partner; and this was so in the Roman law (a). But this liability does not extend to any acts which are not strictly necessary for winding up (b); and any abuse of the agency implied for that purpose will justify the appointment of a judicial factor (c). notes. The implied agency does not validate a draft, acceptance, or Bills and indorsation, made by one partner after dissolution so as to bind the others; and it implies no authority to do so, that the notice of dissolution empowered one partner to receive the assets and pay the debts of the company (d). In order to bind the firm after dissolution, all the partners must join in the draft, acceptance, or indorsement, or it must be signed by some person specially authorized to act for them (e). When a skeleton or blank bill has been signed by the firm, and dated prior to dissolution, though filled up subsequently to that event, it has been held to bind the partners (f). And when, prior to dissolution, two partners drew a bill payable to their own order, and after dissolution one of them indorsed it to a party who knew of the dissolution, the indorsee was held entitled to recover against both partners (g). It sometimes happens that the agency of some one or more of the partners is specially arranged to continue for certain purposes after dissolution. In all such cases the exercise of this power within its prescribed limits will bind the late members of the firm. In Burton v. Issitt, one of two partners was specially authorized to use the name of the other in prosecuting for recovery of partnership property (h). This was held to validate promissory-notes issued in the name of the firm so as to bind the retiring partner. The same was held in Smith v. Winter, where the continuing partner had express permission to use the name of his former associate (¿). Agency conpartner. ferred on one public are mis led. 2. When, notwithstanding complete withdrawal of agency and When the guarantee has taken place with due notice, a partner has done something to lead the public to believe otherwise, he may still remain liable for subsequent acts of his former partners. (a) Dig. lib. xvii. t. 2, 1. 40. (b) Kilgour v. Finlyson, 1 H. Blacks. 156; Abel v. Sutton, 3 Esp. 108. (c) Young v. Collins, as reversed in House of Lords, 1 Macq. 385. (d) Cases last cited; and Snodgrass v. Hair, 1848, 8 D. 390. (e) Same cases, and Wrightson v. Pullar, 1 Stark. 375. (f) Usher v. Dauncey, 4 Camp. 97, (g) Lewis v. Reilly, 1 Q. B. 349. (i) 4 M. and W. 454. Holding out after notice. Authorizing use of name. Practical rules. The most common example of this occurs where a partner, though he has retired and given notice of his retirement, still continues to hold himself out as a partner. In Brown v. Leonard (a), one of two partners retired, and a promissory-note was subsequently issued in the name of him and the two remaining partners. The plaintiff, before receiving the note, had notice from the retiring partner that he had left the concern; but he at the same time stated that his name was to continue for a certain time. He was found liable. In Staples v. Ely (b), a retired partner who allowed his name to remain on a cart, and over the old place of business, was found liable for the negligence of a driver of the cart in the employ of the firm. It has been said that a retired partner does not incur responsibility in this manner, unless his name has been used with his knowledge and authority. And such a view would certainly appear to be in accordance with justice and equity. The well-known case of Williams v. Keats seems, however, to countenance the opposite doctrine (c). In that case there was no evidence that the retired partner had authorized the continuance of his name, beyond the fact that he had not prevented it. To obviate the risk of liabilities of this kind, it should be made matter of special arrangement, prior to dissolution or retirement, that none of the partners shall continue the business in name of the others. For while in actions instituted for the purpose of having a partnership dissolved, or for distribution of the partnership funds after it has been dissolved, the courts have interfered to prevent partners from carrying on the concern for any other purpose than that of winding up (d), they have refused to restrain a surviving partner from carrying on business in the name of a deceased partner, when no agreement against his doing so could be produced (e). (a) 2 Chitty 120. (b) 1 Car. and Pa. 614. See also (d) See Webster v. Webster, 3 Swanst. 490; Lewis v. Langdon, 7 Sim. 421; De Tastet, Jac. 516. (e) Farr v. Pearce, 3 Madd. 74; Davies v. Hodgson, 25 Beav. 177. CHAPTER XVIII. LIABILITY OF MEMBERS OR SHAREHOLDERS FOR THE DEBTS attending the elucidation of the law of this subject in Scotland. THE non-recognition of a separate person in unincorporated asso- Difficulties ciations, though justly regarded as in many respects an imperfection in English law, carries with it one great advantage, namely, that of broadly distinguishing between corporations and mere partnerships. The habit of attributing to the latter a quasi person tends greatly to obscure this distinction in the mind of the Scottish lawyer, and has undoubtedly led to much confusion of thought in relation to the nature and legal incidents of corporations. We have had occasion to notice this in previous chapters; but there is perhaps no branch of the subject in which it is more observable than that now under consideration. To escape from this tendency, and to obtain clear views of the nature of the liabilities which may attach to the members of incorporated companies as contradistinguished from those which are inseparable from the partnership relation, we should recommend that the following principles and considerations be kept steadily in view. ciples to be Corporations are in contemplation of law proper persons, capable General prinof sustaining the characters of debtor and creditor, of holding kept in view. property, and of suing and being sued, like ordinary individuals, for all the intents and purposes of their creation. Partnerships, again, are possessed merely of a quasi personality, and of this only in a limited and special sense; their rights and obligations involve those of their members, and they cannot appear judicially without joinder of the latter in some form or other. In all obligations incurred by corporations, the corporation is itself the true debtor; the creditor deals with it as an individual, and must look for pay Liability arising from contract. Contribution. Liability for contribution arises not ex lege but ex contractu. ment to its property or assets alone, the corporators as such being neither its co-obligants nor its sureties. Obligations, on the other hand, incurred by partnerships, bind not only the quast person of the firm, but each and all of the partners jointly and severally, and render them liable singuli in solidum to the utmost extent of their means and estate. In corporations, membership does not per se create liability for company obligations; in partnerships, it involves this liability without limit. But though liability of members for company debts is not one of the naturalia of a corporation, there is nothing to prevent the members any more than strangers from undertaking such liabilities to any extent and under any conditions they may see fit; and when obligations of this kind are validly constituted, they will receive equal effect with those arising under any other special contract. Now, it is obvious that associations incorporated for the purposes of gain must, like ordinary companies, be possessed of a fund to meet the expenses of the undertaking; and this, except in very exceptional cases, can only be raised by contribution among the members. This contribution may assume various forms. It may consist of a certain fixed sum payable on each share, or it may take the form of a guarantee, undertaken by each member, to a certain amount, or to the full extent of the liabilities to be incurred by the corporation. The obligation to contribute may be created by special contract, either before or after incorporation; and when properly constituted, it will bind all such as have contracted, whether members or strangers. But as the possession of a common fund is absolutely necessary to the success of the undertaking, an obligation to contribute to such an extent and in such a manner as the promoters deem advisable is almost always inserted as a condition of membership in the instrument of incorporation. This condition, coupled with acceptance of shares, forms a special contract binding on every member, and at once creating and defining his liability to contribution. This liability to contribution is obviously something entirely different from the unlimited liability incurred by partners. It does not arise ex lege, but is the creature of the special contract by which it is expressly limited and defined. Hence it can be rendered available and enforced in no other form and to no other 2 effect than those stipulated; and when the covenanted amount of contribution has been exhausted it entirely ceases, however large may be the existing debts or obligations of the corporation. by separate of 1845. If the views here enunciated be correct, it follows that to Ascertained by incorporating ascertain in any given case whether and to what extent the mem- instrument, or bers of an incorporated association are liable for its debts and contract. obligations, when such liability terminates, and in what manner it may be rendered available to creditors, recourse must be had to the provisions of the instrument of formation, viz. charter, special act, special act combined with the Consolidation Act of 1845, or memorandum and articles of association in combination with the Registration Acts. Liabilities arising from separate contracts must of course be determined by reference to the contracts themselves. By the Companies Clauses Consolidation (Scotland) Act it is Companies Act provided as follows: If the company shall be incorporated, no person or corporation, nor the estate, real or personal, of any such person or corporation, who is or shall be a proprietor of the said incorporated company, shall be liable for or charged with the payment of any debt or demand whatsoever, due or to become due by or from the said company, beyond the extent of his or their share in the capital of the said company' (sec. 37). And with respect. to the means competent to creditors of the company to render this limited liability available against shareholders, it is provided, that if any legal diligence or execution shall have been issued against the property or effects of the company, and if there cannot be found sufficient whereon to levy under such diligence or execution, then such diligence or execution may be used against any of the shareholders to the extent of their shares respectively in the capital of the company not then paid up; and for the purpose of ascertaining the names of the shareholders, and the amount of capital remaining to be paid upon their respective shares, it shall be lawful for any person entitled to any such execution, at all reasonable times to inspect the register of shareholders without fee' (sec. 38). provisions. It is clear from these provisions, that the members of com- Import of these panies incorporated by special act under this general statute incur no liability for company debts beyond the amount of their contributions, which is the amount of the company's capital remaining X |