Court Opinion

ID: 6241944
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:46:53.777423+00
Date Added: 2024-06-11T08:58:13.281771
License: Public Domain

Dissenting Opinion bv
Mr. Justice Thompson,
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 *180ite debts while the old firm continued liable for its indebtedness. The death of a member dissolved the partnership, and, upon such dissolution, although some of the partners then created a new partnership to carry on the business, the members of the old firm were liable only for the existing debts of such firm and not for those of the new firm. Appellants who had been shareholders sold their shares upon the following dates and to the following persons, viz.,: Charles Arbuthnot, 50 shares to J. H. Sewell, a stockholder, June 4, 1875; C. F. Iilopfer, 80 shares to John I. House, a stockholder, February 16, 1876 ; Edward House to John I. House, September 19, 1876 ; Archibald Wallace, 20 shares to John Floyd, president and stockholder, August 30,1879; Graham Scott, 10 shares to said John Floyd, November 6, 1878; H. J. Murdoch, 10 shares to said John Floyd in 1880. Thus at these respective dates these appellants severed their partnership relations and their vendees became the-new partners. John Floyd, the largest stockholder, died October 2,1881. In 1887 the bank became insolvent, and in 1891 this suit was-brought. The death of John Floyd in 1881 dissolved the partnership, and its members became then liable for its debts. That was the punctum temporis when the statute of limitations began to run. After it thus began to run a partner could not by a promise take the claim out of the statute. By the dissolution the authority to do so ceased.
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.”
*181It will be conceded that the statute bar can only be removed by one who has authority to do so, and that when a partner is authorized to liquidate he is clothed with such authority. A partner who takes the assets of his firm for the purpose of liquidating may without doubt make an acknowledgment or an express promise which would take a debt out of the statute. This springs from the duty he has assumed with regard to the assets and their application to the payment of the debts of the firm. In Wilson v. Waugh, 101 Pa. 237, it is said by Mr. Justice Green : “ In Levy v. Cadett, 17 S. & R. 128, and in many cases since, it was held that, after dissolution of a partnership, one partner cannot, by his acknowledgment, revive a partnership debt so as to deprive the other partner of the benefit of the act of limitations. It is also true, however, that this rule is subject to the exception that one who is a liquidating partner may, after dissolution, bind his former partner by either an acknowledgment, or an express promise to pay, so as to take the debt out of the statute.”
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, *182amounting to $250,000, which has been since distributed, no suggestion appears to have been made in regard to any liquidation. The firm succeeding that dissolved by the death of Floyd carried on the banking and brokerage business, and in no manner acted as liquidating partners of the dissolved firm. Whatever liability may have existed in regard to appellee’s claim against the old firm, instead of a liquidation there was as to the succeeding firm a clear and distinct novation.
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 *183the firm, composed of persons who had been members of the old firm, might eventually pay this indebtedness, is no foundation for the conclusion that the partners in such firm were acting in regard to it as liquidating partners of the old firm. They were not appointed as such, and their action as liquidating partners in regard to this indebtedness was not known or assented to. The members of the new firm themselves it seems had no knowledge of it, and it is without question that the other alleged partners of the old firm (the appellants) never had any knowledge or suspicion of it. If they did not assent to the appointment of liquidating partners, clearly as to them none were appointed, and therefore there was no authoritj'- to remove the statute bar. Statutes of limitation are statutes of repose, and, while there may exist a natural prejudice against a resort to them, they are justly regarded as wise laws intended to defeat dormant and stale demands which time has stamped with suspicion and doubt. They impose no hardships because they exact a moderate degree of diligence in the enforcement of just and legal claims. The claim in the present ease properly comes within their intendment. For several years prior to 1881 appellants ceased to be partners, and in that year the partnership itself was dissolved. No liquidation took place and no claim was made against the estate of John Floyd, who was the owner of one half of the stock, and none made against appellants until 1891, ten years after the dissolution, and from eleven to sixteen years after they had ceased to be partners. Appellee in the meantime received interest from the new firm up to 1887, the date of its failure, and doubtless was in utter ignorance of any claim against them. The claim in my opinion has no substantial merit to support it and the statute should bar a recovery, because, in the absence of liquidation, the partners could not remove that bar, and because the affidavits of defence contain sufficient averments denying the appointment of liquidating partners with power to do so, and their appointment is thus a question of fact which should be sent to a jury and be determined by it.
I am therefore of the opinion that this judgment should be reversed and a procedendo awarded.
Mu. Justice Mitchell concurred in -this dissent.