Spencer Kellogg & Sons, Inc. v. Lobban

• Decision Date: 11 July 1958
• Citation: 8 McCanless 79,315 S.W.2d 514,204 Tenn. 79
• Parties: , 204 Tenn. 79 SPENCER KELLOGG & SONS, INC. v. L. P. LOBBAN.
• Court: Tennessee Supreme Court

Page 514

315 S.W.2d 514

8 McCanless 79, 204 Tenn. 79

SPENCER KELLOGG & SONS, INC. v. L. P. LOBBAN.

Supreme Court of Tennessee.

July 11, 1958.

Lemle & Kelleher, New Orleans, La., Burch, Porter, Johnson & Brown, Memphis, for appellant.

Emmett W. Braden and J. E. McCadden, Armstrong, McCadden, Allen, Braden & Goodman, Memphis, of counsel, for appellee.

BURNETT, Justice.

In this case the appellant Spencer Kellogg & Sons, Inc., a New York corporation, sued the appellee, L. P. Lobban, for 10 tank cars of soybean oil in the sum of $75,497.80, which was sold by the appellant to a Louisiana partnership in which it is alleged that the appellee, Lobban, is a partner. There is no claim made in the bill that Lobban received any part of the proceeds of the contract, other than a broker's commission.

Lobban, as an individual, is engaged in the soybean oil brokerage business in Memphis, Tennessee, under the trade name of 'Pat Lobban & Company'. On January 11, 1957, he issued the usual and ordinary broker's slip confirming a sale by the appellant, in Buffalo, New York, to Red River Cotton Oil Company, Inc., of Alexandria, Louisiana, for 10 tank cars of crude soybean oil, Lobban signing the broker's slip 'as brokers only.' Appellant, in Buffalo, New York, prepared on its printed form, and signed, a contract for such 10 carloads of oil and forwarded it to Alexandria, Louisiana, where it was signed by the buyer 'Red River Cotton Oil Company, Inc., by J. E. Byram, Jr., Executive Vice President.' This is the contract sued upon in the original bill.

The bill alleges among other things that Lobban over a period of at least seven years had been a member of this Louisiana partnership; that he, as a broker, had been dealing with the appellant; that appellant did not know he was a partner, and that this partnership dealt with many others in addition to the appellant.

It is specifically alleged in the original bill:

'* * * that on September 30, 1950 an account was set up on the books of said corporation in the name of defendant, and thereafter and until May 8, 1957, the date of the last entry thereon, the transactions of said trading partnership were reflected in said account; * * *'.

The bill as originally filed, in addition to the sum set forth in the first paragraph hereof, also sued for certain refining costs which were later struck from the bill on or about the time the defendant Lobban plead thereto.

Lobban, the defendant below, appellee here, filed a motion to dismiss. As a basis for this motion he plead the law of Louisiana, as he had a right to do under Section 24-610, T.C.A. The effect of this motion is that under the Louisiana law a partner may not be sued until the partnership obligation has been established against the alleged partnership; that before a partner, as an individual, can become liable this partnership liability must be fixed as an obligation. The Chancellor rendered a long memorandum opinion in which he sustained the motion to dismiss and treated it as a demurrer on the theory that the law of Louisiana controlled; that it was substantive law rather than procedural law; and since the partnership had not been sued and its liability fixed that a suit against an individual partner could not be maintained in Tennessee.

Subsequent to the filing of this memorandum opinion by the Chancellor, the complainant, appellant here, was allowed to file an amended original bill. This amended original bill was filed 'for purposes of clarity in presentation.' In this amended original bill a great many allegations are made in reference to the dealing of these parties and it is sought by this amended original bill to shift the matter from that of a partnership, as alleged in the original bill, to a joint venture. Yet even with this amended bill and the many averments that are made therein the conclusion is inescapable that what is here sued on is as is set forth in the original bill as heretofore set out. The record does not show the comments, if any, made by the Chancellor on this amended original bill other than his final conclusion of treating the motion to dismiss as a demurrer and sustaining it and dismissing the action.

The Courts of Louisiana more than a century ago had this to say in reference to a partnership of that State: The Court in Smith v. McMicken, 3 La.Ann. 319, at pages 321, 322, said:

'The partnership once formed and put into action, becomes in contemplation of law, a moral being, distinct from the persons who compose it. It is a civil person, which has its peculiar rights and attributes.

'* * * the partners are not the owners of the partnership property. The idea being thus recognized by a fiction of law, is the owner; it has a right to control and administer the property, to enable it to fulfil its legal duties and obligations; and the respective parties, who associated themselves for the purpose of participating in the profits which may accrue, are not the owners of the property itself, but of the residuum which may be left from the entire partnership property, after the obligations of the partnership are discharged.'

This quotation and law as set forth therein has been followed from that time up to the present and is particularly quoted and adopted by the Chief Justice of Louisiana as late as 1956 in the case of Trappey v. Lumbermen's Mutual Casualty Co., 229 La. 632, 86 So.2d 515. Many cases are there cited by the Chief Justice as authority for this statement. We have read many of them and are satisfied that that is the law of Louisiana in reference to a partnership. Though of course Louisiana is concededly the only State in the Union having this partnership relationship.

This '* * * liability does not become enforceable against the individuals who compose the partnership, separate and apart from the firm, until it has been dissolved.' Hayes Machinery Co. v. Eastham, 147 La. 347, 84 So. 898, 900, or, as otherwise stated in the opinion,

'Until the debt is established contradictorily with the partnership, so long as it exists, there is no debt within the meaning of article 2872 of the Civil Code, which can be enforced against the individual partner.' [229 La. 632, 86 So. 517.]

And further, as said by the Chief Justice in the Trappey case:

'It is only '* * * when the partnership has been dissolved, (in which case) it ceases to exist as a separate entity, and the liability of the partners becomes fixed." Citing Hayes Machinery Co. v. Eastham, supra.

This last stated proposition was again restated citing many Louisiana cases therefor in the case of Harrison v. Frye, La.App., 46 So.2d 382, 384. It was there again recognized that an individual member of a partnership could not be sued or made a party defendant because the partnership in Louisiana was a legal entity, separate and distinct from the persons who composed it and that the members of this partnership do not owe any debt during the existence of the partnership unless the partnership itself was joined.

This same case (Harrison v. Frye, supra) sets forth the various ways under the Louisiana Code wherein a partnership is terminated. Among others is the death of one of the partners. The Court though says, not about death but about when a partnership is terminated:

'* * * the mere termination of a partnership does not have the effect, ipso facto, of extinguishing the concern as a legal entity. It remains as such for the purpose of liquidation and until its affairs are completely wound up. Duvic v. Home Finance Service, La.App., 23 So.2d 790; Guess & Albin v. Ham, La.App., 183 So. 61.'

We cite and quote this proposition, as to the termination of a partnership, for the reason that herein it is alleged that the Louisiana partner Byram is dead. Thus it is very forcefully argued as a result thereof that the partnership had terminated. Thus it is said that is is not necessary, even under the Louisiana law, to make the partnership a party defendant but that the appellee, defendant below, may be sued individually because, it is said, that the partnership terminated upon the death of the other partner. We cannot agree to this because it seems to us that common sense dictates the fact that until the affairs of this partnership are completely wound up it has not terminated. That is exactly what is held in the Harrison v. Frye case. This same reasoning, we think, would apply upon the death of a partner.

This same proposition was said in another way in the case of Montague v. Weil & Bro., 30 La.Ann. 50:

'It is also true that a commercial partnership exists for the purpose of its liquidation, after it has been dissolved, and the former partners may be sued in the Court of the firm domicil on the liabilities of the firm, and in a late case this doctrine was extended so as to permit them to be brought in by attachment, if they were non-residents. Lobdell v. Bushnell, 24 La.Ann. 295.'

The Supreme Court of Louisiana has decided very forcefully and very clearly that an individual partner may not be sued and is not liable for the debts and obligations until the partnership has been sued and remedies there exhausted. In the case of Rheuark v. Terminal Mud & Chemical Co., 213 La. 732, 35 So.2d 592, 594, the Court had this to say:

'Commercial partners are bound in solido for the debts of the partnership in the sense that they and each of them may ultimately be required to pay the whole of its debts; yet such solidary obligation is not a primary one, and, until the debt is established contradictorily with the partnership, so long as it exists, there is no debt within the meaning of Article 2872 of the Civil Code which can be enforced against the individual partners, and the partnership is a necessary party to the liquidation of such a claim. In other words, that liability does not become enforceable against the individual members who compose the commercial partnership separately and apart from the firm until it has been dissolved; so long as it...