A surety is entitled to contribution for what he has actually paid in settlement; if he obtains a reduction by compromise, his co-sureties are entitled to an equal benefit in the reduction. He is not obliged to wait until he is actually compelled by suit to pay the debt; 121 but on the other hand, if he defends a suit in good faith and on reasonable grounds, he may compel contribution for the costs of suit.122 1433. The remedy for contribution may be either at law or in equity. Upon the equity of the case, the law raises an implied assumpsit on the part of the others to pay their shares, and on this an action of assumpsit may be brought against each co-surety. This action is old, and not of modern introduction. The remedy at law will in most cases secure substantial justice, but fails to give complete equality where one of several co-sureties is bankrupt. In this case the surety paying the debt can only recover of each one the same amount as if they were all solvent, and thus loses the bankrupt's share in addition to his own. 1434. In those states where courts of equity have the same powers which are inherent in a court of chancery in England, the remedy in equity is frequently more efficacious than that which is afforded in a court of law. By filing a bill in equity, the complainant can bring all the co-sureties before the court, and, by that means, a multiplicity of actions is prevented; and this proceeding will be indispensable when the surety requires a discovery of the persons who are his co-sureties, the instrument by which they became such, and the amount. This remedy is the only effectual means by which the quantum of contribution to be paid by each surety can be ascertained; 123 or where the sureties are each bound in distinct and several penalties; 124 or where one of the sureties has been obliged to pay, the second has become insolvent, and the third has been required to contribute ratably to the payment of the whole debt; because, as before observed, at law only one-third could be recovered from him,' while in equity the court will compel an equal contribution among the solvent sureties. 121 Stallworth v. Preslar, 34 Ala. N. s. 505. 123 Birkley v. Presgrave, 1 East, 220. 122 Fletcher v. Jackson, 23 Vt. 581. 125 125 Peter v. Rich, 1 Chanc. Cas. 34; Hole v. Harrison, 1 Chanc. Cas. 246; Browne v. Lee, 6 Barnew. & C. 689; Cowell v. Edwards, 2 Bos. & P. 268. 359 CHAPTER XIII. PARTNERSHIP. 1435. Definition. 1439-1457. Essential character of a partnership. 1440. The agreement. 1441-1451. The partners. 1441. Who may be a partner. 1444-1448. Kinds of partners. 1445. Ostensible partners. 1446. Nominal partners. 1447. Dormant partners. 1449. Right of introducing new partners. 1451. Distinction between partners and firm. 1452-1455. Management of the business. 1452. By a single partner. 1454. By a majority of the partners. 1458-1467. The capital stock. 1459. Necessity of furnishing stock. 1462. Amount of stock, how ascertained. 1464. Obligation to furnish stock promised. 1468-1474. Different kinds of partnership. 1471-1474. Special or limited partnerships. 1473. By virtue of statutes. 1475-1478. Liabilities to third persons. 1506. Where there is no misconduct. 1511-1533. Effects of dissolution. 1512-1519. Effect as to creditors. 1513. Who are creditors. 1518. What assets liable. 1520-1533. Effect upon partners. 1521. Settlement of the affairs. 1528. Settlement between the partners. 1531-1533. Division of the surplus. 1532. What things to be divided. 1533. Division, how made. 1435. Partnership or co-partnership is an agreement between two or more competent persons for joining their money, goods, labor, and skill, or either or all of them, for the purpose of advancing fair trade and of dividing the profits and losses arising from it, proportionably or otherwise, between or among them.1 Sometimes the term partnership signifies a moral being composed of the reunion of all the partners.2 1436. A distinction must be observed between a partnership and a corporation; a partnership may be composed of any number of persons, by the simple agreement and consent of the parties; for all associations to transact business for the common benefit, with the common stock or capital, formed by the voluntary acts of the parties alone, are partnerships. A corporation cannot be formed by the voluntary act of the parties alone, but must be specially sanctioned by a special law, creating a body politic. In this case, although they have contributed to the general fund and are entitled to the profits, the members are not partners. The corporation exists independently of the particular persons who compose it, and its property alone is responsible for its liabilities. 1437. A partnership is also to be distinguished from a tenancy in common, and from a joint tenancy. Part owners of chattels differ essentially from partners. They are either joint owners, or tenants in common, each having an independent, although an undivided interest in the property; and neither can dispose of or transfer the whole property without the consent of his companion; but each can sell his own share or interest in it, and the purchaser will stand in the place and possess the rights of the seller, whereas in a partnership one can dispose of the whole of the joint property; and if he should sell only one part, or his interest in it, the purchaser would take only the rights of the seller after a full settlement of the partnership debts. 1438. In this chapter we shall consider, 1, the essential character of a partnership; 2, the capital stock; 3, the different kinds of partnership; 4, the liabilities of partners to third persons; 5, the rights of partners against third persons; 6, the dissolution of the partnership. 1439. A great number of questions which may arise on this subject may be solved if we clearly understand how the agreement among the partners is formed, who are the partners, who are to administer the partnership property, the community of interest. 1440. To constitute a partnership there must be an agreement among the 1 Story, Partn. ? 2; Watson, Partn. 1; Gow, Partn. 2; Pothier, Pand. lib. 17, t. 2, in pr.; Collyer, Partn. 2; Montague, Partn. 1; Pothier, De Société, art. prél. n. 1; Domat, Civ. Law, B. 1, t. 8, art. prél.; Code Civil, art. 1832; La. Civ. Code, art. 2772; 5 Duvergier, Dr. Civ. Fr. t. 9, c. 1, n. 17; 4 Pardessus, Dr. Com. n. 966; 2 Bell. Comm. 611, 5th ed.; Aso. & M. Inst. Laws of Spain, B. 2, t. 15. 24 Pardessus, Dr. Com. n. 966. partners, and an intent to form such contract; for there can be no partnership without such intention. This circumstance distinguishes this contract from numerous relations which may arise between the parties from the mere operation of law, independent of contract; for example, there may be a community of interest created by law between the parties which is not a partnership.3 Joint tenants, or tenants in common of lands, or goods and chattels, under devises and bequests in last wills, or donees inter vivos, or distributees under the intestate laws, though having a common interest, are not partners. Every community of goods does not create a partnership, though in every partnership there is a community of interest; to give rise to such a relation, there must be an agreement that it shall exist.* A partnership can commence only by the voluntary consent of the parties; so that when it is once formed, it remains the same until it is dissolved. Being a contract, a partnership is liable to all the rules which require contracts to be made in good faith and clear of fraud, that they be legal, and contain all the essential elements of a lawful agreement. If a partnership be formed for immoral or illegal purposes, or if it be in contravention of the positive law or the public policy of the country, it will be considered void; as, if it be for illegal gaming, illegal insurances, or wagers, to carry on a contraband trade, or the slave trade, or to support a house of ill-fame, or any such unlawful purpose, it will be a mere nullity. The reason for this is clear; it is that a partnership cannot subsist for the purpose of doing unlawful things, as the partners cannot, in such case, unite or bind themselves to each other. 1441. We shall consider who may be partners and the several kinds of partners. The persons who compose a partnership are severally called partners, and, taken collectively, they constitute a partnership or a firm. Every person sui juris is competent to contract the relation of a partner; and even those whose contracts are only voidable may become partners, as in the case of infants, whose contracts are voidable when they are of an uncertain nature as to their benefit or prejudice. Persons of unsound mind cannot enter into any contract, and consequently cannot become partners. Alien enemies are incapable of becoming partners, though there is no doubt alien friends may enter into the contract of partnership. A married woman is incapable by the common law of forming any contract whatever; there are, however, exceptions to this rule, even at common law. By the custom of London, and in some states, by virtue of statutes a married woman may be authorized to carry on trade as a feme sole. In the civil law, the relation of husband and wife is very different from that which these parties sustain toward each other by the common law. In the civil law the husband and wife are considered as two distinct persons, and may have separate estates, contracts, debts, and commit or suffer several injuries; but still, the wife cannot make binding contracts without the consent of her husband and his authority, and the husband is the sole administrator of the property which they hold in community. When authorized by him to act 8 Sayer v. Frick, 7 Watts & S. Penn. 383. Pardessus, Dr. Comm. n. 969; Pothier, de Société, n. 2; Story, Partn. & 3. 5 Gow, Partn. 7, 8; Watson, Partn. 35 to 46; 1 Bell. Comm. 297, 5th ed.; 5 Duvergier, Dr. Civ. Fr. n. 24, 25; Dig. 27, 3, 1, 14; Dig. 17, 2, 53; Pothier, Pand. 17, 2, 5 and 18. Story, Eq. Jur. 240; Story, Partn. & 7; Keane v. Boycott, 2 H. Blackst. 511. 6 'See Collyer, Partn. 15; Burke v. Winckle, 2 Serg. & R. Penn. 189; Gregory v. Pierce, 4 Metc. Mass. 478. In many of the states married women are allowed under certain regulations to carry on business as if they were unmarried and may be partners; in others they are restricted from forming partnerships, though allowed to trade as femes sole. 8 1 Sharswood, Blackst. Comm. 444. as a sole trader, she may make herself liable for all the concerns of her mercantile transactions, and it is supposed that by his authority she may become a partner. The French law contains the same provisions, and the civil code of Louisiana coincides with it." 1442. An infant may form a contract of partnership as he may form any other contract which may be for his benefit.10 It will be governed by the same rules as other contracts, the other parties are bound, but the infant within a reasonable time after coming of age may confirm or avoid it." A corporation acting within its powers may be a partner.' 12 1443. When the partnership has once been formed, it must remain as it was made, as far as regards the partners, until it has been dissolved. It is of the essence of this contract that the partners should choose each other; no partner, therefore, can force his co-partner to receive another person into the firm; and the dissent of a single partner will exclude him; 13 otherwise the exercise of such a right by one, or a majority of the partners, would change the nature, terms, and obligations of the original contract, and take away the delectus persona which is so essential to the constitution of a partnership.14 But the articles of partnership may make a provision upon the subject, and, in that case, a third person may become a member of a firm, without any other consent of the partners; as, where it is provided, that on the death of one of the partners, his executors shall carry on the business with the survivors." 1444. Partners are considered as ostensible, nominal, and dormant. 1445. An actual, ostensible partner is one who not only participates in the profits and contributes to the losses, but who appears and exhibits himself to the world as a person connected with the partnership, and as forming a component member of the firm. He is clearly answerable for the debts and engagements of the partnership; his right to a share of the profits, or the permitted exhibition of his name as a partner, would be sufficient to render him responsible. 1446. A nominal partner is one who has not any actual interest in the trade or its profits, but by allowing his name to be used, holds himself out to the world as having an apparent interest. He is liable as partner to third persons, because of the false appearance he holds forth to the world in representing himself to be jointly concerned in interest with those with whom he is apparently associated. But a nominal partner is not responsible to the other partners for any losses which they may sustain. But in order to charge one as a nominal partner his name must have been used with his consent; 16 and it must be shown that he has held himself out as a partner to the party contracting, that is, that the creditor of the firm must have known of the use of his name.' 17 1447. A dormant partner is one who participates in the profits of the trade or business, but his name being concealed or suppressed in the firm, his interest is consequently not apparent. He is liable as a partner, because he receives and takes from the creditors a part of that fund which is the proper security to La. Civ. Code, art. 121-131. 10 Furlong v. Bartlett, 21 Pick. Mass. 401. " Breed v. Judd, 1 Gray, Mass. 455; Richardson v. Boright, 9 Vt. 368. 12 Holmes v. Old Colony R. R., 5 Gray, Mass. 58. 13 Griswold v. Waddington, 15 Johns. N. Y. 82; Channel v. Fassitt, 16 Ohio, 166. 14 Collyer, Partn. 8; Crawhay v. Maule, 1 Swanst. Ch. 508. 15 Collyer, Partn. 9; 2 Bell, Comm. 5th ed. 634; Scholefield v. Eichelberger, 7 Pet. 586. 16 Leavitt v. Peck, 3 Conn. 324. "Young v. Smith, 25 Mo. 341; Benedict v. Davis, 2 M'Lean, C. C. 347. |