Page:The American Cyclopædia (1879) Volume XIII.djvu/148

 138 PARTNERSHIP nership funds, for partnership purposes, and is used for these purposes. Then it will be treated as part of the capital of the firm, and just as personal property is treated, so far as liability for the partnership debts is concerned, and until the remaining balance is ascertained and divided among the partners ; but then its character as real estate is restored with all the incidents of dower and the like. The legal title must always be traced through the rec- ords. But if the property be, for example, in the name of one partner, he will be regarded as holding it in trust for the partnership ; and if he die, his heir will be held as trustee, and only so much as is not wanted to pay the debts of the firm, or satisfy the claims of the other partners, will be permitted to remain in his hands, as his own and free from the obliga- tions of the trust. So, the widow has her dower in the real estate after debts and claims are satisfied, and not before. The good will of a partnership is, for many purposes, a part of its property, and may be transferred by sale or assigned for the benefit of creditors; and it would undoubtedly pass to the assignees under insolvency, by operation of law. No partner, and no majority, can introduce a new partner without the consent of the others. A partner may sell out all his interest in a part- nership, or may assign it as security for a debt ; but the purchaser or assignee only acquires a right to have the balance due paid to him, and cannot acquire merely by the transfer a right to become a partner. A partnership may be formed by an instrument under seal, which is perhaps the most common, or by a written instrument without seal, or by oral agreement, without any writing. In general, a partnership is formed by an agreement that the parties shall enter together into a certain business, and share the profits and losses. In the absence of special stipulations, the partners share equal- ly, but may stipulate about this as they will. So the agreement may provide for its duration, but if the period appointed for its termination arrives, and it continues in fact, and without a new bargain, it will be held to continue upon the former terms. Persons may be partners as to third persons who deal with the firm, while they are not partners as between them- selves. Thus, A may agree with B and that A shall render certain assistance to the firm of B and 0, either of capital, credit, or skill, and not be held out as a partner, nor be a partner, and own a certain proportion of the profits, and not be liable for any share of the losses. Then, if the firm be not insolvent, A may claim of B and his share of the profits, and, if obliged to pay any debt or loss of the firm, may claim compensation from B and C. But nevertheless, he will be just as liable to the cred- itors of the firm as B or ; and all his prop- erty will be as liable as their property. There have been many cases turning on this point, but the principle of law is clear and certain, however difficult it may sometimes be to apply it. This principle is, that whether a person is a partner in the firm in regard to the rights and obligations among the partners, depends upon the agreements they have made; but, whatever these agreements are, he is a part- ner as to third persons, that is, he incurs as to them all the responsibilities of a partner, in two ways, and on two grounds. One is, that he was, by his own consent, or by his own fault, held out to the world as a partner, so as to justify the creditors of the firm in deal- ing with it as if he were a partner ; and the second is, that, without being so known or held out, he participates in fact in the profits of the concern. For it is a nearly universal rule, that one who participates in the profits as such is liable for the losses. The principal and most difficult question which has arisen on this subject, relates to clerks or salesmen who are paid by a share in the profits. For- merly it was held, that if such a person was paid, for example, " one twentieth part of the profits," this made him a partner, and liable as such ; but if he was paid " a sum equal to one twentieth part of the profits," this was only a payment of wages, which was indeed measured by the profits, but did not make him a partner. But this technical and irrational distinction has passed away; and now the question in every such case would be: Does his bargain with the partners merely provide that his compensation shall be measured by the profits ? for then he is only a person em- ployed by the firm and not a partner ; or does the bargain give him a property in the capital or in the profits? for this would make him liable as a partner. In other words, if the alleged partner has a right and property in one twentieth (or any other proportion) of the profits, while they remain undivided, he is a partner and liable as such ; but if he has no such right or property, but only a claim against the firm for so such money as, upon a settle- ment of the firm's profits, one twentieth of them shall amount to, he is not a partner, and has none of the liabilities of that relation. It is a general rule, both in England and in the United States, that no partner can sue another at law on any matter growing out of and con- nected with the transactions of the partner- ship business, and dependent for its determina- tion upon the partnership accounts. The prin- cipal reason for this is, that whether one part- ner owes another or has a claim against him must depend upon a settlement of all the busi- ness and an adjustment of all the accounts. This a court of equity can direct and super- vise by its machinery of masters, receivers, and the like, although a court of law cannot ; and therefore it is now settled, as a general rule, that questions between partners about partnership affairs must go before a court of equity and not a court of law. But a partner may sue a partner at law in any matter not involving the partnership accounts ; and so if a distinct part thereof is severed from the rest,