CHAPTER XVII. OF THE EFFECT OF DISSOLUTION UPON THE RIGHTS AND AUTHORITY OF PARTNERS. § 399. In general. 1. Dissolution by Death. 400. Effect on rights and liabilities of the firm. 401. Effect on authority of firm as agent of third persons. 402, 403. Rights, powers and liabilities of the surviving partner. 404. Where there are several survivors. 405. Statutory changes in some states. 406. Uniform Partnership Act 407. Continuing business under provisions of will. 408. Continuing in pursuance of partnership articles. 409. Continuing in pursuance of personal agreements. 410. Provisions that survivor shall acquire interest of deceased. 411. Liability of estate of de- 2. Dissolution by Bankruptcy, 412. In general. 413. Bankruptcy, insolvency or assignment of entire firm. § 399. In general.—The partnership being dissolved for some sufficient reason, and due notice having been given when nec essary, it remains to be considered what is the effect of the dissolution, particularly as respects the powers and duties of the partners. For reasons which will be obvious, dissolution by death, which completely removes one of the partners, presents an aspect entirely different from that presented when dissolution results from any other cause, leaving all partners alive and capable or desirous of acting. The effect of death, therefore, must be separately considered. 1. Dissolution by Death. § 400. Effect on rights and liabilities of the firm.-Existing and vested rights of the partners are, of course, not destroyed by the death, though the legal ownership of them may be altered.1 Existing liabilities are not discharged, though the method of enforcing them may be changed.2 The firm not being an entity, continuing contracts of a personal sort are not necessarily discharged by the death of a partner as though the firm were dead,3 but as the continuance of the partnership may be an express or implied condition, its termination in fact by death may operate to terminate such a contract. The decisions in the case of contracts of employment by the firm are not in harmony.* 8 401. Effect on authority of firm as agent of third persons. -Where the firm, i. e., the partners jointly and collectively, has been appointed agent of a third person, the dissolution of the partnership by the death of one of the partners will ordinarily terminate that agency.5 1 See post, § 402. 2 See post, § 411. 3 See Hughes v. Gross (1896), 166 Mass. 61, 43 N. E. 1031, 55 Am. St. R. 375, 32 L. R. A. 620, Burd. Cas. 296. 4 That the contract is not terminated, see Fereira v. Sayres (1843), 5 Watts & S. (Pa.) 210, 40 Am. Dec. 496. Not where the firm in fact continues; Hughes v. Gross, supra. That it is terminated: Tasker v. Shepherd (1861), 6 Hurl. & N. 575; Burnet v. Hope (1885), 9 Ont. Rep. 10; Greggs v. Swift (1889), 82 Ga. 392, 9 S. E. 1062, 14 Am. St. R. 176, 5 L. R. A. 405; Greenburg v. Early (1893), 30 Abb. N. Cas. (N. Y.) 300. 5 See Mechem on Agency (2nd ed.) $ 673; Larson V. Newman (1909), 19 N. Dak. 153, 121 N. W. 202, 23 L. R. A. (N. S.) 849. § 402. Rights, powers and liabilities of the surviving partner. The death of one partner ordinarily operates, as has been seen, to dissolve the partnership. Such dissolution ordinarily operates instantly and ipso facto to terminate the authority of the survivors to continue the business or make new contracts, in the firm name. It also devolves upon the survivors peculiar rights and duties. Upon dissolution by death the entire legal title to all the partnership personalty passes to the surviving partner or partners; 7 and although the title to real estate ordinarily descends to the heir of the deceased partner who held it, the survivors, as has been seen, have the power in equity to make it available for the purpose of liquidating the demands against the partnership. They alone, to the exclusion of the representatives of the deceased partner, have the right to the possession of the partnership assets, and to collect or receive 6 See Lang v. Waring (1850), 17 Ala. 145; Big Four Implement Co. v. Keyser (1916), 99 Kan. 8, 161 Pac. 592, L. R. A. 1917 C. 166; First Nat. Bank v. Cody (1893), 93 Ga. 127, 19 S. E. 831 (though where it is a renewal note the assets may still be liable for the original debt): Central Sav. Bank v. Mead (1873), 52 Mo. 546; Macon Exch. Bank v. Tracy (1883), 77 Mo. 594; Bank of Port Gibson v. Baugh (1848), 9 Sm. & M. (Miss.) 290; Durant v. Pierson (1891), 124 N. Y. 444, 26 N. E. 1095, 21 Am. St. R. 686, 12 L. R. A. 146, Mechem's Cas. 525; Castle v. Reynolds (1840), 10 Watts (Pa.) 51; Bauer Grocer Co. v. McKee Shoe Co. (1899), 87 Ill. App. 434. Estate of deceased partner is not directly bound for debt so created; Bagel v. Miller (1903), 2 K. B. 212. 7 In Barry v. Briggs (1871), 22 Mich. 201, the rule is stated that a sole surviving partner has the entire legal title to all the partner ship assets. He has the right, acting honestly and with reasonable discretion and diligence, to dispose of them as he pleases, to settle all debts against the concern, to make any compromise he may deem necessary, and to turn the assets into an available and distributable form. See also Andrews v. Brown (1852), 21 Ala. 437, 56 Am. Dec. 252, Gilm. Cas. 267. 8 See ante, § 169; Shanks v. Klein (1881), 104 U. S. 18, 26 L. ed. 635, Mechem's Cas. 211, Ames' Cas. 597, Gilm. Cas. 269. 9 As to personalty see Hawkins v. Capron (1892), 17 R. I. 679, 24 Atl. 466, Mechem's Cas. 499; Andrews v. Brown (1852), 21 Ala. 437, 56 Am. Dec. 252; Starr v. Case (1882), 59 Iowa 491, 13 N. W. 645 (the library of a firm of lawyers); Murray v. Mumford (1826), 6 Cow. (N. Y.) 441 (the firm account books); Hewitt v. Hayes (1910), 204 Mass. 586, 90 N. E. 985, 27 L. R. A. (N. S.) 154. debts due the firm.10 Causes of action, being joint, at law, survive to or against them, and therefore they alone are the ones to sue or be sued in respect to partnership dealings.11 But while As to realty, while the legal title does not go to the survivor, he would have the right of a tenant in possession wherever the title stood in the name of both or of himself only; an undoubted right to the possession of whatever was necessary to enable him to close up the business; and a right to make available for partnership purposes any legal titles held in trust for the partnership. See Dyer v. Clark (1843), 5 Metc. (Mass.) 562, 39 Am. Dec. 697, Ames' Cas. 251; French v. Vanatta (1907), 83 Ark. 306, 104 S. W. 141; Sternberg v. Larkin (1897), 58 Kan. 201, 48 Pac. 861, 37 L. R. A. 195; Clark v. Fleischmann (1908), 81 Neb. 445, 116 N. W. 290. 66 sur 10 See Peters v. Davis (1811), 7 Mass. 257; Oakman v. Ins. Co. (1867), 98 Mass. 57; Belton v. Fisher (1867), 44 Ill. 32; Willson v. Nicholson (1878), 61 Ind. 241; Bassett v. Miller (1878), 39 Mich. 133. 11 Survivor sues in his own name, usually describing himself as vivor of himself and (the other partner) deceased.” Representatives of deceased partner not proper parties defendant to be joined with survivor in actions at law on partnership obligations. Childs v. Hyde (1859), 10 Iowa 294, 77 Am. Dec. 113; Voorhis v. Child's Exr. (1858), 17 N. Y. 354, Burd. Cas. 490, Gilm. Cas. 298. So, also, of equitable actions whose sole object is to enforce an accounting by the partnership. Rusling v. Brodhead (1896), 55 N. J. Eq. 200, 35 Atl. 841, Burd. Cas. 273. Representatives of deceased partner not necessary or proper parties plaintiff in actions to enforce rights belonging to the partnership: the survivor alone is the person to sue. Sterns v. Houghton (1866), 38 Vt. 583, Gilm. Cas. 273. In equity: Haig v. Gray (1850), 3 DeG. & S. 741, Burd. Cas. 246. So, of causes of action arising after the death: Bassett v. Miller (1878), 39 Mich. 133, Gilm. Cas. 271 (action for price of goods sold by survivor); Pfeffer v. Steiner (1873), 27 Mich. 537, Gilm. Cas. 272 (trespass to firm property in possession of survivor). Survivor in suing may join an individual claim with one accruing to him as survivor: Adams v. Hackett (1853), 27 N. H. 289, 59 Am. Dec. 376, Gilm. Cas. 274; Hancock v. Haywood (1789), 3 T. R. 433. In action by survivor on partnership claim, held, that defendant may set off claim against survivor personally: Holbrook v. Lackey (1847), 13 Metc. (Mass.) 132, 46 Am. Dec. 726, Mechem's Cas. 999; contra, Waln v. Hewes (1819), 5 Serg. & R. (Pa.) 468. A surviving partner, in a suit against him for a separate debt of his own, may set off a debt due to him and his deceased partner jointly: Slipper v. Stidstone (1794), 5 T. R. 493; Johnson v. Kaiser (1878), 40 N. J. L. 286; or in an action against him on a partnership debt, he may set off a debt due him personally: Lewis V. Culbertson (1824), 11 Serg. & R. (Pa.) 48, 14 Am. Dec. 607. The legal title to a judgment they may have the legal title, they are commonly said to hold it in a species of trust.12 It is their duty to collect and preserve the assets, to apply them to the payment of the debts, to close up the business with reasonable promptness,18 and to account to the representatives of the deceased partner for his share of the final balance.14 In their dealings with partnership assets, the surviving partners are charged with all the duties of fair recovered by the survivor as such is in him personally: Nehrbross v. Bliss (1882), 88 N. Y. 600, 2 Civ. Proc. R. 39, Burd. Cas. 246. But survivor cannot sue where he and his copartner while living could not have maintained an action: Patton v. Carr (1895), 117 N. Car. 176, 23 S. E. 182, Burd. Cas. 248. 12 The trust relationship is much more strongly stated in the American cases than in the English cases. See, for example, the remarks of Lord Westbury in Knox v. Gye (1872), L. R. 5 Eng. Ir. App. 656, and compare the views of the Lord Chancellor in the same case. For purposes of suit, the survivor is permitted to deal with the partnership claims very much as though he owned them. See Holbrook v. Lackey (1847), 13 Metc. (Mass.) 132, 46 Am. Dec. 726, Mechem's Cas. 999, and cases cited. Massachusetts cases speak of him as the absolute owner, though subject to a liability to account for the proceeds and for their application to partnership debts, etc. Hewitt v. Hayes, supra. Nevertheless, he is not the unqualified owner. For example, his interest in the partnership property which can be reached by his individual creditor in competition with firm creditors, is not increased. Maddock v. Skinker (1896), 93 Va. 479, 25 S. E. 535, Burd. Cas. 250. See also Richardson v. Redd (1896), 118 N. Car. 677, 24 S. E. 420, Burd. Cas. 260. 18 See Clay v. Field (1888), 34 Fed. 375; 115 U. S. 260; 118 U. S. 97; Gable v. Williams (1882), 59 Md. 46; Roach v. Brannon, supra. He has large discretion as to methods, if acting in good faith. Is not obliged to apply assets pro rata on all debts, but may make preferences, if no statute forbids. As to the duty of the survivor to preserve the good will for the benefit of the partners, and his liability if he appropriates it to himself, see Hutchinson v. Nay (1903), *183 Mass. 355, 67 N. E. 601, Mechem's Cas. 838, s. c., 187 Mass. 262, 72 N. E. 974, 105 Am. St. R. 390, 68 L. R. A. 186, Mechem's Cas. 842; Costa v. Costa (1915), 222 Mass. 280, 110 N. E. 309; Rowell v. Rowell (1904), 122 Wis. 1, 99 N. W. 473; Rammelsberg v. Mitchell (1875), 29 Ohio St. 22; Lobeck v. Lee, etc. Hardware Co. (1893), 37 Neb. 158, 55 N. W. 650, 23 L. R. A. 795; Joseph v. Herzig (1910), 198 N. Y. 456, 92 N. E. 103; Dyer v. Shove (1897), 20 R. I. 259, 38 Atl. 498, Burd. Cas. 605. 14 See Valentine v. Wysor (1890), 123 Ind. 47, 23 N. E. 1076, 7 L. R. A. 788, Mechem's Cas. 500, Gilm. Cas. 275. |