Strang v. Thomas

BaRdeeet, J. This action is one in equity to settle up tbe affairs of a defunct partnership. Tbe original purpose evidently was to form a limited partnership under the statutes, [603] but the scheme adopted was contrary to the statute, in that-it allowed the business to be controlled by directors chosen by the limited partners. Stats. 1898, sec. 1716. The company failed to post the notice required by see. 1713, and neglected other requirements not necessary to be mentioned.' Such partnerships exist only by virtue of the statute, and unless there is substantial conformity to its requirements the-special partners become liable to creditors as general partners. See Lancaster v. Choate, 5 Allen, 530; Durant v. Abendroth, 69 N. Y. 148, 97 N. Y. 132; Waters v. Harris, 17 N. Y. Supp. 370, 28 Abb. N. G. 192; Vandike v. Bosskam, 67 Pa. St. 330. At the expiration of the time limited by the original agreement they agreed upon a renewal, but failed to comply with the requirements of sec. 1711 by failing to have such renewal certified, acknowledged, and recorded, and by failing to-give the proper notice. The obligations of the parties in such case are thus stated in Troubat, Lim. Partn. § 337: “On the renewal of a limited partnership after the expiration of the former one, or before such expiration, or upon the formation of a new partnership, special partners who carry the capital of the first concern into the newly formed one-render themselves liable in solido for all the debts of the original partnership. And this obligation is indivisible; it involves all the partners in the same liability. It will make-no difference that the capital of the prior partnership has been converted into shares destined for the second one, even with the intention to assign those shares to- the creditors for the purpose of satisfying them.” But it is said the appellant did not know the actual facts,, and did not intend to become a general partner. That may be granted, and still he may not escape liability. In February, 1891, he purchased from the Brimers an interest in the business, which, according to their agreement, represented ten shares in the concern. It was his duty to ascertain what he was purchasing and what obligations he assumed by [604] becoming a member. lie held bis interest until tbe original agreement expired. In May, 1895, witb knowledge tbat tbe business bad been unprofitable, be signed an agreement to continue tbe business for three years. Tbe business was continued at a loss, and be now seeks to escape the responsibility of contribution because be did not intend to make himself liable. If tbe business bad been profitable, no doubt be would have accepted bis share of profits without objection, and could legally have demanded it. Tbe situation being reversed, be must accept tbe consequences. All of tbe indebtedness found due at tbe final wind-up was incurred after be became a member of tbe company, and was incurred in a bona -fide attempt to carry on tbe business to a profitable issue. Claiming, as be did, tbe right to a proportionate share in tbe profits had any been realized, be ought not to complain when called upon to share losses on tbe same basis. As a general partner be was liable, with the other members, for all the debts of the company; so the fact that tbe court only held him liable for a proportionate share is really more favorable than be was strictly entitled to. Tbe apportionment of indebtedness among the members who were solvent, according to their holdings, was fully justified. The creditors who were not members had a technical right to collect against any or all of tbe members of the company, but they are not here complaining. Tbe judgment adjudges the equities of tbe members according to tbe original agreement, and gives tbe solvent ones tbe right to call upon tbe insolvent members for contribution at any future time. We do not think it open to criticism in tbat regard. Tbe appellant further complains that no judgment was .given against Bennett, Lawrence, and McCann. These men signed the original agreement, but sold their interests before any of tbe debts that were in existence at the date of the final suspension of business had been contracted. They sold to men who are included in the list of solvent members, and [605] against wbom judgment was rendered. Moreover, Bennett and McCann were nonresidents when'the suit was begun. Judgment was properly rendered against such of the members as were within the reach of the process of the court, and against members who purchased the interests of the retiring members. We see no ground for disturbing the judgment. By {he Court. — The judgment is affirmed.