| Ill. | Sep 28, 1880
Lead Opinion
delivered the opinion of the Court:
When Byerson died, both firms Avere dissolved. It terminated the firm of Byerson & Johnson, as lumber dealers, and the partnership of Byerson, Johnson and Tarrant, doing business under the name of Tarrant & Co., as manufacturers of lumber.
Under the well settled rules of law, when these partnerships were terminated, the surviving partners of neither firm had power to continue the business of the firms, but were then required to wind up and close the business, and after paying the firm debts, to distribute the proceeds of the assets amongst the surviving partners arid the representatives of the deceased partner. After Byerson’s death, Johnson had no legal authority to purchase lumber and continue the business, so as to bind Byerson’s representatives, or his estate. It was his duty to sell the property, collect the debts due the firm, within a reasonable time, and account with Byerson’s. executrix for all sums she was entitled to receive, after paying the debts OAving by the firm.
Nor did Tarrant and Johnson, as remaining partners of the firm of Tarrant & Co., have the right to purchase logs, manufacture lumber, and ship it to Chicago for sale, so as to bind the estate of Ryerson. There was no such authority conferred by the articles of co-partnership, and it was forbidden by law. Hence, they could not continue the business so as to bind Ryersou’s estate for any loss thereby occasioned. It only remained for them to wind up the business of the co-partnership, and account for and distribute the surplus amongst themselves and the executrix.
But it is urged that there was an agreement entered into by Ryerson, Johnson and Tarrant, after the co-partnership of Tarrant & Co. was formed to buy logs and manufacture lumber in Michigan; that when it should be sawed, it should be shipped to the lumber yard of Ryerson & Johnson, in Chicago, to be sold. And that Ryerson & Johnson agreed to guarantee to Tarrant the cargo price of such lumber, and, if profits were realized, they were to be divided between the partners; and that when Ryerson died, Tarrant, under that agreement, shipped lumber to Johnson, and he received and held it on the same terms and under the agreement, and it was burned, and that Ryerson’s estate should bear half of the loss.
On Ryerson’s death all knew that it ended the partnership as to all unexecuted portions of the partnership agreement. Being terminated, the survivors had no authority to proceed to carry out the agreement and execute its provisions. And if such unexecuted provisions of the articles of co-partnership can not be carried out by the survivors, by what rule can this verbal agreement between themselves alone, relating entirely to the partnership business, and which agreement was entirely dependent, at least on the continuance of the firm of Tarrant & Co. for its performance, be carried on till it was performed, notwithstanding the dissolution of both firms? When they terminated, this verbal agreement being wholly dependent for its performance on the continuance of the firms and their business, it was also terminated at the same time and by the same event.
If it be claimed that the surviving partners were bound to execute contracts entered into by the firm, it may be answered that if the proposition is true, it is so only as to contracts entered into with persons not members of the firm, and not to contracts made between the several members of the firm as to the mode of conducting the business of the firm. We know of no rule that requires the surviving partners to continue the business of the firm so as to execute and carry into effect agreements as to the mode of carrying on the business. Suppose it had been agreed between the partners of the firm of Tarrant & Co. that on a future specified date the firm would purchase laud, erect large and expensive mills, and purchase logs, manufacture lumber and sell it on the market, in commotion with their other partnership business, and Ryerson had died before the time arrived, would any one contend that the surviving partners could go on and carry out the agreement, using the funds of the partnerships for the purpose, and thus bind Everson’s estate? We apprehend not. And although the case supposed may be extreme, it is apprehended both depend on precisely the same principle, and that no well founded distinction can be made. This unexecuted agreement, as to the mode of transacting the firm business, therefore fell with the termination of the firms themselves. As it was dependent on the continuance of the business of the firms, the power to perform its unexecuted portions fell with the ending of the firms themselves. And Tarrant had no legal right to continue to ship, or Johnson to receive, lumber under the agreement. All that was shipped subsequent to Ryerson’s death was therefore not under the agreement, and Ryerson’s estate is liable for no portion of its loss, and the decree of the circuit court was wrong in allowing Johnson to retain the money of the firm of Ryerson & Johnson to pay for its loss.
Again, Johnson purchased a cargo of lumber after Ryerson’s death, placed it in the yard where it was burnt, and he claims that Ryerson’s estate should bear one-half of that loss. Whilst it is conceded that a surviving partner in mercantile business may make small purchases of some articles of the stock to render it more saleable, and to enable him to close it out, he has no power to make large purchases intended to continue the business. We perceive no necessity of purchasing a cargo of lumber consisting, perhaps, of lumber of the usual varieties and grades, amounting no doubt to a considerable sum. If this be true, then Ryerson’s estate should not be held liable for any portion of the loss by its destruction.
Johnson, however, had the right to delay a reasonable time in making sales of the lumber on hand. He was not bound to force it on the market when there was but little demand, and thus sacrifice the property. If the season was dull when Ryerson died, and from the course of trade there was reason to believe that in a few months the demand would revive, Johnson had the right to wait a reasonable time, for the purpose of procuring better prices, and avoiding loss. The evidence shows that Ryerson died in one of the dullest seasons of the year, and that past experience tended to establish the fact that prices would be better in the following autumn, and mere delay, under the circumstances, seems not to have been unreasonable. Johnson should, therefore, not be charged on that account with the entire loss of the lumber on hand at the termination of the partnership. The estate of Ryerson should bear its proportion of that loss. But Johnson should bear the loss of the lumber received by him after Ryerson’s death.
According to the views here expressed, the Appellate Court erred in holding that Johnson’s estate should account for half of the lumber held by the firm at the time of Ryerson’s death, and which was destroyed by fire. If Johnson paid Tarrant with funds of the firm of Ryerson & Johnson, for the lumber shipped to Johnson after Eyerson’s death, and it was burnt, his estate has no right to retain the portion of the money thus paid to which Byerson’s estate would be entitled had such lumber not been shipped and burnt. And Johnson’s estate should account as though such shipment had never been made or loss sustained. . Nor is Eyerson’s estate chargeable with any portion of the loss of the cargo purchased after the partnership was terminated, and the executrix, on stating the account, should not be charged with any portion of that loss.
The record does not show whether after the death of Byerson the business was so managed by Johnson that his transactions in the lumber received by him from these Michigan mills, and in the cargo of lumber bought in the market, were conducted in such manner that they can be distinguished from his transactions in the lumber and other property of Byerson & Johnson on hand at the time of Byerson’s death. If the business was so transacted, and any part of the lumber (on hand at the death of Byerson) was destroyed by fire in October, 1871, in such case Byerson’s estate should bear one-half of that loss, but should not be charged with any part of the loss of .lumber received after his death, from the Michigan mills, or with any part of the loss, if any, of the cargo of lumber bought in the market by Johnson.
We think, from an examination of the facts, so far as shown in this record, that Johnson did not intend to continue the business of the firm of Byerson & Johnson, in the sense condemned by the law, but that he acted on the mistaken idea that he was bound, as surviving partner of Byerson, to complete and perform the agreement made by them with Tarrant, to continue to receive, take and dispose of, and account for, the lumber from the Michigan mills. We are not, therefore, prepared, on the evidence in this record, to require him to be charged as with a conversion of the whole of the partnership property; nor, should he be so charged unless it appeared the business was in fact so transacted by him as to inseparably commingle the property proper of the late firm of Ryerson & Johnson with that which was put in the yard after Ryerson’s death, so that the amount thereof can not be distinguished from the cargo bought in the market and from the Michigan mills. Of course, if the lumber was so commingled, and the books so kept, that the one can not be distinguished from the other, in that case Johnson was liable to be treated as having converted the assets of the late firm to his own use, and should be held to account for the value of Ryerson’s net interest in those assets at the time of his death, and interest thereon.
The Appellate Court, in reversing the decree of the circuit court, did right; but that court erred in rendering a final decree upon this record for a specific amount.
The decree of the Appellate Court is reversed, and the cause remanded to that court, with directions to remand the cause to the circuit court, that an account may be taken, in some appropriate mode, in accord with the views herein expressed.
Deoree reversed.
Dissenting Opinion
dissenting:
I do not concur with a majority of the court in the decision of this case.
Two questions of law arise upon the record:
1. Whether Johnson became personally liable for the loss occasioned to the estate of Ryerson by the fire of October 8 and 9, 1871, by continuing the business of the firm after the death of Ryerson in the manner shown by the evidence, and by using in the business the stock of lumber, and other property of the firm, together with the lumber product of the mill of Esau Tarrant & Co., delivered under the contract of Ryerson & Johnson with that firm, instead of selling the same at once upon Ryerson’s death and realizing the proceeds for the estate.
2. Whether the act of March 26, 1869, requiring a surviving partner to settle the partnership estate in accordance with its provisions, did not forbid Johnson using the property of the firm in the manner shown by the evidence, and subjecting it to the risk of loss attending such a course, even if the representatives of the deceased partner consented to it, or failed to object.
Fyerson, as appears, died July 11, 1871, and the lumber for which appellee seeks to hold the estate of Johnson liable was destroyed by fire October 8 and 9, of the same year, in Johnson’s possession as a surviving member of the firm of Fyerson & Johnson.
It is contended by appellee that, as Johnson continued the business of the firm after the death of his partner Fyerson, his estate is liable for the loss that occurred by the fire.
Did Johnson continue the business in such a manner that the law would regard him as holding the partnership assets and property at his own risk ?
On the death of Fyerson, Johnson, as surviving partner, had the right to dispose of the partnership property, collect the debts due the firm, and pay the partnership liabilities from the proceeds of the assets. He was entitled to a reasonable time to dispose of the property, and it was his duty to realize as large an amount from the sale of the partnership property as reasonably could be made by the exercise of a proper business talent.
It appears that Johnson was a careful, prudent business man, and conducted the business to the best of his ability. That at the time of Fyerson’s death, thd firm was a joint owner with Esau Tarrant of a saw mill at Muskegon, Michigan, and of a large stock of saw logs at the mill, which it was necessary to manufacture into lumber, in order to dispose of the same in a profitable manner; that there was a written article of co-partnership, dated November 8, 1870, to continue one year, between Tarrant and the firm of Fyerson & Johnson; that each had a capital of $15,000 in the business.
It also appeared that a verbal contract had been made between Tarrant and Fyerson & Johnson, that all the lumber manufactured at the mill during the season of 1871 should go to the yard of Ryerson & Johnson, in Chicago, and they were to pay E. Tarrant & Co. the market price for the same.
It also appears that 9,520,000 feet of lumber was cut at the mill that season, and shipped under the contract to the firm at Chicago, about one-half of which was sawed after the death of Ryerson.
When Ryerson died, there was in the yard a large stock of green lumber, all of which, together with the lumber put in the yard after Ryerson’s death, except one cargo, was manufactured at the mill of Tarrant & Co.
It also appeared, from the evidence of lumber dealers, that it was greatly to the advantage of the business, and the firm interests and prudent management required that the business should be continued in the regular way during the season, and it could not be closed to advantage, nor without sacrifice, until in the fall or the following spring.
It also appeared that the entire stock of lumber, and other property in the yard, was destroyed, without any fault or negligence of any person, by the fire of October 8 and 9, the net loss of the firm being $43,782.19.
Now, while it was possible for Johnson to have disposed of the lumber on hand, when Ryerson died, before the fire, yet it is evident, from the facts, that he could not have done so without great loss to the firm. The great bulk of the lumber was green, and at that season of the year unsaleable. By holding it until fall, it would have been marketable, and could then have been sold without loss to the firm.
Under such circumstances, we do not regard it the duty of the surviving partner to sell at once, and at all hazards, the property. Indeed, had Johnson proceeded immediately, and. made sale of the property at a sacrifice, at that season of the year, when it was unsaleable, there would have been much more reason for holding him responsible for the loss than now.
Johnson was entitled to a reasonable time to settle up the affairs of the firm. Was three months an unreasonable time, taking into consideration the nature of the property and the season of the year?
.It would, under the evidence in this case, be establishing, not only an arbitrary, but a hard rule, to hold that Johnson was compelled at all hazards to sell the property within three months, and yet the fire occurred less than three months after Ryerson’s death.
There is another fact to be considered. Johnson was bound to receive the lumber cut at the mill of Tarrant & Co. or else respond in damages for a breach of the contract, notwithstanding the death of his partner. There was no lumber purchased by Johnson after the death of his partner, except one cargo. The lumber received came from the mill of Tarrant & Co., and was received under a contract made long before the death of Ryerson. This he was bound to receive. Johnson had the right to collect whatever was due the firm. He had the right to sell the firm property. He' was bound to receive lumber of Tarrant & Co. under the contract. How, for the reason he has done what the law gave him the right to do, and what he was bound to do, it is contended he continued the partnership business on his own account, and must be held accountable for losses not caused by his fault.
In Nelson v. Hayner, 66 Ill. 487" date_filed="1873-01-15" court="Ill." case_name="Nelson v. Hayner">66 Ill. 487, it was held that the death of either partner is ipso facto from the time of the death a dissolution of the partnership; but in the same case it is said: “ notwithstanding such dissolution, a community of interest still exists between the survivor and the representatives of the deceased partner, and the representatives have a right to insist on the application of the joint property to the payment of the joint debts and a due distribution of the surplus. So long as these objects remain to be accomplished, the partnership may be considered as having a limited continuance.” See, also, Cow on Partnership, where the same doctrine is announced.
The partnership was dissolved upon the death of Ryerson, but although dissolved, it continued for the purpose of closing up the affairs of the firm. Burkhart v. Drener, 4 De Gex, M. & G. 542.
We think Johnson was only required to use reasonable care and diligence in closing out the business, as held in Moore v. Huntington, 17 Wall. 417" date_filed="1873-10-20" court="SCOTUS" case_name="Moore v. Huntington">17 Wall. 417, and when this was done he could only be held liable for the amount realized from the partnership assets, for which he has fully accounted.
In regard to the second proposition, we perceive nothing in the act of 1869 which prevented Johnson from settling up the affairs of the firm in the manner he did. As was held in Nelson v. Hayner, 66 Ill. 487, the act of 1869 contains nothing which changes the nature of the relation between the surviving partner and the representatives of the deceased partner. “ It is to be considered as confirmatory of their respective rights as previously recognized by equity.”
But it is said no inventory was filed by Johnson. Whether an inventory and appraisement of the assets of the firm were made and returned to the county court within sixty days afcer the death of Ryerson, the record is silent, but if it was not done, the failure to observe this requirement of the statute could not affect this case. Ho loss occurred for the reason an appraisement and inventory was not returned. If such was the fact, it is not claimed that Johnson received any of the assets of the firm or converted them to his own use. Hor is there any dispute in regard to the amount of the property, its quality or value. In what manner, then, appellee was damaged, if Johnson failed to observe these provisions of the statute, is not apparent. If no loss occurred, upon what principle can Johnson be held liable? We are aware of none.
Under the second section of the act the representatives of the deceased partner might have compelled the return of an inventory and appraisement if they had desired it, and the fact that they never required it, raises the presumption that they did not regard it of any benefit or importance. Had the surviving partner, Johnson, purchased heavy bills of goods and carried on the business in the same manner as it was transacted before Byerson’s death, as it was insisted in the argument he did, the case would have been different, but such was not done. He received lumber which had been bought before his partner’s death, which he was bound to do or pay such damages as would have been recovered for a breach of the contract, and this was all the lumber received into the yard except one cargo, which is not of sufficient importance to change the result.
The law undeniably requires a surviving partner to proceed with all reasonable dispatch and close up the business of the firm, and where loss has occurred for a failure to observe this duty, it should be borne by the one in default, but what might be regarded as a reasonable time in one case could not be so regarded in another. Under the circumstances of this case, less than three months could not be regarded time sufficient to dispose of the property, and as "it was consumed by fire within that time without the fault of Johnson, he can not be held liable.
Scott, J.: I concur in this dissenting opinion.
I also concur in the dissenting opinion, except as to the one cargo of lumber purchased after the death of the partner.