Williams v. Dovell

• Decision Date: 14 May 1953
• Docket Number: No. 133,133
• Citation: 202 Md. 351,96 A.2d 484
• Parties: WILLIAMS et ux. v. DOVELL.
• Court: Maryland Court of Appeals

Page 351

202 Md. 351

96 A.2d 484

WILLIAMS et ux. v. DOVELL.

No. 133.

Court of Appeals of Maryland.

May 14, 1953.

George B. Woelfel and Thomas J. Curley, Annapolis, for appellants.

William J. McWilliams, Annapolis (McWilliams, Evans & Melvin, Annapolis, and Robert E. Coughlan, Jr., Baltimore, on the brief), for appellee.

Before SOBELOFF, C. J., and DELAPLAINE, COLLINS, HENDERSON and HAMMOND, JJ.

DELAPLAINE, Judge.

The bill of complaint of Elizabeth E. Dovell, widow of William Randolph Dovell, prayed the Circuit Court for Anne Arundel County to decree that she is the owner of an undivided one-half interest in realty situated in Glen Burnie, which her husband and Leroy H. Williams owned for thirteen years as partners in a garage and service station business. The suit was brought under the Uniform Declaratory Judgments Act, which provides that any person interested under a deed, will, written contract or other writings constituting a contract may have determined any question of construction or validity arising under the instrument, and obtain a declaration of rights, status or other legal relations thereunder. Code 1951, art. 31A, sec. 2.

Dovell and Williams purchased the realty in May, 1937, when it was unimproved, for $1,000. It was conveyed to them as joint tenants. They obtained a mortgage loan from the Standard Oil Company of New Jersey with which to build a garage and filling station on the lot. Payments on the mortgage debt were made with partnership funds.

When the partners applied for an agency of the General Motors Corporation in February, 1946, they executed a written partnership agreement to comply with requirements of that corporation. The wife of each partner also executed the agreement to assent to the disposal of the real estate in the event of the withdrawal or death of either partner.

Dovell died in August, 1950. By his will probated by the Orphans' Court of Anne Arundel County, he left his entire estate to his widow.

The chancellor held that the written agreement terminated the joint tenancy, and passed a decree declaring the title to the property to be vested in Williams and Mrs. Dovell as tenants in common, each having an undivided one-half interest therein. Williams and his wife appealed from that decree.

In the absence of a statute, a partnership cannot hold legal title to realty used for partnership purposes. It is generally recognized that partners hold legal title to real estate as tenants in common and not as joint tenants. This rule is explained in 2 American Law of Property, sec. 6.8, as follows: 'Since the partnership itself cannot hold the legal title to real estate, such legal title must be held by the partners themselves. Do they hold as joint tenants or as tenants in common? Although the four unities are present, partnership realty cannot be deemed held in joint tenancy since the right of survivorship, which is of the essence in a joint tenancy, is entirely inconsistent with the requirements of partnership law that partnership realty be applied to the extent necessary to pay partnership debts and adjust accounts between the partners and that the surplus be distributed equally on dissolution of the partnership. Legal title is therefore deemed to be in the partners as tenants in common.'

The English courts formulated the theory that partnership realty is considered converted into personalty for all purposes and is distributed as personal assets of the firm, and thus the title does not pass to the heirs of the partner, nor does any right of dower attach in favor of the wife of an individual partner. That theory was adopted in England to mitigate the hardship of the rule that excluded all children except the eldest from inheritance and the rule that exempted real estate passing to heirs from all but the specialty debts of the ancestor. In the United States there are no laws requiring acceptance of such a theory. In this country the law of primogeniture does not prevail, and there is no exemption of real estate from liability for simple contract debts, but real estate left by an ancestor is an asset for the payment of all debts. Thus there is no necessity for an absolute conversion to justify a fiction that would deprive partnership real estate of its descendible quality. The prevailing theory of the American courts is that partnership realty is impressed with a trust and treated as assets to be applied to the payment of partnership debts, but in so far as it is not needed for partnership purposes, no trust exists and it is held by the partners as tenants in common. It is accordingly held by the great weight of authority that where title to real estate is vested in two partners, upon the death of either partner the deceased partner's share in the real estate descends to his heirs, subject to the equity of the surviving partner to have it appropriated to accomplish the trust to which it was primarily subjected.

In Darrow v. Calkins, 1897, 154 N.Y. 503, 49 N.E. 61, 64, 48 L.R.A. 299, wherein the Court of Appeals of New York adopted this rule, Chief Judge Andrews said: 'The working out of the mutual rights which grew out of the partnership relation does not seem to require that the character of the property should be changed untitl the occasion arises for a conversion, and then only to the extent required. The American rule commends itself for its simplicity. It makes the legal title subservient in equity to the original trust. It disturbs it no further than is necessary for this purpose. The portion of the land not required for partnership equities retains its character as realty, and it leaves the laws of inheritance and descent to their ordinary operation.'

The Maryland Court of Appeals adopted the rule in Fooks v. Williams, 1913, 120 Md. 436, 442, 443, 87 A. 692, 694. Judge Stockbridge said in that case: 'In England there is held to be a complete conversion of such real estate into personal estate for all purposes whatsoever, and it passes to the personal representatives of the partners, and not to their heirs; but in this country by the over-whelming weight of authority when the objects of the conversion have been accomplished a reconversion takes place. When the property has fulfilled all its functions as personal property in respect to the partnership, the partners and the creditors, and is no longer wanted for those purposes, it becomes in the hands of those who hold the legal title, real estate and subject to all incidents as such.'

The Uniform Partnership Act, adopted in Maryland in 1916, Code 1951, art. 73A, § 1 et seq., made a drastic change in the law of partnership. It expressly provides that a partner is co-owner with...