solvent, was dissolved in 1857. A new firm of Mill and Walker was empowered to discharge all debts due to, and to pay all debts due by, the old firm. A bank had discounted for the old firm certain bills, which did not fall due for some months after the dissolution. When they fell due, the acceptors having become bankrupt, the new firm wrote a docquet, dispensing with notice of dishonour; and, at the request of the bank, one of the partners of the new firm adhibited the signature of the old firm. The new firm of Mill and Walker having been sequestrated, recourse was had by the bank upon the estate of Cuthbert, the partner of the old firm, on the ground that that firm had never been discharged. The defence of delegation was set up, but the Court held that it had not taken place, and that the old firm was still liable (a). The law of England affords numerous illustrations of the same English law. kind. The cases of Lodge v. Dicas (b), David v. Ellice (c), and Thomas v. Shillibeer (d), were instances of dissolution or change of the firm by the retirement of one of the partners; while Kirwan v. Kirwan (e), Gough v. Davies (ƒ), and Blew v. Wyatt (g), were instances of the same change by the retirement of some partners and the introduction of others. In all these cases, the circumstances were very strong in favour of the view that substitution of one firm for the other had taken place, so as to release the old firm; yet the English courts refused to give effect to this defence, on the ground that the matter was not beyond doubt. It should be noticed, however, that if the cases of Lodge v. Dicas and David v. Ellice had occurred in Scotland, the finding would probably have been for delegation. The English court went greatly on the technical rule of that law, that the agreement to accept the new firm in room of the old was void for want of consideration, even if it were otherwise established. Now this rule is not observed in the law of Scotland; and by a late decision (a) Muir v. Dickson, 1860, 22 D. 1070. See also Milliken v. Love, 1803, Hume 754; Campbell v. Cruickshank, 1845, 7 D. 548. (b) 3 B. and Al. 611. (c) 5 B. and C. 196. (d) 1 M. and W: 124. (g) 5 Car. and Pa. 397. See also S Additional security differs from delega tion. One firm succeeding another. English cases. Corporations. Effects of amalgamation. in England, it would seem that in future it will not be held to operate in questions of this nature (a). Care must be taken not to confound a mere agreement to accept of further security with a consent to delegation. Thus a creditor may be induced to give delay, in consequence of obtaining the security of a new firm; and if in such a case he afterwards takes proceedings against the new firm, it cannot be said that he has thereby waived his claim against the old (b). Nor does the taking a bill from a partner for a company debt per se infer delegation, so as to release the firm (c). When one firm is succeeded by another, and the new company contains members who were also members of the old, the mere fact of the creditor taking proceedings against these persons for recovery of his debt is no proof that he had adopted the new firm as his debtor, so as to release the old; for he was entitled to go against such persons in their character of partners of the old firm, irrespective altogether of the relation they had contracted with the new company (d). In some English cases, where the creditor was proved to have been aware of an agreement between an old firm and a new, that the latter should take the assets and liabilities of the former, the elapse of many years, during which he had taken no steps to recover as against the old firm, but had received payment of interest arising on his debt from the new company, has been held to infer his assent to delegation (e). The same rules apply to companies incorporated by special act, charter, or registration (ƒ), except in so far as their constitution may render adoption of the liabilities of another company invalid. It may be observed, that the amalgamation of two companies with each other does not produce delegation so as to release former shareholders of one of the amalgamating companies. It is very (a) Lyth v. Ault, 7 Ex. 669. (b) Thompson v. Percival, 5 B. and Ad. 925; David v. Ellice, 5 B. and C. 196; Heath v. Percival, 1 P. W. 682. (c) Wilson and Corse v. Gardiner, 1807, Hume 247; Bedford v. Deakin, 2 B. and Al. 210; Spencely v. Greenwood, 1 Fos. and Fin. 297. (d) Buchanan v. Adam, 1833, 11 S. 762. See also Percival v. Heath, 1 P. W. 682; Milliken v. Love, 1803, Hume 754. (e) Brown v. Gordon, 16 Beav. 302; Oakley v. Pasheller, 4 Cl. and Fin. 207; Rodgers v. Maw, 4 Dowl. and L. 66. (f) See Saxon Life Assurance Society, 2 J. and H. 408. doubtful whether it even gives the creditor the benefit of additional security (a). There are cases to be found in the English authorities in which Merger. 'merger' (a species of novation) has been found to cancel a company obligation by substituting another in its place, and that without any formal consent on the part of the creditor, but by the mere operation of law, in virtue of a principle peculiar to the English system. According to the law of England, if a creditor obtain an obligation of a higher order than he had before, the original obligation is lost or merged in the new. Thus, if a company or firm incurs an obligation by simple contract, and one of the partners grants his bond for the debt, this at once releases the other partners; and, in like manner, it is held that if the creditor obtains judgment against one of the partners only, his doing so destroys ipso facto his recourse against the others (b). In such cases, merger results from the simple fact of accepting the bond or obtaining the judgment. It is said that in equity this principle is not so strictly enforced. No such principle as this ever obtained in the law of Scotland; but the new obligation has always (unless the contrary was expressly stipulated) been held merely corroborative of the old (e). It is important to bear this difference between the two legal systems in mind, for otherwise a very erroneous inference might be drawn from numerous English decisions of which the doctrine of is the true ratio. merger Does not obtain in Scotland. III. RELEASE-DISCHARGE BY CREDITOR, AND BY OPERATION OF LAW. creditor. If a creditor chooses to discharge his debtor or obligant, the Discharge by release will be effectual, provided the fact can be established by legal evidence, whatever may have been the motive upon which the creditor acted; and as to the kind of evidence which the law requires to establish a discharge, the same rules generally apply in (a) Previous case; and see Hardinge v. Webster, 1 Dr. and Sm. 101. (b) Basset v. Wood, 11 Vin. Ab. Exting. B. 8; King v. Hoare, 13 M. and W. 494. See Lindley, p. 367, and (c) Ersk. iii. 4, 22; M. 11518. English doctrine as to partner. the case of firms and companies as in that of individuals, and will be found in any work on evidence. When the discharge is required by law to be in writing, if the creditor be a copartnery, attention must be paid to the mode in which the firm signs obligations; if it be an incorporated company, regard must be had to the forms laid down in its instrument of incorporation for this purpose. The modes in which company debtors may be effectually discharged will be afterwards more fully considered. There is a doctrine of English law, as to the effect which the release by one release of one partner has to release the others, or, in other words, to terminate the company obligation, which it is here necessary to consider, as some doubts have been entertained whether it was not, or at least has not now become, law in Scotland. According to the law of England, an absolute and unconditional release of a company obligation to one partner operates as a discharge to all the partners (a). Is this the law of Scotland? This rule is, however, subject to certain limitations. In the first place, it is held that if it be expressly set forth in the release that it shall be limited to the benefit of the releasee, and shall not avail, even in his case, when he is sued jointly with his co-obligants, then it will not bar action against the company. Further, a distinction is made between a release and a covenant not to sue, so that when the latter is made with one partner, it would seem not to liberate the others (6). But it has also been held, that if a creditor obtains judgment against the partners of a firm for a company debt, and arrests them, and then lets one of them go, the others are entitled to be discharged from custody (c). The author has been unable to discover any express authority or dictum upon this question in the Scottish authorities; yet it would seem never to have been doubted that in our law the discharge of one partner does not operate as a release to the others. And if we attend to the origin of the English rule, it would appear to follow that the Scottish rule must always have been different. The English rule is nothing else than the application to part(a) Bower v. Swadlin, 1 Atk. 294; Cheetham v. Ward, 1 Bos. and P. 630. See also Lindley 350, and Collyer 428. (b) Solly v. Forbes, 2 Brod. and Bing. 38; Price v. Barker, 4 E. and B. 760; nership of the old doctrine of the common law, that where several persons are bound jointly, or jointly and severally, whether as principals or sureties, a release to one is a release to all (a). Now the law of Scotland upon this matter was always different. The discharge of one co-obligant had no effect to release the others, whether they were bound jointly, or jointly and severally (b); and the same rule formerly held good as to cautioners, except in so far as a discharge of one of them diminished the claim against the others to the extent of his share of the obligation (c). It must also be borne in mind, that in another respect the reason of the English rule fails when applied in cases of Scotch partnership. Company obligations are not in Scotland the joint and several obligations of the individual partners, but the obligations of the quasi person of the firm of which the partners are the guarantees. It may perhaps be argued that the recent alteration of the law of Scotland, whereby a discharge to one cautioner is now declared to be a discharge to all (d), has by implication introduced the English rule into our partnership law. But it must be observed that this enactment plainly applies to persons bound as cautioners eo nomine, and not to guarantees becoming such by implication of law. It would therefore seem that, according to the principles of the law of Scotland, a discharge to one partner is not a discharge to all; and that the utmost effect which such a release could operate, would be to limit the obligation of the other partners by the amount of the contribution which would otherwise have been exigible from the partner obtaining the discharge. Sometimes an obligor finds himself released from his obligation by the operation of law, without having himself done anything to contribute to that result. An instance of this has been introduced by the recent Mercantile Law (Scotland) Amendment Act (e), which it is of importance to notice, as it has a very important bearing on the obligations of guarantee societies. Sec. 7 of this statute is as follows: No guarantee, security, cautionary obligation, representation, or assurance granted or made after the passing of this (a) Ex parte Slater, 6 Ves. 146; Watson on Part. 227; Collyer 428; Lindley 350. (b) Second Mercantile Report Law Commission, 91. (c) Bankt. i. 24, 2; Sh. Bell's Com. 277; Ersk. iii. 3, 68. (d) 19 and 20 Vict. c. 60, s. 9. (e) 19 and 20 Vict. c. 60. Release by of law. operation |