Case ID: ohio-np_4/html/0173-01.html
Source: Caselaw Access Project
Author: {"author": "DUSTIN, 3.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(Montgomery County O., Common Pleas.)
    THE COVINGTON CITY BANK v. WIGHT’S EXECUTOR’S.
    
      Co-partnership — Death of one partner— Provision in will of deceased partner that business be^continued after his death.
    
    Where a partner provides in his will that after his death his co-partner should carry on and conduct said business in said firm name for two years after testator’s death for the joint benefit of his estate and said co partner held that only the business then conducted by the firm and the capital engaged therein so far as the interest of the testator was concerned were liable for the debts contracted by such co-partner after he undertook to carry on the business in the firm name, and the individual estate of the testator in the hands of his executors or devisees is not liable on such debts. Especially where the original obligations were never proven against the estate of testator, but instead thereof, notes, ranging in date from fifteen to twenty-one months after the death of the testator were accepted from the new and revived firm which consisted of such surviving partner and so much of the estate of the deceased partner as was at the time of his death embarked in the business of the firm whereby the rights of the holders of the original obligations, as against the general estate were abandoned.
   DUSTIN, 3.

Plaintiff brought suit against defendants as the legal representatives of Collins Wight, deceased, upon nine promissory notes, all of them either executed or indorsed by Harry C. Wight, doing business under the firm name of C. Wight & Son, plaintiffs, claiming that Collin Wight was a member of the late firm of C. Wight®; Son, and that by his death the liability became joint and several, and his executors coda be sued thereon pursuant to See. 6102, Rev. Stats.

To this petition defendants filed a general demurrer, claiming that neither of the nine causes of action is sufficient in law.

Collins Wight died testate, October 23, 1889. H's will was probated October 5,1889, and on the same day Harry C. Wight and Frank Conover were appointed and qualified as executors of said will.

For several years prior to the death of Collins Wight, he and his son, Harry C. Wight, had been partners, doing business under the firm name of C. Wight & Son. At the time of bis death the firm of C. Wight & Son was indebted to Charles C. Boyd & Co., and the notes sued on were given after the death of Collins Wight by Harry O. Wight on account of said indebtedness.

Collins ■ Wight, in his will, provided and directed that said Harry C. Wight should carry on* and conduct said business in said firm name for two years after his death (October 23, 1889,) for the joint benefit of his estate and Harry C. Wight. Said Harry C. Wight, on the 10th day of March, 1890, about five months after the death of Collins White and the probation of his will, elected to carry on said Business m said firm name, and did so carry it on until the 20th of October, 1891.

At the-time the petition was filed, July 12, 1893, the firm of C Wight & Son was insolvent, and plaintiff avers would not pay to exceed fifty per cent on the dollar. The petition shows that on the 17th of February, 1893, about three years and five months after the death of Collins Wight, said notes were presented tc the executors of said Collins Wight,and by them rejected. The necessary implication is that the original indebtedness, in whatever form it may have been at the time of the death of Collins Wight, was not proven against his estate, nor previously presented to his executors for allowance.

It is claimed on behalf of the defendants that there is no cause of action.

First — -Because it does not appear in the petition that there is any estate in the hands of the executors, more than four years having elapsed since the death of said Collins Wight. So far as it appears in the petition, the individual estate of said Collins Wight may be settled and distributed. The individual creditors were entitled to the individual assets in preference to the partnership creditors. It appearing, as it does in the petition, that there were firm assets, it is claimed that the petition should show that there is an estate in the hands of the executors applicable to the payment of partnership debts.

Second — Because the petition shows that the debt which plaintiff seeks to havealiow.ed against the individual assets of Collins Wight, is a debt of the new business of C.Wight & Son, if a debt of either, and therefore is not payable out of the assets of Collins Wight’s individual estate, but out of the assets of the new business which was continued under the provisions of the will of Collins Wight; that this new business began March 10, 1890, when Harry C. Wight elected to carry it on, and ended October 2, 1891, when he ceased to carry on the same. And this question is asked: How can the individual estate of Collins Wight be made liable on this paper after his death (which terminated the original partnership of C. Wight® Son) evento cover old liabilities of the dissolved firm of C. Wight & Son. The death of Collins Wight worked a complete dissolution of the firm. It also “worked an absolute revocation of all implied authority in Harry C. Wight, his survivor, to bind Collins Wight to new engagements, contracts or promises made to or with persons having notice of the dissolution, although springing out of or founded upon the indebtedness of the firm.” Page v. Thomas, 43 Ohio St., p. 43. “After dissolution neither partner can bind the others by making or endorsing negotiable paper in the firm name, though the proceeds are applied to the payment of partnership debts.” Haven & Co. v. Godell, Haven & C., 1 D. ,26.

In Kerper v. Wood,, 48 Ohio St., p. 621, our Supreme Court says: “Conceding to the fullest, the power of a partner during the continuance of a firm, by virtue of his agency, to bind it by acts of his own, done within the scope of the business, and intended to bind it, it is well settled in this state that such a power is revoked by dissolution," and he can no longer execute a note that will bind the other members without an express authority to do so, and no such power can be inferred from the authority given by one partner to the other, to settle, to liquidate, and close up the affairs of the partnership — that his duty in such cases is to close up and settle the partnership liabilities, and not to prolong them by new credits, to deal with the existing creditors of the firm, and not make others; to discharge its existing indebtedness, and not to add to it. ”

Now, under this and simil.ar authorities, can it be affirmed tnat Harry C. Wight, doing business under the name of C. Wight & Son, long after the death of Collms Wight, can execute notes in the firm name, which would bind the firm long after its dissolution?

This would hardly be seriously maintained, I think, except for the fact that the will of Collins Wight authorized Harry C. Wight to continue business in the old firm name for a limited period after the death of Collins Wight. Under the common law, a testator could confer such authority; but it is claimed on behalf of defendants that this provision in Collins Wight’s will was null and void because the secs. 3167, 3168, 3169 and 3170 of the Rev. Stats, in force at the time of Collins Wight’s death and at the time Hariiy C. Wight elected to carry on the business, left no discretion in the executors or the surviving partner as to carrying on the business terminated by the death of Collins Wight. These sections provide how an executor shall proceed as to the partnership property, and if the survivor fails to elect to take it under the statute, then the business must be wound up by a proceeding in court by the survivor or executor.

It is claimed that this statute abolished the right of a surviving partner under the common law to take the assets and close up the business and account to the executors of a deceased partner, and it is also in conflict with the proposition upon which this case seems to be based, that the surivor may carry on the business after the death of one partner, and dissolution of the firm thereby, if the deceased partner so directed in his will, and that in so conducting the business, the survivor may make obligations which will bind individual property of the deceased partner.

It is claimed that the proposition in this case exceeds the common law which never recognized, even under such conditions, the right of the survivor to make obligations to bind other property of the deceased partner than that which was at the time of his death embarked in the venture, and this was subject of course, to the right of creditors of the late firm to demand that the partnership, property shall first be subjected to their existing debts. In short, the proposition on behalf of the demurrer is that the statute© quoted do not recognize the right of a deceased partner to provide by his will, with the consent of the survivor, to carry on the business of the firm, and that the same was abolished by the statute referred to. For confirmation of this theory, we are cited to an amendment to the sections above quoted, in Vol. 87, Ohio Laws, page 97, where sec, 3169 provides that the statute shall not apply where the original articles of partnership in force at the death of a partner, or the will of the deceased partner dispenses with an inventory or appraisement of the partnership assets and with the sale of the interest of such deceased partner, and provides a mode of settlement of such deceased partner’s interest,or a disposal thereof,different from that provided herein, and that in such case the interest of the deceased partner shall be settled and disposed of according to the provisions of such articles of partnership or of said will. It is claimed under the statutes of March 21, 1861, Vol. 58, Ohio Laws, p. 36, which is the same as sections numbered 3176,3168,and 3169,Rev. Stats., and from that time up to the date of March 24, 1890, VoJ. 87; Ohio Laws,p. 97, abov quoted such provisions in a will or articles of co-partnership are not recognized by our statute law, and the will of Collins Wight having been executed and probated within that period, to-wit, October 25 1889, said provision of the will was in conflict with the statute,and therefore null and void,and gave a surviving partner no right to carry on the business. This is an interesting, important and new question, and in the absence of other decisions in Ohio on the subject, the court does not feel like entertaining the proposition maintained by counsel for defendants, because of the serious results it might produce upen numerous partnerships carried on under the supposition that the common law prevails and that firms in which a deceased partner was interested may proceed under authority of the will.

Rut the next question made is that, conceding the authority of Harry C. Wight under the provisions of the will of Collins Wight, to carry on its business as before,had he the power to bind, in the conduct of the business, anything more than was already embarked in it? The three leading cases on this point are:

Ex Parte Garland, 10 Vesey, 1; Pitkin v. Pitkin, 7 Conn. 37; Burwell v. Mandeville’s executors, 2 How. U. S. 560.

Lord Eldon decided the Garland case, and placed it largely upon the ground of convenience, public and private. He said:

“The question really goes to this: whether this cours is to hold that, where a testator directs a trade to be carried on and without limitation, all theotbei purposes of his will are to stand still, or all the administration under it to be so checked, that every person taking it, is in effect to become a security in proportion to the property he takes, and to the extent of all time, for the trade, which the testator has directed to be carried on. The inconvenience would be intolerable, amounting to this: that every legatee is to hold his legacy upon terms, connected with ■transactions, by which he canhot benefit, •which he cannot control,and which may cut down a.ll his hopes as far as they are founded upon the receipt of that bounty.”

’ After further -argument, Concluding, he says: “In this case, I fear,I shall be under the necessity of contradicting the authority of a judge I most highly respect (Lord Fen yon), feeling a strong opinion that only the property declared to be embarked in the trade shall be answerable to the creditor of the trade. If I am not bound by decision, the convenience of mankind requires me to ■hold that the creditors of the trade, a such, have not a claim against the distributed assets, in the hands of third persons under the direction of the same will, which has authorized the trade to be carried on for the bene ■fit of other persons.”

In the above case, as appears by the decision, there was no limitation of time for. the continuance of the business; but in Pitkin v. Pitikn, 7 Conn. 307, A, B, and C being partners in business, A made his will by which he directed his interest in the establishment, viz., the buildings, machinery, stock, privileges and profits thereof, to be continued therein for the term of four years after his decease.

The business proved to be a losing concern, and creditors came upon the executor ■and devisees for their claims.

Held : That the partnership creditors had ■no lien on the estate in the hands ot the devisees, by reason of their right to participate eventually in the profits of the trade; and ■second, that the general assets were not liable to the plaintiff’s claim by virtue of the testator’s last will.”

Taking up the question whether the right to share in the profits does not make the estate also responsible for losses, the chief justice says:

. “The principle that he who enjoys a part of the profit of a partnership, is liable to the creditors of the firm, although unquestionable, as a general rule, yet like other ■general rules, ib limited by the reason on which it is founded. By operation of law, in respect to creditors, a person who is not a partner -in fact, but who is benefited by the profits of a partnership, is clothed with that character, where he takes from them a part of that fund, on which they placed reliance for the payment of their debts. Were it othei wise, the partnership creditors would be injured, and the person alluded to would receive 'usurious interest for his capital, without its being attended with any risk. But all. this is inapplicable in the present nase. in this case the capital is at hazard ; and therefore the reasons derived from the possibility of usury,do not apply; and as to the diminution of the'fund to the disadvantage of the creditors this is impossible. The devisees under the will are entitled to neither capital nor profits, until the dissolution of the partnership. The company concerns must first be attended to, and after the ex-tinguishment of all the debts and expenses, the devisees are to come in for their share of the net surplus, and not before;” and so on.

But the most sweeping case of all is Bur-well v. Mandeville’s executors, 2 How. 560, in which the language of the will is not so specific in describing the property to be continued in trade — as in the Pitkin case. Justice Story, considering this question under a codicil, which provided that,“It is my will that my interest in the co-partnership existing between Daniel Cawood and myself under the name of Daniel Cawood & Co., shall be continued therein until the expiration of the term limited by the article between us; the business to be conducted by the said Daniel Cawood, and. the profit or loss to be distributed in the manner the said articles provide.”

The court says: “By the general. rule of law every partnership is dissolved by the death of one of the partners. It is true that it is competent for the partners to provide by agreement for the continuance of the partnership after ■ such death, but then it takes place in virtue of such agreement only, ana as the act of the parties, and not by mere operation of law. A partner,too, may by his will provide that the partnership shall continue notwithstanding his death; and if it is consented to by the surviving partner, it becomes ■ obligatory, just as it would if the testator,being a sole trader,had provided for the continuance of his trade by his executor after his death. But then in each case the agreement or authority must be clearly made out, and third persons having notice of the death are bound to inquire how far the agreement or authority to continue it ex-, tends, and what funds it binds, and if they trust the surviving party beyond the reach of such agreement, or authority, then it is their own fault, and they have no right to complain if the law does not afford them any satisfactory redress.

“A testator, too, directing the continuance of a partnership may, if he so choose, bind his general assets for all the debts of the partnership contracted after his death, but he may also limit his responsibility, either to the funds already embarked in the trade,or to any specific amount to be invested therein for that purpose, and then the creditors can resort to that fund or amount only, and not to the general assets of the testator’s estate, although the partner or executor or other person carrying on the trade may be personally responsible for all the debts contracted. ”

Here the Justice cites Ex Parte Garland, 10 Vesey, Pitkin v. Pitkin, 7 Conn., above referred to, and remarks that they run quatuor pedibus.

“And this leads us-to remark,” he continues, “that nothing but the most clear and unambiguous language, demonstrating in the most positive manner that the testator intends to make his general assets liable for all debts contracted in the continued trade after his death, and not merely to limit it to the funds embarked in that trade,would justify the court in arriving at such conclusion from the manifest inconvenience thereof, and the utter impossibility of the paying of the legacies bequeathed by the testator’s will, or distributing the residue of his estate, without in effect saying at the same time that the payment may all be recalled, if the trade should become unsuccessful • or ruinous. Such a result would ordinarily be at war with the testator’s indentions in bequeathing such legacies and residues, and would,or might, postpone the settlement of the estate for a half century, or until long after the trade or continued partnership should terminate.”

And after an elaborate opinion upon these points and the proper construction and true interpretation of tho codicil under consideration', the court says:

“There is yet another consideration not unimportant to be brought under review. It is that the whole business of the firm is tb be conducted by Oawood alone, and that neither the executor ncr the egatees are au thorized to interfere with or to scrutinize his transactions. Such an unlimited power over his whole assets by a person wholly unconnected with the administration of his estate could scarcely be presumed to be within the intention of any prudent testator. If to all these we add the manifest inconvenience of such interpretation of the codicil, thus suspending for an indefinite time the settlement of the estate and the payment of the legacies, it is not too much to say that no court of juscice ought upon principle to favor, much less to adopt it.”

In the Wight will the provision is as follows, according to the petition: “The said Harry C. Wight should carry on and conduct said business in said firm name for two years after his (Collins Wight’s), death for the joint benefit of his estate and said Harry Wight.” This provision is not more restrictive than the one interpreted in the case of Burwell v. Mandeville’s executors, and following that authority which elaborately reviews many others, it seems to the court that only the business then conducted by the firm of C. Wight & Son and the capital engaged therein so far as the interest of Collins Wight was concerned, were liable for the debts contracted by Harry C. Wight after he undertook to carry on the business in the firm name in March, 1891, and the individual estate of Collins Wight in the hands of his executors or devisees is not liable on this paper; inasmuch as the original obligations were never proved against the estate of Collins W7ight, but instead thereof, notes, ranging in date from fifteen to twenty-one months after the death of Collins Wight, were accepted from the new and revived firm of C. Wight & Son, consisting, in the opinion of the court, of Harry C. Wight and so much of the estate of Collins Wight as was, at the time of his-death, embarked in the business of the firm, and the rights of the holders of the original obligations, as against the general estate, thereby abandoned.

The demurrer, therefore, will be sustained, as to all the causes of action.