Taylor v. Rasch & Bernart. this country, almost without exception, unites in denouncing such a transaction as fraudulent and void, as to the other partners. Mr. Parsons, in his treatise on partnerships, makes use of the following language: "Instances of partners using the name or credit of the firm for their personal advantage and without authority, are constantly occurring; and as we have seen, when this is known to persons dealing with them, the firm are not held. Some difficulty often arises as to the proof of such knowledge on the part of the creditor. There is a rule, however, which rests on much authority, and is in itself reasonable, just and convenient, which would settle the most of these cases, or at least reduce them to mere questions of fact. It is, that whenever a party receives from any partner, in payment for a debt due from that partner only, whether the debt be created at the time" (thus including the very case here under consideration) "or before existing, or by way of settlement of, or security for, a debt or indebtedness, or obligation of the firm in any form" (thus putting this case and the others all in the same category), "the presumption of the law is that the partner gives this and the creditor receives it in fraud of the partnership, and has consequently no demand upon them." See also the numerous authorities cited by the author in the note. Also Story on Part'ps, sec. 132; Homer v. Wood, 11 Cush. 62, 64. It is competent, of course, for the defendants to rebut this presumption by showing the express or implied assent of the other partners to the arrangement. But without such showing the arrangement clearly cannot be upheld. In each of the numerous adjudicated cases cited by counsel, with but two exceptions, such assent, or its absence, constituted the basis of, or at least an essential element in the decision. The exceptional cases are Strong v. Fish, 13 Vt. 277, and Eaton v. Shaw, 17 Vt. 641. In these cases the subject of assent was not discussed or noticed, and the arrangement was upheld. The reasoning and conclusion, however, are entirely unsatisfactory, and I cannot regard them as sound. Taylor 7. Rasch & Bernart. In the latter case, chief justice Williams delivered a dissenting opinion, which I regard as laying down the law much more in accordance with the current of decisions. As at present appears the arrangement between Tillman and the defendants was not within the scope and course of the partnership business, which was known to the defendants, and was made without the knowledge, assent or approval of his copartners, and the same is therefore fraudulent and void as to them. The second ground of demurrer is therefore not sustained. The third ground of demurrer is, that if the arrangement was not valid, complainant has a complete remedy at law, and equity has no jurisdiction. Cases were cited upon the argument in which actions at law had been brought and sustained in such cases, but in none of them was the question raised. In no case, however, where there was a separate equity jurisdiction, in which the question was raised, has the action at law been maintained; and in nearly every case in which the question has been so raised, equity jurisdiction has been directly asserted or strongly intimated. In an action at law the defrauding partner must be made a party plaintiff, together with his copartners, and the action is denied on the familiar rule of law that a party to a fraudulent transaction cannot himself seek to set it aside. The remedy in such cases is to the innocent defrauded partners, which cannot be sought at law and can be sought only in equity. As we have seen, the arrangement between Tillman and the defendants was presumptively fraudulent. A fraudulent purchaser may be held a mere trustee for the innocent owners or part owners. 2 Story's Eq. Jur. sec. 265. The case here involves to same extent the litigation of partnership relations among the partners themselves. We have, therefore, these three grounds of equity jurisdiction, viz: fraud, trust and partnership. Sec. 1 Story's Eq. Jur. 681; Collyer on Part'p, sec. 643; Story on Part'p, sec. 238 and note 4; Jones v. Yates, 9 B. & C. 532; Greeley v. Wyeth, 10 N. H. 15, 19; Pennock v. Yeager, Taylor v. Rasch & Bernart. 5 Phila. Rep. 171; Homer v. Wood, 11 Cush. 62; Easterbrook v. Messersmith, 18 Wis. 445, 450; Fellows v. Wyman, 33 N. H. 351, 358. So much as to the rights and remedies of the partners in such cases. Here the remedy is sought by the assignee in bankruptcy of the firm for the benefit of creditors. Partnership creditors must be first paid out of the partnership property. Such preference, while it creates no lien, strictly speaking, on such property, may be worked out through the partners. In the ordinary creditors' bill the suit for that purpose is brought by the creditors themselves. The assignee in bankruptcy represents the creditors, and hence the suit is brought in his name. In fact, bankruptcy proceedings are in the nature of a general execution for all the creditors; and an effectual lien is created thereby for their benefit, to be enforced by and through the assignee. The creditors may pursue partnership property which has not been legally parted with into whosoever hands it may be. Under the present bankrupt law this must be done through the assignee. And where, as in this case, property has been placed beyond his reach by action at law, and the right thereto being, as we have seen, a right in equity merely, the same must be reached through the courts of equity, as is sought to be done in this case. "All rights in equity" of the bankrupts pass to the assignee by express provision of the bankrupt act, section fourteen. See 1 Story's Eq. Jur. sec. 675; 2 ib. 1253; Story on Part'p, secs. 97, 326, 360; Sands v. Codwise, 4 J. R. 536, 556; ex parte Stokes, 7 Ves. Jr. 408; Clements v. Moore, 6 Wall. 299, 312; Halbert v. Grant, 4 T. B. Monroe, 481; Mallock v. James, 13 Beasley, N. J. 126; Hoxie v. Carr, 1 Sum. 173, 183, 192; Miner v. Pierce, 38 Vt. 610; Hawkeye Woolen Mills v. Conklin, 26 Iowa, 422; Fleck v. Charron, 29 Md. 318; Cooker v. Cooker, 46 Me. 250, 259; Ferson v. Monroe, 21 N. H. 462; Benson v. Ela, 35 N. H. 463, 410; Tenny v. Johnson, 43 N. H. 144, 147. The third ground of demurrer is therefore not sustained. The demurrer is overruled with costs, and the defendants have leave to answer within thirty days.-October 3, 1871. In re Massachusetts Brick Company. UNITED STATES DISTRICT COURT-MASSACHUSETTS. The stockholders of a trading corporation agreed to lend money to the company in proportion to their several shares. One of them made the loan by giving his note, which the company endorsed and agreed with him to provide for at maturity. They failed to take up the note when it became due, and the promissor paid it within fourteen days after its maturity. Held, That there had been no suspension of the commercial paper of the company for fourteen days. Where stockholders were to advance money to the company in proportion to their interests, and did so advance it for some months, and all but one of them afterwards extended their loans for one year, in accordance with what the treasurer testified was an understanding at the time the loans were made, and the company paid all its trade debts as they matured, and were in good credit, whether the company could be properly considered insolvent, quere. At a meeting of the stockholders, who were also the principal creditors of the company, it was voted unanimously to give a mortgage to one of the stockholders for the excess of his previous advances above his proportion. The petitioner, who was a stockholder and creditor, was present and made no objection. Held, He was estopped to set up the mortgage as an act of bankruptcy by the corporation. In re MASSACHUSETTS BRICK COMPANY. The Massachusetts Brick Company was incorporated in May, eighteen hundred and sixty-nine, for the purpose of manufacturing bricks in Somerville and Medford, with a right to have a capital stock not exceeding five hundred thousand dollars, of which three hundred thousand dollars might be in real estate. The evidence tended to show that the capital stock had been fixed at four hundred thousand dollars, of which about three hundred and fifty thousand had been paid in, and that in July, eighteen hundred and seventy, it was found that so much of this had been invested in land and machinery that the operations of the company were embarrassed for the want of active capital. Thereupon, certain of the shareholders, of whom the petitioner was one, signed this agreement: "The undersigned, stockholders in the Massachusetts Brick Company, hereby agree to furnish the treasurer, in proportion to the amount of stock held by them, whatever money may be required to pay the present indebtedness, at ten per cent. interest per annum, provided In re Massachusetts Brick Company. that not over seventy-five dollars per share shall be required on the amount subscribed, to raise one hundred and fifty thousand dollars in full." The petitioner accordingly lent the treasurer of the corporation five thousand dollars, and took the note of the company at five months, as did others. Some of the stockholders lent their notes on four months, and took a receipt from the treasurer that the company was to pay them at maturity. When the note held by the petitioner came due in December, eighteen hundred and seventy, he agreed to extend the loan and lent the treasurer his note at four months, taking from him a receipt that the company were to provide payment for it at maturity, it being given for their accommodation. The petitioner offered evidence tending to show that he informed the treasurer that he should not renew the loaz again, but should expect the company to pay the note a maturity, which would be the fourth of April, eighteen hundred and seventy-one. The stockholders advanced different sums, not regulated precisely by the number of their shares, and Oliver Ames, the largest holder, advanced ninety thousand dollars, which was thirty thousand dollars more than his proportion. The treasurer testified that there was an understanding among the contributors, that the money should not be called for until the company should be able to pay it, and that they should all share alike. Early in eighteen hundred and seventy-one, at an adjournment of the annual meeting of the stockholders of the company, at which the petitioner was present, Mr. Ames presented a proposition: that if a mortgage were given him for the excess which he had advanced above his share, he would carry" sixty thousand dollars for one year, if the other stockholders would do likewise. This proposition was accepted unanimously. All the stockholders, excepting the petitioner, afterwards signed an agreement to extend their several debts, but he |