Case Name: THE BENEDICT & BURNHAM MANUFACTURING CO., Respondent, v. DAVID J. HUTCHINSON, Impleaded, &c., Appellant
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1886-07-02
Citations: 21 Jones & S. 486
Docket Number: 
Parties: THE BENEDICT & BURNHAM MANUFACTURING CO., Respondent, v. DAVID J. HUTCHINSON, Impleaded, &c., Appellant.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 53
Pages: 486–492

Head Matter:
THE BENEDICT & BURNHAM MANUFACTURING CO., Respondent, v. DAVID J. HUTCHINSON, Impleaded, &c., Appellant.
Estoppel.—Res adjudieata.—Special partnership.
The receipt of a dividend under an order on an accounting in proceedings on an assignment made by A. and B., for the benefit of the creditors of said firm as a limited partnership, and an appearance in said proceedings, does not estop the creditor from bringing an action thereafter for the balance of the claim against all the partners, and enforcing the liability of 0., the alleged special partner, as a general partner, it not appearing that the court in said assignment proceedings had power to litigate the question whether C. was a general or a special partner, or that said question was in fact there litigated.
Sharp *. Hutchinson 100 (N. T. 533); Durant «. Abendroth (9111). 132); and Magin v. Lawrence (45 Super. Ot. 235), followed as to what constitutes a sufficient payment of special capital under the statute relating to special partnership.
Before Sedgwick, Oh. J., Truax and O’Gorman, JJ.
Decided July 2, 1886.
Appeal by defendant from judgment entered on a verdict for the plaintiff found on the direction of the trial judge, and from an order denying a motion for a new trial.
Action against David J. Hutchinson, Alexander Hogg, and Alexander Patterson, as copartners, to recover $4,207.83, being the aggregate amount remaining due on account of certain promissory notes made by the firm of Hogg & Patterson, and payable to the plaintiff.
Of this firm the plaintiff claimed that Hutchinson was a general partner, by reason of his having falsely stated in a certificate of special partnership filed by him, that he had contributed, as special partner, $10,000 to the common stock of the partnership, whereas, in fact, he then contributed only the sum of $8,000.
The main defense relied on by the defendant Hutchinson was, that the plaintiff was estopped from maintaining this action because, in certain proceedings had in the court of common pleas, relating to a general assignment made by Hogg & Patterson, as general partners, and purporting to be for the benefit of the creditors of the firm of Hogg & Patterson, as a limited partnership, the plaintiff had presented the claim now in suit to the assignee for payment, and, during the pendency of this action, had received and accepted from the assignee $1,696.06 on account of its claim.
George II. Forster, for appellant:
I. The referee in the assignment proceedings refused to find the liability of Hutchinson as general partner for the copartnership debts. The question was litigated before the court on the plaintiff’s exceptions to these refusals to find. The court confirmed the referee’s conclusions and decreed accordingly. This decree was never reversed, but stands in full force. Even if the conclusions of law of the referee and the decree of the court were erroneous, yet the same can only be questioned by a direct appeal and a reversal, and cannot be questioned collaterally. The recital in the decree, that on May 12, 1881, Andrew H. Hogg and Alexander H. Patterson as copartners, under the firm name of Hogg & Patterson, at No. 17 West Houston street, New York city (although the issue as to whether one David J. Hutchinson was a general or a special partner in said firm, was not tried or determined by said referee and is not passed upon by this court), executed and acknowledged an assignment in writing, does not help the plaintiff. The plaintiff had a right to request findings of fact and conclusions of law, and it was the duty of the referee to note the manner in which' each proposition was dis posed of. This determination by the referee, shown by the record and excepted to by the plaintiff, is not to be disposed of by such a recital in the decree. The plaintiff "was duly served with process, appeared by attorneys, took part in the proceeding; the appellant was also a party duly served with process, and the decree of the court of common pleas was a final adjudication between the parties by a competent tribunal, as to their rights. This court has no jurisdiction to try the question which has been so adjudicated (Norton v. Woods, 22 Wend. 522; White v. Merritt, 7 N. Y. 352 ; Demarest v. Darg, 32 Ib. 281; Gates v. Preston, 41 Ib. 113). This is so though the judgment is against the facts or without facts to sustain it (Hunt v. Hunt, 72 N. Y. 218 ; Jenkins v. Fahey, 73 Ib. 355 ; Jordan v. Van Epps, 85 Ib. 427; Glacius v. Fogel, 88 Ib. 435). The claim of Hutchinson, to share in the assigned estate as a creditor, necessarily involved the question whether or not he was such a creditor. If a general partner, he could not be such a creditor. The decree that he was entitled to a dividend as a creditor, necessarily involved then, a determination that he was not a general partner, and by this, however erroneous, plaintiff was bound until reversed on appeal. The adjudication in the court of common pleas, that Hutchinson was a creditor, is a defense to this action, both as an adjudication, and as the best evidence to be had on the subject, of whether he was, or not a general partner (Hunt v. Hunt, 72 N. Y. 230 ; Brown v. Mayor, 66 Ib. 390; Burckhead v. Brown, 5 Sandf. 134; Etheridge v. Osborn, 12 Wend. 403 ; Dunham v. Bower, 77 N. Y. 79 ; White v. Merritt, 7 N. Y. 352 ; Bellinger v. Craigue, 31 Barb. 537). Durant v. Abendroth (97 N. Y. 132), has no application because, unlike that case, here the creditors in question were parties to the proceedings, brought in by process, appearing by attorneys, and actually litigating the question.
II. When the assignment was made, plaintiff was called on to elect, and it did so, and is now conclusively bound by that election. Were the partnership a general partner ship, Hutchinson should have joined in the assignment, which he did not. After knowledge of this the plaintiff proved its claim against the estate, which was not assigned, if Hutchinson was a general partner, and when he did so it must be held to have claimed and elected to hold that Hutchinson was not a general partner (New York Fireman Ins. Co. v. Lawrence, 14 Johns. 55 ; Goss v. Mather, 46 N. Y. 689; 2 Lans. 283 ; Wright v. Ritterman, 1 Abb. N. S. 430 ; Cavanagh v. Morrow, Daily Register, July 15, 1884; Leading Cases Eq. W. & T. 541; note to Noyes v. Mordaunt, and Strutfield v. Strutfield ; Estate of James Burke, Parson Select Cases [Penn.] 470 ; Burrill on Assignments, § 478, 4 ed).
Robertson, Harmon & Cuppia, and Roderick Robertson, for respondent:
I. The defendants were liable as general copartners on .the ground that the special capital specified in the certificate and affidavit was not paid in, in cash, as required by law (2 R. S., chap. IV., tit. I; Durant v. Abendroth, 41 Super. Ct. ; affid, 69 N. Y. 148 ; Haviland v. Chase, 39 Barb. 283 ; Van Ingen v. Whitman 62 N. Y. 518 ; Durant v. Abendroth, 97 Ib. 132 ; Sharp v. Hutchinson, 100 Ib. 533 ; Pierce v. Bryant, 87 Mass. 91; Maguire v. Lawrence, 45 Super. Ct. 235 ; Met. Bk. of N. Y. v. Sirrett, 15 Abb. N. C. 318).
II. The joinder by plaintiff in the assignment proceedings and the acceptance of a dividend therein did not prejudice his rights here, nor was there any adjudication in that matter as to the nature of the copartnership of Hogg & Patterson. The plaintiff appeared, specially, in such proceedings, saving all rights to prove, in any suit or proceeding, that the defendant Hutchinson was a general partner. Whether plaintiff had or had not reserved its rights, and even though the referee and court had remained silent on the question as to whether or not the firm of Hogg & Patterson was a general or special partnership, plaintiff’s participation in the assignment proceedings would not have prejudiced him here. The assign ment proceedings were only proceedings m rem, and did not estop plaintiff from proceeding against the firm as a general partnership (Durant v. Abendroth, 97 N. Y. 133).

Opinion:
By the Court.
O'Gorman, J.
—(After stating the facts as above).—The evidence is sufficient to sustain the plaintiff's contention that the defendants were general partners, for the cause set forth in the complaint.
Of the amount of $10,000 stated to have been paid into the funds of the firm by Hutchinson, only $8,000 was actually paid, and as to the remaining $2,000, he returned a note made by Hogg individually for that amount, which was put to the credit of Hutchinson on the books of the new firm. This is not a compliance with the requirements of the law (Sharp v. Hutchinson, 100 N. Y. 533 ; Durant v. Abendroth, 97 Ib. 132 ; Maginn v. Lawrence, 45 Super. Ct. 235).
The only material question which remains is whether the plaintiff is not estopped from taking advantage in this action of the defendant's failure to create a limited partnership.
The proceedings in the court of common pleas, on which defendant Hutchinson relies, proceeded necessarily on the assumption that the assignment made by Hogg & Patterson as general partners, was a valid assignment.
A referee was appointed to fake proof, who found, among other things, that Hogg, Patterson & Hutchinson were engaged in business under the firm name of Hogg & Patterson, but that the issue as to whether Hutchinson was a general or a special partner in said firm was not tried or determined by the referee.
The plaintiff appeared on the reference, and offered to prove the failure of Hutchinson to comply with the requirements of the law as to the creation of special partnership, which proof was excluded by the referee on the objection of counsel for Hutchinson, and on the ground that the question whether or not Hutchinson was liable to creditors as a general partner could not be tried on that reference. On the return of the citation, duly issued, requiring the creditors of the firm to appear in court and attend to the final settlement of the assignee's accounts, the plaintiff appeared by counsel, but "without prejudice to its right to claim in any suit or proceeding that the firm of Hogg & Patterson was not a special or limited partnership, but a general one, and without waiving any right to proceed against the general partnership." In the order of the court of common pleas, confirming the referee's report, it is set forth that the issue as to whether Hutchinson was a general or special partner in said firm was not tried or determined by the referee, and was not passed on by the court.
There is here, therefore, direct and ample evidence that the question was not only not litigated, but was expressly excluded from the consideration of that court and of the referee. Indeed, the consideration of any question as to the validity or invalidity of the assignment was foreign to his functions, which were only to ascertain how the provisions of the assignment should be legally carried out (Re Holbrook, 99 N. Y. 539).
The objection that plaintiff, by electing to take advantage of the proceedings to give effect to the assignment, and by accepting and receiving from the assignee payment of a part of its claim, has disabled itself from maintaining this action, is without merit.
The plaintiff's contention here is that the proceedings in the court of common pleas, were, strictly speaking, in rem; that the assignment was void because all the general partners had not joined in executing it; that the property in the hands of the assignee was still the property of the firm of Hogg & Patterson, and that the plaintiff has always expressly reserved all its rights to all remedies against the partners in another action.
Its acceptance of money from the assignee of two of the partners, in part payment of the indebtedness of the firm to it, is not, under the circumstances of this case, a waiver of any other claim, nor does it preclude it from suing all the partners in another action and recovering any balance remaining due (Durant v. Abendroth, 97 N. Y. 132).
The judgment and order must be affirmed, with costs.
Sedgwick, Oh. J., and Trtjax, J., concur.'