.

s separated from the legal estate, and the latter being left to pass according to the nature of real property, the trust estate is made subject to the rules of partnership personal property, so far as concerns the interest of the partners in relation to one another and to those who are in privity with them. The legal title, however, is affected in equity only to the extent of changing joint tenancy into tenancy in common, which is nothing more than a destruction of the incident of survivorship.(1) The basis of this equitable lien or trust is the agreement and intention of the parties. It is not produced by a superior equity in any class of third persons, but is exclusively an equity between the partners, resulting from their relation of copartnership, and administered in favor of the partners themselves and such third persons as equity subrogateş to the rights of one partner against the other, and against such persons only as are considered as standing in the place of the one against whom it exists, as, his heirs, widow, and perhaps individual creditors. These are the results deducible from Dyer v. Clark, and from Pierce's Adm'r, &c., v. Trigg's Heirs, 10 Leigh, 408; Davis v. Christian, 13 Grattan, 36; Andrews' Heirs v. Brown's Adm'r, 21 Alab. 437, and Howard v. Priest, 5 Metcalf, 582; Tillinghast v. Champlin, 4 R. I. 203, where the subject is thoroughly discussed. In the last but one of these cases, the rule is expressed by Shaw, C. J., to be, that real estate purchased out of partnership funds, to be used and applied to partnership purposes, and considered and treated by the partners as part of the partnership stock, is to be deemed, as far as the legal title is in question, as estate held in common and not in joint tenancy; but as to the beneficial interest, it is held in trust, each holding his property in trust for the partnership, until the partnership account is settled, and the partnership debts are paid. It is a trust arising from the actual or implied agreement of the partners, and the mutual relation in which they stand to each other. And these doctrines are re-declared in Peck et al. v. Fisher, 7 Cushing, 390, and see Baxter, App. Brown, Resp., 7 Manning & Granger, 198; and particularly Tillinghast v. Champlin, 4 R. I. 205; and Crooker v. Crooker, 46 Maine, 230.

[As one incident of this destruction of the individual character of the ownership, it has been held, Loubat v. Nourse, 5 Florida, 350, that a wife is not dowable of land held for partnership purposes.]

*The ground of equitable interference, as has been observed, is *495 the agreement or intention of the parties to make the land a part of the stock in trade. It is admitted, in all the cases, that an express agreement by the partners, that real estate purchased by them, shall be considered as partnership stock, will render it so, as between them, to the

(1) See Deloney v. Hutcheson, 2 Randolph, 183, 186; Smith v. Jackson, 2 Edwards, 28, 30: Buchan v. Sumner, 2 Barbour's Chancery, 168, 198.

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extent of the agreement.(1) But such an agreement may be implied from the circumstances of the purchase, and the conduct of the parties. If land is bought with partnership funds, and is brought into the business of the firm, and used for its purposes, it will be considered as partnership stock, in whose name soever the legal title may be; unless there be distinct evidence of an intention to hold it separately, such as an express agreement in the articles of copartnership, or at the time of the purchase, or, the fact that the price is charged to the partners respectively in their several accounts with the firm; for, such arrangements would operate as a division and distribution of so much of the funds, and each would take his share divested of any implied trust; but the mere circumstance that the conveyance was to them expressly as tenants in common," would not, of itself, be sufficient to rebut the trust.(2) And there is no difference between a purchase from a third person, and a purchase from a partner; if the parnership funds be advanced to one of the partners for lands on which to carry on the business, or which is the same thing, if he gets credit on the books of the firm for the land, intending to vest it in the business, it thereby becomes, in equity, the property of the partnership, though he may retain the legal property in himself.(3) But it seems that neither one of these circumstances, alone, namely, the land's being purchased with partnership funds, nor its being used in and for the partnership business, will conclusively render it partnership stock. The fact that the purchase is out of partnership funds is not a decisive circumstance: one partner may withdraw, with the knowledge and consent of the others, a portion of the partnership

(1) Dictum of Tilghman, C. J., in McDermot v. Laurence, 7 Sergeant & Rawle, 438, 441; dictum of Hosmer, C. J., in Sigourney v. Munn, 7 Connecticut, 11, 20; and of Church, J., in Frink v. Branch, 16 Connecticut, 261, 270; dicta in Coles v. Coles; and in Smith v. Jackson, 2 Edwards, 28.

(2) Dyer v. Clark; Howard and others v. Priest and another, 5 Metcalf, 582; Burnside and others v. Merrick and others, 4 Id. 537, 541; Hoxie v. Carr et al., 1 Sumner, 174, 181, 186; Jarvis v. Brooks, 7 Foster, 67; Buchan v. Sumner, 2 Barbour's Chancery, 168, 199; Smith v. Tarlton, Id. 336; Delmonico v. Guillaume, 2 Sandford's Chancery, 366; Overholt's Appeal, 12 Penna. State, 222; Moderwell v. Mullison, 21 Id. 259; and particularly Tillinghast v. Champlin, 4 R. I. 405.

(3) Boyers v. Elliott, 7 Humphreys, 204, 208. So completely does real estate bought with partnership funds or credit, become partnership property, that where a partnership was composed of four persons, two being dormant partners and living at a distance, and the two acting partners bought land in their own names for partnership purposes, and paid for it, so far as they did pay for it (which was only to a small extent), out of partnership funds, and the partnership then failed, the two dormant partners were then held liable to the vendor for the balance of purchase money. Brooke v. Washington, 8 Grattan, 249; and it has also been decided that real estate bought by one of two partners, for the purpose of providing a manufactory for the firm, in his own name, with an agree. ment, that on certain terms of payment being made by the other partner out of the profits, the land was to become partnership property, on which some money of the firm was subsequently expended, was to be deemed in equity partnership effects, which the first named partner could not dispose of as his own. Deming v. Colt, 3 Sandford, 284.

[*496

funds for a separate purchase on his own account, and all may join *in a purchase of real estate, for purposes wholly independent of the partnership, intending to hold their shares severally on their individual account: under such circumstances, the fact that the payment is made from partnership funds, will not change the nature and operation of the purchase ;(1) and the single fact that the purchase is made with partnership funds, will not, when the purchase is unconnected with the business of the firm, be sufficient to convert it into partnership stock, without some further evidence of an agreement, express or implied, to that effect.(2)

As to the other point, whether the appropriation of land to the uses of the partnership, without its being purchased with partnership funds, will operate to render it partnership property, it was held by one judge in Deloney v. Hutcheson, 2 Randolph, 183, 187, that it could not, on the ground that a resulting trust arises without writing, only where, at the time of the purchase, money is advanced by another; and see Wheatley's Heirs v. Calhoun, 12 Leigh, 265, 273. But this equitable doctrine, in fact, does not proceed so much upon the principle of a resulting trust, as on that of an equitable lien created by an agreement on sufficient consideration: and the difficulty in the case does not arise from the failure of the equity, because the transaction may be regarded as an increase to that extent, of the contribution to the stock in trade; but the difficulty is as to the evidence and extent of the parties' intention. It seems to be settled, that the mere fact that property held by the members of the firm as tenants in common is used in and for the partnership business, or a mere agreement to use it for partnership purposes, is not of itself sufficient to convert it into partnership stock: there must be some evidence of further agreement to make it partnership property. See Brooke v. Washington, 8 Grattan, 256; in the late case of Frink v. Branch, 16 Connecticut, 261, B. owning land with a factory upon it, conveyed one-half of it to S., with whom on the same day he entered into partnership as a manufacturer; by subsequent conveyances, S.'s interest became vested in several persons, who formed another partnership with B. in the same business, using the factory in their business, and making some improvements upon it out of the partnership funds; in their articles of copartnership, this property was referred to as being owned by the partners in common, B. owning one-half, and the other partners the other half; and in reference to the withdrawal of one memter of the firm, the articles contained the following clause: "When the

(1) Hunt & Co. v. Benson, 2 Humphreys, 459; Dyer v. Clark; Wheatley's Heirs v. Calhoun, 12 Leigh, 265, 273.

(2) Smith v. Jackson, 2 Edwards, 28; Cox v. McBurney, 2 Sandford's S. Ct. 561, 566; Wooldridge v. Wilkins et al., 3 Howard's Mississippi, 360, 372; dictum of Hosmer, C. J., in Sigourney v. Munn, 7 Connecticut, 11, 17.

whole concern of said company shall be settled up and divided according to the respective rights of the partners, so far as concerns the partner withdrawing; and in case either partner shall wish to dispose of his share of the real estate owned by said company, he shall give the other partners the first offer of it." B. subsequently mortgaged his half of this land and factory for a debt of his own; and the firm becoming insolvent, the contest was between the mortgagee and the creditors of the firm, who claimed to have a lien in equity upon the land as partnership property. But the decision was against the partnership creditors; and the court said, "This property was not purchased with common funds; nor was any common capital withdrawn from the power of *497] creditors to make the purchase; nor was there any agreement that the property thus owned in common should become partnership stock, or constitute any part of the capital of the company. It was agreed by parol only, that this property should be improved, by the company, in the prosecution of its business; but this agreement extended only to its temporary use. It did not, nor could it, affect the title to the land, even as between 'the parties, much less as the rights of others might be involved."

With regard to the object and extent of this equitable conversion, the principle appears to be this. In the case of land held in common, at law, the several interests of the owners are definite and ascertained: in case of partnership property, the several shares of each partner is the resi due of interest after the debts of the firm are paid, and the claims of the other partner are satisfied. The purpose of equity is to transform the interest of the partners for this object and to this extent, only; to effect the legal estate of either partner with a lien in favor of the joint creditors and the other partner.

The persons in favor of whom, and against whom, this trust or lien will be recognized, are easily ascertained by a reference to these objects. The lien will be enforced in favor of a continuing or surviving partner, and in favor of the creditors of the firm, who are considered as subrogated to the equities of the partners between one another, whether the creditors act in their own persons, or claim through an assignee of the firm, or whether the surviving or acting partner seeks to recover for their benefit. [A receiver of a dissolved partnership-the dissolution being caused by death-appointed by decretal order in equity may enforce it; and this suo motu and without special leave. And such receiver will represent not only the interests and equities of the creditors of the partnership, but also those of the deceased partner.(1)] It will be enforced against a retiring partner, his personal representatives, heirs,

(1) Tillinghast v. Champlin, 4 R. I. 186 and 173.

and widow ;(1) but in Smith v. Jackson, 2 Edwards, 28, 36, the right of dower to the extent to which the deceased partner had the legal title coupled with a beneficial ownership was held to be paramount. It will be enforced also against a purchaser from the partner or his representatives, with notice, actual or constructive, that the real estate is partnership property;(2) but not against a bona fide purchaser or mortgagee without notice.(3) Whether in case of insolvency it will be enforced against the separate creditors of one partner, is a matter of some uncertainty. If the separate creditors, have notice, before becoming creditors, that the land is partnership property, there is no reason why they should not be postponed to the joint creditors,(4) and some cases(5) are express to the general principle that when land is partnership property, it is subject to the rule which in case of insolvency appropriates the joint estate to the joint creditors; but in all these cases, the real estate was in the possession and use of the firm as partnership property which might have been considered as operating as constructive notice of the partnership trust, and it is *impossible to say that that did not form an [*498 essential part of the decision of the court in those cases. The authority of these cases extends to the principle that land purchased with partnership funds and used in the partnership business, is partnership stock as against the separate creditors. In Hale v. Henrie, 2

(1) See Greene v. Greene, 1 Hammond, 535; Sumner v. Hampson and others, 8 Id. 328; Heirs et als. of Pugh v. Currie, 5 Alabama, 446; Andrews' Heirs v. Brown's Adm'r, 21 Id. 437; Dyer v. Clark; Howard and others v. Priest and another; Burnside and others v. Merrick and others; Buchan v. Sumner, 2 Barbour's Chancery, 168, 200; and especially Tillinghast v. Champlin, 4 R. I. 209. [The rule that the creditors of a firm have no equitable lien upon the copartnership property, but can only work out such a lien through the equities of the partners-applicable while the copartners are administering their own funds has no application to the case of a copartnership dissolved by the death of one of the copartners; especially if the surviving partner be insolvent, or where though living, one or both the copartners have become insolvent or bankrupt; so that their property is in the hands of the assignees for distribution. In such cases an equitable lien attaches in favor of the copartnership creditors upon the joint property; and in favor of the separate creditors of each copartner upon his separate property in the hands of the surviving partner, as trustee for each class of creditors by implication, or in the hands of the assignees, as trustees by virtue of an express trust, which will be administered in equity against such trustees upon the direct application of the creditors.]

(2) Edgar v. Donnally, 2 Munford, 387; Hoxte v. Carr et al., 1 Sumner, 174, 192; and on this point especially, and as to what ought to affect a purchaser with notice the so often cited case of Tillinghast v. Champlin, which the ability of Ames, C. J., makes a leading one on this whole subject.

(3) McDermot v. Laurence, 7 Sergeant & Rawle, 438; Forde v. Herron, 4 Munford, 316; Frink v. Branch, 16 Connecticut, 261, 271; Buchan v. Sumner, 2 Barbour's Chancery, 168, 198; dicta in Dyer v. Clark, 5 Metcalf, 562, 580; and in Tillinghast v. Champlin, 4 R. I. 209.

(4) As in Divine, &c., v. Mitchum, 4 B. Monroe, 488; and see Marvin v. Trumbull, Wright, 387.

(5) Dyer v. Clark; and Burnside and others v. Merrick and others; Winslow v. Chiffelle, Harper's Equity, 25; and Boyers v. Elliott, 7 Humphreys, 204.