Scottish Court of Session Decisions

Subject_1 SOCIETY.
Subject_2 SECT. VIII.

Powers of a Majority of a Society; - of a Surviving Partner.

Ludovick Grant, Trustee for Fairholm's Creditors,
v.
George Chalmers, Merchant in Edinburgh

Date: 15 November 1771
Case No. No. 26.

Powers of management vested in the acting and surviving partner of a company.

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Thomas Fairholm, senior, and Adam his nephew, carried on trade under the firm of Thomas and Adam Fairholms; which concern expired in the year 1751.

In the year 1754, Adam and Thomas Fairholms carried on trade in company with Robert Malcolm, under the firm of Fairholms and Malcolm.

This company being dissolved in 1760, the brothers carried on trade under the firm of Adam and Thomas Fairholms. Thomas was entrusted with uplifting the debts due to Fairholms and Malcolm; and did so for several years.

Adam and Thomas Fairholms having, in the year 1764, become bankrupt, they executed a disposition of all their estate to Ludovick Grant, and others, in trust, for behoof of their creditors.

George Chalmers was debtor to Fairholm and Malcolm, the second company, in upwards of £.700 by a promissory note; and in 1770 Thomas Fairholm, under the firm of Fairholms and Malcolm, granted an assignation to this debt in favour of Ludovick Grant, as trustee for Fairholm's creditors.

Grant having brought an action against Chalmers, the defence upon the merits was a plea of compensation on account of certain claims he had against the first company of Thomas and Adam Fairholms, but in limine he objected to the pursuer's title, and stated, That as the promissory notes had been granted to the company of Fairholms and Malcolm, it was not in the power of Thomas Fairholm, one only of the partners, to convey, after the dissolution of the company, the debts due to the company for the payment of the debts of another company; more especially as Thomas Fairholm was bankrupt when he granted the assignation.

The question having been reported to the Court,

The pursuer pleaded:

1mo, Thomas Fairholm, the assigner of the debt, had, ever since the dissolution of the concern of Fairholms and Malcolm, been the sole acting partner in everything relative to the settlement of that Company's affairs. The books and vouchers had been left with him for that purpose; and he had acted accordingly, without any objection being made to his title.

2do, Thomas Fairholm was the only surviving partner of the Company of Fairholms and Malcolm, both Malcolm and Fairholm being dead. When a company accordingly was dissolved either by death or otherwise, the funds did not ipso jure divide among the different partners or their representatives. Till the affairs were finally settled, they were still considered as a company—they fell to sue or be sued in that character—the surviving partner sustinet personam of the company for that purpose: and hence all his acts of administration and management were authorised and binding.

The objection reared, upon Thomas Fairholm's being bankrupt when the assignation was granted, could have no weight. The representatives of Malcolm, the other partner, who alone had any interest, had been called into the field; and as they made no objection to the transaction, it was evidently jus tertii to the pursuer; who being, at all events, a debtor to the company, could never, upon this pretence, withhold payment of what was avowedly due.

The defender answered:

1mo, When a copartnery was dissolved, and all or several of the partners were alive, no one partner could of himself uplift and discharge the company's debts. They must either all concur in every act, or give a power to one to act for them. Though Thomas Fairholm, therefore, had been the sole acting partner in settling the company's affairs, it was not alleged he had any authority to act in that manner.

2do, At the date of the assignation, Thomas Fairholm was not the sole surviving partner, Malcolm being alive. But although he had, it did not follow that the assignation would have been authorised. There was a manifest distinction between ordinary and proper acts of administration; such as uplifting the company's debts and effects, and granting an assignation of them; it being a general rule, that no one acting in the affairs of another could convey the property of his constituent, without a special power, for that purpose.

3tio, Though Thomas Fairholm had been entitled to the management of the company's affairs, either as surviving partner, or as authorised by a mandate express or implied, his bankruptcy, which had occurred prior to the assignment, must have had the effect to annul his powers, either by operating a revocation of the mandate, or by the consequent disqualification it created as to an interference in the affairs of others.

The interlocutor of the Court was as follows: “In respect that no objection was offered by the heirs of Robert Malcolm, who are now made parties to the said process, nor by any others, to the assignation granted by Thomas Fairholm to the pursuer; repel, the objection made to the pursuer's title, and remit to the Lord Ordinary to proceed accordingly.”

Lord Ordinary, Monboddo. For Grant, Macqueen. For Chalmers, Rolland. Clerk, Pringle. Fac. Coll. No. 105. p. 318.