It will be seen that where the separate estates are large, and the joint estate next to nothing, the joint creditors, who would get nothing under the English rule, would receive under this rule substantial dividends. In this case the result is the same as under the Scotch rule, whereas if the partnership property is equal to the amount taken out of the separate estates for the partnership creditors, the result under Mr. Murray's rule is the same as under the English rule, thus avoiding the "injustice" to the separate creditors brought about by the Scotch rule. The suggested rule is indeed a mean between the other two. For a full and clear explanation of the operation of the three rules under different circumstances, the reader is referred to the specific examples in figures given by Mr. Murray.
What we are here concerned with, however, is the principle on which Mr. Murray's rule is based. Is it true that he has reached the bottom of the theory of partnership, when he says that the function of the joint property is to indemnify the partner who has paid a partnership debt? Or is he giving universal application to a subsidiary rule which in truth has but a restricted scope?
Let us first test his conclusions by his own hypotheses, which are as follows : "(1.) A partnership creditor is a creditor of each of the partners.
"(2.) Partnership property is primarily applicable in payment of part- nership debts.
"(3.) A partner who has paid a partnership debt is entitled to be indemnified out of the partnership property."
By (i) he allows the joint creditors to prove at once against the separate estates and receive dividends. Then by (3) the separate estates reimburse themselves from the joint estate. But the amount thus put into the separate estates is divided solely among the separate creditors. Ought it not rather to be open to the claims of the joint creditors as well? For it has now become separate estate, and by (i) all separate estate is liable for partnership debts.
This objection assumes that the separate estates are justified in taking the amount in question and denies the right to apply it solely to the sepa- rate debts. The more fundamental question is. Are the separate estates in a position to take the indemnity at all? For, assuming that they do take it, what has become of hypothesis number (2)? If "partnership property is primarily applicable in payment of partnership debts," how can it be taken to indemnify a partner's separate estate when the result of such taking is to leave partnership debts unpaid?[1] If the word primarily has any meaning, the rest of the partnership debts should be paid before the partner's claim to indemnify is thought of. Look at the absurdity of the result at this second stage of Mr. Murray's rule. There are partnership debts still unpaid; by (i) the partner's separate estate is liable for them; by (2) the partnership property is primarily liable for them; but both these liabilities are avoided, for by (3) the partnership property is converted into separate property and then for some unknown reason is no longer liable for partnership debts. Two funds are confessedly liable
for the same debts; add the whole of one fund to the other and the
- ↑ We are of course discussing the case where the dividends received by the partnership creditors do not amount to payment of their debts in full.
