the agreements of the partners, whilst the actual assets of the firm vary from day to day, and include everything belonging to the firm and having any money value. Moreover, the capital of each partner is not necessarily the amount due to him from the firm; for not only may he owe the firm money, so that less than his capital is due to him, but the firm may owe him money in addition to his capital, e. g., for money loaned. The amount of each partner's capital ought therefore always to be accurately stated, in order to avoid disputes upon a final adjustment of accounts; and this is more important where the capitals of the partners are unequal, for if there is no evidence as to the amounts contributed by them, the shares of the whole assets will be treated as equal.' Lindley Partn. 610. [1 Ewell's Lindley, 2d Am. Ed. 320.] The same author adds in another place: 'When it is said that the shares of partners are prima facie equal, although their capitals are unequal, what is meant is that the losses of capital, like other losses, must be shared equally, but it is not meant that on a final settlement of accounts capitals contributed unequally are to be treated as an aggregate fund which ought to be divided between the partners in equal shares.' Lindley, Partn. 67. On the contrary, in his chapter devoted to partnership accounts [2 Lindley, Partn. 2d Am. Ed. 402], he expressly tells us that the assets of a partnership should be applied as follows: "1. In paying the debts and liabilities of the firm to non-partners. "2. In paying to each partner ratably what is due from the firm to him for advances as distinguished from capital. "3. In paying to each partner ratably what is due from the firm to him in respect of capital. 4. The ultimate residue, if any, will then be divisible as profit between the partners in equal shares, unless the contrary can be shown.' "In accordance with these principles, the following decision has been made by the supreme court of New York in a case cited in a note to page 610 of Lindley on Partnership: 'Where by the terms of the agreement the defendant furnished the capital stock, and the plaintiff contributed his skill and services, and the profits of the copartnership were to be equally divided, the plaintiff is not entitled to any part of the capital stock on a settlement of the affairs of the partnership. He has no interest in any part of the capital excepting so far as in the progress of the business the same may have been converted into profits.' Conroy v. Campbell, 13 Jones & Sp. 326. The case, it will be noticed, is exactly in point. And to the same effect in principle are Whitcomb v. Converse, 119 Mass. 38, 20 Am. Rep. 311, ante; Knight v. Ogden, 2 Tenn. Ch. 473, and Shepherd, ex parte, 3 Tenn. Ch. 189. No case has been found to the contrary. "Chancellor's decree affirmed." (Note: See Meechem's Elem. of Partn. §§ 305-308.) Question 625: (1) If A contributes capital and B, skill and time, is B entitled to any of the capital on dissolution? Why? (2) How are the assets of a partnership to be applied upon a dissolution? (Note: In Lindley on Partnership, 8th Ed., the author says: "The only case that practically gives rise to difficulty is where partners have advanced, or agreed to advance, unequal capitals, and to share profits and losses equally. If nothing more than this is agreed, a deficiency of capital must be treated like any other loss and the assets remaining after the payment of all debts and advances must be distributed amongst the partners, or some of them, as to put all on an equality. If in such case one partner is insolvent and unable to contribute his share of the loss of capital, the solvent partners are not bound to contribute for him, but each partner is to be treated as liable to contribute an equal share of such loss, and the assets are then to be applied in paying to each partner ratably what is due to him in respect of capital.") § 626. CHAPTER 76 DEATH OF PARTNER Effect of death of partner. § 627. Rights, titles and duties as between surviving partner and representative of deceased partner. § 628. Devolution of title to firm real estate. § 629. Rights of creditors of firm against surviving partner and estate of deceased partner. § 626. (Partnerships, Sec. 67.) Effect of death of partner. Case 626. Andrews v. Stinson, 254 Ill. 111. "The principal point discussed in the briefs is whether the two contracts executed by said executors and the surviving partners, Hand and Stinson (in connection with the authority granted in Andrews' will), constituted a continuation of the old or the creation of a new partnership. The death of either partner is, ipso facto, from the time of the death a dissolution of the partnership. (Remick v. Emig, 42 Ill. 343; Nelson v. Hayner, 66 id. 487; Douthart v. Logan, 190 id. 243.) And this is the general rule in other jurisdictions. (22 Am. & Eng. Ency. of Law,-2d ed.-199, and cases cited; 30 Cyc. 620, and cases cited.) It is sometimes said that a stipulation in the articles of partnership providing for its continuation after the death of the partner is binding upon the heirs or representatives of the deceased partner. Such agreements may be binding upon the surviving partners (22 Am. & Eng. Ency. of Law,-2d ed.-202), but it is at the option of the representatives, and if they do not consent, the death of the party puts an end to the partnership. (3 Kent's Com.-14th ed.-57, and note; Buck ingham v. Morrison, 136 Ill. 437.) The surviving partners, on the dissolution of the firm by the death of one of the members, are charged with the duty of proceeding at once, to settle up the partnership estate. They become trustees as to the deceased partner's interest, and while there is a community of interest between themselves and the representatives of the deceased partner in the adjustment of the partnership affairs, the partnership, for that purpose, only has a limited continuance. (Nelson v. Hayner, supra; Douthart v. Logan, supra.) If they continue business they do it at their own peril. They have no lawful right to expend the money of the firm in new enterprises, however necessary the expenditure may be to the conduct of the business. (Remick v. Emig, supra.) While a surviving partner in mercantile business may make small purchases of material to render the stock more salable, he has no power to make large purchases intended to continue the business. (Oliver v. Forrester, 96 Ill. 315.) The surviving partners, under the law, are required to wind up and close out the business, and, after paying the firm debts to distribute the assets among the surviving partners and the representatives of the deceased partner. 1 Woerner's Am. Law of Administration (2d ed.), Sec. 124; 22 Am. & Eng. Ency of Law (2d ed.), 200; 30 Cyc. 636. "Where there are provisions in the articles of agreement or will for the continuance of the business after the death of one of the partners, it is sometimes inaccurately said that the death of the partner does not dissolve the partnership. If the business is carried on after death of the partner under such arrangement or by the agreement of the heirs or personal representatives of the deceased, there is, in effect and in law, a new partnership, of which the survivors and the executors or heirs are the members, the new members becoming liable, as the old, to the creditors of the firm. (22 Am. & Eng. Ency. of Law,-2d ed.-201, and cases cited; 1 Woerner's Am. Law of Administration,-2d ed.-Sec. 123; Exchange Bank v. Tracy, 77 Mo. 594; McGrath v. Cowen, 57 Ohio St. 385; Madison v. Farnham, 44 Minn. 95; Jones & Cunningham's Pr.-2d ed.-82; Parsons on Partnership,-3d ed.-*439. See also, 1 Bates on Partnership, Sec. 52; Qwens v. Mackall, 33 Md. 382.) A reference to the authorities will disclose that while the above rule of law is not followed in some jurisdictions, the weight of authority, as well as sound reason, is in accord therewith. Under this reasoning it must be held that the agreements entered into by the executors and surviving partners created a new partnership." Question 626: What was the principal point in this case? What did the Court decide respecting it? What effect does death have on a partnership? If the partnership articles provide that death shall not affect the firm, does this bind the executor or administrator? What is the duty of the surviving partners? § 627. (Partnerships, Sec. 68.) Rights, titles and duties as between surviving partner, and representative of deceased partner. (See also Andrews v. Stinson.) Case 627. Preston v. Fitch, 137 N. Y. 41. "It has been settled for many years that upon the death of one partner the survivor becomes the legal owner of the assets and has the exclusive right to sell and dispose of them for the purpose of winding up the partnership affairs, and the survivor does not take such assets in the character of a trustee, but as survivor holding the legal title. This was decided lately in the case of Williams v. Whedon (109 N. Y. 333), and it has been the acknowledged law for a long number of years. But although the surviving partner thus takes the legal title to the partnership assets, it is yet plain that they come to him impressed with a certain kind of a trust founded upon his duty to dispose of or realize upon such assets and therefrom to pay the debts of the late firm |