Chick v. Robinson

TAFT, Circuit Judge. The main controversy in this court is whether there was any evidence which should have been submitted to the jury tending- to show that Comstock did not, as certified in the affidavit of Robinson, actually in good faith contribute in cash the $50,000 to the stock of the company on the 2d day of May, 1893. The affidavit was dated the 1st of May, but it seems to be conceded [622] by the counsel for plaintiff in error that, if the money was contributed' before the affidavit was filed, this is a sufficient compliance with the statute. The concession is justified by the decision of the court of appeals of New York in White v. Eiseman, 134 N. Y. 101, 31 N. E. 276. See, also, Ropes v. Colgate, 17 Abb. N. C. 136. The plaintiffs, produced the books of the partnership, which show that on May 1st Comstock was credited by capital stock with the payment of $30,000,. on May 24th with the payment of $10,155, and on June 3d with $9,845, making a total of $50,000. On August 1st, he is credited by interest-with $657, and was paid that amount. The interest thus credited and paid to him is at the rate of 6 per cent, on $30,000 from May 3, 1893, on $10,155 from May 4, 1893, and on $9,845 from June 3, 1893, all down to August 1st. This evidence taken from the books was objected to on behalf of defendant Comstock. He testified that he had never seen the entries in which the credits for his special capital were entered before coming into the court room, and that he did not begin to look into the books until two years after the firm was organized. By section 2364 a special partner is given the power “from, time to time to examine into the state and progress of the partnership concerns, and may advise as to their management.” It seems to us that entries in the partnership books which are open to his inspection,, and with respect to which he may advise, are at least prima facie evidence against him of transactions of the firm. It has been so held under a similar statute in New York. Bank v. Huber, 75 Hun, 80, 26 N. Y. Supp. 961; Kohler v. Lindenmeyr, 129 N. Y. 498, 29 N. E. 957; Hotopp v. Huber (Sup.) 41 N. Y. Supp. 991. Elliott, one of the partners, testified that Comstock contributed $50,-000 in checks, $30,000 of which were deposited to the credit of the firm, and paid on the 2d day of May. Two of the checks were not deposited or collected on the 2d of May. A cheek for $10,155 was collected on the 24th of May, and the remaining check, for $9,845, was deposited and collected on the 3d of June. Elliott testified there was no agreement, so far as he knew, that these checks were to be held, but that they did not deposit them because they did not need the money. Bobinson testified that everything was contributed, in what he considered cash items, on the 1st day of May. He said there was no due-bill of Comstock, but he had an indefinite impression that in the payments there was a note of Parrand, Williams & Clark for $10,155. Elliott and Bobinson were called by the plaintiffs. It further appeared that a note of Parrand, Williams & Clark for $10,155, due to-Comstock, was paid on May 24th at the Commercial National Bank, where it had been deposited by Comstock for collection, and that the note had been sold by the Commercial Bank to the Alpena Banking Company, Comstock’s bank, and that when the note fell due the assistant cashier of the Commercial National Bank paid Comstock by giving his check for that amount to H. S. Bobinson & Co. Comstock testified in his own behalf. His statement was that he gave $50,000 in checks, $30,000 of which were collected on the 2d of May. He testified that he had a note of Parrand, Williams & Clark for $10,155, which he brought down with him from Alpena, where he lived, intending to put it in as part of his contribution, together with a certified [623] check on the Alpena Banking Company, of which he was president and part owner, for $9,845; that when he examined the affidavit, and found the statement therein that the contribution had been made in cash, he did not use the note, but another check on the Alpena Banking Company for $10,155, and certified it as president of that hank-ing company, lie testified that (here was no agreement by which his certified checks aggregating $20,000 should be held, but that when lie found, on the 24th of May, that his check for $10,155 had not been deposited and collected, he concluded that it would save trouble to take up his check, and use the money collected on the Farranu note for (hat purpose. This he did. lie says he objected seriously to the failure to credit him with interest on $50,000 from May 1st, when he delivered all the checks, that he called the attention of Robinson to the injustice, and that the failure to rectify the error was due to the financial difficulties of the firm which so soon followed. It appears clearly, without contradiction, that the checks were good upon the1 day upon which they were delivered to H. B. Robinson, and would have been paid, had they been presented, on that day. The question is whether the circumstances that they were not jicesented until the 24th of May and (he 3d of June, that the payment of the 24th of May was made at the time when the Farrand, Williams & Clark note was paid, and that interest was not charged in favor- of Comstock on the books of the company on the $20,000 until the 24(li of May and the 3d of June, do not tend to -justify an inference of fact contrary to the positive statement of Robinson, Elliott, and Comsiode, that there was no agreement to hold the checks until the 24th of May and 3d of Junen If (here had been such an agreement, to hold the checks, their use by Robinson would clearly not have been an actual contribution in good faith in cash as of May 2d. In the absence of such agreement, Coin-stock was entitled to interest on $50,000 from May 1st, because he could not he charged with the delay in collection, as between the partners. The question is a close one, but we think that in view/ of the positive statement of Robinson and Elliott, called by the plaintiff, and oí Comstock, (tailed in Ms own interest, that no such agreement existed, in view of the uncontradieted explanation by Comstock as to (he mode in which the entries happened to be made, in view of the uncontradieted statements by Elliott (hat the checks were deposited when they were needed, the inferences to be drawn from the book entries and the charge of interest create only a scintilla of evidence supporting (he view that there was any agreement between the partners as to the withholding of the check. The evidence relied on by the plaintiffs amounts, when carefully and calmly considered, to nothing more than a suspicion that there may have been some agreement between the partners. We do not think it was enough to require the court below to submit the issue raised on the pleadings on this point to the jury. It is objected that Comstock’s checks for $20,000 were not an actual contribution in cash to the assets of the firm, even if there was no agreement by the general partners to withhold presentation, and even if they were good when delivered to the general partners. The early decisions construing limited partnership statutes were very [624] strict, and a literal compliance with the statute was enforced. In some states, notably in Massachusetts, this construction of such a law is still maintained. Haggerty v. Foster, 103 Mass. 17. In others a more reasonable view has been taken of late, and all that is required is a substantial compliance with the provisions of the statute, in good faith. Manhattan Co. v. Laimbeer, 108 N. Y. 581, 15 N. E. 712; White v. Eiseman, 134 N. Y. 301, 31 N. E. 276. This is the rule of construction adopted by the supreme court of Michigan in enforcing the statute. Hogan v. Hadzsits, 113 Mich. 282, 71 N. W. 1092. Comstock’s checks were certified, and it is expressly held by the court of appeals of New York that such instruments are equivalent to cash. White v. Eiseman, 134 N. Y. 301, 31 N. E. 276. But it is said that as the certificate was by Comstock, the president of the Alpena Banking Company, of his own check, the check was not certified in such a way as to bind the company. We shall not enter upon a discussion of this objection, because we are of opinion that a check, though uncertified, if good when delivered and paid when presented, is a contribution, in cash in good faith, although it may not be presented until after the filing of the certificate. If the check is good the general partners may obtain the money upon it at any time. If the drawer is dishonest, and subsequently reduces his bank balance so that the check is dishonored, this is conclusive evidence that the delivery of the check was not payment in cash in good faith, and the penal liability of the special partner accrues. The payment of checks as cash is in accordance with a well-known and reasonable usage of merchants, and we can see no reason why the statutes concerning limited partnerships should not be construed in the light of that usage. In the case of In re Palliser, 136 U. S. 263, 10 Sup. Ct. 1035, Mr. Justice Gray, speaking for the supreme court, defines the word “cash,” used in a criminal statute, as follows: “The word ‘cash,’ in this statute, as in common speech, means ready money, or money in hand, either in current coin or other legal tender, or in bank bills, or checks paid and received as money, and does not include promises to pay money in the future.” This, it seems to us, is a sufficient support for our conclusion. Doubtless the weight of authority in the construction of limited partnership statutes is to the contrary; but, as already said, the trend of modern cases is towards a more liberal and sensible view of such statutory requirements. Their purpose is to secure the actual payment of the money into the capital of the firm, and, failing that, to hold the special partner to a general liability. It seems to us that our construction of the statute secures this end, and it does not entrap the honest and unwary into unexpected liabilities, by enforcing a stricter rule as to what are cash payments than obtains in the commercial community. There is nothing in the decisions of the supreme court of Michigan upon this statute which prevents our giving such a construction to it as we think its language and its policy require. Rothchild v. Hoge, 43 Fed. 97. The judgment of the circuit court is affirmed.