Selden v. Hall

Hall, J. — The sections of our Revised Statutes touching the questions involved in this case, are as follows : “ Section 3402. General and Special Partners — • Their Liability.- — Such partnerships may consist of on© or more persons, as general partners, with the powers- and responsibilities of partners, and one or more persons-as special partners, who, contributing a specified amount of cash actually paid in as capital, shall not be personally liable for the debts or responsibilities of the partnership, except as herein mentioned, nor have any power to bind the partnership, or manage its affairs. “Section 3403. Partners to Malee Written Statement — Penalty for False Statement. — The persons desiring to form such a co-partnership shall sign a written statement showing the name and place of residence of each partner, the name or style of the firm, who are general partners, and who are special partners; the amount of cash actually contributed by each special partner, and the amount agreed to be contributed by each special partner, if any and if not paid in, and when it is to be paid in ; the general nature of the business to be transacted, where it is to be transacted, and the duration of the partnership, and the amount of means each special partner may annually withdraw for his individual use from the means of the partnership ; which statement shall be verified by affidavit of one or more of the partners, and if false, the affiant, or affiants thereof, knowing it to be false when made, shall be deemed guilty of perjury, and be punished with the penalties affixed to that crime. “ Section 3404. Statement and Affidavit to be Recorded. — Such statement and affidavit shall be acknowledged ox proved, and recorded in the office of the — 460 — recorder of deeds of the county, or counties, where the business is to be! transacted, in the same manner as deeds are acknowledged, proved and recorded. No limited partnership shall be deemed to be formed or allowed, until such record is made, nor until such statement shall have been published at least once a week for four successive weeks in a newspaper printed in each of the places where the business is to be carried on, if there be any such paper published there, and if not, then in the newspaper published in the place nearest thereto. If any part of such statement be false, the special shall be liable as general partner.” It is provided by section 3405 that a limited partnership shall be deemed to be dissolved when there is a diminution of the firm’s capital otherwise than by losses in its business, “and the drawing out of its means the annual amount allowed to each partner for his use, as originally agreed upon and set forth in said statement, and if the partnership be carried on after such an act of dissolution, every special partner cognizant thereof shall be deemed a general partner, and be liable as such.” There are two contentions made by the counsel of the plaintiff which we shall dispose of in the outset. Those contentions are: First. That the statement of partnership made, sworn to, acknowledged, recorded and published, was false in so far as it related to the contributions to the capital of the partnership made by the general partners, and that thereby the defendant was made liable as general partner; and, second, that the withdrawal, pursuant to the secret agreement of partnership, by G-lessner and Boss, each of seventy-five dollars per month, as a salary, was a diminution of the partnership capital “otherwise than by losses in its business, and the drawing out of its means the annual amount allowed to each partner for his use, as originally agreed upon and set forth in said statement,” made and sworn to on March 10, 1883 ; and that, such withdrawals having commenced in March, 1883, the partnership as a — 461 — limited partnership became dissolved then, and that the continuation of the partnership business after the act of dissolution made the defendant liable as a general partner for the debts of the partnership contracted after the dissolution. Under the statutes it was not necessary for the statement to contain anything concerning the amounts to be contributed by the general partners to the capital of the partnership. The general partners were liable for the debts of the partnership without regard to the amounts-contributed by them to the capital' of the firm. The statement, in so far as it related to the amounts contributed to the capital of the firm by the general partners,was mere surplusage. That the statement, in that respect, was false, could in no manner affect the liability of the defendant as a partner. The statutes do not so provide. Outside of the statutes there is no principle of law that could have such effect. And the same may be said concerning the statement-in so far as it related to the amount of means which each general partner could withdraw, for his individual use, from the means of the partnership. The statement, in that respect, was surplusage, and the general partners had the same right to withdraw from the means of the partnership, as against a creditor of the partnership, that they would have had if the statement had been silent upon the subject. The question in this case, and the only question, is : Was the statement sworn to on March 10, 1883, false, in the light of the facts, in respect to the contribution to the capital of the partnership made by the defendant, the special partner ? The amount contributed by each special partner in a limited partnership, must be in cash. Sect. 3402. But such contribution need not be actually made prior fco the formation of the partnership. And in this respect our statutes on this subject differ from the statutes of New York and Massachusetts, to cases construing which our — 462 — .attention has been called. Under the New York and Massachusetts statutes the contrib ution by the special partner must be paid in cash, and paid prior to the formation of the partnership. Under our statutes, it will be perceived, it is not necessary for the special partner to make .an actual contribution prior to the formation of the partnership ; an agreement to contribute a certain sum .in ■cash on a certain day, subsequent to the formation of the partnership, is sufficient. Sect. 3403. Or, the ¡special partner may contribute a certain sum in cash prior to, and a certain sum in cash subsequent to, the formation of the partnership. Id. Under our statutes a limited partnership is deemed to be formed only when the statement, after having been -duly recorded, “shall have been published at least once a week for four successive weeks in a newspaper in each -of the places in which the business is carried on, if there be any such paper published there. * * * ” In this .respect, also, our statutes differ from the New York and Massachusetts statutes. Under the Massachusetts statutes it would appear that the limited partnership is -deemed formed upon the statement being duly recorded. Haggerty et al. v. Foster, 103 Mass. 19. And in New York the formation of the partnership is deemed complete upon the statement being duly recorded. Van Jugen v. Whitman, 62 N. Y. 515. By section 3404 it is provided that, if any part of the .statement be false, the special partner shall be liable as a general partner. By the statement it was averred that the defendant had contributed two thousand and five hundred dollars, in cash, to the capital of the partnership, while, in fact, at the time of the making .-of the statement, swearing to and acknowledging it, the defendant had not paid -any part of his -contribution. The defendant paid only part of his contribution prior to the recording of the statement; and he paid the balance of it prior to the second day of its publication. — 463 — The question is, did the payment of the contribution by the defendant, subsequent to the making of the statement, but prior to the complete formation of the partnership, satisfy the averment in the statement that the contribution had, at the time of the making of the statement, been paid ? or was the statement false, within the meaning of section 3404 ? The statement required by the statutes, in every •substantial respect, must be strictly true. Under the statutes the time of payment of his contribution by a i-pecial partner is material only in so far as it may precede or succeed the formation of the partnership. It can concern no one to know at what point of time during í hose acts necessary to form the limited partnership the special partner’s contribution was paid. It is only material to know that such contribution was paid prior to the formation of the partnership, if such be the fact. If such be not the fact, it is material to know at what specified time after the formation of the partnership the contribution is to be paid. Had the statement of the partnership named the amount of the contribution to be made by the special partner, and had averred that such contribution would be paid prior to the recording of the statement, the averment would have been sufficiently definite as to the time ■of the payment of the contribution, because, as has been said, the particular time, prior to the recording of the statement, at which such payment was to be made, was immaterial and unimportant; and such averment would have been satisfied by payment of the contribution at any time prior to the recording of the statement, and even by payment made prior to, or at the time of the making of the statement, because such latter payment, .■although not literally true, according to the averment in the statement, would have been true in every substantial respect. The payment would have been made prior to the recording of the statement, prior to the formation of the partnership, prior to its legal existence, and prior to — 464 — the time at which any one dealing with the partnership conld have had an interest in the payment being made. Now, would not the averment in the statement supposed, have been satisfied by the payment of the contribution after the recording of the statement but before the completion of its publication ? Such payment would not have been literally in accordance with the averment, but it also, in every substantial respect, would have satisfied the averment. Because, had the statement named the amount to be contributed by the special partner and averred that such contribution would be paid prior to the completion of the publication of the statement, the averment as to the time of the payment of the contribution would have been sufficiently definite, for the reason that until the completion of such publication the partnership conld not and would not have been formed. The averment, then, that the contribution would be paid prior to the recording of the statement, would have been more particular and definite than was required by the statutes, and being so in an immaterial respect, the want of its literal and strict truth could not have been held to constitute it false within the meaning of the statutes. The payment by the special partner of his contribution at any time pending the making of the statement, or at any time prior to the formation of the partnership must be held to satisfy an averment that the contribution would be paid at a specified time during such formation. And so we hold with reference to the averment actually made in the statement, that the contribution made by the special partner had been paid at the time of the making of the statement. In fact, we think that the meaning of the statutes is that, when the contribution has been paid by the special partner at the time of the making of the statement, or is to be paid before the formation of the partnership shall be completed, the statement should aver that it has been paid.. If the contribution had not been paid when the. statement is made, but is to be paid — 465 — before the partnership can have a legal existence, and is in fact so paid, the object of the statutes is accomplished, and no one is concerned in knowing at just what time during the formation of the partnership, the contribution was paid. If, however, the contribution is to be paid in whole or in part after the formation of the partnership shall have been completed, it is material to know and the statement should aver the exact time at which such payment is to be made. The statutes, in requiring the statement to specify the time when the contribution is to be paid, if it is not paid when the statement is made, can refer only to the payment which is to be made subsequent to the formation of the partnership. We have carefully examined and considered the cases in New York and Massachusetts, cited by the counsel for plaintiff. With one exception we do not think that those cases support the contention made by counsel for plaintiff. But the case of Durant v. Abendroth (69 N. Y. 148), would seem to support that contention. Speaking for myself, I am unable to reconcile the views herein expressed, with that case, notwithstanding the differences herein pointed out between our statutes and the statutes of New York: In that case there was a divided court, and I have not been able to believe that the application of that case to our statutes would be in accordance with reason or justice. Judgment affirmed. Philips, P. J. concurs in the result; Ellison, J., dissents.