Quinlivan v. English

1. Partnership Settlements — Outgoing Partner — Purchase of share of.— Where the mode of partnership settlement and division of the partnership property that is provided in the articles becomes impracticable, or can not bo fairly carried into effect, courts may order a sale of the property; but effect will be given to a stipulation that one or more of the parties shall be entitled to purchase the share of the outgoing partner at a valuation.

Appeal from St. Louis Circuit Court. The eleventh article o£ the partnership agreement, the meaning and effect o£ which is a point in dispute in the case, ivas in the words following, viz: “That in case of the death of any of the said partners, violation of any of the articles of this agreement, or other dissolution of this partnership, a general account of stock shall be taken, in writing, as before provided, and the balance due such deceased or outgoing partner or partners ascertained, and such balance paid such outgoing partner or the representatives of such deceased partner as follows: One-third of such balance in one month from such dissolution or death, and notes of the continuing partner or partners at one and two years’ time for the other two-thirds ; said notes to be secured by deed of trust on the property of said concern, or otherwise, as may be agreed upon, and shall bear interest at the rate of six per cent, per annum.” The facts are sufficiently set forth in the opinion of the court. I. Each partner has the right, as a matter of law, to have the partnership effects applied to the discharge and payment of all the partnership debts and liabilities before any one of the copartners can claim any right or title thereto. (Story on Part. §§ 97, 326, 441; 3 Kent’s Com. § 65 ; Dyer v. Clark, 5 Met. 575 ; Nichóll v. Mumford, 4 Johns. Ch. 525 ; Rodriguez v. Hefferman, 5 id. 428.) II. The interest of a partner in the partnership effects is his share of the surplus after paying the partnership debts and liabilities. (Story on Part. § 97 ; Dyer v. Clark’s Adm’r, etc., f> Met. 575; Nicholl v. Mumford, 4 Johns. Ch. 525; Eodriguezv. Hefferman, 5 id. 428.) TTT. The office of the eleventh article of the partnership agreement was merely to furnish a rule for the distribution of the surplus among the partners, and had no operation except on the surplus after the payment of the partnership debts. Hence, the Circuit Court manifestly erred in refusing to entertain jurisdiction of this case and enforce the payment of the partnership debts out of the partnership property. If this suit cannot be maintained, then, so far as the enforcement of the payment of the partnership debts is concerned, the plaintiffs are without remedy, for the eleventh article of the partnership agreement furnishes no remedy for this injury. IV. The respondent had no right to use or dispose of the partnership property after dissolution, otherwise than for the purpose of closing up the business of the concern, until he had first complied with the requirements of said eleventh article. I. Article eleven of the agreement of copartnership specifies, in the event of dissolution, the method of ascertaining the value of the effects of the copartnership and the extent of its liabilities, and determines the disposition which should be made of its property, and the terms of the payment of the purchase money. If its provisions be enforced, the plaintiffs being the outgoing-partners, the defendant was entitled to retain the property upon complying with the provisions of this article respecting the purchase money therefor. And a court of equity will not interfere for any purpose other than to enforce a compliance with the requirements of this article, unless its execution be impracticable, or the defendant refused, upon reasonable request, to comply with its provisions. (Leach v. Leach, 18 Pick. 68 ; Story on Part. § 207 ; Pars, on Part. 301; Col. on Part. p. 297, § 313 ; Wilson v. Greenwood, 1 Swant. Ch. E. 471; 8 Simons, 532; Law v Ford, 2 Paige Ch. 310.) II. But plaintiff, aside from article eleven, has not established by the evidence a proper case to warrant a court of equity to interpose even by entertaining an action for an accounting. The simple fact that a dissolution by agreement was had did not authorize the plaintiffs, as a matter of course, to resort to this action of accounting. This is only to be done when the parties are unable or some of them are unwilling or refuse to account. There was certainly no ground whatever for an injunction and receiver. The petition alleges the solvency of the firm, and the evidence establishes it. A mere apprehension that the defendant might misapply the funds, or waste the property of the partnership, is no ground for interference by injunction. (Coll, on Part. p. 315, § 343 ; Woodward v. Schatzell, 3 Johns. Ch. R. 412-415.) Nor will a receiver be appointed simply because there has been a dissolution of the partnership. There must be some breach of duty as a partner, or of the contract of partnership. (Henn v. Walsh, 2 Edw. Ch. R. 129 ; Harding y. Glover, 18 Ves. Jr. 280; Coll, on Part. p. 322, § 354.) HI. Plaintiffs were each indebted to the partnership at the time of filing their petition ; and they could not insist upon an account without paying this amount into court. (Coll, on Part. p. 26T, § 301.) IV. The solvency of this firm being alleged in the petition and established by the proofs, the creditors of the firm have no equity or lien calling for the payment of their debts which they can enforce. _ It is the partner, and the partner alone, who has this equity or lien, and at his instance only can it be enforced when the firm is solvent. And the partner of a solvent firm may sell to his copartner his entire interest, and the vendee takes it entirely relieved, not only from any supposed equity in favor of firm creditors, but also from the equity of the vendor to have firm debts paid out of firm property. (Sage v. Chollar, 21 Barb. 596, and authorities there cited; also, 3 Ired. Ch. R. 213.) Hence, he may bind himself by agreement before dissolution to do it on the happening of that event, and a court of equity willmot interfere to enable him to violate the faith of his solemn engagements.