Physical injuries. Bankruptcy and insolvency. Gross misconduct. declaratory process in England, the dissolution generally dates from the time of the decree (a); though exceptions to this rule, arising out of special circumstances, may occasionally be found (b). The costs of procedure are charged against the partnership assets (c). Physical injuries, which in some cases incapacitate a partner from discharging his stipulated duties quite as much as mental aberration, ought to form a good ground for obtaining dissolution; but no cases of this kind seem to have come before the courts, either here or in England (d). As we shall afterwards see, the simple bankruptcy or insolvency of a partner do not of themselves dissolve a copartnery, because they do not operate a transfer of his share this being the consequence only of sequestration or the cessio bonorum (e). But where a partner is bound to contribute his skill, industry, or personal superintendence, it should seem that his imprisonment, taking refuge in the sanctuary, or fleeing from the diligence of his creditors, ought to form a good ground for judicial dissolution, provided the disqualification be more than temporary. 2. Gross Misconduct.-As partnership is a contract of exuberant trust, such gross misconduct on the part of any of the socii as is plainly destructive of mutual confidence, ought to form a valid reason to obtain dissolution. Numerous instances may accordingly be found in English practice, where dissolution has been decreed on this ground (ƒ); and there can be no doubt that these precedents would be followed in this country (g). But mere incompatibility of temper producing petty annoyance and vexation, or even such misconduct as does not plainly interfere with the partnership business, will not be held sufficient; for of such contingencies, the partners take their chance when they form the connection (h). (a) Jones v. Welch, 1 K. and J. 765; Besch v. Frolich, 1 Ph. 172. (b) Kirby v. Carr, 3 Y. and C. (c) Jones v. Welch, supra. (ƒ) Waters v. Taylor, 2 Ves. and B. 399, and Tudor L. C. 298; (g) Bell's Com. ii. 635. (h) Marshall v. Coleman, 2 Jac. and W. 266; Roberts v. Eberhardt, Kay 148; Goodman v. Whitcombe, 1 Jac. and W. 589. The misconduct must be such as to destroy all hope of successfully prosecuting the scheme in which the partners are jointly embarked (a). Upon this ground, confirmed habits of intoxication, likely in the circumstances of the company to prove ruinous to all concerned, would probably be held a ground of dissolution (b). go on without loss. 3. Inability to go on without Loss. When it can be shown to Inability to the satisfaction of the Court, that a partnership cannot go on without the risk of bringing ruin upon all concerned, this will be held a good ground for decreeing dissolution (e). Our courts, however, will not exercise this power except upon very clear grounds; and therefore mere improbability or difficulty of accomplishing the purposes for which a company has been formed, will not be held sufficient (d). When dissolution on this ground is prayed for by a majority of the partners, the Court will be more likely to accede to the request (e); and dissolution has been awarded on the ground that the company could only be carried on by means of a large advance of capital, and even then with doubtful success (ƒ). The supervention of the circumstances above enumerated, viz. incapacity, misconduct, and inability to go on, do not, as we have already observed, dissolve the concern ipso facto, but merely afford grounds in respect of which dissolution may be obtained. Hence, when the partners, or those entitled to represent them, cannot be brought to agree that the concern shall be wound up and dissolved, this can only be validly brought about by judicial intervention. In England, the procedure is to file a bill in equity, praying that the concern may be dissolved and wound up under the directions of the Court; in Scotland, the proper course would seem to be by petition to the Court of Session, setting forth the whole circumstances of the case, and praying for the appointment of a judicial factor to wind up and distribute the company effects. It is not (a) Charlton v. Poulter, 19 Ves. 148, note; Harrison v. Tennant, supra; Anon., 2 K. and J. 441; Baxter v. West, 1 Dr. and Sm. 173; Pease v. Hewitt, 10 W. R. 535; Watney v. Wells, 30 Beav. 56. (b) Bell's Com. ii. 635. (c) Montgomery v. Forrester and Co., 1791, M. 14583; Barr v. Speirs, 1802, 1 Bell's Ill. 258. See also Warren (d) Bain v. Black, 1849, 6 Bell's (e) Montgomery, supra. Judicial inter vention should be obtained. Provisions for dissolution. Circumstances unusual, it is believed, for the majority of the partners, where one of their number has become incapable of discharging his duties, or where the further prosecution of the undertaking seems hopeless, to content themselves with entering a minute of dissolution on the company books, and then at their own hand to proceed to wind up the concern as if it had been formally dissolved, trusting to be able to justify their proceedings in the event of their being afterwards called in question. This practice is highly objectionable. It assumes a discretionary power with which the common law has not entrusted them, and which is capable of the greatest abuse. Dissolution may in the circumstances be the most advisable course, and perhaps the only alternative, but of that they are not the judges; and it is obvious that a power of this kind might often be exercised with the view of expelling disagreeable associates, and even of defrauding a partner of his just rights, where, from temporary aberration of mind, he was incapable of looking after his own interests. Moreover, if it should ultimately turn out that the dissolution was unwarrantable, it would be a matter of great difficulty to set matters right with those whose rights had thus been prejudiced; and protracted and expensive litigation would probably ensue in determining intricate questions of accounting and reparation. Whenever, therefore, in any of the cases under consideration, an arrangement for extrajudicial dissolution and winding up cannot be made with all concerned, the only safe and proper course appears to be an application to the Court. To obviate difficulties of this kind, it is not unusual to introduce provisions in the contract of copartnery, or other instrument of formation, to the effect that, on the emergence of certain conditions, such as a diminution of the capital below a fixed sum, the incurring of a certain amount of loss, etc., the concern shall ipso facto determine. When the contemplated condition is of such a nature that its occurrence can be instantly and clearly established, the partners may proceed to wind up as soon as it occurs, without obtaining the consent of a recalcitrant minority; but where the exact meaning of the condition, or the fact of its having emerged, is open to question, the only safe course appears to be to obtain the intervention of judicial authority. There are some circumstances, the emergence of which ipso facto operates a dissolution, whether the partnership be at will or which ipso facto operate for a term. The ratio of these is, that the further continuance of a dissolution. the partnership would introduce a new partner, or would involve all concerned in the commission of illegal acts. The death of a partner operates a dissolution; for otherwise Death. his heirs or executors would have to come in his room (a). But if it be specially provided that death shall not have this effect, or that the heir of a deceasing partner shall take his place, dissolution will not follow (b). And it may be effectually stipulated that a partner shall have the power, in contemplation of death, to appoint some one as his successor; but if, in such a case, the nominee does not accept, a dissolution takes place on the partner's death (c). In like manner, the marriage of a female partner, as it would Marriage. otherwise have the effect of making the husband partner in her place, operates a dissolution (d). of interest. On the same principle, the assignation by a partner of his share Assignation operates a dissolution, if there be no provision to the contrary in the partnership contract (e). This, of course, must be understood to mean such an assignation as effectually substitutes another in his room; for an assignment not in itself valid, or merely affecting profits, will not have this effect (ƒ). Nor will a mortgage, e.g. an assignation in a bond, of a partner's right to profits on a share, produce dissolution. In such cases substitution does not take place. Sequestration, which transfers to creditors the partner's rights, Sequestration. operates a dissolution (g). The cessio bonorum would seem to have the same effect. So, in England, transfer of a partner's share 62, and 1 Russ. 361. Collyer searched the registrar's book for this case in vain. Coll. 151. See post. p. 683 et seq. (a) Ersk. iii. 3, 25. Aiton v. Cheap, 1769, M. 14573, revd. 2 Paton App. 283; Aikin's Trs. v. Shanks, 1830, 8 S. 753; Christie v. Royal Bank, 1839, 1 D. 743, and 2 Rob. App. 118; 3 Ross L. C. 668; Inst. of Just. iii. 26, 5. Crawshay v. Maule, 1 Wilson 181 and 197; Tudor L. C. 279. But see Sclater v. Clyne, 1831, 9 S. 248; revd. on merits, 5 W. and S. 625. (b) Gillespie v. Hamilton, 3 Madd. 251. (c) Kershaw v. Matthews, 2 Russ. (d) Nerot v. Burnand, 4 Russ. 247. Coll. 435; Lindley 187. (e) Heath v. Sansom, 4 B. and Ad. 175. (f) Glyn v. Hood, 8 W. R. 37; Smith v. Parkes, 16 Beav. 115; Jefferys v. Smith, 3 Russ. 158. (g) Sh. Bell's Com. 222; Hunter, 1830, 9 S. 159. Legal attachment. Insolvency. Cessio and voluntary assignment. Forfeiture to the Crown. War. Supervening illegality. Termination of adventure. under a fi. fa. (a) bankruptcy (b) or insolvency (c), dissolves the partnership. It is not so clear whether adjudication of a partner's share, or attachment thereof by arrestment and furthcoming, would have the same effect. Such, indeed, would seem to be the analogy of the English cases where a partner's share has been taken in execution by fi. fa. See, as to this, ‘Arrestment' and ' Adjudication.' Insolvency in Scotland, and simple bankruptcy, do not of themselves operate a dissolution, because they do not operate a transfer of interest. To produce this effect, they must be followed by sequestration, or the cessio, or by a voluntary trust for creditors (d). They may, however, be made to have this effect by agreement (e), and will often afford a good ground for judicial interference. The transfer of a partner's share to the Crown by forfeiture. for treason, or falling of his single escheat for less crimes, ought also to operate a dissolution. In such cases not only is there a transfer of interest, but the partner is so far civilly dead, and therefore incapable of discharging the duties required of him under the partnership contract (ƒ). When a partnership subsists between persons domiciled in different states, the breaking out of war between them would seem to operate a dissolution ipso facto (g). As a partnership cannot be entered into for the purpose of carrying on an illegal traffic, it seems to follow that the supervention of any statute declaring illegal the business for the prosecution of which the company was formed, puts an end to the partnership (h). If a partnership be entered into on account of some particular adventure, when that adventure ceases the partnership determines (i). (a) Johnson v. Evans, 7 Man. and Gr. 240; Perens v. Johnson, 3 Sm. and G. 419. (b) Ex parte Williams, 11 Ves. 5; Fox v. Hanbury, 2 Cowp. 448. (c) Fox v. Hanbury, per Lord Mansfield. (d) Sh. Bell's Com. 222. See Sclater v. Clyne, 1831, 9 S. 248; revd. on merits, 5 W. and S. 625. See Bell's Prin. 377. (e) See Munro v. Cowan, 1813, 17 F. C. 354, and 2 Bell's Com. 647. (ƒ) See, on this matter, Coll. 71 ; Watson 377; 2 Bell's Com. 409; and Chitty's Laws of Com. 252. (g) Story on Part. s. 315. Griswold v. Waddington, 16 Johns. 438. See Kent's Com. i. 66, 67; and Phill. Int. Law iii. 108. (h) Lindley 187. |