Seligman v. Friedlander

• Decision Date: 25 October 1910
• Citation: 92 N.E. 1047,199 N.Y. 373
• Parties: SELIGMAN v. FRIEDLANDER.
• Court: New York Court of Appeals Court of Appeals

199 N.Y. 373

92 N.E. 1047

SELIGMAN

v.FRIEDLANDER.

Court of Appeals of New York.

Oct. 25, 1910.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Joseph Seligman against Albert Friedlander. From an order of the Appellate Division (138 App. Div. 784,123 N. Y. Supp. 583) reversing an order at Special Term denying a motion to revive an action and for leave to serve a supplemental complaint, defendant appeals on certified questions. Affirmed, and the questions answered as stated.

See, also, 124 N. Y. Supp. 1129.

Prior to the 1st of December, 1901, Albert Friedlander, Albert S. Faber, and Edwin Potosky formed a copartnership under the firm name of A. Friedlander & Co., which was to continue until December 1, 1907. On the 3d of May, 1906, Potosky assigned to said Friedlander ‘his entire interest in the assets and liabilities of said copartnership business,’ and on the 22d of the same month Faber transferred all his interest in the firm assets to Friedlander, who assumed all the copartnership liabilities.

In January, 1908, this action was commenced to recover a claim against said firm alleged to have accrued in 1901 and to have become due on the 1st of December, 1902. It is a strict action at law with no averment of special facts. Each member of the firm was named as a party defendant in the summons, but process was served upon Mr. Friedlander only. On the 2d of June, 1909, Friedlander died, leaving a last will and testament which was duly admitted to probate and lsaac L. Spiegelberg and Marie Friedlander were, respectively, appointed executor and executrix thereof. About the 1st of February, 1910, upon the stipulation of the attorneys for the plaintiff and the defendant, Friedlander, the action was discontinued as against Potosky and Faber, who had not appeared therein, and on the 28th of March following a motion, made to revive the action and to substitute the executors as defendants, was denied at Special Term; but on appeal to the Appellate Division the order was reversed and the motion granted. Leave to appeal from the order of the Appellate Division having been obtained, the following questions were certified to this court:

‘First. Did section 6, chapter 420, of the Laws of 1897, being the partnership law, make the partners in a general partnership jointly and severally liable to the creditors of the firm?

‘Second. Was the plaintiff entitled to an order reviving this action and substituting the personal representatives of Albert Friedlander, deceased, as defendants?’Edmond E. Wise, for appellant.

Frederick M. Czaki, for respondent.

VANN, J. (after stating the facts as above).

The learned justices of the Appellate Division were of the opinion that, by virtue of a statute known as the partnership law, copartners are liable severally as well as jointly and at law as well as in equity. Although this innovation on the common law is held to have been in force for nearly 14 years, the bar, the courts, and the public apparently had not realized that such a change had been made, or that it was seriously claimed to have been made, until the decision now under review was announced. This conclusion was based on section 6 of the partnership law passed in 1897, and when that section is read by itself the position of the Appellate Division seems tenable, but when read in connection with the common law and all the statutes on the subject, as well as its own context, we do not regard it as sound.

At common law the liability of copartners was joint, although it was several in equity. The fundamental principle upon which the partnership relation is founded is that of a joint adventure, with joint ownership of assets and only joint liability for debts, unless the property held jointly is insufficient to pay the firm debts, or it appears that there can be no effective remedy without resort to individual property. Lawrence v. Trustees of Leake & Watts Orphan House, 2 Denio, 577;Voorhis v. Childs' Ex'r, 17 N. Y. 354;Richter v. Poppenhausen, 42 N. Y. 373;Pope v. Cole, 55 N. Y. 124, 14 Am. Rep. 198. Hence, for time out of mind, the representatives of a deceased partner could not be sued at law unless the surviving partners were insolvent, or some other special reason of an equitable nature existed. The theory of the law was that the joint liabilities should be paid from the joint property if possible, and not until that remedy was exhausted, or resort thereto shown to be useless, could payment from the individual property be exacted.

The Legislature, of course, has power to change both rules of liability and rules of procedure. Courts, however, presume that a radical change in the common law by statute, especially when the change affects title to property or rules of liability, will be expressed with the clearness which the importance of the subject demands, or so that its meaning is unmistakable. In the effort to discover the exact intention of a statute claimed to effect such a change, the history of legislation upon the subject will be carefully examined and all the statutes affecting it read together. Construction will not be based on a single section, which, when read by itself, appears to overturn a well-established principle of the common law, but that section will be read in connection with all the commands of the Legislature relating to the matter, and the intention thus gathered from its command as a whole.

Action by the Legislature in relation to the law of partnership has been infrequent and, as we view it, unimportant, except that limited partnerships were long since authorized with special partners, who, under special circumstances, are not personally liable for the debts of the firm, although the capital contributed by them becomes part of the general assets. This change, which was the earliest and, as we think, the only one of a substantial nature ever made by the Legislature affecting the liability of copartners, was first dealt with by chapter 244 of the Laws of 1822, entitled ‘An act relative to partnerships.’ By the third section of that statute it was provided: ‘That partnerships, to be formed under this act, shall consist of one or more partners, jointly and severally responsible according to the existing laws and rules of law on that subject, who shall be called joint partners; and one or more partners, who furnish certain funds or capital to the common stock, whose liability shall extend no further than the fund which he or they have furnished to the partnership stock and who shall be called special partners.’ The Revised Statutes of 1827-28 are substantially the same. 1 Rev. St. (1st Ed.) pt. 2, c. 4, tit. 1, p. 763. As already appears, according to the law existing when the act of 1822 was passed, partners were liable jointly at law and severally in equity, or on proof of special facts. Hence no change was then made as to the liability of partners, proper, for the common law upon the subject was expressly recognized, although the new relation of special partner was authorized with exemption from personal liability, upon compliance with the provisions of the act.

Section 758 of the Code of Civil Procedure, as amended in 1877, provides that: ‘In case of the death of one of two or more plaintiffs, or one of two or more defendants, if the entire cause of action survives to or against the others, the action may proceed in favor of or against the survivors. But,’ as the section continues, 'the estate of a person or party jointly liable upon contract with others shall not be discharged by his death, and the court may make an order to bring in the proper representative of the decedent, when it is necessary so to do, for the proper disposition of the matter; and, where the liability is several as well as joint, may order a severance of the action so that it may proceed separately against the representative of the decedent, and against the surviving defendant or defendants.' Laws 1877, c. 416, § 1, subd. 169. This amendment, while addressed to joint debtors, is held to apply to copartners. It was passed to change the rule laid down in Wood v. Fisk, 63 N. Y. 245, 20 Am. Rep. 528,Hauck v. Craighead, 67 N. Y. 432, and Risley v. Brown, 67 N. Y. 160, which decided that where one of two sureties in an undertaking in the ordinary form, given upon an appeal, died, his estate was absolutely discharged, and the survivor only was liable. Stover's Annotated Code, § 758, note. This section did not change the rule of...