
    [Philadelphia,
    April 5th, 1836.]
    MASON and Another against CONNELL and Others.
    1. ' The liability of a dormant partner to creditors may be avoided by proof of fraud in the formation of the partnership, if no part of the funds have been received by such dormant partner.
    2. It seems that a partnership formed by articles ibr a definite period, may be dissolved by either partner before the termination of the period.
    3. One partner cannot, without the consent of the other, introduce a stranger into the firm, nor can he, without such consent, make the other partner a member of another firm ; but such consent may he implied from the acquiescence and acts of the parties; and if such other partner is made acquainted with the facts, he ought to dissent from the arrangement; otherwise he will be bound by it.
    This was an action of assumpsit brought by Matthew S. Mason and Ignatius M'Donough against John Connell, Francis Worley and Thomas Welsh, to.recover the price of certain goods sold and delivered by the plaintiff to John Connell.
    A return of N. E. 1. was made as to Connell; apd the action proceeding against the other defendants was tried beforé Mr. Justice Rogers at a Court of Nisi Prius, held at Philadelphia, on the 25th of November, 1831.
    It appeared in evidence on the trial, that Francis Worley and Thomas Welsh had for some time previous to the 1st of September, 1828, been engaged in business under the firm of Worley and Welsh; the former residing in the city of Philadelphia, and the latter in the city of Baltimore, and that John Connell, the other defendant, was engaged in similar business in the city of Pittsburgh.
    On the 1st of September, 1828, the following agreement was entered into:
    “ Articles of agreement and co-partnership entered into and agreed upon by John Connell, residing in the city of Pittsburgh, state of Pennsylvania, on .the one part, and Francis Worley, merchant, residing in the city of Philadelphia, and Thomas Welsh, merchant, residing in the city of Baltimore, on the other part, witnesseth, that the above named John Connell, of the city of Pittsburgh, and the above named firm of Worley & Welsh of Philadelphia, have this day formed and entered into a copartnership to carry on, and conduct the mercantile business under the name of John Connell in the city of Pittsburgh and state of Pennsylvania, on the following terms. ■ The said John Connell does agree and hereby bind himself, his heirs, executors, administrators and assigns, to place in the said concern as above named, the amount and full value of $12379,44 of goods or merchandise agreeable to the annexed statement, the same to be taken and held by the above named parties at the specific value of $9,000 as a capital stock in trade; and the above named firm of Worley & Welsh agree and bind themselves, their heirs, executors, and administrators to place in the above named copartnership or let remain in the hands of the concern in Pittsburgh, carried on under the name of John Connell, the amount of $2000 out of the bill of .goods or merchandise bought in the name of John Connell from the firm of Worley & Welsh, under date of the 26th August, 1828, and they further agree and bind themselves to place in the above concern, or let remain out of the goods bought subsequently to the date hereof, for the concern of John Connell, the further sum of $3000; the said $3000, it is however agreed upon, is not to be placed in said concern of John Connell before the first day of July, 1829', unless it -can be made convenient to the firm of Worley & Welsh; and it is further agreed upon by the parties hereto named, that on and after the 1st of March, 1829, the business of the concern shall allow John Connell an interest of 6 per cent, per annum on $7000, and after the said Worley & Welsh shall have placed the additional sum of $3000 in the business, which will then make a capital stock of $5000 placed in the concern by them, then the concern shall allow to John Connell an interest of 6 per cent, per annum on «$4000. It is further understood and agreed upon by the parties herein named, that after paying the expenses necessary or unavoidably accruing in the business, then there shall be an equal division of the profits that may or shall be made in the business, that is to say, one half to John Connell, and one half to Worley and Welsh: and it is further agreed by the said parties herein named, that the co-partnership shall continue to exist for the term .of 3 years from the date hereof, unless sooner dissolved by mutual consent of the partners.
    In witness we have hereto subscribed our names, the 1st Sept. 1828.
    John Connell,
    Woeley & Welsh.”
    The name of the firm subscribed to this agreement, was in the handwriting of Worley.
    The statement referred to in the agreement, and annexed to it was as follows:—
    “ Memorandum of John Connell’s situation in business, according to his representation of it, on the 1st of April, 1828, including sales made out of his stock to the 1st of April, 1828.
    Amount of stock belonging to Anderson & Co. taken ) by John Connell, April 1st, 1828. $ 9044 00
    Amount of goods in Philadelphia bought by John •Connell, in Philadelphia, in May 1828. 9959 04
    
      Amount of stock belonging to Anderson & Co. in the } q, retail store taken by John Connell, 1 April, 1828, 5
    28133 40
    Deduct for sales made from 1 April to Aug. 1,1828, 11453 06
    16679 44
    Deduct for amount of goods sent to Cincinnati, 1700
    Deduct goods in hands of auctioneer, 2600 4300 OO
    Balance on hand, 1st Aug. 1828, $12379 44
    The foregoing schedule exhibits the amount of goods in the hands of and belonging to John Connell, merchant, of Pittsburgh, state of Pennsylvania, on the 1st day of August 1828, which goods or the amount thereof, he agrees to hold subject to a copartnership now about to be formed between him and F. Worley, merchant, residing in Philadelphia, and T. Welsh, merchant, residing in Baltimore, and trading under the name and firm of Worley & Welsh in the city of Philadelphia, and further the said John Connell agrees to place in the said copartnership now about to be formed, the above amount $12379,44 at the rate or value of $9000, and to be received and taken by the above named parties at the specific value of $9000.
    In witness whereof we have subscribed our names the 1st Sept. 1828.
    . John Connell, Worley & Welsh."
    Between the 1st of April, 1829, and the 18th of May in the same year, the plaintiffs sold to Connell, at Pittsburgh, certain goods amounting together in price to $583 55.
    On or about the 1st of June, 1829, the following instrument was executed, which was indorsed on the original articles of co-partnership.
    “ June 1st, 1829. We, the subscribers, parties to the within agreement, do hereby mutually agree to revoke, annul and: make void said instrument of writing from the date of the same, for reason of inability to fulfil the stipulations as named therein by the parties of the first part; and the parties of the second part, having never received any part or portion of profits therefrom and hereby agreeing to relinquish all claim to the same, it is agreed this instrument shall be null and void from its date as though it had never existed: and it is hereby further acknowledged and declared by us, that there never has been any contracts or liabilities incurred by virtue of it or from a knowledge of its existence. In witness of the same, we have hereunto subscribed our names and firm.
    John Connell,
    Worley & Welsh.”
    
      On the 21st of July, 1829, John Connell, being largely indebted, executed an assignment of all his estate and effects to Francis Worley and such others, his creditors, as should execute a release within a certain specified time: Worley & Welsh were preferred creditor's in this instrument, and as such, received from the assets $11,323,22, the whole amount of their claim. A release dated the 4th of August, 1829, was executed by several creditors, but not by the plaintiffs in this case.
    It was proved by a clerk in the employ of Worley & Welsh, that there was no book kept by them in the name of “ John Connell,” and he testified that he never knew a debt contracted in that name by Worley & Welsh, or any debt which had been contracted by John Connel, paid by them, and never knew of any purchase made, or act done,, that indicated the existence of a partnership between Connell and Worley & Welsh, After the assignment he was sent to Pittsburgh to attend to the business arising under it, where he obtained possession of the books of Conpell, and from them made out a statement of Connell’s debts and assets, by which it appeared, that there was a deficiency of$25407,09, whi'ch according to the representations made to him by Connell, arose^between the 1st of September, 1828, and the time of the assignment in July 1829. On his cross-examination, the witness stated that Worley was not a partner in the concern at Baltimore; Welsh was engaged in a different line of business. There was no evidence on the books of Connell showing how the deficiency arose. The books were balanced to the 1st of September, 1828, when the balance in favour of Worley & Welsh was $4104,29. On the 1st of January, 1829, the balance in favour of Worley & Welsh on their books was $13265,32.
    Judge Rogers Charged the jury in substance as follows:—
    
      “ This suit is founded on an alleged partnership between Francis Worley, Thomas. Welsh and John Connell, and a salé of goods to them during the existence of the partnership. To entitle the plaintiffs to recover, it is necessary for them to show the existence of the debt; that there was a partnership; and that the goods were furnished during the existence of the partnership. This the plaintiffs have done, 1st, by proof, that the goods were sold to John Connell at several times, viz. the 23d April, the 2d and 18th May, 1829, 2. By the articles of co-partnership of the 1st September, 1829 : and this is what lawyers term a prima facie case, or in other words, in the absence of all proof on the part of the defendants, it is such evidence as will entitle the plaintiffs to gain a verdict. All that is necessary for a stranger to do, is to show the articles themselves. That is such a proof of partnership as throws the burthen of proof on the other side. It is incumbent on them to show, that .no act has been done in pursuance of the articles, or that the partnership has been dissolved. I do not mean here to touch upon a point in the cause, which will be noticed hereafter. The agreement is limited in point of time to three years, from the 1st of September, 1828, The goods were furnished between the 1st September, 1828, and the 18th May, 1829. And the presumption is, that the articles of co-partnership were not a dead letter; but the inference is, that they were acted on by the parties according to their stipulations. So, also, the presumption is, that the goods went to the use of the firm and not to the separate use of Connell. In default, then, of any proof to the contrary, always supposing that Worley signed the articles with the consent of Welsh, such evidence has been produced as would make it your duty to find a verdict in favour of the plaintiffs. And this brings me to the defence. If I understand the defendants’ counsel, it maybe considered under two heads: 1. They allege fraud practised by John Connell on Worley & Welsh, which, as they say, avoids the contract; and that this being the case of a dormant partnership, the plaintiffs are not entitled to recover: that the parties never acted on these articles, that this was not an actual, but a contemplated partnership; and that, even if a partnership once existed, there was a virtual dissolution of it before the debt was contracted. Partnership is a contract of two or more persons to place their money, effects, labour, and skill, or some, or all of them, ' in lawful commerce or business, and to divide the profits, and to bear the loss, in certain proportions. It is not the actual perception J of profits, that constitutes a partnership, but a capability of receiv-j ing them, if made. A contract of partnership may be made, either by deed, which you know is an instrument under seal, or by an agreement, not under seal, as was done here. There are, you well know, several kinds of partners. An ostensible, actual or known partner, a dormant or sleeping partner, and a nominal partner. This is the case of a dormant partner; for it has been held, that where two persons were concerned together as partners, but the business was done in the name of one, and it was not generally known that they were partners, the other was a dormant partner, (5 Cowen, 534.1 It seems to have been the intention of all parties, that Worley &, Welsh should be dormant partners. The business was to be carried on in the name of John Connell, nor was it known that any partnership existed. The plaintiffs certainly had no knowledge of any other person than John Connell at the time of the sales. This then, being the case of dormant partners, the defendants contend, that John Connell, on the 1st September, 1828, committed a fraud on Worley & Welsh, and that the contract of co-partnership was void, and being void, a dormant partner is not liable to suit. This brings into view a principle which is new. At least I recollect no decided case, and none has been produced. I take this tobe the law. Fraud avoids all contracts, and if you should be of the opinion, that there was a fraud in the concoction or original formation of the partnership, this contract of co-partnership was void; and if the contract was- wholly void, the defendants being dormant, and not ostensible partners, are not in general liable. The distinction is this. Whatever fraud or imposition there may be between, the parties where they are known partners, cannot affect third persons, who are presumed to contract on the faith, and with a knowledge of the partnership. But that is not the case of a dormant partner. There third persons do not credit the firm, but the individual with whom they deal. They then receive no injury. The reason why a person becomes, by implication and operation of law, clothed with the character of a partner, and as such, liable to third persons, is, that by the effect of the agreement for a participation, the party participant takes from the creditors a part of that fund, which is the proper security to them for the satisfaction of their debts, and upon which they rely for payment. Another reason assigned for subjecting a dormant partner to responsibility is, that if he-were exempted, he would receive usurious interest for his capital without its being attended with any risk. The rule, then, must be taken with this qualification, that if the dormant partner has actually received part of the profits, or any part of the capital, then he is liable to third persons, although there may have been fraud in the contract of partnership. He is liable, because he actually takes from the creditors a part of that fund, which is the proper security to them for satisfaction of the debts, and on which they rely for payment. But where there is such a fraud as to avoid the contract of co-partnership between the parties, and where no part of the funds have been received by the dormant partner, in such a case, it is the opinion of the Court, that dormant partners are not liable to creditors, who give credit, not on the faith of the partnership, but of that of the individual with whom they contract! Third persons would be in no better situations than the fraudulent partner, who clearly would have no right of action against the innocent partner. If such should be your .opinion of the facts, your verdict should be in favour of the defendants. And this leads to the inquiry, what facts have been proved; and this will be your duty, under some few directions which I shall give you, as to the manner in which this cause should be viewed. You will recollect that I told you, that the plaintiffs, by proof of the debt, and by the production of the articles of partnership, had exhibited a prima facie case; that they' had shown a cause of action. This, then, shifts the proof from the plaintiffs to the defendants. As the defence consists in an allegation of fraud, it is necessary for them to prove it. The burthen of proof is thrown upon them. And here let me observe to you, that fraud is not to be presumed: as in the case of the imputation of every other criminal action, every man is presumed to be innocent until the contrary is made to appear. It is incumbent on the defendants to satisfy you of the fact of fraud, either by positive testimony or the proof of such circumstances as usually attend fraud. It is not left to con-lecture, but such evidence must be given as to satisfy you, that ' there has been a fraud or imposition practised upon the defendants by Connell, of such a nature as to avoid the contract. It is not by arguments, but by facts, that this must be made to appear. The circumstance on which the defendants mainly rely on this part of their case is, the great deficit, upwards of $28,000, which appears in the account of John Connell, from the 1st September, 1828, until his assignment in July, 1829. From this the defendants wish you to infer, that at the time the partnership was made, viz. on the 1st September, 1828, Connell must have been largely indebted, .and that that fact was not communicated by Connell to the defendants. All the evidence, we have, is derived from the articles-of-co-partnership itself. We know not what took place at their execution, for the witnesses, if any were present, have not been produced. (His Honor here read the statements contained in the articles and asked) What proof have you that these representations were not true to the letter ? If Connell was largely indebted at the time, and Worley dt Welsh did not choose to inquire into his circumstances, this is as .much a proof of folly on their part as fraud on his. They cannot now say, there was fraud on the part of Connell, that the contract is void, and they are not liable as partners. The nonfulfilment of the stipulations in the partnership alone would not be such a fraud as. to avoid the contract, so as to free a dormant partner from a debt, contracted by the partners. To have this effect, it must be such a fraud, as to avoid the whole contract, to make it void from the beginning. In addition to this the plaintiffs’ counsel have endeavoured to show the manner in which these losses occurred. Whether his explanation has been satisfactory, is for you to say.' It will •be for you specially, to remember that the whole burthen of proof is thrown upon the defendants. But the defendants say, that although they executed the article of the 1st September, yet, that nothing further was done in pursuance, of it; that in effect, as soon as the partnership was formed it was dissolved, or that at any raté^it was dissolved before the 23d of April, 1829. If this be true they are not liable. If they merely executed the articles without more, then the plaintiffs have no right of action; that is to say, if John Connell continued to carry "on business on his -own account, after the copartnership, and this clearly appears, the defendants cannot be charged in this suit. In such a case the partnership has not commenced, or, if commenced, it is dissolved by the act or mutual consent of both parties. When a partnership is commenced by articles unsealed, as is the case here, it is nevertheless, in legal effect, a partnership formed by parol, and consequently may be •dissolved by parol. And here again, i,t is necessary to advert to the distinction between an ostensible and a dormant partner. In the •case of a dormant partner whose name has never been announced, he may withdraw from the concern without making the dissolution of the partnership publicly known; for his liability depends upon the mere fact of partnership and no credit has been given to him personally as a supposed member of the firm. Not so in the case of an ostensible partner, who, on his retirement from a partnership to protect himself from liability, must give notice of the dissolution of the partnership. I incline to the opinion that, although these parties formed a partnership by articles for a definite period, it may be dissolved by either, before the period arrives. I am aware that the doctrine of the English Courts is different, and that a contrary principle has been recognised by Lord Eldon in Peacock v. Peacock, (16 Fes. 56,) and in Crowshey v. Maulé, (1 Swan. 495,) yet I hold that the American decisions are founded in the better reason, and are more calculated to advance our commercial interests. There is no , ’such thing as an indissoluble partnership. It is revocable in its own ,,) nature, and each party may, by giving due notice, dissolve the part-i ;; nership as to all future capacity of the firm to bind him by contract; † l' and he has the same legal power, even though the parties had cove- ( f nanted with each other, that the partnership should continue for such i a period of time. The only consequence of such a revocation of the I partnership power- in the intermediate time, would be, that the part-j ner would subject himself to a-claim of damages for a breach of the ^r^covenant. And this, with the fact that it would be contrary to their f own interest to dissolve the connection without cause, will in most cases be an effectual security. It is for the public interest that no partner should be obliged to continue in a partnership against his will, inasmuch as a community of goods in such a case engenders discord and litigation. These views are supported in Marquand v. The JVew York Manufacturing Company, (17 Johns.. R. 525,) .and in Skinner v. Daytoñ, (19 Johns. 538.) And this is also the doctrine of the civil law, which holds, that each partner has a power to dissolve the connection at any time, notwithstanding any agreement to the contrary, and that such a power results from the nature of the association.
    If then, you should be of the opinion that nothing more was done than the mere execution of the articles of copartnership, or that the parnership was dissolved by mutual consent or by the will of one of the parties before this debt was contracted, then your verdict should be in favour of the defendants. I say before the debt was contracted ; for if the partnership was subsisting at the time of the indebtedness of the defendants, then there is nothing in the defence; that is to say, if on the 23d of April, the 2d of May, and the 18th of May, 1829, the times the debt was contracted, the defendants were the partners of John Connell, the defendant fails in this part of his de-, fence. The plaintiffs will have acquired a vested right, of which no subsequent dissolution can deprive him. In your deliberations on this part of the case, you will recollect the observations I made to you in another part of this charge: they are strictly applicable ' here. The plaintiff has shown a prima facie case. The burthen of proof is thrown upon the defendants. The presumption <s, that John Connell was trading for'the company under the name or firm of John Connell, as was agreed upon in the articles. It is for the defendants to prove that no act was done in pursuance of the partnership ; and if dissolved, he should give us something from which we might be able to ascertain, with some reasonable certainty, the manner of its dissolution, when and where, and how it was. dissolved. This imposes no hardship on the defendant, when he seeks to avoid a liability arising from his own evils. If no act was done, but the articles were a mere dead letter, it has been asked, w hy were not the articles cancelled? If dissolved, why have we not some proof of the fact more than mere conjecture, derived from circumstances, which to say the least of them are equivocal ? It is, however, not for me to press this matter. You have heard the evidence, and the arguments of counsel and to you I commit this part of the cause.
    It is true, as has been contended by the defendants’ counsel, that whatever may be the language of articles of copartnership, the deal- • ings and transactions among the partners may be such, as to amount to distinct evidence, that some of the articles were waived by all the parties. But the evidence must be strong, and in the language of the books amounting to demonstration. So also, subsequent inconsistent transactions may show a total abandonment qf the articles of partnership. But so far from their being inconsistent, the plaintiff contends that all the acts and transactions of the parties are consis-, tent with a continuing and subsisting partnership. For this he has referred to the books themselves, of which you will judge.
    Both sides have referred to the instrument of writing, dated the first of June, 1829; and which, whether it be called a renunciation, nullification, revocation, dissolution or declaration of the parties, I am sorry was admitted in evidence. If it is considered as a dissolution of partnership, except as between the parties Ihemselves, it can • only take effect from its date, and this cannot effect the plaintiffs’ claim which arose prior to the the 1st of June.
    It is not competent for the parties to manufacture facts such as those stated in this instrument. If they could and they were to be effectual, there would be an end of all recoveries, in cases such as the present. If the instrument be effectual for any purpose, it rather goes to show a dissolution of partnership of that date, which would be some evidence that up to the 1st of June there was a continuingand subsisting partnership between Worley <Xr Welsh and John Connell. After the first day of June, 1829, the situation of Worley & Welsh, may' be entirely different from what it is prior to that time. •
    In conclusion, I shall direct your attention to the only remaining point in the cause. The defendants contend that the articles of partnership were signed by Worley alone and not by Welsh. That one partner cannot bind another in this way. That this is a joint suit, and that as Welsh is not liable, neither is Worley bound in this suit. This is said to. be a technical objection; it can hardly be called so, since, if this be the fact, then Welsh avoids the payment of $25,000: the loss is thrown, and rightly too, on Worley and Connell.
    The law, as regards. this objection may be thus stated. As one partner can in no instance, without the consent of his copartners, introduce a stranger into the concern as a partner; neither can he without such consent make him a member of another firm. It is true he may engage in a particular adventure; but this is an attempt to form a general partnership without his consent.. If two of the jury were partners, and one was sent to China to attend to the concerns of the firm, it would, I think, surprise you to find yourself engaged in a general partnership with an inhabitant of China. It is out of the ordinary commercial transactions, and therefore presumed to be without the scope of his authority. A contrary principle would indeed be a dangerous one to admit into the law of partnership., It does not come within the scope of his authority so to bind his copartner. But although consent is absolutely'necessary to constitute a partnership, yet such consent may be testified either in express terms or the assent may be tacit, and to be implied from the acts and conduct of the parties. If then Worley signed the article of the 1st of September, 1828, and there is no previous or subsequent authority from Welsh, the defendants are not .liable in this suit; for as has been very correctly observed, this is a joint ■suit, and he must recover against all or none. ' He must prove his contract as it is laid in his declaration. But if Welsh either knew of it before and authorized it, or he has subsequently assented to it, he is bound, as well as the other partner to the contract. And this will render it necessary for you to direct your attention to the facts which have been given you in evidence on this part of the case; for as you find them so should your verdict be. If you believe that Worley signed the article with a previous or subsequent assent of Welsh, before the debt was contracted, your verdict should be in favour of the plaintiffs; but, if you should be of opinion that it was •signed without any previous or subsequent authority from Welsh, your verdict should be for the defendants. And here, it is but jus•tice to remark that the burthen of proof is thrown upon the plaintiffs. It is not only necessary for them to prove the debt and the articles <of copartnership, but inasmuch as the articles were signed by Worley alone, (and not so far as we know in the presence of Welsh,) it is equally necessary to satisfy ypu, that the act met the approbation of Welsh. It is not required that there should be direct and positive testimony of this; if you can reasonably infer it from all the circumstances which has been proved, that is sufficient. For you will recollect I told you, .that, although consent is absolutely necessary to constitute a partnership, yet such consent may be testified either in express terms, or the assent may be tacit,and to be implied solely from the acts and conduct of the parties. If Welsh knew of it, he ought to have dissented from the arrangement; otherwise, he is bound. It will not do for him to take the benefit of the business if it proves successful, and to avoid loss, if it should be an unfortunate concern. This case must be tested by the principles of common sense, and if from the circumstances you believe, that Mr. Welsh assented to the arrangement of Mr. Worley, he is equally bound with Worley himself.”
    The jury having found for the defendants, a motion for a new trial was made on the following grounds :—
    
      “ 1st. Because there was evidence enough, in the cause, to show, that Thomas Welsh authorised or assented-to the partnership, which was formed on the 1st of September, 1828, between. John Connell, Francis Worley and Thomas Welsh.
    2d. Because the verdict was against the charge of the Court.”
    Mr. Brashears and Mr. Sergeant argued, that upon the evidence the jury ought to have found for the plaintiffs.
    They cited 3 Stark. 1070, 1078.
    Mr. Randall and Mr. P. A. Browne, in support of the verdict.
    The law was laid down as favourably for the plaintiffs as they had any right to expect, and the jury having, by their verdict, disposed of the question of fraud, the only point upon which the law would avail them, there is no ground for the interference of the Court. In the course of their remarks, the counsel cited Mercein v. Andrews, (10 WendellAQl.) [Rogers, J. I cannot think that case is law. Gibson, C. J. Certainly it goes too far.]
   The opinion of the Court was delivered by

Sergeant, J.

After a review of this case on the present motion for a new trial, we are of opinion, that the charge of the Judge, who tried the cause, was correct in matters of law, and that the only question, on which doubt could be entertained, was a question of fact, whether or not Welsh assented to the partnership. That question was left fairly to the jury, who have decided in favour of the defendants. And supposing the Court might have felt a difficulty in arriving at the same conclusion, that is not a sufficient reason for setting aside the verdict. The jury are the proper judges of facts; and the Court will not, in that respect, interfere with their verdict, unless it be against the weight of evidence. Should the Court do so, they would virtually take from the jury their peculiar province. In the present case the evidence presents no circumstance, by which the assent of Welsh is so satisfactorily established, that a conclusion might not be drawn of its non-existence. That conclusion the jury have come to, and there it must rest.

• Motion for a new trial denied.  