Ewing v. Caldwell

89 S.E.2d 774 (1955) 243 N.C. 18

Mary A. EWING and Aurie A. Coomer
v.
Daisy CALDWELL.

No. 319.

Supreme Court of North Carolina.

November 2, 1955.

McBee & McBee, Spruce Pine, G. D. Bailey and W. E. Anglin, Burnsville, for defendant, appellant.

Fouts & Watson, Burnsville, for plaintiffs, appellees.

BOBBITT, Justice.

It is not alleged that the deed of 10 June, 1950, from Martha Armstrong to Daisy Caldwell, is void. The allegation made is that Martha Armstrong "understood" that she was conveying her one-half interest in the realty of the partnership as security, it being "the actual intent of Martha Armstrong to secure the investment of $10,417.18 of Daisy Caldwell."

In the absence of allegation that the partnership was dissolved and a settlement between the partners made on 10 June, 1950, the inference is permissible, if not compelling, that the partnership continued until the death of Martha Armstrong and that said real estate remained the principal asset in the continuing conduct of the partnership business.

The impression prevails that plaintiffs have alleged in effect that the transaction of 10 June, 1950, resulted in nothing more than a reduction to certainty as of 10 June, 1950, the amount of the excess of Daisy Caldwell's investment over Martha Armstrong's investment and the giving of such security therefor as would be afforded by the conveyance of Martha Armstrong's one-half interest in the realty. This impression is fortified by the allegation, quoted above, wherein plaintiffs demand an accounting. Too, plaintiffs allege that "Daisy Caldwell joined Martha Armstrong at Spruce Pine, North Carolina, and thereafter said partners jointly carried on the operation of said tourist cottages." (Italics added.) It is further noted that there is no allegation as to what agreement, if any, was made as to the due date of the $10,417.18 for which the instrument is alleged to constitute security.

It is noted that, unless innocent third parties are affected, it makes no difference that the legal (record) title to real estate owned by a partnership is in the name of one partner rather than in the names of all. 40 Am.Jur., Partnership, sec. 103; Justice v. Sherard, 197 N.C. 237, 148 S.E. 241; Young v. Cooper, 30 Tenn. App. 55, 203 S.W.2d 376.

The allegations require that we consider the complaint in relation to a partnership owning the realty herein involved, subsisting until the death of Martha Armstrong.

If the partnership subsisted until then, the death of Martha Armstrong caused its dissolution. G.S. § 59-61(4). In such case, the surviving partner, Daisy Caldwell, had the right and duty to wind up the partnership affairs. In re Estate of Johnson, 232 N.C. 59, 60, 59 S.E.2d 223. As surviving partner, she was required to give bond conditioned upon the faithful performance of her duties in the settlement of the partnership affairs, G.S. § 59-74; and, together with the personal representative of Martha Armstrong, to make a full and complete inventory of the assets of the partnership, including real estate, together with the debts and liabilities thereof, a copy to be retained by her and a copy to be furnished to the personal representative of Martha Armstrong. G.S. § 59-76.

As surviving partner, she was required, within the time prescribed, to file her account with the clerk, and "come to a settlement with the executor or administrator of the deceased partner". G.S. § 59-82. (Italics added.)

Upon failure of the surviving partner to comply with the statutory requirement as to bond, the clerk, upon application of any person interested in the estate of the deceased partner, is required to appoint a collector of the partnership, G.S. § 59-75; and, if the surviving partner fails to make the required inventory or refuses to allow the personal representative of the deceased partner's estate to do so, such personal representative of the deceased partner's estate may forthwith apply to a court of competent jurisdiction for the appointment of a receiver for such partnership, who shall thereupon proceed to wind up the same and dispose of the assets in accordance with law. G.S. § 59-77. Notwithstanding the aforesaid rights of the surviving partner, any partner, his legal representative or his assignee, upon cause shown, "may obtain winding up by the court." G.S. § 59-67.

"The right to an account of his interest shall accrue to any partner, or his legal representative, as against the winding up partners or the surviving partners or the person or partnership continuing the business, at the date of dissolution, in the absence of any agreement to the contrary." G.S. § 59-73. (Italics added.)

The partnership property is to be applied to discharge its liabilities and the surplus to the payment in cash of the net amount owing to the respective partners. G.S. § 59-68(1). The rules for settlement of accounts between partners after dissolution are defined. G.S. § 59-70.

Prior to the adoption of the Uniform Partnership Act, 1941, G.S. § 59-31 et seq., the title to personal property owned by a partnership vested at once in the surviving partner, but this Court, in accord with Shearer v. Shearer, 98 Mass. 107, held that the interest of a deceased partner in real property owned by a partnership descended to his heir, subject to the right of the surviving partner to have such property applied, if necessary, to the payment of partnership debts and the settlement of accounts between the partners. Sherrod v. Mayo, 156 N.C. 144, 72 S.E. 216, and cases cited. See Mendenhall v. Benbow, 84 N.C. 646, 650.

But a radical change in this respect was made by the Uniform Partnership Act. Thereunder, "The property rights of a partner are (1) his rights in specific partnership property, (2) his interest in the partnership, and (3) his right to participate in the management." G.S. § 59-54. As to specific partnership property, a partner is co-owner with his partners, "holding as a tenant in partnership." G.S. § 59-55(1). Thus, a new kind of estate, "``tenancy in partnership'", was created. Goldberg v. Goldberg, 375 Pa. 78, 99 A.2d 474, 475, 39 A.L.R. 2d 1359.

The incidents of this tenancy are defined. G.S. § 59-55(2). These include provisions that a partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership; that when partnership property is attached for a partnership debt no partner or the representatives of a deceased partner can claim any right under the homestead or exemption laws; that a partner's right in specific partnership property is not subject to dower, curtesy, or allowances to widows, heirs, or next of kin; and, directly pertinent here, that "On the death of a partner his right in specific partnership property vests in the surviving partner or partners, * * * "—for partnership purposes. G.S. § 59-55(2) (c-e). "A partner's interest in the partnership is his share of the profits and surplus, and the same is personal property." G.S. § 59-56. (Italics added.)

Dr. William Draper Lewis, the draftsman of the Uniform Partnership Act, has pointed out clearly the reasons for adoption of the English rule, to wit, that a partner's interest in the partnership is personal property, irrespective of the physical character of the property of the partnership, rather than the rule of Shearer v. Shearer, supra. 24 Yale Law Journal, pp. 637-638.

The deceased partner's interest being personal property, the statute requires the surviving partner to make settlement with the personal representative of the deceased partner; and there is placed upon the personal representative of the deceased partner the duty to require that a true accounting be made either by the surviving partner or by a receiver under court supervision. This is in accord with G.S. § 28-172, which provides: "Upon the death of any person, all demands whatsoever, and rights to prosecute or defend any action or special proceeding, existing in favor of or against such person, except as hereinafter provided, shall survive to and against the executor, administrator or collector of his estate."

The conclusion reached is that the right to sue for an accounting of the partnership assets and affairs vested exclusively in the personal representative of the deceased partner. La Russo v. Paladino, Sup., 109 N.Y.S.2d 627; Id., 280 A.D. 988, 116 N.Y.S.2d 617; Id., App.Div., 139 N.Y.S.2d 367; Stewart v. Wall, 4 Cir., 87 F.2d 598; 40 Am.Jur., Partnership, sec. 306; Appeal of Hume, 130 Me. 338, 155 A. 730. No special facts are alleged that would or might enable the plaintiffs, as devisees of Martha Armstrong, to maintain an action against the surviving partner for an accounting.

The plaintiffs having attempted to allege a cause of action for a partnership accounting, the demurrer should have been sustained for plaintiffs' failure to allege facts sufficient to state such cause of action and, the personal representative not being a party plaintiff, for defect of parties plaintiff. G.S. § 1-127.

If the realty was not partnership property, and Martha Armstrong individually owned an interest therein at the time of her death, different questions would arise. However, it is not appropriate that we consider whether plaintiffs could maintain a cause of action against defendant predicated upon allegations that the transaction of 10 June, 1950, was incident to the dissolution of the partnership and a final settlement between the partners, if such were the facts. Suffice it to say that such allegations do not appear in the complaint before us.

For reasons stated, the order overruling demurrer is reversed.

Reversed.