Case Information
*1 OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN
Honoreble Orrfll4 S, Carprntsr
Chalraan and Exeoutire Dlreotor
Tsxar Unemployment Compensation Comml4sion
Auetln, Terar
Dear Sir:
tlnulng oo-partnerehlp, tlnulng oo-partnerehlp, 'I am attaoh tloles ot oopart- 114, an emplo~lng employment com- at these artdoles ng partnership. hip 4unlre4 all T withAraw41, addition neation Aot, an employing Eaah tlma 4 now stkios (if it8 status 1s oyor*r aooount number 14 rot up for it. The 44 refleoted by tho ion of suoh employer, thers- reoord. That other employer nor can lt bo oharged against any other employer.' *2 ,
Ron. Orville S. Carpenter, Page 2
Our attention is ilrst Socueed on paragraph S of the Articles o? Copartnership, vthlch reads as followe:
"8. That upon the death or wlthdraral o? any mem- ber o? the copartnershlp, the copartnerehlp shall not terminate, and the estate o? the deceased partner or shall be deemed to have assigned, withdrawing partner transierred and set over to the oontinoing partner8 in and the 411 of hla right, title, and interest copartnerahip kitbout any iurther act upon the said part o? the estate o? a Aeoaaaed partner or o? such The contlnulng copartnership may ulthdrawing partner.
be under this agreement or by executing [4] new agree- ment. Upon the admission o? a new member or member8 to tbia copartnershlp either under thls agreement or by a separate copartner&hip agreement, it shall be title and interest o? deemed that all of the right, the parties hereto in end to the said copartnership and set over to the newly are assigned, transierred constituted and/or continuing copartnership, which shall assume 411 the obligations o? tble oopartner- ship without any Surther act. The execution OS a new oopartnerahlp agreement shall constitute 4 tendnation o? tbia agreement without any iurther act.=
The effortrr o? the copartners to establish continuing partnerehlp arrangement must be oonsldered in the light of the pertinent provisions o? our Texas Unemployment Compensation XAW, Article 52321-b, Section 17 (a) o? Vernon*8 Revised Cirll Statutes, 1925, which reads in part:
"(e) *kmploying unit* means 4x1~ ~lndlvldual or type o? organization,' ineludlng any partnership, association, trust, estate, joint-atook oompany, lneuranae company, or corporation, whether Aomestlo or foreign, or the ireceiver, trustee in bankruptcy, trustee or euaceasor thereof, or the legal representative o? a Aeoeased person, which has or subsequent to January 1, 1936, bad in Its employ one or more individuals periormlng services tar it within thle State. . .* 5221-b, Section 6 (A), Vernon's Revised Ci~ll
Article 1925, provides as iollows: Statutes,
256 Ron. Orville S. Carpenter, Page ?I
“(d) by employing unit rblcb is become6 an employer subject to this Act, and which under the pro- visions of this subseotlon ceases to be 4n employer subjeot to this Act and subsequent to such time be- oomes an employer subjeot to this Act by reason o?
any of the provlslons hereof, ooming an employer subject shall upon again be-
to this Aot be considered 4 new employer without regard to any rights aoqulred by it during the time that it had theretofore been an employer .s
The ConStNCtiOn o? your Commission that every new legal identity must be taken into oonslderatlon appears to be based upon sound principles, the llabillty~ of an Employing Unit being assessed against the members o? that unit. The law is well settled that a retiring partner reroains liable to existing oreditors, notwithstanding an assumption of debts by his succes- sor or other partners, 32 Tex. Jurifa. p. 773; Reed VS. Shave, 274 t. Vi. 274; Shaw T. Green, 99 S. Yi. (26) 893. h?ter the death of a partner, his estate 1s liable for partnership obll- gations created prior to his death. See Shaw Ts. Kc)illlan, 24 E. PT. (26) 556; Rlgglns vs. Rettor, 46 Tex. 961; note 79 A.L.R. 153S, 1539.
In this factual sltnetlon the Articles of Copartnership eridence 4 desire of the parties-that death or wlthArAwa1 autc- matlcally transfer the interest of the Aeoeased or withdrawing
artnsr. The transfer of the interest may be so aocompllshed, #i ut does not clear this partner’s acaount. The Legislature has erldenoed an intention ‘that ,any ohange in the ownership of a business operating under any assumed name, 48 do Easklns and bells, shall file an assumed name oeitl?iaater Artlele 5924, Vernon’s Revised Clril Statutes, 1925. ,-The legislature aldo thought that any change of ownership should be made lmown and ,6925, Vernon*8 Revised Clrll Statutes. required it by Article to oomply with these provisions 1s pro- A penalty for failure Tided in Article 1070 of our Penal Code.
The purpose of the above legislation 1s for the pro- ln.deallng with suah 4 business. tection of the public For the determination of past and Suture obligations under the agreement itself a new and different firm 82%6tS.
The agreement ?alls.to provide the method and propor- tion of descent surviving partners of the deceased or with- drawing partners interest. X6 believe suah 4 situation 4 new copartnership The wording of necessitates sgreenwnt.
.’ .
Eon. Orville %, Csrpenter, Ye&e 4
paragraph 8 smlfosts 4 rsallutlon of the partlea to the agree- of Copartnero&ip will doubtleas be ces- nent tbbat sew Artlolss essary upon death or *llthdr4ii41.
Paragraph LO of t&e Artlalos of Copartnereblp reads es ?ollows :
'10. That thls agrsewnt SLlhll be In Suil Soroe and etfaot until tendnsted by mutual consoat or the parties horoto, 44 hereinaboro >rovlAeA, or by the glvlng of thirty doye* written notloe by two or mre partlea holding 4 Eejority of Intorest, 4s boroln to the cther portles, provided, and 4~ party hcreto say withdraw trek tbe copertnrrshlp upon glrihg thlrty Qys* written hotlce o? suah lntentlon to tho other partit bcreto.*
Tho abeve 3rovleion etatoe t&et it shall remain *In full Some and s??eot until by Irutual oonocnt o? the terzinatod partlos hereto* or by withdraw41 o? two or rcore parties holding a nmis)orlty of interest. 'Il'e 0411 attention to the partner Arthur E. C4rter who owns elxty per 0e)nt of the partnership. should withdraw &horn and in what proportion
X?~ this partner uould his fntereot pass. The obvious ?aZlure to attompt to dls- pops o?thls snd other fact 8ltuat:ons that oen 4rlse *vlnoe ths thought that 4 now 8gretumnt would bo drown up0
Thers lo 4 gener4lly reoogulssd priociplo of Zau that tho business of 4 partnership my eontlnue arter death or Slth- tlraral Q? 8 partner by spsol?lo agreemact or lnstruotlon in the %-Ill o? a Aeouised prtnsr. Howmr, the often cltod Texas v. 0. Sullivan 8nA Co.,' 99 T8xas 0484 on this point P.ltgslt 395, does not purport to ray that 4 oontlnuanoe of a baelness 1s tho sass partnarshlp.
M iDvestlg4tion of tbls prioofple and Its 4ppllcatlon in other ~urisdlotions, wo tbltk, negetlvos any thought that it Foople 1. Zanigan, 193 3. E. 70s; the aaze partnership. hndrews v. E;tlnson, 90 H. E. P2%. %'o belleve the len6uage o? Chle? Justloe Carter of the Suprucs Court o? illlbol8 In the laast olted 0480 1s most pcrtlnent hors. Ge quota; there are provisions in the artlolsci of *Were
agreement or will for tbi oontlnuanoe a? the busi- it 1s ness after the death of oDe of the partners, said that the death of the sometimes lhaecorately does not dlssolTa the partnership. I? the partxr *5 . Bon. Orville S. Carpenter, Page 5
business IS aarrlea on artsr the death of the partner under such arrangement or by the agreement OS the heirs or personal represautatlves of the deceased, there is, In atteot ana in law, a new partnerahlp, of vihloh the survivors and the exeou- tom or heir8 are the meuberrs, the new embers be- eomlng liable, as the old, to the creditors of the 22 Am. E Eng. Eney. of Law (ea Ed.) 201, ma ii=.
ca888 oited; 1 'i;oerner*s Am. Law oi AdmInIstration (26 Ed.) e 1231 Exchange Bank v. TraoF, 77 ~0.
594; mGrath v. Cowen, 57 Ohio St. 5S5, 49 R. E.
558; Kattfson V. Farnhaz, 44 tiM. 95 46 K. K. 547; JOMS A Cunnlnghamqs Pr. (2d Ed.1 82; T. Pars. (Sd xa.) 459. Partn. See, also, 1Bates on Part- nership, 8 52; Owens v. kackall, S5 kd. 582.
The great weight oi authority is to tkls effeot and to U8 ConVinCiI@y Sound. Any atteniptbp these Article8 or co- partnership for the remaining partner8 to a8sume the interest, asset8 and llablllties of e deceased withdrawing party over- looks the right8 of oreditors. A further thought is that pereons contracting mith thie firm may have done so because of the ability of a partloular member. Thus, the oontract is one for personal eervice and does not survive the rltharawalof a certain partner.
Via, therefore, advise you that a ohange in the person- nel of the partnership rashlons a new partnership and should be 88t Up a8 a lleW GElpl‘OyilIfJ unit.
Your8 very truly ATTORMEYGl5WIAL OF TEEAS BY
A88iStMt ATTORNEY GENERAL OF TEXAS
cOMMl3TEE