the case of a nominal or implied partner, who has no 32 actual interest in the trade or its profits, and he becomes responsible as a partner, by voluntarily suffering his name to appear to the world as a partner, by which means he lends to the partnership the sanction of his credit. (a) There is a just and marked distinction between partnership as respects the public, and partnership as respects the parties; and a person may be held liable as a partner to third persons, although the agreement does not create a partnership as between the parties themselves. (b) Though the law allows parties to regulate their concerns as they please in regard to each other, they cannot, by arrangement among themselves, control their responsibility to others; and it is not competent for a person, who partakes of the profits of a trade, however small his share of those profits may be, to withdraw himself from the obligations of a partner. (c) Each individual member is answerable in solido to the whole amount of the debts, without reference to the proportion of his interest, or to the nature of the stipulation between him and his associates. Even if it were the intention of the parties that they should not be partners, and the person to be charged was not to contribute either money or labor, or to receive any part of the profits, yet if he lends his name as a partner, or suffers his name to continue in the firm after he has ceased to be an actual partner, he is responsible to third persons as a partner, for he may induce third persons to give that credit to the firm which otherwise it *would not receive, nor perhaps deserve. This principle *33 (a) Guidon v. Robson, 2 Camp. 802; Young v. Axtell, cited in 2 H. Bl. 242; Porter, J., 5 La. (Miller), 408, 409; Fox v. Clifton, 6 Bing. 776. (b) Barry v. Nesham, 3 C. B. 641. It was held, that a participation in the profits, qua profits, created a partnership as to third persons, whatever the stipulation may be as between themselves. [But see 25, n. 1.] (c) Waugh v. Carver, 2 H. Bl. 235; Hesketh v. Blanchard, 4 East, 144. Nor can a partner exonerate himself from personal responsibility for the existing engagements of the company, by assigning or selling out his interest in the concern. Perring Ilone, 2 Carr. & P. 401. Washington, 8 Gratt. 248; Hill v. Voor- Mr. Lindley thinks that when a nominal partner need not join as plaintiff, he ought not to do so; for ex hypothesi he is no party to the contract sought to be enforced, and he has no interest in its subjectmatter. Lind. on P. 2d ed. 479. See Waite v. Dodge, 34 Vt. 181, 183. A nominal partner may be joined as defend. ant, as stated in the text. Smith v. Smith, 27 N. H. 244. of law inculcates good faith and ingenuous dealing, and is now regarded by the English courts as a fundamental doctrine. (a) It has been explicitly asserted with us, and is now incorporated in the jurisprudence of this country. (b) So strict is the law on this point, that even if executors, in the disinterested performance of a trust, continue the testator's share in a partnership concern in trade, for the benefit of his infant children, they may render themselves personally liable as dormant partners. (c)1 (3) Of Sharers in Profits. A person may be allowed, in special cases, to receive part of the profits of a business, without becoming a legal or responsible partner. (d) Thus a party may by agreement receive, by way of rent, a portion of the profits of (a) Hoare v. Dawes, Doug. 371; Grace v. Smith, 2 Wm. Bl. 998; Waugh v. Carver, 2 H. Bl. 235; Baker v. Charlton, Peake N. P. 80; Hesketh v. Blanchard, 4 East, 144; Ex parte Hamper, 17 Ves. 404; Ex parte Langdale, 18 Ves. 300; Carlen v. Drury, 1 Ves. & B. 154; Cheap v. Cramond, 4 B. & Ald. 663; Best, J., Smith v. Watson, 2 B. & C. 419; Lacy v. Woolcott, 2 Dowl. & Ry. 458. (b) Purviance v. M'Clintee, 6 Serg. & R. 259; Gill v. Kuhn, ib. 333; Thompson, J., in Post v. Kimberly, 9 Johns. 489; Dob v. Halsey, 16 Johns. 40; Shubrick v. Fisher, 2 Desaus. Ch. 148; Osborne v. Brennan, 2 Nott & M'Cord, 427. Mr. Justice Story (Partn. [§§ 36, 37]) prefers the Roman law, which did not create a partnership between the parties as to third persons, without their consent, or against the stipulations of their own contract. He is of opinion that the common law has pressed its principles on this subject to an extent not required by, even if it is consistent with, natural jus tice; and that it would have been better if no partnership should be deemed to exist, even as to third persons, unless such were the intention of the parties, or unless they had so held themselves out to the public. For the Roman law, see Dig. 17. 2. 44; Voet, ad Pand. 17. 2. 2. But if a dormant partner, when his name has not been announced, and no credit given to him personally, as a supposed member, he may withdraw without giving any notice to the public. Lacaze v. Sejour, 10 Rob. (La.) 144. (c) Wightman v. Townroe, 1 Maule & Selw. 412. The better way would be for the executors, in such cases, to have the trade carried on for the benefit of the infants, under the direction of the court of chancery, as has frequently been done in England. See 4 Johns. Ch. 627. (d) See supra, 25, n. (b) [& 1], as to a sharer of profits. 1 Executors. - Labouchere v. Tupper, 11 Moo. P. C. 198. See Liverpool Borough Bank v. Walker, 4 De G. & J. 24; Lucas . Williams, 3 Giff. 150. But it has been thought that none of the cases sustain the proposition that the execution of an article of partnership by an executor or trustee ipso facto renders him personally responsible without reference to other circumstances; Owens v. Mackall, 33 Md. 382, 394; and in England it has been held not enough to charge executors personally that they had received payments which were made partly on account of net profits due to their testator's estate, when it appeared that there was no capital employed in the business. Holme v. Hammor d, L. R. 7 Ex. 218, ante, 25, n. 1. As to liability of assets, post, 57, n. (a). a farm or tavern, without becoming a partner. (e) So, to allow a clerk or agent a portion of the profits of sales as a compensation for labor, or a factor a percentage on the amount of sales, does not render the agent or factor a partner, when it appears to be intended merely as a mode of payment adopted to increase and secure exertion, and when it is not understood to be an * interest in the profits in the character of profits, and * 34 there is no mutuality between the parties. A person in business may employ another as a subordinate, and agree to pay him a share of the profits, if any shall arise, without giving him the rights or liabilities of a partner. (a) So, seamen take a share, by agreement with the ship-owner, in the profits or gross proceeds of a whale fishery or coasting voyage, by way of compensation for their services; and shipments from this country to India upon half profits are usual, and the responsibility of partners has never been supposed to flow from such special agreements. (b) This distinction seems to be definitely established by a series of decisions, and it is not now to be questioned; and yet Lord Eldon regarded the distinction with regret, and mentioned it frequently, with pointed disapprobation, as being too refined and subtle, and the reason of which, he said, he could not well comprehend. (c)1 (e) Perrine v. Hankinson, 6 Halst. 181. (a) Burckle v. Eckart, 1 Denio, 337. (b) Dixon v. Cooper, 3 Wils. 40; Cheap v. Cramond, 4 B. & Ald. 670; Benjamin v. Porteus, 2 H. Bl. 590; Meyer v. Sharpe, 5 Taunt. 74; Hesketh v. Blanchard, 4 East, 144; Dry v. Boswell, 1 Camp. 329; Wilkinson v. Frasier, 4 Esp. 182; Mair v. Glennie, 4 Maule & Selw. 240; Geddes v. Wallace, 2 Bligh, 270; Muzzy v. Whitney, 10 Johns. 226; Rice v. Austin, 17 Mass. 206; Lowry v. Brooks, 2 M'Cord, 421; Baxter v. Rodman, 3 Pick. 435; Cutler v. Winsor, 6 Pick. 335; Hardin v. Foxcroft, 6 Greenl. 76; The Crusader, Ware, 437; Coffin v. Jenkins, 3 Story, 108, 112. See also supra, 25, n. (b) [& 1]; Loomis v. Marshall, 12 Conn. 69; Hazard v. Hazard, 1 Story, 371. See, also, Story on Partn. [§§ 41-49,] who has analyzed the principal cases on the subject. See, also, Pardessus, Droit Com. ii. n. 560; iii. n. 702; iv. n. 969; and Duvergier, Droit Civ. Franc. v. n. 48 to n. 56, for the French law as to the cases in which an agency, as distinct from a partnership, is within the intention of the parties. (c) Ex parte Hamper, 17 Ves. 404; Ex parte Rowlandson, 1 Rose, 89; Ex parte Watson, 19 Ves. 459; Miller v. Bartlett, 15 Serg. & R. 137. Mr. Carey, in his recent It is intelligible, however, on the doctrine of the later English cases, stated ante, 25, n. 1; and it is recognized in many American cases; ante, 30, n. 1, and cases cited; Edwards v. Tracy, 62 Penn. St. 374, 381; Burckle v. Eckhart, sup. n. (a). affirmed 3 Comst. 132; Felch v. Hall, 25 Barb. 13; Crawford v. Austin, 34 Md. 49; McMahon v. O'Donnell, 5 C. E. Green (N. J.), 306; Stocker v. Brockelbank, 3 Macn. & G. 250. VOL III 3 [ 33 ] (4) Of Limited Partners. - The English law does not admit of partnerships with a restricted responsibility. In many parts of Europe, limited partnerships are admitted, provided they be entered upon a register. (d) Thus in France, by the ordinance of 1673, limited partnerships (la Société en commandité) were established, by which one or more persons, responsible in solido as general partners, were associated with one or more sleeping partners, who furnished a certain proportion of capital, and were liable only to the extent of the funds furnished. This kind of partnership has been continued and regulated by the new Code of Commerce; (e) and it is likewise introduced into the 35 Louisianian code, under the title of partnership in com mendam. (a) It is supposed to be well calculated to bring dormant capital into active and useful employment; and this species of partnership has, accordingly, been authorized by statute in Massachusetts, Rhode Island, Connecticut, Vermont, New Jersey, Pennsylvania, Maryland, South Carolina, Georgia, Alabama, Florida, Mississippi, Indiana, and Michigan, as well as in New York.1 It is declared, in the latter state, (b) that a limited partnership for the transaction of any mercantile, mechanical, or manufacturing business within the state, (c) may consist of one or more persons jointly and severally responsible according to the existing laws, who are called general partners, and one or more persons who furnish certain funds to the common stock, and whose liability shall extend no further than the fund furnished, and who are called special partners. The names of the special treatise on the Law of Partnership, p. 11, vindicates the principle on which the above distinction is founded, and insists that it is perfectly clear and just. Collyer, also, in a still more recent treatise on the Law of Partnership, p. 17, is in favor of the reasonableness of the distinction in the cases where there is, and where there is not a mutual interest in the profits. (d) Lord Loughborough, 1 H. Bl. 48. (e) Répertoire de Jurisprudence, par Merlin, tit. Société, art. 2; Code de Commerce, b. 1, tit. 3, sec. 1. (a) Civil Code of Louisiana, art. 2810. (b) Laws of N. Y. April, 1822, sess. 45, c. 244, and sess. 50, c. 238; reënacted by N. Y. Revised Statutes, i. 764, with some slight variations. (c) In New York, New Jersey, Pennsylvania, Maryland, South Carolina, Alabama, Georgia, Florida, Mississippi, Connecticut, and Vermont, the business of banking and insurance is specially excepted. 1 The student must be referred to the in the text, as well as of many others, for statutes of the several states mentioned the present law on this subject. partners are not to be used in the firm, which shall contain the names of the general partners only, without the addition of the word company, or any other general term; nor are they to transact any business on account of the partnership, or be employed for that purpose as agents, attorneys, or otherwise; but they may, nevertheless, advise as to the management of the partnership concern. Before such a partnership can act, a registry thereof must be made in the clerk's office of the county, with an accompanying certificate, signed by the parties, and duly acknowledged, and containing the title of the firm, the general nature of the business, the names of the partners, the amount of capital furnished by the special partners, and the period of the partnership. The capital advanced by the special partners must be in cash, and an affidavit filed stating the fact. Publication must likewise be made for at least six weeks of the terms of the partnership, and due publication for four weeks of the dissolution of the partnership by the act of the parties prior to the time specified in the certificate. No such partnership can make assignments or transfers, or create any lien, with the intent to give preference to creditors. The special partners may receive an annual interest on the capital invested, provided there be no reduction of the original capital; but they cannot be permitted * to claim as creditors, in case of the insolvency of the *36 partnership. (a) It is easy to perceive, that the provisions of the act have been taken, in most of the essential points, from the French regulations in the commercial code; and it is the first instance in the history of the legislation of New York, that the statute law of any other country than that of Great Britain has been closely imitated and adopted. The provision for limited partnerships in the other states (and which were subsequent in point of time to that in New York) is essentially the same. (b) It is a general and well-established principle, that when a per (a) It has been ruled, in Hubbard v. Morgan, U. S. D. C. for N. Y., May, 1839, that the special partner must, at his peril, see that the law is complied with in all its essentials, or he will be liable as a general partner. [Haggerty v. Foster, 103 Mass. 17; 7 Am. L. Rev. 177; Haviland v. Chace, 39 Barb. 283; Richardson v. Hogg, 38 Penn. St. 153.] (b) If the partnership be a particular one, being formed for some business not of a commercial nature, such partnerships are called particular or ordinary partnerships in the Civil Code of Louisiana, art. 2806, 2807; and the partners are not bound in solido for the debts of the firm, unless such power be specially given; but each partner is bound for his share of the partnership debt. Ib. art. 2843, 2844; 12 Rob. (La.) 247. |