Court Opinion

ID: 6581193
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:38:25.646591+00
Date Added: 2024-06-11T15:57:16.424684
License: Public Domain

Pardee, J.
When articles of agreement for the formation of a partnership are silent as to the matter of the death of a partner, as a legal result that event terminates the contract, for the reason that the law presumes that each member entered into it relying upon the industry and special skill or general ability of every other.
But it is in the power of the contracting parties to waive this consideration and suspend the operation of the general rule of law; and in this, as in most other matters, the law permits individuals capable of acting to bind themselves while in life, and after death théir estates, by such contracts as they may see fit to make. Thus every man can enter into' the partnership relation upon such terms as are satisfactory to himself and his associates and prolong the continuance of tlie obligations growing out of it during a term extending beyond his life. ■
*24By executing a partnership agreement without restriction as to liability, Roswell Blodgett subjected his entire estate to an obligation to respond to all debts contracted in the proper conduct of the business, and to the power of each of his associates to compel it thus to respond, having invested them for a term of years with an agency unlimited within the scope of the partnership undertaking—an agency coupled with an interest; and by his express agreement that his death should not dissolve the relation he continued the subjection of his estate to responsibility for contracts made by them after that event as fully as for those made during his life; for we are unable to discover any desire upon his part to establish a distinction between the period preceding and that following his death so far forth as the extent of hazard to his estate is concerned. And, to meet obligations thus to arise, he put upon his executors the duty and clothed them with the power to provide necessary funds by sale or pledge of assets; and this, whether we regard the original partnership as continuing, or the provision as to his death as an arrangement for a new one in its place after that event. This is as the law reads his agreement; and in interpreting this provision in the light of others in the same instrument, of the circumstances attending its execution, of the condition of the several parties and their relation to each other, and of their several acts performed under it, we think it is the meaning which he gave to it, which his associates had the right to and did give to it, and which he intended they and all persons dealing with and giving credit to the firm should give to it.
Nor is the right-of the persons thus giving credit to be paid, or the duty of the executors to pay by sale or secure by pledge, at all affected by the fact that he left a will the execution of which may be long postponed or even rendered impossible by the disastrous result of the business; for wills speak only of property remaining after contract obligations are discharged; by no act or writing, testamentary or other, could he destroy or diminish either this right of those who upon faith in his contract trusted his estate, or the right of *25his associates to all advantages to be derived from the privilege of continuing the business upon its credit. Therefore, the respondent, with knowledge of the terms of the partnership contract, could after his death safely accept from the executors of his estate a pledge of its assets as security for money loaned to the partnership for its proper uses, without inquiring as to the contents of his will.
It is the claim of the petitioners that it is the strong presumption of the law that the effect of this provision of the partnership agreement is not to make the entire estate of Roswell Blodgett liable for the debts incurred by the firm after his decease, but only such part thereof as prior to his death he had invested in its business, and that this presumption only gives way to a contrary intent clearly expressed. In support of this they have cited numerous cases in which creditors of a partnership, continued after the death of a member, have been denied access to his entire estate and have been compelled to accept only such portion of their claims as the amount of his capital actually invested at the time of his death would pay. But we believe that these cases, with one exception, are instances of the continuation of the business under testamentary provisions without any contract in relation thereto. In construing these, as in construing wills generally, the courts allow themselves to be led to conclusions by what they believe to have been the intention of the testator, and compel persons dealing with a partnership existing by testamentary permission to assume the hazard of rightly interpreting it in the light of that intention.
In Ex parte Richardson, 3 Madd. Ch., 130, articles of co-partnership provided that if Hargreaves, one of the partners, should die before the expiration of the term, the partnership should be continued and his estate be represented in it by such person as he should by will or other writing designate as his successor. He died, leaving a will, in which he provided that the executors and executrix should be his successors in the firm for the benefit of his estate. The court found in the language of the will an *26intent to limit the risk assumed by the estate to the amount which the testator should have actually invested at the time of his death, making no allusion to the articles of agreement. The case was made to stand upon testamentary intention. But we cannot permit any or all of these eases to control us in determining the extent of the right to bind his estate which Roswell Blodgett, for valuable consideration received, conferred upon the surviving parties to a contract. Moreover, if the provision had been found in a will, and the case could be made to depend upon the intention of Roswell Blodgett in placing it there, the'result would remain the same.
It is true there are in the contract the following paragraphs, namely:—“ and that to supply the needed additional capital said Roswell Blodgett shall furnish in cash within six months from the date of this instrument $2,500; ” and “ that if any capital can be spared from the business of the firm the same shall be paid to Roswell Blodgett or his legal representatives in reduction of the amount of capital furnished by him.” But, the money actually placed as capital in the treasury of a general partnership is but a part, often an inconsiderable part, of what is put at hazard; liability for debts may reach far beyond; and to this liability, as much as to the actual contribution of money, creditors look for security and ultimate payment. Of course he desired as between himself and his associates to make his cash contribution as small as possible and to the utmost extent earn profits by his credit. These provisions indicate no more than an expectation upon his part that such addition would suffice; that profits would accrue; and that upon these and the credit of the partners the business would live.
They cannot be interpreted as establishing the utmost limit to which creditors could force him, for, including this specified sum, his entire contribution to the capital of the firm would be only about $41,000. Its indebtedness was at least ’$85,000; to provide for which, either by capital or credit, was, so far forth as creditors were concerned, a *27burden which he could not remove from his own to the shoulders of his associates. And, it is to be noticed that he abstained from any effort to limit his liability by the statutory method provided for that purpose.
It is true too that he reserved for himself only such portion of the yearly profits as would be equal to seven per cent, upon the amount of capital which he contributed. Rut the significance of this concession is lost in the fact that his associates were chiefly to bear the burden of the business; and that they were his son and son-in-law, heirs expectant of his estate.
The Superior Court is advised to dismiss the petition.
In this opinion the other judges concurred.