68

to contribute to losses sustained by the partnership, a duty to the partnership, not to his co-partners, for by Sec. 40 (a) (2) 69 the right to contributions is a partnership asset. Sec. 18 (b) requires the partnership, not the co-partners, to indemnify the partner in respect of certain payments.70 Sec. 21 makes the partner accountable to the partnership, not to his co-partners. 7 Sec. 35 speaks of the partner's power to bind the partnership, not his co-partners, after dissolution.72 These extracts seem more consistent with the entity than with the aggregate view of the nature of the partnership and illustrate the difficulty, if not impossibility, not only of writing and talking about the partnership, but of formulating its rights and obligations without treating it as a legal person.

It may be argued that the section which declares the partners to be co-owners of the partnership property is inconsistent with the recognition of the partnership as an entity.73 The answer to

68 Sec. 18. (Rules Determining Rights and Duties of Partners.) (a) Each partner . must contribute toward the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits.

69 Sec. 40. (Rules for Distribution.) (a) The assets of the partnership are: (I) the partnership property; (II) the contributions of the partners necessary for the payment of all the liabilities specified in clause (b) of this paragraph.

70 Sec. 18. (b) The partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its business or property.

71 Sec. 21. (Partner Accountable as a Fiduciary.) (1) Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property.

72 Sec. 35. (Power of Partner to Bind Partnership to Third Persons After Dissolution.) (1) If the partnership is not dissolved because it has become unlawful to carry on the business, a partner cannot, after dissolution, bind the partnership to third persons. . .

73 See definition, Sec. 6, n. 63.

Sec. 25. (Nature of a Partner's Right in Specific Partnership Property.) (1) A partner is co-owner with his partners of specific partnership property holding as tenant in partnership.

(2) The incidents of this tenancy are such that:

(a) A partner, subject to the provisions of this act and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners.

(b) A partner's right in specific partnership property is not assignable except in connection with the assignment of the rights of all the partners in the same property.

(c) A partner's right in specific partnership property is not subject to attachment

this suggestion is to be found in an analysis of the quality of ownership which under this Act is vested in the partners as

Co-owners.

"Ownership is merely a collective term denoting the aggregate of several independent rights. It has no meaning other than the sum of its component parts, and it admits of no other definition than an enumeration of these parts. Little difference of opinion exists respecting this enumeration. The rights which collectively constitute ownership are the right to possess, the right to use, the right to the produce, the right to waste, the right of disposition, whether during life or upon death, and the right to exclude all other persons from any interference with the thing owned. In the language of the Civilians, dominium includes jus possidendi, jus utendi, jus fruendi, jus abutendi, jus disponendi, and jus prohibendi." 74

Let us examine under each of these six heads the ownership of the partner as limited by the Act in this and other sections.

The partner may possess for partnership purposes and for such purposes only.75 Even the surviving partner or partners has no right to possess except for a partnership purpose.76 As he may rightfully possess only for partnership purposes, his possession when exercised is as agent for the partnership, what the Civilians call "alieno nomine." It appears, then, that possession is in the partnership.

As partnership property is permitted to become such for the purpose of being used in the partnership business, it follows that the partnership enjoys the use of partnership property.

Property acquired by the use of partnership funds or otherwise

or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws.

(d) On the death of a partner his right in specific partnership property vests in the surviving partner or partners, except where the deceased was the last surviving partner, when his right in such property vests in his legal representative. Such surviving partner or partners, or the legal representative of the last surviving partner, has no right to possess the partnership property for any but a partnership purpose. (e) A partner's right in specific partnership property is not subject to dower, curtesy, or allowances to widows, heirs, or next of kin.

74 HEARN, LEGAL RIGHTS AND DUTIES, 186.

75 Sec. 25 (2) (a), see n. 73.

76 Sec. 25 (2) (d), see n. 73.

is partnership property." Hence the produce of partnership property belongs to the partnership to the same extent as does the original fund.

As the use of partnership property within the scope of the firm business is a matter for the partnership to decide, it follows that the partnership may waste, i.e., change the form of the partnership property.

A partner cannot, acting singly, assign any right in specific partnership property; 78 nothing can be attached or seized on execution by his creditors; 79 on death his rights pass to the surviving partner. The partner has no power of disposition except as he is acting as agent for the partnership. The power of disposition is evidently in the partnership.

80

One partner could not recover against third persons for injury to his rights as co-owner of partnership property. The partnership may exclude the partner from possessing except for partnership purposes.

Of these six rights which constitute ownership it appears that none is held exclusively by the partners, and that the most important, the power of disposition, is held exclusively by the partnership. The nature of co-ownership by the partner under this Act is not such as to exclude the legal personality of the partnership, but on analysis appears rather to be in harmony with that theory than with any theory which denies the legal personality of the partnership. The right of ownership vested in the partner is no more than nominal, and it does not materially impair the ownership of partnership property by the partnership entity.

The conclusion is that while the Act does not explicitly adopt either the entity or aggregate view of the nature of the partnership, it ought to be very difficult for an open-minded court carefully analyzing the whole Act to hold that a partnership is not vested

77 Sec. 8. (Partnership Property.) (1) All property originally brought into the partnership stock or subsequently acquired, by purchase or otherwise, on account of the partnership is partnership property.

(2) Unless the contrary intention appears, property acquired with partnership funds is partnership property.

78 Sec. 25 (2) (b), see n. 73.

79 Sec. 25 (2) (c), see n. 73.

80 Sec. 25 (2) (d), see n. 73.

81 Sec. 9 (1), see n. 66.

with rights and obligations, and therefore a person before the law. But mistrust of codification and the habit of endeavoring to construe any statute so as not to change the common law may lead those courts which conceive that the partnership is not a legal person at common law to deny that it is made one by this Act, though in particular instances they will, as they have done in the past, treat it as if it were a legal person in order to accomplish justice unattainable in any other way. It seems likely that in matters not expressly covered by any provision of the Act, and which depend upon the nature of the partnership, different results will be reached by different courts, and so we shall not attain the uniformity sought for by the Act.

The most important matter in which this lack of uniformity can be foreseen is in regard to the rights of creditors to set aside dispositions of partnership property whereby they are hindered or delayed.82 At least four situations may arise, which are not provided for by the Act, which turn on the nature of the partnership, and as to which there is conflict among the state and federal decisions to such extent that it is impossible to say where is the weight of authority.

(1) The firm being insolvent applies its assets, or part of them, to pay a debt of the partners not a partnership debt.83

(2) The firm being insolvent applies its assets or part of them to the payment of separate debts of one or more partners.84

82 See W. H. Cowles, "The Firm as a Legal Person," 57 CENT. L. J. 343.

83 This has been held valid in the following cases: Victor v. Glover, 17 Wash. 37, 48 Pac. 788 (1897); Saunders v. Reilly, 105 N. Y. 12, 12 N. E. 170 (1887) (semble); Bernheimer v. Rindskopf, 116 N. Y. 428, 22 N. E. 1074 (1889); Farwell v. Huston, 151 Ill. 239, 37 N. E. 864 (1894); Carver Gin & Machine Co. v. Bannon & Co., 85 Tenn. 712, 4 S. W. 831 (1887); Couchman's Adm'r v. Maupin, 78 Ky. 33 (1879) (semble).

Contra, Cron v. Cron's Estate, 56 Mich. 2, 22 N. W. 94 (1885); Hilliker v. Francisco, 65 Mo. 598 (1877); Brownlee v. Lobenstein, 42 S. W. 467 (Tenn. Ch. App., 1897).

84 Held valid in the following cases: Boyd v. Arnold, 103 Ark. 105, 146 S. W. 118 (1912); Ellison v. Lucas, 87 Ga. 223, 13 S. E. 445 (1891) (semble); Hargodine & McKettrick Dry Goods Co. v. Belt, 74 Ill. App. 581 (1897); Smith v. Smith, 87 Ia. 93, 54 N. W. 73 (1893); Old Nat. Bank v. Heckman, 148 Ind. 490, 47 N. E. 953 (1897); Kincaid v. Nat. Wall Paper Co., 63 Kan. 288, 65 Pac. 247 (1901); Goddard Peck Grocery Company v. McCune, 122 Mo. 426, 25 S. W. 904 (1894); Robinson v. Allen, 85 Va. 721, 8 S. E. 835 (1889) (semble); Stahl v. Osmers, 31 Ore. 199, 49 Pac. 958 (1897); Sigler v. Knox County Bank, 8 Oh. St. 511 (1858); Wiggins v. Blackshear, 86 Tex. 665, 26 S. W. 939 (1894); Fitzpatrick v. Flannagan, 106 U. S.

(3) The firm being insolvent transfers its assets to a part

(4) The firm being insolvent divides its assets among the partners.86

Cases holding these transactions valid appear to proceed on the ground that there is no firm entity known to the law, that the property is that of the partners, that the obligations are those of the partners, that each partner as against his co-partner has a contractual right to have the firm assets applied to firm liabilities, that this right which is called "partner's equity" may be released, waived or transferred, and the creditor whose rights are merely

648 (1882); Huiskamp v. Moline Wagon Co., 121 U. S. 310 (1887); Sargent v. Blake, 160 Fed. 57 (1908).

Contra, on the ground that equity takes jurisdiction over a general assignment, Bartlett v. Meyer-Schmidt Grocer Co., 65 Ark. 290, 45 S. W. 1063 (1889): on the ground that such an act is fraudulent, Pritchett v. Pollock & Co., 82 Ala. 169, 2 So. 735 (1886); Keith v. Funk, 47 Ill. 272 (1868); Patterson & Co. v. Seaton, 70 Ia. 689, 28 N. W. 598 (1886); Collier v. Hanna, 71 Md. 253, 17 Atl. 1017 (1889); ClarkJewell-Wells Co. v. Tolsma, 151 Mich. 561, 115 N. W. 688 (1908); Bannister v. Miller, 54 N. J. Eq. 121, 32 Atl. 1066 (1895); James v. Vanzandt, 163 Pa. 171, 29 Atl. 879 (1894) (semble); Bedford v. McDonald, 102 Tenn. 358, 52 S. W. 157 (1899); Goodby v. Cary, 16 Fed. 316 (1883): on the ground that it is unlawful to destroy the derivative right of creditors worked out through the so-called partner's equity, Bank v. Durfey, 72 Miss. 971, 18 So. 456 (1895).

85 Held valid in the following cases: In re Suprenant, 217 Fed. 470, 472 (1914) (semble); Howe v. Lawrence, 9 Cush. (Mass.) 553 (1852) (insolvency not apparently known to firm); Russell v. McCord, Fed. Cas. 12,157 (1878); Reese & Heylin v. Bradford, 13 Ala. 837 (1848); Hanford v. Prouty, 133 Ill. 339, 24 N. E. 565 (1890); Armstrong v. Fahnestock, 19 Md. 58 (1862); Sanchez v. Goldfrank, 27 S. W. 204 (Tex. Civ. App. 1894).

Contra, Conroy v. Wood, 13 Cal. 626 (1859); Schleicher v. Walker, 28 Fla. 680, 686, 10 So. 33 (1891) (semble); Franklin Sugar Refining Co. v. Henderson, 86 Md. 452, 38 Atl. 991 (1897) (on the ground that partners cannot destroy derivative right of creditors); Roop v. Herron, 15 Neb. 73, 17 N. W. 353 (1883) (on the ground that the firm as a legal person is the owner of the assets); Bulger v. Rosa, 119 N. Y. 459, 465, 24 N. E. 853 (1890) (semble); Conaway's Adm'rs v. Stealey, 44 W. Va. 163, 28 S. E. 793 (1897); Saloy v. Albrecht, 17 La. Ann. 75 (1865); In re Denning, 114 Fed. 219 (1902); In re Terens, 175 Fed. 495 (1910) (interpreting terms of instrument of transfer as retaining "partner's equity"); Amundson v. Folsom, 219 Fed. 122 (1914) (actual intent to hinder creditors found as a fact).

86 Held valid: Sackett v. Rumbaugh, 45 Fed. 23, 33 (semble); Allen v. Center Valley Co., 21 Conn. 130 (1851); Bates v. Collender, 3 Dak. 256 (1883); Lee v. Bradley Fertilizer Co., 44 Fla. 787, 33 So. 456 (1902); Davis v. Smith, 113 N. C. 94, 18 S. E. 53 (1891); Singer Nimick & Co. v. Carpenter, 125 Ill. 117, 17 N. E. 761 (1888). Contra, In re Head, 114 Fed. 489 (1902), and also cases in second paragraph of preceding note. None of these lists purports to be complete.