state or condition of man, are personal statutes, and follow and govern him in every country. Now, supposing the case of our law fixing the age of majority at twenty-five, and the country in which a man was born and lived previous to his coming here placing it at twenty-one, no objection could, perhaps, be made to the rule just stated. And it may be, and, we believe, would be true, that a contract made here between the two periods already mentioned would bind him. But reverse the facts of the case, and suppose, as is the truth, that our law placed the age of majority at twenty-one; that twenty-five was the period at which a man ceased to be a minor in the country in which he resided; and that at the age of twenty-four he came into this state and entered into contracts; would it be permitted that he should, in our courts, and to the demand of one of our citizens, plead as to protection against his engagements, the laws of a foreign country, of which the people of Louisiana had no knowledge? Most assuredly it would not."

Referring to this last decision Mr. Wharton says: "It will be seen, therefore, that the opinion of the Supreme Court of Louisiana, severely as it has been condemned, is that which now obtains through the German Empire, and may be regarded as the law both in England and the United States." Conf. Laws, § 115.

But so far as England and the United States are concerned, Mr. Wharton does not seem to be sustained by the authorities. It is believed that the rule generally followed in this country was correctly stated in Bank of La. v. Williams et ux, 46 Miss. 624, where it was said: "It is the prerogative of the sovereignty of every country to define the conditions of its members, not merely its resident inhabitants, but others temporarily there, as to capacity and incapacity. But capacity or incapacity, as to acts done in a foreign country, where the person may be temporarily, will be recognized as valid or not in the forum of his domicil, as they may infringe or not its interests, laws and policies."

APPEAL from Marshall District Court:

The plaintiff is a corporation organized in March, 1870, under the general incorporation law, for the express object of "assisting the members of the association in the acquisition of freehold property, in the erection of buildings and otherwise improving the same, and in the removal of incumbrances or liabilities upon property already held by them, and to enable them to secure the amount of their shares in advance upon furnishing good mortgage security as provided by the bylaws of the association, and to facilitate the accu

mulation, borrowing and redemption of capital." The capital stock was fixed at $300,000, and the shares were $200 each. The same was to be paid

at the rate of one dollar per share each month. It was provided in the articles of incorporation that certain fines might be imposed for non-payment of monthly dues and dereliction of duties on the part of officers.

Such were the sources from which the corporation in the first instance obtained any money and it was loaned to the member who would pay the highest premium therefor. The theory of the organization was, that in ten years or less the accumulations arising from the several sources of revenue would make the shares worth par or $200 each, and whenever that period arrived the assets were to be divided and the corporation cease to exist. But in no event was it to exist longer than

ten years.

The defendant became a member of such corporation and subscribed for several shares of the stock. After having paid his monthly dues for some time he applied for a loan of $1,400, and the same was put up to be competed for among the members. The defendant bid 59 1-2 per cent. premium, which being the highest bid, the loan was made to him, to secure which he gave the plaintiff a written obligation and mortgage, and this action is brought to foreclose such mortgage.

The defendant continued to pay his monthly dues and the interest stipulated for when the loan was made for some time thereafter, but finally he ceased to make any payments whatever.

The defendant in his answer alleged that the contract was usurious and that he had paid more than was legally due thereon and asked an accounting and that he be allowed his proportionate share of all the assets of the corporation as an "offset to the contract," and that the mortgage be declared satisfied and cancelled of record.

There was a reference, a finding of facts made by the referee and his conclusions of law reported to the court, which report was confirmed and the mortgage decreed satisfied and judgment rendered in favor of the defendant for $88.73, and against him in favor of the School fund for 53.55. The plaintiff appeals,

Brown & Binford for appellant; O. L. Binford, W. E. Snelling and Caswell & Meeker, for appellee. SEEVERS, J., delivered the opinion of the court. The abstract contains all the evidence, but the appellee objects, there cannot be a trial de novo in this court because no motion was made at any time for a trial on written evidence. This objection is well taken. Vinsant v. Vinsant, December term, 1877, and numerous other cases. Error, however, has been assigned and the finding of facts is perhaps sufficiently full and complete to enable us to determine all the questions made by counsel which are of vital importance.

The obligation given by the defendant and secured by the mortgage is as follows:

"$1400. On or before ten years from this date I promise to pay to the Hawkeye Benefit and Loan Association, of Marshall county, Iowa, the sum of fourteen hundred dollars with interest thereon at

the rate of six per cent. per annum, payable monthly, on the first Monday of each and every month, or on such other day as may be fixed upon by said association for the collection of monthly dues of its members. The principal sum of fourteen hundred dollars, and all interest accrued thereon, shall become due and payable whenever the interest shall be more than six months in arrears and unpaid; or at the longest, at such time (not exceeding ten years) as said Hawkeye Benefit and Loan Association shall have accumulated sufficient assets, embracing moneys, property, and notes of like import with this, to divide to each of its members the value of two hundred dollars for each share held by him in the capital stock of said association; and the dividend so accruing to the maker of this note shall be then applied hereon in payments. This note is secured by mortgage on real estate.

Dated at Marshalltown, Marshall county, Iowa, this third day of April, 1871.

JOHN F. BLACKBURN."

The amount of money actually loaned was only $574, and the referee found the contract to be tainted with usury. But this was more in the nature of a legal conclusion from concluded facts, than a finding of facts based on evidence which was in any manner conflicting. Such conclusion is the subject of review in this court.

Associations, incorporated or unincorporated, based on the same general principles as the plaintiff, have existed for some time, both in this country and England. In the latter they do not profess corporate powers, and the ruling there seems to be that such contracts as the one under consideration are not usurious because the associations are mere partnerships, and the transactions constitutes a dealing in partnership funds. Silver v. Barnes, 6 Bing. N. C. 180; Burbidge v. Cotton, 8 E. L. and Eq. 57. It was so held also in Shannon v. Dunn, 43 N. H. 194; Merrill v. McIntire, 13 Gray, 157, and we do not doubt that similar rulings have been made in other states. We believe it to be true that in neither New Hampshire nor Massachusetts was the association vested with corporate powers. Certainly this is true as to the former state. In Pennsylvania the contrary doctrine prevails. Reiser v. William Tell S. F. Association, 39 Pa. St. 137. In Connecticut such associations have corporate powers, and it was in substance held such contracts were usurious. Mechanics' and Workingmens' Mutual Savings Bank and Building Association of New Haven v. Wilcox, 24 Conn. 147. The same rule was adopted in Buttemore Permanent Building and Land Society v. Taylor, 41 Md.; Mills v. Salisbury Building and Loan Association, 75 N. C. 292; Forest City United Land and Building Association v. Gallagher et al., 25 Ohio St. 208.

The

Without stopping to enquire whether there is any difference between an incorporated and an unincorporated association it is quite apparent there is a conflict of authority, and that courts of the highest respectability are not in accord on this question. A critical examination of the various cases might demonstrate that this conflict is more

apparant than real. Be this, however, as it may, we are fully warranted in establishing such a rule as seems to us to fully accord with the statutes and policy of this state.

The question whether this contract was usurious under the statute in force at the time the contract was made need not be separately considered because of a statute passed in 1872, which, it is insisted, has the effect to remove the taint of usury if such ever existed. This statute forms a part of the code, being sections 1184, 1185, 1186 and 1187 thereof. It is there provided that corporations, to effectuate the same objects as those expressed in the articles of incorporation of the plaintiff, might be organized; and § 1185 provides and determines how and in what manner money may be obtained for the purposes of the corporation. If loans are made to members in strict accord with the provisions of the statute, it is expressly declared that such loans shall not be construed as usurious. Section 1186 is of a legalizing nature, and evidently intended to apply to such corporations as the plaintiff and to contracts like the one in question. It provides that the laws of such corporations, made in pursuance of their "articles of incorporation and by-laws" and the notes, obligations and securities" taken therefor "shall not be construed or held to be usurious by reason of any fines or premiums for the right of preference in taking such loans, paid in addition to the legal rate of interest, but the same shall be valid and binding in all respects; the payment of such fines or premiums in addition to a rate of interest not exceeding ten per centum per annum, payable annually, or at any less period, notwithstanding." The legal rate of interest can not in this state exceed ten per centum per annum on the sum actually loaned. If any greater rate is charged or received, either directly or indirectly, the contract is usurious. Code §§ 2077, 2078.

66

The amount of money actually loaned being only $574, and the plaintiff having charged and received as interest thereon for each month the sum of $7, such contract is usurious, because interest thereon at the legal rate would only amount to $4.78 1-3 if paid monthly.

There can be found in the statute no words which warrant the construction that interest might be charged or received on the premium bid for the money loaned. The language used forbids such construction for the interest can not thereunder exceed the legal rate. Before such an exaction in the shape of interest can be judicially sustained, the authority for it should be found unequivocally expressed in the statute. Section 1185, of the code, is in substance the same as the Ohio statutes, and it was expressly held in the Forest City United Land and Building Association v. Gallagher, supra, that the Ohio statutes did not authorize a charge or payment of interest on the premium. It can not be presumed the general assembly intended to legalize contracts which the statute did not authorize.

We therefore hold the statute does not legalize or make valid the contract in question because more than ten per cent. per annum is exacted on

the money actually loaned. This view relieves us of the necessity of determining whether the legalizing statute is retrospective, and, if so, whether it is unconstitutional.

The referee found the defendant had paid on the contract, exclusive of monthly dues and fines, $336, and, as a conclusion of law, that he was entitled to credit therefor on the sum actually borrowed. This result, in case the contract is found to be tainted with usury, is not, as we understand, seriously contested by appellant.

The referee also found the defendant was entitled to monthly dues to the amount of $326.73, which he had paid to the plaintiff from time to time. In this way the result is reached that defendant is entitled to a judgment against the plaintiff.

It will be seen the written obligation in no manner refers to the monthly dues, nor does the mortgage. If the interest is in arrears and unpaid for six months the principal sum becomes due.

But the non-payment of dues does not produce this or any other result, so far as the contract is concerned. In other words, the payment of such dues is not secured by the usurious contract. Nor did the referee so find, but that the defendant was entitled to a credit for such monthly dues under article thirty, of the "constitution and bylaws" of the corporation, which is as follows:

"Members whose dues and penalties are all paid up, may, on one month notice, withdraw from the association, and shall be entitled to receive back the money they have actually paid for monthly dues, deducting the proper proportion of all losses which the association may have sustained. Members wishing to withdraw, who have had loans from the association, must also first pay up the principal and interest due upon such loans."

The referee found at the time the defendant filed his answer and cross petition he was indebted to the plaintiff for monthly dues $77; fines, $7.70; and interest on dues, $1.57. According to the plain and explicit provisions of the foregoing article, before the defendant could sunder his connection as a member with plaintiff, and receive back the money actually paid, he must have paid up all his dues and penalties.

From the money so paid must be deducted his proper proportion of the losses, and he must also pay the principal and interest thereon of all money loaned him by the plaintiff.

Now as he was in debt to the plaintiff for dues and penalties and interest thereon he was not entitled to withdraw from the corporation and receive the money actually paid. There is no finding whether or not the corporation has met with any losses. We incline to think it should affirmatively appear it had not before the defendant can receive back the whole of the money actualy paid.

Of course he was not under any legal obligation to pay the interest on the money borrowed, for none is due the plaintiff thereon.

The defendant therefore did not have the right to withdraw from the association at the time he filed his answer, because he was then indebted to

the association. For ought that appears in this case, the defendant may not be entitled to receive back anything by reason of losses. The amount due for dues and penalties must be paid. The losses ascertained, and, if any, the defendant's proper proportion thereof deducted from the sum paid, and the defendant is entitled to the residue, and has no further interest in the corporation. The cause is remanded to the circuit court for further proceedings in accordance with this opinion. REVERSED.

PARTNERSHIP-COVENANT NOT TO ENGAGE IN ANY BUSINESS EXCEPT FOR BENEFIT OF PARTNERSHIP-CLAIM FOR PROFITS.

DEAN v. MCDOWELL.

English Court of Appeal, March, 1878.

1. THE RIGHT OF ONE PARTNER TO SHARE IN THE PROFITS MADE BY ANOTHER PARTNER in another business carried on in contravention of the partnership articles is confined to three cases, viz.: where the profits have arisen (1) by use of the partnership property; (2) from a business in rivalry with the partnership; or (3) in a transaction carried on by taking an unfair advantage of his connection with the partnership. In other cases there is no such remedy unless it is expressly given by the articles.

2. CLAIM FOR PROFITS-REMEDY.-Without this the partners are in the simple position of covenantor and covenantee, and the only remedy is by injunction or dissolution, or, after the termination of the partnership, by action of damages. Dicta, in Story, and other text books overruled.

The plaintiff and defendant entered in 1866 into articles of partnership as Dean Brothers, in which the defendant was made the managing partner, and covenanted (clause S) to devote his whole time to the business, and also (clause 11) that "he would not alone nor with any other person either directly or indirectly engage in any trade or business except on account and for the benefit of the partnership." The business of the firm was that of salt merchants and salt brokers, selling salt upon commission for manufacturers, among whom their chief constituents were a firm of Nicholas, Aston & Co.

The partnership between plaintiff and defendant expired by effluxion of time on the 28th of February, 1873. Subsequently the plaintiff discovered that in 1871 the defendant had entered into a secret partnership with one Wilson to purchase the business of salt manufacturers belonging to Nicholas, Aston & Co., and to carry it on simultaneously with his partnership with the plaintiff.

The transaction was arranged in the following manner: The defendant provided the capital for the purchase and carrying on of the business of Nicholas, Aston & Co., but put in a The nominal partner of Wilson.

son as

son executed a declaration that he was only nominee of his father. Articles of partnership were entered into between Wilson and the

defendant's son for a term which would expire one month after the termination of the defendant's partnership with the plaintiff, i.e., on the 31st of March, 1873, and the business was carried on under the old name of Nicholas, Aston & Co. Accordingly the defendant after the termination of his partnership with the plaintiff took his son's place in the partnership with Wilson, and they then continued the business of salt manufacturers, selling their own salt and not employing brokers.

The plaintiff on discovering these facts filed a bill in 1874 claiming an account of the profits made by the defendant in the business of Nicholas, Aston & Co., during his partnership with the plaintiff.

After this, Wilson retired from the firm of Nicholas Aston & Co., and left the defendant the sole owner of that business.

The plaintiff brought a further action in which he claimed to have the business of Nicholas, Aston & Co., accounted for to the partnership of Dean Brothers, as an accretion from the advantage taken by the defendant of his fiduciary position in the latter partnership.

Nov. 20, 1877.-The suit and action were heard together before the Master of the Rolls.

Southgate, Q. C., Chitty, Q. C., and Rotch for the plaintiff

Roxburgh, Q. C., Davey, Q. C., and C. Parke for the defendant.

JESSEL, M. R.:

It is a

In my opinion there is no equity whatever in this bill; and as I have often said upon questions of construction, if there is a question of construction in this case, I am never apt to be very positive as to the correctness of my opinion, because it is only an opinion, but I must say that to my mind there is no question whatever here. clause as familiar to me as any clause that was The ever penned. It is correlative to clause 8. two clauses mean this: clause 8 means that the partner shall devote himself diligently to the business, and clause 11 means that he shall not engage in any other business. That is the whole of it. The words are not in any "other" business, because the first business is not mentioned, but the words are that he shall not directly or indirectly engage in any trade or business except on account and for the benefit of the partnership, that is, excepting the partnership business. But there is no covenant that if he does he will account for the profits to the partnership, which is what this bill asks for. It is a simple breach by engaging indirectly. It does not appear to me at present that he has damaged the partnership at all, but this is not a bill for damages, it is a bill to take an account of the share of the profits made by him in another business in which he engaged by the agen cy or intermediacy of a trustee. He was indirectly engaged, because he furnished the capital and took the profits. It is not even alleged that he neglected the partnership business, or that the partnership sustained any damage whatever.

That being so, it appears to me that this article is to be enforced, and has always been enforced,

when a breach is discovered, either by injunction to restrain the man from engaging in the other business, or by a dissolution. The mischiefs of his engaging in another business are two: it may be it turns his mind from the partnership business, and takes away his time and attention, which did not happen in this case; or it may be that it makes him liable for the losses of the other business, and so may involve him and damage the partnership in which he is engaged. Therefore the other partners have an option of intervening by injunction, and that has been the remedy usually adopted; or they may, at their election, dissolve the partnership for breach of the article. Those are the two remedies. But ever since the Court of Chancery existed till it was abolished no one ever heard of such a bill as this, frequent as the breach, I am afraid, has been. This is pretty good proof that there is no such equity.

But, in addition to that, I go upon the plain words. It is a mere negative covenant, and is not an affirmative covenant at all. It does entitle the partners in the present business to interfere or to take his share of the other partnership business, or interfere in it in any way whatever, as far as I understand that covenant. Therefore, there being no superadded equity, it seems to me that the bill wholly fails, and ought to be dismissed.

As regards the costs, in my opinion, what he did was a breach. It may not have done any harm to the partnership, or it may. I do not see any claim for damages. At the same time a man who enters into engagements of this kind should observe them; and when a bill is brought against him, and more especially when he has not demurred, or put in an answer attempting to defend his conduct, I think I must say that he is so blameable for what he did that it warrants me in dismissing the bill without costs..

As to the claim in the second action, in my opinion, that is simply extravagant, and should be dismissed, with costs.

The bill, therefore, will be dismissed, without costs, and there will be judgment for the defendant in the action.

From this judgment the plaintiffs appealed. Southgate, Q. C., and Chitty, Q. C., (Gazdar with them).

The Master of the Rolls held that the clause in the articles, for breach of which we sue, was put in for a particular purpose, and that our only remedy is by injunction or dissolution. But by the secresy of the transaction we are deprived of that remedy, and we are entitled to the remedy we ask. Courts of equity have always allowed this remedy in cases where there is no legal duty-e.g., as between patentee and infringer of patent. In support of their contention they quoted Somerville v. Mackey, 16 Ves. 382; Lock v. Lynam, 4 Ir. Ch. Rep. 188; Russell v. Austwick, 1 Sim. 52, and they especially relied upon the concurrence of a series of text writers upon the subject with regard to the specific claim of a right to the profits of the other business. Story's Equity Jurisprudence, p. 663; Collyer on Partnership (1840) p. 165; Bisset on Partnership (1847) p. 134. [JAMES, L. J.-It is of no use to

quote these 'ext writers. They all copy from one another, and give us as their only authority the case of Somerville v. Mackey, which in reality is not a decision to that effect. Text writers are not legislators.] Lindley on Partnership (1873), pp. 595, 609, quoting Burton v. Wookey, 6 Madd. 367; Gardiner v. McCutcheon, 4 Beav. 534.

Roxburgh, Q. C., and C. Parke, for the respondents, were not called on.

JAMES, L. J.:

The order of the Master of the Rolls cannot be reversed. It is quite a new thing in equity that a mere breach of covenant should entitle the covenantee to the profits made by the breach. It is true that in all matters of partnership, there must be the utmost good faith, and that there is a fiduciary relation between the partners. One partner must not use the partnership assets nor carry on the partnership business, nor any other similar business, except for the benefit of the partnership; that is, he must not in any way act in rivalry with the partnership. If he does any of these on his own account, that is really part of the thing for which the partnership was established, and therefore his partner is allowed to take a share of the profits. In this case the partner did not enter into any business in any way analogous to the business of the firm, which was that of merchants and brokers selling on commission the produce of salt works. The business in which the defendant engaged was that of a manufacturer of salt. If he had deprived the firm of any profits they would have made, or had diverted business from the firm, then they might claim the profits. But it is not alleged that he did anything of the sort, or that there was one farthing's worth of actual damage to the work in which the firm traded. It was not a benefit arising out of his connection with the partnership; there was no other obligation between him and the defendant than that of an ordinary covenantor with his covenantee. It might have resulted in damage to the firm, but it was not in any way connected with the fiduciary relation of partners. The Master of the Rolls was right in saying that it was an act which did not result in any loss to the partnership, and could not have so resulted unless the defendant's time had been given to the other business and lost to the partnership. Then damage might have resulted, which might have been matter for an action for damages; but here it was not so, and there is no damage; and if no damage, certainly no sort of claim to profits.

The subject-matter of the second action is extravagant.

COTTON, L. J.:

No doubt the defendant committed a breach of the partnership articles. The question is what the plaintiff is entitled to. I agree with the Master of the Rolls that the clause is not one which gives a right to profits in any other business engaged in by a partner. The object of the clause is to keep the whole of the partner's time to the partnership business.

I had more doubt upon the general principle of the partnership contract. The only case cited which bore upon the point was that of Somerville

v. Mackey, but the points there were entirely different. The plaintiff and defendant had entered into a joint adventure for exporting goods to Russia; the business in which the defendant engaged was within the scope of the partnership, and it could not be allowed that he should keep the profits. Here the defendant's other business is in no way within the scope of the partnership business. It was dealing with salt, but in a totally different way; and the profit was not made out of the firm in which he and the plaintiff were engaged. The refore it is not within the rule that a partner is entitled to share in the profits.

There are clear rules and principles which entitle a partner to share in the profits made by his partner. If they are made from a trade within the scope of the partnership business, then the partner who is engaging in that secretly, cannot say that it is not the partnership business. It is that which he ought to have engaged in only for the purposes of the partnership.

The same principle holds in the case of the use of the partnership assets, for then the profit is made out of the partnership property. So if a man use his position as a partner to get a profit or a business which is profitable or an interest in the partnership property or in property which the partners require, he cannot hold it for himself.

But this business of the defendant in the present case not being within the scope of the partnership, nor acquired by him by means of his connection with the firm, nor by a use of the partnership assets, there can be no ground for this claim to the profits.

The second action is disposed of by the consideration that the business was not acquired by the defendant by any advantage taken of his position as a partner with the plaintiff.

THESIGER, L. J.:

In this case there has been a clear breach of covenant by the defendant. But the covenant itself does not attach to the breach the specific remedy which the plaintiffs claim. We must go then to general principles. An action at law would arise upon the breach, but that would not suit the plaintiff, because there has been no loss as the result of the breach, and he would only recover nominal damages. The plaintiff therefore seeks to follow the profits made by the defendant. He must obtain this relief, if he is to succeed, upon some esestablished principle of law or equity. I am unable to find any to support his contention. From the cases that have been cited there are to be deduced three principles correctly laid down by Mr. Justice Lindley in his book on Partnership:1. A partner shall not be allowed to obtain any exclusive advantage by employment of the partnership property; and this is illustrated by the cases of Burton v. Wookey and Gardner v. McCutcheon.

2. A partner is not to derive any exclusive advantage from transactions which are in rivalry with the business of the firm. This is illustrated by the cases of Somerville v. Mackey-if, indeed, that case is to be treated at all as a decision on this point-and Lock v. Lynam.