Case Name: GRATZ and another, against BAYARD and others, assignees of EDWARD CARRELL & Co.
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1824-03-29
Citations: 11 Serg. & Rawle 41
Docket Number: 
Parties: GRATZ and another, against BAYARD and others, assignees of EDWARD CARRELL & Co.
Judges: 
Reporter: Reports of cases adjudged in the Supreme Court of Pennsylvania (Sergeant & Rawle)
Volume: 11
Pages: 41–48

Head Matter:
[Philadelphia,
March 29, 1824.]
GRATZ and another, against BAYARD and others, assignees of EDWARD CARRELL & Co.
By express agreement, a partnership may continue after the death of one of the partners.
A. & B. entered into written articles of partnership, which was to continue five years. In case of the death of A. within the five years, the business of the firm was to be carried on by B. for the joint benefit of himself and the heirs of A., “subject to the advice and inspection of the executors or administrators of A.” And in case of B’s. death, A. was to close the concern as soon as circumstances would admit. The partners were to be equal sharers in the profit and loss. When the articles were drawn it was intended to fix the capital, for which a blank was left, and which was to be advanced by the partners equally; and A. was to advance a sum, also left blank, over and above the stipulated capital, for which he was to be allowed interest, at the rate of six per cent, per annum. But by an additional article bearing the same date, after reciting that the funds of B: were engaged so as not to be at his own disposal, it was agreed, that the capital of the firm should for the present remain undecided, but be fixed on B’s. return'from the West Indies, and in the mean time A. was to be allowed by B. interest at six per cent, on a moiety of whatever capital A. might think proper to employ in the business of the firm. A. died on the 20th June, 181/, intestate. Betters of administration on his estate, were granted on the 1st July, 181/, to C. I). & E., and on the same day B. was appointed guardian of the minor children of Al" On the 2d October, 1819, the firm being- insolvent, B. assigned all the partnership property and all his own-private property to the defendants for the benefit of the creditors, who were to be paid in the order in which they were designated in the deed of assignment, in which the plaintiffs stood first. Considerable sums were paid by the administrators of A. to B. as guardian of the minors, .all of which were expended by him, in the affairs of the firm. The insolvency was produced, principally by losses on an establishment at a distance which was planned by A. Held, that the whole of the partnership fund, including what was acquired after the death of A. passed by B’s. assignment, and that the plaintiffs Were entitled to be paid the amount of their debt.
It seems; that for want of a court of chancery, the provision in the article of agreement, that B. in the event of his partner’s death, was to carry on the business subject to the advice and inspection of Ms executors or administrators, gave no power to the executors or administrators to dissolve the partnership, in case B. should act in opposition to their advice.
■ From the report of his Honor Judge Duncan, before whom this cause was tried, at Nisi Prius, on the 24th of April, 1823, it appeared that Edward Carrell, deceased, and John Connell, entered into written articles of partnership in trade and commerce, dated the 14th of June 1815. The partnership was to continue'five years; it b<?ing the object of Carrell, that at the end of the term his son should become a partner. In case of Carrell’s death within the five years, the business of the firm was to be carried on by Connell for the joint benefit of himself and the heirs of Carrell, iC subject to the advice and inspection of the executor or administrator of Carrell.” Incase of Connell’s death, Carrell was to close the concern as soon as circumstances would admit. The partners were to be equal sharers in profit or loss. When the articles were drawn, it was intended to fix the capital, for which a blank was left, and which was to be advanced by the partners equally; and Carrell was to advance a sum, also left blank, over' and above the stipulated capital, for which he was to be allowed interest at the rate of six per cent, per annum. By an additional article bearing the same date, after reciting that the funds of Connell were then engaged, so as not to be at his own disposal, it was agreed, that the capital of the firm, should, for the present, remain undecided, but be fixed on Connell’s l’eturn from the West Indies; and in the mean time, Carrell was to be allowed by Connell, interest at the rate of six per cent, per annum on a moiety of whatever capital, Carrell might think proper to employ in the business of the firm. Carrell died on the 20th June 1817, intestate. Onthelst July 1817, letters of administration on his estate were granted to Andrew Bayard, John Gibson, and George Rundle; and on the same day Connell was appointed guardian of the minor children of Carrell. On the 2d of October 1819, the firm being insolvent, Connell assigned all the partnership property, and all his private property to the defendants, for the benefit of his creditors who were to be paid in the order designated in the deed of assignment, in which the plaintiffs- stood first. Considerable sums were paid by the administrators of Carrell to Connell, as g-uardian of the minors, all of which were expended by him in the affairs of the firm. It was supposed that the insolvency was produced, principally by losses on an establishment at Blakely, in Alabama, which was planned by Carrell.
A verdict was found for the plaintiffs for 2000 dollars, subject to the court’s opinion on the' evidence.
Binney for the plaintiffs.
It was the intention of the parties that the partnership should continue after Edward Carr ell’s death, and this intention ought to be carried into effect for the benefit of creditors who trusted the firm. Theadministrators-who were named in the agreement, gave nonotice that the partnership would not be continued, and one of the children was an adult and acquiesced in the conduct of the administrators, until the business appeared to be getting bad. Carrell had a right to direct the business to be carried on by Connell after his death for the benefit of his children. He might charge orencumber his property as he pleased. If it had been done by will, it would have been binding, and the same reason applies to a contract. In the Roman law, a principle crept in, that no partnership could be provided for by contract after the death of the party, on account of the uncertainty of the person who should succeed and be introduced into the concern. This is denied by Pothier to be the law of France; and in the Code civil art 1868, it is declared that partnerships may continue after death, where such is the agreement of the parties. In England numerous authorities establish the same position. Crawskey v. Wale, 1 Swant. 507. Id. 509, {note.) Crawfordv. Hamilton, 3 Madd. Ch.Rep. 254. Balm,ain v. Shore, 9 Ves. 500. Pearces. Chamberlain, 2 Ves. 3-3. Warner v. Cunningham, 3 Bow’s P. C. 76, is a high authority to show, that a party may bind his heirs by articles of partnership. It is true that this was a case of real estate; but real estate is more unmanageable than personal, and the general doctrine there laid down is, that the executor may bind his heir ab intestato, as well as by will. Where one partner provides by his will for a continuance of the partnership after his death, the extent to which the creditors of the firm are entitled to come in upon the ássets, depends on the intention of the testator. Where he sets apart a portion of his funds for a continuance of the partnership after his death, ' equity will give only those funds to the creditors of the subsequent partnership. But when there is a general devotion of property to the partnership, equity will give all his assets to the creditors of the'firm. Hanby v. Hammond, 3 Madd. Ch. Rep. 148, note, and Exparte Richardson, Id. 157, fully establish these principles. The first of these positions makes it immaterial, what was the state of Carrell’s assets atthe time of his death. The second gives rise to the question, to what extent did Carrell intend to appropriate his funds? The only question is, as to the intent, for there is not even a dictum to control the power. If the partnership was to continue, it was without limitation. The articles stipulated for the prolongation of the partnership on the same terms, as before. The capital is left blank, and is to be whatever is embarked in the trade. This is a general appropriation of property to the objects of the partnership, which gives to the creditors the right to .resort to all liis assets for payment.
Independently of these views of the subject, the plaintiffs are entitled to recover, because the defendants cannot show that the effects in their hands arose from the estate of Edward Carrell. If Connell has broken his trust by taking the money of his wards for his own purposes, they can only claim upon the terms of the assignment. They arc merely creditors;, they cannot trace the effects which came into Connell’s hands, and therefore cannot follow them; they have no lien on them; and as in Ex parte Garland, 10 Ves. 110, must come in under the arrangement.
Gibson and Condy for the defendant.
A , The contestas between the private creditors of Connell, and the children of Carrell, for the private estate of their father. At the time of Carrell’s death, his estate wa‘s perfectly solvent, and all his children were minors except one, who was married. We contend that there is nothing in the article of agreement, stipulating for a positive continuance of the partnership. It was carelessly drawn by the parties themselves, and should receive a liberal construction. The continuance of the partnership was conditional. It was to be subject to the superintendence and control of Carrell’s executors or administrators, who were never consul! cd, who gave no assent, and who never would have permitted it to proceed, if an exposition of its affairs had been made to them. All the payments-made to Connell we re as guardian, and not as continuing partner, and no act of theirs can be shown, which can be construed into an acquiescence in the continuance of the partnership. Upon a fair construction of the agreement, therefore, Connell had no right to continue the partnership after the death of Carrell, except for the purpose of winding it up.
2. But the partnership was necessairly dissolved by death, whether the agreement provided for its continuance or not. Courts will not enforce specifically all contracts. In the case of Buxton v. Lister, 3 Jttk. 385, which was a bill to compel a party to go on with a contract to purchase timber, the Lord Chancellor said, that before specific performance of a contract .relating to chattels, is decreed, the matter should be well considered. Ex natura rei, a contract of partnership cannot survive. The cases cited of testamentary provisions to carry on a trade, are foreign to this case. By will a man may dispose of his property as be pleases. He may devote it to trade if he thinks proper; but this is not a partnership, but a trust and so the books call it. A trust by which a specific sum is appropriated by will to carry on a trade, may be very useful; but to continue a contract of partnership after death is against sound policy, and the convenience of society. But where provision for such a purpose is made by will, and in the same instruments legacies are given, the legacies must be paid. All the other purposes of the will are not to be suspended until the trade is wound up. Where such a manifest incongruity exists, one intent must give way, and that is the trade. In a partnership, the person is liable as well as the property. By death the liability of the person is gone; and so, from the character of the contract, must that of the property. Can a man create debts to take effect after his death ? Can he postpone debts due at the time of his death, in favour of those to be incurred afterwards? ' Such a proposition, as respects creditors, would be absurd. By our law, the assets of a decedent are td be paid away according to a certain rule ; are the creditors to be told that there is an outstanding partnership, and they must await its. termination? Are legatees, or next of kin to be postponed to the same indefinite period; for the difficulties in regard to creditors, exist also with respect to them. No case can be produced, in which a partnership like this has been directed to be carried on. Equity frequently refuses to carry contracts into' effect, and leaves the parties to their remedy at law. The partnership may, therefore, be dissolved, contrary to the agreement, for equity cannot compel the dissenting partner to perform it. He may recover damages as well for the breach of this, as any other agreement. In Pennsylvania a partner cannot go into equity to dissolve; dissolution must, therefore, be his own act. Here the partnership was dissolved by the death of Carrell, and if Connell sustained an injury by it, he has his remedy by an action to recover damages for a breach of the contract. Gilvary v. Noble, 3 Merrivall, 614. Ex parte Garland, 10 Ves. 110. Whitman v. ÍTonnéreau, 1 MaulSelio. 412. Devalue v. Noble, 6 Merrivall 530, 563, 570, 616. 4 Ves. 396. Gow on Part. 54, -75.
’ Admitting the continuance of the partnership, the estate of Carrell is not liable beyond the amount of the partnership effects at the time of his ,death. It is clear, that the article contemplates a fixed capital. The sum was not fixed, but le'ft blank. Therefore, the capital employed, ascertains the limits. Where the capital is limited, all beyond the limit is the separate property of each partner. The assignment, therefore, did not operate on the estate of ■Carrell, remaining at his death. The assignees took, subject to all ■ equities, without special notice. Consequently, the representatives of Carrell are entitled to all that was his general property at the time of his death. At all events, they should come in as creditors of the first class, because Connell, as guardian, was guilty of a breach of trust.
Reply.
Very important principles are certainly involved in this case, which are more difficult because they are new. It would; however, be useless to encounter them, because they do not necessarily arise. Jt is sufficient to support' the verdict. The plain intent of the parties was to continue the partnership after Garrett’s death, during a term of five years. This is their covenant, entered into for their mutual benefit, and cannot be legally'dissolved. On proper grounds Chancery will inhibit the dissolution of a partnership; Gow on Part. 279, and will compel a specific performance of the agreement, Swanst, 512,. (note,) 513. The provision in the articles was, that the business should be conducted under the advice and inspection of Garrett’s executors, or administrators; but surely this gave them no power to dissolve the contract. The position advanced, that a partnership cannot continue after death, even by contract, is not supported hy any authority or dictum, but is contradicted by authority. Gow. 76, 2711 9 Ves. 500. If the continuance of a partnership after death is incongruous, and against the policy of the law, why has it been upheld, by dicta, by decisions, and by the opinion of the profession ? It cannot be denied, that a man may, by his will, tie up his estate to wait upon a partnership. In testamentary cases the power is unlimited, and legatees have no reason to complain, because they take from the bounty of the testator alone, and if they obtain it after the termination of a partnership, it is better than not to get it at all. The same principle extends to a partnership continued by contract, between which, and those which are continued by testamentory dispositions, neither counsel nor judges make any distinction. It is said, that this was a trust, and so it is in every cáse, and Chancery, will see that the trust is performed. It is mot a sound principle, that assets cannot be effected by debts arising after death. The very nature of partnership illustrates the contrary principle. The surviving partner may make new arrangements to carry the old ■ ones into effect. The property survives to the surviving partner, to continue his power over it. If the partnership property is not sufficient,-resort must be had to the private estate of the deceased partner. It may be said, that assets are not to be effected by debts not authorised by the decedent, but when they are authorised, either by express stipulation, or by the nature of the partnership, the case, is different. There is no difficulty, therefore, in the principle. As to difficulty of arrangement, that must depend on the circumstances of the case. In this there is none, because there are no private debts. When there are such debts, they must be paid; but as to what remains, no one can doubt that it must be disposed of for the partnership, as provided for by the deceased. He was the master of the fund, and might appropriate it as ,he pleased. Next of kin take nothing but what remains after payment of debts.

Opinion:
The opinion of the court was delivered by
Tilghman, C. J.
The defendants' counsel have made three points. 1. That the partnership was dissolved by the death of Carrell. 2. That supposing it not dissolved, the private estate of Carrell was not liable for any debts contracted after his death. 3. That the assignment of Carrell passed no more than his interest in the effects of the firm.
1. Concerning the general law of partnership, there can be no doubt. Where no time is fixed for its duration, either partner may dissolve it, at his pleasure. And unless there be an express stipulation to the contrary, it is dissolved by the death of either party. But I can find no authority for this position, that it is dissolved by death contrary to express stipulation. By the Roman law, it might have been so. But in the present state of commerce, we are not to take our rules from the Roman law. Even France, who in general, has adopted the civil law, has rejected it in this particular. It is provided by the code civil, that partnership may be. continued after.death, where such is the agreement of the parties. There are conveniences and inconveniences, fix this rule how you will. If you say, that the partnership shall be dissolved by death, against the agreement of the parties, you may deprive the family of the deceased, of all the profits of an establishment which had been erected at great expense, and is beginning to reimburse those expenses, with interest, at the moment of death. On the other hand, by continuing the partnership, it may happen, that a capital which had been established by many years of properous business, may be sunk, by the misconduct, or misfortune of the surviving partner. But the question is, how has this law been understood? In the case of Balmain v. Shore, 9 Vez. 500, the subject was a good deal discussed,* and it seems to have been taken for granted, on all sides, that a partnership may continue after death, by express agreement. The same remark is applicable to the case of Pearce v. Chamberlain, 2 Vez. 33. A. D. 1750. In Warner v. Cunningham, 3 Dow. Parl. Cas. 76, it was decided by the house of Lords, on an appeal from Scotland, that a partnership in a colliery and iron works, may be continued, after the death of one partner, where it was so agreed. The elementary authors consider the law as so settled. Gow. 76, 271,/ And if there be a decision to the contrary, the counsel for the defendants have not produced it, nor have I been able to find it. Now it is incumbent on him who asserts, that a man has not a right to make a covenant that shall bind his representatives, to prove it, by good authority; because the general principle is, that he may bind them.
2. Talcing it for granted then, that the'partnership was not dissolved by the death of Carrcll, the next point made by the defendants' counsel is, that the private estate of Carrell, was not'liable to the payment of the partnership debts contracted after his death. The dispute is between the partnership creditors and the children of Carrell; for no private debts appear. The defendants are but stakeholders. It is indifferent to them, to whom the money in their hands is to be paid. But it appears to me, that the question raised by the defendants' counsel is not material, or at least that it is unnecessary to the decision of the cause. The defendants are not sued as representatives of Carrell. They have no assets of his in.their hands. Those assets were paid by his administrators to Carrell, as guardian of the children, and if he applied them without right, to the purposes of the partnership, he was guilty of a breach of trust, for which he was responsible. But the minor chiL dren of Carrell had no lien on the money in the hands of their guardian. It has passed into the partnership funds, with which it is now so blended that it is impossible to distinguish it. I give no opinion whether Carrell had a right to use this money for partnership purposes, or not. If he had not, although he would be personally responsible, it might be a question whether it might not be considered as a partnership debt. But even if it were, it would not interfere with the plaintiff's right to recovery in this suit, -
3. The third consideration is, whether the whole partnership fund, including what was acquired after the death of Carrell, did not pass, by Connell's assignment. I can perceive' nothing against 'its passing. The surviving partner was the only person who had a right to act, either as to the disposal of the partnership effects, or the receiving or paying of debts. He had a right to apply all the funds to the payment of debts, and the assignment is, in substance, no more than such an application. The property is transferred to the defendants in trust to pay the debts, in the order prescribed by the assignor. So that I think there can be no doubt, that the transfer is good for the whole. In the argument of this case, several points of'great moment were suggested, which must add to the regret we all feel, at the want of a Chancery jurisdiction. By the articles of partnership in this case,. Connell was to carry on the business, in the event of his partner's death, subject to the advice and inspection of his executors or administrators. I do not con ccive, that this provision gave power to the executors or administrators, to dissolve the partnership, if Connell should run counter to their advice. It does not appear, indeed, that any advice was given, nor am I imputing blame to Mr. Connell7 who appears to have been ruined by pursuing the scheme which had been devised by his partner. But if prospects had so changed, after CarrelPs death, as to render it manifestly advisable to relinquish the plan, and he refused to relinquish it, contrary to the advice of the administrators of Carrell, I know not how he could have been restrained. But chancery, in such case, would interfere without hesitation. And in many other eases it would interfere, where there was strong probability that the salvation of the firm, and the rights of creditors, depended on such interference. If the survivingpartner acted with gross impropriety, his hands would be tied, and an agent appointed to collect the debts and distribute the effects under the direction of the court. These are powers, which however desirable, are possessed by no court in this commonwealth. Although the sentiments which I have expressed, do not strictly belong to the decision of this case; yet while I was considering what is directly before us, they pressed so strongly on my mind that I trust I may be excused for giving them utterance. To return to the point then, I am of opinion, that upon the evidence submitted to us, the plaintiff is entitled to judgment on the verdict.
Judgment reversed and a venire facias de novo awarded.