In re F. Dobert & Son

MAXEY, District Judge (after stating the facts as above). It appears from the record that, at the death of Frank Dobert, neither he nor Joseph Dobert had an individual estate. The assets of the partnership are wholly insufficient to pay partnership debts. Whether, under such circumstances, the statutory allowances claimed by the widow and children of Frank Dobert may be set apart to them from the assets of the firm of F. Dobert & Son, will depend upon a proper construction of the state statutes, providing for the administration of estates of deceased persons. In a matter of this kind the laws of the state furnish [754] the guide to federal courts; and if byr the laws of Texas the allowance be authorized, then, in obedience to section 8 of the act of bankruptcy (Act July 1, 1898, c. 541, 30 Stat. 519 [U. S. Comp. St. 1901, p. 3425]), it should be set apart to the widow and children in this proceeding. Unfortunately the courts of this state have not decided the precise question involved in the present case, but we may deduce, from the principles announced by the Supreme Court in several cases, in which similar articles of the Revised Statutes of the state in relation to the “Estates of Decedents” have been construed, the correct rule to be applied here. It is thought that the ultimate decision of the question must depend upon the extent.of the control which the probate or county court may lawfully exercise over partnership estates where one of the constituents has died. In other words, if the- probate court is without jurisdiction to administer upon a partnership estate, it follows that it would be powerless to set aside any of the partnership assets to satisfy the statutory allowances of the widow and children of a deceased partner. Thus it was said by Mr. Justice West, as the organ of the court in Clift v. Kaufman & Runge, 60 Tex. 66: “The homestead allowance, if set apart at all by the probate court for the surviving widow, must be set ajiart, alone, from the estate of the decedent, over which that court has jurisdiction. It. is only over the property of the estate that the probate court can exercise control.” See, also, Hoffman v. Hoffman, 79 Tex. 192, 193, 14 S. W. 915, 15 S. W. 471. Has, then, the probate court (which may be referred to indifferently as the probate or county court), under the laws of Texas, jurisdiction to administer upon a partnership estate, upon the death of a constituent of the firm? Upon this point the Supreme Court has spoken in unambiguous language in the case of Altgelt v. National Bank, 98 Tex. 252-267, 83 S. W. 6. It is true, that in the Altgelt Case the court was not construing the articles of the statute involved in this case, but what was there said applies with equal force to the articles under which the widow and children of Frank Dobert claim an allowance. Altgelt v. Alamo Nat. Bank, at page 260 of 98 Tex., at page 9 of 83 S. W., article 1867 of the Revised Statutes of 1895 is quoted, as follows: “Tie rights, powers and duties of executors and administrators shall be. governed by the principles of the common law, when the same do not conflict with any of the provisions of the statutes of this state.” The court, speaking through Mr. Justice Brown, proceeded: [755] ship estates is not a beneficial right. Tiie assets are taken by the surviving partner, charged with the trust or quasi trust to pay the firm debts and wind up its affairs, and it is ills duty to account; to the representatives of ids deceased partner for all partnership assets.’ 22 Am. & Eng. Enc. of Law, p. 96. Again, it is said: ‘The survivors have the exclusive right and duty to act. in 1he settlement of a partnership, and personal representatives of the deceased partner cannot interfere.’ Neither can the surviving partner consent to a participation in the business by such representative. 22 Am. & Eng. Enc. of Law, p. 220; Rogers v. Flournoy, 21 Tex. Civ. App. 558, 54 S. W. 386.” [754] “By the common law the death of one partner dissolves the partnership and terminates the powers of the survivors as partners; but the law imposes upon the surviving partners the duty to close up the business and pay the debts of the partnership, accounting to the personal representatives or heirs of the deceased partner for their interest in what shall remain after paying the debts, for which purposes the surviving partner holds the assets as a trustee, and, to enable him to perform the trust imposed, the law gives to him the right and enjoins it as a duty to take the exclusive possession of the assets of the partnership and to administer them for the purposes before stated. The rule is thus stated: ‘The right of survivorship in partner- [755] See, also, Moore v. Steele, 67 Tex. 439, 3 S. W. 418; Fulton v. Thompson, 18 Tex. 287. The court then quotes with approval the following excerpt from the opinion of Judge Garrett in Rogers v. Flournoy, 21 Tex. Civ. App. 557, 558, 54 S. W. 386, 387: ‘‘Upon Ihe death of Thomas McGuill his surviving partner, Martin McGuill, became vested with the legal title to the partnership assets as trustee primarily for the benefit of the creditors of the firm and ultimately for the benefit of the representatives and heirs of the deceased partner. Shields v. Fuller, 4 Wis. 102. 65 Am. Dec. 295. and note. “Partners may agree upen a dissolution and defeat the derivative equity oí; creditors to have the partnership assets applied to their debts. Wiggins v. Ulackshear, 86 Tex. 665, 2(5 S. W. 939. But the survivor of a deceased partner cannot denude himself of the trust with which he becomes clothed by the death of his partner by an agreement with the administrator either to partition the property or to admit him into joint possession and control, recognizing his title to ihe deceased partner’s share thereof. The duty of the survivor is to administer the trust and wind up the estate, and after paying off the debts to deliver the share of the estate in the residue to the heirs and representatives. The partnership of Thos. McGuill & Son was dissolved by the death of Thos. McGuill, and not by agreement with the administrator. The administrator could make no agreement for the division of the assets to the detriment of creditors.” In construing article 1984 of the Revised Statutes, Mr. Justice Brown propounded the question: “Did the Legislature, in enacting article 1984, intend to repeal the common law as to the administration of partnership estates?” Page 202. And, continuing, it was said at page 263 of 98 Tex., at page 10 of 83 S. W.: “Before the adoption of the Revised Statutes of 4879, the common law prescribed the powers of executors and administrators in reference to both individual and partnership business of Die testator or intestate, and, except by authority conferred by will or partnership contract, neither (‘lass of business could be continued by an executor or administra tor. In making the amendment to article 4981 the Legislature used language applicable to the individual business of the deceased which cannot be applied to partnership business without adding thereto; therefore, under the rule quoted, the language used must be restricted to the individual business of the deceased.” After further discussion, the court continued (pages 264, 265 of 98 Tex., page 11 of 83 S. W.): “By article 1965 every executor is required, with the aid of the commissioners appointed by the court, to make and file ‘a full inventory and appraisement of all the estate of the testator or intestate.’ The interest of the deceased partner in the assets of the firm cannot be inventoried and appraised by the administrator or executor as required by that provision of the statute, because the surviving partner is entitled to the exclusive possession and con [756] trol of the assets of the partnership, free from the interference of the executor or administrator of the deceased partner. Am. & Eng. Enc. of Law, p. 85T. The estate of the deceased partner has an interest only in that which remains after the payment of the debts of the firm, and lias no right to any specific part of the property employed in the enterprise; it would be impossible to .make an inventory and appraisement of such interest, therefore the interest of the deceased partner in the firm assets is not a part of the estate to he administered. “Again, an administrator cannot sell the property of his intestate’s estate, except by the order of tlie court. Kev. St. art. 2113. The court can regularly order- the sale of property only after it has been inventoried and appraised as required by láw, hence the administrator could not get an order of the court to sell property which could not be placed upon the inventory of an estate; therefore partnership property which is not subject to be sold by the administrator -or executor is not included in the terms of article 1984. “The terms of article 1984 commit the question of continuing the ‘business’ to the judgment and discretion of the executor or administrator, without any intimation that another person shall be consulted, which excludes the idea that the surviving partner may participate in the business continued. If the common law applies, the probate court could have no control of partnership estates ;- but- by article 1985 that court may control the action of the executor or administrator ‘in regard to such business’ — that is, the business to be continued; and, the Legislature having failed to prescribe any rules for the administration- of partnership property, the terms of the law are not applicable to partnership business.” From the views expressed in the opinions referred to, the following conclusions are logically deducible: (1) Under existing law in this state,, which is merely a restatement of a principle of the common law, the death of a partner dissolves the partnership, and it then becomes the duty of the surviving partner to close out the business and pay the debts of the partnership, accounting to the personal representatives or heirs of the deceased partner for their interest in the assets remaining after the payment of debts; (2) to enable the surviving partner to discharge the trust imposed upon him, the law gives him the right and enjoins it as a duty to take the exclusive possession of'the assets and to administer them for the purposes stated. As necessary corollaries it follows (1) that neither the heirs nor personal representatives of the deceased partner are entitled to any part of the partnership estate until after the payment of partnership debts, and, (2) the administration of partnership estates being confided exclusively to the surviving partner, the county court has no control over partnership assets, and hence is without authority to set aside allowances to the widow and children from such assets, and can only do so out of any residue coming to the heirs or personal representatives after the payment of partnership debts. The estate of the deceased pártner in such residue must be measured by the interest which the decedent, during his life, had in the partnership, the extent of which is ascertainable by reference to the articles between the partners. This opinion would be unduly extended by analyzing articles 2037 to 2062 of the Revised Statutes of the state, which provide for allowances to the widow and children of a decedent and regulate the procedure in reference thereto. But an examination of those articles will disclose that it'is only the estate of the decedent out of which-the allowance 'maybet.set aside — an estate which may be inventoried and appraised, and .one ¡¡which is under the control and supervision of the county court, [757] and one which that court is authorized to sell — the individual estate o f the decedent, and not an undefined and unascertainable interest in the partnership assets. Indeed, in the articles of the statutes referred to there is no mention of “partnership,” or “partnership property,” or ■of “partnership estates,” thus supplying further evidence, if it were needed, that it was not the purpose of the Legislature that the administration of partnership estates should be included within the terms of the statute. The winding up of the partnership business remains, where the common law left it, "in 'the hands of the surviving partner; and it is only in the residue remaining after the payment of partnership debts that the estate of a deceased constituent is interested, and it is only out of such residue, assignable to the heirs or personal representatives of the deceased, that the allowance to the widow7 and children may be set apart. The consent of the surviving partner in the present case to setting aside the allowance, if effective under any circumstances, is deprived of vitality and efficacy here, since his consent was given about two months after the title to his interest in the partnership property had vested in the trustee in bankruptcy. Bankruptcy Act, § 70. The court is of the opinion that the order of the referee, declining to set aside the allowance to the widow and children of Prank Dobert, deceased, was correct, and it is therefore affirmed,