received a part back on the credit of such pretended sale, was defrauded.

66

Partners be tween them

476, Smith v.

We have seen, that such is the nature of a partnership, Liabilities of that each shares the joint stock in common with his partners, and thus, unless in cases of gross mismanage- selves. ment or fraud, one cannot interfere with the proceedings of the rest, so as to hold them responsible to him. And even in cases of mismanagement, a court of equity is the proper tribunal to resort to for redress. But there are exceptions to almost every rule, and though it be a general principle, that one partner shall have no remedy against another, cases may happen-as, for example, where money has been paid by mistake-in which a court of law will entertain a hostile suit of this kind. Thus, where money had been received to the separate use of one partner, and carried wrongfully to the partnership account, it was held, that the sum so applied 2 Term Reports, might be recovered back. Mr. Justice Grose: " Sup- Barrow. pose that the plaintiff had received this money, he "would have been entitled to set apart for his own use "the whole sum, except that part which belonged to "the partnership account. Then the circumstance of "the defendant's having received it cannot alter the Id. 479. right." The principle is, that in an independent concern the partners are like indifferent persons, and so, where, debts being incurred on a partnership account, and a balance struck, the plaintiff paid his adjusted proportion into the hands of other partners, who did not hand it over to the creditors, it was held, that for so much of the money as was thus misapplied before the bankruptcy of those partners, the plaintiff might prove Wright . Hununder the commission, and for the sum improperly ter. retained after the bankruptcy, it was held, he might recover to the full amount. So, where there was a covenant in articles of co-partnership to account yearly, and to adjust and make a final settlement at the end of

66

1 East, 20,

2 Term Rep. 479, Foster v. Allanson.

Cary, 58-158; see also Montagu, Watson, and Gow, on partnership.

Dissolution of
Partnership.

seven years, but, in point of fact, the partnership was dissolved before the expiration of that term; a settlement of accounts was made, including several items not belonging to the partnership, and the defendant, one of the two partners, promised to pay the balance; it was held, that such promise was binding; both parties had consolidated the demand, and the defendant must thereby be taken to have given his consent to consider this as a new debt on an account stated (k).

In these cases it is observable, that the partnership was not considered to be in force as touching the transactions in question: in the one case, money had been paid on a separate account; in the other, the mutual concern was dissolved.

It is not a part of our undertaking to explain the various suits and remedies, at law or in equity, which may be had by or against partners; it will be, therefore, sufficient to refer the reader to the text-books upon the subject (1).

A dissolution of partnership may take place by mutual consent between the parties, by the interference of a court of equity in cases of misconduct on the part of some member of the firm, the bankruptcy of one or more partners, and by death. It seems, that the execution of a judgment against one partner, where an account of all the concerns is taken, dissolves the firm. And the lunacy of a partner is, probably, a sufficient ground for putting an end to the mutual contract, but this must Id. 303, Cary, be done by a decree of a court of equity, and not by the act of the other partners.

2 Vesey &

Beames, 300.

p. 164.

(k) There must be an express promise. 2 Bingham, 170, contrary to Holt's N. P. Cases, 368.

(7) See particularly Mr. Cary's very useful treatise, where conciseness and information are very ably combined.

The dissolution may be effected by parol, where it has been so formed; it should be destroyed by deed, where it has been formed by deed. And where arbitrators have had all matters in dispute between partners referred to 1 Sir William Blackstone,475, them, it has been held, that they had the power of disGreen v. Wasolving a partnership.

ring.

A public notice of the dissolution should be given, as in the London Gazette, and it is necessary to give particular notice to persons who have been accustomed to deal with the firm (m). For many people there were said Lord Kenyon, who never saw a Gazette to the day of their deaths, and very mischievous indeed would be the consequences, if they were bound by a notice inserted in it. But the medium of the Gazette has been Peake's Cases, esteemed sufficient publicity as it respected individuals 155. who were not in the habit of dealing with the firm. A promissory note, the subject of the action, was dated after a partnership had been dissolved, and endorsed by one of the original partners; it was sought to charge the other partner with it; but Lord Kenyon said, that "at least to those who have had no previous dealings "with the partners," if a dissolution" is certified in 1 Espinasse, "the ordinary and usual way, it seems sufficient, at 371, Godfrey v. "least to be left to the jury, to infer notice." But, we have seen, that as between third persons, the permitting a name to be continued over the door, is a recognition of the partnership, unless the party who deals with the firm under such circumstances be aware of the dissolution.

Turnbull.

When the joint debts are paid, and the property duly See Cary,

(m) By a circular. 1 Starkie, 421, by Lord Ellenborough. A change in the printed cheques is sufficient notice of the change of partners in a banking house. 3 Campbell, 147, Barfoot v. Goodall.

p. 165.

See Cary, p. 168.

Id. 167.

2 Barnewall & Cresswell, 72.

Ibid, by Bayley, Justice.

distributed among the partners, the dissolution may be said, in a general sense, to be accomplished. The debts must be first paid, for, until that is done, no appropriation can take place in respect of partnership shares or incumbrances. If any one of the firm be guilty of a breach of duty in misapplying the effects before the concern is finally wound up, the proper course is, to apply to the Court of Chancery, who will appoint a manager.

The rule of the subject of the application of debts is, that the debtor may declare on what account he pays the money. If he do not make any specific appropriation, the creditor may elect to what account he may think proper to place the sum received (n). But "there is a third rule, viz. that when one of several "partners dies, and the partnership is in debt, and the "surviving partners continue their dealings with a par"ticular creditor, and the latter joins the transactions of "the old and new firm in one entire account, then the

payments made from time to time by the surviving partners must be applied to the old debt. In that case, it is to be presumed, that all parties have con"sented that it should be considered as one entire

account, and that the death of one of the partners "has produced no alteration whatever." But entries made in books kept for private purposes are not binding till a communication has been made to the party affected

(n)" But the rule is subject to this qualification, that "when there are distinct demands, one against persons in "partnership, and another against one only of the partners, "if the money paid be the money of the partners the cre"ditor is not at liberty to apply it to the payment of the "debt of the individual; that would be allowing the creditor to pay the debt of one person with the money of others." By Lord Chief Justice Abbott, Moody & Malkin, 40, Thomp son v. Brown.

by them; so that where, upon the death of a country banker, partner in a firm at Huddersfield, the London bankers, their correspondents, at first entered all receipts and payments made after the death of the deceased partner to the account of the old firm, but afterwards transmitted two distinct accounts to the country; one, the account to the death of the partner, and the other, the account of receipts and payments subsequent to his decease; it was holden, that the first entry was not a complete appropriation to the old account, not having been communicated, and that, consequently, the heirs and devisees of the deceased partner were liable for the old debt, the bankers being justified in applying the Cresswell, 65, payments subsequently received to the debt of the new firm. In the month following the death of the partner, the London bankers had received more than sufficient to discharge the balance due from the old firm, but this. was held to make no difference (o).

2 Barnewall &

Simson v. Ing

ham.

There must not be any collusion upon a dissolution. Where two persons, H. and S., had been in partnership as warehousemen, and the defendant had bought goods of them, after which there was a public notice of dissolution, and that all debts due to the partnership should be paid to H. only; receipts given after the dissolution by S., in discharge of the debtor, were deemed fraudu2 Campbell, lent and void, and H. recovered against the defendant 561, Henderin an action wherein the names of both partners were joined.

Nevertheless, if there be no express notice not to pay the outgoing partner, and a debtor make a bonâ fide

(0) See 1 Merivale, 572, Clayton's Case. Delivering up old dishonoured bills and receiving good new bills, a payment in discharge of an old debt. 14 East, 239, Newmarch v. Clay.

son v. Wild.

15 Vesey, jun. 198, Duff v.

E. I. Company.