Beers against Reynolds & Maginnis

Beers against Reynolds & Maginnis. Where a limited partnership is dissolved by the agreement of the parties before the period fixed for its termination by the original certificate, it continues as to persons crediting the firm without actual notice of such dissolution, until the notice required by the statute has been filed, recorded, and published for four weeks as therein prescribed. If any alteration be made in the capital or shares and the partnership be in any manner thereafter carried on, before the publication of the notice is completed, the special partner becomes liable as a general partner. Accordingly where parties to a limited partnership agreed to dissolve it and caused notice of such dissolution to be filed and recorded, and commencedits publication, and the special partner at the same time sold his interest in the copartnership effects to the general partner, who secured the price by a mortgage on the effects and other property and a judgment, and continued the same kind of business, and afterwards and before the publication of the notice was completed, purchased goods of the plaintiff who had no actual notice of the dissolution; Held that the special partner was liable to the plaintiff as a general partner, without reference to the intent with which the dissolution took place and the mortgage and judgment were taken. This was an action brought to recover of the defendants, Maginnis & Reynolds, the amount of a bill of goods sold by the firm of James H. Beers & Son, composed of the plaintiff and George W. Beers, on the 23d of April, 1848, and delivered to Maginnis. The defendant Reynolds appeared and answered, and the cause was tried at the Niagara circuit before Justice Mullett. On the trial it was proved that on the 16th day of July, 1847, the defendants formed a limited partnership pursuant to the statute, to carry on the tailoring business at Lockport in the county of Niagara during two years from its commencement, under the name of James Maginnis. Maginnis was the general, and Reynolds the special partner, and the latter contributed $1000 towards the capital of the business. Prior to the attempted dissolution, James H. Beers & Son, who did business in New-York, dealt with the firm. O.u the 17th of April, 1848, the defendants agreed upon a dissolution of the copartnership, and on that day they signed and acknowledged a notice of dissolution,'and caused the same to be filed and recorded in the office of the clerk of the county of Niagara, where the original certificate was recorded, and immediately thereafter commenced the publication of such notice in a newspaper printed in Niagara and in the state paper, pursuant to section'24-of the statute “Of limited partnerships,” and such notice was published once in each of said papers before the 23d of April. At the tima of the agreement to dissolve, and on said 17th of April, Reynolds sold his interest in the copartnership to Maginnis for the sum of $1500, and to secure the payment thereof the latter executed to Reynolds a chattel mortgage on the personal property which had belonged to the firm, and other property owned by him individually, and also executed to him a bond conditioned for the payment of $1500 with interest, on demand, with a warrant of attorney, upon which judgment was entered the same day. On the 20th of October, 1848, an execution was issued upon this judgment to the sheriff of Niagara county, against Maginnis, upon which $14 were made, and as to the residue the sheriff returned nulla bona. That on the 23d of April, 1848, Maginnis purchased of Beers & Son in New-York a bill of goods suitable for the tailoring business, to the amount of $688,12; that the firm of Beers &. Son was since dissolved, and George W. Beers had assigned his interest in this account to the plaintiff. It was proved that on the Said 17th of April Reynolds wrote a letter to James H. Beers, notifying him that the limited partnership was that day dissolved; that it was addressed to Beers at New-York, and deposited on the day it was written in the post office at Lockport. Evidence was given on the part of the plaintiff tending to prove that this letter was not received by the firm of James H. Beers & Son until a day or two after Maginnis had purchased and taken away the bill of goods, and that they had no notice of the dissolution until the receipt of this letter. It was proved that in September, 1848, the account in suit was presented for payment to Maginnis, and he admitted the amount was correct. The justice before whom the cause was tried charged the jury, among other things, that the transaction of the 17th of April, between the defendants, consisting of the sale by Reynolds to Maginnis of his interest in the copartnership property and the giving by the latter of the mortgage and judgment, was a violation of the statute in relation to limited partnerships, and made Reynolds liable as a general partner as to all the creditors of the firm at the time, and all persons who became creditors of the firm afterwards without notice of the dissolution, irrespective of the intent with which the dissolution took place and the mortgage and judgment were taken. To this the counsel for Reynolds excepted. He also charged the jury that if the plaintiff, at the time he sold the bill of goods in suit, had actual notice of the dissolution of the limited partnership, he could not recover against Reynolds. That if the plaintiff was entitled to recover, interest should be allowed on the amount of the account from the time it was presented to Maginnis. To this last the counsel for the defendant Reynolds excepted. The jury rendered a verdict in favor of the plaintiff against both defendants for $837,10, being the amount of the account and interest from the time it was presented to Maginnis. The defendant Reynolds having made a bill of exceptions, appealed to the supreme court sitting at general term in the eighth district, where the judgment was affirmed. He appealed to this court. F. L. Bowen, for appellant. N. Dane Ellingood, for respondent. [MAJORITY — Gardiner, Ch. J.] Gardiner, Ch. J. delivered the opinion of the court. According to the original certificate acknowledged by Reynolds and Maginnis, the limited partnership between them was to continue for two years. The 24th section of the statute (1 R. S. 767,) expressly provides, that no dissolution by act of the parties shall take place,, previous to the time specified in the certificate, until a notice shall be filed, recorded and published in the manner therein prescribed. The demand in controversy was contracted within the two years, in the firm name, and as the jury have found, without any knowledge, express or implied, on the part of the plaintiff, that a dissolution was contemplated by the copartners, previous to the time for that purpose fixed in their certificate. It appears by the bill of exceptions, that the firm had been a customer of the plaintiff, and was indebted to him at the time of the attempted dissolution. Under these circumstances it is obvious, that the partnership would continue as to the plaintiff, until actual notice of a dissolution, or a constructive notice of the same fact, given for the time, and in the manner prescribed by the statute. That Reynolds was liable to the plaintiff, therefore, as a special partner, there can be no doubt. The more important question is, is he or can he be made responsible as a general partner? It appeared upon the trial, that at the time of the attempted dissolution, and as part of the arrangement then made, Reynolds disposed of his interest in the concern to Maginnis, the general partner, for fifteen hundred dollars, and took by way of security, a chattel mortgage upon the copartnership effects, and upon the individual property of the vendee, together with a judgment for the same demand; that upon this judgment an execution was issued, upon which fourteen dollars was made by the sheriff, who in October following, made his return of nulla bona as to the residue. The learned judge instructed the jury, that this transaction made Reynolds liable as a general partner, as to existing creditors of the firm, and as to all those who became creditors, without notice of the dissolution, without reference to the intent with which the dissolution- took place, and the mortgage and judgment were taken. In other words, as I understand the charge, no intent to defraud creditors was essential to create this liability. I think that this instruction was justified by the language of the statute, under which the copartnership was formed. The twelfth section of the act, among other things provides, that every alteration in the nature of the business, or in the capital, or shares of the copartnership, from that specified in the certificate, shall be deemed a dissolution; and that every such partnership, which shall in any manner be carried on, after any such alteration, shall be deemed a general partnership. That there was an alteration in the shares of the copartnership is manifest; since the whole interest of Reynolds, which included his contribution to the capital, was by this transfer turned into a debt against Maginnis, and secured to the special partner, by a specific lien upon the firm property, to the exclusion of the creditors of the copartnership, whether existing or subsequent. The partnership was subsequently, within the meaning of the statute, “ carried on,” because the debt in controversy was contracted in the usual course, without any notice, as we have seen, of the arrangement between the co-partners, or of a dissolution, either actual or constructive. Under the circumstances disclosed by the bill of exceptions, we are of opinion, that the plaintiff had an election, to consider the arrangement between the defendants, at the time of the attempted dissolution, as merely void, and enforce his demand against the firm, as if it had continued, as originally organized; or, to treat the transaction as a violation of the twelfth section of the statute, and charge Reynolds as a general partner; and this, irrespective of a design to defraud or injure the creditors of the firm. The act makes his liability to depend upon the carrying on of the co-partnership, after an alteration in the shares of the partners in the capital, as a matter of fact, without regard to the motives which led to the arrangement. There is no force in the exception to the ruling of the judge upon the question of interest. The goods were all purchased of the plaintiff by Maginnis, at the same time and for a price fixed by the parties. The debt was therefore liquidated, when contracted. ¡No precise time of credit was given. When, therefore, after a reasonable time had elapsed, and the account was presented, and impliedly admitted, the defendants were in default for witholding payment, and interest was properly chargeable from the time of the demand. (2 Comstock, 135.) The judgment of the supreme court should be affirmed. Judgment affirmed.