120 N.Y. 381 | NY | 1890
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *383 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *385 The question presented is whether the defendant Colgate, as a special partner in a limited partnership, had protection against liability. Without the aid of the statute upon the subject, there was no relief for him against the responsibilities of a general partner. And to render it available as an exemption from liability, compliance with the provisions of the statute was essential in the formation of the limited partnership, and in its renewal or continuance. The view of the trial court upon the evidence was, that it was legally and regularly formed, and the contribution of $100,000 by Colgate duly made, which afforded to him the rights of a special partner, and that the first renewal was effectual; but that the *387 statement in the certificate for the further continuance, made in February, 1882, to the effect that the special capital remained wholly unimpaired was false, inasmuch as the firm was then insolvent, and for that reason the defendant was liable as a general partner. If the solvency of the firm was essential to a renewal or continuance of the limited partnership, and to the exemption of the special partner from liability as a general partner, or if it was necessary for that purpose to embrace in the certificate a statement truly made of the then actual condition of such capital, the recovery must be sustained. The conclusion was fairly required that the firm was then insolvent in fact, although it did not so appear by the books of the firm or by any information which the special partner had obtained from the balance sheets furnished him or otherwise.
The question becomes one of construction of the statute, which provides that the certificate of formation shall contain: 1. The name of the firm under which such partnership is to be conducted; 2. The general nature of the business intended to be transacted; 3. The names of all the general and special partners interested therein, distinguishing which are general and which are special partners, and their respective places of residence; 4. The amount of capital which each special partner shall have contributed to the common stock; 5. The period at which the partnership is to commence, and the period at which it will terminate. (1 R.S. 764, § 4.) The certificate shall be acknowledged, certified, filed and recorded. (Id. § 6.) And with it shall be filed an affidavit of one of the general partners, stating that the sums specified in the certificate to have been contributed by each of the special partners to the common stock, have been actually, and in good faith paid in cash. (Id. 765, § 7.) And it is further provided that: "No such partnership shall be deemed to have been formed, until a certificate shall have been made, acknowledged, filed and recorded, nor until an affidavit shall have been filed as above directed; and, if any false statement be made in such certificate or affidavit, all the persons interested in such partnership *388 shall be liable for all the engagements thereof as general partners." (Id. § 8.) Then follows provision for publication of notice. (Id. § 9.) Thus far, the provisions of the statute apparently have relation to the formation of a limited partnership. It is further provided that "Every renewal or continuance of such partnership beyond the time originally fixed for its duration shall be certified, acknowledged and recorded, and an affidavit of a general partner be made and filed and notice given in the manner herein required for its original formation; and every such partnership which shall be otherwise renewed or continued shall be deemed a general partnership." (Id. § 11.)
This is the only provision for the renewal or continuance, and in it must be found whatever is essential to the extension of the existence of the partnership beyond the period originally given to it. The evidence of the renewal or continuance must be furnished in the same manner as that of its formation. The same formality must be observed. And because the last mentioned section does not contain within itself the requisites of the certificate and affidavit, reference must be had to sections 4 and 7, in which appears the manner of the formation, so far as relates to the certificate and affidavit. The provisions there, must be followed in the renewal or continuance. The only thing essential to be considered here, has relation to the special capital. It is provided in section 4 that the certificate shall contain a statement of the amount of capital which the special partner shall have contributed, and, in section 7, that it shall appear by the affidavit, that the amount so specified in the certificate has been actually and in good faith paid in cash.
The inquiry arises whether the statement in the certificate and affidavit, or in either of them, that the special capital remained unimpaired was essential to the renewal or continuance of the limited partnership, or whether in fact such condition of the capital was necessary to effectually accomplish it. It is not so expressed in the terms of the statute, nor is it necessarily within its import. The manner which the renewal is to be represented, is that required to form the partnership *389
originally. The evidence of the latter is in the certificate, affidavit and proof of publication of notice, all of record. The original certificate states the amount of capital which has been contributed by the special partner to the common stock, and the affidavit declares that the amount so certified has been in good faith paid in cash. The repetition of those statements in the certificate and affidavit of renewal or continuance would, in that respect, seem to be a literal compliance with the statute, at least in form. In that sense the manner of doing it was the same, as, or like that provided for the creation of the partnership; and in that view no statement of the condition of the capital at the time of renewal or continuance would be deemed essential. But it is contended on the part of the plaintiffs that something must appear in the papers required for the continuance to show that the capital is then unimpaired, else the requirement of the certificate and affidavit is in that respect useless, and can serve no beneficial purpose by way of information to the then and future creditors of the firm, or those dealing with it. The purpose of this provision of the statute is not that a new partnership be created, but that one already existing may be continued; that its life may, at the option of the partners, be prolonged. No new capital is to be contributed by the special partner. His right and relation as such, so far as they are dependent upon capital, are supported by the contribution made by him in the outset. There may be reasons for the denial of the right to renew or continue the partnership, unless the capital remains intact, and unless the evidence of it be furnished by the record required to be made of the renewal, and the contrary may not be wholly without the claim of rational contention. But which view has the support of the better reason, or would be productive of the better rule applicable to it under all circumstances, is not now the subject of consideration further than it may have a bearing upon the question of construction of the statute. If it is not required by the statute that the fact be made so to appear by them, the statement in the certificate and affidavit that the capital remained unimpaired would seem to have *390
been surplusage, and the fact that it was not so was unimportant for the purposes of the question here, unless the effectual renewal or continuance of the limited partnership was dependent upon the capital then so remaining. It may be observed that the provisions of section 8, declaring the effect of any false statement, relates only to the certificate and affidavit made on the original formation of the partnership, and that there seems to be no provision of that character applicable to the proceedings taken for its renewal or continuance. But whatever the statute directs to be done is essential to accomplish it without reference to the existence or want of any penal provision, as all the rights and privileges qualifying the obligations and liabilities incident to a general partnership according to the common law or law merchant are wholly derived from the statute, which, for their support, must be substantially in all respects observed. (Haviland v. Chace, 39 Barb. 283;Sharp v. Hutchinson,
The only provision for the contribution of capital by the special partner is found in section 2, which provides that it be made "in actual cash." This has relation to the formation of the partnership, and contribution of capital at any other time or during its continuance is not only not provided for, but by section 12 it is declared that every alteration "in the capital or shares thereof contributed, held or owned, or to be contributed held or owned by any of the special partners," shall be deemed a dissolution of the partnership. The contribution of capital, therefore, by which the interest of the special partner is represented during the time of the continuance of the partnership, is unchangeably fixed by that made on its formation. (Lineweaver v. Slagle, 4 East. Rep. 467.) And this capital is guarded against the act of the special partner *391
by statutory inhibition of its withdrawal (§ 15), and by the penalty, if it be so withdrawn by him wholly or partially during the continuance of the partnership, that his relation and protection as such ceases, and he becomes a general partner. (Bulkley v. Marks, 15 Abb. Pr. 454; Beers v. Reynolds,
If it had been within the legislative purpose that such further information be furnished, it may and seems that it would, in some manner, have been so indicated in the statute. And to say that it was within its contemplation that the papers made to continue the partnership, must import that the special capital remains unimpaired, and, if not so, no continuance of it can be effectually had, requires an implication not warranted by any language of the statute.
In Metropolitan National Bank v. Sirret (
In Haddock v. Grinnell Manufacturing Company (109 Penn. St. 375; 2 East. Rep. 604), there was no new certificate making any reference to the special capital, but the affidavit stated the amount originally contributed, and that it remained in the common stock. While it appeared by the certificate and affidavit made on the formation that the amount had been paid in cash, there was nothing in either the agreement for renewal or the affidavit then made that the contribution was made in cash. The court held that the affidavit was insufficient to support the continuance of the limited partnership, and that the liability of the special partner was that of a general partner, for the reason that it was not stated in what shape the capital remained, whether "in cash, in merchandise," or was represented by "bad debts, a margin in stock or speculation in real estate," and added the remark that "the creditors are entitled to know when the partnership is renewed whether the special capital is a reality or a myth." It may be observed that while the provision of the Pennsylvania statute relating to renewal or continuance is the same in that respect as in this state, it is different in relation to the nature of capital furnished. There the contribution may be made in cash, goods or merchandise, and when made in goods, their nature and value shall be fully set forth in the certificate. The view expressed in the opinion in that case was to the effect that the affidavit should give as full information upon the renewal as upon the original formation, and that when renewed or continued the partnership must be in the same condition, so far as the special capital is concerned, as when originally formed. While that view is not entirely in harmony with Metropolitan NationalBank v. Sirret, and is not adopted here, it is unnecessary to say of that case more than that it is distinguishable from the present one in the fact that the requisite certificate, and affidavit within the meaning of the statute, were not made for renewal, and upon that ground the decision there made was placed. *398
We think that the impairment of the capital without the fault of the special partner, did not deny the right to renew or continue the partnership, nor is the statement of the condition of the special capital in the certificate or affidavit essential to effect a renewal. It follows that those instruments contained all that was required by the statute to accomplish such continuation, and whatever was in excess of it was, for that purpose, surplusage. What might be the consequences of such additional statement in the certificate as bearing upon the liability of the special partner to creditors who may have been induced by it to give credit to the firm, is a question not here for consideration. Nor is the question considered whether or not the trial court was right in holding, as matter of law, that the contribution of capital was duly and in good faith made by the special partner in the formation of the partnership.
These views lead to the conclusion that judgments should be reversed and new trials granted, costs to abide the event.
All concur.
Judgments reversed.