Court Opinion

ID: 6544450
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:18:26.639914+00
Date Added: 2024-06-11T15:55:46.990134
License: Public Domain

Wood, J.  1. "Where conversion is rightfully made, whether by the court or a trustee, all the consequences of conversion must follow if there be no equity in favor of the heir or any one else for reconversion.” Foster v. Foster, L. R. 1 Ch. Div. 588; In re Simmons, 55 Ark. 485. This principle applies here. The mortgage held by the firm of Coolidge & Company, being but a security for debt — a chose in action — was personalty. Turman v. Sanford, ante, p. 95. When the elder Coolidge died, the surviving partner held the partnership assets as trustee, for the sole purpose of winding up the partnership buisness. Hill v. Draper, 54 Ark. 395. As such, it was his right, as well as his duty, to gather in and make available all the assets of the firm' for satisfying firm creditors, adjusting partnership equities, and then to hold the residue for distribution-to those entitled thereto. In this process of winding up the partnership, all partnership assets of whatever form, by a fiction of equity, for commercial convenience, were personalty in the hands of the surviving partner. But, when the necessity-required, in the business of bringing the partnership affairs to a close, the surviving partner had the unlimited power and right, so long as he acted in good faith, to change the form of the assets from personalty to realty, and the reverse. That is,.he had the right of conversion. He exercised that right in this case, converting personalty into realty. There is no charge of fraud. Therefore the asset must continue as realty, and go to the devisees under the will as such, unless there be some equity in favor of appellee Tor reconversion. There is no such equity. In re Simmons, 55 .Ark. supra. Before the affairs of the partnership were concluded, that which was personalty by rightful process of conversion had become partnership realty, and it so remained until the time for 'distribution. This brings the case within the rule of the American ■cases announced by Chancellor Walworth in Buchan v. Stunner, 2 Barb. Ch. 165, and quoted by this court, through Judge Cockrill, in Lenow v. Fones, 48 Ark. 563, as follows: “As between the personal representatives and the heirs at law of a deceased partner, his share of the surplus of the real estate of the co-partnership, which remains after paying the debts of the co-partnership, and adjusting all tire equitable claims of the different members of the firm, as between themselves, is considered and treated as real estate.” But it is urged that the death of Coolidge, intervening the conversion of the mortgage into the real estate in controversy, renders inapplicable the above doctrine to the case at bar. While the death of Coolidge ipso facto dissolved the partnership, the delectus personae being at an end, it did not eo instanii wind up the concern and distribute its assets. Firm assets remained such during the time required to pay off the debts and get the assets in shape for distribution. During this time neither the surviving partner, in his indivdual capacity, nor those standing on the rights of the deceased, had any interest which they could take. Had Coolidge lived, and the partnership been dissolved by mutual consent, or otherwise, he could not have received or held any of the firm assets in his own individual right, until same had been distributed to him in his character as an individual. Those succeeding to his rights as distributees or devisees under his will take onty what he had or could have taken, had he been living and the partnership been dissolved, i. e. his individual interest in the assets of the firm. As was said by Chief Justice Shaw in Howard, v. Priest, 5 Mete. 58.2: “'The true and actual interest of each partner in the common stock is the balance found due him after the payment of the debts and the adjustment of the partnership account. * * * And, as the widow and heirs claim only in right of the husband and father, such derivative right, in equity, will extend no further in behalf of the wife and children than that of the partner from whom it was derived.” This is the inevitable result, it seems to us, under the law peculiar to partnership property. The law of descents and distribution operates upon the property of the individual, and not upon the property of the firm, and there is no individual property until the firm property is at an end, which does not occur until its debts are paid, its affairs closed, and the residue of the assets distributed. The learned counsel have not cited us to a case where the facts are exactly similar to- the case at bar, and after a somewhat exhaustive research we have not been able to find one. But the doctrine announced is logical and sound, and supported by analogous principles announced by many eminent text writers and learned courts. Par. Part. 371; Lind-le), Part. § 341; Story Part. §§ 90-95, and note; Gobble v. Tom-linson, 50 Ind. 550; Collyer, Part. § 135, note; 1 Bates, Part. §§ 290, 297, note; Dyer v. Clark, 5 Mete. 562; Woodward-Holmes Co. v. Nudd, 58 Minn. 236, S. C. 59 N. W. 1011, 27 L. R. A. 340; Griffey v. Northcutt, 5 Heiskell, 757; Sternberg v. Larkin, 48 Pac. 861; Tillinghast v. Champlin, 4 R. I. 207.  2. The land in controversy was clearly ancestral, and in the paternal line. It was not acquired by Miss Burke through “any industry or exertions of her own,” nor did it come to her “by the deed or will of a stranger to her blood.” She took it by devise from her grandfather, who was also the father of appellant. The land was therefore not a new acquisition, but ancestral. Having come from the father of appellant, the grandfather of Miss Burke, at her death without issue of her own blood it must go back to the line whence it came — to appellant as the heir at law, and not to appellee as the next of kin. Kelly's Heirs v. McGuire, 15 Ark. 556; Galloway v. Robinson, 19 Ark. 396; 24 Am. & Eng. Enc. Law, 399. The complaint states the facts, which the demurrer admits, and it follows that the demurrer should have been sustained, as the complaint fails to state a cause of action. Reversed and remanded, with directions to sustain the demurrer.