Gilman Paint & Varnish Co. v. Legum

Marbury, C. J., delivered the opinion of the Court. The appellant sued the appellee, together with C. Eugene Tovell and Walter J. Levy, severally and as partners, trading as Tovell Construction Company, on an open account for four shipments of certain paint goods, the first of which was on January 10, 1948, and the last February 6, 1948. The balance due for these shipments is admitted to be $935.27. The goods were shipped from Chattanooga, Tennessee, to Greenville, Georgia, and each bill contains the notation: “F.O.B. CHATTA FRT ALLWD”.

The record is entirely silent as to where the order came from, although it may perhaps be presumed that it came from Greenville, Georgia, where the Tovell Construction Company was engaged in manufacturing. Suit was brought in the Baltimore City Court. Of the three defendants, only the appellee was summoned. ⁶⁶⁷ He filed the general issue pleas and a special plea, stating that he is a limited partner only of the Tovell Construction Company. The question to be decided in this case is what was his status at the time of the purchases from the appellant.

The case was heard before the court sitting without a jury, and it was held that he was only a limited partner and not liable to the appellant, and, therefore, a judgment was entered in his favor for costs. From this judgment the plaintiff appealed. On the first day of December, 1942, the appellee, whose address is given as Baltimore, Maryland, and C. Eugene Tovell, whose address is given as Reisterstown, Maryland, and Walter J. Levy, whose address is given as Baltimore, Maryland, filed a certificate of limited partnership under the name of Tovell Construction Company to extend two years from that date. This certificate, which was acknowledged by all the parties, and was recorded on December 17, 1942, in the Superior Court of Baltimore City, provided that Tovell and Levy were equal general partners, and Legum was the limited partner.

It listed the cash contributed by each of the general partners as $25,000.00, and by Legum as $150,000.00, and Legum’s share of the net profits was to be 38% per cent. A similar certificate extending the original agreement for another period of two years was acknowledged before a notary on December 1, 1944, but was not recorded until July 30, 1948. Another certificate, dated the 29th of December, 1945, extended the second certificate to January 31, 1946, after which it was to be automatically renewed from month to month until superseded or terminated. This was acknowledged on December 29, 1945, but was not recorded until July 30, 1948.

It appears, therefore, that at the time this merchandise was sold, there was nothing on record in Maryland which indicated that this limited partnership existed beyond December 1, 1944. The certificate on record set out that the time of return of the limited partner’s contribution was to be “Immediately upon winding up of partnership ⁶⁶⁸ affiairs as soon after expiration of term as possible.” The nature of the business was stated to be general construction and construction contracting, and the principal place of business, 403 West Monument Street, Baltimore. It appears from the record that the Tovell Construction Company was engaged in manufacturing prefabricated houses at different places in Georgia in 1948, and the appellant contends that as its shipments were to Georgia, the question of the status of the appellee should be determined by Georgia law. It states that this result is fortified because the Company had changed the nature of its business, was conducting a different kind of enterprise in Georgia, and that the latter State was its principal place of business.

These conclusions we do not find substantiated in the record, and we are unable to adopt them as facts. When a manufacturer receives an order from a business concern in another state, he is not required to investigate the records in all of the other states to find out what is the status of his would-be purchaser and. who compose it. But he cannot assume that his prospective purchaser is necessarily a corporation or a partnership of the state where the order is to be sent. All companies doing business in a state are not residents of that state.

It does not seem to be an unreasonable expectation that a careful shipper would ascertain what are the facts about the residence of the consignee before shipment is made. There is not the slightest evidence in the record that any inquiry was made by the appellant whether the Tovell Construction Company was a corporation or a partnership, or, if the latter, who composed the partners or in what state it was organized. None of the officers of the appellant, nor any of its employees connected with the shipment, testified in the case. Its counsel, who was called by the defendant, testified that he inserted on the invoices filed with the declaration, the names of Tovell, Levy and Legum as partners, that these were not on the invoices when he received them ⁶⁶⁹ from his client, and he got the names from his client when he asked who the Tovell Construction Company was.

The record does not disclose when his client found out who the partners of the Tovell Construction Company were, or how it found out. There is nothing to show that any representation was made to the appellant at any time that Legum was a partner, either general or special, nor is there anything to show that appellant relied upon the supposed fact that he was a general partner. If inquiry had been made, the appellant would have found that the three partners were all Marylanders, two of them being Baltimoreans. Appellant’s contracts were apparently consummated in Tennessee, as the deliveries were F.O.B. Chattanooga.

Park Beverage Co. v. Goebel Brewing Co., 197 Md. 369 , 79 A. 2d 157 . Under these circumstances, we think that the question of what kind of a partner the appellee was in January and February, 1948, must be decided according to Maryland law, because the actual facts show that the partners were all Marylanders, the partnership agreement was made in Maryland, it was a Maryland partnership in its inception, and no representations otherwise were made to the appellant. The Maryland law is the Uniform Limited Partnership Act, incorporated in Article 73 of the Code, and passed in 1918 by Chapter 280 of the acts of that year. There had been a previous statute which had been the subject of a number of decisions, notably Lineweaver v. Slagle, 64 Md. 465 , 2 A. 693 .

That decision followed the pattern of decisions in other states, and such decisions led to the adoption of the Uniform Act. In order to understand the purpose of these acts, it is necessary to go back to the common law and the earlier decisions. In the case of Waugh v. Carver (1793) 2 Henry Blackstone 235, it was held that the test of the existence of a partnership was profit-sharing. That decision was generally followed, although somewhat modified, and the Supreme Court of the United States in Meehan v. Valentine (1892) 145 U. S. 611 , 12 S. Ct. 972, 975 , 36 L. Ed. 835 , ⁶⁷⁰ said that those “who own and share the profits” are partners.

Limited partnerships, however, had been recognized by the civil law, and acts were passed in many of the states providing for them. The general purpose of these acts was not to assist creditors, but was to enable persons to invest their money in partnerships and share in the profits without being liable for more than the amount of money they had contributed. The reason for this was to encourage investing. The courts, however, continued to construe these partnership acts strictly, as in derogation of the common law, and it became evident that, as drawn, they did not accomplish the purpose for which they were intended.

Consequently, the National Conference of Commissioners on Uniform State Laws adopted a limited partnership act in 1917, and recommended it to the legislatures of the several states. The committee of the Conference which prepared the draft of the law was its committee on commercial law, the chairman of which was William Draper Lewis of the Law School of the University of Pennsylvania. A discussion of the act and its purposes will be found in an article by Mr. Lewis in University of Pennsylvania Law Review, Vol. 65, p. 715, published in June, 1917. In that article, he makes the following statement: “The act proceeds on the assumption that no public policy requires a person who contributes to the capital of a business, acquires an interest in the profits, and some degree of control over the conduct of the business, to become bound for the obligations of the business, provided creditors have no reason to believe at the times their credits were extended that such person was so bound.” The same statement is made in the Commissioners’ note to the Uniform Limited Partnership Act, 8 Un.

Laws Ann., p. 2. Section 11 of the Uniform Act (Art. 73, Sec. 11) reads as follows: “(Status of Person Erroneously Bebieving Himself a Limited Partner.) A person who has contributed to the capital of a business conducted by a person or partnership erroneously believing that he has ⁶⁷¹ become a limited partner in a limited partnership, is not, by reason of his exercise of the rights of a limited partner, a general partner with the person or in the partnership carrying on the business, or bound by the obligations of such person or partnership; provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business, or other compensation by way of income.” Section 28 (Art. 73, Sec. 28) establishes as one of the rules of construction that: “The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this article.” Section 6 (Art. 73, Sec. 6) provides: “(Liability for False Statements in Certificate.) If the certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew the statement to be false (a) At the time he signed the certificate, or (b) Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file a petition for its cancellation or amendment as provided in Section 25 (3).” The contention of the appellant in this case is that had it examined the records in Maryland in January or February, 1948, it would have found only the record of the limited partnership entered into in 1942 and ending in 1944, and therefore there was nothing on record to lead it to suppose that the appellee was a limited partner only, and as to it, he must be considered a general partner. However, there was then nothing on record to show that Legum continued as a partner at all after 1944, and, from the statements in the original limited partnership agreement, it might readily have been assumed that Legum’s share had been returned to him, and he was no longer a partner in any sense. As we have indicated earlier, there is nothing in the record to show that the appellant at any time prior to, or during, its transactions with the Tovell