Nor does an agreement between partners that, in case of either of them retiring from the partnership business, or departing this life during the continuance thereof, the continuing or surviving partner or partners A transfer of partnership property to one shall not be compelled by the retiring partpartner in consideration of his assuming the ner, or by representatives of the deceased partnership debts, making it his separate partner, to repay to him or them his or property, however, cannot be taken advan- their share in the copartnership business tage of by a creditor of the firm in jurisdic- immediately; but the clear balance, as astions in which a creditor must join in an certained from the last stock taking, due assumption in order to be benefited by it, to the retiring or deceased partner, together by proving his debt against property so with any additional capital, shall be repaid transferred, in the hands of an assignee in out of the business by the continuing or insolvency of the purchaser, where he has surviving partners by instalments until the not agreed to accept the continuing partner whole amount shall be fully paid or disindividually as his debtor. Robb v. Mudge, | charged,-change the nature of such liabil

And where a partnership is dissolved, one b. As affecting rights to priority of pay-partner retiring and assigning all his share

And where a partnership is dissolved, and one partner transfers all his firm assets to his copartner, who assumes the partnership debts, and both become insolvent, there is no joint estate, and all the creditors, both joint and separate, are entitled to share pari passu in the estate of the bankrupt continuing partner. Re Downing, 1 Dill. 33, Fed. Cas. No. 4.044: Upson v. Arnold, | Supp. 736. 19 Ga. 190, 63 Am. Dec. 302,

new firm succeeding to its business, may I paid. And it can no longer have any place prove their claim, pari passu, and be in the accounting of the partnership affairs. preferred over individual creditors of the Webster v. Lawson, supra. members of the new firm, when the new firm Unless there is an express or implied assumed the debts of the old with the in- agreement between the parties to apply the tention of all the parties to have the busi-assets to such purpose. Thayer v. Humphness continue and pay the old debts out of rey and Smith v. Edwards, supra. the business, but the new firm had failed and made an assignment for the benefit of the creditors. Thayer v. Humphrey, 91 Wis. 276, 30 L.R.A. 549, 51 Am. St. Rep. 887, 64 N. W. 1007.

And in such a case a retiring partner is not in a position to restrain the voluntary disposition of the partnership funds. Griffith v. Buck, supra.

Nor can retiring partners pursue specificSo, an assignment by a partner to his co-ally, or have an account of, the effects of partner of his interest in the partnership the late firm, to the end that they may be assets, in consideration of an assumption by subjected to the satisfaction of claims exthe latter of the partnership debts, vests in isting against the firm. Croone v. Bivens the assignee the entire control of the part- and Smith v. Edwards, supra. nership assets subject to the partnership So, where a partner purchases his codebts; and under it no question can arise partner's interest in the firm, agreeing to as to the power of the purchasing partner discharge the firm liabilities, he takes the to transfer the property in payment of pre- property free of the lien of the retiring ferred creditors, on the ground of want of partner, and holds it as his individual propassent of the copartner. Ketchum v. Dur-erty; and the creditors of the partnership kee, Hoffm. Ch. 538. are no longer entitled to have it applied to the payment of their debts in preference

VII. Assumption as affecting resort to to the individual debts of its owner. Ladd partnership property.

v. Griswold, 9 Ill. 25, 46 Am. Dec. 443; Williamson v. Adams, 16 Ill. App. 564; Warren

a. The prevailing rule with relation v. Farmer, 100 Ind. 593; Robb v. Mudge, 14 to partnership lien.

The great preponderance of authority holds that the rule that a sale by a partner | of his interest in the partnership assets, or a division of the partnership assets between the partners, effects a waiver or surrender of the individual partner's equity, to which creditors are entitled to be subrogated, to have the firm assets applied to the payment of the firm debts; and that the partnership lien to secure such application thereupon terminates, is not altered or affected by the fact that the purchase, or the taking, of a share in severalty, is made upon or in consideration of an assumption of partnership debts. Thayer v. Humphrey, supra; Reddington v. Franey, 124 Wis. 590, 102 N. W. 1065; Maquoketa v. Willey, 35 Iowa, 329; Griffith v. Buck, 13 Md. 102; Croone v. Bivens, 2 Head, 339; Smith v. Edwards, 7 Humph. 106, 46 Am. Dec. 71; Blackwell v. Farmers' & M. Nat. Bank, 97 Tex. 445, 79 S. W. 518.

In such case property of the partnership ceases to be joint property; and the lien or equity of the retiring partners to make a sale of the property and an application of the proceeds to the joint debts is destroyed. West v. Chasten, 12 Fla. 315; Griffin v. Or man, 9 Fla. 22; Johnson v. Emerick, 70 Mich. 215, 38 N. W. 223; Cory v. Long. 2 Sweeney, 491; Baker's Appeal, 21 Pa. 76, 59 Am. Dec. 752; Webster v. Lawson, 73 Wis. 561, 41 N. W. 710.

Gray, 534; Fulton v. Hughes, 63 Miss. 61; Robb v. Stevens, Clarke, Ch. 192; Dimon v. Hazard, 32 N. Y. 65; Rankin v. Jones, 55 N. C. (2 Jones, Eq.) 169; Doty v. Crawford, 39 S. C. 1, 17 S. E. 377; White v. Parish, 20 Tex. 689, 73 Am. Dec. 204; Ex parte Ruffin, 6 Ves. Jr. 119.

A partnership creditor of a dissolved firm stands in the same position as a retiring partner with reference to the firm assets, and, the retiring partner having no such lien, the creditors likewise have none. lis v. Staley, 3 Baxt. 167, 27 Am. Rep. 759.

Hol

And a dissolution of a partnership by the retirement of a partner, the continuing partner covenanting for payment of the partnership debts, followed by bankruptcy of the continuing partner, deprives the joint creditors of resort against the joint property remaining in specie where the transaction was bona fide. Ex parte Williams, 11 Ves. Jr. 3.

So, though a retiring partner whose continuing partner has taken the partnership assets and assumed the payment of the partnership debts is to be regarded as a surety as to the creditors of the firm, yet he cannot specifically pursue, or have an account of, the effects of the firm in equity, to the end that they may be subjected to the satisfaction of the partnership claims, where the creditors are not made parties to the bill. Croone v. Bivens, 2 Head, 339.

And, upon the death of the purchasing partner, the assets purchased go to his adIn West v. Chasten, supra, Deveau v. ministrator, subject to the ordinary rules Fowler, 2 Paige, 400, infra, VII., c, was of administration, and cannot be claimed distinguished upon the ground that in that by the selling partner as surviving partcase it does not appear that it was the in-ner, or as assets of the firm, to be applied tention that the effects transferred should first in payment of the partnership debts. be appropriated to the private use of the White v. Parish, supra. transferee, leaving the debts of the firm un

Nor does a promise by a partner on dis

solution, to his copartner, in consideration of a purchase of the entire stock of goods of the firm, to pay the partnership debts, create any lien on the goods sold; it creates a mere personal obligation on the part of the purchaser, and does not of itself pre-by a partner, who, in consideration thereof, vent the latter from subsequently selling the goods for the payment of his individual debts. Williamson v. Adams, supra; Hapgood v. Cornwell, 48 Ill. 64, 95 Am. Dec. 516; Griffith v. Buck, 13 Md. 102; Fulton v. Hughes; Dimon v. Hazard; Cory v. Long; and Baker's Appeal,-supra.

Nor does it enable firm creditors to avoid a disposition by him of such property. Fulton v. Hughes, supra.

And, when so used for the payment of his individual debts, the individual creditor, taking them without notice of any such promise, stands in the position of a purchaser for a valuable consideration, holding the property discharged of all lien on the part of the firm creditor. Hapgood v. Cornwell, supra.

Nor, where a partner retired from a partnership under an agreement that his copartner would assume and pay the firm debts, he having ample assets for that purpose, and the retiring partner taking certain property; and the assets in the hands of the continuing partner were ultimately wasted, and both parties became insolvent, -has the continuing partner any lien in equity upon the partnership assets taken by the retiring partner for his indemnity; and a creditor would have none, and could not maintain a bill to enforce an equitable lien against the property taken by the retiring partner. Hollis v. Staley, supra.

So, where the guardian of minor heirs conveys, under proper authority, their interest in the property of a partnership to a corporation which assumes all the debts of the partnership, the business of which it was organized to continue, a debt due the minors from the partnership becomes a general debt of the corporation, and does not continue to be a lien on the partnership property. Francklyn v. Sprague, 121 U. S. 215, 30 L. ed. 936, 7 Sup. Ct. Rep. 951.

This rule appears to be confined to personal assets, however, and not to apply to partnership realty; and, where it is agreed between partners, on dissolution of the firm, that the partnership property shall be taken assumes the firm debts; and the assuming partner forms a new partnership with a third person, who has knowledge of the transaction, and that no part of the purchase price has been paid; and the partnership property, consisting of real estate, is conveyed to the new firm instead of to the purchasing partner, the debts of the firm remain a lien upon the property thus conveyed. Graham v. Thornton (Miss.) 9 So. 292.

And where one firm succeeds another in business, and the new firm assumes the debts of the old firm, and afterwards allows one of its members, who was also a member of the old firm, to retire discharged from all liability for the firm debts, and to take part of the firm real estate as security for a debt due him from the firm, such real estate is subject to the debts of the old firm after the other partnership property has been exhausted. Childs v. Pellett, 102 Mich. 558, 61 N. W. 54.

b. Rule that the lien is not destroyed.

A few of the courts have taken the position that there is no solid distinction between a direct sale to pay a private debt, and a transfer to one partner, by which all the assets of the firm are removed from the prior claim of the partnership creditor and made subject, first, to the claims of the private creditor.

This was the rule announced in Tenney v. Johnson, 43 N. H. 144, holding that the right of priority of partnership creditors still continues, notwithstanding a retirement of a partner from the firm, and a release of all his interests in its assets, and a receipt by him from the remaining partner of an obligation to pay all its debts; and that, where partners differ, and their differences are submitted to arbitrators, Nor will securities constituting partner- who award that all the goods and other ship assets, delivered to his copartners in assets of the firm shall pass to one of them, payment for their shares, by a partner pur- who shall pay the partnership debts; and chasing such shares in the partnership as- afterwards the goods and assets are atsets and assuming the payment of the part-tached by private creditors of the partner nership debts, be subjected to demands of firm creditors in the hands of an assignee thereof, where, at the date of dissolution, the assets of the firm were amply sufficient to pay all the partnership debts, but they were afterwards squandered by the continuing partner, and the whole transaction appears to have been conducted in good faith. Belknap v. Cram, 11 Ohio, 411.

And notes given by a partner to his copartners on dissolution, for their shares of the partnership assets, the purchasing partner assuming the partnership debts, become their individual property, and cannot be subjected to the payment of the creditors of the firm in the possession of an assignee.

Ibid.

charged with the debts,-the creditors of the firm are entitled to be preferred, even though the award has been executed by a transfer in accordance therewith.

So, in Conroy v. Woods, 13 Cal. 626, 73 Am. Dec. 605, it was held that partnership property, bound for partnership debts when the firm was in existence, continues to be bound therefor after dissolution by sale to a partner, especially where the purchasing partner assumes, as part of the transaction, the payment of such debts.

Likewise, Caldwell v. Scott, 54 N. H. 414, holds, citing Tenney v. Johnson, supra, that the priority of partnership creditors in respect to the assets of a partnership is not affected by the act of a partner in retiring

from the firm and releasing all his interest | old partnership concern by applying the asin the assets to his copartner, who agrees to pay all the partnership debts.

sets to such debts, does not change the equity of the outgoing partner and the corresponding equity of the firm creditors to have the assets applied to the firm debts. Thayer v. Humphrey, 91 Wis. 276, 30 L.R.A. 549, 51 Am. St. Rep. 887, 64 N. W. 1007.

And Phelps v. McNeely, 66 Mo. 554, 27 Am. Rep. 378, Following Tenney v. Johnson, supra, holds that a sale by a partner of his interest in his firm to his copartner, and an agreement upon the part of the co- And while a transaction by which one partner to pay the firm debts, made at a partner assumes the debts of another in time when the firm was insolvent, do not consideration of partnership effects or propaffect the right of a creditor of the firm erty being placed in his hands for that purto be paid out of the firm assets, in prefer- pose does not create a trust in the assumence to individual creditors of the purchasing partner which could be specifically ening partner; and a deed of trust of all the forced by a bill in equity; it so far partakes assets of the late firm, given by the pur- of the character of a trust as to transfer the chasing partner to secure the payment of an superior obligation to the creditor to him. individual indebtedness of his own, which Townsend v. Long, 77 Pa. 143, 18 Am. Rep. accrued prior to the dissolution, is of no 438. effect as against such right of the firm creditor.

c. Retention by special agreement or arrangement.

Nor does the act of a partner retiring from a firm, of leaving his interest in the partnership assets with his continuing partner to sell and dispose of and pay the debts, there being no sale from the one to the other, destroy the right of the retiring partThe lien of the partners upon the partner to have the assets applied in payment nership assets to secure the payment of the of the partnership debts. Williamson v. partnership debts, though waived, where one Adams, 16 Ill. App. 564. partner sells his interest to another, and And a release by two of three partners the latter assumes the partnership debts, or to a third, of their interest in the partnerwhere there is a division of the partnership ship effects, taken with full knowledge and property between them, accompanied by an subject to all the equities existing between assumption of the debts, may be retained the parties, is not such a sale as will deby special agreement between them. Black-prive a vendor to the firm of his right of well v. Farmers' & M. Nat. Bank, 97 Tex. 445, 79 S. W. 518.

And property of a partnership, transferred on dissolution by one partner to the other, under the stipulation that the selling partner should retain a lien thereon to secure the payment of the partnership debts, does not become the separate property of the purchasing partner, and is not subject to execution for his debts, where the agreement was duly recorded, or the execution creditor had actual notice of the lien. Rogers v. Nichols, 20 Tex. 724.

action for goods which he alleges the firm fraudulently obtained from him. Ward v. Woodburn, 27 Barb. 346.

Likewise, a person who purchases property subject to partnership debts of a member of the firm, and agrees in writing to assume and pay such debts as part of the purchase price, recognizes the equitable lien of the partnership creditors; and it is not necessary that such creditors put their claims in judgment before filing a bill to compel such payment. Olson v. Morrison,

29 Mich. 395.

So, partnership assets taken by a partner And a partner who sells to his copartner on the dissolution of the firm, under con- his one-half interest in the firm, in part tract on his part to apply them to the firm consideration for which his copartner is to debts in exoneration of the retiring part-pay all liabilities of the firm, it being agreed ner, are impressed with a trust for that purpose, which the retiring partner may enforce in equity. Allen v. Cooley, 53 S. C.

414, 31 S. E. 634.

that a third person shall remain in charge of the business until the contract is complied with, remains in possession through such third person, and does not surrender his rights as a partner to have the partnership assets applied in payment of partnership liabilities. Hatchell v. Chew, 22 Ky.

And one of two partners, who has purchased of his copartner his interest in the firm subject to the equity of having the partnership property applied to the pay-L. Rep. 738, 58 S. W. 816. ment of its debts, may, where the firm placed in the hands of garnishees certain notes, which had originally belonged to the purchasing partner, but had been by him transferred to the firm, hold any surplus which may remain after the debt due the garnishee has been paid, as against an attaching creditor on an individual debt of the other member of the firm. Montross v. Byrd, 6 La. Ann. 518.

So, a sale by a partner of his interest in an insolvent firm for the purpose of paying the old firm debts, thus winding up the

Nor does an assignment by the administrator of a deceased partner of all his interest in the partnership effects to the survivor, under an agreement that the latter shall discharge all the debts of the firm, discharge the lien or equity existing in favor of each partner, on dissolution, to have the partnership property applied to the payment of the partnership debts. Deveau v. Fowler, 2 Paige, 400.

So, partnership property conveyed, upon the dissolution of a partnership, by one partner to the other, the latter agreeing to