Story Case

Henry Forgan and "Winfield Snow were partners, manufacturing hardware supplies. Title to all of the firm property, including real estate, was in the name of Forgan. Forgan died and Snow attempted to sell all of the firm assets for the payment of firm debts. The assets were worth $10,000 and the liabilities of the firm amounted to $12,000. The real property was worth $6,000; the widow of Forgan maintained that she had a dower interest therein, of $1,000, which is one-third of Forgan's share therein. If she should take this amount, Snow would be liable for this additional sum to the creditors and he contends she has no rights. What will the Court do in the matter? .

Ruling Court Case. Brown Vs. Andrews' Heirs, Volume 21 Alabama Reports, Page 437; Same Case, Volume 56 American Decisions, Page 252

E. L. Andrews & Co. was a partnership, composed of E. L. Andrews, Z. Andrews, and Thomas Brown. Both E. L. and Z. Andrews died, and Brown, as surviving partner, was closing up the partnership affairs. Prior to the time that Brown was admitted to the partnership, certain real estate was jointly owned by the two Andrews. When the firm was formed, this real estate was taken in as firm property, but title thereto still remained in the joint names of the Andrews. When they died, it descended to their heirs at law. This was a bill brought by Brown, in closing up the business of the firm, for the purpose of obtaining control of this estate and certain other stock which was held by the heirs.

Decision

As to all personal property and choses-in-action which belong to the partnership, title thereto passed directly to the surviving partner to be used in closing up the business of the firm. This real property, standing as it did, in the joint names of the Andrews, passed to their heirs-at-law; but in Equity Court, the beneficial interest passed to the surviving partner, to be used in closing up the partnership affairs. Accordingly, Equity Court will compel the heirs to make such conveyance as is necessary, in order that money may be realized therefrom, for the purpose of paying firm debts.

Mr. Chief Justice Dargan said in part: "When a partnership is dissolved by the death of one or more of the partners, the legal title to all the personal property and choses-in-action belonging to the firm business becomes vested exclusively in the survivor; not, indeed, for his own peculiar benefit, but for the purpose of paying the debts, and then dividing the net balance amongst those entitled, giving to the representatives of the deceased partner the same interest he would have taken had he been in life, and the firm had been dissolved, not by death, but by mutual consent.

"But, as regards real property, the case is different at law, because legal title descends to the heirs-at-law of the deceased partner, and a court of law looking to the legal title alone, cannot regard the mere equities of others. In a Court of Equity, however, real estate belonging to the firm is considered as personal property, to the extent, at least, that it is liable to pay the debts of the firm, and then to distribution between the partners in the same manner as if it had been personal, instead of real estate, being prior to the claims of the representatives of the deceased partner, overrides his wife's title to dower, as well as the title of his heirs-at-law. The consequence is, that the heir-at-law holds the legal title, subservient to or in trust for, the surviving partner, who is charged with the payment of debts." It was, therefore, decreed that heirs-at-law of the Andrews must hold the property, subject to the right of the surviving partner to dispose of it for the payment of the partnership debts.

Ruling Law. Story Case Answer

As has been frequently stated, the death of a partner will work a dissolution of the firm. Upon his death, title to all personal property, including choses-in-action, i. e., claims against third persons, passes to the surviving partner. The surviving partner takes title thereto, not for his own benefit, but for the purpose of settling the affairs of the firm.

Title to real estate passes to the heirs of the partners who held it. If title is held jointly by the partners, upon the death of one partner, his part of the legal title will pass to his heir. If title to real estate is held by one partner, and he is survivor, title will pass to him. If, again, title is held by one partner, and he dies, title will pass to his heirs. In any case, whoever holds the legal title, holds it for the purposes of the partnership. Until all the firm obligations have been met, neither heirs nor widow of a deceased partner, get any beneficial interest in the property.

In the Story Case, the Court will compel the parties to apply all the money, coming from the sale of the partnership property, to the payment of partnership debts. The wife of Forgan can claim no dower interest, although the real estate was in the name of Forgan. She and the other heirs must dispose of it, under Snow's direction, for the payment of firm debts.