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not dis

nership.

Secondly, Where the parties on the bill are not distinct Election firms that is to say, where no member of a partnership of proof. carries on trade on his separate account · and one of the Where partners draws upon the general firm, or the general firm parties are upon the individual partner:- in this case, if the holder of tinct firms, the bill, at the time he took it, had notice that the different but only individual parties on it were included in one general partnership, partners of (notwithstanding he procures the separate indorsement of one general partone of the partners on the bill, for the express purpose of raising a contract for a double security) he cannot prove against both the joint and the separate estates, but is put to his election (1); because, as Lord Eldon has justly observed, where the object appears to be to give the bill a character of respectability by this distribution of the names of a partnership, a party to such an arrangement ought not to avail himself of it, against his knowledge of the method, in which the obligation of the firm ought regularly (2) to be created. If the holder is in perfect ignorance of the Distincidentity of the parties, and bona fide conceives them to be tion as to whether distinct houses of trade at the time he takes the bill, then the holder it would seem consistent with the principle of the above decisions, that he should be allowed to prove against both estates. But in a late case, where A. and B. were in partnership, B. being a secret partner, and A. on the partnership account drew bills in his own name on B.,→ Lord Eldon held, that the holder of these bills (though he was ignorant of the partnership) was not entitled to prové them against the joint estate, and also against the separate estate of B.; but that he was only entitled to prove them against each of the separate estates. (3)

knew that

fact or not.

prove

In some cases, where the creditor has a right of proof Where originally against both estates, he may forfeit such right by right to his own laches, or by his own deliberate election to come against only against one. In one case where, after proving against

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both estates is forfeited.

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Election

of proof

By laches.

By a deli

berate election.

Where joint creditors,

partner

the joint estate, the creditor laid by for some time without proving against the separate one, and acted as a joint creditor by joining in a petition with other joint creditors (1), the late Vice-Chancellor thought that he was concluded; but Lord Eldon, upon appeal, held the contrary. (2) But where A. held a bill drawn by C. and Co. upon B. (who was a member of that firm, as well as a third person who was an infant) but A. was ignorant of these circumstances,and separate commissions being taken out against B. and C. (the infancy of the other partner excluding a joint commission) an order was made under each commission for keeping distinct accounts of the joint and separate estates, and A. proved his debt against the joint estate under each commission, and received dividends under each;-it was held, that as A. had modelled his proof, not as against the liability of the parties arising from the contract on the bill, but upon his right to include or exclude the resort to a dormant partner, he had made a deliberate and conclusive election to resort to the joint funds alone; and could not, in addition to the two proofs he had already made, prove also against the separate estate of B. (3)

Where two partners dissolved their partnership, one continuing the business and covenanting to pay the joint upon a dis- debts and afterwards a joint commission issued against solution of them; the joint creditors, who had not (previous to the ship, have bankruptcy) accepted the continuing partner as their sole no election debtor, were held not to have an election to prove against against the the separate estate of the continuing partner, but to have only a right to prove against the joint estate; notwithstanding what was the joint stock of the two, under the circum

separate estate.

(1) Ex parte Husband, 5 Mad. 421. From the marginal abstract of this case, it would seem as if all that it decided was, that the creditor had simply a right of election; but the report of it expressly states, that there were two distinct firms, and that the creditor was ignorant of the general partner

(2) Ex parte Husbands, 2 G. & J. 4.

(3) Ex parte Liddel, 2 Rose, 34. For a very able and accurate examination of the cases relating to the doctrine of election, see Mr. Eden's Treatise on the Bankrupt Law, page 170, et seq.

stances of the case, became the separate estate of the Election continuing partner. (1)

of proof.

Where A. sold goods to B., and other goods to C., and Joint B. and C. joined in a note for the whole, A. was allowed makers of a promisto prove against the separate estate of each, on giving up sory note. the joint note. (2)

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of a bill, though given by one part ner for his separate debt, has no election

T. (who was in partnership with M. and F., and also Where carried on a separate trade) being indebted to K. 1007. the holder on his separate account, sent him a bill of exchange for 300%., that wanted two months of becoming due, indorsed by T. M. and F. (but not by T. in his individual character), and requested K. to give him credit for the 100%., and to send him a bill for the remainder of the 3007. K. accordingly gave him credit for the 100%., and sent him a banker's check for 200%., which was duly paid- the bill separate for 300l. was dishonoured, and T. M. and F. became bankrupts :-under these circumstances, Lord Eldon held that the transaction must be considered as an exchange of paper; and that K. had no right of election in his proof upon the bill, nor any right to prove for any part of the 300l. against the separate estate of T. (3)

against his

estate.

rate credi

separate

Where a joint and separate creditor sues out a separate A joint commission against one partner, and afterwards another and sepacreditor sues out a joint commission, the first commission tor, who will not be superseded in favour of the last, without sues out a securing all the rights of the joint and several creditor to commisprove under the joint commission, and elect between the sion, which is superjoint and separate estates; and he will be allowed also seded in to elect, out of which estate he will be paid the costs of favour of a joint one, superseding the first commission. (4) not de

(1) Ex parte Freeman, Buck, 47. Ex parte Fry, 1 G. & J. 96.; and see Ex parte Fell, 10 Ves. 347. Ex parte Williams, ante, 566.

(2) Ex parte Lobb, C. B. L. 250.

(3) Ex parte Kirby, Buck, 511. (4) Ex parte Brown. Ex parte Munton, IV. & B. 60. 1 Rose, 443. Ex parte Smith, 1 G. & J. 256.

prived of his elec

tion.

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SECTION VII.

Of Proof between Partners, and different Firms composing one general Partnership.

Although one partner may be a creditor of another, and may (under certain circumstances) enforce his claim against him both at law and in equity notwithstanding the partnership, yet in Bankruptcy it is now a settled rule, that a solvent partner cannot prove under a commission against his copartner, so as to come in competition with the creditors of the partnership (1)—that is, that he has no right to receive any portion of his debt, until all the creditors of the partnership are paid 20s. in the pound, as well as all interest due upon their respective debts subsequent to the date of the commission. (2) The above rule is founded on this plain principle of reason and justice, viz. that a partner, who is himself liable to all the creditors of the partnership, ought not to take any of the funds, before all the creditors (to whom he is so liable) are duly paid. (3)

And where all the partners become bankrupt, the same rule is adopted as to the proof between the different estates, though it is in this case frequently more difficult of appli cation, and does not seem to be altogether founded upon quite so sound a principle. It appears, however, to be established by the modern decisions, that not only is the

(1) Ex parte Burrel, C. B. L.
532. Ex parte Parker, ibid. Ex
parte Pine, ibid. Ex parte Broome,
1 Rose, 69.

(2) Ex parte Reeve, 9 Ves. 588.
(3) Though the partner cannot
prove for the purpose of receiving
dividends, he is, however, at liberty
to enter a claim for the amount of
his demand. Ex parte Broome,
1 Rose, 69. And it seems to be
a question undetermined, whether,
he has not strictly a right to prove,

with a reservation of his right to receive dividends until the taking of the partnership accounts-though the practice of the commissioners is not to permit such proof. The arguments in favour of the proof are, 1st. That the demand of the partner is an equitable debt; 2dly, That it is a debt within the 52d section of the new act; and, 3dly; That the partner would be barred by the certificate of his copartner. And see 1 Mont. Dig. 245.

separate estate of one partner prevented from claiming Proof against the joint estate of the partnership in competition between. with the joint creditors (1), but that the joint estate, also,

is not permitted to claim against the separate estate in competition with the separate creditors. (2)

the rule.

The only exceptions to this general rule seem to be, Excepfirst, where money or effects have been fraudulently ab- tions to stracted from one estate and applied for the benefit of the other (3); and, secondly, where some of the members of a partnership form an entirely distinct firm, carrying on a different trade from that of the general partnership, and where the articles of one trade have been furnished by one firm to the other. (4)

And first, where money or effects have been fraudulently Money abstracted from one estate to benefit the other.

fraudu lently ab

fraud.

This question, it will be perceived, involves the con- stracted. sideration of innumerable transactions, each depending on What is a its own peculiar circumstances; and the question will al- case of ways be, whether or not, in the opinion of the Lord Chancellor, or of a jury, the transaction will be held to amount to a case of fraud. It has however been decided, that where one partner takes the property of the partnership fund, and applies it to his own use without the knowledge of the other partners, and to the prejudice of the partnership estate, this is such a case of fraud as falls within the exception to the rule; and that the assignees, on behalf of the joint creditors, may consequently prove the amount of the sum so abstracted against the separate estate. (5) The term fraud, indeed, (as Lord Eldon has observed) is used

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