of the firm; and, also, those who contract with a partner in his separate capacity place reliance on his various resources or means, whether individual or joint. And inasmuch as individual debts are often contracted to raise means which are put into the business of a partnership, and also partnership effects often withdrawn from the firm and appropriated to the separate use of the partners, it cannot be practically true that the separate estate has been benefited to the extent of every credit given to each individual partner, nor that the joint estate has retained from the separate estate of each partner the benefit of every credit given to the firm." The court, however, concluded that the rule was well established, saying: "Some general rule is necessary, and that must rest on the basis of the unalterable preference of the partnership creditors in the joint effects, and their further right to some claim in the separate property of each of the several partners. The preference, therefore, of the individual creditors of a partner in the distribution of his separate estate, results as a principle of equity from the preference of partnership creditors in the partnership funds, and their advantage in having different funds to resort to, while the individual creditors have but one." But whether the reasons assigned to the rule are satisfactory or not, the rule itself seems to be established by the clear weight of authority.

It is unqualifiedly adopted by the Federal Bankruptcy Act,52 and by the Uniform Partnership Act,58 as has been seen.

§ 454. Same subject-Contrary views.-But notwithstanding the quite general concurrence in the rule giving each class of creditors priority in the respective funds, it has met with some forcible dissent,54 and upon principle it is difficult to sustain it.

52 Sec. 5, subd. f. quoted ante, note 31 449.

53 Sec. 40, subd. h. quoted ante, note 32 449.

54 See Hutzler v. Phillips (1887), 26 S. C. 136, 1 S. E. 502, 4 Am. St. R. 687; Blair v. Black (1889), 31 S. C. 346, 9 S. E. 1033, 17 Am. St. R. 30, Mechem's Cas. 644; Pettyjohn

v. Woodruff (1890), 86 Va. 478, 10 S. E. 715; Freeport Stone Co. v. Carey (1896), 42 W. Va. 276, 26 S. E. 183; Bardwell v. Perry (1847), 19 Vt. 292, 47 Am. Dec. 687; Gueringer v. Creditors (1881), 33 La. Ann. 1279, (see also Miller v. N. O. Fertilizer Co. (1908), 211 U. S. 496, 29 S. Ct. 176); Camp v. Grant

The true rule, from the standpoint of principle, would seem to be that inasmuch as each partner is individually liable for the partnership debts, the creditors of the firm (and therefore of each partner as well) are entitled to share equally with the separate creditors in the separate assets of the partners, at least after exhausting the partnership assets. The basis of this qualification is found in the fact that the partnership creditor has recourse to two funds (i. e., the partnership assets and the individual assets), while the individual creditor has recourse to but one fund, namely, the individual assets; and it is a principle of equity that where one creditor has access to two funds while another creditor has access to but one, the former shall exhaust the separate fund before resorting to the common fund. Having done so, however, without obtaining payment in full, he may then resort to the other fund.

In Kentucky a modified application of this principle is made whereby when the partnership creditor claims priority in and has secured a percentage of his claim out of the partnership assets, the individual creditor may take a similar percentage out of the individual assets; the residue of the individual assets, if any, will then be distributed pro rata among the partnership and the individual creditors.55

§ 455. Same subject-How where there are individual but no partnership assets. But either rule giving the individual ereditors a priority in the individual assets, so far as it rests upon equitable considerations, applies only where there are two funds. Thus, where there are individual assets but no partner

(1851), 21 Conn. 41, 54 Am. Dec. 321; Robinson V. Security Co. (1913), 87 Conn. 268, 87 Atl. 879, Ann. Cas. 1915 C, 1170, to the effect that partnership creditors may share equally with individual creditors in the separate assets.

55 See Northern Bank of Ky. v. Keizer (1865), 2 Duv. (Ky.) 169, Mechem's Cas. 650; Fayette Nat. Bank v. Kenney (1880), 79 Ky. 133, 2 Ky. Law R. 35, Mechem's Cas.

ship assets and no solvent partner, it has usually been held that the partnership creditors may share equally with the individual creditors in the separate assets of the partner, though there are holdings to the contrary.56

Whether the partnership creditors may so share in the individual assets under the provisions of the Federal Bankruptcy Act has been the subject of much dispute, but it has now been authoritatively decided that they may not.57

§ 456. Same subject-Firm cannot compete with individual creditors. Passing next from the right of partnership creditors as such to compete with the individual creditors in the separate estate of one partner, the question arises whether, if that partner was indebted to the partnership, the latter or those who represent it can, in a judicial distribution of the assets, compete with the individual creditors of that partner in the

distribution of his assets. As to this, the general rule is that the partnership or those who represent it cannot be permitted to compete with the separate creditors of one partner in the distribution of his estate,58

An exception to the rule has been made where the claim of the partnership against the partner is founded upon his wrongful and fraudulent appropriation of firm assets to his own use.59

Although the Uniform Partnership Act seems to be opposed,60 it has usually been held that a surviving partner who has paid the partnership debts may, as to any deficiency left after applying the partnership assets, have a personal claim for a pro rata part against the estate of the deceased partner, upon which he may share pari passu with the individual creditors.61

§ 457. Partner competing with partnership creditors in individual assets. Where the partnership creditors may reach the separate estate of one partner (as where he has no individual creditors, etc.) another partner who has a claim against that partner may not compete with the partnership creditors.62 But if his claim were a negotiable one, his bona fide transferee for value might compete, and if there had been a novation a transferee could compete although the claim were not negotiable.

§ 458. Obtaining claims against both estates by contract. While it is thus generally true that the joint and the

58 See Read v. Bailey (1877), 3 App. Cas. 94, Ames' Cas. 409; In re Hamilton (1880), 1 Fed. 800; Cowan V. Gill (1883), 11 Lea (Tenn.), 674; Lodge v. Fendal (1790), 1 Vesey, Jr. 166, Ames' Cas. 394. Contra, Bird v. Bird (1885), 77 Me. 499, 1 Atl. 455.

This rule seems not to be altered by the Bankruptey Act, § 5 g. See In re Telfer (1910), 106 C. C. A. 366, 184 Fed. 224; In re Effinger (1910), 184 Fed. 728.

59 See Read v. Bailey, supra; Ex parte Sillitoe (1824), 1 Glyn & Jameson, 374, Ames' Cas. 428, Gilm.

Cas. 569; McElroy V. Allfree (1906), 131 Iowa 518, 108 N. W. 119, Gilm. Cas. 573.

60 See Sec. 40 (i).

61 See Olleman v. Reagan (1867), 28 Ind. 109; In re Ruby (1896), 24 Ont. App. 509; Payne v. Matthews (1836), 6 Paige (N. Y. Ch.) 19, 29 Am. Dec. 738; [contra is Kirby v. Carpenter (1849), 7 Barb. (N. Y.) 373]; Morris v. Morris (1848), 4 Gratt. (Va.) 293; In re Dell (1878), 5 Saw. (U. S. D. C.) 344, Ames' Cas. 419.

62 See Ex parte Topping (1864), 4 De Gex. J. & S. 551, Ames' Cas.

separate assets are reserved for creditors of their respective class, it is possible that a creditor may have secured both a partnership and an individual obligation which will entitle him to prove his claim against both the partnership and the individual estates. Thus it has been held, though there are also cases to the contrary, that a creditor holding a partnership note separately endorsed by one partner may, in case of insolvency, prove against both estates.63 A mere joint and several claim would be more questionable,64 and if the obligation were really a partnership one only, although signed in the individual names of the partners instead of in the firm name, it would be treated accordingly.65

§ 459. Application of assets when there was no ostensible partnership-When there was merely an ostensible but not an actual partnership.-Questions as to the proper application of the assets also arise where there was really a partnership between the parties, but there was none ostensibly, as where, of two partners, one was dormant and the other appeared to the public as

473, Gilm. Cas. 576; In re Head (1894), 1 Q. B. 638.

ette Nat. Bank v. Kenney (1880), 79 Ky. 133, 2 Ky. Law R. 35, Mechem's Cas. 653; Hill v. Cornwall (1894), 95 Ky. 512, 26 S. W. 540, 16 Ky. Law R. 97, Burd. Cas. 474. Compare In re Barnard (1886), 32 Ch. Div. 447.

63 See In re Farnum (1843), 8 Fed. Cas. 1057; In re Bradley (1871), 2 Biss. 515; In re Adams (1887), 29 Fed. 843; Williams Nat. Bank v. Hall (1893), 160 Mass. 171, 35 N. E. 666, Burd. Cas. 473; Fowlkes v. Bowers (1883), 79 Tenn. (11 Lea) 144; Union Nat. Bank v. Bank of Commerce (1880), 94 Ill. 271; Winslow v. Wallace (1888), 116 Ind. 317, 17 N. E. 923, 1 L. R. A. 179, Mechem's Cas. 658; Hawkins v. Mahoney (1898), 71 Minn. 155, 73 N. W. 720; In re Gray (1888), 111 N. Y. 404, 18 N. E. 719; Reed v. Bacon (1900), 175 Mass. 407, 56 N. E. 716; Anderson v. Stayton Bank (1916), 82 Oreg. 48. 357, 159 Pac. 1033. Contra: Fay

64 Under present Bankruptcy Act, held, not permissible: In re Mosier (1901), 112 Fed. 138. Under state insolvency statutes, permitted in Ex parte Nason (1880), 70 Me. 363. Compare Ex parte First Nat. Bank, id. 369. On tort claim permitted: Matter of Peck (1912), 206 N. Y. 55, 99 N. E. 258, 41 L. R. A. (N. S.) 1223, Ann. Cas. 1914 A 798.

65 See Adams V. Lumber Co. (1912), 120 C. C. A. 302, 202 Fed.