White v. . Hackett

H. Gray, J. The only question brought up by the "appeal is whether Schenck, who was the special partner of his co-defendant Sackett in a business conducted in the name of the latter, is, after the insolvency of the partnership, entitled to dividends in common with the other creditors of the partnership, for cash loaned by him to it during the prosecution of its business and used in payment of its liabilities. *180 Had Schenck been a general partner the indebtedness to him would have been postponed until the creditors of the firm should be satisfied; for the obvious reason that in such case he would have been liable to have satisfied those debts out of his individual estate after the assets of the firm had been exhausted. Hot so in the case of a special partner; his loss, if he keeps within the provisions of the statute, is limited to the capital invested by him, except in the single case of the partnership indebtedness to him; and in that case he is placed by statute upon the footing of a general partner, and is, in case of the insolvency of the partnership, prohibited under any circumstances from being allowed to claim as a creditor until the claims of all the other creditors of the partnership are satisfied. (1 R. S., 2 ed., 756, § 23.) It was insisted upon the argument, that this provision related only to the claims of a special partner as such, and not to claims which might arise out of the transactions of the special partner acting individually and nol for the partnership. If such should be the construction given to it, no reason can be assigned why it was made; no possible case can arise in which the debt of 'a partner in an insolvent concern would not, without the statute, be postponed to those of the creditors of the partnership. The statute declares that no special partner shall, under any circumstances, be allowed to claim as a creditor until the claims of all the other creditors of the partnership shall be satisfied. I can see no difference between the language employed, in its application to this case, and what it would have been had the provision in terms declared no special partner should be allowed to claim as a creditor whether he was a creditor of the firm as such partner or under any other circumstances. The provision referred to has received a construction by the Chancellor against the claims of the special partner, the correctness of which is con ceded by the Superior Court of the city of Hew York. (Mills v. Argall, 6 Paige, 577, 582; Hayes v. Bement, 3 Sandf., 394.) The subject of limited partnerships has again recently occupied the attention of the Legislature, and this, with other stringent provisions affecting the rights and liabilities of special partners, *181 has been materially changed (Laws of 1857, 837, §§ 3, 4), but the change came too late to affect the rights of the parties now before us. They were fixed by the law as it stood when the question arose. The judgment of the general term should be reversed, and that of the special term affirmed. Selden, J., was absent; all the other judges concurring, Ordered accordingly.