Hyperlawhypertext legal database President of Manhattan Co. v. Phillips 53 N.Y. Super. Ct. 84

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President of Manhattan Co. v. Phillips

53 N.Y. Super. Ct. 84 21 Jones & S. 84 Court N.Y. Super. Ct. Decision date 1886-03-01 English

Delivered by O’G-orman, J.

Contents

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p. 84
THE PRESIDENT, &c. of the MANHATTAN CO. v. WILLIAM I. PHILLIPS and RICHARD H. LAIMBEER.

Headnote

Special partnership—compliance with statutory requirements—Evidence— testimony of interested witness.
On October 1, 1883, defendant Laimbeer was one of the three members of, and thé special partner in, the firm of “ Phillips & Co.,” to which firm he had theretofore actually paid in as special capital the sum of $20,000. On that day said firm was dissolved by consent, and it was agreed that a new firm under the name of “ William I. Phillips,” should be formed by said Phillips, one of the members of the old firm, as general partner, and defendant Laimbeer as special partner, the latter to contribute as his capital $20,000. Thereupon, Phillips drew a check in behalf of the old firm for $20,000, and delivered the same to defendant Laimbeer in repayment of the special capital contributed by him to said old firm, which check defendant Laimbeer deposited in his bank,, making his balance there about $35,000. On the day previous, he had arranged with said bank to obtain $20,000 in bills, which, on October 1, he drew out on his check, and paid in cash to said Phillips as his special capital in the new firm, which money was deposited in bank to said new firm’s credit. Thereupon and upon the same day Phillips drew a check in the name of the new firm to the order of the old firm for $20,000, which was deposited in bank to the old firm’s credit. This check was given without any valid consideration to the new firm, and, from all that appears, exhausted its money on that day. There was no evidence that defendant Laimbeer was aware of the drawing of said last named check by Phillips, or that he in any way assented to or connived at it. Held,, in an action by a firm creditor, in which it was sought to. charge Laimbeer as a general partner, that a verdict in Laimbeer’s favor was properly directed.
It'was conceded by plaintiffs that, on the whole of Laimbeer’s testimony, • the jury had the right to find in his favor on the issue as to the good faith of his payment to, the new firm, but they contended that as he was an interested person, the jury were- not bound to accept his memory, and the case should have been submitted to them. Held, that this contention was without weight, since Laimheer’s testimony was not opposed by that of others not liable to be impugned on the same or any other account:
The special partnership herein was formed October 1, 1883; the statutory publication was begun in One paper October 6, 1883, and in the other
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October 10, 1883. Held, that the publication was made with sufficient diligence.
The articles of copartnership described the business of the special partnership to be “ a general produce and commission businessthe publication stated it to be “ a general commission business.” Held, that a certificate stating it to be “ a general commission business, buying and selling grain, flour and produce on commission,” described with reasonable certainty the business to be carried on by the firm.
Before Sedgwick, Ch. J., Trtjax and O’Gorman, JJ.
Decided March 1, 1886.
Exceptions ordered to be heard at general term.
Action on promissory note made by defendants’ firm. Laimbeer defended on the ground that he was a special partner. The limited partnership was formed October 1, 1883, apd its certificate was filed and recorded on that day. Laimbeer contributed $20,000 in cash on the same day as special capital. The certificate stated the object of the business to be “a general commission business, buying and selling grain, flour and produce on commission.” The articles of partnership stated it to be “a general produce and commission business.” The publication in the ‘ ‘ Register ” commenced on October 6, 1883, and that in the “ Real Estate Chronicle” October 10, 1883. Both these publications stated the nature of'the business to be “a general commission business.”
Plaintiff asked a direction to the jury to find a verdict for plaintiff on the grounds : 1st. There was no immediate publication ; 2d. That there was a material variance between the statement of the nature of the business to be transacted, as embodied in the certificate and in the advertisements. This was denied, and an exception taken.
The plaintiff asked to go to the jury upon the bona fides of the original contribution by Laimbeer of the $20,000 paid in by him as special capital, which was also denied, and an exception taken.
On motion of defendant’s counsel, the court directed a verdict in defendant’s favor, and .plaintiff excepted.
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The exceptions were ordered to be heard in the first instance at the general term.
Stem & Myers, for plaintiffs
I. By section 9 of the limited partnership act, the partners are required to publish the terms of the partnership for at least six weeks, &c., in two newspapers “ immediately after such registry,” &c. ; and it is provided by the same section that if “ such” publication be not made, “the partnership shall be deemed general.” By the original act of 1822, the publication was not required to be made “immediately.” In the present case, the publication in the “ Chronicle ” did not commence until on the tenth day after the filing of the certificate. That was not an immediate publication; it was not “such” a publication as the statute requires, and therefore the parties did not secure the privilege conferred by the statute. The legislature intended to put a reasonable period to the labor of a party searching through the files of newspapers so as not to require a search for an indefinite period to see whether a publication had not been made at some time or other before giving the requested credit. That reasonable period was secured by the phrase “for at least six weeks immediately after such registry.” That phrase has been construed to mean six publications, once a week, the first publication to be made in the first week (Bowen v. Argall, 24 Wend. 496 ). In the case of Smith v. Argall ( 6 Hill, 479 ), the court said, “ The statute is rigorous in its terms, and those who claim its benefits must show a substantial conformity to its requirements.” See also 3 Den. 435 .
II. Neither did the certificate truly set forth the general nature of the business intended by the articles to be transacted, nor did the publication truly set forth the nature of the business specified in the certificate. In the present case, the articles of partnership show that the business intended to be transacted was “a general produce and commission business.” That meant a general produce
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business on their own account, and not merely on commission, and also a general commission business unrestricted to any particular sort of merchandise. In their certificate they suppressed the fact that the firm was formed to carry on a general produce business on their own account; and they also suppressed .the fact that the firm was formed to carry on a general commission business in all sorts of commodities. In the present case there was a substantial variance between the certificate and the publication in this regard. Both publications described the business as “a general commission business.” This description did not conform to the original articles, since it omitted the fact that by the original articles the firm was formed to carry on, on its own account, “a general produce business.” It did not conform to the certificate, because it stated the business to be “a general commission business whereas, by the certificate, no general commission business was formed, but simply a business to deal on commission in “grain, flour and produce.” The broad scope of the general words in the certificate—“a general commission business ”—is narrowed and restricted by the special recital of the particular classes of goods, “ grain, flour and produce ” (Jackson v. Stackhouse, 1 Cow. 122 ; McIntyre v. Williamson, 1 Edw. Ch. 38 ; Payler v. Homersham, 4 Maul & Selw. 425 ; Van Hagen v. Van Renssellaer, 18 Johns. 420 ; Elmendorf v. Lansing, 5 Cow. 470 ; 8 Wend. 494 ; 1 Barb. Ch. 398 ). In Durant v. Abendroth ( 69 N. Y. 148 ), the court said, “The parties have made a careless, though no doubt innocent mistake, but they have failed to comply with the statute, and the special partner is therefore deprived of its protection.”
III. Plaintiff was entitled to go to the jury on the question of the bona fides of the contribution. The testimony showed that the $20,000 was paid in October 1, 1883. On the same day it was all loaned to a, previous firm called “Phillips & Co.,” of which the defendant Laimbeer was a member, and in which firm he was said
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to have invested $20,000 as capital. On the same day Laimbeer received the check of the old firm for $20,000 as a return of his special capital. The old firm at that time could not have paid that $20,000 to Laimbeer without first obtaining it from the new firm. The investment of the $20,000 in the new firm in cash and the receipt by Laimbeer of the $20,000 check of the first firm were simultaneous acts. The old firm had no assets. It paid Laimbeer $20,000 on October 1, 1883, out of the money of the new firm. An hour or two after the new firm started (it was the firm that made the note here sued on) it had not a cent of capital. It had all been paid out and had all gone back to Laimbeer. We claim the jury had the right to find that when the $20,000 was paid into the new firm, it was paid in on the understanding that it should be used to enable the old firm to return the same amount to Laimbeer. If the jury had such right and had so found, then the $20,000 was not paid in “ in good faith ” within the meaning of the statute (Metropolitan Bank v. Sirret, 91 N. Y. 320 ).
We concede that upon the whole of Laimbeer’s testimony the jury had the right to find in his favor on that issue. But he was an interested party ; and though he was not directly contradicted, yet the jury had the right from the proven circumstances to draw an inference adverse to Laimbeer, and were not bound to accept his memory in his own favor (McNulty v. Hurd, 86 N. Y. 541 ).
Winchester Britton, for defendant Laimbeer.

By the Court.

The learned trial judge directed that the jury find for the defendant Laimbeer, and that the exceptions be heard first at general term.

The chief contention is, whether defendant Laimbeer was a special or a general partner in the firm, carrying on business in New York under the name of “ William I. Phillips,” and the decision will depend on the question, whether he did ‘ ‘ actually and in good faith ” pay into the common stock of that firm $20,000.

p. 89
The defendant Laimbeer had been, before October 1, 1883, a partner in the firm of “Phillips & Go.,” the members of which were, William I. Phillips—its financial and managing partner, Frederick Phillips—who did the outside business, and Laimbeer—who claimed to have been a special partner, and who had actually put $20,000 into the firm. That firm came to an end by mutual consent on October 1, 1883, and it was agreed between said William I. Phillips and Laimbeer, that a new firm should be composed of William I. Phillips, the general partner, and Laimbeer, the special partner, the latter putting into that firm also, the sum of $20,000. The name of the new firm was to be “William I. Phillips.”

About noon on October 1, 1883, William I. Phillips and Laimbeer met at Laimbeer’s office in New York, for the purpose of closing the connection of Laimbeer with the old firm, and starting the new firm. The first thing to be done, was to pay back to Laimbeer the $20,000 he had contributed as special partner to the old firm of “Phillips & Go and to that end, William I. Phillips, as representing the old firm, drew a check of that firm on the Manhattan Bank for $20,000, dated October 1, 1883, payable to Laimbeer, or his order. This check Laimbeer deposited on that day in the Produce Exchange Bank, in which he had been for a long time a depositor and director. On the morning of that day, he had in that bank to his credit, and subject to his draft, $13,670.42, and this check raised his balance to about $35,000. On the preceding day, he had arranged with the cashier of that bank, to have for him twenty bank bills of one thousand dollars each, and on October 1, he got these bank bills, giving his check for the amount to the Produce Exchange Bank. The money so contributed by Laimbeer to the old firm having been thus repaid him by William I. Phillips, as representing the old firm, Laimbeer handed to him, as general partner of the new firm of “Wilham I. Phillips,” the twenty one-thousand-dollar .bank notes,

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and these bank notes were, on that day, deposited in the Manhattan Bank to the credit of the new firm.

So far, all seems to have been done correctly, and according to the proper intention of the parties. On the same day, however, William I. Phillips drew a check of the new firm for $20,000, payable to the order of “ Phillips & Co.,” the old firm. This was the first check drawn in the name of the new firm, and it was indorsed in the handwriting of William I. Phillips, thus—“deposited by Phillips & Co.” This check was deposited on that day to the credit of “Phillips & Co.,” the old firm, in the Manhattan Bank, and was given without any valid consideration moving to the new firm, and, from all that appears, exhausted all the money of the new firm on that day.

There is no evidence that defendant Laimbeer was aware of the drawing of that check by William I. Phillips, or that he in any way assented to or connived at it. There is no apparent motive for his doing so.

It is conceded by the plaintiffs, that on the whole of Laimbeer’s testimony, the jury had the right to find in his favor on that issue ; but they claim that he was an interested person, and that the jury were not bound to accept his memory in his own favor, and that the. case should have been sent to the jury.

That argument would have weight, if his testimony had been opposed by that of others, not hable to be impugned on the same or any other account. But in this case, I can find no testimony from which an inference can be fairly derived, that Laimbeer had knowledge of, or was a party to, or was in any way responsible for the drawing of that check.

Proof of fraud, although it may seldom be sustainable by direct evidence, but must be gathered from circumstances, must yet not be left to mere conjecture and surmise. The inferences must be founded on facts, and be their legitimate consequence. There is nothing in the facts of the case, which would sustain a verdict adverse

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to him on that question, and in so holding, no error was committed by the trial judge.

As to the other objections to the existence of a special partnership, they are, in my opinion, not well taken. The publication of the terms of the limited partnership was made with reasonable diligence, and without any unreasonable delay. The certificate filed described, with reasonable certainty, the nature of the business to be carried on by the firm.

The judgment should be for defendant Laimbeer, with costs.

Sedgwick, Oh. J., concurred.

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