Court Opinion

ID: 6245313
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:57:07.22389+00
Date Added: 2024-06-11T08:59:16.344647
License: Public Domain

Opinion by
Mb. Justice Mitchell,
The auditor found that the term of the partnership under its articles had not expired, there had been no formal dissolution or settlement of accounts, there were still some undistributed assets, and one unpaid debt, a mortgage on real estate belonging to the partnership, though held in the name of an individual partner, yet, notwithstanding these circumstances, he found as a fact that the firm had sold its entire plant, equipment and good-will, and by common consent ended its business. This finding was confirmed by the court, and we see no reason to question its soundness. The auditor’s conclusion that the case is “ analogous to that of a partnership which has dissolved by mutual consent, settled its accounts, paid its debts, and has a surplus in land,” is the logical deduction from the facts. Dissolution, as between the partners, is a matter of intention, and it may be shown by the sale of the whole property and business, as well as in other ways: 17 Am. & Eng. Ency. of Law, 1100.
The question then arises, had the real estate returned to its normal character, or did it still continue in its equitable status of personalty so that its proceeds were distributable as such? In dealing with questions of this kind it is important to keep constantly in mind what equitable conversion really is, a fiction by which for certain specific purposes, and to the limited extent required for such purposes, realty may be treated as personalty or personalty as realty. As said in Wentz’s Appeal, *248126 Pa. 541, “ the money never is • real estate, in law any more than in fact, but for certain purposes, and within certain limits it is treated as if it was real estate. . . . The whole doctrine is the creation of equity for a specific purpose, and when that purpose is accomplished, the rule ceases to operate. So far therefore from the money actually becoming real estate, and requiring a positive act of reconversion to restore it to its natural character of money, it never is real estate, and is only treated as such within a limit,” and quoting Sharswood, J., in Foster’s Appeal, 74 Pa. 397, “when the purpose of conversion is attained conversion ends.”
Land held by partners as partnership assets is to be treated as if it were personalty to the extent demanded bjr the purpose with which it is put into the common stock, but no further. How far that shall go is largely a matter of intention, but the presumption is that it shall extend to all the regular and legitimate uses of the business, and it may be that as to creditors this presumption must be held conclusive. It is frequently said that during the partnership it is “ an out and out conversion,” but the phrase is unfortunate, and apt to mislead. Even in a leading case in which it is used, the limited sense in which it is to be taken is shown elsewhere in the opinion, “ where land is a part of partnership stock, it at no time—not even during the continuance of the partnership—becomes personalty in such an unqualified sense as to give one partner an implied power to dispose of the whole partnership interest in it. As regards the power of disposition, land held as partnership stock is not subject to the rule which makes each partner the agent of the firm: ” Foster’s Appeal, 74 Pa. 39T.
The. realty involved in the present case was put into the partnership assets for use by the firm in the business, and so long as the business continued it was liable to be treated for all necessary business purposes as part of the general stock. But its status as personalty even during the continuance of the business was temporary and restricted, and the moment the necessity for so treating it ceased, its quasi character ceased and it resumed its normal position as land'. To extend the operation of the conversion so as to alter the devolution of title would be to pervert an equitable fiction from the very purpose of its invention. If the firm had been dissolved by the death of Wil*249liam Robinson, as it would have been except for the special provision of the articles of partnership, his share in the settlement of the assets as to the part represented by this fund, would have passed to his heirs as real estate. The effect of the dissolution by bringing the entire business to an end was exactly the same.
As to the dwelling house of William Robinson, a fortiori it was real estate. It had never been anything else.
Decree affirmed.