Essentials of the Law ...: Elementary law ... with notes and references for the use of students at law

the business without pursuing the provisions of the articles as to entering into new articles, or paying out the value of the part of A's interest which he is entitled to acquire, or giving security. C must account to A's estate for subsequent profits.9

Claims against surviving or continuing Partners as Executors or Trustees.

It often happens that a partner in a firm, disposing of his interest in it by will, and not desiring the affairs of the firm to be exposed to the interference of strangers, makes his fellow-partners, or some of them, his executors or trustees, or includes one or more of them among the persons appointed to those offices. If, having done this, he dies while the partnership is subsisting, there may arise at the same time, and either wholly or in part in the same persons, two kinds of duty in respect of the testator's interest, which are in many ways alike in their nature and incidents, but must be, nevertheless, kept distinct. There is the duty of the surviving partners as partners towards the deceased partners's estate; and of this we have just spoken. There is also the duty of the same persons, or some of them, as executors or trustees towards the persons beneficially interested in that estate; and this is determined by principles which are really independent of the law of partnership.

These distinguished by further Illustrations.

The nature of these complications and the distinctions to be observed may be exhibited by some further illustrations: a. A and B are partners. A dies, having appointed B his sole executor, and B carries on the trade with A's capital. Here B is answerable to A's estate as partner and A's executor, if he were a person other than B himself, would be the proper person to enforce that liability. B is also answerable as executor, to the persons beneficially interested in A's estate, for the improper employment of his testator's assets.

b. A, a trader, appoints B his executor, and dies. B enters into partnership with C and D in the same trade, and employs the testator's assets in the partnership business. B gives an indemnity to C and D, against the claim of A's residuary legatees. Here C and D are jointly liable with B to A's residuary legatees, not as partners, but as having knowingly made themselves parties to the breach of trust committed by B.1

Claims must be distinct, and against proper Parties in proper

Capacity.

In these "mixed and difficult" cases, as Mr. Justice Lindley calls them,2

it is important for persons seeking to assert their right to an account of profits to make up their minds distinctly in what capacity, and on the score of what duty, they will charge the surviving partners, or any of them. If they proceed against executors as such, for what is really a partnership liability, if any, and without bringing all the members of the firm before the court, failure will be the inevitable result3

And must be for Profits alone, or for Interest alone.

Again, the right, where it exists, is an alternative right to interest on the capital improperly retained in the business, or to an account of the profits made by its use; and one or other of these alternatives must be distinctly chosen. A double claim for both profits and interest is inadmissible, and a mixed claim is equally so.1

ARTICLE 62.

RULES FOR DISTRIBUTION OF ASSETS ON FINAL SETTLEMENT OF

ACCOUNTS.

In settling accounts between partners, after a dissolution of partnership, the following rules are to be observed (subject, as to the payments to partners, to any special agreement):

Losses are to be paid first out of profits, next out of capital, and lastly, if necessary, by the partners individually.

The assets of the firm are to be applied in the following manner and order:

1. In paying the debts and liabilities of the firm to persons who are not partners therein.

2. In paying to each partner ratably what is due from the firm to him for advances as distinguished from capital.

3. In paying to each partner ratably what is due from the firm to him in respect of capital.

4. The ultimate residue, if any, is divisible among the partners in the proportion in which profits are divisible under the partnership contract.5

3. See Simpson v. Chapman, 4 D. M. G. 154: Vyse v. Foster, L. R. 7 H. L. 318; Travis v. Milne, 9 Ha. 149.

4. Per Lord Cairns, Vyse v. Foster, L. R. 7 H. L. at p. 336.

5. Almost verbally from Lindley, i. (3d ed.), 827.

PART III.

PROCEDURE AND ADMINISTRATION.

CHAPTER IX.

PROCEDURE IN ACTIONS BY AND AGAINST PARTNERS.

"In the absence of statutes changing the rule, actions must be brought by and against partners as individuals. In England and some the States of this country suits in the firm name are now authorized by statute either generally or in cases where the names of the partners are unknown.”’1

The partners must all join as plaintiffs in an action at law to enforce a partnership claim; and this whether the action is brought before or after dissolution of the partnership. No others should be joined as plaintiffs.2

A dormant partner, however, need not be joined as plaintiff in an action by the firm.3

All the partners must be joined as defendants in an action against the firm; the non-joinder of proper defendants in such an action can, however, only be raised by plea in abatement.4

Where two firms are composed in part of the same individuals, no action at law can be maintained by one firm against the other. In such case the remedy is in equity.5

Where one of the partners refuses to join in an action at law for the enforcement of a demand in favor of a partnership, he may be made a defendant in a suit in equity by the other partners."

Articles 63 to 67, inclusive, relate to the new procedure in England and are not applicable to this country.

These rules [states our author], do not introduce any

1. See Gilm. Part. 566. Rules of Sup. Court (English) Order XVI. r. 10; 1 Lind. Part. (Ewell's ed.), 264 et seq., and the American cases cited in notes.

2. Notes, 1 Lind. Part. (Ewell's

ed.), *265 et seq., where a large number of cases are cited.

3. Id. *265, note and cases here cited.

4. Id. *265, note.

5. Id. *267, note.