Argued
May 1, 1895
[Copyrighted Material Omitted]
Appeal, No. 416, Jan. T., 1895, by plaintiff, from judgment
of C.P. Crawford Co., May T., 1894, No. 28, for defendants on
case stated. Affirmed.
Case
stated.
The
case stated was as follows:
"In
1867 Cyrus Kitchen and others organized a general
copartnership under the name and style of the Meadville
Savings Bank, for the purpose of carrying on a general
banking business in the city of Meadville, and signed
Articles of Association, a copy of which is hereto attached
and marked 'Exhibit A,' and made a part of this case
stated.
"On
Jan. 20, 1877, five shares of the capital stock of said
association, originally issued to A. P. Ingraham, were
regularly transferred to D. V. Derickson, and were held by
the said Derickson until the date of his death, on July 21,
1891. The said D. V. Derickson never signed said articles of
association. He was never a director or officer of said
association, and was never advertised as a stockholder.
Defendants' testator made no mention in his will of his
said stock.
"The
said association continued to do business after his death,
without any change in the method of keeping their accounts,
or any distinction between deposits prior and subsequent to
said death.
"On
Jan. 13, 1894, the Meadville Savings Bank closed its doors,
and on Jan. 23, 1894, made a general assignment to J. W.
Smith, for the benefit of its creditors.
"George
N. Wilcox, the plaintiff, was a depositor in said bank prior
to the death of said Derickson, and on that date there was
due him on open account the sum of $1,952.91. Subsequently
said George N. Wilcox continued to do business with said
bank, depositing from time to time, and checking against his
said account; and from March 3, to April 1, 1892, his account
was overdrawn. It was again overdrawn from May 6, to May 11,
and again from Dec. 6, to Dec. 13, 1892. But on Jan. 13,
1894, when the doors were closed, there was due him on said
account the sum of $2,742.27. The executors of said decedent
never accepted the said stock of their testator under the
said Articles of Association, never took any part in the
business of said association, nor in any way admitted or
assumed any liability as stockholders.
"If
the court be of opinion on the above facts that the plaintiff
is entitled to recover, then judgment to be entered in favor
of plaintiff and against defendants for such sum as plaintiff
is legally entitled to recover; otherwise judgment to be
entered for defendants. Either party reserves the right to
take an appeal to the Supreme Court from judgment entered
hereon."
The
material portions of the Articles of Association were as
follows:
"We,
the subscribers hereto, hereby agree to form ourselves into
an association by the name, style and title of the Meadville
Savings Bank, for the purpose of dealing in exchange, bills,
notes, bonds and other securities, receiving deposits and
generally carrying on like business.
"The
capital stock of said association shall consist of five
hundred shares of one hundred dollars each, of which the
parties have subscribed the number set opposite their
respective names, and agree to pay fifty dollars on each
share in cash at the time of subscribing therefor, and five
dollars on each share on the first day of May next, and a
like amount every thirty days thereafter until the whole is
paid. The stock and interest of and in said association shall
be held as and in the nature of personal and partnership
property only, and shall always be liable and deemed to be
hypothecated for any indebtedness or liability of the holder
thereof to said association, whether presently due or
otherwise; and the said stock shall not be assigned or
transferred without the consent of the board of directors;
and all the property of and belonging to said association, as
well lands and tenements as chattels, rights and credits,
shall be held by and in trust for said association as
partnership or associate property and assets, and for
partnership or associate purposes. The stock, shares and
interest in said association shall be assignable and
transferable only on the books thereof and with the assent of
the board of directors, in the presence of the president and
cashier, and upon such transfer the assignee or assignees of
such share or shares shall thereby, as to such share or
shares, succeed and become subject to all the rights and
obligations of an original party thereto. Provided, that no
stockholder shall be entitled to vote upon more than fifty
shares of stock owned by him. Provided, also, that none of
the stock of said association shall be held by a minor,
either personally or by guardianship, except in pursuance of
a devisee, nor by any corporation. And, provided that in case
of the refusal of the board of directors to assent to the
transfer of any such stock to any person competent to hold
the same, then and thereupon the holder thereof shall be
entitled to require of said association to receive an
assignment of such share or shares of stock and to receive
therefrom a sum equal to the par value of such share or
shares with the addition of a proportional part of the
contingent fund as indicated by the last semiannual statement
of the condition of the association.
"This
association shall continue until it shall be declared to be
dissolved by the votes of the holders of a majority of the
shares of stock entitled to representation at a
stockholders' meeting called for that purpose, and no
general assignment of the assets of said association shall be
made except in pursuance of a like vote, nor shall the death
of a stockholder be, nor operate as a dissolution of said
association, but the shares of such decedent shall thereupon
vest in his executors or administrators or devisees of said
stock who shall succeed with like effect as provided in case
of a transfer upon the books of the association, except in
the case of a minor devisee the stock shall stand in the name
of the guardian of such minor. The holders of the stock of
this association either by original subscription, transfer or
otherwise, shall, by virtue of such subscription, or
acceptance of such transfer, be subject to and thereby take
upon themselves the several and respective duties and
obligations devolved and incumbent upon them as stockholders
or directors, as the case may be."
NOYES,
P.J., of the 37th judicial district specially presiding,
delivered the following opinion:
"On
the 20th of January, 1877, D. V. Derickson, the
defendants' testator, became a member of a partnership
association doing business in the name and style of the
Meadville Savings Bank, by a transfer on the books of the
association, in the manner prescribed by the articles, of
five shares of stock originally held by A. P. Ingraham. He
died on the 21st of July, 1891, leaving a will, in which he
makes no specific reference to the stock in this bank. The
executors have never accepted the stock, or in any manner
acted as partners.
"The
articles of association of the bank provide that it shall
have a capital stock of $50,000 divided into 500 shares of
$100 each; that the business shall be transacted by officers
elected by the shareholders; that transfers of the stock may
be made on the books in the manner provided by the articles
that the death of a member shall not dissolve the
partnership; but that his executor, administrator or devisee
shall succeed to his rights, in the manner provided in case
of a transfer on the books.
"The
plaintiff is a depositor and creditor of the bank, which owed
him $2,742.27 on the 13th of January, 1894, when the bank
failed and closed its doors. All of this indebtedness was
contracted by the bank after the death of D. V. Derickson.
The question of law presented is whether under these facts
and in view of the language of the Articles of Association
the executors are liable to the plaintiff for this
indebtedness.
"It
is, perhaps, not strictly correct to say that the death of
one partner works no dissolution of the firm, where by
agreement of the partners the business is to be continued
notwithstanding the death, for a partnership cannot exist
without partners; and a dead man's estate, apart from the
persons to whom it has passed by law at his death, has no
capacity to fill the place in the partnership made vacant by
his death: Parsons on Contracts (1st ed.), 406-451. It is,
however, well settled that the usual consequences of a
dissolution, whether by transfer of the interest of a partner
to another, or by death of one of the partners, may be
avoided by suitable provisions in the partnership agreement,
or by provisions in the will of the dying partner, if agreed
to by the survivors. If such is the agreement the business
may be continued after the death as before. The personal
representative, or devisee, of the decedent may not demand an
account until the termination of the partnership, by the
terms of the agreement. And so much of the decedent's
estate as is invested in the partnership venture, or is by
him subjected to the demands of the partnership business,
will pass into the hands of those to whom it is given by the
law, clogged with the liabilities thus placed upon it by its
former owner. These principles are well settled both in our
own state and elsewhere: Gratz v. Bayard, 11 S. & R.
41; Laughlin v. Lorenz, 48 Pa. 275; 17 Am. & Eng.
Ency. of Law, 1134; Lindley on Part., 1353, (*605) note 1.
"It
seems quite clear that the liability of a deceased
partner's estate for debts contracted...
