Opinion
No. 3142.
Decided March 5, 1940.
The general rule that the death of a partner dissolves the firm and vests the partnership property in the surviving partner for the purpose of settling the firm's affairs is inapplicable where the partnership agreement provides otherwise, e.g. by requiring the surviving partner to purchase the interest of his deceased partner when ascertained in the manner prescribed by the agreement.
Where upon the death of a partner the surviving partners carry on the business as before without intentional departure from their former course of dealing the presumption is that they intended to operate under the original articles of co-partnership so far as applicable. And the presumption applies to a provision in the original articles for the ascertainment and purchase of a deceased partner's interest.
An agreement of co-partnership between A, B and C provided that on a partner's death "the amount . . . ascertained to be due and owing to the deceased partner" on the basis of the value of the deceased partner's interest, "shall be paid by the surviving partners to his representative . . . and . . . the share of the deceased partner . . . shall . . . belong to the surviving partners in the proportion in which they have contributed to the purchase." After the death of A the surviving partners B and C carried on the business until the death of B and thereafter C continued the business. On the death of A, the surviving partners were obligated to pay to A's representatives, who were also bound to accept, the value of A's share. The business having been continued by B and C on the basis of the original articles until B's death, and without the purchase of A's share, C the sole surviving partner is entitled to acquire the interests of both A and B on the terms of the original partnership agreement.
The sums required to be paid in such case being capable of judicial determination are not deemed indefinite or uncertain.
BILL IN EQUITY, for the appointment of a receiver to liquidate the assets of a bakery conducted under the name of Normand Brothers, and for an accounting. The business was established by Aime Normand, George Normand, and Leonce Normand under articles of copartnership dated February 14, 1912. The plaintiffs are the heirs-at-law of George Normand, who died on May 21, 1938, and Maria Normand, his widow and the administratrix of his estate. The defendants are Leonce Normand, the sole surviving partner of Normand Brothers, Sylvio Normand, executor of the will of Aime Normand, who died on August 2, 1939, and the beneficiaries under the will.
After the death of George Normand the surviving partners, Aime and Leonce, carried on the business, and since Aime's death Leonce has continued to do so. The clauses of the partnership agreement of February 14, 1912, deemed material to the present controversy and numbered 1 to 5 for convenience, are as follows:
"1. The partnership shall be carried on under the style or firm of Normand Brothers, the death of any partner shall dissolve the partnership between the remaining partners.
"2. Any partner may retire from the partnership on giving not less than six calendar months previous notice in writing to the other partners of his intention so to do, or leaving such notice at the counting house or office of the partnership and at the expiration of such notice the partnership shall determine so far as regards to the partner giving or leaving such notice, but not as between the remaining partners.
"3. In the event of any of the said partners retiring as aforesaid he shall not, during the remainder of the term, carry on or engage or be interested directly or indirectly in any other business competing or interfering with the business of the said firm.
"4. Any partner who shall be desirous of selling his share and interest in the business shall give the preference to the other partners.
"5. In the event of the death of any partner, an account and statement shall be taken and made out of his share of the capital and effects of the partnership and all of unpaid interest and profits belonging to him up to the time of his decease, for which purpose a valuation shall be made of any assets or effects requiring valuation and the amount so ascertained to be due and owing to the deceased partner shall be paid by the surviving partners to his representative within six calendar months from his decease, with interest thereon until payment at the rate of six per cent (6%) per annum; and [upon] such payment the share of the deceased partner in the partnership property and effects shall go and belong to the surviving partners in the proportion in which they shall have contributed to the purchase thereof."
The defendant Sylvio Normand, executor of the will of Aime Normand, alleges in his answer that upon the death of George Normand clause 5 became effective and that Aime and Leonce were entitled to purchase and the plaintiffs obligated to sell the interest of George Normand in the partnership business. He seeks specific performance of the agreement.
The defendant Leonce Normand claims that he has the right to purchase the interests of both George and Aime, while the executor of Aime's estate denies that right so far as Aime's interest is concerned, claiming that the partnership terminated at the death of George.
The plaintiffs deny that clause 5 constitutes a valid contract "because its provisions were indefinite and uncertain as to the sale price and the method of arriving at it."
The following questions of law were transferred by Young, J., without a ruling:
1. Was there at George's death an enforceable obligation under the partnership agreement for Aime and Leonce to buy, and George's estate to sell, George's share in the partnership? 2. Was there at Aime's death an enforceable obligation under the partnership agreement for Leonce to buy, and Aime's estate to sell, Aime's share in the partnership?
Chretien Craig, for the plaintiffs.
Richard F. Upton and Robert W. Upton, for the defendant Leonce Normand.
McLane, Davis Carleton, for the other defendants.
McLane, Davis Carleton, for the motion.
It is the general rule that the death of a partner dissolves the firm and vests in the surviving partner or partners the possession and management of the partnership property for the purpose of settling the firm's affairs. Cotton v. Stevens, 79 N.H. 224. It is not uncommon, however, for articles of copartnership to provide the method by which the partnership affairs shall be settled, and when such provisions exist they must prevail. Parsons, Partnership (4th ed.), s. 344.
Partners "may agree that upon the death of any of their number, the survivors shall become the absolute owners of the firm assets, with a personal liability to pay the deceased partner's representatives for his interest." Burdick, Partnership (3d ed.), 148. In such a situation the right of the representatives is to have the value of the deceased partner's interest "ascertained in the method prescribed by the agreement, and paid by the survivors in the stipulated manner." Ib. 149.
The partnership agreement in the present case provides, in effect, that in the event of a partner's death his legal representative is to be paid a sum based primarily on the value of the deceased partner's interest in the firm, and on payment of that sum title to the partnership property is to vest in the surviving partners. Since the sum to be thus paid is capable of judicial determination, it cannot be deemed indefinite or uncertain. Kann v. Company, 81 N.H. 535, 540; s. c. 85 N.H. 41, 48. On the death of George Normand the surviving partners were obligated to pay to George's legal representative, and the latter was required to accept, the value of George's share as stipulated in the contract.
Although the original partnership was dissolved by the death of George, the pleadings indicate that the surviving partners continued the business precisely as before with no intentional departure from their former course of dealing. Under such circumstances it is presumed that they intended the original articles of copartnership to be those of the new partnership "excepting such, if any there were, as were plainly inapplicable." See Parsons, Partnership (4th ed.), s. 165, and cases cited.
"If a partnership is continued after the expiration of the time originally contemplated, or is dissolved by the retirement or addition of a partner, the business being continued, the continued partnership is deemed to be on the same terms, as far as applicable, as before" (Bates, Partnership, s. 216, and cases cited), and a provision in the articles that if a partner dies before the expiration of the partnership term the surviving partner shall pay a stated sum for the deceased partner's interest applies to the continued partnership (Cox v. Willoughby, 13 Ch. Div. 863).
It follows that Leonce, as sole surviving partner, is entitled to acquire the interests of both George and Aime on the terms prescribed by clause 5 of the partnership agreement. When George died, Aime and Leonce each owed George's estate one sixth of the value of the partnership property. When Aime died, Leonce owed Aime's estate one half of the value. Since George's estate has not been paid, Leonce should pay the administratrix one third of the value of the partnership property as of the date of George's death. He should pay Aime's estate one half the value as of the date of Aime's death less one sixth of the value as of George's death.
The questions transferred are answered in the affirmative.
Case discharged.
All concurred.
ON MOTION FOR REHEARING. After the foregoing opinion was filed Sylvio Normand, individually and as executor of the will of Aime Normand, and the other defendants interested under the will moved for a rehearing on the ground that the record is so ambiguous and inadequate that this court cannot properly determine the questions transferred "until the facts involved are more fully and clearly presented" in the Superior Court.
Counsel state in the motion that the reserved case "was prepared by and agreed upon" by the attorneys representing the interested parties and assert that if they are relieved from the agreement by the Superior Court, they are prepared to establish facts tending to prove that Aime and Leonce Normand, after the death of George Normand, "operated the business as trustees." The proffered evidence is to the effect that "the former articles of partnership were recognized to be unsatisfactory," that there was no express agreement "either to accept the terms of the old partnership or to enter into a new partnership agreement," and that on July 31, 1939, a "draft of a new proposed partnership agreement" was submitted by Aime to Leonce but "was never executed owing to Aime's death."
We find in this evidence nothing to indicate the existence of a trusteeship. On the contrary, the fact that Aime and Leonce were contemplating new articles of partnership definitely confirms the presumption that they were continuing business under the old articles until a new agreement could be reached.
Motion denied.
All concurred.