Rathke v. Griffith

• Decision Date: 13 May 1950
• Docket Number: 31148.
• Citation: 218 P.2d 757,36 Wn.2d 394
• Parties: RATHKE, v. GRIFFITH et al. (two cases).
• Court: Washington Supreme Court

218 P.2d 757

36 Wn.2d 394

RATHKE, v. GRIFFITH et al. (two cases).

No. 31148.

Supreme Court of Washington.

May 13, 1950

Department 2.

Rehearing Denied August 14, 1950.

O'Leary Meyer & O'Leary, Olympia, for appellants.

Mifflin &amp Mifflin, Seattle, for respondent.

ROBINSON, Justice.

This case involves two actions, consolidated for purposes of trial, in which respondent sought and obtained judgment against appellants Griffith, on account of advances made by respondent to the partnership known as Midfield Packers, a frozen foods concern, in which Mr. Griffith was allegedly a general partner. The amounts of the judgments are not at issue, and the sole question raised on appeal concerns the status of Mr. Griffith in the partnership. If he was, as is asserted, a general partner, he is liable to respondent; on the other hand, he urges that he was a limited partner only and it is conceded that, if he is correct in this contention he may not be held responsible for the debts in question. The facts in the case are as follows:

On or about August 14, 1942, Mr. Griffith, in company with several others, executed a writing, denominated 'Articles of Limited Copartnership,' which provided that the parties thereto were associating under the firm name of Midfield Packers, an organization formed for the purpose of canning and otherwise processing fruits and vegetables. Therein appellant Griffith is described as a limited copartner, and his liability is fixed at $1,000. On December 8, 1942, the articles were filed in the office of the Thurston county auditor. Mr. Griffith's only contribution to the partnership consisted of his assuming the indebtedness of the Midfield Packers on a certain truck. He paid this indebtedness in full, the entire payment amounting to over $1,000.

In 1944, the original agreement was supplemented by another agreement allowing certain of the original parties to withdraw from the concern, and specifying that Mr. Griffith was to remain in the organization as a limited partner. This agreement was likewise filed with the Thurston county auditor on April 3, 1944. No publication of the certificate of partnership, or of the modification thereof, was ever made by the parties in accordance with the requirements of Rem.Rev.Stat. § 9969, which statute was in force during this period.

The Midfield Packers entered into business, and, in the course of time, contracted the indebtedness which has become the subject of this action. Mr. Griffith testified that, upon learning that creditors of the partnership were claiming that he was a general partner, he immediately executed a bill of sale by the terms of which he conveyed all of his interest in the partnership to the two individuals named as general partners in the original articles and in the later modification. This bill of sale purports to have been executed in November, 1946, and was filed in the office of the Thurston county auditor.

It would appear that, in a number of respects, the parties involved in the organization of the Midfield Packers failed to comply with the strict terms of the limited partnership statutes in force at the time. Their most significant lapse was their failure to publish the certificate of partnership, in accordance with the terms of Rem.Rev.Stat. § 9969, in effect prior to 1945, which provided that: 'The partners shall, for four consecutive weeks immediately after the filing of the certificate of partnership, publish a copy of the same in some weekly newspaper published in the county where the principal place of business of the partnership is, or if no such paper be published therein, then in some newspaper in general circulation therein, * * *.'

The statute further provided that, until this requirement was complied with, the partnership was to be deemed general. Rem.Rev.Stat. § 9969. Neither of the parties to this action has referred us to any Washington cases interpreting this statute, but it is admitted that, in jurisdictions where similar statutes were in force, it was customary to construe them strictly and literally. In the present case, the trial court took the view that the failure of the parties to comply with this, and with certain other statutory requirements not necessary to be discussed here, had the effect of imposing liability as a general partner upon Mr. Griffith, the alleged limited or special partner. It would appear that the trial court's decision was in accord with the majority of the cases decided in other states under the old type of limited partnership laws. The question Before us is whether the passage of the Uniform Limited Partnership Act in 1945 changed the situation with respect to attempted limited partnerships formed prior to its adoption. In this connection, it is pertinent to consider briefly the history of the concept of the limited partnership in the United States.

This form of association, though common on the continent of Europe since the middle ages, was unknown to the common law of England and the United States, and was originally borrowed from the civil law of France. Clapp v. Lacey, 35 Conn. 463; 3 Kent's Commentaries (14th Ed.) 38. Ames v. Downing, 1 Brad., N.Y., 321, includes an interesting account of the historical background of the limited partnership see, also, Jacquin v. Buisson, 11 How.Prac., N.Y., 385. From their earliest inception, in New York and Connecticut in 1822, limited partnership statutes, being in derogation of the common law, were strictly construed by most courts. Pierce v. Bryant, 5 Allen 91, 87 Mass. 91; Holliday v. Union Bag & Paper Co., 3 Colo. 342; Richardson v. Hogg, 38 Pa. 153. The view was commonly taken that the special or limited partner was essentially a general partner, with immunity from personal liability only on condition of full and exact compliance with the statutory requirements as to the details of formation of the association. Crane on Partnership, p. 81, § 26, note 15. At a later date some courts began to take a more liberal view, and to hold that 'substantial compliance' with the statutory terms was sufficient to free the special partner from liability. Thus, the statutes often provided that, at the time of filing the certificate of partnership, one of the general partners should file an affidavit stating that sums specified in the certificate of partnership to have been contributed by each of the special partners had actually been paid in cash; and they commonly further provided that any false statement in this affidavit would result in the alleged special partners being held liable as general partners. The earlier cases held that a statement that the payment had been made in cash when it had actually been made by check (and the check had not been presented for payment at the time of the filing of the affidavit), was a false statement within the meaning of the latter proviso, and rendered all parties to the transaction liable as general partners. Durant v. Abendroth, 69 N.Y. 148, 25 Am.Rep. 158; McGinnis v. Farrelly, C.C., 27 F. 33. (We may note that these cases, dated 1877 and 1886, respectively, are among those relied on by respondent here.) Later cases, in recognition of the fact that payment by check is commonly accepted as payment in cash, relaxed this rule, and, expressing the view that, in the situation described, it would be unreasonable to hold the special partner to general liability, refused to do so. Chick v. Robinson, 6 Cir., 95 F. 619, 52 L.R.A. 833; White v. Eiseman, 134 N.Y. 101, 31 N.E. 276.

But such liberality was by no means universal, and in any event did not extend to cases such as the one at bar, for the statutes commonly stated explicitly that, if publication of the certificate was not made as specified, the partnership should be treated as general. Even 'substantial compliance' demanded that the requirements for publication be satisfied. Smith v. Argall, 6 Hill, N.Y., 479, affirmed 3 Denio, N.Y., 435. If they were not, the partnership was deemed general. Davis v. Sanderlin, 119 N.C. 84, 25 S.E. 815. As Rem.Rev.Stat. § 9969, was indentical with the New York and North Carolina statutes in this respect, both the persuasive authority of the cases above cited, as well as the express wording of the statute itself, would doubtless compel us, if we held the statute binding, to find in the present case that appellant Griffith, in spite of his expressed intention to become a limited partner, was, as a matter of law, a general partner and liable as such.

But it was coming to be recognized that the strict interpretation being given to the limited partnership statutes by the courts, though it unquestionably carried out the intent of those responsible for the adoption of these statutes, was rendering this form of association commericially impracticable. See Commissioners' note to section 1 of the Uniform Limited Partnership Act, Vol. 8, Uniform Laws Annotated, p. 2. The limited partnership statutes were quite commonly coming to be regarded as a trap, In re Marcuse & Co., 7 Cir., 281 F. 928; for the fact that any minor deviations from the statutory provisions might have the effect of subjecting the 'limited' partners to unlimited liability, naturally rendered the limited partnership a hazardous means of obtaining limited liability, and, therefore, discourage its employment. Accordingly, in 1916, a Uniform Limited Partnership Act was drafted in order to remedy these deficiencies. It has since been adopted by more than half of the states, see Vol. 8, Uniform Laws Annotated, 1949 Supp., p. 6, and has been in effect in Washington since 1945. Rem.Supp.1945, §§ 9975-1 to 9975-30, inclusive. Mr. William Lewis, the draftsman of the new act, has written of it as follows: 'Practically all the differences between the new Uniform Act and the existing statut...