the assignee would stand in no better situation than the partner himself and he usually could not sue at law.3 2. Firm Against Partner. §201. Firm cannot sue one partner at law.-2. For similar reasons, the partners as such cannot sue one partner at law to recover upon a claim made against him by the firm. The same difficulty of parties, and the same uncertain character of the claim, exist as where the situation is reversed, as seen in the preceding section. Thus, the partners as such cannot maintain an action at law against one partner to recover for goods sold to him by the firm, or for the recovery of money due from him to the firm upon his note or otherwise, though a bona fide indorsee of the note might sue.5 The same general considerations respecting an assignment of the claim by the firm to a nonpartner and the right of the latter to sue, would apply as in the preceding case of the partner against the firm.6 § 202. The difficulty as to parties, however, in these cases, has been held to be confined to the state of the parties upon the record. Thus where a partner gave his note to another partner, but the latter was really trustee for the partnership, it was held that the payee might maintain an action at law against the maker, although the recovery was for the benefit of the partnership and if all the partners had been necessary parties plaintiff the action could not have been maintained." On the other hand, statutory or other requirements that all 8 See Bullard v. Kinney (1858), 10 Cal. 60, Mechem's Cas. 288. Compare Simrall v. O'Bannons (1847), 46 Ky. (7 B. Mon.) 608. 4 See Woodman V. Boothby (1876), 66 Me. 389. 5 See Parker v. Macomber (1836), 18 Pick. (Mass.) 505; Bank v. Delafield (1891), 126 N. Y. 410, 27 N. E. 797; Burley v. Harris (1836), 8 N. H. 233, 29 Am. Dec. 650, Gilm. Cas. 454; Ivy v. Walker (1880), 58 Miss. 253; Summerson v. Donovan (1910), 110 Va. 657, 66 S. E. 822, 19 Ann. Cas. 253. 6 See Woodman v. Boothby, supra. 7 See Van Ness v. Forrest (1814), 12 U. S. (8 Cranch) 30, 3 L. ed. 478. actions shall be prosecuted in the names of the real parties in interest, might destroy the force of the position referred to in the preceding paragraph. 3. Partner Against Partner. § 203. One partner cannot sue another at law on claim involving partnership transactions.-3. In this case the difficulty as to parties does not arise. By the hypothesis, the firm is not involved as a party on either side. It is simply one partner against another. The difficulty, if any, arises solely from the nature of the claim which the partner is seeking to enforce against his copartner. That claim may arise:-(a) Out of partnership transactions; (b) Out of matters relating to the partnership, but not constituting partnership transactions; (c) Upon matters which were originally partnership transactions but which have been separated and segregated by special agreement; and (d) Upon matters having no connection with the partnership. a. In the first of these cases the claim will usually be that the plaintiff has performed labor for the partnership, or has sold goods or loaned money or rented property to the partnership, or has advanced or paid out money for the partnership, as the result of which the defendant has become indebted to him; or that the defendant has received something due or belonging to the partnership, for a part of which he should account to the plaintiff; and the like. As to this, it is the general rule that one partner cannot sue another partner at law upon a claim against that partner arising out of and involving partnership transactions, unless (1) that claim has, by the agreement of the parties, been in some way segregated and taken out of the domain of the partnership accounts; or (2) unless the part 8 See post, 8217; Douthit v. Douthit (1892), 133 Ind. 26, 32 N. E. 715 (where the court says, "Where there is an agreement adjusting partnership affairs, and that agreement awards to one partner a specific sum, or creates a specific duty in his favor, he may maintain an action upon a breach of the duty or promise); Beede V. Fraser (1894), 66 Vt. 114, 28 Atl. 880, 44 Am. St. R. 824, Mechem's Cas. 300 (where the court says, "When the parties by an express agreement separate a distinct matter from the partnership dealing, and one expressly agrees to pay the other a specified sum for that matter, as nership accounts, at least so far as that claim is concerned, have been fully settled, and a final balance has been arrived at in his favor, or, as it is frequently expressed, unless there has been an account stated between them. If such a balance has been reached in his favor, then, if there is no express promise, the law will usually imply a promise by the other partner to pay it, and the claim becomes, by the accounting and promise, so far transformed from a partnership liability into a personal and private one, that the partner entitled may sue the partner obligated in an action at law.10 Some courts, however, require an express promise to pay the amount found due and do not raise an implied promise. § 204. Reason for the rule.-The reason for the general rule denying the right to sue at law is that it is ordinarily impossible to determine whether the defendant partner is really indebted to the plaintiff partner or not, until the partnership accounts are settled and the true standing of the parties ascertained; they have not, by implication, agreed to account otherwise; until that is done no debt arises; and the process and remedies afforded by a court of law are not usually adequate or appropriate to the investigation of claims requiring such an accounting. Where, however, the parties themselves have made sumpsit will lie on the agreement, though the matter arose from the partnership dealing''). 9 See Sadler v. Nixon (1834), 5 B. & Ad. 936, Ames Cas. 453, Gilm. Cas. 451; Remington V. Allen (1871), 109 Mass. 47; Holyoke v. Mayo (1862), 50 Me. 385; Harris v. Harris (1859), 39 N. H. 45; Johnson v. Wilson (1870), 54 Ill. 419; Towle v. Meserve (1859), 38 N. H. 9; Cobb v. Martin (1912), 32 Okla. 588, 123 Pac. 422; Simpson v. Miller (1908), 51 Oreg. 232, 94 Pac. 567. Fact that partner suing at law for contribution to a debt paid by him did not pay it voluntarily, but was compelled to pay, held to make no difference. Sadler v. Nixon, supra. 10 See Wycoff v. Purnell (1860), 10 Iowa 332, Mechem's Cas. 286; Pope v. Randolph (1848), 13 Ala. 214; Spear v. Newell (1841), 13 Vt. 288, Mechem's Cas. 311; Holyoke v. Mayo (1862), 50 Me. 385; Douthit v. Douthit, supra; Burns v. Nottingham (1871), 60 Ill. 531, Gilm. Cas. 459 (must be a final balance). 11 In Spear v. Newell, supra, the court in going over the list of common law actions to see if there was one applicable, said that the common law action of account would not an investigation and have stated the result showing a balance due to one of the partners, the chief objection to a suit at law is obviated and it may therefore be maintained. The codes of procedure have not in general changed the rule,12 nor is it dealt with by the Uniform Partnership Act. § 205. When rule does not apply-Single completed transaction. The general rule, moreover, has been held not to apply where the partnership was a special one, for a single and finished transaction only, or where all of the partnership affairs have been settled except a single transaction.18 § 206. When relation was not a partnership Joint ventures. So, finally, if the relation in question was not that of partnership, any rule applicable to that situation only would obviously not operate. Thus with regard to those situations which, as has been seen,14 are sometimes said to be "joint ventures" rather than partnerships, it has been held in a number of cases that actions at law could be maintained by one associate against another, and that the rule applicable to partner lie since (in this case) the defendant had received nothing; covenant would not lie because there was no agreement under seal; assumpsit would not lie because there was no liquidated or settled balance. The common law action of account render is now generally obsolete though it seems to be retained, in a modified form at least, in a few states. 12 See Emery v. Pease (1859), 20 N. Y. 62. 13 See Fry v. Potter (1880), 12 R. I. 542, Mechem's Cas. 882; Kutz v. Dreibelbis (1880), 126 Pa. 335, 17 Atl. 609; Welch v. Miller (1904), 210 Pa. 204, 59 Atl. 1065; Wheeler v. Arnold (1874), 30 Mich. 304; Clarke v. Mills (1887), 36 Kan. 393, 13 Pac. 569, Mechem's Cas. 884, Gilm. Cas. 458; Crittenden v. Cobb Court of equity will not, it is said, take jurisdiction where accounts are simple and may therefore be settled at law: Lesley v. Rosson (1860), 39 Miss. 368, 77 Am. D. 679, but it is doubtful if this was a case of a partnership at all. 14 See ante, §§ 16, 43. ship did not prevent.15 A number of cases, however, have held actions in equity permissible in such cases.16 § 207. One partner may sue another at law upon claim connected with but not constituting partnership transactions.b. But there is a large class of cases involving matters which, though they may in some way be connected with the partnership, do not constitute partnership transactions, but are individual transactions between particular partners, and as to these an action at law may often be maintained. It is the characteristic of these cases that the injury is to the partner as an individual and not to the firm as such. Thus § 208. As for not forming partnership as agreed.-A breach of an agreement to enter into partnership, or to permit a person to become partner, may furnish the basis of an action. at law, because here, though a partnership was contemplated, it was never created, and there can consequently be no partnership transactions involved, and no necessity for an accounting.17 § 209. Or for dissolving contrary to agreement.-For like reasons, an action at law may be maintained by one partner to recover damages against another who has dissolved the partnership in violation of his agreement that it should continue for a definite term.1 18 15 See Clark v. Sidway (1891), 142 U. S. 682, 12 S. Ct. 327, 35 L. ed. 1157; Bruce v. Hastings (1868), 41 Vt. 380, 98 Am. Dec. 592; Jordan v. Soule (1887), 79 Me. 590, 12 Atl. 786, Haven V. Mehlgarten (1857), 19 Ill. 91. 16 See ante, §§ 16, 43, note. 17 See Hill v. Palmer (1882), 56 Wis. 123, 14 N. W. 20, 43 Am. Rep. 703, Mechem's Cas. 303; Treat v. Hiles (1887), 68 Wis. 344, 32 N. W. 517, 60 Am. R. 858. See also Ramsay v. Meade (1906), 37 Colo. 465, 86 Pac. 1018. For similar reasons an action at law will lie to recover for services performed under an agreement to launch a partnership: Lawson v. Glass (1881), 6 Colo. 134. 18 See Farwell v. Wilcox (1918), Okla. -, 175 Pac. 936, 4 A. L. R. 156, and note; McCollum v. Carlucci (1903), 206 Pa. 312, 55 Atl. 979, 98 Am. St. R. 780; Bagley v. Smith (1853), 10 N. Y. 489, 61 Am. Dec. 756, Mechem's Cas. 305; Greenham v. Gray (1855), 4 Ir. Com. L. 501. See, also, Ramsay v. Meade, supra. Compare Ryder v. Wilcox (1869), 103 Mass. 24. See also Uniform Partnership Act, sec. 38(2) (b). |