159 Pa. 165 | Pa. | 1893
Lead Opinion
Opinion by
The American Bank was a partnership, of which appellants were members, organized April 6, 1869, in a banking and brokerage business in Pittsburgh, Pa. The capital, by the partnership articles, was $200,000, divided into 2000 shares of $100 each. This was all paid up, and certificates, of the amounts' subscribed and paid by each partner, delivered. The business was transacted by a president, cashier, and a board of directors, who were elected annually. While the methods and forms of business adopted were those of a joint stock company or a corporation aggregate, still the members, notwithstanding this, were well aware of their responsibilities as partners, as is shown by the first of the written special stipulations of their partnership articles, which is as follows :
“ And whereas, the stockholders will be individually bound for all liabilities of the company, and are therefore deeply interested in the character, credit and responsibility of each other, it is especially agreed upon that no person or persons under a legal disability or restriction of personal responsibility, such as married or single women, minors, and those acting in a representative capacity, shall be eligible to hold stock or to become or remain members of said company, nor shall any one not fully pecuniarily responsible, be eligible to become a member, or, being a member, to remain so.”
John Floyd was the first president, and was continued in the office until his death, Oct. 2,1881; then another president, William Floyd, was appointed to the vacancy, and the bank continued business without interruption down to November 25, 1887, when, because of insolvency, it went into the hands of a receiver.
Of these appellants, Graham Scott, 10 shares, O. F. Klopfer, 30 shares, O. Arbuthnot, 50 shares, Archibald Wallace, 50 shares, were original subscribers to the articles of association. Edward House and H. J. Murdoch apparently acquired their shares after the bank had commenced business, for their names do not appear among the original subscribers. Scott
As has been noticed, the president, John Floyd, probably the owner of the largest interest in the bank, subscribing first for' 250 shares and afterwards purchasing others, died October 2,-1881; others of the original subscribers had died before him.John I. House died January 8, 1879.
Samuel M. Robinson, the appellee, commenced depositing' in the bank September 15, 1870, and continued depositing and checking out until the bank failed in November, 1887. By am agreement he first was to receive six per cent interest on all-deposits left for six months ; this continued until June, 1875,-when the rate was reduced to five per cent; this ran until April 1, 1877, when the rate of interest was reduced to three-per cent, and so continued to the end. The interest at the-rates agreed upon was regularly paid him every six months up-to the date of the failure of the bank, when his balance was-$21,000. He had drawn out by check after the sale by Arbuth*not and Klopfer of their shares,$12,441.45; the receiver has paid him in distribution of the assets $6,892.73. After the sale by 'Wallace of his shares, Robinson deposited $5,530. On September 18,1891, almost four years after the insolvency of the bank, the appellee brought suit against these appellants and those joined with them as partners for the recovery of the balance yet unpaid, $16,369.74.
As will be noticed, in the suit brought in the common pleas, there are fourteen defendants; judgment for want of a sufficient affidavit of defence was entered against all of them ; but only six, Scott, Murdoch, Klopfer, Arbuthnot, Wallace and House, prosecute this appeal. The facts tending to create liability as partners are not precisely the same as to all of defendants.
The affidavit of defence by Scott admits : (1) The formatfon of the partnership, the subscription and payment of the
Taking the averments in these affidavits, and those not denied in plaintiff’s statement, to be the truth, the “ American Bank ” was, so far as concerned creditors, nothing but a partnership composed of many individuals, among them these appellants. From time to time, some of them sold their stock and withdrew; at the time of the withdrawal of these appellants, and for years before, this plaintiff was a depositor; the partnership, when they retired, owed to him a large amount of money: he could at that time, and within six years thereafter, without question, have maintained this action for the indebtedness then existing. But, by subsequent deposits, the debt increased. What is their liability with reference to this increase? If plaintiff’s contract relations with the bank had commenced
The question of actual notice was not present in the case of ■Campbell v. Floyd and others, 153 Pa. 84, and the cases argued with and ruled by that opinion, all of which arose out of this •same partnership.
Wallace swears that when he sold his stock he gave actual ■personal notice of the fact to this plaintiff, and thereafter had ■no further connection with the bank, and no one was authorized to act for him with respect to this business. In his denial of authority to the remaining partners to act for him, he is corroborated by the agreement or articles of copartnership. His withdrawal did not effect the dissolution of the partnership, with all the legal consequences which generally follow such an event in business partnerships. It was not a cessation of business and .dissolution by consent of all the members, or a dissolution by •the expiration of the term fixed in the articles, or a dissolution •such as' finally did take place when the receiver was appointed; in either of 'these cases, active management is continued beyond the date of -dissolution, only for one purpose, winding up ■the business, that is, realizing on assets, the collection of debts due the partnership, and the payment of debts owing by it. It was not intended the withdrawal or death of a member should .operate as a dissolution in fact; so far as they could, by agreeínent, give it a perpetual existence, that was intended. Notice
Then follow most minute details of a method of compensating any party who wishes to sell his stock and withdraw, or who has been “exscinded” from membership, and then this stipulation: “ And it is distinctly understood and fully agreed upon that no party or parties shall be able to effect a dissolution of the company by any proceedings at law or equity, but the mode or manner of any change in the parties or their interests shall be accomplished as hereinbefore provided; ” that is, by a majority of the members at a meeting called for that purpose. Then it was provided, in case of the death of a stockholder, his heir or legal representative, with the consent of the board, could become a member.
As between themselves, by their agreement, there could be no dissolution, in the usual sense of that term, except by a majority vote at a meeting called for that purpose; the partnership never was to cease business and be wound up in any other way. As the agreement expresses it, a partner might, by resolution of the board, be “ exscinded,” that is, cut off, or he might, by consent of the partnership, dispose of his interest and withdraw, or he might die, but in neither case was this to affect the continued life of the partnership. Therefore, the distinction which the law makes between the powers of liquidating partners and surviving partners, only to a limited extent, is applicable here, for the remaining partners were to immediately settle up nothing with any of the creditors; otherwise, the payment of depositors would have closed the bank every time a member •sold out his interest or died. In fact, under the agreement, although the financial responsibility of the partnership could be changed, the withdrawal of a member in no way impaired its paid-up capital; he did not draw his share of this out of the bank when he sold; he got his money from the buyer who took his place as a member of the partnership. Assuming, then, as a fact, which is disputed by plaintiff, that Wallace gave him
Robinson knew when he commenced his deposits the bank was a partnership; prior to the notice, Wallace’s liability depended on the fact of his being a partner, and not on Robinson’s knowledge of the fact; but, when he got the notice, he knew as a fact Wallace had been one, had sold out and was no longer a partner; he knew, too, that there wag no dissolution in fact, but only a severance of Wallace’s connection as a member; he knew the bank continued on in business for years afterwards, for he continued to do business with it just as before, with no change in the accounts and no indication of a desire on the part of either depositor or bank to settle up and pay the old accounts, or to transfer them to a new partnership. He knew, as well as the bank did, it was not liquidating accounts ; he probably would not have permitted his money to remain for years with the liquidating partners of a dissolved partnership, nor have deposited more money with them. If he was notified by Wallace of the sale of his interest, the necessary reasonable inference is, he knew Wallace had no further interest in the old assets any more than in the new business; that he would confer on his copartners no authority to acknowledge and promise to pay an old debt, for, as between the partners, he owed none. He knew from the notice that from
On the exceptional facts presented in this case, it seems to us the conclusion must follow, if the notice were given, that the plaintiff knew there was no authority in the remaining partners to toll the statute, and as he brought no suit within the six years, as against Wallace he cannot recover.
As to the other five appellants, three of them allege they gave notice by publication of the sale of their respective interests. As airead}7 seen, such notice was not sufficient to relieve them from liability. As to the two others, notice of any kind is not alleged. But, as to all of them, it is alleged that the deaths of John Floyd, October 22,1881, and. of others, worked a dissolution of the partnership by operation of law; that death, ipso facto, dissolved the partnership.
It may be conceded, this worked a change in the partnership, so far as concerned its personality, and the law presumes notice of the fact of death to plaintiff; but this, in the face of this agreement, in no way affected the liability of the surviving members, for, by their agreement, it was not to affect the partnership ; and as to existing creditors, without notice, all were surviving or continuing partners, without regard to the fact of withdrawal. Death, the law presumes equivalent to actual notice; thereafter the creditor could not hold the deceased partner’s estate answerable for new indebtedness, nor, except within the statutory period, for the old; but these appellants neither died nor gave actual notice of the severance of their relations with the partnership; nor was presumptive notice to the creditor of the severance of one partner’s connection by death any notice to him that some of the living ones had withdrawn; as between them and this creditor they continued to be partners, and are therefore answerable for all business transactions of the firm during their actual and presumptive membership.
The questions here raised by appellants and now decided were not directly passed on in - Campbell v. Floyd, supra, because they were not neoessary to a decision of the cause. There was no positive averment of actual personal notice to the cred
The argument of the learned counsel for appellants, as to the intolerable hardship to retiring partners in holding them up to such a measure of liability, and that no partner, under such a rule, can retire with safety without a cessation of, and a complete winding up of the business, we have fully considered. It does not seem to us that the inference of hardship is warranted by the facts in this case, or by the law applicable to the facts. In partnerships other than banking, it has always been understood that, in case of a retiring partner with the assumption of existing indebtedness by the new firm, actual notice must be given to all creditors of the old firm of the change, if the retiring partner wishes to clear himself of continued liability. The perils attending a banking copartnership such as this, may be, doubtless are, greater than in other kinds of business; there is probably more risk incident to the care of other people’s money than of one’s own, but this is no reason for relaxing well-established rules of law for the protection of the public. In the case before us, a copartnership was formed by many individuals for profit; in the minds of a large part of the public, a voluntary banking partnership with individual responsibility is safer than one where the members are associated as a corporation ; not seldom the partnership holds out to the public, as an inducement to favor, this individual liability. On the faith of it, the depositor intrusts the partnership with his money; he does this, not only on the faith of the paid-up capital, but also, it may be assumed, on the good character, business capacity
The judgment as to Archibald Wallace is reversed, one sixth the costs to abide the event, and as to him a procedendo is awarded; as to the other appellants, the judgment is affirmed.
Dissenting Opinion
Dissenting Opinion bv
December 30, 1893:
The appellants in their affidavits of defence invoke the protection of the statute of limitations. The dormant nature and character of the demand fully warranted them in seeking to secure from it the repose contemplated by the statute. This suit was brought by appellee against appellants, as partners doing business as the American Bank, for the recovery of money received by the bank from time to time, commencing in 1870, and upon which interest, first at six per cent, subsequently at five per cent and finally at three per cent, was paid. The partnership, organized to conduct a banking and brokerage business, was formed by articles of association in which it was provided that shares of stock were to be issued, each share to be entitled to one vote, that transfers of shares were to be made with the consent of the board of directors and that withdrawals were to be permitted upon valuation. From the character of the partnership each sale of stock, and the transfer of the same to the vendee with the consent of the board of directors, practically operated to create in each instance a new partnership. The 'new firm with its new members thus created became liable for
Even conceding that those withdrawing had not relieved themselves as to existing customers of the bank by a proper notice, yet the death of Floyd caused a dissolution, and certainly, as to those who had previously withdrawn, the statute then began to run, for they never became partners in the new firm that continued the business of the old.
In Reppert v. Colvin, 48 Pa. 252, it is said by Mr. Justice Read: “The law is well settled that, after dissolution of a partnership, the partners cease to have any power to make a contract in any way binding on each other. The dissolution puts an end to the authoritj^, and operates as a revocation of all power to create new contracts. Of course a new promise, of which the original debt is only the consideration by a partner after the dissolution of the copartnership, will not take the debt out of the statute of limitations so as to make the copartners liable.”
When therefore the death of John Floyd caused a dissolution of the firm, unless the surviving partners were made liquidating partners, the statute bar continued. While the appointment of a liquidating partner need not be express or specific it may be inferred from acts done in liquidation with the consent or the knowledge of the former members. The authority to act as liquidating partner must however spring from express authorization or an implied assent. When so established its purpose is to wind up the affairs of the firm. In the present case there is nothing to warrant the conclusion that the appellants had any knowledge of or in any manner assented to the appointment of any liquidating partners. When John Floyd died in 1881, three of the appellants, for a period exceeding five years, had ceased to have any connection with the partnership and had given notice by publication of their withdrawal, and one for a period of two years who had given appellee personal notice of his withdrawal, and the others for over one year. They have not in any manner or form directly or indirectly given any authority to their former partners to act as liquidating partners, and have not expressly or impliedly assented to any liquidation by them. When he died liquidation of the dissolved firm was not undertaken. While he had a large estate,
The articles of agreement so far from changing the law of the ease only make it more emphatic. The agreement is meant to prevent liquidation and provide for a continuance of the business without a break, so far as customers are concerned. As to the rights of the partners inter se, it binds them, so far as an agreement can, not to bring about a dissolution except in the way specified, but it has no such provision as to death. In such event the agreement says, ‘“The heir or legal representative ’ may by consent of the board become a member. ” Without such consent he is not a member, and with it he becomes by virtue of it only a member not of the old firm but of the new. It’ is manifest that the appellee so understood it, because he received interest from such new firm and claimed a dividend from the proceeds of its assets. One of the affidavits of defence avers a novation, for it states: “ That not only did the plaintiff continue to transact business with this bank for a period of eleven years after said affiant had sold all his interest therein, but, as your affiant is advised and believes and expects to be able to prove on the trial of this case, he did this with a full knowledge of the fact that this affiant had sold and transferred in said bank as hereinbefore stated, and after having said knowledge the said plaintiff agreed to leave his money with the new partnership and to receive interest thereon at the rate of three per cent per annum for the use by the new partnership of the said money, and that the said new partnership actually paid to the plaintiff at various times and dates after September 19,1876, for the use by said new partnership of said money, interest at the rate of three per centum per annum, and even down as late as October, 1887, the plaintiff continued his loan of said money to the new partnership, upon the same terms, and at the same rate of interest as he had loaned the money at and after September 19, 1876, to the said new partnership.” The fact that
I am therefore of the opinion that this judgment should be reversed and a procedendo awarded.