the special assent and agreement of each part- ner thereto, before it became a subject of partnership, or was brought within the scope of the partnership business. Under the operation of the agreement, a partner who purchased real estate, either on joint or partnership account, did so not under or by virtue of the partner- ship articles, or under authority derived from the partnership business and his implied agency to represent the firm therein, but solely and exclusively from the special assent or agreement of his associates to engage in that particular purchase. So that each parcel of real estate Sec. 1) DUTY TO OBSERVE GOOD FAITH. 429 to be acquired, as well as the agreement to purchase the same, was first made the subject of a special arrangement. It is difficult to un- derstand how, under such circumstances and conditions, a copartner- ship could properly be said to include or extend to the business of purchasing and selling real estate. The special subject of each purchase, as admitted by Kilbourn, like the purchase of bonds and other securities, did not and could not come within the operation of the copartnership, or become a part of the partnership agreement until each particular piece of property had been selected and agreed upon. It is undoubtedly true that, under this alleged agreement, if a partner had submitted to the firm or his as- sociates the question of buying a particular parcel of land, and they had agreed to make that purchase, he would thereafter have occupied an agency or fiduciary relation in respect to that particular piece of property. But the question here is whether his failure to give the firm, or his copartners, the opportunity of making an election to buy cer- tain real estate, and his making the purchase thereof for his own ac- count, or jointly with another, is such a violation of his fiduciary re- lations to the firm and his associates in respect to copartnership busi- ness as to entitle the latter to call him to account for profits realized in such transactions. In other words, will the violation of his under- taking to give to the firm, or his associates, the opportunity or option to engage in any particular transaction, not within the scope of the firm's business, entitle the copartners to convert him into a constructive trustee in respect to the profits realized therefrom? That the members of the firm, prior to 1871, or after that date, by special agreement, made purchases of particular parcels of real es- tate on speculation or for investment, did not make such speculative transactions a part of the partnership business so as to invest either partner with the implied authority to engage therein on account of the firm. The name of the firm was never, in fact, used in such spe- cial ventures, which no partner had authority to enter into except and until the consent of the others had been specifically obtained so to do, each instance of buying on firm or joint account being the subject of a separate, special and distinct agreement. It may be said of any and every partnership, irrespective of its regular business, that by consent of all the members other matters be- yond the scope of the partnership may become the subject of invest- ment or speculation on joint account; but such special transactions cannot properly be said to come within the scope of the partnership. The very fact that the express consent of each partner was required in order to engage in such special ventures goes clearly to show that the transactions were not within the scope of the partnership, for, if they were, special consent could not be required as a condition prece- dent for engaging therein. Matters within the scope of the partnership are regulated and con- trolled by a majority of the partners, but by the alleged stipulation 430 EIGHTS AND DUTIES OF PARTNEKS INTER SE. (Cll. 6 under consideration a single member of the firm could control the firm's action in respect to purchases of real estate. This is inconsistent with the idea that the business of the firm extended to such purchases. Again, the alleged agreement does not provide how such future acquisitions as might be specially selected or agreed upon for specula- tion or for investment were to be paid for, or in what proportion the several partners should be interested therein. Neither does it dis- tinctly appear from the allegations of the bill, nor from the testimony of the appellees, whether, in acting upon information given, the spe- cial purchases were to be made for the account of the partnership or for the account of the several members of the firm. The methods of keeping the accounts of such transactions in the name of the individual members rather than in the name of the firm would indicate that such purchases were for the benefit of the separate partners' rather than for the firm. There is no allegation in the bill, nor any direct statement in the testimony of the appellees, that if the information had been given as to the Stearns transactions, either the firm or themselves would have exercised the option of engaging therein upon the conditions of allow- ing Stearns to determine "when, at what price, and on what terms any portion of the real estate might be sold." Neither is it alleged in the bill, nor shown by the proofs, that the appellant in any way neglected the partnership business, nor that the firm and his copartners sustained any damage whatever from the transactions. On the contrary, it is shown that from the purchases and sales of the property bought on joint account with Stearns the firm derived its regular commissions. This alleged new stipulation amounts, if it has any legal force and operation, simply to an agreement for a future partnership, or the joint acquisition of such special properties as might by mutual and unanimous consent be considered as holding out a prospect of profita- ble speculation; and at most could only be regarded as an agreement for a future partnership in respect to such properties as might be specially selected for speculation. It is well settled in such cases that no partnership takes place until the contemplated event actually oc- curs. It stands upon the same principle as an option to become a part- ner, which creates no partnership until the option is actually exercised. If the stipulation in question could be construed into an agreement that no partner should engage in the buying and selling of real es- tate on his own account, would that entitle the other members of the firm to share in the profits that L,atta made in real estate speculations without having first secured the consent of his copartners to his en- gaging therein ? No such proposition can be sustained. In Murrell v. Murrell, 33 La. Ann. 1233, it was held that a partner who, in violation of the act of partnership, enters into another firm, does not thereby give the right to his original copartner to claim a share in the profits of the new firm. The violation of the agreement may give rise to an action for damages, but, inasmuch as the original Sec. 1) DUTY TO OBSERVE GOOD FAITH. 431 copartner could not be held, without his consent, for the debts of the new firm, he cannot claim to be made a partner therein. In Dean v. Macdowell, 8 Ch. Div. 345, one of the stipulations in the articles of copartnership was that "said C. A. MacDowell should diligently and faithfully employ himself in and about the business of the partnership, and carry on and conduct the same to the greatest advantage of the partnership," and by another article it was stipu- lated that neither partner should "either alone or with another per- son, either directly or indirectly, engage in any trade or business ex- cept upon the account and for the benefit of the partnership." The business of the firm was to deal as merchants and brokers in selling the produce of salt works on commission, and during its existence Macdowell clandestinely purchased a share in a firm of salt manu- facturers. A bill was filed by the other partner for an account of the profits realized in the new business, and it was held by the master •of the rolls that the bill could not be sustained. On appeal this judg- ment was aifirmed. L,ord Justice James, after stating the general principles of partnership law, said: "The business which the defend- ant has entered into was the business of manufacturing salt, which was to be the subject-matter of the trade of the first firm. If in that he had in any way deprived the firm of any profits they otherwise would have made, if by his joining in the partnership for the manu- facture he had diverted the trade from the firm in which he was a partner to some other firm, I can see that that would be a breach of his duty; but it is not pretended or alleged that any alteration took place in the business of the firm by reason of his having become a partner in the other business. It is not pretended that there was any -alteration in the commission or anything else. Everything remained exactly as it was, so that it cannot be suggested that there was a far- thing's worth of actual damages done to the original firm by reason of his having become a partner in the works which produced the arti- cles in which the firm traded. Under these circumstances it seems to Tne that we cannot say it was a benefit arising out of his partnership. It was not a benefit derived from his connection with the partnership, or a benefit in respect of which he was in a fiduciary relation to the partnership. He was only in a fiduciary relation to the partnership in this respect, namely, the same as a covenantor is with regard to any other covenantee in respect of any other covenant which is broken. It was a partner entering into a covenant with a partner ; still it was simply a covenant that he would not do something which would re- sult in damage. But it was not a covenant, in my view, which was in any way connected with the fiduciary relations between the parties. That being so, it seems to me that the master of the rolls was right in saying that you cannot extend the cases with regard to a share in the profits to a case in which, as between these parties, there was really nothing but a breach of covenant, which breach in truth did not result and could not have resulted in a farthing's worth of loss to 432 EIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6" the partnership, unless, indeed, it could lead to this : That the man was neglecting his business, devoting himself to the other business, and employing his time and attention and mind in it, and diverting him- self from the business in which he was engaged." These views, which were concurred in by the other members of the court, are directly in point in the present case, which, in principle, cannot be distinguished from the case there under consideration. We are clearly of opinion that the alleged new stipulation that each copartner should furnish to the firm, or to the members thereof, in- formation as to bargains in real estate, and give it or them the option to engage in the acquisition thereof before acting upon such informa- tion for his own benefit, neither enlarged the scope of the partnership so as to make it include the purchases and sales of real estate, nor precluded any member of the firm from making purchases on his own account or jointly with others; and that the act of the appellant in purchasing property with Stearns was no such' a violation of his duty and obligation to the firm of Kilbourn & L,atta, or to the members thereof, as to entitle the appellees to share in the profits which he realized therefrom. In respect to the second ground, on which the court below rested its judgment, that the appellant could not take advantage of the skill, knowledge, and information as to the real estate market acquired in the course of his connection with the partnership of Kilbourn & Latta, so as to gain any profit individually therefrom, but was bound to share with his copartners all the beneficial results which could be derived from his knowledge or information on that subject, we need not do more than to say that this proposition is wholly unsupported either by the authorities or by any legal principle applicable to partnership law. It is well settled that a partner may traffic outside of the scope of the firm's business for his own benefit and advantage, and without going into the authorities it is sufficient to cite the thoroughly con- sidered case of Aas v. Benham [1891] 2 Ch. 244, 255, in which it was sought to make one partner accountable for profits realized from another business, on the ground that he availed himself of informa- tion obtained by him in the course of his partnership business, or by reason of his connection with the firm, to secure individual advantage in the new enterprise. It was there laid down by Lord Justice Lindley that if a member of a partnership firm avails himself of information obtained by him in the course of the transaction of the partnership business, or by reason of his connection with the firm, for any purpose within the scope of the partnership business, or for any purpose which would compete with the partnership business, he is liable to account to the firm for any benefit he may have obtained from the use of such information; but if he uses the information for purposes which are wholly without the scope of the partnership business, and not com- peting with it, the firm is not entitled to an account of such benefits. Sec. 2) EIGHTS AND DUTIES AS TO CONDUCT OF BUSINESS. 433 It was further laid down in that case, in explanation of what was said by Lord Justice Cotton in Dean v. Macdowell, ubi supra, that "it is not the source of the information, but the use to which it is ap- plied, which is important in such matters. To hold that a partner can never derive any personal benefits from information which he obtains as a partner would be manifestly absurd." And it was said by Lord Justice Bowen that the character of information acquired from the partnership transaction, or from connection with the firm, which the partner might not use for his private advantage, is such information as belongs to the partnership in the sense of property which is valuable to the partnership, and in which it has a vested right. Tested by these principles, it cannot be properly said that Latta used any information which was partnership property, so as to ren- der him chargeable with the profits made therefrom. His knowledge of the real estate market, or in rfespect to profitable investments therein, was not used in competition with the business of the firm, nor in any manner so as to come within the scope of the firm's business. The points already considered being sufficient to dispose of the case, we do not deem it necessary to go into the other question discussed as to whether a parol partnership in respect to purchasing and selling real estate, or an agreement between copartners to give each other the option of engaging in such purchases, would come within the oper- ation of the statute of frauds. We are clearly of opinion, upon the whole case, that the decree should be reversed, and the cause remanded to the court below with directions to dismiss the bill at the costs of the appellees. SECTION 2.— RIGHTS AND DUTIES AS TO THE CONDUCT OF THE BUSINESS. KATZ v. BREWINGTON. (Court of Appeals of Maryland, 1889. 71 Md. 79, 20 Atl. 139.) Charles Brewington filed a bill of complaint against Louis Katz, alleging that in May, 1887, they had entered into a copartnership un- der the name of L. Katz & Co., and that the business had been carried on under the firm name until the tirne of the filing of the bill. It was further charged that the books of the firm were in the possession and control of Louis Katz, who refused to permit complainant to have access to the same, and that Katz had sole control and possession of the goods of the firm, and was disposing of the same in fraud of complainant; that complainant no longer felt safe with the books and assets of said firm in the possession of said Katz, and desired Gil.Paet.— 28 i34 RIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. G that said copartnership should be wound up under the order and direction of this court; tliat Katz absolutely excluded complainant from all control of the business, and refused to give him any in- formation in regard to the business of the firm, having carried the books of the firm away from the place of business of said firm, and refused to disclose the place where said books were deposited. * * * The court ordered an injunction, and set down for hearing the application for a receiver, directing that notice should be given to the defendant. The notice was not served in due time, but neverthe- less the parties appeared in court, by counsel, on the day appointed for the hearing; and, after the court had heard their statements on the bill and exhibit, it appointed a receiver. After the appointment of a receiver, an answer was filed by defendant, and an appeal was taken. Bryan, J. We are, of course, on this appeal, confined to the state- ments of the bill of complaint. The defendant might have objected to the motion for a receiver on the ground that he had not received the required notice, but he does not appear to have done so. If he had filed his answer before, the hearing it would have been con- sidered both in the court below and in this court. The time appointed for the continuance of the partnership had expired before the filing of the bill of complaint, and it was then existing only by the mutual consent of partners. The agreement of partnership required Katz to furnish all the capital, and the profits were to be equally divided after payment of debts and expenses. It was not alleged by com- plainant that any profits had been made, or that there were any debts due by the partnership. It was, however, alleged that the defendant had excluded him from all control of the business of the firm, and had refused to give him any information respecting it, and had car- ried away the books from the place of business, and had refused to disclose the place in which they were. Each partner has an equal right to take part in the management of the business of the firm. Al- though one of them may have an interest only in the profits, and not in the capital, yet his rights are involved in the proper conduct of the afifairs of the firm, so that profits may be made. So each partner has an equal right to information about the partnership affairs, and to free access to its books. The complainant had a right to learn from the books whether there were profits, and whether there were debts. If he were denied this information, as charged in his bill of complaint, a sufficient reason appears for not alleging that profits had been earned, and that debts existed. In Const v. Harris, 1 Turn. & R. 496, Lord Eldon said: "The most prominent point, in which the court acts, in appointing a receiver of a partnership concern, is the circumstance of one partner having taken upon himself the power to exclude an- other partner from as full a share in the management of the partner- ship as he who assumes that power himself enjoys." This principle seems to be universally approved by the authorities. It is decisive of the present question. The order must be affirmed. Sec. 3) EIGHTS AND DUTIES AS TO CONDUCT OF BUSINESS. 435 LINDSEY V. STRANAHAN. (Supreme Court of Pennsylvauia, 1889. 129 Pa. 635, 18 Atl. 52i.) Per Curiam. There is but a single question in this case : Is J. R. Lindsey, the plaintiff, entitled to compensation for his services as a partner? It is conceded that there was no express contract that he should be paid for such services, and there is no principle better set- tled than that the law will not imply a contract in such cases. The reason is that the partner is but attending to his own affairs. This rule is inexorable; as much so as that between parent and child. Were it otherwise, we might have a contract between the partners upon the settlement of every partnership account as to the value of their respective services. It is true this principle may work hardship in particular cases— almost every general rule does; but that is a weak argument against the soundness of the rule. When the copart- nership agreement contemplates that one partner shall manage the business, or do more than his share of the work, it is easy to provide for his compensation in the agreement itself ; and if no such stipula- tion is then made, as before said, the law will not imply one. Even where a liquidating or surviving partner settles up the business, it has been repeatedly held that he is not entitled to compensation for doing so, although, in such case, he performs all the services. Beatty v. Wray, 19 Pa. 516, 57 Am. Dec. 677; Brown v. McFarland, 41 Pa. 129, 80 Am. Dec. 598 ; Gyger's Appeal, 62 Pa. 73, 1 Am. Rep. 382 ; Brown's Appeal, 89 Pa. 139. Judgment affirmed. THAYER v. BADGER. (Supreme Judicial Court of Massachusetts, 1898. 171 Mass. 279, 50 N. E. 541.) Contract, by the surviving partner of the firm of Hayden & Thayer, to recover a balance alleged to be due from the defendant, as ad- ministrator of the estate of his deceased partner, on the settlement of the firm's affairs. The case was submitted to an auditor, and the sole ■question was whether the plaintiff had a right to pay a commission to the new firm of Thayer, Owen & Tyler, of which he was a member, for selling the property of the firm of Hayden & Thayer in liquidation. The auditor found "as a fact that the method adopted by the sur- viving partner in disposing of the merchandise of the old firm in the course of the settlement of the affairs of that firm was a prudent and reasonable one, that the charge for selling merchandise made by the new firm was a reasonable one, and ruled as matter of law that there was no objection under the circumstances to the charge of $650 com- mission made by the firm of Thayer, Owen & Tyler for selling the merchandise of the firm of Hayden & Thayer in liquidation." At the i36 EIGHTS AND DUTIES OF PARTNERS INTER SB. (Ch. 6 trial in the superior court, on the auditor's report alone, without a jury, before Hardy, J., the defendant asked a ruling that the surviving partner had no right to make any charge for winding up the affairs of the late firm, and therefore had no right to turn over the mer- chandise of the firm of Hayden & Thayer to be sold by the firm of which he was a member on commission, and that the sum charged by such firm as a commission for making the sale, or at least that portion of such commission which the surviving partner was entitled to as a member of said new firm, ought not to have been charged in the ac- count. The judge declined so to rule, adopted the findings of the audi- tor, and found for the plaintiff; and the defendant alleged exceptions. The judge reported the case for the determination of this court. If the ruling was right, the finding was to stand; if wrong, a new trial was to be granted. HotMES, J. The only question in this case is whether the judge below was bound to rule as matter of law that a surviving partner has no right to turn over merchandise of the late firm to a new firm of which he is a member, to be sold upon commission by the latter; and that the commission charged, or at least the surviving partner's share, should not be allowed in the account between him and the executor of his deceased partner. In this case the auditor has found that the course adopted was prudent and reasonable, and the charge reason- able. Whether we should have made the same findings we cannot tell, but, they having been made, and we being bound by them, we are not disposed to go so far as to say that it is impossible that the charge should have been justified by the saving to the old firm and the trouble to the new from the arrangement. It is true, no doubt, that there is a disinclination to allow pay to a surviving partner for winding up (Dunlap v. Watson, 134 Mass. 305), but the tendency is to deal with such questions on their particular circumstances, rather than by absolute rules. Turnbull v. Pomeroy, 140 Mass. 117, 118, 3 N. E. 15 ; Robinson v. Simmons, 146 Mass. 167, 176, 15 N. E. 558, 4 Am. St. Rep. 399. Findings to stand. SECTION 3.— INDEMNITY AND CONTRIBUTION. DOWNS V. JACKSON. (Supreme Court of Illiuois, 1864. 33 111. 465, 85 Am. Dec. 289.) Beckwith, J. This was a bill in chancery for contribution and set-off. The parties were partners, sharing profits and losses equally in the manufacture and sale of furniture for one year, ending No- vember 23, 1860, when the copartnership was dissolved, and the plain- Sec. 3) INDEMNITY AND CONTRIBUTION. 437 tiff in error bought the interest of the defendant in error in certain furniture belonging to the firm, and gave his notes therefor, a part of which were paid, but upon the remainder there was due at the commencement of the suit about $200. At the time of said dissolu- tion the firm was indebted to Roundy, Chabin & Co. in the sum of about $J:00, upon which indebtedness a judgment was rendered in April, 1861. An execution was afterwards isssued thereon and sat- isfied by a sale en masse of certain lands belonging to the parties sev- erally. On the 1st day of January, 1862, the plaintiff in error redeem- ed from the sale by paying to the purchaser the amount of his bid, with interest, for which he gave a receipt upon the back of the cer- tificate of sale, which he delivered to the plaintiff in error. In the spring of 1863 the parties had a, settlement of all their copartnership matters, except the claim of the plaintiff in error to be repaid one- half of the amount paid by him to redeem said lands and the balance due upon said notes. The plaintiff in error by the present suit seeks contribution for a moiety of the sum paid by him and a set-off of the same against the amount due upon his notes. The liability of the par- ties to Roundy, Chabin & Co. was a joint one, and it was the duty of each party to exonerate the other from a moiety of it. No act falling short of a complete exoneration of the one party and his property from so much of the liability as he was entitled to be exonerated from will operate as a discharge of the other party from his obligation in that re- gard. The sale en masse of the lands of the defendant in error with those of the plaintiff in error did not discharge any part of the prop- erty sold, nor the parties from their respective duties. Neither party could obtain a discharge of his property without paying the whole amount of the purchase money and interest, and each of them had the same right after the sale, within the time allowed by law, to re- deem the lands for that purpose as he had before that time to pay the debt to discharge himself from personal liability. The sale may have been irregular, and for that reason might have been set aside; but setting aside the sale would have revived the debt, and we are unable to discover any satisfactory reason for requiring the plaintiff in error to make the charge upon his property a personal debt against the de- fendant in error and himself before satisfying it. The law does not require acts to be done where there is no conceivable object to be gained by doing them. In the present case the right to contribution is founded upon the duty of exoneration. The plaintiff in error has been compelled to pay money to exonerate his property from a lia- bility, a moiety of which he ought to have been exonerated from by the defendant in error. The lands were discharged from the sale by the purchasers accepting the redemption money. The statute, pro- viding a mode of evidencing the redemption, may be enforced by an appropriate remedy; but a compliance with its provisions is not a con- dition precedent to the assertion of the right of plaintiff "in error to contribution. The court below should have rendered a decree in 438 RIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 favor of the plaintiff in error for the one-half of the sums paid by him, with interest thereon from the time of its payment. The plaintiff in error was not entitled to the set-off claimed by the bill. There was no proof of the insolvency of the defendant in error, nor of any special equity requiring the set-off to be made. * * * The decree of the court below will be reversed, and the cause re- manded. Decree reversed. MURPHY v. CRAFTS. (Supreme Court of Louisiana, 1858. 13 La. Ann. 519, 71 Am. Dec. 519.) Land, J. The plaintiff and defendant were commercial partners, transacting a general commission business under the name and style of Murphy & Crafts in the city of New Orleans. Their contract of partnership was in writing, and the third article thereof was in these words : "We will not indorse any note, draft, or give our signature separately or collectively, except for our legitimate business purposes." Crafts, in violation of this article of the partnership agreement, ac- cepted in the partnership name, for the accommodation of his brother- in-law, John C. Robertson, of the city of Boston, bills of exchange to the amount of $12,500. Robertson failed in business, and the firm of Murphy & Crafts lost, in consequence of these acceptances, the sum of $5,592.90. The principal question in this case is whether Crafts is liable to his partner for the loss. * * * Judge Story, in his Commentaries on the Law of Partnership, says : "One of the most obvious duties and obligations of all the partners is strictly to conform themselves to all the stipulations contained in the partnership articles, and also to keep within the bounds and limitations of the rights, powers, authorities, and acts belonging and appropriate to the due discharge of the partnership, trade, or business. Of course, every known deviation from, and every excess in, the exercise of such rights, powers, authorities, and acts, which produce any loss or injury to the partnership, are to that extent to be borne by the partner who causes or occasions the loss or injury, and he is bound to indemnify the other partners therefor. The same doctrine is recognized by Pothier as existing in the French law ; and it seems, indeed, so clear- ly the result of natural justice as to require no particular exposition." See Story on Part. § 173. According to these rules, the defendant is clearly bound to indemnify the plaintiff for the loss resulting from his breach of the third article of their contract of partnership, unless the same was superseded or waived in the course of their business with the assent of the plaintiff. And this is the defense made by the defendant to the action; but we concur with the district judge that the evidence is insufficient to show Sec. 3) INDEMNITY AND CONTKIBUTION. 439 that the partners came to a new arrangement in the course of their business, and thereby superseded article 3 of their contract, or that the plaintiff ratified the acceptance in favor of Robertson. Judgment affirmed. CHARLTON V. SLOAN. (Supreme Court of Iowa, 1888. T6 Iowa, 288, 41 N. W. 303.) Action in chancery to dissolve a partnership and to settle its affairs. A decree to that effect was entered, and provision was made for the division of the assets of the firm. Beck^ J. The petition alleges that plaintiff and defendant, under a written agreement, entered into a copartnership for the sale of jewelry, books, stationery, etc. The contract is set out by copy as an exhibit to the petition. It is shown that plaintiff paid into the concern cash or its equivalent equaling the amount of the stock he was re- quired to pay under the contract. It is alleged and charged that de- fendant, with the dishonest intention to defraud plaintiff, made false and "blind" entries in the books of the firm, and drew out and mis- applied the money of the firm, and failed to charge himself with money appropriated to his own use, and in other matters acted dishonestly. It is also alleged that defendant, during plaintiff's absence, and with- out his knowledge and consent, leased at a large rent a new storeroom, and thereby lost the trade and good will of the business connected with the old stand, and that this was done after plaintiff had suggested to defendant that the business of the firm ought to he closed up, in which defendant concurred, and agreed that it should be done. It is shown that the lease cannot be disposed of or surrendered except at a loss of $1,600. It is alleged in the petition that defendant is in- debted to plaintiff, on account of the business of the partnership, in the sum of $5,000, and that defendant is in poor health, and for that reason is incapable of managing the business of the firm. A receiver was appointed, who proceeded under the direction of the court to manage the affairs of the partnership. The defendant denies the charges of fraud, and dishonest and unfaithful management of the firm's business, and declares that he is ready and willing, and now offers, to settle the partnership business, and to account for all sums received by him from the firm, and that plaintiff has refused to settle unless defendant would pay $1,600, the alleged loss arising from the lease of the new storeroom. * * * In our opinion the evidence fails to support the charge of bad faith and dishonesty made by plaintiff in the petition against defendant; and we think it is not shown that defendant wrongfully withheld from the partnership any money or property to which it was entitled. It may be that the new storeroom was unwisely rented by defendant, 440 EIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 but the act was not wanton or fraudulent, or done with any improper motive, which would render him liable to make good to the firm or to his partner the loss resulting therefrom. * * * We reach the conclusion that the decree of the district court ought to be affirmed. YORKS V. TOZER. (Supreme Court of Minnesota, 1894. 59 Minn. 78, 60 N. W. 846, 28 L. R. A. 86, 50 Am. St. Rep. 395.) Action by Thomas J. Yorks against David Tozer for an accounting between plaintiff and defendant, as partners, and to recover money paid under the partnership agreement. Judgment for plaintiff, and defend- ant appeals. Canty, J. It is conceded by both parties, and found by the court, that the plaintiff and defendant were partners in the purchase of a tract of land; that it was agreed by and between them that the title should be taken in the name of defendant; that he should advance the purchase price, and pay the taxes, and plaintiff should sell the land, and, after repaying defendant the money so advanced by him and 7 per cent, interest thereon, the balance of the proceeds of such sale should be divided equally between them. The land was so pur- chased April 33, 1883, for $450, and the title so taken. The land was sold and conveyed by defendant August 6, 1890, for $1,560. Said purchase money and the taxes paid by defendant, and interest on all of the same up to the time of said sale, amount to $807.32, leaving $753.68, the balance of the proceeds of said sale, so to be divided be- tween them. This action is brought for an accounting and a recovery of the sum due plaintiff under said agreement, and the trial court awarded plaintiff one-half of said balance of $753.68, and from the judgment entered thereon defendant appeals. There is no settled- case, and the error assigned is that the judgment is not sustained by the findings of fact. The court further finds that in July, 1890, without the knowledge of plaintiff, defendant negotiated a sale of said land to said purchaser ; that the purchaser procured an abstract of title to said real estate from the register of deeds ; that said abstract was in fact false, as it omit- ted one recorded conveyance, a link in the chain of title, and by such abstract' it appeared that the original patentee was still the owner in fee of the land, whereas in fact defendant had a good title of record; that the purchaser submitted the abstract to two different and com- petent attorneys, who each advised him that, according to the ab- stract, the defendant had no title, and defendant was informed by such purchaser of the opinion of said attorneys. Defendant, believing he had no title, at an expense of $536, then procured a conveyance to himself from said original patentee, and claims that this expense Sec. 3) INDEMNITY AND CONTRIBUTION. 441 should be allowed him in said accounting as a part of the cost of the land to be deducted from such proceeds of said sale, and that plaintiff is entitled to only one-half of the balance of such proceeds, after this $526 is also deducted therefrom. It is further found by the court that defendant did not inform plaintiff of any of said negotiations, or of the apparent defect in said title, or show him or inform him of said abstract, or consult him as to purchasing the supposed title of said patentee, and that plaintiff had no knowledge or notice of any of these things, or of the sale of said property to said purchaser from de- fendant, until after the deed thereof was recorded, and he discovered it by an examination of the records; "that had said defendant ex- hibited said abstract of title to said plaintiff, or informed him in what respect said title of said defendant was claimed to be defective, said plaintiff could at once have informed said defendant that said abstract was not a true and correct abstract of title to said lands ;" and "that plaintiff was not in any manner ever consulted by defendant in regard to said supposed defect of title." The court further finds that defend- ant acted in good faith in the sale of the land, and in expending said sum of $526 in attempting to cure the supposed defect in his title, but holds that he cannot compel plaintiff to stand one-half or any part of such expense. We are of the same opinion. If defendant did not act in bad faith, he was, to say the least, grossly negligent. It does not appear that the plaintiff was not accessible and could not be com- municated with in a reasonable time. This land was the only partner- ship property, and its purchase and sale was the only partnership busi- ness. It was not an act in the usual course of the partnership busi- ness, but one which went to the very foundation of the partnership. It is found by the court that the plaintiff, and not the defendant, con- ducted the negotiations for the purchase of this land, and procured the conveyance to defendant; and he should be presumed to have had some knowledge of the state of the title. No reason is given by de- fendant why all the negotiations for -the sale of the land and the pur- chase of this supposed title by him were kept secret from plaintiff. In ■every important exigency the partner about to act should consult the ■other partner, at least if there are no circumstances which excuse him -from so doing. The order appealed from should be affirmed. WARRING v. ARTHUR et al. (Court of Appeals of Kentucky, 1895. 98 Ky. 34, 32 S. W. 221.) "Eastin, J. This action was brought by appellant in the Bell cir- cuit court, alleging the existence of a partnership between himself and appellees, and seeking to enforce an alleged right of contribution from appellees of certain sums which he claimed to have paid in excess of liis proportion of the partnership indebtedness. It is charged in the 442 EIGHTS AND DUTIES OF PARTNERS INTER SB. (Ch. 6' petition that this partnership relation arose by operation of law out. of the fact that appellant and some of the appellees had, in the year 1890, signed articles of incorporation, and undertaken to organize a corporation in the town of Middlesborough, imder chapter 56 of the General Statutes of Kentucky, and that all of the appellees had sub- scribed for and become the owners of stock in this proposed corpora- tion, which had never, in fact or in law, become a corporation, by rea- son of the failure of the projectors thereof to comply substantially with the requirements of the statute regulating the formation of cor- porations in Kentucky. It is alleged, however, that this abortive cor- poration commenced business and incurred liabilities which it was un- able to pay, and that, the defects in its organization being discovered, and the fact that it had no legal corporate existence becoming known to some of its creditors, suits were brought against appellant to charge- him individually, as one of the incorporators and stockholders thereof, and that he had thus been compelled to pay on its account the sum of $1,527.68. It is further alleged that by reason of the failure to become legally incorporated the relation between appellant and his associates became that of partners, and that they all became equally liable to- creditors for said indebtedness, and that he was entitled to contribu- tion from the others for their respective proportions of the amount paid by him individually. It is stated, however, that of his several associates only two, to wit, the appellees John M. Brooks and R. H. Fox, were, at the time of ,the filing of the petition, either solvent, or within the jurisdiction of the court, and appellant therefore asked that they be required to contribute equally with him the amount he had so paid out, and asked judgment against each of them for an amount equal to one-third thereof, or $442.56. To this petition a general de- murrer was sustained by the court, and, leave being given to amend, appellant, at a subsequent term of the court, filed an amended peti- tion, in which he alleged for the first time that the company or part- nership referred to in his original petition was insolvent at the time of the filing thereof ; that it never had any invested capital ; that its business had been done on credit; that it had long since ceased to do business ; that all the property it ever had had been sold by order of court; that from the time of the attempted organization it had been insolvent, and had long since been dissolved. To the petition as thus amended appellees Fox and Brooks again demurred, but, their de-' murrers being overruled, they excepted, and were given time to answer. Separate answers were afterwards filed by these appellees, to which ap- pellant filed replies, and also general and special demurrers, which were not then passed upon by the court, and separate rejoinders were then filed by Fox and Brooks, thus making up the issues on the plead- ings. Appellant testified in his own behalf. Brooks gave his disposi- tion; and a written statement by Fox, which was agreed to be read as his deposition, was filed, and these, with the exhibits attached to them, constituted the evidence heard upon the trial. Upon the hear- Sec. 3) INDEMNITY AND CONTRIBUTION. 443 ing the court below overruled the demurrers filed by appellant to the answers of Brooks and Fox, respectively, but on the merits adjudged that appellant take nothing by his petition, and dismissed the same with costs, to all of which appellant excepted, and prayed an appeal. The record before us presents some questions of more than ordinary interest, especially that arising on the merits of the case as prepared, and pertaining to the mutual obligations to each other of parties stand- ing in the relation of the parties to this action ; but, interesting as a consideration of that question might be, it is unnecessary, in our view of the case, and the decision of the court will be based entirely upon the sufficiency of appellant's petition to sustain the action against ap- pellees. It is to be observed that the liability sought to be fixed by appellant on appellees is that of partners. The very foundation of the cause of action rests upon the assumption that the failure of these parties to pursue substantially the course pointed out in and required by the statute for the organization of a corporation made them part- ners in this business, and, a partnership being thus established by op- eration of law, this action for contribution as between partners was brought to charge each with his proportion of what one member there- of had been compelled to pay on account of partnership liabilities. Yet it is nowhere alleged in the petition as amended, nor is it anywhere claimed in the case, that there had ever been any settlement of the partnership accounts, or any accounting between the parties, whereby a balance had been struck, or whereby the appellees were found to be indebted to the firm in any sum on final settlement. That this is, as a general rule, necessary in order to enable one partner to maintain an action of this kind against his copartners, is too well settled to require discussion. Where- the transaction out of which the liability arises is independent of or outside of the partnership business, or where the partnership covers a single venture, or but one transaction, so that no accounting is necessary, the rule is perhaps different; but in a business such as the one under consideration here, covering a variety of transactions, we know of no exception to the rule as above stated. This rule is recognized by this court in the cases of Lawrence V. Clark, 9 Dana, 359, 35 Am. Dec. 133, Shearer v. Francis (Ky.) 5 S. W. 559, and Stone v. Mattingly (Ky.) 19 S. W. 402, and may be said to be fundamental as to the right of one partner to sue his co- partner. It is true that this action was brought in equity, and that the petition contains a prayer for all general relief; but it does not ask for a settlement of the partnership accounts, or for a winding up of its affairs. It does state that the partnership is insolvent, but it nowhere says anything as to the nature or amount of its indebtedness ; and while it alleges that appellant has made these payments for it, it takes no account of the fact that other members of the firm may also have paid out money for it, as Brooks in his testimony swears that he has done. And this shows the importance of the rule referred to, for how could this one partner have known the state of the account be- 444 EIGHTS AND DUTIES OF PARTNERS INTER SB. (Ch. 6 tween this firm and each of the other partners when there had been no settlement of the partnership accounts, and how unreasonable it would be to allow him to maintain an action against each of the others for their full proportion of what he might have paid without refer- ence to the question as to what they may have paid? In other words, how can there be any fair or just contribution, or any claim to con- tribution, as between partners, until after a final settlement and ascer- tainment of the exact state of the account of each partner, and a full settlement of the partnership affairs? Admitting all that is alleged in this petition to be true, it might well be that appellant was entitled to recover nothing from his partners by way of contribution on ac- count of what he had paid, for, as there is no pretense that the part- nership accounts have ever been settled, it might appear on such set- tlement that appellant was still indebteded to the partnership in a large sum, and that his partners had actually paid for it much more than he had done. Indeed, this very claim is here made by his partners. It is charged by them that, though he subscribed for stock to the amount of $2,500, yet he has paid for no part of it; and while he claims that it was agreed that he should not pay for it, still Brooks and Fox deny that there was any such agreement. We only refer to this, however, as illustrating the imperative necessity for and the emi- nent propriety of the rule which forbids that such an action be main- tained in the absence of a full settlement of the partnership affairs which will show the exact state of the account between it and every other person, and especially the other members of the firm, so that the claims and demands of the partners, as between themselves, may be known. Another point to which attention may be called is the fact that this petition fails to state that this alleged partnership was an equal part- nership, or that the appellees. Fox and Brooks, who are each asked to contribute equally with appellant, are equally interested with him in the partnership. It appears from the record that appellant sub- scribed for $2,500 of the stock, while each of the appellees named sub- scribed for $1,000 of the same. The fact that they were stockholders is the fact relied on for holding them liable as partners. Mr. Lindley, in his work on Partnership, lays it down as a general rule "that part- ners must contribute ratably to their shares towards the losses and debts of their firm" (2 Lindl. Partn. p. 386) ; and this, we think, is the accepted doctrine on the subject. Certainly any other rule would be very inequitable in this case, and while we do not care to decide that this must be the basis of recovery in every such case, yet we would call attention to the absence from the petition in this case of any allegation as to the respective interests of the partners among whom this loss is sought to be apportioned. In conclusion, it is clear from the views above expressed, that no error was committed by the court below to the prejudice of appellant, and the judgment dismissing his petition with costs is therefore affirmed. Sec. 3) INDEMNITY AND CONTRIBUTION. 445 MAGILTON V. STEVENSON et al. (Supreme Court of Peunsylvauia, 1896. 173 Pa. 5U0, 34 Afl. 2.35.) Bill in equity for the dissolution of a partnership and an account. The master to whom the case was referred reported as follows : Whereas, in accordance with the terms of the partnership agreement, Magilton "shall in no event be put to a loss of more than $1,250, and the balance shall be made up and paid to him in case of greater loss by the other partners," the amount contributed by the plaintiff being the sum of $4,670, adding to which the amount advanced by him to the receiver of $100, making a total of $4,770, from which, deducting the amount which it ^yas agreed should represent the maximum loss of the plaintiff of $1,250, leaving a balance of $3,530 which should be paid by the defendants to the plaintiff, and they should be held to be jointly and severally liable to the full payment of the same, together with the costs of the cause, including a suitable allowance for the services of the receiver. Exceptions to the master's report were over- ruled by the court, which was assigned as error. Fell, J. The first contention of the appellant is that the decree in this case should not have been entered, as the partnership affairs had not been settled and the plaintiff's loss ascertained. The part- nership was formed for the single purpose of constructing waterworks in Mayfield, Ky. The only contribution of capital was that made by the plaintiff. The land on which the works were to have been con- structed had been transferred, and the enterprise abandoned, and the business was a total failure. The receiver was unable to obtain a bid for the few articles of personal property found on the premises, and nothing of value came into his possession. The report of the learned master that the remaining property of the partnership was "practically worthless," as explained by the testimony and other parts of his report, is in effect a finding that they were worthless. There were no as- sets, no accounts to settle, and nothing remained but to adjust the equities between the parties. The partnership agreement provides that "the profits and losses are to be shared equally by the partners, each being entitled to one- fourth of the profits, and to be liable for one-fourth of the losses; provided, however, that the said Magilton shall in no event be put to a loss more than $1,250, and the balance shall be made up, and paid to him in case of greater loss, by the other parties." The master held that the liability of the defendants to pay the loss of the plaintiff in excess of $1,250 was a joint and several liability. It is conceded that the finding of the master on this point would be correct if the parties stood in the relation of strangers; but it is contended that, in view of their partnership relation, the proviso, read in connection with the contract, imposes a Hability on each of the remaining partners to bear -only one-third of the plaintiff's loss in excess of $1,250. The 446 RIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 plaintiff furnished the whole cash capital, and the twofold purpose of the proviso was to fix a limit beyond which his loss should not extend, and to secure the repayment by the other partners of the balance of his contribution to the common property. This was done by providing that the balance should be paid to him by them. This is the plain meaning of the words used. In the preceding clause, there is a dis- tinct limitation of individual liability for the general losses of the business; and the omission of this limitation from the proviso is sig- nificant, and indicates an intention that each should be liable for the whole in the event of the failure of the others to pay their shares. As the partnership had ended, and the defendants had refused, after demand, to adjust the accounts in accordance with the agreement, we see no error in the allowance of interest. The decree is affirmed, at the cost of the appellant. SECTION 4.— A PARTNER'S RIGHT TO HAVE FIRM PROP- ERTY APPLIED TO FIRM DEBTS. WARREN V. TAYLOR et al. (Supreme Court of Alabama, 1877. 60 Ala. 238.) The original bill in this case was filed by John F. Warren against Joseph W. Taylor and Mrs. Mary C. Benagh, and sought a settlement of a partnership which had existed between Warren and Taylor, the foreclosure of a mortgage which Taylor had given to Warren on his interest in the partnership effects, and the adjustment of the con- flicting liens of Warren's mortgage and a mortgage owned by Mrs. Benagh. The mortgage by Taylor to Warren was given to secure him against any liability on account of certain bills of exchange, drawn by Taylor, in the firm name, for his personal use, with Warren's consent. The mortgage from Taylor to Mrs. Benagh was also given to secure her for a loan to Taylor for his personal use. Both mortgages were on Taylor's interest in the firm of Taylor & Warren. The mortgage to Mrs. Benagh was recorded some time prior to the mortgage to War- ren. The chancellor held that the complainant had no lien as a partner, on account of the said bills of exchange he had been obliged to pay, but must rely only on his mortgage, and that Mrs. Benagh's mort- gage, having been first recorded, was entitled to preference over his mortgage. Decree accordingly. Complainant appealed. Stone, J. Money was borrowed separately from two persons, each transaction having its inception about the same time — January, 1874. The evidence of the indebtedness was in each case renewed from time ■to time, and mortgages given as security on the same property — the Sec. 4) APPLICATION OF FIRM PROPERTY. 447 borrower's interest in the Times newspaper and its property. In the -case of Mrs. Benagh's loan, the first mortgage was executed directly to her, on the same date as the loan, January 8, 1874. This mortgage was renewed every three months. In the loan by Fitts & Co., bankers, the bill of Taylor & Warren, partners and joint owners of the Times newspaper, was taken as security, due at a short interval. This debt was increased during the year, and was renewed every 30 days. A mortgage on Taylor's interest in the Times newspaper was given to Warren to indemnify him against the use of- the firm name, Taylor & Warren. This mortgage was also renewed at short intervals. At the request of Taylor none of the mortgages were put on record until March, 1875. Each series of mortgages was renewed within every three months ; and this, it was beHeved, would preserve the Hen from the date of the several mortgages given in renewal, without expense and notoriety of registration. In other words, it was believed that mortgages on personalty might be recorded within three months after their execution, and this would operate constructive notice to cred- itors and purchasers from their date. Each of the loans was for the personal use of Mr. Taylor, and no part of the money was applied to the purposes of the partnership of Taylor & Warren. Neither Mrs. Benagh, nor Mr. Warren, knew of the mortgage to the other, or that the other loan had been negotiated. On the 23d of March, 1875, Mr. Taylor being short in the payment of interest, promised quarterly, to Mrs. Benagh, she consulted counsel, and on his advice had her mort- gage recorded on that day. Warren's mortgage was recorded four days afterwards. The question presented is, which has the paramount claim on the mortgaged property? Warren has paid up the bill to Fitts & Co. out of his private funds, and he is the actor in this suit. 1. In settling partnership accounts, each partner is clothed with the right to insist that the partnership effects shall be first applied to the payment of the partnership debts; and this right will prevail over the claims of an alienee or creditor of the copartner. So clearly de- fined is this right — so necessary to persons engaging in joint ad- ventures of this kind — that it has been long and firmly settled that each partner has a lien on the effects that they shall be applied primarily to the extinguishment of the partnership liabilities. This results, natural- ly and necessarily, from the nature of the enterprise and of the title by which the property is held. The title is in the company or associa- tion of individuals, and no one of the number has a separate owner- ship or right to any part or piece of the property or effects of the partnership. And the lien goes further than this. After the debts are all paid, each partner has a lien on the remaining partnership ef- fects for any balance due him upon a proper accounting together. 1 Story's Eq. Ju. § 677; Moore v. Smith, 19 Ala. 774; Donelson's Adm'rs v. Posey, 13 Ala. 752; Cannon v. Copeland, 43 Ala. 201; McGown V. Sprague, 23 Ala. 524; Reynolds v. Mardis' Heirs, 17 Ala. 32 ; Reese v. Bradford, 13 Ala. 837 ; Lucas v. Atwood, 2 Stew 448 RIGHTS AND DUTIES OF PARTNERS INTER SB. (Ch. 6 378 ; Emanuel v. Bird, 19 Ala. 596, -54 Am. Dec. 200 ; Bridge v. Mc- Cullough's Adm'rs, 27 Ala. 661 ; Waldron v. Simmons, 28 Ala. 629 ; Andrews v. Keith, 34 Ala. 722; Coster's Ex'rs v. Bank of Georgia, 24 Ala. 37; Parsons on Partnership, 265, 350, 351, 352, 168, 502; Fourth Nat. Bank v. Railroad Co., 11 Wall. (U. S.) 624, 20 L. Ed. 82; Rodriguez v. Hefferman, 5 Johns. Ch. (N. Y.) 417; Sitler v. Walker, Freem. Ch. 77. 2. The disputed question in this case is whether the claim of, War- ren is a partnership demand. There can be no question that it was a partnership debt, so long as it remained unpaid to Fitts & Co.; and they could have claimed and asserted all the rights against the part- nership and its effects which the law accords to partnership creditors. The bill was executed in the firm name, with the knowledge and con- sent of both partners ; and this bound the firm. Even if the firm name had been signed by one, without authority from the other, the bill was made to be used, and was used in borrowing money; and there is no evidence that Fitts & Co. knew the use to which the money was to be applied. We are not prepared to say that the debt would not have been a partnership Hability, even if the bill had been executed as last supposed. Knapp v. McBride, 7 Ala. 19 ; Jemison v. Bearing's Ex'rs, 41 Ala. 283; Cullum v. Bloodgood, 15 Ala. 34; 2 Brick. Dig. 306, § 103 ; Sprague v. Zunts, 18 Ala. 382. The relation between partners is one of generous confidence. In the absence of special agreements to the contrary, the law constitutes each the agent of the other, and the representative of the firm in the conduct of all the ordinary business of the partnership. The act of one is the act of all. If it be a mercantile partnership, a sale by one is a sale by all. And a payment to one member of the firm discharges the debt, although that member may misapply or squander the money. It is not unfrequently the case that one partner becomes more in- debted to the firm than another. He may use more of the income and effects in his personal and private affairs, may overdraw his share, or may anticipate future receipts and emoluments, sometimes with and sometimes without his copartner's knowledge or permission. In ei- ther case, his share of the profits, or of the capital, if needed, will stand incumbered by a lien to make good such deficit to his copart- ner; and that lien will be paramount to the right of any alienee or creditor of his. "In general, when a sum of money is advanced to a partner, or a partner is permitted to take it as a loan, and there are no express terms agreed on, his profits are in the first place answer- able; and, if they are insufficient, his share of the stock goes to dis- charge this balance; and, if that is insufficient, he becomes a personal debtor for the balance." Parsons on Partnership, 241. See, also, 3 Kent's Com. marg. p. 40 et seq. If, instead of borrowing the firm's credit to raise money on, Mr. Taylor had used its money, or had hypothecated its bills receivable, and thus realized the sum of them on his private account — and this Sec. 4) APPLICATION OF FIRM PEOPEETT. 449 either with or without Mr. Warren's consent — the rule above de- clared would have applied in all its force, and Mr. Warren would have held a lien. So, if there had been a partnership debt of Taylor & War- ren, and Mr. Warren had paid it out of his private funds, this would have given him a claim and lien against Taylor's interest in either profits or .capital of the partnership, paramount to the rights of cred- itors of or purchasers from Taylor. And such creditor or purchaser would have no right to complain ; for he would realize, by the trans- action, all that Taylor could claim. He would be entitled to no more. In other words, Mrs. Benagh, in this suit, can claim what Taylor could claim, if he were suing Warren; no more. She purchased no other right. See Donelson's Adm'rs v. Posey, and other authorities supra. She cannot complain of this ; for, purchasing a partner's interest in partnership effects, it was her duty to inquire of the other partner how the account stood between them. It will be seen that we have placed Warren's superior claim on the lien which the law gave him as a partner. Hence it was not neces- sary for him to take a mortgage, or, taking it, to have it recorded. When he incurred the liability for Taylor, by allowing him to pledge the credit of the firm, he had no knowledge or notice of Mrs. Benagh's claim. We need not and do not decide that his claim would prevail over Mrs. Benagh's, if, before the firm became bound to Fitts & Co., he had been notified of the conveyance to her. We hold that, after taking a proper account between the partners, charging Taylor with the sum paid Fitts & Co. and interest as so much paid to and for him by Warren, the business manager, and charging to each partner all proper debits, and allowing to each all proper cred- its, if a balance be found due to Warren, he has a first lien on the partnership effects, income and capital, for its payment. This is his share in the partnership effects, and he is entitled to it, before Mrs. Benagh can take anything by her mortgage ; any balance to be equally divided between Warren and Taylor, and the interest of the latter, as far as necessary, to be applied to the payment of Mrs. Benagh's mortgage and interest thereon from January 1, 1876. Should the bal- ance, on taking the account, be found in favor of Taylor, and against Warren, then such balance to be a first lien in favor of, and applied, as far as necessary, to the payment of, Mrs. Benagh's mortgage debt, computed as above; any balance of partnership effects to be equally divided between the partners, and Taylor's share to go to Mrs. Benagh, so far as necessary to extinguish her mortgage claim. If anything be reahzed from the mortgaged property in Greene county, the product to be applied to the payment of Warren's claim, if neces- sary, after exhausting the partnership effects. Should any of the part- nership property and effects be used in paying a balance found due to Warren, and should any portion of Mrs. Benagh's claim remain un- paid, and should there remain a surplus of proceeds of the Greene county mortgaged property, after paying Warren's claim, then, to the Gil.Pabt.— 29 450 EIGHTS AND DUTIES OF PARTNERS INTER SE. (Ch. 6 extent that Taylor's interest mortgaged to Mrs. Benagh is applied to Warren's claim, she (Mrs. Benagh) is subrogated to the mortgage rights of Warren in the surplus of the proceeds of the Greene county- mortgaged property. The decree of the chancery court is reversed, and a decree is here rendered, in accordance with the principles declared above. Costs of appeal to be paid by the appellees. Sec. 1) EEMEDIES OP PAETNERS INTER SE. 451 CHAPTER VII. REMEDIES OF PARTNERS INTER SE. SECTION 1.— ACTIONS AT LAW. SADLER V. NIXON. (Court of King's Bench, 1834. 5 Barn. & Adol. 930.) Assumpsit for money paid by the plaintiff to the defendant's use, etc. At the trial before Denman, C. J., at the London Sittings after last Michaelmas Term, the following appeared to be the facts of the case: The plaintiff, the defendant, and another person, being co- partners in trade, employed a builder to repair a building which was their joint property and in which they carried on their trade. The builder brought an action against the three copartners for the repairs, and obtained judgment, but took the plaintiff only in execution, who, in order to regain his liberty, paid the whole debt. The present ac- tion was brought to recover one-third of the money so paid. It was contended that the plaintiff, one of the three joint contractors, having- been compelled to pay money which his co-contractors were jointly li- able to pay, was entitled to maintain this action. On the other hand, it was said that, the plaintiff and the defendants in the first action being not merely co-contractors, but copartners in trade, one of them could not maintain an action against the other to recover money paid on ac- count of the firm, but that his remedy was by bill in equity; the rea- son why an action at law in such a case was not maintainable being that it would be useless for one partner to recover what, upon taking a general account among all the partners, he might be liable to refund, and this objection applying as well to a compulsory as to a voluntary payment. The Lord Chief Justice was of that opinion, and nonsuited the plaintiff, but reserved liberty to him to move to enter a verdict. F. Pollock on a former day in this term moved accordingly. It may be conceded that, where one partner voluntarily makes a payment on account of the others, he cannot maintain an action at law against his copartners; but it is otherwise where the payment is by compul- sion. The principle on which the plaintiff is entitled to recover is that he has been compelled to pay out of his own funds money which the defendant was jointly liable to pay. 452 REMEDIES OP PARTNERS INTER SB. (Ch. 7 Lord Denman, C. J., now delivered judgment, and said the court were of opinion that there was no ground for the distinction taken on the part of the plaintiff, and, therefore, there would be no rule. Rule refused. JACKSON V. STOPHERD. (Court of Exchequer, 1834. 2 Cromp. & JI. 361.) Assumpsit for goods sold and delivered, with the money counts, and a count on an account stated. Plea, the general issue. At the trial, before Bolland, B., at the last Assizes for the county of Lancaster, it appeared that, several years prior to December, 1831, the plaintiff and defendant became joint lessees of a coal mine, and had jointly carried on the working of the mine down to that period. At that time, the coal having been all gotten and the pit filled up, one Whitehead, at the request of the plaintiff and defendant, balanced the profit and loss of the concern, with the exception of some small coal on the coal-pit hill, and some debts due to the firm, and accounts to a small amount which were not then come in. The plaintiff said he would join in no more coal pits. The defendant said he would open another coal pit, whether the plaintiff joined in it or not. It was agreed that Whitehead should value the materials and utensils used for work- ing the coal mine, and that they should take each an article successively, article by article, until the whole had been divided. Whitehead made an inventory and a valuation, and a few days afterwards he met them by appointment, in order to arrange about the division of the utensils valued, and told them that il71. 19s. 9d. was the amount of the valua- tion, and gave each a copy of the inventory and valuation. It was ultimately agreed that the defendant should take the whole of the utensils at the valuation, and the defendant afterwards took possession of the whole of the materials and utensils accordingly. The valuation made by Whitehead was produced, but it was not stamped, and it was thereupon objected for the defendant that it was not admissible in evidence, and that parol evidence of the amount was also inadmissible. It was likewise objected that the action could not be maintained, inasmuch as there had been no final settlement of the partnership accounts, and no express promise to pay the moiety of the value of the materials. The learned Baron overruled the objections, but gave the defendant leave to move on both points. His Lordship told the jury that if they were of opinion that the partnership was dissolved, and that the footing on which the defendant took the uten- sils was that he was to pay for one-half of them, the plaintiff was en- titled to their verdict. The jury found a verdict for the plaintiff for the sum of i85. 19s. lOd., being half the amount of the valuation. F. Pollock, in Michaelmas Term last, obtained a rule to show cause Sec. 1) ACTIONS AT LAW. 45-3 why the verdict should not be set aside, and a nonsuit entered, or a new trial granted. Bayley, B. Upon the general rule of law there is no difficulty. One partner cannot maintain an action for a balance on the partnership account until the accounts have been settled 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 par- ticular transactions are insulated 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, the plaintiff's right of action may be put upon the footing of a separate transaction; and I collect that that was the footing upon which it was placed by my Brother Bolland. The parties were about to divide the different articles, so as to put half in the one scale and half in the other ; and if they had done that, and the plaintiff had afterwards sold his to the defendant, justice would have required that the plaintiff should pay the defendant for his moiety. But they might come to another 'agreement — that one partner should take the whole of the property, paying the value, dis- tinct from the general account ; and, upon the whole, I think that that was the transaction, and it is so found by the jury. Independently, therefore, of the general law of partnership, it seems to me that the nature of the bargain as to the division of the property raised an im- plied obligation on the defendant to pay in money before a final set- tlement of the accounts. The case of Fromont v. Coupland does not seem to me at variance in any respect with the other decisions, or with the view which I take of this case. A claim, by way of set-off, was there made, not on a bargain of an insulated nature, but on a balance of weekly accounts, and the court decided that it could not be maintained, as there had not been any final settlement. Here, unless there had been a consent and a purchase, the defendant would not have been entitled to use this property for his own separate purposes. It may be observed that the partnership there was continuing, and that the balance in favor of one partner at the end of one week might be against him at the end of the next, or at the conclusion of the partner- ship. As to the question of the stamp, it seems to me that St. 55 Geo. Ill, c. 184, sch. part 1, does not apply, as the valuation was for the information of the parties, and not binding upon them, although it was afterwards made the foundation of an agreement. Vaughan, B. I am of the same opinion. I think this rule cannot be supported on either ground. It is, no doubt, a general rule that one partner cannot maintain an action on a partnership transaction so long as the partnership concerns remain unadjusted; but, if any sub- ject be withdrawn, and made the foundation of a distinct settlement, it is then no objection that other accounts remain unadjusted. The question whether there was an agreement that the defendant was to '154 REMEDIES OF PARTNERS INTER SB. (Ch. 7 take the materials and utensils, and to pay the plaintiff one-half of the value of the whole, was left to the jury, and they found that it was so. Rule discharged.^ BURLEY & HARRIS v. HARRIS. (Superior Court of Judicature of New Hampshire, 1840. 8 N. H. 233, 29 Am. Dec. 650.) This was assumpsit on an account annexed to the writ. The cause was tried on the general issue, and a brief statement was filed, alleging the causes of defense disclosed in this case. It was admitted that Harris, the defendant, was a partner in the firm of Burley & Harris, in whose name the suit was brought. The defendant had received goods belonging to the firm to the amount of $495.84, for which he was liable to account to the firm; but it was not admitted or proved that the defendant, on a full adjustment of the partnership affairs, would be found indebted to the firm. The parties offered in evidence the original articles of partnership betwixt them, and an assignment of the partnership demands to Burley, with an agreement that Burley was to account for these demands in payment of certain company debts, and in payment of Harris's portion of the partnership profits, if there should be any. The partnership business remains unsettled at this time. On the disclosure of these facts the court directed a nonsuit, subject to the opinion of the court; and it was agreed by the parties that, if this ruling of the court should not be sustained, the nonsuit was to be set aside, and judgment rendered for the plaintiffs for the amount of the account annexed. Upham^ J. The authorities are very clear that an individual can- not stand in the relation of plaintiff and defendant in the same suit. A judgment in such case would avail nothing, as the defendant would have the same right to discharge an execution founded on it as the plaintiff. The question has arisen in numerous instances where an in- dividual has been a member of different firms, in which one firm held claims against the other and attempted to enforce them at law. Judge Story, in his treatise on Equity, says that no suit can be maintained at law in regard to any actions or debts between two firms, where in- dividuals of the firms are partners in each. In such a case, all the partners must join and be joined ; and no person can maintain a suit against himself, or against himself with others. The objection is a complete bar to the action. Nay, even after the death of the partner or partners belonging to both firms, no action upon any contract, or mutual dealing ex contractu, is maintainable by the survivors of one 1 The concurring opinion of Gurney, B., is omitted. Sec. 1) ACTIONS AT LAW. 455 firm against those of the' other firm ; for in a legal view there never was any subsisting contract between the firms, as a partner cannot contract with himself. , 1 Story's Eq. 630; Bosanquet v. Wray, 6 Taunt. 597 ; Mainwaring v. Newman, 2 Bos. & P. 120 ; Jones et al. V. Yates et al., 9 Barn. & Cres. 532. In Eastman v. Wright, 6 Pick. (Mass.) 316, and May v. Parker, 12 Pick. (Mass.) 39, 22 Am. Dec. 393, are remarks of the court to the same effect. In the case of Holmes V. Higgins, 1 Barn. & Cres. 68, it appeared that a number of persons had associated themselves together and subscribed sums of money for the purpose of obtaining a bill in Parliament to make a railway. It was holden that they were partners, and that a subscriber who acted as a surveyor in their employ could not maintain an action against all or any of the subscribers. Chief Justice Abbot held that the sub- scribers were partners, and that it was perfectly clear that one partner could not maintain an action against his copartners for work and labor performed, or money expended, on account of the copartnership. But in this case the partnership effects have been assigned to one of the firm, and it is contended that the assignment should be protected and the holder of the partnership property permitted to enforce all claims in the partnership name. This doctrine is correct. In many instances of dissolution of partnerships the remaining partner is, by agretment, exclusively authorized to arrange the joint affairs and to receive the partnership credits as the fund out of which to discharge the partnership debts. Where this is the case, and notice as well of the dissolution as of the private arrangement between the parties is given, a debtor to the firm cannot, by colluding with the outgoing partner, obtain from him a discharge of the debt. Gow on Part. 275 ; Hender- son V. Wild, 2 Camp. 561 ; Skaife v. Jackson, 3 Barn. & Cres. 421 ; Scott V. Trents, 1 Wash. (Va.) 77; Mountstephen v. Brooks, 1 Chit. 390; Arton et al. v. Booth, 4 Moore, 192. The claims of the firm against all persons, other than the partners, may well be enforced under such an arrangement. But until a final adjustment is made of the balance due on all partnership accounts, or at least until some balance is struck, and a specific sum is found due to some one part- ner, no suit can be enforced by one member of a firm against another. Gow on Part. 88; Walker v. Long, 2 Browne (Pa.) 125; Ozeas v. Johnson, 4 Dall. (Pa.) 434, 1 L. Ed. 897; Murray v. Bogert et al., 14 Johns. (N. Y.) 318, 7 Am. Dec. 466; Beach v. Hotchkiss, 2 Conn. 426 ; Bond v. Hays, 12 Mass. 34 ; Wilby v. Phinney, 15 Mass. 116; Fanning v. Chadwick, 3 Pick. (Mass.) 420, 15 Am. Dec. 233; Brinley v. Kupfer, 6 Pick. (Mass.) 179; Foster v. Alanson, 2 D. & E. 479. ' No settlement of the partnership claims has been made in this case. The assignment to Burley is in fact a mere power of attorney, au- thorizing him to collect the partnership demands and apply them in payment of the partnership debts, while he was to hold the balance to be adjusted by the partners. The partner who took upon himself 45C REMEDIES OF PARTNERS INTER SB. (Ch. 7 the business of collection covenanted to account for all the property received, to pay the debts, and to pay the defendant his share of the profits upon a final settlement, if the firm should be found to have real- ized any profits for division. The partnership business as betwixt the partners was left entirely unsettled, and in case of any difficulty in the settlement betwixt them their claims were to be submitted to the arbitration of individuals designated in the articles of dissolution. There is no pretense, then, for maintaining this suit, on the ground of any adjusted balance made betwixt the parties. It is a mere naked suit brought by a firm against a partner for an indebtedness to the firm. The suit is, therefore, felo de se. The parties on either side upon the record are the same. Should any difficulties arise in the final settlement of the concerns of these partners, there is a plain rem-- edy in equity, where the objections which occur here would not exist. Suit dismissed, without costs. LEDFORD V. EMERSON. per cent, would be a reasonable commission, amounting to $90.85, which would leave a balance in the defendants' hands of $3,551.47. Came has also re- ceived since the dissolution $103.20, and Raymond has received since the dissolution $281.52, making the total assets now in the hands of the partners $3,936.19. Let us next find the amount of capital stock of each partner at the time of the dissolution, calling all that each member had in the con- cern capital stock ; the members remaining substantially the same from its commencement to its close. This capital stock will be found by adding to the amounts invested by each, at the commencement, the interest on the amount invested by him above the amount of $1,- 200 ; also by adding the amount added to this capital by the services rendered by each and amounts paid, and deducting therefrom the amount of the indebtedness of each to the firm for such articles as they had received during the same time. It appears that the account of each partner was kept in that way each year, and that nothing was divided during the existence of the company, and nothing was paid as interest on stock, or paid by the members of the copartnership for what they received from the firm. It appears that the accounts kept in this way up to August 1, 1852, showed that the capital stock of each, including the whole original investment, was as follows: Put- nam & Chase (including Obed Chase), $6,476.77; J. G. Raymond. $2,468.22; Came & Palmer (represented by Came), $1,387.56. But Chase, in his deposition (cross-interrogatory No. 16), states the amount due each partner, October '8, 1863, the day of the disso- lution, and including the whole of the original investment of each, but exclusive of interest from August 1, 1863, as follows: Putnam & Chase (including Obed Chase), $6,424.17; then taking the average amount between August 1 and October 8, 1863, and casting interest upon the excess above $1,200 for two months and seven days, and it gives as interest, $58.63, making their whole investment, October 8, 1863, $6,482.80. He also states in the same way the investment of Raymond, October 8, 1863, at $2,550.72; casting interest as before on average capital over $1,200 for two months and seven days, $14.62; Raymond's whole investment, October 8, 1863, $2,565.34. He also states in the same way the investment of Came, October 8, 1863, at $1,433.56; casting interest as above on his average capital above Sec. 3) ACCOUNTING AND DISTRIBUTION. 493 $1,300 for two months and seven days, $2.35; Came & Palmer's whole investment, October 8, 1863, $1,435.91. Adding these three total amounts of investment together, we have, as the total invest- ments of all the partners, October 8, 1863, $10,484.05. This is as near an approximation to accuracy as I am able to make from data given in the evidence ; but it can only be an approximation, of course. We thus find this company commencing with an aggre- gate capital stock of $7,700, and after continuing business about two years and five months this aggregate capital stock has increased to $10,484.05, and then, upon closing up of the affairs of the copartner- ship, collecting debts, disposing of property, and paying debts, there remains of the assets in all only $3,936.19. Deducting total assets from total investments, it shows a loss of $6,547.86. * * * The next question that arises is in relation to the distribution of the assets. What proportion is each to have? Why, clearly, by the eleventh article, these^ assets are to be divided among the part- ners in proportion to the share which each has in the capital stock, after paying the debts of the firm. The plaintiff, relying upon this article, claims that Raymond is entitled to share the property in the defendants' hands with them, in the same proportion that his stock bears to theirs, which would give him something over one-third as much of these assets as the defendants receive, and that Came is to share in the same according to the amount of his stock. This would have been so under this article, had the fifth article been bmitted al- together, or had the provision of that article been that the profit or loss should have been shared, not equally, but in proportion to the capital stock of each at the close of the copartnership. But the fifth article provides that the losses and profits shall be shared equally, one-third by each member of the new firm; and be- fore it can be, ascertained what the assets are that are to be divided, the profits are first to be divided equally, and the balance will be the assets to be divided, according to the amount of capital stock, or, if there have been losses, they must first be borne equally by the several members, one-third by each, and the balance, after sharing the losses in that way, is to be divided by article 11. Thus, although Putnam & Chase had at first three times the amount of stock that Raymond had, and four times the amount that Came & Palmer had, yet they were to receive interest on all above $1,200, and were only to have an equal share of the profits with each of the others, and were only to bear, an equal proportion of the loss. Now, we have seen that the whole loss during the continuance of the com- pany was $6,547.86. Dividing this by three, it gives the loss to each, $3,182.63 ; so that each is to first share his proportion of the loss be- fore the dividend of assets can be made. Properly, if a profit had been made, this would first be divided equally, which would leave just the capital stock to be divided, or, if a loss is made, each should 494 REMEDIES OF PARTNERS INTER SB. (Ch. 7 first pay his proportion of the loss, and, if this were done, then the stock would remain, for each one to take just what he put in. Suppose in this case the company had gained $6,000, instead of losing that amount : then each would have been entitled to an equal third of the profits, $2,000, and this would have been first divided, and that would have left just the same amount of capital stock for each to take out that he had put in. But now the tables are turned, and if each partner were to pay in his amount of the loss, $2,000, and more, that would make the amount of stock good, so that each could receive just what he had invested in stock. It will be seen at a glance that, if each partner paid in his proportion of the loss, that would make the whole loss, which, with the assets on hand, would equal the whole amount of capital stock invested ; and then, each hav- ing shared his proportion of the loss, according to the fifth article, the assets could be divided according to the eleventh article, and each would have just the amount he put in. But if, instead of paying in each his proportion of the loss, and then receiving his share of the investment, we offset the amount of loss to the share he is to receive as capital stock, the result will be the same. Putnam & Chase have invested in all $6,482.80. Deduct their pro- portion of the loss, $2,182.62, and it leaves for them to come from the assets $4,300.18. But they have received in all only $3,551.47, leav- ing still due to them, above all they have received, $748.71. Raymond had invested in all $"2,565.34. Deduct his proportion of loss, $2,183.62, and it leaves for him to come from the assets $382.72. But he has already received from the assets $281.52, which leaves due to him only $101.20. Game's share of the loss is $2,182.62, while he has invested in all only $1,435.91. Deducting his whole investment from his share of the loss, and it leaves him in debt to the company, $746.71. Came has also received of assets, since dissolution, $103.20. This added to the other indebtedness, he owes the company $849.91. Now, if Came should pay in this amount, which he is bound to do by the fifth article, in order to bear his equal proportion of the loss, it would just meet the amounts due to Putnam & Chase and to Ray- mond. $748.71+$101.20=$849.91. Thus we see that Came, or Came & Palmer, owe the company just enough to pay the amounts due to Putnam & Chase and to Raymond, and leave each thus to share an equal proportion of the loss, and then to divide the assets according to the amounts invested by each. The present bill must necessarily be dismissed in its present form: First, for want of proper parties. All who are to be directly affected by the decree must be made parties to the bill. Obed Chase should be joined as one of the Putnam & Chase. Came should also be joined, or Came & Palmer; and, as it is not certain how that share does stand, the only safe way will be to make both Came and Came & Palmer parties to the bill. And, second, Because Raymond has evi- Sec. 3) ACCOUNTING AND DISTRIBUTION. 495 dently no claim upon the defendants. But, leaving Came out of the question, the defendants have a claim against the plaintiff for some- thing, because, if nothing can be got of Came, then the loss by him is to be borne equally by the other two, probably ; so that the defend- ants would have a right to call on the plaintifif to pay them such a sum as would equalize their losses by Came. But if Came is made a party, and is responsible, then, when he pays in what he owes, the plaintiff -can recover his balance of $101.20, while the defendants would be getting the balance of $748.71 which remains due to them. Even if the loss by Came were to be borne by the other two partners, not equally, but in proportion to the sum invested by each, then it will be seen that there would be a balance due from the plaintiff to the de- fendants, provided they must lose the amount due from Came. Assuming that the written articles of agreement do not include and regulate such losses as this, still, how should the partners who are as- sociated together, and are to share the profits and losses equally, ad- just a loss by the failure of one of their own number to pay or share his proportion of the general loss, otherwise than by sharing such loss equally between them? Raymond was as much the surety of Came to the company as Putnam & Chase were; and, if this is a joint debt to the other members of the firm, then in case of loss they would all share the loss equally. But we do not need to decide this question here, as in any event this plaintiff can recover nothing of these de- fendants. If not amended, the bill must be dismissed, with costs; and, if amended, the defendants will be entitled to their costs to this time. In this way it will be observed that the same result is reached that the defendants contend for in their answer, though in a different way; not by contradicting the written articles of agreement, but by apply- ing and enforcing them. Let us illustrate the principle involved in this case by a simple ex- ample, which we will suppose: Three partners go into company. A. puts in $2,000, and B. and C. $1,000 each. A. is to draw interest on $1,000 of his capital, and they are to divide the profits and share^ the losses equally; and at the close each is to share in the assets in proportion to the amount of his investment or share of the capital stock. Suppose at the end of two years they close up, and find they have made a profit of $3,000. They divide the profit equally, and take $1,000 each. This leaves the capital stock so that each has what he invested. But suppose, at the end of two years, on closing up, they have lost $3,000. This is to be borne equally. The share of each to lose is $1,000. Now, it will be seen at a glance that it makes no difference whether each pays in his share of the loss in cash, and then divides the assets in proportion to the amounts invested, or offsets the loss against his capital stock before he receives his share of the assets. They have lost $3,000 out of $4,000 of capital, which leaves the as- 496 EEMEDIBS OF PARTNERS INTER SE. (Ch. 7 sets only $1,000. The result will be precisely the same if A. takes, the whole of the $1,000 that is left, and the others take nothing, that it would be for each to pay in $1,000 (his share of the loss) and then to divide, and A. take $2,000 and B. and C. $1,000 each. The share of loss for B. and C. is just equal to the capital stock, and A.'s loss is just half his capital stock. But suppose the loss to be $6,000, which would be $2,000 more than all the capital stock; then, as between themselves, B. and C. must pay each $1,000 more, beside losing all their capital stock, while A. loses nothing but his capital stock, because his stock is double theirs, and his share of the loss is only the same as theirs. In all these cases we are considering the liability of the partners as among themselves, and not as to third persons. But again: Suppose A. has $2,200 of the stock, B. $1,100, and C. $700, making $4,000 capital, as before, with the same conditions as before, and at closing they find a loss of $3,000. If each pays in his share of the loss ($1,000), that restores the capital stock, so that each can have just what he invested. But if, instead of paying in the loss, they offset that against their investment, then A. would be en- titled to receive of the assets $1,200, that being his share of capital above his share of loss; B. would be entitled to receive $100, that being the amount of his stock above his share of the loss; C. would owe $300, that being the amount that his capital stock falls short of making his proportion of the loss. Now, if C. pays his $300, and thereby shares his proportion of the loss, then A. and B. can get what belongs to them ; the $1,000 of assets and the $300 paid by C. making $1,300, which will give A. his $1,200 and_B. his $100. But suppose A. has the $1,000— all the assets except the $300 due from C— in his hands, and C. becomes bankrupt and fails to pay his $300 ; how does the case stand between A. and B.? A. has got all the assets. B. has got nothing. B. calls on A. to divide with him in proportion to their capital stock. But the company still owes A. $200, and it owes B. but $100. If this loss by C. is to be borne by A. and B. in proportion to their several amounts of capital stock, then neither could claim 'anything of the other, because, although B. has received nothing, while A. has received $1,000, yet the amounts they have lost over and above their $1,000 each is now just in proportion to their capital stock, namely, two to A. to one to B. But if this loss by C. is to be borne equally between A. and B., then A. could rightfully call on B. for $50, in order to equalize their loss by C, after having shared equally in the general loss by the company. That would be very much like the case before us, though here the defendants would have some claim upon the plaintiff in any event, if Came should not pay in the amount he owes the company; but, if he does pay, then all parties will get their dues. The bill to be dismissed, unless amended. Sec. 3) ACCOUNTING AND DISTEIBUTION. 497 LAMB V. ROWAN. (Supreme Court of Mississippi, 1903. 81' Miss. 45, 35 South. 427.) Johnston, Special Judge. This case is here on Lamb's appeal and Rowan's cross-appeal from the final decree of the chancery court of Copiah county settling a partnership accounting between Lamb & Rowan and providing for the sale of the partnership property. On April 3, 1889, E. A. Rowan began the suit in the chancery court of Copiah county for a partnership accounting and for the sale of the property belonging to the firm of Lamb & Rowan. It is stated in the bill that Rowan and Lamb formed a partnership in October, 1883, for the purpose of carrying on a sawmill business in Copiah county near the town of Beauregard, on the Illinois Central Railroad, and that they afterwards built another sawmill and a planing mill near Wesson. The business was discontinued in the year 1894, though there was no formal dissolution of the partnership. It is averred in the bill that large profits were made in the business, which was con- ducted directly and indirectly by Lamb, and that on accounting Lamb would owe the firm not less than $20,000, and that the firm would be largely indebted to Rowan. Lamb denied in his answer that there was any partnership between himself and Rowan. Pending this pro- ceeding the partnership property was placed in the hands of a re- ceiver. * * * It is insisted for Rowan in a suggestion of error that interest should be allowed to Rowan on the decree in his favor against Lamb ren- dered by the chancery court and corrected by this court on a former suggestion of error submitted by the appellant. The general rule, sus- tained by all of the authorities that have been cited by counsel and by many others which we have consulted, is that ordinarily interest is not allowed on a partnership accounting. To this there are some ex- ceptions, where, in the discretion of the court, interest may be allow- ed. * * * ■yye are of the opinion that no interest should be allowed at any time during the period of this accounting. There is no point during this whole period that can be fixed equitably as the time when interest should be charged. The accounting in the chancery court shifted from one set of balances to another. The first report of the master was set aside by the chancellor. The second report of the master was materially' modified by the chancellor on both sides of the accounts. And, finally, the balances found by the chancellor in the decree appealed from have been changed by this court, and dififerent balances directed to be struck, which has not yet been done. During this whole period of time the accounting has been in progress. The accounts in the case show that the total sales of lumber amounted to over $180,000 during the existence of the partnership. And the ac- counts oLeach partner with the firm were in many instances com- Gil.Paet.— 32 i98 EEMEDIES OF PARTNERS INTER SE. (Ch. 7 plicated and obscure, and so many items were controverted it was impossible to state the accounts with exactness. We will notice other leading authorities on this subject. Judge Story said that interest is not allowable in partnership accountings un- til a balance has been struck on a settlement between the partners. Dexter v. Arnold, 3 Mason (U. S.) 28J:, Fed. Cas. No. 3,855. Vice Chancellor Sandford of New York, in Beacham's Assignees v. Eck- ford's Ex'rs, 3 Sandf. Ch. 116, after a review of all the authorities, came to the conclusion that there is no general rule established, but that the allowance or refusal of interest depends upon the circumstan- ces of each particular case. Judge Sharswood, in Gyger's Appeal, 62 Pa. 79, 1 Am. Rep. 382, approved this rule, saying: "This seems much the safest principle .to adopt in view of the confidential relation of the .parties and the variety and complication of 'such accounts." lyindley says that the general rule is that interest is not allowed in partnership accountings. Eindley on Partn. (4th Ed.) 786. It is said in various cases that there is no fixed rule on the subject as to what circumstances may call for the allowance of interest. And it may be said that Judge Sharswood stated the rule correctly to be that each depends upon its own peculiar facts and circumstances. This was held in Buckingham v. Ludlum, 29 N. J. Eq. 350 ; Johnson v. Harts- horne, 52 N. Y. 173; Gyger's Appeal, 62 Pa. 73, 1 Am. Rep. 382. The following cases also hold this doctrine : Moss v. McCall, 75 111. 190; Tirrell v. Jones, 39 Cal. 655; Whitcomb v. Converse, 119 Mass. 38, 20 Am. Rep. 311; Tutt v. Land, 50 Ga. 339. It has also been held that a partner is not entitled to interest on money advanced to or deposited with the firm for its use, unless there be a special agree- ment to that effect. Lee v. Lashbrooke, 8 Dana (Ky.) 211; Dav v. Lockwood, 24 Conn. 185; Desha v. Smith, 20 Ala. 747. We 'an- nounce 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 equitable to make the allowance. All of the cases that we have examined hold in the broadest terms that in the exceptional cases the allowance or disallowance of interest in an accounting between partners is within the discretion of the court. Exercising this discretion according to our views and convictions of the circumstances of this particular case, we adhere to our former ruling on this question. * * * » Sec. 1) EIGHTS AND REMEDIES OF CREDITORS. 499 CHAPTER VIII. RIGHTS AND REMEDIES OF CREDITORS. SECTION 1.— AT LAW. I. Creditors of the Partnership. MEECH et al. v. ALLEN. (Court of Appeals of New York, 1858. 17 N. Y. 300, 72 Am. Dec. 46.o,) Appeal from the Supreme Court. The complaint averred these facts: In May, 1847, the plaintiffs recovered a judgment against one Taylor, upon his sole and individual indebtedness, for $8,650.65, which was duly docketed and became a lien upon his real estate. In 1848 Taylor died, seised of real estate in his own individual right, upon which said judgment was a lien. Taylor and one Hiram Pratt, who died in May, 1840, were in their lifetime partners in the business of common carriers upon the Erie Canal and the Great Lakes. A demand arose against them as such partners, which was in litigation when Pratt died, and upon which a judgment was recovered in the Supreme Court, and duly docketed on the 13th of May, 1842, against Taylor, as survivor of himself and Pratt, for $9,-990.05, which judgment was assigned to and became the property of the defendant Allen after the death of Taylor and the recovery of the plaintiffs' judgment. In April, 1850, executions were issued upon both of the above-described judgments to the sheriff of Erie, who in virtue thereof, on the 4th of June, 1850, sold certain parcels of the real estate in the city of Buf- falo, whereof Taylor died seised in his own right. The plaintiffs attended at the sale, and gave notice to the defendant of the facts stated, claiming that their judgment was entitled to priority and that the money raised by the sale should be applied first to its satisfaction. The defendant became the purchaser at the sale. There is no other individual property of Taylor out of which the plaintiffs can obtain satisfaction of their judgment except the land thus sold, and there is sufficient estate of Hiram Pratt, deceased, to satisfy the judgment of the defendant. The complaint prayed that the land might be resold and the pro- ceeds first applied to the payment of the plaintiffs' judgment, or that the defendant pay to them so much of the proceeds of the sale al- ready had as would extinguish their judgment, with the costs of this 500 EIGHTS AND REMEDIES OF CEEDITOES. (Ch. 8 action. The defendant demurred, and had judgment in his favor, which was, on appeal, affirmed by the Supreme Court at General Term in the Eighth District, whereupon the plaintiffs appeal to this court. SeIvDEN, J. It is a settled rule of equity that, as between the joint and separate creditors of partners, the partnership property is to be first applied to the payment of the partnership debts and the separate property of the individual partners to the payment of their separate debts, and that neither class of creditors can claim anything from the fund which belongs primarily to the opposite class until all the claims of the latter are satisfied. This, however, is a rule which prevails in courts of equity in the distribution of equitable assets only. 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. In regard to all such cases the rule is equitas sequitur legem. 1 Story, Eq. Jur. § 553. In Wilder v. Keeler, 3 Paige, 171, 23 Am. Dec. 781, Chancellor Walworth says : "Equitable rules are adopted by this court in the administration of legal assets, except so far as the law has given an absolute preference to one class of creditors over another." So, in the case of Averill v. Loucks, 6 Barb. 470, Paige, P. J., says : "Courts of equity, in the administration of assets, follow the rules of law in regard to legal assets, and recognize and enforce all antecedent Hens, claims, and charges existing upon the property, according to their priorities." This is also conceded in the case of McCuUoh v. Dashiell, 1 Har. & G. (Md.) 96, 18 Am. Dec. 371, where the whole doctrine of the distribution in equity of the joint and separate property of partners is very elaborately examined. Archer, J., by whom the opinion of the court was delivered, there says: "At law the joint creditors may pursue both the joint and separate estate, to the extent of each, for the satisfaction of their joint demands, which are at law considered joint and several, without the possibiHty of the interposi- tion of any restraining power of a court of equity." But especially must it be beyond the power of such courts to interfere where an absolute right of legal priority is given by force of a positive statute, as in case of a judgment. Chancellor Walworth, in Mower v. Kip, 6 Paige, 88, 29 Am. Dec. 748, says: "The rule of this court is to give effect to the lien of a judgment upon a legal title, so far as it can be enforced by execution at law." As there is no doubt that at law the judgment for a partnership debt attaches and becomes a Hen upon the real estate of each of the part- ners, with the same effect as if such judgment were for the separate debt of such partner, it is obvious, from the preceding authorities, that the theory upon which the complaint in this case was drawn is erroneous. The principle that the separate property of an individual partner is to be first applied to the payment of his separate debts has, as we have seen, never been held to give priority as to such prop- erty to a subsequent judgment for an individual over a prior judg- Sec. 1) AT LAW. 501 merit 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, as in the case of White V. Carpenter, 2 Paige, 219. The mere general equity of the separate creditors to have their debts first paid out of the individual property of the partners 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 partner- ship debt. The plaintiffs cannot, under the averments in the complaint, avail themselves of that principle of equity which enables a creditor hav- ing a lien upon one fund only to compel a creditor who has a lien, not merely on the same fund, but also upon another, to resort first to the latter, to the end that both may be paid. If the complaint had averred that there was sufficient partnership property, upon which the defendant's judgment was a lien, to satisfy such judgment, it is pos- sible that, under the principle referred to, the plaintiffs might have been entitled to some relief ; and in that event it would not have been a valid objection to the complaint that it did not ask for relief appro-, priate to the case. But the averment in the complaint is simply that there is sufficient estate of the deceased partner, Hiram Pratt, to satisfy the defendant's judgment. This averment brings the case directly within the doctrine laid down by Lord Eldon in Ex parte Kendall, 17 Ves. 520. He says: "If A. has a right to go upon two funds, and B. upon one, having both the same debtor, A. shall take payment from that fund to which he can resort exclusively, that by those means of distribution both may be paid. That takes place where both are creditors of the same person and have demands against funds the property of the same person. But it was never said that if I have a demand against A. and B., a creditor of B. shall compel me to go against A., without more, as if B. himself could insist that A. ought to pay in the first instance, as in the ordinary case of drawer and acceptor, or principal and surety, to the intent that all obligations arising out of these complicated rela- tions may be satisfied. But if I have a demand against both, the creditors of B. have no right to compel me to §eek payment from A., if not founded in some equity giving B. the right, for his own sake, to compel me to seek payment from A. The point has also been expressly decided in this state in the case of Dorr v. Shaw, 4 Johns. Ch. 17. The only difference in principle between that case and this is that there it did not appear that the joint debtors were partners. This, however, is a difference which operates against the claim of the plaintiffs here. Where two individuals, not partners, are jointly indebted, it might seem to be just to presume that each owed one-half, and to that extent, therefore, there might be an equity in favor of the one owing an individual debt to have so much of the joint debt paid by his co-debtor. But in regard to part- 502 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 ners it is now well settled, upon an analogous question, that no such presumption can be indulged. Formerly a judgment creditor of one of two partners might levy his execution upon property belonging to the firm, and, upon the presumption that the interests of the partners were equal, might proceed to sell and appropriate one-half the avails to the satisfaction of his debt. This, however, was long since over- ruled. In the case of Button v. Morrison, Lord Eldon, in discussing this question says : "It may be represented that the world cannot know what is- the distinct interest of each (i. e., each partner), and there- fore it is better that the apparent interest of each should be considered as his actual interest. But courts of equity have long held other- wise." He then lays down the rule, ever since acted upon, that the creditor in such a case must wait until the partnership accounts are settled before he can claim anything from the partnership property. The principle here asserted by Lord Eldon is directly apphcable to the present case. It is that no inference can be safely drawn, from the mere external relations of partners to the world, as to the situa- tion of their affairs inter se, and that, in all judicial proceedings in- volving the latter, an investigation is first to be made ; and such is the variety and frequent complexity of partnership dealings that any other rule would obviously lead to gross injustice. It is impossible, therefore, in this case to assume, without any averments on the sub- ject in the complaint, that the estate of the deceased partner, Pratt, ought, in equity, to pay any portion of the defendant's judgment. Hence, upon the principles laid down by Lord Eldon, and universally acted upon by courts of equity, the complaint is clearly insufficient. The judgment of the Supreme Court, therefore, should be affirmed, with costs. Judgment affirmed.^ 1 In Stevens v. Perry, 313 JIass. 380 (1873), In holding that a firm creditor may, by trustee or garnishment proceedings, reacli the goods or effects of a jiartner in the hands of a third person, the court said: "It is well settled as matter of law in this commonwealth that, in a suit against two or more co- partners upon their joint debt, the separate property of any one of the part- ners )nay be attached, and the lien so acquired is not discharged or impaired by a subsequent attachment of the same property upon a suit in favor of a separate creditor of the same partner. Allen v. Wells, 22 Pick. (Mass.) 430, 33 Am. Dec. 757 ; Newman v. Bagley, 16 Pick. (Mass.) 570. The Supreme Court of New Hampshire has in several cases held otherwise. Jarvis v. Brooks, 23 N. H. 136; Bowker v. Smith, 48 N. H. Ill, 2 Am. Rep. 189. But we must con- sider ourselves bound by our own decisions. As the debt due from the part- ners jointly is also due from each, it may be enforced against the separate property of each. It is immaterial whether tliis 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 necessary that the principal debtors should have made a joint deposit, or that the fund should belong to then) jointly. It is enough if funds attachable upon a trustee prneoss are due from the alleged trustee to either one of the principal defendants." Sec. 1) AT LAW. 503 JAFFRAY et al. v. JENNINGS et al. (Supreme Court of Michigan, 1894. 101 Mich. 515, 60 N. W. 52, 2rj L. R. A. 645.) Hooker^ J. Plaintiffs were copartners, residing in New York, and were jobbers, of whom the defendants (father and son, and also part- ners) purchased goods. The son, Ward L,. Jennings, having pur- chased a quantity of goods for his firm from the plaintiffs, the latter commenced proceedings by attachment upon an affidavit which al- leged that the defendants fraudulently contracted the debt upon which the action was brought, viz., that arising from the purchase mentioned. The writ was levied upon property belonging to the father, an4 upon his application the attachment was dissolved by the circuit judge. It was admitted that at the time of the levy the firm had sufficient per- sonal property out of which the claim could have been satisfied. De- fendants' contention is that the individual property of the innocent defendant was not subject to seizure by attachment. Counsel for the plaintiffs build a strong argument upon the doctrine that each part- ner is an agent of his fellows, citing May v. Newman, 95 Mich. 501, 55 N. W. 364, to the proposition that an attachment lies against a debtor whose agent fraudulently contracted the debt. But the stat- ute upon which the remedy by attachment depends has relieved the innocent partner from the application of this rule. An examination of the statutes may aid in solving this question. We start with the proposition that "attachment is a harsh and extraordinary remedy, un- known to the common law; and the statutory provisions upon which the right depends, being in derogation of the common law, must be strictly construed, and cannot be extended beyond their terms." See cases cited in 1 Jac. & C. Dig. p. 96, § 1; Estlow v. Hanna, 75 Mich. 219, 42 N. W. 812. An action against joint debtors is like any other action. It is aimed at the individual debtors. A service on one is not a service upon the other ; they may appear separately ; their de- fenses may be different; the judgment is against each for the whole amount; the execution issues against the individuals, the officer being commanded to collect the debt from the goods and chattels, and, for want thereof, of the lands and tenements, of the individuals. And this is as true where the joint obligation is a partnership debt as in cases where the debtors are not copartners. ■ The act authorizing pro- ceedings in attachment permits any creditor to have an attachment against his debtor, upon conditions mentioned. The conditions are that he shall show that the defendant — i. e., the debtor — is believed to be guilty of certain acts, or to possess certain intentions regarding the debt or his property, fraudulent in character, the general tenor of which indicates danger that sucb debtor will put his property beyond the reach of the creditor. The law lays hold of the property of such debtor, to preserve it for the creditor. So long as there is a sole 504 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 debtor, no difficulty is likely to arise, but when the debt is joint the question arises, how far should the fraudulent acts and intentions of one subject the property of another to seizure? The acts, if strictly construed, only provide for attachment against the debtor who is guilty of the fraud. An additional remedy, summary in its nature, is given against him. It is given, in terms, against no others. And where the act is done by one only, the law can only be made applicable to another by invoking the doctrine of agency. No one will question the fact that one can, through an agent, sub- ject his property to attachment; and this is as true where the agent is a partner as where he is not, and where the act complained of is the fraudulent purchase of goods by a partner, as in this case. There is much persuasiveness in the argument that, as the firm received the benefit and appropriated the fruit of the transaction (whether with knowledge upon the part of both or not), the rule that a partner is an agent of his copartners makes his act the act of both. It would not be so convincing if the cause for attachment were another of those named in the statute — e. g., if one only was shown to have an intent to dispose of the firm property, or had actually done so without the knowledge of his partner, or where he absconded, or removed out of the state, or was about to do so, with intent to defraud the firm creditors. Still more hard would be the attachment against one where his copartner had merely resided out of the state for three months, which in itself is ground for attachment, regardless of the honesty of his intention. Can it be said that in all of these cases these acts are partnership acts, binding the partners under this application of the doctrine of agency? Is it true that the creditors of a firm in Michi- gan, one of the members of which lives in Chicago, have the absolute right to commence all actions against the firm by attachment, and to levy not only on the firm property, but that of each resident member, as well as that of the nonresident? If not, it must be that this doc- trine is improperly appHed, or a distinction must be drawn between the different causes for attachment named in the statute, and the lia- bility limited to those acts which, we may say, either as a conclusion of fact or law, are the acts of the firm, which would seem to limit the cases to those where the debt was fraudulently contracted, and where the property of the firm had been assigned, concealed, or dis- posed of with intent on the part of one to defraud the firm creditors. If plaintiffs' theory is correct, these would be the acts of all partners, and subject to seizure not only the partnership property, but the in- dividual property of each partner, no matter how honest, and notwith- standing their solvency. There can be no doubt that partners are bound by the contracts, and many times by the torts, of one of their number, to the extent of liability. But is it as clear that the nature of the remedy is always subject to the' same rule? As already stated, this remedy is statutory, and the statutes must show the design to cover such cases as this, or they are not to be treated as within them. Sec. 1) AT LAW. 505 The attachment statute is borrowed from New York. It will be found in the Revised Statutes of 1838 and 1816 and the Compiled Laws of 1857. The section of which Howell (section 8015) is an amend- ment remained unchanged from the time of its adoption until 1861. It is section 19, c. 1, tit. 4, pt. 3, p. 512, Rev. St. 1838. The same is found in Rev. St. 1846, § 30, p. 517, and Comp. Laws 1857, § 4771. It reads as follows, viz. : "When two or more persons are jointly in- debted as joint obligors, partners, or otherwise, the attachment may Tse issued against the separate or joint estates or property of such joint debtors or any of them, and the same proceedings shall be had as hereinbefore prescribed." It goes without saying that under this act, where all of the joint debtors are shown to have participated in the statutory act, or where it appears that each has entertained the fraudulent intent, the writ should issue against all; and it is as plain that in such case the writ could be issued against the separate or joint estates of the debtors. So far it lays down a plain, consistent, and just rule. Shall we go further, and say that it was meant that the writ would be as far-reaching in cases of joint debtors, who are not ■partners, where one was innocent of wrong? That would probably not be claimed by any one. As to partners, the same claim might be made as is made here, viz., that in dealing with the partnership prop- erty the act of one is the act of all, and that the consequences are the same to all. But this act had received a construction before it be- came a law in Michigan. In the case of Cyrus Chipman, an abscond- ing debtor (14 Johns. [N. Y.] 217), decided in 1817, it was held that "the attachment might issue against the property of one of several part- ners who absconds, for a debt due by the firm, although his copart- ners are resident within the state, and subject to process. This is not conclusive of the question here, and is cited only to show that ^counsel in that case did not resort to the remedy by attachment against all of the partners. Two years later the same court held that an at- tachment might issue against the separate property of an absconding debtor upon a debt due from his copartnership. Here, again, the writ appears not to have been sought against the partners who remained. But the case went further, and held that the partnership property •could not be seized; and the reason was that the other partner had a right to retain it to pay the partnership debts. Ex parte Smith, 16 Johns. (N. Y.) 102. It may still be said that in neither of these cases were all of the partners sued in attachment, and therefore there yet remains doubt if the right contended for does not exist under this ■statute, and it is probable that such doubts led to the amendment of 1861, which reads as follows: "When two or more persons are jointly ■indebted as joint obligors, partners, or otherwise, and an affidavit shall be made, as provided in section two of this chapter, so as to bring one ■or more of such joint debtors within its provisions, and amenable ■to the process of attachment, then the writ of attachment shall issue against the property and effects of such as are so brought within the 506 EIGHTS AND KEMEDIES OP CREDITORS. (Ch. 8 provisions of said section; and the officers shall be also directed in said writ to summon all such joint debtors as may be named in the affidavit attached thereto, to answer to the said action as in other cases of attachment." Before discussing the statute, let us review the situation. Under the previous statute, attachment lay against all joint debtors, whether partners or not, where it could be shown as matter of fact that all participated in the act constituting a cause. It was also plain that, where one joint debtor only committed such act, his property only was subject to the writ, unless there was a partner- ship. There was, then, no necessity for legislation to reach either of these cases, for joint debtors, where not partners, were fully protected where innocent of wrong, and the creditors had his remedy ag-ainst both where both participated, and against the offender where only one was guilty. In this condition of affairs, the Legislature passed section 8015, thereby giving immunity from attachment to joint debt- ors, including partners, who were not themselves participants in the wrongful act. Now, by a construction of this act, it is sought to say that partners are not within its terms, because the act of one is the act of all, and that, as a matter of law, they are, therefore, all par- ticipants in the fraudulent act. If that is so, the statute seems to have no office to perform. It has relieved nobody. Joint debtors, not partners, could not be attacked by attachment before unless guilty. But there may have been a doubt about partners. That doubt seems to have caused the enactment of a law whose only object must have been to reach and relieve the very class of cases which the construc- tion contended for seeks to exclude from its protection. As said at the outset, attachment is a harsh and extraordinary rem- edy. The law may well restrict its use, and deny it as against all honest persons, though they have the misfortune to be connected in business as partners with dishonest persons. Such persons have legal obligations to discharge in relation to the partnership affairs. They must see that obligations are discharged, and the law presumes that they will faithfully do so. No very good reason suggests itself why the private fortune of an honest partner should be seized because his partner has been detected in a fraudulent act in connection with part- nership affairs. It is common knowledge that few men or firms can survive an attack by attachment. It is the almost certain precursor of insolvency, as in former days it was of bankruptcy, and we should hesitate before broadening the scope of the act in c[uestion. A case quite similar to the present was before the court, viz., Edwards v. Hughes, 20 Mich. 290. Mr. Justice Cooley wrote the opinion, and seems to have taken a similar view of these statutes to that expressed above. It is true that the facts in that case may permit it to be dis- tinguished from the present, but the language used is broad, and it is hardly possible that the court could have overlooked the contin- gency of such cases as this. Since this decision we think the bar have understood that the liability was limited to such partners as person- Sec. 1) AT LAW. 507 ally participated in the fraudulent act. See Tiffany's Justice Guide, p. 60, note 1, where this doctrine is laid down; Shinn, PI. & Pr. § 307. See, also, People v. Circuit Judge, 41 Mich. 326, 2 N. W. 26, where a writ issued against nonresident partners only. We think the learned circuit judge correct in his conclusions, and that his order dissolving the attachment should be affirmed, with costs.^ II. Creditors op the P.\rtners. HEYDON V. HEYDON. (Court of King's Bench, 1693. 1 Salk. 393.) Coleman and Heydon were copartners, and a judgment was against Coleman, and all the goods of both Coleman and Heydon were taken in execution. And it was held by Holt, C. J., and the court, that the sheriff must seize all, because the moieties are undivided; for if he seize but a moiety, and sell that, the other will have a right to a moiety of that moiety ; but he must seize the whole, and sell a moiety thereof undivided, and the vendee will be a tenant in common with the other partner. TAYLOR V. FIELDS. See ante, p. 210, for a report of the case. PARKER V. PISTOR. (Court of Common Pleas, 1802. 3 Bos. & P. 288.) This was a rule calling on the plaintiff to show cause why the sher- iffs of London should not have time to return a writ of fieri facias to the first day of next term. The defendant was one of two partners, and the application was made on the part of several creditors of the partnership, and the ob- 1 The dissentnig opinion of Montgomery. J-, in nUich ilcGrath, C. J., con- curred, is omitted. Whether, in a suit against the firm, the property of the partnership can be attached because of the misconduct of one partner, will depend upon whether his act wa s within or without the scope of the partnership business. In Staats V. Bristow, 73 N. T. 264, the nonresidence of one partner, and in Evans v. Virgin, 69 Wis. 158, 33 N. W. 569, the fraudulent transfer by one partner of his separate property, was held not to justify an attachment of the firm prop- erty, but only the misconducting partner's interest in such property. But in Winner v. Kuehn, 97 Wis. 394, 72 N. W. 227, where the misconducting part- ner was the general manager, his misconduct was held sufficient to justify an attachment. i 508 EIGHTS AND REMEDIES OF CEBDITOES. (Ch. 8 ject was to prevent the partnership goods from being sold until an ac- count could be taken of the several claims upon this property. Best, Serjt., who obtained the rule, observed that the sheriff was only entitled to take possession of an undivided, not of a separate, moiety of the partnership goods ; that he could only hold that moiety in the same manner as the defendant himself had done; and that, as the defendant was not entitled to sell the partnership goods without the consent of his partner, the sheriff ought not to be obliged to do so by a writ of venditioni exponas. He mentioned a case in the Court of King's Bench, where a similar application had been made, which stood over several times, and the rule was at last made absolute by consent; the plaintiff having been driven to give that consent in con- sequence of Lord Kenyon saying that the court would enlarge the rule from time to time until the parties did consent. He also referred to Eddie V.' Davison, Doug. 650, and Taylor v. Field, 4 Ves. Jr. 396, where it was holden that the joint property of an insolvent partner- ship, taken in execution for a separate debt, could not be retained against the joint creditors. Lens, Serjt., contra, insisted that this was merely the common case of partnership goods taken in execution; that, if the defendant had any interest whatever, the sheriff was bound to take the partnership goods and sell them; if not, he ought to return nulla bona. He ob- served that in Taylor v. Field it was admitted that the above rule would prevail at law, and in Pope v. Haman, Comb. 217, this dis- tinction is pointed at; Holt, C. J., saying: "Upon a judgment against one copartner the sheriff may take the goods of both in execution, and the other copartner hath no remedy at law otherwise than by re- taking the goods if he can ; for the vendee of the sheriff becomes tenant in common with the other copartners." The Court were of opinion that there was no ground for their in- terposition; that it was a very plain case at law, and that all the difficulties were to be encountered in equity; that the safest line of conduct for the sheriff to pursue was to put some person in possession of the defendant's share as vendee, leaving him and the parties in- terested to contest the matter in equity, where a bill might be filed, stating that he had taken possession of the property, and praying that it might not be disposed of, until all the claims were arranged. Vide Chapman v. Koops, 3 Bos. & P. 289. Rule discharged. RANDALL v. JOHNSON. (Supreme Court of Rhode Island, 1881. 13 R. I. 338.) Potter, J. William J. Randall and Lydia Randall, copartners by the style of William J. Randall & Co., sue Johnson, the defendant, in trespass vi et armis for breaking and entering the plaintiffs' store Sec. 1) AT LAW. 509 and attaching certain personal property which they claim as the prop- erty of said firm. Johnson, the defendant, pleads that J. F. Comstock & Co. sued out a writ of attachment against said William J. Randall, and that he, Johnson, being a deputy sheriff, attached said property on the said writ as the property of said William, and said property was afterwards sold at public sale by order of one of the judges of this court according to the provisions of the statute, and that the said William was notified thereof as by law provided, and was him- self the highest bidder for and purchaser of a portion of them. The plaintiffs demur. The plaintiffs, William J. Randall & Co., contend that, being part- nership property, it could not be attached as the property of one of the partners, and that therefore the plea, if true, alleges no valid de- fense. The weight of the authority seems to be most decidedly in favor of the right of a creditor of one partner to attach that partner's right in the goods, chattels, and tangible property of the firm for his private debt due from such partner. Story on Partnership, §§ 363, 311 ; 3 Kent, Com. *65, and note b; Collyer on Partnership (4th Am. Ed.) p. 738, § 833, and note. In the note to the latter work, as also in Kent, the cases are well stated. The attaching creditor can only take the interest of the partner — i. e., subject to the settlement of the partnership affairs — and, although the sheriff may and must seize the chattel, he can sell only the partner's right in it as above. The difficulties likely to arise in such attachment are stated in many of the cases. But, on the other hand, if the law were otherwise, a debtor might prevent attachment of his property for a debt due from himself by putting it into a partnership. In the case of Phillips v. Cook, 34 Wend. (N. Y.) 389, the sub- ject was considered by Judge Cowen, who delivered the opinion of the court, and the cases reviewed at great length. It was there held that the sheriff might seize the whole of the particular article, and sell the interest of the debtor in it, and deliver it to the purchaser, who then became a tenant in common with the other partner and took sub- ject to a settlement of partnership accounts and to the equitable claims of the creditors of the firm; and this, we think, is in accordance with the other decisions on the subject. See, also, opinion of Nelson, C. J., in Birdseye v. Ray, 4 Hill (N. Y.) 158, 161; and as to the disposal of the purchase money and the remedy of the other partner, see Phillips V. Cook, 34 Wend. (N. Y.) 389, and Doner v. Stauffer, 1 Pen. & W. (Pa.) 198, 31 Am. Dec. 370. Although, if the officer sells the whole, it will be as to the co-tenant a conversion (Ladd v. Hill, 4 Vt. 164; White v. Morton, 33 Vt. 15, 53 Am. Dec. 75; Bradley v. Arnold, 16 Vt. 383; Walker v. Fitts, 24 Pick. [Mass.] 191; Waddell v. Cook, 3 Hill [N. Y.] 47, 37 Am. Dec. 373; Drake on Attachment, § 348), yet it is no conversion as to said William J. Randall. Whether his interest or the whole is sold, 510 EIGHTS AND REMEDIES OP CREDITORS. (Ch. 8 he cannot complain ; and, if the plea be taken as true, he cannot main- tain this action, and the suit in its present form must fail. Whether the other party plaintiff can maintain a suit will depend on whether she was, or not, a partner or had any interest in said property. Demurrer overruled. SANBORN et al. v. ROYCE. (Supreme Juaicial Court of Massachusetts. 1S82. 132 JIass. 594.) Tort, by Charles H. Sanborn and Charles H. Packard, copartners doing business under the firm name of Sanborn & Packard, for break- ing and entering the plaintiffs' close in Boston, and taking and carry- ing away certain articles of personal property belonging to them, with a count in tort for the conversion of the same. The defendant, a con- stable of the city of Boston, justified under a writ against Packard, by virtue of which he attached the property in question. At the trial in the superior court, before Putnam, J., it appeared that the plaintiffs were copartners in the grocery and provision business, and the de- fendant was notified of this fact at the time of the attachment; that on May 3, 1879, a creditor of Packard individually sued out a writ against him and delivered it to the defendant, who by virtue of it, on May 31, 18?!), attached all the property of the partnership, placed a keeper over the same, and afterwards on the same day, by order of the plaintiff's attorney, withdrew the keeper and removed the goods, and on June 3, 1879, released the attachment, and left the goods where he found them; and that the writ against Packard was duly entered in court on June 19, 1879, and is now pending. Upon these facts the defendant contended, and asked the judge to rule, that he was justified, by virtue of said writ, in what he did with reference to the property, and that the plaintiffs could not maintain their action. The judge declined so to rule, and ruled otherwise. The jury returned a verdict for the plaintiffs, and the defendant alleged exceptions. C. Ai,LEN, J. The question presented in this case has been several times alluded to, but has never been decided in Massachusetts, though it has been the subject of much discussion and conflicting opinion elsewhere. It has been declared that the teal and actual interest of each partner in the partnership stock is the net balance which will be coming to him after payment of all the partnership debts and a just settlement of the account between himself and his partner. Peck v. Fisher, 7 Cush. 386. This doctrine is in accordance with the great body of modern decisions. It is also declared in Allen v. Wells, 22 Pick. 460, 33 Am. Dec. 7 57, that a separate creditor can only take and sell the interest of the debtor in the partnership property, being his share upon a division of the surplus, after discharging all demands upon the partnership. This rule, also, is supported by a great weight of authority. It is rather remarkable, in view of the multitude of Sec. 1) AT LAW. 511 cases in which the question has arisen and the conflict of opinion which has existed, that the manner in which a creditor of one member of a firm may apply that member's interest in the partnership to the pay- ment of his debt has not been more often the subject of legislation. The rights of parties, however, in this state, as in almost all the states of the Union, are still left to be worked out as well as possible by the courts. There is an entire concurrence of opinion among the leading text-writers, in recent times, that courts of law cannot adequately deal with the subject. 3 Kent, Com. 65, note; Story, Part. §§ ;362, 312; Collyer, Part. (6th Ed.) § 793. Lindley sums up what he has to say with the remark: "The truth, however, is that the whole of this branch of the law is in a most unsatisfactory condition and requires to be put on an entirely new footing.'' Lindley, Part, (-ith Ed.) 694. It is sufficient for the purposes of the present case to decide, as we do, that the seizure and actual removal of specific chattels of a partnership on mesne process or execution against one member thereof for his private debt, and the exclusion of the firm from the possession of its property, are a trespass. The authorities in support of this proposition seem to us more in accordance with just legal principles than those which are opposed to it. Fourth Nat. Bank v. Railroad Co., 11 Wall. (U. S.) 624, 628, 529, 20 L. Ed. 82; Cropper v. Coburn, 2 Curt. (U. S.) 465, Fed. Cas. No. 3,416; Burnell v. Hunt, 5 Jur. 650, by Patteson, J.; Garvin v. Paul, 47 N. H. 158; Durborrow's Appeal, 84 Pa. 404; Haynes v. Knowles, 36 Mich. 407; Levy v. Cowan, 27 La. Ann. 656. Exceptions overruled. PLACE v. SWEETZER et al. (Supreme Coiu-t of Ohio, 1847. 16 Ohio, 142.) This is a bill in chancery, reserved in the county of Delaware. John W. Place, the complainant, Adam Wolf, and Abraham Wolf were partners, carrying on mercantile business in Delaware county, and, while they were so in partnership, Sweetzer, one of the defendants, having two judgments in the court of common pleas of that county against said Adam Wolf, amounting together to somewhat more than $1,400, and the defendant Cone having a judgment in the same court for about $150, took out executions by virtue of which the sherifif levied upon the stock of goods of the firm and took them into his possession. The complainant, then another of the partners, brought this bill, seeking to enjoin the judgment creditors from selHng the partnership effects to satisfy the separate debt of one of the part- ners. There is a cross-bill also, filed by the judgment debtor, Adam Wolf, wherein he states that he transferred to Sweetzer a certain quantity of pork and lard, which was to be sold and the proceeds thereof applied toward the payment of one of the judgments; that 512 EIGHTS AND REMEDIES OP CREDITOKS. (Ch. 8^ this pork and lard were sold, but the proceeds, through the neglect and misconduct of Sweetzer, were entirely lost, and not so applied;; that Sweetzer ought to account for the amount of sales, and give a. credit for it upon one of the executions. The cause comes on for hear- ing upon bill, cross-bill, answers, replication, and testimony. * * * Avery, J. The first question arising in this case is whether the- original bill, with its injunction, can be sustained. This, of course,- must depend upon the rights of a judgment creditor having an exe- cution against one of the partners for his separate debt. The goods of the firm, being personal property, and held always- subject to levy tuider an execution at law against all the partners- for a partnership debt, must be deemed to be held by the same title,, and the share of each partner to be held likewise subject at law to- levy under an execution against him individually. But though this property may be seized, and thus withdrawn from the debtor's con- trol, it does not necessarily follow that it must be sold also under the- execution. If the sale could not be restrained, great injustice might very often be the consequence ; for in many, perhaps in most, cases- neither the sheriff, nor the debtor, nor any other person, could make known at the sale what property the purchaser would take. The in- terest of the partner cannot be ascertained till all the partnership ac- counts are arranged ; and it is well settled that this interest is a cer- tain share of the surplus after all of the demands against the firm, including those of the partners individually, are paid. It is this share of the surplus only which can be sold under execution, and to secure- a fair sale of it the value must be known. This can be accomplished through the aid of a court of equity alone, where all the intricate- affairs of a partnership may be examined and adjusted. A resort to this court, in cases like the present, may become important to se- cure the rights, sometimes of judgment creditors, at other times of the debtor, and sometimes, as here, to secure the rights of other part- ners. We see no objection to allowing the remedy in either case. The present complainant, when the levy was made, had at once a di- rect interest to bring the concerns of the partnership to a close, to apply the effects of every description to the payment of debts of the firm, and to prevent a sacrifice of the judgment debtor's share, be- cause by such a sacrifice his own share might be burdened. The com- plainant prays that an account be taken between the parties of the amount due by the firm, that the same be first paid out of the property of the firm, and that complainant's interest in the surplus be paid, before execution creditors be permitted to assert their claims on the property and apply it to the payment of the separate debt of Adam Wolf. This prayer of the bill will be granted, the accounts be sent to a master for examination and report, and the injunction in the meantime be continued. The cross-bill will be dismissed, as the al- legations are not sufficiently supported by the proof. Sec. 1) AT LAW. 513 PEOPLE'S BANK, Garnishee, v. SHRYOCK et al. (Court of Appeals of Maryland, 1877. 48 JId. 427, 30 Am. Rep. 476.) Brent, J. The appellees, having obtained a judgment against William H. Trego, issued upon it an attachment by way of execution. This attachment was laid in the hands of the People's Bank of Balti- more, to bind the interest of the defendant, Trego, in a sum of money standing upon the books of the bank to the credit of the firm of Trego & Kirkland, of which firm Trego was a partner. The question then arises, is a debt due to a copartnership liable to attachment at the suit of a creditor of one of the partners ? If the at- tachment had been laid upon the tangible effects of the firm, there would be no doubt of the right to do so; for all the authorities con- cur that the property of a firm may be sold for the debt of one of the partners. When sold, the vendee purchases and is substituted to nothing more than the interest of the partner, which afterwards be- comes the subject of ascertainment by a proper adjustment of the respective interests of the partners. The rights of copartners and creditors of the firm are not thereby sacrificed or disturbed. But where a debt is the subject of attachment, the judgment, if obtained against the garnishee, changes the right to the fund without any set- tlement of partnership account, and vests in the attaching creditor an absolute claim to the payment over to him of so much money. In Drake on Attachment, § 567, the author says : "The attachment of a debt due to a copartnership in an action against one of the partners is justly distinguishable from the seizure on attachment or execution of tangible effects of the firm for the same purpose." He refers to the case of Winston v. Ewing, 1 Ala. 129, 34 Am. Dec. 768, and this case is a very strong one upon the question now presented for our decision. There it was sought to subject the debt due to a firm to an attachment issued against one of the partners. The court held that this could not be done. The property of the partnership, it was con- ceded, was liable to execution and sale for the separate debt of a partner; the vendee under such sale becoming tenant in common with the other partner. But it was otherwise held in regard to a debt due. The court says; "It has been expressly adjudged that the interest of one partner in a debt due to the partnership cannot be subjected by process of attachment to the satisfaction of the separate debt of that partner, without showing from the state of the partner- ship accounts, as between the partners and with reference to. the in- debtedness of the partnership, what the right or interest claimed amounts to." The authorities cited are Fisk v. Herrick, 6 Mass. 272, Lyndon v. Gorham, 1 Gall. (U. S.) 367, Fed. Cas. No. 8,640, Church v. Knox, 2 Conn. 514, and Brewster v. Hammet, 4 Conn. 540; and they conclusively show that an attachment like the present would not be maintained in the courts of either Massachusetts or Connecticut. Gil.Paet.— 33 514 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 In Lyndon v. Gorham, 1 Gall. (U. S.) 367, Fed. Cas. No. 8,640, de- cided by Judge Story, that learned judge says: "In order to ad- judge the trustee responsible in this suit, it must be decided that the funds of one partnership may be applied to the payment of the debts of another partnership upon the mere proof that the principal debtor has an interest in each firm. If this be correct, it will follow that a separate creditor of one partner will have greater equitable as well as legal rights than the partner himself has. The general rule undoubt- edly is that the interest of each partner in the partnership funds is only what remains after the partnership accounts are taken; and un- less, upon such an account, the partner be a creditor of the fund, he is entitled to nothing." In Johnson v. King, 6 Humph. (Tenn.) 233, it is 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 part- nership debts. If a judgment were given at law, upon the garnish- ment proceeding against the debtor of the partnership, to satisfy the separate liability of one of the partners, it would unjustly abstract a portion of the fund primarily belonging 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 partnership affairs it shall appear whether the separate debtor of the execution creditor has any, and what, interest in the general surplus, or in the particular debt so impounded. Such proceedings cannot take place at law." We have quoted at length from this case, because the views there expressed seem to be specially appropriate to the case before =is. The proceeding of attachment in this state is essentially a legal pro- ceeding, and in no way appropriate to ascertain and settle the equitable rights between the garnishee and defendant, or to ascertain, by ad- justing the partnership affairs, the true interest of the defendant in the fund attached. The only judgment which could be given against the garnishee would be for a proportion of the money due the partner- ship, that proportion to be measured by the number of the members composing the firm and the amount due the attaching creditor. This would certainly be against the weight of authorities in this country, and in most cases productive of the greatest injustice. In the cases of Sheedy v. Bank, Garnishee, 62 Mo. 18, 21 Am. Rep. 407, and Myers v. Smith et al, 29 Ohio St. 120, both decided in 1876, it was held that partnership demands cannot be garnished for the separate debt of one of the partners. And to the same effect are the decisions in Vermont, New Hampshire, New York, Louisiana, and Mississippi. See Drake on Attachment (4th Ed.) § 570, and notes. The exception to this rule is where equity powers have been conferred Sec. 1) AT LAW. 515 by statute upon the common-law courts, and when by virtue of such powers they can compel a settlement of the partnership for the pur- pose of ascertaining whether one of the partners has such an interest in a particular debt due the firm as to justify its appropriation to the payment of his individual indebtedness. As no such powers have been conferred upon the common-law courts of this state, the excep- tion cannot be applied to an attachment here. The only cases in this country in which it is claimed a contrary doctrine is held, and to which we have been referred, are the cases of McCarty v. Emlen, 2 Dall. (Pa.) 277, 1 L. Ed. 380, Knox v. Schep- ler, 2 Hill (S. C.) 595, and Wallace v. Patterson, 3 Har. & McH. (Md.) 463.^ * * * So satisfied are we, upon the ground of reason and expediency, and the great weight of authority, that the partnership credits of a con- tinuing partnership should not be subjected to the process of attach- ment at the suit of a separate creditor of one of the partners, that we cannot adopt the case of Wallace v. Patterson to the extent which is claimed for it. In our opinion, then, in a case like the present, where the partner- ship is a continuing one, and where there has been no adjustment of partnership affairs, a debt due the partnership cannot be taken by garnishment to pay the individual debt of one of the members of the firm. This judgment will therefore be reversed, and judgment entered for the appellant. JOHNSON v. WINGFIELD et al. (Court of Chancery Appeals of Tennessee, 1S97. 42 S. W. 203.) Barton, J. This cause is before us on bill and demurrer. The de- murrer was sustained, and the bill dismissed. Complainant appealed, and assigns errors. The main question presented in the case is whether in this state specific property belonging to the firm is subject to levy for the individual debt of one of the members of the firm. The case made in the bill substantially is as follows : The complainant shows and avers that he had obtained before a justice of the peace in Ham- ilton county two judgments against the defendant Wingfield, on which executions had been issued and certified, in pursuance of sec- tion 3786 of the Code of Tennessee, to Hamblen county, where exe- cutions had been issued, which were placed in the hands of a con- stable, and by him, on the 2d day of January, 1896, levied on the interest of Nisbet Wingfield in a lot of iron pipe and other material, the property of the firm of J. N. Hazelhurst & Co., a firm composed of J. N. Hazelhurst and Nisbet Wingfield, in which firm, it is alleged, 1 Thompson v. Lewis, 34 Me. 1G7, contra. 516 KIGHTS AND EEMEDIES OF CEEDITOES. (Ch. 8 Hazelhurst and Wingfield were equal partners. It is further alleged that the interest so levied on in the partnership property was advertised and sold according to law by the constable making the levy at public sale in the city of Morristown, on the 5th of January, 1896. It is further charged that J. N. Hazelhurst and Wingfield continued as partners, under the firm name of Hazelhurst & Co., until January 7, 1896, when the firm dissolved; upon what terms and conditions, com- plainant does not know, but it is charged that there was no partner- ship settlement had between the partners, and that the purpose and object of the dissolution of the partnership was to embarrass and de- feat the collection of complainant's execution. It is further charged that on January 7, 1896, a new partnership was organized, under the old firm name of J. N. Hazelhurst & Co., composed of J. N. Hazel- hurst and D. R. H. Plant, and that this firm was engaged in the com- pletion of the waterworks for the city of Morristown, under the con- tract made for that purpose by the old company. It is charged that, after the 'sale was made, the statement was made by one of the attor- neys of Hazelhurst, a member of both firms, who had been present and made a bid at the sale of the property, that Wingfield was no longer a member of the firm, and had no interest in any other property which belonged to the old firm of Hazelhurst & Co. It charged that the new firm, composed of Hazelhurst and Plant, had full knowledge of the complainant's levies ; that the property levied on was reason- ably worth in the market, at the time of the levy, $3,000; and that Wingfield's interest in the property was at the time of the sale and purchase by the complainant, who was the purchaser at the execution sale, reasonably worth $1,500; that complainant notified Hazelhurst & Co. not to move or interfere with the pipe until his interest was paid for; that Hazelhurst & Co. disregarded the notice and complainant's rights in the property, and converted the same to their use, in the ■construction of the waterworks, a few days after complainant had pur- chased Wingfield's interest in the partnership property; that com- plainant was damaged by the conversion fully $1,500. It is further shown that the new members of the firm of Hazelhurst & Co. were nonresidents; that they had a fund coming to them in the First Na- tional Bank of Morristown, against which an attachment was prayed and issued. The prayer of the bill is that a partnership account be had and stated between the defendant J. N. Hazelhurst and Nisbet Wing- field, so as to ascertain what interest Wingfield had in the partnership property described in the levies, and the value of that interest at the time the levies were made, at the time of the sale, and also at the time when the property was converted by J. N. Hazelhurst & Co., and for a decree against J. N. Hazelhurst & Co. and R. H. Plant, or the new firm of Hazelhurst & Co., for the amount so found, and for gen- eral relief. It is also shown in the bill that the old firm of Hazel- hurst & Co. had other property at the time of the levies besides that levied on, it appearing that certain property was levied on belonging Sec. 1) AT LAW. 517 to the firm, and that was released, and levy made on other property. The proceedings before the justice of the peace, the executions, and the return of the officer, are made exhibits to the bill. The officer's return, in substance, is that he levied on all the right, title, and in- terest which Nisbet Wingfield, as member of the firm of J. N. Hazel- hurst & Co., had in the following personal property, situated and being in Morristown, Tenn., on the Southern Railway's side track, to wit, 25 iron fire plugs, etc., described in the paper. Both executions also show due sale of the property after advertising, the property in each instance being bid in by the complainant, Johnson, for $15. The defendants filed a demurrer and answer, the demurrer being in- corporated in the answer; the substance and point of demurrer be- ing that a levy cannot be made on a certain, specific part of partner- ship property for the individual debt of one of the members of the firm, as the bill' shows was done in this case, and that, to reach a part- ner's interest in partnership property, the levy must be made upon all the partnership property. The point is made that the partnership owned as an entirety the particular assets of the partnership, and had a right to use the same in the business of the partnership; that the purchaser would be required sim'ply to take the interest of the debtor partner, and would have no right to maintain this bill for trover or conversion of the specific property levied on. The answer filed denies that the interest of Wingfield at the time of the levy amounted to any- thing, and asserts there was an excess of liabilities at that time over assets. As stated, the demurrer was sustained, and the bill was dis- missed. * * * The main question presented has been before our Supreme Court in a number of cases, and the subject seems to be surrounded by many perplexities. One of the earlier and the leading case in this state on the subject is that of Haskins v. Everett, 4 Sneed, 531. This was an action of replevin brought by Haskins & Reynolds against James Everett, to recover certain personal property belonging to the firm of Haskins & Reynolds, which had been levied on by an execution in the hands of a constable, issued on a judgment recovered by one Brow- den against Haskins for his individual debt. Judge Caruthers, in his opinion, stated that the question was whether partnership property can be taken in execution and sold for the private debt of one of the members. The circuit judge held that it could, and gave judgment for the value of the property, and also for $43, damages for the de- tention of the property which had been taken in the action, against the complainants, Haskins & Reynolds; and this judgment was af- firmed by the Supreme Court. Judge Caruthers, in his opinion, says : "Whatever doubts and difficulties may have existed on this subject, the law is now well settled that partnership property may be seized and the interest of one partner sold for his individual debt. The pur- chaser, however, only takes the interest of such judgment debtor after the settlement and adjustment of the partnership accounts, and not 518 EIGHTS AND REMEDIES OF CEEDITOES. (Ch. 8 his proportion of the property sold. What that interest is cannot gen- erall}' be ascertained until a final adjustment and settlement of the partnership concerns. The effect of the sale and purchase is only to place the purchaser in the shoes of the partner whose interest he buys, and make him a tenant in common with the other partners. This is a necessary consequence of the rule that each partner has a lien upon the firm property, as well for the debts due by the firm as his own share and proportion thereof. The judgment creditor or the purchaser under him must take the interest sold subject to all such liens and claims. To ascertain the, interest sold, the purchaser or any of the other partners may file a bill for the settlement of the partner- ship. The great uncertainty of the value of the interest purchased (for it may be nothing, or more or less than the amount bid) does not affect the principle." In this case it will be noted that the Su- preme Court gave judgment against the firm for $43, damages for the retention of the property belonging to the firm. While it is not specifically stated that the property levied on was only a part of the property belonging to the firm, we think it sufficiently appears that it was certain, specific property. In the case of Saimders v. Bartlett, 13 Heisk. 317, a bale of cotton, which was held to be the property of Joyner & Son, had been levied on by an attachment at the suit of Rolfe Saunders, for a debt of Rodney Joyner, Jr., the second mem- ber of the firm of Joyner & Son. It was sought to be replevied by Bartlett, Gould & Heath, to whom the property had been consigned. The decision was against the plaintiffs in the replevin suit. But two grounds were stated for the decision in the opinion: First. That there was no right of action in the complainant, because the property was held to be the property of Joyner & Son. Second. Judge Free- man said, in delivering the opinion : "Assuming that the owners were partners, it presents the question whether the sheriff can levy an at- tachment against one of the partners on the property of the firm, and take possession by virtue of such levy. We think it settled in Tennessee that he may do so under an execution; but he can sell only the interest of the partner against whom the process issued. Haskins v. Everett, 4 Sneed, 531. The same doctrine was laid down in a case of joint ownership. Rains v. McNairy, 4 Humph. 358, 40 Am. Dec. 651. Such seems to be the weight of authority in most of the other states of the Union, as well as in England. In fact, it would seem to follow as a matter of necessity from allowing the in- terest of the partner to be sold or taken at all under process against him. We therefore hold that the attachment was properly levied on the interest of Rodney Joyner, Jr., whether he was a partner or joint owner; that the sheriff was properly in possession of the cotton; and that the plaintiffs below had not the right to possession as against him." In the case of Morrow v. Fossick, 3 Lea, 129, it is said the right of the creditor to seize the firm property, either by execution or attachment, for the debt of the member of the firm, and sell or ap- Sec. 1) AT LAW. 519 propriate the debtor partner's interest, and ordinarily to file a bill in advance to ascertain that interest, is conceded; citing Haskins v. Everett, 4 Sneed, 531, and 1 Story, Eq. Jur. § 677. In Lincoln Sav. Bank v. Gray, 12 Lea, 459, the case, as shown by the opinion, was substantially that there were two firms of Gray & Co., known as the old and the new, in both of which one T. J. Gray was a partner. The old firm became indebted to the bank, the complainant in the suit; and the case made in the bill was that Gray had used, in the business of the new firm, the property and funds of the old firm. Judge Free- man states that complainant has sought, based on these facts, a de- cree for its debts against Gray & Co., the old firm, and also the new firm, and has obtained an attachment against the new firm attaching all its effects and assets, and prays that these properties be sold, or a sufficiency to pay the bank, and the proceeds applied to the payment of the debts stated in the bill of Gray as Gray & Co., the old firm. He states this attachment and impounding of these assets has no foundation on which it could have been sustained had proper steps been taken by the defendants to defeat it. "Gray was simply the debtor of complainant, and was a partner in the new firm of Gray & Co., of which Woodard was a member. This certainly gave him no right to have the latter firm wound up without something more. A levy on the interest of one party in a partnership, either of an execution or an attachment levied on such interest, would be the basis on which such relief could be asked, .in order that the creditor might have the interest of his debtor ascertained and applied, he having a fixed lien on the same by process." "But we -know of no principle on which a simple creditor at large of a member of the firm has such a right." In the case of Boro v. Harris, 13 Lea, 47, Judge Cooper, delivering the opinion of the court, said : "All that an individual' creditor of either one of the partners could reach by the levy of an execution, or which a purchaser could acquire under an execution sale, would be the interest of that partner dependent upon a partnership account. Haskins v. Everett, 4 Sneed, 531. And, if the ostensible partners had in fact no interest in the partnership property, the creditor or pur- chaser, if there were nothing else in the case, would take nothing." There would appear to be in these cases some confusion of principle. Referring to authorities outside of the state : The confusion and perplexity in which this question is involved is not confined to our own state, but is found in the annunciations of the text-writers on this subject, and in the decisions of nearly all of the courts of last resort of the United States and in England. Mr. Freeman in his work on Executions (2d Ed. § 125), in treating of the matter, says: "It is universally conceded that, except where some statutory provi- sion to the contrary has been enacted, the interest of the partner is liable to an execution for his individual debts. * * * Confessedly, a sale under an execution against one partner does not divest the title of the partnership in the property. It transfers only such interest 520 EIGHTS AND REMEDIES OF CEBDITOES. (Ch. 8 as remains in the judgment debtor upon the settlement and adjust- ment of the affairs of the partnership. As the rights of the partner- ship are paramount, it would seem that they would preclude the of- ficer serving the writ from taking the property into his exclusive pos- session, even for the purposes of levy and sale. And this view has been maintained with great force in several decisions pronounced in the Supreme Court of New Hampshire. The authorities elsewhere are almost unanimous in affirming that the officer may, in levying on the interest of a partner, assume exclusive possession of the chattels of the firm, and retain it until the sale. It is also vtndoubted that the interest subject to execution is, at least in equity, in no respect greater than that held by the defendant; that it is subject to the paramount claims against the partnership, and is in fact nothing beyond the right to demand an accounting, and to share in the surplus that may remain after all the partnership obligations have been discharged. Whether the levy can be upon any specific part of the goods of the firm, and whether, by the sale, the purchaser acquires any interest in the property sold, beyond the right to call for an accounting, are questions upon which the authorities are not agreed. The earlier cases were determined when partnerships were regarded as mere co- tenancies. Hence those cases, and such modern cases as have been controlled by them, place sales under execution for the separate debt of a co-partner very much on the same ground as a sale for a separate debt of a co-tenant. Therefore, according to this view, an officer can, under such an execution, levy upon a part as well as upon the whole of the chattels of the firm; and it can, by his sale, transfer a moiety of the legal title, together with the right to take and hold possession against the other partners, levying them without any other means of enforcing the rights of the partnership than by proceedings in chancery. But the courts have gradually progressed towards a realization of the true nature of partnerships, and have therefore come to understand that they are materially different from co-tenan- cies. A copartner has no right to any specific chattel belonging to the firm, nor has he any right as against the firm to take or hold exclusive possession of any such chattel. The real ownership of all the chattels is vested in the firm. The interest of each partner is merely a right to share in the proceeds of these chattels after all the partnership obligations have been satisfied. Upon what principle can the purchaser at an execution sale be sustained in the exercise of rights to which the defendant was never entitled? Clearly, upon no principle whatever. The precedents made at an early day, when the law of partnership was imperfectly understood, are losing their force as authorities. Their place is being supplied by a line of deci- sions destined to grow in favor and in number, declaring that the creditor of an individual partner cannot sell any specific article, but only the partner's interest in the whole of the partnership assets, and that the purchaser does not acquire the right to hold possession of Sec. 1) AT LAW. 521 the property purchased as against the other member of the firm, but only an interest in the proceeds, after the business of the firm shall have been settled. Though the right of the officer to seize the prop- erty of the partnership under an execution against one of its members is conceded, it must be exercised, as far as possible, in harmony with the rights of the other partners, and not in hostiUty to them. His power to take and deliver possession of the corpus of the property is merely incidental of the right to reach the interest of the debtor, and is to be exercised only as a means to that end. Consequently, if he exceeds that limit, and undertakes to interfere with the rights of the other partners to a greater extent than is necessary to reach the inter- est of the debtor partner, and dispose of it, as when, instead of selHng the interest of the debtor partner, he undertakes to sell the entire property, though his act is nugatory, such interference renders him Hable as a trespasser ab initio." In the same authority (section 254) it is said: "Taking possession is not optional with the officer. He must take possession, or in some way subject the property to his con- trol, in order to make a valid levy and sale. The levy and sale must be consistent with the defendant's interest. If the levy or sale pur- ports to be upon an estate in severalty, this is an invasion of the rights of the co-tenants, who are not parties to the writ, for which they may sustain an action against the officer making it. When the defendant is a member of a copartnership, the duty of the officer must be as- certained from examining the decisions of his own state. The ma- jority of the decisions on this subject are based on the false assump- tion that a copartnership is a co-tenancy, and therefore sustains the officer in taking exclusive possession of the partnership property un- der a writ against one member alone. [Citing, among other cases, as authority for this statement, the case of Haskins v. Everett, 4 Sneed, 531.] The minority, based on more correct preceptions of the nature of a copartnership and the rights of its respective members, will not permit a writ against one member to be used to seize all the assets and to suspend the business of the firm. The law with respect to the levy of a writ on a partner's interest in firm property involves many perplexities, the solution of which is worthy of legislative aid. To deny the right to make such a levy may very seriously embarrass creditors of a debtor amply able to discharge their debt; while to ad- mit the right may involve the copartners, and perhaps the creditors of the firm, in very serious inconvenience and substantial loss. Where the levy is permitted, its ultimate effect is to confer on the purchaser thereunder nothing beyond the right to an accounting. This is all the judgment debtor has, and therefore all he can transfer, whether the transfer be voluntary or involuntary. Specific chattels constituting a part of the assets cannot in several of the states be seized and sold under a writ against one of the partners. In other states, the seizure of either a part or the whole of the chattels of a copartnership under .a writ against one of its members, and the exclusion of its copartners 522 RIGHTS AND EEMEDIBS OF CREDITORS. (Ch. o from their possession, are unauthorized, and warrant an action of tres- pass against the officer. But in the majority of the states the right and duty of an officer acting under a writ against a copartner are the same as when acting under a writ against a co-tenant. He may seize any of the property in which the defendant has an interest; may retain possession until the sale; and may then deliver possession to the purchaser, who, in a qualified sense, becomes a co-tenant with the copartners who were not parties to the writ. Whether the latter are entitled to resume possession in the event that the property is needed in liquidating the partnership liabilities, or for other partnership pur- poses, and, if so, by what remedies their rights may be enforced, are unsolved judicial problems. Though, by the laws of the state in which the officer is acting, he may take exclusive possession of property under a writ against one of its owners, he must confine his levy and sale to the interest of the defendant. If he assumes to levy upon or to sell the whole property, his act, as against the partners or co-tenants not named in the writ, is wrongful. They may regard him as a tres- passer upon their rights, or as guilty of an unlawful conversion of their property. He may be sued for trespass or conversion, as the injured co-tenants may elect." Mr. Parsons, in his work on Principles of Partnership, also dis- cusses these questions, points out the confusion, and says, among other things (section 104) : "It is needless to state that a system cannot be coherent while the fundamental principle upon which it rests remains unsettled. * * * An attachment by a separate cred- itor is sustained upon the ground that the sheriff could seize the firm stock, and sell a partner's interest, which would be treated as a moiety. This is according to the theory of a tenancy in common, or holding by several titles with joint possession, which would be severed by exe- cution, and the purchaser vested with defendant's title and possession. This practice is unsound. The sheriff can, it is true, seize the firm stock in order to sell a partner's interest in it. The execution fi. fa. required a tenable thing for it to operate from; but, the requirement of the writ being satisfied, the sheriff must not disturb or remove the stock, and can sell only the partner's interest in it. The purchaser acquires no right to immediate possession, but merely a claim to the balance, if any is coming to the partner, to be ascertained by an ac- count." In 17 Am. & Eng. Enc. Law, p. 1336, we find it stated : "The in- terest of one partner in the partnership property may be attached or taken and sold on execution for his separate debt; but only that por- tion of the partnership property which belongs to the debtor partner, after paying the debts due to the firm and his own indebtedness to the firm, can be sold. The duty of the sheriff is to attach or levy upon the whole of the partnership effects, or so much of them as may be requisite to satisfy his process [citing in note 3, for this statement,, cases from Alabama, Illinois, Indiana, Louisiana, Mississippi, New Sec. 1) AT LAW. 523 York, Pennsylvania, Texas, Virginia, and California], though some of the states permit a levy on specific property less than the whole [citing, as authority for this statement, cases from Kansas, Louisiana, Maine, Missouri, New York, New Jersey, Ohio, and Kentucky] . The creditor acquires no legal interest in the property levied upon, and, until the interest of the debtor becomes a share in common in the buyer by means of a sale, the title is unaffected, and a purchaser from the firm would get a title unincumbered by the levy; and even a judgment against one partner is not such a lien upon the real estate of the firm as to remain an incumbrance after a sale by it. These principles apply to actions brought by a creditor of the partnership against one partner, or to an attachment or levy of execution by a partnership creditor against the individual interest of one partner, as well as to actions upon claims against an individual partner." On page 1340 of the same book we find it stated: "In order to guard against intermediate sales, and to make the levy effectual, the sheriff is, as a general rule, required to take exclusive possession of the property levied upon; such possession not being deemed adverse to the part- nership, and the property in his hands being subject to partnership debts" — citing, as authority for this statement, cases from nearly every state in the Union, and among others the Tennessee cases above cited. Continuing, it is said : "In some states, however, the theory is adopted that, as the debtor partner is not entitled to exclusive possession, the sheriff is not, and that, therefore, it is sufficient to declare that there is an attachment or execution, designating the property levied upon, or otherwise, according to local practice" — citing, as authority for this statement, cases from Iowa, Louisiana, Massachusetts, Michigan, New Hampshire, New York, North Carolina, Wisconsin, and the case of Fourth Nat. Bank v. Railroad Co., 11 Wall. (U. S.) 624, 20 L. Ed. 82. Continuing, it is said : "A sale of the entire interest in the prop- erty, or any specific part of it, as distinguished from the interest of the debtor partner, will make the officer a trespasser ab initio." It is further stated on page 1343, same book: "The buyer at an execu- tion sale acquires the same title that the debtor partner had, subject to the partnership debts and equities between the partners; the claim of the copartners, or any balance found due them, being considered as a debt, in determining the debtor partner's interest. If the partner- ship is insolvent, or if the debtor's share is absorbed by the equities of his copartners, the buyer gets nothing. And if the buyer sells or disposes of the whole property, and appropriates the proceeds, he is liable for conversion. That a partnership is insolvent, or that there is no surplus for the debtor partner, does not make the levy a trespass. The property sold continues liable for the joint debts, but the joint creditors have no claim upon the purchase money." These extracts will show into what confusion this subject has fallen by reason of the early decisions in all the states, evidently based, as stated by the text-writers from whom we have quoted, on an erroneous 524 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 conception, or, rather, a failure to recognize the true status of part- nership property. It is well settled everywhere that, as to partner- ship property, partners are trustees of the partnership, as to each other and the advantages derived from it inure to the benefit of the firm. And it is undoubtedly true that a firm or its members could, by in- junction, or other appropriate remedy, prevent a partner from divert- ing partnership property to his individual use, to the damage of the firm, and could prevent him from exercising rights of possession and control which would be destructive of the purposes, or an injury to the business, of the firm. It is also well settled, as a general rule, that an execution cannot reach any higher interest in property than the debtor himself has; and yet all these decisions which justify an officer in taking exclusive possession of firm property would seem to ignore these just principles, which are so absolutely necessary to the successful operation of partnership business. It would seem to be a contradiction of terms and principles to hold that the officer only takes and the purchaser only gets the interest which a partner may have in partnership property after a firm has been wound up and liquidated, and the partner's ultimate interest thus ascertained, and that an officer may seize partnership property, and retain exclusive possession of it until the sale, he thus being enabled to do what the individual partner would have no right to do. And it also seems a violation of fundamen- tal rights, and the taking of private pi'operty without compensation, to hold, as we understand was held in the case of Haskins v. Everett, su- pra, that where a partnership has endeavored to assert its rights of pos- session by a replevin suit as against an officer who had levied on the property for the individual debt of one of its members, it would be liable for damages for the use and detention of its own property. It would seem that many perplexing questions might arise out of this holding. Suppose different executions were levied on different ar- ticles or lots of personal property belonging to a partnership for the individual debt of a member of the firm, and on an accounting and liquidation it was ascertained that the interest of the debtor partner was only sufficient to pay one of the claims ; what claim would have priority? It seems to be clear that, as long as property has not been converted by a partner, and is being used, or subject to be used, for the legitimate purposes of the partnership, no partner has any certain or exclusive or special interest in any specific partnership property, but it is the property of the entity, the firm. How, then, can a cred- itor or an officer take any specific interest in any particular piece of property belonging to the firm under such an execution, levy, and sale? Let us suppose that a creditor having a debt amounting in the aggre- gate to about $500, as in this case, levies on partnership property worth $3,000, and another creditor, having a debt of $1,500, levies at a subsequent time on another article of partnership property worth $1,500. On an accounting it is ascertained that the debtor partner's interest in the firm at the time of the levies amounted to $1,500. The Sec. 1) AT LAW. 525 property worth $3,000 was sold, and bid in by the execution creditor, at $500, in satisfaction of the first debt mentioned. What will be the result? At the time of the first levy, if the debtor partner is to be charged with one-half the property levied on, as taken out in his in- terest, it would absorb all his interest in the firm. In other words, does the levy on specific property appropriate any specific property, or only the debtor's interest in the firm ? It would seem that by far the more sensible and enlightened method of reaching a partner's interest in the firm would be by garnishment, as provided by statute in Geor- gia; and, as said in Freem. Ex'ns, it would seem to be a subject de- serving of legislative attention. The hardship that might result from carrying out the rule laid down in this state in the cases in 4 Sneed, 531, and 13 Heisk. 317, could be well illustrated by this case, where the firm had a contract to build an extension system of waterworks. A part of the material necessary to the completion of the contract was levied on and sold by an officer for the individual debt of one of the members, and it is stated in the bill that the purchaser, the complain- ant in this case, notified the other partner that he must not move or do anything with this property until his interest was paid for. It seems that this partner paid no attention to this direction; and it would clearly appear that, if the complainant had had it in his power to enforce the directions given by him, it would not oftly have resulted in great damage and ruin to the firm's business, but also to the other partner, who was in no way to blame for Wingfield's indebtedness. But, whatever trouble may arise from these holdings we do not feel at liberty, in this court, to depart from what we understand to be well- settled principles in this state. Nor do we wish to be understood as criticising the holdings of our Supreme Court upon this subject, further than to call attention to the seeming inconsistencies that arise there- from, and which are common to all the earlier cases in almost every state in the Union, as well as in England. But, for the purposes of this case, we may state that we understand' the decisions in this state from which we have above quoted to settle the following points: (1) That partnership property may be levied on by the creditor for the individual debt of a member of the firm. (3) 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 possession of the property levied on, and to 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 accounts, as is the language used in the case of Haskins v. Everett, supra, or a mere right to an ac- counting, as stated in another case. (5) That, as stated by Judge Freeman in Lincoln Sav. Bank v. Gray, 12 Eea, 459, a levy is neces- sary in order to fix a lien so as to authorize the filing of a bill. These points being settled, it results, in our opinion, that the chan- cellor was in error in dismissing the complainant's bill. While we 526 EIGHTS AND EEMEDIBS OF CEEDITOES. (Ch. 8 think that Hazelhurst had the right to use, and properly, whether by himself, or by the new firm of Hazelhurst & Co., used, the iron which had been levied on, in carrying out the contract and business of the old firm, still it is the logical effect of the decisions which we have quoted that the creditor, Johnson, having the right to have the prop- erty levied on, by the sale and purchase took whatever interest Wing- field had in this property at that time, which could only be ascertained by an accounting, and that this he has a right to do. If it shall turn out on an accounting that at the time of the levy the liabilities of the firm, as claimed in the answer filed with the demurrer, exceeded the assets, and that the firm was insolvent, then Johnson will, of course, take nothing by his purchase; and it is also clear that Johnson's in- terest could not exceed the value of Wingfield's share in all the part- nership assets after all partnership debts were paid, and all charges against him in favor of Hazelhurst were settled. The logical result of our cases on this subject seems to be that the taking by the officer has practically the same eft'ect as the withdrawal and conversion of that amount of property by the debtor member of the firm, subject to being compelled to return such an amount of the property after the exhaustion of other partnership property as might be necessary to pay all partnership debts, and to secure to the other partner his just share and division of the partnership assets. For these reasons the decree of the chancellor will be reversed, and the cause remanded to be further proceeded with, with directions to refer the cause to the master to take an account, and to ascertain and report the condi- tion of the old firm of Hazelhurst & Co. at the time of the levies made, as shown in the bill; and the complainant will be entitled to a decree for the value of Wingfield's interest in the property levied on, if any, on the lines indicated in this opinion. The decree of the chancellor is reversed, the demurrer overruled, and the cause remanded, as stated, and the defendants will pay the costs of the appeal.^ AULTMAN & CO. v. FULLER, WILLIAMS & CO. (Supreme Court of Io^y.a, 1880. 53 Iowa, 60, 4 N. W. 809.) Action in equity to set aside an execution sale of an undivided half of a threshing machine, and to determine the conflicting claims of the plaintiffs and defendants in relation to the same. The machine was owned by one Tierney and one Cook. The plaintiffs obtained a judgment against both, and the defendants obtained a judgment against Tierney alone. The plaintiffs cause execution to be levied upon the entire machine. The defendants cause execution to be levied upon an undivided half, as being the interest of Tierney. The whole machine was sold to plaintiffs under their execution, and an un- 1 AIBrmed orally b.v Supreme Court, October 16, 1897. Sec. 1) AT LAW. 527 divided half was sold to defendants under their execution; the sale to defendants being made first. The plaintiffs aver that Tierney and Cook were in partnership, that the machine was partnership prop- erty, and that their claim against them was a partnership debt. They also aver that here was no valid levy of the defendants' execution. The defendants for answer make a general denial. Other facts are stated in the opinion. The court dismissed the plaintiffs' petition, and they appeal. Adams, C. J. * * * We have, then, a case where the defendants, as creditors of one of the partners only, levied upon partnership prop- erty for the purpose of collecting their debt. This they might do under a provision of the statute. Section 3053 of the Code of 1873 provides that "when the officer has an execution against a person who owns property in partnership with another, such officer may levy on and take possession of the property owned * * * in partnership sufficiently to enable him to appraise and inventory the same." The defendants by their levy, if regularly made, acquired a lien upon the interest of Tierney in the property. Code 1873, § 3054. But his interest was not necessarily equivalent to an undivided half "Of the property. It might be more or less than that, and it might be nothing. His interest was equivalent to such fraction as would con- stitute his share in the property, after satisfying from the partner- ship assets all claims against the partnership, whether due to third persons or to his partner. But such interest, of course, was uncertain while the partnership affairs remained unsettled. Possibly it might be sold on execution notwithstanding its uncertainty. Hubbard v. Curtis, 8 Iowa, 1, 74 Am. Dec. 283. It would seem certain that it could be, unless the remedy provided by section 3054 of the Code is to be deemed exclusive of all other remedies. That section provides that, where a debtor partner's interest in firm property is levied upon by his separate creditor, the interest may be ascertained by an action in equity, and the lien acquired by the levy may be enforced in such action. The defendants should, we think, have proceeded under that section. They sold, however, without the ascertainment of Tierney's interest. Whether the sale was void, or not, we need not determine. In purchasing at the sale they certainly acquired nothing more than Tierney's interest, as the same should appear after the partnership liabilities had been discharged. Hubbard v. Curtis, above cited. And the plaintiffs claim that such interest would be nothing. * * * It is finally insisted by the defendants that the plaintiffs' remedy, if any, is not in equity. But it should be remembered that the defend- ants had acquired a lien upon the property, which under the statute was enforceable in equity to the extent of Tierney's interest, to be ascertained in an action in equity, if one should be instituted for that purpose. None, however, was instituted. In the meantime the plain- tiffs, as partnership creditors, acquired by their levy an interest in the same property. They claim that the defendants have no rights in the 528 EIGHTS AND REMEDIES OF CBEDITOES. (Ch. 8' property as against them. As the defendants' rights in the property,, if any, could be determined and enforced only by an action in equity, which they neglected to bring, it appears to us that the plaintiffs should be allowed to maintain an action in equity to determine sub- stantially the same question. In our opinion the court erred in dismissing the plaintiffs' petition.. Reversed.^ SECTION 2.— IN EQUITY. RODGERS V. MERANDA et al. (Supreme Court of Ohio, 1857. 7 Ohio St. 180.) The original proceeding was a petition for an order of distribution- of the separate or individual assets of an insolvent debtor, as be- tween separate and partnership creditors. It appears from the record that about the 13th of June, 1854, Peter Murray, an insolvent debtor, made an assignment of all his estate, real and personal, to the plaintiff, in trust for the payment of his individual creditors in proportion to the amount of their respective demands. Though possessed of a large and valuable estate, it had been found insufficient to pay his separate debts and liabilities in full. At the date of his failure and assignment he was a partner with John W. Dever in a mercantile firm under the name and style of Dever & Murray; which firm had also become insolvent, and likewise Dever;; and the firm had made an assignment of the partnership property and assets about the same time to John Meranda, one of the defendants, in trust for the payment of the joint debts or liabilities of the firm. In this condition of affairs the partnership creditors, although they have filed their claims with the assignee of the firm for their distribu- tive shares out of the partnership property, claim the right to be ad- mitted to a participation in the dividends of the separate estate of Murray, pari passu with his individual creditors; while the latter iln Willis V. Henderson, 43 Ga. 325 (1S71), SlcCay, J., In holding illegal an execution for the debt of one partner levied against the firm's property, said: "Without doubt, by the common law, it was competent to levy upon and sell the interest of a partner in any property belonging to the partner- ship. Shaw V. McDonald, 21 Ga. 395. The purchaser got the interest of the partner. He did not get an undivided title equal to the partner's share in the concern according to the agreement, but the interest of the partner after a settlement of the concern affairs. Hoskins v. Johnson, 24 Ga. G25. Evident- ly this was a very clumsy and often a very unjust mode of enforcing the claims of a creditor against one of the firia. The purchaser did not know what he was buying, since his interest depended altogether upon the result of a settlement of the Arm affairs. Our Code (section 1!X)8) prohibits the sale of effects so situated, and provides that the interest of a partner in the partner- ship assets may be reached by the process of garnishment." Sec. 2) IN EQUITY. 529 deny the right, and insist that his separate estate shall be applied to the satisfaction of his individual debts in preference to his partnership debts. It appears, further, that Murray, besides advancing his part of the capital of the firm, also loaned money to the firm to a large amount, for which he held the obligations of the firm, which obligations, by the assignment of Murray, came into the hands of the plaintiff, who has presented the same to the assignee of the firm, and claims to have the same paid out of the assets of the firm, pari passu with the other partnership debts. The other creditors resist this, and plaintiff asks an order of distribution to that effect out of partnership assets. iDefendants demurred to the petition. The court below sustained the demurrer, and gave judgment in favor of the defendants; and this petition in error is filed to review and reverse that judgment. Bartley, C. J. Two questions are presented for determination in this case. The first is whether, in the distribution o'f the assets of insolvent partners, where there are both individual and partnership assets, the individual creditors of a partner are entitled to be first paid out of the individual effects of their debtor, before the partner- ship creditors are entitled to any distribution therefrom. It is well settled that, in the distribution of the assets of insolvent partners, the partnership creditors are entitled to a priority in the partnership ef- fects, so that the partnership debts must be settled before any division of the partnership funds can be made among the individual creditors of the several partners. This is incident to the nature of partnership property. It is the right of a partner to have the partnership property appHed to the purposes of the firm, and the separate interest of each partner in the partnership property is his share of the surplus after the payment of the partnership debts. And this rule, which gives the partnership creditors a preference in the partnership effects, would seem to produce, in equity, a corresponding and a correlative rule, giving a preference to the individual creditors of a partner in his separate property; 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 satis- faction of the partnership creditors. The correctness of this rule, however, has been much controverted ; and there has not been always 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, established from considerations 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. 3 Kent, Com. 65. And, again, Gil.Part.— 34 530 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 others have assigned as a reason for the rule that the joint estate is supposed to be benefited to the extent 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 creditors, as to preference, to each estate respectively, which has been thus bene- fited by their transactions. McCuUoh v. Dashiell, 1 Har. & G. (Md.) 96, 18 Am. Dec. 271. But these reasons are not entirely satisfactory. So important a rule must have a better foundation to stand upon than a mere consideration of convenience; and practically it is undeniable that those who give credit to a partnership look to the individual re- sponsibiHty of the partners, as well as that of the firm, and also those who contract with a partner in his separate capacity place rehance on his various resources or means, whether individual or joint. And in- asmuch as individual debts are often contracted to raise means which are put into the business of a partnership, and also partnership ef- fects often withdrawn from the firm and appropriated to the separate use of the partners, it cannot be practically true that the separate estate has been benefited to the extent of every credit given to each individual partner, nor that the joint estate has retained from the sepa- rate estate of each partner the benefit of every credit given to the firm. Unsatisfactory reasons may weaken confidence in a rule which is well . founded. What, then, is the true foundation of the rule which gives the in- dividual creditor a preference over the partnership creditor in the dis- tribution of the separate estate of a partner? To say that it is a rule of general equity, as has been sometimes 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 attainable. 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 partner- ship creditors in the joint estate, cannot be successfully controverted. It originated as a consequence of the rule of priority of partnership creditors in the joint estate, and, for the purpose of justice, became 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 Sec. 2) IN EQUITY. 531 have, as a general thing, a great advantage over the separate creditors. Besides being exclusively entitled 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. And besides the advantage which the joint creditors have, arising from the fact that the partnership fund is usually much the largest, as men in trade, in a great majority of cases, embark their all, or the chief part of their property, in it, and besides their distributive rights in the surplus of the separate estate of the other partners, the joint creditors have a degree of security for their debts and facilities for recovering them which the separate creditors have not. They can sell both the joint and the separate estate on an execution, while the separate creditor can sell only the separate prop- erty and the interest in the joint effects that may remain to the part- ners, after the accounts of the debts and effects of the firm are taken, as between the firm and its creditors, and also as between the partners themselves. With all these advantages in favor of the partnership creditors, it would be grossly inequitable to allow them the exclusive benefit of the joint fund, and then a concurrent right with individual creditors to an equal distribution in the separate estate of each part- ner. What equality and justice is there in allowing partnership creditors, who have been paid 80 per cent, on their debts out of the joint fund, to come in pari passu with the individual creditors of one of the partners, whose separate property will not pay 20 per cent, to his separate creditors? How could that be said to be an equal distribution of the assets of insolvents among their creditors? It is true that an occasional case may arise where the joint effects are pro- portionably less than the separate assets of an insolvent partner. But, as a general thing, a very decided advantage is given to the partnership creditors, notwithstanding this preference of the individ- ual creditors in the separate property; and that advantage, arising out of the nature of a partnership contract, is unavoidable. Some general rule is necessary; and that must rest on the basis of the un- alterable preference of the partnership creditors in the joint effects, and their further right to some claim in the separate property of each of the several partners. The preference, therefore, of the individual creditors of a partner in the distribution of his separate estate results as a principle of equity from the preference of partnership creditors in the partnership funds, and their advantages in having different funds to resort to, while the individual creditors have but one. It has been argued that partnership contracts are several as well as joint, and consequently have an equal legal right with separate creditors upon the individual property of a partner. But the right 532 RIGHTS AND REMEDIES OP CREDITORS. (Ch. 8 of partnership creditors against the separate property of individual partners in proceedings at law is not in controversy. The question here relates to the relative equitable rights of two classes of creditors in the distribution of the estates of insolvents. Much of the confusion upon this subject has probably arisen from confounding the abstract rights of creditors in proceedings at law with their relative rights to an equitable adjustment in marshaling the assets of insolvents in chan- cery. The rule here adopted appears to have been followed in England for nearly a century and a half. We find it distinctly recognized in the case of Ex parte Crowder, 2 Vern. 706, decided in 1715. And in Ex parte Cook, 2 P. Wms. 500, Lord Chancellor King declared it set- tled as a rule of convenience in bankruptcy that joint creditors should be first paid out of the partnership estate and the separate creditors out of the separate estate of each partner, and, if there be a surplus of the joint estate after paying the joint creditors, the share of each partner should be distributed to his separate creditors, and if, on the other hand, there should be a surplus of the separate estate of a part- ner after the satisfaction of his individual creditors, it should be ap- plied to any deficiency of the joint funds in the satisfaction of the partnership debts. Lord Hardwicke followed the same rule, in Ex parte Hunter, 1 Atk. 228. But it appears that in Ex parte Hodgson, 2 Bro. C. C, decided in 1785, Lord Thurlow made an innovation on the rule in bankruptcy, declaring that there was no distinction between joint and separate creditors, that they ought to be paid out of the bankrupt's estate and his moiety of the joint estate, and that the joint creditors ought to come in pari passu with the separate creditors. This ruling of Lord Thurlow appears to have had reference to pro- ceedings at law and in bankruptcy, for it is said that, consistently therewith, it was competent for the assignees to confine the joint cred- itors, where there was a joint estate, to that fund exclusively, by fil- ing a bill in equity against the other partners and obtaining an injunc- tion on the order in bankruptcy. But how far this innovation went, in practice, to aflPect the ultimate rights of the parties, is wholly im- material, inasmuch as Lord Loughborough, in Ex parte Elton, 3 Ves. Jr. 238, in the year 1796, restored the rule which previously prevailed, holding that the rule introduced by the Case of Hodgson was incon- venient, inasmuch as every order which he passed in bankruptcy, giv- ing a joint creditor a dividend out of the separate estate of a partner, would give rise to a bill in equity, on the part of the separate creditors, to restrain the order and secure the application of the separate es- tate to the satisfaction of the separate debts; and, although it was adjudged that a joint creditor might prove his claim under a separate commission, yet he could not receive any dividend therefrom until the amount of his distribution in the joint fund could be ascertained and the claims of the separate creditors satisfied. And the opinion of the Lord Chancellor, in this case, puts an end to the assertion, which Sec. 3) IN EQUITY. 533 has been sometimes made, that this rule was peculiar to proceedings in bankruptcy. Touching this he said : "If it stands as a rule of law, we must consider what I have always understood to be settled by a vast variety of cases, not only bankruptcy, but upon general equity, that the joint estate is applicable to partnership debts and the separate estate to the separate debts." Again, in speaking of the inconvenience of lyord Thurlow's rule, he said : "What I order here to-day, sitting in bankruptcy, I shall forbid to-morrow, sitting in chancery; for it is quite of course to stop the dividend on a bill filed. The plain rule of distribution is that each estate shall bear its own debts. The equity is so plain that it is of course upon a bill filed." Lord Eldon, with some characteristic doubts and misgivings, con- sistently followed this rule of his immediate predecessor. Chiswell V. Gray, 9 Ves. 126; Button v. Morrison, 17 Ves. 207. And it has ever since remained the settled law of England, applicable, not simply to proceedings in bankruptcy, but as a general rule of equity, in the distribution of the assets of insolvents. The supposition that this rule arose from any provision of the statutes concerning bankruptcy in England is a mistake. It was long and well settled as a rule of equity before any statute was enacted touching this subject. It does not appear to have been sanctioned by any positive enactment until St. 6 Geo. IV, c. 16, § 16. It is not a little remarkable that this rule of equity, so long settled and acted on in England, should have encountered so much opposition as it has in the courts of the several states of this country. In Pennsylvania the rule was discarded by a majority of the court in the case of Bell v. Newman, 5 Serg. & R. 78, decided in 1819. And the rule adopted in that case was that where a surviving partner dies indebted to partnership and also to individual creditors, and leaving joint assets and also separate assets, the separate creditors should re- ceive as much out of the separate property as the joint creditors could receive from the separate portion or share of such partner in the joint property, and that then the balance of the separate property should be divided pro rata among both classes of creditors. This was placed partly on the ground of equity and partly on the ground of a statute directing equality of distribution of the assets of deceased persons. Judge Gibson, however, dissented, insisting forcibly on the rule adopt- ed in England as a general principle founded in equity. And it has been insisted that this case did not strictly fall within the application of the principle, inasmuch as the estate to be distributed in that case was the estate of a surviving partner, against which the claims of the joint creditors were as purely legal as those of the sepa- rate creditors. And Chief Justice Tilghman remarked, in the opin- ion of the case, that "no rule was intended to be laid down which may affect cases differently circumstanced." The case of Sperry's Estate, 1 Ashm. 347, did not directly affect the question, inasmuch as it came fully within the exception that where 534 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 there is no joint fund, and no solvent partner, the separate and joint creditors should be paid ratably out of the separate estate. The ques- tion was again brought to the attention of the court in that state in Walker v. Eyth, 25 Pa. 216, where the court expresses the opinion that it is a rule of equity "that, where there are partnership and sepa- rate creditors, each estate should be applied exclusively to the pay- ment of its own creditors, the joint estate to the joint creditors and the separate estate to the separate creditors." But the question was not directly decided; the decision of the case being put upon another ground. So that the general principle, in a case proper for its appH- cation, is said to remain still an open question in Pennsylvania. 1 Am. Law Cases, 483. In Virginia the question was presented in 1848, in the case of Mor- ris' Adm'r v. Morris' Adm'r, 4 Grat. 293, and was elaborately dis- cussed on both sides ; but the court was equally divided on the ques- tion of adoption of the rule as a general rule of equity, and the deci- sion of the case was put on other grounds. In New Jersey, in the case of Wisham v. Lippincott, 9 N. J. Eq. 353, the rule was doubted as a general principle of equity, although not decided. In Vermont, in the case of Bardwell v. Perry et al., 19 Vt. 292, 47 Am. Dec. 687, the rule was discarded as a principle of equity, with this qualification : that the separate creditors could require, in equity, that the joint creditors should first exhaust the partnership funds, be- fore coming in with the separate creditors of a partner for a pro rata distribution out of his separate estate. It does not appear that the doctrine of the English courts on this subject was ever adopted as a rule of equity by the courts of Massa- chusetts ; but it is said that a statute was enacted in that state in 1838, providing, as a rule for the distribution of insolvents' estates, that the net proceeds of the separate estate shall go to the separate creditors and that of the partnership estate to the joint creditors. The rule appears to have been discarded in Connecticut, in the case of Camp V. Grant et al., 21 Conn. 41, 54 Am. Dec. 321, and also in Mississippi, in the case of Dahlgren v. Duncan, 7 Smedes & M. 280, but adopted in Alabama, in Bridge v. McCullough, 27 Ala. 661. In New York it has been adjudged that "the rule of equity was uniform and stringent that the partnership property of a firm shall all be applied to the partnership debts to the exclusion of the creditors of the individual members of the firm, and that creditors of the latter are to be first paid out of the separate effects of their debtor before the partnership creditors can claim anything therefrom." Jackson v. Cornell, 1 Sandf. Ch. 348. The history of the English rule was some- what reviewed by Chancellor Kent in Murray v. Murray, 5 Johns. Ch. 60, and upon full consideration adopted as a rule of equity by Chancellor Walworth in Wilder v. Keeler, 3 Paige, 167, 23 Am. Dec. Sec. 2) IN EQUITY. 535 781, Payne v. Matthews, 6 Paige, 19, 29 Am. Dec. 738, and Hutchin- son V. Smith, 7 Paige, 26. The same doctrine was adopted by Chancellor Desaussure in South Carolina as early as 1811 in Woddrop v. Ward, 3 Desaus. 203, and also by the Supreme Court of New Hampshire in Jarvis v. Brooks, 3 Foster, 136. The subject was very fully reviewed in the Court of Appeals of Maryland in McCulloh v. Dashiell's Adm'r, 1 Har. & G. 96, 18 Am. Dec. 271, wherein it was settled in that state that in equity the indi- vidual creditors of a partner were entitled to a preference over the joint creditors in a distribution of the separate estate of their debtor. And the same doctrine was settled by the Supreme Court of the United States, on full consideration, in Murrill et al. v. Neill et al., 8 How. 414, 12 L. Ed. 1135. It has been laid down generally by the elementary writers, both in England and in this country, as a settled rule of equity. * * * It is argued, however, that this doctrine was overruled in Ohio in the case of Grosvenor v. Austin, 6 Ohio, 104, 25 Am. Dec. 743. It is true that the reasoning of the court in the opinion is to that effect; but the case decided falls within one of the acknowledged exceptions to the rule. Where the parthership has become insolvent, and there are no partnership assets for distribution, and no living solvent part- ner, it has been uniformly conceded that the principle of the rule does not apply. The case of Grosvenor v. Austin was a bill in equity by the creditors of the firm of Seymour Austin & Calvin Austin for a distributive share with the individual creditors of Seymour Austin out of the assets of his separate estate in the hands of his adminis- trator. There were no partnership assets, and both parties had died insolvent. This was not a case, therefore, for the application of the principle under consideration. And Judge Lane, in delivering the opinion, says as to this rule : "This court are of opinion that, if any such rule exist, it must have been of frequent application, and thus have become familiar to the profession. Yet no case is found in the books, except the one in 9 Vesey and the South Caroliiia case, that touches such a doctrine, unless cases founded on the statutes of bank- ruptcy. A claim so novel, in a case necessarily of such common oc- currence, must be listened to with caution amounting to jealousy," etc. Touching the subject of this obiter opinion, the following remarks of the Supreme Court of the United States, in Murrill v. Neill, 8 How. 414, 12 L. Ed. 1135, are in point: "The rule in equity governing the administration of insolvent partnerships is one of familiar acceptation and practice. It is one which will be found to have been in practice in this country from the beginning of our judicial history, and to have been generally, if not universally, received. This rule, with one or two eccentric variations in the English practice, which may be noted hereafter, is believed to be identical with that prevailing in England, and is this: That partnership creditors shall, in the first instance, be 536 EIGHTS AND REMEDIES OF CEEDITORS. (Ch. 8 satisfied from the partnership estate, and separate or private cred- itors of the individual partners from the separate or private estate of the partners with whom they have made private and individual con- tracts, and that the private and individual property of the partners shall not be appHed in extinguishment of partnership debts, until the separate and individual creditors of the respective partners shall be paid. The reason and foundation of this rule, or its equality and fair- ness, the court is not called on to justify. Were these less obvious than they are, it were enough to show the early adoption and general prevalence of this rule to stay the hand of innovation at this day — at least, under any motive less strong than the most urgent proprie- ty." * * * The remaining matter for determination in this case involves the inquiry whether, in case of an indebtedness for money lent to the part- nership by a partner who afterward becomes insolvent, the separate creditors of the latter shah be entitled therefor to a pro rata dis- tribution with the partnership creditors out of the joint fund. It is claimed that the liability of the firm to a partner for money loaned is a partnership debt, and that the individual creditors of that partner are, in equity, entitled to an equal distribution therefor out of the part- nership property. On the other hand, it is claimed that as each part- ner is individually liable for the debts of the firm, and as no partner can be allowed to participate with his own creditors in the distribution of a fund, the separate creditors of a partner, as they can only claim through the rights of their debtor, cannot be allowed such participa- tion with the joint creditors. It was at one time held to be the law, on the authority of adjudica- tions by Lord Talbot and Lord Hardwicke, that if a partner has loaned money to the partnership, or the partnership has loaned money to the separate estate of one of the partners, according to the equitable rule of distribution of the assets after insolvency, in the former case the separate creditors of the partner would be entitled to an equal share out of the joint assets to the extent of the debt created for the money lent, and that in the latter case the partnership creditors would be entitled to payment to the same extent out of the individual estate of the partner. Ex parte Hunter, 1 Atk. 223 ; Story on Partn. § 390. But this doctrine has long since been overruled, and the con- trary appears now to be well settled. In Ex parte Lodge, 1 Ves. Jr. 166, Lord Thurlow held that the assignees on behalf of the joint estate could not be entitled to distribution out of the estate of Lodge for mon- ey which he had abstracted from the partnership, unless he had taken it with fraudulent intent to augment his separate estate. And in Ex parte Harris, 2 Ves. & B. 210, 212, Lord Eldon said: "There has long been an end of the law which prevailed in the time of Lord Hard- wicke, whose opinion appears to have been that if the joint estate lent money to the separate estate of one partner, or if one partner lent to the joint estate, proof might be made by the one or the other in each Sec. 2) IN EQUITY. 53T case. That has been put an end to, among other principles, upon this, certainly, that a partner cannot come in competition with separate creditors of his own, nor, as to the joint estate with the joint creditors. The consequence is that if one partner lends il,000 to the partner- ship, and they become insolvent in a week, he cannot be a creditor of the partnership, though the money was supplied to the joint estate. So, if the partnership lends to an individual partner, there can be no proof for the joint against the separate estate; that is, in each case no proof to affect the creditors, though the individual partners may cer- tainly have the right against each other." This doctrine proceeds upon the principle that, in the distribution of the assets of insolvents, the equities of the creditors, whether joint or separate, must be worked out through the medium of the partners ; that creditors can only step into the shoes of their immediate debtors in reaching their effects, where there are conflicting claims ; and that, inasmuch as an individual partner could not himself come in and compete with the partnership creditors, who are in fact his own cred- itors, in the distribution of the fund, and thereby prejudice those who were not only creditors of the partnership, but also of himself, there- fore the separate creditors of a partner could not enforce any claim to a distributive share of the joint effects against the partnership cred- itors which could not have been enforced by the partner himself for "his own benefit. Story on Partnership, § 390. The rule, however, that these several funds are to be thus administered as they stood at the time of the insolvency, is to be received with this important limita- tion : 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, fraudu- lently, or under circumstances from which fraud may be inferired, or under which it would be implied. In the case before us, however, it is not pretended that the firm ob- tained the borrowed money from Murray improperly. The separate creditors of Murray, therefore, are not, on account of this claim for money lent by Murray to the firm, entitled to participate with the partnership creditors in the distribution of the joint effects. Judgment of the common pleas reversed, and ordered that the sepa- rate effects of Peter Murray be distributed pro rata, first among his individual creditors, before any application thereof be made to the payment of the partnership debts of Dever & Murray, and that the partnership effects be applied first to the payment of the partnership debts, irrespective of the claim of the partner, Peter Murray, of money loaned by him to the firm. 538 EIGHTS AND BBMEDIES OF CREDITORS. (Ch. 8 DAVIS V. HOWELL. (Court of Chancery of New Jersey, 1880. 33 N. J. Eq., 72.) RuNYON, Ch. John C. Bennett and James M. Andrews were, on or about the 10th of February, 1876, partners in business in PhilUps- burg. On that day they made an assignment under the assignment act, for the equal benefit of their creditors, to the complainant, Wil- liam M. Davis. Five days after the making of that assignment An- drews made an assignment under the act for the equal benefit of his- creditors to the complainant and Joseph Howell, and about the same time Bennett made a like assignment to Sylvester A. Comstock and Charles F. Fitch. The partnership estate will pay a dividend of only about 11 per cent, of the partnership debts. Most of the partnership creditors have put in their claims under the assignment of Andrews, and claim and insist upon a proportionate participation with his in- dividual creditors therein as to so much of their claims as may not be paid out of the partnership estate, and they threaten the complain- ant and his co-assignee of Andrews' estate with legal proceedings if their demand be not complied with. The complainant, therefore, comes into this court for protection and instruction as to his duty in the premises. His co-assignee, Howell, is a creditor of Andrews' estate, and he is made a defendant. The question presented has been often discussed, and, though there exists some contrariety of judicial determination upon it, must be considered as settled by the great weight of authority. The rule is laid down in the text-books that joint debts are entitled to priority of payment out of the joint estate and separate debts out of the separate estate. Story's Eq. Jur. § 675; Snell's Prin. of Eq. 419;' Story on Part. 376 ; 3 Kent's Com. 64, 65 ; Pars, on Part. 480. And though the propriety of the rule has been often and persistently questioned, on the ground that it is a violation of principle and devoid of equity, and was originally adopted from considerations of convenience only and in bankruptcy cases, and not on principles of general equity, yet it is so firmly established that it must be regarded as a fixed rule of equity. Its history is so well known and has been so often stated that it is profitless to repeat it. It was declared in 1715, in Ex parte Crowder, 2 Vern. 706 ; it was afiirmed by Lord Hardwicke, and, though Lord Thurlow refused to follow it, it was restored by Lord Loughborough and followed by Lord Eldon ; and it has existed ever since in the English Chancery. It has an exception where there is no joint estate and no solvent partner; but where there is any joint es- tate the rule is to be applied. That part of the rule which gives the joint creditors a preference upon the joint estate has been repeatedly recognized in this state. Cammack v. Johnson, 2 N. J. Eq. 163 ; Mat- lack V. James, 13 N. J. Eq. 126; Mittnight v. Smith, 17 N. J. Eq. 259,. Sec. 2) IN KQUiTT. 539 88 Am. Dec. 233; Scull v. Alter, 16 N. J. Eq. 147; Hollingshead v. Curtis, 14 N. J. Law, 402 ; Brown v. Bissett, 21 N. J. Law, 46 ; Lin- ford V. Linford, 28 N. J. Law, 113. In Scull v. Alter the Supreme Court recognized the rule in all its parts. Chief Justice Hornblower, by whom the opinion of the court was delivered (the question arose under an assignment under the assignment act, and was the same as is presented in this case), said: "But if it is an assignment not only of the partnership effects and property of the firm of Carhart & Brit- ton, but also an individual and several assignment by them of their respective and several estates, then it must be treated as such. The estates and debts must be marshaled, the partnership effects applied in the first instance to the partnership debts, the effects of Carhart ap- plied in the first instance to the payment of his separate debts, and in like manner the effects of Britton to the payment of debts due from him individually." In Connecticut the rule is not followed, and that part of it which gives the separate creditors a preference upon the separate estate has been repudiated. Camp v. Grant, 21 Conn. 41, 54 Am. Dec. 321. It has been repudiated, also, in certain other states. Bardwell v. Perry, 19 Vt. 292, 47 Am. Dec. 687 ; Emanuel v. Bird, 19 Ala. 596, 54 Am. Dec. 200. But the doctrine is recognized elsewhere, and has been es- tablished after thorough discussion and careful consideration. In Wilder v. Keeler, 3 Paige (N. Y.) 167, 23 Am. Dec. 781, Chancellor Walworth, after a full discussion of the subject, gives the sanction of his weighty opinion to the rule as a doctrine of equity. He says : "In the case now under consideration there was, at the death of G. F. Lush, a large joint fund belonging to the partnership, out of which the joint creditors were entitled to a priority of payment, and out of which several of the joint creditors who have come in under this decree have actually secured a portion of their debts. Nothing but an unbending rule of law should, under such circumstances, induce the court to permit them to come in for the residue of their debts, ratably, with the separate creditors. The amount of the fund which will remain after paying the separate creditors, being a fund which could not be reach- ed at law by the joint creditors, whose remedy survived against the surviving partner alone, must be considered in the nature of equitable assets, and must be distributed among the joint creditors upon the principle of this court that equality is equity." The doctrine was recognized in Morgan v. Skidmore, 55 Barb. (N. Y.) 263. In Penn- sylvania, in Bell v. Newman, 5 Serg. & R. (Pa.) 78, 91, 92, Gibson, J. (afterward Chief Justice), in a dissenting opinion strongly supports the rule as one founded on the most substantial justice. In Black's Appeal, 44 Pa. 503, and again in McCormick's Appeal, 55 Pa. 252, the doctrine is completely recognized and affirmed. In South Caro- lina, in Woddrop v. Price, 3 Desaus. 203, Tunno v. Trezevant, 2 Desaus. 264, and Hall v. Hall, 2 McCord, Eq. 269, the doctrine was held to be a doctrine of equity. In Massachusetts it is established by 540 EIGHTS AND EBMEDIES OF CREDITORS. (Ch. 8 Statute. In Murrill v. Neill, 8 How. 414, 12 L,. Ed. 1135, it is recog- nized by the Supreme Court of the United States. The objection that is always pressed as the conclusive argument against it is that partnership debts are several as well as joint, and it is urged that therefore the partnership creditor has an equal claim upon the individual estate with the separate creditor. But it is beyond dispute that in equity the former has a preferred claim upon the part- nership estate. To accord to him an equal claim, as to the balance of his debt which the partnership assets may not be sufficient to satisfy with the individual creditor, would be to give him an advantage to which he is not equitably entitled. If he obtains a legal lien on the separate estate, he will not be deprived of it. Wisham v. Lippincott, 9 N. J. Eq. 353; Randolph v. Daly, 16 N. J. Eq. 313; National Bank V. Sprague, 20 N. J. Eq. 13 ; Howell v. Teel, 29 N. J. Eq. 490. But if he has no such lien, and the assets are to be marshaled in equity, that same equitable doctrine by which the partnership assets are de- voted in the first place to the payment of his debt, to the exclusion of the separate creditor, and to which he is indebted for the preference, will in like manner and for like reason give the latter preference up- on the separate property. Such was the view of Chancellor Kent. He says : "So far as the partnership property has been acquired by means of partnership debts, those debts have in equity a priority of claim to be discharged, and the separate creditors are only entitled in equity to such payment from the surplus of the joint fund after sat- isfaction of the joint debts. The equity of the rule, on the other hand, equally requires that the joint creditors should only look to the sur- plus of the separate estates of the partners after payment of the sepa- rate debts. It was a principle of the Roman law, and it has been ac- knowledged in the equity jurisprudence of Spain, England, and the United States, that partnership debts must be paid out of the partner- ship estate and private and separate debts out of the private and sepa- rate estate of the individual partner." 3 Kent's Com. 64, 65. The obvious infirmity of the objection to the rule is that it leaves out of consideration the fact that it is to equity that the joint creditor is in- debted for his preference. It is also urged that, instead of the rule, it would be more equitable to require the joint creditor to have re- course to the partnership property before allowing him to participate in the separate estate, on the equitable ground that he has two funds for the payment of his debt, while the separate creditor has but one ; but the rule as established is a rule of justice and equity. It has for its basis the presumption that joint debts have been contracted on the credit of the joint estate and separate debts on that of the separate estate. It has the weight of great authority and long establishment, notwithstanding persistent objection and some fluctuation, and it is based on equitable principles. Soimd policy is in its favor. Though there may be, as there are in the case of all such rules, instances in which it works unsatisfactorily, yet that on the whole, and as a rule, Sec. 2) IN EQUITY. 541 it has not operated unjustly, is evidenced by the fact that it has existed so long (Ex parte Crowder was decided in 1715), notwithstanding opposition, and that in Massachusetts, at least, it has, in the face of the opposition referred to, been established by legislative authority, and that, too, as lately as 1838. In this state it has, as has been shown, the sanction of our judicial tribunals, and it is too firmly estabHshed to be disturbed. It is true that in Wisham v. Lippincott, 9 N. J. Eq. 353, 356, the Chancellor expressed strong doubt of its correctness as a general rule ; but in the other cases before cited, both previous and sub- sequent, the rule has been recognized without any expression of dis- approbation or dissatisfaction. There will be a decree that the joint assets be first applied to the payment of the joint debts, and the separate assets to the separate debts, and that the joint creditors may participate in any surplus of the separate assets, which may remain after payment of the separate debts. The costs of the parties will be paid out of the funds repre- sented by the complainant — the partnership estate — and Andrews' es- tate in equal shares. HARRIS et al. v. PEABODY et al. (Supreme Judicial Court of Maine, 1881. 73 Me. 2G2.) Virgin, J. Royal Williams and James A. Norton, copartners un- der the firm name of Williams & Norton, upon their own petition were individually and as copartners duly adjudged insolvent debtors. The assets of the partnership, amounting to $1.19 only, were absorbed by the expense of selling the same. Norton's individual estate had no assets, while Williams', after deducting legal costs and charges, amounted to $1,177.36. Against the partnership estate claims amount- ing to more than $2,300 were proved; against Williams' individual estate, $1,133.67 ; and against Norton's, no claims. Before the court of insolvency the partnership creditors claimed a pro rata dividend from the separate assets of Williams pari passu with his individual cred- itors; but the judge denied the claim, and decreed that the assignees should distribute those assets among the individual creditors. There- upon the complainants brought this bill (claimed by them to be author- ized by the insolvent statute [St. 1878, p. 73, c. 74, § 11, as amended by St. 1879, p. 156, c. 154, § 3]), somewhat in the nature of an appeal from the decree of the judge of insolvency; and the parties have brought the case before us on an agreed statement, reserving the , question of jurisdiction of this court, which is expressly raised. * * * The next question is, was the decree of the court of insolvency cor- rect in ordering a distribution of Williams' individual assets among his separate creditors, to the exclusion of the complainants, the cred- itors of the firm. The respondents rely upon the provisions of St. 1878, p. 86, c. 74, § 54, and certain cases cited on their brief. 542 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 It is familiar history that as early as 1715 Lord Chancellor Har- court laid down as the rule of administering the joint and separate estates in bankruptcy that the joint estate shall be applied in payment of the partnership debts, and the separate estate of the separate debts ; any surplus of either estate being carried over to the other. Ex parte Crowder, 2 Vern. 706. This doctrine was followed by Lord Chan- cellor King in Ex parte Cook, 2 P. Wms. 500. But it seems that this rule was departed from by Lord Thurlow, who let in creditors of the firm concurrently with the separate creditors upon the separate es- tate, upon the ground that they were equally creditors of the firm and of the partners. Ex parte Cobham, 1 Bro. C. C. 576 ; Ex parte Hodg- son, 2 Bro. C. C. 5; Ex parte Page, 2 Bro. C. C. 119. The former rule was restored, however, by Lord Loughborough (Ex parte Elton, 3 Ves. 239; Ex parte Abell, 4 Ves. 837), confirmed by Lord Eldon (Ex parte Clay, 6 Ves. 813; Ex parte Taitt, 16 Ves. 193), and it has been the prevailing general rule ever since in England (Lindl. Part. [3d Eng. Ed.] 1201; Robs. Bank. 584; Colly. Part. [Perkins' Ed.] 775, 776; Lodge v. Prichard, 1 De G., G. & S. 609), and in this coun- try as well. Among the numei'ous cases, see Wilder v. Keeler, 3 Paige (N. Y.) 167, 23 Am. Dec. 781; Payne v. Matthews, 6 Paige (N. Y.) 19, 29 Am. Dec. 738; Murray v. Murray, 5 Johns. Ch. (N. Y.) 60; 3 Kent, 64, 65; Story, Part. §§ 376-378; In re Marwick, 2 Ware, 233 ; Pars. Part. 480 et seq., and notes. This rule was also adopted in the United States bankrupt law of 1841 (Act Aug. 19, 1841 c. 9, § 14, 5 Stat. 448), in the United States bankrupt law of 1867 (Act March 2, 1867, c. 176, § 36, 14 Stat. 534; Rev. St. U. S. § 5121), in the insolvent laws of Massachusetts (St. 1837-38, p. 475, c. 163, § 21), and in the insolvent laws of this state (St. 1878, p. 86, c. 74, § 54) . Jarvis v. Brooks, 23 N. H. 136. This rule applies to the estates as they exist when the parties are declared bankrupt or insolvent, and not before; for the creditors of the firm have no lien upon its property which can prevent the partners from bona fide changing its character and converting it into separate estate of one of them prior thereto. Ex parte Ruffin, 6 Ves. 119; Case V. Beauregard, 99 U. S. 119, 25 L. Ed. 370; Robb v. Mudge, 14 Gray (Mass.) 534. The reasons assigned for giving the partnership creditors the pref- erence over the joint estate in bankruptcy have been various. But the view generally taken founds it, not upon any lien or superior claim which they primarily have, but upon a privilege or preference, some- times denominated a lien, "derived from the equitable right which each partner, who being liable for aU the partnership debts, and whose interest in its property being simply his share of the residue after pay- ment of its debts and settlements of its accounts, consequently has, that the partnership property shall go to pay its debts in preference to those of any individual partner." Case v. Beauregard, supra; Johnson v. Hersey, 70 Me. 74, 35 Am. Rep. 303 ; Washburn v. Bank, 19 Vt. 286, Sec. 2) IN EQUiTT. 543 288. It has also been said that this priority in joint assets and equality in the separate are founded on the fact that the partnership creditor trusted each and all partners while the separate creditor trusted but one, and that natural justice warrants the marshaling of the assets so as to give the former the preference (Brock v. Bateman, 35 Ohio St. 609) ; that it is famihar law that a creditor of a partnership, having recovered a judgment against it, may satisfy his execution against partnership property or against the individual property of any of the partners (Tucker v. Oxley, 5 Cranch [U. S.] 34, 40, 3 L. Ed. 29; Egery v. Howard, 64 Me. 68, 73 ; Washburn v. Bank, supra) ; and in the case of intervening insolvency, having two funds from which to satisfy his claim, the principle familiar in marshaling assets or securi- ties comes in and compels him to exhaust the fund to which he has the exclusive right before he be allowed to comp.te with a creditor who has a claim only on one of the funds (Ex parte Elton, 3 Ves. 240 ; L Story, Eq. § 558). Lord Justice Turner said: "This rule may per- haps proceed upon this : That the joint estate is clearly liable both at law and in equity for the joint debts — at law by reason of the sur- vivorship, and in equity by virtue of the rights of the partners inter se to have it so applied — and that the separate estate is as clearly liable, both at law and in equity, for the separate debts, and that carrying over the surplus of the one estate to the other, although it may not strictly work out the rights, may afford the best means of adjusting the complications which arise from the joint estate being liaJale for the separate debts only so far as the interest of the partners from whom the debts may be due may extend, and from the separate es- tates, if taken for the joint debts, having recourse over against the joint estates, and which arise also from the equities between the pr.r- ties." Lodge v. Prichard, supra. Prof. Parsons suggests the ground that a partnership is a distinct entity, contracting its own debts, having its own creditors, and possessing its own property applicable to its debts ; that, when it has ceased to exist, it is resolved into its ele- ments, and the relations between its members and creditors arise. If the joint debts have been paid, the former partners share the re- maining property. If the joint funds are not sufficient to pay its debts, they who were its members become the debtors of the joint creditors. Pars. Part. 346, 347. The rule that each estate is to be applied to its own debts, and the surplus of each to the creditors remaining of the other, is applicable only to the facts upon which it is predicated; i. e., when there is joint estate, and all the partners are insolvent. But, if there is no available joint estate and no solvent partner, then the creditors of the partner- ship have no exclusive fund to exhaust, but may share concurrently with the separate creditors the separate estate. Ex parte Hayden, 1 Bro. C. C. 454, and notes in Perkins' Ed. 398 ; Colly. Part. § 926 ; Lindl. Part. 1234; Story, Part. § 380; Pars. Part. 482. In some of the cases this is called an exception to the rule. Prof. Parsons says 544 EIGHTS AND REMEDIES OF CEEDITOKS. (Cll. 8- that, "instead of being an exception, it is a case that falls without the rule." Others say it is a part of the rule. Judge Drumraond, after stating what he denominates "the well-established rule upon the sub- ject," says : "It is partly on the ground that, although it is a debt of the firm, it is still a debt against each individual member of it, for the satisfaction of which the property of each is responsible, and that, being the only source to resort to for the payment of the debt of the firm, it should be appropriated as well to pay the debts due from the firm as from the individual members." In re Knight, 8 Nat. Bankr. Rep. 436, 438, Fed. Cas. No. 7,880. The same doctrine prevails in all the federal District Courts. In re Marwick, 2 Ware, 233; Bump, Bankruptcy (9th Ed.) 771, and cases there cited. Such, evidently, is the opinion of Mr. Justice Clifl;ord. Amsink v. Bean, 11 Nat. Bankr. Rep. 495, 22 Wall. 395, 22 L. Ed. 801, and the case of Ex parte Eeland, 5 Nat. Bankr. Rep. 222, Fed. Cas. No. 8,228, which he there cites. We are aware that this question has been decided otherwise in Massachusetts (Howe v. Lawrence, 9 Cush. 553, 57 Am. Dec. 68, and Somerset Potters' Works v. Minot, 10 Cush. 592) ; but the answer of Judge Drummond is more satisfactory to our minds (In re Knight, supra). Neither does the dictum of Mr. Justice Daniel outweigh the great weight of current authority. See, also, Rogers v. Meranda, 7 Ohio St. 179 ; Brock v. Bateman, 25 Ohio St. 609. It seems there were some joint assets, though not enough to pay the cost of selling; and h'ence (in the language of the statute) no "net proceeds." In such case there should be considered no joint as- sets, though, when there are any available joint assets, however small in value, the rule is applicable. Lindl. Part. 1235 ; Colly. Part. § 926. Story, Part. § 380, says they must be enough to be "available." The question is thoroughly examined in Re McEwen, 12 Nat. Bankr. Rep. 11, Fed. Cas. No. 8,783. As recently as December, 1880, the ques- tion came before Judge Choate (S. D. N. Y.), who said: "It is, how- ever, unnecessary to go into this question, because in a recent decision, which is conclusive on this court, the right of firm creditors to share pari passu with individual creditors in the individual estate has been recognized and enforced, where the firm, as well as the individual partners, had been adjudicated, and the firm assets were not more than sufficient to pay the costs and expenses properly chargeable to the firm estate. In re Slocum (D. C. Vt. Oct. 4, 1879) Fed. Cas. No. 12,951 ; affirmed on review by Blatchford, C. J., December 13, 1880." Fed. Cas. No. 12,950. In re Eitchfield (D. C.) 5 Fed. 47, 50. Decreed that the partnership creditors of Williams and Norton are entitled to dividends from the assets of the estate of Royal WilHams, pari passu with his separate creditors. :ec. 3) IN EQuiTT. 545 In re MARWICK. (United States District Court for Maine, 1845. 2 AVari!, 229. Fed. Cas. No. 9,181.) This was a case of objection to a proof of a debt. Albert Marwick, the bankrupt, in May, 1837, entered into a copartnership with one Frederick Davis, and as partners they purchased a quantity of pro- visions for the Georgia Lumber Company to the amount of $800, for which they drew their bill on the company in favor of one Bradbury. Before the bill was paid the company failed, and the failure of the company produced that of the copartnership of Marwick & Davis, by which the firm was dissolved. They afterwards gave their joint note for the sum remaining due, viz., $740.88. This note Bradbury for a valuable consideration transferred to Dole, with notice that it was a partnership debt. The assignee of Marwick & Davis rendered in his account of the joint estate, October 25, 1844, showing outstand- ing demands in favor of the firm to the amount of $13,000, which comprised the whole assets of the firm, and which were all represented as utterly worthless. Dole, the creditor, proved his debt June 17, 1843. The assignee, after rendering his first account, applied for liberty to compromise or sell the claim against the Georgia Lumber Company, which was disposed of for $40, of which a supplementary account was rendered, and the amount paid into court April 25, 1845, to the credit of the joint estate. The final account of the assignee of the separate estate showed assets to the amount of $545.93. Two debts have been proved and allowed against the estate — one by Charles E. Marwick for $684.04, and the debt of Dole. Marwick objected to the admission of Dole's debt against the separate estate. Ware, District Judge. Two questions have been raised and argued in the present case. The first is whether the creditors of a copartner- ship can in any case be admitted to prove their claims against the separate estate of one of the copartners, for the purpose of receiving dividends in concurrence with the separate creditors of the copartner. The second is whether, admitting that they may in some cases, the partnership creditors can be admitted so to prove under the facts in this case. * * * This general rule for marshaling the assets and claims is taken from the English bankrupt law ; but under that system there are exceptions as well established as the rule itself. One of these exceptions is where there is no joint estate and no living solvent partner, as is the fact in the present case. In such a case the joint creditors are allowed to prove and receive dividends against the separate estate, in concurrence with the separate creditors. Story, Part. § 372 ; Eden, Bankr. Law, 172. But to bring the case within the exception there must be ab- solutely no joint estate. If there be any, however small, the excep- tion is not allowed, and it has been rejected where the joint estate amounted only to £1. lis. 6d. And again there must be no living Gil. Part. — 35 546 lUGHTS AND EEMEDIES OF CEEDITOKS. (Ch. 8 solvent partner; and "solvent" is here used, not in its ordinary sense — 'that is, an ability to pay the whole of one's debts — but in the sense of nonbankrupt partner. For, though he may be in fact insolvent and unable to pay the whole of his debts, if he be not actually in legal bankruptcy, the exception is excluded, and the general rule prevails. Ex parte Janson, 3 Madd. 229. * * * It appears from the proofs in the case, or the facts which are ad- mitted, that the assignee rendered in his first account of the partner- ship estate in October, 1844, in which the whole assets, consisting of outstanding demands, are represented as worthless ; that afterwards he applied for liberty to compromise or collect a debt, on which he obtained $40, and rendered into court a supplementary account; and it further appears, that the money to take up this note was actually advanced by Charles E. Marwick, as creditor of the separate estate. Now, the argument is that if the exception to the general rule of marshaling the assets and debts, established under the English bank- rupt system, may be admitted under our statute, then, as it is founded on the general principles of equity and distributive justice, a creditor of the separate estate ought not to be permitted to defeat the equity of the joint creditor by purchasing for a small sum a partnership de- mand, for which nothing could have been obtained but for this pur- pose. Allowing the premises on which the argument is founded to be correct, it does seem to present itself with some force to the equitable consideration of the court. The effect in the present case will be that the separate creditor will receive nearly the whole of his claim and the joint creditors but a small percentage, if each is restricted to his own appropriate fund. But after considerable reflection I have come to the conclusion that, admitting the assumption on which the argument is founded, it can- not prevail. * * * My opinion, on the whole, is that the proof cannot be admitted against the separate estate, in competition with the separate creditors. THAYER V. HUMPHREY. DAyiES V. SAME. {Supreme Court of Wisconsin, 1895. 91 Wis. 27ti, (34 N. W. 1007, 30 L. R. A. 549, 51 Am. St. Rep. 887.) J. D. Putnam and Alfred G. Goss were partners in the milling busi- ness under the name of J. D. Putnam & Co. The partnership was dissolved by mutual consent; the business being thenceforward car- ried on by J. B. Goss alone at the same place under the name of J. B. Goss & Co., who assumed all the debts of J. D. Putnam & Co. The firm property of J. D. Putnam & Co. was conveyed to J. B. Goss. Sec. 2) IN EQUITY. 547 IvOttie Thayer was a creditor for money lent to J. D. Putnam & Co. After the dissolution she took the note of J. B. Goss & Co. for her claim against J. D. Putnam & Co. She afterwards recovered judg- ment on this note against J. B. Goss and Alfred J. Goss, in form joint and several. The trial court found that Alfred J. Goss was not a partner with J. B. Goss in the firm of J. B. Goss & Co., but that he was liable to Thayer by reason of his being held out to her as a part- ner. Alfred J. Goss, being insolvent, made an assignment for the bene- fit of his creditors to Humphrey. J. B. Goss, likewise, being in- solvent, assigned to one Weld all his property, including the remaining assets of J. D. Putnam & Co. J. D. Putnam was also insolvent. Thay- er filed her claim, based on her judgment, with Humphrey, seeking to participate pari passu with the individual creditors of A. J. Goss in the distribution of his separate assets. The court held that she must first go against the partnership assets, and could not go against the individual assets of A. J. Goss until his separate creditors were paid. From this order Thayer appealed. Davies was also a creditor of J. D. Putnam & Co., but did not ac- cept J. B. Goss & Co. as a substitute for his original debtor. He is not a creditor of either J. B. Goss or J. B. Goss & Co. He also filed his claim with Humphrey, seeking to participate in the distribution of the separate assets of A. J. Goss. The court held that he must first go against the assets in the hands of the assignee of J. B. Goss. From this order Davies appealed. Marshall, J. * * * Now, in this situation, can the creditors of J. B. Goss, doing business as J. B. Goss & Co., who are so circum- stanced as to be entitled to hold J. B. Goss and A. J. Goss liable as members of an ostensible firm — and all the creditors, at least of the new concern, including those having claims against the old firm that, by arrangement with them, have been assumed and made debts of J. B. Goss & Co., are so circumstanced in fact — prove their claims pari passu with the individual creditors of A. J. Goss in his assign- ment? Also, can the' creditors of the firm of J. D. Putnam & Co. so prove ? * * * There are several propositions of law that apply which are well es- tablished — too well to need to be more than stated — among which are that the assets of an insolvent partnership, in insolvency proceed- ings, must be applied first to the payment of the partnership debts ; that, generally speaking, partnership creditors cannot prove in com- petition with the individual creditors of a partner; that the fixed rule is that joint estate must go to joint creditors, and separate estate to separate creditors, though the former may prove pari passu with separate creditors, when there is no living solvent partner and no partnership assets. Now, in this case there is no solvent partner. J. D. Putnam, J. B. Goss, and A. J. Goss are all insolvent. So, keep- ing in mind the above-stated propositions of law, the vital question is: Are there any partnership assets to which appellants can resort? If 548 EIGHTS AND REMEDIES OF CEEDITOES. (Ch. 8 there are such, then the foundation stone, upon which tliey construct their claim of right to share pari passu with the individual creditors of A. J. Goss, disappears. On that subject we shall not attempt to harmonize the large number of cases that can be found in this country. The simple question of whether, when there is an ostensible firm, by holding out to creditors generally, the property of such firm is to be considered, in equity, joint property for the administration thereof, in insolvency, the same as if such property belonged to a firm in fact, is the key to the situation. That it ought to be so considered is, we assume, too clear for argu- ment; that is to say, if A. and B. do business with persons generally as A. & Co., and incur liabilities to such persons who deal in good faith, believing that there is a firm in fact as well as in name, and, under such circumstances, that they have a right to believe it is com- posed of A. and B., and the business becomes insolvent, the property of the ostensible firm should be considered, to all intents and pur- poses, in regard to the administration of the business in insolvency un- der the control and direction of a court of equity, the same as if they were partners in fact. 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 primarily 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 estoppel is for; that is what equity is supposed to accomplish, — to prevent fraud and promote justice between man and man in the administration of human affairs. And we are there- fore prepared to find that such is the law as substantially declared by the court of appeals in chancery of England. In Re Rowland and Crankshaw, 1 Ch. App. 431, the precise ques- tion here under consideration was presented. The business was con- ducted in the name of Rowland & Co. Crankshaw was held to be the ostensible partner, in a contest to determine whether the property should be administered in bankruptcy as joint property of Crankshaw and Rowland, partners, or as the individual property of the one who was the actual owner. The opinion of the court, which, being short, can best be stated by quoting it in full so far as relates to the par- ticular question under consideration, is by Lord Cranworth, as fol- lows: "In the administration of bankruptcy, it has been the object from the earliest times to apportion the assets, as fairly as possible, between the joint and separate creditors. There is found much diffi- cuhy in doing this satisfactorily, but some rules have been clearly laid down ; for instance, that the joint property pays the joint cred- itors, and the separate property pays the separate creditors. Now, Sec. 2) IN EQUITY. 549 what is said here is that this estate, though said to be joint, is, in fact, separate. These two gentlemen traded under the name of Rowland & Co., and tradesmen suppHed them with large quantities of goods, and thus they became bankrupt ; and now it is said that they were not partners, and that the real arrangement between them was that every- thing belonged to Crankshaw. " That is no reason; and, as Crank- shaw suffered Rowland to trade in the name of the firm, any persons trading with him are entitled to say that Rowland & Co. are the per- sons with whom they dealt, and the goods are joint goods." This is a most concise statement of the law, as held by the English Court of Chancery. The meaning is too plain and unmistakable to leave any room for discussion, and we find that the rule so tersely stated has been adhered to, and repeatedly approved, in subsequent cases, in language rather tending to extend than restrict the principle involved. In Ex parte Sheen (In re Wright) 6 Ch. Div. 335, the question was again before the court, where the circumstances were that there was no general holding out, and the court held that where there is no os- tensible partnership by a holding out to creditors generally, but only a holding out to two or three creditors, the facts are not sufficient to make the property of the alleged ostensible firm joint estate. This, though not referring to, inferentially approves. In re Rowland and Crankshaw. In Ex parte Hayman (In re Pulsford) 8 Ch. Div. 11, the question again came before the Court of Chancery, on appeal from the Chief Judge in Bankruptcy, and In re Rowland and Crankshaw was expressly approved. The case so clearly covers the two cases under consideration that we quote liberally from the opinion, after stating the facts. Such facts are as follows : Prior and up to Au- gust 31, 1875, Hayman, Catford, and Pulsford carried on business as Hayman, Pulsford & Co. On that date the firm was dissolved, and notice was published stating the fact. At the same time a letter was sent to each of the persons with whom the firm had done business, stating the fact of dissolution, and that thereafter the business would be carried on by Thomas Pulsford, under the style of Pulsford, Son & Co. Thereafter the business was so conducted. Tom Pulsford, the son of Thomas Pulsford, took an active part in conducting the busi- ness up to the time the insolvency occurred, when Thomas Pulsford filed a petition in bankruptcy; and on the suggestion that, on account' of the way the business had been conducted, it might be held that the father and son were partners, a petition was also filed by them as joint traders. The creditors resolved upon a liquidation by arrange- ment, and such resolution was registered. Hayman, a separate credit- or of the father, in respect to matters outside the firm of Pulsford, Son & Co., appealed from the order for a liquidation of the business as that of a firm, on the ground that there was no partnership. He pre- vailed, and the registration was canceled, and the decree was not ap- pealed from. Thereafter the father and son signed a declaration in in- solvency, upon which Ravenscroft, a creditor, presented a petition al- 550 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 leging that they had treated father and son as partners, under the firm name of Pulsford, Son & Co., on which an adjudication was made against them by consent. Hayman then appealed to the court to an- nul the adjudication. On this application, following In re Rowland and Crankshaw, the application was dismissed on the ground that, though no actual partnership had subsisted between father and son, yet the son had been held out as a partner to the petitioning creditor to such an extent as to enable him to maintain the adjudication. This decision was not appealed from. Hayman then applied to the court for an order declaring that aU, or such portion as the court should think proper, of the estate which appeared in the acts of the bankrupts or either of them as joint estate, formed part of the separate estate of the father, and for a direction that the trustee should treat the same accordingly as separate estate of the. father. Hayman was the only separate creditor; that is, creditor outside those of the business of Pulsford, Son & Co. On the hearing, the evidence showed that sub- stantially all the creditors did business with Pulsford, Son & Co. as a firm consisting of the father and son, though it appeared that the father was the actual owner of the business, and that there was no firm in fact. Hayman's application was refused, and he appealed. On the hearing of this appeal in the Chancery Division of the High Court of Justice, James, L. J., propounded to appellant's counsel the following interrogatory : "If I go to a shop, and find the names Thompson & Jones on the door, and I go in, and find Thompson and Jones selling goods, am I not warranted in believing that they are partners ?" to which answer was made in effect : "That would not change the nature of the assets, and make property which belonged to the father in fact the joint property of father and son" — just as it is claimed in this case, it will be observed. Appellants contend that the fact of holding out sufficient to constitute an ostensible firm of J. B. Goss & Co. will not change the nature of the assets so as to make the individual property of J. B. Goss joint property, in equity, of J. B. Goss & Co. The positions are identical. In the opinion of the court this is answered by James, L. J. After reciting the facts in Re Row- land and Crankshaw, as in Lord Cranworth's opinion in that case, he says: "Every point of that judgment applies to this case, with this single exception, which fact is in favor of the decision of the reg- istrar, that, instead of the words used being '& Co.,' which is an am- biguous term, and might mean anybody in the world, the words are 'Pulsford, Son & Co.' But it is said that this conclusion will work hardship to the appellant, who is a creditor of the father alone. I think that is only one of those misfortunes which occur to persons who deal with others who afterwards become insolvent and become bank- rupt, having partners. The hardship would have been exactly the same upon Hayman if there had been a real partnership created by a formal instrument. The same consequences would then have hap- pened as happen where there is only an ostensible partnership." It Sec. 2) IN EQUITY. 551 will be distinctly noted at this point that the court makes no distinction in the administration of estates of an ostensible and an actual firm in bankruptcy. The Lord Justice proceeds : "The rule has been estab- lished that joint creditors take the joint estate, and separate creditors take the separate estate; and you only have to consider what is joint and what is separate estate; and you must apply the rule independ- ently of the hardship. The supposed hardships are those which it may inflict in any particular case. We can only apply the fixed rule that that which is joint estate shall go to the joint creditors, and that which is separate estate shall go to the separate creditors." The reasoning of these cases is, in our opinion, unanswerable, and we deduce therefrom the principle of law that, if a person allows an- other to carry on business in such a way as to amount to a holding out to persons generally that he and such other are partners, and credit is given to both on the supposition that they are partners in fact, the property with which such business is carried on, though in law that of such person, in equity will be treated as the joint property of such person and such other ; and neither of them, nor the creditors of either, can prove up in insolvency in competition with the creditors who have trusted the two as partners and the business as that of the two. To the same effect is Van Kleeck v. McCabe, 87 Mich. 599, 49 N. W. 872, 24 Am. St. Rep. 182. Applying the law thus stated to the question under consideration, the conclusion is easily reached that, while there are no firm assets at law of the ostensible firm of J. B. Goss & Co., all the property used by J. B. Goss in conducting the business, in equity, is the joint property of such ostensible firm, and to it all the creditors of such ostensible firm can resort, the same in all respects as if there had been a firm in fact. This effectually disposes of the appeal of appellant Lottie Thayer, though it is as effectually ruled by the law applicable to the Davies appeal, as will appear by what follows. Appellant Davies never be- came a creditor of J. B. Goss or of J. B. Goss & Co., by any agreement to which he was a party; and, while his appeal presents the question of whether there is any joint property to which he can resort, such question involves a different question from the one discussed as par- ticularly applicable to the Thayer appeal. We must start the discussion of the Davies appeal with the prop- ositions of law — ^in respect to which though, there is some conflict, they are too well established by the great weight of authority to be ques- tioned by this court — that partnership creditors have no lien on the partnership assets independent of the equity of the partners, but must work out their preference over the individvtal creditors of the mem- bers of the partnership through the equities of such members; that, so long as the equity of the individual members of the partnership exists to have the partnership property applied to the partnership debts, the creditors have the equity to compel its enforcement; that if one member sells his interest, bona fide, to his copartner or a stran- 552 EIGHTS AND REMEDIES OF CREDITOES. (Ch. 8 ger, without in any way retaining his equity to have the partnership creditors paid out of it, the joint property is thereby converted into the individual property of the purchaser. The question to be determin- ed is, in view of the facts that the sale was made by Putnam in con- sideration of the debts of the partnership being paid; that the firm was insolvent at the time ; that the whole transaction was really made by him to relieve himself from the partnership liability; that the prop- erty was put into the possession of J. B. Goss for the purpose of con- tinuing the same business with the same assets, and effect a settlement of the old partnership affairs — all of which clearly appears, can it be held that the equitable title to the property was changed, so as to af- fect the equitable right of Putnam to have the creditors of the old firm paid out of it, or were the equitable rights of the outgoing partner and the creditors preserved by reason of the facts, and the assets in the hands of J. B. Goss impressed with a trust to carry out the intention of the parties? In discussing these questions, full effect should be given to the significant controlling words, in the rule correctly stated in Willis v. Satterfield, 85 Tex. 301, 20 S. W. 155 : "Bona fide, with- out in any manner retaining the lien." In Conroy v. Woods, 13 Cal. 626, 73 Am. Dec. 605, it was held that where a sale is made by one partner to his copartner, and the consideration for the sale is the pay- ment of the partnership debts, the sale is not "bona fide," within the meaning of the rule, so as to cut off the equity of the vendor to have the property applied to the payment of the partnership debts. Very few cases can be found that go as far as the California court on this subject, except in the New Hampehire court, which does so, holding that the creditor 4ias an equitable interest independent of the equity of the individual partner. In Ex parte Cooper, 1 Mont., D. & D. 358, and Ex parte Williams, 11 Ves. 3, it is held that where an outgoing partner sells bona fide to his copartner, and takes for his consideration an agreement that the purchaser shall pay the debts, no equitable in- terest in the property is retained. To the same effect are Stanton v. Westover, 101 N. Y. 265, 4 N. E. 529 ; Fulton v. Hughes, 63 Miss. 61 ; Dimon v. Hazard, 32 N. Y. 65 ; and many other cases that might be cited. In Darby v. Gilligan, 33 W. Va. 246, 10 S. E. 400, 6 L. R. A. 740, it is held that where a firm is insolvent, if a partner sells out to his copartner, and the purchaser agrees to pay the firm debts, the sale cannot be considered bona fide, so as to cut off the equity of the firm creditors to be preferred; and to the same effect is Olson v. Morri- son,, 29 Mich. 395. In the latter case Olson and Jones were partners, Olson sold out to Morrison, the consideration being that the vendee should pay the debts of the firm. It sufficiently appears that the firm was insolvent. The vendee neglected to comply with his agreement, and the creditors, joining with the vendor, brought suit to compel per- formance of the agreement, and to subject the property to the payment of the partnership debts. 'Held, that the agreement to pay the debts as consideration for the transfer was a sufficient recognition of the eq- 'Sec. 2) IN EQUITY. 553 uitable lien of the partnership creditors, tracing the same through the equity of the vendor, to enable them, joining with him, to enforce such equity. In Menagh v. Whitwell, 52 N. Y. 146, 11 Am. Rep. 683, it was held that, as between the firm and its creditors, the title of the former to the joint property is not divested by any separate transfers to outside parties for the individual benefit of the respective vendors, and that, when there has been no transfer by the firm as such, con- veying the corpus of the property, and it remains in specie, though transferred by the separate transfers of the individual members, it may yet be followed and reached in the hands of those claiming under such separate transfers, by creditors of the firm. This is upon the theory that neither partner separately has any interest in the corpus of the property ; that his interest is Hmited to his proportionate share of what remains after a settlement of all partnership obligations and an ac- ■counting between himself and his copartner. A distinction is drawn in this case between a bona fide sale by one of a partnership to two of his copartners without reservation, which, under the prevailing rule of Ex parte Ruffin, 6 Ves. 119, operates to liberate the assets from ,the partnership liability, and a sale made by one member of a firm of more than two, to one of the partners, or to an outside party. In that class of cases the New York courts have uniformly held, since Menagh "V. Whitwell, that the partnership effects are not liberated from the part- nership liability. In this case, if it is held that the sale was really to J. B. Goss, under the New York rule, the corpus of the property never passed by any act of the firm, so as to change the equitable title in respect to creditors existing at the time of the sale. The trend of the New York cases, since Menagh v. Whitwell, has been to extend the rule which preserves the equity of the creditors in case of the sale by one of the members of an insolvent firm, the purchaser assuming the partnership obligations in place of the outgoing partner, whether such sale is to a copartner or otherwise. This clearly appears by the follow- ing, from the opinion in Bulger v. Rosa, 119 N. Y. 465, 24 N. E. 853 : "The equity of the firm creditors cannot be defeated by any attempt- ed conversion of the assets of the insolvent firm into the individual assets of one of the partners, through a transfer by one partner of his interest therein to the other. In such a case, till the assets come to the hands of a bona fide purchaser, the same can be reached by the partnership creditors." To the same effect are Nordlinger v. Ander- son, 123 N. Y. 544, 25 N. E. 992, and Peyser v. Myers, 135 N. Y. 599, 32 N. E. 699. In the latter case there had been a change in the firm some time prior to the assignment for the benefit of creditors, the new firm not having made any express contract to pay the old firm debts. There were two sets of creditors, and, in discussing the sub- ject of their equitable rights, the court said: "The priority of the lien of firm creditors is not divested by the transfer by an insolvent firm of the assets to one or more of the partners, nor can it be afifected by ;any mere change in the personnel of the firm, as by the withdrawal of 554 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8- one partner from the firm or the introduction of another." See, also, Phelps V. McNeely, 66 Mo. 554, 37 Am. Rep. 378, where it was held that if a partner sells out his interest in the firm to his copartner, who agrees to pay the debts, the firm being at the time insolvent, the equities of the creditors are preserved. The evidence in that case tended to- show that there was no property, other than that formerly belonging to the partnership, out of which the firm debts could be paid; but it does not clearly appear whether the court rested its decision on the ground that there was an implied promise under the circumstances to pay the firm debts out of the partnership assets, or on the ground that the insolvency of the firm impeached the bona fides of the transaction. The court went further, and held that, notwithstanding the vendee of the property had turned the same out to secure his individual creditors, who had received it as security in good faith, it could, nevertheless, be reached by the partnership creditors; but .this was subsequently over- ruled in Re Edwards, Goddard Peck Grocery Co. v. McCune, 122 Mo> 426, 25 S. W. 904, 29 L. R. A. 681. We might go on at great length, reviewing decisions on this sub- ject, and cite numerous authorities where outgoing partners have been held to retain their equity to have the firm debts paid, and the rights of the creditors to the assets which have come under the control of equity have been worked out through the equity of such partners. Probably there are few questions upon which there is such a conflict of authority as the one under consideration ; but nearly all are in har- mony with the principle that if the bona fides of the transaction is impeached, or if the equity is retained by agreement, express or im- plied, then the creditors can enforce such equity. The conflict chiefly arises in regard to what circumstances or facts are sufficient to impeach the good faith of the transaction, and in respect to what is sufficient to show a contract that the partnership debts shall be paid out of the partnership assets, and impress a trust upon such assets for that pur- pose. By the mere fact of the dissolution of a partnership by one member selling out to his copartner or to a stranger, the purchaser ot purchas- ers agreeing, as consideration for the purchase, to pay the partnership debts, the firm being insolvent at the time, no presumption of a bona fide agreement arises which will operate to change the equitable title of the property; and such agreement must clearly appear to exist in- consistent with the continuance of the equitable rights of the partner,, and, through him, of the partnership creditors; else it is retained. Lindl. Partn. 699. If the circumstances are such as to show that the property was merely transferred for the purpose of winding up the af- fairs of the concern, there being no express agreement that the property shall be exclusively that of the vendee, it will, in case of bankruptcy, be distributed as joint estate. Id. 699, 700. This is upon the presump- tion that such was the intention of the parties. The presumptions to- be indulged in, in such cases, rather go to support an implied agree- Sec. 2) IN EQUITY. 555 nient to do what in equity and good conscience the parties ought to do. In Sedam v. Williams, 4 McLean, 51, Fed. Cas. No. 12,609, and Marsh V. Bennett, 5 McLean, 117, Fed. Cas. No. 9,110, it was held that the equity was retained to have the partnership creditors paid out of the partnership assets, and that such assets were impressed with a trust for that purpose by virtue of an express agreement. In Re Dawson, 59 Hun, 239, 12 N. Y. Supp. 781, which does not appear to have been appealed from or criticised, it was held that where one member of a firm retires, selling out his interest to a third party, who continues the business with the remaining partner, with whom he enters into part- nership, and the partnership assumes the debts of the previous firm, and such new firm becomes insolvent, and makes an assignment for the benefit of creditors, the property transferred to the new firm be- comes charged in equity with a trust for the payment of the debts of the old firm, which the outgoing partner may enforce. Such holding is certainly equitable and just when applied to a state of facts, as in this case, which leaves no room for doubt but that it was the intention of all the parties dealing with the property to preserve and administer the partnership assets in the nature of a trust to liquidate the old debts; and to this extent we expressly approve of and apply it here. This does not in the least trench upon the rule that if a partner sells out, bona fide, his interest in the partnership assets and business, with- out in any manner retaining his equity to have the partnership creditors paid out of such assets, he waives his equity in that regard, but is per- fectly consistent with it. If the agreement was express that the debts shall be paid out of the assets, then the equity is retained by express contract; if the circumstances of the transaction show that the con- templation of the parties was that the debts should be so paid, then the equity is retained by implied agreement ; and the assets are, in the ad- ministration of the affairs of the purchaser in insolvency, as effectually impressed with a trust in favor of the vendor, and, through him, the creditors of the old partnership, in the one case as in the other. The circumstances involved in these appeals point unerringly to the con- clusion that it was the intention of J. D. Putnam, J. B. Goss, and A. J. Goss that the new concern of J. B. Goss & Co. should continue the old business with the same assets, for the primary purpose of winding up such business and liquidating the debts theretofore contracted in it out of the old assets, so far as practicable. Hence the court below, sitting as a court of equity in the administration of the affairs of A. J. Goss and J. B. Goss, was warranted in concluding that the property of J. B. Goss is impressed with a trust to carry out the intention of all the parties con- cerned in the dissolution of the old firm, and formation of the new con- cern of J. B. Goss & Co. ; that the debts of the old firm should be as- sumed by the new concern, and be paid out of the property turned over to it, and the operations of the business, so far as this can be done with due regard to the equities of the creditors who trusted such new concern. 556 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 [After stating that the two sets of creditors — those of J. D. Putnam & Co. and of J. B. Goss & Co. — can all prove in the insolvency proceed- ings of J. B. Goss, the opinion concludes :] This effectually disposes of all the questions presented, and leads to the conclusion that neither of the appellants can prove pari passu with the individual creditors of A. J. Goss in his assignment, but they can both prove pari passu with all the creditors of the ostensible firm of J. B. Goss & Co.' in the assignment of J. B. Goss. * * * Newman, J., in a dissenting opinion, in which Pinney, J., concurred, said: It may be true — it is not necessary to question it — that Alfred J. Goss is estopped, as against this petitioner, to deny that he was a partner with James B. Goss, and that there were, in fact, partnership assets. But this does not aid the petitioner, nor bring her nearer to a remedy against these assets, until it is also established that James B. Goss and his individual creditors are bound by a like estoppel. That cannot be established in this proceeding, because neither the necessary par- ties are before the court, nor the evidence by which it is to be estab- lished. And there is great danger of doing the petitioner an irrep- arable wrong if, with so little knowledge of the actual situation, her remedy is Umited by the court to those assets; for, at the best, it is but a desperate chance. It is said that James B. Goss is also estop- ped to deny the alleged partnership and the joint ownership of the property used in it. But the court has not listened yet to James B. Goss' side of that question. It is assumed, without proof, that he permitted Alfred J. Goss to hold himself out as a partner, and the property and business as partnership property and business. * * * But it is not very important whether James B. Goss shall, when the question is presented, be held to be estopped or not. A much more important question will be whether his individual creditors are estop- ped from claiming that these assets, which are in the hands of his assignee for their benefit, were really his individual assets. No one questions that they were his individual assets in law, and they are his individual assets in equity, unless these individual creditors are estop- ped to claim them as such. Now, there really is no evidence in the case which shows the nature of these debts to the individual credit- ors of James B. Goss. It seems to be assumed by the majority that they were all debts contracted to persons who gave credit to an osten- sible partnership; while, in truth, there is no evidence on the subject. There is nothing to show that these debts are not all due to persons who dealt with him, in good faith, relying upon his apparent sole re- sponsibility, from the possession of this property, and his sole con- duct of the business. Nor does it appear whether these debts were contracted in the milling business, or whether they were the misfor- tunes of independent enterprises. In this condition of the case, it certainly cannot be prudent to decide this question of which set of creditors have the superior equity to these assets. * * * Sec. 2) IX EQUITY, 557 SWANN et al. v. SANBORN et al. (United States Circuit Court, Northeru District of Florida, 1878. 4 Woods, 625, Fed. Gas. No. 13,675.) The bill was filed by Samuel A. Swann and others, claiming to be creditors of a partnership which, it was alleged, carried on the busi- ness of manufacturing lumber, and which, it was alleged, was com- posed of F. S. Chester, the bankrupt, E. N. Chester, Franklin E. Town, and Horace Stillman. * * * The prayer of the bill was that the assets of the late firm of Ches- ter & Co., which had been returned to the bankrupt court as assets of the bankrupt estate of F. S. Chester, and were in the possession of his assignee, might be adjudged primarily liable for the debts of the firm of Chester & Co., and enable complainants to subject such assets to the payment of their claims. The District Court made a decree sub- stantially in accordance with the prayer of the bill, and the defend- ants appealed to the Circuit Court. * * * Woods, Circuit Judge. * * * As to the claim, made by the bill, that E. N. Chester and F. E. Town were partners in the firm of Chester & Co., the evidence shows conclusively that they were not in fact partners; but it shows that, with the knowledge of F. S. Ches- ter, they held themselves out as such. The truth is that there was, in fact, no such firm. The property all belonged to F. S. Chester. It was bought with his money, and owned by him exclusively. Now, under this state of facts, which class of creditors is entitled to priority of payment of the supposed partnership? F. S. Chester never reported that E. N. Chester and Town were part owners of the mill and other property of Chester & Co. His exclusive title to this property could not be divested by any statements made in relation thereto by E. N. Chester and Town. If the firm of Chester & Co. existed as to stran- gers, it was a firm in which F. N. Chester owned all the property, and the other partners were interested only in the business, in its gains and profits. All the products of the business — all the lumber made, for instance — were liable for the partnership debts; but the individual property of one of the partners, even though used by the partnership to carry on its business, was liable in the first instance for the individual debts of the owner. Murrill v. Neill, 8 How. 414, 12 E. Ed. 1135. If I am right upon this proposition, the prayer of the bill that this property may be first subjected to the payment of the partnership debts cannot be sustained. It is individual, and not partnership, property, and must be first applied to the individual debts of the owner. * * * The case is that Stillman loaned $30,000 to F. S. Chester, to be used for the erection of his mill and the carrying on of the business. F. S. Chester was the only one of the three persons engaged in any way in the enterprise who had any money. The property used in the 558 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 business was all his individual property, and did not belong to the firm. The property was bought with money furnished by Stillman, under an agreement that he should be secured by mortgages upon it. He has mortgages of record to the amount of $33,000, which ap- pears to be the full value of the property. The assignee of F. S. Chester is entitled to this property; for it is the individual property of F. S. Chester, and cannot be taken for his partnership debts until his individual debts are paid. The property will not pay these debts. The complainants' partnership creditors have, therefore, no claim to this property, and their bill seeking to subject it to their debts must be dismissed, at their costs. Decree accordingly. SECTION 3.— INSOLVENCY OR BANKRUPTCY— APPLICA- TION OF ASSETS. HAWKINS et al. v. MAHONEY et al. (Supreme Court of Minuesota, 1898. 71 Minn. 155, 73 N. W. 720.) StarT^ C. J. Arthur IT. Ives and Amos P. Ireland, partners un- der the firm name of Ives, Ireland & Co., duly made an assignment of all of their partnership and unexempt individual property, for the benefit of their creditors, under the insolvent laws of this state. The net assets of the partnership, for distribution, amount to $3,151.65, and the partnership debts are $19,736.34. Ireland's net individual assets are $4,000; and his individual debts, $2,997.47. Ives' net assets are $100, and his personal debts, $415.40. Included in the firm debts proved is that of the Irish-American Bank, for $4,078.89, which is based upon the notes of the firm given to the bank for a loan by it to the firm, in the sum of $4,000, and signed by the firm, and hy Ireland in his individual name. There is also included in the firm debts that of the St. Anthony Falls Bank, for $5,512.50, which is based upon notes executed by the firm to it for a loan of $5,500, but none of the notes were signed by either of the individual part- ners. Each of these banks made the loan to the firm in express reliance upon the individual property and credit of Ireland. The trial court, by its order of distribution, directed the assignee to pay the net assets of the firm, pro rata, to the firm creditors, in- cluding the Irish-American Bank ; net individual assets of Ireland, pro rata, to his individual creditors, excluding the firm creditors, except the Irish-American Bank, which was included therein to the full amount of its debt, without any deduction for the payment thereon it was to receive by its dividend from the firm assets; and the net assets of Ives to his individual creditors. The assignee Sec. 3) INSOLVENCY OK BANKRXJPTCT. 559 and certain firm creditors appealed from this order. The appeals present two general questions for our decision. They are, did the trial court err (a) in distributing the firm assets to the firm credit- ors, and the individual assets to the individual creditors? (b) in di- recting a dividend to be paid to the Irish-American Bank from both funds ? 1. The trial court adopted the general equity rule in insolvency and bankruptcy for the distribution of firm and individual assets, respectively, which is that, where there are both partnership and in- dividual assets for distribution, the partnership assets will be first ap- plied to the payment of partnership debts, and the individual assets, in like manner, to the payment of the individual debts of the partners. If there is a surplus in either fund after paying in full the creditors to whom it primarily belongs, it is carried to the other fund, and distribut- ed as a part thereof. The rule seems to be limited to cases where there are substantial firm assets for distribution. This we do not decide. The first half of the rule, that equity gives to the firm creditors priority in the firm assets over the creditors of the individual partners, is conclus- ively settled, and everywhere accepted as the law ; but the other and re- ciprocal half of the rule, that the separate debts of the partners are to be first paid from the individual assets, has been controverted by able courts in this country, while those which have adhered to it have not always agreed as to the reasons for its adoption. The principles upon which the rule rests are clearly stated in the dissenting opin- ion of Chief Justice Gibson in the case of Bell v. Newman, 5 Serg. & R. (Pa.) 91, and the opinion of Chief Justice Bartley in Rodgers V. Meranda, 7 Ohio St. 179. The latter wrote thus of the rule: "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 estate, cannot be successfully controverted. It originated as a consequence of the rule of prioritv of partnership creditors in the joint estate, and, for the purposes of justice, became 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 concur- rently with the rest entitled to the separate estate of each partner? The joint creditors are no more meritorious than the separate cred- itors, and it frequently happens that the separate debts are con- tracted to carry on the partnership business." Judge Story, in his time, declared the rule to be firmly established. He, however, ques- tioned its equity and propriety, but added, "Such as it is, however, it is for the public repose that it should be left undisturbed, as it may not be easy to substitute any other rule which would uniformly work with perfect equality and equity in the mass of intricate trans- actions connected with commercial operations." Story, Partn. §§ 377, 382. The rule was expressly approved by Chancellor Kent, who declared it to rest upon just and obvious principles of equity, 560 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8' and to be settled by a series of English and American decisions. 3 Kent, Comm. *65. Prof. Parsons declared it to be distinctively settled, and a simple rule, eminently practical, and founded upon obvious principles of policy. T. Pars. Partn. pp. 382, 383. What- ever question there may have been as to this rule half a century ago,, it is now thoroughly and decidedly established by the great weight and number of adjudged cases, and must be followed, unless it is- contrary to the letter or spirit of our insolvency law. The assignee claims that it is so, in that it violates the fundamental principles of equal distribution and no preferences, upon which the insolvency law rests, and asks us to adopt the Kentucky rule, which is, in effect, that where a firm is insolvent, and there are both firm and individual assets to be distributed to firm and individual creditors, the partner- ship assets are to be distributed exclusively to the firm creditors; then the individual creditors are to receive a percentage on their claims from the individual assets, equal to that received by the firm creditors on their claims from the partnership assets ; and the balance,, if any, to all of the creditors, pro rata. Bank v. Keizer, 2 Duv. 169. The original of this rule seems to be the rule adopted in Pennsyl- vania, in Bell v. Newman, 5 Serg. & R. 77, for the distribution of firm and individual assets, in a case where a surviving partner died, leaving both partnership and separate creditors, and firm and sepa- rate assets in the hands of his administrator. Gibson, J., dissented, and, in his opinion, ably vindicated the equity rule, and tersely stated the objections to the rule laid down in the opinion of the court, in these words : "It is evident, therefore, the rule would operate un- equally, by making the separate creditors share their fund with the joint creditors, where it happens to be the largest, without subjecting the latter to share theirs under like circumstances. It may be said, it is impossible to put them on a footing in this respect. I grant that it cannot be done on any plan of participating in the same fund, but you precisely put them on a footing by making each fund bear the burden of its own debts ; and, if that of the separate creditors should happen to be the most productive, I know not on what princi- ple of equity they can be deprived of the advantage." 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. As to the claim that the equity rule is contrary to the express prohibition of our insolvency law as to preferences, it is to be noted that the equi- ty rule is the unquestioned rule in England for the distribution in bankruptcy of the firm and separate assets, and was expressly adopt- ed by section 14 of the federal bankruptcy act of 1841, and' section 36 of the act of 1867. This is significant, for the prohibition of prefer- ences is a pronounced feature of all bankrupt laws, and especially so of the bankrupt acts of 1841 and 1867. If it be held that the prohibi- Sec. 3) INSOLVENCY OR BANKEUPTCT. 561 tion of preferences in our insolvency law abrogates any part of the equity rule, the whole thereof is annulled, and firm and individual assets constitute a single fund, to be distributed to firm and individual creditors pro rata. It is clear that the law cannot be so construed, and that the prohibition as to preferences relates to, and is directed against, the acts of the insolvents. The same suggestions apply with equal force to the claim that the requirement of the insolvency law of equality in the distribution of the net assets to the creditors abrogates the equity rule. It is difficult to see upon what principle we can consistently hold, as we are, in effect, asked to do by the as- signee, that the equity rule is annulled by the provisions of the in- solvent law forbidding preferences, and requiring equality of dis- tribution, and adopt in place of it the Kentucky rule ; for the lat- ter permits the firm creditors to have the exclusive benefit of the firm assets, if they are greater and pay a greater dividend to firm creditors than the individual assets do to individual creditors; but, if they are less, then, and only then, the two classes of creditors share equally. The firm creditors never share their fund with the separate creditors, but the latter must share theirs with the former, whenever it is the largest. If one of these rules is forbidden by the insolvency law, the other is, also. The fact that the insolvency law contains no directions for marshaling the assets of insolvents where there are different classes of creditors and different funds, indicates that it was the intention of the Legislature to leave the settled equity rule in force. The insolvency law's requirement of equality and no prefer- ences is subordinate to the settled equities and priorities of partner- ship creditors in and to the firm assets, and the correlative equities and priorities of the separate creditors in and to the separate assets, when the assets are marshaled and distributed by the court in in- solvency proceedings. The direction of the statute for the equal dis- tribution of the insolvent's property means a distribution in accord- ance with the recognized rules of equity. See Hanson v. Metcalf, 46 Minn. 25, 48 N. W. 441 ; Kells v. McClure, 69 Minn. 60, 71 N. W. 827. * * * 2. The claim of the Irish-American Bank was based upon promis- sory notes executed by the firm of Ives, Ireland & Co., and by Ire- land in his individual name; and for this reason the trial court per- mitted the bank to receive a dividend on the full amount of its claim, from both the partnership and individual funds. The trial court's order in this respect is claimed to be erroneous, for the reason that the consideration of the notes determines the character of the debt, which was for money loaned to, and used by, the firm; hence it is immaterial whether or not the individual name of the partner is on the notes, for with or without it they represent a partnership debt, for which he is liable; consequently the bank has no equities superior to the other firm creditors. The question of double proof in such a case is not a new one. It was at one time the rule in England that Gil.Pakt.— 36 562 RIGHTS AND REMEDIES OP CREDITORS. (Ch. 8 a creditor holding a note signed by the firm and an individual part- ner must, in bankruptcy, elect which estate he would prove his claim against. The rule is, and always has been, otherwise in this country, and it is settled by a very decided weight of authority that such double proof is permissible. T. Pars. Partn. p. 390; 2 Bates, Partn. § 841; 17 Am. & Eng. Enc. Law, 1210; Emery v. Bank, 7 Nat. Bankr. Rep. 217, Fed. Cas. No. 4,446; In re Bradley, 2 Biss. 515, Fed. Cas. No. 1,772; Ex parte Nason, 70 Me. 363; Roger Wilhams Nat. Bank V. Hall, 160 Mass. 171, 35 N. E. 666. It is true, as claimed, that the federal bankrupt law provided for double proof in certain cases; but Judge Clifford, in Emery v. Bank, clearly indicates, independent of the statute, that where a creditor has taken the precaution, before parting with his money, to secure an express written contract for its repayment from both the firm and the individual partner, his right is clear, in case of bankruptcy, to the benefit of his caution, and to prove his claim against, and receive a dividend from, the fund belonging to the partnership, and also from the estate of the individual partner. This precise question was involved in the cases of Ex parte Nason and Bank v.. Hall, supra, and in each the rule as to double proof was maintained on principle. In the last-named case the court, after citing the authorities in support of the rule, concludes thus : "In view of the modern decisions, and the general agreement of opinion, we think it unnecessary to argue elaborately for the right of a creditor who has required two contracts, binding two distinct estates, to in- sist upon both." Our conclusion on this question is that the Irish- American Bank was entitled to receive a dividend on its claim from both funds. The trial court, however, directed a dividend to be paid to it from both funds, concurrently, on the full amount of its debt. There are authorities sustaining this part of the order but it is mani- festly inequitable to other creditors. When the bank receives a divi- dend from the firm assets, the primary fund for the payment of its claim, its debt is paid pro tanto ; and to permit it to receive a divi- dend from the individual assets, on the part of its debt paid from the firm assets, to the prejudice of other creditors, is not just, and there- fore not legal, in the absence of any statute declaring it to be so. It follows that the order appealed from must be modified so as to permit the bank to receive a dividend from the individual assets of Ireland only on the balance of its claim after applying as a payment its dividend from the firm assets, and that this case must be remanded, with direction to the district court to so do.^ 1 Mitchell and Canty, JJ., do not concur in permitting double proof. Sec. 3) rNSOLVENCT OK BANKHUPTCT. 563 MILLER'S RIVER NATIONAL BANK v. JEFFERSON. (Supreme Judicial Court of Massacliusetts, 1884. ]38 Mass. 111.) HoLMi;s, J. The Miller's River National Bank discounted a draft of the firm of Goodman, Schofield & Co., consisting of Goodman, Hale and Schofield, who are now in insolvency individually and as a firm. As a condition of making the discount, the bank required se- curity to be given for the whole indebtedness of the firm to it, in- cluding previous advances, as well as the draft. Goodman and Hale accordingly transferred to the bank promissory notes of the firm owned by them respectively, and given for advances made by them to the firm. These notes were payable on demand. The discount- ed draft had been paid before the insolvency proceedings were be- gun, but some of the previous advances had not been; and the ques- tion is whether the bank can prove the collateral notes, after having already proved for the whole amount of the unpaid advances. The statutes and decisions have applied the maxim that equality is equity in a somewhat mechanical way to the distribution of in- solvent estates. But we know of no authority applicable to this case that goes beyond preventing parties from taking a larger propor- tion of the fund than they or those whom they represent may be supposed to have contributed to it. If the principal and the collateral 'claim represent two distinct contributions, there is nothing in the general policy of the insolvent law opposed to double proof. If, for instance, a stranger to the firm had held these notes for advances made by him, and had pledged them to the bank to secure it for its subsequent advance, the pledged notes, being provable before, would not cease to be so when pledged, and the pledgee would hold any bal- ance received above its debt as trustee for the pledgor. In the present case the collateral notes represent distinct contribu- tions as much as in the case just supposed — contributions from mem- bers of the firm, to be sure, who are liable in solidum for the firm debts, but still contributions diminishing their separate estates and swelling that of the firm. Even in the hands of a partner, they would be recognized as debts, and, although the partner would not be al- lowed to prove them in competition with his own creditors, if there was a surplus he would be let in, and, according to many decisions, would have to be paid in full before any dividend could be paid in respect of capital. This being so, what substantial reason is there why a holder for value should not receive dividends to the extent of his interest, like a pledgee of accommodation paper? It is true that the considera- tion which gives this particular debt its capacity to compete with the claims of other creditors is the advance to the firm, and that that ad- vance has already been proved to its full -amount. But, if the bank had made a separate purchase of these notes, it could prove them, 564 RIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 although such a purchase would add nothing to the fund appropriat- ed to the firm creditors. In this case the bank is equally a holder for value, and the transfer of the collateral notes was part of the consideration for the advance to the firm. Again, at the time the notes were transferred to the bank, the bank could have maintained an action upon them. Thayer v. Buffum, 11 Mete. 398; Richards v. Fisher, 2 Allen, 527. Without implying that the right to maintain an action and the right to prove in in- solvency are coextensive, it may be said that one follows from the other pretty directly when the general policy of the insolvent laws has been satisfied. The fact that the notes were payable on demand makes no differ- ence. Pub. St. 1882, c. 77, § 14, no more subjects indorsees to a part- ner's disability to prove than it does to his disability to sue. Thayer v. Buffum and Richards v. Fisher, ubi supra. If the obstacles to proving the collateral notes, considered as contracts of the firm, are overcome, we do not understand the de- fendants to argue that they present any further difficulties in their aspect of securities, or to deny that a creditor holding security from one partner, like one holding it from a stranger, may retain his se- curity and prove for the full amount of his debt. Judgment for the plaintiff. ALLEN V. DANIELSON, Assignee, et al. (Supreme Ck)urt of Ehode Island, 188T. 15 R. I. 480, 8 Atl. 705.) DuRFHE^ C. J. The assignment under which the questions in this case are raised conveys all the property of the assignors, except such as is exempt from attachment by law, to the assignee, in trust to sell and convert it into money, and apply the proceeds to the payment, first, of certain claims entitled or allowed to be preferred, and then "for the equal benefit of all our creditors in proportion to their re- spective claims." At the time of the assignment some of the general creditors held claims which were secured by mortgage. The first question is whether the creditors so secured were en- titled to dividends on their full claims pro rata with the other cred- itors. The rule in bankruptcy, both in England and in this country, where we have a bankrupt law, is that creditors so secured shall have dividends only on the residue of their claims after converting and applying the security, or after deducting its appraised or agreed val- ue. This rule has been applied sometimes in the settlement of an insolvent estate after the death of the debtor, or under his assignment ; but, according to the decided weight of authority, the rule is to allow all the creditors to bring in their claims in full, and have dividends ac- cordingly ; it being the duty of the personal representative or assignee, Sec. 3) INSOLVESCT OR BANKETTPTCT. 565 if a secured debt is so reduced by the dividends that the security will more than pay it, to redeem for the benefit of the creditors. 1 Story, Eq. Jur. § 564b; Bisp. Eq. § 343; Jones, Pledges, § 587; Mason V. Bogg, 2 Mylne & C. 443 ; In re Xeres Wine Shipping Co., L. R. 3 Ch. 771 ; Moses v. Ranlet, 3 N. H. 488 ; West v. Bank, 19 Vt. 403 ; Walker v. Baxter, 26 Vt. 710; Findlay v. Hosmer, 2 Conn. 350; Eogan V. Anderson, 18 B. Mon. (Ky.) 114; Citizens' Bank of Paris V. Patterson, 78 Ky. 391; Shunk's Appeal, 2 Pa. 304; Miller's Es- tate, 82 Pa. 113, 22 Am. Rep. 754 ; Van Mater v. Ely, 12 N. J. Eq. 271; Evertson v. Booth, 19 Johns. (N. Y.) 486; Jervis v. Smith, 7 Abb. Prac. (N. S.) (N. Y.) 217'; Bates v. Paddock, 118 111. 524, 9 N. E. 257, 59 Am. Rep. 383. The ground of decision in these cases is that the creditors are severally creditors to the full amount of their claims, and are there- fore entitled to dividends to the full amount; the security being re- garded as something collateral, which does not reduce the debt, but only secures the creditor pro tanto, in case the debtor or his estate cannot pay the debt in full. And in the case at bar this is the rule which comports with the language of the assignment declaring the trust, namely, that the assignee shall apply the proceeds, after pay- ing the preferred creditors, "for the equal benefit of all our creditors, in proportion to their respective claims," not in proportion to their claims less the value of any securities which they hold. In the case of Re Knowles, 13 R. I. 90, this court allowed a cred^ itor under an assignment who was secured, and who, after the pres- entation of her claim, had converted and applied her security, to share with the other creditors only to the extent of her unpaid residue. The case was a petition for an opinion on a case stated, and was doubt- less submitted without full argument or presentation of authorities, so that the court, prepossessed in favor of the rule in bankruptcy on the score of equality, and by familiarity with it, and wishing to avoid a diversity of rules,, supposing that there were two lines of decision of about equal authority to choose between, naturally, without the consideration which it might otherwise have bestowed, chose that line of decision which was in accord with the rule in bankruptcy. The case is not without respectable support. Amory v. Francis, 16 Mass. 308; Farnum v. Boutelle, 13 Mete. (Mass.) 159; Wurtz v. Hart, 13 Iowa, 515. But we have no doubt we should have decided the case differently if we had before us when we decided it the same array of authorities which we have before us now. The question, then, is, shall we adhere to it out of regard for the maxim stare de- cisis, or shall we adopt what we now consider the sounder rule? We have come to the conclusion that, considering how recently the case was decided, very little harm will come from overruling it, and that by doing so we shall not only establish the correct rule, but also, which is no inconsiderable gain, establish the rule which is generally prev- alent elsewhere. 566 EIGHTS AND REMEDIES OP CREDITORS. (Ch. 8 It appears in the case at bar that the assignee has already made two dividends. No part of the first was paid to the secured creditors when it was made, it being then supposed that the mortgaged prop- erty would suffice to pay them in full. Before the second dividend the mortgaged property was sold, and the proceeds were foiind to be insufficient, quite a large residue of indebtedness remaining unpaid. The assignee, in making the second dividend, recognized the secured creditors, in accordance with the rule laid down in Re Knowles, as creditors to the extent of the unpaid residue, and allowed them as such to share pro rata with the other creditors in the second dividend and also made up to them for not participating in the first divi- dend. The assignee now has more assets to be applied, and the cred- itors who were secured contend that they are entitled to be paid out of said assets so much as is necessary to put them on an equality with the other creditors, on the basis of their claims in full, before any third dividend is made. * * * Our decision is that the creditors who were secured are entitled to receive out of the funds in the hands of the assignee so much as will put them in a par proportionately with the other creditors, on the basis of their claims as they were when the assignment was made, before any other dividend, provided that what they receive shall not exceed what remains due to them as creditors, if the assignee has so much. If the assignee happens not to have so much, we do not think he is bound to make good the deficiency out of his own means, he having acted in good faith under the rule as laid down on Re Knowles, with the acquiescence of the creditors, in making the for- mer dividends.^ 1 "The agreement between the debtor and creditor was that the debt should be paid. That debt was a definite 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 security. That is not a factor of the debt, but is merely an incident to the debt. The very force and meaning of a collateral security are in the idea of a guaranty of the performance of the principal agreement, which was to pay the debt. The property which a creditor holds as collateral to the indebtedness of his debtor secures him to that extent, in case his debt is not paid in full by the debtor or by his estate. 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 securi- ties before enforcing his direct remedies against the debtor. 1 Story, Eq. Jur. § 640 ; Lewis v. United States, 92 U. S. 618, 23 L. Ed. 513. Then on what principle can we hold that because the debtor becomes insolvent the contract with his creditor is changed, and that the creditor cannot, under those cir- cumstances, 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 ]iot see why, in the absence of intervention by positive or statutory law, the engagements of parties should be varied." Per Gray, J., in People v. Remington & Sons, 121 N. Y. 328, 24 N B. 793 SLR, A. 4.58 (1890). The United States bankruptcy law (Act July 1, 1898, c. 541, § 57h, 30 Stat. 560 [U. S. Comp. St. 1901, p. 3443J) provides that collateral securities shall be Sec. 3) INSOLVENCY OK BANKRUPTCY. 567 HART V. HIATT et al. (Court of Appeals of Indian Territory, 1899. 2 Ind. T. 245, 48 S. W. 1038.) Action by Hart against W. T. Hiatt and others upon a promissory note made by them as partners. An attachment was issued, and prop- erty of the firm, consisting of agricultural implements, cows, heifers, calves, horses, colts, crop of oats, and the crop of growing wheat on 873 acres, was seized. The several partners claimed their statutory exemption out of the property thus attached. The case was referred to a special commissioner, who found as a matter of law that when partnership property is levied upon under an attachment the defend- ant in the attachment has not the right to claim his exemptions, whether the debt sued upon be one against the partnership or against the individual sued. To this finding the defendants excepted, which exception the trial court sustained. Plaintiff appealed. TowNSEND, J. * * * 'j'hg jjext important question in this case, in our view of it, is raised by the ruling of the court in sustaining appellees' exception to the fourth finding of the commissioner. Can a partner have exemption out of partnership assets when the same is levied upon under legal process? A learned author, after discuss- ing this question and the decisions of different courts, says: "But it will not be necessary to enlarge this discussion, first, because the subject has been gone over in the preceding subdivisions; and, sec- ond, because the courts have, by a very decided weight of authority settled the doctrine that those statutes do not contemplate the set- ting apart of exempt property out of partnership assets." Thomp. Homest. & Exemp. § 194. Another author says: "There are cases recognizing the exemption of partnership property, but ordinarily the statutes favor the individual representing a family, or the fol- lower of an avocation; and the general rule is that partnership prop- erty is not exempt when not expressly made so. * * * The ques- tion has been much discussed, but it seems clear that a partner cannot claim as exempt to him property which he does not own. The firm is an artificial person, of which he is a part; but its property is not his. Therefore there must be statutory authorization before he can rightful- ly claim any portion of the partnership property, other than such au- thorization, as that which exempts certain property to individual debt- or owners." Wap. Homest. p. 904. "It does not appear that, at the valued, and the secured creditor shall receive a dividend only upon the un- paid balance. "The statute ouly requires the property to be renounced, sold, or valued when it is the property of the bankrupt. If the goods or estate of any third persons have been pledged for the bankrupt's debt, equity does not require that the general creditors shall have the advantage of the security. » * * This rule applies to partnerships when the estate of one partner has been pledged or mortgaged for a debt of the firm." Per Lowell, J., in Re Hol- brook, Fed. Cas. No. 6,588. 568 EIGHTS AND REMEDIES OF CEEDITOBS. (Ch. 8 time of the attachment, the plaintififs had dissolved partnership, or had divided their joint property, or had had a general settlement and winding up of their business. We agree with the plaintiffs' counsel that the statute is humane and beneficial in its purpose and operation, and fairly entitled to as liberal a construction as can be given it, con- sistently with its true and just interpretation. There are many dif- ficulties, however, in the way of applying it to the case of copartners and joint owners, and these difficulties we find to be insuperable. Property purchased with the joint funds of the firm, and constituting a portion of its capital, must necessarily be subject to all the inci- dents of partnership property. On the decease of one member of the firm, it would go to the surviving member, and he would have a right to hold it, to be used in settling the affairs of the concern, and paying its debts. In the case of numerous partners can it be said that each would have the right to claim, as exempt from attachment for the joint debts $100 worth of tools and implements, and another $100 worth of materials and stock; or is the whole firm to be consid- ered as one debtor only? Does the exempted property in that case belong to the partners jointly, or does each take a separate share? It appears to us that the statute is intended to apply only to the case of a single and individual debtor. The exemption which it gives is strictly personal. The statute speaks in the singular number through- out, unless possibly the clause as to. fishermen (Gen. St. c. 133, § 32, cl. 9) be an exception. 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. It also provides that his family are to be secured in the enjoyment of certain indispensable comforts and necessaries, out of his property. But property belong- ing to the firm cannot be said to belong to either partner as his sepa- rate property. He has no exclusive interest in it. It belongs as much to his partner as it does to him, and cannot in whole or in part be appropriated (so long as it remains undivided) to the benefit of his family. It may be wholly contingent and uncertain whether any of it will belong to him on the winding up of the business and the settle- ment of his account with the firm. The exemption, in our opinion, is several, and not joint. It applies to the debtor in the singular num- ber, and is personal and individual only." Rond v. Kimball, 101 Mass. 106. In Thurlow v. Warren, 82 Me. 164, 19 Atl. 158, 17 Am. St. Rep. 472, the agreed state of facts was as follows: "It appeared that, at the time the plaintififs were adjudged insolvents, they were the sole owners, in their copartnership capacity, of a pair of oxen; that they were the owners of no other oxen, either as copartners or as individuals; and that they subsequently replevied them from their assignee, the defendant, to whom the oxen had been delivered by the messenger of the court of insolvency. It was agreed that, if judgment should be for the plaintiffs, they were to recover nominal damages, with full costs; and, if for defendant, he was to have judg- Sec. 3) INSOLVENCY OR BANKRUPTCT. 569 ment for $200, with interest and full costs." The court say that, "al- though in some jurisdictions the contrary view is taken, still the great weight of deliberate and well-considered cases hold that individual, and not partnership, property is exempt" — citing Pond v. Kimball, supra; Bonsall v. Comly, 44 Pa. 442; Guptil v. McKee, 9 Kan. 30; In re Handlin, 3 Dill. (U. S.) 290, Fed. Cas. No. 6,018. * * * We think the appeal was proper, but that the judgment of the court below in sustaining the exceptions to the findings of the commis- sioner, and overruling the motion of appellant to quash the writs of supersedeas issued by the clerk of the court, was erroneous, and the same is hereby reversed, and the case remanded for further pro- ceedings. Ex parte SILUTOE. Ex parte HUNTER. In re GOODCHILDS & CO. (In Chancery, before Lord Eldon, Cli., 1824. 1 Glyn & J. 374.) John Goodchild, the elder, John Jackson, William Jackson, John Goodchild, the younger, James Jackson, and Thomas Jones, carried on the business of bankers at Bishop Wearmouth under the firm of Goodchilds, Jackson & Co., and in London under the firm of Jack- son, Goodchilds & Co. That branch of the banking business which was carried on in London was conducted by John and William Jack- son, the partners resident in London. John and William Jackson al- so carried on the business of ironmongers in London, under the firm of John & William Jackson, on their separate account. * * * A debt arose from the banking firm to the ironmongery firm for money procured for the benefit of the former firm on the credit of the indorsement of the latter firm. All the partners were adjudged bankrupts. Proof was tendered against the assets of the banking firm for the foregoing debt on behalf of the ironmongery firm. The proof was rejected. This was an appeal from a decision of his honor, the Vice Chan- cellor, who was of opinion that no substantial distinction could be made between a loan of money or sale of goods by a minor part- nership to the aggregate firm, and that this case came within the principle under which proof has been made by smaller firms, and by an order had directed that such sum of i8,222 should be proved against the estate of Goodchilds, Jackson & Co. * * * The Lord Chancellor. It appears to me to be necessary in de- ciding this case to be well informed of the principle upon which the question turns, and the extent to which the decisions are to be ap- plied, and it is of the utmost moment that the uniformity of the princi- ple to be applied here should be carefully preserved. We all know, who have had occasion to practice in this court since the j^ear 1796, 570 EIGHTS AND KEMEDIBS OF CREDITORS. (Ch. 8 that nothing has been more perplexing than the application of this- very principle, and, if there is anything in this case that might bring into question what has been considered as settled law, it is of the last importance that it should be reasoned and stated at large. The rule of the court upon this point is founded upon principles so clear that it would perhaps have been better that it should never have been departed from; but it has been departed from, and I feel no in- clination to diminish or add to the exceptions. The rule is that a partner in a firm against which a commission of bankruptcy is- sues shall not prove in competition with the creditors of the firm, who are in fact his own creditors — shall not take part of the fund to the prejudice of those who are not only creditors of the part- nership, but of himself. To that rule there is an exception, man- ifestly founded in justice, and that is, where a partner becomes a creditor in respect of the fraudulent conversion of his separate estate to the use of the partnership (an exception established in Ex parte Kendal, 1 Rose, 71, and other cases). In this commer- cial country it has become of great importance to know what is to be done in cases where the same individual is to be considered as standing in many distinct characters as member of several firms. If you look at the old law as to bills of exchange, you will find that in older times it was found infinitely difficult to deal with paper to which a man was party in more characters than one. Now, to meet the more- complicated nature of commercial relations, we say that a man may be half a dozen men for the purpose of binding himself and benefit- ing others, and for that purpose may put his name upon bills in dif- ferent characters, and may be a member of many partnership houses. These various relations originally came upon the court with surprise,, and presented great difficuhies. I well remember the Case of Shake- shaft, Stirrup, and Salisbury, cited in Ex parte St. Barbe, 11 Ves. 414, stated 6 Ves. 123, 743, 747. There were four or five persons in a partnership. Some of them carried on business in Liverpool, some in other places, and the credulous world took it for granted they were different concerns, though they were in fact only so many wheels of one machine. Another relaxation of the rule was therefore admit- ted — that, where there is a demand arising from a deahng by the part- nership in a distinct trade, proof might be admitted; but then the question, what is a dealing in a distinct trade ? is always to be looked at with great care. I apprehend that the principle does not apply more to two persons, who happen to be constituent members of a part- nership of six, than to one or each of the six, if one or each was a distinct trader. I take it to be quite clear that if an individual part- ner has nothing more to say than this, that he has lent ilOO to his partnership, the strict rule immediately applies to him, and shuts him out from the benefit of proof. If it were sufficient to state that the partner would not have lent the ilOO but as a separate trader, the rule is at an end. We are not, therefore, merely to consider the ques- Sec. 3) INSOLVENCY OR BANKRUPTCY. 571 tion whether John and William Jackson were partners as ironmongers, but whether this is to be considered a transaction between trade and trade; and in looking at the circumstances with a view to that question great care is necessary lest we establish a principle which might in its consequences be the destruction of the rule; and if it be supposed that Mr. Goodchild, or any individual of the six, had been a separate trader, coal dealer or corn dealer, and had with his separate moneys retired a bill discounted at the Bank of England, is it to be said that, because he is a separate trader, therefore the retiring of that bill is to make him a creditor to prove against the creditors of the partnership ? And if that would not entitle the individual to prove, is there any distinction between the case of one separate trader and the case of two individuals who are separate traders in partnership? It is true, you must look at the whole series of transactions ; but if Mr. Goodchild for 10 years had been advancing money to his firm, till he had advanced £5,000, if you please, and that all the members of the firm had considered him as a creditor, and in their partnership books he had stated the partnership to be debtor to him, still the same principle that would not permit him to prove the ilOO would apply to the i5,000. The question, therefore, to be decided here is: What is the principle upon which it can be said that the rule of law is to be relaxed in respect of the dealings of these two partners, because they were ironmongers, not dealing in the trade of ironmongers, not dealing in their separate articles, but dealing for the convenience of the general partnership, by advancing money to retire bills discounted by the Bank of England? Where is the distinction in this case which can be safely drawn, preserving all the decisions, to prevent the ap- plication of the general rule of law? I think it will be found, by ref- erence to the original record of the cases that have been cited, that in those petitions the consideration for which the demand accrued is stated at length. January 24. On this day the Lord CHANCEiyi-OR stated that he had carefully examined all the cases relating to this question of proof by partners as separate traders, in competition with their joint creditors, and that they were all cases in which the articles of one trade had been furnished to another trade ; that there was no case in which the exception had been allowed where money had been advanced to the partnership by one or more of the partners ; and that his opinion was the proof could not be maintained. The order of the Vice Chancellor was discharged. 572 EIGHTS AND REMEDIES OF CREDITOKS. (Ch. 8 In re BUCKHAUSE. (United States District Court for Massachusetts, 1874. 2 Lowell, 331, 10 Nat Bankr. Rep. 20(J, Fed. Cas. No. 2,086.) LowELiv, District Judge. * * * J understand that the firm of Buckhause & Gough, the bankrupts, were, at the time of their bank- ruptcy, indebted to the firm of Gough & Flynn in a certain sum for goods sold and delivered; and the question is whether that sum can be proved as a debt. Gough was a member of both firms, but Flynn was not a member of the bankrupt firm, and he offers this proof as the solvent or remaining partner of his late firm, having the right to wind up its affairs. It has for a long time been the law of England that proof may be made by one firm against the other in such a case. The firms are re- garded as distinct legal entities, capable of contracting with each oth- er in equity. Story, Partn. 394; Lindl. Partn. p. 996; Ex parte Thompson, 3 Deac. & C. 612. The English cases have gone beyond this, and have admitted con- tribution between the joint and separate estates, whenever there has been a distinct trade carried on, and the contract or dealing has been between "trade and trade," as they say, though the partners may have been the same in both firms, or though one firm may have included the other. The Massachusetts courts refuse to follow these last de- cisions, or to permit any proof between a firm and its members; but no court has denied the right of proof when the two firms had one or more distinct partners. In such a case a debt would exist which, to be sure, could not be recovered at law, for a technical reason. Bo- sanquet v. Wray, 6'Taunton, 597; Story, Eq. § 679. But I apprehend the better opinion to be that such a debt can be recovered in equity, without going into a general settlement of the accounts of both firms. Story, Eq. § 680; Hayes v. Bement, 3 Sandf. (N. Y.) 394; Calvit v. Markham, 3 How. (Miss.) 343. A learned author has 'expressed a doubt whether there would be a remedy even in equity. He says : "In Bosanquet v. Wray, the court seem to have thought that in such a case there might be a remedy in equity. It is not, however, easy to see how such a remedy could be worked out, except as against the common partner by a dissolution of the claimant partnership. The Court of Chancery does not assume jurisdiction simply to compel payment of a debt, where there is no lien or charge to be enforced ; nor, except in cases within its peculiar jurisdiction over trusts and the like, does it- give reHef, unless there is, or at some time has been, a legal right." Dix. Partn. 268. But Story, at section 680, says: "Courts oi equity, in such cases, look behind the forms of the transactions to their substance, and treat the diflFerent firms, for the purposes of sub- stantial justice, exactly as if they were composed of strangers, or were in fact corporate companies." It cannot be denied that, in sub- Sec. 3) INSOLVENCY OR BANKRUPTCY. 573 Stance, a debt due from A. & B. to A. & D. is a very different thing from a mere overdraft by A. from funds of A. & B. To refuse to notice the distinction is to disregard the credit of D. altogether. Whetlier there be a remedy in equity or not, while the firms remain 'solvent, it seems clear that there is a debt which equity can recognize, and which, in bankruptcy, ought to be entitled to its share of divi- dends, in justice to the creditors of the creditor firm. Indeed, the right to sue at law has been granted by statute in one state. Adams, Eq. (5th Am. Ed.) 240, note 1, citing the laws and decisions in Penn- sylvania. I have often decided that equitable debts may be proved under our bankruptcy act, and I am not aware that a contrary deci- sion has ever been made. Holding this to be a debt in equity, and finding the decisions in bankruptcy in favor of allowing its proof, I admit it, though without any intimation that, as between one partner, or any number of partners, and the others, where there i"s no firm with a foreign member, the Massachusetts cases may not express the true doctrine of this country. Debt admitted to proof. McELROY v. ALLFREE. (Supreme Court of Iowa, 1906. 131 Iowa, 518, 108 N. W. 119.) This is a proceeding in probate for the allowance of a claim against the estate of George D. Wood, deceased. Defendant answered by a general denial. The trial court allowed the claim in full, and defend- ant appeals. Deembr, J. George D. Wood before his death was the cashier of and had the exclusive management of what was known as the Bank of Colfax, a copartnership composed of George D. Wood and Alex- ander Wood, engaged in the banking business at the town of Colfax. Plaintiff is the receiver of the copartnership, and defendant, the ad- ministrator of George D. Wood's estate. It is claimed that George D. Wood, while acting as cashier and managing officer of the partner- ship, which we shall hereafter call the bank, wrongfully, fraudulent- ly, carelessly, and negligently, without the consent of his partner, and in excess of his authority, withdrew from said bank more than $100,- 000 in money, which was used by him and one Fellows in grain spec- ulation and converted to his and their own use; that notes for the amount or a part thereof were taken from Fellows who was then as now insolvent, which was well known to the cashier, and that by rea- son of said wrong, fraud, and conversion, plaintiff is entitled to have the amount withdrawn established as a claim against decedent's es- tate. * * * George D. Wood, in addition to being liable to his individual cred- itors, was also liable to the creditors of the bank, and if this were a case where a receiver was seeking to establish the rights of firm cred- 574 RIGHTS AND REMEDIES OP CREDITORS. (Ch. 8 itors against assets in the hands of the administrator of George D. Wood's estate, we should have one for appHcation of the doctrine of marshaHng assets. But that is not the situation here. Were the bank a going concern and Geo. D. Wood aHve, he, Wood, would personally owe the amount of his abstractions therefrom. This would not be a partnership, but an individual, liability although indirectly partner- ship creditors would profit therefrom. It is the liability of the debtor that we should look to in order to determine whether or not the doc- trine of marshaling applies. In the case given by way of illustration, Wood's liability would be clearly individual and not because of his membership in the banking firm. The fact that Wood is dead and that the bank is in the hands of a receiver does not change this rule, es- pecially where fraud is established, as in this case. Here the recovery is against Wood or his estate because of his personal and individual liability for fraud and the doctrine of marshaling does not apply. Counsel for defendant have cited a number of cases in support of their contention, but none of them go to the extent claimed. Indeed they support the rule here announced. It may be that if the bank, in good faith, had loaned Geo. D. Wood the amount of money which he fraudulently abstracted, the rule contended for would apply. But that is not the situation here. The testimony plainly shows that the money was not only negHgently and carelessly, but fraudulently, taken from the bank. In such cases no court of respectabiHty has held that the doctrine of marshaling applies. On the contrary, beginning with the declaration of Lord Thurlow in Ex parte Lodge, 1 Ves. Jr. 166, and of Lord Eldon in Ex parte Harris, 1 Rose, 129, and ending with the latest authorities and text-writers upon the subject, it is held that if a managing partner fraudulently abstracts money from the firm, the firm or its representative may share with his individual creditors in his estate and its assets, and in competition with them. Bates on Partnership, vol. 2 (1st Ed.) § 839. And it is not necessary to show that the individual private estate had been augmented by the transac- tion. Indeed some of the cases go to the full extent of holding that, even if the liability be contractual, the doctrine of marshaling does not apply. Bird v. Bird, 77 Me. 499, 1 Atl. 455. We need not go to that extent in the present case. It is enough for us to hold to the gen- eral rule that when one member of a firm fraudulently abstracts some of its assets a representative of that firm may share pari passu with the individual creditors of the delinquent member. Indeed there may be cases where they might, under the doctrine of constructive trust, take all. We have gone over the record with care, and find no error. The judgment is therefore affirmed. Sec. 3) INSOLVENCY OR BANKEUPTCT. 575 WALTER et al. v. HERMAN et al. (Court of Appeals of Kentucky, 1901. 110 Ky. 800, 62 S. W. 857.) White, J. On December 5, 1898, the appellee Martin Herman ob- tained an attachment against William J. Wilmer and Berry Wilmer, late partners doing business as Wilmer Bros. On this attachment two insurance companies were served as garnishees. On December 7, 1898, the appellant the Pease Company obtained an attachment against Wil- liam J. Wilmer, doing business as W. J. Wilmer & Co., under which the same two insurance companies were served as garnishees. By agreement the insurance companies paid into court $1,440 in full of their indebtedness to W. J. Wilmer & Co. for loss by fire of a stock •of goods. In the action by Herman the appellant Walter filed a peti- tion to be made a party, alleging that the firm of W. J. Wilmer & Co. was composed of W. J. Wilmer and appellant Arton Walter, Jr., and that as such partners they suflfered the loss by fire, and that firm was entitled to the benefit of the proceeds paid into court. He also pleaded that the firm of W. J. Wilmer & Co., as thus composed, was indebted to the Pease Company the claim sued on by it, as well as a claim to liimself individually, and had no assets, outside the insurance proceeds, save $10 or $13 in accounts. Appellant then asked that the proceeds of the insurance be paid on the partnership debts, first to the Pease Company debt, and next to himself as an individual creditor. An is- sue was presented as to whether Walter was a member of the firm of W. J. Wilmer & Co., and upon trial before a jury it was determined he was, and so adjudged by the court. Subsequently the court rendered judgment that Walter's claim of $356.60 was valid against the firm •of W. J. Wilmer & Co. Upon reasons and motion to set aside the two above judgments, the court declined to do so, and held that the prop- erty ($1,440) was voluntarily in court, as neither the attachment of Herman nor the Pease Company reached it, as one was against W. J. and Ben Wilmer, partners as Wilmer Bros., and the other against W. J. Wilmer as W. J. Wilmer & Co. However, the court declined to ■direct its receiver to pay the fund to Walter on his debt adjudged to him, or to the Pease Company on his written order. After further pleading as to priority of the claims of Herman over the Pease Com- pany, the case was submitted, and the court adjudged that that of Herman was superior, and directed the payment to him of his claim in full, and directed the remainder to be paid to the Pease Company. The latter judgment, from which this appeal is prosecuted, was ren- •dered in January, 1900, the former judgment having been rendered prior to May, 1899. It is clear from the record that the Pease Company was a creditor of the firm of W. J. Wilmer & Co., composed of Wilmer and Walter; and as such firm creditors, outside of any question of priority of at- tachment, that company is entitled to be first paid out of the insurance 576 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8- money paid into court that was the sole assets of that firm, because- appellee Herman was not a firm creditor, but was a creditor of an entirely different firm of Wilmer Bros., composed of W. J. and Ben Wilmer, We are also of opinion that the judgment on the verdict of the jury as to whether appellant Walter was a member of ^ the firm is conclusive of that question, as is also the judgment in Walter's favor for his debt of $356.60 as against the firm. From neither of these judgments have appeals been prosecuted, and they therefore stand unquestioned. The question, then, presented is as to the rights of Walter, to whom the firm of which he was a member owed a debt, and Herman, an individual creditor of Wilmer. The rule of priorities is thus stated by Mr. Parsons (section 402 of his work on Partner- ship) : "While solvent partners cannot prove against the joint fund to the prejudice of joint creditors, because they are liable to those creditors, they may prove against the joint fund, in competition with the several creditors, to whom they are liable. Indeed, their rights are prior to those of the several creditors, for those creditors can have the right of their debtor to the joint fund only after all claims upon it are satisfied, and among these the claims of the other partners^ * * * j(- follows, therefore, that the several creditors of each one- will be postponed, so far as the joint assets go, not only to the joint creditors, but to the claims of the co-adventurers for balances due from their companies arising out of the adventure." This well-settled prin- ciple of partnership is decisive of the right of Walter to the sum of $356.60, adjudged to him prior to any claim of appellee Herman, which the trial court refused. We are of opinion that the judgment ap- pealed from is erroneous, and it will be reversed, and cause remanded for judgment directing the payment out of the fund in court — the debt due the Pease Company first; then the debt of Walter; and, if any remain, the share of Wilmer, upon settlement of the partnership,, to appellee Herman; and for proceedings consistent herewith. Ex parte TOPPING et al. (In Chancery, before Lord Cranworth, L. C, 1865. 4 I)e Gex, J. & S. 551.) This was the appeal of Charles Topping and others from a decision of Mr. Registrar Winslow, sitting as a Commissioner in Bankruptcy, whereby he rejected a proof for £404. lis. 6d., tendered by the appel- lant Charles Topping on behalf of the separate creditors of the bank- rupt George Tevey, against the separate estate of the bankrupt Charles Robson. The proof was tendered in respect of a debt due to the bankrupt George Levey from the bankrupt Charles Robson, to whom, in the year 1834, the bankrupt George Levey had, out of his own private moneys, made an advance to enable the bankrupt Charles Robson to Sec. 3) INSOLVENCY OR BANKRUPTCY. 577 increase his business capital. * * * The bankrupts were adjudged bankrupts as copartners in January, 1864, and the appellant Charles Topping was one of the assignees. The other appellants were separate creditors of the bankrupt George Levey. It was admitted at the bar that the separate estate of the bankrupt Charles Robson would be insolvent, whether the proof in question was admitted or not, and that there could be nothing coming from that estate for the joint creditors. * * * The Lord Chancellor. The right which, under an adjudication of bankruptcy against two partners, one of them, who is a creditor of his copartner, has to prove against the separate estate of his debtor, where it is clear that, whether such proof be admitted or not, there will be no surplus of the separate estate of the debtor available for the purposes of the joint creditors, must be considered by the light of certain artificial rules which are derived from the principles of the Court of Chancery as to marshaling, and which were embodied for the first time in an order made in bankruptcy by Lord Loughborough in the year 1794. By the effect of that order separate accounts are kept of the joint estate and of the separate estate of each partner, and if there be any amount of joint estate the joint creditors are not admitted to prove against the separate estate until the separate creditors are paid, and then they are to receive from the separate estate the surplus only which remains. The consequence is that it has been held that one partner cannot prove against his copartner, because, in ordinary cases, that proof would diminish 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 estate. Therefore it has been laid down as a general rule that a partner cannot be permitted to prove against the estate of his copartner until the joint debts are satisfied. The question here is whether, under the circumstances of this case, that rule so expressed should be confined within the limits of the pur- pose by reason of which it was framed, or whether it should be car- ried out to the letter when the reason or purpose ceases to have any application. * * * But the case before me is a different kind, and I regard it as con- sisting entirely of these circumstances, to which I mean to limit my decision, namely, that the debt sought to be proved by the partner against his copartner is a debt arising from an undisputed contract apart from the copartnership, and which was in existence at the time of the adjudication in bankruptcy. I also limit my decision to a case where, as in this case, by no possibility can there be any surplus of the partner's estate against which proof is proposed to be made, whether the proof be admitted or not. Gil.Paet.— 37 578 EIGHTS AND EEilEDIES OP CEEDITORS. (Ch. 8 Limiting, then, my decision to a case so circumstanced, I think it reasonable and just that the rule should not be extended beyond the reason which introduced it and was the cause of its being laid down; and, if it be true that the estate of the partner against which the proof is tendered cannot by possibility yield a surplus, it would be unreason- able and unjust to refuse the opportunity of proof being made. * * * In my judgment, therefore, the proof by one partner against the separate estate of another partner ought in this case to be admitted. But, inasmuch as contingencies may arise which may render the sepa- rate estate of the partner larger than is now contemplated, there should be added to the order a declaration that the proof must be subject to be expunged and the dividend to be refunded in the case of any such surplus of the estate of that partner occurring for the benefit of the joint creditors. * * * i MURRAY V. MURRAY et al. (Court of Chancery of New York, 1S21. 5 Johns. Ch. 60.) The plaintiff, John V. Murray, and Robert Murray, George W. Mur- ray, and John R. Wheaton, were partners under the firm name of Robert Murray & Co. The partnership failed while the plaintiff was in England on firm business. George W. Murray and Wheaton hav- ing gone to Europe, leaving Robert Murray the only partner in this country, the latter, by virtue of a power of attorney from his copart- ners, executed several assignments of the firm property to John B. Murray and Clark for the benefit of certain creditors. Afterwards all the members of the partnership, except the plaintiff, were declared bankrupt under the United States bankruptcy law and received their discharge. The plaintiff, having returned to the United States and never having been adjudged bankrupt in this country, filed this bill, charging that John B. Murray and Clark had, by virtue of the assign- ment to them, received large sums of money, more than sufficient to satisfy the debts directed to be paid, and that they had in their hands a large balance belonging to the partnership, which plaintiff prayed might be turned over to him, as the remaining solvent partner. This cause was brought to a hearing for the purpose of obtaining the opinion of the court whether plaintiff was entitled to an account from the as- signees of the firm and to the payment of the balance in their hands. If the plaintiff was not so entitled, the bill was to be dismissed. Kent, Ch. The question in this case, between the plaintiff and the assignees of his bankrupt partner, relates to the control and distribu- tion of the partnership fund. The plaintiff, in a particular manner, 1 It seems that the United States bankruptcy law of 1898 (Act July 1 1898 c. 541, § .5g, 30 Stat. 547 [U. S. Comp. St. 1901, p. 3424]) would permit the proof of the claim of the partnership estate against the individual estates, and vice versa. Sec. 3) INSOLVENCY OE BANKEUPTCT. 579 claims the balance reported to be due from the estate of John I. Clark, deceased, to the house of Robert Murray & Co., and insists that he is entitled, in preference to the assignees, to distribute that balance, and to disregard the settlement which was made by those assignees with the executor of Clark. * * * It is admitted, in all the cases, that the assignees of a bankrupt part- ner and the remaining solvent partner are tenants in common in re- spect to the partnership 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. This was expressly held in Smith v. Stokes, 1 East, 363. Trover will not lie for one against the other. It has also been held that the solvent partner and the 'assignees of the bankrupt cannot sue alone, and that they must unite in actions at law. Ashhurst, J., in Graham V. Robertson, 2 Term, 282 ; Eckhardt v. Wilson, 8 Term, 140. What right, then, has the solvent partner to come into this court, to call the entire joint funds out of the possession of the assignees, who are his co-tenants in common, and as such have an equal control over the joint funds? There is no case giving to either party the absolute, ex- clusive possession and distribution of the entire effects. Neither party is strictly entitled, as against the other, to anything more than his share of the surplus after the partnership debts are paid. Field v. Taylor, 4 Vesey, 396. In this case there is no justice or equity in the pretension of the plaintiff. He admits that the partnership debts greatly exceed the partnership funds, and that there cannot be any surplus coming to either party. His sole object, then, is to have the partnership funds, which have been or may be under the control of the assignees, pass into his hands for distribution, instead of having them distributed by the assignees; and he denies all right in the assignees to touch or distribute any of the partnership funds and wishes to vacate all that they have done. But it appears that a great majority in interest of the joint creditors, and who have partnership debts due them to nearly $500,000, have come in and proved their debts under the separate com- mission in the case of Robert Murray. These include almost all the debts, except such as were provided for under the assignments to J. B. Murray and Clark. It also appears that the assignees, after having by suit obtained a liquidation of the balance due from the estate of Clark, and bestowed great care and efforts towards the recovery and security of that debt, settled it upon terms which they deemed prudent and just, under all the circumstances. This settlement and consequent dis- charge of the estate of Clark was in February, 1810 ; and in October following, due public notice having been given to the creditors, several of them appeared before the commissioners of bankrupts and ratified that settlement. If there was anything wrong in the settlement, it was for the creditors to disturb it; and it would be most unreasonable to permit the plaintiff to set aside all that had been done by the assignees 580 RIGHTS AND REMEDIES OP CREDITORS. (Ch. 8 under such a sanction from the creditors, merely for the purpose of making his own distribution. There is no charge of misconduct in the assignees. The whole bill is a denial of their competency to act, though every case on the subject admits that assignees of a bankrupt partner are tenants in common with the solvent partner. If the pre- tensions of either 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 trustees under the control of th»s 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 par- ticular equities in them, as lyord Eldon observed, "vastly beyond what tenants in common have where no bankruptcy has occurred" ; and their claim to the distribution of the partnership fund has been en- couraged and strengthened by the decisions in chancery. This will appear by a review of some of the leading chancery cases. * * * Upon this review of the cases I am not able to perceive any color- able reason for the pretension set up by the plaintiff to the exclusive distribution of the partnership funds. There would be much more ground, upon the established doctrines of equity, for an exclusive right of distribution on the part of the assignees, since under their com- mission the court is in the practice of directing an account of the joint estate to be taken and a distribution of that estate ratably among the joint creditors. The most that can be said is that the solvent partner upon the dissolution of the partnership by bankruptcy, being a tenant in common, may retain and distribute the funds in his possession, and may, as was held in Fox v. Hanbury, Cowp. 445, sell those partnership effects for a valuable consideration and without fraud. They cannot be called out of his possession by his co-tenants, the assignees, unless under the direction of this court, on a bill filed by them for contribu- tion, or, perhaps, where an account of the joint fund is directed to be taken in bankruptcy. But, on the other hand, there is no foundation in law or equity for the solvent partner to call to account, either the partnership debtors who have bona fide settled with the assignees, or the assignees themselves, for the funds in their possession. They hold those funds by an equal title in law with him as tenants in common, and by a superior equitable title as trustees, charged with the payment of both the joint and separate debts. I shall accordingly declare that the plaintiff has no right or title in law or equity to call the assignees to account for the partnership funds, which have been or are now in their possession as such assignees, in order to obtain by decree the possession of those funds for distribu- tion among the creditors of Robert Murray & Co., inasmuch as those assignees have an equal right and title in law as tenants in common Sec. 3) INSOLVEKCT OR BANKRUPTCY. 581 with the plaintiff, and a better right in equity, to the possession of those funds for the same purpose of distribution. * * * And I shall direct the original bill, and bill of revivor and supplement, to be dis- missed, but without costs, considering the special circumstances of the case, and the importance of the points investigated and discussed. Decree accordingly.^ FERN V. GUSHING et al. (Supreme Judicial Court of Massachusetts, 1849. 4 Cush. 357.) Shaw, G. J. This was a writ of scire facias against Daniel Gush- ing and Sewell G. Mack, as trustees. It appears, by the answers and the facts agreed, that suits were brought, first by Francis Vose, and second by the plaintiff. Fern, against Whitney & Blair and the present defendants as their trustees. The actions were continued in court some time, during which the defendants accepted an order, drawn on them by Whitney & Blair, to pay over to a third firm the balance of funds in their hands, subject to prior liens. This fact has no material bearing. The plaintiff's action, though commenced after that of Fran- cis Vose, came to judgment first, and the plaintiff took out execution and placed it in the hands of an oflicer, who duly made demand upon the defendants for the funds in their hands, they having been charged as trustees, and execution awarded in usual form against the goods and effects of Whitney & Blair in their hands. Afterwards judgment was rendered in the action of Francis Vose, and execution also award- ed against the goods and effects of Whitney & Blair in the hands of the defendants ; Vose's being the first attachment. This execution was placed in the hands of an officer, and a demand made upon the defend- ants for the goods and effects of Whitney & Blair in their hands. This occurred on the 24th of March, 1847. On the morning of the same day the first publication was made of a notice issued by a messenger, upon a proceeding in insolvency, upon the application of Blair alone, after the dissolution of the partnership of Whitney & Blair. It ap- pears that he did not set forth the insolvency of the firm, but only his own ; and the warrant and other proceedings were conducted upon the principle of his several insolvency. The messenger under this warrant demanded the funds in the hands of the defendants. Afterwards the defendants paid over the whole balance of the funds in their hands, 1 The United States bankruptcy act of 1898 (Act July 1, 1898, c. 541, § 51i, 30 Stat. 547 [U. S. Comp. St. 1001, p. 3424]), provides: "In the event of one or more but not all of the members of a partnership being adjudged bankrupt, 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 ex- peditiously as its nature will permit, and account for the interest of the part- ner or partners adjudged banltrupt." Jones V. Newsom, 7 Biss. (U. S.) 321, Fed. Cas. No. 7,484 (1876), accord. 582 EIGHTS AXD EEilEDIBS OF CEEDITORS. (Ch. 8 after deducting the amount which they were allowed by the court to retain for their costs and expenses as trustees, on the execution of Vose, as the first attaching creditor. The ground on which the plaintiff seeks to charge these defendants as trustees, after they have paid over the entire fund on the execution of the previous attaching creditor, is this : That the plaintiff, by suing out his execution against Whitney & Blair and causing demand to be made of their effects in the hands of the defendants, had perfected his lien on the fund, so as to place it beyond the risk of being defeated and having his attachment dissolved by any proceedings in insolvency, but that Vose, though he recovered judgment and took out execution, did not have a demand made on the trustees on his execution until after the first pubhcation of the notice of insolvency, and therefore that his attachment was thereby defeated, and let in the plaintiff as the first indefeasible lien on the fund. This reasoning is plausible, but we think not sound, and not suffi- cient to give the plaintiff, as second attaching creditor, a priority over Vose, who was the first. It is not necessary now to decide what act by an attaching creditor is a sufficient taking of the property in the hands of a trustee, so as to prevent a dissolution of the attachment by insolvent proceedings, whether it be the judgment, the issuing of execution, the delivery of such execution to an officer, or the demand by the officer upon the trustee. This decision stands on other grounds. The insolvent proceedings were against Blair alone. The assignee under these proceedings had no right to take the partnership property, except the share and interest of the insolvent, after the payment and satisfaction of partnership debts. The assignment extended only to the interest of the insolvent partner in the property and effects of the partnership after the payment of partnership debts. Pierce v. Jack- son, 6 Mass. 244; Allen v. Wells, 22 Pick. 450, 33 Am. Dec. 757; Dyer v. Clark, 5 Mete. 562, 39 Am. Dec. 697; Parker v. Phillips, 2 Cush. 175. The insolvent proceedings, therefore, against Blair, did not affect the partnership property attached by Vose in the hands of the trustees, who were indebted to the firm only; and the messenger under these proceedings had no right to the property, and the trustees rightfully paid over the funds in their hands on Vose's execution as the prior at- taching creditor. Nothing remained to satisfy the execution of the plaintiff. Judgment for the defendants. Sec. 3) INSOLVENCY OK BANKRUPTCT. 583 HALSEY V. NORTON. (Supreme Court of Mississippi, 1S71. 45 Miss. 703, 7 Am. Rep. 745.) Action by Norton, as assignee in bankruptcy of H. F. Giren and D. A. Giren, as members of the firm of Giren, Brown & Co., against Hal- sey. Judgment below for plaintiff. Halsey appealed. SiMRALL, J. It is urged for the plaintiff in error that the judgment ought to be reversed, because the assignee, Norton, ought to have unit- ed with him as coplaintiff the solvent partner. It was said by the Chief Baron in Taylor v. Fields, 4 Vesey, 396, "that the surplus of partnership effects is joint property, and that the interest of each part- ner is only his share of what remains after the partnership accounts are taken." The assignee takes precisely the position of the bankrupt as respects the joint property. That interest is transferred to him to be administered for the creditors. Bankruptcy does not divest the title of the solvent partner. It dissolves the copartnership, and constitutes the assignee and the solvent partner tenants in common or joint own- ers. To stand in a court of law, the plaintiff must have the entire legal right. If the title be held by several, all must join in the suit. Eck- hard v. Wilson, 8 T. R. 140, and Murray v. Murray, 4 Johns. 70, are to the point that the assignee and the solvent partner must unite in a suit respecting the joint effects and choses in action. But it must be manifested that there is another person, not coplaintiff, who ought to, etc. This may be by plea in abatement, or by nonsuit, if proved on the trial (1 Chitty's Plead. 453, 453), or by demurrer, if it appears on the face of the declaration. The declaration is thus: "E. E. Norton, assignee, etc., of Henry F. Giren and Dickson A. Giren, as members of the firm of Giren, Brown & Co." It is not averred who composes the firm, except these two bankrupts, nor does it appear affirmatively that there were any other members. The copartnership name may be and often is purely artificial, not discovering who are its members. Proof was not made on the trial that any other person was a member, although objection was made by the defendant to the admission of evidence in truth of the account on that ground. If it was not ap- parent on the record that there was a solvent partner, if the defend- ant proposed to nonsuit the plaintiff or prevent his recovery, she ought to have proved the existence of such a partner. We do not think that the record presents the point made by the plaintiff in error, so that she can avail of it in this court. Affirmed. 584 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8 LOOMIS V. WAIvIvBLOM et al. (Supreme Court of Minnesota, 1905. 94 Minn. 392, 102 N. W. 1114, 69 ti. R. A. 771.) Jaggard, J. On November 27, 1893, defendants, partners doing business as Wallblom & Thorsell, executed a deed of assignment under the state insolvency law, both as individuals and as partners, of all their unexempt property, which was filed in the district court of Ram- sey cotmty. The National Wall Paper Company filed and proved its claim in the assignment matter, but did not file a release, and received no dividend. In March, 1895, it brought an action against Charles Wallblom and John Thorsell, as copartners doing business as Wall- blom & Thorsell, in the district court of Ramsey county, alleging in its complaint the sale of goods of the value of $354.77, and default in payment. There was no allegation that the goods were sold , to the firm or purchased for partnership purposes. Default was made, and judgment entered on the 9th day of April, 1895, against "Charles Wall- blom and John Thorsell, as copartners doing business as Wallblom & Thorsell, and each of them." On the 4th day of August, 1898, Charles Wallblom filed his individual petition in bankruptcy, and was on Au- gust 5th adjudged a bankrupt. The claim of the National Wall Paper Company was listed as follows: "National Wall Paper Co., Chicago, 111. $354.77. Consideration, goods bought." On December 19, 1898, Charles Wallblom was discharged from all his debts. This appellant, as assignee of said judgment, thereafter brought this action to re- new the judgment hereinbefore set forth. Respondent Wallblom an- swered, setting up his discharge in bankruptcy as a defense. The reply does not deny actual notice of the bankruptcy proceedings on the part of the National Wall Paper Company, but denies that notice was given to the partnership creditors. It does not appear that de- fendant John Thorsell was served or appeared in the proceeding. Up- on the trial it was admitted that the copartnership of Wallblom & Thor- sell ceased to do business in 1893, and that the partnership was dis- solved so far as it could be done by the acts of the partners. The debt here sued upon was not paid or discharged. The court found that no- tice had been given to all creditors whose claims were scheduled, and ordered judgment in favor of Wallblom upon the merits. From an order denying plaintiff's motion for a new trial, this appeal was duly taken. Appellant's assignments of error involve the determination of this question, namely: "Did the court err in holding as a proposition of law that the individual discharge in bankruptcy of Wallblom released him from the claim here sued upon?" The answer to that question depends, in the first place, upon a con- struction of the bankruptcy act. The certificate of discharge recited that the bankrupt had conformed to all the requirements of law in Sec. 3) INSOLVENCY OE BANKRUPTCY. 585 -that behalf. The court thereby decreed that the bankrupt "be forever discharged from all his debts and claims which by said act were made provable against his estate, and which existed on the 4th day of Au- gust, 1898, on which day the petition for adjudication was filed by him, excepting such debts, if any, as are by said act excepted from the operation of a discharge in bankruptcy." There is no claim that the discharge was invalid by reason of any of the things mentioned in chapter 3, §§ 14 and 15, of the bankruptcy act of 1898 (Act July 1, 1898, c. 541, 30 Stat. 550 [U. S. Comp. St. 1901, pp. 3427, 3428]). The discharge did not purport to forever release the bankrupt from all his debts and liabilities, but only from all such "debts and claims" as were by said bankruptcy act "made provable against his estate." That the debt was one which might have been proved in bankruptcy proceedings against the estate of the individual partner is evident from the whole tenor of the law, and especially from chapters 1, 3, §§ 1, 4, 30 Stat. 544, 547 (U. S. Comp. 1901, pp. 3418, 3423), chapter 3, §§ 4, 5, of that law, 30 Stat. 547 (U. S. Comp. St. 1901, pp. 3423, 3424). See, also, section 16, 30 Stat. 550 (U. S. Comp. St. 1901, p. 3428). Indeed, subdivision "g" of said section 5 expressly pro- vides that the court may "permit the proof of the claim against the individual estates and vice versa and may marshal the assets of the partnership estate and the individual estates so as to prevent prefer- ences and secure the equitable distribution of the property of the sev- eral estates." The history and present status of this case differentiate it from any authority to which our attention has been called, or which a careful search has enabled us to find. Collier on Bankruptcy (5th Ed.) p. 74, § 5a. The partnership ceased to do business, and had been dissolved so far as the parties could dissolve it, in 1893. Moreover, in that year, by general assignment under the state insolvency law, the partners conveyed all their unexempt individual and firm assets to an assignee. The plaintiff has not made it appear that any such firm assets now exist. This court will not presume that they do. This case therefore does not involve any question of marshaling assets, nor of the right of the plaintiff against the firm assets or the other partner. Respondent alone appears to have been served with sum- mons in this action. The question here presented to this court af- fects the judgment against him alone. It is also to be borne in mind that this is not an objection to the entry of a decree of discharge, but only to the right of the appellant to renew or extend this judgment. The entry of the judgment materially affected the nature of the claim on which it was based, so far as these proceedings are concerned. It might be that in certain contingencies this court would examine that judgment for the purpose of ascertaining what the original con- tract was. Such a proposition is, however, academical in this case. When the judgment was entered it became a lien on any unexempt real estate within the county where the judgment was docketed which belonged to the defendant and respondent Wallblom, and the creditor 586 EIGHTS AND REMEDIES OF CREDITORS. (Ch. 8" became entitled to appropriate new rights and remedies against him in consequence. So far as this case involves that judgment, the orig- inal cause of action was merged therein. In McKittrick v. Cahoon, 89 Minn. 383, 95 N. W. 233, 62 L,. R. A. 757, 99 Am. St. Rep. 606,. this court held that where, by an order in bastardy proceedings, the putative father of a natural child was required to pay a monthly stipend for its support, and upon refusal a final money judgment was obtained for the total amount due, the rights of the person entitled to recover under the order of filiation were merged in the judgment, and the debt evidenced thereby was not excepted from the operation of the bankruptcy act of 1898 (section 17), although the claim on which the judgment was based, standing by itself, would not have been dis- charged. Such a judgment as the one here sought to be extended, filed in the bankruptcy proceedings, might, under appropriate conditions, have- been paid in full or in part by the application thereto of the whole or a proper part of the funds in the hands of the respondent's trus- tee in separate bankruptcy proceedings. Its full discharge as an in- dividual liability on a firm debt may accordingly be had in bankruptcy proceedings. Jarecki Mfg. Co. v. McElwaine, 5 Am. Bankr. R. 751, 107 Fed. 249 ; Curtis v. Woodward, 58 Wis. 499, 17 N. W. 328, 46 Am. Rep. 647. Collier in his note to In re Freund, 1 Am. Bankr. R. p. 31, says: "Both on principle and by the weight of authority it would seem to be law that a discharge granted to one member of the firm- releases him from all his provable debts and liabilities, both from those incurred individually and from those incurred as a member of the- partnership. The few cases which held to the contrary under the former act seem to have been based upon a misconception of the ex- tent of the rights of an assignee in the bankrupt's property, and as to the effect upon the firm of the bankruptcy of one member." In Re- Meyers (D. C.) 96 Fed. 408, relied upon by appellant, upon an ob- jection to discharge on the ground of fraud, there were independent and merely individual proceedings by the two partners. The petition asked for discharge of both individual and partnership debts. Brown, J., said (page 411) : "No adjudication of the firm as a bankrupt is asked, nor could such an adjudication be made without formal applica- tion therefor, and the presence of both partners in the same proceed- ings. Where there are absolutely no firm assets, separate proceedings may be valid, and a discharge of each partner separately may possibly be had, because the firm debts are several as well as joint." Appel- lant also relies largely upon In re Mercur, 122 Fed. 389, 58 C. C. A. 472. That case involves an obviously different state of facts, and is in its reasoning not of necessity entirely inconsistent with the rule here applied. In the early history of partnership law, the courts fell into the habit of speaking of a partnership as "a separate entity." The inac- curacy and impropriety of such nomenclature was so clearly and re- Sec. 3) INSOI.VENCT OR BANKRUPTCY. 587 peatedly demonstrated as to lead to its substantial abandonment. Re- cent decisions on the marshaling of assets under the present bank- ruptcy law have led to the undesirable resurrection of the phrase. Its misleading and ambiguous character is well illustrated by the subtle- ties of appellant's brief, and by his use of it as a justification for a fallacious conclusion derived by unwarranted deductions from a fic- tion of law. His argument commands admiration for its ingenuity and industry, but compels the conviction that its result would be a plain perversion of the letter and purposes of the bankruptcy law. The learned trial court properly held that the discharge in bankrupt- cy operated as a full defense. * * * Order affirmed.^ 1 Corey t. Perry, 67 Me. 140, 24 Am. Rep. 15 (1877), contra. 588 TERMINATION OF THE PARTNERSHIP. (Ch. 9 CHAPTER IX. TERMINATION OF THE PARTNERSHIP. SECTION 1.— BY ACT OF THE PARTIES. HENN V. WAESH. (Vice Chancellor's Court of New York, 1833. 2 Ed. Cli. 129.) Bill to dissolve the copartnership and for an account. An injunc- tion had been granted. The defendant put in his answer. Cross- motions now came before the court — one, on the part of the complain- ant, for a receiver, and the other, by the defendant, to dissolve the injunction. The copartnership had commenced on the 1st day of May, 1833, and was to continue for five years. By the agreement between the copart- ners an inventory was to be made at the end of two years, and if either was then dissatisfied he was to have liberty to dissolve the firm. The complainant had put into the concern the sum of $1,000 in cash, as his part of the capital, and the goods of the defendant, with fixtures belonging to him, were taken at a like sum, after allowing for debts which he owed. The charges of misconduct in the bill were met and denied by the answer. McCouN, V. C. A partnership agreement, like any other, is binding upon the parties, and they must adhere to its terms. Neither partner is at liberty to recede from it against the will of the other without sufficient cause. Mere dissatisfaction by one partner will not justify him in filing a bill for a dissolution, where by their express agreement it is to continue for a definite term; and this court will not interfere to dissolve the contract upon such ground. Here there was a five- year partnership, with the privilege of dissolving it at the end of two years. The complainant has become dissatisfied ; and he makes various charges in his bill, showing prima facie cause enough for a dissolu- tion before the stipulated time. But his allegations are positively and fully denied in the answer. As the matter now stands the complain- ant's case fails, and he would not be entitled on the hearing to a de- cree for a dissolution — consequently not to an injunction or receiver in the meantime. If there be any breach of covenants by one partner, which in its consequences would be so important as to authorize the party complaining to call for a dissolution before the copartnership could be dissolved by efflux of time, the complainant may then have an Sec. 1) BY ACT OF THE PARTIES. 589 injunction. Gow, 135. There must be some actual abuse of the part- nership property or of the rights of a copartner, and not a mere tempta- tion to such abuse, which will induce this court to interfere. Glassing- ton V. Thwaites, 1 S. & S. 124. * * * The injunction must be dissolved; and the motion for a receiver denied. SOLOMON V. KIRKWOOD et al. (Supreme Court of Michigan, 1884. 55 Mich. 256, 21 N. W. 336.) CooivEY, C. J. The plaintiffs, who are in the city of Chicago dealers in jewelry, seek to charge the defendants as partners upon a prom- issory note for $791.93, bearing date of November 9, 1882, and signed "Hollander & Kirkwood." The note was given by the defendant Hol- lander, but Kirkwood denies that any partnership existed between the defendants at the date of the note. The evidence given on the trial tends to show that on July 6, 1882, Hollander & Kirkwood entered into a written agreement for a part- nership for one year from the 1st day of the next ensuing month in the business of buying and selling jewelry, clocks, watches, etc., and in repairing clocks, watches, and jewelry, at Ishpeming, Mich. Busi- ness was begun under this agreement; and continued until the latter part of October, 1882, when Kirkwood, becoming dissatisfied, locked up the goods and excluded Hollander altogether from the business. He also caused notice to be given to all persons with whom the firm had had dealings that the partnership was dissolved, and had the fol- lowing inserted in the local column of the paper published at Ish- peming: "The copartnership heretofore existing between Mr. C. H. Kirkwood and one Hollander, as jewelers, has ceased to exist; Mr. Kirkwood having purchased the interest of the latter." This was not signed by any one. A few days later Hollander went to Chicago, and there, on Novem- ber 9, 1882, he bought, in the name of Hollander & Kirkwood, of the plaintiffs goods in their line amounting to $791.92, and gave to the plaintiffs therefor the promissory note now in the suit. The note was made payable December 15, 1882, at a bank in Ishpeming. When the purchase was completed, Hollander took away the goods in his satchel. The plaintiffs had before had no dealings with Hollander & Kirkwood, but they had heard there was such a firm, and were not aware of its dissolution. They claim to have made the sale in good faith and in the belief that the firm was still in existence. On the other hand, Kirkwood claimed that Hollander and the plaintiffs had con- spired together to defraud him by a pretended sale to the firm of goods which the plaintiffs knew Hollander intended to appropriate exclu- sively to himself; and he was allowed to prove declarations of Hoi- 590 TERMINATION OF THE PARTNERSHIP. (Ch. 9 lander which, if admissible, would tend strongly to prove such a con- spiracy. The questions principally contested on the trial were, first, whether the acts of Kirkwood amounted to a dissolution of the partnership ; second, whether sufficient notice of dissolution was given; and, third, whether there was any evidence to go to the jury of an understanding between Hollander and the plaintiffs to defraud Kirkwood. The trial judge, in submitting the case to the jury, instructed them: That Kirk- wood, notwithstanding the written agreement, had a right to withdraw from the partnership at any time, leaving matters between him and Hollander to be adjusted between them amicably or in the courts; and for the purposes of this case it made no difference whether Kirk- wood was right or wrong in bringing the partnership to an end. If wrong, he might be liable to Hollander in damages for the breach of his contract. Also, that when partners are dissatisfied, or they cannot get along together, and one partner withdraws, the partnership is then at an end as to the public and parties with whom the partnership deals, and neither partner can make contracts in the future to bind the partnership, provided the retiring partner gives the proper notice. Also, that if they should find from the evidence that there was trouble between Hollander and Kirkwood prior to the sale of the goods and the giving of the note, that Kirkwood informed Hollander in sub- stance that he would have no more dealings with him as partner, that he took possession of all the goods and locked them up, and from that time they ceased to do business, then the partnership was dis- solved. Further, that whether sufficient notice had been given of the dissolution was a question for the jury. Kirkwood was not bound to publish notice in any of the Chicago papers. He was only bound to give actual notice to such parties there as had dealt with the partner- ship. But Kirkwood was bound to use all fair means to publish as widely as possible the fact of a dissolution. Publication in a news- paper is one of the proper means of giving notice, but it is not abso- lutely essential; and on this branch of the case the question for the jury was whether Kirkwood gave such notice of the dissolution as under the circumstances was fair and reasonable. If he did, then he is not liable on the note; if he did not, he would still continue liable. The judge also submitted to the jury the question of fraud in the sale of the goods. The jury returned a verdict for the defendants. We think the judge committed no error in his instructions respect- ing the dissolution of the partnership. The rule on this subject is thus stated in an early New York case : The right of a partner to dissolve, it is said, "is a right inseparably incident to every partnership. There can be no such thing as an indissoluble partnership. Every partner has an indefeasible right to dissolve the partnership as to all future contracts by publishing 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 Sec. 1) BT ACT OF THE PARTIES. 591 that the partnership shall continue seven years, either partner may dis- solve it the next day, 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. 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." Skinner v. Dayton, 19 Johns. (N. Y.) 513, 538, 10 Am. Dec. 286. To the same efifect are Mason v. Connell, 1 Whart. (Pa.) 381, and Slemmer's Appeal, 58 Pa. 155, 98 Am. Dec. 248. There may be cases in which equity would enjoin a dissolution for a time, when the circumstances were such as to make it specially injurious; but no question of equitable restraint arises here. When one partner becomes dissatisfied, there is commonly no legal policy to be subserved by compelling a continuance of the relation, and the fact that a contract will be broken by the dissolution is no argument against the right to dissolve. Most contracts may be broken at pleasure, sub- ject, however, to responsibility in damages; and that responsibility would exist in breaking a contract of partnership as in other cases. The instruction respecting notice "was also correct. No court can determine for all cases what shall be sufficient notice and what shall not be. The question must necessarily be one of fact. * * * But we think the judge erred in receiving evidence of Hollander's admissions or declarations tending to show fraudulent collusion be- tween him and the plaintiffs. * * * For this error there must be a new trial. WALKER V. WHIPPLE. (Supreme Court of Michigan, 1885. 58 Mich. 476, 25 N. E. 472.) Champlin, J. In this case it is conceded that the copartnership •entered into was not limited by the express agreement of the parties. It was therefore determinable, in the absence of fraud, at the will of -either party. I do not agree that a limitation may be engrafted upon such a copartnership agreement by implication arising out of the business engaged in or the circumstances of the case. It may be said that it is generally understood that such contract relations are not formed, except with a view of engaging in some business which may require both time and capital to carry out the object for which the partnership was formed. It is nevertheless true that, unless the term for which the partnership is to continue is limited or fixed by the agree- ment, either party may, at his pleasure, dissolve the relation. This is elementary law. The defendant exercised his right, and the partner- ship was dissolved by his refusing to continue the business further in company with complainant. It does not concern us what his rea- sons or motives for doing so were. There were no existing engage- 592 TERMINATION OF THE PARTNERSHIP. (Ch. d' ments of the firm that have interfered with the winding up of the part- nership affairs. The whole matter between the partners was satis- factorily settled and adjusted by the decree appealed from by com- plainant, except a claim made by him, but which the court below dis- allowed, of prospective profits which complainant claims might have been realized, had the defendant not dissolved the partnership. The effect of allowing such claim would be to mulct the defendant in dam- ages for doing what he had a legal right to do. I can find no war- rant for the infliction of such penalty, and the results which would flow from the establishment of such doctrine would be injurious and far-reaching in their consequences. The farthest courts have gone- in this direction occurs in cases where, by the terms of the partner- ship agreement, the time for its duration was limited, and before the- expiration thereof one of the parties has dissolved the partnership; but in such cases there has been a breach of the contract, and the damages allowed are such as were the consequences of such breach. I think the decree of the circuit court should be affirmed, with costs ; and it is so ordered.^ SECTION 3.— BY OPERATION OE EAW. PEARCE V. CHAMBERLAIN. (In Chancery, at the Rolls, 1750. 2 Ves. Sr. 34.) Articles between Robert Plummer and Daniel Pearce recited that Plummer had carried on the trade of a brewer at Hoddesdon, and had employed Pearce as servant and brewer, who having behaved himself faithfully, etc., and advancing a moiety of the value of the effects, he took him into partnership for 9 years, if Pearce should so long live; but, if he lived to the end of 9 years, the partnership should continue for any further term, not exceeding 21 years, as Pearce should desire, on giving notice, to continue it. It was provided that, notwith- standing the death of Plummer, it should be carried on by his repre- sentatives, and that, if Pearce should give that notice, he should not have it in his option to pay off the representatives of Plummer and carry it on himself, but with them. This bill was by the widow and representatives of Pearce, against the representatives of Plummer, for an account, and for liberty to- carry on the trade with the defendants. 1 The opinion of Sherwood, J., holding that the agreement of the parties contemplated the continnation of the partnership through the threshing sea- son, and therel:ore complainant was entitled to damages for the premature termination by def«udant, is omitted. Sec. 2) BY OPERATION OF LAW. 593 For defendants was cited Godfrey v. Browning, March 7, 1742, where it was held that one copartner could not appoint a representa- tive to carry on the trade after his decease, otherwise it might fall to the lot of an infant or person not at all fit to carry it on, and Bax- ter V. Burfield (B. R. Paschse, 1746), 2 Stra. 1266, where it was held that a covenant to teach a boy his trade was rescinded by the death of the master, on the ground that it was a bond to serve personally, and that he was not bound to serve an executor. For plaintiffs : It might be so where there is a general partner- ship, for then the death of one partner would determine it, but not so where a particular term has been agreed on; but if there was a case for that, it would not do here, because the provision for the repre- sentatives ought to be mutual, and shows they did not guard against an infant's carrying it on. No case is cited to show that all partner- ships must continue or conclude on the living or death of the prin- cipals. On the death of the master the boy cannot become apprentice by a course of representation, as then it might be to the most ignorant person ; but that is different from articles of copartnership in a bene- ficial trade, wherein a right has been purchased for a period of years. In the Case of Huddleston one party was a lunatic, who could not carry on the trade ; yet Lord Talbot thought himself bound by the articles, and obliged the other to carry it on for the benefit of himself and the lunatic. Vid^ Sayer v. Bennet, 1 Cox, Ch. Ca. 107. Et per Lord Eldon, C, 2 Ves. & B. 302, 303. Strange, M. R. Considering the whole frame and design of the articles, Pearce was only admitted in ease of Plummer, and for his skill in the trade, and, after that end was defeated by his death, it could not be the intent that any representative of him should have an op- portunity to carry it on, as it might fall into such hands as could not be of service, and though it might come to the representatives of one, and not of the other, that is by express provision of the parties. There- fore on the articles the plaintiff is not entitled to a decree to carry on the partnership. But, as a general question, the consequence with regard to trade weighs greatly with me. It would be of ill consequence in general to say that in articles of partnership in trade, where no provisions for the death of either is made, they might subsist for benefit of an execu- tor who may not have skill therein. The plaintiff could be of no use in carrying on the partnership. Plummer wanted one whose knowl- edge he could confide in. The plaintiff, the administratrix, is en- titled to one-third; the infant to the other two shares. Her intestate might be indebted, and the assets wanted to be distributed. It is improper, therefore, to suffer such a construction, unless the parties provide for it. I remember that case in Baxter v. Burfield, 2 Stra. 1266. It was an action against the surety in a bond conditioned for performance of the articles. The master, to whom the youth was bound, died. The executors thought they might have some benefit of Gil.Pabt.— 38 594 TEEMINATION OF THE PARTNERSHIP. (Ch. 9 his time ; and the view, therefore, was not to have him personally their servant, and to instruct him farther in the trade, but to put that bene- fit of the infant's service into their own pocket. The court, considering the inconvenience attending apprentices or trade in general, if infants were obliged to serve executors or administrators for remainder of the term, although not of the same trade with the infant, determined it for the defendant, that the action would not lie. I also remember Huddleston's Case, and am pretty certain (though not positive) that he was under a great dejection of mind, so that a commission was applied for ; but before that question came before the court he had recovered himself, and was desirous to carry on the partnership. The court said these were accidents which could not be provided for; but that was no reason, when he had brought all his substance into trade, the other partner should say that a temporary disorder intervening should deprive him during life from going on with the business, and that he should put the whole benefit of the partnership into his pocket, without accounting for it. So that the court held he had not forfeited the benefit under the partnership, but should, .notwithstanding that accident, be considered as partner. That case depended entirely on that circumstance; and there was a prospect of his recovery.^ 1 "As a partner cannot possibly continue to be a member of a firm after his death, any agreement with his executor, or other person having a beneficial interest in the share of the assets which belonged to him, for the continua- tion of the business thereafter with the surviving partner, is, necessarily, the formation of another partnership, the terms of which, when not otherwise ex- pressly agreed upon, may be implied, from the manner of conducting the business, to be the same as those of the former partnership. 'What is inac- curately called provision against the dissolution of the partnership is an agree- ment 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 of them, or some other person, shall immediately on his death take his placje in the firm, and become a partner in his stead. All these agreements and arrange- ments, and all that can be made for a similar purpose, are, in fact, only bar- gains 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 surviving partners and the representatives or appointees of the deceased have for their effect only the formation of a new partnership, which, upon some terms or other, takes the stock and carries on the business of the old one.' Parsons on Partnership, § 343. The effect cannot be otherwise of any arrange- ment for a continuation of the business, between the surviving member of the firm and the executor or other appointee under the will of the deceased mem- ber, 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 beneficiaries of the will, and becomes their prop- erty." Per Williams, J., in McGrath v. Cowen, 57 Ohio St. 383, 401 49 N E 338 (18981. In Wild v. Davenport, 48 N. J. Law, 129, 7 Atl. 295, 57 Am. Rep. 552 (1886), it Is said: "A provision in articles of partnership that, on the death of a partner, his executor, or personal representative, or some other person, shall be entitled to the place of a deceased partner in the firm, with the capital of the deceased in the firm business, or some part of it, is binding upon the sur- viving 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 " Sec. 3) BY OPERATION OF LAW. 595 In holding that, where a partnership is dissolved by the death of a co-partner, no notice of dissolution is necessary, Bigelow, C. J., in Marlett v. Jackman, 3 Allen (Mass.) 287 (1881), said: "The delectus personarum lies at the foundation of the agreement of the parties, and is one of the main considerations on which it rests. The personal quaHties of each member of a firm enter largely into the inducements which lead parties to form a copartnership ; and if the abilities and skill, or the character and credit, of any one are withdrawn, the con- tract between them is terminated, and the copartnership' is dissolved. When, therefore, by the death of a member of a firm, his personal liability ceases and his estate is by operation of law absolved from all future contracts and transactions entered into in the name of the firm, it would seem to follow, as a necessary consequence, that the power of the surviving partners to bind each other by new contracts and engagements must at once cease." RAYMOND V. VAUGHAN. (Supreme Court of Illinois, 1889. 128 111. 256, 21 N. E. 566, 4 L. R. A. 440, 15 Am. St. Rep. 112.) Bill for accounting brought by George M. Vaughan against Samuel B. Raymond in the circuit court of Cook county. A decree was ren- dered in favor of complainant. Defendant took a writ of error to the appellate court. The decree was affirmed and defendant brings error to this court. Per Curiam. This was a bill filed by defendant in error, Vaughan, against Samuel B. Raymond, plaintiff in error, to compel an account- ing in respect of partnership affairs alleged to exist between them. The answer of Raymond expressly admits the formation of the co- partnership, as alleged in the bill, and its continuance from Septem- ber 15, 1874, to the 20th day of January, 1876, when the complain- ant, Vaughan, was adjudged insane. It will therefore be unneces- sary to discuss the question of the partnership further than may be- come important in illustrating other branches of the case. It is insisted by counsel for plaintiff in error that, if the partner- ship existed, first, that it was ipso facto dissolved by the adjudication of the insanity of Vaughan by the county court of Cook county on the 20th day of January, 1876, and that plaintiff in error, as conserv- ator of Vaughan, accounted for all the property of Vaughan, and all his rights and credits accruing from the copartnership prior to said date in settlement of Vaughan's estate in said court, and that, the partnership being dissolved, Vaughan has no claim, legal or equitable, to the proceeds of the partnership business after such dissolution ; second, if this is not so, that, the partnership being determinable at the will of either party, Raymond elected to determine the partnership, 596 TERMINATION OF THE PARTNERSHIP. (Cll. 9 and did terminate it, at the date of the adjudication of insanity, and that such dissolution can be inferred from circumstances, and that the circumstances proved show such election by him; third, that the discharge by the- county court of Raymond, as conservator of Vaughan, upon his final report as such conservator, is a bar to relief sought by the bill in this case, so long as it remains unreversed; and, fourth, that, in any event, by a settlement made between the parties in Philadelphia in June, 1879, Vaughan received of Raymond $2,500 in full satisfac- tion and discharge of his interest in the business and profits of such copartnership. The first contention presents a question of the most difficulty. It is said in Parsons on Partnership, 465 : "There are not wanting strong reasons and high authority for the conclusion that insanity, certain, complete, and hopeless, of itself, and at once, dissolves the partner- ship; but we think the decided weight of authority in England and in this country opposes this conclusion, and holds that the partnership continues until it is dissolved by decree." Chancellor Kent, 3 Kent, Comm. 58, says : "Insanity does not work a dissolution of partner- ship ipso facto. It depends upon circumstances under the sound dis- cretion of the court of chancery. But, if the lunacy be confirmed and duly ascertained, it may now be laid down as a general rule, notwith- standing the decision of Lord Talbot to the contrary, that, as partners are respectively to contribute skill and industry as well as capital to the business of the concern, the inability of a partner by reason of lunacy is a sound and a just cause for the interference of the court of chancery to dissolve the partnership, and have the accounts taken, and the property duly applied." And the same author (3 Kent, Comm. 645) says : "In cases of partnerships it would at least require a decree in chancery to dissolve the partnership on the ground of lunacy." Story, in his work on Partnership, § 395, says: "The common law, * * * upon grounds of public policy or convenience, holds that in- sanity does not ordinarily, per se, amount to a positive dissolution of the partnership, but only to a good and sufficient cause for a court of equity to decree a dissolution." This writer, however, adds : "We say 'ordinarily,' for where the insanity has been positively ascertained under a commission of lunacy, or by the regular judicial appointment of a guardian to the lunatic, it may deserve consideration, whether it does not ipso facto amount to a clear case of dissolution of the part- nership by operation of law, since it immediately suspends the whole functions and rights of the party to act personally." Mr. Chief Jus- tice Parker in Davis v. Lane, 10 N. H. 161, makes the same sugges- tion. That case was, however, upon the effect of insanity in revoking the power of an agent to act for his principal. Mr. Parsons also seems to be of the opinion that the courts would hold that where the insanity was determined by due inquest it would, per se, operate as a dissolution of the partnership. Both Story and Parsons refer in support of this latter suggestion, to the case of Isler v. Baker, 6 Hurnph. Sec. 2) BY OPERATION OF LAW. 597 (Tenn.) 85, alone, to sustain the text. That case holds the doctrme indicated by Mr. Parsons, but stands, so far as we have been able to find, unsupported by any adjudicated case, and none are cited by the court in support of its conclusion. Collier on Partnerships, bk. 2, c. 3, § 3 ; Gow on Partnership, c. 5, § 1, each lay down the rule that a de- cree of a court of chancery is necessary to a dissolution of the partner- ship, notwithstanding there has been an adjudication declaring one partner a lunatic. In Besch v. Frolich, 1 Phil. Ch. 172, one of the partners had been adjudged insane upon commission of lunacy. Upon bill filed to dissolve the partnership, it was insisted that it should be decreed dissolved from the time of the incapacity of the insane part- ner. This the court, Lord Chancellor Cottenham deHvering the opin- ion, held could not be done, And says : "That there are three consid- erations between partners — the share of each in the capital ; the share of each in the good will ; and the labor which each undertakes to de- vote to the business. Your argument is that because one of these con- siderations, and that, perhaps, the least valuable of the three, fails, you are entitled from that time to take to yourself the whole benefit of the other two. * * * Whatever delay has occurred is imputable to the plaintiiiE himself. It was competent for him to have filed his bill at any moment since the time when his partner first becarne incapable of attending to the business." In Jones v. Noy, 2 Mylne & K. 125, the partners were solicitors. One of them, Hardston, became insane, and incapable of attending to business, and died two or three years afterwards. Noy, the other partner, carried on the business one or two years, and then sold it out. Hardston's executors filed a bill to compel Noy to account in respect to the partnership business, and the proceeds of the sale. Sir John Leach, M. R., in determining the cause said: "It is clear upon principle that the complete incapacity of a party to an agreement to perform that which was a condition of the agreement is a ground for determining the contract. The insanity of a partner is a ground for the dissolution of a partnership, because it is immediate incapacity, but it may not in the result prove to be a ground of dissolution, for the partner may recover from his malady. When a partner, therefore, is affected 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 dissolution, he must obtain a decree of the court. If he does not apply to the court for a decree of dissolution it is to be con- sidered that he is willing to wait to see whether the incapacity of his partner may not prove merely temporary. If he carry on the partner- ship 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." See, also, Griswold v. Wadding- ton, 15 Johns. (N. Y.) 57; Bagshaw v. Parker, 10 Beav. 532; Sadler V. Lee, 6 Beav. 324; Robertson v. Lockie, 15 Sim. 285; Pearce v. Chamberlain, 2 Ves. Sr. 33. * * * 598 TERMINATION OF THE PARTNERSHIP. (Ch. 9 The rule supported by the decided weight of authority, and an- nouncing the correct doctrine, is that the insanity of a partner does not, per se, work a dissolution of the partnership, but may constitute sufficient grounds to justify a court of equity in decreeing its disso- lution. But this doctrine must be understood and is applied by courts of equity with appropriate limitations and restrictions; for, while cur- able, temporary insanity will be sufficient, upon an inquisition, to .sus- tain an adjudication of insanity in the county court, the appointment of a conservator, and commitment of the ward to an insane asylum, yet it will not authorize a court of chancery to decree a dissolution of a partnership, if the malady be temporary only, with a fair prospect of recovery within a reasonable time. Story, Partn. § 397. Under our system the adjudication of insanity may be had for the purpose of enabling those temporarily insane to avail themselves of the facili- ties for treatment and cure provided by the beneficence of the state. In such case the adjudication of the county court is necessary to their admission to the state hospital for the insane, where, in theory at least, the curable are admitted. It is manifest that the adjudication by the county court can have no effect in determining the partnership ; and, upon bill filed to dissolve the partnership, it would have no other effect than to establish the insanity. Courts of equity will, as between the partners, look to the effect produced upon the partnership relations and business, and refuse to determine the partnership, and apply its assets, unless the insanity materially affects the capacity of the part- ner to discharge the duties imposed by his contract relation. A part- ner embraces the character both of principal and agent. F'or him- self, with respect to the concerns of the partnership, he virtually acts as principal, and as agent for his partners. His power to act for them is coupled with an interest in all that pertains to the business of the concern. It would seem, therefore, that if for any reason one member of the firm should assume control and management of the business and affairs of the partnership, he should, while so controlling it, man- age it for all, and in the interest of all the partners. His duty would not, perhaps, be strictly that of a trustee, but would be analogous to it, and he would not be allowed to derive personal advantage from the use of the partnership assets, or business or good will of the firm. This rule is universal in its application to fiduciary relations. Bowen v. Richardson, 133 Mass. 293; Freeman v. Freeman, 136 Mass. 260; Perry, Trusts, §§ 127, 128, 455-464. At any time after the insanity of Vaughan, the continuing partner had, if he saw proper to exercise it, the right to apply for a dissolution of the partnership, or, as it was a partnership at will, might have dissolved it of his own volition. There is much evidence in the record tending to show that some time prior to January 20, 1876, Vaughan became deranged, but re- mained seemingly conscious of his own incapacity for business. Upon consuhation with Raymond they went together to an asylum near Chicago, to consult a physician as to the best course to pursue, and it Sec. 3) BY OPERATION OF LAW. 599 was agreed and determined that application be made to the county court to have Vaughan adjudged insane. Vaughan testifies, and there is much in this record to corroborate his statement, that it was agreed by Raymond, in view of his going to the asylum to be treated for his malady, that he (Raymond) would look after and attend to the busi- ness of the firm, and carry it on in his absence. It is not, however, necessary to put the case upon that ground, for it does clearly appear that Raymond, without objection, or any notice to any one, continued the business precisely as before, and the presumption is that he did not intend a dissolution of ihe firm. It is to be presumed, in the absence of evidence showing to the contrary, that he waited to determine whether the incapacity of his partner would prove temporary merely, and it became practicable for him to resume business. So long as he thus continued to carry on the partnership business without taking steps to dissolve the partnership, there could be no dissolution or he be excused from afterwards accounting for the profits actually derived by him from the business of the firm. The circumstances relied upon as show- ing an election by Raymond to dissolve the copartnership are wholly insufficient. On the contrary, it appears that these parties were bro- kers ; that for a number of years prior to the formation of this part- nership Vaughan had represented as broker in the wholesale sugar market in Chicago the Franklin Sugar Refinery of Philadelphia, Pa., whose business was there conducted by Harrison, Havemeyer & Co. It also appears that Raymond had been likewise engaged as a broker in sugars in Chicago, he representing two or more sugar refineries in the east, each of the parties having realized considerable sums by way of commissions in the course of their business. By an arrangement be- tween them, they consolidated their business, Vaughan receiving one- third, and Raymond two-thirds, of the profits, and they were to share losses and expenses in the same proportion. Each, however, remained the broker of the refineries that they had previously represented; that is, Vaughan represented the Franklin Sugar Refinery, and no change was made in the agency whatever. After Vaughan was adjudged in- sane, instead of dissolving the copartnership or doing any act show- ing an intent so to do, Raymond continued to carry on the business in all respects as before. Vaughan still continued to be the broker of the Franklin Sugar Refinery, and that concern had no notice of any change in its brokers at Chicago. It is shown that a very large busi- ness was done by Raymond, acting in the name of Vaughan, as broker of said refinery, and large profits were received by him therefrom. Vaughan had brought the business of the Franklin Sugar Refinery to the firm. No confidence had been reposed by this principal in Ray- mond, he at no time having acted as individual broker of that refinery. It was not until after Vaughan's discharge from the asylum that ar- rison, Havemeyer & Co. had any notice or intimation that Raymond pretended that a dissolution of the firm had taken place. And then, as it is clearly shown, to induce Harrison, Havemeyer & Co. to make 600 TEEMINATION OF THE PAKTNEESHIP. (Ch. 9 him their broker at Chicago, and to induce Vaughan to give up and surrender the business in that city, Raymond paid Vaughan $3,500. Negotiations were had between these parties through Mr. Harrison, of the firm of Harrison, Havemeyer & Co., and his testimony leaves no doubt that the payment of said sum of $2,500 by Raymond to Vaughan was for a surrender by Vaughan to Raymond of his (Vaughan's) right to act as broker for the Franklin Sugar Refinery in the Chicago market. We cannot undertake to review this evidence in detail, but it leaves no question in our minds that the dissolution of the firm did not take place at any time prior to the settlement before spoken of in re- spect to the future conduct of the business. * * * We find no error in this record, and the judgment of the appellate court will be affirmed. GRISWOLD et al. v. WADDINGTON et al. (Supceme Court of New York, 1818. 15 Jobns. 57.) This was an action of assumpsit. The defendant Joshua Wadding- ton was an American citizen, residing in New York, and the defend- ant Henry Waddington a British subject, residing in lyondon. The defendants had been in partnership together, and carried on their business at London under the firm of Henry Waddington & Co., and at New York under the firm of Joshua Waddington & Co. The plain- tiffs were citizens of the United States, resident in New York, and the demand sought to be recovered in this action was a balance of account arising on transactions between the plaintiffs and Henry Wad- dington, or the firm of H. Waddington & Co., during the late war between this country and Great Britain. * * * The jury found a verdict for the plaintiffs for $17,757.09, subject to the opinion of the court on a case made, with liberty to either party to turn the case into a special verdict, with power to the court to grant a new trial or a venire de novo. * * * Spencer, j. * * * Upon the fullest reflection which I have been able to give to the subject, my opinion is that the declaration of war between the United States and Great Britain produced a suspen- sion during the war, or, ipso facto, a dissolution of the partnership previously existing between the defendants, so that the one is not re- sponsible upon the contract, express or implied, of the other. It will be perceived that this proposition assumes the fact that the partner- ship between the defendants had not become dissolved by the efflux of the time, or the acts of either of the partners, although this point is, in itself, very questionable. The better conclusion from the evi- dence is that the partnership expired by its own limitation during the war; and the existence of the war would, at all events, dispense with the public notice which is, in general, necessary to the valid dissolu- tion of a partnership. Sec. 2) BY OPERATION OF LAW. 601 The case discloses that the firm of Henry Waddington & Co. con- sisted of Henry and Joshua Waddington; that Henry is a British sub- ject, resident before and during the war in London, conducting the partnership concerns there, whilst the defendant was resident here. The negotiations which gave rise to the present suit took place in Eng- land, and exclusively with Henry Waddington, during the late war between this country and Great Britain. It was admitted on the argument, and so the fact undoubtedly is, that the proposition I have advanced is neither supported nor denied by any judicial decisions or elementary writer of the common law; but, if I mistake not, it is supported by the strongest reasons, and by necessary analogy with adjudged cases. The first inquiry is, what are objects and ends of partnerships? They are entered into with the view that, with the joint funds, skill, and labor of the several partners, the interests of the concern may be advanced and promoted. There may be, and frequently are, different inducements influencing each partner. One may have more capital and credit. Another may have more skill, activity, and experience. The one may choose to be a dormant and inert partner, furnishing an equivalent for the services and skill of the other, and leaving the business entire- ly to his control and management. But, unexplained as this partner- ship is, we must understand it to be a union with a view to the em- ployment of the joint capital, labor, and skill of both the partners for the purposes of internal and external commerce between this country and Great Britain. That the object of the partnership embraced both these objects of internal and external trade would seem to be unques- tionable from the local position of the partners. That the death, insanity, and bankruptcy of one of the partners operates as a dissolution was not questioned in the argument; and a respectable elementary writer, Mr. Watson, is of opinion that the tnarriage of a feme sole partner would produce the same consequence. The cases of Pearce v. Chamberlain, 2 Ves. 33, and Sayer v. Bennet, Watson, 382, and several other cases cited by him, all go to establish the general principle that death, insanity, or bankruptcy, work a dis- solution of the partnerships, and they proceed on the principle that the other partners are not bound to admit the representatives of a deceased or insane partner into the concern; the confidence having "been originally placed in the personal skill and assistance of those no longer able to afford it. Let these principles be applied to the present case, and it would seem that the same result is inevitable. In what situation did the war put the defendants, as regarded each other ? Most undeniably the two na- tions, and all their citizens or subjects, became enemies of each other, and the consequence of this hostility was that all intercourse and communication between them became unlawful. This is not only the acknowledged principle of the law of nations, but is also a part of -the municipal jurisprudence of every country. I need not cite cases 602 TERMINATION OF THE PAETNERSHIP. (Ch. 9' in support of a position wliich has so repeatedly been recognized in the Enghsh courts, and in our own, possessing as well admiralty as common-law jurisdiction. Another consequence of the war was that the shipments made by each of the partners would be liable to capture and condemnation by the cruisers of the government of the other;, and another very serious evil attended them: No debts contracted in the partnership name could be recovered in the courts of either nation ; they not having, in the language of the law, a persona standi in judicio, whilst they were amenable to suits in the courts of both nations. The Hoop, 1 C. Rob. Adm. 201. It is true, the same dis- ability to sue for debts due the firm antecedent to the war would ex- ist. This however, does not weaken the objection. It remains still an important item, in considering whether a partnership exists, when the new debts created are to be liable to the same disability. It ap- pears that Joshua Waddington is a citizen of the United States, and. it has been already mentioned that Henry Waddington is a British- born subject. They owed different allegiances, and it became part of their duty to lend all their aid, in a vigorous prosecution of the war, the one to the United States, and the other to Great Britain; and it appears to me that it would not comport with policy or morality that the law should imperiously continue a connection, when by its very continuance it would afford such strong inducements to a violation of that fidelity which each owes to his government. Again, all communication and intercourse being rendered unlaw- ful, and it being a well-established principle that either partner may,, by his own act, dissolve a partnership, unless restrained to continue it for a definite period by compact, in what manner could such in- tentions be manifested during the war. It might, indeed, be made known to the public of one of the countries, but it could not be notified, to the public of the hostile country; and thus, unless the war pro- duced a dissolution, he would be responsible, notwithstanding he had. the desire to dissolve the connection, merely from inability to make known that determination — an inability produced by events utterly uncontrollable. When the objects and intentions of an union of two or more individuals to prosecute commercial business are considered, when it is seen that an event has taken place, without their fault and beyond, their control, which renders their respective nations, and along with them the defendants themselves, enemies of each other; that all com- munication and intercourse has become unlawful; that they can nO' longer co-operate in the conduct of their common business, by af- fording each other advice, and are kept hoodwinked as to the con- duct of each other; that the trade itself in which they were engaged' has ceased to exist; that, if they enter into any contracts, they are incapable of enforcing their performance by an appeal to the courts ;. that their allegiance leads them to support opposite and conflicting, interests — I am compelled to say that the law cannot be so unjust as to pronounce that partnership so circumstanced, when all its obr Sec. 3) ' BT OPERATION OF LAW. 603 jects and ends are prostrated, shall continue; and with the clearest conviction upon my mind, and in analogy to the cases to which ref- erence has been made, I have come to the conclusion that the partner- ship between the defendants was, at least, suspended, and I incline to the opinion that it was, ipso facto, dissolved iDy the war, and, conse- quently, that the defendant J. Waddington is not liable to this ac- tion. * * * If the law worked a suspension or dissolution of the partnership, every person dealing with Henry Waddington was bound to take notice of the fact ; and with the old dealers of the firm there was knowledge of all the material facts which enter into the determination of the cause. Judgment for the defendant. EUSTIS V. BOLIvES et al. (Supreme Judicial Court of Massachusetts, 1888. 146 Mass. 413, 16 N. E. 286, 4 Am. St. Rep. 327.) Contract by William T. Eustis against Charles H. Bolles, George F. Wilde, and Francis D. Hall, to recover the balance of a promissory note. Hearing in the Supreme Judicial Court, before C. Allen, J., who reported the case to the full court. Morton, C. J. This is a suit upon a note dated January 1, 1880, signed by "B. Callender & Co." It was signed and delivered to the plaintiff by B. Callender, and at that time the only parties composing the firm were the said Callender and the defendants Bolles and Wilde. The defendant Hall, who was formerly a partner,, had withdrawn from the firm on July 2, 1877, and notice of the dissolution was given by publication in the Boston Daily Advertiser, but no personal notice was given to the plaintiff. The note in suit was given in renewal of a former note which the plaintiff held at the time of the dissolution. It further appears that the defendant Hall, in December, 1877, filed his petition in bankruptcy, was adjudicated a bankrupt and thereupon, in June, 1878, received his discharge. Upon these facts we are of the opinion that the defendant Hall is not liable in this action. The only ground upon which he could be held is that the plaintiff had no legal notice of the dissolution of the old firm. If the firm had not been previously dissolved, the bankruptcy of Hall would have dissolved it. The bankruptcy, like the death of a partner, dissolves the partnership, and as it is a public, notorious proceeding, all creditors are bound to take notice of it, and no further notice need be given. The publica- tion of bankruptcy or insolvency proceedings is legal notice to all persons by which they are bound. Story, Partn. §§ 332-336; Ar- nold V. Brown, 34 Pick. 89, 94, 35 Am. Dec. 396; Marlett v. Jackman, 3 Allen, 387 ; Butler v. Mullen, 100 Mass. 453. The plaintiff was a creditor of Hall at the time of his bankruptcy. He is presumed to 604 TERMINATION OF THE PARTNEESHIP. (Cll. 9 have had notice of it, and this is notice that at tliat time the partner- ship had been dissolved. It is as effective a notice that the old copart- nership no longer existed as it would be if the bankruptcy itself had worked the dissolution. * * * We are therefore of opinion that the defendant Hall is entitled to a judgment. The defendants Bolles and Wilde rely upon discharges under our insolvent laws. Their discharges were obtained under the statute of 1884, c. S36, as amended by the statute of 1885, c. 353. These stat- utes made a material change in our insolvent laws. * * * We are therefore of the opinion that the discharges of the defend- ants Bolles and Wilde are a bar to the plaintiff's claim against them. Judgment for defendants. SECTION 3.— BY JUDICIAIv DE;CREE. BARING et al. v. DIX. (In Chancery, at the Eolls, Sir Lloyd Kenyon, 1780. 1 Cox, Cas. 213.) On a bill filed by two partners against the third, praying an ac- count of all partnership dealings, and that the partnership might be dissolved, and the leasehold premises, on which the trade had been carried on, might be sold, it appeared that the partnership had been originally instituted for the purpose of spinning cotton under a pat- ent which had been obtained in that behalf, but that after several at- tempts the invention totally failed, and was now entirely given up. The defendant, Dix, refused to consent to the dissolution of the part- nership, or the sale of the leasehold premises, notwithstanding it ap- peared that the mills must otherwise remain wholly unoccupied, and the rent be payable without any profit arising to answer it. And the counsel for the plaintiffs apprehended that they could not insist upon the dissolution of the partnership, or the sale of the premises, against the consent of the defendant; but his honor ordered "that upon the defendant's refusing to concur in the sale of the premises, and the dissolution of the copartnership, it should be referred to the master to inquire and state to the court whether the said copartner- ship business could now be carried on according to the true intent and meaning of the said articles of copartnership." And his honor declared that, if the master should report that it could not be so car- ried on, he would direct the premises to be sold, and would dissolve the copartnership. Reg. Lib. A. 1785, fol. 393. N. B. — On the 30th of May following the defendant, Dix, signi- fied his consent to the dissolution. Sec. 3) BY JUDICIAL DECREE. 605 CASH V. EARNSHAW et al. (Supreme Court of Illinois, 1872. 66 111. 402.) Scott, J. Thi.s bill was to dissolve a copartnership entered into by the parties to this suit on the 26th day of November, 1869, for the purpose of carrying on the business of quarrying stone, and was to continue through the full period of five years. The ground set out in the bill, upon which the plaintiff seeks re- lief, is the misconduct of the partner Emanuel Earnshaw. No cause of complaint is alleged against any other member of the firm. He is charged with specific acts of wrongful conduct and general mis- management of the business of the firm. On account of the char- ges in the bill, plaintiff in error sought to have the court dissolve the copartnership, appoint a receiver, and close up the affairs of the firm. The court below denied the relief, and plaintiff brings the cause to this court on error. It is not for every act of misconduct on the part of one partner that a court of equity, at the instance of another, will dissolve the partnership and close up the affairs of the company. The court will require a strong case to be made, and it is laid down as a general principle that a court has no jurisdiction to make a separation be- tween partners for trifling causes or temporary grievances involving no permanent mischiefs. 3 Kent, 60. Story, in his work on Partnership, states the rule to be that, to justify such an extraordinary interposition, the court always expects a strong and clear case to be made out of positive and meditated abuse. For minor misconduct or grievances, he says, if they require any redress, the court, ordinarily, will go no further than to act upon the faulty party by way of an injunction. Story on Partnership, § 288, and authorities cited. We have carefully examined the evidence in the record, and we fail to discover that clear and satisfactory proof of the allegations in the bill that the law undoubtedly requires. Indeed, so far as we can see, there is no act on the part of Emanuel Earnshaw that the plaintiff in error can have any just cause of complaint, unless it was the failure to give him a check for $500 on the 12th day of Novem- ber, 1870, when requested. And, if there was no explanation to this fact, we do not think that it is of sufficient gravity to justify the use of the extraordinary power by the court of equity to put an end to the entire contract between the parties. The contract of copartner- ship was deliberately entered into after mature consideration, and not without considerable knowledge of each other's characters and fitness, and it ought not to be dissolved on account of any mere tri- fling cause. It is apparent, from what took place at the time, that Earnshaw did not intend any wrong to plaintiff in error by the refusal to give 606 TERMINATION OF THE PARTNERSHIP. (Ch. 9 the check. The evidence warrants us in saying that there was an lionest dispute as to the amount then due to him. Plaintiff in error, for some reason satisfactory to himself, did not choose to have the accounts passed upon at that time, and hence the check was not giv- en. It turned out, however, upon subsequent investigation, that there was more than the amount demanded due him, and he ought, in fact, to have the check; but Earnshaw may have been honestly in doubt as to the amount. If so, he ought not to be charged with willful misconduct, and his contract for that reason alone dissolved, and his business broken up. The consequences of the dissolution of copartnership are of too serious a character to be justified by so slight a cause. Under the most unfavorable view, it would only work a temporary inconvenience, and it is not pretended that any permanent injury resulted from the refusal to give him a check for the desired amount on that day. His own conduct in the premises is not alto- gether blameless, and he ought not to be allowed to make the mis- taken judgment of his partner the ground for the dissolution of their contract. By the agreement of the parties, Emanuel Earnshaw was made general superintendent of the affairs of the company, and it is in- sisted that he made large sales on credit to the injury of plaintiff in error as a member of the firm. It was not provided by the arti- cles of copartnership that no sales should be made on a credit. It was, however, stipulated that no sales should be made on a credit by one member "against the express wish or consent of two others." The evidence tends to show that the sales that were made on credit, of which complaint is made, were not recklessly done, but were deem- ed reasonable sales at the time. Certainly they were not so improv- idently made as to be regarded as willful misconduct on the part of the superintendent. Losses did occur, but they were through mere error of judgment. The credits given were for' short periods, and other parties, considered prudent men, engaged in the same line of business, made similar sales with like disastrous results. In making the sales on credit, he violated no express agreement of the parties, and, inasmuch as it appears that it was in accordance with' the cus- tom of the trade, we see no grounds for just complaint against the action of the superintendent in this regard. He seems to have act- ed with reasonable prudence, and certainly no willful conduct can be imputed to him that ought to be visited with any serious conse- quences. The most serious cause of complaint seems to be in reo-ard to making the Shannon contract in the first place, and the subsequent agreement with Steele and McMahan to perform and complete his contract with them. It is alleged that by reason of the improvident contract with Shannon, and the subsequent agreement to complete the work on Lake street, large losses were in eludes, or rather postpones, the special partner as a creditor until tb other creditors are satisfied. Advances made by him to the partnei ship by way of a loan are clearly within its terms. It cannot be cor fined in its operation to the advances made by way of contributio to the capital under the articles of partnership. That would rende the section wholly useless, for without it there is nothing in the statut which would permit the special partner to share with the other crec itors as to his part of the capital invested. The whole scope of tb act is to the effect that he subjects that to the hazards of the entei prise. The lawmakers have used emphatic language, and we hav nothing to do but abide by their words. Other courts have reache the same conclusion upon statutes in substance the same as the on under consideration. White v. Hackett, 20 N. Y. 179 ; Mills v. Ai gall, 6 Paige (N. Y.) 577; Ward v. Newell, 42 Barb. (N. Y.) 48S Dunning's Appeal, 44 Pa. 150. The judgment in this case is affirmed.^ 1 In Clapp V, Lacey et al., 35 Conn. 463 (1868). It was heUl that the specli partner could prove and share ratably with other firm creditors for all clain except his claim for capital. Sec. 2) THEIR FORMATION AND CONDUCT. 627 TILGE et al. v. BROOKS et al. (Supreme Court of Pennsylvania, 1889. 124 Pa. 178, 16 Atl. 746, 2 L. R. A. 796.) Paxson, C. J. The defendant below, Matthew Brooks, was sued as a copartner with W. Howard Brooks and A. May Stevenson for a debt admittedly due by the firm of W. Howard Brooks & Stevenson. The grounds upon which this claim rested are these : Matthew Brooks had intended and attempted to form a partnership with W. Howard Brooks and A. May Stevenson, in 1871, as a special partner. This special partnership was in fact a renewal of one made in 1866. The renewed partnership expired in 1876, when Matthew Brooks retired from the firm. The sales for which it is sought to make him liable were made in 1881, or about five years after dissolution of the firm of which he had been a member. When he retired, no notice was given of the dissolution. It was claimed — and I do not understand it to be disputed — that there were such irregularities in the formation of the special partnership as to make the special partner liable to the penalties provided by the act of Assembly in such cases. The eighth section of the act of Slst of March, 1836 (P. L. 1835-36, 143), in regard to limited partnerships, provides that, "if any false statement be made in such certificate or affidavit, all the persons interested in such partnership shall be liable for all the engagements thereof as general partners." There can be no doubt that during the time the defendant Brooks was a member of this firm he was liable for its en- gagements by reason of his noncompliance with the statute. The plaintiffs below claim that he was in point of fact a general partner, and was liable, after he left the firm, to creditors, by reason of his failure to give notice of his withdrawal ; and a number of authorities are cited in support of this proposition, among, others, Andrews v. Schott, 10 Pa. 47, where it was said by this court : "For, unless the conditions of the act are substantially observed, all the defendants are general partners." The language quoted from Andrews v. Schott would seem to be justified by the phraseology of the act of 1836, as, for instance, "if the special partner transact any business on account of the partnership, or be employed for that purpose as agent, attorney, or otherwise, he shall be deemed a general partner." Like instances might be given from other sections of the act. But, when the act de- clares that under certain circumstances a special partner shall be deemed a general partner, it certainly does not mean that he is in fact a general partner; indeed, there is in the language an implication that he is not. Nor do I see how the Legislature can make a man a member of a firm without his consent and the consent of the firm. It may, indeed, make him liable for the debts of a firm as though he were a general partner ; and this is all the Legislature probably in- tended to' do. The confusion upon this subject may be occasioned by the inaccurate language sometimes employed in referring to it. A 628 LIMITED PARTNERSHIPS. (Ch. 10 man who is not a member of a firm may yet make himself liable to its creditors by holding himself out to such creditors as a partner. Yet in fact he does not become a partner. He is merely liable as a part- ner. There being no general partnership, so far as Brooks was con- cerned — only a liability on his part for the debts of the limited part- nership because of its irregularities — we see no reason why he should have given notice of the dissolution of a partnership which never ex- isted. Haviland v. Chace, 39 Barb. (N. Y.) 283, was decided upon the New York statute, and is not consistent with our own act of 1836; nor are authorities elsewhere of much service to us in construing it. Under our statute no general partnership was formed. It does say that an omission to comply with its requirements shall have the effect of creating a partnership not intended by the parties. Judgment affirmed. INDEX. [the figures befer to pages.] ACCOUNTING AND DISTRIBUTION, In general, 484^-498. without dissolution, 472, 480. in illegal partnerships, 139. ACTIONS, between partners, at law, 71, 451-470. for balance struck, 458, 459, 460. single adjusted item, 452. independent transactions, 462. for breach of partnership agreement, 401. for deceit, 464. between partners, in equity, 470-483. accounting without dissolution, 472, 480. specific performance of partnership agreement, 479, 480. for receiver, 433, 481, 483. for dissolution, 483. between flrmS having common member, 469. by partner against partnership, 454, 467. by or against surviving partner, 271-280. ADMISSIONS BY PARTNER, 858, 411, 412. ADVANCES, 486. AGENCY, mutual agency as test of partnership, 86, 45, 49, of partners for partnership, 354^359. see Partners. ASSIGNMENT, of firm property, by one partner, 233, 236. by surviving partner, 236. by partner, of his Interest, 446, 528. ATTACHMENT, by firm creditors, of partner's separate property, 499, 503. by separate creditors, of firm property, 507-528. BANKRUPTCY, application of assets, 558-587. collateral, proof by creditor holding, 563, 564, 566 n. discharge in, what debts barred, 584. dissolution, cause for, 603. double proof, 561, 563. limited partnership, proof by special partner, 626. of firm, right of solvent partner to control assets, 578, 58.3. of one partner, effect on actions against firm, 581. proof between firms having common member, 572. by firm against separate partner, 573. by firm creditors against separate partner, 541, 545, 584. by partner against firm, 569, 575. by partner against partner, 576. Gil.Part. (629) 630 INDEX. [The figures refer to pages.] BILLS AND NOTES, " see Negotiable Paper. CAPITAL, 164-170. COMPENSATION, Partner's Right to. 435, 488. COMPETENCY, of persons to be partners, 121-133. COMPETITION, by partner with firm, 425. CONTEJIPLATED PAHTNEKSHIP, 87. CONTRACT, extent of partnership liability in, 309-324. nature of firm, 280-306. quasi severable character in equity, 292-306. contracts in name of one partner, 156-157, 312-324. formalities of, 133-139. CONTRIBUTION BETWEEN PARTNERS, 436-446. .CONVERSION, of firm realty into personalty, 193-210, 269. of firm property into separate property, 217, 221, 223, 220. CORPORATIONS, capacity to be partners, 131. defective, as partnerships, 104, 106. distinguishable from partnerships, 91. CREDITORS, RIGHTS AND REMEDIES OF, assignment for benefit of firm creditors, 233, 236. attachment of partner's separate property, 499, 503. against dormant partner, 348, 849. against estate of deceased partner, 292-,306. bankruptcy of firm and members, 558-587. effect of death of partner on, 269. exemption, firm property not subject to, 567. estoppel, effect on, 546, 557. of partnership, in partner's separate property, 499, .502 n., 503, 528. in firm property, 528, 538, 541. priorities over separate creditors, 247, 251, 528, 541. nature and basis of priorities, 221, 223, 226, 247, 251. on conversion of firm into separate property, 217, 221, 223, 22G. of separate partner, in separate property, 499, 528. firm property, 210, 507-528. successive transfers of each partner's interest in firm property, effect, 247, 251. DEATH, of partner, effect on firm realty, 193-209. on firm property, 266-280. on firm contracts, 281, 286, 202-306. dissolution of firm by, 592, 594 n. see Surviving Partner. DEED, power of partner to execute, 382-391. DELECTUS PERSONARUM, 113-120. DISSENT BY PARTNER, 391-395. INDEX. G31 [The figures refer to pages.] DISSOLUTION, by agreement of parties, 588-592. operation of law, 592-603. banlsruptcy of partner, 603. death, 592, 594 n. insanity, 595. war, 600. judicial decree, 483, 604-609. notice of, 348, 349, 589, 603. breach of contract by premature, 588, 591. right of partner to, 589, 591. powers of partner after, 403^17. effect of, on partnership liability, 341-355. accounting without, 472. limited partnership, notice of, 027. DISTRIBUTION, of firm assets among creditors, 528, 538, 541. in partnership by estoppel, 546, 557. in winding up of partnership, 484r-498. DORMANT PARTNER, liability of, 318, 348, 349. notice of dissolution by, 348, 349. DOWER, in partnership realty, 196, 200, 267. DUTY OP PARTNERS, see Partners. EQUITY, distribution of firm assets in, 528, 538, 541. of partners, in applying firm assets, 247, 251, 446, .528, 541. quasi severable character of firm contract in, 292-306. liability of estate of deceased partner in, 292, 293, 298, 300, 304. remedies of partners inter se in, 470^83. see Partners. ESTOPPEL, partnership by, 95-104. distribution of assets in partnership by, 546, 557. EXEMPTION, firm property not subject to, 567. EXECUTION, of judgment against partner, 210, 247, 251, 507, 508, 515, 526. of judgment against firm, 499, 502 n., 503, 528. FARMING ON SHARES, 61, 63, 65 n. FIRM, see Partnership. FIRM NAME, necessity of, 56, 154, 156. doing business in name of partner, 156, 157, 312-324. FORMER CUSTOMER DEFINED, 346. FRAUD, liability of firm for, of partner, 396, 397, 399, 401. FRAUDS, STATUTE OF, compliance with in forming contract of partnership, 133-138, 214. 632 INDEX. [The figures refer to pages.] FRAUDULENT CONVEYANCES, conversion of firm into separate property, 217-229. applying firm property to pay separate debts, 221, 223, 226 n., 243, 245. successive transfers of each partner's interest In firm, 247, 231. GARNISHMENT, by firm creditor,- of separate partner's property, 502 n. separate creditor of firm's property, 513. GOOD FAITH, partner's duty inter se, as to, 418-483, 439, 440. competition witli firm, 425. GOOD WILL, 177. GROSS PROFITS, sliaring, effect of, 80. HUSBAND AND WIFE AS PARTNERS, 121. ILLEGAL PARTNERSHIPS, 139. INCOMING PARTNER, assumption of firm obligations by, 325, 326. INDEMNITY AND CONTRIBUTION, right of partner to, 436-446. INFANTS AS PARTNERS, 125. INSANITY, dissolution, cause for, 595. INSOLVENCY, effect of, on transfers of firm property, 217-229. see Bankruptcy. INTENTION, to be partners, 7-17. sole test of partnership in modern law, 11, 13, 16, 17, 36, 49. test of intention, 17-82. sharing profits, 17-57. former doctrine, 17-30. development of modern doctrine, 31-57. exceptions to former doctrine, 22, 27. common enterprise or business, 57-83. vsfords not conclusive, 10, 11, 13, 16, 17, 49. INTEREST, nature of partner's interest in firm, 247, 251, 510, 528, 541. in accounting, 487, 497. JOINT LIABILITY, nature of, 281, 286. statutory changes, 305. and partnership liability, 288, 289. JOINT PURCHASE, not a partnership, 1, 2. JOINT TENANTS, distinguishable from partners, 83, 84. JOINT--STOCK COMPANIES, 108. INDEX. 633 [The figures refer to pages.] -JUDGMENT, agaiust one partner, effect of, 281, 286. how executed, 210, 247, 251, 507, 508, 515, 526. against firm, execution of, 499, 502 n., 503, 528, 541. JURISDICTION, equitable actions between partners, 470-483. LAND OF PARTNERSHIP, see Real Estate. LIABILITY, nature, extent, and duration of partnership, 281-355. nature of joint, 281, 286. partnership liability and joint liability, 288, 291. in contract, 281-306. extent of, 309-324. in tort, 306-309. commencement and duration of, 225-355. assumption of firm obligations, 325-835. novation, 336-341. dissolution, 341-355. quasi severable character in equity, 292-306. of partners, effect of dissent, 391-395. effect of dissolution on, 404. of retiring partner, 328-334. of firm, for partner's fraud, 396, 397, 399, 401. LIEN, of partners, on firm assets, to pay firm debts, 247, 25], 446, 528, 541. of firm creditors, on firm assets, derivative right, in equity, 251, 528, 541. on partner's separate property, 499. of separate creditors, quasi equitable lien, 528, 541. XilMITED PARTNERSHIP, origin and characteristics, 610. formation, requisites of, 615. contribution to capital, form of, 619. special partner, participation in control, 625. banlsruptcy of, proof by special partner, 626. dissolution, notice of, 627. LIMITATIONS, STATUTE OF* partners' power to waive, 411, 413. LOSSES, sharing, 5, 7, 56, 138. stipulation against liability for, 68, 71 n. liability for, implied from sharing profits, 56, 68, 78, 138. MAJORITY, POWERS OF, 391-395. MARRIED WOMEN, as partners, 121. MARSHALING ASSETS, firm and separate creditors, 528-587. MERGER OF FIRM LIABILITY, in judgment against partner, 281. MINING PARTNERSHIPS, 118 n. MORTGAGE, power of partner to mortgage firm property, 236 n. MUTUAL AGENCY, as test of partnership, 31, 36, 45, 49. 634 INDEX. [The figures refer to pages!] NAME, firm name, necessity of, 56, 154, 156. doing business in name of partner, 156, 157, 312-324. NATURE AND CHARACTERISTICS OP PARTNERSHIPS, 146-280. NEGOTIABLE PAPER, power of partner to issue, 157, 360, 371, 372, 879, 381, 405, 408. renewing, after dissolution, 405. indorsing after dissolution, 408, 409. NOTICE, of dissolution, sufficiency, necessity, 341-355, 589, 603. in case of dormant partner, 348, 349. former customer, 346. of limited partnership, 627. NOVATION, 336-341. PARTITION, of partnership realty, 203, 214, 215. PARTNERS, rights and duties inter se, 418-450. as to good faith, 418-433, 439, 440. conduct of the business, 433-436. indemnity and contribution, 436-446. application of firm assets to firm debts, 247, 251, 446-450, 528, 541. compensation, 435, 486. right to dissolntion, 589, 591. remedies inter se, in equity, accounting, 472, 480, 484^-498. specific performance, 479, 480. for receiver, 433, 481, 483. for dissolution, 483. actions at law, single adjusted item, 452. for balance struck, 458, 459, 460. for breach of partnership agreement, 461. independent transactions, 462. for deceit, 464. • powers of, in general, 354r417. origin and nature of partner's power, 354-359. test of authority, nature of question, 360-304. particular powers considered, 365-390. to make admissions, 358, 411, 412. to issue negotiable paper, 157, 360, 371, 372, 379, 381. to borrow money, 366, 368. to buy, 366, 367, 368. to give guaranty, 369. to sign firm name, 360, 368, 369, 370, 371, 372, 379. to confess judgment, 370. to accept bills, 157, 371, 381. to execute sealed instruments, 382, 383, 387. to take debts out of statute of limitations, 413. to transfer firm property, 213, 230-246. to make general assignment, 233, 236. to mortgage firm property, 236 n. powers of majority, 391-395. power to subject firm to liability in tort, 396. powers after dissolution, 403^17. liability of, in contract, 281-306. extent of, 309-324. commencement and duration of, 225-355. INDEX. 635 [The figures refer to pages.] PARTNERS— Continued, assumption of firm obligations, 325-.335. by incoming partner, 325-326. by continuing partner or new firm, 328-334. novation, 336-341. dissolution, 341-355. partnership liability and joint liability, 288-291. quasi severable character in equity, 292-306. effect of dissent, 391-395. of retiring partner, 328-334. several liability of partner, 309, 311. contract in name of one partner, 312-324. liability of estate of deceased partner, 292-306. exemption, right to, in firm property, 567. competency of persons to be, 121-132. survivorship among. 266, 267 n. nature of interest of, in firm property, 210-216, 247. 251, 510, 528, 541. successive transfers of each partner's interest, 247, 251. applying firm assets to pay separate debts, 243, 245. dormant, defined, 349. liability of, 318, 348, 349. notice from, in ease of dissolution, 348, 349. see Bankruptcy ; Limited Partnership ; Partnership.. PARTNERSHIP, vsfhat constitutes, 1-112. nature and characteristics of, 146-280. various conceptions, 146-153. • firm or partnership name, 56, 154-163. arises out of contract, 81, 113-145. competency of parties, 121-132. formalities, 133-138. for' what purposes, 139. contract for, when within statute of frauds, 133-138, 214. sharing profits, as test of, 17-57. former doctrine, 17-30. development of modern doctrine, 31-57. various exceptions, 22, 27. sharing profits, as compensation for services, 5, 7, 10, 22, 27. as compensation for loan, 4. mutual agency, as test of, 31, 36, 45, 49. intention to be partners, sole test of, 11, 13, 16, 17, 36, 49. specific intent to form, not essential, 16, 17, 49. common enterprise or business necessary, 57-83. joint purchase of goods for division, does not create, 1. purchase of goods by one for resale for mutual gain, 2. farming on shares, 61, 63, 65 n. relations distinguishable from, 83-94. contemplated, agreement for, 87. associations not for profit, 85. distinguishable from tenancy in common, 58, 61, 83, 84. distinguishable from corporation, 91. defective corporation as partnership, 104, 106. joint-stock companies, 108. trading and noutrading, 362, 372, 379. estoppel, partnership by, 95-104. property of, capital, 164-170. property other than capital, 171-176. good will, 177. title to, how taken and held, 189-192. conversion of firm realty into personalty, 193-209, 239, 266-280. 636 INDEX. [The figures refer to pages.] PARTNER'SHIP— Continued, nature of partner's interest in, 210-216, 528, 511. transfer of, 217-265. by act of firm, 217-229. by act of single partner, 230-246. successive transfers of each partner's interest, 247. effect of death of partner on, 266-280. title to, after death of partner, 267. dower in firm realty, 196, 200, 267. partner's right to have, applied to firm debts, 247, 251, 446, 528, 541. fraudulent conversion of firm into separate property, 217-229. application of, to pay partner's separate debts, 221, 223, 226, 243, 245. creditors, rights of, in, 217-229. nature of, 221, 226, 247, 251, 446, 528, 541. exemption, not subjecl to, 567. liability of, nature and duration, 281-355. in contract. 281-306, 309-324. in tort, 306-309. commencement and duration of, 225-355. assumption of obligations of, 325-341. by incoming partner, 325-326. by continuing partner or new firm, 328-334. partnership liability and joint liability, 288-291. quasi severable character in equity, 292-306. death, effect of, on partnership liability, 281, 286, 292-306. mining, characteristics of, 118 n. subpartnerships, 117. competition of partner with, 425. action by partner against, 454, 467. termination of, 588-609. by act of parties, 588-592. operation of law, 592-604. judicial decree, 604-609. notice of, sufficiency, necessity, 341-355. effect of, on firm obligations, 341-355. see Bankruptcy; E5quity; Execution; Estoppel; Fraudulent Con- veyances; Good Will; Liability; Lien; Limited Partnership; Partners. PARTNERSHIP BY ESTOPPEL, 95-104. see Estoppel. PARTNERSHIP INTER SE— TRUE PARTNERSHIP. 1-6. PARTNERSHIP AS TO THIRD PERSONS. 17-57. PARTNERSHIP CREDITORS, see Creditors; Execution; Liability; Lien; Partners; Partnership. POWERS OF PARTNERS, see Partners. PROFITS, sharing of, as test of partnership, 17-57. former doctrine, 17-30. development of modern doctrine, 31-57. various exceptions, 22, 27. sharing of, alone, evidence of partnership, 56. Implied liability for losses, 56, 68, 78, 138. as compensation for services, 5, 7, 10, 22, 27. for loan, 4. sharing, nothing being said about losses, 56, 68, 71 n. with stipulation against losses, 56, 68, 71 n., 78. PROPERTY OF PARTNERSHIP, see Partnership, INDEX. 637 [The figures refer to pages.] REAL ESTATE, partnership to deal in, 133-13G. whether firm property, 171. title to firm, how taken and held, 190. conversion of, into personalty, 193-209, 239. dower in, 196, 200, 267. partition of, 203. efCect of death of partner on firm, 193, 196, 202 n., 203, 266-280. firm creditors, rights of, after death of partner, 269. RECEIVER, of partnership, right of partner to, 433, 481, 483. RELATIONS DISTINGUISHABLE FROM PARTNERSHIP, 83-94. REMEDIES, of partners inter se, 451^98. see Actions ; Creditors ; Execution ; Judgment ; Partners. RETIRING PARTNER, liability of, on firm obligations, 828-334, 404. notice by, on dissolution, 328-334. see Liability; Partners. SEALED INSTRUMENTS, power of partner to execute, 382-391. SECRET PARTNER DEFINED, 349. SERVICES, share of profits as compensation for, 5, 7, '10, 22, 27. partner's right to compensation for, 435, 486. surviving partner's right to compensation for, 435. SHARING PROFITS, see Profits. STATUTE OF ETIAUDS, requirements of, in forming partnership, 133-138, 214. SUBPARTNERSHIP, 117. SURVIVORSHIP AMONG PARTNERS, 266, 267 n. SURVIVING PARTNER, title of, in firm property, 267-280. rights and duties of, 271-280. remedies of deceased partner's representatives against, 275. whether a trustee, 275, 280 n. compensation for winding up partnership, 435. powers of, 236, 410. actions by or against, 271-280. TENANTS IN COMMON, distinguishable from partners, 83, 84. not necessarily partners, 58, 61, 63. partnership more than common ownership, 58. TERMINATION OF PARTNERSHIP, see Dissolution ; Partnership. TITLE TO FIRM PROPERTY, how taken and held, 189-192. conversion of firm realty into personalty, 193-209. transfer of, 217-265. death, efCect of, on, 266-280. surviving partner, title of, 267-280. see Partners ; Partnership ; Surviving Partner. 638 INDEX. [The figures refer to pages.] TORT, partnership liability in, 306-309. power of partner to subject firm to liability in, 396-402. TRADING PARTNERSHIP, 362, 372, 379. TRUSTEE, whether surviving partner a, 275, 280 n. WAGES, see Compensation. WAR, cause for dissolution, 600. WEST PUBLISHING CO., PRINTERS, ST. PAUL, MINN.