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administrator. Where the administrator dies and the firm becomes bankrupt, the administratrix de bonis non may prove a claim for such funds against the estate of the partnership and of the deceased administrator. In re Jordan, 2 Fed. R., 319.

§ 386. In equity, and under the fourteenth section of the bankrupt law, partnership creditors are entitled to payment out of partnership assets to the exclusion of separate creditors. Collins v. Hood, 4 McL., 186.

§ 387. Where a partner withdraws from a firm, without any formal dissolution, the remaining partner takes the assets clothed with a trust in favor of the firm creditors, and upon his subsequent bankruptcy his individual creditors have no claim on those assets as against the firm creditors. Jones v. Newsom, 7 Biss., 321.

§ 388. The natural presumption, where a partner pays a sum of money to his private creditor, who is also a creditor of the firm, is that he means to pay it on his private accounts, unless circumstances vary this presumption. Gass v. Stinson, 3 Sumn., 98.

§ 389. On dissolution of a partnership in case of insolvency, the rule in equity is that the partnership creditors have a preferred claim against the partnership assets over the separate creditors of the partners, and the separate creditors of the individual partners have a like preference over the partnership creditors against the separate assets. This rule is incorporated in the provisions of the bankrupt law. In re Warren, Dav., 320 (§§ 119–24).

§ 390. Private creditors. The proceeds of sale of the individual property of a partner are individual assets, and must be first applied to the payment of the individual debts of such partner. In re Estes, 6 Saw., 459.

§ 391. United States as creditor.- Where it was alleged that A. and B. were partners, and after A.'s death his executors appropriated partnership property to the payment of taxes on his estate and in expenses of administration, he being at the time of his death insolvent and indebted to the United States in judgments and otherwise, which judgments were a lien on the real estate of A., the lien of the United States and their priority of payment were not thereby affected, but they could enforce the judgments notwithstanding the acts of the administrators. United States v. Duncan, 4 McL., 607.

§ 392. Where partnership property is not sufficient to pay the debts of the firm, the priority of the United States does not reach the undivided interest of one of the partners in the partrership effects if he is indebted to the United States. But when it has become his separate, individual property, the rule would be different. The true test is whether the property belonged to the partnership or the individual. Ibid.

§ 393. Where the United States has a claim against a partnership composed partly of foreign and partly of resident members, and the resident members become bankrupt, it is entitled to a priority of payment out of the separate estate of such resident partners. United States v. Lewis,* 13 N. B. R., 33.

394. Where a partnership firm, being indebted to the United States for duties, makes an assignment of all their effects for the payment of their debts, for which the social fund is inadequate, this is an act of insolvency quoad the social fund, under the act of congress, which gives the United States the preference to other creditors "in all cases of insolvency." United States v. Shelton, 1 Marsh., 517.

§ 395. The priority of the United States does not extend so as to take the property of a partner from partnership effects, to pay a separate debt due by such partner to the United States, when the partnership effects are not sufficient to satisfy the creditors of the partnership. United States v. Hack, 8 Pet., 271.

§ 396. how far entitled to partnership assets.― Judgment against an individual partner is a lien against the real estate of the partnership, subject to the payment of the firm debts, and subject to the equities of his partners. Johnson v. Rogers,* 15 N. B. R., 1.

§ 397. Where the interest of a partner in the joint assets of a firm is levied on, and sold under an execution, the purchaser acquires only an interest in the assets which remain after the payment of the partnership debts. The fact that he purchased the interest of both partners sold on separate executions can have no effect to enlarge the interest of either acquired on the separate sale of that interest. His rights are in subordination to the claims of the joint creditors. Osborn v. McBride, 16 N. B. R., 22; 3 Saw., 590.

§ 398. The rule that prefers partnership property to the payment of partnership debts is for the benefit of partners, and they may waive it. Held, that they did waive it by giving their notes, and a mortgage upon the partnership property to secure them, notwithstanding the debts for which the notes were given were the individual debts of the partners; and that such mortgage was good in bankruptcy. In re Kahley, 3 Ch. Leg. N., 85; 2 Biss., 383.

$399. If goods are delivered to a consignee to sell, and are taken to pay his debt, the seizure cannot be justified on the ground that he was a partner, for partnership assets cannot be taken for separate debts. Merrill v. Rinker, 1 Bald., 528.

§ 400. A levy of execution against a partner upon the joint property, real or personal, of

the partnership is a levy upon the interest only of the judgment debtor, if any, after payment of all the partnership debts and other charges thereon. The purchaser at such execution sale takes merely the unascertained interest in the property which the judgment debtor would have upon final adjustment of the partnership accounts. The sale does not transfer any part of the joint property to the purchaser, so as to enable him to take it from the other partners, for instance, in case of real estate, to maintain ejectment for it. Clagett v. Kilbourne,* 1 Black, 346.

§ 401. It is a rule too well settled to be now called in question, that the interest of each partner in the partnership property is his share in the surplus, after the partnership debts are paid; and that surplus, only, is liable for the separate debts of such partner. United States v. Hack, 8 Pet., 271.

§ 402. Where one partner becomes bankrupt, his assignee can take that portion of the partnership assets, only, which would belong to the bankrupt after the payment of all the partnership debts, and the solvent partner has a lien upon the partnership assets for all the partnership debts, and also for his own share thereof, before the separate creditors of the bankrupt can come in and take anything. Parker v. Muggridge, 2 Story, 334.

§ 403. Partnership creditors.- Where a firm carries on business in two different places under different partnership names, if all the partners are the same they are the same firm, and the assets of both nominal firms are equally applicable to the payment of all the creditors. In re Williams,* 3 Woods, 493.

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§ 404. A person who sell goods to a partner, knowing that they are for his own separate use, has no right to charge them to the firm. Gullat v. Tucker,* 2 Cr. C. C., 33. § 405. - claims of against partner's separate estate.- Query: Whether under the bankrupt act the creditors of a partnership can be allowed to prove claims against the separate estate of one of the partners to receive dividends, in concurrence with the separate creditors of the partner, when there is no joint estate and no living solvent partner? If there be any joint fund, however small, such proof cannot be allowed, although such fund may have been created by the separate creditors purchasing some of the partnership assets, actually worthless, for the purpose of creating it; for if there be a joint fund, the court cannot, under the statute, look behind the fact, to inquire how it has been produced. In re Marwick, Dav., 229. § 406. rights of, as to assignees.- Where a partnership firm assign their interest in the partnership property subject to a stipulation for the payment of the partnership debts, a creditor of the partnership cannot maintain a bill against the assignees to obtain a direct appropriation of that property to the payment of the firm debts, unless it be shown that the assignment was intended to defraud the creditors. Case v. Beauregard,* 1 Woods, 125. § 407.

exemptions.- Partners cannot have an exemption of household and kitchen *furniture out of property belonging to a bankrupt partnership. In re Corbett, 5 Saw., 206. § 408. Partnership effects in the hands of the assignee in bankruptcy are charged with a trust or equitable lien in favor of joint creditors, and the partners have only separate interests in the surplus, and cannot claim any particular article as exempt. There is a decided distinction between a partner and a tenant in common, in claiming such exemption. Ibid. § 409. lien of. Where partners, acting in good faith, whether before or after the dissolution of the firm, convert the joint into separate property in whole or in part, the creditors are bound by that action, because their lien depends upon that of the partner himself, and if he has in good faith relinquished it they cannot revive it. In re Clap, 2 Low., 168. § 410. Partnership debts constitute a lien or equitable charge upon whatever partnership property existed at the time of the dissolution of the firm. Fiske v. Gould,* 12 Fed. R., 372. § 411. Where a partnership has not gone into liquidation, a simple contract creditor of the firm cannot maintain a suit to subject partnership assets, no trust having been declared. Case v. Beauregard,* 1 Woods, 125. See § 356-60.

§ 412. One partner may, with the consent of the other partners, assign his interest in the firm to pay an individual debt. The partners in such case have an equity to have the property subjected to the payment of the partnership debts, and to this equity the partnership creditors may be subrogated, unless the partners themselves waive it. The creditors as such have no lien on the property. They can only operate through the lien of the partners, and if this be given up they are without remedy, unless they can show fraud. Ibid.

§ 413. Upon the dissolution of a partnership each partner has a lien upon the partnership effects, as well for his indemnity against the joint debts as for his proportion of the surplus. But the creditors of the partnership, as such, have no lien upon the partnership effects for their debts. Their equity is the equity of the partners, and is to be worked out through the rights of the latter. Hoxie v. Carr,* 1 Sumn., 173.

§ 414. what fraud on.- - If a surviving partner mingles his own goods with those of the partnership, so that they cannot be distinguished, an appropriation to the payment of his individual debts of the mingled stock to the extent of a value no greater than would be al

lowed in equity to individual creditors, in marshaling the assets for distribution between them and the creditors of the partnership, is not in any view a fraud upon the latter. McGinty v. Flannagan,* 16 Otto, 661.

§ 415. A bona fide sale for valuable consideration, by one partner to another, of all the partnership effects, vests the sole title in the latter as his separate estate; but if there be want of good faith sufficient to raise a presumption of fraud, equity will declare the assignment void. The insolvency of the firm and of the members, and even a knowledge of such insolvency by the partners, does not make the transaction void; but where only five days intervene between the transfer and the filing of a petition in bankruptcy by the partner to whom the property was transferred, the conclusion is almost irresistible that the bankrupt had in contemplation the filing of the petition at the very time he accepted the transfer, and the transfer is void as to joint creditors. In re Byrne,* 7 Am. L. Reg. (N. S.), 499.

§ 416. Where two partners divided their stock in trade and afterwards carried on separate establishments, but each continued to use the firm name, held, that if a dissolution was not effected by such arrangement, a mortgage given by one of them on that part of the assets falling to him in the division, to secure an individual debt, was void as to the firm creditors: and, whether a dissolution was effected or not, such mortgage was fraudulent and void as to such creditors, if intended by the parties to prevent, hinder or delay them in the collection of their claims. Moline Wagon Co. v. Rummell,* 2 McC., 307.

$ 417. Where a copartnership is insolvent, or is possessed of assets not more than adequate for the payment of debts, one member of the firm cannot, upon retiring, rightfully withdraw beyond the reach of creditors, and to their injury, a portion of the assets or property, and make a personal application of those assets by putting them in the shape of a homestead. Such property is as much within the reach of a court of equity as before. In re Sauthoff, 5 Cent. L. J., 364; 16 N. B. R., 181. See $$ 374-80.

$418. A transfer by a partner of his firm property to the other partners is not such a transfer as constitutes a fraud upon the creditors of the firm, or hinders or delays creditors, or constitutes a preference contrary to the provisions of the bankrupt act, particularly when the firm, or members composing it, are solvent. In re Munn, 7 N. B. R., 468; 3 Biss., 442.

§ 419. Equity will not sustain an agreement between partners, if the firm be at the time insolvent, by which the whole property and effects of the firm are transferred to one member; the effect being to defeat the equitable preference of the firm creditors, and to give the separate creditors of the partner accepting such transfer a preference to the creditors of the company. Collins v. Hood, 4 McL., 186.

§ 420. When partners are in fact insolvent they should be considered in equity as holding the partnership effects in trust for the benefit of the firm creditors, and that they cannot, by a transfer of the interest of one to the other, defeat this trust. In re Cook, 4 Ch. Leg. N., 1; 3 Biss., 122.

$421. A sale by one partner to his copartner, when the firm is insolvent and upon the eve of bankruptcy, which, if upheld, would operate to apply the property of the retiring partner to the payment of the individual debts of the partner purchasing, is presumptively fraudulent as to the firm creditors, and the courts will set aside such sale and distribute the property as firm property to the payment of the firm debts. If the legal effect of such transfer would be to change the order of payment, and prefer the private creditors over the firm creditors, it is void as ereating a preference contrary to the provisions of the bankrupt act, section 35. Ibid.

VII. ACTIONS.

1. Between Partners.

§ 422. In general.- A state court is the proper tribunal for settling the affairs of a partnership between partners. The rights of partners, as respects each other, will not be adjudicated as an out-branch of a proceeding in bankruptcy. In re Lathrop, 5 Ben., 199.

§ 423. Where a party claims to be a partner in a lot of cattle with one who, as he believes, denies his interest, he should come to an understanding with the latter at once, and bring his suit for breach of partnership agreement; but after lying by for four years, all the time under the belief that he is not recognized as a partner, and until his alleged partner is dead, he cannot set up a claim to be regarded as a partner. Rice v. Martin, 7 Saw., 337.

§ 424. A promissory note given by one member of a commercial company to another member, for the use of the company, will sustain an action at law by the promisee in his own name against the maker, notwithstanding both parties were partners in that company, and the money when recovered would belong to the company. Van Ness v. Forrest, 8 Cr., 30. 305

VOL. XXIV-20

§ 425. If one of three joint defendants pay the whole debt upon a joint execution for a debt contracted by them jointly, in a transaction in which they were partners, he cannot, at law, recover from the other partners their respective proportions of the whole debt which he has thus paid. Riggs v. Stewart, 2 Cr. C. C., 171.

§ 426. S. and H. were partners. Upon a settlement of accounts in a chancery suit, it was ascertained what the assets, debts and estimated surplus were; it was ascertained further that S. owed H. on account of transactions of the firm a certain amount exceeding said surplus, but there was no final decree ascertaining the clear assets of the firm, and requiring S. to pay any finally ascertained sum to H. In a suit by G. against said firm as guarantors of a debt due by R., a decree was rendered directing the payment by said firm of an ascertained deficiency remaining after recourse against R., and the same was paid out of the social assets. S. subsequently went into bankruptcy, and H. claimed a lien upon the individual estate of S. by right of subrogation to G. for half of the debt paid out of said firm assets. It was held that if, in the suit for settlement, a final balance had been found due from S. to H., and a decree rendered requiring S. to pay such balance to H.; and afterwards, upon the decree of this debt to G., H. had paid it out of his individual means, then H. might have had a right of subrogation for half against S.'s individual estate, but that such debt having been paid out of social assets, H. had no right to be subrogated to the rights of G. In re Smith,* 16 N. B. R., 113.

§ 427. For services.— A partner cannot maintain an action at law against his copartners to recover for services rendered the partnership. Taylor v. Smith,* 3 Cr. C. C., 241.

§ 428. Evidence.-In an action at law by one partner against another, the partnership book kept by the defendant is not evidence against the plaintiff, although it has been in his possession. Sutton v. Mandeville, 1 Cr. C. C., 2.

§ 429. Action at law before final settlement.- Until there is a final settlement and adjustment of all accounts between partners, and a balance struck, one partner is not permitted to sue the others either at law or in equity for money paid by him on account of the partnership. Held, accordingly, that a suit in equity could not be maintained by a partner against his copartners to recover a sum which, it appeared from a statement signed by defendants, the plaintiff was entitled to be credited with, it clearly appearing from the statement itself that it was not intended as a final settlement, and the bill not seeking an accounting and final settlement. Halderman v. Halderman,* Hemp., 559.

§ 430. An action at law will lie for a balance found, on final accounting, to be due by the firm to one of the partners. Whether a bill in equity will lie in such case, quære. Ibid. § 431. If the connection in a joint adventure terminate in a sale of the property, and one appropriates the proceeds to his own use, and charges himself with the proportion due to his associate in the adventure, an action on the case will lie by the part owner for his portion. Aliter, if the connection does not terminate with the sale, in which case account rendered must be brought. Hourquebie v. Girard, 2 Wash., 212.

§ 432. One partner cannot maintain an action at law against his copartner unless there has been an express promise to pay a balance ascertained upon settlement of accounts to be due. Pote v. Philips,* 5 Cr. C. C., 154.

§ 433. Items of partnership account cannot be recovered in a suit at law by one partner against the other if the joint concerns have not been settled. The accounts current rendered by each to the other are admissible in evidence to show by the admissions of the parties that the items are not items of partnership account. Barry v. Barry, 3 Cr. C. C., 120.

§ 434. An action at law will not lie between partners on a partnership transaction until a balance is struck, and the defendant promises to pay it. Goldsborough v. McWilliams,* 2 Cr. C. C., 401.

§ 435. For an accounting.- An accounting between partners cannot be had on affidavits on an interlocutory motion; it must be had in the orderly progress of a suit. Wilkinson v. Tilden,* 9 Fed. R., 683.

§ 436. Upon a bill for a partnership accounting and to have lands of the partnership sold, the court can enforce a sale of lands outside of the district by obliging the parties to convey. Lyman v. Lyman,* 2 Paine, 11.

§ 437. A mercantile firm being desirous of obtaining title to certain valuable property upon which they held a mortgage for much less than its value, a scheme was devised by which, with the connivance of the debtor, they should obtain judgment for more than the actual amount of their claim, in fraud of the rights of other creditors of the mortgagor, and buy the property in on foreclosure. The partner to whom was intrusted the management of the affair, instead of obtaining title to the property for the firm, secured it for himself, whereupon one of his copartners sued to compel him to account. Held, that the purchase of real estate was outside the scope of the partnership business, and, both for that reason and be

cause the transaction was a corrupt one, in carrying out which no aid could be derived from a court of equity, the bill could not be maintained. Wheeler v. Sage,* 1 Wall., 518.

§ 438. The old action of account, which has almost totally fallen into disuse, cannot be maintained against a dormant partner who has had nothing to do with conducting the business. Spear v. Newell,* 2 Paine, 267.

§ 439. The fact that a balance of stock on hand has been sold to a new company, of which defendant is a member, will not render him liable to an aotion. Ibid.

§ 440. Where plaintiff and defendant entered into an agreement to buy and sell real estate and divide the profits, plaintiff to furnish the capital, which was to be refunded with interest, and defendant to perform the labor, and defendant, after refusing to sell a certain piece of land which had been bought and the title put in his name, until it deteriorated in value, conveyed it to plaintiff, held, that plaintiff could maintain a bill in equity to have the real estate sold and the loss or profit, if there should be a profit, divided; the difference between the purchase price of the land, with interest and expenses, and the sale price, to constitute the profit or loss. Olcott v. Wing,* 4 McL., 15.

$441. If the books and papers of a firm have been destroyed or suppressed, false entries made in them, or no entries made by the partner who has charge of them to his debit, with a view to fraud, the injured partner may support a specific charge by his own affidavit, but not by one which specifies no amount under any particular item. Askew v. Odenheimer,* 1 Bald., 330.

§ 442. On bill by the fraudulent partner for an account, the master may charge him on any evidence which is competent or admissible as proof of the item; he cannot hold the injured partner to such a degree of proof as would justify a charge, under ordinary circumstances, against a customer or partner; there must, however, be some proof. Ibid.

§ 443. Where the plaintiff sued for a certain amount as his share of the profits resulting from a joint or copartnership transaction, and the only issue raised by the pleadings was whether or not plaintiff and defendant were jointly interested in the contract and plaintiff entitled to one-half the profits, and no accounting was asked for, none is necessary, and there is no occasion for a reference. McCormick v. Largey,* 1 Mont. T'y, 158.

$444. To enjoin.— In a suit to enjoin a retired partner from enforcing a claim against the new firm, accruing subsequent to his retirement, on the ground that, after collecting the claims and paying the debts of the old firm, a statement of the accounts between the old and new firm showed a balance, exceeding the amount of defendant's claim, in favor of the new firm, held, that a correct computation showed the balance to be on the other side, and that an injunction should be denied. Nixdorff v. Smith,* 16 Pet., 132.

§ 445. Upon bill for a partnership accounting, a sale of stock threatened by defendant may be restrained temporarily on the ground that the injury to plaintiff would be irreparable. Wilkinson v. Tilden,* 9 Fed. R., 683.

§ 446. Equity will interfere by injunction to restrain one partner from violating the rights of his copartner, even when a dissolution of the partnership is not necessarily contemplated. Marble Co. v. Ripley, 10 Wall., 339.

§ 447. For dissolution.- Bad character, drunkenness and dishonesty on the part of a partner, if proved, make a strong case for relief, on such terms as equity may impose for the protection of both parties, in a suit by the other partner to dissolve the partnership, but they do not authorize him of his own motion to treat the partnership as ended, and to take to himself all the benefits of the joint labors and joint property. Ambler v. Whipple, 20 Wall., 546. § 448. Necessary parties in suit to settle.- Creditors are not necessary or proper parties to a suit between partners to wind up the partnership. Hoxie v. Carr,* 1 Sumn., 173.

§ 449. If, in a bill to wind up a partnership, certain of the original partners are not joined, and to join them as defendants would oust the jurisdiction of the court, and the successors to the rights (but not the obligations) of certain of the original partners are joined, there being no charge of fraudulent confederacy in the bill, the bill should be dismissed, both on account of the non-joinder and misjoinder. Bank v. Carrollton Railroad,* 11 Wall., 624. § 450. In a suit to settle the affairs of a copartnership, all the partners or their representatives are necessary parties. Gray v. Larrimore, 2 Abb., 542.

2. By and against Partners.

§ 451. In name of one partner, when maintainable. When each of two partners is in the habit of taking to different parts of the country, for sale, articles belonging to the firm, which when taken are charged to the person taking them, and he is considered accountable to the firm for them, held, that although there is no absolute sale of the property to the person taking it,

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