converted into personalty; and so, if three persons contract that certain. real property belonging to them shall be sold, and the proceeds be divided among them, so that each one of them has a right to insist that it shall be sold, and that he shall have his share of the proceeds as money, that real property is in equity converted into personalty, and if any one of them dies while the property remains unsold his share is personalty, as between his heir and his personal representatives.

Now, if it be established that by the contract of partnership all the partnership property is to be sold at the dissolution of the partnership, then any real property which has become the property of the partnership becomes, by force of the partnership contract, converted into personalty; and that, not merely as between the partners, to the extent of discharging the partnership debts, but as between the real and personal representatives of any deceased partner.

That this is so I should, in the absence of all authority, have decided upon the principle; and when I find, notwithstanding the decision of Lord Thurlow, followed by Sir W. Grant, that Lord Eldon was clearly of opinion that real property purchased by a partnership for the part, nership purposes and with the partnership funds becomes personalty, that Sir J. Leach repeatedly so decided without any doubt, and that Sir L. Shadwell also decided the last case in the same way, I can have no difficulty in coming to the conclusion that,' whenever a partnership purchase real estate for the partnership purposes and with the partnership funds, it is, as between the real and personal representatives of the partners, personal estate.

Now, this case is not the ordinary case where persons carrying on the ordinary business of a commercial or manufacturing partnership have found it necessary to purchase real estate for partnership purposes. That is not the case. Here they bought land as the stock in trade, by the sale of which they were to make their profits. The land was not in the nature of plant, but was the very subject-matter of their trade. Does that make any difference? If it does, I think it is in favor of treating it as converted, because the real estate is here clearly put in the same position as ordinary stock in trade; and it appears to me that, if I entertained more doubt than I do on the general question, that doubt would in this case be very much diminished by the circumstance that here the real estate is itself bought for the very purpose of selling it again. The very intention of the partnership was to buy land to resell it. That is their very contract, and without selling the land again there would be no partnership business. The partnership was for the purpose of buying land to parcel it out in plots, and to sell them again, and each partner had a right to say he would. have that contract carried out. We have here what Lord Thurlow wanted in Thornton v. Dixon, an actual contract that the land shall be sold.

I must, therefore, decide that the share of A. Darby was personal estate, and passed to his personal representatives.

DYER v. CLARK et al.

(Supreme Judicial Court of Massachusetts, 1843. 5 Metc. 562, 39 Am. Dec. 697.)

Bill in equity. The plaintiff is surviving partner of the firm of Burleigh & Dyer, and the defendants are the administrator, the widow, and the minor children of the deceased partner, Stevens Burleigh. The case was heard on the bill, the answer, and a master's report.

SHAW, C. J. This is a suit in equity by the surviving partner of the firm of Burleigh & Dyer, established by articles of copartnership under seal, for the purpose of carrying on the business of distillers. The principal question is one which has arisen in several other cases, and is this: Whether real estate, purchased by copartners from partnership funds, to be held, used, and occupied for partnership purposes, is to be deemed in all respects real estate in this commonwealth, to vest in the partners severally as tenants in common, so that, on the decease of either, his share will descend to his heirs, be chargeable with his wife's dower, and in all respects held and treated as real estate, held by the deceased partner as a tenant in common; or whether it shall be regarded as quasi personal property, so as to be held and appropriated as personal property, first, to the liquidation and discharge of the partnership debts, and to the adjustment of the partnership account, and payment of the amount due, if any, to the surviving partner, before it shall go to the widow and heirs of the deceased partner. This is a new question here, and comes now to be decided for the first time.

There are some principles, bearing upon the result, which seem to be well settled, and may tend to establish the grounds of equity and law upon which the decision must be made. It is considered as established law that partnership property must first be applied to the payment of partnership debts, and therefore that an attachment of partnership property for a partnership debt, though subsequent in time, will take precedence of a prior attachment of the same property for the debt of one of the partners. It is also considered that, however extensive the partnership may be, though the partners may hold a large amount and great variety of property, and owe many debts, the real and actual interest of each partner in the partnership stock is the net balance which will be coming to him after payment of all the partnership debts and a just settlement of the account between himself and his partner or partners. 1 Ves. Sr. 242.

The time of the dissolution of a partnership fixes the time at which the account is to be taken, in order to ascertain the relative rights of the partners and their respective shares in the joint fund. The debts may be numerous, and the funds widely dispersed and difficult of collection; and therefore much time may elapse before the affairs can be wound up, the debts paid, and the surplus put in a condi

tion to be divided. But, whatever time may elapse before the final settlement can be practically made, that settlement, when made, must relate back to the time when the partnership was dissolved, to determine the relative interests of the partners in the fund.

When, therefore, one of the partners dies, which is de facto a dissolution of the partnership, it seems to be the dictate of natural equity that the separate creditors of the deceased partner, the widow, heirs, legatees, and all others claiming a derivative title to the property of the deceased and standing on his rights, should take exactly the same measure of justice as such partner himself would have taken, had the partnership been dissolved in his lifetime; and such interest would be the net balance of the account, as above stated.

Such, indeed, is the result of the application of the well-known rules of law, when the partnership stock and property consist of personal estate only; and, as partnerships were formed mainly for the promotion of mercantile transactions, the stock commonly consisted of cash, merchandise, securities, and other personal property, and therefore the rules of law governing that relation would naturally be framed with more especial reference to that species of property. It is therefore held that on the decease of one of the partners, as the surviving partner stands chargeable with the whole of the partnership debts, the interest of the partners in the chattels and choses in action shall be deemed so far a joint tenancy as to enable the surviving partner to take the property by survivorship, for all purposes of holding and administering the estate, until the effects are reduced to money and the debts paid, though, for the purpose of encouraging trade, it is held that the harsh doctrine of the jus accrescendi, which is an incident of joint tenancy at the common law, as well in real as in personal estate, shall not apply to such partnership property; but, on the contrary, when the debts are all paid, the effects of the partnership reduced to money, and the purposes of the partnership accomplished, the surviving partner shall be held to account with the representatives of the deceased for his just share of the partnership funds.

Then the question is whether there is anything so peculiar in the nature and characteristics of real estate as to prevent these broad principles of equity from applying to it. So long as real estate is governed by the strict rules of the common law, there would be, certainly, great difficulty in shaping the tenure of the legal estate in such form as to accomplish these objects. Should the partners take their conveyance in such mode as to create a joint tenancy, as they still may, though contrary to the policy of our law, still it would not accomplish the purposes of the parties, first, because either joint tenant might, at his option, break the joint tenancy and defeat the right of survivorship by an alienation of his estate, or (what would be still more objectionable) the right of survivorship at the common law would give the whole. estate to the survivor, without liability to account, and thus wholly de

feat the claims of the separate creditors, and of the widow and heirs of the deceased partner.

But we are of opinion that the object may be accomplished in equity, so as to secure all parties in their just rights, by considering the legal estate as held in trust for the purpose of the partnership; and, since this court has been fully empowered to take cognizance of all implied as well as express trusts and carry them into effect, there is no difficulty, but, on the contrary, great fitness, in adopting the rules of equity on the subject which have been adopted for the like purpose in England and in some of our sister states. And it appears to us that, considering the nature of a partnership and the mutual confidence in each other which that relation implies, it is not putting a forced construction upon their act and intent to hold that, when property is purchased in the name of the partners out of partnership funds and for partnership use, though by force of the common law they take the legal estate as tenants in common, yet that each is under a conscientious obligation to hold that legal estate until the purposes for which it was so purchased are accomplished, and to appropriate it to those purposes, by first applying it to the payment of the partnership debts, for which both his partner and he himself are liable, and until he has come to a just account with his partner. Each has an equitable interest in that portion of the legal estate held by the other until the debts obligatory on both are paid and his own share of the outlay for partnership stock is restored to him. This mutual equity of the parties is greatly strengthened by the consideration that partners may have contributed to the capital stock in unequal proportions, or, indeed, that one may have advanced the whole. Take the case of capitalist, who is willing to put in money, but wishes to take no active concern in the conduct of business, and a man who has skill, capacity, integrity, and industry to make him a most useful active partner, but without property, and they form a partnership. Suppose real estate, necessary to the carrying on of the business of the partnership, should be purchased out of the capital stock and on partnership account, and a deed taken to them as partners, without any special provisions. Credit is obtained for the firm, as well on the real estate as the other property of the firm. What are the true equitable rights of the partners, as resulting from their presumed intentions, in such real estate? Is not the share of each to stand pledged to the other, and has not each an equitable lien on the estate, requiring that it shall be held and appropriated, first to pay the joint debt, then to repay the partner who advanced the capital, before it shall be applied to the separate use of either of the partners? The creditors have an interest, indirectly, in the same appropriation, not because they have any lien, legal or equitable (2 Story on Eq. § 1253), upon the property itself, but on the equitable principle which determines that the real estate so held shall be deemed to constitute part of the fund from which their debts are to be paid before it can legally or honestly be diverted to the private use of the

partners. Suppose this trust is not implied; what would be the condition of the parties, in the case supposed, in the various contingencies. which might happen? Suppose the elder and wealthy partner were to die. The legal estate descends to his heirs, clothed with no trust in favor of the surviving partner. The latter, without property of his own, and relying on the joint fund, which, if made liable, is sufficient for the purpose, is left to pay the whole of the debt, whilst a portion, and perhaps a large portion, of the fund bound for its payment is withdrawn. Or suppose the younger partner were to die, and his share of the legal estate should go to his creditors, wife, or children, and be withdrawn from the partnership fund; it would work manifest injustice to him who had furnished the fund from which it was purchased. But treating it as a trust, the rights of all parties will be preserved. The legal estate will go to those entitled to it, subject only to a trust and equitable lien to the surviving partner, by which so much of it shall stand charged as may be necessary to accomplish the purposes for which they purchased it. To this extent, and no further, will it be bound; and subject to this all those will take who are entitled to the property, namely, the creditors, widow, heirs, and all others standing on the rights of the deceased partner. *

*

On the facts of the present case, we are of opinion that the real estate in question was a part of the capital stock, purchased out of the partnership funds, for the partnership use, and for the account of the firm.

The plaintiff has received a sum in rents and profits that have accrued since his partner's death. The defendant Clark, as administrator of Burleigh, the deceased partner, has sold an undivided half of the property as his, under a license, and with the assent of the plaintiff. The widow joined to release her dower, for a nominal sum. But we cannot perceive that the right of the widow is distinguishable from that of the creditors and heirs of the deceased partner. As far as this estate was held in trust by her deceased husband, she was not entitled to dower. For all beyond that she will be entitled, because he held it as legal estate, unless she is barred by her release, of which we give no opinion.

The plaintiff is entitled to a decree charging the amount of rents and profits in his hands, and so much of the proceeds of the sale made by the administrator, as will be sufficient to discharge the balance of the partnership account; and the rest of the proceeds will remain in the hands of Clark, the administrator of Burleigh, to be distributed according to law.1

1 Hubbard et al. v. Winsor et al., 15 Mich. 147 (1866), Campbell, J.: "Bill to restrain the collection of certain taxes. * * * The grounds set up for relief are that real estate belonging to the complainants was assessed to the partnership. We think the objections concerning the mode of as

sessing real estate are not tenable. It appears that the land was all handed in on one list with other property belonging to the firm, and, as it is alleged in the bill to be held in joint tenancy, there could be no assessment of shares