Section 3. (1) A person has "knowledge" of a fact within the meaning of this Act not only when he has actual knowledge thereof, but also when he has knowledge of such other facts as in the circumstances shows bad faith. (2) A person has "notice" of a fact within the meaning of this Act when the person who claims the benefit of the notice (a) states the fact to such person, or (b) delivers through the mail, or by other means of communication, a written statement of the fact to such person or to a proper person at his place of business or residence. SECTION 3.-LIABILITY OF A PARTNER TO HIS Uniform Partnership Act, Section 38. (2) (a) (II) When dissolution is caused in contravention of the partnership agreement each partner who has not caused dissolution wrongfully shall have the right, as against each partner who has caused the dissolution wrongfully, to damages for breach of the agreement. FLETCHER v. REED. (Supreme Judicial Court of Massachusetts, 1881. 131 Mass. 312.) MORTON, J. This is a bill in equity brought to settle the affairs of a partnership. * * * The master finds that the copartnership between the parties was formed by an oral agreement, for an indefinite time, to which no exception is taken. A partnership for an indefinite period is in law a partnership at the will of the partners, and either partner may withdraw when he pleases, and dissolve the partnership, if he acts without any fraudulent purpose. It follows that the master rightly ruled that the defendants were not entitled to be allowed for any damages which they contended were caused by the withdrawal of the plaintiff from the firm. * * * Decree for the plaintiff. SECTION 4.-POWER OF THE PARTNERS TO WIND UP THE PARTNERSHIP AFFAIRS Uniform Partnership Act, Section 37. Unless otherwise agreed, the partners who have not wrongfully dissolved the partnership or the legal representative of the last surviving partner, not bankrupt, has the right to wind up the partnership affairs: Provided, however, that any partner, his legal representative, or his assignee, upon cause shown, may obtain winding up by the court. bankrupt, and another, having no knowledge or notice of this fact, makes a contract in the ordinary course of the business, there appears no reason why he should not be able to call on his other partners, not bankrupt or deceased, to contribute towards any loss which his separate estate may sustain on account of the contract. STEWART et al. v. ROBINSON et al. (Court of Appeals of New York, 1889. 115 N. Y. 328, 22 N. E. 160, 5 L. R. A. 410.) DANFORTH, J. The defendants are brought before the court as trustees and executors of the estate of Joseph Colwell, deceased. It appears that Colwell, in his life-time, and one Samuel S. Hepworth, carried on business as copartners under the name of S. S. Hepworth & Co., for the manufacture and sale of centrifugal machines and some other machinery, under articles of agreement, one of which was entered into February 22, 1877, and provided for the continuance of the partnership for five years from January 1, 1877. * * * Before the expiration of the stipulated time, and on the 18th of October, 1881, a further agreement was made that the copartnership should continue until dissolved by mutual consent or terminated by six months' notice in writing by one party to the other, and that, "in the event of the death of either, the business shall be continued by the survivor until the expiration of five years from the 1st day of February next succeeding such death; the estate of the deceased partner to have the same share and interest in the profits, and to bear the same share of the losses of the business, as would have been received and borne by the deceased partner had he lived: Provided, however, that if the survivor shall think it necessary to employ an additional clerk in consequence of the death of the deceased partner, in such case the expense shall be charged to and shall be borne by the share in the profits of the deceased partner." The firm business was thereafter continued under these instruments until the 1st day of June, 1882, when Colwell died, leaving children and a will. He appointed the above-named defendants executors and trustees, and gave them, in trust for his children, the greater part of his estate, and directed a distribution of the whole, making no reference to the business of the firm of S. S. Hepworth & Co., or to it in any way, or to the agreement above set out, and revoking all other wills theretofore made by him. It also appeared that from the death of Colwell to September, 1887, the business of S. S. Hepworth & Co. was continued and carried on by Samuel S. Hepworth, he assuming to do so under the agreements of February 23, 1877, and October 13, 1881. In the course of that business, in September or October, 1887, or five years after Colwell's death, he contracted debts with the plaintiff and with other persons or firms in the name of S. S. Hepworth & Co., for some of which he gave promissory notes in that name, and others of which rest in account. On the 4th of October, 1887, Hepworth individually and as surviving partner was insolvent to the extent of about $500,000, and on that day made an assignment in both capacities for the benefit of his creditors. The individual debts of Colwell have been paid, and property remains in the hands of his executors. The plaintiffs, either as original creditors or by assignment, are the owners of the debts contracted by Hepworth, and set out in the complaint, amounting in the aggregate to about $15,000, and they seek to recover the amount from the individual estate of Colwell, and in the mean time ask for the appointment of a receiver of his property, assets, and estate, and an account thereof from the defendants as his representatives. Various defenses were interposed by them, but, so far as material upon this appeal, their effect depends upon the single question whether the general estate of Colwell was by virtue of the above agreements rendered liable for debts contracted by Hepworth in the firm name, after the death of Colwell. The trial court and the general term have held against the plaintiffs, and the defendants had judgment accordingly. It is a general rule that a contract of partnership is dissolved by the death of one of the parties, whether entered into for a fixed time or not, and that after his death the former partner cannot bind the estate of the decedent by new contracts, and, although the partnership be expressly extended to executors, they could not be compelled to carry it on, and would be entitled to a dissolution and an account of the assets, subject to the liabilities of the firm incurred up to the time of dissolution. These are familiar and well-settled principles. Here the representatives of the deceased partner were not to be partners with the survivors, nor were they to have anything to do with the conduct of the business or its management; on the contrary, the business is "to be continued by the survivor." We have only to inquire, therefore, whether the partnership agreements take the case out of the general rule. The frame of the last articles shows that the parties contemplated and bargained for a continuance of the business for the term of five years from the 1st of February next preceding the death of either, but the residue of the clause containing this stipulation depends to some extent for its interpretation upon the preceding or original article. The second agreement refers to the first as containing the terms and conditions on which the business is to go on; and looking there we find that the capital, however represented, by money, tools, machinery, or material, was not to exceed $4,000, and was to be provided by Colwell and to remain his individual property. That contribution made him an equal partner, and upon dissolution of the firm, was to be repaid to him, with interest, before any division of surplus earnings should be made. Death of a partner, however, was not as of course to work a dissolution, but the wife and children of the decedent were immediately to succeed to his interest in the business, which thenceforward was to be prosecuted for their benefit and that of the surviving partner. We do not need to ascertain whether this clause could have any effect without the assent of the parties named, for it never came into operation, being suspended by that of the agreement of October 13th, which provides for the continuance of the business "by the survivor," and the distribution of profits or losses "to the estate of the deceased partner, as would have been received and borne by him had he lived." It is to be seen, therefor, that the capital invested was to remain the same. It was not to exceed $4,000. It belonged to Colwell, but was to continue in the business notwithstanding his death, and could not be withdrawn until the expiration of five years from that event. much the surviving partner might insist upon. I do not see that he could rightfully exact more, and, if he could not, how could third persons? There is in fact no partnership, for there are no partners. There is a surviving partner. Under the first article it might be said that, if the wife and children assented, they would have become partners. The executors cannot be deemed partners, for that capacity has B.& B.BUS.Law-84 not been put upon them, nor have they assumed it directly or indirectly by taking any part of the management of the business. They knew of its continuance, and loaned Hepworth money upon security. Nothing more. A new partnership was not formed; nor can one be implied. But it is said the "estate" of the deceased partner is to share in profits or bear a portion of the losses. Of what? Not a partnership, but a business conducted by a surviving partner. An estate cannot be a partner. I think the provision in the agreement means nothing more than that the capital actually invested in the business before or at the death of the partner shall continue to be so subject or liable. The general rule already adverted to does, upon the death of a partner, terminate the power of his associate or copartner to contract new debts on the credit of the firm. Assuming, with the appellant, that this general result of law may be varied by an express agreement, it will then depend upon the particular terms of that agreement to what extent the estate of a deceased partner may be bound by the surviving member of the firm, "whether his estate shall be generally liable for all the debts, or only to the extent of the property embraced and left in the partnership to be employed by the survivors." Story, Partn. 201a. But it is said in Burwell v. Mandeville's Ex'rs, 2 How. 560, 11 L. Ed. 378: Nothing, however, but the clearest and most unambiguous language, showing in the most positive manner an intention on the part of the testator to render his general assets liable for debts contracted after his death, will justify a court in extending the liability of his estate beyond the actual fund employed therein at the time of his death. * * * In the case now before us the directions or authority are such only as we said in the former case would be insufficient to enable a creditor to reach the general assets of an estate. They are almost literally in every sense substantially the same as those actually presented by Burwell v. Mandeville's Ex'rs, supra, and in view of the decisions thus referred to it would be useless to go on in this discussion as a new one, or do more than call attention to the terms of the contract on which appellants must succeed or fail in their contention against the decision of the court below: First. The "capital" is fixed at $4,000, the sole property of Colwell. Second. It is with that capital that "the business of the copartnership is to be conducted." Third. The profits of the business are to be divided between the parties at convenient periods. Fourth. At the dissolution of the partnership, and the liquidation of its business the cash capital is to be repaid before any division of surplus earnings. These terms and conditions are by reference incorporated into the new agreement on which the appellants rely. The second agreement repeats the same general language. In the event of death "the business" shall be continued, i. e., the business already described as employing a certain capital, not an additional capital; and the profits and losses of the same "business" are to be shared in the same manner as if the deceased partner were alive, with only one addition; the survivor may, if he thinks necessary in consequence of his partner's death, employ an additional clerk, the expense of whose employment shall be borne by "the share of the profits of the deceased partner." Here are no words from which can be implied an intention to bring into the concern other capital, or make new' debts a charge upon any assets outside of those already pledged to the business of the firm. It is nothing more than an authority to the surviving partner to continue an existing business, and therefore within the authorities cited; and upon reason and common sense the plaintiffs cannot have the relief they seek in this action. The respondents assail the validity of the agreement for any purpose. I do not think it necessary to determine the question so raised. It is enough to dispose of the present case that we find no language on the part of the deceased which indicates any intention on his part to put in hazard his general estate, or which by fair construction furnishes any ground for the present action. It follows that the judgment appealed from should be affirmed, with costs. All concur, except EARL, J., not voting. SECTION 5.-RIGHTS OF PARTNERS AFTER DISSOLUTION WITH RESPECT TO THE DISPOSI TION OF PARTNERSHIP ASSETS Uniform Partnership Act, Section 38. (1) When dissolution is caused in any way, except in contravention of the partnership agreement, each partner, as against his co-partners and all persons claiming through them in respect of their interests in the partnership, unless otherwise agreed, may have the partnership property applied to discharge its liabilities, and the surplus applied to pay in cash the net amount owing to the respective partners. But if dissolution is caused by expulsion of a partner, bona fide under the partnership agreement, and if the expelled partner is discharged from all partnership liabilities, either by payment or agreement under section 36 (2) he shall receive in cash only the net amount due him from the partnership. (2) When dissolution is caused in contravention of the partnership agreement each partner who has not caused dissolution wrongfully shall have all the rights specified in paragraph (1) of this section. SECTION 6.-RELATIONS OF THE PARTNERS AFTER DISSOLUTION UPON THEIR ELECTION TO CONTINUE THE BUSINESS Uniform Partnership Act, Section 38. (2) (b) When dissolution is caused in contravention of the partnership agreement, the partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name, either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the 2 Lewis' Note to Section 38.-The right given to each partner, where no agreement to the contrary has been made, to have his share of the surplus paid to him in cash, makes certain an existing uncertainty. At present it is not certain whether a partner may or may not insist on a physical partition of the property remaining after third persons have been paid. |