Obligations inter socios do infer liability to the public. be made the condition in the case of the particular individual, or if a new partner has entered the firm by coming exactly in place of a former partner who has resigned in his favour (a). So also an incoming partner will be held liable, if he has made himself a quasi partner with the old firm, by sharing its profits, by holding himself out as one of its partners, or by recognising the agency of the other partners to bind him. In such cases the liability for old debts will be equally good against the incoming partner, even if we suppose that a new firm has not been created, or that it has not undertaken the obligations of the old. Hence, if a number of persons were to join an old firm, and thereby form an entirely new company, one of their number might render himself effectually liable for the debts of the former concern while the others remained free. It must be observed, however, in relation to this matter, that an not necessarily arrangement inter socios that an incoming partner shall contribute to a certain extent towards relieving the original partners of existing obligations, does not necessarily infer the liabilities of a partner to the public. If this is a mere private arrangement to which the public creditor was no party, the latter could only render it available by assignation, legal or conventional, from the old firm in his favour, and only to the stipulated amount. No doubt such private arrangements, taken in connection with other circumstances, will afford a strong presumption that the new firm has de facto taken over the obligations of the old, or that the incoming partner has quoad these obligations become a partner of the old concern (b); yet they are not conclusive. New shareholders in corporations; In the case of a proper corporation, incoming shareholders incur responsibility for its existing debts and obligations according to the liability attaching to the shares, or to the interest in the company of which they become possessed, as provided in the instrument of incorporation. The reason of this is, that the corporation is a continuous entity, and retains its liabilities as well as its rights irrespective of its fluctuating membership; and the liability to contribute (a) See Maclean v. Rose, 1836, 15 S. 236. (b) See the English cases, ex parte Williams, Buck 13; ex parte Freeman, ibid. 471; ex parte Jackson, 1 Ves. jun. 131, Cooke's Bank. Law 534; ex parte Peele, 6 Ves. 601; ex parte Whitmore, 3 Deac. 365; Page v. Cox, 10 Ha. 163; Lemere v. Elliot, 6 H. and N. 656. attaches to the shares, by whomsoever they may be held. This holds good even in the case of such corporations as are formed under the Letters Patent Acts or by registration, without conferring on their members the privileges of limited liability; for notwithstanding of this, they are still corporations. law companies. As regards common law companies, which wear the external in common appearance of corporations, from their being managed by directors and having a capital divided into shares transferable at the will of their owners, the question whether an incoming shareholder incurs liability for company obligations previously contracted, is attended with considerable difficulty. With respect to such liabilities as may have been incurred by the promoters before the partnership relation was formed by the company being brought into existence, there can be no doubt that it is in a similar position with corporations and ordinary firms, that is to say, the future members can never be held liable when the company, after formation, has not adopted the obligations of its promoters (a). But the question is very different with regard to the liability of persons joining the company subsequent to its formation for obligations which it has. de facto incurred. According to the law of England, a distinction appears to have English law. been taken between the liability of shareholders among themselves, and their liability as to creditors. The shareholders have been. held liable for all past obligations in a question with each other, the mere fact of their purchasing shares being taken as evidence of their agreement to incur such liability; but the ordinary partnership rules have been held to apply in questions with the public (b). It is very questionable whether these views can be taken as in Scottish law. conformity with the law of Scotland. Associations of the kind now under consideration seem in contemplation of our law to be somewhat more than mere firms, though they are not corporations, and to stand as it were midway between the two. They cannot, indeed, appear judicially by a descriptive name without joinder of partners, but the quasi persona appears to be much more developed in their case than in that of private firms; and no countenance has ever been (a) See 'Promoters,' supra. (b) Cape's Exs., 2 De G. M. and G. 562; Thomas v. Clark, 18 C. B. 662. Amalgamation. given to the notion, that the resignation of one member dissolves the concern, or that an increase of membership creates a new company. On the contrary, it is one of the distinguishing characteristics of such associations, that their shares may be bought and sold like those of incorporated companies. It would therefore seem that the quasi persona is to many effects possessed of continuous existence, however much the membership may fluctuate, and is capable of incurring and sustaining obligations irrespective altogether of the members of whom for the time being it may be composed. Now, if this be so, it seems to follow that all incoming shareholders become de facto liable for its existing obligations at whatever period they may have been incurred, because the quasi persona is the real and subsisting debtor, and they are its guarantees or sureties. Indeed, it may be said that all persons entering such associations are bound to know this, just as they are bound to know that the executive management of such companies is entrusted to directors, and not to the members generally; so that the mere fact of their entering the concern may be said to imply their consent to become liable for its existing obligations. It may indeed be argued, that in this view partners disposing of their shares ought ipso facto to be released from their liabilities by delegation to their disponees; but though this may in old times have been law in Scotland, the fact that it is not so now does not affect the question, since a man may always become liable for an obligation in which there are previous obligants without releasing any of their number. That the doctrine here stated is law in Scotland, is strongly indicated by the fact that it is generally so understood, and seems to have been universally acted upon in practice; indeed, no case seems ever to have occurred in which a defence founded on the English rules has even been so much as stated where incoming shareholders have been sued for company obligations (a). When two companies amalgamate, the liabilities of each for the debts and obligations previously contracted by the other will fall to be regulated by the same rules as would apply in the case of two (a) See Maclean v. Rose, supra ; 1859, 21 D. 192; Liquidators of National Exchange Co. v. Drew and Western Bank v. Douglas, 1860, 22 D. 447; Dobbie v. Johnstone, 1859, 21 D. 624. individuals forming a partnership. This appears to have been decided in England (a), and there seems no reason to doubt that it would be held law in this country (b). In like manner, when the proper person of a corporation, or the quasi person of a firm, becomes the partner of another company, the same rules seem to apply. (a) Lindley, Supp. 75. Bank, 1860, 22 D. 540; Buchanan v. (b) See Western Bank v. Ayrshire Lennox, 1838, 16 S. 824. U CHAPTER XVII. CONTINUANCE AND EXTINCTION OF LIABILITY OF PARTNERS, Ambiguity of THE expresssion, liability of partners for company obligations, is expression. Responsibility for future acts. Liability for existing obligations. ambiguous. It may mean one of two things, and it may mean both. It may mean, first, that liability which attaches to every partner for company obligations already incurred; and it may mean, secondly, the liability which he, once being a partner, may retain, to be made responsible for obligations to be incurred by the company hereafter. In other words, it may mean responsibility for the past, or liability to be made responsible for the future. Again, it is sometimes used as a compendious phrase to cover both meanings, as in such phrases as 'limited' and 'unlimited liability.' The distinction, however, is important; and a disregard of it has often been productive of much confusion of thought. The liability to be made responsible for future acts begins as soon as the partnership relation is constituted: it terminates, as regards the soci, by the severance of the partnership relation, unless for purposes of winding up; but as regards the public, it only ceases when due notification has been made that the partnership relation is brought to an end. On the other hand, the liability for past engagements survives the severance of the partnership relation, and as regards the public terminates only by implement or satisfaction; while, in a question with the socii, it may be brought to an end by arrangement, even before the company obligation has been extinguished. These observations of course apply only to partnerships and unincorporated companies. In the case of bodies incorporated by charter, special act, or registration, different rules apply, which will be afterwards considered. In prosecuting our inquiries into this branch of the subject, we shall, in accordance with the distinction above explained, consider |