CHAPTER VIII. Exuberant trust in partnership. No claim beyond share of profits. DUTIES OF PARTNERS TOWARDS THE COMPANY AND PARTNERSHIP is a contract of exuberant trust (a), and therefore the law expects and requires that the conduct of the partners towards each other shall be characterized by the most scrupulous good faith, that they shall zealously act and co-operate for the common good, and that they shall not place their individual interests before those of the company. In conformity with these principles, it is settled law that a partner can make no claim beyond his share of profit, whether in the name of salary, commission, or otherwise, on account of his trouble in conducting the partnership business, or for his services in behalf of the company; for, however eminent or indispensable these may have been, they are no more than what it was his duty as a partner to do (b). Nor in the absence of special stipulation does it make any difference that the claimant was put to an unusual amount of personal trouble or inconvenience on account of a casus improvisus (c), or that he was a managing partner (d), or that the services were of a purely professional kind (e). The same principles have been given effect to in England (ƒ). But these rules do not apply where services have been rendered in carrying on the business of the firm after its dissolution (g); for such services are then no longer prestable ex con (a) In societatis contractibus fides (b) Brock v. Brown, Dec. 9, 1696, (d) See Hamilton v. Geddes, 1805, 4 Pat. App. 657. (e) Duncan v. Union Canal Co., 8 Feb. 1831, 9 S. 398. See also Hunter v. Cochrane's Trs., 18 Feb. 1831, 9 S. 477. (f) Hutcheson v. Smith, 5 Irish Eq. 117; Whitle v. Macfarlane, 1 Knapp 311; Bentley v. Craven, 18 Beav. 75. (g) Berry v. Lamb, 7 July 1832, 10 tractu of the partnership, and may therefore be charged for. When, however, a surviving partner carried on the concern as executor of his deceased partner, he was held in England entitled to no remuneration, as he did no more than was his duty as executor (a). It is always competent to stipulate that a partner shall be entitled to remuneration over and above his share of profits; and such stipulation, when proved, will be effectual (b). This may be stipulation. changed by Partners can not stipulate advantage. Another consequence of the exuberant trust inseparable from the contract of partnership may be stated as follows:-Partners, for private in dealing with strangers, cannot stipulate for any private advantage at the expense of the company, which shall be available to them in a question with the company. Whatever a partner acquires with the company funds he is bound to communicate to the company, though the acquisition has been made in his own name; and even when he purchases with his own money and in his own name, a right which is in the company's line of trade, or would be for it a beneficial acquisition, he will be held to purchase, not for himself, but for the company (c). In such cases, however, the company merely acquires a jus ad rem (d), the jus in re remaining with the partner who made the purchase in his own name; or, as it is expressed in England, the purchasing partner being held to be a trustee for the benefit of the copartnery (e). The rules here referred to have been repeatedly enforced and illustrated in England. Thus, in the well-known case of Featherstonehaugh v. Fenwick (ƒ), two partners who had obtained in their own names a lease of the partnership premises, dissolved the copartnery, and sought to exclude their copartners from all interest in the new lease. They were, however, found to be merely trustees of the lease for behoof of the firm (g). S. 792; Featherstonehaugh v. Turner, 25 Beav. 382; Brown v. De Tastet, Jac. 284; Crawshay v. Collins, 2 Russ. 347, 3 Ross Le. Ca. 622. (a) Burden v. Burden, 1 V. and B. 172. See also Stocken v. Dawson, 6 Beav. 371. (b) Macwhirter v. Guthrie, 1822,1 S. 295, Hume 760; Berry v. Lamb, 7 July 1832, 10 S. 792. See per Wigram, V.-C., in Webster v. Bray, 7 Ha. 179; Geddes v. Hamilton (Glasgow Glass Application of rule in England. Questionable if this be law in Scotland. In England, the maxim, in societatis contractibus fides exuberat, has received a still more extensive application, and has given birth to the following rule: that a partner shall not be allowed to derive profit from any dealings between himself and the partnership, unless such right have been conceded to him by agreement. Thus it has been held that a partner, who deals in a certain commodity, and supplies therewith the firm of which he is a member, cannot make the ordinary profit of his trade thereon, but must supply it at wholesale price, or at the price at which he obtained it (a). It seems also to be an established rule, that a partner cannot carry on for his own benefit any business which would compete with that of the firm of which he is a member (b). It is very doubtful how far these rules, as applied to the members of private partnerships—not to directors in public companies— can be taken to be in accordance with the law of Scotland. A partnership in Scotland possesses, as we have already seen, a quasi persona distinct from the individuals of which it is composed; and they accordingly may, like third parties, stand to it in the relations of debtors and creditors. It is difficult, therefore, to see why they should not be able to act and transact with it on the same footing as strangers, and why contracts entered into with them should not be equally binding. It may be said that they stand to each other or the company in the relation of trustees, and therefore cannot make profit by their mutual transactions. But it must be observed that they are trustees only quoad the funds which the society de facto possesses, not as regards such as it may be desirable for it to possess, but which it does not yet possess. It does not therefore appear that there is any good reason to hold that, according to the law of Scotland, a partner may not supply the company with an article of which it stands in need, on the same terms of advantage to himself as if he were dealing with strangers. In like manner, it appears foreign to the genius of our law to maintain that a man, by becoming the partner of a firm, must be held to have incapacitated himself from carrying on any business that might be in rivalry with the business of the firm. The firm Swa. 489; Clegg v. Fishwick, 1 M. and (a) Bentley v. Craven, 18 Beav. 75. (b) Lock v. Lynane, 4 Irish Ch. 188; Glassington v. Thwaites, 1 Sim. and St. 124; England v. Curling, 8 Beav. 129. and he are separate persons; and if a principle such as this were once assented to, it would seem to follow that a man could not at one and the same time be a member of two separate companies in the same line of business,-a doctrine that has never received the sanction of the courts either here or in England. Of course the case is very different where a partner has, in his transactions or contracts with the company, been guilty of fraudulent misrepresentation or concealment, or where, taking advantage of his connection with the company, he has fraudulently secured advantages for a rival concern carried on conjunctly with others or started on his own account. In such cases the transaction cannot stand; not in respect of the partnership relation, but because it is vitiated by the element of fraud. It is also a consequence of the exuberant trust reposed in partners, in virtue of which they are regarded as trustees of the partnership property for the benefit and uses of the partnership, that they cannot employ that property for their own private advantage. Thus in England it was held, that where the master of a vessel, who was part owner of her with others, traded with her on his own account, and made considerable profits, he was bound to account to his co-owners for their share of such profits (a). Partners canpany property purposes; not use com for their own company In like manner, it would appear that a partner cannot render nor the the influence or connection which he acquires by being a member connection. of the firm, a means of securing for himself advantages which he ought in honour to have obtained for the firm. This was decided in the English case of Russel v. Austwick (b); and if a similar question arose in Scotland, there is no reason to doubt that the equitable principle here mentioned would be given effect to. It is a consequence of the trust reposed in partners by each other, that they are bound to give the best of their attention and skill to the management and furtherance of the company's affairs. But if, from defect of judgment, or want of sufficient skill or prudence, they fall into error in management, they are not liable in the consequences, provided they have managed the company's affairs as they do their own (c). (a) Gardner v. M'Cutcheon, 4 Beav. 534. See also Benson v. Heathorn, 1 Y. and C. C. C. 326. (b) 1 Sim. 52. (c) Ersk. iii. 3, 21. See Dig. xvii. t. 2, 1. 52, s. 2, and 1. 72. Bound to give attention and their best skill. Will of the society. How it is to be ascertained. Limited by the sphere of action. CHAPTER IX. POWERS OF MAJORITIES. ACCORDING to the law of Scotland, when an association of individuals is formed for the purposes of mercantile gain, whether it takes the form of a private firm, a common law company, a quasi corporation, or a fully incorporated body politic, a fictitious person is brought into existence for the prosecution of a certain undertaking, business, or line of trade. To enable this fictitious person to attain the ends of its creation, it must necessarily be endued with the attributes of willing and acting within the sphere of its prescribed operation. During the term of its subsistence, therefore, it is this fictitious person, and not the units of which it is composed, that must be considered as willing and acting. To its resolutions the individual wills of its members must be regarded as surrendered or subordinated; and it is bound by their individual acts and deeds only in so far as these are in accordance with its volition, express or implied. The fact that it transacts with the public by the intervention of its partners or officials, does not in the least degree detract from the truth of this proposition. It is the principal of which they are the general or special agents; and its will is as separate and distinct from theirs as the will of a merchant is distinct from that of his clerks and assistants. They have no right to bind it beyond the limits of their agency: when they do so, they are liable in indemnity; and contracts made with them in the knowledge that they are exceeding their powers are mere nullities. The important question therefore at once presents itself, How is the will of a mercantile association to be ascertained? In answering this question, the first consideration which arises is, that a mercantile association, as it is a fictitious person, cannot be conceived of as possessing any power of volition at all beyond |