Court Opinion

ID: 5505460
Source: CourtListenerOpinion
Date Created: 2022-01-10 03:10:41.369326+00
Date Added: 2024-06-11T08:34:02.197371
License: Public Domain

FOLLETT, J.
The plaintiff seeks to recover on two grounds: (1) That defendants’ testator withdrew his capital stock, in violation of 1 Eev. St. p. 706, § 15, which provides:
“No part of the sum which any special partner shall have contributed to the capital stock, shall be withdrawn by him, or paid or transferred to him, in the shape of dividends, profits or otherwise at any time during the continuance of the partnership.”
(2) That defendants’ testator was allowed to claim as a creditor, in violation of 1 Rev. St. p. 767, § 23, as amended by, chapter 414 of the Laws of 1857, which provides:
“In case of the insolvency or bankruptcy of the partnership, no special partner shall, except for claims contracted pursuant to section 17, under any circumstances, be allowed to claim as a creditor, until the claims of all the other creditors of the partnership shall be satisfied.”
Section 17, referred to in section 23, provides:
“He [a special partner] may also loan money to, and advance and pay money for the partnership, and may take and hold the notes, drafts, acceptances and bonds of or belonging to the partnership, as security for the repayment of such moneys and interest, and may use and lend his name and credit as security for the partnership in any business thereof, and shall have the same rights and remedies in these respects as any other creditoT might have.”
The referee found, on conflicting evidence, that the limited partnership was solvent on the 13th day of November, 1887, which finding we affirm.
The evidence shows that Charles H. George and Wilson H. George, the general partners of the limited partnership, undertook the duty of settling the affairs of the firm, and that they proceeded so far as to pay off all its debts, except the one owing to the plaintiff. It is asserted that in case a limited partnership expires, and the special partner withdraws, leaving all of his capital and all of the firm assets in the hands of the general partners, upon their agreement to pay to him the amount of his interest in the firm as settled and agreed upon, which they never do, it amounts to a “withdrawal of capital,” within the meaning of section 15, above quoted. This proposition cannot be sustained. Under the statute, the general partners are required to manage the affairs of the firm, and when the special partner, at the termination of the period for which the partnership is formed, leaves all of his capital and all the assets of the firm in the hands of his solvent general partners, and takes their joint promise to pay him his interest in the firm, which they never pay, that does not amount to a withdrawal of capital or of assets, within the meaning of the section. This precise question was decided in Lachaise v. Marks, 4 E. D. Smith, 610. In that case a limited partnership had existed under the name of Lord & Brown, but, before the expiration of the time limited for its duration, the special partner sold to the general partners all of his interest in the firm, and entered into an agreement dissolving it. Notice of the dissolution was filed, recorded, and published, as required by statute. The general partners assumed to pay all of the liabilities *1089of the firm, and gave to the special partner their notes for $17,000 for his interest, signed “Lord & Brown,” which was the name of a new general partnership organized to carry on the same business. It was held that the giving of the notes did not amount to a withdrawal of any part of the capital or assets of the firm. The judgment at general term, in the case cited, was written by the late Judge Woodruff, in which all of his associates concurred, and it has never been questioned. In tlie case at bar the promise, by the new firm, to pay to the withdrawing special partner the amount of his interest in the limited partnership, did not withdraw any assets from it, nor did it create any obligation against it. The assets of the old firm were left in the custody of the general partners, subject to the claims of the creditors, and the liability created was against Charles H. George and Wilson H. George. The old firm was most effectually dissolved—First, by the lapse of time during which it was to continue and the agreement of the partners; and, afterwards, November 5, 1888, by the death of Wilson H. George, one of the general partners. Nor have the provisions of section 23 above quoted been violated. Neither the special partner nor his representatives have been allowed any claim against the limited partnership or its assets. The claim presented and compromised was against the estate of Charles H. George, who became liable, by virtue of his promise to pay the sum found due to the special partner, and there is not the slightest evidence that the funds wherewith this compromise was effected were derived, in part or in whole, from the assets of the limited partnership, and the referee has not found that the limited partnership had not sufficient funds on hand at the date of the death of Charles H. George to pay the claim of this plaintiff, nor was any attempt made to establish such a proposition. It is found that Charles H. George was insolvent when he died, which is not equivalent to finding that the limited partnership was then insolvent, which could not be shown without ascertaining whether it had sufficient assets on hand to pay its only liability, the plaintiff’s claim. On this branch of the case the referee found:
“Twenty-Second. That the entire amount of the capital invested by Franklin E. James in the special partnership remains in the hands or under the control of Charles H. George and Wilson H. George, jointly, or of Charles H. George, solely, from November 13, 1887, to June 4, 1889.”
We assume that the date June 4, 1889, is a misprint for June 14, 1889,—the date of the death of Charles H. George. The judgment should be affirmed, with costs. All concur.