Andrews v. Stinson

Apr 18, 1912
Versions:254 Ill. 111
98 N.E. 222
Mr. Chief Justice Carter

delivered the opinion of the court:

The principal point discussed in the briefs is whether the two contracts executed by said executors and the surviving partners, Hand and Stinson, (in connection with the authority granted in Andrews’ will,) constituted a continuation of the old or the creation of a new partnership. The death of either partner is, ipso facto, from the time of the death a dissolution of the partnership. (Remick v. Emig, 42 Ill. 343; Nelson v. Hayner, 66 id. 487; Douthart v. Logan, 190 id. 243.) And this is the general rule in other jurisdictions. (22 Am. & Eng. Ency. of Law,—2d ed.— 199, and cases cited; 30 Cyc. 620, and cases cited.) It is sometimes said that a stipulation in the articles of partnership providing for its continuation after the death of the partner is binding upon the heirs or representatives of the deceased partner. Such agreements may be binding upon the surviving partners, (22 Am. & Eng. Ency. of Law,— 2d ed.—202,) but it is at the option of the representatives, and if they do not consent, the death of the party puts an end to the partnership. (3 Kent’s Com.—14th ed.—57, and note; Buckingham v. Morrison, 136 Ill. 437.) The surviving partners, on the dissolution of the'firm by the death of one of the members, are charged with the duty of proceeding at once to settle up the partnership estate. They become trustees as to the deceased partner’s interest, and while there is a community of interest between themselves and the representatives of the deceased partner in the adjustment of the partnership affairs, the partnership, for that purpose, only has a limited continuance. (Nelson v. Hayner, supra; Douthart v. Logan, supra.) If they continue business’ they do it at their own peril. They have no lawful right to expend the money of the firm in new enterprises, however necessary the expenditure may be to the conduct of the business. (Remick v. Emig, supra.) While a surviving partner in mercantile business may make small purchases of material to render the stock more salable, he has no power to make large purchases intended to continue the business. (Oliver v. Forrester, 96 Ill. 315.) The surviving partners, under the law, are required to wind up and close out the business, and, after paying the firm debts, to distribute the assets among the surviving partners and the representatives of the deceased partner. 1 Woerner’s Am. Law of Administration, (2d ed.) sec. 124; 22 Am. & Eng. Ency. of Law, (2d ed.) 200; 30 Cyc. 636.

Where there are provisions in the articles of agreement or will for the continuance of the business after the death of one of the partners, it is sometimes inaccurately said that the death of the partner does not dissolve the partnership. If the business is carried on after the death of the partner under such arrangement or by the agreement of the heirs or personal representatives of the deceased, there is, in effect and in law, a new partnership, of which the survivors and the executors or heirs are the members, the new members becoming liable, as the old, to the creditors of the firm. (22 Am. & Eng. Ency. of Law,—2d ed.—201, and cases cited; 1 Woerner’s Am. Law. of Administration,—2d ed.—sec. 123; Exchange Bank v. Tracy, 77 Mo. 594; McGrath v. Cowen, 57 Ohio St. 385; Madison v. Farnham, 44 Minn. 95; Jones & Cunningham’s Pr.— 2d ed.—82; Parsons on Partnership,—3d ed.—*439. See, also, 1 Bates on Partnership, sec. 52; Owens v. Mackall, 33 Md. 382.) A reference to the authorities will disclose that while the above rule of law is not followed in some jurisdictions, the weight of authority, as well as sound reason, is in accord therewith. Under this reasoning it must be held that the agreements entered info by the executors and surviving partners created a new partnership.

It is insisted by counsel for defendants in error that the executors had nothing to do with carrying on or conducting the business under either, of these agreements, and therefore they cannot be held to be partners. Nothing is said in either agreement to that effect. Under the original partnership agreement Stinson and Hand were to attend to all the details of the business and Baker P. Andrews was to give only such time and attention as he desired. The first extension agreement distinctly provided that the only modification was to extend the agreement until January 15, 1908, “without in any way altering, changing or modifying any of the other terms or provisions thereof.” Undfer the agreement executed by the executors and surviving partners on March 12, 1908, there was a provision that each party should draw out from the profits of the business $250 a month, the executors of the estate of Baker P. Andrews being considered as one of the parties, and this was stated to be in full compensation for all claims for services in conducting or in any manner carrying on the said business. Monthly reports were to be made to them, as formerly. Except as changed and modified by the last mentioned agreement as to the proportionate interests of the parties, manifestly the executors, as representatives of the estate, had as much power and control over the business under the agreement of August 9, 1907,, and that of March 12, 1908, as did Baker P. Andrews in his lifetime. Furthermore, it must be held that said agreement of March 12, 1908, is a full settlement and accounting of the affairs of the old firm, such settlement being conclusive upon the executors. The personal representatives of a deceased member of a firm may adjust the affairs of a partnership with the surviving partners, and in the absence of fraud or mistake the settlement is conclusive upon the parties and all persons claiming through them. Sage v. Woodin, 66 N. Y. 578; Kimball v. Lincoln, 99 Ill. 578; 2 Lindley on Partnership, (Ewell’s ed.) *1069; Holliday v. Land and River Improvement Co. 57 Fed. Rep. 774; Sternberg v. Larkin, 58 Kan. 201.

Under this condition of affairs, could the county cotirt of Logan county, under sections 87 to 90 of the Administration act, (Hurd’s Stat. 1909, pp. 127, 128,) -compel the surviving partners of the old firm to comply with the prayer of the amended petition of the executors? Sections 87 and 88 provide that the surviving partner or partners shall, within sixty days after the death of the partner, file a full, true and complete inventory of the estate of the co-partnership, and also a complete list of the liabilities at the time of the death o'f the deceased partner. This, according to the pleadings, was done by the surviving partners. Section 89 provides that the surviving partners shall continue in possession of the effects of the partnership and proceed to settle its business. Section 90 provides that upon the committal of waste by the surviving partner or partners, the court may, upon proper application, protect the estate by citing the surviving partner or partners and require them to give security, and, if necessary, appoint a receiver for the property. It has been held by this court that these sections of the statute are practically cumulative and do not provide new remedies with reference to the closing up of the estate, (Nelson v. Hayner, supra,) and that such remedies are not exclusive of the ordinary jurisdiction of a court of equity. (Breckenridge v. Ostrom, 79 Ill. 71.) Under a fair construction we think these provisions of the statute simply authorize the county court to require an accounting and to preserve the property until such an accounting is had. While the county court has general equity powers to compel the accounting, these sections of the statute afford no remedy and confer no rights' upon anyone except the executors, administrators or heirs of the deceased members of the firm. Undoubtedly, a county (or probate) court has the authority, under these sections, to require the surviving partners of an original partnership to make an accounting, but if they show that they have settled with the executors of a deceased partner’s estate, said county court cannot compel them to make a further accounting to that court unless it appears there was fraud' or mistake in such account and settlement.

The plea of plaintiff in error to the amended petition is considered and treated in the briefs of both parties as if it were a plea in abatement at common law. This proceeding is statutory and of a summary character. The pleadings should be more in the nature of pleadings in chancery than at common law but need not follow strictly the forms of either. This plea, while perhaps subject to some criticism as to arrangement and wording, shows with sufficient clearness and certainty that the said two contracts entered into between the executors and the surviving partners created a new partnership between said executors and said surviving partners, and that the contract of March 12, 1908, was a settlement and adjustment of the old partnership accounts. The plea, in effect, amounted to a plea of a stated account in equity. The demurrer of defendants in error admitted the truth of the allegations set out therein. The plea, therefore, precluded the petitioners from obtaining the relief prayed for in the said amended petition. It showed that there had been a settlement and that the property of the old partnership had been turned over to the new partnership.

The judgment of the Appellate Court and the decree of the circuit court must be reversed and the cause remanded to the circuit court, with directions to that court to overrule defendants in error’s demurrer to the plea and for further proceedings in harmony with the views herein expressed. with directions.

Reversed and remanded, with directions.