Court Opinion

ID: 3544602
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:56:02.06967+00
Date Added: 2024-06-11T14:06:24.299490
License: Public Domain

I do not agree with the majority opinion or the conclusion therein reached. In my opinion the statute (sec. 10261, Rev. Codes 1921) is exclusive, and the surviving partner may not obtain the intervention of equity to compel the executrix to account, since he is possessed of ample legal authority to continue in the possession of the partnership property and finally conclude the business of the partnership. By the statute, it is expressly provided that "when a partnership exists between the decedent, at the time of his death, and any other person,the surviving partner has the right to continue in possession ofthe partnership, and settle its business. * * * The surviving partner must settle the affairs of the partnership without delay,and account to the executor or administrator. * * * Upon the application of the executor or administrator, the court or judge may, whenever it appears necessary, order the surviving partner to render an account, or in case of neglect or refusal may, after notice, compel it by attachment. * * * The surviving partner is a trustee of the estate or interest of the deceased partner in the property of the partnership, for every purpose, and the court or judge may require the surviving partner to account at any time." This legislative enactment appears to be but a restatement of the rule at common law, and its provisions have on several occasions been considered and applied by this court. (Krueger
v. Speith, 8 Mont. 482, 3 L.R.A. 291, 20 P. 664; Boehme v.Fitzgerald, 43 Mont. 226, 115 P. 413; First National Bank
v. Silver, 45 Mont. 231, 122 P. 584; Silver v. *Page 427 Eakins, 55 Mont. 210, 175 P. 876; Mares v. Mares,60 Mont. 36, 199 P. 267; Myers v. Sumer, 64 Mont. 342,210 P. 76.)
In the Krueger Case, in applying the statute, it was by this court said: "Undoubtedly, under this provision, a surviving partner is a trustee or quasi trustee of the interest which the deceased partner had in the partnership property at the time of his death; and as such, is liable to account therefor, to the administrator or personal representative of the deceased partner. Strictly speaking, a surviving partner could hardly be termed a trustee of the copartnership, as that ceased to exist on the death of one of its members. * * * The assets which pass to the executor or administrator consist of the individual estate of the deceased; partnership assets, as such, form no part of such individual estate. The residuum only, after satisfying liabilities and advances, if any, made by the survivor, becomes the property of the estate. (So, also, Andrade v. SuperiorCourt of San Francisco, 75 Cal. 459, 17 P. 531.) If it was otherwise, immediately on the death of one of the members of a partnership, the partnership estate would be in custodia legis, and would have to be administered and settled like any private or individual estate. Our statute does not contemplate a proceeding like this, and while it requires the inventory to include the interest of the decedent in a partnership, it also gives to the surviving partner full power over the partnership estate and property for the purpose of settling and accounting, and subjects him to legal proceedings, only when he fails to perform his duty within a reasonable time. He gives no bond such as is required to be given by an administrator, nor do accounts against the partnership require the formal proofs or allowance which the law requires in the case of claims against an estate. None of the requirements with which the law surrounds an administrator are required of a surviving partner in the settlement of a partnership estate, but all such matters are left to the judgment and presumed knowledge of the surviving partner, and his acts, if done in good faith, bind alike his own and the interest of *Page 428 
the representatives of the deceased partner in the partnership property. (Story on Partnership, sec. 328.) The authorities to which we have referred, settle the question, that it is only in a qualified sense that a surviving partner is a trustee of the representatives of a deceased partner. He takes, or rather retains the partnership property, jure proprio; and the only trust which attaches to his possession and disposition of the property is his duty to settle up the affairs of the partnership and account to the representatives of the deceased partner, a duty, as we have seen, which he may be compelled to perform if he neglects or unreasonably defers." Subsequent decisions have been to like effect.
In the Boehme Case it was held that the surviving partner is entitled to all property and assets of the firm, and it is his exclusive province to liquidate the business of the partnership, although he is required to render account to the executrix of the will of his deceased partner.
In the First National Bank Case it was held that, while the death of a partner works a dissolution of the partnership, the only effect upon the partnership property is to place it in the exclusive control of the surviving partner. He retains possession of such property, "not by virtue of any supposed representative relationship, but jure proprio, since the interest of each member of the partnership extends to every portion of its property," the Krueger Case being therein cited.
In the Silver-Eakins Case it was said by the court: "It is true that one partner cannot maintain an action at law against his copartner, at least until an accounting is had and a balance determined, and the reason for this rule is apparent. The interest of each partner extends to every portion of the firm property (sec. 5469, Rev. Codes [sec. 7984, Rev. Codes 1921]) and therefore neither partner is entitled, as against the other, to the exclusive possession of the whole or any specific part of the partnership assets. (Boehme v. Fitzgerald, 43 Mont. 226,115 P. 413.) But whenever the reason for that rule ceases, *Page 429 
so does the rule itself, and the reason ceases immediately upon the death of one partner. The partnership is thereupon dissolved (section 5494), and the surviving partner becomes at once entitled to the possession of sufficient firm property to enable him to discharge the duties imposed by section 7607. (Bank v.Silver, 45 Mont. 231, 122 P. 584.) If, then, it was made to appear by this complaint that possession of this $1,920.80 was necessary to settle the firm debts, an action for money had and received would lie to recover it. (Conger v. Atwood, 28 Ohio St. 134, 22 Am. Rep. 462; 20 R.C.L., p. 1010.)"
And in the Mares Case it was held by us that "a general partnership is dissolved by the death of one of the partners (sec. 5894, Rev. Codes [sec. 8009, Rev. Codes 1921]), and it is the duty of the surviving partner to make account to the personal representative of the deceased partner. (Sec. 7607, Rev. Codes [sec. 10261, Rev. Codes 1921].) The law imposes this duty upon the surviving partner, and not upon the representative of the estate; so that it is the plain duty of the surviving partner to make such accounting, rather than exact the same from the personal representative of the deceased partner. The surviving member of the copartnership is presumed to have the possession of, and knowledge concerning, the books of account, property and assets of the firm; and he is given express statutory authority to continue in the possession of the partnership property, and to settle up its business after the dissolution of the partnership by death of one of its members, irrespective of the appointment and qualification of a personal representative of the deceased partner's estate."
And here, the allegations of fact upon which the plaintiff predicates a right of accounting and recovery in this action are not unlike those in the case of Myers v. Sumer, 64 Mont. 342,210 P. 76, wherein the plaintiff's complaint was held not to state a cause of action under the statute and the holding of this court in Mares v. Mares. *Page 430 
Under this statute it is held in California that a surviving partner cannot collect, from the general assets of his partner's estate, a debt due from the deceased to the partnership without first complying with the statute, thereby ascertaining whether the partnership assets are sufficient to pay its debts. (Painter v. Estate of Painter, 68 Cal. 395, 9 P. 450.) This statute vests the surviving partner with the exclusive right of possession, and the absolute right of control and disposition of the assets of the partnership. (Allen v. Hill, 16 Cal. 113;Miller v. Lux, 100 Cal. 609, 35 P. 345, 639.) And when the affairs of a partnership are finally settled up and upon striking a balance it is found that one partner has drawn from the firm more money than his proportion, where there is a deficiency of partnership assets, the relation of debtor and creditor between the surviving partner and the personal representative of the decedent arises, but not before. (Gibson v. White, 34 Cal. 258;  Logan v. Dixon, 73 Wis. 533, 41 N.W. 713.) The statute gives a surviving partner ample power to take possession of the property of the partnership and wind up its affairs, and it follows that he does not require the interposition of a court of equity to aid him in doing that which he has ample authority to do himself. (People v. Myers, 70 Cal. 582, 12 P. 719.) And in McKay v. Joy, 70 Cal. 581, 11 P. 832, it was held that a surviving partner cannot maintain an action against the personal representative of his deceased partner for an accounting of partnership affairs.
Thus it is plain, in application of the statute, that where a partnership is dissolved by the death of one of the partners, the survivor has the entire legal right to all the assets of the firm for the purpose of winding up the affairs of the partnership, and if copartnership assets come to the possession of the administrator of a deceased partner and are actually administered into his estate, the surviving partner may obtain relief in equity against the estate of such deceased partner without authenticating his claim under the statute of administration (Marlatt v. Scantland, 19 Ark. 443), and *Page 431 
the surviving partner may maintain an action at law against the representative of his deceased partner to recover books of account or evidence of indebtedness in his possession. (Murray
v. Mumford, 6 Cow. (N.Y.) 441; Sterns v. Houghton, 38 Vt. 583;  Kinsler v. McCants, 4 Rich. (S.C.) 46, 53 Am. Dec. 711.)
"Although one partner cannot maintain an action at law against his copartner, a surviving partner may sue an administrator of the estate of his deceased partner who had wrongfully obtained possession of property belonging to the partnership, or who wrongfully retained possession of choses in action belonging to the firm which were in the possession of the deceased partner at the time of his death." (20 R.C.L., 1010.)
Speaking of the position of surviving partners, Professor Mechem says: "They alone, to the exclusion of the representatives of the deceased partner, have the right to the possession of the partnership assets, and to collect or receive debts due the firm. Causes of action, being joint, at law, survive to or against them, and therefore they alone are the ones to sue or be sued in respect to partnership dealings. But while they may have the legal title, they are commonly said to hold it in a species of trust. It is their duty to collect and preserve the assets, to apply them to the payment of the debts, to close up the business with reasonable promptness and to account to the representatives of the deceased partner for his share of the final balance." (Mechem, Elements of Partnership, 2d ed., sec. 402.)
For the purpose of closing up the affairs of a partnership, the surviving partner has the exclusive right to the possession and control of the partnership assets, and he becomes vested with them. (Egberts v. Wood, 3 Paige Ch. (N.Y.) 517, 24 Am. Dec. 236; Wickliffe v. Eve, 17 How. 468, 15 L. Ed. 163 [see, also, Rose's U.S. Notes]; Bischoffsheim v. Beltzer, 20 Fed. 890.) A deceased partner's executor cannot interfere in the settlement of partnership matters, but may call upon the *Page 432 
surviving partner to account for the surplus. (Watson v.Miller, 55 Tex. 292.)
It is the settled rule that no indebtedness can possibly exist between the members of a partnership until its debts are paid, its business entirely settled, and the balance between the partners ascertained (Armstrong v. Hollen, 58 Or. 534,115 P. 423), and I am of opinion, that it should be applied with greater reason and force as between a surviving partner and the personal representative of a deceased partner.
However, in view of the plaintiff's allegations of facts in the complaint before us, is his position such that he may exact an accounting from the executrix? I think not. In my opinion he has mistaken his remedy. It is made to appear affirmatively by his allegations and the claim made against the estate as a part of the complaint, that no settlement of the affairs of the partnership has ever been made, and that no settlement or attempted settlement of accounts was ever made or attempted as between the plaintiff and the executrix. Neither is it shown that the plaintiff ever made demand upon the executrix for the partnership property or assets in her possession or under her control. After the death of his partner, Haire, the plaintiff remained passive so far as the partnership property and business was concerned. He waited until two days before the presentation of creditors' claim against the estate was barred before making demand or asserting any rights or claims of himself or of the partnership against the executrix. Having failed to protect and administer the estate lawfully in his possession as his exclusive trust, he now seeks in equity to compel the executrix to account to him. This may not be accomplished, since the law gives him ample and exclusive authority to administer the partnership business and protect his separate interest in the partnership estate. If, upon liquidation of the partnership estate, a balance is found due the survivor he may recover from the estate of his deceased partner, but not until he has concluded the partnership *Page 433 
business and thereby ascertainment is made of the amount due.
As is shown conclusively by the allegations contained in the amendments to the complaint, the partnership business remained unsettled. The plaintiff simply undertakes an accounting of the unsettled partnership business, and merely asserts to the personal representative: "You have certain assets of the partnership in your possession and I have some in mine; the affairs of the firm are not concluded, but since there are no creditors, we should have an accounting and you should pay me the amount found to be due me." Under the statute and the authorities the plaintiff may not pursue such course. He is required to settle up the partnership business, strike a balance of accounts, and then may compel the personal representative of the deceased partner to make payment. To protect his rights against the estate of his deceased partner pending liquidation of the firm business, he is authorized to present a contingent claim to the representative of the estate. (Sec. 10173, Rev. Codes 1921.) In the amendments to the complaint, as in the claim against the decedent's estate, the plaintiff expresses a willingness to account, which is not a basis for the present action.
Considering all of the allegations of the plaintiff's complaint in light most favorable to the attempted statement of a cause of action, the action is simply one whereby the surviving partner is attempting to compel an accounting with the representative of a deceased partner. This may not be done, as held by us in Mares v. Mares supra. Failing to show affirmatively an accounting and settlement of the partnership affairs by the surviving partner, and the presentation of a claim to the executrix against the estate for the amount to be found due to the plaintiff, based upon such a settlement, the plaintiff has failed to state a cause of action entitling him to recover.
Rehearing denied June 14, 1928. *Page 434