Case Name: Fred. J. Selden, Plaintiff in Error, v. William M. Hall, Defendant in Error
Court: Kansas City Court of Appeals
Jurisdiction: Missouri
Decision Date: 1886-04-05
Citations: 21 Mo. App. 452
Docket Number: 
Parties: Fred. J. Selden, Plaintiff in Error, v. William M. Hall, Defendant in Error.
Judges: Philips, P. J. concurs in the result; Ellison, J., dissents.
Reporter: Missouri Appeal Reports
Volume: 21
Pages: 452–477

Head Matter:
Fred. J. Selden, Plaintiff in Error, v. William M. Hall, Defendant in Error.
Kansas City Court of Appeals,
April 5, 1886.
1, Limited Partnerships — General and Special Partners — Liabilities of — Construction of Statute — Chapter Fifty-Seven, Revised Statutes. — Under the statutes of this state on the subject of limited partnerships (Oh. 57, Rev. Stat.) it is not necessary that the statement provided for by section 3403 contain anything concerning the amounts to be contributed by the general partners to the capital of the partnership. The general partners are liable for the debts of the partnership, without regard to the amount contributed by them to the capital of the firm; and anything relating to this, in the statutory statement, is mere surplusage, and in no manner affects the liability of a ' special partner. So it is not required that the statement contain anything as to the amount of means which each general partner could withdraw, for his individual use. from the means of the' partnership, and anything relating to this, in the statement, is also surplusage, and does not affect the liability of a special partner, nor operate to dissolve the limited partnership, nor make the' special partner liable as a general partner for the firm debts.. Ellison, J., dissents.
2. -- Contribution by Special Partners, When to be Made— Construotion of Section 3403. — The statute requires that the amount contributed by each special partner, in a limited partnership, must be in cash. Sect. 3403, Rev. Stat. But such contribution need not be actually made prior to the formation of the partnership. And in this respect our statutes, on this subject, differ from the statutes of New York and Massachusetts, which do require contribution prior to the formation of the partnership; while, under our statutes, an agreement to contribute a certain sum in cash, on a certain day, subsequent to the formation of the partnership (sect. 3403, Rev. Stat.); or where the special partner contributes a certain sum, in cash, prior to, and a certain sum, in cash, subsequent to the formation of the partnership, it is sufficient. So, under our statutes, a limited partnerships deemed to be formed only when the statement, after having been duly recorded, “shall have been published once a week for four successive weeks,” etc, while, under the statutes of New York and Massachusetts, the formation is deemed complete upon the statement being duly recorded. Ellison, J., dissents.
3. -Payment by Special Partner — Compliance with Statute —Case Adjudubd. — Where the payment of the contribution by the special partner is made, as in this case, subsequent to the making of the statement, but prior to the formation of the partnership ¡ and the averment of the statement is, as here, that the contribution had, at the time of the making of the statement, been paid ; the statement is not a false statement, within the meaning of section 3404, and although not literally true, according to the averment in the statement, is true in every substantial respect. The meaning of the statute is, that when the contribution has been, paid by the special partner at the time of making the statement, or is to be paid before the formation of the partnership shall be completed, the statement should aver that it has been paid. The statutes, in requiring the statement to specify the time when the contribution is to be paid, if it is not paid when the statement is made, can refer only to the payment which is to be made subsequent to the formation of the partnership. Ellison, J., dissents.
4. Construction oe Statutes — Intention to Govern — Spirit oe Statute Over Letter. — The intention of the legislative act may often be gathered from a view of the whole and every part of the statute taken and compared together. When the true intention is accurately ascertained, it will always prevail over the literal sense of the terms. And although it may be conceded that it was the purpose of the legislature that the sworn statement of the special partner should express the absolute truth; yet, in determining the matter, regard must be had to the general scope of the whole statute. So, if the thing sworn to be true, according to the spirit and aim of the statute, it is a legal truth, from which no liability can spring. Section 3403, read in connection with others, clearly enough indicates that the general aim of the legislature was to secure actual payment within the time agreed, to perfect the organization, and to enforce it by certain liabilities and penalties. Per Philips, P. J., in separate opinion. Ellison J., dissents.
Error to Jackson Circuit Court, Hon. E. M. Black, Judge.
Affirmed.
Statement of case by the court.
This is an action against defendant, as a partner of the late firm of G-lessner & Ross, who were manufacturers of crackers, and to which firm plaintiff sold large quantities of flour. The defendant defended on the ground that the firm, was a limited partnership, under our statutes relating to that subject, duly formed, and that he was a special partner in said firm. The plaintiff claimed that the provisions of the statute were not complied with in the formation of the partnership. This, was the issue between the parties.
The partnership statement, sworn to and made by Grlessner, Ross and defendant ITall, on March 10, 18S3, set out that “the capital of this partnership is seven-thousand and five hundred dollars ($7,500). Henry Ross, general partner, contributed two thousand and five hundred dollars in cash ($2,500); John P. Grlessner, general partner, contributed two thousand and five hundred dollars in cash ($2,500); William M. Hall, special partner, contributed two thousand five hundred dollars in cash ($2,500). Cash capital paid up, $7,500.”
The said partnership statement of Grlessner, Ross-- and Hall, set out that “ each of the partners hereto, both general and special, will, if they select so to do, draw annually, out of the earnings and income of said partnership business, one-third of said earnings and income for his individual use, after deducting all necessary expenses incurred.”
The partnership statement was duly acknowledged' on the day that it was made and sworn to ; and it was-duly recorded on April 19, 1833. The said statement with th& jurat and acknowledgment of the notary public making the same, was duly published in a newspaper-in Kansas City, in which city the business of the partnership was to be located, on April 20, April 27, May 4r and May 11, in the year 1883.
The contribution to the capital of the partnership,, made by the defendant, was paid in cash, six hundred dollar-! being paid on April 18, 1883, and one thousand and nine hundred dollars being paid April 21, 1883. The-contribution made by Ross was paid in cash on April 23, 1883. Of the amount contributed by Grlessner, only $1877.65 were paid, at various times, extending from April 24: to May 4, 1883, and of said amount $1103.80-were not paid in cash.
In addition to the partnership statement, above referred to, “articles of agreement for limited partnership” were executed between the parties. That agreement may be designated as the secret agreement of partnership. By it, among other things, it was provided that the general partners should each draw from the partnership a salary of nine hundred dollars per year. And during the existence in business of said partnership the general partners drew said salaries. There was no evidence tending to show that the defendant, the special partner, had drawn anything out of the partnership-business.
The trial was had before the court without the intervention of a jury. The court gave the following declaration of law:
‘' The court declares the law to be, that on the pleadings and uncontradicted facts shown in evidence in this case, the finding and judgment must be for the defendant.”
This statement sufficiently presents the facts of the case for this report.
Botsford & Williams, and Lathrop & Smith, for the plaintiff in error.
I. Defendant having, on March 10, 1883, pursuant to section 3403, Devised Statutes, referring to limited partnerships, made and sworn to the partnership statement, stating that each partner had contributed two thousand and five hundred dollars in cash to the total paid up capital of seven thousand and five hundred dollars, which statement was false in that neither partner had then paid any cash whatever, and that one partner has since paid only a small part of his contribution, the defendant became liable, as a general partner from the beginning, for the debts of the partnership of which he was a member, and tlie judgment should have been against him for the amount of plaintiff’s demand. Sect. 3404, Rev. Stat.; 1 Lindley on Part. (4 Ed.) 383-5, note 1; Haggerty v. Foster, 103 ' Mass. 17; Gen. Stat. Mass. (I860)'Ch. 55, sects. 2, 3, 4; Smith v. Argali, 6 mil. (N. Y.) 479; Argali v. Smith, 3 Denio (N. Y.) 435; Yanlngen v. Whitman, 52 N. Y. 513 ; Durant v. Abendroth, 69 N. Y. 148; 2 N, Y. Rev. Stat. 1875, p. 1153, sects. 2, 6, 7, 8 and 9.
II. ¡.The withdrawal, pursuant to the unsworn and secret agreement of Glessner, Ross, and Hall, of March 10, 1883, by Glessner and Ross each, of seventy-five dollars per month, as salaries, “was a diminution of the firm capital ” otherwise than by losses in its business, and the drawing out of its means the annual amount allowed to each partner for his use, as originally agreed upon and set forth in said statement, made and sworn to by them on said March 10,1883, and such withdrawals having commenced in March, 1883, and defendant having not only been cognizant of said withdrawals, but having in advance consented to-them, the firm, as a limited partnership — if a legal limited partnership was ever formed — became dissolved when the first withdrawal was made in March, 1883 ; and the continuation of such partnership business, after such act of dissolution, made defendant liable as a general partner, for the debts of the firm contracted after the firm was so dissolved. Sect. 3405, Rev. Stat.; Beers v. Reynolds, 11 N. Y. 97. Our statute on limited partnerships, having been taken from the New York statute, should be similarly construed. Batehelder n. Altheimer, 10 Mo. App. 185; 3 Kent 35; Skouten v. Wood, 57 Mo. 380.
•III. The conditions of the statute must be complied with as c.>millions precedent, and one failing to do so, for any reason, will remain liable as a general partner. 1 Lindley on Part. (4 Ed.) 383, and note of ten pages.
IV. The word “ requested,” in section nine of New . York statute of 1875, is a misprint, and should be “reg istered.” The statute is the same as that of 1829 in that state. 6 Hill (N. Y.) 479 ; 3 Denio (N. Y.) 435.
Y. The word “each,” used in section 3405, Revised Statutes, in the plain, ordinary, and usual sense of the word, its place in the statute, the context, and the object sought to be accomplished, all indicate that it refers to the partners, general and special alike, and that it was the intention of the legislature to prohibit the diminution of the capital of a limited partnership by' the general partners in a manner not contemplated by the original agreement and sworn statement of the partners, made at the time of the formation of the partnership.
Warner & Dean, for the defendant in error.
I. The statute requires a reasonable construction. The commendable objects and beneficial results intended by it, should not be narrowed by any technical construction of it. 3 Kent’s Com. 35; Parson’s Part. 573.
• II. The defendant Hall, who 'is a special partner, not only substantially, but literally complied with the statute in regard to the payment of the money contributed by him. In the light of th% preliminary conditions, imposed by the statute, before legal birth was given the partnership, the sworn statement was not false. The co-partnership, under the statute, has no life, is not formed, and is merely ethereal, until all the preliminary conditions essential to -its birth are performed. It is not “deemed to be formed” until [the record of statement is made, nor until such statement shall have been published, at least once a week for four successive weeks, in a newspaper.' The statement was sworn to March 10, recorded April 19, and published April 20, 27, May 4 and 1-1,1883. Thus, according to the express terms of the statute, this partnership was not “formed until” May 11, 1883. The true construction of our statute is satisfied, if in the interim between the time of the sworn statement and the birth of the partnership, the special partner actually contributes his cash, although, the statement recites that the cash is paid in. The statement relates to the date of the “forming” of the partnership, and not to its inchoate state when statement is made.
III. The statutes of this state, and those of New York, although the same in principle, are nevertheless widely different, so that the cases from New York are inapplicable. Under the statutes of New York the partnership is formed at the time of filing and recording of the papers, without reference to the subsequent publication. They make the publication merely a condition 'subsequent to the formation of the partnership. Our statute makes the publication a condition precedent to birth. In New York, upon the recording of the papers, the world is informed that a special partnership is formed, and to deal with it at once accordingly. In Missouri the public are cautioned that no special partnership is in existence “ until” notice is published once a week for four weeks',, and to act accordingly. The two statutes are wide apart on the question under consideration.
IY. The only object of our statute is to limit the general liability of a so-called special partner, providing he honestly fulfils its conditions as to himself. Other matters in the statement, not required by the statute, are mere surplusage. Omission, neglect, or falsity, in the performance of the conditions imposed by the statute, incurs the vengeance of the penalty ; not so as to other matters not so required. Falsity in the surplusage cannot be punished by the statute, but only general principles of estoppel.
Y. Section 3405, Revised Statutes, speaking of a diminution of the capital, refers only to special partners, and it is not shown that Nall ever drew out a cent.
YI. Where the special partner is a general partner in another firm, to which the insolvent partnership is indebted, the debts due to such firm are not to be postponed on account of the special partner’s interest therein. Hayes v. Bement, 3 Sandf. (N. Y.) 394; Hayes vi Heyer, 35 N. Y. 326.
VII. The defendant Hall has, in every way, substantially complied with the statute.

Opinion:
Hall, J.
— The sections of our Revised Statutes touching the questions involved in this case, are as follows :
" Section 3402. General and Special Partners — • Their Liability.- — Such partnerships may consist of on© or more persons, as general partners, with the powers- and responsibilities of partners, and one or more persons-as special partners, who, contributing a specified amount of cash actually paid in as capital, shall not be personally liable for the debts or responsibilities of the partnership, except as herein mentioned, nor have any power to bind the partnership, or manage its affairs.
"Section 3403. Partners to Malee Written Statement — Penalty for False Statement. — The persons desiring to form such a co-partnership shall sign a written statement showing the name and place of residence of each partner, the name or style of the firm, who are general partners, and who are special partners; the amount of cash actually contributed by each special partner, and the amount agreed to be contributed by each special partner, if any and if not paid in, and when it is to be paid in ; the general nature of the business to be transacted, where it is to be transacted, and the duration of the partnership, and the amount of means each special partner may annually withdraw for his individual use from the means of the partnership ; which statement shall be verified by affidavit of one or more of the partners, and if false, the affiant, or affiants thereof, knowing it to be false when made, shall be deemed guilty of perjury, and be punished with the penalties affixed to that crime.
" Section 3404. Statement and Affidavit to be Recorded. — Such statement and affidavit shall be acknowledged ox proved, and recorded in the office of the recorder of deeds of the county, or counties, where the business is to be! transacted, in the same manner as deeds are acknowledged, proved and recorded. No limited partnership shall be deemed to be formed or allowed, until such record is made, nor until such statement shall have been published at least once a week for four successive weeks in a newspaper printed in each of the places where the business is to be carried on, if there be any such paper published there, and if not, then in the newspaper published in the place nearest thereto. If any part of such statement be false, the special shall be liable as general partner."
It is provided by section 3405 that a limited partnership shall be deemed to be dissolved when there is a diminution of the firm's capital otherwise than by losses in its business, "and the drawing out of its means the annual amount allowed to each partner for his use, as originally agreed upon and set forth in said statement, and if the partnership be carried on after such an act of dissolution, every special partner cognizant thereof shall be deemed a general partner, and be liable as such."
There are two contentions made by the counsel of the plaintiff which we shall dispose of in the outset. Those contentions are: First. That the statement of partnership made, sworn to, acknowledged, recorded and published, was false in so far as it related to the contributions to the capital of the partnership made by the general partners, and that thereby the defendant was made liable as general partner; and, second, that the withdrawal, pursuant to the secret agreement of partnership, by G-lessner and Boss, each of seventy-five dollars per month, as a salary, was a diminution of the partnership capital "otherwise than by losses in its business, and the drawing out of its means the annual amount allowed to each partner for his use, as originally agreed upon and set forth in said statement," made and sworn to on March 10, 1883 ; and that, such withdrawals having commenced in March, 1883, the partnership as a limited partnership became dissolved then, and that the continuation of the partnership business after the act of dissolution made the defendant liable as a general partner for the debts of the partnership contracted after the dissolution.
Under the statutes it was not necessary for the statement to contain anything concerning the amounts to be contributed by the general partners to the capital of the partnership. The general partners were liable for the debts of the partnership without regard to the amounts-contributed by them to the capital' of the firm. The statement, in so far as it related to the amounts contributed to the capital of the firm by the general partners,was mere surplusage. That the statement, in that respect, was false, could in no manner affect the liability of the defendant as a partner. The statutes do not so provide. Outside of the statutes there is no principle of law that could have such effect.
And the same may be said concerning the statement-in so far as it related to the amount of means which each general partner could withdraw, for his individual use, from the means of the partnership. The statement, in that respect, was surplusage, and the general partners had the same right to withdraw from the means of the partnership, as against a creditor of the partnership, that they would have had if the statement had been silent upon the subject.
The question in this case, and the only question, is : Was the statement sworn to on March 10, 1883, false, in the light of the facts, in respect to the contribution to the capital of the partnership made by the defendant, the special partner ?
The amount contributed by each special partner in a limited partnership, must be in cash. Sect. 3402. But such contribution need not be actually made prior fco the formation of the partnership. And in this respect our statutes on this subject differ from the statutes of New York and Massachusetts, to cases construing which our .attention has been called. Under the New York and Massachusetts statutes the contrib ution by the special partner must be paid in cash, and paid prior to the formation of the partnership. Under our statutes, it will be perceived, it is not necessary for the special partner to make .an actual contribution prior to the formation of the partnership ; an agreement to contribute a certain sum .in cash on a certain day, subsequent to the formation of the partnership, is sufficient. Sect. 3403. Or, the ¡special partner may contribute a certain sum in cash prior to, and a certain sum in cash subsequent to, the formation of the partnership. Id.
Under our statutes a limited partnership is deemed to be formed only when the statement, after having been -duly recorded, "shall have been published at least once a week for four successive weeks in a newspaper in each -of the places in which the business is carried on, if there be any such paper published there. " In this .respect, also, our statutes differ from the New York and Massachusetts statutes. Under the Massachusetts statutes it would appear that the limited partnership is -deemed formed upon the statement being duly recorded. Haggerty et al. v. Foster, 103 Mass. 19. And in New York the formation of the partnership is deemed complete upon the statement being duly recorded. Van Jugen v. Whitman, 62 N. Y. 515.
By section 3404 it is provided that, if any part of the .statement be false, the special partner shall be liable as a general partner. By the statement it was averred that the defendant had contributed two thousand and five hundred dollars, in cash, to the capital of the partnership, while, in fact, at the time of the making .-of the statement, swearing to and acknowledging it, the defendant had not paid -any part of his -contribution. The defendant paid only part of his contribution prior to the recording of the statement; and he paid the balance of it prior to the second day of its publication.
The question is, did the payment of the contribution by the defendant, subsequent to the making of the statement, but prior to the complete formation of the partnership, satisfy the averment in the statement that the contribution had, at the time of the making of the statement, been paid ? or was the statement false, within the meaning of section 3404 ?
The statement required by the statutes, in every •substantial respect, must be strictly true. Under the statutes the time of payment of his contribution by a i-pecial partner is material only in so far as it may precede or succeed the formation of the partnership. It can concern no one to know at what point of time during í hose acts necessary to form the limited partnership the special partner's contribution was paid. It is only material to know that such contribution was paid prior to the formation of the partnership, if such be the fact. If such be not the fact, it is material to know at what specified time after the formation of the partnership the contribution is to be paid.
Had the statement of the partnership named the amount of the contribution to be made by the special partner, and had averred that such contribution would be paid prior to the recording of the statement, the averment would have been sufficiently definite as to the time of the payment of the contribution, because, as has been said, the particular time, prior to the recording of the statement, at which such payment was to be made, was immaterial and unimportant; and such averment would have been satisfied by payment of the contribution at any time prior to the recording of the statement, and even by payment made prior to, or at the time of the making of the statement, because such latter payment, .although not literally true, according to the averment in the statement, would have been true in every substantial respect. The payment would have been made prior to the recording of the statement, prior to the formation of the partnership, prior to its legal existence, and prior to the time at which any one dealing with the partnership conld have had an interest in the payment being made.
Now, would not the averment in the statement supposed, have been satisfied by the payment of the contribution after the recording of the statement but before the completion of its publication ?
Such payment would not have been literally in accordance with the averment, but it also, in every substantial respect, would have satisfied the averment. Because, had the statement named the amount to be contributed by the special partner and averred that such contribution would be paid prior to the completion of the publication of the statement, the averment as to the time of the payment of the contribution would have been sufficiently definite, for the reason that until the completion of such publication the partnership conld not and would not have been formed. The averment, then, that the contribution would be paid prior to the recording of the statement, would have been more particular and definite than was required by the statutes, and being so in an immaterial respect, the want of its literal and strict truth could not have been held to constitute it false within the meaning of the statutes. The payment by the special partner of his contribution at any time pending the making of the statement, or at any time prior to the formation of the partnership must be held to satisfy an averment that the contribution would be paid at a specified time during such formation. And so we hold with reference to the averment actually made in the statement, that the contribution made by the special partner had been paid at the time of the making of the statement. In fact, we think that the meaning of the statutes is that, when the contribution has been paid by the special partner at the time of the making of the statement, or is to be paid before the formation of the partnership shall be completed, the statement should aver that it has been paid.. If the contribution had not been paid when the. statement is made, but is to be paid before the partnership can have a legal existence, and is in fact so paid, the object of the statutes is accomplished, and no one is concerned in knowing at just what time during the formation of the partnership, the contribution was paid. If, however, the contribution is to be paid in whole or in part after the formation of the partnership shall have been completed, it is material to know and the statement should aver the exact time at which such payment is to be made. The statutes, in requiring the statement to specify the time when the contribution is to be paid, if it is not paid when the statement is made, can refer only to the payment which is to be made subsequent to the formation of the partnership.
We have carefully examined and considered the cases in New York and Massachusetts, cited by the counsel for plaintiff. With one exception we do not think that those cases support the contention made by counsel for plaintiff. But the case of Durant v. Abendroth (69 N. Y. 148), would seem to support that contention. Speaking for myself, I am unable to reconcile the views herein expressed, with that case, notwithstanding the differences herein pointed out between our statutes and the statutes of New York: In that case there was a divided court, and I have not been able to believe that the application of that case to our statutes would be in accordance with reason or justice.
Judgment affirmed.
Philips, P. J. concurs in the result; Ellison, J., dissents.