Page:Harvard Law Review Volume 4.djvu/351

335 NOTES. , 335 liability disappears. Add two plus quantities together and obtain a minus quantity ! In other words, hypothesis number (3) is, as Mr. Murray applies it in the case of bankruptcy, absolutely inconsistent with numbers (i) and (2). The logical result of numbers (i) and (2) would seem to be the Scotch rule. Moreover, in obtaining this result we make no assump- tion that the partnership is a "distinct person." For we do not say that the firm is the debtor. We adhere to Mr. Murray's statement that the in- dividual partners are the debtors, and we merely insist on adhering also to his second statement, namely, that certain property of these debtors is primarily applicable to certain debts of theirs. In short, the conception seems to be exactly analogous to the case of a creditor who has specific property of his debtor's as security; and here it*is undoubted law that in bankruptcy the creditor may exhaust the whole of his security and come upon the rest of his debtor's property, pari passu with the other creditors, for the amount of his debt which remains unpaid. If partnership prop- erty, therefore, is primarily applicable, apply it as far as it will go, and come on the separate estate for the rest. If the estates are applied in the order indicated, the conditions of number (3) cannot arise; and, even though they are applied in the reverse order, number (3) can have no place, unless the debts have been paid in full or the partnership property is more than sufficient to pay what is left of them. If, however, the debts have been paid in full, it follows, as a matter of course, from the fact that partnership property is primarily liable, that whatever is left of the part- nership property must go to replace that part of the separate property which was taken to pay the debts in question. In short, number (3), in so far as it is valid as a necessary deduction from numbers (i) and (2), gives no support whatever to Mr. Murray's rule; while, as applied in Mr. Murray's rule, it is inconsistent with num- bers (i) and (2). Having apparently arrived at the Scotch rule, let us consider Mr. Mur- ray's objections to it. He says that it unduly favors partnership creditors and produces great hardship to the separate creditors. We admit that in many cases the result of the Scotch rule is that partnership creditors re- ceive large dividends, while separate creditors receive exceedingly small ones. But what more natural than that A, who confessedly has a claim against two funds, should be in a better position than B, who has a claim on but one of them? It is of course just that A should be compelled to exhaust his own fund before competing with B ; but beyond this A's claim against the separate estate is as good as B's, and we fail to see any ''un- fairness " in letting him enforce it on equal terms wdth B. The English rule seems to be founded on a misunderstanding of this principle of mar- shalling. A, though only partially satisfied out of the partnership prop- erty, is deprived altogether of his right against the separate property, until B is wholly satisfied. The injustice of such a rule is apparent, and is it not also apparent that anything short of the Scotch rule is equally indefensible ? Mr. Murray, however, urges, as a further objection to the Scotch rule, that it necessitates the assumption that a partnership is a ''distinct person," and that this theory is irreconcilable with English law. Of course the Scotch rule is one of the necessary consequences of the assumption alluded to; but, if our deductions have been correct, it is also a necessary conse-