Fancher Bros. & Co. v. Bibb Furnace Co. , 80 Ala. 481 ( 1887 )

PARTNERSHIP — POWER OF PARTNER — SUBMISSION TO ARBITRATION — ESTOPPEL.

A partner, by agreement, without the previous consent or subsequent ratification of his copartners, submitted matters affecting the partnership affairs involved in a pending suit to arbitration.Held, that the submission was not binding on the partners who did not participate, and the partnership was not estopped from prosecuting the suit. The principle of law that, where two or more unite in bringing an action, all must recover, or none can, has no application to the law of partnership. A partnership consisted of three members, but had been dissolved. Two suits were pending in favor and in the names of all the partners suing as partners. One of these suits had been commenced before, and the other after, the dissolution. They were consolidated, and became one suit. One of the partners, by agreement made out of court, without the concurrence or assent of the others, but against the protest of the one who alone was consulted, entered into an agreement to submit the matters in controversy to the arbitrament of three named arbitrators. The arbitrators acted, attended by the partner who had entered into the agreement of submission, and made their award in favor of the defendant. The dissent of the other partner was not known to the defendant until after the award was made. Is this a defense to the action? Both reason and the weight of authority hold that the submission was not binding on the partners who did not participate. 1 Colly. Partn. § 441; Story, Partn. § 114; Pars. Partn. *176 et seq.; Morse, Arb. Award, 7; note to Hutchins v.Johnson, 30 Amer. Dec. 630; Scarborough v. Reynolds, 12 Ala. 252;Huber v. Zimmerman, 21 Ala. 488; Wright v. Evans, 53 Ala. 103;McBride v. Hagan, 1 Wend. 326.

There is a principle of law that, when two or more unite in bringing an action, all must recover, or none can; that, if one has disabled himself to maintain the suit, this precludes the others from recovering, for they can only have a joint recovery; and there are authorities which hold that this principle applies to suits by partners. Salmon v.Davis, 5 Amer. Dec. 410. There is one case in this state which seems to recognize that doctrine. Cochran v. Cunningham, 16 Ala. 448, 50 Amer. Dec. 186. The relations, rights, and powers of simple co-obligees are very different from those of copartners. The former are presumed to own each a pro rata separable interest, and to have power over the subject of contention equal to the proportion each sustains to the whole number; say one-half, one-third, one-fourth, etc. Hence, prima facie, he can make a valid disposition of his undivided but separable part, without any reference to any other subjects of joint ownership between him and his co-obligees or joint owners. We say prima facie, for circumstances may exist which would vary this rule. Partnership is different. No one member can claim an individual or separable interest in any article or subject of the partnership property. The partnership is itself a personality, and may he sued as such. The members individually can claim no absolute right to any part of the partnership effects. As between themselves, the partnership property is held in trust, and under a lien — First, to pay and discharge all the partnership liabilities;second, to equalize and adjust accounts and inequalities between the partners; and, third, to divide any balance in proportion to their several stipulated interests. Warren v. Taylor, 60 Ala. 218. Hence there is no individual ownership in the several partners, except on a division of the residuum, after paying the partnership debts, and after adjusting the accounts between themselves.

It results from these peculiar characteristics of partnership property that no individual member should be able, beyond the sphere of his admitted powers, to defeat the purposes of the trust, or to hinder the utilization of the effects in discharging the liens which each partner has upon them. If one member can sell, remit, or incumber his interest in a part of the effects, and thereby destroy or impair the customary methods and remedies for reducing them to actual possession that they may be administered, a better reason should be given for such pernicious power than we have heard suggested, or can conjecture. Set-off of a partner's individual debt is not allowed against a partnership demand.Watts v. Sayre, 76 Ala. 397. Why should estoppel against orremittitur by one partner have a greater effect? If it be said the firm, or a majority of the partners, have their remedy in equity, we inquire how, and against whom? Is it against the individual partner, who has estopped himself? He may be insolvent; and it would seem that, as the estoppel and hinderance extend only to his proportional interest, he should not be held accountable to a greater extent. Is the equitable recourse to be asserted against the debtor who has defeated the action at law by making good the defense of estoppel against one? This would be to reverse the order of things, and to cast on the unoffending members of the firm the burden of relieving themselves from the complication their offending co-member had unwarrantably brought upon them. We need not enter into an elaborate discussion to show how utterly opposed to the principles asserted in analogous cases such doctrine would be. Let a single illustration suffice. The interest of a partner in partnership effects is sold under execution against him alone.

The purchaser acquires no title to any specific property. He purchases only the ultimate interest of the execution debtor, which is his share of the residuum, after the partnership debts are paid, and the accounts among the partners equalized. Andrews v. Keith, 34 Ala. 722;Daniel v. Owens, 70 Ala. 297. This could not and would not cast on the remaining partners the duty of instituting proceedings to ascertain and separate the purchaser's interest.

The rulings on this question in this state are not in harmony. As we have said, the case of Cochran v. Cunningham, 16 Ala. 448, seems to support the defense here relied on. Cunningham v. Carpenter,10 Ala. 109, had ruled the other way; and Crymes v. White, 37 Ala. 549, (a later case,) is in harmony with Cunningham v. Carpenter, supra; Burwell v.Springfield, 15 Ala. 273; Stead v. Salt, 3 Bing. 101; Nall v.McIntyre, 31 Ala. 532; Martin v. Thrasher, 40 Vt. 460. We adhere to the doctrine declared in Cunningham v. Carpenter, supra.

The judgment of the circuit court is reversed, and the cause remanded.