Kruger v. Spieth

• Decision Date: 12 February 1889
• Citation: 20 P. 664,8 Mont. 482
• Parties: KRUGER v. SPIETH.
• Court: Montana Supreme Court

20 P. 664

8 Mont. 482

KRUGER v. SPIETH.

Supreme Court of Montana

February 12, 1889

Appeal from district court, Gallatin county.

Action by Louis Kruger against Jacob F. Spieth, surviving partner of the firm of Spieth & Krug. Plaintiff procured an attachment to be levied on defendant's property, which was afterwards dissolved on defendant's motion, and plaintiff appeals.

Armstrong & Hartman, for appellant.

E. W Toole, for respondent.

DE WOLFE, J.

The appellant (plaintiff) brought his action in the district court against the defendant, as surviving partner of the firm of Spieth & Krug, upon four promissory notes made by the firm prior to the death of Charles Krug, one of the members of the firm. The plaintiff, at the time of bringing his action, also applied for a writ of attachment against the property of the defendant, and filed the affidavit and undertaking required by law, which were approved by the clerk, and an attachment issued against the property of the defendant. The record is silent as to what property was attached under this writ; but from the subsequent proceedings we infer that it was levied upon property in the hands of the defendant as surviving partner. A motion was made to discharge this attachment, on the following grounds: First. There is no law of this territory authorizing the issuing or levying of an attachment against a representative person. Second. This court has not yet acquired jurisdiction of the subject-matter of this action. The motion was heard and decided by the judge at chambers, and an order made dissolving the attachment upon the first ground stated in the motion. An appeal was taken from the order of the judge, and the only question presented by the record is the correctness of this order. The question is an important one, affecting as it does, the rights of creditors, the rights of a surviving partner, and the rights of the heirs and representatives of a deceased partner, and we will try and give the questions involved the consideration which their importance demands.

The learned judge, who dissolved the attachment in the case based his decision on two grounds-- First, because a surviving partner holds partnership property as a trustee and in pursuance of a statute which vests him with the possession for the sole purpose of settling up the business of the partnership, and accounting for the residue to the heirs or representatives of the deceased partner; that an attachment against the property will prevent the due execution of this trust; second, because the creditor of the partnership has a lien on partnership property which can be enforced in equity, and, under the law of this territory, an attachment does not lie when a lien exists. The principle is undoubtedly correct that upon the death of a partner the survivor or survivors become, in a certain sense, trustees of a partnership property, and become liable for its misapplication.

Judge Story, in his treatise on Partnership, thus defines the duties and liabilities of a surviving partner: "The survivors are entitled to close up the affairs of the firm, to collect and adjust the debts due to it, and to pay its debts and discharge its liabilities. They are also bound to apply the partnership property to the like purposes with reasonable diligence. If they are negligent in the discharge of their duties in these particulars, courts of equity will interfere, and upon the application of the representatives of the deceased partner appoint a receiver, *** and wind up the affairs of the firm." Story, Partn. § 328. Chancellor Kent lays down like principles in the following language: "A community of interest (after the death of a partner) still exists between the survivor and the representatives of the deceased partner, and those representatives have a right to insist on the application of the joint property to the payment of the joint debts, and a due distribution of the surplus. So long as those objects remain to be accomplished, the partnership may be considered as having a limited continuance. If the survivor does not account in a reasonable time, a court of chancery will grant an injunction to restrain him from acting, and appoint a receiver, and direct the accounts to be taken." 3 Kent, Comm. 57. Again, on page 63, the learned author, in speaking of the powers and duties of a surviving partner, says: "On the dissolution by death, the surviving partner settles the affairs of the concern, and a court of chancery will not arrest the business from him, and appoint a receiver, unless confidence be destroyed by his mismanagement or improper conduct. The surviving partner is alone suable at law, and he is entitled to the possession and disposition of the assets to enable him to discharge the debts and settle the concern."

Many authorities could be adduced in support of these well-settled principles, but it is not deemed necessary to refer to them, as our own statute is but an affirmance of the common-law principle. Section 229 of the probate practice act, which is the one defining these rights and duties, is as follows: "When a partnership exists between the decedent, at the time of his death, and any other person, the surviving partner has the right to continue in possession of the partnership, and to settle its business, but the interest of the decedent in the partnership must be included in the inventory, and be appraised and appropriated as other property. The surviving partner must settle the affairs of the partnership without delay, and 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. Upon the application of the executor or administrator, the probate judge may, whenever it appears necessary, order the surviving partner to render an account, and in case of neglect or refusal may, after notice, compel it by attachment, and the executor or administrator may maintain against him any action which the decedent could have maintained." Undoubtedly, under this provision, a surviving partner is a trustee or quasi trustee of the interest which the deceased partner had in the partnership property at the time of his death, and as such is liable to account therefor to the administrator or personal representatives of the deceased partner. Strictly speaking, a surviving partner could hardly be termed a trustee of the copartnership, as that ceased to exist on the death of one of its members.

In Williams v. Whedon, 16 N.E. 365 the court held that a surviving partner did not hold partnership property as a trustee, but held by virtue of his own rights as survivor. In the case of Knox v. Gye, L. R. 5 H. L. 656, the court, speaking by Lord WESTBURY, says: "Another source of error is the looseness with which the word 'trustee' is frequently used. The surviving partner is often called a 'trustee' but the term is used inaccurately. He is not a trustee either expressly or by implication. On the death of a partner the law confers on his representatives certain rights as against the surviving partner, and imposes upon the latter correspondent obligations. The surviving partner may be called, so far as these obligations extend, a trustee for the deceased partner; but when these obligations have been fulfilled, or are discharged, or terminate by law, the supposed trust is at end. *** There is nothing fiduciary between the surviving partner and the dead partner's representative, except that they may respectively sue each other in equity. There are certain legal rights and duties which attach to them, but it is...