La Montagne v. Bank of New York

94 A.D. 219, 88 N.Y.S. 21

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: May 15, 1904
• Status: Published

Opinions

Ingraham, J.:

The facts in this case are stated in the opinion of Mr. Justice Hatch, in which in the main I concur. I do not, however, agree with him so far as he holds that any use by the general partners of the capital contributed by the special partners after its actual payment to the general partners, but before filing the certificate, would make the special partner liable as a general partner, or render the statement contained in the certificate, that the contribution of the special partner had been fully paid in cash, untrue. Undoubtedly the truth of the certificate is to be determined as of the time of its being filed with the county clerk; but if then true, it fulfilled the purpose for which the law was enacted. (White v. Eiseman, 134 N. Y. 101.) If at the time the certificate was executed and filed the special partner had actually paid the money to the general partners, so as to part with all control over it, the statute was complied with. (Durant v. Abendroth, 69 N. Y. 148.) The certificate which was required to be filed with and recorded by the county clerk, provided for by the Revised Statutes (1 R. S. 764, §§ 4, 6) which were in force at the time this partnership was formed, must state the amount of the capital which each special partner shall have contributed to the common stock, and section 8 (1 R. S. 765) provided that if any false statement be made in such certificate all persons interested in such partnership shall be liable for all engagements thereof, as general partners. The certificate .is not required to contain a statement that the amount of capital which the special partners have contributed remains intact in the hands of the general partners at the time the certificate is filed; and where a special partner has in good faith paid to the general partners the money which he is to contribute to the partnership in cash so that he has no further control over it, and the amount that he has so contributed is correctly stated in the certificate, the statute is complied with, and the special partner is not responsible for any act of the general partners in relation to the money after he has actually paid it to the general partners. (Metropolitan National Bank of N. Y. v. Sirret, 97 N. Y. 320.) Having once actually and in good faith paid to the general partners the amount of cash which he was to contribute to the partnership, any interference with that money by the special partner is expressly prohibited by the statute and such an interference would make the special partner liable as a general partner. (1 R. S. 766, § 17, as amd. by Laws of 1857, chap. 414.)

Take a case where the special partner actually paid to the general partners his contribution in cash upon the day that the copartnership articles were executed and the certificate actually signed, and the general partners in good faith, without the knowledge or consent of the special partner, on the day of its receipt applied a part of the contribution of the special partner in the purchase of a warehouse in which, or other property with which to conduct their business which was to commence on the following.day, such a use by the general partners of the contribution of the special partner would not be a violation of the statute, making the certificate whene it was filed on the following day a false certificate, and making the special partner liable as a general partner. And this is, it seems to me, what was done in this case. Prior to the organization of this special' partnership, the general partners had been conducting a business in the city of New York. A special partnership was formed to take over that business and to carry it on, and the contribution of capita,! by the special partner was made for that purpose. On the 22d day of June, 1892, the copartnership articles were executed. They provided that the limited partnership should begin on the 23d day of June, 1892; that the special partner should contribute as his share of the capital of the limited copartnership the sum of $200,000; that the members of the old firm should contribute to the capital stock of such copartnership the sum of $100,000, which should be so contributed by transferring to said limited copartnership all of the property, assets and good will of the former copartnership of La Montagne, Clarke & Co.; that the old firm covenanted that such property and assets so transferred by them were worth, and within one year would yield in cash, over all the liabilities of the old firm, the sum of $100,000. On that day the certificate required by the statute to be filed was executed, and at the time these copartnership articles and certificate were executed the special partner actually paid to the general partners the sum of $200,0001 The whole- capital of the new firm was to consist of the $200,000 contributed by the special partner and the assets of the old firm contributed by the general partners; and on June twenty-second after these papers had been executed, the contribution by the special partner was deposited in the defendant bank to the credit of the new copartnership. It was proved that it was stated to the officer of the bank at the time of the deposit that the firm was not to commence business until the following day, when the certificate would be filed ; but there was no restriction upon the general partners, or the new firm which prevented a withdrawal of that deposit from the bank, upon the. same day on which it was deposited or before the new firm did business.

By the deposit there was created the relation of debtor and creditor between the bank and the new firm, and the bank was bound to honor the drafts of the new firm upon it to the extent of the deposit. By the execution of these copartnership articles the new firm became the owner of the assets of the old firm as transferee of the assets of the old firm, and the new firm was responsible for the payment of the debts of the old firm to the extent, at any rate, of the amount that it had received of the assets of the old firm. To protect those assets it was essential that the debts of the old firm should be paid, and there is no allegation that the assets of the old firm were not more than sufficient to pay its obligations and furnish the capital which the general partners were bound to contribute by a transfer of the assets of the old firm to the new, and to protect those assets the members of the new firm had the right to apply the capital contributed by the special partner as his contribution to the new firm. Neither the defendant bank nor the special partner was liable for any misappropriation of the special capital so contributed by the general partners, if there had been a misappropriation ; but the evidence in this case, as I view it, is undisputed that there was no such misappropriation. They applied a portion of the capital contributed to the new firm to the payment of the debts of the old firm, as they were bound to ’do as assignees of the assets of the old firm; and as a result of such a payment they acquired the assets of the old firm, discharged from the obligation to pay that sum. When, therefore, they withdrew from the account of the new firm the sum of $60,000 and deposited it to the credit of the old firm, to meet in part an indebtedness of the old firm to the defendant bank on the afternoon of June 22,1892, and subsequently applied the balance thus deposited to the credit of the old firm in meeting the obligations of the old firm, there was no misappropriation of the capital contributed, but, on the contrary, a payment by the new firm on account of an indebtedness of the old firm and which discharged the assets which they received from the old firm from the obligation to pay .such indebtedness. The evidence is . undisputed that this new firm subsequently received all of the assets of the old firm, paid all its obligations, and continued the business with the capital and assets that it had received from the old firm to August 11, 1893, when it was found that the new firm had become insolvent, and that all of this $60,000 was used in paying the indebtedness of the old firm. The account of the old firm shows that this deposit of $60,000 was made on June twenty-second, leaving a balance due the old firm, after paying the drafts presented to the bank during the day, of $9,406.21, and this balance was subsequently drawn out of that account by the old firm, and the account was finally balanced and closed. The referee has found, and it is not disputed, that the bank acted in good faith in the usual course of business in paying these checks drawn upon it by its depositors; and in all the transactions there is not the slightest evidence to show that this capital contributed by the special partner was used for any other purpose than in paying the debts of the old firm, and which the new firm was bound to pay if it received the assets of the old firm, and that it was with the assets of the old firm that the business was transacted that the new firm was organized to conduct. Upon no principle can this defendant be liable to the new firm, or to its surviving partners, for the deposit that it received on the twenty-second of June to the credit of the new firm, and which it has paid out upon checks of the new firm.

It is true that the limited copartnership was to commence on the twenty-third day of June and to continue for ten years; and that fact was stated in the certificate which was duly filed on the morning of June twenty-third. Assuming that notice of that fact was given to the bank when the deposit of $200,000 was made, I can see no authority for holding that such a notice tied up that, deposit until the special copartnership had been actually performed. I assume that if, for. any reason, the certificate had not been -filed on the following day, somebody would have been entitled to this, money, and the bank-would not have been justified in refusing to-pay it out upon a check signed by the firm in whose name it was deposited. The bank owed these individuals who had associated themselves together to carry on this business. When the deposit was made there was no limitation of the power of the depositors to withdraw the amount to. their credit in the- bank, and when they drew that amount to pay an indebtedness of the old firm, the assets of which had been transferred to the new'firm, the new firm certainly could not recover the amount so paid from the creditors upon the ground that it was a misappropriation of the capital of the new firm; and the fact that such a sum had been paid the night before the new firm was to commence business could not at all affect the question.

The rule that property or money of a copartnership cannot be given to discharge the individual indebtedness of one copartner or for any other than copartnership purposes has no application to this case, for here the money that was paid was to discharge the indebtedness of the old firm, whose assets had been transferred to the new firm, and whose successor in business the new firm was. Assuming that on the morning of the twenty-third of June this deposit of $60,000 to the credit of the old firm had not been made, and that the old firm was indebted to the bank in the sum of $60,000 for overdrafts which the bank had paid, on the morning of June twenty-third, when the new firm took over, under the copartnership agreement, all of the assets of the old firm and applied them to its own use, the new firm would have been bound to pay to the bank the amount of the indebtedness of the old firm. If it would, then the fact that there was a credit on the books of the bank to the old firm and a debit on the accounts of the new firm on the night of the twenty-second could not affect the rights of either of the parties. The new firm ratified the act of the bank in accepting the check on the twenty-third of June by acquiescing in the balancing of the account of the new firm in the bank in which'the check for $60,000 was charged as a debit and was returned to the new firm as a proper charge upon its account. If the bank was entitled to demand of the new firm the payment of the old firm’s indebtedness to it on the twenty-third day of June, the fact that the members of the new firm paid the debt to the bank on the dajr before, and that the new firm subsequently ratified that act by receiving without objection the voucher for that payment which had been charged to the new firm in the account of the bank, discharged the bank from any obligation to the firm for the money of the new firm which it had received and applied to the payment of an indebtedness for which the new firm was liable. The new firm got all the benefit of this payment. It received the assets of the old firm, discharged from its obligations to pay the indebtedness to the defendant, and, having received the benefit of the payment, it is precluded, while retaining that benefit,>jfroflii>Lque§tiqning.i.thet.:;validity, -of that payment,. ., , . , ... .......... . t I agree with Mr. Justice Hatch that, under the pleadings, the - defendant, was entitled to. prove this defense, anffthat, it was error for the referee to. hpld that, to be available,, thin defense must be , separately pleaded. I do Hot agree, however,, that ¿upon this record there isj no proof that the ¡balance of this check for. $p0,p00> after payment of the amount due the defendant, on June twenty- ,, second, was applied to the indebtedness pf the old.firm.. On the . contrary, it appeared from the account between the. bank and. the old firm^ introduced in evidence by the plaintiffs, that on the twenty-second and twentydhird of J¡une thejiank, hafl. paid [put on checks of the old firm an amount which, after crediting the old firm, with this $60,000, left it indebted to the bank ,on. July, twenty^ , rourth in the sum of..$351A8,. which was made good .by.the dpposit on that day pf another check of the new firm for that amount and then the account was- closed. This proof being ..offered, by the:.,, plaintiffs, it was sufficient to show that the bank had».paid.,puf.pn.,; account of .and on the order of the, old firm, an amount .exceeding the sum of $60,000 that ¡was .deposited. by the firm tp the cred.it ..qf, ,. ■the old firm on the" night pf , Jpne;. twenty-second..- Upon the undis- , puted facts, therefore,think-the plaintiffs failed to-..establish any , cause of action against the ,defendant, and that the. defendant was entitled to judgment, and in this state qf the record it.spems to be ; unnecessary to. send the case, back for a neve trial.. ", ,

-The . judgment should, therefore, be reversed _and,_judgment, y directed for the defendant dismissing the complaint, with posts in this court .and in the court below., . . ._

O’Bbién and McLaughlin,' JJ., cóhcurred-'yYÁN-UBüNT/P. J., and Hatch, J., dissented. • ■ J' ..... - -■