Stearns, Suretyship, p. 24; Baylies, Surety- | Mon. 6; Frye v. Barker, 4 Pick. 382; Page
ship, p. 481; Shumaker, Partn. 341, 342.
Messrs. F. N. Hendrix and L. J. Van
Fossen, with Messrs. Davis & Sennett,
for respondent:

charge of one of such debtors from his obligation to pay.

McAreavy v. Magirl, 123 Iowa, 605, 99 N. W. 193; Barnes v. Boyers, 34 W. Va. 303, 12 S. E. 708; Buchanan v. Clark, 10 Gratt. 164; Rawson v. Taylor, 30 Ohio St. 389, 27 Am. Rep. 464; 2 Collyer, Partn. chap. 24, § 596; 1 Collyer, Partn. chap. 17, § 407; Story, Partn. § 334; Parsons, Partn. 4th ed. §§ 296, 313, 324; A. F. Shapleigh Hardware Co. v. Wells, 90 Tex. 110, 59 Am. St. Rep. 783, 37 S. W. 411; Hall v. Jones, 56 Ala. 493; White v. Boone, 71 Tex. 712, 12 S. W. 51.

ance of $1,914.72 upon two promissory notes, executed by the defendants in 1901 and due, respectively, on November 1st and November 15th of that year. When the notes were given, and for two years prior thereto, the defendant D. B. Collins and J. A. Mahood were engaged in the farm machinery business as a copartnership under the firm name of Collins & Mahood. The notes were given by the copartnership for goods purchased from the plaintiff. Mahood did not answer. Collins attempted to avoid personal liability by alleging and offering to prove certain Messrs. Turner & Townsend also for facts which his counsel contend show that respondent. Mahood is the principal debtor, and that he (Collins) is a mere surety, and that he Young, J.. delivered the opinion of the has been discharged from liability by reacourt: son of the plaintiff's failure to sue Mahood. This action was brought to recover a bal-The existence of the copartnership is ad

I. Scope.

This note is intended to include the whole general subject of assumption of partnership liabilities on dissolution, including not only the right to assume, and what constitutes assumption, and what is included in it, but also all the various effects and results of assumption with reference to creditors as well as partners, and with reference to remedies as well as rights. The subject of consideration is limited, however, to partnership debts and to assumption on dissolution. And ordinary novation by which one indebtedness is substituted in the place of another is not included, unless the facts are such as to make it an assumption of partnership debts on dissolution. Nor is the note intended to include assumption of individual debts. But the assumption of debts incurred by an individual in a business which a partnership is afterwards organized to continue, does not seem to differ in principle from an assumption of the debts of a partnership by a succeeding partnership, and, therefore, cases of this class have been included. And the subject of the note plainly covers not only assumption by a continuing partner or partners on dissolution by the retirement of a partner or partners, but also assumption by incoming partners and by new partners taking the place of retiring ones, and by the succeeding firm after such changes are made, as well as assumption on dissolution or retirement from business, upon which a third person or persons, not previously concerned, purchase, or otherwise become interested in, the partnership business or assets; any such change being in effect a dissolution of the old firm.

II. The assumption.

a. Right to assume.

1. Generally.

a firm shall be discharged upon dissolution is one which the partners are at liberty to arrange between themselves by express contract. Cobb v. Benedict, 27 Colo. 342, 62 Pac. 222.

And an incoming partner may, by agreement, become liable for debts of the partnership, contracted before he enters it. Fagan v. Long, 30 Mo. 222; Beall v. Poole, 27 Md. 645; Updike v. Doyle, 7 R. I. 446; Hine v. Beddome, 8 U. C. C. P. 381.

Or by otherwise dealing with the creditor in such a manner as to create an implied obligation and duty to pay the same in common with the old firm. Beall v. Poole, supra.

And an agreement made by members of a partnership, on dissolution, by which one partner turns over to his copartners his interest in certain personal property and real estate of the firm, and by which his copartners assume to pay a partnership debt, is valid. Rush v. Gray, 83 Ind. 589.

So, a contract by which several partners, by mutual consent, apportion a stated quantity of firm indebtedness among themselves, each promising the other, in consideration of a like promise by the others, to pay a stipulated amount and save the others harmless therefrom, is valid and enforceable at law. Edwards v. Remington, 51 Wis. 336, 8 N. W. 193.

And a written agreement by which a partnership, formed on the retirement of one member of a firm and the taking in of a new member, assumes the debts of the old firm, is, as between the partners, though not as to creditors, an effective release of the retiring member's liability on such debts. Sanders v. Bush (Tex. Civ. App.) 39 S. W. 203; Gray v. McMillan, 22 U. C. Q. B.

456.

Nor is a transfer by a partner on dissolution of his interest in the firm to his copartner, the copartner assuming all of the debts, openly made, invalid as operating to hinder, delay, or defraud creditors, since the property remains subject to judgment

The question as to how the liabilities of and execution in the hands of the purchaser

mitted, and also the execution of the notes. The first question raised by the assignHe alleges that in December, 1901, the part-ments of error (and it is the only one we nership was dissolved; that all of its prop-need consider) is whether the allegations of erty was transferred to Mahood; that, as a part of the agreement for dissolution, Mahood agreed to pay the firm debts including the notes in suit; that all firm creditors, including the plaintiff, were duly notified of the dissolution and the terms upon which it was made; that on several occasions this defendant notified the plaintiff to proceed against Mahood; that Mahood was solvent when the partnership was dissolved, but has since become insolvent. The trial court rejected the testimony offered to sustain the above defense, and directed a verdict for the amount due upon the notes. Defendant has appealed from the judgment entered upon the verdict.

at the suit of any firm creditor. Stansell v. Fleming, 81 Tex. 298, 16 S. W. 1033.

And a company engaged in insurance, desiring to retire from business, has the right to enter into an arrangement with another company by which an adequate sum to provide for its liabilities is set out from its assets and turned over to the latter company, which is to stand in its place and take upon itself the liabilities on its policies; and, where such an arrangement is made, though without the consent of the policy holders, a policy holder can claim only against the assuming company. Re European Assur. Soc. L. R. 1 Ch. Div. 307. Nor can a partner who, on dissolution, takes a conveyance from his copartner of his interest in the partnership effects, and agrees, in consideration thereof, to pay the debts of the firm, repudiate, on the ground of his infancy, his agreement to pay the Idebts of the firm and retain all the partnership effects; if he elects to rescind the agreement, his copartner has the right to insist that his interest in the copartnership effects shall be applied to the payment of the debts in the same manner as if the dissolution had not taken place, unless the goods have gone into the hands of a bona fide purchaser, who had actually paid for them before notice of the retiring partner's rights. Kitchen v. Lee, 11 Paige, 107, 13

Am. Dec. 101.

And a bond conditioned for the payment

of all the indebtedness and liabilities due

or to become due by and against certain named persons as late copartners binds the obligors upon a judgment recovered against such copartners growing out of a partnership transaction, though only one of them was named as obligee in such bond. Mann v. Ætna Ins. Co. 40 Wis. 549.

2. The question of consideration.

An assumption of partnership indebtedness upon dissolution must be founded upon a valuable or sufficient consideration. Kling v. Tunstall, 109 Ala. 608, 19 So. 907; Morris

the answer and the offers of proof constitute a defense. Counsel for defendant contend that they do. They contend that |“where a partnership is dissolved, and one partner purchases the interest of the other in the partnership property, and assumes and agrees to pay the partnership debts, he becomes in equity the principal debtor as to such debts, and the other his surety, and a creditor having notice of such agreement is bound by such relationship; and (2) that, where a creditor with such notice is requested by the surety to collect his claim from the partner who has assumed the debts, and he neglects or refuses to do so, the surety is discharged, provided the prinv. Marqueze, 74 Ga. 86; Bracken v. Dillon, 64 Ga. 243, 37 Am. Rep. 70; Salter v. Edward Hines Lumber Co. 77 Ill. App. 97. And the dissolution of a partnership, and the taking of all the partnership property by one of the partners, and the assumption by him of all the partnership liabilities, do not release the other partner, where the promise was made after the dissolution, and was not an inducement to or consideration for it. Eagle Mfg. Co. v. Jennings, 29 Kan. 657, 44 Am. Rep. 668; Ringo v. Wing, 49 Ark. 457, 5 S. W. 787.

An assumption by a partnership of indebtedness of a firm which it succeeded is of no binding force unless it was a part of the new firm's contract of partnership, or if made afterwards, unless it rested upon a new and valuable consideration moving from the old firm to the new one. Kling v. Tunstall, supra.

And evidence of the assumption by the members of a new firm of the indebtedness of an old firm which it succeeded is indefinite and insufficient for that purpose where it does not appear when, or upon what consideration, the assumption was made. Ibid.

So, a direct promise by a new firm formed from an old one by the addition of a partner, made to a creditor of the old firm, in order to be binding, must be supported by a valuable consideration. Ibid.

to fulfil a previous contract with one of its And an agreement by a firm newly formed, members, made with the other contracting party, is without consideration, and not binding upon the firm. Goodenow v. Jones,

75 Ill. 48.

And the rule has been asserted that a promise to pay a debt of a partnership, to operate as a satisfaction, must be that of a third person,-something over and above the original promise or indebtedness. Frentress v. Markle, 2 G. Greene, 553.

A promise by a partner to pay a debt of his firm is based upon a sufficient consideration, however, where it was made at the time of the dissolution, and formed a

cipal was at the time solvent." We shall have occasion to refer only to the first of the above propositions. That the relation of principal and surety is created as between the remaining and the retiring partner upon the facts stated is well settled. As between themselves the partner assuming the debts becomes the principal, and the retiring partner the surety. Pingrey, Suretyship & Guaranty, § 20; Moore v. Topliff, 107 Ill. 241; Wendlandt v. Sohre, 37 Minn. 162, 33 N. W. 700. As to this there is no dispute. The question in controversy (and upon this there is a conflict of judicial opinion) is whether a creditor who is not a party to the agreement between the partners creating this new relation between them, and does not assent to it, but merely has notice of it, is bound by it, and must, after such |

part of the dissolution. Etna Ins. Co. v. Wires, 28 Vt. 93.

And the act of a partner of retiring from a firm and surrendering to his copartner the partnership effects furnishes a good consideration for an agreement on the part of the copartner to pay the debts of the firm. Bellas v. Fagely, 19 Pa. 273; Vanness v. Dubois, 64 Ind. 338; Rose v. Roberts, 9 Minn. 119, Gil. 109.

And an agreement among a firm of three members, who were to share in the profits of a contract for the construction of a railroad, two members of which became financially embarrassed, by which the third member retired and assigned his interest in the firm to one of the associates, to whom alone the partner was to look for any claim, under the contract, entered into to prevent the appointment of a receiver, which was proposed by the retiring partner, is based upon sufficient consideration, the consideration arising both from the assignment by the retiring partner of his interest, and from the alternative proposition for a receiver. Matherson v. Belden, 14 App. Div. 519, 43 N. Y. Supp. 888.

So, the rule that a promise to do what one is legally bound to do is void, and cannot constitute a consideration for a

con

tract, does not apply where the promise is made to a third person as a consideration for his doing what he would not be bound to do were he not to obligate himself by a contract which rests in part for its consideration upon such promise; and an agree ment by partners, made with others about to join the partnership as special partners and contribute funds thereto, in consideration thereof to assume and pay all existing indebtedness of the old firm, is good. Childs v. Seabury, 35 Hun, 548.

notice, treat the retiring partner, not as a joint debtor, but as a surety. We have no hesitation in holding that, under such circumstances, the partners continue to be bound as joint debtors to the creditor, pursuant to their original obligation. In our view there is no reasonable ground for a difference of opinion upon this. The obligation of the partners to their creditor was created by contract. They were joint obligors. By the contract they subjected themselves to all of the obligations of that relation, and conferred upon their creditor all of the benefits arising from it. To sustain the doctrine that the partners can, by their own act, change the character of their obligation to their creditor, and without his assent, express or implied, violates the fundamental principles of the law of contract. debt. Siegel v. Chidsey, 28 Pa. 286, 70 Am. Dec. 124.

And where goods are purchased, and a note is given therefor, and a partnership is formed between the purchaser and another, and the goods purchased are transferred to the firm, this constitutes a good consideration for a promise by the firm to pay the note. McCreary v. Van Hook, 35 Tex. 631.

Nor is the purchase of the business and assets of a partnership by a corporation organized for the purpose of succeeding it an insufficient consideration for a promise upon the part of the corporation to pay the debts of the firm. Shober & C. Lithographing Co. v. Kerting, 107 Ill. 344.

So, an agreement by which a partner withdraws from a partnership and other members come in, and the new firm is to have all the assets of the old firm and to assume all its debts, is based upon a sufficient consideration, moving from the outgoing partners to the incoming ones, to support it. Lee v. Fontaine, 10 Ala. 755, 44 Am. Dec. 505; Wright v. Carman, 47 N. Y. S. R. 125, 19 N. Y. Supp. 696.

held liable for goods sold to the old firm And an incoming partner in a firm may be where he assumes payment therefor as a tion for his rights in the firm. Rickards member of the new firm, as part considerav. Hene, 30 Neb. 259, 46 N. W. 477.

And an agreement by an incoming partand continues the partnership business with ner, who purchases an interest in a firm the remaining partners, to assume and pay the rent of the premises occupied by the firm, constitutes a promise by him to pay his debt to the outgoing partners by paying their debt to the landlord, and is based upon a good consideration, and may be enforced by the landlord. Reynolds v. Law

And while a firm is not liable to a cred-ton, 62 Hun, 596, 17 N. Y. Supp. 432. itor of a member of a firm for money loaned because the money went into the firm and was used for its benefit, this fact furnishes a sufficient consideration to support a subsequent promise by the firm to pay the

So, when an incoming partner, in consideration of being received into the firm and becoming a part owner of the firm property, agrees to assume, with the old partner or partners, the existing debts of the busi

It abrogates an express contract without | rule announced is in harmony with the the consent of the party beneficially inter- foregoing text. From these we cite: Rawested, and forces upon him a new contract son v. Taylor, 30 Ohio St. 389, 27 Am. Rep. to which he has not given his assent. In 464; A. F. Shapleigh Hardware Co. v. Wells, Pingrey on Suretyship & Guaranty, § 21, 90 Tex. 110, 59 Am. St. Rep. 783, 37 S. W. it is said that "the great weight of author- 411; White v. Boone, 71 Tex. 712, 12 S. W. ity is that two or more principal debtors 51; Hall v. Jones, 56 Ala. 493; Barnes v. cannot, by agreement among themselves, Boyers, 34 W. Va. 303, 12 S. E. 708; Whitwithout consent of the creditor, so change tier v. Gould, 8 Watts, 485; McAreavy v the character of the liability of one of them Magirl, 123 Iowa, 605, 99 N. W. 193; Shepto such creditor from principal to surety herd v. May, 115 U. S. 505, 29 L. ed. 456, 6 as to enable him to demand from the cred- Sup. Ct. Rep. 119; Conwell v. McCowan, 81 itor the treatment of a surety for the debt; Ill. 285; First Nat. Bank v. Finck, 100 Wis. that is, a retiring partner or other principal 446, 76 N. W. 608; Keller v. Ashford, 133 debtor cannot become a surety as to the U. S. 610, 33 L. ed. 667, 10 Sup. Ct. Rep. creditor by simply informing him that his 494; Story, Partn. § 158; Parsons, Partn. codebtors have agreed that he shall be held 4th ed. §§ 296-324; Bates, Partn. §§ 533, only as a surety." 534.

The question has been carefully considered in a large number of cases, and the ness, such agreement is a good considera- | tion for a bona fide transfer of the firm property to pay such a debt. J. & H. Clasgens Co. v. Silber, 93 Wis. 579, 67 N. W. 1122.

The leading cases upholding the doctrine that a creditor with notice of the agreewith the statute of frauds. Freeman v. Badgley, 105 Cal. 372, 38 Pac. 955; Ringo v. Wing, 49 Ark. 457, 5 S. W. 787.

The prevailing rule would seem to be, how. ever, that an assumption of partnership debts by an incoming partner, who had purchased the interests of retiring partners and agreed with the continuing ones, for a new partnership, is a promise to pay his own debts incurred by the purchase, by paying the debts of his creditors; and is not, therefore, within the statute of frauds. Reynolds v. Lawton, 62 Hun, 596, 17 N. Y. Supp. 432; Haggerty v. Johnston, 48 Ind. 41; Poole v. Hintrager, 60 Iowa, 180, 14 N. W. 223; J. & H. Clasgens Co. v. Silber, su

And where a partnership consisting of two persons dissolved, one of the persons retiring and another taking his place, and the new firm continued the old business, and afterwards the incoming partner retired and a new member took his place, the remaining partner having been a member of all the various firms and each of the new firms having continued the business of the preceding firm, and each having continued the account with a creditor of the first firm; an agreement by such continuing part-pra. ner with a third incoming partner in a firm organized to continue the business, by which the last firm, in consideration of receiving the assets of the old firm, agreed to pay off all the debts of the old firm, is based upon a good consideration. Schindler v. Euell, 45 How. Pr. 33.

3. Statute of frauds as affecting.

The position is taken by some of the cases that a promise of a new firm, consisting of an old firm with new partners, to pay the debts of the old firm, though made on a legal consideration, is a collateral promise to pay the debts of another which must be in writing under the statute of frauds, where the transaction is such that the retiring partners still remain liable. Sternburg v. Callanan, 14 Iowa, 251.

And the same theory has been applied to an agreement by which partners sold out their partnership effects to a third person, he agreeing verbally with them to pay their firm debts. Shoemaker v. King, 40 Pa. 107. And an agreement by a new firm succeeding an old one, to pay the debts of the old firm, not a part of the partnership agreement, but made subsequently, is an agreement to pay the debts of another which must be established in compliance

And that this is the case whether the assumption is considered as inuring to the benefit of the retiring partner, or to that of the creditors of the old firm. Lee v. Fontaine, 10 Ala. 755, 44 Am. Dec. 505; Wright v. Carman, 47 N. Y. S. R. 125, 19 N. Y. Supp. 696; First Nat. Bank v. Eichelberger, 1 Woodw. Dec. (Pa.) 397.

Within this rule, an agreement by a partner in a firm which had undergone successive changes by the retirement of partners and the coming in of others in their places, with an incoming partner in a firm organized to continue the business, by which the last firm into which the partner came, in consideration of receiving the assets of the old firm, agreed to pay all the debts of the old firms, is not within the statute of frauds. Schindler v. Euell, 45 How. Pr. 35.

Nor is a promise by a firm to pay a debt for goods purchased by a member on his individual credit before the formation of the firm, which goods were transferred to the firm, a promise to pay the debt of another, required to be in writing. McCreary v. Van Hook, 35 Tex. 631.

And a covenant by a new firm, upon the retirement of a partner from an old one and the coming in of a new partner in his place, made on receiving the goods and effects of the old firm, to discharge its debts,