Chaney v. Burdett

• Decision Date: 25 February 2002
• Docket Number: No. S01G1070.,S01G1070.
• Citation: 274 Ga. 805,560 S.E.2d 21
• Parties: CHANEY et al. v. BURDETT et al.
• Court: Georgia Supreme Court

560 S.E.2d 21

274 Ga. 805

CHANEY et al. v. BURDETT et al.

No. S01G1070.

Supreme Court of Georgia.

February 25, 2002.

James C. Gaulden, Jr., Duluth, James F. Martin, Marietta, for appellant.

Buker, Jones, Morton & Haley, J. William Haley, Atlanta, for appellees.

THOMPSON, Justice.

We granted a writ of certiorari to the Court of Appeals in Chaney v. Burdett, 248 Ga.App. 668, 548 S.E.2d 407 (2001), to determine whether, upon the death of one of two partners and the dissolution of a partnership: (1) in the absence of an agreement to continue the business of the partnership, the representative of the deceased partner has the right to liquidate partnership property; and, if so, (2) whether the representative is owed a fiduciary duty by the surviving partner with respect to winding up. We answer these inquiries affirmatively.

The facts leading up to this lawsuit are set forth in the opinion of the Court of Appeals. We summarize them as follows:

Charles Chaney and Lawrence Burdett were equal partners in a partnership known as BMW Partners. The partnership agreement was silent as to the effect of a partner's death on the partnership.

The sole asset of the partnership was real property which the partnership rented to a corporation co-owned by Chaney and Burdett. Pursuant to the lease agreement,¹ the corporation was to pay the partnership $8,000 per month. However, the agreement was not adhered to strictly; after a number of years, the corporation began paying the partnership $9,000 per month—because that is what it could afford to pay. Each partner received one-half of that amount, i.e., $4,500 per month.

Chaney died on April 15, 1998; his wife, Bonnie Chaney, became his legal representative, and she sought liquidation of the partnership assets. Burdett wanted to continue the partnership business and he offered to purchase the estate's interest in it. Thereafter, he informed Chaney in a letter that the corporation would no longer pay $9,000 per month rent because, he claimed, the fair market value of the rent was $4,500 per month. Burdett also claimed that the corporation had overpaid the rent to the tune of $80,000, and that, therefore, the rent would have to be adjusted retroactively to recoup the overpayment.

Chaney brought suit seeking, inter alia, liquidation of the partnership assets, and a determination that Burdett breached his fiduciary duty to her, as the representative of her husband's estate, by adjusting the rent. The trial court awarded summary judgment to Burdett on these issues and Chaney appealed. The Court of Appeals held, in part, that upon the death of a partner in a two-person partnership, the surviving partner can unilaterally choose to continue the business even in the absence of an agreement to continue the partnership; that, following the death of Charles Chaney, Burdett was the sole partner and he chose to continue the business of the partnership; and that, therefore, Chaney could not compel liquidation of the partnership assets. Chaney v. Burdett, 248 Ga.App. 668, 670(1), 548 S.E.2d 407, supra. It also held that Burdett does not owe a fiduciary duty to Chaney because, as the representative of her husband's estate, she stands as an ordinary creditor of the partnership, not a partner. Id. at 674(5), 548 S.E.2d 407. We granted a writ of certiorari to consider these holdings, and reverse.

1. A partnership is dissolved upon the death of a partner, unless there is a written agreement of the partners to the contrary. OCGA § 14-8-31(a)(5). However, dissolution does not spell the termination of the partnership; the partnership continues until the winding up of the partnership business is complete. OCGA § 14-8-30. Thus, if a partnership is dissolved because of the death of a partner, the remaining partner or partners must wind up the partnership affairs. OCGA § 14-8-37; see Murphy v. Murphy, 214 Ga. 602, 604, 106 S.E.2d 280 (1958). During that period, any partner or the legal representative of the estate of a deceased partner has the right to application of the partnership property; the surviving partner is entitled to possession of the partnership assets only for the purpose of winding up its affairs. Murphy, supra. That this is so is made manifest by OCGA § 14-8-38(a), which provides,...