Kittredge v. Langley

• Citation: 252 N.Y. 405,169 N.E. 626
• Parties: KITTREDGE v. LANGLEY.
• Decision Date: 07 January 1930
• Court: New York Court of Appeals

252 N.Y. 405

169 N.E. 626

KITTREDGE

v.LANGLEY.

Court of Appeals of New York.

Jan. 7, 1930.

Action by Benjamin R. Kittredge against William C. Langley. Judgment dismissing the complaint on the merits (132 Misc. Rep. 361, 229 N. Y. S. 583) was affirmed by the 823), and plaintiff appeals. 823), and plaintiff appeals.

Reversed, and new trial granted.

Appeal from Supreme Court, Appellate Division, First Department.

R. Randolph Hicks, George F. Canfield, and Evelyn P. Luquer, all of New York City, for appellant.

R. E. T. Riggs, and A. S. Gilbert, both of New York City, for respondent.

CARDOZO, C. J.

The action is in equity against the special partner in a limited partnership to charge him with liability to the extent of his capital contribution withdrawn from the partnership at or about the time of dissolution.

Grannis and Lawrence were stockbrokers in the city of New York. They formed in 1907 a limited partnership in which the present defendant. Langley, became the special partner with a capital contribution of $80,000. On May 1, 1908, when the term of the limited partnership expired, its assets were left in the possession of a general partnership formed by the same partners; the debts being assumed. This latter partnership continued for a month only, and on June 1, 1908, was dissolved and liquidated. Langley and Lawrence acted as the liquidators.To Langley there was paid the $80,000 which he had contributed to the limited partnership. Grannis received a seat on the New York Stock Exchange, valued at that time at $71,000, which had been his contribution to the capital, and also $7,412.11 cash. Lawrence received cash in the amount of $10,599.70. There were no unpaid claims other than the plaintiff's, which amounted at that time to about $82,000, though by now with the accrued interest it has more than doubled. Notice of this claim had been given to the partnership in May, 1908, but not till April, 1914, was there any action to enforce it.

The action, when begun, was in tort for conversion. The two general partners, Grannis and Lawrence, and the special partner, Langley, were named as defendants, but the summons was served on Lawrence and Langley only. Plaintiff had a verdict except as to the defendant Langley, as to whom the complaint was dismissed, for the reason that he was a special partner. Judgment was entered on the verdict against the firm of Grannis & Lawrence, Grannis not being served (Civil Practice Act, § 1197); and execution issued upon that judgment against the individual property of Lawrence and the joint property of the firm was returned unsatisfied. Thereafter the defendant Grannis, appearing specially for that purpose only, moved to amend the judgment by striking his name therefrom on the ground that Civil Practice Act, § 1197, is limited by its terms to actions upon contract, and is not to be extended to one in tort for conversion. The Appellate Division upheld that contention, and its order modifying the judgment was affirmed by this court. Kittredge v. Grannis, 234 N. Y. 501, 138 N. E. 422. Still later the judgment as thus modified was reversed and a new trial granted for errors in the charge. Kittredge v. Grannis, 236 N. Y. 375, 140 N. E. 730.

The plaintiff, coming back for a new trial, changed his complaint from one in tort to one in quasi contract, charging the same acts, however, that he had charged at the beginning. Again the plaintiff had a verdict, on which judgment was again entered against the firm under Civil Practice Act, § 1197, and execution against the firm property and against the individual property of Lawrence returned unsatisfied. Grannis again moved to amend the judgment by striking out his name. The Appellate Division affirmed the judgment and also an order denying the amendment. Upon appeal fo this court, the judgment was affirmed (Kittredge v. Grannis, 244 N. Y. 168, 155 N. E. 88), but the order denying the amendment was reversed and the amendment granted (Kittredge v. Grannis, 244 N. Y. 182, 155 N. E. 93). We held by a closely divided vote that, since the action was in tort at the beginning, the amendment changing it to one in contract, though effective as to Lawrence was ineffective as to Grannis. ‘In view of the allegations of the original complaint, the defendant Lawrence appeared at the trial only as an individual in defense of his own interests; the court could not give judgment which would affect the interests in joint property of other defendants not served.’ Per Lehman, J., 244 N. Y. 182, at page 194, 155 N. E. 93. 96.

The plaintiff began in the meanwhile the present suit in equity. The theory of the suit is that he has exhausted the legal remedies available against the general partners, and that the capital withdrawn by the special partner is now chargeable in equity with liabilities unpaid. The defendant, the special partner, maintains in opposition: (1) That the plaintiff has not exhausted his remedies at law; (2) that he has not established his claim by any judgment binding upon the special partner or by evidence dehors the judgment; and (3) that the capital contribution was rightfully withdrawn, and is now retained without obligation to refund it either to the firm or to a creditor. These grounds of opposition will be successively considered.

1. We think the plaintiff has exhausted his remedy at law in such a sense and to such a degree that he may now resort to equity in the pursuit of equitable remedies. This question is quite distinct from the one whether he has established his debt by a judgment binding on the defendant, or must establish it anew. If that necessity be assumed, there is even then no insuperable barrier to equitable remedies where the case in its other aspects is referable to some acknowledged head of equity jurisdiction. Equity may still act because of the futility or inadequacy of remedies at law upon a showing that those remedies have been pursued to the limit of the possible and that there will be no injustice to the defendant through the failure to pursue them farther. Trotter v. Lisman, 209 N. Y. 174, 102 N. E. 575;National Tradesmen's Bank v. Wetmore, 124 N. Y. 241, 26 N. E. 548;Patchen v. Rofkar, 12 App. Div. 475, 476, 42 N. Y. S. 35;Id., 52 App. Div. 367, 65 N. Y. S. 122;People ex rel. Cauffman v. Van Buren, 136 N. Y. 252, 32 N. E. 775,20 L. R. A. 446;Whitney v. Davis, 148 N. Y. 256,42 N. E. 66§; American Surety Co. of New York v. Conner, 251 N. Y. 1, 5, 166 N. E. 783;First Nat. Bank of Riverside v. Eastman, 144 Cal. 487, 493, 77 P. 1043,103 Am. St. Rep. 95,1 Ann. Cas. 626;Williams v. Adler-Goldman Commission Co. (C. C. A.) 227 F. 374;Bank of Commerce & Trusts v. McArthur (C. C. A.) A.) 256 F. 84;Quarl v. Abbett, 102 Ind. 233, 242, 1 N. E. 476,52 Am. Rep. 662;Earle v. Grove, 82 Mich. 285, 290, 52 N. W. 615; 38 A. L. R. 269, 270, and cases there collated. Such a showing is made upon the record now before us.

The plaintiff cannot stir another step in the pursuit of legal remedies. He has recovered a judgment against Lawrence and is still unable to collect it. He is not in a position to recover a judgment against Grannis or against Grannis and Lawrence jointly, for Grannis is now a resident of Massachusetts without an office or place of business in this state, and has steadily refused to submit himself to the jurisdiction of our courts. The plaintiff's every effort to recover a joing judgment has been thwarted by an adverse ruling. If equity will not act now, it can never come to his relief at all, for there is nothing more that he can do. Trotter v. Lisman; National Tradesmen's Bank v. Wetmore; Patchen v. Rofkar, supra.

A different conclusion might be called for if injustice would ensue to the defendant by recourse to equity at this time without further compliance with preliminary conditions. The chance of such injustice is illusory. The defendant would profit nothing by the recovery and enforcement of a judgment for the misappropriated securities against the other partners jointly. This is evidenced in divers ways. Such a judgment was twice recovered, though modified later upon appeal. In each instance execution was issued against the joint property and returned unsatisfied while the judgment was still in force. The fact is thus established that the defendant's liability as special partner would not be reduced by a dollar if the judgment were standing against the firm just as it is now standing against Lawrence. The evidence thus furnished by the executions is confirmed by other evidence more recent. Grannis, examined under a commission in Massachusetts, testified upon this trial that neither he nor the firm had any assets in this state. There is not even a suggestion to the contrary. In such circumstances equity would be sacrificing the substance to the shadow if the tyranny of a formula, the mirage of an unattainable condition, should lead it to stay its hand.

2. Assuming that there has been due exhaustion of the remedy at law, we approach the second question, the adequacy of the evidence to establish the misappropriation of the securities and the existence of a debt. We think the plaintiff might have been required, if the defendant had so chosen, to prove the debt anew without reference to the judgment. We think, however, that there has been a waiver of that requirement, a consent by the defendant that the evidence in the first action be accepted without repetition as evidence in this. If that is so, the debt was proved.

We have said that the judgment against Lawrence was not binding upon Langley, and that the cause of action, in default of waiver, must have been established once again. The ratio decidendi of our opinion when the judgment was modified by striking out the name of Grannis goes far to blaze the path for us, irrespective of decisions elsewhere. The implication is a strong one that the judgment as thus modified is binding upon Lawrence individually, and not upon any one else, whether a partner or a...