Shamburg v. Ruggles

Mr. Justice Gordon delivered the opinion of the court, January 2d 1877. A dormant partner is one who is unknown, as such, to those doing business with the firm ; hence he is one who lends no credit to the partnership. If A., B. and C. enter into articles of association and agree that t£e business shall be conducted by A., and in his name alone; B. and C. in such case, are dormant partners, and though liable for the debts and obligations of the firm during its continuance, are not so liable for debts contracted after its dissolution, although notice of such dissolution may not have been given to the public, or those previously dealing with it; for, it is to be presumed, that credit was given upon the responsibility of A. alone [151] and not upon that of B. and C. If, however, the business be conducted in the name of A. and Co., a different presumption arises, for then it is supposed that credit is given not to A. alone, but to all those composing the company; in other words, to the • firm and not to any one individual of it. In such case, if B. and G. retire, notice must be given to those dealing with the firm, or he will continue to be liable for the debts thereof, subsequently contracted with former creditors, who may be ignorant of the dissolution : Deford & Co. v. Reynolds, 12 Casey 325. Strong, J., in this case, remarks : “ The only object which such an one can have, in remaining dormant or secret, is, that credit may be given to the ostensible partners alone, and not to him. With such a purpose or object, doing business under the name of one partner and ‘ company’ is inconsistent. It can be nothing less than an invitation to the public to give credit to more than the single partner named.” Shamburg and his co-partners did business under the name of “ The Citizens’ Bank,” and surely it would be understood that credit given to it would not be given to a mere name, but to the persons who formed the association. If Shamburg was a dormant partner so were all his associates, for they were like himself, but shareholders of the stock of this partnership; hence, if the argument set up for him be correct, it will apply equally to every member of this banking association, and we shall have the anomaly of a partnership composed wholly of irresponsible members. As this cannot be, we must take it, that all those who were engaged in the banking business, under the name of The Citizens’ Bank, were equally responsible for the obligation of the firm. Under this view of the case, Shamburg would be liable for the deposits of Ruggles, on the 4th of January 1873, though, at the time, he was not a member of the firm; for, not only had Ruggles no notice of the withdrawal of Shamburg, but his name continued to appear as one of the directors of the bank. We consider the instructions of the court below, on this branch of the case, as unexceptionable. On the other point, however, we cannot see where the evidence was found to bind Shamburg for the deposit of January 19th 1871; for as we have not the articles of association before us, we must deal with this as an ordinary partnership, and in such case the defendant would not be liable for a debt contracted before he became a member of the firm. As was said, by Justice Sharswood, in the case of Babcock v. Stewart, 8 P. F. Smith 179, “ The credit of the new member of the firm did not enter into the consideration of those contracting with the original partners and it would be manifestly unjust to hold him liable to them.” The evidence produced to fasten this debt upon Shamburg is as follows: the certificate of deposit of the 19th of January 1871; endorsed, “ Int. paid to Jan. 19th 1872. Int. paid to Jan. 4th 1873. Int. paid to Oct. 4th 1873,” — that Shamburg became a stockholder by purchase, in May or June 1871, and that he sold his stock in Decern [152] ber 1872, that he was a director of the bank during the year 1872, and that this fact was advertised from February 16th 1872 until June 5th 1873. Rut in this there is no evidence of the assumption of this debt by Shamburg. Suppose the case to be as the learned judge puts it to the jury; that there was no separation of past from future effects and liabilities, and a continuance of business without discrimination between past and future profits; may not all this be predicated of any partnership ? Yet, ordinarily, such a state of facts would not make the incoming partner liable for the debts of the firm. As ivas held in the case above cited, he was not bound to inquire whether all the property in the possession of the firm had been paid for. Those who sold or delivered goods, or did work on the credit of the original partners, having by law no lien, parted with all their interest in the effects, and could only look personally to those with whom they contracted. Rut we apprehend that a debt, originating in a contract for the deposit or loan of money, is of no higher grade than one arising from the sale of goods, and there is, therefore, nothing to exempt it from the general rule. It is true the payment of interest, on this deposit, if made with Shamburg’s knowledge and assent, may have been some evidence of an assumption, but even this would amount to so little, that, without something else of a more definite character, it ought not to be submitted as the ground of a verdict; for, from the very nature of the association, if it were to continue the business of banking, Shamburg could not prevent it paying interest on its former deposits. We must also recollect that tins was not a new firm, but the old firm with a new member, and that, it must needs, as long as it was solvent, go on paying off its old liabilities until they were extinguished; and I cannot see how the fact that it did so, could make the new partner liable for debts, not contracted on his credit, and which he never assumed to pay. Judgment reversed and a venire facias de novo awarded. Agnew, C. J., doubts.