* *

considerable length. He says (p. 501): "But there is the important distinction between the cases where both mortgagee and mortgagor separately insure) that where the mortgagee insures solely on his own account, it is an insurance of the debt; and if his debt is afterwards paid, the policy ceases from that time to have any operation. If the premises are destroyed by fire before any payment or extinguishment of the mortgage the underwriters are bound to pay the amount of the debt to the mortgagor, if it does not exceed the insurance. But then upon such payment the underwriters are entitled to an assignment of the debt from the mortgagee, and may recover the same amount from the mortgagor, either at law or in equity, according to the circumstances, for the payment of the insurance by the underwriters docs not in such a case, discharge the mortgagor from the debt, but only changes the creditor."

*

Mr. Justice Lawrence, delivering the opinion of the court in Honore v. Ins. Co., 51 Ill. 409, said (page 413): "The contract of insurance, it has been often remarked, is one of indemnity merely. Any person having an interest in property may through an insurance, indemni y himself against loss by fire. * In this case the mortgagees insured at their own cost, without privity with the mortgagor and without his knowledge, and when the company paid the debt due them from the mortgagor, it indemnified them against loss and was entitled to be subrogated to these claims." This court in discussing King v. Ins. Co., 7 Cush. 1, said: "Certainly it is much more consonant to every principle of equity to say that the debt may be recovered for the benefit of the insurance company, than that the mortgagee should be twice paid. The doctrine of that case would sanction wagering policies and furnish a dangerous temptation to incendiarism." (See a dicta to the same effect by Walker, J., in Norwich Ins. Co. v. Boom, 52 Ill. 442, 446).

It may safely be said that the Massachusetts courts are alone in their position on this right of subrogation. And for my part I am thoroughly convinced that the justice of the case is with the overwhelming weight of authority, and in favor of the right of subrogation. JAMES F. NOBLE.

March 15, 1895.

PARTNERSHIP-PROOF BY SEPARATE CREDITOR AGAINST JOINT ESTATE.

It is hard to say which of the innumerable difficult questions in law is the most difficult. Indeed, it may seem to betray weakness of intellect to speak of any questions of law as being difficult; for is not law a science that can be mastered by any boy who can read and write if he will but spend two years in diligent (?) study? and have we not very high authority in favor of the proposition that two years of study are sufficient to entitle the aforesaid boy to give legal advice without danger of prosecution for obtaining money under false pretences? Yet to those who still find some difficulties in the law, it is doubtful if there is any subject more puzzling than that of partnership. If Lord Coke's prayer, "God forbid that any man should know all the law," were ever necessary in order to prevent the development of legal omniscience, it certainly was answered when Providence set lawyers and judges to combining the common law theory of a partnership with the entity theory. In re the Tower of Babel is the only precedent for the confusion that has followed.

Among the difficult questions of partnership law, the right of a separate creditor to prove against the joint estate is by no means the easiest, as a late case in South Carolina shows. In Calhoun v. Bank of Greenwood,* the facts were as follows: A carried on business in Charleston under the name of X & Co., and in Greenwood under the name of A & Co. Various transactions were had between X & Co. and A & Co., whereby A & Co. became indebted (if one can use such a term) to X & Co. in the sum of some $8,000. Included in this amount was the sum of $4,500 borrowed from one H, on a note signed by A as A & Co., and indorsed by A, as X. & Co. The note was secured by the assignment of a mortgage given to X & Co. by one J. After these transactions had taken place, A and B entered into partnership under the name of A & Co., to carry on the same business that had previously been carried on by A under that name. By the partnership agreement, B was to have one-third interest in the firm, for which he was to contribute $1,000 in cash, and to assume one-third of the liabilities previously contracted by A under the name of A & Co. Some months later A, as X & Co., made an assignment for the benefit of creditors, and a few days later the firm of A & Co. made a similar assignment. *20 S. E. 153.

A's assignee presented a claim for the aforesaid amount of $8,000 against the assignee of A & Co. In this $8,000 was included the aforesaid debt of $4,500 to H, which had been paid after A's. assignment, from the proceeds of the mortgage assigned to Has security. The circuit judge disallowed the whole claim, and on appeal his decision was sustained by the supreme court. The court lays down the general proposition that the separate creditors of a partner cannot prove against the joint estate in competition with the joint creditors, which, of course, is well established.

The application of this principle to the $4,500 debt was the only point which caused the court "serious concern.” As regards the rest of the claims, the general principle was unquestionably properly applied by the court, but in regard to the $4,500 debt there is certainly room for a difference of opinion. For while the separate creditor has, in general, no primary right to compete with the joint creditors in the distribution of partnership assets, he may obtain a derivative right by virtue of the doctrines of subrogation. Thus in Re Foot,* where one partner pledged his property to secure a firm debt, and after an adjudication of bankruptcy the debt was realized by a sale of the collaterals, it was held that the separate creditors of such partner were entitled to prove the amount of this debt against the joint estate pari passu with the joint creditors. The court in that case thus states the principle on which the decision rests: "Where there are two classes of creditors having a common debtor, who has several funds, and one class of creditors can resort to all the funds, while the other can resort to only part of them, the former shall take payment out of the fund to which they can resort exclusively, so that both classes may be protected; and if the former resort to the fund common to both classes, to the loss of the latter, the latter are entitled to be substituted to the extent of the deprivation to which they have been subjected, to the extent of the deprivation to which they have been subjected in the place of the former. This principle has been frequently applied where specific liens exist in favor of different creditors upon property of the same debtor; and the rule is the same where the parties are creditors of different debtors, where as between the debtors equity demands that one of them should discharge the debt in exoneration of the items." Applying this principle to the present case, the following *12 N. B. R 337.

results seem logically to follow: A, as A & Co., having contracted a debt to H, when A and B formed their partnership, this debt was assumed by the firm and became a partnership debt. The payment of this debt, therefore, out of the proceeds of A's separate property, to wit, the mortgage assigned by A to H, should have entitled A's creditors, under the rule laid down in Re Foot, to prove for this $4,500 claim against the partnership property. The court, however, proceeds on the theory that since the mortgage had been assigned to H two years before A's general assignment, A's separate estate was not injured by the payment of H's claim out of the proceeds of such mortgage. No cases are cited by the court in support of its position.

In cases

The decision in Calhoun v. Bank of Greenwood, is thus directly opposed to that in Re Foot which represents the prevailing rule (see Bates on Partnership, § 842); though it is in accordance with Harmon v. Clark,* in which case the firm property had been pledged to secure the debt of a partner. In principle, the doctrine of Re Foot seems sound. It is true, as Lord Eldon says, in Ex parte Kendall, that if I have a demand against A and B, "the creditors of B have no right to compel me to seek payment from A, if not founded in some equity giving to B the right, for his own sake, to compel me to seek payment from A." like Re Foot and Calhoun v. Bank of Greenwood, however, the equity of the partner to have the firm property applied to the payment of the firm debt in exoneration of his own estate seems clear; and it therefore follows that his separate creditors are entitled to be subrogated to this equity, and to prove against the joint estate to the extent to which the joint creditors have diminished the separate estate. The South Carolina court does not seem to deny the justice of this proposition, but insists that in the case before it there was no diminution of the separate estate of A. This reasoning seems wholly untenable, for as the court says in Re Foot: "The rights of the parties are not changed because the holders of the notes satisfied them by a sale of the securities, instead of resorting to the joint estate in bankruptcy. By the course taken the separate estate has been dimished to the extent that satisfaction might have been obtained from the joint estate, and to that extent the separate creditors have been deprived of a fund to which they were entitled to equitable priority, as against a class of creditors who had resort to another fund, which was, as between the debtors, the primary fund for payment.'

* 13 Gray 114. +17 Vesey 520.

وو

EDWARD AVERY HARRIMAN.

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COMMENT.

THE

HE last few months seem to have been especially fruitful in the establishment of new law journals. In December appeared the first number of "The Barrister," of Toronto, Canada, published by the Law Publishing Company of that city. It is rather more general in its scope than the average law journal, devoting only a comparatively small space to the discussion of late cases and giving more space to general legal news items. There is also a department set aside for Law School news.

In January we received volume I, No. 1, of the "New York Law Review," published by the Cornell Law Publishing Company, of