that fund be contributed in actual cash payments. The expression "fund so contributed," which fund is made the limit of the liability of special partners, imports contributed "in cash." It was, of course, competent for the legislature to have authorized such partnership, and to have permitted the special partner to contribute property or goods at a just valuation, but they have not done so. So it was competent to have permitted a contribution of part cash and part goods or other property, but for reasons concerning which we are hardly at liberty to speculate, this was not done.

$504. Parties who claim under a statute which derogates from the general rule of law must show a strict compliance.

We are bound by the statute, and the parties cannot claim under the statute, which derogates from the general rule of law, without showing a strict compliance with the statute. They cannot be permitted to say that it was just as well for the firm and for its creditors to have a contribution of goods at their fair value as to have cash. The legislature saw fit to require that he who contributed capital to be employed in the joint business, to be the basis or consideration of his participation in the profits, should, in order to the limitation of his liability for debts, pay all of that contribution in money, before the partnership should be deemed formed; that that money should be under the exclusive control of the general partners; that they should be at liberty to invest or employ it as in their discretion they saw fit, for the benefit of the firm and its creditors; and that no one should be permitted to share profits on the basis of a contribution of goods or property, and yet be entitled to limit his liability for debts. It is unnecessary to vindicate the statute, and yet it is pertinent to inquire—can a person be permitted, under such a statute, to put in $100 cash, and a stock of goods estimated at $50,000, be permitted to share profits on the basis of a contribution of $50,100, to capital, and yet be not liable for the debts?

§ 505. Necessity that the statement of the amount contributed to the capital stock shall be specific.

I am decidedly of opinion that the parties failed to establish a limited partnership, and that they were always general partners. I may add, further, that an express provision of the statute, that the certificate filed shall state "the amount of capital which each special partner shall have contributed to the common stock," was not satisfied by a certificate that Letchworth had contributed "$1,000 in cash and about $8,000 of effects and property, the exact amount of which is yet to be ascertained."

For these reasons the decision of the district court was correct. Whether the other ground of the decision was so or not it is unnecessary to inquire. The adjudication is affirmed, with costs.

TAYLOR v. RASCH.

(Circuit Court for Michigan: 1 Flippin, 385–388. 1874.)

Opinion by LONGYEAR, J.

STATEMENT OF FACTS.- The firm of Tillman, Sillsbee & Company was a limited partnership, and was composed of William Tillman and Charles E. Sillsbee as general partners, and John S. Newberry as special partner. Whatever the proofs show as to the general partners being parties to the arrangement for exchange of patronage between them and the defendants, or as to what the particular character of that transaction was, one thing is certain,

and that is, there is no proof or pretense that the special partner was in any way privy to the arrangement, or knew of it, or in any way assented to it. $506. The capital of a special partner in a limited partnership is protected against contracts out of the scope of the business made by the general partners.

It is contended, however, that by the statutes of Michigan the general partners had authority to bind the firm. The statute referred to is as follows: "Section 3. The general partners only shall be authorized to transact business, to sign for the partnership, and to bind the same." 1 Compiled Laws of 1871, p. 520, sec. 1569. The effect of the statute is simply to exclude the special partner from active participation in the business of the firm; and as to the general partners, it confers no authority upon them to transact business, sign for the partnership, and to bind the same in any manner, or to any extent whatever, beyond the purposes and scope of the partnership. Therefore, conceding that the arrangement in question was made with the general partners, as claimed in the answer, if it was not within the scope and purposes of the partnership, it was wholly unauthorized, and therefore void. This brings us to the second and only remaining issue made by the answer.

The scope and purposes of the partnership are specified in the articles as follows:

2d. "That the general nature of the business to be transacted by said partnership is the purchase, sale and manufacture of all kinds and descriptions of furniture, chairs, upholstering, furnishing and upholstered goods, lumber, and all kinds of articles, merchandise, tools and machinery, used in such manufactures."

Surely it does not require argument to show that a contract for the purchase of clothing for the individual general partners, or otherwise, does not come within "the general nature of the business to be transacted by said partnership," as specified in the articles.

$507. Usage of general partners in limited partnership to engage in transactions beyond the scope of the partnership articles cannot affect a special partner not aware of and not assenting to such usage.

But it was contended that such had been the usual course of business of the firm, and proofs were adduced tending to show that such was the fact; and it was argued that, therefore, the defendants had a right to assume that the transaction was within the scope of the partnership. The articles of copartnership were duly filed and published as required by the statute, and all persons dealing with the firm were bound to take notice of, and were chargeable with knowledge of their contents. No departure by the general partners, no matter how common or long continued, if not consented to or known and acquiesced in by the special partner, could have the effect to change or enlarge the scope of the business as specified in the articles. To hold the contrary would be to disregard plain provisions of law for the protection of special partners and the public, and would make a limited partnership one of extreme hazard to the special partner.

In the opinion of this court, overruling the demurrer to the bill, it was shown that a general partnership could not be made liable upon a contract by an individual partner out of the scope of the partnership business. The same principle of law that protects general partners from liability in such cases protects the capital of special partners in a limited partnership. Troubat on Limited Partnership, sec. 377.

It results that the complainant is entitled to a decree against the defendants

for the balance of the account of Tillman, Sillsbee & Co. against them over and above the $50 actually paid to the firm by one of its employees on account of defendants, together with interest on such balance from and after the date. of the last item in the account, viz., June 8, 1870, and for costs.

The balance of the account as alleged in the bill and admitted by the answer was.... $473 25 Interest from June 8, 1870, to date, October 19, 1874, four years, four months, eleven days......

Total...

Decreed accordingly.

144 47

$617 72

$508. What constitutes.- Partnerships are divided into general and limited; the former is where the parties are partners in all their commercial business; the latter, where it is limited to some one or more branches and does not include all the business of the partners. United States Bank v. Binney,* 5 Mason, 176.

§ 509. An agreement between owners of vessels to form a line for carrying passengers and freight between New York and San Francisco is but a contract for a limited partnership, and the remedy for the breach of it is in the common-law courts. Vandewater v. Mills, 19

How., 82.

$ 510. Notice - Articles of partnership.- All persons dealing with a limited partnership are bound to take notice of the articles of partnership when duly filed and published according to law, and are chargeable with knowledge of their contents. Taylor v. Rasch, 1 Cent. L. J., 555; 11 N. B. R.. 91. See §§ 506-7.

$511.

dissolution. In publishing notice of the dissolution of a limited partnership before the time named in the certificate of its formation, pursuant to the provisions of the statute of New York (1 R. S., 767, § 24), requiring such notice to be published "once in each week for four weeks," when any day of the week is taken for the first publication, the same day of the week must be taken for each of the succeeding publications. Successive publications at irregular intervals, held not to be good simply because, by dividing the time covered by the publications, beginning with the date of the first, into periods of seven days each, it appeared that one publication was made during each of those periods, although five publications were thus made and more than four weeks elapsed between the first and the last. In re King,* 5 Ben., 453.

§ 512. Under the laws of New York, special partners must contribute in cash a specific sum to the common stock of a partnership, and the certificate must state the amounts each special partner has contributed, and the affidavit must state that such sums have been paid in cash. A certificate that the special partner has contributed a certain amount in cash, and a certain amount in goods, is not within the statute, and in such a case he is a general partner and liable as such. In re Merrill, 13 N. B. R., 91. See § 502-5. § 513. A general partnership cannot be made liable upon a contract by an individual partner out of the scope of the partnership business. The same principle of law that protects general partners from liability in such cases protects the capital of special partners in a limited partnership. No departure by the general partners, no matter how common or long continued, if not consented to, or known and acquiesced in by the special partner, can change or enlarge the scope of the business as specified in the articles. Taylor v. Rasch, 1 Cent. L. J., 555; 11 N. B. R., 91. See §§ 503–7.

IX. MISCELLANEOUS.

§ 514. Dormant partners Secret partnership.- One may be a dormant partner although the style & Co." is used in the firm name. Metcalf v. Officer,* 1 McC., 325.

$515. A secret partnership is where the existence of certain persons as partners is not avowed or made known to the public by any of the partners; even if some of the partners intend to be such secretly and their names are disclosed against their will, it is no longer a secret partnership. United States Bank v. Binney,* 5 Mason, 176. See Winship v. United States Bank, 5 Pet., 559.

§ 516. The liability of a secret partner arises from his being one of the contracting parties, and being benefited by the profits of the contract, so that to charge a secret partner for debts contracted in the name of the firm, it is necessary to show that such debts were contracted

in the name and business of the firm, or that the secret partner had an interest in the contract or profits. In re Munn, 7 N. B. R., 468; 3 Biss., 442.

§ 517. The firm of Munn & Scott, together with several others, were engaged in carrying on the elevator business, at various elevators, as partners in receiving, storing and shipping grain, the profits being divided. The business was carried on under the name of Munn & Scott. The two parties, Munn and Scott, continued to do business outside of the elevator business in their firm name. Certain notes were given by Munn & Scott, and for non-payment of these within fourteen days a petition was filed in bankruptcy against the various parties engaged in the elevator business under such name. Held, that all the members of the elevator firm, except those whose names were used, were silent or dormant partners, and only liable as such; and, as it appeared that the proceeds of the notes did not go to the use of the firm of which they were members, and that they were not given for the benefit of the firm, or in the business of that firm, they had shown a sufficient reason for not voluntarily paying the notes described before their liability should be judicially determined; and that the suspension of payment for fourteen days was not an act of bankruptcy within the meaning of the bankrupt act. Ibid.

§ 518. A secret partner is not liable unless money, obtained by the discount of a note which he has not signed, comes to the use of the secret partnership. Bank of Alexandria v. Mandeville, 1 Cr. C. C., 575.

§ 519. An action of debt, under the Virginia law, may be maintained upon a promissory note against a secret partner who has not signed it. Ibid.

§ 520. General reputation, while not admissible to prove a partnership, is admissible to show that one of the partners, in a partnership otherwise proved, was a dormant, and not an ostensible, partner. Metcalf v. Officer,* 1 McC., 325.

§ 521. It was agreed between A. and B. that A. should furnish a certain amount of goods to stock a store, which B. was to conduct as the sole person interested in the business; that B. should be at liberty, if he chose, to furnish additional goods; that the net profits of the business should be divided equally between them; A. to be entitled to an accounting from B., and to have the right to sell any goods in the store, with certain exceptions, to his friends and customers. The business was carried on as designed, A. and B. in fact furnishing goods in about equal amounts, and B. was ostensibly the sole person interested in the business. Held, that A. was liable as a partner to third persons dealing with B. Bigelow v. Elliot,* 1 Cliff., 28. § 522. A. and B.. by virtue of a private agreement, became partners as to third parties. The contract specified no firm name, but allowed each partner to purchase goods on his own individual credit and designated B. to transact the business, while the connection of A. with the concern was kept secret. B. having given his note for certain goods bought by him, held, that, while no recovery could be had against A. on the note, B. not having used his own name as a firm name or intended to bind any one but himself, yet the note was not, under the circumstances, to be considered as payment, even under the Massachusetts rule making the giving of a negotiable promissory note prima facie evidence of payment under ordinary circumstances, and that a recovery could be had against A. on the general counts, upon surrendering the note. Palmer v. Elliott,* 1 Cliff., 63.

$523. Assignment.- Where partners assigned the partnership property in trust for certain purposes, and submitted their affairs to arbitration for the purpose of an accounting to be made in conformity with such assignment, the arbitrator cannot make an award inconsistent therewith. McCormick v. Gray, 13 How., 27.

§ 524. fraudulent stipulation in.- A provisional stipulation in a deed of assignment, coercing the creditors of a partnership "to delay their suits" against the firm or else forfeit their claims upon the fund assigned, is fraudulent. Marsh v. Bennett, 5 McL., 117. § 525. of partner's interest Rights of assignee.- Where one member of a firm had sold to a third person an interest in the concern upon certain payments to be made, it was held that such partner could not, by such agreement to sell, compel his partners to accept the vendee as a member of the firm. McNamara v. Gaylord, 1 Bond, 302.

§ 526. The assignee of a bankrupt surviving partner succeeds to the rights of the bankrupt as such surviving partner. Loveridge v. Larned,* 7 Fed. R., 294.

§ 527. The assignee of a partner's interest in the partnership obtains only an equity to share in the surplus, if any, of the firm property after settlement of the partnership accounts. This rule applies in all cases, whatever may be the nature of the partnership property, as, for instance, in case it is a lease of a railroad, and however broad may be the language of the assignment. To a bill to enforce such an assignment, therefore, all the partners should be made parties. Bank v. Carrollton Railroad,* 11 Wall., 624.

§ 528. An assignee of an interest in a partnership, under an assignment of part of the partners, not consented to by the others, is not a partner, and cannot dissolve the partnership or maintain a suit for an accounting; but after dissolution he may maintain such suit, although

one of the defendants had no notice or knowledge of his interest. Mathewson v. Clarke,* 6 How.. 122.

§ 529. The assignee of an assignee of a copartner's interest in a firm formed for the purchase and sale of lands may maintain a bill in equity against the other partners and the agent of the concern to discover the quantity purchased and sold, and for an account and distribution of the proceeds. Pendleton v. Wambersie,* 4 Cr., 73.

§ 530. Partnership settlement

Accounts - Indemnity. In a settlement made between two partners residing in different countries, through a third person as agent, one of them was credited with a certain agreed sum to cover a liability which he was under for the firm as surety on certain custom-house bonds. Afterwards, by the death of such partner and the e'ection of the government to take a joint judgment on the bonds, his estate was exonerated. Held, that the settlement would not be opened so as to allow the other partner to recover back one-half of the money. Bispham v. Price,* 15 How., 162.

§ 531. A paper containing mutual releases and assignments, each the consideration of the other, was prepared by one partner and signed by him; the other partner received a copy without objection, and promised to sign it, but did not. Until said partner had signed the paper he was not bound by it. Ambler v. Whipple, 20 Wall., 546.

$532. If the exception from the operation of a statute of limitations of merchants' accounts applies to the accounts of partners inter sese in any case, yet it does not include their stated accounts. Bispham v. Price,* 15 How., 162.

§ 533. To constitute a settled account between partners, all parties must consent to it, and this consent must be either express or implied; and in the absence of an account thus settled, an action of indebitatus assumpsit will not lie. Lamalere v. Caze,* 1 Wash., 436.

§ 534. In stating a partnership account, if one partner has had sole charge of the business, he should be charged with the total capital and the proceeds of sales, and credited with the cost of goods disposed of by him and which are included in the capital. Gunnell v. Bird,* 10 Wall., 304.

§ 535. If a partner who has committed frauds on the firm agrees to indemnify the injured party to his satisfaction, by an assignment of all the partnership effects, such assignment will be construed liberally in favor of the latter, and will be reformed in equity so as to meet the intention of the parties. Askew v. Odenheimer,* 1 Bald., 380.

§ 536. Expenses, special agreements as to.— Where a partnership agreement provided that one of the partners should be entitled to a certain share of the net profits of the business after deducting "the actual expenses that may appertain to the goods themselves," it was held that those terms included taxes, clerk hire and advertising. They are as much a part of the actual expenses appertaining to the goods as storage commission or insurance, Foster v. Goddard — Goddard v. Fcster, 1 Black, 506.

$537. Where the families of partners were supported out of the common fund, there being an understanding that no charge was to be made for family expenses, held, that this included expenses of children during their minority, but not advances made to them after coming of age. Salaries paid to children as clerks, after coming of age, held to be a proper charge against the partnership. Lyman v. Lyman,* 2 Paine, 11.

$538. A stipulation in partnership articles, that each partner shall pay his own individual expenses, held not to include expenses when traveling on the business of the firm. Withers t. Withers, 8 Pet., 355.

§ 539. Contracts against public policy. Where a party signed an administration bond as surety of one of the partners of a mercantile firm, who was administrator, at the request of the members of the firm, and upon their joint representation that they intended to make the administration a matter of partnership business, to take possession of the assets of the intestate, and share as partners in the gains and losses of the administration, so that in signing the bond he became surety for the partnership, and not merely of the partner who was administrator, the transaction was against the policy of the law, and illegal, inasmuch as administration is a trust, and to permit the appropriation of administration assets by a mercantile firm is a breach of trust. The contract cannot therefore be enforced, and a loss sustained by such surety upon the bond cannot be recovered from the firm. Forsyth v. Woods, 11 Wall., 484.

§ 540. Liability of firm on separate obligations of members.- Where money was borrowed by certain parties as copartners upon a note signed by such partners individually, but the money was borrowed for the benefit of the firm, and was so used, the liability created is a firm liability. In re Thomas, 6 Cent. L. J., 151; 8 Biss., 139.

$541. In single transaction-Parol proof.- A partnership may exist in a single transaction as well as in a series. In re Warren, Dav., 320 ($ 119-24).

8542. There may be a partnership in buying and selling lands, and, so far as third persons are concerned, it may be proved by parol. Ibid.