Amunategui v. Spokane Cattle Loan Co.

• Decision Date: 26 February 1923
• Citation: 36 Idaho 688,214 P. 211
• Parties: MARGARETA AMUNATEGUI, Plaintiff, v. SPOKANE CATTLE LOAN COMPANY, a Corporation, Defendant. SPOKANE CATTLE LOAN COMPANY, a Corporation, Cross-complainant and Respondent, v. GUILLERMO BILBAO COMPANY, a Copartnership, GUILLERMO BILBAO, BEGNINO BERMENSOLA, MARGARETA AMUNATEGUI, Cross-defendants, and VICTOR YTURRI, as Administrator of the Estate of BENITO AMUNATEGUI, Deceased, Cross-defendant and Appellant
• Court: Idaho Supreme Court

214 P. 211

36 Idaho 688

MARGARETA AMUNATEGUI, Plaintiff, v. SPOKANE CATTLE LOAN COMPANY, a Corporation, Defendant.

SPOKANE CATTLE LOAN COMPANY, a Corporation, Cross-complainant and Respondent, v. GUILLERMO BILBAO COMPANY, a Copartnership, GUILLERMO BILBAO, BEGNINO BERMENSOLA, MARGARETA AMUNATEGUI, Cross-defendants, and VICTOR YTURRI, as Administrator of the Estate of BENITO AMUNATEGUI, Deceased, Cross-defendant and Appellant

Supreme Court of Idaho

February 26, 1923

PARTNERSHIP-SURVIVING PARTNER-RIGHT TO MORTGAGE PROPERTY OF PARTNERSHIP-INDIVIDUAL NOTES-PARTNERSHIP INDEBTEDNESS.

1. Where the proceeds of notes executed by one partner, in favor of a bank, bearing only his name without the firm name, were deposited to the partnership checking account, checked out by partnership checks, treated by the bank and the individual partners as partnership funds, the partnership receiving the benefits therefrom, and the notes being charged to the partnership account by the bank, such notes became an obligation of the partnership and it was liable thereon.

2. A surviving member of a partnership has full power to control and dispose of the firm assets for the purpose of winding up its affairs and may pledge or mortgage its property to secure its existing indebtedness.

APPEAL from the District Court of the Third Judicial District, for Elmore County. Hon. Charles F. Reddoch, Judge.

Action to foreclose chattel mortgage. Judgment for cross-complainant. Affirmed.

Judgment affirmed and costs awarded to respondent.

J. G Watts, for Appellant.

In the absence of an agreement between the partners upon the subject, the death of a partner dissolves the firm. (30 Cyc 620.)

The surviving partner must settle the affairs of the partnership without delay, account with the executor or administrator and pay over such balances as may from time to time be payable to him, in right of the decedent. (C. S., sec. 7660.)

In the absence of any provision in the partnership articles on the subject, the survivor has no authority to continue the business, as distinguished from winding it up. If he does continue it, he alone is liable for debts incurred. (30 Cyc. 636.)

One member of a partnership after dissolution cannot bind the partnership except so far as necessary for winding up the business. (Lindley on Partnership, 2d ed., p. 525.)

The surviving partners may not continue the business, except with the consent of the executor or administrator (in this case the widow), and the approval of the probate court. ( McElroy v. Whitney, 12 Idaho 512, 88 P. 349.)

E. G. Davis, for Respondent.

After dissolution a partner can bind the partnership by any act appropriate for winding up partnership affairs or completing transactions unfinished at dissolution. (Sec. 5847-1.a C. S.)

As against the heirs, devisees and creditors of a deceased partner, the legal title to firm assets vests in the surviving partners, who are given the exclusive right to the possession and control of the partnership assets, for the purpose of paying the partnership debts and disposing of the effects of the concern for the benefit of themselves and the estate of the deceased. (20 R. C. L. 995, 996.)

For the purpose of winding up partnership affairs, a surviving partner has the power to borrow money and give a pledge or mortgage of the partnership assets. (20 R. C. L. 997.) And when such transfer is made in good faith it is effectual against all the other creditors, as well as against the representatives of the deceased partner. (Bohler, Huse & Co. v. Tappan, 1 F. 469; First Nat. Bank v. Parsons, 128 Ind. 147, 27 N.E. 486; Bell v. Hepworth, 134 N.Y. 442, 31 N.E. 918, 12 L. R. A. 781; Burchinell v. Koom, 8 Colo. App. 463, 46 P. 392; Id., 25 Colo. 59, 52 P. 1100.)

The right of a surviving partner to sell, mortgage and dispose of the assets, and apply them according to his own discretion and judgment, in the payment of debts, has been repeatedly recognized. (Williams v. Whedon, 109 N.Y. 333, 4 Am. St. 460, 16 N.E. 365; Fitzpatrick v. Flannagan, 106 U.S. 648, 1 S.Ct. 369, 27 L.Ed. 211; Emerson v. Senter, 118 U.S. 3, 6 S.Ct. 981, 30 L.Ed. 49; Durant v. Pierson, 124 N.Y. 444, 21 Am. St. 868, 26 N.E. 1095, 12 L. R. A. 146; Patton v. Leftwich, 86 Va. 421, 19 Am. St. 902, 10 S.E. 686, 6 L. R. A. 569; First Nat. Bank v. Parsons, 128 Ind. 147, 27 N.E. 486; Krueger v. Speith, 8 Mont. 482, 20 P. 664, 3 L. R. A. 291; Smith v. Phelan, 40 Neb. 765, 59 N.W. 562; Roach v. Brannon, 57 Miss. 490; Johnson v. Berizheimer, 84 Ill. 54, 25 Am. Rep. 427; note, 65 Am. Dec. 295.)

Where the legal representative of a deceased partner, and all the beneficiaries of the estate, consented to the continued employment of the partnership property in the business of the partnership, subsequently carried on by the surviving partners, they cease to have a lien upon the property as against the subsequent creditors of the concern. (Hoyt v. Sprague, 103 U.S. 613, 26 L.Ed. 585; 20 R. C. L. 990, 991.)

The business of a firm having been continued after the death of one of its members precisely as before, the representative of the deceased member taking the benefit of his interest, the firm is not to be deemed dissolved by his death. (Butler v. American Toy Co., 46 Conn. 136; Nave v. Sturges, 5 Mo.App. 557.)

A partnership undergoes dissolution on the death of a partner (C. S., secs. 5843-5846); but a partnership is not terminated on dissolution; it continues until the winding up of partnership affairs is completed. (Sec. 5842, C. S.)

BUDGE, C. J. McCarthy and Wm. E. Lee, JJ., concur.

OPINION

BUDGE, C. J.

On or about October 5, 1917, Benito Amunategui, Guillermo Bilbao and Begnino Bermensola formed a copartnership to engage in the sheep business, known as Benito Amunategui Company. Benito Amunategui had theretofore been engaged in that business and was the owner of some sheep and the necessary equipment used in connection with that business. Bilbao and Bermensola purchased an equal interest in the sheep and outfit owned by Amunategui by giving him their notes and making small payments in cash. After the partnership had thus been organized and the interest of each party fixed at an equal one-third, of which fact there is no denial, the three partners, on November 1, 1917, went to the Commercial Savings Bank at Mountainhome and each partner executed his individual note for $ 5,000 each to the bank. On the same day the bank entered these three notes in its liability ledger under the name of Benito Amunategui Company and the proceeds of the notes, with other moneys, aggregating the sum of $ 16,815.76, were deposited to the credit of the partnership at that bank, subject to check. On December 28, 1917, the partnership was credited with $ 2,000 the proceeds of a note signed by Benito Amunategui, individually, in favor of the bank. On April 8, 1918, the partnership borrowed $ 1,000 from the bank, the note being signed in the name of the partnership. This amount was also credited to the partnership checking account.

It appears from the record that while four of these notes were signed by the individual members of the partnership they were entered on the liability ledger of the bank under the name of the partnership, the proceeds were credited to the checking account of the partnership and checks were drawn against that account by the partnership for partnership purposes. On April 12, 1918, Benito Amunategui died. On June 18, 1918, $ 3,000 of the partnership indebtedness to the bank was paid. This consisted of the note for $ 2,000 signed by Amunategui on December 28, 1917, and the note for $ 1,000 signed by the partnership on April 8, 1918. This payment was made with partnership funds. In the fall of 1918 the amount of the partnership indebtedness to the bank was $ 15,000 evidenced by the three $ 5,000 notes, which, with interest, amounted to $ 16,350.18. At this time, the bank being unable to carry this indebtedness, a loan was negotiated for the partnership from the Spokane Cattle Loan Company, respondent, for the last-mentioned amount, which sum was transmitted to the bank. It appears at this time, that the bank of its own volition, changed the name of the partnership on its books, by drawing a line through the name Benito Amunategui Company and writing in the name Guillermo Bilbao Company and the account was carried in the latter name thereafter. A chattel mortgage covering all of the property owned by the former partnership was made by the Guillermo Bilbao Company to the Spokane Cattle Loan Company to secure the payment of $ 16,350.18. It will therefore be seen that the proceeds of the loan from the Spokane Cattle Loan Company were used exclusively to pay the existing debt of the partnership to the bank and that the partnership indebtedness was renewed thereby. It also appears that all moneys thereafter deposited with the bank were deposited in the name of Guillermo Bilbao Company and all partnership checks were drawn against that account. There were no articles of copartnership and the business of the partnership was conducted as theretofore but under the name Guillermo Bilbao Company. The notes and mortgage given to the Spokane Cattle Loan Company were renewed from time to time in the name of the latter partnership, the last renewal being made on Sept. 7, 1920. The Spokane Cattle Loan Company, in December, 1920, deeming itself insecure, commenced summary proceedings to foreclose its chattel mortgage on the personal property of the partnership. An injunction was applied for by Margareta Amunategui, widow of Benito Amunategui, which was granted and resulted in the sheep and equipment being returned to the partnership. After the commencement of this action, one. Victor Yturri, was appointed administrator of the estate...