Page:Harvard Law Review Volume 10.djvu/75

49 Harvard Law Review. Published monthly, during the Academic Year, by Harvard Law Students. SUBSCRIPTION PRICE. $2.50 PER ANNUM 35 CENTS PER NUMBER. Editorial Board. Robert G. Dodge, Editor-in-Chief. Herbert C. Lakin, Treasurer. Franklin M. Archer, William H. S. Kollmyer, Roland Gray, Arthur M. Marsh, Livingston Ham, James A. Pirce, Logan Hay, Edward Sandford, Harold D. Hazeltine, Harry U. Sims, Robert Homans, Lloyd W. Smith. Ostensible Partnerships. — Suppose that A and B hold themselves out as partners, but that as a matter of fact there is no partnership, and A is actually owner of all the property used in the business. What are the respective rights of attaching firm and separate creditors? If A hold B out as the ostensible owner of goods, it is held that a creditor of B who attaches the goods is preferred to a subsequently attaching creditor of A, and, conversely, a creditor of A who attaches the goods gets priority over a subsequently attaching creditor of B. As Cooper, C, remarks in Hillman v. Moore^ 3 Tenn. Ch. 454, " It is a race of diligence, and he who is first in time is first in right." If this rule applies where A holds B out as ostensible owner, why should it not apply where A holds out B and himself, under the guise of a partnership, as ostensible owners? If it be true that in such a case the first attaching creditor, whether he be creditor of the ostensible firm or of the actual owner, is pre- ferred, then it follows that, as the two sets of creditors have equal rights against the property used in the business of the ostensible firm, both sets would come in pari passu on this property in case of the bankruptcy of the true owners ; for bankruptcy or an assignment in insolvency operates as an attachment of the bankrupt's property for the benefit of his creditors. To hold that, on the bankruptcy of the actual owner, the creditors of the ostensible firm are entitled to preference in respect to the ostensible firm property on the ground that the actual owner is estopped to deny that such property is firm assets, works out justice as between the firm creditors and the true owners, but entirely disregards the rights of the separate creditors. Thesiger, L. J., says in Ex parte Hay'man, L. R. 8 Ch. D. 11: " The law relating to ostensible partnerships is founded on the doctrine of estoppel, and though the doctrine of estoppel might be perfectly good as between those who contftict with the joint creditors and the joint creditors themselves, I do not see why in the event of bankruptcy the estoppel should apply to the separate creditors whose rights before bankruptcy stand very much in the same position as those of joint creditors," — /. e, before bankruptcy they could seize property used in the business as separate property of the actual owners, and joint creditors could seize the 7