Watson. Partnership is a voluntary contract between two or more persons for joining together their money, goods, labor, and skill, or either or all of them, upon an agreement that the gain or loss shall be divided proportionably between them, and having for its object the advancement and protection of fair and open trade. (r) *4 *All the above definitions, however, with the exception of Mr. Dixon's, are, with reference to the law of England, too wide; for they include not only partnerships in the proper sense of the word, but also many corporations and companies which differ from partnerships in several important respects. Mr. Dixon's definition avoids this error, but the relation of principals to which he refers is not altogether free from objection. (8) 2. Distinction between partnerships, corporations, and Corporations. A corporation is a fictitious person, created by special authority (and by the law of England by the Crown or by parliament), and endowed by that authority with a capacity to acquire rights and incur obligations, as a means to the end for the attainment of which the corporation is created. A corporation, it is true, consists of a number of individuals, but the rights and obligations of these individuals are not the rights and obligations of the fictititious person composed of those individuals; nor are the rights and obligations of the body corporate exercisible by or enforceable against the individual members thereof, either jointly or separately, but only collectively, as one fictitious whole. As the civilians neatly express it-Si quid universitati debetur singulis non debetur, nec quod debet universitas singuli debent. With partnerships the case is otherwise; the members of these do not form a collective whole, which is regarded as distinct from the individuals composing it; nor are they collectively endowed with any capacity of acquiring rights or incurring obligations. The rights and liabilities of a partnership are the rights and liabilities of the partners, and are enforceable by and against them individually:' Si quid societati debetur singulis debetur et quod debet societas singuli debent. (t) (r) Watson, Partn. p. 1. This definition is copied by Gow in his work on partnership, § 2. (8) See the observations of the Master of the Rolls on the above definitions in Pooley v. Driver, 5 Ch. D. 471 et seq. (t) See Lloyd v. Loaring, 6 Ves. 773; Beaumont v. Meredith, 3 V. & B. 180. 1 Where persons enter into articles of association for banking purposes, and, Companies. 1. Un-incorporated. The fundamental distinction between partnerships and unincorporated companies is, that a partnership consists of a few *individuals known to each other, bound together by ties of friendship and mutual confi without any charter, assume a name, open a stock-book, subscribe for shares of stock, and a portion pay small sums thereon, hold meetings, elect directors, publish the names of such directors, (none of whom take any steps to inform the public that they do not belong to the association), enter into, and transact business as a bank, they are all liable as partners. Pettis v. Atkins, 60 Ill. 454. Persons held meetings and subscribed for stock in a proposed corporation for running a particular steamboat; but, failing to obtain a charter, it was finally agreed to form a limited partnership; but the provisions of the act in relation to such partnership had not been complied with: Held, that such persons were not liable, as general partners, for debts contracted in the meantime, by the owner of the boat, for repairs. West Point Foundry Association v. Brown, 3 Edw. Chy. 284. The "New England Express Company," being a co-partnership, and not a corporation, any stockholder subscribing for shares, and paying in part of his subscription, becomes a member of the company and liable for its debts, although he never attended any meetings, or received any certificate of stock, or knew of the contract of the plaintiff. A statute of New York, requiring a suit to be brought against the officers of a co-partnership, before the private stockholders could be sued, relates only to the remedy, and is not in force in Massachusetts. Boston, etc. R. R. Co. v. Pearson, 10 Reporter 81. Certain persons subscribed articles of association, whereby they agreed to unite in a company for building a theatre, and to pay for the shares placed opposite *5 their names at the rate of $500 a share. Trustees were appointed to transact the business of the company, who purchased a site and contracted, in the erection of a theatre, debts considerably above the amount subscribed. Afterwards the company was incorporated: Held, that the members were jointly and severally liable as co-partners for all the debts contracted before the incorporation. Haslett v. Wotherspoon, 2 Rich. Eq. 395. Persons associating themselves together under articles, to purchase property and to carry on a manufacturing business; if their organization be so defective as to come short of creating a corporation within the statute, become in legal effect partners; and their rights, as members of the company, to the property acquired by such company, will be recognized and protected. Whipple v. Parker, 29 Mich. 369. See, also, Flagg v. Stowe, 85 Ill. 164. As to the creditors, each member of an insolvent voluntary association is liable for all the debts, the same as in ordinary partnerships. Hodgson v. Baldwin, 65 Ill. 532. Where two or more parties agree to form a corporation, some putting in machinery and patents, and others money and labor, but no corporation is formed by reason of a failure to comply with the statute, if the parties are entitled to share in the profits and losses, it will constitute a quasi partnership, although the title to the property put in, whether real or personal, may not be changed. Flagg v. Stowe, 85 Ill. 164. But in such case, the persons so operating together, will not become jointly entitled to the property itself, but simply to its use, except dence, and who, therefore, are not at liberty without the consent of all to retire from the firm and substitute other persons in their places; whilst a company consists of a larger number of individuals not necessarily acquainted with each other at all, so that it is a matter of as to the money advanced. If the party furnishing the machinery withdraws and files his bill for an account and a sale of the property, he will be liable to account to the party advancing the money, for any loss that has occurred. Flagg v. Stowe, supra. In accounting in such case, it is error to allow a certain per cent. for the use of the machinery. It should be the fair value of its use as situated, and not what it might have been worth, if used at some other place. Flagg v. Stowe, supra. Associates in forming, and stockholders in a company, assuming to be without legal corporate existence, are liable as co-partners upon contracts made in the name adopted as its corporate name, although the parties dealing with the company believed it to be a corporation, and dealt with it as such; and although the associates and stockholders did not intend to become copartners and liable as such. Jessup v. Carnegie, 12 Jones & Sp. 261. In Merchants, etc. Bank v. Stone, 38 Mich. 779, however, it was held that where a body professing to be a corporation, has been dealt with expressly as such, those who have so dealt with it cannot question its corporate existence for the purpose of charging its members, individually, as if they were partners. Merchants, etc. Bank v. Stone, 38 Mich. 779. Actions upon a promissory note, dated June 3, 1867, made by one of the defendants as agent of the Utica Steam Woolen Mills Company, a corporation whose charter had expired by statutory limitation on February 27, 1866, in ignorance of which fact, the business had thereafter been carried on by the trustees as usual. The action was brought against certain of the stockholders, plaintiff claiming that they were liable as co-partners, for the debts contracted after the expiration of the charter: Held, that the action could not be maintained; that the business must be deemed to have been carried on by the directors, acting as trustees, and that persons dealing with the said officers, must be considered as contracting with them in their representative capacity, and as relying upon their responsibility in such capacity. Central, etc., Institution v. Walker, 5 Hun, 34. Evidence that the officers of a corporation did business as if they were partners was held inadmissible where the party dealing with them had not been misled by their neglect to observe corporate formalities, and in a suit against them he was required to establish a corporate liability. New York Iron Mine v. Negaunee Bank, 39 Mich. 644. Stockholders in a manufacturing corporation who, upon the expiration of its charter, agree to continue the business in the name of the corporation, and appoint one of their number as managing agent to carry on the business, and who agree to furnish money when called for by him, in proportion to the number of shares held by each of them in the corporation, are liable to third persons as partners, upon commercial paper made by such agent for the benefit of the firm, and signed with the name of the former corporation by him as agent. National, etc., Bank v. Landon, 45 N. Y. 410. Several persons formed an association, making no provision for future incorporation, by which they severally agreed comparative indifference whether changes amongst them are effected or not. Nearly all the differences which will hereafter be noticed as existing between ordinary partnerships and unincorporated companies, will be found traceable to the above distinction. Indeed it may be said that the law of unincorporated companies is composed of little else than the law of partnership modified and adapted to the wants of a large and fluctuating number of members. ' Incorporated companies are societies consisting usu- 2. Incorporated ally of many persons, having transferable shares in a companies. common fund, but incorporated by Royal Charter or by Act of Parliament. They are not pure partnerships, for their members are recognized as an aggregate body; nor are they pure corporations, for their members are more or less liable to contribute to the debts of the collective whole. Incorporated companies are intermediate between corporations known to the common law and ordinary partnerships, and partake of the nature of both; and the law relating to these companies depends as well on the principles which govern ordinary partnerships, as on those which are applicable to corporations strictly so called. (u) 3. Historical sketch of the law relating to companies. By the common law of this country every association of persons formed for the sake of sharing profits, is either a part- sketch of Comnership or a corporation; and a company which is nei- pany law. ther a corporation nor a partnership, is a thing unknown to the common law of England. (v) It has even been said that a large partnership, the shares in which are transferable without the assent of all the members, is illegal at common law; and although the better opinion is that this is not so (2), *still the courts to furnish certain sums, respectively, *6 otherwise provided by statute, are partnerships, and a creditor must proceed against the surviving shareholders before an action can be maintained against the representatives of a deceased shareholder. Moore v. Brink, 6 Thomp. & C. 22; s. c. 4 Hun, 402. (u) See the judgments in 5 Ch. 431 and 725. (v) M'Intyre v. Connell, 1 Sim. N. S. 233. (x) See Walburn v. Ingilby, 1 M. & K. 76. Progress of joint-stock treat as illegal any association for profit which attempts to arrogate to itself the privileges of a body corporate. (y) But within the last century, it may almost be said within the last half century, associations unknown to the common law have struggled into existence, and after much opposition have become legal. These are commonly called coinpanies, or more accurately joint-stock companies. When joint-stock companies, i. e., partnerships with a joint-stock divided into numerous transferable shares, began to ascompanies. sume importance, and to force themselves upon the attention of the legislative and judicial departments of the State, the reception they met with was by no means encouraging. Owing to the established rules relating to parties to actions and suits, a joint-stock company could not practically sue its own debtors, nor could disputes between its members be readily, if at all, adjusted. At the same time, the doctrine that each member was answerable for the whole of the debts of the company was studiously promulgated and rigorously enforced. nuisances. Under these circumstances, joint-stock companies were regardRegarded as ed as nuisances, and the first legislative enactment relat6 Geo. I. c. 18. ing to them, was an attempt to put them down altogether. (2) This attempt was simply futile; and notwithstanding the Bubble act, joint-stock companies increased both in number and importance. It was not however, until the end of the first quarter of the present century, that the legislature began to retrace its steps. Reaction. In the year 1825 the Bubble act was repealed, (a) and from that time to the present the legislature has endeavored by various means so to amend the law as to give free scope to a combination of capital, and at the same time to prevent injustice being done either to or by its subscribers. *7 Even when the opposition which joint-stock companies had *to encounter was greatest, they could always apply to the Crown for a charter of incorporation. Whether a charter would be granted, depended mainly on the opinion which the officers of the Crown entertained of the proposed objects and constitution of (y) Blundell v. Winsor, 8 Sim. 601. This subject will be examined more fully hereafter under the head Illegal Partnerships. See Bk. I. c. 6, § 1. (z) 6 Geo. 1, c. 18, commonly called the Bubble act. (a) 6 Geo. 4, c. 91. The 2nd section of the Bubble act had been previously repealed by 5 Geo. 4, c. 114. |