Hartford National Bank v. Beinecke

15 A.D. 474, 44 N.Y.S. 486, 26 N.Y. Civ. Proc. R. 226

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: March 15, 1897
• Status: Published

Opinions

Patterson, J.:

This is an appeal from an order denying a motion of the defendants Beinecke and Hesdorfer to compel the plaintiff to reply to new matter contained in their separate answer to the complaint herein.

The action was brought against Emil Seidenberg, Joseph Seidenberg, Adolph Stiefel, Bernard Beinecke and Joseph Hesdorfer, and the allegation of the complaint is that the defendants were copartners in trade under the firm name and style of E. Seidenberg, Stiefel & Co. The defendants Beinecke and Hesdorfer in their answer deny that they were, or either of them was, at any time a partner of the firm of E. Seidenberg, Stiefel & Co. mentioned in said complaint, except as thereafter stated in the answer ; and then they proceed to set up that each of them was a member of a limited copartnership duly formed under the laws of the State of New York, wherein the defendants other than themselves were the general partners and they the special partners, and they allege that the obligation sued upon in the complaint was the act and obligation of the limited copartnership. They also allege that they complied with all the. provisions of the law of the State of New York relating to limited partnerships.

By their motion the appellants sought to compel the plaintiff to set forth in a reply such facts as they may claim would render the appellants liable, notwithstanding the nature of the copartnership as pleaded by them.

The allegation of the complaint relating to the copartnership of the defendants is of such a character that the special partners could not interpose a general denial to that allegation. They were copartners with the other defendants under the firm name and style of E. Seidenberg, Stiefel & Co. A limited partnership under the statute is, except as provided by that statute, subject to the rules of the common law. As was said in the familiar case of Ames v. Downing (1 Bradf. Suit. 326), “ The special partnership is by no means a complete anomaly. By the statute it is termed & partnership, and both as to the rights of the parties to the contract and as to the world it is in itself a proper partnership, except as it limits the liability of the special partner and restricts his control over the business of the firm. The members are partners, and by slight irregularities may easily be turned into general partners. The statute terms them partners; except for the statute they would be general partners, and from participating in the profits it would seem to be a just consequence that they are partners in every sense,, subject to liabilities and enjoying privileges as partners in every particular, except as otherwise specially provided. The common law regulates the mutual rights and duties and liabilities of partners and governs these limited partnerships in every respect not excepted out of the general rule by this statute.” Such being the relations of the defendants Beinecke and Hesdorfer to the firm, they in their answer set up in avoidance of the liability sought to be enforced against them as partners, the special fact of their relationship to the firm being such as they were authorized to create by becoming special partners in a limited partnership, for thereby they set up such matter as enables them to evade or escape' from the legal effect of a pleading by alleging new matter in answer to that pleading, and that is a definition of avoidance. The Code authorizes the court where an answer contains new matter constituting a defense by way of avoidance to require the plaintiff on the defendant’s application to reply to that new matter. (Code Civ. Proc. § 516.) The question here is, whether in this case, such a requirement should have been made. Upon the issue joined as it now is, it is not disputed that it would be competent for the plaintiff at the trial to overcome the matter in avoidance by proving such facts as would make the defendants, appellants, liable as general partners. There are two distinct and separate kinds of liability of general partners to which a special partner may be subjected. One relates to irregularities or insufficiencies in the formation of the limited partnership caused by a non-compliance with any of the provisions of the law relating to the organization or the establishment of such limited partnership. The other is a liability arising from the commission of any one of the acts prohibited by sections 20 and 21 of the Limited Partnership Act (1 R. S. 763-767). This distinct liability is pointed out in Van Ingen v. Whitman (62 N. Y. 523), in which the court said: “ Manifestly, there is a difference * * * between a disregard of the provisions of the statute which are prerequisites for the formation of a limited partnership and of tne provisions which are a guide for the conduct of its affairs after it has had a legal inception. Until it is legally instituted, there is no lawful limited partnership, and no member of the association may claim the protection afforded by the law. After it has been legally formed and had its start according to the law, it may be well said that the protection obtained shall not be forfeited by any member unless he himself is chargeable with knowledge of an infraction of its provisions and an intention to disobey its requirements.”

What the appellants desire in this case is information as to which class of liability it may be claimed they are subject to, and it seems but just and reasonable that they should, have such information to be set forth in a reply in order that they may be prepared at the trial to meet what is alleged against them. It may be claimed that the protection of the statute is not available to them because of their concurrence in or assent to some act prohibited by sections 20 and 21 of the Limited Partnership Act, and if that be so, they should not be compelled to proceed to trial without any notification of the particular transaction to be made the subject of inquiry at a time when they would be utterly helpless. This is in no sense a mere attempt to elicit the plaintiff’s evidence before the trial, but it is Only an application to be informed as to particular facts (and not evidence of the facts) which it may be claimed would convert their limited partnership relations into those of general partners.

The order below was wrong and should be reversed, with ten dollars costs, and the motion to require a reply to be served to the new matter granted, without costs.

Rumsey, O’Brien and Ingraham, JJ., concurred; Van Brunt, P. J., dissented.