This section is from the book "Popular Law Library Vol8 Partnership, Private Corporations, Public Corporations", by Albert H. Putney. Also available from Amazon: Popular Law-Dictionary.
" But independent of the authorities, we are satisfied that the rule holding the estate of a deceased partner primarily liable in equity, is sound in principle. Doggett, in his lifetime, was individually liable for this debt, and if he had been sued, and a judgment obtained against him, any of his individual property would have been liable to be taken and sold in satisfaction of the debt. It is true, if he had been sued at law in his lifetime, it would have been necessary to join his partners as defendants in the action; but after judgment, it was not necessary to exhaust the partnership assets before individual property could be taken, but the creditor could resort to such property in the first instance, if he saw proper. Did the death of Doggett in any manner change the liability which existed on this contract before his death? We think not. The liability continued as before, but the remedy to enforce that liability was changed from a court of law to a court exercising equitable powers. The death of a debtor may extinguish a legal remedy on a joint contract, but we are not aware that it has ever been held that the death of a debtor could extinguish the debt or discharge the estate of the deceased."
In Arnold vs. Hagerman, 45 N. J. Eq., 186, 17 Atl. Rep., 93; 14 Am. St. Rep., 712, and Mechem's Cases on Partnership, p. 446, the court said: "In equity a partnership is for some purposes deemed a single entity. Thus, when the property involved in the business of a partnership is to be applied by a court of equity to the payment of debts, that property is treated as belonging, not to the persons composing the firm, but to a distinct debtor, the partnership, and is used first to liquidate the debts contracted in the business of that debtor, and only the surplus, if any, is surrendered to the individual partners. This equitable practice rests upon the presumed intention of the partners themselves, and hence is primarily considered as their equitable right against each other. Consequently, since the decision of Lord Eldon in ex parte Ruff in, 6 Ves., 119, it has been generally held that the partners could put an end to this right, and that if, by their agreement, the partnership is dissolved, and its property is assigned to one of their number, or to a stranger as his own, without reservation of the right, the right to have partnership debts paid out of that property is extinct. Growing out of this right of partners has arisen a corresponding equity in partnership creditors to have their debts first satisfied out of the firm property, which is now deemed a substantial element of their demands."
The presumed intention of the partners, spoken of by the court, is the contract of partnership itself, presumed by law, when the partnership is entered upon, namely, that the partnership, as an entity, shall hold the title to the property of the firm and that the individual partner shall have only a contingent interest upon accounting and settlement of the firm affairs. Of course when the firm passes the title to all the firm property this contingent interest is gone; and, of course, till then, the individual creditor of the individual partner can take, in law or in equity, from the partner, of the partnership property, no more than the partner possesses, which is nothing till the firm debts are paid.
This branch of the subject seems clear and reasonable. But why should partnership creditors be postponed in their rights against the partner's individual estate till his individual creditors have been satisfied, if this estate happens to be in the disposition of a court of probate, equity, or bankruptcy? Why this sudden change of liability? If there is a solvent partnership or a solvent partner, the reason is not difficult to find, and it is simply that the law looks with favor upon the satisfaction of all debts and in the simplest and most direct manner consonant with justice. But the rule as established seems to go too far, inasmuch as it will not permit a partnership creditor to file his claim against the individual estate of the partner except when there is no solvent partner and no net partnership assets at all. An individual creditor whose interest is against the filing of partnership claims against the estate of his debtor can prevent this by presenting to a heavily indebted partnership without assets something of the value of a secondhand sewing machine. This defect in the law should be remedied by statute.
In this case of Arnold vs. Hagerman, the court further said: "The fourth proposition denies the right of the complainant to impeach this assignment. The assignment was in the form sanctioned by our statute. It was for the benefit of all creditors who were entitled to any share in the property assigned; it created no preferences; and it provided for no delay beyond what was necessary for the execution of the trust which it properly declared. Although such assignments do hinder creditors from obtaining that priority of lien which otherwise their vigilance might secure, yet they are not on that account within the meaning and scope of the statute which avoids transfers to defraud creditors. 2 Pom. Eq. Jur., Sec. 994, note. The assignment was perfected before the entry of complainant's judgments, and, as it operated to divest the legal title of the debtors, the complainant's executions did not become a lien. The assignment, as we construe it, placed all the creditors of the same class upon an equal footing, and in such cases equality is equity. Consequently both in law and in equity, the complainant is bound."
The right of a partner to give a chattel mortgage was in question in Hage vs. Campbell, 78 Wis., 572; 47 N. W. Rep., 179; 23 Am. St. Rep., 422. In regard to this right the court said: "The mortgage was given by Torger Hage on behalf of the firm, in the absence and without the knowledge of the other partner, Iver Hage, who was absent in Dakota.
We suppose one partner may, without the consent of his co-partner, being absent, pay a debt or execute a mortgage in the name of the firm, upon partnership property, to secure a firm debt. The power of each partner to bind the firm fairly extends to such a transaction, unless restricted by the articles of copartnership, and it does not appear that there was any such restriction on the power of the partner in this case. It was clearly within the scope of the implied authority of Torger to execute the mortgage, as much as selling the goods or collecting the debts due the firm. This proposition seems too plain to require discussion. The mortgagee, deeming himself insecure, took possession at once of the mortgaged property, as he had a right to do, and employed Torger, as agent or clerk, to sell the goods and pay over the proceeds to him, to be applied upon the mortgage debt. There is no legal objection to such arrangement. It certainly did not create any secret trust, as counsel suggests. The plaintiff might employ the mortgagor to sell the goods for him and pay over the proceeds of all sales made."
 
Continue to: