2. An adoption by the creditor of the new firm as his debtor does not by any means necessarily deprive him of his rights against the old firm either at law (n) or in equity (0); 3. And it will certainly not do so if, by expressly reserving his rights against the old firm, he shows that by adopting the new firm he did not intend to discharge the old firm (p);" 4. And by adopting a new firm as his debtor, a creditor cannot be regarded as having intentionally discharged a person who was a member of the old firm, but was not known to the creditor so to be (2); 5. But the fact that a creditor has taken from a continuing partner a new security for a debt due from him and a retired partner jointly, is strong evidence of an intention to look only to the continuing partner for payment (); 6. And a creditor who assents to a transfer of his debt from an old firm to a new firm, and goes on dealing with the latter for many years, making no demand for payment against the old firm, may not unfairly be inferred to have discharged the old firm. If a jury finds that he has done so, the Court will not disturb the verdict (8); The affairs of a partnership were submitted to an arbitrator, who was to designate which partner should assume certain debts, and also to divide and dispose of the firm assets; to which submission a creditor assented, and agreed to be bound by the award, which was that one party should take the assets and pay all the debts: Held, that the surrender by the other partner of his interest in the assets, and the consent of the creditor to the submission, was a consideration for his promise, and that the co-partner was released thereby from the claim. Backus v. Fobes, 20 N. Y. 204. Where, upon the dissolution of a copartnership, one partner assumes a liability, he does it primâ facie, upon sufficient consideration, leaving his copartners liable only as sureties; and they may take measures to have the claim assigned and collected from the partner liable. Etna Ins. Co. v. Peck, 28 Vt. 93. (n) David v. Ellice, 5 B. & C. 196; Thompson v. Percival, S. B. & Ad. 925. Heath v. Percival, 1 P. W. 682, and 1 Str. 403; Kirwan v. Kirwan, 2 Cr. & M. 617; Gough v. Davies, 4 Price, 200; Blew v. Wyatt, 5 C. & P. 397. (0) Oakford v. European, &c., Ship Co., 1 Hem. & M. 182; Sleech's case, 1 Mer. 539; Clayton's case, ib. 579; Palmer's case, ib. 623; Braithwaite t. Britain, 1 Keen, 206; Winter v. Innes, 4 M. & Cr. 101. (p) Bedford v. Deakin, 2 B. & A. 210; Jacomb v. Harwood, 2 Ves. S. 265. (q) Robinson v. Wilkinson, 3 Price, 538. (r) Evans v. Drummond, 4 Esp. 89; Reed v. White, 5 ib. 122. (s) Hart v. Alexander, 2 M. & W. 484. and if the question arises before a Judge, e.g., in bankruptcy or in the administration of the estate of a deceased partner, the Court will consider all the circumstances of the case, and will infer a discharge if, upon the whole, justice to all parties so requires (†) But the small number of cases in which relief has been *450 refused, compared with those in which it has been granted, shows that the leaning of the Court is strongly in favor of the creditor. The further illustration of these principles and their application to companies which amalgamate with others will be noticed hereafter. (b) of the doctrine of merger. security in Having now examined the mode in which a partner may be discharged from liability, by reason of a substitution of some other person in his place with the creditor's Merger of one assent, it is necessary to advert to a doctrine by which another. a partner occasionally finds himself discharged, simply because his creditor has obtained a security of a higher nature than that which he previously possessed. Bills, &c., cre If a person solely indebted enters into partnership with another, and the two give a joint note or bill for the debt of the first, and the note or bill is not paid, the creditor is not ate no merger. precluded from demanding payment from his original debtor (u), unless it can be shown that the bill or note was taken in satisfaction of the original demand. (v)1 So, if two partners are indebted (t) Ex parte Kendall, 17 Ves. 522-5; Oakley v. Pasheller, 4 Cl. & Fin. 207; Wilson v. Lloyd, 16 Eq. 60; Brown v. Gordon, 16 Beav. 302. (u) Ex parte Seddon, 2 Cox, 49; Ex parte Lobb, 7 Ves. 592; Ex parte Meinertzhagen, 3 Deac. 101; Ex parte Hay, 15 Ves. 4; Ex parte Kedie, 2 D. & C. 321. (v) As in Ex parte Whitmore, 3 Deac. 365; Ex parte Kirby, Buck, 511; Ex parte Jackson, 2 M. D. & D. 146. 1 See ante, 550, note. nership is not extinguished by a transfer thereof to another firm composed in part of the same persons; and the latter firm may negotiate the note to third persons. Fulton v. Williams, 11 Cush. 108. There being two outstanding mortgages of certain lands, X. and Y., partners, bought with partnership funds one-half of the senior mortgage interest, and the entire legal interest in the land, taking the former in the name of X. and the latter in the name of Y. In a contest between the holders of the first The joint and several note of a part- mortgage and junior mortgagee, held, on the partnership account, and one of them gives a bill or note for the debt, and that bill or note is dishonored, the creditor who took it will not be precluded from having recourse to both partners for payment (2), unless it can be shown that he intended to substitute the liability of the one for the joint liability of the two. (y)3 But when a creditor obtains from his debtor a security of a higher nature than he had before and does not take care *451 to accept it as collateral security, (), the original debt is merged in the higher security, and can no longer be made the foundation of an action, or of proof in bankruptcy (a); and this doctrine is as much applicable to joint as to several obligations. And there is no mean authority for saying that if two parties are jointly indebted by simple contract, and one of them gives his bond for payment of the debt, the joint debt is at an end (b); but there are recent decisions to the Securities of a higher nature do. that there was no merger of the legal and equitable estates so purchased; there being an intervening estate by the second mortgage, the taking of the purchased estates in different names showing an intention to keep them distinct, and the transaction not being injurious to the junior mortgagee. Scott v. Webster, 44 Wis. 185. (x) Keay v. Fenwick, 1 C. P. D. 745 ; Bottomley v. Nuttall, 5 C. B. N. S. 122; Whitwell v. Perrin, 4 C. B. N. S. 412; Ex parte Hodgkinson, 19 Ves. 201. See, too, Ex parte Raleigh, 3 M. & A. 670; Bedford v. Deakin, 2 B. & A. 210, noticed ante, p. 440. (y) As the jury found was the case in Evans v. Drummond, 4 Esp. 89, and Reed v. White, 5 ib. 122. Compare the cases in the last note. 2 See Melane v. Spencer, 6 Ired. L. 423; Wilson v. Jennings, 4 Dev. L. 90. See ante, 450, note. Although the acceptance of a security of a higher dignity merges and extinguishes the original cause of action; yet if one partner, who has executed in the name of the firm a single bill for the amount of a debt which the firm owes, afterwards gives a promissory note in the name of the firm, a recovery may be had thereon against the firm. The partnership debt, which was extinguished by the acceptance of the single bill, is thereby revived. Davidson v. Kelly, 1 Md. 492. Where a creditor of a former commercial firm sues its individual members for goods sold to the firm, and declares in his petition on the itemized account of the goods, and also on a promissory note of the firm given in liquidation of the account by one not authorized to sign for the firm, he will be entitled to recover for the goods on the unopposed proof of their sale and delivery. Dodd v. Bishop, 30 La. An. 1178. (z) As in Ex parte Hughes, 4 Ch. D. 34, note. (a) Ex parte Oriental Financial Coporation, 4 Ch. D. 33; Higgen's case, 6 Co. 44 b; Owen v. Homan, 3 Mc. & G. 378; Price v. Moulton, 10 C. B. 561; Shack v. Anthony, 1 M. & S. 572. (b) Basset v. Wood, 11 Vin. Ab. Exting. B. 8; and see Owen v. Homan, 3 Mc. & G. 407; Ex parte Hernaman, 12 Jur. 642. contrary (c), and the question cannot be considered as yet settled. However, it seems that if the creditor obtains judgment against one of the partners only, he loses his remedy against the others (d); except when they are abroad, and cannot therefore be sued Contra, Ward v. Motter, 2 Rob. (Va.) 536. See, also, Anderson v. Levan, 1 Watts and Serg. 334. The execution of a sealed note for a debt due by partners, by one of them, in the firm name, without authority, does not merge the joint liability on the simple contract. Brozee v. Poyntz, 3 B. Mon. 178; Calk v. Orear, 2 id. 420; Horton v. Child, 4 Dev. L. 460. So, a promissory note given by a firm is not merged in a bond and mortgage, executed at the same time and for the same debt, by one partner in the name of the firm, but without the knowledge of his co-partners. Pierce v. Cameron, 7 Rich. 114. The mere acceptance of a bond and a deed of trust to secure it by a creditor from one member of the firm after dissolution, for a partnership debt due by simple contract, destroys the right of the creditor to proceed at law against the other member; but a court of equity will look at the attendant circumstances of the case, and will not absolve the firm from liability unless it appears from those circumstances, or otherwise, that the higher security was accepted as a substitute for the simple contract of the firm. Niday v. Harvey, 9 Gratt. 454. A partnership assigned the partnership effects for the benefit of such creditors as should sign the deed of assignment, and receive their dividends; and, in consideration thereof, and that they would release the other partners, the senior partner covenanted to pay the balance due such creditors after exhausting the property assigned: Held, that the prior claims of the creditors who became parties to the agreement were extinguished, and merged in the covenant of the senior partner. Hosack v. Rogers, 8 Paige, 229. (d) King v. Hoare, 13 M. & W. 494; Ex parte Higgins, 3 DeG. & J. 33. A colonial judgment creates no merger, Bank of Australasia v. Nias, 16 Q. B. 717. 2 When a judgment is obtained against one of two partners on a joint, the contract is merged in the judgment; and an action at law cannot be maintained thereon against the partners. Sedan v. Williams, 4 McLean, 51; Smith v. Black, 9 Serg. & R. 142. Contra, Williams v. Rogers, 14 Bush, 777. The ostensible partner of a firm gave notes in the partnership name, which was his own name, for goods purchased for the use of the partnership, upon which the payee, in ignorance of the partnership, sued and recovered judg ment against the ostensible partner alone: Held, in an action afterwards brought against the dormant partner, that his liability upon the notes was extinguished by the judgment. Moale v. Hollins, 11 Gill & J. 11. See, also Smith v. Black, supra. A bill against dormant partners, after judgment recovered against the os here with effect. (e) But if one partner only is sued, and judg ment is given for him, the creditor is not precluded from afterwards suing the others, unless the first action failed for a reason which applies equally to the second. (ƒ) and several With respect to obligations which are joint as well as several, Merger of joint there is more difficulty. A joint and several obligaobligations. tion, arising ex delicto, is extinguished by a judgment recovered againt any one of the persons obliged (g); but, as regards joint and several obligations arising ex contractu, although a joint judgment against all the persons obliged extinguishes the separate tensible partners, cannot be sustained, without showing special cause for relief; as that the plaintiff was kept in ignorance of the partnership by undue means; that he has used due diligence to inform himself, etc. Penny v. Martin, 4 Johns. Ch. 566. Where one of several partners unites with a third person in making a note to a creditor of the firm, for a partnership debt, which, by agreement, is made and accepted, not for the debt but a collateral security, merely, a judgment upon the note will not merge or affect the original indebtedness, even as to the partner signing the note. In such a case, the agreement prevents the merger. Hawks v. Hinchcliff, 17 Barb. 492. Judgment against one partner upon a contract, upon its face his sole and individual contract, is no bar to a subsequent action upon it as a partnership contract. Scott v. Colmesnil, 7 J. J. Marsh. 416. Where a State statute provides that in suits against two or more jointly indebted, the judgment shall be evidence, as against those not served with process, only of the extent of the plaintiff's demand, the original demand against the parties not brought into court is not merged in the judgment against those who were. Mason v. Eldred, 6 Wall. 231. The fact that a judgment was ren dered against part of the members of a firm does not affect the equitable right to have the partnership property subjected to its payment. Equity does not regard the form of the judgment, but the substance of the debt. Martin v. Davis, 21 Iowa, 535. Where a partnership exists between two persons, one of whom is a dormant partner, and the creditors of the firm have obtained judgments against the ostensible partner, founded on debts created on the partnership account, upon which executions have been issued and returned nulla bona, a bill in equity against both partners will be sustained, upon the allegation that the dormant partner has by fraudulent connivance with the ostensible one, obtained the possession of and laid claim to all the partnership assets, in fraud of the creditors; the relief which equity will give is to subject the whole assets to the payment of such debts. How v. Kane, 2 Chand. 222. (e) See 19 & 20 Vict. c. 97, § 11; Ex parte Waterfall, 4 De G. & S. 199 (f) Phillips v. Ward, 2 Hurlst. & C. 717. (g) Brinsmead v. Harrison, L. R. 6 C. P. 584, aff. 7 ib. 547; Brown v. Wootton, Cro. Jac. 73; Buckland v. Johnson, 15 C. B. 145; and see, as to the plea of another suit depending, Boyce v. Douglas, 1 Camp. 61. |