Didlake v. Roden Grocery Co.

• Decision Date: 08 April 1909
• Citation: 49 So. 384,160 Ala. 484
• Parties: DIDLAKE v. RODEN GROCERY CO. ET AL.
• Court: Alabama Supreme Court

49 So. 384

160 Ala. 484

DIDLAKE v. RODEN GROCERY CO. ET AL.

Supreme Court of Alabama

April 8, 1909

Rehearing Denied May 11, 1909.

Appeal from City Court of Birmingham; Charles A. Senn, Judge.

Suit by Mollie Didlake, as administratrix, against the Roden Grocery Company and others. From a decree for defendants, complainant appeals. Affirmed.

George Huddleston, for appellant.

Powell & Blackburn, for appellees.

SIMPSON J.

The bill in this case was filed by the appellant against the appellees, and seeks to set aside a sale of the partnership assets to a corporation composed in part of the surviving partners.

The facts, in short, are that B. F. Roden was originally in business alone, doing business under the name of B. F. Roden & Co., and subsequently took into partnership appellant's intestate, James N. Didlake, and J. D. Harris, in 1884, the firm continuing as B. F. Roden & Co., and that it so continued until the death of said Didlake December 7, 1901 their business being that of wholesale grocers. At the time of the death of Didlake a large supply of goods had been bought for the Christmas trade, and the business was continued by the surviving partners up to that time, they selling as much as possible, and purchasing only to the extent of keeping the stock in proper shape for disposition of the goods. A corporation was then organized under the name of B. F. Roden Grocery Company the stockholders being said B F. Roden and J. D. Harris (the surviving partners), and one Bivings and one Scott, whose stock was before the filing of this bill sold to said Roden. Said corporation was organized January 1, 1902. There is some conflict in the testimony as to whether there was a distinct agreement between Mrs Didlake, as administratrix, and the surviving partner, that the stock of goods was to be sold to the new corporation, but it is not disputed that she was requested to have some one representing her present at the taking of the inventory; that she did have her uncle, Morris, present; and that the inventory was taken under the supervision of himself and Mr. Bivings who was not connected with either the firm or the corporation at that time, but who was to become a stockholder in the corporation (and did so become) afterwards. The stock of goods was inventoried at cost and carriage, and taken at that valuation by the corporation; and the evidence shows, and reason suggests, that that was fully as much as (if not more than) could have been realized in any other way. When they came to the live stock owned by the corporation, Mr. Morris suggested that they select some third party to value them, and named J. F. B. Jackson, which proposal was acceded to by Mr. Bivings; and Mr. Jackson valued them, Mrs. Didlake taking one horse and the corporation the others at said valuation. The stock of goods inventoried something over $50,000, and the bills and notes receivable (some good and some bad) about $125,000, while the firm owed about $75,000. The corporation undertook to collect the bills and notes, charging 2 per cent. for the service, and it is testified that, whenever a customer made a payment, it was applied, first, to the indebtedness to the firm, and Mr. Bivings, who is secretary and treasurer of the corporation, states that as a result of this process the corporation lost about $5,000 which it would otherwise have been able to collect. The indebtedness of the firm has been paid off, all the claims that are collectible have been collected, and the balance has been distributed, Mrs. Didlake offering no objection, but receiving from time to time her dividends in checks of the corporation, aggregating about $17,000. It seems that she was disappointed, having expected to receive about $25,000; and, when the payments ceased, she employed counsel, and commenced this suit. There seems to be little or no controversy as to the facts.

The main contention of the appellant is that this was a purchase by the surviving partners at their own sale, which may be set aside at the option of the cestui que trust, and that the "good will" of the firm was a valuable asset which should be accounted for by the surviving partners; also, that the remainder of the term for which the building was leased was worth something. As to this last contention, it is shown that the corporation took the lease and paid the rent from the time it went into possession, and there is no evidence tending to show that the property was worth anything more than it was rented for. On the contrary, the testimony shows that at the expiration of the lease the corporation rented the same building for $25 per month less than the previous rental. The death of one partner dissolves the firm, and the title to the personal assets becomes vested in the survivor as trustee to wind up the business. It is his duty to collect the claims as far as possible, to pay off the debts, to sell out the stock of goods to the best advantage; and, while he may continue the business for a short time, in disposing of the stock on hand, yet he is not authorized, without the consent of the representative of the deceased partner, to continue the firm business indefinitely, nor to embark in new enterprises. On the other hand, it is his right to wind up the business as soon as possible, and the representative of the deceased partner cannot insist on continuing. He has the discretion to sell the stock of goods as a whole or separately as he may deem best for the interest of himself and the representative of the deceased partner. Parsons on Partnership (3d Ed.) *pp. 380, 438, 440; Bates on Partnership, §§ 715, 716, 729, 731. It is true, also, that a surviving partner is held to a strict accountability; and, if he sell the property of the partnership to himself, a court of equity will set aside the sale on a proper application seasonably made by the representative of a deceased partner. Parsons on Partnership (3d Ed.) *pp. 442, 443, 445. This author states that, while a surviving partner has not the right to take the assets at a valuation, yet there may be cases where this mode of settlement would be best for all parties, and "a court of equity may find in particular circumstances good reason for not decreeing a sale." Star pages 445, 446. Another author says, "The surviving partners have no priority of right to purchase, * * * and cannot take the property to themselves at such value without the assent of the representatives of the deceased." Also that, "statutes and articles apart, the forced conversion of a large stock into money is almost sure to be attended with the most ruinous consequences, not only to the surviving partners, but to the estate of the deceased. The easiest and most rational solution of which difficulties is a purchase by the survivors of the unascertained share at a just and bona fide valuation. Hence, although both parties are, in a sense, trustees of the deceased's interest, and there is generally a dangerous inequality of knowledge in respect to the subject-matter of the sale, yet such transaction is within the power of each to make, provided one of the surviving partners is not also an executor; and such sale, though liable to suspicion, is, if in perfect fairness, reasonable, and in good faith, valid and binding on the heirs, or distributees or creditors, and will be ratified by the court." Bates on Partnership, § 743, pp. 789, 790. The right of the administrator to sell the interest of the deceased partner to the surviving partner, if the transaction be fair, has been sustained by the English courts; Lord...