President of the Manhattan Co. v. Phillips — 16 N.Y. St. Rep. 199

Majority

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The President and Directors of the Manhattan Co., App’lts, v. William I. Phillips et al., Resp’ts.^[1]

(Court of Appeals,

Filed June 5, 1888.)

Headnote

1. Partnership—Special partnership—Publication of certificate.

Laimbeer and William 1. Phillips formed a partnership for the purpose as expressed in the written articles “ of carrying on a general produce and i commission business ” Laimbeer being a special partner. The certificate recited that the nature'of the business to be transacted is that of a general commission business buying and selling grain, flour and produce on commission.” The articles of partnership and the certificate bore date October first, as did the order for publication. The first publication in the .two papers named in the order was on the sixth and tenth of October respectively, and each stated that the firm was formed “for the purpose of conducting a general commission business.” Held, that the publication of the certificate was a substantial compliance with the statute and that there was no material variance between the statement as to the nature of the business to be conducted as the same was embodied in the certificate and the description given in the advertisements.

2. Same—Payment of capital—Evidence—When for jury.

It appeared that the firm of P. & Co., was dissolved by mutual consent, and that on the same day a co-partnership was formed under the name of William I. Phillips. Laimbeer was a special partner in the firm of P. & Co., putting in $30,000. He was also a special partner in the firm of William I. Phillips and was to pay in as capital for that firm $30,000. On the first of October Laimbeer made a check on the New York Produce Exchange Bank for $30,000, on which he received the money, and handed it to William I. Phillips. On the same day William I Phillips in the name of P. & Co., drew its check on the Manhattan Bank for $30,000 to the order of Laimbeer and delivered it to him and he the same day about noon deposited the same in the Produce Exchange Bank and it was passed to his credit. Without it his account would have been good for less than $14,000 and the payment of the check given by him to Phillips would have overdrawn that account. It appeared that there were two deposits to the credit of P. & Co. in the Manhattan Bank on the first of October, one of $30,000 the other of $1,573.54. On the next day October second, a check of P. & Co. for $30,000 came in through the clearing house. Evidence was offered to show that on the first day of October the firm of P. & Co. was insolvent and that on the same day a check signed William I. Phillips for $30,000 to the order of P. & Co. was deposited to its credit. Held, that there was evidence from which the jury could find that the payment was not made in good faith. That they might find there was no valid payment of the capital agreed to be contributed to the firm of William I. Phillips.

3. Evidence—When credibility of witness for the jury.

It is a proper question for a jury to decide what degree of faith should be given under the facts of the c; se to the explanatory testimony of an interested party who has been called by his adversary.

This is an appeal from a judgment of the superior court of the city of New York overruling exceptions taken by plaintiff at the trial, and after verdict for the defendant Laimbeer ordered to be heard in the first instance at the general term. The defendants, William I. Phillips and Laimbeer, were sued as copartners under the name of William I. Phillips,” and a recovery sought upon a

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promissory note, dated January 3, 1884, alleged to have been made by them in that name. Laimbeer alone answered, setting up that the partnership was formed under the statutes of this state relating to “Limited Partnerships ” (T. I., ch. 4, pt. 2, of Rev. Stats.); that he was a special partner merely, and subject only to such liabilities as by statute attached to one in that character. Upon the trial of the issues the plaintiff proved the formation of a partnership between Laimbeer and William I. Phillips “for the purpose,” as expressed in the written articles, “of carrying on a general produce and commission business,” under the name of “ William I. Phillips,” in the city of New York, from October 1, 1883, to May 1, 1885; that Phillips was to be the general partner, and contribute $5,000, and Laimbeer the special partner, and contribute $20,000 to the capital of the concern, and a certificate which recited “that the nature of the business to be transacted is that of a general commission business, buying and selling grain, flour and produce on commission.” The articles of partnership and the certificate bore date October 1, 1883, as did also the order for publication, which designated “The Daily Register ” and “ The Real Estate Chronicle ” as the newspapers in which the terms of the partnership so formed should be published. The certificate was recorded on the same day, the first publication in the “ Register ” was October 6th, and in the “'Real Estate Chronicle” October 10th; each stated that the firm was formed “ for the purpose of conducting a general commission business.”

At the close of the evidence, the plaintiff’s counsel moved the court to direct a verdict for the plaintiff, upon the grounds as stated by him:

“First. That the publication in the Real Estate Chronicle did not commence, according to the affidavit of publication, until the 10th day of October, 1883-, and, therefore, there was not an immediate publication, and, therefore, there was no compliance with the statute.”

“Second. That there is a material variance between the statement of the nature of'the business to be transacted, as embodied in the certificate that was filed and recorded on the 1st of October, 1883, and the statement of the nature of the business as embodied in the advertisements introduced in evidence.”

This motion was denied.

The plaintiff had also given evidence as to the circumstances attending the payment by the special partner of his contribution to the capital of the concern, and its counsel asked to go to the jury upon the question of the bona fides of that payment. This also was denied, and then a more explicit request was made for permission “ to go to the jury

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on the question, whether or not the $20,000 that was paid in on the 1st of October, 1883, by Mr. Laimbeer, was not paid in upon the understanding that it should find its way back to him, either through the preceding firm of Phillips & Co., or in some other way.”

This was denied on the ground as stated by the trial judge, “ that there is no evidence that would justify such a finding by the jury.” Exception to each of the above rulings was duly taken and the court then directed a verdict in favor of the defendant Laimbeer. To this the plaintiff also excepted, and after verdict, the court on motion of plaintiff’s counsel, ordered the exceptions to be heard in the first instance at the general term, where, after argument they were overruled and judgment ordered for the defendant Laimbeer, dismissing the complaint as to him, with costs.

Stern & Myers, for app’lts; B. F. Tracy, for resp’ts.

We agree with the court below that the publication of the certificate was in substantial compliance with the statute, and that there was no material variance between the statement as to the nature of the business to be conducted, as the same was embodied in the certificate, and the description given in the advertisements.

We are, however, of opinion that the jury should have been permitted to enquire whether the money of the special partner was paid in good faith, as a real contribution to the capital of the concern, or whether it was formal only. Both parties went into evidence The principal witness called for the plaintiff was the defendant Laimbeer. From his evidence, and the documents put in during his examination, it appeared that the firm of Phillips & Co.. was formed on the 1st day of June, 1882; that it continued in existence until October 1, 1883, when, by mutual consent of the copartners, it was dissolved; that on the same day a copartnership was formed under the name of William I. Phillips. The defendant, Laimbeer, was a special partner in the firm of William I. Phillips & Co., putting in $20,000. He was also a special partner in the firm of William I. Phillips, and was to pay in as capital for that firm, the sum of $20,000. William I. Phillips was one of two general partners in the first named firm, and was the sole general partner in the last. On the first of October, Laimbeer made a check on the Hew York Produce Exchange Bank for $20,000, payable to the order of -, presented it to the paying teller, and for it received twenty bank bills, each of $1,000. These bills were, on the sameday, “about noon,” handed by him to “Williaml. Phillips, ” and the transaction constitutes the alleged payment in of the capital of the firm of William I. Phillips. On the same day William I. Phillips, in the name of “ William I. Phillips & Co.,” drew its check on the Manhattan Bank for $20,000,

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to the order of R. H. Laimbeer, and delivered it to him: and the teller says, “ I received it about noon, I think.” He deposited the check the same day in the Produce Exchange Bank, and it was passed to his credit. Without it, his account would have been good for less than $14,000, and the payment of the check given by him to Phillips would have overdrawn that account. It appears that there were two deposits to the credit of Phillips & Co., in the Manhattan Bank on the first of October, one of $20,000, the other of $1,572.54. On the next day, October second, a check of Phillips & Co., for $20,000, came in through the clearing house.

Evidence was offered to show that on the 1st of October, 1883, the firm of Phillips & Co. was insolvent, and that on the same day a check signed William I. Phillips, for $20,000, to the order of Phillips & Co., was deposited to its credit. In the absence of some explanation it might be inferred from these facts that the transactions of October 1st were simultaneous, that the intention was to use the capital contributed by Laimbeer to the firm of “William I. Phillips,” to make him good for the capital contributed to the firm of William I. Phillips & Co. If so, the payment could not be upheld as one made in good faith, for the new firm would have had only the right of money, but no continued possession, nor any benefit from it. The appropriation would have been made before its formation. Metropolitan Bank v. Sirrett, 97 N. Y., 320 . It is true an explanation was given; one which the appellant concedes might in some view authorize a jury to nnd in favor of the defendant, and so uphold the transaction. But because that explanation came from a witness called by the plaintiff, notwithstanding the witness was the defendant, the court held it must be taken as true, made the concession of the plaintiff final, and so disposed of the issue without the intervention of the jury.

A similar ruling was presented in Becker v. Koch ( 104 N. Y., 394 ; 5 N. Y. State Rep., 688), under circumstances in their effect not unlike those now before us, upon the evidence of a party interested and called by his adversary, and it was held that it was a proper question for the jury as to what degree of faith should be given under the facts of the case to the explanatory testimony. The principle of that case governs and requires that the appeal should succeed.

The judgment is therefore reversed and a new trial granted, with costs to abide the event.

All concur.