Haddock v. Grinnell Manufacturing Corp.

Mr. Justice Paxson delivered the opinions of the Court, DANIEL HADDOCK, JR., v. GRINNELL MANUFACTURING CORPORATION, NO. 238. SAME v. KIERNAN, TO USE, NO. 239. SAME v. MILES, TO USE, NO. 241. SAME v. DEWITT, TO USE, NO. 242. SAME v. CRIDER, TO USE, NO. 243. All of the above cases rest upon the same state of facts and are governed by the same principle. They may be considered together. The plaintiff in error was sued as a general partner of the firm of Vanuxem, Wharton & Co. In his affidavit of defence he alleged that he was not a general partner of said firm, but “ was a special or limited partner therein, by virtue [380] of articles of agreement between his co-defendants and himself, recorded in the office of the Recorder of deeds for the county of Philadelphia, in Limited Partnership-Book No. 5, page 207, and in the same book page 305, &c. That the said limited partnership was duly and properly formed under the provisions of the Act of Assembly of the Commonwealth of Pennsylvania approved the twenty-first day of March, A. D. 1836, and its supplements, to continue for the term of one year from the first day of January, A. d. 1882, and the same was extended by the articles recorded on page 305 of the said book for the further term of two years from the thirty-first day of December 1882.” Copies of all papers relating to the formation of the said partnership and its renewal were attached to the affidavit. No question arises as to the regularity of the proceedings in the formation of the original partnership ; the difficulty occurs as to its renewal. It is objected in the first place that the renewal did not take place until six days after the expiration of the original partnership, and in the second place, that the renewal was not accompained by the affidavits and certificates required by the Act of Assembly. In Andrews v. Schott, 10 Barr, 47, the renewal did not take place until sixteen days after the expiration of the original partnership, and it was held that the continuity was broken, and that it was the formation of a new firm. It is proper to observe however, that there were other and weighty reasons for this ruling,’among which maybe mentioned the fact that other partners had been introduced. We need not speculate as to what the ruling of that case would have been had there been no other question involved save the mere break in the continuity. It is very clear in that case as well as in this, that from the expiration of the old firm to the date of the renewal, the partnership was general, and the special partner would have been liable for all debts contracted during that period. As this case turns upon other questions, we leave the effect of a renewal after the expiration of the original articles just where Andrews v. Schott left it. The eleventh section of the Act of 1836 regulating limited partnerships provides that “every renewal or continuance of such partnership beyond the time originally fixed for its duration, shall be certified, acknowledged and recorded, and an affidavit of a general partner be made and filed, and notice given in the manner herein required for its original formation, and every such partnership which shall be otherwise renewed or continued shall be deemed a general partnership.” The twelfth section of said Act provides: “That every alteration which shall be made in the names of the partners, in the [381] nature of the business, or in the capital or shares thereof, or in any other matter specified in the original certificate, shall be deemed a dissolution of the partnership, and every such partnership which shall in any manner be carried on after any such alteration shall have been made, shall be deemed a general partnership, unless renewed as a special partnership, according to the provisions of the last (eleventh) section.” Was this renewal a substantial compliance with the foregoing provisions of the Act of 1886 ? In considering this question we must bear in mind that while the Act was not intended to trip up those who have substantially and in good faith complied with its terms, yet inasmuch as it confers the privilege of embarking in business as a special partner without liability beyond the capital employed or put in by him, this court has uniformly held parties to a strict compliance with all the essential'features of the law. All our decisions from Andrews v. Schott to the present time are consistent upon this point. The Act of 1886 was intended to furnish information to creditors. This, and this only, is the object of its provisions which’ require the certificate to set forth tbe names and residence of the general and special partners, specifying which are general and which are special; the amount of capital contributed by the special partners; the length of the term of the partnership, &c. To a similar object must be referred the provisions of the Act providing for the acknowledgment and recording of the certificate; for the filing of an affidavit by the general partner that the sum specified as contributed by the special partner has been actually and in good faith paid in cash, and for the publication of the terms of the partnership. The penalty for a violation of any of these provisions is to make the firm a general partnership. An inquiry into the necessity of all this is foreign to this discussion. It is sufficient for us that the Act of Assembly so reads. Does the certificate of renewal furnish the information to creditors required by the Act of 1886 ? It contains no reference to the special capital. The affidavit of the general partner sets forth “That the sum of $50,000 specified in the original articles of co-partnership referred to in the foregoing certificate to have been contributed by the special partner, Daniel Haddock, Jr., to tlie common stock of Vanuxem, Wharton & Co., has been so contributed, and remains in the common stock of the said firm, &c.” The pinch of the case is in the last line of the affidavit. It is stated that the special capital remains in the common stock of the firm. But in what shape does it remain ? Is it in cash, in merchandise, or does it represent bad debts, a margin in [382] stock, or a speculation in real estate? The creditors are entitled to know when the partnership is renewed whether the special capital is a reality or a myth; whether it is in a shape to respond to their claims. It may never have been drawn out by the special partner; the affidavit may truly say it remains in the common stock of the firm, yet it may be in such shape as to be of no more value to creditors than if drawn out by the special partner. The point was made that inasmuch as the eleventh section of the Act of 1836 does not specify what the affidavit of the general partner shall contain, it is only necessary to set forth the fact of the renewal in general terms. This construction of the Act would render it insensible. It provides, as before stated, that an affidavit of the general partner “shall be made and filed, and notice be given in the manner herein required for its original formation.” This evidently means that the affidavit shall give as full information upon the renewal as upon the original formation of the limited partnership. A mere formal affidavit setting forth the renewal only, would not give creditors any valuable information as to the condition of the firm, and the object of the Act was to provide this notice. When a special partnership is continued or renewed it must be in the same condition so far as the special capital is concerned, as when it was originally formed. Such capital must be unimpaired ; it must be in such condition as to be available for creditors, and it is the duty of the general partner to furnish this information in his affidavit. If this duty is neglected the partnership becomes general and the special partner has no immunity. We need not discuss the affidavit of the special partner, as it is not involved in this case. The Act of 1836 designates the general not the special partner as the person who shall make the affidavit. Hence the affidavit of the special partner though never so full, is of no more account than that of any stranger to the firm. We might give a good reason for this were it necessary; it is sufficient for us to point to the Act of Assembly. Upon the whole we find no error in this record and the judgment in each case is Affirmed. HADDOCK v. HUTCHINSON ET AL., NO. 240. The judgment in the above case is affirmed for the reason given in the other cases.