to contribution, may be the right of the other partners to insist that the whole of a charge, loss or liability shall be borne by the partner by whose misconduct it was caused. In the earlier sections of this chapter it has been pointed out that each partner owes to his co-partner the performance of certain duties, like the duty to act in good faith towards his partners, to keep proper accounts, to exercise reasonable care and diligence, to observe the terms of the partnership agreements, and so on. If one partner violates any one of these duties and thereby causes loss or liability to the firm, not only would the wrong doer be entitled to no contribution if the consequences should fall in the first instance upon him, but if they fall upon his co-partners in whole or in part they may insist that he shall bear the entire loss and indemnify them entirely against it."7 311, Mechem's Cas. 692; Henry v. Jackson (1865), 37 Vt. 431; Scott v. Bryan (1887), 96 N. Car. 289, 3 S. E. 235; Sloan v. Gibbes (1899), 56 S. Car. 480, 35 S. E. 408, 76 Am. St. R. 559; Gross v. Davis (1888), 87 Tenn. 226, 11 S. W. 92, 10 Am. St. R. 635. See also Uniform Partnership Act, sec. 40(d), and sec. 18(a) quoted above. 77 See Murphy v. Crafts (1858), 13 La. Ann. 519, 71 Am. Dec. 519, Mechem's Cas. 275, Gilm. Cas. 438; McCoy v. Crossfield (1909), 54 Oreg. 591, 104 Pac. 423; Yorks v. Tozer (1894), 59 Minn. 78, 60 N. W. 846, 28 L. R. A. 86, 50 Am. St. R. 395, Mechem's Cas. 278, Gilm. Cas. 440; Smith v. Loring (1826), 2 Ohio 440; Kintrea V. Charles (1865), 12 Grant's Ch. (Up. Can.) 123. CHAPTER VIII. OF DEALINGS BETWEEN PARTNERS AND WITH THE FIRM. § 192. In general. 193. Dealings between partners. 194, 195. Dealings between firm and partner. $196. Dealings between firms having a common partner. § 192. In general.-Questions may arise respecting dealings had between the partners themselves or with their firms but not immediately involving third persons. These cases will chiefly fall under one of three heads: Dealings between the partners; Dealings between the firm and a partner; and Dealings between firms having one or more partners in common. § 193. Dealings between partners. With respect of matters which do not relate to or involve the partnership, partners are, of course, as free to deal with each other as though they were not partners.1 With respect of matters which relate to the partnership but do not involve partnership dealings, the partners may also freely deal with one another. Thus, for example, one may borrow from another the money he is to contribute to the partnership capital or buy from another the interest in property which he is to put into the partnership, and the obligations so incurred may be enforced in the same manner as though no partnership existed.2 So, even though the matter 1 Thus one partner may make another his agent with reference to the former's private business affairs and the case is in no way affected by the fact that they are partners as to other matters. See Paine v. Moore (1844), 6 Ala. 129; Volk v. Roche (1873), 70 Ill. 297. 2 See Cook v. Canny (1893), 96 Mich. 398, 55 N. W. 987, Mechem's Cas. 904; Bull v. Coe (1888), 77 Cal. 54, 18 Pac. 808, 11 Am. St. R. 235, Mechem's Cas. 905; Bates v. Lane (1886), 62 Mich. 132, 28 N. W. 753; Bright v. Carter (1903), 117 Wis. 631, 94 N. W. 645; Hoskins v. Dickinson (1900), 124 Mich. 11, 82 N. W. 660. be one directly involving partnership affairs, the partners may, so far as their obligations to each other are concerned, make practically any lawful agreement which they please. Thus one may assume and agree to pay a particular firm debt or portion of the firm debts and hold his co-partner harmless therefrom; 3 one may sell or assign to the other all his interest in specific property or assets of the firm; they may agree among themselves as to the manner in which the partnership duties or labor shall be distributed,5 or how or how not the partnership funds or credits shall be employed; and, in general, they may segregate any portion of the partnership affairs and make it the subject of a special agreement which is to control as between themselves. 6 § 194. Dealings between firm and partner.-Although, as has been seen, the firm is not a legal entity, it is constantly recognized that there may be dealings between a partner and his firm in its collective capacity. Thus a partner may sell or lease property or loan money to the firm; and, on the other hand, he may buy or rent property from the firm or borrow money from it. And though, as will be seen, there may be difficulty, in many cases, in enforcing claims so arising by an action at law because of the necessity of the partner being both a plaintiff and defendant, yet they may be enforced in equity in actions for an accounting, and they may often be so assigned to third 8 8 See Edwards V. Remington (1881), 51 Wis. 336, 8 N. W. 193, Mechem's Cas. 907. 4 See Beede v. Fraser (1894), 66 Vt. 114, 28 Atl. 880, 44 Am. St. R. 824, Mechem's Cas. 300; Shurtleff v. Willard (1837), 19 Pick. (Mass.) 202; Coggschell v. Munger (1893), 54 Mo. App. 420; Holt v. Howard (1903), 77 Vt. 49, 58 Atl. 797. 5 See Miller v. Freeman (1900), 111 Ga. 654, 36 S. E. 961, 51 L. R. A. 504, Mechem's Cas. 894. 6 See Murphy v. Crafts (1858), 13 La. Ann. 519, 71 Am. Dec. 519, Me chem's Cas. 275, Gilm. Cas. 438; 7 See Carpenter V. Greenop Even though the creditor partner parties as to enable the latter to enforce them at law even though the assignor might not be able to do so.9 Where, in such dealings, the firm gives its negotiable promissory note to a partner, or the partner gives one to the firm, the cases are numerous in which the actual and bona fide transferee of the note has been permitted to sue at law.10 The giving of such a note by the firm to a partner, payable at a time prior to any agreed or probable termination of the partnership, would be strong evidence of an intention to segregate that item from other partnership accounts and make it an independent obligation.11 How the partner creditor would stand in competition with the general creditors of the firm who were not partners, is a question for later consideration.12 § 195. -Whether money advanced by a partner to or for the firm is to be regarded as a loan or as a permanent addition to capital, is, when not made clear by some express agreement, frequently a question difficult to decide. It depends largely upon intention, to be deduced often from facts and circumstances.13 The importance of the question arises chiefly from the standpoint of the time when it is to be repaid, e. g., on demand or at partnership funds. See Cambre v. Lasseigne (1913), 134 La. 94, 63 So. 680. 9 Whether an assignee may enforce the claim will, of course, be affected by such questions as whether it is assignable, whether the assignee may sue in his own name, whether he takes subject to partnership equities, etc. 10 See Carpenter v. Greenop, supra; Jennings v. Pratt (1899), 19 Utah 129, 56 Pac. 951; Wintermute v. Torrent (1890), 83 Mich. 555, 47 N. W. 358; Woodman v. Boothby (1876), 66 Me. 389; Walker v. Wait (1878), 50 Vt. 668; Knaus v. Givens (1892), 110 Mo. 58, 19 S. W. 535; Buchanan v. Mechanics', etc., Institution (1896), 84 Md. 430, 35 Atl. 1099, Burd. Cas. 298; Temple v. Mech. Part.-12 177 Seaver (1853), 65 Mass. (11 Cush.) 314; Roger Williams Nat. Bank v. Hall (1893), 160 Mass. 171, 35 N. E. 66 (may prove it in insolvency proceedings). But, contra, that he takes it subject to the partner's disabilities, see Simrall v. O'Bannons (1847), 46 Ky. (7 B. Mon.) 608. As to rights of transferee to whom the note was transferred merely to enable him to sue, see Wintermute v. Tarrant (1890), 83 Mich. 555, 47 N. W. 358; Cutting v. Daigneau (1890), 151 Mass. 297, 23 N. E. 839, cited post, § 200. 11 See Carpenter V. Greenop, supra; Temple v. Seaver, supra. 12 See post, § 451. 13 See Topping (1879), 92 Ill. 92. V. Paddock at the expiration of a reasonable time, or only when other capital is repaid upon a final termination of the firm.14 It may also involve the question of the right to interest upon the amount.15 Partners may not force advances upon the firm or charge their copartners for disbursements rendered necessary only by their own default or made in violation of partnership agreements and not assented to by those sought to be charged.16 §196. Dealings between firms having a common partner.— As there may be dealings between a firm and a partner, so there may be dealings between two firms having one or more partners in common. Thus one firm may sell to or buy of the other, or lend to or borrow money from the other.17 These obligations, however, as in the former case are subject to the disability that, owing to technical rules concerning parties, the members of the one firm cannot sue the members of the other at law.18 As will be seen, however, equity will often take jurisdiction,19 and under the reformed procedure in many States the common law objection has been removed.20 In many cases also the difficulty may be overcome by assigning the claim to a third person.21 14 See post, § 464 et seq. 15 See ante, § 182. 16 See McFadden v. Leeka (1891), 48 Ohio St. 513, 28 N. E. 874, Mechem's Cas. 280. See also Magilton v. Stevenson (1896), 173 Pa. 560, 34 Atl. 235, where the amount that defendant partner could be made liable for was limited by the articles of partnership. 17 See Bolton v. Puller (1796), 1 Bos. & Pul. 539, Burd. Cas. 187; Bonwit v. Heyman (1895), 43 Neb. 537, 61 N. W. 716. 18 See Green v. Chapman (1854), 27 Vt. 236; Beede v. Fraser (1894), 66 Vt. 114, 28 Atl. 880, 44 Am. St. R. 824, Mechem's Cas. 300; Cole v. Reynolds (1858), 18 N. Y. 74, Mechem's Cas. 293; Aylett v. Walker (1896), 92 Va. 540, 24 S. E. 226; Taylor v. Thompson (1903), 176 N. Y. 168, 68 N. E. 240 (an action for deceit). In Bosanquet v. Wray (1815), 6 Taunt. 597, Ames' Cas. 442, it is said that no legal contract can exist in such a case, "the parties could only so far enter into this contract as to render it available in equity.'' 19 See post, § 233; Cole v. Reynolds, supra; Crosby V. Timolat (1892), 50 Minn. 171, 52 N. W. 526; Noyes v. Ostrom (1910), 113 Minn. 111, 129 N. W. 142; Rogers v. Rogers (1847), 40 N. Car. 31; Burrows v. Leech (1898), 116 Mich. 32, 74 N. W. 296, 5 American Law Review 47. 20 See Cole v. Reynolds, supra. |